Liberia - Decoris Oil Palm Project

Document of The World Bank FOR OFFICIAL USE ONLY F L /.// I 1 FILE UU Y Report No. 2526-LBR LIBERIA DECORIS OIL PALM PROJECT STAFF APPRAISAL REPORT September 26, 1979 West Africa Projects Department Agriculture Division 4 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. LItERIA DECORIS OIL PALM PROJECT Currency Equivalent Currency Unit - hited States Dollars Weights and Measures 1 metric ton =. .98 long ton 1 long ton = 2,240 lb =1.016 metric ton 1 hectare (ha) 2,47 acres 1 acre = 0.405 h0etare 1 kilometer = 0.62 mile 1 mile = 1.609 kilometer Abbreviations ADB - African Development Bank AGRIMECO - Agricultural Mechanization Company CDC - Commonwealth Development Corporation DOPC - Decoris Oil Palm Company EEC - European Economic CommupPty ffb - Fresh Fruit Bunches GDP - Gross Domestic Product GNP - Gross National Product GOL - Government of Liberia IRHO - Institut de Recherches pour les Huiles et 016agineux LBDI - Liberian Bank for Developiuent and Investment LPMC - Liberian Produce Marketing Corporation LPPC - Liberia Palm Products Corporation LIBSUCO - Liberia Sugar Corporation LIPALMCO - Liberia Palm Oil Processing Company MA - Ministry of Agriculture MFN - Ministry of Finance MLG - Ministry of Local Government MLM - Ministry of Lands and Mines MPW - Ministry of Public Works NPA - National Ports Authority OPPC - Oil Palm Pricing Committee SODEPALM - Soci6t& pour le D6veloppement et l'Exploitation du Palmier A Huile Fiscal Year July 1 - June 30 FOR OFFICIAL USE ONLY LIBERIA DECORIS OIL PALM PROJECT Table of Contents Page No. I. THE AGRICULTURAL SECTOR ....................... *............ ... 1 A. Background ....................... . . . . . ............. 1 B. Sector Characteristics ......................... 2 C. Sector Objectives, Strategies and Constraints ............ 2 D. Bank's Role in Agriculture and Rural Development 3 E. Agricultural Institutions ......................... 4 F. The Oil Palm Sub-Sector ................... ....... * ...... 5 II. THE PROJECT AREA .................................... .. * ...... 8 III. THE PROJECT .......................... ............ * ......... 10 A. General Description . ................. . ................. 10 B. Detailed Features ..................*.. . ........... 11 C. Cost Estimates ........................................... 17 D. Proposed Financing Plan .................................. 18 E. Procurement ...........................00.................. 20 F. Disbursements ..... ........................................ 21 G. Accounts and Audits ... ..... ........... ..... ....... 6 .... 22 IV. PROJECT IMPLEMENTATION ...............o ............... 22 A. Organization ...... ........ ...... ...................... 22 B. The Decoris Oil Palm Company .................. ........ 22 V. AGRICULTURAL PRODUCTION AND TECHNOLOGICAL SPECIFICATIONS ..... 24 A. Production and Yields ....*................. 4............. 24 B. Cultivation Techniques................................... 25 C. Oil Mill ...................................... 25 D. Environmental Considerations ............................ 25 A' VI. MARKETS, PRICES, FINANCIAL ANALYSIS .......................... 26 A. Markets .. .... . .. ....... ............. ............. 26 B. Prices ................................................... 26 C. Farmer Benefits ...................................... ... 27 This report is based on the findings of an IBRD appraisal mission which visited Liberia in January/February 1979, composed of Messrs. R. Ali and C. Hachero (Bank) and J. Bogaerts, L. Daw, and J. Olivin (Consultants). 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. D. Financial Implications for DOPC ........................... 27 E. Financial Implications for Government ..................... 28 VII. BENEFITS AND JUSTIFICATIONS ................................... 28 A. Project Benefits ......... ......... .. ................... 28 B. Economic Rate of Return ................................ 29 C. Sensitivity and Risk Analysis ............................. 29 VIII. AGREEMENTS, CONDITIONS AND RECMMNDATION ............................... ....... 31 List of Annexes Annex 1. Summary of Project Cost Annex 2. Detailed Financing Plan Annex 3. Table 1. Illustrative Cash Flow 2.5 ha Smallholder Farm- " Table 2. Projected Cash Flow Decoris Oil Palm Company Table 3. Projected Profit and Loss Statement Decoris Oil Palm Company Table 4. Projected Balance Sheet Decoris Oil Palm Company Table 5. Projected Government Cash Flow Annex 4. Table 1. Estimated Schedule of Disbursement IBRD " Table 2. Estimated Schedule of Disbursement EEC Annex 5. Assumptions Underlying Rate of Return Calculations " Table 1. Calculations Economic Mill Gate Value Palm Oil and Palm Kernel Annex 6. Table 1. Economic Rate of Return for the Project "o Table 2. Economic Rate of Return for the Nucleus Estate " Table 3. Economic Rate of Return for the Smallholder Annex 7. Project File Working Documents and Data Supporting Charts and Maps IBRD Chart No. 20389. Organization Chart Decoris Oil Palm Company IBRD Chart No. 20224. Schedule of Technical Operations IBRD Map No. 14275. Map of Project Area LIBERIA DECORIS OIL PALM PROJECT I. THE AGRICULTURAL SECTOR A. Background 1.01 Liberia. The total area of Liberia is 111,400 sq ki, of which 6,200 sq km are used for agriculture. Total population is about 1.7 million; average density is about 15 per sq km. Soils are generally fertile and the climate is suitable for a variety of field and tree crops. Almost 60% of the population or 160,000 families are classified as agricultural households. Average family size is about 6-7 per household. 1.02 Economic Trends. Liberia has a highly dualistic economy; its primarily agricultural economy co-exists with a foreign controlled enclave sector dominated by iron ore mining. The enclave sector is export-oriented and produces, besides iron ore, rubber and forest products. It provides about 70% of export earnings, generates about 25% GDP, and 15% of all Govern- ment revenues. Iron ore is the major export earner since the major cash crops, rubber, coffee, and cocoa, contribute less than 10% to GDP and only 15% to export earnings. The weakness of Liberia's open and narrowly based economy became very evident over the last three years. The decline in demand for iron and steel products in the industrial world was felt hard in Liberia as iron ore production fell by more than 30% during this period. This has had consid- erable adverse effects on the growth of GDP, balance of payments and government revenues. GDP growth rate averaged about 5% per year between 1967 and 1974; however, it dropped to about 1% in 1975, and preliminary estimates indicate that it will not exceed 1.6% per year between 1977 and 1978. There has been an upward trend in the contribution to GDP of the agriculture, forestry and services sectors, but this was insufficient to offset the poor performance of the iron ore sector. There was a sharp decline in the resource balance from a surplus of US$91.0 million in 1974 to deficits estimated at US$32.0 million in 1977. Government of Liberia (GOL) is extremely concerned with the above trends. It is therefore making a serious effort to diversify the economy and is emphasizing development of its export-oriented tree crop production. 1.03 Population growth is about 3.3% per annum; about 2.9% is due to natural growth and 0.4% to migration from outside. In recent years urban population has grown by about 6% per annum, due to heavy migration from rural areas. About 40% of the population is under 15 years of age. The structural imbalance in the economy between the modern sector and the tradi- tional sector is also reflected in the employment and income data. Agricul- ture provides employment for about 73% of the total labor force of 650,000, about 32% of whom are women; industry employs about 14%. Employment by mining companies is negligible. Rubber concessions employ about 7% of the total labor force or about 20% of the total labor force in the modern sector. -2 - Income distribution is sharply skewed. Overall average per capita GNP is about US$460 per annum, but about 55% of households, mainly rural, have annual incomes of US$100 or less while 5% have annual incomes of US$2,500 and above. B. Sector Characteristics 1.04 Three distinct types of farming operations exist: (a) concession farms: large foreign-owned plantations, 3,000 ha to 38,000 ha in size, producing exclusively for exports; (b) Liberian-owned commercial farms: farms, 20 ha to 200 ha in size, engaged primarily in rubber production but with secondary interests in coffee, cocoa and oil palm; (c) traditional farms: small farmers cultivating at any one time 2 ha to 3.5 ha of land, mainly for home consumption. The latter comprises over 90% of all households in agriculture. In addition there is the Liberia Sugar Corporation (LIBSUCO), which produces for the domestic market. The principal cash crops are rubber, coffee and cocoa. Rubber production is currently about 80,000 metric tons, about 70% of which is produced by six concessions on about 60,000 ha, the rest by about 5,400 Liberian farmers. Average yields on concession farms are 2-3 times those on Liberian farms. Annual production of coffee is about 10,000 tons from about 30,000 ha. About 3,500 tons of cocoa are produced from about 9,500 ha. 1.05 Rice and cassava are the main crops of traditional farmers, pro- ducing about 250,000 tons of rice from 215,000 ha and about 155,000 tons of cassava from 36,000 ha. Livestock development is negligible. Total cattle population is estimated at 7,300; sheep: 11,500; and pigs: 10,500. Crops of traditional farms are generally low yielding. Farmers have little access to capital and agricultural inputs and operate in an environment with minimal infrastructure. Coffee and cocoa are small farmers' main cash crops. They also harvest fruit from wild oil palm. C. Sector Objectives, Strategies and Constraints 1.06 Objectives. The five-year National Socio-Economic Development Plan (1976-1980) attaches priority to agriculture and rural development, and is considered to be the cornerstone of GOL's development strategy. Its objectives are to diversify and modernize agricultural production, increase productivity, improve associated rural economic activities such as marketing and processing, and provide social and other basic infrastructure. GOL aims at achieving balanced development, participation of the entire population in the development efforts, and a more equitable distribution in benefits of economic growth. 1.07 Strategies. The strategy for agricultural development involves: (i) establishment and operation of large industrial estates with associated smallholder participation for oil palm, coconuts, and sugar cane production; these would be run by public sector corporations; - 3 - (ii) encouragement of smallholder rubber, coffee and cocoa production; (iii) implementation of integrated agricultural development projects to raise the productivity, income and living conditions of traditional farmers; and (iv) implementation of several "special projects" such as the rice program which features fully mechanized land clearing and cultivation of cleared areas by smallholders. The undesirability of pursuing the fourth strategy is now appreciated by Government since it has led to uneconomic investments in two large projects aimed at increasing rice production. Government is now placing emphasis on rural development projects based on modified versions of the Bank assisted Lofa and Bong Projects (para 1.09). However, it is recognized that large-scale tree-crop estates can make an important contribution to expansion of exports and Government revenues, provided they are properly designed and managed. The proposed export-oriented Decoris Oil Palm Project which includes a nucleus estate and smallholder component is a good example of this. 1.08 Constraints. There are several constraints on development of the sector: (i) There is a shortage of qualified middle and higher level technicians, such as extension officers and crop specialists, without which no project can be success- fully implemented. (ii) Technological levels of subsistence farmers are low; and farmers' organizations, particularly the cooperative movement, are weak. (iii) The Ministry of Agriculture (MA) is weak in areas of sectoral planning, project preparation, and monitoring and evaluation of ongoing projects. (iv) There is a lack of infrastructure and support services and there are distribution and marketing deficiencies. Feeder roads, storage centers and buying points are inadequate. D. Bank's Role In Agriculture and Rural Development 1.09 Current. The Bank supports Liberia's balanced approach except for large-scale mechanized rice production; since it is considered that rice as well as most other crops can be produced more efficiently by small- holders under integrated agricultural schemes, emhasis in Bank support. is on financing smallholder rural development. However, tree crop and forestry projects involving both large-scale enterprises and small farm participation are also receiving attention. The ongoing Bank group-financed projects are generally successful. The first, Cr. 306-LBR, an Agricultural Development and Technical Assistance project, suffered during its early stages because of financial, administrative and managerial problems. But the situation gradually improved and all project objectives except for the Pilot Rubber Scheme were achieved. Preinvestment studies carried out under the project led to three projects. The Lofa Agricultural Development Project, Cr. 577-LBR of August 1, 1975, is progressing satisfactorily with good expatriate and Liberian management staff. Appraisal targets for swamp rice and coffee should be reached; however there is likely to be a shortfall in cocoa output. Farmer response is good. The Bong Agricultural Development Project, Cr. 700-LBR of December 29, 1977, is also being implemented satis- factorily. This is an integrated project similar to the Lofa Project. The Rubber Project, Cr. 786/Ln. 1544-LBR of April 21, 1978, aims at strengthening the Liberian-owned rubber industry. Project start-up activities such as staffing, land acquisition for nurseries and building sites, preparation of building plans, etc. have started but it is highly unlikely that the 833 ha ] planting target for 1979 could be reached because of insufficient_planting material and staffing difficulties. This project at full development would contribute substantially to Liberia's export earnings. A forestry project, Cr. 839-LBR, which became effective on July 28, 1978, aims to strengthen forestry institutions and produce lumber mainly for exports. The need to develop local expertise is recognized in all Bank-financed projects and training programs have been included in them for both project staff and farmers. 1.10 Future. Support will continue to be given to a balanced approach to agricultural development in Liberia with emphasis on rural development (RD). One RD project is being prepared by Liberia with guidance from the Bank. Although discussions on its composition are still taking place, it is likely to include components aimed at strengthening institutions for administer- ing agricultural development at the county level as well as productive and social infrastructure investments. Follow-up rubber and forestry projects are planned and assistance would continue to be given to coffee and cocoa development. These would contribute substantially to foreign exchange earnings. The Bank will also continue to assist in developing local expertise; a Bank mission in February 1979 examined manpower problems in Liberia and identified training needs for the agricultural sector. The report will form the basis for develop- ing a comprehensive manpower development program. A recently signed feeder road project (Ln. 2236a-LBR) will improve the road network of the Western and Central Counties of Liberia and provide infrastructure support for existing and future projects. E. Agricultural Institutions 1.11 Ministry of Agriculture (MA) is responsible for planning and implementing agricultural programs. While its budgetary allocations more than tripled between 1973 and 1976, its impact has been limited because of inadequately qualified and experienced technical staff. Its budget is spent mainly on salaries and wages. Minimal logistic support is - 5 - provided for field staff. MA is fully aware of the need to streamline its activities and is in the process of decentralizing its operations by strength- ening all its county offices. Under Cr. 306-LBR, the Bank provided technical assistance to GOL for strengthening its headquarters operations. Further assistance would be provided to strengthen institutions at the county level under the RD projects mentioned in para 1.10. 1.12 The Agricultural Mechanization Co. (AGRIMECO). This is a wholly owned Government corporation, established in 1972 to implement large-scale land clearing and farm mechanization schemes. It is operated as a commercial company empowered to provide machinery services to anyone. Since inception AGRDMECO has been clearing land mainly for MA-sponsored projects. AGRIMECO was not considered suitable for smallholder development in the Bank-financed Lofa and Bong Projects (Cr. 577-LBR and Cr. 700-LBR) on technological, finan- cial and economic grounds. It was ruled out under the present project for the same reasons. Its price quotations for land clearing are US$1,600 per hectare, which is more than double the estimated costs if the project does the land clearing itself (para 3.06). AGRIMECO's overhead costs and profit margins account for most of the cost differential. 