Turkey - Fifth Livestock Development Project

Documenl of The World Bank FOR OFFICIAL USE ONLY Report No. 8533 PROJECT COMPLETION REPORT TURKEY FIFTH LIVESTOCK DEVELOPMENT PROJECT (LOAN 1862-TU) APRIL 12, 1990 Agriculture Operations Division Country Department I Europe, Middle East and North Africa Regional Office lhls document has a restrcted drIbuton and My be used by i e* E the m Of their offict. duties. Its contebt msy not otherwise be disclosed I Word Bank t  Currency Equivalents US$1 - Turkish Lira (TL) 76.0 (1980) 111.2 (1981) 162.6 (1982) 225.5 (1983) 366.7 (1984) 522.0 (1985) 674.5 (1986) 857.2 (1987) 1,422.3 (1988) Abbreviations and Acronyms AI Artificial insemination CTSS - Center for Technical Support Services EBK - Et ve Balik Kurumu (Meat and Fish Organization) FMD Foot and mouth disease GDANB - General Directorate for AI, Natural Services and Breeding Improvement GDVS General Directorate of Veterinary Services GOT - Government of Turkey LDP General Directorate for Livestock Development Projects MAFRA Ministry of Agriculture, Forestry and Rural Affairs (previously MFAL) MFAL Ministry of Food, Agriculture and Livestock OED = Operations Evaluation Department PCR = Project Completion Report RPC Regional Poultry Cooperation TCZB = Turkiye Cumhuriyeti Ziraat Bankasi. (Agricultural Bank of Turkey TKV = Turkiye Kalkinma Vakri (Development Foundation of Turkey) TYT Turkiye Yapagi ve Tiftik A.S. (Turkish Wool and Mohair Corporation) VBH = Village broiler house WB - World Bank  F0R OIviCIAL USE ONLY THE WORLD BANK Washiton. C.20433 0 -w April 12, 1990 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Turkey Fifth Livestock Development Project (Loan 1862-TU) Attached, for information, is a copy of a report entitled 'Project Completion Report on Turkey: Fifth Livestock Development Project (Loan 1862-TU)M prepared by the FAOIWorld Bank Cooperative Program and revised by the Europe, Middle East and North Africa Regional Office. No audit of this project has been made by the Operations Evaluation Department at this time. Attackment The docunent has a rsmtded distibutInm and my be used by ecets l In the pefoanuce of their officil duties. is contents may not oteise be disctsed wbout Wodd ank authoion.  FOR OMCIAL USE ONLY FIFTH LIVESTOC DEVELOMPNT PROJECT ttCAN 1862-TO) PROJECT COT PLETIOg mPORm Table of Contents Pap Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. i Basic Data ............................ .. .* il Evwluatlon Summary . . v 1. Introduction ................... 1 2. Background ................... 1 3. Project Objectives and Description. 2 4. Project Design and Organization. 4 5. Project Implementation .................. . 7 6. Project Results.. ................... 8 7. Project Sustainability .................. . 12 8. Bank Performance .................... 13 9. Borrower Performance .................... 14 10. Project Relationship .................... 14 11. Consultancy Services .................... 15 12. Project Documentation and Data .............. . 16 Appendix Co4ments from the Ministry of Agriculture, Forestry, and Rural Affairs and the Agriculture Bank .17 Annex 1. Related Bank Loans and Credits .. 21 2. Project TSimetable ..22 3. Loan Disbursements (Cumulative Estimated and Actual) . . 23 3a. Original Loan Allocation ..24 3b. Revised Loan Allocation . . . . . . . . . . . . . . . . . . . 25 3c. Final Loan Allocation . . . . . . . . . . . . . . . . . . . . 26 4. Project Cost and Financing ..27 5. Project Results - Direct Benefits .... . . .. . 2a 6. Status of Covenants ..29 7. Use of Bank Resources . . . . . . . . . . . . . . . . . . . . 3 A. Staff Inputs . . . . . . . . . . . . . . . . . . . . . . 31 B. Missions . . . . . . . . . . . . . . . . . . . . . . . . 32 8. Physical Implementation .... . . . . . ...... . . . . 33 1 - Number of Dairy Farms Established ... . ...... . . 33 2 -Number of Cattle and Sheep Fattening Operations . . . . . 34 3 - Number of Merino Sheep Enterprises Established .. ... 35 4 - Numbes of Angora Coat Enterprises Established ..... . 36 5 - Poultry Component . . . . . . . . . . . . . . . . . . . . 37 6- Credit Delivery . . . . . . . . . . . . . . . .3b 4 Physical Parameters - Poultry Component (1985-1987) . .. 39 10. Indicative Financial Farm Budget - 5-Cow Dairy Farm . . . .-. 40 11. Indicative Financlal Farm Budget - Cattle Fattening .... . 42 12. Consultants Employed .... . . . . . . ........ . 44 Attachment 1 - Description of the Project (L.A., Sched. 2) .45 MAP - IBRD 148411 This document has a restricted distibution and may be used by recipients ondy in the perfonnanca of their ofcial duties Its contents may not otherwise be disclosed without World Dank authorization.  (i) TURKEY FIFTH LIVESTOCK DEVELOPMENT PROJECT (LOAN 1862-TU) PROJECT COMPLETION REPORT PREFACE This is the Project Completion Report (PCR) for the Fifth Livestock Development Project in Turkey, for which Loan 1862-TU in the amount of US$51.0 million was approved in June 1980. The loan was closed on December 31, 1987. The last disbursement took place on October 31, 1988. The PCR was prepared by the FAOIWorld Bank Cooperative Program, with the exception of the Preface, Evaluation Summary, part of paras. 6.6 and 12.1, and Annex, tables 3b, 3c, 4, 7A and Attachment 1, which are the responsibility *f Bank staff, who also made some editorial changes to enhance the claz- .ty of the report. The PCR takes account of a draft PCR prepared by the Government in March 1989. This PCR was read by the Operations Evaluation Department (OED). The PCR was sent to the Borrower for comments. Comments received from the Ministry of Agriculture, Forestry and Rural Affairs (MAFRA) and from the Agricultural Bank of Turkey (TCZB) are attached as an Appendix to this report.  - il o FIFTfI LUVES1OT IE lft OICT ILlS 18b2-1T) BASIC DATA MEE A. KEY PRJET DATA Aprtiul ktual or EsUta EsUated ktua t1t1. Project Cut US$ Millie) 123.0 / total troject Cott m1 sillion) 8,10.0 */ LI hut 1Ub million) 51.0 51.0 vote of Drd Appral 06.3.O0 ate of Lon Agr t 06.06.80 btt of Lo EffKctiVnes 10.06.80 10.22.80 Clsingi ate 06.30.87 12.31.V Ecomic Rt of Ibturn (1) 71.1S IIA Intitutional PUeorate NId Imbe of laficiaris (lio crated) 2,"O fa failis HIA pls a aditial 2,780 job creatd 1s. hWFf louit FY79 FM30 FMl F FY83 FY84 F5 FV86 FW FiN1 ldentitftio"Prep. 23.7 2.0 otiation 8.3 &AaIsl 57.5 pervisim 0.6 33.1 11.2 23.4 12.8 15.6 37.1 19.4 11.9 Othwr 0.1 1.3 2.5 .0.5 TOTALS 23.8 9.7 33.1 13.7 23.9 12.8 15.6 37.1 19.4 lt.9 C. WWtthE DIBnu FY81 FM2 FY83 F FM Fill F7 FY83 FY8 Aprail Estimate U$ million) 1.0 5.30 12.30 23.30 38.30 48.30 51.00 ktual 4U13 million) 1.31 4.62 8.80 16.35 32.55 37.52 50.43 1.00 ktul a t of Estimte (Ol 25 38 38 43 67 74 Dte of final Disbset Octoer 31, 19"8 */ To$Al eCOA proeJ coo n" ovolablo. e pe. 12 of tot and Ann 4J on Proj.o Financing for element of projet coot t by Iw and 1ZB.  - iii - D. Nnsliol DATA - P~~~~~~~~~~~~~oerforanc bate lle. el Speclelzataons t--- _- rTpe' (Nr./Yr.) Prsom Rpresnted /I Status 12 Tcnd 13 of Problm I0 Proidentification 7/I8 I L ItdntificatinIPr,p 11173 1 L PrpWratin 917M Prwration IFAO/CP) 2179SM 3 1, N, F Supervisions I Si 3-4/I1 4 E, L, 1, AN 2 1 P 2 -6/81 2 L, L 2 1 P 3 6/61 1 E 2 1 0 0 7/ tlel 1 L 2 1 n/g S7/ 12/11 1 L 2 1 F, N 6 10/82 2 L, A 2 2 F, N 7 5/63 2 4, E 2 3 0, F 8 10/R3 1 A 2 2 0, F 9 71 484 2 A, a 2 2 0, F 10 el 4164 1 A N/A N/A niq 11 7/ 9-10/84 1 A 2 2 N, f to/ 12 5-6185 1 E 13 11/85 1 E 14 4-3/06 9/ 3 E, AN, Al 2 2 15 7/18 1 L 16 9-10/86 3 A, L, L 17 6/87 1 N/A t8 10/87 1 E 19 11/88 1 E PI mission 4/89 2 E, L E. OTNER POJECT DATA lorruwr Sovernmt of the Republic of Turkey Executing AeKCieS Ministry of Agriculturc, Forestry and Rural Affairs, bwnal Directorate for Livestork Delmet (LOP)/ mnral Directorate of Projecst d Ibplmntation (1WI) II/, Agricultural Iank of Turkey (TCIS, Turtivh ool and lohair Corporation, and llat and Fish Organization /12 Fiscal er of Borrowe: larch I - Februry 28 (at loan signature), changq during implmntation period to Janur 1 - Dcme 31. NaMe of Currecy: Turkish Lira (TL) Currecy Exchnge Ratet Appraisal year Averep 1979 11.00 a LT 31.10 Intervaning Years Average 1980-87 1184.00 a LT 374.46 Completion Year Average 1998 131.00 a LT 1,422.30 1/ E s Economist/Financial Analyst; L a ivestock Specialist; N a Mir Specialist AN 2 Aniul IHalth Specialist AF * Animal Feding Specialist 2/ 1 * ProIn free/mnor prIems; 2 a oenrate problms; 3 N Mjor problms 3/ 1 a lproving; 2 a Stationary; 3 x Deteriorating U Financial; N Mnagemnt; t a Technical; P a Political; 0 * Other 51 All prt-tium eCept the econoist. 6' This mission was limited to supervision of the on-farm component. 7/ Part-time only, in conjunction with other supervisory activities. 8/ Partial supervision only. 9/ Nid-ter reviem mission. 10/ Typ of problms and status no longer indicated in supervision reporitng fars. 11/ Following dissolution of LOP in a 1984 reorganization of th Nlinistry. 12/ Caponot ancelled.  -iv - I-I FIFTH LFVESTK D"=flOPEN PRO]BT (Loan 1862-TU) PROJECT COMPLETION REPORT Evalmation mar Proiect Backuxound and Objectives 1. Turkey has large livestock resources, with livestock contributing 33X of total agricultural GDP. However, the subsector is largely charaoterized by low productivity. The project under examination was the fifth of a series of livestock projects initiated in 1971 designed primarily to support the genetic upgrading of indigenous herds through supervised credit for the import of pedigree dairy cattle. The fifth project, however, included in addition components for poultry production, sheep and goat production, artifizial insemination, control of livestock diseases, and construction of meat and mohair processing facilities. The poultry component is innovative in the use of a NGO (the Turkish Development Foundation - TKV) to assist in implementation and in the vertical integration of production, processing, and marketing through regional processing facilities partially owned by participating farmers and a national marketing company organized by TKV. The project was appraised in October/November 1979 and the loan signed in June 1980. Total project costs were estimated at about US$125 million, of which the estimated foreign exchange cost (41X) was to be financed by a Bank loan of $51 million. fmplementation Ixprience 2. As a result of sharp changes in macroeconomic policies in 1980/81, including introduction of realistic exchange rates and reduction of obstacles to livestock export, major assumptions in the project design shortly become obsolete. Meat production became relatively more attractive and locally bred friesians became cheaper than imports. This reduced demand for subloans under the project. Somewhat belatedly the loan was amended in 1983 and 1984 to permit financing of loans for locally bred improved livestock and for fattening operations, as well as to permit disbursement against the Agricultural Bank's (TCZB) own separate livestock lending programs provided the loans were approved by the Ministry of Agriculture as meeting agreed technical criteria. As a result of the Government's changed attitude toward expansion of parastatals, the meat processing component was dropped. A foot and mouth disease control program was added. In 1984 the Ministry of Agriculture was reorganized merging previously separate extension services and substantially decentralizing decision responsibility to the provincial level. The main implementation agency for the project within the Ministry was dissolved as a result. While these changes are expected to be generally beneficial for the sector over the longer run, the immediate effects were to cause considerable short-term disorientation and delays as well as loss of project data. Progress of the poultry component was accelerated by TCZB's  - V . agreement during p.