Malagasy Republic - Morondava Irrigation and Rural Development Project

RESTR I CTED Report No. PA-128a Tlis report is for officiai use only by the Bank Gsoup and specifically authorized orgmiZations or persons. It may not be published, quoted or ated without Bank Group authorization. The Bank Group does not accept responsibllity for the accwacy or completeness of the report. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL REPORT MORONDAVA IRRIGATION AND RURAL DEVELOPMENT PROJECT MALAGASY REPUBLIC May 26, 1972 Agriculture Projects Department  CURRENCY EQUIVALENTS Currency Unit - Franc Malgache (FMC) US$1.00 - FMG 255 FMG 1.00 - US$0.0039 FMG 1 million = US$3,900 WEIGHTS AND MEASURES 1 hectare (ha) = 2.47 acres 1 kilometer (km) 2 - 0.62 mile 1 square kilometer (km ) = 0.3886 square mile 1 cubic meter (m3) 3 = 35.31 cubic feet 1 million cubic meters (Mm ) = 810.7 acre-feet 1 kilogram (kg) = 2.205 pounds 1 ton - 2,205 pounds 1 ton of paddy = 660 kg of rice 1 ton of seed cotton 370 kg of lint cotton ABBREVIATIONS AMVR - Aire de Mise en Valeur Rurale (Rural Development Area) BNM - Malagasy National Development Bank CFDT - Compagnie Francaise pour le Developpement des Fibres Textiles IRAM - Institut de Recherche Agronomique Malgache GR - Rural Engineering Department SCMV - Service Central de Mise en Valeur of the Ministry of Agriculture SODEMO - Societe pour le Developpement Economique de la Region de iMorandava FISCAL YEAR January 1 to December 31  MALAGASY REPUBLIC APPRAISAL OF THE MORONDAVA IRRIGATION AND RURAL DEVELOPMENT PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ............ .. ................. i-ii I. INTRODUCTION ............................... 1 II. BACKGROUND ............................................ 1 III. THE PROJECT AREA ...................................... 2 General ................................ 2 Climate ................................ 3 Soils, Topography and Drainage ................ 3 Agriculture ................................ 3 Transportation ........ ................ 4 Present Status of Project Irrigation Facilities ....... 4 IV. TIE PROJECT ........................................... 5 Project Description .................... 5 Project Works ............................. 6 Water Supply, Demand, and Quality .............. 7 Engineering Design ............................ 7 Cost Estimates ........................... . 8 Financing ............................. 8 Procurement ............................. 9 Disbursement .......................................... 10 Accounts and Audit ....... ............................. 10 V. ORGANIZATION AND MANAGEMENT ........................... 10 Project Authority ..................... 10 Settlement and 11ealth Control ......................... 12 Civil Works ............... .............. 13 Agricultural Research .............................. 13 Supporting Agricultural Services ...................... 14 Operation and Maintenance ............................. 14 Project Charges ................................ 15 This report is based on the findings of an appraisal mission which consisted of Messrs. C.J.M. Le Moigne and C.G. Moret (IDA) and J. Marinet, G. Laques, and A. Degremont (consultants).  -2 - PaRe No. VI. PRODUCTION, MARKETING, PRICES, AND FARM INCOME ........ 16 Production ............................................ 16 Marketing ............................................. 18 Prices ............ .................................... 18 Income of Rice Cultivators ............................ 18 Income of State Farms ................................. 19 VII. BENEFITS AND JUSTIFICATION ............................ 20 VIII. AGREEMENTS REACHED AND RECOMMENDATIONS ................ 21 ANNEXES 1 - Climatological Data at Morondava 2 - Soils 3 - Description of the Project 4 - Construction Schedule 5 - Water Supply, Demand, and Quality 6 - Cost Estimates 7 - Equipment 8 - Estimated Schedule of Expenditures and Disbursements 9 - Project Authority (SODEMO) 10 - Settlement and Health Control 11 - Research Station 12 - Production without and with the Project 13 - Marketing 14 - Economic Analysis *AP Projected Land Use and Irrigation Network  MALAGASY REPUBLIC MORONDAVA IRRIGATION AND RURAL DEVELOPMENT PROJECT SUMMARY AND CONCLUSIONS i. This report appraises a project for irrigation and rural develop- ment in the Morondava Region, for which an IDA credit of US$15.3 million is proposed. The project is part of the Government program to accelerate region- al development and encourage land settlement on the west coast of the island. (It would also contribute toward the Government's major goals in the agricultural sector, namely increasing rice production and diversification of exports.1 Because water supply is vital for agricultural development in this region, the Government's long term plans for the Morondava Plain call for irrigation of some 30,000 ha. ii. In 1970, the Association extended a credit of US$5.0 million