Ghana - Fisheries Project

RESTRICTED Report No. P-740 FILE COPY This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF GHANA FOR A FISHERIES PROJECT September 11, 1969  :NiThRi5;ICNAI. EVElP'ENr ASSOCIATION_ REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF GHANA 1. I submit the following report and recommendation on a proposed development credit in an amount in various currencies equivalent to US$1.3 million to the Republic of Ghana to assist in financing a fisheries proJect. PART I - HISTORICAL 2. The proposed project was identified during the course of a Bank identification mission in October/November 1966 and was prepared with the help of an FAO/IBRD Cooperative Program mission in June 1967. 3. In August 1968, the Government requested the Association's assis- tance in financing the proposed project, which was appraised in September/ October 1968. Negotiations were held in Washingtn in April 1969. The riegotiators for the Republic of Ghana and the other Ghanaian parties were His Excellency E.M. Debrah, Ambassador of Ghana to the United States; Mr. I. Ackom-Mensah, Managing Director, Ghana Industrial Holding Corporation, Mr. J.N.N. Adjetey, Chief Fisheries Officer, Ministry of Agriculture; and Mr. A.D. Tagoe, State Attorney, Attorney-General's Office; and Mr. J.E. Yeboah, General Manager, Agricultural Development Bank. 4. The followning is a summary statement of Bank loans and IDA credits to Ghana as of Aug. 31, 1969: Loan or Amount (US$ million) Credit No. Year Borrower Purpose Bank IDA Undisbursed 310 GH 1962 VRA Power 47.o .1 l8 GHE 1968 Republic Pawer dis- 10.0 h.3 of Ghana tribution 618 GH 1969 VRA Power ex- pansion 6.o 6.o S-7 GH.. 1969 Republic Highway of Ghana engineering 1.5 1.5 160 GH 1969 Republic Water supply of Ghana and sewerage _ 3.5 365 Total (less cancellations) 53.0 15.0 of whiclh has been repaid to Bank and others 2.8 Total now outstanding Amo-unt sold: .1 of which has been repaid .1 Total now held by Bark ard D A g42 __7_ Total lindisbursed ____ 9.3 __  - 2 - 5. The Volta Project, financed by Loan No. 310-GH, was completed in early 1966 about a year ahead of schedule and at considerable savings on the original cost estimates. The construction works for the power distribution project, financed by Credit No. 118-GH, is progressing satis- factorily. The Electricity Corporation of Ghana had had difficulties on its accounting and financial side, but has now taken remedial measures suggested by IDA, including employment of a firm of consultants and a qualified chief accountant. 6. The proposed credit would, therefore, be the sixth Bank group financing in Ghana. Appraisal for a cocoa rehabilitation project is currently taking place and a proposal for a credit of about US$6 million is likely to be presented to the Executive Directors towards the end of Fiscal Year 1970. PART_II - DESCRIPTION OF THE PROPOSED CREDIT 7. BORROWIER: The Republic of Ghana. BENEFICIARIES: The Agricultural Development Bank and Ghana Industrial Holding Corporation. PURPOSE: To assist in financing the foreign exchange cost of fishlng vessel construction through credits to fishermen and to finance the foreign exchange cost of technical assistance, spare parts and studies for fishing port development. AMOUNT: US$1.3 million. AMORTIZATION: In 50 years, including a 10-year period of grace, thrcugh semi-annual installments of 1/2 of 1% from December 15, 1979 through June 15, 1989 and of 1-1/2% from Dccember 15, 1989 through June 15, 2019. SERVICE CHARGE: 3/4 of 1% per annum. RELENDING TERMS: The Borrower wo,bId relend a substantial part of the credit to the Agricultural Development Bank at 6-1/2% per annum for about 9 years, including a 3 year grace period, and a small amoiunt to the Ghana Industrial Holding Corpora- tion for technical assistance andspare parts at 6-1/2% per annum.  - 3 - PART III - THE PROJECT 8. An appraisal report entitled "Ghana - Fisheries Project" (PA-7) is attached. 