Tanzania - Pyrethrum Project

Document of The World BankFIEC Y FOR OFFICIAL USE ONLY Report No. P-2754-TA REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE UNITED REPUBLIC OF TANZANIA FOR A PYRETHRUM PROJECT March 31, 1980 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency unit = Tanzanian shilling (Tsh.) US$0.12 = Tsh 1.0 US$1.00 = Tsh 8.30 US$1,000 = Tsh 8,300 WEIGHTS AND MEASURES _ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~4 1 meter (m) = 3.28 feet (ft) 1 kilometer (k) = 0.62 miles (mi) 1 sq. meter (m ) = 10.76 sq. ft 1 hectare (ha) = 10,000 m = 2.47 acres 1 kilogram (kg) = 2.204 pounds (lb) 1 metric ton (m ton) = 1,000 kg = 2,204 lb GLOSSARY OF ABBREVIATIONS APO - Assistant Production Officer EDF - European Development Fund GAPEX - General Agricultural Products Export Company GOT - Government of Tanzania ICB - International Competitive Bidding IERR - Internal Economic Rate of Return KILIMO - Ministry of Agriculture MDB - Marketing Development Bureau of Kilimo MOF - Ministry of Finance MOW - Ministry of Works NORAD - Norwegian Agency for Development PMO - Prime M:inister's Office RIMU - Road Improvement and Maintenance Unit TAN-ZAM - Tanzania-Zambia Highway TAZARA - Tanzania-Zambia Railway TECO - Tanganyika Extract Company TIB - Tanzania Investment Bank TPB - Tanganyika Pyrethrum Board UAC - Uyole Agricultural Center GOVERNMENT FISCAL YEAR July 1 - June 30 TPB FINANCIAL YEAR July 1 - June 30  FOR OFFICIAL USE ONLY TANZANIA PYRETHRUM PROJECT CREDIT AND PROJECT SUMMARY BORROWER: United Republic of Tanzania BENEFICIARIES: Tanganyika Pyrethrum Board (TPB) and Uyole Agricultural Center (UAC). AMOUNT: US$10.0 million equivalent TERMS: Standard RELENDING TERMS: US$4.0 million of the proceeds of the credit would be onlent to TPB at an interest rate of 10% per annum repayable in 10 years, including 5 years of grace; US$1.7 million would be channeled to TPB as equity; US$1.4 million would be passed on to UAC as a grant. The exchange risk will be assumed fully by the Borrower. PROJECT DESCRIPTION: The proposed project aims at increasing the production of pyrethrum in the highlands of the Mbeya and Iringa Regions of Southern Tanzania. Therefore, the project would finance (a) a program to increase smallholder pyrethrum produc- tion; (b) a program to strengthen pyrethrum research in Tanzania; (c) the strengthening of TPB's organization and infrastructure; and (d) the improvement and maintenance of district and feeder roads. RISKS: A risk faced by the Project would be a future collapse of pyrethrum export prices as a result of the development of new substitutes. However, current research is aimed mostly towards developing agricultural chemicals which would not compete with pyrethrum. Also the costs of licensing new insecticides protects pyrethrum's market position. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  ESTIMATED COSTS: US$ '000 Local Foreign Total Program to increase and improve pyrethrum production 1,269 1,107 2,376 Program to expand pyrethrum research 590 987 1,577 Strengthening TPB's organization and infrastrtucture 1,376 1,704 3,080 Improvement and maintenance of district and feeder roads 614 1,905 2,519 Total Base Line Costs 3,849 5,703 9,552 Contingencies Physical 479 699 1,178 Price 998 1,447 2,445 Project Costs 5,326 7,849 13,175 TOTAL PROJECT COSTS 4,846 7,849 12,695 (net of Taxes and Duties) FINANCING PLAN: US$ Million Local Foreign Total IDA Credit 2.2 7.8 10.0 Government of Tanzania 2.7 - 2.7 (Net of Taxes and Duties) Total Project Costs 4.9 7.8 12.7 ESTIMATED DISBURSEMENTS: IDA Fiscal Year FY81 FY82 FY83 FY84 FY85 FY86 US$ Million Annual 0.3 2.3 2.4 2.4 1.9 0.7 Cumulative 0.3 2.6 5.0 7.4 9.3 10.0 RATE OF RETURN 17% APPRAISAL REPORT: Report No. 2749b,-TA, dated March 20, 1980  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE UNITED REPUBLIC OF TANZANIA FOR A PYRETHRUM PROJECT 1. I submit the following report and recommendation on a proposed credit to the United Republic of Tanzania of US$10.0 million equivalent on standard terms to help finance a program to increase smallholder pyrethrum production, a program to strengthen pyrethrum research in Tanzania and the Tanganyika Extract Pyrethrum Board's (TPB) organization, and to improve and maintain district and feeder roads. US$4.0 million of the proceeds of the credit would be onlent to TPB under a Subsidiary Loan Agreement which would be on terms and conditions acceptable to the Association including an interest rate of 10% per annum, repayable in 10 years, including 5 years of grace. US$1.7 million of the proceeds of the credit would be channeled by the Tanzanian Government to TPB as equity and US$2.9 