Burkina Faso - Agricultural Sector Adjustment Credit Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 15571 TNPLEMENATION COMPLETION REPORT BURKINA FASO AGRICULTURAL SECTOR ADJUSTMENT CREDIT (CREDIT 2381-BUR) APRIL 23, 1996 Agriculture and Environment Division West Central Africa Department Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (as of 01/01/996) Currency Unit = CFA franc US$1 = 495 CFA francs SDR I = US$1 40 WEIGHTS AND MEASURES Metric System FISCAL YEAR January I - December 31 ABBREVIATIONS AND ACRONYMS AG. SECAL Agriculture Sector Adjustment Credit CAS Countrv Assistance Strategy CFD (Caisse Francaise de Developpement) CGP General Equalization Board (Caisse Generale de Perequation) CNA National Poultry Center (Centre National Avicole) CONASUR National Comittee for emergency relief (Comite National pour les s6cours d'urgence) CRPA Regional Center for the Promotion of Agriculture and Livestock) (Centre Regional de 1'romotion Agro-Pastorale) CSPPA Agricultural Prices Stabilization Fund (Caisse de Stabilisation des Prix des Produits Agricoles) FODEL Livestock Development Fund (Fonds de Developpement de I 'Elevage) GATT General Agreement on Tariffs and Trade GMB Burkina Milling Company (Grands Moulins du Burkina) ICR Implementation Completion Report LPDA Letter of Agricultural Development Policy (Lettre de Politique de Developpment Agricole) MARA Ministry of Agriculture and Livestock (Ministere de l 'Agriculture et des Ressources Animalesy OFNACER Cereal Marketing Board (Office National dies Cereales) ONAVET National Veterinarv Board (Office National Veterinaire) PFP Policv Framework Paper PIP Public Investment Program (Programme dcInvestissements Publics) PNGT National Program for Village Land Use (Programme National de Gestion des Terroirs) SAC Structural Adjustment Credit SOFITEX Cotton Company (Societe des Fibres Textiles) SONACOR National Rice Milling Company (Societe Nationale de Collecte du Riz) SONAGESS Security Stock Management Companv (Societe Nationale de Gestion du Stock de Securite) SOSUCO Sugar Company of Comoe (Societe Sucrire de la Como6) UCOBAM Vegetable Cooperatives Union (Union des Cooperatives Agricoles et Maralch&res du Burkina) UEMOA West African Economic and Monetarv Union (Union Economique et Monetaire Ouest- Africaine) VAT Value Added Tax WFP World Food Program Burkina Faso's currency is the (CFA franc), which is pegged to the French franc (FF). Until January 12. 1994. the parity of the CFA franc to the French franc was 50 to 1. Since then it has been at 100 to 1.  FOR OFFICIAL USE ONLY TABLE OF CONTENT Page PREFACE ........................................................................................................................................ EVALUATION SUMMARY ............................................................................ i PART I - PROGRAM IMPLEMENTATION ASSESSMENT ....................................................... I A. INTRODUCTION .............................................................. I B. PROGRAM OBJECTIVES ............................................................................ 2 1. Statement of Program Objectives ...................... ...................................... 2 2. Evaluation of Objectives ............................................................ 2 C. ACHIEVEMENT OF PROGRAM OBJECTIVES ....................................................................... 3 1. Intensification and management of natural resources ......................... ..................... 3 2. Trade and Price Liberalization ................... ......................................... 4 3. Reorganization of the institutional environment ....................................................... 6 (a) Restructuring of public institutions involved in rural development ........ ............ 6 (b) Divestiture of the State and Privatization ........................................................... 6 (c) Cotton sub-sector - Performance contract with SOFITEX .......... ..................... 7 (d) Sugar sub-sector. Performance contract with SOSUCO ........... ....................... 8 4. Improvement of publicfinancial management . ........................................................ 9 5. F ood security ............................................................ 9 D. MAJOR FACTORS AFFECTING THE PROGRAM .................................................................. 10 E. PROGRAM SUSTAINABILITY ...................................1......................................... 1 F. BANK PERFORMANCE ............................................................................ 12 G. BORROWER PERFORMANCE ............................................................................ 12 H. ASSESSMENT OF OUTCOME ............................................................................. 13 I. FUTURE OPERATIONS .........................................13.......................................................... 13 J. KEY LESSONS LEARNED ......................................... 13 PART H: STATISTICAL ANNEXES ......................................... 15 TABLE 1: SUMMARY OF ASSESSMENTS ......................................... 15 TABLE 2: RELATED BANK CREDITS ......................................... 17 TABLE 3: PROJECT TIMETABLE .................... .................................................................... 1 8 TABLE 4: CREDIT DISBURSEMENTS: CUMULATIVE ESTIMATED AND ACTUAL .................. 18 TABLE 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION ............................................ 18 TABLE 6: STUDIES INCLUDED IN PROJECT .................................................................... 19 TABLE 7: PROJECT FINANCING .................................................................... 20 TABLE 8: STATUS OF LEGAL COVENANTS .................................................................... 20 TABLE 9: BANK RESOURCES: STAFF INPUTS .................................................................... 22 TABLE 10: BANK RESOURCES: MISSIONS ......................................................................... 23 ANNEX: Comments of the Borrower Tis document has a restricted distribution and may be used by recipients only in the perfornance of their official duties. Its contents may not otherwise be disclosed wiihout World Bank authorization.   IMPLEMENTATriON COMPLETION REPORT BURKINA FASO AGRICULTURE SECTOR ADJUSTMENT CREDIT (CR. 2381 - BUR) PREFACE This is the lmplementation Completion Report (ICR) for the first Agriculture Sector Adjustment Credit (AG. SECAL I) in Burkina Faso, for which Credit 2381 - BUR in the amount of SDR 20.6 million equivalent was approved on June 6, 1992 and made effective on August 31, 1993. The Credit was closed on December 31, 1995, compared with an initial closing date of December 31, 1994 The first tianche, released upon effectiveness, was fully disbursed by December 1993. The second and third tranches were released in June 1995, and the Credit was fully disbursed by December 13, 1995. Parallel financing of the program was provided by the European Union and the Government of France The ICR was prepared by Alec Bouchitte, consultant, under the supervision of Adolfo Bnzzi (Task manager, AF4AE). It was reViewed by Hans-Martin Boehmer (AF4CO), Cynthia Cook, Division Chief (AF4AE), and Franz Kaps, Operations Advisor (AF4DR).. Preparation of this ICR was begun after the Bank's final supervision mission in November, 1995. It is based oni material in the program files, including the President's Report, the Letter of Agricultural Development Policy, supervision reports, progress reviews on the occasion of tranche releases and other related documents. Borrower's comments to this report are attached in the Annex. The Borrower has also prepared a full implementation completion report which is available upon request The conclusionis of the report are also attached.   IMPLEMENTATION COMPLETION REPORT BURKINA FASO AGRICULTURE SECTOR ADJUSTMENT CREDIT (CR. 2381 - BUR) EVALUATION SUMMARY Introduction 1. Prior to the adjustment program, the Bank played a limited role in Burkina Faso's economic development, focusing its sector investments mainly in agriculture (integrated rural development projects and fertilizer credit), transport, health and education. Relations between the Bank and Burkina deteriorated to the point where no new credits were approved in 1986 and 1987. Relations improved sinficantly with a new Government coming to office in late 1987 and lending resumed in 1988. Preparation of the first Structural Adjustment Credit (SAC I) was initiated in 1989. SAC I negotiations took place in May 1991 and the Credit became effective in September 1991. A first Policy Framework Paper (PFP) was also approved in early 1991. In parallel, preparation of the present Agriculture Sector Adjustment Credit (AG. SECAL I) was started in 1991, presented to the Board in June 1992 and became effective in August 1993. Moreover, in accordance with the Country Assistance Strategy, a first set of investment operations was approved in the period 1988-1992 in the field of Agricultural Research, Agricultural Services and Extension, Natural Resource Management and Food Security. Program objectives 2. The Credit supports the adjustment program spelled out in the Government's Letter of Agnicultural Development Policy of May 4, 1992 (LPDA). It aims at deepening and extending to the agricultural sector the reforms undertaken through SAC I in order to: (i) modemize and diversify agricultural production; (ii) increase food security;, and (iii) improve natural resource management. The main objectives of the agriculture sector adjustment program were fivefold: (a) providing adequate legal and regulatory framework to improve the land tenure systems, stabilize the small farmers on their land, and facilitate community-based natural resources management;, (b) liberalizing trade (external and domestic) and prices of agricultural products, including traditional cereals, rice, oil seeds, wheat, fruits, vegetable, livestock, cotton and sugar; (c) reorganizing the sector institutional environment, including (i) restructuring of public institutions involved in rural development, at central and local levels, (ii) privatization of inefficient parastatals, and (iii) signature of performance contracts wi'th the cotton and sugar companies;  - ii - (d) improving public financial management, especially the public investment program (PIP) and operating budgets; and (e) reducing the role of the State (through parastatals) in the domestic grain market, to the management of the national security stock, food aid and market information svstems. 3 To achieve the objectives, fifty measures were identified and presented in the policy matrix annexed to the LPDA. Core measures were selected to constitute the conditions of tranche releases of the Credit in the field of tariff reform, signature of performance contracts, restructuring of the Ministry of Agriculture and privatization. 