Cameroon - Plaine des M'Bo Rural Development Project

Document of | ETURN TO ILE CPY The World Bank REPORTS Dr)$ FOR OFFICIAL USE ONLY WITHIN | Report No. P-1904-CM REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE UNITED REPUBLIC OF CAMEROON FOR THE PLAINE DES M'BO RURAL DEVELOPMENT PROJECT December 9, 1976  CAMEROON PLAINE DES M'BO RURAL DEVELOPMENT PROJECT CURRENCY EQUIVALENTS CURRENCY UNIT CFA Franc (CFAF) US$ 1 = CFAF 245 1/ CFAF 1,000 = US$ 4.1 CFAF 1,000,000 = US$ 4,082 1/ Floating exchange rate. ABBREVIATIONS Caisse Centrale: Caisse Centrale de Cooperation Economique (France) SODERIM Societe de Developpement de la Riziculture dans la Plaine des M'Bo Mission de Mission de Developpement de la Riziculture dans la Developpement: Plaine des M'Bo IRAF : Institut de Recherche Agronomique et Forestiere FISCAL YEAR July 1 to June 30  INTERNATIONAL DEVELOPMENT ASSOCIATION FOR OFFICIAL USE ONLY REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE UNITED REPUBLIC OF CAMEROON FOR THE PLAINE DES M'BO RURAL DEVELOPiMENT PROJECT 1. I submit the following report 1/ and recommendation on a proposed credit to the United Republic of Cameroon for the equivalent of US$2.0 million, on standard IDA terms, to help finance the first phase of the Plaine des M'Bo rural development project. The Caisse Centrale de Cooperation Economique of France would participate in the financing of the project with a loan to Cameroon equivalent to US$0.5 million, the terms of which are expected to be 20 years, including 3 years of grace, with interest at 3.5 percent per annum. PART I - THE ECONOMY 2. A report "Proposals for a Medium-Term Public Development Program, A Special Study, Cameroon" (No. 1097a-CM), was distributed to the Executive Directors on"May 11, 1976. In October and November 1976, an economic mission visited Cameroon and a report is in preparation. The following sections, which are substantially similar to those included in the Second Douala Port Project President's Report, dated August 20, 1976, incorporate comments from this economic mission. Economic Potential 3. Cameroon has a population of about 7.3 million (mid-1975) 2/ and covers an area of 475,000 km , about the size of France. The country's natural resources are varied, but not always easily accessible. Soils and climatic conditions permit cultivation of a wider range of crops than is commonly found in West Africa, and the forest areas of the southeast contain large untapped timber resources. The north holds promising potential for livestock development. 4. While the main opportunities for development in Cameroon lie in the expansion of agricultural production, including forestry, the country has the potential to increase production of import substitutes needed for a growing domestic market, and to process alumina and agricultural and forestry products for export. A bauxite project is in the early stages of preparation, and offshore oil and gas exploration is being carried out and has yielded some promising results. 1/ Given the technical assistance nature of the proposed project, this report constitutes a combined President's and Appraisal Report. 2/ Revised estimate based on the first population census taken in 1976. Thit documcnt his a restricted distribution and may be used by recipients onily in the performance of :heir offcial duties. itJ contents may not otherwise be disclosed without Worid Bank authorization.  - 2 - 5. Commerce, transportation and transit services are other important economic activities. Cameroon's main economic centers are separated by vast underpopulated areas. The country moreover serves as a main export route for landlocked Chad. As a result, large investments in port and inland transport infrastructure are essential to promoting agriculture, forestry and industry, and strengthening Cameroon's role as a regional trade center. Past Performance 6. During the first decade of independence (1960-1970), the Govern- ment' s primary objective was to unify the nation and to ease serious inter- nal political and social tensions. Output of agriculture and industry grew rapidly and, along with high world prices for cocoa and coffee, resulted in a 7 percent per annum real growth rate. Gross investment averaged about 14 percent of GDP, slightly over half in the public sector, with the largest part devoted to the transportation network, the most immediate development constraint. A major effort was also directed at expanding education and diversifying agriculture. Significant increases in fiscal revenues combined with stringent expenditure controls produced sizeable budget surpluses that made it possible to accumulate reserves and to finance a large part (up to 40 percent) of public investment out of local revenues. However, this pol- icy also imposed excessive restraint on much needed current expenditure in such areas as road maintenance, public health, and education. 7. During the period 1971-1975, growth of real GDP slowed to less than 3 percent per annum. This was caused by factors largely outside Cameroon's control such as: (i) low export prices for cocoa and coffee during 1971 and 1972, (ii) several years of drought in the north; (iii) a drastic decline in domestic and foreign private investment, triggered pri- marily by the relative stagnation of the agricultural sector and by the completion of the most obvious import substitution projects during the preceding decade; (iv) a drop in 1975 in world demand for both cocoa and timber; and finally (v) rapidly rising import prices. 8. The Government reacted to these developments by stepping up pub- lic investment, which has increased by 50 percent to reach annual averages of about US$190 million in constant 1974 dollars during the Third Develop- ment Plan (1972-1976). At the same time, greater emphasis has been placed on agricultural output. Within a public investment program averaging 9 per- cent of GDP, rural development has comprised about 18 percent, transport and communications 42 percent, energy 6 percent, and education 9 percent. Since nearly 75 percent of public investment has been in sectors where its contribution to domestic output is both indirect and delayed, the impact of this substantial investment effort on economic growth was limited during the Third Plan period. In addition, physical realizations have been in many cases less than projected due largely to substantial cost increases and the subsequent need to reduce the scope of projects or defer them.  - 3 - 9. The balance of payments has not been a major constraint until recent years; however, imports increased rapidly in 1974 and 1975 as a re- sult of worldwide inflation and the heavy public development expenditure, especially in capital goods. At the same time agricultural exports declined, particularly exports of timber, causing a sizeable current account deficit in 1975. Together with a decline in private capital inflows this resulted in a fall in reserves from a level equal to nearly three months of import requirements in 1970 to one-half month at the end of 1975. Thanks mainly to considerably improved export demand and higher prices, especially for coffee and timber, by May 1976 gross reserves had recovered to the absolute level of 1972 and 1973. However, because of continuing international infla- tion, Cameroon's offical gross international reserves, in mid-1976, still covered less than one month of import requirements, a low level by usual. international standards but still acceptable in the Banque des Etats de l'Afrique Centrale (BEAC) monetary union arrangements. Prospects and Development Strategy 10. Cameroon's development effort over the next five years will be carried out under the Fourth Plan (1977-1981). A Bank economic mission discussed its recommendations on the level and composition of public invest- ment with the Government in November 1975 and agreed on overall priorities. It is antlcipated that short- and medium-term growth of GDP will be 5 to 6 percent per annum in real terms, slightly lower than achieved during the 1960s. However, if the Government can maintain a high volume of public investment and further expand and diversify the country's production base, more satisfactory rates of growth can be attained in the early 1980s. With this goal in mind, the new Five-Year Plan has set a very ambitious public investment target of over US$2.0 billion in constant 1974 dollars or two and one-half times that achieved during the preceding plan period. The Plan gives increasing emphasis to the development of directly productive sectors, particularly agriculture and electric energy, while the share of transport infrastructure investments is declining somewhat but remains high in absolute figures. Social investments, particularly for sports and administrative buildings, see their importance considerably reduced. These changes in sectoral priorities are very much in line with the recommendations of the 1975 economic mission. The overall investment targets, however, appear very high indeed in almost all sectors. They exceed by nearly two-thirds the invest- ment levels the mission considers physically possible to achieve over the next five years. Consequently, reductions in Plan targets will almost certainly be unavoidable during the plan period. These cuts will have to be carefully assessed so as to make sure that the sectoral priorities established in the Plan are not distorted during execution. 11. To achieve even the lower investment targets suggested by the Bank mission, the Government must strengthen its ability to choose, prepare, and implement projects, particularly in the rural and transport sectors. Some progress is being made in this direction. Special planning units are grad- ually being established within the technical ministries. A Government-owned consulting firm the Societe d'Etudes pour le Developpement de l'Afrique , was created under the Ministry of Economy and Planning to accelerate project  preparation. Commercially-oriented public corporations are also serving to strengthen the project implementation capacity of the public sector. Nevertheless, further improvements are needed, particularly in the manage- ment of public corporations and in strengthening and coordinating rural development institutions. The project presented in this report is designed to assist efforts recently undertaken by the Government in these fields by providing technical assistance experts, training local staff, and financing high priority studies and project preparation in key economic sectors. 12. In addition to the physical limitations imposed by absorptive capacity constraints, financial considerations also suggest that public investment during the Fourth Plan is unlikely to exceed US$1.3 billion in constant 1974 dollars, or some $400 million per year in current dollars. Indeed, this is about the maximum Cameroon can possibly hope to finance. Budgetary revenues already reach 17 percent of GDP and cannot be expected to increase much faster than the economy as a whole. At the same time reserves of the stabilization funds are likely to stagnate, considering the uncertain price outlook for most export crops. Current expenditures, on the contrary, will expand as a result of recent increases in public investment in transport, education, and health. Furthermore, public debt charges will grow rapidly, particularly those of public enterprises, and will absorb an increasing share of public savings. Consequently, in the next five years, public savings after debt service will probably not exceed US$100 mil-lion per year, or some 25 percent of total public investment, as compared with 38 percent over the past few years. Cameroon will thus have to rely on external financing for the bulk of its public investment. 13. An increasing reliance on foreign borrowing during a period of relatively slow economic growth, and unfavorable terms of trade, will require careful foreign debt management. However, on the reasonable assumption that at least 50 percent of foreign public capital inflow will be on concessionary terms, the foreign debt service ratio could be maintained below 10 percent by 1980. Cameroon's proven ability to make effective use of external resources, and the Government's dedication to development are reasons for added external support. To avoid further rapid buildup of debt service, lenders, including the Bank Group, should provide a large part of their assistance on concessionary terms. They should also be prepared to finance a high proportion of project costs, including when necessary, a part of local costs. PART II - BANK GROUP OPERATIONS IN CAIMEROON 14. The Bank Group's commitments in Cameroon now amount to US$245 million and cover eighteen projects: six in agriculture, seven in transpor- tation, three in education, one in public utilities, and one small- and medium-scale enterprise project. Transportation represents the largest share (55 percent) of our past commitments followed by agriculture (nearly 30 percent). Annex II contains a summary statement of Bank loans and IDA credits as of October 31, 1976 and includes notes on ongoing projects.  - 5 - Although delays and setbacks have been occasionally encountered in the execution of projects, the Government has consistently shown willingness to collaborate with the Bank in finding solutions to such problems. 15. For the future, the Bank Group's strategy is to support the Gov- ernment in its efrort to increase agricultural production, including export- oriented crops, and in the process create productive employment in rural areas; to upgrade and improve the operation and maintenance of the country's infrastructure; to stimulate investment by local entrepreneurs and increase employment in urban areas; and to increase the efficiency of Cameroon's institutions. 16. In agriculture, we have been able to help the Government further diversify production by financing its oil palm and rubber plantations in the east and west, and rice irrigation and livestock in the north. The ongoing cocoa p'foject is helping to modernize cocoa growing by smallholders and to raise rural productivity in areas south and west of the capital. The rubber project approved in June 1975 will develop the southwest coastal region. Preparation work for rural development projects in populated but poor regions is underway with the assistance of the Bank. Preparation of the Zapi-East Integrated Rural Development Project is nearly completed and the project is scheduled to be presented to the Board during FY78. Field appraisal of the Rural Development Fund Project has just been completed. The second stage of an oil palm development project (SOCAPALM), which is designed to help meet a rising domestic demand for palm oil and which would also inaugurate a smallholder development program, is scheduled to be presented to the Board during the current fiscal year. Furthermore, the Plaine des M'Bo Rural Development Project, which is proposed in this report, will help finance studies and three-year trial activities required before a full-scale rural development program can be launched in the western highlands. Besides promoting much needed foodstuffs production, increased Bank Group lending for agriculture will support the Government's effort to focus on rural development in order to improve income distribution and to achieve a better balance in regional development. 17. Recognizing the crucial importance of transportation to economic growth in Cameroon and in neighboring countries, the Government has devoted the largest portion of public investment to this sector. The Bank Group, together with bilateral institutions, has substantially aided development of adequate transport facilities. The Second Highway Project of 1973 was designed to help complete the country's basic trunk road system. -The project has encountered severe cost overruns partly alleviated by a recently approved Supplementary Credit. The Second Railway Project of 1974 has focused on track improvement and expansion of the equipment needed to maintain and augment the railway's overall carrying capacity. Given projected sharp traffic increases- and the backlog of required investments, substantial capital outlays are still necessary particularly for the expansion of the port of Douala, which will be assisted by a recently approved Bank loan and IDA credit, and some related facilities such as a railway station and marshalling yard to be built outside the port area. An engineering loan, approved in May 1976, will  - 6 - help complete the engineering of this station and marshalling yard. Improve- ment of the Douala-Yaounde transport corridor will also require substantial investment. A study, financed by the Bank and scheduled to be completed in FY77, will help determine an economically optimal investment strategy for this corridor. Future road investments will mainly be for road maintenance and feeder roads to provide links to local markets and facilitate exploita- tion of Cameroon's forests. In other sectors, the Small- and Medium-Scale Enterprise Project approved in 1975, focuses mainly on developing local entrepreneurship. A Third Education Project, approved in April 1976, places special emphasis on rural education and training. 18. In all our projects, we will include, as needed, training, technical assistance, and other provisions necessary for strengthening institutions and improving sector policies. The proposed Technical Assistance Project would help to strengthen government services in several key Ministries involved in .investment planning, policy analysis and project processing. In addition, through our economic work we will continue to advise the authorities, at their request, on development questions in general, and on particular matters such as economic management, problems of urban migration, and manpower development. To help achieve the Government's priorities and to support our future lending strategy will require increased emphasis on strengthening the institutional framework, particularly concerning project planning preparation and implementa- tion in transportation and rural and urban development. 19. During the second half of the sixties, overall disbursements of foreign aid to Cameroon amounted to about US$40-45 million a year. While at the beginning of this period 65 percent of aid funds were grants, the proportion of loans slowly increased. A major part of external assistance was provided by France and was concentrated in infrastructure and productive sectors. The aid-giving agencies of the EEC (European Development Fund and European Investment Bank) directed their lending mainly to agriculture, with infrastructure in second place. Bank Group disbursements were small during this period. From 1972 to 1974 overall disbursements of foreign aid increased to about US$60 million with one-third as grants. The Bank Group's share of these inflows amounted to about 25 percent. Our lending to Cameroon has been closely coordinated with other donors; in eleven of our eighteen projects, joint or parallel co-financing arrangements have been made. 20. Public debt outstanding and disbursed as of December 31, 1974 amounted to US$295 million and is projected to reach US$1.5 billion in 1981. Public debt service as a proportion of export earnings amounted to 4.5 percent in 1975 and is projected to reach 9.5 percent in 1981. At that time disbursements may be over US$400 million with only 9 percent consisting of grants. At present IBRD debt, outstanding and disbursed, amounts to about 13 percent of all public debt and 10 percent of public debt service. IDA credits, outstanding and disbursed, amount to about 13 percent of public debt outstanding and 0.1 percent of public debt service. The Bank Group is expected to account for about 25 percent of total public debt and 14 percent of public debt service in 1980.  - 7 - 21. In October 1974, Cameroon became IFC's 100th member. IFC's first operation in Cameroon, a US$450,000 underwriting to bring domestic share- holders into a previously wholly foreign-owned shoe manufacturing company, was approved in May 1975. In September 1976, IFC Board approved an equity investment of nearly US$900,000 in a foreign-owned rubber estate (SAFACAM). The investment will assist in the rehabilitation and diversification of an existing estate by producing rubber for export and palm oil for the domestic market. The operation will also facilitate participation by domestic share- holders. PART III - THE AGRICULTURAL SECTOR 22. Agriculture plays a major role in the Cameroon economy, providing a livelihood for about 85 percent of the population and accounting for 35-40 percent of GDP and over 75 percent of the value of exports. The agricultural sector can be divided in two major subsectors: traditional agriculture and industrial plantations. The traditional subsector accounts for over 85 percent of agricultural output. It comprises some 950,000 smallholders cultivating plots-avereaging about two hectares each, using family labor. Smallholders produce foodcrops for subsistence and for the local market, and cocoa, coffee, cotton and groundnuts for export. The industrial plantation subsector com- prises several large government-owned and a few private industrial estates (foreign-owned), producing mainly palm oil (for export and domestic consump- tion) and rubber (for export). 23. Production for export has so far been the most dynamic. Output of cocoa and coffee increased considerably during the 1960s at annual rates of about 3.5 percent for cocoa, 5.5 percent for robusta coffee and 9 percent for arabica coffee. Cameroon is now the world's fifth largest producer of cocoa (110,000 tons) while its share of world coffee (88,000 tons) and cotton production (41,000 tons) are relatively minor. In recent years, growth of cocoa has accelerated appreciably, while that of robusta and arabica coffee declined slightly as a result of the aging of plantations. Cotton production has suffered a considerable setback due to the severe droughts which have recently affected the northern provinces. The oil palm sector continues to expand rapidly (an estimated 80,000 tons of oil were produced in 1975) but because of increasing domestic demand, exports are generally negligible, though in 1975 exports accounted for 10 percent of production. Good eco- logical conditions exist for rubber and coconut for which development plans are underway. 24. Cameroon is largely self-sufficient in foodstuffs, with production expanding at an annual rate of 3-3.5 percent, ahead of population growth. This expansion results from a rapid growth of non-traditional foodstuffs, especially vegetables, beans and potatoes. However, there is a serious stagnation of output of traditional staples (plantains, millet, sorghum, maize and cassava). This has reduced the supply of staple foods to major urban centers, which consume more and more imports of rice and wheat.  - 8 - 25. This stagnation partly results from unfavorable climatic conditions in particular in the northern region, lack of adequate support services to smallholders and the absence of an effective marketing organization. Existing extension services are mostly concerned with the improvement of cashcrops and have paid little attention to the development of foodcrops, except for rice in the north. Marketing is reasonably well organized for export crops but foodcrop marketing is largely in the hands of small traders, most of whom operate within a small area and with limited turnover which constrains the cash cropping of traditional foodstuffs. 26. Farm incomes and services to farmers are unevenly distributed. The highest income areas are the central savannah and the western and coastal low- lands (US$130 - 140 per capita); the poorest areas are the northern plains and the western highlands (US$70 - 80 per capita), which are densely populated. The weakness of extension and credit services is particularly evident in the lowest income areas. 27. However, prospects for developing smallholder agriculture are promising and Government now intends to increase its support for the small- holder by making more investment funds available to this subsector. A total capital outlay of US$383 million would be allocated for agricultural and livestock projects between 1976, and 1981, as compared to only US$168 mil- lion 1/ during the 1972-1976 period. Furthermore, institutions are being improved. In particular, the Fonds National de Developpement Rural created in 1973 to expand and coordinate rural development programs, has recently been reorganized and given more flexibility to provide credit to farmers. Third, the Planning and Agriculture Ministries would be given additional means - including technical assistance - to prepare and monitor rural development projects. 28. As an example of Government concern towards the rural poor, several projects for the overpopulated western highlands are envisaged. Here, about 600,000 people, among the-poorest of the country, depend on production of arabica coffee and foodcrops, on decreasingly productive land. For social reasons, it is not likely that this population could migrate rapidly outside their original region. Settlement of the few plains around the highlands, of which the Plaine des M'Bo is one, could reduce population pressures. This explains the high priority given by Government to the project proposed in this report. Yet, in the long run, the scope for such settlements is not sufficient to solve the problem; a simultaneous effort to improve agriculture in the highlands is necessary. Preparation of projects to this end is already underway. Furthermore, a technical assistance project is currently being presented to the Board, which would improve the ability of the Ministries of Planning and Agriculture to prepare and monitor such projects. 