Senegal - Rice and Terres Neuves Projects

RESTRICTED FILE C011 Report No. P-923 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 The report may not be published nor may it be quoted as representing their views.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 DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PR ESIDENT TO THE EXECUTIVE DIRECTORS ON PROPOSED CREDITS TO THE REPUBLIC OF SENEGAL FOR THE TERRES NEUVES SETTLEMENT PROJECT AND THE CASAMANCE RICE PROJECT April 29, 1971  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO TEE EXECUTIVE DIRECTORS ON PROPOSED CREDITS TO TEE REPUBLIC OF SENEGAL FOR THE TERRES NEUVES SETTLEMENT PROJECT AND THE CASAMANCE RICE PROJECT 1. I submit the following report and recommendation on tao proposed credits to the Republie of Senegal in amounts in various currencies equivalent to US$1.35 million for the Terres Neuves Settlement Project and US.$3.7 million for the Casamance Rice Project. These projects are designed to achieve broad common objectives; they are accordingly discussed in this single report, in the context of the situation of agriculture in Senegal and what the Bank is doing to help the Government foster agricul- tural development. PART I - HISTORICAL 2. The Republic of Senegal, which became independent in 1960 and a member of the Bank Group in 1962, has until recently received the bulk of its foreign aid from France and the European Economic Community (EEG). This assistance was substantial but because of the special circumstances following independence it did little more than help cushion the depress- ing effects of the adjustment forced upon Senegal during its first decade. In 1960 Senegal was one of the most developed countries in West Africa but this was to a large extent based on Dakar being the economic ancl administrative capital of French West Africa. The end of the West African federation terminated Senegals leading role, so that the country's industrial base had to adjust to a smaller market. At the same time, price support by France for the country' s main export crop was discontinued and groundnut prices had to adjust themselves to prevailing world market levels. 3. The bulk of Bank Group lending to Senegal has been for trans- portation, essentially for projects which could not easily be financed by traditional lenders (Annex 1). In 1966 a credit for improving the railways waSS made. The project is expected to be completed in the first quarter of 1972, almost three years behind schedule because of difficulties on the managerial and financial side and the use of savings under the project for additional track relaying. A recent supervision mission reported that satisfactory steps were being taken by the Senegalese authorities, and a follow-up operation is under consideration. In 1967 a loan was rmade for Dakar Port. All new construction work has been completed; only dredging - because of the unexpected presence of hard material - hlas set back completion by nine months to October 1971. Imple- mentation oi the 1970 highway project, which focuses on the improvement of  feeder roads, is progressing satisfactorily. The contract for con- struction was awarded in March and work is expected to start soon. The road Jniprovement and maintenance study began in November 1970. 4. As the Senegalese Government placed increasing emphasis on agriculture, and as the capacity of the Bankts Permanent Mission in West Africa increased, the Bank Group was able to direct its lending to this field. A first operation was undertaken with the financing of the groundnut-millet improvement program in early 1969. The program has not beer, successful, not only because groundnut production has fallen becattse of poor weather but also because of organizational problems and inadequate producer prices. The operation has been under close supervision, and during negotiations on the projects now proposed, an understarnding vas reached on the additional measures required to rehabilitate the groundnut sector. The Bank Group project needs to be amended to take into account changed conditions as described in para. 25 of Part II of this report. 5. In May 1966, IFC2 made an equity investment of US$0.8 million in and a long-term loan of US$2.4 million to SIES (Soci