Report No. 744a-LBR FILE COPY Appraisal of Lofa County Agricultural Development Project Liberia June 27, 1975 Agriculture Projects Department Western Africa Regional Office Not for Public Use U Document of the International Bank for Reconstruction and Development International Development Association 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 It may not be published, quoted or cited without Bank Group authorization.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 Currency Unit United States Dollar WEIGHTS AND MEASURES 1 acre (ac) = 0.405 Hectare (ha) 1 mile - 1.61 Kilometer (km) I square mile = 64O ac = 259 ha 1 ton = 2,240 pound (lb) = 1,016 kilogram (kg) ABBREVIATIONS AETC = Agricultural Extension Training Center AGRIMECO = Agricultural Mechanization and Land Development Company AHT = Agrar und Hydrotechnik CAES = Central Agricultural Experiment Station ERR = Economic Rate of Return FTC = Farmer Training Centre GDP = Gross Domestic Product GNP = Gross National Product GOL Government of Liberia LBA = Licensed Buying Agents LBDI = Liberian Bank for Development and Investment LISCO Liberian Iron and Steel Corporation LPMC Liberian Produce Marketing Corporation MA = Ministry of Agriculture MPW = Ministry of Public Works PMU = Project Management Unit PSC = Project Steering Committee RDA = Rural Development Authority UL = University of Liberia UNDP = United Nations Development Program USAID United States Agency for International Development WARDA = West Africa Rice Development Association WHO World Health Organization FISCAL YEAR January 1 - December 31 LIBERIA LOFA COUNTY AGRICULTURAL DEVELOPMENT PROJECT TABLE OF CONTENTS Page No SUMMARY AND CONCLUSIONS ............ ........................ i - iv I. INTRODUCTION ........ 1 II. BACKGROUND .... 1 A. General . ................ ..................... B. Agricultural Sector ............. 2 C. Agricultural Strategy . . 3 D. Agricultural Institutions . .................. 4 III. THE PROJECT AREA ................................. 6 General ................................ 6 Water ................................ 6 Local Administration ............................. 6 Mineral Resources ............................... 7 Communications ...................... 7 General Infrastructure .................. 7 Farming Systems ...................... 7 Land Tenure ....................... 8 IV. THE PROJECT ........ .............................. 8 A. General Description ..... ..................... 8 B. Detailed Features ...... ................... 9 - Farm Development .................. 9 - Crop Development . ........................ 10 - Seed Multiplication and Seedling Nurseries 11 - Supply of Inputs ...... ................... 11 - Staffing .. ............................... 11 - Village Wells ............................ 12 - Support Services ......................... 12 This report is based on the findings of an appraisal mission composed of A. Arben, M. Burer, M. 0. Farruk, I. Peprah, A. Mercer (IDA), C. Tagoe (West Africa Rice Development Association) and E. Schroepfer (USAID Consultant). TABL' OF CONTENTS (Continued) V. PROJECT COST AND FINANCIAL ARRANGEMENTS .... ...... 13 A. Project Costs ............................... 13 B. Proposed Financing .......................... 14 C. Procurement ................................. 17 D. Disbursement ................................ 17 E. Budgetary Control, Funding Procedures, Accounts and Audit ........................ 19 VI. ORGANIZATION AND MANAGEMENT. ...................... 20 A. Institutions, Staffing and Project Implementation ............................. 20 B. Staff, Cooperative and Farmer Training ...... 23 C. Farm Inputs, Procurement Distribution and Credit Arrangements ..... .............. 24 D. Processing and Storage ...................... 27 VII. PRODUCTION, MARKET PROSPECTS, FARM INCOME AND RECOVERY OF COST ............................. 27 A. Production ................................... 27 B. Marketing and Prices ........................ 29 C. Farmer Benefits ............................. 32 D. Financial Implications to Government ........ 33 VIII. BENEFITS AND JUSTIFICATION ....................... 34 IX. AGREEMENTS REACHED WITH THE BORROWER .... ......... 36 ANNEXES 1. Agriculture Table 1: Rainfall Statistics Table 2: Estimated Crop Yields Table 3: Crops Outputs Table 4: Cost of Cocoa Seedlings Table 5: Cost of Coffee Seedlings Table 6: Cultivation Costs (1 ha) - Upland Rice - Improved Table 7: " - Swamp Rice - Improved Table 8: " It - New Table 9: - Coffee - Rehabilitated Table 10: " I" - New Table 11: " - Cocoa - Rehabilitated Table 12: " - New Table 13: Fertilizer Costs Table 14: Size of Farm and Cropping Pattern in the Project Area Table 15: Holding size and Labor Units per Holding Table 16: Labor Requirements for Project Crops ANNEXES (Continued) 2. Infrastructure in the Project Area 3. Land Tenure Table 1: Land Tenure Situation 4. Farm Incomes Table 1: Changes in Average Farm Income in the Project Area Table 2: Farm Budget and Cash Flow - Upland Rice - Improved Table 3: " - Swamp Rice - New Table 4: " I It - Improved Table 5: " - Cocoa - New Table 6: " - Rehabilitated Table 7: " - Coffee - New Table 8: " - Rehabilitated 5. Organization and Management Table 1: Staffing Requirements Organization Chart - Lofa County Agricultural Development Project (WB9718R) 6. Cooperatives 7. Farm Inputs and Credit Table 1: Illustrative Revolving Credit Fund 8. Marketing, Markets and Prices Table 1: LPMC Statement of Income 1971-1974 Table 2: LPMC Produce Purchases (tonnages) 1968-1974 Table 3: LPMC Farmer Prices 1967-1975 Table 4: LPMC Farmer and Export Prices 1966-1974 Table 5: LPMC Projected Farmer and Export Prices 9. Financial Analyses Table 1: Project Financing Table 2: Project Cost - Summary Table 3: " " - Building and Construction Materials Table 4: " - Vehicles Table 5: - Equipment Table 6: " - Salaries and Wages Table 7: " - Vehicle Operating Table 8: " " General Operating Table 9: Illustrative Cash Flow to Goverrnent Table 10: Project Costs - Farm Inputs Table 11: IDA Credit Disbursement Schedule MAPS IBRD 11517R IBRD 11518R LIBERIA LOFA COUNTY AGRICULTURAL DEVELOPMENT PROJECT SUMMARY AND CONCLUSIONS i. The Government of Liberia (GOL) requested IDA and USAID financial assistance for an agricultural development project in Lofa County. The pro- ject was identified by IDA 1/ and prepared by German consultants, Agrar und Hydro-technik under the Liberian Agriculture Development Technical Assistance Project (306-LBR). This report is based on the findings of an appraisal mission that visited Liberia in January 1975. ii. The Liberian economy is largely dependent on mining, timber, and rubber, which are in turn dominated by foreign concessions. GOL wishes to expand its economic base and now seeks to assist small farmers to reduce imports and to diversify and expand agricultural exports of coffee, cocoa, and non-concession rubber, and to increase rural incomes. This project would (a) assist 8,000 farmers to improve and/or develop 5,600 ha upland rice, 1,900 ha rainfed swamp and irrigated rice, 2,800 ha coffee and 2,300 ha cocoa; (b) strengthen agricultural support services; (c) establish farm input systems through existing cooperatives; (d) strengthen institutional framework for agricultural development; and (e) improve existing infrastructure. iii. This report appraises the Lofa County Agricultural Development Project which would introduce improved cultivation methods and farm inputs through a complete agricultural service package to improve yields and quality of upland rice, swamp rice, coffee and cocoa grown by small farmers. Where sufficient water is available, double crop irrigated rice would be introduced. Farm credit would be provided for inputs comprising: tools and sprayers, seeds and seedlings, fertilizers and agricultural chemicals and hired labor for swamp development. Other components of the project would be construction of village wells, expansion of agricultural and cooperative extension services beyond project needs, marketing assistance, seed multiplication facilities, seedling nurseries, staff, cooperative and farmer training facilities, strengthening Ministry of Agriculture's capability for planning and initiating agricultural development, banking facilities, health monitoring facilities, and road improvements. Project development would be over a five-year period. iv. A total of 8,000 farm families would be involved with average holdings of less than 4 ha. As land availability is not a constraint to project development, farmers would retain their existing holdings under the traditional land tenure system which is conmon to much of West Africa and provides special recognition of swamp and tree crop development. Swamp rice cultivation would be encouraged in the present undeveloped swamps through 1/ Appraisal report PA-120a, March 7, 1972 (Appraisal of an Agricultural Development and Technical Assistance Project, Liberia). - li - improved drainage and water control to relieve dependenice on the traditional shifting cultivation of uplands. Coffee and cocoa development would be restricted to suitable soils. Project would provide development and seasonal credit up to a maximum of US$1,000 per farmaer at any one time; actual limit to be decided by Project Management dependent on crop mix, soil suitability and farmer capability. v. Incremental production of 7,300 tons milled rice would reduce rice imports. Incremental production of 2,500 tons coffee and 1,600 tons cocoa are less than 0.05 percent and 0.2 percent respectively of world production and would be readily exported at remunerative prices. The international coffee and cocoa organizations have raised no objections to the project coffee and cocoa components. vi. Project would be carried out by a Project Management Unit (Pmu) responsible to the Minister of Agriculture through a ministerial Project Steering Committee (PSC). An ongoing IDA-financed study for the reorganiza- tion of the Ministry of Agriculture is expected to be completed by the end of 1975; part of which will cover the Ministry's role in implementing this and future development projects. Should GOL be unable to strengthen the Ministry's capability to undertake project implementation, then GOL would discuss the establishment of a Special Development Authority for project implementation which would be ab:Le to retain and concentrate scarce and costly resources. This project provides for substantial recruitment and training of Liberians, primarily in agricultural development in excess of project needs and should be regarded as technical assistance in preparation for subsequent agricultural development projects. Additionally, as competent and qualified Liberians are in short supply, project provides for recruitment of up to ten internationally recruited staff to fill senior management posi- tions and provide practical training. In the event that qualified Liberians are not available, promising Liberians will be recruited as counterparts, who will be trained by the internationally recruited staff within an agreed timetable to acceptable standards. Early appointment of project manager, training and development controller, and agriculture manager would be covered by retroactive financing of US$100,000. To encourage local acceptance and project liaison, a Project Advisory Committee (PAC) would be formed consist- ing of local representatives and PMU staff. vii. Cost of project is estimated at US$17 million, net of all identifi- able taxes and duties, including US$5 million for physical and price contin- gencies, during the five-year development period 1976-1980. Project infra- structure accounts for 14 percent of base costs, incremental farm inputs 31 percent, farmer support services 53 percent, and technical assistance 2 percent, whilst physical contingencies total US$0.6 million (5 percent of base costs), and expected price increases amount to US$4.4 million (35 percent). Foreign exchange costs are estimated at US$7.8 million (46 percent of total project costs) and would be shared between IDA and USAID, US$4.8/3.0 million respec- tively (61 and 39 percent of foreign exchange costs). The proposed IDA Credit of US$6.0 million (35 percent of total project costs) would cover US$4.8 - iii - million foreign exchange costs and US$1.2 million local costs (28 percent and 7 percent respectively of total project costs). The proposed USAID Loan of US$5.0 million (30 percent of total project costs) would cover US$3.0 million of foreign exchange (18 percent) and US$2.0 million of local costs (12 percent). The IDA credit would be on standard terms and the USAID loan would be for 40 years, including 10 years grace, repayable in 30 equal installments with interest of 2 percent during grace period and 3 percent thereafter. GOL would contribute US$6.0 million covering local farm inputs and local staff and operating costs. viii. Procurement of vehicles and equipment. valued at more than US$25,000 and estimated to have a total value of US$0.9 million to be financed by IDA would be through international competitive bidding (ICB). Local manufactured goods would be allowed a 15 percent preference. Items between US$5,000 and US$25,000 would be procured on the basis of local competitive bidding procedures acceptable to IDA, for which an overall limit of US$0.3 million would apply. Reimbursement of internationally recruited staff costs of US$1.4 million would be against ID)A approved contracts. Reimbursement of vehicle running costs, house and office rents, PMU adlministration expenses totalling US$2.1 million would be against certified documentation of IDA approved local pro- cedures. The USAID loan would be disbursed direct under USAID procedures against the costs of (a) imported farm inputs, and hired labor for swamp development; (b) vehicles, equipment, internationally recruited and local staff of the PMU cooperative/credit division, and the schistosomiasis sur- veillance unit, including drugs, supplies and consultants services; and (c) construction of a dormitory including equipment. ix. The IDA credit would be disbursed over a five-year period against 100 percent of foreign exchange or 80 percent of