Liberia - Rubber Development Project

Document of The World Bank FOR OFFICIAL USE ONLY FILE COPY Report No. 1 771 -LER STAFF APPRAISAL REPORT LIBERIA RUBBER DEVELOPMENT PROJECT March 6, 1978 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 Currency Unit - United States Dollars WEIGHTS AND MEASURES 1 acre (ac) - 0.405 hectares (ha) 1 mile - 1.61 kilometers (km) 1 square mile - 640 acres - 259 ha 1 metric ton - 0.98 long ton ABBREVIATIONS AETC Agricultural Extension and Training Center AHT Agrar-und-Hydrotechnik GMBH ACDB Agricultural and Cooperative Development Bank BWI Booker Washington Institute CDC Commonwealth Development Corporation CTO Chief Technical Officer coo Chief Operations Officer GOL Government of Liberia GDP Gross Domestic Product IDA International Development Association IBRD International Bank for Reconstruction and Development LRPC Liberia Rubber Processing Corporation MA Ministry of Agriculture MLM Ministry of Lands and Mines ODM Overseas Development Ministry PRS Pilot Rubber Scheme PSC Project Steering Committee RAS Rubber Advisory Service RPAL Rubber Planters Association of Liberia SRA Senior Rubber Advisor USAID United States Agency for International Development UL University of Liberia FISCAL YEAR July 1 - June 30  FOR OFFICIAL USE ONLY LIBERIA RUBBER DEVELOPMENT PROJECT Table of Contents Page No. I. INTRODUCTION ......... ........................ .1 II. THE PROJECT AREA .................... .................... 1 III. THE PROJECT .................................. 3 A. Summary Project Description ............. 3 B. Detailed Features ...... ....................... 4 C. Cost Estimates ...................................... 8 D. Proposed Financing ....... .......................... . 9 E. Procurement ......................................... 11 F. Disbursement ........................................ 11 G. Accounts and Audits ...... ........................... 12 IV. TECHNOLOGY AND PRODUCTION SPECIFICATIONS ............... . 12 A. Planting Materials ............... .. ................. 12 V. PROJECT IMPLEMENTATION ...... ............................ 20 A. Organization ........................................ 20 B. Rubber Development Unit ............................. 20 C. Criteria for Participation ..... ..................... 22 D. Loan Processing ..................................... 24 E. Credit Recovery .................................... 25 F. Programming and Budgeting ..... ...................... 26 VI. PRODUCTION, DEMAND, MARKETING AND PRICES ........ ........ 26 VII. FINANCIAL ANALYSIS ...................................... 29 A. Financial Implications for Farmers .. ................ 29 B. Financial Implications to Government ........ ........ 32 VIII. ECONOMIC ANALYSIS ....... ................................ 32 IX. AGREEMENTS REACHED AND RECOMMENDATIONS .................. 38 This staff appraisal report is based on the findings of an appraisal mission which visited Liberia in May/June 1977 composed of Messrs. Ali, Saadat, Greenwood (Bank) and Campbell (Consultant). 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.  Table of Contents (continued) Page No. Charts Organization Chart 18073 Tables Table 1: Summary of Main Characteristics in Project Area .... 2 Table 2: Distribution of Farm Sizes in the Project Area ..... 2 Table 3: Summary of Project Costs ........................... 9 Table 4: Financing Plan by Project Component ............... . 10 Table 5: Characteristics of Selected Clones .... ............. 13 Table 6: Budded Stump Requirements .......................... 14 Table 7: Phasinng of Budded Stump Nurseries and Production 14 Table 8: Phasing of Budwood Nurseries, Budwood Requirements and Production .................................. 15 Table 9: Yield Data and Assumed Project Replanting Yield .... 16 Table 10: Estimated Cost per Acre of Project Replanting, Proposed Credit and Farmer Contribution .... ..... 17 Table 11: Estimated Cost for Rehabilitating One Acre .... ..... 18 Table 12: Training Program ................................... 19 Table 13: Projected Producer Price of Rubber ................ . 28 Table 14: Illustrative Cash Flow - Three Acre Farm (Replanting) .................................... 30 Table 15: Illustrative Cash Flow - 15 Acre Farm (Replanting) . 31 Table 16: Illustrative Cash Flow - Eight Acres Rehabili- tation .......................................... 33 Table 17: Illustrative Government Cash Flow .... .............. 34 Table 18: Economic Rate of Return Calculation .... ............ 37 Table 19: Sensitivity Test ................................... 40 Annexes ANNEX 1 Table 1: Summary of Project Costs .41 Table 2: Building Costs ........................ 42 Table 3: Vehicle Costs .43 Table 4: Equipment and Furniture Costs .44 Table 5: Staff Salaries .45 Table 6: Vehicle Operating and Other Recurrent Costs .46 Table 7: Cost of Training. 47 ANNEX 2 Table 1: Detailed Financing Plan .48 Table 2: Estimated Schedule of Disbursement. 