Mali - Office du Niger Technical Assistance - Engineering Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4414 PROJECT PERFORMANCE AUDIT REPORT MALI: OFFICE DU NIGER TECHNICAL ASSISTANCE PROJECT (CREDIT 854-MLI) March 25, 1983 Operations Evaluation Department 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. ABBREVIATIONS AND ACRONYMS FAC - Fonds d'Aide et de Cooperation (French Development Agency) IER - Institut d'Economie Rurale (Rural Economics Institute) ON - Office du Niger RMWA - Regional Mission in West Africa FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT MALI: OFFICE DU NIGER TECHNICAL ASSISTANCE PROJECT (CREDIT 854-MLI) TABLE OF CONTENTS Page No. Preface ............................................................ i Basic Data Sheet ....................................................... ii Highlights ......................................................... iii PROJECT PERFORMANCE AUDIT MEMORANDUM I. SUMMARY ....................................... ...1..... I II. MAIN ISSUES .............................................. 2 A. Project Preparation and Appraisal .....2.............2 B. Consultants ............................. ........... 3 C. Procurement ........................................... 4 PROJECT COMPLETION REPORT I. Background ..................................................... 7 II. Formulation .................................................... 8 III. Implementation ................................................. 9 IV. Consultant Performance ....................................... 12 V. Bank Performance ............................................. 18 Map IBRD 13412R 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.  PROJECT PERFORMANCE AUDIT REPORT MALI: OFFICE DU NIGER TECHNICAL ASSISTANCE PROJECT (CREDIT 854-MLI) PREFACE This is a performance audit of the Office du Niger Technical Assis- tance Project in Mali, for which Credit 854-MLI, in the sum of US$4.5 million, was approved on October 10, 1978. The credit has not been fully disbursed. Disbursements amounted to US$4.20 million as of March 1, 1983, at which time the Closing Date was March 31, 1983. The audit consists of a memorandum prepared by the Operations Evaluation Department (OED) and a Project Completion Report (PCR) dated June 21, 1982. The PCP was prepared by the Western Africa Regional Office. The audit is based on a review of the President's Report (P-2387-MLI) dated September 27, 1978 (no appraisal report was prepared), the Credit Agreement dated October 30, 1978, the PCR together with correspondence with the Bor- rower, internal Bank memoranda on project issues as contained in relevant Bank files, and interviews with Bank staff who have been associated with the project. The audit suggested some minor technical changes to the PCR, which were accepted and included therein. On the basis of the above procedure, the audit agrees with the main findings of the PCR. However, the audit elaborates on problems related to preparation of the project, selection of consultants, and procurement. Copies of the draft report were sent to the Borrower on December 13, 1982 for comments; however, none have been received.  - ii - PROJECT PERFORMANCE AUDIT REPORT MALI: OFFICE DU NIGER TECHNICAL ASSISTANCE PROJECT (CREDIT 854-MLI) BASIC DATA SHEET KEY PROJECT DATA Appraisal Actual or Actual as % of Item Estimate Estimated Actual Appraisal Estimate Total Project Cost (US$ million) 5.2 14.2 273 Loan Amount (US$ million) 4.5 4.5 100 Disbursed) - 4.2 - Cancelled) As of March 1, 1983 - Repaid ) - - - Date Board Approval - 09/27/78 Date Effectiveness 11/30/78 01/31/79 Date Physical Components Completed 09/30/80 10/30/81 Proportion then completed (%) 50 100 150 Closing Date 09/30/82 03/31/83 Economic Rate of Return (%) n.a. n.a L. Institutional Performance good poor - Financial Performance good poor CUMULATIVE DISBURSEMENTS FY79 FY80 FY81 FY82 FY83 (to date) Appraisal estimate (US$ million) 2.0 3 5 4.1 4.5 4.5 Actual (US$ million) 1.6 2.6 3.6 4.0 4.2 Actual as % of estimate 80 74 88 89 93 Date of final disbursement/b MISSION DATA Date No. of Manweeks Specializations Performance Types of Mission (mo./Yr.) Persons in Field Represented-/C E TrendLe Problems/f Reconnaissance 05/77 3 0.5 n a. n.a. n.a. n.a. Identification/ Preparation 11-12/77 9 2.5 n.a. n.a. n.a. n.a. Discussion/ Identification 06-07/78 2 2.2 n.a. n.a. n.a. n.a. Subtotal 52 Supervision 1 (unofficial) 09/78 1 0.5 d n.a. n.a. n.a. Supervision 2 (unofficial) 11/78 1 0.5 d n.a. n.a. n.a. Supervision 3 03/79 2 2.0 d,e 2 n.a. M Supervision 4 05/79 2 1.0 c,e 2 1 M Supervision 5 11/79 3 2.0 a,d,e 2 2 M Supervision 6 05/80 3 2.2 a,d,e 2 1 M Supervision 7 01/81 4 2.2 a,c,d,e 2 1 F,M Supervision 8 (unofficial) 05/81 1 1.0 a n.a. n.a. n.a. Supervision 9 10/81 2 4.0 c,e 2 1 - Subtotal 14.9 Completion 01/82 1 0 6 TOTAL 20.7 OTHER PROJECT DATA Borrower Government of Mali Executing Agency Office Du Niger Fiscal Year January 1 - December 31 Name of Currency (abbreviation) Malian Franc (MF) Currency Exchange Rate Appraisal Year Average US$ 1.00 - MF 490 Intervening Years Average US$ 1.00 - MF 410 Completion Year Average US$ 1.00 - MF 550 Follow-on Project: None /a Not available or not applicable. /b Not fully disbursed, Closing Date is March 31, 1983. /c a = agronomist; b = agricultural economist, c = financial analyst, d economist, e irrigation engineer. /d 1 problem-free or minor problems; 2 - moderate problems, and 3 = major problems. e 1 = improving; 2 = stationary; and 3 = deteriorating. /f F - financial; M = managerial; T = technical; P = political, and 0 - other.  - iii - PROJECT PERFORMANCE AUDIT REPORT MALI: OFFICE DU NIGER TECHNICAL ASSISTANCE PROJECT (CREDIT 854-MLI) HIGHLIGHTS The main objective of this technical assistance credit was to assist in preparing a project to rehabilitate land and irrigation infrastructure which was under the control of Office du Niger (ON). ON (a public organi- zation) is the largest productive enterprise in Mali. The project also included funds to carry out urgent repairs of existing canals and drains. Total project costs were estimated at US$5.2 million. Credit 854-MLI would finance the estimated foreign exchange cost of US$4.5 million. The actual cost of the project rose to US$14.2 million. This large cost overrun of 173 percent was due to start-up problems and to ON's lack of cooperation with consultants which caused the extension of their employ- ment. Cost overruns were financed by Fonds d'Aide et de Cooperation (FAC) and by the Government. The project did not achieve its main objective of preparing a project to rehabilitate the irrigation infrastructure of Office du Niger. However, socio-economic studies financed under the project together with IDA's supervision brought to light major structural and economic problems within ON which, up to the present, the Government does not seem willing to take steps to resolve. This inaction by the Government prevents the appraisal of a follow-on irrigation rehabilitation project that was expected. Tech- nical assistance provided by consultants was of uneven quality, partly because of non-cooperation by ON. However, a stronger performance by consultants together with stronger support by Bank personnel would not have solved the institutional problems that beset ON. Because the project consisted mainly of technical assistance, an economic rate of return was not estimated at ap- praisal or completion. A lesson to be learned from the project is that technical assistance likely will not be effective in solving parastatal policy issues. Usually, such policy issues can only be resolved through a high level dialogue with a Government that has the will and power to deal with them (PPAM, para. 6). Other points of special interest are: - project problems may have arisen because the executing agency, ON, was a financially independent, parastatal organization (PPAM, para. 10); - IDA mis-evaluated ON's intent to cooperate and its competence (PPAM, para. 12 and PCR, para. 6); - iv - - non-provision of spare parts and service by supplier has resulted in heavy equipment purchased under the Credit being inoperative. This points up again the importance of including an initial supply of spare parts in the equipment procurement package and ensuring that arrangements are made for a continuing supply during project implementation (PPAM, para. 14 and PCR, para. 12.); - a special study revealed for the first time many socio-economic constraints that would have to be overcome for successful imple- mentation of the planned irrigation rehabilitation project. These constraints include: punitive water and other service charges, high debts of settler population in relation to income, non-security of land tenure, and abuse and extortion of settlers by special police force and extension staff (PCR, para. 30). - 1 - PROJECT PERFORMANCE AUDIT MEMORANDUM MALI: OFFICE DU NIGER TECHNICAL ASSISTANCE PROJECT (CREDIT 854-MLI) I. SUMMARY1/ 1. The major purpose of this technical assistance project was to prepare a project which would rehabilitate the irrigation infrastructure under the control of Office du Niger (ON). ON was created around 1932 and is currently the largest productive enterprise in the country. Total project costs at appraisal were estimated at US$5.2 million. Of this total, the credit would finance 87 percent, or US$4.5 million, and the Government the remaining US$0.7 million, which was estimated to be the amount of the local cost. 2. The project was viewed as a three-year program of technical assis- tance and a program of rehabilitation works. The technical assistance compo- nent consisted of a program to strengthen technical and administrative services of Office du Niger; plans, cost estimates, and other information required for implementation of a rehabilitation project; agricultural research to lay the basis for future crop diversification; and a pilot program. The pilot program was expected to determine the most cost-effective methods of carrying out the proposed rehabilitation works by means of experimental land levelling and other farm works over an area not to exceed 1,500 ha and to make some urgent repairs of sections of existing canals and drains. The technical assistance component would require the employment of five engineers and one management consultant. Other project components included an aerial photographic survey, a socio-economic study of Office du Niger's settler population, an audit of ON's accounts and setting up a new system of accounts, and training scholarships for Malian engineers. 3. At the time of appraisal, ON's irrigation system consisted of a barrage across the Niger River and other irrigation works which served 53,000 ha of arable land, 42,000 -of which were cultivated. This system served 4,500 farm families and ON had a permanent staff of 2,850. Major crops produced were paddy and sugar cane, which ON processed in its own mills. 4. The project was identified and prepared in November 1977; it was negotiated in June 1978, approved by the Board on September 27, 1978 and signed on October 30, 1978. 5. The project experienced considerable start-up problems (delays up to six months) in the engineering studies and rehabilitation program due to late arrival of the engineering consultants, delays in equipment delivery, and lack of cooperation and technical competence on the part of ON. Moreover, 1/ Adapted from the PCR. - 2 - there was a great deal of misunderstanding on the part of ON and consultants alike about one of the most important aspects of the project, namely, the on-farm works. A feasibility study was finally produced by the engineering consultant instead of ON, as was expected at appraisal. This feasibility study was technically accepted as far as the rehabilitation of the major distribution and drainage works were concerned, but it was weak in the areas of on-farm works and agricultural development. The financial management consultant was unable to work effectively due to lack of cooperation by the ON Accounting Department. However, this consultant lacked imagination to give his work meaningful orientation under the prevailing conditions. The socio- economic studies confirmed general impressions that institutional constraints and issues were far more important than the technical problem which had received most attention during project identification and preparation. Nevertheless, Bank staff entertained hopes that workable solutions could be found to the institutional and technical problems and, therefore, spent a great deal more time on the supervision of this project than normal. 6. In conclusion, the technical assistance project fulfilled some of its objectives by providing the technical information sought prior to undertaking the rehabilitation project. On the other hand, the socio-economic studies and close supervision have uncovered major structural and economic issues not foreseen during preparation in 1977, issues which the Government did not seem willing to resolve and which prevented the appraisal of a follow-on project. Performance of technical assistance provided has been uneven in quality, but even a stronger performance by consultants and Bank personnel would not have been capable of solving the institutional constraints besetting ON. In hindsight, a technical assistance project was not the right tool to tackle parastatal policy issues which can only be solved in the longer term by an intense dialogue on those issues with a government that has the will and the power to deal with them. Unfortunately, these issues and the institutional setting were not well identified or evaluated in 1977. II. MAIN ISSUES A. Project Preparation and Appraisal 7. That the project failed to achieve its objective to prepare a project for rehabilitation of the irrigation command area of Office du Niger and to strengthen its management is quite clear. What is not so clear is why the technical assistance project failed to achieve its objectives following an expenditure of some US$14 million, representing a 173 percent cost overrun, coupled with a time delay of 50 percent. 8. The President of Mali personally requested the President of IDA to consider financing the development of irrigation infrastructure under the control of ON in March 1977. IDA approached this request with considerable prudence. A reconnaissance mission from RMWA visited Mali in May 1977 and recommended that an identification mission be sent to consider a technical - 3 - assistance project. An identification/preparation mission, in November 1977, recognized that there were deficiencies in the management of ON. Because Bank/IDA had not had any previous experience with ON, it appears from corre- spondence that IDA believed that a technical assistance project would be a good vehicle for obtaining an evaluation of ON's capabilities and for ex- ploring the possibility of developing a productive relationship with it. 9. As pointed out in paragraph 1, the project consisted of (i) a pilot program to determine the best procedure to be followed in carrying out rehabilitation of irrigation works based on aerial photographic surveys (which would also support works rehabilitation), (ii) a socio-economic study of the settler population in the area for the purpose of relocating them after rehabilitation, (iii) repairs of critical areas of the canal system, (iv) technical assistance to improve management of ON, and (v) agricultural re- search. All of these components make up a defensible technical assistance project, given the status of ON and its operations at that time. 10. Part of the ensuing problem was and still is that ON, a para- statal organization, run along military lines, is largely independent of the Government. It is not dependent on the Government for a budget, genera- ting its own revenue from rice and sugar sales, and in full control of its production operations. Furthermore, ON had been receiving assistance from the People's Republic of China and the Soviet Union prior to the project. 11. Although ON, according to IDA personnel who visited its office during project preparation, was enthusiastic about working with the Bank, after the project commenced, ON personnel, particularly the Chief of ON's Studies Bureau (PCR, para. 7), failed to cooperate with the consultants, preventing them from carrying out their terms of reference. Because costs of consultants' services exceeded the original appraisal estimates, primarily due to delays in the work of the consultants, IDA recommended an extension of their work period to better fulfill the original objectives. The added cost of their work was financed by Fonds d'Aide et de Cooperation (FAC). 