local expenditures for vehicles and equipment, internationally recruited staff, LBDI support, and consultant services; and 90 percent of expenditures on buildings and construc- tion materials, general operating and service costs to cover 35 percent of project costs. The USAID loan would be disbursed against 100 percent of total expenditures for imported inputs, and hired labor for swamp development; vehi- cles and equipment, and staff costs of the PMU cooperative/credit division, and the sciiistosomiasis surveillance unit (including operating costs), and construc- tion and equipment of a dormitory block to cover 30 percent of project costs. x. At project maturity in 1987, incremental production would amount to 7,300 tons milled rice, 2,500 tons coffee, and 1,600 tons cocoa with total foreign exchange benefits at 1985 prices in 1975 dollars of US$9.3 million based on rice import substitution and coffee and cocoa export parity. Rice incremental production is equivalent to 20 percent of forecasted 1980 rice imports, wlhile coffee and cocoa production represents an increase over 1973/74 exports of 67 and 48 percent respectively. At maturity, average per capita income would have risen from US$63 to UISS182. xi. On the basis of cost estimates, yields, and prices developed in appraisal and assuming a 30-year project life, the economic rate of return would be 25.9 percent. - iv - xii. On the basis of the assurances and conditions set out in Chapter IX, the project is suitable for an IDA credit of US$6 million in conjunction with a USAID loan of US$5 million. I. INTRODUCTION 1.01 The Government of Liberia (GOL) has requested an IDA Credit of US$6 million and a USAID loan of US$5 million to assist in financing agricul- tural development in Lofa County, the first agricultural investment project undertaken by the Bank Group in Liberia. This report appraises a project costing US$17 million which would benefit some 8,000 farm families by: improving upland rice cultivation; rehabilitating rice swamps, coffee and cocoa farms; developing additional swamps for rice cultivation; and developing new coffee and cocoa farms. Additionally, the project provides for strength- ening the Ministry of Agriculture, and for infrastructure improvements including water supplies, disease control, cooperative development, banking, and roads. 1.02 The project was identified by IDA 1/ and was prepared by German Consultants, Agrar und Hydrotechnik (AHT), financed under the Liberia Agri- cultural Development and Technical Assistance Project (306-LBR). 1.03 This report is based on the findings of an IDA appraisal mission in January 1975, consisting of Messrs. A. Arben, M. Burer, M.O. Farruk, I. Peprah, A. Mercer (IDA), C. Tagoe (West Africa Rice Development Association) and E. Schroepfer (USAID Consultant). II. BACKGROUND A. General 2.01 Liberia has an area of about 110,940 km and a population of 1.5 million, growing at 2.8 percent per annum. Estimated GNP in 1972 was US$355 million or US$250 per capita (with income from concessions excluded per capita income decreases by 50 percent to US$120). Income distribution is highly skewed: 75 percent of the total population engaged in subsistence farming earns only US$70 per capita compared to US$150 by urban wage earners while only 4 percent of the population commands 60 percent of the national income, averaging about US$3,300 per capita. Mining and agriculture account for 30 percent and 21 percent respectively of GDP which has grown at 5.2 percent annually in recent years. Foreign concessions (rubber, timber and mining) dominate the economy by providing 30 percent of total public sector revenues, and 90 percent of export earnings, of which 30 percent is repatriated as profits, interest and salaries. The fiscal system is unsophisticated, lacks discipline, and notwithstanding the strong trade surpluses the country has a chronic balance of payments deficit on current accounts due to repatriation of investment income of foreign concession-ires. 1/ Appraisal report PA-120a, March 7, 1972. (Appraisal of an Agricultural Development and Technical Assistance Project, Liberia.) - 2 - B. Agricultural Sector 2.02 Liberia has a gently rolling coastal topography, which becomes more rugged inland. The climate is tropical, annual rainfall ranging from 4,300 mm at the coast to 1,800 mm inland. Most rain falls between April and November. Liberia is well suited ecologically for the competitive cultiva- tion of many of the tropical tree crops, in particular rubber, cocoa and robusta coffee; although oil palm grows wild and is also a planted crop, yield potential, as in West Africa in general, is much lower than in the Far East. Rice, which is the principal food crop, and other food crops are produced mostly in small farms by a traditional system of shifting cultiva- tion under which soil fertility can be maintained only through a long period of bush fallow. however, valley bottoms and swamps are fertile, and with water control and fertilizers, can be continuously cultivated in rice. Govern- ment is concentrating on programs for developing such areas and a principal component of the project appraised in this report would be directed to engineering the development of swamps for rice growing. 2.03 Agricultural output totalled US$95 million in 1972 of which US$60 million originated in the monetized sector composed of rubber, coffee, cocoa, palm products and other export crops, and US$35 million in the subsistence sector. Rubber alone accounts for about US$25 million in the monetized sector. The structure of the agricultural sector is characterized by (a) foreign concessions, (b) Liberian owned commercial farms, and (c) small traditional farms that comprise more than 90 percent of agricultural holdings in Liberia. Foreign concessions are limited principally to large rubber plantations and timber exploitation, the basic features of these enterprises being highly trained expatriate managerial and technical staff, extensive capital investment, large scale itodern technology and high levels of effi- ciency. The Liberian-owned commercial farms primarily produce rubber but they are increasingly expanding into poultry, livestock, coffee, cocoa, oil palm and some rice and vegetables. They employ moderately capital intensive technology, and have relatively easy access to capital and other resources, often against the security of their owned interests in other sectors. Most owners are absentee and management is poor, except in cases where the farm is large enough to support an experienced professional manager. The traditional sector is largely outside the monetized economy, is located in areas with minimal infrastructure, and is composed of farms where less than 4 ha is culti- vated each year. There is little or no adoption of modern innovation, and the sector primarily produces rice, cassava, yams, and other subsistence crops along with some coffee, cocoa, oil palm and sugar cane that are grown as cash crops. Farms in the project area, see Chapter III, are largely of this type although due to relatively good communications, they are more commercially oriented than the mctjority of farms in the traditional sector. 2.04 Government policy in the past has been to develop agriculture through permitting foreign enterprises to establish concessions under very attractive conditions for land acquisition and favorable tax structures. In turn, through the demonstration effect of the concessions, Liberian enterprises have moved into agriculture generally as a secondary business interest. This spontaneous development has been mostly without Government assistance, and the Liberian commercial farmers have relied on the concessions for technical support, both in terms of advice and inputs such as improved planting material. A small service industry has developed in support of these commercial farmers, as have institutions such as an association of rubber producers. 2.05 The great bulk of farmers, over 90 percent, are in the traditional sector where they are only now beginning to receive direct help from Govern- ment, and this only on a very limited scale. Equally, the traditional farms have no commercial support except a very small amount provided in some areas by the Liberian Produce Marketing Corporation (LPMC). 2.06 In short, agricultural development in Liberia until very recently has occurred with a minimum of Governmental intervention in either the positive or negative sense. Thus, while Government has given very little assistance to the sector in terms of extension and other support services and input sub- sidies, it equally has avoided introducing constraints such as producer prices and other controls and taxes that might have restricted production. In Chapter VII pricing arrangements for commodities are discussed in detail. C. Agricultural Strategy 2.07 A frontal attack on agriculture and rural poverty will be indispens- able for Liberia's development in the decades to come. With uncertainties over future iron ore mining and the constraints on the development of a modern industrial sector, much of future growth, employment and foreign exchange earnings will have to depend on the development of agriculture. A Bank Economic Mission 1/ that visited Liberia in 1973 recommended Government adopt programs that would improve in the medium run the income earning capacity of the rural poor, i.e. those in the traditional sector and in the longer run the production of export crops. The mission also concluded that any success- ful development strategy in Liberia would need to be regional because constraints and ecological conditions differ between the coastal belt, which is relacively thinly populated, has good communications, and is where most of the concession plantations and commercial farms are located, and the rural interior where the majority of the population lives cut off from the coastal cities and the national market. The Mission stated that the principal points of an action program in pursuit of the foregoing strategy should be: (a) improvement of the institutional structure to plan and carry out development projects more effectively; (b) improvement of price incentives for increased production by adopting an active price policy and improving the marketing system and the infrastructure; and 1/ Report No. 426a-LBR, dated March 1. 1975. --4- (c) provision of a package of measures - extension, input supply, credit and marketing - to traditional farmers in order to raise t:heir level of production. The project appraised in this report conforms to the strategy proposed by the Economic Mission and indicates the acceptance by Government of Liberia (GOL) of the principles of the strategy. The project would increase the incomes of traditional farmers through assisting them to improve their production of rice, cocoa, and coffee. These are crops which grow well in the project area and in which the farmers have experience. 2.08 With increasing awareness of the pressing need to effect change in the traditional farming areas, Government has adopted a number of ad hoc approaches to development in recent years. Whilst some of these appear of doubtful validity, they are still in the early stages and it is not possible to assess fully their effectiveness. The most important of these is a large scale mechanized land clearing program designed initially to aid the produc- tion of rice. This program has focused on two areas, Cape Mount, and Foya in the project area. For the mechianical clearing, GOL has established the wholly GOL owned Agricultural Mechanization and Land Development Corporation (AGRIMECO), managed and operated by AGRIDEV of Israel. Whilst the land clearing (1,500 ha to December 1974) in the Foya area has been efficiently carried out, the financial cost has been high and much damage done to the fragile top soil. Farmers have been uninterested in using the land for rice and most of the cleared land is now reverting to bush. The Ministry of Agriculture (MA) is now attempting a crash program to help smallholders to develop the existing and yet to be cleared land with coffee, cocoa and oil palm, and LPMC is being required to provide inputs financed initially from its Agricultural Development Fund. Credit arrangements for smallholders participating in the scheme have not been finalized and generally adminis- tration of the program is poor. In view of the high development costs of this type of program and its doubtful benefits, and because its "give away" nature could conflict with project procedures, an assurance was obtained at negotiations that the existing special rice and tree crop development program areas in Lofa County would not be included in the project in any way and that GOL would not permit,with limited exceptions, AGRIMECO to undertake any new land clearing in the project area after December 31, 1975 and during the project development period. A further assurance was obtained from GOL during negotiations that in the interest of avoiding conflicts with the project LPMC and MA would ensure that charges levied for the development of land cleared by AGRIMECO in the project area and the conditions and terms of credit for inputs and cultivation of such land would be economic and in harmony with those applied under the project. D. Agricultural Institutions 2.09 Ministry of Agriculture. The Ministry of Agriculture (MA) is respon- sible for agricultural research, extension and administration of technical - 5 - assistance. Its past impact has been limited, due to poor planning and management, limited funds - about US$1.0 million or less than 2 percent of total GOL expenditure between 1968 and 1970, the low caliber of the staff, many of whom are unqualified and were appointed for non-professional reasons, and lack of interest in agriculture. Government is aware of the need to strengthen MA and is currently undertaking a reorganization study with the aid of consultants financed under Credit 306-LBR. In addition GOL is devoting an increasing proportion of its expenditure to agriculture; US$6.3 million (7 percent of total GOL expenditure) in 1974; and US$9.6 million (10 percent of total GOL expenditure) was allocated for 1975. 