million to the Ministry of Works (MOW); US$1.4 million would be passed on to the Uyole Agricultural Center (UAC) as grant. PART I - THE ECONOMY I/ 2. A Basic Economic Mission visited Tanzania in August 1976. The Basic Economic Report was distributed in December 1977 (Report No. 1616-TA). A new Country Economic Memorandum will be issued later in this fiscal year. A summary of social and economic data is in Annex I. Profile of the Economy 3. Tanzania is one of the 30 least developed countries in the world with a per capita income in 1978 of US$230. The economy is still heavily dependent on agriculture: 90% of the labor force is engaged in agriculture and approximately 50% of GDP and about 70% of total exports are derived from agricultural production. The industrial sector is still small, producing about 10% of GDP, approximately the same percentage as 11 years ago. The service sector produces about 40% of GDP. Overall population density is low, though a few areas are considered overpopulated. Population growth is estimated at 3.0% per annum with both fertility and mortality at relatively high levels. 4. Since the Arusha Declaration in 1967 Tanzania has pursued a socialist development strategy. Banking, insurance, and most large-scale enterprises in manufacturing, plantation agriculture, transportation, and wholesale trade are under state control. There is extensive state intervention in economic activity, including import licensing, foreign exchange controls, price control, the reservation of some activities to the state or cooperative sector, and 1/ This section is essentially the same as that of the President's Report on the Tanzania Rural Development Bank Project, dated February 13, 1980.  - 2 - detailed Government investment planning. The second major feature of Tanzania's development strategy is its strong emphasis on rural development and social programs to benefit the poor and reduce inequalities in income distribution. This is reflected in ambitious programs for the provision of rural water supplies and health services and in the decision to achieve universal entry into primary education beginning in 1977. Long Term Economic Trends 5. In the decade 1968-78 real GDP at factor cost grew at an annual average rate of 4.8%, or about 1.8% per annum per capita. While economic growth was severely disrupted by the economic crisis following the failure of rains and large increases in import prices in 1973 and 1974, the economy has recovered well with annual growth at 5 to 6% for 1976 through 1978. During this decade the service sector grew the fastest - 6.3% p.a., followed by the industrial sector - 4.0% p.a. and then agriculture - 2.7% p.a. 6. The Government has a good record of domestic resource mobilization. Between 1967-68 and 1977-78 the share of recurrent revenues rose from 15.1% to 19.3% of GDP. However, most of this increase occurred before 1975-1976. Since then revenue has been increasing at a rate below the GDP growth rate (in 1974/75 revenue was 22% of GDP). This increase was achieved through a combination of highly progressive direct taxes and proportional or moderately progressive indirect taxes. Except during the economic crisis in 1974-75, the rate of national savings has also been high: gross national savings fluctuated at around 16-17% of GNP from the mid-1960s through 1973, fell to half that level during the crisis years and recovered to the pre-crisis level in 1976 and 1977. These are high levels of savings for a country at Tanzania' s income level. 7. Some progress has also been made in achieving the Government's objective of a more equitable income distribution. Between 1969 and 1975 the average urban rural gap remained approximately constant, halting the trend towards an increasing gap in the early 1960s. It is likely that the gap has been slightly reduced since 1976 due to continued recovery of agricultural production and higher producer prices. However, regional income differentials in rural areas have tended to widen slightly. Within the formal urban sector there has been a dramatic narrowing of the post-tax income differential between the highest-paid government officials and minimum wage earners from 50 to 1 in 1961 to 8 to 1 in 1975. However, an informal sector has emerged comprising large numbers of unemployed and underemployed workers with earnings significantly below the official urban minimum wage. The policies of wage restraint and higher producer prices pursued since 1975 should have a bene- ficial impact on almost all dimensions of income distribution, and the basic needs oriented programs in rural water and health and in universal primary education (para. 4 above) are