Haiti - Industrial Credit Project

Document of COPY The World Bank FILE COPY FOR OFFICIAL USE ONLY Report No. P-2948-HA REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF HAITI FOR AN INDUSTRIAL CREDIT PROJECT March 25, 1981 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: Gourde (G) US$1: G5 Gl: US$0.20 Gl,000,000: US$200,000 (The Gourde has, since 1919, been pegged to the U.S. dollar at the rate of G5 5 US$1) ABBREVIATIONS BNC Banque Nationale du Credit (National Credit Bank) BNRH Banque Nationale de la Republique d'Haiti (National Bank of the Republic of Haiti) BPH Banque Populaire Haitienne (Popular Bank of Haiti) BRH Banque de la Republique d'Haiti (Bank of the Republic of Haiti - successor to BNRH as the Central Bank) CEGES Centre de Formation aux Affaires et a la Gestion (Business and Management Training Center) FDI Fonds de Developpement Industriel (Industrial Development Fund) IDAI Institut de Developpement Agricole et Industriel (Agricultural and Industrial Development Institute) IDB Inter-American Development Bank ILO International Labor Organization IMF International Monetary Fund INAGHEI Institut National d'Administration, de Gestion et des Hautes Etudes Internationales (National Institute for Public Administration, Management and Higher International Studies) INFP Institut National de Formation Professionelle (National Vocational Training Institute) OFATMA Office d'Assurances des Accidents du Travail, Maladie et Maternite (Insurance Office for Labor Accidents, Illness and Maternity) ONA Office National de l'Artisanat (National Handicrafts Office) ONAPI Office National de Promotion Industrielle (National Office for the Promotion of Industry) PPF Project Preparation Facility SEN Societe d'Equipement Nationale (National Equipment Company, a subsidiary of IDAI) UNDP United Nations Development Program USAID United States Agency for International Development FISCAL YEAR October 1 to September 30  HAITI FOR OFFICIAL USE ONLY INDUSTRIAL CREDIT PRO.JECT CREDIT AND PH))JlCT SJ44AiY dorrower: Republic of Haiti. Amount: SDR 5,700,000. Beneficiary: Bank of the Republic of Haiti (BRH). Terms: Standard. Project Description: The project would support the industrial development of Haiti by making medium- and long-term credit available to the industrial sector through FDI established within BRH to provide a rediscounting and guaranLee mechanism for participating financial intermediaries. The project also includes a technical assistance component to help develop medium- and small-scale industry and to assist the insti- tutional development of BRH, FDI and the Office of Indus- trial Promotion (ONAPI). Through the provision of medium- and long-term funds and technical assistance, the project would help expand the industrial sector and contribute to improving its efficiency. The project would directly create about 2,000 jobs, and, through its built-in incentives, stimulate the financing of small- and medium-scale industry, which, thus far, has had no access to medium- and long-term credit. Project risks are relatively high, given the pilot nature of the rediscounting and guarantee mechanism and the difficulties inherent in setting up a new institution to carry it out. Moreover, local financial institutions have no experience with such a scheme, nor does the Central Bank have much experience in supervising operations of the banking sector. These risks are mitigated by ensuring that FDI has a competent management, assisted by consultants; by the provision of technical assistance to BRH to help it improve its supervision function and to ONAPI to help its institutional development and its ability to assist medium- and small scale industries. 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 - Project Cost and Financing Plan: Local Foreign Total -----(US$ Million)----- Government 1.0 1.0 IDA Credit Component 6.0 6.0 Technical Assistance 1.0 1.0 Financial Intermediaries and Beneficiaries 3.0 3.0 Totals 4.0 7.0 11.0 Disbursements: IDA Fiscal Years (US$ Million) 1982 1983 1984 1985 Annual 1.3 2.3 2.0 1.4 Cumulative 1.3 3.6 5.6 7.0 Staff Appraisal Report: Report No. 3218-HA, dated January 30, 1981.  INTFRNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOM!ENDATION OF THE PRESIDENT OF IDA TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF HAITI FOR AN INDUSTRIAL CREDIT PROJECT l. 1 submit the following report and recommendation on a proposed development credit of SDR 5,700,000 (US.7 million equivalent), on standard IDA terms, to the Republic of Haiti, to hflIn finance an industrial credit project. The proceeds of the credit would be made available by the Republic of Haiti to the BanK of the Republic of Haiti for use by its Industrial Development Fund in rediscount operations with participating public and commercial banks. PART I - THE ECONOMY 1/ 2. The last economic report on Haiti, distributed to the Executive Directors on March 9, 1981, was Report No. 3079-HA, dated February 17, 1981, and entitled "Economic Memorandum: Recent Economic, Industrial and Sector Developments." Its main findings are summarized below. Relevant social and economic data are presented in Annex I. 3. Haiti is the poorest country in the Western Hemisphere. GNP per capita in 1979 stood at US$260. Data for 1976 indicated that almost 75 percent of the population lived under conditions of absolute poverty. An infant mortality rate of about 150 per thousand live births, an average life expectancy of 51 years, low nutrition and sanitation standards (malntutri- tion and gastroenteric diseases account for over half of the deaths in the country) and an adult illiteracy rate of about 80 percent illustrate the depressed living standards of the population. Though accurate information does not exist, underemployment is widespread, particularly in the agricul- tural and informal sectors. 4. The Haitian economy was characterized during the 1970s by modest growth subject to cyclical fluctuations. The average annual growth rate was 3.8 percent or 2.1 percent per capita during the 1970-79 period. Gross domestic product (GDP) Rrowth has fluctuated from 1.3 Dercent in 1977 to 5.3 percent in 1978 and to 1.7 percent in 1979. These results were strongly influenced bv the Derformance of agriculture. Manufacturing and construction show a more even performance. 5. Agriculture provides employment for about 73 percent of the popula- tion. It accounted for about 40 percent of GDP growth between 1970 and 1979. The sector is characterized by erratic behavior, extremely low productivity and heavy dependence on climatic conditions. Its weak performance is reflected in rapidly increasing food imports and declining agricultural export volume. Between 1970-71 and 1978-79, the share of food imports in total imports increased from 11 Percent to 18 percent, while agricultural exports decreased by 1.3 Percent annually, in real terms. Recognizing that sustained economic 1/ Peprixted substantially from PRNo.1933-LA of February 18, 1981 for a Post Hurricane Agricultural Rehabilitation Project in Haiti. All references to fiscal years are to Haitian fiscal years ending September 30.  - 2 - growth and a broadening of its benefits requires measures to improve agricul- tural productivity, the Government has recently initiated programs to introduce improved grain varieties, rehabilitate coffee plantations, restore the major irrigation system and develop agro-industries. 6. Since 1970, manufacturing industries, construction and public utilities have emerged as the most consistently dynamic activities with annual average growth rates of 6.6 percent, 13.9 percent and 9.0 percent, respectively. Their combined share in real GDP represented 21 percent in 1979 (in constant prices), but, desDite their strong growth dynamics, their combined contribution to GDP growth during the nine-year period did not exceed one-half of the GDP increm-n'-. The manufacturing sector owes much of its expansionary drive to the export processing industries and to a rapid increase in output of construc- tion materials. Growth of locally manufactured products for the domestic market was necessarily limited by the thinness of this market, explainable by the early stage of development of Haiti. 