Cameroon - Second Education Project

CIRCULATING COPY RESTRICTED Report No. P-1090 TO BE RETURNED TO REPORTS DESK FILECP This report is for official use only by the Bank Group and specifically authorized organizations or persons. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE UNITED REPUBLIC OF CAMEROON FOR A SECOND EDUCATION PROJECT June 8, 1972 CURRENCY EQUIVALENTS 1 US Dollar = CFA Francs 255.8 CFA Franc 1 = US$ 0.0039 INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENI TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE UNITED REPUBLIC OF CAMEROON FOR A SECOND EDUCATION PROJECT 1. I submit the following report and recommendation on a proposed development credit to the United Republic of Cameroon for the equivalent of US$9.0 million on standard IDA terms to help finance a project for education. PART I - THE ECONOMY 2. The most recent report on the Cameroon Economy, "Current Economic Situation and Prospects of the Republic of Cameroon" (in five volumes, R71-4, -11, -18, and -53), was distributed to the Executive Directors seriatim start- ing on January 8, 1971. The report of the updating mission which1visited Cameroon in November 1971 was discussed with the Government in May, 1972 and will be distributed to the Executive Directors in early July, 1972. A note on the economy dated January 12, 1972 (updated) and country data are included in Annex II PART II - BANK GROUP OPERATIONS IN CAMEROON 3. fThe Bank Group's commitments in Cameroon now total $70.8 million. The loans and credits outstanding cover eight projects -- three in agriculture, three in transport, and one each in education and public utilities. Implement- ation has been generally satisfactory, although considerable delays have occur- red in executing some projects. Annex I contains a summary statement of Bank loans and IDA credits as of April 30, 1972 and notes on the execution of on- going projects. 4. The Bank Group's strategy is designed to support Cameroon's Third Five-Year Plan (1971/72 - 1975/76). Although the very high level of total in- vestment indicated for the Third Plan period may be optimistic, the sector goals and priorities which the Government has set for the economy are justified. The Third Plan allocates 32Z of public sector investment to transport and 13% to agriculture and rural development. Investment in roads, railways, and ports is essential if Cameroon is to realize its export potential in diversified cash crops, forest products, and minerals; investment in transport will also serve the needs of the adjacent land-locked countries. Assistance to agriculture is needed since 65Z of the population depends on cash and subsistence crops for a livelihood, and since there are viable projects which will increase exports and the incomes of small farmers. The Bank Group is complementing the Government's plans by financing transport, agriculture and education. -2- Since France and the European Economic Community (EEC) are major sources of foreign assistance to Cameroon, the Bank will continue to collaborate with them and, from time to time, invest jointly with them. (For a summary of the main current and prospective sources of external finance see para 15 of Annex II). 5. Bank projects currently under preparation include a road project which will help complete the Trans-Cameroon route, a cocoa project for small- holders, a railway re-alignment and renewal project, a large expansion of Douala's port, and a livestock project in a thinly populated area in the north-central part of the country. It is hoped that the road and cocoa projects will be ready for presentation to the Executive Directors in FY-73 while the railway, port, and livestock projects would be for FY-74 (the preparation of the railway, port, and road projects is included in earlier Bank Group financing of projects in those sub-sectors). 6. Bank Group lending accounts for a very small proportion of Cameroon's external debt of about U3230 million, for only $23.3 million out of $70.8 million in commitments has been disbursed so far. Total public.debt service is currently estimated to be 5.0% of projected export earnings; this ratio is expected to rise to about 6.5% by 1975/76. The Third Five-Year Plan calls for a gross investment of CFAF 280 billion (US.l.1 billion), of which it is calculated that CFAF 200 billion will be forthcoming, broken dowm as follows: CFAF 100 billion private sector, and CFAF 100 billion public sector (CFAF 36 billion from the Government and public institutions, and CFAF 64 billion in foreign assistance). It is assLmed thatr about 40% of foreign aid will be in the form of grants. Since the Third Plan is much higher than the Second Plan and since the other major lenders, France and the EEC, are not expected to increase their assistance, Bank lending could rise to close to 40% of all aid commitments made during the Third Plan period. The Bank Group's share of total external debt, accumulated as of 1975/76, would chen be about 40% with the Bank's share of debt service being estimated at 26 at that time. PART III - EDUCATION IN CAIEROON 7. The complex adminis5rative and socio-political struc'ure of Cameroon, a result of ibs dual Anglo-French colonial hiszory, poses serious obstacles to creating a modern educational system capable of meeting the country's needs. English-speaking est Cameroon and French-speaking East Cameroon, bhe two states of the republic, inherited educational systems having marked differences in administrabion, structure, curricula and language of instruction. These differences remain obstacles to an integrated national educational system. Despite able federal and state ministerial personnel, there has been insufficient coordination betwieen the public and private authorities responsible for education at the federal, state, and local levels. As a result, there has been uncontrolled enrollment groith, sharply mounting expenses, lov: efficiency, and uneven regional standards. Ene successful May 20 referendum creating a United Hepublic is expected to alleviate some of these conditions by cenbralizing the administration of education. 