Cameroon - Western Highlands Rural Development Project (Vol. 1 of 2) : Main report

Report No. 1780-CM FILE COPY Appraisal of Western Highlands Rural Development Project Cameroon March 6, 1977 Regional Projects Department Western Africa Regional Office FUI OFFICIAL USE ONLY Document of the World Bank 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 US$1 = CFAF 245 CFAF I = US$0.0041 CFAF 1,000 = US$4.1 CFAF 1,000,000 = US$4081.63 WEIGHTS AND MEASURES (Metric System) 1 hectare = 2.47 acres 1 kilometer (km) = 0.624 miles 1 kilogram (kg) = 2.205 pounds 1 metric ton (ton) = 2204.6 pounds 1 liter (1) = 1.057 US quart ABBREVIATIONS BCU - Bottomlands Cultivation Unit (UCCAO) Caisse - Coffee Price Stabilization Board COOPMUT - Department of Cooperatives and Mutual Assistance (Ministry of Agriculture) DEP - Planning Unit - Ministry of Agriculture DPA - Provincial Delegation of Agriculture, Western Province FONADER - National Rural Credit Fund FTDU - Field Trials and Demonstration Unit (UCCAO) Genie Rural - Rural Works Department of Western Province (Ministry of Agriculture) IRAF - Agricultural and Forestry Research Institute MIDEVIV - Foodcrop Development Agency (Ministry of Agriculture) ONAREST - National Scientific Research Organization PCU - Pest Control Unit (UCCAO) PMU - Project Monitoring Unit (UCCAO) SPU - Seed Production Unit (UCCAO) UCCAO - Arabica Coffee Growers' Cooperative Union, Western Province FISCAL YEAR UCCAO January 1 to December 31 Government July 1 to June 20  FOR OFFICIAL USE ONLY CAMEROON WESTERN HIGHLANDS RURAL DEVELOPMENT PROJECT Table of Contents Page No. SUMMARY AND CONCLUSIONS ............................... i-vii I. INTRODUCTION ...................... . ........ ....... I II. BACKGROUND .......... I A. General .......................................... 1 B. Agricultural Sector ..... ........................ . 2 C. Institutions ..................................................... 2 D. Agricultural Development Strategy ............. ... 4 III. THE PROJECT ............. .............................. 5 A. Project Concept and Project Area . ................ 5 B. Summary Project Description ...................... 6 C. Detailed Features ..... .......................... 8 D. Organization and Management ..................... 12 IV. COST ESTIMATES AND FINANCIAL ARRANGEMENTS ............. 15 A. Cost Estimates ........... . 15 B. Proposed Financing ............ . .................. 17 C. Cost Recovery ....... ............................. 20 Do Procurement ...................................... 20 E. Disbursement ................ ..... .. ............. 20 F. Accounts and Audit ............................... 21 V. YIELDS AND OUTPUT; MARKETS AND PRICES; AND FINANCIAL IMPACT ON FARMERS, COOPERATIVES AND GOVERNMENT ........ 22 A. Yields and Output ................................ 22 B. Markets and Prices ............... . ................ 23 C. Financial Impact of Project ..... ................. 25 VI. ECONOMIC BENEFITS AND JUSTIFICATION . .... .............. 26 VII. ASSURANCES, CONDITIONS AND RECOMMENDATION .... ......... 27 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- ANNEXES 1. Project Area Table 1 : Estimated Population in Project Area Table 2 : Climatic Data of Bafoussam Chart No 17863: Isohyets and Interannual Histograms for Rainfall 2. Project Entities A. General B. Project Area Institutions C. Project Execution D. Monitoring and Evaluation Table 1 : UCCAO - Consolidated Balance Sheets Table 2 : FONADER - Resources and Outlays Table 3 : FONADER - Credit Operations in Western Province Appendix 1 : Job Descriptions - Key Staff Chart No 18088 - UCCAO Organization of Field Services Chart No 18089 - UCCAO Proposed Organization Chart 3. Farm and Crop Development* A. Introduction B. Farm Systems C. Improvements under the Project D. Farm Budgets, Nutrition, Labor E. Major Crops F. Phasing, Yields and Production G. Field Services and Training Table 1 Average Farm Crop Composition Table 2 : Incremental On-Farm Input Table 3 : Farms in Project Area Table 4 : Phasing Table 5 : Yield Projections Table 6 : Production Projection Table 7 : Farm Budget - Red Ferralitic Soils Table 8 : Farm Budget - Black Deposition Soils Table 9 : Farm Budget - Brown Soils Table 10 : Farm Budget - Reworked Ferralitic Soils Chart No 17921: Required and Available Labor Chart No 17886: Agricultural Timetable 4. Seed Production* A. Background B. Seed Production under the Project Table 1 Seed Production  -3- ANNEXES (Cont'd) 5. Research, Trials and Farm Demonstration* *A. Field Trials and Farm Demonstration Program B. Reforestation Program Table I Proposed Contract Research Topics 6. Cooperative Service Centers* Table 1 Incremental Storage Requirements Table 2 Size and Location of Existing Cooperative Stores Table 3 Location of New/Upgraded Service Centers Table 4 Distribution of Service Centers 7. Bottomlands Development* Table 1 : Technical Characteristics of 30 ha Perimeter - Drainage by Channel Remodelling Table 2 : Technical Characteristics of 30 ha Perimeter - Drainage and Flood Protection with Dykes Table 3 : Technical Characteristics - 10 ha Irrigated Perimeter Table 4 Investment Cost Table 5 : Cost of Bottomland Works Table 6 : Management Team Table 7 : Technical Assistance Table 8 : Farm Budget - 1 ha Bottomland Cultivation Table 9 : Economic Value of Production Appendix 1 : Preliminary Inventory of Suitable Bottomlands 8. Village Water Supply* Table 1 : Number and State of Present Installations Table 2 : Estimation of Requirements Table 3 : Location of Proposed Installations Table 4 : Cost of Spring Collection System Table 5 : Cost of a Small Piped Supply Scheme Table 6 : Cost of Equipment 9. Markets and Prices A. Coffee B. Food Crops Table 1 : UCCAO - Arabica Production by Cooperative (1969-77) Table 2 : UCCAO - Producer, F.O.B. and World Market Prices 1961-77 Table 3 : Analysis of Cost per kg of Principal UCCAO Cooperatives Table 4 : Arabica Coffee - Price Structure and Forecast  -4- ANNEXES (Cont'd) Table 5 : Coffee Price Structure (Current Terms) Table 6 : Terms of Trade - Arabica and Foodcrops Table 7 : Estimated Costs - Electronic Sorting Machines Table 8 : Costs and Benefits - Coffee Quality Improvement Measures Table 9 : Marketable Surplus of Food in Western Province Table 10 : Food Price and Cost-of-Living Indices in Yaounde Table 11 : Consumer Prices for Food - Bafoussam Table 12 : Farmgate Prices for Foodcrops Table 13 : Economic Farmgate Value - Maize Table 14 Economic Farmgate Value - Rice Table 15 : Export Price - Groundnuts Appendix 1 : Calculation of Coffee Quality Discount Appendix 2 : Operating Costs of Sorting Machines Appendix 3 : Note on Size and Design of Pulperies Chart No. 17864: Design of Depulper 10. Project Costs Table 1 : Summary of Project