Liberia - Bong County Agricultural Development Project

Report No. 1307a-LBR FILE COPY Liberia: Bong County Agricultural Development Project February 11, 1977 Western Africa Regional Office Agriculture Projects Division I FOR OFFICIAL USE ONLY Document of the World Bank 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.  CURRENCY Currency Unit = United States Dollar WEIGHTS AND MEASURES 1 acre (ac) = 0.405 hectares (ha) 1 mile = 1.61 kilometers (km) 1 square mile = 640 ac = 259 ha I ton = 2,240 pounds (lb) = 1,016 kilograms (kg) ABBREVIATIONS AETC - Agricultural Extension Training Center AGRIMECO - Agricultural Mechanization and Land Development Company ALiT - Agrar-UND-Hydrotechnik BPMU - Bong Project Management Unit BWI - Booker Washington Institute CAES - Central Agricultural Experiment Station ERR - Economic Rate of Return FTC - Farmer Training Center GDP - Gross Domestic Product GNP - Gross National Product GOL - Government of Liberia ICA - International Coffee Agreement ICO - International Cocoa Organization LBA - Licensed Buying Agents LBDI - L,'berian Bank for Development and Investment LlEC - Liberian Electricity Corporation LIPA - Liberian Institute for Public Administration LISCO - Liberian Iron and Steel Corporation LPMC - Liberian Produce Marketing Corporation LPMU - Lofa Project Management Unit MA - Ministry of Agriculture MH - Ministry of Health and Social Welfare MPW - Ministry of Public Works NSA - National Seed Association PCC - Project Consultative Committee PMU - Project Management Unit PSC - Project Steering Committee UL - University of Liberia UNDP - United Nations Development Program USAID - United States Agency for International Development WARDA - West Africa Rice Development Association WHO - World Health Organization FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY CURRENCY EQUIVALENTS The official monetary unit is the Liberian dollar, with a par value to the US dollar. The US dollar is legal tender in Liberia. GOVERNMENT OF LIBERIA - FISCAL YEAR July 1 - June 30 GLOSSARY OF ABBREVIATIONS BPMU Bong County Project Management Unit GDP Gross Domestic Product IDA International Development Association LBDI Liberian Bank for Development and Investment LPMC Liberian Produce Marketing Corporation USAID United States Agency for International Development. This document has a restricted distribution and my be used by recipients only in the performance of their official duties. Its contents may not othefwia be discboed without World Bank auionriution.   LIBEt'IA BONG COUNTY AGRICULTURAL DEVELOPMENT PROJECT Table of Contents Page No. SUMMARY AND CONCLUSIONS .... ......... ... .. ......................... i-iv I. INTRODUCTION .................... ...... ........ .......* 1 II. BACKGROUND ......... ........... ,.... 1... .. A. The Macroeconomic Setting .. ....................... 1 B. Agriculture ............... ....... ............................. 2 - Sector Characteristics ............... . ........ 2 - Sector Objectives, Strategies and Policies .... 3 - Sector Institutions ....... so* ... ... ............ 4 - Other Institutions ................ ............ 5 III. THE PROJECT AREA ................ .......................... 6 General .................................................. -o... 6 - Topography, Hydrology and Climate . ............ 6 - General Infrastructure ................ ...... 6 Institutions ................................................. .... .... 6 IV. THE PROJECT ............................. . 7 A. General Description . .............................. . 7 - Farm and Crop Development .... .............. 8 - Development of Physical Infrastructure 8....... - 8 - Institutional Support .......................... 8 - Other Assistance . ....................... a .... . 8 B. Detailed Features .............................................. 9 - Farm and Crop Development . ..................... 9 - Physical Infrastructure .........ia....str.......s 9 - Institutional Development ..................... 10 - Other Assistance .0 .. ......................... 11 V. COST ESTIMATES AND FINANCIAL ARRANGEMENTS ............... 12 A. Project Costs ............... O..* .................... 12 B. Proposed Financing . ............ . . . . ........... ...... 14 C. Procurement .. ............... . .. . . .. ...................... . 15 D. Disbursement .. . ........................................ 16 E. Budgetary Control, Funding Procedures, and Accounting Records ..... ... . .. . .. . .. . . . ........ ............. 17  -2- Page No. VI. ORGANIZATION AND MANAGEMENT ...... ................... .a. . ...... 18 A . In st itut ions . . . . . . . ..... .... . .......... . .... . ....... . ...... ..1 18 B. Staffing .o .... o ... ...o* ...... * * * * **......... **...* *..* 20 C. Training . .o .... * o * ....... 20 D. Farm Inputs - Procurement and Distribution 21 E. Credit Arrangements .........00000006............... 22 F. Post-Project Administration o ............. 23 VII. PRODUCTION, MARKET PROSPECTS, FARM INCOME AND COST RECOVERY .... . ... .. .. ...o....... ,. 24 A. Plroduction ..... o..oo- o- ........ o... ao.. 24 B. Markets, Marketing and Prices o ....... ...... 24 C. Farmer Benefits ... . ..... ... . . ...... . . . . . . . ......... .. . . ... . 26 D. Cost Recovery .....o ... . 27 VIII. BENEFITS AND JUSTIFICATION ....o...... .................... 27 IX. AGREEMENTS REACHED AND RECOMMENDATIONS o .................. 29 ANNEXES 1. The Project Area 2. Farm and Crop Development 3. Farm Support Services: Research, Seed Multiplication and Extension 4. Farm Support Services: Cooperatives, Credit, Input Supply and Marketing 5. Roads 6. Health Services 7. Organization and Management 8. Project Cost 9. Market Prospects and Prices 10. Economic Analysis MAPS IBRD 12367 - Project Area IBRD 12366 - Liberia Rural Development Projects CHARTS World Bank 16393 - Project Organization  LIBERIA BONG COUNTY AGRICULTURAL DEVELOPMENT PROJECT SUMMARY AND CONCLUSIONS i. The Government of the Republic of Liberia (GOL) has requested Bank Group and USAID assistance in financing a rural development project in Upper Bong County. The project was identified by GOL, and prepared by Agrar- UND-Hydrotechnik with funds provided under Liberia Agricultural Development and Technical Assistance Project (Credit 306-LBR). This report is based on the findings of a joint IBRD-USAID appraisal mission that visited Liberia during May/June 1976. ii. The modern sector of the Liberian economy, composed of the conces- sions (rubber, forestry, iron ore mining), commercial agriculture, manufac- turing, construction and services, generates nearly 86% of GDP while the traditional sector (primarily smallholder agricultural production) supporting 70% of the population generates the remaining 14%. GOL has embarked on a