7. Starting from very low levels, public investment has increased rapidly since 1970, at an average annual rate of 23.4 percent in real terms, and its sectoral composition has undergone significant changes. While during the first Five-Year Plan (1971-76), only about 11 percent of total government development expenditures was for agriculture, the latter's share in the second Five-Year Plan (1977-81), on the basis of projects alreadv approved, is estimated at about 24 percent. Other areas of high priority are transport, education, and health, especially geared to rural areas. The overall orienta- tion of the 1977-81 development program also reflects the Government's objec- tive to decentralize economic activity in favor of rural areas and provincial towns. Their share in total development expenditures is likely to increase from about 50 percent in the recent past, to about 70 percent during the second Five-Year Plan period. However, the Government's decision to carry out three major investment projects outside the Five-Year Plan, will displace or delay planned investments and could substantially alter the expected pattern of outlays 8. Institutional strengthening is among the second Five-Year Plan's highest priorities, and technical assistance for proj-ct preparation and implementation has been considerably increased. A Joint Commission for the Implementation of External Cooperation Programs was established in 1975 to consider the country's economic situation and external technical and financial assistance programs. The Commission, for which the Organization of American States (OAS) provides the secretariat, is composed of senior government officials and of representatives of the multilateral and bilateral aid agencies active in Haiti. The Caribbean Group for Cooperation in Economic Development, under the chairmanship of the World Bank, is another forum for policy dialogue with the Haitian authorities. 9. The mobilization of domestic resources for development expenditures is hampered by institutional weaknesses in the banking sector and in public finance. During the 1977-79 period, gross national savings (GNS) amounted to 2.9 percent of gross national product (GNP), down from 5.5 percent in FY75. As the public sector provides a sizeable share of total savings, success in raising national savings would depend, to a considerable degree, on efforts  to improve public finance management. In line with the recommendations of the Bank and other donor agencies, a major reorganization of fiscal management, currently taking place with IMF assistance, should help strengthen such efforts. Inflation was not particularly high in the recent past, but its rate is increasing pari-passu with world inflation, rising from 9.4 percent in 1979 to around 12 percent in 1980. An expected lower supply of food in 1981 will probably increase the consumer price index by 20 percent. 10. Most public revenues have been integrated into the budget; the Treasury now centralizes all current expenditures and a significant share of capital expenditures; tax collection is being consolidated and para- fiscal functions have been removed from the Regie du Tabac; sound accounting procedures are being established in all public institutions; customs duties have been consolidated and their average rate raised; new taxes have been imposed on the lottery and on international communications and the income tax law was amended to improve equity and elasticity of income taxation. 11. Notwithstanding a very strong performance of coffee export tax revenues, the public sector deficit increased significantly from 3.4 percent of GDP in FY79 to around 4.7 percent in FY80. As a result, the Government could not reach agreement with the IMF on the program related to the remainder of the 1979-81 Extended Fund Facility (EFF) until March-April 1980, and this agreement was substantially revised in December 1980 in the light of the impact of Hurricane Allen. The situation will require both additional revenue measures and tight control of expenditures. FY81 will be a difficult period for Haiti inasmuch as the coffee crop will be a poor one, world coffee prices have dropped and bauxite export revenues will also decline. 12. Despite the slowdown in national savings, gross investment has accelerated, reaching 14.9 percent of GNP in 1977-79. This growth in invest- ment was entirely attributable to the public sector, whose share of total investment has increased to two-thirds. The gap between national investment and savings, therefore, averaged 12 percent of GNP between 1977-79, compared to 8.4 percent in 1975 and 4.1 percent in 1970. The most important contributions to filling this resource gap, have come from government borrowing from inter- national and bilateral aid agencies (40 percent), grants-in-aid (35 percent), and private transfers and direct foreign :nvestment (25 percent). The public sector depends almost exclusively on foreign sources for the financing of its deficit. These inflows permitted prior to 1980 an increase in foreign reserve holdings despite a net outflow of short--erm funds. 13. Gross international reserves fell from a level equal to two months of imports of goods and net factor services (NFS) in 1977-79, to a level of one month of goods and NFS by September 1980, as a result of a sharp expansion of Central Bank credit to the public sector and of government investment in several industrial projects in 1980. Private transfers continue growing as the number of Haitians working abroad increases. Private direct investment has also been rapidly rising with political stability, fiscal incentives, and cheap labor as the main factors. It is expected to continue to rise. In 1979, new private foreign investment was almost five times higher than in 1975 (in nominal terms).  14. The high proportion of grants and concessionary loans has helped in maintaining the debt-service ratio at an estimated 4.2 percent for 1979. The rising level of private foreign investment and of suppliers' credits, however, will bring with it larger factor payments in the form of dividend repatriation and interest payments. Net factor payments have doubled in 1979 over 1976 and the ratio of public debt amortization, plus net factor payments (including private non-guaranteed debt) to exports of goods and non-factor services, is 11.6 percent. 15. A necessary continuation -- at a somewhat quicker pace than in the past -- of Haiti's economic development will require a further increase in the use of foreign savings, given the extremely low domestic saving capacity. This would require external financing of a high proportion of the cost of development projects, including local cost when the latter constitute a major share of total cost. Furthermore, in view of the country's poverty, Haiti will continue to require external assistance on concessionary terms for some time to come, if it is to achieve a significant improvement in the standard of living of its population. An important factor in determining the availability of this assistance will be the effective implementation of the fiscal reform, and, in particular, the control of expenditures, including those of a capital nature. This aspect will be closely monitored by the Association. PART II - BANK GROUP OPERATIONS IN HAITI 1/ 16. Since 1974, IDA has financed nine projects in Haiti. Two credits for highway projects were made in 1974 and 1975. In 1976, a credit was made for an education project and, in 1977, credits were made for power and rural development projects. In 1978, credits were made for a transportation project (secondary roads and a pilot port component); for a second education project and for a water supply project in provincial towns. In 1979, a credit for a second power project was approved. In 1981, credits were approved for a post-hurricane agricultural rehabilitation project in the Southern Peninsula and for a port development project. The total of credits outstanding is US$110 million, of which US$37.4 million were undisbursed as of February 28, 1981. Annex II contains a summary statement of Bank Group operations in Haiti as of February 28, 1981, and notes on the execution of ongoing projects. IFC has not made any investments in Haiti but is now considering two projects, one in agro-business and the other for a housing bank. 17. Various multilateral and bilateral development agencies are active in Haiti. IDB has made loans for rural development, transportation, industrial credit, rural education, water supply, development of the Port-au-Prince harbor and urban drainage in Port-au-Prince, and has under active consideration projects for agricultural and industrial credit, rural development and refores- tation. In addition, projects are being prepared for secondary road construc- tion and water supply. USAID is providing assistance for integrated rural 1/ Reprinted, with minor changes, from President's Report No. 2933-HA on an Agricultural Rehabilitation Project in the Southern Peninsula.  - 5 - development projects, community development, malaria eradication, maternal- child health and family planning, modernization of coffee production and marketing, construction of feeder roads and for highway maintenance. In addition, USAID is considering a program of assistance under Title III of PL480 to help strengthen the staff and improve the efficiency of key ministries. The Canadian International Development Agency (CIDA) is supporting a rural development project in the Southern Pe- nsula and a power project in Port-au- Prince in connection with IDA's Second Power Project, and is assisting agricul- tural atud .echnical education and the construction of schonl facilities. CIDA has also completed a study of Haiti's water resource potential for both irri- gation and for power generation. France is financing seed production, educa- tional planning and research, road construction and equipment for provincial airports. The Federal Republic of Germany is providing technical and financial assistance for a regional development project in the Gonaives Plain, power facilities for Cap Haitien and the Drouet and Gonaives-St. Marc areas, and, together with France, is providing technical assistance for the execution of the IDA-assisted rural development project in the Northern Plain. 18. Recent and prospective IDA operations in Haiti take into account the ongoing and planned roles of other official lending agencies. In line with the Government's Five-Year Economic and Social Development Plan (1977-81) and with Haiti's development priorities, current and planned IDA operations are meant to support the improvement and expansion of basic infrastructure in transportation, power, sites and services and marketing of produce; to expand educational opportunities and upgrade technical skills, to promote development in both rural areas and provincial towns, and to create new employment opportunities in the directly productive sectors. All proposed operations would include substantial institution building components. 19. A third education project is being prepared for appraisal in June 1981. A sixth highway project, to be appraised in April, would include a bridge rehabilitation component being prepared under the ongoing Sixth Transport Project. A third power project has been identified and is in early stages of preparation. The ongoing Rural Development Project provides for the preparation of another project which would extend the scope of the Regional Development Agency's programs to additional areas of the Northern Department. A pilot fuelwood project is also under preparation; it would address the severe soil erosion problem and the need to rationalize fuelwood production. An urban project, being prepared with assistance from the Project Preparation Facility, is expected to help the poorer segment of the population through upgrading of a produce market in Port-au-Prince and sites and services assistance in one or two provincial towns. 20. The Bank Group's share in Haiti's external debt disbursed and out- standing came to 28.5 percent as of October 1, 1979. The Bank Group's share of external public debt service was about 3.8 percent. While its share of out- standing public external debt is expected to increase to about 29.8 percent in 1980, its share of external debt service would rise to about 4 percent.  -6- PART III - THE MANUFACTUJRING AND FINANCIAL SECTORS The Manufacturing Sector - Structure and Growth 21. According to official statistics, manufacturing growth accelerated from an average real rate of 0.6 percent p.a. during the 1950s and the 1960s to almost 7 percent during 1970-79, considerably above the average for the whole economy. It is estimated that, in fact, industrial growth was around 14 percent during the 1970s, if one takes into account the fact that import-substituting industries established in the 1960s and the export processing industries of the 1970s are not included in the official estimates. Major industries contributing to growth in the import-substituting group were cement, wheat products, flour, clothing and shoes, beer and sugar refining, and in the assembly export group, electronics, clothing, toys and sporting goods. Haiti's manufacturing sector, nevertheless, provided only 13 percent of GDP in 1979 (excluding industries not included in official estimates) and is still dominated by traditional activities. Food, beverages, textiles, clothing, leather, and footwear represented almost 57 percent of value added in manufacturing in 1976. Other subsectors renresenting smaller shares of value added were machinery and equipment (10 percent), construction materials (5 percent), tobacco (4 per- cent) and essential oils (3 percent). Wood products and furniture, paper and printing, metal products and other activities represented the remaining 21 percent of the total value added in that year. This sectoral structure is typical for a country still at an incipient stage of industrialization. Manufactured Exports 22. Net manufactured exports experienced a remarkable increase of 12 percent p.a. in 1970 prices during 1970-77, from only US$11 million in 1970 to more than US$54 million in 1977. Export processing industries, which in 1977 accounted for 42.3 percent of net manufactured exports, are concentrated in clothing (52 Percent), electronic components (26 percent) and sporting articles (16 percent). With $2,800 average direct investment per job, export processing industries are labor intensive and have, since 1971, created some 18,000 jobs as opposed to 2,000 new jobs in modern industries producing for the local market. Manufactured exports are directed mainly to the U.S. market but have been lately constrained by import quota restrictions on garments. Their growth, as that of industry in general, has also been hampered by inade- quate infrastructure. Future development of export processing industries will depend, among other things, on tapping new markets and diversifying exported products. Emplovment 23. Haiti has an estimated unemployment rate of 15 percent, which is further aggravated bv widespread disguised unemployment. Only 8 percent of the total labor force is absorbed in industry. Manufacturing sector employment increased at 3 percent p.a. between 1971 and 1977, while the urban labor force, swelled bv rural emigration, experienced increases of 4 percent p.a., well above the growth of the total active population. This situation emphasizes the need for regional and infrastructure development and, in particular, the need to create jobs in the industrial sector, and to improve agricultural productivitv.  -7- Industrial Policy 24. The Government's industrial policy, although not clearly defined, has been implemented through a system of incentives favoring employment creation, export growth, and spatial decentralization. In addition, the Government is supporting the development of technical assistance services for the manufacturing sector. The Government is currently preparing an industrial policy for the Third Development Plan (FY82-86) based on the promotion of employment creating industry. The investment code, currently under revision, consists of five decree laws issued between 1960 and 1977. Differentiated fiscal incentives are granted to: (a) enterprises manufactturing goods not being produced in Haiti; (b) those creating industrial linkages; (c) labor intensive, export oriented enterprises using local raw materials; (d) and those located outside of Port-au-Prince. Income tax holidays are granted to eligible enterprises for periods ranging between five year; (for pioneer industries) to 15 years (for enterprises located outside of Port-au-Prince). There is a need to revise the incentive system which protects privileged firms from entry of new competition and grants fiscal incentives to firms exporting their total production as opposed to those producing for both local and export markets. Also, traditional products such as crafts, which could contribute to employment creation, need to be encouraged. 25. Traditionally the Government has left the industrial sector to private enterorise, although it recently embarked on a more active role in industry with a view to expanding employment opportunities and widening the industrial base. It decided to purchase a new sugar mill and to participate in a fishing fleet venture and in a vegetable oil plant. These projects, which were not included in Haiti's Five-Year Plan or in its investment budget, were financed under relatively hard terms. Moreover, their economic justifi- cation is not clear. The Government is also considering investments in a second sugar mill, a cement plant and a textile plant: it is not yet clear what the Government's decision will be regarding these projects. Feasibility studies are being carried out on the cement and textile projects. As part of its effort to assist the private industrial sector, the Government established a new agency in March 1979, known as Office National de Promotion Industrielle (National Office for the Promotion of Industry - ONAPI), to expand the market for Haiti's industrial products; promote new investments, and assist in developing the industrial sector. Prospects for Industrial Growth 26. Development of the industrial sector in Haiti is limited by several factors, in particular by a small domestic market characterized by the low purchasing power of the majority of Haitians and a thin industrial base, which is incapable of creating a reasonable level of demand for intermediate goods. Haitian exports have henefitted from U.S. Customs regulations which permit duty-free entry of goods assembled overseas, provided the value of U.S. components is no less than 60 percent of the total value of such goods. On the other hand, growth in exports has slowed down in some subsectors, particularly textiles and garments, because of the U.S. quota system. Unreliable raw materials' supply combined with their low quality hamper interindustry linkages and backward integration, and reduce the quality of finished goods. There are also severe shortages of craftsmen, technical  - 8 - personnel and managerial and entrepreneurial talent. Poor road conditions and communications systems, serious power shortages, and inadequate water supply outside of Port-au-Prince, have contributed to the concentration of industry in the Port-au-Prince metropolitan area. Moreover, availability and access to credit are major problems confronting new and smaller enterprises in Haiti. Finally, the weak institutional framework has also inhibited further growth of the industrial sector. 27. Prospects for industrial growth depend upon the development of labor-intensive export industries, which require the identification and development of new markets. It is also necessary to promote the growth and rationalization of the agricultural sector to increase the supply and quality of domestic inputs for industry. The incentive system needs to be revised, mainly by establishing progressive incentives on the basis of employment creation and domestic value added. In addition, administrative bottlenecks which hamper industrial investment should be removed. While in the long run the development of the economy, particularly of the industrial sector, will be determined by a number of factors, including physical infrastructure which needs to be improved, in the short term industrial parks and access to term financing may alleviate some of these short-comings. In addition, some trained manpower for industry is being provided from a number of sources, including vocational and technical facilities under IDA's Second Education Project (Cr. 770-HA of March 1978). A national program of industrial parks, based on regional plans and future improvements in infrastructure, needs further consideration. The proposed project would assist the Government in reducing credit constraints by making available term financing for the indus- trial sector and developing an efficient credit scheme. It would also strengthen and provide technical assistance services, particularly to help small and medium enterprises in project preparation and to improve their operations, and would serve to intensify the dialogue between the Government and IDA, regarding industrial and financial policies. The Financial Sector: Institutional Framework 28. The monetary and financial policies of Haiti are established by the Ministry of Finance and Economic Affairs after consultation with the Banque de la Republique d'Haiti (BRH). A law of June 26, 1980, gives the Ministrv of Finance and Economic Affairs authority over the financial system, including direct control of BRH and financial institutions. BRH influences monetary and credit policies mainly through interest rate management. The effectiveness of these policies is limited by the dual currency (dollar! gourde) system and the small size and openness of the Haitian economy. Capital moves freely in and out of Haiti under a fixed exchange rate of five gourdes per U.S. dollar, a rate which has not changed since 1919. 29. Until September 11, 1979, BRH operated both as a Central Bank and a commercial bank, as Banque Nationale de la Republique d' Haiti (BNRH). At that time, the Government assigned commercial banking operations to the newly established Banque Nationale du Credit (BNC). In addition to BRH and BNC, there are nine banking institutions (eight private and one public), and one government-owned development finance company (IDAI). There are also about 32 agencies of private insurance companies (mostly foreign), four government- owned pension funds, aDproximately 50 active "caisses populaires" (savings  - 9 - loans associations) and one agricultural finance Bureau within the Department of Agriculture, Natural Resources and Rural Development. A proposed private development finance company is still in the planning stage, mainly because it lacks government support. Four foreiRn banks dominate the commercial banking sector with 86 Percent of private bank assets. Domestic banks are relatively weak institutions. Commercial banks provide primarily import-export financi.-, with about 94 percent of their total loan portfolio concentrated in short-term operations. Term loans are usually ciose to one-year maturity or are callable on demzid, and therefore are basically of a short-term nature. 