Cameroon - Livestock Development Project

r-niLE~,N,iSB.E C2,py A'i UIUUloH DOCUMENT OF INTERNA' IONAL BANK FORREC5ONSTRUCTION AND DEVELOPMENT Not For Public Use Report No. P-1367-CAM REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE UNITED REPUBLIC OF CAMEROON FOR A LIVESTOCK PROJECT March 13, 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 It may not be published, quoted or cited without Bank Group authorization.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 EQUIVALENTS Currency Unit CFA Franc (CFAF) US$ 1 CFAF 250 CFAF 1,000 US$ 4.00 CFAF 1,000,000 US$ 4,000 FISCAL YEAR July 1 to June 30  REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED IDAN TO THE UNITED REPUBLIC OF CAMEROON FOR A LIVESTOCK PROJECT 1. I submit the following report and recommendation on a proposed loan to the United Republic of Cameroon for the equivalent of US$ 11.6 mil- lion to help finance a livestock project. The loan would have a term of 21 years, including six years of grace, with interest at 7-1/4 percent per annum. Of the proceeds of the loan US$ 0.9 million would be relent to Fonds National de D6veloppement Rural for 13 years, including 6 years of grace, with interest at 5 percent per annum; and US$ 5.2 milliorn would be relent to Soci6te de Developpement et d'Exploitation des Productions Animales for 21 years, including 6 years of grace on principal repayments, with inter- est at 7-1/14 percent per annum to be capitalized for 3 years. PART I - THE ECONOMY 2. The renort "The Recent Economic Development of Cameroon" (No. R 72-247) was distributed to the Executive Directors on November 27, 1972. An updating mission visited the country in May/June 1973; its major findings are reflected in the following paragraphs and Annex I contains country data. A basic economic mission is planned for early FY 1975 to coincide with the preparation of Cameroon's Fourth Development Plan (FY77-81). Economic Potential 3. Cameroon's natural resources are varied, although not abundant. Its range of soils and climatic conditions permits cultivation of a large number of crops and provides substantial agricultural potential. These crops include oil palm and rubber in-the south, cocoa and coffee in the central region, and rice, groundnuts, cotton and other sahelian crops in the north. The forestry region of the southeast contains large untapped timber resources,and the north, good potential far livestock. L. While the main opportunities for development lie in expansion and diversification of agricultural production, Cameroon also possesses valuable industrial potential. It consists not only of the production of import substitutes needed for a growing domestic market, but also of the processing of local raw materials, particularly agricultural and forestry products,for export. 5. Commerce, transport, and transit services are important economic activities. Cameroon is a big country with three main economic centers (West, South,and North) separated by vast underpopulated areas. In addition, the country serves as one of the main export routes for landlocked Chad and CAR. An active transport sector is therefore vital to the development of Cameroon, and considerable investments are needed to build or maintain adequate port, road, and railroad infrastructure -- prerecquisites to  prcmoting agricultural and industrial developnment and to strengthening the role of Cameroon as a regional trade center. Past Performance 6. During the first decade of independence (1960-70) the Government has made serious efforts to lay the groundwork for accelerated economic development and to step up the mobilization of financial resources for this purpose. In spite of internal political difficulties during the early 1960's and of administrative constraints arising from Cameroon's top-heavy federal structure, these efforts have been quite successful. During the l196's GDP grew at an average rate of six percent a year and owing to prudent financial policies the Government was able to finance a rising proportion of public investment from domestic savings. 7. The sectoral distribution of public investment corresponded :airly well 'o the country's development requirements. By far the largest part of piblic investment was devoted to lifting the most immediate developmen' constraint, nanely the shortcomings of the transport network. Conscious of the lack of trained manpower at all levels, the Government also e-tphasized the expansion and improvement of education. Numerous new schools were opened, school enrollment soared and a beginning was made with the reform of education. In agriculture, the Government promnoted crop diversification through projects for rubber, oil palm, cotton and rice and made a beginning with the rehabilitation of existing coffee and cocoa acreage. In industry, the Government's efforts were limited to providing financial support for key projects and maintaining a liberal investment climate which led to an increase in Frivate f reign investment and quick expansion of manufacturing capacity, particularly in the field of import substitution. 