2.10 Liberian Produce Marketing Corporation (LPMC). The export crops, coffee, cocoa, palm kernels and palm kernel oil (but not rubber), are processed and marketed exclusively by the Liberian Produce Marketing Corporation (LPMC) which was established in 1962, as a 50 percent GOL and 50 percent Danish-owned company with the Minister of Agriculture as Chairman and four GOL appointed directors to the ten-member board. In 1972 when LPMC's tax exemption status ended, GOL decided not to buy out the Danish partner's interest but to review the position annually. LPMC is largely autonomous, operates commercially and is profitable. Export crops are purchased at prices established by LPMC through Licensed Buying Agents (LBAs) who in turn buy through unlicensed traders or subagents. In addition to export crops, LPMC also purchases and mills paddy for sale locally and in Monrovia; and imports milled rice for private trading (8,400 tons in 1974). Whilst LPMC's involvement in the Lofa County paddy market is small (approx. 22 percent of 2,000 tons marketed in 1974), its official paddy price tends to establish the local market floor price. LPMC operates three rice mills, coffee hullers, a palm kernel mill, and a palm oil mill; it also owns small estates growing coffee, cocoa or oil palm. LPMC maintains and controls two funds financed from deductions from export crop sale proceeds (other than rubber), namely a Price Stabilization Fund (US$1.1 million in 1974) for export crops, and an Agricultural Develop- ment Fund (US$1.4 million in 1974). The latter fund is used to finance the tree crop program covering coffee, cocoa and oil palm which LPMC has operated on MA's behalf since 1973. 2.11 Liberian Bank for Development and Investment (LBDI). LBDI was established in 1965 with IFC assistance and subsequently received two Bank loans. Agricultural credit is extremely limited in Liberia, the only known sources of farm credit for which collateral is required are LBDI and the commercial banks; whilst the cooperative, credit and marketing division of the Ministry of Agriculture provides in a small way credit for seasonal inputs and land development without collateral. LBDI has agreed to establish a branch in Voinjama with project financial assistance to administer the proposed revolving credit fund which will provide agricultural credit to project farmers through their cooperatives. An assurance to this effect was obtained at negotiations. 2.12 Cooperatives. There are four farmer produce marketing cooperatives with some 3,700 members in the project area. Primary marketing was in the hands of private traders, mainly Lebanese, until 1972 when GOL revoked the - 6 - licences of these LPMC buying agents and appointed the four cooperatives in their place as the Licenced Buying Agents for Lofa County. Two of the cooperatives are well run with assistance from Peace Corp Volunteers and their operations are profitable; the other two are still in the early stages of development and require support which would be provided under the proposed project. Cooperative income consists of LPMC coffee and cocoa buying com- mission, and rice trading profits. The cooperatives are anxious to increase their volume of operations and to expand into the provision of farm input supplies, credit and savings facilities which are presently severely limited in Lofa County. The three largest cooperatives are constructing substantial storage capacity from their own financial resources or with loans from LBDI. The project would use the cooperatives for the delivery of farm inputs and credit, and for providing marketing facilities to project farmers. 2.13 Research. Although rubber research is undertaken privately by Firestone Plantations Ltd., results are made available to Liberian farmers, and provide a sound technical base for the industry. Rice and other food crops applied research is the responsibility of GOL Central Agricutural Experiment Station (CAES) at Suakoko with support from West Africa Rice Development Association (WARDA) and UNDP. The gradual improvements in quality are encouraging, but GOL needs to increase budgetary allocations to sustain the research effort. There is little or no research on coffee, cocoa and oil palm but data is available from other West African countries with similar ecological conditions. III. THE PROJECT AREA 3.01 General. The project area is centered on Voinjama in Lofa County in Northwest Liberia (see map). It is bordered by Sierra Leone to the West 2 and by Guinea to the North and East. The project area covers some 3,300 km and contains nearly 14,000 farming families (90,000 people). The climate is tropical with ample rainfall of over 2,500 mm; topography and soils are suit- able for the proposed development program. 3.02 Water. The project area is drained by three major rivers, and intersected by numerous streams. Swamps are formed from bottom land which is permanently or temporarily waterlogged. Swamp rice cultivation during the rainy season is reasonably assured and a small proportion of swamps have sufficient water for two rice crops a year. The project area contains an estimated 16,000 ha suitable for swamp rice development. 3.03 Local Administration. Lofa County is divided into four chiefdoms administered by elected paramount chiefs, which embrace 32 clans, each with its own elected clan chief, and hierarchy of town and village chiefs and elders. The county is administered by a County-Superintendent, the personal representative of the President, but who reports administratively to the Minister of Local Government and Rural Development. In recognition of their importance and considerable traditional influence, the paramount and clan chiefs became paid GOL employees in 1974 with the election of paramount and clan chiefs subject to confirmation by the President and County-Superintendent respectively. 3.04 Mineral Resources. The Wologisi range on the southern border of the project area contains estimated iron ore reserves of 900 million tons, presently unexploited but with potential annual production of 10 million tons of pellets. The Liberian Iron and Steel Corporation (LISCO), the concession holders, must under the terms of their concession agreement, decide by October 1975 whether to commence construction and, if they so decide, start construction by September 1976 and production during 1980/81. Wologisi mine development could have two effects on the proposed agricultural development project: on one hand part of the rural labor force may be attracted to the mine; on the other, however, the development would provide an accessible and remunerative market for rice and other food crops grown in the project area. The possible impact of the mine on the labor situation is taken into account in the economic analysis in Chapter VIII. 3.05 Communications. There is an unpaved primary road linking the main towns of Foya, Kolahun, Voinjama and Zorzor with Monrovia and numerous poorly maintained feeder roads and tracks link other population centers. GOL gave an assurance during negotiation that the Ministry of Public Works (MPW) would upgrade the maintenance standard of both primary and feeder roads (see para. 4.12). Whilst at present there are nine small airfields in the project area used only by GOL and private small aircraft, Liberia Airways proposes to intro- duce a trial scheduled service Monrovia/Voinjama in mid-1975. As telecom- munication facilities with Monrovia are limited to a few GOL and private radio sets, the project organization would install its own radio. 3.06 General Infrastructure. Social and related services are limited. The project would improve village water supplies and whilst education and health facilities are also inadequate, improvements to education would be made through the GOL Community Schools program to be financed in part by IDA and augmented by project farmer training efforts; improved health facilities will be provided through an approved USAID-financed rural health program for Lofa Cotnty supported in part by a project-financed schistosomiasis surveil- lance unit. 3.07 Farming Systems. The upland farming system of shifting cultivation consists of rice intercropped with vegetables, maize, peppers, beans, plan- tains, etc., in the first year; followed by root crops and sugar cane in the second year; thereafter the land is left fallow for five to ten years. This very long fallow period is indicative of the area's relatively low popula- tion pressure. At any one time up to 10,000 ha of the project area will be under upland rice cultivation. A small number of swamps, (about 700 ha), have been developed for rainfed rice cultivation on a semi-permanent basis and are fallowed for a short period every 3 to 5 years. A mixture of local rice varieties are grown on both uplands and swamps without the use of fertilizers or pesticides. Tree crops grown in the project area are coffee 4,600 ha, - 8 - cocoa 3,000 ha and oil palm 500 ha. Cultivation standards are low, and fertilizers and insecticides are not used. Total area presently under culti- vation in food and tree crops is 19,000 - 20,000 ha annually, about ten percent of land suitable for cultivation. The 1971 Census of Agriculture covering a substantial part of the project area indicated a highly skewed farm size distribution, 90 percent of the farms are less than 4 ha covering 46 percent of the surveyed area while the remaining 10 percent of the farms are larger than 4 ha covering 54 percent of the surveyed area. However, of the remaining 10 percent about half the farms are less than 10 ha and only 80 farms are larger than 20 ha, and many of these larger farms are neither fully developed nor intenisively cultivated. Four ha is about the maximum that the typical farm family can handle without hired labor (except at harvesting). Availability of suiLtable land is not a constraint to improving the production of the smaller farmers. Most farms have some upland rice, and a few also swamp rice; all farms grow the other traditional food crops for home consump- tion and some obta:in cash income from vegetables and fruit trees. Coffee and cocoa tend to be cultivated by the larger farmers, but many small farmers have small plantings, usually up to 0.5 ha, to provide a cash income. Based on the 1971 Census of Agriculture, the average family labor force is 2.3 adult equivalents on farns of 4 ha or less. Labor requirements are unevenly dis- tributed over the year with peaks from March to June/July (land preparation, planting) and from mid-October to December (harvesting). In between these peaks there is seasonal under-employment. 3.08 Land Tenure. Apart from small amounts, largely in the urban areas that are owned freehold, land in Liberia is owned by the State. Within each tribal area, however, the traditional authorities are responsible for the administration of land and allocate right of usufruct to members of the com- munity and others. This process is common to much of West Africa and provides satisfactory tenure especially in areas, such as the project area, where population pressure is light. Land allocated to an individual may not be sold or otherwise disposed of and as the planting of tree crops, because of their long life, conveys a more permanent and owner-like right of usage, permission of the t:raditional authorities must be obtained by the farmer before he plants tree crops. To minimise the risks of ownership disputes over tree crop areas and swamps which are limited in extent, the project would provide the technical capability to undertake land surveys, if required. IV. THE PROJECT A. General Description 4.01 The project would be carried out over five years 1976 through 1980 and would involve: (i) Farm and Crop Development - provision of development loans and seasonal credit, through a revolving credit fund, to develop and improve production of: upland rice - improvement 5,600 ha swamp rice - rehabilitation 500 ha swamp rice - new 1,400 ha coffee - rehabilitation 500 ha coffee - new 2,300 ha cocoa - rehabilitation 800 ha cocoa - new 1,500 ha (ii) Staffing - provision of technical and administrative staff with support facilities for project implementation. (iii) Training - construction and operation of a staff training center, a farmer training center, and dormitory facilities. - recruitment and training of Liberians for extension, cooperative/credit and project management; - training and upgrading existing cooperative staffing and organization; (iv) Social Services - construction of 100 village wells; - provision of a schistosomiasis surveillance unit. (v) Support Services - financial assistance to establish an LBDI branch at Voinjama. - provision of consultant services to advise (a) the coffee and cocoa program, and (b) the schistosomiasis program. GOL would undertake, independently but in support of the project, road improvements including construction of up to 100 km of new feeder roads and rehabilitation of up to 500 km of existing feeder roads. B. Detailed Features 4.02 Farm Development. The schedule of farm development would be as follows: - 10 - Year 1 2 3 4 5 Total Upland rice - Improvement 150 650 1,200 1,600 2,000 5,600 Swamp rice - Rehabilitation 50 50 100 150 150 500 - New - 150 250 400 600 1,400 Total Rice 2C0 850 1,550 2,150 2,750 7,500 Coffee - Rehabilitation 50 80 100 120 150 500 - New - 500 500 600 700 2,300 Total Coffee 50 580 600 720 850 2,800 Cocoa - Rehabilitation 50 100 150 200 300 800 - New - 300 300 400 500 1,500 Total Cocoa 50 400 450 600 800 2,300 GRAND TOTAL 300 1,830 2,600 3,470 4,400 12,600 4.03 Crop Development. The project would provide credit for farm inputs, including hired labor for swamp development, tools and equipment, seeds, seedlings, fertilizer and chemicals for: (a) Upland rice improvement - presently upland rice is inter- cropped with other food crops under shifting cultivation. Estimated paddy yields are 1,000 kg/ha and are expected to increase to 1,700 kg/ha with the use of 100 kg/ha of fertilizer (20-20-0) and 50 kg/ha of improved seed of LAC 23 variety. Seed would be replaced every fifth year; farm tools would be available if required. Some 5,600 ha of the present 7,300 ha cultivated would be improved under the project. (Details at Annex 1.) (b) Rainfed swamp rice - there is already 650 ha of rainfed swamp rice in Lofa County. The project would increase paddy yields from 1,500 kg/ha to 3,500 kg/ha over a five-year period for 500 ha through better water control and the use of fertilizer, and fungicide treated seed of the IR 5 or IR 20 varieties. The project would develop an additional 1,400 ha of swamp rice by providing credit for hired labor in addition to credit for inputs. However, a special provision of US$0.3 million for mechanized land clearing equipment is included in project costs in case labor is inadequate or clearing work too onerous to be carried out by hand. (Details at Annex 1.) (c) Irrigated swamp rice - of the 1,900 ha of improved and new rainfed swamp developments approximately 400 ha would have sufficient water for double cropping. Paddy yields (double crop) are expected to increase to 6,300 kg/ha over a six-year period. (Details at Annex 1.) - 11 - (d) Tree crop development - project would rehabilitate 500 ha coffee and 800 ha cocoa and would establish 2,300 lia of new coffee and 1,500 ha of new cocoa. Farm inputs would be provided including tools, seedlings, fertilizer, sprayers and agricultural chemicals. Rehabilitated coffee yields are expected to increase from 280 kg/ha to 700 kg/ha over a 5-year period, rehabilitated cocoa yields from 280 kg/ha to 600 kg/ha over a 2-year period. New planted coffee yields are expected to increase to 1,000 kg/ha at full development 6 years after seedlings are planted, and new planted cocoa to 850 kg/ha after 8 years. (Details at Annex 1.) 