Somalia - Bay Region Agricultural Development Project

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Report No. P-2669-SO REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE SOMALI DEMOCRATIC REPUBLIC FOR A BAY REGION AGRICULTURAL DEVELOPMENT PROJECT December 5, 1979 This docment has a restricted dWtribution nd may be used by recipients only in the performance of their oflicial duties. Its contents may not otherwise be disclosed without World Bank uthorIzaion.  CURRENCY EQUIVALENTS (For Calendar 1979, and at September 1979) Currency Unit - Somali Shilling (So.sh.) So.Sh. 1.00 - US$0.1589 US$1.00 - So.Sh. 6.295 WEIGHTS AND MEASURES 1 hectare (ha) 10,000 m 1 square kilometer (KM ) - 100 ha 1 metric ton (mt) - 1,000 kg ABBREVIATIONS ADC - Agricultural Development Corporation ADF - African Development Fund DEO - District Extension Officer DVO - District Veterinary Officer ETC - Extension Training Center FEA - Field Extension Agent FRO - Field Research Officer GNP - Gross National Product GOS - Government of Somalia ICB - International Competitive Bidding IDA - International Development Association IFAD - International Fund for Agricultural Development MLFR - Ministry of Livestock, Forestry and Range MOA - Ministry of Agriculture MPW - Ministry of Public Works NES - National Extension Service NRA - National Range Agency ONAT - Tractor Hiring Agency PADU - Pilot Agricultural Development Unit PMU - Project Management Unit REO - Regional Extension Officer RVO - Regional Veterinary Officer SMS - Subject Matter Specialist WDA - Water Development Agency USAID - United States Agency for International Development FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY SOMALIA BAY REGION AGRICULTURAL DEVELOPMENT PROJECT Credit and Prolect Summary Borrower: Somali Democratic Republic Beneficiary: Ministry of Agriculture Amount: US$12.0 million Terms: Standard Prolect Over a period of six years, the proposed project would Description: increase crop and livestock production in the Bay Region by improving potable water supplies and providing all-season access roads; supporting the development of a viable farming system that would preserve the productivity of the land; training Somalis and helping to build institutions capable of carrying on the agricultural development so initiated. The project would form the first phase of a long term development and would include funds to prepare a follow up phase. Benefits of the first phase would allow the average family in the Bay Region to meet basic food requirements and increase marketable surpluses. Local communities would be stabilized. In addition, the road component would benefit regions to the North and West of the project area. Major risks are that project implemen- tation could be delayed. Extension and research activities could take longer than expected to focus on key issues. Farmer and local community receptivity could be lower than expected and the Government might not provide the strong support required at the end of the six-year investment period to continue the long-term development efforts in the Region. However, in view of the Government's strong commitment to this project and the comprehensive extension program, these risks should be held at acceptable levels. This document his a restricted distribution and may be used by recipients only in the performance of their ofcil dutie. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - Estimated Project Costs: US$ Million % of Proiect Component Local Cost Foreign Cost Total Cost Total Water Supply 1.4 3.5 4.9 11 Access Roads 2.2 7.0 9.2 20 Adaptive Research 0.4 0.5 0.9 2 Seed Farm 0.6 0.9 1.5 3 Range Service 0.9 0.7 1.6 4 Veterinary Service 0.9 1.1 2.0 4 Technical Assistance and Training 0.6 10.9 11.5 26 Project Management Unit 0.7 0.6 1.3 3 National Monitoring & Evaluation Facility 0.3 0.6 0.9 2 Physical Contingencies 0.4 1.4 1.8 4 Price Contingencies 2.2 7.2 9.4 21 Total Project Costs 10.6 34.4 45.0 100 Taxes 1.6 - 1.6 Total Project Costs 9.0 34.4 43.4 (net of taxes) Financing Plan: Source Amount US$ Million Z of Total IDA 12.0 28 ADF 8.9 21 USAID 10.5 24 IFAD 8.0 18 Government 4.0 9 Total 43.4 100 Estimated Disbursements: US$ Million 1980 1981 1982 1983 1984 1985 1986 1987 Annual (FY) 0.4 - 1.4 3.7 2.4 1.7 1.6 0.8 Cumulative 0.4 0.4 1.8 5.5 7.9 9.6 11.2 12.0 Rate of Return: 20% (Calculated on 87% of total project costs). Staff Appraisal Report: Report No. 2406a-S0, dated November 29, 1979. Maps: IBRD 14245 IBRD 13870  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE SOMALI DE:MOCRATIC REPUBLIC FOR A BAY REGION AGRICULTURAL DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed credit to the Somali Democratic Republic for the equivalent of US$12.0 million on standard IDA terms to help finance a Bay Region Agricultural Development Project. Additional financing for the project would be obtained, on concessionary terms, from the United States Agency for International Development (USAID) (about US$10.5 million), the African Development Fund (ADF) (about US$8.9 million equivalent), and the International Fund for Agricultural Development (IFAD) (about US$8 million equivalent). PART I - THE ECONOMY 2. A Country Economic Memorandum (Report No. 2244-SO) was distributed to the Executive Directors in January 1979. Country data sheets are attached as Annex I. 3. The Somali Democratic Republic gained its independence in 1960 and the present Government came into power in 1969. In 1976, a political party, the Somali Revolutionary Socialist Party, was formed and became the main political institution. At present, the country is still suffering from the hostilities in the border areas in the Ogaden, and the phasing-out of Soviet aid and technical assistance in 1977. This, combined with large-scale migration of Somali workers to the Middle East, has led the Government to re-examine its development strategy. Although no major strategy has yet emerged, some cautious steps tending to increase the role of market forces in the economy have been taken. 4. Somalia is a large country with a 3,000 kilometer coastline; its land mass varies from a hot and arid coastal plain, to rugged mountains and plateaux, and lowlands of varying fertility and rainfall. Only 13% of the land is said to be arable!, but with water the limiting constraint, only a small fraction of this potentially arable land is, in fact, cultivated. Of a total population of approximately 3.7 million, over two-thirds are nomads and semi-nomads who depend OnL livestock for their livelihood, and about 20-25% are farmers cultivating land along the Juba and Shebelli rivers and in the higher-rainfall Bay and North-west regions. The existence of several minerals has been confirmed but with exploration still in its early stages, commercial viability remains to be proved. Short of other known resources, Somalia's prospects center on agricultural and livestock development in which progress will depend upon careful management of scarce land and water resources.  -2- 5. The small monetary sector of the economy provides only limited opportunities for employment. Apart from the traditional export of live- stock, commercial agriculture is mainly centered on the production and export of bananas, in which foreign concession holders are still important, and the production of sugar for the domestic market. The expansion of manufac- turing and other service sectors of the economy is limited by the small size of the domestic market, poor infrastructure, and the shortage of capital and entrepreneurial experience. Bank staff estimate that about 70% of the population live at subsistence levels of about US$200-250 per family of five. Social services are still very inadequate; the primary school enrollment ratio (at about 40% in 1977), though considerably higher than five years ago, remains relatively low. There is little economic data on Somalia. Even basic figures such as GNP, population, number of livestock, or output of major agricultural crops are only rough estimates. With a per capita income in the order of US$130 in 1978, the UN classifies Somalia as one of the least developed countries. Development Strategy 6. Since 1970 the Government has adhered to a program of "scientific socialism", emphasizing egalitarianism and social justice, development through the public sector, nationalization of certain foreign enterprises, and the formation of cooperatives. While the Government has always stated that there is room for private initiative in Somalia and several privately financed projects have been implemented, the main emphasis has been given to develop- ment of the public sector. Public ownership and management have expanded through nationalization, creation, and growth of enterprises. The parastatal sector now includes more than 50 autonomous agencies that have eliminated private enterprises in wholesale trade and banking while taking a major share in manufacturing. The Five-Year Development Plan 1974-78 was essen- tially a public investment program that allowed for a few small private ventures. Although it provided a needed impetus to investment in the economy, the Plan does not seem to have played a major role in the allocative process. Despite the Government's initial intentions, industry and mining, and infra- structure, have received more public investment than agriculture. At the same time, public enterprises have expanded without firm Government control, owing to a large extent to the inadequacies of monitoring instruments. 7. Since the bulk of the population is engaged in herding or in sub- sistence farming, a development strategy for Somalia should be based on agriculture and livestock resources. The major development goals of the Somali Government include self-sufficiency in food grains, the partial sub- stitution of other food imports (oils, rice) and improvement of the lot of the traditional nomadic herdsmen through settlement programs and improvements in livestock production and marketing facilities. The current emphasis on irrigated agriculture is meant to make the country less dependent on the erratic pattern of rainfall, and assure more stable and predictable increases in output. However, rainfed agriculture, which occupies the largest number of farm families is also being assisted. Improvements in livestock production and marketing are being promoted together with projects aiming at the rehabil- itation of the rangelands.  -3- 8. Somalia has made considerable progress in meeting some basic needs, a program of literacy and primary education has had noticeable results, and an effective system of food supply has been established. In other areas of the social sectors, however, the record is less impressive, particularly in water supply, sanitation, and health where services frequently seem to benefit mainly the urban population. On the other hand, economic growth has been rather slow, making it difficult for Somalia to pursue its basic needs policies vigorously. The GovernmerLt's industrial development policy focusses on the processing of domestic rawr materials to substitute for imports, although there are a few rather large investments which do not conform to this policy. Finally, the Government places emphasis on developing infrastructure, espe- cially transportation and communications. Economic Performance, Problems, and Sectoral Developments 9. The 1974-78 Five-Year Development Plan was revised several times but remained overambitious with respect to both financial and implemen- tation capacities. Financial implementation reached about 60%, 55%, 77% and 73% of the targets in the first four years. However, the absence of adequate monitoring and evaluation makes it impossible to determine the economic impact of these expenditures. In real terms, annual investment has probably been increasing and what was an essentially financial constraint in 1973-74 had, by 1976, turned into an implementation constraint which has worsened recently as a result of the exodus of skilled Somalis to the neighboring oil-exporting countries (see below, para 10). Many incomplete projects from the 1974-78 Plan are therefore included in a Three-Year Development Program 1979-81, under which investment of So.Sh. 5.7 billion (of which So.Sh. 3.4 billion are carry-overs) is contemplated. 10. About 100,000 Somalis have migrated to work in the neighboring oil-exporting states and their total earnings equal about ten times the total domestic value added in Somalia's modern sector. Labor migration has been a phenomenon that the Goverament neither organizes nor controls, and its magni- tude is such that the drain of skills and the inflow of private funds may affect the smooth functioning of a government-controlled economy. This migration is seriously depleting Somalia's already low stocks of qualified and skilled manpower, thereby reducing the absorptive capacity of the country and weakening its institutions. Migrant remittances have financed imports of about US$50 million in 1977, roughly equivalent to Somalia's exports of livestock (75% of total export value), consisting mostly of basic consumers' goods (foods, textiles, some durables). To a certain extent, these remit- tances could be mobilized to finance investment incentives although oppor- tunities for private capital to engage in productive investment are few. 11. Budgetary policies have generally been conservative and efforts have been made to mobilize resources through taxation. Although the drought and the border problems have adversely affected the Government's budget, the external grants they attracted have considerably eased their financial impact. However, expenditures on basic needs and defense have risen so much that the current budget fell into deficit in 1977 (by So.Sh. 2.5 million) for the  -4 - first time since 1971. The border problems of 1977 may only have accelerated an outcome that was already visible. In fact, the supply of government services nationwide, and the recurrent cost implications of recent public investments and policies, especially in productive services (such as agri- cultural extension) and basic needs (such as education, health and drinking water) will mak' it increasingly difficult for the budget to generate savings. 