Turkey - Intensive Dairy Production Project

Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY Report No. 2542 PROJECT PERFORMANCE AUDIT REPORT TURKEY INTENSIVE DAIRY PRODUCTION PROJECT (FIRST LIVESTOCK DEVELOPMENT PROJECT) (Credit 236-TU) June 12, 1979 Operations Evaluation Department 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.  FOR OFFICIAL USE ONV'. Project Performance Audit Report TURKEY INTENSIVE DAIRY PRODUCTION PROJECT (FIRST LIVESTOCK DEVELOPMENT PROJECT) (Credit 236-TU) TABLE OF CONTENTS Page Preface i Basic Data Sheet 11 Disbursement Table iii Highlights iv PROJECT PERFORMANCE AUDIT MEMORANDUM I. Summary 1 II. Main Issues 3 A. The Nucleus Dairy Herd 3 B. Project Size 4 C. Audit of Project Accounts 5 Annex 1 - Government Comments 7 PROJECT COMPLETION REPORT I. Background 11 II. Project Description 12 III. Implementation 12 IV. Impact of the Project 22 V. Special Issues 27 VI. Borrower and Bank Performance 28 VII. Conclusion 32 Annex 1 - Financial and Economic Analyses 34 Annex 2 - Details of Farm Development Loans Terminated as of December 31, 1976 53 Annex 3 - Herd Projection 54 Annex 4 - Reproductive Performance 57 Map 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.  Project Performance Audit Report TURKEY INTENSIVE DAIRY PRODUCTION PROJECT (FIRST LIVESTOCK DEVELOPMENT PROJECT) (Credit 236-TU) PREFACE This is a performance audit of the Intensive Dairy Production Project in Turkey for which Credit 236-TU was approved in February 1971 in the sum of US$4.5 million. The final disbursement in respect of this credit was made on March 14, 1978. The audit report consists of an audit memorandum prepared by the Operations Evaluation Department and a Project Completion Report dated August 9, 1977. The PCR was prepared by the Europe, Middle East and North Africa Regional Office on the basis of a country visit in March 1977. The audit memorandum is based on a review of the Appraisal Report (No. PA-36a) dated January 26, 1971, the President's Report (P-896) of February 3, 1971, the Credit Agreement dated February 22, 1971, and the PCR; correspondence with the Borrower and internal Bank memoranda on project issues as contained in relevant Bank files have also been con- sulted and Bank staff associated with the project have been interviewed. An OED mission visited Turkey in September 1978 in connection with the OED studies on Delays in Project Implementation and on Super- vision. The mission held discussions with officials of the Ministries of Finance and Agriculture, and the Turkish Agricultural Bank. A field trip to visit some participating farmers was undertaken. The information obtained during that mission was used to test the validity of the conclu- sions of the PCR and permitted discussion of future dairy herd development, an aspect not covered by the PCR. A copy of the draft report was sent to the Borrower on February 16, 1979. The comments received from the Government (see Annex 1 of the PPAM) have been taken into account. The suggested corrections and changes of the PPAM and PCR have been incorporated. In one instance the audit mission could not fully agree with Government comments and in this case the difference in views has been footnoted. The audit finds the PCR comprehensive and accurate with respect to the project's principal achievements and shortcomings. The points discussed by the audit mission have been selected because of their rele- vance to this as well as other projects in Turkey. The valuable assistance provided by the Government of Turkey, TCZB and their staff met during the preparation of this report is grate- fully acknowledged.  - ii - PROJECT PERFORMANCE AUDIT REPORT BASIC DATA SHEET TURKEY INTENSIVE DAIRY PRODUCTION PROJECT (CREDIT 236-TU) (FIRST LIVESTOCK PROJECT) KEY PROJECT DATA Appraisal Actual or Item Expectation Current Estimate Total Project Cost (US$ million) 7.5 9.4 Overrun (%) - 25.0 /1 Credit Amount (US$ million) 4.5 4.5 Disbursed )- 4.5 Cancelled ) Repaid to ) December 31, 1978 Outstanding to ) - 4.5 Date for Completion of Physical Components 12/31/74 12/31/77 Proportion of Time Overrun () - 92 Incremental Economic Rate of Return (%) 20 19 OTHER PROJECT DATA Original Actual or Item Plan Revisions Current Estimate First Mention in Files or Timetable 04/28/67 Government's Application - - 08/09/68 Negotiations 04/06/70 04/20/70, 05/04/70, 05/19/70 05 /11/70 Board Approval 02/09/71 - 02/16/71 Credit Agreement Date 02/19/71 02/22/71 02/22/71 Effectiveness Date 05/24/71 09/23/71, 12/23/71 Closing Date 06/30/75 12/31/76, 06/30/77 03/14/78 02/28/78 Borrower Republic of Turkey Executing Agency General Directorate for Livestock Development Fiscal Year of Borrower March 1 - February 28 Follow-on Project Name Second Livestock Development Project Credit Number 330-TU Amount (US$ million) 16 Credit Agreement Date 09/28/72 MISSION DATA Month, No. of No. of Date of Item Year Weeks Persons Manweeks Report Appraisal 09-10/69 4 3 12 Total 12 Supervision 1/2 08/72 2 1 1 09/29/72 Supervision I22 03/73 2 1 1 05/18/73 Supervision III/_2 10/73 3 1 1 11/07/74 Supervision IV02 02/74 3 1 1 05/28/74 Supervision V02 12/74 2 1 1 01/23/75 Supervision VI/2 02/75 3 11 Supervision VII/12 05/75 2 1 1 06/30/75 Supervision VIII/02 10/75 3 2 2 11/25/75 Supervision IX/2 06/76 4 2 2 07/12/76 Total 11 Completion 03/77 4 3 3 08/09/77 COUNTRY EXCHANGE RATES Name of Currency (Abbreviation) Lira (LT) Year: Appraisal Year Average Exchange Rate: US$1 = LT.15.0 Intervening Years Average US$1 LT.15.12 Completion Year Average US$1 = LT. 25.25 /I Project was scaled down. /2 Time also spent on other Livestock Projects.  - 111 - Project Performance Audit Report TURKEY INTENSIVE DAIRY PRODUCTION PROJECT (FIRST LIVESTOCK DEVELOPMENT PROJECT) (Credit 236-TU) DISBURSEMENT TABLE (US$ million, cumulative) Appraisal Actual Actual as % Period Ending 1/ Estimate Disbursement of Estimate 12/31/71 1.3 0 12/31/72 3.5 0 12/31/73 4.4 - 0 12/31/74 4.5 1.3 29 12/31/75 - 2.3 - .12/31/76 - 3.6 - 12/31/77 - 4.3 - 12/31/78 - 4.5 - 1/ There is no disbursement table in the appraisal report. Appraisal estimates have been drawn from a table in para. 3.24 of the appraisal report which gives only annual disbursement figures.  - iv - Project Performance Audit Report TURKEY INTENSIVE DAIRY PRODUCTION PROJECT (FIRST LIVESTOCK DEVELOPMENT PROJECT) (Credit 236-TU) HIGHLIGHTS The Intensive Dairy Production Project was the first livestock project financed by the World Bank Group in Turkey. It provided funds for improving dairy production on commercial farms near main uLban con- sumption centers. The credit also financed technical services and training for project staff and farmers. After initial delays in staffing the project succeeded in developing viable dairy farms with milk production above appraisal esti- mates. The institutional arrangements under the project worked well and the General Directorate for Livestock Development (LDP) has become a successful department in implementing a number of livestock projects. Although the project fell short in the number of participating farms, higher milk output and prices account for a recalculated ERR of 19%, compared to 20% estimated at appraisal. The following points may be of special interest: - Disposal of surplus improved cattle unresolved (PPAM paras. 6 to 10); - Difficulty of matching Bank's auditing requirements with national control mechanism (PPAM paras. 15 to 17; PCR para. 3.17); - Rapid acceptance of recommended technology package led to higher than expected yields (PCR paras. 4.07-4.08, and 7.01 (d)); - Successful introduction of milk recording system (PPAM para. 7; PCR paras. 4.07, 4.08, 6.04 and 7.01 (e)).  Project Performance Audit Memorandum TURKEY INTENSIVE DAIRY PRODUCTION PROJECT (FIRST LIVESTOCK DEVELOPMENT PROJECT) (Credit 236-TU) 1/ I. SUMMARY - 1. In February 1971, IDA lent US$4.5 million to Turkey (Credit 236-TU) to support a dairy development project. The project provided for financial and technical assistance to dairy producers in and around the four largest milk-consumption centers (i.e. Adana, Istanbul, Ankara and Izmir). The project provided for the importation of improved dairy cattle to serve as a nucleus for upgrading the national dairy herd, for a supervised credit program to assist farmers develop their dairy capabilities, for technical services and for training of project staff and farmers.. Of the total project cost of US$7.5 million, some 60% (US$4.5 million) was to be financed by the Credit, 22% (US$1.65 million) by farmers and 18% (US$1.35 million) by the Government. The Credit was appraised in September 1969. Negotiations began in May 1970 but were prolonged until January 1971 due to differences of opinion between Government and the Bank concerning recruitment procedures for key per- sonnel, on-lending arrangements and interest rates, the responsibility for foreign exchange risk, procurement procedures and import duties. The impasse was finally resolved early in 1971. The Credit became effective in December 1971, some seven months behind schedule, due to delays in recruitment of the two technical. specialists by LDP/IDPD. 2. Overall, despite a slow start-up, the project largely met appraisal expectations in establishing an institutional infrastructure for the introduction of modern dairying in Turkey. The creation of a new directorate within MinAg to provide expertise in the implementa- tion of livestock development projects represented a central project achievement; the slippage associated with establishing it also consti- tuted the main constraint to timely project execution. Recruitment and training of staff were also contributing factors to slippage, but once staff was strengthened and began gaining operating experience, the processing of farm plans went smoothly, and their quality was satisfac- tory; also, on-farm supervision was well executed and the production records were adequately monitored. The institutional linkage developed between the technical agency (LDP) and the credit channel (TCZB) was also an important project-related innovation; the demonstration of the poten- tial effectiveness of supervised credit programs as a vehicle for effec- tive subsector development was a direct result of project activities. 1/ Adapted from the PCR. - 2 - 3. On-farm development was generally satisfactory. Although the project will not reach full development for another three-four years, production records indicate that farmers have been successful in adopting the technical package offered by the project. Performance records gen- erally exceeded appraisal estimates, and there was a minimum of deviations from projected technical coefficients. Loan cancellations or overdue problems were also minimal. There is good reason to believe that the results achieved during the early project period will continue, indi- cating that the strategy envisaged at appraisal was both realistic and suited to Turkish conditions. 4. Deviations from original appraisal expectations included: (a) a reduction in the total number of farm plans funded under the project from 270 to 159, du Tmainly to increase in on-farm investment costs;- (b) an increase in farmers' contributions to on-farm investment costs from 25% to almost 29%; (c) a variation in the anticipated number of farm plans prepared in the various geographical regions of the project; (d) the introduction of milking machinery on about 49% of project farms; (e) the financing of some 60% of the value of eventual total herd as compared with appraisal estimates of 50%; (f) a shortfall in the formal training of project staff; and (g) a failure to develop the applied research and surveys component. 5. The current estimates of the financial rates of return for the 30 and 40-cow models are 23% and 25%, respectively, compared with 18% and 19% forecast at appraisal. The ERR is currently estimated at 19% compared with 20% estimated at appraisal. 1/ The figure has been updated on the basis of information supplied by the Government in its letter of March 16, 1979. See Annex 1. -3- II. MAIN ISSUES A. The Nucleus Dairy Herd 6. The objectives of the project were not restricted to increase supplies of milk and meat but also to raise the number of locally bred improved dairy cattle. Imported cattle was to be the nucleus of an up- grading program for the national dairy herd. During the preparation stage of the livestock projects (See PCR para. 1.04) - the Second Live- stock Project was prepared simultaneously - a third project, i.e. improvement of the national dairy herd, was also considered. However, it was found that a separate project would have only limited foreign exchange requirements, mainly for the import of grade cattle and that the proposed Intensive Dairy Project could fully meet the initial needs for establishing the nucleus of a national dairy herd. 7. To permit proper control of £le production performance of imported cows a milk recording system - was introduced. This recording system was expected to serve two purposes: (i) to monitor production, and (ii) to permit selective breeding. While the system has worked well in monitoring on-farm milk production, indicating for instance that average milk yields per cow (3,450 kg in year 4) are about 28% above appraisal estimates (2,700), full use of this informa- tion has not been made for selective breeding purposes on all farms. 8. During its visits to project farms, 2/ the audit mission found that cattle owners have been basing their judgements on which animals to select for breeding purposes, more on their appearance than on genetic potentials. Greater effort needs to be made to educate farmers to make more use of production records in selecting for genetic merit to ensure maximum improvement not only in individual herds but in the genetic upgrading of the national herd also. 9. An issue of major importance in the context of the present project's objective is that the upgrading of the national dairy herd could well be limited over the long-term by the fact that no mechanism 1/ The recording system is based on regular checks of milk produced by each cow. LDP controllers visit project farms, every three to four weeks and weigh the daily milk produced by each cow. Consequently, a production curve for the whole lactation period can be established through interpolation. 