Benin - Technical Assistance Project

FILE COPY Document of The World Bank FOR OFFICIAL USE ONLY Report No.?-2040-BEN REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE PEOPLE'S REPUBLIC OF BENIN FOR A TECHNICAL ASSISTANCE PROJECT May 5, 1977 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 Currency Unit: CFA Francs (CFAF) US$1.00 = CFAF 245 CFAF 1 million = US$4,081 FISCAL YEAR January 1 - December 31 System of Weights and Measures : Metric Metric US Equivalents 1 meter (m) 2 3.28 feet (ft) 1 square meter (g ) 10.8 square feet (sq.ft.) 1 cubic meter (m ) 35.3 ·cubic feet (cu.ft.) 1 kilometer (km) 2 0.620 mile (mi) 1 square kilometer (km) 0.386 square mile (sq. mi.) 1 hectare (ha) 2.47 acres 1 metric ton (t) 2,204 pounds (lb) ABBREVIATIONS AND ACRONYMS CARDER - Centre d'Action Regionale pour le Developpement Rural FAC - Fonds d'Aide et de Cooperation FAS - Fonds Autonome de Stabilisation et de Soutien des Prix des Produits Agricoles FED - Fonds Europeen de Developpement IITA - International Institut of Tropical Agriculture IRAT - Institut de Recherches Agronomiques Tropicales et des Cultures Vivrieres IRCT - Ins.titut de Recherches du Coton et des Textiles Exotiques SONACEB - Societe Nationale pour Commercialisation et Exportations du Benin SONADER - Societe Nationale pour le Developpement Rural du Dahomey SONACO - Societe Nationale Agricole pour le Coton SONAGRI - Societe Nationale pour la Production Agricole MDRAC - Ministere du Developpement Rural et de 1 Action Cooperative FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE PEOPLE'S REPUBLIC OF BENIN FOR A TECHNICAL ASSISTANCE PROJECT I submit the following report and recommendation on a proposed development credit to the People's Republic of Benin for the equivalent of US$1.7 million on standard IDA terms to help finance a technical assistance project. FAC (Fonds d'Aide et de Cooperation) would provide co-financing for the project in the form of a grant of US$0.7 million. PART I - THE ECONOMY 1. There has not been any economic mission to Benin recently, although a mission to review Benin's next plan is scheduled for later this year. Annex I contains basic country data. The last economic report (Report No. 191a - DA) entitled "Economic Situation and Prospects of Dahomey" was issued on August 20, 1973. The following analysis is based on information gathered by the 1975 IMF Article XIV consultation mission and by various Bank missions that visited Benin in the course of 1976 and early 1977. Past Development 2. With a GDP per capita of only US$140, Benin is classified by the UN as one of the world's 25 least developed countries. It is an overwhelm- ingly rural nation: 80 percent of the population is dependent on agricul- ture which accounts for 30 percent of GDP and 90 percent of foreign exchange earnings. Insufficient and irregular rainfalls limit the production of high value tree crops. Seventy percent of the total agricultural output consists of subsistence low-value root crops (yams and cassava). Palm oil, cotton and groundnuts are the country's major export crops. GDP per capita in the rural sector is very low, averaging about US$50. 3. Transport and commerce are the second most important activities in Benin. The port of Cotonou has traditionally been the door to the sea for land- locked Niger and a transit port for the western part of Nigeria. A large share of the imports of consumer goods (beverages, tobacco, radios, etc.) and ex- ports of agricultural products registered as Benin trade, is in fact unofficial border trade to and from Nigeria. Due to the recent congestion of the port of Lagos, the transit function of the Cotonou port has further developed. In 1976 it is estimated that about half of the port's total traffic (960,000 tons) originated in or was destined for neighboring countries (30 percent to Niger and 20 percent to Nigeria). Transport and commerce generate about one third of Benin's GDP (at factor cost), account for 10 percent of its foreign exchange earnings, and employ about 12,000 persons. This document has a restricted distribution and may be used by recipients only in the performance of their offcial duties. Its contents may not otherwise be disclosed without World Bank authorization. - 2 - 4. The country has an embryonic industrial sector and the known mineral resources - limestone and phosphate - have not yet been exploited. There are plans to start exploiting the Onigbolo limestone deposit in the near future. There are also indications of the existence of oil offshore. Political Situation and Recent Economic Development 5. Since independence in 1960, there have been numerous changes of Government. This instability has been due in part to regional and ideological differences. A major turning point occurred at the end of 1974, when the military Government that had been in power since 1972, decided to establish a Marxist-Leninist system. The declaration of the new regime was accompanied by measures aimed at decreasing foreign influence and increasing the country's self-reliance. Nationalization of foreign private interests in key sectors (banking and credit, gasoline distribution, services related to the port and industry) took place and the various technical assistance programs were scaled- down. These measures disrupted the economy, since there was an inadequate number of Beninese to replace the departing expatriates. The situation was further aggravated by drastic changes in the public service which resulted in further losses of productivity. 6. The agriculture sector was affected by these developments which lead to a deterioration of support services, especially input distribution. Furthermore the Government's pricing and marketing policies did not provide enough incentive to farmers, being mainly guided by the Government's desire to keep the cost of living and the level of salaries low in the urban centers. Production of most agricultural products stagnated during 1974-76 and cotton production dropped sharply from 50,000 tons in 1972/73 to less than 20,000 tons in 1975/76. Maize production was also affected by the Government's decision to prohibit maize exports by private traders to Nigeria, a tradi- tional outlet for Benin. The Government intends to establish a state grain trading monopoly. 7. The Government decided in 1976 to implement measures aimed at encouraging farmers to produce more. Farmgate prices were increased to generally more satisfactory levels for the 1976/77 season. Farm inputs were distributed on time for the first time in four years. Preliminary results for the 1976/77 season are, however, not encouraging. The farmers' response has been limited. Low rainfall also contributed to a further decrease in output. 8. In the modern sector, transport and other economic activities have been stimulated by the rapid growth of transit trade with Nigeria. Transport was the only growing sector in Benin over the 1971-75 period. In 1976, the Government took further measures to improve the port's handling capacity which had fallen to a low 12 tons/hour in 1975 as opposed to 23 tons/ hour in 1972/73. To attract Nigerian traffic away from the congestion at -3- the Lagos Port, border formalities are being simplified. The ad valorem transit tax of 2.08 percent on the Nigerian traffic has been dropped. 1/ A study of the feasibility of extending the port facilities is underway. The Government of Nigeria is financing the coastal expressway linking Cotonou with the N4gerian border, to be completed in 1977, and is planning to build several other roads linking the western part of Nigeria to the Benin-Niger axis. 9. Public investment in recent years has been at a low level. Total gross investment is estimated to have stagnated at about $50 million per year over the 1971-75 period, (i.e. a low $16 per capita compared with US$32 in neighboring Togo and $89 in the Ivory Coast), while public investment is esti- mated to have averaged about US$25 million per year, (i.e. also a low US$8 per capita compared to US$27 and US$55 in Togo and the Ivory Coast respec- tively). Public investments were concentrated in road infrastructure and agriculture. Benin has not had a national plan since 1972, but the Govern- ment is now working on the preparation of an interim 3-year plan covering the 1977-79 period. 10. While Benin has not been successful recently in spurring economic growth, it has maintained a strict financial orthodoxy. The Central Govern- ment's current budget, which was in chronic deficit during the sixties (requir- ing support from France until 1970), has been in equilibrium since then, even generating a small surplus of about 7 percent of current revenues between 1971 and 1975. This was achieved through an austerity policy of freezing civil servants' salaries, which have not been increased for 10 years, and limiting expenditures on materials. Revenues (in real terms) increased very little due to the zero growth of the economy. 11. Benin has succeeded in maintaining the equilibrium of its balance of payments despite the sharp deterioration of its trade balance, the deficit of which increased to US$40 million in 1974/75 (11 percent of GDP). The improvement of the service account, due to increased transit shipments to Nigeria, helped to compensate for this. At the end of the first quarter of 1976, Benin's net foreign exchange reserves amounted to only US$16.5 million, i.e., the equivalent of one month of imports. 