Haiti - Second Rural Development Project in the North

Document of The World Bank FOR OFFICIAL USE ONLY -L.OOP Report No. P-3519-HA REPORT AND RECOMMENDATION OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT OF SDR 17.7 MILLION TO THE REPUBLIC OF HAITI FOR A SECOND RURAL DEVELOPMENT PROJECT June 17, 1983 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Gourde (G) G 1.00 = US$0.20 G 5.00 = US$1.00 G 1 million = US$200,000 The Gourde has been tied to the US Dollar at the ratio of five Gourdes to one Dollar since 1919. WEIGHTS AND MEASURES Metric British/US Equivalents 1 meter (m) = 3.281 feet (ft) 1 cubic meter (m3) = 35.32 cubic feet (ft3) 264.2 gallons (gal) 6.290 barrels (bbl) 1 kg = 2.206 pounds (lb) 1 ton (t; metric; 1,000 kg) = 1.100 short tons (sh. ton) FISCAL YEAR October 1 - Septembet 30 GLOSSARY OF ABBREVIATIONS BCA - Agricultural Credit Bureau CIDA - Canadian International Development Agency DARNDR - Ministry of Agriculture, Natural Resources and Rural Development EDH - Electricite d'Haiti FAC - French Assistance and Cooperation Fund FAO/CP - Food and Agricultural Organisation of the United Nations/Cooperative Program GOH - Government of Haiti GTZ - German Official Technical Assistance Organization IDB - Inter-American Development Bank IFAD - International Fund for Agricultural Development IMF - International Monetary Fund KfW - German Reconstruction Loan Corporation ODN - Organization for the Development of the North RDF - Rural Development Fund SAC - Agricultural Credit Association SNEP - National Water Supply Company UNCDF - United Nations Capital Development Fund USAID - United States Agency for International Development  FOR OFFICIAL USE ONLY HAITI SECOND RURAL DEVELOPMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Haiti Amount: SDR 17.7 million (US$19.1 million equivalent) Terms: Standard Project Description: The project would focus on the improvement of crop production by small farmers in Haiti's Northern region and support the following activities for this purpose: (i) Rehabilitation of two irrigation systems (460 ha in total), improved maintenance and related on-farm development (920 ha); (ii) Agricultural development including the strengthening of the regional extension service, diversification of agricultural research and expansion of seed production; (iii) Provision of credit (short and medium-term) for small farmers; (iv) Rehabilitation and construction of 116 km of rural roads and strengthening of road maintenance for another 200 km of existing roads; (v) Construction of 21 community water supply systems and 100 wells, rehabilitation of 95 existing wells, and strengthening of rural water supply maintenance; (vi) Institutional development of the Organization for the Development of the North (ODN) including technical assistance, studies and training, and (vii) the establishment of a facility (Rural Development Fund) to support local community development activities. Substantial contributions to project costs are expected from the International Fund for Agricultural Development, the Federal Republic of Germany and France. Benefits: Almost all of the project area's population of 775,000 would benefit from the project, though in varying degrees. The agricultural development component would directly involve 6,250 farm families and result in substantial incremental production of foodcrops. The roads and water supply improvements would affect 135,000 and 128,000 rural dwellers, respectively. Important benefits would also accrue from the improve- ment of the employment and health situation in the project area. Risks: Experience with on-farm development and rational water management is limited, and the introduction of new crop varieties and technologies may occasionally face 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 - problems of adoption. Components focusing on rainfed agriculture may be affected by the erratic rainfall pattern in the project area. However, these risks are considered manageable. ODN, which has gained valuable experience under the first IDA project and improved its ability to deal with project implementation problems, and frequent IDA supervision missions would monitor project implementation carefully in order to initiate corrective measures as soon as delays or other critical problems should arise. Estimated Costs: a/ ----- US$'000---------- Local Foreign Total Irrigation St. Raphael System 900 1,370 2,270 Grison Garde System 510 190 700 Subtotal 1,410 1,560 2,970 Agricultural Development Extension 695 800 1,495 Research and Development 820 1,890 2,710 Seed Production 480 240 720 Subtotal 1,995 2,930 4,925 Agricultural Credit 290 350 640 Rural Roads 2,865 2,055 4,920 Water Supply 1,710 2,375 4,085 Institutional Development Project Coordination 1,135 1,305 2,440 Training 250 475 725 Monitoring and Evaluation 120 480 600 Preparatory Studies 300 - 300 Subtotal 1,805 2,260 4,065 Rural Development Fund 1,050 450 1,500 Base costs 11,125 11,980 23,105 Physical contingencies 880 755 1,635 Price contingencies 2,495 1,920 4,415 TOTAL PROJECT COST 14,500 14,655 29,155 a/ Cost estimates exclude taxes and duties, from which this project is exempt.  - iii - Financing Plan: ------------US' 000 ----------- Local Foreign Total IDA 10,010 9,105 19,115 IFAD 2,875 2,125 5,000 Germany, F.R. of - 2,240 2,240 France 15 1,185 1,200 Government 1,600 - 1,600 14,500 14,655 29,155 Estimated Disbursements: -------------US$' Million--------- IDA FY 1984 1985 1986 1987 1988 Amount 0.7 2.3 4.6 5.0 6.5 Cumulative 0.7 3.0 7.6 12.6 19.1 Appraisal Report: Report No. 4369b-HA, dated June 16, 1983. Rate of Return: 23 percent for components, excluding rural water supply, which account for 82 percent of total costs. Maps: IBRD No. 16788 attached.  I A  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT OF IDA TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF HAITI FOR A SECOND RURAL DEVELOPMENT PROJECT 1. I submit the following report and recommendations on a proposed development credit of SDR 17.7 million (US$19.1 million equivalent), on standard IDA terms, to the Republic of Haiti, to help finance a Second Rural Development Project. PART I - THE ECONOMY 2. The last economic report on Haiti, distributed to the Executive Directors on May 25, 1982, was Report No. 3931-HA entitled "Economic Memorandum on Haiti". Its main findings, updated and complemented with findings of recent missions to Haiti, are summarized below. Relevant social and economic data are presented in Annex I. 3. Haiti's GNP per capita stood at US$270 in 1981, the lowest level in the Western Hemisphere. Its dire poverty is reflected in 1977 data showing that almost 75 percent of the population lived under conditions of absolute poverty; the rate of infant mortality was about 115 per thousand live births; average life expectancy was 53 years; there were low nutrition and sanitation standards (malnutrition and gastro-enteric diseases account for over half the deaths in the country) and the adult illiteracy rate was almost 80 percent. Extreme rural poverty, high pressure on agricultural land (400 inhabitants per sq km) and the lack of development of other sectors resulted, in recent years, in an acceleration of migration within and out of the country. 4. High mortality and migration have so far slowed population growth (1.7 percent per annum during the 1975-80 period), but the natural desire on the part of the Government is to improve health conditions. Thus, health improvements and growing difficulties imposed on emigration to neighboring countries will aggravate the already unfavorable relation of resources to population. Efforts are currently under way to promote modern methods of contraception through community organizations and other groups in collaboration with various national and external public and private agencies. 5. Haiti's GDP expanded at an average annual rate of 4.4 percent or 2.7 percent per capita during the 1970-80 period. The pattern of growth, however, was subject to cyclical fluctuations, influenced by the performance and weight of agriculture, which is subject to the vagaries of weather and external markets. Manufacturing and construction have shown a more even performance. 1/ Reprinted substantially from PR No. 3395-HA of March 3, 1983 for an Urban Development Project.  -2- 6. Between 1970 and 1980, agriculture provided employment for about 65 percent of the labor force, contributed on average 35 percent to GDP, and grew at an average annual rate of 1.7 percent. The sector--which pro- vides most of Haiti's exports--is characterized by extremely low product- ivity. Furthermore, the rapid disappearance of Haiti's forests and the resulting soil erosion are reducing the availability of wood, the country's prime source of energy, and leading to a shrinkage of productive land. In an effort to halt these trends, the Government has recently initiated erosion control and forestry programs. It also has initiated programs to introduce improved grain varieties, rehabilitate coffee plantations, restore the major irrigated systems and develop agro-industries. 7. Since 1970, manufacturing industries, construction and public utilities have emerged as the most consistently dynamic activities with average annual growth rates of 7 percent, 14 percent and 9 percent respec- tively. The manufacturing sector owes much of its expansionary drive to the export processing industries--which have a potential for further development-- and to a rapid increase in output of construction materials. Growth of locally manufactured products, other than construction materials, for the domestic market was necessarily limited by the thinness of this market. Construction, on the other hand, was fueled by public investment in infrastructure. 