Burundi - Local Construction Industry Pilot Project

Document of iI COPY The World Ban FOR OFFICIAL USE ONLY Report No. P-3250-BU REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF BURUNDI FOR A PILOT PROJECT TO ASSIST THE LOCAL CONSTRUCTION INDUSTRY March 25, 1982 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 - Burundi Franc (BuF) US$1.00 - BuF90 BuFl - US$0.011 BuF1 million - US$11,111 GLOSSARY OF ABBREVIATIONS BANCOBU - Banque Commerciale du Burundi BCB - Banque de Cridit de Bujumbura BNDE - Banque Nationale pour le Dgveloppement Economique (Development Bank) BRB - Banque de la R6publique du Burundi (Central Bank) CADEBU - Caisse d'Epargne du Burundi (Savings Bank) CAMOFI - Caisse Centrale de Mobilisation et de Financement (National Bank for Savings and Investments) DETN - Direction des Etudes et Travaux Neufs (New Works (Directorate) ILO - International Labour Organization HTPEM - Minist6re des Travaux Publics, de l'Equipement et des Mines (Ministry of Public Works, Energy and Mining) ONIMAC - Office National d'Importation et de Commercialisation des Mat6riaux de Construction et d'Equipement Domestique (National Office for the Import and Marketing of Construction Materials and Domestic Equipment) ONL - Office National du Logement (National Housing Office) REGIDESO - Rggie des Eaux (National Water and Electricity Authority) SIP - Soci6t6 Immobiliare Publique (Public Housing Corporation) SOMIBUROM - SociAt6 Mixte Miniare et Industrielle Burundo-Roumaine (Burundo-Rumanian Mining and Industrial Company) SSE - Small Scale Enterprises UNDP - United Nations Development Programme UNIDO - United Nations Industrial Development Organization UPRONA - Union Pour le Progr6s National (Union for National Progress) FISCAL YEAR January 1 - December 31 FOR OFFICIAL USE ONLY BURUNDI PILOT PROJECT TO ASSIST THE LOCAL CONSTRUCTION INDUSTRY CREDIT AND PROJECT SUMMARY Borrower: Republic of Burundi Amount: SDR 4.6 million (US$5.2 million) Terms: Standard Beneficiaries: Republic of Burundi and the National Development Bank (BNDE) Relending Terms: About US$2.4 million of the proceeds of the Credit would be relent to BNDE at an initial rate of 8 percent per annum, with a flexible amortization schedule conforming to the aggregate amortization schedule of BNDE's subloans, subject to a maximum of fifteen years, including a grace period not to exceed five years. BNDE would relend the funds to construction enterprises, brick and lime producers at a rate which would initially be of 12 percent per annum. This rate would be reviewed annually by the Government, BNDE and IDA. The relending rate from the Government to BNDE would at all times be four percent below the rate applicable to subloans. The Republic of Burundi would bear the foreign exchange risk. Project Description: (i) Objectives: (a) at the sector level, to foster the production of local materials to reduce the high dependence on imports; improve the industry's efficiency and reduce construction costs by adapting the building code to local conditions; and strengthen the capacity of the Ministry of Public Works, Energy and Mining (MTPEM) to supervise the implementation of construction projects; (b) at the enterprise level, it would assist in the development of small- and medium-sized contractors and also of producers of local materials through provision of financial and technical assistance. 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 (ii) Components: (a) a credit program to finance the construction of two limekilns and the purchase of equipment for brickmakers and construction enterprises; (b) technical and/or managerial assistance to promoters of limekilns, brickmakers and local construction companies; (c) technical assistance to the Ministry of Public Works, Energy and Mining; (d) plantation of eucalyptus trees; and (e) feasibility studies. (iii) Benefits: By reducing the reliance of the local construction industry on imported materials, the Project should improve the supply of construction materials, reduce their cost and consequently improve the financial and economic returns of the construction industry. This would have positive effects on the balance of payments, and stimulate the growth of industrial activity and employment. It would also contribute to the emergence of a group of local contractors. (iv) Risks: (a) possible problems in the coordination of the various public and private institutions responsible for Project implementation; (b) difficulties in recruiting experts; and (c) possible weaknesses in the performance of BNDE. To minimize these risks, the responsibility of Project implementation would be entrusted to a Project Unit, the technical assistance would be provided by a single firm, and BNDE's operations would be closely supervised. Estimated Costs 1/ US$ MILLION Local Foreign Total Development and Improvement of Local Construction Materials - Limekiln construction 0.16 0.22 0.38 - Eucalyptus plantation 0.08 - 0.08 - Equipment for brick production 0.01 0.09 0.10 - Technical assistance 0.15 0.28 0.43 - Feasibility studies 0.04 0.40 0.44 Sub-Total 0.44 0.99 1.43 1/ Includes taxes on equipment and materials imported by enterprises under the Project (estimated at US$0.6 million). iii US$ MILLION Local Foreign Total Assistance to the Ministry of Public Works, Equipment and Housing (MTPEL) - Tachnical assistance 0.14 0.25 0.39 Assistance to Local Construction Companies - Financial assistance 0.72 1.36 2.08 - Technical assistance 0.15 0.30 0.45 Sub-Total 0.87 1.66 2.53 Operations of Project Unit 0.21 0.30 0.51 TOTAL BASE COST 1.66 3.20 4.86 Physical Contingencies 0.09 0.14 0.22 Price Contingencies 0.85 1.43 2.29 TOTAL PROJECT COST 2.60 4.77 7.37 Financing Plan - Government 1.24 /1 - 1.24 - IDA 0.43 4.77 5.20 - Lime and brick producers and local contractors 0.93 - 0.93 TOTAL 2.60 4.77 7.37 Estimated Disbursements (US$ MILLION) IDA FY 1982 1983 1984 1985 1986 Annual 1.1 1.8 1.5 0.8 Cumulative 1.1 2.9 4.4 5.2 Economic Rate of Return: not applicable Appraisal Report: No. 3343 BU, dated March 25, 1982 Map: IBRD 12260 1/ Including 0.6 million equivalent in taxes  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF BURUNDI FOR A PILOT PROJECT TO ASSIST THE LOCAL CONSTRUCTION INDUSTRY 1. I submit the following report and recommendation on a proposed development credit to the Republic of Burundi for the equivalent of SDR 4.6 million (US$5.2 million) on standard IDA terms to help finance a pilot project to assist the Local Construction Industry. Up to US$2.4 million of the proceeds of the Credit would be relent to the National Development Bank (BNDE) at an initial rate of 8 percent per annum, with a flexible amortization schedule con- forming to the aggregate amortization schedule of BNDE's subloans, subject to a maximum of fifteen years. The relending rate from the Government to BNDE would at all times be four percent below the rate applicable to the subloans, which is to be reviewed annually. PART 1 - THE ECONOMY1- 2. A Country Economic Memorandum was distributed to the Executive Directors in March 1981. Updated country data are provided below and in Annex I. 3. Background. With an average GNP per capita of about US$200 in 1980, Burundi is one of the poorest countries in the world and is designated as "least developed" by the United Nations. Of a population of about four million, only 90,000 are wage earners; the remainder depend mainly on subsistence agri- culture. The Government is facing several critical problems in its efforts to develop the economy: the capability to prepare and manage programs and projects is weak; the agricultural labor force is largely untrained; and population growth keeps straining Burundi's productive resources, particularly in agriculture. Despite a stated policy of "spaced births", the problems of population pressure cannot be solved in the immediate future. A major effort must therefore be made to increase agricultural productivity. During the past decade, per capita agri- cultural production declined steadily. The search for more arable land has caused large-scale deforestation and severe shortages of firewood in the rural areas, which makes the development of alternative energy sources urgent. 4. Shipments of imports and exports through the principal outlets via Tanzania have frequently encountered delays due to bottlenecks in the port of Dar-es-Salaam, underinvestment in the railway link between Tabora and Kigoma on Lake Tanganyika, and losses because of theft. However, action is being taken to make external connections more reliable. The link via Rwanda and Uganda to the port of Mombasa (Kenya) is becoming increasingly attractive with the continuing improvement of national highways between Bujumbura and Mombasa. 1/ This part is substantially the same as that in the President's Report No. P-3149-BU on an Integrated Rural Development/Ngozi III Project, considered by the Executive Directors on December 8, 1981. - 2 - 5. Government Development Strategy. Since 1977 the Government has designed a new strategy to achieve social justice, ethnic reconciliation and improved living conditions in the rural areas. The poll tax, which was levied on all males, was replaced by compulsory deposits which can be withdrawn after three years. In addition, the traditional obligation for small farmers to pro- vide services to landowners, in exchange for the right to cultivate land, was abolished. Likewise, land which was obtained in an irregular manner for specu- lative purposes was returned to the State or to the farmers who cultivated it. Other aspects of the new policies, which are embodied in the Third Five-Year Plan (1978-82), are: (a) emphasizing agricultural production to meet the increasing needs for food of the rapidly growing population; (b) increasing the rate of economic growth substantially in order to provide greater employment opportunities and more income to the poorest segments of the population; (c) raising the investment rate significantly; (d) giving the Government a more active role in mobilizing financial and manpower resources, and greater parti- cipation in mixed enterprises in the commercial and productive sectors; and (e) fostering decentralization of economic and social activity away from the capital city through the creation of development poles and voluntary settlement of the peasant population in villages. To facilitate the implementation of its strategy, the Government strengthened the role of planning by elevating the planning organization to the rank of Ministry and by giving it a key role in selecting and monitoring public investment. 6. Recent Economic Developments. The period 1976-79 constitutes an important phase in Burundi's economic history, as it witnessed an acceleration of economic growth to an annual average of 4.4 percent in real terms, as well as a major effort by the Government to raise the country's investment rate, traditionally among the lowest in the developing world. During this period, the volume of investment grew by about 75 percent, and the investment rate rose from 9 percent of GDP in 1976 to more than 12 percent of GDP. This effort, which was led and implemented by the public sector, had important repercussions on the pattern of demand, inflation, and the mobilization of domestic and external financial resources. 7. The growth of domestic demand in Burundi accelerated in the last few years owing mainly to high producer prices for coffee during 1976 and 1977, and to the rapid growth of public sector expenditures during 1978 and 1979. Public consumption and investment expanded at a rate almost triple that of the private sector during the period 1976-79. Government expenditures more than doubled in current terms and increased from about 16 percent of GDP in 1976 to 21 percent in 1979. Capital expenditures, particularly for infrastructure. and for the financing of public enterprises, contributed most to this growth. The government overall deficit, which increased from about 3.3 percent of GDP in 1976 to 7.3 percent in 1979, was covered to an increasing extent through recourse to the domestic banking system (about half in 1979). 8. The rapid expansion of domestic credit was the main cause of the almost 26 percent rate of inflation in 1979, although rising import prices were also a contributing factor. Mainly because of high transportation costs, import prices increased by 33 percent in 1979, more than twice the international inflation rate. Owing to a significantly lower coffee crop, a fall in the volume of investment, and a slowdown in Government spending, GDP growth decelerated during 1980 to 1.8 percent in real terms, domestic credit did not expand much further, and, in spite of continued inflationary pressures from abroad, domestic inflation slowed down significantly to about 14 percent. - 3 - 9. Burundi's external current account registered surpluses in 1976 and 1977 but showed deficits in 1978 and 1979. In 1979, the current account deficit was about US$57 million, equivalent to 7 percent of GDP. Underlying this shift was an adverse movement in the country's terms of trade as well as an unprecedented increase (55 percent) in the volume of imports. Owing mainly to a one-third decline in the volume of coffee exports, a 16 percent fall in the terms of trade and notwithstanding a decline in imports in real terms, Burundi's current account deficit widened to US$100 million in 1980, equivalent to 11 percent of GDP. The country's growing deficit has been financed mainly with project-related aid to the Government and parastatals from multilateral and bilateral agencies. During 1979-80, these flows averaged US$64 million per annum (equivalent to 32 percent of Burundi's 1979-80 imports), compared to US$18 million in 1976. 