Malawi - Karonga Rural Development Project

RESTRICTED CIRCULTING COPY s Report No. P-1008 .IO,B RETURNED TO REPORTS DESK G=FI L cpy 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 It may not be published, quoted or cited without Bank Group authorization.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 DEVELOPMENT CREDIT TO THE REPUBLIC OF MALAWI FOR THE KARONGA RURAL DEVELOPMENT PROJECT January 6, 1972   INTERNATIONAL DEVELOPMENT ASSOCIATICN REPCRT AND RECUOENDATICN OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOFMENT CREDIT TO THE REUBLIC OF MALAWI FOR THE KARONGA RURAL DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed credit to the Republic of Malawi for the equivalent of US $6.6 million on standard IDA terms to help finance a project for integrated rural development. PART I - THE ECCKQMY 2. Malawi became independent with the break-up of the Federation of Rhodesia and Nyasaland in 1964. Nyasaland, the future Malawi, has been the poorest of the three countries forming the Federation and on independence required support from the United Kingdom to balance its current budget amounting to US $16 million or about 4O percent of curren-t expenditures. This picture has changed remarkably. Real output since independence has increased by about 5.3 percent annually and gross invest- ments by 28 percent annually. While not yet able to balance the current budget, Malawi's need for budgetary support from the United Kingdom has sn cut to the equivalent of 13 percent of current expenditures in 1971 a..d budgetary independence is now within reach. Exports doubled between 196. and 1970, and an increased capital inflow in 1970 brought about a rise in foreign external reserves which reached US $28 million at the end of November 1971, the equivalent of about 41!~ months imports. 3. There are several factors underlying this progress. In spite of disturbances about the time of independence, Malawi has enjoyed a large measure of internal stability. Malawi has good agricultural land and a generally favorable climate. The agricultural sector, which provides half the gross domestic product, has been served by a strong agricultural extension service for a number of years. Farmers have proved to be highly responsive to market incentives and receptive to guidance from extension efforts, due perhaps at least in part to the fact that hundreds of thousands of Malawi workers have found temporary employment in Southern Rhodesia and South Africa over the past half century and have become accustomed to living in money economy. Moreover, since 1965, there has been a concerted and successful effort by the government and the ruling Malawi Congress Party to encourage farmers to adopt the improved cultiva- tion practices being suggested by the extension services. Finally, Malawi has proved attractive to private foreign investors, who have invested substantial sums in the development of tobacco and tea, and more recently in manufacturing.  -2- 4. The marked improvement in the fiscal situation has resulted from measures that have increased current revenues by over 15 percent a year since 1964 while the expansion of recurrent expenditures has been held down to an average of 7 percent a year. However, while this was accompanied by measures to increase the efficiency of government services, expenditures on certain services has been inadequate. Expenditure on health, for example, showed little increase and now amounts to less than one US dollar per capita annually, one of the lowest rates in Africa. The Government has now approved ceiling rates in increase for different types of recurrent expenditures for the next three years in order to limit the overall rise in recurrent expenditureBto 6 percent a year to eliminate British budgetary support by the end of 1973, except for the "topping up" of salaries of the remaining British expatriate civil servants in Malawi. The prospect that the government will succeed in this objective seemrs reasonably good. 5. Gross investment rose from 11 percent of GDP in 1964 and 1965 to 20 percent for the last two years. Part of this increase was financed by a rise in net capital inflow from US $3 million in 1960 to about US $40 million in 1970. Another part was met during 1966 and 1967 by drawing down foreign exchange reserves. However, a rising portion of gross investments was covered by an increase in private domestic savings. In 1964 domestic consumption almos-t equalled GDP; Malawi now saves about US $19 million annually, equivalent to about 30 percent of total investment. 6. Since independence, public investments have increased by about 30 percent a year with increasing emphasis in recent years on agriculture and transport. A number of agricultural schemes, incorporating provision of inputs, credit, extension services, marketing and some infrastructure, were introduced at Salima (financed by German aid) and at Lilongwe and Chikwawa (financed by IDA) during 1968 and 1969. Investment in roads has increased since 1968 with particular emphasis on opening up access to the northern part of the country. However, some of the increased public investment during the period since independence has been in projects which in economic terms were undertaken prematurely. 