Burundi - Fisheries Development Project

LE >*COPY Document of The World Bank FOR OFFICIAL USE ONLY Report No.P-1807-BU REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INT]ERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF BURUNDI FOR A 'ISHERIES DEVELOPMENT PROJECT April 8, 1976 This document has a restricted distribution and may be used by recipients only In the performance of their official duties. Its conlents may not otherwise be disclosed without World Bank authorization.  Currency Unit: Franc Burundi (FBu) US$1 FBu 78.35 FBu 100 US$ 1.28 FBu 1 million US$ 12,763 Fiscal Year: January 1 to December 31  FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF BURUNDI FOR A FISHERIES DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Burundi for the equivalent of US$6.0 million on standard IDA terms to help finance a Fisheries Development Project. The Government will relend about US$2.0 million of the credit proceeds to the National Economic Development Bank (BNDE) at 4 percent per annum for a term of 15 years including a grace period of 5 years. BNDE will relend these funds to the Regional Development Society at 8-1/2 percent interest per annum for 10 years for the purpose of project facilities and at 6 percent per annum for 3-6 years for credits to fishermen. The Abu DhabL Fund for Arab Economic Development will participate in financing the project with a Loan of Dh 4 million (US$1.0 million equivalent) on terms and conditions to be nego- tiated with the Government of Burundi. PART I - THE ECONOMY 2. The last economic report on Burundi (504a - Bu) was distributed to the Executive Directors on January 14, 1975. This was followed by an economic memorandum (885a-BU) distributed on October 24, 1975. Country diata are pro- vided in Annex I. Burundi is one of the 25 least developed countries as defined by the United Nations. 3. Burundi remains one of the poorest of the least developed countries, with a per capita income estimated at US$92 in 1974. Over the past five years GDP grew by no more than 2 percent annually in real terms. Of a population of 3.5 million only 115,000 are in wage employment; the remainder depend mainly on subsistence agriculture. The agricultural labor force is largely untrained, and the level of enrollment in formal education is one of the lowest in Africa. 4. The economy is dominated by the agricultural sector. Food crops account for over half of GDP; other crops, of which coffee remains by far the most important, account for a further 10 percent. In 1974 coffee pro- duction reached a record of about 28,000 tons, 35 percent higher than in the preceding year. The large harvest combined with a markedly higher producer price resulted in a 62 percent increase in farmer incomes derived from coffee, with consequent multiplier effects in both industry and services. 5. Burundi has become increasingly dependent on coffee for foreign exchange earnings; its share in total exports rose from 79 percent in 1965 to 84 percent in 1974. Owing to external marketing and transport delays, a quarter of the 1974 crop was exported only in early 1975. The value of im- ports on the other hand rose 36 percent in 1974, and, consequently, foreign 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.  - 2 - exchange reserves fell sharply. The trend was reversed during the first four months of 1975 as delayed coffee payments were received, while at the same time imports fell to a level nearly 40 percent below that of the second half of 1974. By December 1975 reserves stood at a level equivalent to six months of merchandise imports. Rising import prices, combined with increased internal demand, caused a record 23 percent jump in the cost of living index for low income urban families during the year ended March 1975. 6. The level of investment has remained consistently low, averaging only 8 percent of GDP over the last five years. Domestic savings have amounted to only 5 percent of GDP over the same period, approximately equal to net capital inflows. Close to half of total gross capital formation was financed by external aid. 7. Due to high coffee prices, government revenues in 1974 were 14 per- cent above the level attained in 1973, while current expenditures grew at only 9 percent. Thus in 1974, the Government was able to finance a 70 percent increase in its investment budget. 8. Burundi faces a formidable set of disadvantages, excessive depend- ence on a single export (coffee) for foreign exchange, long and inefficient transport links for external trade, rudimentary infrastructure, and a largely untrained labor force. In the past, civil strife has disrupted development and diverted resources. Further, the terms of trade have deteriorated 40 percent since 1970. There are, however, some encouraging indications. Internal order has been restored and a new planning organization created. Improvements are being made in financial administration, and a number of promising agricul- tural projects are under preparation. Substantial nickel deposits have been found and may be brought into production over the next ten years. 