Madagascar - Livestock Sector Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 19811 IMPLEMENTATION COMPLETION REPORT MADAGASCAR LIVESTOCK SECTOR PROJECT (Cr. 2243-MAG) December 3, 1999 Rural Development 2 Country Department 8 Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their| official duties. Its contents may not be disclosed without World Bank authorization.  Currency Equivalents (Estimated average for the period January 1 to December 31) Currency Unit: FMG Year 1991 1992 | 1993 l 1994 1995 i 1996 l 1997 1998 | 1999 FMG 1835 1864 1914 3067 4266 4061 5091 5000 Weights and Measures Metric System Fiscal Year of Borrower January 1 - December 31 ABBREVIATIONS AND ACRONYMS AFD Agence Francaise pour le Developpement CCCE Caisse Centrale de Cooperation Economique CEPROVET Veterinary Promotion Center CIREL District Livestock Office COMODEL Livestock Sector Divestiture Committee CPR Center for the Production of Breeding Stock DEL Livestock Department FIFAMANOR Dairy and Agricultural Extension Project FY Fiscal Year GDP Gross Domestic Product GOM Government of Madagascar ICB International Competitive bidding LCB Local Competitive Bidding MinAgri Ministry of Agriculture MinEl Ministry of Livestock MPAEF Ministry of Animal Production, Water and Forestry NORAD Norwegian Agency for Development Cooperation O&M Operation & Maintenance ROMA Malagasy Dairy ROMANOR Norwegian Malagasy Dairy Project SAR Staff Appraisal Report SPEL Provincial Livestock Service Vice President : Callisto Madavo Director : Michael Sarris Sector Manager : Joseph Baah-Dwomoh Staff Member Ousmane Seck  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT MADAGASCAR LIVESTOCK SECTOR PROJECT (Cr. 2243-MAG) TABLE OF CONTENTS Page No. PREFACE ...............................................I EVALUATION SUMMARY ...............................................I PART I: PROJECT IMPLEMENTATION ASSESSMENT ...............................................1 PART Il: STATISTICAL TABLES .............................................. 10 TABLE 1: SUMMARY OF ASSESSMENTS .10 TABLE 2: RELATED BANK CREDITS .11 TABLE 3: PROJECT TiMETABLE .12 TABLE 4: CREDIT DISBURSEMENTS: CUMULATIVE ESTIMATED AND ACTUAL .12 TABLE 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION .13 TABLE 6: IMPACT INDICATORS .16 TABLE 8: PROJECT COST .20 TABLE 9: PROJECT FINANCING .20 TABLE 8: ECONOMIC COSTS AND BENEFITS .21 TABLE 9: STATUS OF LEGAL COVENANTS .22 TABLE 10: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS .23 TABLE 11: BANK RESOURCES: STAFF INPUTS .23 TABLE 12: BANK RESOURCES: MISSIONS .24 ANNEXES Annex 1: Summary of Borrower's Evaluation Report Annex 2: Borrower's Comments on the ICR MAP: IBRD 16922 R This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   IMPLEMENTATION COMPLETION REPORT MADAGASCAR LIVESTOCK SECTOR PROJECT (Cr. 2243-MAG) PREFACE 1. This is the Implementation Completion Report (ICR) for the Madagascar Livestock Sector Project (Cr. 2243-MAG), for which a credit in the amount of SDR14.0 million was approved on May 16, 1991 and made effective on August 12, 1992. 2. The credit was closed as expected on June 30, 1999. The final disbursement is expected to take place before October 31, 1999, at which time any unused balance would be canceled. NORAD and the Government co-financed the project, and IDA administered the NORAD grant. NORAD's comments have been incorporated in the report, and the Government's comments are attached. 3. The ICR was prepared by Yves Wong, Consultant, and was reviewed by Joseph Baah-Dwomoh, Sector Manager, Rural Development II and Michael Sarris, Director, Country Department 8. 4. Preparation of the ICR is based on the report of the Borrower's Project Completion Evaluation Report of July 19, 1999, and on existing material in the project file. An unofficial English translation of the summary of the Borrower's report is attached.   IMPLEMENTATION COMPLETION REPORT MADAGASCAR LIVESTOCK SECTOR PROJECT (Cr. 2243-MAG) EVALUATION SUMMARY Introduction 1. IDA has supported livestock development in Madagascar since the early seventies. The Livestock Sector Development Project (Cr. 585-MAG) aimed at developing parastatal ranches. Two subsequent projects, the Village Livestock and Rural Development Project (Cr. 506-MAG); and the Second Village Livestock and Rural Development Project (Cr. 121 1-MAG) focused on support services in the Mahajanga area with a first attempt to support the sector as a whole through the provision of foreign exchange for imports of veterinary drugs and Livestock Directorate reinforcement. The project was identified in 1988 following the decline of livestock sector over the past decades. Until the mid 1970s, the livestock sector was successful in supplying the local demand for beef while allowing for substantial exports. However, since 1975, beef production has decreased, while milk production has increased only marginally. Yet, considerable scope for livestock development remained due to the absence of livestock diseases common in Africa, and to the presence of abundant land resources for grazing and feed production in many regions of the country. Beef export prospects were also good at the time, as sanitary restrictions on exports to the European Union (EU) had been lifted and Madagascar could again benefit from its quota to EU. 2. The decline of the sector was due to many factors, the most important being the poor institutional and economic framework. Weak and inefficient government agencies dominated the sector, providing unfair competition to the emerging private sector by being directly involved in production, processing, marketing, input supply, and provision of veterinary services and products. Inappropriate policies, including provision of free veterinary services and reliance on subsidized and imported food under aid programs, created an unfavorable economic environment. Project Objectives 3. The main objective of the project was to promote livestock production for domestic consumption and exports through a mixed adjustment and investment operation. The policy reforms aimed at economic liberalization and private sector development for input supply and provision of services to producers, while investments aimed at improving the quality of services provided by the public sector and developing the private sector through producer association activities. 4. The main policy reforms were: (a) redefinition of the respective roles of government and the private sector; (b) promotion of farmer associations to take over responsibility for feed mixing and distribution, fodder seed multiplication, cattle breed improvement, and milk collection; (c) establishment of a private veterinary profession; (d) streamlining of public sector entities dealing with production or marketing; and (e) establishment of an incentive framework to allow market-based competition. The  ii institution strengthening component aimed at: (a) improving the capacity of the Livestock Department (DEL) of the Ministry of Animal Production, Water and Forestry (MPAEF); (b) strengthening training in livestock and veterinary science; and (c) streamlining Government's role in the sector. The production development component included: (a) support to extensive cattle production systems, mainly through improved disease control in the western and northern regions; and (b) dairy development in the central highlands, by strengthening dairy producer associations and improving milk collection (access tracks, chilling centers), feed supply and breeding services. 5. The objectives were clear and consistent with the new policies of economic liberalization and public divestiture from private sector activities. The main project risk was correctly attributed to the lack of response of the private sector. However, more realistic targets should have been set for the riskier extensive beef production component as it depended upon the completion of innovative reforms and it covered remote regions where the private sector was virtually non-existent and supporting infrastructure very weak. On the other hand, the policy reform objectives were feasible, and the institution strengthening component appropriately endorsed a longer term approach for staff development. 6. The appraisal report also incorrectly assumed that the EU market would remain open; however, its subsequent closure eliminated Madagascar's sole export market. Project reliance on disease control as the main activity to promote extensive cattle production in the western and northern regions proved to be overly optimistic. However, it correctly identified over-capitalization and significant under-utilization of the modern dairy sector as being serious risks and appropriately recommended a low technology approach. Achievement of Objectives 7. Except for the extensive beef production component, the project has substantially achieved its objectives. Initial delays occurred during effectiveness, which took 14 months, due to the long legal process for passing reform legislation and for cross-effectiveness of cofinancing arrangements. Project start-up was marked by slow progress due to the political transition, affecting decision-making on important legal, budgetary and project management matters. 8. The Project Mid-Term Review marked a turning point in project implementation. On the basis of a fully participatory process, the review (followed by a project priority-setting exercise two months later) resulted in important corrective actions being taken. These included the appointment of a new project coordinator, introduction of service contracts with governmental project entities, and amendment of the credit agreement to include financing of the establishment of savings and loan associations and rehabilitation of livestock roads. After the mid-term review, project implementation significantly improved in such areas as financial and accounting control, work programming, and monitoring and evaluation. 9. At project completion, the project is still several years away from full development. On policy reforms, the Ministry of Livestock (MinEl) has redefined its role of policy formulation, provision of extension services, epidemiological surveillance, regulation, and statistical data collection. It is no longer involved in feedmill operation and fodder production, input supply, breed improvement, and veterinary practice. Milk powder volumes from donor aid are now insignificant and taxation is at recommended levels. Stock breeding centers are no longer operational. 10. The institution strengthening component has made much progress but is still incomplete. The introduction of service contracts, emphasizing participation, performance targets, impact indicators, and  iii accountability, between the project and the livestock services significantly improved performance. Subsequent to the review of training in DEL, a policy favoring local training was adopted. The project target of setting up 90 private veterinarians has been fully achieved (100%) and 95% of these veterinarians have received their sanitary mandates. MinEl is now proceeding to rationalize its staffing with EU support for compensation payment to redundant staff. The provincial and district livestock services have been strengthened by the rehabilitation of office buildings, provision of vehicles and office equipment, and computerization of offices A livestock database has been prepared. 