4 Overall, the objectives of the adjustment program are clearly set out and consistenit with the country development strategy. The measures of the policy matrix are relevant and cover most of the key aspects of the sector strategy. However, it appears that the scope of the measures in the policy rnatnx was over-ambitious and the timetable for implementation optimistic, as full completion would require further support and time, possibly through a second sector adjustment operation. Also, the conditiorialities for second and third tranche release could have been more focused and less dependent on assessments to be made of satisfactory implementation of action plans. Furthermoie, some key aspects could have been more developed in the LPDA such as: (i) water and irrigation policies, in relation with natural resource management; (ii) social and poverty issues, including impact on living standards and nutrition status; (iii) improvement of human resource management within the ciVil service; (iv) organizational arrangements of the adjustment process, to ensure better coordination among the institutions involved; and (v) definition of impact indicators, conceming inter alia competitiveness of key sub-sectors and farmers revenues. Implementation Experience and Results 5. The objectives of AG. SECAL I have been partially achieved. Progress has been substantial in trade and price liberalization, tariff reform, strengthening of cotton and sugar sub-sectors, and food security. Important delays have been observed for other key reforms including land laws, reorganization of Ministry of Agriculture and Livestock (MARA), privatization, and improvement of public financial management. 6. In the field of liberalization, domestic trade and exports of livestock and of most agricultural products have been fully liberalized with the elimination of monopolies, price controls, stabilization schemes and export taxes. Import monopolies and price control remain for sugar and rice (elimination was not included in the policy matrix). For cotton, as agreed in the performance contract, the unique cottoni company keeps the monopoly on seed cotton primary marketing and on lint export; seed cotton prices are still set by the Government. The tariff reform is well under way as the proposals of a specific study (up-dated following the CFA franc devaluation in January 1994) have been reviewed and new tariffs will likely be enforced in 1996. 7. The performance contract (Contract Plan) for the cotton sutb-sector was signed as plaruned in .January 1992, between the State and the cotton company (SOFITEX). Agricultural Prices Stabilization Fund (CSPPA) was stripped of its stabilization role while providing SOFITEX with increased managemenit autonomy, this proved benefiz2al to the functioning of the sub-sector. Moreover, the CFA franc devaluation, together with an incre,cse of world marlket prices, led to an increase onf seed conon  - iii - prices and permitted the recovery of production (although moderate) and the restoration of SOFITEX's financial situation. An amendment to the Contract Plan was signed (with considerable delay) in July 1995 as a consequence of the devaluation and proved highly controversial as it appeared mainly geared to comfort SOFITEX's financial situation at the expense of a better price structure for the farmers The Contract Plan, although it facilitated the restructuring of the subsector, did not live up to its objectives of stimulating renewed growth for the cotton sector, and Government intervention remains substantial. Future reform of the cotton sub-sector would have to include further measures such as clarification of the fiscal situation of SOFITEX, improvement of the pricing policy, elimination of fertilizer subsidies, improvement of SOFITEX management, and rehabilitation of cotton producers' associations. In the sugar sub-sector, the unique sugar company (SOSUCO) has been rehabilitated with success and a performance contract between SOSUCO and the Govemment was signed to cover the period 1992/93 to 1997/98. It permitted to restore a satisfactory level of efficiency and, thanks to the CFA franc devaluation, of competitiveness. Again, the Contract Plan has introduced rigidities (import monopoly, transport equalization) which may prove detrimental to the liberalization efforts. 8. The draft land law is still under discussion in the national Parliament. It includes several provisions which would allow individual farmers to obtain official titles providing for sufficient securt on their land. However, it appears that it may not prove very flexible and pragmatic in allowing for operational mechanisms to facilitate community-based land management and close attention should be paid to the practical feasibility of the new legal provisions. 9. A first set of studies was completed in 1993 on the restructuring of MARA and its decentralized agencies. Some resistance within the civil service and divergence among donors led to delays in decision taking. Eventually, after a national workshop held in May 1995, the Government set the principles and objectives of the restructuring and launched detailed operational studies which have been completed in December 1995. The restructuring process should start in 1996. 10. Privatization is well behind schedule and the two parastatals which were supposed to be sold to private entrepreneurs (CSPPA) and National Rice Milling Company (SONACOR) are still operated by the State or are in receivership. Such difficulties are mainly due to insufficient preparation of the privatization, inadequate handling of the privatization process by the national commission, pooI profitability of the entities to be privatized, and limited number of potential buyers. A waiver had to be granted to permit tranche release. 11. Little progress has been made in the improvement of public finance, especially the management of the Public Investment Program (PIP). Greater efforts should be made to ensure better selection of projects, consistency with development policies, better assessment of recurrent costs and to avoid a classical donor driven approach. 12. A major factor affecting the program has been the devaluation of the CFA franc in January 1994, along with the upward trend of the intemational prices of a number of agricultural commodities, particularly those for cotton. This has had a major positive impact on the reforms program by helping restoring the competitiveness and profitability of the various agricultural sub-sectors. Government changes and the rotation of staff led to some discontinuity, loss of institutional memory and some disruption in the implementation and monitoring of the reform agenda.  - iv - 13. Overall, the Bank performance has been satisfactory. Support to the Borrower for the design of sector policies and preparation of the Credit was thorough and intensive. However, the reorganization of the Africa Region of 1994 and resulting staff movements led to a period of discontinuity and deficiencies in pursuing close supervision and donor coordination until the change in task management in 1995, which required a new adaptation period. The Borrower's perfornance was highly satisfactory during the preparation of the adjustment program, which was comprehensive, participatory and consistent with the new national economic policy. During implementation, the performance was deficient on a number of aspects, mainly because of weak commitment and capacity at the intermediate level of the administration, insufficient planning and monitoring of the reforms, and lack of coordination of the various ministries and public institutions involved. Borrower's performance was overall satisfactory on covenant compliance. 14. The Outcome of the AG. SECAL I can be considered satisfactory, as substantial progress has been achieved, especially in the fields of price and trade liberalization for traditional cereals, livestock and oilseeds, tariff reform, rehabilitation of the cotton and sugar sub-sector, and food security. However, full completion and sustainability of some measures and reforms need further support. Summary of Findings, Future Operations, and Key lessons learned 15. The summary of findings and key lessons are the following: * Preparation and implementation of the program should have explicitly included appropriate consultation and monitoring arrangements (involving the Parliament, the economic operators and the civil society), and more flexible planning, in order to broaden ownership and adapt to changes deriving from the democratization process. * To increase commitment and reduce the risks of reversals, adjustment programs should contribute to increase the political and economical influence of farmers by setting an adequate legal framework which would facilitate their political representation, and supporting the development of farmer organizations at national, regional and local levels. * Contract-Plans (cotton and sugar) between a State-company and the State should have permitted a better definition of the contractual obligations of the two parties and provided for a framework of actions in the context of increased autonomy. In practice: (i) they did not prevent State interference; (ii) they proved difficult to amend and therefore introduced rigidities when changes appeared necessary; and (iii) performance objectives over a five year period became quickly obsolete and irrelevant. * Privatization efforts need to be supported by a better knowledge of the real situation and potential for private sector involvement. Restoration of profitability may be required prior to privatization through restructuring and rehabilitation. Technical Ministries should be more involved in the privatization process. Transfer of public monopolies to private hands is a risk that should be addressed early on through better support to the management of the privatization process.  Program Management Units for sectoral adjustment operation under technical line Ministries have difficulties in assuring the required leadership, coordination and credibility with respects to intersectoral issues vis-a vis the rest of the Govemment and particularly with respect to the Ministry of Finance and the Ministry of Commerce. In these cases, responsibilities should rather be entrusted to the Ministry of Finance or the Pnrme Minister's Office. 16. The first process of sector adjustment has been marked during implementation by a major devaluation of the currency. The agricultural sector possess todays a number of assets including restoration of competitiveness, a stabilized macro-economic environment, and the completion of a number of important reforms. However, the Govemment agrees that to return to a high growth path, it is necessary to deepen and complete the reform measures initiated under the first operation. A second agnculture sector adjustment program which is building and expanding on the results of AG. SECAL I, including addressing some key unfinished policy agenda items, is now under preparation.   