Cameroon - Second Oil Palm Project

Document of The World Bank . FOR OIFFHlCRAL USE ONLY RETURN To Report No. P-1982-CM EPRTS BESK REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON PROPOSED BANK AND THIRD WINDOW LOANS TO THE UNITED REPUBLIC OF CAMEROON FOR A SECOND SOCAPALM PROJECT March 16, 1977 This document has a restricted distribution and may be used by recipients only in the performance of their oflcial duties. Its contents may not otherwise be disclosed without World Bank authoriEation. CAMEROON SECOND SOCAPALM PROJECT CURRENCY EQUIVALENTS CURRENCY UNIT CFA Franc (CFAF) US$ 1 = CFAF 245 1/ CFAF 1,000 = US$ 4.1 CFAF 1,000,000 = US$ 4,082 1/ Floating exchange rate. ABBREVIATIONS CAMDEV = Cameroon Development Corporation CEC = Coastal Estates Center FONADER = Fonds National de Developpement Rural HEVECAM = Societe Hevea - Cameroun PAMOL = Societe Pamol Cameroun (Unilever Group) SAFACAM = Societe Africaine Forestiere et Agricole - Cameroun SOCAPALM = Societe Camerounaise de Palmeraies FISCAL YEAR July 1 to June 30 FOR OFFICIAL USE ONLY INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON PROPOSED BANK AND THIRD WINDOW LOANS TO THE UNITED REPUBLIC OF CAMEROON FOR A SECOND SOCAPALM PROJECT 1. I submit the following report and recommendations on proposed Bank and Third Window loans to the United Republic of Cameroon to help finance a second oil palm development project. The Bank loan of US$18 million would have a term of twenty years, including four and a half years of grace, with interest at 8.5 percent per annum. The Third Window loan of US$7 million would be on standard terms, with the first payment due on January 15, 1983 and final maturity on January 15, 2001, and with interest at 4-1/2 percent per annum. 1/ PART I - THE ECONOMY- 2. A report "Proposals for a Medium-Term Public Development Program, A Special Study, Cameroon" (No. 1097a-CM), was distributed to the Executive Directors on May 11, 1976. In October and November 1976, an economic mission visited Cameroon and its findings are incorporated below; a report is in preparation. Economic Potential 3. Cameroon hag a population of about 7.3 million (mid-1975) and covers an area of 475,000 km . The country's natural resources are varied, but not always easily accessible. Soils and climatic conditions permit cultivation of a wider range of crops than is commonly found in West Africa, and the forest areas of the southeast contain large untapped timber resources. The north holds promising potential for livestock development. 4. While the main opportunities for development in Cameroon lie in the expansion of agricultural production, including forestry, the country has the potential to increase production of import substitutes needed for a growing domestic market, and to process alumina and agricultural and forestry pro- ducts for export. A bauxite project is in the early stages of preparation, and offshore oil and gas exploration is being carried out and has yielded some promising results. 5. Commerce, transportation and transit services are other important economic activities. Cameroon's main economic centers are separated by vast underpopulated areas. The country moreover serves as a main export route for landlocked Chad. As a result, large investments in port and inland transport infrastructure are essential to promoting agriculture, forestry and industry, and strengthening Cameroon's role as a regional trade center. 1/ The following sections are substantially similar to those included in the Plaine des M'Bo Rural Development Project President's Report, dated December 9, 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. -2- Past Performance 6. During the first decade of independence (1960-1970), the Govern- ment's primary objective was to unify the nation and to ease serious inter- nal political and social tensions. Output of agriculture and industry grew rapidly and, along with high world prices for cocoa and coffee, resulted in a 7 percent per annum real growth rate. Gross investment averaged about 14 percent of GDP, slightly over half in the public sector, with the largest part devoted to the transportation network, the most immediate development constraint. A major effort was also directed at expanding education and diversifying agriculture. Significant increases in fiscal revenues combined with stringent expenditure controls produced sizeable budget surpluses that made it possible to accumulate reserves and to finance a large part (up to 40 percent) of public investment out of local revenues. However, this policy also imposed excessive restraint on much needed current expenditure in such areas as road maintenance, public health, and education. 7. During the period 1971-1975, growth of real GDP slowed to less than 3 percent per annum. This was caused by factors largely outside Cameroon's control such as: (i) low export prices for cocoa and coffee during 1971 and 1972, (ii) several years of drought in the north; (iii) a drastic decline in domestic and foreign private investment, triggered primarily by the relative stagnation of the agricultural sector and by the completion of the most ob- vious import substitution projects during the preceding decade; (iv) a drop in 1975 in world demand for both cocoa and timber; and finally (v) rapidly rising import prices. 8. The Government reacted to these developments by stepping up public investment, which has increased by 50 percent to reach annual averages of about US$190 million in constant 1974 dollars during the Third Development Plan (1972-1976). At the same time, greater emphasis has been placed on agricultural output. Within a public investment program averaging 9 percent of GDP, rural development has comprised about 18 percent, transport and com- munications 42 percent, energy 6 percent, and education 9 percent. Since nearly 75 percent of public investment has been in sectors where its contri- bution to domestic output is both indirect and delayed, the impact of this substantial investment effort on economic growth was limited during the Third Plan period. In addition, physical realizations have been in many cases less than projected due largely to substantial cost increases and the sub- sequent need to reduce the scope of projects or defer them. 9. The balance of payments has not been a major constraint until re- cent years; however, imports increased rapidly in 1974 and 1975 as a result of worldwide inflation and the heavy public development expenditure, es- pecially in capital goods. At the same time agricultural exports declined, particularly exports of timber, causing a sizeable current account deficit in 1975. Together with a decline in private capital inflows this resulted in a fall in reserves from a level equal to nearly three months of import requirements in 1970 to one-half month at the end of 1975. Thanks mainly to considerably improved export demand and higher prices, especially for -3- coffee and timber, by May 1976 gross reserves had recovered to the absolute level of 1972 and 1973. However, because of continuing international infla- tion, Cameroon's offical gross international reserves, at end-1976, still covered less than one month of import requirements, a low level by usual international standards but still acceptable in the Banque des Etats de l'Afrique Centrale (BEAC) monetary union arrangements. Prospects and Development Strategy 10. Cameroon's development effort over the next five years will be carried out under the Fourth Plan (1977-1981). A Bank economic mission discussed its recommendations on the level and composition of public in- vestment with the Government in November 1975 and agreed on overall priori- ties. It is anticipated that short- and medium-term growth of GDP will be 5 to 6 percent per annum in real terms, slightly lower than achieved during the 1960s. However, if the Government can maintain a high volume of public investment and further expand and diversify the country's production base, more satisfactory rates of growth can be attained in the early 1980s. With this goal in mind, the new Five-Year Plan has set a very ambitious public investment target of over US$2.0 billion in constant 1974 dollars or two and one-half times that achieved during the preceding plan period. The Plan gives increasing emphasis to the development of directly productive sectors, particularly agriculture. The share of transport infrastructure investments is declining somewhat but remains high in absolute figures, while investments in electric energy will increase. Social investments, particularly for sports and administrative buildings, see their importance considerably reduced. These changes in sectoral priorities are very much in line with the recom- mendations of the 1975 economic mission. 11. However, to ensure that appropriate priorities will in fact be achieved, the Government will need to strengthen its ability to choose, prepare, and implement projects, particularly in the rural and transport sectors. Some progress is being made in this direction. Special planning units are gradually being established within the technical ministries. A Government-owned consulting firm the Societe d'Etudes pour le Developpement de l'Afrique, was created under the Ministry of Economy and Planning to accelerate project preparation. Commercially-oriented public corporations are also serving to strengthen the project implementation capacity of the public sector. Nevertheless, further improvements are needed, particularly in the management of public corporations and in strengthening and coordi- nating rural development institutions. A recently approved Technical As- sistance Credit will assist efforts recently undertaken by the Government in these fields by providing technical assistance experts, training local staff, and financing high priority studies and project preparation in key economic sectors. 12. Even assuming these improvements take place, absorptive capacity is likely to limit the rate of investment in the high priority sectors. With respect to the overall investment level, financial considerations also suggest that public investment during the Fourth Plan is unlikely to exceed US$1.3 billion in constant 1974 dollars, or some $400 million per year in current dollars. Budgetary revenues already reach 17 percent of GDP and cannot be expected to increase much faster than the economy as a whole. Current expenditures, on the contrary, will expand more rapidly as a result of recent increases in public investment in transport, education, and health. Furthermore, public debt charges will grow rapidly, particularly those of public enterprises, and will absorb an increasing share of public savings. Consequently, in the next five years, public savings after debt service will probably not exceed US$100 million per year, or some 25 percent of total public investment, as compared with 38 percent over the past few years. Cameroon will thus have to rely on external financing for the bulk of its public investment. Lenders, including the Bank Group, should be prepared to finance a high proportion of project costs, including when necessary, a part of local costs. An increasing reliance on foreign borrowing during a period of relatively slow economic growth, and unfavorable terms of trade, will require careful foreign debt management. However, on the reasonable assumption that at least 50 percent of foreign public capital inflow will be on concessionary terms, the foreign debt service ratio could be maintained below 10 percent by 1980. Cameroon's proven ability to make effective use of external resources, and the Government's dedication to development are reasons for added external support. 