12. After repeated attempts by IDA to move things along toward the ultimate objective of preparing a rehabilitation project, little was achieved, and that which was achieved was ignored by ON. In retrospect, IDA mis- evaluated ON's intent to cooperate and its competence. This mis-evaluation might be explained by the fact that IDA was anxious to engage in a project with ON because of the development potential of ON's land resources. B. Consultants 13. According to some IDA staff, ON was reluctant to employ consultants even though the project was basically for technical assistance. Furthermore, ON chose to employ the "second best" consultant (in IDA's opinion) on the grounds that the "first choice" consultant could not be on-site in sufficient time. The consultants that were employed arrived two months late and then were not provided essential cooperation when they did arrive. This leads to a question that is to be discussed later (para. 16): should IDA have taken another approach in preparing a project with ON? C. Procurement 14. The PCR notes (para. 12) that bulldozers which were delivered to ON by a local supplier in Mali had not been provided with spare pafts. Conse- quently, the equipment became inoperative after a short time.. The local supplier, although paid by IDA and ON, had not made one payment to the manu- facturer as of March 1981. According to one version, the manufacturer has not provided the local supplier with spare parts because of lack of payment for the original equipment. Hence, equipment purchased under the Credit cannot be repaired. Whether or not the lack of payment to the manufacturer is the reason spare parts were not available is unclear; however, the importance of including an initial supply of spare parts in the equipment procurement package and ensuring that arrangements are made for a continuing supply during project implementation is clear. Failure to do so may, as in this case, directly affect project benefits. Further, in this regard, the Bank/IDA might need to consider more closely reliability of the supplying firms when it reviews procurement procedures and contracts in the future. Conclusions 15. Office du Niger is the largest irrigation entity presently operating in Mali. IDA staff agree that the area and irrigation system controlled by ON has great untapped potential for food and livestock production. The project made only a modest move towards that potential. Most of the blame for the lack of progress has been attributed to ON. In retrospect, some IDA staff believe that detaching specialized IDA staff in an advisory capacity, rein- forced by essential consultants, would have been better received by ON and could have generated more participation by ON in the preparation of a reha- bilitation project. However, given the disappointing results of the close supervision by IDA, this approach might well have suffered the same fate. 16. In the audit-s view, some new approach to development of ON facili- ties still should be considered by IDA; much more information of the situation in Office du Niger is now available. The PCR, paragraph 46, concludes that fundamental obstacles involved in Office du Niger can only be overcome by Government decisions. Efforts to encourage the Government to take some action need to be continued. In retrospect, concerning Credit 854-MLI, the Bank accepted ON's performance too long. It did not suggest cancellation of the credit and did not try another approach that might have received support by the Government. 1/ The equipment supplier recommended by a consultant was not chosen by ON. -5- MALI OFFICE DU NIGER TECHNICAL ASSISTANCE COMPLETION REPORT June 21, 1982 Western Africa Projects Department Agriculture 3  - 7- MALI OFFICE DU NIGER TECHNICAL ASSISTANCE Credit 854 - MLI Completion Report I. Background 1. At the request of the Government of Mali, a World Bank identifica- tion preparation mission visited Mali in November/December 1977 to explore the scope for financial and technical assistance to Office du Niger (ON). A previous HQ/RMWA reconnaissance mission had recommended that the identi- fication mission examine the following possible actions for a TA project: (i) establishment of a consultative unit which would help to set up an analytical accounting system and conduct economic analyses of the various options for consolidating, expanding and diversifying the Office du Niger; (ii) detailed engineering for some of the more promising civil works; (iii) equipment for urgent rehabilitation work; and (iv) applied research for cotton. The TA project was orginally perceived as an introductory involvement by IDA to get acquainted with the capabilities and working procedures of ON, a public agency which controls irrigation development over +50,000 ha and covers a potential area of 500,000 ha, and which up to that time, had only been associated with Chinese and Russian assistance. 2. In view of Mali's severe cereals deficit during the drought years of the early seventies and beyond, the mission supported Government's emphasis on the need to strengthen full water control irrigation systems such as those attempted by ON. The Bank already participated in the development of rice production by controlled flooding (Operation Riz Mopti) at a much lower initial investment per ha than full water controlled irrigation. The recon- naissance mission nevertheless recommended increased support for the latter because of the vulnerability of the controlled flooding system to irregular rainfall and flood patterns. While irrigation with full water control is more costly to develop, this disadvantage was considered as very much reduced in the case of ON since the basic irrigation infrastructure (dam, intake works and main canals) already existed. 3. The reconnaissance mission was of the opinion that a correct irriga- tion subsector policy for Mali should be to aim at a balanced development of both irrigation systems. As drought-proof production increased, Mali would be able to afford to expand production by controlled flooding; conversely, as the relative share of rice production with controlled flooding increased, there would be a need for a parallel strengthening of the drought-proof production base. In this context, the ON represented an important producer: 90,000 T of paddy with an eventual production potential of 200-250,000 T after rehabilitation and expansion. This gave it a unique position not only in Mali but in West Africa as well. Government-s interest in developing this potential was understandable and rightly supported by the reconnaissance mission. - 8 - II. Formulation Project Identification and Preparation 4. The project was identified and prepared in November/December 1977 by a mission of 5 Bank staff and 4 consultants who spent 18 days in Mali, of which 14 were at Office du Niger. The project concept was finalized in discussions with the Malian authorities in May 1978 and negotiated in August 1978. A President's report was prepared in September, 1978. Given the pilot and technical assistance nature of the activities to be undertaken under the proposed project, a separate staff appraisal report was not prepared. Instead, a detailed identification report was produced to serve as a working document for ON, consultants and Bank staff. The project was conceived as a preparatory step towards the rehabilitation of the irrigation infrastructure of the Office du Niger affecting 35,000 ha of rice fields scheduled for improvement between 1981 and 1988. The main components of the Technical Assistance project were to: (i) strengthen the technical services (in par- ticular the Technical Studies Bureau and the Works Department of the Office du Niger); (ii) prepare plans, cost estimates and other documents required for implementation of the rehabilitation project covering some 35,000 ha (at the level of a feasibility study); (iii) test the most cost-effective methods of carrying out the proposed rehabilitation works by means of experimental land levelling and other on farm works over an area not exceeding 1,500 ha; (iv) carry out some urgent repairs of sections of canals and drains pending overhaul during a general rehabilitation; (v) purchase additional equipment required to implement (iii) and (iv); and (vi) lay the basis for future crop diversification through support for agricultural research (including rice research and pilot programs). The technical assistance component consisted of support for the Bureau of Technical Studies (3 engineers); the Works Department for on-farm development and work and equipment handling; and a management consultant who would assist the Director General to design and implement improved accounting and management information systems. The technical assistants were to be advisers to their respective department heads but would report directly to the Director General of ON. This implied that the responsibility for the implementation of the TA and the preparation of the feasibility study were to rest with the ON. The lack of a clear definition of tasks and responsibilities in this case proved to be the cause of many misunderstandings, frictions and delays in project implementation. 