Tanzania - Fisheries Development Project

FtIE 1 Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-1880-TA REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE UNITED REPUTBLIC OF TANZANIA FOR A FISHERIES DEVELOPMENT PROJECT June 18, 1976 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (as at November 1, 1975) Tanzania Sh = US$0.12 US$1.00 = T Sh 8.05 (The Tanzania Shilling is officially valued at a fixed rate of 9.66 T Sh to the SDR. The US Dollar/Tanzania Shilling exchange rate is there- fore subject to change. Conversions in this report were made at US$1.00 to T Sh 8.05, which is close to the short-term average exchange rate.) ABBREVIATIONS TRDB = Tanzania Rural Development Bank DDC = District Development Corporation TAFICO = Tanzania Fisheries Corporation TANZANIA FISCAL YEAR July 1st - June 30th  FOR OFFICIAL USE ONLY REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE UNITED REPUBLIC OF TANZANIA FOR A FISHERIES DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed development credit to the United Republic of Tanzania for the equivalent of US$9.0 million on standard IDA terms to help finance a Fisheries Development Project. Approximately US$5.0 million of the proceeds of the Credit would bc re'ent to the Tanzania Rural Development Barnk (TRDB) for 20 years including four years grace with interest at four percent per annum. TRDB would onlend these funds at 8-1/2 percent. PART I - THE ECONOMY General 2. Although it has been sometime since the last full economic and updating reports on Tanzania were finalized in May and December 1972, respectively, considerable staff economic work has been accomplished on the country since that time. An agricultural sector report was issued in December 1974. The report of an indcuary and mining mission was distr-ibuted in April 1975 and a study of the fiscal aspects of Tanzania's recent decen- tralization was completed in April 1975. In March 1976, at the request of the Government, the Bank mounted a special mission which analyzed the fiscal implications of the Government's programs for Universal Primary Education and Universal Rural Water Supply. The work of this mission will provide a substantial input to the work of the basic economic mission which is scheduled to visit Tanzania in mid-1976. Throughout the last two years or so Bank staff have engaged in a continuous economic dialogue with the Government on the serious balance of payments difficulties which have been encountered by the country and the Government's policies and programs designed to close the external gap. These policies and programs were reviewed in the Program Loan President's Report No. P-1517a-TA, dated November 25, 1974 and in a memorandum (M75-687) from the Secretary dated September 25, 1975. The Consultative Group for East Africa met in April 1975 to discuss the progress and prospects of the Tanzania economy and the need for additional resources to support the Government's development program. 3. The TANU Party, under the leadership of President Nyerere, has been the guiding force in Tanzania's political evolution since the 1950's. Over the years following independence the political leadership has developed a philosophy of egalitarian socialism which has been articulated in many documents, most central of which is the Arusha Declaration of 1967. In restructuring the political, economic and social life of the country the leadership has introduced an impressive series of far-reaching institutional reforms. For the past decade Tanzania's social and economic policy has been guided by three fundamental objectives: (a) the achievement of a participatory, This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  decentralized socialist economic order; (b) the eradication of absolute poverty and progress toward greater income equality; and (c) more rapid long-term economic growth with full participation of all regions and pop- ulation groups in the development process. Reflecting this philosophy some of the Government's most significant decisions have been in the area of i.acomes policy. The tax structure is highly progressive and middle and upper incomes have been restrained while lower income wages have been increased. In the provision of social infrastructure services, poorer areas have been favored. As a result of these and related policies, dif- ferentials in living standards between upper and lower urban dwellers have been narrowed and some impact has been made on urban/rural differentials and regional disparities of income. 4. The overriding goal is to develop a socialist economic system and the consequence has been a series of industry nationalization measures and proliferation of government parastatal enterprises. The state has increasingly intervened in the price mechanism; prices of domestic factors and products and imports are controlled directly or by such indirect methods as import licensing. These structural changes have resulted in some imple- mentation problems. In addition, scarce managerial manpower has been spread very thinly, exacerbating already serious shortages of top and middle-level staff. Some of these conflicts should be seen, however, as the inevitable consequences of a "frontal" attack on poverty and underdeyelopment. 5. With a per capita income of only $130 (1973), Tanzania is classified as one of the 25 least developed countries as defined by the United Nations (country data are provided in Annex I). Between 1968 and 1973 Tanzania's GDP grew at 4.6 percent per annum. Domestic savings averaged 17 per- cent of GDP, while gross investment averaged 21 percent -- extremely high rates for a country at Tanzania's low level of per capita income. The growth rate of GDP was not commensurate with the magnitude of the investment effort, however, in part because of the high proportion of investment which was directed into infrastructure and social services projects such as the transportation links with Zambia, because of sluggish growth in the agricul- tural sector, and because of stagnant or declining productivity in paras- tatal enterprises. During this period the balance of payments position of Tanzania was generally satisfactory, despite the disappointingly slow growth of exports (overall export volume grew at only three percent per year from 1968 to 1972 and in 1973 export volume fell back to the 1968 level). Never- theless, because of a sharp increase in capital inflows, the overall balance of payments was in surplus from 1971 to 1973, and there was a modest build-up in foreign exchange reserves. As a result of prudent financial management, net reserves were increased to approximately $145 million by the end of 1973, the equivalent of four months' imports. 