Ghana - Cocoa Rehabilitation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 16818 IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GHANA COCOA REHABILITATION PROJECT (Credit 1854-GH) June 30, 1997 County Department 10 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 Cedi per US$1.00 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 160 278 341 1 343 368 437 649 957 1200 1596 WEIGHTS AND MEASURES Metric System FISCAL YEAR OF BORROWER January 1 - December 31 ABBREVIATIONS AND ACRONYMS AfDB African Development Bank AgSAC Agricultural Sector Adjustment Credit BADEA Arab Bank for Economic Development in Africa COCOBOD Ghana Cocoa Board CRETEC Cocoa Research and Extension Technical Committee CRIG Cocoa Research Institute of Ghana CRP Cocoa Rehabilitation Project CSD Cocoa Services Division CSSVD Cocoa Swollen Shot Virus Disease DCA Development Credit Agreement DFR Department of Feeder Roads in the Ministry of Roads and Highways EFA Extension Field Assistant ERP Economic Recovery Program FY Fiscal Year GOG Government of Ghana ICR Implementation Completion Report LBC Licensed Buying Company MOFA Ministry of Food and Agriculture MRH Ministry of Roads and Highways MUV Manufacturing Unit Value Index ODA Overseas Development Administration (U.K.) PA Project Agreement PBC Produce Buying Company Ltd. PD Procurement Division PPMRD Policy, Planning, Monitoring and Research Department PY Project Year SAC Structural Adjustment Credit SAR Staff Appraisal Report Vice President Jean Louis Sarbib Country Director Serge Michailof Technical Manager Jean Paul Chausse Task Team Leader Gotz Schreiber  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GHANA COCOA REHABILITATION PROJECT (Cr. 1854-GH) Table of Contents P reface ......................................................................................................................................................... iii Evaluation Summary .....................................................................v Part I: PROJECT IMPLEMENTATION ASSESSMENT ..................................................................... 1 A. STATEMENT AND EVALUATION OF OBJECTlVES ...................................................................1 B. ACHIEVEMEN T OF PROJECT OBJECTIVES .....................................................................3 C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT ...........8 Implementation Record .....................................................................8 Major Factors Affecting the Project .....................................................................9 D. PROJECT SUSTAINABILYTY .................................................................... 10 E. BANK PERFORMANCE .................................................................... 10 F. BORROWER PERFORMANCE .................................................................... 11 G. ASSESSMENT OF OUTCOME .................................................................... 11 H. FUTURE OPERATIONS .................................................................... 12 I. LESSONS LEARNED .................................................................... 13 Part I: STATISTICAL TABLES 1. Summary of Assessments 2. Related Bank Loans/IDA Credits 3. Project Timetable 4. Loan/Credit Disbursements: Cumulative Estimated and Actual 5. Key Indicators for Project Implementation 6. Key Indicators for Project Operation 7. Studies Included in Project 8A. Project Costs 8B. Project Financing 9. Economic Costs and Benefits 10. Status of Legal Covenants 11. Compliance with Operational Manual Statements 12. Bank Resources: Staff Inputs 13. Bank Resources: Missions Appendices 1. ICR Mission's Aide Memoire 2. Map i This document has a restricted distribution and may be used by recipients only in the perfonnance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   lMPLEMENTATION COMPLETION REPORT REPUBLIC OF GHANA COCOA REHABILrTATION PROJECT (Cr. 1854-OH) Preface This is the Implementation Completion Report (ICR) for the Cocoa Rehabilitation Project in Ghana for which IDA Credit 1854-GH in the amount of SDR 31.3 million (US$40.0 million equivalent at appraisal) was approved on December 1, 1987, and made effective on November 15, 1988. Cofinancing was provided by the African Development Bank/African Development Fund (ADB/ADF), the Arab Bank for Economic Development in Africa (BADEA), the European Union (EU), and the Overseas Development Administration (ODA) of the United Kingdom. The credit was closed on June 30, 1996, two years after the original closing date of June 30, 1994. Final disbursenent took place on September 25, 1996, at which time a balance of SDR 13.1 million (US$18.2 million equivalent at closing) was canceled. The ICR was prepared by a joint FAO/CP World Bank mission' which visited Ghana in Febnruy 1997, revised by G. Schreiber (AFTA3), and reviewed at a meeting chaired by S. Michailof, Country Director for Ghana. The borrower contributed to the preparation of the ICR by arranging field visits and meetings, providing data as well as comments on the mission's aide-memoire. Advance copies of this document were provided to the borrower and the cofinanciers for review and comments. The Departnent for international Development (formerly ODA) of the United Kingdom has endorsed this report. To date, no formal comments have been received from the borrower or the other cofinanciers. ' H. Trupke (Mission Leader, FAO/CP), L. Campbell (Bio-Resources Engineer, World Bank, consultant), and C. Carlier (Tree Crops Specialist, World Bank, consultant). . .  