1.13 Other Institutions. Other institutions which would be directly involved in project implementation include the Ministries of Lands and Mines (MLM), Public Works (MPW), Local Government (MLG) and the National Ports Authority (NPA). MLM is responsible for surveying and deeding all Government lands. MFW would be responsible for constructing, rehabilitating, and resur- facing some roads in the project area (para 3.15) and together with MLG for maintenance of public roads in the project area. NPA is responsible for operation of all ports in Liberia. It would provide space for the proposed oil palm company for its operations at Harper. These four institutions have common problems: insufficient technical staff, inadequate management and lack of vehicular support. MLM, in particular, lacks staff capable of carrying out surveys for obtaining land titles; they would have to be supported by survey teams hired from the private sector. F. The Oil Palm Sub-Sector 1.14 Production. Liberia has approximately 10,000 ha of cultivated plantations, about 50% of which is in full production. There are about 35,000 ha of wild groves, which are harvested by small farmers for home consumption and village markets. About 80% of the cultivated area is in the hands of large farmers and corporations ranging in size from 65 ha to 3,000 ha. The remaining 20% is operated by small farmers with GOL's technical and financial assistance. Present palm oil production is estimated to be around 10,000 tons. Average yields are relatively low: cultivated plantations produce about 1.75 tons of palm oil and 0.25 tons of palm kernel oil per hectare per year while yield from wild groves is only about 15% of this. 1.15 The oil palm industry is still in its early stages of development. The largest and oldest plantations are the 3,000 ha LIBINC plantation in Bassa County (established in 1965), and the 2,000 ha West Africa Oil Palm Corporation (WAC), plantation in Cape Mount County. Both are privately owned. GOL's -6- involvement in the sector did not begin until 1972 when it began to provide technical and financial assistance to farmers through the Liberian Produce Marketing Corporation (LPMC, para 1.18). There are three smallholder farming projects being operated by LPMC. These are the 900 ha project at Foya-Solumba, a 300 ha project in Zlehtown and a 270 ha project in Kpatwee. These projects have been in operation since 1974 and are being financed wholly by GOL. 1.16 Government's first attempt to develop a large-scale industrial estate with associated smallholders followed the signing of an agricultural cooperation agreement between the Presidents of the Ivory Coast and Liberia. Ivory Coast agreed to assist Liberia in developing its oil palm and coconut industry. As part of the assistance, the proposed oil palm project at Decoris was prepared together with two other projects at Buto in Sinoe County, and Dube in Grand Gedeh County, by the Ivorian Corporation, Socigt6 pour le D&veloppement et l'Exploitation du Palmier I Huile (SODEPALM) in 1976. GOL would like to develop a 5,200 ha complex at Buto (3,100 ha of nucleus estate and 2,100 ha of smallholder); a 5,200 ha project at Dube (4,166 ha of nucleus estate and 1,034 ha of smallholder) and the Decoris project. The Buto project is being financed by the European Economic Community (EEC) and the Dube project by the Liberian Bank for Development and Investment (LBDI). Under an agreement signed in March 1977 SODEPALM was assigned a contract to manage the Buto and Dube projects for the Liberia Palm Products Corporation (LPPC) (para 1.19). In 1977, 510 ha were planted at Buto and in 1978, 940 ha. Plans are to plant 1,650 ha in 1979,, but this may prove over- ambitious as only about 300 ha were cleared and windrowed at the time of appraisal in January/February 1979. At Dube about 615 ha have been developed. If developed as planned, these three projects at full maturity, around 1993, would produce about 50,000 - 60,000 tons of palm oil annually. This would be less than 1% of world production and about 1% of the amount sold on the entire world export market. 1.17 Processing. Processing capacity is limited and inefficient. Mills are of the Vandekerckhove Rural Extraction Unit types, with capacities in the range of 1-10 tons of fresh fruit bunches (ffb) per hour. LPMC has been operating a 1 ton ffb/hour mill at Totota since the middle of 1975. It plans to open one of similar size and make at Foya in mid-1979. There are also three private plants: LIBINC: with a capacity of 10 tons ffb/hour, WAC: 5 tons ffb/hour and another with capacity of 1 ton ffb/hour. The oil extraction rates of these mills average about 15% which is quite low compared to 22-23% for well run modern mills. LPMC also has a palm kernel oil mill at the Freeport Zone of Monrovia, in operation since 1972. It has a processing capacity of 18,000 tons of palm kernel annually but currently uses less than half of this. 1.18 Institutions: Liberian Produce Marketing Corporation (LPMC). This company is involved in marketing tree crop products other than rubber. However, there are privately owned companies in the oil palm sub-sector such as LIBINC and WAC (para 1.15) which produce and market their own products. LPMC was established in 1962 by GOL in partnership with the Danish East Asiatic Company (EAC). In December 1975, GOL acquired EAC's 50% shareholding, but retained EAC as managers until December 31, 1977. The only remaining expatriate staff is the General Manager. LPMC has autonomous status within MA. In 1971 LPMC was given overall responsibility by GOL for its tree crops program. -7 - In 1972 it began operation of a palm kernel processing mill (para 1.17). In_1977 GOL established the Liberia Palm Products Corporation as a subsidiary of LPMC for the purpose of carrying out the Buto project (para 1.19). LPMC has responsibility for GOL tree crops program, but has suffered from a shortage of qualified technical staff to carry out the program since its inception. Even now there are no Liberians among LPMC's senior tree crop staff with adequate technical qualifications and experience to execute any sizable project. 1.19 Liberia Palm Products Corporation (LPPC). LPPC was established in January 1977 as part of the external financing agreement between GOL and EEC for the Buto project. Its Board of Directors consists of representatives of the Ministries of Finance, Agriculture, Commerce, Planning, Local Government, the General Manager of LPMC and LPPC's Managing Director. Its share capital is US$0.8 million. Although supposedly financially autonomous, its operating expenses are met by the Ministry of Finance (MFN) as if it were a Government department. LPPC currently suffers from inadequate management, lack of adequate financial and accounting controls and lack of experienced technical staff. 1.20 Future Policy. GOL intends to continue developing industrial oil palm estates with associated smallholders and continue providing technical and financial assistance through LPMC to small and medium sized producers in areas where soils and climate favor oil palm production. GOL also intends to rationalize the institutions for administering the subsector. - 8 - II. THE PROJECT AREA 2.01 Location. The project is located in Maryland County. It falls within an area bounded on the North by latitude 4045'N; South, by latitude 4029'N; East, by longitude 7 4'W;and West, by longitude 800'W. The distance by road from Monrovia is 760 km and from Harper 32 km (IBRD Map No. 14275). 2.02 Climate. Climatically the area is very favorable for oil palm cultivation. There is a very short dry season in January and two months of heavy rains in May and June. The monthly mean average is 200 mm. Average annual rainfall has been 2,200 mm during the last 15 years (1964-1978) and average annual water deficit is estimated at 60 mm which is one of the lowest encountered in the oil palm belt in West Africa and in other oil palm growing areas. Annual sunshine recorded at Tabou in the Ivory Coast, 45 km east of the project area, is estimated at 1,954 hours which is more than sufficient for palm production. Mean monthly temperatures vary between 240C and 27 C; the minimum never falls below 22 0. 2.03 Vegetation. The area has been inhabited and farmed for a long time. The vegetative pattern is a mosaic consisting of patches of light forests (33% of the total area) with a high density of small and medium size trees (approximately 365/ha), regrowth of various ages (45%), annual crops (5%), perennial crops (5%) and swamps (12%). There are no large areas of noxious weeds such as Imperata cylindrica or Eupatorium odoratum. 2.04 Topography/Hydrology. The project is situated on the old Africa Precambrian shield. The terrain is generally undulating with most of the slopes having gradients below 10%. Steep slopes occur on areas adjacent to rivers. The project's hinterland is drained by an extensive and closely spaced network of rivers, streams and creeks running perpendicular to the coast. Their widths vary between 3 - 5 m for the smallest creeks to 20 - 30 m for main rivers (IBRD Map No. 14275). The proposed nucleus estate is bounded by two major drainage systems, the Deyea Creek on the West and the Decoris River on the East. Three river/creek systems flow north to south through the proposed estate: the Jivroke Creek to the East, the Bolulu Creek in the center and the Gbwenewe Creek to the West. 2.05 Soils. Detailed soil surveys have been carried out for 8,300 ha. Soils are generally fertile throughout the area. They range in texture from sandy loams to light clays. There are four classes of soils distributed as follows: Class I - 30%; Class II - 22%; Class III - 11% and Class IV - 37%. Details of these classes are found in Working Paper Cl of the Project Files. 2.06 Population. Total population within a 20 km radius of the nucleus estate has been estimated at 46,000 and within a 30 km radius 56,000. There are two major towns at Harper (6,000) and Plibo (5,000). There are several - 9 - villages: Bewahn (730), Blebo (730), Newake (400) and Wloween (200). The population on the 8,300 ha surveyed to date is estimated at about 1,200-1,600 (density of 22/sq km) or 250-300 farm families. Labor for oil palm development would therefore be adequately available. The social organization in the area is based on tribal authority. There is a paramount chief responsible for several clans. A clan comprises several villages under the authority of clan chiefs and town chiefs. Each village is divided into "quarters" (usually large traditional families) directed by "headmen". 2.07 Farming Systems. Farming systems are based on shifting cultivation. Farmers clear forests and areas ready to come out of fallow during the dry season. Rice is planted at the beginning of the rainy season. After the rice is harvested, cassava is planted for about 1 or 2 years. The land then reverts to fallow for about 7-10 years. Rice and cassava are planted mainly for home consumption; but any extra production is sold in Plibo and Harper. Each household comprises about 6 persons and farms about 1-1.5 ha each year. Perennial crops are limited to smallholder rubber plantations, many of which are of poor quality (with low yields less than 315 kg per hectare). There are also some sugar cane patches and fruit trees near villages. There are numerous wild old palm groves which are harvested and processed using tradi- tional methods. Palm oil is used mainly for home consumption; but part is sold in bottles in Harper and Plibo. There are no commercial oil palm plantations in the area. 2.08 Land Tenure. All lands are considered public and owned b_y the State. The President is the only person authorized to provide titles. There are two systems of tenure: private property where occupants have freehold title to land, and tribal property which smallholders farm on the basis of tribal certificate. Tribal certificates are obtained from the Paramount or Clan Chiefs. Part of all tribal properties are earmarked "tribal reserves" and certificates cannot be given for these. The procedure for obtaining title to a piece of land under the tribal system is as follows. The farmer applies to the tribal chief for a tribal certificate. For this the chief is . usually handed a gift which can be in cash or kind. The chief provides the farmer with a tribal certificate which he then takes to the Land Commissioner in the area. The Land Commissioner makes sure that the parcel in question is not part of the "tribal reserves" and that the land does not belong to anybody else. He certifies this. The farmer takes the tribal certificate to MFN where he pays US$1.50 per hectare for the area stated on his certificate. He then gets the parcel surveyed either by a private or Government surveyor. The applicant takes the map of the land he is applying for and the receipt from MFN to the President's office with his request for land. The President reviews the application and makes his decision. * 2.09 Roads. Roads in the project area are poorly developed. The existing road network is shown in IBRD Map No. 14275. The only road with direct access to the proposed estate and smallholder plantations is the Plibo-Blebo road which crosses the Northern section of the estate site, and connects villages including Wloween, Bewahn, Doughbo, Newake and Blebo. The Plibo-Harper road provides a link with the national road network. - 10 - III. THE PROJECT A. General Description 3.01 The project was identified by GOL and prepared by the Ivorian Corporation SODEPALM (para 1.16). Its main objectives are to generate export earnings and provide employment and incomes for rural farm families through the establishment of 7,500 ha of high yielding oil palm on a nucleus estate and associated smallholdings. In achieving these it would help diversify, widen and strengthen the base of the Liberian economy. At full development it would produce about 24,000 tons of palm oil and 4,300 tons of palm kernel; employ about 1,000 people permanently and include about 1,000 smallholder families. 3.02 The project would be carried out by the specially established Decoris Oil Palm Company (DOPC) and would be implemented over a 7 year period (1980-1987). It would comprise: (a) establishing and operating a 5,000 ha nucleus estate using mechanical and hand clearing methods: (b) providing technical services and credit facilities to develop 2,500 ha of plantation area for smallholders with individual oil palm holdings averaging 2.5 ha in size; Cc) training staff and smallholders both on-the-job and abroad; (d) constructing an oil mill with a processing capacity of 30 tons of fresh fruit bunches (ffb) per hour; (e) establishing a fruit collection system (to serve the nucleus estate and smallholder plantations); (f) operating a grant/credit scheme for participating smallholders; (g) constructing within the nucleus estate and smallholder block plantations about 27 km of main access roads, 93 km of feeder roads and 350 km of collector tracks including supporting culverts and bridges; 1/ (h) rehabilitating and resurfacing about 14 km of main access roads and construction of 35 km of feeder roads linking the nucleus estate to smallholder plantations with support- ing culverts and bridges; 1/ Main access or grade 1 roads would be all weather laterite roads with an average daily traffic of 40 plus, a cleared width of 12 m, a width between palm trees of 22 m and a surface thickness of 15 cm. Feeder or grade 2 roads would also be laterite but with average daily traffic of 20 plus, cleared width of 12 m, a width between palm trees of 15 m and a surface thickness of 10 am. Collector tracks would be simple dirt tracks with no filling. - 11 - (i) constructing and installing of storage and port facili- ties at Harper to facilitate loading to mainline vessels and shipping directly from that port; (j) providing technical assistance to strengthen the monitoring and evaluation division of MA and consultant services to carry out a review of the oil palm industry in Liberia, oil mill design, and preparation of tender documents, soil surveys and mapping, design and supervision of port improvements and the design and supervision of oil barge construction. B. Detailed Features 3.03 Statutory Corporation. The project would be implemented by a statutory corporation, the Decoris Oil Palm Company Ltd. (DOPC), which would have the structure of a commercial entity in accordance with the Liberian Business Corporation Act. It would come under the Ministry of Agriculture. To ensure efficient management DOPC would enter into a corporate management agreement with an internationally recognized firm experienced in oil palm estate management (para 4.02). DOPC would require about 40 man years of management and consulting time over the first 5 year investment period costing about US$1.6 million. Senior staff would be provided with houses (8) costing about US$50,000 each, four cars (US$7,000 each) and four 4-wheel drive vehicles (US$9,000 each). About 10,000 square feet of office space, workshops and warehouses would be constructed at a cost of about US$225,000. The cost tables in Project File Working Paper C6 provide details of staffing, housing, buildings and equipment. 