12. Recent trends in the agricultural sector have inevitably resulted in a growing gap between the incomes of the urban population and the farmers, some of whom shifted back to subsistence crops. The cash income of farmers is estimated to have declined by 50 percent between 1972 and 1976. I The resulting loss of tax revenues is negligible compared with the incremental value added created by the development of the Nigerian traffic. -4- Prospects 13. Benin's economic prospects are for only limited growth. GDP is not expected to grow by more than 3 to 4 percent per annum over the next decade, assuming perseverance with the recent efforts to improve the economic situa- tion. The measures taken in 1976 mark an improvement in economic policies. The proposed technical assistance project, which would help the Government strengthen agricultural institutions and prepare a long-term development program for the Zou-Borgou area, is a reflection of this. 14. Cooperation with Nigeria could become a major factor for Benin, since Nigeria could provide what Benin lacks most, a neighboring large market and a financial base. The two countries are already associated in the extension of the Cotonou clinker grinding plant (100,000 tons) to be completed in early 1978. They are also considering joint investment in a project to produce 40,000 tons of refined sugar at Save for the Nigerian market; and a cement plant based upon the Onigbolo limestone deposit producing between 500,000 tons and I million tons per year. The implementation of these proj- ects could considerably improve the balance of payments outlook for Benin given adequate price and marketing guarantees by Nigeria. 15. The stimulation of Benin's economy implies an increase in public investment to at least US$50 to US$60 million per year, in constant 1977 prices, in the late seventies and early eighties. Such a program, in view of the limited local financial resources, would have to be financed, as in the past, mostly by foreign aid. Public savings will continue to be limited, especially in view of Government's decision to increase civil service sal- aries starting January 1977, which will result in a 15 to 20 percent increase in the Government's wage bill. 16. Benin's total external debt was relatively high at the end of 1975, amounting to US$160 million, or about 40 percent of the country's GDP. External public debt service amounted to about 10 percent of the country's exports in 1975/76. This constitutes a relatively high burden for Benin considering its poverty and limited foreign exchange earnings possibility. Debt service as a share of Government revenues is probably substantially higher. 17. Given Benin's extreme poverty, limited development prospects, dif- ficulty in mobilizing domestic resources, and relatively high debt service ratio, foreign donors should continue to provide aid on the softest possi- ble terms and also to cover a high proportion of local costs if necessary. In any case the volume of external aid to Benin is likely to be limited until a greater effort is made by the authorities concerned in project pre- paration and implementation. - 5 - PART II - BANK GROUP OPERATIONS IN BENIN 18. To date the Bank Group has extended 5 credits to Benin, totalling US$39.6 million. Two of the Credits were for agriculture (2Q percent of total lending) and two for highway construction and maintenance (61 percent). The fifth and most recent operation was an education project with a large rural training component. Annex II contains a summary statement of Bank Group operations in Benin as of March 31, 1977, as well as notes on the execution of ongoing projects. 19. The Hinvi Agricultural Development Project (1969) which financed the construction of an oil palm mill as well as palm plantings and food crop improvement, was IDA's first operation in Benin and has been completed satis- factorily (see para. 29). IDA's second involvement in agriculture in Benin was the Zou-Borgou Cotton Development Project (1972). The project failed to achieve its objectives for the reasons given in paras. 30-39. 20. The Bank Group's involvement in the transport sector began in 1960, when the Bank acted as Executing Agency for a UNDP "Land Transport Study". This study led to the financing of a four-year highway maintenance project in 1970, successfully completed in 1974, followed by a Second Highway Project in 1973. The Second Highway Project, co-financed by USAID, which comprises principally the reconstruction of 320 km of the Parakou-Malanville road, Benin's most important North-South trunk road, and the continuation of the road maintenance program, is progressing satisfactorily. However, severe cost overruns due to inflation and unforeseen technical difficulties led the Association in FY76 to provide a supplementary credit of US$9 million. 21. The first Education Project, which became effective in 1976, pro- vides for the improvement of the ongoing rural youth training program, and the construction and equipping of a skills upgrading center in Cotonou. The project also includes a preinvestment study for a follow-up training/ education project. The project is progressing on schedule. 22. Another IDA operation expected to be presented to the Board on the same day as the proposed project, is a feeder road project designed to support agricultural development and to strengthen the institutional framework for the improvement and maintenance of the feeder road network. IDA is also consider- ing financing a Third Highway Project, to be submitted to the Board within the next few months, and a project for the extension of the port of Cotonou for the preparation of which IDA has already advanced $500,000 under the Project Preparation Facility. IDA's future involvement in the agriculture sector will depend very much on the outcome of the proposed technical assistance project. PART III - THE AGRICULTURE SECTOR Background 23. Benin may be broadly divided into northern Sudanian and southern Guinean type climates. The annual precipitation ranges, on average, from 1,300 mm in the South to 900 mm in the far North, although there are wide- spread local fluctuations and differences from year to year. Rainfall is generally insufficient for coffee, cocoa and rubber, and oil palm yields are lower than in neighboring countries. However, favorable climatic conditions exist for the cultivation of food crops, cotton and groundnuts. The quality of soils is generally mediocre throughout the country, and in the South there are signs of soil depletion due to over-cropping. Benin has an estimated 9 million ha suitable for cultivation. Of this area only about 1.1 million ha are cultivated. The agricultural population is about 2.1 million, mainly smallholders cultivating about 2.5 ha per family. In the North, a substantial area of potentially productive bottomland is left uncultivated because of onchocerciasis. 24. Benin produces about 1 million tons of yams and cassava and 320,000 tons of cereals (including 210,000 tons of maize and 90,000 tons of sorghum/ millet). Rice production, although relatively modest (15-20,000 tons), has developed rapidly in recent years. The country produces a surplus of maize which is exported to Nigeria through border trade while at the same time it imports about 5,000 tons (18,000 tons during the drought years 1972 and 1973) of wheat and rice mostly for urban consumption, i.e. about 3 percent of total cereal consumption. Export crops consist of unshelled groundnuts (40,000 tons), seed cotton (20,000 tons in 1975 and 1976), and palm oil (25,000 tons). The country's main sources of foreign exchange earnings are oil palm products (about one-third of total exports including border trade with Nigeria), followed by cotton and groundnuts. Livestock is important in the North, but Benin is a net importer of about 10,000 head of cattle annually from Niger. Organization 25. The organization of the agriculture sector, which was entirely changed in 1975, is now as follows. The Ministry of Rural Development and Cooperative Action (MDRAC) is responsible for policy matters and coordination in the agricultural sector. It comprises six directorates for agriculture, livestock, fisheries, rural engineering, forestry and planning. The Ministry of Rural Development and Cooperative Action also coordinates the activities of six Regional Action Centers for Rural Development (CARDERs) responsible for regional agricultural development (extension work, credit delivery and primary marketing of cotton and food crops) and seven crop-oriented state agencies of which SONAGRI (National Company for Agricultural Development) is one of the most important. SONAGRI is responsible for providing management and technical support to the CARDERs and also for cotton ginning operations. The National Company for Marketing and Exports, controlled by the Ministry of Finance, has the monopoly for the export of all agricultural products. - 7 - 26. Benin has been relying on French aid to carry out research, essentially the Institute of Tropical Agronomic Research and Food Crops (IRAT) for food crops, and the Institute of Cotton and Exotic Fiber Research (IRCT) for cotton. In February 1977, the Government created a national re- search agenc, in the Ministry of Rural Development and Cooperative Action to supervise all research activities in Benin, with continuing French support. 