2/ The audit mission visited some farms and contrary to the information contained in the Government letter. (Annex 1) found that several farmers had selected breeding bulls on pheno type. exists at present for LDP or any other Government entity to control the disposal of surplus male and female stock from project farms. Although LDP acts to the maximum extent possible to put sellers and buyers in contact, it does nothing at present to ensure that the farms of prospec- tive buyers are suitably prepared to receive improved cattle. This could have increasingly serious effects as the number of animals available for. disposal is on the rise. In the absence of some more direct control, the situation could arise in which significant numbers of animals do not attain their yield potential because feeding conditions, management veterinary control and recording on second generation farms are inade- quate. Again, were short-term fluctuations in milk and meat prices to be such as to result in slaughter of large numbers of potentially valuable dairy breeding animals, a mechanism needs to be in place to ensure that over the long term such wastage is avoided and maximum uti- lization is made of costly imported germ plasm, not only by the original farmers importing it but by those farmers to whom surplus animals are sold. 10. The Bank did not sufficiently advise the project on this issue during its implementation. The audit recognizes that LDP in a free market economy cannot exercise exclusive rights in acquiring surplus stock from project farms. However, milk controllers visiting the farms on a regular basis could be instructed to question farmers on their intentions in regard to surplus stock disposal. Based on the informa- tion obtained contacts between interested, LDP appraised, prospective participants could be arranged for, making the continuing livestock projects less dependable on cattle imports. At the same time assurances would be obtained that the prospective buyers have adequate facilities and provisions to safeguard acceptable production levels. B. Project Size 11. The PCR refers to the "appraisal estimate" of 250-300 farmers to participate as opposed to the actual number of only 159 participants (PCR, para. 3.06a). More accurately, it should have been stated that the 250-300 participant range was never accepted and actually fought by the appraisal mission. 12. The appraisal mission had found that the assumption of the FAO/IBRD preparation team of 300 farmers participating was too opti- mistic. The mission considered 150-170 farmers as likely to have the basic qualification and interest in taking up dairying at the suggested high level. This conclusion was based on a careful analysis of the number of farmers in the project area (about 200). 13. Without consultation with the appraisal mission, the report was subsequently revised and the number of farmers expected to partici- pate was increased to 250-300 (about 70%) and the number of heifers from - 5 - 3,600 to 4,350 (21%). According to available information, this was done in order not to reduce the total cost of the project following devalua- tion of the Turkish lira. The number of participating farmers and heifers to be imported was increased at a very late stage of the preparation cycle, about six weeks prior to Board presentation and seven months after credit negotiations. 14. The actual participation of farmers reached 159 and a total of 3,300 heifers were imported during project implementation, thus bearing out the appraisal mission's original judgement of the project potential. Inflation, however, took up the cost differential between the project size originally proposed and the enlarged project as approved. Without this cost inflation, disbursement delays and a possible cancellation of unuseable portions of the Credit might have occurred. In retrospect, therefore, the decision to enlarge the project size, in the manner in which this was done, appears to have been questionable. C. Audit of Project Accounts 15. According to Section 4.03 (b) of the Credit Agreement and 2.07 (b) and (c) of the Project Agreement, the accounts of TCZB, the Intensive Dairy Production Division (IDPD) of LDP, and the Special Operational Fund (SOF) had to be audited annually and copies of the audited accounts together with a signed copy of the auditor's report, all in the English language, were to be sent to the Association within three months after the end of the Borrower's fiscal year. To date, the Association has not received any audited accounts or auditor's report (PCR, para. 3.17). As a matter of fact, the Bank has never received any audited accounts and/or audit reports on any other Turkish agricultural project. 16. The audit mission was informed by the Turkish authorities that audits as known in the U.S. or some other European countries are not feasible under Turkish laws and regulations for LDP. Under prevailing conditions, it is impossible to undertake a separate audit of a specific department within a ministry. Strict control of receipts and expendi- tures is the responsibility of a corps of controllers assigned to the Treasury. A well-established system of countersigning, copies of receipts to the Treasury combined with well-defined procurement pro- cedures permits adequate control of monetary transactions. What the system lacks in the eyes of the Bank are the analyses and evaluations of specific actions taken or omitted to make audits a more meaningful management tool. Due to this well-established system, there is no need for private auditing firms in Turkey. Contracting of foreign auditing firms is precluded by Turkish law. 17. This situation has been known to the Bank for many years. Filed correspondence shows that the Borrower was rarely reminded of the auditing obligation as stipulated in the Credit and Project Agreements. -6- No written reply was ever received and the issue was never pressed because Bank staff was fully aware of the impossibility to produce audits. The introduction of the auditing covenants had become a routine in Bank opera- tions, a routine which did not consider an existing, well functioning control system but tried to impose a new approach which was unacceptable under the country's laws. - 7- T.C. ANNEX 1 GImDATARIM VE HAYVANCILIK BAKANLI6I HAYVANCILI6I GELI T RMtE PROJELERi GENEL 1tODURLII gb.M4d. :Eqt,SiV,Vpt.Proj. AN K A R A D :025. 6 NirY1997I Konu : . J.-i ..... K~u 28383 Lr. Shiv S. KaDur Director Operations Evaluations Department, World Bank 1818 H Street N.1. ;lashington D.C. 20433 U.S.A. Dear IMr. Kapur, Re Credit 236 TU Project Audit Report Thank you for the draft of the Project Audit Report. After a study of this report we have various comments to offer which we enclose with this letter in the hope that they may of be use to you in finalising the report. Yours sincerely General Director Encl. 1 Copy to I1r Ffrench I,'ullen - 8 - FIRST LIVESTOCK DEVELOPMENT PROJECT CREDIT 236 TU Draft Project Performance Audit Report Comment by LDP Final Disbursement Totals The figures given throughout the draft report refer to disbursement of the credit up to 30 June 1977. Later 200 in-calf heifers were supplied to 9 more farms and further sums were used for Technical Services and Technical Training. To acconnt for these additional expenditures the following changes should be made : Page 3,Paragraph 4 (a); ".... farm plans funded under the project from 270 to 159, ...." r Page 6, Paragaph 13 second line; after " actual number " insert " at 31 December 1976 " . Page 7, Paragraph 16; " The actual participation of farmers reached 159 Page 12 Paragraph 3.04; A total of . 90.776.000 (or US $ 5.991.155 at L 15.15 $ 1 ) in sub-loans was approved by TCZB to 159 project farmers. Details are summarised in the following table: Region No.of Loans Total loan Amt. Total Development Plan Cost Adana 72 33.136 51.264 Izmir 38 25.478 32.605 Istanbul 33 21,479 27.657 Ankata 17 7.684 15.314 Total 159 87.777 126.840 Page 14, Paragraph 3.06 (a); " the total number of farm plans a proved and funded under the project was 159, 41% less them the appraisal estimate of 270 ..... . Page 14 Paragraph 3.06 (c); " .... in Adana region ( 72 as compared with 55-56 ) ". Page 15 Paragraph 3.08; " Total Project costs were T1 144.6 million ..." Table Actual as % of Item Appraisal Actual Appraisal On farm investments Fodder cropestablishment 99810 7.976 81 Farm Machinery 19,230 22,829 119 Buildings 24,990 31,607 126 Livestock 43,620 50,268 115 Technical Services /2 10.100 30.228 310 Technical Training 4.500 608 13 Total 112.250 144.635 129 Note /1 will now be omitted. -9- Page 16 Paragraph 3.09 In the table Actual No. of In-calf Heifers should be 3506 and their unit cost 13,223 TL. Page 16 Pararaph 3.10; " The IDA Credit of US $ 4,5 million financed 47% Af project costs... Note 1/ will now be omitted. Page 17 ParagraDh 3.10 : Goverment actually provided 31%. ape. 17 Paragraph 3.10 Table Category Appraisal Actual Actual as % of Appraisal Livestock 40.920 47.092 115 Machinery 13,020 16,341 126 Seed 3,810 - - Technical Services 5.000 4,133 83 Technical Training 4.500 609 13 Total 67,500 1/ 68,178 -2/ 100 Note :1/ Appraisal exchange rate 15 T = 1 US M 2/ Exchange rate 15,15 T. = 1 US $ B) Other Comments Milking Macihes Although these were included in farm investment very few were financed by loans, and none from the proceeds of the credit. We suggest for paragraph 4 (d) on page 3 :"Milking machinery was included in development plans on about 49% of farms " and for paragraph 3.06 (d), page 14 to end : " *** and 49% of project farms purchased milking machines Theileriosis Page 25 Paragraph 4.09. It is hardly true to say losses from theileriosis occurred on most farms, a better wording would be " ..... but losses from theileriosis were experienced on some farms." Use of records for selective breeding purposes Paragraphs 7,8 and 9 on pages 4 and 5 say " no use of this infor- mation (cow milk production yields) has been made for selective breeding purposes" ;"..... cattle owners have been basing their judgement on which animals to select for breeding purposes, more on their appearance than on */a- - 10 - genetic potentials " ; "there is no indication that the Bank succeeded in ,onvincing the borrower of the importance and usefulness of the milk recording system for Relective breeding purposes." U7e consider that this totally misrepresents the constructive use of records that is being made on project farms. Bulls for use on project farms are selected after theyhave been assessed on the following basis a) 1-others yield compared with herd contempories. b) Conformation of mother, with special regard to udder,legs and feet. c) Conformation of the bull,that is freedom from defects. d) Pedigree. Perhaps the intensive Dairy Production Division has been at fault in not reporting this more fally in quarterly and terminal reports, although it was reported in the original draft report on the Second Stage of Intensive Dairy Production Project used in the preparation of the Third Livestock Development Project (paragraph 3.04). It is surprising however that Bank Supervising Missions have not reported back to us on this matter as they Burly would have if they failed to realise the use that was being made.of records. As far as the Audit Mission is concerned we have checked the position on the farms visited by tl this Idission and find that in- every case the herd bull had been selected as outlined above, and we cannot understand where the Mission got its information unless it was from farm No .9:? Ankara where 2 bulls had been judged of equal .uerit and the farmer selected the better looking one for his own use and sold the other to project farm No. Ankara. $ale of female breed ing stock Paragraph 10 and 11, It is true that there is no control of conditions on farms to which our project farmers are selling stock, but we are operating in a free economy and have no means of enforcing conditions on these farms. Nar have we thought it advisable to impose sale conditions on our project farmers which might be an added disincentive to them joining the Project. \Ie would howeve strongly refute the suggestion that cattle sold from our project farms are r lost to the economy; they remain in Turkey, and the demand for them is so strong and prices sufficiently high to ensure that they will be used for breeding purposes. - 11 - PROJECT COMPLETION REPORT TURKEY INTENSIVE DAIRY PRODUCTION PROJECT (FIRST LIVESTOCK DEVELOPMENT PROJECT) (CREDIT 236-TU) I. BACKGROUND 1.01 Livestock is an important resource in Turkey accounting for about 30% of the total value of agricultural output. Livestock products, partic- ularly milk products, are traditional in the Turkish diet, and provide a main source of food and income for virtually all farm families which comprise some 58% of the total population. 1.02 There are currently estimated to be about 14.8 million cattle in the country. The First and Second Five-Year Plans called for a growth of live- stock output of 5.6% and 4.8% p.a., but actual rates achieved were only 2.6% and 3.2%, respectively. The Third Plan (1973-77) target is 5% p.a., but pre- sent performance indicates that a growth rate of only 2-2.5% p.a. will be achieved. Thus the growth of livestock production over the last 15 years has barely matched the human population increase of 2.5%. Low productivity is characteristic of the livestock subsector, especially of dairying, as milk production tends to be an incidental by-product of livestock keeping. Over- all the animal industry is currently operating at only about 15% of its poten- tial productivity due to the poor genetic quality of native breeds, poor feed- ing and management practices by farmers (who make little use of modern inputs or technology), and a scarcity of medium- and long-term credit for on-farm investment. 1.03 The First Livestock Development Project, I/ the Bank's first project in the subsector, 2/ was designed to overcome some of the major difficulties constraining dairy development, which included a shortage of high quality dairy stock, inadequate animal husbandry skills and forage crop knowledge and shortage of medium- to long-term credit. The main goals of the project were to establish nucleus herds from imported purebred Holstein cattle to provide superior animals for the upgrading of local herds, and to develop the necessary institutional and technical infrastructure to promote introduction of modern dairy production techniques generally. 1.04 The project was prepared as part of Turkey's Second Five-Year Plan (1968-1972) by the State Planning Organization (SPO) assisted by three FAO/ IBRD Cooperative Programme missions which visited Turkey in 1967, 1968,and 1969. Preparation of the First Livestock Development Project, which was one of the four projects initially identified in the sector, was completed in September 1969. 