IMPLEMENTATION COMPLETION REPORT BURKINA FASO AGRICULTURE SECTOR ADJUSTMENT CREDIT (CR 2381 - BUR) PART I - PROGRAM IMPLEMENTATION ASSESSMENT A. Introduction 1. Burkina Faso is a landlocked country, with a population of about 10 million and ranks among the world's poorest countries (GNP per capita of US$290 in 1994). Population growth remains arotnd 3 percent per annum. The agricultural sector accounts for about 40 percent of GDP and is the main source of income for 80 percent of the population. Burkina's exports remain dominated by three primary commodities: (i) cotton, (ii) livestock, mostly exported to coastal countries, and (iii) gold. Prior to 1988, economic policies in Burkina Faso were characterized by central planning, state ownership of land, tight controls and restrictions on the private sector, and extensive direct state involvement in productive activities, including agricultural processing and marketing. High agricultural growth (6 I percent per year) could be achieved during 1982-1988 due to favorable climatic conditions and expanded cultivation on new land recently freed of onchocercosis. These growth rates could not be sustained as Burkina entered into a period of stagnation and recession. Through a number of parastatals, the Govemment has tried to regulate markets, prices and trade. This has resulted in important inefficiencies, high transaction costs, and has prevented the development of the private sector. These constraints were compounded by an increasingly overvalued exchange rate which imneded competitiveness 2. In 1988, the economic situation seriously worsened and it became clear that levels of public speniing could not be sustained anymore. The Govemment started considering alternative economic policies and entered into a constructive dialogue with the Bank and the IMF. Following completion of the country economic memorandum in 1988, the Govemment issued a first draft Policy Franework Papei (PFP) in 1989 which was thoroughly debated in 1990 and presented to the Boards of the Bank and IMF in early 1991. A first Structural Adjustment Credit (SAC I) was approved by the Bank in June 1991. The key objectives of the reform program have been to improve the competitiveness of'the economny, reduce the State's role in the economy, promote private sector activities, pursue a balanced management of public funds, improve the balance of payment situation, and lay the foundation for a sustained longer-term growth needed to raise standards of living and alleviate poverty. The preparation of the AG. SECAL I started in 1989 in parallel with SAC I; it was appraised in late 1991 and approved in June 1992, followring the adoption by the Govemment of the Letter of Agricultural Development Policy (LPD-)A). It became effective in August 1993 more than one year after approval because of delays in the recruitment of the program extemal auditors. Following the CFA franc devaluation in January 1994, the macroeconomic situation improved significantly as the tradable goods sector responded well (especially exports of cotton and livestock), inflation was sufficientiy contained to restore competitiveness, and the real GDP growth rate started to rise again.  2 B. Program Objectives 1. Statement of Program Objectives 3. The AG. SECAL I supports the policies set out in the Govemment's LPDA of May 4, 1992. The program aims at deepening and extending to the agricultural sector the reforms supported at the macroeconomic level by the SAC 1, in order to (i) modemize and diversify agricultural production; (ii) increase food security and; (iii) improve natural resource management. The main objectives were: (a) intensification of production and natural resource management, by providing an adequate regulatory framework to improve the land tenure systems and provide security for the small farmers on their land, (b) liberalization of trade (external and domestic) and prices of agricultural products, including traditional cereals, rice, oil seeds, wheat, fruits, vegetable, livestock, cotton and sugar; (c) reorganization of the sector institutional environment, including (i) the redesign of public institutions involved in rural development and food security, at central and local levels, (ii) restructuring or privatization of inefficient parastatals, and (iii) clarification of administrative and financial relations between the State and key agro-industries (performance contracts with the cotton and sugar companies); (d) improvement of public financial management, focused on the preparation of the public investment program (PIP) and operating budgets, to (i) improve the consistency of investments and projects with sector strategy and policies, (ii) anticipate macroeconomic consequences of recurrent costs, and (iii) avoid classical donor driven approach; and (e) improvement of food security by (i) reducing the role of the State Cereal Marketing Board (OFNACER) in controlling and regulating the grain market, and (ii) setting up an efficient early warning and market information system. 4. The design of this first AG. SECAL was based on the LPDA. It was the result of a very participatory preparation process which lasted almost two years under the leadership of the Ministry of Agriculture and Animal Resources (MARA). Preparation involved all relevant ministries and public institutions, along with representatives of the civil society. The design of AG. SECAL I was fully in line with the Country Assistance Strategy and the Policy Framework Paper developed in close collaboration with the Burkinabe authorities. The matrix annexed to the LPDA included 50 measures to be implemented within the period of the program. These measures were selected from the proposals and recommendations of ten working groups (one group for each key sub-sector and four groups on common issues). 2. Evaluation of Objectives 5. Burkina emerged only recently from a state-controlled regime and came relatively late to the adjustment process. Consequently it was felt necessary to tackle all key issues at the same time, including the creation of an enabling environment for the private sector and the individual farmers, land  3 tenure security, liberalization of prices and trade, better access to technology and production factors, and streamlining the role of state (restructuring of public institutions, privatization). In general, the objectives, measures and conditions of tranche release of the Credit were clearly set out and the 50 measures of the matrix are consistent with the five broad objectives and cover most of the key aspects of the sector strategy. 6. However, given the little experience that Burkina had with the adjustment process, the program may appear today as having been over-ambitious. While important progress could be achieved in key areas and essential reforms were carried out, the performance of the program as a whole weakens when comparing achievements to the whole set of objectives. This is especially the case for implementation of the 50 measures of the matrix some of which needed more time or had to be postponed. Generally, these measures included complex reforms which required a longer timeframe, strong and continuous commitment of the civil service (combination of legal, regulatory, administrative and financial aspects), and also involved the participation of relevant private operators. On the other, hand the conditionalities for second and third tranche release could have been more focused and less dependent on assessments to be made of satisfactory implementation of action plans. Furthermore, some key aspects could have been more developed in the preparation of the LPDA such as: (i) water and irrigation policies, in relation with natural resource management; (ii) social and poverty issues, including their impact on living standards and nutrition status; (iii) improvement of human resource management within the civil service, to reduce tum-over, develop training and improve incentives; (iv) organizational arrangements of the adjustment process, to ensure better coordination among the institutions involved; and (v) building up of socio-economic indicators, conceming inter alia the impact on competitiveness of key sub-sectors and farmers revenues. C. Achievement of Program Objectives 7. As discussed below, the objectives of AG. SECAL I have been partially achieved. Progress has been substantial in trade and price liberalization, tariff reform, strengthening of cotton and sugar sub-sectors, livestock, and food security. Substantial delays have been observed for other key reforms including land laws, reorganization of MARA, privatization, and improvement of public financial management. 1. Intensification and management of natural resources 8. Main actions under the program included the adoption of an improved land use system which would secure individual farmers' tenure rights and expand community-based land management. This system would enhance farmers' long-term economic strategies, on-farm investments devoted to improve soil fertility, plantations and private irrigation. Measures included: (i) evaluation of the impact of the former land law; (ii) evaluation of experiences of community land management under the National Program for Village Land Use (PNGT); and (iii) enactment of a revised land law on the basis of the findings of above evaluations (to be completed not later than 1994). 9. The evaluation process has been partial and of little input in the preparation of the new land law. The draft law, which has been substantially delayed, has been presented to the national Parliament in October 1995 and is currently under discussion in a specialized commission. At its present stage, the draft version includes several provisions which would allow individual farmers to obtain official titles and providing sufficient security on their land. However, it appears that it may not be sufficiently  4 flexible and pragmatic to allow for operational mechanisms that would facilitate community-based land management. Closer attention should be paid to the feasibility of these arrangements and the operationality of implementing specific regulations and decrees with respect to traditional practices and customs. 2. Trade and Price Liberalization ,0 Tradle and Tanff reform. All export taxes were eliminated prior to credit effectiveness. With the exception of rice and sugar, import monopolies were also eliminated. For rice and sugar, a specific import tariff study was completed in May 1992. Consequently, the Government abolished the 50 lrer2cnt Transitional Import Tax (TCI) for both commodities. The tariff rate of rice was set at level I 1 I percent). The tariff for sugar was set in the context of SOSUCO's performance contract, on a (leclinling basis in order to reduce protection from 110 percent in 1992 to 25 percent in 1998. The current tariff rate for sugar is at level m (37 percent plus 15 percent VAT). However, to a great extent, the study was rendered obsolete by the CFA franc devaluation and had to be reviewed. As a result, a riew tariff study was completed in September 1995 which proposes a new protection policy for a-ricultural commodities and inputs. Its findings, which have been reviewed by the Government and a iont donor mission in November 1995, should lead to set new adequate tariffs for cereals, sugar and a.,ncultural inputs, consistent with the General Agreement on Tariffs and Trade (GATT) and West African Economic and Monetary Union (UEMOA) agreements. However, the Government protection policy remains sensitive to internal political pressure and vested interests as demonstrated by the export ban on hides and skins introduced by the Government in mid-1995 to provide a protected market to a local transformation industry. This controversial measure is now being discussed in the context of a tfI0ow up adjustment operation. 