8. The desire for education is so strong in many areas that private schools have expanded rapidly to meet the demand 7hich the federal and state - 3 - governments could not satisfy. The important role of private education at primary and secondary levels makes effective educational planning and con- trolled development difficult. This is particularly the case in ;Iest Cameroon where, for instance, all primary schools and all but one of twelve primary teacher training colleges are private, and 86% of all secondary enrollments are in private institutions. In East Cameroon, 43% of primary and 65% of secondary enrollments are in private schools. Albhough the teaching staffs of private schools are paid by public funds, private schools are not under the effective control of the state and federal governments which support them. 9. The maintenance of this system requires substantial public funds. The responsibility for financing education is divided between (a) the Federal Government which is responsible for financing construction materials for primary schools and all capital and recurrent expenditures at secondary and post-secondary levels, and (b) the state governments which are responsible for minor construction for primary schools and the recurrent costs of primary education, primary teacher training, and the vocational training schemes of various ministries. In 1969/70, total public educational expenditures amounted to CiF 8..4 billion and accounted for 20- of the combined budgets of the then Federal, East and jest Cameroon Governments, or 3" of GDP. 10. Besides the structural problems and the financial burden of the education srstem described above, Cameroon has an immediate need for trained technicians and skilled workers to meet its economic targets over the next decade. Shortages of such workers became increasingly apparent in the late 1960's when industry and commerce grew rapidly. Moreover, a large proportion of the professional (85) and sub-professional (46%) staff are expabriates. The current vocational and technical education system is unable to produce sufficient and appropriately trained numbers of workers needed i* modern industry and commerce. For this reason, the Government is placing emphasis in its present planning on expanding and improving vocational and technical braining. It would also like to'draw up specific plans for training agricultura personnel, but at the present time there is neither a sufficiently defined policy nor any precise data on which bo build agricultural and rural training plans. 11. To meet these problems, the Government has devised an educational development strate,r which places highest priority on creating an integrated education system for the entire country, and also on expanding and upgrading education in those regions of the country most hampered by its lack, particular ly the Northern region of East Cameroon. Levels of education given most weight within this overall strategy are primary and secondary education .There reform is intended to provide the underlying framework for further development of the entire system. In effect, the Government ,ants to use education as a means for unifying the country as well as for promoting economic development. 12. As specific measures for reform and for achieving an integrated education system by 1?80, the Goverrmient intends in its Third 2lan to (a) introduce a uniform education structure in East and .,est Cameroon, cogether .ith associated curricular reform at both primary and secondary levels to create a system adapted bo the local environment and designed to meet the requirements of a modern economy in Cameroon, (b) create a national planning mechanism, (c) develop local administration and supervision over schools, particularly private ones, and (d) correct regional im- balances by strengthening education, particularly primary education and teacher training, in the Northern region. Since higher education is already on a federal basis, the Third Plan,with respect to higher education, deals only with expanding enrollments. W,Iork has already started in preparing and instituting some of these reforms. PART IV - THE PROJECT 13. The Association's first education project (US-410.5 million, Credit No. 161-CM, signed in September, 1962) is providing technical assistance to help establish a national planning department, referred to above, to be responsible for planning all levels of education for East and 5est Cameroon. Eventually this department will become part of a National Institute of Education which is to be created with possible UNDP and bi-lateral assistance during the Third Plan period. The Association's first education project is also assisting the Government in improving education by expanding and upgrading: (a) primary and secondary teacher training, (b) general and technical secondary education, and (c) agricul- tural secondary and higher education. Because of delays in appointing con- sultant architects and agreeing on designs for project institutions, im- plementation is about 12 months behind schedule. l8. iile .his firsi project is meeting the immediate needs of J'est Cameroon, it does no' cover fully the needs of East Cameroon. For this reason, a second project has been proposed primarily To meet the additional needs of East Cameroon, but also so provide assisGance in defining the future requirements for education and training Throughout the country. A UESCO mission co Cameroon in .'ovember, 1970 identified items suitable for a second educa'ion project. After brief. IDA reconnais- sance missions in June and October 1571, agreement uas reached aith the Governent on the items to be prepared in October-iovember 1971 witn U7ESCO assistance. The projec' ..as appraised in Novemoer-December 1971 by a mission undertaken .ibh the participa'ion of representatives from FAO, 1LO, and UNESCO. Iegotiations aere held in 'ashington from May 9 to 13, 1972 with a Cameroonian delegation led by 11r. Amadou Bello, Director of Programs in the Tinistry of Planning. 