9. At present the Government lacks a coherent overall development strategy. This is in part due to the low priority accorded planning in the past. As a first step in addressing this problem, the Government has trans- ferred responsibility for national planning to a new "Bureau Technique d'Etudes" (BTE). To make the new planning organization more effective, IDA is assisting in strengthening of its staffing. A strong planning capa- bility would enable the Government to take the lead in initiating new projects and in coordinating external aid within the context of a well defined develop- ment plan. 10. The short term prospects for the economy are favorable. Although coffee production in 1975 fell considerably from the record level achieved in 1974, prices have risen sharply owing to frost damage to Brazil's coffee trees. Coffee production is expected to recover in 1976. In the longer term , if the Government focuses on development and strengthens its administration, it may achieve slow growth instead of stagnation. If nickel mining proves feasible, the prospects over the next ten years would be transformed. Although such a development appears technically possible, the commercial viability of nickel mining has yet to be proved.  - 3 - 11. Disbursements: of official development assistance amounted to US$24.8 million in 1974. Belgium contributed about 26 percent, and UN agencies, IDA and the European Development Fund another 42 percent. Technical assistance accounted for about US$12 million, while the aid contribution to public sector projects reached. about US$10.8 million in addition to program aid of some US$2.0 million, In the 1970-74 period, total foreign capital inflows amounted to about US$109 million, of which US$105 million were in grant form. On December 31, 1974, Eurundi's external medium and long-term debt amounted to about US$8.0 million excluding undisbursed amounts. Of this the Bank and IDA together hold 57 pErcent. Debt service averaged 2.9 percent of export earnings during 1972/74, with the Bank Group receiving 41 percent of service payments. By 1980, the Bank Group will probable continue to hold a high proportion of debt and debt service, if most other aid is given on grant terms. N6twithstanding the low debt service ratio, the country is not able to finance any borrowirLg on commercial terms, as its absolute capacity to service external debt is limited by the size and fluctuations (due to depend- ence on coffee) of its export earnings. External aid should finance a high proportion of total prcject costs, including local expenditure, and should be on grant or near grant terms. PART II - BANK GROUP OPERATIONS IN BURUNDI 12. In 1957, the Bank lent US$4.8 million to the Belgian Trust Territory of Rwanda-Urundi for the improvement of the Bujumbura-Muranvya road and the expansion of the lake port of Bujumbura. The loan, guaranteed by Belgium, was fully disbursed at independence in 1962 and is being repaid by Burundi with Belgian assistance. The last payment is due in 1977. 13. Since independence, six credits have been made to Burundi, totaling US$13.2 million. The first credit for US$1.1 million, was made in March 1966 for the rehabilitation and extension of Bujumbura's water supply system. A credit of US$1.8 million was made in April, 1969 for the improvement of coffee production by smallholdiers, followed by a second credit of US$5.2 million approved in November, 1.975. A credit of US$380,000, made in June 1970, helped finance the detailed engineering of the Bujumbura-Nyanza Lac road and a highway maintenance study. This study led to the fourth credit, of US$5 million, for a highway maintenance project signed in March 1974. A Technical Assistance Credit of US$1.5 million (Credit 613-BU) was made in March 1976 to help strengthen planning, statistical services and project preparation. No Bank loans have been made since independence. 14. The Water Supply Project (Credit 85-BU) was completed in March 1973. While the project did not meet all objectives, Bujumbura was provided with an ample and safe water supply. Implementation of the First Coffee Improvement Project (Credit 147-BU') was hampered by frequent delays in the delivery of construction materials:, the civil disturbances in 1972 and management problems. The first coffee washing station started operating in 1973 and the remaining three only in 1975. The project is now virtually completed. The Second Coffee  - 4 - Project (Credit 593-BU) will provide 110,000 smallholder coffee farmers wiLh instruction in better cultivation techniques and with inputs such as ferti- lizers, insecticides, and tools. The project will also expand the facilities for processing coffee. The Highway Maintenance Project (Credit 467-BU) has commenced satisfactorily. The project consultants took up their duties in Burundi at the end of 1974, orders have been placed for the maintenance equipment, and a survey of training needs has been completed. Annex II contains a summary statement of IDA credits as of February 29, 1976 and notes on the execution of ongoing projects. 