1I. Triaditional cereals. The reforms were all undertaken before credit effectiveness. nley included: (i) eliminating all attempts of price administration and market control; (ii) liberalizing trade; and (iii) permitting the free movement of cereals between provinces. Exports and imports of coarse m'rains no longer require prior authorization. These measures led to a significant increase in private sector trading activities and improved the availability of cereals in the zones of chronic deficit in the northern part of the country. 1_. R'ice sub-sector Domestic trade in rice has been liberalized and traders are free to obtain supply of nrce at the wholesale stage, without approval of the Ministry of Commnerce. However, the Covernment did not achieve any other significant reform in the liberalization of the sub-sector. tIthough the milling company (SONACOR) has no longer the obligation to purchase all paddy, it still retains a "de facto" monopoly for paddy collection and processing, and administers the paddy price iricludinig a transport equalization system (p&r6quation). The Caisse Generale de Perequation (CGP) sill retains an import monopoly (the elimination of import monopoly was not included in the AG. SECAL 1) and sets the wholesale price of rice also including a pgr6quation system. Under the pre- e-valuation pnrce structure, SONACOR's activities had to be subsidized through the substantial nmargins that CGP retained from rice imports. The devaluation of the CFA franc on January 12, 1994, enabled CGP to remove all subsidies for the processing of local paddy and to increase substantially the p!rice of rice which made subsidies superfluous. The rice sector has remained very much in state hands .i'h. the consequence of increasing transaction costs and preventing the emergence of private local i:Uinr iact'vities. However, it is to be noted that with the exception of the privatization of SONACOR,  5 which the Government failed to carry out, no other specific measures for the liberalization of the sub- sector were included as tranche release conditions in program design. Liberalization of the sectoi may have benefited from a better description of rice related measures as tranche conditionalities. HoweveC.. it appears that the Government was not ready to address the issue of rice liberalization in the pre- devaluation period, given the substantial margins generated by CGP. This has now changed and a partial liberalization of the sector (one third of imports) has been implemented on January 1, 1996 13. Livestock sub-sector. Export taxes and non-tariff barriers to exports have been eliminated. along with all trade restrictions. This led to a considerable improvement in the competitiveness of the sub-sector and its capacity to respond quickly to market signals. After the CFA franc devaluation exports of livestock (mainly to Ghana and C6te d'lvoire) picked up by 50 percent in 1994. Provision of veternary services is now increasingly performed by private veterinarians and private distribution of animal drugs is developing. However, liberalization of drug distribution could lead to the introducuon of poor quality products and, thus, needs better quality control systems. 14. Cotton and oil seeds. The Stabilization and Equalization Board (CSPPA) was involved in the stabilization of prices of cotton and oilseeds (shea butter, sesame and groundnuts). In January 1992, the cotton stabilization function was transferred from CSPPA to SOFITEX (the mixed capital cotton company). For shea butter, karit6, and sesame, CSPPA purchased the products from traders or directli' from the producers at predetermined prices and also retained an export monopoly. The export monopoly and the stabilization function for oil seeds were abolished prior to credit effectiveness, producer prices are no longer predetermined, domestic trade is free, and exports no longer require a permit. However, the Govemment failed to address the issue of the privatization of CSPPA (see pal a 22)_ 15. Sugar. The sugar import monopoly, previously entrusted to CGP was transferred to SOSUCO (the State majority-owned sugar company in Burkina), to improve the management of sugar stocks and import requirements. SOSUCO maintains a wholesale pan-territorial price through a transport equalization system. The sugar trade and marketing system remains inefficient. It fails to ensure a uniform distribution over the whole country and encourages fraud because of the high tariff on sugar imports which render official imports unprofitable at the domestic "equalized" price. The program was however successful in rehabilitating SOSUCO and improving its performance (see para. 28). 16. Fruits and vegetables. Domestic trade and exports have been liberalized, obstacles to the import of packaging cartons removed, and State intervention considerably reduced (see para. 23) 17. Fertilizers. Trade is liberalized and all fertilizer subsidies have been removed. HIowever, only the cotton sub-sector through SOFITEX provides for an organized distribution system. 'The inport tariff on fertilizers has been reduced from level HI to level I in late 1992. However, the Govcrnrent reestablished a specific subsidy scheme of about 30 percent for fertilizer and pesticides for the campaign 1995/96 in order to reduce the impact of the CFA franc devaluation on fertilizer farmn-gate prices. 'These subsidies would be eliminated for the 1996/97 campaign as it appeared that the benefito of the subsidies were mostly appropriated by traders who embarked on speculative operations.  6 3. Reorganization of the institutional environment (a) Restructuring of public institutions involved in rural development 18. According to the LPDA, the Govemment committed itself to restructure the Ministry of Agriculture and Livestock (MARA) and its decentralized agencies (CRPA's) with a view to: (i) improving provision of agricultural services, (ii) divesting CRPAs from commercial activities to the benefit of the private sector (inputs, marketing of crops, rural infrastructures); and (iii) promoting better professionalism of farmer's associations so that they could assume greater responsibilities in the management of support services to individual farmers. The findings and proposals of a specific study were to be reviewed by the Govemment in mid-1993 and a restructuring action plan was to be prepared as third tranche conditionality. 19. Two initial studies, mostly analytical, were completed by the end of 1993 to (i) review the present situation of MARA and CRPAs; and (ii) assess the farmers' needs in support services. Divergent opinions among key donors conceming the design of agricultural services and the role of farmers' organizations contributed to delays in the implementation of these studies and consequently in the design and programming of the restructuring. Eventually, a three-day national seminar was held in May 1995 to review the above mentioned studies and to define the principles of the institutional reforms, including the role of farmer associations. FAO assisted the Govemment to define the operational setup and detailed programming of the reorganization which would start in 1996. Despite the delays and controversy raised by the reorganization of MARA, it permitted to enlarge the participation of all the actors involved and increased the national understanding of the issues at stake and commitment to the reform. Main features of the restructuring include: (i) privatization of the commercial activities of the regional agencies (CRPAs) and modification of their legal status; (ii) within each regional agency, decentralization of the operational support services to the provincial level, with some administrative and monitoring functions left at the regional level, and (iii) redeployment and departure of staff. 20. Moreover, two Permanent Secretariat, one for Livestock and one for Cereals, were created in 1994, to coordinate and manage development activities in these two subsectors (to be financed by France and the European Union). They were complemented by a number of bodies, Committees, and two Development Funds. While this institutional framework, in particular the creation and the financing of the Funds, is still subject to discussions, it appears too heavy, of dubious sustainability without continuous donor support, and duplicating Ministerial structures. The restructuring of MARA should consider .;treamlining and mainstreaming these setups. (b) Divestiture of the State and Privatization 21 Livestock sub-sector. Operational and financial audits were to be completed during the period 1992-1994 for four public enterprises involved in support services to breeders or meat processing, namely: (i) Office National Veterinaire (ONAVET) in charge of distribution of veterinary drugs; (ii) Centre National Avicole (CNA) in charge of production of chicks and support services to individual chicken breeders, (iii) various slaughter houses and cold stores in several locations of Burkina; and (iv) the parastatal feed-lot of the Comoe. Audits of ONAVET and CNA have been completed and the Government decided to privatize these two agencies. However, privatization failed due to difficulties in finding buyers with the required technical and financial capacity. The Govemment further agreed to  7 start the liquidation of both agencies in December 1995, in line with the last PFP of March 1995. No action has been taken yet concerning the slaughtering houses and cold stores. The feed-lot was transferred to the Ministry of Education and Research. Divestiture from these enterprises, although being part of the Govemment reform program, was not explicitly contemplated under the AG. SECAL. 22. Privatization in the cereals sub-sector. As a condition of release of the second tranche of the Credit, the State should have reduced its participation in the share capital of (i) the rice milling company (SONACOR), and of (ii) the Price Stabilization and Equalization Fund (CSPPA), to a level below 25 percent of the capital. The condition was not met and a waiver was granted in June 1995 to permit the release of the tranche. This was justified by the fact that the Government showed determination in the privatization process (tender had been launched but proved unsuccessful) and, in the context of the PFP of 1995, the Government committed itself to liquidate both entities by June 1996, if privatization efforts failed. Moreover, "de facto", SONACOR is operating along commercial lines since the elimination of CGP subsidies, and CSPPA has been in receivership since more than two years and has stopped most of its activities. Completion of these measures is now underway. The restructuring of the Cereal Marketing Board (OFNACER) was also envisaged under the program. Instead, the Government decided, in agreement with the donors, to liquidate OFNACER in 1994 and created a small agency with a mandate limited to managing the security stock (see paras. 31 and 32). 