13. The proposed project is designed: (i) to assis* the Government in implementing its general edacazional sCraCer and reforms (paras 11 and 12 above),(ii) to meet speciLic needs in teacher training and in Gechnical education, (iii) to prepare the groundaork for further technical education and agricultural and rural 6raining, particularly in the horchern region. Its objective would be to 3rain skilled -or.:ers, technicians and Uechnical teacIers in thosO areas of the country mosc in need of them. The proposed credit would help linance .ho follot-ing: (a) constraction and equipmcnb for: - three primary 'eacher 'raining colleges (a ne:. one, located in Garoua in the North, and extension of those located in N,TKongsamba and Kumba); one of these colleges (Kumba) to include a center for primary education refona and teaching material production; - extension o-" one secondary teacher and primary inspector training college (at Yaoundd); - one new demonstration upper general secondary school (Yaound) to provide teacher trainees with teaching experience in the nea secondary curricula and to serve as an innovation center in secondary curriculum development; - two new technical secondary schools (a' Garoua and Douala) waich would also serve as demonstration schools in (the re- formed) technical education; one of them (Douala) to include a workshop teacher training section; - one new adult vocational training center (Douala); (b) pre-investment studies of agricultural education and rural training throughout the country, and of' technical education and vocational training requirements in the Northern region; and (c) related technical assistance for 'he organization and implement- ation of training programs and the training of counterpar6s. 16. The numDber of additional students -hich the new and extended schools financed under 'he project can accommodate is shown below:. Additional Institdtions Student Places Additional Sta__ __Additional Total Student Boarding Places Housing Units Three Primary Teacher Training Colle-es (new and extended) 280 630 230 One Ecole Normale Supdrieure (extended) 3'0 890 210 - One Demonstration Secondary School (new) 1,000 1,000 2 2-o Technical Secondary Schools and Teacher Train- ing Section (new) 1,113 1,11$ 200 3 One Adult Vocation- al Training Center (new) 250 250 60 3 TATKL 2, 12 -6- 17. Annex III includes a summary of the project. The complete analysis is contained in the Appraisal Report (PE - 46a) which is being circulated separately to-the Executive Directors. One feature of this project worth noting is the adult vocational training center in Douala which will offer short train- ing and upgrading courses (1 to ' weeks) for about 2,000 employees a year in all trades represented in local industry at semi-skilled, skilled and tech- nician levels; a minimum of 1,500 would attend training courses organized by the center itself and 500 would attend special courses organized on the specific request of firms bhrough the Chamber of Commerce. The center wiould be a public institution, sponsored by the inistry of "ducation and jointly managed by public administration and private sector representatives. Another feature of the project is the pre-investment study of agriculture and rural training. This study would determine how the existing uneconomically small public institutions and the various bilateral and private training programs could best be integrated. The study would also analyze measures needed for training women in rural areas so they can improve their agricultural practices and methods of food preservation. The study is in principle suitable for UNDP financing, but cannot be included in the current UIDP program for Cameroon. 18. The timetable for project execution calls for the completion of all school construction by the end of the fourth year after the credit becomes effective, while technical assistance would carry through to the end of the sixth year. 19. The Project Unit established under the first IDA credit would also be responsi2ble for supervision of this second project. The Project Unit :Yould include the principal posts of Project Director, Project Architect (:-aho would also serve as Deputy- Project Director) and Procurement Specialist, and would be provided with additional supporting staff. The present Project Director would remain in office but a Project Architect and architectural consultanbs, accept- able to the Association, would be appointed. The Project Director rould now become responsible directly to the Hinister of Education so that some delays experienced in the f2irst project may be avoided. The other ministries involved in the project would dasi-nato senior representatives to coordinate -:iith the Project Unit, as required. The Credit irould finance the total costs o' tie architect, architectural consultants; and Procurement 3pecialis t's services as ell as additional eqipment and :aniture 'to facilitate the Unit's expanded operations. All other Project Unit costs ;ould be borna by the Governiment. 20. 'The estimated total cost of the project is the equivalent of US, 11.t million, of fhich te orai ,n exchanga comw-onenG is 37.9 million. 