Ghana - Export Rehabilitation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-3695-GH REPORT AND RECOMMENDATION OF THRE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION - TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 71.8 MILLION TO THE REPUBLIC OF GHANA FOR AN EXPORT REHABILITATION PROJECT December 12, 1983 This document hs a restricted distribution and my be used by recipients only in the performiace of their offcia duties. Its contents may not otherwise be divdhsed without World Bank authorlation. CURRENCY EQUIVALENTS Currency Unit = Cedis US$1 = 30 Cedis 1/ 1 Cedi = US$.03 l7 US$1 = SDR 0.944037 FISCAL YEAR Government of Ghana: January 1 - December 31 (effective January 1, 1983) ABBREVIATIONS AND ACRONYMS AGC - Ashanti Goldfields Corporation CSD - Cocoa Services Division ERP - Export Rehabilitation Project FPIB - Forest Products Inspectioc Bureau GCMB - Ghana Cocoa Marketing Board GDP - Gross Domestic Product GPA - Ghana Port Authority GTXB - Ghana Timber Marketing Board KLNR - Ministry of Lands and Natural Resources NIB - National Investment Bank PUDC - Provisional National Defence Council SGKC - State Gold Mining Corporation SSVD - Swollen Shoot Virus Disease TDB - Timber Export Development Board 1/ Effecti-e October 10, 1983. BEST COPY AVAILABLE FOR OFFICIAL USE ONLY GHANA EXPORT REHABILITATION PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Ghana Amount: SDR 71.8 million (US$76 million equivalent), of which SDR 35.9 million (US$38.0 million equivalent) will be an allocation from the IDA Special Fund. Terms: Standard Project Description: The project aims at arresting and reversing the declining export production and foreign exchange earnings by rehabilitating the traditional export industries (cocoa, timber and gold mining) through provision of spare parts, equipment and materials and thus generating needed supply response to the policy adjustment measures announced in the Government's economic recovery program; and removing the immediate bottleneck to evacuation of export commodities by improving the port facilities. The project would assist the Government in sustaining its economic recovery program, and also in implementing policy and institu- tional changes aimed at resuscitating the export sector. The major benefits of the project would be Ghana's improved foreign exchange earning capacity with net incremental foreign exchange earnings from the project amounting to about US$42 million per annum. The risks associated with the project are that the macroeconomic and export sector policy and institutional reforms are not fully implemented due to political difficulties and generally weak institutional capability of the public sector. The Government is strongly committed to the recovery program and associated policy measures and has already taken a number of actions to improve the export sector policy framework. To minimize the institutional risks, a substantial amount of technical assistance would be provided in parallel with the project. Executing Agencies: Ghana Cocoa Marketing Board (GCMB), State Gold Mining Corporation (SGMC), National Investment Bank (NIB), Ghana Port Authority (GPA). Relending US$52.3 million equivalent of the proposed Credit for Arrangement: the cocoa, gold mining and port components would be onlent by the Borrower to GCMB, SGMC and GPA at an interest rate of 11.6 percent with a repayment period of 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. 15 years after 5 years of grace. US$23.7 million equivalent would be made available to the National Investment Bank for purchases of foreign exchange by state-owned and private companies on terms and conditions acceptable to the Association to carry out the timber component of the project. Two Year Requirements and Financing Plan: -------------------- (USS Two-year IDA Special Government and Requirements IDA Fund Cofinanciers Cocoa 130.0 12.0 11.9 106.1 Gold Mining 80.0 9.2 14.4 56.4 Timber 60.0 14.4 9.3 36.3 Ports 15.0 2.4 2.4 10.2 TOTAL 285.0 38.0 38.0 209.0 Estimated Period of Disbursement: January 1984 to June 1986. The IDA and IDA Special Fund Credits would be disbursed in two tranches. US$38 million would be available for disbursement after Credit effectiveness. The remaining US$38 million would be disbursed after a review of progress in December 1984. Rate of Return: Approximately 20 percent. Appraisal Report: None Map: IBRD 3112R INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED EXPORT REHABILITATION PROJECT TO THE REPUBLIC OF GHANA 1. I submit the following report and recommendation on a proposed Credit to the Republic of Ghana of the equivalent of SDR 71.8 million (US$76 million equivalent) on standard IDA terms to help finance an Export Rehabilitation Project. Of the total Credit amount, SDR 35.9 million (US$38.0 million equivalent) would be financed from IDA and SDR 35.9 million (US$38.0 million equivalent) from the IDA Special Fund. PART I - THE ECONOMY 1/ 2. An economic report entitled "Ghana: Policies and Program for Adjust- ment" was distributed to the Executive Directors in October 1983 (4702-GH). Part I of this Report contains the principal findings of the report. Basic economic data and selected social indicators are summarized in Annex I. 3. The Ghanaian citizens once enjoyed a fairly high standard of living compared with citizens of most other West African nations. However, a declining gross national income has combined with high population growth (estimated at 3 percent a year) to cause a substantial erosion in real per capita income. At least 18 percent of the labor force is estimated to be unemployed, underemployment is widespread, and almost half the population of 12 million is now estimated to live in absolute poverty. The country's basic- needs indicators now appear to be on a par with those of other Sub-Sahara African countries with comparable per capita incomes. Thus, despite the growth in health facilities, modern health services are available to only about a third of the people and fewer in rural areas; only 35 percent have access to safe water. Although the education system is well established and elementary education has been free since 1962, 50 percent of adult men and 70 percent of adult women have had no formal education. 4. On December 31, 1981, Flight Lt. Rawlings replaced the Government headed by President Limann. After a difficult first year in office during which the new Government, Provisional National Defence Council (PNDC), essen- tially pursued a holding strategy, recent policy measures announced by the Government show a firm resolve to come to grips with the country's economic problems. 1/ This Part is the same as Part I of the President's Report for the Export Rehabilitation Technical Assistance Project which is being submitted to the Executive Directors for their consideration simultaneously with this proposed project. BEST COPY AVAILABLE - 2- Basic Structural Characteristics 5. Ghana is endowed with considerable natural and human resources. The country has valuable mineral deposits, particularly gold, but also diamond, bauxite and manganese. The large hydropower potential has only been partly tapped to geierate electric power for the country as well as for export to neighboring countries.- Recently some oil deposits have been discovered and off-shore oil exploitation is under way. Ghana has sufficient arable land to grow various kinds of food cereals and starchy staples and possesses consider- able fishing resources. The country is also rich in forest resources. 6. Agriculture is the largest sector of the economy, accounting for about 51 percent of GDP, although only about 11 percent of the land area is cultivated, divided equally between cocoa and food crops. flearly 70 percent of the population derive an income from agriculture or related activities. The basic staple foods are maize, rice, millet, yam, cassava, and plantain but, except for cassava, yields of these crops have stagnated. Food produc- tion in 1980 was only 88 percent of that in 1975. Prolonged droughts in 1975-77 and 1982-83, inadequate support services, poor transport facilities and lack of fertilizers and other inputs contributed to the decline. In the last five years, Ghana has had to import 10 to 15 percent of its cereal consumption (mainly rice and maize). Most foodstuffs other than cereals and starchy staples are either unavailabLe or can be purchased only on the black market. 7. Ghana is typical of a developing country that depends on primary products for exports. Cocoa (of which Ghana is the world's third largest producer) contributes about 60 percent of total export earnings; production has been declining, however, and world cocoa prices are depressed. Timber is also an important export. Although production has been declining for the past two decades, mining is still Ghana's second largest foreign exchange earner, contributing 10 to 15 percent of the total. Diversification of the export base, although emphasized by every Government over the past 25 years, has not made much headway. 8. Industrial production and services account for 17.5 and 32 percent of GDP, respectively. 1anufacturing--including textiles, steel, tires, oil re- fining and simple consumer goods--contributed 9 percent of GDP in 1980 (down from 14 percent in 1971) and provided full- or part-time employment to about 12 percent of the labor force. Manufacturing in Ghana remains heavily dependent on imported inputs, however. As a result, the goal of import sub- stitution through industrialization has met with little success and imposed a serious burden on the economy. 9. Ghana used to import all of its petroleum, mostly in the form of crude oil, which is refined domestically and used chiefly as a source of fuel for the transport sector. Recently, some oil deposits have been discovered and commercial exploitation has commenced. Production of crude is now about 1,200 barrels per day, equivalent to 7 percent of Ghana's requirements. Hydroelectric power meets most of Ghana's non-transport commercial energy needs. BEST COPY AVAILABF -3- Recent Economic Developments 10. Despite relatively abundant natural resources and human capital, Ghana's economy has been ailing for many years. Prominent among the symptoms are: declining per capita income, persistent high inflation, a greatly over- valued exchange rate, widespread smuggling and other illegal economic acti- vities, large public-sector deficits, a difficult balance of payments situa- tion, low productivity, low domestic saving and declining investment, deterio- rating infrastructure, severe under-utilization of productive capacity, high unemployment, a brain drain of skilled professionals, skewed income distribu- tion, and much-weakened institutions. Real GDP has declined every year since 1975, except for 1978, and real per capita income has fallen by 25 percent since 1975. Per capita income in current prices was estimated at $350 in 1982. Per capita food availability is 30 percent lower than in 1975. The reasons for these difficulties are manifold. Political instability and persistent mismanagement of the economy by successive Governments, an over- extended parastatal sector, sharp increases in oil prices, adverse terms of trade for Ghana's major exports, and declining export production are among the most important factors. 11. Inflation has been rampant since the mid-1970s. The consumer price index increased by an average of 80 percent a year after 1975, and reached the triple digit level (116 percent) in 1981, despite extensive Government use of price controls. Large public deficits, excess liquidity, and shortages of goods all contributed to the rise in prices. Fixed wage earners and cocoa farmers have suffered the most, while traders, import licensees, speculators, and farmers with marketable crops have been the main beneficiaries. 12. Budget deficits grew, as the Government proved unable to sustain a program of stabilization begun in 1978, when Government expenditures were cut by about one-third in real terms and the deficit was reduced to 5 percent of GDP (compared with 12 percent in 1977). An increase in the minimum wage in November 1980 and a serious shortfall in revenues--due to a dramatic fall in cocoa duties to 5 percent of total revenues (from 47 percent in 1978/79) and to a narrowing of the Government tax base--widened the deficit to 04.7 bil- lion, or 10 percent of GDP, in 1980/81. 1/ In 1981/82, the deficit amounted to about 05 billion--i.e., 50 percent of estimated expenditures for the year and equivalent to the entire revenue collection. 