27. There are no well-defined sectoral objectives for agriculture in Benin. The Government's traditional policy in agriculture is directed to- wards encouraging the development of industrial export crops such as oil palm, groundnut and cotton. To capitalize on the country's good potential for food crops, the Government also aims at increasing cereal production to meet the growing demand from urban centers in Nigeria. The Government's policy on the organization of agricultural production is not clear. Several attemps have been made to create large collective farms but by and large it is assumed that individual small farms will prevail. Producer cooperatives remain limited, although the grouping of farmers was one of the most success- ful achievements of the Zou-Borgou Project. 28. Public investments in the agricultural sector have remained at the relatively low level of $10 million per year during 1971/75. The two projects jointly financed by IDA and FAC, the Grand Hinvi Oil Palm and Zou-Borgou Cotton Development, represented about half of the overall agriculture invest- ment over the 1971-75 period. FED has been another important source of financing. Because of the lack of well-prepared projects, agricultural investment is not expected to increase substantially through the early eighties. The Hinvi Agricultural Development Project 29. The project, which dates back to 1969, aimed at establishing 6,000 ha of oil palms, preparing 6,000 ha for annual crop production, constructing an oil mill, and developing tree plantings and beef production. Development was organized through cooperatives, and the project managed by the National Rural Development Agency of Dahomey. Oil palm plantings were completed as scheduled in 1970, but two consecutive years of drought have delayed the growth of trees. Because of limited rainfall, yields are expected to be only about 80 percent of appraisal estimates. While only 1,500 ha of food- crops were planted, the project has been successful with respect to the in- troduction of ox-traction, and the strengthening of the project agency. The future of the cooperatives is compromised by financial difficulties and low producer prices. The mill which started operation in 1974, one year behind schedule, is running satisfactorily. Zou-Borgou Cotton Development Project 30. The main objective of the project was to increase seed cotton pro- duction in the Zou and Borgou provinces from 25,000 tons in 1970 to 56,000 tons by 1974, through increasing the areas under cotton from 29,000 to 59,000 ha, and the number of growers from 29,000 to 41,000. The productivity of other crops grown in rotation with cotton was to be improved through the residual effects of fertilizers applied to cotton. - 8 - 31. The project was to comprise the provision of staff and equipment to the National Agricultural Company for Cotton (SONACO) to administer agricul- tural extension, credit and primary marketing services; the establishment of a revolving fund to supply short and medium-term credit to cotton growers; construction of two new ginneries; rehabilitation of 620 km of feeder roads; applied agronomic research; and a feasibility study for agricultural diversi- fication in the project area. The original concept was to have the National Agricultural Company for Cotton responsible for the planning and supervision of extension work carried out by two French consulting firms. The ginning of raw cotton and marketing of lint and cotton seed was entrusted to CFDT 1! under a joint venture agreement with the Government. The project cost was estimated at $12.7 million with IDA financing $6.1 million, FAC $3.1 million and the Government $3.5 million. 32. The project initially reached appraisal production estimates for seed cotton. In 1973 production reached 19,000 tons in Zou and 23,000 tons in Borgou, with yields of 1,100 and 1,200 kg/ha respectively. However, this pace was not sustained because of institutional problems which led to the direct control of the marketing of cotton and management of extension ser- vices, and low producer prices. In 1973, the Government decided to take over cotton marketing and all ginning facilities from CFDT and make the National Agricultural Company for Cotton directly responsible for the organi- zation of extension work, and the National Company for Marketing and Exports responsible for the marketing of cotton lint and seed. IDA agreed to these changes after the Government agreed to maintain expatriate technical assis- tance. However this was phased out faster than expected. Consultants were asked to withdraw in 1974 and 1975, although the Government did not have adequate staff to replace them. Government also decided to shift key proj- ect extension personnel from one region to another and from one service to another, thus disorganizing extension work. 33. At the end of 1975, Government set up the CARDERs and turned the National Agricultural Company for Cotton into SONAGRI whose functions are spelled out in paragraph 25. This resulted in coordination problems with the CARDERs, the production agencies. In addition, SONAGRI suffered from financial problems since the Government did not pay its contribution to project costs in 1974 (US$1.6 million), and has not repaid SONAGRI for the subsidies granted to farmers since the beginning of 1974. The Government has given assurances that the $1.6 million would be paid to SONAGRI during 1978 in three equal payments, the first of which would be made not later than March 31, 1978 (Development Credit Agreement, Section 4.03(b)), and that FAS (Autonomous Support Fund) would reimburse SONAGRI for the unpaid 1/ CFDT is a company which, in accordance with the Credit Agreement, man- aged its own and the Government's ginneries in the project area, and supplied technical and marketing services to the Project. - 9 - subsidies before the end of September 1977 (Development Credit Agreement, Section 4.03(a)). The Government also agreed to include in the "bareme" paid to SONAGRI, in addition to production and operating costs, the amount of input subsidy (Development Credit Agreement, Section 4.03(c)). 34. The Government pricing policy also acted as a disincentive. Cotton producer prices were too low in both absolute terms and compared with ground- nuts and maize to make cotton attractive to the farmers, until the 1976/77 season, when they were raised to CFAF 50/kg. This together with the organi- zational changes, affected the farmer's confidence in the project. As a re- sult there has been a sharp decline in cotton production in the project area from 42,000 tons in 1973 to 17,600 tons in 1975 and perhaps less in 1976. Yield and quality have also deteriorated. This has resulted in heavy losses to the economy estimated at US$10 million for 1974 and US$25 million for 1975 and 1976, i.e. about 10 percent of Benin's annual foreign exchange earnings. 35. No reliable data are available on foodcrops, but their production is believed to have suffered from attempts to restrict the traditional border trade with Nigeria. 36. Other components of the project were implemented more successfully. The Glazoue ginnery financed under the project is operating satisfactorily. A proposed second ginnery was not built since cotton production never reached the expected level. A nonquantifiable but important benefit has been the organization of effective farmer groups. These groups operate like small cooperatives and some of them have demonstrated their ability to handle pri- mary cotton marketing and to organize the distribution of farm inputs. The project has also been successful in expanding the production of rice and hybrid maize and introducing ox-drawn cultivation. SONAGRI (formerly SONACO) has maintained its activities reasonably well, especially the operation of the ginneries. Accounting procedures are being improved, and the 1975 and 1976 accounts were properly audited. However the feeder roads con- struction program had to be reduced from 620 km to 450 km because of cost overruns. 37. In 1973, a Government delegation visited Washington to seek IDA's agreement to the then proposed organizational changes. Later, with IDA's agreement, the Government entered into a new technical assistance agreement with CFDT. Upon the creation of the CARDERs in 1975, another delegation came to Washington and it was agreed that the newly created SONAGRI should be strengthened by certain key appointments, its accounts audited, its rela- tionship with the CARDERs more clearly defined and the Government's pricing and marketing policies made more growth oriented. Measures taken since then have been responsive to these agreements except with respect to marketing policies. 