resulting in a significant redirection in public expenditures toward the rural poor. 8. Despite this impressive overall record of development, some pro- blems have begun to manifest themselves in recent years. Exports have failed to keep pace with the growth of the rest of the economy. The overall export index is down almost one-third since 1966. This poor performance in exports  - 3 - is due to the poor growth rate of agricultural cash crops. While agricul- tural output has increased impressively in recent years (by an average of about 7% in the years 1976-78), most of this growth has been in the hard-to- measure subsistence sector, while the monetary sector has lagged well behind. Over the last decade subsistence growth has averaged 5.1% per annum while monetary sector growth has been only 2.3% per annum. This has led to a severe retardation of growth of exports of agricultural products. This failure of export growth has led to increasing dependency on foreign loans and grants to pay for imports. 9. A second problem that is becoming more serious is the deceleration of the growth of government revenues. While still at a high ratio to GDP compared to most other developing countries, government revenues have been growing more slowly than GDP in recent years. At the same time recurrent expenditures have been higher than budgeted. As a result, public sector savings have been well below expectations and the Government has had to rely more upon borrowing (both foreign and local) and external aid for financing development than was planned. Recent Economic Developments 10. During 1975-77 the Government followed a program agreed to at the time of the first Program Loan (No. 1063-TA) in late 1974. This program included redirecting investment to more productive sectors, higher agricul- tural producer prices, constraints on wages and salaries, price and tax increases to restrain consumption and tight control of imports. These poli- cies, aided by the boom in coffee prices, succeeded in keeping government spending under control with low levels of borrowing from the banking system and led to a balance of payments surplus of almost US$150 million in 1977. Food production increased and government stocks of most foodgrains reached record levels. In 1978 the Government was able to ease import restrictions and begin to import the spares and raw materials needed by industry, which had been running below capacity. 11. Unfortunately the price of coffee, Tanzania's major export, began to fall at the same time that imports were liberalized. Also, in October, 1978 war broke out with Uganda and the resulting imports of military equipment and domestic mobilization put an increasing strain on the balance of payments and the domestic budget. Consequently the current account showed a deficit of more than US$450 million in 1978 and the overall balance of payments was almost US$300 million in deficit. As a result, reserves were drawn down and the country was forced to delay payment of about US$60 million in import bills. 12. The situation has deteriorated further in 1979 and the Government's economic policies are facing a major challenge. The overall balance of payments is expected to be almost US$200 million in deficit and as a result arrears are expected to be about US$200 million by the end of the year. At the same time the domestic budget deficit has ballooned. The recurrent budget is expected to show a deficit of almost Tsh. 1 billion for 1978/79 and govern- ment borrowing from the banking system is expected to be more than Tsh. 3 billion, a major component in an almost 35% increase in the money supply.  - 4 - Import licenses have been reduced by almost 40% from the 1978 level in real terms (following a 10% devaluation in January of 1979). The Government has been able to arrange for almost US$75 million in funds from the IMF from its first credit tranche, the Trust Fund and the Export Compensatory Fund, but negotiations for further assistance from the IMF have so far been unsuccessful. The 1979/80 budget calls for a reduction in the level of recurrent expenditure and borrowing from the banking system of Tsh 1.67 billion, but through the first quarter of this fiscal year borrowing was already Tsh 1.4 billion. A major problem is lack of budgetary discipline as spending agencies have been able to exceed their budgetary allocations with the Treasury continuing to honor their checks. The Government urgently needs to develop a comprehensive program to deal with the current crisis, as it did in 1974. The Bank has offered to help the Government in developing such a program. 