12. The external financial constraint is mainly the result of sluggish exports, with relatively stable imports over the past three years. The structure of the balance of payments in 1977 was essentially similar to that of previous years, with low exports equivalent to US$71.3 million, accounting for only about 40% of imports. The large trade deficit was more than compensated for by transfers (US$108.0 million) and capital inflows (US$64.2 million). Exports declined by about 12% in 1977 mainly on account of bananas, the second most important export item. The drop in banana exports resulted partly from a marketing dispute in the Middle East. Decreased activity in fields such as fish and meat canning, formerly assisted by the Soviet Union, also contributed to declining exports. Livestock exports have stagnated during the past three years largely because of the 1974-75 drought, but early indications for 1978 suggest a resumption of growth (in volume) together with satisfactory price developments. 13. The sluggish exports and a low level of domestic savings, both attributable to the country's poverty, have made external assistance most important in the financing of development. Somalia joined the Arab League in 1974 and mounted a major effort to attract funds from the Arab petroleum exporting countries. The large inflows of external capital and transfers from 1975 onward indicate that the effort has been successful. Due to polit- ical events, the source of foreign assistance has recently changed from the socialist countries (except for China which maintains a large program) towards Arab bilateral and multilateral institutions (continuing the trend started in 1975) and Western countries, several of which (the EEC, Federal Republic of Germany and Italy) have had substantial assistance programs for a number of years. The public external debt of Somalia outstanding and disbursed as of December 1977 was approximately US$400 million, and although a large share is on fairly soft terms, the debt service ratio has increased from 3.4% in 1972 to about 5.5% in 1977. 14. In summary, the Government's record over the past few years has been mixed, but the country's poverty is such that even partial successes must be welcomed. The slow development of agriculture in a mostly nomadic society, the shortage of qualified manpower, the difficulties of organizing and manag- ing an efficient public sector, and the limitation of financial resources can all be imputed to the country's human and natural constraints. The Government has attempted to alleviate some of these constraints and has partially succeeded. It has met some of the basic needs. It has also laid a national basis for growth in manufacturing together with an initial system of economic and physical infrastructure, though growth in income, exports, and imports has been rather slow.  -5 - 15. As regards future policies, greater emphasis should be gi-ven to economic growth; this would imply directing more investments towards produc- tive activities, particularly agriculture and small-scale industry. The mobilization of resources to this end should be sought through better manage- ment of public enterprises, and more dynamic measures to encourage the migrants to return to Somalia and to attract and mobilize the financial resources of the migrants. In the interest of economic growth, better oppor- tunities and greater incentives ought to be created to stimulate production, and a dialogue on various policy options for this purpose has recently commenced between the Government and the Bank. 16. Somalia's export prospects are rather poor because of the concentra- tion on two primary products -- livestock and bananas -- both of which face problems in expanding production in the long run. Livestock is subject to cyclical droughts which decrease export supplies. Banana exports have fallen because of both supply (drought, floods, poor agricultural practices) and demand (increasing competition from multinationals in both Italy and the Middle East) problems, but production could recuperate within two years. Diversification efforts have been attempted with hides, skins, and fisheries with limited success and even dimmer prospects now that Soviet technical assistance, dominant in these three activities, has been wound up. Therefore, in view of the country's poverty and uncertain export prospects, assistance should be provided on the softest terms possible and contain provisions for local currency financing., PART II - BANK GROUP OPERATIONS IN SOMALIA 17. Starting in 1965 IDA has made 19 credits totalling about US$131 million, of which about 33% have been made for transportation development, including construction oE three trunk roads and a new deepwater port and associated extensions at Mogadishu. IDA credits were also made for live- stock development in FY74, for a development finance company project in FY77, and for education in FY71, FY75 and FY78. Lending for crop agricul- ture commenced in FY76 with two credits for a Drought Rehabilitation Project and a North-West Region Agricultural Development Project. Additional Credits for Central Rangelands and Agricultural Extension and Training projects were appraved in FY79. Agricultural credits approved for Somalia represent 35% of total lending. A credit for development of water supply in Mogadishu and a technical assistance Credit for project preparation were approved in FY78. No Bank loan or IFC investment has been made to Somalia. Annex II contains a summary statement of IDA credits as of October 31, 1979 and notes on the execution of ongoing projects. 