I  IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GHANA COCOA REHABILITATION PROJECT (Cr. 1854-GH) Evaluation Summary Introduction i. The Cocoa Rehabilitation Project (CRP) was the third IDA-financed cocoa project in Ghana. Based on a cocoa sector study carried out by the Bank in 1980, the project was first identified in 1981, and a prefeasibility study was undertaken in the same year. Further preparatory work was suspended due mnainly to an unfavorable economic environment. The project was re-identified in 1985, prepared in 1986, and appraised in 1987. Credit 1854-GH in the amount of SDR 31.3 milion (US$40.0 million equivalent at appraisal) was approved on December 1, 1987, and became effective on November 15, 1988. Total project costs were estimated at US$128.0 million, with co-financing to be provided by the African Development Bank (US$33.0 million) and other co-financiers (US$18 million) and counterpart contributions of US$16.1 million by the Government of Ghana (GOG) and US$20.9 million by the Ghana Cocoa Board (COCOBOD). Project Objectives and Components ii. The project objectives were clear, realistic and very relevant to the country and the sector. They were to: (a) support the sectoral policy reforms agreed under the first Structural Adjustment Credit, and (b) increase cocoa yields and production to stabilize output at about 300,000 tons per year, mainly through the rehabilitation of 300,000 ha of existing cocoa and the replanting of about 57,000 ha. This was to be achieved by: (i) maintaining producer price incentives; (ii) improving the institutional efficiency of COCOBOD; (iii) improving cocoa evacuation and quality control; (iv) implementing a road rehabilitation program; and (v) strengthening cocoa research. The project comprised nine components: technical services for cocoa production; farm extension services; seed production and distribution; Cocoa Swollen Shoot Virus Disease control (CSSVDC); research; *nn input supply; internal cocoa marketing; monitoring and evaluation; and road program. iii. Project conditions focused on the gradual privatization of farm input marketing, streamhlng of COCOBOD's cocoa buying and handling operations as well as improved organization of extension and demand orientation of research. Implementation of the project's policy and institutional reform agenda received a strong boost with the coming into effect in June 1992 of the Agricultural Sector Adjustnent Credit (AgSAC) which strongly underpinned, and in some cases went beyond, the CPR's objectives. Implementation Experience and Results iv. Performance in implementing the various project components was mixed. The components aiming at improving the technical services for cocoa production and enhancing the efficiency and effectiveness of the cocoa extension services were implemented broadly as designed, but the pilot program for the unification of cocoa extension services with those ofthe Mnisatry of Food and Agriculture was not implernented. Seed production and distribution were improved. Seed pod production was scaled to match actual demnand of about 2.2 million pods per year. The arrangements agreed to for distribution of seed pods were followed, but pods are still sold at a highly subsidized price. v  v. Under the CSSVD progam 17,930 ha of diseased cocoa trees were to be cut out and 17,330 ha replaned. Due to repeated changes in financing arrangements for the comnponent, only about 5,000 ha were cut out from 1988/89 to 1993/94. From July 1994 onwards, a "Cordon Sanitaire" program was initiated, separaing the areas of mass infection from those of scattered outbreaks. The European Union provided STABEX funds (about US$4.2 million) for incentive payments, and IDA financed vehicles and eqtipment. During the two years until project closing another 8,056 ha were cut out, bringing the total to 13,050 ha (about 73% of the SAR estimate); to date, only 3,810 ha have been replanted under the program. vi. The main thnist of the research component was to strengthen the capacity of the Cocoa Research Institute of Ghana (CRIG) to deliver the necessary scietific and technical support to the cocoa industry, which was broadly achieved. Research/extension linkages have been strengthened, but there still is much need for improvement as regards translating research findings into appropriate extension messages. vii. Under the frm input supply component COCOBOD began, as planned, to phase out subsidies in 1988/89, but no action was taken to privatize the marketing channel. To comply with policy reforms supported by AgSAC after 1992, COCOBOD initiated a process of identifying private companies to take over the markting of inputs, but eventually aborted this process and instead sold all its input stocks to the Coffee, Cocoa and Sheanut Farmers Association (CCSFA), effectively making CCSFA the sole distributor for cocoa production inputs in the country. COCOBOD continued to import and distribute inputs on behalf of the CCSFA unil June 1995. Funding was provided by CCSFA from sales receipts, and shortfalls due to the continuation of below-cost sales have been covered from the compensation fund which is administered by CCSFA. CCSFA still subsidizes inputs at between 40 and 85 percent, thus not only depleting the compensation fund, which was designed for price sabilization, but also effectively preventing the emergence of a competitive private input marketing system while sustainin an active black market and cross-border trade in essential agro-chemicals. viii. At appraisal it was considered premature to attempt the immediate privatization of domestic cocoa rnma~lin and emphasis was placed instead on enhancing the efficiency of COCOBOD's purchasing, evacuation, storage, inspection and infestation control activities. A marketing strategy was to be formulated and agreed upon at the mid-term review. Following the appraisal recommendations, purchasing operations were stamlined, vehicles and eqLuipment procured and 16 new transit sheds built. In March 1992, COCOBOD was required under AgSAC to introduce competition into the internal marketing of cocoa beans. By 1995/96, 11 private Licensed Buying Companies (LBCs) were operating; procuring about 101,000 tons of beans, equivalent to about 25 percent of total deliveries. Enhanced private involvement is constrained by LBC difficulties in aessg working capital and by lack of vehicles, equipment and facilities. The purchase of jute sacks for an esfimated US$4.7 million did not materialize due to unusually protracted procurement difficulties. ix. To strengthen COCOBOD's policy analysis capacity, its Policy Planning, Monitoring and Research Department (PPMRD) was reorganized as planned, a Monitoring and Evaluation Unit was established and a Management Information Service and data bank were set up. Only two of the four major studies planned have been completed, however, leaving the infonmation base for sectoral monitoring and policy formulation very weak. x The roads program was not carried out as planned. When the project was prepared, COCOBOD had