'he proposed Credit of .. .0 million -Tould cover the foreign exchange componean and .)l.1 million (about one-third) of cha local costs; he remainder of the local costs would be borne by the Government. Goods and services imported for the project would be exempi from customs duties and taxes, since 'this is the Governnent's policy on 10-1-inanced edacation projects. Local expenditures would not be tax-exempt and such 'taxes, as viell as indirect taxes, are estimated at 400, 000. This means that the project, net of all taxes, qoth direct and indirect, .fould cost .11.0 million, of which IDX -,-ould contribute J2.E. 21. The estimates of construction costs are derived from a study of -7- recent school building costs in Cameroon and based upon information obtained from public and private enterprises. The average cost is equivalent to US$154 per m2 of gross area. Local cost adjustments varying between 10% to 30% of basic prices have been made for buildings in rural areas to compensate for transport- ation costs. 22. The Government has undertaken to budget funds to cover the addition- al recurrent costs involved in the operation of the project institutions (Sec- tions 3.01 and 4.02 of the Development Credit Agreement). In 1975/76 %Then all project institutions and programs would be operative, an additional CFAF 280 million would be required for their operation. The costs for scholarships and allowances for the trainees, where applicable, would amount to an additional CFIF 250 million per year. Except for half of the recurrent cost of the adult vocational training center (CFAF 16 million), which would be met by the Orivate sector, all costs would be borne by the Government and would represenu about 3.8% of the public recurrent expenditures on education in 1975. 23. All contracbs for construction and for supply of furnibure and equipment would be awarded in conformity with the Association's Guidelines for international competitive biddint. Cameroon accords preferential duties on imports from the EEC but all goods and services imported for this project will be exempt from customs duties and local taxes, as mentioned in para 20 above. M4anufacturers in Cameroon and in the Customs Union of the Central African States (UDEAC) would be accorded a margin of preference equal to the existing rate of customs duty applicable to competing imports or 15% of the c.i.f. prices, whichever is lower. This is substantially the same formula as -as applied to procurement under the first education project. From experience with the first education project, it is probable that the only item on which local or UDEAC suppliers would be bidding competitively is furniture, to cost an estimated '400, 000 or less than 3m of the proposed credit*. Awards i-or civil works conoracts are expected to be won by locally-based construction firms, while contracts for equipment are expected to go to foreign bidders. 2AT V - IE GAL EISTRUIJ'123 _d AUHORITY 2. The draft Development Credit igreement beteen the Association and -he Uniced ."ep,ublic of Cameroon, the iecomend.aion of the Commitbee provided for in Article V, Section 1 (d) of the Articles of Agreement and the text of a resolution approving the proposed Development Credit are being distributed td the Executive Directors separately. 25. Tne draf u Development Credit .greement conforms to the normal pattern of Development Credibs for education projects. The effectiveness of the proposed Development Credit iould be conditional on the aopointment of a Project Unit Director, a Project Architect and architectural consultants, in accordance with Section 3.01 of the Development Credit Agreement. Disburse- ments on account of expenditures for the Adult Vocational Guidance and Traiing Center in Douala would be conditional upon the approval by the Association of the legal status and regulations of the Center. -8- 6. I am satisfied that the proposed Developmerit Credit w6uld comply with the Articles of Agreement of the Association. PART VI - RECOMM-MDATION 27. I recommend that the Executive Directors approve the proposed Development Credit. Robert S. McNamara President Attachments ,,ashington D.C. June 8, 1972 ANNEX I Page 1 THE STATUS OF BANK GROUP OPERATIONS IN CAMEROON A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of April 30, 1972) Loan or US$ millions Credit Amount (less refunding) Number Year Borrower Purpose Bank IDA Undisbursed 100 1967 Cameroon CAMDEV 11.0 0.1 490 1967 CAMDEV CAMDEV 7.0 6.9 593 1969 Sopame Oil Palm 7.9 5.2 604 1969 SNEC Water Supply 5.0 1.5 161 1970 Cameroon Education 10.5 10.3 180 1970 Cameroon Roads 7.0 4.6 663 1970 Cameroon Roads 12.0 11.9 687 1970 Regifercam Railway 5.2 1.8 229 1971 Cameroon Ports 1.5 1.5 x 302 1972 Cameroon Rice 3.7 3.7 Total now held by Bank and IDA 37.1 33.7 Total undisbursed 27.3 20.2 47.5 x not yet effective ANNEX I page 2 B. PROJECTS IN EXECUTION Performance under existing loans and credits has been generally satisfactory, though there are some difficulties. Credit No. 100 of $11 million and Loan No. 490 of $7 million to CAMDEV both of 1967 for a plan- tation project: Disbursement6for this CAMDEV project are slightly behind schedule, but neither the delays nor their causes are serious; management requires strengthening and CAMDEV has had considerable difficulty in re- cruiting the small number of foreign experts required. Loan No. 604 of $5 million to SNEC of 1969 for a water supply project: This project was completed ahead of schedule with substantial savings which have been approved for investment in further water distribution works; disbursements, however, have lagged due to the strong working capital position of the borrower; the closing date for this project has been postponed to September 30, 1972 by which time all funds are expected