18. Performance on ongoing projects has been somewhat weak due mainly to shortage of qualified personnel. As the pace of development continues to rise, absorptive capacity constraints are becoming increasingly evident, especially in the field of agriculture where projects are rather complex and implementation experience is limited. Therefore, in preparing and appraising new projects, particularly close attention is being paid to implementation  -6- capacity and the adoption of measures to ease this constraint when necessary. As one step to address this problem, the Government is establishing a Project Implementation Unit which would strengthen the capacity for project implemen- tation considerably by providing monitoring and logistical support to the projects, including assistance in procurement and recruitment of consultants. 19. We plan to concentrate our future efforts on the country's directly productive sectors, agriculture and livestock, and also on education and transportation. While agriculture and livestock offer potential for develop- ment, most rural development activities are only in the early stages. More- over, agricultural development in Somalia is particularly difficult because most of the people in rural areas are nomadic. To increase our knowledge of agriculture in Somalia the Bank is currently making a comprehensive review of the sector. In addition to these sectors, we plan to support the Government's industrial development efforts (and assist in the formulation of an industrial development policy) through our country economic work and future industrial development finance projects. We also plan to continue assistance to the water supply sector. 20. Somalia's statistical service lacks the capacity to fulfill the data needs of development programs. The Bank's operations have experienced difficulties in obtaining statistical data. We are therefore helping to strengthen the Central Statistical Department in the State Planning Commission under the Agricultural Extension and Farm Management Training Project through provision of technical assistance and training of Somali staff. 21. To facilitate the development and implementation of the Associa- tion's growing operational program in Somalia, we established a one-man resident mission in 1977. The mission represents the Bank Group in its contacts with the Government, thus facilitating an efficient and smooth day-to-day working relationship, and assists in coordination of cofinancing efforts. In addition two Bank staff members have recently been seconded to the Project Implementation Unit (para. 18). PART III - THE AGRICULTURAL SECTOR AND THE BAY REGION Production Environment 22. Somalia is heavily dependent on livestock and farming for its economic development but, with the exception of commercially produced bananas and sugarcane, production tends to be subsistence oriented. Although the export of live animals and animal products contributes 75-80% of Somalia's total foreign exchange earnings and involves approximately two-thirds of the country's population, it remains a traditional industry based on natural rangelands which make up 45% of the total land area (30 million ha). Only  -7- 0.7 million ha or 1% of Somalia's total land area are currently cultivated - 540,000 ha of this is rainfed, the balance is under controlled or uncontrolled irrigation. About 195,000 families are engaged in crop production and 90% of the cultivated area is used to grow sorghum, maize and sesame. State farms growing maize, rice and other irrigated crops are slowly gaining importance. 23. Cereal consumptiLon is around 350,000 tons per year. Of this, imports account for 15-30% and will rise unless output can be increased to bring production trends in line with population increases. Domestic output has improved considerably, but not yet returned to the pre-1973/75 drought levels. Major impediments are the shortage of qualified manpower, the absence of essential infrastructures, and the lack of institutional means, facilities, and coordinat:Lon. As a result most producers operate in isolation. Very few have access to the limited services available. Fewer use purchased inputs. All suffer significant wastages trekking livestock to market and/or holding grain against subsistence requirements until a saleable surplus appears. The Bay Region 24. The 4 million ha Bay Region contains nearly 60% (320,000 ha.) of Somalia's existing rainfed agriculture. It also has a further 370,000 ha, currently used as rangeland, that is cultivable; and is considered to have the greatest potential of all regions for a rapid increase in area of rainfed cultivation and crop yields. The remainder of the Region (3.3 million ha) is rangeland which currently supports nearly 300,000 head, or 9%, of the country's livestock. The rangeland is believed to be overstocked. Agricultural Policies and Services 25. The severe 1973/75 drought disrupted the economy and forced the Government to redirect the country's development priorities, particularly in agriculture, to achieve self-sufficiency. Somalia aims at self-sufficiency in major food commodities through an expansion of the area under cultivation and through gains in productivity. The Government plans to achieve this objective through increased technical assistance to agriculture, soil conserva- tion, better water management and irrigation intensification, and progressive transition from nomadism to settled farming. Irrigation development is intended as a shield against future weather vagaries affecting crops. On the other hand, range conservation and management would protect livestock against future prolonged drought. The livestock development strategy emphasizes disease control measures, improvement of the marketing system and improvement of herd productivity through better range and animal management. Although the potential for irrigation in the Bay Region is largely unknown, its natural resources and potential for dryland farming fit the Government's priorities and provide the best opportunity for immediate action. 26. Since 1971, the Agricultural Development Corporation (ADC) has had a monopoly over the sorghum and maize trade. Farmers generally maintain on- farm grain stores of about 2 tons (2 years' subsistence supply) and sell excess production, although the amount delivered to ADC undoubtedly varies  -8 - with the price offered and the accessibility of ADC buying poinits. ADC estimates its storage losses to be about 2% per year, which compares favorably with estimates of on-farm storage losses of 20-40%. Sorghum was the only crop purchased by ADC in the Bay Region during the 1977 crop season. Livestock marketing within the country is dominated by the private sector. The Livestock DteJelopment Agency under the Ministry of Livestock, Forestry and Range (MLFR) provides limited marketing facilities and services and acts mostly as a field collection agency. One of LDA's ten marketing centers is located at Baidoa in the Bay Region. Milk is marketed on an ad hoc basis. 