-oject implementation to reduce equity requirements from 401 to 10X, and by TKV's decision to participate directly as a shareholder in regional poultry corporations, and to sell their shares subsequently to farmers as now producers joined. 3. Due to data inadequacies, it is impossible to quantify returns on project investments in dairy, poultry, and beef production. The component for development of a hybrid broiler industry appears successful to date, although financially vulnerable to declines in domestic poultry prices (such as occurred in 1986), particularly given low equity requirements and high interest rates. The small-scale (5 cows or less) dairy c4mponent has been reasonably successful, receiving 52X of dairy loans (by number) with about 751 of farmers reported to be repaying. However, only 251 of farmers with larger dairy operations are reported to be repaying their loans. The fattening operations appear profitable, but do not contribute to the project's original objective of herd upgrading. The disease control component made important contributions to increasing vaccine production which can be expectea to have a positive impact on national disease control programs. The physical targets of the mohair processing component were achieved, but production is still disappointing at less than 501 of capacity due to marketing difficulties and shortage of working capital. The artificial insemination component succeeded in expanding the number of insemination teams from 111 to 268, but productivity of the service did not improve and farmers are reported not to have confidence in the system. It is also disappointing that a component for preparation of a livestock sector strategy has to date only resulted in a series of technical studies which have not yet been pulled together into a usable strategy document. fnpst&InsbiLi t 4. Project sustainability will largely depend upon future policy decisions affecting the livestock subsector. The development of an appropriate livestock strategy would be a valuable first step. Sustainability of the dairy component depends upon overcoming marketing constraints. It is likely that an integrated approach combining input supply, technical advice, credit and marketing, in a manner similar to the poultry component, would be beneficial. The fattening component should continue to thrive based upon its profitability and tse of know technology. Progress has been made in increasing the supp'.y of trained veterinarians. This needs to be matched by improvements in the delivery of effective animal health services, including policies encouraging private veterinary practice. Lack of farmer confidence in the extificial insemination services has contributed to high unit costs which make sustainability of this component doubtful in the near future. Sustainability of the poultry component will depend to a large degree on whether financing can be found for additional complementary facilities as well as progress in increasing the density of poultry producers, making provision of services more cost-effective.  . vi - I.ossons 2a ed 5. Major changes in the macro-economic environment or in the structure of a project's main imuplementing agency should be followed promptly by detailed analysis to determine what changes in project dosign are appropriate. Adequate attentlon should be paid to awirketing problems and the importance of project monitoring. Development of a clear strategy for the livestock sector would hae been beneficial. The close involvement of TKV in the preparation of the poultry component facilitated progress in its implementation. This type of preparation involvement by implementing agencies should be encouraged.  TURKEY EIFTH L1VESTOCK DEVELQ2MENT PROJECT .a.ETCOMPLETION REPORT 1. IX nn 1.1 This project completion report reviews performance under Loan 1862-TU of October 31, 1980 (US$51.0 million) for the Fifth Livestock Project. The Closing Date, originally June 30, 1987, was extended to December 31, 1987. The loan amount was fully disbursed on October 31, 1988. 2. Background 2.1 Since the early seventies, the Government of Turkey's (GOT) livestock sectof policies have emphazised increased production in order both to sat- isfy rising domestic demand and encourage exports. Increased awareness of the need to reduce income inequities between urban and rural areas, as well as between western and eastern Turkey, has also pointed to the need to assist livestock producers. The policies have focused largely on the introduction of new technology at farm level to improve the efficiency of production, linked to credit and technical assistance. In addition, emphasis was given to improving processing and marketing facilities. 2.2 In support of these policles, the World Bank (WB) has hitherto fi- nanced five livestock development projects in Turkey. 