29. The Bank supports Government's efforts to achieve a balanced growth between rural development projects in traditional areas and integrated estate 1/ At 1974/75 prices and exchange rates.  and smallholder plantation projects. This strategy involves developing both industrial companies and smallholder schemes. In the past, Bank Group lend- ing for development of tree crop plantations (CAMDEV FY 67 and SOCAPALM FY 69), was followed by loans or credits for rice irrigation (FY72), livestock (FY74), cocoa (FY75) and rubber (FY76). The Bank's lending in the agricultural sector has three main objectives: firstly, increasing technical and managerial capabilities, strengthening institutions, and improving sector policies, mainly through training and technical assistance; secondly, raising foreign exchange earnings through expanding the production and export of rubber, cocoa, livestock and forestry; and thirdly, increasing the productivity of the overpopulated and poor rural areas. To the latter end, four integrated rural development projects are at various stages of preparation. PART IV - THE PROJECT 30. Negotiations for an IDA credit were held in Washington from November 15 to 18, 1976 with a Cameroonian delegation headed by Mr. Benoit Bindzi, Ambassador of the United Republic of Cameroon in Washington. Project Area 31. The Plaine des M'Bo, which is about 200 km north of Douala, is located in the overpopulated western highlands (150-200 persons per km ) and comprises 30,000 ha at the base of the Bamileke Plateau. The mean altitude is 720 meters. The topography of the plain is flat. There are several meandering rivers with many tributaries, as well as stagnant ponds. At the southern end of the plain, a rock formation slows down the flow of water on the main river. As a result, the terrain is divided into permanently flooded, seasonally flooded and non-flooded parts. The soils are water-logged with zonal differences due to the fluctuations on the water table and the presence of surface water in places. Total annual rainfall averages 1,730 mm, with two peak periods in May and September; the dry season ranges from mid-November to February. Mean temperatures vary only slightly during the year. Vegetation zones include semi-deciduous forests, savannah grasses, and tree-and-underbrush areas along the riverbanks. The soils are of good texture but their potential remains to be verified. 32. The plain appears to have been reasonably well settled in the past, but complete depopulation occurred early in this century, partly because the plain harbored vectors of sleeping sickness, malaria and onchocerciasis. However, because of increasing population pressure in the surrounding high- land, 10,000 inhabitants have recently settled along the footlines of the plain where they grow traditional crops for cash (coffee) and for food (plantain, cassava, sweet potatoes). The major part of the plain is still empty, except along the central road running from Dschang to Melong. A detailed survey of 20,000 ha shows that 13,000 ha of unoccupied land are  - 10 - suitable for double-cropping rice and legumes (11,000 ha) and single-cropping rice in bottomlands (2,000 ha) without expensive land clearing. However, 10,000 ha of unoccupied land have not yet been surveyed and some further development potential of about 2,000 ha seems likely to be identified. Preliminary investigations suggest that the health problem can be controlled at reasonable cost, using methods which have already been tested successfully elsewhere. Settlement of about 5,000 to 7,000 farm families would then be feasible. Project History 33. The project stems from experiments begun in 1971 by the Institut de Recherche Agronomique et Forestiere (IRAF) which initially suggested the possibility of growing two crops of rainfed rice a year on the Plaine des M'Bo. Given the positive results of three years work at IRAF's agronomic station on the Plaine, the Government set up the Mission de Developpement de la Riziculture dans la Plaine des M'Bo in 1973 to implement a pilot operation partially financed by the French aid agency Fonds d'Aide et de Coopera- tion. It also classified as state-owned land 4,000 ha out of a total iden- tified potential of 13,000 ha. As this operation progressed, the Government hired the Societe d'Assistance Technique et de Cooperation, a French consulting firm, to prepare a feasibility study for a project that IDA and the Caisse Centrale de Cooperation Economique agreed to consider. This study, completed in mid-1975, proposed a project aimed at developing a highly mechanized farm on about 8,000 ha to grow two crops of rice per year. Then, the Caisse Centrale and IDA requested that the project should also benefit the landless farmers living at subsistence level in the nearby overpopulated highlands. The concept of a settlement project was acceptable to Government, and the Consultants amended the study accordingly. Early in 1976 without waiting for the conclusion of the appraisal mission, Government invested some US$5.5 million in farm equipment, in infrastructure for the immediate development of a 800 ha farm and in facilities for processing and storage of 5,000 tons of rice. 34. The proposed project was appraised in February 1976. The joint Caisse Centrale/IDA appraisal mission concluded that the project area has development potential but that technical and economic questions have not been resolved to the degree necessary to justify a large scale development project. In the first place, there were uncertainties regarding the results of early agronomic trials and the Mission de Developpement's larger scale trials (on 200 ha in 1974 and 1975 and on 400 ha in 1976). These mainly concerned the best cropping system and the most appropriate fertilizer requirements that would be necessary to obtain yields which would justify the project economi- cally. Secondly, the proposed heavy mechanization for land preparation would not have used available labor resources adequately and would have entailed high overhead charges for the settler. Although soil and other ecological conditions in the project area undoubtedly require a certain degree of on-farm mechanization, the proposed project assumed that settlers would have to be permanently dependent on a central farm which the mission considered to_ be unsatisfactory as a long run solution.  - 11 - 35. Some 13,000-15,000 ha in the project area can be developed, and a large part of the land is suitable for the double-cropping of rice in rotation with a legume (groundnuts, soybean, beans). The project area also offers one of the few possibilities to settle almost in situ, about 5,000-7,000 industrious, landless farmers from the overpopulated neighboring mountains. 36. According to the mission's preliminary estimates, the development of some 13,000 to 15,000 ha in the project area would cost about US$35.0 million in 1976 prices, or about US$5,000 per farm family. However, during the first phase, alternative mechanization and other systems will be tested in an attempt to find ways and means to establish a settlement project at reasonable costs per family. Current estimates include the cost of land clearing, preparation, settlement, control of health hazards, and necessary farm equipment and infrastructure. Based on the Bank's latest economic price forecasts and reasonable yields (3 tons for rice and 1.7 for soya or ground- nuts) at complete maturity, a full development project could yield a rate of return of about 15 percent and provide 25,000 tons of rice (for which the domestic market already exists), 15,000 tons of soybeans (for which local marketing prospects will be investigated) or groundnuts for import sub- stitution ,-and 10,000 tons of traditional foods for domestic consumption. 37. Therefore, as a first phase, it is proposed that the Association should finance pre-investment studies and agronomic trials on 300 ha in the project area, in order to prepare a settlement scheme appropriate for the full development of the plain. Simultaneously, the Societe de Developpement de la Riziculture dans la Plaine des M'Bo (SODERIM) 1/ will exploit the 800 ha which have been already developed, using equipment which was purchased previously (see para. 33). Government has agreed that no further development outside these 1,100 ha will be undertaken in the plain, until the proposed Phase I project has provided the necessary guidelines for such a development. (Section 3.08 of the draft Development Credit Agreement). The Phase I Project - Summary Description 38. The three-year Phase I project would cover six cropping seasons. This offers adequate scope for carrying out the measurements necessary to provide sound agronomic recommendations and workable approaches to organi- zation of the settlement and development of the plain. These results would be summarized in a new feasibility report, which would be used as the basis for appraisal of a full development project. 39. Specifically, the Phase I project would finance technical personnel,' equipment, infrastructure and operating expenses required mainly to: 1/ A decree establishing SODERIM as the entity to succeed the Mission de Developpement will be ratified shortly.  - 12 - (a) complete soil tests and analysis of the area to be developed on the plain and carry out further agronomic trials with a view to finding a suitable cropping pat- tern and defining the related fertilizer application requirement; (b) organize the settlement of farmers on 300 ha, to test promising mechanization systems and different types of equipment and settlement schemes; (c) study: (i) the domestic marketing of soya; (ii) health control measures, particularly tsetse eradication; and (iii) migration problems; (d) incorporate the results of the above trials and studies into a feasibility report for the full scale development and settlement of the Plaine des M'Bo. The Phase I Project - Detailed Features 40. Soil Tests and Analyses: Although an existing soil survey, carried out in 1973, provides an adequate framework to guide the development of the plain, some doubts remain as to the productivity of soils, moreover, the subsequent years of cropping may have brought about chemical modifications to the soils. Possible deficiencies (and toxicities) that might limit crop production have to be further investigated. Thus, available data would be reviewed and thorough soil analyses carried out in virgin areas and areas cropped for at least three-years. Work would be subcontracted by SODERIM to IRAF, which would carry out the study in consultation with the Inter- national Institute for Tropical Agriculture or another experienced foreign institute. 41. Agronomic Trials: Under the project, SODERIM would, with support by IRAF carry out field trials to establish the fertilizer requirements of rice, soya and other legumes (groundnuts, beans, cowpeas), the adaptation of these crops in the farming system, and prospects for double-cropping with rice. SODERIM would be responsible for implementation of the agronomic trials program, which would be conducted each season along lines defined with consultants. In addition, IRAF would continue to test new varieties and conduct related experiments at its agronomic station on the plain.  - 13 - 42. Mechanization/Settlement Systems: 1/ A promising new mechanization/ settlement system would be tested on 200 hectares, with the participation of some 100 farm families, of which about half are already settled on the plain. The objective would be to establish two groups of 50 farm families on 100 hectares of land each, which would use central maintenance facilities provided by SODERIM. Each group would form a threshing unit and would be expected to become self-managing. This concept is based on a real need, since close cooperation between farmers is essential to obtain effective utilization of the threshing machine in a short period of time. The new system would even out the peak manual labor requirements at harvest, reduce losses during harvest and, hopefully, make possible the best cropping pattern in economic terms. In order to permit comparisons between several methods of land cultivation techniques, various types of other light farm equipment (mini- tractors, power tillers and cultivators) would be tested to ascertain their adaptability to small farms under the project conditions. After experiments with this equipment, another group of 50 farm families would be settled on the remaining 100 ha of land and provided with the equipment. These systems would be supervised by SODERIM, with technical support from the Centre National d'Etude et d'Experimentation du Machinisme Agricole, and consultants contracted for this purpose by SODERIM. A prime objective of these tests will be to reduce mechanization costs to the minimum compatible with efficient settlement. 