Malagasy Republic - Morondava Irrigation and Rural Development Project

RESTRICTED CIRCUL.ATING COPrY Report No. P-1100 TO BE RETURNED TO REPORTS DESK FILE C cPY This report is for official use only by the Bank Group and specifically authorized organizations or persons. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE MALAGASY REPUBLIC FOR THE MORONDAVA IRRIGATION AND RURAL DEVELOPMENT PROJECT June 14, 1972  Rate of exchange: US$1.00 = FW.25.8 FMG100 = US$0.390 (prior to December 1971) US$1.00 = FMG277.7 FM100 = US$0.360 (prior to August 1969) US$1.00 = FM246.9 FMG100 = US$0.405  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECONMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE MALAGASY REPUBLIC FOR THE M)RONDAVA IRRIGATION AND RURAL DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed credit to the Malagasy Republic for the equivalent of $15.3 million on standard IDA terms to help finance an irrigation and rural development project. Approximately $6.6 million of the proceeds of the credit would be relent to the Societe pour le D6veloppement Economique de la R6gion de Morondava (SODEMO), for 40 years, including 10 years of grace, with interest at 3.5 percent per annum. PART I - THE ECONOMY 2. An economic report, entitled "Recent Economic Position and Prospects of the MIalagasy Republic" (Report No. AE-1la) was distributed to the Executive Directors on January 27, 1971. An economic mission is scheduled to visit-Madagascar in the fall. Annex II shows basic country data. 3. With a land area of 590,000 km2, and a population of 6.9 million, Madagascar is sparsely populated. The population is unevenly distributed; some areas, particularly in the center of the island, are heavily populated and there are already signs of overcrowding. 4. MAdagascar's GDP in 1970 was estimated at $890 million and the per capita income was less than $130. The economy is basically agricultural. Over 80% of the population is rural, and agriculture accounts for 70% of commodity production. More than half of this production is, however, for subsistence; monetary income from agricultural pursuits is around 20% of total monetized income. The main products for local consumption are rice, manioc, and meat. The main export products are coffee (accounting for nearly one third of export earnings), cloves, vanilla, and animal products. In 1968, agricultural products as a whole accounted for 85% of exports. In 1971, agricultural products still represented 70% of exports, despite the increase in exports of minerals (mostly chromite). 5. The Malagasy economy remains heavily dependent on France, both for foreign aid and technical assistance. There are some 34,000 Frenchmen living on the island, playing a significant role in the economy, in civil administration as well as in industry, agriculture, and trade. Most of the expatriates are in Tananarive. The country has a large university (3,900 student) which relies heavily on French financial and technical support. Madagascar is also a member of the Franc Zone, thereby benefiting from free convertibility of its intra-zone export earnings and from over- draft facilities with the French Treasury. In general, however, Madagascar's trade with countries outside the Franc Zone has been in balance, primarily because of coffee and vanilla exports to the US.  6. In the 1960s real GDP grew at about 4.7% per year, representing an annual increase in per capita MDP of slightly over 2%, a year. Average per capita aDP thus rose from $100 in 1960 to about $120 in 1969. In 1970, however, aDP grew by about 6%, owing to the conjunction of good crops and above-average export prices, mainly for coffee. The production of rice rose from 1.5 to 1.7 million tons and the output of coffee, vanilla, cloves and cotton increased considerably. This, combined with full pro- duction of the new chromite mine in Andriamena, increased the country's export proceeds by nearly 40% in one year. Consequently, foreign reserves nearly doubled from $25.0 million in December 1969 to $49.7 million in December 1970, representing 3.5 month** imports. In 1970, real per capita GDP is estimated to have increased by 4%, twice as much as the average in the preceding five-year period. In 1971, however, while exports increased by another 1.5%, there was a 25% increase in imports. In parti- cular, imports of foodstuffs rose by 53% (or 14% of total imports), reflecting principally the trebling of rice imports necessitated by the lower domestic production caused by cyclones. As a result, foreign reserves, expressed in Halagasy Francs, declined by 6%. By December 1971, foreign reserves re- presented only about 3 months' imports. 