Niger - Niamey International Airport Project

FILE COPY DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No.P-1381a-NIR REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF NIGER FOR AN AIRPORT PROJECT April 10, 1974 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization.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.  CURRENCY EQUIVALENT Unit = Franc CFA (CFAF) US$ 1 = CFAF 250 CFAF 1 = us$ o.OoL GFAF 1,000 us$ 4.o0 CFAF 1,030,000 = US$ 4,0o0 Fiscal Year - October 1 to September 30  REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF NIGER FOR THE NIAMEY INTERNATIONAL AIRPORT PROJECT I submit the following report and recommendation on a proposed development credit to the Republic of Niger for the equivalent of US$5.0 million on standard IDA terms to help finance a project for the developmaent of Niamey International Airport. The proceeds of the credit would be made available to ASECNA (Agence pour la Securite' de la Navigation Ae'rienne en Afrique et 'a Madagascar), which will be responsible for the execution of the proj ect. PART I: THE ECONOMY 2. The basic ?roblems of economic development in Niger were set out in a report entitled "The Economic Position and Prospects of Niger" dated May 1972 (R72-125). An economic mission has visited Niger in October/November 1973 and its report is expected to be completed in July 1974. Annex I contains country data. Background 3. Niger has been classified by the United Nations as one of the 25 "least developed countries" in the world. Like its sahelian neighbors, it suffers from a number of serious growth constraints: a landlocked situation coupled with long borders and formidable internal and external distances, limited domestic markets, lack of water and other natural resources which can be easily and quickly developed, generally poor soils, uneven population diEtribution and a low level of education, particularly in the rural areas. These constraints have been compounded since 1967 by six consecutive years with little or no rainfall. The magnitude and the effects of this drought are described in more detail in a report entitled "Appraisal of Drought Relief Fund Project--West Africa" dated October 24, 1973 (R73-112). 4. Niger's economy is almost entirely dependent on agriculture and livestock, and is likely to remain so for the foreseeable future. Together, these two sectors account for half of GDP and about 80 percent of export earnings, and make the economy particularly vulnerable to adverse weather conditions. The sectors of services and industry (mainly construction and uranium mining) account for a further 35 and 10 percent of GDP respec- tively. 5. Mainly as a result of the drought, real GDP per head, which had been growing slowly from pre-independence years until about 1967, has been declining at an increasingly rapid pace since then. Production of basic grains (millet and sorghum) has declined and is expected to fall to less than 800,000 tons in 1973/74, as compared with a "normal" level of about 1.2 million  tons. Export crops have also been affected both through lower yields and through reallocation of land and labor to foodcrops; whereas groundnut produc- tion had reached a peak of nearly 300,000 tons unshelled in 1967/68, it is not likely to exceed 30,000 tons in 1973/74, while the cotton crop will be less than 2,000 tons against 10,500 tons in 1969/70. Livestock losses are extremely difficult to evaluate, but are estimated to have amounted in 1973 to about 30 percent of tuie "normal" stock. 6. Although small percent changes in average per capita incomes are not very meaningful in Niger's context, the setback caused by the drought has had very serious concrete effects. As a result, the share of national income going to rural areas, i.e., about 90 percent of total population, has declined seriously, especially in most recent years. Second, large groups of the population have seen their already low standard of living reduced further. To ensure their basic food requirements, they have withdrawn from the cash economy into the pure subsistence sectors. A further effect has been the acceleration of the southward migration of population, creating serious political, social and health problems in addition to the economic ones, and taxing heavily the administration in its attempts to deal with them. Finally, the free distribution of food has tended to create among the destitute popu- lation an attitude of dependency which might provide difficult to reverse, particularly if prolonged. 7. During the past 4 to 5 years the economy's dependence upon external factors has remained very strong. This is evidenced notably by the size of the resource gap which has varied between 5 and 9 percent of GDP with an average proportion roughly 50 percent higher than the ratio of public invest- ment to GDP. The current deficit was growing until 1970 when it exceeded US$20 million equivalent. Since then uranium exports--a new item in the balance of payments--have somewhat improved the situation. Very high prices for groundnuts and groundnut oil over the past two years have brought addi- tional relief to the current balance. However, Niger has not been able to take full advantage of the favorable markets because quantities exported have fallen sharply as a result of the drought. At the same time, forced sales of live animals by herders, because of the drought have created a buyers' market in Niger's second major export. 