conscious effort to diversify its economy and reduce sectoral imbalance by promoting development of the non-enclave sector with a greater emphasis on the development of the agricultural sector (to reduce imports of rice and increase exports of cocoa, coffee, palm products and non-concession rubber). Government strategy is to rapidly increase agricultural production through development of large-scale public sector plantations (oil palm and rice) simultaneously with smallholder development. iii. Pursuant to the above strategy, GOL has initiated a number of highly capital-intensive, large-scale projects, and though some short-term increases in rice output were obtained, costs have been high and have resulted in some uneconomic investments. An alternative strategy, involving simple, relatively inexpensive technologies, expanded use of rural labor and develop- ment of infrastructure and institutions to provide farm support services, is being developed under the Lofa County Agricultural Development Project (Credit 577-LBR). A similar strategy is proposed for Bong County. iv. The project area, consisting of Gbarnga, Kokoya and Sanoyie districts in Bong County, has an area of 600,000 ha and a population of about 140,000 persons. Seventy-five percent of the households practice subsistence farming and have average farm sizes of about 2 ha. Seventy percent of the cultivated area is under tree crops, mostly rubber, and the remaining area is under rice, cassava and other field crops. Ecologically, the area is suitable for the profitable cultivation of coffee, cocoa, upland and swamp rice, besides a wide variety of minor crops, vegetables and fruits. However, development of smallholder farming has been inhibited by inadequate support services and infrastructure.  - ii - v. About 9,000 farm families would participate and would be provided with farm support services (extension advice, input supply, credit arrange- ments, land development, soil selection) for development of 5,750 ha of upland rice, 3,000 ha of cocoa, 1,500 ha of coffee and 2,050 ha of swamp rice. The project would construct about 170 km new farm-to-market roads, recondi- tion an existing 130 km and maintain 540 km; expand and improve the training center and other related facilities at the Central Agricultural Experiment Station (CAES) at Suakoko; construct offices, storage facilities and housing for project staff, and assist villages in constructing 300 village wells. The project would strengthen related institutions and promote new ones; it would establish six chiefdom cooperatives to facilitate inputs, credit supply and marketing for smallholders; provide technical and administrative staff support to Ministry of Agriculture (MA); provide financial assistance for development of rural banking; improve research facilities and capabilities at the CAES; promote smallholder land registration; assist the Ministry of Health in the surveillance of schistosomiasis; strengthen GOL capabilities for project monitoring and evaluation; and would provide consultant services for project preparation and reorganization of the MA. vi. The project would be implemented by the Bong Project Management Unit (BPMU) established as a semi-autonomous entity within the MA. The BFMU would be responsible through a Project Steering Committee to the Minister of Agriculture. Coordination at the county level would be through the Project Consultative Committee. The feeder road program would be implemented by a special feeder road unit to be established within the Ministry of Public Works; schistosomiasis surveillance would be through a special unit created within the Ministry of Health, and evaluation and monitoring through a project monitoring and evaluation unit established within the Ministry of Agriculture. Project headquarters would be at Suakoko. The project provides for recruitment and training of Liberian staff; additionally, funds have been provided for seven internationally recruited staff to fill senior management and technical positions for which qualified Liberians are unlikely to be available. vii. Total cost of the project is estimated at US$20.3 million, net of all identifiable taxes and duties, and including US$5.2 million for physical and price contingencies. Foreign exchange costs are estimated at US$9.7 million (48% of total costs). IDA would contribute US$7.0 million (34%), USAID US$6.0 million (30%) and GOL US$7.3 million (36%). The proposed IDA credit would finance 55% of total foreign exchange costs and 15% of local costs, while the USAID loan would finance 45% of foreign exchange and 15% of local costs. The IDA credit would be on standard terms. viii. Vehicles, equipment for offices, research laboratories, workshops, and other items would be procured through international competitive bidding in accordance with Bank guidelines for contracts valued over US$50,000; contracts of less than US$50,000 but more than US$5,000 would be through local competitive bidding procedures satisfactory to the Association; items costing less than US$5,000 would be procured through local customary procedures satisfactory to the Association. Such procurements are estimated at a value of US$1.5 million. Domestically manufactured goods would be allowed a 15%  - iii - preference when comparing domestic bids with those of foreign manufacturers. Contracts for construction of buildings, houses and purchase of construction materials, etc. (US$0.7 million), would not be attractive to foreign contrac- tors, and contracts would be awarded on the basis of local competitive bidding procedures satisfactory to the Association. International staff (US$1.6 million) would be recruited and consultants for project preparation and studies (US$0.4 million) would be retained on terms and conditions and with qualifications acceptable to the Association. Other items to be financed include local staff salaries (US$0.7 million), vehicle operating and general services costs (US$0.9 million) and assistance for LBDI branch development (US$0.1 million). USAID financed goods and services covering road building equipment, materials and labor, farm inputs, local staff salaries, vehicle operating and general services costs estimated to have a value of US$4.2 million would be procured in accordance with USAID procedures. ix. The IDA credit of US$7.0 million would be disbursed over five years and would cover (a) 100% of the CIF costs of directly-imported vehicles and equipment (other than farm equipment and road building vehicles and plant), or 90% of the total cost if locally procured (US$0.8 million); (b) 80% of the cost of buildings and furnishings (US$0.4 million); (c) 100% of foreign expenditure (including recruitment charges) for internationally recruited staff, consultants, feasibility