6. Events then occurred which resulted in a drastic change in the overall balance of payments of Tanzania. The 1973 and 1974 rains failed in many parts of the country necessitating substantial increases in imports of basic food items beginning in mid-1974. The drought also affected cash crops, leading to a further decline in the export volumes of coffee, cotton  - 3 - and sisal. Although world prices for Tanzania's exports jumped 52 percent in 1974, total export receipts rose only 18 percent due to drought-affected crop yields. At this same time as a result of higher prices for imports the total import bill for 1974 rose by 60 percent over 1973. The outcome of these forces was a rapid depletion of net reserves to only $50 million at the end of 1974, equivalent to only three weeks of imports. Industrial production also stagnated in 1974, due in part to shortages of imported raw materials and spare parts stemming from the growing foreign exchange constraint. As a result, overall GDP may have actually declined slightly during the year although official statistics indicate an increase of 2 percent. While pro- duction declined, domestic deLmand increased rapidly, due to expansionary fiscal, monetary and wage policies, causing severe pressure on the domestic price level. The retail price index for low income workers rose by 57 percent in 1974 while that for middle-grade civil servants jumped 35 percent. 7. During 1975, while the food production shortfall was substantially reversed and inflation was reduced to around 30 percent, grain imports were still required and the balance of payments situation remained critical. In addition, export performance was extremely disappointing with total value of exports declining by over 11 percent. The overall balance of payments gap for 1975 was about $140-145 million, equal to the deficit for 1974. Tanzania was able to cover the 1975 foreign exchange gap by curtailing imports to the bare minimum and by securing substantial program type assistance, including a $30 million Program Loan (No. 1063-TA) from the Bank and a $24.3 million drawing on the IMF special oil facility'approved in August 1975. Tanzania's present economic crisis cannot be attributed exclusively to drought-related crop failures and import price escalation. The most disturbing aspect of Tanzania's economic situation has been the declining growth rate of output from the agricultural, industrial and mining sectors. The growth rate of agricultural output had been running slightly behind the rate of growth of population for six years prior to the harvest failure of 1974. Inadequate producer price incentives, inefficiencies in the transport and distribution systems for inputs and marketed production, and the effects of inadequately planned villagization (paragraph 21 below) contributed to this disappointing performance. In the modern sector many enterprises have experienced declining labor productivity which has been attributed to lack of incentives, poor discipline and ineffective management. Furthermore, while the ratio of domestic savings to GDP rose during the 1960's,'it began to decline by 1973 and fell drastically to 7.5 percent in 1974 as a direct outcome of the balance of payments crisis. In addition to the above-mentioned factors, the high level of investment which has gone into slow-gestation social and economic infrastructure rather than into the directly productive sectors has prevented more rapid growth of output. 8. The Tanzanian Government in late 1974 formulated a comprehensive program of policy actions to bring the balance of payments under control in the medium run and to restore the growth rate of output. The principal elements of the program included a reallocation of investment in favor of directly productive sectors, measures to raise agricultural output, steps to improve incentives in industry and mining and to increase the export orient- ation of these sectors, and constraints on public and private consumption demand. Imports were cut through direct controls and measures were introduced  - 4 - to slow down the rate of growth of private consumption. Indirect taxes were raised and further increased in the 1975/176 budget. User charges for water and electricity were also raised and an extremely restrictive wage and salary policy has been followed. Further, the Sovernment is making a serious effort to bring the rate of growth of public consumption expenditures under control. The 1975/76 budget called for a level of current expenditures below the revised estimate for 1974/75 and while this target may not be realistic the intentions of the Government are nevertheless clear. In addition cuts of about 7 percent in the civil service were made in March 1976. 