its own budget for mantenance and rehabilitation of roads in cocoa producing areas and for the construction and maitenance of low-standard feeder roads to cocoa producing villages ("cocoa roads'). Bythe time of appraisal, GOG had instructed the Department of Feeder Roads (DFR) of the Ministry of Roads and Highways to take over full responsibility for cocoa feeder roads, and implementation of the roads component was assigned to it. DFR subsequendy raised major objections concening the technical standards of the cocoa roads and the proposed emphasis on spot improvement and mainteance. When these issues were resolved after about three years, the roads wgeted for spot improvement and maintnance had deteriorated so much that most required complete vi  rehabilitation. Even then, DFR failed to act expeditiously in preparing work programs for tendering and approval by IDA. At credit closing, only 275 km of roads and three bridges were completed under the IDA credit. ADF financed the rehabilitation of 404 km of roads, and COCOBOD funded the rehabilitation of 450 km of the 750 km of roads targeted for using labor-based contractors. None of the planned 60 km of new feeder roads and 80 km of new tracks had been constructed, but 22 (of the 25 planned) steel bridges supplied by ODA were installed. With an aggregate of 1,129 kni, the roads component achieved only 38 percent of the 3,000 km planned. xi. The project suffered implementation difficulties throughout its history. Co-financing arrangements were only finalized in October 1989, resulting in a start-up delay of several components. Major problems included frequent changes in the senior staff of COCOBOD and the generally low staff morale throughout the organization, because of the ongoing restructuring and retrenchment associated with the privatization and/or discontinuation of many of COCOBOD's traditional activities. In the absence of clearly defined responsibilities for project management, coordination and execution, the decision making process was extremely cumbersome. Performance improved following a change in COCOBOD management in early 1994, causing IDA to agree to two successive one-year extensions of the credit closing date to June 1996 to complete various civil works, order outstanding equipment and provide continued support to the CSSVDC program. Nevertheless, US$18.2 million remained undisbursed when the credit closed and were canceled. GOG's and COCOBOD's combined contributions of US$14.9 million fell substantially short of the US$37 million expected at appraisal, and total project cost have been re-est d at US$87.1 million. xu. The Bank failed to ensure sufficient political support and project ownership within the implementing agencies. Project management and implementation arrangements were not sufficiently well defined, and the technical specification for the roads component were established without taking into account the views of the technical staff of the implementing agency. Arrangements for project supervision changed during implementation and were not always fully effective. xiu. The failure of COCOBOD to put in place effective arrangements for project management, establish a workable system for the procurement of goods and services and adhere consistently to the Bank's procurement guidelines substantially impeded implementation and in particular procurement. Another major problem was the persistent failure to achieve agreement among concemed agencies on implementing agreed project components, notably the roads component and the unification of agricultural extension services. COCOBOD also made inadequate efforts to foster the privatization process, especially for input supplies. The transfer of responsibility for input supply from COCOBOD to CCSFA must be considered more a circumvention, rather than implementation, of the agreement to privatize input marketing. DFR's failure to act in a timely manner resulted in substantial further deterioration of the road system in the cocoa areas and a drastic shortfall of implementation and disbursements under the roads component. The Borrower did well, however, in implementing the agreements regarding COCOBOD's restructuring and, after 1992, opening domestic cocoa marketing to the private sector. xiv. The outcome of the project has to be assessed against the background of world price developments for cocoa, changes in the macro-economic environment, as well as preceding and contenporaly operations in support of economic recovery and/or specifically of the cocoa subsector in Ghana. The central project objective, stabilizing cocoa production at about 300,000 tons per annum, was already within reach in 1988/89, the year the credit became effective, when production (or purchases by COCOBOD) totaled just over 300,000 tons. Substantial increases in the administratively fixed producer prices (113 percent in real terns) implemented during 1984/85-1987/88 had already revived fanner interest and induced considerable new plantings of cocoa trees, resulting in the surge of production in the late 1980s. Thereafter, sharply faling interational prices and failure to adjust producer prices adequately for domestic inflation caused a substantial decline in real producer prices, and cocoa production remained essentially stagnant from 1988/89 through 1994/95 at around 300,000 tons per year. World market prices began to rise again in 1993/94, and as the producers' share of the fob price was also vii  increased from 25 percent 1993/94 to almost 45 percent in 1995/96, growers again responded to the improved production incentives, and the 1995/96 crop, also favored by excellent weather, totaled 403,850 tons. xv. The project's production objective was to be achieved through the rehabilitation of existing cocoa plantings, new plantings, and replantings under the CSSVDC program. By project closing, about 250,000 ha had been placed under improved management, and 39,000 ha had been replanted. In the absence of reliable stabstics on cocoa acreage, age of trees and yields, esimates of incremental production due to measures taken under the project are necessarily very crude. Moreover, the output response to these measures has also been significantly affected by the sharp variations in faimers' price incentives prior to and throughout the project