7. In recent years, the Government has made a strong effort to increase public sector investment and to create conditions for the expansion of private investment. Gross fixed capital formation rose from FMGI 22 billion in 1966 to 35 billion in 1970. While detailed information for 1971 is not yet available, and is particularly scarce respecting private investment, there are indications that there has been a continued increase in investmenit. The proportion of GDP devoted to investment increased from 12% in 1966 to over 14% in 1970. 8. In line with its objective to increase investment, the Government has taken appropriate steps in its budget. Until 1967, surpluses on the recurrent budget were rising and financed an increasing share of the growing capital expenditure. In view of the substantial increase in capital ex- penditure which occurred during 1967-69, the budget deficit increased. In 1970, therefore, the Governmnt introduced some selective austerity measures aimed at curtailing current expenditures, and also reduced capital appro- priations to the level of available resources. During the past few years, about one half of the public sector investment has been financed by re- current budget surpluses and the rest by foreign aid. The European De- velopment Fund (FED) has been the principal source of external capital aid (about one half of the total) while others, principally France and the Bank Group have provided the rest. 9. Madagascarts first five-year plan ended in 1968. It was followed by an interim plan 1969-70 and by the preparation of a new plan, the official adoption of which has, however, been delayed, though its main outlines have been foUowed. The development strategy since the end of the last plan aims at (i) self-sufficiency in rice; (ii) diversification of exports through stimulation of new exports (livestock, cotton, forest products) and the expansion of mining; and (iii) improvement in transport, particularly roads and ports. There has been some progress with regard to each of these ob- jectives.  -3- 10. At the end of 1970, Madagascar's external public debt, including undisbursed amounts, amounted to $137.7 million equivalent. France is the major creditor, accounting for 44 percent of the total, while Bank Group lending accounted for 21.1 percent. Debt service payments in 1970 amounted to $7.0 million or 4.3 percent of the estimated foreign exchange earnings. Although debt service is relatively low, it is desirable, in view of the country's poverty and the still limited prospects for its exports, that the major proportion of external aid continue to be provided on concessional terms. PART II - BENK aROUP OPERATIONS 11. Since the newly independent Malagasy Republic became a member of the Bank and IDA in September 1963, Madagascar has received four IDA credits totalling $29,100,000 and three Bank loans totalling $11 ,100,000. Of these amounts, two thirds have been lent for projects in transport, while two projects, representing somewhat less than 20% of total lending, were in agriculture. The balance is accounted for by a loan for education. Annex I contains a sumuary statement of Bank loans and IDA credits as of April 30, 1972. Project execution is generally satisfactory. Adminis- trative delays in the preparation of withdrawal applications, which did occur in earlier projects, have been largely overcome. 12. The priority which the Bank Group in its lending is giving to the improvement of transport conforms to Madagascarts development ob- jectives. The Tamatave port project, currently in execution, will soon provide a reliable outlet for exports. Bank Group financed road construc- tion in the central and northern regions has increased all-weather land connections within the island and will continue to do so in the north and in part of the western regions. I expect to be able to submit to you early in the next fiscal year, a third highway project and, later in the year, a proposal for a railway loan. 13. Madagascar's agriculture is of equally high priority, both in the GovernmenV'a development strategy and in the Bank Group's program. There are projects for general agricultural development, forestry, live- stock and rice at various stages of preparation which I hope will result in Bank Group operations over the next two fiscal years. Projects are also under preparation for technical education and a development finance company. PART III - AGRICULTURE 14. While over 80% of the Malagasy population is rural, less than 5% of the total area of Madagascar is cultivated. The population is concentrated in certain parts of the island, in particular in the high  -4 - central plateau and east coast areas. Migration toward these areas of high population density, especially from the more arid southern and southeastern regions of Madagascar, has