9. On the production side, several steps have been taken to increase output. The Government has raised agricultural producer prices to levels approaching world parity and certain progressive export taxes have been reduced or eliminated. The overall planning capability of the Ministry of Agriculture is being strengthened and a project coordination unit to improve implementation has been established in the Ministry. Furthermore, as a major component of its effort to expand material production the Government has made significant progress in reallocating public investment in favor of the directly productive sectors of agriculture, industry and minipg. Another problem area in which action has been undertaken is that of export development. In October 1975, Tanzania, in conjunction with Kenya and Uganda, devalued the shilling by approximately 14 percent. Given the heavy reliance of the East African Community on export markets in the U.K. and the substantial recent decline in the value of sterling, this devaluation can be construed as an attempt at restoration of competitiveness of exports to the U.K. and also an incentive to exporters to non-sterling markets. The Government's progress in implementing policies and programs designed to close the balance of payments gap in accordance with understandings relating to the program loan was the subject of a memorandum (M75-687) from the Secretary to the Executive Directors dated September 25, 1975 (paragraph 2 above). The most encouraging aspect of the Government's res- ponse to the balance of payments crisis was the demonstration that Tanzania retains the ability to push through necessary and unpopular measures over a wide front. It is this characteristic of a "hard state", together with the basically sound program of economic restructuring, which holds the promise for the future. 10. Tanzania's prospects for bringing the balance of payments deficit under control in the medium term clearly depend upon the effectiveness of the program of policy actions outlined above. It is not possible to determine the time period over which all the policy measures introduced by the Tanzanian Government will take effect. The austerity measures introduced in 1974 and 1975 have already had an impact on imports and on domestic consumption, and the recovery of food production in 1975 has clearly helped to alleviate the food deficit. However, the basic program of economic restructuring will require more time before its full effects can be realized. For example, some new investments in agriculture, industry and mining that will directly benefit the balance of payments will take several years to come to fruition. Thus the balance of payments will remain weak in the short run. However, Tanzania should have a stronger economy at the end of the restructuring process. The central focus of the assistance efforts should be, therefore, to ensure that the balance of payments gaps arising over the next few years  - 5 - do not prevent Tanzania from implementing a development program designed to incorporate the required policy changes. In this connection, nego- tiations for a proposed second program loan were recently held in Dar es Salaam. In addition, and despite Tanzania's impressive domestic savings performance, a continued capital inflow in excess of the foreign exchange component of high priority projects will also be required if Tanzania is to achieve its development targets. Financing of some local expenditures will, therefore, be justified. 11. In terms of debt outstanding and disbursed, the Bank Group is Tanzania's second largest creditor after the People's Republic of China. Other major lenders are Sweden, Canada, Denmark, the Netherlands and the Federal Republic of Germany. The current low overall_debt service ratio of about 7 percent is expected to rise to about 11 percent by 1980 and remain at about that level throughout the 1980's. Including a notional one-third snare of tiie debt of the East African Community Corporations, the IBRD is presently holding 13 percent of Tanzania's outstanding external debt and IDA 10 percent- the IBPD share is expected to rise ahout ?1 nercent in the next five years, and the IDA share to rise to about 13 percent. Debt ser- vice payments to the Bank are about 13 percent of total debt service payments; the corresponding share for IDA is about 3 percent. These two figures are projected to rise to about 25 percent and 3 percent, respectively, by 1980. The debt service ratio of Bank loans to exports is expected to rise to about 2 percent by 1980. The Bank's exposure is high because several major donors are now making their aid available either on grant basis or very concessional terms and because as a result of prudent debt management suppliers' credits have been kept to a minimum. The average interest rate on loans to Tanzania outstanding at December 31, 1974 amounted to only -274 percent and the average term was 22 years. East African Community 12. The East African Community Corporations have experienced diffi- culties in recent years. While the 1967 Treaty for East African Cooperation is one of the most far-reaching and comprehensive economic cooperation agree- ments in existence among sovereign states in the developing world,-in practice, the degree of economic integration and cooperation among the Partner States is much less than what was envisaged in the Treaty. Political developments in the Partner States have created tension within the Community and impaired the growth of interstate trade. These difficulties have been compounded by the balance of payments constraints which all ti Fee Partnrer States experienced. 13. Of the Community Corporations, the East African Railways Corpora- tion (EARC) has been the most severely affected. As a result of long delays by the Partner States in approving increases in tariffs and restrictions on the interstate transfer of corporate funds, EARC was unable to order essential spare parts and supplies with the result that its operational capacity has deteriorated considerably. In July 1974, the Partner States agreed, with Bank assistance, on a package of financial measures to rehabilitate the EARC including interstate transfer of funds and injection of additional capital. However, this agreement was never fully implemented and as a  - 6 - result disbursements under Loan No. 674-EA (East African Railways III) were suspended in February 1975. A further meeting was held in July 1975 at which an agreement was again reached on formula for sharing of debt service payment by the Partner States, and suspension of the loan was lifted. 14. The Partner States recognized that because of their fundamental, political and economic differences, a review of the 1967 Treaty was called for. For this purpose a Commission has been established consisting of three Cabinet level officials from each country, with Mr. Demas, President of the Caribbear Development Bank, as Chairman. This Commission is expected to submit its reports by the end of 1976. While there is hope that the Commission may deal with the structural differences in the long run, the Corporations are still facing a difficult period. 