5. The project also included (i) agricultural equipment for the rice research station at Kogoni, located in the Office du Niger zone; (ii) a pilot program of irrigated fodder production; (iii) a study of the commercial and organizational problems of the Office du Niger feedlots; (iv) an hydrological survey of the Mema area for the resumption of irrigated cotton production; (v) socio-economic studies of settler population; and (vi) audit of the ON accounts. IDA was to finance 86% of the total estimated project costs, or the equivalent of 100% of foreign exchange costs estimated at US$4.5 million. - 9 - 6. The President's Report stated that there was no significant risk involved with the project except that, failing satisfactory performance by the Office du Niger, it might not lead to the envisaged rehabilitation project. This risk was considered slight given the sizable potential of the Office du Niger and the commitment of its staff. III. Implementation Start-up problems 7. International firms providing engineering and management services and auditing were invited to bid in June 1978. From the limited number of responses, three firms were finally selected. The cost of two were considerably higher than anticipated but were accepted as being within IDA limits. The residential expert arrived on schedule at end 1978 and performed his work without too many obstacles. The engineering team, which arrived in early 1979 after a 2 month delay, experienced many problems getting started due to logistics problems such as lack of transportation (which should have been provided by ON under the project), lack of adequate air-conditioned office space and initial housing problems. More serious, however, was the attitude of the Chief of ON's Studies Bureau who refused, at first, to co- operate and withheld vital information from the engineering team (including the identification report). This matter was resolved during the first supervision mission. Also, the topographical surveys to be undertaken by this bureau prior to the engineering team's arrival were very much behind schedule. Engineering equipment arrived about 6 months late due to port strikes in England so that almost no repairs or land development work were carried out in 1979, contrary to earlier estimates. Effectiveness experienced a short delay of 2 months. Project Revision 8. Because of delays in project implementation, the January 1981 supervision mission recommended the following extension of consultant activities. (a) the engineering consultant would: - prepare the detailed engineering design for 10,000 ha; - organize on-land development for another 2,000 ha; - provide continued TA for the Work Department (2 years and Studies Bureau). - 10 - (b) the organization consultant would: - organize a new accounting system and help prepare the 1980 financial statements. These recommendations were accepted by Government. At the same time FAC agreed to take over financing these activities since IDA funds would have been insufficient. The FAC contribution was estimated at about US$2 million. Physical Progress 9. Studies (a) Engineering Studies. The engineering studies were originally scheduled to be ready by March 1980 but, due to delays caused by start-up problems and the lack of sufficient qualified surveyors at ON, rescheduling of the completion date was necessary. The studies suitable for the feasibility study were finally completed a year later, by March 1981. (b) Management Accounting Studies. The first phase of the studies-- identification of the problems, constraints in financial procedures and accounting systems, and recommendations for improvements--was completed by March 1979. Subsequent actions agreed upon, namely preparation of an experimental budget, budget control, and cost accounting were never carried out completely because of the lack of reliable basic data and the unwilling- ness on the part of ON to cooperate. A number of actions agreed upon after project revision in January 1981 and to be financed by FAC were not imple- mented (see para. 8). (c) Socio-economic Studies. These studies conducted by IER and later on assisted by other consultants started off on schedule but were considerably delayed by logistic problems such as lack of field transportation and equipment for mechanical data processing. However, by January 1981, sufficient data had been made available to show the seriousness of the financial and social situation of the settlers and to indicate that the socioeconomic problems would be much more difficult to resolve than the technical problems. (d) Livestock Studies. The livestock studies proceeded on time and were submitted for comment to the Bank and ON early 1980 and finalized in an acceptable manner by June 1980. (e) Pedological Studies. The pedalogical studies were carried out by the engineering team according to plan, and supplied important information concerning the agronomy aspects. 10. During the first year (1979) 530 ha were scheduled to be rehabili- tated. Only 180 ha were done due to delays in equipment delivery and land surveying. No attempt was made to test different approaches and methods. In the second year (1980), an additional 1,000 ha were developed using basically - 11 - only one construction design and method was and foregoing the idea of experi- mentation. An additional 500 ha were rehabilitated in 1981, but this time an attempt was made to test some different methods of on-farm development in an area previously "rehabilitated". Procurement 11. A two man consultant mission was fielded in early 1978 to assess civil works equipment needs and prepare equipment specifications for the tender documents. In the short time allotted to it, this mission over- estimated the real working capacity of the existing equipment which depended primarily on the availability of spare parts and the proper functioning of the Works Deparment. Moreover, the mission was instructed to limit additional engineering equipment as much as possible, on the grounds that important civil works would not be started before the envisaged rehabilitation project. This resulted in the omission of: (i) compacting equipment required for the reconstruction of embankment and field channels; and (ii) drain cleaning equipment capable of operating under very marshy conditions, which sub- sequently proved to be essential. 