Tanzania - National Agricultural Extension Project (Phase II)

Document of The World Bank Report No. 15117-TA STAFF APPRAISAL REPORT THE UNITED REPUBLIC OF TANZANIA NATIONAL AGRICULTURAL EXTENSION PROJECT - PHASE II June 5, 1996 Agriculture and Environment Operations Division Eastern Africa Department Africa Region  CURRENCY EQUIVALENTS Currency Unit = Tanzania Shilling (Tshs.) USS1.00 = Tshs. 620 WEIGHTS AND MEASURES Metric System ABBREVIATIONS ASMP Agriculture Sector Management Project ACE Assistant Commissioner Extension CALD Commissioner Agriculture and Livestock Development CAS Country Assistance Strategy DALDO District Agriculture & Livestock Development Officer DC District Commissioner DEO District Extension Officer DESC District Extension Steering Committee EU Extension Unit FEPU Field Education and Publicity Unit GOT Government of Tanzania IDA International Development Association IFAD International Fund for Agricultural Development MOA Ministry of Agriculture NAEP National Agricultural Extension Project NALERP National Agriculture and Livestock Extension Rehabilitation Project NCB National Competitive Bidding NGO Non-Governmental Organization PIP Project Implementation Plan PSC Project Steering Committee REO Regional Extension Office RALDO Regional Agriculture & Livestock Development Officer SMS Subject Matter Specialist ZCC Zonal Communication Center ZCO Zonal Communications Officer  THE UNITED REPUBLIC OF TANZANIA NATIONAL AGRICULTURAL EXTENSION PROJECT - PHASE II STAFF APPRAISAL REPORT CONTENTS CREDIT AND PROJECT SUMMARY .............................................. I 1. COUNTRY AND SECTOR BACKGROUND .............................................. I A. BACKGROUND .............................................. I B. MAIN SECTOR ISSUES .............................................. I C. SECTOR STRATEGY .............................................. 2 2. THE PROJECT .............................................. 3 A. RATIONALE FOR IDA INVOLVEMENT .............................................. 3 B. LESSONS LEARNED FROM PREVIOUS BANK INVOLVEMENT .............................................. 3 C. PROJECT OBJECTIVES .............................................. 4 D. PROJECT DESCRIPTION .............................................. 4 E. PROJECT COSTS AND FINANCING .............................................. 7 F. PROCUREMENT, DISBURSEMENT, ACCOUNTS AND AUDITING .............................................. 7 G. PROJECT IMPLEMENTATION .............................................. 8 H. MONITORING AND EVALUATION .............................................. 9 3. ASSESSMENTS .............................................. 9 A. TECHNICAL ASSESSMENT .............................................. 9 B. INSTITUTIONAL ASSESSMENT .............................................. 10 C. ECONOMIC ASSESSMENT .............................................. 10 D. FINANCIAL ASSESSMENT .............................................. 12 E. ENVIRONMENTAL ASSESSMENT ............................................................................................... 1 3 F. SOCIAL AND GENDER RESPONSIVENESS ..................................... 1 3 G. SUSTAINABILITY ..................................... 13 H. BENEFITS ......................................14 1. RISKS ..................................... 14 4. ASSURANCES AND RECOMMENDATION ..................................... 14 A. ASSURANCES AND AGREEMENT ...........................1.4.................... .... 14 B. RECOMMENDATION ............15 ANNEXES 1. Project Cost Summary, Financing Plan, Disbursement Plan, Procurement Plan 2. Components Project Cost Summary 3. Procurement, Disbursement, Accounts and Auditing 4. Economic Analysis 5. Research Extension Linkages 6. Outline of Project Implementation Plan 7. Documents in Project File MAPS IBRD No. 27641   THE UNITED REPUBLIC OF TANZANIA NATIONAL AGRICULTURAL EXTENSION PROJECT CREDIT AND PROJECT SUMMARY Borrower: United Republic of Tanzania Implementing Agencies: Ministry of Agriculture and Co-operatives Beneficiaries: Smallholder Population; Government Poverty: Yes Amount: SDR 21.5 million (US$31.1 million equivalent) Terms: Standard with 40 years maturity Commitment Fee: Standard (a variable rate between 0-0.50 percent of the undisbursed credit balance, set annually by the Executive Directors of IDA). Financing Plan: Paragraph 2.14 Net Present Value: US $28.7 million at 12 percent discount rate Economic Rate of Return: 25 percent Staff Appraisal Report: Report No. 15117-TA Map: IBRD 27641 Project ID: TZ -PA -2753   THE UNITED REPUBLIC OF TANZANIA NATIONAL AGRICULTURAL EXTENSION PROJECT - PHASE II STAFF APPRAISAL REPORT 1. COUNTRY AND SECTOR BACKGROUND A. BACKGROUND 1.1 The agricultural sector is the foundation of the Tanzanian economy: it contributes more than 50 percent to the country's GDP, 75 percent to export earnings and provides 84 percent of total employment. The sector continues to be critically important in Tanzania's drive to increase economic growth and reduce poverty. The agricultural economy is in the hands of some 3.5 million smallholder farmers: 93 percent of all farm families cultivate less than 2 hectares each. Food crop production dominates the sector, with livestock production and cash crop production second and third in importance in terms of contribution to agricultural GDP. Good agricultural land is plentiful relative to population but under utilized, and considerable potential for intensification and managed, sustainable horizontal expansion exists. In a drive to increase smallholder productivity, a National Agricultural and Livestock Extension Project (NALERP) has been supported by IDA since June 1989, and was put in place following an IDA supported pilot effort which introduced T&V-based agricultural extension in five districts. This project, effective in June 1989, was considered the first phase of a long-term program to establish an efficient, unified, cost-effective, and sustainable national agricultural extension service for smallholder crop and livestock production. The project covers 16 of the 20 regions of mainland Tanzania. The other four regions are served by the IFAD supported Southern Highlands Extension and Rural Financial Services Project. The first extension project focuses on merging crop and livestock extension services into a multi-disciplinary system; strengthening extension management and organization, upgrading the quality of extension personnel, providing physical infrastructure and logistical support to the system and increasing farmers production and income. The first phase has achieved many of its objectives. It is scheduled to close on June 30, 1996 about one year ahead of the original closing date, as all the funding under IDA has been disbursed or committed. B. MAIN SECTOR ISSUES 1.2 Despite a favorable resource base for agricultural production, Tanzanian agriculture is characterized by very low labor and land productivity, little use of improved genetic material and animal traction and very low use of commercial inputs. Marketing of agricultural produce particularly livestock and products is a serious constraint in several areas.  -2- 1.3 Despite several reforms geared towards economic recovery, the agricultural sector management to speed up development and increase production and productivity continues to be weak. The weakness has particularly been noted in the areas of policy management, inadequate institutional and financial framework to manage a market oriented agricultural economy, rural infrastructure and, until recently, too much Government dominance in management of the sector with declining resources. Adoption of recommended cultural practices is improving production on smallholder farms, but availability of inputs, credit and marketing continue to be major constraints. Traditionally the Government staff including extensionists have not paid adequate attention to participatory approach in the past. Several NGO and farmer led initiatives have supplemented extension delivery of the public extension service with cost sharing but these relationships have not been formally integrated into the extension system nor has their potential to reduce public costs and improve quality of extension service been fully exploited. In the past the Government discouraged private sector entry to provide extension services in crops of their interest but now MOA issues no objection to such requests. However, this new policy initiative needs to be integrated into an overall MOA strategy to seek partners to reduce public sector extension costs. C. SECTOR STRATEGY 1.4 The Government's overall goals and strategy for the agricultural sector are articulated in the recently updated National Agricultural and Livestock Policy. The main objectives of the policy are to promote food security, improve national nutrition standards, generate foreign exchange, and raise rural income levels and alleviate poverty. The policy emphasis on strategies for full exploitation of agricultural potential includes investments in agricultural extension and research, diversification of food and export crops, development of livestock production, integrated and sustainable use of natural resources, and development of human resources within the sector. 1.5 Since 1986 as a part of the national economic recovery program major changes have taken place in the agricultural sector. Besides the devaluation of the Tanzanian currency and complete decontrol of the foreign exchange market which have benefited export crop products, the Government has increased producer prices in real terms, liberalized the marketing of food grains and some export crops, and allowed the private sector to deal with agricultural input marketing and distribution. The competition in a free market environment has benefited farmers. In terms of initiatives supported under the IDA funded Agriculture Sector Management Project (ASMP) the Ministry of Agriculture (MOA) is going through a rationalization and downsizing process, limiting its core functions to research and extension, regulation and policy formulation, and management. This project also includes a review of sector expenditures and a revision of the sector investment program, for which IDA has offered its assistance. The resulting investment program could be the basis for an Agricultural Sector Investment Project. In parallel, the Government has embarked on a major reform initiative under which the Government role would be limited to the core functions of governance, the commercial and non-essential activities would be given off to the private sector, the roles and  -3- functions of the Ministries would be rationalized and consequently the civil service downsized. The regional government is proposed to be restructured and slimmed down, and the district focus enhanced by transferring resources from the regional level to the districts and making district administrations community based. 2. THE PROJECT A. RATIONALE FOR IDA INVOLVEMENT 2.1 The proposed project reflects the country's development objectives and the Bank's Country Assistance Strategy (CAS). The central focus of the CAS is to support growth with poverty reduction, and accelerating growth in agriculture is at the core of this strategy. The emphasis is on assisting peasant farmers in adopting more productive technologies, including high-yielding varieties, which is the basic objective of the proposed project. The project is designed to (i) continue to support efforts to reshape the role of the MOA limiting its core functions to policy formulation, regulation, extension and research; (ii) increase participation in the development process by enhancing farmers' role in the generation and dissemination of technology; (iii) develop the human resource base through the training of farmers and extension staff; and (iv) increase agricultural growth and smallholder incomes. IDA is well placed to continue to strengthen the extension service in Tanzania given its involvement in a series of initiatives within the agricultural sector. These include the National Agriculture and Livestock Research Project (Cr. 1970-TA) which has established the basic framework for technology generation in agriculture. IDA is supporting agricultural research and extension programs in over thirty countries in Sub Sahara Africa and can disseminate lessons learned across countries. The support to this project is consistent with IDA's strategy to focus on core areas of support in agriculture, including research, extension, animal health, and natural resources management and to concentrate on systemic solutions as time slices of long- term national programs. B. LESSONS LEARNED FROM PREVIOUS BANK INVOLVEMENT 2.2 The lessons, in particular those related to the cost effectiveness of the extension program, would be incorporated in the proposed project. Experience under the ongoing operation shows that the Government's strategy in implementing the extension program has been correct: i.e. to combine the crop and livestock extension into a unified service in the field; to create a unified line of command for the extension service; to upgrade the skills of a large number of extensionists; and to move towards providing extension services to groups of farmers instead of individuals. Experience shows that effort made to focus on farmers' groups means farmers transfer technology and leam best practices from each other. The Government is concerned to take into account three main lessons learned: (i) to focus on the financial sustainability of the service, collaborating with NGOs and private agro-industries (tobacco, tea, sisal, etc.) where possible; (ii) to focus on farmers' participation in the generation and dissemination of technology; and (iii) to  -4- support the dissemination of technology with the use of appropriate communication technology. C. PROJECT OBJECTIVES 2.3 The main objective of the project would be td continue to improve the delivery of extension service to smallholder farmers for increasing their incomes and productivity, while improving its relevance, sustainability and cost effectiveness. The proposed NAEP II will follow the essential elements of the training and visit system of agricultural extension. It would seek to work using the participatory approach, giving an effective role and voice to farmers. The extension service will reinforce the group approach in farmer consultation, message delivery and problem solving and will facilitate the addressing of farmer problems such as the development issues. It will initiate the process of private sector/NGO/farmer participation in extension with cost sharing, including selective privatization, where feasible. Select agricultural training institutions will be strengthened. The project is expected to result in yield increases for major crops and livestock of about 10-20 percent over a five-year period. Institutional development would include training for about 800 village and divisional extension officers and some 1300 subject matter specialists and managers, and enhanced management information and M&E systems. D. PROJECT DESCRIPTION 2.4 The project will be implemented in 16 regions of mainland Tanzania. The project will have four main components. Institutional Strengthening (US$15.7 million including contingencies): 2.5 The project will continue the re-organization and strengthening of the extension service at MOA headquarters and the field services to enhance effective project direction and management, strengthen districts' roles, improve linkages and put in place an effective monitoring and evaluation system. The project will support the following specific activities: (a) increasing the number of full time Subject Matter Specialists (SMSs) available to extension by placing all SMSs under District Extension Officer, and locating at least three SMSs at below district headquarters (i.e. Divisional) level; the number of SMSs at district headquarters will be re-assessed and rationalized; (b) establishing a Project Steering Committee (PSC) under the chairmanship of Principal Secretary, MOA, at the Central level for project direction and management; and a District Extension Steering Committee under the District Commissioner for program review and providing support for farmer mobilization, raising resources locally and resolving farmer problems; (c) enhancing farmer -research-extension linkages described in Annex 4; (d) dispensing with services of 902 village extensionists adjudged by MOA to be unsuitable and not trainable and rationalizing village extensionists' work areas; and (e) establishing a monitoring and evaluation system comprising of: (i) a management information system (MIS) focusing on annual measurement of outputs and inputs; (ii) impact evaluation and  -5- beneficiary assessment feedback; (iii) surveys and contingent evaluations; (iv) data bank, data processing, analysis and reporting; and (v) training of M&E staff. 