continued for some time and if unchecked, would threaten these areas with excessive pressure on land. 15. Although the high central plateau and east coast areas account for most of the irrigated rice grown in Madagascar and for much of coffee and banana, further agricultural development of these areas is not of high priority because of their relatively limited potential. Other areas of Madagascar suitable for agriculture are the northern tropical region, which produces sugar cane, cocoa and spices, the middle west and the west coast, which is livestock country, and the alluvial flood plains of the west coast with a high potential for the cultivation of cotton, tobacco, and high- quality rice. 16. In order to check population pressure in the high plateau and east coast areas, and to spur the development of the highly productive middle west and west coast regions, the Government is encouraging migration to the less densely populated and potentially more productive areas. Insufficient experience with the organization of settlements, the lack of extension services, transport and other general infrastructure are constraints which the Government will have to overcome during the next years. 17. Agriculture, which provides livelihood to more than four fifths of the population, accounts for less than one third of GDP. In 1969, annual per capita income in the rural areas was about $80. Nore than 80% of export earnings during the late 1960's were from agricultural products, mainly coffee, vanilla, high-quality rice and sugar. On the other hand, Madagascar, over the same period, imported low-quality rice, wheat flour and dairy products, amounting to about 23% of the value of agricultural exports. 18. The Bank Group has financed two projects in agriculture. The first was a $2.8 million livestock development loan-in 1969, and the second, a $5.0 million credit for an irrigation project in the Lake Alaotra area. Experience gained during the progress of the Lake Alaotra project has influenced the design of the present- ly proposed project which, however, adds the new dimensions of rural settlement and health. PART IV - THE PROJECT 19. A report, entitled "Appraisal of the Mbrondava Irrigation and Rural Development Project - Malagasy Republic" (No. PA-128a), is being circulated separately to the Executive Directors. A Credit  and Project Swumary is provided at Annex III. 20. The project, based on feasibility studies financed by the UNDP, was appraised in October-November 1971. Negotiations for the proposed IDA credit were held in Washington in May 1972. The Mala- gasy delegation was led by Mr. Raymond Rabeharisoa, Secretary General of the Ministry of Agriculture, and included Messrs. Jean Rabeson and Pierre Raharison, respectively Director of the Service Central de Mise en Valeur and of the Service du Genie Rural of the Ministry of Agriculture, Messrs. Gaston Ralison and Ramamonjisoa of the IfLnistry of Finance and Messrs. Henri Rasolondraibe and Charles Randrianasolo of the Malagasy Bnbassy in Washington. 21. The project,. to be carried out over a period of six and one half years, would be the first phase of the Government development plan for the Morondava region. It provides for irrigation and associated services in three new agricultural areas, and the settle- ment of about 2,100 families to participate in the cultivation of these areas. 22. The project area of about 10,000-hectares, located between the Morondava and Andranomena Rivers, in the central part of Mada- gascar's west coast, would be divided into three units. The first, of about 4,700 hectares, would be devoted to irrigated rice cultiva- tion by some 2,300 small farmers to be settled there. The second; of about 2,700 hectares, would be developed as a state farm special- izing in tobacco and peanut production, with burley tobacco grown in rotation with peanuts and a forage crop. The third, of about 1,900 hectares, would be developed as a state farm for cotton production, with medium staple cotton grown in rotation with a forage crop. 23. The specific project works would include: (a) construction of a diversion dam at Dabara on the Norondava River; (b) rehabilita- tion of about 64 kmi of main canals; (c) a gravity irrigation and drainage system on 6,600 hectares for cotton and rice cultivation; (d) a sprinkler irrigation system on 2,700 hectares for tobacco and peanut cultivation; (e) on-farm development, including tertiary and quaternary canals and drains; (f) improvement and construction of about 90 km of roads in the project area; (g) construction of project buildings; and (h) construction of ten new villages and expansion of ten existing ones. 24. In addition to these works, the project would include the selection