to have been disbursed. Credit No. 161 of $10.5 million of 1970 for an education project: This project is about 12 months behind schedule because of delays in appointing consulting architects and because of necessary revisions in the proposed designs which were accepted by the Government. Bids were received for construction of schools and were found to be substantially in excess of appraisal estimates. The Government has since negotiated a contract with the lowest bidder for the schools in the North and the draft contract is now within the appraisal estimates. We are presently exploring with the Govern- ment ways and means of lowering the cost of the schools to be constructed in the South. Credit No. 180 of $7 million and Loan No. 663 of $12 million both of 1970 for a roads project: This project is about fifteen months behind schedule, due primarily to administrative delays on the part of the imple- menting agencies. This problem has been reviewed with the Government on several occasions, and three contracts for construction and two contracts for consultant services were signed in December, 1971 and work started in January of this year. Loan No. 687 of $5.2 million to REGIFERCAM of 1970 for a railway project: This project is being implemented satisfactorily and full disbursement by the closing date of June 30, 1974 is expected. Credit No. 229 of $1.5 million of 1971 for a port project: This project is about nine months behind schedule because of institutional changes required and time-consuming government procedures involved; a revised disbursement schedule has been set up. The Government's preparation of the major port develop- ment project, integrally linked to the first project, is also behind schedule by nine months. Credit No. 302 of $3.7 of 1972 for a rice project: This credit was approved by Executive Directors on January 25, 1972,was signed on April 26,but is not yet effective. Loan No. 593 of $7.9 million to SOPAME of 1969 for an oil palm project: A significant cost over-run is expected in this project. The supervision mission which visited Cameroon from January 24 to February 1, 1972 made a preliminary calculation of the cost over-run through 1975 which is estimated at $2.9 million, about 25% of project costs. ANNEX I page 3 Revenues from local palm oil sales by Sopame are expected to provide funds for much of the additional expenditure after 1975. Although the Govern- ment is required under the Loan Agreement to provide all funds needed to complete the project, the co-lenders (Fonds dtAide et de Coop6ration and Caisse Centrale de Cooperation Economique) have indicated that they may be prepared to meet part of the supplementary financing provided (i) the Government contributes a substantial amount, (ii) the Bank also participates, and (iii) the economics of the additional investment are justified. A re- appraisal mission, undertaken from May 23 to June 7 in cooperation with the co-lenders, has made a detailed field review of the cost over-run and ways are now being studied to effect economies and, if necessary, to modify the design of the project. The Executive Directors will be informed in due course of the measures proposed for dealing with Sopamets problems.  ANNEX II page 1 CAMEROON - THE ECONOMY PART I - COUNTRY DATA Area: 183,524 square miles (475,450 km2) Population: (1971 estimates) Total 5.9 million (of which 15,000 non-Africans) Density 12.5 per km2 Rate of growth 2.1 % per year (1963 -1971) Gross Domestic Product: (billion CFAF at market prices) 1- 1966/67 1967/68 1968/69 1969/70 1970/71 GDP at current prices 194.2 219.0 240.8 281.0 306.0 rate of growth 12.7% 10.0% 16.6% 8.9% GDP at constant 1966/67 prices 194.2 211.2 222.4 243.1 249.4 rate of growth 8.8% 5.3% 9.3% 2.6% GDP per capita at constant 1966/67 prices (US$) 142.0 152.0 155.o Structure of 1970/71 GDP (constant 1966/67 prices) billions billions Sources: CFAF % Uses: CFAF % Agriculture 99.3 40 Private consumption 181.8 73 Mining, manufacturing Public consumption 44.6 18 and construction 44.6 18 Gross domestic investment 36.4 14 Public Utilities 2.5 1 Deficit on goods and Trade, transportation services -7.0 - 3 and telecommunication 64.7 26 Gross domestic income (255.8) Government 28.2 11 Change terms of trade -6.4 - 2 Other services 10.1 4 249.4 100.0 249.4 100.0 1/ Preliminary estimates. x Based on 277.71 exchange rate. ANNEX II page 2 Financing of Domestic Investments (in billions CFAF at constant prices) 1969/70 1970/71 Gross domestic investments 35.1 36.4 Gross domestic savings 27.9 23.0 Net capital inflow 1/ 7.2 13.4 Central and Federated Government Finances (in billions of CFAF) 1968/69 1969/70 1970/71 1971/72 Current revenues 42.3 47.1 53.8 59.9 Current expenditures 37.7 41.8 49.2 52.2 Current balance 77 Capital expenditures 3.0 5.0 3.7 7.8 Money and Credit Relations to monetary areas: Member Equatorial African'Monetary Union and Franc Zone. (in billions 0FAF) June June June 1969 1970 1971 Money 30.7 34.8 38.5 Quasi money 3.9 5.2 7.4 Credits to private sector 37.3 44.5 45.8 Credits to public sector -9.3 -17.8 -15.3 Estimated as a residual. 