2.6 The project will support provision of vehicles, equipment and furniture, rehabilitation of field offices, construction of a limited number of residential houses in critical areas where rented accommodation is unavailable, and recurrent operating costs of vehicles, field supervision and maintenance allowances. During negotiations, the contractual agreement between the Government and the front-line extension staff for the use of the motorcycles and bicycles provided to them on loan was reviewed and found satisfactory. Extension Education and Training (US$12.6 million): 2.7 The project will support the training of extension staff including trainers, farmers and provide support to select training institutions. The training programs will aim to enhance the effectiveness of technology transfer, more effective farmer-extension research linkages, development support to farming, and addressing gender issues related to agriculture. A needs assessment will precede new training programs and a process of training evaluation to feed into future training programs will ensure relevance and effectiveness. The knowledge and skills at each level would be upgraded through a mix of regular courses, especially designed retraining, refresher and upgradation courses, higher diploma courses, workshops, seminars and dissemination of relevant information through print and other mass media. 2.8 Specific training and education programs would include: (a) Staff Training: (i) 446 field assistants adjudged trainable to undergo one-year upgradation course; (ii) 101 certificate holders (backlog) to be retrained under a one-year course; and 800 diploma holder Village Extension Officers/Divisional Extension Officers (VEOs/DIVEOs) to take a three-month especially designed course in crop and livestock production; (iii) extension managers and SMSs (1300 nos) to undergo two to four weeks refresher courses in group dynamics, participatory approach, communication support skills, development support to production, management skills; (iv) front-line extension staff to be trained in practical skills of group working, participatory extension, communication, facilitating development support, through the Bi-Monthly Workshops (BMWs) and Monthly Training Sessions (MTSs) by extending sessions of these meetings; (v) these skills of staff covered under (iii) and (iv) above to be further enhanced through study visits relevant to major program concerns; (vi) forty extension managers/SMSs with diploma qualifications to be deputed for graduate courses; (vii) post-graduate and higher diploma courses for 80 extension managers/trainers/SMSs to be planned by Sokoine University of Agriculture (SUA) in collaboration with international institutions, as needed; some of these training courses will be designed to include a training abroad in courses grounded in SUA; (viii) a two-week overseas sensitization capsule to be developed for a limited number of extension managers and trainers in group development, participatory approach to extension, women's issues and credit support to self-help groups; and (ix) limited provision for training of staff of  -6- ministries represented on the PSC; (b) Farmer Training: (i) 500 one-week residential courses for leaders of farmer/women/youth groups; (ii) 5000 one-day on-site training for members of farmer groups; (iii) farm study tours; (iv) technical information bulletin/materials to farmers and demonstrations. A minimum of 30 percent of the places in training courses will be reserved for women and about 30 percent for youth (M/F); (c) Training Institutes: Between themselves the eight Ministry of Agriculture Training Institutes (MATIs) and Livestock Training Institutes (LITIs) and two Farmer Training Centers (FTCs) supported by the Sokoine University of Agriculture (SUA) have adequate capacity to conduct the proposed training courses; and (d) Training Coordination: Government will establish a Training Coordination Committee (TCC) to finalize the annual training plan, review training curricula and training progress, facilitate networking between training institutions, and give directions for overall management of training support. 2.9 The project will finance the costs of training, needs assessment study and monitoring and evaluation and provide financial support to the training institutes which will include teaching aids including library, laboratory equipment and chemicals, farm equipment and structures, equipment for livestock production and agribusiness units, office equipment, audio-visual aids, limited provisioning of furniture and equipment for classrooms and hostels, and limited rehabilitation of civil works. Communications Support (US$2.9 million): 2.10 The project will assist in operationalizing Government strategy to decentralize information management to the Zonal level for an effective response to the area-specific information needs of the farming communities. The project will finance civil works (rehabilitation of zonal offices), communication support equipment, vehicles, and a budget for materials production, field visits and essential operating costs. The following specific activities will be supported: (a) establishment of seven Zonal Communication Centers (ZCCs) of which six will be funded by the proposed Credit, and the seventh namely the Southern Highlands ZCC will be funded by IFAD-supported Southern Highlands Extension and Rural Financial Services Project. The ZCCs will also serve as a forum for research-extension linkage in jointly determining communication strategies and choice of material for extensionists, SMSs, researchers and farmers. In the first year only two ZCCs will be established, and based on the lessons learned from their operation the remaining ZCCs will be established from project year 3 onwards; (b) reorganization of MOA's Field Extension and Publicity Unit (FEPU): the reorganized FEPU will have seven sub-units and will work with a professional staff of 19 (instead of 34 at present); (c) a Needs Assessment study will be carried out, and its findings will form the basis for zonal communication strategies; (d) overseas training will be provided to two radio program staff in radio script writing and one professional staff in social marketing and participatory techniques; a consultant will be engaged for three months to train core ZCC staff in communication skills and use of audio-visual aids; the trained staff will then provide training to other staff and field extensionists. FEPU will be encouraged to selectively outsource production of information material.  -7- Pilot Initiatives (US$1.7 million): 2.11 The project will pilotize initiatives to improve extension management, technology transfer, inter-linkages between farmer-extension-research, participation of other providers in extension delivery, seeds production and input supply, farner empowerment and gender impact. Some of these initiatives will be tried to improve operations of the current extension system, others would need separate project outlines and funding support. Nine pilots had already been identified by the Government task force. More pilots may be identified and executed during NAEP II implementation. Government will formulate projects for the identified pilot initiative, as needed, in an agreed format to be described in the Project Implementation Plan (PIP), and obtain IDA's no-objection before implementation. Lessons learned from the pilot initiatives will be appropriately adopted to improve/restructure NAEP II. 2.12 Besides, the project will also finance a few short term technical assistance and consultancies, support to NGOs and fanner groups for pilot initiatives and other specified project activities; recurrent non-salary operating costs and salary costs of a limited number of incremental project staff hired on contract basis. E. PROJECT COSTS AND FINANCING 2.13 A breakdown of project costs, financing plan, and the disbursement plan are shown in Annex 2. The total cost of the project is estimated at Tshs.22.07 billion or US$32.94 million equivalent. Foreign exchange costs are estimated at US$10.70 million or about 33 percent of total project cost including contingencies. Project costs include physical contingencies equivalent to US$0.635 million (2 percent of total project costs) and price contingencies of US$3.94 million (14 percent). 2.14 The proposed credit of US$3 1.1 million would finance about 95 percent of total project costs. Government contribution of US$1.8 million, mainly for recurrent costs, civil works and salary costs would finance about 5 percent of total project costs. Government share would include funds raised from cess imposed on cash crops and made available to the program. To ensure timely availability of adequate counterpart funds, the Borrower will (a) include the necessary counterpart funds (Tsh. 180 million/year) in its annual budget; (b) open a project account (local currency) and a special account (US dollars) in a commercial bank approved by the Bank of Tanzania; (c) make provision of at least Tshs180 million for project activities in the Government budget of fiscal year 1996/97; and (d) every year by July 31 furnish evidence to IDA that amounts provided in the budget for the project in the previous year were released in a timely manner for the intended purposes. Assurances to this effect were obtained at negotiations. F. PROCUREMENT, DISBURSEMENT, ACCOUNTS AND AUDITING 2.15 The details of procurement, disbursement, accounts and auditing are provided in Annex 2. IDA would finance: (a) goods totalling about US$2.93 million to be procured  -8- through international competitive bidding (ICB) procedures; (b) works and goods totalling about US$3.6 million to be procured through national competitive bidding (NCB) procedures; and (c) goods, works and services totalling about US$2.63 million to be procured through other procedures. The proposed IDA credit of US$3 1.1 million would be disbursed over five years, with disbursements to be completed by June 30, 2001. To facilitate disbursements, a special account would be established and operated in a commercial bank, under terms and conditions satisfactory to IDA. Project accounts would be audited by the Comptroller and Auditor General of Tanzania or by independent auditors acceptable to IDA and reports on such statements will be provided to IDA within six months after the close of each fiscal year. Assurances to this effect were received at negotiations. G. PROJECT IMPLEMENTATION 2.16 MOA will have overall responsibility for implementing the NAEP II . The Assistant Commissioner (Extension), under Commissioner Agriculture and Livestock Development and the Principal Secretary MOA, as head of the Ministry's Extension Unit (EU) will be the principal officer-in-charge for project implementation. A Project Steering Committee (PSC) will be established under the chairmanship of the Principal Secretary, MOA and comprising of Principal Secretaries of Ministry of Finance (MOF); Planning Commission; Prime Minister's Office; Ministry of Community Development, Women and Children; Ministry of Justice and Constitutional Affairs; heads of departments of MOA and a representative each of the farmers, other extension providers (private sector/NGO/parastatal) with Assistant Commissioner (Extension) as member- Secretary to address policy issues, approve annual work plan and budget, review project progress and audit observations, approve amendments to Project Implementation Plan (PIP), and provide directions for overall management of the program. Government initiatives under the civil services reforms program are aimed at decentralizing responsibilities and functions to the districts. The project includes several steps to enhance district focus, e.g. all concerned SMSs will be placed under the District Extension Officer; at least three SMSs will be located at divisional level and a District Extension Steering Committee (DESC) will be established under the District Commissioner (DC) to review the project periodically, liaise with NGOs, and other extension providers, assist in raising resources locally for supporting extension activities and providing support in farmer mobilization and resolving farmer problems. The Government has provided to IDA a Letter of Sectoral Policy setting out its priorities and intentions regarding agricultural research and extension in the country. Government will prepare a Project Implementation Plan (PIP) which will inter alia include arrangements to operationalize various features of NAEP II such as participatory approach, effective farmer participation in technology generation and transfer, other providers (NGOs/private sector) participation in extension on cost-sharing basis, farmer empowerment. The draft PIP was discussed during negotiations and the finalized PIP, satisfactory to IDA, will be furnished before project effectiveness. The Government will prepare and furnish to IDA  -9- by May 31 every year an annual work program, training plan, procurement plan and budget for the following year. H. MONITORING AND EVALUATION 2.17 Based on a study currently in progress a comprehensive monitoring and evaluation system will be established. Findings and recommendations of M&E system would be incorporated in annual progress reports. The annual work program, training plan and supporting budgets for the following year would be submitted to IDA by May 31 each year. The above documents would include a review of the program progress, implementation issues and proposed solutions, program timetables and updated performance indicators. A joint Mid-Term Review (MTR) by the borrower and IDA (representatives of farmer groups, women groups and other providers of extension like NGOs/private sector will be associated with the exercise) will be carried out no later than December 31, 1998 to review physical implementation and the extent to which project objectives have been achieved. Based on the findings and recommendations of the MTR the project will be appropriately restructured/improved. Project performance indicators were agreed upon during negotiations. 