13. Tanzania continues to attract large amounts of foreign assistance. Because of the very concessional tesrms on which this aid has been given to Tanzania and the Government's reluctance in the past to use higher cost commercial loans and supplier's credits, the overall debt service ratio has historically been low (less than 10%). However, the recent balance of pay- ments crisis has forced the Governmnent to utilize such loans and as a result the debt service ratio is estimated at 12% in 1979 and 15% in 1980. We expect it will remain in the range of 15-20% throughout the 1980's. In 1978 the Bank held 12% of Tanzania's external debt (for the Bank Group, it was 28%) and received 37% of Tanzania's debt service (40% for the Bank Group). We are projecting this debt service share to fall to about 21% in 1980 and to remain around 25% for the coming decade. 14. Tanzania's development will require resources in excess of domestic savings and external capital made available solely to finance the foreign exchange costs of projects. Given the Government's efforts to mobilize domestic resources and in view of our support for its increased emphasis on local cost intensive rural investments, the Bank Group will continue to finance a high proportion of total costs including, in appropriate cases, a portion of local costs. East African Community (EAC) 15. The recent developments in the East African Community were outlined in a report to the Executive Directors dated December 19, 1977 (R77-312). Dr. Victor Umbricht, the independent mediator appointed by the Partner States, has visited East Africa on numerous occasions and has now prepared reports to the Partner States on the results of his fact-finding work on the EAC Corpora- tions and the General Serv-ces, and the methodology adopted in appraising the assets and liabilities. The next phase of the mediator's work will be to make recommendations on the allocation of these assets and liabilities. The mediator's report and recommendations on the future structure of the East African Development Bank (EADB) have been accepted in principle by the Partner States and the revised EADB Charter along with the Treaty to enact the new Charter have been submitted to the three Governments for signature.  - 5 - 16. The de facto breakup of the Community has had some impact on Tanzania's budget as new national entities had to take over the services formerly provided by the EAC Corporations. A major development related to the EAC difficulties was the closure of the border with Kenya. Kenya was a major trading partner of Tanzania and considerable adjustments have had to be made in locating new suppliers for some items and developing alternative outlets for some manufactured goods and agricultural products. PART II - BANK GROUP OPERATIONS IN TANZANIA 1/ 17. Tanzania joined the Bank, IDA and IFC in 1962. Beginning with an IDA credit for education in 1962, 40 IDA credits and 19 Bank loans, of which two on Third Window terms, amounting to US$759.5 million have so far been approved for Tanzania. In addition, Tanzania has been a beneficiary of 10 loans totalling US$244.8 million which have been extended for the development of the common services and development bank operated regionally by Tanzania, Kenya and Uganda through their association in the East African Community. IFC investments in Tanzania, totalling US$4.7 million, were made to the Kilombero Sugar Company in 1960 and 1964. This Company encountered financial difficulties and in 1969, IFC and other investors sold their interest in the Company to the Government. A new IFC investment of US$1.7 million in soap manufacturing in Mbeya was approved by the Executive Directors on June 8, 1978 and an investment of US$1.5 million in metal product manufacturing was approved on May 10, 1979. Annex II contains summary statements of Bank loans, IDA credits and IFC investments to Tanzania and the East African Community organizations and notes on the execution of ongoing projects. 18. To support Tanzania's overall development strategy Bank Group lending operations are increasingly focusing on the rural sector and directly productive projects. Previous Bank Group assistance to the agricultural sector in Tanzania has included IDA credits totalling US$145.2 million and IBRD loans totalling US$37.0 million for fifteen agricultural and three rural development projects. Agricultural projects include one for agricul- tural credit, three each for livestock and tobacco, two for cashewnuts and one each for the production of tea, sugar, maize, fish, forestry products and cotton. Rural Development Projects have been financed in the Kigoma, Tabora and the Mwanza/Shinyanga Regions. Project Performance Audit Reports for the Flue-Cured Tobacco Project and the Smallholder Tea Project have recently been prepared. In both cases, the economic rate of return is satisfactory. However, implementation experience highlighted the weakness of the parastatals involved and the consequent need for considerable investment in institution- building. These lessons have been taken into account in the design of this Project. Furthermore, a number of recent Bank Group supported infrastructure 1/ This section is essentially the same as that of the President's Report on the Tanzania Rural Development Bank Project, dated February 13, 1980.  - 6 - projects have bee.2 cKi-a ly linked with specific productive activities. For example, the Urban Water Supply Project (Loan No. 1354-TA) approved in January 1976, will support the Industrial Complex in Morogoro (Loans No. 1385-T-TA and 1386-TA) and the Morogoro Textile Project (Loan No. 1607-TA and Credit No. 833-TA). Other directly productive projects recently approved are the Mufindi Pulp and Paper ProJect (Loan No. 1650-TA and Credit No. 875-TA) and the Tanganyika Development Finance Company Limited (TDFL) Project (Loan No. 1745-TA). In addition, a Tourism Rehabilitation Project (Credit No. 860-TA), a Sixth Education Project (Credit No. 861-TA) and a Fifth Highway Project (Credit No. 876-TA) were approved by the Executive Directors in FY79. A fourth line of credit to the Tanzania Investment Bank (Loan No. 1750-TA), a credit for the Dar es Salaam Port Engineering Project (Credit No. S-24-TA) and a line of credit to the Tanzania Rural Development Bank (TRDB) have been approved this fiscal year. Projects which have been appraised include a Second Urban Water Supply Project, a Coconut Project, a Tea Processing Project, an Education Project and a Foodgrain Storage and Milling Project. A rural development project in Mara Region, a small scale industries project, an urban project, a harbours project, a railway project, and an agricultural services project are also under preparation. 19. Although the comparatively high undisbursed proportion of loans and credits, detailed in Annex II, is in large part a result of the recent approval of many of these projects, it also reflects the fact that overall project implementation has been slower than was projected. It is clear in retrospect that both the Bank Group and Tanzania have been optimistic re- garding Tanzania's absorptive capacity. The causes of the difficulties in implementation are varied. Some stem from the scarcity of suitably trained and experienced manpower, some reflect the problems in identifying agronomic input packages appropriate to the needs of smallholder farmers while others result from the strains associated with attempting a "frontal attack" on poverty. These problems have been compounded by frequent and drastic ad- ministrative changes, which -- though potentially the source of long-term benefits -- have certainly disrupted orderly execution of projects and made parts of earlier project concepts obsolete. Also, the Uganda war (para. 11) has had some impact on project implementation. In the early stages of the war, there was some diversion of equipment and manpower; however these problems have largely been solved. The problem over the medium term is the financial implications of the war. If general economic problems resulting from the war are not resolved, the availability of adequate local funds could become a major constraint to implementation. In general, difficulties have been most severe in agriculture, particularly in the smallholder rural sector. As our lending program has increasingly concentrated on this sector, these problems have become correspondingly more apparent and severe. By contrast, the "modern" sector projects have tended to fare better: the Tanzania Investment Bank, Mwanza Textile and Morogoro Industrial Estate Projects, for example, are proceeding well. 20. As the Bank Group's lending program has expanded, increasing attention has been given to measures designed to improve project implementa- tion. A course was conducted in Dar es Salaam in 1973 and again in 1978 on  Bank Group procurement with the relevant Government officials. A special project implementation unit was set up in the Ministry of Agriculture and 11 Agricultural Development Services staff have been assigned to Bank Group financed projects in agriculture and rural development. The need to establish a close and continuous working level dialogue between responsible Tanzanian officials and Bank Group staff on implementation problems was one of the prime reasons for the expansion of the Resident Mission to two professionals in October 1976. In February 