13. Balance of payments difficulties persist. Capital inflows have vir- tually dried up, due to political uncertainties. Commercial lending was not feasible due to lack of creditworthiness and accumulation of large arrears, while official aid was reduced in response to lack of action on macroeconomic policy. Without capital inflows, imports and service payments were perforce held to the level of export earnings, which were also declining in quantity and value. Export earnings in 1981 were estimated to be 33 percent lower than in 1980 ($766 million v. $1.1 billion). The overvalued exchange rate acted as a strong disincentive to production for export, since the cost of production far exceeded the price received at the official exchange rate. Overvaluation, 1/ Through 1982, the fiscal year was July-June. BEST COPY AVAILABLE - 4 - along with shortages of consumer goods in rural areas, also resulted in a wide variety of illegal and unproductive economic activities. Domestically pro- duced and imported goods were smuggled to the Ivory Coast and Togo for sale against the hard CFA, with tremendous losses (unofficially estimated at over $100 million a year) to the country's external account. International reces- sion also contributed to the poor export performance. Because of weak demand, world prices of cocoa plummeted and prices of other primary exports were equally unfavorable. The international oil crisis compounded Ghana's pro- blems. Imports of crude oil and petroleum products preempted almost half the country's export earnings. 14. Ghana has held its current account deficit low (it actually showed a small surplus in 1979), but at the cost of severely restricting imports. The import-GDP ratio, which stood at 20 percent in 1974, declined to only 3.6 per- cent by 1981 at the official exchange rate. This has created chronic and extremely acute shortages of raw materials, spare parts, and investment and consumer goods, resulting in stagnation in production and consumption and sharp deterioration in the physical infrastructure. Production in the manu- facturing sector is only one-fourth of installed capacity. An estimated 70 percent of road vehicles are presently out of service, while more than a third of railway locomotives are awaiting spare parts for major repairs or overhaul. The entire road network is deteriorating rapidly and is already unusable in many places. All this has badly affected the export mining and forestry industries as well as the efficiency of the ports. 15. Capital formation was quite rapid in the 1950s, but became increas- ingly negative thereafter. By the 1970s, gross investment averaged only 8.9 percent of GDP, suggesting that net investment may have been negative. Gross investment is currently estimated at an extraordinarily low 2 percent of GDP, compared to 21 percent for Sub-Sahara Africa as a whole. In an infla- tionary environment, with very little scope for productive investment and negative real interest rates for savers, domestic savings are also low--about 3 percent of GDP compared to 23 percent for the rest of Sub-Sahara Africa. The binding constraint, however, is lack of foreign exchange rather than domestic resources for investment. 16. State enterprises have been assigned a large role in production and distribution of goods and services ever since Independence. However, their performance has been distressing both in terms of output and profitability. They have generated serious pressures on fiscal and monetary policies. The main problems are inefficient and frequently changing management, Government control over prices, lack of required inputs, machinery and spare parts, heavy overhead expenses on redundant labor, and lack of strict accountability. 17. Ghana originally had a large reservoir of trained manpower, but in recent years there has been a tremendous exodus of professional workers to countries where salaries and living conditions are better. It is reported that one-third of all secondary-school teachers have migrated to Nigeria, Liberia, Sierra Leone and elsewhere. The outflow of managerial and profes- sional personnel has further thinned the administrative talents at senior levels of the civil service, which has been demoralized by relatively low salaries, an economic system that penalizes them severely compared with other BEST COPY AVAILABLE - 5 - segments in the society, and uncertain and adverse working conditions. On the other hand, unskilled manpower is in oversupply, and redundancy and over- staffing are special problems at lower levels of Government administration. Economic Developments in 1982/83 18. Soon after it came to power, the Rawlings Government took some extra- ordinary measures to arrest the slide in the economy. These included demoneti- zation to siphon off excess liquidity, and severe restraint on Government expenditure and monetary growth. It was rewarded with some moderation in inflation; the consumer price index rose only 30 percent in 1982, compared to 116 percent the previous year. The budgetary deficit during the last six months of 1982 was contained at 02.5 billion--at least no worse than in the preceding 12 months and lower in real terms and as a ratio of current GDP. But this improvement was achieved at a substantial cost: the wage/non-wage ratio of recurrent expenditures became more skewed and development expendi- tures as a proportion of total Government spending declined significantly. Furthermore, export earnings continued to slide (to $627 million in 1982) and external capital flows, both official and private, slowed to a trickle. New loans and grants from all bilateral and multilateral sources amounted to only $45 million in 1982. Net transfers from all external sources were still lower--$38 million, or enough to finance only 6 percent of the country's already depressed imports. Consequently, imports had to be held to $694 million, down by 35 percent over 1980. This is less than $60 per capita, or about half the corresponding level for Senegal and one-fourth that for Ivory Coast. In nominal value, non-oil imports were lower in 1982 than in 1974. 19. The foreign exchange shortage, combined with the border closing, dried up remaining supplies of raw materials and spare parts and reduced production levels throughout the economy still further. Inadequate rainfall exacerbated Ghana's economic problems. Cereal production registered a short- fall of 332,000 tons. The Volta Lake Reservoir fell to an historic low, resulting in the shutdown of all five potlines of VALCO Aluminum Smelter and further reducing foreign exchange earnings. Furthermore, a steep fall in world cocoa prices meant that the unit export value of cocoa in 1982 was only $1,594/ton, 37 percent lower than in 1981. To make matters worse, some one million Ghanaian citizens -- about 10 percent of the population -- were expelled from Nigeria in early 1983 as a result of Nigeria's own economic difficulties. Their requirements added severe pressure on the economy. Food shortages became acute and market prices shot up. Absenteeism on farms, mines and offices became more pronounced with adverse effects on productivity that was low to begin with. Economic Recovery and Short-Run Outlook 20. On April 21, 1983, the Government announced the 1983 budget, a short- term stabilization program, and a series of economic reforms, including a long overdue reform in the exchange rate. A new system of export bonuses and import surcharges resulted in de facto devaluation of 809 percent; subse- quently, a unification of the exchange rate at cedis 30 per US dollar became effective on October 10, representing a 990 percent devaluation since April 1983; and at the same time, the interest rates were adjusted upwards by 35 to 40 percent. BEST COPY AVAILABLE - 6 - 21. The new economic recovery program is designed to begin the process of correcting structural imbalances and rehabilitating the economy. If imple- mented successfully, the program will realign relative prices in favor of production and export sectors, reduce budget deficits and thereby the under- lying inflationary pressures, and facilitate the flow of imports needed to permit the growth of export production. Thus, among other important measures announced in April were an increase in cocoa producer prices to provide incen- tives to farmers, a doubling of gasoline producer prices as a step towards more realistic pricing of petroleum products, greater balance in Government budget and emphasis on productive sectors in the allocation of foreign and domestic resources. Water, power, railway and telecommunication tariffs were raised substantially. A price and incomes policy was instituted whereby the minimum wage was doubled and civil service salaries were raised by an average of 60 percent. 22. The 1983 budget reflects the impact of adjustments in the exchange rate and attempts to restore tax bases. Government revenues are expected to rise from 04.6 billion in 1982 to 014.6 billion in 1983, an increase of 217 percent. The Government is also committed to eliminating subsidies to public sector enterprises and keeping a tight rein on other expenditures. Despite the increases in wages and salaries, therefore, the deficit is expected to fall from 04 billion in 1982 to 03.4 billion in 1983 -- i.e., from 50 percent of the 09.2 billion spent in 1982 to 24 percent of a projected expenditure of 018.1 billion. 23. In the export sector, the changes in exchange rates and price incen- tives will have a favorable impact, but it is unlikely that export earnings will increase much in the immediate future. Cocoa exports, in particular, are unlikely to respond quickly, since infrastructure constraints, inelastic world demand, and agronomic problems related to past neglect will continue to operate in the short run, and production and exports are likely to increase by only 5 to 10 percent a year for the next few years. A more vigorous recovery is projected for mining and timber, permitting total exports to rise from about $582 million in 1983 to an expected $960 million in 1985, with con- tinuing recovery thereafter. 24. While the stabilization program will, with adequate external assis- tance, provide some relief from the present economic crisis, it has also been conceived as a first step in a longer-term process of returning the economy to a more satisfactory growth path. Thus, a critical next step will be prepara- tion of a comprehensive economic rehabilitation program to be initiated during the stabilization period and continued for three to four years thereafter. A program to rehabilitate the roads, ports, railway and transport infrastructure will also be needed. Other necessary tasks include improvement of parastatal operations, a review of the role of the private and public sectors, and strengthening Government capacity for planning and economic management. 25. Ghana's growth prospects beyond the stabilization and rehabilitation phases will depend to a considerable extent on (a) the determination of the Government to sustain the kind of economic policies it has now begun even though some features may not be universally popular, and (b) an investment plan that fulfills the key requirements of the economy. So far, the Govern- BEST COPY AVAILABLE ment has resisted all pressures to rescind or modify its economic recovery program despite serious economic and political difficulties. But an immediate inflow of food, fuel and other imports is essential, since shortages in these nreas could set back the Government's efforts to arrest inflationary tenden- cies and thus erode the success of devaluation. A minimum import program of about $1 billion f.o.b. is needed to begin the reconstruction program with sufficient momentum, and this will require a substantial infusion of foreign exchange, especially in view of the need to build up reserves and reduce arrears. Also, allocation of these imports will have to be improved in order to appreciably augment the supply of basic consumer goods, raw materials and spare parts that are prerequisite to increasing export production. 26. Beyond the short term, if the Government is able to maintain a more realistic structure of prices and coats and a viable exchange rate, restrain growth in public consumption, improve public revenue performance, reduce the inflationary tendencies associated with large public-sector deficits, and make a concerted drive to expand production and exports, particularly of cocoa and minerals, through more appropriate price incentives, support services, and more assured supplies of necessary inputs, it should be feasible to achieve rates of real growth in excess of 4 percent a year (or one percent per capita) after 1985/86. The attainment of even such a modest rate of growth after two or three years would be a major turnaround. Of course, this presupposes a more stable political environment than exists at present. It also presupposes that Ghana's own efforts will be supported by an augmented flow of external assistance. Ghana's needs for external capital over the next few years are substantial and will call for a major effort on the part of the donor com- munity. Unless concessional assistance is forthcoming, the possibility of successful stabilization and economic rehabilitation will be seriously dimi- nished and could adversely affect the country's stability. Relations with IMF 27. At the request of the Government, an IMF mission visited Ghana from May 1 - May 25, 1983 to negotiate ad referendum, a stabilization program which forms the basis for a one-year standby agreement. The elements of the stabi- lization program have been discussed in paras. 