8. Over the last 5 or 6 years the general picture has been one of a deteriorating real economy. However, in the same period, this picture has been coupled with one of relative financial ease. A rather strict control of current expenditure by the Government and rising revenues mainly from taxes on the "modern" sector have resulted in a budget current surplus of CFAF 3 billion in 1971/72, nearly 25 percent of current receipts, and about triple the budgeted surplus. Further, the elimination of past budget deficits and arrears, as well as the accumulation of deposits from public and semi- public institutions (such as the marketing organizations and the social security fund), has resulted in an increasingly liquid position of both the treasury (currently some CFAF 4 billion) and the banking system. Finally,  - 3 - a very sizable increase in foreign assets since 1970--now amounting to some CFAF 11 billion, or 6 months worth of imports-- has resulted from movements in unrecorded trade with neighboring countries, from the inflow of foreign aid (mostly grants) and, to some extent, from direct foreign investments (such as the uranium mine and a textile mill). 9. The last year for which external debt figures for Niger were reported was 1970, when the total outstanding amount was about US$63 million equivalent, including an undisbursed portion of about US$31 million. Since a large part of the foreign aid inflow to Niger since then has been in the form of grants, it is estimated that the country's foreign debt has not in- creased substantially in the past three years. However, debt service payments, which were equivalent to 3.4 percent of exports of goods and non-factor services in 1970, are estimated to have reached about 6 percent in 197!I and 1972. Government Policies 10. Until 1971 Government development policies were embodied in a fairly sophisticated planning system of 3 interrelated components: a ten-year (1964/ 74) "Perspectives Decennales," medium-term "Plans" (e.g., for 1971/74) and rolling four-year public investment "Programmes" designed to permit necessary adjustments over time. The system also provided for yearly reviews of the execution of public investment programs, an exercise all too frequently over- looked elsewhere in Africa. 11. However, the Government has become increasingly dissatisfied with this system for three main reasons. In the first place, the Government has resented the fact that outside observers (mainly aid donors) have frequently and overtly criticized the Government for the non-achievement of officially stated targets; secondly, the Government has become disillusioned with the results of past development efforts, including national planning and external assistance; finally, the very flexibility built into the planning system led to repeated adjustments, resulting in a gradual but significant drifting away from the Government's initial objectives. Consequently, the Government decided in 1971 not to make official the draft "Plan 1971-74," to stop the formal public investment review process and to refrain from using the "Perspectives Decennales" as well as past 'Plans" and "Programmes" as a frame of reference. At the same time, a decision was taken to proceed with the preparation of new "Perspectives" for 1972-82. While a comprehensive picture of the Government's development strategy is not available at present, there is little doubt that the Government will give first priority to agri- culture, with particular emphasis, on foodcrop production and the improvement of living conditions in the rural areas. 12. Niger's immediate problem is the food shortage expected again for 1974, due to the 1973 drought. The estimated import requirement of at least some 300,000 tons of staple grains alone will tax heavily the country's  - 4 - financial resources and raises formidable difficulties in terms of supply sources, external and internal transportation, storage and organization of distribution, which seem to be beyond the present capacity of the Govern- ment. Emergency relief supplies from abroad and foreign assistance in dealing with the transportation and distribution problems may again be necessary. Prospects 13. The basic constraints to development in Niger can hardly be mini- mized and for a long time to come the central problem will remain the rela- tionship between population and resources, primarily agricultural resources. Since in the current religious, social, ethnic and political context of Niger it is unlikely that an active population policy could be successfully imple- mented in the foreseeable future, any solution to this problem would have to aim first at an increase in agricultural productivity. 