43. Marketing Study for Soya: The study would determine the prospects for production and utilization of soya locally. It would analyze the pros- pects for soya oil and meal - including livestock development and animal feed requirements in Cameroon and in neighboring countries - and would also investigate the possibilities of promoting soya for human consumption. More- over, the study would cover proposals for marketing procedures, price policies and investment costs. This study, which would complement an ongoing study of the market for vegetable oils and fats in Cameroon, would be carried out over a two-month period by a consultant contracted by SODERIM. 44. Health Control Study: Disease vectors, which have been identified as being similar to those successfully eliminated elsewhere, will have to be controlled before large-scale settlement could be undertaken. The project would focus on the control of glossinas (tsetse flies) in the forested areas of the plain and would evaluate the cost and effectiveness of alternative methods of insect vector control. In addition, better information would be developed about current,disease and nutrition problems in order to design a health care program for the area. The Office National de la Recherche Scienti- fique et Technique would be responsible for the health study, while SODERIM would evaluate the structure and location of human settlements in the plain, and improvements in village domestic water supply and sanitary practices. 45. Migration Study: SODERIM, with the help of a specialist team, including sociologists and economists, would carry out a study of the characteristics of settler candidates, in such terms as work experience, resources and family structure, and thereby would define the most appro- priate conditions of settlement on the plain and the requirements for 1/ The following assumptions have been made for the settlement scheme: one farm family consists of an average of 7 persons of whom 2 are active farmers; 2 ha will be allocated per farm family in the trial areas.  - 14 - support services and settlement organization. The study would also pro- vide SODERIM with guidelines to locate the best sources of candidates for settlement and to determine acceptable criteria for the recruitment and the selection process. Organization and Management 46. The Phase I Project would be under the overall responsibility of the SODERIM General Manager assisted by a small group of qualified and ex- perienced professional staff and consultants. These key positions would comprise the General Manager, a Research Assistant and an Administrative and Financial Manager. These positions would be filled by expatriates since it is unlikely that Cameroonians with the required experience and qualifica- tions could be made available for the project. The Project Manager would supervise the management of the existing 800 ha farm and would coordinate project staff and consultant's work. Ultimately, he would be responsible for the preparation of the feasibility report for the full development of the Plaine des M'Bo. This report, which would embody the experience and information obtained during the Phase I project, would be the subject of discussions between IDA and Government not later than September 30, 1979. The Research Assistant, an agronomist with tropical experience, would be in charge of-agronomic trials, the settlement/mechanization scheme, and the mechanization equipment tests. The Administrative and Financial Manager would organize suitable accounting/financing procedures at SODERIM. Other local staff, already in place, would include a production chief, four field supervisors, six extension officers, three experiment officers, and three statisticians. In addition, two mechanics would maintain the existing in- frastructure and facilities, including the rice mill, storage facilities and agricultural equipment. 47. The various consulting firms and research institutes involved in the project would enter into appropriate agreements with SODERIM and report to the Project Manager. These arrangements would include detailed terms of reference acceptable to IDA and a work schedule to be revised at the end of each cropping season. Implementation and Phasing 48. Procedures have been carefully prepared to ensure the effective implementation of the Phase I project. First, Government has agreed to approach five qualified consulting firms immediately, in accordance with IDA guidelines for the use of consultants, to secure the arrival of project key personnel early in 1977 before the beginning of the first cropping season. Draft terms of reference for the consultants and for the studies were drawn up by IDA and were formally discussed with Government during negotiations. Secondly, agreements specifying the above terms of reference of the main domestic research institutions involved have been prepared and drafts were submitted to IDA at the time of negotiations. Consultants' and the Project Manager's reports would be made available to Government and IDA, two months after the end of each cropping season. The soya marketing study-and  - 15 - the soil test and analyses should be completed at the end of the first year. By the end of 1978, the Project Manager would initiate preparation of the full feasibility study. Cost and Financing 49. The total cost of the project, based on mid-1976 prices and including contingencies, amounts to US$2.5 million net of taxes. Foreign exchange costs are estimated at US$2.0 million or 80 percent of costs, net of taxes. The proposed IDA credit of US$2.0 million would be complemented by a loan from the Caisse Centrale equivalent to US$0.5 million; both would be passed on by the Government as grants to SODERIM. The Government will ensure that funds amounting to US$0.3 million are always available to SODERIM to prefinance project expenditures. Given the investments in infrastructure and equipment for this project already made by the Government, 100 percent external financing of project costs, net of taxes, is justified. Total expatriate staff and consulting services would amount to 168 man-months for a total.cost of US$1.0 million in 1976 terms, or US$70,000 per man-year on average, of which about US$30,000 would be salary. Procurement 50. Since the equipment (US$0.4 million) and the contracts for build- ings (US$0.3 million) are not large enough to make international tendering appropriate, equipment and buildings' contracts would be awarded on the basis of competitive