10. In 1981, the Burundian economy registered significant growth owing to a resumption of investment activity and an exceptionally good agricultural crop. According to preliminary data, in 1981 GDP and investment both grew at about 5 percent in real terms. Coffee production increased from about 15,200 tons in 1980 to about 41,000 tons in 1981. Because of Burundi's quota under the International Coffee Agreement (ICA), however, during 1981 coffee exports were limited to 24,000 tons. The increase in export volume more than offset a significant decline in the world market price. The balance of payments registered an overall deficit in 1981 of about US$30 million owing mainly to increased imports, a decline in net capital inflows, and a depreciation of the banking system's foreign exchange holdings in terms of the US dollar. By the end of 1981, Burundi's gross reserves had fallen to about US$60 million, equivalent to 3 months of imports of goods and non-factor services. Domestic inflation slowed down again in 1981 to about 8-10 percent. The relatively low level of domestic inflation reflects not only an improvement in supply conditions (particularly of foodstuffs), but also the depressing effects on import prices, expressed in local currency, of the appreciation of the Burundi Franc (which, because it is pegged to the US dollar, has followed the upward movement of the US dollar vis-a-vis the currencies of Burundi's major European trading partners). 11. External Assistance, Major Issues and Prospects. Because of the unfavorable outlook for world coffee prices, the medium-term prospects of the economy are not good (coffee exports constitute about 90 percent of Burundi's merchandise exports). According to current forecasts, the price for coffee could fall by about 35 percent in real terms between 1978-80 . and 1985. The impact of this decline in Burundi would have to be absorbed by the small farmers (through lower producer prices in real terms) and by the Government (through lower coffee tax receipts in real terms). Even with a policy of demand restraint, it will be difficult for Burundi to reduce its current account deficit to below 10 percent of GDP. 12. Burundi's future external capital requirements are likely to be much higher than in the recent past. In order to sustain a growth rate of the economy of about 4.5% p.a. in real terms, medium- and long-term external capital requirements would have to more than double to an average of about US$180 million p.a. in current prices during the period 1982-84. Although Burundi has been remarkably successful in mobilizing external resources, recently a few high priority agricultural projects have not attracted sufficient financing. The composition of aid flows also would have to be changed, since direct balance of payments support (and/or commodity assistance for essential imports) would have to be provided of a greater extent than before. 13. Restraining the growth of domestic demand and stimulating the productive sectors would help Burundi obtain needed external aid. This would imply close coordination of policies on several fronts: Government expenditures, the taxation of consumer goods and imports, as well as price policies. Together with the Government's investment program, a more flexible pricing strategy should constitute the cornerstone of a policy to expand domestic production. In recent months, the Government has taken important steps in this direction by raising significantly electricity and water tariffs, domestic transport fares, gasoline retail prices, and by selectively lifting rent controls. The major policy issues outlined above have been the object of discussions between the Burundian authorities and two IMF missions which visited Burundi during the second half of 1981. Discussions between the Government and the IMF started in 1981 on a medium-term adjustment program to be supported with an Extended Fund Facility. Negotiations are expected to resume during the next few months. Under current IMF guidelines, Burundi could draw up to SDR 155 million during the period 1982-84, enough to cover Burundi's non-project external financial requirements during those years. 14. Because of the expected financial constraints, it is highly unlikely that during the period 1980-84 the volume of investment can be much more than half of that envisaged in the Plan. Nevertheless, even this reduced level would still allow the economic growth mentioned above (para. 12) as well as some increase in the investment rate. Also, a lower level of investment would be more in line with the country's implementation capacity. 15. The Government has already taken steps to reduce its investment objectives, but an important issue remains whether the Government will attain its objective of directing investment to the productive sectors, particularly agriculture. Population pressure on available land, and its adverse effects on soil fertility, foodcrop production and nutrition, underlines the urgency of accelerating rural development. The Government recently launched a number of integrated rural development projects which, over the next few years, are expected to benefit an increasing number of small farmers. However, the preparation of integrated rural development projects has been hindered by limited knowledge of intensified cultural practices and of the willingness of small farmers to adopt them. The first major projects, which began implementation in 1981, remain in many respects experimental and will have to be complemented by adaptive research. 16. Government policy is to establish regional development companies (RDCs) to promote integrated rural development, appropriate technology, village-level organizations, and decentralization of Government services. To this end, the RDCs will manage all agricultural, forestry and veterinary Government staff working in the proposed project areas. These integrated rural development schemes cut accross the functions of various ministerial - 5 - departments. Although the Government expects RDCs to eventually cover part, if not all, of their expenditures with their own earnings, opportunities to make commercial profits will only develop slowly, and RDCs will probably depend on Government budgetary allocations for a number of years. In spite of this financial dependence, the Government intends to endow the RDCs with full management autonomy. 17. Despite certain successes, a number of parastatals have been affected by inadequate coordination with the central Government, management problems, lack of career incentives for staff, financial weaknesses and, in the case of agricultural parastatals, lack of small farmer participation owing to insufficient incentives. Increasing the efficiency of the parastatal sector constitutes a top Government priority. With IDA assistance, the Government is assessing the situation of the parastatal sector with the intention of providing it with the resources, autonomy and flexibility it requires to achieve satisfactory economic and financial performance. 18. To complement the efforts made by the RDCs, it will also be necessary to promote rural development more actively by stimulating the activities of small and decentralized organizations such as Government-sponsored and private cooperatives as well as private secular and religious groups, and by supporting the communal efforts under the sole political (UPRONA) party. The scope and efficiency of the activities of communes (the basic administrative unit) could be greatly improved by providing more resources to local authorities. Available evidence suggests that these organizations can play a key role as "transmission belts" between the small farmers and the rest of the economy. Rural development projects now face the difficult challenge of combining the vertical integration needed for increasing the production and quality of coffee with the more parti- cipatory arrangements necessary for increasing foodcrop production and meeting other basic needs. This reconciliation is critical since the satisfaction of basic nutritional needs to a large extent guides the socioeconomic behaviour of the farm family. The scarcity of land is already such that, in a number of regions, farmers face a choice between continuing coffee cultivation and gradually shifting to foodcrop production. 19. If the Government continues to focus on development, pursues improvements in policies and strengthens its administration, it may achieve a steady, albeit slow, improvement in per capita incomes. If mining of Burundi's nickel resources proves feasible, the prospects over the next ten years would be much better. However, the commercial viability of exploiting these deposits has yet to be established. Regional development in Central Africa will also be important to Burundi's economy. In September 1976, Burundi, Rwanda and Zaire signed a convention establishing the "Economic Community of the Countries of the Great Lakes" (CEPGL). The Community, which has its seat in Gisenyi, Rwanda, aims inter alia at stimulating and intensifying intra-regional trade and cooperation in a wide range of activities. A major objective of the Community is the electrification of the Great Lakes region. The glass container project which was approved by the Board of IFC in 1981 will be the first major regional industry to be implemented under the aegis of the CEPGL. The three countries have set up a joint development bank to finance regional development projects, in particular to exploit methane deposits around Lake Kivu, and to develop a fishing industry around Lake Tanganyika. They have also instructed the Secretariat of CEPLG to investigate ways of improving the transport system - 6 - around the lakes in order to ease the transport bottlenecks affecting Burundi and Rwanda. 20. In 1977-80, total long-term capital inflows to Burundi amounted to about US$220 million, of which US$90 million (41 percent) was in the form of grants. Most of the assistance has come from the UN agencies, Belgium, the European Development Fund, IDA, the Federal Republic of Germany, and the People's Republic of China. On December 31, 1980, Burundi's external medium and long-term debt amounted to about US$290 million (including undisbursed amounts), of which IDA held 32 percent. Debt service averaged 8.5 percent of export earnings. Owing to the large proportion of grants in external assistance, IDA will probably continue to hold a large proportion of Burundi's outstanding debt. Notwithstanding the relatively low debt service ratio, Burundi, because of its poverty and the instability of its export earnings, should refrain from borrowing on commercial terms. External aid should there- fore be on grant or very concessional terms and should continue to include a substantial share of local cost financing. PART II - BANK GROUP OPERATIONS 21. Since IDA lending started in Burundi in 1966, eighteen credits have been made, of which fifteen expressed in dollars, for a total amount of US$92.9 million, and three expressed in Special Drawing Rights, totalling SDR40.0 million. One credit (US$1.1 million) helped improve water supply to Bujumbura; four credits (US$17.3 million) were for agriculture (two for coffee production, one for fisheries and one for forestry); three credits (US$19.4 million, including an engineering credit of US$400,000) helped start a highway maintenance and improvement program; a US$10.0 million credit is supporting the improvement of primary education and a second one of US$15.0 million finances vocational and technical training; two credits (US$4.0 million) were made for technical assistance; and the National Economic Development Bank received a credit of US$3.4 million. A US$15.0 million credit for an Urban Project aimed at improving the conditions of the poor in the city of Bujumbura and a US$7.7 million credit for a Telecommunications Project became effective in October 1980 and January 1981, respectively. The Second Coffee Project and the Fisheries Project are cofinanced by the Kuwait Fund for Arab Economic Deve- lopment (US$1.0 million) and the Abu Dhabi Fund (US$1.2 million), respectively. The Second Highway Project is cofinanced by the Arab Bank for Economic Develop- ment in Africa (BADEA) in an amount of US$6.0 million. The Forestry Project is cofinanced with a credit of US$1.2 million equivalent made from the EEC Special Action Account. Credits for a Nickel Exploration Project (SDR3.3 million), a Third Highway Project (SDR20.5 million), and a Kirimiro Rural Development Project (SDR16.2 million), were signed in FY82 and are not yet effective. In addition, one credit approved by the Board in FY82, for an Integrated Rural Development/ Ngozi III (SDRl4.2 million) Project, has not yet been signed. In June 1981, IFC approved a glass container project (para. 19). Annex II contains a summary statement of IDA credits, notes on projects in execution, and the status of disbursements as of September 30, 1981. 