Turkey - Second Fruit and Vegetable Project

Document of FILE COpy The World Bank FOR OFFICIAL, USE ONLY Report No. P--2985-TU REYioRT aND RECOMMENDATION i-xESTDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF TURKEY FOR A SECOND FRUIT AND VEGETABLE PROJECT March 10, 1981 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.  TURKEY CURRENCY EQUIVALENTS Currency Unit Calendar 1978 July 1979 Jan. 1980 /1 Februar 19 US Dollar l - TL 24.28 TL 47.10 /2 TL 70.0 /3 TL 96.00 /3 TL 1 - US$ 0.04 US$ 0.02 US$ 0.01 US$ 0.01 /1 Since January 1980 the rate is being adjusted for the differential inflation between Turkey and its major trading partners. TL 78/$1 was used for this report. /2 Except for imports of crude oil, petroleum products and fertilizer raw materials, and exports of agricultural products benefitting from official price supports, for which it was TL 35 - US$1.00. .L Except for imports of fertilizers and insecticides/pesticides, as well as raw materials and inputs for their manufacture, for which the rate was TL 55 - US$1.00, TL 70.0 - US$1.00 as from October 1980, TL 78.6 - US$1.00 from January 31, 1981. FISCAL YEAR Republic of Turkey March 1 to February 28 Turkiye Cumhuriyeti Ziraat Bankasi (TCZB) January 1 to December 31 ABBREVIATIONS AND ACRONYMS cMO - Central Marketing Organization GDU - General Directorate of Agricultural Affairs of NAF GDAR - General Directorate of Agricultural Research of MAF GDPPQ - General Directorate of Plant Protection and Quarantine of MAF GOT - Government of Turkey NAF - Ministry of Agriculture and Forestry MEYSEB - General Directorate of Fruit and Vegetable Export Development Projects of NAF RMC - Regional Marketing Corporation SEE - State Economic Enterprise SIS - State Institute of Statistics SOF - Special Operational Fund SPO - State Planning Organization TCZB - Agricultural Bank of Turkey (Turkiye Cumhuriyeti Ziraat Bankasi) TOPRAKSU - General Directorate of Land and Water -Resources Development, Ministry of Village Affairs TZ - Agricultural Extension Service of GDAA of MAF (Teknik Ziraat) TZDK - Agricultural Supply Organization  FOR OFFICIAL USE ONLY TURKEY SECOND FRUIT AND VEGETABLE PROJECT Loan and Project Summary Borrower: Republic of Turkey Beneficiaries: (i) General Directorate of Fruit and Vegetable Export Development Projects (MEYSEB) and (ii) the Agricultural Extension Service (Teknik Ziraat--TZ), in the Ministry of Agriculture and Forestry (MAF); (iii) Agricultural Bank of Turkey (Turkiye Cumhuriyeti Ziraat Bankasi--TCZB); and (iv) the State Planning Organization (SPO) Loan Amount: US$40 million equivalent in various currencies. Terms and Conditions: 17 years including 4 years grace, with interest at 9.6 percent. Relending Terms: The Borrower will onlend US$28.1 million equi- valent to TCZB, for a similar period, at an interest rate which will allow TCZB a spread of 3.5 percent on all its onlending in the project; the Borrower will assume the foreign exchange risk. The Project: The project's major objective is to help Turkey gradually realize its export potential int fruits and vegetables through: (a) increasing the production of fruits and vegetables in those areas most suited to horticultural production; (b) creating a nucleus of marketing organizations in the private sector to facilitate increased export earnings through fruit and vegetable exports; and (c) formulating a master plan for a further integrated development of the horticultural sector. The project covers the first four and a half years of a nine and a half year development program designed to achieve these objectives. To ensure increased production, the project will support the establishment of 7 new nurseries, 500 citrus and 350 noncitrus orchards (2.5 ha each), and 1400 small citrus and non-citrus orchards (0.5 ha each), 100 vineyards and 150 greenhouses, besides providing operating credit to support 850 existing vegetable farms and 1,500 orchards, and 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.  - ii - helping integrate applied research with extension to ensure the dissemination of its benefits. The training and visit extension system developed by MEYSEB under the First Fruit and Vegetable Project (Ln. No. 762/Cr. 257-TU) will be strengthened in the three provinces included in that project, and expanded to cover seven new provinces. To help increase exports, the project will establish one central and four regional marketing organizations, to rationalize the marketing abroad of fruits and vegetables and develop a national strategy for expanding such exports. The project will also cover provision of working capital to existing processing and packing facilities to enable them to utilize their installed capacity fully. Assistance for studies and the preparation of a master plan for a rational future development of the horticultural sub-sector is also envisaged. Additional production resulting from the project will increase the supply of quality fruits and vegetables for both exports and domestic consump- tion, gradually increase Turkey's export earnings, and benefit some 7,000 farm families in the project area through higher and more evenly distributed incomes. Though the project is not aimed specifically at small farmers, it is expected that about 28 percent of the subborrowers will be at, or below, the relative rural poverty level. In addition, it will benefit some 28,000 families providing labor, and indirectly the suppliers of goods and services widely scattered through the project area, especially those dealing with machinery services, inputs distribution and downstream packing and trading activities. The risks are; possible delays in the appointment of required specialists whose input is critical for project implementation; inadequate coverage of the extension services due to insufficient operating budgets; and a time lag in the exporter acceptance of marketing organizations. However, these are normal risks inherent in projects of this type. With the measures proposed to minimize them, they are acceptable.  Estimated Cost: Local Foreign Total ------ US$ Million -- Investment credit 15.9 10.8 26.7 Production credit 8.2 4.5 12.7 Technical support services 13.6 9.7 23.3 and training Agroindustry working capital 2.3 4.5 6.8 Marketing Organizations 4.3 1.8 6.1 Studies and Master Plan 0.6 1.0 1.6 44.9 32.3 77.2 Price Contingency 18.1 11.7 29.8 Total Project Cost 63.0 44.0 107.0 Financing Plan; Local Foreign Total