30. Of the two government-owned commercial banks, BNC is the larger, although exact portfolio data are not available as its assets have not yet been fully separated from those of BRH. The other public bank, Banque Populaire Haitienne (BPH) is in rinancial difficulties and operates almost as BNC's subsidiary. IDAI, a g'ivernment-owned entity established in 1961, is the only development finance company in Haiti. It is primarily involved through its subsidiary, Societe d'Equipement National (SEN), in equity investments which represent 58 percent of its assets. Monetary Policies and Operations 31. BRH periodically reviews the minimum and maximum interest rates allowed for financial institutions (currently lending rates range between 14-18 percent) to keep them in line with interest rates abroad. Savings accounts earn 6 percent p.a. and time deposits under one year earn 10-12 percent D.a. Interest rates for time deposits above one year vary between 11 percent and 14 percent p.a. for deposits up to USSlOO,OOO, and 12-18 percent p.a. for those above. Given these rates and the reserve require- ments (currently 34 percent on demand and savings deposits; 10 percent on term deposits above one year and 20 percent below one year), it is estimated that the average spread of private bank operations is around 4 nercent p.a. In the opinion of local bankers, operations Droviding an interest spread of at least 2 percent p.a. are attractive. These reasonable spreads are the result of BRH's interest rate policies that, since 1979, allow and promote competition. During 1975-1979, inflation averaged around 10.6 percent p.a. rising to around 12 percent in 1980. Despite these levels of inflation, current lending rates provide for positive real interest of up to 6 percent p.a. Given the expected increase in inflation in 1981 over the 15 percent level, mainly due to hurri- cane related shortages in foodstuffs, real rates of interest could decline. Based on BRH's policies, however, it is expected that nominal interest rates would be adiusted to reflect market conditions. 32. A new Banking Law, of November 17, 1980, sets out the general regulations governing financial institutions. Detailed regulations will be issued by BRH regarding the term structure of banks' lending operations. In the past, reserve requirements have seldom changed and were not used to affect the volume of credit. Capital requirements under the new Banking Law tend to favor foreign banks, particularly those already established in the country. Application of the Banking Law may be hampered by the limited experience of BRH's Supervision Department and by limitations, under the Law, regarding the provision of specific information on bank operations.  - 10 - 33. The level of real savings in Haiti is low. The public sector generates little savinas as growth of current revenues is still limited by obsolete income tax and import duty legislation (which is being revised), and by fluctuations in coffee export taxes. A small, high income grouD has not made its savings available to the financial sector because, until late 1979, interest rates, which had not changed since 1974, did not encouragefinancial savings. However, recent developments giving BRH greater flexibility in adjusting interest rates are expected to encourage the growth of the financial sector. 34. BRH, BNC, IDAI and BPH constitute the major sources of domestic lending in Haiti. In 1979, these institutions accounted for 59 percent of the total claims on the financial system while the remaining 41 percent was in the hands of the private banking sector. Government-owned financial entities, with 98 percent of total claims on the public sector, are the major sources of funds for public enterprises which in 1979 held 43.4 percent of total liabili- ties of the financial system. Private banks also provide significant financial resources through reserve requirements to monetary authorities. On the other hand, private banks with 71 percent of claims on the private sector in 1979, are the major source of funds for private enterprises. Nevertheless, the participation of public banking institutions, mainly BNC, in private credit financing is significant, around 29 percent in 1979. Because commercial credit is almost entirely short-term, it has been difficult to quantify the demand for medium- and long-term credit. The Government, however, together with the banking and industrial sectors, is satisfied that there is a substan- tial demand for such credit. This was also confirmed by soundings made with the private sector during appraisal of the project and by a USAID-financed report on the potential for a private development finance company. Issues and Outlook 35. Monetary authorities have since 1979 followed a policy of managing interest rates in line with market conditions, promoting competition among banks and helping to sustain a mininum level of savings. Nevertheless, there is a need for foreign resources to finance economic growth, particularly in the industrial sector. Medium and long-term resources are scarce while short-term lending is provided mainly to prime borrowers. To continue fostering the growth of the small financial markets BRH should continue its policy of main- taining interest rates close to international market rates. Standard regula- tions governing guarantees (i.e. collaterals and mortgages) should be developed. It is expected that the proposed proiect would encourage financial intermedia- ries to provide term lending to productive and efficient projects of the Drivate sector. Moreover, the proposed project would contribute to strengthen- ing BRH staff's capabilities, in particular those of its Supervision Department. PART IV - THE PROJECT 36. The project was identified in 1979 and was prepared by BRH, with assistance of Bank staff and consultants financed under a Project Preparation Facility (PPF) advance of US$375,000. It was appraised in July/August, 1980. A Staff Appraisal Report (No. 3218-HA) entitled "Haiti Industrial Credit Proiect" is being distributed separately. Annex III contains a supplementary  - 11 - Project Data sheet. Negotiations for the proposed credit took place in Washington, D. C. from February 11 through February 20, 1981. The Haitian delegation was led by H.E. Mr. Serge Charles, Ambassador of Haiti to the United States. Project Objectives 37. The primary objective of the proposed project, 'IDA's first involve- ment in the Haitian industrial sector, is to support the Government's policy of promoting industrial development through financing the private industrial sector, particularly small and medium industrial enterprises. The project would assist the Government in establishing a special fund in BRH to provide term loans through financial intermediaries and guarantees for smaller loans on an optional basis. The project would also provide technical assistance to BRH to strengthen its supervision capabilities and to hel?) in developing technical assistance programs for small and medium scale ~nterprises. In particular, the project would provide technical assistance to ONAPI to strengthen its capabilities in providing specialized services and to develop technical assistance programs to small and medium enterprises. Institutional Structure 38. A special fund, Fonds de Developpement Industriel (FDI), has been established in BRH to provide medium- and long-term financing for private industrial Haitian-owned enterprises. A two-tier credit system would be established comprising BRH, through FDI, as a second-tier institution, and a network of participating financial intermediaries, qualified by BRH. FDI has an indefinite duration, separate staff and non-transferrable permanent resources allocated to it by the Government through BRH. FDI is subject to examination by the internal comptroller of BRH and it will be audited annually by indepen- dent external auditors acceptable to IDA. FDI's lending activities will be conducted pursuant to a Statement of Policy which is satisfactory to the Association and which has been approved by the Board of Directors of BRH. The Statement of Policy also includes basic procedures to be followed by FDI's staff. These procedures are in the process of being set out in detail in FDI's Operating Manual. 39. FDI's initial staff consists of a Director and two professionals, to be supported by a consultant with an economic and financial background and with experience in industrial sector technical assistance programs. FDI policies and procedures provide that all new credit applications and guarantees will be approved by FDI's Director. Sub-projects which, in the course of their implementation, require changes in their terms and conditions, will be referred to the Board of BRH for review and decision. 