3. ASSESSMENTS A. TECHNICAL ASSESSMENT 3.1 The project design is technically sound: the extension methodology has been tested under a pilot operation (1986-89) and has been used with measurable success in 16 of the 20 regions of the country over the past six years under the ongoing NALERP. The Tanzanian extension methodology is based on the Training and Visit management system and provides for: (a) a unified extension system adapted to disseminate technology concerning all of the farmers' commodities; (b) regular contacts between farmer groups and extension staff; (c) farners participation in the development of technical messages; (d) well established research-extension linkages; (e) continuous training of staff; (f) regular supervision of staff; and (g) a simple organizational structure of the extension service as part of the regular institutional structure of MOA. In the design of the project, special care was taken to (a) address existing weaknesses in the research extension linkages; (b) enhance farmers' participation in the technology development process; and (c) strengthen the communication skills of front line staff and the use of mass media to complement face to face extension. New features such as collaboration with private enterprises and NGOs, seed production, and farmers empowerment to decide on extension providers would be tested first under small scale pilot operations before being adopted for implementation on a larger scale.  -10- B. INSTITUTIONAL ASSESSMENT 3.2 The project will be implemented by the extension service which is a part of the regular institutional structure of the MOA, and no new parallel administrative units will be established. Since 1985, when pilot extension activities were started with IDA support, the extension managers and front-line staff have gained considerable experience through learning-by-doing, short-term technical assistance, various types of training, and support from IDA and other donors. MOA carried out an appraisal of the qualifications, experience and performance of all extension staff; as a result of this exercise a number of staff have been retrained, several extensionists have undergone upgradation, diploma and degree courses and special skill courses under the NALERP. The training of the remaining staff has been programmed in NAEP II. MOA has also decided to dispense with the services of 902 extensionists adjudged unsuitable for the job who cannot be brought to the prescribed standards by training. Inter-ministerial coordination will be enhanced by the proposed Project Steering Committee, and the proposed District Extension Steering Committee will secure for the program the support and assistance of other organs of the government, other agencies and people's representatives in the district. C. ECONoMIc ASSESSMENT 3.3 The economic impact of an agricultural extension project is diffuse. The desired outcome, the adoption by farmers of production techniques which will improve productivity and profitability, is only partially attributable to the "awareness" and "training" provided by the extension service. While an important complement to the other factors which influence the choice of alternate production techniques, it is difficult to isolate the effect of governnent funded "agricultural extension" from all the other considerations which constrain, and determine, farmer adoption of more efficient production methods. The approach adopted in this presentation has been to identify the "minimum incremental benefit stream" which would justify the proposed investment in the government extension service, and then under an "incremental adoption" model, see whether the proposed project can, under a reasonable set of operating assumptions, produce the desired minimum benefit stream. 3.4 The incremental returns from increasing productivity for the various agricultural enterprises was calculated net of on-farm input and labor costs. The actual extension "messages" on ways to improve profitability, reduce risk and increase productivity come from experience gained with the best farmers in the country, coupled with results from research and adaptive trials carried out by the research and the extension services. Domestic markets in food crops, agricultural exports and farm inputs were liberalized in the late 1980's and early 1990's. The inputs supply market was the most recent market to be liberalized, and prices are gradually declining as domestic competition in the supply markets develops. Any future shifts in the factor-product terms of trade are expected to be in favor of farmer products. The assessment was carried out in constant 1995 prices, over a 20 year period. Input-output price relationships are not varied. Milk, tobacco and  -11- millet were evaluated at domestic prices, which are at or below "economic prices". The other products were valued at "economic prices" projected for the year 2000 based on data from the November 1995 edition of the "Commodity Markets and the Developing Countries", a World Bank Quarterly. Food prices are based on import parity calculations, export crops on export parity, at the farmgate. Input costs were conservatively evaluated at domestic prices, which are equal to, or higher than, import parity prices. Rural wage rates are not adjusted, but remain at market rates. This reflects the fact that farmers have to compete vigorously for labor at times of peak requirements (weeding and harvest). The market for foreign exchange has been liberalized for two years, and access to foreign exchange at market prices is open and effective. No adjustment was made in the foreign exchange rates. 3.5 Under the "minimum national impact" approach, it is noted that to obtain a rate of return of 25 percent or a benefit-cost ratio of 2.1 (at a discount rate of 12 percent, Tanzania's opportunity cost of capital--OCC) on the proposed off-farm investment in government extension services, it is sufficient for net on-farm benefits generated from selected crops and livestock to grow at a rate of 0.45 percent per annum, over the 20-year economic life of the project. The selected crops are maize, sorghum, millet, rice, cotton, coffee, and tobacco (covering an aggregate of 70 percent of the cultivated area), and the livestock are dairy cattle. The benefits derive from an average annual yield increase of 0.15 percent and an average annual increase of on-farm costs of 0.07 percent. 3.6 The "incremental adoption" analysis shows that the above rate of return and benefit-cost ratio can result from the intervention of an extension service that influences 11 percent of the farmers cultivating the selected crops (and raising the selected animals), raising their yields between 10 and 22 percent over a five-year period. Since these crops represent some 70 percent of the area cultivated, this implies that the extension service would bring an additional 270,000 farmers to use improved production techniques. This is an average of 54,000 per year for the 3,500 front line agents supported under this project: or about 15 farmers per agent per annum. This is felt to be a target which is well within the capabilities of the improved extension service. Monitoring and evaluation surveys by the Ministry of Agriculture (MOA) indicate that, with existing technology, crop yields have increased by about 30-50 percent for farmers having direct contact with the national extension service. Therefore the projected increases in yields of from 10 to 22 percent, following initial adoption of improved technology, are considered conservative. 3.7 However, recent analyses have suggested that the cost of government resources can be significantly higher than estimated opportunity costs of capital. Therefore, a sensitivity analysis was undertaken to assess the impact of a higher cost of resources. It was found that, at the OCC of 12 percent, the NPV would be about US$29 million equivalent, but if the cost of resources were, say, 17 percent, the NPV would still be positive but would decline to about US$1 million equivalent. Thus the economic viability of the project is fairly robust to changes in government resource cost, but  -12- planned efforts to increase private sector involvement in extension will be important to long-term viability. D. FINANCIAL ASSESSMENT 3.8 The Ministry of Agriculture was allocated Tsh 17.2 billion (US$29 million) from both budgetary sources, in FY96, or 3.3 percent of total Governmental expenditure. The agricultural extension activities, carried out by the Agriculture Division and the Livestock Division, were budgeted a total of US$11.5 million equivalent in FY 1996. Of this, US$7 million was from the recurrent budget (all in local resources) and US$4.5 million from the development budget (of which US$3.8 million was in foreign resources). The development budget includes funds for the first phase of the ongoing National Agriculture and Livestock Extension Rehabilitation Project, which accounts for US$3.8 million of the total US$4.5 million in the FY96 provision. (This project will close at the time the proposed project would begin.) 3.9 The annual incremental expenditure under the proposed project would average some US$5.8 million (without price contingencies). Expenditures are higher in the first few years, and then taper off. The incremental recurrent costs in the final year of the project are US$1.9 million. It would appear, from current funding levels, that this level of incremental recurrent costs, which represents incremental vehicle operations, personnel costs and administrative expenses, can be accommodated by the country. It would imply an increase of only 1 0 percent in the MOA recurrent budget, or an increase of 27 percent in the recurrent budget currently allocated to support of extension services. 3.10 MOA has categorized its 26 projects including NAEP II into four main national programs namely research, extension, animal health and irrigation; and further classified them for the purpose of resource allocation into super-core (12), core (10) and non-core (4) projects. MOA confirmed that both extension and research programs have been classified super-core, and will occupy top priority for resource allocation. The average annual counterpart funding requirement of these 26 projects including NAEP II totals Tsh.1.10 billion; of only super-core projects it is Tsh.0.93 billion; which is within the confirmed availability of Tsh. 1.20 billion for MOA's development budget during the period 1994/95 through 1997/98, for which budget forecasts are available. Expenditures of this magnitude fit within the country's public finances and are likely to be sustained over the long term. Further, the Government has decided to levy a cess on several commercial crops (cotton, cashew, tobacco, coffee, tea) and a part of the funds raised from these levies (outside the budget resources) will be made available to the extension project. Under NAEP II the Government will pilotize initiatives for private sector/NGO participation in extension on a cost-sharing basis. Based on an assessment of the performance under these initiatives the cost-sharing arrangements will be appropriately expanded. Given the low income of a large proportion of the rural population, a direct cost recovery from beneficiaries (particularly those growing staple food crops) for service provided at this time would have adverse welfare implications.  -13- E. ENVIRONMENTAL ASSESSMENT 3.11 The NAEP II is ranked C for environmental assessment purposes. It would directly support the efforts to improve the environmental sustainability of the core technical messages to be disseminated. The messages would promote improved fallow, minimum tillage, afforestation activities (agro-forestry and fuel wood production), contour planting and anti-erosion devices, composting, rationalized use of fertilizer and pesticides, integration of crops and livestock, and water harvesting and management all of which would have positive environmental impact. Increased incomes which should follow improved extension advice should enhance the environmental sustainability of the smallholder agriculture. F. SOCIAL AND GENDER RESPONSIVENESS 3.12 This project would contribute to broad based poverty alleviation in the country by supporting technological change and innovation in agricultural and livestock production, which will improve returns to all production factors including land and labor, and increase rural incomes. Women in Tanzania's agricultural sector play key roles as farmers, managers, farm laborers and decision makers, and would continue to be major beneficiaries from the extension program. Increased incomes for women should result in improved household food security since women are the major providers of their families. G. SUSTAINABILITY 3.13 The institutional sustainability of the project is enhanced by the fact that there is strong Government ownership. The project has been designed by Tanzanians, it would use existing Government channels for implementation and no additional implementation units are proposed to be established. The phase 2 project includes initiatives for piloting other providers' participation on cost-sharing basis and selective privatization of extension service. In the longer term these measures coupled with other initiatives such as raising resources by cess and levies for research and extension in future have the potential of reducing Government's financial burden. In FY95 and 96 annual MOA budgeted expenditures constituted about 2.1 percent of the agricultural GDP (AGDP). Research and extension projects were provided about 0.5 percent of the AGDP. The Government has confirmed that the NAEP II will be the second after research amongst the highest priority projects (out of 12 super-core projects) which will be provided assured funding. An analysis of the Government's forward budgets for the years 1994/95 through 1997/98 shows that counterpart funds requirement of the super-core projects will be fully met from the annual amounts earmarked for MOA's development budgets. Expenditures of this magnitude fit within the country's public finances and are likely to be sustained over the long term. The economic analysis of project investments shows a satisfactory economic rate of return of 25 percent. After the project closes in 2001, the Government expects the extension program to move to phase three and the existing institutional arrangements in place would be available to operate this phase. Government also expects that with growing private sector and NGO participation and with farmer groups  -14- increasingly assuming greater role in sharing extension functions, the overall public expenditures on extension should gradually decline and would continue to be sustainable within the country's public finances. H. Benefits 3.14 By increasing livestock and agricultural productivity and output, the project will help to reduce rural poverty, increase food security and improve nutrition levels. Women in view of their crucial role in Tanzania agriculture will be major beneficiaries. Agricultural growth and exports should also increase. Through the dissemination of messages related to improved fallow, afforestation, and anti-erosion techniques the project would also have a positive impact on soil fertility, conservation and water management. The project will have an impact on the rationalization of the MOA, and on the quality of staff. A set of indicators has been developed during preparation to measure the internal performance of the project, and to measure the impact on agricultural productivity, farmers' revenue, and agricultural production. 1. RISKS 3.15 Some of the challenges faced in the implementation of the project include: (i) timely and adequate release of counterpart funds - during preparation, the GOT has identified 12 out of the 26 projects proposed to be implemented in future as super-core projects which will have top priority for counterpart fund allocation. NAEP II is part of the super-core projects; (ii) derailment of the macro-economic reform program, which could reduce funding for Government activities, increase inflation, and affect farmer incentives - this would have to be dealt with through a process of close supervision and consultation with GOT during implementation; (iii) some operational risks such as delays in procurement and particularly civil works construction -- which would be minimized through training and support to the relevant Government departments and agencies. While the project does face significant risk, the potential rewards are deemed to justify incurring this risk. 4. ASSURANCES AND RECOMMENDATION A. ASSURANCES AND AGREEMENTS 4.1 Prior to negotiations the Government furnished: (a) a draft Letter of Sub- Sectoral Policy in respect of agricultural research and extension (para 2.16); (b) criteria for assessing the performance of the zonal communication centers to be established in the first year (para 2. 10); (c) the Auditor General's report of the special audit of NALERP funds and the remedial action program; (d) a copy of the contract specifying terms and conditions for the use of motorcycles and bicycles supplied to the front-line extension  -15- staff on loan (para 2.6); and (e) first year work program, training plan, procurement plan and budget (para 2.16). During negotiations the Government furnished a schedule for the release of 902 village extensionists. Agreement was also reached on project performance indicators. 4.2 Assurances were obtained at negotiations that the Government would: (a) (i) establish a project account (local currency) and a special account (US dollars) in a commercial bank approved by the Bank of Tanzania; (ii) agree that these accounts will be audited by the Auditor General or independent auditors acceptable to Auditor General and IDA, (iii) include the necessary counterpart funds in its annual budget; and (iv) furnish to IDA every year evidence that the funds provided in the budget of the previous year for project activities were released in a timely manner for the intended purposes (para 20, Annex 3); (b) carry out needs assessment studies for the training program and for developing communication strategies (paras 2.7 and 2. 10); and (f) furnish by May 31 every year the work program, training plan, procurement plan and budget for the following year (para 2.16). 4.3 The Government has furnished a Letter of Sectoral Policy on agricultural research and extension. 4.4 As conditions of effectiveness the Government would: (a) furnish the final PIP and the Financial Management Manual satisfactory to IDA, and a copy of Government circular introducing these for MOA operations; (b) furnish evidence satisfactory to IDA that adequate provision (not less than TShs 180 million) have been included for project activities in the Government budget for the fiscal year 1996/97; (c) establish a Project Steering Committee and a Training Coordination Committee, and a District Extension Steering Committee in each district (paras 2.8 and 2.14); and (d) furnish draft standard bidding documents for procurement using NCB procedures. B. RECOMMENDATION 4.5 Subject to the above assurances, the project is suitable for an IDA Credit of SDR 21.5 million (US$31.1 million equivalent) to the Government of Tanzania.   -16- Annex 1 Page 1 of 5 TM TRIUlY, P.O. Box 9111. DAX in SALr AA- ii~~~~~~I i~UNrr REUU-I OF TANZAIA THE bMNTER FOR FINANCE TYC/B/40/79 4th March, 1996 The President World Bank WASHINGTON, D.C. Dear Sir, LETTER OF SECTORAL POLICY CONCERNING AGRICULTURAL EXTENSION AND RESEARCH IN TANZANIA Background The initiatives under Tanzania's structural adjustment programme and Government's overall policy of liberalizing the economy have had a profound beneficial impact on the agricultural sector. Besides the devaluation of Tanzanian currency and complete decontrol of the foreign exchange market which have benefitted export crop products, the Government has liberalized the marketing of food grains and some export crops, and allowed the private sector to deal with input marketing and distribution. This has resulted in an increase in producer prices in real terms. The competition in a free market environment has benefitted the farmers. Government priorities for agricultural institutions are undergoing changes, with the focus shifting to the provision of basic social and infrastructural services to the economy and away from involvement in production activities. This shift emphasizes an agricultural production system more determined by market forces and the activities of farmers, cooperative societies, and other private sector agents, and less determined by direct Government intervention.  -17- Annex 1 Page 2 of 5 The Government has recognized the need to redirect the role of public institutions in agriculture in line with the objective of promoting and sustaining an enabling environment for growth in agricultural production, trade, and investment in order to achieve the national objectives of (i) increasing rural incomes, (ii) enhancing food security, (iii) achieving export growth, and (iv) conserving the environment. The Government's strategic vision for institutional development of the agricultural sector calls for changes so that (i) the legal and regulatory framework promotes an enabling environment for the expansion of production, trade and investment by private sector, (ii) Government role is limited to core functions of providing only those goods and services that are public in nature, and (iii) the internal incentive systems and resource allocation systems promote and facilitate high quality performance in the carrying out of the core functions. In terms of initiatives supported under IDA-funded Agriculture Sector Management Project (ASMP) the Ministry of Agriculture (MOA) is going through a rationalization and downsizing process, limiting its role to basic core functions, e.g. research, extension, regulation and policy formulation and management. In parallel the government has embarked on a major reform initiative under which the Government's role would be limited to the core functions of governance, the commercial and non-essential activities would be given off to the private sector, the roles and functions of the ministries would be rationalized and consequently the civil service downsized. The regional government is proposed to be restructured and slimmed down, and the district focus enhanced by transferring resources from the regions to the districts and making district administrations more community based. National Agricultural Policy There has been substantial progress in carrying out the reform process in agriculture, thus the national agriculture policy has been reviewed to incorporate the current vision. The main objectives of the National Agricultural Policy are: To assure basic food security for the nation and to improve national standards of nutrition by increasing output, quality and availability of food commodities.  -18- Annex 1 Page 3 of 5 research and extension programmes, primarily focused on the small farmers, which continue to be regarded as the most important activities of the Ministry Agriculture. Development Strategy for Agricultural Research The ongoing IDA-supported NALRP has established a unified research establishment, rehabilitated and strengthened research infrastructure, facilitated in formulating zonal research priorities and a research master plan and piloted a farming system research approach for the benefit of smallholders. our strategic vision of the next phase of the research programme is to make research more user-oriented and farmer- driven; farming system approach to embrace all research programmes; to promote private sector initiatives in research; to provide through cess/levies extra-budgetary resources to research, zonal autonomy in matters of allocation of resources and decision making: appropriate incentives for researchers to achieve national research objectives; and further strengthening of farmer-research-extension linkages. Development Strategyfor Extension We will continue with the time-tested Training and Visit system of message delivery but the Government is committed to actively encourage private sector/NGO entry in providing extension services to the farmers with cost sharing, including selective privatisation, where feasible. Thus pluralism will be increased through an evolutionary process with due regard to sustainability and cost effectiveness. Further the farmers will be more actively involved in the processes of generation and dissemination of technical recommendations and messages; we therefore intend to adopt a participatory approach giving an effective voice and role to the farmers. As the incentives for intensification in agriculture improve, farmers will be able to influence the generation of technology appropriate to their needs, and to demand support from the extension service in obtaining and utilizing new technologies. And as the farmers move to more intensified agriculture, the extension providers will need to equip themselves in helping farmers to address their requirements for such agriculture. The extension service will reinforce the group approach in farmer consultation, message delivery and problems solving and will facilitate the addressing of farmers problems such  -19- Annex 1 Page 4 of 5 To improve standards of living in the rural areas through increased income generation from agricultural and livestock production, processing and marketing. To increase foreign exchange earnings for the nation by encouraging the production and increased exportation of cash crops, livestock products, other agricultural surpluses, byproducts and residues. To produce and supply raw materials, including industrial crops, livestock by products and residues for local industries, while also expanding the role of the sector as a market for industrial outputs through the application of improved production, marketing and processing technologies. To develop and introduce new technologies which increase the productivity of labour and land. lTo develop human resources within the sector in order to increase the productivity of labour and to improve ability, awareness and morale. To provide support services to the agricultural sector, which cannot be provided efficiently by the private sector. T o promote specifically the access of women to land, credit, education and information. Agriculture Development Strategy Focus As you are aware Tanzanian agriculture is dominated by smallholders of some 3.7 million farm families, who constitute one of the poorest sections of our country's society. However, this sub-sector is the major producer of food and cash crops including exportable crops. The realization that the smallholder sub-sector can rapidly become more productive using available and new technologies led the Government to launch the national programmes for agricultural research and extension to generate and adopt technologies responsive to farmer needs, and to transfer these technologies to them. The government regards the ongoing National Agricultural Research Project (NALRP) and the National Agricultural and Livestock Extension Rehabilitation Project (NALERP) and the proposed National Agricultural Extension Project (NAEP II) as phases of the long-term national  -20- Annex 1 Page 5 of 5 as development issues which impact on adoption of extension recommendations (inputs, credit, transport). We intend to provide appropriate support to farmers organizations so that they become over the years a constituency to support greater efficiency in agricultural extension. Training of frontline extension workers and now of farmers and farmer groups, who will be equal partners in the process, will underpin an effective delivery system. We will base our training programmes on the recommendations of a comprehensive needs assessment study, and selectively strengthen the training institutions to effectively carrying out the training programmes. We intend to involve willing NGOs in farmers training programmes. The pilot initiatives component will be an important