15. The future lending program will be aimed primarily at increasing agricultural productivity, thereby improving the nutrition and living stand- ards of the impoverished rural population. Consistent with the Government's emphasis on rural development, a comprehensive reform of the education system has been initiated. A basic education project in support of this reform has been prepared with assistance from UNESCO and was appraised in February-March, 1976. We also intend to continue assistance for expanding and improving the road network, a prerequisite for rural development, as well as Burundi's efforts in improving planning, project preparation and project implementa- tion. Also, we will continue to include project management and technical expertise in project lending. PART III - THE FISHERIES SUB-SECTOR 16. Fishing is the principal economic activity along the Burundi shore of Lake Tanganyika (about 150 km). Currently, fishing contributes less than one percent to total GDP, and represents a relatively small sub-sector of the economy; however, it is capable of significant expansion. Fresh fish is much sought after in Burundi, and dried fish is commonly consumed in most parts of the country. Per capita fish consumption has declined significantly as a result of the loss of fishing boats and the flight of fishermen and their families during the civil strife which took place in 1972. An FAO/UNDP study shows that per capita fish consumption in Burundi is low compared with neighboring countries. 17. Lake Tanganyika offers the most important fisheries resources in Burundi. Total production of fish from the 2,000 km2 of Burundi waters in Lake Tanganyika (1/16 of the total surface of the lake) was estimated at about 15,400 tons in 1971. Following the 1972 civil strife, production dropped to about 6,400 tons and 1974 production was estimated at about 9,500 tons of which small sardine-like fish, known as ndagala, accounted for more than 80 percent. Research is currently underway, under an FAO/UNDP project, to determine the potential for fisheries production; results to date indicate that a sustainable level of production of at least 25,000 tons per annum for Burundi is possible and suggests that the real potential may be substan- tially higher.  - 5 - 18. Three distinct groups of fishermen, characterized locaLly as indus- trial, artisanal and traditional, fish Lake Tanganyika waters. The indust- rial fisheries date from the mid-1950's and consist of 18 purse seine units owned by Greek nationals. These units employ between 25-35 fishermen each, and their catch totals about 5,000-6,000 tons a year. Artisanal fishing was first developed in the late 1950's when catamarans, equipped with nylon liftnets, were introduced by the fisheries service of the Ministry of Agri- culture and Livestock (see paragraph 23). This technique which is practiced with 4-5 fishermen per boat, proved highly successful and was adopted rapidly by traditional fishermen all along the lake shore. The traditional fishermen use single canoes and scoopnets; they catch approximately 4-5 tons per boat a year. This group now numbers about 700 canoes (down from a maximum of 1,600 canoes in 1966); its importance is declining as traditional fishermen pro- gressively adopt the techniques and equipment of the artisanal fishermen. Marketing and Processin.S 19. About 35 percent of the total catch is retailed fresh In Bujumbura and the remainder is cocnsumed near the lakeshore or is dried for resale in the interior. Industrial fishing units are required to wholesale their total catch in the Bujumbura Central Market, and most of their catch is retailed fresh there, although some small portion is transported short distances for resale. Traditional and artisanal fishermen sell their surplus to traders at the principal landing beaches, where most fish is dried for wholesale in Bujumbura and subsequeni:ly sold throughout Burundi. Most is sold in Bujum- bura and Bubanza provinces; supplies to other provinces are irregular and limited. 20. Sun-drying, the traditional preservation technique for ndagala, is carried out by fishermen and their families and by middlemen. Dried fish keep about one month, and are subject to insect damage and decay. The FAO/ UNDP project (see para. 21 below) has introduced preservation and packaging techniques that preserve fish for up to six months. The FAO/UNDP project staff are also experimenting with fresh fish marketing. Trials of export of frozen luxury fish products have yielded promising results. The FAO/UNDP Fisheries Projects 21. FAO/UNDP have aided Burundi fisheries development since 1970. An initial project (1971-73) carried out research on fish stocks, catch levels, and processing and marketing. The objective was to produce a management plan for fisheries resources in Lake