27. Except for sorghum and maize, the prices for agricultural products are basically determined by the interplay of domestic market forces. Sorghum and maize prices are controlled by ADC in conjunction with the Government at all market levels. Livestock producer prices are non-competitive because of imperfect dissemination of price information. In addition, poor infrastructure limits farmers' access to traders and makes trucking and trekking expensive and only possible during part of the year. The pricing strategy for sorghum and maize has caused, and may continue to cause, major liquidity and management problems for ADC even though the sorghum prices have been changed about once every two or three years. These problems arise when ADC is either forced to buy large quantities on the international market to make up for local short- falls (as in 1976) or when unexpectedly large amounts of domestic production are offered for sale (as in the summer of 1978). However, as far as the proposed project is concerned, present price levels of themselves should not impede achievement of project objectives. The Government's policy has been to encourage the use of modern production inputs. These have to be imported and are often not only exempted from duties, but are also subsidized. Subsidies may be desirable at this stage of development as a means of getting farmers familiarized with new techniques, but as their use becomes more widespread the burden on the Government's budget will increase. IDA has an ongoing dialogue with the Government on pricing issues in the context of the Agricultural Sector Review (para. 19). 28. Crop research is currently being carried out almost exclusively at the Central Agricultural Research Station at Afgoi, under the supervision of the Director of the Agricultural Research Institute (part of the Ministry of Agriculture). Three regional research stations are being developed in the major ecological zones at Gelib, Bonka (near Baidoa in the Bay Region), and Aburein. Although some work has been done, there is a great need for a long range research program, starting with adaptive work and building up gradually towards a more basic research program. In the Bay Region cost savings and early results could be achieved by making better use of existing local knowledge and cautiously augmenting this with information already available in other countries and at international research centers, until local work provides Region specific results. 29. Government programs related to crop production are the responsibility of the Ministry of Agriculture (MOA). The Ministry is assisted by parastatal and public agencies - the Production and Extension Department, the ADC, the National Tractor Hiring Agency, the Somali Development Bank, and the Water  -9 - Development Agency (WDA). Government programs related to the rangelands and livestock production are the responsibility of the Ministry of Livestock, Forestry and Range, assisted by several public agencies including the National Range Agency (NRA), the Livestock Development Agency, the Department of Veterinary Services and tlhe Water Development Agency. Government programs related to roads are the responsibility of the Ministry of Public Works (MPW). Bank Group Assistance in the Agricultural Sector 30. As indicated in Part II of this report, Bank Group assistance to the agricultural sector in Somalia started with the Trans-Juba Livestock Project (IDA Credit 462-SO) in FY74 followed by two credits in FY76 for the Drought Rehabilitation Project (IDA Credit 623-SO) and the Northwest Region Agricultural Development Project (IDA Credit 635-SO). An Agricultural Exten- sion and Training Project (IDA Credit 905-SO) and the Central Rangelands Development Project (IDA Credit 906) followed in FY79. Currently there is the proposed project, the Agricultural Sector Review (para. 27) and Bank Group assistance for preparation of a Livestock Marketing Project. 31. Implementation of on-going agricultural projects has met with some difficulties (para. 19) mainly due to the scarcity of trained manpower which is being aggravated by the continued migration of Somalis to the neigh- boring petroleum exporting countries. To ease difficulties of this nature, the FY79 projects and the proposed project provide additional technical assistance and emphasize institution building by providing comprehensive training programs. More pervasive difficulties, such as hiring consultants, procuring equipment and monitoring project implementation, have been addressed by setting up a Project Implementation Unit (para. 18) in the State Planning Commission, and including, in the proposed project, the funds to estab- lish a national monitoring and evaluation facility. PART IV - THE PROJECT Background 32. A report entitled "Staff Appraisal Report, Bay Region Agricultural Development Project" (No. 2406a-SO) dated November 29, 1979 is being distributed separately. A Credit and Project Summary appears at the beginning of this report and a Supplementary Project Data Sheet is given in Annex III. The project was prepared by the Government with the assistance of the FAO/World Bank Cooperative Program,, and appraised by an IDA/IFAD mission in June 1978. Negotiations were held in Washington, D.C. from November 6, 1979 to November 9, 1979. The Somali Delegation was headed by Mr. Ahmed Mohamed Mohamud, the Chairman of the National Economic Committee. Project Concept 33. Despite its recognized potential for increased production, the Bay Region could not be deveLoped without first making major improvements to infra- structure and the existing information base, which is at present inadequate to  - 10 - define and choose between alternative strategies. The proposed project would address the key prerequisites for increasing crop and livestock pro- duction in the Region, by helping to provide: (i) additional year-round sources of potable water for animal and human consumption; (ii) all-season physical access to areas where agricultural production is either currently or potentially significant; and (iii) the institutional strength to maintain and use these facilities. The project would attempt to provide the institutional strength first, by organizing existing know-how and disseminating it to farmers, by strengthening local agricultural organizations, and by carrying out adaptive research and field trial programs specifically geared to the Bay Region, and second, by developing a viable farming system that both embraces the complementary integration