of about 2,100 new families and their settlement in the project area, the purchase of farm machinery and equipment for the operation and maintenance of irrigation works, the establishment of a new research station, the implementation of a health program  - 6 - designed to combat endemic diseases and control schistosomiasis, and a feasibility study for a second phase irrigation project in the Morondava region. Consultants would be engaged to assist in the design and supervision of project construction works, the establishment and agricultural development of the three, project units, the settlement of farmers, the training of project personnel and the preparation of the feasibility study for the second phase irrigation project. 25. The settlement and health control aspects of the project are somewhat of an innovation in Madagascar. While the Government has embarked upon a settlement policy which would relieve the pressure on densely populated areas in the high plateaus and on the east coast, there has been little experience to date with Government,.launched settlements. The principles SODEMD will follow in the selection of settler families will be that farm.families al- ready in the Morondava region would have priority in the allocation of land for irrigated rice cultivation; second, that farm families would be given priority over single agricultural workers;.third, that, to the extent possible, settlers would be chosen from among ethnic groups already represented in the area. The settlers chosen would all receive.a plot of land at least sufficient to satisfy the subsistence needs of their family, whether they are laborers on one of the state farms, or full time rice farmers. The latter category of settlers would receive two hectares for irrigated rice cultiva- tion. 26. Schistosomiasis of the urinary type (bilharzia) is endemic in the region. At present, it affects about 20% of the-inhabitants. Although the projected improvements to the irrigation and drainage systens should slow the spread of the disease, the large increase in the area's population which the settlement scheme would bring about, would increase the chances of infection, and hence..the incidence of this debilitating disease to 40 to 50% of the inhabitants by 1980, unless measures are taken to combat it. The project therefore includes a health program expected to cost about $1.0 million equivalent, consisting of the construction of a clinic and three new dispensaries, the expansion of an existing hospital so as to double its capacity to about 50 beds, and the carrying out of an epidemiological study intended to control schistosomiasis in the project area. 27. The main irrigation and road works would be carried out by contractors under the direction of the Ministry of Agriculture's bervice du Genie Rural (GR), an agency responsible for civil works related to agriculture. The feasibility studies for further development in the Mo- rondava region would be carried out by consultants under the direction of the Service Central de Mise en Valeur of the Ministry of Agriculture (SCMV) which is responsible for formulating agricultural development  schemes. All other parts of the projoct would be implemented under the direction of the Socift6 pour le DSveloppement Economique de la R6gion de Morondava (SODEHO), a new regional development institution being established by the Government along the lines of the institution implementing the Lake Alaotra project. 28. In order to expedite the preparation of final designs, consultants are to be employed by GR and by SODEKO and may be selected before signature of the proposed credit agreement. Ex- penditures for the services of such consultants incurred after May 1, 1972, and up to $200,000 equivalent, would be financed retroactively under the proposed credit. 29. SODEKO would be a joint stock company with a share capital of FMG300 million which would be held by the Government (56*), para- statal agencies (17O), local entities (21%), and private firms (6%). SODEMO would be headed by a Malagasy general manager. However, due to the lack of sufficient qualified Malagasy nationals to fill other executive positions in SODEMO, except for that of a deputy manager for settlement and social affairs, expatriates would be recruited for the three other positions of deputy general manager within SODEMO. In addition, four expatriates would be hired to serve as directors in charge, respectively, of the rice farming unit, the two state farms, and of SODEKO's operation and maintenance unit. These seven experts are to be provided by consultants to be en- gaged by SODE4O. Each expert would be provided a Malagasy counter- part for in-service training. Financing for the foreign exchange cost of experts services is included in the proposed credit. 