Guinea - Livestock Development Project

Document of The World Bank f'ILE COPY FOR OFFICIAL USE ONLY ap.it NO. P-2855a-GUI REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REVOLUTIONARY PEOPLE'S REPUBLIC OF GUINEA FOR A LIVESTOCK DEVELOPMENT PROJECT August 19, 1980 Tbis decuome hs a resrcted dibulb and wmy be aed by recipents only in te pef n of their Offical dus. Its contts may not otherwise be disclasd withot Wold Bank unhoi.  CURRENCY EQUIVALENTS Currency Unit = Syli US$1.00 - 19 Syli Syli 1.00 = US$0.05 Syli 1,000 = US$52.60 Syli I million = US$52,630 WEIGHTS AND MEASURES Metric System LIST OF ABBREVIATIONS BDE Bureau d'Etudes BGCE Banque Guineenne du Commerce Exterieur DGE Direction Generale d'Elevage (General Directorate of Livestock) DREP Direction Regionale de l'Elevage et de la Peche (Regional Livestock Services) IRBANC Institut de Recherches et de Biologie Appliquee - Nenenkhaly Condetto (Central Vaccine Production and Diagnostic Laboratory) RMWA Regional Mission (World Bank) West Africa GOVERNMENT FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY THE REVOLUTIONARY PEOPLE'S REPUBLIC OF GUINEA LIVESTOCK DEVELOPMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Revolutionary People's Republic of Guinea Amount: SDR 13.3 million (US$17.5 million equivalent) Terms: Standard Project Description: The proposed project-s major objective would be to increase the productivity of the Guinean cattle herd and thereby augment national meat and milk production, improve nutri- tion, and raise the standard of living of cattle-herding families. It would be implemented over four years and would include: (a) Institutional strengthening through: upgrading of the General Directorate of Livestock (DGE) to provide a central capacity for the day-to-day implementation of the project, and establishment within the DGE of a Research and Planning Office (Bureau d-Etudes, BDE). (b) Support for animal health and husbandry services through: upgrading of regional livestock services including reconstruction or refurbishing of headquarter buildings and provision of basic equipment and materials; sales to herdsmen of drugs, medicines and mineral licks; a national vaccination campaign; reinforcement of the central vaccine production and diagnostic laboratory; and a pilot credit program to encourage cattle ownership and use of draft animals. (c) Staff training through: establishment of a 40-person capacity training center and provision of fellowships for overseas training. (d) A total of 19 man-years of technical assistance, 30 man-months of short-term consultant services, and the services of an architect for the design and supervision of construction work. By full project development it is expected that national beef production would increase by 30 percent or 4,200 t per annum, and milk by 39 percent or 11,000 t per annum, representing a significant improvement in national protein intake. Aggregate net real income from the livestock sector is expected to increase by 30 percent. The institution strengthening and training measures would provide the basis for planning and implementing other livestock activities, and examining and helping resolve critical sectoral problems. The potential for export of N'Dama breeding stock would provide much 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.  - ii - needed foreign exchange, and the pilot credit scheme would establish the basis for a future integrated cropping and animal husbandry farming system. The project involves no major technical risks. Main risks relate to: (i) the importance of staffing the project with qualified Guinean and internationally recruited technical assistance personnel, and obtaining support from Government institu- tions connected with the project, and (ii) the willingness of livestock owners to participate in the project. Careful attention would be paid to selection of qualified Guinean and expatriate staff, and organizational features built into the project would facilitate Government-s role in implementation. Livestock owners are fully aware of the benefits of veterinary inputs, and the measures agreed with Government to improve the marketing and pricing system would help ensure active participation of herdsmen in the project. Estimated Cost: Foreign Local Total (US$ million) Strengthening of DGE and establishment of BDE 0.9 0.5 1.4 Reinforcement of Regional Livestock Services 3.0 1.1 4.1 Vaccination Campaigns 0.7 0.2 0.9 Vaccine Production and Diagnostic Laboratory 0.9 0.1 1.0 Incremental Drugs, Medicines, Mineral Salts 3.2 -- 3.2 Training Center and Fellowships 1.1 0.5 1.6 Technical Assistance 2.9 __ 2.9 Pilot Credit Program -- 0.2 0.2 BASE COST 12.7 2.6 15.3 Contingencies Physical 1.1 0.2 1.3 Price 3.7 0.7 4.4 TOTAL PROJECT COST (including taxes) 17.5 3.5 21.0 Taxes 0.6 0.6 TOTAL PROJECT COST (net of taxes) 17.5 2.9 20.4  - iii - Financing Plan: Foreign Local Total (including taxes) (US$ million) IDA 17.5 - 17.5 Government -- 2.4 2.4 Herdsmen -- 1.1 1.1 17.5 3.5 21.0 Estimated Disbursements: FY81 FY82 FY83 FY84 FY85 (US$ million) Annual .45 5.85 4.65 4.40 2.15 Cumulative .45 6.30 10.95 15.35 17.50 Economic Rate of Return: 25 percent Staff Appraisal Report: 2959a-GUI dated August 19, 1980 Map: IBRD 14977   INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REVOLUTIONARY PEOPLE'S REPUBLIC OF GUINEA FOR A LIVESTOCK DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed Credit to the Revolutionary People's Republic of Guinea for the equivalent of SDR 13.3 million (US$17.5 million) on standard IDA terms to help finance a Livestock Development Project. PART I - THE ECONOMY 1/ 2. Since 1976 Guinea has been re-examining its development policies, institutions, and relations with the outside world, while making an effort to adjust to rapidly changing economic conditions. This process has broadened the opportunities for Bank Group involvement in Guinean development efforts, and has permitted a more fruitful dialogue on some development policy issues. Economic missions have identified the major structural constraints to the growth of output and income, and have provided a basis for planning an ex- panded Bank Group involvement in key sectors. The last mission took place in February 1980, and its findings and those of earlier missions are reflected in the following assessment of the state of the economy and its prospects. An Economic Memorandum is now being prepared. Background Conditions 3. Guinea is well endowed with arable land, water and mineral re- sources. Its broad range of eco-climatic zones allows diversified crop production in addition to cattle-raising, forestry and fishing. Before independence, the country was a major exporter of bananas, coffee, pine- apple and palm oil, and was practically self-reliant in basic foodstuffs. With respect to mineral resources, bauxite reserves are estimated at 6.5 billion tons, or 29 percent of the world's known reserves in 1979. Con- siderable high-grade iron ore deposits have been identified, and there are good geological prospects for uranium and offshore oil. Numerous rivers provide significant potential for hydroelectric power. 1/ Since the President's Reports of August 28, 1979 for the Second Highway and Rice Projects, most of the macroeconomic aggregates, particularly national accounts, public finance, and balance of payments estimates, have been revised on a preliminary basis as a result of a February/March 1980 economic mission. The new data are given in Part I and Annex I of the present report, and will be incorporated in the Economic Memorandum now being prepared which will be discussed with the Government in late 1980.  -2- Past Performance (1958-73) 4. Notwithstanding Guinea's resource endowment, economic performance from the time of independence until 1973 was disappointing. Real growth of GNP during this period was estimated at less than 2.5 percent annually, lower than the rate of population growth. Agricultural exports practically vanished, and Guinea became a net food importer of even its staple food, rice. The years following independence were characterized by a comprehen- sive reorganization of all economic and social activities in Guinea with a view to building a socialist economy. This entailed a sharp curtailment of the private sector and the establishment of Government trading companies operating at controlled prices, the creation of numerous other public enterprises in manufacturing, transport and other sectors, and extensive State investment in industrial, transport and social infrastructure. Returns on many projects were limited by managerial inexperience and plan- ning inadequacies, and public enterprises absorbed high and rising amounts of Government resources. The capital costs and recurrent expenditure of the public sector soon exceeded budgetary savings, and the Government resorted to heavy foreign borrowing and Central Bank advances to finance them. Foreign borrowing from Western and centrally planned economies was done on an ad hoc basis, and soon resulted in unmanageable debt obligations that could not be met by declining export proceeds. At the same time, the liberal advances of the Central Bank led to a rapid increase in money supply, galloping infla- tion, and an overvalued exchange rate for the Syli. Consequently the public trading enterprises could neither obtain adequate supplies of local goods at official prices nor distribute them widely enough, and an active "parallel" or "black" market developed with prices substantially higher than official levels. Furthermore, the lack of foreign exchange caused sharp reductions in imports of raw materials and intermediate inputs, which constrained production in manufacturing, agriculture and consumer goods. The economy thus stagnated in a vicious circle of foreign exchange shortages, poor incentives, and declining investments, output and exports. 