Cost Table 2 : UCCAO - Headquarters Staff and Project Monitoring Table 3 : Extension Service - General Cost Table 4 : Field Trial and Demonstration Unit Cost Table 5 : Bottomland Cultivation Unit Cost Table 6 : Seed Production Cost Table 7 : Pest Control Unit Cost Table 8 : Training Cost Table 9 : Cooperative Service Centers - Civil Works and Vehicles and Equipment Costs Table 10 : UCCAO - Commercial Services: Industrial Investments Table 11 : Village Water Supply Cost Table 12 : Bottomland Development Cost Table 13 : Project Evaluation and Preparation of Follow-up Project Costs 11. Financial Aspects A. Project Financing B. Smallholder Credit C. Cash Flows D. Accounts and Audit Table 1 : Estimated Schedule of Disbursements Table 2 : Revolving Credit Fund - On-Farm Inputs Table 3 : UCCAO - Consolidated Cash Flow Table 4 : UCCAO - Projections of Income and Expenditure Table 5 : Government Cash Flows  -5- ANNEXES (Cont'd) 12. Economic Benefits and Justification Table 1 : Net Value of Incremental Production Table 2 : Economic Rate of Return Maps 13072 13073 13208 * Bound separately as Technical Supplements available on request.   CAMEROON WESTERN HIGHLANDS RURAL DEVELOPMENT PROJECT Summary and Conclusions Background i. The Government of Cameroon has asked the Bank Group to help finance a rural development project which forms part of a larger development program in the Western Highlands of the country. The project was prepared by RMWA and Cameroonian technicians and this report is based on the findings of an appraisal mission which visited Cameroon in May-June 1977. Project Concept and Project Area ii. The Western Highlands are characterized by a high population den- sity, mountainous terrain and heavy rainfall. The area contains 17 percent of Cameroon's population but only 3 percent of its land area. The pressure of population on the limited land resources has led to intensive cultivation of nearly 95 percent of the cultivable land, including steep slopes. The result is that soil fertility has declined and erosion is a serious threat in large parts of the area. In the long run, spontaneous emigration and resettlement in adjacent underpopulated areas will help to alleviate this problem. In the meanwhile, improvements in agricultural productivity should and can be sought in situ. For this purpose the proposed project will provide a complementary package of inputs, techniques and infrastructure aimed at the farming system as a whole. By developing institutions (including training people) and introducing appropriate procedures and technique, the proposed project would improve the agricultural productivity and thereby incomes and welfare of some 600,000 rural inhabitants with per capita incomes (US$70) less than 25 percent of the national average (US$300). Project Description iii. The project would consist of: (a) strengthening and equipping a newly created Directorate of Production Services within UCCAO (the cooperative union of arabica coffee growers), which would be responsible for extension, pest control, seed production, training, and field demonstration and trials; (b) establishing a 30-bed training center to train extension agents, cooperative staff and members, and senior exten- sion staff; (c) improving field storage facilities for inputs, coffee, and foodcrops by upgrading 25 existing and constructing 10 new rural service centers;  - ii - (d) establishing a revolving credit fund (to be operated by UCCA0) which would finance seasonal inputs and small farm tools and equipment; (e) constructing about 220 water points to provide 18,000 rural families with safer and more convenient water supply. Each water point would also have simple facil- ities to help smallholders with the washing and fermenta- tion of coffee; (f) constructing simple water control works to enable about 400 ha of currently uncultivated bottomlands to be put into productive use by some 1,300 rural families; (g) increasing the mechanical coffee grading capacity of UCCAO from 7,000 tons to 14,000 tons per year and intro- ducing machines capable of improving coffee quality; (h) establishing a project monitoring unit which would record changes in a limited number of performance indi- cators as an aid in improving project implementation and monitoring the impact of project actions; and (i) strengthening the Planning Unit in the Ministry of Agriculture to evaluate the proposed and other proj- ects. The Unit would also contract for 34 man-months of consultant studies to examine the feasibility and design of a possible follow-up project. Project Execution iv. The project would be managed by UCCAO which has demonstrated its abilities in cooperative organization, marketing and financial management. It would be directly responsible for agricultural field services and, for this purpose, would create a new Directorate of Production Services. Actual implementation of the bottomland development component, the construction of village water supply systems and agronomic research would be contracted out to existing government agencies specialized in these respective sectors. Key staff, including a Director of Production Services, an Executive Controller (who would supervise all procurement), and Head of Training Division, would be recruited internationally (as suitable candidates are not likely to be available locally) and would have qualifications and experience satisfactory to IDA. v. Field Services. UCCAO's Directorate of Production Services would consist of four units in charge of: extension, pest control, seed production, and training. Extension would be organized according to the Training and Visit System which emphasizes: (a) a unified service with a single chain of command; (b) a systematic program of visits to farmers coordinated with short training sessions for extension staff dealing with recommendations that can be applied immediately afterwards; (c) a concentration of effort on key  - iii - farmers; and (d) coordination with input supply and credit. The extension service would have five geographical sectors headed by sector chiefs who would be based at cooperative service centers. Special units would be re- sponsible for a field trial and demonstration program and for advice to bottomland farmers. vi. Pest Control. The Pest Control Division would be responsible for spraying against antestia, a major coffee plant pest. It would also supervise farmers in spraying their coffee trees against anthracnose, the other impor- tant coffee plant pest. This division would build upon an existing govern- ment service. vii. Seed Production. A mechanized farm for the production of seed of higher yielding varieties of maize, potatoes and groundnuts would be created under the project. This farm would use foundation seed produced by