13. Cameroon is considered eligible for Bank lending on Third Window terms on the basis of the following criteria: 1. Per Capita Income In 1975 Cameroon's GNP per capita was US$270. 2. Performance The Government has demonstrated its commitment to development by increasing public investment by 50 percent during 1972-1976, the last Plan period. Emphasis is placed on agricultural pro- duction and rural development has comprised about 18 percent of the public investment program. 3. Ability to Repay Given the country's able economic management and the fact that the foreign debt service ratio is unlikely to rise above 10 percent by 1980, Cameroon remains creditworthy for additional Bank lending. However, lenders, including the Bank, should pro- vide a large part of their assistance on concessionary terms, in order to avoid too rapid a build-up of debt service. 4. Access to Alternative Sources of Finance Cameroon will have to rely heavily on external sources of funds to finance its public investment program during the next five years. Cameroon, however, has no special access to new sources of concessionary finance and cannot prudently afford to borrow substantial sums on commercial terms. - 5 - PART II - BANK GROUP OPERATIONS IN CAMEROON 14. The Bank Group's commitments in Cameroon now amount to US$251.5 mil- lion and cover twenty projects: seven in agriculture, seven in transportation, three in education, one in public utilities, one small- and medium-scale en- terprise project, and one technical assistance project. Transportation represents the largest share (53 percent) of our past commitments followed by agriculture (27 percent). Annex II contains a summary statement of Bank loans and IDA credits as of January 31, 1977 and includes notes on ongoing projects. Although delays and setbacks have been occasionally encountered in the execution of projects, the Government has consistently shown willing- ness to collaborate with the Bank in finding solutions to such problems. 15. For the future, the Bank Group's strategy is to support the Govern- ment in its effort to increase agricultural production, including export-or- iented crops, and in the process create productive employment in rural areas; to upgrade and improve the operation and maintenance of the country's infra- structure; to stimulate investment by local entrepreneurs and increase employ- ment in urban areas; and to increase the efficiency of Cameroon's institutions. 16. Given the priority Government rightly attaches to regional distribu- tion of agricultural development, as well as to a sound balance between the promotion of large plantations and smallholder schemes, Bank Group assistance has been directed accordingly. Thus we have helped Government create an effective and well-managed plantation sector by financing oil palm and rubber plantations in the east and west. At the same time, we have helped promote small-holder rice irrigation and livestock in the north. The ongoing cocoa project is helping to modernize cocoa growing by smallholders and to raise rural productivity in areas south and west of the capital. The rubber project approved in June 1975 will develop the southwest coastal region. Preparation work for rural development projects in populated but poor regions is underway with the assistance of the Bank. The Plaine des M'Bo Rural Development Proj- ect (Credit 672-CM), which has been recently approved by the Board, will help finance studies and three-year trial activities required before a full-scale rural development program can be launched. Preparation of the Zapi-East Inte- grated Rural Development Project is nearly completed and the project is sched- uled to be presented to the Board during FY78. Also scheduled for presenta- tion to the Board in FY78 is a tree crop estate and smallholder development project in the west, a follow-up of the Bank Group financed CAMDEV project. Field appraisal of the Rural Development Fund Project was completed in Novem- ber 1976. Furthermore, the proposed Second SOCAPALM Project is a follow-up to a successful oil palm project (SOCAPALM I) which has been completed, and is a first step in promoting smallholder oil palm plantations in Cameroon. Besides promoting much needed foodstuffs production, increased Bank Group lending for agriculture will support the Government's effort to focus on rural development in order to improve income distribution and to achieve a better balance in regional development. 17. Recognizing the crucial importance of transportation to economic growth in Cameroon and in neighboring countries, the Government has devoted the largest portion of public investment to this sector. The Bank Group, together with bilateral institutions, has substantially aided development of adequate transport facilities. The Second Highway Project of 1973 was -6- designed to help complete the country's basic trunk road system. The project has encountered severe cost overruns partly alleviated by a recently approved Supplementary Credit. The Second Railway Project of 1974 has focused on track improvement and expansion of the equipment needed to maintain and augment the railway's overall carrying capacity. Given projected sharp traffic increases and the backlog of required investments, substantial capital outlays are still necessary particularly for the expansion of the port of Douala, which will be assisted by a recently approved Bank loan and IDA credit, and some re- lated facilities such as a railway station and marshalling yard to be built outside the port area. An engineering loan, approved in May 1976, will help complete the engineering of this station and marshalling yard. Improvement of the Douala-Yaounde transport corridor will also require substantial invest- ment. A study, financed by the Bank and scheduled to be completed shortly, FY77, will help determine an economically optimal investment strategy for this corridor. Future road investments will mainly be for road maintenance and feeder roads to provide links to local markets and facilitate exploita- tion of Cameroon's forests. In other sectors, the Small- and Medium-Scale Enterprise Project approved in 1975, focuses mainly on developing local en- trepreneurship. A Third Education Project, approved in April 1976, places special emphasis on rural education and training. 18. In all our projects, we include, as needed, training, technical as- sistance, and other provisions necessary for strengthening institutions and improving sector policies. The recently approved Technical Assistance Proj- ect would help to strengthen government services in several key ministries involved in investment planning, policy analysis and project processing. In addition, through our economic work we will continue to advise the authorities, at their request, on development questions in general, and on particular mat- ters such as economic management, problems of urban migration, and manpower development. To help achieve the Government's priorities and to support our future lending strategy will require increased emphasis on strengthening the institutional framework, particularly concerning project planning preparation and implementation in transportation and rural and urban development. 19. During the second half of the sixties, overall disbursements of foreign aid to Cameroon amounted to about US$40-45 million a year. While at the beginning of this period 65 percent of aid funds were grants, the pro- portion of loans slowly increased. A major part of external assistance was provided by France and was concentrated in infrastructure and productive sectors. The aid-giving agencies of the EEC (European Development Fund and European Investment Bank) directed their lending mainly to agriculture, with infrastructure in second place. Bank Group disbursements were small during this period. From 1972 to 1974 overall disbursements of foreign aid increased to about US$60 million with one-third as grants. The Bank Group's share of these inflows amounted to about 25 percent. Our lending to Cameroon has been closely coordinated with other donors; in eleven of our twenty projects, joint or parallel co-financing arrangements have been made. 20. Public debt outstanding and disbursed as of December 31, 1975 amounted to US$362 million and is projected to reach US$1.5 billion in 1981. Public debt service as a proportion of export earnings amounted to 5.4 per- cent in 1975 and is projected to reach 9.5 percent in 1981. At that time annual foreign aid disbursements may be over US$400 million with only 9 per- cent consisting of grants. At end 1975, IBRD debt accounted for 13.7 percent - 7 - of all public debt,.outstanding and disbursed, and 10.6 percent of public debt service. IDA credits accounted for 13.5 petcent of public debt out- standing and 0.1 percentof public debt 'service. The Bank Group is expected to account for about 25 percent of total public debt and 14 percent of public debt 'service in'1980. 21. -In October 1974,,Cameroon became IFC's 100th member. IFC's first operation in Cameroon, a US$450,000 underwriting to bring domestic share- holdersiito a previously wholly-f'oreign-owned shoe manufacturing company, was "approved in May 1975. In September 1976, IFC Board approved an equity investment of nearly"US$900,000 in-a-foreign-owied rubber estate (SAFACAM). The investment will asist in the rehabilitation and diversification of an existing estate by 'producing rubber for export and 'palm oil for the domes- tic-market. Theoperation will also facilitate participation by domestic shareholders. PAAT III - THE AGRICULTURAL SECTOR 22. Agricultuie including forestry and livestock plays a major role in the Cameroon economy, providing a livelihood for about 85 percent of the popu- lation and accounting for 35-40 percent of GDP and over 75 percent of the value of exports. The agricultural sector can be divided in two major subsectors: traditional agriculture and industrial plantations. The traditional subsector accounts for over 85 percent of agricultural 'output. It comprises 'some one million smallholder' cultivading plots averaging about two hectares each using family labor. Smallholders produce foodcrops for' subsistence and for the local market, and cocoa, coffee, cotton and groundnuts 'for -export. Cattle-raising mainly by iomadic'and semi-nomadic pastoralists 'in northern Cameroon and the north-central Adamaoua*p'lateau'accounts for about 15 percent of the production of the traditional subsector. The industrial plahtations subsector comprises several large government-owned and a few private industrial estates (foreign- owned) producing mainly palm oil (mainly for' domestic consumption) and rubber (forlexport). Output of cocoa and' coffee increased considerably during the 1960s, at annual rates of Abo'ut 3.5 perceht for cocoa', 5.5 percent for ro- busta coffee and 4'percent for 'arabica coffede. "' A-d'itionally, the country has vast forestry resources which aire only partially tapped. 