8. While gross investment represented only 11 percent of GDP in 1982, its share had steadily risen from 10 percent in 1970 to 13 percent in 1981. This progress was entirely attributable to the public sector, whose share of total investment has increased from one-fifth in 1970 to over 50 percent in 1981, as a result of an average expansion rate of 10 percent per year in real terms. The Government's investment strategy, as stated in its two Five-Year Development Plans (1972-76 and 1977-81), was geared to the decentralization of economic activity in favor of rural areas and provin- cial towns. 9. The mobilization of domestic resources for investment is hampered by a low average income level and institutional weaknesses in the capital market and in public finance. During the 1980-82 period, gross domestic savings amounted to only 1.6 percent of GNP. Foreign assistance, there- fore, plays a major role in supplementing domestic savings; some two-thirds of public investment is financed by foreign aid. 10. As regards public sector savings, the Government of Haiti has undertaken during the period 1979-81 a major reorganization of fiscal management. All tax revenues have been integrated into the Government budget; the Treasury now handles all Central Government expenditures; tax collection is being consolidated and parafiscal functions have been removed from the Regie du Tabac (State Trading Monopoly); sound accounting proce- dures are being established; customs duties have been consolidated and rates on luxury goods have been raised; new taxes have been imposed and the income tax law was amended to improve equity and elasticity of income taxa- tion. While there were significant gains towards achieving the goals of the fiscal reform, large extra-budgetary expenditure authorizations in 1980 and 1981 raised the public sector deficit from 7.9 percent of GDP in 1979  - 3 - to around 11.3 percent in 1981 and increasing recourse was made to central bank financing. The public sector deficit was reduced to about 9.5 percent of GDP in 1982. 11. Haiti could not escape the negative effects of world recession. In addition, the 1981 coffee crop was particularly poor. This, coupled with a drop in its world price and a decline in bauxite export revenues, resulted in an overall decline of Haiti's merchandise exports of 28 percent as compared with the level achieved in 1980. These low export revenues and the demand pressures generated by the domestic financing of the fiscal deficit generated a foreign exchange crisis. Furthermore, Haiti's drawing rights under an Extended Fund Facility (EFF) established with the Inter- national Monetary Fund (IMF) for the period 1979-81, were interrupted as ceilings on net domestic bank credit to the public sector and on net domestic assets of the monetary authorities were exceeded. As recession continued during 1982, export revenues did not improve despite record bauxite exports and some increase in assembly industry sales in the US market. 12. Economic activity would have declined again during 1982, were it not for agriculture, where a relatively good crop allowed overall GDP to be level with the one of 1981. The assembly industry, the most dynamic sector in the recent past, showed some growth again during 1982 in spite of the world recession. Stringent monetary and fiscal policies restrained both public and private expenditures. The foreign exchange constraint led to an accumulation of commercial arrears of US$20 million, and official foreign reserves dropped. As the foreign exchange situation became critical, the Haitian Authorities signed a Stand-by Arrangement with the IMF for the period June 1982 to September 1983. Under the conditions of this Arrange- ment, public expenditures and the arrears in the payment for vital imports are being reduced and a new general sales tax was approved. Also, measures are being taken to improve tax collection and an in-depth audit of the Central Bank is presently under way. Up to the date of the present report, the conditions of the Arrangement had been fully met. 13. The continuing high proportion of grants and concessionary loans extended to Haiti has helped the country maintain its debt-service ratio at an estimated 7.5 percent for 1982. The rising level of private foreign investment and of supplier's credits, however, will bring with it larger factor payments in the form of dividend repatriation and interest payments. 14. The ability of Haiti to maintain an acceptable growth rate in the future will depend on successful efforts to improve substantially the productivity of the agricultural sector and to continue diversifying the economic structure, especially into export-oriented industry. Because of the limited capacity to generate adequate levels of savings, Haiti will have to continue relying heavily on foreign savings to finance a high proportion of the costs of carefully selected development and institution building projects. Moreover, such external assistance should continue being extended on very concessionary terms in view of Haiti's low income level, modest prospects for overall export growth and increasing dependence on imported energy. But the terms, size and timing of the external assistance will depend very much on Haiti's own efforts in exercising  -4- fiscal and monetary prudence, in mobilizing domestic resources and putting them to good use. 15. The Association and the IMF are closely involved in Haiti's effort to improve fiscal performance and economic management in general. The Association, at the request of the Haitian Authorities, established a subgroup within the Caribbean Group for Cooperation in Economic Develop- ment. IDA is also extending assistance to the authorities in the prepara- tion of longer term plans to mobilize the country's scarce resources for economic development, including the priorities of public investments, identification of bottlenecks in project execution and, more generally, institution building efforts. PART II - BANK GROUP OPERATIONS IN HAITI 2J 16. The Bank Group began its operations in Haiti with a loan for a highway project in 1956. Since then, IDA has extended 18 credits and IFC has made one investment (US$1.5 million) for an integrated poultry project. As of March 31, 1983, the total of credits outstanding was US$205.2 million, of which US$93.3 million were undisbursed. Annex II includes a summary statement of Bank Group operations and IFC investments in Haiti and notes on the execution of ongoing projects. Bank Group loans and credits have financed six transport projects mainly serving the Northern region; three power projects helping to increase the country's electricity generation and distribution capacity; three education projects emphasizing primary school construction and qualitative improvements at the primary level; one water supply project for provincial towns; one rural development project in the Northern region; one agricultural rehabilitation project designed to help compensate damages caused by a severe hurricane; one port development project improving international port facilities of Port-au-Prince and small coastal port installations all around the country; one industrial credit facility; one pilot forestry project; and an urban development project, including sites and services schemes in three cities and the upgrading of the Port-au-Prince central market. 17. Overall, project implementation and disbursement performance are satisfactory. However, on several occasions, lack of counterpart funds has delayed disbursements. The establishment of working funds in recent pro- jects has brought improvement in this respect. Nevertheless, the Associa- tion is carefully monitoring the capacity of absorption of the country for externally assisted development investments. The Government of Haiti (GOH) has requested the major external aid agencies to finance temporarily a larger share of local costs of projects. In case the major agencies should agree to the Haitian request, a larger number of high priority projects could be continued without delays or reductions, or started as planned, and the country would still be able to satisfy the conditions of the fiscal stabilization program agreed with the International Monetary Fund in order to help overcome the present economic difficulties. 2/ Reprinted substantially from PR No. P3395-HA of March 3, 1983 for an Urban Development Project in Haiti.  - 5 - 18. Many public and private aid agencies are active in Haiti. Among the most important are the Inter-American Development Bank (IDB), the United States Agency for International Development (USAID), the Canadian International Development Agency (CIDA) and the assistance agencies of the Federal Republic of Germany and France. 19. IDB retains a diverse program in Haiti both regionally and sectorally. In addition to transportation, agriculture and energy, projects in health, education, industry, urban improvement, water supply and port improvement are now being implemented or planned. The USAID program is largely implemented in collaboration with private volunteer groups and is concentrating on agricultural production, improving rural infrastructure, conservation and restoration of natural resources, health care and the strengthening of public and private development institutions. The sale of foodstuffs to the GOH, supported with long term, low interest credits, is also important. CIDA had been supporting a rural development project in the Southern Peninsula and is now undertaking a review of its country lending strategy. CIDA is participating in the second IDA power project and remains committed to supporting the institutional development of public and private organizations within Haiti. This objective is reflected in training and technical assistance projects now underway with the Ministries of Education and Agriculture and the National Institute of Administration. 