equivalent (Credit 214-MAG) to assist Government in implementing the Lake Alaotra Irrigation Project - located about 200 km north of Tananarive - for the production of high quality rice. Progress on that project is satis- factory and work is on schedule. iii. The proposed Morondava Irrigation and Rural Development Project would provide irrigation to three operationally independent units totaling 9,300 ha. The first unit of 4,700 ha would be devoted to rice cultivation by some 2,300 farmers of which about 1,200 are already in the area; 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. About 1,000 families would be settled as permanent laborers on the two state farms. About 2,000 ha of the project area are presently productive while the remainder i bush. The project would include construction of a diversion dam, irrigation and drainage systems, farm roade, and on-farm development works; construction of 10 new villages and expansion of 10 existing ones, together with all necessary public facilities; introduction of a health program to control bilharzia; settlement of about 2,100 families and an increase in the holding size of the 1,200 families already in the area; purchase of equipment; establishment of a research station; and the creation of a project authority "Societe pour le Developpement Economique de la Region de Morondava" (SODEMO). iv. Estimated total project cost ls US$27.0 million. The proposed IDA credit of US$15.3 million, or 57% of the total, would finance the foreign exchange costs. Project works would be constructed by contract following international competitive bidding, except for up to US$1.0 million worth of small and scattered contracts for construction of settlement and health control facilities that would be awarded on the basis of local competitive bidding. Equipment material and supplies would also be procured through international competition; it is estimated that about US$3.8 million in foreign exchange would be required for these items and for the cost of foreign consultants.  - ii - v. Overall responsibility for the project would rest with SODEMO, a corporation to be established by Government specifically for project im- plementation. The day-to-day operations would be directed by a General Manager, assisted by four deputies in charge of settlement and social affairs, administration and finance, technical matters, and research. Headquarters would be in the town of Morondava, and three operational units would have offices in the field to manage rice farming and the two state farms, each functioning independently of the other. The Rural Engineering Department (GR) of the Ministry of Agriculture would be responsible for construction of major civil works and drainage system; it is in charge of all similar works throughout the country. The Service Central de Mise en Valeur of the Ministry of Agriculture (SCMV) would keep the Association informed of progress on the project and would be responsible for carrying out feasibility studies for a second phase irrigation project in the Morondava Plain. Consultants would assist SCMV, SODEMO, and GR in the implementation of the project. vi. At full agricultural development in 1983, the net value of produc- tion is expected to be about US$3.1 million, compared with a level of US$0.1 million without the project. The economic rate of return would be about 16%. Net annual foreign exchange earnings would amount to about US$2 million by the end of the construction period and about US$3 million at full develop- ment. A sensitivity analysis indicates that, under a number of adverse conditions, the economic rate of return would still exceed 12%. Per capita income of the project beneficiaries would increase from the present subsis- tence level of US$45 to US$100-140 at full development. The project would thuis assist a very poor section of Malagasy's rural population, but, even at full development their income would still be below per capita rural income, estimated to reach about US$140 by the mid-1980's. vii. The project is suitable for an IDA credit of US$15.0 million. The borrower would be the Government of the Malagasy Republic.  MALAGASY REPUBLIC MORONDAVA IRRIGATION AND RURAL DEVELOPMENT PROJECT I. INTRODUCTION 1.01 The Government of the Malagasy Republic has requested an IDA credit of US$15.3 million to assist in financing the Morondava Irrigation and Rural Development Project, which is located in the Morondava Region on the west coast. Works would include construction of a diversion dam on the Morondava River, irrigation and drainage systems for about 9,300 ha, farm roads, on-farm development works, health control, housing and communal facilities for project staff and about 3,300 families, and establishment of two large-scale state farms. The project would constitute the first phase of Government's general development plan to eventually regulate the Morondava River in its upper basin and irrigate a total of some 30,000 ha. 1.02 This would be the second IDA credit to the Malagasy Republic for irrigation development and the third Bank Group operation in the agricultural sector. Credit 214-MAG (1970) for US$5.0 million financed the Lake Alaotra Irrigation Project for the production of high-quality rice. Progress on that project is satisfactory, works are on schedule and completion is ex- pected by 1976. Loan 585-MAG (1969) for US$2.8 million financed livestock development. After a slow start the project is now proceeding satisfactorily. 