Madagascar - Mangoky Agricultural Development Project

Document of The World Bank FILE COPY FOR OFMICIAL USE ONLY Rqpot No. P-2372-MAG REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE DEMOCRATIC REPUBLIC OF MADAGASCAR FOR THE MANGOKY AGRICULTURAL DEVELOPMENT PROJECT February 22, 1979 ITh dgct ba a _roud iliistim s_d my be sod by nedplet osy in th puformee of their 1d1si isl he cuskat my mt drwe be dbcomed wi*h* Wrld Bk aldwrdatlo.  CURRENCY EQUIVALENTS Calendar 1978 January 1979 Unit = Malagasy Francs (FMG) - Malagasy franc (FMG) US$1.00 = FMG 225.64 - FMG 212.06 FMG 1 = US$0.004 - US$0.005 FMG 1,O00 = US$4.43 - US$4.72 (The Staff Appraisal Report is based on US$1 = FMG 225) ABBREVIATIONS AND ACRONYMS BTM Bankin'Ny Tantsahe Mpamokatra (Banque nationale pour le developpement rural) - National Bank for Rural Development CFDT Compagnie Francaise pour le developpement des fibres textiles - French Textile Company FAC Fonds d'aide et de cooperation of the French Government FAFIFAMA Livestock Development Unit in Ministry of Rural Development FED Fonds europeen de developpement - European Development Fund IFAD International Fund for Agricultural Development SAMANGOKY Society pour l'amenagement et la mise en valeur de la Vallee du Bas Mangoky - Development and Production Agency for the Lower Mangoky Valley SODEMO Societe pour le developpement economique de la region de Morondava - Agency for the Economic Development of the Morondava Region FISCAL YEAR Government - January 1 - December 31 SAMANGOKY - October 1 - September 30  FOR OFFICIAL USE ONLY MADAGASCAR MANGOKY AGRICULTURAL DEVELOPMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Democratic Republic of Madagascar Beneficiaries: Ministry of Rural Development and Agrarian Reform, SAMANGOKY Amount: US$12.0 million Terms: Standard Project (i) Objectives: The Project would support the development of Description: 3,700 ha of new land for the production of rice and cotton. It would complete an irrigation system serving about 10,000 ha in the lower Mangoky Valley. (ii) Components: The Project represents the final tranche of the first phase of a long-term master plan for the development of the Mangoky delta. It would include: (a) development of irrigation and drainage networks for 3,700 ha and road infra- structure; <b) development of about 3,300 ha of new land and production of concrete canal segments for tertiary and quaternary irrigation networks; (c) detailed design studies and supervision of civil works; (d) incremental agricultural production costs; (e) applied agricultural research for the Mangoky scheme; (f) social infrastructure; (g) investigational research and trials on operating problems, overseas study trips and training courses, monitoring and evaluation, and studies to prepare future projects for the Mangoky region; and (h) project preparation activities for agriculture and new development projects. (iii) Benefits: Increased production of rice and cotton by about 13,000 and 2,000 tons, respectively, with a total value of about US$3.9 million annually. About 3,200 families or 19,000 persons would benefit directly from the Project. The average farm income would be nearly US$800 as compared with a farm income of about US$220 on traditional farms in the area. The project would create new employment for about 8,500 people. (iv) Risks: The success of Project implementation will depend on (i) the quality of SAMANGOKY management in executing land development works and in organizing agricultural produc- tion, (ii) the degree of support and control of SAMANGOKY's activities by the Ministry of Rural Development (iii) farmer cooperation and (iv) the introduction of good irrigation and soil management practices on actual or potentially saline or alkaline soils. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Estimated Cost: ----US$ Million---- Local Foreign Total (a) Major Civil Works 1.5 3.6 5.1 (b) Land Development 3.9 5.6 9.5 (c) Design studies & supervision 0.2 0.3 0.5 (d) Incremental agricultural production costs 1.2 1.5 2.7 (e) Social infrastructure 0.1 0.0 0.1 (f) Training, applied investigation, research & project preparation 1.4 2.0 3.4 Total 8.3 13.0 21.3 Contingency Allowances Physical 1.2 1.9 3.0 Price 2.0 3.1 5.1 Total Contingencies 3.2 5.0 8.1 Total Project Costs 11.4 18.0 29.4 Taxes and Duties 3.0 Total Project Costs (net of taxes and duties) 8.4 18.0 26.4 Financing Plan: US$ Percent (million) of Total Government of Madagascar 4.8 18 SAMANGOKY/Farmers 2.2 8 Cotton Organization/Farmers 0.9 3 IFAD 6.5 25 IDA 12.0 46 Total (net of taxes and duties) 26.4 100 Estimated IDA Fiscal Year Disbursement: 1980 1981 1982 1983 1984 1985 Annual 0.2 1.3 3.5 4.5 2.0 0.5 Cumulative 0.2 1.5 5.0 9.5 11.5 12.0 Rate of Return: About 18 percent Staff Appraisal Report: No. 2178-MAG, dated February 14, 1979 Maps: IBRD 13654 and IBRD 13655  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE DEMOCRATIC REPUBLIC OF MADAGASCAR FOR THE MANGOKY AGRICULTURAL DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Democratic Republic of Madagascar for the equivalent of US$12.0 million on standard IDA terms to help finance an agricultural development project in the Mangoky delta. The International Fund for Agri- cultural Development (IFAD) will participate in the financing of the project on a parallel basis with a loan of SDR 5.0 million equivalent (approximately US$6.5 million. PART I - THE ECONOMY 2. A Bank economic mission visited Madagascar in July 1978. A summary of its findings is set out below. Country data sheets are provided in Annex 1. 3. With a GNP per capita estimated at US$210 in 1977, Madagascar is one of the poorest countries in the world. It is predominantly an agricultural country and 85 percent of its 9.4 million 1/ people live in rural areas with a per capita income of about US$120 per annum. In many areas the standard of living is close to subsistence level. Although the country is sparsely populated (an average of 16 inhabitants per square kilometer), there is great pressure on cultivable land in some regions. Owing mainly to different eco- logical conditions, the highlands are more advanced than the coastal areas, and the south is particularly poor with a harsh, arid climate and infertile soils. The east coast is rich agriculturally, but crops are frequently devasted by cyclones. Internal migration is common and has accelerated as improved roads have provided access to new areas. However, poor roads remain a major constraint to development; only one third of the main highways are passable in all weather in a country where production centers may be as far as 800 kilometers from main points of consumption. Many areas are cut off from the rest of the country for several months each year. 4. Over the past few years the growth of the economy continued to be slow and uneven. Having risen but marginally in the preceding year real GDP fell in 1976 by 2.9 percent owing to a slight decline in agricultural produc- tion and a steep drop of about 14 percent in manufacturing output. GDP is estimated to have increased by 3.9 percent in 1977; even so output of goods and services showed only a slight increase over the period since 1974; and, 1/ According to the latest available census data mid-year population in 1977 is estimated to be only 8.0 million, which would raise the GNP per capita to US$240.  -2- with population increasing by about 2.5 percent annually, per capita GDP fell by about 5 percent. Budgetary investment outlays were stepped up con- siderably after 1975; but the investment rate remained practically unchanged at about 14 percent as the sharp rise in Government capital expenditure was largely offset by a substantial decline in private investment. The savings rate too continued to be fairly stable and fluctuated around 10-11 percent. The resource gap as a consequence has been maintained at a low level. 5. Agricultural production has not recorded any marked growth over the last three or four years. Even over the longer period since 1970 it has increased at an annual rate of only about 1 percent. Despite periodic good crops, paddy production did not keep pace with demand; and production in 1977 estimated at 2.0 million tons was only about 7 percent higher than in 1970. Groundnut production, after rising significantly in 1976, fell again to 47,000 tons in 1977, while meat production did not register any significant rise. Imports of rice and edible oils have been increasing; at 105,000 tons and 16,000 tons, respectively, they were about three to four times as large in 1977 as in 1970-71. Sugarcane production continued to stagnate as there has been no addition to the refinery capacity for several years. Among other cash and export crops, coffee production, except for a 6 percent drop in 1976, has been rising steadily, reaching some 89,000 tons in 1977. However, raw cotton production, which had been increasing fairly fast, levelled off after 1975 due to shortages of fertilizers and pesticides, vanilla output declined, while pepper showed no noticeable increase. 