7. The government has no investment plan for the economy as a whole, but maintains a three year revolving central government development program which includes proposed expenditures on projects and possible means of financing. It is currently formulating some general economic targets for the next 10 years. The current central government development program for FY1972-FY1974 envisages expenditures of about US $37 million a year, slightly higher than the average of the previous two years. Development of agriculture and roads is emphasized but a notable amount of investment is allocated to complete construction of the new capital at Lilongwe. The proposed Karonga project and the Lilongwe II project approved last May for an IDA credit of US $7.25 million (No. 244) form the core of the current program for agricultural development. 8. The overall level of public investments for the next three years under the current development program is probably feasible provided that  -3- an adequate supply of experienced manpower is available. This may be especially important in agriculture where the recent rapid increase in investment from US $2 million in 1965-1967 to US $14 million in 1968-1970, i.e., from 6 percent to 17 percent of total central government develop- ment expenditures, was not matched by a comparable expansion of the sup- ply of skilled manpower for extension services. Already there are a number of unfilled vacancies, particularly at the level of lower field assistants. With a further budgeted increase in agricultural investments to US $28 million for the following three years (thus reaching about 25 percent of total central government development expenditures), the demand for skilled manpower will increase. The projected expansion of agricul- tural education will go some way to meet the gap, but dependence on expa- triate technical and managerial personnel is likely to remain heavy. 9. In the absence of public savings, the level of public investments that can be financed depends directly on the flow of external capital assistance to Malawi. Improvements in the fiscal situation of the central government would first go to reduce external budget support and the scope for local borrowing to finance public investment, although rising, is still limited. High priority projects in sectors such as agriculture, transport and education would, therefore, require a high proportion of external financing, including financing of local expendi- tures. 0U. The service on Malawi's external public debt as of December 1970 amounted to iS $5.7 million or about 9 percent of export earnings. It is probable that despite continued rapid increase in exports, Malawi's debt service burden will increase during the next few years. The govern- ment has acknowledged the need for a careful management of capital flows and external debt, so that borrowing on hard terms is kept to a minimum and restricted to economically justifiable projects. Malawi should seek the bulk of its external financing on concessional terms. PART II - BANK GROUP OPERATIONS 11. Malawi has to date received a total of six IDA credits amounting to US $40 million. There have been no-Bank loans or IFC investments. A summary statement of IDA credits as of November 30, 1971, is at Annex I. 12. Three development credits, totalling US $23 million, have been made for highways, education and power, respectively. The remaining three credits, totalling US $17 million, have been for integrated rural development, with the emphasis on peasant agriculture. This approach has been particularly successful in Malawi, and the Government proposes to follow it wherever feasible. 13. One of the first projects supported by IDA in Malawi, a US $6 million IDA credit in 1968 for Phase I of the Lilongwe Agricultural Development Project (No. 113), helped finance on an integrated regional basis land development, land reorganization and registration, marketing  - 4 - and storage facilities, extension services, credit for farm inputs and administrative services and staff training. A second phase of this project was approved for financirg by an IDA credit of LS $7.25 million in May 1971 (No. 244). 1I. Future Bank Group lending will continue to emphasize rural development. With the assistance of the Bank's Permanent Mission in Eastern Africa, the Government of Malawi is preparing a second phase of the Shire Valley Agricultural Development Project, which also was suc- cessfully launched in 1968 with IDA assistance (Credit No. 114 of US $3.7 million). The project will provide a package of services to in- crease productivity and the standard of living of a large number of small farmers in the area. In cooperation with the government, projects in education, transportation and power are also under preparation. 15. Although there have been delays in project execution in some cases, particularly in the initial stages, progress is now generally satisfactory. In the first phases of the Lilongwe and Shire Valley Projects, there were procedural delays in applying for disbursement which have been satisfactorily overcome. Construction of the primary teacher-training college under the Education Proje.