2 Preliminary estimate 3/ Budget estimates. ANNEX II page 3 External Trade Relationship to customs area: Equatorial African Economic and Customs Union (UDEAC); Associated Member of the European Economic Community 1968/69 1969/70 1970/71 .Imports (in % of GDP) 20.5 21.7 22.7 Exports (in % of GDP) 21.5 23.6 20.1 Concentration of exports: 1969 1970 Cocoa 38.0% 29.0% Coffee 20.0% 25.0% Aluminum 14.0% 9.0% International reserves December June 30 August 1969 1971 1 Gross foreign assets (US$ million) 48.0 91.0 80.0 IMF Position (US$ million) Credit tranche position 6.5 12.6 12.6 Quota 6.5 12.6 12.6 World Bank Group Operations (US$ million, as of April 30, 1972) Commitments Disbursements Bank 37.1 9.8 IDA 33.7 13.5 External Public Debt (US$ million) Total debt including undisbursed at December 31, 1971 230.1 Total debt excluding undisbursed 143.8 Total debt service 1971 12.3 Debt service relative to exports 5.2% ANNEX II page 4 Social Indicators Birth rate (per 1,000 population): 40.0 Death rate (per 1,000 population): 19.0 Male population (% of total): 48.0 Dependent population (% of total): 146. Urban population annual rate of growth: 6.0 Urban population (settlements of 5,000 and over - % of total): 22.0 Primary school enrollment (% of 6-13 years age group): 74.0 Modern sector employment (% of total active employed): 2/ 7.0 - Public (% of total): 30.3 - Private (% of total): 69.7 Primary: 24.4 Secondary: 20.2 Tertiary: 25.1 Foreign employment (as a percentage of total private modern employment): 2.4 of which: Management (% of total) 85.5 Senior level technicians (% of total) 73.6 Technicians (% of total) 34.8 Skilled (% of total) 6.0 3/Population under 15 or over 60 years. ~Population employed between 20 and 55 years. ~/Excludes armed forces. ANNEX II page 5 PART II - RECENT ECONOMIC DEVELOEMENTS 1. Cameroon is endowed with diversified although not abundant natural resources. Its development potential is favorable. A variety of climates and soils has permitted cultivation of a large number of export crops, making Cameroon less vulnerable to external price fluc- tuations than many other countries producing primary commodities. The rivers have good hydro-electric potential. There are also indications of oil, copper, natural gas, and bauxite but, thus far, no definite pros- pects of commercial exploitation. The lack of an adequate transport network is a major problem and has hindered economic development. Much of past and current development efforts, including those of the Bank Group, have therefore been devoted to improving transport. 2. Economically, Cameroon has done well in its first decade of independence. Throughout the 1960ts the econony grew rapidly, well ahead. of the 2.1 percent population growth rate. During the last three to four years real GDP increased by about 7 percent a year, chiefly due to favorable export prices. GDP per capita for 1968/69 was estimated at $145, and latest estimates now show 1970/71 GDP per capita of $155 at constant 1966/67 prices. The main factors of growth have been the diversification of agri- cultural exports, rapid growth of industry and commerce, and large infra- structure investments, particularly in transport. A further important factor was the liberal investment climate which encouraged foreign firms, mostly French, to invest in Cameroon. 3. A furtherfactor which has boosted economic growth was favorable world market prices for the most important export products, cocoa and coffee. During 1965-1969, Cameroon's terms of trade improved annually by 9 percent. This factor largely accounted for the 10 percent annual growth of government revenues during 1965-1969 and for the increase during those years of foreign reserves (from $27 million in 1965 to $91 million in June 1971, equivalent to four-five months of imports). Since the beginning of 1970, however, terms of trade have been deteriorating, particularly due to the decline in cocoa prices (from 46 cents per lb. in 1969 to 25 cents in November 1971). Moreover, cotton and groundnut crops were disappointing due to the drought. Economic growth has also been affected by the decline in foreign investment. GDP growth in 1970/71 is provisionally estimated at less than 4 percent in real terms and the prospects are that the growth rate will drop during 1971/72 as well. As a result of declining export prices, the balance of trade has shifted from a surplus of $20 million in 1969/70 to a deficit of $30 million (about 12 percent Of imports) in 1970/71. Gross foreign assets have been declining since mid-1971. 4. The worsening of the terms of trade since the beginning of 1970 puts into relief the major problems of Cameroon's economy which are: the inadequacy of transport, backward agriculture, the increase in urban unem- ployment, and the need for technical and vocational training. As far as human resources are concerned, the number of professionals and skilled workers is still low. Much progress has been made in the Cameroonization of the civil service, although foreign technical advice remains vital. ANNEX II page 6 Foreigners still largely manage and own the private modern sector. 5. Agriculture remains the mainstay of the economy, accounting for 40 percent of GDP and about three-fourths of employment. Agricultural equipment is not modern and techniques are largely traditional; the plots are small, and credit and extension services are seldom available. *While efforts to increase some export crops have been effective, the Government has not yet come to grips with the problem of increasing production of domestic foodstuffs and livestock, on which a large part of the population depends for its livelihood and which is becoming increasingly important in view of the rapidly growing needs of the cities. This lack of government action is in part due to the absence of a federal Ministry of Agriculture and Livestock. At present, agriculture is the responsibility of the state governments of East and West Cameroon, which however neither dispose of the necessary funds nor the qualified manpower to launch an effective agricul- tural development effort. For the same reasons, the institutional frame- work has also remained weak. Concentration of decision-making and establishment of agricultural organizations for credit, instruction, land reform and extension services.are expected to take place soon following the recent referendum creating a unitary state. 