1/ The first and third concentrated on dairy development, largely in the central and western provinces. Under the first project (CR 236-TU; 1971; US$ 4.5 million) a nucleus herd of over 3,000 imported animals was to be established on private farms in and around the four main milk consuming centres in western Turkey, to provide breeding stock for genetic upgrading of indigenous herds. The project, completed in 1977, was considered largely successful. 2.3 The third project (L 1265; 1977; USS 21.5 million), was a repeater project of the first, and aimed at consolidating and expanding the achieve- ment of the first project, as well as expanding its area coverage. Over 10,000 pedigree Holstein and Brown Swiss heifers and bulls were imported. A particular feature of this project .was the small (S-cow) village farmer component which was a first attempt to extend, on a pilet basis, credit and new technology to small livestock producers. .1/ See Table 1 of Annex  2.4 The second livestock project (CR 330-TU: 1972: USS 16 million). was aimed at alleviating the problem of overstocking in relation to the available grazing resources in eastern Turkey. The project provided credit to encourage fattening operations and village livestock development in three provinces ; tern Turkey. The fattening component was based on the expansion of onSivng activitles, using known technology, which was profitable at the farm level, and was generally successful. However, village livestock development proved disappointing. In particular the group action concept was not accepted by farming communities during the life span of the project. 2.5 The fourth project provided supervised credit for sheep and cattle improvement as well as for dairy production, originally In eastern Turkey (L 1586-TU; 1978; US$ 24 million). The project had a somewhat wider concept, however, in titat it provided funds for: technical services for farm development planning anc supervision; animal heslth services; a milk industry study; local and overseas training; surveys and field research in forage production and utilization, animal production; and veterinary health care. The project did not succeed in achieving its original objectives of introducing technical change involving breed improvement and management of grazing resources. Nevertheless, the PCR for the project concluded that due to modifications in project design - reducing the emphasis on large-scale dairy and imported cows, and expanding the fattening activities -- project results were beneficial to both participating farmers and the economy as a whole. 3. Proiect Obiectives and Descrintion 3.1 The fifth project sought to further consolidate and expand the gains made under the previous four liv4stock projects and to initiate Bank- assisted efforts in complementary activities in the fields of animal health, artificial breeding, meat processing, mohair exports and poultry production. Specifically, the project would: a) channel medium- and long-term supervised credits for on-farm development to dairy, breed-improvement and poultry producers, most of whom would be small farmers; b) control economically important livestock diseases to prevent the adverse effects on milk and meat production and human health, and for which there were established means of control; c) upgrade the genetic merit (and hence productivity) of cattle through an expanded artificial insemination programme; d) install two meat cutting facilities and twelve intestine processing units in parastatal (EBK) slaughterhouses and provide tefrigerated rail transport to service demand in the deficit meat markets of central and western Turkey and export m.arkets; and e) construct a 1,000 ton per annum mohair processing plant for the export of high-value mohair tops. The project consisted of the followlng six components: i) Livestock Development and Breed Improvement (US$42.8 million, in- cluding contingencies). This component would provide supervised credit through the Turkish Agricultural Development Bank (TCZB) to a total of 2,300 beneficiaries for:  -3 - a) dairy cattle improvement, based on imported pdiqrPe cattle, on about 1.150 farms I/ ; b) breed improvement, based on the upgrading and culling of local cross-bred cattle, involving the establishment of about 600 10-cow units; c) Merino sheep improvement, including the establishment of about 300 50-ewe units; d) Angora goat improvement for mohair production, involving the establishment of about 250 100-doe units. The supervision of the credit and the livestock husbandry assistance to farmers was to be provided by the General Directorate for Livestock Development Projects (LDP) of the Ministry of Agri- culture 2/. The project would provide funds for an additional 15 veterinarians, 15 agronomists, 16 middle-level animal health technicians and 17 middle-level agriculturalists. ii) Villag. PultrX Daevelopment (US$ 29.9 million). This component would finance a six-year time slice of a ten-year programme, based on a pilot operation which wasproceedingsuccessfully in the south of Turkey, with the assistance of the Turkish Development Foundation (TKV). Medium- and long-term credit would finance: a) individual Village Broiler Houses (VBH) with a capacity of 2,000 broilers per cycle (10.000 broilers annually) for about 600 producers; b) twelve Regional Processing Centres (RPC) each with a caoacity of 1,200 tons of dressed meat annually to serve the cold storage and processing needs of, and to supply mixed