studies and overseas training of local staff (US$2.15 million); (d) 70% of expenditures for vehicles' operating costs, general services materials for village wells, local costs of LBDI branch (US$1.1 million); (e) 20% of expenditures for local staff (excluding those financed by USAID) (US$0.6 million); (f) 100% of foreign expenditure and 50% of local expenditure for improving the CAES research facilities at Suakoko (US$0.45 million); and (g) an unallocated amount of US$1.5 million. x. An advance of up to US$200,000 has been granted under the Project Preparation Facility and would finance expenditure in connection with project start-up activities, e.g., office buildings, recruitment of key expatriate staff and vehicles. xi. Direct benefits from the project would, qt maru,ity (Year 13), be the incremental production of 8,740 turis of rice, 3,000 tons of cocoa and 1,500 tons of coffee annually, representing nec annual foreign exchange earnings/savings of US$6.7 million. The project would cause substantial mobilization of labor in the project area, particularly the seasonally unemployed. By 1990 the project would raise the net annual income of the participating farmers from US$360 (US$68 per capita) to about US$850 (US$160 per capita). The economic rate of return is estimated at 21%. Intangible and nonquantifiable benefits would accrue to the community as a whole from road improvements, banking facilities, health services, better marketing infrast'ucture, etc. Development of the cooperatives would create rural capabilities for institutional farm support services while strengthening the technical, managerial capabi]itices of the MA and other related GOL agerncies would help futute planning and implemtatation of rural development projects.  - iv - xii. On the basis of the assurances, actions and recommendations obtained at negotiations and set out in Chapter IX, the project is suitable for a IDA credit of US$7.0 million.  I. INTRODUCTION A. General 1.01 The Government of Liberia (GOL) has requested Bank Group and USAID assistance in financing a rural development project in the Upper Bong County. This report appraises a project designed to increase the cash income and improve the quality of life of the smallholder peasant farmers in the Gbarnga, Kokoya and Sanoyie districts by providing a range of farm support services and other infrastructural and institutional improvements. Approximately 9,000 farm families would directly benefit from production increases in upland and swamp rice, cocoa and coffee. 1.02 The project was identified by GOL and prepared by Consultants, Agrar-UND-Hydrotechnik, financed under Liberia Agricultural Development and Technical Assistance Project (Credit 306-LBR). The Lofa County Agricul- tural Development Project (Credit 577-LBR), which was also prepared under Credit 306-LBR is being financed by IDA (US$6.0 million), USAID (US$5.0 mil- lion) and GOL (US$6.0 million). The institutional arrangements for the Lofa County Project have been formalized without any difficulties; Government con- tribution to date to the project fund has been satisfactory and the proj- ect has received the requisite cooperation and response from the farmers and local leaders. There were initial delays in staff recruitment but there have been no major implementation difficulties and none are foreseen. 1.03 The report is based on the findings of a joint IBRD/USAID appraisal mission which visited Liberia from May 9 - June 3, 1976 consisting of Messrs. Farruk, Hachero, van de Poll (IBRD) and de Verteuil (Consultant), and Messrs. Dawson, Spears, Guiot (USAID) supported by USAID Consultants Hatch, Jackson and Honadle. II. BACKGROUND A. The Macroeconomic Setting 2.01 Liberia has a total area of about 111,000 km and a population of 1.5 million growing at 3.3% per annum. Average per capita GNP in 1975 was US$410, nearly 60% higher than 1972. GDP (monetized sectors only) at current prices in 1975 amounted to US$662.0 million, an increase of 22% over 1974 resulting primarily from higher contract prices for iron ore. In real terms, however, GDP growth in 1975 was negative, iron ore shipments were 30% lower than previous years, earnings from other exports declined and consequently the declining trend on trade balance continued. There has not been any significant change in the structure of the economy; agriculture and mining still account for 24% and 31% respectively of GDP. The modern sector composed of concessions (rubber, forestry, iron-ore mining), commercial agriculture, manufacturing, construction, and services generates 86% of GDP while the traditional sector  -2- (primarily agricultural production) supporting about 70% of the population generates the remaining 14%. Concession or enclave sector contributes nearly 37% of the GDP with iron ore mining being the single largest activity in the group. Income distribution still remains skewed; however, recent analysis shows that since the early seventies, substantial redistribution of income in favor of the traditional sector has taken place. Despite significant improvements in Government's concession policy, tariff reform and tax admin- istration, there is further need to improve overall fiscal management partic- ularly in the field of expenditure control, resource planning and budgeting. B. Agriculture Sector Characteristics 2.02 Liberia is a part of the tropical rain forest of Africa but large parts of the country are now covered with secondary forest due to slash and burn agriculture. The climate is warm and humid with rainfall ranging from 4,600 mm on the coast to about 1,600 mm inland. The soils are adequate for the cultivation of perennial crops (rubber, cocoa, coffee and oil palm) but less suitable for annual crops because of rapid soil degradation and risks of erosion. Therefore, soil fertility can be maintained only through the tradi- tional system of shifting cultivation. However, valley bottoms and swamps, consisting of alluvial overflow plains and low terraces can be continuously cultivated with rice and other minor crops given proper water control and fertilizer application. (Annex 1) 2.03 The agricultural sector is characterized by (a) foreign concessions, (b) Liberian owned commercial farms, and (c) traditional smallholder farms; the latter comprise more than 90% of agricultural holdings in Liberia. Foreign concessions are limited principally to large rubber plantations and timber exploitation. These enterprises have highly trained expatriate managerial and technical staff, extensive capital investment, use large scale modern technology and consequently, enjoy high levels of efficiency. The Liberian- owned commercial farms primarily produce rubber but they are increasingly expanding into poultry, livestock, coffee, cocoa, oil palm and some rice and vegetables. They are moderately capital-intensive and have relatively easy access to capital and other resources, often against the security of their own interests in other sectors. Most owners are absentee and manage- ment is poor, except in cases where the farm is large enough to support an experienced professional manager. The traditional sector is largely outside the monetized economy, is located in areas with minimal infrastructure, and is composed of farms where less than 4 ha are cultivated each year. There is little or no adoption of modern innovation, and the sector primarily produces rice, cassava, yams and other subsistence crops along with some coffee, cocoa, oil palm and sugarcane as cash crops.  - 3 - 2.04 Agricultural output in 1975 (at current prices) totalled US$197.0 million of which US$71.0 million originated in the monetized sector composed of rubber (US$36.0 million), coffee, cocoa, palm products, etc., and US$126.0 million in the subsistence sector. Average growth in value of all agri- cultural output during the period 1964-1974 has been over 5% per annum in real terms. However, the traditional agricultural sector grew at only 2.4% while increases in the concessions and commercial sectors have been larger. 2.05 Ecologically, Liberia is suitable for profitable production of a wide variety of annual and perennial crops. Rice, cassava, and other food crops are grown extensively all over the country, cocoa and coffee primarily in the Upper Lofa, Upper Bong, and Nimba and parts of Grand Gedah Counties, while rubber is grown in Montserrado, Bong, and parts of Nimba County. Oil palm is indigenous and widespread, while coconuts are grown mainly in the Coastal areas. However, profitable cultivation of oil palm and coconuts is limited to the coastal belt (50-60 miles wide). Rubber, coffee and cocoa are the major cash crops for the farmers and important sources of Liberian export earnings. The total cultivated area is estimated at 510,000 ha, of which 37% (191,000 ha) is under rice comprising 171,000 ha of upland rice and the rest swamp rice. Average yields for upland and swamp rice are estimated to be 1,000 kg and 1,400 kg per ha respectively, and total production of rice during 1975 was about 230,000 metric tons. Other crops cover some 300,000 ha of which cocoa and coffee cover about 22,000 ha each. Due to unsuitable climatic conditions, total absence of natural pastures, and endemicity of trypanosomiasis, livestock production is of very minor importance in tradi- tional agriculture. Sector Objectives, Strategies and Policies 2.06 Prior to 1971, GOL's role in the development of Liberian agricul- ture was focused on the rubber and timber concessions and commercial planta- tions. Problems relating to traditional agriculture, rural poverty, and inequality of incomes were not the major concern of the policy makers. In recent times, however, development of non-enclave agriculture has been em- phasized by the Government, budgetary provisions have been increased (3.8% of total expenditure in 1970 to 7.8% in 1974), and some policy changes in- troduced (e.g., new pricing formulae for export crops, establishment of price stabilization and agricultural development funds, support price for paddy, renegotiation of rubber concession agreements, etc.). 2.07 GOL objectives for agriculture are aimed at diversifying and mod- ernizing the sector. Three basic strategies have been adopted: (a) estab- lishment and operation of large plantations for oil palm, coconut, coffee, cocoa, sugarcane, and rice by public sector corporations; (b) integrated rural development projects whereby productivity, income and living condi- tions of the small traditional farmer would be improved by providing a range of farm support services and infrastructural improvements; and (c) implemen- tation of special projects, expanded rice programs, etc., featuring fully mechanical land development, and cultivation of cleared areas by smallholders with support services provided by GOL. Under the National Development Plan,  FY77-80, allocations of US$33.0 million for large-scale farming, US$22.0 mil- lion for integrated projects and US$16.0 million for special projects are budgeted. 2.08 It is apparent that both (a) and (c) above reflect Government's desire to rapidly increase agricultural output and offset the labor shortage. However, experience from large-scale, mechanized projects in Lofa, Bong and Nimba counties have raised some concern about their economic viability. Fully mechanical land development has proved to be expensive (about US$1,000/ha); serious damage had been caused to the fragile top soil; support services are inadequate; and consequently production targets have not been reached and the economic and financial costs may therefore not be justified. 2.09 The strategy for smallholder development being implemented and first introduced under the Lofa project and proposed for the Bong project requires: (a) introduction of simple, relatively inexpensive, technical innovations that allow for better use of rural labor; (b) on-farm measures to increase subsistence smallholders' yields of upland food crops and cash incomes through development of upland tree crops and swamp rice; (c) develop- ment of a low-cost delivery system for inputs, credits and other farm support services; and (d) price incentive improvements for farmers by providing better marketing facilities and pursuing appropriate pricing and marketing policies. Sector Institutions 2.10 The Ministry of Agriculture (MA) is responsible for planning and implementing agricultural development programs. MA budgetary allocations have increased since 1971, but their impact has been limited by low field staff standards and inadequate management. The budget primarily covers salaries and wages, provides minimal logistic support for field staff, and fiscal management is highly centralized. MA is aware of the need to stream- line its activities and is currently analyzing its needs with the help of consultants financed under Credit 306-LBR (para. 4.17). 2.11 Liberian Produce Marketing Corporation (LPMC). All export crops, excluding rubber are marketed exclusively by LPMC, established in 1962 by GOL in partnership with the Danish East Asiatic Company (EAC). In December 1975, GOL acquired EAC's 50% shareholding but retained EAC as managers until December 31, 1977. LPMC still has autonomous status within MA and the Board of Directors (five Liberians, two EAC representatives) is unchanged. In addi- tion to marketing coffee, cocoa and oil palm products, LPMC is responsible for farmer support services for these crops and for establishing commercial plantations. Two LPMC subsidiaries, Liberian Palm Produce Corporation and Liberian Cocoa and Coffee Corporation, have been established for the commer- cial development of oil palm, coconut, and coffee and cocoa respectively. 