4.04 Seed Multiplication and Seedling Nurseries. Adequate supplies of fungicide-treated seed of improved varieties would be provided from breeder seed supplied by CAES, Suakoko, through either the privately owned National Seed Association or from project seed multiplication farms. Coffee and cocoa seedlings grown from approved seed would be supplied by LPMC nurseries on contract. Alternatively the project would produce its own seedlings from imported seed. Technical advice on seedling production would be provided by consultants retained under the project. (Details at Annex 1.) 4.05 Supply of Inputs. The project would provide farm inputs to farmers on credit for both farm development and seasonal requirements. Long-term loans would be provided to small farmers to rehabilitate existing farms and to establish new farms for swamp rice, coffee and cocoa. Loans would be given in kind for tools and equipment, coffee and cocoa seedlings, fertilizers and agricultural chemicals during the development period; and in cash for hired labor for swamp land development. Seasonal credit would be provided in kind for upland rice and swamp rice to cover seed and fertilizer; and for coffee and cocoa would cover fertilizer, agricultural chemicals and replace- ment sprayers. Delivery of farm inputs would be made through the farmer coop- eratives. To ensure farmers permanent access to credit, the project would establish a revolving credit fund to finance inputs, and which would be administered by LBDI on behalf of GOL under a trust agreement. LBDI would establish a branch at Voinjama with project financial assistance (para 4.11), and would maintain separate accounts and financial arrangements for the revolving credit fund. Farm inputs, other than seed and seedlings would be imported through LPMC (acting on a commission basis), whilst rice seed, coffee and cocoa seedlings would be procured locally (para. 4.04). (Details of inputs and credit delivery systems are in Chapter VI and Annnex 7). 4.06 Staffing. The project provides for up to 276 administrative, tech- nical and commercial staff positions for project implementation, including 161 staff who would be available for transfer to agricultural development programs in other areas in the last two years of project development. In case suitably qualified Liberians wouild not be available for key positions, the project orovides for up to ten internationally recruited staff. Staff so recruited would be required to undertake practical training of their Liberian -- 12 - counterparts. Where appropriate, staff would be provided with rented housing, and senior staff with vehicles and junior staff with motorcycles (details are in Annex 5). 4.07 Staff training in project management and organization, and basic technical skills would be provided at a residential training center, to be constructed under the project at Voinjama and would be supplemented by prac- tical on the job training. Further technical training would be provided at CAES, Suakoko for rice agronomy; and at the existing Agricultural Extension Training Center (AETC), Monrovia, where the project would construct a 15/20 bed dormitory block for project use for residential training courses covering cultivation of rice, coffee and cocoa (para 6.12). The staff training program is substantially in excess of immediate project needs and should be regarded as an Investment in institution building that would be realized by other deve- lopment projects (para 6.08). Internal training and support of cooperative staff would be provided by the project through the assignment of four fulll time resident cooperative officers (one to each cooperative) under the direction of the cooperative training officer (para 6.13). Farmer training would be provided by project staff for the more progressive farmers and their wives at a residential farmer training center to be constructed by the project at Kolahun. Full use would be made of the demonstration effect of these farmers (para 6.14). 4.08 Village Wells. The project would assist villages to construct up to 100 hand-dug village wells on a self help basis by the provision of materials and technical advice. 4.09 Schistosomiasis Surveillance Unit. The project would construct and staff laboratory facilities to monitor swamp areas being developed under the project for schistosomiasis to support the Lofa County medical authorities, and the approved USAID rural health program (not part of this project) which provides improved medical facilities, including additional clinics, midwives, village health visitors, drugs and supplies. Support Services 4.10 Establishment of LBDI Branch. The project would provide financial assistance to LBDI for two years to establish and staff a branch at Voinjama. The branch would provide normal banking services and administer the project's revolving credit fund. 4.11 Consultant Services. To strengthen and oversee the cocoa and coffee development program, consultants would be required for a total of 14 man- months to provide periodic technical advice. The project would also finance visits, by a WHO specialist to advise on the schistosomiasis surveillance program for a total of 6 man-months. 4.12 Road Improvement. The project area is well served with unpaved primary and feeder roads but their condition is poor, many require realignment and the reconstruction of some culverts and minor bridges. To provide all - 13 - weather access, the project requires (a) the upgrading and subsequent mainte- nance of the primary road, linking Foya, Voinjama and Zorzor, together with 500 km of existing feeder roads, and (b) construction of 100 km of new feeder roads. An assurance was obtained at negotiations that Ministry of Public Works (MPW) would undertake the road program, the phasing of which would be agreed upon with the Project Management Unit (PMU). The cost of MPW road improvements is estimated at about US$1.5 million. This amount is not included in project cost nor covered by the project financing plan, see Chapter V, para. 5.02. To strengthen the MPW program, the Project would finance and PMU would undertake a small road maintenance program for minor feeder tracks not covered by MPW. V. PROJECT COSTS AND FINANCIAL ARRANGEMENTS A. Project Costs 5.01 Project costs for the five-year development period 1976 through 1980 are estimated at US$17 million including contingencies of US$5 million and are net of all identifiable taxes and duties. Physical contingencies have been calculated at 5 percent of base costs and amount to US$0.6 million, whilst price contingencies amounting to US$4.4 million (35 percent of base cost plus physical contingencies) allow for compounded increases in costs of (a) vehi- cles, plant and farm inputs of 18 percent in 1976, 8 percent per annum 1977 through 1979, and 7 percent in 1980; (b) buildings and construction materials for training centers, roads, and wells of 24 percent in 1976, 12 percent per annum 1977 through 1979, and 10 percent in 1980; (c) salaries, consultants, technical assistance and local costs of 11 percent in 1976, and 7 percent per annum 1977 through 1980. Project infrastructure accounts for 14 percent of base costs, incremental farm inputs 31 percent, farmer support services 53 percent, and technical assistance 2 percent. Total foreign exchange costs are estimated at US$7.8 million, 46 percent of project costs. Detailed cost estimates are presented in Annex 9 and summarized on page 15. 5.02 Costs are based on prices prevailing during January 1975 for vehicles, equipment, materials, and farm inputs and exclude all identifiable taxes and duties. Confirmation was obtained at negotiations that (a) all project imports would be exempt from import taxes and duties, and (b) the salaries of internationally recruited staff would be free from income taxes. Salaries and wages have been based on up-to-date scales including allowances. Cost of staff who may need to be recruited overseas is based on current international salary levels and includes anpropriate allowances. Hired labor for land development has been costed at full current market value. The cost of seasonal inputs has been estimated on an incremental basis. The project provided road improvement costs referred to in para 4.12, cover purchase of limited equipment and operating costs during development period for mainte- nance of minor feeder tracks; whilst the costs of the GOL program are not included in project costs. 14 1 B. Proposed Financing 5.03 A special feature of the project is a USAID contribution of US$5.0 million. IDA would contribute US$6.0 million, and GOL US$6.0 million. The IDA credit would finance US$4.8 million (61 percent) of the total foreign exchange costs of US$7.8 (46 percent of total project costs) and US$1.2 million (13 percent) of local costs. The USAID loan would finance US$3.0 million (39 percent) of foreign exchange and US$2.0 million (22 percent) of local costs; it would be separately disbursed and cover the costs of the PMU cooperative/credit division, imported farm inputs and hired labor for swamp development, the schistosomiasis surveillance unit and construction of a dormitory. The IDA Credit would be on standard terms and the USAID loan would be for 40 years, including 10-year grace, repayable in 30 equal annual installments with interest at 2 percent during the grace period and 3 percent thereafter. The financing plan is summarized on page 16. 5.04 Retroactive financing of up to US$100,000 is proposed to cover the costs of early recruitment of the project manager, training and development controller, and agricultural manager prior to credit signature. 15 - (uss '000) n ' 'US$ vow)) Percent of Base Local Foreign Total Costs I. Infrastructure Costs Road improvement 277.7 174.0 451.7 4 Training centers 437.5 423.2 860.7 7 Well construction 50.0 50.0 100.0 1 Schistosomiasis uhit 82.1 202.0 284.1 2 14 II. Fann InpuLs (Incremental) Fertili zers 204.J 830.0 1 ,03h.8 9 Seeds, seedlings, sprayers, shemicals, and hired labor for swamp development 2,143.8 530.0 2,673.8 22 31 III. Fanner Support Services Local staff 2,299.9 - 2,299.9 19 internationally recruited staff - 1,525.0 1,525.0 13 Buildings 48.0 77.0 125.0 1 Vehicles and equipment 186.9 826.8 1,013.7 8 Administration and operating costs 728.7 648.0 1,376.? 12 53 IV. Technical Assistance Assistance to LBDI 60.0 90.0 150.0 1 Consultarts - 100.0 100.0 1 2 Base cost estimate 6,519.4 5,476.0 11,995.4 100 V. Physical contingencies (5%) 321-0 274.0 595.0 Expected Irice increases (-5,/-1) 2,409.6 2,000.0 4,409.6 Total cass zcf project 92250.0- 7750.0 17,000.0 Distribution % 54 46 100 - 16 - Summary cf Proposed Financing (US$ '000) Total IDA USAID GOL Investment Costs Buildings and construction materials h35.0 340.0 95.0 - Vehicles and equipment 1,246.1 836.0 185,1 225.0 Farm Inputs Fertilizer 1,034.8 - 1,03408 - Other including seed, seedlings, tools, agricultural chemicals and hired labor 2,673.8 - 1,042.0 1,631.8 Annual Operating Costs Local staff 2,773.7 - 650.6 2,123.1 Internationally recruited staff 1,895.0 I,410.0 h85.0 _ Vehicles and equipment 902.0 902.0 - Administration 785.0 743.0 4R2.0 Assistance to LBDI 150.0 150.0 - Consultants 100.0 60.0 40h0 - Subtotal 11,995.4 4,441.0 3,57h.5 3,979.9 Contingencies - physical 595-0 219.0 176.0 200.0 - price 4,409.6 1,340.0 1,249.5 1,820.1 Total 17,000.0 6,000.0 5,000.o 6,000.0 Percent 100 35 30 35 - 17 - C. Procurement 5.05 Contracts for the procurement of vehicles, plant, equipment and other items financed by IDA and valued at more than US$25,000 would be let following international competitive bidding (ICB) in accordance with IDA guide- lines. Such procurement is estimated to have a value of US$0.9 million. Domestically manufactured goods would be allowed a 15 percent preference or tariff, whichever is lower, when comparing domestic bids with those of foreign manufacturers. Items between US$5,000 and US$25,000 would be procured on contracts which would be awarded on the basis of comipetitive bidding adver- tised locally and in accordance with local procedures which are acceptable to IDA. A maximum limit of US$0.3 million would be placed on the procurement of items between US$5,000 and US$25.000. Procurement financed by USAID would be in accordance with their procedures -and is estimated to have a value of US$3.6 million (para 5.10). 