20-26 above. The Executive Directors of the IMF discussed the program on August 3, 1983 and approved a standby agreement amounting to SDR 238.5 million and also approved a drawing from the compensatory financing facility in the amount of SDR 120.5 million. External Debt and Creditworthiness 28. An agreement on a long-term rescheduling of Ghana's medium-tern external debt was concluded in March 1974. Under this agreement, all payments due after February 1, 1972, in respect of pre-1966 debt obligations, are to be paid over a period of 28 years beginning 1982, after a grace period of 10 years, at 2-1/2 percent per annum. Ghana's medium and long-term external public debt outstanding and disbursed at end-1982 is estimated at US$1,192 million representing about 3 percent of GDP. The debt service ratio of public and publicly guaranteed medium and long-term debt is about 9 percent of exports of goods and non-factor services and is expected to rise modestly after the grace period on the rescheduled debt expires. Arrears on Ghana's BEST COPY AVAILABLE - 8 - short-term debt increased from US$245 million In 1977 to US$4d9 million by end-1978. By December 1980 these arrears had declined to US$332 million. However, 19d1 saw a relapse with arrears increasing by $142 million. By the end of 1982, the short term arrears had accumulated to $5dO million. The economic recovery program alms to reduce these arrears in a phased manner. 29. Ghana is relying on official sources for most of the external capital required to support its development program, and relatively little of its medium- and long-term borrowing is on commercial terms. Consequently, Bank Loans and IDA Credits disbursed together represented about 22 percent of the country's estimated public external debt at end-1982. Net transfers over the last decade averaged $25 to $30 million per annum but were $7 million in 1982. Bank Group commitments on a per capita basis amounted to $1.76 during 1977-82 and lending dropped to less than a project a year during this period. Service payments on Bank Loans and IDA Credits in 1982 aocovated for 25 percent of the country's external debt service, but they are projected to decline to 17 percent of external debt service by 1987 as other sources of lending revive. 30. Ghana's extremely difficult economic conditions and its vulnerability to fluctuations in cocoa export earnings make it desirable that future debt service obligations be kept as low as possible. Consequently, Ghana will have to depend on IDA resources for Bank Group borrowing over the next few years. This is also consistent with Ghana's relatively low per capita income. At the same time, to help ensure a more adequate flow of foreign exchange into the country, it would be appropriate to finance some local costs of projects. PART II - BANK GROUP OPERATIONS IN GHANA 1/ 31. Since 1962, when the Bank Group financed its first operation in Ghana, the Bank has made 10 Loans totalling US$190.5 million and 21 Credits totalling US$279.3 million. Included in the 21 Credits is one whereby Ghana is a beneficiary of a Bank-financed regional clinker project covering three countries (Togo, Ivory Coast and Ghana). There are no IFC investments. Annex II contains a summary statement of Bank Loans and IDA Credits as of September 30, 1983. 32. Pow- generation and distribution represents the largest share of past commitments (27 percent) and the sector has been assisted by tb i power generation projects and three power distribution projects. Bank Group in- volvement in the sector started in 1962 with the Volta River project whch included the construction of the Akosombo dam, the country's first hydro power plant (912 KW) and the transmission grid. The project also helped to create the Volta River Authority (VRA), the power generating company. Subsequent 1/ This Part is the same as Part II of the President's Report for the Export Rehabilitation Technical Assistance Project which is being submitted to the Executive Directors for their consideration simultaneously with this proposed project. BEST COPY AVAILABLE - 9 - Bank involvement in power generation included the Volta River expansion pro- ject in 1968 and Kpong Hydroelectric project in 1977. In power distribution, three Bank Group operations (in 1968, 1971 and 1977) helped to establish and expand a low voltage distribution network and create the Electricity Corpora- tion of Ghana (ECG), the power distribution company. Cofinancing was a major operation in our lending to the power sector and involved a number of donor agencies including Arab Funds, European Investment Bank, European Development Fund, Canadian International Development Agency (CIDA), Development Loan Fund (USA), US Exim Bank, and Export Credits Guarantee Department (U.K.). Along- side power generation and distribution, agriculture has been a major focus of Bank Group lending, receiving 22.5 percent of the Bank Group's lending to Ghana. The lending program in agriculture has covered fisheries (1969). Eastern Region cocoa (1970), sugar rehabilitation (1973), livestock develop- ment (1974), Ashanti Region cocoa (1975), oil palm (1975), Upper Region agri- cultural development (1976) and Volta Region agricultural development (1980). The main thrust of the Bank Group's lending operations in agriculture has been to assist the country in achieving greater self-sufficiency in agricultural production, particularly food and raw materials for agro-industries, and rehabilitating the cocoa subsector. Earlier Bank Group projects in the sector were directed towards development of specific subsectors with emphasis on smallholder development, while starting in late 1970's, more emphasis has been given to a broad-based integrated agricultural development. Two such projects are currently under implementation, one in the Upper Region and the other in the Volta Region, which aim to increase farm incomes and the standard of living of a large number of smallholders by introducing improved farming technology, providing farm support services and developing rural infrastruc- ture. Major donor agencies which provided cofinancing in our agriculture sector operations were Overseas Development Administration (U.K.), Inter- national Fund for Agricultural Development, and Arab Bank for Economic Development in Africa. The Bank Group is also executing a UNDP-financed technical assistance project designed to strengthen the management and operation of the Ghana Cocoa Marketing Board. 33. Transportation is the third most important sector in the Bank Group's program in Ghana (20.5 percent of commitments). Projects financed in the sector include three road projects (in 1973, 1975 and 1980) and a railway rehabilitation project approved in 1981. The road projects focussed initially on rehabilitation and reconstruction of part of the country's main trunk road system but, in light of rapid deterioration in the entire road sector prin- cipally due to acute shortages of imported inputs, later emphasis was placed on emergency maintenance to keep roads open for agricultural and export traffic. An ongoing railway project which is cofinanced with African Develop- ment Bank (ADB) seeks to remove the present transport bottleneck to Ghana's traditional exports (cocoa, timber and minerals), for the movement of which railways have a comparative advantage. A telecommunications project currently under implementation aims at improving and expanding domestic telephone services in Accra and major urban centers. In the field of water supply two projects (in 1969 and 1974) have helped increase and improve the water supply in the Accra/Tema metropolitan area and adjacent rural areas. The first project helped expand the water supply distribution network and sewerage system in the Accra/Tema area and the second project which was cofinanced with ADB and CIDA included construction of a reservoir at Weija, a treatment plant RPTP~ 0%%1V 4JR11 P"I F - 10 - and a transmission pipeline. A third water supply project was approved by the Executive Directors in March 1983 to help carry out emergency repairs and maintenance on the pipeline from Kpong which presently provides two thirds of the Accra water supply. The project also includes substantial technical assistance to strengthen the management and operations of the Ghana Water and Sewerage Corporation and to increase its capacity for improving water supply, especially in the rural areas. In the manufacturing sector, two DFC opera- tions (in 1975 and 1979) have financed investment projects in manufacturing and agro-industry undertaken by small and medium enterprises. The main emphasis of Bank Group lending in this sector has been to encourage enter- prises using raw materials and which are capable of contributing to foreign exchange earnings and savings. A related objective for the DEC projects was to strengthen the institutional capacity of the National Investment Bank (NIB), Ghana's main development finance institution. The second DFC project which includes cofinancing under an EEC Special Action Credit is providing foreign exchange working capital to help increase capacity utilization of priority enterprises, in addition to long-term capital investment. An energy project aimed at strengthening Ghana's technical capacity to accelerate petroleum exploration was approved by the Executive Directors in May 1983. 34. The serious economic difficulties which the country has experienced in recent years have adversely affected implementation of a number of Bank Group financed projects. The dwindling revenue base of the Government has constrained its ability to finance the local costs of projects, and the lack of foreign exchange has resulted in a severe shortage of imported materials and spare parts required for the operation and maintenance of projects; the mass exodus of qualified Ghanaians to neighboring countries, and demoraliza- tion, absenteeism and low productivity among the remaining work force have also adversely affected project performance. The unusually adverse conditions surrounding Bank Group financed projects and their generally poor performance have been described in greater detail in the Project Performance Audit Reports. Overall, the main conclusion of the Reports was that macroeconomic and sectoral policy constraints were the major factors responsible for poor performance of the audited projects. Because of delays experienced in the implementation of a number of Bank Group projects in Ghana, the disbursement performance is falling behind appraisal estimates. Annual gross disbursements have averaged about 25 percent of outstanding Loan/Credit commitments and as of September 30, 1983 US$162.6 million remain undisbursed. The Bank Group has held periodic implementation reviews with the Government to identify steps which could be taken by Borrowers and the Bank Group to accelerate disburse- ment on ongoing Loans and Credits. 35. The principal objectives which will guide the formulation of our assistance program to Ghana ar-: (a) to support the adoption of policies designed to reverse the downward trend in the economy and return it to a path of growth; (b) to help rehabilitate and improve capacity utilization of the country's existing assets; (c) to stimulate agricultural and industrial pro- duction, particularly for export promotion and efficient import substitution; and (d) to improve the country's essential infrastructure (transport, water, power) so as to relieve major bottlenecks to increased production. We also plan a substantial increase in our economic and sector work to broaden and deepen our understanding of the constraints which are likely to impede the BEST COPY AVAILABLE - 11 - recovery process, to provide direction to our future lending program and the design of project components. In both our lending and economic and sector work, attention will be given to ways of strengthening the institutions responsible for economic management and development spending. The proposed Export Rehabilitation Technical Assistance Project is designed to support the Government's program to strengthen the institutions responsible for Ghana's major export industries. 