of crop and livestock production and also preserves the produc- tivity of the land. 34. The proposed project has therefore been conceived as the first phase of a long-term development program in which the first phase would provide the infrastructure, institutional strength and information base, funds and facili- ties required to prepare a second phase project that would focus more directly on increasing agricultural production. In addition, because of the many technical and institutional questions that remain unanswered, the first phase project would be implemented in two stages. The first of these would last three years. It would concentrate on procuring project goods, staffing, training, gathering information, extending assistance to farmers (within the limits of proven region specific technology), and initiating an applied research program to find solutions to already identified farming problems. During the first stage, a Project Management Unit (para. 36) would prepare by February 28, 1983, with the assistance of an hydrologist, a research agronomist and a livestock specialist whose qualifications and terms of employment are satisfactory to IDA, a work plan satisfactory to IDA that would specify the timing, ways and means for completing the implementation of each project com- ponent during the proposed second three-year stage (draft Development Credit Agreement, Section 4.12). Disbursements of credit funds for each project com- ponent following the preparation of this plan would be contingent upon agree- ment between IDA and Government to continue with the implementation of each component as originally defined or as modified as a result of experience (draft Development Credit Agreement, Section 4.12 and Schedule 1, para. 3). Project Objectives 35. The proposed project would lay the groundwork for increasing crop and livestock production in the Bay Region. Over a period of six years, it would improve the potable water supply, upgrade the road network, support the development of a farming system that would preserve the productivity of the land, train Somalis and help build institutions capable of carrying on the agricultural development task in the Bay Region. Specifically, the project would provide for:  - 11 - (a) improving the supply of potable water in the Region for human and livestock consumption through: (i) drilling and developing about 60 deep boreholes on the Limestone Plateau (of which six would serve selected pilot range improvement units, and the remainder, crop producing areas); (ii) an investigation/ production drilling program in the Basement Complex involving about 40 drilled boreholes, 10 dug wells and 4 "uars" (earth reservoirs); and (iii) testing the availability of water for irrigation in the Limestone Depression by drilling about 6 boreholes and 2 test production wells. Funds would be provided for drilling equipment, transport facilities, staff housing, surveys and studies, and incremental operating costs; (b) upgrading and mai ntaining all roads in the Bay Region to give all-season access to areas where agricultural production is presently or potentially significant by: (i) rehabilitating about 350 km of 6 m wide low standard main roads; (ii) con- structing about 210 km of 4 m wide feeder or access roads; and (iii) clearing about 250 km of access tracks. The project would provide for road construction equipment, transport facili- ties, staff housing, a mechanical workshop and incremental operating costs; (c) intensifying the farming system in the Bay Region through: (i) introducing simple improved production practices and initiating a program of adaptive research and field demon- stration trials aimed at crop production, animal husbandry and range management; (ii) creating four pilot agricultural development units to integrate crop and livestock activi- ties and test the technical and institutional means of integrating farm and range activities; (iii) strengthening the veterinary service in the Region; (iv) strengthening the agricultural extension service in the Region (to be financed under the Agricultural Extension and Farm Management Train- ing Project); (v) producing quality seeds; (vi) testing means to improve on-farm storage of grains and fodder; and (vii) supporting the production and diffusion of improved farm tools and animal drawn implements. The project would provide for staff housing and office space, machinery and equipment for the seed farm and research center, transport facilities, surveys, studies, and incremental operating costs; (d) technical assistance and training including: (i) training abroad for key Somali staff; (ii) short-term study trips abroad for selected Somali staff; (iii) expatriate experts to fill key posiLtions during project implementation; and (iv) consultancy services. The project would provide for the construction of staff housing and office space, trans- port facilities and operating costs. The Government would furnish a plan satisfactory to IDA for the overseas training of Somali staff by June 30, 1980 (draft Development Credit Agreement, Section 4.11); and  - 12 - (e) strengthening national monitoring and evaluation facility of the State Planning Commission and make it responsible for the independent monitoring and evaluation of, initially, agri- cultural development projects and, ultimately, all development projects in the country. The facility would be headed by an internationally recruited monitoring and evaluation specialist who would be assisted by an internationally recruited sociologist, an internationally recruited statistician and economist, and other support staff (draft Development Credit Agreement, Section 4.04). The project would provide for the construction of housing facilities and office space, transport and incremental operating costs for the facility. The State Planning Commission would prepare a work program satisfactory to IDA by February 28, 1981 (draft Development Credit Agreement, Section 4.10). Project Implementation 36. The Ministry of Agriculture was chosen by the Government to imple- ment all aspects of the project except for the national monitoring and evaluation facility which, as explained above, would be responsibility of the State Planning Commission. A Project Management Unit (PMU), headed by a Project Director, would be set up in the Bay Region to implement the project during the investment period on behalf of the Ministry of Agriculture (draft Development Credit Agreement, Section 4.02). The PMU would maintain close contact with the Regional Government, the Regional Governor and District Commissioners. A Bay Region Development Coordinating Committee would be established as a condition of credit effectiveness to ensure adequate cooper- ation at the regional level and provide policy making level support for the PMU (draft Development Credit Agreement, Sections 4.03 and 7.01(d)). This Committee would consist of the Regional Governor, the Ministers of Finance, Agriculture, Livestock, Forestry and Range, Water and Mineral Resources, Public Works, the Chairman of the State Planning Commission and the Project Director. It would meet once a year or as needed at the request of the Project Director. 