instrument to improve and restructure the NAEP II, as well as help in designing the next phase of the extension programme. We have included as main objectives of this component improving extension management, reducing government spending, providing complementary services to public extension, and increasing responsiveness and accountability in all (public and private) services. As scope for improvement never ends, we will appropriately include more objectives as the need emerges. We are committed to enhance the district focus in implementation of extension programme. We have included initiatives under this project to supplement the measures proposed under the civil service reforms programme to devolve more powers and resources to the districts and to decentralize administration to be as near the people as possible. Best regards, Yours sincerely, Prof. Simon M. Mbilinyi MINISTER FOR FINANCE cc: Hon. Mr. Paul Kimiti Minister for Agriculture and Cooperatives DAR ES SALAAM  -21- Annex2 The United Republic of Tanzania National Agricultural Extension Program Components Project Cost Summary (TSHS Million) (USS '000) Foreign Base Local Foreign Total Local Foreign Total Exchange Costs 1. Institutional Strengthening 4,430.17 4,090.81 8,520.98 7,145.44 8,598.08 13,743.52 48 48 2. Extension Training 5,129.72 1,419.79 6,549.51 8,273.74 2,289.98 10,563.72 22 37 3. Extension Communication Support 970.79 625.68 1,596.47 1,565.78 1,009.16 2,574.94 39 9 4. Pilot Initiatives 920.14 0.00 920.14 1,484.10 0.00 1,484.10 0 5 Total BASELINE COSTS 11,450.82 6.136.28 17.587.10 18,469.06 9,897.23 28,366.29 35 100 Physical Contingencies 253.23 136.24 389.47 408.44 219.74 628.18 35 2 Price Contingencies 3,226.81 846.40 4,073.21 3,411.49 536.35 3,947.84 14 14 Total PROJECT COSTS 14,930.86 7,118.92 22,049.78 22,288.99 10,853.32 32,942.31 32 116 Financing Plan IUSD Million) International Government of Development Tanzania and Project Components Association Beneficiaries Total Institutional Strengthening 13.9 1.7 15.6 Extension Training 12.6 0.0 12.6 Extension Communication Support 2.8 0.1 2.9 Pilot Initiatives 1.8 0.0 1.8 Total Project Costs 31.1 1.8 32.9 Disbursement Plan Disbursements Amount Items (USD Million) % of Financing 1. Civil Works 0.8 90% 2. Vehicles, Equipment and Furniture 4.6 100% of foreign costs and 90% Of local costs 3. Technical Assistance, Training 12.4 100% and Studies 4. Pilot Initiatives 1.4 100% of foreign expenditures and 90% of local expenditures 6. Incremental Operating Costs 7.3 100% for the first USD 3.0 million, 90% for the second USD 3.0 million, 60% thereafter. 7. Unallocated 4.6 Total 31.1  -22- Annex 3 -til II Page 1 of3 THE UNITED REPUBLIC OF TANZANIA NATIONAL AGRICULTURAL EXTENSION PROGRAM (NAEP HI) Procurement, Disbursement, Accounts and Auditing (see para. 20) I. Procurement Arrangements 1. All procurement of goods, works and consulting services would be made in accordance with current World Bank procurement and consultants Guidelines. Bank's standard bidding documents for goods, works and consultants would be used. (a) Civil Works: All civil works contracts amounting to a total of US$1.16 million for rehabilitation of office buildings and small houses each costing US$200,000 or less) will be by NCB. Civil works which cannot be bid economically using NCB, due to a lack of local contractors, will be completed by Force Account, up to an aggregate amount not to exceed $0.20 million. (b) Goods and Equipment: To the extent practicable, contracts for similar goods, such as vehicles and office equipment and computers, shall be grouped in bid packages estimated to cost the equivalent of US$100,000 or more each. Procurement of goods under contract estimated at US$100,000 equivalent or more will be done by ICB. For contracts less than US$100,000 equivalent NCB procedures will be adopted (US$2.7 million). Small contracts of US$20,000 equivalent or less will use national shopping procedures (a minimum of three quotations) with aggregate not to exceed US$400,000. Under ICB, domestic manufacturers of goods will be allowed a preference of 15 percent or the existing rate of import duty, whichever is lower, over the CIF price of the competing foreign bidder. Fuel, oil and lubricants covered by the O&M costs will be procured according to normal Government procedures, which are satisfactory. (c) Technical Assistance and Training: The project will finance four major and several minor studies, meet the cost of technical advisors and fund training of staff, trainers, community leaders/members. Consultants will be hired following procedures set forth in the "Guidelines for Use of Consultants by the World Bank as Executing Agency". All consultant contracts for firms over US$100,000 and for individuals above US$50,000 and all training proposals will be subject to IDA prior review. Where applicable, consultant contracts will include a training component. (d) Pilot Initiatives: All procurements for small projects under the Pilot Initiatives will follow the relevant procurement procedures described in (a) through (c) above. NGOs, community groups, parastatal organizations involved in implementing the Pilot Initiatives will follow the IDA procedures when procuring items financed by IDA. The procurement arrangements are summarized in the table given below.  -23- Annex 3 Page 2 of 3 (e) At negotiations a time table for finalizing standard bidding and contract documents under ICB and NCB was agreed, as well standard processing time for key procurement activities. (f) All bidding packages (for civil works and goods) estimated to cost US$100,000 or more would be subject to IDA prior review. Other contracts will be subject to post review in accordance with the provisions of Appendix I of IDA procurement guidelines. Prior review would cover about 37 percent of goods and 40 percent of consultant services of IDA-funded contracts. (g) Annual Procurement Work Plan: The Borrower would prepare an overall Annual Procurement Work Program which would contain details with respect to procurement packages, estimated cost per package, procurement method, and procurement implementation schedule. The plan would be furnished to IDA by May 31 each year in respect of program for the following year. Figures in US$ ('000) ITEM ]CB NCB OTHER TOTAL I CIVIL WORKS 0.00 931.61 232.90 1,164.51 (D to) (838.45) (209.61) (1,048.06) 2 VEHICLES 2,729.34 690.65 0.00 3,419.99 (2,729.34) (690.65) (0.00) (3,419.99) 3 PLANT AND EQUIPMENT 207.42 1,199.77 385.62 1,792.81 (207.42) (1,163.78) (374.05) (1,745.25 4 TECHNICAL ASSISTANCE, 0.00 0.00 14,752.77 14,752.77 TRAINING AND STUDIES (0.00) (0.00) (14,752.77) (14,752.77) 5 PILOT INITIATIVES 0.00 897.25 897.25 1,794.50 (0.00) (897.25) (897.25) (1,794.50) 6 RECURRENT OPERAT NG COSTS 0.00 0.00 10,017.57 10,017.57 (0.00) (0.00) (8,339.43) (8,339.43) TOTALS 2,936.76 3,719.28 26,286.11 32,942.15 (2,936.76) (3,590.12) (24,573.11) (31,099.99) Figures in parenthesis indicate IDA contributions. II. Disbursements would be made against standard IDA documentation with the following exceptions, for which certified Statements of Expenditures (SOEs) would be used: (i) contracts less than US$100,000 equivalent; (ii) all local training; and (iii) operating costs. SOE thresholds for consultants would be US$100,000 for firms and US$50,000 for individuals. SOEs would be certified by the Finance Manager in the MOA and the Ministry of Finance, who would confirm that these are in agreement with the books of account. These would be subject to review by IDA supervision missions and interim and annual audits. In order to facilitate the availability of funds for the Project when needed, a Special Account will be established in a commercial bank and operated and maintained on terms satisfactory to IDA. An initial deposit of US$1 million will be deposited by IDA into the Special Account. The special Account will be replenished on the basis of satisfactory documentary  -24- Annex 3 Page 3 of 3 evidence, to be provided to IDA, of eligible payments made from the account for goods and services required for the project. No limit will be set on the size of the payments to be made from the Special Account other than that imposed by the balance remaining in the account. III. Accounts will be maintained in the formats to be prescribed in the PIP by four GOT organizational units, namely District Offices (DOs), Regional Offices (ROs), participating Training Institutions and the Extension Unit (EU) established in the MOA. Accounts will be maintained in accordance with Government financial regulations. All project transactions will be accounted for under a separate sub-heading (NAEP II) in all accounting records and financial statements. The summarized accounts of the project would be in the form of a "Sources and Application" of funds (SAF) statement from the consolidated project expenditure summary compiled by the EU. A balance sheet would also be prepared to reflect the assets and liabilities. EU would be responsible for procurement of goods and services required by the project, for making withdrawals from the IDA Credit Account, and for establishing and operating the special account. The books to be maintained by EU including the Withdrawal Register, a Special Account Cash Book and ledgers, Subsidiary Books and Records will be described in the Financial Management Manual. The Government will prepare a financial management manual (FMM) and include it in the PIP; the FMM will describe the financial procedures, accounting system, fund inflow and release procedures, financial powers to be exercised and accountability. Government agreement to introduce FMM for project's financial management will be a condition of effectiveness. IV. Audit: The annual statutory audit will normally be carried out by the Auditor General. However, in case of anticipated delay in conducting audit the Government would agree for audit to be conducted by independent auditors of repute acceptable to Auditor General and IDA, so that the audit reports are furnished to IDA within the agreed period of 6 months. The audit will be carried out in respect of the project accounts, the special account and the SOE claims. EU would be responsible for submission audit reports concerning project accounts, special account and SOEs to IDA within six months of the close of each fiscal year. The internal audit section of MOA will be strengthened with one additional experienced auditor and an audit assistant who would have the responsibility of carrying out a complete audit of eight regions under NAEP II every year.   -25- Annex 4 Page 1 of 7 THE UNITED REPUBLIC OF TANZANIA NATIONAL AGRICULTURAL EXTENSION PROJECT - PHASE II Economic Analysis 1. The economic impact of an agricultural extension project is diffuse. The desired outcome, the adoption by farmers of production techniques which will improve productivity and profitability, is only partially attributable to the "awareness" and "training" provided by the extension service. While an important complement to the other factors which influence the choice of alternate production techniques, it is difficult to isolate the effect of government funded "agricultural extension" from all the other considerations which constrain, and determine, farmer adoption of more efficient production methods. The approach adopted in this presentation has been to identify the "minimum incremental benefit stream" which would justify the proposed investment in the government extension service, and then under an "incremental adoption" model, see whether the proposed project can, under a reasonable set of operating assumptions, produce the desired minimum benefit stream. 2. Two types of analysis were carried out. Firstly the "national impact" analysis shows that in order to achieve an adequate incremental return to the project (defined in this case as an internal rate of return of 25 percent, or a Benefit-Cost ratio of at least 2 at the 1 2 percent discount rate), the project investment needs to produce, an average annual growth rate of 0.1 5 percent per annum for the twenty years of the project life, across a series of crops and livestock activities where improved production techniques are available, and which account for some 70 percent of total area cultivated (for the crops). Secondly, the "incremental adoption" analysis indicates that the outreach and capacity of the improved extension service, as designed, should provide at least this minimum incremental benefit stream. The basis for these assertions is described below. The attached set of tables (Tables I and 2) provide further details on the calculations. Basic Assumptions 3. Target Crops: The extension service is national in coverage. Its activities will affect agricultural productivity and farm profitability for a range of food and traditional export crops, and livestock activities. Based on an assessment of available research results, and evidence from the first phase project, the project has the ability to affect productivity in the crops enumerated below. Only these crops and livestock based activities are taken into consideration in assessing economic benefits. The total area cultivated each crop (or livestock activity) is indicated in brackets. The selected crops (and livestock activities) account for some 70 percent of the total cultivated area in a given season (and 20 percent of the cattle herd). The crops where improved technology exists, and where its adoption will be furthered by the strengthened extension service include: maize (1.1 million ha), sorghum (637 thousand ha), paddy (315 thousand ha), millet (369 thousand ha), coffee (160 thousand ha), cotton (560 thousand ha), tobacco (75 thousand ha), traditional, uLnimproved dairy herds (2.7 million head) and cross bred or exotic dairy herds (82 thousand head). 4. Production benefits. The incremental returns from increasing productivity for these various agricultural enterprises was calculated net of on-farm input and labor costs. The actual extension "messages" on ways to improve profitability, reduce risk and increase productivity come from experience gained with the best farmers in the country, coupled with results from research and adaptive  -26- Annex 4 Page 2 of 7 trials carried out by the research and the extension services. Almost all improvements in productivity come about from an increase in on farm costs, due to the increase in the quantity or quality of purchased inputs (improved seed, more suitable fertilizers, better targeted pesticides), or an increase in labor inputs (to improve soil preparation prior to planting, to plant earlier, to plant in lines, to weed more effectively, to monitor for pests). It has also been noted that, in rainfed peasant agriculture in Africa where production risks are specially high, farmers are unlikely to adopt a new technique and invest scarce resources in it, unless they can make double their money back in the first year: i.e. the first year's incremental benefit-cost ratio for the crop budget has to be higher than 2. This feature has been built into the economic assessment. Whereas both benefits and costs increase during the project period, due to the additional efforts of the extension service, the rate of growth in yields, while very small, is still more than twice the rate of growth in costs. 