9. The project is the first stage of an overall longer-term program for expansion of fisheries in Ghana which, in addition to the increase in the number of fishing vessels, would involve expansion and modernization of port and marketing facilities. The project includes: the construction, equipping and operation of about forty purse seine fishing vessels for :Lflshore fishing; technical assistance, including the provision of a naval architect and production manager, to the Boatyards Division (BD) of the Ghana Industrial Holding Corporaticn (GIHOC); and harbor studies for future fishing port development. :10. The total project cost is estimated at US$2.3 million, of which local currency expenses equivalent to approximately US$560,0oo would be provided by the Government and GIHOC and approximately US$430,000 would be provided by the fishermen as down payments under hire purchase contracts and as working capital for operation of the vessels. The foreign exchange component of the project, amounting to US$1,3 million, would be financed out of the proceeds of the credit. This would cover the purchase of engines, nets and gear and other equipment and the foreign exchange cost of consul- tants' services and technical assistance. 11. The proceeds of the credit relating to the construction and equip- ment of the fishing vessels (US$825,000) would be relent by the Government to the Agricultural Development Bank (ADB). The ADB would in turn onlend these proceeds to approved purchasers of fishing vessels as part of the hirc nurchase arrangements, and GIHOC would, on behalf of the purchasers, undertake procurement of materials and equipment and the constructicn of the vessels. 12. An amount of US$175,000 would be relent by the Government to GIHOC ^or the purchase of hand tools and minor equipment for BD and spare parts required for the maintenance and repair of vessels. Part of this amount could be used, if needed, to supplement technical assistance to BD wihich is being provided by the UIRP. 13. An amount of tJS$230,000, will be utilized by the Government for financing the foreign exchange cost of consultants' services for conducting harbor studies at Tema for improvement of the existing fishing port and preliminary studies at Elmina and lumnford, followed by a detailed study of one of these two ports with a view to the possibility of constructUJx; an additional fishing port to handle the future expansion of the fishing fleot. 14. The ADB has competent management, and, while it would in the initial period depend on BD's expertise in the screening and evaluation of loan app'1- cants and collection of installments, it is expected that in due course it would gain sufficient familiarity with these operations to handle the entire function on its own and administer the loans effectively. The BD has had cc:n-  siderable experience in boat construction. A naval architect will finalize a new, simpler and somewhat cheaper design which would permit more effectiv; uses of timber and skills available locally, and a production manager would improve overall production efficiency. Both of these experts have recently been engaged under a UNDP/SF project. 15. Procurement of items financed under the credit (other than con- sulting services) would be on the basis of international competitive biddinc, and disbursements would be made only for the actual foreign exchange cost ol materials, equipment and services. 16. Ghana, which is one of the largest producers and consumers of fish in tropical West Africa, currently has an annual deficit of about 20,000 tons of fish which has to be met by imports. The expansion of the fishing fleet resulting from the proposed project tould increase fish production by about 9,000 tons per annum -- the landed value of vhich amounts to about $1.3 million. In addition to this, tho project would establish the framework for further development in the field of fisheries by strengthening BD to enable it to produce modem, technically improved vessels, by providing institutionalized credit for the purchase of vessels and by providing a basis on which decisions on future fishing port develop- mnent could be made. 17. The project is well conceived and is technically and economically sound. Assuming a ten-year operating life for the fishing vessels, the financial rate of return on the vessels would be 30 per cent -nd the economic rate of return is expected to be about 50 per cent. PART IV - LEGAL INSTRUMEI3TS AN'D AUTHORITY 18. The draft Development Credit Agreement between the Republic of Ghana and the Association, the draft Project Agreement between the Associa- tion and GIHOC the Recommendation of the Committee provided for in Article V, Section l(d) of the Articles of Agreement and the text of a Resolution approving the proposed development credit are being distributed to the Executive Directors separately. 