12. A short-term independent consultant was employed to assist ON with the evaluation of the bidding documents. Unfortunately, his recommendation to purchase only well-tested Caterpillar equipment (five bulldozers), was ignored. ON ordered Marshall bulldozers on the grounds that (a) they had promised faster delivery (2 months) and (b) the fact that they were equipped with Leyland engines used on ON's trucks, outweighed the risk of the unproven capacity of the local supplier to supply spare parts and service. Bidding prices for both makes differed little and IDA approved ON's selection. The Marshall bulldozers were finally delivered in May 1979, with a 6 month delay due to railway and port strikes in England. They broke down after a short period of operation and have been out of order ever since, because the local supplier has not been able to guarantee the after sale service (confirming the doubts of the consultant). The foreign manufacturer has not received a single payment from the local agent, who was paid 50% by ON and 50% directly by IDA, according to contract conditions. This became apparent when the Manufacturer made inquiries to the Bank in March 1981 about their payment. Similar after sale service problems were experienced with the 0 & K graders supplied under the IDA Credit by the same local firm. Agricultural Equipment for Rice Research Station at Kogoni 13. Agricultural equipment for the IER station at Kogoni (seed produc- tion) was to be procured under LCB by the ON. IER did not indicate its needs until early 1980 but ON has taken no action despite repeated requests by various supervision missions and IER. It should be noted, however, that if the equipment had been procured, IER would not have had the funds to operate it. The issue of seed production will be tackled in another project under preparation. - 12 - Vehicles and Miscellaneous Equipment 14. Vehicles for works and engineering departments were procured by ICB. Some additional vehicles were purchased later by LCB, following the Bank's guidelines. Equipment for the engineering bureau (topographical equipment) and for the accounting department (electronic accounting machines) were acquired locally during project implementation after approval by Bank staff. Consulting and Auditing 15. International firms providing engineering and management services and auditing were invited to bid in June 1978. From the limited number of responses three firms were finally selected. The contract for the engineering studies was originally awarded to a Dutch firm but it was withdrawn because the Dutch firm could not send out their lead engineer in time. Project Cost and Disbursement 16. Disbursements, although slow in the beginning picked up and pro- ceeded more or less according to identification estimates. However, by January 1981 the funds available under the Credit were not sufficient to fully finance the preparation that was still required. The balance of US$783,000 was reallocated to ensure preparation of the feasibility report (by consultants instead of ON), the preparation of health and literacy com- ponents, and to pay for some commitments already made. Complementary actions (preparation of the detailed design by the consultants for the rehabilita- tion of about 10,000 ha, continuation of the development at the pace of 1000 ha/year, supervision of the rehabilitation works, continued technical assistance by the consultants for management and accounts department, supple- mentary vehicles and office equipment) would be guaranteed by FAC financing (about US$2 million). IV. Consultant Performance Financial Accounting Consultant 17. The terms of reference for the management consultant in his contract with ON were, in fact, quite clear and contained sufficient detail to establish a good work program. His task was primarily directed at the reorganization of the financial management of the ON at the level of the Directorate General, as well as the individual services and departments. His first report, which analyzed administrative procedures and accounting systems and recommended improvements, was released in March 1979 and, after some editorial difficul- ties, was finally approved by ON. The recommendations for the reforms of both the general accounting and the management information systems were modest and sensible and did not touch on the reorganization of the complex structure of - 13 - ON's management, since this was outside the scope of his TOR. The main shortcoming of the report, measured against the TOR, was that it did not indicate a time schedule for the introduction of these limited reforms. It should also be noted that the recommendations should have been sorted out in order of priority. ON approved the text but did not implement any of the recommendations. 18. In May 1979, new objectives were defined by ON and executed until October 1979 by the consultant (IDA was informed later). These included the preparation of an experimental budget, budget control and cost accounting but they were never completed because the basic data supplied by ON were unreliable and the new DG had little inclination towards financial management. 19. The arrival of a new consultant at ON in November 1979, changed little of the confusion in the accounting department except for the completion of the 1979 final accounts. He then, in agreement with ON, took it upon himself to diversify from the essential job of implementing accounting reforms to broader goals such as providing ON with new legal statutes and unified staff regulations. Both have been completed, but the statutes failed to improve the relationship with Central Government and were not accepted by the Board of Directors. The staff regulations have thus far been rejected by the higher echelons of ON as a threat to their job security. 20. In January 1981, a Bank supervision mission decided, in agree- ment with ON, to redirect the consultant's work to the following fields: (i) accounts for the financial year ended June 30, 1980 to be finalized by July 1981 and audited; (ii) accounts for the financial year ended June 30, 1981 to be brought near completion by October 1981; (iii) reorganization and updating of physical stock inventories and the incorporation of stock movements in the general accounting system for the 1981/82 financial year; (iv) analysis and reorganization of farmers accounts and their incorporation in the general accounting system for the 1981/82 financial year; (v) improve- ments in the mechanization of the accounting system through the purchase of two electronic accounting machines; (vi) setting up of a new accounting plan and procedures geared to the project's general and cost accounting needs; (vii) preparation of 1981-82 and 1982-83 budgets based on the most significant production areas (rice and sugar); and (viii) training of accounting staff and introduction of management techniques to departmental heads. The consultant and ON Accounting Departments were responsible for the execution of this program. The only significant achievement by November 1981 was the installa- tion of the electronic accounting machine and programming of a general accounting and payroll system. Neither is yet operational. A chart of accounts (Plan comptable) was presented to the supervision mission in November 1981, but it needed further modifications and supporting procedures to make it operational. A new budget format was also hastily prepared for the same mission but not utilized by the ON Budget Section. The 1979/80 (June) and 1980/81 accounts were to be audited in May 1982. 21. To sum up, after three years of Technical Assistance, little change has occured in the Accounting Department. The consultant did not succeed in persuading ON to accept his recommendations. As a result, he felt compelled to change his priorities instead of pursuing his originally agreed upon - 14 - tasks. Significant application of practical solutions, even within those changed priorities, was made difficult by the Accounting Department's repeated rejection of even minor changes in the status quo. 22. However, the major issue was that of the underlying weaknesses in ON's day-to-day management and its organizational structure, which had been raised by the identification mission, but which was left outside project at the insistence of ON and for fear of jeopardizing IDA's intervention in the ON. As a result, the consultant had to work within the framework of an obsolete and unworkable management system. Engineering Consultant 23. The first experts of the field team (hydraulic engineer and senior irrigation engineer) arrived two months behind schedule. Their first three months were unproductive because their counterpart, the chief of the Bureau of Technical Studies, isolated them completely from all information and access to ON management, and did not provide them with any office equipment. The specialists in land levelling and mechanical equipment arrived end-March, about a month before the delivery of the equipment purchased for urgent repairs and pilot on-farm development. The topographical surveys, to be conducted by the Bureau of Studies on selected project sites were seriously behind schedule. As a result, the consultant team experienced a delay of about 6 months before they could start their work. 24. The major tasks not described in detail in the consultants/ON contract were: (i) preliminary studies and design for the rehabilitation of the irrigation infrastructure works in the area receiving water from the Canal du Sahel; these studies, which were to be completed in 12 months would allow subsequent appraisal of a rehabilitation project; (ii) urgent repairs to the infrastructure works which were not originally specified in the contract but were agreed on later (mainly on the embankments of the Fala de Molodo and Canal du Sahel and extension of the drainage system in the sectors Ndebougou- Miono); (iii) a pilot program of 1,500 ha of on-farm development (no time period specified in the contract, but it was later agreed that this program would be realized in 2 years); and (iv) training the Works Department in the operation and maintenance of engineering equipment. After the Bank supervision mission of March 1979, major misunderstandings between the consultants and ON were straightened out, although frictions persisted about the availability of transportation to the consultants and the lack of essential office equipment and materials. 