6. Fostered by fiscal incentives, protection against competition from imports and provision of institutional term financing, manufacturing normally accounts for about 14 percent of GDP. Industrial output, which still consists mainly of textiles and processed foods, declined in 1975 and 1976; and despite some recovery in 1977, remained below the level attained in 1974. However, while output of processed foods and textiles have followed a stagnant or a downward trend, some of the minor industries - chemicals, tobacco manufactures, rubber, paper products - maintained fairly steady growth. The setback to industrial growth in recent years was caused by a number of factors: capacity bottlenecks and aging equipment, owing partly to declining private investment, uncertain and inadequate availability of agricultural materials for processing industries, shortages of imported inputs, and, in some cases, even deficient demand. These factors reflect to some extent the effects of uncertainty accompanying the shift through greater Government control from a predominantly free market system to a mixed economy. In particular, private investment in industry was discouraged and maintenance of industrial plans suffered. 7. With sudden and sharp rise in current budget expenditure and Govern- ment spending on capital development the fiscal situation deteriorated con- siderably after 1975. Current expenditures rose steeply with the rising wage bill of the Government and increasing outlay on maintenance; and the current budget surplus, which used to be substantial, dwindled as revenues failed to keep pace with the growth of expenditures. Furthermore, as Government intensi- fied its efforts to raise investment levels and stimulate the economy, public  -3- investment expenditure rose from 11.2 billion FMG in 1975 to 20.5 billion FMG in 1977. The outlays on the consumer rice subsidy, although they declined in 1976, rose again to 3.6 billion FMG in the subsequent year. The overall Treasury deficit, which more than doubled to 20 billion FMG between 1975 and 1977, was financed increasingly through recourse to Central Bank advances. The budget for 1978 envisaged a 26 percent increase in total outlay as com- pared to the estimated actual expenditures in 1977, while capital spending was proposed to be raised by nearly 80 percent to 36.4 billion FMG. Revenues too were expected to go up sharply, partly as a result of tax reform measures. The overall deficit, however, might turn out to be somewhat larger than the projected 16.1 billion FMG owing to underestimation of expenditure on per- sonnel and the settlement of payments deferred from 1977, on the one hand, and shortfalls in revenues on the other. Even so the overall fiscal situation is likely to have shown some improvement in 1978 as compared to the preceding year. The Government is contemplating economies in current expenditure, particularly by paring consumer subsidies, so as to minimize the burden of unproductive outlays in the future. 8. Monetary and credit developments since 1975 have been influenced mainly by the Government's deficit financing aeeds. Outstanding domestic credit went up by more than 50 percent to 126 billion FMG during 1975-77, due, for the most part, to the steep and continued rise in net claims on Government. As a result, money supply, which had been increasing moderately, rose by 15 percent in 1976 and as much as 25 percent in 1977. Despite this monetary expansion and little growth in the output of goods and services the annual inflation rate has been moderate, about 9-10 percent during 1976-77, partly because of increasing demand for cash balances and the consequent accumulation of idle funds. These balances could, if drawn down, add to the pressure on prices in the future. 9. The balance of payments situation which had been deteriorating showed a substantial improvement in 1976, when a surplus of 2 billion FMG was recorded; but the payments surplus in 1977 is now estimated to have been much smaller. The turnaround in the balance of payments situation occurring in 1976 is attributable more to exogenous factors than to any significant im- provement in the structure of the balance of payments. Trade surpluses were recorded in 1976 and 1977 as a result of (a) a sharp rise in prices of exports, particularly coffee, which reversed the continuing deterioration in the terms of trade, and (b) the imposition of stricter quantitative restrictions on imports in 1976. There was a substantial decline in the availability of imports after 1975. On the other hand, the volarue of exports dropped sharply in 1976, and continued to fall in 1977, while there was no lasting reduction in the services deficit, nor any sustained rise in capital inflows. 10. The growth and development of the Mlalagasy economy have over a fairly long period been affected by constraints resulting from shortage of savings, slow growth of markets for major primary exports and low productivity of traditional agriculture. The country, however, is relatively well-endowed with natural resources and has a well-established administrative set-up. With appropriate policies and adequate external capital assistance medium and long- term prospects for the economy should be favorable. There is considerable scope for the expansion of agriculture and livestock production. Only about a fifth of the arable land is at present being cultivated, while fertilizer consumption, estimated to be some 14,000 tons in 1976, is still rather small.  The irrigation potential has as yet been only partially exploited. The outlook for further development of manufacturing based on locally available materials is promising. On the whole, sustained growth at an average annual rate of 4-5 percent appears to be feasible. 11. The Government has been taking far-reaching steps to strengthen national control of the economy. As a part of this process economic and financial institutions, productive sectors, foreign trade and internal market- ing have undergone extensive reorganization. Inspired by the basic needs approach the Government has also formulated long-term development objectives which envisage a more egalitarian income distribution and satisfaction of specified minimum co1asumption requirements of the population by the end of the century. The Government also stresses national self-sufficiency and the eventual establishment of an industrial base large and diversified enough to meet the entire domestic demand for equipment and other manufactures. 12. A Three-Year Plan, which is to be the first of a series of medium- term investment programs designed to attain these long-run development objec- tives, was launched this year. The Plan envisages overall expansion of the economy at an average annual rate of 5.5 percent during 1978-80. The rate of investment is projected to rise to 17.1 percent of GDP by 1980 from the plan estimate of 11.5 percent in 1977. The savings rate is to be stepped up, partly through the mobilization of additional budgetary resources for capital development. But about a quarter of the investment outlays during the Plan period is expected to be financed through external loans and grants. Greater emphasis will be placed on the development of food crops; and household con- sumption is targeted to rise, in real terms, by 3.6 percent per year. The Plan also accords high priority to manufacturing, particularly basic industry and processing of agricultural raw materials. 13. Madagascar's external public debt, outstanding and disbursed, amounted to US$202.8 million at the end of 1977. Slightly over half of it (US$102.3 million) was owed to the Bank Group, and as much as 37.8 percent to IDA alone. Among bilateral donors France and the Federal Republic of Germany are the most prominent, each holding about 14 percent of the disbursed debt. Japan and the People's Republic of China rank next in importance (about 5 percent each) followed by the USA (3 percent) and Italy (1.1 percent). Suppliers' credits and commercial borrowing (4.6 percent of the disbursed debt) have been relatively unimportant. The Government, in fact, has been generally prudent with regard to external indebtedness; the outstanding disbursed debt at the end of 1976 thus amounted to nearly 11 percent of GNP as compared to the average of 21 percent for low income countries. Because of relatively limited reliance on external assistance and concessionary terms of most loans and credits debt service payments have remained small. The estimated debt service ratio of 3.5 percent in 1976 was only marginally higher than in 1970.  PART II - BANK GROUP OPERATIONS IN MADAGASCAR 14. Madagascar has received fourteen IDA credits amounting to US$158.2 million and five Bank loans totaling US$32.6 million. About 48 percent of Bank Group lending has been for transport, 21 percent for electric power, 22 percent for agriculture and 9 percent for education. IFC's first invest- ment was made in March 1977 with an equity investment of US$290,000 and a loan of US$11.0 million for the expansion of a textile mill; other projects in sugar, leather and ferrochrome are under consideration. Annex II contains a summary statement of Bank loans and IDA credits, and of IFC investments as of December 31, 1978, as well as notes on the execution of ongoing projects. 15. The priority given to transport investment recognizes that improve- ment in communications is a precondition for Madagascar's development. Four projects were for the construction of all-weather links between the island's different regions, one for improvements to Madagascar's main port of Tamatave and one for the modernization of the railway line between Tamatave and the capital, Antananarivo. Bank Group lending for agriculture consists of two livestock development projects, two irrigation projects and a forestry project. A study on the problem of marketing and pricing of meat is being executed with the assistance of an international consultant firm. 16. In the past, problems have arisen in the course of execution of several projects. There were delays in execution, cost overruns and defi- ciencies in institution building, especially in agriculture. The Morondava Irrigation Project which was reduced in scope in 1974 continues to encounter acute problems, but the Government has prepared a plan of action to deal with them; the plan includes a redefinition of the implementing agency's (SODEMO) responsibilities and financial structure, completion and audit of overdue accounts, and preparation of an investment program and budget for development of the Morondava area. Implementation of the plan of action has started and is being closely monitored by the Government and the Association. Imple- mentation of the Village Livestock Project has improved substantially. The highway projects are also proceeding satisfactorily. 