1/ The project was known as the Intensive Dairy Production Project at appraisal. 2/ The use of the term Bank throughout the report refers to the World Bank group; the project was partially financed by an IDA credit. - 12 - II. PROJECT DESCRIPTION 2.01 The project was designed as the first phase in the development of modern dairying in the main milk consuming centers of Adana, Istanbul, Ankara and Izmir. It consisted of: (a) the establishment of an Intensive Production Division (IDPD) within a new General Directorate for Livestock Projects (LDP) of the Ministry of Food, Agriculture and Livestock (MinAg) for the purpose of developing, preparing and supervising dairy farm development plans; (b) a program for medium- to long-term credit through the Agri- cultural Bank of Turkey (TCZB) to provide project farmers with funds for the purchase of improved breeding stock, tractors and farm machinery, seeds, fertilizers, and other necessary inputs; and (c) technical services, including applied research, demonstrations and surveys, and training for project staff and farmers. 2.02 The project was appraised in September 1969 and negotiations began in May 1970. However, negotiations were prolonged due to differences of opinion between the Government and the Bank on: (a) recruitment procedures for key technical personnel; (b) on-lending arrangements (including interest rate levels), and the responsibility for foreign exchange risk; and (c) methods of procurement of essential project machinery and import duties on such goods. Agreement was finally reached in January 1971. The Credit was approved by the Board on February 6, 1971 and signed on February 22, 1971. The date of effec- tiveness was postponed from May 24 to December 23, 1971 due to delays in the recruitment of the two technical specialists by IDPD. Basic project data are summarized in Annex 1. III. IMPLEMENTATION Institutional Development 3.01 LDP was established within MinAg by legal decree in May 1971, with responsibility for administration of special projects for the development of the livestock industry in Turkey. The Headquarters was established in Ankara, with additional offices in Adana, Istanbul and Izmir. Within LDP, IDPD was given direct responsibility for developing the program funded under the First - 13 - Livestock Development Project. IDPD was staffed with a project manager and two internationally recruited specialists to supervise the preparation and implementation of development plans and to provide training and support for project staff. Each project office was staffed with a project team consist- ing of: a manager and deputy manager (one of whom was veterinarian, the other an agronomist), one agricultural officer, one agricultural technician, one veterinarian, and one animal health technician. 3.02 After initial delays in hiring the two technical specialists and other key technical staff, IDPD functioned satisfactorily, particularly in the preparation of farm development plans and in the supervision of their implementation. Good working relations were established with TCZB, the General Directorate for Veterinary Affairs (DVS), and the Agricultural Supply Corporation (TZDK), which were maintained throughout implementation. How- ever, several key problems hampered the functioning of IDPD. First, salaries for IDPD staff were based on general civil service rates, thereby causing difficulties in the recruitment of qualified and experienced personnel due to competition from the private sector. The situation was particularly serious in the Adana office which was the most understaffed during the initial project period. Secondly, civil service per diem rates of IDPD staff were not ade- quate to cover expenses incurred by such staff visiting the field, thus acting as a disincentive to project staff working there. The Special Operational Fund (SOF) was envisaged as a means to meet such problems by providing LDP with additional operating funds from monies accruing on the interest collected on project sub-loans. 1/ However, due to the delays experienced in project implementation, no funds were paid into the SOF until 1973. After an advance provided by TCZB to the SOF of LT 1 million, LDP did begin to supplement project staff per diems. However, even with the supplementary funds from the SOF, per diems generally did not keep pace with rising living costs in Turkey and staff were generally out-of-pocket when working in the field and consequently tended to spend less time than was desirable on field work. On-lending Operations 3.03 TCZB was responsible for channeling credit to participating project farmers. Initial applications were processed by local TCZB branch offices, which assessed the applicant's creditworthiness, and made recommendations for the maximum credit to be allowed. IDPD regional offices then prepared farm investment plans for creditworthy farmers for review by the technical special- ists, by the TCZB branch manager, and finally by the project manager. Plans were submitted to the Board of TCZB for approval, following a final review by the IDPD managerial staff and the Encouragement.and Development Loans Division of TCZB. 3.04 A total of LT 87,717,000 (or US$5,789,937 at LT 15.15 = $1) in sub- loans was approved by TCZB to 150 project farmers. Details are summarized in the following table: 1/ Of the 9% interest paid by subborrowers, 8.5% was intended to be retained by TCZB and 0.5% was to be deposited by TCZB in the SOF. - 14 - Project Subloans Approved by TCZB, 1971-1977 (LT '000) Number Total Total Development Region of Loans Loan Amount Plan Cost Adana 69 32,264 50,392 Izmir 34 24,101 31,229 Istanbul 30 20,668 26,846 Ankara 17 7,684 15,314 Total 150 87,717 123,781 Source: LDP,.Ankara TCZB required that all subborrowers have title deeds to farm land and/or other property in order to be eligible for project funds. Further, until mid-1975, TCZB also required that farmers possess about 0.5 ha of irrigated land per cow in the Adana and Izmir regions. Subsequently, this requirement was relaxed so that farmers needed only to have adequate areas of land suitable for forage crop production, not necessarily land under irrigation. The dropping of the irri- gated land requirement was due to project experience which demonstrated that satisfactory forage crops could be produced on unirrigated land in certain areas receiving adequate rainfall. At appraisal, it was envisaged that farmers would own milking herds of not less than 10 cows to be eligible for the proj- ect, but TCZB interpreted this initially as being at least 20 cows; however, requirements were gradually relaxed during project implementation to include farmers with smaller herds but possessing suitable experience in dairying. Processing of loan applications by TCZB was completed generally within one month except in cases where farmers had outstanding debts. The repayment record for project subborrowers thus far has been satisfactory. TCZB branch managers have monitored the progress of on-farm implementation closely in order to ascertain that credit proceeds were utilized for investment purposes. The gross default rate for the project was estimated to be only about 0.5%. On-farm Development 3.05 The initial response of farmers to the project was guarded due to several factors. First, farmers were unfamiliar with the idea of supervised credit, sometimes withdrawing from the project after making the initial appli- cation when they realized the degree to which funds were tied to specific farm plans. Second, the early TCZB requirements that farmers own irrigated land for forage crop production excluded a number of farmers, particularly in the Ankara and Istanbul regions. Third, during early project years, milk prices were not keeping pace with rapidly rising costs for farm inputs. However, applications increased with the nearly two-fold increase in milk prices in 1975. Fourth, applications increased in the Adana region after two years of whitefly infestation of cotton which, combined with low government-controlled prices for that commodity, made dairying more attractive to farmers. Finally, before the project there were virtually no modern, well-managed dairy herds - 15 - to serve as a demonstration for farmers wishing to join the project. As the earliest project farms began to develop, however, other farmers were encour- aged and the number of applications increased. 3.06 Overall, implementation of the project at the farm level was satis- factory, although there were deviations from the original appraisal projec- tions. Specifically: (a) the total number of farm plans approved and funded under the project was 150, 45% less than the appraisal estimate of 270. The reduction in the number of farm plans financed was chiefly due to-an increase in on-farm investment costs which were esti- mated at an average of LT 360,000 per farm at appraisal but rose actually to an average of LT 730,820 per farm. This in- crease was due to three factors, viz, (i) prices of key farm inputs exceeded appraisal estimates -- specifically, imported in-calf heifers and tractors, which together accounted for approximately 55% of the total on-farm investment costs, experienced price increases of 29% and 44% respectively over appraisal estimates 1/; (ii) higher building investment costs because of farmers' preference for traditionally designed structures, resulting in some over capitalization of these facilities which was compounded by increases in the cost of building materials of 42% over appraisal estimates; and (iii) a larger percentage of farmers than estimated at appraisal were given subloans for tractors (78% as compared with 33%); (b) farmers contributed 28.7% of on-farm investment costs as com- pared with 25% estimated at appraisal; (c) a higher than anticipated number of plans were prepared and approved in the Adana region (69 as compared with 55-56) and substantially fewer in the Ankara region (17 as compared with 65-75) due to TCZB's initial requirement that farmers possess adequate irrigated land, which was relatively scarce in the latter region; (d) at appraisal, it was not foreseen that milking machinery would be financed -- subsequent increases in labor costs made milk- ing machines financially attractive and 49% of project farmers purchased imported milking machinery which was financed from proceeds of the Credit; and (e) on average, farmers were financed for 60% of eventual total herd size as compared with appraisal estimates of 50%. IDPD technicians would have liked to see a still higher percentage financed. 1/ Appraisal estimates include contingencies imputed from the appraisal report at 17.44%. - 16 - 3.07 Further, deviations from the appraisal report resulted from the fact that the average project farm size was relatively large, and because farmers tended to seek the maximum size of loan, particularly for the purchase of machinery, cattle, and for the construction of buildings. The appraisal report did not completely anticipate the initial conservatism of TCZB in favoring loans to larger farmers, nor the tendency for the more advanced farmers to participate so fully in a technically innovative project; that such farmers were better able to qualify for substantial loans from TCZB also had a tendency to inflate the average loan size. Total Project Costs 3.08 Total project costs were LT 140.2 million compared with appraisal estimates of LT 112.3 million. Expenditures are summarized in the following table: Total Project Costs /1 Actual as % Item Appraisal Actual of Appraisal On-farm investments Fodder crop establishment 9,810 7,976 81 Farm machinery 19,230 22,829 119 Buildings 24,990 31,607 126 Livestock 43,620 47,209 108 Technical services /2 10,100 30,228 199 Technical training 4,500 391 9 Total 112,250 140,240 125 /1 Project cost figures are as of June 30, 1977. Undisbursed funds in the technical services and training categories, amounting to the equivalent of some US$250,000, are not included in the totals. The text and tables reflect LDP data as of June 30, 1977, and must be revised at the time of final disbursements expected to be in early 1978. /2 Includes the LDP budget charged to the Credit at the following rates: 100% in 1971-72, 50% in 1973-74 and 33% in 1975-77. The IDPD budget, excluding the costs of two foreign consultants wholly charged to the project, has been prorated as follows: for administration, other staff, travel, and transportation, 100% in all years up to 1975, and 75% in 1975-76 to reflect the expanded work program of Livestock III (Loan 1265-TU, the follow-up project to Livestock I). Source: LDP, Ankara - 17 - 3.09 The breakdown of expenditures for on-farm investments (the main cost category) was as follows: On-farm Investments No. of Units Cost/Unit (LT) Appraisal Actual Appraisal /1 Appraisal /2 Actual Fodder crops Hectares developed 3,150 3,931 2,550 2,995 2,029 Farm machinery Tractors 100 117 57,000 66,941 95,986 Mowers 200 130 15,000 17,616 9,848 Rakes 200 127 17,000 19,965 5,881 Balers 70 89 36,000 42,278 35,883 Trailers 250 43 10,000 11,744 13,721 Milking machines - 73 - - 30,164 Cattle In-calf heifers 4,200 3,306 9,000 10,570 13,632 Imported bulls 90 46 30,000 35,232 21,384 Local bulls - 86 - - 12,938 Buildings /3 No. of cows at full development 8,400 5,500 2,150 2,970 5,747 /1 Excludes contingencies. /2 Includes contingencies imputed at appraisal estimate of 17.44%. /3 Price contingencies imputed at appraisal estimate of 38.16%. Source: LDP, Ankara. Financing 3.10 The IDA Credit of US$4.5 million financed 46% 1/ of project costs compared with 60% estimated at appraisal. This was due mainly to absolute increases in project costs; in particular, costs of technical services and administration and to a lesser degree of farm machinery and livestock. Gov- ernment was expected to contribute 18% and farmers 22% of total costs, but 1/ Based on actual IDA funds spent as of June 30, 1977, amounting to some US$4.23 million, rather than the total anticipated expenditure of US$4.5 million. - 18 - Government actually provided 32%. The contribution of farmers remained un- changed. The most important factor involved in both the increase in total project costs and the decrease in the proportion of total costs funded by the Credit was the increase in the cost of technical services, mainly financed by Government. The increases in the costs of technical services were attribut- able to actual increases in staff salaries and operating costs above appraisal estimates, and to the overall extension of the project implementation period. The appraisal report in fact did rather underestimate the absolute costs of establishing and operating LDP; however, it was clearly difficult to foresee the need to extend the project closing date by over two and a half years. Although the project was declared effective in December 1971, the first farm development plans were not approved until late 1973. Also, the training com- ponent was slow developing. These factors necessitated the extension of the closing date from June 30, 1975 to February 28, 1978. The Credit financed the various project components in the following proportions: Allocation of the Proceeds of the IDA Credit (LT '000) Actual as % Category Appraisal Actual of Appraisal Livestock 40,920 44,033 107 Machinery 13,020 16,341 126 Seed 3,810 - - Technical services 5,000 3,014 60 Technical training 4,500 392 9 Total 67,500 63,388 94 Source: LDP, Ankara. Procurement 3.11 LDP/IDPD acted as the procuring agent for all imported cattle and machinery, arranging for the importation and delivery of these inputs to proj- ect farmers. TCZB arranged for the foreign exchange payments and insurance. Tractors and machinery were procured from abroad through international compe- titive bidding (ICB). Although machinery and tractor purchases attracted keen bidding, bids could not be called until machinery orders were large enough to attract bidders. This postponement resulted in delays of up to one year in the actual on-farm delivery of machinery needed for the production of forage crops. 