20. The Federal Republic of Germany is providing technical and finan- cial assistance for urban development in Port-au-Prince, for a rural devel- opment project in the Gonaives Plain and for power sector development all over the country. Together with France, Germany has been providing sub- stantial technical assistance for the First IDA Rural Development Project in the Northern region. Likewise, the co-financing of water supply and of the IDA port development projects is included in the German program. France has financed road construction and currently sponsors two integrated rural development projects, educational planning and research, a multitude of training programs and a maritime lighting project. Also France is financing components of the Third IDA Power Project and may become engaged in forestry development and further power projects. IDA Strategy 21. Originally, Bank Group lending to Haiti was heavily supporting infrastructure improvement (power, transport) but as Government priorities changed, social sector investments (education, urban development), rural development and reforestation gained in importance. The present lending program reflects the priorities of the national development plans and attempts to establish a balance between the continued need for infrastructure investments benefitting export-oriented industries and the equally necessary enhancement of the quality of rural living and immediate increase in agricultural productivity. As in the past, IDA projects will include substantial institution-building components and have regard to the current and future programs of other bilateral and multilateral assistance agencies. Co-financing of IDA projects by these agencies is very active and appears to keep a good potential for the future.  -6- 22. Under the current IDA program, the ongoing Pilot Forestry Project provides for the preparation of a second large-scale erosion control/reforestation project which will reduce the loss of valuable top soil and improve the supply situation for firewood. In the context of the power expansion program supported by the major assistance agencies, Haiti has requestee IDA to support an increase of the thermal generation capacity of the Carrefour power plant, and in 1985, the Guayamouc hydroelectric scheme which would at the same time substantially reduce siltation in the Peligre reservoir, the country's largest existing hydropower scheme. High priority investments needed in the water supply sector have recently been brought to the attention of IDA by Government, and in the education sector, primary and vocational education would require further IDA involvement. Sector reviews are being undertaken or will start soon in agriculture, industry, education and population, and are expected to lead to the identification of projects in these fields. 23. The Bank Group's share in Haiti's external debt disbursed and outstanding came to 23.8 percent as of October 1, 1982. The Bank Group's share of external public debt service was about 3.7 percent and will decrease during the coming years. PART III - THE AGRICULTURAL SECTOR Background 24. Haiti lies in the tropical zone. The country occupies the western third of the island of Hispanola, with an area of 27,750 Km2 and a long and rugged shore line of 1,530 km. The interior of the country is mountainous with 40 percent of the land above 500 m and 63 percent lying on slopes of 20 percent or steeper. Depending on available sources, estimates of cultivated areas range from 700,000 to 1,400,000 ha. These are limited land resources in relation to a population of over 5 million (1981), giving an average density of 185 persons per km2, or 400 persons per km2 of arable land. While less than one-fifth of the land is classified as best suited for field crops, the acreage actually cropped covers over one-third of the land, reflecting the high-degree of over-utilization. Rainfall varies widely, from over 3,000 mm on slopes exposed to the trade winds to less than 600 mm in marginal areas, especially the drought-prone Northwest peninsula. The southern part of the country is subject to frequent hurricanes. The Rural Sector 25. Agriculture plays a major role in Haiti's economy. Over the past years, it provided 65 percent of employment, accounted for about 35 percent of GDP and over 50 percent of merchandise exports. Cash crops (coffee, sugar cane, cocoa, sisal, cotton) account for 34 percent of total value of agricultural commodities; food crops (rice, corn, plantain, beans, millet, sweet potatoes) for 56 percent and livestock production for some 10 percent. Most farmers keep a few heads of livestock. Pigs are most important as a source of animal protein and as a vehicle of savings;  - 7 - followed by beef cattle. African swine fever has recently dramatically reduced the pig population; restocking is being planned with external assistance (IDB, USAID). Agricultural sector growth is uneven due to periodic fluctuations in coffee production and frequent droughts and hurricanes; since 1980, agricultural growth has been stagnant. Haiti needs substantial imports of basic foodstuffs such as maize, beans, wheat and rice. Imports of wheat (20 percent of overall cereal consumption) are growing at 15 percent annually as a result of changes in consumption habits in expanding urban areas, rapid population growth, and fluctuation in the supply of local staple foods. 26. Over two-thirds of the rural population is estimated to earn annual per capita incomes of US$100 or less (1981), about one-third of the country's average. Heavy demographic pressure on arable land,excessive tree cutting for firewood, overcultivation and lack of soil conservation have resulted in deforestation and serious land erosion (irreversible in some areas). However, land distribution in Haiti is not overly unbalanced. A high proportion of farmers own their land, although titles are often disputed because of complex family ownership and laws regulating entitlements to the inheritance. In one region (Artibonite), a eadastral survey is underway and the Government intends to expand this effort, which will require many years for full implementation, to the rest of the country. About 46 percent of the farms have less than 2 ha of land; 73 percent less than 4 ha and only about 8 percent are larger than 10 ha. Larger holdings occupy the most productive flatlands primarily devoted to the cultivation of sugar cane. Smaller holdings are normally fragmented with an average of three parcels per farm. Wage labor in agriculture is common in some parts of Haiti and many small landowners/farmers try to improve their cash income with earnings from other activities. Agricultural Constraints 27. The most important constraint is the low level of production technology, which translates directly into low yields of the main crops. It imparts to Haitian agriculture one of its main and most paradoxical characteristics: the under-utilization of the productive lowlands and the overutilization of the marginal uplands with resulting erosion. The five major areas of technical problems are: (a) use of low yielding varieties; (b) poor crop management; (c) inadequate use of water resources; (d) insuf- ficient soil and water conservation; and (e) endemic pest problems. How- ever, with external assistance, progress has been made over the last 20 years with the introduction of improved varieties of sugar cane, cotton, rice and corn. 28. Weed control generally is insufficient, and use of purchased inputs (fertilizers, pesticides) is limited (most often justifiably, since local varieties would not give an economic response). Coffee and sugar cane growing are little more than picking or cutting exercises, with little or no management. Land preparation by hand is relatively poor in quality.  -8- 29. Some 226,000 ha of soils would be suitable for irrigation if sufficient water were available; 66,000 ha are under some form of irrigation and another 11,000 ha could be irrigated without major additional investment. However, only a few thousand hectares benefit at present from full water control. The irrigation infrastructure is old and has been damaged by seasonal floods and is not well maintained. Water intakes and canals have silted up as a result of erosion. Drainage is poor as well, and lack of land levelling, the presence of scattered trees in the fields, and inadequate organization of water distribution limit the efficiency of irrigation. 