8. In the early 1970's economic growth slowed down because of declining world prices for cocoa and coffee and a decline in foreign private investment. In spite of the recession, Government managed to increase budgetary savings through a boost in tax rates, improved tax collection and better expendi-ture control. Public investment however rose even faster and the result was drawdown of treasury reserves and an increase in external debt. With an eatimated debt service ratio in 1973 of 8 percent, Cameroon's debt problemns are still manageable, however. The increase in cocoa, coffee and timber prices in 1973 has been leading to improvenents in government finance and in the balance of payments, and a slight recovery of the reserve position. Prospects and Development Strategy 9. Prospects f x further economic growth remain favorable, provided the Government can come to grips with several structural problems which have come to the fore in recent years and of which the Governmnent and foreign development partners are increasingly aware. (i) In agriculture, which will remain the rnainstay of the economy, more determined action should be taken to bring financial and technical assistance within the reach of the  -3- small farmers. The advantages of diversified climate and soil should make it possible to achieve large output increases in almost all crops as well as in livestock. The small farmers, who account for most of the country's agricultural production, are however still largely unaware of improved cultivation techniques and mostly use traditional, low-yielding production methods. An agricultural survey by the Bank earlier this year therefore recommended to the Government various specific measures concerning applied research, extension services, supplies of inputs and agricultural credit. On income distribution grounds, the survey recommends increased attention to development possibilities in the backward northern plains and western highlands which have a large, destitute population but reasonably good agricultural and livestock potential. (ii) Even if rural development efforts become more successful, rapid migration from the countryside to the cities is bound to ccntinue. Cameroon's urban population is expected to rise from 20 percent in 1970 to 38 percent in 1985. The main problem in the cities will be to provide productive errployment, and to plan land use for housing, infrastructure, and social services. The Government intends to devote increased attention to migration and urban problems and has asked the Bank for advice. In the industrial sector, a revision of policies is necessary in order to restore foreign investors' confidence which in recent years had suffered from slow and cumbersome procedures. (iii) In spite of massive investments in recent years, the basic transport infrastructure is still insufficient to meet the country's requirements. The congestion of the Douala port is slowing down economic expansion, particularly of forestry production. The Douala-Ya unde section of the railroad requires major improvements and the road system needs to be adapted to traffic growth and the development of new agricultural and forestry areas. 10. To resclve these problems, action on two fronts is essential. First, a strengthening of project preparation and implementation machinery, and second, a mobilization of adequate domestic and external resources for a fairly large public investment program. 11. Considerable progress is being made on the first objective. In 1972, President Ahidjo's policy of national integration culminated in a successful referendum which abolished the former federated states and replaced the cumbersome federal structure by a unitary government. Within the new structure, stronger economic ministries are being established to replace the weak technical departments in each federated state; and within the new ministries, the Government is trying to establish planning units for project and policy formulation. 12. Current efforts to achieve improvements in project preparation and implementation are likely to have a very favorable impact on the organization of rural development work and of the new Ministry of Agriculture; a special fund for rural development (FONADER) has been created to promote agricultural projects and rural development infrastructure. The changes taking place in the government structure are likely to require a substantial increase in foreign technical assistance. Although the Government will continue to ensure for itself full control of final decisions, there is no reluctance on its part to receive expatriate advice whenever appropriate.  13. With respect to investment financing, the recent economic mission concluded that an average yearly public investment spending of US' 130 million would represent the minimum required to catch up with the backlog of infrastructural investment and to support the 5 percent anmual GDP growth rate deemed feasible by the mission. With continued prudent fl scal policies, public savings should cover about 80 percent of the public investment. However, external financing of about US' 100 million a year will be required to allow for debt service and some rebuilding of reserves. Bilateral and other sources outside the Bank Group are expected to contribute about three- quarters of Cameroon's external aid requirements. The Bank Group's share of Cameroon's external debt would rise to 32 percent as against 13 percent at present. Service on Bank Group debt by 1979 would however amount to only 11 percent of Cameroon's total public debt service (as against the present 8 percent), which in turn is not expected to exceed 13 percent of projected export earnings. 