38. The Credit Agreement provided for IDA financing of the purchase of incremental inputs for 1973 and 1974. However, a portion of the funds allo- cated for this purpose were left undisbursed at the end of the period con- cerned. In early 1977, the Association decided to disburse this amount, - 10 - together with the funds originally allocated for the second ginnery and the unallocated funds, a total of $1.1 million, for expenditures for fertilizers and pesticides purchased for the 1974 and 1975 seasons. This decision was made despite the problems encountered by the project, to enable SONAGRI to maintain the area presently under cotton production. PART IV - THE PROJECT 39. The proposed project was identified by an IDA mission in May 1976. An appraisal mission visited Benin in October 1976, and a follow up appraisal took place in February 1977. Negotiations were held in Washington from April 20, through April 22, 1978. The Beninese delegation was led by Mr. Akpo, Minister of Rural Development and Cooperative Action. Rationale for a Technical Assistance Project 40. It was always intended that there should be a follow-up project to Zou Borgou I. But the failure of the first project and the prevailing structural problems (lack of a clearly defined pricing and marketing policy, financial and technical weaknesses of the agricultural institutions such as SONAGRI, deterioration of the support and extension services) in the agri- culture sector indicate that a full-scale second project is presently not feasible. Yet in view of the key role of the agriculture sector, especially cotton, and the recent more determined approach taken by the Government, both the Government and IDA have agreed that it was important to maintain IDA's involvement in the sector. The proposed technical assistance project would be an appropriate means of providing the expertise required to improve the institutional situation and prepare a follow up project. It would also allow more time for the farmers to regain confidence in the project. Project Description 41. The proposed project, which is summarized in the Project and Credit Summary (Annex III), would be of an interim nature designed to prepare the way for a regional development project. It would be carried out over two years and would include: (a) the provision of technical assistance to SONAGRI through the assignment of consultants and equipment to: (i) strengthen the accounting and financial management; (ii) set up an Evaluation and Planning Directorate within SONAGRI to help the CARDERs in their technical and other farm support services, and to prepare development projects for the Borgou and the Zou; and - 11 - (iii) reorganize and reinforce the training capability of SONAGRI and the CARDERs, especially in the Borgou area; (b) providing trucks and staff vehicles to SONAGRI; (c) setting up within SONAGRI a development fund for pilot projects to be carried out by the CARDERs in Borgou and Zou; (d) providing consultant services to make investment pro- posals for the area to be cleared of onchocerciasis, and establishing a field station in the area to develop land use programs; (e) providing additional personnel and equipment to the Planning Directorate of the Ministry of Rural Devel- opment and Cooperative Action to carry out a detailed agricultural survey in the Zou and Borgou; and (f) pursuing adaptive research in cotton and food crops and organizing seed multiplication for food crops. Detailed terms of reference of the various components were agreed upon during negotiations, together with various covenants governing their implementation. These requirements are described in their context in Annex III. The more im- portant covenants are listed in Annex IV. Project Implementation 42. The General Manager of SONAGRI, who reports to the Ministry of Rural Development and Cooperative Action, would be the Project Manager. He would be directly responsible for all project activities, except the applied research and agricultural survey. The applied research activities would be under the responsibility of the Director of Research of the Ministry of Rural Development and Cooperative Action , but the program would be designed in con- sultation with SONAGRI. The Director of Planning of this Ministry would be in charge of the agricultural survey. 43. All expatriate staff financed under the project would report directly to the Project Manager except for the research specialist. The tech- nical assistance posts would be filled by expatriates, since it is unlikely that nationals with the required experience and qualifications would be avail- able. Government agreed that it would cause the General Manager of SONAGRI to employ for all expatriate staff posts and consultant assignments, specialists whose qualifications, experience, terms of reference and conditions of employ- ment are satisfactory to IDA. The terms of reference were agreed upon during negotiations (Development Credit Agreement Section 3.02). - 12 - Project Costs and Financing 44. The total cost of the project, based on March 1977 prices and including contingencies, would amount to US$2.5 million (net of taxes of US$0.1 million). Foreign exchange costs are estimated at US$1.7 million or 65% of total costs. The proposed IDA credit of US$1.7 million would be complemented by a grant from FAC of US$0.7 million. Total external financing (IDA and FAC) would amount to 96 percent of total costs, thereby financing US$0.7 million of local costs. Both the IDA credit and the FAC grant would be passed on by the Government as grants to SONAGRI (Development Credit Agreement Section 3.01(b)). The FAC participation would be pari-passu (2/3 IDA: 1/3 FAC) except for the cost of expatriate staff (three fully financed by FAC, three fully financed by IDA), short term consultants and onchocerciasis studies (both fully financed by IDA). IDA would finance $0.3 million of local costs. Total expatriate staff services would amount to 9.5 man-years and consultants services to 68 man-months for a total cost of US$1.0 million. The average cost would be US$65,000 per man-year of expatriate staff, and US$80,000 per man-year of short-term consultant. A condition of effectiveness of the proposed credit would be the effectiveness of the FAC grant (Development Credit Agreement Section 6.01). The Government contribution of $0.2 million would cover 45 percent of incremental local staff salaries (including taxes). Procurement 45. Contracts for the purchase of goods or civil works of more than $10,000 would be procured on the basis of competitive bidding advertised locally in accordance with the applicable procedures of the borrower which are considered acceptable to the Association. To the extent feasible, vehicles totalling $220,000 would be grouped for bulk procurement. Contracts of less than $10,000, would be purchased locally in accordance with other applicable procedures of the Borrower including sollicitation of price quotations from local suppliers. It is expected that the Government would request the Bank's West Africa Agricultural Project Management Unit to assist in recruiting expatriate staff to be financed by IDA. The expatriate research and training specialists already in place would be retained by SONAGRI. The services of short-term consultants would be procured in accordance with IDA's guidelines. Disbursement 46. The IDA credit would be disbursed against: (a) 100% of the total cost of expatriate staff - with the exception of the research and training specialists, and the agricultural economist - (US$278,000); (b) 100% of the total cost of consultants (US$421,000); - 13 - (c) 39% of incremental local personnel costs (US$150,000); (d) 67% of the costs of equipment (US$240,000), and of expenditures under the development fund (US$133,000); (e) 67% of the costs of buildings (US$32,000); and (f) 67% of the operating costs (US$176,000). (g) unallocated (US$270,000). Disbursements for local personnel and operating costs would be made against certificates of expenditures, the documentation for which would not be submitted for review, but would be retained by SONAGRI and made available to supervision missions. Expenditures under the Development Fund would be subject to IDA's prior approval. Benefits and Risks 47. The general situation in the agricultural sector can only be charac- terized as unsatisfactory. But there have recently been some more favorable trends such as the increase in the producer price for cotton and improvement in the financial management of SONAGRI. The main purpose of the technical assistance provided under the project, would be to build upon these trends and help prepare a full-scale, second-phase project. Without the technical assistance, it is difficult to envisage that the conditions would be created in the sector in a reasonable amount of time, sufficient to warrant further IDA involvement. Even with the technical assistance there is an inherent risk that the Government may not create the necessary conditions. There is a risk that technical advisers would not be able to achieve a constructive dialogue with the authorities concerned. The Association would take special care to ensure this does not happen by intense supervision efforts. PART V - LEGAL INSTRUMENTS AND AUTHORITY 48. The draft Development Credit Agreement between the People's Republic of Benin and the Association, the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association and the draft resolution approving the proposed Development Credit, are being distributed separately to the Executive Directors. 49. Features of special interest of the draft credit document are listed in Annex IV. A condition of effectiveness included in the Credit Agreement, would be the effectiveness of the FAC agreement. A condition of disbursement would be the approval by IDA of sub-projects to be financed under the Develop- ment Fund. 50. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association. - 14 - PART IV - RECOMMENDATIONS 51. I recommend that the Executive Directors approve the proposed Credit. Robert S. McNamara President Attachments Washington, D.C. May 5, 1977 Page 1 of 4 pages TABLE 3A BENIN - SOCIAL INDICATORS DATA SHEET LAND AREA (THOU KM2) ------------------------------------------------ -------- BENIN REFERENCE COUNTRIES (1970) TOTAL 112.6 MOST RECENT AGRIC. ** 196D 1970 ESTIMATE TOG LIBA Ili COAST** GNP P7R CAPITA (US$) 70.0 100.0 140.0 180.0 290.0 340.0 POPULATION AND VITAL STATISTICS POPULATION (MIDYR. MILLON) 2.1 2.7 3.1 2.0 1.3 5.4 POPULATION DENSITY PER SQUARE KM. 18.0 24.0 28.0 36.0 12.0 16.0 PER S. KM. AGRICULTURAL LAND 114.0 . . .. 