a nearby agricultural research station or imported. viii. Training. A Training Center to be created under the project would be responsible for recruitment and training of extension staff as well as of cooperative staff responsible for credit and input distribution. A unit within the center would be provided with equipment for producing audiovisual material including a mobile cinema van to be used for farmer education. ix. Input Distribution and Credit. UCCAO would be responsible for pro- curement of fertilizer and pest control chemicals and sprayers. Credit for the purchase of such farm inputs and equipment would be made available to farmers through departmental cooperatives. Distribution of credit in kind would be the responsibility of the heads of the cooperative service centers which would be constructed under the project and which would be under the control of departmental cooperatives. x. Village Water Supply and Bottomlands Development. Two units would be created in the Provincial Department of Rural Works (Genie Rural), one to be responsible for the construction of water points and the other for bottom- land development works. A project implementation agreement between UCCAO and the Directorate of Rural Works in the Ministry of Agriculture, would regulate the relationship of UCCAO and these two units and would specify the nature of work to be done and related costs. Cost Estimates and Financial Arrangements xi. Total project costs are estimated at US$25.0 million including sales and excise taxes of about US$2.2 million; import duties on items ex- pressly 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$13.0 million or about 52% of total project cost. Estimated price increases occuring after the December 1977 base period would be about US$3.5 million or 16% of base cost estimates plus physical con- tingencies.  - iv - xii. An IDA credit of US$13.0 million would finance 57% of project cost net of taxes or 100% of foreign expenditures. The Credit, together with a part of Government's contribution (US$1.9 million) would finance rural ser- vices which are normally provided by line agencies of Government. Of the total sum of US$14.9 million, US$0.8 million would go to the Planning Unit of the Ministry of Agriculture and would cover the cost of establishment and initial operations of a Project Evaluation Unit as well as the cost of consultant's studies required for the preparation of a further development project for the Western Highlands. Under the project, UCCAO would assume responsibility for rural services in the project area and for this purpose would receive the balance of the Credit and Government contribution (US$14. 1 million) to finance: (a) a Directorate of Production Services in UCCAO with four divisions in charge of Extension, Training, Pest Control and Seed Pro- duction (US$10.3 million); (b) incremental headquarters staff required for project implementation and monitoring of project progress (US$1.8 million); (c) constructing a village water supply system (US$1.3 million); and (d) bottomlands development works (US$0.7 million). The remainder of project cost - US$10.1 million - would be financed by Government (US$2.5 million), farmers (US$0.2 million), and UCCAO (US$7.4 million). Funds thus provided from local sources would finance: (i) the Revolving Credit Fund (US$4.1 million) and (ii) Cooperative Service Centers and industrial machinery and equipment (US$6.0 million). UCCAO financing would be provided from its reserves which are primarily intended for price stabilization but may be used for investments in the rural sector with the approval of the Ministries of Agriculture and Economy and Plan. xiii. UCCAO would use Government finance (channelled through FONADER) to supplement its own reserves in order to create a Revolving Credit Fund. The ratio of Government financing to UCCAO's own funds in constituting the Revolving Credit Fund would be about 65:35. The Fund would lend to individ- ual cooperative members at an interest rate equivalent to 9% per annum, of which FONADER would receive about 4%. In addition, a 2% charge is required by law to finance a National Guarantee Fund. The Revolving Fund would thus earn the spread between the interest charge of 9% and FONADER's fee plus the Guarantee Fund levy (6% altogether). On funds provided from UCCAO resources, the Fund would keep the spread between the 9% interest charge and the Guar- anteed Fund levy of 2%. Such earnings would be adequate for meeting the costs of credit administration and for financing further credit to small- holders. Cost Recovery xiv. Farmers benefitting directly from the bottomlands development com- ponent would be required to pay an annual participation fee of US$56 per hec- tare (US$17 per farm family) for 10 years. This would ensure recovery of full development cost plus interest at a nominal rate of 5% per annum during the 10-year period. In addition, for maintenance of developed bottomlands, beneficiaries would be required either to contribute five working days of labor or to pay US$6.50 per hectare per year as a maintenance levy.  -v - Procurement xv. With the exception of contracts under US$100,000 procurement of goods and services financed by the IDA credit would be under International Competitive Bidding (ICB) procedures; IDA financing of such items is expected to amount to US$3.2 million. Items under US$100,000 but above US$20,000 would be procured on the basis of locally-advertised competitive bidding procedures which would be acceptable to IDA. For contracts of less than US$20,000, direct procurement on the basis of several quotations would be allowed up to a sum not exceeding US$1.0 million. Civil works in connection with village water supply and bottonlands development, for which IDA financing of US$1.6 million is proposed, would be done on force account. This is because such works have a low unit cost, are widely dispersed geographically and are phased over a period of several years with the result that they do not usually attract for- eign bidders. There are at present no private contractors in Cameroon who have experience in this type of work. About US$5.1 million of incremental staff and related operating costs would also be financed by IDA. Disbursements xvi. The IDA credit would cover: (a) 100% of expatriate staff salaries and related expenses (US$2.1 million); (b) 85% of the operating costs, including training fellow- ships and salaries of newly recruited local staff of UCCAO's Directorate of Production Services and of in- cremental headquarters staff (US$3.6 million); (c) 90% of the cost of civil works and construction of: staff housing for UCCAO's Directorate of Production Services; the Training Center; the Seed Production Center; a village water supply system; and bottomlands development (US$3.4 million); (d) 90% (or 100% of c.i.f. cost if imported) of the cost of vehicles and equipment of the Directorate of Pro- duction Services including vehicles and equipment required of the construction of a village water supply system and bottomlands works (US$2.0 million); and (e) 90% of the operating costs of a Project Evaluation Unit to be established in D.E.P., including consul- tants' services for the preparation of a feasibility study (US$0.6 million). US$1.3 million would be unallocated.  - vi - xvii. Disbursements in respect of categories (a), (b) and (c) above would be on the basis of a certified statement of expenditures. Documents in sup- port of such statements would be retained by the Borrower and be available for inspection in the course of project supervision. All other disbursements would be fully documented. Financial Benefits xviii. Farmers. Participating farm families would benefit from expanded employment opportunities through a more intensive cultivation of their scarce land resources. With the project, labor input would be about 25 percent above what it would otherwise be. Cash incomes would thereby increase by some 54 percent to a range of US$395-702 per farm family (US$57-98 per capita) depend- ing on soil quality. This growth in income (on a gross basis) of 54% after 3 years is well in excess of the expected rate of growth in per capita national income in Cameroon over any three-year period. For some 1,300 heads of fami- lies, who would otherwise have insufficient or no cultivable land, the bottom- land development program would enable them to earn cash incomes equivalent to US$3.10 per working day, considerably higher than the legal minimum wage in the project area. Rural families would also derive important but unquantifi- able benefits from erosion control and soil enrichment measures promoted under the project and in the form of water for domestic use. xix. UCCAO's role under the project would principally be to act as an agent of Government in the management and financial control of rural services which are presently the direct responsibility of line agencies of Government (para xii). In addition, the project provides a framework in which UCCAO can plan investments in support of its on-going commercial activities. Such investments-construction of service centers, management housing, headquarters office and storage space, expansion in coffee-processing capacity and normal increases in working capital-are estimated to cost about US$35.0 million be- tween PYI and PYIO. UCCAO's normal commercial activities would generate enough reserves to allow it to meet these outlays. The use of such reserves for investment purposes is governed by the Ministries of Agriculture and Economy and Plan which have both approved the investment program of UCCAO as incorporated in the proposed project. xx. Government. Apart from its contribution to financing smallholder credit (para xxi), Government would pass on the IDA credit to UCCAO as a grant and, additionally, provide US$1.9 million to finance rural services during the investment period. Beyond this, further outlays would be required to keep rural services operating at the levels reached by PY 4. Total Government expenditures during PY 1 - PY 10 are estimated at US$35.6 million excluding debt service of US$0.8 million in the same period. These expenditures would be less than Government receipts made up of the proceeds of the IDA credit (US$13.0 million), export taxes, and Stabilization Fund levies on incremental project production (US$22.7 million) and excise taxes on expenditures out of increased farm incomes (about US$4.2 million).  - vii - Economic Benefits and Risks xxi. The project addresses itself to the farming system as a whole. Accordingly, project inputs will serve to improve yields and output for different crops, the composition of which may change as relative prices change. However, the overall value of incremental output should not be affected. A subsidiary benefit of project actions is expected to be a reversal of the decline in arabica coffee production which is the major cash crop of the region; by PY 9, coffee production would be some 3,000 tons above the previous peak production level attained in 1973. The project's direct economic benefit would be an increase in the production of food crops and coffee. At full development, the net economic value of incremental proj- ect production is estimated to be US$9.0 million a year. The net contribu- tion of the project to foreign exchange earnings, through export expansion (coffee) and import substitution (rice and maize), would be about US$3.0 million per year at full development. The economic rate of return of the project over a 15-year life is estimated at 20 percent. This includes the costs and benefits of the rural roads to be improved under the complementary feeder roads project. xxii. The major risk that these results might not be obtained would de- rive from a decrease in the prospects for the export price of coffee and/or a delay in establishing an efficient system for the delivery of advice and inputs to farmers. Sensitivity analysis simulating these occurences by re- ducing the projected price of coffee by a further 20 percent and by delaying farmer take-up of project proposed improvements by a whole year still gives a rate of return of 15 percent, which would be satisfactory. Recommendation xxiii. With assurances and conditions on the points outlined in Chapter VII, the project is suitable for an IDA credit of US$13.0 million.   I. INTRODUCTION 1.01 The Government of Cameroon has requested Bank Group assistance to finance a rural development project in Western Province. The proposed project is part of a development program for the Western Highlands, comprising Western and North-West Provinces. A rural development project focusing on food crops was identified by the Bank's agriculture sector mission in 1974. Owing to the importance of coffee in the area, Government preferred a coffee-oriented project and commissioned a feasibility study along those lines. The resulting consultants' study, completed in April 1975, was found inappropriate for Bank financing because of the heavy emphasis on coffee. Subsequently, a balanced rural development project was prepared jointly by RMWA and Cameroonian techni- cians in late 1976. The proposed project was appraised by a mission composed of Messrs. A. Osei, J. Gamba and 0. Honisch (Bank) and K. Egger, C. Redfern and G. Sivilia (Consultants) which visited Cameroon in May-June 1977. 