Cameroon - Livestock Sector Development Project

Documntof The World Bank FOR OFIMCIAL USE ONLY AA/J 3o/Y- A1 * . Report N P-4847-CM MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONML BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$34.6 MILLION TO THE REPUBLIC OF CAMERoON FOR A LIVESTOCK SECTOR DEVELOPMN PROJECT November 15, 1988 This dooument has a resticX dWtbuon and may be med by recipleaf only in the pefornm of dwk offlkd dutoL Its conten may not otherwise be hidosed withou Wodd Bank authorizatoL  - CURRENCY EQUIVALENTS Currency Unit = CFAF FRANC (CFAF) US$1 - CFAF 290 al WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS BDPA Bureau pour 1-e developpement de la production agricole EDF European Development Fund FAC Fonds d'aide et de cooperation (France) GNP Gross National Product -IFAD . International Fund for Agricultural Development 14MINEPIA Ministere de l'6levage. de la peche et des industries animales OPV Office pharmaceutique vdt6rinaire PLMAI Pilot Land Management Area SODEPA Societe de developpement et d'exploltation des productions animales FISCAL YEAR July 1 -June 30 a/ Exchange rate at end September 1988. The exchange rate of the CFA Franc is fixed at 50:1 with the French Franc, which is a floating currency.  FOR OMfCLAL USE ONLY REPUBLIC OF CAMEROON LIVESTOCK SECTOR DEVELOPMENT PROJECT LOAN AND PROJECT SUMMARY Borrower: Republic of Cameroon- Beneficiary: Ministry of Livestock, F1theries and Animal Industries (MINEPIA) Amount: US$34.6 million equivalent Terms: Standard IBRD terms, with a five-year grace period and 17 years maturity Onlending Terms: Up to US$8.9 million would be entrusted to one or several intermediaries against a management fee of 11 to 32 plusaa margin on repayments and on- lent to private-seitor agents, herder associations, and semi-intensive poultry breeders at an annual rate of not less than 11X. Financing Plan: IBRD : US$ 34.6 million IFAD 2 US$ 10.8 million Government s US$ 6.3 million EDF s US$ 1.9-million FAC sUS 1.6 million - - US$ 55.2 million Economic Rate of Return: Between 262 and 34Z Staff Appraisal Report: No. 7370-CM Mans IBRD No. 20985 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.  MEMORANDUM AND 3ECOMMENDAT1ON OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF CAMEROON FOR A LIVESTOCK SECTOR DEVELMPNENT PROJECT 1. The following memorandum and recommendation on a proposed loan to the Republic of Cameroon for US$34.6 million equivalent is submitted for approval. The proposed loan would be on standard IBRD terms with 17 years maturity,-including a 5-year grace period, at the standard variable interest rate, and would help finance a livestock sector development project. The project would be cofinanced by the Iiuternational Fund for Agricultural Development (IFAD) (US$10.8 million equivalent), the European Development Fund (EDF) (US$1.9 million equivalent) and the Aid and Cooperation Fund (FAC) of France (US$1.6 million equivalent). 2. Background. Agriculture, and in particular livestock, could make an important contribution to reshaping Cameroon's economy, hard hit by the fall of the world market prices of its principal commodities. Agriculture's contribution to the economy dropped from 40? of GNP in the 1960s to-about 202 in 1986 due to oil production. Agriculture still provides employment to three-fourths of the population, 252 of export receipts, 152 to 202 of State revenues and, with tie depletion of domestic oil reserves, is returning to the forefront of the economy. The ecological diversity of the country offers a wide range of possibilities for crop and animal production. The livestock sector accounts for 162 of agricultural production and is an important souwce of income for 302 of the rural population. It offers immediate growth opportunities, as appropriate markets, technology, feed resources and husbandry skills exist. Yet, the majority of the pastoral population still livea below the relative poverty level. The domestic 4emand for meat is about 50Z higher than domestic production and still growing. High rates of livestock mortality due to diseases result in losses of about US$100 million per annum and could be substantially reduced with a better health service delivery system. Available range la-ds could carry two or three times the present livestock population, though in densely populated areas the actual stocking rate is close to carrying capacity. The main bottlenecks of the sector are of an institutional, financial, and administrative nature. 