feed concentrates and vaccines to, about 100 individual producers; c) nine parent stock farms with an individual annual capacity of 1.1 million starter chicks to be supplied to the VBHs; d) a grandparent stock farm to produce presently imported female parent stock with a capacity of producing 375,000 grandparent females annually; and e) a premix feed plant with six feed mixing units to supply the premix concentrate needs of the VBHs. The processing and parent stock units were to be geared to clusters of producers, which would permit taking advantage of economies of scale in the processing and marketing stages. In order to assist the small producers, so-called Centres for Technical Support Services (CTSS) would be set up under the supervision of LDP. 1/ 600 5-cow units; 400 12-cow units; 100 20-cow units; and 50 30-cow units. 2/ MFAL, -tow MAPRA.  - 4 - iii) Animal HeUalh (USS 8.7 million), The animal health cnmponent would focus on three diseases: Mastitis, Brucellosis and Theileriosis. The programme would proceed in two steps: first a baseline study was to be carried out to survey the incidence of the three diseases concerned, followed by a 4 to 5 year control Programme. Provision was made to assist in the production of Brucellosis vaccines and the equipping of 65 field teams to carry out a.o. an effective Theileriosis vaccination programme. iv) Artificial Brgeding (USS 36.1 million). The component, located in 20 provinces of central, southern and western Anatolia, would expand the ongoing Al programme. A total of 300 teams (technicians. drivers and vehicles) would be equipped; existing Al centres would be expanded; a new laboratory would be built; and some frozen semen would be imported, as well as some pure bred heifers and bulls, to expand the breeding herds. v) Mgat Processing (USS 3.5 million). Two meat processing facilities would be built in EBK's existing slaughterhouses. In addition. twelve refrigerated rail wagons would be provided and twelve intestine processing facilities would be added to existing slaughterhouses. vi) Mohair Processing (USS 4.0 million). Under this component a new three shift 1,000 ton/year mohair processing plant. owned and operated by the Turkish Wool and Mohair Corporaton (TYT), would be constructed and equipped in Afyon. 3.3 Total project cost was estimated to be US$125 million, of which US$51 million (41% of the total cost), equivalent to the foreign exchange cost, was to be financed by the WB loan. TCZB would finance US$22.6 mil- lion (18X); farmer contributions would total US$5.9 million (5X); and GOT would finance the reminaing US$45.5 million (362). 4. Proiet Design and nrganization 4.1 The initial preparation of the project was carried out by LOP using their experience of the first four projects and similar models to analyze the viability of the livestock development proposals. 1/ Project design reflected the socio-economic reality in Turkey during the late seventies; i.e. heavy reliance on government and parastatal intervention. Although the SAR alludes several times to the need for exploring the possibility of in- creasing involvement of the private sector in areas such as veterinary services, artificial insemination, livestock product marketing, etc., this was not reflected in the project design. The poultry component was the notable exception. 4.2 The poultry development proposals benefited in particular from two design features. Firstly, they were vertically integrated. containing support for breeding, feed production, distribution. producer credit and marketing. Secondly, they were based on the experiences of an existing integrated pilot poultry project. Staff of TKV had been fully involved in the preparation of the poultry component and consequently they 1/ Some assistance had been received from the FAO/CP in the fields of mohair processing.  -5- were conversant with the proposals and the innovative financial arranqements therein. 4.3 The component entailed production in each location to start with clusters of around 20 associated producers (village broiler houses or VBH's), with new ones being added annually until optimal groups of 100 producers were formed. Regional production companies (RPC's) and parent stock units were set up and connected to a number of clusters, serving around 600 producers. The VBNWs would secure starter chicks from the parent stock farms and purchase mixed feed and supplies from units attached to the RPC's, while the mature broilers would be processed and packaged by the same RPC's. Initially, processing was done manually, while cold storage would be provided by small portable units. When production increased, the RPC's would invest in full processing facilities, including slaughterhouse;. refrigerated storage, and feed units. A national marketing company would sell the meat produced by the RPC's under one brand name throughout Turkey. All RPC's. parent stock units and the marketing holding company would be joined together under the umbrella of one apex holding, KOY-TUR. which permitted all component units or companies to benefit from centralized services and coordination, as well as to provide specialized extension services on poultry nutrition and diseases, engineering and financial analysis. 