Cameroon - Cameroons Development Corporation Project

RESTRICTED Report No. P-530 FILE CjOrr This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATIONS OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A BANK LOAN AND A DEVELOPMENT CREDIT FOR A PLANTATION PROJECT IN CAMER OON March 13, 1967  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVE-OPMENT ASSOCIATION REPORT AND RECONIMENDATIONS OF THE PRESIDEJT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE CAMEROONS DEVILOPD4ENT CORPORATION AND CREDIT TO THE FEDERAL REPUBLIC OF CAMEROON 1. I submit the following report and recommendations on a proposed operation consisting of a Bank loan, in an amount in various currencies equivalent to $7 million to the Cameroons Development Corporation (Camdev) and an IDA credit, in an amount in various currencies equivalent to $11 million, to the Federal Republic of Cameroon to assist in financing a plantation project in West Cameroon. PART I - HISTORICAL 2. The Federal Republic of Cameroon is a Federation of the States of East and West Cameroon, and was established in October 1961. East Cameroon, a former French administered trust territory, gained indepen- dence in 1960 as the Republic of Cameroon. Wqest Cameroon, the former United Kingdom trust territory of Southern Cameroons, joined the newvly independent Republic of Cameroon as a result of a plebiscite in 1961. The Federal Republic of Cameroon joined the Bank in 1963 and IDA in 196!. In July 196b, the Executive Directors approved two Bank technical assistance grants of $200,000 and $100,000 (later increased by $20,500) for feasibility studies of road and agricultural projects. The proposed loan and credit would be the first lending operation of the World Bank group in Cameroon. Also under consideration is a project preparation credit of about $0.5 million for the final engineering of a road project. 3. In July 1965, the Federal Government of Cameroon asked the Bank and the Association to help finance part of the development program of Camdev, a statutory corporation established in the West Cameroon to own and operate plantations. At about the same time the European Economic Community (EEC) had under consideration an oil palm plantation that would also be developed by Camdev. However, the EEC proposed to treat its part of the program independently from the rest of Camdev's development program and to isolate it financially. After discussion initiated by the Bank and IDA with the EEC, Camdev and the Cameroon Government, it was agreed that Camdev's development should be treated for all practical purposes as a single program to be financed by the Bank, IDA and the EEC under arrangements to coordinate administration.  - 2 - 18. A Bank and IDA mission appraised the project in November/December 1965. Negotiations for the proposed Bank loan and IDA credit were completed in Washington on December 16, 1966. The Government of Cameroon was repre- sented by a delegation headed by the Ambassador in Washington. Camdev was represented by Mr. Mukete, Chairman of the Corporation. PART II - DESCRIPTION OF THE PROPOSED FINANCING 5. Bank loan: Borrower: Cameroons Development Corporation. Guarantor: Federal Republic of Cameroon. Amount: Equivalent, in various currencies, to $7 million. Purpose: To help finance a planting program in lWest Cameroon. Amortization: In L4 semi-annual installments commencing on January 1, 1976. Interest rate: 6%. Commitment charge: 3/8 of 1% per annum. Disbursement: Except for disbursements on account of commitment and interest charges, the Bank loan would be drawn down only after the IDA credit had been fully disbursed, i.e. between 1971 and 197h. 6. IDA credit: Borrower: The Federal Republic of Cameroon. Beneficiary: Cameroons Development Corporation. Amount: Equivalent, in various currencies, to $11 million. Purpose: To help finance a planting program in West Cameroon.  - 3 - Amortization: In semi-annual installments of 1/2 of 1% of the principal amount beginning July 1, 1977 and 1-1/2% of the principal amount beginning July 1, 1987, the last payment to be made on January 1, 2017. Service charge: 3/L of 1% per annum. Relending terms: To be made available to Camdev in the form of equity. Disbursement: The IDA credit would be disbursed between 1967 'and 1971. 7. The EEC loan The EEC loan of $6.h million would be for a term of 22 years including 10 years of grace, at an interest rate of 2%, and would be made to the Federal Government, which would relend the proceeds to Camdev on the same terms. The loan was approved by the EEC Commnision on Niarch 2, 1967. PART III - THE PROJECT 8. An Appraisal Report (TO5L,8b) is attached. Camdev was established in 19L6 as a statutory corporation to take over the operation of former German-owned estates under a lease contract with the government of the Trust Territory and is the largest single enterprise in West Cameroon. Throughout its life Camdev has been plagued by financial problems resulting from a weak financial structure. Until 1959, with the exception of certain amounts borrowed from the Nigerian government, Camdev had to finance its expansion out of earnings. In 1960 a management contract was signed with the Commonwealth Development Corporation (CDC), which thereupon made a