5. While lack of foreign exchange sharply limited the supply of imported goods, and indirectly of local products as well, excess money supply strongly stimulated local demand. As a result of 15 years of deficit financing, money supply reached a high level of 44 percent of GDP in 1973, or about twice the level attained in most other West African countries. Most of this money overhang was concentrated in the urban areas where it aggravated the severe excess demand situation and absorbed much of the limited supply of goods that would otherwise have been available to the rural areas. Meanwhile, official prices were nowhere near an adequate level and the result was widespread parallel transactions in the markets for goods, labor and foreign exchange. 6. These trends created considerable difficulties for the people. The rural population, about 80 percent of the total, operated principally at a subsistence level, selling as little as possible on the official market, and was largely excluded from the official distribution of imported consumer goods. On the other hand, the urban population had to compete for the limited supply of goods it could buy through official channels with rationing cards, and was forced to supplement its needs in the unofficial market at very high prices.  - 3 - 7. Foreign debt reached 75 percent of GDP in 1973, and public debt service approached 72 percent of exports. Arrears on debt service accumu- lated rapidly and foreign reserves dwindled. In 1972/73 the current account deficit exceeded US$170 million or 18 percent of the GDP. Recent Trends (1973-79) 8. The productive and financial bases for a more dynamic economy have been strengthened since 1974, although the country-s economic development is still hampered by structural problems. This improvement in underlying conditions, brought about initially by new bauxite-mining operations, was further encouraged by the gradual adoption of more outward-looking policies since 1978 vis-a-vis western nations and neighboring countries, notably the Ivory Coast and Senegal. 9. Development of two large bauxite mines raised GDP growth to an average of 3.2 percent p.a. between 1973 and 1979 in real terms, while GNP increased at 3.4 percent p.a. By 1979, per capita GDP of Guinea's 5.3 million inhabitants reached US$292, and per capita GNP US$274. The rural sector has continued to dominate the economy, its share in GDP in 1979 representing 41 percent compared to 58 percent in 1973, while the mining sector's contribution more than quadrupled, from 4 percent to 18 percent over the last 6 years. 10. Increased gross domestic output especially for exports, and a stricter control of aggregate demand, allowed Guinea to record a balance of trade surplus of about US$25 million p.a. on average between 1976-78. However, the current account recorded a deficit of US$61 million p.a. on average during this period, or about 4 percent of GDP. The overall balance of payments remained in deficit at about US$94-million p.a. This deficit was due to increasing factor service payments mainly related to the mining operations, and to relatively low capital inflows. The balance of payments deficit has been financed in about equal proportions through an accumulation of debt arrears and by a decrease in gross foreign exchange reserves. At the end of 1978, foreign reserves covered only one month of imports compared to almost three months at the end of 1975. 11. About 60 percent of gross export earnings has been used to pay for both direct foreign exchange costs of mining operations and mining- related debt service, leaving only 40 percent to finance increased imports of essential raw materials, foodstuffs and consumer goods, hardly enough to provide necessary current inputs for manufacturing and agriculture and adequate incentives to producers. In the agricultural sector, Government has attempted to stimulate production through an increase in public investment and efforts to improve distribution of consumer goods in the hinterland. Investment, however, has been concentrated on mechanized collective farms whose output has been disappointing. Furthermore, inadequate producer prices and poor supply and distribution of goods to rural producers through official trade channels remain serious obstacles to sectoral development. Private trade has been tolerated since 1977. Its official legalization in 1979, as a step towards lessening restrictions on movement of goods and people internally and across national borders, has led to improved supply of consumer goods and foodstuffs through imports by private traders using their own foreign exchange.  - 4 - 12. Higher bauxite exports and favorable world market conditions have greatly increased Government revenue through taxation and sharing of profits. Thus, since 1973 Government current revenues and in particular tax revenues have increased markedly faster (19 percent p.a.) than GDP (7.2 percent p.a.), while public recurrent expenditures have increased at a moderate 11.5 percent per year. Part of this additional revenue has been turned over to the Central Bank for amortization of accumulated Government debt. Though Government domestic borrowing declined from 3.8 billion Sylis in 1973 to 0.2 billion in 1979, this reduction was more than compensated by an increase in credit extension to public enterprises from Sylis 7.4 billion in 1973 to Sylis 20 billion in 1979, necessitated in part by the transfer of their profits to Government as discussed in para. 13. Total credit to the public sector thus expanded from Sylis 11.2 billion in 1973 to Sylis 20.2 billion in 1979. At the same time, the Government reduced the amount of currency in circulation, while the deposits of the private sector decreased and those of public enterprises rose at a much slower pace than their sales. Thus the money supply has been kept relatively stable in absolute terms, and declined in relative terms to 32 percent of GDP at the end of 1978. These deflationary measures, together with the trade liberalization and the influx of private foreign exchange assets converted into import goods, led to a fall in prices and exchange rates on the parallel market, and probably to some improvement in the real purchasing power of most of Guinea's poorest population. 13. Net transfers from public enterprises to the Government have increased substantially in recent years, due mainly to a growth in commercial profits of trading enterprises having access to undervalued foreign exchange produced by the mining and agricultural sectors, and insufficient expenditure by public enterprises for both replacement investment and current maintenance. However, the Government has demonstrated a desire to better maintain and fully exploit existing capital assets, and has begun to allocate a larger proportion of its recurrent budget for much needed maintenance expenses and spare parts. Importantly, it is also undertaking serious examination of the viability of public enterprises; a few of the least successful have been closed down, while others have embarked on rehabilitation programs, some- times with external assistance. The Government's objective is to make these enterprises self-sufficient, and it has therefore recognized the need to revise pricing policies to enhance cash flows, ensure adequate credit to maintain working capital and stocks, and call upon foreign technical assistance (including post-rehabilitation management assistance) to strengthen operational efficiency. 14. Most investment in Guinea is of a public or parapublic nature. The third and most recent development plan covered the period October 1973 to December 1978. Its original forecasts called for a public and parapublic investment outlay of US$2.9 billion or about 45 percent of GDP, of which US$1.8 billion, or 65 percent of total investment, was to be in semipublic joint ventures with foreign investors (mainly in the mining sector). The plan was later scaled down to US$1.7 billion (of which US$870 million for investment by the Central Government per se) to take into account delays in the implementation of iron ore projects at Mount Nimba and Simandou, and of  - 5 - bauxite mines at Dabola and Tougue. Actual investment by the Central Govern- ment is estimated at US$478 million during the plan period, or 55 percent of planned expenditure. Two-thirds of Central Government investment was financed by foreign assistance. Foreign borrowing was particularly heavy between 1973-76, when it covered over 70 percent of financing requirements. Large outlays in connection with mining operations, purchase of equipment for rural production brigades, as well as for the transport sector, were the main components in the high investment levels in the 1973-76 period, to the tune of over US$100 million per annum. In 1977-78, partly because of reduced availability of foreign financing, investment outlays of the Central Govern- ment fell to less than US$74 million per annum. In addition to this, the Central Government disbursed some Sylis 9.7 billion (almost US$500 million) in financial assistance to public enterprises over the 1976-79 period. Prospects 15. Guinea's long-term development prospects are good. However, the Government has not yet defined its development priorities for the next Plan period, other than the customary major projects in need of foreign financing. Based on Bank analysis and projections, it appears that Guinea's short and medium-term economic development prospects will hinge critically on the rate of growth in the mining sector, while long-term prospects will be affected by rural development. Mining exports increased from US$61 million in 1973 to US$360 million in 1979 and are likely to reach US$400 million in 1980. 