3.04 Planting Program. Phasing of the project planting program would be as follows: Project Year 11/ 2 3 4 5 Total -------hectares------- Nucleus Estate 0 800 1,400 1,400 1,400 5,000 Smallholders 0 400 700 700 700 2,500 Total: 0 2 2,100 2 1 __500 No. of Smallholders: 0 160 280 280 280 1,000 Plantings would be completed in 5 years and all plantings would be in pro- duction within 9 years. A continuous supply of fruit is required for the mill to achieve a high level of efficiency. With a nucleus plantation, the 1/ Establishing nursery and clearing for subsequent planting. - 12 - risk of large variations in supply arising from fluctuations in the output from smallholdings would be considerably reduced. In addition a well run plantation mill with an efficient fruit collection and marketing system would be in a position to offer smallholders competitive prices and a regular outlet for their fruit. Because of the suitability of the soils and climate for oil palm growing in the Decoris area, GOL intends to continue the planting program in a follow-up phase in which development of smallholdings would comprise the major effort. 3.05 Nucleus Estate Development. To ensure that the planting program proceeds as scheduled, about 8,350 ha (44% of which would be under plantations) for which detailed soil surveys have already been done would be acquired by GOL and leased to DOPC for a period of not less than 50 years as a condition of effectivness. An assurance was obtained at negotiations that GOL would acquire and transfer to DOPC for a period of not less than 50 years all additional land required to establish 5,000 ha of plantations no later than September 1980. Settlers already cultivating any of the land acquired by GOL for transfer to DOPC would be compensated by GOL adequately. An assurance was obtained at negotiations that the criteria for determing compensation should be agreed between the Bank and the Borrower and shall inter alia include cash payments for structure and value of crops, land of comparable size and quality, as well as community facilities in the areas of resettlement. 3.06 DOPC would clear the nucleus estate mechanically using its own machinery. Costs are estimated at about US$614 per hectare compared to AGRIMECO's quote of US$1,600 per hectare. Provisions have been made for 5 crawler tractors and associated equipment costing about US$1.2 million and 22 chain saws costing about US$20,000. Crawler tractors equipped with KG blades would be used for felling trees in planting areas; the tree would then be cut into sections using chain saws and burnt. Tree pushing equipment would be used only in areas earmarked for roads, boundaries and building sites. There would be no windrowing as about 3 m wide planting rows would be opened using specially designed V blades. 3.07 The project's seed requirements would be met from the Institut de Recherches pour les Huiles et 016agineux (IRHO) seed gardens in the Ivory Coast and other suitable suppliers. Germinated seedlings would be flown in a week prior to being planted in prenurseries. The planting material to be used has been tested and proven under conditions in the Ivory Coast similar to those in the Decoris area, and have already proven successful elsewhere in Liberia. Assurances were obtained at negotiations that DOPC would make necessary arrange- ments with IRHO and/or other suitable suppliers for the supply of all project seed requirements. 3.08 Smallholders. Smallholder plantations would be developed in blocks, 300-400 ha in size, located in 7 main villages adjacent to the motorable road leading to the nucleus estate. The villages would include Bewahn, Blebo, Newake, Wloween, Dougbo, Tuogbo and Wilsonville (IBRD Map No. 14275). The program would be the responsibility of DOPC's Smallholders Plantation Division (para 4.02). Participants would be selected by DOPC's staff in accordance with selection criteria specified in para 3.09. Credit would be provided in (a) kind: including seedlings, cover crop seeds, wirenetting, fertilizers, agrocides and other non-labor inputs valued at US$455 per hectare and (b) cash: US$1.00 per day worked or a total of US$150 per hectare. DOPC would also provide as a grant technical assistance during land preparation for surveying, pegging and logging valued at US$73 per hectare and extension - 13 - services. DOPC would be responsible for fruit collection and smallholders would enter into a loan agreement with DOPC which would include a commitment to sell all ffb to DOPC's mill from plantations established with DOPC's assistance; loans would be paid from the proceeds of the sales. 3.09 In keeping with GOL's objectives of assisting the rural poor, assurances were obtained at negotiations that DOPC, in selecting_smallholder participants, would give preference to people who: (i) are residents of the village where the plantation is located; (ii) are engaged in agriculture as their main source of livelihood; (iii) have labor available to establish, maintain and harvest 2.5 ha of oil palm; and (iv) are willing to enter a formal agreement with DOPC stating their willingness to (a) follow DOPC's recommendations on cultivation, maintenance and harvesting techniques; (b) repay their loan plus interest at 12.5% per annum over a 7 year period following 6 years of grace for principal during which interest would be capitalized; (c) offer DOPC land as collateral; and (d) agree to sell all fresh fruit bunches to DOPC. As an incentive to participate in the project it is necessary to provide farmers as a grant 1 bag (60 kilos) of rice per month valued at US$25 per bag for four years, during which their plantations mature, as well as sufficient land for cultivating food crops (para 3.10). DOPC would also aid them in establishing food gardens, selling them fertilizers, agrocides and tools and providing extension service. 3.10 Lands currently owned by Government adjacent to villages would be used for smallholder block plantations. To obtain the 2,500 ha required during this phase of the program it would be necessary to carry out soil surveys on about 5,500 ha (assuming about 45% would be suitable for planting), select the best of this, and have it demarcated for smallholder plantations. There should be no difficulty in finding this amount of land since there is about 9,000 ha of potentially suitable areas. (IBRD Map No. 14275) At negotiations an assurance was obtained from GOL that this would be completed by December 31, 1980. In demarcated areas participating farmers would initially obtain tribal certificates for their holdings but would subsequently with DOPC technical assistance obtain title. Each farm would be allowed to plant food crops on an extra 2 ha outside the block plantations. Settlers already cultivating lands where smallholder plantations are to be located would be compensated on terms satisfactory to the Bank. The relevant assurance stated in para 3.05 applies to these settlers as well. 3.11 Training. Under their contract agreement, DOPC management consult- ants would be required to implement a program for training Liberians and providing them with opportunities for on-the-job experience that would enable them to fill senior managerial and technical posts at an early stage. DOPC would be required by Project Year 2 to select candidates for the mill engineer and mill manager positions since their training would require at least 4 years of university training plus 2 years practical work before joining the company. Part of their training would involve visits to companies where the mill equipment is being manufactured including working with engineers in the construction phase. Further practical experience in actually running a mill would be obtained by working with the expatriate mill engineer and mill manager. Liberians who are already trained in agriculture and engineering would be given on-the-job training and short courses abroad including short working periods in oil palm plantations of other developing countries. These would be initially hired as field superintendents; from among them the estate - 14 - manager, assistant estate manager, smallholder manager and roads engineer would be selected. Persons selected by DOPC to undergo training for senior managerial and technical positions would be required to provide an undertaking that they would work with DOPC for a minimum period of two years after completion of this training. At negotiations an assurance was obtained to this effect. Overseers, headmen, laborers (for harvesting) and farmers would receive on-the-job training. 3.12 The Central Mill. Production would begin in 1986 with about 14,000 tons ffb building up to an annual production of about 109,000 tons by 1993. To process this, a palm oil mill capable of processing 30 tons ffb per hour would be constructed. Its cost is estimated at US$13.1 million. The mill would be a single production line type to be built in two stages. In the first stage, to be completed by 1986, all civil works and installation of plant and equipment capable of processing 20 tons ffb per hour would be completed. This would cost about US$11 million (exclusive of contingencies). While equipment for the 20 ton ffb mill is being tested, equipment to process an additional 10 tons ffb per hour (costing about US$2 million) would be installed. The total mill would be in operation by end 1987, i.e. at project completion. The contract for the mill would be on a turn-key basis with all equipment ordered by 1984. A maintenance workshop equipped with tools and equipment required to keep the mill functioning at all times would be constructed on the mill site. At negotiations assurances were obtained that DOPC would employ consultants to prepare preliminary designs of the palm oil mill, prepare tender documents, supervise mill construction and implementation of the works. The consultants and the terms and conditions of their contract would be acceptable to the Bank. 3.13 Estate-and Smallholder Fruit Collection System. Both estate and smallholders ffb would be collected from roadside collection points by dump trucks (capacity: 6 tons ffb) provided under the project. Those collecting smallholder ffb would be equipped with scales. Each truck would make an average of three trips a day. Ffb would be graded by project staff,, weighed and loaded manually. There would be discounts for overripe or badly bruised fruits. The truck driver would be responsible for weighing and grading the fruit. Receipts would be made in triplicate. One would go to the smallholder and the others to DOPC's smallholder plantation and processing and marketing divisions. Trucks would be weighed at the mill gate (in and out) and the weight of each truckload recorded. The weight of bunches delivered daily by each block plantation would be communicated the next day to the overseer of the particular block plantation where fruits were collected the previous day. The aggregate of the truck driver's records of individual sales should tally with millgate delivery weights. Farmers would be paid in cash at the end of each week. The price to be paid would be established annually according to procedures stated in para 6.04. 3.14. Road Program. 1/ To ensure efficient transportation of ffb, palm oil and kernel and distribution of inputs, the project would include a program for constructing and improving main access and feeder roads and collector tracks including 15 km North-South access roads on the nucleus estate costing 1/ Details of the road program are found in Working Paper C3 of the Project File. All costs are based on contractors quotations at time of appraisal. - 15 - about US$26,000 per km; 12 km East-West access roads costing about US$29,000 per km; 5.8 km access road linking the southern boundary of the nucleus estate to the existing Fishtown-Harper road at a cost of about US$26,000 per km; rehabilitation of 9 km of the Fishtown-Harper road costing about US$10,000 per km; resurfacing about 5 km of Plibo-Harper road leading to the port of Harper at a cost of about US$10,000 per km. The program would also include: construc- tion of about 43 km of feeder roads on nucleus estate, 50 km of feeder roads on the smallholder plantation, and 35 km of feeder roads linking smallholder plantations to the estate. All feeder roads are estimated to cost about US$16,000 per km. About 350 km of tracks would be graded. The dissected nature of the terrain would also necessitate construction of culverts and bridges. These would probably include bridges as follows: 100' for the Bolulu Creek costing US$150,000; 50' for the Gbwenewe Creek costing US$75,000; 100' for the Decoris River costing approximately US$150,000; 100' for the Deyea Creek costing approxi- mately US$225,000; and 50' for the Wachuka Creek costing US$75,000. Assurances were obtained at negotiations that DOPC would employ consultants to prepare final designs for roads and bridges and prepare tender documents. The con- sultants' terms of reference and conditions of employment would be acceptable to the Bank. All estate roads and feeder roads on smallholder plantations would be maintained by DOPC; however, assurances were obtained at negotiations that GOL would maintain all other roads constructed under the project. 3.15 Some roads in para 3.14 would be used more than 75% of the time by non-project users. The roads are the 9 km of the Fishtown-Harper road to be rehabilitated (costing US$80,000), the 5 km of Plibo-Harper road to be resurfaced (costing US$45,000), the 35 km of feeder roads linking smallholder plantations to the estate (costing US$568,000). The latter would include a bridge across the Deyea Creek costing an additional US$225,000. Their total costs inclusive of the contingencies at levels shown in para 3.19 would be US$1.3 million. During negotiations assurances were obtained from GOL that these roads would be constructed by GOL by December 31, 1981. 3.16 Port Improvements. 1/ DOPC would be responsible for shipping its own palm oil and palm kernel. It would have facilities which would be con- structed at Harper to store palm oil and onload it to mainline vessels. They would include: a barge fitted with pumps, an oil palm storage depot consisting of two storage tanks, each capable of storing 1,000 tons of palm oil; a pumping/ boiler room with associated equipment and piping; and a weigh bridge capable of handling trucks of 20 tons capacity. Further, a mooring facility would be constructed at 7 m facing the eastern side of the existing National Ports Authority (NPA) pier. This would comprise two mooring dolphins located 15 m on either side of a loading dolphin. The pier and the barge would be connected with oil resistant flexible hoses. The project would purchase a 500 ton barge which would be fitted with two diesel engine palm oil pumps each having a capacity of 125 tons per hour at a head of 15 m water column. Pumps would be of the screw type with cast iron housing and steel screws. Estimated cost of the barge is US$600,000 while that of the total port 1/ Details are found in Working Paper C4 of the Project File. - 16 - improvements exclusive of contingencies is US$1.3 million. 1/ DOPC would require about 195 m2 of space for its facilities. NPA has agreed to rent DOPC space at Harper to install its facilities and pass its water and electricity lines. 3.17 Consultant Services, Studies and Surveys. The project provides for 90 man months of consultant services estimated to cost about US$10,000 2/ per month and 3 man years of technical assistance (US$50,000 per man year) 3/ to assist MA in strengthening its Monitoring and Evaluation Division. Consultants would: (a) prepare preliminary designs of the palm oil mill, prepare tender documents, analyze tenders and supervise mill construction (50 man months, starting 1983); (b) design and supervise construction of port facilities at Harper (5 man months, beginning 1985); (c) design and supervise in conjunction with the project's road engineer access and feeder roads financed under the project (12 man months, beginning March 1980); (d) review the oil palm industry in Liberia to see how best the institutions in the sub-sector can be rationalised and made more efficient (para 1.20), (14 man months, beginning early 1981); (e) prepare a follow-up oil palm project (6 man months, beginning early 1984); (f) develop and advise PPC on a pricing formula for small- holder ffb (2 man months, beginning 1984). 1/ This is made up as follows: Civil works: $130,000 Equipment: 240,000 500 ton Barge: 600,000 Barge Mooring and Working Dolphins: 130,000 Insurance and Freight for equipment: 32,500 Loading costs, mounting and commissioning of facilities: 150,000 Consultancy, Design and Supervision 48,000 2/ This includes fees for 25 working days at US$250 per day; accommodation and meals of US$75 per day; air fares, internal transportation and incidentals totalling US$1,500 per month. 