bidding advertised locally and in accordance with local pro- cedures which are acceptable to IDA. The services of expatriate management staff and consultants-(US$1.0 million) would be obtained according to procedures acceptable to IDA. Disbursements 51. The IDA credit would be disbursed pari passu with the Caisse Centrale loan and Government's contribution (to cover the equivalent of US$0.1 million in taxes) to finance 75 percent of the cost of: (a) consulting services and expatriate staff: US$0.7 million; (b) local staff and operating costs : US$0.4 million; (c) equipment : US$0.3 million; and (d) buildings : US$0.2 million. US$0.4 million would be unallocated. Disbursements would be against contracts and invoices for items a, c, and d. Disbursements for local staff and operating costs (item b) would be made against statements of expenditures certified by the Project Manager with the supporting documentation retained by SODERIM and made available for inspection during supervision missions.  - 16 - Benefits and Risks 52. The Phase I Project benefits would provide Government with solid technical and economic grounds on which to base a decision on a total invest- ment for Phase II estimated at US$35.0 million in 1976 prices. The proposed Phase I project entails the ultimate risk that the agronomic trials would demonstrate the impossibility of obtaining the minimum yields necessary to justify the investment required to develop the project area. However, given the preliminary results obtained by IRAF during four years of experiments and the changes that have been introduced in the original project concept, we are reasonably confident that the new tests proposed in this project will provide a workable solution to known difficulties. The mechanization/ settlement schemes envisaged in the project could run into unexpected problems given the absence of precedent for this type. of development in West Africa. But again, this would be unlikely because the population interested in the settlement project is industrious and known to be capable of adjusting to new farming systems, and because the project would provide expertise necessary to overcome known difficulties. On balance, the risks are worth taking given the estimated development potential of the Plaine des M'Bo, where at least 13,000-15,000 ha could be developed to provide an adequate income for 5,000-7,000 families (some 30,000-40,000 inhabitants in total) now 'living at the minimum subsistence level in the surrounding overpopulated Bamileke Plateau. PART V - LEGAL INSTRUMENTS AND AUTHORITY 53. The draft Development Credit Agreement between the United Republic of Cameroon and the Association, the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement and the text of a draft resolution approving the proposed credit are being distributed to the Executive Directors separately. 54. A feature of the draft Development Credit Agreement of special interest is referred to in paragraph 37 of this report. In addition, the following special conditions of credit effectiveness are provided in sec- tion 6.01 of the dra't Development Credit Agreement. (a) initial disbursement conditions under the CCCE Loan Agreement have been fulfilled; (b) the General Manager, the Research Assistant and the Administrative and Financial Manager, described in para. 46, have been appointed; and (c) the Financing Agreement to be entered into by the Government and SODERIM has been duly executed and authorized.  - 17 - 55. I am satisfied that the proposed development credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATIONS 56. I recommend that the Executive Directors approve the proposed Development Credit. Robert S. McNamara President Attachments December 9, 1976   TABLE 3A Page 1 ofL pages CAMEROON - SOCIAL INOICATORS DATA SHEET LAND AREA tTHCU KN21 ______ CAMEROON REFERENCE COUNTRIES (19701 TOTAL 475.4 MOST RECENT AGRIC. 156.0 1960 1970 ESTIMATE GHANA IVORY COAST MALAYSIA GNP PER CAPITA (US$) 9 0.0 190.0 270.0 340.0 340.0 440.0 POPULATION AND VITAL STATISTICS _______________________________ POPULATION (MI0-YR, MILLION) 5.8. 6.6 7.3 8.6 5.4 10.4 PCPULATICt DENSITY PER SQUARE KM. 11.0 1L.0 15.0 36.0 16.0 32.0 PER SQ. KM. AGRICULTURAL LAND .. L2.0 62.0 30.0 291.0 VITAL STATISTICS CRUOE 8tRTe- RATE PER THOUSAND 43.5 42.1 40.I 49.8 46.1 42.2 CRUOE OFATH OATE P'E THOUSANO 28.0 23.5 22.0 24.4 23.3 12.9 INFANT MLUQTALITY RATE I/THOU) .. .. 142.0 /L 156.0 ,. 40.8 /a LIFE EXPECTANCY AT blRTH (YRS) 35.9 41.0 41.0 4L.5 41.0 56.7 GROSS REPRCCUCTION RATE 2.3 / 2.7 2.7 3.2 3.1 2.6 . POPULATICN GRnWTH RATE (%) TOTAL 2.4 2.0 2.0 2.6 3:4 2.6 URbAN . 6.1 7.5 5.0 87 6 URBAN POPULATION (I OF TOTAL) 1I.9 A 20.3 26.3 29.0 28.0 27.8 AGE STRUCTURE IPERCENT) 0 TO 14 YEARS 40.0 43.0 *- 46.9 42.5 44.7 i 15 '0 64 YEARS 56.0 54.0 .. 49.5 5l.8 52.1 . 65 YEARS ANO OVER 4.0 3.0 .. 3.6 2.7 3.2 a AGE OEPEhGENCY RATIO 0.8 0.9 .. 1.0 0.8 0.9 / ECONONIC OEPENOENCY RATIO 1.0 1.2 .. - 1.4 0.9 I. 1 6 FAMILY PLANNING ACCEPTOPS (CUMULATIVE, TOGUI .. .. .. 10.9 222.2 USERS It OF MARRIED WOMEN .. .. .. 2.0 80 a EMPLOYMENT TCTAL LAeCR FORCE (THOUSAND) 2400.0 2800.0 .. 3300.0 2600.0 2900.0 /a LABOR FORCE IN AGRICULTURE (S) 88.0 82.0 .. 54.0 82.0 43.0 R UNEMPLOYEO (I OF LABOR FORCE) .. .. .. 5.0 S 6.0 6.00 INCOME DISTRIBUTION I OF PRIVATE INCCME REC'O 8Y- HIGHEST 5X OF HOUSEHOLDS .. .. .. .. .. 28.3 HIGHEST 20X OF HOUSEHOLDS .. .. .. .. .. 56.0 LOWEST 201 OF HOUSEHOLOS .. .. .. .. .. 3.5 LOWEST 40S OF HOUSEHOLDS .. .. .. .. .. 11.2 DISTRIBUTION OF LANO OWNERSHIP S OWNED BY TOP IO OF OWNEAS .. .. .. I OWNED BY SMALLEST 102 OWNERS .. .. .. HEALTH ANO NUTRITION POPULATION PER PHYSICIAN 33T70.0 /b 29330 0 30520.0 /b 12950.0 12140.0 POPULATION PER NURSING PERSON 5400 0 c 2700A0 I 26L0.0 MS 1070.0 2480.0 a 1080.0 Iac POPULATION PER HOSPITAL 8ED 450. /. 50d 0 .. 760.0 680.0 20:0 ! PER CAPITA SUPPLY OF - CALORIES (Y OF REQUIREMENTS) 96.0 96.0 104.0 96.0 108.0 93.0 i PROTEIN (GRAMS PER OAY) 59.0 59.0 64.0 4 L 46.0 60.0 49.0 a.dd -Of WHICH ANIMAL AND PULSE .. 23.0 .. 10.0 18.0 /a 20.0 a OEATH RATE 11THOU) AGES 1-4 .. .. .. .. .. 5.5 EDUCATION ADJUSTED ENRCLLMENT RATIO PRtMARY SCHOOL 66.0 108.0 107.0 L 58.0 i 76.0 89.0 4 SECONOARY SCHOOL 2.0 / 9.04. 11.0 /-. 9.0 L 11.0 LL 34.0 L- s YEARS OF SCHOOLING PROVIDED (FIRST ANO SECOND LEVEL) 14.0 Ia._ 14.0 4 14.0 f IS.0 13.0 13.0 L VOCATIONAL ENROLLMENT tS OF SECONOARY) 23.0 22.0 21.0 La 23.0 7.0 3.0 . ADULT LITERACY RATE (S) .. 12.0 .. 25.0 20.0 71.0