14. Methods of advance technology, such as soil analysis by satellite, nuclear and solar energy, and artificial rain are being experimented with or are contemplated by the Government as a partial solution to the country's problems. However, until more conclusive and applicable results of these trials are reached, the Government is pursuing a number of more "conventional" schemes ranging from general improvements not requiring any specific organiza- tional framework, such as widespread distribution of improved seeds, to the more complex integrated rural development projects and capital-intensive operations, such as irrigation projects and breeding and fattening ranches. All these projects aim at increasing productivity in agriculture, mainly yields per hectare, since the availability of agricultural land is gradually but unavoidably becoming a major constraint, and growth through extensive production methods increasingly more difficult. 15. At the same time, the Government is actively promoting mineral prospecting and production. Plans are being implemented to double uranium production, to reach 1,400 tons of concentrates in 1974. Exploration for other minerals and oil is being carried out by a number of foreign firms. Encouraging findings by oil companies have been reported in the Eastern part of the country, while a number of other minerals (copper, manganese, limestone and iron ore) have been found in the South-West, mainly in the Liptako-Gourma area. However, the cost of transportation is likely to be a major constraint to the economic exploitation of these resources. 16. Short of major, unusually rich discoveries of underground wealth or a technological breakthrough in the development of agriculture, Niger's [oreseeable economic future cannot be depicted as bright. In view of the prospective resource gap, the level of poverty of the country, the limitations of its resources and of its growth potential, as well as its heavy dependence on external factors, foreign aid to Niger should continue on concessionary terms. Also, in spite of the present combination of a high level of foreign  reserves and liquid funds in the public sector, Niger cannot be expected in the long run to make large contributions to the financing of public investments. Foreign aid funds should, therefore, continue to finance a high proportion of local costs if development projects are to be implemented. PART II: BANK GROUP OPERATIONS IN NIGER 17. To date the Bank Group contribution to Niger's development consists of five credits (Annex II). The first credit was made in 1964 to finance a highway development project, which was satisfactorily completed in 1969. The highway maintenance project, for which a credit of US$6.1 million was made in 1968, was due for completion in October 1973. To enable continuation and extension of the training program included in the project, an increase of US$350,000 in the amount of the credit has been recently approved by the Executive Directors, and the Closing Date has been postponed by 15 months, until December 31, 1974. A US$584,000 credit was made in 1970 for an agri- cultural credit project. Although project implementation has been delayed and credit requirements have been so far below appraisal estimates, the project is now proceeding satisfactorily and is providing long-term benefits by improving the quality of Niger's agricultural extension services. A US$5.7 million credit was made to Niger in 1972 to help finance a highway construction project. The project is proceeding satisfactorily. Due to the various recent currency realignments, an increase of US$850,000 in the credit amount has been recently approved by the Executive Directors to cover .m increase in the dollar costs of the project. It is expected that the project will be completed and the credit fully disbursed by the present Closing Date. Finally, in October 1973, the Executive Directors approved a US$2 million credit to Niger within the US$14 million of credit extended to the six sahelian countries for a drought relief fund project. 18. Recognizing the magnitude of the constraint of inadequate transport and communications on the development of Niger the Bank Group's strategy in the country has been so far concentrated mainly on the development of the internal transportation infrastructure, primarily roads. This strategy has complemented the efforts of the Government and other aid donors and has helped lay the foundation of a minimum infrastructure for the development of the productive sectors of the economy. 19. Bank Group assistance in the development of the transportation sector will continue. However, future IDA lending will be increasingly channelled directly to the two main productive sectors, agriculture and livestock, with a view to raising the income of the rural population. An integrated rural development project has been recently appraised and is scheduled to be submitted shortly to the Executive Directors for considera- tion. The project would cover the whole department of Maradi and is designed to provide benefits to about 70,000 families, involving some 500,000 people. Its primary aim would be to raise productivity in agriculture and animal husbandry through improved extension services, agricultural credit, road development, soil conservation, health care and functional literacy.  -6- 20. A number of other projects are also under consideration by the Association for financing and are scheduled to be submitted to the Executive Directors for consideration in FY75 and FY76: a telecommunications project, which a Bank mission is currently helping prepare; an education project likely to result from the sector work currently being done by the Government with the assistance of a Bank staff member, specifically appointed for this purpose; a road development project, likely to result from the transport sector review undertaken by the Bank in February 1974; a project for the production of rice under irrigation, currently under preparation; and a livestock project currently being prepared by the Fonds d'Aide et de Cooperation (FAC). 21. Niger remains one of the countries in which external assistance is limited at present more by the country's capacity to identify, prepare and implement projects than by shortage of external funds. To alleviate this constraint, projects financed by the Bank Group in Niger will generally include elements of technical assistance and training of local staff. 22. The Bank Group, which ranks sixth in terms of volume of aid committed, about $17 million, behind France, the Fonds Europeen de Developpement (FED), Canada, USA and Germany, and roughly on a par with UNDP, has been a relatively small lender to date, providing only about 7 percent of total foreign aid committed to Niger during the 1968-73 period. Ilowever, Niger is one of the countries to which it has been possible to devote additional staff resources since the Bank's reorganization, and these efforts should be reflected in an appreciable increase in the IDA resources channelled to Niger in the coming years. PART III: TRANSPORTATION IN NIGER 23. Niger's land-locked economy is burdened with high transport costs because of the long distances to be covered within the country and to the nearest ocean ports. Road transport is predominant, rail transport non- existent. Mechanized surface transport is complemented on the one side by animal transport, on the other by air transport. The sector is ,he responsi- bility of the Ministry of Public Works, Transport and Urbanism, with the Directorate of Transport being responsible for policies and regulations, while the Directorate of Public Works is in charge of construction and maintenance of the transport infrastructure. A mission has recently visited Niger to review this sector, focussing mainly on roads with some attention given also to river transport. 24. Niger has about 8,000 km of roads of which less than 10 percent are paved. The main backbone of the road system is the 1,800 km east-west axis between the Mali and Chad borders, which crosses the most fertile and densely populated parts of the country, and which is being improved with assistance from IDA, Canada and FED. Secondary roads stretch from this  axis to the northern desert regions with connections to the Mediterranean across the Sahara, and to the south, through neighboring countries to Join the various access ways to the seaports of Abidjan, Cotonou, Lagos and Lame. The Bank Group has been associated with improvements of these access ways in neighboring countries, as in the case of the Parakou-Malanville highway in Dahomey, for the rehabilitation of which a $11.8 million credit was made in July 1973. This road links with the railway at Parakou to carry about 45 percent (about 150,000 tons in 1970) of Niger's external trade through the port of Cotonou. 25. Water transport is still of little importance, primarily due to highly irregular water levels and lack of infrastructure to harness the main waterway, the Niger river. However, the recent completion of the Kainji dam in Nigeria makes the river potentially navigable for about 7 months per year. Canada (CIDA) is currently undertaking a US$4 million study of the feasibility of this mode of transport with experimental barge trips between Niamey and the coast, while USAID has financed the raising of the bridge over the river at Malanville. Further, a prefeasibility study of a dam in Niger at Kaindadji near the Malian border has just started. If feasible, this dam would render the river navigable all year round between Bamako in Mali and Port Harcourt in Nigeria. 26. Although only limited investments in the water transport system seem justified until completion of these studies, in the long term substantial im- provements in this system might in time bring significant economic benefits to Niger in the form of lower transport costs, particularly as this mode of transport is suitable for heavy bulk cargo, such as petroleum products. Furthermore, an adequate water transport system would enhance the economic justification of the exploitation of mineral resources, which have been identified in the Liptako-Gourma area. 27. Air transport in Niger is centered around Niamey airport, the closest to Europe of all West African airports south of the Sahara. Five airlines provide international services to Niger, including Air Afrique, a multinational company of which Niger is a shareholder. Internal air trans- port is served by Air Niger, a national airline with a route mileage of about 2,600 km and scheduled services to five local airports. These services are complemented by the operations of some minor charter services. 