17. In our future lending to Madagascar, we expect agriculture to absorb an increasingly larger share of total Bank lending, in line with Government strategy, which is stated in its long-term development plan and which recog- nizes that expansion of agricultural production is one of the prerequisites of further development of the country. A pipeline of possible projects has been identified. We are currently assisting the Government in preparing an agricul- tural credit project, a rural development project, a small-scale irrigation project and a second forestry project. At the same time, we will continue supporting infrastructure development. A second railway project has been negotiated and should be presented to the Executive Directors in the near future. A fifth highway project, concerned mainly with the improvement of highway maintenance, and a water and sanitation project for Antananarivo have been appraised. In addition a DFC project which will include assistance to artisans and small-scale industries has been appraised. Projects in education  and urban development are being prepared. We expect the Government to seek cofinancing from other external lenders for some of the projects and we intend to assist the Government in its efforts to mobilize new external sources of financing. PART III - THE AGRICULTURAL SECTOR Background 18. About 85 percent of Madagascar's population of about 9.4 million live in the rural areas, and agriculture dominates the economy. Agriculture contributes about 40 percent of total GDP, accounts for more than 80 percent of export earnings, and supports directly over 80 percent of the population. Madagascar's agricultural sector is striking in its diversity. The rural economy varies among several sharply different geographic regions, producing a very wide range of crops and other agricultural produce. A variety of production systems are employed, ranging from large-scale mechanized agri- culture to the simplest, small-scale traditional farming. This diversity has to some extent protected Madagascar against the vicissitudes of international commodity prices and adverse climate (drought and cyclones being ever-present hazards). It also contributes to wide disparities in wealth and level of development among geographic regions. In many areas, the standard of living is close to subsistence level, while in others, the population is relatively prosperous. Owing mainly to different ecological conditions, the central highlands and particularly the area around Tananarive are more developed and prosperous than the coastal areas, while the south is particularly poor. 19. The growth of Madagascar's agricultural production over the past 15 years has been disappointing, with the average rate of increase somewhat less than the population growth rate of 3 percent a year; from 1970-75, the annual rate of increase was about 2 percent. This performance largely reflects the low growth rate of rice production and the stagnation or even decline of the national cattle herd. During this period, production of some crops increased significantly, notably cotton and coffee. The potential for agricultural development in Madagascar is considerable. Many commodities now being produced offer excellent scope for expansion, while intensification of production in virtually all parts of Madagascar could significantly increase output. On the west coast, in particular, there are large areas of undevel- oped yet fertile land which can be brought into production. In many cases, as a result of research and trials, the technical base for expansion or intensification exists already. In other areas, notably rice production, promising high-yielding new varieties could be introduced based on an effort in applied research. Government Strategy and Services 20. The Government of Madagascar's broad objectives for rural develop- ment are spelled out in its development plan approved in December 1977, which includes a long-term strategy for the period 1978-2000, and a three-year plan  - 7 - for 1978-80. In essence, Madagascar's objective for the year 2000 is to develop a strong and self-sufficient basis for development. Agriculture is to represent the basis of development, and will receive a major share of investment and effort. The plan emphasizes the linkage of Madagascar's eco- nomic, political, social and cultural development to the establishment of a socialist regime. The Government is expected to assume control of cultivated land, particularly large farms which have been lying idle for some time, or newly-developed land; socialist cooperatives would become responsible for this land. The plan foresees state control over basic industries, particularly those related to agriculture. 21. Local Government. The reorganization of jocal administration and government based on the "fokonolona" system which the Government has been undertaking since 1972 is an important foundation for development. This system involves the establishment of representative institutions at four levels. Fokontany, which coincide roughly with traditional village units (about 11,400); firaisam-pokontany, at the former canton level (about 1,250); fivondronam-pokontany, at the former subprefecture level (about 110); and faritany (6) which have replaced the former provinces, comprise the hierarchy of the system. The "fokonolona" system reflects an effort to associate tra- ditional institutions and practices with a more representative and responsive local government, and to provide a vehicle for decentralization of power as part of Madagascar's socialist revolution. The reform is being implemented gradually, and many details of the new system, notably regarding local finance, the role of cooperatives within the fokonolona system and the role of fokonolona institutions in the control of industry and parastatals, are still being considered by the Government. However, the new entities have assumed important responsibilities, notably for marketing of rice and other agricul- tural products, and for planning and implementation of small-scale development projects, particularly in rural areas. 22. Agricultural development and extension. The Ministry of Rural Development and Agrarian Reform is the central institution for rural devel- opment programs. It is concerned with extension, plant protection, veterinary services, irrigation systems, fisheries and forestries. It also deals with planning, with overseeing semi-autonomous regional authorities and parastatal agencies, and with land redistribution. In addition to the Ministry's basic services and departments, several regional extension agencies provide services to farmers in parts of Madagascar. These are formally part of the Ministry but tend to function autonomously. About 26 parastatal agencies operate under the aegis of the Ministry, among which is SAiANGOKY, the agency responsible for the Mangoky development. 23. Agricultural Credit. The National Rural Development Bank (BTM), created in 1977 when banking functions were reorganized and private banks nationalized, is the principal source of credit for agriculture. Credit for specific commodities is also extended through parastatal agencies (such as SAMANGOKY) and in the form of inputs with costs recovered at harvest time. BTM's lending has expanded rapidly in the past three years. It has extended  - 8 - a high proportion of short- and medium-term credit for marketing and has recently substantially increased its credit to farmers through the fokonolona institutions (as moral guarantor). BTM is likely to increase its ai /vities rapidly in the future, as the Government views it as a key institution to support its rural development policies and the primary source of ruial credit. Marketing and Pricing 24. Rice. Rice is grown on about half of permanently cultivated land. It is the staple food of the Malagasy diet. Family rice fields represent about 70-80 percent of the total area under rice, the remaining 20-30 percent representing organized irrigation schemes developed or supported by the Govern- ment and producing the bulk of the surpluses which are available for marketing. The Government has direct responsibilities for marketing and pricing of rice and intervenes at several stages. Domestic marketing has been declared a ITmonopoly of the state" and the Government is seeking control and organizes all aspects of internal marketing through a number of regional agencies, among which is SAMIANGOKY. Mlost of these agencies have experienced considerable diffi- culties and, as a result, rice marketing has been at high cost and inefficient. The Government also controls rice imports, determining amounts required, organizing supplies and shipments, and overseeing distribution. The Govern- ment fixes prices of paddy and rice at the producer and retail level. These prices apply throughout the country and are normally reviewed annually. Current price levels involve a significant subsidy to consumer both for domestically produced and imported rice. Rice subsidies for domestic market- ing operations are financed by a subsidy fund managed by the Central Bank; subsidies for imported rice are financed directly by the Government. Ob- viously the marketing and pricing arrangements raise complex issues at the national level. Their implications for SAMANGOKY are, however, relatively limited because SAMANGOKY's marketing responsibilities cover only a small geographic area and are efficiently managed. However, if levels of producer prices continue to be held at levels significantly below import parity, the capacity of SAMANGOKY and associated farmers to support charges for capital investments will be restricted. 