6. Economic development hinges on investments in infrastructure, particulary on improvements in transport -- roads, railways, ports. Allocations to transport have accounted for 45% of public investment during the past five years and are expected to continue on a large scale. The Bank Group is vigorously assisting the Governmentts efforts to improve the transport network. In spite of projects undertaken in recent years, however, the movement of goods and people is still retarded by bottlenecks in the Douala port and on the Douala-Yaounde railway and by inadequacies in the road system. The Trans-Cameroon road/railway route, costing over $100 million, is the largest single development project in the country and will contribute to the unification of the diverse peoples who make up the population. It will spur development of the Northern region, centered particularly around the towns of Ngaounder6 and Garoua (the proposed second education project, incidentally, includes studies of technical and vocational education requirements in the Northern region). 7. Partly due to the slow economic development of rural areas, people are moving to the cities. The urban population has been increasing by 6% a year and is expected to reach 3.0 million by 1985. This would be 38% of the population as compared to only 16% in 1963 and 22% in 1970. This increase has been far more rapid than the expansion of employment in Cameroonts secondary and tertiary sectors. Urban unemployment is likely to increase further in the next decade and to become a source of political and social unrest. Employment creation is thus becoming the most important objective. Since effective agricultural development might slow down but could not possibly stem the rural exodus, the Government will need to give urgent attention to increasing urban employment in industry, transport, trade and other services. ANNEX II page 7 8. The Government's success in this endeavor will to a large extent depend on maintenance of the favorable climate for private investments, both foreign and domestic. In recent years, however, Government's relations with the private sector became strained by bureaucratic interventions while efforts to identify and promote industrialization possibilities remained inadequate. The Government has become increasingly aware of these short- comings and the President is personally directing an effort to improve communication with the business community. Future industrialization will principally depend on the ability of Cameroon to attract foreign capital and expertise which can produce intermediate products for the local economy and process local goods for export. 9. The major development problems discussed in the preceding paragraphs find adequate recognition in the Government's development plan 1971/2 - 1975/6. However, action in the crucial areas of agricultural and industrial development needs more precise definition and thus more resources (including foreign tech- nical assistance) for project preparation. The pipeline of directly productive projects is small and without determined attempts to step up project preparation much of the plan will remain unrealized. Although Cameroonts administrative ability has increased remarkably, it needs more foreign technical assistance than is presently available to help work out the practical problems of agri- cultural and industrial development. Foreign aid donors have, nevertheless, recognized the need to train local counterparts to replace, in due course, the large number of foreign experts working in Cameroon. 10. The Government announced the development plan at a time when prospects for domestic resource mobilization were poor. The plan calls for total investment of CFAF 280 billion (US$1.1 billion) of which half would be public. This amount is a 70 percent increase over investment in the last five years (1966/7 - 1970/1). While it is doubtful whether the project content of the plan is sufficiently worked out to permit the plants full implementation, financial difficulties are likely to be even more of a constraint. In spite of the plants optimistic calculations of foreign aid disbursements, the need for public savings was nevertheless estimated at CFAF 10 billion a year, about 35 percent of proposed public investment. 11. To realize this amount of savings will require a very determined effort. During the recent period of rising export prices (1965-70), Government revenue increased rapidly and in spite of rising current expendi- tures, budgetary savings averaged CFAF 3 billion, about d percent of revenue and 1.5 percent of GDP. Public savings moreover increased through large surpluses of the agricultural stabilization funds. The more recent decline in export prices has however led to a much less favorable situation. In 1970/71 the Government realized only a small budgetary surplus and the situation may not improve in the present fiscal year. ANNEX II page d 12. At the same time, prospects for the agricultural stabilization funds have become unfavorable. The cocoa fund budget calls for price support payments during 1971/2 of CFAF 3.7 billion plus CFAF 1.5 billion in arrears from the past year. These payments would virtually exhaust the reserves of the fund, which was heavily depleted last year by a special investment budget of OFAF 10.5 billi.on. .Before long, the Government will probably have to lower the cocoa producer price. At present international prices, the Goven- ment is paying.the private sector about CFAF 24 per kg. To mitigate the effect of last year's,drastic decline in cotton production,,the cotton stabi- lization fund has also been paying maintenance subsidies to farmers. Only a partial recovery of cotton production is expected this year. 13. In order to,improve prospects for .savings during,the