period. Nevertheless, the incremental cocoa production attributable to the combined effect of project measures and to improved producer incentives alter 1993/94 is estimated at about 100,000 tons p.a. at present and might rise to about 115,000 tons per year by the year 2002 (at full maturity of the newly planted trees). In this respect, the outcome of the combined measures taken under the project and the subsequent AgSAC has, thus, been satisfactory. This is reflected by a re-estimated ERR of 24% against an appraisal estimate of 23%. xvi. Many, but not all, of the institutional objectives have been achieved. COCOBOD has been significantly stramlned, research and extension activities have been strengthened and focused, and extension-research linkages have been strengthened. Progress towards promoting the emergence of an effective private input marketing systemn has not been satisfactory. As a result of actions taken in the context of AgSAC, private sector involvement in domestic cocoa marketing, on the other hand, has progressed significantly beyond what was expected at appraisal. And a feeder road maintenance management system has been established, aimed at ensurig adequate and timely funding of maitenance of the roads rehabilitated under the project. xvii. The poor implementation experience does not allow a satisfactory rating for this project. While measures taken and investments implemented under the project have strengthened institutional capacity, physical fcilities and service performance in the subsector, the production effect was muted until significant policy reform neasures to improve farmers' production incentives were implemented in the context of AgSAC. Summary of Findings, Future Operations, and Key Lessons Learned xviii. The most important findings are that: (a) for projects which envisage a multiplicity of policy and institutional changes, from the beginning local commitment and project ownership has to be ensured from both policy makers and implementing agencies; (b) project management, implementation and prurment arrangements must be clearly defined and agreed upon by all parties; (c) extraneous factors, such as major changes in international commodity prices, exchange rates, inflation rates, climatic conditions, etc., can be crucial for the success or failure of have paramount effects and supersede the impact of the project per se; and (d) complex multi-component projects require periodic multi-disciplinary supervision missions. xix. While the investments in staff development, physical facilities and rural roads appear sustainable, overall sustainability of the project is not certain. The opportunities created by the partial liberalization of domestic cocoa marketing and COCOBOD's withdrawal from input marketing have not yet been fully taken up by private entrepreneurs. GOG remains commied to liberalization, but further action will be needed to ensure that the progress made on the institutional front and in marketing and pricing policy is sustined. This concerns, for example, the arragements between COCOBOD and CCSFA for financing, importing and marketing agro- chemicals and the regulatory constraints on fertilizer imports, but also the institutional and policy environment for private involvement in cocoa marketing. GOG has indicated its intent to merge COCOBOD's extension service with that of MOFA, to take action in support of more private sector involvement in domestic cocoa marketing, and to increase the faners' share in the fob price to at least 60 percent within two or three years. viti  IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GHANA COCOA REHABILITATION PROJECT (Cr. 1854-GH) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. STATEMENT AND EVALUATION OF OBJECTIVES Introduction 1. The project was the third IDA-financed cocoa project in the country. The first two, the Eastern Cocoa Project (Cr. 205-GH) and the Ashanti Cocoa Project (Cr. 1181-GH), were implemented during 1970-1979 and 1975-1982, respectively, with the main aim to replant and rehabilitate about 50,000 ha of cocoa. Both suffered from low farmer participation owing to inadequate returns at prevailing producer prices. In 1983 the Government of Ghana (GOG) initiated a series of policy reforms, including in the cocoa subsector, aimed at removing constraints and promoting the export earning industries. IDA supported these reforms through three projects: (i) First Reconstruction Inport Credit, (ii) Export Rehabiltation Project, and (ii) First Structural Adjustnent Credit (SAC-I). The subsequent Cocoa Rehabilitation Project (CRP) was not only to help implement key policy agreemes already reached under the earlier credits, but also to address major investment and institutional constraints in the sector. 2. Based on a cocoa sector study carried out by the Bank in 1980, the project was first identified in 1981, and a prefeasibility study was carried out in the same year. Further preparatory work was suspended due nainly tD an unfavorable economic environment and unresolved policy issues. The project was re-identified by the Bank in 1985, prepared in 1986 and appraised in 1987. Project Objectives and Components 3. The main project objectives were to: (a) support the policy reforms in the cocoa sector agreed under the first Structural Adjustment Credit, and (b) increase cocoa production and yields to stabilize output at an annual level of about 300,000 tons, mainly through the rehabilitation of 300,000 ha of existing cocoa and the replanting of about 57,000 ha. This was to be achieved by: (i) maintaining producer price incentives; (ii) improving the institutional efficiency of COCOBOD, notably in extension, seed production, disease control, and by gradually privatzing input distribution; (iii) improving cocoa evacuation and quality control; (iv) implementing a road rehabilitation program; and (v) strengthening cocoa research. The project comprised nine main components: (i) Technical Services for Cocoa Production, including the reorganization, decentralization and training of staff of the Cocoa Services Division (CSD) of the Ghana Cocoa Board (COCOBOD); (ii) Extension Services for Improved Technologv, through reorganization, training, technical assistance as well as provision of vehicles, equipment and buildings, including the renovation of the Bunso