1977 a regular Government/Bank Group review of project implementation was established. Monthly discussions in Bank Group financed projects chaired by the Ministry of Finance (MOF) and attended by Bank Group staff and officials from implementing agencies deal in detail with individual problem projects and problems which are affecting project implemen- tation across a number of sectors. As a result of these efforts, there has been a noticeable improvement in project implementation. Actions agreed to during the reviews have been completed relatively quickly and coordination and communication between the MOF and the various ministries and agencies res- ponsible for project implementation has improved markedly. 21. The Government has become increasingly conscious of the importance of effective implementation. In addition to fully supporting the project implementation review system, MOF has set up a unit to oversee project per- formance. Furthermore, there have been more consistent responses to Bank suggestions and a willingness to openly discuss project problems raised by Bank staff. As a consequence, the disbursement records of Bank Group financed projects have improved somewhat over the last two years, and a recent analysis indicated that the Tanzanian disbursement performance is about equal to the Bank-wide average. While there is still a potential for further significant improvements, the Government is implementing its investment program, including Bank Group and other foreign aided projects, more effectively than in the past. PART III - THE AGRICULTURAL SECTOR AND PYRETHRUM SUBSECTOR Background 22. Agriculture contributes approximately 50% to the GDP, about half of it from subsisLence production. Agriculture and related activities thus constitute the largest single sector in the Tanzanian economy, and agricul- tural exports account for about 70% of total merchandise exports (see para 3). The major export commodities are coffee, cotton, sisal, tobacco, tea and cashewnuts. Over 90% of the population lives in rural areas and the vast majority is engaged in agriculture. 23. Most agricultural production is from family operated smallholdings. Estate production has diminished in importance and the state farm area remains relatively small. Large-scale agriculture is confined to the production of sisal, coffee, tea, sugar, wheat, rice and livestock products. Tanzania's livestock herd, which is largely traditionally managed, is grazed extensively over the 40% of the country free from tsetse fly.  - 8 - 24. The recent performance of the agricultural sector has been somewhat sluggish. Over the period 1967-77, the average annual rate of growth of agri- cultural production was about 2.7%, less than the estimated population growth. The effects of this slow growth were exacerbated in 1973 and 1974 by a severe drought, which necessitated large foodgrain imports. Since 1976, agricul- tural production has increased in real terms at an average annual rate of 7%. However, cash crop production has remained stagnant and despite increased food-crop production, rising demand has resulted in a continued requirement for imports of maize, rice and wheat. 25. The Government of Tanzania has undertaken a comprehensive program to support the development of the agricultural sector in conjunction with efforts to achieve balanced regional growth and more equitable income distri- bution. Within these objectives, the Government is paying particular atten- tion to achieving self-sufficiency in food production. The proposed project fits well into this strategy, since, although pyrethrum generates only about 1% of current foreign exchange earnings, there is substantial potential for expanded output and earnings. 26. A major thrust in the Government's program for agricultural and rural development is the grouping of the country's rural populace into villages, villagization, in order to facilitate the provision of infrastruc- ture and services and to encourage self-reliance and a community approach to rural development. There are now about 7,700 registered villages, containing over three-quarters of Tanzania's rural population. The registered village is intended to be the country's primnary social, economic and political unit, with economic infrastructure owned by the village, economic services coordi- nated at village level and basic social services provided to each village. Early experience with villagization has been mixed, but it is too early to judge how effectively villages will be able to meet their ambitious goals. Agricultural Services 27. Agricultural research is undertaken by a variety of Government agencies, under the overall