plan period, the-Government will have to curtail,first of all,the growth of current expenditures. The Government is aware of this need; the plan foresees current expenditures growth at 6 percent a year as compared to about 10 percent a year in the past five years. However, if export income remains depressed, the' Government may have to contemplate.an even lower growth rate of current expenditures., The Government may moreover have to reduce the cocoa and perhaps other agricultural producer-prices .in spite of the serious consequences for farmers' incomes and the risk that export volume would drop. 14. Ever since independence the Cameroon Government has followed sound financial policies and there is 'every reason to expect that the Government will attempt to reduce low-priority expenditures to free resources for economic development. However,the Government recognizes that a reduction in the development plan may also be required. Meanwhile, international aid agencies can,soften the impact of the export price decline on domestic savings by pro- viding a high proportion of aid on concessional terms, and a high,proportion of project cost, including the financing of local expenditures. 15. As mentioned in paragraph 6 of the main Report and Recommendation, it is estimated that.some CFAF 64 billion out of a public investment program of about CFAF 100 billion would come from foreign assistance. Since the Third Plan is much higher than the Second Plan and since the other major donors, France and EEC, are not expected to increase their assistance, Bank Group lending could rise to close to 40 percent of all aid commitments made during the Third Plan period. In comparison, in the five-year period 1965-69, disbursements of foreign aid amounted to an estimated total of CFAF 46 billion (US$167 million). The FAC provided 40 percent of this,,and the FED 25 percent, as grants. Loans amounted to about 24 percent of the aid total, mainly from the Caisse Centrale, US AID, and the Kreditanstalt fffr Wiederaufbau. Disbursements averaged about CFAF 9 billion annually (US$32.4.million). By 1970 the proportion of loans. increased as grants declined. World Bank disbursements were very small during 1965-69. In 1970 disbursements amounted to CFAF 19billion (US$69 million) from all sources, of which 30 percent from France. French aid was concentrated in infrastructure (40 percent) and productive sectors (30 percent). The Common Ithrket program was primarily in agriculture (50 percent) with a relatively small emphasis on infrastructure (20 percent). ANNEX II page 9 16. Cameroon's external public debt has increased rapidly. It amounted to $230 million at the end of December 1971. The debt service ratio is likely to rise from 5.2% in 1971 to about 6.5% in 1975/76, taking into account service on existing and estimated new public debt. In making this projection it has been assumed that grant aid disbursements will remain substantial, that Cameroonts traditional aid donors will continue to offer relatively favorable terms on official loans and that meanwhile Cameroon, in order to avoid rapid exhaustion of its debt servicing capacity, will keep supplier credit financing within strict limits. The forecast debt service ratio is still not very high and a modest increase in conventional debt would therefore appear justified. However, in view of the country's poverty and modest growth prospects, Cameroonts needs for external capital are expected to extend over a considerable length of time. A continued rapid build-up of external debt should be avoided and it is therefore desirable that most foreign assistance be on concessional terms. Bank Groupts assistance should be on soft blend terms under the circumstances.  ANNEX III page 1 CAMEROON - A SECOND EDUCATION PROJECT CREDIT AND PROJECT SUMMARY Borrower: United Republic of Cameroon. Amount: $9.0 million. Terms: Standard. Project Description: To help finance the expansion of teacher training, secondary education, and technical and vocational training; related specialist services and the training of national counterparts, including scholarships; and pre-investment studies of the countryls agricultural education and rural training, and of technical education and vocational training requirements in the Northern region. Estimated Cost: US$ (millions) Local Foreign Total Construction 1.99 2.83 4.82 Equipment 0.25 2.52 2.77 Furniture 0.20 0.19 0.39 Pre-investment studies 0.04 0.10 0.14 Technical Assist- ance 0.14 0.55 0.69 Project Adminis- tration. 0.06 0.19 0.25 Contingencies 0.81 1.51 2.32 3.49 7.89 11.38 Distribution of Cost by Category of Ependiture: Percentage of Project Cost Academic and comtunal facilities 27% Boarding 12% Staff housing 2% Equipment and furniture 35% Technical assistance and project administration 12% Professional services 5% Site developmenlt 7% 1o Contingencies 25% ANNEX III page 2 Estimated Disbursements: Cnulative disbursements at the end of each fiscal year are estimated as follows: (US$ millions) 1973 1974 1975 1976 1977 1978 0.2 0.9 5.6 8.3 8.8 9.0 Procurement- Arrangements:All civil works, equipment, and furniture will be tendered on the basis of international competitive bidding. Cameroon accords prefer- ential duties on imports from EEC, but imports for this project will be exempt from customs duties and local taxes. For the purposes of bid comparison, local bidders and those esta- blished in the Customs Union of the Central African States (UDEAC) will be given a margin of 15% of the c.i.f. price on imported goods or the prevailing duty generally applied to non- exempt imports, whichever shall be lower. Consultants: Consulting architects are to be appointed pr*x to effectiveness. Appraisal Report: PE-46a dated June 6, 1972. 化 MARCH 1972 IBRD 3843