Cocoa College, 17 farner training centers and 150 staff houses; (iii) Seed Production and Distribution, by improving existing and establishing new seed gardens, staff training, and reorganizing seed distribution on commercial principles;  (iv) Cocoa Swollen Shoot Virus Disease Control (CSSVDC), mainly through the cutting out and replanting of about 17,000 ha with CSSVD-resistant varieties against incentive payments to finners, and including training, technical assistance, vehicles and equipment; (v) i mainly by providing assistance to the Cocoa Research Institute of Ghana (CRIG) through staff development, rehabilitation and up-keep of facilities, and the establishment of an 'on- farm' fanming systems research unit; (vi) Farm Input Supply, to gradually introduce a subsidy removal and pnvatization program for cocoa inputs and including the import of agro-chemicals; (vii) Internal Marketing to enhance efficiency of the marketing system by introducing a commercial approach and encouraging competition, including rationalization of buying system and stations, provision of vehicles, equipment, training and technical expertise; (viii) Monitoring and Evaluation by establishing an M&E Unit within the PPMR Department of COCOBOD and additional units in the Cocoa Services Division (CSD) and the Produce Buying Company Ltd. (PBC), including the provision of training, equipment, expertise, equipping a library, and funding for several studies; and (ix) Road Pro consisting mainly of 3,000 km of spot improvement pardy by labor-intensive methods, a recurrent maintenance program increasing from 600 km in Project Year 1 to 2,100 km in Project Year 5, as well as the construction of 60 km of new roads, 80 km of tracks and two major bridges. 4. The project objectives were clear, realistic and at the time most relevant to the country and the sector. A mrajor underlying assumption, however, proved to be incorrect. At appraisal it was forecast that international cocoa prices would gradually increase from about US$2,000/ton in 1986/87 to US$2,360 at credit closing. These forecasts proved to be flawed, as incremental production in Indonesia, Malaysia and Ivory Coast; resulting from new planings made in the late 1970s and early 1980s, substantially exceeded growth in world demand during the second half of the 1980s, with a depressing effect on world prices. At the time of appraisal, COCOBOD's and GOG's share in the fob export price was about 70 percent, implying the availability of ample fimds for project countrpart financing and other cocoa sector support measures by government. The low firmers' share ofthe fob price, on the other hand, was considered a major obstacle to further production increases and to be addressed under the project. The official famngate price at that time stood at 0 85/kg - about US$550/ton equivalent or about 28 percent of the world market price. 5. Designed to achieve a rapid rehabilitation of the cocoa sector, the project was quite demanding for the Borrower. It attempted to address a wide range of institutional reforms, including reorganization of COCOBOD and retrenchment of stafE and policy issues (e.g., divestiture, elimination of input subsidies, privafization of input marketing) simultaneously with a number of geographically dispersed physical action programs. For the five- year project, Credit 1854-GH in the amount of SDR 31.3 million (US$40.0 million equivalent at appraisal) was approved on December 1, 1987, and became effective on November 15, 1988. Total project costs were estimated at US$128.0 million, with co-financing to be provided by ADB/ADF (US$33.0 million) and other co-financiers (US$18 nillion) and counterpart contributions of US$16.1 million and US$20.9 million, respectively, by GOG and COCOBOD. 6. Implementation of the policy and institutional reform agenda supported by the project received a strong boost with the coming into effect, in June 1992, of the Agriculural Sector Adjustmt Credit (AgSAC). AgSAC 2  supported, inter aba, a program of actions to: (a) rationalize the operations and reduce operating cost of COCOBOD, (b) abolish the monopsony of the Produce Buying Company Ltd. (PBC), a COCOBOD subsidiary, in the purchase of cocoa from farmers and implement a program for private sector entry into domestic cocoa marketing, (c) improve the transparency of determination of prices, fees and taxes applicable in the cocoa sector, and gradually increase the share of the export price received by cocoa growers, and (d) eliminate govemment control of fertilizer marketing margins and phase out public commercial participation in farm input marketing.2 B. ACHIEVEMENT OF PROJECT OBJECTIVES 7. Overall Achievement. The central project objective, increasing Cocoa Production, 1985/861996/97 cocoa yields and production so as to stabilize output at an annual level Cca ru on,c185/6(t96/9 of about 300,000 tons, was already within reach in 1988/89, the year 1984/85 174,813 the credit became effective, when production (or sales to COCOBOD) 1985/86 219,937 totaled 300,155 tons - almost 50 percent more than the average 1986/87 227,765 recorded for the preceding four years. Indeed, despite temporary set- 1987/88 187,360 backs in 1991/92 and 1993/94, cocoa production averaged slightly over 1988/89 300,155 1989(90 308,178 300,000 tons per annum for the entire period from 1988/89 through 1990/91 293,352 1996/97. Although some of this increase may be attributable to the 1991/92 242,817 major publicity drive by COCOBOD rekindling farmers' interest as 1992193 312,123 well as to enhanced contacts of CSD and CRIG staff with fanmers, the 1993/94 254,654 major impetus for the rise in output came from the improvement of the 1995/96 403,850 macro-economic and sectoral policy framework, including substantial 1996/97 335,000 prelim. increases in growers' prices from 1985/86 onward (see paras. 