25. Cotton. Cotton is one of the major industrial crops in Madagascar. Production has increased steadily over recent years. The Compagnie Francaise pour le Developpement des Fibres Textiles (CFDT), which has played a major role in the development of cotton production in Madagascar since 1956, is mainly responsible for cotton marketing. Established as a Malagasy corpora- tion in 1973, with all shares held by private interests, CFDT has principal responsibility for seed multiplication, distribution and marketing, including purchase of all seed cotton and ginning and sale of fiber and seeds to local manufacturers. Although its long-term contract with the Government expired in 1976, CFDT has continued its operations essentially unchanged, pending negotia- tions with the Government on its future role in Madagascar. Prices of cotton are currently set at levels which approximately reflect import parity. The Government is negotiating the establishment of a successor organization which would be wholly or partially owned by the Government but which will probably  - 9 - retain virtually all of CFDT's present structure and operating procedures. Assurances were obtained from Government that it would maintain arrangements satisfactory to IDA and IFAD for the financing and marketing of cotton in the Mangoky region (Section 4.10, draft Joint Project Agreement). 26. The Government would consult from time to time with IDA and IFAD on pricing and marketing policies affecting rice and cotton production, partic- ularly as these would have a direct impact on farmers in the MANGOKY region and on SAMANGOKY (Section 4.08, draft Joint Project Agreement). Mangoky Delta Development 27. The Mangoky delta, located in southwest Madagascar is a relatively isolated natural region bounded by the Mozambique Channel to the west, and inhospitable and sparsely populated areas to the north, south and east. Its rich potential for agriculture has long been recognized. However, because of the region's isolation and sparse population, and because of the unpre- dictable and often violent regime of the Mangoky river, the Mangoky Valley remained undeveloped until recent years. In 1952, an experimental station was established at Tanandava to conduct research and trials on various crops and to define broad development options for the delta region. Shortly thereafter, a program of studies was initiated, including investigations of sociological and health factors, which led in 1960 to the definition of a pilot development scheme for about 1,000 ha on the left bank of the Mangoky river. This was followed in 1961 by the completion of an ambitious long-term master plan for development of more than 100,000 ha of land in the Mangoky valley, and a project for development of a first phase of 10,000 ha. Since then the basic irrigation system for the 10,000 ha area has been constructed and about 6,000 ha of land have been developed for cultivation. The Fonds d'Aide et de Cooperation (FAC) of the French Government and the European Development Fund (FED) contributed to the financing of these investments. The proposed project would complete the development of the first phase of the master plan. 28. The development of the Mangoky irrigation schemes has resulted in important social changes for the area, the most important being rapid migra- tion of population from other parts of Madagascar. In mid-1978, the popula- tion living in the vicinity of the SAMANGOKY development area was estimated at 30,000 people; however, much of the population remains itinerant, coming to the area for the cotton haryest and returning to their place of origin - normally the south - at other times of the year. At some periods of the year the population is probably larger than 50,000. The stationary population of the area is, however, increasing. Bank-Financed Agricultural Development Projects 29. The Bank Group has previously financed two irrigation projects in Madagascar. The Lake Alaotra Irrigation Project approved in July 1970 was designed to improve an irrigation and drainage network and increase crop production (mostly rice) on 12,000 ha of peat soils in the central plateau of Madagascar. It was completed successfully in 1976 (Project Performance Audit  - 10 - Report, dated June 14, 1977). The second projecc is the Morondava Irrigation and Rural Development Project approved in June 1972. The project aims to rehabilitate and extend an existing irrigation system of about 9,300 ha, to develop associated services and to settle about 2,100 families in the area. A new regional development institution, SODEMO, was established by the Government to implement the project. By early 1974 it was apparent that there would be serious cost overruns while forecast agricultural benefits decreased substantially. The project was therefore revised and reduced in scope, and the Credit Agreement was amended in February 1976. The Executive Directors were informed of these changes (IDA/Sec. M75-305 of December 24, 1975). But SODEMO has continued to face serious organizational, technical and financial problems and has sustained considerable financial losses during the past four years. Implementation of a plan of action to correct these problems started in early January 1979 and is being closely monitored by the Government and by the Association. 30. The Bank Group also financed two projects in the livestock sector. The first project, approved in January 1969, aimed at introducing modern ranching. It faced considerable difficulties in its execution and many features had to be revised. The project has been completed (Project Perfor- mance Audit Report, dated April 11, 1977). The lessons learned were reflected in the second livestock project approved in August 1974. The project will assist traditional livestock in about 2,000 villages, improve pasture on about 10,000 ha, construct about 300 water points, develop livestock extension services, improve and maintain rural roads, construct village schools and provide mobile health units through FAFIFAMA, a parastatal agency. The project is complex and also encountered problems following credit signature. At present the situation is much improved. FAFIFAMA is now well established and operational. Implementation of the project's most important component - the development of veterinary and livestock services for village producers - is proceeding well. Cooperation with fokonolona institutions in all aspects of FAFIFAMA's work is excellent. PART IV - THE PROJECT Background 31. The Project proposal was prepared by the Ministry of Rural Develop- ment and Agrarian Reform, and by SAMANGOKY, with assistance from consulting engineers (SOGREAH and SOMEAH). 1/ The project was appraised in April 1978. Negotiations were held in Washington from November 27 to December 1, 1978. The Government delegation was led by Mr. Leon Rajaobelina, Governor of the Central Bank. The main features of the Project are outlined in the Credit and Project Summary and the Supplemental Project Data Sheet of this report. A detailed account of the Project background and components is contained in Staff Appraisal Report No. 2178 dated February 14, 1979, which is being circu- lated separately. 1/ SOGREAH - Societe Grenobloise d'Etudes et d'Applications Hydrauliques SOMEAH - Societe Malgache d'Etudes et d'Applications Hydrauliques  - 11 - Project Description 32. The proposed Project would support the development of about 3,700 ha for production of rice and cotton, to be farmed by about 3,200 families. It would complete an irrigation system serving about 10,000 ha in the Lower Mlangoky Valley which has been under development since the early 1960s. These investments are based on a long-term master plan for the region which aims ultimately to bring about 100,000 ha of land into production. The Project would be implemented over a five-year period and would comprise the following components: (a) Development of primary and secondary irrigation and drainage networks for 3,700 hectares and road infrastructure; (b) Land clearing and levelling, and development of tertiary and quaternary irrigation systems for about 3,300 ha, including production of concrete canals for the tertiary and quaternary irrigation network; (c) Detailed design studies and supervision of civil works; (d) Incremental agricultural production costs; (e) Applied agricultural research for the Mangoky Scheme; (f) Social infrastructure; (g) Investigational research and trials on operating problems, overseas study trips and training courses, monitoring and evaluation, and studies to prepare future projects for the Mangoky region; and (h) Project preparation activities for agriculture and new development projects. 