30. Soil erosion affects most areas of Haiti; it results from heavy population pressure on land and forests, scarcity of flat or moderately sloping land, and over-utilization of soils, especially in the productive valleys and plains. According to FAO estimates, the country loses some 15 million cubic meters of soil yearly, corresponding to 6,000 ha of land. Though most of the eroded land is still usable, especially for tree planting, productivity is declining. Other erosion effects are: (a) poor retention of water because of excessive runoff and higher fluctuations of the underground water supply, causing shortages of irrigation water in dry areas; (b) disruption of irrigated agriculture; and (c) rapid siltation of the Peligre reservoir, the country's major hydroelectric scheme. Institutional Constraints 31. The general weakness of agricultural support services has been a major constraint to improving agricultural performance. The most important support elements are the various services of the Ministry of Agriculture, Natural Resources and Rural Development (DARNDR) whose efficiency, however, is hampered by insufficient funding and staffing. Its present, though increasing, share in budgetary allocations still compares unfavorably with the sector's important contribution to the national economy. The field structure of DARNDR is weak. Only 5 percent of its operational budget is reserved for field expenses and of 400 technicians in DARNDR's services, only about 200 are assigned to the districts. Duplication of effort, poor coordination and lack of effective programs aggravate the situation. Likewise, the activities of the various technical assistance and voluntary agencies are not always coordinated, which often results in poor utilization of resources and programs. The recently enacted Law of Decentralization (August 1982) is opening ways and is providing means for shifting important development functions to the regions. 32. Another important aspect of the institutional framework relates to the lack of an effective community structure. The Haitian farmer is strongly individualistic, with no active cooperative tradition. Different informal organizations, however, exist among rural neighbours and might be developed to become instruments of rural change. A number of agricultural credit associations and community action groups have been created to secure credit and ensure collective guarantees and community improvement (road repair, maintenance of irrigation works, school building and maintenance) through self-help.  - 9 - Agricultural and Rural Development Policies 33. The strategy proposed in Haiti's five-year plan (1982-86) calls for increasing food and export crop production, improving of infrastructure and agricultural support services, more investment in irrigated agriculture, stronger reliance on and promotion of farmer's associations, and, generally, the preservation of natural resources. During the plan period, annual increases of 2 to 6.8 percent in food crop production and overall increase of up to 60 percent for industrial and export crops are envisaged. To reach these objectives, the Government intends to allocate US$250 million equivalent - mostly concessional funds expected from the main external donor agencies - to programs for (a) food production; (b) animal production; (c) conservation and management of land resources (including erosion control and reforestation); (d) agricultural research; (e) organization and promotion of rural life; (f) integrated regional development, and (g) institutional strengthening. While the objectives of the plan are considered to represent the highest investment priorities, its size may be too ambitious in relation to the volume of external resources that in effect will be forthcoming and Haitian institutional constraints (paras. 31 and 32 above). 34. In implementing its agricultural and rural development programs,Haiti is receiving and will continue to receive in the future, substantial external support. The present bilateral and multilateral aid program is very diversified and more than 50 percent of the funds received for agriculture are allocated to integrated rural development. The programs, spread over several regions of the country, try to stimulate an improvement of economic and social conditions in rural areas by simultaneous actions in several sectors (education, health, water supply, transport, housing). Other externally supported programs range from irrigation, coffee improvement, rice development, forestry and soil erosion to agricultural credit and research. The Project Area Location and Physical Characteristics 35. The project area encompasses the northern plain of Haiti, the northern mountain range and a small section of the central plateau. It borders the Atlantic Ocean in the north, and the Dominican Republic in the east covering about 4,200 km2. In administrative terms, it includes the northern and northeastern districts. The area's population (1981) is about 775,000, giving a density of about 185 per km2. Eighty five percent of the population are rural dwellers; the rest live in urban clusters; Cap Haitien with 65,000 inhabitants being the largest. 36. The area includes five main watersheds draining into the Atlantic. Average rainfall varies widely, from 800 mm in the northeast (St. Raphael, Central Plateau) to over 2,000 mm in the highlands. In the plain, it generally increases from east (1,000 to 1,200 mm) to west (1,900 mm). Main rainy periods are September to January and March to June, but seasons are not very stable and precipitation fluctuates widely. About 40 percent of soils in the project area are suitable for agriculture (classes  - 10 - I to IV of the land capability classification of the US Soil Conservation Service). Some parts are subject to flooding and erosion has increased over past years, especially of soils in limestone areas. Land Use and Farming Systems 37. Although there are no detailed statistics available, it is estimated that out of a total of about 186,000 ha of regularly cultivated land in the project area, 11,000 ha are used for sugar cane (major cash crop), 64,000 ha for food crops (rice, sorghum, beans, cassava) and about 20,000 ha for plantains, fruit trees, coffee, vegetables, tobacco and cocoa. Some 70,000 ha are used for mixed cropping on small plots, and some 10 percent of the land is in fallow or not cultivated for a number of reasons (floods, droughts, absentee ownership). Livestock production is of secondary importance (10-20 percent of farm income). Mixed cropping is the usual practice, except for rice, part of sugar cane, and irrigated vegetables. Farm Size and Land Tenure 38. There are about 100,000 rural families in the project area with total annual per capita farm incomes (1982) of about US$90 equivalent. The majority of farms are small (1.25 ha in the plain; 0.5 ha on the hillsides) and fragmented. In the plains, land tenure is different: 25 percent of farms around St. Raphael are larger than 13 ha, and in the plain near Cap Haitien, one-third of the good land is occupied by farms larger than 25 ha. Typically, the farm owner, often assisted by other members of the family, raises a wide variety of crops and holds one animal (usually a pig). Some 20 percent of the land is cultivated by tenants and sharecroppers. Infrastructure 39. A main asphalted road connects the Northern region and the project area with the capital and the Central region of the country. The rural road system has been partly improved by the First IDA Rural Develop- ment Project but two-thirds of the roads in the western and eastern sections are in need of rehabilitation and better maintenance. Water supply, i.e., access to safe water is an important constraint although, in selected areas, the first IDA project has successfully changed the situa- tion. There are 16 public health centers and 29 dispensaries unevenly scattered over the project area and there is a hospital in Cap Haitien. The provision of basic education reaches the national average. Many external non-governmental organizations are supporting the expansion and operation of health and educational facilities. Previous IDA Involvement in Agricultural and Rural Development in Haiti 40. IDA has been supporting three operations in agriculture/rural development in Haiti. In 1976, the First Rural Development Project (US$10.0 million) was approved. It included the improvement of agricul- tural output by developing better crop varieties, irrigation, strengthening of extension services, provision of credit and the strengthening of infra- structure (rural roads, water supply, marketing facilities). Also, a  - 11 - regional development agency - the Development Organization for the North (ODN) - was set up. After initial delays in recruiting international and national staff, difficulties with counterpart financing, and inadequate knowledge of the physical and human environment, the project took off actively and will be concluded during CY83. Appraisal goals were exceeded with respect to water supply and adaptive research, and fully met for the roads component, but performance fell short of expectations for irrigation, credit and extension. These results, however, were finally achieved only after the completion of a series of additional studies and surveys, and the subsequent introduction of several adjustments during project implementa- tion. Additional studies brought better knowledge on crop patterns and population distribution, while climatologic, soil, drainage and water man- agement, and hydrogeological studies provided important insights into the physical conditions of the project area. An intensive study of the sugar economy of the area led to decisive action by Government to improve the efficiency of the local sugar industry. The adjustments in project design affected mainly the irrigation component for which the organizational con- ditions (in particular maintenance capability) were weaker than expected, the volume of agricultural credit (lower demand than expected) and the sugar component (sugar industry less efficient than expected). Also, a revolving fund was established half-way through the project which resulted in a very marked speedup of project activities and disbursements. 