3/ This excludes the cost of housing and transportation. - 17 - At negotiations assurances were obtained that consultants would be hired under terms and conditions satisfactory to the Bank. C. Cost Estimates 3.18 Total project cost over the 7-year development period 1980/81 to 1986/87 is estimated at US$48.8 million. Of this US$26.7 million or ' would be foreign costs. Costs are detailed in Annex 1 and summarized in Table 1. TABLE 1. LIBERIA DECORIS OIL PALM PROJECT Summary of Project Cost (US$ million) PERCENT OF: LOCAL FOREIGN BASE PROJECT COST EXCHANGE TOTAL COST COST NUCLEUS ESTATE Field Establishment 2.3 2.1 4.4 13 9 Palm Oil Mill 4.7 8.3 13.0. 39 27 Harper Port Oil Storage Station 0.4 1.0 1.4 4 3 Road Construction 1.3 1.0 2.3 7 5 Buildings and Houses 2.1 0.6 2.7 8 6 Vehicles, Equipment and Furniture 0.3 1.3 1.6 5 3 Staff Salaries, Other Recurrent Costs and Studies 1.8 3.0 4.8 15 10 Subtotal 12.9 17.3 30.2 91 63 SMALLHOLDER Field Establishment 0.9 0.5 1.4 4 3 Road Construction 0.8 - 0.8 2 1 Buildings and Houses 0.1 0.1 0.2) Vehicles, Equipment and Furniture -- 0.1 0.1) 3 2 Staff Salaries and Other Recurrent Costs 0.4 0.3 0.7) Subtotal 2.2 1.0 3.2 9 6 BASE COST 15.1 18.3 33.4 100 69 CONTINGENCIES Physical 1.2 1.4 2.6 8 5 Price 5.8 7.0 12.8 38 26 Subtotal 7.0 8.4 15.4 46 31 PROJECT COST 22.1 26.7 48.8 100 PERCENTAGE 45% 55% 100% - 18 - Project costs include an estimated US$0.9 million of identifiable taxes on fuel, diesel oil and lubricants and other locally purchased consumables but exclude all other taxes and duties on items specifically imported for the project. The latter reflects GOL present policy to exempt from duties and taxes all goods imported for project use. This was confirmed during negotiations. Base cost estimates use prices and quotations obtained during appraisal, but have been adjusted to reflect costs that are expected to prevail by end of 1979. 3.19 Costs include: (a) physical contingencies equal to 15% of base costs for all civil works; 7%, for vehicles and equipment and 5%, for all other items except salaries; (b) price contingency of 10% compounded annually for all local costs; and (c) price contingencies for foreign costs in accord- ance with the Bank's general guidelines calculated on base costs plus physical contingencies compounded annually: 1980-85 1986-90 Vehicle, equipment and farm inputs: 6 5 Civil works, construction material 7 6 and consultants: Salaries and other operating costs: 7 7 Total contingencies calculated on the foregoing basis are equivalent to 31% (US$15.4 million) of total costs or 46% of base line costs. D. Proposed Financing Plan 3.20 The proposed financing plan is summarized in Table 2, and shown in detail in Annex 2. - 19 - Table 2. LIBERIA DECORIS OIL PALM PROJECT Proposed Financing Plan (US$ million) IBRD ADB CDC EEC GOL TOTAL Field Establishment - Nucleus Estate 2.0 -- 2.3 -- -- 4.3 - Smallholder 0.6 -- 0.8 -- -- 1.4 Oil Mill 4.2 -- 5.1 -- 3.8 13.1 Port Facilities 1.0 -- - -- 0.3 1.3 Road Construction 0.8 1.0 -- 1.7 0.4 3.9 Buildings and Houses -- 1.8 -- -- 1.1 2.9 Vehicle and Equipment -- 0.4 1.4 -- -- 1.8 Staff Salaries -- - 1.1 -- 1.5 2.6 Consultancy 1/ 0.5 -- -- -- -- 0.5 Recurrent Costs - Administrative and Operating -- 1.6 -- -- -- 1.6 Base Cost 9.1 4.8 10.7 1.7 7.1 33.4 Unallocated 2.9 3.2 4.3 0.3 4.7 15.4 Total Costs 12.0 8.0 15.0 2.0 11.8 48.8 Percentage 25 16 31 4 24 100 1/ Refers to financing of consultancy costs for items in d, e and f of para 3.17 and provision of technical assistance; financing of consultancy for mill, port and roads included in costs of these items above. The IBRD loan would be at the current lending rate at the time of loan approval and would be for a period of 20 years with a 5-year grace period. The CDC loan would be for a period of 20 years including a 7-year grace period at 7.5% per annum. ADB loan would be for 20 years including 5-year grace period at an interest rate of 8% including the statutory commission. Conditions of the EEC loan are similar to those of IDA. Details of the type of financing are shown in Annex 2. CDC's loan would be joint financing while those of the EEC and ADB would be parallel financing. In addition to its US$25.3 million equity investment, GOL would arrange further finances for DOPC to the tune of about US$3.0 million required between years 6 to 9 to bring all plantings to maturity and the mill into operation. Assurance to this effect was obtained during negotiations. - 20 - 3.21 The Bank and other cofinancers' loans to GOL would be passed on to DOPC as equity and loans. DOPC's debt/equity ratio would be about 1:1.09. The total equity investment would be about US$25.3 million. Of this, about US$13.5 million would come from IBRD, CDC, ADB and EEC -loans, and the rest from local resources (para 6.06). Conclusion of a subsidiary financing agreement between GOL and DOPC for channelling GOL and Bank funds on terms and conditions satisfactory to the Bank would be a condition of effectiveness. Interest rates would be equal to at least the going commercial rate for long-term loans which is at present 10%; CDC, ADB and IBRD loans would be relent for 25 years with a repayment period of 17 years and a grace period of 8 years during which interest would be capitalized. DOPC would provide credit to farmers (para 3.08) in cash and kind. During negotiations, assurances were obtained that loans to smallholders would be at an interest rate (also positive) of at least 12.5% for 13 years including a 6-year grace period for principal and interest but during which period interest would be capitalized. At negotiations assurances were obtained from Government that its relending interest rate to DOPC and DOPC's onlending interest rate to smallholders would be reviewed annually in consultation with the Bank with a view to maintaining an adequate rate of interest. 3.22 To expedite project implementation and avoid unnecessary slippage GOL agreed to undertake a number of start-up activities during 1979 and the first half of calendar year 1980. These include establishment of DOPC, selection of a management agency, preparation of a draft management agreement, acquisition and leasing to DOPC lands for the nucleus estate (para 3.05), ordering planting material, and initiating registration and selection of smallholders. The total cost of start-up activities (which are included in project costs), estimated at US$0.9 million, would be reimbursed to GOL out of CDC's loan. E. Procurement 3.23 All Bank-financed and CDC contracts for US$100,000 or more for purchasing farm inputs such as fertilizer, wirenetting, chemicals, etc. (US$1.6 million); heavy equipment and vehicles (US$1.4 million); barge and port facilities at Harper (US$1.3 million); consultants (US$0.9 million), valued in aggregate at US$5.2 million would be procured through ICB in accordance with Bank guidelines. Contracts for these same items between US$20,000 to US$100,000 (up to US$1.5 million) would be procured under local competitive bidding (LCB) procedures acceptable to the Bank, and contracts of less than US$20,000 (up to US$800,000) by direct competitive shopping. Domestically manufactured goods would be allowed a 15% preference or the applicable import duty whichever is lower. Since the oil mill would be the first of its kind in Liberia, it would be built under a turn-key contract. The latter, valued at US$17.1 million (of which US$4.9 million would be financed by the Bank), would be awarded under limited international tendering - 21 - procedures acceptable to the Bank, after prequalifications of potential suppliers. Services of expatriate staff valued at US$1.4 million would be obtained in accordance with procedures acceptable to the Bank. Contracts for civil works (other than buildings to house the palm oil mill which would be procured under the turn-key contract) comprising mainly offices, senior and junior staff housing, laborers housing and camps, warehouses and workshops valued at US$2.9 million, and construction, rehabilitation and resurfacing of roads, valued at US$2.3 million,would be financed by ADB, EEC and GOL in accordance with their own procedures; however the design standards and timing of construction would be satisfactory to the Bank. The latter mentioned cofinancers and GOL would also finance a large part of project costs such as salaries, operating expenses, training and field establishment costs amounting to US$17.6 million, including contingencies, in accordance with their own procurement procedures, but in a manner and timing satisfactory to the Bank. F. Disbursements 3.24 Bank Group funds of US$12.0 million would be disbursed under the following categories: Category I - 100% of the foreign exchange costs of directly imported seeds, polybags, fertilizers, tools, and other materials for the field establishment program or 80% of local costs if procured locally, totalling US$2.9 million; Category II - 50% of the foreign exchange costs of the palm oil mill equipment totalling US$4.8 million; Category III - 100% of the foreign exchange costs for the barge and port installations at Harper Port totalling US$1.3 million; Category IV - 100% of the foreign exchange costs of directly imported equipment for the road program or 80% of local costs if procured locally, totalling US$0.9 million; Category V - 100% of the foreign exchange costs for consultants' services and technical assistance totalling US$1.1 million or 80% of local expenditures; Category VI - unallocated estimated at US$1.0 million. An estimated schedule of disbursement is shown in Annex 4. Applications for withdrawals from the loan would be fully documented. - 22 - G. Accounts and Audits 3.25 DOPC would keep records consistent with sound accounting practices and adequately reflecting their operations and financial positions. Records would show accounts of the smallholders development section separately which would include a statement of account for each participating farmer. DOPC's accounts would be audited annually by independent auditors acceptable to the Bank. Audited accounts, balance sheets and operating statements would be submitted to the Bank within four months of the end of the financial year. IV. PROJECT I)PLEMENTATION A. Organization 4.01 The project would be implemented by the Decoris Oil Palm Company Limited. Appointees to its Board of Directors would include representatives from the Ministries of Agriculture, Finance, Planning and Public Works, and DOPC's General Manager. DOPC, as other corporations involved in agro-industrial development, would be under the Ministry of Agriculture b;it would work closely with the follow- ing organizations: Ministry of Lands and Mines (HLM) which would assist farmers in obtaining title to their lands; Ministry of Public Works (MPW), which is respon- sible for road construction and maintenance of public roads in the project area; Maryland County Superintendent's Office; the President's Office, which has power to sell public lands and LPMC. DOPC was recently been established. The project provides for a study of institutions in the oil palm sub-sector (para 3.17d), Assurances were obtained at negotiations that the implementation of any recommen- dations of the study would be in agreement with the Bank and any changes in the status of DOPC shall be acceptable to the Bank. B. The Decoris Oil Palm Company 4.02 Structure and Staffing. GOL has appointed a Coordinator attached to the Ministry of Agriculture to implement the start-up activities between now and April 1980 (para 3.22). By that time DOPC's senior managerial staff including the gene- ral manager and financial controller would have taken up their positions. When fully operational, DOPC would consist of five main divisions: Finance and Adminis- tration, Estate Plantation, Smallholder Plantations, Engineering, and Processing and Marketing (IBRD Chart No. 20389). The latter would be added in Project Year 6. 1/ DOPC's senior management would be provided by an international management firm, acceptable to the Bank, operating under a management agreement also acceptable to the Bank. A condition of project effectiveness would be the signing of the agree- ment. At negotiations it was agreed that GOL would consult the Bank from time to time about the future need of management services to be provided by an international firm or organization and an assurance was obtained that if for any reason the management agreement is terminated GOL would enter into another agreement with another international firm under terms and conditions acceptable to the Bank. 1/ DOPC's functions and responsibilities of its senior managerial staff are found in Project File Working Paper C5. - 23 - 4.03 When the project is fully operational, the senior management staff would compromise: General Manager, Financial Controller, Estate Plantations Manager, Assistant Estate Plantations Manager, Smallholder Plantations Manager, Roads Engineer, Chief Mechanic, Mill Engineer and Mill Manager. Personnel recruited to senior positions would be acceptable to the Bank. As there is a general shortage of Liberians with experience in oil palm production, it is expected that initially the key staff, comprising the General Manager, Finance Controller, Estate Plantation Manager, Mill Engineer and Mill Manager, would be recruited internationally. The management firm however should make every effort to find qualified Liberians whenever possible. The management agreement (para 4.02) would be for a period of at least 4 years. It would specify that Liberian personnel would be provided with training abroad and on-the-job managerial experience to enable them to fill senior managerial and technical positions at an early stage. Details of intermediate and lower level staff requirements and phasing are shown in Project File Working Paper C7. 4.04 Programming, Budgeting and Reporting. At the start of the financial year DOPC would prepare annual budgets which would be presented to the Bank and prepare cash flow statements showing operating costs, revenues and capital requirements. Monthly statements, which would be the basis of management actions, would be reviewed by DOPC's Board. Based on the Board's approved budget, GOL would make quarterly budgetary allocations and thereafter make available to DOPC all necessary funds promptly as needed. DOPC would keep records, have their books audited and submit financial reports as specified in para 3.25. In addition DOPC would submit to the Bank quarterly progress and annual reports. At negotiations assurances were obtained on the above mentioned. In addition, the deposit of not less then US$0.9 million (to cover expenditures during the first quarter of Project Year 1) by GOL into DOPC's bank account should be a condition of effectiveness. 4.05 Monitoring and Evaluation. Under the project technical assistance would be provided for strengthening the Monitoring and Evaluation Unit of MA's Planning Division. An Agricultural Economist would be employed there with responsi- bility for monitoring the financial and technical progress of the project, as well as other ongoing oil palm projects, evaluating its economic and social impact and establishing the data base for planning a follow-up project. 1/ This staff would have complete access to all DOPC's records including those of the initial auditor. In the initial stages particular attention would be paid to field development costs. The qualifications and experience, terms and conditions of employment including terms of reference would be satisfactory to the Bank. At negotiations an assurance to this effect was obtained from Government. 4.06 Implementation Schedule. An implementation schedule for all technical operations is shown in IBRD Chart No. 20224. Further details in timing for field establishment, oil mill and port facilities are shown in Project Working File Papers Nos. 1 and 4. To avoid slippage GOL would carry out the start-up activities in para 3.21. 1/ Some socio-economic data on farmers in the project area has already been collected by MA and is available in the Project Files; however, further data would be collected during implementation. Some suggested TOR for a Base Line Survey are available in Project File Working Paper C5. - 24 - V. AGRICULTURAL PRODUCTION AND TECHNOLOGICAL SPECIFICATIONS A. Production and Yields 5.01 By 1993 the project would be in full production with average annual production estimated at 109,000 tons ffb. Seventy-one percent or 77,000 tons ffb of this would be produced by the nucleus estate and 31,000 tons ffb by smallholders. At extraction rates of 22% for palm oil and 4% for palm kernel, this would yield about 24,000 tons of palm oil and 4,300 tons of palm kernel. Harvesting would begin in 1986, four years after the first trees are planted, when total production would amount to about 13,800 tons ffb. 5.02 The planting material to be used is well adapted to soil and climatic conditions in the project area. In Ivory Coast peak yields on well managed estates under conditions similar to those in the project area are about 17 tons ffb/hectare/year. For project evaluation purposes, these yields have been reduced to 91% to compensate for possible reduction due to unforeseen manage- ment and ecological difficulties. Yields for the nucleus estate at full maturity have thus been estimated at 15.5 tons ffb/ha, and those for small- holders at 12.5 tons ffb/ha to adjust for lower standards of maintenance and less rigorous harvesting schedules (see Table 3). 