5.06 Project houses and buildings would be rented insofar as practical and PMU would enter into rental agreements under local procedures satisfactory to IDA. To ensure early availability of suitable rented accommodation, advance payments of rent would be permitted to part finance landlord costs of construction and/or improvements. Project costs include US$0.2 million for rented accommodation. Project training centers with a value of US$0.1 million would be constructed by either local contractors in accordance with local contract procedures acceptable to IDA or PMU force account. 5.07 Wells would be constructed by villagers under supervision on a self- help basis with project supplied materials estimated to cost US$0.1 million. 5.08 A substantial part of project costs, an estimated US$5.0 million, would be for hired labor, local staff salaries, maintenance and operation of buildings, vehicles and equipment which are unsuitable for competitive bidding. Internationally recruited staff (see para 6.04) would be appointed on terms acceptable to IDA for all positions other than commercial manager, cooperative training officer, and head of the schistosomiasis surveillance unit who would be appointed on terms acceptable to USAID. D. Disbursement 5.09 The IDA Credit of US$6 million would be disbursed (see Annex 9, Table 11) over the five-year period, 1976 through 1980, to cover 35 percent of total project costs against the following categories: - 18 - US$ million Cat. 1 100 percent of foreign or 80 percent of local expenditure for vehicles and equipment not financed by USAID (para 5.10, Cat. 1 (iii)) 0.9 2 90 percent of expenditure for civil works and construction materials 0.4 3 100 percent of foreign or 80 percent of local expenditure for internationally recruited staff /1 1.7 4 90 percent of local expenditure for administra- tion and operating costs 1.7 5 100 percent of foreign and 80 percent of local expenditures for LBDI assistance 0.2 6 100 percent of foreign and 80 percent of local expenditure for consultants services /2 0.1 5.0 Unallocated 1.0 Total 6.0 5.10 The USAID loan of US$5 million would be disbursed during the same period to cover 30 percent of project costs against the following categories: US$ million Cat. 1 100 percent of total expenditure for: (i) fertilizer, agricultural chemicals, improved seed, agricultural tools and equipment, and hired labor for development 2.1 (ii) Vehicles and equipment for the cooperative/ credit division and the schistosomiasis unit 0.2 (iii) erected cost of 15-20 bed dormitory block with equipment 0.1 (iv) internationally recruited staff, local staff, consultants /3 and general support costs for the cooperative/credit division, and schistoso- miasis unit 1.2 3.6 Cat. 2 Unallocated to cover physical and price contingencies 1.4 Total 5.0 /1 All staff excepting commercial manager, cooperative training officer, and head of the schistosomiasis unit who are financed by USAID (para 5.10, cat. 1 (iv)). /2 Visiting coffee and cocoa experts for project crop development. /3 Visiting WHO specialist for the schistosomiasis program. - 19 - 5.11 The GOL contribution of US$6.0 million, 35 percent of project costs, would cover the following categories; local costs of imported vehicles and equipment, local staff costs (other than financed by USAID loan, Cat. 1 (iv)) and the costs of seeds and seedlings. 5.12 IDA disbursements would be fully documented for Categories 1, 2, 3, 5 and 6. Disbursement for Category 4 would be made on the basis of statements of expenditures, the supporting documents for which would not be submitted for review but would be retained by PMU for scrutiny by IDA project supervision missions. Surplus credit funds, if any, would be used for further development of the project area. 5.13 Disbursement of USAID funds would be made direct according to USAID procedures. E. Budgetary Control, Funding Procedures, Accounts and Audit 5.14 Under supervision of the Deputy Project Manager, the Finance Manager would prepare annual budgets for approval by the Project Steering Committee. (PSC) and inclusion in MA Annual Estimates. Project budgets will be based on the cost estimates in this report with suitable ammendment to reflect changes in project costs, policies, and development schedules. Thereafter PMU would submit to the Project Steering Committee quarterly cash flow forecasts indicating costs, revenues and working capital requirements. 5.15 During negotiations, agreement was obtained that as a condition of effectiveness, GOL would establish a project bank account with LBDI, or an established commercial bank if LBDI is initially precluded by its statutes from commercial banking, with an amount of US$100,000. Subsequently the account would be replenished with funds by the Ministry of Finance quarterly in advance to finance forecasted local expenditures as approved by PSC (para 5.14). Both IDA and USAID reimbursement of local expenditures would be made direct to the Ministry of Finance. Subject to approval of the project budget and the regular submission of the quarterly cash flow forecasts (para 5.14), PMU would be given full authority to operate the Bank account within the budgetary allocation. 5.16 PMU would maintain income and expenditure records in accordance with acceptable accounting practices to reflect the operations and financial position of the project and to provide evaluation data. The accounts would be scrutinized periodically by the PMU evaluation and planning section, and audited annually by external auditors acceptable to IDA. Assurance in this respect was obtained at negotiations. 5.17 GOL would ensure that project farmer cooperatives maintain adequate a) farmer credit records, and b) operating records and accounts. These 20 - records and accounts would be audited annually by the Registrar of Cooperatives, and subject to scrutiny by IDA project supervision missions. Assurances to these effects were obtained at negotiations. 5.18 LBDI would maintain separate accounts and records of the revolving credit fund, in accordance with the revolving credit fund agreement (see para 6.19) which would be audited annually by external auditors acceptable to IDA. Assurance to this effect was obtained at negotiations. VI. ORGANIZATION AND MANAGEMENT A. Institutions, Staffing and Project Implementation 6.01 Background. MA technical field services are grouped under an assist- ant minister in eight division: rice, extension, cooperatives/credit and marketing, applied research, livestock, agricultural engineering, plant quarantine, and fisheries. In 1973, MA made LPMC responsible for sponsoring coffee, cocoa and oil palm development by private farmers. 6.02 In the project area there are currently several independent and uncoordinated MA operations: these are the MA extension service, the Foya rice project, the AGRIMECO mechanized land clearing program at Foya and Kolahun, a UNDP swamp rice development project, a Taiwanese staff rice project, and the LPMC tree crop program. Within six months of project effectiveness, LPMC would relinquish extension responsibilities for coffee and cocoa in the project area and transfer extension staff surplus to its needs to the project. In addition, the present County agriculture and cooperative extension staff which comprises the County Agent, a cooperative officer, and 14 other staff would be transferred to the project which henceforward would be responsible for all extension services in the County. The project would strengthen these services through the recruitment and training of additional staff; provision of transport, equipment and buildings; and through introducing improved conditions of service for staff (par 4.07). At the end of the proj- ect development period the extension service would again become an MA county organization albeit much strengthened and more efficient, if it had not been transferred to the Special Development Authority (as discussed at paras 6.08 and 6.09). The remaining MA controlled organizations and projects in Lofa County would remain independent of the project; these activities are the Foya rice project, the AGRIMECO mechanized land clearing program at Foya and Kolahun, a UNDP swamp rice development project, a Taiwanese staffed rice project, and the LPMC oil palm program. Assurances to these effects were obtained at negotiations. 6.03 A Project Management Unit (PMU) would be established to carry out the project and would have headquarters at Voinjama. PMU would be headed by a Project Manager responsible through a project steering committee to the Minister of Agriculture. PMU would comprise six divisions: administration - 21 - and personnel, finance, training, cooperatives and credit, land development, and agriculture. The project manager would be assisted by a Deputy and be supported by an evaluation and planning unit. The training division would be responsible for all staff and farmer training. The cooperatives and credit division would be responsible for strengthening and supporting the four project cooperatives (see para 6.15), which would be the channels for farm input, credit delivery, and credit repayment collection; and to facilitate project involvement in farmer cooperatives, GOL gave an assurance during negotiations to designate the commercial manager as an assistant Registrar of Cooperatives. The land development division would be responsible for land use planning, swamp identification and layout, maps, feeder road iden- tification and alignment, and survey work connected with land demarcation (see para 3.08). The agriculture division would consist of three sections: (a) field experiments, demonstration farms and applied research, it would conduct the latter in liason with CAES (see para 2.13); (b) extension services for all project crops; and (c) rice seed multiplication and the production of coffee and cocoa seedlings either directly or through the agency of LPMC. 6.04 PMU positions would be filled by qualified local staff wherever suitably qualified Liberians were available; however, such persons are in short supply and it is clear that some positions will have to be filled by persons recruited internationally. At this time the number of the latter cannot be determined, but the project provides funds for international recruitement of the project manager, evaluation and planning officer, hIds of the six operational divisions, a cooperative training officer, and the head of the schistosomiasis surveillance unit. Internationally recruited staff will have the dual function of project execution and of training Liberians at all levels. The project provides sufficient funds for Liberians to be appointed as deputies to the project manager and each of the six operational division managers, if in practice these are expatriates. Under this arrangement an expatriate appointed to any of these posts would be responsible for train- ing his deputy to take over from him within a period that would be agreed by GOL and IDA at the time of the expatriate's appointment. To assist and en- courage GOL to recruit a project manager, training and development controller, and an agricultural manager prior to project signature, retroactive financing of expenditure so incurred is provided (see para 5.04). Furthermore during negotiations the arrangements for international recruitment and the prefinanc- ing required for this purpose were discussed and agreed. Job descriptions for key positions are presented in Annex 5. Assurances were obtained at negotiations that the project manager, deputy project manager, training and development controller, agricultural manager, finance manager, administrative manager, land planning officer, and evaluation and planning officer would be appointed on terms, conditions, and with qualifications satisfactory to IDA. The commercial manager, cooperative training officer and head of the schisto- somiasis surveillance unit would be appointed on terms, conditions and with qualifications satisfactory to USAID. Additionally it was agreed during negotiations that the appointment of the project manager, training and devel- opment controller, and agricultural manager would be a condition of effective- ness. - 22 - 6.05 Project Steering Committee. To ensure cooperation with other GOL departments concerned directly cor indirectly with the project, a Project Steering Committee (PSC) would be established within three months of credit effectiveness with terms of reference acceptable to IDA. The Committee would comprise the Ministers (or their deputies) of Agriculture (Chairman); Finance; Planning; Local Government and Rural Development, with the Project Manager as Secretary. Assurance to this effect was obtained at negotiations. 6.06 Project Advisory Committee. A Project Advisory Committee would be established within three months of effectiveness to ensure cooperation with the area adminstration, and support for and participation in the project by the local people. The committee would consist of the County Superintendent (Chairman), the four paramount chiefs of the County who are elected by the people, the presidents of the four cooperatives, and the project manager and his deputy. The evaluation and planning officer would be the secretary. PMU would discuss its objectives and plans with the Committee in order to take full account of local needs, corditions, customs and attitudes. 6.07 The weakness of the Ministry of Agriculture (MA) was discussed in Chapter II (para 2.09). Currently a study is being made of MA, its functions and its financial needs under Credit 306-LBR. This study will not be con- cluded until late 1975 and it cannot be determined which of its recommendations will be acceptable to GOL. 6.08 As MA now functions it does not attract persons of the qualifica- tions, energy and experience that Liberia needs if MA is to be an efficient instrument in the development of the nation's agriculture. Under the proj- ect an attempt will be made to recruit and train personnel with the capa- bilities of playing a major role in Liberia's agricultural development in the future. It seems clear, however, that at the end of the project period when PMU will have completed its task, and when the project area will revert to normal extension activities that the persons recruited and trained under the Project will not be prepared to transfer to MA, unless the role it plays in the nation's development is much greater and more effective than now, and unless the terms and conditions of service that the Ministry offers are adequate and attractive. 