11. The extensive beef production component is not expected to yield the objective of incremental beef production at full development (year 10) as this target was unrealistic. However, preliminary data indicate significant benefits from decreased calf mortality and increased milk production of zebu cows resulting from water supply development activities implemented after the mid-term review. In spite of the poor supply response, significant steps have been taken under the project to improve the support environment for beef production. National epidemiological surveys have been completed for the major cattle and pig diseases. Completion of the national reference laboratory, which was not scheduled at appraisal, would provide important operational support to the regional laboratories for epidemiological surveillance. Vaccination coverage for the main diseases is steadily rising with the installation of private veterinarians, reaching a rate of nearly 100% in a number of communes while the national coverage is estimated at about 60%. 12. The highlands dairy development component, financed by IDA and NORAD, has fully achieved its objectives. A key incentive was the unmet demand for milk and milk products as well as attractive prices. On extension and support to farmer associations, effective programs have been implemented by ROMA and FIFAMANOR. At project completion, some 11,585 producers, or 83% of the appraisal estimate, were organized into approved associations, which were also organized into unions and regional and national federations. The project also emphasized the development offemale producer associations; at project completion, some 157 (19% of the total number of associations) were established, which were among the most successful in milk production and collection. ROMA is evolving into an autonomous and self-financing agency run by producer associations, and local and regional dairy "inter- professions", which include representatives of the main dairy industry, have been established. 13. On feed and fodder development, the adaptive research component was successfully carried out by FIFAMANOR, resulting in the adoption of improved new varieties of fodder maize, oats, and different rootcrops by farmers. Farmer associations are also involved in seed production, significantly reducing the problem of supply of improved seeds. FIFAMANOR also established an analytical and feed formulation laboratory, which has provided cost-effective feed formulations to livestock producers. 14. The Livestock Promotion Fund (LPF), a revolving fund set up under the project to support producer association investments in feed mixing and distribution, and milk collection and processing, has been fully disbursed. Due to changing needs, the appraisal investment targets were revised. Instead of using the matching grant system proposed in the appraisal report, the LPF has opted for loans at commercial rates in order to preserve the integrity of the fund. The rehabilitation of the modern ROMINCO dairy plants was not carried out due to the suspension of CCCE aid. 15. The rehabilitation of about 1,000 km of livestock roads and tracks was not completed due to suspension of CCCE aid. IDA agreed during the mid-term review to reallocate US$1.0 million of IDA funds for district road and track rehabilitation, which has yielded significant benefits for milk collection and marketing of other agricultural products. Substantial genetic improvements have been carried out under the project under NORAD cofinancing, so that genetic potential is no longer a limiting factor to  iv milk production. As scheduled at appraisal, a Herd Book has been created by FIFAMANOR, which maintains a tracking system for high-yielding cows. 16. Credit. As a result of the mid-term review, the IDA credit was amended to finance the establishment of savings and loans associations for livestock producers based on the model of the IDA- funded Pilot Rural Finance Project. Loans made to producers from savings or from external sources for the purchase of pregnant cows have been highly successful as they have been fully repaid within two years in spite of interest rates of 36% per year. 17. Environmental Impact. Bush fires continue to be set in the dry season to provide palatable pastures for grazing cattle. Studies carried out under the project have shown that bush fires are complex phenomena that can be addressed only through a broader approach outside the project scope. The highlands development component, however, is expected to have a positive environmental impact as producers are switching from grazing to more intensive systems, with cows kept in stalls. 18. Project Costs. Project costs incurred were only 73% of appraisal estimate. The road rehabilitation component was significantly reduced due to suspension of CCCE cofinancing. Government contributions were also lower than appraisal estimates, due to significantly lower budgetary allocations in 1995-97. Major Factors Affecting the Project 19. The political transition period between 1991 and 1992 slowed down the decision-making process. Policy reforms were not easily accepted, which delayed credit effectiveness. Political considerations also slowed down replacement of weak project management. At project start-up, government practices were inconsistent with declared reforms. The budget continued to fund parastatals slated for divestiture, and food aid continued to arrive into the country without tariff increases. The establishment of LPF by the Ministry of Finance was also delayed. New procedures for budget allocation between 1995 and 1997 significantly reduced counterpart funding for the project and resulted in a severe drop in disbursements. Project Sustainability 20. The reforms carried out and the entities created under the project have a good chance of being sustainable. Public sector activities are now restricted to policy formulation and sectoral adjustment, regulation, epidemiological surveillance, and support to livestock producer associations, which the State will continue to support. Private sector activities, which include fodder and feed production, seed multiplication, supply of breeding stock, milk collection and processing, and veterinary practice are becoming more firmly entrenched and thus increasingly sustainable. The LPF will ensure continued funding for investments in these activities, while producer associations are becoming more professional.. Bank Performance 21. Bank performance has been satisfactory overall. The Bank took the lead role among donors in promoting essential sectoral adjustment. Bank missions usually included good skill mixes, but more frequent missions would have been useful when progress was slow. The Bank was flexible on project restructuring when needed. The transfer of project supervision responsibility after the mid-term review to the Bank's resident mission was very positive: links with the client were strengthened, administrative delays reduced, and donor coordination improved. The Bank's' performance as Administrator of NORAD's Trust Fund could have been enhanced with better communication with NORAD.  v Borrower Performance 22. The Borrower's perfornance could be considered to be satisfactory. Although it was slow to implement the necessary sectoral reforms and administrative changes at various times during the project, all the corrective actions were eventually taken. Problems of counterpart funding were also finally resolved. Assessment of Outcome 23. The overall project outcome could be rated as "satisfactory", although project achievements are still fragile. Sectoral adjustment is virtually complete, but rationalization of the Government livestock services has only just started. All legislation on animal health and sanitary control has been updated, and the basis for effective epidemiological surveillance has been laid down. Private sector development has been highly satisfactory. A private veterinary profession is now in place, and vaccination rates continue to rise. Milk production and producer incomes have significantly increased. The Livestock Promotion Fund has been successfully set up as a revolving fund. However, the introduction of two new diseases of importance for export markets is an indication of the weaknesses of the veterinary services Future Operation 24. Government's livestock sector program is designed as a long-term program for livestock development. Thus, the government is interested in pursuing some of the project's activities in line with the redefined roles of the public and private sectors. In its dialogue with the government on country assistance strategy, IDA is proposing a new integrated operation called "Agricultural Intensification and Food Security Project". The latter is expected to include the national program approach of previous IDA operations. Key Lessons Learned 25. Major lessons learned from the project are: (a) The success of the project was highly dependent upon the commitment of the Government and officials towards divestiture. (b) The hybrid nature of the project, combining policy reforms and investments, was appropriate for the achievement of project objectives. (c) The policy reforms implemented were necessary to provide a suitable incentive framework for private sector development. (d) Organizing all livestock development projects under a single program improved these interventions, although suspension of CCCE aid affected the whole sector. (e) Effective project management and accountability are essential elements for successful project implementation. Their absence affected the extensive beef production component. (f) Adequate counterpart funding is critical for successful project implementation. Insufficient local budgets affected the project. (g) Beneficiary participation is essential for achieving project objectives. The bottom-up approach for the elaboration of annual work plans and for the mid-term review improved project implementation. (h) The mid-term review was used effectively to take stock of project implementation progress and enable corrective actions to be taken to achieve project objectives.  vi (i) Poor roads and lack of access to credit were severe constraints to rural and private sector development. These issues need to be addressed up-front in development projects. () The issue of bush fires was very complex and required a multi-sectoral approach which was outside the scope of the project.  