16. Despite this favorable forecast, the foreign exchange situation will remain critical if no new major sources are identified in the near future. This is because of: (a) the high foreign exchange content of the operating costs in mining projects; (b) increasingly high debt service obligations, including substantial arrears; and (c) import requirements for the manu- facturing, transport and other sectors, as well as for minimum needs for imports of foodstuff, consumer goods, and services. Guinea will therefore need large amounts of external assistance to support its balance of payments until at least 1985. Foreign Assistance and External Debt 17. Over the past few years, Guinea has been diversifying its sources of foreign assistance through renewed ties with the western industrialized countries, expanded relations with such OPEC countries as Algeria, Iraq, Libya, Kuwait, Saudi Arabia, and with multilateral sources. During this process, Guinea faced a rather difficult transition period between 1975-78, at which time increased reliance on private financing (particularly suppliers' credits) hardened external borrowing terms and put additional pressure on the balance of payments. More recently, there is evidence that public assistance is gradually replacing private financing, and the average terms of external borrowing in 1979 were softer than those recorded in the previous two years. Both the Bank Group and IMF have maintained a dialogue with the Government on a wide range of policy matters, and Guinea has qualified for drawings under the IMF first credit tranche and trust fund facilities.  - 6 - 18. The accumulation of foreign debt to finance investments in public infrastructure and public enterprises as well as public consumption, have resulted in a burden of foreign obligations which is and will remain for years a major problem. Guinea's external outstanding public debt reached US$1.3 billion as of December 31, 1979, of which US$1 billion (66 percent of GDP) was disbursed. Loans denominated in convertible currency amount to 53 percent of the total public debt disbursed as of the end of 1979, and to 83 percent of the 1979 disbursements. Limited foreign exchange earnings have hindered the payment of debt service, and despite the negotiation of several rescheduling agreements, outstanding arrears on loans due in convertible currency totalled US$114 million at the end of 1979. During 1979, public debt service was projected to US$143 million, of which only U$82 million was actually paid. In 1978 and 1979 the ratio of debt service obligations to gross export earnings was about 50 percent if debt service on private borrowings, i.e., debt owed by the two mixed bauxite companies, is included. Actual service payments including private debt amounted to about 35 percent of export receipts. 19. Service for public debt outstanding at December 31, 1979 should exceed US$140 million p.a. over the 1980-82 period. Even if foreign capital inflows cover the entire foreign exchange costs of new investments, arrears are likely to rise further, at a pace provisionally estimated at US$60 million per annum, of which two-thirds in convertible currency. Service on new commitments would of course further increase this amount. With limited scope to maneuver, the Government has addressed the problem through debt rescheduling negotiated bilaterally with some creditors, and measures to improve debt management through the newly established External Debt Depart- ment in the Central Bank. The Government has also undertaken a stricter control of investments financed by external credits, and a more judicious official import program. Some relief was provided in this area by the opening of trade. However successful these efforts may be, during the next few years Guinea will have to rely on substantial amounts of foreign assis- tance on concessionary terms. This will be needed not only for investment purposes but also to provide foreign exchange for intermediate and consumer goods imports which are vital to stimulate economic activity and relieve supply constraints, particularly in the rural sector. Furthermore, despite the Government's achievements in keeping the growth of its current consump- tion expenditures below the growth of revenue, net public savings after debt service will be negligible until the mid-1980s, and local cost financing by external sources will be needed. PART II - BANK GROUP OPERATIONS IN GUINEA 20. To date, the Bank Group has financed nine operations in Guinea. Two loans totalling US$73.5 million in FY69 and FY71 financed infrastructure for the Boke Bauxite Mining Project. IDA credits of US$7.0 million and US$14 million respectively were granted in FY75 for a Daboya Pineapple Development Project and FY76 for a first Road Maintenance Project. In FY79, three credits were signed, one of US$8 million for an Education Project, the second of US$12.5 million for a Water Supply and Sanitation Project, and the third,  US$1.1 million for a Power Engineering and Repair Project. Two additional credits were signed in November 1979, one of US$10.4 million for a Rice Development Project, the second, US$13 million for a Second Highway Project. Annex II contains a summary statement of Bank loans and IDA credits as of July 31, 1980, and notes on the execution of ongoing projects. 21. The Bank Group's share in Guinea's external public debt outstanding and disbursed as of December 31, 1979, and of total public debt service in 1979 amounted to 8.1 percent and 11.4 percent respectively. IDA credits represent 5.3 percent of Bank Group outstanding commitments and a negligible proportion (0.2 percent) of Guinea's public debt service payments. By 1985, the Bank Group's share in Guinea's public debt outstanding will reach 16.5 percent of total commitments, 63.8 percent of which would be IDA credits. IBRD's share of debt service will drop to 6.3 percent, while that of IDA will remain insignificant at 0.5 percent of total public debt service payments. 22. In view of the general shortage of foreign exchange and the poor state of infrastructure in Guinea, the Bank Group's first projects aimed at promoting mining and agricultural exports and at beginning to rehabilitate road infrastructure. The Boke Project was completed satisfactorily and bauxite output has increased steadily. Despite some delays in execution, the Daboya Project is now exporting fresh fruit to Europe, and a follow-up project based on expanded smallholder development is under consideration. The First Highway Project has been largely successful in rehabilitating and maintaining a major part of the transport network vital for agricultural development. 23. Encouraged by the experience in execution of these first proj- ects, the Bank Group has begun to expand and diversify its lending program. This has been facilitated by agreement reached with Government on four basic priorities: (i) rehabilitating and maintaining basic infrastructure; (ii) developing human resources; (iii) expansion of mining; and (iv) rural develop- ment. The first three would gradually remove constraints on the development of economic activities, including lack of foreign exchange, and would increase absorptive capacity, while the benefits of the fourth would be distributed among the largest segment of the population. Thus, Bank Group operations in each of these four areas have been approved or are under preparation, with particular emphasis on sectoral planning, institution-building and training. The Water Supply and Power Engineering Projects, the latter initially con- centrating on the deteriorated system in Conakry, and a more comprehensive first Power Project appraised in December 1979, concentrate on the first objective of improving infrastructure. The Second Highway Project supports this strategy and would expand the road rehabilitation and maintenance work begun under the First Highway Project. It would also strengthen certain sector institutions to help Guineans acquire and successfully apply the engineering and technical skills necessary to plan, design, and implement road transport projects. The First Education Project arose out of the clear need for more trained technical manpower, and aims to assist the Government in improving and expanding training programs for industrial technicians and  - 8 - skilled workers, with emphasis on strengthening sector institutions. Because of the vital importance of mining in helping alleviate the country-s foreign exchange shortage, the Bank Group is also considering further intervention in this sector. Feasibility studies are being reviewed for the Nimba Iron Ore Mining project and for the Konkoure Hydroelectric Power/Aluminum Smelter project. 24. One of the Government's main priorities is increased exploitation of agricultural and livestock resources. It is in the rural sector, how- ever, that the country has experienced the greatest difficulty in harnessing its development potential. The Bank Group has found it difficult to find non-enclave projects suitable for financing. Basic institutional support for the rural sector, economic incentives to farmers, accessibility to modern technology, as well as applied agricultural research activity have been virtually non-existent. These factors affect the willingness and ability of Guinean farmers to respond to production expectations. To come to grips with these fundamental issues, the Bank Group has been working with Government to prepare a series of projects which entail direct intervention in the rural sector in activities chosen for their growth potential. The Rice Development Project approved in FY80 stresses institution-building at the national level, and is introducing on a pilot basis low-cost improved rice production methods to test farmer response in a potentially highly productive part of the country. The project also includes consultant services to carry out a study of agricultural prices and rural incentives. The proposed Live- stock Development Project aims at strengthening the institutions responsible for day-to-day field operations and sectoral planning and analysis, improving animal health and productivity, and training livestock sector staff. 25. The Bank Group will continue to assist the Government in develop- ing its policies toward new sectors of activity, and is beginning to prepare an industrial rehabilitation/IDF project to help improve the efficiency and productivity of the country's public enterprises and to foster further growth of the private sector. A port project also under consideration will aim at rehabilitating port facilities, fulfilling cargo handling requirements, and improving port administration and operations. At the same time, an urban project is being prepared which is designed to upgrade several low income settlements and develop sites and services in Conakry. The Bank Group is executing agency for a Water Master Plan financed by UNDP which will start shortly, and which is aimed at helping the Government to formulate a program for national use of water resources. PART III - THE LIVESTOCK SECTOR 26. The agriculture sector provides a livelihood for about 80 percent of Guinea's population, and contributes about 40 percent of GDP. Rice is the predominant food crop. Livestock, particularly cattle, are an important element of the rural economy. Resources comprise about 1,250,000 cattle, 250,000 sheep, 300,000 goats, 60,000 pigs and five million chickens. Of the total cattle population, about 45 percent are in Middle Guinea (Fouta Djalon), 27 percent in Upper Guinea, 18 percent in Maritime Guinea, and about 10 percent in the Forest Region (see map).  