33. The components can be described as follows: (a) Irrigation and Drainage Infrastructure and Roads Under the Project, existing irrigation and drainage networks would be extended in order to serve three new sectors - the north extension of Namatoa (1,800 ha), the west extension of Ankazomena (1,500 ha), and the Mangolovolo area (400 ha) (see map IBRD 13655). The existing main canal would be extended by a distance of about 8 km up to Mangolovolo, and a gravity irrigation and drainage system would be developed to serve the north and west extension sectors. The road network would include the necessary service, traffic and access roads.  - 12 - (b) Land Clearing and Levelling and Development of the Tertiary and Quaternary Network The proposed north and west extension areas are currently in medium- dense forests. These areas would be cleared and land would then be levelled in preparation for development of the tertiary and quaternary irrigation and drainage networks. Land clearing and levelling techniques have been developed since the 1960s in the Mangoky area and SAMANGOKY has considerable experience with these works. The quaternary irrigation system would be of reinforced concrete in most areas, except where heavy soils permit an earth network. Concrete canal segments would be manufactured at an existing factory estab- lished for the purpose and located in the Project area. The principal in- vestment items would be land clearing and levelling equipment to supplement SAMANGOKY's existing stock, materials for manufacture of canal segments, and direct costs for land clearing and levelling, and development of the irriga- tion and drainage network. (c) Detailed Design Studies and Supervision of Works Detailed designs have been completed for the irrigation and drainage systems and on-farm development works. The available data are adequate for cost estimate purposes. Detailed designs and surveys, preparation of tender documents, and supervision of works will continue to be carried out by con- sulting engineers engaged by the Department of Agricultural Engineering with the approval of IDA and IFAD (Section 3.02, draft Joint Project Agreement). (d) Incremental Agricultural Inputs SAMANGOKY would farm land developed in the extension areas in asso- ciation with farmers who would settle in the area. Rice would be grown on 80 percent of the land and cotton on 20 percent. Project investments include the cost of incremental agricultural inputs required for these developmelnts (seeds, fertilizers, pesticides, and extension services). (e) Applied Research in the Project Area An applied research program, especially for rice, is urgently needed. Research work would aim at (i) finding improved varieties of rice and assess- ing their adaptability to different kinds of soils, including saline soils, in the project area; and (ii) determining the best cultivation techniques including sowing and transplanting dates; fertilizer, pesticide and herbicide application methods; and rotation systems. Research would be followed by the implementation of a seed multiplication program and farmer training program. Terms of reference for the research program would be submitted to IDA and IFAD for approval (Section 3.07, draft Joint Project Agreement).  - 13 - (f) Social Infrastructure About six new primary schools would be constructed and some existing schools would be extended to serve migrant families settling in the Project area. The newly-constructed schools would be of austere standards and would be financed by SAMANGOKY and the fokonolonas. SAMANGOKY would expand an existing secondary school by one classroom, establish a new technical training school and enlarge an existing dispensary to serve its own needs and those of the surrounding area. (g) Technical Services The Project would include a program of studies to prepare future development projects for the Mangoky delta. The studies would focus on phase 2 of the long-term master plan, that is, the development of about 20,000 addi- tional ha of land on the left bank of the Mangoky River. Terms of reference for these studies would be submitted to IDA for approval (Section 3.07, draft Joint Project Agreement). The Project would include technical services for applied investi- gational research on operating problems; such studies would include trials with sub-surface drains in small areas to assess the impact on production, particularly with regard to salinity problems. Short training programs and study tours would be included for SAMANGOKY staff and Ministry officials directly concerned with the Project. Monitoring and evaluation studies to assess development of production trends and sociological aspects of develop- ment would be included. (h) Project Preparation Work The Project would include a program of project preparation work which would have the dual objective of preparing proposals for projects for presentation to the Bank and other financing sources and of strengthening the project preparation capacity of the Ministry of Rural Development. The Government has prepared a list of project proposals which include promotion of several commercial/industrial crops and integrated regional development schemes; these studies would be conducted either directly by the Ministry of Rural Development and Agrarian Reform or by consultants engaged by the Ministry. Detailed proposals for these studies will be submitted to IDA and IFAD for approval (Section 3.07, draft Joint Project Agreement). Project Implementation 34. The project would be implemented over a 5-year period by SAMANGOKY under the overall direction of the Ministry of Rural Development and Agrarian Reform. SAMANGOKY is responsible for all development schemes in the Mangoky region including (i) all operations related to cultivation of the developed area together with the associated farmers; (ii) all building construction works; and (iii) force account works, particularly land development. SAMANGOKY's organization and responsibilities reflect its role as a Government  - 14 - development agency with considerable autonomy. SAMANGOKY's role would remain fundamentally unchanged during execution of the proposed Project. Government would consult with IDA and IFAD prior to approving any changes in SAMANGOKY's current constitution, legal statutes and operating regulations, and organiza- tion which could have a material impact on Project implementation (Section 4.04, draft Joint Project Agreement). SAMANGOKY operates in a designated development zone of the Lower Mangoky Valley and is ensured through legisla- tion in force of appropriate authority for land development activities in the area. 35. SAMANGOKY has developed gradually since its establishment in 1961 and is now a well-managed and experienced institution with effective manage- ment procedures. SAMANGOKY has been managed entirely by Malagasy staff since 1976 and its performance in recent years has been entirely satisfactory. No major changes in staffing or management are expected. Government would consult with IDA prior to appointing a new director of the Works Department of SAMANGOKY (Section 4.05 (b), draft Joint Project Agreement). SAMANGOKY's Works Department is responsible for all land development activities. The Department would continue to operate autonomously within SAMANGOKY's organi- zation. Management information systems adequate to accurately identify costs of land development works would be employed (Section 4.06, draft Joint Project Agreement). 36. SAMANGOKY's total subscribed capital is currently about US$1.3 mil- lion, with the Government holding almost all the shares. SAMANGOKY covers all its operating costs from its production revenues with the exception of an annual grant from the Government to cover maintenance costs of the primary irrigation system. It is expected that this grant, representing only about one percent of total revenues, will be phased out within four years. SAMANGOKY has no significant outstanding debt. SAMANGOKY's present financial position is satisfactory. The company's balance sheets and income statements for the past 10 years indicate that charges to farmers cover all current costs and give SAMANGOKY a small profit on its operations. The principal issue for SAMANGOKY's future financial position is whether the company should pay to Government a sum reflecting a charge for utilization of land and irrigation infrastructure or whether SAMANGOKY is in a position to undertake debt for land development works. This issue, which arises from the cost recovery issue cited below (para. 42), would be discussed in conjunction with the agreed modification of the current cost recovery scheme; when the Government has presented detailed proposals on cost recovery to IDA, SAMANGOKY's financial plan and, specifically, the issue of capacity to service debt or to pay a rent charge to the Government would be reviewed. 37. Assurances were obtained that SAMANGOKY would: (i) maintain accounts adequate to explain Project activities; (ii) ensure that these were audited every year by auditors acceptable to IDA; (iii) submit audited finan- cial statements to IDA not later than nine months after the closing of the fiscal year; and (iv) submit for IDA and IFAD approval any significant changes in existing accounting and audit procedures (Section 4.02, draft Joint Project Agreement).  - 15 - 38. The Government would submit to IDA and IFAD (i) an annual report, verified by the Ministry of Finance, summarizing the financial situation of all Project activities and a description of control procedures (Section 4.01 (b), draft Joint Project Agreement); (ii) an annual report on Project progress including a proposed work program for the ensuing year for IDA and IFAD review not later than October 1 of each year (Section 3.06, draft Joint Project Agreement); (iii) detailed proposals for a monitoring and evaluation system for approval by IDA before December 31, 1979 (Section 3.04 (d) draft Joint Project Agreement); and (iv) reports on a regular basis on agricultural production and matters relating to it in the project area (Section 3.04(e) of the draft Joint Project Agreement). A completion report summarizing performance under the Project and evaluating its success and problems would be submitted to IDA and IFAD not later than six months after the Closing Date or such later date as may be agreed between the Borrower, IDA and IFAD (Section 3.04 (c), draft Joint Project Agreement. Cost Estimates 39. Total Project costs are estimated at US$29.4 million, of which about US$18.0 million or 61 percent represent foreign exchange costs. Detailed costs are as follows: ---- US$ Million---- Local Foreign Total (a) Major Civil Works 1.5 3.6 5.1 (b) Land Development 3.9 5.6 9.5 (c) Design studies & supervision 0.2 0.3 0.5 (d) Incremental agricultural production costs 1.2 1.5 2.7 (e) Social infrastructure 0.1 0.0 0.1 (f) Training, applied investiga- tion, research & proj. prep. 1.4 2.0 3.4 Total 8.3 13.0 21.3 Contingency Allowances Physical 1.2 1.9 3.0 Price 2.0 3.1 5.1 Total Contingencies 3.2 5.0 8.1 Total Project Costs 11.4 18.0 29.4 Taxes and Duties 3.0 Total Project Costs (net of taxes and duties) 8.4 18.0 26.4  - 16 - Financing Plan 40. The financing of Project costs would be shared as follows: US$ Percent (million) of Total Government of Madagascar 4.8 18 SAMANGOKY/Farmers 2.2 8 Cotton organization/Farmers 0.9 3 IFAD 6.5 25 IDA 12.0 46 Total Costs (net of taxes and duties) 26.4 100 41. The proposed IDA Credit of US$12.0 million would be to the Govern- ment of Madagascar, on standard IDA terms. The Credit would finance about 46 percent of total Project cost (excluding taxes and duties). IFAD has agreed to provide a loan of SDR 5,0 million equivalent (approximately US$6.5 million) to the Government for the Project; the terms of this loan would be similar to those of the IDA Credit, and it would finance about 25 percent of total Project cost. The IFAD loan would finance land clearing and levelling costs, applied agricultural research and investigational work, and Project preparation for projects for rice, oilseed, and livestock production. SAMANGOKY would finance from its revenues and retained earnings working capital for incremental rice production and the development of social infra- structure. As CFDT has in the past, the successor cotton company would finance working capital requirements for incremental cotton production. Farmers would participate in the financing of Project investment through their labor input. The Government would finance about 18 percent of total Project costs. Recovery of Costs 42. In the past, capital investments in development of the Mangoky irrigation network and land development have not been recovered directly from farmers or from SAMANGOKY. Under SAMANGOKY's system of cotton pricing and rice cultivation charges, farmers have paid their full share of the pro- duction cost and current charges of SAMANGOKY: extension services; operation and maintenance of the irrigation network; SAMANGOKY's overhead, financial charges and direct production inputs. This system is supported by the Govern- ment on grounds that farmers in the SAMANGOKY scheme have no ownership rights; the Government retains full title to land and improvements. The Government, however, has not yet formulated a national policy on cost recovery for irriga- tion development or on charges to farmers for services. Under the Bank- financed Lac Alaotra project, farmers were expected to pay the full costs of land development, but following political agitation in the area, payment  - 17 - schedules were significantly reduced. In Morondava the Government lhas neither determined an appropriate cost recovery system nor enunciated the principles on which such a system would be based. Since SAMANGOKY's current system has worked relatively effectively, IDA, IFAD and the Government agree that the system should be altered only following careful evaluation of the conse- quences for SAMANGOKY and farmers. Agreement was reached that the Government would gradually introduce a system of investment cost recovery and that it would submit detailed proposals for cost recovery from SAIANGOKY farmers for review by IDA and IFAD not later than June 30, 1980. It would consult with IDA and IFAD thereafter on progress in implementing this cost recovery plan from time to time (Section 3.08, draft Joint Project Agreement). Procurement 43. Contracts for major civil works would be awarded following inter- national competitive bidding in accordance with Bank Group guidelines. These works would comprise extensions to the primary and secondary irrigation and drainage networks, and tertiary drainage system and road works; total value is estimated at about US$7.5 million (including contingencies). Similar works have been carried out in a satisfactory manner in the past in the Mangoky irrigation scheme by international civil works contractors. On-farm develop- ments, installation of the tertiary and quaternary irrigation network, and manufacture of canal segments would be carried out by SAIANGOKY, on the basis of arrangements satisfactory to IDA between SAMANGOKY and the Government (Section 3.01(b), draft Joint Project Agreement). The estimated total cost of these works is about US$14.0 million (including contingencies). Disbursements 44. The credit would be disbursed over five years on the following basis: 80 percent of total expenditures for major civil works and for manu- facture of canal segments and installation of the irrigation network; 100 percent of foreign expenditures or 80 percent of local expenditures for engineering studies and supervision, training, monitoring, and evaluation studies, and project preparation. Disbursements against all categories would be fully documented except for expenditures related to civil works carried out by SAMANGOKY, which would be made against a certificate of expenditure. Retroactive financing of about US$200,000 for detailed design studies, soil surveys and other initial expenses from September 1, 1978 is recommended. Neither the Association nor IFAD will disburse against parts C (extension services, marketing facilities and agricultural inputs) and E (social infrastructure) of Schedule 1 (draft Joint Project Agreement); these items will be covered by Government and SAMANGOKY contributions. Benefits 45. Benefits resulting directly from Project investments would consist of increased production of rice and cotton. The value of annual incremental production is estimated at about US$3.9 million at full development (year 9). Additional benefits would result which have not been quantified. Improved  - 18 - social infrastructure would ameliorate the health situation in the Project area; applied research and investigational work would eventually result in higher productivity; and investments in training courses and study tours would improve dissemination of new cultivation techniques. Moreover, long-term benefits would result from funds spent for the preparation of phase two of the valley's development and for technical assistance for general project preparation. 46. The economic rate of return from directly productive elements of the Project is estimated at about 18 percent over 40 years. The rate of return was tested for sensitivity. If investment costs were increased by 20 percent, the rate of return would be reduced by 3 percentage points to 15 percent; if operating costs were increased by 10 percent, the rate of return would be reduced by one percentage point to 17%; if benefits were reduced by 20 percent, the rate of return would be 12 percent. If benefits lagged by one year, the rate of return would be 14 percent. 47. About 3,200 families or 19,000 persons would benefit directly from the Project. The farmers would include both traditional farmers from the Mangoky region and recent immigrants from other parts of Madagascar. The average farm income would be nearly US$800 or about US$130 per head, as com- pared with a farm income of about US$220 on traditional farms in the area. The Project would create new employment for about 8,500 people, among them 250 new employees of SAMANGOKY. Environmental impact 48. While the natural vegetation (forest) of the region is being removed and replaced by irrigation supporting a large population, project developments are not expected to have an adverse environmental impact. 49. Schistosomiasis is a serious health problem in the SAMANGOKY area, and its incidence has increased with development of the irrigation system; it currently affects an estimated 5-10 percent of the population. SAMANGOKY and Ministry of Health officers seek to control the disease through treatment of infected areas. The Government has assured continued support of appro- priate control programs (Section 4.09, draft Joint Project Agreement). Risks 50. The success of Project implementation will depend almost entirely on the quality of SAMANGOKY management in executing land development works and in organizing agricultural production, and on the degree of support and control over their activities exercised by the Ministry of Rural Development. SAMANGOKY is well managed and compares very favorably with other Malagasy institutions working in the agricultural sector, but this situation could be altered by changes in staff or if the nature of its statutes and relations with the Ministry are altered without due consideration of the consequences.  - 19 - 51. A related problema is farmer discipline. SAMANGOKY currently exerts strict controls over agricultural activities. With the on-going reorganiza- tion of local administration and Government, it may be possible that respon- sibilities and part of the authority for SAMANCOK'Y's scheme may be transferred to the fokonolonas and that decisions could be made on land distribution or organization of agricultural activities which might result in deterioration of the scheme. The Govern.nent a-reed to consult with IDDA and IFAD prior to introducing any maior change in SIA:ANCOKY's existing agricultural production system (Section 4.07, draft Joint Project Agreement). 52. A third problem, particularlv concerning cotton but to some extent also rice cultivation, may be increasing salinitv or alkalinity of soils. Off-setting these risks are the basic simplicity of Project design and SAMANGOKY's proven experience with the proposed developments. PART V - LEGAL INSTRUMENTS AND AUTHORITY 53. The draft Development Credit Agreement between the Democratic Republic of Madagascar and the Association, the draft Joint Project Agreement betw2en thie Democratic Republic of 'ad.3gascar, the Association, and the Inter- national Fund for Agricultural Development and the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agree- ment of the Association are being distributed to the Executive Directors separately. 54. Special conditions of the Project are in Annex III. In addition a condition of effectiveness is that the borrower enter into arrangements with SAMANGOKY to carry out certain parts of the project on behalf of the borrower (Section 5.01, draft Development Credit Agreement). 55. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 56. I recommend that the Executive Directors approve the proposed Credit. Robert S. McNamara President by Ernest Stern Attachments February 22, 1979  - 230- Page I T^IILI 3A NDACASCAR - SOCIAL SI0ICATORS DATA SPECT RZFZIEKCg GROUrS (ADJUSTED AVIaOES LDAGACA it LAtD ARF.A (THOUSAND SO(. PM) _ 1DT *ZCT EiSSTDTE) TmTAL S92.0 SA SANC HXT lCHER ACYICULTURAL 3b8.6 HOST RECENT 0IOURAPHIC NCOM INCOME 1960 Lk 1970 A ESTIMATE Lk REGION a CNoUP g Cto'1F L GNP PER CAPITA (US$) 110.0 150.0 210.0 223.6 182.9 432.3 ENERrY CONSUMPTION PER CAPITA (IISLOCRAMS OF COAL EQUIVALENT) 38.0 71.0 71.0 86.7 88.9 251.7 POPULATION AND VITAL STATtSTICS TOTAL POPULATION, MID-YEAR * (MILLIONS) 5.9 7.6 9.4 URBAN POPULATION (PERCENT OF TOTAL) 10.0 14.1 14.5 13.6 15.0 24.2 POPULATION DENSITY PER SQ. DI. 10.0 13.0 16.0 16.4 46.8 42.? PER SQ. P3. AGRICULTURAL LAND 16.0 21.0 26.0 53.6 254.1 95.0 POPULATION ACE STRUCTURE (PERCENT) 0-14 ns. 39.0 46.1 47.3 44.4 43.6 44.9 15-64 YRS. 57.5 50.2 49,2 52.7 53.3 52.0 65 YRS. AND ABOVE 3.5 3.7 3.5 2.8 2.9 3.0 POPULATION GRO'iTr RATE [PERCENT) TOTAL 2.4 2.6 3.1 2.6 2.4 2.7 lNtRAU 4.0 6.2 5.2 5.8 4.0 5.8 CRUDE BIRTH RATE (PER THOUSAND) 50.1 49.7 50.2 46.9 44.3 42.2 CRUDE DEATH RATE (PER THOUSAND) 28.6 24.2 21.1 20.6 19.7 12.4 GROSS REPRODUCTION RATE 2.9 /j 3.2 3.3 3.1 2.9 3.2 FA117LY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. .. .. IlSERS (PERCENT OF MARRIED WOMEN) .. .. .. 2.5 14.6 14.2 FOOD AND NUTRITION INDra oP PFO0 PP-ODUCTION PER CAPITA (1970-100) 99.0 100.0 89.0 94.2 96.4 104.3 PU CAPITA SUPPLY OF CALORIES (PECERNT OP REQU7RDCN;tS) 104.0 103.0 !05.0 90.1 92.5 99.5 -VOTEINS (CRAMS PER DAY) 55.0 53.0 57.0 55.2 50.0 56.5 OF WH1ICH ANIMAL AND PULSE 17.0 j 17.0 15.6 h 17.1 13.9 17.5 CHILD (ACES 1-4) MORTALITY RATE .. 33.3 a *- *- *- 7.5 HALTH LIFO EXPECTANCY AT BIRTH (YEARS) 35.9 40.9 43.5 43.7 45.5 53.3 DIFANT MORTALITY RATE (PER THOUSAND) 133.0 1f 102.0 I .. 138.4 102.7 i2.5 ACCESS TO SAFE WATER (PERCENT OF POPULATION) I'tAL .. 11.0 25.0 22.4 26.4 31.1 URIAN .. 67.0 76.0 66.3 63.5 68.5 RUlAL .. 1.0 14.0 10.4 14.1 18.2 ACCESS TO EXCRETA DISPOSAL (PERCEiT OF POPULATION) TOTAL .. .. .. 23.9 16.1 37.5 URBAN .. :8.0 .. 70.3 65.9 69.5 RU.AL .. .. 9.0 14.2 3.4 25.4 POPULATION PER PHYSICIAN 10400.0/f 11390.0 10820.0 LI 21757.5 13432.7 9359.2 POPULATION PER NURSING PERSON 3930.O/t.k 3760.0 3640.0 L 3473.8 6983.3- 2762.5 POPULATION PER HOSPITAL BED tOTAL 510.0 400.0 420.0 645.4 1157.6 736.5 URBAN .. 170.0 240.0 172.9 183.3 278.4 IIUIAL .. 520.0 500.0 1292.6 1346.5 1358.4 ADMISSIONS PER HOSPITAL BED .. .. .. 19.2 19.5 19.2 SOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL *- 5.8 4.7 4.9 5.2 URBAN .. 5.3 5.0 5.0 4.8 RURAL 5.9 4.7 4.7 S.3 AVERAGE NUMBER OF PERSCNS PER ROON TOTAL .. .. .. URBAN .. .. .. .. 1.8 2.3 RURAL .. .. .. ACCESS TO ELECTRICITY (PERCENT OF DHELLINGS) TOTAL .. 5.0 .. .. 25.9 28.3 URBAN .. .. .. RURAL .. .. .. .. 8.7 10.3 * According to the latest available census data mid-year population in 1977 is estimated to be only 8.0 million which would raise the GNP per capita to US $240.  - 21- ANNEX I TAIL! 3A MADAGASCAR - SOCIAL INDICATORS DATA SHETT REFZRENCE GROUPS (ADJUSTED AVERAGES MADAGASCAR - MOST RECENT ESTIMATE) SAMH SANE NEXT HIGHESt NDST RECENT GEOGRAPHIC INCOME INCOME 1960 Ab 1970 Lb ESTIMATE lb REGION /c GROUP td GROUP /e EDUCATION ADJUSTED ENROL-AENT RATIOS PRLMARY: TOTAL 52.0 83.0 85.0 52.1 62.9 75.8 FEMALE 45.0 77.0 .. 37.6 45.9 67.9 SECONDARY: TOTAL 4.0 11.0 11.0 8.0 14.4 17.7 Fe1ALE 3.0 8.0 9.0 5.0 8.8 12.9 VOCATIONAL (PERCENT OP SECONDARY) 9.0 9.0 7.0 7.2 6.6 7.4 PUPIL-TEACHER RATIO PRIMARY 70.0 65.0 63.0 43.2 38.5 34.3 SECONDARY 24.0 20.0 24.0 22.8 19.8 23.5 ADULT LITERACY RATE (PERCENT) .. 39.0 40.0 20.3 36.7 63.7 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 4.0 6.0 6.4 3.9 3.1 7.2 RADIO RECEIVERS PER THOUSAND POPUIATION 15.0 80.0 112.0 40.1 31.1 71.1 TV RECEIVERS PER THOUSAND POPULATION ,. 0.5 1.0 2.2 2.8 14.1 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 8.0 8.0 9.0 3.9 6.0 16.3 CINEKA ANNUAL ATTENDANCE PER CAPITA 0.5 0.7 0.4 1.2 1.4 1.6 EMPLOYMENT TOTAL LAPOR FORCE (THOUSANDS) 2100.0 /a 3800.0 4400.0 FDEALE (PERCENT) 46.2 45.7 45.5 32.6 24.2 28.0 AGRICULTURE (PERCENT) 93.0 83.0 83.0 73.3 60.7 54.1 INDUSTRY (PERCENT) 2.5 3.4 .. PARTICIPAIION RATE IPERCENT) TOTAL 53.7 32.3 50.5 42.0 39.8 37.8 KALE 58.7 37.7 56.0 54.8 53.3 50.3 FEKALE 48.9 47.0 45.2 27.3 19.6 20.9 ECONOMIC DEPENDENCY RATIO 1.1 1.1 1.0 1.2 1.3 1.3 INCOME DISTRIBIJTION PERCENT OF PRIVATE INCOHE RECEIVED BY RIGHEST 5 PERCENT OP HOUSEHOLDS 41.0 In .. .. 25.7 20.3 19.5 HIGHEST 20 PERCENT OF HOUSEHOLDS 6s.1 .. .. 55.1 45.1 48.9 LOWEST 20 PERCENT OF HOUSEHOLDS 5.2 .. .. 5.8 5.7 5.9 LOWEST 40 PERCENT OF HOUSEHOLDS 13.0 /n .. .. 14.5 16.8 15.7 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVL (US$ PER CAPITA) URBAN .. .. .. 108.8 88.5 155.9 RURAL ., .. 85.0 74.1 71.9 97.9 1ST IMATED RELATIVE POVERTY INCOME LML (US$ PER CAPITA) URBAN l110.0 124.4 100.8 143.7 RURAL .. .. 50.0 59.6 42.0 87.3 ESTIATED POPULATION BELOU POVERTY INCOHE LEVEL (PERCENT) URBAN *- *- 25.0 26.8 46.0 22.9 RDRAL .. .. 90.0 47.6 48.0 36.7 Not available Not applicable. MOTES La The adjusted group averages for each indicator are population-weighted geometric means, excluding the extreme values of the indicator and the most populated country in each group. Coverage of countries among the indicators depends on availability of data and is not unifora. A Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1973 and 1977. |c Africa South of Sahara; /d Low Income ($280 or less per capita, 1976); /e Lover Middle Income (S281-SSO per capita, 1976); /f 1962, rural population only; L. 1961-63; /h 1972-74 average; L. 1966; U. Including assistant medical officers and dentists; /k Includes midwives and assistant midwives; /1 Including midwives; /m 1957; Ln Population. September, 1978  - 22 - ANNEX I Page 3 yFLT?iTTTONS OF qOCTIL FtRTTCATI7RS Notes: Although t!r dol te er draw tr-eure generli fudged the noet authoritct-n and reliable. it should al- he noted that then nay not ha inter- natloallr.Hnipreftvecneenf ho lckt of scodordtned deitnitlon and concpt. u-nd hv differen counries in c1iletig the dece. r'ho dac. are. neiee uatit ooru len' ouiue1odct rn. and characteriz crai tao differences between co.a mia.. Ptj.'The ed.IIotod A-,pcore for each i.dioctor ore uoinoihe geo-irt ma ., eecldlag the xret celes f he idicaser and the met group neroge lotcaplttnuris "itFprcronincarofoceeowtradscra diaoa.dhou.o. lcnadietribocion end povertyar mo ppuatonumlattdge-tric scen with.out thr t. ao of enree. nus LAND AREA (thocea.nd eq. he) Pouainpr hopclbed -Ytotal. -rhat. and rura - Population (total. Tt-al - local outfac etr- ocotain land area and islandwaters. uroo _adrural)dictod by th it resp...c ice tuber of hospital bed.r moicitra lot recat Otnoeo arcltrlarscedttpurarily -oilable in poblf in cd prin-to gnrlad eceiateed hospital.ad a or peraaei fr crps, p-tcrn.- srket sod citchee gardens at to batlitioaceen H.ifpta ar nsbliahmente porn.astly stffe by lefallow.l at Inoe on ph-otn1an. Eatah(thnetj rdigprincipally owetdia1 car art not Included. RaraIhoepltaa hcwrner Isuluds health and mmdi- GR1' Ff5RCAPITA (USl) - CSP per capita netiastee an cotnt etches pritee,.) alcsesntpermanenly atoffod by a phye.ioias (hut by a medIcal ar -calculted by eas cocaeosnthod se World Beask Atlee (1975-77 bai) een,frs idwiIr, etc.) which after Is-pas.tes ......daties end 196i, 1970, esd 1977 da. pr-tde aIialted r-nn cf sedIcal facilities Adiaion e ho bealhd -_Total number of adelesiens to an diechergam ENfACY CONSUMPTION PER CAPtTA - Annual In-eumptlos. of tmeca e.ergy iron. spt. doedby the camber of bede. (cccl and lig.iuto orlu, nau al e ad hydra-. .. ouwler and g50- torsal oc-nricity) In kilugcam of coaI oqainalsac Pee caPita. HOUSItING A-eraco utnoof ho.a.behld (Per.... Pet house.hold) - tonal. Tnban, and reral- POPU'LATION AND VITAL STATISTICS A household coosiocs of a group of indinidoa. who share lioing quarters Total pupuataon,I aid-na (sillio-e) - Ae ofJuly ii if sot availble, sed tho ir nu"n ends. A boarder or lodger say or nay not be included In ntotof two -nd-poar nuimawo 196,970, asd 1977 dasa. the hou..ehold for otstiatical purposes. Stat-etical definition fP ai;.