IMPLEMENTATION COMPLETION REPORT MADAGASCAR LIVESTOCK SECTOR PROJECT (Cr. 2243-MAG) PART I: PROJECT IMPLEMENTATION ASSESSMENT Introduction 1. The project was identified in 1988 following the decline of the livestock sector, which contributed about 15% of agricultural GDP and provided some or full income to over 60% ofnational households, had been declining for the past decades in terms of both production and growth. Until the mid 1970s, the livestock sector was successful in supplying the local demand for beef while allowing for substantial exports. However, since 1975, beef production has decreased by about 7%, while milk production has increased only by 0.5% per year since 1960, much less than the annual population growth estimated at over 3%. Yet, considerable scope for livestock development remained, particularly in the more intensive dairy, pig and poultry production which was an important source of income for the rural population. Madagascar also had a comparative advantage for livestock and milk production, due to the absence of livestock diseases common in Africa and to the presence of abundant land resources for grazing and feed production in many regions of the country. Beef export prospects were also good at the time, as sanitary restrictions on exports to the European Union (EU) had been lifted and Madagascar could again benefit from its quota to EU. 2. The decline of the sector was due to many factors, the most important being the poor institutional and economic framework. Weak and inefficient government agencies dominated the sector, causing duplication of effort and providing unfair competition to the emerging private sector by being directly involved in production, processing, marketing, input supply, and provision of veterinary services and products. Inappropriate policies, including provision of free veterinary services and reliance on subsidized and imported food under aid programs, created an unfavorable economic environment. Project Objectives 3. The main objective of the project was to promote livestock production for domestic consumption and exports through a mixed adjustment and investment operation. The policy reforms aimed at economic liberalization and private sector development for input supply and provision of services to producers, while investments aimed at improving the quality of services provided by the public sector and developing the private sector development through producer association activities. Thus, the project was designed as a package of policy reforms, supported by an institution building component and a production development component, and was to be coordinated with several free-standing projects to be financed in parallel by other donors. 4. The main policy reforms were: (a) redefinition of the respective responsibilities of government and the private sector; (b) promotion of farmer associations to take over responsibility for such areas as feed mixing and distribution, fodder seed multiplication, cattle breed improvement, and milk collection;  2 (c) promotion of private veterinary practice; (d) streamlining of public sector entities dealing with production or marketing; and (e) establishment of an incentive framework to allow market-based competition, based on suitable pricing mechanisms to be set up for dairy products imported under food aid or subsidized surpluses. 5. The institution strengthening component aimed at: (a) improving the capacity of the Livestock Department (DEL) of the Ministry of Animal Production, Water and Forestry (MPAEF); (b) strengthening training in livestock and veterinary science; and (c) streamlining the government's role in the sector. 6. The production development component included: (a) support to extensive cattle production systems, mainly through improved disease control in the western and northern regions; and (b) dairy development in the central highlands, by strengthening dairy producer associations and improving milk collection (access tracks, chilling centers), feed supply and breeding services. 7. The objectives were clear and consistent with the economic adjustment programs that were being discussed under the Bank's dialogue with Government at that time. There was also an emerging consensus in the country, and among donors, on the need to liberalize the economy and to divest the public sector from production, marketing and other activities that were more the role and responsibility of the private sector. It was largely recognized that socialist policies of the previous decades had failed and that fundamental reforms were necessary to restart the stagnating economy, including the livestock sector. 8. However, while the long term project objectives were appropriate, there were several substantial risks associated with a number of the project development objectives. More realistic targets for the five-year period of the project should have been set for the extensive beef production, which required a longer timeframe for the completion of innovative reforms. On the other hand, policy reform objectives were feasible, in spite of expected opposition from entrenched livestock services in MPAEF (now called Ministry of Livestock or MinEI). The institution strengthening component correctly endorsed a longer term approach for staff development by initially supporting a manpower requirements review, as major weaknesses of the livestock services had been identified, including over-staffing, unclear mandates, poor work programming and supervision, low staff morale and pay, and inadequate operating and investment funds. 9. The main project risk was correctly identified as being lack of response of the private sector; private entities to take the place to be vacated by Government in input supply, marketing and veterinary practice were scarce or non-existent. Thus, project objectives for the extensive beef production component, which was implemented in the remote areas of the country where the private sector was virtually non-existent and the support infrastructure very weak, were over-optimistic. 10. At appraisal, it was incorrectly assumed that beef exports to EU would continue, but the subsequent ban closed down the sole export market for processed beef. The project design also assumed that disease control alone would be sufficient to induce increased extensive cattle production in the western and northern regions. That approach was overly optimistic.  3 11. The appraisal mission correctly identified over-capitalization and significant under-utilization of the modern dairy sector as being serious risks and correctly recommended a low technology approach which focused on increasing local demand for milk and dairy products. 12. During negotiations, it was agreed that French Cooperation (FAC), and not IDA, would be providing support to the semi-intensive production of pork and poultry and to the operation of a new production unit for veterinary vaccines in partnership with international companies. CCCE financing of milk road and track improvement was also confirmed, although the target of 1,000 km was considered to be ambitious. NORAD cofinancing was agreed in principle for the genetic and feed and fodder improvement programs. Achievement of Project Objectives 13. In spite of initial implementation delays, the project, except for the extension beef production component, has substantially achieved its objectives. Delays occurred during effectiveness, which took 14 months for the conditions to be satisfied, due to the long legal process for passing reform legislation and for cross-effectiveness of cofinancing arrangements. 14. The first year of project implementation (1992-93) was marked by slow progress due to the political transition, which affected decision-making on important legal matters, such as the finalization of the Boards of ROMA and ROMINCO. No action was taken to increase tariffs on milk imports in the 1993 budget, and the by- law for setting up COMODEL was not signed. The transfer of project coordination responsibility to the Director of Livestock in October 1993, in fact, further slowed down project implementation. The main problems were excessive centralization, lack of delegation ofauthority, and poor work programming. However, project activities implemented by other project entities, as in the highlands dairy development component, proceeded normally. 15. The Project Mid-Term Review conducted in April 1995 marked a turning point in project implementation. On the basis of prior consultant reviews of project implementation and of a fully participatory process involving stakeholders, the review (followed by a priority-setting exercise two months later) led to important corrective actions being taken. These included the appointment of a new project coordinator, introduction of service contracts with Government project entities, and amendment of the credit agreement to include financing of the establishment of savings and loan associations and rehabilitation of livestock roads. After the mid-term review, project implementation significantly improved. In 1996, notable progress had been achieved in financial and accounting control, work programming, and monitoring and evaluation. 16. At project completion in June 1999, the project is still several years away from full development due to the implementation delays in the first half of the project. However, except for the extensive beef production component, the project has substantially achieved the objectives set for the project period. 17. On policy reforms, the Ministry of Livestock (MinEI) has redefined its role in policy formulation, provision of extension services to the non-milk subsector (for the milk subsector, the livestock producer associations are committed to taking over these activities in the medium term), epidemiological surveillance, regulation, and statistical data collection. It is no longer involved in feedmill operation and fodder production, input supply, breed improvement, and veterinary practice. These activities are now handled by farmers, farmer associations, private traders, and private veterinarians. Milk powder is now received under donor aid in insignificant amounts, and taxation is set at levels recommended by the Bank. Privatization of the breeding centers has been put on hold, as a result of the Privatization Law which has removed all responsibility for that activity from COMODEL (which has been set up under the project for that purpose). As these centers are no longer operational, their privatization does not appear to be a top Government priority.  4 18. The institution strengthening component has made much progress but is still incomplete. DEL capacity improvement was seriously delayed until the replacement of the Director in 1996. The introduction of service contracts between the project and DEL divisions and provincial livestock services after the mid-term review significantly improved performance. These contracts emphasized participation, accountability, setting of clear quantitative targets, timely provision of budgets, and monitoring and evaluation. A training policy favoring local training has been adopted. The project target of creating a private veterinary profession has been achieved (all 90 private veterinarians are operating, and 95% of them have received their sanitary mandates). A consultant review confirms that 80% of them are doing an effective job. To fill in gaps in geographical coverage, MinEl is taking steps to increase the numbers of private veterinarians . As a result of the new private veterinarians, MinEl can redeploy its staff. A first phase is scheduled to be implemented in the second half of 1999 with EU support for providing compensation to redundant staff. 19. Although not scheduled at appraisal, the project has supported the establishment of a database for the livestock sector. The responsibility for preparation and maintenance of this database is in the hands of the public sector. Livestock statistics for 1998 have been prepared. 