37. The PMU would have full control over all resources provided under the project, and would be given the mandate to oversee the strengthening of the regional institutions directly involved in the project. These include the regional units of the Ministry of Agriculture, the Ministry of Livestock, Forestry and Range, the National Range Agency, the Water Development Agency, and the Civil Engineering Department of the Ministry of Public Works. The regional units would be brought under the direction of the PMU during the project investment period. Their staff would be directly responsible to the Project Director. Although seconded to the PMU, these units would retain their identity as the regional extension of their respective ministries, agen- cies or departments. This would facilitate their administrative reintegration to their original institutions at the end of the project investment period and would allow the PMU to develop clear lines of authority and cooperation within and between these well defined units, thus creating an environment for con- tinued interagency cooperation after the PMU is dissolved.  - 13 - 38. Various concerned governmental agencies would second staff to the PMU. Because of its importance for the proper and timely implementation of the project, the Government has prepared a draft legal document establishing the PMU and describing the procedures and to bring the regional staff and facilities of MLFR, NRA, WDA and MPW under the direction of the PMU during the investment period. This draft document was reviewed by the Association during negotiations and it is satisfactory. The execution of the legal document and the appointment of the Project Director, the Project Technical Manager and the Financial Controller would be additional conditions of credit effectiveness (draft Development Credit Agreement, Section 7.01(c)). The Project Management Unit (PMU) 39. The Project Director would be responsible for overseeing all Project activities and ensuring that they complement other development efforts undertaken by the Regional Government, Central Ministries and other government institutions. The Project Director would be an agriculturalist, preferably with a good knowledge of the economy of the Bay Region. The Project Technical Manager would be an experienced agriculturalist or agricul- tural economist with a broad knowledge in semi-arid agriculture and with experience in managing development projects in the African context. He would be responsible for all technical aspects of project implementation and would report to the Project Director. He would be the leader of a team of interna- tionally recruited staff and would assist the Project Director in coordinating the implementation of the project, including the construction of facilities created under the project, the coordination and quality control of training programs, the proper use of project funds and the monitoring and evaluation of project activities. The Financial Controller would be responsible to the Project Director through the Project Technical Manager and would assist them in organizing the procurement of project related goods and services and in establishing a system of financial control and accountability for the consti- tuent units of the project. The Project Director, Project Technical Manager and Financial Controller would have qualifications, and be given terms of reference, satisfactory tc, IDA (draft Development Credit Agreement, Section 4.13). 40. The Monitoring aLnd Evaluation Section of PMU would be headed by a Somali agriculturalist or agricultural economist who would be responsible to the Project Technical Manager. An internationally recruited Agricultural Extension Specialist would assist the Project Technical Manager in establishing a management oriented system of monitoring and evaluation of project activities and results. 41. The Government would submit semi-annual progress reports to the financing agencies. Within six months of completion of disbursements under the IDA Project, the Government would prepare a completion report on the implementation of the project, including actual costs, benefits and contri- bution towards the accomplishment of the country's development objectives (draft Development Credit Agreement, Section 4.07(c) and (d)).  - 14 - Intensification of the Farming System 42. This component includes all aspects of the project aimed at inten- sifying crop and livestock production both in the cropped and in the range areas and at preserving the productive potential of agriculture in the Region. Thus five subcomponents - extension service, veterinary service, adaptive research and field trials, range management, and seed production - would be brought together to create the institutional environment under which it would become feasible to adopt an integrated approach to agricultural development in the region. The Project Technical Manager would assist the Project Director in coordinating the implementation of these five subcompo- nents and in establishing procedures for continuous cooperation among their staff at the working level. 43. The Regional Extension Service. The extension service would be headed by the Regional Extension Officer (REO) who would be assisted by two Subject Matter Specialists at the regional headquarters and by eleven District Extension Officers, who in turn, would supervise 106 Field Extension Agents, each covering about 500 families. Extension coverage of the Bay Region would follow the phasing proposed under the Agricultural Extension and Farm Manage- ment Training Project. Coverage would proceed one district at a time, starting with the Baidoa District and with the Pilot Agricultural Development Units and progressively covering the region as trained extension staff become available. Because the National Extension Service is at its early stages of development, an internationally recruited Agricultural Extension Specialist would be recruited to serve as a technical advisor to the REO and to assist him in getting the regional extension service started. He would also represent the link between this project and the Agricultural Extension and Farm Management Training Project. The Extension Specialist would be responsible to the Project Director through the Project Technical Manager and would assist them in supervising project activities aimed at intensifying the farming system, coordinating crop, livestock and range research activities, establishing strong links between research and extension, and establishing a management-oriented system of monitoring and evaluation. The Extension Specialist would work closely with the headquarters staff of the National Extension Service at Afgoi and would follow the same extension methodology being followed nationally. 