36. In addition to the proposed Credit and the Reconstruction Import Credit recently approved by the Executive Directors, a more broadly based program of rehabilitation of the country's economic assets will be required. In the near term IDA would support a program to rebuild the network of trunk roads including major bridge reconstruction and ports rehabilitation com- ponents, and provide assistance to rehabilitate the power distribution system and the oil refinery. In agriculture, further assistance to the development of oil palm production is envisaged as well as for cocoa given the over- whelming importance of this crop, at least in the short term, for foreign exchange earnings. In brief, projects with major rehabilitation components are likely to absorb the bulk of Bank Group resources for the next few years as these are likely to show the highest benefits and quickest returns. For the outer years, the Bank will begin to examine prospects for new productive investments including support for education, health and other important activities in the social sectors. The extent to which the Bank Group can provide financial and technical assistance to support such a broad-based program will be conditioned by the performance of the Government in carrying through its economic recovery program. 37. The Government of Ghana has requested the Bank to act as a catalyst to help muster external assistance through cofinancing and more generally in the context of strengthened aid coordination. At the request of the Govern- ment, the Bank Group reconvened a meeting of the Ghana Consultative Group on November 23 and 24, 1983. The participants of the meeting have endorsed the Government's economic recovery program, and it is expected that the foreign exchange requirement for 1984 under the program will be substantially met by the donors' contributions. PART III - THE EXPORT SECTORS 1/ COCOA, TIMBER AND MINING 38. If Ghana's current economic recovery program is to succeed and the Government is to be able to sustain policy reform measures recently intro- duced, it will be essential to generate positive supply response from the export sector to restore the country's foreign exchange earning capacity. Sustained economic recuvery would require that the present severe shortage of 1/ This Part is similar to Part III of the President's Report for the Export Rehabilitation Technical Assistance Project which is being submitted to the Executive Directors for their consideration simultaneously with this proposed project. BEST COPY AVAILABLE - 12 - imported inputs be alleviated to rehabilitate the existing productive assets and improve utilization of the existing capacity. Since the export sector remains the principal determinant of Ghana's import capacity, the Government's econobmic recovery program assigns the highest priority to increasing export earnings by arresting and reversing declining production in key export industries. 39. The Government of Ghana has introduced, for the first time, an integrated foreign exchange budget that is announced at the same time as the fiscal budget. IDA reviewed and was satisfied with the foreign exchange budget for 1983. The foreign exchange budget presents the estimates of expected inflows of foreign exchange based on export projections, aid dis- bursements and other receipts. The outflows are projected by taking into account the import program, debt servicing and other payments. The set of priorities reflected in the sectoral allocation of foreign exchange were (a) export oriented sectors; (b) oil and petroleum products; (c) food; (d) Government revenue generating activities; (e) other production sectors; and (f) infrastructure. Of course, the foreign exchange needs of the economy are so enormous that it was not possible to accommodate the full demands of even these six areas. But the prioritization scheme underlying the foreign exchange budget at least ensured that the most pressing needs were financed adequately. The actual outcome of the budget will, however, depend on how far the amount and the sources of financing assumed in the budget are realized. The budgeting exercise is expected to provide some semblance of order in the management of scarce foreign exchange. IDA has also reviewed the foreign exchange budgets for 1984 and has been satisfied that adequate allocations of foreign exchange are made to meet the priority needs of export-oriented sectors, including their infrastructure requirements. IDA will review the foreign exchange budgets for 1985 and 1986. 40. IDA has also reviewed with the Government the size and composition of the 1983 development budget. The criteria governing the development budget were (a) completion of ongoing projects with special emphasis on infrastruc- ture requirements of export-oriented and production sectors, and (b) adequate counterpart financing of foreign aided projects. Although the amount ear- marked for development projects is totally out of line with the identified needs of the economy, the overall budgetary deficit ceilings had to be observed while formulating the development budget. IDA has carried out a similar review of the 1984 development budget with the Government and has been satisfied with the budget. The main consideration in making this review has been whether the export-oriented sectors are being provided adequate local counterpart funds for carrying out their directly productive activities and also for complementary investments in the supporting infrastructure. The set of priorities in the sectoral allocation of foreign exchange as described in the preceeding paragraph has also been a governing factor in this review exercise; in particular, the complementarity of export oriented sectors and Government revenue generating activities and infrastructure has been focussed. A similar budget review will be carried out for 1985 and 1986. A successful review of the foreign exchange and development budgets will be a condition for release of the second tranche under the proposed Export Rehabilitation Project (ERP) (Schedule 1, para. 3 of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). BEST IMPY AVILABLE - 13 - 41. Traditionally Ghana's export sector has played a significant role in the country's economy, accounting for about a fifth of GDP and one third of Government revenues and employing about 35 percent of the labor force. In 1980 total export earnings amounted to US$1.1 billion. Major exports are cocoa, timber and minerals (gold, diamonds, manganese and bauxite) which together constitute over 90 percent of total export earnings. As the table below shows, there has been a substantial decline in the volume of exports under these sectors during the last decade. Cocoa and gold exports in mid 1982 have been reduced to about 40 percent of the level attained in 1972 while timber exports have declined to 10 percent. The following paragraphs discuss the factors contributing to their decline and the Government's strategy for overcoming both physical and policy constraints and reviving the production and exports of these sectors. Table 1 (page 14-18) sets out in summary the export sector policy and institutional reforms that the Government proposes to implement in conjunction with the proposed project and the proposed Export Rehabilitation Technical Assistance Project. These reforms are discussed in detail in the following paragraphs. EXPORT TRENDS OF SECTORS UNDER THE ERP Export Index in 1982 1972 1975 1980 1982 (1972 =100) Cocoa (000 tons) 406 341 234 178 1/ 43.8 Gold (000 ounces) 737 513 337 302 40.9 Timber (000 cu.meters) 1,006 605 185 111 10.9 1/ 1982/83 season BEST CP-PY A1 1 "I E U. r vi I L--I LA .z.. Table I (Cocoa Sector) Sector Issues Proposed Ohanges Justification/Benefits Timetable for Action Producer Price (bcoa producer price to be reviewd Financial incentives to cocoa farmers Price increase proposal to IDA annualy In consultation with IDA; ard increased production. Returns by January 31, 1984 anid agree- a new price to be announced before from cocoa production become are mnt with IDA by ebruary 28, March 31 each year. campetitive with those from maize. 1984. Goverment Implementation of the agreed price by March 31, 1984 is a disburseament condition for the cocoa sector Credit allocation. Similar conasultations anid agreement with IDA for subsequent years. An independent Ocoa Producer Camittee to be established by Price Review Comittee to be January 31, 1984. establisbed, with farmer and CB representatives, to review and determine producer prices. Foreign Exchange WB continues to be aloed to Increased production through timely Streamlined procedures to utilize retain 10% of export proceeds availability of imported Inputs (e.g. the retention funds recently intro- for Inportation of recurrent Insecticides) and inproved efficiency duced by the Government will be inputs and essential spare parts. In haulage. monitored by D. Production Strategy A long-term strategy and Swollen loag-run economic viability of the Production strategy, SSVD control Shoot Virus Disease (SSVD) control cocoa sector, with the aim of conso- program and compensation plan to progran to be established, conce- lidating cocoa acreage by half and be prepared by June 30, 1984 and trating rehabilitation in areas not more thn doubling present average then to be carried out according yet infected; a compensation yields. to a timetable satisfactory to IDA. system introduced to encourage replanting. Sector Organization GOB anid extension services of CiD Inproved operating efficiency of Restructuring has been initiated; to be restructured as a c mercial GCXB; greater financial discipline; copletion of COB UorgAnization entity. Outstanding GOIB debt to accountability of managenent and is a disbursement condition for be switched to Goverment long- performance monitoring. After the cocoa sector Credit allocation. term loans with a grace period to initial period, Gov't revene to enable GCB to finance development increase throupi corporate taxes expenditures. and GHB dividends. BEST COPY AVAILABLE Table 1 (Continued Oocoa Sector) Sector Issues Proposed a es Justification/Benefits Thetable for Action Staffing A five-year retrenchment progran Reduced operatirg costs of GOB; Staff retrenchent startirg in to be Implemented, aiming at a increased share of cocoa revenues 1984 In a manner and according substantial net reduction of for farmers. to timetable satisfactory to IDA. anployees per annum; adjustment Adjustment assistance progran to assistance for displaced workers. be sihnitted to IDA by March 31, 1984. Privatization GOB's cocma plantations to be Reduced operating costs and improved Study of potential and procedures privatized by parcellirg out anog efficiency by G(MB; lor-term ration- to be coupleted by Jue 30, 1984 present workers and/or selling to alizatim of sector organization. and action takm by December 31, private investors. 1984. u' GOB to divest its three cocoa ditto Study of divesat procedures products factories and Insecticides to be completed and action taken plant. by above dates. GOB to prepare a progran to ditto Program to be reviewed with IDA Increase haulap of cocoa by by June 30, 1984, and Implemented private truckers, especially in a anmer anl according to time- frn depots to ports. table satisfactory to IA. GOiB to prepare a study ecaminirg ditto Study to be reviewed with alternative coco marketing WA by June 30, 1985, and arrargants, siuch as privatization action taken by December 31, 1985. or onltiple buying. BEST COPY AVARLABLI Table I BEST COPY AVAILABLE (Timber Sector) Sector Issues Proposed Changes Justification/Benefits Timetable for Action Sector Organization GIM abolished and to be replaced Greater freedom and initiatives 'IEDB to be established by by an independent Timber Export for mllers and exporters to export; April 30, 1984. Development Board (TEDB) establi- reduction In Government control shed strictly as an export prao- and intervention in export proce- tion body with representation of dures; improved omrket Intelligence producirg mills as well as Gov't. and promtion. Control on Industry Minm export price regulation Increased timber exports ad sipli- Action completed. Effective abolished. fication of export procedures; im tatim of simplified improved unrket =nfidence in Ghana procedures to be umnitored by IDA. products. Prior Government approval of ditto ditto export contracts discontinued. Grading and Inspection Ebrest Products Inspection Bureau Greater arket acceptability of Ghana 'b be established by April 30, (FPIB) to be established as a self- products; higher foreiga exchage 1984. regulating professional body to earnings through avoidance of under- strengthen grading and inspection invoicing; simplification of export of export parcels. procedures. Uniform timber grading rules to ditto 'b be adopte by March 31, 1985. be adopted Foreign Exchange Exiating procedures for retention Increased production and operating Procedures have rently been of 20% of export proceeds efficiency of mllIs through timely streamined cmsiderably. Further streamlined. availability of recurrent bported