27. The ownership of cattle is well distributed involving an esti- mated 160,000 families (1.3 million people) or 30 percent of Guinea's rural population. Herd size is generally less than ten animals. While a few families with larger herds have higher than average incomes, for most cattle- owning families incomes are about, or slightly above, the rural sector average. Cattle are reared for meat, milk and draft purposes, with the relative importance of each function partly dependent on geographic locality. Cattle also represent a means of storing capital for emergencies and for gifts at weddings and other occasions. Most cattle-owning families are sedentary, grazing their animals near the village and also growing crops. Forage re- sources are generally abundant except for certain more densely populated regions where transhumance in the dry season is practised. Some tendency towards integration of cattle rearing and crop husbandry is noticeable in Guinea, a process that would be encouraged under the proposed project. 28. Guinea-s cattle population consists almost entirely of the N-Dama breed, a small humpless animal with good fertility and relatively high overall productivity. Its most outstanding characteristic is a relative tolerance to trypanosomiasis, transmitted by the tsetse fly and widely prevalent in much of Africa. For this reason N-Damas have become much sought after by countries with humid tropical climates like Guinea's where the disease poses a major health hazard to less resistant breeds. Due to the N'Dama's heartiness, sizeable export potential exists for these animals, and in turn for earning Guinea much needed foreign exchange. This activity would be explored and developed under the proposed project as part of the work program of the Bureau d-Etudes to be established within the Livestock Service (para. 30). 29. Herd productivity in Guinea is low despite the careful attention paid by herdsmen to their cattle. This situation is due mainly to poor animal health. Major disease hazards are contagious bovine pleuropneumonia (CBPP), anthrax, blackleg, pasteurellosis and rinderpest; internal and external parasites can result in serious debilitation, and trypanosomiasis is a threat particularly to weak animals. Furthermore, lack of minerals limits animal growth, and over-milking of cows reduces calf growth rates and increases calf mortality. Parasites probably cause the most serious overall economic losses to the livestock sector. Institutional Structure 30. Overall authority for development of Guinea's livestock sector lies with the Ministry of Livestock and Fisheries which was created as a separate Ministry in 1979. The General Directorate of Livestock (DGE) is the agency under the Ministry in charge of implementing field activities. Responsibility for sectoral analysis planning and evaluation of investment proposals in the livestock sector has up till now been handled by a research and planning office within the Ministry. Under the proposed project, the functions of this office as they specifically relate to the livestock sector would be largely taken over by a new research and planning unit, Bureau d'Etudes (BDE), to be created within the DGE (para. 51). Responsibility for  - 10 - education of veterinary and livestock production personnel is shared with the Ministry of Higher Education and Scientific Research for high-level staff, and with the Ministry of General and Vocational Education for middle-level employees. 31. The DGE heads a field livestock service that operates within the country's overall regional administrative structure through 33 small regional offices (Direction Regionale de l'Elevage et de la Peche-DREPs), which are in turn broken down into about 320 districts based on the number of arrondisse- ments (subregional administrative units) in the country. The intended func- tion of the Livestock Service is to continually survey the state of animal health, to diagnose disease and give medicines, treatments and vaccinations, and to provide advice on animal husbandry. However, its performance is currently constrained by inadequate infrastructure, a critical shortage of equipment and materials for disease diagnosis and treatment, lack of trans- portation which hampers mobility of field services and, most importantly, the virtual absence of key veterinary inputs such as drugs, medicines and mineral salts. Further, staff quality is low because of inadequate practical training and also the lack of appropriate on-the-job experience with modern veterinary and animal husbandry techniques due to the shortage of equipment and materials. The main emphasis of the proposed project would be to assist the Government in responding to these urgent needs. Sector Education and Staffing 32. Guinea has two intermediate-level livestock colleges and three higher faculties. Some senior personnel of the Ministry and Livestock Service have studied abroad, although courses were often poorly adapted to tropical livestock conditions. Most sector staff are graduates of the national system in which the quality of education is very inadequate. The institutions lack even the most basic library, laboratory, and practical training facilities, and curricula are often only marginally relevant to sector needs. Moreover, teaching staff are generally recent graduates of the same institutions, and often lack the specialized training and field experience to be effective teachers. 33. Government's present policy is to guarantee jobs to all graduates of its higher education system. However, the Livestock Service and Ministry are already fully staffed at the middle and upper levels, and enrollments at the educational institutions are too high. At the present rate, the number of these personnel to be employed in the sector could well double in three years and triple in five, creating considerable budgetary problems and substantially decreasing sectoral efficiency. 34. Resolution of the above issues, which are also endemic to other sectors, will require fundamental changes in Government's policies with regard to education, training and manpower planning. Nevertheless, the authorities are aware of the need to start tackling these problems, and the First Educa- tion Project provides three consultant years to assist in tailoring educa- tional curricula and output to the needs of various sectors, especially agriculture. Moreover, a Unesco educational survey mission in early 1980 also  - 11 - concentrated on these areas with particular attention to the rural sector. Under the proposed project, Government has agreed that one of the functions of the BDE, to be set up within the DGE and assisted by an internationally recruited economist, will be to follow up on this work and to help establish manpower requirements and develop measures aimed at limiting admissions into education institutions and reducing overstaffing in the sector. Steps to initiate a system for that purpose will be undertaken not later than December 31, 1981 (Section 3.08 of draft Development Credit Agreement). Until an appropriate strategy is developed and implemented, however, the proposed project will provide, as a first step toward improving the training of Livestock Service personnel, an upgrading center for all existing staff as well as fellowships abroad for higher level staff. Marketing, Pricing, and Taxation 35. Marketing of cattle is done both through an official channel and through the unofficial or "parallel" market. Cattle on the official market are sold to regional livestock purchasing enterprises who in turn deliver the animals either to an official regional butcher for local sale of meat or to one of two main slaughterhouses for subsequent sale by OBETAIL, the Government enterprise in charge of supplying meat to Conakry. The level of sales on the official market is based on a quota system whereby 10 percent of each farmer's cattle herd must be sold to Government. Data on herd size is gathered through an annual census carried out by local administrative officials. Prices on the official market are only about 20 percent of those on the parallel market, Government's objective being to supply meat to con- sumers in Conakry at prices intended to keep the cost of living low. However, such prices encourage cattle owners to conceal part of their herd from the census takers, to evade as far as possible the livestock purchasing enter- prises, and to offer only their worst animals for sale.- Moreover, animal and weight losses in transit are high as a result of unsatisfactory handling. The official system, however, has not been strictly enforced by Government which has increasingly tolerated parallel market activity. 36. Because herdsmen and consumers have been able to trade on the parallel market, continuation of the official system (provided no further measures are attempted by Government to enforce it more strictly) would have only a minor impact on incentives for farmers to adopt project recommenda- tions. Nevertheless, it would continue to compromise relations between livestock extension workers and herders (because the former carry out their own census suspected by herdsmen to form the basis of the quota), and hamper such actions as sanitary meat inspection. Moreover, by discouraging farmers from selling to Government, the low prices could inhibit development of an official N'Dama export market. 