14. Cameroon's ability to make effective use of external resources and the Government's dedication to development are reasons far increased external support. Although debt service is still low, it is rising rapidly and will absorb an increasing share of gross public savings. Therefore, Cameroon can make only a modest contribution to the financing of future public investment. To avoid further rapid buildup of debt service, lenders, including the B nk Group, should provide a large part of their assistance on concessionary terms and also be prepared to finance a high proportion of project costs including, as in the present project, a part of local costs.  - 5 - PART II - BANK GROUP OPERATIONS TN CAMEROON 15. The Bank Group's commitments in Cameroon now amount to US$ 130 million and cover ten projects: three in agriculture, four in transportation, twjo in education and one in public utilities. Following recent approval of a large loan/credit for the Second Highway project, transportation now repre- sents the largest share (57 percent) of our past commitments followed by agriculture (24 percent). Annex II contains a summary statement of Bank loans and IDA credits as of January 31, 1974 and includes notes on the execution of ongoing projects. Although delays and setbacks have been occasionally encountered in the execution of the projects, the Government has consistently showni willingness to collaborate with the Bank for the determination and application of satisfactory solutions. 16. For the future, the Bank Group's strategy is to support the Governmnent in its efforts to equip the country with infrastructure, to accelerate rural development, and to increase the efficiency of Cameroon's institutions. 17. Recognizing the crucial importance of transportation to economic growth in Cameroon and in neighboring countries, the Government has devoted the largest portion of public investments to this sector. The Bank Group, together with bilateral institutions, has substantially helped Government develop adequate transport facilities. The recently approved Second High- way project will help complete the establishment of the basic trunk road sys- tem. Given sharp traffic increases and the backlog of required investments, massive injections of capital will still be necessary in the years ahead, particularly for the expansion of the port of Douala and the possible realign- ment of the Douala-Yaounde line. An interim railroad project is likely to be distributed for Board consideration shortly. Future road investments would mainly be for road maintenance and feeder roads to provide links to local mar- kets and facilitate exploitation of Cameroon's forests, a major area for future development. 16. In the past, we have been able to help the Government further diversify agricultural production by financing its oil palm and rubber plantations in the east and west, and rice irrigation in the north. Increased Bank Group lending to agriculture will support the Government's increased efforts to organize itself and focus on rural development in order to correct geographical and economic imbalances in Cameroon's development (see Part III). In other sectors, we are actively considering a first power generation and distribution project, a first small-scale industries project, and a third education project with special emphasis on rural education and training. 19. In all our projects, we will as in the past include training, technical assistance and other provisions to strengthen government institutions and improve sector policies. Besides, through our economic work we will continue to advise the authorities, at their request, on development questions in general, and subjects such as economic management, problems of urban migration , and manpower development in particular.  -6- PART III - AGRICULTURE IN CAMEROON 20. As in many other West African countries, the agricultural sector dominates the Cameroonian economy. It provides a livelihood for 80 percent of the population, accounts for about 40 percent of GDP and produces over 65% of the country's foreign exchange earnings. 21. While two crops, cocoa and coffee, account for almost 80 percent of the value of agricultural extoorts, Cameroon is making good progress in diversifying its economy; past Bank Group loans and credits for agriculture have supported Government efforts in this respect. In addition to cocoa and coffee, bananas, palm products and some rubber are produced in the south, and cotton in the north. Among food crops, rice production is expected to increase, partly with Bank Group assistance. Forest exploitation also provides a large source of income and foreign exchange. Agricultural production stems mainly from many traditional smallholdings most of which are between one and three hectares. The 30,000-ha CAMDEV estate (mainly oil palm and rubber) in the west, and the 9,000-ha SOCAPAIM oil palm plantation in the east, are the two largest industrial plantations. Both are state-owned and receiving Bank Group assistance. 