22. Project performance has been hampered by the shortage of local management capacity and technical skills, which is likely to remain a major constraint to development for some time to come. This situation has particularly -7- delayed the execution of the Fisheries and the Second Coffee Projects, although the implementation of the Second Coffee Project has recently improved. Problems encountered in the execution of IDA-financed projects were discussed with the Government during the Second Country Implementation Review held in Bujumbura in June 1980. Recommendations were made in particular regarding the training of local staff, accounting, audits and disbursement procedures. Given existing constraints, however, project performance is, on the whole, satisfactory. 23. Future IDA operations in Burundi will aim primarily at reversing the decline in agricultural productivity, improving the transport and communi- cation network, developing energy resources and strengthening absorptive capacity through training and technical assistance. The Second Technical Assistance Project is assisting the Government in its efforts to improve the planning process and the management of the public enterprise sector. A third technical assistance credit aiming principally at continuing these efforts and assisting in the restructuring of the public enterprise sector is to be appraised in June 1982. A sector mission visited Burundi in May 1981 to determine priority areas in the energy sector. Its report is being prepared. A second credit to the Development Bank has been appraised. A Third education project aiming primarily at strengthening basic education, is to be appraised shortly. PART III - THE CONSTRUCTION INDUSTRY Background 24. The Construction Industry in Burundi is small, underequipped, concentrated, and highly dependent on foreign skills. In 1979, it contributed to about 4% of GDP, 30% of industrial output, and employed about 10,000 people, representing about 8% of total wage employment. Construction investments accounted for a fairly stable proportion of 52% to 60% of total investments in the years 1977-79, representing about US$60 million in 1979. Most construction enterprises are working at full capacity. Lack of local materials, transport difficulties, lack of manpower and of financing are the main constraints to the development of the sector. 25. The Government is the main client and also accounts for about 13% of the sector output, mainly as maintenance work. Major public works are usually contracted to foreign-controlled firms, the output of which accounts for 70% of the total construction value. About twenty privately-owned Burundian firms, religious missions and self-employed artisans account for the remaining 17%. Artisans are very active in the housing sector. Construction Materials 26. Lack of local materials has long been a constraint to the develop- ment of the construction industry. Although bricks, tiles, stone, sand, gravel, wood, bamboo and limited quantities of quick lime are produced locally, the country currently imports about 90% of its needs. In 1979, the CIF value of these materials represented about US$13 million. The market for these products is characterized by irregular supply, sharp variations in prices, and a general shortage of such basic materials as cement, galvanized sheets and reinforcing rods for concrete, which are the three main materials used in construction. The price of cement, for instance, fluctuated between US$178 per ton and - 8 - US$400 per ton during 1979, a year in which the country imported about 27,000 tons of cement, representing over 74% of the total volume of construction materials imports and 32% of its CIF value. In addition, irregularity in supply leads to excessively high operating costs and renders it difficult to complete jobs on schedule. 27. To alleviate the problem caused by the variations in price levels and import volumes and in an effort to improve the country's supply of construc- tion materials, the Government created in 1978, the National Office for Import and Marketing of Construction Materials and Domestic Equipment (ONIMAC), a public company responsible for regulating the import of construction materials and stabilizing the price of these goods. 28. In addition, the Government is trying to expand the local production of lime and of bricks. Burundi has large deposits of limestone which can be used in the manufacture of pozzolanic cement. SOMIBUROM, the public mining company created in 1978 for the development of Burundi's mineral resources is entrusted with the geological exploration and the development of the country's major lime deposits. A program to build three new limekilns is being implemented with assistance from the United Nations Industrial Development Organization (UNIDO). Starting in 1982, at least 4,000 tons of lime should be available which would still be well below the 15,000 tons which the construction market could absorb annually. The government has also established a new public company to rehabilitate and operate a cement plant and bring its production capacity to 20,000 tons of pozzolanic cement a year. Bricks are produced in most regions of Burundi by private manufacturers and by the National Housing Office (ONL). In 1980, 25 million bricks were produced. They are generally of uneven sizes and forms and their resistance to compression and erosion is limited. It is estimated that 30 to 50% of the production is lost because of poor quality. It would be possible to improve significantly the quality of bricks, in parti- cular by using some simple equipment for the preparation of the clay and by building shelters for storing the bricks before they are baked. This could lead to a larger utilization of bricks in construction which could substitute for about 2,000 tons of imported cement a year. Manpower 29. The lack of qualified manpower is a constraint to growth and one of the reasons of foreign predominance in the construction industry. In addition to a few local civil engineers and architects trained abroad, the yearly average output of graduates from local technical schools during 1975-79 was limited to 13 surveyors and general construction technicians, 12 carpenters and masons, 10 electricians, and about 50 semi-skilled carpenters and masons. Contractors have been hiring some operators and foremen in Zaire and other neighboring countries, but shortages of specialized workers appear more difficult to overcome. Qualified plumbers are reportedly in particularly short supply. Under the Second Education Project approved by IDA on January 29, 1980, two construction trades training schools will be built which are expected to train about 80 middle-level technicians and 125 skilled workers per year (including 27 plumbers). The total annual output of specialized workers would then represent 45% of the projected manpower requirements of the construction sector. -9- Construction Enterprises 30. The private sector is dominated by foreign contractors, including seven subsidiaries or branches of large foreign companies and about twelve smaller enterprises owned and managed by expatriates. The largest foreign subsidiary has a staff of about 3,500 and has been producing about a third of contract values in the formal sector with a quasi monopoly in new road construction. Each of the other six foreign subsidiaries has a staff of 200 to 1,000, net fixed assets between US$200,000 and US$2.2 million and may be considered as medium-scale enterprises. In general, they have adequate equip- ment and qualified staff, and their management positions and about a third of professional positions, are held by expatriates. They benefit from the parent companies' technical and commercial assistance, particularly for the direct importation of raw materials in periods of shortages. The firms owned by expatriates are small-scale enterprises each with a staff of 20 to 200 and fixed assets of less than US$220,000. 31. There are about twenty enterprises headed by a Burundian owner- manager, of which three are medium scale enterprises and the others small- scale. These local enterprises work mostly on Government buildings and public housing projects and, in the case of small-scale enterprises, some high income private housing. They are generally underequipped and labour-intensive and have a weak liquidity situation, but are profitable and have a low indebtedness with a debt/equity ratio generally below 0.4:1, suggesting a strong borrowing capacity. The main constraints that local enterprises face in their develop- ment are lack of finance (para. 34-37) and shortages of raw materials. In addition to the modern construction sector, there is a large number of self- employed artisans in both urban and rural areas. They are engaged mainly in the construction of traditional houses for families. These artisans lack tools and their competence is uneven; some 200 of them are expected to receive financial and technical assistance under the ongoing Urban project. The Public Sector 32. The Ministry of Public Works, Energy and Mining (MTPEM) is the agency most active in the public construction sector. Its Road Directorate executes all maintenance and small new works for roads and supervises the preparation and the execution of the larger road projects by contractors. The Buildings Directorate establishes and enforces policies regarding the construction industry, assists in the preparation and supervision of major Government building works and is responsible for maintenance of all 1,500 Government buildings. The capability of the Buildings Directorate is adequate, with a staff of about 20 construction technicians, including 5 expatriates. The joint construction output of other Ministries (mostly Agriculture, Army and Education) is much smaller. The Implementation Unit of the First Education Project has, however, successfully undertaken a large construction program for primary schools. REGIDESO, the parastatal responsible for water and power development, executes all maintenance and most new works in the water sector and all maintenance and about 25% of new works in the power sector. The National Housing Agency (ONL) was created in 1974 to complement the small capacity of the private sector in the construction of public housing programs. It suffered from poor financial management, and is now being reorganized with technical assistance from the Netherlands. - 10 - Building Regulations 33. The Government procurement procedure is of particular importance since Government contracts represent about 80% of total value of construction work. General regulations on construction activities are based essentially on the pre-independence Belgian legislation. They are generally satisfactory but rather complex and are not systematically publicized and enforced. Construction standards have become obsolete and do not take into account local construction techniques and materials. The overall procurement procedure of the Government is generally satisfactory but not rigorously applied. Special contract conditions are often scanty or incomplete, due to inadequate technical specifications. The absence of classification of contractors leads to inefficiencies in contractor selection and contract supervision needs to be strengthened. Financing 34. Well-established contractors report no major financing constraints. The financial institutions, however, are not adapted to efficiently meet the needs of smaller local enterprises. The development of local construction firms would require the provision of financing on flexible terms for equip- ment and permanent working capital needs. 35. In 1979, credits outstanding from the three commercial banks totalled about US$59 million, of which an estimated US$6.7 million consisted of short-term loans to the construction sector. Commercial banks mainly provide performance bonds and guarantees for advance payments, as required by Government contracts. They also provide short-term credits against bills certified by the Government and, occasionally, loans for up to three years for vehicle purchases. However, they tend to limit these credits and guarantees to a small sum and require a security coverage of 100% which most domestic construction enterprises are unable to meet. Generally, commercial banks are wary of granting medium-term loans and only do so when assured of the Central Bank (BRB) refinancing or with the Government's guarantee. In 1979, the National Development Bank (BNDE) had a total portfolio oustanding of about US$12.2 million. The share of the construction sector amounted to US$3.2 million (26%), mainly for the financing of private houses and public housing programs. The Savings Bank (CADEBU) had an outstanding portfolio of about US$13 million, of which about 70% for housing construction and improvement loans. The National Bank for Savings and Investment (CAMOFI) was set up in January 1979 by the Government with the objective of using surplus liquidities from the public sector to grant long- and medium-term loans for the financing of developments projects. As of December 1979, CAMOFI had made loans totalling US$5.7 million, of which 25% went to public construction programs. 