3.12 Cattle were imported from Germany and Holland in six separate con- signments. Procurement was through ICB. A purchasing commission from IDPD selected the animals. A total of 3,306 in-calf heifers and 76 bulls was im- ported as compared with appraisal estimates of 4,200 in-calf heifers and 90 bulls. A few cattle died during transit to Turkey. Between 2% and 6% of the - 19 - pregnant heifers in each consignment aborted, particularly in the first im- portation which had a rough sea passage. As a result of this experience the second to sixth consignments were transported by rail. Imported cattle were generally of good quality in the first four and sixth importations. However, the Bank and the Borrower disagreed on the quality of cattle purchased under the fifth importation. It was the Bank's judgment that some 15% of cattle in this importation were substandard. LDP staff felt that they were more than acceptable. The Bank also disagreed with LDP's decision to accept the minimum production specifications set out in the Credit Agreement as the basis for choosing among bids, rather than considering cattle with better production records which were offered by bidders at slightly higher prices. The Borrower felt the production specifications of the Credit Agreement were an adequate basis for considering bids, and a means to obtain high quality animals at reasonable prices. The Bank took the view that the specifications were the minimum acceptable standard and that if better cattle were available at rea- sonable prices they would be preferable. Disbursement and Reallocation of Funds 3.13 The project is scheduled for completion on February 28, 1978, after three extensions of the closing date (from June 30, 1975, to December 31, 1976, to June 30, 1977, and to February 28, 1978). As of June 30, 1977, some US$4.23 million had been disbursed. Extension of the closing date was necessary due to delays in on-farm developments caused by the slow start-up of the administra- tive infrastructure necessary to implement the project. Delays in the recruit- ment of key technical personnel resulted in staffing problems which slowed the preparation of farm development plans and resulted in slow development of the training component. Two reallocations of funds among investment categories took place during the project's lifetime. They were as follows: - 20 - Reallocation of Proceeds Reallo- Reallo- Category Number Original % of cation % of cation % of and Description Allocation Total (6/4/75) Total (3/17/76) Total (US$ '000) (US$ '000) (US$ '000) Im. Iported Freisian and Brown Swiss Heifers 2,400 53.3 2,900 64.4 3,050 67.8 II. Imported machinery and equipment (excl. tractors) for the production of hay and silage, incl. mowers, side-delivery rakes, pick- up balers and forage har- vesters, and spare parts thereof; forage crop seed (a) Machinery 500 11.1 550 12.2 560 12.4 (b) Seed 200 4.5 50 1.1 - - III. Imported or locally- produced agricultural tractors, 35-46 hp 400 8.9 450 10.0 640 14.2 IV. Imported 4-wheel drive, 6- to 8-passenger vehicles (carry-all type) and imported sedan-type station wagons 80 1.8 - - - - V. Services of technical specialists for Part B of the project 200 4.4 220 4.9 220 4.9 VI. Technical studies for Part C of the project 200 4.5 220 4.5 - - VII. Training and travel under Part C of the project 20 0.4 30 0.7 30 0.7 VIII. Unallocated 500 11.1 100 2.2 - - Total 4,500 100.0 4,500 100.0 4,500 100.0 - 21 - The reallocations of funds reflected the overall increases in the costs of livestock and machinery imported under the project. The funds originally allocated for the purchase of seed and for technical studies were reallocated to cover these increasing costs. Due to strict Government import regulations which made procurement of foreign vehicles difficult, funds intended for their purchase were reallocated, and vehicles were procured locally. Training 3.14 At appraisal it was envisaged that both project staff and farmers would benefit from a series of training courses and tours in Turkey and abroad to be complemented by farm field days and demonstrations, particularly in forage crop production and fodder conservation. Funds were also provided for applied research and surveys, but the latter components were not implemented (due mainly to staff constraints) and the funds were reallocated. Formal tours and courses were not organized expeditiously nor did they function as an effective mechanism for providing training to project staff and farmers. Staff constraints were the main contributing factor. Only two study tours were completed, although the Bank encouraged the Borrower to expand this activity. The first study tour was taken early in the project to Spain to visit a World Bank financed livestock project (Loan 633-SP), by the Deputy Director of LDP, the Project Manager, 4 regional managers, the 2 technical specialists, the manager of the TCZB Encouragement and Development Loan Division, and 5 TCZB branch bank managers. A second study tour to India in 1976 visited a successful dairy cooperative, and included 6 Turkish officials. LDP prepared and approved a proposal for a 3-month study tour to the United States in forage crop production for two staff during May to August 1977. Other factors besides staff constraints contributed to the failure of the study tour strategy envisaged at appraisal to provide extensive training to a large number of project staff and farmers. The training component tended to be too vaguely defined by the appraisal report. This resulted in delays in the formulation and submission of training activities by project staff to MinAg whose review and approval was required for each tour. In retrospect, it was perhaps unrealistic to expect that the project staff, who were executing on-farm activities, would have the time and resources to also formulate and implement a training program. The time taken and the difficulties experienced in establishing a new institutional system to implement project activities was such as to preclude sufficient attention to the training component. 3.15 A second weakness in training was the inadequate effort provided by the project for TCZB staff. Branch bank managers as well as officials in the Encouragement and Development Loans Division of TCZB were not always included in the training efforts of project technical staff and, in fact, their train- ing needs were quite different. No attempts were made to tailor training courses to TCZB staff interests or problems (for example, short courses on agricultural banking, tours of agricultural banks, etc). Given the key role TCZB played in the project, this was clearly an oversight on the part of the Bank and the Borrower. The Bank repeatedly expressed its concern for expansion of training financed under the project and attempted to ease the institutional constraints hampering training efforts (e.g., through facilitating arrange- ments for the payment of foreign exchange costs, travel, etc.). However, the - 22 - Bank did little to suggest a concrete training package to the Turkish project staff, which clearly had difficulties in defining one. On the Borrower's side, not enough commitment for an active training package was evidenced, and MinAg's insistence to review in detail and approve each training proposal, and all participants, added significant delays to the implementation of formal training activities. 3.16 To a significant extent the lack of formal training and demonstra- tions was substituted for by the efforts of the technical specialists and other key project staff to provide in-service training to staff and farm demonstrations and field days to farmers. The two technical specialists were particularly active in these areas during implementation of the project as were also regional managers and other senior IDPD staff in the later stages. Accounts and Audit 3.17 Both TCZB and IDPD kept detailed records and accounts on all project subloans, and submitted quarterly summaries of this information to the Bank, as agreed. IDPD staff also monitored on-farm progress closely, gathering detailed information on production records. However, to date, the Bank has not received copies of audited accounts or auditors' reports from TCZB, IDPD or SOF as required by the credit documents. 1/ IV. IMPACT OF THE PROJECT Introduction 4.01 The First Livestock Development Project, the Bank's first project in the livestock subsector in Turkey, was innovative in establishing a nucleus of improved dairy stock and a new institutional infrastructure necessary to support the introduction and spread of improved dairy management generally. Besides these basic achievements, the project developed improved dairy models on some 150 farms in order to demonstrate the essential new techniques in forage crop production, animal health and general livestock management. Institutional Impact 4.02 Project strategy was based upon the establishment of a new direc- torate (LDP) within MinAg to take the leading role in creating a new linkage between the credit source (TCZB) and on-farm technical services utilizing modern inputs and methods. The main institutional achievements were: 1/ Sections 4.03(b) of the Credit Agreement and 2.07(b) and (c) of the Project Agreement refer. - 23 - (a) the establishment of LDP and the creation within it of IDPD, a division capable of preparing and supervising dairy-farm development plans, and providing technical services and support to project farmers; (b) the establishment of a program of supervised credit linking technical services and credit to meet on-farm development needs; (c) on-the-job training of IDPD professional and subprofessional staff through practical field work in implementing project- related technical services; and (d) on-the-job training and experience for TCZB staff in the implementation of a supervised credit program providing longer-term funds for longer-term farm development needs. 4.03 LDP was created within MinAg to execute Bank Group financed livestock projects in Turkey. The creation of such a unit within the Ministry was there- fore partially the result of the Bank Group's planned investment program in the livestock subsector. At the same time, it also reflected Government ini- tiative in wishing to establish an institutional unit capable of promoting improvements in the livestock subsector as a whole. Within LDP, IDPD was specifically charged with the execution of activities financed under Credit 236-TU. 4.04 At the time of appraisal there was discussion of an alternative organization for project implementation. Specifically, TCZB was considered as the implementing agency, through its own supervised credit program. How- ever, it was felt that TCZB had numerous banking issues to resolve and that to load it with additional responsibilities at that particular time would be unwise. Also, MinAg wished to develop a group with expertise in livestock development projects, which was lacking at the time of project appraisal. Whether an alternative organizational structure would have accomplished project and institution-building goals more effectively is, of course, a matter of speculation. From the Borrower's point of view, although TCZB could have been strengthened into the executing agency, this would not have filled the existing gap in MinAg's experience and ability to implement long-term development of the livestock sector. From the Bank's point of view, given its program for a series of projects in the livestock subsector, the creation of a single specialized project unit had the advantage of maximizing the training effects of project work experience for technical staff. Furthermore, the establishment of a good working relationship between TCZB and LDP/IDPD staff provided for an interchange of ideas and perspectives, and acted as an effec- tive mechanism for linking technical- and credit-related issues and problems in the livestock sector. 4.05 The role of the two internationally recruited technical specialists in project implementation was important. They provided both technical train- ing and support to project staff, and also established close working ties with project farmers in their regions. It is unlikely that the project would have - 24 - succeeded in establishing either an institutional or a technical presence to the extent it did without the support and incentive provided by the two tech- nical specialists. 