43ff). Moreover, producer prices in neighboring Togo and Cote d'Ivoire were sharply reduced in 1988/89 and 1989/90, respectively, largely eliminating the price incentives for cross-border sales of cocoa.3 8. It is not clear, therefore, what portion of the increased production Raio of (over 403,000 tons in 1995/96, some 335,000 tons in 1996/97) can be Cocoa Producer Prices in US$, attibuted directly to the project.4 Nevertheless, with renewed farmer interest, Ghana;te d'Ivoire by project closing about 250,000 ha - or about one quarter of Ghana's entire cocoa area - had been placed under improved mmagement (SAR target for 1984/85 0.75 "rehabilitation": 300,000 ha), and replanting (including 3,810 ha under the 198586 0.6520 CSSVDC program) has reached 38,867 ha against an appraisal estimate of 1987/88 0.58 57,000 ha. 1988/89 0.52 1989/90 0.79 9. In contrast, performance in implementing the various components 1991/92 0.863 (see para. 4(i)-ix)) designed to support the achievement of the overall 1992J93 0.61 objectives has been mixed, as described in more detail below, bearing in mind 1993/94 0.72 that start-up of all activities was affected by the late finalization of the 1994/95 1.02 financing plan (see pam. 29). 2All three AgSAC rnches were released and the credit was fully disbursed on January 23, 1996. 31In Togo, the fanmgate pnce was reduced from CFAF 300/kg in 1987/88 to CFAF 225/kg for the 1988/89 season; in CMte d'Ivoire, it was halved fiom CFAF 400/kg in 1988/89 to CFAF 200/g for 1989/90. 4Nei1her the cocoa survey, hich is to provide an updated inventory of the country's cocoa acreage and tree stDck, nor the study of socio- economic aspects of cocoa fanning, which would pemit a proper assessment of farmers' response to vanous support msures, have been completed as yet (see para. 24 and Table 7). 3  10. Technical Services for Cocoa Production. At the time of appraisal, the Cocoa Services Division (CSD) of COCOBOD was responsible for exension, seed production, disease control and input supply. The aim of this project component was to reorganze CSD to enhance its efficiency, ensure effective supervision, allow better use of limited numbers of slklled staff, prmote specializion, and reduce costs. The reorganization was carried out fully in line with the SAR proposal, and CSD with its headquarters in Accra now operates 6 regional offices and 39 district offices (reduced from 101). lIn 1993, further efforts were made to reduce staff, mostly at district level, and additional cuts took place in 1994 with the divestment of input marketing. During the project period, overall CSD staffing was reduced from 16,128 to 3,432. Although a consultant employed for 18 months to identify training needs of extension staff and develop training curricula did not produce satisfctory assessments and recommendatons, CSD formulated a staff development program and identified essental staff trainng needs. However, due mainly to problems in the decision making process, only 13 senior staff benefited from training abroad (in management M&E, plant protection, seed production, etc.) for a total of 124 person/weeks. As proposed, a small M&E unit was established in CSD and is functioning as a useful management tool; the absence of reliable up-to-date baseline information on essental physical and socio-economic parameters of the country's cocoa sector constitutes a significant impedient to sector analysis and policy formulation (see also para. 8, fn. 4, and para. 24). 11. Extension Services for Lmproved Technology. CSD's cocoa extension service was reorganized, placing emphasis on direct contact wi farmers. The CSD districts were divided into 1,465 units of approximnately 1,200 ha of cocoa each.5 Each unit was further divided into 16 sub-units individually visited by an Extension Field Assistant (EFA) on one unchanging day in four-week working cycles. The T&V method of extension has been adopted, fanmer contacts are made by utilizing target or contact finners, and the extension/research linkages have been substantially improved (see para. 20). Farmers are represented on the management committee of CSD and CRIG. 12. 702 EFA's were trained at Bunso Cocoa College for a total of 2,937 staff-months. To ensure adequate staff mobilty, a total of 110 4WD vehicles and 1,900 motorcycles were procured under the project; the latter were given out on a loan/purchase basis to field staff In addition, 18 trucks and 4 buses were received by CSD. 13. The program for rehabilitating and renovating the classrooms, dining and donmitory buildings, providing improved teaching equipment and upgrading of roads at Bunso Cocoa College was satisfactorily implemented. The college now can accommodate up to 400 students for each of its 4-months training sessions. The building contractors generally performed well. One contractor experienced cash flow problems towards the end of his contract and was able to complete only about 90 percent of his obligations; the college authorities expect to finish the work (two classrooms and two dormitories) with COCOBOD resources. Only six of the 17 farmer trainng centers were improved, and none of the staff houses were renovated, as this was no longer perceived as an urgent need. Reallocating funds not needed for this subcomponent and for storage facilities which were no longer required due to the liberalization of internal cocoa marketing, IDA agreed to finance the completion of COCOBOD's regional office in Kumasi, but delays in awarding contracts and poor contractor performance prevented completion ofthis work by project closing. 14. The component also envisaged a pilot program for the unification of cocoa extension services with the general agricultural extension service of the Ministry of Agriculture (now Ministry of Food and Agriculture - MOFA), whereby MOFA was to be made responsible for cocoa extension in half of the CSD districts of Volta Region and CSD for non-cocoa crops in half of Brong-Ahafo Region, beginning in 1989. The main reasons for the non-implementation of this sub-component are the continuing insistence of COCOBOD on the need for a 5 As much as 40 percent of this overall total "cocoa area" is, however, no longer planted to cocoa, as a result of past neglectk CSSVD, and the devastaing fies of 1983. 4  separate extension service to address sector specific issues and CSD staff resistance fearing a downward adjustnent of their wages to those of MOFA which are, at present, about 35 percent lower. Despite repeated public announcements by GOG of its intention to unify agncultural extension services, this issue remains unresolved and the extension services of MOFA and CSD continue to operate in parallel. 