41. The proposed project would attempt to consolidate and expand the development activities initiated under the First Rural Development Pro- ject. It would greatly benefit from the experience gained, but even more so, from the existence of a now well functioning project implementation institution (ODN), a more developed infrastructure, newly available tech- nical packages to improve agricultural output (primarily for rainfed crops), a network of field stations built up for trials in the main ecolo- gical zones, and a group of trained technical and administrative specia- lists and support staff. Some of the auxiliary implementation agencies (extension service; rural water supply system; road maintenance) have been strengthened and some parts of the project area have been declared "inten- sive development zones", ensuring substantial technical and financial support. 42. The other two IDA operations in the Haitian rural sector are an Agricultural Rehabilitation Project (FY81; US$3.2 million) and a Pilot Forestry Project (FY82; US$4.0 million). The Agricultural Rehabilitation Project was an emergency operation to alleviate the damage to the agriculture of the southern region caused by Hurricane Allen in 1980. The project includes the provision of fertilizer and farm tools, and the estab- lishment of farm service centers and nursery programs (coffee). Initial difficulties and delays in project implementation occurred due to the lack of experience of the counterpart agencies with the organization of emer- gency operations and with IDA procurement procedures. Again, however, after a certain learning period, the project took off well and is now almost fully disbursed and will be completed during CY83. The Pilot Forestry Project will develop approaches to later large-scale reforestation schemes, train forestry personnel, reorganize the Forestry Bureau and improve the management of the remaining public forests. It has recently  - 12 - become effective and all main activities are being initiated. The Government strongly supports the project in view of the growing dimensions of the erosion problem and scarcity of fuelwood in Haiti. PART IV - THE PROJECT Background 43. The proposed project was identified by the Cooperative Program of the Food and Agriculture Organization (FAO/CP) between March 1979 and August 1980 and prepared in May 1981. IDA appraisal took place in September/October 1982. Negotiations were held in Washington, D.C. from May 31 to June 3, 1983, and the Haitian delegation was led by Mr. Claude Weil, Minister of Planning. A staff appraisal report No. 4369b-HA of June 17, 1983, is being distributed separately. Project Objectives 44. The project would help implementing the Government's rural development policies in the Northern region of Haiti. It would focus on crop production and concurrent improvements in rural infrastructure and rural living conditions, affecting - in varying degrees - a target population of about 135,000 rural dwellers. A concerted program of all development agencies operating in the project area would provide more efficient technical packages and strengthen agricultural support services. Substantial contributions to project costs are expected from IFAD, the Federal Republic of Germany and France. Project Description 45. The project would include the following components: (a) the rehabilitation of two small existing irriga- tion systems with a total irrigated area of 460 ha and on-farm development and maintenance on a total of 920 ha; (b) agricultural development, including the strengthening of the regional extension service, diversification of agricultural research and expansion of seed production; (c) the provision of credit (short and medium-term) for small farmers; (d) the rehabilitation and construction of 116 km of rural roads and strengthening of road maintenance for another 200 km of existing roads; (e) the construction of 21 community water supply systems and 100 wells, rehabilitation of another 95 existing wells and improvement of the rural water supply maintenance system;  - 13 - (f) further institutional development of the Organization for the Development of the North (ODN), including technical assistance, studies and training; and (g) the establishment of a facility ("Rural Development Fund"-RDF-) to support small-scale local community development activities. Detailed Features of Project Components 46. Irrigation: The project area includes several smaller irrigation schemes built or rebuilt in the 1930's and 1940's. These schemes, through the action of time, floods, and neglect of maintenance have deteriorated and are urgently in need of improvement. The project would rehabilitate the remaining areas (260 ha) of the St. Raphael system not improved under the first IDA project, as well as the Grison Garde system (200 ha). At St. Raphael, during the initial two years, emphasis would be placed on on- farm development and efficient operation and maintenance of the irrigated land rehabilitated under the first IDA project. Only thereafter, would new civil works investments follow (Schedule 1, para. 4(c), of the draft Credit Agreement, Conditions of Disbursement); consisting of improvements on critical sections of the main canal lining, on 12 intakes and control structures, on secondary canals and 35 distribution structures. Likewise, the drainage system would be improved involving about 6 km of secondary drains and 50 other structures (drops and culverts). Also, a service road of about 10 km would be built and on-farm works (improvement of irrigation and drainage ditches, farm levelling, smoothing) undertaken for about 400 ha. Bilateral technical assistance services (36 man-months for irrigation, and 48 man-months for on-farm development) financed by Germany (GTZ)) would assure technical guidance, supervision of the rehabilitation and expansion of works and the training of local personnel for maintenance functions. Furthermore, under this component, initial local salary support for technical staff and vehicles for field activities and a contribution to their operation and maintenance would be provided. 47. For the Grison Garde system, serving primarily for intensive rice production, a new distribution and headwork control structure, 5 new other control structures and 3 km of rehabilitation of the main canal are envisaged. The distribution system would be expanded by about 5 km and a total of 25 control and other structures (drops and culverts) would be added. For drainage, about 5 km of secondary drains would be constructed and several natural collectors and other structures (15 drops and culverts) improved. On-farm works would include irrigation and drainage ditches and smoothing on 100 ha, and a service road of about 3.5 km. As in the case of St. Raphael, major civil works investments would only commence after two years when further stream flow data have been collected and evaluated confirming the availability of sufficient supplementary water for an expanded irrigated area (Schedule 1, para. 4(b) of the draft Credit Agreement, Condition of Disbursement). During negotiations, the Government has given assurances to undertake a comprehensive irrigation water charges system study following terms of reference reviewed on the same occasion. The aim of the study would be to define a system which would gradually increase water charges to a level allowing the recovery of the largest possible share of operation and maintenance costs. The recommendations of  - 14 - the study would be implemented not later than by the end of 1985 (Sections 5.05 and 5.06 of the draft Credit Agreement) and in the meantime (effective January 1984), the Government is committed to introducing a provisional water charge of US$ 10 equivalent per ha and year as well as to raise this charge to no less than US$ 15 equivalent one year later. With respect to the provisior of counterpart funds for irrigation operation and maintenance, the Government would make appropriate arrangements (Section 5.04 (a) of the draft Credit Agreement) and has submitted at negotiations detailed budget estimates for the implementation period of the project and accepted procedures for periodic consultations with the Association in order to ensure the adequacy and timely availability of counterpart funds (Section 4.10 of the draft Credit Agrement). 48. Agricultural Development: This component would consist of three 4 related sub-components-Extension and Soil Conservation, Research and Development, and Seed Production. Currently, there are 30 extension agents assigned to the project area mainly in activities initiated under the first IDA project and covering about 50,000 ha of cultivated land. Under the proposed component, the extension network would be reorganized in order to improve intensive crop production programs on 920 ha of irrigated and some 8,000 ha of rainfed land. Working closely with the seed supply and credit services, the extension staff would promote the use of improved varieties that have been tested under the first project (irrigated rice and vegetables, rainfed sugarcane, corn, cassava, plantains and beans). Furthermore, the planting of fruit trees (mangoes, citrus, avocado), particularly on hillsides, and of trees for timber or firewood on non-arable land, and the rehabilitation of smallholder cocoa plantings would be supported. For more efficient soil conservation, the component would include simple conservation measures such as contour strips of grass, planting of hedges around farm plots, strip cropping, contour bunding, and mulching which were promoted on a pilot scale during the first project and which have been well received. Also, gully control work (partly financed by the "Rural Development Fund", see para. 54 below) would be supported. After redeployment, each extension worker would assist about 260 families operating with the help of local contact farmers. For better mobility and intensity of farm visits, the component would also provide extension workers with appropriate motorcycles and support their operating expenditures; for the conservation measures, tools would be procured. 