22. Livestock consists mainly of beef cattle (2.5 - 3 million heads) and accounts for about 9 percent of Cameroon's agricultural production. Cattle are raised in northern Cameroon and the north-central Adamaoua plateau (see map) mainly by nomadic and semi-nomadic herdsmen. Annual meat production is estimated at 75,000 tons 1/, equivalent to an average per capita consumption of 12 kg. While most of the production is for the domestic market, two foreign-owned ranching companies have managed to export 1,000 - 1,500 tons of carcass meat annually to Gabon and Congo. Except for these foreign ranching companies, cattle-raising in Cameroon has remained unchanged for centuries. Nutritional deficiencies and poor animal health, especially as a result of trypanosomiasis, largely account for the low productivity of the national herd. Since graziers do not have secure land rights, they make no attempt to improve pastures. Additionally, slaughtering and meat distribution facilities are unhygienic. 23. Investments in agriculture have so far been hampered by the fragmented and weak government services responsible for project preparation and implementation. Although the creation in 1972 of central Ministries of Agriculture and Livestock, instead of the previously separated administrations, is an improvement, these Ministries are not yet adequately staffed; furthermore, a greater effort needs to be made to coordinate the responsibilities for research and training, now the responsibility of several Ministries. Never- theless, the Government has stepped up its efforts to centralize and coordinate rural development, and has recently created a Fonds National de Developpe- ment Rural (FONADER), to which it has appointed one of its top civil servants, for this purpose. 24. The Government's low interest rate policy has discouraged private banks from financing agricultural development and agricultural credit has been mainly the responsibility of Banque Camerounaise de D6veloppement (BCD) that has lacked the staff and projects to make loans to private crop and livestock producers. However, with the creation of FONADER, the Government is expected to devote more of its financial and personnel resources to the establishment of a strong and viable credit and development institution for the rural sector. j Including about 5,000 tons from animals i-mported from Chad.  -7- 25. The Government's increased concern with rural development coincides with our own efforts, supported by the conclusions of an agriculture sector survey mission that visited Cameroon in May 1973, to improve income distri- bution within the economy and within the sector, and especially to focus on projects benefitting large numbers of poor rural people, preferably in the more backward areas. Most of our future projects would meet several or all of these criteria. Thus, the present project would benefit pastoralists and farmers so far untouched by modern development; a cocoa rehabilitation and planting project, recently appraised, is designed to help raise the productivity of many cocoa smallholders; and an integrated rural development project in the very populated but backward north is under consideration for FY75. Furthermore, whereas the output of export crops has increased rapidly, food crop production has increased less so, and meat production has at best only kept pace with population growth. Yet rapid urbanization and changing consumption patterns have created an increased demand for agricultural and livestock products. Without increased domestic production, this growing demand would have to be met from increased imocrts. The Government is conscious of this and anxious to increase the production of domestic food as well as to promote export crops. The proposed livestock project as well as the cocoa and integrated rural development projects, will give support to this policy. PART IV - THE PROJECT Background and Purpose 26. Like many countries in Western Africa, Cameroon suffers a meat deficit. Fortunrktely, however, it has good potential grazing lands for livestock development and an already sizeable cattle herd. But production even at present levels is threatened by tsetse fly infestations and cons- trained by the unproductive traditional nomadic and seminomadic methods employed by most cattle owners. Hence meat production is not keeping pace with demand, and to maintain per capita beef consumption at presenlt low levels would require production increases of about 5G percent by 1985. 27. Government's main livestock development objective is to satisfy Cameroon's beef requirements through increased domestic production. As a subsidiary objective, Government plans to raise meat hygiene and minimize waste by improving slaughter and retail butcher shop facilities in Yaound6 and Douala. Government plans to assist livestock producers in two important ways: first by helping them to intensify their grazing methods; and secondly by safeguarding grazing lands for livestock through tsetse fly eradication. While eradication campaigns have been successfully carried out in Nigeria for over twenty years, means for intensifying production by traditional pastoralists though proven elsewhere in Africa are largely untried under West African conditions. Recognizing that changes in production systems will involve risks and that innovations need to be tested to determine their technical and financial feasibility as well as their social acceptability, Government has prepared investment proposals for this purpose involving both state and private sector ranch development.  