3. The efficiency of the Ministry of Livestock, Fisheries and Animal Industries (MINEPIA) is severely hampered by inadequate resource allocation, with a focus on animal health activities which could mostly be taken over by private agents. Most of the recurrent expenditures budget pays for salaries or subsidizes veterinary treatments and drugs. As a result, field extension activities have been limited and lack a coherent approach, and are not coordinated with crop extension activities. Communal land use and the absence of land registration discourage investments in range land improvement. The import and distribution of veterinary drugs are entrusted to a parastatal agency, the Veterinary Pharmaceutical Office (OPV), which has not been managed according to commercial criteria and has created a financial burden Cb. the Government's budget. Private sector involvement in the marketing of veterinary drugs is still incipient. The technical performance of the Bank-funded Livestock Development Company  - 2.. (SODEPA) is satisfactory in ranching and slaughterhouse activities but the company has been burdened by excessive overhead costs. The project would assist SODEPA in improving its manaaement but would not provide further investment in the company. It is expected that SODEPA's extension functions would be transferred to MINEPlA's field services. Two previous Bank-financed projects have, with moderate success, financed infrastructure for the livestock sector, tsetse clearance over a large segment of the Adamaoua Province, credit, and the construction of slaughterhouses. They have, however, only slightly touched on policy and institutional aspects. 4. Rationale for Bank Involvement. The project would emphasize privatization and environmental policies. Progress in these areas could open the way for similar policies in other sectors and for the proposed structural adjustment program. The proposed project's approach has been successfully implemented in other Bank projects in Africa. The Bank could, therefore, contribute useful experience to project implementation. The project would also be a logical follow-up to the National Agricultural Research Project and would be in harmony with, and complement, the proposed Agricultural Extension project, ensuring closer extension cooperation between the Ministry of Agriculture and-MINEPIA. Financing of these various projects by the same institution would enhance the coordination and impact of the total package. 5. Prolect Obiectives. The project would aim to increase meat and milk production, raise producer incomes, in particular of poor livestock herders, and reduce the Government's financial burden resulting from its services to the livestock sector. The project would reach these objectives bys (a) improving the efficiency of the traditional and emerging modern livestock production sector; (b) promoting the role of the private sector in the provision of services to producers; (c) making parastatal enterprises profitable and competitive; and (d) strengthening the planning and extension capabilities of MINEPIA's livestock services. The project would test various procedures, allowing the recognition and consolidation of the rights of herder groups to particular grazing areas, water resources and, in the North, transhumance routes. 