1/ Table 3. Yield Assumptions Year After Planting 3 4 5 6 7 8-20 - 30 Where Planting Year is 0 Nucleus Estate ffb/tons/ha 3.0 6.5 10.0 12.5 15 15.5 minus 2% 12.5 per annum Small ffb/tons/ha 0 5.0 8.0 10.0 12.0 12.5 minus 2% 10 per annum Palm Oil Extraction 17.2 18.7 20.0 21.5 22.0 22.0 22.0 Rate % ffb Palm Kernel (% ffb) 3.0 3.0 3.6 4.0 4.0 4.0 4.0 1/ Detailed information pertinent to this section is given in Project File Working Paper No. Cl. - 25 - B. Cultivation Techniques 5.03 The expected project yields would be obtained if certain basic practices are followed. These are well known and have been successfully implemented in neighbouring countries like the Ivory Coast. The project would therefore: (i) use seeds of high yielding planting material (hybrids between Deli Dura and African pisifera); (ii) raise seedlings in two stage polybag nurseries with correct manuring and watering; (iii) cull all abnormal seedlings at the end of both nursery stages; (iv) avoid all soil disturbance during land preparation; (v) sow adequate quantities of cover crops; (vi) plant seedlings in the field during the rainy season; (vii) control weeds, protect plants against rodents, and manure adequately; and (viii) harvest completely according to a rigorous weekly schedule. Details on the above are found in Project File Working Paper Cl. C. Oil Mill 5.04 As the bedrock in the project area is very thick, it is uneconomical to supply water to the mill and staff housing by borehole and underground pumps. Surface water would therefore be pumped from the Bolulu Creek or any of its tributaries, filtered and chlorinated (for home use only). Preliminary analysis of the water has shown that it is suitable for that purpose. However, to ascertain the precise technical specifications of the water treatment station to be constructed under the project, water samples would be taken and analyzed every month for at least one year. D. Environmental Considerations 5.05 In preparing the designs for the oil mill and port facilities, the consultants (para 3.17, a, b) will be required to consider the implications for the environment arising out of the operations of these facilities. Specifically, the consultants will examine the problems that might be assoc- iated with the disposal of liquid wastes and air pollutants from the palm oil mill; and, the storage and transfer of oil at the port site. The consultants will avail themselves of the Bank's environmental guidelines and be assisted in this undertaking by the Bank's Environmental Affairs Office, as may be appropriate. - 26 - VI. MARKETS, PRICES, FINANCIAL ANALYSIS A. Markets 6.01 There would be no difficulty in selling project production. About 75% would be sold abroad. The export market for palm oil is gpod, and is expected to remain so in future. Between 1960 and 1976, consumption of fats and oils worldwide expanded steadily with an average annual rate of increase of 3.6%. Over the last decade there have been significant shifts in consumption of fats and oils away from animal fats in favor of vegetable oils. Even though the overall demand for fats and oils is inelastic, that for palm oil and other individual oils such as palm oil is highly elastic (mainly because of substitution effects). For example palm oil now accounts for about 12% world export market but this is expected to grow to about 247 -by 1990. Production from projects currently being planned and implemented in Liberia estimated at about 50,000-60,000 tons would not have any significant impact on world production and exports. In 1978 world production of palm oil was 3.4 million tons and exports 2.1 million tons. By 1990 world production is expected to increase to about 7.9 million tons and exports 6.6 million tons. 6.02 Recent developments in West African markets are also significant for Liberia. At present an increasing share of the palm oil produced in West Africa is being consumed domestically. Between 1955 and 1974 palm oil exports from these countries dropped by 60%. The decline in exports was highest in the case of Nigeria whose export share fell from over 30% during the late fifties to less than 1% in 1974. Nigeria is now a net importer. In the same country in aggregate terms total consumption of fats and oils is predicted to rise from 565,000 tons in 1976 to 762,000 tons in 1980 and 978,000 tons by 1985. By that time imports to Nigeria were projected at about 200,000 tons. Nigeria is therefore a potentially attractive market for Liberian palm oil. 6.03 About 25% of project production would be sold locally. Domestic consumption of palm oil in 1978 was estimated at about 10,000 metric tons. This is expected to grow at about 3% per annum reaching 15,000 tons by 1990. In addition Liberia is currently setting up a palm oil processing factory which would produce refined oil and other oil based products. The factory would process a minimum of 50 metric tons of palm oil per day, and it would require about 15,000 tons of palm oil by 1982. Its raw material requirement would be met from local sources including part of the output (about 6,000 metric tons of palm oil) from the proposed Decoris project. B. Prices 6.04 International prices (c.i.f. Europe) for palm oil and palm kernel average about US$577 and US$332 per metric ton respectively in 1979. Follow- ing the forecasts of the Banks Commodities Division, palm oil prices (CIF Europe, 1979 constant terms) are expected to rise to about US$616 per metric ton by - 27 - 1982; but drop to about US$512 per metric ton by 1990 when proj ct output is in full production. Palm kernel prices are expected to rise t about US$362 per ton by 1982 and rise furt er to about US$369 per ton by 1 90. Prices used in the analysis are US$443 per ton for palm oil and US$ 86 per ton for palm kernel. These are ex-mill gate values and are based on the Bank's forecasted reference price for these two products for 1990 expressed in 1979 constant terms after deductions for freight, insurance, sales commissions, handling and other charges as shown in Annex 5, Table 1. Producer prices are estimated at US$58 per ton ffb after allowing for processing, transportation and other charges. A producer price around this level would provide adequate incentives to smallholders (para 6.05). Actual producer prices would be determined by an Oil Palm Pricing Committee (OPPC) which GOL would set up by January 1, 1985. OPPC would include representatives of the Ministries of Agriculture, Commerce, Finance, Planning, DOPC and smallholders. In estab- lishing the price OPPC would use the results of an oil palm pricing study which would be carried out by independent consultants financed under the project (para 3.17). The pricing formula would be acceptable to the Bank. Assurances related to the foregoing were obtained. C. Farmer Benefits 6.05 An illustrative cash flow for a 2.5 ha farm in shown in Annex 3, Table 1. The farm would be developed over a 2 year period. Production starts in the fourth year after planting and reaches full bearing in the eight year. Assuming a farm gate price of US$58 per ton ffb (para 6.04), the annual cash income (constant 1979 terms) from a 2.5 ha farm at full development would be about US$1,150. This is much higher than the US$100 per annum which the majority of farmers in the project now earn. Net returns per man day would start at about US$4.07 per day worked in the first year of production and reach US$8.70 at full development. These returns compare favorably with the US$5.50 per day obtained from commercial rubber plantations where improved planting material is being used. Farmers are expected to work an average of 110-120 days full time per year on their oil palm plantations; they would therefore have enough time to also farm their food crops (para 3.09). D. Financial Implication for DOPC 6.06 DOPC's projected cash flow, profit and loss statement and balance sheet (all figures in 1979 constant terms) are shown in detail in Annex 3, Tables 2, 3 and 4 respectively. The company's debt/equity ratio is 1:1.09 with a total government investment in equity of US$25.3 million. While the trees are maturing and the mill is under construction, there would be some cash deficit; but these are overcome by Year 10. The financing gap of US$3.0 million from Years 6 to 9 would be met from medium-term borrowing from local banks. This loan which would be for a period of 10 years with a 5 year grace period at 10% annual interest rate would be arranged by Government (para 3.20). DOPC would show surpluses in its annual cash position after debt service from Year - 28 - 11 onwards. The Company would be in a healthy financial position when trees mature and the mill is in full operation by Year 13. The annual cash surpluses increase from US$0.8 million in Year 13 to US$1.4 million by Year 20. DOPC projected profit and loss statement shows that it would experience losses between Years 6 to 10. However these losses decline from US$2.9 million in Year 6 to US$1.6 million in Year 9 when all trees are in full production. DOPC shows a profit from Year 11 onwards. Annual profits increase steadily from US$0.9 million in Year 11 to US$1.8 million in Year 13 and US$3.3 million from Year 20 onwards. The financial rate of return to the Company is 15%. Although projected balance sheets show an increase in capital (equity plus cumulative profits) from US$21.9 million in Year 6 to US$23.9 million in Year 15, it is expected that total capital would be at least US$58.5 million by Year 20. Government intends to use any excess profits from DOPC to develop its oil palm industry. E. Financial Implication for Government 6.07 An illustrated cash flow for GOL is shown in Annex 3, Table 5. The cumulative deficit amounts to US$30.0 million by Project Year 9. GOL would arrange further financing of about US$3.0 million for Years 6 to 9 to bring all trees to maturity and the mill into full production. This would be in addition to the US$11.8 million which it contributes to total project costs. DOPC begins to repay its loan in Project Year 9 with annual repayments of US$4.0 million; from Year 9 to Year 25, the cumulative deficits decline to US$4.5 million. This entire deficit can be wiped out by Year 25 if DOPC pays GOL dividends from the US$32.0 million profits which it accumulates by Year 25. An assurance was obtained at negotia- tions that DOPC shall declare dividends out of its surplus in amounts at levels acceptable to the Bank provided that dividends are not declared unless DOPC's net profit in any fiscal year exceeds 5% of its equity. VII. BENEFITS AND JUSTIFICATIONS A. Project Benefits 7.01 The project would meet Government's twin objectives of increasing foreign exchange earnings and providing employment for rural farm families. The principal direct benefit from the project would be the additional annual production of 24,000 tons of palm oil and 4,300 tons of palm kernel. By 1993, additional net foreign exchange earnings in 1979 constant dollars would be about US$11.0 million annually. The project would have a permanent staff of about 1,060 people drawn from the Decoris area and employ about 1,200 people during the development phase. The project would also provide cash incomes for at least 1,000 farm families (7,000 people). They would earn about US$950 per family per annum compared to their present cash incomes of US$100 per family per year. The average skilled worker on the estate would earn about US$1,200 per annum which compares very favorably with incomes of similar type of workers on the nearby Firestone rubber and LIBSUCO sugar plantations. - 29 - 7.02 The project would involve training at least 1,500 people in oil palm production techniques. Access and feeder roads and bridges across the Deyea Creek and Decoris River would provide the needed infrastructure for about 30,000 people residing in the villages in the immediate vicinity of the project and set the stage for further development in the area. Benefits which were not quantified in the rate of return calculations are improved farm to market transport conditions; these would assist the people in the whole project area. B. Economic Rate of Return 7.03 Assumptions used in computing the project's internal.rate of return (ERR) are listed in Annex 5, Table 1. The overall ERR for the project is 12%. That for the estate component only is 11.5% and for the smallholder component 12.5%. Assuming a discount rate of 10%, the economic net present value (NPV) of total project investment in 1979 constant dollar terms is estimated at about US$5.02 million. 7.04 The official exchange rate of Liberia's currency is on par with the U.S. dollar; however for the purposes of sensitivity analysis, a shadow exchange rate of 1.10 Liberian dollars to the U.S. dollar was used. At this rate the ERR is 13%. 7.05 The majority of farms in the project area are owner-operated. There are not many opportunities for off-farm employment except for casual work on absentee owner rubber farms. The sensitivity of the ERR was tested assuming a value for the opportunity cost of farm labor, which in this case is the value of the rice, cassava and palm oil smallholders would be producing and collecting if they were not involved in oil palm growing. This is estimated from budgets at about US 70 cents per day. At this rate the ERR is also 12% (mainly because labor represents only 4% of total project costs). C. Sensitivity and Risk Analysis 7.06 Sensitivity analysis was used to determine which variables would be most crucial to the success of the project. As a measure, the cross-over value was used. The cross-over value is the value of the variable tested for which NPV discounted at 10% is zero and is a measure of how far the variable can differ from its most likely value before the project becomes economically unacceptable. The cross-over value may therefore be interpreted as the value of the variable tested beyond which the ERR would be below the estimated opportunity cost of capital. This is assumed at 10% for Liberia. Sensitivity to changes in the most critical variables are discussed below. - 30 - 7.07 Yields and Extraction Rates: The project is especially sensitive to changes in yields. The cross-over ffb yield for the nucleus estate is 13.5 tons ffb/ha against appraisal estimates of 15.5 tons ffb/ha and that for smallholders is 9.7 tons ffb/ha against appraisal estimates of 12.5 ffb/ha. Given the ecological conditions of the project area (good soils and annual water deficit of 60 mm per annum), the yield potential of the planting material (17-18 tons ffb/ha), experience under similar conditions in the Ivory Coast , and the precaution taken in putting in an experienced management team, it is highly unlikely that yields over the life of the project would drop to the cross-over values mentioned to cause the project to fail economically. Nevertheless, to minimize this risk, project management would pay particular attention to the cultivation techniques discussed in Section,V of this report. The management team would also have the responsibility of training Liberians in oil palm techniques so that project would be assured continued good manage- ment. The project is sensitive to palm oil extraction rates. The cross-over extraction rate is 19.5% against appraisal estimates of 22%. The main safe- guard against the risk of lower extraction rates would be to ensure that the mill is well managed and maintained at all times. The mill engineer and mill manager must be both very experienced. An ample stock of spare parts and a fully equipped workshop are necessary. The project has provided for these. In addition Liberian staff who would eventually run the mill would receive adequate training. The project is less sensitive to palm kernel extraction rates. The cross-over value is 0.8% compared to appraisal estimates of 4%. 7.08 Prices: The project is also sensitive to changes in palm oil prices. The cross-over value of palm oil price is US$455 per ton (in 1979 constant terms) compared to appraisal estimates of US$512,per ton. However project viability would be relatively insensitive to changes in palm kernel prices. Its cross-over value is US$15 per ton (in 1979 constant terms) against appraisal estimates of US$369. It is highly unlikely that prices would drop so low as to make the project unviable. Historically, Bank projections of palm oil and palm kernel prices have been 15-20% lower than current world prices. Indications are the market for palm oil would continue to be good; the Bank has forecasted a drop of only 0.6% by 1990 (in 1977 constant terms). 7.09 Development Period: It is possible that full project development might be delayed because of delays in land clearing due to machinery breakdown, late delivery of inputs, low rates of smallholder uptake, etc. These would have serious effects on project viability. If benefits are delayed a year and the costs remain unchanged, the ERR is 10.1%. If the project is delayed, it is highly likely that costs will increase as well because of inflation. With a lag of 1 year and a cost increase of 10%, the ERR is 9%. It is there- fore extremely important that the project management adhere as closely as possible to the implementation schedules shown in Chart 20389. It is also very important that GOL carry out the start-up activities (para 3.21) as agreed. It is particularly important to get the smallholder program off the ground in the first year of the project period. Delay in implementation of these would lead to delays in achievement of the targets set out in the appraisal estimates. - 31 - 7.10 Mill Construction: If the mill construction is delayed by a year and all other project activities are achieved on time, the ERR drops from 12% to 10%. Project management would therefore have to pay close attention to the implementation schedule shown in Chart 20389. The project would be able to withstand modest increases in the mill equipment and construction costs. In fact, mill costs would have to go up by 62% before the project becomes unviable. It could however safely withstand cost increases up to 30%, as the ERR would then still be 10.8%. 