4.06 The major institutional innovation of the project was the tying of a technical service package, prepared by a specialized technical agency, to the provision of longer-term supervised credit to project farmers. The pro- vision of the total package constituted a major change in the credit and technical services offered to dairy farmers and represented a valuable first for the project. Technological Impact 4.07 The project can be viewed as a first step in the introduction of modern dairying in Turkey. In fact, the main impact of the project lies not in its direct effect in increasing supplies of milk and meat, but rather in its longer-term technological impact. The project's emphasis on the intro- duction of new productive technologies was achieved by close supervision of farmers by project technical staff, and by the tying of TCZB credit funds to documented purchases of animals, machinery or other on-farm investments. The key technological impacts of the project were: (a) the importation of improved dairy breeding stock for the upgrading of the national herd; (b) the introduction of improved methods of animal housing and management; (c) the introduction of new methods of forage crop production, including double cropping on irrigated land; and (d) the introduction and popularization of silage production from maize and sorghum hybrids for utilization as feed. 4.08 The project provided for a package of investments involving new techniques in dairy production. It provided for the importation of quality Holstein cows and the adoption of new techniques in forage crop production and animal feeding/management, along with the application of strict veterinary control measures. Overall, the project record showed that with careful and continual supervision, farmers quite readily adopted new techniques of dairy- ing. The total area of forage crop established exceeded appraisal estimates by almost 25%: Forage Crop Establishment No. of Farm Plans Total Ha Developed Region Appraisal Actual Appraisal Actual Adana/Izmir 120 103 1,004 2,936 Istanbul 80 30 1,046 741 Ankara 70 17 1,100 254 Total 270 150 3,150 3,931 - 25 - Forage crops established well. The average area of forage crop established per farm was some 26 ha compared with 12 ha projected at appraisal. However, yields per ha were below appraisal expectations in the Izmir and Adana regions, although yields in Ankara and Istanbul approximately equalled projections. Low forage crop yields in Izmir and Adana were generally due to the tendency of farmers to divert resources and labor to other crops, particularly cotton. Although an adequate supply of good quality forage was the most important factor determining milk production rates of imported cattle, some farmers were slow to give up the traditional view of cattle as scavengers rather than as animals requiring specialized feed. As a result, some farmers were hesitant to devote equal resources and care to the production of forage crops as to their cash crops. However, details of reproductive performance and mortality rates (Annex 2) show that in general farmers were successful in managing imported cattle. The calving percentage ranged between 92-95%. Calf mortal- ity was rather high, averaging 10-14% in the first three project years com- pared with appraisal estimates of 9-10%; but these rates reflect calves born mainly of heifers, calving at an early age after a long journey. Milk yields were considerably higher than appraisal estimates (Annex 2); the average of all project farms was as follows: Milk Production per Cow in Herd (kg/yr) Pro- Project 1 2 3 4 5 6 9-25 Appraisal 1,320 1,320 2,500 2,600 2,700 2,900 3,000 3,250 Actual 1,000 3,297 3,218 3,350 3,450 3,450 /1 3,450 /1 3,450 /1 /1 Projected levels. Source: LDP, Ankara. Average yields on 42 farms which received cattle under the first importation for cows in the second lactation ranged between 1,929 kg/cow/yr and 4,492 kg/ cow/yr, with a mean of 3,455 kg. Averages of 16 farms for second lactation yields for cattle imported under the second importation ranged between 2,431 kg and 4,865 kg, with a mean of 3,468 kg. Thus, milk production records were most satisfactory, reflecting a generally high standard of animal management by project farmers. For each importation, yields from 20-cow herds were lower than yields from larger herds. Lower performance in smaller herds was the result of two separate factors: (i) on larger farms with only 20-cow herds, farmers were less committed to dairying and were more heavily involved in other farming activities such as cropping; and (ii) smaller farmers with 20-cow herds were often without reserve income. - 26 - During the first years of project implementation, many smaller producers experienced cash flow difficulties and attempted to economize on the feeding of stock with an inevitable lowering of yields. Young stock in particular were often underfed which resulted in a considerable lowering of the produc- tive capacity at maturity of such cattle. Despite strong technical arguments, project staff had great difficulty in convincing most farmers of the need to improve the management of young stock. 4.09 Overall, imported cattle experienced few problems in acclimatizing to Turkish conditions, given the generally satisfactory level of feeding and management and improved barn facilities. However, imported cattle were more susceptible to tick-borne diseases including Theileriosis, which was prevalent in the Adana and Izmir regions. Spraying of animals during the tick season was helpful, but small losses from Theileriosis were experienced on most proj- ect farms. The cattle on project farms were also regularly tested for tuber- culosis and brucellosis and reactors were compulsorily slaughtered. As of March 31, 1977, a total of 71 reactions to tuberculosis and 25 to brucellosis had been found, involving 15 farms. The most serious outbreaks occurred in the Istanbul region where four farms experienced major outbreaks. Two of these cases occurred on farms where imported cattle were mixed with indigenous cattle previously held on the farm. Thus, isolation of the imported herd from native cattle was of great importance in the avoidance of disease, but could only be accomplished if the farmer sold all of his original animals and had his imported cattle permanently housed without access to communal pastures. 4.10 It is estimated that at full development some 600 bulls produced by project farms annually will be sold for breeding purposes, representing 25% of all bulls bred on such farms. Accurate figures were not available for the total number of project bulls produced for breeding thus far. However, records of bulls disposed on some 55 project farms in 1976 were as follows: Project Bulls Sold in 1976 No. Sold No. Retained on Region Total No. Sold for Breeding Farm for Breeding Adana 291 86 17 Ankara 51 26 5 Izmir 96 47 8 Istanbul 113 51 9 Total 551 210 39 Source: LDP, Ankara. Thus of the total of 551 bulls sold from these farms in 1976, 38% were sold for breeding purposes and an additional 39 were retained on project farms as service animmals. No records were available on the remaining 302 animals, but it was presumed that they were sold for slaughter. - 27 - Economic Impact 4.11 Financial and economic analyses are summarized in Annex 2. Finan- cial rates of return for the 30 and 40-cow models respectively were 23% and 25% as compared with 18 and 19% forecast at appraisal. The economic rate of return (ERR) for the project, based on the 36-cow model, which represents the average project farm unit, has been calculated along with sensitivity analyses. The ERR is currently estimated at 19%, compared with 20% as calculated at appraisal. The sensitivity tests show that increases of 10% in operating costs would be expected to reduce the economic and financial rates of return by only some 2%. Decreases of 5% or 10% in milk and cattle sales would reduce the ERR to 17% and 15%, respectively. A concurrent decrease of 5% in gross revenues and an increase of 5% in both operating and investment costs would reduce the ERR to 16%. 4.12 The main economic contribution of the project lies in its longer- term provision of a supply of surplus improved dairy stock for breeding to farmers outside of the project. At full development an estimated 600 breeding bulls and about 1,000 in-calf heifers of high quality improved Holstein stock are expected to be released annually by project farms. This represents a substantial contribution of improved breeding animals to the build-up of the national dairy herd. Breeding animals would be worth about US$1.5 million annually. An additional 750 cull cows and 1,250 bulls of slightly lesser quality would be released per annum by the project at full development, representing substantially higher quality animals than local cattle, to be utilized for breeding or as milk or meat animals. The total value of incre- mental production of milk and upgraded animals produced by the project would thus be approximately US$6.6 million annually. In addition, project farms can be expected to have a considerable impact in demonstrating the feasibility of adopting an innovative technical package and thereby in contributing to the technical modernization of the Turkish dairy industry. The project also will have a beneficial effect on the production of milk, generating an additional 15,780 tons of milk annually worth about US$4.3 million, at full development in year 10. Some 58% of the total increase in the volume of sales can be attributed to the increase in yields per cow due to the replacement of local animals by genetically superior cattle managed under improved conditions. V. SPECIAL ISSUES Substitution 5.01 The First Livestock Development Project must be viewed as a techno- logically innovative project the main goal of which at the farm level was to introduce a technical package to dairy farmers consisting of closely integrated elements. The successful importation of exotic breeds of cattle into Turkey required a parallel development of forage crop production, improved animal housing facilities and animal management techniques. It cannot be stated un- equivocally that all 150 project farmers could not have found financing from alternative sources to make selected on-farm improvements. However, it is - 28 - unlikely that farmers would have invested in the full specialized package that they did without the high level of technical expertise and supervision provided by the project. The importation of improved dairy cows represented an expen- sive and risky investment for project farmers; although the project was not the sole source of imported dairy cows in Turkey, it was the only vehicle combining the procurement of these animmals with an individualized farm plan representing an integrated program of management for the imported animals. Few farmers would have had the financial resources and the technical expertise to undertake these types of investment without the project. Diversion 5.02 No evidence of the diversion of project funds was found by project staff or by Bank missions who have supervised implementation of the project independently over the life of the project. Farmers who did not comply with the very specific investment program detailed in farm development plans were requested by LDP/IDPD or TCZB to terminate their participation in the project. However, the number of these cases was only five (Annex 3). Funds provided to farmers by the project were also closely supervised by TCZB. TCZB only disbursed funds to farmers against documented bills of purchase for local goods. All imported goods were procured through LDP, and TCZB arranged for the payment of the foreign exchange costs of these items (through letters of credit guaranteed by IDA), and debited the accounts of project farmers. Replication 5.03 The First Livestock Development Project must be viewed as a pilot endeavor in which a new directorate was established within MinAg capable of implementing livestock development projects and in which a supervised credit program embodying an innovative technical package for dairy production was introduced. As such, the project was necessarily small in scope, requiring intensive technical supervision for each farmer, as well as enta-iling con- siderable costs in the establishment of this new institution. The basic project design has been replicated in the Second and Third Livestock Devel- opment Projects, and is expected to provide for the continuing development of an institutional structure capable of replicating the basic project strategy in other areas in Turkey. VI. BORROWER AND BANK PERFORMANCE Borrower Performance 6.01 The Borrower regarded the development of the livestock subsector as of high priority and actively cooperated with the Bank in early efforts to define suitable projects for financing. Overall performance by the Borrower was satisfactory. However, LDP efforts to perform project duties were not always supported as fully by the Government as they might have been. Key technical and bureaucratic problems which resulted from Government policy or procedures, or slow response to the need to modify a position, sometimes - 29 - jeopardized the efforts of both technicians and farmers to carry out project activities successfully. 6.02 In particular, at the end of the project period, several key tech- nical difficulties appeared, the resolution of which depend on the future- ability and commitment of Government to react effectively to them. First, in certain parts of the project area Government milk plants are operating only five days per week, resulting in marketing problems for project farmers who are experiencing milk spoilage or who are forced to accept lower prices in alternative outlets for their products. To date, no action has been taken to remedy the situation, despite strong Bank representations on the matter. As more farms reach full development, increased supplies of milk will have to be marketed through permanent (7-day) outlets. Second, according to Turkish law all cattle should be tested for tuberculosis and brucellosis and positive reactors should be compulsorily slaughtered. In practice, testing coverage is far from complete. In most areas only animals on Government farms or on farms in Government-related projects (e.g., Livestock I and III) are being tested regularly and reactors slaughtered. Farmers receive renumeration at levels often below market value, particularly their value as potential breeding stock. Selective testing of animals results in the de facto penalization of project farmers who have difficulty keeping their cows free of infection when their neighbors' cattle are not being controlled. Compulsory slaughter- ing of animals at below market prices is a disincentive to farmers to par- ticipate in the project. Although the outbreaks have been limited to date, the potential for contagion exists so long as all dairy cattle are not tested and controlled. The problem could pose serious difficulties for small village farmers (whose herds have a higher risk of becoming infected) and could result in such farmers being discouraged from seeking to improve their cattle through Government-sponsored improvement schemes (such as Livestock III). 