15. Since February 1976 the relationship between the Partner States has further deteriorated. Arrangements for debt service payments were again disrupted resulting in long delay in making debt service payments to the Bank. Disbursements to the East African Railways Corporation, the East African Harbours Corporation, the East African Posts and Telecommunications Corporation and the East African Develop- ment Bank were suspended by the Bank on April 28, 1976. As the Executive Directors were informed on May 25, 1976 (SecM76-383), a mission visited East Africa in May to discuss with the Presidents and Finance Ministers the debt service problems which endangered both the Bank's operations in East Africa and the credit standing of the Community and the Partner States (being jointly and severally responsible). An Agreement was reached to ensure remittances from the Regional Offices of the Corporations to complete all overdue payments and these were made by June 1, 1976. Disbursements on the Community loans were, therefore, resumed with effect from June 1. Regarding future debt service payments, the Agreement (i) specifies fixed contributions by each Partner State to meet external debt obligations, (ii) commits the Governments to ensure remittances from the Regional Offices of the Corporation, (iii) establishes a mechanism and procedure for timely payments, and (iv) provides automatic foreign exchange cover for debt service remittances.  - 7 - PART II - BANK GROUP OPERATIONS IN TANZANIA 16. Tanzania joined the Bank, IDA and IFC in 1962. Beginning with an IDA credit for education in 1963, 23 IDA credits and nine Bank loans amounting to $349.8 million have so far been approved for Tanzania. In addition, Tanzania has been a beneficiary of 10 loans totalling $244.8 million, which have been extended for the development of the common ser- vices and development bank operated regionally by Tanzania, Kenya and Uganda through their association in the East African Community. The only IFC investments in Tanzania to date, totalling $4.7 million, were made in the Kilombero Sugar Company in 1969 and 1964. This Company encountered financial difficulties and in 1969 IFC and other investors sold their interest in the Company to the Government. Annex II contains summary statements of Bank loans and IDA credits to Tanzania and the East African Community organizations as of May 31, 1976 and notes on the execution of ongoing projects. 17. In keeping with Tanzania's overall development strategy our lending operations are increasingly focusing on the rural sector and directly productive projects. Up to the end of FY72 10 out of 14 loans and credits made directly to Tanzania had been for infrastructure. Of the 18 Tanzania operations approved since then all but four: Urban Sites and Services (Credit No. 495-TA), Highway Maintenance (Credit No. 507-TA and Education IV and V (Credits No. 371-TA and 607-TA), were for directly productive projects. These directly productive projects are supporting both the agiculture and industrial sectors, including the Kigoma Integrated Rural Development Project (Credit No. 508-TA) and our first direct lending for an industrial project (Mwanza Textiles, Loan No. 1123-TA). In addition, a tobacco processing project and a project to support selected industries at Morogoro are expected to be ready for consideration by the Executive Directors in the near future. A proposed second rural development project and a water supply project have recently been appraised in the field and negotiations for a second program loan were recently held in Dar es Salaam (see paragraph 10 above). 18. While it should be borne in mind that over one half of total Bank Group lending to Tanzania has been approved in the last two fiscal years and that initial start-up difficulties are perhaps inevitable, the project implementation difficulties referred to in Annex II of this report have been greater than anticipated. Some of these problems stem from the scarcity of suitably trained and qualified manpower, some reflect the understandable reluctance and apprehension of an essentially conservative traditional sector to adopt new "technology" and others are undoubtedly a reflection of the strains created in a society which is attempting a unique traverse from one set of economic, institutional and political rules to another. The Government has become extremely conscious of these  implementation issues and is taking steps to resolve these problems. An earlier reluctance to recruit technical assistance for planning and imple- mentation has been replaced by a willingness to utilize such assistance whenever it is demonstrably necessary. A technical assistance project designed to strengthen project preparation and implementation was recently approved by the Executive Directors. At the request of the Government about 10 technical staff have been supplied by the Agriculture Development Services (ADS) and a Bank staff member has recently been seconded to the Project Implementation Unit in the Ministry of Agriculture. In a longer term attempt to alleviate the human resource constraints our lending is expected to increasingly emphasize formal and non-formal training. Further- more, a conscious attempt is being made to develop less complex projects. 