2. 12 The Agricultural Mechanization Co. Inc. (AGRIMECO) is a wholly- owned Government corporation established in 1972 to implement large-scale land clearing and farm mechanization schemes. It is operated as a commercial company and is empowered to provide services to anyone; however, since incep- tion AGRIMECO has cleared nearly 4,000 ha in the Lofa, Bong, Nimba, Grand  - 5 - Gedah and Cape Mount counties for MA-sponsored projects, its principal clients. Despite operational efficiency, the technology is not considered suitable for smallholder agricultural development on financial and economic grounds (see para 2.08 and 2.09). Accordingly, assurances were obtained at negotiations that as of June 30, 1977 MA would not undertake any new large-scale mechanized land clearing activities for tree crop development in the project area until the proceeds of the credit have been fully employed. Other Institutions 2.13 Liberia has not succeeded in creating and sustaining institutional credit for the traditional agricultural sector. The Government-owned Agricul- tural Credit Corporation, established in 1957, ceased in 1963, burdened with heavy financial losses. Only about 20% of commercial bank lending is for agri- culture and then mainly for concessions and commercial farms. The Liberian Bank for Development and Investment (LBDI, established in 1965 with IFC assistance) made 42% of its loans to the agricultural sector, but almost all for rubber, timber and wood processing. Thus the only institutional and extremely limited source of smallholder credit have been the Cooperative, Credit and Marketing Division of the Ministry of Agriculture and LPMC. MA provides credits for seasonal inputs but administration of the program is poor, and credit recovery has been unsatisfactory. LPMC has recently intro- duced a program of providing free seedlings for up to 10 acres to any farmer willing to plant tree crops and, in the special project areas (see para 2.07), a cash grant of US$30 per family per month until the trees come to maturity. Such a policy is not considered to be consistent with efficient management and use of resources and in the long run could impose undue burdens on the Government's finances, besides hindering development of appropriate credit institutions. These matters were discussed at negotiations and GOL agreed to discontinue this policy with effect from September 30, 1977 and September 30, 1978 in the Bong county and Lofa county special project areas, respectively. 2.14 The College of Agriculture and Forestry in the University of Liberia (UL) is the sole institution for graduate training in agricultural sciences, while its Agricultural Extension Training Center (AETC) provides facilities for the training of extension and other field staff. Additionally, the Booker Washington Institute offers a four-year vocational training program in agricul- ture. Agricultural research activities in Liberia, primarily carried out at the Central Agricultural Experiment Station at Suakoko, suffer from a lack of direction and coordination besides having poor physical facilities (Annex 3). Besides Ministry of Agriculture, the Ministries of Action for Development and Progress and Local Government, Rural Development and Urban Reconstruction - are involved in rural development in Liberia, but their impact has been minimal.  -6- III. PROJECT AREA 3.01 General. The project area consists of the Gbarnga, Kokoya and Sanoyie districts in the Bong County 1/, and has a total area of 650,000 ha and a population of about 140,000 of which 100,000 (19,000 farm families) are engaged in farming. The people primarily belong to the Kpelle Tribe and most of them are small farmers cultivating between 1 and 3 ha with average per capita income of about US$68 per annum (see Annex 2 and para 7.07). 3.02 Topography, Hydrology and Climate. Eighty percent of the area consists of dissected rolling uplands, 12% are swamps (poorly drained valley bottom), and the rest are isolated high hills or mountains. The climate is tropical with a mean annual rainfall ranging from 1,600 mm in the central parts to 2,200 mm in north and south. Most of the upland consists of deep ferralitic soils with a high laterite gravel content and low fertility. The valley bottom soils have textures varying, from loamy sand/sandy clay to sandy clay loams and iron-toxicity in soils is a major problem. 3.03 General Infrastructure. Social and related services are limited. Roads are poorly maintained. The few small airstrips in the area are used by GOL and private light aricraft only. Telecommunications between the area and other parts of Liberia are limited. Liberia Electricity Corporation (LEC) runs the power station in Gbarnga (rated capacity of 2,280 kw) which supplies the town and neighborhoods. There are 45 elementary schools (32 in the Gbarnga district, 6 in the Kokoya district and 7 in the Sanoyie district), 14 junior high schools and 1 college for graduate studies. Under the Bank's Second Education Project 12 community schools will be constructed in the county. Medical services are limited to the Phebe Hospital and a few govern- ment clinics (details in Annex 1). Institutions 3.04 As in other counties of Liberia, two types of institutions - the traditional and the modern public sector - dominate local administration. There are six chiefdoms divided into 28 clans (based upon traditional lineage categories), the clans in turn being divided into towns (geographic considera- tion) and towns into quarters. There are four development councils (consisting of paramount and clan chiefs and other leading persons) which have advisory functions to GOL (through county superintendents) for development activities and represent a formal link between Government and traditional institutions. 3.05 Land tenure arrangements form another important traditional institu- tional link. Although the state is officially the ultimate owner of all land, individual family right of usufruct is ruled by traditional laws and customs and traditional tribal control in their respective areas is honored. The 1/ Administratively, Liberia has nine counties and five territories.  - 5 - Gedah and Cape Mount counties for MA-sponsored projects, its principal clients. Despite operational efficiency, the technology is not considered suitable for smallholder agricultural development on financial and economic grounds (see para 2.08 and 2.09). Accordingly, assurances were obtained at negotiations that as of June 30, 1977 MA would not undertake any new large-scale mechanized land clearing activities for tree crop development in the project area until the proceeds of the credit have been fully employed. Other Institutions 2.13 Liberia has not succeeded in creating and sustaining institutional credit for the traditional agricultural sector. The Government-owned Agricul- tural Credit Corporation, established in 1957, ceased in 1963, burdened with heavy financial losses. Only about 20% of commercial bank lending is for agri- culture and then mainly for concessions and commercial farms. The Liberian Bank for Development and Investment (LBDI, established in 1965 with IFC assistance) made 42% of its loans to the agricultural sector, but almost all for rubber, timber and wood processing. Thus the only institutional and extremely limited source of smallholder credit have been the Cooperative, Credit and Marketing Division of the Ministry of Agriculture and LPMC. MA provides credits for seasonal inputs but administration of the program is poor, and credit recovery has been unsatisfactory. LPMC has recently intro- duced a program of providing free seedlings for up to 10 acres to any farmer willing to plant tree crops and, in the special project areas (see para 2.07), a cash grant of US$30 per family per month until the trees come to maturity. Such a policy is not considered to be consistent with efficient management and use of resources and in the long run could impose undue burdens on the Government's finances, besides hindering development of appropriate credit institutions. These matters were discussed at negotiations and GOL agreed to discontinue this policy with effect from September 30, 1977 and September 30, 1978 in the Bong county and Lofa county special project areas, respectively. 2.14 The College of Agriculture and Forestry in the University of Liberia (UL) is the sole institution for graduate training in agricultural sciences, while its Agricultural Extension Training Center (AETC) provides facilities for the training of extension and other field staff. Additionally, the Booker Washington Institute offers a four-year vocational training program in agricul- ture. Agricultural research activities in Liberia, primarily carried out at the Central Agricultural Experiment Station at Suakoko, suffer from a lack of direction and coordination besides having poor physical facilities (Annex 3). Besides Ministry of Agriculture, the Ministries of Action for Development and Progress and Local Government, Rural Development and Urban Reconstruction - are involved in rural development in Liberia, but their impact has been minimal.  -6- III. PROJECT AREA 3.01 General. The project area consists of the Gbarnga, Kokoya and Sanoyie districts in the Bong County 1/, and has a total area of 650,000 ha and a population of about 140,000 of which 100,000 (19,000 farm families) are engaged in farming. The people primarily belong to the Kpelle Tribe and most of them are small farmers cultivating between 1 and 3 ha with average per capita income of about US$68 per annum (see Annex 2 and para 7.07). 3.02 Topography, Hydrology and Climate. Eighty percent of the area consists of dissected rolling uplands, 12% are swamps (poorly drained valley bottom), and the rest are isolated high hills or mountains. The climate is tropical with a mean annual rainfall ranging from 1,600 mm in the central parts to 2,200 mm in north and south. Most of the upland consists of deep ferralitic soils with a high laterite gravel content and low fertility. The valley bottom soils have textures varying, from loamy sand/sandy clay to sandy clay loams and iron-toxicity in soils is a major problem. 3.03 General Infrastructure. Social and related services are limited. Roads are poorly maintained. The few small airstrips in the area are used by GOL and private light aricraft only. Telecommunications between the area and other parts of Liberia are limited. Liberia Electricity Corporation (LEC) runs the power station in Gbarnga (rated capacity of 2,280 kw) which supplies the town and neighborhoods. There are 45 elementary schools (32 in the Gbarnga district, 6 in the Kokoya district and 7 in the Sanoyie district), 14 junior high schools and 1 college for graduate studies. Under the Bank's Second Education Project 12 community schools will be constructed in the county. Medical services are limited to the Phebe Hospital and a few govern- ment clinics (details in Annex 1). Institutions 3.04 As in other counties of Liberia, two types of institutions - the traditional and the modern public sector - dominate local administration. There are six chiefdoms divided into 28 clans (based upon traditional lineage categories), the clans in turn being divided into towns (geographic considera- tion) and towns into quarters. There are four development councils (consisting of paramount and clan chiefs and other leading persons) which have advisory functions to GOL (through county superintendents) for development activities and represent a formal link between Government and traditional institutions. 3.05 Land tenure arrangements form another important traditional institu- tional link. Although the state is officially the ultimate owner of all land, individual family right of usufruct is ruled by traditional laws and customs and traditional tribal control in their respective areas is honored. The 1/ Administratively, Liberia has nine counties and five territories.  -7- system provides satisfactory tenurial arrangements at this stage of develop- ment. However, an individual can secure registered title to his land under GOL laws (the Aborigines law, Public Land law No. 30 and Registered Land law). The procedures are complicated by bureaucratic intricacies, and at present only large, well-to-do farmers and Monrovia-based elite have been registering land (Annex 2, para 13). 3.06 Important communal labor groups known as KIU are formed among people of different households (to ease the labor burden by working with friends and neighbors). Cooperative saving societies, sometimes referred to as SUSU, formed by pooling resources, also exist. Thus, an environment of traditional cooperative action is present and this might be exploited to establish modern service cooperatives (Annex 2, para 12). 