6.03 The performance of TCZB as the project's credit channel has been satisfactory. Few difficulties have been encountered in the processing of credit applications, and although TCZB was perhaps too conservative during the initial project period in the terms of its collateral eligibility require- ments, it was flexible in changing and relaxing them during the course of project implementation. The Association and TCZB disagreed over the calcula- tion of monies accruing to the SOF; TCZB's interpretation has resulted.in the accumulation of 30% less funds in the SOF than envisaged at appraisal. Further the overall usefulness of the SOF was reduced by the fact that project effectiveness preceded the approval of the first farm plan by nearly two years. 6.04 The performances of LDP/IDPD were satisfactory, after a rather slow start. Their overall productivity cannot be viewed as high; however, given the difficulties associated with the creation of a new institution and the need to use staff lacking field experience initially, delay was to be expected. LDP/IDPD staff were successful in establishing good working relationships and extensive contact with project farmers. They also monitored and documented the progress of the project well, providing comprehensive records on the devel- opment of all 150 project farms. This took considerable manpower which was consequently not available for the development and supervision of farm plans. However, given the pilot nature of the project,'from the standpoint of both - 30 - Turkey and the Bank, the data generated were extremely valuable for the assess- ment of the technical and financial viability of the project and for the plan- ning of future projects. Bank Performance 6.05 The Bank appraisal team was correct in reducing the original project proposal to approximately 270 farmers, and in fact even then overestimated the number of farms which could be established under the project. Increases in the costs of key inputs were largely responsible for the increased on-farm in- vestment costs resulting in the reduction of the project to 150 sub-borrowers. However, project technicians felt that the appraisal team was too conservative in recommending that no more than one half of the full development herd be financed, resulting in a slow herd buildup and a tight cash flow situation for project farmers. Hindsight indicates, however, that the appraisal team's attitude was balanced and reasoned in this respect. 6.06 There were several points of contention which the Borrower felt were the result of the Bank's design of the project. LDP staff were critical of the inclusion of technical criteria and standards in the project agreement between TCZB and the Association, on the grounds that their inclusion sug- gested that TCZB could evaluate and reject farm development plans on technical grounds. LDP staff felt strongly that all technical aspects of the project were its responsibility and concern, and that the loan documents tended to obscure this division of responsibility. TCZB's criticism of the Bank was based on its perception that its role as a key implementing agency was not adequately appreciated by the Bank. Specifically, TCZB felt that: (i) Bank supervision missions should have worked more closely with TCZB staff especially at the branch bank level. Although supervision missions did regularly visit TCZB staff in both Ankara and regional offices, TCZB felt that the liaison should have been more rigorous and technical in nature; (ii) TCZB staff did not receive adequate formal training oppor- tunities under the project, as training was oriented more to the needs and priorities of LDP staff; and (iii) TCZB staff should have accompanied the LDP/IDPD technical staff on all cattle purchasing missions. 6.07 There were several changes in project criteria and specifications, and in allocations of funds during the project's lifetime, and the Borrower felt that the Bank was adequately flexible in agreeing to and implementing these changes. The Borrower particularly appreciated the Bank's flexibility in: (a) the deletion of the specification that farmers in the Ankara region import Brown Swiss cattle, when they showed a strong preference for Holsteins; - 31 - (b) the dropping of the eligibility requirement that farmers possess irrigated land; and (c) the dropping of the requirement that farmers own at least ten milking cows to be eligible to enter the project. 6.08 Bank supervision missions visited the project regularly at roughly six-month intervals. There was satisfactory continuity of Bank staff on such missions. The Borrower felt these visits to be highly beneficial to both project staff and farmers, and as evidence of the Bank's commitment to the success of the project. Supervision missions concentrated on on-farm visits, and visits to regional offices of LDP, focusing on the problems associated with the introduction of the new technical package to dairy farmers. The Borrower suggested that it would have been useful if supervision missions had left a short memo detailing the key points discussed in wrap-up meetings at the time of mission departure. In addition to the usual letters to Gov- ernment following Bank missions, such notes would have provided a more direct link between such missions and LDP/IDPD staff. 6.09 The Borrower felt that the Bank was helpful in supporting the prepa- ration of foreign study tours, and particularly in assisting to arrange the Spanish and Indian trips in cooperation with project staff (para 3.14). How- ever, the Borrower would have welcomed a more direct proposal from the Bank detailing a substantive training package, as well as arranging for the admin- istrative planning of these trips, as LDP staff lacked both expertise and resources to handle the official and administrative arrangements for train- ing and travel abroad. 6.10 The Borrower was critical of Bank procurement rules as resulting in long delays in the actual delivery of imported inputs. In particular, the sub- mission of machinery purchases to international competitive bidding resulted in delays of delivery of machinery of more than one year due to the postpone- ment of bidding until an adequate number of orders had been collected to attract bidders. The Borrower felt that although the Bank was aware of this procurement problem, and had discussed alternate procurement possibilities, the Bank did not follow up this issue actively enough and did not attempt to provide a solution in.light of the critical importance of machinery to forage crop production and hence to the overall project's success. Second, the Bor- rower disagreed with the Bank's judgment that some 15% of cattle procured in the fifth importation were substandard (para 3.12). The Borrower felt that it had complied with the procurement rules for purchasing cattle, and had obtained animals of adequate quality. 6.11 The Borrower indicated that occasional delays in payments for sala- ries of consultants and for cattle purchases had occurred. They suggested that these might have been avoided if the Bank had provided more detailed in- formation on procedural requirements for disbursements. However, the Borrower chose not to make available concerned working level staff for discussions with Controller's staff visiting Turkey specifically to assist in solving such problems. Moreover, the Borrower could have avoided delays that occurred provided they had accepted repeated advice tendered by visiting Bank staff and had submitted withdrawal requests in sufficient time to permit processing and transfer of funds. - 32 - VII. CONCLUSION 7.01 The main lessons to be learned from the project were: (a) the creation of a new institutional unit for project imple- mentation required more time and resources than generally appreciated; project effectiveness was delayed several times due to staffing difficulties, and these problems were not fully resolved at the time of effectiveness. The project perhaps should not have been declared effective until these difficulties were fully resolved, as this situation led to a delay of nearly two years between the date of effective- ness and the approval of the first farm development plans. Thus, the difficulties inherent in the establishment of a new institution, particularly one involving a high degree of innovation, should not be underestimated. Institution- building is a slow process; (b) although farmers were often slow to accept the concept of supervised credit, usually preferring untied funds, the successful performance of project farms confirmed the fea- sibility and effectiveness of this approach in Turkey; (c) the formulation and implementation of a training package, particularly one entailing overseas study, required both a commitment and expertise, which were lacking in the project. Within the limits of operational supervision missions, Bank staff did attempt to provide the Borrower with advice and assistance in the utilization of funds earmarked for train- ing purposes. However, the main constraint to a successful training program was administrative rather than technical. LDP staff were able to collaborate with the Bank missions in broadly defining training needs and priorities. How- ever, they were unable to handle the administrative arrange- ments for implementing international training activities. The Bank could possibly have made a substantial contribu- tion to project success by playing a more supportive role in assisting LDP staff in planning and implementing training activities. Furthermore, this type of difficulty was not unique to the First Livestock Development Project; similar constraints having been experienced in other Bank financed projects in Turkey. Therefore, it could be helpful for the Bank to assist Borrowers more fully in the implementation of training components. This presently occurs in the Plan- ning Advisory Division (PAD) of the International Relations Department (IRD) which handles training arrangements in UNDP projects, for which the Bank is the executing agency. Their intervention has been effective by assisting Borrowers in contacting overseas training agencies, arranging payments - 33 - for course fees, travel and other expenses and monitoring the trainees' progress while overseas. The existing system in non-UNDP projects, whereby the Borrower alone is responsi- ble for these tasks, has proven both ineffective and time- consuming. Bank project officers attempting to provide assistance to the Borrower are often duplicating information and experience which are immediately available in the PAD. Although it is clear that PAD is not presently authorized to undertake training assistance in non-UNDP projects, the project experience leads to the recommendation that in cases where overseas training is concerned, either PAD or some other unit in the Bank be charged with the responsibility of assist- ing the Borrower in determining suitable institutions and training course options to meet the training requirements defined by the project, and thereafter in making administra- tive, financial and other arrangements for the implementation of these activities including the monitoring of trainees' progress while overseas. This would be an appropriate mecha- nism for providing additional support to the Borrower, which would not interfere with the technical advisory role of other Departments; (d) the project's strategy, involving the introduction of high quality imported animals and to upgrade farms through a supervised credit program, was an appropriate and successful vehicle to create nucleus herds and to provide farmers out- side of the project with improved breeding stock as well as to introduce new dairy management, nutrition and health com- ponents. However the costs of such a program were high and considerable staff effort and commitment were required; strong and continuous technical supervision of farmers was necessary in order for the technical package to be success- ful, particularly in the absence of modern farms to act as a demonstration of the new techniques being introduced; and (e) successful monitoring of on-farm developments has many benefits, but its manpower costs are high. Where competent and experienced staff is limited, allocation of staffing beween monitoring and field development work requires a considerable element of judgment to strike a reasonable balance, as occurred in the present project. - 34 - ANNEX 1 COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY Financial and Economic Analyses 1. This annex presents data and tables for the financial and economic analyses. The basic data were provided by LDP. Coefficients were reviewed and checked by the mission while on supervision in the field. 2. The .financial analysis was calculated for 30-, 40-, and 36-cow models. Average production data of project farms was used in the analysis. The 30-cow model was based on 5 project farms, and the 40-cow model on 8 farms. The 36-cow model was developed to represent the average project farm unit. Values were calculated using data representative of all 150 subloans. 3. Table I presents basic technical coefficients derived from data re- corded by project technicians on all 150 subloans during the first four years of project implementation. Table 2 summarizes some basic farm development costs as compared with appraisal estimates. 4. All project costs were valued at the exchange rate of LT 15.15 = US$1 which was fixed by the Treasury Department for the life of the project. Financial Analysis 5. The financial projections for the 30- and 40-cow models have taken into account the technical coefficients as reflected in the respective herd development tables and the prevailing farmgate prices in each year for inputs and outputs (summarized in Tables 3 and 4). 6. The data applied are weighted averages for each model size. 'Forage crops have been fully costed and imputed to the project. All labor was hired and assumed to be semi-skilled workers who were employed for the full year in the dairy or associated activities. Economic Analysis 7. The information for the economic rate of return calculations is in Tables 11-16 of this annex. 