siaplification to be studied by Inputs. March 31, 1984 aid Implemental by June 30, 1984. State-owned companies Alternative strategies for awner- Iag-rn rationalizatim of sector Study to be cmvleted by ship ad nnagenant of state-awned organization ad Increased viability September 30, 1984; alternative companies to be studied ard of the state-owned sb-sector. ategies to be adoptei by adopted, Including the possibility 99= 31, 1984. of privatizatim and management contracts. Table 1 (Continued Timber Sector) Sector Issues Proposed aiges Justification/Benefits TJnetable for Action Concession Policy A general revelw of forest con- Optimal utilizatim of forest re- Revie to be carial ott by cession allocations to be carried sources and increased export produ- Jum 30, 1985 and action taken out and follow-Wp action to re- tion. by Decaber 31, 1985. allocate ucomic oncesawons, with priority to export producers. BEST COPY AVAILABLE BEST COPY AVAILABLE Table 1 (Mining Sector) Sector Issues Proposed amWes Justification/Benfits Timetabla for Action Sector Organization 9(IE to enter into a management Increased anagerial ad tecSnical Sinig of managenent contract contract with an international capability of SMC thraqmg large-scale prior to disbursent of the mining company to anage injection of expatriate umnagers mining mpomt of proposed S(I mines a coomnerdal entity necessary to Implaent the rehabilita- Credit except for $5 millia Worth tion program. of urgently required 1Import Itm; prelimimry ndm has already begum. Foreign Echange Foreign exchange retention by SaC Increased production and operating Streamlina proceduree recently increased fran 20% to 35% efficiency through availability of introduced by the Goverment to (about $10 million/year at present necessary imported inputs on a timely utilize the retention funds will production levels), with SGHC basis. be mitored by IDA. oa allowed direct access to retained funds. Plan of Action SCIC to carry out plan of action Enhanced orker unrale and Action to be taken before to improve productivity including productivity. Decenber 31, 1984. the introduction of work incentive schemes, including food and productivity bonuses. SGCI's Finances Goverment to convert SC's debts Improved finances of SW. Action to be taken by June 30, to long-term loan with appro- 1984. priate grace periods. Monitoring Sf perfornmnce to be amitored auring accountability of manage- Amual; first review vith IDA in and reviewed amuially by Govern- met and adequacy of policy measures Deamber 1984. ment, ME and IDA. Cost of affecting S(IC. production of SH mines to be reviewed anmally and required financial measures taken by Goverment to umintain viability. - 19 - A - The Cocoa Sector Recent Trends 42. Cocoa is the predominant sector in Ghana's economy. It generates 60 percent of export earnings, and 10 percent of GDP. It employs 24 percent of the working labor force and takes up more than half of the country's total land under cultivation. Also up until 1981, the cocoa sector provided about one-third of Government revenues. In the mid 1960's, Ghana was the leading producer of cocoa in the world, producing some 566,000 tons (1964/65), about one-third of total world supply. 43. The next ten years saw a steady decline with 1974/75 production dropping to some 400,000 tons. Subsequently output has declined even more rapidly, with 1982/83 production of only 180,000 tons. Correspondingly, Ghana is now the third largest cocoa producer in the world, accounting for about 12 percent of output. The immediate objective of the proposed project would, therefore, be to arrest this declining production. The impact of this declining production on Ghana's economy was made even more acute by a falling off of international cocoa prices between 1977 ($3,790 per ton) and 1981 ($1,800 per ton). Sector Constraints and Issues 44. Government policies in the past have been largely responsible for poor production performance of cocoa in the past decade. The main factors responsible for the decline of cocoa output were inadequate producer prices, high marketing costs and institutional weaknesses of the Ghana Cocoa Marketing Board (GCM4B), the lack of imported inputs and deteriorating transport infra- structure as discussed below. 45. Price Policy. The cocoa producer price is determined by the Government and the adjustments allowed in the past have been far short of general price increases, making cocoa farming increasingly unprofitable both absolutely and relative to other crops. If the Government had followed a more realistic price policy and let the producer price increase at the same rate as the export price from mid 1960s onwards, the rate of decline in the real incomes of cocoa producers could have been arrested. Instead the instrument of price policy was used to exact more taxes from the industry which increased from an average of 18 percent of cocoa export proceeds in the early 1960s to more than 50 percent by the late 1970s. A growing divergence between the official producer price and prices prevailing in the neighboring Ivory Coast and Togo provided increasing incentive to smuggle cocoa out of the country. Furthermore, the erosion of real income from cocoa has led to a shift of family labor to food farming and has contributed to labor shortages, as farmers are unable to hire casual labor during peak demand periods. 46. Input Supply Policy. The availability of insecticides and spraying machines has been erratic and in 1979-81 the absolute amount available declined sharply. Repair facilities and spare parts for spraying machines have also been almost non-existent. Surveys in 1974 and 1978 revealed that BEST C.PY mtIjqn - 20 - 47 percent of the farms infected with capsids were not sprayed at all, 36 percent once, 13 percent twice, only 4 percent thrice and none 4 times (which is the recommended frequency). The output response has, therefore, been disappointing. 47. Deteriorating Transportation System. Lack of adequate vehicles and spare parts and deteriorating roads and bridges increased difficulties in evacuating cocoa to the ports. The weakness of the transportation system led to deterioration in the quality of cocoa beans purchased (storage facilities being deficient), difficulty in moving merchandise and farm inputs to cocoa growing areas and depressed morale among cocoa farmers. 48. Marketing and Extension Costs. The basic institutional setup for marketing, input supply and extension lacks efficiency and effectiveness. Staff of GCMB and Cocoa Services Division (CSD) which provides extension services has increased enormously over the years. The work force of CSD has grown from about 4,000 in mid-1960s to about 44,000 at present though cocoa production is now only 32 percent of the level in mid-1960s. A recent study estimated that of the total of over 100,000 staff of GCMB (all divisions and subsidiaries) and CSD, an estimated 46,000 were surplus costing 0377 million annually. While there is surplus field and administrative staff, there is an acute shortage of qualified accounting and workshop staff. Government Strategy and Short-term Rehabilitation Program 49. Given the importance of cocoa in the national economy, the Government considers rehabilitation of the cocoa industry as a priority and an essential element of Ghana's economic recovery program. Although the long-term projec- tion indicates that the real world price of cocoa is likely to fall, to which the Government is beginning to respond with an export diversification strategy, in the short to medium term the cocoa sector offers substantial potential for recovery of exports, given the country's overwhelming reliance on cocoa for export earnings. Ghana has a comparative advantage in the production of cocoa and Ghana's cocoa has traditionally enjoyed quality premium in the interna- tional market. With proper policy framework, especially adequate producer price and input supply policies, and removal of evacuation bottlenecks, Ghana can, as a short-term objective, arrest and reverse the decline in cocoa output and, as a medium term objective, restore production to the level achieved during the mid 1970's (i.e., 400,000 tons) through rehabilitation of existing farms and improved capsid control and husbandry practices. 50. In recognition of the importance of the cocoa sector, the Government has prepared with the assistance of IDA a comprehensive study for the rehabili- tation of the cocoa sector. 1/ The study examined all major aspects of the Ghanaian cocoa industry and proposed policy and institutional measures to improve producer incentives, marketing efficiency and extension effectiveness including restructuring of GCMB. The study also identified required inputs, equipment, and materials for rehabilitation of the cocoa sector, which the 1/ Cocoa III Prefeasibility studies (in 12 volumes) carried out in 1982 by Peat, Marwick and Mitchell (U.K.). BESl COPY AVAILABLE - 21 - Bank Group originally intended to help finance under a third cocoa project. However, in view of the urgent need to initiate early measures, the Government has prepared on the basis of the study a short term rehabilitation program which aims at implementing essential policy changes and providing required inputs to cocoa farmers and GCMB for a period of two years (1984-1985). The program would be supported by this proposed project and the proposed Export Rehabilitation Technical Assistance Project. In contrast to the earlier two cocoa projects financed by the Bank Group which were confined to specific geo- graphical areas, the modified strategy under the proposed project would be to deal with the major issues in the cocoa sector on a broad-based sectoral level and attempt to implement a comprehensive reform package as discussed in detail in the following paragraphs. Cocoa Sector Reform Measures 51. Producer Price Adjustment. Past studies on the cocoa sector have shown that Ghanaian cocoa production is influenced mainly by real producer prices. In recent years, substantial increases in nominal producer prices for cocoa have taken place. In 1981, the producer price was raised from 04,000 per ton to 012,000 per ton. However, high domestic inflation rates largely eroded the impact of this three-fold increase and in 1982 the cocoa producer price was still only one-third of that in 1963 in real terms. In May 1983 the cocoa producer price was again raised from 012,000 to 020,000 per ton. Assuming realistic exchange rates in the future, improvements in real cocoa producer prices are possible with the recent increase in world cocoa prices,1/ possible reduction in marketing costs and gradual decrease of Government reliance on cocoa for revenues. 52. The spurt in food prices over the last few years, particularly of maize, has improved relative financial returns from food farming and therefore its attractiveness, as compared to cocoa, though returns to the economy from cocoa are much higher than those from foodcrops. The market price of maize increased from 066 per ton in 1963 to 020,000 in 1982 while the producer price of cocoa increased from 0220 per ton to 012,000. With the drought in 1982 and bush fires in early 1983 and acute foreign exchange shortage, prices of maize now range from 040,000 to 060,000 per ton. It is reasonable to expect that after the harvest this year and improved availability of imported foodstuff as a result of external support, the present high prices of foodstuff will come down. Assuming the maize price settles at 020,000 per ton, the return per manday from maize (traditional cultivation) will be 0145 compared to 0118 from rehabilitated cocoa at the present producer price of 020,000 per ton. With a 25 percent increase in cocoa producer prices from the present level, the return per manday from rehabilitated cocoa would equal that from maize. 53. A regular review and adjustment of producer prices is essential to maintain farmers' incentives for cocoa production. In view of the uncertain- I/ Recently world cocoa prices have risen to $2,500 per ton. Assuming the f.o.b. Accra prices ranging from $2,100 to $2,400 and an exchange rate of 0 30 to US$1, cocoa producer prices are 28 to 32 percent of f.o.b. prices. BEST COPY AVAILABLE - 22 - ties of the international coooa market and of the domestic inflation rate, particularly the prices of competing foodstuffs, it is not considered desirable to provide for an automatic adjustment of cocoa producer price based on a predetermined formula. Instead, an annual review and adjustment would be undertaken. Given the importance of cocoa to the economy and possible con- flict between the commercial objectives of a restructured GCMB (paras. 