1.02 There have been 12 Bank Group operations in the agriculture sector in Cameroon. Three operations involve projects which have been satisfactorily completed: (i) the first CAMDEV oil palm and rubber project - Loan 490-CM, US$7.0 million, Credit 100-CM, US$11.0 million, in 1967; (ii) the first SOCAPALM oil palm project - Loans 593-CM, US$7.9 million in 1969 and 886-CM, US$1.7 million in 1973; and (iii) the first SEMRY rice project - Credit 302- CM, US$3.7 million in 1972. Four Bank-Group financed projects are in the course of implementation and are all progressing satisfactorily: (a) a livestock project, Loan 938-CM, US$11.6 million in 1974; (b) a cocoa project, Loan 1039-CM, US$6.5 million in 1975; (c) the Niete rubber project, Credit 574-CM, US$16.0 million in 1975; and (d) the Plaine des M'Bo Rural Develop- ment Project, Credit 672-CM, US$2.0 million in 1977. The five remaining operations are loans or credits approved recently: (a) a Technical Assis- tance Project, Credit 673-CM, US$4.5 million; (b) a second SOCAPALM project, Bank/Third Window Loans 1391/2 CM, US$25.0 million (both recently declared effective); and (c) the Rural Development Fund Project, Credit 723-CM, US$7.0 million. Two loans recently approved would continue operations financed ear- lier by the Bank Group - the SEMRY rice project and CAMDEV's planting program - and an IDA credit, recently approved, would finance a rural development proj- ect in the eastern part of the country (ZAPI - East). II. BACKGROUND A. General 2.01 Cameroon has a population estimated at 7.6 million (mid 1976) ayd growing at about 2.3% per annum2 The average population density of 16/km over a total area of 475,400 km masks a wide range. There are densely populated regions--the high plateau of the west, the savannah areas of the northern plains, and the Yaounde-Douala axis--separated by vast under-popu- lated areas. The natural vegetation ranges from lush tropical rain forests in the south to sahelian plains in the north, allowing for the cultivation of a wide range of crops.  -2- 2.02 Per capita income is about US$300 on average, with the absolute poverty level estimated at about US$75 per capita. In the early 1970's, growth of real GDP was slow (about 3% p.a.). With some improvement in the commodity terms of trade and a return to more normal weather, it is expected that GDP growth during the Fourth Plan Period (1977-81) will average 6% p.a. The achievement of this target will depend on Cameroon's ability to maintain the high rate of public investment observed during the period 1972-76. B. The Agricultural Sector 2.03 Agriculture is the dominant sector in the Cameroonian economy, employing 75% of the population and generating about 35% of GDP and over 70% of the value of exports. Over 90% of agricultural output comes from the traditional sector, indicating the importance of smallholder production of the traditional export crops - cocoa, coffee, cotton and groundnuts. In addition, the 1 million smallholders produce almost all the foodcrops on small parcels (averaging about 2 ha) using rudimentary tools and family labor for the most part. There is also an industrial plantation sector, made up of three government-owned and three privately-operated estates producing palm oil (mostly for local consumption) and rubber (for export). The country has considerable forest resources which are underutilized largely because of lack of transportation facilities. Livestock is an important economic activity in the North, which has nearly 40% of the national cattle herd (estimated at 3 million). There is good potential for developing fishery resources both offshore and inland. 2.04 Foodcrop production has grown much faster than the traditional export crops. This has been in response to rapidly growing demand in the urban areas. For a decade, the production terms of trade have consistently moved against the traditional export crops and in favor of food crops. To restore incentives to export production, Government has recently adopted several measures including higher producer prices and input subsidies (para 2.15). 2.05 Farm incomes and services to farmers are unevenly distributed. The highest income areas are the central savannah and western and coastal lowlands (US$150 per capita); the poorest are the northern plains and the western highlands (US$70 per capita) which are densely populated. Rural sector services, especially extension and credit, are weakest in the poorest areas. C. Institutions 2.06 Overall responsibility for development strategy and planning lies with the Ministry of Economy and Plan, which normally entrusts the planning  - 3 - and supervision of development programs in the rural sector to the Ministries of Agriculture and Livestock. Frequently, actual project implementation is by a state-owned development company (Societe d'Etat) such as SOCAPALM (plantation and outgrower oil palm), CAMDEV (plantation oil palm and rubber), HEVECAM (plantation rubber), SODECAO (smallholder cocoa) and SODEPA (live- stock). Development companies, although under the supervision of a ministry, operate according to commercial procedures. Other development activities are carried out by field services of the Ministry of Agriculture. 2.07 The Ministry of Agriculture is represented in each Province by a delegation from the main directorates - Agriculture, Rural Works, Community Development, Statistics, and Training. The same structure is repeated at the next lower administrative level (department). Services to farmers are provided by technical officers and extension agents, organized by district. These services are hampered by insufficient and inadequately-trained person- nel, and by the lack of a coherent work program and the means to implement it. These services would be reorganized under the project (para 3.07). Some ancillary services such as crop protection and seedling production for cocoa and coffee farmers, implemented by the ministry services, are financed by stabilization boards through the National Rural Credit Fund, FONADER (para 2.09). The Directorate of Cooperatives and Mutual Assistance (COOPMUT) in the Ministry of Agriculture is charged with promoting cooperative development and enforcing cooperative legislation--registering cooperatives, supervising functions such as elections and accounts, and training cooperative officials and members. COOPMUT's audit function in particular is not satisfactorily carried out (para 4.14). 