25. Two subsequent supervision missions (1979) reported improvement in the working atmosphere and certain progress in the studies and works although it became clear that the consultants, the Technical Studies Bureau, and the Works Department would not catch up on the delays in the work program, concerned, i.e., the technical feasibility studies and the on-farm development pilot program. The supervision missions had to explain and emphasize at length the objectives of this very important part of the Credit, namely to test, analyze and evaluate a number of alternative methods of design and - 15 - implementation of on-farm development. Apparently neither ON nor the con- sultants understood this and only reluctantly agreed to follow this approach. However, the 180 ha realized in the first year did not yield any information on optimal techniques, unit cost of works or yields on improved land. The works had not been conceived and implemented as an experimental test program but rather as a full-scale civil works contract. 26. Supervision missions in 1980 noted improvements in the progress of works, in particular the on-farm development works. However they did not agree with the design and construction methods chosen for the field channels and levelling techniques chosen by the consultants and the Studies Bureau. Delays in the engineering studies could not be made up because of lack of Malian counterparts (draftsmen). Appraisal of a rehabilitation project by end-1980 as originally foreseen was not possible. The consultant had failed to implement the training program for the operation and maintenance of equip- ment. 27. By January 1981 with a 12 month delay, the consultants presented their preliminary studies for a rehabilitation project. The general aspects of the project as proposed were accepted, although important modifications were necessary for a number of design aspects (cross-section of carrying capacity of canals, water management system, drainage criteria and irriga- tion efficiencies). The need for modifications highlighted the lack of understanding of the agronomic aspects and their importance for a rehabi- litation project. This was further confirmed by the failure of the 1,500 ha pilot program to yield usable information on alternative design and construc- tion methods and corresponding unit costs. There were no real alternatives tested and the general design suffered from basic design errors, which did not allow a sufficient hydraulic head and could not achieve effective water distribution. Moreover, in the consultant team there was no real expertise in land levelling. As a result, yields were the same as in the non-improved areas. The responsibility for the agricultural operations and the agronomic performance on the rehabilitated area rested entirely with the Services Agricoles of ON. They did not competently demonstrate how to utilize the agronomic potential of the "rehabilitation" by a change in water management and adaptation of agricultural practices. The consultant team leader was replaced at the Bank's request, and the performance of the new team improved markedly, which resulted in a feasibility study (produced entirely by the consultant instead of ON) that was acceptable from the engineering standpoint but still weak on the agricultural development aspects. It should be noted, however, that it was agreed that ON would take the main responsibility for agricultural production and development and send the Director of the Services Agricoles to the consultants' HQ to prepare this annex. 28. The consultants' input on related studies such as those on soil and cotton was acceptable. In particular the soil study related well to the agronomic problems to be anticipated. Summarizing the consultants' performance the following conclusions can be drawn: (i) delays in the consultant's work can mainly be attributed to ON's lack of ability, and in some instances unwillingness, to provide their promised support services and contractual - 16 - counterpart performance; ii) the sensitive environment of ON required qualities on the part of the consultant such as communication skills, sense of improvisation, perception of and interest in the socio-economic issues as well as a thorough understanding of the agronomic requirements and general agricultural aspects. These qualities are difficult to specify and were not laid out in the contract between ON and the consultants. The input on agronomy and general agricultural development was supposed to be delivered by ON; iii) the consultants first equipment specialist was apparently unable to build an effective working relationship with ON staff which may account for the manifest failure of this component in terms of the reorganization of the works department workshops and training of equipment maintenance teams. He was eventually replaced, but this came too late to have an impact on the performance of the works department during the implementation of the repair and on-farm development was, in their own words, a failure 1/ because they did not appreciate the significance of underlying agricultural and socio- economic problems in time and relied on the opinion of the Technical Studies Bureau and the Services Agricoles of the Office du Niger. The consultant/ON collaboration started off badly but improved later on. Unfortunately, this improvement came too late to save one of the most important components of the project. However, it should be recognized that had it had a competent and cooperating partner, the consultants' performance would have been undoubtedly considerably better. Livestock Consultants 29. The livestock studies did not pose too many problems during their execution mainly because they involved divisions of ON which proved to be cooperative and receptive. Their final recommendations, which were accepted after modifications by Bank staff, pertained mainly to industrial livestock fattening and did not deal with livestock owned by the ON settlers whose economic importance outweighs the livestock of ON's enterprise. Their TOR did not, however, ask them to deal with farmers' livestock problems. Consultants Socio-economic Studies 30. The socio-economic studies conducted by IER and later assisted by those of consultants unfortunately experienced much delay. This was due to lack IER's indecisiveness on the one handd and endless logistic problems on the other. The results of both studies however contributed greatly to a change in priorities from the purely technical issues associated with the rehabilitation of the ON to socio-economic issues such as land tenure, farmers' participation, producer prices, marketing policy, water charges, and nutrition and health. The more technical data on yields and farm budgets collected by IER are of doubtful statistical value. However, the part of their studies carried out with assistance from French Consultants was very revealing and candid on the social issues and exposed the major issues and constraints which would have to be overcome during rehabilitation. The water and various service charges, which often took the form of fines in kind (kg of paddy), imposed for many years by ON which in turn did not provide the 1/ Admitted in their feasibility study. - 17 - corresponding services and did not adjust for increases in paddy prices, have led to excessively high debt levels and arrears for many of the farmers, many of whom