7.11 Field Establishment Costs: Modest increases in the two biggest items in field establishment costs do not have a big effect on project viability. Should land clearing costs go up by 10%, the ERR would still be 11.5% and for a 10% increase in the cost of fertilizer, the ERR would be the same. 7.12 Wage Rates: The project would also withstand modest increases in the wage rates. If laborers' wages increase 10% per annum each year of the development period, i.e. up to 1985, the ERR is 11.5%. Wages of laborers would have to increase more than 100% before the project becomes unviable. For 100% increase in labor costs, the ERR is 10,01%. 7.13 In summary, management would have to pay close attention to timely land clearing, delivery of inputs, appropriate cultivation techniques and mill operating efficiency. Any serious lowering of yields and extraction rates and delaying of the project target would make the project unviable. 7.14 There are no unusual project risks. The project would be managed by an international firm with considerable oil palm experience. The project's technical package has been well tested under similar conditions in neighboring Ivory Coast. The project area seems to be particularly well adapted for oil palm production with an average annual rainfall of 2,200 mm and an average annual water deficit of only 60 mm. There is some risk of delay in the rate of development of the smallholder plantations which would be overcome with assistance from DOPC and GOL. VIII. AGREEMENTS, CONDITIONS AND RECOMMENDATION 8.01 During negotiations assurances were obtained from Government that: (a) GOL would acquire and transfer to DOPC by September 1980 for a period of not less than 50 years additional land required to establish 5,000 ha of plantation; and that settlers displaced from lands to be used for the nucleus estate and smallholder block plantations would be compen- sated on terms satisfactory to the Bank (3.05); (b) DOPC would make necessary arrangements with IRHO and/or other suitable suppliers for the supply of all project seed requirements (3.07); - 32 - (c) In selecting smallholder participants, preference would be given to people according to criteria laid out in para 3.09 (3.09); (d) GOL would by December 31, 1980, carry out soil surveys on about 5,500 ha of land in villages adjacent to the nucleus estate, and shall demarcate and earmark suitable portions of land for the establishment of the 2,500 ha smallholder block plantations (3.10); (e) Persons selected by DOPC to undergo training for senior managerial and technical positions would be required to provide an undertaking that they would work with DOPC for a minimum period of 2 years after completion of their training (3.11); (f) DOPC would employ consultants to prepare preliminary designs of the oil mill, prepare the tender documents, supervise the mill construction and implementation of the works and that the consultants' terms and conditions of the contract would be acceptable to the Bank (3.12); (g) DOPC would employ consultants to prepare final designs for roads and bridges and prepare tender documents and that the consultants' terms of reference and conditions of employment would be acceptable to the Bank (3.14); (h) GOL would maintain all roads in the project area other than those roads to be maintained by DOPC (para 3.14) and would construct by December 31, 1981, 35 km of feeder roads linking smallholder plantations including supporting culverts and bridges; rehabilitate 9 km of the Fishtown-Harper road and resurface 5 km of the Plibo-Harper road (3.15); (i) DOPC would employ consultants to design and supervise con- struction of port facilities at Harper; prepare a follow- up oil palm project under terms and conditions acceptable to the Bank (3.17); (j) GOL would employ consultants to review the oil palm industry in Liberia and to develop and advise OPPC on a pricing formula for smallholders' fresh fruit bunches under terms and conditions acceptable to the Bank (3.17); (k) GOL would arrange finances required by DOPC in an amount of about US$3.0 million between Years 6 and 9 to bring all plantings to maturity and the mill into operation (3.20); - 33 - (1) DOPC would ensure that loans to smallholders would be at an interest rate of at least 12.5% for 13 years including a 6-year grace period for principal and interest during which interest would be capitalized and that GOL's relending rate to DOPC and DOPC's onlending interest rate to small- holders would be reviewed annually in consultation with the Bank with the view to maintaining an adequate interest rate (3.21); (m) Implementation of any recommendations resulting from the study of institutions in the oil palm sub-sector would be in agree- ment with the Bank and any change in the status of DOPC shall be acceptable to the Bank (para 4.01); (n) Budgets, audited financial statements and progress reports as specified by the Bank would be submitted and that funds would be made available to DOPC promptly as needed in the quarter they are required (4.04); (o) GOL would set up an Oil Palm Pricing Committee by January 1, 1985 and establish a pricing formula for smallholder ffb which would be acceptable to the Bank (6.04); (p) DOPC shall declare dividends out of its surplus in amounts and levels acceptable to the Bank provided that dividends shall not be declared unless DOPC's net profit in any fiscal year exceeds 5% of its equity (6.07). 8.02 Conditions of effectivness would be that: (a) Government would have acquired and leased to DOPC for a period of not less than 50 years the 8,350 ha (44% of which would be under plantations) for which detailed soil surveys have already been completed (3.05); (b) A subsidiary finance agreement between GOL and DOPC satisfactory to the Bank for channelling GOL and Bank funds to DOPC has been concluded and arrangements satisfactory to the Bank for channel- ling the funds of other cofinancers to DOPC have also been con- cluded (3.21); (c) DOPC has signed a management agreement with an international firm acceptable to the Bank (4.02); (d) A deposit of not less than US$0.9 million has been made by GOL inot DOPCts account (4.04). - 34 - 8.03 With the above assurances and conditions the project is suitable for a Bank loan of US$12.0 million for 20 years including 5 years grace. - 35 - ANNEX I LIBERIA DECORIS OIL PAIL PROJECT Summary of Project Cost (US'000) FOREIGN EXCHANGE LOCAL YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 TOTAL % AMOUNT COST NUCLEUS ESTATE Field Establishment 320.8 850.4 1,132.2 1,261.2 843.9 -- -- 4,408.5 47 2,076.9 2,331.6 Palm Oil Mill 1/ -- -- 200.0 2,825.0 5,795.5 3,662.0 582.5 13,065.0 64 8,328.2 4,736.8 Harper Port Oil Storage Station 1/ -- -- 12.0 194.7 598.2 525.6 -- 1,330.5 74 978.0 352.5 Road Construction Program 1,235.2 1,041.6 19.0 19.0 25.0 -- -- 2,339.8 44 1,049.0 1,290.8 Buildings and Houses 45.0 264.0 736.0 759.5 888.0 -- -- 2,692.5 22 615.3 2,077.2 Vehicles and Equipment 663,7 833,5 63.6 9.2 39.0 -- -- 1,609.0 79 1,286.5 322.5 Office Furniture and Equipment 32.9 16.1 8.1 -- -- -- -- 57.1 65 37.6 19.5 Coosultancy 2/ -- -- 215.0 255.0 30.0 -- -- 500.0 100 500.0 -- Staff Salaries 328.0 445.0 431.5 374.5 491.5 -- -- 2,070.5 53 960.0 1,110.5 Other Recurrent Cost - Administrative 207.0 275.6 306.3 334.4 359.1 -- -- 1,482.4 60 898.8 583.6 Roads Operating Cost 104.0 192.2 132.2 132.2 132.2 -- -- 692.8 83 578.2 114.6 Subtotal: 2,936.6 3,918.4 3,255.9 6,164.7 9,202.4 4,187.6 582.5 30,248.1 56 17,308.5 12,939.6 SMALLHOLDER Field Establishment 89.9 249.5 343.9 391.0 290.0 -- -- 1,364.3 40 546.2 818.1 Road Construction 3/ 300.0 517.4 -- -- -- -- -- 817.4 -- -- 817.4 Buildings and Houses -- -- 80.5 62.0 48.0 -- -- 190.5 22 43.0 147.5 Vehicles and Equipment 33.0 35.8 20.0 4.8 9.0 -- -- 102.6 80 82.1 20.5 Office Furniture and Equipment 5.3 5.3 -- -- -- -- -- 10.6 62 6.6 4.0 Staff Salaries 89.9 124.9 148.4 142.4 45.0 -- -- 550.6 31 175.0 375.6 Recurrent Costs - Administrative 12.6 28.9 36.9 36.9 36.9 -- -- 152.2 80 121.7 30,5 Subtotal: 530.7 961.8 629.7 637.1 428.9 -- -- 3,188.2 30 974.6 2,213.6 BASE COST 3,467.3 4,880.2 3,885.6 6,801.8 9,631.3 4,187.6 582.5 33,436.3 55 18,283.1 15,153.8 CONTINGENCIES Physical 4/ 257.6 398.8 239.0 510.2 805.9 378.7 51.8 2,642.0 55 1,453.1 1,188.9 Price 5/ 386.3 1,100.5 1,260.9 2,927.5 5,353.2 1,529.7 225.2 12,783.3 55 7,030.8 5,752.5 Subtotal: 643.9 1,499.3 1,499.9 3,437.7 6,159.1 1,908.4 277.0 15,425.3 55 8,483.9 6,941.4 PROJECT COST 4,111.2 6,379.5 5,385.5 10,239.5 15,790.4 6,096.0 859.5 48,861.6 55 26,767.0 22,094.6 1/ Disbursements in Years 6 and 7 only for capital costs to complete oil mill and oil storage stations. 2/ 20 man months at US$10,000/man month plus technical assistance for monitoring and evaluation. T/ Cost of feeder road within smallholder plantation. 4/ 15% for all civil works; 7% for.vehicles, agricultural and road equipment; and 5% for all other costs excluding salaries and wages. 5/ Price contingencies on foreign exchange costs: Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Vehicles, Equipment, Farm Inputs 9% 16% 23% 0 30% 38% 46% 54% Civil Works 11% 18% 27% 36% 45% 55% 65% Operating Costs 11% 18% 27% 36% 45% 55% 65% All Local Costs (10%) 16% 27% 40% 53% 69% 86% 105% ft -4 - 36 - ANNEX 2 LIBERIA DECORIS OIL PALM PROJECT Detailed Financing Plan (Us$'000) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 TOTAL Field Establishent I.j IBRD 260.6 574.7 689.4 741.8 356.6 -- -- 2,623.1 CDC 150.1 525.2 786.7 910.4 777.3 -- -- 3,149.7 Subtotal: 410.7 1,099.9 1,476.1 1,652.2 1,133.9 -- -- 5,772.8 Palm Oil Mill 2/ IBRD -- -- 200.0 871.8 1,715.2 1,154.4 212.4 4,153.8 CDC -- -- -- 1,041.5 2,304.7 1,485.0 221.8 5,053.0 GOL -- -- -- 911.7 1,775.6 1,022.6 148.3 3r858.2 Subtotal: -- -- 200.0 2,825.0 5,795.5 3,662.0 582.5 13,065.0 Harper Port oil Storae 3/ - 7. HR -- -- 12.0 121.5 427.0 417.5 -- 978.0 GOL -- -- -- 73.2 171.2 108.1 -- 352.5 Subtotal: -- -- 12.0 194.7 598.2 525.6 -- 1,330.5 Road Contructio 4/ IBRD 701.6 96.0 -- -- 12.0 -- -- 809.6 ADB 140.6 377.2 151.2 151.2 142.2 -- -- 962.4 EEC 677.4 1,086.3 -- -- -- -- -- 1,763.7 GOL 119.6 191.7 -- -- 3.0 -- -- 314-3 subtotal: 1,639.2 1,751.2 151.2 151.2 157.2 -- -- 3,850.0 Buildings and Houses 5/ ADB 29.3 171.6 509.7 498.5 561.6 -- -- 1,770.7 GOL 15.7 92.4 306.8 323.0 374.4 -- -- 1,112.3 Subtotal: 45.0 264.0 816.5 821.5 936.0 -- -- 2,883.0 Vehicles and Equipment I/ AV B 119.2 128.2 86.1 10.8 48.0 -- -- 392.3 CDC 615.7 762.5 5.6 3.2 -- -- -- 1,387.0 Subtotal: 734.9 890.7 91.7 14.0 48.0 -- -- 1,779.3 Staff Salaies If CtD 280.0 280.0 200,0 125.0 250.0 -- -- 1,135.0 GOL 137.9 289.9 379.9 391.9 286.5 -- -. 1,486.1 Subtotal: 417.9 569.9 579.9 516.9 536.5 -- -- 2,621.1 Consultancy and Technical Assistance - IBRD it -- -- 215.0 255.0 30.0 -- -- 500.0 R.current Costs - Administrative - ADD 9/ 219.6 304.5 343.2 371.3 396.0 -- -- 1,634.6 Base Cost 3,467.3 4,880.2 3,885.6 6,801.8 9,631.3 4,187.6 582.5 33,436.3 Unallocated IBRo 141.3 134.0 212.4 646.7 1,145.8 586.5 71.3 2,938.0 ADB 79.2 261.3 344.3 939.5 1,611.5 -- -- 3,235.8 CDC 152.1 396.0 512.6 950.9 1,793.4 407.1 65.3 4,277.4 EEC 52.0 195.4 -- -- -- -- -- 247.4 GOL 219.3 512.6 430.6 900.6 1,608.4 914.8 140.4 4,726.7 Subtotal- 643.9 1,499.3 1,499.9 3,437.7 6,159.1 1,908.4 277.0 15,425.3 TOTAL 4,111.2 6,379.5 5,385.5 10,239.5 15,790.4 6,096.0 859.5 48,861.6 1/ Nucleus and Smallholders establishment cost combined; Bank finances 100% of foreign exchange cost and CDC all local costs. Y/ IBRD finances 50% of the foreign exchange cost of the mill, 100% of foreign exchange cost of consultancy, housing, vehicles and training; CDC finances 50% of the foreign exchange cost of the mill, 1007. of the foreign exchange cost of civil works (excluding housing) and 507. of the local cost of the oil mill; GOL finances 100% of the local cost for civil works, housing, vehicles and training, and 50% of the local cost for the oil mill. I/ IBRD finances 100% of the foreign exchange cost and GOL 1007. of local cost. 4/ IBRD finances 1007. of the foreign exchange cost of heavy and workshop equipment and consultancy; ADB finances 1007. of materials and equipment operating cost and 1007. of the foreign exchange cost for road construction on contract; GOL finances 15% of local cost for equipment and road construction on contract during Years 1 and 2 and 100% during Year 5 and EEE 85% in Years 1 and 2. 5/ ADB finances 100% of the foreign exchange cost and 50% of all local costs; GOL finances 50% of all local costs. 6/ ADB finances 100% of the vehicles (including office equipment); CDC finances 1007. of agricultural equipment. 7/ CDC finances 100% of expatriates' salaries and GOL all local costs. S/ Includen technical assistance for monitoring and evaluation. 9/ ADB finances 100% of recurrent costs. t' - 37 - ANNEX 3 Table 1 LIBERIA DECORIS OIL PALM PROJECT Smallholder's Illustrative Cash Flow for 2.5 ha Year -1 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Years 10-11 CASH INFLOW Production (tons/FFB) 1/ -/ -- -- -- -- 12.5 20.0 25.0 30.0 31.2 31.2 31.2 Sales at US$58/ton -- -- -- -- -- 725.00 1,160.00 1,450.00 1,740.00 1,809.60 1,809.60 1,809.60 Grant 2/ " r12.50 80.00 28.75 30.00 32.50 -- -- -- -- -- -- -- Cash Credit 2/.,, 25.00 160.00 57.50 60.00 65.00 -- -- -- -- -- -- -- Credit 3/ 524.00 338.00 68.50 88.25 120.00 -- -- -- -- -- -- -- Total INFLOW - 561.50 578.00 154.75 178.25 217.50 725.00 1,160.00 1,450.00 1,740.00 1,809.60 1,809.60 1,809.60 CASH OUTFLOW Nursery Cost 4/ 471.50 78.50 -- -- -- -- -- -- -- -- -- -- Farm Inputs 57 12.50 239.50 68.50 88.25 120.00 139.25 172.50 230.50 250.75 267.50 267.50 267.50 Power Saws 40.00 20.00 -- -- -- -- -- -- - -- -- Total OUTFLOW - 524.00 338.00 68.50 88.25 120.00 139.25 172.50 230.50 250.75 267.50 267.50 267.50 Net Inflow before Debt Service 37.50 240.00 86.25 90.00 97.50 585.75 987.50 1,219.50 1,489.25 1,542.10 1,542.10 1,542.10 Debt Service 6/ -- -- -- -- -- -- 581.00 581.00 581.00 581.00 581.00 581.00 Net Inflow after Debt Service 37.50 240.00 86.25 90.00 97.50 585.75 406.50 638.50 908.25 961.10 961.10 961.10 On Farm Man Days 25 160 57.5 60 65 95 100 102.5 102.5 110 110 110 Net Return Per Man Day 1.50 1.50 1.50 1.50 1.50 6.17 4.07 6.23 8.86 8.74 8.74 8.74 1/ FFB ton/ha yield Year 4 - 5 tons; Yea5, - 8 tons; Year 6 - 10 tons; Year 7 - 12 tons; and Year 8 onwards - 12.5 tons. / Food allowance of US$0.50/man dayoantd &$1.00/man day paid in cash,or-a-tota--of-U541J5/-man-day, 3/ All farm input and labor excluding food allowance. 4/ See Working Paper C7. / Cover crop seeds, wire netting, fertilizers, chemicals and tools. / Loan to smallholder is at 12.5% for 13 years including a 6-year grace period for principal and interest but during which period interest is capitalized; cumulative value of annual loans at end of Year 6 follows: -1 0 1 2 3 4 Credit 549.00 498.00 126.00 148.25 185.00 1,506.25 Cumulative Value 1,112.97 897.41 201.83 211.08 234.15 2,657.44 say UE2Z100.00 添 震！ 、 - 38 - T,ble 2 LIBERIA DECORIS OIL PÅW MOJECT X-l~, E~t, - Mýýil oil Pal. Compeý P~l~,d C~h Flow (Uý$ 000) Y,ar i Yar 2 Year 3 Year 4 Year 5 year 6 year 7 Yeår 8 Year 9 Y- 10 Yýýr 11 Yý., 12 y... 13 ýý.r 14 Y.ar 15 yeare 16"17 Year 18 Year 19 Y.ar 20 YearB 21=22 Year 23 Y.ar 24 Y- 25 Y.ara 26~27 Year 28 Year 29 yý.ý 30 11 011 Pst, 1070.0 2268.4 4290.0 6527.2 8346.0 9544.4 10143.6 10272.0 10272.0 10272,0 10272.0 10272.0 10272,0 10272.0 10272.0 10229.2 10143.6 9972.4 9694.2 9373,2 9159.2 8902.4 114.8 258.3 516ý6 774,9 IDIB.8 1176.7 12ý4.1 1248.4 1248.4 1248,4 1248.4 1248,4 1241 1219.8 1183.9 To, 1 5.1.. 11ý4.ý ý5ýb.7 4796.6 7302.1 93",8 10721.1 11377.7 1152U.4 11520.4 11520.4 11520.4 11520.4 1152 2.:4 ly 25:4 11477.6 11377.7 11192.2 10878.1 ids21.2 1027B.5 ý91.u ý. R~ ss.l. 92.8 255.2 417.6 380.0 580.0 580.0 580.0 487.2 324.8 162.4 iBRII 131:1 536 5 B09 2 1554.5 2437.8 1438.9 189.2 coc ý9 6 1309 : 2 1003'.3 2020.7 3416.9 1261.4 191.4 AM 403.9 854.8 986.5 1354.3 1995.6 -- 1.ý.1 l_. 1938.2 270 .5 2799.0 4929.5- 7750.3 2700.3 3BOA -- lo,., »dt;ýTem Lýns .0 - -- -- -- 1600.0 1000.0 500.0 EWýurm OIL ca~ 367.8 260.2 404.6 727.3 1218.. 719.5 94.5 CDC 99.3 654.5 501.6 1010.3 170 .5 630.7 95.7 ADB lý ' 3 8.0 4480 617.0 863,1 - 492:4 1281.7 -- -- EM 729 ý.l. 1 3,9,:2 CM 1 114,1 1 19 17 Z4-ity '1" ' " 7 4 :9 1.fl- 4,l,:' 6'379ý01 127..1 10084.5 15760.4 BSBO.8 4419.0 5051.8 8219.7 9944.8 11301.1 11957.7 12100,4 120076 11"5.2 11682.8 11520.4 11520.4 11520,4 11520.4 11477.6 11377.7 11192.2 10878.1 10521.2 10278.5 9993.0 1. 1111-1 410.7 1099.9 14 6.1 1652,2 1133.9 555.3 398.2 207.9 P. oil mil - 200.0 2825.0 57 5:1 316,:1 58 .5 us'P" Part 011 $Lorws& Ststiou -- 12.0 194. 