-- )LlPtns2lplucluc loerococof tuit.) - Rtiolo urbas so canal popua- hold very. dona; difterent definitions of urhas areas nay affect -op-bllty Anerace osber of pcraoe.n. tn t-tcoel urbat, end t.otl - Anetag.nus nf dafo ancog coutriea. bet of peron pr ton. ou11, urban, und tutul occpied covet.. n Poua sdes-inn dwnlligoa. reaIPnucn-lp. Weellisge eanlde uspenase ct.usr., Pet cc. ha. - Mid-pea populattun par aqusc klil-mt- (100 beccres.) unoccpIedPets. of total area. Acc-- tc electricity (P.cret of dwrllingu) - total. urban. and -rurl1 Par g. ka. agrloultu- land - Cuaputed as shon far sgrinlturl land Cu tne t.o.aI dwell lgo outh eloectrcity in liningqecesa per..teentag -nly. of total, urbes, and rural doe11loga respecti-cly. PuoLatLccont tre(eret - Children (0-14 years) , working-age (15-64 year), and rotiood (65 y...a an d ...er) aa pr-ategee af lid- EDUCATION Yea population. Adluated e..ollsestratios Popultion gothrae(eot)-celenurs 2 ,- Conpaud annal Pirint nnhocl - otl an.d fnea.le - Total ssd f.m,sle narsilast Df all ages gr...th fate of total ond uban ni-erpopulationsforL950-60. on ibe priaory lena!l aspretag ofrepniey rmaysboeg 191-7, and ..70-75. pocuio;onlyicue bleoae -Ipaabtsjuedfa C9d Ochroe(prtcucd -enio iebitsprta nd sO diffe-rn lengths uf pri-ary eda-tnlo; for --utrine withtusiaea edo- nid-ce- yotlt -o u-y-ac soitfhau acerogee eding to 1960 md cool -.1nroleo nay enc-d 111 psetent elu.e. n pupile org bela. an AUC a-d flv..a, cOOO nvg In 1)7 otnesice taeimae shon tho ftca chuol age. C-dAn froathnrot Hcoov A-r l d-utha per thouu-d fci d- N -hnatobnl-otal,' cud fen..le - Coputed .e.. bn;eodaryed...- cear pt uloiuc; tt;-npr orthaeti~- scanoeding in 1960 and 1970 tcre- qui-nn Ilo.. tou yearn of upprod primury -toeteutiust Pro- u-d ttvu cccgn o-dig ic 1971 for scet inten t set imts. videe gecrel -crtlonl, or tmacba.r arcioli, i-arutius fr! P paple Croon in-'- 0 raft-Ave toga noehet of daughtes a woman will bear usually of 11 to 17 poar ofla ge;rtorteellndofct2oura1s ere generall on -rnoma -prodoctive prodiIfieepe tenon .. pent age- _eolded,..j upootfic f-cilicy eaten; ca..olly five-er anerages ending Is 1960. V_nticau Iotint (pe ren of n...ndary) - V-oti-ril institution tIn- 1970, and 1975. o'd eosrl,idncil r other program whic h ape rat. lsd.pepmsdtly fonly lo "P -ontcre. annual tb-..ands) - As..oal samb- of onodeproec f aoc-dary taic-It-onn. actoecur- of botch-control dtnt_ under ..ospiosa of nanionel femily .u.-.olrreo-etor,an Deodary - Total etudents enrolled in MacIng- poo"g-a pvry cc' utudry -lvl tided. by nosete oft. oohsrs is'Lhe no-es- yuccl olaicin-usno (orono of arold coeo.. .fr.e.. a. tat - spading 1enel. na,rtid wOC f chuo-keriog age (11-44' years) oho .ee birth-con.trol Adult litefrcy note (-e...nt) - Listrase adults sbIe to read sd wrte s oti-e t all macrri~d unne in name age gr...p. apercentage of total adult popuatirn agd Ii years and snee. 155 lt !TRTTIOS CONSUIIPTIOR laenofTod production Per oselta (1970-100) - Ind... ounbee of per Pssegr car (net. thousand cp...icotin) Passeng r,tr -opriae Str care sa.pit. aac-l production of all fod nnoiecsatglcehn eigh peosa 00lde m hln . Ire s ilitary PeDaissNIn of ouorien (Perce..t of recafrasesn) - Canputad fro. vehicle.. esergy equicalene of net loud -uppllne -iulable is .... try pnr -apins Radio co..eivero (c tcrn ouanol-Altperffcie fur radio pe dy.A-1ilabla auppl be "toriae doneatfo prcdu-tio.r in-arte lees broadogeta to general1 public e, huado ouain eon1 lud ...ol Ie'oa enpotne, sod ch-go- is t-ok. etl, eupite e lde esinal feed, sends, reoiners isouo-ieoad oyur hn risraco o.fradi sts si qns_slc sd in food P..ce..Io, andPlon tod datr ibutio. R.- .ffeot; .dta totrecn yearny say. not hbco-porbestonac ..ct no"ittee qairmetn hewr sscfto_d by FAO base.d as phyilological needs for no- abolished lcnig mal -cttclty and health coosidrirtg e-ira...soatal tenPeture, body TVrafet fonrt,chou-andooiai,;-laeicefo rudanto gsr weighta, ago and se- diotcibatio- of population, and al11-ing 10 Pe- puoprtuso ouain oldscllsdC eent 000 gen t foe rout.eta house.holdIlevel. triesensd Is peace whec retgis.trationo1f Tv aete aIn effeot. Pat Ita.s spol fpn o(gaspedy - Protain contest of per gaopsa lcuaio er tuuad poolt ige - ho.s the anersgetoua espita e eopye od pe day. etapply of fond Is define a tn si% f'daflytganeta hintrs espapor', defined sepsrtodiool puhi- ehoa, aq lrne Pcfr Il onseeeetblished by CISIA provide fcr gstlnnidanated prfeaily to tenrding genral nw.In Is -aside to. a simni. alo....e of h0 gras ef ntal. peateis pec day and 20 grana beJ"dsly" if It eppears at least four tiec 5 eeI ef animali and pulse pratein, of whioh 10 gSee. should ha anisal protots. Cmes asa-I ettends..e Per fepi,. Per o..ar - laced on shin sbat af titkste These atandueds are lowr toss those of 75 gram aft ctaprestsi and cold daring the year. isolodiag adeleal..e to drive-in cilsamas and eabile 23 geama of osmmal prosts an as average far the earld, peopos..d bp amis. 00 In she ThIrdOrl od tray etaPia ott supply true asta asd oulse - Protein suppiy of food EMLOYMEN{fT deeimed frus anloalo and pulsee in g-os per day. Itu1 labor_force__(tho....ndul tosiayuctine parsons, isoodiog armed Child (eans 1-4) or talitp rate foer thoean!d) - -anua deaths pen thon- fore. ... snpluyod boo occluding houaewi-e, etudnone, et.. Defist- end in age group 1-4 pe-re, no ide to thisAage group. tosIcnrioun cousrIne are O.tt opr Femlefoeonc)- Femal labor intro 00 proectoge of total Labor forts HEALTH Aiutuefrcect) - Labor force is forming. futeetrY, ltuntg an d fhinbie Life enneonan-y an birth (y.-oc - Ac-rge number ofipaste of life epe ng of tota labor force. -eaisio -a birch; usualIly floe-or avcagS. ending in 1960, 1970, lsdnetrp (pr..entL- Lbor forc in niniog, --s-cri,r..n.o .. auf-ouing and and 1975. eocoI Zty.run ond go aa percentage of tota labor fonce. Infant --rsliec rate fot hosad - Atonal death. of infant under Perc.ipninio noe fp nor)nt ttl ne.ad forala - Total, -aIe. and one year of age Per tho"on la hlrtn. famals labor fooce- por-rootgno of tfe it r-np-odye populations. Acento saewter(rcn ofppuaio)-tota, orbn, and rue1 Tbesn are TIOe adjoecd p.rticipacito ratet -efI-t-rcaae- Nunher of people (tota,ulnad rural) with r...e..ble. a..ea. to atruootyo of tho popuatio., o-d 1c-g tien tred. sate water eupply (Iocldoe ttaa"d' surf-c waterr unreaed but foo- dependenc.Y ratIo- Ratio of Popoaion ceder 15 and 65 aed onet to ameantaminted caner n oh 00 cht tco pt.rtatd brhl,spig,the lebor fIto In age gtop of 1-h ptre. and sesltarp -olie) se pe--nsaen of thoir -opactiv- populatio... In an2urban see e.. .pablic founttoi or etardpont booted Oct .rot INCOMEt DIiTgIBCTION tha tiC nete fromI .. ho-is ca -on ided as olt withIn tegPecntg of prc-nt iso-r (beth.to cah sod.kind)- roi-d by rithast 5 ennble acu o- f to os. Is.otla .ser sble o--s woulId y.r..nt. richest 20prcn. .- P.se 21 proent. ad pooret 40 pencest imly that tho ho,uoifornebrr tho ho..eohold do no ha- to of ho..oh.oldo. sod a dieProotuaopr f lIt aup tfecig the famIty's water -edn. POVERTY ThRifT GROCPS Atrene tcnutrtadt-opcee t-rtoooc ofocrulcaicul--ttal. cto end-e<-uodb-clucafoutrt .Inco ed oIt, auc~~ nad ua rrl-hn.bor ofpoi ttl.ta,ad ua)nro yorc booloe Pon-rco incctIoli tha irue. ln eu ho Iia Iipoo on Potoontogo o the it renenn ouaiu.tceoatiltloaeut b 1o aeta o-food eqlnetsIs not 'disjposal - nay oI-u. t,he collection od dipo..., cub or without affordabl. tetnt h.fbrcsnr andwat--tser bywoita-r-konss.n E.tl.teud -tel oiroe5 oolcl(S o cepita) -orbun and rual1 atthe un 1plc p--lr aod umil-ti ltos Reltion p--ety Inco..lo.I I tht inon lon ..es than one-third tbL'viatlclpy Ihy.lco- fputo~tl-c dcvidcd by ounhet of pruclc"ig - pr capit p.e. linoeo ..o.o..tr pttyalclo- q-u. _H fro. ndnl no -a-nioaIty la-o. talaraiunli ru~cottnoo Iroe (pren)- ro sdtoat ?itjtutlot. r r.tttttfloruon-Pop.tot-c- dlvidod by -orer f Par-tn of population (urban an1 racal) cito aeinther 'obaoate paot" or pr-.iccng -:Uoad tocoic gaduata -uru-, pr-aItlIa- osun, and 'relative poo o ice_ Is greate., E..sosic asd Social at Dintaioc trnmsAsolysle and Pejcboslparce-o  - 23 - ECONOMEC INDICATORS GROSS NATIONAL PRODUCT IN 1976 ANNUAE RATEs ow cRm'oTt US$ Mn 7. 1967.70 I'J70-75 1974-76 CNP at Market Prices 1,651.2 100.0 5.4 0.6 - 0.9 Cronsq Domestic Investment 213.4 12.9 6.0 - 1.0 - 8.6 Gross National Saving 190.4 11.5 28.5 - J.5 1.0 Current Account Balance - 23.3 - 1.4 _ _ _ Exports of Goods, NFS 372.0 22.5 0.8 - 2.0 - 1.3 Imports of Goods, NFS 418.0 25.3 1.8 - 3.9 - 7.0 OUTPUT LABOUR FORCE AND PRODUCTIVITY IN 1976 l 2/ Value Added Labour Force VA Per Worker us$ Ml1n I. Mln 7 USS 7, Agriculture 633.0 38.0 3.36 84.0 188.4 45.0 Industry 318.0 19.0 0.20 5.0 1,590.0 378.0 Services 654.0 39.0 Unallocated 69 0 3/ 4.0 2/ 0.42 11.0 1,721.0 409.0 1,674.0 100.0 398 100.0 420.6 100.0 GOVERNMENT FINANCE Central Government FMG Bln % of GDP 1977 1977 1975-77 Current Receipts 68.0 15.3 14.8 Current Expenditure 78.0 17.6 15.6 Current Surplus - 10.0 2 3 - 0.7 Capital Expenditures 20.5 4.6 4.2 External Assistance (net) 4.6 v 1.0 1.2 MONEY. CREDIT AND PRICES 1972 1973 1974 1975 1976 1977 (Billion FMG Outstanding at the End of the Period) Money and Quasi Money 68.2 71.5 85.3 86.9 100.0 121.0 Bank Credit to Public Sector - 2.9 - 3.5 6.0 12.7 19.4 29.7