54-56) on the one hand and producer incentive* and price stabilization on the other, a Cocoa Producer Price Review Committee, independent of GCMB, would be estab- lished by January 31, 1984 to review and determine new producer prices (Schedule 5, para. B 1 (b) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). The Committee would be chaired by the PNDC Secretary for Finance and Economic Planning with membership of the Chief Executive of GCMB and at least one representative of cocoa farmers. Beginning in 1984, and each year thereafter, the Government would submit its proposed prices by January 31 to IDA for review, would agree on the prices by February 28, and would announce them by March 31 (Schedule 5, para. B I (b), of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). The announcement of the 1984 cocoa prices would be a condition of disbursement of the cocoa component of the Credit (Schedule 1, para. 2 (d) and para. 2 (c), respectively, of the draft Development Credit Agreement and the draft Special Fund Credit Agreement). On the basis of the current estimates of domestic inflation in 1983 and the necessity to provide enough incentives to farmers, a cocoa producer price increase of at least 50 percent seems warranted for 1984. In reviewing proposed prices, special attention would be paid to maintaining adequate incentives for cocoa producers. 54. Reorganization of GCMB. The restructuring and reorganization of GCMB is crucial to cocoa sector rehabilitation. It is proposed to integrate CSD, which is responsible for providing extension services to cocoa farmers, with GCM3. This is needed in the interests of integrated sector planning and operation, tighter control over CSD activities, economy in the use of central support services leading to a reduction in operating costs and easier avail- ability of resources for CSD. 55. The GCMB, which has previously operated virtually as a Government department, would be reorganized as a commercial body running on a profit- making basis. This is considered essential if the efficiency of GCMB is to be improved, performance criteria worked out and accountability of senior manage- ment ensured. The basic principle is to give GCMB control over its resources (with effective monitoring by the Government through its representation on the Board of Directors) so that it can institute proper planning and financial management and be judged as to its performance at the end of the financial year. The Government will continue to have its revenues from cocoa through corporate taxes and dividends paid by GCMB. However, GCKB should build up its equity so as to be able to finance its development expenditures. Until GCMB's revenues start to improve, its outstanding debt would be converted to Govern- ment's long-term loans with an appropriate grace period. BEST COPY AVAILASLE - 23 - 56. The proposal for the restructuring of GCMB was conveyed to IDA by the Government at negotiations. Subsequently a cabinet directive has authorized GCMB to proceed with the restructuring. The restructuring proposals are the work of a Steering Committee chaired by the PNDC Coordinating Secretary with membership of PNDC Secretary for Finance and Economic Planning and Chief Executive of GCMB. The Steering Committee will also oversee the implementation of the restructuring of GCMB, which will have to be legally accomplished prior to disbursement under the cocoa component of the Credit (Schedule 1, para. 2 (d) and para. 2 (c), respectively, of the draft Development Credit Agreement and the draft Special Fund Credit Agreement). 57. Although cocoa is the most important foreign exchange earner, the failure by the Government in the past to provide sufficient foreign exchange to import essential recurrent needs (particularly insecticides) has been one of the major reasons for declining cocoa output. Given the importance of assuring timely inputs to cocoa farmers and essential spare parts for the cocoa evacuation vehicles, the Government has already authorized GCMB to have access to at least 10 percent of its foreign exchange earnings through a foreign exchange retention scheme, and has agreed to maintain this scheme (Schedule 5, para. B 1 (g) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). Guidelines for the proper use by GCKB of retained foreign exchange would be evolved by the Government. 58. Reduction in GCB Operating Costs. In order to allow cocoa farmers to have a progressively greater share of f.o.b. value and to ensure that GCMB remains commercially viable, serious efforts would be made to reduce GCMB operating costs. Several steps would be taken in this regard during the project period: (i) Plantations run by both GCMB and CSD are a heavy burden at present accounting for over 20 percent of the operating costs of GCMB, CSD, Produce Buying Division (PBD) and Produce Inspection Division (PID) combined and employing about 18,000 staff. The Government has taken initital steps to parcel out the plantations among the workers presently employed there (who would no longer be GCXB employees) and/or sell these plantations to private investors or retain only a minority share. In order to assess the potential of these planta- tions and criteria and procedures for eventual divestment, a study would be completed by June 1984 and, based on the results of the study, action by the Steering Committee completed by December 1984 (Schedule 5, para. B 1 (d) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). (ii) There is a need to assess fully the financial viability of the three cocoa products factories and the insecticide formulation plant presently operated as subsidiaries of GCKB and to examine how these subsidiaries should be set up as separate companies with private investment. Although the Government has taken initial steps for divestment, an in-depth study of these subsidiaries and procedures for their eventual divestment would be completed by June 1984 and BEST COPY AVAILABLE - 24 - action by the Steering Committee on the recommendations of the study completed by December 1984 (Schedule 5, para. B 1 (d) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). (iii) Serious overstaffing exists in almost all the Divisions of GCMB and CSD, which has been one of the important factors contributing to high operating costs. Under the project, a five-year program for staff reduction would be undertaken. The annual target for net reduction (net of essential new recruitment) of the current staff on the payroll of GCMB and CSD has been initially agreed to be 5,500 for 1984 (this excludes employees of plantations, cocoa products factories, PBD district organization and formulation plant for which action will be taken after studies are completed (see (i) and (ii) above). As an important element of the economic recovery program, the Government is strongly commit+ed to reducing overstaffing in the public sector and has established a Mobilization Committee to retrain redundant workers for redeployment to productive sectors especially in food farming. An adjustment assistance program for displaced workers of GCMB is under preparation by the Government and this program would be submitted to the Association for its review and comments by March 31, 1984 (Schedule 5, para. B I (c) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). Progress in implementing the staff reduction program would be one of the performance criteria for release of the second tranche of the Credit (Schedule 4, para. (iii) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). (iv) Significant possibility of reduction in operating costs exists through greater reliance on private haulers, particularly from depots to port. At present about 30 percent of long distance haulage is by private haulers. Although the Government has taken steps for further increase of private haulage, GCXB would prepare a program to increase further private sector haulage of cocoa by June 30, 1984 for review with IDA (Schedule 5, para. B 1 (d), of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). (v) GCMB should be able to reduce costs by improving its storage of cocoa and cocoa products before export. Assurances were given that GCMB would prepare a study on the procedures for receiving at ports, storing and shipping of cocoa and cocoa products by June 30, 1984 and implement the results by December 30, 1984 (Sci:dule 5, B 1 (d) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). (vi) To operate efficiently as a private institution, GCMB would undertake a study to develop a corporate planning and management information system. Assurances were given that this study would be completed by August 31, 1984 and the results implemented by February 28, 1985 (Schedule 5, para. B. 1 (d) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). BEST COPY AVAILASLE - 25 - (vii) A long run possibility of reducing marketing costs through privati- zation of cocoa marketing and introduction of multiple buying system exists. However, the full implications of privatization and intro- ducing the multiple buying system need to be carefully studied. A study of alternative systems for marketing would be completed by June 1985 for review with IDA and the results carried out by December 31, 1985 (Schedule 5, para. B 1 (d) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). 59. Production Strategy. Implementation of the production support components of the proposed project would be within the framework of a long- term strategy for cocoa rehabilitation and replanting. This strategy involves consolidation of cocoa acreage to about half of the present acreage which are not infected with Swollen Shoot Virus Disease (SSVD) with efforts to obtain more than twice the present average yields. The rehabilitation under the proposed project would concentrate on the selected areas with about two-thirds of the resources going to these areas and the remaining one-third to other areas (even this one-third would be carefully allocated to areas which are not infected with SSVD and have some potential). Additionally, a two-year interim strategy for SSVD control would be mounted, emphasizing control of isolated outbreaks in priority areas for rehabilitation and forming a buffer zone between the Eastern and Central Regions on the one hand and the priority areas on the other. After this operation is completed, the strategy would be to move into Eastern and Central Regions gradually for SSVD control, consistent with availability of resources. For successful implementation of the interim and longer-term strategy for SSVD control, the Government would formulate a policy of compensation payments to cocoa farmers for replanting the trees cut down. Agreement has been reached at negotiations regarding strategy discussed above and assurances have been given that the Government would prepare such a strategy and a plan of compensation payments for review with IDA by June 30, 1984 (Schedule 5, para. B 1 (f) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). B - The Timber Sector General 60. Forests represent a very significant national resource in Ghana. Covering about 8.2 million ha., some 34 percent of total land area, they contain valuable redwoods and other species, highly prized in European and other markets for veneer, plywood and lumber. In addition, Ghana's rural population (about 7.2 million people or 68 percent of the population) depend on the forests for fuelwood, building poles, and timber for housing. Fuelwood consumption is estimated at 10 million m3 annually, or six times industrial log consumption. The forests also play a crucial role in protecting water catchment areas and preventing soil erosion, sedimentation of reservoirs and downstream flooding effects. BEST COPY AVAILA"LE - 26 - 61. Historically, the sector has generated about 5 percent of total GDP and 8 percent of foreign exchange earnings, ranking third (behind cocoa and minerals) in exported commodities. However, in recent years production and earnings from the sector have been declining. In 1965 log production was 1.5 million m3; by 1972 this had decreased to 1 million m3. However, during the past decade production has further fallen off and now stands well below the 1972 level e.g., 0.1 million m3 in 1982. Exports of wood and wood products were valued at US$20 million in 1965 and had increased to US$90 million by 1976 but had fallen to less than US$20 million by 1982. 