40. A Project Advisory Committee has been established, chaired by the Governor of BRH, and comprising the Director of FDI and representatives of the Ministry of Finance and Economic Affairs, the Ministry of Industry and Commerce, the Ministry of Planning, ONAPI, and the participating financial intermediaries and private industry. The Committee will be instrumental in obtaining the cooperation of government agencies to implement the project and will assist the Government in examining overall industrial and credit policies and in exchanging views with FDI's staff on technical assistance programs for small  - 12 - and medium enterprises. It will meet at least once every twelve months or as required by the Governor of BRH. Formal adoption of the Project Advisory Committee's bylaws in a form and substance acceptable to IDA and the appoint- ment of its members would take place not later than September 30, 1981 (Section 3.04 of the draft Credit Agreement). 41. All financial institutions accredited by BRH, which have less than 25 percent of their loan portfolios affected by arrears, would be eligible to participate in the FDI scheme and would enter into a participation agreement with BRH. Receipt by IDA of a copy of a satisfactory participation agreement between BRH and at least two financial intermediaries would be a condition of credit effectiveness (Section 5.01(b) of the draft Credit Agreement). Finan- cial intermediaries would be responsible for making, administering and maint- aining adequate records on all subloans for their respective beneficiaries. Except for the portion of their guaranteed subloans, the intermediaries would assume the full credit risk on their loans. FDI will follow up on interme- diaries' operations with assistance from BRH's Supervision Department. About half of the private banks in Haiti could become eligible to use the scheme. Public institutions, such as BNC and IDAI, interested in using FDI's resources but not meeting the eligibility criteria because of current substantial loan portfolio arrears, would need to prepare and implement a program acceptable to FDI and IDA to improve their management, organization and financial conditions. Such a program would show how the institution intended to reduce its port- folio affected by arrears to 25 percent within one year (during which it could provisionally participate in the discount facility, but not in the guarantee scheme) and to 10 percent at the end of the third year and thereafter (Section I(B) of the Schedule to the draft Project Agreement). Credit Features 42. FDI's initial resources, would include: (a) the US$6 million credit component of the proposed IDA credit; and (b) US$1 million equivalent to be provided by the Government. A first payment by the Government equivalent to US$250,000, would be a condition of credit effectiveness (Section 5.01(d) of the draft Credit Agreement). The balance would be made available as requested by FDI, but in any case, not later than October 31, 1983 (Section 3.03 of the draft Credit Agreement). These initial resources of FDI, amounting to US$7 million, represent 70 percent of total investments under the project, which, together with another 30 percent from financial intermediaries and project beneficiaries, would result in total investment of the order of US$10 million. The Government would service the IDA credit which would be allocated to increase the permanent resources of FDI for industrial lending and provide institutional technical assistance under conditions acceptable to IDA (Section 3.01(b) of the draft Credit Agreement). The Government will also help meet the administrative costs of FDI until September 30, 1983 (Section 3.03 of the draft Credit Agreement). Consultant services would be financed under the institutional technical assistance component. To ensure the liquidity of FDI, BRH would provide up to US$1 million equivalent as bridge financing, if and when required, to permit FDI disbursements before IDA funds for individual subprojects are released (Section 2.08 of the draft Project Agreement). 43. Project costs include US$1 million equivalent of the proposed credit credit to finance institutional technical assistance for FDI, BRH's Super- vision Department and ONAPI. US$375,000 would be used to repay the Project  - 13 - Preparation Facility advance (para. 36). The remaining resources of US$625,000 would initially be allocated as follows: US$150,000 for ONAPI, US$250,000 for FDI, US$100,000 for BPH's Supervision Department and US$125,000 unallocated. 44. FDI will ope,rate as a revolving fund with all sub-loan collections being recycled into new subloan disbursements. With initial resources of US$7 million, FDI would disburse an average of US$2 million annually during the first four years of operations. By the fourth year it is expected that FDI would secure additional resources. An average gross 3pread of about 12 percent p.a. of average total assets is estimated and the net income would reach 6 percent p.a. by 1984. Losses under the guarantee scheme are estimated at 10 percent of the total guarantee portfolio or 4 percent of the total FDI portfolio. FDI's initial liquidity, equivalent to 4-5 months of disbursements, would be used as a reserve for potential losses and for disbursements although experience may show that guarantee operation losses could be lower than estimated. Twenty percent of FDI's net income would be provided as grants to finance special technical assistance programs geared to the development of the industrial sector. During the first two years of project implementation, technical assistance programs will mainly be implemented by ONAPI in agreement with FDI and IDA. The signing of a cooperative agreement, satisfactory to IDA, between FDI and ONAPI would be a condition of disbursement to ONAPI (Schedule 1, para. 4 of the draft Credit Agreement). Prior to the withdrawal from the Credit Account of one-third of the amount allocated to credit opera- tions, IDA and BRH would exchange views on the soundness of IDF's policies and the terms and conditions of sub-loans and their discounting, including the use of resources by the various sub-sectors (Section 3.05 of the draft Project Agreement). Relending Terms 45. FDI will, through financial intermediaries, finance sound indus- trial projects of enterprises engaged in handicrafts, manufacturing, fisheries, mining, tourism, transport and construction as well as service enterprises. This financing, denominated in gourdes, would cover the cost of purchase, construction or renovation of equipment, machinery, cargo vehicles, civil works and industrial buildings. To make available FDI term resources to a large number of firms and individuals, the maximum subloan size and total outstanding for any beneficiary would not exceed $250,000. Repeater opera- tions would be possible only when at least 50 percent of previous FDI subloans to the same borrower had been repaid. Interest rates charged by financial intermediaries are subject to market rates within the limits (currently between 14 percent and 18 percent) established by BRH for commercial banks. These rates are periodically reviewed to reflect market conditions. BRH will maintain interest rates at levels sufficient to reflect market conditions and inflationary trends (Section 3.04 of the draft Project Agreement). 46. Considering the small size of FDI's individual discounts and its limited project appraisal capabilities, simplified appraisals prepared by financial intermediaries would be acceptable. The first four operations of each financial intermediary would require IDA's prior approval (Section 2.02(a) and (b) of the draft Project Agreement). In these cases, FDI would submit to IDA for approval a copy of its review of the standard appraisal formats. After these first four operations to be approved on a case by case basis, FDI's Director would request IDA authorization of subprojects in minimum batches involving financing of at least US$200,000 equivalent (Section 2.02(d) of the draft Project Agreement).  - 14 - Each authorization request would consist of a list of subprojects containing their industrial classification, brief description, number of jobs created, the amount of the subloans, the expenditures to be financed, the terms of the subloans, the name of the financial intermediary granting the subloans and the dates of submission of the discount application by the financial intermediary to FDI (Section 2.02(d) of the draft Project Agreement). The final date for submission of requests for financing of subprojects under the IDA credit would be January 31, 1985 (Section 2.02(f) of the draft Project Agreement). 