36. In 1978, a new system of credit regulation based on the distinction between rediscountable and non-rediscountable credit was introduced. Rediscount, with a few exceptions such as export credits which are rediscountable by nature, requires prior authorization of the Central Bank. Only major contractors have access to credit from the commercial banking system. Small contractors have difficulties in obtaining credit because (i) loans to these contractors are considered too risky, and (ii) the contractors may be unable to satisfy the criteria for rediscounting eligibility without which commercial banks are hesitant to extend credit. - 11 - 37. Ceilings on interest rates are set by the Central Bank and vary depending on whether operations are rediscountable or not. Following the readjustment in the structure of interest rate in October 1981 further to policy discussions with the Bank and the IMF, lending rates vary between 11 percent and 15 percent for non-rediscountable loans and between 7 to 11 percent for rediscountable loans. The Central Bank rediscount rates vary between 4.5 percent and 9 percent. As inflatio-n, which averaged 22.0 percent in 1976-78, 30% in 1979 and 15% in 1980-81, is projected to be in the order of 12% in 1982-84, the present interest rates will however remain slightly negative in real terms. IV. THE PROJECT 38. The proposed Project was identified in 1977, and appraised in September 1980. Negotiations were held in Washington from February 15 to 19. The Government's delegation was led by Mr. Nyaboya, Minister of Public Works, Energy and Mining. A detailed description of the Project components can be found in the staff appraisal report (Report No. 3343/BU dated March 25, 1982)which is being distributed separately to the Executive Directors. An advance under the Project Preparation Facility of US$300.000 was granted in July 1981. The main features of the Project are highlighted in the Credit and Project Summary at the beginning of this report. Special conditions of the credit are summarized in Annex III. Objectives and Description of Project 39. The proposed Project would represent the first attempt by the Bank to assist in the development of the local construction industry in a country of the Eastern Africa Region. The main bottlenecks that are constraining the development of the local construction industry include a heavy dependency on imported construction materials due to the insufficient production of local materials (para. 26) and obsolete construction standards (para. 33); the lack of adequate financial and technical support to permit the growth of domestic contractors who have development potential (para. 34); and the lack of qualified local manpower (para. 29). The Project aims at removing some of these obstacles through a number of actions that are distinct but interrelated. At the sector level, it would foster the production of local materials to reduce the historical high dependence on imports; improve the industry's efficiency and reduce construction costs by adapting to local realities the building code which still requires European standards; and strengthen the capacity of the Ministry of Public Works, Energy and Mining (MTPEM) to supervise the implementation of construction projects. At the enterprise level, it would assist in the development of small- and medium-sized contractors and also of producers of local materials through provision of financial and technical assistance. 40. Although the actions to be taken under the Project are distinct and diverse, they will be coordinated by a single Project Unit (para. 46) and it is expected that they will be mutually reinforcing. For instance, a revision of the building code would permit greater use of locally-produced construction materials while technical and financial assistance to producers would assist in expanding the volume and improving the quality of these materials; furthermore, a strengthening of local contractors through financial and technical assistance would make them - 12 - more capable of participating in Government construction projects, while the training of the staff of the MTPEM would result in a more efficient supervision of these Government-financed projects. This Project is experimental and pilot in the sense that it does not address all the needs and constraints of the sector and there are uncertainties about the reaction of beneficiaries during project implementation, as it is the first attempt at providing coordinated assistance to producers of construction materials and local contractors. It is hoped that, through this project, experience will be gained and lessons will be learned that will permit preparation of a larger project to assist the construction industry in a more integrated fashion. The Project Unit will be responsible for preparing such a project, with IDA's assistance. Development and Improvement of Local Construction Materials (a) Construction of Limekilns 41. To develop the production of lime (para. 28), the Project would provide financial, technical and managerial assistance to contractors for the construction and operations of two limekilns each with a production capacity of 2,500 tons of lime per annum. The kilns would be owned by the contractors. The enterprises would be selected by the Project Unit on the basis of their technical and management capabilities, and would in addition meet the following criteria: (i) maximum net fixed assets of BuFlOO million, in 1980 prices (US$110.000); (ii) inability to obtain term financing through normal commercial bank channels or from parent companies abroad (Section 1.02 (g) of the draft Development Credit Agreement). Loan requests would be prepared with the assistance of the Project Unit, would be appraised by BNDE and reviewed and approved by IDA. The promoters would provide out of their own resources at least 25% of the investment cost of the kilns and the balance would be sublent by BNDE (para. 49). Under an agreement with the Government, SOMIBUROM would undertake to supply the limestone required by the kilns at a price sufficient (i) to cover direct costs of production and an appropriate share of its management, general and administration costs and (ii) to generate a 12 percent return before taxes on the value of assets used for such production; this price would be reviewed annually by the Government and the Association (Section 4.03 of the draft Development Credit Agreement). The signature of the agreement between the Government and SOMIBUROM and the preparation of a satisfactory program of development of lime deposits to supply the two lime kilns would be conditions of effectiveness of the Credit. (Section 6.01 (b) and (c) of the draft Development Credit Agreement.) To ensure a regular supply of fuel wood for the two limekilns, it was also agreed that the Water and Forest Directorate of the Ministry of Agriculture and Livestock would (i) maintain and exploit eucalyptus tree plantations in accordance with appropriate forestry practices; and (ii) reserve and make available the production of such plantations for the operation of the limekilns financed by sub-loans at a price which would cover the full investment, operation and maintenance costs of such plantations; this price would be reviewed annually by the Government and the Association (Section 4.05 of the draft Development Credit Agreement). In addition, to foster the optimal use of the lime produced by the lime kilns, the Project Unit will promote the use of the lime in the construction sector. - 13 - (b) Improvement of Brick Production 42. The Project would provide financial, technical and managerial assistance to brick manufacturers to improve their operations and the quality of bricks produced. Subloans of up to 75% of the investment cost would be granted to brick manufacturers through the BNDE (para. 49), for the acquisition of small equipment and construction of shelters. The brick manufacturers would be selected on the same basis as limekiln promoters (para. 41). The manufacturer would provide out of its own resources at least 25% of the cost of the investment. The brick manufacturers would also receive managerial assistance mainly in the areas of accounting and financial management, and technical assistance for the selection of equipment, the exploitation of deposits and the construction of kilns where the bricks are baked. In order to encourage the brickmakers to participate in the Project, the Government would make available for periods of up to two years, a portion of the quarry of Kamenge, which has been prospected for the establishment of an industrial brick plant and found to be of efficient size and of satisfactory quality, to brickmakers who would commit themselves to produce bricks of standardized format and to exploit the quarry in accordance to a method which will be determined by the Project Unit; after the initial two year period, these arrangements would be reviewed by the Association and the Government (Section 4.04 of the draft Development Credit Agreement). (c) Feasibility Studies and Preparation of Follow-up Project 43. The Project would finance feasibility studies to examine additional ways to expand the production of construction materials, improve the availability and price of imported construction materials and strengthen the construction industry. The Project Unit would be responsible for preparing a list of priority topics for investigation and a program for conducting these studies which would be submitted to IDA for approval (Section 3.09 of the draft Development Credit Agreement). Such studies would, for example, examine whether construction materials such as timber or bamboo could be utilized more efficiently and whether small scale production of building hardware and construction tools better adapted to the needs of the country could be developed. The Credit would also finance a study to prepare a follow-up Project. Technical Assistance to the Ministry of Public Works, Energy and Mining (MTPEM) 44. The Studies and New Works Department (DETN) of the Buildings Directorate of the MTPEM, which generally acts as the agent of all Government agencies to complete tender documents, analyze bids and supervise execution of contracts, would receive technical assistance under the Project as follows: (i) services of a construction engineer (para. 47) for two years to draft a general document specifying norms and procedures for the use of materials and construction methods; and to review the tendering documents used by the Government; (ii) the services of a construction technician (para. 47) for two years to provide on-the-job training for the staff of DETN regarding procurement of construction works contracts and supervision of their execution. The Government would ensure that during the execution of the Project, DETN is adequately staffed and, each year of Project execution, the Government and the Association shall exchange views on the adequacy of this staffing so as to ensure that the staff of DETN shall draw maximum benefits from their cooperation with the consultants and the specialists (Section 3.07 of the draft Development Credit Agreement). - 14 - Assistance to Local Construction Enterprises. 45. The Project would provide managerial, technical and financial assistance to local contractors. A construction expert would give advice, on the use of materials, and construction techniques, including assistance in the preparation and implementation of some of the most difficult contracts. He would also organize training courses for general foremen. A management expert would give advice on accounting, supply management, and organize courses for accountants, technicians and foremen. In addition, during a one year period, an experienced technician would organize training for plumbers, carpenters and masons to alleviate the existing shortage of qualified staff in these fields. The Project Unit would also provide guidance to small contractors on the purchase of imported construction materials. Subloans of up to 75 percent of the cost of the investment, totalling about US$2.4 million, would be granted by BNDE to local construction enterprises (para. 49) for the financing of equipment renewal and expansion. These enterprises would be selected on the same basis as limekiln promoters (para. 41). In addition it would be required that they have been established and in operation for at least three years (Section 1.02 (g) of the draft Development Credit Agreement). It is estimated that 10 to 15 local cons- truction enterprises will fulfill the requirements of these criteria and obtain loans under the proposed Credit to increase their production capacity by about 30 percent within two years. (These loans would be tied to an expansion plan for the whole enterprise rather than to specific contracts.) Project Management and Implementation 46. The Project would be implemented over a period of two and a half years. The credit component would be administered by BNDE (para. 48). Overall implementation of the Project would require coordination between several public and private agencies (The Ministry of Public Works, Energy and Mining (MTPEM), the Ministry of Commerce and Industry (MCI), BNDE, promoters of limekilns, brick makers, local construction enterprises), none of which presently has the capacity to assume this task. It is therefore proposed to set up a Project Unit which would be entrusted with overall responsibility for Project execution and would receive all powers necessary for this purpose (Section 3.02 (b) of the draft Development Credit Agreement). The Project Unit would be established under MTPEM, and would report directly to the Minister. The Project Unit would in particular, assist enterprises in preparing their loan requests and ensure adequate coordination among all agencies involved in the Project including the MCI, which would be consulted on aspects of the Project related to industrial production. If the Project is successful, responsibility for the tasks assumed by the Project Unit could be eventually divided between the MTPEM and the MCI by merging the relevant sections of the Project Unit into these Ministries. This could be envisaged in the framework of a follow-up project. 