8. The following assumptions underly these calculations: (a) The exchange rate adopted was LT 15.15 = US$1. - 35 - (b) All project components and each of the 150 subloans have been phased in at the actual rate of project implementation. Thus: (i) farms and their respective inputs have been phased into the calculation as of the date of delivery of imported cattle to the farm; (ii) calculations have taken into account the lag of two years between project effectiveness and the actual implementation of the first farm plan; (iii) the cost of Technical Services and Training was assumed to be the actual expenditures incurred by the executing agencies. A small amount of undis- bursed funds remained in the training category and have been imputed to training in 1977. (c) The actual yield averages for the first four years of the proj- ect have been applied, and thereafter the expected trend was imputed; any inflationary pressure would be expected to affect both costs and benefits to the same extent, thus maintaining the relationship between them. (d) All apparent transfer payments have been eliminated from the project. Table 16 shows the applicable tax rates on machinery which have been excluded from the calculation. (e) Two shadow wage rates have been applied to agricultural labor: 0.25 to maintain comparability with the appraisal report and 0.60 for the permanently hired semi-skilled labor from semi- urban or rural sources otherwise employed for five months during peak season agricultural activities at LT 50/man day and for two further months as casual labor at the same rate. (f) Income taxes have not been deducted from the cash inflow. (g) The sensitivity analyses affect the project only from year 6 onwards. (h) All prices used are constant prices. 9. Based on these criteria, the present estimate of the basic economic rate of return (ERR) of the project is 19% as compared with 20% in the ap- praisal report. The results from the sensitivity tests are shown in Table 15. 10. The sensitivity tests show that increases of 5% and 10% in operating costs reduce the ERR only slightly. Decreases of 5% and 10% in milk and cattle sales reduce the ERR to 17% and 15%, respectively. A concurrent decrease of 5% in gross revenues with increases of 5% in operating costs and investments would reduce the ERR to 16%. - 36 - 11. The total incremental increase in the value of milk sales between the Preproject and Full Development (Year 10) situations due to the project, can be attributed separately to price changes and to physical volume of pro- duction, as follows: Preproject Full Development Percent Year 0 Year 10 Difference Price of milk (LT/kg) 2.40 4.00 67 Milk sales (t) 1,500 17,280 1052 Value of sales 3,600 69,120 1820 ('000 LT) 6. The respective weights are the following: '000 LT Percent Total increment 65,520 100.0 Increment due to price changes 25,248 38.5 Increment due to quantity increase 37,872 57.8 Increment due to price/quantity interactions 2,400 3.7 7. The increments attributable to increases in the volume of sales are further broken down into the share attributable to increases in yields per milk- cow, the share attributable to the increase in the milking herd and their inter- actions, as follows: Preproject Full Development Percent Year 0 Year 10 Difference Cows in milking 1,500 5,400 260 Net milk yield 1,000 3,200 220 (kg/cow/yr) Volume of sales (t) 1,500 17,280 1052 8. Therespective weights are the following: Milk (t) Percent Total increment in volume of sales 15,780 100.0 Increment due to increase of herd 3,900 24.7 Increment due to increase in yields 8,580 54.3 Increment due to herd/yield interaction 3,300 21.0 Over one-half of the contribution to net milk sales is derived from the increase in yields per milch cow (as exotic breeds are substituted for local breeds in the project), one-fourth to the increase in milking herds, and one-fifth to the interaction between herd and yield increases. - 37 - COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY Summary of Technical Coefficients Actual as a % Milk production (kg/cow/yr) Appraisal Actual of Appraisal Year 1 - 3,250 246 Year 2 2,500 3,250 130 Year 3 2,600 3,350 129 Year 4 2,700 3,450 128 Milk sales (kg/cow/yr) Year 1 - 3,000 - Year 2 2,350 3,000 128 Year 3 2,450 3,100 127 Year 4 2,550 3,200 125 Calving rate (%) Year 1 Year 2 Year 3 Year 4 Year 5 Appraisal 100 80 80 85 85 Actual 100 94 92 92 92 Mortality (%) Year 1 Year 2 Year 3 Year 4 Year 5 App. Actual App. Actual App. Actual App. Actual Ap Actual Cows 5 5 5 3 5 3 4 3 4 3 Heifers (1-2 yrs) - - 4 5 4 4 3 3 3 4 Bulls, baby beef and breeding (1-2 yrs) - - 4 2 4 3 3 3 3 3 Heifers (calves) (0-1 yr) 10 14 10 11 9 10 9 9 8 9 Bull calves (0-1 yr) 10 14 10 11 9 10 9 9 8 9 Source: LDP, Ankara. - 38 - COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY Summary of Basic Data - Costs Item Ankara Istanbul Izmir/Adana Appraisal Actual Appraisal Actual Appraisal Actual Alfalfa hay Yield (t/ha) 11.0 12.0 14.0 12.5 21.0 15.0 Cost (LT/t) 160 400 Concentrates Farmgate cost (LT/kg) 0.75-0.90 2.50 Appraisal Actual Hired labor LT/hr 2.0 8.0 Manhours/cow 250 300 Veterinary costs (LT/cow/year) 100.0 300.0 Cattle insurance % of value of head 5% 8% Milk prices (seasonally weighed) -------- LT/kg ------- (farmgate, unchilled) Ankara 1.44 4.00 Istanbul 1.42 3.50 Izmir 1.20 4.00 Adana 1.11 3.50 Value of breeding Actual-------------- animals (LT/head) Appraisal Average Maximum Minimum Cull cows 2,250 8,000 12,000 6,000 Cull heifers-1 1,500 8,000 8,000 8,000 Baby beef bulls 2,200 8,000 10,000 5,000 Breeding heifers 4,000 15,000 20,000 8,000 Breeding bulls 6,000 10,000 18,000 5,000 /1 Very few sold as the herds were building up. Source: LDP, Ankara. - 39 - COMPLETION REPCZT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY Price Trends- Pre- Item Unit Proiect 1973 1974 1975 1976 Cattle (LT/herd) Imported heifers - 16,000 16,000 14,000 12,000 Imported bulls - 20.000 31,000 31,000 21,000 Native co-: (cull) 4,000 4,000 4,000 4,000 5,000 Native heifers (cull) 3,000 3,000 Native fat bull 3,000 4,000 4,000 4,000 5,000 Native calves 2,000 2,000 2,000 2,500 Holstein cows (cull) - - 7,000 8,000 8,000 Holstein calves - - 4,000 4,000 4,000 Holstein breeding bulls - - 9,000 10,000 15,000 Holstein fat bulls - - 8,000 8,000 9,000 Holstein breeding heifers - - 14,000 15,000 18,000 Holstein heifers (cull) - - 6,000 8,000 8,000 crops LT/ha Forage crop establishment 1.506 1,674 1,930 2,503 Machinery LT/unit Imported tractors - - 66,600 98,800 110,700 Mower - - 5,300 8,500 12,700 Side rake - - 3,700 6,200 6,500 Silage harvester - - 21,300 31,000 33,300 Baler - - 30,100 38,900 36,800 Trailer - - 12,000 15,000 15,000 Concentrates LT/kg 1.75 1.75 2.25 2.50 2.80 Labor LT/hr 4.0 4.0 6.0 8.0 8.0 Buildings LT/cow/2 Ankara/3 2,914 4,391 3,222 5,262 Adana 3,238 3,911 5,094 6,188 Istanbul 5,270 6,783 7,594 8,258 Izmir 5,102 6,617 7,478 7,955 Building cost/4 Index 100 146 213 262 305 Cement 100 146 209 Construction iron 100 121 204 Seeds LT/kg Alfalfa: a. Kayseri 20 20 40 50 b. Peruvian 50 50 75 80 Maize 3 3 4 55 Vetch 6 7 8 9 Oats 1.9 2.2 2.7 3.0 Sorghum - 6 8 12 Veterinary Services LT/cow 240 240 260 300 300 Cotton LT/kg 5.87 7.83 7.83 10.00 Milk LT/kg 240 2.40 3.75 3.75 4.00 1 Actual project data (eicluding pre-project), average for 150 subloans. All prices are farmgate unless otherwise indicated. /2 Computed by dividing the total cost of the far= buildings by the number of cows in milk at full development. /3 Many farmers in Ankara region did not need to construct new buildings. Data are based on estimates as producers often overcapitalized beyond project requirements. /4 Building cost indices from the State Institute of Statistics (1963 - 100 charged to 1970 - 100). Source: LDP, Ankara. - 40 - COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY Farm Operating Costs Pre- Item Unit Project 1972 1973 1974 1975 1976 Concentrate Price LT/kg 1.75 1.75 2.25 2.50 2.80 2.80 Coefficient kg/kg 1/2.5 1/2.5 1/2.5 1/2.5 1/2.5 1/2.5 milk Labor Wage LT/hr 4.00 4.00 6.00 8.00 8.00 8.00 Coefficient hr/cow 300 300 300 300 300 300 Veterinary LT/cow 240.0 240.0 260.0 300.0 300.0 300.0 Forage production LT/cow - 1,320 1,680 2,000 2,000 2,000 Sundry LT/cow 240 240 260 300 300 300 Source: LDP, Ankara. - 41 - COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJEC: TUPKEY A. 30-Cow Model: Investment l (LT) Financial -------- Year --------- Item Item Unit Price 1 2 17 Imported in-calf heifers 16,211 229,400 46,200 1 Imported bull 14,400 14,400 - Farm machinery - 79,300 20,000 Buildings 5,487 164,600 - Crop establishment 1,994 18,800 13,700 Total - 506,500 79,900 B. 30-Cow Model: Sources and Application of Funds (LT) IDA TCZB Farmer Total Year 1 Cattle 228,800 15,000 - 243,800 Machinery 57,900 14,200 7,200 79,300 Buildings - 61,900 102,700 164,600 Crop establishment - - 18,800 18,800 Subtotal 286,700 91,100 128,700 506,500 Year 2 Cattle 43,200 3,000 - 46,200 Machinery - - 20,000 20,000 Buildings - - Crop establishment - - 13,700 13,700 Subtotal 43,200 3,000 33,700 79,900 Total 329,900 94,100 162,400 586,400 Sources (%) 56.2 16.2 27.6 100.0 /1 Based on the average of 5 farms, 3 in the Izmir region, 2 in Ankara region. Source: LDP, Ankara. April 28, 1977 COMPLETTON REPORT FIRST LIVESTOCK DEVELOPMENT PROJiECT TURKEY C. 30-Cow Model.: Projected Income Statement (LT '000) -----------------------------------Year --------------------------------- Actual Projected Item Preproject 1 2 3 4 5 6 7 8 25 Revenue Milk 24.0 92.6 167.1 202.5 316.8 388.8 432.0 432.0 432.0 432.0 Cattle 23.0 65.0 14.0 58.0 78.0 112.0 144.0 236.0 276.0 1,076.7/2 Cash crops/1. 30.0 - - - - - - - - - Subtotal 77.0 157.6 181.1 260.5 394.8 500.8 576.0 668.0 708.0 1,508.7 1 Operating Expenses General 4.8 5.8 7.8 9.0 13.2 16.2 18.0 18.0 18.0 18.0 Concentrates 15.4 49.0 75.2 105.0 158.2 193.2 219.8 232.4 232.4 232.4 Hred labor 12.0 14.4 27.0 36.0 52.8 64.8 72.0 72.0 72.0 72.0 Hay/3 - 20.0 16.0 16.0 - - - - - - Forage production - 15.8 25.2 30.0 44.0 54.0 60.0 60.0 60.0 60.0 Subtotal 32.2 105.0 151.2 196.0 268.2 328.2 369.8 382.4 382.4 382.4 Net Operating Income 44.8 52.6 29.2 64.5 126.6 172.6 206.2 285.6 325.6 1,12613 Incremental Operating Income - 7.8 (15.6) 19.7 81.8 127.8 161.4 240.8 280.8 1,081.5 /1 Cotton cultivation /2 Includes salvage value of herd 7-3 At appraisal it was not foreseen that farmers would need to purchase, hay for supplementary feeding of new stock. Establishment of forage crops was slower than anticipated. /4 General operating costs comprise only veterinary and small sundry items. Source: LDP, Ankara. April 1977 COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY E. 30-Cow Model: Projected Cash Flow (LT '000) -----------------------------------------Year ------------------------------------------- Item Actual Projected 1 2 3 4 5 6 7 8 9 10 11 12 Inflow Funds Cenerated 52.6 29.2 64.5 126.6 172.6 206.2 285.6 382.4 382.4 382.4 382.4 382.4 Owners Contribution 128.7 33.7 - - - - - - - - - - Credit 424.0 - - - - - - - - - - - Total 605.3 62.9 64.5 126.6 172.6 206.2 285.6 382.4 382.4 382.4 382.4 382.4 Outflow Investments: Cattle 243.8 46.2 - - - - - - - - - - Miscellaneous 262.7 33.7 - - - - - - - - - - Subtotal 506.5 79.9 - - Debt Service: Interest 38.2 38.2 38.2 38.2 38.2 33.4 28.6 23.8 19.1 14.3 9.5 4.8 Principal - - - - 53.0 53.0 53.0 53.0 53.0 53.0 53.0 53.0 Subtotal 38.2 38.2 38.2 38.2 91.2 86.4 81.6 76.8 72.1 67.3 62.5 57.8 Net Inflow 60.6 (55.2) 26.3 88.4 8.1.4 119.8 204.0 305.6 310.3 315.1 319.9 324.6 Cumulative 60.6 5.4 31.7 120.1 201.5 321.3 525.3 830.9 1141.2 1456.3 1776.2 2100.8 source: LOP, Ankara. April 1977 -44- COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY A. 40-Cow Model: Investment1 (LT) Financial ------- --Year----------- Item Unit Price 1 2 26 Imported in-calf heifers 16,380-15,400 344,000 77,000 1 Bull 17,000 17,000 - Machinery2 - 116,200 Buildings (LT/milch cow) 4,925 197,000 - Crop establishment 2,408 35,800 29,700 Total - 710,000 .106,700 B. 40-Cow Model: Sources and Application of Funds (LT) IDA TCZB Farmer Total Year 1 Cattle 339,000 22,000 - 361,000 Machinery 72,700 15,000 6,000 93,700 Buildings - 34,300 162,700 197,000 Crop establishment - - 35,800 35,800 Subtotal 411,700 71,300 204,500 687,500 Year 2 Cattle 72,000 5,000 - 77,000 Machinery - - 22,500 22,500 Crop establishment -_- 29,700 29,700 Subtotal Total 483,700 76,300 256,700 816,700 Sources (%) 59.2 9.3 31.5 100.0 /1 Actual average data from 8 farms in Adana, 2 in Istanbul and 2 in Izmir. /2 Machinery comprised a package of tractor, baler, silage harvester, mower, rake, trailer, and milking machines. Not every farm imported each item. Source: LDP, Ankara. April 28, 1977 COMPLETTON REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY C. 40-Cow Model: Projected Income Statement/i (LT '000) SYear --------------------------------- Actual Projected Item Preproject 1 2 3 4 5 6 7 8 25 Revenue Milk/2 24.0 143.3 258.0 331.5 421.6 489.6 544.0 544.0 544.0 544.0 Cattle 23.0 69.0 112.0 114.0 120.0 130.0 201.0 263.0 316.0 1,161.6 Cash crops 40.0 - - - - - - - - - Subtotal 87.0 212.3 370.0 445.5 541.6 619.6 745.0 807.0 860.0 1,705.6 1 Operating Expenses General 4.8 10.1 11.9 15.6 18.6 21.6 24.0 24.0 24.0 24.0 Conc-entrates 15.4 73.5 106.4 146.0 193.5 220.4 245.6 251.1 251.1 251.1 Hired labor 12.0 25.2 41.4 62.4 74.4 86.4 96.0 96.0 96.0 96.0 Hay/3 - 20.0 20.0 20.0 20.0 - - - - - Forage production 27.7 37.0 52.0 62.0 72.0 80.0 80.0 80.0 80.0 Subtotal 32.2 156.5 216.7 296.0 368.5 400.4 445.6 451.1 451.1 451.1 Net Operating Income 54.8 55.8 153.3 149.5 173.1 219.2 299.4 355.9 408.9 1,254.5 Tncremental Operating Income - 1.0 98.5 94.7 118.3 164.4 244.6 301.1 354.1 1,199.7 /1 Based on actual data from 12 farms located in: Adana (8), Istanbul (2), and Izmir (2). /2 Net milk sales were 200 kg/cow/lactation less than actually produced. /3 At appraisal ,it was not foreseen that farmers would need to purchase hay for supplementary feeding of new stock. Establishment of forage crops was slower than anticipated. Source: 1D1, Ankara. COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY E. 40-Cow Modtl: Projected Cash Flow (IT '000) ------- -----------------Y-----------------------------------------Year Iteml) Actual Projected 1 2 3 4 5 6 7 8 9 10 11 12 Inflow Funds generated 55.8 153.3 1.49.5 173.1 219.2 299.4 355.9 408.9 408.9 408.9 408.9 408.9 Owner's cnIltrIbution 204.5 52.2 - - - - - - - - - - Cretdit 560.0 - - - - - - - - - - - Total 820.3 205.5 149.5 173.1 219.2 299.4 355.9 408.9 408.9 408.9 408.9 408.9 1 Outflow Investments Cattle 361.0 77.0 - - - - - - - - - - Miscel-Janleolus 349.0 29.7 - - - - - - - - - - Subtotal 710.0 106.7 - - Debt Service: Interest 50.4 50.4 50.4 50.4 50.4 44.1 37.8 31.5 25.2 18.9 12.6 6.3 Principal. - - - - 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 Subtotal 50.4 50.4 50.4 50.4 120.4 114.1 1.07.8 101.5 95.2 88.9 82.6 76.3 Net Inflow 59.6 48.4 99.1 122.7 98.8 185.3 248.1 307.4 313.7 320.0 326.3 332.6 Cumu 1lative 59.6 108.0 207.1 329.8 428.6 613.9 862.0 1169.4 1483.1 1803.1 2129.4 2462.0 Source: LDP, Ankara. April 1977 - 47 - COMPLETION REPORT FIRST LIVESTOCK DEVELOP%ENT PROJECT TURKEY /1 A. 36-Cow Model: Investment- (LT) Financial Economic -------------- Year ------------- Item Unit Price Unit Price 1 2 3 22 Imported in-calf heifers 13,632 13,632 299,904 1 Imported or local bull/2 13,975 13,975 13,975 Machinery/3 - - 152,324 Buildings7 5,747 5,747 206,892 Crop establishment/5 2,029 2,029 25,160 15,000 13,000 Total - - 698,255 15,000 13,000 B. 36-Cow Model: Sources and Application of Funds (LT) IDA TCZB Farmer Total Year 1 CattleL6 292,954 17,936 2,989 313,879 Machinery 109,000 23,000 20,324 152,324 Buildings - 76,550 130,342 206,892 Crop establishment - - 25,160 25,160 Year 2 Crop establishment - 15,000 15,000 Year 3 Crop establishment _____ - 13,000 13 Total 401,954 117,486 206,815 726,253 Sources (%) 55.3 16.2 28.5 100.0 /1 Composite farm model, average of actual data recorded from 150 subloans. All unit prices were averages, weighted at the timing of importation of cattle. 