coordination of the Ministry of Agriculture (Kilimo). However, research priorities have not always been firmly estab- lished, research resources have not been allocated in accordance with develop- ment priorities and field testing has to be increased to improve the farming system in Tanzania's various agro-economic zones. Agricultural Extension services are provided by staff of the regional administrations and by staff of some cash-crop parastatals. Training of the extension staff is being provided by Kilimo. Field staff are under-trained, inadequately supervised and given limited managerial and logistical support. The situation has worsened in 1978 by the appointment of many of the better-trained extension staff as village managers. Their responsibility compared to the village management technicians' and to the extension staff's has not been fully clarified. Government agencies hold varying views on how extension should be organized in the future and these differences must be resolved if the exten- sion services are to be improved. Credit for the rural sector is provided  - 9 - by the National Bank of Commerce (NBC), which is the sole source of short- term credit for marketing parastatals' produce, and by the Tanzania Rural Development Bank (TRDB), which provides short-, medium- and long-term credit to villages and farmers. The Association recently approved a project to strengthen TRDB's operations (para. 18). Rural Transport Services are inade- quate for the effi-cient movement of crops and inputs. Only 10% of the road network provides allweather service, the remainder are often impassable in the rainy season. Rural roads are in especially poor condition. In addition, the trucking fleet has been inadequate to service rural needs. The Government of Tanzania's actions to address these problems are directed mainly at the public sector; they include increased support for regional road constructior/ maintenance capacity and an IDA-assisted project to develop the public trucking industry (Credit No. 743-TA). Marketing and Pricing 28. Parastatal organizations for major crops and livestock are respons- ible for the marketing and processing activities. Since the Arusha Declara- tion the Government of Tanzania has progressively enlarged the role and scope of these institutions, placing severe strains on their physical and managerial resources. As a result, the marketing system suffers from lack of competition, high costs and poor services. The Government is aware of these problems and is beginning to develop programs to address them. The Bank Group is assisting in this process through its analysis of and support for parastatals involved in agriculture projects. 29. The control of producer and wholesale prices of all principal agricul- tural crops (except vegetables, fruit, fish and eggs) is an important tool of Government policy. The responsibility for the formulation of pricing recommend- ations rests with Kilimo; the Market Development Bureau (NDB) in Kilimo carries out annual price reviews for major crops, taking into account produc- tion costs, the need for incentives to producers, the financial position of parastatals and inter-regional equity. MDB is currently being financed by IDA, under the National Maize Project (Credit No. 606-TA) and would receive further IDA funds and long-term technical assistance under the proposed Grain Storage and Milling Project. Pyrethrum Production and Yields 30. The pyrethrum plant is a small perennial growing to some 60 cm in height. Its dried flowers yield an extract, the active ingredients of which (pyrethrins) have excellent insecticidal properties with no adverse environ- mental side effects. It has a wider spectrum of activity than many other insecticides and is effective against all common household insects. Despite its long use (about 150 years) pyrethrum does not seem to have caused the development of any significant degree of immunity in treated insect popula- tions. Its sensitivity to sunlight makes pyrethrum unsuitable for agricul- tural field use. However, because of its low mammalian toxicity it is used primarily in food-related industries, homes and public buildings, and in animal shelters, usually as a liquid spray or in aerosols. It is also used in  - 10 - the form of creams and ointments, mosquito coils and sticks. The residue after extraction (pyrethrum marc) also has a commercial value as a cattle feed Ingredient. 31. An analysis of the future demand for pyrethrum must take into account the developrmient of syrnthetic substitutes (pyrethroids) derived from petrochemicalss However, while they have similar properties, no single pyrethroid can tully mat