23. - Cameroon is largely self-sufficient in foodstuffs, with production expanding at an annual rate of 3-3.5 percent, ahed of populatioh growth. This expansion results from a rapid growth of non-traditional' foodstuffs, especially vegetables, beans and potatoes. However, Cameroon had been de- ficient in edible fists and" there s a, serious stagnati on of output of tradi- tion lItaples (plantains, millet, srghuI, maie and cassava), resulting from factors suc as' lack of 'aequatesu po n services to smallholders, and maktig org'&hization.* owe-er foreifi j aon marketing i However, marketig is esonbly well"organized for export crops. Farm 'incomes an servicd c o e t aers areunevenly distributed. The highest income 'areas are the central savannah and the western and coa- stal lowlands (US$130 - V40'per capita); the poorest areas are the northern plains and the western highlands (US$70 - 80 per capita), which are densely populated. The weakness 'o'f extension and credit services is particularly in evidence in thelowest incom'e areas. Howeve"r, prospects are good for de- veloping smallholder agriculture by making more investment funds available -8 - to this subsector as well as improving institutions involved with the prep- aration, implementation and monitoring of projects in this subsector. 24. The Bank supports Government's efforts to achieve a balanced growth between rural development projects and integrated estate and smallholder plan- tation projects. This strategy involves developing both plantation estates and smallholder schemes as is the case in the project presented in this report. In the past, Bank Group lending for development of tree crop planta- tions (CAMDEV FY67 and SOCAPALM FY69), was followed by loans or credits for rice irrigation (FY72) and livestock (FY74). A loan and credit to CAMDEV for a total of US$18 million, the first Bank Group operation in Cameroon, financed planting of oil palm, plus planting or replanting of rubber, tea and pepper on a total area of 10,500 ha; the objectives of the CAMDEV project have been largely attained, and it can be considered a success. A Bank loan later fi- nanced a cocoa project (FY75), and an IDA credit was made available for a rubber plantation (FY76). The Plaine des M'Bo Rural Development Project, recently approved by the Board, will help prepare a settlement scheme in an area at the base of the overpopulated western highlands. A technical assist- ance project also recently approved will improve especially the capability of the Ministries of Planning and Agriculture to prepare and monitor projects. 25. The Bank assisted the first stage of SOCAPALM's development with a US$7.9 million loan in 1969 and a supplemental loan of US$1.7 million in 1973. The original project was modified after reappraisal in 1972 when land clearing proved more expensive than expected and when one of the sites proved partly unsatisfactory. The revised project included i) the establishment of 6,000 ha of oil palms at M'Bongo and 2,500 ha at Eseka, to be concluded in the 1976 planting season and ii) construction of a palm oil mill for each estate and relevant infrastructure investments. At the time the Second SOCAPALM Project was appraised, some 330 ha. of cleared land remained to be planted and some complementary investments such as housing for estate workers had not been completed. These items, as well as essential expansions in oil processing capacity considered premature under the First Project are included in the Second Project. These items are, therefore, included in the Second SOCAPALM Project. Project implementation has slipped to thirteen years from the nine estimated at reappraisal because of occasional lack of planting mate- rial, temporary labor shortages, and severe loss of young plants to rodents. The management of SOCAPALM has been strengthened, however, so that these problems are now under control and planting objectives have been achieved. From the beginning of its activities in this sector, SOCAPALM investments have been secured by equity contributions from Government, grants, and long- term borrowing from external sources (FED, BEI, IBRD, CCCE). Because of factors largely outside its control, rapid price inflation, adverse exchange rate variations, and higher interest rates, the costs of its program have exceeded estimates by about 29 percent over reappraisal estimates; and as a result SOCAPALM ran into financial difficulties in 1976 which resulted in a shortfall between available long-term funds and investments, which was tem- porarily financed with short-term bank facilities. However, SOCAPALM now has secured adequate financing (a combination of equity, commercial loans and foreign grants) to replenish its working capital and to insure the financing of its investment program and debt service until 1981, when self-generated funds would be sufficient to meet future financing requirements. -9- 26. The long run prospects for developing in Cameroon tree crops such as rubber and oil palm are good. Palm oil is a basic staple for the people of southern Cameroon and is an important source of edible oil in other parts of the country (present per capita consumption is estimated at some 9.4 kg per annum for the whole country). In recent years, there has evolved a growing industry based on the processing of palm oil and kernel oil for soap and detergent markets of Cameroon and its landlocked partners in the Central African Customs Union (UDEAC). Overall, Cameroon had been deficient in edible fats and palm oil seemed to offer a good opportunity to help fill the existing gap. 27. Virtually all estate plantations developed to date, including those of the state-owned Cameroon Development Corporation (CAMDEV) and SOCAPALM's existing ones have been established in the western and south-central parts of the country, close to the main population and industrial centers. For the sparsely populated and relatively underdeveloped south-western region of the country, the Government is elaborating a long-term development program involv- ing suitable tree crops such as rubber, coconut and oil palms. A start was made with the implementation of this program when the Niete rubber estate was established in the south-west region in 1975 with the assistance of the Association (Credit 574-CM). The new Kienke estate to be established under the proposed Second SOCAPALM Project will be the second step of a program for developing the southwest region. PART IV - THE PROJECT Introduction 28. A report entitled "Appraisal of the Second SOCAPALM Project - Cameroon" (No. 1364-CM dated March 18, 1977) is being circulated separately. A loan and project summary is provided in Annex III of this report. The project was prepared mainly by the Societe Camerounaise de Palmeraies (SOCAPALM), and appraised in June 1976. Negotiations for the loan were held in Washington from February 7 to 17, 1977 with a Cameroonian delegation headed by Mr. Michael Tabong Kima, Charge d'Affaires, a.i., of the Embassy of the United Republic of Cameroon in Washington. Background and Purpose 29. The Government of Cameroon has asked the Bank to help finance a project which forms part of a continuing program of development of the southern parts of the country based on estate/smallholder tree crops. This report is based on the findings of an appraisal mission which vis- ited Cameroon in June 1976. 30. Cameroon has suffered from an overall deficiency in edible fats, despite a good potential for crops such as palm oil. Palm oil deriving from wild groves has long been a basic food staple for the people of south- ern Cameroon. However, the traditional sector had never treated oil palm - 10 - production as a cultivated crop, its production of palm oil had been hap- hazard, and it could therefore hardly be counted on to bring about the desired production increases rapidly. Therefore, in the 1960s the Govern- ment decided to develop plantation estates, which could rapidly increase production and which could, at the same time, demonstrate to smallholders the benefits of growing oil palms and provide a nucleus of infrastructure and services for sound smallholder oil palm development. 31. To carry out this strategy, Government created two state-owned corporations, CAMDEV and SOCAPALM. These two have developed some 32,000 ha on five estates/oil mill complexes, which are intended to become nuclei for smallholder plantations. These estates are in the western and south-central parts of the country, close to the main population and industrial centers. There is also good potential for tree crops in the southwestern region. The proposed project would have three objectives: (i) help meet a rising domestic demand for palm oil; (ii) inaugurate a smallholder development; and (iii) support recent efforts to stimulate the development of the southwest region. Since this is the first smallholder oil palm project in Cameroon and since the recently created institutions dealing with smallholders have limited experience, a 2,000 ha smallholder scheme is considered to be about the right size for such a component at this stage. Project Description 32. The new Kienke estate would be established in the southwest, north- west of the HEVECAM rubber concession, and would form part of the long-term tree crop development program for that region. Other investments would be made on the M'Bongo and Eseka estates which are in the south-central parts of the country. The smallholder program would also be centered on these estates. 33. Over a five-year development period, the project would comprise: (a) clearing about 6,850 ha of land and planting about 6,000 ha with high-yielding selected oil palm trees on Kienke estate and providing infrastructure to create an estate complex, including the first phase of a processing factory; (b) establishing 2,000 ha of smallholder oil palm plantations under an outgrower program; (c) clearing 1,000 ha and planting 1,330 ha (including 330 ha of land already cleared) of oil palm on M'Bongo estate (see para. 25); (d) providing for management and administration of the Kienke and part of the administrative costs of the Eseka and M'Bongo estates; and (e) construction, equipping and furnishing of a common facilities complex in Douala, that would be jointly owned by several estate-owning companies. - 11 - The project would also finance harvesting equipment and staff housing on the M'Bongo and Eseka estates, as also the maintenance of all the estate plant- ings during the five-year project period. Maintenance thereafter and the necessary collection and processing equipment and certain infrastructure investments, would be provided and financed by SOCAPALM in its future invest- ment program. Project Execution 34. All project components, with the exception of the Douala complex, would be managed by SOCAPALM, which is owned by the Government (58.5 percent), the publicly-owned Societe Nationale d'Investissements (10.5 percent), and the cocoa and coffee stabilization boards (17 percent and 14 percent respectively). Although a publicly-owned company, SOCAPALM operates on commercial lines under a Director-General, who is responsible to a Board of Directors consisting of representatives of Government, local business, and farmers. In order to strengthen SOCAPALM's management capabilities for this project, a qualified Chief Accountant and a Manager for the Kienke Estate would be appointed as a condition of effectiveness and an Executive Controller would take up his duties by February 28, 1978. (Section 6.01 (d) and (e) of the draft Loan Agreement and Section 3.01 (b) of the draft Project Agreement.) All estates, including Kienke, will then have experienced managers who have proved them- selves capable of handling day-to-day affairs including on-the-job training for the estate staff. These managers report to the Director-General through a Field Manager (Inspecteur des Plantations) based at headquarters. Kienke estate would have five sector, chiefs for field development. Annual audits of SOCAPALM would-be carried out by independent auditors and would be submitted to the Bank (see Section 4.02 of the draft Project Agreement). 