3.07 Approximately 10% of the project area is under cultivation of which 70% is tree crops (mostly rubber) and 30% annual crops (mostly rice and cassava). Distribution is rather uneven with only one-third of the cultivated land being shared among 75% of the households (smallholders) having average farm sizes of about 2 ha. However, land scarcity does not limit agricultural production; rather, expansion and improvement on small farms have been inhibited by lack of support services and infrastructure. Upland rice, occupying nearly 55% of the smallholder's cultivated area, is the predominant subsistence crop. Upland farming, under a system of extensive shifting cultivation, consists of rice intercropped with vegetables and minor cereals in the first year, followed by root crops and some sugarcane in the second year; thereafter the land is left fallow for five to ten years. Swamp rice is grown by about 10% of the farmers, cassava by 70%, corn by 25%, sugarcane by 22%, cocoa by 29% and coffee by 14%. Coffee and cocoa are the most important long-term cash crops. Farm management and husbandry standards are generally inadequate, land and labor are the primary inputs, while use of fertilizers, improved seeds (local varieties are morphologically uneven and of low genetic potential), pesticides, etc. is rare. Maintenance of tree crops is substandard and many stands are indistinguishable from secondary forests. Yields are low and returns to labor unattractive. Details are at Annex 2. IV. THE PROJECT A. General Description 4.01 The principal objective of the project would be to increase and sustain farm incomes by providing farm inputs and strengthening and develop- ing farm support services to the small farmers (see para 3.01). The project would be implemented over a five-year investment period 1977/78-1981/82 as follows:  -8- Farm and Crop Development Provide farm inputs, including fertilizers, insecticides, seeds and seedlings, farm equipment (power tillers, chain saws, hand winches, threshers, etc.) for cash or credit to increase production of 5,750 ha of upland rice, 3,000 ha of cocoa, 1,500 ha of coffee and 2,050 ha of swamp rice; of which 300 ha will be for double cropping), improve on-farm processing of coffee and cocoa; establish seed mul- tiplication farms and seedling nurseries and seed gardens; assist farmers in the selection of appropriate soils for different crops through soil survey and soil analysis; and assist farmers, where required, in land clearing and land development. Development of Physical Infrastructure Construct about 170 km new farm-to-market roads, recon- dition/upgrade an existing 130 km and maintain 540 km; construct offices, stores and houses; expand the training center and related facilities at Suakoko; and construct 300 village wells. Institutional Support Establish the Bong County Project Management Unit (BPMU) for project implementation; provide technical and adminis- trative staff for project implementation; establish cooperatives to facilitate input, credit supply and market- ing; provide financial assistance to LBDI for establishing banking facilities at Gbarnga; improve the research facil- ities and capabilities at the CAES; promote the smallholder land registration process; assist the Ministry of Health in the surveillance of schistosomiasis in the project area; and strengthen the evaluation and monitoring unit set up under the Lofa County Project for effective project evaluation. Other Assistance Financing consultants for the preparation of an integrated agricultural development project, tentatively identified in Grand Gedah county, and for a small survey to explore the citrus industry; and finance a more detailed study for the reorganization of MA.  B. Detailed Features Farm and Crop Development 4.02 Details of phasing and scheduling for crop development are at Annex 2, para 48. During the first year of the project, development would be confined to upland and swamp rice; thereafter, the tree crop program would be incorporated. 4.03 Upland Rice. Improvements to about 5,750 ha of upland rice produc- tion (existing yields - 1,000 kg/ha) would be obtained through the use of improved seeds (primarily LAC 23 with TOS 2581, 2583 used for late plant- ing) supplied to participating farmers every fifth year, compound fertilizer (22-40-0), and better farm management practices (details at Annex 2, paras 17-20). 4.04 Cocoa and Coffee. The project would develop 3,000 ha of cocoa and 1,500 ha of coffee for smallholders. Development would primarily consist of new plantings with (a) high yielding materials; (b) appropriate fertilizer applications, disease and pest control and other husbandry practices; and (c) improved on-farm and commercial processing. Participating farmers would be encouraged to group together and develop their coffee/cocoa in single blocks to facilitate administration of support services including phytosani- tary measures and quality control (details at Annex 2, paras 21-36). 4.05 Swamp Rice Development. The project would reclaim 1,650 ha of in- land swamps and improve about 400 ha of existing swamps. Of this approximately 300 ha would be developed for double cropping of rice where simple inexpensive (about US$700/ha) earthen barrages and other rudimentary structures would be constructed for storing run-off from catchment areas for use during the dry season. Land clearing on virgin swamps would be done manually with the help of small hand equipment; flood protection and water control would be through peripheral drains, field bunds and levelling. The project would provide assistance in preparing simple topographical surveys and soil analyses to select swamps for development. On-farm measures would focus on proper water management, timely planting and fertilization, and use of varieties resistant to iron toxicity (details at Annex 2, paras 37-46). 4.06 Supply of Inputs and Equipment. The project would supply improved rice seeds (560 tons), coffee and cocoa seedlings (7 million), fertilizer (5,000 tons), insecticides, chemicals, shade crops, additionally, power tillers for double cropped swamps, knapsack sprayers, hand winches, chain saws, cocoa fermentation boxes, etc., would be provided (see Annex 2, para 45). All farm inputs and farm equipment would be rented or sold at full commercial cost with provision for credit (see para 6.17 and Annex 4). Physical Infrastructure 4.07 Feeder Road Development. Only 55% of the population has direct access to a road and the estimated road density is about one km for every 18 km2. This is considered inadequate for timely delivery of inputs, services to farmers and marketing of produce. The project would provide funds for  - 10 - equipment and personnel for constructing 170 km of new farm-to-market roads, reconditioning/upgrading about 130 km of existing ones and maintaining about 540 km (including the newly constructed ones) of farm-to-market roads in the project area. At the end of project development, road density in the project area would be about 1 km for every 7 km2. The Ministry of Public Works would have the primary responsibility for the feeder road program but would work in close liaison with project management. Construction/upgrading/ maintenance would be done under MPW force account. No detailed engineering would be done for these roads (details at Annex 5, para 6.06). 