30. The fulfillment of all formal steps required to complete SODEMO's establishment, including the adoption of statutes defining its management and financial structure, would be a condition of effectiveness of the proposed credit. 31. The total cost of the project net of taxes is estimated at $27.0 million equivalent. The foreign exchange component, estimated at $15.3 million (57%), would be financed by IDA. The local cost component would be financed as follows: the Malagasy National Development Bank (BNM) is expected to provide loans to SODEMO totalling $3.3 million equivalent; private participations in SODEMO's equity will provide $0.4 million equivalent; and the balance of $8.0 million will be provided by the Government directly in the form of an equity contribution of 200 million Malagasy Francs ($0.8 million equivalent) to SODEKO, and by grants or loans. Commitment of the proposed financing by the agencies concerned, and the approvals or corporate action necessary for the commitment of funds as required for project implementation, would be a con- dition of effectiveness of the proposed credit.  - 8 - 32. About $6.7 million equivalent of credit proceeds would be utilized directly by Government agencies - GR and SCKV - for major civil works and for consultants services. The balance would be channeled to SCDE40 as follows: the amounts necessary to carry out the settlement, health and research aspecto of the project-would be passed on by Government in the form of a grant, estimated at $2.0 million equivalent; the remainder of credit proceeds would be onlent to SCDEKO for 40 years, including ton years of grace, at a rate of interest of 3.5% per annum, which is the rate at which Government lends to its agencies for agricultural projects. The signature and effectiveness of a subsidiary loan agreement along theae lines would be a condition of effectiveness of the proposed credit. 33. The cotton (1,600 t/a), peanuts (3,400 t/a) and tobacco (1,350 t/a) to be produced under the project would be exported primarily to EEC countries. The quantities involved are negligible in terms of quantities traded on the world market and Madagascar should find a ready market at competitive prices particularly in Europe where demand for these produsts is growing. The low-quality rice to be produced under the project would all be consumed locally, reducing, but not eliminating, the projected annual deficits in this product and the resulting import requiremnts. 34. The charges to be paid by rice farmers (see below) and the revenues of the state farms are such that SODEH0 s full annual operation and maintenance oosts and its administrative Costs for operating the settlement scheme will be covered. Moreover, except for the Cost of the agricultural research and the studies, the full amount of capital investment will be recovered over a 40-year period the estimated life of the project - including a 5% return. The low financial return stems from the low monetary income of small farmers in the rice scheme who could not support higher charges and is not likely to lead to any distortion in the use of resources. 35. The small rice farmer would pay to SODEM0 for 40 years the equivalent of 600 kg of paddy per cropped hectare for each harvest. This compares with expected yields of four tons per cropped hectare at full development. In addition, the cash surpluses of the two state farms would accrue to SODEKO. SODEKO would also collect an annual irrigation and drainage charge from an existing citrus state farm which will benefit from improved water aupply and health conditions brought about by the project. 36. SODI40 will turn over to the Government its net cash surplus after meeting its operating oosts, debt service, replacement of equipment, dividend payments to its shareholders, and after establishing a working capital fund equivalent to $1.0 million. The Eurplus is expected to grow to about $1.0 million equivalent each year starting in 1988.  -9- 37. Contracts for civil works and equipment will be awarded after international competitive bidding in accordance with the Bank/IDA Guidelines except (i) for contracts for construction of settlement and health control facilities and other small works expected to cost less than $100,000 each and not more than $1.0 million in the aggregate, and (ii) for contracts for miscellaneous equipment expected to cost less than $10,000 each and not more than $400,000 in the aggregate. These contracts would be tendered locally in accordance with existing Government procedures, which ensure adequate local, competition. A margin of preference equivalent to 15% of the c.i.f. price of imported goods or import taxes payable by non-exempt importers, whichever is less, would be accorded to the local manufacturers of equipment. Madagascar grants import duty preferences to EBC countries but GR and SODEMO are tax exempt or entitled to tax reimbursement, and comparison of bids among foreign suppliers or contractors would be made on the basis of a bid price net of taxes and duties. 