28. The proposed project, to be carried out over 197L-79, would support Government's plans and would enable it to implement the first phase of its livestock development program. It would comprise establishing and operating three 20,000-ha state ranches and two slaughter plants, modernizing 12 butcher shops, develooing livestock production on 150 private ranches and farms, and eradicating tsetse flies from 800,000 ha of good pasture land. Societ6 de D6veloppenent et d'Exploitation des Productions Animales (SODEPA) has recently been established under the M'1inistry of Livestock to develop and operate the state-owned ranches and slaughter plants; its general rnanager, technical director, and financial controller would be appointed before the loan becomes effective (Section 8.01 (e) of the Loan Agreement), and a number of key appointments would be made in agreement with the Bank (Section 3.05 of the Project Agreement). Fonds National de Developpement Rural (FONADER) would provide credit for private ranch, farm and butcher shop develooment, with assistance from SODEPA; for this it would emnloy agricul- tural credit staff satisfactory to the Bank (Section 3.03 (b) of the Loan Agreement). The Ministry of Livestock would nlan and implement the tsetse fly extermination camnaign. The Ministry would also administer funds for training Cameroonians in livestock production and the nrenaratinn of further investment DrrDosals for the livestock subsector. 29. Except for limited veterinary coverage, support services for livestock production have been neglected. To overcome this constraint, the project would help to develop SODEPA as an institution to provide technical services for livestock production, and would provide FONADER with an early opportunity to take up its responsibilities through a well-defined project. It would also introduce policy changes and technical irnovations, and it must be considered a large scale pilot operation. The risk involved in such a project is well justified, however, as without these innovations, cattle production will stagnate. Moreover, the pro- ject components have been designed to permit their early replication as experience is gained in determining the most efficient means of adapting modern tecnniques to local conditions.  -9- 30. The project was identified by a PMWA mission *n September 1971, prepared by consultants, and appraised in May/June 1973. The appraisal report, Appraisal of a Livestock Development Project (No. 295-CM, dated March 6,1974)is being circulated separately to the Executive Directors. A Loan and Project Summary is in Annex III of this report. Negotiations for a loan were held in Washington in February 1974 with a Cameroonian delegation headed by Mr. Tchoungui, Cameroon's Ambassador to the United States. Detailed Features State ranches and slaughter plants 31. In addition to producing slaughter stock, the ranches to be established and operated by SODEPA would provide breeding andi fattening stock for private ranch development. They would be located, respectively, in the northwest, center and east of Cameroon (see map), and would be readily accessible to pastoralists in the leading cattle producing areas of the country. They would test and demonstrate modern techniques of animal production for later adoption by the private sector. The three ranches would be stocked with zebu cattle to be purchased on the local market and would carry 8,000 animal units each. They would be developed in years 1, 2 and 4 of the project respectively. However, no disbursements would be made for expenditures incurred (a) for the establishment of the Faro ranch until the Bank has aDproved a plan for the tsetse fly extermination campaign and the effective use of the cleared areas, and (b) for the establishment of the Ndokayo ranch until the Government and the Bank have agreed on the conditions under which the ranch would be profitable (Schedule 1, para 3 (b) and (c) of the Loan Agreement). The slaughter plants to be established in Yaounde and Douala would have a peak hourly capacity of 25 cattle andt 2?5 small stock, ana would meet international standards for hygiene; the two existing facilities are unhygienic and unsuitable for modernization or for expansion and they would be closed. Tsetse fly extermination 32- Elimination of tsetse flies is necessarv to reclaim grazing eteas now abandoned by cattle owners because of heavy infestation, and to contain the spread of the fly to the remaining fly-free areas of the Adamaoua plateavii A small extermination campaign has already been carried ot successfully in northern Cameroon with help from the Nigerian Government. The proposed campaign would be carried out by the Ministry of Livestock in good potential savarnah grazing areas where tsetse fly extermination would be the only feasible means of overcoming trypanosomiasis. A survey of the 800,000-ha extermination area would be made to determine the optimal aerial spraying program in terms of efficiency and cost. .X3 a condition of disblurserment for this prorrrra, a  - 10 - detailed plan for its implementation and for the use of the cleared areas would have to be approved by the Bank (Schedule 1, para 3(b) of the Loan Agreement). Protectioil of the cleared areas frorn reinfestation would be facilitated by the existence of mountainous barriers and by the extermination already completed by Nigeria to the west. After clearance from tsetse flies, the area would provide suitable grazing for the herds of about 1,000 traditional Dastoral families, relieving the pressure on other presently overgrazed areas. Private sector development 33. The project would finance