35. The Kienke Estate. The planting season would begin in March-April. The 6,000 ha of project plantings would be divided into five sectors. Plant- ings would begin in the southern zone close to where the estate center would be located, and in the fourth year the plantings would shift to the northern zone. Plantings the first year would cover 750 ha; the yearly rate would then accelerate to 1,750 ha. For land preparation, the project would follow the precedent of the Niete rubber estate project in the same region, where the option of mechanical clearance on force account was adopted because of lower costs and technical advantages. Therefore, 20 heavy duty tractors and sup- porting equipment would be provided under the project. Construction of the central village would begin in the first year and would be followed by con- struction of four satellite villages. Including the main access road, about * 360 km of plantation roads would be built to minimum standards under the project. The first 20 ton/hour capacity of a scheduled 40 ton/hour palm oil processing factory would also be financed. The oil palm estate labor requirements would reach a plateau of about 1,100 field workers in the fourth year of the project. During negotiations, it was agreed that all land and rights in respect of land as are required for the Kienke estate, would have been made available to SOCAPALM (see Section 6.01(f) of the draft Loan Agree- ment). - 12 - 36. Completion of M'Bongo and Eseka Estates. The proposed project would provide US$74,000 to replace plants which were damaged by rodents in 1974. The replanting affects 330 ha of the M'Bongo estate which had been cleared under the first project (see para. 25). Harvesting and collection equipment, some staff housing for both estates, and completion of the final line of the 40 tons/hour oil mill at M'Bongo, would also be financed. 37. Expansion of M'Bongo Estate. The M'Bongo estate which was financed under the previous loans for SOCAPALM, would be expanded by 500 ha annually in a two-year period from 6,000 to 7,000 ha. The expansion is justified given the improved capability of the M'Bongo estate management, the availability of land, and the expanded capacity of the M'Bongo processing factory. 38. The Outgrower Component. Smallholder development is the responsibi- lity of the Fonds National de Developpement Rural (FONADER), the government agency responsible for providing short- and medium-term credit to the rural sector. Individual farmers and farmers' groups (including cooperatives) are eligible for such credit. As it has no regional offices, FONADER operates through other government agencies which have field staff. For the outgrower component of the proposed project, credit funds provided by Government would be passed through FONADER, which would use SOCAPALM as its agent in managing the proposed component. The outgrower program would be the responsibility of a specialized outgrower development service, the Service de Plantations Villageoises, to be established within SOCAPALM. In the field, personnel of this service would operate independently of the estates, organized initially in three sectors, each attached to an existing mill and under an experienced sector chief. Each outgrower would have an individual contract with SOCAPALM setting out the participants' obligations and the terms of the credit. Out- grower produce would be collected and bought by SOCAPALM. 39. The outgrower plantings would be in the vicinity of the existing estates at M'Bongo/Edea and Eseka, (1,000 ha each) and thus would have growing conditions that have been thoroughly investigated and proved suitable for oil palm. Although individual land tenure rights are traditional and not codified, an assurance would be obtained that each outgrower would have the right to use the land on which his plantings are to be established (Section 3.05 (b) of the draft Loan Agreement). Aside from small-scale food crop farming, the main economic activities in these areas are the SOCAPALM estate/ oil mill complexes, commercial forestry exploitation, collection of fruit from wild palm, and some cocoa production. Surveys in these areas have identified some 500 farmers who are interested in becoming outgrowers, and this pool of potential candidates bodes well for the success of the project. An estimated 1,000 smallholders would be involved by the end of five years. Outgrower plantings would be con- fined to a radius of 25 km from the relevant oil mill complex and must be with- in a 500 metre access to passable roads or to the railway. All participants would be qualified farmers, who would agree to follow, throughout the develop- ment period, the technical advice provided by SOCAPALM. Land would be cleared manually by the participating farmers, either individually or by a cooperating group. Seedlings, cover crop seed, fertilizer, and cash advances based on labor input would be supplied on credit by SOCAPALM; protection against rodents would be provided by the farmer. SOCAPALM would supervise all operations. Since this would be an inaugural outgrower program, the project would provide - 13 - for the housing and equipment of SOCAPALM's outgrower extension service. Con- ditions of disbursement for this smallholder component of the project would be the signing of a Credit Administration Agreement between FONADER and SOCAPALM and the appointment of a Manager for the Smallholder Development Pro- gram by SOCAPALM (para 4(b) and (c) of Schedule 1 of the draft Loan Agreement). 40. The Common Services Complex. The main tree crop companies in Cameroon, including SOCAPALM, are in the process of establishing an inter- agency central organization to provide common services, which will be called the Coastal Estates Center (CEC). The expected benefits would be increased efficiency and lower overheads. A 2.5 ha site in the Douala industrial zone will be granted to the CEC by Government for the complex (Section 3.05 (c) of the draft Loan Agreement), which would entail construction of an office building, a vehicle park and garage facilities, and warehouse space. The conclusion of a subsidiary loan agreement, satisfactory to the bank, between the Government and this real estate corporation is a condition of disbursement for these funds (Section 3.02 (a) of the draft Loan Agreement). Total Costs and Financing Arrangements 41. Total project costs would be US$38.5 million, including sales and excise taxes of about US$4.7 million; import taxes on items expressly imported for the project would be waived by Government and have therefore been excluded from project cost estimates. Foreign expenditures are expected to account for US$25.0 million or 65 percent of total project costs. Provision for expected price increases occurring after the November 1976 base period, would be US$9.1 million or 34 percent of base cost estimates plus physical contingencies. 42. A proposed Bank loan of US$18.0 million and a Third Window loan of US$7.0 million would be made to Government and would finance 74 percent of project costs net of taxes, equivalent to the foreign exchange component. The Bank Loan of US$18.0 million would have a 20-year term, including four and a half years of grace and an interest rate of 8.5 percent. The Third Window Loan would be on standard terms, with the first payment due on January 15, 1983 and final maturity on January 15, 2001, and with interest at 4.5 percent. Both loans would be passed on by the Government to the project entities: to SOCAPALM for plantation development and the outgrower program and to the CEC for the Douala complex. Funds received by SOCAPALM on account of extension and supervision of outgrowers would be a grant from Government; otherwise both SOCAPALM and CEC would repay both loans to the Government at the interest rate applicable to the regular Bank loan. 43. The balance of net of tax project costs (US$8.8 million) together with financial charges and working capital requirements during the development period (US$5.4 million), would be met by Government (US$10.5 million) and by SOCAPALM's self-generated funds (US$3.7 million). To maintain a satisfactory equity/investment ratio above 30 percent, a part of Government contribution to SOCAPALM (US$8.2 million) would be an increase in equity investment, and the balance would be a loan for a 10-year term including a five-year grace period during which interest, at 9 percent, would be capitalized. - 14 - 44. The Government would make US$1.2 million available to FONADER as a grant to enable FONADER to provide credit and cash grants to smallholders under the project. FONADER would charge farmers a 9 percent interest rate (including 1.25 percent statutory interest tax) for the cost of the farm inputs which would be made available in kind. Interest, which would be capitalized, and principal would be collected by SOCAPALM for FONADER after six years of grace, in seven annual installments, through deductions from payments for sales of produce. Cash payments for 80 percent of initial labor costs would be made as a non-reimbursable grant to those farmers who derive 75 percent or more of their income from agriculture. These cash payments are expected to account for about 35 percent of the FONADER financing. The producer price would be set by Government at a level adequate to ensure a reasonable revenue to the smallholders and full cost recovery by SOCAPALM; the Bank would have to be consulted prior to any price changes (see Section 4.04 of the draft Loan Agreement). In addition to credit repayments, Gov- ernment would recover funds advanced for the smallholder component through export and sales taxes on oil and kernel derived from smallholder produce. The rate of return on these funds would be about 9 percent but would be over 18 percent if Government should keep the projected margin between the producer price and the market value of oil and kernel from smallholder produce. Procurement 45. Except for items specified below, procurement would be through international competitive bidding (ICB) following Bank guidelines. Goods and services subject to ICB -- mainly machinery, vehicles and equipment, fertil- izer and some construction work (for the CEC) -- are estimated to cost US$20.6 million. Goods manufactured in Cameroon would be allowed a preference equal to the lower of 15 percent of the c.i.f. price on imported goods, or the prevailing duties generally applied to non-exempt imports. Contracts not exceeding US$100,000 would be let under competitive bidding procedures adver- tised locally and satisfactory to the Bank. Most land