37. These observations have been discussed with Guinean authorities who, although sensitive to Government policy on the issue, nevertheless agree that there are inefficiencies in the system as currently practised. Accordingly, the Government has agreed that not later than December 31, 1981, it will take  - 12 - measures satisfactory to the Association aimed at removing the above con- straints to livestock sector development and offering adequate production incentives to herdsmen (Section 3.13 of draft Development Credit Agreement). Detailed analysis regarding adjustment of cattle prices will be carried out by the BDE during the first year of the project. This analysis will take into account the interim findings of the agricultural pricing study presently being carried out under the Rice Development Project (Credit 952-GUI). 38. Government revenues from the livestock sector stem primarily from the "vaccination tax", an inappropriately named assessment which is essen- tially a cattle poll tax of US$0.80 per adult animal. Collection is done by Government tax officials based on the annual census conducted by regional administrations. Revenues from the tax go to regional budgets and are not specifically earmarked to go back into the sector. Moreover, because herdsmen inaccurately report herd size to census takers and evade the tax collectors, the amount of money obtained annually (Sylis 6 million or US$300,000) is judged to be little more than the cost of the collection effort. The revenues that would be made under the project through sale to herdsmen of veterinary products and mineral licks (Sylis 280 million or US$14.6 million over the four year project period) would substantially exceed the relatively insignificant returns from the tax. For this reason, and due to the negative impact of the tax on herdsmen's attitudes toward the Livestock Service, Government has agreed that measures to phase out the tax will be undertaken by December 31, 1981 (Section 3.12 of draft Development Credit Agreement). Strategy and Investment Programs 39. The Government-s primary objective in the livestock sector is to increase national meat production, particularly for urban consumers. It also wishes to improve nutrition through higher milk production, increase the standard of living of cattle herding families, and further develop the potential for mixed farming through animal traction. Herdsmen are receptive to the use of appropriate inputs, the N-Dama breed is highly suited to the local environment, and in most areas there are sufficient pasture resources. A principal constraint, however, is the lack of appropriate veterinary and animal husbandry support services. Recent efforts to improve the animal health situation have consisted essentially of two UNDP/FAO assisted projects: a vaccination program in eastern Guinea, and an upgrading of the vaccine production and disease diagnosis laboratory at Kindia in the west. The vaccination campaign has helped Government largely eradicate contagious bovine pleuropneumonia in the east, and significantly reduce the incidence of other diseases. Both projects have been successful. Other programs in the sector include a pilot genetic improvement exercise sponsored by UNDP, and a proposal to establish a ranch in the Forest Region for which an agreement has been signed between Government and a private group which would operate the ranch as an autonomous commercial venture. 40. The Association supports the Government's livestock strategy, and through the proposed project would begin to help Government tackle the major causes of low cattle productivity. Because the two UNDP/FAO projects are due to end in December 1981, one aspect of the project would take over where  - 13 - these leave off, while also extending the vaccination program to the western half of the country, and upgrading animal health services throughout the country for improved treatment of parasitic diseases and other ailments. The proposed project is also intended as a vehicle for institutional reforms. The policy proposals agreed with Government (paras. 34 and 37-38) will address key inefficiencies related to sector education and staffing and to cattle marketing, pricing and taxation. The improvements concerning these matters expected to be made during execution of the project will be facilitated by the institutional strengthening and staff resources to be provided under the project. Such changes would help ensure the full realization of the sector-s sizable long-term development potential. PART IV - THE PROJECT 41. Initial livestock sector analysis and project identification were financed with funds available under the ongoing Daboya Pineapple Project (Credit 569-GUI) and carried out in 1977 by consultants. The project concept was subsequently revised by Government in agreement with the Bank's Regional Mission in Western Africa (RMWA), and a preparation report was submitted by RMWA to Government in July 1978. Appraisal took place in October/November 1979. A US$200,000 PPF advance was approved in March 1980 to finance detailed design and preparation of bidding documents for the project's building con- struction program. Negotiations took place in Washington, D.C. from July 22 to July 30, 1980 with a Guinean delegation headed by Mr. Mohamed Lamine Toure, Vice-Governor of the Central Bank. The Staff Appraisal Report No. 2959a dated August 19, 1980 is being circulated separately. The map (IBRD 14977) shows the location of the project. Objectives and Description 42. The project's major objective will be to increase the producti- vity of the Guinean cattle herd, thereby augmenting national meat and milk production, improving nutrition, and raising the standard of living of cattle-herding families. This will be achieved through the following measures: vaccinations against common cattle diseases, provision of drugs, medicines and mineral licks, and upgrading of the livestock husbandry and veterinary support service. While not the primary focus of the project, the measures to be undertaken will also benefit other forms of livestock. Resources will also be provided under the project to investigate areas of high potential or of concern relating to the sector. The proposed project will have a countrywide coverage, although its focus will be greater in areas of higher cattle density. It will be implemented over four years and will include: (a) Institutional strengthening through: (i) upgrading (provision of a new headquarters building, equipment, and technical assistance) of the DGE to provide a central capacity for day-to-day project implementation;  - 14 - (ii) establishment (provision of equipment and technical assistance) within the DGE of a Research and Planning Office (BDE) to undertake sectoral planning, special studies, monitoring of ongoing operations, and preparation of a possible follow-up project; (b) Support for animal health and husbandry services through: (i) upgrading of regional livestock services, including reconstruction or refurbishing of regional headquarters buildings (DREPs), and provision of basic equipment and materials; (ii) sales to herdsmen of drugs, medicines and mineral licks through the upgraded regional services; (iii) a national vaccination campaign against common cattle diseases by mobile teams organized under two field headquarters; (iv) reinforcement of the central laboratory for vaccine production and diagnosis of diseases; and (v) a pilot credit program to encourage cattle ownership and use of draft animals in mixed farming. (c) Staff training through: (i) establishment of a 40-person capacity training center for short-term recycling courses (gener-ally one to three weeks) for livestock service staff at various levels; and (ii) provision of fellowships for overseas training for senior project staff; (d) A total of 19 man-years of technical assistance (including services in item (a) above), 30 man-months of short-term consultant services, and the assistance of an architect/ construction supervisor to design and monitor the building program. The General Directorate of Livestock (DGE), under the authority of the Ministry of Livestock and Fisheries, will be responsible for implementation of all project activities. 43. Upgrading of Regional Livestock Services. Under the project, the field headquarters of the regional livestock service (DREPs) will be reconstructed or refurbished and provided with the resources necessary to  - 15 - conduct their work. Where needed, running water, electricity, and a telephone will be supplied as well as basic furnishings, veterinary equipment and veterinary products. At the arrondissement level, simpler equipment will be provided. 44. The main role of the DREP headquarters will be to support field activities in the arrondissements. Each regional director will provide administrative support and professional guidance to arrondissement staff, and will be responsible for ordering, storage, distribution and accounting of veterinary supplies channelled through his field staff to herders. DREP directors will be answerable to the DGE in Conakry, but will also maintain working linkages with the vaccination program field coordinators and with the vaccine laboratory, both of which will be under the general supervision of the DGE. The extension efforts of the regional services will be supported by regular radio broadcasts on the national radio system in the three main languages used by livestock owners. At the arrondissement level, field staff will operate as general livestock extension officers focussing primarily upon the treatment of sick animals. 