28. Aviation, as a mode of transport, is the responsibility of the Directorate of Civil Aviation and Meteorology of the Ministry of Public Works, Transport and Urbanism. However, in view of the still limited number of its trained staff in the civil aviation field, most of the functions of the Directorate are being carried out by ASECNA, a multinational corporation formed in 1959 by the Treaty of St. Louis between 14 African states, includ- ing Niger, and France. Pursuant to this treaty, ASECNA is entrusted with tliree main functions: (i) to control air navigation over the territories of its African members, as well as approach and landing aids at their main airports (art. 2); (ii) to manage, operate and maintain, if requested,  - 8 - ground facilities of member states' airports (art. 10); and (iii) to study, design and construct, if requested, airport facilities for its member states (art. 18). 29. In 1961 ASECNA entered into an agreement with the Government of Niger, the "Contrat Particulier," on the basis of which ASECNA manages, operates and maintains Niamey airport and some other minor airports in Niger. Under this agreement, ASECNA may be requested to execute, as an agent of the Government, specific projects for the development of Niger's airports. To this end, the Government and ASECNA would enter into a specific agreement, the "Contrat Special," for each such project. 30. ASECNA is governed by a Board of Directors, designated by the member states. A Director-General is ir. charge of its management and is assisted by technical staff drawn from the various member states. ASECNA's headquarters are in Dakar, with a representative in every member country. The representative is assisted by technical staff and can call upon head- quarters' experts whenever required. ASECNA has currently a staff of about 6,000, of whom about 400 are expatriates from France and countries other than the 14 African member states. Abouit 350 of the staff are based in Niamey, where ASECNA maintains one of its Flight Information Centers (FIC) serving the area, and its main regional school for training of all technical staff (air traffic controllers, meteorological personnel, etc.). 31. The total cost of ASECNA's operations in its member countries is about CFAF 9 billion (US$36 million equivalent) a year. This is financed by receipts from airlines (40%) and subsidies from France (34%) and other member governments (26%). These subsidies are in line with the world-wide practice of providing aerial navigation facilities at government expense. ASECNA's budget does not cover construction of airport facilities, and such financing is, therefore, the sole responsibility of the individual Govern- ments concerned. PART IV: TIE PROJECT 32. A report entitled "Appraisal of Niamey International Airport Project - Niger" (No. 289a-NIR) is being circulated separately. A Credit and Project Sumlmary is attached as Annex III. The proposed project was identified in 1971 by a Bank mission, and subsequently prepared by ASECNA. Field appraisal took place in January/February 1973 and was completed at headquarters in July 1973. Negotiations were held in Washington from March 18 to 22, 1974. hle delegation of Niger consisted of Mr. A. Alfidja, Director of Planning in the Ministry of Development and Cooperation, as head; Mrs. M. Hadiza, Charge d'Affaires at the Embassy of Niger in Washington; MIr. A. Cheiffou, Director of ASECNA in Niger; arLd Mr. C. Bellier from ASECNA's headquarters in Dakar.  - 9 - 33. Niamey airport occupies a strategic position on the air routes between Europe and the cities of the Wesit African Coast between Abidian and Lagos. As the last major airport before or after crossing the Sahara, it is of interest as a transit stop for international air carriers operating on these routes. Also in view of the landlocked position of the country the airport is vital for long distance travel and transport of high-value and perishalle commodities between Niger and the outside world. 34. Niamey airport derives substantial revenues from these transit operations, since Niger traffic alone would not justify international service on the scale currently enjoyed. Nearly 50 percent of the current international passenger volume utilizing the airport is transit traffic (39,096 passengers in 1972 of a total of 80,695) and the transit proportion is expected to in- crease to over one-half of international traffic by 1977. If Niger were to be deprived of these transit flights, its own international traffic would warrant only a costly feeder service with smaller aircraft serving adjacent centers offering connections with international flights. This would affect both passengers and freight. International air freight generated by Niger totalled only 4,783 tons in 1972, but is expected to rise to 8,200 tons in 1977 and 16,700 tons by 1982. 