clearing, estate road building, plantation work and minor estate construction, estimated at US$10.9 million, would be done on force account using equipment owned by SOCAPALM. The remaining project costs (US$7.0 million) would be mostly for staff and labor costs and operating expenses. Disbursement 46. The proceeds of the Bank loan and the Third Window loan would be dis- bursed pari passu on the basis of an 18:7 ratio. A uniform disbursement rate of 67 percent would be established for all categories of expenditure against which disbursements are made, representing the average foreign exchange cost of such items. A uniform rate was adopted because such a precedent was estab- lished in the HEVECAM project (Credit-574 CM) and has greatly facilitated disbursements. Disbursements of the Bank and Third Window loans would cover expenditures for: (a) estate field development: US$6.7 million; (b) vehicles, machinery and equipment (including machinery and equipment for oil mills): - 15 - US$7.4 million; (c) construction, including specialized civil works on oil mills (US$3.8 million); (d) SOCAPALM's expenditures for the development of outgrower plantations (US$0.6 million); (e) general and administrative costs of Kienke estate (US$1.1 million); and (f) for vehicles and for the construc- tion and equipment of the common services complex (US$1.4 million). US$4.0 million would be unallocated. Disbursements for (a), (d) and (e) would be against certificates of expenditure, the documentation for which is not submitted for review but would be retained by SOCAPALM for inspection by Bank project supervision missions. Disbursements for (b), (c) - except for construction work to be done by force account - and (f) would be fully docu- mented. Markets and Prices 47. Present per capita consumption of palm oil is 9.4 kg and growing at an estimated 4.5 percent per year. This domestic market would absorb about 85 percent of the project-produced palm oil (about 29,000 tons per annum at full development). There is a large and growing market for oil palm products in Nigeria, Cameroon's neighbor and trade partner to the west. Furthermore, industrial products of Cameroonian origin enjoy preferential tariff treatment in the Central African Customs Union (UDEAC). Project- produced palm kernels (about 6,000 tons per annum at peak production) are assumed to be exported, or crushed locally when domestic crushing capacity is expanded. In summary, project-produced oil and kernels should find a ready market at reasonable prices. Benefits and Risks 48. The direct benefit from project-financed investments would consist of increased palm oil production mostly to meet local demand which would otherwise have to be satisfied through imports or not all. There would also be an increase in kernel production for home consumption or export. The ex-harbor value of incremental oil and kernel production at peak production would be some US$11.0 million equivalent per annum, of which about 55 percent would represent domestic value added. 49. Smallholders participating in the outgrower program would stand to benefit from much higher cash incomes than otherwise. It takes some five years for palms to enter into production; after that, net cash incomes would grow per man/day worked from an initial US$1.80 (which is in line with wages of unskilled workers on these estates) to US$11.20 in Year 8. 50. For SOCAPALM's shareholders, their investments would, in spite of a long gestation period, show a healthy return. On the basis of current revenue and cost projections, the annual cash return to Government and other public agency investments in SOCAPALM would be some US$16.3 million by 1996 from project plantings alone and about US$28.5 million from existing plant- ings. - 16 - 51. The economic rates of return for the main project components are as follows: 14% for the Kienke estate which represents 62% of total project costs excluding price contingencies; 23% for the Outgrower component which is 6.5% of total costs; 17% for the extension of M'Bongo which accounts for 8% of total costs; and 14% on the M'Bongo and Eseka estates, the completion of which accounts for 17% of total project costs. The weighted average rate of return is about 15%. If costs were to be 20% higher than estimated, the overall rate of return as well as the rates of return for individual compo- nents would fall by 2-3 percentage points. 52. The risk that the project would not meet its objectives is small and would be further reduced by measures to be implemented under the pro- posed project for improving SOCAPALM management. If demand for palm oil in Cameroon or for kernel on the world market turned out to be below those forecast, demand for palm oil for food and as industrial raw material in Nigeria, Cameroon's more affluent neighbor, is forecast to require imports of nearly 140,000 tons by 1985. Already trade in these commodities between the two countries is sizeable. PART V - LEGAL INSTRUMENTS AND AUTHORITY 53. The draft Loan and Intermediate Term Loan Agreements between the Bank and the United Republic of Cameroon, the draft Project Agreement between the Bank and SOCAPALM, the Report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement of the Bank, and the text of the draft resolutions approving the proposed Loans, are being distributed to the Executive Directors separately. 54. Features of the Loan and Project Agreements of special interest are referred to in paragraphs 34, 35, 39, 40 and 44 of this report. 55. Special conditions of loan effectiveness (Section 6.01 of the draft Loan Agreement) would be that: (a) the Financing Agreement between the Borrower and SOCAPALM had been duly authorized or ratified by all necessary corporate and governmental action; (b) the Chief Accountant for SOCAPALM and the Estate Manager for the Kienke estate had been appointed by SOCAPALM; (c) SOCAPALM had established a short list of candidates for the position of Executive Controller; and (d) all land and rights in respect of land as are required for the Kienke estate had been made available to SOCAPALM. 56. Conditions of disbursement (para. 4(b) and (c) of Schedule I of the draft Loan Agreement) for specific project components include: - 17 - (a) for the smallholder component of the project: (i) the signing of a Credit Administration Agreement between FONADER and SOCAPALM; and (ii) the appointment of a Manager for the Smallholder Development Program by SOCAPALM; and (b) for the common services complex, the legal establishment of CEC and the signing of a subsidiary loan agreement between the Borrower and CEC. 57. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and with the established criteria for Third Window loans. PART VI - RECOMMENDATION 58. I recommend that the Executive Directors approve the proposed Loans. Robert S. McNamara President Attachments March 16, 1977  CAEIIN - SOCIAL I10CATaS DATA SHEET LAND AREA (THCktK1421 -_0TA 4 . CAMEROON PSRENTREFERENCE COUNTRIES (19?01 TOTAL. 415.4 OTRCN AGRIC. 5.0 1960 190 ESTIMATE GHANA IVORY COAST MALAYSI,A -- -- - - - - - - - - - - - - - - - - - - - - --- --- - - - - GNP PER CAPITA (u$ 90.0 190.0 270.0 340.0 340.0 440.0 POPULATION AND VITAL, f TISTICS POPULATION tMID-YR, MILLION) 5.5 6.6 7.3 8.6 5.4 10.4 PCPULATICN DENSITY, PER SQUARE KAb 11.0 11.0 15.0 36.0 t6.O 2.0 PER SQ. KM. AGRICILTURAL LAND 42.0 . 30.0 291.0 VITAL STATISTIlia CRUDE BIRTH RATE PER THOUSAND 43.5 42.1 40.4 49.8 46.1 42.2 CRUDE DEATH PATE PER THOUSAND 28.0 23.q 22.0 24.4 23.3 12.9 INFANT MORTALITY RATE WTHOU) 142.0L 156.0 w0 L LIFE EXPECTANCY AT BIRTH (YRS) 35.9 41.0 41.0 41.5 41.0 86.7 GROSS AEPRCCUCTION RATE 2.3 L 2.7 2.7 3.2 3.1 2.6 L& PnPULATICh GROiTH RATE (%) TOTAL 2.4 2.0 2.0 2.6 3.4 2.6 URBAN 6o 6.5 5.0 8.? 3.6 URBAN POPULATION (1 OF TOTAL) 15.9 20.3 26.3 29.0 39.0 27.8 AGE STRUCTURE IPERCENT) 0 TO 14 YEARS *40.0 43.0 46.9 4 4. 15 TO 64 YEARS .56.0 54.0 49.5 52.1 65 YEARS AND OVER 4.0 3.0 3.6 2.? 3.2 a AGE DEPENDENCY RATIO 0. 0.9 101.0 Gl 0.9 ECONOMIC DEPENDENCY RATIO 1.0 1.2 1.4 0.944 1.6 FAMILY PLANNId ACCEPTORS ATIVE, TMCUI 10.9 222.2 USERS ( 0 ; IED WOMEN) 2.0 8.0 EMPLOYMENT TOTAL LABCR FORE THOUS4NDI 2400.0 2800.0 3300.0 2600.0 2900.0 LABOR FORCE IN %GRICULTURE (I) 88.0 82.0 54.0 82.0 43.0 UNEMPLOYED 13,q LABOR FORCE) 5.0 6.0 6.0 INCOM§ DIST% UtIpN I of PRIVOVE INCOllE AEC*D BY- HIGHEST 53 OF ,OUSEHOLDS 28.3 HIGHEST 20% OF HOUSEHOLDS 56.0 LOWEST 202 OF HOUSEHOLDS 3.5 LOWEST 40X OF HOUSEHOLDS 11.2 DISTRIBUTION OF LAND OWNERSHIP 9 OWNED 5Y TtP 102 OF OWNERS I OWN5ED RY SMALLEST 102 OWNERS HEALTH AND NUTRITION POPULATION PER PHYSICIAN 329?&.0 30520.0 12960.0 121:oo POPULATION PER NURSING PERSON 5300.0 _ .0 A 1010.0 24 0 1080.0 POPULATION PER HOSPITAL BED 4 550.0 160.0 680.0 d 210.0 PE2 A PITA SUPPLY OF - CAL IES It OF REQUIREMENTS) 96.0 96.0 104.0 96.0 t0o.0 93.0 t PROTEIN (GP4MS PER DAY) 59.0 59.0 64.0 46.0 60.0 49.0 & -OF WHICH ANIMAL AND PULSE 23.0 1O.0LA 8.OL 20.0 a 01671H RATE 1ITHOUS AGES 1-4 5.5 EDUCATION ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL 68.0 108.0 1 SECONDARY SCtOL 2.0 110 0 110 4 YEARS OF SCHoI.NG PROVIDED (FIRST AND SE$0 LEVELI 14.0 L2,.L 14.04L 14.0 Lf 15.0 13.0 13.0 & VOCATIONAL ENROLL NT IS OF S8CO#IDAkY . 23.0 22.0 22.0 L 23.0 ?.0 3.0 ADULT LITERAY NATE (31 12.0 25.0 20.0 77.0 f HOUSING PERSONS PER ROOM (AVERAGE) 2.3 OCCUPIED DWELLINGS WITHOUT PIPED WATER (1) 65.0 4 ACCESS TO ELECTRICITY (S OF ALL DWELLINGS) 43.0 RURAL DWELLINGS CONNECTED TO ELECTRICITY (%1. . . .. 30.0 CCNSUMPTICON RADIO RECEIVERS (PER THOU POP) 3.0 36.0 36.0 18.0 1.0 41.0 PASSENGER CARS (PER THOU POP) 3.0 6.0 6.0 34.0 10.0 23.0 ELECTRICITY lKWH/YR PER CAP) 190.0 201.0 .. 338.0 120.0 382.0 NEWSPRINT (KG/YR PER CAP) . . 0.6 0.2 42. ------------------------- ----- - --------------- ------4--- ------ SEE NOTES AND DEFINITIONS ON REVERSE ANNEX I Page 2 of 4 page. Unleoss otherwioe noted, data for 1960 refer to any year betwen 1959 and 1961, for 1970 between 1968 and 1970, and for Most Recent Estimate between 1973 and 1975. Malaysia has been selected as the only aon-OF7C of a siae otatler to Caroon, which, endowed with a diversified tropical production, reaches the GDP per capita target (US $400 to 600). CAME0ROON1 1960 La West Cameroon; L 1962; Le Including midwives, asaistant midwives and assistant nurses; /d Government hospitals, rural hospitals and medical conters; /. 12-18 years of age, I 13 years for East Cameroon. 1970 La Including midwivea and assistant ourses L 1964-66; .L 12-18 yeara of age, /d 13 years for East Cameroon MOST RU ENT ESTIMATE L 1972; L 1971; c Including assistant nurses /d 1969-71 average; a 12-18 years of age; /f 13 years for East Cameroon. 