30.0 VITAL STATISTICS AVERAGE BIRTH RATE (/TH)U) 51.4 50.6 49.9 51.0 42.8 46.1 AVERAGE DEATH RATE (/TH3U) 31.5 26.6 23.0 26.6 23.5 23.3 INFANT MORTALITY RATE (fTHOU) 110.0 .. ** ** 137.3 LIFE EXPECTANCY AT BITH (TkS) 34.3 38. 11.8 38.5 41.0 41.0 GROSS REPROCUCTION RATE 3.3 3.3 3.3 3.3 2.6 3.1 POPULATIOv4 GROWTH RATE (I) TITAL 3.1 2.8 2.7 2.7 3.3 3 4 JRaAN *. 6.0 5.9 6.0 .. 8.7 JR8AN POPULATION (I OF TOTAL) 9.3 .. 13.1 13.0 26.2 28.0 AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 46.0 44.9 45.4 45.0 40.7 42.5 15 TO 64 YEARS 50.2 52.6 52.1 52.0 56.0 54.6 65 YEARS AND OVER 3.8 2.5 2.5 3.0 3.3 2.7 AGE DEPENDENCY RATIO 1.0 0.9 0.9 0.9 0.8 0.8 ECONOMIC DEPENDENCY RATIO 0.9 1.0 , 1.0& 1.3k 1.0 Z, 0.9 / FAMILY PLANNING ACCEPTORS (CUMULATIVE. THOU) .. .. ** JSERS (I OF MARRIED WOMEN) ** ** * EMPLOYMENT TOTAL LABOR FORCE (THOUSAND) 1100.0 1300.0 1500.0 720.0 580.0 2600.0 LABOR FORCE IN AGRICULTURE (1) 55.0 52.0 ** 78.0 12.0 82.0 UNEMPLOYED (Z OF LABOR FORCE) .. .. .. .. 20.0 6.0 INCOME DISTRIBUTION B OF PRIVATE INCOME REC-D BY- HIGHEST 5Z OF HOUSEHOLDS 31.4 .. ., .. 61.1 . HIGHEST 201 OF HOUSEHOLDS 51.1 a .. .. .. 72.6 o . LOWEST 201 OF HOUSEHOLDS 5.5 c .. .. .. 5.3 . LOWEST 40Z OF HOUSEHOLDS t5 c .. .. .. 10.9 0 . DISTRIBUTION OF LAND DWNERS41P -------*---------***-****** I OWNED BY TOP 102 OF OWNERS .. .. .. I OWNED BY SMALLEST 10% OWNERS .. .. .. HEALTR AND NUTRITION POPULATION PEh PHYSICIAN .. 29260.0 30050.0 L 28140.0 10450.0 15320.0 POPULATION PEk NURSING PERSON * . 440.0 2360.0 4200.0 4140.0 3130.0 c POPULATIO4 PEk HOSPITAL 8ED .. 870.0 880.0 820.0a 530.0 850.0 PER CAPITA SUPPLY OF - CALORIEs (% OF REQUIREMNTS) 96.0 98.0 98.0 94.0 88.0 108.0 PROTEIN (GRAMS PER DAY) 54.0 55.0 56.0 51.0 36.0 60.0 -OF WHICH ANIMAL ANT -ULSE ** 18.0 .. 19.0 Ic 10.0 /j 18.0La DEATH RATE (I/THOU) AGES 1-4 45.0 .. .. .. EDJCATION ADJUSTED ENRULLMENT RATIO PRIMARY SCHOOL 26.0 40.0 .. 16.0 43.0 76.0 SECONDARY SCHOOL 2.0 5.0 8.0 L 12.0 11.0 L TEARS OF SCHOLLING PROVIDED (FIRST AND bECOND LEVEL) 13.0 13.0 13.0 13.0 12.0 13.0 VOCATIONAL ENkaLLMENT (Z OF SECONUARY) 13.0 .. .. 10.0 5.0 7.0 ADULT LITZRACY RATE (Z) 20.0 .. .. .. 15.0 20.0 HOUSING PERSONS PER 9UDH (AVERAGE) .. .. .. OCCUPIED DWELLINGS WITHOUr PIPE) W4TER (%) .. .. .. ACCrSS TO ELECTRICITY (t OF ALL DWELLINGS) .. .. .. .. RURAL DWELLINGS CONNECTED TO ELECTRICITY (%) .. .. .. .. CONSJMPTION RADIO RECEIVERS (PER THOU POP) 13.0 32.0 52.0 22.0 132.0 11.0 PASSENGER CARS (PER THOU POP) 1.0 4.0 5.0 4.0 11.0 10.0 ELE:TRICITY (KWH/Y PER CAP) 5.0 12.0 17.0 33.0 330.0 120.0 NEWSPRINT (KG/YR PER CAP) ** .. ** .. 0.1 0.2 SEE NOTES AND DEFINITIONS JN REVLRSE ANEX I Page 2 of 4 pages NOTES Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961, for 1970 between 1968 and 1970 and for Most Recent Estimate between 1973 and 1975. ** The Ivory Coast has been selected as an objective country because of its geographic proximity and its more advanced stage of economic development. BENIN 1960 /a 1963; /b African population only; /c Population; Ld Based on deaths reported for 12 monthe period; /e Prior to 1965; 7 Ratio of population under 15 a-? 65 and over to total labor force. 1970 /a Ratio of population under 15 and 65 and over to total labor force; lb Government hospital establishments only; c 1964-66. MOST RECENT ESTIMATE: /a 1961-73; /b Ratio of population under 15 and 65 and over to total labor force; Ic 1971; /d Government hospital establishments only. TOO 1970 /a Ratio of population under 15 and 65 and over to total labor force; lb Government hospital establishments only; c 1964-66; /d 12-18 ye are of age. LIBERIA 1970 /a Ratio of population under 15 and 65 and over to total labor force; /b Unemployed and partially employed; Uc Population, higher income calculated as residual, includes expatriates; Id 1964-66; /e Due to migration, growth rate is higher than the rate of natural increase. IVORY COAST 1970 /a 1965-75; /b Ratio of population under 15 and 65 and over to total labor force; /c Government only; /d 1964-66, e 12-18 years of age; /f Due to immigration, population growth rate is higher than the rate of natural increase. R3, May 10, 1977 DEFINITIONS OF SOCIAL INDICATORS Land Area (thou km2) Population per nursing person - Population divided by number of practicing Total - Total surface area comprising land area and inland waters. male and femals graduate nurses, "trained" or "certified" nurses, and ric. - Most recent estimate of agricultural area used temporarily or parma- auxiliary personnel with training or experience. nently for crops, pastures, market & kitchen gardens or to lie fallow. Population per hospital bed - Population divided by number of hospital beds available in public and private general and specialised hospital and GNP par capita (US$) - GNP per capita estimates at current market prices, rehabilitation centers; excludes nursing homes and establishments for calculated by same conversion method as World Bank Atlas (1973-75 basis); custodial and preventive cars. 1960; 1970 and 1975 data. Per capita supply of calories (% of requirements) - Computed from energy equivalent of net food supplies available in country per capita per day; Population and vital statistic available supplines cmprise domestic production, imports less exports, and Population (mid-year million) e of July first: if not available, average changes in stock; not supplies exclude animal feed, seeds, quantities used of two end-year estimates; 160, 1970 and 1975 data. in food processing and loses in distribution; requirements were estimated by FAo based on physiological needs for normal activity and health consid- Population density - per square km - Mid-year population per square kilometer ering environmental temperature, body weights, age and sex distributions of (100 hectares) of total area. population, and allowing 101 for waste at household level. Population density - per square km of agric. land - Computed as above for Per capita supply of protein (grams per day) - Protein content of per capita agricultural land only. net supply of food per day; met supply of food is defined as above; require- ments for all countries established by USDA Economic Research Services Vital statistics provide for a minimum allowance of 60 grams of total protein per day, and Crude birth rate per thousand, average - Annual live births per thousand of 20 greos of animal and pulse protein, of which 10 grams should be animal mid-year population; ten-year arithmetic averages ending in 1960 and 1970, protein; these standards are lower than those of 75 grams of total protein and five-year average ending in 1975 for most recent estimate. and 23 grams of animal protein as an average for the world, proposed by FA0 Crude death rate per thousand, average - Annual deaths per thousand of mid-year in the Third World Food Survey. population; ten-year arithnetic averages ending in 1960 and 1970 and five- Per capita protein supply from animal and pulse - Protein supply of food year average ending in 1975 for most recent estimate. derived from animals and pulses in grams per day. Infant mortality rate (/thou) - Annual deaths of infants under one year of age Death rate (/thou) ages 1-4 - Annual deaths per thousand in age group 1-4 per thousand live births. years, to children in this age group; suggested as an indicator of Life expectancy at birth (yra) - Average number of years of life remaining at malnutrition. birth, usually five-year averages ending in 1960, 1970 and 1975 for develop- Ing countries. Education Gross reproduction rate - verage number of live daughters a woman will bear Adlusted enrollment ratio - primary school - Enrollment of all ages as per- in her normal reproductive period if she experiences present age-specific centage of primary school-age population; includes children aged 6-11 years fertility rates, usually five-year averages ending in 1960, 1970 and 1975 but adjusted for different lengths of primary education; for countries wich for developing countries. universal education, enrollment may exceed 100% since some pupils are below Population growth rate (%) - total - Compound annual growth rates of mid-year or above the official school age. population for 1950-60, 1960-70 and 1970-75. Adjusted enrollment ratio - secondary school - Computed as above, secondary Population growth rate (%) - urban - Computed like growth rate of total education requires at least four years of approved primary instruction; population, different definitions of urban areas may affect comparability of provides general, vocational or teacher training instructions for pupils data among countries. of 12 to 17 years of age; correspondence courses are generally excluded. Urban population (% of total) - Ratio of urban to total population; different Yeara of schooling provided (first and second levels) - Total years of definitions of urban areas may affect comparability of data among countries, schooling; at secondary level, vocational instruction may be partially or completely excluded. Age structure (percent) - Children (0-14 years), working-age (15-64 years), Vocational enrollment (% of secondary) - Vocational institutions include and retired (65 years and over) as percentages of