20. The extensive beef production component is not expected to yield the objective of incremental beef production at full development (year 10). Implementation of the component was delayed by several years' inactivity due to weak DEL management and slow progress in health coverage by private veterinarians in the more remote rangeland areas. Improved health coverage was assumed in the appraisal report as being the main factor leading to increased offtake, and in some communes, vaccination coverage against anthrax is nearly 100%. Although appraisal objectives for beef exports were not set, there was an implicit assumption that increased offtake would be driven and absorbed by exports to EU. The closing of that market eliminated a major production incentive. Government now recognizes that redeveloping the export market for Malagasy beef will require a multi- pronged and long-term approach involving both the public and private sectors. The main diseases must be brought under control, and the privately-run slaughterhouses must comply with EU sanitary norms. 21. A factor not foreseen at appraisal relates to decreased calf mortality and increased milk production of zebu cows as a result of water supply development activities implemented after the mid-term review. As only 1-2 years of data are available, it needs to be treated with caution but preliminary estimates indicate that thiswater supply activity is having a significant impact on improving extensive beef production, particularly during the dry season. In spite of the poor supply response, significant steps have been taken under the project to improve the support environment for beef production. National epidemiological surveys have been completed for themajor cattle and pig diseases (tuberculosis, Rift Valley fever, anthrax, Teschen, etc.). Completion of the national reference laboratory, which was not scheduled at appraisal, will provide important operational support to the regional laboratories. The network will strengthen the database on regional animal health profiles and play a key role in epidemiological surveillance and in improving the effectiveness of disease control programs. The provincial and district livestock services have been strengthened by the rehabilitation of office buildings and provision of vehicles and office equipment. These offices are now fully computerized andthe staff is trained on computer use. However, during the implementation of this project, two new diseases of importance for export markets were accidentally introduced: Rift valley fever of small ruminants, and African Swine fever which devasted the smallholder pig industry. These introductions are an indication for the weaknesses of the veterinary services (quarantine and epidemiosurveillance). 22. The pilot research and development program was carried out by the national research agency (FOFIFA), as scheduled. It included studies and trials on breed and fodder improvement, feeding systems, and disease control. However, little progress was made in developing systems for reducing the incidence of bush fires as a comprehensive approach was required, which was outside the scope of the project.  5 23. The highlands dairy development component, financed by IDA and NORAD, has fully achieved its objectives. A key incentive to producers has been an unsatisfied demand for milk and milk products and attractive prices. The lowlands dairy development program, which was expected to be financed by ADB as a stand-alone project, was not implemented due to suspension of ADB aid to Madagascar. The highlands development component included five sub-programs. However, the introduction of two new diseases of importance for export markets is an indication of the weaknesses of the veterinary services. 24. . (a) Extension and Support to Farmer Associations. Effective programs for extension and support to development of farmer associations were implemented by ROMA and FIFAMANOR. While responsibility for extension for the beef production component was handed over to the National Agricultural Extension Project (NAEP) in 1995, that for dairy development remained with ROMA and FIFAMANOR at the request of the milk producer associations. That was in line with appraisal plans for conversion of ROMA into an autonomous agency run by producer associations at the end of the project. At project completion, ROMA has taken the first steps of this conversion with the establishment in early 1999 of local and regional dairy "inter-professions", which include representatives of eight different groups of actors in the dairy industry. For extensive beef production, the Livestock Department provided livestock specialists to NAEP to train their subject matter specialists. 25. At appraisal, it was expected that some 12,000 farmers would be organized into 200 new associations. At project completion, some 11,585 producers, or 83% of the appraisal estimate, were organized into approved associations, which were also organized into unions and regional and national federations. While womenwere not specifically targeted, nonetheless the project emphasized the development of female producer associations. At project completion, some 157 of those associations (19% of the total number) were established. Being amongst the most dynamic associations, they were highly successful in milk production and collection and in providing attractive incomes to their members. 26. (b) Feed and Fodder Development. The adaptive research component was successfully carried out by FIFAMANOR, resulting in the adoption by producers, specially in the dry season, of improved new varieties of fodder maize, oats, and different rootcrops. Farmer associations are also involved in seed production, reducing the problem of supply of improved seeds. FIFAMANOR also established with NORAD funding an analytical and feed formulation laboratory, which has provided cost-effective feed formulations to livestock producers mixing their own feeds. 27. The Livestock Promotion Fund (LPF), a revolving fund set up under the project to support producer association investments in feed mixing and distribution and milk collection and processing, has been fully disbursed. Instead of using the matching grant system proposed in the appraisal report, LPF opted for full loans at commercial rates in order to preserve the integrity of the fund. The interest collected would be used to finance the operating cost of the fund. The Fund was only established in 1995 after significant delays in the finalization of institutional arrangements by the Ministry of Finance. 28. ( c) Milk Collection and Processing Infrastructure in the Highlands. The rehabilitation of about 1,000 km of livestock roads and tracks, scheduled for funding by CCCE under parallel financing arrangements, was not completed due to suspension of that aid between 1994 and 1998. At Government request, IDA agreed during the mid-term review to reallocate US$1.0 million of IDA funds for that activity. A total of 216 km of road was rehabilitated, and significant benefits on milk collection and marketing of other agricultural products have been reported. 29. The LPF also funded the construction of 87 milk collection points and centers and three collection/processing centers (appraisal targets were revised to accommodate current needs). Early results indicate  6 that these activities are profitable. Scheduled to be financed by CCCE, the rehabilitation of ROMINCO's modern dairy plants was not carried out due to suspension of its aid to Madagascar. NORAD expressed interest in the rehabilitation and funded consultant reviews but did not follow up with investments in view of the low economic viability of the modern sector. The plants are virtually non-operational, being also affected by weak plant management. 30. (d) Genetic Improvement. Substantial genetic improvements have been carried out under the project under NORAD cofinancing, to such extent that the genetic potential of cows in the project area is no longer the limiting factor to milk production. As scheduled at appraisal, a Herd Book has been created by FIFAMANOR, which maintains a tracking system for high-yielding cows. 31. (e) Research and Development. Livestock producers have benefited from increased knowledge and developments in livestock and milk production. These include identification and measurement of disease incidence (national mapping of the main diseases has been completed), development and testing of vaccines (effective vaccines are now in use against anthrax in cattle and Teschen disease in pigs, which had decimated pig populations in a number of regions), dry season supplementary feeding of urea-treated rice stalks, and improved manure and silage production. 32. Credit. As a result of the mid-term review, the IDA credit was amended to finance the establishment of savings and loans associations for livestock producers based on the model of the IDA-funded Pilot Rural Finance Project. For the first time for many of them, association members could deposit their savings and have access to credit. Loans received by members to purchase pregnant cows are bringing significant benefits to the families. In spite of interest rates of 36% per year, these loans have been usually repaid in full within two years. 33. Environmental Impact. In the dry season, herders continue to set fires to pasture to produce greener vegetation, although this is not linked to any dramatic cattle population growth, as anticipated under the extensive beef production component. Numerous studies have shown that bush fires are complex phenomena that need a broader approach which is outside the scope of the project. The highlands development component, on the other hand, should have a positive environmental impact as producers are switching from grazing to more intensive systems, based on forage production and keeping cows in stalls 34. Project Costs. Project costs incurred were only 73% of appraisal estimate. Reductions in project scope were due to suspension of cofinancing arrangements with CCCE (US$5.40 million for road rehabilitation). Government contributions were also lower than appraisal estimates, mainly due to significantly lower budgetary allocations in 1995-97. Major Factors Affecting the Project 35. In the transition period between 1991 and 1992 when the political system in the country significantly changed, slow decision-making affected the project. Policy reforms underlying the project were not easily accepted. Political considerations also had a major influence in keeping in place a weak project manager and head of livestock services during the first half of the project. Consultant assistance provided under bilateral aid gave effective support to central project coordination and to technical aspects of livestock production. 