47. In addition to the Project Director, a Codirector, and their Deputy, the Project Unit would include one lime and one brick expert responsible for providing technical assistance to the lime producers and the brickmakers; one construction engineer and two construction technicians to provide technical assistance to the contractors; one management expert to assist the entreprises in the three sectors (lime, brick, and construction). A training specialist would prepare and conduct courses and workshops for plumbers, carpenters and masons. These experts would be internationally - 15 - recruited. During each year of Project execution, the Government would ensure that Project Unit is adequately staffed. The Association and the Government would exchange views annually about the adequacy of this staffing (Section 3.07 (a) of the draft Development Credit Agreement). A single firm of consultants has been chosen to provide the experts and it is expected that the contract will be signed shortly. The Project Director has been selected. Project Cost and Financing 48. The total cost of the Project is estimated at US$7.4 million of which US$4.8 million or about 65% represents the foreign exchange component. The total cost of technical assistance representing 164 man-months is estimated at US$1.5 million excluding contingencies. This does not include the cost of feasibility studies which is estimated at US$440,000, excluding contingencies. The average cost of technical assistance (including international travel, salary and benefits) is estimated at about US$8,300 per staff-month. Physical contingencies of 10% were allowed for the construction of the limekilns, the eucalyptus plantations and the technical assistance components. Price contingencies are based on estimates of inflation rates, both international and local, as follows: 1980 - international 17%, local 20%; 1981 - international 12%, local 15%; 1982 - international 10%, local 12%; 1983 - international 10%, local 12%; 1984 - international 10%, local 12%. The proposed US$5.2 million IDA Credit (SDR 4.6 million) would finance about 70% of total Project cost including 100% of foreign exchange requirements and about US$0.4 million in local costs. Local contributions would amount to US$2.1 million, representing 30% of the Project cost: the Government's contribution would amount to US$1.2 million equivalent (of which about US$0.6 million would be recovered in duties and taxes), which would represent about 16% of total Project cost (about 8% after recovery of duties and taxes); the contribution from the producers of lime and bricks and from the local contractors would amount to US$0.9 million equivalent, or about 12% of total Project cost. The Government would deposit its contributions into the BNDE Account and the Project Account in installments (Section 3.01 (b) (ii) and 3.08 (b) of the draft Development Credit Agreement). As conditions of effectiveness of the Credit, the Government would (a) deposit into the BNDE Account at the Central Bank the equivalent of US$110,000 (Section 6.01 (e) of the draft Development Credit Agreement) and (b) deposit the equivalent of US$110,000 as part of its contribution to the financing of other project components in the Project Account at the Central Bank (Section 6.01 (d) of the draft Development Credit Agreement). 49. Up to US$2.4 million from the proceeds of the Credit would be onlent to BNDE to finance the foreign exchange cost of the subloans to enter- prises under conditions to be stipulated in a Subsidiary Agreement between the Government and BNDE (Schedule 4 of the draft Development Credit Agreement). The Government would onlend to BNDE the funds to be used for the subloans at an initial rate of eight percent per annum. BNDE would relend the funds at a rate which would be initially of 12 percent per annum and would be reviewed annually by the Government, the Association and IDA (Section 2.12 (b) of the draft Project Agreement). The relending rate from the Government to BNDE would at all times be 4 percent below the rate applicable to subloans. The rates applicable to subloans are justified as: (a) they are already three points - 16 - above the maximum rate charged by commercial banks for rediscountable medium-term loans; (b) although domestic inflation averaged 22.0 percent in 1978, 30 percent in 1979 and 15 percent in 1980-81, it is expected that it will slow down to an average of 12 percent per annum between 1982 and 1984; (c) even if the interest rates were marginally negative, an element of subsidy is warranted by the experimental nature of the Project; and (d) as indicated above, interest rates would be reviewed annually. The Government would assume the foreign exchange risk on the subloans and, as an incentive to encourage enterprises to participate in the Project, would not charge a fee for the coverage of this risk. The amortization schedule of subloans would be a maximum of fifteen years with a maximum grace period of five years (Section 2.02 (c) of the draft Project Agreement). BNDE would not reject an application for a sub-loan for security reason only, as long as such security would represent (i) at least 50% of the amount of the subloan in the case of contractors and (ii) at least 25% of the subloan in the case of the limekiln promoters and brickmakers (Section 2.11 of the draft Project Agreement). The risk of non-repayment would be shared between the Government and BNDE in the proportion of 75/25 percent respectively (Section 3.01 (c) of the draft Development Credit Agreement). In order to avoid that the resources available for financing of enterprises be used only for a few projects or enterprises, the maximum subloan granted by BNDE to lime producers, brick manufacturers, and local contractors, for a single project would be limited to US$400,000 or to 75 percent of the total cost of the project, whichever is less. Furthermore a single enterprise would not receive subloans amounting to more than the equivalent of US$400,000 in the aggregate. All subloans made by BNDE to enterprises would be subject to IDA's review and approval (Section 2.02 (a) of the draft Project Agreement). The signature of a Subsidiary Agreement acceptable to IDA would be a condition of effectiveness of the Credit (Section 6.01 (a) of the draft Development Credit Agreement). According to its Statement of Policy, BNDE's term debt is not to exceed four times the amount of BNDE's unimpaired subscribed share capital plus surplus and reserves. This requirement is satisfactory and would be maintained under the proposed Project (Section 3.03 of the draft Project Agreement). Cost Recovery 50. The recipients of the subloans would repay them to BNDE under the conditions specified above (para. 49). Following normal practice and as an incentive to participate in the Project, local contractors, brickmakers, and promoters of limekilns would not be charged for technical assistance. Procurement 51. Procurement for the subloans refinanced under the Credit would be in accordance with the standard IDA practice for development banks. BNDE would supervise procurement for items financed under the subloans. Its procurement practices are generally acceptable. The purchase of vehicles and equipment for the Project Unit would be under competitive bidding advertised locally under procedures which are acceptable to IDA (Schedule 3 of the draft Development Credit Agreement). In order to facilitate Project implementation, the experts in the Project - 17 - Unit and MTPEM will be employed under a contract with a single consulting firm (para. 47), which was selected in accordance with the IDA Guidelines of August 1981. The cost of this contract is about US$1.1 million. Disbursements 52. Disbursements would be made on the basis of (a) 100% of foreign expenditures for directly imported equipment, vehicles, materials and furniture and 75% of local expenditures for goods, procured locally but previously imported; (b) 65% of total expenditures for civil works; (c) 100% of foreign and 50% of local expenditures for consultant services for the Project Unit and for the audits; (d) 100% of foreign and 80% of local expenditures for consultant services for feasibility and other studies; (e) 100% of foreign and 80% of local expenditures for the purchase of equipment for the Project Unit and for the cost of operation of the Project Unit; and (f) 100% reimbursement of the Project Preparation Facility Advance. All disbursements would be fully documented. In the case of subloans to lime and brick producers and contractors, BNDE would be required to apply a disbursement procedure acceptable to IDA, including physical inspections upon delivery with a view to avoiding over-invoicing (Section 2.03 (a) (iv) of the draft Project Agreement). Audit 53. Not later than.six months after the close of each Government fiscal year, the management of the Project Unit would submit to IDA suitable financial statements reflecting the financial operations and position of the Project. These financial statements would be audited by an independent auditor acceptable to IDA (Section 4.01 (b) of the draft Development Credit Agreement and Section 3.02 of the draft Project Agreement). The cost of these audits would be financed under the Project (para. 52). BNDE already submits audited annual statements to IDA. Benefits and Risks. 54. The development of the local lime production and the improvement in the quality of brick production should reduce the reliance of the construction industry on imported materials, substantially improve the regularity of supply of construction materials, and reduce their cost. Technical and financial assistance to local construction companies would provide them with the technical and organizational means they need to participate in the growth of the sector and to enhance their share of the market. This should have positive effects on the balance of payments, and stimulate the growth of industrial activity. The Project would also contribute to the emergence of a class of domestic contractors and create new jobs. 55. Because of the low investment cost and of the high price of imported cement for which the lime would substitute, the economic rate of return of the two lime kilns is estimated at 93% and 135% respectively. The net foreign exchange savings calculated in 1980 prices, would be about US$880,000. The benefits of the component geared to assisting domestic construction enterprises are expected to be substantial in terms of value added, employment generation and foreign exchange savings. The main purpose of the brick component is to reduce - 18 - production losses to a level not exceeding 30% after two years (para. 28). It is estimated that the resulting profits of the brick manufactures would offset the cost of the component in about five years. In view of the nature of the project components it was not possible to calculate an economic rate of return for the project as a whole. 56. The task of coordinating the activities of the several public and private institutions involved in project implementation could be difficult. Furthermore, the success of the project will depend also to a large extent upon the availability of experts. Finally, possible weakness in BNDE's performance could delay implementation. In order to minimize these risks, responsibility for coordinating the various agencies involved in Project implementation would be assigned to a Project Unit reporting directly to the Minister of Public Works, which would be assisted by several experts provided by a single consulting firm, and the staffing of which would be reviewed periodically by the Government and the Association (paras. 46 and 47). In addition, the Association would continue to closely supervise BNDE's operations since a second line of credit to BNDE has recently been appraised. PART V - LEGAL INSTRUMENTS AND AUTHORITY 57. The draft Development Credit Agreement between the Republic of Burundi and the Association, the draft Project Agreement between the Republic of Burundi and the Development Bank, BNDE, and the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement are being distributed to the Executive Directors separately. 