23. Fnrit and vegetable sub-sector. In 1990, the Union of Vegetable Cooperatives (UCOBAM) was controlling 66 percent of fresh vegetable exports to Europe, mainly green beans. This apex cooperative provides inputs and technical support to the member local cooperatives and purchases their production. The State was deeply involved in UCOBAM management and played a key role in inducing the national banking system to finance the whole cooperative system. However, weak competitiveness and poor management led UCOBAM and local cooperatives to substantial losses and indebtedness. Under AG. SECAL I: (i) operational and financial audits of UCOBAM and main member cooperatives have been achieved, and (ii) the State withdrew from the management of UCOBAM. However, the settlement of financial losses is subject to the acceptance of the restructuring plan and staff reductions by the boards of the various cooperatives. (c) Cotton sub-sector - Performance contract with SOFITEX 24. As planned in the AG. SECAL policy matrix, SOFITEX has been operating under a performance contract (Contrat-Plan) signed with the State since early 1992. The reforms proved crucial in improving the sub-sector response to the new economic conditions created by the CFA franc devaluation of January 1994. The nominal farm-gate price for 1994/95 was increased by about 40 percent to 112 CFAF/Kg (to be noted however that the previous level was among the lowest in the region) and the production of seed cotton moderately recovered to 143,000 tons compared to the record low of 116,000 tons in 1993/94 (the production target of the Contract-Plan was set at 170,000 tons). For 1995/96, the farm gate price was again increased by about 30 percent to 140 CFAF/Kg for an estimated production of 153,000 tons. CSPPA was stripped of its stabilization role while providing SOFITEX with increased management autonomy; this proved beneficial to the functioning of the sub- sector. The restructuring efforts combined with the CFA franc devaluation and the increase of the world market prices since early 1994, permitted to completely recover the financial situation of SOFITEX and the company has started generating profits since the 1994/95 campaign.  8 25. However, much progress remains to be achieved to improve the institutional and organizational set-up of the cotton sector, promote supply response, stimulate growth, settle the financial situation of the farmers' associations, improve the performance of SOFlTEX and consolidate its financial situation. In particular, although a new and more effective two-stage payment was introduced, the Contract-Plan failed to effectively link producer prices to the world market, this would have permitted a better remuneration of the producers as a result of the windfall benefits deriving from the CFA franc devaluation and higher world market prices. Performance of the sub-sector was largely below the objectives and indicators defined in the Contract-Plan, with no visible consequences on SOFITEX management or changes in policies. Moreover, the autonomous body, including farmers' representatives, meant to decide on prices and redistribution of benefits, was not established. Overall, although the Contract-Plan permitted to define an operational framework tor the functioning of the sub- sector, it largely failed to improve its performance and the efficiency of SOFfTEX. It also induced rigidities when changes appeared necessary after the CFA franc devaluation. In this respect a controversial amendment to the Contract-Plan was signed one and a half year after the devaluation mainly to secure SOFITEX's financial situation at the expense of a better incentive structure for the producers. 26. A number of issues remains to be addressed which the Contract-Plan seems to be unable to tackle. This involves various measures now being contemplated under a second AG. SECAL including: (i) clarification of the fiscal situation of SOFITEX and settlement of cross debts with the State; (ii) elimination of fertilizer subsidies in relation with the setting of a better pricing policy with links to the world market; (iii) better participation of farmers associations in the decision making process, with particular focus on the pricing and stabilization policy; (iv) improvement of SOFITEX management and policies especially for transportation, marketing of cotton fiber, procurement rmiethods, decentralization towards the factories; and (v) support program in favor of the farmers' associations. (d) Sugar sub-sector. Performance contract with SOSUCO 27. Given the deep financial distress affecting SOSUCO by the beginning of the 1990s, it was decided under the program to rehabilitate the company. With support from the Caisse Franqaise de Developpement (CFD), a detailed rehabilitation program of SOSUCO was prepared in Apnrl 1991 and led to the signature of a Contract-Plan with the State covering the period 1992/93 to 1997/98. 28. The ongoing rehabilitation process includes: (i) SOSUCO's share capital restructuring; (ii) medium-term investment program in order to improve productivity; (iii) reductions of staff, and (iv) improvement of technical and financial management. The Contract-Plan: (i) guarantees SOSUCO's managerial autonomy; (ii) sets the economic environment of the sugar sub-sector; and (iii) defines the fiscal and financial relations between SOSUCO and the State. SOSUCO's restructuring program permitted to a great extent to rehabilitate the company. Its efficiency and financial situation considerably improved (also as a result of the CFA franc devaluation) so that it can face better privatization prospects. SOSUCO is now in the list of companies slated for privatization which has been voted by the Parliament in June 1994. However, the Contract-Plan also .introduced a number of rigidities in the trade and marketing arrangement which may prove detrimental to the liberalization efforts of the sub-sector (import monopoly, transport equalization).  9 4. Improvement of public financial management. 29. About 40 percent of public investment in Burkina Faso goes to the rural sector, of which more than 90 percent is financed by external sources, which also finance much of the operating costs through projects. The objectives of the program have been to (i) improve the selection of public investments and projects to ensure consistency with sector strategy and policies; (ii) anticipate the impact of induced recurrent costs on future State operating budgets; (iii) ensure medium-term macroeconomic consistency; and (iv) reinforce the role of the Government so as to avoid donor driven allocation of investments and funds. Under SAC 1, the LUNDP and the Bank assisted the Government im establishing a three-year rolling Public Investment Program (PIP) and improving its monitoring by strengthening a Project Management Data Bank (BIP) in the Ministry of Finance. Moreover, the Bank is financing a Public Institutional Development project (PID) launched in 1992 which supports the Govemment in the implementation of the budgetary and fiscal reform. AG. SECAL I did not introduce new reforms but supported and helped monitoring the improvement of public finance for the agricultural sector. 30. Improvements in this area have been only marginal. Although several unsustainable projects have been eliminated from the project portfolio, the PIP is still not a planning tool, but rather a listing of projects by donors. Lack of consistency remain between the PIP, the annual investment budget and the data base of the various ministries involved in rural development (mainly the Ministry of Finances, MARA, the Ministry of Water and Environment and the Ministry of Commerce). In general, these data bases are not updated on time and are not sufficiently comprehensive. Furthermore, no estimation of recurrent expenditures included in the PIP is currently available, and data concerning the public payroll are not consistent with the census of the civil service which has been concluded recently. In addition, expenditures data of line ministries involved in rural development cannot be reconciled with those of the Ministry of Finance. The reform process will have therefore to be continued and reinforced and will only progress if there is a clear commitment from the Government to move away from a donor driven piecemeal approach towards a more coordinated and coherent approach in support to national priority programs. 5. Food security 31. The National Cereals Plan which was designed in 1986-87 defines the key policies for the cereal sub-sector. It provides for measures to inter alia: (i) develop the local production, processing and marketing of traditional cereals; (ii) develop and intensify the production of maize for which Burkina has a comparative advantage; (iii) facilitate the private trade of cereals between surplus and deficit regions; (iv) improve the management of food aid; and (v) create an institutional framework for the management of cereal policy and food security. The two main measures included in the adjustment program were the streamlining of the Cereals Marketing Board (OFNACER) and the establishment of efficient market information and early waming systems. 32. OFNACIER. Under the AG SECAL, the Government was to sign a performance contract with OFNACER, reducing its role to the management of: (i) a reduced food security stock; and (ii) the market information system. In view of the accelerated liberalization of the cereal market and serious mismanagement of OFNACER, the Government decided to liquidate it, rather than restructure it. The liquidation process was initiated in June 1994 and is being completed. A new agency, the  10 SONAGESS, has been created recently with the sole mandate of managing a reduced food security stock not to exceed 35,000 tons. SONAGESS status and performance contract are still to be set and the financing of the operating budget is being sought (likely to be financed by the European Union on a declining basis). During the transitional period, the security stock is being managed by the local branch of World Food Program (WFP). Moreover, the National Committee for emergency relief (CONASUR) has been created in 1993 to coordinate emergency food relief programs, and the Statistic Department under MARA was strengthened to manage the market information and early warning system, and is considered to perform correctly. D. Major factors affecting the program 33. Political transition. In the context of the first presidential and legislative elections which took place in the period 1991-1993, several changes of Government led to some discontinuity and losses of institutional memory in the preparation and implementation of AG. SECAL I. After 1993, the intersectoral teams which had participated in the preparation of the AG. SECAL were to a great extent disseminated among various institutions and many of them were longer involved in the implementation of the reforms. Furthermore, the situation in Burkina is characterized by: (i) a dominant attitude at the middle level of the Administration in favor of a State-controlled economy; (ii) opposition of civil servants' unions to reforms linked to the privatization and retrenchment of workers in the public sector; and (iii) weakness of the private sector in agriculture, and lack of influential professional or consumer pressure groups and lobbies to push in favor of these reforms. As a result, following a rather dynamic preparation process of the AG. SECAL in 1990 and 1991 and the initiation of the reforms until credit effectiveness, the implementation of most of the measures addressing the divestiture of the State from economic and commercial activities stalled or have been delayed. 