36. At project start-up, governmental policies were inconsistent with declared reforms. Thus, budget proposals included provisions for the rehabilitation of the parastatal ranch in the mid-west and of stock breeding farms, in contradiction with divestiture policy. Government policy to provide easy access to cheap and subsidized food aid from donor countries weakened local dairy production and constrained its markets. Raising of import tariffs to a  7 level of 30%, as proposed by the Bank, was completed only in Government budget year 1994, with two years of delay. Switching the responsibility of project coordination between the Director of Livestock and the ex-Secretary General of MPAEF between 1992 and 1994 severely affected project implementation, particularly of the extensive beef production component which was then under the responsibility of the Livestock Department The Ministry of Finance finalized institutional arrangements for the operation of the Livestock Promotion Fund only in 1996, causing significant delays to its start-up and to its operation. Between 1995 and 1997, new procedures introduced by the Ministry of Economy and Plan for budget allocation significantly reduced counterpart funding for the project and resulted in disbursements falling to 20% of previous levels. Project Sustainability 37. The reforms carried out and the entities created under the project have a good chance of being sustainable. The division of responsibilities between the public and the private sectors for operation of the livestock sector is now clear and fully accepted by all stakeholders. For the public sector, MinEL has divested itself from animal breeding and drug distribution activities and now concentrates on its permanent mandates of policy formulation and completing sectoral reforms, regulating the sector, carrying out epidemiological surveillance, and providing support to livestock producer associations. 38. Private sector activities developed under the project also have good prospects of sustainability, although they are still quite fragile and need continued government support for another 4-5 years. The livestock producer associations have effectively taken over activities related to fodder and feed production, seed multiplication, supply of breeding stock, and milk collection and processing. Loan repayments to LPF will ensure continued funding of new investments in these activities, which have excellent prospects of profitability due to the unsatisfied demand and attractive prices for milk. The further development of associations into inter-professions will enhance their sustainability. The establishment of a private veterinary practice has been entirely successful. Many of these veterinarians are running profitable practices, and the majority of them are effectively fulfilling their sanitary mandates. Bank Performance 39. Bank performance has been satisfactory overall. In particular, the Bank has played the lead role in promoting adjustment of the livestock sector. It supported Government's successful efforts to integrate all sector development activities into the Livestock Sector Program. The Bank identified most of the main issues and problems during project identification, preparation and appraisal. However, the major project assumption that Madagascar would continue to benefit from its beef export quota to EU was over-optimistic and the risk of losing that market was not identified. 40. While Bank missions usually included good skill mixes, the frequency of missions could probably have been increased with positive effects during the period 1990-91 when progress was relatively slow. The Bank was flexible and responsive to the frequent need for credit amendment as the project was being restructured, but could have been more forceful in requiring management changes in livestock services. The participatory nature of the mid-term review resulted in significant project restructuring to address such constraints as poor roads and lack of credit. No deviation from Bank policies and procedures was reported. Finally, the transfer of project supervision responsibility after the mid-term review to the Bank's resident mission was very positive. It not only strengthened links with the client, but also reduced administrative delays, promoted donor coordination, and improved the technical quality of Bank assistance. 41. The Banks' performance as Administrator of NORAD's Trust Fund could have been enhanced by better communication with NORAD on the planning of missions, regular briefings, and transmission of documents and  8 reports. On the other hand, delays in the replenishment of the Trust Fund account delayed disbursements to some extent. Borrower Performance 42. At project completion, the Borrower's overall performance could be considered to be satisfactory, in spite of earlier political, policy and institutional problems. The targeted sectoral reforms have substantively been completed, albeit with some difficulty at the beginning of the project. The role of government services is now clearer, and the divestiture program has been completed in practice. Although the breeding centers have not been officially privatized as scheduled, they are no longer operational and are not a burden on the public budget. The Borrower is committed to the development of producer associations as an effective interlocutor. On the other hand, inadequate provision of counterpart funding significantly slowed down project implementation after the mid-term review and lack of government action to strengthen weak project leadership and management at the Livestock Department caused several years of implementation delays. While ROMA and FIFAMANOR are providing effective support to producer associations, MinEI, which only became a separate ministry in 1997, has still to fully evolve into its newly-defined role. Thus, although the basis of a national epidemiological surveillance system has been laid down, this is not yet fully effective. Assessment of Project Outcome 43. Overall project outcome could be rated as "satisfactory", although project achievements are still fragile and need further support for sustained development. Policy reforms have been largely completed, as well as divestiture from private sector activities. Private sector development has been highly satisfactory. Effective livestock producer associations have been established. Privatization of veterinary practice is now an operational reality, and vaccination rates continue to rise. Milk production and producer incomes have significantly increased, and LPF will continue to finance milk collection and processing and other milk production development activities. However, the introduction of two new diseases of importance for export markets is an indication of the weaknesses of the veterinary services. Future Operation 44. Government's livestock sector program, in which this project has played a lead role, is designed as a long- term program as livestock development and disease eradication activities need a long-term perspective. Thus, Government is interested in pursuing some of this project's activities in line with the redefined roles of the public and private sectors. In its dialogue with Government on country assistance strategy, IDA is proposing a new integrated operation called "Agricultural Intensification and Food Security Project". Government and IDA have started a dialogue on the prospects of supporting the continuation of some project objectives under the new operation. The latter is expected to integrate the national program approach of previous IDA operations with empowerment of decentralized authorities and bodies, consistent with the country's move towards provincial autonomy. It would operationalize, together with other donor actions, key recommendations of the Rural Development Action Plan, which is being finalized by the Government with the cooperation of all donors. Key Lessons Learned 45. Major lessons learned from the project are: (a) The success of the project was highly dependent upon the commitment of the Government and officials towards divestiture. (b) The hybrid nature of the project, combining policy reforms and investments, was appropriate for the  9 achievement of project objectives. (c) The policy reforms implemented were necessary to provide a suitable incentive framework for private sector development. (d) Organizing all livestock development projects under a single program improved these interventions, although suspension of CCCE aid affected the whole sector. (e) Effective project management and accountability are essential elements for successful project implementation. Their absence affected the extensive beef production component. (f) Adequate counterpart funding is critical for successful project implementation. Insufficient local budgets affected the project. (g) Beneficiary participation is essential for achieving project objectives. The bottom-up approachfor the elaboration of annual work plans and for the mid-term review improved project implementation. (h) The mid-term review was used effectively to take stock of project implementation progress and enable corrective actions to be taken to achieve project objectives. (i) Poor roads and lack of access to credit were severe constraints to rural and private sector development. These issues need to be addressed up-front in development projects. (j) The issue of bush fires was very complex and required a multi-sectoral approach which was outside the scope of the project (k) Contracting livestock services is an important way of improving quality of the project's implementation.  10 IMPLEMENTATION COMPLETION REPORT MADAGASCAR LIVESTOCK SECTOR PROJECT (Cr. 2243-MAG) PART II: STATISTICAL TABLES TABLE 1: SUMMARY OF ASSESSMENTS A. Achievement of objectives Substantial Partial Negligible Not Applicable Macro policies x Sector policies X . Financial objectives X Institutional development X Physical objectives _ Poverty reduction Gender issues X Other social objectives X Environmental objectives __X______ _- Public sector management Private sector development X Other (specify) B. Project sustainability Likely Unlikely Uncertain x C. Bank performance Highly Satisfactory Deficient Satisfactory Identification X Preparation Assistance X Appraisal X Supervision x D. Borrower performance Highly Satisfactory Deficient Satisfactory Preparation X Implementation X Covenant compliance X E. Assessment of outcome X  I1 TABLE 2: RELATED BANK CREDITS Credit title Purpose Year of Status approval | Concurrent operations i Second Agricultural Credit Provide foreign exchange to finance 1987 Completed Project (Cr. 1804-MAG) subprojects in agricultural production and primary processing and marketing and strengthening of BTM. National Agricultural Support the establishment of a 1989 Completed Research Project (Cr. decentralized national agricultural 2042-MAG) system, based on participatory and multi-disciplinary research planning and evaluation. Agricultural Extension Test the feasibility of an improved 1990 Completed Pilot Project (Cr. 2150- extension management system. MAG) Following operations I Second Irrigation Support irrigation rehabilitation and 1994 Active Rehabilitation Project (Cr. sustainable management through a 2644-MAG) participatory approach empowering water user associations. National Agricultural Support the establishment of a 1995 Active Extension Project (Cr. national extension system under a 2729-MAG) single framework and based on clear ( management criteria. Social Fund II (Cr. 2778- Alleviate poverty and support 1995 Active MAG) community development through partnerships with NGOs and beneficiary communities.  