58. Special conditions of the Project are listed in Section III of Annex III of this report. Additional conditions of effectiveness of the proposed Credit would be as follows: (a) The Subsidiary Credit Agreement between the Government and the BNDE, has been signed (para. 49); (b) The Agreement between the Government and SOMIBUROM has been signed and a program of development of lime deposits has been prepared (para. 41); (c) The Government has made the first deposit in the BNDE account (para. 47); and (d) the Government has made the first deposit in the Project Account (para. 47). 59. I am satisfied that the Proposed Credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATIONS 60. I recommend that the Executive Directors approve the Proposed Credit. A. W. Clausen President Attachments Washington, D.C. March 25, 1982 ANNEX I 19 Page 1 of 5 BUKUNDI SOCIAL INDICATORS DATA SHEET BURUNDI REFERENCE GROUPS (WEIGHTED AVE ES LAND AREA (THOUSAND SQ. KM.) - MOST RECENT ESTIMATE)- TOTAL 17.8 MOST RECENT I)W INCOME MIDDLE INCOME AGRICULTURAL 17.1 1960 /b 1970 /b ESTINATE /b AFRICA SOUTH OF SAHARA AFRICA SOUTH OF SAHARA GNP PER CAPITA (US$) 50.0 90.0 180.0 1 238.3 794.2 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 11.0/c 11.3 17.3 70.5 707.5 POPULATION AND VITAL STATISTICS PDPULATION, MID-YBAR (THOUSANDS) 2851.0 3350.0 4022.0 URBAN POPULATION (PERCENT OF TOTAL) 2.2 2.2 2.3 17.5 27.7 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 6.5 STATIONARY POPULATION (MILLIONS) 17.0 YEAR STATIONARY POPULATION IS REACHED 2135 POPULATION DENSITY PER SQ. KM. 102.6 120.5 144.7 27.7 55.0 PER SQ. KM. AGRICULTURAL LAND 168.8 208.6 230.6 73.7 130.7 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 42.5 43.8 41.9 44.8 46.0 15-64 YRS. 54.6 53.2 54.8 52.4 51.2 65 YRS. AND ABOVE 2.9 3.0 3.3 2.9 2.8 POPULATION GROWTH RATE (PERCENT) TOTAL 1.6 1.6 2.0 V 2.6 2.8 URBAN 1.6 1.6 2.4 / 6.5 5.1 CRUDE BIRTH RATE (PER THOUSAND) 46.8 44.1 45.3 46.9 46.9 CRUDE DEATH RATE (PER THOUSAND) 26.5 24.2 22.3 19.3 15.8 GROSS REPRODUCTION RATE 3.0 2.9 2.9 3.1 3.2 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) USERS (PERCENT OF MARRIED WOMEN) .. .. FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 103.0 100.0 104.0 89.5 89.9 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 91.0 98.0 97.0 90.2 92.3 PROtEINS (GRAMS PER DAY) 56.0 61.0 60.0 52.7 52.8 OF WHICH ANIMAL AND PULSE 28.0 30.0 30.0 17.8 16.1 CHILD (AGES 1-4) MORTALITY RATE 41.0 36.0 32.8 27.3 20.2 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 37.2 39.5 41.8 45.8 50.8 INFANT MORTALITY RATE (PER THOUSAND) .. 140.0 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. .. .. 23.9 27.4 URBAN .. 77.0 94.0 55.0 74.3 RURAL .. .. .. 18.5 12.6 ACCESS to EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL ., .. .. 26.2 URBAN .. 96.0 95.0 63.5 RURAL .. .. .. 20.3 POPULATION PER PHYSICIAN 96566.7 55833.3 45020.0 31911.8 13844.1 POPULATION PER NURSING PERSON 6768.7 7494.4 6180.0 3674.9 2898.6 POPULATION PER HOSPITAL BED TOTAL 877.6 744.4 .. 1238.8 1028.4 URBAN 27.3 113.4 .. 272.8 423.0 RURAL 3723.1 1074.9 .. 1745.2 3543.2 ADMISSIONS PER HOSPITAL BED .. .. HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL .. .. URBAN .. .. RURAL * .. 5.0. AVERAGE NUMBER OF PERSONS PER ROOM TOTAL .. .. URBAN .. .. RURAL ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. RURAL .. .. The ollowing figures reflect the most recently available date: 1/ 200.0 2/ 2.2 3/ 5.0 20. ANNEX I 20___ Page 2 of 5 BURUDI - SOCIAL INDICATORS DATA SHEET BURUNDI REFERENCE GROUPS (WEIGHTED AVE AGES - MOST RECENT ESTIMATE)- MDST RECENT LOW INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b AFRICA SOUTH OF SAHARA AFRICA SOUTH OF SAHARA EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 18.0 27.0 21.0 56.4 73.7 MALE 27.0 37.0 26.0 ' 70.7 96.8 FEMALE 9.0 18.0 17.0 50.1 79.0 SECONDARY: TOTAL 1.0 2.0 3.0 10.0 16.2 MALE 1.0 3.0 4.0 / 13.6 25.3 FEMALE 1.0 1.0 2.0 / 6.6 14.8 VOCATIONAL ENROL. (Z OF SECONDARY) 35.0 24.0 12.0 Z/ 8.0 5.3 PUPIL-TEACHER RATIO PRIMARY 36.0 37.0 33.0 46.5 36.2 SECONDARY 15.0 12.0 16.0/d 25.5 23.6 ADULT LITERACY RATE (PERCENT) 13.9/c .. 25.0 25.5 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 0.9 1.1 1.3 2.9 32.3 RADIO RECEIVERS PER THOUSAND POPULATION 20.0 19.4 27.6 32.8 69.0 TV RECEIVERS PER THOUSAND POPULATION .. .. .. 1.9 8.0 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION .. 0.1 0.3 2.8 20.2 CINEMA ANNUAL ATTENDANCE PER CAPITA .. .. .. 1.2 0.7 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 1495.2 1676.8 1923.9 FEMALE (PERCENT) 45.6 45.2 44.4 34.1 36.7 AGRICULTURE (PERCENT) 90.0 87.0 84.1 80.0 56.6 INDUSTRY (PERCENT) 3.0 4.0 4.9 8.6 17.5 PARTICIPATION RATE (PERCENT) TOrAL 52.4 50.1 47.8 41.7 37.2 MALE 58.3 56.0 54.1 54.3 47.1 FEMALE 46.9 44.4 41.7 29.2 27.5 ECONOMIC DEPENDENCY RATIO 0.9 0.9 1.0 1.2 1.3 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS .. HIGHEST 20 PERCENT OF HOUSEHOLDS .. LOWEST 20 PERCENT OF HOUSEHOLDS LOWEST 40 PERCENT OF HOUSEHOLDS .. POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 213.0 136.0 381.2 RURAL .. .. 136.0 84.5 156.2 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. 99.1 334.3 RURAL .. .. 37.0 61.2 137.6 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 55.0 39.7 RURAL .. .. 85.0 68.8 Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1976 and 1979. /c 1962; /d 1975. The followiaS figures reflect the most recently available data: May, 1981 1/ 25.0 2/ 30.0 3/ 20.0 4/ 2.5 Vf 3.4 k/ 1.6 7/ 13.0 - 21 - ANNEX I DEPINITIOS 0P SOCIAL INDICATORS Page 3 of 5 oea: Although the data ae dran from sourcas gensrally judgad the east authoritative and rliablae, it ahould al.o b eotad that they say not ha Intar- nationally cospaabla because of the lack of standardi-d definitions and toncepte uad by different countria In collaetig th. data. The dat, era, nona- thalag., usaful to decribe ordera of magnitude, indicatea trend., and charateri cartetain major diffarnoso beteeaountrta. The raferecs groupa are (1) the sa. oountry group of the ~ubject country mnd (2) a country group with someahet higheraverage licoe ohan tha country artup of the aubjact country (atoept for "Capita Surplu 011 Exportera" grp hera "MiddIe Inoome North Africo and Middle East" bl ohoen becausa of strongar socto-cultural aftiote ). In the referent group data the auerags are population weightead arith=etic man for easch tndlcator and shown only whan ajority of the countrie t a group ha. data for that indicator. Since the ovarage of countrteamn ttdtoore dapenda on tha availability of data and ta ot untfors, cautto ut he mectied in relating aveage of one Indtoeor to another. These average te oto ueeful in omparing the value of oe ndictor st a time among the country and reference groupe. LAND AREA (thouaand eqlu.) Populaton per Hospital bed - total, urban, and rural - Populrtion (to:, Total - Total eurfeaerea coapriing land area and Inland eter.. urban, and nr ) divided by thier reopecttve noer of hopital boda Awricultural - Etttata of agricultural asre used tnmporrtily or persmoantly availabl do public end private tgeeral mod apeoialt"ed hospital and re- for trop., paeture., sarket and kitchn gardene or to lie tallow; 1978 data. hahtatioenter. lospitalaeretblihentm pernaneotly ataff ed by ut Inat one physician. Etuntab entu providuig prtntipatly'usto- GR PER CAPITA (US$) - OMP per capita si-ates at current aarket priten, cal- dial care are not Includad. Rural hospitalo, ho-nver, intlud health r~lated by aape conersion method - World Bank Atlas (1977-79 basis); 1960, ond ial cnters not por,anenty mtaffed by a phyeician (bt Oa 1970, ond 1979 data. nedical mseistant, nurse. midoife, nc.) thich offer in-pata,como- dation and provide a liäted range of nedtcal facilities. For nati - EP1G CONSUMPTION PER CAPITA - Annual coneumpton of coa-rctal eergy (coc1 tital prposs uban hospital Intlude WHOt principal/gnral hospicais, and lignite, prtroleum, naturat gae ond hydro-, crlear and geohral elrr- aod rotat bopital looat or rural hoapita too medical mod aterolty tricity) in kograma of tomt equivlent par capit.; 1960, 1970, and 1979 centers. Spncilized hospitalt ara includnd oly under total, data. Ad Ptaatona rer Honpital ted - Total number of ndmissions toor liscarges fron hospital divided by nhe nuaber of bedn. POPULATION AND VITAL STATISTICS Total Population, Måd-Year (tnosand,) - A, of July 1; 1960, 1970. end 1979 HOUSING data. Avramn Ize of Htouaaho,ld (paeons_ ter hoseholdl - total,_urban, ond rural - Urban Population (percnt of total) - RUtio of urban n ttotal populatioa; A household contsst of a group of Individual. tho nhare livong quater differnr definitions of urban area, a pafect comparabilty of data and their mi. eas. A boarder or Lodger nay or say non br ocluded to asong cutrien; 1960, 1970, and 1979 data, hr hvousehold for tatt-ictl porpoas. Population Projerton, Average number fo erons pen oo.- tot urten and rurl- Average n- Poputatiot toinear 2000 - Current populatton projeftions urn baed on 1980 bar of persons per room lo olt urban, and rural occupted conventional total poputation hr agr mod sen and their aortaity and fertiliy rate - dwellings, respectively. D eligaexcludeto-prmanttruturesuad Projectio parnaeters for nortality rate compria of three l e ssunum- unoocupied put. ing lift axpectancy at birth ncoreasing t h ~o try's per capita incoe Access to Electricity (p,rcent of dwellings1 - tota,_ unbat, and roral - lovet, mod fematt lifn epnctancy stabtltatng at 77.5 yeare. The para- Conventional daelioga with electrity to living quantera as percentage mter. for f.tility re -also have three levele asuating decline in of total, urbar, ond rural dwellingS respectively. fertility -aordlig to incoa level and post famlly planning perforeance. Each country i then assifned 000 of these atne conhinationt of ~ortality EDUATION and fertiltty trend, for projction purpoea. Adjusted Enrollmet Ratice Stationary population - In a tationary population ther, io o grothasin Priarv echool - total, aln end fenalt - Gros. total, moln and foale the btrth rea ta equal to the death rate, and ao the a atrucure re- ourollmet of ull agem ut the prima-y level on percnotagee of repective sait constant. Ths is achieved onty aftar fertility rae decline to pritmry achool-aga population; normally includoa chldren nged 6-11 the replame,nnt 1nnel of unit out reprodotio rann, hen sach generation years but adju.ted for dtfferent lngths of primaryedoutton; foo of omen rePlace tself txartly. The stationary population sie was contrie winh ottversal educaton enolltaent sup eceed 100 pnrcent entiated on the baaI of chr projectd tharattentics of tht populatton aineeonn pupise beolo or above tha offtcil schoot a. in the yar 2000, and tho rate of decline of fertility rate to replace- Secondary echool - total. malo and tenal - Cosputed om abov; secondary sent levat. Iducationrequre ut est four ynara of approved praary instructco; Year stattionary population is reached - The year whte stutionary population provides general, vocational, or teaoher tra-ig instrti.on for pupik eie has been rtached,. u.aly of 12 to 17 years of age; orreepondeo uraea generolly Population Density excluded. Per q. .- Kid-yar populrtion pnr aquare kiloneten (100 hectarea) of Voltional erollent (rercent of secondary) - Vocationl intitution total ara; 1960, tl and 1979 dato. tclude tchtcal, induetrtol, o other programs ohtch operatodepend- Per an. he. agrcltural land - Coput,d as above for agricultural land ently or at departonta of ieondary itttons. only; 1960, 1970 and 1976 data. Pupil-tnncherrato - rimary and se-condry - Totet student nrolled in Populotion Ams Struture (peåcnt) - Children (0-14 yeare). working-age (I5- pntry tnd secondary leveta divided Op ooers of teachere to the 64 yeara), and recired (65 years mod over) a. percentage. of mid-year popu- rorresponding tevete. tation; 1960, 1970, and 1979 dato. Adult lIteracy rata (Percent) - Litrat adulte (al to read und write) Popu2ation Gronth toae (percent) - total - nual growth rate of total eid- as a percenag of total adult population agad 15 years and over. yar popotattonE too 1950-60, 1960-70, and 1970-79. Porulation ronh toa (prc.ent) - rhan- Aoual growth rate- of urban popu- CONSUMPTION tattona for t15-60, 1960-70, mod 1970-79. Pasangr Care (rar thousand opulation) - Passeer cr comprise motor Coude tirth date (pnr thousand> - Aunual live birtoh per thousand of sid-yar care e 2ating le then oight persona; cludet mbulancem, hearee and population; 1960, 1970, and 1979 data, eilita y vehicles. Crude Daath tote (pr thousad - Annual datha per thoomande of eid-pean tadio Receivers (per thousand roolaton) - All typee of recaiver for radio populatio; 1960, 1970. and 1979 data. broadtu.t. to general public per thoomand of populotton; exclde ut- Oroas aproduction Rte -Avasgeubr of daugtraawomanottl ler to ltiensedrecevrs to countes ard tt yea that registration on radio her norsal raproductrAv period if mhe experiencee present agepecgific fer- eetsnwasOn effet; duca for racent yeara may not be comparlhe sie tility rata; uuallyp fivt-yer average. Goding In 1960, 1970, and 1979. st countrtes abolished licensing. Pastly Plannint - Acceotur., Aua2l (thou.anda) - Annual nuber of nccepore TV R eevera (ren thousand oputttion) - TV receivero for broodoastto of blth-control devicea undn .apices of national faily plann.in prograt, fnearal publdr pnr thouaand population; excludes unliened T reretve Family Plning - U-eB (prcant of married on) - P.rcentage of marred tt rountrie1 mod In Yeare alec regi1toation of TV ets oas to effect. .omen of child-beari.ngag (15-44 yeara) who uae birth-rcoarol devi-ceo Neaper Cirrulatton (rer touand poulaton) - Shons the oarage oSt- all eurrfed women On saa age group. ontation of "daily gral teretn newspaper", defined asaperiodical publicttati devotad prlmarily to raor.ding general naas. It is con.idered FOOD AND HUTRITON to be "dailyt If it appars at lest four tnm aa wek. Ilde of Food Productio per Capit (1969-71r100) - Index of ptr capitaannal Cinesa Annual Attendance rar Caita per Yanr-Based 00 the noer of procdortion of otl ford coeodties. Pnrtodt eclodes tend ond fend and tcketa eold during tIa year, tncluding admissione tO driv.