mid-year population. technical, industrial or other programs which operate independently or as Age dependency ratio - Ratio of population under 15 and 65 and over to those departments of secondary institutions. of ages 15 through 64 Adult literacy rate (%) - Literate adults (able to read and write) as per- Economic dependency ratio - Ratio of population under 15 and 65 and over to centage of total adult population aged 15 years and oner. the labor force in age group of 15-64 years. Family planning - acceptors (cumulative, thou) - Cumulative number of acceptors Housing of birth-control devices under auspices of national family planning program Persons per room (urban) - Average number of persons per room in occupied since inception. conventional dwellings in urban areas; duellings exclude non-permanent Family planning - users (Z of married women) - Percentages of married women of structures and unoccupied parts. child-bearing age (15-44 years) who use birth-control devices to all married Occupied dwellings without piped water (%) - Occupied conventional dwellings women in same age group. in urban and rural areas without inside or outside piped water facilities as percentage of all occupied dwellings. Employment Access to electricity Ct of all dwellings) - Conventional dwellings with Total labor force (thousand) - Econonically active persons, including armed electricity in living quarters as percent of total dwellings in urban and forces and unemployed out excluding housewives, students, etc., definitions rural areas. in various countries are not comparable. Rural dwellings connected to electricity (t) - Computed as above for rural Labor force in agriculture (7) - Agricultural labor force (in farming, forestry, dwellings only. hunting and fishing) as percentage of total labor force. Unemployed (% of labor force) - Unemployed are usually defined as persons who Consumption are able and willing to take a job, out of a job on a given day, remained out Radio receivers (per thou pop) - All types of receivers for radio broadcasts of a job, and seeking work for a specified minimum period not exceeding one to general public per thousand of population; excludes unlicensed receivers week, may not be comparable between countries due to different definitions in countries and in years when registration of radio sets was in effect; of unemployed and source of data, e.g., employment office statistics, sample data for recent years may not be comparable since most countries abolished surveys, compulsory unemployment insurance. licemaing. Passenger ears (per thou pop) - Passenger cars comprise motor care seating Income distribution - Percentage of private income (both in cash and kind) less than eight persons; excludes ambulances, hearses and military received by richest 5%, richest 207, poorest 20%, and poorest 40% of house- vehicles. holds. Electricity (ksh/yr per cap) - Annual consumption of industrial, commercial, public od private electricity in kilowatt houre per capita, generally Distribution of land ownership - Percentages of land owned by wealthiest 107 based on production data, without allowance foe losee in grids bat allow- and poorest 102 of land owners. ing for imperts sod exports of elentricity. Newsprint (kg/yr per cap) - Per capita annual consuaption in kilograms Health and Nutrition estimated from domestic production plus net imports of newsprint. Population per physician - Population divided by number of practicing physicians qualified from a medical school at university level ANNEX I Paee 3 of + pages ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1975 ANNUAL RATE OF GROWTH (Mt current prices) US$ M1n. _ 1970 -75 GDP at Market Prices 403.6 loo.o 7.9% Gross Domestic Investment 60.9 15.1 decrease Gross Domestic Saving 13.5 3.3 decrease Current Account Balance -47.4 -11.7 Exports of Goods, NYS 125.6 31.1 decrease Imports of Goods, FS 173.1 42.9 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 197 Value Added Labor Force-1/ V. A. Per Worker UMln. Mln.*r Agriculture 111.0 34.6 Industry 44.0 13.7 Services .)166.0 51.7 Unallocated ) Total/Average 321.0 - GDP at factor cost 0OVERNMENT FINANCE General Government Central Government M1n.) of DP (CFAF Bn.) of GIF 1975 1970 1970-75 19 1975 197--7 Current Receipts 15.7 17.4 17.9 Current Expenditure 15.0 16.7 16.6 Current Surplus - -7 0.7 1.3 Capital Expenditures 5.8 6.4 8.1 External Assistance (gross) 5.1 5.7 6.8 MONEY, CREDIT and PRICES 1970 1971 1972 1973 1974 125 TMBllion CFAFoutstanding end periodf Money and Quasi Money 7.26 7.71 9.90 11.52 14.03 29.66 Bank credit to Public Sector -0.14 -0.82 -0.51 -1.16 -2.42 -2.94 Bank Credit to Private Sector 7.40 8.53 10.41 12.73 16.45 32.60 (Percentages or Index Numbers) Money and Quasi Money as % of GDP 11.8 11.6 14.4 15.9 18.0 32.9 General Price Index (1969 - 100) Annual percentage changes ins 117.3 130.9 144.0 / General Price Index Bank credit to Public Sector Bank credit to Private Sector 19% 15% 22% 22% 29% 98% NOTE: All conversions to dollars in this table are at the average exchange rate prevailing during the period covered. 1/ Total labor force; unemployed are allocated to sector of their normal occupation. nUnallocatedt consists mainly of unemployed vorkera seeking their first job. not available February 1975 not applicable AMNEZ I Page 4 of 4pages TRADE PAYIWTS AND CAPITAL FIDWS BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1971-74) 1970 1973 1975 (Recorded) u $ min % (Millions US $) Exports of Goods, NFS 72.2 115.5 125.6 Cotton 10.5 27.0 Imports of Goods, NFS 9T,2 157.5 173.0 Cocoa 8.2 21.0 Resource Gap (deficit -)- Palm products 4.4 11.4 -23.0 -42.0 -47.5 Other 15.7 40.6 Interest Payments (net) Workers' Remittances Other Factor Payments (net) 12.9 16.2 20.2 Net Transfers Balance on Current Account -10.1 8 -27.3 Total 38.8 100.0 Direct Foreign Investment 6.8 3.3 CTERNAL DEBT. DECEMBER 31. 19? Net MLT Borrowing Disbursements - - US $ M1n Amortization - - - Subtotal 0.3 10.8 9.9 Public Debt, incl. guaranteed Capital Grants 8.8 8.9 10.7 Non-Guaranteed Private Debt Other Capital (net) 1.0 -2.9 Total outstanding & Disbursed 93.7 Other items n.e.i 1/ Increase in Reserves (+) 6.8 -5.7 -6.7 DEBT SERVICE RATIO for 1975- March 1976 Gross Reserves (end year) 20.6 38.2 74.2 78.8 Net Reserves (end year) 12.9 16.4 20.8 16.4 Public Debt, incl. guaranteed 7% (1971) (1974) Non-Guaranteed Private Debt - Fuel and Related Materials 2.8 6.2 8.6 Total outstanding & Disbursed Imports 76.2 108.6 146.4 7% of which: Petroleum 3.7% 5.7% 5.9% Exports - - - of which: Petroleum - - - IDA LENDING March 31, 76 (Million US $): RATE OF EXCHANGE 1RD 1975 - US $ 1.00 = CFAF 223 outstanding & Disbursed 25.0 1974 - US $ 1.00 - CFAF 240 Undisbursed 14.6 1973 - US $ 1.00 = CFAF 230 Outstanding incl. Undisbursed 39.6 1972 - US $ 1.00 = CFAF 256 1971 - US 1.00 - CFAF 278 1970 - US $ 1.00 = CFAF 278 1/ Ratio of Debt Service to Exports of Goods and Non-Factor Services. not available not applicable May 5, 1977 ANNEX II Page 1 of 3 pages THE STATUS OF BANK GROUP OPERATIONS IN BENIN A. STATEMENT OF IDA CREDITS (as of March 31, 1977) Credit /1 Number Year Borrower Purpose Amount Undisbursed (US$ million) 144-DA 1969 Dahomey Oil Palm 5.2 /2 0.0 /4 215-DA 1970 Dahomey Road Maintenance 3.5 - 307-DA 1972 Dahomey Cotton 6.1 1.1 415-DA 1973 Dahomey Roads 20.8 /3 9.5 583-DA 1975 Dahomey Rural Education and Training 4.0 4.0 TOTAL 39.6 14.6 of which has been repaid 0.0 TOTAL now outstanding 39.6 TOTAL now held by IDA 39.6 TOTAL undisbursed 14.6 /1 Prior to Exchange Adjustment. /2 Including a Supplementary Credit of $.6 million made in 1974. /3 Including a Supplementary Credit of $9 million made in 1976. /4 Balance $24,448.00. ANNEX II Page 2 of 3 pages B. Projects in Execution 1/ Credits No. 144 Hinvi Agricultural Development Project; US$4.6 million and 144-2 Credit of March 5, 1969 and US$0.6 million Supplementary The Project was satisfactorily completed (see para 29 of the main text). Credit No. 215 Highway Maintenance Project; US$3.5 million Credit of September 9, 1970; Closing Date: December 31, 1974 The Project was satisfactorily completed in 1974 and its main objective of improving the quantity and quality of road maintenance was achieved. Credit No. 307 Zou-Borgou Cotton Project; US$6.1 million Credit of May 24, 1972; Closing Date: September 30, 1975 The Project is discussed in detail in paras 30-39 of the main text. Credit No. 415 Second Highway Project; US$11.8 million Credit of July 3, 1973; Closing Date: December 31, 1977 Due to inflation and currency realignments, project cost esti- mates increased to US$23.2 million or 77 percent above the original cost estimates. The Association provided a supplementary credit of US$9.0 mil- lion on March 10, 1976, which became effective on October 5, 1976. All contracts for improvement of the southern section (151 km) of the Parakou- Malanville road and two sections (20 km) of the Godomey-Bohicon road, as well as for consultants' services for supervision of construction and for technical assistance, have been awarded and work is now proceeding on schedule. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. ANNEX II Page 3 of 3 pages Credit No. 583 Rural Education and Training Project; US$4.0 million Credit of September 5, 1975; Closing Date: June 30, 1981 This project consists of two main components (i) b)ailding and equipment of a skills upgrading center in Cotonou; and (ii) technical assis- tance, buildings and equipment for an ongoing rural youth training program. The project is proceeding well almost on schedule despite some delays in declaring the credit effective. Bids have been called. Tenders are ex- pected to be returned by June 1977. The chief of the Skills Upgrading Cen- ter is in post, and the one of the Rural Youth Training Program will take post in December 1977. ANNEX III Page 1 BENIN TECHNICAL ASSISTANCE PROJECT Credit and Project Summary Borrower: People's Republic of Benin Beneficiary: Societe Nationale d'Agriculture (SONAGRI) Amount: US$1.7 million, equivalent Terms: Standard Co-financing: The French Fonds d'Aide et de Cooperation (FAC) would participate in the financing of the project with a grant to Government of US$0.7 million equivalent. Project Description: The proposed project would be of an interim nature, and designed to prepare the ground for a regional development project. It would be carried over two years and include: 1/ (a) providing technical assistance to SONAGRI through the assignment of consultants and equipment to: (i) strengthen accounting and financial management through the appointment of a financial advisor and an accountant; (ii) set up an Evaluation and Planning Directorate within SONAGRI, with support by an agricul- tural economist and an agronomist, to backstop CARDERs in their technical and other farm support services, and to prepare development projects for the Borgou and the Zou; 1/ A detailed description of items (a-f) is given in an Appendix X to this Annex. ANNEX III Page 2 (iii) reorganize and reinforce the training capability of SONAGRI and the CARDERs, especially in the Borgou area through the appointment of a training specialist, the creation of a national audio-visual workshop, and the continuation of black- smith training program; (b) providing trucks and staff vehicles for SONAGRI; (c) setting up within SONAGRI a development fund for pilot projects to be carried out by the CARDERs in Borgou and Zou; and (d) providing consultant services to make investment proposals for the areas to be cleared of onchocerciasis, and establishing a field station in the area to develop land use programs; (e) providing additional personnel and equipment to the Planning Directorate of the Ministry of Rural Development and Cooperative Action to carry out a detailed agricultural survey in the Zou and Borgou; (f) pursuing adaptive research in cotton and food crops and organizing seed multiplication for food crops through the appointment of a research agron- omist, the establishment of a field experimental unit and of a seed multiplication farm within the Research Agency of the Ministry of Rural Develop- ment and Cooperative Action. ANNEX III Page 3 Estimated Costs (including taxes) Local Foreign Total -------------- US$'000-------------- Financial Management 56 257 313 Evaluation and Planning Unit 34 227 261 Training 77 214 291 Trucks and Staff Vehicles for SONAGRI 23 102 125 Development Fund 50 150 200 Onchocerciasis Studies 53 217 270 Agricultural Survey 99 40 139 Adaptive Research 304 198 502 Seed Multiplication 102 65 167 Subtotal 798 1,470 2,268 Physical Contingencies (5%) 40 73 113 Price Contingencies /1 90 166 256 928 1,709 2,637 /2 Financing Plan IDA FAC Government Total ----------------- US$'0----------------- Financial Management 283 14 16 313 Evaluation and Planning Unit 141 115 5 261 Training 146 136 9 291 Trucks and Staff Vehicles for SONAGRI 84 41 - 125 Development Fund 133 67 - 200 Onchocerciasis Studies 242 - 28 270 Agricultural Survey 72 36 31 139 Adaptive Research 211 200 91 502 Seed Multiplication 117 50 - 167 Subtotal 1,429 659 180 2,268 Contingencies 271 41 57 369 Total 1,700 700 237 2,637 /1 6% in 1977, 13.5% in 1978. /2 Include US$120,000 in taxes. ANNEX III Page 4 Estimated Disbursement (US$'000) 1977 1978 1978 Annual 400 800 500 Cumulative 400 1,200 1,700 Procurement Arrangements Contracts for the purchase of goods or civil works of more than $10,000 would be procured on the basis of competitive bidding advertised locally in accordance with the applicable procedures of the borrower which are considered acceptable to the Association. To the extent feasible, vehi- cles totalling $220,000 would be grouped for bulk procurement. Contracts of less than $10,000, would be purchased locally in accordance with other appli- cable procedures of the Borrower including sollicitation of price quotations from local suppliers. It is expected that the Government would request the Bank's West Africa Agricultural Project Management Unit to assist in recruiting expatriate staff to be financed by IDA. The expatriate research and training specialists already in place would be retained by SONAGRI. The services of short-term consultants would be procured in accordance with IDA's guidelines. ANNEX III Appendix A Page 1 DETAILED FEATURES OF THE PROJECT A. Strengthening of the Financial Management of SONAGRI 1. SONAGRI, formerly SONACO, has been hampered by the lack of com- petent financial management. Under the Zou Borgou Cotton Development Project, a consultant initiated work on the reorganization of SONACO, and the SONAGRI accounts were reviewed by an independent auditor. These activities would be pursued under the proposed project. In order to set up an effective account- ing and cost system, the project would provide for (a) a financial advisor for 18 months to initiate the reorganization of accounting procedures, (b) three consultant missions (totalling 15 man-months) to support the reorganization program, and (c) the services of an external auditor to ensure an independent audit of SONAGRI's accounts for three years (1976-77 through 1978-79). Funds would also be made available for vehicles and the operating costs of the sup- port. No later than the end of March 1978, the financial advisor should prepare an administrative and accounting reorganization plan to be reviewed by Government and IDA (Development Credit Agreement Section 3.06). 2. Since an important role of the financial advisor would be to train nationals for the financial management and accounting of SONAGRI and the CARDERs, Government agreed to appoint five accountants to work with the con- sultants not later than by September 30, 1977 (Development Credit Agreement Section 3.03). Cost of these accountants for a two year period is covered under 'the project. B. Evaluation and Planning Directorate 3. There is an obvious need to strengthen the organization and man- agement of SONAGRI and to endow it with the capability of designing devel- opment programs. This would be the task of the Evaluation and Planning Directorate to be established within SONAGRI. This Directorate would be responsible for identifying the main technical problems, preparing regional development projects for the Zou and Borgou, and also monitoring the impact of prices on farmers' incomes and making recommendations to the Government on pricing and marketing policies. 4. The proposed project would provide for (a) an agricultural eco- nomist (18 man-months), (b) an agronomist (1 man-year), (c) 10 man-months of consultants (livestock, maize, cotton, rice, small irrigation schemes), (d) two qualified nationals for a two-year period, and (e) equipment vehicles and operating cost of the unit. Government agreed that (a) the two nationals would be appointed to the Directorate by September 30, 1977 (Development Credit Agreement, Section 3.03); (b) it would cause the Evaluation and Plan- ning Directorate to submit to IDA quarterly reports on its activities (Devel- opment Credit Agreement, Section 3.07 (a)); (c) forward to IDA for its com- ments proposals for a Borgou project by June 1978, and a Zou project by ANNEX III Appendix A Page 2 December 1978 (Development Credit Agreement, Section 3.07 (c)), and (d) by December of each year, review with IDA the findings of the Evaluation and Planning Directorate on pricing and production incentives (Development Credit Agreement, Section 3.07 (b)). C. Training 5. The training program carried out by consultants in the Zou under the first project would serve as a basis to reinforce the training capability of SONAGRI and the CARDERs, especially by training the trainers, preparing a com- prehensive overall training program for a follow up project, and reinforcing the current training program in the Borgou. Funds would be provided under the project for (a) the extension for another two years of the training spe- cialist already in place, including vehicles and operating costs, (b) the training of senior CARDER personnel in crop production (maize, rice, ground- nuts) by the International Institute of Tropical Agriculture (IITA), in Nigeria, (c) missions to study other agricultural development projects in West Africa, (d) equipping and upgrading the audio-visual workshop established in the Zou under the first cotton project, to transform it into a national workshop serving all CARDERs, (e) since ox-traction implements are currently imported, and the progress of ox-traction depends on proper repair and main- tenance facilities, a blacksmith training program carried out at Parakou (under UNDP financing until early 1977) would be pursued under the project, with the help of a specialist assigned for 18 months. The workshop would be used to meet the needs of all its agricultural services (Development Credit Agreement, Section 3.08). D. Reinforcement of SONAGRI's Transport Fleet 6. SONAGRI has responsibility for transporting the cotton crop to the ginneries