15. Seed Production and Distribution. Anticipating rising demand for seed under the replanting and new planting program, CSD's seed production potential was to be increased from about 1.9 million pods annually to about 3.2 million pods per year. Adjusting to lower than appraised demand, CSD has increased the production of the existng seed garden (mainly by expanding the area of the garden by 60 ha) to about 2.2 million pods per year and has established a new seed garden in 1990 with 24 ha (against an SAR estimate of 80 ha) in the Western Region. Total 1995/96 output amounted to 2.2 million pods, of which 1.9 million were distributed. The proposed pilot imgated seed garden to determine the feasibility of increased pod production throughout the year was not established because of disagreement with IDA over the scope and cost of major elements of this facility and, hence, the economic justification of the proposed investments. The training program was implemented as planned, including that of the newly appointed seed garden coordinator. The arrangements suggested in the SAR for distribution of seed pods were followed, but pods are still sold at a highly subsidized price of 010 against a corresponding dry weight market price of 046 and actual estimated production cost of 0260. 16. Cocoa Swollen Shoot Virus Disease Control (CSSVDC). A total of 17,930 ha of diseased cocoa trees were to be cut out and 17,330 ha to be replanted. Affected farmers were to receive a cutfing-out and replanting grant, m three tranches, equivalent to four years' loss of production; the rates were to be adjusted each year in line with changing producer prices. The financing arrangements for this component were changed several times during the project period. The original DCA specified an amount of US$5.0 to be provided for incentive payments. At a donors' meeting in October 1989 it was decided to reallocate these funds to the roads component, with the funding for CSSVD control to be fully provided by COCOBOD. The mid-term review mission in March 1992 recommended to transfer these funds back to the CSSVDC program since they were not being disbursed under the roads component, while the falling international cocoa prices made it difficult for COCOBOD to fince the program from its own resources. In a subsequent revision, however, funding for incentive payments was again eliminated from the IDA credit. 17. From 1988/89 to 1993/94, COCOBOD cut out about 3.6 million aflhcted trees (on about 5,000 ha). From July 1994 onwards a "cordon sanitire" program was initiated, separatng the areas of mass infection in the Eastern Region from areas with only scattered outbreaks of the disease. Given the urgent need to accelerate the CSSVDC program in this belt, the European Union (EU) agreed to provide STABEX fiuds for incentive payments, 6 while IDA financed vehicles and equipment. During the remaining two years until credit closing, another 8,056 ha (some 12.1 million trees) were cut out, bringing the total to 13,050 ha or about 73 percent of the SAR estimate. At the same time 3,810 ha have been replanted under the program. The surge in activities frorn 1994 onwards can be pardy attributed to better management, but mosdy to the provision of adequate funding for incentive payments to farmers and the restoration of the real value of these payments from 1994/95 onward.7 6 A total of ECU 3.4 million was to be provided and to be released in two tranches of ECU 1.7 million each. The first tranche was released in 1994, and the second is expected to be released dwing 1997. 7 The incentive payment for the initial yea of cutting out remained unchanged at %120,000nha from 1991/92 through 1993/94, thus declning from 48% of the produces' cocoa price in 1991/92 to 390/o of the producers' price in 1993/94 (and firm 27%e of the world market price for cocoa in 1991/92 to less than 100/o of the world market price in 1993/94), but was restored to 48% ofthe producers' pnce and about 24% ofthe world market pnce for cocoa in 1994/95, 1995/96 and 1996/97 (0336,000/ha in 1994/95, 0403,000/ha in 1995/96, 0576,000/ha in 1996/97). 5  18. Research. The main objecive of this component was to stengte CRIG's capaity to deliver the necessary scientific and technical support to the cocoa industry, mainly by (a) reoranizing its work prram, (b) sti~gthening staff capacity, (c) rehabilitating and upgrding of facilites, and (d) establishing an "on-i.rm" finning systems research unit (FSU). Whereas training, technical assistance, consultancies, vehicles and equipment were mosdy funded by ODA, IDA financed infiastructu rehabilitation. The work of the institute was reorgazed into research thmsts, considerably improving the problem-orientation and multi-disciplinarity of researci, and the new FSU has added the required farming systems perspective. 19. Satisfctory progress was made in rehabilitatng physical plant and equipment, including the laboratories, a plant quarantine house, electricity supply, a new print shop, and library acquisitions. Occasional delays occurred in the rehabilitation program and the acquisition of equipment, but by credit closing most of the appraisal tage were achieved. The procurement process for establishing the quarantine facility was unduly protrated, and the resulting delays prevented the contracted works to be completed before the credit closing date. COCOBOD is now financing its completion. The technical assistance program supported by ODA was particularly successful, and CRIG now has a well trained (in-house and overseas) and highly motivated complemt of senior professional, technical and administrative staff. 20. Eflbctive research/etension linkages have been established. These are coordinated by the Cocoa Research and Extension Technical Committee (CRETEC), comprising appropriate staff from both CRIG and CSD, which meets three to four times a year. The joint CSD/CRIG trials and outreach programs also foster close collaboration. Nevertheless, there is still much room for improvement as regards translating research ndins into extension messages appropriate for prevailing on-farm socio-economic conditions as well as assessing the relevance and impact of research on the farming community. 