1.03 This report is based on feasibility studies financed through a UNDP project and prepared by the consulting firms of Agrar und Hydrotechnik of the Federal Republic of Germany and the Societe d'Aide Technique et de Cooperation of France (SATEC), with assistance from the FAO/IBRD Cooperative Programme. The project was appraised in October/November 1971, by Messrs. G.J.M. Le Moigne and C.G. Moret (IDA) and J. Marinet, G. Laques, and A. Degremont (Consultants). II. BAC GROUND 2.01 The island of Madagascar, since 1960 the independent Malagasy Republic, has a total land area of 592,000 km2 (the fourth largest island in the world) and a population of 6.9 million growing at an annual rate of 2.2%; over 85% of the population is rural. The country's population density of less than 12 inhabitants per km2 is very low, but the population is unevenly distributed over the island, with some regions, particularly in the center of the Island, soon to become overpopulated. Only 2.8 million ha, or less than 5% of the total area, is under cultivation. These lands lie in the more accessible parts of the country, mostly in valleys along the east coast and on the central plateau; the other parts of the country are largely covered with forests, mountain ranges, and eroded hills. Internal migration to the less densely populated and potentially productive areas, such as the western coastal plain where the Morondava project is located, is part of the Government 's overall development strategy. 2.02 The agricultural sector i the most important one, providing a livelihood for more than 80% of the population, even though it accounts for  -2- le8s than one-third of GDP. Per capita income in 1969 was about US$80 in the rural areas compared with about US$120 for the country. During the 1960's, GDP growth at constant prices was about 4.5% per year; growth in the agricultural sector during the same period was lower, roughly estimated at 3.0% per year. Rice, which is the staple food in the country (per capita annual consumption is 125 kg) and the main crop, is grown on more than 30% of the cultivated land. Agricultural products account for over 80% of export earnings; the main crops, together with their share in total exports during the second half of the 1960's, are: coffee, 30%; vanilla, 9%; high- quality rice, 7%; and sugar 7%. Total earnings from food and agricultural exports during 1964-69 increased only moderately at 3% per year; food imports during the same period, mainly low-quality rice, wheat flour and dairy products, amounted to about 23% of agricultural exports. Local rice pro- duction varies greatly from year to year due to erratic climate condition and there are consequently large variations in the level of rice imports in any given year; no rice imports were required in 1967 and 1968 while the level in 1965 and 1969 was US$9.6 million and US$5.8 million, respectively. 2.03 There are five major agricultural production regions in the country: The "high plateau" in the central part of the island, accounting for most of the irrigated rice grown; the east coast, where the main products are rice, coffee, and bananas; the northern zone, which has a tropical climate, growing mainly cash crops such as sugar cane, cocoa, and spices; the middle west, where soil and climate conditions are ideal for livestock development; and the west coast, where the population is scarce and food crops (rice, cassava) and livestock are the main traditional activities. The high fertility of some of the alluvial flood plains in the latter region has led to the development of cotton and tobacco cultivation as well as production of high-quality rice for export. 2.04 In spite of the population pressure on the high plateau and east coast, agricultural development In these regions has low priority because of the relatively limited potential of the former and unfavorable topographic conditions in the latter. Increasing emphasis is therefore being given by Government to the development of the less populated but highly productive middle west and west coast regions. The proposed Morondava Irrigation Project would thus contribute to the Government's regional development efforts by promoting settlement and agricultural development on the west coaist. Through the production of rice, cotton, tobacco and peanuts, the project would also contribute toward the Government's major goals in the agricultural sector, namely self-suff