47. Responding to the needs of small and medium enterprises, interme- diaries would make working capital loans not to exceed US$45,000 per applicant to be financed under the project. The maximum aggregate amount of working capital financing under the proposed credit would not exceed 30 percent of FDI resources initially available for lending. The same 30 percent limit on working capital financing would also apply to projects involving both working capital and fixed asset financing (Part III(C) of the Schedule to the draft Project Agreement). Preinvestment studies and technical assistance services for investment projects could be financed under the scheme. 48. The terms of FDI financing would be for up to 15 years, including up to 3 years of grace, although the average term is likely to be about 6 years. Working capital and technical assistance subloan repayment would be for up to 2 years including 6 months of grace. As an incentive to financial interme- diaries to handle smaller loans, a higher spread and larger percentage discount are provided. Following the above criteria, the maximum amount, percentages of FDI financing and interest spreads for intermediaries are as shown below (Part III(D) of the Schedule to the Project Agreement): Maximum percentage Amount to be of sub-loans Financial Category of discounted to be discounted Intermediary Discount Operations by FDI by FDI Spreads I Up to 90% 1/3 of interest US$50,000 charged to ulti- mate beneficiary. II From US$50,000 80% 1/4 of interest to US$150,000 charged to ulti- mate beneficiary. III From US$150,000 70% 1/6 of interest to US$250,000 charged to ulti- mate beneficiary.  - 15 - Terms and Limits of Guarantees 49. To encourage financial intermediaries to provide medium-and long- term lending to small and medium enterprises, FDI can provide guarantees at the request of financial intermediaries simultaneously with the specific FDI subloans. Guarantee operations are limited to the first two categories (see para. 48) cf F{S-_Clnt operatiors (Part IV(B) of the Scheduile to the draft Project A0reement). Maximum guarantee coverage will be 75 percent of principal discounted in the first category and 60 percent of principal discounted in the second category. Financial intermediaries would pay a guarantee fee, which is not transferable to ultimate beneficiaries, equivalent to 1/8 of the interest charged to the ultimate beneficiary. The maximum volume of guarantees to be provided by FDI is limited to 40 percent of FDI's total outstanding portfolio (Part IV(D)(4) of the Schedule to the draft Project Agreement), while liquid reserves would, in four years, accumulate to 25 percent of the outstanding guarantee portfolio. As experience is gained, this percentage may be changed to bring it in line with actual loss experience. FDI's Director will closely monitor the guarantee portfolio to ensure that losses are kept at a minimum. 50. Eligibility criteria under guarantee operations are: (a) benefi- ciaries 'o have a maximum debt/equity ratio of 3:1 and an estimated debt service coverage of at least 2:1; (b) beneficiaries to have no overdue finan- cial obligations; (c) guarantees not to be part of refinancing operations; and (d) the total exposure of FDI to the same beneficiary not to exceed US$90,000. Technical Assistance 51. The proposed project includes US$1 million of technical assistance services for FDI, BRH's Supervision Department and ONAPI. This amount would be used to repay advances made under the Project Preparation Facility and to finance the activities described below. An amount of US$125,000 has not been allocated and is held in reserve for technical assistance needs identified in the course of project execution. Excluding the unallocated amount, 84 man/ months of consulting services are included in the projects at an average all inclusive cost of US$6,000 per man/month. (a) FDI: Consulting services to assist FDI staff would be financed under the project, as professional staff with the necessary qualifications are difficult to find in Haiti. Initially, a consultant with economic and financial background would assist FDI staff in project evaluation and review and in supervision. Short-term consultants, as required for project implementation, could also be financed under the project. The terms of reference of the consultants to be hired by FDI would be acceptable to IDA (Section 2.09 of the draft Project Agreement). An amount of US$250,000 has been allocated to cover the full cost of consultant services. (b) BRH's Supervision Department: FDI will seek the cooperation of BRH's Supervision Department for the supervision of financial institutions and the evaluation of their financial condition. The development of BRH's Supervision Department procedures and staff would require consultant services. The IMF has recently appointed an experienced banking examiner as a consultant,  - 16 - who may be partly financed under the proposed project, to develop a detailed program of technical assistance for BRH's Supervision Department and, as required by the Governor of BRH, to make recommendations regarding the eligibility of financial intermediaries; the supervision functions of BRH related to the proposed project, and regarding the internal audit and control of FDI. One hundred thousand U.S. dollars equivalent has initially been allocated to finance technical assistance to BRH's Supervision Department. The terms of reference of additional consultants for BRH's Supervision Department, if required, would be acceptable to IDA (Section 2.09 of the draft Project Agreement). (c) ONAPI: Because of the limited experience of ONAPI's staff, consul- tant services are also needed for a review of ONAPI's organization, the development of its technical assistance policies and priorities, and of initial technical assistance programs. ONAPI has engaged a local consultant, acceptable to IDA, to undertake these tasks. An amount of US$150,000 equivalent has been allocated under the proposed project to finance ONAPI's consulting needs. The scope of ONAPI's technical assistance program for small and medium enterprises and the method of its implementation would be reviewed by IDA prior to ONAPI's signing a technical cooperation agreement with FDI (Condition of Disbursement, Schedule 1, para. 4 of the draft Credit Agreement). Disbursements and Procurement 52. IDA would reimburse FDI 86 percent of its disbursements for approved subloans, against fully documented withdrawal applications. Based on this disbursement percentage, it is expected that IDA funds would finance, on the average, the foreign exchange costs of individual subprojects estimated at 60-65 percent. IDA would reimburse FDI for expenditures under eligible subloans incurred not more than 90 days prior to submission of the discount application by the financial intermediary to FDI. IDA funds would be disbursed against full documentation to cover 100 percent of total expenditures for institutional technical assistance. The closing date for disbursements would be June 30, 1985. 53. FDI and participating intermediaries would satisfy themselves that the procurement items are suitable for the investment projects and are reason- ably priced, and that the beneficiaries have examined the main sources of supply and were purchasing from the most advantageous source. Procurement of consulting and training services would be open to international recruitment and could be fully financed under the proposed credit, provided that the consultants, terms and conditions of employment have been approved by IDA. Benefits and Risks 54. The project would enhance the development of an expanded and more efficient industrial sector, including the generation of employment oppor- tunities through the provision of medium and long term funds and technical assistance. The project's built-in incentives favor medium and small enter- prises. It is expected that the IDA credit would help finance at least 2,000 jobs in incremental direct employment, since initially most subprojects are expected to be for expansion. The Droject would a sc support BRH's interest  - 17 - rate DolicV; strengthen BRH's capabilities to evaluate the performance of financial intermediaries and strengthen the professional capabilities of ONAPI in providing technical assistance to small and medium enterprises. The project would be a useful vehicle to intensify the dialogue between IDA and the Government on industrial and financial policies. It would also provide a means to build-up the capabilities of public financial institutions which are expected to s5eek access to Fi)T rediscount onerations. 