19. The draft Development Credit Agreement and draft Project Agree- ment generally follow the pattern of other agreements for fisheries project:. Section 2.07 of the Project Agreement limits the sales price of the project fishing vessels to N0 44,000 ($43,120) each plus amounts acceptable to the Association on account of increased costs of the Boatyards Division. PART V - THE ECONOMY 20. A rpport on "The Current Economic Position and Prospects of Ghana" (Aw-6a), and a subsequent updating economic memorandum dated June 12, 1969, were circulated to the Executive Directors on May 7, 1969 and Jutne 19, 1969, respectively. A basic data section containing sone recerit- information is attached to this report as an annex.  21. The salient features of Ghana's economy were discussed in the "Report and Recommendation of the President to the Executive Directors on a Proposed Loan to the Volta River Authority with the Guarantee of the Republic of Ghana" (P-703) dated Milay 22,1969. Its main conclusion was that even to make a modest growth in GDP of the order of 4 per cent per annum possible, Ghana would require a substantial inflow of resources to finance an increase in investment, particularly in agriculture, power and road transport. W-ith heavy maturities of past borrow ings to be met and with large amounts of fresh money to be raised, it is important that Ghana borrow a substantial part of its requirements on concessional terms, 22. Political developments are encouraging. A constituent assembly, convened under the auspices of the Iational Liberation Council, promulgated a new constitution in August 1969. As a result of elections held in late August, a cabinet responsible to the National Assembly and a Presidential Commission which would discharge the functions of the President as an interim arrangement took office a week ago8 Given political stability, and re.aistic economic policies specifically regarding the main export, cocoa, and some consolidation of the external debt, there is reason to expect a gradual improvement in Ghana's economic position. PART VI COIIPLIANCE. WTITH ARTICLES OF AGREEMENT 23. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association, PART VII - I--0iJ4-LITLi-i.TICI T 24. I recommend that the Executive Directors approve the proposed development credit. Robert S0 McNamara President Attachment Iashington, D. C. September 11, 1969  BASIC DATA (based on exchange rate of NO 1000 = $0.98) Area: 92,100 square miles Population: 8.4 million Rate of growth: 2.6 - 3.0% Density: 91 per square mile Political Status: Independent: March 6, 1957 Gross Domestic Product: 1967 - at current prices: $1,758 million 1967 - at 1960 prices : $1,119 million 1968 - at current prices: $1,904 million 1968 - at constant prices: $1,794 million Rate of growth 1962/63 - 1966/67: 4.7p (at constant prices) 1968: 2.5% (at constant prices-est.) Money, Credit and Prices 1966 1967 1968 Money supply $212 mill. $236 mill. $251 mill. interest rate, Central Bank 7% 6% 5.5% -ir terest rate, Commercial Bank Prime 8% 8.5% 8.5% Interest rate, Commercial Bank Average 9.5% 9.5% 9.5% Consumer Price Index (March 63=3.00) (Annual Average) 161.9 157.0 169.7 12vholesale Price Index (1961=100) 134.4 136.7 162.9  Balance of Payments: (US$ million) 1965 1966 1967 1968 Exports 321.1 280.2 284.5 318X5 Imports (C. I. F.) 481.1 355X9 294.8 302,8 Trade balance -160.0 0 75.7 - 10.3 -l5.7 Net invisibles - 62.2 - 54,3 - 70.9 _73.4 Current acci-unt balance -222.2 -130.0 - 81.2 -57.7 Net private capital 85.8 52,8 25.7 25.2 Net public capital 48.8 47.0 19.6 18.5 Other capital (net) 41.8 - 10 .. 18.1 7.3 IMF drawings - 10.6 46.9 18.7 10,9 Change of reserves 56c4 - 15.7 35.3 - 4.2 (decrease +) International Reserves (December 31, 1965) US $21M3 million External Public Debt Outstanding (as of June 30,1968) Total US $527 milUion Medium-term (rescheduled) US $312 million Long-term US $175 million Other Key Indicators C1966 "967 1968 Production of Major Items: Cocoa - thousand long tons (crop year) 41.0 38r 389.7 Gold- .thousand fine ounces 684.4 762.4 727.1 Diamond - thousand carats :*8lB5 2)5375-2.,447Q1 Mlanufacturing output - US $ mill 139 136 206.7 Composition of Exports (per cent) Cocoa 62 65 65 Timber 11 9 9 Gold 9 9 9 Diamonds 5 5 6 Electric Power Consumption (million KW.H) 576 1,560 42650  -.3 Government Finance (percent of GDP) 1967 1968 Current budget Revenues 13.4 15.1 Expenditures 12.6 14.1 Saving 0.8 1.0 Capital budget Revenues 2.8 3.5 Expenditure 4.2 3.9 Overall deficit o.6 o.6 Tax Revenue (per cent of GDP) 12.3 September U, 1969