38. At full agricultural development, the value of incremental produc- tion due to the project is estimated at $3.0 million equivalent per annum, and the value of incremental foreign exchange earnings due to the project is estimated at about $2.0 million equivalent.. Discounting costs and benefits over the 40-year life of the project, the economic rate of return would be about 16%. 39. At full development, the annual per capita income of the small rice farmer, after payment of the project charges, is expected to range from $100 to $140. This compares with a present annual per capita income of $45 for farmers already in the project area. The settlers would also benefit from improved educational, housing and medical services to be provided as a consequence of the project. PART V - LEaAL INSTRUMENTS AND AUTHORITY 40. The draft Development Credit Agreement between the Malagasy Republic and the Association, the Recommendation of the Committee provided for in Article V, Section I(d) of the Articles of Agreement and the text of a resolu- tion approving the proposed credit are being distributed to the Executive Directors separately. 41. The draft Development Credit Agreement conforms to the nonmal pattern in credits for agricultural projects, including adequate provisions concerning the matters discussed in the preceding paragraphs 35, 36, and 37. 42. I am satisfied that the proposed development credit would comply with the Articles of Agreement of the Association. PART VI - RECa(MENDATION 43. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President Attachments Washington, D.C. June 14, 1972   ANNEX I THE STATUS OF BANK GROUP OPERATIONS IN THE MNLAGASY REFUELIC STATEMENT OF BANK LOANS AND IDA CREDITS (as at April 30, 1972) Loan or Amount (US$ million) Credit Number Year Borrower Purpose Bank IDA Undisbursed 90 1966 Malagasy Republic Roads - 10.0 2.5 510 1967 Malagasy Republic Education 4.8 _ 2.1 134 1968 Malagasy Republic Roads - 4.5 - 570 1968 Malagasy Republic Roads 3.5 - 1.3 585 1969 Malagasy Republic Agriculture 2.8 - 1.9 200 1970 Malagasy Republic Port . 9.6 9.3 2114 1970 Malagasy Republic Agriculture _ 5.0 14.6 Total now held by Bank and IDA 11.1 29.1 Total undisbursed 5.3 16.4 21.7   ANNEX II rage 1 MALAG&SY REPUMLIC OCUNTRI DATA Area: 590,000.square kilometers Population: 6.9 Mh(1970) Donsi t 11.7 per I Rate of growths 2.2% p.a. Population Characteristics Health Crude birth rate (per 1,000): n.a. Population per physician: 8,200 (1969) Crude death rate (per 1,000): n.a. Population per hospital bed: 360 (1969) Infant mortality (per 1,000 live births) s n.a. GDP per capita: $129(1970) Education Adult literacy rate: n.a. Primary school enrolments: 50% (1968/69: Gross Domestic Product (1970) Annual Rate of Growth (~million) GDP 1961-65 196-7 GDP at market prices: 890.0 100% (cst. 2.o 4.7,; Gross capital formation: 140.0 15.7% ces) Gross fixed capital formation: 126.0 14.2% Imports of investment 1967-71 Exports of goods, NFS: 163.0 18.3% goods (current prices) Imports of goods, NFS: 174.4 19.6% Public Finances in 1970 (Consolidated Budget) 1/ Average 1967-69 FMG million % GDP %GDP Current receipts 51,325 25.0 Current expenditures 43,234 17.5 18.7 Current surplus 8,091 3.3 2.1 Capital expenditures 12,698 5.1 4.6 Prices and Credit (FMG billion) Consumer Price Claims on Claims on Index Jan.1964-100 Government (net) Private secto End of year: 1969 114.8 .90 41.18 1970 118.8 -2.39 48.45 1971 128.8 -4.00 50.75 January 1972 130.3 -4.72 50.07 February 1972 132.8 n.a. n.a. 1/ Budget of the Central Government, the Provincial Governments and the annexed budgets.  (FMG Billion) tUALANCE OF PAYMENTS IN 156! 1969 1 970 Exports of Goods, NFS 32.11 34.79 45.24 lnports of Goods, NfS -42.94 -47.57 -48.45 Resource Gap (Deficit -) -10.83 -12.78 -3.21 Interest Payments (net) -3.66 -3.44 -3.48 Workers' Remittances -3.34 -2.12 -2.93 Transfers 13.74 13.34 14.11 Balance on Current Account -4.09 -5.00 4.49 Foreign Investment 1.89 2.15 1.85 Errors anrd Omissions -o.64 1.27 -0.59 Increase in Official Reserves'/ -2.84 -1.57 5.76 FOREIGN EXCHANGE RESERVES 2/(Net) End Year 1966 1967 19966 1969 1970 1977 In millions of dollars 13.16 11.62 8.78 7.21 13.85 13.00 In billions of Malagasy Francs 53.3 47.0 35.6 25.9 49.9 50 MERCHANDISE EXPORTS (3 year average 1969-71) FMG Billion ,% Coffee 10.41 28.4 Cloves 4.o6 11.0 Vanilla 3.39 9.2 Rice 2.52 6.9 Animal Products 2.97 8.1 Minerals 1.35 3.7 All other commodities 12.01 32.7 TOTAL 36.71 100.0 TOTAL $million 132.2 100.0 1/ Eccluding SDR's. Z/ Including SDR'a. 3/ Changes in par value of currencies account for part of the variations of the reserves expressed in dollar terms.  