Tanganyika. The project included a small development component for artisanal fisheries which was subsequently recast as a larger program to rehabilitate artisanal fishing. When this project was completed, two new projects were approved, one for research and the other for development. The former is providing the basis for more accurate estimates of fishing potential in Lake Tanganyika. It has identified potential problems in fisheries development, notably pollution of the lake, and will continue to monitor pollution levels. A future regional research program for the lake,  - 6 - including Burundi, Zaire, Tanzania and possibly Zambia, is currently being discussed, and the UNDP and the Swedish International Development Agency have agreed to consider financing such a program. 22. The development project (1974-76, total cost US$890,000) is assist- ing the Government in rehabilitating the artisanal fisheries sector. It has provided fishing equipment, three small processing centers, training, institu- tional development and technical assistance. Two fishing centers have been established and a third center should be constructed in 1976. Each center includes 30-50 fishing units, which are metal-hulled catamarans and trimarans, powered by small outboard motors. The Regional Development Society for Fisheries (RDS), a parastatal organization, recently created with UNDP/FAO assistance, owns these boats and allocates them to fishermen under a hire- purchase scheme. The centers also include storage facilities for fishing equipment, offices, housing for staff, and a simple fish processing plant. The project is progressing quite well, particularly on the technical level. The principal problems to date relate to the development of management capa- bility and the efficiency of extension services, and to the training of counterpart staff. There have also been persistent problems with shortages of materials and delays in procuring equipment and supplies from overseas. Institutions 23. Institutions for the promotion and regulation of fishing and related processing and marketing activities have very limited staff, and are heavily dependent on the FAO/UNDP project for staff, technical assistance, materials and equipment. Responsibility for government fishing programs rests with the Fisheries Service in the Ministry of Agriculture and Livestock; its activities for the most part have been limited to the project activities of the FAO/UNDP. The Government is in the process of staffing the RDS which will assume prin- cipal responsibility for all aspects of fisheries development in Burundi while the Ministry would keep responsibility for the formulation of policies, the provision of technical assistance, extension services, training, and research activities. RDS is to be run along commercial lines, and is expected to be financially viable. Its initial capital was subscribed by the Government with funds provided by the FAO/UNDP. PART IV - THE PROJECT 24. A report entitled "Appraisal of a Fisheries Development Project Burundi" (No. 977a-BU) is being circulated separately. A credit and project summary is provided in Annex III; a map of the project area is attached as Annex IV. 25. The project was prepared by Bank Group Staff, in cooperation with the Government of Burundi and staff of the FAO/UNDP fisheries projects in Burundi. Preparation was based on research and experimental work under the FAO/UNDP fisheries projects. The project will continue and expand the  - 7 - FAO/UNDP fisheries development activities, which the UNDP intends to term- inate by the end of 1976. The project was appraised in September/October, 1975. Negotiations for the proposed IDA credit were held in Washington in March 1976. The Burundi delegation was led by H.E. Pierre Bigayimpunzi, Minister of Agriculture and Livestock. A delegation from the Abu Dhabi Fund for Arab Economic Development consisting of Mr. Al Nowais, Deputy Director, and Dr. El Alfi also participated to discuss cofinancing arrangements. The Project Area 26. The project area includes the Burundi waters of Lake Tanganyika and the lake shore plain (see Annex IV map). The estimated rural population of the area is about 100,000 people. 27. Fishing dominates the economy of the project area, although farming is also important,and most fishermen are also farmers. Fishing takes place all along the lake shore; however, most boats are concentrated near about 10 principal landing beaches. There are perhaps 2,500 full-time fishermen, with an additional 450 employed on Greek-owned purse seine units. Agriculture in the region is mixed; the lake plain supplies much of the produce marketed in and around Bujumbura; export crops, notably coffee, cotton and oil palm are also grown. The principal food crops are beans, cassava, bananas, swamp rice, and palm oil. The potential for development of both food and export crops is good. Project Description 28. The proposed project is a comprehensive fisheries deveLopment program designed (a) to