the modeniization of 12 retail shops in Douala and Yaound6 that are suitable for this. These outlets would pernit the hygienic handling through retail of about 10 percent of the meat processed at the new plants. Credit facilities would be arovided by FONIADER and technical assistance by SODEPA to about 3 mixed farmers to fatten cattle on their farms; and to about 11 settled graziers to develop larger breeding/fattening operations. Private sector participants would include families varying in size from about 6 members on small mixed farms to about 50 for the family groups of traditional pastoralists on larger ranches. This credit program would be the first for cattle production in Cameroon and would involve, in association writh on-farm and ranch inivestments, the introduction of improved grazing systems and changes in land tenure arrangemernts. Training and studies 3a. In-service training would be directed towards replacing expatriate staff employed on the project's tsetse fly extermination, private sector credit, and state ranching and slaughter operations. It was agreed that, after Cameroonians have acquired sufficient experience in project implementation, the Government would discuss with the Bank their promotloni to uositions initially held by expatriates (Section 3.07 of the Loarn Agreement). Funds would also be provided for overseas training in livestock production and credit for which local institutions are inadequate. Furthermore, a follow-up project would be orepared, including provisions for the development of areas reclaimed from tsetse flies anc for expansion of credit facilities to the traditional sector in other areas of the country. Policy changes 35. The project would involve changes in land tenure arrangements as for the first time in Cameroon pastoralists would be given 20-year leases as a security and incentive to improve their production methods (Section 3.06 of the Project Agreement). It may also involve changes in price regulations for meat. Current meat prices are substantially above the official retail prices, and price controls are not being effectively enforced. The Government knows this, and that the controls, if rigorously imposed, would depress production. Nevertheless, it is politically  - 11 - difficult to phase out all controls when prices in general are rising rapidly. It was agreed (Section 3.09 of the Loan Agreement) that the Government would make a study of its meat price regulations, including the possibility of removing price controls, on the basis of which measures satisfactory to the Bank would be taken. Besides, reimburse- ment of payments made by FONADER for loans to butchers would be con- ditional upon the Bank having approved the lending conditions and profitability criteria (Schedule 1, para 3 (d) of the Loan Agreement). Finally, the project would involve a departure from the Government's low interest rate policy in respect of sub-loans to private farmers, ranchers and butchers. The sub-loans would bear interest at 10 per- cent, which is the minimum necessary to cover credit administration costs and to attract finance to the livestock sector. Project costs and financing 36. Total project cost net of taxes is estimated at about US$ 14.6 million equivalent (see Annex III), of which US$ 7.4 million foreign. Cost estimates include appropriate physical contingencies; in particular a 15 percent physical contingency has been applied to the tsetse fly extermination component, which can be estimated accurately only after completion of the survey of the area to be sprayed. An additional 15 per- cent contingency has been included for spraying materials to cover the special risk of erratic deliveries of aviation fuel and insecticide. Adequate price contingencies have been applied to the various items of cost, taking account of the large price increases expected to occur in 1974 and 1975 in particular (see Annex III). 37. The Bank would make a loan of US$ 11.6 million (79 percent of total project cost net of taxes), to cover the foreign exchange component and make a contribution to the financing of local currency costs. The rest of the local costs would be met by the Government (US' 2.8 million) and private sub-borrowers (US$ 0.2 million). The loan would be made to the Government for a term of 21 years, including six years of grace, and the proceeds of the loan would be used as follows (see Annex III): US$ 0.9 million would be onlent to FONADER to finance credits to sub-borrowers, and US$ 0.3 million would be granted to FONADER for the administration of this credit program; US% 5.2 million would be onlent to SODEPA to finance its ranch and slaughter plants development ; US$ 2.4 million and US$ 0.4 million, respectively, would be passed on as budgetary allocations to the Ministry of Livestock for tsetse fly extermination, and for training and stuldies; and US' 2.4 million would be retained as contingencies. 38. The Government's contribution would complement the proceeds of the loan as described in Annex III. In particular, the Government would provide US$ 0.5 million as equity in SODEPA. Conditions of effectiveness of the loan would be,inter alia, that a first installment of the equity participation, ccnsisting of CFAF 50 million, had been made available to SODEPA, and that financing agreements acceptable to the Bank between Government and FONADER, and Government and SODEPA, had been signed (Section 8.01 of the Loan Agreement).  - 12 - 39. The funds onlent to FONADER would be repayable in 13 years, including 6 years of grace on principal repayments, at 5 percent interest. Those onlent and lent by Government to SODEPA would be repayable in 21 years, including 6 years of grace on principal repayments,and bearing the same interest as the Bank loan. Sub-borrower pastoralists, farmers and butchers could receive credit with terms varying from one year for short-term credit up to 9 years for medium- term credit. All loans to private sub-borrowers would bear interest at 10 percent. The spread between interest rates received and paid by FONADER would cover the cost of loan administration and the risk inherent in this first livestock credit program. Sub-borrowers would make contributions amounting to 20 percent of the cost of their investments. Procurement and Disbursement 40. It is expected that, except for livestock purchases, contracts for all items in excess of US$ 50,000 would be awarded on the basis of international competitive bidding in accordance with the Bank's guidelines for procurement, with the additional provision that slaughter plants, which require the careful integration of specialized buildings and equipment, would be procured by a turnkey contract. A 7.5 percent preference for domestic contractors would be applied. Only domestic cattle would be required for thUe project and the only practical means of purchasing these would be through negotiated contracts with local traders. As SODEPA's ranches would be developed over four years, some ranch infrastructure would be constructed by force account. Private sub-borrowers would procure their goods and services through ordinary commercial channels. Internationally recruited staff and consultants would be employed in accordance with procedures acceptable to the Bank. 41. The proceeds of the Bank loan would be disbursed to cover (a) 100 percent of payments by FONADER under sub-loans to butchers, farmers and cattle owners (representing 80 percent of the investment cost of shop, farm and ranch development); (b) 100 percent of foreign expenditures for SODEPA's expatriate salaries; consultants for the tsetse fly extermination component and for project preparation; and overseas graduate and post-graduate training; (c) 100 percent of foreign expenditures or 90 percent of total expenditures for spraying, insecticides, fuels, vehicles and equipment for the tsetse fly extermination component; and ccnsultants, vehicles and equipment for loan administration for FONADER; and (d) 90 percent of total expenditures for buildings, vehicles and equipment, livestock and ranch infra- structure development for SODEPA; and land clearing and fencing for the tsetse fly component. US$ 2.4 million of the loan would be unallocated to cover contin- gencies. Up to US$ 100,000 would be used to cover retroactively the cost of consultants emploved for the Droject since March 1, 1974.  - 13 - Economic and Financial Justifications L2. The principal direct benefits from project developed farms and ranches would be the incremental annual production of about 1,300 tons of meat, 2,000 breeding heifers, 1,500 improved breeding bulls, and 1,500 feeder steers at full development in PY12.An additional 3,000 tons of meat would be produced annually by graziers in areas reclaimed from tsetse flies. The total incremental meat production would represent an increase of about 10 percent over Cameroon's present output, all of which would be required for domestic consumption. The project would also have important but unquantifiable benefits that, it is anticipated, will lay the foundation for a modern livestock industry. These would include (a) the demonstration of improved techniques of cattle and land management that would be suitable for adoption by many private graziers and farmers in the area; (b) training of Cameroonians in livestock production; (c) development of credit, extension and tsetse fly extermination services; (d) reduction of overgrazing; and (e) improvement of meat quality in the country's two largest cities. The economic rate of return for the project is estimated at 13 percent. The financial rates of return for investments made by private farmers and graziers are estimated at between 14 and 23 percent; for the large-scale SODEPA ranches, 12 percent; and for slaughter plants, 15 percent. The per capita net cash incomes for families of ranchers and farmers would be between US$ 100 and US$ 250 at full development compared to predevelopment incomes of between US% 50 and US$ 75. PART V - LEAL INSTRUIMENTS AND AUTHORITY 43. The draft Loan Agreement between the United Republic of Cameroon and the Bank, the draft Project Agreement between the Bank and SODEPA, the Report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement and the text of a draft resolution approving the proposed loan are being distributed to the Executive Directors separately. 