45. Vaccination Program. The project's annual vaccination program will aim at providing countrywide prophylactic coverage against the major cattle diseases (para. 29). The overall strategy of the program will be the same as that successfully used under the ongoing UNDP/FAO-assisted project in the east. The vaccination campaign in the west (Middle and Maritime Guinea) will get underway in the project's first year; financing of the eastern program (Upper Guinea and the Forest Region) will begin in the second year, after completion of the UNDP/FAO project in December 1981. Based on the high rates of annual coverage already attained under the UNDP/FAO project (70 percent of the herd in eastern Guinea), the total number of annual vaccina- tions under the proposed project is expected to increase gradually over the four-year project period to 80 percent of the national herd. 46. The proposed project will also finance continued operation and strengthening of the vaccine production and disease diagnosis laboratory (Institut de Recherches et de Biologie Appliquee - Nenenkhaly Condetto - IRBANC) which was recently modernized under a second ongoing UNDP/FAO project. The proposed IDA project will provide replacement equipment and supplies as well as funds to develop those vaccines now being imported. Costing for the proposed project has only allowed for estimated necessary replacements of worn out UNDP-financed vehicles and equipment, because all items in good working order financed under these two projects will continue to be made available for use by the project (Section 3.09 draft Development Credit Agreement). 47. Staff Training. Training will be undertaken primarily at a 40- person capacity recycling center to be constructed on the same site as the IRBANC laboratory so as to make use of the laboratory's facilities for demon- strations. The center will provide short intensive courses (1-3 weeks) for existing Ministry and Livestock Service staff. Additional training will be  - 16 - provided through on-the-job association with the project's technical assis- tance staff, and through 15 medium-term (1-year) and 30 short-term fellowship courses for the more senior staff within the Ministry and Livestock Service. An internationally recruited livestock training specialist will direct the center, and will be supported by a Guinean counterpart and a small group of teaching and demonstration staff. A second internationally recruited special- ist with a broad background in livestock teaching and extension work will also be based at the center, but will be oriented primarily towards making follow-up visits to DREP teams in the field and supervision of the pilot credit scheme. Responsibility for identifying staff training needs, selecting candidates, and forward planning will be handled by a small committee answer- able to the Minister and composed of the project's senior staff. To facilitate these planning activities, the committee will prepare and present to IDA at least two months before the start of each fiscal year an outline program for the next year, acceptable to the Association, for the training center and for fellowship awards (Section 3.06 of draft Development Credit Agreement). 48. Pilot Credit Scheme. The project's pilot credit program will be based at Kissidougou in the transition zone between the Forest Region and Upper Guinea where soil and topography are well suited for use of draft animals. Whereas use of draft oxen by more established families is quite common there, the project will assist, through the provision of credit, the ownership of livestock and draft oxen by poorer families. A participating family will typically be expected to purchase one heifer and two males, plus draft equipment, so as to form the nucleus of a future herd. However, some flexibility will be allowed whereby a participant could purchase up to four animals or, if he wishes to reduce his debt service obligation, he could start with only two animals plus the draft equipment. 49. The provision of agricultural credit in Guinea is currently under the responsibility of the Banque Nationale de Developpement Agricole (BNDA) which, due to lack of field offices and staff, operates mainly through the use of intermediaries for the administration of credit operations. Its own role is generally restricted to providing funds and bearing risks. For the proposed project, field management of the credit program will be carried out by DGE staff, supervised by a Guinean credit program officer in liaison with BNDA. Because the pilot scheme will involve innovations previously untested on an organized basis in Guinea, this first venture will be a small- scale one involving a total of about 100 families. Financing terms provide for one year of grace followed by six years of annuity repayments at an interest rate of 11%. Participants, who will be screened for suitability, will have to contribute one-fifth of the investment cost, the remainder being financed through credit. Debt service payments during the first years of the program could be financed by contracting out work-oxen services, for which there is an established local market. From year nine of the program, net annual revenues from each participant's herd and work oxen are estimated to average over US$950. Detailed arrangements regarding the credit scheme have been agreed with Government and will form the basis of a model contract acceptable to IDA to be used between participants, BNDA and DGE (Section 3.07 (ii) of draft Development Credit Agreement).  - 17 - 50. Other Activities. While the project will focus primarily on the activities described above, other important sector matters to be dealt with by the DGE or BDE include: export of N'Dama breeding stock, genetic improve- ment measures, and forage resource management. Implementation 51. Detailed implementation of field activities will be carried out by the DGE, headed by a Guinean director. Four main operational departments within DGE will be in charge respectively of: the regional livestock ser- vices, the vaccination program, the IRBANC laboratory, and the training center. A department of financial and administrative services will handle project finances and accounting, procurement, and storage and distribution of supplies. The western and eastern vaccination programs will each be run by a field coordinator. The BDE, also headed by a Guinean, will be responsi- ble for overall sector policy for special studies such as those relevant to marketing and pricing, manpower planning, education and recruitment, and for monitoring of ongoing operations. In view of the importance to project implementation of the Guinean directors of DGE and BDE, a condition of effec- tiveness of the proposed Credit will be that they be in position and be appropriately qualified and experienced. The Government has provided assur- ances that it will also fill at all times the positions of other key local staff with qualified and experienced personnel (Sections 5.01 (a) and 3.04 of the draft Development Credit Agreement). 52. Technical Assistance. Six internationally recruited specialists--in all, 19 man-years of technical assistance--will assist Guinean cadres in specialized activities for which local expertise is limited. These positions will be: (i) an economist in the BDE to assist in sector planning and evalua- tion, and to help revise sector training and recruitment, and pricing and marketing policies; (ii) a livestock specialist at DGE to supervise the project's field operations; (iii) a financial manager for DGE's financial and administrative services department; (iv) a veterinarian specialized in disease diagnosis and vaccine production for the IRBANC laboratory; (v) a livestock training specialist for the recycling center; and (vi) a livestock extension specialist to assist at the training center, to undertake follow-up visits to regional staff, and to oversee the credit program and any activities regarding export of breeding stock. In order to encourage the transfer of specialist expertise to Guinean cadres, terms of reference for internationally recruited personnel will place strong emphasis on their role in assisting counterpart staff to acquire the specialist skills. 53. Provision for the employment of an architect/construction supervisor for the building program, and for the hire of about 30 man-months of short-term specialist services would also be provided for such purposes as: supplemental courses at the training center, design of radio programs for extension work, hiring of a credit specialist to initiate the pilot credit program, and assistance for special studies. The qualifications, experience, terms and conditions of employment, and terms of reference of all technical assistance staff and short-term consultants will be satisfactory to the Association  - 18 - (Section 3.02 of draft Development Credit Agreement). As a condition of effectiveness, the Government should have signed a contract with a consulting firm for the project's six resident technical assistance staff (Section 5.01 (b) of draft Development Credit Agreement). Cost and Financing 54. Total project costs are estimated at US$21 million (US$20.4 million net of tax), of which US$ 17.5 million or 83 percent is foreign exchange. Total project costs include an estimated US$0.6 million in Government markups on fuel, lubricants, and construction materials, which represent a tax element. Technical assistance costs, which amount to US$2.9 million or 19 percent of base costs (inclusive of all fees, overheads, airfares, and expenses), have been estimated on the basis of recent consultant contracts in Guinea, and average US$9,600 per month for the project's resident staff and US$13,000 per month for short-term consultant services. Cost estimates do not include any local staff salaries because in view of Government's overstaffing, the pro- posed project is not expected to require additional personnel. Base costs are expressed in mid-1980 prices. Physical contingencies amount to US$1.3 million, and allowances for expected price increases are based on anticipated local and international inflation rates and amount to US$4.4 million. 