19. The difficulties facing the EAC and the common services corporations (paras 12-15 above) have affected the Bank's lending program to the Community. Yet while the exact form of the reorganized Community services remains to be determined, the development of the transport and communications infra- structure to facilitate national programs of the Partner States will continue to be an important aspect of the development of the three countries. We therefore anticipate a continuing role for the Bank in these sectors. Field appraisal of a fourth Posts and Telecommunications project has been completed and a Railways project and a EFarbours project will be ready for appraisal in fiscal year 1977. In each instance all organizational and guarantee questions will be resolved before conclusion of lending arrangements. PART III - THE RURAL SECTOR Rural Organization 20. In order to make the Government more responsive to rural needs and better able to promote rural development, the administrative structure and many of the functions of Government were decentralized to the 21 regions and nearly 80 districts in July 1972. The regions are now primarily res- ponsible for promoting and coordinating development programs within their respective areas. The relevant centralized functional ministries are responsible for providing necessary technical support. Each district and region is expected to have its own development plan and budget and to direct all development staff and activities within its jurisdiction. These development efforts include the establishment of publicly owned regional and district development corporations (DDC's) to engage in commercial activities. Although progress has been inevitably patchy, reflecting the local availability of the required expertise, the new structure has already demonstrated its potential to take initiatives and to more effectively promote development programs. It is also apparent that the lack of adequate support from the central technical ministries, for example, in the extension services  which generally lack adequate training and logistical support, is inhibiting the effectiveness of the regional development activities. 21. The Arusha Declaration of 1967 identified the ujamaa village as a means of effecting self-reliance and a community approach to develop- ment. The Government sees villagization as the only effective way to deliver essential economic and social services to a widely scattered rural population. In early 1974 the Government decided to rapidly increase the pace of villagization and it is currently estimated that about 70 per- cent of the rural population, almost 9 million people, are now villagized. While.production declines can be expected, almost all of the resettled farmers were evidently able to plant their crops; indeed they were required to do so by the Government. In some areas of the country, however, there has been, during the 1974/75 cropping season, a substantial shift away from cash or export crops, particularly from cotton to food crops. The Government has also relaxed its emphasis on communal farming in the new villages and farming on individual plots or "block farming" is the norm. The Government is aware that inadequately planned and poorly coordinated villagization has had a negative impact on agricultural production but the decision was made to complete the process in as short time as possible and the resettlement is now largely an accomplished fact. The long-term potential of the new villages remains of course to be seen. Increased demands for social as well as economic services may be anticipated, and indeed are already in evidence. The Government's ability to respond to these demands and to encourage the new vi14agLe-ceomunities to engaged in self-help activities when the Government cannot provide the services will be critical to the success of villagization. Fisheries 22. Tanzania has important fish resources in her territorial waters of Lakes Tanganyika and Victoria. Smaller quantities are available in various other inland lakes and swamps. In addition, the coastal waters of the Indian Ocean are capable of greater exploitation that is presently undertaken. Lake Tanganyika, reported to be the second deepest lake in the world, has large relatively-unutilized stocks of fish and offers excellent prospects for the development of these resources. Preliminary surveys indicate a standing stock of about 2.5 million tons of which about 30 percent could be harvested annually without detriment to the standing stock. Only 2 percent of the standing stock is harvested today. The main fish include 2 species of sardines (dagaa and lumbo) and three species of nile perch and various predators. Dagaa is the most important fish, making up more than 75 percent of the catch in both the traditional and commercial sectors. Some 13,400 fishermen make a living of fishing often supplemented by subsistence farming. 23. Lake Victoria, the world's second largest lake, also appears to have fairly large fish resource, but in contrast to Lake Tanganyika, Lake Victoria is already heavily exploited especially in the shallow  - 10 - waters. Preliminary data indicates that an annual sustainable yield of about 200,000 tons may be possible while the total catch of fish from the Lake averages only about 40,000 tons, most of which come from the shallow waters. Any further increase in the catch would, however, have to be restricted to waters outside those now being fished, and before undertaking this effort, a better data base needs to be developed. 24. The 550 mile coastline of mainland Tanzania has a narrow continental shelf which drops off sharply after a depth of about 60 meters. The most important shell-fish is shrimp, which is found in the more shallow waters of up to 20 meters deep. The most important table grade fish, caught by trawling, are red snapper and flat fish. The sus- tainable yield appears to be higher than the present catch. However, much research remains to be done on the future potential for marine fishing off the coast of Tanzania. 25. About 25 percent of total fish production comes from marine fishing, the rest from inland lakes and fresh water resources involving in total some 40,000 traditional fishermen and about 3,000 commercial operators. The marine fish are generally sold fresh while inland production is sold both fresh and sun-dried. The traditional method of preserving fish by sun-drying on the beaches has certain shortcomings and large quantities of fish are spoiled by rains and insect infestation. However, the quality of dried fish can be improved by the provision of covered drying racks and lowering the level of insect infestation. This can result in an extension of the period for which such fish can be preserved from one month to three months. Although fresh fish is generally preferred, dried dagaa is consumed widely in most parts of Tanzania and is in some places a basic staple of the diet. Fish consumption varies greatly in Tanzania ranging from 46 kg