598 2 6 -- R-d Pm-- 1531.2 1119:1 19:1 1 :0 25:0 6' .0 61.0 61.0 61.0 61.0 61.0 61.0 61.0 61.0 61.0 61.0 61.0 61.0 61.0 61.0 61.0 61.0 61.0 61.0 61.0 61.0 61.0 3.ildi ..d H~ . 4,.ý 264 0 .11 1 .21 1 936 0 - - -- -- - - -- -- -- -- -- -- -- -- -- -- -- - - V i. . 30 0 30 0 30 0 30 0 30:1 31:. 30 30 0 350 0 30.0 3,.0 30 0 30 30 *b i:r od EquiPsont 696.7 869 . 3 .3., 14.0 48.0 3 .0 30.C 5 .0 ":0 21.4 8.1 C 5 :1 oftt- ad Eq.lp- 38.2 5 :'C C -5 C -5 0 -5 -5 0 -5 -5 40.0 _5 0 659 9 636 5 6 5 2.5 512.5 512.5 51 .5 512.5 2.5 212:1 212:0 12:1 23ý2:1 132:1 ..ff 417.9 5 23 232.5 232.5 232.5 23 2 .5 232.5 23 2 .5 232.5 23 2 .5 23 .5 23 .5 232.5 2 ":9 475 4 503 538:2 3, 3ýý '9ý.. 39ý.0 396.0 396,0 396.0 396.0 396.0 392.0 396.0 396.0 3,6 0 39 0 3,6 C-r. 323.6 49, 396.0 396.0 396.0 39'6.0 396.0 39b.. C.P,.1 cssts - Proit cliioctt« aýd ~ spott. i- -- - 216.0 54.0 108,0 108.0 275.0 150.0 80.0 80,0 80.0 80.0 80.0 80.0 80.0 80.0 80.0 120.0 120.0 120.0 120.0 120.0 120.0 120.0 ý-ýt ost. Mill md 011 Blom 445.0 586.0 820.2 1140.8 1332.0 1448.1 1509.3 152D.3 1520.3 1520.3 1396.5 1396.5 1396.5 1396.5 1396.5 1396.5 1396.5 1396.5 1396.5 1396.5 1396.5 1396.5 R~ t Cu.. ýL, C.II-ti- 44 7 170,1 2D4.9 225.9 242.6 ý46.6 2 6 6 216:,6 146:5 141:6 1 : 66 246:6 21ý1:1 146:ý6 146:6 16 246:ýl 246.6 24ý.b 24ý.1 2:, 15ýý llý 1 1 1, 1, lý9 1 :6 16 L'O lis ýd T- p. t~ 195:' 0'6:89 .67-3, 1221 3 l14::1O 14,4:ýý 1466.0 1481.1 14919 8 536 ý5 4 7 84 6 60 5 20 129 .7 1080.7 ing ~ IsnInt~ l212:ý 1, 1 1 18 2.5 1912.5 1812.5 1812.5 1812.5 1812.5 1809.6 1792.2 1769.0 1713.9 0:' 16 ýelIb.l r Fn 116.0 388.6 759.8 0 6 0 1792.2 1812.5 1892.5 1660 0 22.8 1587.5 3 ýý1:61 U2:1 2ý3.1 210.1 291.1 293,8 294,2 28B.3 29 1 643,9 1499,3 1479,9 3417.7 6159,1 2029.3 897 _6 12 288.9 294: 213 2ý2:4 257.8 . 1 fý - ý30 7 H:2 T. i ýýfi- bf.- ýbý Se~ . 4111.2 6379.5 5270.5 10084.5 15760.4 8793.5 4488. 1 4 3 b162.9 6170,2 6177.6 6054.9 6066.8 6..7 9 6ý168.49 dIN 6 9:19 d118.2 611''1 li6ýl 1413.b befors D*tt Uýtll -- 87.3 (9.1) 972.3 3113.7 3988.5 5344,1 5 52.4 5937.5 5837.4 566 562 5453 6 5432.8 5412.0 5391.2 5302.2 5207.8 3033.9 4764.8 4590.5 4607.3 4579.4 4030.0 4030.0 4030:0 4811ýl 11.1.:1 40.0:0 4080.0 403'.:90 403 :0 403 .0 4030.0 4030.0 4030.0 4030.0 4030.0 - -- D.bt i 1~-T.- loss. 108 ýýC 0 1. . 1. 0 10 -0 - - k*di-T.to 1~ - - -- . .--- - -.- . --.. --- - - :: sftar ýbt Servics 87.3 (9.1) 972.3 (916.3) (41.5> 234.1 742.4 827.5 727.4 557.6 1597.9 lý23.6 1402.8 1382.0 1361.2 1272.2 1177.8 1003.9 4764.8 4590.5 4607.3 4579.4 cusulstiw 5~ ,./Defult 87.3 78.2 1050.5 134.2 92.7 326.8 1069.2 1896.7 2624.1 3181.7 6377.5 7801.1 9203.9 10585.9 13308.3 14850.5 15758.3 16762.2 26291.8 30882.3 35489.9 40069.0 11 B- V~B p~ el. W$2"lye.r per hett.m; 6 ysst, g- ",i,d t 12.5% p- e4n emtrlb,ttm to ~ I p,,j,,t ~ 1. US'11 I ,," -; *1~1 111 l CýO 1..ý (O114.C 1- <US$S.C ..d ~ los. <US$2.5 lill..) ..d .11 of EEC 1.11.0 . 1, 1..' ý. ý,t1,yed t, a. eqýity by GOL ~ ~sl Iq.ity t USB2 .3 illiý. 41 Incl9d*a for &t,ll, :l:,ýtail,d Fi,ý"tý Pl- (A-ý-. 2). Pleid E,"bli,b«nt rost fø, both N, 0 od Sssllh,ld- ?r- Y.- 6 ~ 1 1*, -1 »,ld b, phøZd,,$t; fte, Y- le 11 ,pst, -l' '8.ýd -uti US$23.2 I f..ý. 10.0 ýllim) ~d AM <US$""!' 71 CM =ld m wW from IBRD (US$7,7 ýlilm), c 1,1 ill-) r tt«l US$2.8 illim, Y-r 4 - US$4 I ""i .$7, ýlli-. Y..ý 6 - US$2.7 illi-, ..d Y.- 7 - US$0.4 t.t.1 f US$32.3 t tý. ~d of Sth Y- diý- t- 1~ to b, ~A~d f~ ~ ,tal b»k to b, gmý.t.ýd by GOL. t- 10 y-, il,lýi,g 5 y.... g.... p.ti.d &t 10% ~ ~us. 》 攙 、 雲之 N - 39 ANNEX T«blc 3 LIBERIA DECORIS OIL PAIM COMPANY Prolected Profit -d las. Stats~ (US$ 000) Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Y.ar 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 year 24 year 25 Year, 26-27 Year 28 Year 29 Y..I 30 SAMS Oil Ulm 1070.0 2268.4 4280.0 6527.2 8346.0 9544.4 10143.6 10272.0 10272.0 10272.0 10272.0 10272.0 10272.0 10272.0 10272.0 10272.0 10272.0 10229.2 10143.6 9972.4 9694.2 9373.2 9159.2 8902.4 K~ncl 114,8 258,3 516.6 774.9 1018.8 1176.7 1234.1 1248.4 1 48.4 1248.4 1248.4 1248.4 1248.4 1248.4 1248.4 1248.4 1248,4 1248,4 1234,1 1219,8 1183,9 1148,0 1119.3 1090.6 Total SAUS 1184.B 2526.7 4796.6 7302.1 9364.8 10721.1 11377.7 11520.4 11520.4 11520.4 11520.4 11520.4 11520.4 11.520.4 11520.4 11520.4 11520.4 11477.6 11377.7 11192.2 10878.1 10521.2 10278.5 9993.0 I.te-ý an Smallhld- L-a. 45,6 117.8 176.7 222.3 174.8 127,3 79,8 39,9 13.3 Total INCOME 1184.8 2572.3 4914.4 7478,8 9587.1 10895.9 11505.0 11600.2 11560.3 11533.7 11520.4 11520.4 11520.4 11520.4 11520.4 11520.4 11520.4 11477.6 11377.7 11192.2 10878.1 10521.2 10278.5 9993.0 EKPLNSES Støff Salaries 512.5 512.5 512.5 512.5 512.5 232.5 232.5 232.5 232.5 232.5 232.5 232.5 232.5 232.5 232.5 232.5 232.5 232.5 232.5 232.5 232.5 232.5 232.5 232.5 Recor ant Costa: pale oil Mill 423.7 556 5 778.0 1084.5 1264:7 1373:9 1372:1 1442:1 1442.3 1442.3 1320.5 1320.5 1320.5 1320.5 1320.5 1320.5 1320.5 1320.5 1320.5 1320.5 1320.5 1320.5 1320.5 1320.5 Oil Storege 21.3 29:5 42.2 56.3 67 3 74 2 7 3 78 0 78.0 78.0 76.0 76.0 76.0 76.0 76.0 76.0 76.0 76.0 76.0 76.0 76.0 76.0 76.0 76.0 F,lit Collectiom - Oil Transp-tatim 11 44 0 69.9 117 5 170.1 204 9 225 9 242.6 246 6 246 6 246.6 246 6 246 6 246 6 246 6 246 6 246.6 246.6 246 6 246 6 246 6 246.6 246.6 246.6 246.6 and Maintenance 15 :7 37 3 6 36:6 8 5 9 969:9 1028:1 1 49 .6 1o64:4 1071:4 1 078.4 1085 :4 1085:4 1093:1 1106:6 1120 :l 1133.6 1133.6 1139:3 1149:4 1159:5 1169.6 1089.6 949.6 809.6 I . 3 5 . 1 1 a. 1 . 181 .5 18 Fýcha - Iholder FFB 16 0 88 : 6 7 9 8 1282:2 50 0 690 7 10792.2 2 12.5 1812.5 1812.5 1812.5 1812.5 1812.5 1812.5 1812.5. 1812.5 1809.6 1792.2 1769.0 1713.9 1660.0 1622.8 1587.5 !lSýl Lang- ~ Lo~ 1970.0 2280.0 2320.0 3043.0 2853,0 2663.0 2473.0 2283.0 2093.0 1903.0 1713.0 1523.0 1333.0 1143.0 953.0 763.0 573.0 383.0 193.0 - - -- -- C.- ,i 1 Loans -- 160.0 260.0 260.0 310.0 327.0 245.0 163.0 81.0 -- -- -- -- -- -- -- -- - -- -- -- -- D.Pre,l t inn: pa 1. 011 mill: Mill 106 9 217 0 390 6 569 6 704.5 788.6 834.7 842.8 842.8 842.8 842.8 842.8 842.8 842.8 842.8 942.8 842.8 840.3 833.2 821.5 797.2 771.9 754.6 735.4 Bausing ýl 29:1 29:1 29:1 29' '1 29.1 29.1 29.1 29.1 29.1 29 1 29.1 29.1 29.1 29.1 29.1 29.1 29.1 29.1 29.1 29.1 29.1 29.1 29.1 29.1 Vahi.t.. 12 8 12.8 12.8 12,8 12.8 12.8 12.8 12.8 12.8 12:8 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12,8 Haýp- Pert: Oil St.r.ga 158 2 58 2 58.2 58,2 58.2 58.2 58.2 58.2 58.2 58:2 18 11:2 11:2 18:2 18 18:2 58.2 58.2 58.2 58.2 58.2 58.2 58.2 58.2 Berge 91 0 91:0 1.0 191.0 191.0 191.0 191.0 191.0 191.0 191 0 1 0 1 0 91 0 91 0 91 0 91 0 1.0 191.0 191.0 191.0 191.0 191.0 191.0 191.0 B,ilding, and Ro es 24 0 245 0 245 0 245.0 245 0 245 0 245 0 245 0 245 0 245 0 245 0 245 0 245.o 245 0 245 0 245.o 245.0 245.0 245.0 245.0 245.0 245.0 245.0 245.0 Vehi,les and Equ1p::nt 101 112:1 1 12:1 112:1 1 12:B 1113:8 112:8 112 :8 1 12:8 112:8 112:8 1 12:8 112:8 112.8 112:8 112:8 112.8 112.8 112.8 112.8 112.8 112.8 112 8 112.8 112.8 1 ., I ., 1 ., l 1 .5 Fora ture iPsent 3 13.1 3.5 13.5 1 1 13 11:, 13 13 13 1':' 13.5 11:1 13.1 13.1 ,::d Equ, 3 3 3 5 5 13 5 1 3 1':1 6 863.5 A-tti.. 121 125,6 254,8 458,6 668,8 827.2 925.9 980.1 989.6 989.6 989.6 ý9 .6 9., ýý9 : 6 9.9:ý 1.1 , B, 9. 17. 116,1 -,o, _16"1 T.ý.1 EXFENSES 4133.1 5507.5 6938.2 9125.3 9884.4 9992.2 10021.4 9817.1 9552.1 9288.1 8981.3 8791.3 8609.0 8432.5 8256.0 8079.5 7889.5 7696.9 7484.1 7252.6 7154.8 6965.9 ý>ý51.1 6534.0 KET PROFIT (LOSS) (2948.3) (2935.2) (2023.8) (1646.5) (297.3) 903.7 1483.6 1783.1 2008.2 2245.6 2539.1 2729.1 2911.4 3087.9 3264,4 3440.9 3630.9 3780.7 3893.6 3939.6 3723.3 353ý5.3 3527.4 3459.0 C~ TIVE PROFTT (LOSS) (2948.3) (5883.5) (7907.3) (9553.8) (9851.1) (8947.4) (7463.8) (5680.7) (3672.5) (1426.9) 1112.2 3841.3 6752.7 9840.6 13105.0 16545.9 20176.8 23957,5 27851.1 31790.7 39237.3 42792.6 46320.0 49779.0 S.I.ri. ø, proccosing and mainten~e costs (Ses Proj t File Working ?aper C7). Sol~i.. Of driver. ..d 1..drs, foll, spares and tr:sportetion casts smallholders) (Sec Proje.t File Wýking Paper C7) Total long-teM loen Of USM.2 million t IM per non- far 25 ye.rs incl ding 8 year, grace; camm 1 1... UsS 3 * 1 mi lion .8 5 yes- gre.. «t 10% per aým; (Interest Years 2 to 5 ara capitalized ..d .I.e,...rly -rti.ad doring 10 y11Z.."111Yd! .) venue r i. r C-at of pale Oil Mill, US$12,576,000 or US$12.6 million Floa =allýated of US$5.8 million to be depreci.t.d over stimted prodaction of 2.373,090 tone of FFB ar $7.75 per ton of FFEi pr~,111d, 5/ Ho.i.g far Oil Mill I US$428,000 plu. anallocared of US$154 , 000 ".prarý.,.d r . r ý/ V.bia1.. far Oil Mill . US$51,000 depreciated at 25% per an~. 71 oil storage cost of US$730,000 plý unallocared of US$435,000 depre,iated at 551. per annum. ý/ Coat of US$600 000 plue ýllmated of US$355,000 depreclated at 20% per annum. 51 Coat Of US$2 .9 million, pi- -.11-td Of US$2.0 million depre,iated at 5% per 151 Coat of US$251,000 plus frutt coll,etim vebielý - US$200,000 - depreelated at 25% per annum. b Coat of US$67,700 dp..ýitd at 20% par annum. 2 Capitalj,ed Development Conts of US$14,8 million (Field Establishment - US$4.4 million, Roads - US$3.2 million, Consultancy US$0.2 million, Staff Salaties - US$2.9 million, Ree,ýent Costs - US$1.6 million, Rand, Operating C~t - US$0,7 million, and Vehjeles, Equipsent and %mitýe - US$1.8 million) and Unalloc~,d. cf US$6.8 million ar US$21.6 Million amartiled over total estimated prodýtion of 2.373,090 ta.. Of PPB r US$9.10 par tan E FF B Vr,c,,aed. 'b' - 40 - ANNEX 3 Table 4 LIBERIA DECORIS OIL PALM COMPANY Projected Balance Sheets (US$'000) Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 ASSETS Current Assets Cash on Hand & in Banks 1/ 87.3 78.2 1,050.5 134.5 92.7 326.8 1,069.2 1,896.7 2,624.1 3,181.7 Smallholders Loan 1,361.0 1,419.9 1,377.1 1,222.3 1,007.3 792.3 577.3 362.3 181.7 60.2 Fixed Assets 2/ Pale Oil Mill: Pill 18,400.0 18,400.0 18,400.0 18,400.0 18,400.0 18,400.0 18,400.0 18,400.0 18,400.0 18,400.0 Housing 582.0 582.0 582.0 582.0 582.0 582.0 582.0 582.0 582.0 582.0 Vehicles 51.0 51.0 51.0 51.0 51.0 51.0 51.0 102.0 102.0 102.0 Subtotal 19,033.0 19,033.0 19,033.0 19,033.0 19,033.0 19,033.0 19,033.0 19,084.0 19,084.0 19,084.0 Harper Port Oil Storage 1,165.0 1,165.0 1,165.0 1,165.0 1,165.0 1,165.0 1,165.0 1,165.0 1,165.0 1,165.0 Buildings and Houses 4,900.0 4,900.0 4,900.0 4,900.0 4,900.0 4,900.0 4,900.0 4,900.0 4,900.0 4,900.0 Vehicles and Equipment 1,400.0 1,400,0 1,400.0 1,400.0 1,400.0 1,400.0 1,400.0 1,400.0 1,400.0 1,400.0 Furniture and Equipment 68.0 68.0 68.0 68.0 68.0 68.0 68.0 68.0 68.0 68.0 Total Fixed Assets 26,566.0 26,566.0 26,566.0 26,566.0 26,566.0 26,566.0 26,566.0 26,617.0 26,617.0 26,617.0 Less: Depreciation 2/ 769.3 1,648*7 2,701.7 3,933.7 ,300.6 6.751.6 8,248.7 9,753.9 11,259.1 12,764.3 Net Fixed Assets 25,796.7 24,917.3 23,864.3 22,632.3 21,263.4 19,814.4 18,317.3 16,863.1 15,357.9 13,852.7 Other Assets Capitalized Development Costs 3/ 21,600.0 21,600.0 21,600.0 21,600.0 21,600.0 21,600.0 21,600.0 21,600.0 21,600.0 21,600.0 Less: Amortization 2/ 125.6 380.4 839.0 1,507.8 2,335.0 3,260.9 4,241.0 5,230.6 6,220.2 7,209.8 21,474.4 21,219.6 20,761.0 20,092.2 19,263.0 18,339.1 17,359.0 16,369.4 15,379.8 14,390.2 Smallholder Investment 4/ 2,400.0 2,400.0 2,400.0 2,400.0 2,400.0 2,400.0 2,400.0 2,400.0 2,400.0 2,400.0 Revaluation of Assets (2,900.0) (2,900.0) (3,500.0) (2,000.0) (2,000.0) (900.0) -- 1,800.0 2,000.0 2,300.0 Total ASSETS (Rounded) - 48,000.0 47,000.0 46,000.0 44,000.0 42,000.0 41,000.0 39,700.0 39,700.0 37,900.0 36,200.0 LIABILITIES Interest Payable 1,900.0 2,200.0 2,600.0 3,300.0 3,100.0 3,100.0 2,700.0 2,400.0 1,900.0 1,800.0 Long-Tern 5/ 22,900.0 23,200.0 23,200.0 21,700.0 20,200.0 18,800.0 17,300.0 16,200.0 13,800.0 10,500.0 Medium-Term 1/ 1,600.0 2,600.0 2,600.0 3,100.0 3,100.0 2,480.0 1,860.0 1,340.0 620.0 -- Total LIABILITIES - 26,400.0 28,000.0 28,400.0 28,100.0 26,400.0 24,380.0 21,860.0 19,940.0 16,320.0 12,300.0 CAPITAL 1/ 24,800.0 25,300.0 25,300.0 25,300.0 25,300.0 25,300.0 25,300.0 25,300.0 25,300.0 25,300.0 Add: Net Profit (Loss) 2/ (2,900.0) (5,900.0) (7,900.0) (9,500.0) (9,800.0) (8,900,0) (7,500.0) (5,600.0) (3,700.0) (1,400.0) Total LIABILITIES and CAPITAL (Rounded) - 48,000.0 47,000.0 46,000.0 44,000.0 42,000.0 41,000.0 39,700.0 39,700.0 37,900.0 36,200.0 1/ See Annex 3, Table 2, Projected Cash Flow Decoris Oil Palm Company. T/ See Annex 3, Table 3, Projected Profit and Loss Statement, Decoris Oil Palm Company. 5/ Includes: Field Establishment - US$4.4 million, Roads - US$3.2 million, Consultancy - US$0.2 million, Staff Salaries - US$2.9 million, Recurrent Costs - US$1.6 million, Roads Operating Cost - US$0.7 million, Vehicles, Equipment and Furniture - US$1.8 million, and Unallocated of US$6.8 million, or total of US$21.6 million. 4/ Includes: Field Establishment - US$1.4 million, Buildings - US$0.2 million, Vehicles - US$0.1 million, and Unallocated - US$0.7 million, or total of US$2.4 million. 5/ Loans onlent by GOL from IBRD, CDC and ADB funds. 珊 숙 - 41 - ARM 3 T.bl. 5 LIBERIA DECORIS OIL ?ALM PROLM7r Governænt of Liberia Projected Cash FIm (US$-000) Year i Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Yea, 9 Year 10 Year 11 year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Yen, 18 Feer 19 Year 20 Year 21 Ytara 22m25 Years 26~40 Year. 41-50 CASH 1RFLOW L.... IBRE, 1103.5 804.7 1313.8 2581.8 3756.6 2158.4 283.7 Å 117 1242.8 1434 5 1 71.3 2759.3 -- -- GDC 1197:'9 1963.7 1519:9 3'086.0 5055.4 1892.1 287.1 EEC 729.4 1281 .7 -- S,bt,tal 361B.7 5292.9 4268.2 7639.1 11571.3 4050.5 570,8 R,p,e, t, fro, ýcois 01 1 Fela C-p..y 21 -- 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 Total I,fl~ 3618.7 5292.9 4268.2 7639.1 11571.3 4050.5 570.8 4030.0 4030.0 4030,0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 OUTFLew Consultancy, Konitoring .od S' 1-" 1':' l":' 3:4 Decori. Oil pale ComPaýy 41ýý,2 637;.5 517. 1 lO0.4 1 11760 609 859,5 T.ý.1 0.1f1_ 4111,2 6379.5 5383.5 10239.5 15790,4 6096.0 859,5 Sýll, /ýficit bef,ý .b ' 41 (492.5) (1086.6) (1117.3) (2600.4) (4219.1) (2045.5) (288.7) 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 4030.0 UBT SERVICE IERD Charge 5/ 81.8 75.8 66.0 47.2 18.8 2.2 C:ý.ra.t 61 44.0 120.0 204.0 356.0 608.0 848.0 948.0 781.2 716.0 650.8 595.6 530.4 455.2 390.0 324.8 259.6 194.4 129.2 64,0 fti..ip.l 6/ -- -- -- - -- 630.0 790.0 815.0 815.0 815.0 815.0 815.0 815-0 815.0 815.0 815.0 815.6 B15.0 815.0 800.0 C. it.eýt Charge 51 103.5 89.2 78.0 54.8 17.2 2,2 eDe I.ýar.ar 71 45.o 161.2 288.8 461.2 765.0 1027.5 1125.0 1038.8 951.8 865.1 778.5 691.8 605.2 518.6 432.0 345.4 258.8 172.1 85.5 P.intip.l 7/ -- -- -- -- -- -- -- 1155.0 1155.0 1155.0 1155.0 1155.0 1155.0 1155.0 1155.0 1155,0 1155.0 1155.0 115ý.0 1153.0 coassitænt Charge 51 55.5 46.5 36.0 21.0 ADB i,ter,st 71 24.0 96.0 200.0 336.0 528.0 640.0 554.4 511.6 468.8 426.0 383.2 340,4 297.6 254.8 212.0 169.2 126.4 83.6 40.8 Ptinýip.l -- -- -- - -- 535,0 535.0 535.0 535.0 535.0 535.0 535.0 535.0 535.0 535.0 535.0 535.0 535.0 535.0 510.0 EEC.týiý. Charge 81 2.7 10.3 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 14.9 14,7 14.6 14.4 14.2 14.1 13.9 13.8 13.6 13.5 13.0 47.7 114.7 20.2 pti.ýIP-1 9/ - -- - -- -- -- -- -- -- - 20,0 20.0 20.0 20.0 20-0 20.0 20.0 20.0 20.0 20.0 60.0 240.0 900.0 600.0 Sbtotaj Debt Se=ice 356.5 599.0 887.8 1291.2 1952.0 3699.9 3967.4 4851.6 4656.6 4461.9 4287.1 4102.3 3897.6 3702.8 3508.0 3313.3 3118.5 2923.7 2728.9 Z498.5 73.0 287.7 1014.7 620.2 Net S-pl-/Deficir (849.e) (1685.6) (2005.1) (3891.6) (6171.1) (5745.4) (4256.1) (4851.6) (626.6) (431.9> (257.1) (72.3) 132.4 327.2 522.0 716.7 911.5 1106.3 1301.1 1531,5 3957,0 15832.3 (1014.7) (620.2) C-l.ti- S.rpl..Iýfiýir (949.0) (2534.6) (4539.7) (8431.3)(14602.4)(20347.8)(24603.9)(29455.5)(30082.1) (30514.0) (30771.1) (30843.4) (30711.0) (30383.8) (29861.8) (29145.1) (28233.6) (27127.3) (25826.2) (24294.7) (20337.7) (4505.4) (5520.1) (6140.3) 1,eludes cont"g ... ies. 11 Sec Projected Cash Flov for D .... is Oil Pels, Company (AnDex 3. T.bl. 2), 11 In, 1,1~ ,,,,,g .. l.:ý::d q.ity i~ rssert i. the ...p..y. yser. I t. 7 1 t. GOL ~ I contributino to poje,t cost. 51 314 f 1% .. -di.b.r..d b.la.ýa. As~ the .- .-iýnt ýh.tg. £.r IBRD, CDC od ADB. ý/ t. ý.t t 8% .ý di.b.t..d p.tti.n; 1.- for 20 yes- inýldi.g 5-y..r gr.ý. t 8%. For CDC, interset at 7.5. m disbursed portion; loan for 20 ye... inel,ding 7-yea, Eta- at 7.5%; for ADB, U, 1,,ludig tatý,ry comissim, on disbuýed portion loý for 20 yýrs including 5-yýr grace at BZ. 3/4 f 1% pst .ýo- .. di.b.r.sd p-ti... I% of ptin,ipal t, be paid ann,ally fro, Y-re 11 to 20; 3% f pri-ipal fron Yeara 21 to 50. �� � w и - 42 - ANNEX 4 Table 1 LIBERIA DECORIS OIL PALM PROJECT Estimated Schedule of Disbursement (Bank Loan) (US$1000) IBRD Fiscal Year and Quarter Disbursement Cumulative Disbursement FY 1980/81 First - 75 75 Second - 125 200 Third - 200 400 Fourth - 200 600 FY 1981/82 First - 200 800 Second - 200 1,000 Third - 200 1,200 Fourth - 200 1,400 FY 1982/83 First - 300 1,700 Second - 300 2,000 Third - 400 2,350 Fourth - 400 2,400 2,800 FY 1983/84 First - 500 3,200 Second - 500 3,700 Third - 600 4,300 Fourth - 600 4,900 FY 1984/85 First - 700 5,700 Second - 700 6,400 Third - 800 7,200 Fourth - 800 8,000 FY 1985/86 First - 700 8,700 Second - 700 9,400 Third - 600 10,000 Fourth - 600 10,600 FY 1986/87 First - 400 11,000 Second - 400 11,400 Third - 300 11,700 Fourth - 300 12,000  - 43 - ANNEX 4 Table 2 LIBERIA DECORIS OIL PALM PROJECT Estimated Schedule of Disbursement (EEC Credit) (US$'000) IBRD Fiscal Year and Quarter Disbursement Cumulative Disbursement FY 1980/81 First - 75 75 Second - 150 225 Third - 200 425 Fourth - 275 700 FY 1981/82 First - 350 1,050 Second - 450 1,500 Third - 500 2,000 Fourth - - - - 44 - ANNEX 5 LIBERIA DECORIS OIL PALM PROJECT Assumptions Underlying Rate of Return Calculations 1. Project Life: Assumed to be 30 years including a 7 year investment period during which development activities would be completed. 