6.09 It is possible that GOL will find it difficult or maybe impossible to reorganize MA to meet these objectives; inevitably, for example, an improve- ment in terms and conditions of service will have to be harmonized with other agencies of Government and this could prove difficult. If MA is not reorga- nized there is the danger that project recruited and trained staff would be lost to the sector. Also MA would itself be no better qualified to spervise the implementation of successor projects to that appraised in this report, for example, the Agricultural Development Project that has been prepared for Bong County, and the Smallholder Rubber Development Project. To guard against this possibility, agreement was reached with GOL that in the event MA was not organized to the degree necessary to ensure the successful implementation of the Lofa and other development projects, a special development authority - 23 - would be established to take over these functions. Assurance was obtained at negotiations that within six months of issue of the consultant's report on the reorganization of MA, GOL will discuss the implications of the report with IDA. Project Implementation 6.10 For implementation the project would be divided into clan areas grouped under the four paramount chiefdoms. One chiefdom would be developed at a time with Zorzor chiefdom last as it has the weakest data base. The evaluation and planning unit would collect planning data on the Zorzor chiefdom as one of its first priorities. Implementation would be carried out in stages. The first stage would be identification of development areas, swamps, road requirements, and farmers; followed by farmer training, road improvement, land clearing, soil preparation, and distribution of seed and seedlings. Existing MA extension, cooperative and credit services would be transferred to PMU (para 6.02). 6.11 Sufficient extension, cooperative/credit staff would be recruited and trained in project year one to service farmers commencing land development in project year two. Part of this staff would then be transferred to the next development area in project year three and replaced by more recently recruited staff. This progression would be continued until development was completed with the most experienced staff concentrating on the new areas. By the end of the development period, staff would be progressively reduced, permitting the surplus staff to be transferred to other projects or development schemes, whilst those remaining in Lofa County would revert to MA (see also para 6.09). At the end of development period, local staff, equipment and facilities of the schistosomiasis surveillance unit would be transferred to the Voinjama (Ministry of Health) hospital; road equipment and staff would be transferred to Ministry of Public Works; staff training center and farmer training center would be transferred to County Superintendent for benefit of the County unless required for other MA development schemes. B. Staff, Cooperative and Farmer Training 6.12 In view of shortages of trained staff and time constraints, project would train all staff levels through a combination of short formal courses interspersed with practical field training. Courses would be provided at a staff training center to be constructed at Voinjama and at AETC, Monrovia. Staff would be recruited at least six months prior to field appointment to allow for adequate training. Training would be the responsibility of the Training and Development Controller, assisted by two full-time lecturers at Voinjama and the division managers. Courses at Voinjama would cover admin- istration and organization, project objectives, communications and PR, and basic agricultural practices. More advanced training would be provided 24 - through short-residential technical courses at CAES, Suakoko, on rice agro- nomy, and at AETC for all project crops with teaching inputs provided by University of Liberia, WARDA and MA technical staff. 6.13 Training would be given to all cooperative staff levels, covering farmer credit, input supply, marketing, management and organization. Training, which would be the responsibility of the cooperative training officer with guidance from the Training and Development Controller, would be undertaken either at the PMU training center Voinjama or at the cooperatives, by a full time cooperative officer, assigned to each of the four cooperatives, who would conduct short introduction and technical courses interspersed with supervised practical training. 6.14 Farmer training would consist of residential farm family courses at the farmer training center, demonstration farms, farm visits, village/group discussions with film and slide shows and other training aids. Training would be coordinated by the Training and Development Controller, with support from the project manager, agricultural manager, and commercial manager. Full use would be made of the demonstration effect of the more progressive farmers. C. Farm Inputs, Procurement Distribution and Credit Arrangements 6.15 During Project development period, PMU cooperative/credit division would supervise and train the four farmer cooperatives to establish annual farm input and credit requirements from information supplied by village groups with extension staff assistance. These village requirements would be totalled by the four area cooperatives who would in turn advise LPMC (for procurement of inputs), LBDI (for farmer credit needs and financing of non-incremental farm inputs from the revolving credit fund), and PMU (for project financing of incremental farm inputs). On receipt of LPMC organized imported inputs together with Liberian procured seed and seedlings, cooperatives would organize distribution to village centers, primarily with hired transport, at preannounced times. Farmers would collect inputs and if, on credit, complete all credit documentation at that time. Distribution would be supervised by the extension services. All farm inputs would be provided to the farmer in kind and financed from the revolving credit fund. Cash payments for hired labor as certified by the extension service, would be made by cooperatives, under PMU direct supervision with funds provided from the revolving credit fund. All farm inputs would be supplied at full cost plus a cooperative operating margin. 6.16 Credit. Both medium-term development loans and seasonal credit would be provided under the project. Development loans for swamp rice would cover the cost of tools, hired labor and/or equipment for land clearing; and for coffee and cocoa would cover the cost of tools, seedlings, fertilizers, sprayers and agricultural chemicals. Seasonal credit for upland and swamp - 25 - rice would cover seed and fertilizers; and for coffee and cocoa would cover fertilizers, sprayers and agricultural chemicals. Farmer credit records would be maintained by the cooperatives. Development loans would bear interest at 10 percent per annum, whilst seasonal credits would bear a service charge of 10 percent (equivalent to 15 percent per annum where average seasonal credit outstanding eight months). Following revision of the usury law in March 1975, which raised interest limits from 10 percent to 25 percent, commercial interest rates have risen to 12-15 percent. However small farmers have very little access to commercial credit; such limited amounts of credit that are available are provided mainly from Government sponsored sources at very low interest rates. Given the trial nature of the project, and project farmers' first exposure to substantial agricultural credit, the 10 percent interest rate for development loans and the service charge of 10 percent on seasonal credit are realistic and within the debt servicing capacity of all proposed project crop developments (see Annex 4). Swamp development loans would be disbursed in one installment and repayable in 6 equal annual installments after a 2-year grace period. Coffee and cocoa development loans for re- habilitation would be disbursed in one installment repayable in 5 and 3 equal annual installments respectively. Coffee and cocoa development loans for new planting would be disbursed over three years and would be repayable in 4 equal annual installments for coffee, and 8 equal annual installments for cocoa after a four-year grace period for both coffee and cocoa, during which interest would be capitalized. Development loans would be disbursed in kind with exception of cash for hired labor (para 6.15). Seasonal credit would be provided in kind. All credit would be repayable at the end of each season following harvesting. 6.17 Loan and credit applications, after screening by a village or group Credit Advisory Comittee consisting of village or clan chief, one or two respected farmers, local-agriculture and cooperative/credit extension assistants,and a credit officer from the cooperative, would be submitted to PMU for approval. Development loan applicants would require tribal confirmation of the borrower's right to use the land to be developed. As the farm crop development pattern will vary considerably, the project proposes that discretion should be given to PMU to determine individual credit limits within an overall maximum of US$1,000 per farm family. Whilst this seems high, it is based on the cost of farm inputs required to develop 1 hectare of cocoa spread over a 4-year period (3 year development together with the first seasonal credit granted in year 4) which is within the capacity of the family labor of the smaller farmer to cultivate in addition to his upland food crops. On the same basis 1 hectare coffee would require US$746 (over 4 years), 1 hectare rainfed swamp rice, US$385 (for 1 year). Credit would be restricted to the smaller farmers and would be assessed on a farmers availability and suitability of land, capability, family labor availability, and creditworthiness. The overall credit limit of US$1,000 would be amended from time to time to allow for price inflation with IDA's prior approval. Based on the crop development program duriL.g the project development period, credit needs would total US$3.8 million, US$3.0 million for development and US$0.8 million for seasonal credit. Sufficient development loan repayments would be received by the revolving credit fund in the post project development period to finance completion of project commenced crop development (see Annex 7, Table 1). - 26 - 6.18 Credit Recovery. Credit recovery would be the responsibility of the cooperatives. As project area LBA's, the cooperatives would purchase farmers coffee and cocoa and make deductions of credit repayments from the proceeds. Marketing of coffee and cocoa through his cooperative would be a condition for a farmer's access to project credit. As paddy would be partly farm consumed and partly sold freely on the local market, it would not be possible to make deduction from sale proceeds, consequently the farmers cooperative, with cooperative/credit extension service assistance, would maintain close liason with paddy farmers at harvest time, to collect credit repayments. Addition- ally, by offering attractive paddy prices, cooperatives would encourage the marketing of surplus paddy through their own organizations thereby strengthen- ing their credit collection opportunities. The assistance of Credit Advisory Committees and of the tribal authorities would be sought in bad debt recovery. 6.19 Field Staffing. An important part of the credit system would be the role of the PMU cooperative/credit assistant, supported by the agriculture extension assistants, namely: (a) to establish farmer credit needs, (b) to explain and train the farmer in credit management; (c) to supervise and advise the field management of farm inputs, credit, marketing and credit recovery system, and (d) general field support of the farmer cooperative efforts. 6.20 Credit Institutions. The project would create a revolving credit fund for farmer credit, to be administered by LBDI on GOL behalf under a agreement between LBDI and GOL. At the end of project development in 1980, the fund would amount to US$3.8 million 1/ for the benefit of 8,000 farmers. By 1987, all development loans amounting to US$3.4 million would have been repaid and available for further agricultural development as determined by the trust agreement. The fund would be built up by the channelling of the development and incremental seasonal inputs, financed and supplied by the project to farmers through the farmers cooperatives (see para 6.15). The fund would charge the farmers cooperatives interest at 7 percent per annum on the credit which the cooperatives in turn on-lend to farmers at 10 percent, leaving a 3 percent margin (approximately an 8 percent margin on seasonal credit as farmer lloans would be outstanding for less than 12 months - para 6.16) to cover credit administration and bad debts. LBDI would receive a 2 percent commission on disbursed credit leaving 5 percent to be retained by the revolving credit fund. Development loan and seasonal credit repayments would be recovered from farmers by cooperatives and paid over to LBDI, for credit to the revolving credit fund. After the first year, seasonal farm inputs would be financed direct from the revolving credit fund, leaving only the incremental seasonal inputs tcgether with additional development inputs to be project financed (details at Annex 7). Additionally, LBDI would provide normal banking facilities to the project, cooperatives, County authorities, LPMC, and other orgarizations and larger farmers. Savings facilities would be available to the smaller farmers at the cooperatives who are currently paying 2 percent per annum on deposits. An assurance was 1/ Excluding interest income. - 27 - obtained at negotiations that GOL would establish a revolving credit fund in accordance with an agreement to be entered into with LBDI, satisfactory to IDA by September 30, 1975. D. Processing and Storage 6.21 Processing Facilities. At Voinjama, LPMC has a 1-ton/hour rice mill and a 1-ton/hour coffee huller for processing LPMC's own and farmers produc- tion. Due to its pricing policies, see Chapter VII, LPMC purchases of paddy rice and cherry coffee are small and consequently these processing facilities are under utilized. Most farmers prefer to have their paddy milled and cherry coffee hulled on contract by small private millers of which there is an increasing number. The LPMC and private mills provide sufficient physical capacity to handle existing production as well as increases in production that would be induced by the project. 