a year per person in the lakeshore regions to less than 1 kg in some inland regions reflecting the fact that only about 5-10 percent of current fish production enters commercial markets. Both the wholesale and retail fish trade are almost entirely in the hands of private traders although some wholesaling of fresh fish is carried out by the National Cold Chain Organization. Unlike most other prices of consumer goods in Tanzania prices of fish are not subject to Government control. Development Strategy 26. Tanzania's development strategy has given high priority to agri- cultural development and more recently food production. As part of this strategy, renewed attention is being given to the fisheries subsector  - 11 - as a means of supplying badly needed protein in the diets of those living in the rural areas. The strategy that is emerging emphasizes the development of both the traditional and modern sectors. In an effort to generate a relatively quick production response the establishment of a limited number of publicly owned commercial ventures utilizing relatively capital intensive fishing and processing techniques is being encouraged. Meanwhile, in an attempt to establish a long term basis for the develop- ment of the traditional fishing, various pilot programs are being estab- lished. In order to significantly increase fish consumption the Government also recognizes that the marketing system has to be greatly strengthened. The Government is presently initiating studies designed to formulate the basis for a coherent long term marketing development program. 27. The fisheries sector is serviced by the Fisheries Division of the Ministry of Natural Resources. This division administers an extension service organized on a regional and district level with policy direction and technical support provided by the Ministry. There are about 600 extension staff nominally engaged in fisheries extension and development work but many of them lack adequate training and equipment. To support the development of commercial fishing in Tanzania, the Tanzania Fisheries Corporation (TAFICO) was established in 1974. TAFICO is also in charge of boat building and net making programs and is operating several boat- building yards. The boat building program is intended to produce appro- priate sizes of types of sea worthy fishing boats and is linked with the Government's policy to increase fishing production by replacing inadequate boats. The Corporation has limited staff and resources and will require considerable technical assistance to enable it to carry out its respon- sibilities. Credit to fishermen is available through a number of insti- tutions, mainly the National Bank of Commerce, Tanzania Investment Bank and the Tanzania Rural Development Bank (TRDB). TRDB has been the channel for all Bank Group supported credit operations in the rural sector. Although arrears in loan repayments have risen faster than anticipated, it is con- sidered to be a generally sound and well managed institution. TRDB is presently recruiting and training additional credit supervisors in an attempt to strengthen loan administration. 28. A two-year Diploma course for fisheries officers and extension workers is presently available at the Kunduchi Training Institute. The course includes three months field work each year; total enrollment is about 40 students. In addition, a vocational training institute, supported by NORAD, will soon be operational at Mbegani which will provide, among others, courses in marine diesel mechanics, fishing techniques, wooden boat building, general mechanics and refrigeration and marine engineering. Some on-the-job training is also provided at TAFICO boat yards. In addition, several fisheries officers are receiving overseas training under bilateral assistance program.  - 12 . PART IV - THE PROJECT 29. The proposed project would support the Government's strategy for the development of the subsector by helping to expand the capacity of the commercial sector in the short and medium run and by helping develop a basis for the longer term improvement of traditional fishing at the village level. The proposed project was appraised in July 1975 and negotiations held in Washington from February 23 to 26, 1976. The Tanzania delegation was headed by Mr. Mutalemwa, Commissioner for External Finance, Ministry of sn>rtnce and Planning. An appraisal report entitled Tanzania Fisheries Development Project (Report No. 963a-TA ) dated March 8, 1976 is being circulated separately to the Executive Directors. A Credit and Project Summary is provided as Annex III to this report. 30. The proposed project would represent the first stage of a long- term program to develop fisheries production in Tanzania. It would, over five years, support the establishment and development of commercial fisheries at selected centers, improve fishing techniques and marketing data and pro- vide the basis for the long-term fisheries development of the traditional sector by supporting a pilot fisheries program for ujamaa villages on Lake Tanganyika. Specifically, it would provide: (a) development of three marine fishing centers and one lake center at Kigoma; (b) establishment of a pilot ujamaa fisheries program at Lake Tanganyika; (c) provision of appropriate transport facilities on Lake Tanganyika; (d) a study to assess the market potential for expanded pro- duction of dried dagaa and an investigation into the effect of chemical pollution on the life cycles of fish in Lake Tanganyika and to examine potential catch rates and market prospects for haplochromis from Lake Victoria; and (e) technical services and future project preparation. Fishing Centers 31. The four fishing centers -- three along the coast and one on Lake Tanganyika -- would be established in an effort to increase the size of the catch presently achieved and to improve processing and marketing techniques. These fishing centers would be owned and operated by joint venture companies formed by TAFICO (paragraph 27 above) and local District Development Corporations (DDC) (paragraph 20 above). It is expected that  - 13 - each of the fishing centers on the coast would be provided with 10-meter