34. Devaluation of the CFA franc. Prior to the devaluation, Burkina, which is highly dependent on the economic situation of its francophone neighbors, had been adversely affected by the intemal adjustment policies implemented in the whole CFA zone. In this context, effective demand for Burkina's exports weakened over time (livestock and meat especially) because of loss of competitiveness, and remittances of the 3 million emigrated Burkinabe workers (mostly in the CFA zone) fell significantly. The devaluation of the CFA franc of January 1994 completely reversed the situation and had a major positive impact on the sector adjustment program. Competitiveness and profitability of various sub-sectors have been restored and exports boosted (cotton, livestock, and with less emphasis, fruits and vegetable), which facilitated the recovery of the financial situation of several key economic agents, such as SOFITEX. Furthermore, better opportunities for import substitution (rice, sugar) has facilitated the tariff reform. 35. World market prices. Credit effectiveness of AG. SECAL I coincided with (i) an upward change of trend of the international prices of a number of agricultural commodities, especially cotton; and (ii) the decrease of food stocks and subsidized exports from the European Union and the USA, which led to higher pnrces of imported meat and cereals. Adequate real exchange rate and attractive world market prices have been very positive factors for the reforms, by increasing the added value to be shared between the economic agents of the agricultural sector. 36. Controversies among key donors. In the field of restructuring of public institutions, the Bank on one side and the European Union, France and Switzerland on the other, have had divergent views on the design of the restructuring of Agricultural Services, especially conceming the respective roles and  11 weight of State and farmer associations in the generation and transfer of agricultural technology. Disagreement on the nature and scope of a study on farmers' needs led to increased delays in the definition of an action plan for the restructuring of MARA and CRPAs. Finally, the national workshop of May 1995 allowed the Govemment to set a balanced policy: (i) confirming the leadership of restructured public services in technology transfer, and (ii) including a comprehensive support program in favor of farmer associations which would progressively take over responsibilities in the provision of support services. The detailed studies for the restructuring of MARA and CRPAs, which were launched after the national workshop, were completed in December 1995. E. Program sustainability 37. Sustainability can only be assessed for those reforms which were fully achieved. Full completion of the reform agenda however requires further support and needs to maintain: (i) stable political and social conditions; (ii) competitive exchange rates and stable macroeconomic conditions; and (iii) strong commitment from the Govemment. Tentative assessment of sustainability of reforms is presented below, in a medium-term perspective. Overall, although much remains to be done in the area of public enterprises and public administration reform, the direction of adjustment defined by this operation has not been challenged and the Government is actually in favor of deepening the reform agenda under a second operation. 38. Liberalization of trade and tariff reforms (with the exception of rice, sugar and wheat/flour) have been substantially achieved and are likely to be sustainable as the Government could already reap the benefits in terms of better food security for traditional cereals, private sector development for oilseeds, and increased exports for livestock. The CFA franc devaluation and regional integration will probably help to maintain an adequate protection policy and reasonable tariff levels. 39. To date, privatization in agriculture has been mostly unsuccessful for the following reasons: (i) most of the entities to be privatized were not profitable or with huge liabilities; (ii) real private entrepreneurs with sufficient know-how and financial capability appear to be very few; (iii) some privatization were only made possible by providing special privileges and conditions to the private sector, sometirne providing for a "de facto" monopoly, increasing distortions in the economy to the detriment of th- consumer. Liquidation might have been in some cases the best option, but has proven difficult to pursue under persistent political resistance. An alternative scenario could be to ensure that these companies intervene along purely commercial lines on a leveled field in competition with small- scale private entrepreneurs. However, in some cases the Burkinabe market is only large enough to permit oligopolistic ventures at best. The liquidation of OFNACER was a positive development in the liberalization of the cereal sector. The comparative advantage of traditional cereals such as sorghum and maize, and the considerable improvements to cereals marketing will likely prove sustainable in the medium to long term. On the other hand, the new institutional framework in charge of food security is complex, sometimes redundant and still relies on foreign aid from multiple donors. 40. Rehabilitation and restoration of competitiveness of the cotton and sugar sub-sector have been substantially achieved through the performance contracts and will be likely completed during AG. SECAL II. Cotton enjoys a natural comparative advantage in Burkina and the subsector is well organized and likely to be sustainable. However, SOFITEX presently suffers from a declining credibility in farmers' eyes which has translated into a disappointing supply response after the CFA franc devaluation. Further measures are required to consolidate performance and sustainability (see  12 para. 26). For sugar, sustainabilty of the sub-sector will depend on the appropriate management of the level of tariff piotection incldding Lhe possibility of shielding the domestic market against excessive volatility of the intemational market, which is characterized by dumping from developed countries. Sustainability of exports of fruit and veRetables to Europe by the cooperative system still seems uncertain in the highly competitive intemational environment. It would require more involvement of professional private foreign and local investors and a reduction in air transport costs. 41. More efficient management of public finance and investment planning is a basic condition for sustainable development of the agnrcultural sector. Continued Government and donors' commitment is necessary to agree on a medium-term framework for a more coordinated approach to public financing. F. Bank performance 42. Overall, the Bank performance has been satisfactory. Identification took place in June 1989 Mithin the framework of the preparation of SAC 1. Policy dialogue between the Borrower, the Bank and other key donors continued throughout the preparation of AG. SECAL I. Preparation, which was comprehensive and participatory, involved most of the institutions and actors concerned by the implementation of the adjustment program. All aspects of the program were discussed in detail and the Bank gave full and satisfactory support to the preparation process. The period from identification thiough appraisal was therefore time consuming (128 staff weeks). In addition, the Bank gave helpful advice and support in fulfilling the conditions of credit effectiveness. 43 Generally, supervision has been sufficiently initensive (65 staff weeks for two and a half years period) and contributed efficiently to address important issues such as the tariff reform, reorganization of the cotton sub-sector and the liquidation of OFNACER. Dialogue and coordination with other key donors was continuous and positive, as several joint missions took place throughout the implementation period. However, divergence of views in the field of the reorganization of MARA and the design of research and extension programs contributed to some delays in the effective implementation of two conditions for second and third tranche release. In addition, the reorganization of the Africa Region in the second half of 1994 and the tesulting staff changes led to a period of uncertainty until a joint supervision mission took place in March 1995 which helped solving the remaining issues for the release of the second and third tranches of the Credit, which eventually took place in June 1995. G. Borrower performance 44. During preparation of AG. SECAL 1, Borrower's performance was highly satisfactory despite changes of Government and preparation tearns. The preparation process was comprehensive and participatory; the results of the various working groups involved were very valuable and consistent with the overall adjustment strategy. Most proposals from these groups were used as the basis of the LPDA and for the design of the agnrculture sector adj ustment program. 45. As far as implementation is concemed, Borrower's performance was deficient. In general, high ranking authorities in the Govemment, especialiy in the Ministry of Finance, had strong commitment to the completion of reforms and fulfillment of measures of the policy matrix, including many that were not supported by a corresponding conditionality. However, various shortcomings and constraints led to important delays. One issue has been the insufficient information, planning and coordination between the various ministries involved (AG. SECAL has been generally more perceived  13 as a classical investment project, which falls under the responsibility of the NMinistry of Agriculture and Livestock, than a reform program of the whole agricultural sector with ramifications in the whole economy). Main reasons for this situation have been the (i) inactivity of the Interministerial Steering Committee; and (ii) relative weakness and isolation of the AG. SECAL, Coordination Unit in MARA, whose staffing and logistics did not receive the adequate support. Moreover, the chlanging political environment led to quick succession of ministers in several key sectors, including Agriculture and Livestock, which hindered the dialogue process and complicated the implementation of reforms. 