and for leasing its trucks to the CARDERs for the transportation of inputs and the food crop output. SONAGRI purchased 15 new trucks, which now enable it to meet transport needs until the end of 1977. To ensure that the fleet continues to meet the needs, provision would be made under the credit to purchase 4 new trucks in 1978. E. Development Fund 7. While the project is essentially limited to technical assistance at the management level to prepare for subsequent projects, ongoing field development would be carried out on a pilot scale, to test the project imple- mentation capability of the CARDERs. Among possible small sub-projects that could be promoted are: (a) bottomland development for low-land rainfed rice; (b) the purchase of rice mills by village groups; (c) building of grain stor- age facilities; (d) animal traction; and (e) the purchase of ULV equipment for cotton spraying. To make provision for such activities, a development fund of US$200,000 equivalent would be created within SONAGRI. Sub-projects would be presented by the CARDERs of the Zou and Borgou to SONAGRI for review, ANNEX III Appendix A Page 3 then by SONAGRI to IDA for approval for disbursement from the Fund (para- graph 3(b) of Schedule 1). Criteria for approval would include technical and economic feasibility, costs, implementation schedule, credit terms and conditions, and provision for credit recovery. F. Development of Areas Freed from Onchocerciasis 8. The rich potential of the valleys of North Benin can be devel- oped after completion of the ongoing program of onchocerciasis eradication scheduled to be completed,by mid-1978. To prepare for this development, a resource inventory will be carried out by earth satellite under USAID financ- ing, and through ground surveys under UNDP financing. In order to prepare investment proposals for these areas, once the resource surveys are completed, provision would be made under the project for 25 man-months of consultant services. Since little is known about possible land use (crops and varieties, management, fertilization, pest control), a field research station would be equipped under the project in the onchocerciasis area to initiate work to develop the needed information. Government has agreed that it would submit to IDA a program for the station by December 30, 1977 (Development Credit Agreement Section 3.10). The station would be operated under the Directorate of Research of the Ministry of Rural Development and Cooperative Action, while it is anticipated that the investment studies would be made by SONAGRI. G. Detailed Agricultural Survey 9. UNDP has supplied the services of an agricultural economist and a statistician to the Planning Directorate of the Ministry of Rural Development and Cooperative Actio to start a base line data survey on agriculture in the country. This survey, of a reconnaissance nature, will not supply suf- ficient data on which to base comprehensive development programs. In addi- tion, the Ministry has not been provided with enough surveyors, transport and calculating equipment. Under the project, therefore, the Directorate would be supplied with additional personnel and equipment to carry out a more detailed survey in the Zou and Borgou by focussing on the input-output relationships of typical farms depending on ecology, cropping patterns and level of technology, thus providing a better basis for preparation of a second stage project. H. Adaptive Research 10. Under the Zou Borgou Cotton Project, technical improvements on cot- ton and food crops were tested and extended to farmers, through the adaptive research work sub-contracted by IRCT and IRAT. Because of lack of financing in 1977, the ongoing cotton research program, currently financed by IRCT, will soon be stopped, and jeopardizing future cotton improvement. There- fore, cotton research would be financed under the project, and would focus on pest control, variety testing (including seed production) and agronomy, and other priority aspects of research, namely rice improvement, and variety testing of sorghum and groundnuts in the Borgou, not hitherto covered. ANNEX III Appendix A Page 4 11. Funds would be provided under the project for: (a) four man-months of consultants, (b) two years of a cotton research specialist, (c) six quali- fied nationals to carry out the programs, (d) training of Beinese personnel at the International Institute of Tropical Agriculture or other suitable organizations and (e) construction equipment and operation of a field experi- mental unit at Okpara for foodcrops. Government would (a) appoint the na- tional personnel to carry out the research program by September 30, 1977 (Development Credit Agreement Section 3.03) (b) give IDA an opportunity to review the qualifications and programs of consultants who would visit Benin in support of the research activities, and (c) submit by end December 1977 a detailed research program for the 1978 season (Development Credit Agreement Section 3.10). All research activities under the project would be carried out under the responsibility of the Director of the newly-created national Re- search Agency in the Ministry of Rural Development and Cooperative Action in close liaison with SONAGRI and the CARDERs of Zou and Borgou. The national research programs would greatly benefit from a liaison with neighboring na- tional research programs, and those of the regional and international research institutes such as IITA, IRAT, IRCT, and the West Africa Rice Development Association. This liaison would be encouraged under the project. I. Seed Multiplication 12. Cotton seed multiplication has been satisfactorily carried out as part of the cotton research program and would be pursued under the project. Seed multiplication of hybrid maize is to be undertaken by SONAGRI to cover the increasing demand of farmers. Under the project, a seed multiplication farm would be equipped, and funds would be made available to cover the operat- ing costs of maize seed production. This program, designed with consultant support (2 man-months) would help set up a national seed production service with SONAGRI, with technical support by the Research Directorate of the Ministry of Rural Development and Cooperative Action. It is expected that the program would be incorporated in a future development project. Govern- ment would cause SONAGRI to submit a maize seed multiplication program (in- cluding a budget) to IDA for approval by September 30, 1977 (Development Credit Agreement, Section 3.09). Annex III Table 1 BENIN TECHNICAL ASSISTANCE PROJECT Project Cost US$ Foreign Local Total Foreign Exchange ----------- us$---------- 1. Strengthening Financial Management Financial advisors 109,300 , 14,700 124,000 83 Trainees 36,600 36,600 Consultants 65,500 65,500 100 External Audit 65,000 65,000 100 Equipment 17 600 4,400 22,000 80 257,LO 55,700 313,100 80 2. Evaluation and Planning Directorate Expatriates 167,400 17,100 184,500 88 Local Personnel (trainees) 13,000 13,000 Equipment 17,600 4,400 22,000 80 Consultants 42,_00 _ 42,000 100 227,000 34,500 261,500 85 3. Training Expatriates 160,200 15,000 175,200 91 Local Personnel 22,500 22,500 Equipment Infrastructure 32,200 16,400 48,600 66 Operating Costs 5,600 8,300 13,900 40 Training courses 16,500 l14,D0) 30,500 54 214,500 76,200 290,700 74 4.SONAGRI - Transport Fleet 102,000 23,300 125,300 80 5. Development Fund 150,000 50,000 200,000 75 6. Project Preparation in Area Freed from Onchocerciasis Personnel (national) 18,400 18,00 Equipment 20,200 15,000 35,200 57 Operating Costs 6,400 9,600 16,000 40 Consultants 200 000 200 000 100 226,600 79 84 7. Agricultural Survey Personnel (national) 75,000 75,000 Equipment 28,600 7,200 35,800 83 Operation _11,200 18 20 8. Adaptive Research 39,800 99,000 138,800 29 Research Specialist 105,500 6,000 95 Personnel (national) 218,400 218',400 Equipment and buildings 20,500 21,200 41,700 49 Operation 40,400 57,600 98,000 41 Consultants 32,000 _ __ 32,000 100 198,400 303,200 501,600 39 9. Seed Multiplication Farm Equipment and Buildings 48,600 27,100 75,700 64 Operating Costs 75,000 75,000 Consultants _16,000 16,00 100 64,600 102,100 166,700 39 Subtotal 1,480300 787,000 2,267,300 65 Physical contingencies 71',000 39,400 113,400 Price contingencies 173,000 83,100 256,100 Subtotal 247,000 122,500 369,500 TOTAL 1,727,300 909,500 2,636,800 65 ANNEX IV SUPPLEMENTAL PROJECT DATA SHEET Section I Timetable of Key Events (a) Project Identification: May 1976 (b) Project Preparation Agency: SONAGRI (c) Appraisal: October 11-15, 1976 (d) Follow up Appraisal: February 7 - 16, 1977 (e) Negotiations: April 20 - 22, 1977 (f) Loan Effectiveness planned: September 1977 Section II Special Implementation Action: None. Section III Special Conditions 1. (a) Government's payment to SONAGRI of US$1.6 million in three equal payments, the first of which would be not later than March 31, 1978 (para. 33). (b) Payment by FAS to SONAGRI by September 30, 1977 of the balance of the subsidies due to SONAGRI since January 1, 1974 (para. 33). (c) Setting up the price for cotton sales by SONAGRI at a level sufficient to enable SONAGRI to recover in addition to its production and operating costs (including financial charges relating to cotton production) the subsidies provided to cotton farmers in any one year (para. 33). 2. Condition of effectiveness: the effectiveness of the FAC's grant agreement (para. 45). 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