fishing boats equipped with easily maintainable engines. Qualified crews for these boats would be recruited from the local communities and from the training school at Mbegani (paragraph 28 above). The Lake Tanganyika Fishing Center would be established at Kigoma. About 10 commercial boats, improved in design compared to the ones now operating on the Lake, would be provided at the center. Other required investments would include covered drying racks, cold storage facilities, vehicles, equipment and building. Uiamaa Fisheries Program 32. About 90 percent of the total annual catch in Tanzania is produced by 40,000 fishermen using traditional techniques. The longer term develop- ment of this sector is therefore dependent on the articulation of programs and techniques designed to help these fishermen. There are now at least 100 villages along the shore of Lake Tanganyika, and of these about 20 are in various stages of ujamaa development. Most of the villagers are poor and depend on fishing for a large part of their subsistence. Fishing techniques vary from village to village, but most of the fishermen work from theshore at night using canoes and some form of light to attract the fish. Some of them are familiar with beach seines, although many do not have the resources to purchase them. Catamarans and trimarans fitted with lift nets have been successfully used by Burundi fishermen and recently the UNDP/FAO supported Lake Tanganyika Research and Development Project at Kigoma had some success with this fishing method. However, some concern has been expressed that because of differences in currents and winds along the Tanzania's shore these vessels may not be suitablefor Tanzania waters duriilg parts of the year. The Research and Development Project is conducting research into the fish resources of Lake Tanganyika and into fishing methods and would cooperate closely with the ujamaa fisheries program. 33. The pilot fisheries program would be first initiated in a few villages near Kigoma, and would be gradually expanded to include about 20 ujamaa villages. Credit would be provided to each participating village for the purchase of boats equipped with the necessary nets and other fishing gear. The fish caught would be dried on the shore on covered drying racks financed under the project, and then transported either by truck or over the Lake to the railroad at Kigoma for onward distribution to other parts of the country. This component has been designed to have considerable flexibility both with regard to fishing techniques and village organization. It is designed to provide increased opportunities for village fishermen to improve catching methods, organization and market outlets. The program build up would be carefully phased in order that the benefits of learning by doing are maximized. It is expected that the village fishing boats would, at least in the initial stages, be of standard FAO design and provided with 10 hp inboard engines. However, the techniques would be adjusted in the light of experience and the results of the work of the UNDP/FAO project. While the fishing methods proposed are relatively simple and the drying methods are traditional, combining and managing the elements of catching, processing, transportation and marketing may prove to be complex in the village context.  - 14 - 34. An internationally recruited fisheries specialist would be employed by the Ministry of Natural Resources. He would maintain close liaison with the Kigoma UNDP/FAO Center as well, as with the training centers at Kunduchi and Mbegani (paragraph 28 above) and would train local extension staff. The extension workers would be organized into three mobile fishing units, who would be responsible for advising and supporting the village fishing units. The specialist would, in cooperation with the UNDP/FAO project, would also be responsible for the investigation of alternative fishing techniques for possible inclusion in the ujamaa program. Lake Transport 35, As many of the ujamaa villages along the shores of Lake Tanganyika are not served by any roads becauise of the precipitious cliffs and extensive mountains and as the roads to many others are extremely poor, the project would include provision for necessary lake transport facilities (barges and tugs) to allow the villages to transport dried dagaa to Kigoma. The trans- port facilities would also be used to distribute basic supplies to these villages and would help strengthen the presently inadequate transport facilities. Market Study and Investigation of Chemical Pollution 36. No difficulty is expected in marketing the project output. However, project production would represent a significant proportion of the 5 to 10 percent of fish production which presently enters commercial markets. Because of this and, in view of the value of fish as a source of protein and given Tanzania's vast unexploited fish resources, a two-year market study would be undertaken to assess the market prospects for increased production of both fresh and dried fish. Terms of reference for the study would be prepared by the Ministry of Natural Resources, and the Ministry would ensure coordination of this work with the research work now being carried out by the Food and Nutrition Board and the University of Dar es Salaam. Prior to initiation of the study, the detailed proposals would be submitted to IDA for comment (Section 3.09 draft Development Credit Agreement). The study would concentrate on an assessment of the market prospects for increased production of dried dagaa from Lake Tanganyika, but it would also include a small component to examine potential catch rates and market prospects for haplochromis from Lake Victoria.  - 15 - 37. An increasing volume of agricultural chemicals is being used on lands bordering Lake Tanganyika, and as the lake has no significant outlet, concern has been voiced that unacceptable levels of these chemicals may begin to accumulate in both the waters and the fish therein. Since DDT is known to affect the reproductive cycle of some animals, it is possible that fish stocks may be affected by excessive DDT levels at some time in the future. Consequently, funds would be provided under the project for a study to investigate the effects of increasing levels of chemical pollution on the life cycles of fish in Lake Tanganyika. Terms of reference for the study would be prepared by the Ministry of Natural Resources and would be submitted to IDA for comment before award of the research contract (Section 3.09 draft Development Credit Agreement). Both the marketing and pollution studies are expected to be carried out by Tanzanian institutions. Technical Assistance 38. The project would be the Government's first major comprehensive investment in the fisheries sector. As such and in order that a sound basis for future development of the sector can be established, there is a special need to ensure that the project is properly managed and closely monitored. Tanzania has had considerable experience in traditional fishing but is largely unfamiliar with'the newer more sophisticated techniques which would be introduced under the project. Furthermore, Tanzania's fishing insti- tutions (paragraphs 27 and 28 above) are still in a very formative stage. A substantial technical assistance component would therefore be included as part of the project. Technical assistance would be provided to assist the Ministry of Natural Resources and TAFICO in overall project planning and coordination, to aid in the establishment of the marine and lake fishing centers, to aid the ujamaa fishing program (paragraphs 32-36 above), and to carry out monitoring and evaluation of project activities. Specifically, this assistance would provide for the recruitment of nine internationally recruited staff (40&man-years at $48,500 per man year). The Government has already initiated contact with several countries, specifically Norway and Holland, to provide some of these staff on a grant basis. In the absence of firm arrange- ments support for these personnel would be included in the proposed credit. It would be a condition of credit disbursement for each project component that the critical technical specialists for that component had been recruited on terms and conditions satisfactory to the Association (paragraph 4, Schedule 1, draft Development Credit Agreement). Organization 39. The Ministry of Natural Resources would have overall respon- sibility for all project activities. In order to assist the Ministry with this task, a coordinating committee would be established to provide policy guidelines for the project. Members of the Committee would include: The Director of Fisheries of the Ministry of Natural Resources, who would also  be designated project coordinator, the General Manager of TAFICO, the two internationallv recruited project managers in the Ministry of Natural Resources and TAFICO (paragraph 38 above), the General Manager of TRDB, representatives from the Prime Minister's Office and from the Ministry of Finance and Planning, and the relevant regional development directors. It would be a condition of credit effectiveness that the coordinating committee had been established (Section 4.01(b) draft Development Credit Agreement). The fishing centers would each be managed by a joint venture company formed by TAFICO and the relevant District Development Corporation. The Lake transport facilities would be owned and operated by the joint venture company to be established at Kigoma. The National Cold-Chain Organization (parag- raph 25 above) would collect fresh fish daily from the coastal fishing centers for distribution by truck or rail to the main markets at Tanga and Dar es Salaam. The fish from Lake Tanganyika would be marketed by the Kigoma joint venture company through existing channels. Fish would be distributed to Kigoma and to Tabora, Dodoma, Dar es Salaam and other towns which are easily reached along the line of rail. Since Kigoma joint venture company would be the major buyer of the dagaa produced by ujamaa cooperatives, TAFICO, as the prime joint venture partner, would exchange views with the Association from time to time on the price paid for dagaa to the ujamaa cooperatives. The market and pollution studies would be carried out under the direction of the Ministry of Natural Resources by Tanzanian institutions (paragraph 37 above). 4C. As the pilot ujamaa program on Lake Tanganyika is experimental it would be carefully phased and monitored. The program would be managed by TRDB in conjunction with the regional fisheries extension service and the Ministry of Natural Resources. TRDB would draw up a detailed program, including the selection of villages, training of boat crews and marketing arrangements, which would be submitted to the Association for review before any sub loans were approved (Section 3.05 draft Development Credit Agreement). The bertower would every six months, or more often if needed, exchange views with the Association on the details of the ujamaa training program and on the investigation of alternative fishing techniques (Section 3.12 draft Development Credit Agreement). Cost and Financing 41. The total cost of the project, including import taxes and duties (which are insignificant) is estimated at US$12.4 million. The foreign exchange component would amount to US$7.0 million or 57 percent of total costs. Details of project cost are included in Annex III. The proposed IDA credit of S9.0 million would finance the foreign exchange component as well as $2 million of local costs. Financing of some local costs is considered justified for the reasons given in paragraph 10 above. The joint ventures and ujamaa villages together would contribute about $1.2 million or 10 percent of total costs and the Government would provide the remainder of about $2.2 million or 18 percent of total costs.  - 17 - Onlending and Channeling of Funds 42. Approximately $5 million of the proceeds of the credit would be channeled by Government to TRDB at 4 percent interest per annum for 20 years with a 4-year grace period on interest and capital repayments under a subsidiary loan agreement the terms and conditions of which would be acceptable to the Association (Section 3.13 draft Development Credit Agreement). TRDB would onlend these funds to the joint venture companies and ujamaa villages at8