are unable to repay. About 80% of these debts are due to charges and fines and the rest for input use (also imposed 1/). The centralized and controlled threshing and marketing led to socially unacceptable practices such as the operation of a special police force, which resulted in widespread abuse and extortion of the settler population. Because of food shortages many farmers had to cultivate rice and other crops outside the ON perimeters in order to support their families; this led to neglect and underutilization of their rice farms. Security of land tenure was virtually non-existent because non-compliance with the often vague instructions by the extension services or default on debt repayment could lead automatically to eviction. On the other hand, eviction could be avoided by making payments to the extension staff. It goes without saying that any technical rehabilitation was doomed to fail in this socially disruptive environment. ON's Performance 31. Although the identification mission started out with moderately optimistic expectations about the performance of ON's management and its services, it became rapidly clear during project implementation and supervi- sion that these expectations would not materialize. The attitude of the key departments with which the TA project had to deal such as the Accounting Department, Works Department, and Studies Bureau, ranged from outright obstruc- tion as continuously displayed by the Accounting Department and Studies Bureau to the inertia and incompetence demonstrated by the Works Departmant and Agricultural Services. At the level of the Director General's office no one was competent to analyze the reports and recommendations by consultants and no one had the decisiveness to implement the recommendations and coordinate decisions if any were taken. 32. The support for agricultural research for rice and crop diversifica- tion (including fodder crops) did not materialize because: (i) ON did not procure the equipment requested by IER; (ii) ON lacked the technical percep- tion of the major agronomic problems and was not able to draw up a coherent applied research program for addressing these problems, despite frequent discussions during supervision missions. 33. This paralysis which finally permeated the totality of the ON after the departure of the first DG coincided with a very rapid deterioration of ON's financial reserves and a total reversal of its cash flow, which was considered positive in 1977. Undoubtedly, the unbudgeted expenditures related to the construction of the Canal de Costes and the implementation of the TA project contributed to this situation. However, the major factors were: 1/ Farmers were forced to accept and pay for fertilizers whether they could use them or not. - 18 - a wild growth in permanent and temporary personnel (nearly 10,000 employees now); growth of collectable farmers debts, absence of work programs and work budgets for the routine operations as well as the construction and rehabilita- tion programs; and a collapse of the sugar production from 19,000 tons in 1978 to less than 10,000 tons in 1981/82. Of these factors, the collapse of the sugar production was predictable because of the lack of an adequate drainage system and maintenance, poor cultural practices and increasing technical problems with the sugar factory. The inability to make and implement deci- sions as well as the disastrous financial situation form the major obstacles for any rehabilitation project associated with ON. Government Peformance 34. Government did not lend its full support to implementation of the TA project, in part because of the distance that ON maintained from its parent ministry. The Ministry of Agriculture did intervene in the firing of the former Director General and in inviting consultants to reinforce the IER's socio-economic studies. The findings of these studies were, however, not followed up, namely, to act on the freshly revealed issues such as the land tenure rights for the settlers, water and other production charges, and an acceptable marketing and producer price policy. In this respect the Ministry was not alone, since other key ministries such as Planning and Finance did not show any interest in discussing these matters. The Bank's proposals on the role of ON in rural development for the settlers remained unanswered. Performance of Consultants and ON - Conclusion 35. The performance of the partners in the TA project should be evaluated against the specification of their terms of reference and their contracts. The TOR for the consultants, as well as their contracts with ON, were proposed by the identification mission which had assumed ON was willing to cooperate with the consultants and had the managerial and technical capa- bilities to perform the tasks agreed upon. Therefore, the operational limi- tations such as the reluctant attitude of ON and the lack of reliable base data created an unforeseen background against which the performance of the Office du Niger, and the consultants in particular, must be judged. V. Bank Performance Identification Mission and Report 36. One of the main, although not explicitly stated, purposes of the identification mission was to develop a working relationship with the Office du Niger, which, so far, had proven inaccessible to foreign donors (and able to manage its day-to-day affairs without outside assistance). In 1977, - 19 - at the time of the identification mission, the Office du Niger had made a remarkable production come-back from the downhill situation experienced in the sixties (46,000 T paddy in 1968/69) and had reached the apex of its performance (90,000 T paddy in 1977/78). In spite of the obvious financial losses on the rice production and the mission's strong doubts about the competence of the financial management 1/, ON's long-term financial structure and prospects were evaluated too optimistically. It was hoped that the intervention of an auditor and a financial consultant would be sufficient to throw more light on the financial situation which would then be addressed in a follow-up project. 37. The time allowed to observe the performance of the individual divisions and services inside the ON during a one-shot mission was too short to draw conclusions regarding their competence and their internal coordina- tion, although the weaknesses of the accounting, budget and reporting systems as well as the Technical Studies Bureau were recognized. As a result, the recommendation for management reorganization was merely limited to improve- ments in the accounting and budgeting system which had no consequence on the overall structure of the Office. For instance, no mention was made of the Services Agricoles which was responsible for the inadequate field water management and harvesting extension services since at that time they were believed to function reasonably well. The Works Department was considered capable of doing regular maintenance work and on-land development works. This observation was made prior to the construction of the Canal de Costes, a major work undertaken by ON in 1978. This major task proved to be very disruptive for the Works Department, which was not conceptually, organizationally, physically or financially equipped to implement major construction work. 38. The irrigation engineers (three) on the identification mission each had different views on the priority actions to rehabilitate works and improve the operation of the irrigation systems. One line of thinking was to give priority to the rehabilitation of major distribution works and to cleaning and repairing the drainage system, and it was this one which eventually prevailed in the identification report. Another opinion recom- mended minimizing rehabilitation of the major distribution works through spacing and spreading the required peak water demand over a larger period throughout the irrigated area. This would reduce water consumption, which automatically would lead to reduced drainage needs, and, consequently, fewer major works for drainage improvement. However, excessive farmsize was con- sidered a major impediment for improving the on-farm water management needed for this approach. A third opinion was to concentrate on improving water management as top priority (including field levelling) followed by urgent clearing of the blocked drains and minor repairs to the major water distri- bution works. 