5. Prices: Domestic markets in food crops, agricultural exports and farm inputs were liberalized in the late 1980's and early 1990's. The inputs supply market was the most recent market to be liberalized, and prices are gradually declining as domestic competition in the supply markets develops. Any future shifts in the factor-product terms of trade are expected to be in favor of farmer products. The assessment was carried out in constant 1995 prices, over a 20 year period. Input-output price relationships are not varied. Milk, tobacco and millet were evaluated at domestic prices, which are at or below "economic prices". The other products were valued at "economic prices" projected for the year 2000 based on data from the November 1995 edition of the "Commodity Markets and the Developing Countries", a World Bank Quarterly. Food prices are based in import parity calculations, export crops on export parity, at the farmgate. Input costs were conservatively evaluated at domestic prices, which are equal to, or higher than import parity prices. Rural wage rates are not adjusted, but remain at market rates. This reflects the fact that farmers have to compete vigorously for labor at times of peak requirements (weeding and harvest). The market for foreign exchange has been liberalized for two years, and access to foreign exchange at market prices is open and effective. No adjustment was made in the foreign exchange rates. 6. Off Farm Costs: The off farm costs include the incremental costs to the Government of the proposed project: both the incremental investment and recurrent costs of the extension service over the five years of buildup, and the recurrent costs of maintaining the improved level of service, over the 20 years of the evaluation period. Cost estimates include physical but not price contingencies. No adjustment was made for foreign exchange costs for reasons noted above. 7. Adoption: The MOA has some 4,400 front line extension agents, to service the 8,800 villages in the 20 regions in the country. Some 80 percent of these, or 3,500 front-line staff are in the 16 regions to be serviced under the proposed project. Each extension agent should be capable of working with a minimum of 40 contact groups. Each contact group should average 10 farmers, giving each extension agent theoretic influence over 400 farmers. Under these assumptions, the extension service is capable of influencing the behavior of some 1.4 million farmers, 40 percent of the total farm families in the country. While the extension agents only interact directly with a small proportion of total farmers, innovations are shared within and across farming communities, and mass communication techniques are used to reach a wider audience. 8. The analysis looks at adoption in two ways. Under the "national impact" aspect of the economic assessment, the intention is to see how large a productivity change would be needed, across all the crops identified above, in order for the investment in agricultural extension to be justified. Under the "incremental adoption" approach, the analysis models the gradual effect of the project on individual farmers, as they are convinced to adopt new technologies, and obtain increased output. This latter model  -27- Annex 4 Page 3 of 7 has the extension service affecting 1.5 percent of all farmers growing the selected crops (and livestock) in the first year of project activities, 2.0 percent the second year, and 2.5 percent for each of the remaining three years of the project. By year 5 of the project, an additional I I percent of the fanning population would have adopted improved techniques. Each farmner who adopts new techniques is assumed to have incremental yields of between 10 and 22 percent (with the appropriate increases in production costs), depending on the crop or livestock activity (see tables). 9. Under the "incremental adoption" analysis, incremental benefits lag the activities of the extension service. While the 1.5 percent of the farmers adopt new techniques and receive instruction in the first year of the project, their productivity does not start to go up until year two of the project, and only reaches its full increment in year six of the project. The benefits from subsequent years of extension service activity are lagged in the same fashion, so that full incremental output is not achieved until year 10. Since this is a second phase project, it builds on an existing institution, and is able to start producing results, even though they are not very large, in the first year of implementation. 10. Surveys of adopting farmers during the first phase project and assessments by technical staff indicate that yield improvements of 50 to 100 percent can be obtained from the adoption of improved cropping techniques. A recent independent survey of farm families in Tanzania indicates that some 60 percent of farmers had had some contact with the extension service. although only 36 percent had been contacted in the preceding year. While this indicates the need for improvement (to be obtained during this second phase project) it validates the assumptions of outreach made in modeling extension impact. The same survey indicates that some 20 percent of farmers used fertilizer, and 18 percent "improved 2 ~~~~~~~~~~~~~~3 seed" . A survey of agriculture in 1986/87 indicated that 14 percent of farmers used fertilizer, providing an indication that the gradual adoption of improved technology does appear to be taking place, as awareness, access, availability of credit, and other factors permit. Rate of Return, Benefit-Cost Ratio, and Sensitivity Analysis 11. The analysis compared the net returns from changes in "on farm" profitability, against the "off farm" costs of the extension service. The impact of the project is compared, theoretically, with what would have happened had the project not been implemented (not against overall yield trends, which are subject to weather and other factors). As noted above, two analyses are undertaken. The first one indicates the "minimum national impact" necessary to generate a satisfactory rate of return. The other, the "incremental adoption" approach, shows that by starting with a conservative estimate of the capacity of the extension service to influence farmer behavior, and adding together the incremental benefit streams generated by those farmers who adopt improved technology, the incremental benefit stream needed to provide the satisfactorv rate of return can indeed be generated. 12. Under the "minimum national impact" approach, it is noted that to obtain a rate of return of 25 percent or a benefit-cost ratio of 2.1 (at a discount rate of 12 percent, Tanzania's opportunity cost of capital) on the proposed off-farn investment in government extension services, it is sufficient to generate the incremental benefits which result from a growth rate of 0.15 percent per annum, over the 20 year I Poverty Assessment, 1993-94, D. Narayan, ENVSP Division, World Bank. 2 Although the definition of "improved" is imprecise, and does not mean hybrid seed. 3 Agriculture Sample Survey, 1986-87, Central Bureau of Statistics, United Republic of Tanzania  -28- Annex 4 Page 4 of 7 economic life of the project. These benefits are not across all of agriculture GDP. They are confined to a selection of crops (70 percent of the area cultivated) and livestock activities (dairy). On-farm costs are assumed to grow at 0.07 percent per annum, to permit an on-farm benefit cost ratio of at least 2.0. 13. The "incremental adoption" analysis shows that the above rate of return and cost benefit ratio (which imply the same incremental benefit stream) can be obtained by an extension service that influences 11 percent of the farmers cultivating the selected crops (and raising the selected animals) over the course of the five year project. Since these crops represent some 70 percent of the area cultivated, and if area cultivated is evenly shared amongst the country's 3.5 million farm families, this implies that the extension service would bring an additional 270,000 farmers to use improved production techniques. This is an average of 54,000 per year for the 3,500 front line agents supported under this project: or about 15 farmers per agent per annum. This is felt to be a target which is well within the capabilities of the improved extension service. 14. Sensitivity Analysis In order to assess how robust the economic rate of return and benefit-cost ratio are to changes in various assumptions, a sensitivity analysis was undertaken on: (i) the benefit and cost streams; (ii) the key variables determining project impact: farmer adoption rates, incremental yield growth, and share of area receiving the average 0.15 percent per annum yield growth during the project life. The results are shown in the table below, and indicate the economic performance of the project to be fairly robust. If project costs go up 50 percent, the economic rate of return drops to 21 percent, indicating it is still worthwhile. If benefits drop by 50 percent, then the economic rate of return drops to 13 percent (i.e. it is still viable). If the costs are incurred as scheduled, but the benefits delay 3 years from the timing in the original analysis, the economic rate of return drops to 15 percent, indicating that the project is still viable.  -29- Annex 4 Page 5 of 7 SENSITIVITY ANALYSIS ERR of B/C Ratio of 25 % 2.1 (at 12%) Base Economic Rate of Return 25% 2.1 Project Costs Up 20 Percent 21% 1.7 Project Costs Up 50 Percent 17% 1.4 Incremental Benefits Down 20% 21% 1.7 Incremental Benefits Down 30% 18% 1.5 Incremental Benefits Down 50% 13% 1.0 Project Incremental Benefits Delayed I Year 21% 1.8 2 Years 18% 1.5 3 Years 15% 1.3 ERR of 25% ERR of 12% (B/C of 2.1) (B/C of 1.0) Incremental Adoption Due to Project (in % of total farmers after five years) 11.0% 5.0% Rate of Incremental Annual Yield wth Due to Project Across All Crops (Growth In Costs Constant at 0.7 %/annum) 0.150% 0.102% Proportion of Area Cropped With AverageYield Growth of 0.15% / Annum 100% 48% 15. Switching value tests were carried out on three key variables. Under the "incremental adoption" approach, the number of farmers who adopt new technologies, as a result of extension efforts, needs to drop from 11 percent of the farmers cultivating the selected crops, to 5 percent of these farmers, a decline of 55 percent below an already conservative estimate, in order for the project returns to be borderline (i.e. an ERR of 12 percent). Similarly, under the "minimum national impact" approach, the average incremental growth in yields would have to drop some 32 percent, from 0.15 percent per annum to 0.102 percent per annum, for project returns to be borderline. Finally, under the "minimum national impact" analysis, the original area under crops susceptible to improvement, and where yields were growing at 0.15 percent per annum, would have to drop by 52 percent before the returns were borderline. These shifts in basic parameters, while possible, are very unlikely, and the project returns are estimated to be robust. Fiscal Analysis 16. The Ministry of Agriculture (Vote 43) was allocated Tsh 17.2 billion (US$ 29 million) from both budgetary sources, in Fiscal 1995/96. This is 3.3 percent of total Governmental expenditure. The MOA was seventh in the ranking of Government agencies by size of Total Budgetary Expenditure allocation, coming after the Ministry of Finance, Defence, Ministry of Works, the Ministry of Health the Police  -30- Annex 4 Page 6 of 7 Force, and the Ministry of Education (after the requirements for State House and Debt Service have been taken off the top). 17. The allocation of total expenditures to the MOA declined some 20 percent in real terms between FY 95 and 96. The Recurrent Budget rose some 34 percent in FY 96 (due to the infusion of Tsh 3 billion for Agricultural Inputs), while the Development Budget declined by sonic 55 percent in real terms. 18. Two thirds of MOA's overall allocation is the Recurrent Budget amounting to some Tsh 11.6 billion (US$ 19.3 million) and one third is the Development Budget or Tsh 5.6 billion (US$ 9.3 million).. Some 27 percent of total expenditure by MOA (Tsh 4.6 billion or US$ 7.7 million) is to be financed from foreign sources, a fairly high share of the total. These foreign funds, only included in the Development Budget represent 83 percent of finance for this section of the budget. 19. The Ministry's Recurrent Budget is used to cover personnel emoluments (46 percent), subventions to other organizations both local and international (41 percent), with a very small share going into the financing of operations, travel and supplies (12 percent, or Tsh 1.4 billion (US$ 2.3 million). 20. The agricultural extension activities, carried out by the Agriculture Division, and the Livestock Development Division, were budgeted a total of US$ 6.9 million in FY 1996. Of this, US$ 7.1 million was from the Recurrent Budget (all in local resources) and US$ 4.5 million from the Development Budget (of which US$ 3.8 million was in foreign resources) as noted in Table 3 attached. The Development Budget includes funds from the first phase of the proposed National Agricultural Extension project, which accounts for US$ 3.8 million of the total US$ 4.5 million in the FY 96 provision. 21. The annual incremental expenditure under the proposed NAEP II project would average some US$ 5.8 million (without price contingencies). Expenditures are higher in the first few years, and then taper off. The incremental recurrent costs in the final year of the project are US$ 1.9 million. It would appear, from current funding levels, that this level of incremental recurrent costs, which represents incremental vehicle operations, personnel costs and administrative expenses, can be accomodated by the country. It would imply an increase of only 10 percent in the MOA Recurrent Budget, or an increase of 27 percent in the Recurrent Budget currently allocated to support of Extension Services.  -31- Annex 4 Page 7 of 7 Tanzania National Agriculture Extension Project - Phase II Economic Analysis List of Supporting Tables Table 1: Assessment of Minimum National Impact Table 2: Assessment of Adoption Rates and Potential limpact Table 3: Financial and Economic Prices Table 4: Expenditure on Ministry of Agriculture FY 1996  TANZANIA National Agriculture Extension Project - Phase If Economic Analysis Assessment of Minimum National Impact (in Tsh millions of Oct. 1995) AGGREGATE ANALYSIS Yearl Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year l0 Yea1 Yearl12 Yearl13 Yearl4 Year 15 Yearl16 Year 17 Year I8 Year 19 Year20 INCREMENTAL NET BENEFIT STREAMS FROM ON-FARM ACTIVITIES Maize 134 269 403 538 673 809 944 1,080 1,217 1,353 1,490 1,627 1,764 1,901 2,039 2,177 2,316 2,454 2,593 Sorghum 56 112 169 225 282 338 395 452 509 566 623 680 738 795 853 911 968 1,026 1,084 Millet 13 25 38 50 63 76 88 101 114 127 140 152 165 178 191 204 217 230 243 Paddy 45 90 134 179 225 270 315 361 406 452 498 543 589 635 682 728 774 821 868 Cotton 72 144 217 289 361 434 507 580 653 726 799 873 946 1,020 1,094 1,168 1,242 1,316 1,390 Coffee 23 45 68 91 113 136 159 182 205 228 251 274 297 320 344 367 390 414 437 Tobacco 36 72 108 144 181 217 253 290 326 363 400 436 473 510 547 584 621 658 696 CattleTraditional 348 696 1,046 1,395 1,746 2,098 2,450 2,802 3,156 3,510 3,865 4,221 4,578 4,935 5,293 5,652 6,011 6,371 6,732 CattleImproved 30 61 91 122 152 183 214 245 275 306 337 368 399 430 461 493 524 555 586 Total 0 756 1,514 2,273 3,034 3,797 4,561 5,326 6,093 6,861 7,631 8,403 9,176 9,950 10,726 11,504 12,283 13,063 13,846 14,629 INCREMENTAL OFF-FARM COST STREAM 6,127 3,173 3,716 2,381 988 988 988 988 988 988 988 988 988 988 988 988 988 988 988 988 INCREMENTAL NET PROJECT BENEFITS -6,127 -2,417 -2.201 -108 2,047 2,809 3,573 4,338 5,105 5,874 6,643 7,415 8,188 8,962 9,738 10,516 11,295 12,076 12,858 13,642 t (in Tsb (in US $S millions millions) NPV of Onfarm Benerits at 12% 34,328 55.4 NPV of Off-farm Costs at 12% 16,536 26.7 NPV of Net Incremental Benefits at 12% 17,793 28.7 Benefit Cost Ratio (at 12 %) 2.1 Internal Rate of Return 25% BACKGROUND DATA AND ASSUMPTIONS Foreign Exchange Rate: I USS 620 Tsh Overall Coefficients Av. Annual Growth in Farm Yields: 0. 150% (across full area cuiltivated) Av. Annual Growth in Farm Costsa 0.070% Overall Effect of an Annual H Average Yield Growth of: 0.15% over 20 years is an increme 3 0% (Underlying the incremental net benefit streams are an average annual growth in crop/livestock yields of 0.15% and an average annual growth in on-farm costs of 0.07% These coefficients produce a net benefit stream from on-farm activities which grows atan average annual rate of 0.45%.)  TANZANIA National Agriculture Extension Project - Plase 11 Economic Analysis Assessment of Adoption Rates and Potential Impact (Tsh millions of Nov 1995) AGGREGATE ANALYSIS Yecrl IYr 2 Yu3 Year Year 5 Year6 Ycai Yea 8 Yeat Year l Year l Yecr 12 Ycar l3 Year 14 Ycu I Year I6 YearI Year I Ycu l Year Z INCREMENTAL NET BENEFIT STREAMS FROM ON-FARM ACTIVITIES Maize 52 175 391 705 1,120 1,490 1,791 1,996 2,101 2,101 2,101 2,101 2,101 2,101 2,101 2,101 2,101 2,101 2,101 Sorghum 16 55 123 220 348 461 553 614 646 646 646 646 646 646 646 646 646 646 646 Millet 2 8 18 32 50 66 79 87 92 92 92 92 92 92 92 92 92 92 92 Paddy 16 56 126 227 363 485 584 652 688 688 688 688 688 688 688 688 688 688 688 Cottn 28 95 213 382 607 807 968 1,079 1,135 1,135 1,135 1,135 1,135 1,135 1,135 1,135 1,135 1,135 1,135 Coffee 9 41 100 187 302 413 495 551 580 580 580 580 580 580 580 580 580 580 580 Tobacco 14 47 105 188 299 399 479 534 562 562 562 562 562 562 562 562 562 562 562 Catde Traditionra 66 222 492 880 1,389 1,836 2,194 2,436 2,559 2,559 2,559 2,559 2,559 2,559 2,559 2,559 2,559 2,559 2,559 Catle Improved 12 48 112 206 330 446 534 595 625 625 625 625 625 625 625 625 625 625 625 Total 0 216 748 1,678 3,027 4,807 6,402 7,678 8,545 8,988 8,988 8,988 8,988 8,988 8,988 8,988 8,988 8,988 8,988 8,988 INCREMENTAL OFF-FARM COST STREAM 6,127 3,173 3,716 2,381 988 988 988 988 988 988 988 988 988 988 988 988 988 988 988 988 INCREMENTAL NET PROJECT BENEFITS -6,127 -2,958 -2,968 -703 2,039 3,820 5,414 6,690 7,557 8,000 8,000 8,000 8,000 8,000 8,000 8.000 8,000 8,000 8,000 8,000 Tsh USS Millions Millions NPV of Onfanrw enefit at12% 34,246 55.2 NPV of Off-farm Costs at 12% 16,536 26,7 Benefit Cost Ratio (at 12 %) 2.1 IRR 28% BACKGROUND DATA AND ASSUMIPIONS Foreign Exchange Ree: I USS - 620 Tsh Share of falmen adopting new techa (each year): 1.5% 2 0Y% 2.5% 2.5% 2.5% Cuuaative Adoption Rates by Year: r5 10-/ Anna Rates of Growh Cwnulative Yield (tadtuced by etension service): Yields s Increase in 5 Y Maize 4.0%/ 2. 0r. 21.7r SnugbIam 3.0% 1.5% 15.9%/ Millt 2.0Y. 10%. 10.4% 0- Paddy 4.0%. 2.0%/ 217% ID Cotton 4.0/ 20% 21.7% Coffee 4.0% 20% 217% Tobacco 4.0% 2.0% 217% Catte Traditional 2.0Y% 1 0Y. 10,4% Catle Improved 4.0%. 2. 0% 21.7%  - 34 - Table 3 FINANCIAL AND ECONOMIC PRICES (Estimated Average for late 1995) Financial Prices Economic Prices Outputs Tshs/kg Tshs/kg Rice 170 138 Maize 65 91 Sorghum 60 89 Coffee 700 760 Cotton 100 168 Source: Mission estimates in collaboration with MOA officials  Agriculture in the National Budget 1995/96 Recurrent Budget Development Budget Total Expenditure Total Share of Local Foreign Total Share of Total Share of Total Total Total Total Budget 413,284.7 801.8% 18,448.7 97,225.1 115,673.8 2066.2% 528,958.5 607.8% Debt Service 171,725.2 333.2% State House 355.7 0.7% Budget After Debt Service and 241,203.8 468.0% 18,448.7 97,225.1 115,673.8 2066.2% 356,877.6 410.1% State House Ministry of Finance 51,543.8 100.0% 401.3 35,076.9 35,478.2 633.7% 87,022.0 100.0% Defence 41,680.7 80.9% 2,236.8 500.0 2,736.8 48.9% 44,417.5 51.0% Ministry of Works 20,882.1 40.5% 5,826.7 14,330.0 20,156.7 360.0% 41,038.8 47.2% Police Force 17,303.8 33.6% 791.4 22.0 813.4 14.5% 18,117.2 20.8% Ministry of Health 13,389.7 26.0% 1,042.6 7,687.7 8,730.3 155.9% 22,120.0 25.4% iMinistry of Agriculture 11,599.0 22.5% 945.9 4,652.6 5,598.5 100.0% 17,197.5 19.8% Prison Service 10,849.4 21.0% 432.9 16.6 449.5 8.0% 11,298.9 13.0% Foreign Affairs and Int'l Cooperation 10,541.6 20.5% 25.9 25.9 0.5% 10,567.5 12.1% Electoral Commission 10,041.2 19.5% 10,041.2 11.5% Ministry of Education 10,002.0 19.4% 853.7 8,120.6 8,974.3 160.3% 18,976.3 21.8% Ministry of Water, Energy and Minerals 1,456.4 2.8% 1,534.7 8,771.2 10,305.9 184.1% 11,762.3 13.5% Prime Minister's Office 4,120.1 8.0% 112.0 4,976.1 5,088.1 90.9% 9,208.2 10.6% Ministry of Science, Technology 8,970.2 17.4% 729.7 4,699.1 5,428.8 97.0% 14,399.0 16.5% and High Education Share of Expenditure (other than m StateHouse and Debt Service) 212,380.0 412.0% 14,933.6 88,852.8 103,786.4 1853.8% 316,166.4 363.3%   -36- Annex 5 Page 1 of 2 THE UNITED REPUBLIC OF TANZANIA NATIONAL AGRICULTURAL EXTENSION PROJECT - PHASE 2 Research Extension Linkages 1. The linkage between research and extension is a continuing process. This was formally initiated under the ongoing phase 1 project of the national extension called the National Agricultural and Livestock Extension Rehabilitation Project (NALERP). The linkage is based on a common decision by research and extension on the types of farmer problems to be solved by research; researchers communicating solutions to extension who deliver these solutions in the form of recommendations to the farmers and convey the feedback on results of adoption by farmers of these recommendations to research together with fresh issues and problems; these are then addressed by researchers and the cycle continues. Some of the research recommendations developed under laboratory conditions need adoption to suit varying local field conditions; and for this purpose researchers carry out field trials on farmers' fields, simulating more closely actual farming conditions. Under Farming Systems Research (FSR) approach these trials take into consideration many other factors besides the technological factors, such as farmers' resource endowments, risk situations, and sociological realities. NALERP established several instruments of research-extension cooperation: (a) close coordination between the extension service and the FSR and other research programs achieved through several committees where researchers and extensionists meet regularly (Zonal Technical Committees, Zonal and Regional Agriculture Committees, Zonal and National Agricultural shows, National Coordinating Committee, Regional Extension Coordinating Committee, National Technical Committee, and Pre-seasonal/annual zonal workshops in each agro-climatic zone); (b) the nomination of specific liaison officers by both research and extension at zonal/regional and national levels; and (c) the establishment of a detailed schedule of regular coordination and contacts between research and extension workers. These arrangements are in place and over the years research-extension linkages have considerably strengthened. 2. A notable development in the last 5 years is the realization by both researchers and extensionists that farmers should have a more proactive role in the generation of technology as well as in its dissemination. The linkage is therefore now viewed as a farmer-extension-research linkage and both research and extension have initiated several steps for making this tripartite linkage effective. Extension has adopted farmer group approach and the group is consulted on the types and nature of the problems that should be addressed by research. Farmer systems approach has been extended to several commodities and problems are increasingly being handled by research under this approach. The limiting factor in conducting more field trials under this approach is the availability of funds, as management of field trials requires more resources. 3. The Ministry of Agriculture in Tanzania has decided to follow a multi-pronged approach to further enhance farmer-extension-research linkages. Under NAEP II funds have been provided for continuing and strengthening the regular institutional interface between research and  Annex 5 Page 2 of 2 extension through the various committees and meetings mentioned in the previous paragraph. Farmers representatives will be added to some of the regional/zonal coordination meetings. Funds have also been provided for extension to 'buy in' research particularly for the farmer- managed field trials. Under phase 2 project of national research now under preparation the following steps are proposed to strengthen linkages: (a) as far as practicable, the entire research including commodity research will be based on Farming Systems approach; (b) adequate funds will be provided for researchers to conduct commodity research on farmers' farms; and (c) provision will be made to supplement NAEP II initiatives under village/division linkages. The Government has decided to levy a cess on several cash crops and a substantial part of the proceeds will be used to finance research and extension. The Board of Trustees for managing these funds will have farmer and user representatives, and therefore users will participate in deciding the research agenda funded by cess/levy.  -38- Annex 6 Page 1 of 7 THE UNITED REPUBLIC OF TANZANIA NATIONAL AGRICULTURAL EXTENSION PROJECT - PHASE 2 Brief Outline of the Project Implementation Plan Introduction 1. The National Agricultural Extension Project (NAEP II) is the second phase of the national extension program which will continue the extension activities now being implemented under the ongoing phase 1 called the National Agricultural and Livestock Extension Rehabilitation project (Cr. 1994-TA). The phase I has achieved many of the project objectives; a unified extension service has been established, extension management has been strengthened and the Ministry's capacity for managing the national program enhanced by provision of physical infrastructure and logistical support. The results on the ground are satisfactory, extension has covered nearly 2.16 million farm families, extension service is in regular contact with nearly 70 percent of the farmers contacted, adoption rates of extension recommendations have been steadily going up, in crop husbandry nearly 67 to 76 percent of the contacted farmers adopted two or more of the extension recommendations, the adoption rates for livestock recommendations at 43 percent to 65 percent were comparatively lower. The yields of many crops have improved. Surveys show yield for maize in coastal, western and northern regions of the country increased by 650 (original expectation at project start 350), 750 (250), and 465 (300) Kg per hectare. The Project 2. The phase 2 program will take over from the phase 1 on July 1, 1996. The phase 2 program will be implemented in 16 regions of mainland Tanzania for a period of five years. The main objectives of NAEP II are to continue to provide extension services to the farmers to improve their productivity and incomes. The extension will be based on the T&V system and will use participatory approach and reinforce farmer group approach. The project will initiate the process of private sector/NGO/farmer participation in extension on cost-sharing basis and selective privatization, as feasible. The project will have four main components: Institutional Strengthening, Education and Training, Communication Support and Pilot Initiatives. The program in phase 2 includes some new features which respond to the lessons learned in phase 1. These include a strong recognition and an appropriate arrangement to encourage participation of other providers (NGOs/private sector) in extension services; piloting initiatives to make extension more user-oriented, cost effective and participatory; improving implementation by initiating steps for greater district focus and providing arrangements for inter-ministerial coordination; providing communication support to face-to-face extension; emphasizing group approach by extension instead of individual contact and providing for staff and  -39- Annex 6 Page 2 of 7 farmer leaders training for the purpose; strengthening the financial management of the project and providing additional means for enhancing farmer-extension-research linkages. Institutional Implementation Arrangements 3. The implementation arrangements operating for phase I will essentially remain in place and will be strengthened for inter-ministerial coordination, enhanced district focus, financial management and internal audit. 