provide the technical assistance and tra[ning, and the fishing equipment, materials and basic services necessary to significantly increase the productivity and incomes of approximately 3,000 low income traditional and artisanal fishermen (about 1,500 are presently employed and another 1,500 will be new fishermen) and their families, (b) to expand and improve fish preservation methods, and (c) to improve marketing facilities and extend them throughout Burundi. The proposed project also includes preparation of a comprehensive rural development plan for and the initiation of pilot development activities in the Lake Tanganyika coastal region. In order to provide the above services and facilities, the project includes the following components: (a) Fishing Equipment and Materials A wide range of materials such as fishing boats, motors, and equipment (e.g., nets, lamps, rope, anchors) for artisanal fisheries wilL be provided to fishermen on a credit basis or sold for cash. Materials will be provided for an estimated 600 units of which about 250 are already operating, many without adequate equipment. The project will also procure and operate f:Lve catamaran purse seine units at each of five fishing centers (see paragraph (b) below) on an experimental  -8- basis. These units will combine techniques of the artisanal and industrial fisheries, thus affording smallscale fisher- men the opportunity to learn more sophisticated fishing techniques. (b) Fishing Centers and Fishing Stations Five fishing centers (three of which have been partially developed by the FAO/UNDP project) and five fishing stations will be developed at the principal landing beaches on the lake shore. Each center will include facilities for storage of fishing gear and provision of services to fishermen, depots for sale of fishing equipment and supplies, and a processing plant to produce smoked fish. The stations will be similar to fishing centers, except that processing plants will not be provided. (c) Fish Marketing Marketing facilities will be improved through the construction and equipment of a main storage depot in Bujumbura and four smaller depots in principal marketing centers in the interior. Transportation will also be improved. The principal marketing effort will be the improvement of collection, storage, and marketing for dried fish and development of an effective market- ing system for dried smoked ndagala produced by project fishing centers. In addition, a small freezer cold storage unit would be established to aid in pilot export operations. The RDS will manage the fish marketing activities; initially it will rely on existing marketing channels and will engage in direct marketing activities in the interior of Burundi only after studies have demonstrated the viability of such operations. RDS will prepare marketing studies prior to construction of each of the new fishing centers or stations. (d) Fisheries Extension Service The project will train and equip an extension staff and provide necessary equipment, offices and staff housing. The extension service will provide counsel and training to fishermen on improved fishing techniques, assistance in securing equipment and supplies, and advice on preservation techniques. The service should reach an estimated 3,000 fishermen at full development; it will have a staff of about 10 extension agents. (e) Regional Development Society Headquarters Physical investment will include office facilities in Bujumbura, a garage and workshop, office equipment, furni- ture and supplies, vehicles and storage facilities.  - 9 - (f) Coastal Region Development Activities This component: includes the preparation of an integrated rural development plan for the region and the implementation of pilot development activities. The plan preparation has two stages: 11) the identification of priority development activities, and (2) data collection, field studies, and preparation of the development program. Following the first stage and IDA approval of plans, pilot activities will be initiated. These activities are likely to include strengthening of extension services, provision of agricul- tural inputs (including selected seeds, tools and small livestock), village processing facilities such as flour mills and oil presses and development of social infrastructure and community installations. (g) Technical Assistance, Training, Studies The project will provide technical assistance and training to assist the Regional Development Society in the execution of the project and in. the development of technical and managerial competence in fishing and in fish preservation and marketing. Technical assistance will include a specialist for each of the following areas: fisheries development and extension, fish processing, fish marketing, and management and administration. The appointment of the specialist for management and administ- ration and his counterpart will be a condition of credit effect- iveness. (See' Section 6.01 (f) of the draft Development Credit