35. Niamey's future as an air traffic transit stop is threatened by the current deficiencies of the airport. The runway at Niamey airport is too short and weak to handle such aircraft as some of the DC-8 types now in use. Not only are severe payload limitations imposed but also the runway is dete- riorating noticeably under the impact of heavy aircraft landings. This situa- tion will shortly be aggravated by the introduction of newer and heavier wide- bodied aircraft which, while more efficient than those ciurrently in service, will still be subject to payload limitations. Continued deterioration of the runway could soon result in an unacceptable risk to the safety of international flights. 36. ASECNA has prepared a long-term development plan for the improvement of Niamey airport. The current investment program of the airport, which covers the period 1974-82, is the first phase of this plan and is expected to cost about US$7.3 million equivalent. 37. The proposed project comprises most of the items included in the investment program, leaving only the freight shed extension, transfer of offices and some minor buildings and equipment renewals to be undertaken by the Government (Section 4.01 of the Development Credit Agreement). The project is expected to provide improvements to existing facilities so as to enable large, modern, long-range aircraft to operate safely and economically from Niamey airport. Specifically, the project consists of:  - 10 - (i) reinforcement of the existing runway and taxiway; (ii) extension of the existing runway from 2,570 m to 2,770 m, with a turning area and overshoot (stopway); (iii) enlargement and reinforcement of a portion of the existing apron, and addition of a further aircraft parking position; (iv) provision of blast protection on shoulders; (v) replacement and relocation of the localizer of the Instrument Landing System (ILS), and provision of new equipment therefor; (vi) provision of high-intensity runway lighting equipment and of a high-intensity approach lighting system; and (vii) provision of various meteorological equipment. Cost and Financing Plan 33. Total project costs including taxes are estimated at aboUt US$5.9 million equivalent, out of which US$3.5 million would be in foreign exchange. The cost estimate is based on detailed engineering studies and includes an allowance of about US$1.3 million to cover contingencies. Taxes estimated at US$900,000 are also included in the total. A breakdown of cost8 is provided in Annex III. 39. The proposed credit of US$5.0 million would be made to Niger on standard IDA terms. ASECNA, which manages the Niamey airport will execute the project on behalf of the Government. The Government will, therefore, make the proceeds of the credit available to ASECNA, which would control and disburse the funds, as was the case in the Dakar International Airport Project (Loan No. 867SE), approved by the Executive Directors in November, 1972. For legal and aministrative reasons it has not been feasible to impose a direct repayment obligation upon ASECNA, but the proceeds of the credit will be treated in the airport's accounts as a loan for a period of 25 years, includ- ing 5 years of grace, with interest at 7-1/4 percent per annum, capitalized during the construction period. ASECNA will make the corresponding service payments to the Government from the revenues of the airport operations. A "Contrat Special" acceptable to the Association, covering the above terms, would be concluded between the Government and ASECNA as a condition of effectiveness of the Credit (Section 8.01 (b) of the Development Credit Agreement). 40. The proposed credit would cover 100 percent of total estimated project costs after taxes. It would finance 100 percent of the estimated foreign exchange costs, or about US$3.5 million, and US$1.5 million equivalent of local costs.  Procurement and Disbursement 41. In view of the nature and size of the project, all civil works would be executed under one contract, a procedure estimated to interest as large a number of contractors as possible, as well as to ensure better execu- tion and more adequate supervision. Such contract will be awarded, and all other equipment to be financed under the proposed credit will be procured, on the basis of international competitive bidding. 42. The proposed credit would be disbursed against 85 percent of total expenditures (including taxes) for civil works, design and supervision, and 100 percent of foreign exchange costs or 85 percent of total costs (including taxes) for equipment and its installation. The project is expected to be completed by June 30, 1976 and the credit fully disbursed and closed by December 31, 1976. It is proposed that any balance of the credit remaining unused after project completion be used, with the Association's approval, for further improvements to the airport. Stpervision and Training 43. ASECNA's own staff are preparing the engineering design of the proposed project. In view of their competence in this field, it is proposed to entrust ASECNA also with the supervision of construction and inspection of installations. Further, since the training facilities of ASECNA, located in Niamey, are adequate, provision for training under the project is not required. Accounting 44. Under the terms of its "Contrat Particulier" with Niger ASECNA is responsible for