46. Another issue is related to the privatization process initiated under SAC I and supported by a Privatization Support Program. Most technical mninlstries and institutions to be privatized did not bring enough support and commitment to privatization because they were not properly informed and felt excluded from the process. In the field of restructuring of MARA and CRPAs, the Government took a rather long time to set clear policy objectives anid principles conceming the role of the farmers organizations, the content of public services to agriculture and an adequate level of decentralization. However, this has permitted to increase the commitment of all stakeholders anid is likely to render the process irreversible. H. Assessment of outcome 47. Based on the Bank's ex-post evaluation norms, AG. SECAL I can be considered as overall satisfactory. This assessment is based on the fact that the program has achieved substantial progress for the main objectives such as the liberalization of trade, tariff reform, the studies concerning the restructuring of MARA and CRPAs, and food security However, much of these achievements have been obtained with delays and implementation of other objectives were constrained. Full completion and sustainability of most reforms is likely but conditioned bv the rnaintenance of continued political commitment, an adequate macroeconomic environment and medium-term support for the completion of the adjustment agenda of the sector. L. Future operations 48. The reform agenda in the agricultural sector is clearly not finished in Burkina. Reforms need to be deepened and consolidated under a second operation currently under preparation, which will focus on elirrminating remaining barriers in rice, sugar and cotton, and stimulating supply response. It will also support implementation of the restructuring of MARA and CRPAs and complete the privatization of state enterprises in the sector, along with the improvement of the management of public finances and in particular the public investment program. A folbiow up sector adjustment operation should be complemented by a well targeted investment prograrn to restore growth and enhance the impact of the adjustment process. A second agriculturatl services and research project under preparation will accompany the structural reforms of MARA and improve the delivery of public services. A private irrrigation project is also under preparation to increase the production and the added value of crops by promoting and financing private investrrments for irrigation equipmnent, processing, and marketing. J. Key lessons learned 49. Democratization an(d seclGr adjnstmenf. Ongcing dernocratization processes imply a larger involvement of the civil society and national Parham&mts in the debate leading to important policy decisions. This entails more complex and tirne consum irg d& - ussions so to broaden the platform of  14 understanding, but will often lead to delays in the preparation of the programs and in the implementation of the reforms. Greater participation of the people's representation is a very positive factor to ensure better sustainability of these reforms, provided that the interests of the different actors involved in the reform are sufficiently and correctly dealt with. Organizational arrangements of future adjustment programs should therefore include appropriate participatory processes (involving the Parliament, the civil society and relevant economic operators, including farmers' organizations), adequate monitonrng arrangements and more flexible planning. 50. Role offarmer organizations. Some reforms included in the adjustment program may have a short term negative impact on the condition of (i) the urban economic agents, who will have to pay more for their food consumption because of relative increase of agricultural prices; and (ii) the civil servants which fear losses of power and reductions of staff. To balance the likely resistance to reform by political pressure of urban workers' unions and urban elite, the adjustment programs should support the development of strong farmers' organizations, at local, regional and national levels and broaden the basis of ownership of the reform program through appropriate information, education and communications (IEC) methods. These organizations should progressively become key participants in the preparation, implementation and monitoring of the reform program and be represented in important meetings and structures. 51. Contract Plans (cotton and sugar) between a State-company and the State should have permitted a better definition of the contractual obligations of the two parties and provided for a framework of actions in the context of increased autonomy. In practice: (i) they did not prevent State interference; (ii) they proved difficult to amend and therefore introduced rigidities when changes appeared necessary; and (iii) performance objectives over a five year period quickly became obsolete and irrelevant. 52. Privatization. Under SAC I and AG. SECAL 1, most privatizations in the agricultural sector have had mediocre results for three main reasons: (i) insufficient restructuring prior to privatization which led to technically unviable and poorly profitable entities; (ii) weak competition among potential buyers due to a limited number of entrepreneurs, and (iii) lack of communication and involvement of the technical ministries and of the entities to be privatized. For future operations (i) the nature and capacity of the private sector should be better known through specific economic and sociological studies; (ii) alternatives to immediate privatization could be considered when public enterprises can be efficiently put in competition with active private and/or informal sector, so as to prevent the creation of private monopolies; and (iii) preparation and programming of each privatization should be improved by preliminary studies along with adequate participation and communication. 53 Coordination and monitoring. The reform program involved ten ministries, various parastatals and many actors of the civil society. To maintain a dynamic reform process in this complex environment, and ensure adequate monitoring and policy analysis capabilities, the AG. SECAL Management Unit should be recognized by all participant ministries, public institutions and stakeholders. Such entity should therefore be: (i) located at a sufficiently high level within an institution with sufficient leadership, and (ii) provided with high-level staffing and adequate logistical support.  15 IMPLEMENTATION COMPLETION REPORT BURKINA FASO AGRICULTURE SECTOR ADJUSTMENT CREDIT (CR. 2381 - BUR) PART II: STATISTICAL ANNEXES Table 1: Summary of Assessments A. Achievement of Objectives Substantial Partial Negligible Not applicable (/) (/) ~~~(V') (a/ Macro Policies Ea Sector Policies fl 0 0 Financial Objectives Institutional Development E0 Physical Objectives a a U3 Poverty Reduction U U a Gender Issues E] Other Social Objectives a a El Environmental Objectives 0 Public Sector Management U 0C Private Sector Development U El a Trade and tariff reform 0O  16 Table 1: Summary of Assessments (Continued) B. Project Sustainability Likely Unlikely Uncertain (v') (V) (/) Highly C. Bank Performance satisfactory Satisfactorv Deficient (O) (V) (1) Identification J IA U Preparation Assistance Q Appraisal El El Supervision E I? E Highly D. Borrower Performance satisfactory Satisfactorv Deficient (V) (1) (i) Preparation E El Implementation E E E3 Covenant Compliance E IA E Operation (if applicable) E E E Highly Highly E. Assessment of Outcome satisfactory Satisfactory Unsatisfactory unsatisfactor El) () El) El  17 Table 2: Related Bank Credits LoanlCredit title Purpose Year of Status _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ___ approval Preceding and on RoinM operations . 1 Fertilizer Credit The project seeks to improve fertilizer policies and the structure 1985 Project of fertilizer use by removing subsidies and other distortions, completed. identifying and providing better and cheaper fertilizers and Credit closed. eliminating supply inadequacies . 2. Agricultural This long term Program seeks to strengthen the capacity of 1988 Credit to be Research national agricultural research, improve the linkages betveen closed in 1996. individual research programs, and strengthen research- Follow-up extension links. under preparation 3. Agricultural Services This long term Program seeks to improve the effectiveness and 1989 Project to be impact of agricultural and livestock extension services in completed in transferring technology to farmers, to strengthen animal health 1996. Follow- services and adaptive research programs, and to provide up under functional literacy to farmers preparation 4. Environmental The Project seeks, by involving the local communities, to stop 1991 Project to be Management and reverse the process of natural resources degradation in completed in order to secure sustainable agricultural growth, to restore 1998. _ _________________ biodiversity, and to protect the wildlife and forests. 5. Food Security The Project seeks to strengthen existing food security 1992 Project to be institutions and support the creation of a national focal point completed in for the analysis of the cereal policy, to improve the market 1999. information and early warning systems for cereals, and to increase the purchasing power and the nutritional status of the rural poor. 6. Community-based The Project seeks to improve the conservation of wildlife and 1995 GEF financing. Wildlife Conservation biodiversitv, along with the quality of rural life, by involving Project on- and Management the local communities in the design, development and going. management of related activities as safari hunting and eco- tourism. Under preparation 1. Second Ag. Sector Consolidate and deepen the reforms initiated under the first Appraisal in Adjustment credit 1996 2. Agricultural Services Support the restructuring of MARA and improve the delivery Appraisal in __ ___ _ ______ of agricultural services and research 1996 3- Private Irrigation and The Project will seek to increase the production and the added Appraisal in Agroprocessing value of crops by promoting and financing private investments 1996 for irrigation equipment, processing, marketing, and strengthening of producer groups.  18 Table 3: Project Timetable Steps in Project Cycle Date Planned (1) Date Actual/ Latest Estimate Initiating memorandum October 1991 Appraisal November 1991 Negotiations March 1992 April 1992 Letter of Development Policy May 1992 May 1992 Board Presentation July 1992 June 9, 1992 Signing October 1992 October 6, 1992 Effectiveness December 1992 August 31, 1993 First Tranche Release December 1992 August 31, 1993 Second Tranche Release December 1993 June 30, 1995 Third Tranche Release December 1994 June 30, 1995 Project Completion December 1994 November 1995 Loan Closing December 1994 December 31, 1995 (1) As provided in the Report and Recommendation of the President of IDA to the Executive Directors, dated May 12, 1992. Table 4: Credit Disbursements: Cumulative Estimated and Actual (US$ thousands) l _____________________ FY93 FY94 FY95 FY96 Appraisal Estimate 10,000 10,000 8,000 Cumulative 10,000 20,000 28,000 Actual 9,609 673 19,299 Cumulative 9,609 10,282 29,581 Actual as % of Estimate - 0 48% 37% 106% Cumulative Date of Final Disbursement December 13, 1995 Table 5: Key Indicators for Project Implementation No Implementation Indicators were included in the President 's Report.  