1/ No balance sheet had been prepared since 1960. - 20 - 39. The identification mission had grave doubts about the socio-economic situation of the settlers and their relations with the ON, such as water and other service charges, security of land tenure, marketing policies, and farmers incomes. In spite of strong objection by ON's Management, the mission nevertheless succeeded in including socio-economic studies by a local, non-ON agency (IER). 40. In view of these multiple (and at times conflicting) perceptions by the identification mission of the priorities required for a long-term rehabi- litation program, it is not surprising that the terms of reference and the task descriptions that were written into the contracts for each of the major partners in the TA project, were at best too vague. It could be argued, however, that had each of the partners involved been sufficiently competent, the joint interpretation of the final version of the identification report as accepted by ON, should have reduced, if not eliminated, some ambiguities. This approach presupposes, however, that ON's engineering and accounting services, as well as its Management were adequately prepared to absorb and react to outside recommendations, whereas it later became obvious that they were not. Supervision 41. As in a pilot project, it was difficult to write precise terms of reference and instructions for implementation of the project without knowing the kind and extent of problems to-be expected. Therefore, the recommenda- tions and actions proposed by the identification mission were understandable. Moreover, in view of the uncertainty about ON's performance and the risks involved, there were no real alternatives at that time to the proposed, modest TA project. It is not clear, however, if stronger involvement by the TA expert in the day-to-day management could have been negotiated, although contracts between ON and consultants giving more managerial power to the consultant would not have been acceptable to ON. 42. Once the project started and the consultants were in the field, the perception by Bank staff of the real issues became increasingly clear, which necessitated boosting the intensity and depth of supervision. Supervision coefficients increased from 8.2 manweeks in the second semester of FY 1979 to 16.8 manweeks in the first semester of FY 1982. Bank Staff Time Input (Manweeks) FY78 FY79 FY80 FY81 FY82 Preappraisal/Identification 3.4 Appraisal/Preparation 2.9 Appraisal 66.5 2.3 Negotiations Board Pres. 3.4 Supervision 8.2 17.0 18.5 16.8 - 21 - 43. These coefficients clearly reflect the increasing concern of Bank staff about the slow progress of the TA project and growing disappointment with the results produced by ON and consultants to the point where it became necessary to maintain a regular correspondance with ON and the consultants on technical issues. This correspondance however, received little response from ON and consultants. Disappointment with the performance of ON and consultants was brought to their attention, in particular during the supervision mission of January 1981. Whereas the consultants responded by changing their field team, ON did not implement any of the corrective measures agreed in the mission minutes. In spite of these setbacks staff remained hopeful that sufficient information would become available to warrant a follow-up appraisal. The mission was positively influenced by the presence of the Dutch-financed technical assistance project to train extension workers and water management staff, and which indicated alternative technical solutions for the on-farm development and farm equipment not foreseen in the consultant's preliminary engineering studies. 44. The results available to the staff from the engineering team's feasibility study, the socio-economic studies by other consultants as well as the Dutch TA project led to the conclusion that an initial modest step in the rehabilitation of ON's management structure could be recommended. In retrospect the question remains whether, given the growing misgivings and doubts about ON's performance and competence, the project should have been declared a problem project and it should have been suspended. The first time that there was a real reason to declare the project a problem was during the supervision of January 1981 when the first results of the consultants were presented and the mission expressed open dissatisfaction with the progress of the project, including the quality and timeliness of these results. Positive Results of the TA project 45. Despite its shortcomings, there were some positive results from the TA project. The following studies were produced: (i) The feasibility studies carried out by consultants with ON assistance comprised mostly technical and engineering proposals for the rehabilitation of 17,000 ha of rice fields irrigated from the Gruber Canal. After minor technical adjustments, and with the exception of the agricultural development component, it is acceptable as a working document for an appraisal mission. Their final report will be ready by first quarter of 1982. (ii) The socio-economic studies carried out by the consultants deal particularly with: (a) relations between ON and its farmers (b) family income and budgets (c) work patterns in a typical peasant family. The main conclusions reached by the studies are: - 22 - (a) the composition of the family budget and the general lack of adequate nutrition levels by the average farm family have been identified; (b) farmers' debts mainly from accrued arrears in water and other service charges by ON have reached alarming and unrecover- able proportions; (c) more knowledge is needed on the equipment currently used by the peasant family and the part played by women in income production; and (d) frustration among the farmers about their status as "colons" without any right to landholding, unrealistic water and service charges, exploitation by ON personnel (in parti- cular the special police). They are the main causes of the insta- bility of the farmers' population and one of the factors accounting for low production. (iii) Topographical surveys and benchmark verification by IGN (Institut Geographique National de France); (iv) Pedological Studies pertaining to the development of soil fertility under irrigation conducted by consultants; (v) Livestock studies prepared by consultants on the industrial fattening enterprise. Conclusions 46. In November 1981 the last supervision mission concluded that a large rehabilitation project could not be envisaged until Government and ON change their attitudes: (a) vis-a-vis the farmer on questions of security of land tenure, prices and marketing, rules for paddy and water, and other user charges, (b) improve ON managerial capability, and (c) resolve the financial crisis which emerged because of the collapse of sugar production. The mission proposed to strengthen ON management with the appointment of expatriate tech- nical assistance in line positions and a modest (pilot) rehabilitation program of about 4,000 ha on the pattern developed by the Dutch TA project. The ON rejected these proposals and instead turned to other donors (France in par- ticular) to finance ON rehabilitation and development. France indicated that it shared the Bank's point of view and it proposed instead that the co-donors would make a last, joint attempt to make Government decide on the main issues mentioned above, after which they could even expand their financial support to sugar cane rehabilitation. So far, Government has not officially reacted to the French proposal and the mission proposed by the French has not taken place. Indeed, a debate is taking place in Government circles between the status quo advocates, who want to maintain the Office du Niger paddy produc- tion agency and those who consider that paddy production should be given back to the farmers. The ON would provide water and levy services (imports). The TA project has allowed co-donors to grasp the technical/managerial problems but has not been an excellent vehicle to sort out the more fundamental issue now being debated. Sector and macroeconomic dialogue are now the only way through which co-lenders could influence Government decisions or the future of the Office du Niger. 化：