2 Bull price was the average weighted price of 46 imported units and 86 domestic units, weighted by 132/150. . /3 Machinery package composed of the actual number of units provided to 150 project farms, as follows:. Ratio of units to Average Financial Average Economic Item total subloans Unit Price Unit Price ----------------- LT --------------- Imported tractor 117/150 95,986 75,148 Mover 130/150 9,848 7,097 Side rake 127/150 5,881 4,238 Silage harvester 114/150 29,685 21,392 Baler 89/150 35,883 22,612 Other machinery 59/150 13,762 13,762 Milking machine 73/150 30,164 21,737 / Buildings were calculated at LT 5,747 per cow on 36 cows at full development. /5 For 26.2 h, average for all 150 units. / All imported cattle were financed by proceeds of IDA Credit; TCZB contribution includes farmgate cost of imported cattle, farmer's contribution includes a portion of locil bulL. Source: LDP, Ankara. COMPLETION REPORT FTRST LIVESTOCK DEVELOPMENT PROJECT TURKEY C. 36-Cow Model: Projected Income Statement (LT '000) --------------------------------------Year -------------------------------------- Item Actual Projected Preproject 1 2 3 4 5 6 7 8 9 25 Revenue Mlk 24.0 151.2 225.0 244.1 332.8 384.0 460.8 460.8 460.8 460.8 460.8 Cattle 23.0 74.0 16.0 102.0 92.0 110.0 138.0 200.0 240.0 294.0 1440.0 Cash crops 30.0 - - - - - - - - - - Subtotal 77.0 225.2 241.0 346.1 424.8 494.0 598.8 660.8 700.8 754.8 1900.8 4. Opurating Expenses General 4.8 10.1 10.4 12.6 15.6 18.0 21.6 21.6 21.6 21.6 21.6 Concentrates 21.4 63.4 100.1 123.5 171.6 196.6 234.9 251.4 251.4 251.4 251.4 Hired Labor 12.0 25.2 36.0 50.4 62.4 72.0 86.4 86.4 86.4 86.4 86.4 Forage production - 27.7 33.6 42.0 52.0 60.0 72.0 72.0 72.0 72.0 72.0 Subtotal 38.2 126.4 180.1 228.5 301.6 346.6 414.9 431.4 431.4 431.4 431.4 Net Operating Income 38.8 98.8 60.9 117.6 123.2 147.4 183.9 229.4 269.4 323.4 1469.41 Increniental Operating Income - 60.0 22.1 78.8 84.4 108.6 145.1 190.6 230.6 284.6 1430.6 Source: LDP, Ankara. April 27, 1977 COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY E. 36-Cow Model: Projected Cash Flow (LT '000) -------------------------------------------Year -------------------------------------- Item Actual Projected 1 2 3 4 5 6 7 8 9 10 11 12 Inflow Funds generated 98.8 60.9 117.6 123.2 147.4 183.9 229.4 269.4 323.4 323.4 323.4 323.4 Owner's contribution 178.8 15.0 13.0 - - - - - - - - Credit 519.4 - - - - - - - - - - Total 797.0 75.9 130.6 123.2 147.4 183.9 229.4 269.4 323.4 323.4 323.4 323.4 1 Outflow Investments: Cattle 313.9 - - - - - - - - - - - Miscellaneous 384.3 15.0 13.0 - - - - - - - - Subtotal 698.2 15.0 13.0 - Debt Service: Interest 46.7 46.7 46.7 46.7 46.7 40.9 35.1 29.2 23.4 17.5 11.7 5.8 Principal - - - - 64.9 64.9 64.9 64.9 64.9 64.9 64.9 64.9 Subtotal 46.7 46.7 46.7 46.7 111.6 105.8 100.0 94.1 88.3 82.4 76.6 70.7 Net Inflow 52.1 14.2 70.9 76.5 35.8 78.1 129.4 175.3 235.1 241.0 246.8 252.7 Cumulative 52.1 66.3 137.2 213.7 249.5 327.6 457.0 632.3 867.4 1108.4 1355.2 1607.9 Source: LDP, Ankara. April 27, 1977 COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY Fconomic Rate of Return (LT Million) --------------------------------------------------------------------------------------------------------- Item 1 2 3 4 5 6 7 8 9 10 1 11 12 13 14 15 16 17-24 25 licrwiental rconomic Benefits 1. ;.itk - 5.9 12.3 17.1 30.8 40.4 47.9 56.1 60.6 65.4 65.4 65.4 65.4 65.4 65.4 65.4 65.4 65.4 2. C:ittle - 2.4 0.8 4.4 8.1 6.5 13.5 16.8 21.5 27.9 33.8 37.2 40.6 40.6 40.6 40.6 40.6 212.5 3. Crops .4) 2.1*) (2.6) ( .4.5) .5 4.5) .5)( 5) (.5) ( .5) (4.5) ( 4..5) 5)(4.5) ( 4.5) (.i ( 4.5) Total - 6.9 11.0 18.9 34.4 42.4 56.9 6 77.6 82.4 94.7 98.1 101.5 101.5 101.5 101.5 101.5 273.4 I')Jct Investments 1. Cittle - 14.7 7.2 5.3 19.8 - - - - - - - - - - - - - 2. Hachinery - 5.4 2.6 1.9 7.2 - - - - - - - 5.4 2.6 1.9 7.2 - . 3. IiLdings - 9.7 4.7 3.5 13.0 - - - - - - - - - - - * - 4. Crop establishment - 2.5 1.2 0.9 3.3 - - - - - - - - - - - - - Total - 32.3 15.7 11.6 43.3 - - - - - - - 5.4 2.6 1.9 7.2 - - 0 Incr,mental Operating Costa 1. on farmsL± - 3.5 7.2 10.9 20,3 27.0 33.9 41.0 44.7 48.4 49.4 49.4 49.4 49.4 49.4 49.4 49.4 49.4 2. Technical services/2 1.6 2.7 3.9 4.5 6.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 3. Tcjhnical training - - - .1 - L .2 5.81 - - - - - - - - - - - 4. LaborL - 0.5 1.1 1.9 3.4 4.5 6.0 6.9 7.6 8.3 8.3 8.3 8.3 8.3 8.3 8.3 8.3 8.3 Total 1.6 6.7 12.2 17.4 30.4 32.4 46.4 48.6 53.0 57.4 58.4 58.4 58.4 58.4 58.4 58.4 58.4 58.6 Economic Rate of Return: 19% Sensitivity Test Investment costs +10%: 19% Operating costs +10%! 17% Project benefits -5%: 177 Project benefits -10:. 15 /L on-farm operating costs include all recurrent costs associated with forage production. 12 Technical service costs have been attributed to the project on the following basis: (1) for UDP 100% - 1971/72, .50% - 1973/74, 337 - .1975/77; and (ii) for 1lPS 100. - 1971/74, 75% - 1975/76. For years after 1976, LDP costs do not include technical specialists, and IDPD costs are attributed to the project at the rate of 25. of the budget. /13 Labor has been valued at a shadow wage rate of 0.75. 4 Less than 1/10 uit t usCd. Includes all estimated undishursed funds troin IbA credit remialning in 1977. .re: Mission CiStimates. - 51 - COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY Rates of Return 30-Cow 40-Cow 36-Cow I. FINANCIAL Basic ROR - Appraisal Report/l 18 19 - Basic ROR - Completion Report 23 25 22 Sensitivity/2 Operating costs: +10% 21 23 20 : +20% 19 21 18 Gross revenues : -10% 20 22 19 : +10% 26 28 25 Milk sales : +10% 25 27 24 Cattle sales : +10% 24 26 23 Operating costs: +20%) Gross revenues : +10%) 23 25 21 II. ECONOMIC Basic ROR - Appraisal Report - - 20 Basic ROR - Completion Report - - 19 Sensitivity Shadow wage (0.6): - - 20 Operating costs: + 5% - - 18 : +10% - - 17 Investments : +10% - - 19 Gross revenues : - 5% - - 17 : -10% - - 15 : + 5% - - 21 Gross revenues : - 5%) Operating costs: + 5%) - - 16 Investments : + 5%) /1 Represents the regional average of appraisal estimates. 7W Sensitivities run only for years 6-25 as project years 1-5 reflect actual data. Source: Mission estimates. April 28, 1977 - 52 - COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY Rates of Tax on Machinery Effective Customs Municipal Dock Production Stamp Cumulative Item DutyL2 Tax/3 Tax i Tax/5 Tax /6 Rate Tractor/1 1% 15% 5% 10% 10% 27.7% Mower ) Milking Machines') 10% 15% 5% 10% 10% 38.8% Rake ) Forage Harvester ) Baler 25% 15% 5% 10% 10% 58.7% /1 Customs duty for project tractors only; standard rate for other non-exempt tractors is 15% of c.i.f. price. /2 Customs duty is based on c.i.f. price. T Municipal tax is a percentage of customs duty rates. /4 Dock tax is levied on the total c.i.f. price plus customs duty and municipal tax. /5 Production (or sales) tax is levied on total c.i.f. price plus customs duty and municipal and dock taxes. /6 Stamp duty is based only on c.i.f. price. _ource: LDP, Ankara. April 22, 1977 - 53 ANNEX 2 COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY Details of Farm Development Loans Terminated as of Dec. 31, 1976 Project Herd Size at Reason for Destination Destination Loan No. Full Dev. Termination of Cows of Machinery Repaid (Cows) Adana 22 20 Farmer would not Sold to a Duty paid Yes follow plan for neighbor and machines feeding and crop as a herd. retained. production. After repeated warnings mutually agreed to terminate. Adana 32 30 As above Sold to var- Transferred Yes ious farmers to other for breeding. project farms. Istanbul 2 30 Loan to 2 part- Sold as Transferred Yes ners. Partner- breeding to other ship dissolved. cattle. project farms. Izmir 14 20 Farmer would not Transferred Transferred Yes follow plan for to other to other feeding and crop project project farms. production. farms. Mutually agreed to terminate. Izmir 26 20 As above. As above. As above. Yes Source: LDP, Ankara. - 54 - ANNEX 3 Table 1 COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY 30-Cow Model: Herd ProjectionI --------------------- Year-------------------------- Actual Projected Item Pre- Project 1 2 3 4 5 6 7 8 9-25 Herd Compositior/2 Cows 10 12 15 15 22 27 30 30 30 30 Heifers 3 - 4 9 8 10 12 15 15 15 Bulls - - 4 2 2 - - - - - Heifer calves 3 5 7 8 10 12 15 15 15 15 Bull calves 3 6 4 7 9 11 14 15 15 15 Herd bull 1 1 1 1 1 1 1 1 1 1 Total 20 24 35 42 52 61 72 76 76 76 Deaths.2 Cows - 2 1 1 - 1 - 1 1 1 Heifers - - - - - - 1 - 1 1 Bulls - - - 1 - - - 1 - - Heifer calves 1 1 1 - 1 1 1 1 1 1 Bull calves 1 1 1 1 1 1 1 1 1 1 Total 2 4 3 3 2 3 3 4 4 4 Sale,,3 Cull cows 2 10 - 1 1 1 5 6 6 6 Cull heifers 1 3 - - 1 1 1 1 1 1 Breeding cows & heifers - - - - - - - 4 6 6 Breeding bulls - - 2 3 3 4 4 5 5 5 Fat bulls 3 1 - 2 4 7 7 8 10 10 Calves - 6 1 1 - - - - - - Total 6 20 3 7 9 13 17 24 28 28 Purchases, Births/3 In-calf heifers - 14 3 - - - - - - - Bulls - 1 - - - - - - - - Heifer calves - 6 8 8 11 13 16 16 16 16 Bull calves - 7 6 9 10 12 15 16 16 16 Total - 28 17 17 21 25 31 32 32 32 /1 Actual average of 5 farms. 77 At end of year. /3 During year. /4 All sales Preproject and Project Year 1 are of native cattle. Source: LDP, Ankara. ANNEX 3 - 55- Table 2 COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY 40-Cow Model: Herd Projection/1 -------------------- Year ----------------------- Actual Projected Item Pre- Project 1 2 3 4 5 6 7 8 9-25 Herd Composition/2 Cows 10 21 23 26 31 36 40 40 40 40 Heifers 3 - 7 8 10 13 16 18 18 18 Bulls - - 1 1 - - - - - - Heifer calves 3 10 8 10 13 16 18 19 19 19 Bull calves 3 6 6 8 7 8 8 9 9 9 Herd Bull 1 1 1 1 1 1 1 1 1 1 Total 20 38 46 54 62 74 83 87 87 87 Deaths! 3 Cows - - 1 1 1 1 1 1 1 1 Heifers - - 1 - - - - 1 1 1 Bulls - - - - - - - - - Heifer calves 1 1 1 2 2 2 2 2 2 2 Bull calves 1 1 2 2 2 2 2 2 2 2 Total 2 2 5 5 5 5 5 6 6 6 Sales/3 Cull cows 2 10 2 1 2 3 4 8 8 8 Cull heifers 1 3 - - - 1 1 1 1 1 Breeding cows & heifers - - 2 4 - - 3 5 8 8 Breeding bulls - - 3 3 4 5 6 6 6 6 Fat Bulls 3 1 2 3 5 2 2 2 3 3 Calves - 7 5 3 6 8 10 10 10 10 Total /4 6 T 74 14 fH 19 2_ 2 6 3 Purchases, Births/3 In-calf heifers - 21 5 - - - - - - - Bulls - 1 - - - - - - - - Heifer calves - 11 11 14 15 18 20 21 21 21 Bull calves - 8 11 13 15 18 20 21 21 21 Total - 41 27 27 30 36 40 42 42 42 /1 Actual average of 12 farms. /2 At end of year. 77 During year. /4 All sales Preproject and Project Year 1 are of native cattle. Source: LDP, Ankara. - 56 - ANNEX 3 Table 3 COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY 36-Cow Model: Herd Projection/l. ---------------------------- Year -------------------------- Actual Projected Item Pre- Project 1 2 3 4 5 6 7 8 9-25 1erd /omposition/2 CON. 10 21 20 21 26 30 36 36 36 36 ,ifers (2 year) 3 - - 3 3 4 5 5 7 7 .ieifers - - 8 8 9 11 11 15 16 16 Heifer calves 3 9 8 10 12 13 16 17 17 17 Bull calves 3 9 8 9 12 13 16 17 17 17 Bulls - - 8 8 9 11 13 15 16 16 Herd Bull 1 1 1 1 1 1 1 1 1 1 Total 20 40 53 60 72 83 98 106 110 110 Deaths/3 Cows - 1 - 1 - 1 1 1 1 1 Heifers - - - - 1 - 1 1 1 1 Heifer calves 1 2 2 1 2 2 2 2 2 2 Bull calves 1 2 1 2 1 2 2 2 2 2 Bulls - - 1 - - 1 - 1 1 1 Total 2 5 4 4 4 6 6 7 7 7 Sales/3 Cull cows 2 10 1 2 2 3 3 7 7 7 Cull heifers 1 6 1 1 1 1 1 1 1 1 Fat bulls 3 3 - 6 6 6 7 9 11 12 Breeding bulls - 1 - 3 2 3 5 4 4 5 In-calf heifers - - - - - - - 2 4 7 Total 6 20 2 12 11 13 16 22 27 32 Purchases, Births/3 In-calf heifers - 22 - - - - - - - Bull - 1 - 1 - - 1 - - 1 Heifer calves 4 11 10 11 14 15 18 19 19 19 Bull calves 4 11 9 11 13 15 18 19 19 19 Total 8 45 19 22 27 30 37 38 38 39 /1 Based on actual data from 150 project subloans. 72 At end of year. /3 During year. Source: LDP, Ankara. ANNEX 4 Table 1 - 57 - COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TURKEY Reproductive Performance - Calving Percentage All Item Ankara Adana Istanbul Izmir Regions First importation 2nd calf 87.1 92.1 94.8 100.0 94.3 3rd calf 98.8 93.4 92.6 97.5 94.6 Second importation 2nd calf 86.0 87.2 97.9 90.3 91.7 Third importation 2nd calf 95.3 91.7 90.3 95.3 92.1 Source: LDP, Ankara. COMPLETION REPORT FIRST LIVESTOCK DEVELOPMENT PROJECT TUIRKEY Calving of liifers Imported November 1973 Cows Calves Alive June 1974 Dead Calves Aborted-L Dead Cows Region Imported Heifer Calves Total Calves (% Death Empty (No.) (%) (No.) (%) (No.) Rate) (No.) (%) (No.) (No.) (%) Ankara 36 13 36 32 86 2 6.9 2 5.5 - 1 3 cO Adana 381 169 44 305 80 37 10.8 35 9.2 7 8 2 1 Istanbul 157 71 45 124 79 28 18.4 4 2.5 1 3 2 Izmir 180 374 41.3 136 75.5 29 17.6 6 3.3 1 11 6 Total 754 327 43.3 597 79.2 96 13.8 47 6.2 9 23 3 /1 Some of these probably aborted on journey to Turkey. Source: IDP, Ankara. 304 BULGARA Bl r Sea U S S R KATMONU SINOP RGA To6)t@ 1R RBZU~ ZONŠ' <Ó AS O .. ............ ERZURUM- SSKUTAHY NTUNCELI RSH o RINGOLZ ERAN 0 A Y0,7MU T K AASER VAN . USA H KA SE I ALATYA E G BTLS "AED KBAKIR / I C o ADIYAMAZ G -TAKR KUTAHYIZD r ýSPARTA 1 Q MUGL 2-' ANTALYAVAN Reon P Groject Offies T U RK E YProject Area under First Livestock Developnnt Project COMPLETION OF FIRST LIVESTOCK S Y R I A LISe-tAe nd "°h'°°o''° '"'''°'''' DVLPETPOET(CREDIT 26-TU. ) e, oni-or-'o -'"°o ~ CYP.UNational Capitel O Capitats of Provin,es inl Project Area 0 100 200 300 --- - - - Preovnceia Beoundaries KILOMETERS River B 9Rc T o____o__________o_ 20__ ME DITERRANEAoN SEAA '"AK"KA""Re" - 50 U0 R0 200IR Ml L EYP itA ne EFimpyedosmnt Liærc D-lop-nc Pyothe MILE S- n, T,h,,,L,n--ock 'I Pnoj.t COM LEIO OF FI0S LIVETOC f>Y»R»I>AOJA«~t0p~ tofttu,0FiM)