44. The Regional Veterinary Service. The existing veterinary unit in Baidoa would be brought under the direction of the PMU for the six-year project investment period. The Project Technical Manager, assisted by an internationally recruited Project Veterinary Specialist, together with the Project Director and in consultation with the Director of Veterinary Services in the MLFR, would prepare work and training programs for the regional veterinary unit. Somali staff would be trained to provide for a qualified Regional Veterinary Officer (RVO) at headquarters along with his support staff and laboratory technicians. The RVO would be the deputy of the inter- nationally recruited Project Veterinary specialist and would take over respon- sibility for the unit towards the end of the six-year investment period. The RVO would supervise District Veterinary Officers, who in turn would supervise vaccination teams, veterinary store keepers and dispensary attendants. The internationally recruited Project Veterinary specialist would be a qualified veterinarian with experience in low rainfall areas and in pastoral type animal husbandry.  - 15 - 45. Adaptive Research and Field Trials. An internationally recruited Agricultural Research Specialist, assisted by the Extension Specialist, would prepare a two to three year applied research program for the Bay Region, covering both crop and aninal production. This program would be reviewed by IDA and care would be taken to ensure that it fits within the national research strategy (to be developed under the recently approved Agricultural Extension and Farm Management Training Project). This program would have to be locally approved by a committee consisting of the Project Director, the Project Technical Manager, the Veterinary Specialist, the Range Management Specialist, the Director of the Department of Animal Husbandry of the IMLFR, the Director of Research Training and Planning of NRA, and the Director of the Research Institute of IIOA. Once enough reliable information about the Region is put together, this short term research program would be expanded and modified as necessary into a more comprehensive applied research program for the Region. The latter would be submitted to IDA for review and approval as part of the project mid-term review of the overall work program. The inter- nationally recruited Agricultural Research Specialist would be stationed at the Bonka Research Station and would be responsible to the Project Director through the Project Technical Manager. He would assist them in developing a training program for Somali staff at the research station, both on-the-job and abroad. He would supervise the work at the Bonka Research Station and the adaptive/demonstrative trials in the field, both within and outside of the pilot agricultural development units,(PADUs). 46. A Somali Field Research Officer (FRO) would be stationed at each cropping area of each PADU and would be given the physical means and technical back-up to implement the on-farm research program and record its results. The FROs would work closely with the Extension Service field staff to ensure that the research program is well adapted to the needs of the farmers and to ensure the uninterrupted flow of information to and from research. 47. Range Management. To implement this subcomponent which is an integral part of the PADUs, the regional unit of NRA would be brought under the direction of the PMU during the project investment period, but would retain its identity. It rould be strengthened by an internationally recruited Range Management Specialist who would be responsible to the Project Director through the Project Techn:Lcal Manager. 48. Seed Production. The seed farm would be headed by an internationally recruited agriculturalist with experience in seed production to serve as the manager of the seed farm. He would be responsible to the Project Director through the Project Technical Manager. He would supervise seed production activities and would coopierate with the Agricultural Research Specialist and the Range Management Specialist in producing quality seeds for food crops, by pasture and experimental range improvement. He would supervise the establish- ment of a workshop to service farm machinery on the seed farm and to serve as a base for work related to the development of farm hand tools and animal drawn implements and possibly for the construction of village and on-farm grain storage facilities, if found desirable for the Region. He would also be responsible for developing a training program for Somali staff working on the farm and would assist in preparing the mid-term work plan.  - 16 - Water Supply 49. The WDA regional offices and workshop at Baidoa would be strengthened through the provision of an internationally recruited team of technical staff headed by a hydrologist who would be responsible to the Project Director through the Pro,-ct Technical Manager. Somali staff would be trained and equipped to take over responsibility for further water development and main- tenance at the end of the project investment period. Access Roads 50. During the Project investment period, the Regional Unit of the Civil Engineering Department of the MPW would be strengthened by a team of inter- nationally recruited technical staff headed by a civil engineer who would be responsible to the Project Director through the Project Technical Manager. Besides implementing the project works, the team would train the Somali staff in numbers and at levels needed to ensure that the Region acquires an ongoing road construction and maintenance capability. Project Cost Estimates 51. Total project costs would amount to US$45 million, including taxes of about US$1.6 milllion equivalent, over the six-year implementation period. The foreign exchange component is estimated at US$34.4 million, or 79% of the total project costs, net of taxes, of US$43.4 million. The project cost estimates are summarized below: Foreign Project Component Local Cost Foreign Cost Total Cost Exchange ----US$ million