4. Role of the Central Government: The Ministry of Agriculture will have the overall responsibility for implementing the NAEP II. The Assistant Commissioner of Extension (ACE) under the Principal Secretary MOA, as Head of the Ministry's Extension Unit (EU), will be the principal officer-in-charge for program implementation. A Project Steering Committee (PSC) will be established for inter-ministerial coordination and will be headed by the Principal Secretary MOA. The other members of the committee will be the Principal Secretaries of the Ministry of Finance; Ministry of Community Development, Women and Children; Prime Minister's Office; Ministry of Justice and Constitutional Affairs; Planning Commission; heads of departments of MOA; and a representative each of the farmers, and other extension providers. The Assistant Commissioner Extension will be the member-secretary of the PSC. The terms of reference of the PSC will include; (i) address policy issues; (ii) review program implementation, to approve annual work plan, training plan and budget; (iii) consider the audit reports and recommendations; (iv) approve proposals and projects under the Pilot Initiatives component; (v) approve amendments to the Project Implementation Plan; and (vi) give directions for the overall management of the project. The overall management role of MOA will include preparation of the annual work plan and the training plan in consultation with the regional and the district administrations, budget management and release of funds to the field agencies, program supervision, monitoring and evaluation. 5. Role of the Regional Government: The role of the regional government will primarily be supervision and coordination. In addition the region will be the effective interfacing level between zonal research and regional and district extension through the media of the standing Zonal Technical Committee, Zonal Research and Advisory Committee, Regional Extension Coordination Committee and the Zonal Pre-seasonal and Annual workshops. The meetings of these committees follow an agreed established schedule. The principal officer responsible for implementing the project tasks at the regional level would be the Regional Extension Officer (REO) who would report to the Regional Agriculture and Livestock Development Officer (RALDO). The M&E function for all MOA projects will be performed by the M&E Officer who, for NAEP II activities, will report to the RALDO through the REO. A system of regional supervision of the district extension activities has been established under NALERP which will be continued. 6. Role of the District Administrations: The district will be the main implementing unit for NAEP II. The main responsibility for implementing the project at the district level would be of the District Extension Officer (DEO) who will report to the District Agriculture and Livestock Development Officer (DALDO). All the Subject Matter  -40- Annex 6 Page 3 of 7 Specialists (SMS) would report to the DEO and at least three SMSs will be located at below district headquarters, i.e., at divisional level to be available for consultation and advice to the front-line extensionists namely the Village Extension Officer (VEO) and the Divisional Extension Officer (DIVEO). A District Extension Steering Committee (DESC) would be established under the chairmanship of the District Commissioner (DC) with all the district heads of the departments of the concerned ministries, two representatives of the farmers (one woman), a representative each of other extension providers and of the district level credit and marketing cooperatives, and three persons to represent local Governments to be nominated by the DC. The DEO will act as the member secretary of this committee. The DESC will have the following terms of reference: (i) approve the district annual work plan and budget; (ii) periodical program review; (iii) securing cross- sectoral support to the program; (iv) support for farmer mobilisation; (v) support for resolving farmer problems; (vi) raising local resources for the program; (vii) considering proposals for pilot initiatives and making recommendations to MOA; and (viii) general coordination of activities to provide support for program implementation. Component Implementation Arrangements 7. The Institutional Strengthening component will be implemented mainly by the Assistant Commissioner Extension. He will draw up the procurement schedules for procuring the required vehicles and equipment, finalize and award contracts for civil works and for recruiting the agreed staff and consultants. He will arrange to issue orders for the establishment of the PSC, Training Coordination Committee and the District Extension Steering Committees before project effectiveness. For regular extension and training activities the schedules as established under phase 1 would be generally followed. 8. The Education and Training component will be coordinated by the Training Coordination Committee in MOA which will finalize the annual training plan every year in consultation with the participating training institutions. The training plan will be based on the training needs assessment study which will be completed before September 30, 1996. The Training Officer of MOA working under the ACE will be responsible for the day to day management and supervision of the implementation of the approved training plan. The M&E system of the MOA will regularly report on training plan implementation. The implementing training institutions will regularly furnish feedback received on training course evaluation to MOA and this will be discussed in the Training Coordination Committee for lessons to be applied to designing the future courses of training on the subject. 9. The Communications Support Component: The ACE will be responsible for posting the Zonal Communications Officers in two regions before project effectiveness and reorganizing the FEPU in terms of the agreements reached with IDA (para of SAR). The communication support program will be implemented at two levels-central and zonal (i.e., in the regions covered by the zone). ACE will be responsible for drawing up the annual work plan for the central and zonal activities. FEPU will be responsible for implementing the central work program and will have the responsibility of overseeing the  -41- Annex 6 Page 4 of 7 program implementation at the regional level. The program will be based on the needs assessment study to be carried out for the two identified zones before September 30, 1996. 10. The Zonal program will involve close coordination between zonal research, regional extension and the Zonal Communication Unit which will report to the REO and RALDO of the region where the unit is headquartered. The Zonal Communications Officer (ZCO) would be expected to maintain close liaison with the head of the zonal research center and will have regular working relationship with the Head of the Farrning Systems Research in the zonal research center. Similarly his unit will maintain close working relationship with the REOs of the other regions, and with the District Commissioners, DALDOs, DEOs of the districts. The ZCO would be encouraged to travel widely in the area to meet farmers, NGOs, public representatives, and other interests to get a feel and feedback on the impact of the communication material supplied and the need expressed for future. He will also be encouraged to attend the DESC meetings in the districts and the zonal and regional coordination committees meetings between research and extension. The Regional Extension Coordination Committees and other coordination meetings would be utilized for consultants on the zonal requirements for communications support material. At least once a year a special coordination meeting to discuss and evaluate the zonal communication support program would be convened which would be jointly chaired by the RALDO of the headquarters region and by the Zonal Research Director. 11. The Pilot Initiatives component will be implemented in the districts and will be supervised and monitored by the DEO. The details of the criteria for selection of the pilot projects and the process of their approval and funding would be provided in the PIP. The main objective of the pilot initiatives is to improve extension delivery and make extension more demand driven and user-oriented. The following main criteria would be used for selection of appropriate proposals: (i) the pilots should cover an activity or activities within the objectives of the project and the component. Illustrative examples are proposals to improve extension management, farmer-research-extension linkages, participation of other providers in extension, proposals to address constraints in farmer adoption of extension messages such as quality seed, animal traction, input supply, proposals to empower farmer groups to carry out certain extension functions, beneficiary assessment of extension, (ii) the pilots can be tried at one or more locations; (iii) the size of investment in each case should normally not exceed US$100,000. In exceptional case where the pilot trials or coverage exceeds three districts the ceiling may be enhanced to US$200,000. The following approval process will apply. The pilots can be sponsored by the Government departments/agencies, cooperatives, NGOs and others interested in the basic objectives of the program. The pilots generated in a district would be considered in the DESC whose recommendations would be forwarded to the MOA. The EU of MOA would review these proposals which would be approved by the PSC. In case of pilots covering more than one district EU would review them in consultation with the concerned districts and secure approval of the PSC. All pilots with investment of US$20,000 and  -42- Annex 6 Page 5 of 7 above would be subject to no-objection by IDA. The first 5 pilots irrespective of the size of investment will be reviewed by IDA for no-objection. 12. Monitoring and Evaluation: The monitoring and evaluation unit of MOA will be responsible for regular monitoring of the project. The information chain has already been established for regular monitoring of the project. The DEOs furnish all program data to the Regional M&E Officer of MOA who consolidates the information and sends to the MOA headquarters. The formats for reporting and the MIS are provided in the PIP. It will be the responsibility of ACE to ensure that baseline impact surveys are carried out before December 1996, and these are repeated for the mid-term review by September 1998, and for the project implementation completion report before December 31, 2000. A table showing key performance indicators is attached. 13. Project Start-up: The project start up key steps include (a) establishment of the PSC, DESCs and the Training Coordination Committee. It will be the responsibility of ACE to arrange the issue of appropriate orders to establish these committees by July 1, 1996; (b) Reorganization of FEPU would be completed and two ZCO would be appointed; (c) the contracts for the Needs Assessment studies for training and communications support would be awarded in the last quarter of FY96 so that the reports are available before September 30, 1996; (d) the annual work plans, training plan, procurement plan, and budget for FY97 would be finalized based on agreement during negotiations and furnished to IDA before March end; (e) the national project launch workshop will be organized during the fourth quarter of FY96 and the follow-up Regional/district workshops will be organized during the first quarter of FY97. 14. Mid-term Review: A joint mid-term review (MTR) will be conducted by the Borrower and IDA not later than December 31, 1998 to review the implementation progress and the extent to which the project objectives have been achieved. Based on evaluation of the performance of two zonal communication centers established in year I the MTR will recommend on the establishment of zonal communication centers in the remaining five zones. The performance of the pilot projects started in years 1 and 2 will also be evaluated for lessons to be applied to the new pilot initiatives. The MTR will also recommend reallocation of funds, as necessary. 15. Key Activities: A time table of key project activities is attached.  TANZANIA - NATIONAL AGRICULTURAL EXTENSION PROJECT PROJECT IMPLEMENTATION SCHEDULE Key Activities FYr/ FY96 FY97 FY98 FY99 FY2000 FY2001 Qtr. I 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 I Project Process - Finalize SAR x - Intemnal Review x - Negotiations x - Board Presentation x - Benchmark Surveys x x - Impact Evaluation Survey x x - Mid-Term Review x x - Inplementation Completion Rep. - Project Closing x 2. Project Start-up - Appointment of ZCOs, x reorganization of FEPU - Establish PSC, DESCs and x Training Coordination Committee Finalize annual work plan, trg. x x x x x plan, procurement plan and budget - Project Latunch Workshop (a) Headquarters x (b) Region/districts x ___ _ 3. Project Implementation - SMSs to be posted at divisional x level - Conduct needs assessment for (a) training x x (b) communication x x - Extension Operations (a) MTS (per district/year) 12-- 12- ---12-- - 12 - -12 (b) BMW (per district/year) 6 6-- -----66- _6-- -6 - (c) Regional Extn. C.C. x x x x x (d) ZonalIR.AC. IxI I (e) 7onal T.C . x x x x x x x 01> OQ I D 0  Key Activities FYr/ FY96 FY97 FY98 FY99 FY2000 FY2001 . ~~~~Qtr. 1 12 13 14 1 2 3 14 1 2 13 4 1l 2 3 t4 1- 2 3 4 1 3- 4 (f) National T.C. 1 2 3 4 1 2 3 4 1 2 3 4 - Training X - Retraining (diploma holders) ** ** * * ** Nos./year - Refiresher Courses ** ** ** * .* - Farmers' Trg. a. Residential ** ** ** ** b. On-site Group Trg. ** ** ** t ** * c. Farm Study Tours ** . * ** d. Demonstrations ** ** ** - Impact Evaluation of Training x x x x x Program - Communications (a) Writers' Workshops (one per x x x x x x year zone (b) Editorial Board Workshops x x x x x x (one per year per zone) (c) Annual Strategy (per zone) x x x x x x Commrnications Workshop - Pilot Initiatives Pilot Evaluation x x = Activities conducted annually. I*li --. CY,   -45- Annex 7 Documents in the Project File 1. "The National Agricultural Extension Program" - Phase II Final Draft Report of MOA Task Force. 2. "National Agriculture and Livestock Extension Policy and Implementation Guidelines" - MOA, 1992. 3. Costs Estimates of NAEP II - MOA. 4. "The National Agricultural and Livestock Extension Rehabilitation Project: Mid- Term Review" - MOA, 1993. 5. "Recommendations for the Pre-Season Implementation and Planning Workshop". Kibaha Sugarcane Research Institute, 5th-6th October, Dar-es-Salaam - MOA, 1993. 6. "Institutionalism of Research/Farmer Linkages". Working Paper No. 1 Dar-es- Salaam: National Extension Service. Ministry of Agriculture - MOA, 1994. 7. Mafanikio ya utafiti wa mazao na mifugo, Dodoma 1990 by Shao F. A. na Mpiri D.O. 8. An Evaluation of Extension Phase I by Beneficiaries - Sokoine Agriculture University. 9. Technical Report on Communication Support to Extension by Mr. P. C. Mohan. 10. Technical Report on Training to NAEP II by Mr. Suresh Kumar. 11. Technical Papers by Drs. D. Spencer and I. Butare.   MAP SECTION I I   RWANDA _rkbwon 9 9 AFRICA J- BURUNDI( TANZANIA NATIONAL AGRICULTURAL ~tEXTENSION PROJECT Is Phase o- Zanzibar ~~PROJECT AREA MAIN ROADS ____SECONDARZY ROADS BARIGE MOVEMENT RIVERS