44. The major features ac these agreements have already been referred to in Part IV of this Report. Features of special interest include (i) the under- takings of the Government or SODEPA described in paragraphs 28, 34 and 35, (ii) the additional conditions of effectiveness described in paragraphs 28 and 38 and (iii) the conditions of withdrawal described in paragraphs 31, 32 and 3S.  45. Besides, the followirg additional events of suspension and default are of particular interest: (i) a default by the Governnent, SODEPA or FONADER under the SODEPA or FONADER Financing Agreements (Section 7.02 (b) and (c) and Section 7.03 (a) of the Loan Agreement); (ii) the amendment, suspension, abrogation, repeal or waiver of the instruments establishing SODEPA and FUNADER, in such a way as to materially and adversely affect SODEPA's or FONADER's ability to perform their respective obligations (Section 7.02 (d) and (f) and Section 7.03 (b) of the Loan Agreement). 46. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION L7. 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 loan remains fully justified. 48. I recommend that the Executive Directors approve the proposed Loan. Robert S. McNamara President March 13, 1974 Attachments  Page 1 of 3 Pages OONWmY DATA - CAMEROON ARIA POPULATION MasiTT 175150 ~~~~~~~~~ T~~~~llion (sid-1970) ~~~~~~~~~~~~~~~~~~~ / keZof arable land~~~88A erWo aabe an SOCIAL DiDICATORS Reference Countries C=oeroon a Ivo" Coast l1397O)b .e 11 YI owP PIN C ITA U34 (ATLAS RASIS) a . 200 3,1C0 280 /b 330 ZZ)KaPNHIC Crude ir-th rate (Per thousand) . 01. 81 crude death rate (per thousand) .. 1 11.9 38 2? Infant mortality rate (per thousand lie bith)9.. 15.9 14 120 Life eaPectancy at birth (years) *.71.5 52 /c 42 Oross reproduction rot a. . . . /d 3.0 Population growth rate .. ~~~~~~~~~~~ ~~~ ~ ~~~~~~~2.1 0.9 /d 2.1 3.3 POpulation growth rate - urban . 6.9 2a.4 21 2.4 /h.i 8,7 Ic.2.) Age structure (perceot) 05-6L 23.7 46 /b 42 65-6dove 62.9 51 7k 55 65aendey o ater ..4.13.1 Tk ~ 3 Denendency ratio L.~~~~~~~~~~~~~~~~~~~~~~~~ .. .. ~~~~~~~~0.9 /d 1.7 1.0 /l Urban PoPulation as percent of total ..22 / 70 _/ 41 /i.m 28 L/. Fanily planning ~ No. of acceptors mcnul,tive (thous.) ... 108 No. Of users (% of earried wcn.en) ..22 EGPL4ThNT Total l.bor force (thousands) . .2,0 0 150/ ,0 Pesecntage employed in agriculture 2C,4. 1 /n 1570 / 2,0 Percentage une=ployad .. . 7(. 57 /0Jk 7 INCOM4E DISTRiBuTioN Percent of national income received by highest 5%... Percent of national income received by highest 20%... Percent of national income rceiv.d by lowest 20%... Perceant of national lnoose rscoiv.d by lowest 40%... DISTRIBUTION OP LAND 0~,ERSHIP % owned by top 101 of owners ... %ownad by smallest 10% of ouas .. HEALTH AND NUTRITION Populatin per phsician . 21,121 /d 750 5,7b0 Id I7,260 Is Population per nursing person 41,800 I, s 2,930 7d r 266, /t 7/I, 7d uI I 21C 2 7 Population per hospital bad 39 81 o 3I 20 ~ so_ Per capita calorie supply so % of requirements ..9/y10 1~ Per capita protein supply, total (grams per dayj /6 59 1 10 3 13 ~1 5 Of which, animal and pulse I.77ii 1 Death rats 1-1 yerar /7 2. I. 1.5 i5_ EDUCATION Adjusted /8 primary school enrollment ratio .n// 2 d 17/ 2/ Adjusted 79 secondary school enrollment ratio 2 207 /d 70' 7n 72. d Tears of schooling provided, fis2n eodlve 3/nn/. 2 /ni8 /.c 1 7-d 23, 7- 7- Vocational en-r-llarent as % of s-c school enrollment -73 23 - 23 /d 3 c0/ Adult litaracy rate 8 ... . 1~~~ 2n0/j, HOUSING Average No., of Persons per r.oo (urban)...0. o S n Percent of occupied -oit. rithout piped aater C.9.. 77 8 Access to electricity (as % of total population) . .79 77 21 7 Percent of Ou-al poPulati on connected to electriciy... 6787 CONSUMPTION Rai rcivr per 1000 population 3 37 /Ld,u 321 /d 77 17 Pesenger cars per 1000 population ..253 13 13 Electric power coneousption (kwh p. c.) 198 2C0u 2,761 15L 1K2 Newsprint consuosption p-c kg per year ..0.02 12 0.1 2 Notes: Figures refer either to t-he latest peiods or to ancouct of environmental temperature, body wihs n the latest years.. Latest periods refer in principle to dietnibotion by age and aea of national populations. the years 1956-60 or 1966-7p; the latest year in prim- /6 Protein standards (req.ir-neta) for all ....ntrnee ac eatab- ciple to 1960 and 1970. Only significantly different liohed by USDA EconomIc Research Service provide for a mniciou peiods or ye~ar ar footnoted searately. allowance of 60 graaIa of total protein per day, and 20 gram of /1 The Per Capita ON? estimates for ysar other than 1960 animal and polse protein, of which 10 grams shoold be animal is at earket prices, calculated by the sans conversion protein. These standards are .omehat lowe than those of 75 teobmique as the 1972 World Bank Atlas. gram of total protein an 23 gram of animal protein as an 12 Average number of daughters per woe,an or reproductive average for the world, proposed by FAO in the Third World Food age. Su,ney. 13. Population growth reton ar dhr the desadee ending in 17 Sorr stdies have suggeeted that crude death rates of children 1960 and 1970. ages 1 through 4 na be ueed as a first approsination inde of Aj Ratio of under 15 and 65 aud Over age brackets to nalnutrltin.. those in labor force bracket of ages 15 through 61. /8 Percentage enrolled of corresponding population of school age Li APO reference standards represent physiological re- as defined for each oontry. quirements for normal activity sand health, taking /a Definition of arable unknown; /b Does cot coincids with tin 1970 Atlan figar- ounce T-olian -at-al account -in - n bane been revised; /c 1965-70, /d 1969. /e Over 5,000 populatloc; If 190.-70; IL Over 2,0(0 population; In 195/6- 60,; Al Nor 10,000 population; 77 Over 1,000 pnp.1,,tioo /k 1572 ; 71 Ontic ci pepol.tico cnder 15 ned 5 nod 00cr tO totafTa1nor force; Is 1966; /n