1970 /a Registered unemployed; fegistered, not all practicing in the country; /c 1966-68; /d 6-15 and 16-21 years of age respectively. kVOHY COAST 1970 L Due to Iaigration, population growth rate ts higher than the rate of natural increase, Lb 1965-70; /c Ratio of population under 15 and 65 and over to total labor force; /d Government only; /a 1964-66, If 12-18 years of ago. 1970 Ia Weat Malaysia: /b Registered applicants for work; /c Government only, /d 1964-66, /a 12-18 years of age, If 1967; /A Inide only. R3, November 30, 1976 DFINITI OF SOCIA. ICAVRS 2 ondoplation per nursing person - Population dividod by number of practicing - Total surface area coprising land area and inland waters. =and female graduate nurses, "trained" or "certified" nurses, and c. - Most recent estimate of agricultural area used temporarily or per- auxiliary personnel with training or experience. manently for cropa, pasturee, market & kitchen gardens or to lie fellow. Population E ho" it 1 bed - Population divided by numher of hoapital p) - GNP per capita estimates at current markat prices, be available in pulic nd private general and specialized houpital calculated by ame conversion meChod as World Bank Atlas (1973-75 basie), and rehabilitation centers; excludes nursing h and establisments 1960, 1970 and 1975 data. for cusadial and praventive care. Per capita supoly 2f coie(7of requirements) - Conputed from Population and vital statistics e u t f tifoodF.upiea available in country per Pd"ulation mid-vr. million) - As of July firet: if not available, average capita per day; available supplies comprise domestic production, inports of to end-year estimates; 1960, 1970 and 1975 data. lees exports, end changes in stock, not supplies exclude aoinal faid, seeds, quanriri;o uad inefood procnessing and losses to distribution. Population denity - per square km - Mid-year population per square kilo- e ents we timat d by PAO based on physiological needs for meter (100 hectares) of total area.noal activity and health considering nvromental temperature, body Population density - per aquare k of aeric. land - Computed as above for weights, age end 000 distributions of population, and allowing 10. for agricultural land only. waste at household level. Per capita a ply of Protein (Rrams sertday - Protein content of per Vital statistica a upply of food per day oa ly of fond is deftned an Crude birth rate per thousand - Annual live births per thousand of mid-year population; ten-year arithmetic averages ending in 1960 and 1970, and five- Reearch Servi"s provide for a minimum allwance of 60 grans of total year average ending in 1975 for most recent estimate. protein per day, end 20 gras of aoimal and pulse protein, of which Crude death rate per thousand - Annual deathe per thousand of mid-year 10 gras should be animal protein; these otaodards are loser than population; ten-year arithmtic averages ending in 1960 and 1970 and those of 75 gram of total protein and 23 grams of animal protein as five-year average ending in 1975 for m r..co, antiinto. an average for the world. propoed by si0 in the Third sirld rood Iofant ortality race (/thou) - Annual deaths of infants under one Year of qu-7. age per thousand live hirrh, Per pita ort!In supply frot animal and Ise - Protein supply of Life expentancy at birth (yre) - Average nunber of years of life remaining f d animl ad pulses in grame per day. at birth; usually five-year averages ending in 1960, 1970 and 1975 for Death rate f/thou) axes I-4 - Annual deaths par thousand in age group 1-4 developing countries year:, to children in this oge group. auggested an an indicator of Cr0ss repoduction rate - Average number of live daughters a woman will malnuition. hear In her normal reproductive period if she experiences present age- specific fertility rates; usually five-year averages ending in 1960, Education 1970 and 1975 for developing countries. Adjusted enrollment ratio - primary school - Rnrollment of all ages as Population growth rate (%) - total - Compound annual growth rates of mid- percentage of primary xchoal-age population, includes children aged Year population for 1950-60. 1960-70 and 1970-75. 6-11 years but adjuated for different lengths of primary education, Population growth rate (%) - urban - Computed like growth rate of total for countries with univsreal education, enrollment my exceed 100% population; different definitions of urban areas may affect compara- since ome pupilu are below or above the official schoal ago. bility of data among countries. Adjusted enrollment ratio - secondary school - Computed as bov Urban population (% of total) - Ratio of urban to total population; diffe- secondary education requires st least four y.ars of approved primary rent definitions of urban areas may affect comparability of data song iotruction, provides general, vocationl or teachr training countries. inst" ti for pupils of 12 to 17 years of age, rorreaoner Age structure (percent) - Children (0-14 yeara), working-age (15-64 years), cOurses are generally excluded. and retired (65 years end over) as percentages of mid-year population. Years ofschoolingrovided (firet en 1scOn lvels) - Total years of At dependency ratio - Ratio of population under 15 and 65 and over to choolig at level, ion may be partially those of ages 15 through 64. or completely excluded. Eonoomic dependency ratio - Ratio of population under 15 and 65 and over Vocational enrollment ft of secondarj - vocational institutions to the labor force in age group of 15-64 years. i.tTude technical, industrial or other progr which operate inde- Family Planning - acceptors (cumulative. thou) - Cumulative number of pendently or as departments of secondary inatitutiono. acceptors of birth-control devices under auspices of national family Adult literacy rate (%) - Literate adults (able to read and write) as planning program since inception. percentage of total adult population aged 15 yearx end ovr. Family Planning - usere (% of married wanen) - Percentages of married women nf child-bearing age (15-44 years) who use birth-control devices "Pus to all married women in ane age group. ete per roo (averae) - Average number of perxons per room in occupied couventi.na dswellisgs in urban areas; dwellings exclude ags- pmplsmeotpermanent astructures sod unoccupied parts. r force (thous - coominally active persons, including OctEnfto densWthou iged Water C%) - Occupied conventional armed forces and unem d but excluding housewives, students, etc. , r re without inside Or outside piped defioitions in various countries ar n . water facilities as percentage of all Occupied n c allings. Labor force in agriculture (7) - Agricultural labor forceAc,e2 to elcrii % Of al dW,0111088 - Conventional dwelling with forestry, hunting and fishing) as percentage of total labor force. e i quarters as Peroent of total dwellings in urban Unemployed (% of labor force) - Unemployed are usually defined as persons sod rural areas. who are able and willing to take a job, out of a job on a given day, Rural dMelling. ad to electricity Computed as above for remained out of a job, and seeking work for a specified animuo period only. not exceeding one week; nay not be comparable between countries due to differeont definitions of unemployed and source of data, e.g., emplay- ment office statistics, sample surveys, compulsory unemployment insurance. RadIre r cas ts in generathpubi per thousand Of Population, excluades unlicensed Incane distribution - Percentage of private income (both in cash and kind) r in coantries end ie years when regintration of radio ats was received by richest 5%, richest 20%, poorest 20%, and poorest 401 of ffect; data for recent yeses may not be coparable since met housholds. countries abolished licensing. Pagengc crs pertho pe) -Passeager cars comprise motor oars seating Distribution of land ownership - Percentages of land owned by wealthiest laden ambulances, hearsee and military 10% and poorest 10% of land owners. vehicle. EIjStr fi (his' per.Scap - Annual consumsption of induatrial, commr- loalth and Nutrition cial l d prva ectricity in kilowatt hours per capita; Population per Physician - Population divided by number of practicing geerally based on Productin data, without allowance far lases in phyaicians qualified from a medical school at university level, grids but allowing for Imports and exports of electricity. Populatonrosp iL e - Per oplta anual vnisdbptiy n i kilog eal estimated frelt cnte Production Plus net mWta of newsprint. Page 3 of 4 Pages Act Proected 1967. 1972 - 1974 - 1976 - 1967 1974 1981 1967 1 /4 1 i 1101 1972 1974 1976 1981 1 NATIONAL ACCOUNTS p-Year Average at 192- 1969 Prices & Exchange Rates Average Annual Growth Rates As Percent of GDY Gross Domestic Product 799.4 1109.9 11955 1266 .1 1363.8 1798.8 6.8 3.8 6.8 5.7 101.2 104.0 103.6 Gains from Terms of Trade (+) - .5 21.4 - 46.o - 38.2 - 41.2 - 62.9 . . . - 1.2 - 4.0 - 3.6 Gross Domestic Income 789.9 1088.5 1149.5 1237.9 1322.6 1735.9 6.6 2.8 7.3 5.6 100.0 100.0 100.0 Import (incl. NFS) 234.0 325.0 344.5 364.3 387.4 516.6 6.8 3.0 6.0 5.9 29.6 30.0 29.8 Exports " (import capacity) 213.2 290.6 328.4 325.0 336,1 469.0 6.4 6.3 1.2 6.9 27.0 28.6 27.0 Resource Gap -"MtB M"T m"TET 791 --wT 10.6 -46.2 78.5 -1.5 77 TTIr t Consumption Expenditures 682.1 951.2 1013.7 1084.0 1145.2 1445.6 6.9 3.2 6.3 4.8 86.4 88.2 83.3 Investment " (incl. stocks) 128.7 171.7 169.2 183.2 220.1 337,7 5.9 - .1 14.0 8.9 16.3 14.7 19.4 Domestic Savings 107.8 t37.4 153.0 143.9 170.7 290,2 5.0 5.5 5.6 11.2 13.6 13.3 16.7 Natianal Savings 87.9 114.0 102.7 110.0 151.2 249,8 5.3 - 5.4 21.3 10.6 11.1 8.9 14.4 MERCHANDISE TRADE Annual Data at Current Prices As Percent of TOUA Imports Capital goods 40.8 89.1 104.3 143.2 177.5 444.4 16.9 8.2 30.4 20.2 21.7 23.9 35.4 Intermediate goods (l.fuels) 87.3 133.6 198.3 254.3 297.6 533.7 8.9 21.8 22.5 12.4 46.4 45.5 42.5 Fuels and related materials 8.3 15.2 38.3 52.3 61.8 109.8 12.9 58.7 27.0 12.2 4.4 8.8 8.7 of which: Petroleum 8.3 15.2 38.3 52.3 61.8 109.8 12.9 58.7 27.0 12.2 4.4 8.8 8.7 tion oods 51.6 64.9 95.0 112.7 128.9 169.3 12.2 21.0 16.5 5.6 27.4 21.8 13.5 ot rch. 1mports (nif) TMW 307:T M9 39" _E3-r 77577 10.0 20.0 23.6 13.6 l3" IT" Tu" Exports Primary producto (=r. fuels) 143.7 199.9 446.7 398.1 461.0 885.8 6.8 50.0 1.6 14.0 90.8 93.5 86.8 Fuels and related materials - - - - - - of which: Petroleum - - - - - - Manufactured goods 14.6 20.9 31- 53.9 68.3 134.5 7.4 22.0 48.2 14.5 9.2 6.5 13.2 'Total March. Exports (fob) 13" "'lT -TIaT-T7 6.9 47.1 5.2 14.0 fitTD rT.D TUmTu Tourism and Border, Traae . . . . . . . . . Merchandise Trade Indices Average 1967-69 100 Export Price Index 94.0 114.1 172.1 189.2 212.6 303.0 4.0 22.8 11.1 7.3 Import Price Index 94.8 127.6 186.0 218.0 239.3 343.7 6.1 20.7 13.4 7.5 Terms of Trade Index 99.1 89.4 92.5 86.8 88.9 88.2 -2.1 1.7 - 2.0 - .2 Exports Volume Index 94.0 123.8 163.9 147.0 164.0 229.0 5.7 15.1 - 6.9 VALUE ADDED BY SECTOR Annual Data at 1967-69 Prices and Exchange Rates Average Annual Growth Rates As Percent of Total Agriculture 272.2 352.1 380.1 417.5 432.8 540.7 5.3 2.9 6.7 4.6 38.5 37.4 34.4 Industry and Mining 170.9 233.2 230.8 258.8 271.8 371.2 6.4 - .1 8.5 6.4 24.2 22.7 23.6 Service 264.3 401.6 4 46n-s 488.1 658.3 8.7 .1 9.7 6.2 37.4 39.9 41.9 Total 707.4 986.9 1016.3 1136.8 1192.7 1570.2 6.9 1.5 8.3 5.6 100.0 100.0 100.0 RJBLIC FINANCE As Percent of GDP (Central Government) (in CFAF billion) Current Receipts 31.9 56.6 68.4 79.6 103.8 201.1 12.2 9.9 23.2 14.1 16.4 16.4 17.0 C entrE 32.1 46.6 60.9 71.6 93.9 165.9 7.7 14.3 24.2 12.1 16.5 14.6 14.0 Bu- .2 10.0 7.5 8.0 9.9 35.2 152.7 -15.5 14.9 28.9 - .1 1.8 3.0 Other Public SectorSavings 4.6 1.0 13.4 10.9 12.5 19.8 35.7 266.1 - 3.5 9.6 2.4 3.2 1.7 Public Sector Investment 13.5 27.5 43.4 44.2 49.9 124.7 15.3 25.6 7.2 20.1 6.9 10.4 10.6 US $ million CURNENT EKPENDITURE DETAILS Actual Prelim. Est. Proj. IDETAIL C1 At 1974-1975P s otl Current Expend.) 