-t is behind the initial schedule, owing to a last minute change of site. Progress of this component of the project has been satisfactory since construction started in mid-1970, and the remaining portion of the project has been progressing well from the beginning. PART III - THE PROJECT Sector Background 16. Agricultural production over the past four years has grown at about the same rate as GNP, that is, by 8 to 9 percent annually. The country is divided into three regions: Southern, Central and Northern (first Map). Whereas maize, cotton, pulses and groundnuts are grown throughout the country, cotton and tea are produced mainly in the south; tobacco, groundnuts and pulses in the Central region; and rice in the north. Maize is the principal subsistence crop. Production is estimated at 1.0 to 1.3 million tons per year. Surplus quantities are marketed, some directly to shopkeepers and the rest to the Agricultural Development and Marketing Corporation (ADMARC). Except in years of shortage, most of ADMARC's purchases are exported to neighboring countries. AIMARC has statutory monopoly rights to purchase all major crops grown on smallhold- ings at prices it fixes itself. However, it has so far chosen to exercise this right only for cotton, groundnuts and tobacco. Most rice and maize is also sold to ADMARC, but farmers are free to sell directly to shop- keepers. ADMARC purchases farm inputs in bulk for smallholders through- out the country and distributes them throtugh its depots. 17. During the last five years, domestic consumption of milled rice from the Northern Region has gone up by 50 percent. Exports have climbed from 1 to 3 percent of total exports, and further growth is expected.  -5- Malawi continues to be somewhat sheltered from the decline in world mar- ket prices through her ability to sell high quality rice under favor- able trade arrangements in markets in Southern Africa. The Ministry of Agriculture and Natural Resources (MANR) expects to increase marketed rice production from 9,600 tons in 1970 to 32,000 tons by 1975, with the Karonga area maintaining its present share of 35 percent. Ihese fore- casts are based on the implementation of small irrigated schemes on the plains along Lake Malawi. Several such schemes have been started in the Central and Southern regions under bilateral aid programs, mainly British. 18. Many farmers in the Central Plains grow groundnuts and tobacco as cash crops, in addition to maize. Like cotton, the main cash crop of the lowlands, they are grown mainly for export. Although subject to seasonal factors, output of these cash crops has not shown the marked variations that have characterized the marketing of surplus food crops. Cash crop production by smallholders has been increasing at some 7 per- cent per annum in recent years, and now accounts for more than 9 percent of GDP (as against 6 percent in 1957). The overall contribution of cash crops to GDP is about 15 percent, and of agriculture as a whole slightly less than 50 percent. 19. The long-term growth of agricultural production has been achieved primarily by expansion of acreage. The recent growth in cash crop pro- duction and in marketing, of surplus food crops has been due in part to bringing back under cultivation land which had been neglected during the previous decade. Further expansion of acreage is restricted by the limit- ed area of agriculturally suitable land, particularly in the densely popu- lated Central and Southern Regions. To maintain present output, it will be necessary in many areas to protect farm land from erosion. The Karonga project includes soil conservation measures in the areas to be covered. Further production increases will be dependent on increases in yields. Recent research and pilot programs have shown how such increases can be achieved practically. 20. The cattle population in Malawi is estimated at about 510,000 head and is increasing by about 3 percent per annum. Most are in small privately owned herds. Beef consumption has more than doubled since 1965, and presently stands at 57,700 head per annum. Beef fattening is carried out mainly in the Southern and Central Regions near the main consumption centers, but there is a severe shortage of feeder cattle and projections emphasize the future importance of the north as a major area for produc- tion. The proposed project would initiate this development. 21. There are shortages in all categories of staff in the Agricul- tural Services in Malawi and training facilities will eliminate only those in some categories by 1972. The Bunda College of Agriculture - a part of the University of Mal;awi - will produce, from 1972 on, about 12 graduates in agriculture per year, so that most of the senior profes- sional posts will continue-to be held by expatriates during the next few years. Technical Assistants are trained in the Colby College of Agri- culture, which has an annual output of about 125. This is inadequate  -6- and Government is considering the creation of a National Resources College to fill the need. The Project 22. A report entitled "Appraisal of Karonga Rural Development Project - Malawi" (No. PA-106a, dated December 30, 1971) is being circulated separately. A Credit and Project Summary is provided in Annex III and the project area is shown in detail in the second map. 23. The Karonga project was prepared with substantial assistance from the Permanent Mission in Eastern Africa. The project was appraised in the field in April 1971. Negotiations for the proposed IDA Credit were held in Washington in November/December 1971. The Malawi delegation was led by Mr. G. Jaffu, Secretary to the Treasury. 