4.4 The dairy component did not have the benefits of such vertical integration. Thz supervised credit component centred on the use of imported pedigree cattle, following directly upon the work of the first and third livestock projects 1/ . Private farmers were expected to take loans, and to make "a shift away from some cropping to 100% livestock-related activity". They wouli have general access to the state veterinary and Al services, but there was no similar provision of marketing assistance or management support. Moreover, it was insufficiently recognized that, while in Livestock I farms were all fairly close to the market and there was a reasonable density of farms, the fifth project covered a much more widespread geographical area. Under these circumstances, the effective delivery of animal health and hus- bandry services became difficult to ensure, and many farmers experienced marketing problems. 4.5 The veterinary component, while only 7% of project cost, mainly aimed at expanding the existing Government service, mostly by increasing the number of field teams. It was regrettable that agreement on the need to tackle FMD, although suggested by the Bank, was not reached during the design stage of the project. It is arguably the most important livestock disease in terms of economic loss in Turkey, and its inclusion in the project would probably have triggered a review of the animal health delivery service as a whole. Instead, the selection of three other diseases gave the impression that it was possible to tackle them in isolation. 4.6 The selection of Mastitis as a priority for a control programme was highly questionable, because: a) full control has yet to be achieved even in advanced countries, and b) the survey and control system proposed does not appear to have been well understood by the staff concerned. The collection and testing of samples for mastitis has become an end in itself, while the necessary husbandry and prophylactic measures to control mastitis have not I/ While the fourth project uradertook similar work in a different area - Eastern Turkey.  -6- received their due attention. 4.7 The Al proposals involved a massive expansion of the Government services 1/ . Yet, they were not based on a previously successful operating experience. The expected effectiveness of the proposed fully mobile service was therefore Questionable and in any case uncertain. The lack of emphasis on the delivery aspects of AI led, during implementation, to a disproportionate amount of effort being devoted to aspects of herd recording and genetic selection which, while extremely valuable in the long run, have little relevance when the service itself is not accepted by farmers. Moreover, the SAR contained no analysis of the delivery costs involved in the system. Had it done so, including the estimation of likely user charges. it may be that the project would have moved towards some type of static point system instead of a full scale mobile one. Also, although assurances were sought that suitable charges would be introduced for a full recovery of operating costs, this was not incorporated as a technique to ensure the development of (cost) effective services. 4.8 The project design's concentration on breed improvement detracted attention from fodder crop production. Despite constant references in the SAR to the need to ensure an adequate level of on-farm feed resources to support the introduction of high producing dairy cattle, the project design reflected little support to this activity. LDP was expected to implement the technical and economic aspects of the project and coordinate the work of the other units. Yet, in actual fact the failure of the larger dairy units presumably reflects in part an incorrect assumption that large farms would grow only fodder crops (substituting all cash crops previously grown for such fodder crops) and in part the fact that farmers did not get enough extension support to make the required shift in their cropping pattern. Moreover, there was insufficient specialist advice to devise alternative feeding systems using additional concentrates, fitting more effectively with the farmers preferred (perhaps more realistic and less risk prone) farming system. 4.9 The appraisal would also have benefited from a thorough analysis of the financial attractiveness of the dairy proposals in a macro- economic environment characterized by high domestic inflation, especially in the light of the experience gained at that time from the first and third livestock projects. The Mission was unable to obtain the detailed farm models used in the SAR, while those supplied by TCZB were not internally consistent. 2/ Overall, too heavy reliance was put on the parastatal sector to supply the necessary services to the farmers, while the risks related to milk marketing in the more remote areas were insufficiently incorporated. This turned out to be probably the single most important factor contributing to the failure of the large percentage of the larger dairy producers (see para. 6.6). 4.10 A noticeable omission at the design stage was the lack of consideration of cattle and sheep fattening (see paras. 6.6 and 7.2). Even in 1979, there were indications that fattening was much more profitable than dairy production, and in addition, inclusion of the component would have had a beneficial environmental impact by increasing the flow-of cattle from east to west Turkey, thereby relieving the overstocked grazing resources in east I/ The proposals to import pedigree cattle and frozen semen and to build up the Al system complete with performance testing capability accounted for USS 36.1 million (29% of project cost). 2/ The budgeted feed and fodder resources would not maintain the projected herd and produce the levels of milk assumed.  -7- Turkey. A full analysis of both the production of immatures in the East and their fattening in the West, could have shown better ways to ensure reciprocal benefits to both parties. Merely offering credit for fattening operations, as was included at a later stage (para. 5.1) may not necessarily have led to the expected environmental improvements in eastern Turkey. 4.11 In retrospect, the decision to involve TKV in both preparation and execution of the project was a major contribution to the success of the village poultry programme. The lack of livestock sector strategy at the time of appraisal did not assist clear focussing of the main issues in the livestock sector which the project sought to address. The lack of a critical analysis of the problems of the dairy industry was most serious. It should have been apparent that significant expansion of dairy farming needed to be linked with market development. By pushing for, and supporting, the private delivery of Al and switching the investment to develop milk collection and processing, a significantly better outcome could have been achieved 1/ while project design should haire taken account that many locally bred improved cattle were available (partly as a result of earlier projects). 5. Proiect Imolementation 5.1 Several of the original project objectives were changed during the course of the project. The parastatal meat processing component was dropped under influence of the government liberalization programme. Regarding the livestock production credit component, by mid-1983 only 164 farm development loans had been extended i.e. 7.5Z of the total number forecast at appraisal. Equally, the importation of p'nrebred cattle was only 12% of the project total. Loan financing was restricted to the purchase of imported animals which resulted in a disbursement problem, because farmers preferred to buy the cheaper, locally bred Friesians. 5.2 On July 11 1983, the loan agreement was amended to include the purchase of local beef cattle and sheep for fattening and local animals for dairy farming ( Annex , Table 3b). When loan disbursments still failed to increa,.i in 1984, it was agreed to allow financing of loans extended through TCZB's ongoing lending programme for fattening operations, on the condition that the loan applications would be subject to scrutiny by MAFRA and that they would be accepted for priority support services. Around USS 11.5 million of such withdrawal requests were processed. 5.3 The objectives of the disease control component were amended in 1983 to include support for the Government's FMD control programme. Equipment and chemicals valued at US$ 1.66 million were financed to augment the vaccine production capacity and provide eighty vehicles for field teams. 5.4 Project implementation was significantly influenced by the economic reforms that where instituted in the wake of the political changes which took place shortly after the project was negotiated. Yet, perhaps the single most important factor affecting proje:t implementation, that could not have been foreseen during appraisal was the reorganization of the Ministry of Agriculture, initiated in 1984. Broadly reflecting World Bank advice. it merged previously separate extension services and sought to decentralize decision responsibility to the provincial and district level. In principle, the new organization could allow a more effective implementation of 1/ First steps in the direction of involving the private sector are being taken by some private firms which have commenced local improved breeding for commercial purposes.  -8- sectoral programmes in the long run, however, its imemdiate result was a considerable period of disorientation within the Ministry, while new lines of authority and areas of responsibility were being established. 5.5 Most important for the project was that the main implementation agency, the General directorate of Livestock Development (LPD) was dissolved as a result of the reorganization. Project execution responsibility was transferred to the newly organized provincial directorates of agriculture. Project implementation was seriously affected as LPD project staff were transferred to the provincial offices, where, for a considerable period of time, they remained uncertain regarding their new responsibilities. Amonst others, this led to the virtual cessation of on-farm planning and credit supervision by Ministry of Agriculture staff. Credit delivery became virtually a sole TCZB operation, and small dairy procucers had a clearly diminished access to fodder crop and animal husbandry support. In retrospect, it is regrettable that the organizational brrangements were not amended in the wake of the reorganization. 5.6 Implementation of the poultry component experienced a slow start partly because of delays in appointing TKV as consultant, but possibly more importantly, because of delays in the disbursement of sub-loans to poultry farmers by TCZB due to strict equity requirements. The agreement was changed subsequently, whereby TCZB reduced the equity requirements from 40 to 10%, as well as reducing collateral requirements, partially substituting them for a guarantee from TKV. Another change agreed during project implementation was that TKV participated directly as shareholder in the regional poultry corporations and parent stock corporations. Shares initially held by TKV were subsequently sold to farmers, as the companies expanded and other, new producers joined the companies. This arrangement, reflecting TKV's commitment, enabled each company to start with sufficient paid-up capital at the early stages of their establishment, without excessive loan financing or farmers equity participation (see also paras 6.2 to 6.4). 