49. In Research and Development, farming systems surveys and on-farm trials mainly dealing with the introduction of improved crop varieties would be supported. The existing network of six field trial stations would be expanded by another seven, and for the improvement of sugarcane quality, a small control laboratory would be established. An important aspect of research and development work would be the introduction and monitoring of improved on-farm irrigation practices (land levelling, furrowing, irriga- tion scheduling). In Seed Production, the seed multiplication program started under the first project would be continued and expanded. Also, the production of fruit and local varieties of timber tree seedlings as well as cuttings for the renovation of sugar cane plantations would be supported, primarily through the promotion of small village nurseries in cooperation with several private volunteer groups active in the area. As the key ele- ment of the proposed project, Research and Development would be an important recipient of technical assistance services; 108 man-months in  - 15 - total, financed by France (48), IFAD (45) and IDA (15). Seed processing and storage facilities, initial local salary support for technical staff, testing and harvesting equipment, vehicles (including operation and maintenance expenditures) as well as farm inputs (fertilizers, pesticides, seeds) would be provided. 50. Credit: The proposed project would include a small credit component to compensate for the limited access of project area farmers to institutional short and medium-term credit. Short-term lending would be in kind and/or cash primarily for seed, fertilizer, pesticide purchases and seasonal labour; medium-term credit (three to five years) would finance tree crops, animal production, equipment and on-farm development for irrigation. For better efficiency in terms of reduced costs and improved loan recovery, short-term credit operations would be handled by credit associations (Societes Agricoles de Credit-SACs), organized and supervised by the Cap Haitien regional office of the Agricultural Credit Bureau (BCA). SACs exist in the project area since several years and have proved useful as efficient and reliable borrowers; extension agents would provide technical assistance for loan applications. Interest rates and other charges would be those applicable to BCA's nationwide lending program (presently 12 percent interest annually plus an initial commission of 2 percent). So far, BCA has attempted and succeeded to achieve positive interest rates (1982 inflation rate = 8 percent). This policy would be continued and strengthened with IDA assistance by reviewing once a year with BCA the onlending rates in order to maintain their adequacy with respect to inflation, cost of funds in the market, and operating costs (Sections 4.06 (a)-(c) and Schedule 4 of the draft Credit Agreement). BCA would closely cooperate with ODN which would supervise and refinance, on a grant basis, the credit component. Should a borrower desire a credit in kind, ODN would procure or make available from its stocks, the materials or implements required. However, direct supervision of the individual credit accounts would be the task of BCA, and ODN would transfer the credit portfolio it still holds from the first project to BCA prior to credit effectiveness (Section 7.01(g) of the draft Credit Agreement). 51. Rural Roads: Difficulty of access to different parts of the project area has been a major obstacle to agricultural development. As under the first IDA project, an important rural roads component is proposed to expand the transport improvement program for the wider project area. It would consist of the rehabilitation, improvement or construction of 15 sections (116 km) and maintenance support for four years for these as well as the roads built under the first project (200km). Basic design for all roads was completed under the first project and generally, these roads would measure 5 m in width and have good surfaces and adequate drainage for year-round traffic. The Government shares the concept of IDA that labour intensive methods should be applied for all road construction whenever advantageous and possible (Section 4.07 and Schedule 5 of the draft Credit Agreement). In addition to construction and maintenance, the rural road component would include local salary support for incremental technical staff, the procurement of spare parts, fuels and lubricants, a staff training program, and 48 man-months of international technical assistance services for training as well as operation and maintenance. The Government would also make adequate arrangements for the provision of a road  - 16 - maintenance budget (Sections 4.10 and 5.04(b) of the draft Credit Agreement), and during negotiations has given the same assurances for their adequacy and timely availability as outlined in para. 47 for the irrigation component. 52. Water Supply: During the first project, 23 village water systems and 135 wells were established. The proposed project would expand this activity by adding another 21 village water supply systems and 195 wells. Most of the village water systems would be gravity, springfed type, and water distribution would take place through communal standpipes. Wells would be fitted with solid handpumps. As for the installations under the first project, Community Action Committees - with the technical support of the National Water Supply Company (SNEP) - would operate and maintain systems and wells. About 128,000 village dwellers would directly benefit from this component and the Government is willing to make long-term tech- nical assistance and budgetary arrangements for the maintenance of all water supply systems provided under the proposed and the first project (Section 5.04(a) of the draft Credit Agreement). In order to ensure proper maintenance, this component would also create a basic stock of spare parts and provide 50 percent of the incremental salaries for maintenance personnel. Germany (GTZ) would provide international technical expertise (30 man-months). 53. Institutional Development: In view of the complex nature of the proposed project and in order to coordinate the various participating agencies, a technically competent and well administered project implementa- tion agency is an essential prerequisite. ODN, created for the purpose of the first IDA project, is the most indicated choice for this function. While still in need of a helping hand for specialised tasks (including financial management and accounting), it has matured over the past years and begun to perform well, particularly with respect to organizing research and seed production and certain maintenance functions. ODN is increasingly gaining the recognition and political and financial support of Government as a semi-autonomous regional development organization, a role it is expected to perform fully after the conclusion of the proposed project. In order to strengthen ODN in performing its present and future mandate, 56 man-months of international technical assistance services would be provided by IDA, and France (FAC) would add another 56 man-months for monitoring and evaluation. Furthermore, France would provide 48 man-months of international technical assistance services for the establishment of a training unit designed to train farmers, project staff and workers, in cooperation with other training institutions in the area. Equipment, the renovation of existing buildings for training purposes, partial local salary support, training expenditures and a limited number of scholarships (5) for in-service training abroad would complement the assistance granted to ODN. 54. Rural Development Fund: The project would include a special facility (mainly financed by IFAD) to support community based actions to improve rural infrastructure or agricultural production. Typically, these actions would include flood control measures, small irrigation schemes, road improvement, innovative local development programs (for example pisci-  - 17 - culture), beekeeping and cottage industries. ODN would appraise the commu- nity proposals which are expected to cost individually between US$5,000 and US$20,000 equivalent. Funds for community action projects would be grants and IDA/IFAD would review and approve proposals with a cost exceeding US$20,000 equivalent (Section 4.09 of the draft Credit Agreement). Project Cost and Financing, Retroactive Financing 55. The total project cost is estimated at US$29.2 million equiva- lent, net of taxes, with a foreign exchange component of US$14.7 million, or about 50 percent of total project costs. The proposed credit of US$19.1 million would cover 66 percent of total costs and finance 62 percent of the foreign exchange component and about 69 percent of local costs. IFAD, the Federal Republic of Germany and France would finance the remainder of foreign exchange costs and another 20 percent of local cost. The balance of local costs would be contributed by the Government. Prior to credit effectiveness, the Government intends to undertake preparations for irriga- tion investments, initiate studies and strengthen the accounting system of ODN. Expenditures in this respect not exceeding US$0.3 million equivalent, incurred after January 1, 1983, are proposed for retroactive financing (Schedule 1, para. 4(a) of the draft Credit Agreement). 