24. The proposed project, the first phase of a long-run develop- ment, would be a five-year program of agricultural development in the Karonga area of the Northern Region supported by improvements to health services and transportation. The region has considerable development potential, as it has high, although poorly distributed, rainfall and large areas of good soils, and is inhabited by industrl- ous people who have shown their interest in development by their will- ingness to participate in Government-sponsored pilot projects. But the area lacks even the minimum infrastructure necessary. It is almost cut off from the rest of Malawi by a high mountain range that is impassable to commercial transport and must rely on the Malawi Lake Service, which, however, needs rehabilitation and additional investment. Improvements are also needed in health facilities since the prevalence of disease and the danger of its spreading with the expansion of the area under irrigation present an obstacle both to economic and human development. 25. The project would comprise: (a) Construction of eight rice schemes: (i) two irrigated rice schemes with intake and water control structures to produce double-cropped rice on about 1,500 acres, involving the settlement of about 830 farmers; (ii) six schemes for rain-fed rice with simple earth structures to control flood waters to produce single-crop rice on about 6,000 acres, involving the settlement of about 2,000 farmers. (b) Improvements to dry-land crop production: The project would improve production of maize, cotton and groundnuts on about 7,800 acres, involving about 1,750 farmers already farming in the area, through the provision  -7- of extension services and of seasonal inputs (seeds, fertilizers, pesticides) and other inputs such as implements and work oxen. (c) Livestock development: The project would assist small cattle owners in two ways: first, by improving animal health and in- creasing productivity by constructing 22 new dipping tanks, enlarging field veterinary services and provid- ing drugs; second, by improving marketing conditions by establishing four new cattle markets, improving stock routes, and developing 18,000 acres of holding ground. (d) Seasonal and medium-term credit: Seasonal credit would include seed, fertilizer and pesticides. Medium-term credit would include implements and work oxen. Farmers who received proj- ect credit would be required to register with the nearest ADMARC market where they would be obliged to sell their produce. Project credit officers in attend- ance would collect repayments from each sale. (e) Rehabilitation of the freight service on Lake Malawi: In order to increase the speed, capacity, and re- liability of the freight service, the project would construct berthing facilities and associated structures at two ports on Lake Malawi, provide cargo handling equipment at the two ports and provide a 200-ton self- propelled vessel for the Lake Service. The detailed plan for lake transportation is being elaborated by consultants and the submission by the Borrower of a plan satisfactory to IDA for improvement of the Lake Service would be a condition of effectiveness of the Credit Agreement. (f) Improvements to health facilities in the project area: The project would construct five rural health out- posts, improve Karonga district and Chilumba Rural Hospitals, and provide staff and drugs for bilharzia control within the rice schemes. This component of the project, which would absorb only about 4 percent of project funds, would make an essential contribution to increasing agricultural productivity through the reduc- tion of debilitating disease and the protection of health particularly in the areas of irrigated cultiva- tion.  -8- (g) Further studies: Studies would be made on such subjects as improved rice varieties, alternative crops to rice, the scope for irrigation from Lake Malawi or unexploited rivers, drainage problems and cotton and groundnuts fertiliza- tion. If justified by these studies, consultants would be engaged to prepare a feasibility study for a second- phase project. 26. A Project Unit within the Ministry of Agriculture and Natural Resources (MANR) would carry out the agricultural and health components of the project, the latter in consultation with the Ministry of Health. A Project Manager with headquarters in the Karonga district and repolt- ing directly to the Permanent Secretary of MANR, would be in charge of day-to-day operations. His appointment would be a condition of effect- iveness of the Credit Ageement. Malawi Railways Ltd., under the Minis- try of Transport and Communications, would be responsible for the rehabilitation of the Lake Service. As several Ministries have responsibilities concerning the Project, a Karonga Rural Development Project Liaison Committee would be established, whose members would be senior officials from MANR (Chairman), the Office of the President and Cabinet, the Treasury, the Ministries of Works and Supplies, Transport and Communications, Health and Community De7elopment and Local Govern- ment, and the Project Manager, who would be Executive Secretary to the Committee. The Liaison Committee's primary function would be to co- ordinate inter-Governmental project activities. The establishment of such a Committee would be a condition of effectiveness of the Credit Agreement. 