2. Project Costs: (i) all costs are expressed in end 1979 prices net of identifiable taxes and duties; (ii) cost estimates include physical contingencies at the level specified in para 3.19; (iii) the opportunity cost for unskilled farm labor is assumed to be US$1.00 per day; (iv) rice which is provided at the rate of 1 bag (60 kilos) per smallholder farm family per month is costed at its full market value; (v) road maintenance costs have been included for the full project life. 3. Project Benefit: Expected future yields and production are shown in Project File Working Paper C6. (i) Project benefits comprise the value of incre- mental palm oil and palm kernel priced at their ex-mill gate value (for details see Annex 5, Table 1), which are based on the Bank's commodity price forecasts for palm oil and palm kernel; Malaysian, 5%, C.I.F. N.W. European. (ii) Additional non-agricultural benefits from improved roads and rural infrastructure are not included in the calculations; (iii) No salvage value is assumed at the end of the project's economic life. 4. Using the foregoing assumptions and discounting costs and benefits over a 30 year evaluation period, the economic rate of return for.the project is 12%. Assuming a discount ratio of 10%, the estimated opportunity cost of capital in Liberia, the economic net present value (NPV) of project invest- ment in 1979 terms is US$5.02 million. S45 - ANNEX 5 Table 1 LIBERIA DECORIS OIL PALM PROJECT Estimated Mill Gate Value for Palm Oil, Palm Kernel and Fresh Fruit Bunches (Constant 1979, US$ per metric ton) Palm Oil Palm Kernel 1990 1990 Economic - Financial Economic - Financial Reference Price C.I.F. Europe 1/ 512.00 369.00 Less: - freight 2/ 53.00 70.00 - insurance 3/ 6.85 1.40 - port dues 1.20 1.20 - bunker charges 4/ 5.26 6.91 F.0.B. Harper 5/ 445.69 289.49 Ex-Mill Price Mooring 0.04 0.04 rr Wharfage 0.59 0.59 / Towage 0.21 0.21 Transportation 6/ 1.42 1.93 14/ Value Ex-Mill 443.43 286.72 Mill Gate Value Less: - processing costs 7/ 59.67 - storage 8/ 3.22 - fruit collection & transportation 9/ 12.02 - depreciation 10/ 24.00 - interest 11/ 60.00 - profit 127 23.00 Mill Gate Value 261.52 YFB Mill Gate Value 13/ 57.53 1/ Basis EDP commodity forecast (April 1979) prices of Malaysian palm oil, 5%, C.I.F. NW European ports.. 2/ Basis West Africa Conference lines (liner terms). 3/ Calculated at .0038462% on 110% of C.I.F. value of product shipped and 1% sales commission on C.I.F. Europe. 4/ Calculated at 9.7% of the freights (US$53 per ton) plus dues US$1.20 per ton. 5/ Once the mainline vessel calls at Harper as in the present project, there is no difference between F.0.B. Harper and F.0.B. Monrovia. 6/ Average annual recurrent transportation costs of US$1.41 per ton. Project investments in trucks and drivers are found in Project File Working Paper C7. 7/ Based on estimated storage costs of about US$77,000 annually. See Project File Working Paper C7. 8/ Based on estimated storage costs of about US$77,000 annually. 9/ Based on annual transportation costs of US$288,000 at full development. 10/ The capital cost of the oil mill and associated storage facilities of US$14.4 million is depreciated over 25 years or about US$526,000 for 24,000 tons of oil. 11/ Based on finance charges of 10% interest on capital investment of US$14.4 million or US$1.14 million per year. 12/ Assumes a 12% return on equity of US$9.0 million after deduction of the proportionate share in the equity of investments in oil mill and oil storage (or US$4.4 million) or 12% on US$4.6 million. 13/ Based on a 22% extraction rate for oil. 14/ Annual transportation cost of US$8,800 per 4,400 tons.  - 46 - MNEX0 6 Table 1' LIBERIA DECORIS OIL PALM PROJECT Calclation of Economic Rate ef Return for the Projert (US$'000) Year 1 Yer 2 Year 3 Year 4. Year 5 Year 6 Yer 7 Yesr 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Yars 16-17 Year 18 Year 19 Year 20 Years 21-22 Year 23 Year 24 Year 25 Yar 26-27 Year 28 Yeere 9-30 COSTS Field Establishment - cldleus V/ 300.6 741.9 943.6 1023.2 609.1 257.2 188.4 100.8 -- -- -- -- -- .- .... F1eld Establisent - Sallholder 2/ 82.9 218,9 294.5 332.4 233.9 125,8 91.4 50.8 -- -- -- -- - -- - -- - - Palm 0 1 ill -- -- 200.0 2770.6 5687.0 3597.7 572.9 -- -.-- - --- .. . heaper Port Oil Storage -- -- 12.0 191.0 589.6 520.2 -- -- -- -- -- -- .. .. Roed Construction 1494.5 1493.5 11.7 18.7 9.8 - -- -- - .- - -- -- ... Bufidle ned lIouse 43.4 254.9 765.8 789.2 898,6 -- -- -- -- - .- .. Vebi,les snd Equipæent 685.5 855.4 823.0 13.8 47.2 29.7 29.7 29.7 29.7 29.7 29.7 29.7 29.7 29.7 29.7 29.7 29.7 29.7 29.7 29.7 29.7 29.7 29.7 29.7 29.7 29.7 Office Furniture and EquIpment 37.5 21.1 8.0 -- .. 4.9 4.9 4.9 4.9 4,9 4.9 4,9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 Staff Salaries 411.0 555.4 675.9 652.3 552.2 497.1 487.1 487.1 487.1 487.1 183.2 185.2 15 0 2 183.2 193.2 083.2 1932 183.2 183.2 1832 185.2 183.2 1832 1832 13 .2 Rerurrent Conen - Admiis- trntive 214.8 298.8 337.5 364.5 388.3 388.3 388.3 388.3 38.3 388.3 318.5 318.5 318.5 318.5 318.5 318.5 318.5 318.5 318.5 318.5 318.5 318.5 318.5 318.5 318.5 319.5 Road, - Oper,ting Cost 101.8 185.6 125.6 125.6 125.6 60.4 60.4 60.4 60.4 60.4 60.4 60.4 60.4 60.4 60.4 60.4 60.4 60.4 69.4 60.4 60.4 60.4 60.4 60.4 60.4 680.4 Cnpital Coet - Fesit Colectio and Tans- portation -- -- -- -- -- 213.6 53.2 106.2 106.2 273.9 147.9 78.9 78.9 78,9 78.9 78.9 78.9 78.9 78.9 78.9 118.9 118.9 118.9 118.9 118.9 118.9 Reurrent Cost -Mill and 01 ,orage -- -- -- -- -- 425.7 559.7 782.7 1087.9 1270.0 1380.6 1438.7 1449.2 1449.2 1449.2 1331.6 1331.6 1331.6 1331.6 1331.6 1331.6 1331.6 1331.6 1331.6 1331.6 1331.6 ertrent o- ruIt Collention nd Tens-. portaton -- -- -- -- 42.7 66.1 114.6 166.0 200.0 220.4 236.8 240.8 240.8 240.8 240.8 240.8 240.8 240.8 240.8 240.8 240.8 240.8 340.8 240.8 240.8 HarvestIng and Mintenane -- -- -- -- 126.2 340.5 598.3 871.9 981.2 1063.1 1094.1 1113.6 1120.4 1127.2 1134.1 1139.6 1149.1 1158.6 1168.2 1172.5 1180.5 1238.0 1196.2 1077.0 764.3 3372.0 4625.4 4224.6 6281.3 9141.3 6279.5 2842.6 2723.8 3202.4 3695.5 3408.7 3445.2 3479.2 3486.0 3492.8 3382.1 3387.6 3397.1 3406.6 3416.2 3460.5 3468.5 3526.0 3484.2 3365.0 3052.3 Physical Coteegency 217.6 314.2 194.0 379.2 612.3 388.3 134.1 112.5 136.4 161.1 161.9 163.8 165.4 165.8 166.1 160.6 160.9 161.3 161.8 162.3 164.5 164.9 167.8 165.7 159.7 144.1 Total COSTS - 3589.6 4939.6 4418.6 6660.5 9753.6 6667.8 2976.7 2836.3 3338.8 3856.6 3570.6 3609.0 3644.6 3651.8 3658.9 3542.7 3548.5 3558.4 3568.4 3578.5 3625.0 3633.4 3693.8 3649.9 3524.7 3196.4 BENEFITS Pale 0il - - -- - -- 1070.0 2268.4 4280.0 6527.2 8346.0 9544.4 10143.6 10272.0 10272.0 10272.0 10272.0 10272.0 10272.0 10272.0 10272.0 10229.2 10143.6 9972.4 9694.2 9373.2 9030.8 Kerne - -- -- -- 114.8 258.3 516.6 774.9 1018.8 1176.7 1234.1 1248.4 1248.4 1248.4 1248.4 1248.4 1248.4 1248.4 1248.4 1248.4 1234.1 1219.8 1183.9 1148.0 1105.0 Total BEEFITS - - -- .. 1184.8 2526.7 4796.6 7302.1 9364.8 10721.1 11377.7 11520.4 11520.4 11520.4 11520.4 11520.4 11520.4 11520.4 11520.4 11477.6 11377.7 11192.2 10878.1 10521.2 10135.B 1/ Includes indirect taxead duties. / Lebor tempoeent shadow wage rte f US$1.00. � $ �` � �1 л � 47 - T,ble 2 LIBERIA DECORIS OIL Pý MOJECT C,l,.I,tim f th, Erotolir Rot, lf R,t.ý fl, th, N-1,- E-te (US$1000) Year i Yýar 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Y- 12 year 13 Year 14 Year 15 YarB 16~17 Year 18 Y-r 19 Year 20 Years 21ý22 Year 23 Y- 24 Year 25 Years 26~ý7 Y.ar 2B y..r. 29-3C COSTS Fi,ld 293.8 725.9 924.4 1004.0 601.9 257.2 187.8 100.8 NI. 0 1 Mill -- 200.0 2770.6 5687.0 3597.7 572.9 -- "rp r Port oil St rlg, -- -- 12.0 191.0 589.6 520.2 -- R-d C-trortl- 1219:1, 1102, 8 7 '11:1 ý1:1 -- ý8 16 1 :2 B.lldfý,. 9 472 86 4 ,hill- Eq,ip-t 652.8 820.0 62.5 9.0 38.3 24.8 24.8 24.8 24.8 24,8 24.8 24.8 24.8 24.8 24.8 24.B 24.8 24.8 24.8 24.8 24.8 24.8 24.8 24.8 24.8 24.8 Off te Fýit=e & Eqlip- 32.3 15.9 8.0 -- -- 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 S t.ff Sal-i- 323.8 435.0 533.2 515.3 507.7 442.6 442.6 442.6 442,6 442.6 173.7 173.7 173.7 173.7 173.7 173.7 173.7 173.7 173.7 173.7 173.7 173.7 173.7 173.7 173.7 173.7 .tý., R. C.ýý. 202.3 270.2 301.0 328.0 351.8 351.8 351.8 351.8 351.8 351.8 287,4 2B7.4 287.4 287.4 287,4 287.4 287.4 287.4 287.4 287.4 287.4 Z87.4 287.4 287.4 287.4 287.4 R-d, OPIrati- C,st 67.9 123.7 8 .7 83.7 83.7 40.3 40.3 40.3 40.3 40.3 40.3 40.3 40.3 40.3 40.3 40.3 40.3 40.3 40.3 40.3 40.3 40.3 40.3 40.3 40.3 40.3 Sm I lý. 1- 116.0 388.6 759.8 1212.2 1508.0 1690.7 1792.2 1812.3 1812.5 1812.5 1812.5 1812.5 1812.5 1812.5 1812.5 1807.9 1792.8 1769.0 1713.9 1660,0 1605.2 C- F-ir ,.l,- t Tro- P,rtatio: 185.0 24.6 73.8 73.8 249,2 98.4 49.2 49.2 49,2 49.2 49.2 49.2 49.2 49.2 49.2 89.2 89.2 89.2 89.2 S9.2 89.2 .1 S,.r.S. 425.7 559.7 782.7 1087.9 1270.0 1380.6 1438.7 1449.2 1449.2 1449.2 1331.6 1331.6 1331.6 1331.6 1331.6 1331.6 1331.6 1331.6 1331.6 1331.6 1331.6 R11,1r111 Cllt 24 31 61:ýl 91 :3 131 142 142 1 2 14 142: 142 1492 2 4.:ýl 11,1 14, 1 14' 1 2:ýl 1 0, ýý:3 S IS ý,:1 Sý:1 1 :l 7 1 1 1 1 " , 1 1 , 1 ":7 L L 1 1' 1 ':. 7 1 . :6 .11 7 6:1 117 ..port :2' 1 663 7 :7 731:'5 714:1 7 16 74 7 1 7S3:1 7ý :3 71 2BII.3 3562.6 2615.7 5406.7 8438.1 6080.2 2871.3 3256.1 3925.5 4672.7 4549.0 46B7.B 4737.4 4744.2 4751.0 4640.3 4643.6 4649.2 4654.8 4660.5 4699.1 4689.9 4721.6 4622.6 4489.1 4225.6 Add. Phy.i..1 C-tI.S ... y 19B.S 280.4 145.6 383.0 620.5 403.8 157 3 153.B 197.3 234.6 228.4 235.4 237.9 238.3 238.6 233.1 233.2 233,5 233.8 234.1 236.0 235.5 237.2 232-1 225,4 212,3 Total COSTS 3009.8 3843.0 2761.3 5789.7 9058,6 6484.0 3028.6 3409.9 4122.8 4907.3 4777.4 4923.2 4975.3 4982.5 4989.6 4873.4 4876.8 4882.7 48BB.6 4894.6 4935.1 4925.4 4958.8 4854.7 4714.5 4437.9 BENEFTIS 10741:0 2211:4 4,1jýO:ýl 6,27..2 1341:. 114-4 11143:6 10272.0 10 72.0 102272.0 10272.0 271 10272 0 10272 1122ýl 2 L 43 9 72:.4 919':' 9 7ýl:ýi 11.ý1:1 rlo Il . ý,S 7ý4 9 lOlS 1176:4 "' ':4 4 :4 124 4 :4 :4 1134:'1 F.l. 0 1 7 123, 1 248.4 12 12-'. 12 24 12' I'ý4 1 248.4 1 48.4 1248.4 S 8 : 124. g 1. 0 T-1 BENEFITS 1184.8 2526.7 4796,6 7302.1 9364.8 10721.1 11377.7 11520.4 11520.4 11520.4 11520.4 11520.4 11520.4 11520.4 11520.4 11477.6 11377.7 11192.2 10878.1 10521.2 10135.8  ANNEX 6 Table 3 LIBERIA DECORIS OIL PALM PROJECT Calcul4tion of the Economic Rate of Reltrn for Smallholder8 (US$'û00) Year I Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Years 16-17 Year 18 Year 19 Year 20 Years 21-22 Year 23 Y.ar 24 Y-a 25 Years 26-27 Year 28 Years 29-30 COSTS Fleld Establishmnt B 9.7 234.9 313.7 351.6 226.7 125.8 91.4 50.8 ---- -- --,.. R,ad cons.truction 285.0 491.5 -- - -- . - -.. -- .._ Building. and Hose.f14.5 84.9 313.6 302.8 330.3 --- -- -- - VehIcles and Equipment 32.7 35.4 19.8 4.8 8.9 4.9 4.9 4,9 4.9 4,9 4.9 4.9 4,9 4,9 4.9 4.9 4.9 49 49 49 49 49 49 4.9 49 49 0ffice Furniture and Equip~en 5. :52 -- -- -- 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Staf Sare 872 10..4. 137.0 44.5 44.5 44.5 44.5 44.5 44.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5 Rod 1Oeain 1ot 2/ 33.9 61,9 41.9 41.9 41.9 20.1 20.1 20,1 20.1 20.1 20.l 20.1 20.1 20.1 20.1 20.1 20.1 20.1 20.1 20.1 20.1 20.1 20.1 20.1 20.1 20.1 RcretCts-Administrative 12.5 28.6 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 31.1 31.1 31.1 31.1 31.1 31.1 31.1 31.1 31.1 31.1 31,1 31.1 31.1 31.1 31.1 31.1 Capital coats Fruit Collection, and Transportation -. - .- -- - 28.6 28.6 32.4 32.4 24.7 49.5 29.7 29.7 29.7 29.7 29,7 29.7 29.7 29.7 29.7 29.7 29.7 29.7 29,7 29,7 29.7 Recurrent Cost, • FruIt CletoanTrnsprain -- - - - - 17.8 29.0 48..8 67.7 8L.7 89.9 98.7 98,7 98.7 98.7 9B,7 98.7 98.7 98.7 98.7 98.7 98.7 98.7 98.7 98.7 98.7 Hare :in adT antnace.- - - - - 36.1 105.3 188.5 282.0 317.4 344.4 354.6 359.3 . 359.3 _359.3 359.3 361.5 365.4 369.3 373.2 374.3 376,4 378,4 380.5 340.9 236,9 560.7 1062.8 868.2 874.6 688.B 315.3 361.3 427.5 489.1 530.8 550.4 549.6 554.3 554.3 554.3 554.3 556.5 560.4 564.3 568.2 569.3 571.4 573.4 575.5 535.9 431.9 Add. Physical contingency 54.3 105,6 68.0 67.2 65.3 13.6 15,9 19.2 22.3 24,4 27.1 27.1 27.3 27.3 27.3 27.3 27.4 27.6 27.8 28.0 28.1 28,2 28.3 28,4 26,4 21,2 Total COSTS - 615.0 1168.4 936.2 941.8 754.1 328.9 377.2 446.7 511.4 555.2 577.5 576.7 581.6 581.6 581.6 581.6 583.9 588.0 592..1 596.2 597.4 599.6 601.7 603.9 562.3 453.1 FFBi 3/ -- -- -- -- .-- 116.0 3B8.6 759.6 1212.2 1508. 0 1690.7 1792.2 1812.5 1812.5 1812.5 1812.5 1812.5 1812.5 1812.5 1812.5 1807.9 1792.8 1767.8 1713.9 1660.0 1605.2 _1/ Include nule- Decri oil palm input. 2/ l1/3 of nuluetate buildings. / At US$58/t,, of FFB - for production see Smllholder Poutnof FFB. -cf t - 49 - ANNEX 7 LIBERIA DECORIS OIL PALM PROJECT Selected Documents and Data Available in the Project File A. General Reports and Studies on the Sector: Al. Economic Survey of Liberia 1977. A2. External Trade of Liberia 1977. A3. Statistical Handbook of the Ministry of Agriculture 1976. A4. Preliminary Report on the Feasibility Study of the Establishment of an Edible Oil and Oil Seed Industry within the Mano River Union. A5. A Note on West African Oil Palm Production. A6. LPMC Annual Report on the Tree Crops Program October 1974- September 1975. A7. Financial Agreement Between the EEC and the Republic of Liberia, Agreement 2062/Li, 1977. B. General Reports and Studies Related to the Project: Bl. Soil and Vegetation Report: Pedologigue Pour Localiser les Sites des Plantations and Accompanying Maps, 1976. B2. Feasibility Study of an Oil Plm and Coconut Project, 1976. B3. Etudes Socio-Economique sur les Zones Concernees Pars les Projets de Plantation de Palmier, 1976. B4. CDC: Appraisal of Proposed Oil Palm Project at Decoris. General Map, Scale 1:50,000 of the Project Location. Map of Proposed Nucleus Estate Site Prepared by IRHO during Appraisal. Map Showing Location of Initial 3,700 (ha) of Nucleus Estate to be Planted. C. Selected Working Papers: Cl. Agriculture. IBRD Chart 20223 - Schedule of Cultural Practices for 1 ha Oil Palm. C2. Marketing and Processing. IBRD Chart 20222 - Implementation Schedule for Mill and Port Facilities. C3. Road Improvements. IBRD Chart 20421 - Road Standards. IBRD Chart 20423 - Road Layout of Nucleus Estate. C4. Port Improvements. Outline of Proposed Installation at Port of Harper. IBRD Chart 20080 - Details of Loading and Berthing Dolphins. C5. Organization and Mangement. . IBRD Chart 20389 - Organization Chart. C6. Economic Rate of Return Calculations, Production Estimates and Prices. C7. Project Cost Tables. C8. IBRD Map 14274 - General Location of Project Area. IBRD Map 14275 - Detailed Map of Project Area. IBRD Map 14276 - Layout of Initial 3,700 ha of Nucleus Estate Plantation and Potential Areas for Expansion. IBRD Chart 20224 - Schedule of Technical Operations. * LIBERIA DECORIS OIL PALM PROJECT ORGANIZATION CHART: DECORIS OIL PALM COMPANY MINISTRY OF AGRICULTURE] EXTERNAL AUDITORS BOARD OF DIRECTORS GENERAL MANAGER FINANCE ESTATE SMALLHOLDER PROCESSING ADMINISTATION PLANTATION PLANTATION ENGINEERING AND 0 I PERSONNELj SECTION I BLOCK 1 ROADS FINANCE SHIPPING. TRAINING SECTION I BLOCK 2 M EWORKSHOPm MARKETING ACCOUNTS SECTION III BLOCK 3 MBUILDINGS AND FACORYT MAINTENANCE] INTERNAL SECTION IV BLOCK 4 W OA AUDIT IWRS PROCU RES BLOCK 5 AND STORES MEDICAL BLOCK 6 SERVICES PUBLIC BLOCK 7 RELATIONS World Bank - 20389 LIBERIA DECORIS OIL PALM PROJECT Schedule of Technical Operations 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 FIELD DIVISION 1. Order Seed I 2. Seed Germinated 3. Seed to Pre-nursery 4. Nursery 5. Land Cleariing 800 ha IN g O 1400 he m 1400 he m m 1400 ha 6. Seedlings Planted 0 1 O g First Harvest ROADS DIVISION GRADE 1 ROADS 7. Appoint Consultant 8. Survey Grade 1 Roads/Bridges 9. Prepare Tender Documents 10. Preselect Contractor 11. Invitation to Bid 12. Award of Contract 13. Road Works 14. Bridge Works la1rgg 15 Contractor's Maintenance 1 I 16. DOPC Maintenance GRADE 2 ROADS 17. Road Works 18. Culverts GRADE 3 ROADS 19. Road Works a gI 20. Drainage Works 21. ROAD MAINTENANCE 1 I 2 I 3 22. Constructon Tem. Workshop 23. Construction Workshop HOUSING SECTION 24. Planning and Design 25. Selection and Award of Contract R R M 26. Constructon of Stagf Houses A Adtministration FR 27. Construction of Staff Quarters P= Field DiFsionM 28. Construction of Staff Camps M = Oil Mill Division F Ia i o alg lefagsag 29. HOUSING"MAINTENANCE R RoadsOlvision OIL MILL DIVISION 30. Appoint Consultant 31. Survey, Planning, Design me 32. Select, Appoint Contractor 33. Construct Oil Mill - Civil Works IE Electrical Works - Mechanical Works 34 Construct Oil Storage Depot 35. Test and Commission 36. MAINTENANCE/OPERATION PORT SECTION 37. Appoint Consultant I 38. Survey, De,sgn 39 Barge Construction 40 Jetty Construct,on 41 Test and Commison 42 MAINTENANCE/OPERATION MrE m 4lSlipay Con2rcto IN F irst Haves't World Bank - 20224  IBRD 】4275 긷