62. A number of constraints have adversely affected the ability of the forestry sector to make its full potential contribution to Ghana's economic development, the most serious of which have been the grossly overvalued cedi, government controls and regulations on the timber industry, weak supporting institutions and infrastructure, lack of managerial and professional manpower, and the shortage of spare parts and imported inputs. Although currently the world timber trade is depressed, there is a large and increasing demand for tropical hardwood products, a significant proportion of which is expected to come from Africa. The high proportion of Ghana's timber products which were exported in the 1960's and 1970's confirms that Ghana's products were well received. The dramatic decrease in export sales during the last few years has not been due to a decline in export demand so much as to a combination of steadily reducing log production and mill outputs due to factors discussed above. Appropriate government policy, and technical and financial assistance are now required to reverse this trend and restore the sector to its former productivity and profitability. Structure of the Timber Sector 63. The sector comprises a private subsector, with some 150 logging firms and more than 80 mills, which have traditionally supplied more than 60 percent of Ghana's total timber exports, and a state-owned subsector consisting of four major companies, representing the balance of exports. Altogether the sector employs about 70,000 people, or about 15 percent of the employed labor force. 64. The private subsector is engaged in all aspects of production, from logs through lumber, plywood, veneer, and remanufactured items. While, in general, the private sector exhibits better management, sounder financial practices and overall better physical facilities than the state-owned com- panies, these firms continue to suffer from lack of spare parts, materials and other imported inputs. As a result capacity utilization averages less than 50 percent; vehicle and equipment maintenance is impossible in the absence of spare parts; and thus, production and exports have declined in recent years. 65. Of the four state-owned companies, two (African Timber and Plywood Company and Gliksten West Africa Company ) are operating under poor management and with extremely outdated equipment, often inappropriate for the given line of production. The rehabilitation of these two firms will require consider- able long-term capital investment. The other two firms (Mim Timber Company and Takoradi Veneer and Lumber Company) are better managed and on sounder BEST COPY AVAILABLE - 27 - financial footing and assistance of a shorter term nature could likely restore much of their profitability. However, a thorough study of the viability and alternative strategies for the state-owned companies is warranted. Government Strategy 66. Government policy for the forestry sector is to increase productivity to the maximum extent, consistent with environmental protection, including safeguarding cover on water sheds, maintaining animal life and the welfare of the population, and the long-term preservation of the forests, including reforestation as necessary. Government strategy for the private subsector is to facilitate rehabilitation of selected mills to generate foreign exchange quickly, and for the state-owned mills to rehabilitate them seeking minority participation from the private sector, both domestic and foreign, including the possibility of entering into management agreements with large inter- national companies. 67. Several studies have been carried out by the Government as a basis for rehabilitating the timber industry. These include a FAO study on the forestry sector which identified a project to help rehabilitate the state owned companies, to establish pulpwood plantations and to strengthen the forestry sector institutions; an EEC study on Ghanaian timber marketing organization and procedures undertaken by P-E International Operations (U.K.) which recommended specific policy and institutional changes required to promote Ghanaian timber exports; and a timber industry rehabilitation study carried out by a consortium of three international banks to assess rehabilitation requirements with emphasis on the private sector timber companies. On the basis of the above studies and with assistance of the Bank Group, the Government has prepared a short-term timber sector rehabiliation program which aims at increasing the utilization of the existing production capacity especially among the private companies through provision of spare parts, equipment and materials. The program would be supported by the proposed Credit. Timber Sector Policy and Institutional Reforms 68. Vany of the policies and institutions dealing with the sector have been counter-productive to the objective of increasing timber production and exports. Indeed, the principal factors contributing to the sector's marked decline during the past decade stem from excessive and/or inappropriate government controls. Until recently, the Ghana Timber Marketing Board (GTMB) exercised complete control over timber export production and prices. GTMB's principal functions were: (a) to control and supervise production of wood products whether for export or domestic sales; (b) to determine which species must be turned into finished or semi-finished products prior to export; (c) to set prices; (d) to approve and allocate import and export licenses, including contract approval; and (e) to inspect export parcels to ensure correspondence with approved export contracts. In addition, GTMB had responsibility for export promotion and research and statistics. In effect, these assistance functions suffered from GTMB's overwhelming preoccupation with its control functions. BEST COPY AVAILELE - 28 - 69. In order to alleviate immediate physical constraints, the proposed project would provide spare parts, materials and equipment to enable selected timber companies to increase production and exports. However, there would be critical bottlenecks to increasing timber exports unless timber marketing organizations and procedures were restructured so as to enable timber companies to export with a minimum amount of Government control and regula- tion. Specific changes in the timber sector to be implemented in conjunction with the proposed Technical Assistance Project are as follows. 70. Restructuring of Marketing Organizations and Procedures. GTMB has been abolished, and an independent Timber Export Development Board (TEDB) whose membership would include both concerned Government Ministries and representatives of mills producing for export, would be established by April 30, 1984. In the interim period, the Ministry of Forestry would carry out essential functions for timber production and exports (Schedule 5, para. B 2 (a) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). The primary function of TEDB would be to obtain, collate and disseminate to the industry, information concerning Ghana species, export markets and current prices, export opportunities and prospects. The TEDB would operate solely as a market promotion and market intelligence advisory body to serve the industry and would not be responsible for controls on the industry. Various negative controls on timber exports hitherto exercised by the Government have been abolished. These consisted mainly of the practice of requiring Government's examination of draft timber export contracts and the minimum export price regulations. In order to assist the Government in setting up TEDB, the proposed Technical Assistance (TA) project would provide consultant studies to assess the initial requirements of TEDB as well as an internationally recruited expert to help establish TEDB and train staff (Sections 3.02 and 3.03 (a), the draft Development Credit Agreement for TA Project). 71. Inspection and grading of timber products would be strengthened by the establishment of a Forests Products Inspection Bureau (FPIB) as a self- regulating professional body overseeing all functions of grading and grading regulation. The FPIB would establish standard grading rules to facilitate grading and inspection, improve claim handling and minimize fraudulent practices. The FPIB would be established by April 30, 1984 (Schedule 5, para. B 2 (b) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). Necessary consultant services for the proper estab- lishment of FPIB and technical assistance to help manage this new institution and train staff are included in the proposed TA Project (Section 3.02, the draft Development Credit Agreement for TA Project). 72. Foreign Exchange Availability. The present Government policy allows timber exporters to retain 20 percent of export proceeds to be used for impor- tation of spare parts and materials, which has helped to obviate the need to apply for normal import licenses to procure recurrent imports. In practice, however, there were considerable procedural delays due to the requirement to obtain specific approval from the Ministries of Trade and Finance and the Bank of Ghana before the exporter could utilize the funds. The Government has recently streamlined the procedures and now allows all items judged to be necessary for the exporters' work to be included in the automatic import BEST COPY AVAILABLE - 29 - license acquisition. This is an improvement over the previous system under which the utilization of the funds was limited to the import of urgently needed spare parts and consumables. A proposal on further streamlining procedures would be reviewed by IDA by March 31, 1984 and the recommendations of such review would be carried out by June 30, 1984 (Schedule 5, para. B 2 (e) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). 73. State-owned Companies. With one or two exceptions, the large state- owned timber companies suffer from management weaknesses and under-capitali- zation and their rehabilitation would require restructuring in the ownership and management of the companies. Given the potential of the state-owned companies in Ghana's timber exports, a study would be carried out to examine the viability and alternative strategies for the future of the state-owned companies including the possibility of privatization and management contracts. The study which would be financed under the proposed TA Project would be completed by September 30, 1984. Government would review the results of the study with IDA and adopt alternative strategies for these companies before December 31, 1984 (Schedule 5, para. B 2 (c) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). In order to optimize the utilization of forest resources there is a need to rationalize the allocation of concessions. Government would, with technical assistance provided under the proposed TA Project, review with IDA concession allocations by June 30, 1985 with a view to cancelling those concessions which are uneconomic and reallocating them to other producers, with priority given to export producers. The Government action on the reallocation of the conces- sions would be completed by December 31, 1985 (Schedule 5, para. B 2 (d) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). C - The Mining Sector General 74. Ghana's mineral industry is the second most important foreign exchange earner after cocoa, with mineral exports accounting for about 15 percent of the country's foreign exchange earnings. The sector has a signifi- cant impact on communication, power and transportation demands, and provides education and social services throughout the country. Although a complete assessment of Ghana's mineral wealth is impossible because of the low level of exploration carried out so far, the country is well endowed with mineral resources. In addition to gold which is by far the most important mineral providing nearly 90 percent of total mineral exports and employing over 16,000 people, diamonds, manganese and bauxite are the major minerals produced for exports. Diamonds of industrial quality have been extracted from alluvials in the Akwatia area in the Eastern province since the 1920's. However, produc- tion has been declining due to the depletion of existing reserves and the existing low price of industrial diamonds. Manganese ore reserves have been estimated at 20 million tons in the Nsuta mine in the Western region, where an oxidization plant is being constructed to process about 400,000 tons of BEST COpy jAyrBLE - 30 - carbon-based ores annually. Bauxite has been mined since 1943 in Awaso in the Western region, and reserves are estimated at 16 million tons. Increased production of bauxite has been constrained by the inadequate rail capacity on which shipment of bauxite has to depend. Structure of Gold Mining 75. The country's known deposits of old, with proven reserves of about 5 million oz, are in the Ashanti Region (at Obuasi and Dunkwa) and in the Western Region (Tarkwa and Prestea). Gold is produced by two companies: Ashanti Goldfields Corporation (AGC), a joint venture between Government and Lonrho (U.K.) which operates an underground mine at Obuasi, and the State Gold Mining Corporation (SGMC), a wholly Government-owned company, which operates two underground mines (at Tarkwa and Prestea) and an alluvial dredging mine (at Dunkwa). The SGMC was created in 1961 to take over the ownership of several gold mines which were about to be closed down by their private owners who were operating at a loss due to low gold prices. The SGMC decided to continue operation of the