6. Project Resultc 6.1 The project achieved its objectives in relation to the development of the hybrid broiler industry. It was less successful in its interventions on livestock disease control and least successful in dairy development and the genetic improvement of dairy cattle. The physical targets of the mohair component were achieved, but production is still disappointing at less than half of capacity. Data on project impact are extremely scarce and often difficult to reconcile (see para.12.2). However, Table 8 of Annex shows some of the original physical targets and to what extent they are reported to have been achieved. 6.2 A total of around 940 village broiler houses (VBH) were established during the 1982-1987 period serviced by 12 regional poultry corporations. J/ The capacity of each broiler house was doubled from 2,000 birds per cycle to 4,000, potentially resulting in the production of somhething over 20,000 m.t. of broiler meat per year - well in excess of the SAR estimate of 6,700 m.t. 1/ Other information available states that only 653 VOHWs were in production in 1987, while data supplied by TKV states that 1,162 poultry farmers were established with the assistance of the project, most if not all of whom were still in production in 1988 and were still servicing their loans. These differences data could not be reconciled by the PCR Mission.  -9- The physical parameters achieved by poultry producers are generally satisfactory (Table 9 of Annex ). The regional poultry centres were established to support the VBH's and the entire development was managed by the Turkish Developmers Foundation (TKV), which is also a commercial enterprise operating in the po'Itry industry in its own right. A grand parent stock farm was financed under the project, owned by the Ministry of Agri.lture, and is succesfully operated jointly by TKV. a foreign investor and the regional poultry producers. The grand parent stock farm was innovative as it was the first such farm in the country, thereby replacing imports and using innovative techniques such as artificial insemination. 6.3 Broiler producers encountered financial difficulties due to a combination of high interest rates (as was the case with the dairy production component) and slower than expected start-up of production. These difficulties were mostly overcome by the RPC's advancing most inputs in kind, only deducting the expenses at the end of the production cycle. 1/ Moreover, farmers received regular cash payments as advances for their labour. It is reported that these advances were in many instances substantially higher than the actual net margin (after deduction for debt servicing) resulting from their operations. Although such practices may be justified in certain instances to shield farmers from temporary negative developments and allow farmers to satisfy their debt serv cing obligations, it is reported that in certain cases there was a definite danger that this practice may have developed at the farm level into a subsidy rather than a mere stabilization mechanism. This practice also made the interpretation of actual financial performance of VBH's difficult and burdened the RPC's financial performance. The Mid-term Review, carried out in 1986. feared that, although TKV might continue to assist farmers from a financial point of view, the integrated poultry model would be insufficiently financially viable in the initial stages of production to be self-sustaining. This fear was further supported by the high debt:equity ratio which producers were facing due to the mere 10X equity requirements and the high interest rates. It is reported that TKV's direct financial (but often temporary) Involvement has saved many producers and RPC's from insolvency. 6.4 tKV, through its Center for Technical Support Services (CTSS) 2/ has provided essential services to producers. While some of the services to newly established VBH's and RPC's are of a temporary nature (e.g. engineering design for investments, assistance in applying for TCZB credit. etc.), it is recognized that some form of technical support for already establised poultry growers will need to be continued for a number of years. The Mid-term Review expressed concern that the cost of these technical support services could not be recovered from producers. 6.5 The disease control component focused on three diseases only: Mastitis, Theilerosis and Brucellosis. There are reports of significant disease losses in the early stage of the project, mostly attributed, to outbreaks of Foot and Mouth Oisease (FMD). Project records on the vaccination of stock appear incomplete, but evidence from the production institute at Pendik shows that increasing numbers of vaccine to have been produced and issued. To what extent this incremental vaccine production is 1/ In addition the RPC's keep the individual farmers' books and handle the farmers' loan repayments to TCZB through deductions.on payments due to the farmers on the deliveries. 21 Established under a technical assistance contract between MAFRA and TKV. The contract expired on 31 December 1987.  - 10 - due to the project is impossihle to indicate. yet it is obviouc that the project made an imiportant contribution to this production, which in turn must have hod a positive impact on the national disease control programme. OaSes ot Vacclne Produced vaccine IJ