12 TABLE 3: PROJECT TIMETABLE Steps on Project Cycle Date Planned Date Actual Identification May 1988 May 1988 Preparation November 1988 Dec. 88-Mar.1990 Appraisal March 1990 January 3, 1991 Negotiations April 1991 April 2, 1991 Board presentation May 1991 May 16, 1991 Signing June 1991 June 12, 1991 Effectiveness September 1991 August 12, 1992 Mid-term review August 1995 May 1, 1995 Project completion December 31, 1998 June 30, 1999 Credit closing June 30, 1999 June 30, 1999 TABLE 4: CREDIT DISBURSEMENTS: CUMULATIVE ESTIMATED AND ACTUAL Estimated Cumulative Actual Cumulative Actual as a % of Fiscal Year Disbursements Disbursements estimate (US$ million) (US$ million) 1992 0.4 0.00 0 1993 2.0 2.35 118 1994 4.4 3.93 89 1995 8.3 6.32 76 1996 13.1 7.99 61 1997 17.8 11.51 65 1998 19.8 14.76 75 1999 19.8 18.29 _92 Final Disbursement Date: October 1999  13 TABLE 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION A. SECTOR REFORMS AND INSTITUTIONAL DEVELOPMENT Unit Target Completed (i) Animal health monitoring and Appraisal Revised Unit % App. % Rev. epidemiological surveillance National Reference Lab. operational (1) No. n.a. (2) 1 N.A. 45 Regional laboratories rehabilitated No. 5 9 9 180 100 Ivato quarantine station rehabilitated No. 1 1 I 100 100 Mobile surveillance teams operational No. 5 8 8 160 100 (ii) Studies and control of major diseases Veterinary stations involved in bovine No. n.a. 243 243 N.A. 100 tuberculosis investigations _ National map of bovine TB prepared No. n.a. 1 1 N.A. 100 Vaccine for bovine TB tested / n.a. 100 N.A. 25 Veterinary stations involved in anthrax No. n.a. 243 243 N.A. 100 investigations Anthrax incidence maps prepared No./yr n.a. 2 2 N.A. 100 Veterinary stations involved in Rift Valley No. n.a. 100 61 N.A. 61 Fever investigations Vaccine for Teschen disease tested % n.a. 100 100 N.A. 100 Eradication program completed n.a. 100 15 N.A. 15 (iii) Privatization of veterinary services Private veterinarians established No. 90 90 90 100 100 Private vets mandated by Government No. 90 90 85 94 94 Veterinary promotion center established No. n.a. 1 1 N.A. 100 Overall vaccination rate for veterinarians % n.a. 100 56 N.A. 56 (iv) Privatization of breeding centers Privatization studies completed No. 22 16 16 73 100 Centers privatized (3) No. 22 20 2 9 10 (v) Livestock database National documentation center established No. n.a. 1 1 N.A. 100 Regional documentation units established No. n.a. 6 6 N.A. 100 Livestock database established No. n.a. I I N.A. 40 1. Construction has already been completed but the premises are considered by European Union experts to be inadequate. The EU is financing the construction of another building at a more suitable location. 2. n.a. = not estimated 3. As a result of Privatization Law, responsibilities transferred to Privatization Committee, which has yet to address the matter. However, Government divestiture of breeding centers is already effective as all operations have ceased at the centers..  14 B. Support to Extensive Beef Production Unit Target Completed (i) Rehabilitation of livestock services Appraisal Revised Unit % App. % Rev. Regional livestock offices rehabilitated No. n.a. 4 3 N.A. 75 District livestock offices rehabilitated No. n.a. 31 31 N.A. 100 (II) Establishment of beef farmer associations Members of associations No. 252 500 2048 819 410 Associations operational No. 36 36 131 364 364 (iii) Production infrastructure created Drinking points developed No. n.a. 72 47 N.A. 65 (iv) Genetic improvement Artificial insemination posts established No. n.a. 3 3 N.A. 100 Females inseminated No. n.a. 400 283 N.A. 71 (v) Feed improvement Fodder trials laid down No./yr n.a. 12 0 N.A. 0 Urea-treated fodder trials No./yr n.a. 60 33 N.A. 55 (f) Studies Livestock development studies completed No. n.a. 12 8 N.A. 67  15 C. DAIRY DEVELOPMENT Unit Target Completed (a) Extension support and development of Appraisal Revised Unit % App. % Rev. livestock farmer associations Total number of association members No. 14,000 12,000 10,765 77 90 - in FIFAMANOR area No. 4,500 2,500 2,460 55 98 - in ROMA area No. 9,500 9,500 8,305 87 87 Approved grass-roots associations No. 850 850 814 96 96 Approved unions of associations No. 150 190 136 91 72 Approved federations of unions No 15 17 14 93 82 Approved women associations No. n.a. 181 130 N.A. 72 (b) Feed improvement Fodder trials (FIFAMANOR) No./yr n.a. 514 635 N.A. 124 Improved seed production Ha/yr n.a. 125 174 139 139 Seed production by ROMA associations Kg n.a. 5,400 6,626 N.A. 123 Establishment of nutrition laboratory No. n.a. 1 1 N.A. 100 Feed rations formulated No./yr n.a. 118 136 N.A. 115 (c) Genetic improvement __X_____=_ __X Bulls tested for breeding No. n.a. 265 238 N.A. 90 Doses frozen semen produced No. n.a. 9,000 130 N.A. 1 Cows serviced No. n.a. 50,000 46,416 N.A. 93 Cows inseminated No. n.a. 10,000 6,066 N.A. 61 (d) Animal health improvement _ _ Village pharmacies established No. n.a. 138 135 N.A. 98 (e) Milk collection and processing _ _____ __ _X. X Collection centers established (ROMA) No. 50 75 100 200 133 Support to ROMINCO processing plants No. 3 3 0 0 0 (f) Livestock Promotion Fund Milk collection points established No. 46 46 57 124 124 Milk collection centers established No. 18 14 5 28 36 Mini dairy plants established No. 3 3 2 67 67 Mini feedmills established No. 15 4 7 44 175 Salt lick plants established No. 2 2 2 100 100 Milk road rehabilitated Km n.a. 250 216 N.A. 86 (g) Support to rural finance Savings and loan associations established No n.a. 47 48 N.A. 100 Members of associations No. n.a. 8,500 7,765 91 Volume of savings FMG n.a. 280 382 N.A. 136 million I I  16 TABLE 6: IMPACT INDICATORS Project Objective Actual At Full Development 1. Extensive Beef Production (a) Calf mortality From 23% to 15% 10% decrease over 10 years (b) Yearling mortality From 6.5% to 4.5% Not available over 10 years C Birth rate From 62.5% to 64% Not available over 10 years (d) Milk production From 500 I to 600 1 Not available per lactation (e) Increase offtake 80,000 per year Not available (f) Incremental farmer revenue $150 per year after Not available from 50 head herd 10 years 2. Highlands Dairy Production (a) Incremental milk production 1,500 1 per year 1,948 1 per year 2,000 1 per year per cow (base: 1993) (b) Total incremental milk 80,000 1 per day in 60,270 1 per day 80,000 1 per day production 10 years 3 Incremental income per cow (d) Increased return to labor From $0.50 to $1.50 _____________________________ per person-day  17 Table 7: Studies Included in Project Study Purpose as defined in Status Impact of Study l _____________________________ SARlredefined Incidence of Rift Valley Fever in Improvement of Completed Incidence evaluated and mapped, and cattle animal health disease monitored Country declared disease-free. Incidence of tuberculosis in cattle It Long term eradication program planned. Incidence of anthrax and related " Vaccination programs underway. diseases. Testing of vaccine against Effective vaccine available against Teschen disease. disease. Establishment of epidemiological " Surveillance network operational. surveillance network. Feasibility of installation of Privatization of All 90 private veterinarians earmarked private veterinarians. veterinary practice. installed. Installation of milk collection and Private sector Most appropriate locations agreed by processing centers. development. producer associations. Feasibility study of dairy Economic feasibility confirmed. investments Establishment of feedmills and mineral licks. Sustained development of the Designed as sustainable revolving fund. Livestock Promotion Fund Future of ROMA. Government Agreed plan designed for Government divestiture and private divestiture from ROMA and ownership sector development. by producer associations. Establishment of animal nutrition Not identified at Laboratory operational and providing laboratory. appraisal excellent service to producers. Financial audit of ROMINCO. Viability of Confirmed the non-viability of l___________________ ROMINCO. ROMINCO. Survival of ROMINCO I c Survival plan prepared. Preparation of livestock database. Reinforcement of A current database now available. Livestock Department.  18 (continued) Study Purpose as defined in Status Impact of Study SAR/redefined Socio-economic study of System improvement " Little impact of results on the systems. extensive beef production systems. I Marketing of cattle in the mid- I IC Little practical application for results. west. Use of molasses urea mixes for I Beneficial use confirmed but not very cows accessible to cow keepers. Evaluation of oats and urea- Feeding systems Completed Now being used to some extent by producers. treated rice straw for cow-feeding improvement in dry season. Milk quality in Vakinankaratra. " Exposed poor bacteriological quality of milk and underlined need to give high priority to quality issues. Evaluation of improved Manja Production systems " Confirmed potential for further development. Boina cattle in suburban areas of improvement. Mahajanga. Breeding and cow management. " Improvement of dairy production. Technical and economic aspects " Demonstrated economic benefits of control. of tick control. Degree of immunization of dairy " Improved understanding of resistance to animals to diseases transmitted by diseases. ticks. Bibliography of bovine Provided database for planning of long term tuberculosis. eradication program. Reform of technical education at 99?????? EASTA Mahajanga. Privatization of breeding centers. " No privatization actions completed due to new Privatization Law. Administrative, financial and Institution Implemented by CP. accounting organization of CP, strengthening and preparation of manual of procedures.  19 (continued) Study Purpose as defined Status Impact of Study in SAR/redefined ___ Mid-term evaluation of milk Monitoring Inputs into Bank mid-term review mission. production, extensive beef and evaluation production, and institution strengthening components. l Evaluation of project's Input into the continuous adjustment of project sociological impact. directions. Evaluation of project's economic impact. Evaluation of private Redefinition of roles " Provides base for strengthening role of private veterinarians and of program to of public and private veterinarians and for redeploying redundant public divest MinEl's field services. sectors services. Mid-term evaluation of Not identified at Identified weaknesses and recommended corrective activities of savings and loan appraisal. action. associations. Preparation of a national policy Production system Laid the base for directions to follow. for genetic improvement. improvement.  20 TABLE 8: PROJECT COST Appraisal estimate Actual/latest estimate (US$ million) (US$ million) Local costs Foreign costs Total Total A. Production Development. 12.18 11.29 23.47 _ _ Extensive Cattle Systems 4.49 3.93 8.43 3.81 Highlands Dairy Development 7.69 7.36 15.04 9.31 B. Institution Building 3.40 5.21 8.61 12.38 ..Strengthening DEL 1.65 3.02 4.67 ..Monitoring & Evaluation 0.41 0.52 0.93 -.Privatization of Veterinarians 0.79 0.87 1.66 ..Divestiture Program 0.28 0.23 0.51 ..Formal Training Review 0.27 0.57 0.64 iPhysical Contingencies 0.89 0.89 ! 