-n cinemae is oc colendar ynar bais. Commoditte cover primary good (eg. ~ugarane and mobil units. inotead of tugar) which ara nd..i and contai cotrienta (e.g. cOffee and tea are exluded). Aggrega prodrction of esach rountry to bamed o LABOR FORCE national averaga producer poric wights; 1961-65. 1970, and 1979 data. Total Labor on (thoanda) - tconomiall attiva prasons, including Per rapotaorplr of raloties (percent of requienente) - Coaputed fro, armed forces and un.Mployed hut exclqdlng houseomvea, ntudent, ett., nnergyequivalnt of net ford suppliee available in cotry per capita rovaring opoulatIon of all ugea. Definitioa in various rountret ar per day. AVailabl suppliea compri-e dom~atic production, iport. ltes not comparable; 1960, 1970 tod 1979 da., export,, and chaugas ntok. Set supplla. eolode anmal fand, seeds, Famla (pereont) - Female labor fott om percentage of totat labor force. qoantite uoed to food procetstng, an d eses o distribution. Requre- Arrulture (perent) - Labor fora lo furmtng, fornetny, hunting mod santa ere timated by PAO based o physiological needa too noral acti- ftihing am pnerntage of total labor forre; 19tO, 1970 and 1970 dato. vty tnd health considanog rnvtrnmntalo temperature, body wetghts, age Indu.try (pe-tent) - Labor force in ning, rontort to, tanufoctoring ond .e distribution of population, and alltowig 10 perrent for ,at at mod electriiy, water and gae at rnrctge of tocol luhor forra; 0960. househotd laval; 1911-65, 1970, and 1977 data. 1970 und 1979 dato. Par rapita aupply of Proeten (gram par day) - Protein content of prrcapta Partctpation te (perent) - total. moln, and fe'ale - Prtcpatoo o net supply of tord pr day. et supply of fond ta dnfined am above. ta- octivityrateaaoa oted at totl, ma, atd femle lator forc a quirement. for all countrtis .etablishad by USDA provide for inieun parceotag. of total, nala and fesala populton of all1 agte repectivelY; altowanre of 60 gras of totat protein pan dy and 20 gra of anisal ond 1960, 1970. and 1979 data. These are based 00 11Dm particpatton rate pule protein, of which t0 grama shoold hr animal protein. These aand- refleting agn-ex etructure tt the populatit, ad lng tim trend. A ard. ore lover than those of 75 grata of total protein ond 23 gram of fan ettiates are from nationl soorces. aniLal protein ss an atrage for th world, proposed by PfA It ole Third Eonomi, Dep,.dency Ratio - Ratio of populatron under 15 end 65 and over Woold Pood Survay; 1961-65, 0970 and 1977 data. to the total lobor forc. Per capIta protein supply tron animal mod Pule - Protalt Iupply of food da- rlved from ama mnd pulaee in grana per day; 1961-65, 0970 and 1977 data, INCOM DISTRIBT ION Chltd (aem 1-4) Mortalitr Ra (rar thouad) - Annual death per thouand in Percenta of Private Iome (bOt Or carh ord klod) - Received by richeat age group 1-4 yeare, to rhildren in thi aga group; for sm.t developingrc- 5 percnt, richest 20 percont, poornat 20 perc nt, and poorrst 40 perceot tales da dertoed fro. life tables; 1960, 1970 and 1979 data. of bouseholds. REALTH POVERTY TARGET GROUPS Life Expnctanty at Birth (years) - Average nubmr of yeart of life reauiing The following etimate are varv approiate easres of ponety lavels, at hirth; 1960., 1970 and 1979 data. ond ahoold le interprrtnd with coteiderable taution. Infant Mortulity dato (pr thousand) - Annual death. of infacta under One year Estiet ted Absolute Pr~rror ote Level (US$ per capit.) - urbat md rral - of age per thuanc d live irth. Absolote pororty tncose lrrel la thot noe lre blot which a oinimal Acas to Safe Water (pnrcect of population- total, orban, and rutal - n- n qute diet pu essential non-food requi . s n br of people (total, urban, ond rual) otho rasoablearcess to afn fordaler. o d a e at: - r u n d t u un ge .nta d e e i d f e a be tr ein cla tro prot bto hrcbtem,vf apte, hmod otrraleomuhl EtorlmoatrPopu oenc t obsuol tva oner oveu(per r taluba do notave of tetrpd iprotvr opro c tet epart oRtto tech da an f g truh fml r ao o os cer Arre tot Exret Disposal (perrant of rorulation - total, urban, and rural - No'ber ot people (total, urban, and rural) mervef hyexre.ta di.posal om percentage of tlhtr respectli populations. creta dispsa moy lu d tOe rollection mod disposal, titO or without treatet , tf hotat exr.ta Eco or ad Social Ta tal ro and nante-oater ly oater-bornaetayse or the ose of ptt privles and asi-i Ecooc Analysis ord Projections Departmert tar in1Esllations. PayulPti Popratit ont rh Physct - PoLaton divided hy tomber of prac tcn hysi- ay 1981 tana qualtf ted from a medctl school at oniversity levat. Polation tr hurain. Peron - population divided by number of rructicnlg alandfemagrduaternu , pInstarat arat,iad assistant nres. 22~ ANNEX I Page 4 of 5 ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1980 ANNUAL RATE OF GROWTH (%, constant prices) US$ M1n. % 1970-75 1975-80 1980 GNP at Market Prices 920.0 100.0 0.9- 3.8-/ 1.- Gross Domestic Investment 127.7 13.9 6.6 12.1 -4.2 Gross National Savings 27.7 3.0 Current Account Balance -100.1 -10.9 Exports of Goods, NFS 72.7 7.9 3.7 -5.7 -35.6 Imports of Goods, NFS 208.3 22.6 8.0 5.7 -8.6 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1980 Value added UST M1n. % Agriculture 436.3 49.1 Industry 141.2 15.9 Services 223.1 25.1 Other 2/ 88.6 9.9 TOTAL 100.0 GOVERNMENT FINANCE Central Government - (BuF Million) Percent of GDP 1980 (P) 1980 1976-78 Current Receipts 12,715.6 14.3 14.8 Current Expenditure 10,848.2 12.2 11.2 Current Surplus 1,867.4 2.1 3.6 Capital Expenditures 7,736.0 8.7 8.0 External Assistance (net) 3,695.0 4.6 3.6 MONEY, CREDIT AND PRICES 1975 1976 1977 1978 1979 1980 (Million BuF outstanding at end period) Money and Quasi Money 3544.4 5220.9 8233.2 9411.2 11452.7 10619.7 Bank credit to Public Sector 1271.6 1125.0 270.8 1660.8 4150.4 4177.7 Bank credit to Private Sector 997.0 1532.2 1886.9 4491.3 6220.4 6864.4 (Percentage or Index Numbers) Money and Quasi as % of GDP 10.8 13.2 16.8 17.0 16.1 13.3 General Price Index (1970=100) 153.1 163.6 174.6 216.4 272.1 310.2 Annual percentage changes in: General Price Index 15.8 6.8 6.7 23.9 25.7 14.0 Bank credit to Public Sector 41.7 -11.5 -75.9 513.3 149.9 0.7 Bank credit to Private Sector -60.3 53.7 23.1 138.0 38.5 10.4 NOTE: All conversions to dollars in this table are at the average exchange rate prevailing during the period covered. 1/ Growth rates calculated on the basis of GDP at factor cost. D -Net indirect taxes and subsidies. 3/ Consolidated statement of Government finances. (P) Preliminary -.23 - ANNEX I Page 5 of 5 ECONOMIC INDICATORS BALANCE OF PAYMENTS MERCHANDISE EXPORTS (Average 1977-80) 1977 1978 1979 198011 (Millions US Dollars) US$ M1n % Export of Goods, NFS 96.3 71.4 111.9 72.7 Coffee VS.2 91.1 Imports of Goods, NFS 94.7 123.4 192.9 208.3 Cotton 2.1 2.5 Resource Gap (deficit -) 1.6 -52.0 -81.0 -135.6 Skins 0.7 0.8 Tea 1.8 2.2 Interest Paymen:s (net) -0.6 -0.9 -1.3 -3.9 Workers' Remittances .. Other Factor Payments (net) -13.1 -13.6 -8.9 -8.3 Net transfers 29.0 32.7 34.3 47.8 All other commodities 2.8 3.4 Balance on Current Account 16.9 -33.8 -56.8 -100.1 Total 82. 100.0 Direct Foreign Investment - - - - EXTERNAL DEBT, DECEMBER 31, 1980 Net MLT Borrowing Disbursements 18.9 20.2 41.7 46.7 US$ M1n Amortization 3.5 2.6 2.7 2.3 Public Debt, incl. guaranteed 108.2 Subtotal 15.4 17.6 39.0 44.4 Non-Guaranteed Private Debt Capital Grants 13.8 20.9 25.4 31.1 Total outstanding and Disbursed Other Capital (net) -0.3 -24.6 -4.3 24.6 Other items n.e.i. 0.2 3.2 -6.7 - Increase in Reserves (-) -46.1 16.7 3.4 DEBT SERVICE RATIO FOR 1980 Gross Reserves (end year) 2/ 95.9 83.4 92.7 92.9 Public.Debt, incl. guaranteed Net Reserves (end year) 86.0 69.3 65.9 65.9 Non-Guaranteed Private Debt Total outstanding and Disbursed Fuel and Related Materials Imports of which: Petroleum 5.6 6.7 12.6 25.0 Exports of which: Petroleum - - - - RATE OF EXCIANGE IDA LENDING, September 30 1981 .I Ba~ IDA (Amount expressed in US$ Million)- Through Feb. 1973 Since May 3, 1976 UST1.00 - BuF 87.5 USS1.00 - EuF 90.0 Outstanding and Disbursed - 44.1 BuF 100 - USZ 1.14 BuF 100 - US$ 1.11 Undisbursed - 48.6 Outstanding including Undisbursed - 92.7 From March 1973 to May 2, 1976 (Amount expressed in SDR million) US$1.00 - BuF 78.75 UF00 - BuF 18.75 Outstanding and Disbursed - . Undisbursed - 3.3 Outstanding including - 3. Undisbursed 1/ Preliminary estimates. 2/ Central Bank S/ Ratio of Debt Service to Export of Goods and Non-Factor Services. not available - . non applicable September 11, 1981 - 24 - ANNEX II Page 1 of 6 STATUS OF BANK GROUP OPERATIONS IN BURUNDI A. STATEMENT OF BANK LOANS AND IDA CREDITS EXPRESSED IN US DOLLARS (as of September 30, 1981) Aount US$ million Loan or (less cancellations) Credit Number Year Borrower Purpose Bank IDA 2/ Undisbursed One loan 1/ and five credits fully disbursed 4.8 9.8 - 593-BU 1975 Burundi Second Coffee - 5.2 0.24 Improvement 626-BU 1976 Burundi Fisheries Development - 6.0 2.88 679-BU 1977 Burundi Education - 10.0 0.06 731-BU 1978 Burundi Development Bank - 3.4 2.04 773-BU 1978 Burundi Second Highway Project - 14.0 4.48 917-BU 1979 Burundi Second Technical Assistance - 2.5 1.20 918-BU 1979 Burundi Forestry - 4.3 3.30 976-BU 1980 Burundi Second 15.0 12.91 Education - 1049-BU 1980 Burundi Urban Development - 15.0 13.88 1058-BU 1981 Burundi Telecom- munications - 7.7 7.61 Total 4.8 92.9 48.60 of which has been repaid 4.8 0.2 Total now held 0.0 92.7 Total undisbursed 0.0 48.6 1/ Extended in 1957 to the Belgian Trust Territory of Ruanda-Urundi for the improvement of the Bujumbura-Muramvya road and the expansion of the Lake port of Bujumbura. The loan which was guaranteed by the Kingdom of Belgium has been fully reapid. 2/ Prior to exchange adjustments. 25 ANNEX II Page 2 of 6 B. STATEMENT OF IDA CREDITS EXPRESSED IN SDR (as of September 30, 1981) Credit Amount in SDR Million Number Year Borrower Purpose Original Undisbursed 1154 2/ 1981 Burundi Nickel 3.30 3.30 Exploration Total now outstanding 3.30 3.30 Total now held by IDA 3.30 Total undisbursed 0.0 3.30 1/ Two credits were approved by the Board for a Third Highway Project (SDR20.5 million) and a Kirimiro Rural Development Project (SDR16.2 million) in April and June 1981, respectively. 2/ Not yet effective. C. Statement of IPC Investments Amount in US$ Million Type of Year Obligor Business Loan Equity Total 1981 Verreries du Glass container Burundi 4.65 0.78 5.63 Total gross commitments less cancellations, terminations, repayments and sales 4.65 0.78 5.63 Total commitments now held by IFC 4.65 0.78 5.63 Total undisbursed 4.65 0.78 5.63 26 - ANNEX II Page 3 of 6 D. Projects ir Execution 1/ as of September 30th, 1981 Credit No. 593-BU Second Coffee Improvement Project: US$5.2 million of December 5, 1975; Effective Date: October 31, 1976; Closing Date: April 30, 1982. The Project is a continuation of the First Coffee Improvement Project (US$1.8 million Credit No. 147-BU of April 11, 1969). It is being co-financed by the Kuwait Fund (US$1.2 million) on a parallel basis and by Belgium (about US$600,000). The Kuwait Fund has financed the construction of coffee washing stations and of the road construction component, and Belgium assists in the carrying out of a coffee research component. The project is designed to support the development of coffee and food production by strengthening and expanding extension services and distribution of agricultural inputs; it includes a pilot rural development program to improve livestock and food crop production. Start up of the project was slow because of frequent changes in foreign and local project staff. Following the appointment of a new team of experts and of a new Burundian manager, project management improved. Coffee extension work is showing favourable results. Husbandry methods practiced by coffee growers continue to improve and coffee research activities are making satisfactory progress. Construction of twelve washing stations has been completed. The results of the coffee processing component are very satisfactory due to efficient management of the washing stations and the fact that farmers have started to pay greater attention to quality aspects of coffee production. The pilot food crop development program has encountered difficulties. The project is nearly completed. However, to allow for completion of the construction program, the Closing Date has.been postponed from September 30, 1981[to April 30, 1982. Credit No. 626-BU Fisheries Development Project: US$6.0 million of June 11, 1976; Effective Date: February 22, 1977; Closing Date: June 30, 1982 This project is designed to increase the production of fish through the provision of training, equipment and materials to fishermen. and to improve the distribution of fish throughout Burundi. The project also includes financing for the preparation of rural development plans for the coastal region along Lake Tanganyika and the implementation of pilot development activities. The project is cofinanced by a US$1.2 million loan from the Abu-Dhabi Fund. Project implementation was initially very slow because of problems encountered in the recruitment of both expatriate technical assistants and their national counterparts and in the procurement of goods. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the understanding they do not purport to present a balance evaluation of strengths and weaknesses in project execution. - 27 - ANNEX II Page 4 of 6 Some of these constraints have been overcome and the pace of project implementation has accelerated. Production of a limited number of fiberglass hulls for fishing boats has begun and there has been an improvement in the catch rates at some fishing centers. A new experiment is underway to use low quality local wood and a minimum amount of foreign exchange to produce longer lasting and cheaper laminated wood baots. Problems of shortages of spare parts for the outboard engines are being solved. Contracts for all the studies have been signed and all of them are underway. However, SUPOBU's activities related to commercialization and marketing of fish have been unsuccessful, causing severe financial strains on the Company. Further to a review of implementation problems with the Government, it was decided to stop all processing and marketing activities except for high value frozen fish, and limit SUPOBU's role to the provision of fishing craft and gear and extension services. Credit No. 679-BU Education Project: US$10.0 million of April 28, 1977; Effective Date September 1, 1977; Closing Date: March 31, 1983. In line with the reform of primary education in 1973, the main objectives of the Project were to develop primary education in rural areas, and in particular to introduce practical subjects in the curriculum and the local language as the medium of instruction. The project included (a) construction and equipment of 100 Multi-purpose Learning Centers (MLCs) - to be utilized by primary school students and the local community at large - and of a practical subject teacher training center; and (b) provision of equipment and technical assistance to the Rural Education Bureau, which is responsible for the implementation of the reform, as well as for teacher training. As a result of a shortage of cement and fuel caused by the hostilities in Uganda in 1979, project execution has been delayed by about a year. Because of this interruption and of higher than anticipated price increases, the Project is encountering high cost overruns. The construction of 21 MLCs, a teacher training center and a printshop has been completed. Due to high cost overruns, and changes in project scope which included the establishement of a construction unit, and an enlargement of the scope fo the works for the teacher training center and the MLC workshops, only about 50 MLCs will now be built. Funds are nearly totally disbursed. Credit No. 731-BU Development Bank Project: US$3.4 million 30, 1977; Effective Date: March 27, 1978; Closing Date: March 31, 1983 The Project aims at providing funds for investment in medium size productive entreprises and technical assistance to the National Economic Development Bank (BNDE). Implementation of the Project started slowly. Following, however, an amendment of the Credit Agreement of June 1980, which allows the use of up to US$1 million for financing loans to small-scale .enterprises, project execution has accelerated. The newly established Industrial Development Unit of BNDE which is to promote and appraise industrial projects is now fully staffed. - 28 - ANNEX II Page 5 of 6 Credit No. 773-BU Second Highway Project: US$14.0 million of March 29, 1978; Effective Date: July 27, 1978; Closing Date: June 30, 1982 The project finances the paving of a major nation road, Bujumbura-Rugombo (65 km), the start-up phase of an improvement program for selected secondary and tertiary roads and bridges, the construction of a new central laboratory, the strengthening of the mechanized maintenance brigade and the provision of technical assistance and equipment for the ongoing maintenance program. Project implementation, in particular major road construction, was delayed by the lack of cement and fuel supplies due to disruption in international transport through neighbouring countries during the first half of 1979. Since then, works have resumed satisfactorily. Because of these interruptions, and of higher than expected price increases, the project is encountering high cost overruns. The improvement program for selected secondary roads is proceeding satisfactorily. The construction of a new central laboratory is nearly completed. The mechanized maintenance brigade is fully operational and has received all the equipment financed under the project. The technical assistance component is, in general, meeting its objectives; however, difficulties in recruiting local counterparts and in retaining them in service once trained have not made possible the reduction of expatriate technical assistance as planned. Credit No. 917-BU Second Technical Assistatice Project; TTSt2.5 million of June 1, 197Q; Effectiveness Date: September 27, 1979 Closing Date: December 31, 1982 This project provides for the further strengthening of the Government's planning mechanism and its project preparation and implementation capacity. It includes continuation of the technical assistance to macroeconomic planning at the Ministry of Planning, provision of experts to the planning divisions of the Ministries of Agriculture and Industry and financing of feasibility studies. The credit is also financing consultant services to support the Government's effort in restructuring public enterprises. Most of the experts have been recruited. Project implementation is satisfactory. Credit No. 918-BU Forestry Project: US$4.3 million and US$1.2 milion EEC Special Action Credit of June 1, 1979; Effectiveness Date: October 22, 1979; Closing Date: March 31, 1985 This project assists the Government in initiating the first stage for a long-term program to develop basic forestry services and plantations to supply fuel wood, building poles and timber and to establish long-term wood production and marketing policies. The project includes the establishment of rural nurseries in 30 communes, a 2,000 ha eucalyptus plantation and a 5,000 ha pine plantation, technical assistance (provided by France) and financing of energy studies. The three expatriate technical assistant-s (project manager, two silviculturists) are in post. The project is progressing satisfactorily. - 29 - ANNEX II Page 6 of 6 Credit No. 976-BU Second Education Project: US$15.0 million of April 23, 1980; Effectiveness Date: July 21, 1980; Closing Date: June 30, 1985 The project assists the Government in training middle level technicians and skilled workers in industrial trades and secretarial-administrative skills. It includes the construction, furnishing and equipping of two new boarding technical schools, a Mechanics Department and a Typist and Bookkeeper Training Department in two existing schools and staff housing. The Credit became effective on July 21, 1980 and implementation is progressing satisfactorily. Credit No. 1049-B Urban Development Project: US$15.0 million of June 24, 1980; Effective Date: October 31, 1980; Closing Date: December 31, 1985 This project seeks to redress the most urgent infrastructure deficiencies in Bujumbura neighbourhoods while laying the foundation for more efficient future growth. Essential improvements to street, drainage, water and public lighting networks will improve living conditions for 118,000 persons in Bujumbura, or 85% of the population. Serviced plots and loanr for house construction will be made available to families between 15th and 65th income percentiles. An artisan promotion component will provide technical and financial assistance to masons, carpenters, tailors, and metalworkers. An energy assistance program will improve the efficiency of charcoal-burning metal stoves. A municipal services component will strengthen the capacity of the Bujumbura municipality to collect garbage and maintain streets, drains and public buildings. Project start-up is progressing satisfactorily. Street and drainage improvements are underway in the first upgrading neighbourhood and at the Kwijabe serviced site. Artisan trainer-promoters have begun providing assistance to carpenters and metalworkers. Households to receive serviced plots at Kwijabe will be selected in November 1981; those chosen for the first phase of occupancy will begin construction in early 1982. Credit No. 1058-BU Telecommunications Project: US$7.7 million of August 7, 1980; Effective Date: January 7, 1981; Closing Date: June 30, 1985. The project is a major component of the country's 1980-84 investment program for telecommunications. It aims at improving the quality of existing services while extending the coverage to rural areas and segments of the population presently unserved. It would also strengthen the management of telecommunications parastatal company (ONATEL) in order to establish the company as a financially autonomous entity, and provide assistance for staff training. The project became effective on January 7, 1981. ONATEL started functioning in January 1980 and is developing satisfactorily. A delay of three to four months in the recruitment of consultants has delayed project implementation correspondingly. - 30- ANNEX III Page 1 of 2 BURUNDI PILOT PROJECT TO ASSIST THE LOCAL CONSTRUCTION INDUSTRY Supplementary Project Data Sheet Section I: Timetables of Key Events Identification: 1977 Preparation: Government, with IDA's assistance Appraisal Mission: September 1980 Negotiations: February 1982 Planned Date of Effectiveness: July 1982 Section II: Special Bank Implementation Action None Section III: Special Conditions of the Project Under an agreement with the Government, SOMIBUROM would supply the amount of limestone required by the kilns at a price sufficient (i) to cover its direct costs of production and an appropriate share of its management, general and administration costs and (ii) to generate a twelve percent return before taxes on the value of assets used for such production (para. 41). The Water and Forest Administration will plant and maintain eucalyptus plantations, supply the amounts required by the kilns at a price sufficient to cover the full investment, operation and maintenance costs of such plantations (para. 41). The Government would allow the brick makers to exploit the quarry of Kamenge (para. 42). -31 - ANNEX III Page 2 of 2 The Government would exchange views annually with the Association on the adequacy of staffing of the DETN (para. 44) and of the Project Unit (para. 47). The amortization schedule of the sub-loans extended by BNDE would be a maximum of fifteen years with a maximum grace period of five years. BNDE would not request from the sub-borrowers a security exceeding 50% of the amount of the loan for construction enterprises and 25% for brickmakers and limekiln operators. The Government would assume the foreign exchange risk. The risk of non repayment would be shared by the Government (75% and BNDE (25%) (para. 49). The Government, IDA and BNDE would periodically review interest rates applicable to sub-loans. The relending rate from the Government to BNDE would be 4% below the interest rate applicable to sub-loans (para. 49). The Government would deposit its contribution in the Project Account and in the BNDE Account in installments (para. 48). Additional Conditions of Effectiveness (para. 58) Signing of a Subsidiary Agreement between the Government and BNDE. Submission by SOMIBUROM of a program of development of lime deposits satisfactory to IDA and signing of an agreement between the Government and SOMIBUROM. First deposit, by the Government, in the BNDE Account for its contribution to the sub-loans. First deposit, by the Government, in the Project account for its contribution to other project components.  2';" ________ At BUR U Ni DI ¶ ADMINISTRATIVE DIVISIONS A D A tvunlar. :.:2(.r:2I - - -- 'I *.:.rd~;~it,,r.I t..r4r.d.,. .~ ls4Fiir.tI,ilI I*?*fl2, prt.'f .'2S .il, ~ >%..... * i. i I..4-rfliIu..~JI b....41Jr..~: M','*. **~as 1' -t ~ R.wrr: I; /~ I i';~ "I .45 ~ -, - I' /J r-~- i - * Ø I ii1~ I U-?jNx?~Ijj s i /- - . ~ .. - * < 5 - . .. - I ~ - .-* 5' I * I / ..Å.td.-.z.:2 .LK.jr.y:. 4 - "i -- - I I'-,.. I ( -I /? * .. I.- i- :2'.'.:: LU & i? r --. - - .~ - ). --5$--- 5 UI*.*d*T*. ,j 7. IX BUJUMBIJPA *. f Is . */ 4 I *~ .. /- 4 I ' i '.1 -- --i . - . ~ - I ' * -' 2 *;. i ' .c./ .4 ,' - *L~><--' ,* I i .1- ti - . I -" * 1hL, ~ i> . 4 i ty.---- / Iii -~"cL i . I hd I ------ I' , 1/ I - 'I 4 ~ i e.. .1 e. ____________________________ I-, \ I - ~ j\ -.9 kåI,nretoc 7 rc± ii iJ 20 - M.k i - \4¶j~~yb <~ i--,, -~ r 4 Ii,, I . -. ~ 'I, I . I . . - ' 141 I. i. i dIdii*«~.:jjIj2; t~rs~ 11. i., ..fl... . 4 ru - .- 4 -AF . . xi">.) 0"