27. Total project costs are estimated at US $7.8 million net of taxes. The estimate of foreign exchange component is US $h.1 million. The proposed credit of US $6.6 million would finance 85 percent of the total cost of the project, that is, the whole of the foreign exchange costs and US $2.5 million, which is about 69 percent of the local cur- rency costs estimated at US $3.7 million. The balance of US $1.2 million of local costs would be provided by Malawi in the form of annual budgetary allocations by the Government over 5 years. The Government would recover part of its contribution from participants in the project by way of charges for services in preparing land for irri- gation and cattle dipping and grazing fees. The Government's net con- tribution to project costs would consequently be about 10 percent and that of the participating farmers about 5 percent. Malawi's depend- ence on external budgetary support and the justification for financing part of the local cost under the IDA credit have been set out in para- graph 9 above. 28. Procurement of vehicles, machinery, equipment, fuel, fertil- izers, pesticides, drugs, construction of ports, access roads and barges, totalling about US $2.7 million in value, would be by inter- national competitive bidding in accordance with Bank/IDA procurement  guidelines. Items of equipment costing less than US $25,000 equivalent in any year would be purchased subject to local tender. The program of staff housing, workshop and office development, estimated at about US $1.2 million, would be too small and widely scattered to attract in- ternational competition to this remote and inaccessible area, and local competitive tenders would therefore be invited. It is expected that the jetty for Chilumba port may be constructed under an extension to an existing road contract awarded as a result of international tender. All farm inputs procured by international competitive bidding would be handled through ADMARC, which follows procedures satisfactory to IDA. All tenders would be processed by the Central Tender Board, whose proce- dures are satisfactory to IDA. Boreholes, irrigation works, cattle bridges, feeder roads, firebreaks, dipping tanks and their approaches would be built by MANR forces. 29. The agricultural component of the project would directly bene- fit 4,600 farmers, including some 2,800 who would be newly settled, and many small cattle farmers. Most of the labor required for the imple- mentation of the project will be provided by the farm families themselves. The small amount of extra labor required will come from other families living within the area of each scheme, and will be paid for in kind. Generally, the farm families in the project area presently live at sub- sistence level and are underemployed, and there is almost no opportunity for employment for cash wages in the area. By providing employment opportunities under the guidance of the project's technical personnel, the project would make an important contribution to the area's further development. 30. Based on the Bank's price forecasts for the main agricultural commodities to be produced, the overall return to the economy on the total investment in the project is estimated to be not less than 12 per- cent. In terms of the cash income expected to accrue to the participat- ing farmers, the impact of the project will be considerable. Average annual net cash incomes per farm family would increase from about US $8 to about US $200 per annum on double-cropped irrigated rice schemes, to about US $190 per annum on rainfed rice schemes and to about US $110 per annum for farmers with dry-land crops. The project will also have a broader significance; it will introduce to a hitherto largely isolated area of the country the benefits of integrated development en- joyed thus far only by the more favorably located regions, and it will provide invaluable practical experience to guide further development. PART IV - LEGAL INSTRUMENT AND AUTHORITY 31. The draft Development Credit Agreement between the Association and the Republic of Malawi, the Recommendation of the Committee provided for in Article VI Section 1 (d) of the Articles of Agreement of the Association and the text of a resolution approving the proposed credit are being distributed to the Executive Directors separately.  - 10 - 32. The draft Agreement conforms substantially to the pattern of the earlier credits for agricultural projects in Malawi. 33. I am satisfied that the proposed development credit would comply with the Articles of Agreement of the Association. PART V - RECQMMENDATION 34. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President Attachment Washington, D. C. January 6, 1972  Annex 1 Statement of IDA Credits to Malawi as of November 30, 1971 Credit No. Year Purpose Amount (US$ million IDA Undisbursed) S-2 MAI 1967 Highway Engineering 0.49 102-.MAI 1967 Education 6.30 1.40 112-MAI 1968 Highways 11.50 1.52 113-MAI 1968 Agriculture - Lilongwe I 6.oo 1.64 114-IMAI 1968 Agriculture - Shire Valley 3.70 1.59 178-MAI 1970 Power 5.25 2.89 244 -MAI 1971 Agriculture - Lilongwe II 7.25 7.25 Total 404.9 16.29 of which has been refinanced 0.49 Total now outstanding 4o.00 Total undisbursed 16.29   Annex II COUNTRY DATA Area 119,000 square kilometerrs Population (estimate 1970) Total 4.4 million Rate of Growth Around 2.5 percent per year Density 37 per square kilometer Political Status Independent Republic (Independence on July 6, 1964) Gross National Product (1970) at market price K 266 million per capita K 60 $ 72 Average annual growth rate (1964-1970) at current prices 10.2 percent at constant prices 5.3 percent Gross Domestic Investment (1970) K 54.6 Industrial Origin of GDP (1970) in Percent of Total Agriculture, Forestry and Fishing 50.0 Mining and Quarrying .1 Manufacturing 12.5 Building and Construction 4.8 Water and Electricity 1.1 Transport and Communication 5.0 Distribution 9.6 Banking, Finance & Insurance .2 Community Se rvices 10.5 Other Services 5.2 Gross Domestic Product lOOoO (non-monetary sector) (Lho.O) Financing of Public Development Expenditures (K Million) 1964 1967 1970/71 Development Expenditures & Other Public Sector Investments 8.8 13.1 42.9 Public Savings 1/ -12.3 -10.2 -3.L Current Budget Support (for Central Government)144 11.9 6.9 Development Domestic Loans .1 2.8 5.2 Development External Loans & Grants 306 6.o 33-5 Changes in Balances of Govemnment Funds -3.0 -2.6 - . 1/ Of Central Government, Local authorities and public entities  -2- Balance of Payments (K Million) 1964 1967 1970 Exports 24.4 40.4 47.5 Iriports 28.6 50.]. 68.h Trade Balance (-4.2) (-9.7) (-20.9) Services (net) -13.0 -18.9 -20.5 Transfers 18.1 17.7 13.]. Current Account Balance . -10.9 283 Private Long-term Capital 1.1 3.5 -3.5 Public Long-term Capital 1.0 9.1 29.1 Others including Errors & Omissions 14 -2.3 7.9 Capital Account Balance 2.5 1().3 D _i SDR - - 1.6 Overall Balance +3.4 -.6 +6.8 Official Foreign Exchange Reserves, end of period ($ million) 22 22 30 External Public Debt (1970) Total outstanding as of December 31, 1970: Disbursed $117.4 million Including Undisbursed $152.1 million Debt Service Ratio (percentage) 9 IMF Position Quota $15.00 million Drawings as of December 31, 1970 $0.95 million Initial allocation of SDR's $1.89 million units Currency Equivalent US $ 1.0 = 1.3 Kwacha (since December, 1971) US $ 1.0 = 1.2 Kwacha (prior to that)  Annex III CREDIT AND PROJECT SUMMARY Borrower: The Government of Malawi Amount: US $6.6 million equivalent Terms and Conditions: Payable in semi-annual installments commencing July 1, 1982 and ending January 1, 2022 with a service charge of 3/4 of 1 percent per annum Project: THE KARONGA RURAL DEVELOPMENT PROJECT An integrated rural development project consisting of (a) construction of irrigation and drainage works for rice schemes; (b) improvements to dry cultivation of maize, cotton and groundnuts; (c) live- stock development; (d) seasonal and medium-term credit to project farmers; (e) further studies on crops and hydrology and a feasibility study for a possible second phase; (f) improvements to health facilities and (g) rehabilitation of the freight service on Lake Malawi. 'pecial Project Features: The improvement of health facilities in the area would make a contribution in increasing agricultural productivity. The measures to be taken are bilharzia control, the construction and operation of rural health outposts and improvements to rural hospitals. Cost of Project: (US$ Million) Local Foreign Total Component Rice Schemes lol 0.7 1.9 Dryland Crops 0.1 0.1 0.2 Livestock Development 0.3 0.3 o.6 Incremental Farm Inputs 0.1 0.2 0.3 Health Facilities 0.2 0.1 0.3 Transportation 0.3 1.0 1.2 Project Administration 0.9 0.9 1.7 Further Studies 0.3 0.4 0.7 Contingencies 0.4 0.4 0.8 Total 3.7 4.1 7Q8  -2- Financing: (US$ Million) (Percentage) IDA Credit 6.6 85 Government 0.8 10 Project Participants 0.b 5 7.8 100 Procurement Arrangements: Goods and services with a total value of about US$2.7 million would be procured by international competitive bidding. Items of equipment costing less than US$25,000 equivalent in any year would be purchased subject to local tender. Other small and widely scattered items amounting to about US$1.2 million would be subject to local competitive bidding. It is expected that the jetty for Chilumba Port may be constnrcted under an extension to an existing contract awarded as a result of international tender. Estimated Disbursements: 1971/72 1972/73 1973/74 197h/75 1975/76 1976/77 1977/78 0.1 1.2 1.5 1.5 1.3 o.8 0.2 Consultants: The Borrower would be assisted in carrying out studies on hydrology and preparing a feasibility study for a second phase project. Rate of Return: Economic rate estimated at 12 percent. Appraisal Report: Report No. PA-106a;December 30, 1971 Agriculture Projects Department  DEM. 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