1.78 Price Contingencies [ 1.64 3.13 [ 4.77 l TOTAL Project Costs _18.11 20.52 38.63 28.28 TABLE 9: PROJECT FINANCING Appraisal estimate Actual/latest estimate US$ million US$ million 1j % Appraisal IDA 19.80 19.44 98 CCCE 5.40 0.04 1 MCD 1.00 1.63 163 NORAD 2.10 2.05 98 Farrners 2.60 n.a. - Government 7.70 5.11 66 Total 38.60 28.28 73  21 TABLE 8: ECONOMIC COSTS AND BENEFITS The main quantified benefit resulting from the project comes from increased milk production in the highlands, foi which an economic rate of return (ERR) of 19 percent has been calculated for a speed of development of 10 years, as compared to the appraisal estimate of 13 to 19 percent, depending on the assumption on the speed of development of 10 or 8 years. At full development, the incremental milk production is estimated to reach thl appraisal figure of 30 million liters per year. For extensive cattle production, the ERR was not estimated as more lead-time is needed to quantify emerging benefits resulting from improved health care under health programs bein conducted by private veterinarians. These benefits have been delayed due to project implementation problems. At appraisal, an ERR of 17 to 22 percent, depending on the share of the cattle population that would be affected (30 to 50 percent), was estimated. With hindsight, this figure was probably over-estimated, given the severely constraining socio-economic environment, including external market conditions, for extensive beef production. Given the very poor state of roads and the time needed for the installation of private veterinarians and for them t become operational in the dispersed western and northern regions, it was unrealistic to expect that they would havy the capacity to treat 30 to 50 percent of the cattle population in these regions during the relatively short span of the project. The main impact of the component was to come from improved health care. The appraisal assumption that beef exports to EU would continue, if not expand, also did not materialize as that market was closed durinn project implementation. However, the low project benefits estimated at project completion could become importan at true full development when significant health coverage is expected. A new benefit, not foreseen at appraisal, relates to significant calf survival and milk production increases in the extensive zones resulting from water suppll improvements carried out under the project. The benefits, when combined, could yield high ERRs but need to be verified further.  22 TABLE 9: STATUS OF LEGAL COVENANTS Agreement Section Covenant Present Original Revised Description of covenant Comments type status fulfillment fulfillment date date DCA 4.02 Financial CP Implementation of COMODEL has completed divestiture program privatization feasibility studies for the units earmarked, but has been superseded by the Privatization Committee, set up under the Privatization Law, which has not given priority to their privatization. 4.03 Financial C Hiring freeze A general freeze is in effect. 4.04 (i) Financial CD Not grant exemptions for The 94 budget law raised the duties on dairy products level to 30%, as for other dairy. products. 4.04 (ii) Financial CD Regulate imports under An interministerial committee food aid so as not to has been created to coordinate perturb the local market import and decide on pricing mechanisms. The local market is actually very competitive. 4.04 (iii) Management CD Annual donors meeting No longer necessary for coordination of food aid l 4.05 (i) Management CP Effectively enforce Ongoing sanitary protection regulations at airports l 4.05 (ii) Management C Restrict animal imports, Ongoing requiring quarantine, to air transport arriving at the airport at Ivato- Antananarivo. 4.06 Management C Restructuring of DEL. Effective since February 1992. Schedule Management CD 11/94 Carry out mid-term Completed in April 1995. 4 para. 2 review Schedule Management CD 02/95 Review report of mid- Completed. 4 para. 3 term review with Government and donors and take appropriate corrective actions. Schedule Financial CD Cost recovery for Funding for vaccination is no 4 para. 4 veterinary services. longer included in Government budget. Producers now pay full cost of services and drugs, which are provided by private veterinarians. C: complied with CD: complied after delay CP: complied with partially  23 TABLE 10: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS Statement number and title Describe and comment on lack of compliance No major lack of compliance was observed TABLE 11: BANK RESOURCES: STAFF INPUTS Stage of project cycle Actual Weeks US$ '000 Preparation to appraisal 73.9 164.3 Appraisal 18.5 38.9 Negotiations through Board approval 5.6 13.6 Supervision 141.9 418.6 Completion 2.0 5.2 TOTAL 241.9 640.6  24 TABLE 12: BANK RESOURCES: MISSIONS Stage of Project Month/ No. of Days in Specialized Staff Performance Rating Types of Problems Cycle Year People Field Skills Represented Implem Devel- entation opment Identification 05/88 2 16 LS, C n/a n/a n/a Preparation 12/88 1 12 LS, LS n/a n/a n/a 11/89 3 20 LS, V, AE 03/90 2 13 AE, LS Pre-Appraisal 09/90 6 21 AE, AE, AE, LS, V, n/a n/a n/a A Appraisal 01/91 3 18 AE, LS, V n/a n/a n/a Board approval 05/91 - 2 40 AE, C n/a n/a Delays in fulfillment of through 08/92 conditionalities concerning effectiveness legislation, legal reformn of entities, and cross- effectiveness of cofinancing _______ ________ ~~~~~~~~arrangements. Supervision 1 10/92 1 20 AE 2 2 Unstable political situation, inadequate legal framework, and weak project management. Supervision 2 06/93 1 21 AE n/a n/a Inadequate legal framework, no cost recovery for vaccination, and inappropriate food aid pricing. Supervision 3 10/93 2 22 AE, LS 2 1 Weak project management, inappropriate food aid pricing, and lack of monitoring and evaluation. Supervision 4 05/94 1 30 AE U S Weak project management Supervision 5 09/94 1 17 AE n/a n/a Staff reorganization. (informal) __I Supervision 6 03/95 6 24 AE, A, FOS, LA, S S Weak project management (mid-term LS, AHS (procurement), absence of review) regulatory framework, and lack of capacity of other project entities. Supervision 7 06/95 4 25 AE, LA, PSS, AHS S S Staff redeployment, animal health standards and sanitary inspections and control.  25 (continued) Performance Rating Stage of Month/ No. of Days Specialized Staff Implem- Devel- Types of Problems Project Cycle Year People in Skills Represented Entation opment l_______ Field Supervision 8 09/95 2 10 AE, A n/a n/a Insufficient counterpart (informal) funding. Supervision 9 01/96 2 22 A, E S S Slow integration of crop and livestock extension services, poor roads, and lack of access to credit. Supervision 10 06/96 1 10 A n/a n/a Insufficient counterpart (informal) funding, poor roads, and no access to credit. Supervision 11 09/96 1 12 A S S Insufficient counterpart funding, poor roads, and no access to credit Supervision 12 05/97 1 12 A S S Staff reorganization, and slow integration of crop and livestock extension. Supervision 13 12/97 2 12 A, V S S Staff reorganization, and incidence of bovine tuberculosis. Supervision 14 06/98 2 12 A, V S S Staff reorganization, and incidence of bovine tuberculosis. Supervision 15 11/98 2 12 A, V S S Stagnating beef production. Completion 06/99 1 12 A S S Staff Skills: Ratings: A: Agriculturist I - Insignificant problems AE: Agricultural Economist 2 - Moderate problems AHS: Animal Health Specialist 3 - Major problems, appropriate actions being taken C : Consultant 4 - Major problems, not being addressed adequately E :Extension Specialist S - Satisfactory FOS: Farmer Organization Specialist U -Unsatisfactory LA: Livestock Advisor LS : Livestock Specialist PSS: Priority Setting Specialist V: Veterinarian  26 Annex 1 Summary of Borrower's Evaluation Report Project Context I . IDA credit No. 2243-MAG and NORAD grant TF22065, funding the Livestock Sector Project, were closed on June 30, 1999. A grace period of four months was granted for completing disbursements. The project had started in 1993 (reference year). The other partners, aside from the Malagasy Government, included the Fund for Aid and Cooperation (France) for technical assistance and the French Agency for Development (ex CFD) for a program of rural track rehabilitation that will continue until 2001. Presentation of Results 2. The results are detailed, in grouping all data (implementation, commitment, impact, sustainability and future prospects) per entity as per the project organization, but grouping by component is also made in a number of chapters (FIFAMANOR for milk production on the highlands and DEL/PBE for extensive beef production. To note that disbursements for 1999 refer only to the first three months, the official cutting off date for commitments by entity decided for the project (earlier commitments were made by CP/PSE regardless of entity). Project Costs 3. Including ongoing payments for invoices, the IDA credit and the NORAD grant will be disbursed at, respectively, 99.18% and 100% by October 31, 1999, subject to exchange rate fluctuations. Categories 1 and 5 of the IDA credit were overdrawn; due to implementation of activities not foreseen at project start-up, such as IDA financing of rural track rehabilitation, construction of the National Reference Laboratory, rehabilitation of the project headquarters at Anosimasina, and decentralization of technical and financial activities of the project to the regions. This caused an increase in operating costs. The NORAD grant was also overdrawn in categories 1 and 3, due to the distribution of improved bulls and to the execution of an audit and strategy study for ROMINCO. It should be noted that these extra disbursements did not affect the overall allocations of the IDA credit and NORAD grant. In summary, the financial results of the project, up to October 31, 1999, will be as follows: IDA credit: US$19.44 million; CCCE grant: US$ 0.04 million; FAC grant: US$ 1.63 million; NORAD grant: US$ 2.05 million; Government: US$ 5.11 million Overall Economic Viability of Project and Results Obtained 4. The project has yielded significant economic benefits, as shown by an internal economic rate of return (ERR) of 19%, which is quite acceptable given the important funding of institutional strengthening that has not directly yielded positive financial flows. The cost of French technical assistance was also included in the calculation of the ERR, but depreciation charges were excluded. The project had created at the end of 1998 about 18,500 new permanent jobs in the intensive dairy sector. In addition, it generated an additional GDP of more than FMG 84 billion between 1994 and 1998, or equivalent to 10.5% of the GDP growth, for the livestock/fisheries sectors for the same period.  