2.08 The Union des Cooperatives de Cafe Arabica de l'Ouest, UCCAO, is the apex organization of the six departmental cooperatives operating in the arabica coffee-growing areas of Western Province. UCCAO operates under existing cooperative regulations, enforced by COOPMUT, which provide essen- tially for a commercially oriented management structure and accounting system. It is responsible for export marketing and grading of arabica coffee produced by members of its constituent cooperatives, and also arranges crop purchase finance for the individual cooperatives and provides central engi- neering and workshop services. Its major source of income is a 1% commission on coffee sales and a pro-rata charge for coffee grading. UCCAO's "free reserves consist of the difference between the f.o.b. price for coffee an costs to f.o.b., including the producer price and bonus. These reserves are primarily intended for price stabilization but may be invested in the rural sector, subject to the prior authorization of the Ministries of Agriculture and Economy and Plan. As of December 31, 1977, such free reserves would be about CFAF 6,900 million (US$28.2 million). UCCAO's management consists of a General Manager and a Deputy who is also the Finance and Accounting Manager. Policy is made by a Board of Directors composed primarily of elected officials from the constituent cooperatives. UCCAO has been well managed in the past, as evidenced by its operating results over the last few years (Annex 2, Table 2). With the provision of technical assistance to support a newly created extension service and to strengthen accounting and other headquarters staff (para 3.18 and 3.26), UCCAO can provide the overall direction needed for the successful implementation of the proposed project. Further details of UCCAO's organization and functions are at Annex 2, and its financial prospects are reviewed in Annex 11.  -4- 2.09 Agricultural research is the responsibility of the Institut de Recherche Agronome et Forestier (IRAF), which is part of the National Scien- tific Research Organization (ONAREST). ONAREST covers a wide range of sub- jects and no hierarchy of priorities has been established. Foodcrop research has been particularly weak in the past and special efforts are being made in projects financed by the Bank Group to overcome this (para 3.09). 2.10 The National Fund for Rural Development (FONADER) was created in 1973 and given the dual role of: (a) providing credit to farmers, precoopera- tives and cooperatives, and (b) appraising, financing and supervising a wide variety of rural development programs, from insecticides and fertilizer supply to village water supply and irrigation projects. It operates from its Yaounde headquarters, relying on the departmental field services of the ministries concerned for basic evaluation and implementation. The shortcomings of assuming such widespread responsibilities from a narrow base have now become apparent; a reorganization plan has been outlined and is presently under review by Government. This plan suggests concentrating FONADER's activities on agricultural credit operations with corollary changes in its financial and operational structure, such as the opening of regional offices, and offering full agricultural banking services. A detailed organization study, financed by the European Development Fund (FED), is under way. 2.11 Food crop marketing is almost entirely in private hands. The Government recently established the Mission de Developpement des Cultures Vivrieres (MIDEVIV), an official agency, to alleviate food shortages and high prices in urban areas. MIDEVIV concentrates on financing construction of urban markets and operating model farms and a model wholesaling business with a negligible impact. Marketing of export crops, although physically carried out by private dealers, is regulated by the Stabilization Funds (Caisses) of which there is one each for cocoa and coffee. For these crops, the Caisse receives from (or pays to) exporters the difference between the world price and the costs of production and marketing (including the producer price and export taxes). Government intends to reorganize the Caisses and to that end has established a commodity marketing agency (ONCPB). The eventual functions of ONCPB would not affect UCCAO which, exceptionally, retains the surplus earned from its arabica coffee exports (para 2.08). D. Agricultural Development Strategy 2.12 The Fourth Plan (1976-81) allocates 17% of public investments to the rural sector (compared to 12% in the previous plan period). Such investments would be about equally divided both as between smallholder development projects and industrial plantations and also between invest- ments for export-crop production and food crop production. The program also envisages a fairly even distribution of such investments between regions. 2.13 Implicit in the Fourth Plan is a two-pronged strategy. Because of the need for increased export revenues and to utilize potentially  -5- productive natural resources as well as the technical and managerial experience already acquired by existing organizations, about a quarter of the total pro- jected investment will be in the further expansion of plantation agriculture, including promotion of smallholder schemes. The rest of the investment program is addressed to promote and improve production in the traditional sector through a variety of means, such as integrated regional development, settlement schemes, and specific crop promotion. In livestock, a similar balance between project investment in modern ranch programs and in activities to improve traditional livestock production is planned. 2.14 Given the objectives of output diversification and regional and structural balance, Cameroon faces a difficult task in the efficient imple- mentation of development programs in the traditional sector. This sector's aborptive capacity is limited, and the design of integrated rural development projects reaching large numbers of smallholders, such as in the densely populated Western Highlands, has to include a major institution-building effort. Government has stepped up the organization of farmers into groups (precooperatives and cooperatives) to take a more active role in the develop- ment process. At the same time, Government has shown its preference for semiautonomous regional development agencies which have proved more efficient in the administration of rural development programs than the traditional field services of the Ministry of Agriculture. 