6.22 Storage. Farmers rice surplus to their domestic needs would be marketed through the traditional system of private traders with increasing amounts being channelled through the cooperatives; coffee and cocoa would be marketed through the cooperatives as LBAs for LPMC as in the past. Storage capacity available for project production at full development would be adequate as three out of four project cooperatives are constructing additional storage capacity (para 2.12). LPMC has substantially under-utilized storage capacity at Voinjama, and storage capacity of former private commodity traders is unused. Consequently, additional bulk storage facilities would not be re- quired for the project. However, to assist farmers to market their crop at the primary market level, the project would provide for construction of small buying stores at village centers at which the four cooperatives would be able to buy direct from farmers thus excluding the existing small middle- men. VII. PRODUCTION, MARKET PROSPECTS, FARM INCOME AND RECOVERY OF COST A. Production 7.01 The variety of ecological conditions and farm sizes in the project area, and the complexity of cropping patterns, are such that yield variations would be inevitable and substantial. Without project development crop yields are based on observations and surveys conducted in the pre-appraisal study, supplemented for rice by field trial results at CAES, Suakoko, but are neces- sarily tentative. Without and with development yields are summarized below. - 28 - Without Development With Development Average Total Average Total Incremental Area Yield Production Area Yield Production /1 Production ha kg/ha '000 tons ha kg/ha '000 tons '000 tons Crops Upland Rice 5,600 1,000 5.6 5,600 1,700 9.5 Swamp Rice /2 Rehabilitation 400 1,500 0.6 400 3,500 1.4 New - - - 1,100 3,500 3.9 Swamp Rice /3 Rehabilitation 100 1,500 0.2 100 6,300 0.6 New - - - 300 6,300 1.9 6.4 17.3 10.9 Coffee Rehabilitation 500 280 0.2 500 700 0.4 New - - - 2,300 1,000 2.3 0.2 2.7 2.5 Cocoa Rehabilitation 800 280 0.2 800 600 0.5 New - - - 1,500 850 1.3 0.2 1.8 1.6 /1 Upland rice, first year of development. Swamp rice, improved - 5 years after first planting; new - 6 years. Coffee, rehabilitation 5 years after seedlings planted, new - 6 years. Cocoa, rehabilitation 2 years after seedlings planted, new - 8 years. /2 Single crop. /3 Double crop. 7.02 As far as upland rice is concerned the without project yield of 1 ,000 kg/ha may appear high; however upland rice is particularly high yielding in the wetter zones of West Africa where, as in the case of the project area, it is the first crop that follows the slashing and burning of forest or bush fallow. Yields of more than 2 tons/ha have been commonly recorded. The anticipated increment of 700 kg/ha from the minimum package of improved seed and fertilizer is substantiated in particular by the very large volume of experience in the Ivory Coast with upland rice, and is endorsed by the West African Rice Development Association (WARDA). Without and with development yield estimates for swamp rice are drawn from Liberian experience, and in particular from experience obtained at the IDA financed agricultural develop- ment project at Kenema in Sierra Leone, where an identical program of swamp rice development has been implemented for the last three years. Kenema is - 29 - about 150 km from the project area, has a similar eco-climate and is popu- lated by the same ethnic group. Cocoa and coffee yields are based on the very large amount of experience available throughout West Africa. B. Marketing and Prices 7.03 Rice. Project participants would sell their rice on the open market either directly or through their cooperatives. LPMC participates competitively in this market but its share is small, less than 3 percent of all domestically produced rice marketed in Liberia. LPMC intervention in the market is impor- tant only insofar as its paddy price tends to act as a floor price above which private traders operate. Currently the LPMC purchase price is US$0.24/kg; this is somewhat lower than what could be paid for domestically produced rice thus permitting it to remain competitive with imported rice. As LPMC intervention in the rice market could be an important instrument in en- suring that private traders pay fair prices to producers, GOL undertook during negotiations that LPMC would continue its floor price setting role in the project area by continuing to offer to purchase paddy at prices which it would set following consultation with Government and PMU. GOL confirmed that the LPMC role would be to endeavor to maximize, for project participants their share of the real market value for their paddy without LPMC itself becoming a permanent and major purchaser of paddy. 7.04 Adequate paddy processing facilities exist in the project area for the anticipated output. LPMC operates a 1-ton/hr capacity mill which it uses to process its own purchases, and there is a large and increasing number of small mills that practice custom milling. Parboiling is not widely employed. Rice to paddy outturts are 66-68 percent for the LPMC mill; 50-55 percent for the small mills; and about 65 percent for traditional hulling by hand pounding. One reason for low outturns--a good performance would be 68 percent--is the differing milling characteristics of the mixture of varieties grown. This situation would be improved as a consequence of the project. 7.05 In project calculations and farm budgets, the farmgate paddy prices used and expressed in constant 1975 dollars are as follows. Economic price: US$0.23/kg, the 1980 import substitution value of project produced rice which reflects the Bank's assessment that the world market price of rice of a similar quality as now imported by Liberia will by 1980 fall some 27 percent below the present US$380/ton FOB Bangkok. Financial price: US$0.21/kg, the estimated price that the farmer will receive by 1980; it assumes that the farmer's rice eventually will be retailed in Monrovia and that he will receive only 90 percent of the real financial farmgate value due to marketing ineffi- ciencies. Price breakdowns are at Annex 8, Table S. - 30 - 7.06 Project induced milled rice production is estimated at 7,300 tons 1/ equivalent to 20 percent and 3 percent of rice imports and consumption respec- tively in 1980. The domestic market would be able to absorb all project induced rice production. 7.07 Cocoa and Coffee. Project farmers would sell their cocoa, as dry cocoa beans, to their respective cooperatives who are licensed buying agents (LBA) of LPMC which has a monopoly for cocoa exports. The procedure would be the same for coffee. However, some improvements in the marketing and pricing arrangements for both cocoa and coffee are required. There is a need to improve cocoa quality in order to maximize overseas sales returns, and LPMC should switch from purchasing (via its LBAs) clean coffee to purchas- ing cherry coffee (unhulled coffee). For cocoa a premium for high quality, possibly through purchasing two or three quality grades, as in other West African countries, would appear a feasible solution. In the case of coffee much labor is employed in converting cherry coffee to clean coffee 2/ through tedious hand processing techniques. The return for such labor is very low, despite a substantial price differential, since the conversion ratio, clean coffee: cherry is 55 percent by machine, and only 50 percent by hand pounding. It would be more rewarding for both grower and the economy if the misleadingly favorable premium for clean coffee was reduced to encourage cherry sales. LPMC owns and operates sufficient coffee hulling capacity at Voinjama to accept in the form of cherry coffee all coffee purchases in the project area, including production induced by the project. During negotiations, GOL agreed that consultants to be employed for the review of LPMC marketing policies and practices (see para 7.09) would also be required to make recommendations for the introduction of cocoa grading scheme and a price differential scheme for both coffee and cocoa. 7.08 Producer prices currently paid by LPMC are cocoa US$0.79/kg and cherry coffee US$0.33/kg (equivalent to US$0.66/kg of clean coffee). These prices compare favorably with producer prices paid by other West African producers of these commodities, e.g. for cocoa, Ghana US$0.48/kg, Ivory Coast US$0.84/kg; and for clean coffee, Ivory Coast US$0.72/kg. They are also sufficient to attract cocoa and coffee from Guinea and Sierra Leone. Producer prices, however, constitute only a relatively low proportion--generally in the range of 50-60 percent--of their FOB value; at times of high prices, e.g. for cocoa in the first quarter of 1974 the proportion has been very much lower. Many countries, such as Ivory Coast and Ghana, operate produce marketing boards or stabilization funds that through fixing producer prices below market values inter alia function as a means of taxing tree crop farmers. Such activity may be, and often is, in the public interest. In the case of 1/ Equivalent to 10,900 tons paddy at 67 percent outturn. 2/ See Annex 8, para 9. - 31 - LPMC, however, the private partner (see para 2.10) benefits to 50 percent of surpluses accruing to LPMC above certain statutory expenses. Briefly the system is that under its statutes LPMC deducts from the FOB value of its agricultural exports 8 percent as profit (4 percent to the Government and 4 percent to the private partner); 5 percent, which it retains in a price stabilization fund but which it can use for purposes approved by its board; and an additional 7 percent which is deducted as an agricultural development levy and used for a variety of purposes, see para 2.10. Of the balance of 80 percent of FOB value the producer receives the official producer price and the remainder accrues to LPMC to cover its marketing costs; anything additional to this is a further profit on which dividends may be paid. As a commercial entity LPMC generally attempts to fix producer prices to maximize purchases; an incentive to do this is that the private partner is also the overseas marketing agent for LPMC and obtains a 2 percent selling commission for this work. On the other hand as LPMC has a monopoly for cocoa and coffee marketing and fixes the producer prices for these commodities there is the danger that in the absence of any statutory control over LPMC marketing expenses, marketing inefficiencies will develop that will be met at the expense of the producer. There is also the danger that stabilization funds will be employed for purposes, which while worthwhile and in the general economic interest, could mean that LPMC would have liquidity problems at a time of need to support prices, again to the disadvantage of the producers. 7.09 In recognition of the dangers inherent in the present LPMC system, during negotiations Government agreed in principle that LPMC statutes and procedures would be changed in such a way to (a) establish annually.a fixed marketing cost margin for LPMC consistent with efficient marketing procedures, (b) establish a price stabilization fund that would be separate from other LPMC accounts and be used only for price stabilization of the commodities supporting the fund, and (c) establish a price intervention system under which the producer would receive a minimum of 60 percent of the anticipated medium term FOB value of the commodity and under which in any single year anticipated surpluses available over and above the base price would be shared between the producers and the stabilization fund according to and agreed formula, 1/ and any deficits incurred by LPMC in paying the agreed price would be made good by the stabilization fund. An assurance was obtained at negotiations that Government would undertake a study to prepare appropriate new statutes and regulations for LPMC satisfactory to IDA by December 31, 1976. Consultants would be employed for this purpose with funds from Credit 306-LBR. 7.10 According to Bank's forecasts the world market coffee price will appreciate from US$1,366/ton FOB Monrovia in 1974 to US$1,903/ton in 1980 at 1975 constant prices, and the world market cocoa price will decline from 1/ In many countries the producer's share in a single year is limited to a 10 Dercent increase over the price paid in the previous year. - 32 - US$1,944/ton to US$1,260/ton over the same period. The 1980 prices are used in project economic calculations. With these prices, and assuming that under the new pricing arrangements farmers would receive an average of 67 percent of the FOB value of their produce less 10 percent due to marketing inefficiencies (para 7.04), farmgate producer prices in 1980 would be US$1.03 and US$0.69/kg for coffee and cocoa respectively. The relationships between world, FOB Monrovia and farmgate prices for coffee and cocoa are detailed in Annex 8, Table 5. 