19 Table 6: Studies Included in Project Purpose as Defined Study at AppraisalURedefined Status Impact of Study 1. Community Evaluation of the experience Issued in January Conclusions and management of and lesson of experience in 1995 recommendations have only natural resources Burkina Faso (PNGT) partially been taken into account in the new version of the land tenure legislation under discussion in the Parliament 2. Tariffs reform and In the context of internal Issued in May Partly implemented but was trade liberalization adjustment (before the CFA 1992 rendered obsolete after the CFA (rice and sugar sub franc devaluation), propose franc devaluation and had to sectors) relevant level of protection for be updated rice and sugar along with liberalization of domestic trade 3. Tariffs reform and Updating of the above Issued in May Several scenarios have been trade liberalization mentioned study to take into 1995 analyzed. On the basis of this (rice, sugar. and account the effects of the CFA study, and following the joint agricultural inputs) franc devaluation donor mission of November 1995, the Government will (i) enforce adequate tariffs as of early 1996, and (ii) continue with the trade liberalization 4. Privatization of Operational audit, assessment A local competitive bidding SONACOR (Rice of assets and profitability. was launched since early 1995. mill) Proposals for the privatization Submissions are being process evaluated. 5. Privatization of Operational audit, assessment Study completed in Privatization not feasible. CSPPA (export of of assets and profitability. 1993 Liquidation should be cash crops other than Proposals for the privatization considered. cotton and process stabilization board) 6. Reorganization of Coordinate and rationalize the Draft first set of Main feature include the public services activities of ministries and analytical studies streamlining of mandate, agencies whose activities have issued in 1993. decentralization of operational a significant impact on Indicative action activities at provincial level, agriculture plan in April 1995. transfer of commercial Detailed action activities to the private sector, plan to be issued in and redeployment of personnel June 1996  20 Table 7: Project Financing (Foreign costs in equivalent US$ million) Source ___ Appraisal Estimate Actual/Latest Estimate IDA 28 30 ELlropean Uiniori 20 30 French Aid 21 17 Affican Development Bank 13 _ TOTAL 82 77 Iable 8: Status of Legal Covenants Credit Present Description of Covenant F Comments Agrernent Status Sectionl Scin____ _.____ _ ____ ______l_ 3.01 (a) C The Borrower and IDA shall. from timiie to time, at the request of either party, exchange views on the progress achieved in carrying out the programn 3.01 (b) C Prlor to such exchanges, the Borrower shall furnish to 11)A for its review a report on the progress achieved in carrying out itie progiam in such detail as IDA shall reasonably requcst 3.02 C.) Except as IDA shali otherwise agree. procuremenlt of the goods shall be governed bv the provision of the schedule _ ____ _ _ _ _ 2 of this. agreeent_ ___ _ _ 3 03 (a) C The Borrower shall inaintain or cause to maintain, in accordance with consistently maintained sound accounting practicis. the expenditures financed out of the ..._.-_proceeds of the Credit _. i.03 (b) CD The Borrower shall have such records and accounts, including those for the Special Account, for each Year audited by imdependent auditors, The Borrower shall furniish to IDA. not later than 6 months after the end of each F"'Y. a certified copy of such audit by said auditors, as iDA shall have requested. _____ 3.03 (c) CD For all expendituires made on the basis of SOEs, the Borrower shall (i) maintain records and accounts of such expenditures; (ii) retain all records evidencing such expenditures at least one year after IDA has received the audit for FY in which the last Va ithdrawal was made; (iii) enable IDA to examine such records: and (iv) ensure thai said accoun.s and rccords be inudited on a semiannual basis by said auditors, who shall prepare audit reports accordingly andfiurnish tl-nm to IDA, not later thani 3 inonths ahecr tlle cnid. of suEch semianirlual audit period, ______________________ along witth an opinion of reliability of SOEs _  21 Table 8: Status of Legal Covenants (Continued) Credit Present Conditions of Release of Second Tranche Comments Agreement Status Section S4 A. I C The Borrower has reviewed the findings of the rice and sugar import tariffs and, in the light thereof. introduced modifications, acceptable to the Association, to existing tariffs applicable to both commodities ___________h S4 A. 2 NC The Borrower has reduced its participation, whether A waiver was granted direct or indirect, in the share capital of SONACOR and the CGovernment and CSPPA to a level which, in either each case, shall agre,d in the context of not exceed 25 % of the capital, subject. however, in the PFP to privatize or the case of CSPPA, to the results of the stud> relating liquidate the two _________ thereto _ companies by June 1996. S4 A.3 C The Borrower and OFNACER have concluded, and With agreement of IDA, started to implernent, a contract plan which shall be the Governimenit acceptable to the Association, including, in particular, liquidated OFNACER an adequate mechanism for monitoring and Dissemination of market disseminating mnarket information information is currertlv being, adequately handled by the Ministiy of Agriculturc and _______.___ Livestock S4 A.4 C The Borrower and SOFITEX have concluded, and started to implement. a contract plan, which shall be acceptable to the Association, including, in particular, an improved scheme for cotton stabilization S4 A.5 C The Borrower has submitted to the Association the A first draft of such findings of a study relating to a proposed redefinition study concerning the of the respective roles of the various ministries, arid Ministry of Agriculture the provincial and other agencics, that intervene in and Livestock was the agricultural sector, and to the proposed circulated in December restructuring thereof - _ 1993.-__ . _ S4 B. I C The Borrower has satisfied the Association that it has not granted any subsidy. whether direct or indirect, to SONACOR during the preceding twelve months' period S4 B.2 (i) C The Borrower has achieved satisfactorv progress in SONAGESS has been the implementation of the contriact pian with created to manage the OFNACER food security stock. Hlowever, this institution does not fully function yet. . _ _ _ _ _ _ _ ___ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ y t  22 Table 8: Status of Legal Covenants (end) Credit Present Conditions of Release of Third Tranche Comments Agreement Status Section S4 B.2 (ii) CP The Borrower has achieved satisfactory progress in The initial Contract Plan the implementation of the contract plan with was implemented SOFITEX satisfactorily. However, the amendment to the Contract Plan, prepared after the CFA franc devaluation, was only signed in September 1995 and has been subject to controversy and criticismn S4 B. 3 CD The Borrower has submitted an action plan. An indicative action plan together with an implementation schedule, and implementation acceptable to the Association, with a view to schedule was sent to the implementing the findings of the study referred to Bank after a national in S4 A.5 workshop in May 1995. A detailed action plan was completed with assistance l ___________ _________ _____________________________________________ of FA O in D ecem ber 1995 Present Status: C =Complied with CD= Complied with after delay CP= Complied with partially NC= Not complied with Table 9: Bank Resources: Staff Inputs Stage of Actual Staff Project Cycle Weeks Through Appraisal 128 Appraisal-Board 15 Supervision 65 Completion 5 TOTAL 208  23 Table 10: Bank Resources: Missions Performance Rating Ntumber Specialized Implemen- Develop- Stage Of Month/ Pr Days in Staff Sldlls tation ment Types of Project Cycle Year ersons Field Represented Status Objectives Problems (I DA) _ _ _ _ _ _ _ _ Preparation mission May 1990 1 12 Agricultural _ _ l Economist Preappraisal May 1991 1 14 Economist _ Appraisal (joint donor November I 20 Economist _ _ mission) 1991 Post Appraisal I September I 10 Economist _ Crisis of the cotton 1992 subsector Post Appraisal 11 November 1 12 Economist _ Deficits of SOFITEX and 1992 OFNACER. Design of reorganization of MARA Pre Effectiveness June 1993 1 10 Economist Liquidation of OFNACER; restructuring of the cotton subsector; reorganization of MARA Pre-Effectiveness (Join, August I 10 Economist 1 I Import tax on agricultural donor mission) 1993 inputs; continuation of CGP monopoly and high rice protection tariffs Supervision I (Joint November I10 Economist I 1 Coordination between donor mission) 1993 various reform programs; divergence of views among donors concerning the reorganization of MARA and the cotton subsector Supervision 11 November 1 5 Economist Follow up of AG. SECAL 1994 1 and identification of AG. SECAL II Supervision III March 3 14 Agricultural s s Delays in privatization of 1995 Economists SONACOR and CSPPA; (joint donor mission) divergence of view concemning the reorganization of MARA, content of the amendment of the Contract Plan between the State and SOFITEX Supervision IV July 1995 I 5 Agricultural Cotton subsector; Economist reorganization of MARA Supervision V (joint November 4 14 Agricultural s s Trade and tariffs reform; donor mission) 1995 Economists cotton subsector; reorganization of MARA; Cotton specialist Public Investment Budget Completion December 1 14 Consultant, Ag. s s 1995 economist  24 IMPLEMENTATION COMPLETION REPORT BURKINA FASO AGRIC'ULTURE SECTOR ADJUSTMENT CREDIT (CR. 2381 - BUR) ANNEX Comments of the Borrower  Conclusion' The first phase of the PASA project has yielded both positive, and less positive, results. Positive results include cooperation between the main donors, which enabled some amount of synergy in their approach and involvement Also to be mentioned is the clarity of the pursued objectives, both in terms of quality and quantity with respect to the central theme: the reduction of the role of the State and the involvement of other actors (private sector, NGOs, etc..) who are more able to make maximum use of resources and therefore obtain maximum income, both at the level of the household and the nationai economy. The following negative aspects have been noted. (a) the difficulty in measuring the exact impact of the PASA, and more so as a result of the CFA franc devaluation which concealed earlier assessmenits and made it more difficult to determine its impact; (b) the poor performance of the privatization programs which suffered greatly from a lack of coordination among the enterprises, the governing ministries, and the National Commission for Privatization; (c) the slowness and inefficiency with regard to the execution of the various liberalization measures, deriving from the compartmentalization between the Ministry of Agriculture, the Ministry of the Economy and the Ministry of Commerce, (d) some inconsistency between donor positions. Thus, although the LPDA's matrix advocates in favor of the creation of the Livestock Development Fund (FODEL) (step 34), this principle was later denounced. In the same way, although the PFP of March 1995 called for liberalization for one-third of rice imports, the joint mission's aide- memoire of November I 995 suggested the total liberalization of rice imports. This page is the translation of Borrower's conclusion of his Implementation Completion Report  MINISTERE DE L'AGRICULTURE BURKINA FASO ET DES RESSOURCES ANIMALES La Patrie ou la Mort. Nous Vaincrons ! ouagadougou. le A V? 1996 N