56. Cost estimates are based on April 1983 prices and a detailed analysis of quotations received at that time, as well as on actual costs of similar items procured under the first IDA project. Physical contingencies have been estimated at 20 percent of base cost for roads built under labour intensive methods, 15 percent for other construction and 10 percent for equipment and materials. Prices for imported equipment, scientific equipment, vehicles, general supplies and materials, and services are expected to grow 8 percent in 1983, 7.5 percent in 1984, 7 percent in 1985 and 6 percent thereafter. Local costs are uniformly expected to grow 12 percent per annum during the project implementation period. 57. In total, 119 man-months of international technical assistance for the rural roads component, research and development and project implementation are provided under the proposed IDA project, at an average man-month cost of US$11,000 (including base costs, assignment allowances and customary overheads). This cost is considered reasonable in view of the highly specialized nature of the services required and the large amount of short-term assignments. Technical assistance specialists would be contracted in accordance with the "Guidelines for the use of Consultants by World Bank Borrowers and by World Bank as Executing Agency" of August 1981 (Section 4.02(a) of the draft Credit Agreement). IFAD, Germany and France would add another 311 man-months of specialist services to the project, procured,and administered under their own guidelines. Co-Financing 58. The contribution of IDA and the Government to the project would be substantially complemented by the International Fund for Agricultural Development (IFAD), the Federal Republic of Germany (GTZ) and France (FAC). The respective amounts totalling US$8.4 million equivalent would be US$5.0 million; US$2.2 million equivalent and US$1.2 million equivalent.  - 18 - IFAD would finance important shares of the RDF and agricultural development and project execution costs; Germany would provide consultants and tech- nical assistance for water supply, irrigation and sugarcane production, while France would support consultants for research and development (in- cluding a group of volunteers), and training. Both bilateral contributions are foreseen as full grants; the IFAD loan (administered by IDA) would be for 50 years (including 10 years of grace) at 1 percent interest per annum. The conclusion of all necessary governmental action to make the IFAD loan agreement effective as well as the notification of Germany (GTZ) and France (FAC) that all conditions to the disbursements of their grants have been fulfilled would be conditions of effectiveness (Sections 7.01 (a) (b) of the draft Credit Agreement). Procurement 59. Contracts for irrigation works (except for small structures totalling US$0.6 million equivalent in remote areas of the St. Raphael and Grison Garde systems for which negotiated contracts or force account arrangements may be required) and road construction exceeding US$0.5 million equivalent (totalling US$5.1 million) would be procured through ICB in accordance with Bank Group Guidelines for Procurement. For road construction, wherever possible and advantageous labour-intensive methods would be applied in line with principles and techniques already established under the first project as well as under road components of former and ongoing IDA transport projects. Contracts of smaller volume ranging between US$0.05 million and US$0.5 million equivalent (totalling US$0.6 million), would be procured through local competitive bidding following procedures acceptable to IDA. Contracts for less than US$0.05 million (totalling US$0.2 million) may be procured by direct negotiations, provided all terms and conditions are satisfactory to IDA. Local bidders for civil work contracts would receive a margin of preference of 7.5 percent. All contracts for the supply of vehicles, equipment and materials exceeding US$0.1 million (totalling US$2.7 million) would be procured through ICB, and contracts between US$0.05 million and US$0.1 million (totalling US$0.2 million) through local competitive bidding. On contracts for the supply of equipment and materials, the local preference would be the lower of 15 percent or the applicable customs duty. Contracts for the purchase of equipment and materials for less than US$0.05 equivalent (totalling US$0.6 million) may be procured through direct shopping, locally or abroad. Approval by IDA of tender evaluation documents for all contracts above US$0.1 million equivalent would be required prior to the award of all such contracts. All other contracts would be reviewed in the field by IDA supervision missions. Disbursement 60. The proposed credit would be disbursed as follows: (a) 100 percent of total expenditures for civil works with respect to irrigation, water supply, roads and ODN; vehicles and equipment for irrigation, water supply, ODN; consultants for roads and ODN, and training for water supply (US$13.0 million);  - 19 - (b) 78 percent of total expenditures for road maintenane (US$1.2 million); (c) 54 percent of total expenditures for water supply mainte- nance (US$0.2 million); (d) 30 percent of total expenditures for vehicles and equipment as well as operating costs for extension, research, seed multiplication, agricultural credit, training for agricul- tural development and irrigation, and monitoring and evalua- tion (US$1.0 million); (e) 30 percent of total expenditures for civil works with respect to research, agricultural credit; and local salaries for irrigation, extension, research, seed multiplication, ODN, training, and monitoring and evaluation (US$1.3 mil- lion); (f) initial deposit in Special Account (US$0.4 million); and (g) unallocated (US$2.0 million). Project Implementation 61. Since the proposed project to a large extent represents an expan- sion and consolidation of activities initiated under the first project and ODN would again serve as project implementation agency (see para. 53 above), full project execution could start immediately after credit effec- tiveness. ODN would directly be responsible for central procurement, vehicle maintenance, irrigation and water supply systems construction, research, seed production and the organization of training. Functions such as road and water supply system maintenance as well as agricultural credit, however, would be handed over (although remaining under the general coordi- nation of ODN) to other agencies created or strengthened for this purpose during the first project. As the project proceeds, ODN would increasingly assume its role as a regional development agency and not merely act as a project unit. 62. In order to define the mutual obligations of all participating agencies towards the project, the Borrower would conclude an agreement with ODN, and ODN with all the other agencies, prior to credit effectiveness (Sections 4.01(b) and (c) and 7.01(e) and (f) of the draft Credit Agreement), and the efficiency of the working relationship between ODN and DARNDR would be subject to special periodic reviews (Section 5.03 of the draft Credit Agreement). Furthermore, in order to ensure that at all times the project management would be in the hands of competent professionals, any appointments or changes in the positions of the Director General and the Administrative/Financial Managers of ODN would require prior consultation with IDA (Section 5.02(b) of the draft Credit Agreement); the hiring of a financial adviser would be a condition of effectiveness (Sections 4.02(b) and 7.01(d) of the draft Credit Agreement). The Project is expected to be completed by December 31, 1987.  - 20 - Project Working Fund/Special Account 63. Since experience with other projects in Haiti has shown that bud- getary constraints limit the capacity of Government to pre-finance expendi- tures to be reimbursed under IDA credits, a working fund of US$0.5 million equivalent (including US$0.1 million from IFAD), to be established and maintained by withdrawals from the credit accounts, would be set up in a special account opened in an appropriate bank. IDA would commence recovery of the initial deposit when the total unwithdrawn amount less all special commitments to commercial banks has reached the level of US$ 1.0 million (Sections 2.03(a)-(f) and 7.01(c) of the draft Credit Agreement). Accounts and Auditing 64. All entities involved in the project would keep separate accounts and, with the assistance of ODN, would establish and maintain appropriate accounting systems (Section 5.01(b)(i) of the draft Credit Agreement). All accounts would be inspected regularly in accordance with Haitian standard procedures for the control of development investment expenditures. In addition, all project accounts would be audited annually by external auditors whose qualifications are acceptable to IDA and their reports and relevant statements would be forwarded to IDA not later than four months after the end of the Haitian fiscal year (Section 5.01(c) and (d) of the draft Credit Agreement). Economic Analysis 65. A detailed economic and financial analysis for all components of the proposed project (except for the rural water supply) was undertaken. For the agricultural components, all quantifiable benefits and costs (over a horizon of 20 years) such as incremental production of food crops, on-farmactivities, services improvements, infrastructural and irrigation investments were assessed and taken into consideration. The rural roads component has been subject to a separate analysis, based on surveys of 15 roads, undertaken during 1982 by ODN and the Ministry of Public Works, supported by expert consultants. The overall rate of return of the agricultural components (including institutional costs) is about 20 percent and not very sensitive to changes in the main benefits and costs. It would require a decrease in all agricultural benefits by 20 percent, or an increase in on-farm costs of 83 percent or a substantial delay in the project schedule (two years for instance) to reduce this rate to about 12 percent. The overall rate of return of the road component is estimated to be 31 percent (the analysis brought out rates of return varying between 23 and 100 percent for individual road links) and the analysis of switching values shows that benefits could be reduced by one-half, or costs be doubled, before the rate of return would fall to 12 percent. A one year delay in project implementation would depress the rate of return of the road component to 24 percent. The combined results of the economic analysis show an overall rate of return of 23 percent for the agricultural development and rural roads components which account for 82 percent of total project costs.  - 21 - Environmental Impact 66. Deforestation and excessive cultivation of sloping land contri- bute widely to Haiti's erosion and floods and siltation in the plains. Since the proposed project would expand the pilot soil conservition mea- sures started under the first IDA project and in addition promote tree planting, the environmental impact would be favorable. All agricultural programs would foster the improvement of varieties optimally adapted to the ecology of the project area. Benefits and Beneficiaries 67. Almost all of the project area's population of 775,000 would benefit from the project, though in varying degrees. The agricultural development programs are designed for a direct participation of 6,250 farm families (about 44,000 persons) and apart from the expected increase in farm family income, a demand for about 318,000 farmhand man-days annually would be created for low-skill labour at harvest times and for more permanent work on farms. The incremental agricultural production arising from the project (in 1983 prices, after full implementation) is estimated to reach some 12,000 tons of food crops and vegetables annually, representing a value of about US$ 4.6 million equivalent. Cash crops (tobacco, cocoa, sugar cane) would generate another US$ 1.7 million equivalent. The rural roads component would directly improve the surface transport and communications situation of 135,000 rural dwellers and the construction and maintenance requirements would generate a demand for about 21,000 man-days of low-skill labour annually. The water supply component would also have a very beneficial impact: 128,000 area dwellers would receive potable water and a visible improvement in health (particularly child health) is expected. Since women play an important role in farm labour and trading activities, several components of the proposed project directly benefit them as members of the labour force and in their family roles. Risks 68. Experience with on-farm development and rational water management is still limited and the introduction of new crop varieties and technologies may occasionally face problems of adjustment. Components focusing on rainfed agriculture may be affected by the erratic rainfall pattern in the project area. However, these risks are considered minor and of short-term impact only. Under the first project, farmers were generally receptive to change and improved crop varieties. ODN, which has gained valuable experience under the first IDA project and improved its ability to deal with project implementation problems, and frequent IDA supervision missions would monitor project implementation carefully in order to initiate corrective measures as soon as delays or other critical problems should arise.  - 22 - PART V - LEGAL INSTRUMENTS AND AUTHORITY 69. The draft Development Credit Agreement between the Republic of Haiti and the Association, and the Recommendations of the Committee pro- vided for in Article V, Section 1(d) of the Articles of Agreement, are being distributed separately. 70. Special conditions of the credit are listed in Section III of Annex III of the report. Conditions of Effectiveness would be (i) the conclusion of all necessary governmental actions to make the IFAD loan agreement effective; (ii) the notification by Germany (GTZ) and France (FAC) that all conditions to the disbursement of their grants have been fulfilled; (iii) the establishment of a Special Account; (iv) the hiring of a financial adviser for ODN; (v) the execution of working agreements between the Borrower and ODN, and ODN and all other agencies participating in the proposed project, and (vi) the transfer of the ODN credit portfolio to BCA (Section 7.01(a)-(g) of the draft Credit Agreement). 71. I am satisfied that the proposed credit will comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATIONS 72. I recommend that the Executive Directors approve the proposed credit. A. W. Clausen President Attachments June 17, 1983 Washington, D. C.  ANNEX I - 23 - Page I of 5 TABLE 3A RAITI - SOCIAL INDICATORS DATA SHEET RAITI REFERENCE GROUPS (WEIG TED AV GES AREA (THOUSAND SQ. KM.) - MOST RECENT ESTIMATE)'- TOTAL 27. 8 MOST RECENT MIDDLE INCOME MIDDLE INCOME AGRICULTURAL 13.9 1960 lb 1970 /b ESTIMATE /b LATIN AMERICA & CARIBBEAX AFRICA SOUTH OF SAHARA GNP PER CAPITA (US$) 90.0 110.0 270.0 1902.0 1053.2 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF C A, EQUIVALENT) 34.Z 32.7 63.3 1259.9 610.1 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THOUSANDS) 3630.0 4235.0 5009.0 URBAN POPULATION (PERCENT OF TOTAL) 15.6 19.9 27.5 65.7 28.3 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 7.5 STATIONARY POPULATION (MILLIONS) 13.7 YEAR STATIONARY POPULATION IS REACRED 2090 POPULATION DENSITY PER SQ. KM. 130.8 152.6 177.3 35.2 54.7 t PER SQ. EM. AGRICULTURAL LAND 305.0 293.1 352.8 92.5 129.9 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 40.9 42.9 43.4 39.7 46.0 15-64 YES. 55.2 53.4 53.1 56.1 51.1 65 YRS. AND ABOVE 3.9 3.7 3.5 4.2 2.8 POPULATION GROWTH RATE (PERCENT) TOTAL 1.6 1.5 1.7 2.4 2.8 URBAN 4.1 4.0 4.9 3.8 5.2 CRUDE BIRTH RATE (PER THOUSAND) 38.8 37.1 35.5 31.4 47.2 CRUDE DEATH RATE (PER THOUSAND) 19.5 16.6 13.8 8.4 15.7 GROSS REPRODUCTION RATE 3.0 3.0 2.4 2.1 3.2 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. .. 16-1/c USERS (PERCENT OF MARRIED WOMEN) .. .. 5.0/c FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 104.0 100.0 89.0 110.0 90.7 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 91.4 86.8 92.1/d 108.4 93.9 PROTEINS (GRAMS PER DAY) 48.7 47.0 50.1Jd 66.0 54.8 OF WHICH ANIMAL AND PULSE 16.8 16.7 17.7/d 34.0 17.0 CHILD (AGES 1-4) MORTALITY RATE 46.5 29.1 18.1 5.6 23.9 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 44.4 48.9 53.2 64.2 51.0 INFANT MORTALITY RATE (PER THOVSAND) 182.0 142.6 114.6 64.2 118.5 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. .. 14.0/c 65.6 URBAN .. .. 38.0/c 78.9 RURAL .. .. 7.0/c 43.9 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. .. .. 59.3 URBAN .. .. .. 75.3 RURAL *- 1.0 .. 30.0 POPULATION PER PHYSICIAN 9230.0 10609.2 5936.3/d 1617.3 4185.2 POPULATION PER NURSING PERSON 4021.8 3077.4 2936.9/d 1063.5 2213.2 POPULATION PER HOSPITAL BED TOTAL 1567.4 1194.6 1218.9/d 477.4 1036.4 tURBAN 298.0 470.9 583.41d 679.8 430.8 RURAL * 5075.8 3309.7/d 1903.4 3678.6 ADMISSIONS PER HOSPITAL BED .. .. .. 27.3 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL .. 3.6 4.4/c URBAN .. 2.2 4.2/.c RURAL 4 4.3 4.5/c AVERAGE NUMBER OF PERSONS PER ROOM TOTAL .. 1.9 URBAN .. 2.0 RURAL * 1.9 ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. 4.1 2.9/e URBAN .. .. RURAL .. ..  - 24 - ANNEX I TABLE 3A Page 2 of 5 HAITI - SOCIAL INDICATORS DATA SHEET HAITI REFERENCE GROUPS (WEIGHTED AV EaAGES - MOST RECENT ESTIMATE)- M)ST RECENT MIDDLE INCOME MIDDLE TNCOME 1960 /b 1970 /b ESTIMATE /b LATIN AMERICA & CARIBBEAN AFRICA SOUTH OF SAHARA EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 46.0 51.0 62.0 104.3 83.3 MALE 50.0 57.0 .. 106.4 96.1 FEMALE 42.0 46.0 .. 103.3 80.4 SECONDARY: TOTAL 4.0 6.0 15.0 41.3 15.3 MALE 5.0 8.0 16.0 40.4 19.4 FEMALE 2.0 4.0 13.0 41.8 11.3 VOCATIONAL ENROL. (% OF SECONDARY) 21.4 19.0 8.0/c 33.7 4.7 PUPIL-TEACHER RATIO PRIMARY 42.9 52.3 41.2/d 29.9 38.6 SECONDARY 12.7 18.0 27.0 16.7 23.4 ADULT LITERACY RATE (PERCENT) 15.0 23.3 23.0 79.1 35.6 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 2.3 2.7 4.0/c 42.8 31.9 RADIO RECEIVERS PER THOUSAND POPULATION 5.8 19.6 20.5 270.5 71.8 TV RECEIVERS PER THOUSAND POPULATION 0.5 2.6 3.0 107.7 17.9 NEWSPAPER ("DAILY GENERAL INTERFST") CIRCULATION PER THOUSAND POPULATION 10.5 18.7 6.9 63.7 19.1 CINEMA ANNUAL ATTENDANCE PER CAPITA .. .. 1.21d 2.7 0.6 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 1970.9 2102.4 2375.4 FEMALE (PERCENT) 47.6 47.0 46.1 24.4 36.5 AGRICULTURE (PERCENT) 80.0 74.2 73.5 31.3 56.5 INDUSTRY (PERCENT) 6.4 7.2 7.2 23.9 17.7 PARTICIPATION RATE (PERCENT) TOTAL 54.3 49.6 47.4 33.6 37.0 MALE 58.4 54.3 52.5 50.4 46.9 FEMALE 50.4 45.2 42.6 16.8 27.2 ECONOMIC DEPENDENCY RATIO 0.8 0.9 1.0 1.3 1.3 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS .. .. BIGEEST 20 PERCENT OF ROUSEHOLDS .. .. LOWEST 20 PERCENT OF HOUSEHOLDS .. .. LOWEST 40 PERCENT OF HOUSEHOLDS .. .. POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 169.0/d .. 507.0 RURAL .. .. 144.0/d 184.1 200.6 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) LURBAN .. .. 82.0/d 518.0 523.9 RURAL .. .. 73.0/d 371.1 203.6 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 55.0/d RURAL .. .. 78.0/d 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 1978 and 1980. Ic 1976; Id 1977; /e 1975. May, 1982  - 25-- ANNEXi mIT