Agreement.) An additional specialist for technical and mechanical activities would be provided if the RDS undertakes major force account works or boat building. The National Economic Development Bank (Banque Nationale de Developpement Economique, BNDE) would employ a technical advisor to enable it to assist RDS in financial management. In addition, consulting services will be provided to carry out the regional development study, marketing studies, project preparation, and a study of pollution in Lake Tanganyika. Project Execution 29. The RDS, under the supervision of the Ministry of Agriculture and Livestock and with the technical assistance described above,will be execut- ing agency for those activities related to fishing,i.e., provision of materials and equipment, fish processing and marketing, fisheries extension, and its own institutional development. The execution of the project will in large measure depend on the senior staff appointed to the RDS and the tech- nical assistance provided under the project. The BNDE, which part- icipated in project preparation, will have an active role in project im- plementation. It will act as an intermediary in channeling credit proceeds to  - 10 - the RDS and it will supervise the credit program for fishermen, and assist the RDS in developing proper management procedures and accounting systems. The Bureau Technique d'Etudes will be responsible for coastal region development planning; pilot programs will be implemented by the Ministry of Agriculture and Livestock. The executing agencies will obtain IDA approval for terms of reference for studies and technical assistance and will consult with IDA on the appointment of technicians and counterparts, with qualifications and experience satisfactory to IDA (see Section 3.02 of the draft Development Credit Agreement and Section 2.04 of the draft Project Agreement). Cost Estimates 30. Total project cost including contingencies is estimated at US$8.4 million equivalent, excluding taxes and duties of about US$0.1 million. The proposed IDA credit of US$6.0 million will finance 86 percent of the foreign exchange costs (US$4.8 million) and 40 percent of the local costs (US$1.1 million), or about 71 percent of project costs net of taxes and duties. The Abu Dhabi Fund will participate in the financing with a loan of Dh 4 million (US$1.0 million equivalent) to the Government of Burundi. Terms and condi- tions are still to be negotiated but it is expected that the loan will carry an interest of not more than 3 percent and will be repayable over a period between 10-20 years including a grace period of about 5 years. The Abu Dhabi Fund loan, jointly with the IDA Credit, will finance materials, equip- ment and vehicles provided under the project. The loan will finance 11 percent of total project cost net of taxes and duties including 14 percent of foreign exchange cost and 7 percent of local cost. Total external financing will thus amount to 82 percent of total project costs net of taxes. Effective- ness of the Abu Dhabi Fund Loan Agreement will be a condition of Credit effec- tiveness (see Section 6.01 (d) of the draft Development Credit Agreement). Financing Plan 31. Financing of project costs would be shared as follows: FBu US$ % (million) (million) Government of Burundi 17 0.2 2 Regional Development Society 32 0.4 5 Fishermen 70 0.9 11 Abu Dhabi Fund for Arab Economic Development 76 1.0 11 IDA 470 6.0 71 Total: 665 8.5 100 32. Retroactive financing from February 1, 1976 of up to US$150,000 is recommended to cover the cost of employment of key project staff and preliminary project implementation. The Government will establish an account equivalent to US$100,000 for RDS to ensure that funds are available to finance  project investments. The establishment of this account will be a condition of credit effectiveness (see Section 6.01 (e) of the draft Development Credit Agreement). Channeling of Credit Proceeds and Re-Lending Terms 33. The Government will onlend part of the credit proceeds and the proceeds from the Abu Dhabi Fund loan (totaling about US$3.0 million) to the BNDE at 4 percent per annum for a term of 15 years including a grace period of 5 years. BNDE, in turn, will relend these funds to the RDS which will utilize them (i) to construct and equip project facilities such as fishing centers, fishing stations, and experimental purse seine units and (ii) to purchase fishing boats and equipment that will be sold to fishermen for cash or on credit. Sub-loans to the RDS for project facil- ities will be for 10 years and carry an interest rate of 8-1/2 percent per annum. Sub-loans to RDS for credit to fishermen for the purchase of fishing boats and equipment will be at 6 percent per annum for 3-6 years. Credit to fishermen will be at 10 percent per annum for periods varying bet:ween between 3 and 6 years. To be eligible for credit, fishermen will be selected on the basis of criteria satisfactory to IDA. Loan contracts will be made following a model contract acceptable to IDA (Section 2.10 (a) of the draft Project Agreement). Funds repaid by RDS to BNDE would be reutilized for fisheries development following investment plans to be agreed upon annually between BNDE and IDA. The conclusion of subsidiary loan agreements satisfactory to IDA between the Government and the BNDE and between the BNDE and RDS will be a condition of credit effectiveness (see Section 6.01 (b) and (c) of the draft Development Credit Agreement). 