1967 1972 1974 1975 1976 PUBLIC SW11 ThirdPln oTta Education 14.4 17.1 16.9 17.1 17.4 INVESTNT P RA W1971 / 72 - 1975 /76) Other Social Services .7 10.7 9.7 10.0 10.3 Social Sectors 247.6 26.6 Agriculture 5.0 5.6 5.9 6.1 6.6 Agriculture 167.5 18.0 Other Economic Services 11.6 8.7 11.2 12.3 13.5 Industry and Mining 14.0 1.5 Administration and Defense 59.5 45.3 42.6 41.8 40.3 - Power 56.8 6.1 Other 8.8 12.6 13.7 12.7 12.1 Transport and communications 387.2 41.6 Total Current Expenditures (in Other 57.7 6.2 CFAF billion) 32.1 46.6 60.9 71.6 93.9 t Expenditures 100.0 SEICTED INDICATORS 1960- 1967- 1972- 1977- FINANCING (Calculated from 3-.yea.r averaged data) 1965 1976 1981 2 A uatCOR 4.0 3.1 Public Sector Savine - 351.8 37.8 114prt Elasticity .. .968 .789 1.010 Local Borrowing 55.8 6.0 Mfrginal Damestic Savings Rate .. .023 .239 .289 Foreign Financing 523.2 56.2 Marginal National Savings Rate .. .137 .151 .239 Total Financing 9m 100.0 IAliR FORCE AND Total Labor Force Value Added orer (9 67- 69 Prices A Exe. Rates) OUTPUT PER WORKER % of Total 1967 - 71 In U.S.Dollars ent of Average 19 61- 71 12.67 W l_ l Growth Rate 1967 1971 7 1971 Growth Rate Agriculture - 22,200 31,700 18.5 19,7 9.3 4,585.6 4,186.1 118.9 107.7 - 2.6 Industr 29,210 41,360 24.3 25.7 9.1 1,064.7 1,090.4 27.6 28.1 .6 27,328 34,427 22.7 21.4 6.0 5,027.8 5,420.4 130.3 139.5 1.9 Government 41,494 53,486 34.7 33.2 6.5 _ 4,152.5 4,848.0 123.2 127,4 Total 07TmW Y- 55 i 7 T3TT TIBET W. TWW T5 .2 not applicable - Kil or negligible I/ Estimated actual disbursements JL Excluding government not available -- lose Mh3a half the 2/ Net of debt service smallest unit shown 3/ Modern sector only Page 4 of 4 pages CMEROON Average Annual Act Estimated ProJected G Re SUMMARY BALANCE OF PAYMENTS Exports (incl. NPB) 309 340 533 693 648 766 937 109g 1228 1358 16.0 IE,qga.(j1 N8142 2o 6 7 11 1382 lJ6 114.6 ~ci c e 7 - -55!_ 13 qb A14 A7 -I-T12 E~ -207 7.7 Interest (net) - 5.5 - 6 -11 -16 - 17 - 21 - 34 - 42 - 49 - 59 28.3 Direct Investment Income - 1.7 - 2 - 4.5 - 7.7 - 8 - 8 - 11 - 15 - 21 - 28 28.5 Workers'Remittance -17.0 -21 -24 -33 - 34 - 39 - 45 - 52 - 59 - 68 14.9 Curn rnf net 1. 1 11 20 214 0 8 41 1414 12.9 oCur9nt4!c,O..t. _j -7 -76 _M _3g121 Private Direct Investment 12 -25.6 4.6 -13.3 - 4 18 22 27 31 36 109.1 Official Capital Grants 7 6.8 7.2 13 24 26 28 31 34 37 9.0 Public M&LT Loans Disbursements 28 72.4 51.5 60 78 118 150 191 253 317 32.4 -ReDayments - 8 - 8.8 -12.4 -16 - 18 - 18 -A -+2-2 40 - 6o 27.2 Net Disbursements To 73.6 31 -To 126r12213 257 33.8 Other M&LT Loans Disbursements . * * -Repayments . * Net Disbursements . . . . . . * * Capital Transactions n.e.i. 2 11.8 -18.7 -44 32 Change in Net Reserves 11 42.6 -15.9 0 52 GRANT AND LOAN COMMIOIMENTS Official Grants Grant-like 33.6 25.0 41.9 47.8 77.0 Public M&LT Loans DEBT AND DEBT SqCE IBRD - - 25.7 34.1 1.0 Pbi Dt Outs..ibursed 161.9 194.3 235.9 271.7 361.7 IDA 1.5 12.7 24.0 - 20.2 Other Multilateral 3.6 .7 16.3 - 7.6 Interest on Public Debt 5.4 6.2 9.6 11.0 14.9 Repayments on Public Debt 7.4 9.1 14.9 13.5 20.1 Governments 8.2 24.6 81.1 67.8 99.4 Total Public Debt Service 12.8 15.3 24.6 24.5 35.0 Suppliers 3.0 4.8 .8 - 6.5 Other Debt Service (net) .. .. Financial Institutions 15.6 - 1.5 20.6 Total Debt Service (net) .. . Bonds - - - - Public Loans n.e.i. - - - 1. Burden on Export Earnings (5) Total Public 90T Loans 1 .4 1 1.14 1 Public Debt Service 4.1 4.5 4.6 3.5 3.4 Total Debt Service .. .. Actual Debt Outstanding on TDS + Direct Invest.Inc. December 31. 1975 EXTERNAL DEBT Disbursed only Percent TOtal Percent Average Terms of Public Debt World Bank 49.7 13.7 96.9 14.1 Int. as % Prior Year DO&D 4.1 3.8 4.9 4.7 5.5 IDA 48.9 13.5 90.2 13.1 Amort. as % Prior Year DO&D 5.6 5.6 7.7 5.7 7.4 Other Multilateral 39.9 11.0 52.0 7.6 Governments 171.0 47.3 364.3 52.9 IBRD Debt Out. Disbursed 7.7 13.8 23.1 28.7 49.7 Suppliers 7.0 2.0 10.1 1.5 as % Public Debt O&D 4.8 7.1 9.8 10.6 13.7 Financial Institutions 43.7 12.0 73.1 10.6 as % Public Debt Service 3.9 6.5 5,7 8.6 10.6 Bonds - - - - Public Debts n.e.i. 1.4 .4 1.4 _ IDA Debt Out. Disbursed 11.0 18.4 30.1 34.1 48.9 Total Public M&LT Debt 7177 100.0 9 100.0 as % Public Debt O&D 6.8 9.5 12.8 12.6 13.5 " as % Public Debt Service - 0.1 0.1 0.1 0.1 Other M&JLT Debts . Short-term Debt (dieb. only) not applicable e staff estimates not available - nil or negligible ... not available separately .- less than half the but included in total smallest unit shown ANNEX II Page 1 of 6 pages THE STATUS OF BANK GROUP OPERATIONS IN THE UNITED REPUBLIC OF CAMEROON A. Statement of Bank Loans and IDA Credits (as of January 31, 1977) US$ Million Amount (less cancellations) Loan or Credit Number Year Borrower Purpose Bank TW IDA /3 Undisbursed Four Credits and six Loans have been fully 39.7 24.2 - disbursed 161-CM 1969 Cameroon Education 11.7 /1L 0.4 320-CM 1972 Cameroon Education II 9.0 6.8 429-CM 1973 Cameroon Roads II 24.0 - 429 1 CM 1976 Cameroon Roads II 15.0 14.0 935-CM 1973 Cameroon Roads II 24.0 24.0 983-CM 1974 Cameroon Livestock 11.6 8.2 1038-CM 1974 REGIFERCAM Railways 16.0 1.1 1039-CM 1974 Cameroon Cocoa 6.5 4.7 574-CM 1975 HEVECAM Niete Rubber Project 16.0 14.0 575-CM 1975 Cameroon DFC - Small Scale Enterprises 3.0 3.0 S4-CM 1976 REGIFERCAM Railways 2.3 2.0 1245T-CM 1976 Cameroon Education III 17.0 17.0 657-CM 1976 Cameroon Second Doula Port 10.0 /2 10.0 1321-CM 1976 Cameroon Second Doula Port 15.0 /2 15.0 672-CM 1977 Cameroon Plaine des M'Bo Rural Development 2.0 /2 2.0 TOTAL /4 115.1 17.0 114.9 122.2 of which has been repaid 1.4 0.0 0.0 TOTAL now outstanding 113.7 17.0 114.9 Amount sold 0.2 of which has been repaid - 0.0 TOTAL now held by Bank and IDA /3 113.7 17.0 114.9 TOTAL undisbursed 55.0 17.0 50.2 122.2 B. Statement of IFC Investments (as of January 31, 1977) Equity . 311-CM 1975 BATA Shoe Factory .38 355-CM 1977 SAFACAM Rubber Plantation .80 1.18 Undisbursed 1.06 /I Including a Supplementary Credit of US$1.2 million made in 1975. /2 Not yet effective. /3 Prior to exchange adjustment. /4 The Technical Assistance Credit (US$4.5 million) has been approved by the Board but has not yet been signed, therefore, it is not included in these totals. ANNEX II Page 2 of 6 pages C. PROJECTS IN EXECUTION 1/ Cr. No. 161, 161-1 First Education Project: US$10.5 million Credit of September 23, 1969; Effectiveness Date: April 29, 1970; Closing Date: June 30, 1977 (Original Closing Date: June 30, 1974) and US$1.2 million Supplementary Credit of July 30, 1975; Effectiveness Date: October 30, 1975; Closing Date: June 30, 1977. Implementation of this project was slow, especially in the initial years, due to delays in both the construction and technical assistance programs. In May 1975, a Supplementay Credit of US$1.2 million was approved to cover cost increases due to currency realignments. Construction of all buildings and delivery of virtually all furniture and equipment have been completed, and project accounts are now being finalized. The project was well-managed, particularly as project unit staf gained experience. A completion mission which visited Cameroon in February 1975 found that project facilities are generally well adapted to local requirements. Realization of educational objectives has been less evident, due to the trend of enrollment to greatly exceed capacity at project secondary schools and to fall short of capacity at project primary teacher training colleges. Cr. No. 229 Douala Port Project: US$1.5 million Credit of January 14, 1971; Effectiveness Date: April 14, 1971; Closing Date: December 31, 1974; (Original Closing Date: June 30, 1973). The Douala Port Project commenced in July 1972 and physical work under the Credit was satisfactorily completed in November 1974. Covenants and undertakings agreed during Credit negotiations have been reasonably ful- filled, but financial targets were not achieved. Remedial financial measures are included in the Second Douala Port Project. Cr. No. 320 Second Education Project: US$9.0 million Credit of June 28, 1972; Effectiveness Date: February 27, 1973; Closing Date: June 30, 1979. Due to difficulties in selecting architects and agreeing on the designs, project implementation is delayed by twenty-four months, but no 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 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 6 pages extension of the closing date of June 30, 1979, is expected. The project is generally well managed. Following cost overruns due to currency realign- ments and the accelerated price increases which have occurred since 1973, one project school was transferred to the Third Education Project. (Loan 1245-T). Cr. No. 429, Ln. No. 935 Second Highway Project: US$24.0 million Credit of September 26, 1973; Effectiveness Date: December 20, 1973; Closing Date: December 31, 1978; and US$24.0 million Loan of same date; Effectiveness Date: December 20, 1973; Closing Date: December 31, 1978. Construction of the Pont du Noun-Foumban road (50 km) was completed satisfactorily in December 1976. Construction of the Douala-Pont du NKam road (161 km) is slow and its completion is delayed by at least one year. Construc- tion of the Figuil-Mora road (163 km) is progressing well. The maintenance study is being carried out and the Government has taken steps to hire technical assistance for the Ministries of Equipment and Agriculture. The project has considerably suffered from the 1973-1974 world-wide inflation, which nearly doubled its total cost. Consequently, the Government agreed to postpone construction of the Garoua-Figuil road (98 km). A Supplementary Credit of US$15.0 million was approved in March 1976 to help alleviate the burden imposed on the Government by the project's cost overruns. Ln. No. 983 Livestock Project: US$11.6 million Loan of May 14, 1974; Effectiveness Date: September 16, 1974; Closing Date: June 30, 1980. Project implementation has progressed satisfactorily, although some project components are behind schedule. The situation at two project ranches continues to be very good and activities in the third started in December 1976 following an approved preliminary development program. The contract for the construction of two abattoirs (in Yaounde and Douala) was signed in October 1976 and construction work is expected to start in March 1977. Thirty two credits have been disbursed and about forty one credits are expected to be disbursed during 1977. The tsetse fly eradication campaign started in November 1976 as scheduled and continues satisfactorily despite some technical and budgetary diff Iculties, it is expected to end in March 1977 having freed about 1,600 km of pastureland. The construction of the first 30 km anti-tsetse barrier is to start immediately after this year's spraying campaign. Ln. No. 1038 Second Railway Project: US$16.0 million Loan to REGIFERCAM of September 18, 1974; Effective- ness Date: December 18, 1974; Closing Date: December 31, 1977. Procurement of main project items is satisfactory. The track mate- rial has been delivered and final delivery of rolling stock items is underway. ANNEX II Page 4 of 6 pages Although problems were encountered in the construction of the foundation for the Japoma bridge, the works are expected to be completed by April 1977. Due to the fluctuation in exchange rates during project implementation, additional financing was required to cover the cost of the equipment already ordered and of the reconstruction of the Japoma bridge. Consequently, the