55. The proposed IDA Credit for the equivalent of SDR 13.3 million equivalent (US$17.5 million) would finance the project's foreign exchange cost. The Government will contribute US$2.4 million including US$0.6 million in taxes stemming from the above markups on fuel, lubricants, and construction materials. Herdsmen will finance US$1.1 million of project costs through payments for veterinary products and mineral licks. A breakdown of project costs is shown in the cost table on page (iii). Procurement and Disbursement 56. International competitive bidding in accordance with IDA guidelines will be used for all contracts over US$50,000 for: (i) equipment, vehicles, materials and furnishings (estimated cost US$4.0 million); (ii) veterinary products for supply to farmers (US$5.7 million); and (iii) construction works (estimated cost US$3.2 million of which IDA US$2.1 million). About US$11.8 million of IDA financing will therefore be for items procured through inter- national competitive bidding. Purchases will be grouped wherever practical to derive maximum advantage from bulk procurement. For civil works, mate- rials, equipment, vehicles, furnishings and veterinary products that cannot be grouped in packages of at least US$50,000 each (US$1.4 million), procurement will be through local competitive bidding procedures acceptable to IDA, or through negotiated purchase on the basis of local price quotations. Certain minor materials, furnishings, and small equipment which are currently obtained through centralized Government importing agencies will continue to be pur- chased through this mechanism (estimated cost US$0.3 million). Arrangements for the hiring of internationally recruited staff and short-term consultant services (US$3.6 million) and for the fellowship program (US$0.4 million) will be through procedures satisfactory to IDA. Bidding documents for construction contracts will be subdivided into lots arranged so as to provide the opportunity for bidding by small locally represented construction firms. In evaluating bids for constructions, local contractors will be allowed a 7.5 percent preference (Schedule 3 of draft Development Credit Agreement).  - 19 - 57. The IDA credit will be disbursed over four and a half years to cover 100 percent of foreign exchange costs of: construction, equipment, furnishings, spare parts, laboratory materials, chemicals, incremental purchases of veterinary products (drugs, medicines, and mineral salts), technical assistance staff and other consultant services, and the fellowship program (SDR 12.31 million - US$16.2 million). The Credit will refinance the amount disbursed under the PPF advance (SDR 0.15 million - US$0.2 million) and will also cover 16 percent of foreign expenditures for replacement purchases of veterinary products (SDR 0.84 million - US$1.1 million). The disbursements against replacement purchases of veterinary products are calculated so as to avoid IDA financing of foreign exchange costs in fuel and lubricant and transportation costs (para. 55). All disbursements will be fully documented (Schedule 1 of draft Development Credit Agreement). Financial Procedures, Reports, and Audits 58. For the project's foreign expenditures, a special account in foreign exchange will be set up in the Banque Guineenne du Commerce Exterieur (BGCE). Working capital requirements in this fund will be kept at a minimum through direct payments to suppliers whenever possible, but some foreign exchange will be necessary for financing by Government of certain smaller items and materials purchased directly for the project, and for the direct financing of some fellowship costs and short term consultancies. This re- volving fund will be equivalent to US$100,000, and will be established immediately after project effectiveness through a withdrawal of this amount from the IDA Credit. IDA will replenish the account upon receipt of evidence of disbursements from the fund for allowable expenditures. Should any disbursements be made from the fund that are not acceptable to IDA, Government will be responsible for replenishing the fund in the corresponding amount (Section 2.03 (d) of draft Development Credit Agreement). The opening of an account in the BGCE for the revolving fund will be a condition of effectiveness of the proposed Credit (Section 5.01 (c) of draft Development Credit Agreement). 59. Payments received by livestock service staff from herdsmen for veterinary products and mineral licks will be deposited in the regional banks and subsequently transferred to a central account earmarked for this purpose in the Banque Nationale du Developpement Agricole (BNDA) in Conakry. Given the large volume of veterinary supplies and medicines to be provided by the project, a carefully designed system of record keeping and accounting will be used. Project progress reports will be produced quarterly and annually. An audit report prepared by a qualified independent auditor under procedures satisfactory to IDA will be submitted to IDA within four months of the end of each financial year (Section 4.02 of draft Development Credit Agreement).  - 20 - Cost Recovery 60. Charges for veterinary products and mineral licks will be set at levels designed to cover purchase and distribution costs, and to provide a margin to compensate for the absence of revenues due to the imminent abolition of the vaccination tax. In setting these charges, herdsmen's ability and willingness to pay will be taken into account. The level of such charges and any adjustments will be discussed annually with IDA (Section 3.05 (b) of draft Development Credit Agreement). So as to cover Government's financial require- ments for repurchase of veterinary products and mineral salts, funds received from herdsmen for these products in the account with BNDA will be converted to foreign exchange at the official exchange rate between the syli and the foreign currencies required. Should herdsmen's contributions be insufficient to meet these needs, Government will provide the extra funds required (Sec- tion 3.05 (a) of draft Development Credit Agreement). Benefits and Risks 61. The project's directly quantifiable benefits will result from substantial improvements in livestock productivity. These have been esti- mated entirely in terms of cattle output, the project's specific focus, but other forms of livestock would also gain. Through the project's vaccination coverage and improved veterinary and animal husbandry services, national beef production is anticipated to increase by 30 percent or 4,200 t per annum, and milk by 39 percent or 11,000 t per annum by full project develop- ment. This will represent a significant improvement in the population-s protein intake. Almost all of Guinea's cattle-owning families (1.3 million people) will benefit from the vaccination program, and the majority are expected to use the upgraded veterinary services. Aggregate net real income from the livestock sector is expected to increase by 30 percent. 62. The institution-strengthening and training measures will provide the basis for planning and implementing other livestock activities, including a possible second project based on the productivity impetus gained by the proposed operation, and for examining and helping resolve critical sectoral problems. Furthermore, the pilot credit program will encourage the spread of cattle ownership and the use of draft oxen, and will establish a framework through which advantageous mixed farming systems (closely interrelating livestock and cropping practices) could be developed. The project's economic rate of return is estimated at 25 percent, and will remain a viable 14 percent even under the combined assumptions of a herdsmen participation rate of only 75 percent of expectations, an implementation delay of one year, and a cost increase of 20 percent. 63. The project involves no major technical risks. Main risks relate to: (i) the importance of staffing the project with qualified Guinean and internationally recruited technical assistance personnel and obtaining support from the Government institutions connected with the project; and (ii) the willingness of livestock owners to participate in the project. The risk of not attracting qualified staff will be minimized by careful attention to selection of key Guinean personnel and consultants. Fellowships and courses  - 21 - at the training center will aid this effort. Further, the project's institu- tional arrangements (organizational, administrative and financial) have been designed to simplify and facilitate for the Government the logistical and accounting problems inherent in a countrywide project of this scope. Concern- ing the second risk, Guinean livestock owners are fully aware through contacts with herdsmen in neighboring countries of the benefits of veterinary inputs and mineral licks. When available in Guinea, such items are in high demand and herdsmen readily pay for them. The improvements to the marketing and pricing system agreed with Government will provide further incentives for active participation of herdsmen in the project. PART V - LEGAL INSTRUMENTS AND AUTHORITY 64. The draft Development Credit Agreement between the Revolutionary People's Republic of Guinea and the Association, and the Recommendation of the Committee provided for in Article V, Section I (d) of the Articles of Agreement of the Association, are being distributed to the Executive Direc- tors separately. Features of particular interest in the draft Development Credit Agreement are referred to in Parts III and IV, and in Annex III to the present report. 65. Special conditions of effectiveness are: (a) the Directors of the DGE and BDE shall be in their posts and shall have qualifications and experi- ence satisfactory to the Association; (b) the signing of a contract satis- factory to the Association for the project's technical assistance positions; and (c) opening of an account in BGCE for the foreign exchange revolving fund. (Section 5.01 of draft Development Credit Agreement). 66. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 67. I recommend that the Executive Directors approve the proposed Development Credit. Robert S. McNamara President By: Ernest Stern Attachments Washington, D.C. August 19, 1980  - 22- Annex 1 Pane I TABLE 3A GUINEA - SOCIAL INDICATORS DATA SHEET GUINEA REFERENCE GROUPS ( AEIGHT S LAND AREA (TROUSAND SO. KM.) - __DST RECENT ESTIHATE_) TOTAL 245.9 AGRICULTURAL 71. 7 MOST RECENT OWU INCOME MIDDLE INCOME 1960 / 1970 /b ESTIVATE / AFRICA S0UTH OF SAHARA AFRICA SOUTH OF SAHARA GNP PER CAPITA (USS) 80.0 110.0 210.0/ 228.9 726.2 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 65.0 98.0 91.0 80.0 699.4 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (MILLIONS) 3.1 4.1 5. 