4.08 Buildings. The BPMU offices (15,000 square feet) would be con- structed at Suakoko and six zonal offices at different locations; eight senior staff houses, a schistosomiasis laboratory and crop research laboratories would also be constructed to be staffed and equipped under the project. The training center, now being built (Credit 306-LBR) at CAES, would be expanded. The project would provide materials and other assistance to villagers for construction, on a self-help basis, of 300 village wells for improved water supply (details in table 2, Annex 8.) Institutional Development 4.09 Cooperatives. The project would develop cooperative societies to supply farm inputs and credit and for marketing farmers' crops. These would be developed within the traditional KUUS and SUSU systems (details at Annex 4). 4.10 Rural Savings. Funds would be provided for LBDI to establish banking facilities at Gbarnga including office space, staff and equipment. In addition to customary banking services, LBDI would manage the project's revolving credit fund (para 6.20). An assurance was obtained at negotiations that LBDI would establish the Cbarnga facilities by June 30, 1977. 4.11 Health. Urinary and intestinal schistosomiasis are endemic in the project area and therefore a rise in the prevalence of this disease, particularly among those who develop swamp rice is not improbable. Monitoring of project farmers is therefore important and the project would strengthen the Shistosomiasis Surveillance Unit established under Credit 577-LBR (para 6.07). Apart from monitoring the Unit would also undertake limited testing of vector control techniques. An assurance was obtained at negotiations that the findings of the Unit would be reviewed with the Association by December 31, 1978 and that GOL would promptly act to institute the required preventive and curative measures in the event of a marked increase in the incidence of schistosomiasis in the project area (details at Annex 6). 4.12 Project Management. MA's capability to implement the project would be strengthened through the establishment of the Bong Project Management Unit (BPMU) which would be located at Suakoko. BPMU would have responsibility for project implementation including recruitment and training of field staff. (details at Annex 7). An assurance was obtained at negotiations that MA would provide the necessary land for establishing project headquarters and constructing staff houses and other facilities.  - 11 - 4.13 Research. The project would finance the short term improvement of research facilities at the Center including continuation of rice research initiated under 306-LBR, the initiation of cocoa and coffee reseach and improvement of laboratory facilities for the agronomy and soil section. In addition, funds have been provided for two consultant-months for an in-depth analysis of existing research facilities in Liberia, the required organiza- tional changes, physical improvements, hiring of additional specialist staff, and training needs for research personnel. The initiation of the recommended program would be undertaken by the project. During negotiations, assurances were obtained that by December 31, 1977 GOL would prepare for review with the Association proposals for the reorganization of agricultural research for Liberia. A condition of disbursement of funds for the research component (except continuation of rice research initiated under 306-LBR) would be that this review, including detailed cost estimates is acceptable to the Association. 4.14 Land Tenure. Tribal land rights provide some tenurial security for farmers but with the expected increased competition for land due to increased yield and income potential arising from project measures, there is a need to promote land registration for smallholders. The project, which would work closely with the county land registration office, would provide a small survey team within BPMU to undertake surveys of land being developed by project farmers, and subsequently would assist farmers to complete the complicated procedures for obtaining title deeds (Annex 2, para 13 and Annex 7, para 15). 4. 15 The Monitoring and Evaluation Unit established under the Lofa Project (Credit 577-LBR) would be strengthened with additional staff and equipment to evaluate the Bong project (see Annex 7, para 17). Assurances were obtained at negotiations that no later than September 30, 1977, GOL shall amend the terms of reference of the existing unit enabling it to function for the Bong project. Other Assistance 4.16 Project Preparation. Funds have been provided for consultants to prepare a third rural development project identified by GOL in Grand Gedah County. Additionally a small survey to identify the potentials of a citrus fruit canning industry in Liberia would also be undertaken. 4.17 Reorganization of MA. Consultants were employed under Credit 306-LBR to review the adequacy of the present institutional arrangement for agricultural development in Liberia and to suggest specific proposals for reorganizing MA. The consultants' report, which is currently under review by GOL and the Association, recommends, inter alia, that a semi-autonomous Rural Development Authority be established to plan and inplement smallholder agricul- tural development projects. However, the study was not intended to provide details of the reorganization proposals (e.g., job descriptions, position classification, manpower planning, cost implications) that would allow imple- mentation of the proposals. In view of the urgent need for creating an institutional framework that would ensure continuity of farm support services during the post-investment phases of this and other projects being developed  - 12 - within the agricultural sector, funds have been provided under this project for a follow-up study designed to provide more detailed proposals for reor- ganization, including specifics of implementation. However, this study will be contingent upon satisfactory review of the Consultants' report (under Credit-306-LBR) by the Association. 4.18 Assurances were obtained at negotiations that about 70 consultant man-months amounting to US$0.35 million would be employed for research (para 4.13), project preparation (para 4.16), and the MA reorganization (para 4.17) would be appointed with terms of reference, qualifications and condi- tions of employment satisfactory to the Association. V. COST ESTIMATES AND FINANCIAL ARRANGEMENTS A. Project Costs 5.01 Project costs are estimated at US$20.3 million including US$0.2 million of identifiable indirect taxes but excluding all other taxes and duties. The foreign exchange component would be US$9.8 million or 48% of total costs. 1/ Details are at Annex 8 and are summarized below: 1/ Liberia uses US$ as its own currency.  - 13 - Base Line Local Foreign Total Costs Total Costs -----US$'000