railway has obtained a supplier's credit of US$890,000 to supplement Bank financing for the rolling stock, and the foreign exchange cost of the consulting ser- vices (US$925,000) originally included in this Second Railway Project has been transferred to the Third Railway Project financed under Loan No. S-4 which became effective on October 5, 1976. Due to the world slump in the timber market and recent substantial increases in staff costs, REGIFERCAM experienced difficulty in attaining the financial covenants included in the Loan Agreement. During the negotiations of the Third Railway Project, the Second Railway Project financial targets were retained and the Government and REGIFERCAM undertook to take the necessary measures including tariff increases to achieve the target set for 1978/79. A first tariff increase averaging 12.4 percent has been implemented, effective June 1, 1976, and subsequent tariff increases will be implemented on July 1, 1977 and 1978, respectively. Ln. No. 1039 Cocoa Project: US$6.5 million Loan of September 18, 1974; Effectiveness Date: February 26, 1975; Closing Date: June 30, 1981. SODECAO's management control and supervision of work at the sector level is weak. Progress in the construction of infrastructure is now satis- factory but arrangements for the maintenance of cocoa feeder roads are un- certain. The overall success of the project is threatened because chemical treatment against black pod is not carried out in the correct manner by farmers. This is because under present marketing arrangements the returns to labor required for correct treatment are not adequately covered by the expected incremental yields. Furthermore, Governmemt requires exporters not to purchase cocoa which has a defective bean content in excess of 40 percent. This regulation, presently not adhered to, should be enforced. With the strict enforcement of this regulation, an increase in producer price for Grade 1/2 would encourage correct protection and enable Government to pass on some of the benefits of present and expected high world prices for export-quality cocoa. These and other management problems which the Project is encountering will be further discussed with Government in a mission scheduled for April. Cr. No. 574 Niete Rubber Estate Project: US$16.0 million Credit of June 3, 1975; Effectiveness Date: December 1, 1975; Closing Date: June 30, 1981. Progress in establishing Niete Rubber estate has been steady; plant- ings are on schedule and construction work ahead of schedule. Labor hired locally has been more than anticipated and is sufficient up to now; recruit- ment from other areas may become necessary soon. Collection of rubber seed is being improved, as unusually heavy rains have hampered seed produc- tion. HEVECAM's Chairman has been appointed to an important national posi- tion, and his resignation of the Chairman post should be anticipated. The terms of reference for the regional master plan studies have been drawn up. ANNEX II Page 5 of 6 pages Cr. No. 575 Small- and Medium-Scale Enterprise Project: US$3.0 million Credit of July 1 1975; Effectiveness Date: July 30, 1976 (Original Effectiveness Date: December 1, 1975; First Postponement: February 2. 1976; Second Post- ponement: June 2, 1976); Closing Date: December 31, 1980. ' The Credit was declared effective on July 30, 1976. After consider- able delay, two expatriate advisors for the Banque Camerounaise de Developpe- ment (BCD) have been recruited and assumed their positions in BCD. Commitment of the first subprojects is expected in early 1977. The delivery of technical assistance to entrepreneurs by the three agencies financed by UNDP under the Project is progressing despite problems of interagency coordination. Ln. No. 1245-T Third Education Project: US$17.0 million Third Window Loan of July 2. 1976; Effective- ness Date: December 31, 1976 (Original Effectiveness Date: October 4, 1976); Closing Date: December 31, 1981. The loan is effective. Ln. No. S-4 Douala Railway Station and Marshalling Yard Engineering Project: US$2.3 million Loan of June 25. 1976; Effectiveness Date: October 5, 1976; Closing Date: October 31, 1978. The loan is effective. Ln. No. 1321 Second Douala Port Project: US$15.0 million Cr. No. 657 Loan of September 24, 1976; Effectiveness Date: April 25, 1977; (Original Effectiveness Date: January 24, 1977); Closing Date: June 30, 1981 and US$10.0 million Credit of same date; Effectiveness Date: April 25, 1977 (Original Effectiveness Date: January 24, 1977); Closing Date: June 30, 1981. Effectiveness has been postponed in order to allow Government more time to complete legal documents. Cr. 672 Plaine des M'Bo Rural Development Project: US$2.0 million Credit of February 28, 1977; Effectiveness Date: June 28, 1977; Closing Date: June 30, 1980. The Credit documents were signed on February 28, 1977. ANNEX II Page 6'of 6 pages Cr. No. Technical Assistance Project: US$4.5 million Credit. Signing is delayed because Government has not completed preparation of the relevant decrees. ANNEX III Page 1 of 4 pages CAMEROON SOCAPALM SECOND STAGE DEVELOPMENT PROJECT LOANS AND PROJECT SUMMARY Borrower: The United Republic of Cameroon Beneficiary: Societe Camerounaise de Palmeraies (SOCAPALM) Amounts and Interest US$18.0 million at 8.5 percent Rates: US$ 7.0 million at 4.5 percent Term: Bank Loan 20 years, including four and one half years of grace Third Window First payment due on January 15, 1983 and final maturity on January 15, 2001. Relending Terms: Both SOCAPALM and CEC would repay both loans to the Government at the interest rate applicable to the regular Bank loan. Project Description: Over a five-year development period, the project would provide for: a) establishment of 6,000 ha of high-yielding selected oil palms on Kienke estate; and the first phase of an oil palm processing factory; b) establishment of 2,000 ha of smallholder oil palm plantations with the technical support and under the supervision of SOCAPALM; c) land clearing for 1,000 ha of palms, and plant- ing and maintenance of 1,330 ha (including 330 ha on land already cleared) of palms on the M'Bongo estate; harvesting and collec- tion equipment and staff housing for both the M'Bongo and Eseka estates; and expansion of an oil processing mill at M'Bongo; d) management and administration of the Kienke estate and part of the administrative costs of the Eseka and Kienke estates; and e) construction, equipping and furnishing of a headquarters service complex in Douala, that would be jointly owned by several estate- owning companies. ANNEX III Page 2 of 4 pages PROJECT COST SUMMARY (1977 - 1981) % of Total Project Local Foreign Total Cost US$ Million Oil Palm Estate Development Field Establishment 4.0 4.2 8.2 Constructions 1.1 2.0 3.1 Vehicles, Equipment 0.6 3.7 4.3 Oil mills 1.0 5.3 6.3 Management/Administration 0.9 0.6 1.5 Subtotal 7.6 15.8 23.4 60.9 Outgrower Program Field Establishment 0.4 0.4 0.8 Extension/Supervision 0.6 0.2 0.8 Subtotal 1.0 0.6 1.6 4.1 Douala Complex Construction 0.6 0.9 1.5 Vehicles, Equipment 0.2 0.2 Subtotal 0.6 1.1 1.7 4.4 Total base cost 9.2 17.5 26.7 69.4 Contingencies Physical 1.0 1.7 2.7 Price 3.3 5.8 9.1 Subtotal 4.3 7.5 11.8 30.6 Total Project Cost 13.5 25.0 38.5 100 ANNEX III Page 3 of 4 pages Proposed Financing Plan (US$'million) IBRD Government SOCAPALM Total a) Project Cost Plantation development 19.0 9.3 28.3 Outgrover program 0.6 1.2 1.8 Douala complex 1.4 0.7 2.1 Contingencies 4.0 2.3 6.3 Subtotal 25.0 13.5 38.5 b) Working capital requirement 0.7 0.7 c) Financing Charges 1.0 3.7 4.7 Total Financing Requirement 25.0 15.2 3.7 43.9 ESTIMATED SCHEDULE OF DISBURSEMENTS Fiscal Year Disbursement Cumulative Disbursements ----------------(US$ million)--------------- 1977 2.1 2.1 1978 3.3 5.4 1979 4.0 9.4 1980 7.1 16.5 1981 7.1 23.6 1982 1.4 25.0 ANNEX III Page 4 of 4 pages Procurement Arrangements Except for items specified below, procurement would be through international competitive bidding (ICB) following Bank guidelines. Goods and services subject to ICB -- largely machinery, vehicles and equipment, fertilizer and some construction work (for the CEC complex) -- are estimated to cost US$20.6 million. Goods manufactured in Cameroon would be allowed a preference equal to the lower of a) 15 percent of the c.i.f. price on imported goods, or b) the prevailing duties generally applied to non-exempt imports. Contracts not exceeding US$100,000 would be let under competitive bidding procedures advertised locally and satisfactory to the Bank. Most land clear- ing, estate road building, plantation work and minor estate construction, estimated at US$10.9 million, would be done on force account using equipment owned or to be acquired by SOCAPALM. The remaining project costs (US$7.0 million) would be mostly for staff and labor costs and operating expenses. Rate of Return The economic rate of return on the project is estimated at 15 per- cent. Appraisal Report Appraisal of Second SOCAPALM Project, Cameroon, No. 1364-CM, dated March 18, 1977. ANNEX IV Page 1 of 2 pages SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Time taken by country to prepare project: 12 months including land survey; (b) Project prepared by: SOCAPALM (technical and economic sections); COGESCAM (socio-economic sections); (c) Documents sent to Bank: May 15, 1976; project preparation kept under review by Supervision mission for First SOCAPALM project; (d) Departure Appraisal Mission: June 1, 1976; (e) Negotiations completed: February 17, 1977; (f) Planned date of effectiveness: July 5, 1977. Section II: Special Bank Implementation Actions None. Section III: Special Conditions 1. The Financing Agreement between the Borrower and SOCAPALM has been duly authorized or ratified by all necessary corporate and governmental action. (See para. 38.) 2. The Chief Accountant for SOCAPALM and the Estate Manager for the Kienke estate have been appointed by SOCAPALM. (See para. 34.) 3. SOCAPALM has established a short list of candidates for the posi- tion of Executive Controller. (See para. 34.) 4. Annual audits of SOCAPALM would be carried out by independent auditors and would be submitted to the Bank. (See para. 34.) 5. All land and rights in respect of land as are required for the Kienke estate have been made available to SOCAPALM. (See para. 35.) 6. For the common services complex, the legal establishment of CEC and the signing and authorization of a subsidiary loan agreement by the CEC and the Borrower has taken place. (See para. 40.) ANNEX IV Page 2 of 2 pages 7. For the smallholder component of the project: i) the signing of a Credit Administration Agreement between FONADER and SOCAPALM has been signed and duly authorized; and ii) the Manager for the Smallholder Devel- opment Program has been appointed. (See para. 39.) 8. The producer price for smallholder produce would be set by Govern- ment at a level adequate to ensure a reasonable revenue to the smallholders and full cost recovery by SOCAPALM; the Bank would have to be consulted prior to any price changes. (See para. 44.) 9. Although individual land tenure rights are traditional and not codified, an assurance would be obtained that each outgrower would have the right to use the land on which his plantings are to be established. (See para. 39.) 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