2.15 To encourage the modernization of the traditional sector, various incentive programs have been instituted - credit for the purchase of modern tools and inputs, higher producer prices, and subsidies on certain key inputs including fertilizer and pest control material. III. THE PROJECT A. Project Concept and Project Area 3.01 Project Concept. The proposed project is part of a larger program of development for the overpopulated Western Highlands. For social reasons, resettlement projects can affect only a small proportion of the population in the foreseeable future. In the long run, improvements in agricultural pro- ductivity in situ are required to reduce the pressure of the population on soil fertility. The major objective of the proposed project is to provide for the development of institutions, procedures, and techniques capable of im- proving agricultural production and standards of living of a large number of small farmers in the project area. The system of multiple intercropping and the division of labor by sex (para 3.04) rule out development projects based on a single crop. The proposed project is thus designed to achieve more intensive cultivation of all crops included in the prevailing farming system, coupled with measures to prevent erosion and loss of soil fertility. Thus, apart from increasing foodcrop production, the proposed project would also  reverse the trend of declining coffee production, which began in 1973 (23,000 tons compared to an estimated 11,000 tons in 1977). Similar development projects in the remaining parts of the Western Highlands are currently being considered for financing by bilateral aid from the Federal Republic of Germany and FED. 3.02 Project Area. The project would be carried out in those parts of the Western Province which coincide with the arabica-coffee growing areas in which UCCAO cooperatives exist. The specific geographical division, districts and traditional chiefd9ms involved--see Map 13072--have a2population density varying from 56/km in Bamoun Division to over 290/km in the area around Bafoussam. 3.03 Physical Characteristics. The project area is on generally high ground (1,200-1,800 m) with slopes, almost all cultivated, frequently exceed- ing a 25% gradient. The natural vegetation of rain forest has given way to cultivated mixes virtually everywhere. In low-lying bottomlands, about 2,000 ha are mostly covered by raffia-palm which is used in construction or tapped for wine making. The climate has transitional tropical cnaracteristics, with temperatures and humidity moderated by the high altitude. Mean annual rainfall is 1,700 - 2,000 mm over a nine-month rainy season (March to November). Soils, of basaltic or gneiss origin, have a high organic matter content and are generally classified as having medium to high agricultural value. 3.04 Farm Systems and Land Tenure. Farm holdings are uniformly small in the project area; only 23% of holdings exceed 2.0 ha and such holdings represent less than 32% of cultivated land (Annex 1, para 18). The average family (seven persons including three working adults) farms 1.3 ha under an assortment of perennial (mostly coffee) and annual crops (usually for food) grown for the most part in mixed stands. Women are generally responsible for food crops and men for cash crops. As a result coffee trees originally planted in pure stand by men tend to be encroached upon by foodcrops culti- vated by women. The cropping system involves complex multiple intercropping, with a large variety of shrubs, trees and grass-type plants all grown on the same ridge. Controlled weeding and mulching, split ridging, and the variety of crops all contribute to erosion control and maintenance of soil fertil- ity. Customary cultivation rights are granted to male heads of family by the traditional ruler. Land so granted can and is effectively passed from one generation to the next. No problems of land tenure are expected. In the allocation of cultivable bottomland areas, which are generally communal property, traditional rulers would play a major role (para 3.15). B. Summary Project Description 3.05 The project is designed to increase the productivity, incomes and welfare of a rural community whose present per capita income is less than 30% of the national average. Over a four-year investment period, about 30,000 such families would benefit from better credit, input delivery, training, marketing and extension services; at full development (PY 9) all  80,000 families would participate in the project. The proposed project would also provide a means for channelling cooperative savings into productive investments in the rural sector (para 4.07). The project would consist of: (a) strengthening and equipping a newly created Directorate of Production Services within UCCAO which would be responsible for extension, pest control, seed production, training, and field demonstration and trials; (b) establishing a 30-bed training center to train extension agents, cooperative staff and members, and senior exten- sion staff; (c) improving field storage facilities for inputs, coffee, and foodcrops by upgrading 25 existing and constructing 10 new rural service centers; (d) establishing a revolving credit fund to finance seasonal inputs and small farm tools and equipment; (e) constructing about 220 water points to provide 18,000 rural families with safe and more convenient water supply. Each water point would also have simple facil- ities to help smallholders with the washing and fermen- tation of coffee; (f) constructing simple water control works to enable about 400 ha of currently uncultivated bottomlands to be put into productive use by some 1,300 families; (g) increasing the mechanical coffee grading capacity of UCCAO from 7,000 tons to 14,000 tons per year; and in- troducing machines capable of improving coffee quality; (h) establishing a project monitoring and evaluation unit which would record changes in a limited number of perfor- mance indicators as an aid in improving project implemen- tation and monitoring the impact of project actions; and (i) strengthening the Planning Unit in the Ministry of Agri- culture to enable it to evaluate the proposed and other projects. This unit would also supervise 34 man-months of consultants studies to examine the feasibility and design of a possible follow-up project. Bank Group financing for a related and complementary project for the improve- ment of feeder roads in the project area was recently approved. The network of rural service centers has been planned in coordination with the feeder roads program (Map 13208).  -8- C. Detailed Features Farm and Crop Development (Annex 3) 3.06 Phasing. Based on past experience of farmers' response to new technology, average adoption rates are expected to be high. The targets in terms of the number of farmers having access to improved services and of crop areas benefitting from better inputs would be as follows: PY2 PY4 PY 9 Farmers with access to rural service centers 10,000 30,200 81,200 Coffee area under full pest control (ha) 6,000 18,000 46,000 Maize area 1/ under improved seed (ha) 8,100 23,000 60,000 Water points completed 67 217 217 Bottomland developed (ha) 60 400 400 It is expected that the whole of PY 1 would be devoted to critical preparatory activities, including initial surveys and recruitment of key staff. 