ANNE( II Pa-ge 3 External Debt on December 31, 1970 (in millions of US Dollars) Medium and long-terin redits, public 86.7 Non-guaranteed private NLT 8.7 Total outstanding and disbursed 95.4 Debt Service Ratio, 1970a 4.3% IBRD/DA Lending, December 31, 1971 $ Million IBRD DA Oaatmnding and disbursed 4.9 12.2 Undisbursed 6.2 16.9 Outstanding including undisbursed 11.1 29.1 Rate of Exchange Since December 1971: US$1.00 = 255.8 Malagasy Francs Between August 1969 and Deceuber 1971: US$1.00 - 277.?7 Malagasy Francs Throulgh Augulst. 1969:s US$1.00 * 246.9 Malagasy Francs Eastern Africa Department May 24, 1972   ANNEX III Page 1 MALAGASY REPUELIC MORONDAVA IRRIGATION AND RURAL DEVELOP14ENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Malagasy Republic Beneficiary: Societ6 pour l D hveloppement Economique de la Region de Morondava (SOD4MO) Amount: US$ 15.3 million equivalent Tenms: Standard Proj ect Desition: The project would be the first phase of the Government development plan for the Morondava region and would consist of the construction of an irrigation system, the establish- ment of three agricultural units totalling 9,300 ha, the settlement of about 2,100 families to participate in the operation of these units, and the provision of health services in the project area. The first unit of 4,700 ha would be a settlement scheme devoted to rice cultivation; the second unit would be developed as a state farm specializing in tobacco and peanut production on 2,700 ha; and the third unit would be developed as a state farm for cotton production on 1,900 ha. Government would establish the Socift6 pour le D6veloppement Economique de la Region de Morondava (SODEKO) to manage the projeot and the Rural nigineering Department (RED) of the Ministry of Agriculture would be responsible for construction of major civil works. In addition, the Service Central de la Mise en Valeur (SCMV) of the Ministry of Agriculture would be in charge of a feasibility study for a second phase project in the Morondava region.  ANNEX III Page 2 Estimated Cost: (US$ million) Executive Local Foreign Total Agency I. Civil Works A. Main works RED -diversion dam 0.5 1.7 2.2 -canals and drains 0.8 2.6 3.4 -road links 0.1 0.2 0.3 Sub-total 1FU 1T 3 B. On-farm works SODEMO -tobacco farn 0.4 1.8 2.2 -cotton farm 0.1 0.4 0.5 -rice area 0.3 1.0 1.3 Sub-total oT T.7 1.- C. Buildings and Research Station 0.8 0.3 1.1 SODEMO Total Civil Works 3.0 8.0 11.0 II. Settlement and Health Control 3.3 1.2 4.5 SODEMO III. Equipment (Operation and Maintenance Equip- ment; Farm Machinery; Vehicles) 0.1 0.9 1.0 SODEMO IV. Management and Operating Costs 1.7 0.1 1.8 SODEMO V. Consultants (engi- SODEM)O, neering; management; RED and feasibility study) 0.3 1.9 2.2 SCMV VI. Contingencies 3.3 3.2 6.5 Total Project Cost 11.7 15.3 27.0  ANNEX III Page 3 Financing Plan: (US$ million) Local Foreign Total IDA Credit _ 15.3 15.3 Government Contribution (equity, grants, loans) 8.0 8.o "National Development Bank", loans 3.3 - 3.3 Other Equity 0.4 - 0.4 Total 11.7 15.3 27.0 Procurement Arrangements: All contracts for civil works and equipment would be awarded after international competitive bidding in accordance with Bank/IDA guidelines, except for minor contracts for con- struction of settlement and health control facilities and other small works and items expected to cost less than $100,000 each and not more than $1.4 million in the aggregate. Local manufacturers would receive a preference of 15 percent or the import duties whichever is less. Estimated Disbursements: Fiscal Year (US$ million) 1973 1974 1975 1976 97 1 78 1979 Total 1.0 2.1 2.5 ^ 2 6 2.17 7.9 71773 Map: Attached is a map, IBRD 3954, indicating the project area. Consultants: Consultants would be engaged to assist in the design and supervision of construction of project works, the establish- ment and agricultural development of the three project units, the settlement of farmers, the training of project personnel, and the preparation of the feasibility studies for the second phase irrigation project in the Morondava region. Rate of Return: Economic rate of return: about 16%. Appraisal Report: Report No. PA-128a, dated MNy 26, 1972.  MALAGASY REPUBLIC ________________ MORONDAVA IRRIGATION AND RURAL DEVELOPMENT PROJECT _ ^6l,ble RarAarly o00rn U,,0[ 0rwsh Fo00~1fl003,0 0u,a.n / $00404 t1 10 6I-SDR T-ElRN PROJECTED LAND USE AND IRRIGATION NETWORK [0444 340040 P40n00 (hI 613 I<' ~i __ ,,Go R 3a0I MD ,44 0.4 0.oo~o 04444 4G03l30 be 0,0