accounting at Niamey Airport. Since ASECNA accounts for its operations in Niger on a country-wide basis, the true cost of operation of any particular airport is not directly reported. However, ASECNA is able to extract from its accounts those directly related to the operation of Niamey airport and to calculate the portion of its indirect costs and depreciation attributable to that operation. Under the proposed project agreement ASECNA will produce annually for Niamey airport proforma statements of profit and loss, as well as of sources and applications of funds. These statements will be audited by the "Agent Comptable," the auditor appointed to ASECNA by the Government of France and who is acceptable to the Association (Section 4.02 of the Project Agreement). Financial Benefits and Measures 45. Mainly as a result of the project, the Niamey Airport operation, currently a deficitary one and a burden on the Government, is expected to become profitable. To ensure that operating revenues cover operating expenses as well as interest payments and debt amortization, and further produce a reasonable surplus to be applied to future investments, tariff increases will be implemented upon completion of the project. These measures will  - 12 - comprise an increase of up to 10 percent in landing fees, and a handling charge on imports of up to US$20 per ton, or any other suitable measures which will achieve (a) an operating ratio (ratio of operating expenses before depreciation, to gross revenues) of less than 60 percent as of 1978 and of less than 55 percent as of 1981, and (b) a return on net fixed assets of at least 7-1/4 percent as of 1982. The financial rate of return on project investments is estimated, on conservative assumptions, at 9 percent. Economic Benefits 46. The quantifiable economic benefits of the project fall under three main headings: (a) increased revenue from landing fees resulting from the introductibn of large aircraft; (b) avoidance of loss of existing revenue from landing fees for long-range aircraft - a loss which would be incurred if inter- national flights had to be discontinued; and (c) avoidance of additional costs that eventually would have to be met by Niger in providing a feeder service to a neighboring international airport if Niamey was removed from the interna- tional air network. Taken together over 20 years, these benefits would yield an economic return of about 20 percent. 47. The calculation of quantifiable benefits assumes that international freight and passenger traffic at present originating or terminating at Niamey could be diverted, if necessary, by means of a feeder service to the nearest adjacent international airport in the region. In practice, it is doubtful whether the growing exports of meat and fresh vegetables to the European market could economically be handled in this more costly way, and this export trade would probably be signficantly reduced if no direct air service were available, whereas with the introduction of more efficient, larger capacity aircraft on the existing service there will be scope for considerable expan- sion. A further benefit from the project, which has not been quantified, will be the maintenance of emplovment for the several hundred employees whose work relates mainly to the large aircraft currently calling at Niamey. PART V: LEGAL INSTRUMENTS AND AUTHORITY 48. The draft Development Credit Agreement between the Republic of Niger and the Association, the draft Project Agreement between the Association and ASECNA, the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association and the text  - 13 - of a draft resolution approving the proposed credit are being distributed to the Executive Directors separately. The draft agreements conform to the normal pattern for credits for airport development projects. 49. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI: RECONMENDATION 50. In formulating this proposal it has not been possible to take full account of the consequences of recent increases in petroleum prices. However, available information indicates that the proposed credit remains fully justi- fied. 51. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President Attachments: Washington, D.C. April 10, 1974   ANNEX I Page 1 of 3 pages COUNTRY DATA i:T3:ER AREA POPULATION DENSITY 1TT1T' '!,-,km2 i 50 million (mid-197') S.( Per km 2 '2 Per km2of arable land SOCIAL INDICATORS 1Re eren( e '01 lrl.re . I 14alil it nisia PrC r ONP PER CAPITA US$ (ATLAS aASIS) 5eJ 1 l(-kO 701 30 0 100 (1(71 DEMOWRAPHIC Crude birth rate (per thousand) 50 (6 65 - Crude death rate (per thousand) 7S-40 1: I; Infant mortality rate (per thousand live births) 200 120 .. I Life expectancy at birth (years) 3 37 52 7 Gross reproduction rate s ,.1 Population growth rate (percent) .2 2.1 2.1 0.' Population growth rate - urban Age structure (percent) - 197 5. o-ih 44n6 19 .j 15-64 52.9 17.2 51 .S 65 and over 2.53 Denendency ratio 0.99 1 1.1?: 1 1.7 I 0.9 Urban population as percent of total 4.5 (1970) 7.1 99 70 Family planning: No. of acceptors cumulative (thous.) I. 10. No. of users (% of married women) .. 12 EHPWYMENT Total labor force (thousands) .. 1.500 O.