6. Proiect Description. The project would combine policy reforms based on the Government's shift of focus toward traditional herders and emerging semi-intensive production units, institution building based on the realignment of responsibilities within the sector resulting from the policy reforms, and further investments and credit lines. The main policy reforms would cover: (a) the privatization of veterinary services by providing incentives to Govenment agents to transfer to the private animal health care sector; (b) full cost recovery for all clinical services, vaccinations and drugs provided by MINEPIA; (c) the reorganization of OPV; (d) the transformation of SODEPA's commercial activities into autonomous, self- financing operations; (e) the harmonization of the extension methods and activities of MINEPIA and the Ministry of Agriculture; (f) the limiting of staff recruitment in MINEPIA to the number required to compensate for normal attrition, other than the agents transferred to the private sector, and reorientation of its training centers to the training of existing istaff and private sector agents; and (g) the monitoring of the impact of meat  -3- Import taxation on consumption and production. Proiect investments would comprise (a) an institution building component to create and strengthen producer associations, promote grass-root participation by women and poor herders in development activities (item financed by, and added-at the specific request of, IFAD), improve livestock extension services in the main production areas, and strengthen the planning and administration capability of MINEPIA; (b) a resource management component to test land tenure and sustainable land use systems in pilot land management areas (PLMHs), which would be provided with minimum infrastructure, to expand range land research and monitoring, and develop a sustainable protection system for areas cleared of the tsetse fly; (c) an animal health component to finance the reorganization of OPV, the eventual clearance of an additional 12,000 km2 of tsetse infested' areas, and the introduction of a special health program for small stock; and (d) a credit component for onlending for the establishment of private drug import and veterinary clinics, livestock and land development and women's activities in the PLMAs, semi-intensive poultry production, and feed and livestock processing industries. 7. Actions Agreed Upon. Th. Government has forwarded to the Bank a Letter on Livestock Development Policy, indicating its intention to implement the measures on which agreement was confirmed during negotiations, i.e., that it would (a) facilitate the transfer of MINEPIA staff to private practice by providing them, free of charge, an initial stock of drugs and protecting them from competition by Government agents; (b) charge producers full cost for veterinary services, treatments and drugs provided by the Livestock Service and a contribution in cash and kind from herders in areas kept clear cf the tsetse fly, using the revenues thus generated mostly to finance MINEPIA's non-salary operating costs; (c) reorganize SODEPA as of December 31, 1989 and OPV by December 31, 1990; (d) carry out a study of the budgetary and administrative procedures applied by- HINEPIA and implement its recommendations as of July 1, 1990; (e) ensure that, starting in 1989190, enrollment of new students in the livestock training institutes would not be automatically linked to recruitment for public service, which would be limited to compensation for attrition; and (f) recruit an extension specialist, a small stock specialist, and an administrative controller before June 1, 1989. Conditions of loan effectiveness would be (a) communication to the Bank of the choice of the area where privatization of animal health care would begin, (b) the promulgation of new tariffs for veterinary services; (c) the establishment of a committee in MINEPIA to supervise the privatization of veterinary services; and (d) cross effectiveness with IFAD's loan and FAC's grant. Conditions of disbursement for the credit component would be the signing of an agreement, satisfactory to the Bank, between the Government and financial intermediaries for the management of the subloans, and, for the insecticide component, the Bank's agreement on the type of insecticide to be used. 8. Benefits. Quantifiable project benefits, in the form of increased meat and milk production, would result from an improved availability of veterinary drugs nationwide, health and extension services in the three major livestock producing provinces, and the conservation and  -4- further extension of areas cleared of the tsetse fly in the Adauooua Province. Further non-quantifiable economic, social and environmental benefits would result from the policy measures, institution building efforts, and pilot land improvement activities. Financial benefits would accrue to OPV and private veterinary practices, and by extensionu to the Government's budget. The project would have a special input on women, poorer herlers, and the environment. The internal rate of return of the project components leading to quantifiable benefits is between 26Z and 34Z, depending on the herders' response to the proposed measures. 