49 ANNEX 3 List of Project File Working Papers. 50  LIBERIA RUBBER DEVELOPMENT PROJECT I. INTRODUCTION 1.01 The Government of Liberia (GOL) has requested Bank Group assistance in financing a rubber development project. This report appraises a project designed to strengthen the Liberian-owned rubber industry by: improving management and technical knowhow; developing an efficient rubber extension service; providing funds for rehabilitating rubber of tappable age and for replanting abandoned rubber in accessible areas with high-yielding material; assisting smallholders in marketing and processing; and developing an appro- priate rubber pricing policy. 1.02 During the 5-year investment period, approximately 40,000 acres of low-yielding, poorly managed rubber would be replanted, and 23,500 acres of mature rubber tapped under the control of a Rubber Development Unit (RDU) to be created within the Ministry of Agriculture (MA). Approximately 4,000 farm families would directly benefit from the replanting program and 2,300 from the rehabilitation program. 1.03 This project was identified by GOL and prepared by consultants, Agrar-UND-Hydrotechnik (AHT), financed under Liberia Agricultural Development and Technical Assistance Project (Credit 306-LBR). The Pilot Rubber Scheme (PRS), also financed under Credit 306-LBR, has provided useful organizational, financial and technical lessons which would be beneficial to the proposed project. Lofa County Agricultural Development Project (Credit 577-LBR), financed by IDA (US$6.0 million), USAID (US$5.0 million) and GOL (US$6.0 mil- lion), and Bong County (Credit 700-LBR) Agricultural Development Project, financed by IDA (US$7.0 million), USAID (US$6.0 million and GOL (US$7.3 mil- lion) were also prepared with funds provided under Credit 306-LBR. Overall, the aforementioned projects are progressing satisfactorily. However, the Bong County project has not been signed, due to delays in appointing senior staff. II. THE PROJECT AREA General 2.01 The project area, shown in Map IBRD13114, includes the counties shown in Table 1. The area consists of two main zones. The first (Zone 1) consists of Marshall and Bomi Territories, Montserrado and Grand Bassa and the second (Zone II) comprising Bong and Nimba Counties. It covers some 288,000 acres of rubber lands (75% of the total acreage of Liberian-owned rubber farms). Development would affect 24% of Liberian-owned rubber in the area and  - 2 - would take place on farms located on both sides of the main Monrovia-Ganta road. Development would not take place contiguously, but would depend largely on the distribution of small farmer holdings, which are scattered. Nurseries, training centers, headquarters and processing factories are easily accessible. Key charac- teristics of the project area are summarized in Tables 1 and 2. Smallholders in the project area grow rice, cassava and rubber and work part-time for large farmers. Sinoe, Maryland and Lofa Counties, although they have rubber, were excluded from the project area for different reasons. In Sinoe, more than 90% of holdings are greater than 100 acres and would not qualify for project assistance. In the case of Lofa, Government decided that with one Bank-financed project in the county, they would concentrate on rubber development elsewhere. Maryland has been excluded because of labor shortages arising from competing needs of the rubber, sugar, oil palm and forest industries. TABLE 1 SUMMARY OF MAIN CHARACTERISTICS IN PROJECT AREA No. of Agricul- Counties and Area Under Rubber Population Density tural Households Territories (Acres) ('000) Square Mile ('000) Montserrado 51.2 137 17 Bong 157.2 54 26 Grand Bassa 12.7 24 16 Nimba 18.8 54 33 Marshall 14.2 NA NA Bomi 28.0 NA NA RAS survey of farms (less than 100 acres) in the project area showed the majority (55%) were less than 20 acres (Table 2). TABLE 2 DISTRIBUTION OF FARM SIZES IN THE PROJECT AREA Size Group (Acres) % of Total Farms Average No. of Tasks -/ per Farm < 10 32 1.5 10-20 33 4.6 21-50 23 11.5 51-100 12 23.8 All Farms < 100 100 7.5 1/ A task equals approximately 4 acres.  -3- Physical Aspects 2.02 Topography and Soils. The project area varies widely in topography. It is generally heavy rolling in Montserrado and lower Bong Counties, but gently rolling in the counties further north. Soils are generally deep and intensively weathered with a weak porous and loamy texture. They can be divided into gravelly, yellowish brown (Plinthic Ferra-soils) and gravel-free yellowish and reddish brown soils. Gravelly soils are typical of the rolling uplands. Practically all soils show a gradual increase of clay content with depth. All have a low fertility status. They are generally suitable for rubber growing, but would require fertilizers during the growing period. 2.03 Climate. Climate is generally very favorable for rubber cultiva- tion. It is hot (average 80