27 Milk Production in the Highlands 5. The bulk of the economic benefits is due to intensive milk production in the milk triangle with an incremental production calculated in 1999 to be around 14 million liters for a value of FMG 21 billion. The objective stated in the 1991 appraisal report was thus achieved within the timeframe, while using a less favorable, but more realistic, starting point for the FIFAMANOR region (1,100 liters of milk per cow per year, instead of the 500 liters assumed in the appraisal report). This sector has a promising future, with an important growth and a market that is far from being satisfied. World prices of milk powder have been favorable for the project (EU policy to reduce stocks since 1994), even if a slight fall occurred in 1998 (reduction in demand by the large Asian importing countries). A detailed note on this matter was submitted to the World Bank in 1997 and 1999 (a project risk identified in the appraisal report). On the other hand, an important problem that has been well-quantified by the project, is that of milk quality, which should become the main issue for operators in the sector. Thus, an interprofession approach for the future would be the only way to resolve the problem, namely through premium payments for quality. IDA support is requested for that phase. Besides, NORAD funding under bilateral aid has already been secured for continuation of technical work at producer level (through support to FIFAMANOR). Extensive Beef Production 6. Results are below appraisal estimates. The project achieved significant results only on water supply development which had a clear impact during the dry season. The main results are an increase in milk production and reduction in the death of calves (incremental production of more than 11 million of liters worth FMG 29 billion and 21,000 calves saved for a value of FMG 3.3 billion.). The technical themes promoted were not always appropriate and were programmed only as pilot operations. However, they enabled orientations to be set, namely for producers who wanted to move to a more intensive production system. The international market was also not favorable to beef production, as a result of falling prices following the mad cow crisis in Europe, and the ban of Malagasy beef exports to the EU (still in effect). Finally, activities in specialized subsectors (honey, silk and pig production) have confirmed their importance for revenue generation in rural areas (poverty reduction), particularly for women. The project requests IDA involvement in providing technical support to these village activities that can be readily intensified. CP/PSE has prepared a project on this. This could be carried out in synergy (in the framework of PADR) with French cooperation that is already supporting (and will continue to do so) the poultry and pig subsectors in the area of professional organization. The continuation of the water supply development program will depend on the identification of needs by regional stakeholders in the framework of the regional preparation teams for PADR.. Institutional Strengthening 7. Other than the changes in behavior it has brought about, the new sector policy framework put in place by the project has enabled to strengthen public services in: * organization of epidemiological surveillance; * collection of statistical data, with publication of the 1998 annual statistics report; * programming and evaluation of the sector and of livestock projects, with an effective system of implementation and impact indicators, and a consolidated annual report of the program which includes all donors and projects; * training, documentation, and communication; * coordination of activities in the sector, namely the evolution of the project into a program as from 1994 through integration of all funding sources and donors. The publication since 1997 of consolidated annual  28 reports, including all activities and donors, is the clearest example. empowerment of decentralized services, the project having reached a true contracting mode of its activities and financing with regional livestock services. 8. The follow-on to IDA financing for certain aspects of institutional strengthening (animal health and food hygiene) has already been confirmed by EU, which will include the first phase of the bovine tuberculosis control program under its PASA project. Main Trends in the Sector 9. The project has been effective in introducing changes in the sector, namely in: * cost recovery in animal health. Until 1993, vaccination and veterinary services were provided, free of charge, by Government services. The principle of full payment for veterinary services, after a period of resistance and a sharp drop in vaccination rates, is now accepted by all as confirmed by the sociological survey and increasing rates of vaccination coverage since 1996 after the brutal drop in 1994; * privatization of veterinary practice. Here also, the project has confirmed the feasibility of empowering the private sector for a number of tasks. This orientation is now well understood in spite of some understandable reluctance by Government staff concerned over their future. Support to the process (without funding for installation) must continue, and IDA support is being requested for this. * privatization of Government production units. Unfortunately, project achievements have been below target. Only the studies have been completed. The final decision rests with the Privatization Committee, which was created during the project. * empowerment of livestock producers. On physical problems (rural tracks, water supply, marketing of products, ), there has been a significant shift in attitude towards a progressive taking over by beneficiaries, which can increase with the creation of GTDR (participation in regional projects). The initial participation of beneficiaries was generally easy to achieve. However, there is much to do to ensure sustainability. Regrouping of all these professional entities on the same site at Anosimasina is a very good initiative for future collaboration between the public sector and its private partners. In this process of transfer of responsibility, a number of technical actions need to be supported. * re-focussing of public sector on its permanent functions. Government livestock staff have now well understood their main functions, even if some progress is still needed in the daily routine. * restructuring of the public services that must accompany this "revolution" in operating practice. The debate on this matter has started and, with access to material from relevant studies carried out under the project, can be completed within a reasonable timeframe. Funding from EU has been secured to accompany this phase. * decentralization of activities and funding. Through its program contracts (for private and parastatal entities) and service contracts (for government services), the project has established the practice of decentralized management (activities and funding) within MinEl and preferential recourse to operators specialized in project implementation. The Livestock Project and PADR 10. The follow-on of livestock development activities of the World Bank will be set within the new approach for PADR. The project has contributed significantly to the debate on this matter (the Project Coordinator is a permanent member of the Equipe Permanente de Pilotage and participated in GTC and GTDR). A number of principles of PADR were already largely applied to the project (decentralization, participatory approach, clear definition of respective roles of the public and the private sectors). However, as the country moves towards  29 regional autonomy system, a central responsibility or at least a national coordination is mandatory for certain activities to avoid moving backwards (functions connected with "Competent Authority", national policy of genetic improvement, control of tuberculosis, and African swine fever, etc.) The National Coordinator Livestock Sector Program Ralambofiringa Arsene (signed)   Annex 2 Page 1 of 8 IMPLEMENTATION COMPLETION REPORT MADAGASCAR LIVESTOCK SECTOR PROJECT (Cr. 2243 -MAG) Borrower's Comments Borrower's Comments on ICR  Annex 2 Page 2 of 8 RUODLIK'I DMAAGASDURA Tanura - ?aafh - d Yadro MUSTDEL DE LFELEAGZ Amanzuivo, it 4 SEP. 1955 SECRETAZ G L PAWGRAMME SECgORlL EI2VAGE Lo Crmmatoa du Pogmm Seoidel'evWe CELLUL DE =OTAGE B.P. 121 TEA =32573-22."735 1 Ea t221.1L94 1nsicutIg Ip RW 6s= Raddnt de Is Baque WAd N -_4_5 0_ /" N 3 & M G/P S Z /C P 31S 1'gntlou de Moeslax Ziva RAZAPIWTSALAMA) 12AM: kapport d'ach&voment du Pojet Sectrt Eleag. - 2$3 1AG ___ . ICK de A Banquo Mondialb */L N*155199/NM4EL du 23107/99 Morsieur, En accusant riception du document cltA on rdf&ace, nous avons I'hozneur do vo comUnquor quelquos commentaires et lea rensignns suppldaestairs requl. Nou vous oonmons qu il rapport de cZture transrls par Monsur la bfinimo de 1'Etevagc wu rdfene supra, constitmt b6 rapport de lmpnmteur. , eon aChoet t BDanque mondiale en et destinatrm Cc rapport contian: un risurn6 ot lea perspectves du projet, - los rdsbations techniques et financires par raport aux objectifs ainsi que I.s impacts, lc bilan et les parapectivos par agence d'ex6cution du prcet, - la rentabilitd les effets Induits et la coot du pro3jet - en annex., los tudes, les tuavvx de consultations et Ws formaions affectuEs dan. le cadre du projga Suit. i votre demande, nou vous oommuniquons l'Evalualon des erormances des bailleurs et cellos de 1'Empruntcur. La ficbe joint. donne la suitsion des indicsteurs d'impacu, d6fnie dans l'ICR (Table 6), domen compldrde et epliqude. Ndanmoins, quelqucs observaons sur le contenu de cet ICR mdritent d'&re soulign6es: De 1'exploitatioa oe Is syntbdse des ndicateuns de suivi d'exocution du projet au 30 juin 1999 (base do donndes, locaux des r6gions rd&abiiit, points d'abreuvemenr, membres des usociadons, associations or lgroupements, finances rurales, ...), nous vous t-annmttons ci-joli un tbleau r6capltulatK Identifian Is contnbution de chaque pVnafre finanler. sur la base de I'adhision & 1'exncution de la Dclaration de Politique Sectorielle. Lca donn6o ainsi foumnics sont on cohErence parfte aux informadio d6crites danA le rappor de clate su-rfIrenci6. Quelques transcriptions sont A ajuster. Ainsi, au point 28: 206 km de pistes ont &6 rihabilit6cs au lieu de 216 kn, at qu'il y a Ueu de lire 87 cenrs et points de colecto au lieu de 86, au paragraphe 29,  Annex 2 Page 3 of 8 Concruant la rm rccumu des lntudona, point 10 do aEvatio# mazumy V .C point Is dA ii Pat IX. l'opaonal du cmntreo da a a mntm 4onaaes d do u pea 66 p's 'a ooalddiato. Ausui l eat ndesaai de soulipr 1'odez u fta va a fomiatos an cascadet ls p satio he fonatios local. toucha -un plus gand nomb de bdcairo at sur dei thAme IdontifTa par MIM w&m& - Sur lea 1ipns appzisat du prot pO 45 deoatBe t Ils .routil a OWD pmwo ou conw de ervice i, utihsi p~ar los agance. d ' xdwIou~4~p . P to oblie i aindre [ous objeWt: la tasmparene du proeddures pour une z d'pplic h slon un oronogruamoe concert. * Sur Iss saatages ecaCb o eonomique du pr.jot (table *), Ib tux d rentabilit intome (rRI) du projet sa de 9Igo ca,uld xar IL boea dt 10 m mas non Sur 9 ML Dan s on lm o Wi e s*Ial et au ddvsloppem t niul en pedariliar, ous ntmn quo la pr aet * cr it.905 ols permo t loanan t vao jt& addWounle eat o nd 2 go mllier MG. So pan, dano s cIsanc du P du saoctw dlevApAMe I, p*iode 1994 -I99s ,e s o. u 12i,I clle.du PI dtu Wcrw pdakr pow [a m5m pdriode co de 3.6