1- / Li URBAN POPULATION (PERCENT OF TOTAL) 9.9 13.8 18.0 17.3 28.9 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 9.0 STATIONARY POPULATION (MILLIONS) 23.0 YEAR STATIONARY POPULATION IS REACHED 2170 POPULATION DENSITY PER SQ. IH. 13.0 17.0 21.0 27.4 61.7 PER SQ. KM. AGRICULTURAL LAND 45.0 58.0 71.0 82.6 126.0 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 42.1 42.5 43.5 44.9 45.5 15-64 YRS. 55.1 54.7 53.6 52.2 51.6 65 YRS. AND ABOVE 2.8 2.8 2.9 2.8 2.8 POPULATION GROWTH RATE (PERCENT) TOTAL 2.2 2.8 2.9/c 2.7 2.7 URBAN 9.0 6.1 6.4 6.8 4.9 CRUDE BIRTH RATE (PER THOUSAND) 47.0 47.0 46.0 47.4 46.8 CRUDE DEATH RATE (PgR THOUSAND) 30.0 24.0 21.0 19.6 16.4 GROSS REPRODUCTION RATE 3.5/e 3.1 3.1 3.2 3.2 FAMILY PLANNING ACcEPrORS, ANNUAL (THOUSANDS) .. USERS (PERCENT OF MARRIED WOMEN) .. .. FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 97.0 100.0 86.0 91.8 94.0 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 86.0 90.0 84.0 90.2 92.7 PROTEINS (GRAMS PER DAY) 43.0 44.0 42.7 53.0 53.0 OF WHICH ANIMAL AND PULSE 8.0 7.0 8.0 18.4 15.6 CHILD (AGES 1-4) MORTALITY RATE 45.0 36.0 30.0 27.7 21.3 HEALTH LIFE EXPECTANCY AT BIRTN (YEARS) 35.0 40.0 43.0 45.3. 50.1 INFANT MORTALITY RATE (PER THOUSAND) 141.0f .. ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. .. 10.0 23.2 31.0 URBAN .. .. 27.0 58.0 66.8 RURAL .. *- 3.0 16.8 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 13.0 .. 28.9 URBAN .. 70.0 .. 67.0 RURAL .. 2.0 POPULATION PER PHYSICIAN 48000.0 32519.0 16629.0/d 30910.4 14508.2 POPULATION PER NURSING PERSON 3890.0 5231.0 2449.0/d 5793.2 3279.5 POPULATION PER HOSPITAL sED TOTAL 1122.0 612.OLa 616.0 1198.9 1141.5 URBAN 207.0 146.0 RURAL 2199.0 1271.0 ADMISSIONS PER HOSPITAL BED .. 16.0 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL .. .. URBAN .. .. RURAL .. .. AVERAGE NUMBER OF PERSONS PER ROOM TOTAL .. .. URBAN .. .. RURAL .. .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. URBAN .. .. RURAL .. ..  - 23- Annex 1 Page 2 TARLE U GUINEA - SOCIAL INDICATORS DATA SHBBT GUINEA REFIRENCE GROUPS (WEIIHTED AVIICB - MUST RECENT ZSSIT TI ) IDSI RZCENT LOW INCOMI MIDDLE INCOME 1960 l 1970 / ESTIMATE / AFRICA SOUSH OF SAHARA AFRICA SOUTH OF SAHANA EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 30.0 33.0 .. 57.7 61.7 MALE 44.0 45.0 .. 74.2 69.2 FBMILE 16.0 21.0 .. 54.1 51.4 SECONDARY: TOTAL 2.0 13.0 .. 10.0 20.6 MALE 3.0 21.0 .. 13.7 29.2 FBIALE 0.4 5.0 .. 7.1 14.7 VOCATIONAL ENROL. (1 OF SECONDARY) .. 3.2 .. 6.8 7.0 PUPIL-TEACHER RATIO PRIMARY 66.0 36.0 .. 45.0 36.6 SECONDARY 26.0 23.0 .. 25.2 24.3 ADULT LITERACY RATE (PERCENT) 7.0 9.0/b .. 25.5 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 2.0 2.0 2.0 3.6 38.8 RADIO RECEIVERS PER THOUSAND POPULATION 12.0 23.0 27.0 31.5 83.5 TV RECEIVERS PER THOUSAND POPULATION .. .. .. 1.8 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 0.2 1.0 1.0 4.6 24.2 CINEMA ANNUAL ATTENDANCE PER CAPITA .. .. .. .. 0.7 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 1521.6 1939.6 2308.4 FEMALE (PERCENT) 40.3 40.3 39.0 33.5 38.1 AGRICULTURE (PERCENT) 88.2 84.7 82.0 80.7 54.3 INDUSTRY (PERCENT) 6.1 8.5 11.0 8.1 17.8 PARTICIPATION RATE (PERCENT) TOTAL 49.6 47.7 46.1 42.2 38.8 MALE 59.5 57.4 55.8 55.1 48.4 FEMALE 39.9 38.1 36.6 29.5 29.4 ECONOMIC DEPENDENCY RATIO 0.9 1.0 1.0 1.2 1.3 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS .. .. HIGHEST 20 PERCENT OF HOUSEHOLDS .. .. LOWEST 20 PERCENT OF HOUSEHOLDS .. .. LOWEST 40 PERCENT OF HOUSEHOLDS .. .. POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. .. 138.2 RURAL .. .. .. 86.1 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. 70.0 107.0 RURAL .. .. .. 65.0 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. RURAL .. .. .. 66.9. Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of coumtries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970. between 1969 and 1971; and for Moat Recent Estimate, between 1974 and 1978. /c Recent Government estimates from Adminiatrative Census indicate a resident population (excluding non- Cuineans) of 4.53 mill. in 1977 and population growth rate of 2.71 p.a.; /d WHO preliminary estimated data; /e African population; If 1955-60 average; J/ Governmmnt hospitals only; /h 1965. Apri , 1980 /1. New national accounts estimates were produced as a result of the February/March 1980 economic mission and indicate a GNP per capita of US$274 in 1979. These estimates will be discussed and finalized with Government in late 1980 within the context of a forthcoming Economic Memorandum. /1 Updated Bank estimates indicate total population of 5.3 million in 1979.  -24 - Annex 1 Page 3 DEFINITIONS OP SOCIAL INDICATORS Notes; Although the data are drass frn sources ge....ely judged the most so-horitati-e end reliable, it sha-ld alo be sated thaet they 'say sac be inter- uatio.ally o-paeals b.osu.s of the lack of ntasdardlesd dafieitisas sad conce.pts used by differest caustetas Os sollecetig th. dsta. The data are, sse- theless, seefo1 to d-scibe aedeen of megaitrde, indicate tren.ds, aed Chsra...triaaerCtais ajar differeaces betes..scao....rie.. The,eeec gap r (1) the. sass...a.try group of the sshjeCt su-try end (2) a country gesap with sarehat high-e sn-esge um the the co..s.ry grouP af the sujec_ oty(.acptOa '.Capital Surplus Oil Espaetsrt" grasp sheer. "Middle .n.ase Earth Aftia en.d Middle Oats" is threes because af sarauger oc-ctueaffisities) - I the ref.eeCe.. . gap data the asrge r papoletis weighted aritheetie mesas tar ...ah indloater and sheer asy sh.. at least haSP af the aarieaagesap has date far that Inditata. Since the acs fg c- utetes sman the ideaar deedsa he -rtlbhility of data s isst Csf i, ceulsms beeera.ised ia reltiag asssg-s ad ea (adiCater ctasthr The. segeare asy efa -crapariog the v-lua Oaeicdilcaca at a time sogthe aco.ntry sad rfraegreups. LAND ARtA (thaoaseqhn)Parultics car hosul - Papuuetlat auvtae,s by sumter oa rac igPry- Tatal - local sur ace are comprising lead araad ilelgd water.CsasaqaIid ra eia calata.encylvl Agricultural - EstIat ofarcutrl drss ed tepcriyo ersesl a ta e -arlig P ernan - Papulatias dtstded hy sombera: rerc for copa, asturs, mahat sdkbother. reso to lie fiella; 1977 data, maeen eal rduate tortes 'praCtical curses,ed esiast nuss GNP PER APII~~.-GNP p.C .pit. ..-t C9-rkt pti... Caches, sadirarel)idis%ided. by nheir repecti' number sof hapita1 beds c-1ated hy s -m covarla method as World Saab Atlas (1976 -P8 basin); 1960, available Inpablie and private general and sperielierd bspinal end re- 19)0,. d 1978 data. habilinenlen c.enter. Hoapita1s are nstablinhb.entn permeaenly nteffed hy et least see physician. Eatbhliebtmesta pre-tdi,g prIncIpally cu.etadia1 tNERGY CONSUMPTION FEE CAPITA - As"a1.... cnaptica of a I.ela eegy Ilae care see etaldd. Rural haspitale, h-wsm, ialade health and medical sod ligita, peroem,oture1 gas an ydra- nalarad geonheema lec- cetrsnt emaetly staffed by * physicies (but by a medical saieet.. telcity) ia killagrama at oal eqoi-ulent per tapita; 1960, 1970, gad 1978 se,midwife, ste.) shih af fe i-pa1tiesatsadnansd prC.ide date, limited range af medita1 fclitie. Per statimnttl Pares rban hampi- POPPLATINI AltO OCTAL STATOSTICO ~~~~tale isclsde WO.SO pelsolpa1 general end specialisd haspict-I, and rura POPULATION AND VITAL STATISTICS ~~~~~~~hseyitaln . Icn or rural hespitels end medical end"mtsrtty crater. Tata1 Paralatlc.. Mid-Year (mlin)- As of July 1; 1960, 1970, snd 1978 Admissions pter-opital Sad - Totl amber at adminsiass t.ora discharges data. Pram hosp~~~~~~~~~~~~~~ital divided by the number of beds. Orhat 1porlatios(ecn af teu.t. - Ratla ofurbso ta . ease papalatias; di'fferent dafiuttiana of orb e.t areas maye affect conprsility at data HOUSING acgu..uatrlsa;1960, 1970, utd 1978 data. A-meag. uSe. af Ficashald (farca ...e.r ba-eeha1di - totl arhaI. end rural Papulacios Pro (earicus ~~~~~A has.sh-Id caniste of a 9reap of individalsabI har livgg quattrn Poyslelon i Tsar 100 -Curret -popaltio proj mcti. sueer haaed .. 1980 sad their maia meals, A hoarder Sr lodger may Sr may not be ilcludad it total papulaIcla. by ;ag AMd send their s.Ctslitpadfrii ae, tehsyhl a tseie ufne Projectlso P prmter far .artalty rates tomprise of thre ees eo- Aseregeswe-beaferaearos - canal urba.. sd coral - A-vergesue.- lug life eapct...cyaIt bIrth istra.sing with ccuatry's per espies i. as e .f.peresa per raa_ Ic~ all urbss sad ura at-piedtaseaia ..sel, sad f_mal life P... ap CanY sthil ietg at 77.5 years. The para- dwellings, r-p-cti-ely. D.allangar-cIsdesan-pmsen stacuessd actternfor fe-tility rate elsa have thtse le-1etemIgdecline in ncuidprs farul ty accr"s ScE t ac lve sd et feetly pla..niag perfrmats Acc.e. ca El-ttrialty (preroet af deellgnas - ,tota, urban,and rural - Elah curyis thea a .iu . n of. t"hese site coba olm f -merrlny Csavetisa..l dwellings sit0 e1ectitityt lsa srter aspr . C and fertility trea.ds far p-jectiac pu-pasec. of tetal. urban, end rural d.elliug respectively. Sttanioc..CY cccaleatvn-Isuttaioa..ry .poplatiac there is Sc grwth since cbs bIrth rats in . eulto tha dsath reta, acd glue iha age strc.ture r- EDOCATIO09 asacnsat.Tisi taahieved auly aftc fertility rates dec line to Adjusted Esra1luart Ratian the,elaees evl.atfnt te rpadci rt, -hI...eah ge.eraclc Primers sabsal- tatel, male atd female-lease. teta., mal et d female ofcnsrPlaces itsel ecrtl. The scatiacary papUlatin ales asIalat afal ages at she primar .ee as. pere'tge of r.ap.c tive cenisated on the basis ofth rjatad characteristics of the papa1atics primary schel-ag paaltin nomlyicae hldr- aged 6-11 Is the year 28011, sad the rate of decline at fertility rate ta replace- pages bat adJusted for differeenC lesgthn of primaryeuain far mast Icrel. cauntrlescish usisereal e~~~~~~ducatils earlmat map eace.d 100 Percat Yea stetiS...ry crla eis rea be hd - The year ohms tatiasary papulatian elate sae pl are balro bas he afficie1 achaal age. utas has b...s reahed. Seteedary eabal - tatsl, male end female _Campatedasa b-se;encsdery Pocolatico DO.c.ity Cdct_rqisa ea au er fapee rmr ictutic; per as. ku. - Eid-year papulatian per uq-ar kilam..ter (100 hectarasl of pravidee general, vct Iatl rtahrtesngierti o i tatulaea .s.ally at 12 to 17 years at sam; carrespandence o.Curee are gese-aly Per na. Zt. -geicoltor1 lend - Camped as abase far agric-laurl land eals.drd _Iy