55. She project is in many respects a pilot scheme. The risks inherent in creating a new faci_ity in Haiti are relatively high, especially risks related to FDI's management and staffing, due to short suDply of skilled professionals, and the necessary promotion of the project required at cue outset. In addition, financial institutions have no experience in this type of lending and despite built-in incentives, they may not put a strong effort in promoting the scheme, thus slowing down project implementation. Also, BRH's capabilities to supervise the banking community are still being devel- oped and this mav cause delays in project implementation. However, these risks should be considerably reduced by: (a) the appointment of a competent Director to head FDI; (b) close contact between FDI and lDA during project implementation; and (c) IMF's current involvement in building up BRH's capa- bilities to undertake its supervisory role. The need to keep project appraisals very simple may constitute some additional risk insofar as ensuring that only viable and economically beneficial projects are financed. However, FDI's review function should increasingly reduce this risk and its effect on subloan repayments. Although the exposure of total guarantees has been limited, the: guarantee facility involves additional risks which are undertaken to Dromote loans to small and new enterprises. The extensiorn services to be provided for small and medium enterprises could enhance the success of these enterprises and thus reduce the riskiness of their operations. PART V - LEGAL INSTRUMENTS AND AUTHORIT' 56. The draft Development Credit Agreement between Lite Republic of Haiti and the Association, the draft Project Agreement between the Association and the Bank of the Republic of Haiti, and the recommendation of the Committee provided for in Article V, Section l(d) of the Articles of Agreement are being distributed separately. Special conditions are listed in Section III of Annex III. Additional conditions of effectiveness would be that: (i) FDI has been provided with US$250,000 equivalent as the first payment under the Government's contribution of US$1 million, and (ii) IDF has signed participa- tion agreements, satisfactory to the Association, with at least two partici- pating financial intermediaries. A condition of disbursement for the ONAPI component would be that FDI and ONAPI have entered into a technical cooperative agreement. 57. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Associatior,.  - 18 - PART VI - RECOMMENDATION 88. I recoimnend that the Executive Directors approve the proposed credit. Robert S. McNamara President by: Ernest Stern Aitachments March 25, 1981  - 19 - ANNEX I TABLE 3A Page 1 of 5 HAITI - SOCIAL INDICATORS DATA SHEET RAITI REFERENCE GROUPS (WEIGHTED AV GRAGES LAND AREA (THOUSAND SQ. RM.) - MOST RECENT ESTIMATE)- TOTAL 27.8 AGRICULTURAL 13.9 MOST RECENT MIDDLE INCOME MIDDLE INCOME 1960 b 1970 /b ESTIMATE /b LATIN AMERICA & CARIBBEAN AFRICA SOUTH OF SAHARA GNP PER CAPITA 110) 110.0 130.0 260.0 1384.1 726.2 ENERGY CONSUMPTiON PER CAPITA (KUIOGRANIS OF COAL EOJIVALENT) .. 43.0 57.0 1055.9 699.4 7OPULATION AND VITAL STATISTICS P(PUlATION, MID-YEAR (MILLIONS) 3.6 4.2 4.8 IRBAN POPULATION (PERCENT OF TOTAL) 15.6 19.8 23.8 63.4 28.9 POPULATION PRO JECTIONS POPIILATION IN YEFAR 2000 (MILLIONS) 8.0 STATIONARY POPILATION (MILLIONS) 17.0 YEAR STATIONARY POPULATION IS REACHED 2145 POPULATION DENSITY PER SQ. KM. 131.0 153.0 173.0 28.1 61.7 PER SQ. KM. AGRICULTURAL LANED 259.0 300.0 345.0 81.7 126.0 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 42.0 41.5 43.5 41.4 45.5 15-64 YRS. 55.0 54.0 52.9 54.7 51.6 65 YRS. AND ABOVE 3.0 4.5 3.6 3.9 2.8 POPULATION GROWTH RATE (PERCENT) TOTAL 1.6 1.5 1.7 2.7 2.7 URBAN 4.4 3.9 4.1 4.1 4.9 CHUDE BIRTH RATE (PER THOUSAND) 45.0 43.0 43.0 34.8 46.8 CRUDE DEATH RATE (PER THOUSAND) 23.0 18.0 17.0 8.9 16.4 GROSS REPRODUCTION RATE .. 3.0 2.9 2.5 3.2 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) . . . 16.1 USERS (PERCENT OF MARRIED WOMEN) .. .. 5.0 FOOD AND NUTRITION GIDEX NF FOOP PRODUCTION PFR CAPITA (1969-71-1O0) 104.0 100.0 91.0 106.9 94.0 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 88.0 87.0 93.0 107.4 92.7 PROTEINS (GRAMS PER DAY) 47.0 47.0 51.0 65.6 53.0 OF WHICH ANIMAL AND PULSE 17.0 17.0 18.0 33.7 15.6 CHILD (ACES 1-4) MORTALITY RATE 39.0 29.0 23.0 8.4 21.3 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 42.0 47.0 51.0 63.1 50.1 INFANT MORTALITY RATE (PER TH(O)SAND) 150.0c .. 66.5 ACCESS TO SAFE WATER (PERCENT OF POFPULATION) TOTAL .. .. 14.0 65.9 31.0 lRBAN .. .. 38.0 80. 4 66.8 RlRAL .. .. 7.0 44.0 ACCESS TO EXCRETA DISPOSAL (PERCENT OF PGPI'LATION) TOTAL .. .. .. 62.3 URBAN .. .. .. 79.4 RURAL .. .. .. 29.6 POPULATION PER PUYSICIAN 10600.0 11730.0 5936.0 1849.2 14508.2 POPULATION PER NURSING PERSON 11880.0 7460.0 3513.0 1227.5 3279.5 POPULATION PER HOSPITAL BED TOTAL 1790.0 1370.0 1219.0 480.3 1141.5 URBAN . . RUJRAL * * ADMISSIONS PER HOSPITAL BED .. .. .. . HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL .. 3.6 4.4 URBAN .. 2.2 4.2 RURAL .. 4.3 4.5 AVERALt0 NUMBER OF PERSONS PER ROOM T0TAL *- 1.9 IIRBAN .. 2.0 RURAL .. 1.9 ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. 2.9 SRBAN .. .. VIlRA' .. ..  - 20 - ANNEX I TABLE 3A 2 of 5 EAITI - SOCIAL INDICATORS DATA SHFET EAITI REFERENCE CROUPS (WEIG6TED Al5RAGES - MOST RECENT ESTIMATE)- MOST RECENT rIEDDLE INCOME MIDDLE INCOME 1960 /b 1970 lb ESTIMATE /b LATIN AMERICA & CARIBBEAN AFRICA SOUTH OF SAHARA EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 46.0 49.0 71.0 99. 7 61.7 MALE 50.0 55.0 .. 101.0 69.2 FEMALE 42.0 43.0 .. 99.4 51. 4 SECONDARY: TOTAL 4.0 6.0 .. 34.4 20.6 MALE 5.0 8.0 .. 33.5 29.2 FEMALE 2. 0 3.0 .. 34. 7 14.7 VOCATIONAL ENROL. (Z OF SECONDARY) 21.0 19.0 8.0 38.2 7.0 PUPIL-TEACHER RATIO PRIMARY 43.0 45.0 .. 30.5 36.6 SECONDARY 13.0 18.0 .. 14.5 24.3 ADULT LITERACY RATE (PERCENT) 15.0 20.0 23.0 76.3 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 2.0 3.0 3.5 43.0 38.8 RADIO RECEIVERS PER THOUSAND POPULATION 6.0 20.0 21.0 245. 3 83.5 TV RECEIVERS PER THOUSAND POPULATION 0.5 2.6 2.9 84.2 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 11.0 19.0 20.0 63.3 24.2 CINEMA ANNUAL ATTENDANCE PER CAPITA .. .. .. .. 0. 7 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 1967.1 2101.9 2340.6 FEMALE (PERCENT) 47.4 47.4 46.0 22.2 38.1 AGRICULTURE (PERCENT) 80.0 74.2 69.8 37. 1 54.3 INDUSTRY (PERCENT) 6.4 7.2 8.0 23.5 17.8 PARTICIPATION RATE (PERCENT) TOTAL 55.8 50.6 50.5 31.5 38.8 MALE 59.7 55.2 55. 1 48.9 48.4 FEMALE 52. 1 46.4 46.2 14. 0 29.4 ECONOMIC DEPENDENCY RATIO 0.8 0.9 1.0 1.4 1.3 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS .. HIGHEST 20 PERCENT OF BOUSEHOLDS .. LOWEST 20 PERCENT OF HOUSEHOLDS LOWEST 40 PERCENT OF HOUSEHOLDS .. POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 169.0 RURAL .. .. 144.0 190.8 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 82.0 474.0 RURAL .. .. 73.0 332.5 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN *- *- 55.0 RURAL .. .. 78.0 Not available Not applicable. NOTES L The group averages for each indicator are population-weighted arithrnetic neans. Coverage of countries armong the indicators depends on availability of data and is not uniform. Lb Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1974 and 1978. /c 1965-70 average. Most recent estimate of GNP per capita is for 1979, all other data are as of April, 1980. October, 1980  [CL C 'C C CCC CCC C C. 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