34. Funds for fisheries extension services and for coastal region development activities will be transferred directly to the RDS, the Min- istry of Agriculture and Livestock, and the Bureau Technique d'Etudes as appropriate. Funds for technical assistance, studies and training will be administered for the Government by the Ministry of Agriculture and Livestock and the Bureau Technique d'Etudes. Procurement 35. Fishing equipment (outboard motors, lamps, nets, etc) and fish processing equipment (US$0.8 million) will be purchased on the basis of price quotations, solicited after advertising in an internationaL fishing journal and notification of embassies in Bujumbura. Vehicles and other equipment will be procured on the basis of price quotations from local suppliers offering adequate guarantees of service and spare parts. Fish- ing boats (US$0.7 million) will be manufactured locally. Civil works (US$0.38 million), which are too small to attract international contrac- tors, will be carried out by force account or by local contractors fol- lowing local competitive bidding. Consultant services (US$0.4 million) and technical services (US$1.5 million) will be procured in accordance with Bank/IDA guidelines.  - 12- F. Disbursements 36. Proceeds of the credit will be disbursed over five years on the following basis: (a) 56 percent of the foreign exchange costs or 48 percent of the total cost of fishing equipment and materials, plant equipment, vehicles, and supplies; the Abu Dhabi Fund will simultaneously disburse 44 percent of the foreign exchange costs or 37 percent of the total costs for these goods; (b) 90 percent of the total cost: of RDS civil works, of operating costs for RDS fisheries extension and fishermen training and for local training, and regional development activities; (c) 100 percent of the foreign exchange costs or 90 percent of total costs for technical assistance, studies and overseas training. Disbursements will be fully documented; disbursements under (b) will be made against certificates of expenditure, the documentation for which will be retained by the borrower and made available for inspection by IDA during the course of project supervision missions. Disbursements for the construc- tion and equipping of fishing centers or stations will only be made after the specialists for the fish processing and marketing divisions of RDS and their counterparts have been appointed and for each individual center or station after individual marketing plans have been approved by IDA. (See paragraphs 4(b) and 4(c) of Schedule 1 to the draft Development Credit Agreement.) In addition, no disbursements will be made for any regional development activity until the Association has been provided with a plan for such activity. Any funds remaining in the credit account on completion of the project will be used for project related activities. Environmental considerations 37. The project itself creates no environmental problems; however Lake Tanganyika is particularly susceptible to pollution. Recent studies have indicated an accumulation of chemicals in fish, although in quantities well below recognized danger levels. However, investigation of the causes, origins and severity of pollution has been inadequate to assess the gravity and magni- tude of the problem or indicate possible remedial actions. In order to remedy these shortcomings, the project will include a study, supplemental to the UNDP research project, comprising: (i) additional basic research on pollution, and (ii) a report to advise the Government and international agencies on the magnitude of the problem and to recommend control programs and future research.  - 13 - Benefits 38. At full development (in year six), the project should increase fish production by about 10,000 tons as compared to the present production of about 9,500 tons per year. The economic rate of return of the project is estimated to be 20 percent over 20 years. Benefits would flow to some 3,000 fishermen (including about 1,500 fishermen presently employed) who will earn between $300 and $600 a year of net cash income over and above fish retained for consumption, and to a broad range of the population who will be able to obtain an additional source of protein at a relatively low price. Additional jobs will be created for about 1,500 new artisanal fish- ermen, and for about 200 employees in the RDS fishing centers and stations and the five RDS fishing units. About 300 people will be employed in the construction of the project. 