21. FarTn Iput Supply. Over a five-year period, from 1988 to 1992, COCOBOD was to gradually remove input subsidies and privatize first retailing then wholesaling and finally importation, allowing the private sector sufficient time to develop a wide retail network with a minimum disruption in the supply system. COCOBOD initiated, as planned, the subsidy removal process, but no action was iniated to privaize the marketing chanel. Under pressure to comply with policy reforms being supported by AgSAC, COCOBOD initiated a prooess of identfyig a substantial number of private companies to take over the markeng of inputs, but eventually (in 1993/94) aborted this process and instead sold all its input stocks to the Coffee, Cocoa and Sheanut Farmers Association (CCSFA),8 effectively making CCSFA the sole distributor for cocoa production inputs in the cuntry. CSD continued to import and distribute inputs on behalf of the CCSFA until June 1995. Funding was provided by CCSFA from sales receipts, and shortfalls due to the coninuation of below-cost sales have been covered from the compensation fund which is administered by CCSFA.9 Since July 1995, CCSFA has been solely responsible for the entire procurement and distribution process, but CSD continues to assist with demand forecasting and the leasing of some of its storage facilities. In 1996, it also assisted with arranging the prourement of imported inputs. CCSFA continues to subsidize inputs at levels estimated to range between 40 and 85 percent thus not only depleting the campsation fund, which was originally designed for price stabilization, but also effectively preventing the emergence of a competitive private input marketing system while sustaining an active black market and cross-border trade in essential agro-chemicals. sAll cocoa farmers are registered as members of so-called "societies" for the purpose of selling thei cocoa at the cocoa buying centers established troughout the country, and CCSFA is the natonal umbrella ogazation of all these societies. 9'This fund is peinodically replenished by COCOBOD through payments intended to compensate cocoa growers for increases in export prices beyond tose anticipated at the tme the producer prices are established prior to the annual cocoa purchasing season. It is meant to provide additional revenue to cocoa growers. 6  22. Intenal Cocoa Marketing. At appraisal it was considered premature, in view of the very poor state of the road system and the weakness of the private sector, to attempt the immediate privatization of the cocoa marketing system. Therefore, in designing this project component, emphasis was placed on enhancing the efficiency of the Produce Buying Company (PBC - a wholly owned subsidiary of COCOBOD) in cocoa buying, storng and handling, and of the inspection, grading and infestation control activities. The domestic cocoa markeg arrangements would be reviewed and a marketing strategy formulated and agreed upon at the time of the mid-ern review. Following the appraisal recommendation, the capacity threshold for autonomous societies (cocoa buying centers, see para. 21, fnu. 7) was raised from 50 tons to 70 tons of cocoa bought, 656 societies were closed, and 830 were converted into sub-societies. To facilitate efficient produce evacuation from the producing areas, 40 tractors as well as tarpaulins were procured and 16 new transit sheds were built. The purchase of jute sacks for an estimated US$4.7 million did not materialize due to unusually protracted procurment difficulties. The M&E unit has been established and is functioning as planned, the haulage/logistics manager has been employed locally instead of internationally, the cost accountant has been hired, and five officers of PBC were trained. 23. In March 1992, COCOBOD was required under AgSAC to introduce competition into the intemal marketing of cocoa beans. By January 1993 two private companies had been licensed to commence purchasing cocoa from farmers alongside PBC, and four others had been granted provisional licenses. By credit closing, 11 such Licensed Buying Companies (LBCs) were operating. In 1995/96, they procured about 101,000 tons of beans, equivalent to about 25 percent of total deliveries. Enhanced private competition to PBC is constaied by LBC difficulties in accessing sufficient working capital and by lack of vehicles, equipment tarpaulins, bags, scales and storage facilities.10 24. Monitorng and Evaluation. To strengthen COCOBOD's policy analysis capacity, its Policy Planning, Monitoring and Research Department (PPMRD) was reorganized as planned, and within it a Monitoring and Evaluation Unit was established and a Management Information Service and data bank were set up. Three officers were trained abroad in commodity pricing and two in MIS, monitoring and evaluation. The PPMRD and its M&E Unit are considered by COCOBOD management to perfomr satisfactorily, but suffer from equipment and mobility constraints. The post of manager of the M&E Unit is currently vacant Of the four major studies to be undertaken, only two were completed by the time of credit closing (see Table 7), leaving the information base for sectoral monitoring and policy formulation very weak. 25. Road Program. This component was not carried out as planned. When the project was prepared, COCOBOD had its own budget for maintenance and rehabilitation of roads in the main cocoa production areas and for the construction and maintenance of low-standard feeder roads to cocoa producing villages ("cocoa roads'). By the time of appraisal, GOG had instructed the Department of Feeder Roads (DFR) of the Mnistry of Roads and Highways to take over full responsibility for cocoa feeder roads, and implementation of the roads component was assigned to it, using conractors under LCB/ICB procedures. Not having been involved in the design of the project, DFR subsequently raised major objections, arguing that the technical standards of the cocoa roads were inadequate and that the proposed emphasis on spot improvement and maitenance was inappropriate for the existing condition of these roads and the climatic condition in the project areas. DFR also disagreed with COCOBOD and IDA on various operational proposals, including those conceming technical assistance. When the contentious issues were finally resolved after about three years, the roads targeted for spot improvement and for mantenance had deteriorated so much that most required complete rehabilitation at substaially higher cost than appraised. '