7.11 Annual project induced cocoa and coffee production at full maturity in 1985 would amount to 1,600 tons and 2,500 tons respectively. These outputs would result in substantial proportional increases in exports of the two commodities, 48 percent over 1973/74 cocoa exports, and a 67 percent increase in the case of coffee. By worlk trade standards the increments in production are very small, 0.1 percent of expected 1985 world trade in cocoa and 0.05 percent of expected world trade in coffee in the same year. While Liberia is a member of the International Coffee Organization but not of the Inter- national Cocoa Organization, both have been informed of the scope of this project and have profered no objection to its being implemented. C. Farmer Benefits 7.12 The project through its comprehensive support services including farm inputs, credit, and marketing will enable the 8,000 participating farmers to increase both the area under cultivation and crop yields. These improve- ments will bring substantial direct benefits both in the return on the farmer's investment and on his family labor. Crop budgets are summarised below and indicate on a per hectare basis for the three crops, the benefits of improved technology over traditional practices. - 33 - Summarized Crop Budgets Without Development With Development Incremental Net Return /1 Net Return /1 Net Return $/ha $/manday $/ha $/manday $/ha Upland Rice 210 1.00 305(45%) 1.40(40%) 95 Swamp Rice (Single cropped) Rehabilitated 316 1.50 650(105%) 2.50(67%) 334 New - - 650 2.50 650 Swamp Rice (Double cropped) Rehabilitated 573 1.60 1159(102%) 2.50(56%) 586 New - - 1159 2.50 1159 Coffee Rehabilitated 283 3.80 562(99%) 4.10( 8%) 279 New - - 870 5.90 870 Cocoa Rehabilitated 188 3.80 390(107%) 4.30(13%) 202 New - - 557 4.60 557 Note: Figures in parenthesis show increase over without project situation. /1 Net return after debt servicing. 7.13 Whilst no attempt has been made to produce a typical farm budget, since farm sizes, crop combinations and land ownership patterns are diverse and unidentified; illustrative crop budgets (1 hectare) have been produced for upland rice, swamp rice, coffee and cocoa (see Annex 4) to demonstrate both the economics and the improvements attainable. On the basis of total project production at full development in 1987, the project is expected to increase average annual net family income of participating farmers from US$313 to US$913, equivalent to an increase in per capita income from US$63 to US$182 (including the value of vegetables, fruits and minor crops). D. Financial Implications to Government 7.14 The financial implications to GOL of implementing the project are summarized in Annex 9, Table 9. Although cost of US$2,125 per farm family appears high, partly explained by the coffee and cocoa development costs, it includes substantial infrastructure and training costs beyond project needs. - 34 - 7.15 However, after the development period, revenue from indirect taxation and LPMC dividends accruing to GOL together with the agricultural development fund levy arising from project production (see para 7.08) would finance the full cost of extension and cooperative/credit services, and from 1987 there would be an annual surplus of about US$0.7 million before IDA Credit servic- ing. VIII. BENEFITS AND JIJSTIFICATION 8.01 Direct benefits from the project would be incremental production of 7,300 tons of rice; 1/ 2,500 tons of coffee and 1,600 tons of cocoa annually at full maturity from 1985 onwards, which would result in increased income for 8,000 families. Living standards for the remaining population in the project area would be improved through social infrastructure and marketing arrange- ments. 8.02 Project rice production would be consumed internally, coffee and cocoa being exported. The gross foreign exchange savings/earnings arising from rice import substitution and additional exports is estimated at US$9.3 million based on the Bank's 1985 price forecasts in constant 1975 terms 2/ of US$400/ton for rice, US$1,800/ton for coffee; and US$1,200/ton for cocoa. 8.03 The project will bring about a substantial mobilization of labor resources in the area, particularly the seasonally unemployed. It is estimated that during the project implementation period, 2.6 million mandays of employment will be created. In addition, the project will create additional employment opportunities in the agricultural industries and services sector, as well as in transportation and construction. 8.04 Apart from these direct benefits to participating farmers, the project would have important secondary benefits, largely unquantifiable, for the community from improved roads, banking, education and health facilities, including improved drinking water supplies. The project would also strengthen MA's technical capability in agriculture, cooperative/credit extension, agri- cultural research, and agricultural project management for further agricultural development. 8.05 The economic rate of return (ERR) based on incremental costs and incremental benefits is estimated at 25.9 percent. The main assumptions in estimating the cost and benefit streams are described in Annex 10. 8.06 Risk and Sensitivity. The project is subject to the risk that the estimated benefits might not be fully attained because of four factors. 1/ Equivalent to 67 percent of 10,900 tons paddy. 2/ FOB Monrovia equivalents. - 35 - First it would be the first project of its type in Liberia and will require degrees of coordination and cooperation within and between GOL agencies that has not been practiced in the past. It appears inevitable therefore that problems of coordination and demarcation of responsibilities will arise which could result in delays in project implementation. The likelihood of serious delays is lessened, however, in the light of GOL commitment to make the project function efficiently through the appointment of three key project staff members prior to credit effectiveness; early formation of a ministerial project steering committee responsible for policy matters; establishment of a project advisory committee in the project area to maintain communication between GOL, local tribal authorities and farmers representatives; and a specific allocation of funds in the MA's annual budget to cover project local costs. Second, this will be the first exposure of project participants to a relative intensive form of development, and thus the extent of their re- sponse cannot be forecasted accurately, this leaves some question concerning the degree of accuracy of the production assumptions in terms of both area and yields employed in the report calculations. Fortunately, the project area is only some 150 km from a similar project financed by the Bank Group in Sierra Leone (Integrated Agricultural Development Project - Credit 323-SL), where farmer response has been excellent. As the people of the project area are of the same ethnic group as those participating in the Sierra Leone project and have similar customs and traditions, it appears likely that a similar strategy response would be obtained under the project. Third, while yield data on rice, both upland and swamp, are good and substantiated in particular by experience in the Sierra Leone project, those on coffee and cocoa are less firm. This is because there is no existing detailed experience in Liberia or its immediate neighbors of the yield performance of those crops under the type of management that would be provided under the project. The yields employed in report calculations are those generally accepted by authorities, but given the long life of these plantings (cocoa may produce for more than 50 years), they are susceptible to error. Fourth, in project economic calculations a shadow rate of labor is employed, 50 percent of the estimated market wage - Annex 10. Should the Wologisi mine be opened, the opportunity cost of labor would change. Whilst the extent of such a rise is unknown, its magnitude would be influenced by the volume of experienced labor which would transfer to Wologisi from the Bomi mine which is due to close in the near future. Additionally, it is anticipated that loss of local labor to Wologisi mine would be replaced by migrant labor from neighboring Sierra Leone and Guinea. Such labor is presently available as there are no immigration restrictions, but its use has been restricted by lack of cash for payment of wages. 8.07 Sensitivity tests have been used to test the potential impact, singly and Jointly of some of the above possible adverse factors. The factors employed are an overall delay in project benefits by 2 years, de- creases by 10 percent and 20 percent in project benefits, 10 percent and 20 percent increase in project costs, employment of the estimated market wage for labor rather than the shadow rate, and project life shorter than - 36 - 30 years used in the statistical calculations to take account of possible errors in forecasting crop yields, and are detailed in Annex 10, Table 3. ERR decreases from.25.9 percent to 12.1 percent should the following adverse factors occur together; labor costed at estimated market wage of US$1.00, costs increased by 10 percent, and benefits decreased by 10 percent and delaved by two years. The ERR is not sensitive to a reduction in project life by 5 years. IX. AGREEMENTS REACHIET)D ITII THE BORRONWER 9.01 I)uring negotiations it was agreed that retroactive financing of up to US$100,000 would be available for the employment of the project manager, the training and development controller, and the agricultural manager. Such financing would apply from June 1, 1975. 9.02 During negotiations assurances were obtained from GOL that: (a) the GOL existing special rice and tree crop development areas in Lofa County would be excluded from the project, and AGRIMECO, with limited exceptions, would not undertake any new land clearing in the project area after December 31, 1975 and during the project disbursement period (para 2.08 - CA Section 5.01 (a)); 1/ (b) MA and LPMGC would establish charges for land developed in the project area by AGRIMECO and credit terms for farm inputs, consistent with project charges and credit terms (para 2.08 - CA Section 5.01 (b)); (c) LBDI would establish a branch at Voinjama within six months of credit effectiveness to provide normal banking services, and to administer the project revolving credit fund (para 2.11 - CA Section 4.05 (g)); (d) sufficient funds and equipment would he allocated to MP1lW Lofa County to carry out the road program (para 4.12 - CA Section 5.04); (e) satisfactory procedures would be established for quarterly advance replenishment of PMU bank account for local expenditures (para 5.15 - CA Section 4.03 (b)); 1/ Paragraph references are to Appraisal Report, CA to Credit Agreement. - 37 - (f) annual accounts of the project and of the revolving credit fund, audited by external auditors satisfactory to IDA, would be submitted to IDA within four months of the financial year end (paras 5.16 and 5.18 - CA Sections 4.02 (d) and 4.05 (f)); (g) LPMC would relinquish extension responsibility for coffee and cocoa in the project area, with the exception of the AGRIMECO cleared areas, and would transfer surplus extension staff to PMU, within six months of effectiveness (para 6.02- CA Section 5.03 (a)); (h) project commercial manager would be designated assistant registrar of cooperatives for audit of project farmer cooperatives (paras 6.03 and 5.17 - CA Sections 4.04 (a) and (b)); (i) the project manager, deputy project manager, training and development controller, agricultural manager, finance manager, administrative manager, land planning officer, evaluation and planning officer would be appointed with qualification and terms acceptable to IDA (para 6.04 - CA Section 3.06 (b)); (j) a project steering committee would be established within three months of effectiveness (para 6.05 - CA Section 3.07); (k) GOL would enter into discussions with IDA, within 6 months of submission of consultants' report on MA reorganization, for implementation of this and other development projects (para 6.09 - CA Section 5.02); (1) farm loans and credits would be limited to a maximum of US$1,000 per farm family (para 6.16 - CA Schedule 4 para 4 (d)); (m) a revolving credit fund would be established in accordance with an agreement to be entered into between GOL and LBDI, satisfactory to IDA, by September 30, 1975 (para 6.19 - CA Section 4.05 (a)); (n) new produce pricing statutes and regulations for LPMC would be established by December 31, 1976 (para 7.09 - CA Section 5.03 (b)). 9.03 During negotiations it was agreed with GOL that the conditions of effectiveness of the credit would be that: - 38 - (a) the USAID loan of US$5 million to assist the project had been formally ratified by the governments of both USA and Liberia and had become effective (CA Section 7.01 (a)); (b) the project manager, training and development controller, and agricultural manager had been appointed (para 6.04 - CA Section 7.01 (b)); (c) GOL had established a special PMU bank account with either LBDI or an established commercial bank with an initial payment of US$100,000 (para 5.15 - CA Section 7.01 (c)). 9.04 On the basis of the above assurances and conditions, the project would be suitable for an IDA credit of US$6 million to Government of Liberia. ANiiEX 1 Page 1 LIBERIA LOFA COUNTRY RURAL DEVELOPK&iET PROJECT AGRICULTURE A. Climate, Water and Soils 1. Introduction. The project area is principally located in the northern most part of Liberia, the so-called Upper Lofa area, administrat- ively part of Lofa County. It is bordered by Sierra Leone to the west and by the Republic of Guinea to the north, and east; the southern limit is the borderline of the high rain forest that stretches far to the south, covering the largest part of Liberia. Southeast of Voinjama separated by a 30 kin-wide mountain range lies another part of the project area of which ZorZor is the most important town. Eleven clans (approximately 90,000 people) live in the project area where population density is estimated at about 22 per sq kilometer. Assuming that farm population is 75% and each farm holding consists of 5 persons, the number of farm holdings is some 13,500. 2. Rainfall. Annual rainfall averages 2,500 mm, there is one rainy season from April/May until November, during which precipitation reaches about 2,300 mm or 90% of total annual rainfall (Table 1). August is on average the wettest (411 mm) and January the driest (13 mm) month. The sliding average annual rainfall figures over 5-year periods since 1953 show that annual rainfall in Voinjama is diminishing during the last decade. In particular the last 5 years (1969-1973) annual rainfall has been some 25% below normal. 3. Temperature. Average monthly temperature oscillate only slightly around 2h4C. The daily temperatures however, could differ significantly, such as an absolute minimum of 5
Группа Всемирного банка · Staff Appraisal Report
Liberia - Lofa County Agricultural Development Project
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