3.07 Production Services Directorate. UCCAO would create a new Director- ate of Production Services which would be responsible for extension, training, pest control and seed production. The new extension service would absorb existing personnel in the project area and recruit and train new agents. A phased program would increase extension coverage from the present average of one agent/900 farmers to a level of one agent/400 by the end of the project period. The service would be equipped with vehicles and radio communication equipment. 3.08 Extension Recommendations. Extension work would concentrate on improvements in (i) plant nutrition, (ii) pest control, (iii) seeds, and (iv) grain storage at farm level. Special efforts would also be made to improve coffee washing and fermentation by farmers (para 3.14); to promote erosion control methods (para 3.09) and to introduce modern farming practices in developed bottomlands (para 3.15). Fertilizer recommendations would be based on those established for coffee and maize for which detailed data on agronomic and economic results are available for the project area. Such data indicate that present average levels and composition of fertilizer use -- (100 kg/ha mostly of ammonium sulphate) are inadequate; average consumption would accordingly be increased to 400 kg/ha at a 3:1 ratio of compound to sulphate. There are indications that other plants in the cropping system would also benefit from increased rates of fertilization. The average annual infestation rate of the two major coffee plant pests,antestia and anthracnose, are re- spectively 50 and 30%. The proposed pest control unit (PCU) would provide direct spraying services for the control of antestia. In addition, for protective spraying against anthracnose, sprayers and appropriate chemicals 1/ On a pure crop basis.  - 9 - would be made available to farmers under the supervision of PCU. At full development the equivalent of pure coffee plantations protected against antestia each year would be about 46,000 ha, and about 31,000 ha against anthracnose. Improved varieties of maize, groundnuts, and potatoes to be produced by a new seed production center, financed under the project, would be sold to farmers. The center would be built around an existing agricultural station near Foumbot and equipped with agricultural machinery and mechanized seed handling and conditioning equipment. Foundation maize and groundnut seed would be procured from the IRAF station at Dschang, and tested varieties of potato seed stock would be imported. It is intended that the seed production unit should develop into an independent commercial operation when demand justifies this (para 3.23). Finally, to reduce post-harvest losses (es- pecially of maize), estimated at 30%, credit would be provided for the pur- chase of wire mesh by farmers, who would construct a crib, the design of which has already been tested in the project area. Food storage and treatment of stored grain would reduce losses by about half. 3.09 Research and Demonstration. UCCAO would contract with IRAF for applied agronomic research into certain selected topics including minimum tillage, rotations and crop combinations, and production of breeder and foundation seed. Field trials and demonstration plots would be established by the Field Trials and Demonstration Unit (FTDU) to be created under the project. Trials would concentrate on eco-farming models - the integration of productive trees, shrubs and crops to achieve an ecologically stable farming system - as a defense against the effects of over-cultivation and excessive rainfall on soil fertility in mountainous areas. FTDU would introduce techniques based on similar experiments in Rwanda, including cultivation of crops better adjusted to less fertile slopes and leguminous crops on exhausted soils, and various methods of, and species suitable, for mulching. Provision would be included in the project for financing visits by FTDU staff to Rwanda to study the successful experiment at first hand. FTDU would have a small three-man unit for planting and maintaining forest in support of its eco-farming pro- gram. Nursery materials would come from existing farms run by the Provincial Forestry Department. 3.10 Training. To enable the extension program to be carried out effi- ciently, a new 30-bed capacity training center would be established under the project (para 3.24). An initial four-months course would be conducted for newly recruited extension agents, and shorter courses would be conducted for cooperative staff featuring practical subjects. The training center would include a-small unit for producing audiovisual and propaganda material to aid extension agents in their work. This unit would be provided with an offset press, film making equipment, and a mobile cinema van. Cooperative Service Centers (Annex 6) 3.11 To improve the services available to cooperative members, a network of Cooperative Service Centers (CSC), each covering about 3,000 farmers, would be established under the control of UCCAO cooperatives. A typical CSC would provide office space for field staff and storage for coffee, food crops,  - 10 - inputs and farm materials and equipment. Inputs and services could be pur- chased by all farmers, including those not members of a cooperative. There exist rudimentary structures which are used by cooperatives for coffee stor- age; 25 such centers would be upgraded and 10 new ones constructed under the project. To complement existing cooperative vehicles, an additional 16 trucks and 13 pick-ups would be purchased under the project to handle crop, input and personnel transport. Smallholder Credit (Annex 11) 3.12 The project would establish a Revolving Credit Fund which would be financed by UCCAO and Government and be administered by UCCAO (paras 4.07 and 4.08). Seasonal credit, repayable in one year, would be given for fertilizer, improved seed, and chemicals for pest control and seed treatment. Three-year credits, covering 90% of cost, would be given for the purchase of depulpers, sprayers and wire netting for the construction of grain storage cribs. Farmers would make a 10% downpayment on all items purchased with the medium- term credit facilities. By PY5 the credit fund is expected to amount to CFAF 1.2 billion (US$4.9 million), adequate to finance the seasonal needs of 30,000 farmers. Village Water Supplies (Annex 8) 3.13 Smallholder washing and fermentation of harvested coffee with inadequate and polluted water is largely responsible for the prevalence of "stinking beans," a quality defect which causes UCCAO coffee to be purchased at a discount. To provide clean water both for human consumption and for coffee treatment, about 220 water points would be constructed during the four-year investment period. The water supply network proposed includes wells, spring-water collection systems, and small and medium piped schemes based on springs or river offtake. T