9. Risks. The project's success would depend on (a) the degree of private sector interest which would materialize for the provision of veterinary services; (b) the availability of an efficient financial network to channel credit to the service and production sectors; (c) the motivation of MINEPIA's field extension staff; (d) the availability of adequate budgetary resources for MINEPIA; (e) the avoidance of detrimental effects of population pressure on pastoral activities; (f) the absence of serious droughts during the first few project years; and (g) the containment of environmntat damage which might result from more intensive livestock activities. Measures to create private sector interest have been built into the project and could be increased if necessary. Improved financial channels, needed after the first year of the project, are expected to become available through the planned establishment of a new agricultural credit bank. The onlending function could otherwise be entrusted to adequate rural development entities or non governmental organizations. Field staff are expected to be motivated through improved training and the introduction of mixed crop and livestock farming to contain the effects of increasing population pressure on pastoral activities. Finally, the risk of highly damaging droughts is acceptably low at the latitudes where most of the project would be Implemented. An Improved offtake rite and measures to strengthen the herders' rights to rangelands and their: 1.terest in protecting them are the two factors which should best contain the environmental risks of the project. The introduction of non-polluting tsetse control methods would also reduce the impact of residual insecticides oan the local fauna. 10. Recommendation. I am satisfied that the proposed loan would comply with the Articles of Agreement of the IBRD and recommend that the Executive Directors approve the proposed loan. Barber Conable President by V. David Hopper Attachments Washington, D.C. November 15, 1988  I,~~~~~~~~~~~~~~~~~~, Schedule A REPUBLIC OF CAMEROON LIVESTOCK SECTOI DEVELOPMEPT PROJECT ESTIMATED COST AND FINANCING PLAN Estimated Proiect Costs a/ Local Foreign Total ----(USS million)- Institution Building 7.7 13.4 21~ 1 Resource Management 1.9 5.0 6.9 Animal Health 1.8 8.7 10.5 Credit 1.1 6.6 7.7 Base Cost 12.5 33.7 46.2 Physical Contingencies 1.1 1.5 2.6 Price Contingencies 3.2 3.2 6.4 Total Project Costs 16.8 38.4 55.2 ai Includes US$4.7 million of taxes anid duties and US$300,000 for a PPF. Financina Plan Local ForeM lTotal ---- (US$ Million)----- IBRD 7.5 27.1 34.6 IFAD 3.3 7.5 10.8 Government 6.1 0.2 6.3 EDY - 1.9 1.9 PAC - 1.6 1.6 Total 16.9 38.3 55.2  -7- Schedule B Page 1 of 2 REPUBLIC OF CAMXEROON LIVESTOCK SECTOR DEVELOPMENT PROJECT PROCUREMENT MEtHOD AND DISBURSEMENTS Prdject Element Procurement Method Total. ICB LCB Other N.A. Cost - --- (US$ million)-------------- Civil vorks - 0.7 - -07 (0.6) - ' (0.6) Vehicles and Equipment * 6.3 1.0 0.7 al - 8q0 (4.8) (0.6) (0.4) - (S-8) Consultant Services - - 5.1 bi - 5.1 - - (2.2) - (2.2) Training and Studies - - 3.2 bI - 3.2 _ _ (1.9) - (1.9) insecticides 6.1 - - - 6.1 (6.1) - - - (6.1) Veterinary Drugs 2.0 0.5 - 2.5 (0.4) (0.3) - - (0.7) Operating Costs * - - - 19.6 19.6 - - - (10-.0) (10.0) Goods and Services - - - 8.5 8.5 for Credit Lines _ _ (7.0) (7.0) Incremental Local Salaries - - - 1.2 1.2 PPF Refund - - - 0.3 0.3 _ _ _ (0.3) (0.3) TOTAL 14.4 2.2 9.0 29.6 55.2 (11.3) (1.5) (4.5) (17.3) (34.6) Note: Amounts in parentheses concern Bank financing. al Quotations from three suppliers. bl Includes amounts for items financed by other cofinanciers under their own procedures. * Except for the Extreme North Province financed by IFAD.  -8-~~~~~~~~~~~~~~~~ Schedule B Page 2 of 2 Disbursements a/ Amount Percentae Cgteaorv (USS milllon) Pinanced by Bank Civil Works 0.6 100l Vehicles and Equipment * 5.3 100% of foreign expenditures and 85 of local expenditures Consultant Services, Training and Studies 3 5 lOO0 Insecticides 5.6 1001 Drugs 0.6 501 af Operating Costs * 8.8 On a declning scale b/ Goods and Services for 6.4 1001 Credit Lines PPF Refund 0.3 Amount due Unallocated 3.5 Total 34.6 a/; Pari-assu (it1) cofinancing with IFAD. kl 901 for up to US$4 million; then 601 up to US$? million and 301 thereafter, In line with expected increases in-revenue from cost recovery. * Except for the Extreme North Province financed by IPAD. Estimated IBRD Disburs nt- IBRD fiscal Year 89 90 21 92 93 94 95 --------1-- 8$ million-------------a - Annual 4.0 4.9 4.0 5.7 6.8 6.8 2.4 Cumulative 4.0 8.9 32.9 18.6 25.4 32.2 34.6  9 Schedule C REPUBLIC OF CAMEROON LIVESTOCK SECTOR DRVELOPMENT PROJECT Timetable of 1ev Proiect Processing Events (a) Time taken to preparet 12 months (b) Prepared bys BDPA (consultants) (c) -First Bank missiont November 1987 (d) Appraisal mission departure: March 8, 1988 (e) Negotiations: October 1988 (f) -Planned Date of Effectiveness: March 1989 Cg) List of Relevant PCRss Livestock I  Schedule D - 1l1- Pagp 1 of 2 THE STATUS OF BANK GROUP OPERTIONS IN C_ROON A. STATEMENTS OF BANK LOANS AND IDA CREDITS (asor 0Ctober 31, 1911) bmount in USJ aillion -- (less cvanellations) Loin or Fiscil Undis- Closing Credit No. fear Borrowr Purpose Bank IDA bursed liate Credits Z5 Creditsis) closeo 227.22 C10100-CAN 1990 CANEROON LIVESTOCK 11 16.00 .21 12/31/87(R) C11680-CA 1981 CANERGON TECHNICAL COOPERATI 10.00 1.23 12131186(R) TOTAL numer Credits a 2 26.00 1.44 Loans. 21 Lonsits) closed 326.40 U20920-CAt 1982 CANEROON FRSiRY 2.36 12131/88(R1 L21-00-C 1982 CANOON OIL P UDIBBER CONS 5%i. 17.09 06130188 21800-N 1992 CAERON RADS v 70.00 .3? 06130/9iR) 1.22440-CAN 1983 CAnEROO= URBAN DEVELOPMENT 20.00 .47 06/30/8B L22590-C 1963 CAINRO PORTIil 22.50 S* 41 06430i89 L24040-CAN 1984 CANSON PESTRNROVINCE IRP 21.50 Io. 123119 L24850CAJ 1985 CANERMN IIVCA UBER 8.30301 01230190 1.2567-CAl 1?85 CANEROON fSUR il 25.50 21.88 12/31191 L25840-C 195 C ROADS VI 125.00 101.65 04130/91 12630a- 1986 CANEROON EDU-. & YOC. TRAIN. 30.1Q 25.22 O630J93 .O38-CAN 1987 CAEROON ROADS VI 20.00 -- 06-30/91 27660-CN 1987 CAIIERGON A6RIC. RESEMAC: 17.80 16.8? 0/30/93 * 1.29120-CAN 1988 CANERDO. COCOA ZYIAB 103.00 103.00 12/31194 TOTAL nusber Loans : 13 521.0 -c 318.95 T7TAL*'- 847.90 25Z.22 of winch repaid 119.94 12.70 TOTAL held bv Bank & IDA 729.9 . 240.51 Amunt sold 13.45 of which repaid 8.45 TOTAL undisbursed 320.39 NOTES: * Not Yet effective 4* Not Yet siqned ** tal APoroved, ReanYMents and Outstandinq balance represent both active ind inactive LDans and Credits. IR) indicates formally revised Closini Date, The Net Approved and Bank Repayments are historical value, all others are market value. The Signing, Eifective, and Closing dates are based upon the Loan Departnent offital data and are not taken from the Task Budqet iile.  REPUBLIC OF CCAMEROON SUMMARY OF IFC INVESTMENTS (As of October 31, 1988) Orig. Gross Commitment Total Fiscal Type of - US$ Million - Held Year Company Business Loan Equity Total bLJYSJl Undisbursed 1 0. 1975 Bata Soci6t6 Anonyme Shoes - 0.13 0.13 0.00 - ^ Camerounaise 1977/79 S.A.F.A. Cameroun, Palm Oil & Rubber - 1.38 1.38 1.38 - 1981 S.A.C 1979 Alucam-Compagnie Aluminum Smelting 7.00 0.93 7.93 0.93 Camerounaise de l'Aluminium P6chiney-Ugine 1981 Soci6t6 Camerounaise Flout Milling 1.12 0.19 1.31 0.54 de Minoteries 1981 Soci6te Camerounaise Class Container - 0.10 0.10 0.10 de Verrerie Manufacturing I 1982 Soci6te Sucriere du Sugar Plantation 1.44 - 1.44 1.12 - Cameroun & Manufacturing 1985 Soci6t6 des Palmeraies Palm Oil 1.98 0.56 2.54 1.65 de la Ferme Suisse 1986 Cotonniere Industrielle Textiles 2.98 - 2.98 3.13 - du Cameroun (CICAM) 1986 Soci6te Industrielle Dairy Products 2.28 0.57 2.85 2.72 1.06 Laitiere du Cameroun (SILAC) 1987 Prestige Bottling Co. Soft Drink 2.67 0.30 2.97 2.91 1.08 1988 Societ6 des Plantations Banana Plantation 1.91 0.33 2.24 2.21 1.34 Nouvelles du Penja TOTAL