39. The financiaL rate of return for the RDS on its commercial opera- tions should be about L5 percent. By year six, it is expected that RDS should be earning substantial profits. Risks 40. The proposed project involves some significant risks, namely: (i) because of management and technical problems the project might fail to meet physical objectives; (ii) services to fishermen might decline or lapse following the investment period; (iii) unfavorable fish prices or higher than expected operating costs might cause the RDS to operate at a loss and might reduce Lncentives to fishermen to increase production. These first two risks have been dealt with by inputs of technical assis- tance and training for project execution and institutional development. The third risk is inherent to fisheries production,but is somewhat compen- sated by the high rate of return to investment by fishermen. Overall,the project offers good prospects for yielding substantial financial and eco- nomic benefits for Burundi, notably to small-scale fishermen, and for im- proving nutrition. It represents one of the best investment opportunities available at this time in Burundi. PART V - LEGAL INSTRUMENTS AND AUTHORITY 41. The draft Development Credit Agreement between the Republic of Burundi and the Association, the draft Project Agreement among IDA, RDS, and BNDE, the Recommendation of the Committee provided for in Article V, Section 1 (d) of the A2rticles of Agreement of the Association, and the text of a draft Resolution approving the proposed Development Credit are being distributed to the Executive Directors separately. 42. Features of the draft Development Credit and Project Agreements of special interest are referred to in paragraphs 28(g), 29, 30, 32, 33 and 36. In particular, the following special conditions of credit effec- tiveness are provided (see Section 6.01 of the draft Development: Credit Agreement):  - 14 - (a) the execution and effectiveness of the Loan Agreement between the Abu Dhabi Fund and the Government; (b) the conclusion of subsidiary loan agreements between the Government and BNDE, and BNDE and RDS; (c) the establishment of a Government fund in the amount of US$100,000 to cover RDS investment expenditures; and (d) the appointment of a specialist and his counterpart for the management and administration division of RDS. 43. Also, the draft Development Credit Agreement (see paragraphs 4(b) and 4(c) of the draft Development Credit Agreement) provides for the follow- ing special conditions of disbursement: (i) no disbursements shall be made for the development of fishing stations or centers until the specialists and theiT counterparts for the fish processing and market- ing divisions of the RDS have been appointed; disburse- ments for each individual station or center shall be made only after individual marketing plans have been approved by IDA; (ii) no disbursements shall be made for any regional develop- ment activity until the Borrower has furnished the Association with a plan for such activity, satisfactory to the Association. 44. I am satisfied that the proposed Development Credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATIONS 45. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President Attachments April 8, 1976  ANNEX I Page 1 of l~ pages TABLE 3A BURUNDI- SOCIAL INOICATORS DATA SHEET LAND AREA (THOU K012)--------------- ---------- --------------- ~~~~~BURUNDI REFERENCE COUNTRIES (197.0) TOTAL 27.8 MOST RECENT AGRIC. 1 6. 0 1960 1970 ESTIMATE MALAWI SIERRA LEONE URUGUAY GNP PER CAPITA CUSS) 50.0 70.0 80.0 80.0 150.0 89C.0 POPULATION AND VITA%L STATISTICS POPUILATION (HID-YR. MILLION) 2.8 3.4 5.6 4.5 2.6 2.9 PD'ULATION DENSITY PER SQUARE KTM. 99.0 121.0 129.0 38.0 36.0 18.0 PIER SQUARE KM. AGRIC. LAND . 224.0 102.0 VIfAL STATISTICS CRUDE BIRTH RATE PER TH4OUSAND 46.0 Za. 41.0 41.0 4 9. 0 45.0 22.0 CRUDE GEATHt RATE PER THOUISAND 25.0 /a 20.0 20.0 25.0 23.0 9.0 INFANT MORTALITY RATE C/THOU) 150.0 a 138.0... 1 83.0 4!.0 LIFE EXPECTANCY AT 9IRYX (YRS) 37.0/ 41.0 41.0 39.0 41.0 69.0 GROSS REPRULUCTIODN RATE 2.: 6/Fb 2.8 2.8 3.2 2. 9 1.4 PO'ULATION GROWTH RATE (I) TOTAL 2.1 2.0 2.0 2.6 2.2 1.3 JRAAN ..2.0 ..7.0 6.0 UR3AN POPULATION (I OF TOTAL) 2.O a 2.0 -/a 5.0 /a 14.0 /a AGE STRUCTURE (PERCENT) a TO 14 YEARS 4 6.8a/a 45.0 . 4 3.9 420 28. 15 TO 64 YEARS 4.7 52.0 ..5.ON5. 6,6.0 65 YEARS AND OVER 4.2 7 3.40 ..4.0 7N 3. 0 8.0 AGE DEPENDENCY RATIO 1.0 /a 0.9 ..0.9 /a 0.8 0.6 ECONOMIC OEPENOENCY RAYIO 1.o07 c 0. 9 /b .. .9 7W- 1.3 1. 0 FAMEILY PLANNIN G- ACCEPTORS (CUMULATIVE. THOU) . .. iSERS (1 OF MARRIED WOMEN) . .. EMPLOYMENT TOTAL LABOR FORCE (THOUSAND) 1 5 00.0 180o0. 0 .2 300. 0 1050. 0 OI0C.0 LADOR FORCE IN AGRICULTURE (l) 90.0 81.0 . 88.0 73.0 11.0 UNEMPILOYED ft OF LABOR FORCE)...... 2. 3 /b 8.0 INCOME OISTRTOUTION IOF PRIVABTE INCOME REC'D BY- HIGHEST 5t OF POPULATION..... 2 9.5{ 36 2 /c -f 15.0 /a HIGHEST 201 OF POPULATION..... 52.:9 62.a83tfW 7. 57W LOJCEST 201 OF POPULATION .. . . 11 2a 4. 4 7. LOWEST 40a OF POPULATION ... .15.0