mines and maintained the existing workforce of about 8,600 workers despite loss of productivity and overall efficiency. At present about 65 percent of Ghana's gold production comes from AGC while the SGMC is producing the balance. Sector Issues and Constraints 76. Ghana's gold production has steadily declined for a number of years and the decline was most marked during the last decade when total gold output decreased from 740,000 oz in 1970 to less than 360,000 o in 1980. Major factors contributing to the decline were: (a) erosion in the finances of the mining companies resulting from the grossly distorted exchange rate regime in the past and the spiralling inflation which have critically affected the financial viability of the companies; (b) lack of management autonomy which has not permitted operating the individual mines of SGMC as commercial enti- ties, resulting in lack of definition of responsibilities and performance targets and inadequate mine planning and financial control; (c) shortages of foreign exchange which have not permitted to meet recurrent imported inputs such as maintenance, spares, replacement equipment and necessary rehabilita- tion of existing mines and plant facilities; (d) progressive departure of most foreign management and technical personnel resulting in poor management and low productivity and high absenteeism of mine workers due to generally severe economic conditions; (e) the use of over-aged production equipment in opera- tion with low productivity, health and safety standards; and (f) lack of financing necessary to explore promising deposits and to develop new mines. Generally, the erosion caused by overvalued exchange rates and inadequate retention of foreign exchange from exports have led to rapid decapitalization. Government Strategy and Rehabilitation Program 77. Ghana's gold subsector has the potential to significantly increase its role as a major foreign exchange earner for the country owing to the relatively high grade of its known deposits, and vast gold mineralization including relatively shallow alluvial type deposits. Als,, gold mining can achieve high profitability due to present gold prices, the recent devaluation BEST COPY AVAILABLE - 31 - of cedi, and the structure of mineralization quite favorable for mining. Although gold mining in Ghana has been on the decline for about two decades, it can be resuscitated to its potential if satisfactory management autonomy and necessary financial and technical assistance are provided. The Government has recognized the serious economic implications of the decline of gold pro- duction in Ghana and, as an important element of its economic recovery program, has prepared a short-term program for rehabilitation of the SGMC and AGC mines. The program for SGMC aims at restoring SGMC's gold production to the level achieved in 1979 by increasing output from the present 72,000 oz to 165,000 os per annum over a three-year period through rehabilitation of under- ground facilities, mining equipment, dredges, processing mills and provision of spares and consumables. Specific production targets for each of the SGMC mines and rehabilitation input requirements are shown in Annex IV of this President's Report. The mining component of this proposed project would provide foreign exchange to support the SGMC rehabilitation program. A program for increased gold production from the AGC mine has also been prepared which envisages increasing output from 250,000 oz annually at present to about 350,000 oz over a period of four years. It is expected that this investment program would be implemented with commercial sources of financing and IFC's participation is currently under active consideration. The future of the mining industry in Ghana will depend to a considerable extent on the invest- ment of new capital. In order to promote foreign investment and ensure that investment conditions in the country as a whole and in the mining industry in particular are comparable or better than in other countries, an investment code was promulgated in 1981. Sectoral Policy and Institutional Reforms 78. In order to address major sectoral issues which have constrained efficient operation of the SGMC, the Government has in principle agreed to implement the following policy reforms in conjunction with ERP and the proposed TA Project. 79. Foreign Exchange Retention. In order to ensure that SGMC does not have to rely on normal Government foreign exchange allocation to meet its recurrent imported inputs and to enable SGMC to meet part of the financial requirement for its rehabilitation out of its own resources, the foreign exchange retention by the SGMC has been increased from the previous 20 percent to 35 percent of its export sales. At the current level of production this will allow SGMC to retain about $10 million per annum, which will enable the SGMC to meet its recurrent import needs from its own resources. The Govern- ment and the SGMC would maintain the policies and procedures for the renten- tion funds satisfactory to IDA (Schedule 5. para. B3 (c) of both the draft Development Credit Agreement and the draft Special Fund Credit Areement). 80. Management Autonomy. The SGMC would be given full management autonomy and its mines would be allowed to run as a commercial entity under a management contract. Given the presently weak institutional capability of the SGMC, the Government has agreed to engage an internationally experienced mining management company to run the SGMC and train the local counterpart staff. It is envisaged that a total of about 60 man-years of such managerial and technical personnel would be financed under the proposed TA project. The BEST COPY AVAILABLE - 32 - progress under the management contract would be monitored periodically by the Government and IDA. The necessary planning and preparation work required before the Government would be in a position to invite management contract proposals from international mining companies has already started with funds provided under a Project Preparation Facility advance. The appointment of an international mining management company and signing of a management contract satisfactory to IDA would be a condition of disbursement of the Credit for the mining component with an exception of $5 million which would be needed initially to meet urgent import requirements (Schedule 1, para. 2 (f) and para. 2 (d), respectively of the draft Development Credit Agreement and the draft Special Fund Credit Agreement). 81. Work Incentive Scheme. There is an urgent need to improve the living conditivn of the mine workers as the scarcity of food has caused serious absenteeism and low productivity among mine workers and it is evident that the rehabilitation of the mines would be impossible without improvements in the food supply situation. The SGMC would introduce a plan of action to improve productivity in its mines specifying, inter alia, a work incentive scheme including direct provision of food and special bonuses to reward higher productivity. Such a scheme would be carried out before December 31, 1984 (Schedule 5, para. B 3 (a), of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). 82. SGMC's Finances. The Government recognizes that the poor financial performance of the SGMC has been partially due to the grossly distorted exchange rate regime in the past. While the recent devaluation has signifi- cantly corrected the distortion and the new exchange rate should initially be sufficient to restore the viability of the company, its effects will have to be carefully assessed once the cost-price relationships in the economy following the measure have settled down. In order to enable the restructured SGMC to start with an improved financial position, the Government has agreed to convert SGMC's outstanding debts into a long-term loan with terms and conditions satisfactory to IDA by June 30, 1984. In addition, the cost of production of SGMC mines and the profitability of the company would be reviewed not later than December 31, 1984 and thereafter annually (Schedule 5, para. B3 (b) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). PART IV - THE PROJECT Background 83. The proposed Export Rehabilitation Project (ERP) was identified early in 1981 jointly by the Government and the Bank. It had been designed as the Bank's primary response to an economic recovery program then under preparation which the Government would implement with tne support of an IMF standby arrangement. Originally the ERP was appraised by a Bank mission in August 1981. Further processing of the project had, however, been held in abeyance due to the delay by the Government to act on the economic recovery program and the change of Government in December 1981. Early in 1983 a delegation of the BEST COPY AVAILABLE - 33 - new Government led by the Secretary of Finance reached an understanding with the IMF on major elements of an economic recovery program to be supported under a Fund standby arrangement and approached the Bank with a request to reactivate the ERP. Given Ghana's urgent need for quick-disbursing assist- ance, the Bank agreed to a two-stage approach under which the Bank would first respond to the recovery program with a Reconstruction Import Credit (RIC) and then follow up with the ERP. While the RIC aims at helping the authorities to cope with immediate problems of introducing macroeconomic reform measures with quick-disbursing support to the agriculture and transport sectors, the ERP would have the objective of sustaining the momentum by facilitating the supply response from the export sector and thus setting in motion the recovery process. A $40 million Credit for the RIC was approved by the Executive Directors on June 28, 1983 and is making satisfactory progress. The RIC is expected to be fully disbursed by end-June 1984. 84. Following the Government's announcement of the economic recovery program late April 1983, the ERP was reappraised by a Bank mission which visited Ghana between May 16 and June 6. The negotiations of the ERP took place in Washington between November 7 and November 14, 1983 with a Government delegation led by Mr. J. G. Renner, Secretary for Lands and Natural Resources, and included representatives from the Ministry of Lands and Natural Resources, SGMC and GCMB. There is no separate staff appraisal report for the proposed Credit. A Credit and Project Summary is presented at the front of this report and supplementary data and information are contained in Annexes III, IV, V and VI. Project Objectives 85. The primary objective of the proposed project is to support and sustain the Government's economic recovery program by strengthening the country's foreign exchange earning capacity through the rehabilitation of the export sector. The Government's recovery program assigns the highest priority to reversing declining production in the export industries, in particular, cocoa, gold, and timber exports, which together account for almost 90 percent of the country's foreign exchange earnings. In order for these export industries to be able to respond effectively to the recently announced macroeconomic policy measures (paras. 20 to 23 above), the present severe shortage of imported inputs should be eased through quick-disbursing foreign exchange to the sector, coupled with improved performance and retention. Specifically, the proposed project seeks to increase export production of cocoa, gold mining and timber industries by carrying out most urgent short- term rehabilitation needs and improving utilization of the existing capacity through provision of spare parts, materials and equipment. The project also seeks to address a number of policy and institutional issues which have adversely affected output of the export sector and to strengthen the institu- tional capability of various export sector organizations. In parallel with the proposed Credit, approximately 120 man-years of technical assistance would be provided to strengthen the institutional capability of the cocoa, gold mining and timber sectors under the proposed Export Rehabilitation Technical Assistance Project as described in the accompanying President's Report. BEST COPY AVAILABLE - 34 - Project Description 86. The proposed project would include: (a) providing foreign exchange for importation of material inputs (spare parts, materials, and equipment) required for the rehabilitation of the cocoa, gold mining, and timber induat- ries as well as the cargo handling facilities at the ports of Takoradi and Tema; and (b) carrying out reforms in the policy and institutional framework of the export sector to address the present policy constraints and short- comings as discussed in Part III of this report. 87. Specifically, the proposed project would finance the two-year (1984 and 1985) import requirements for the following rehabilitation activities. Detailed requirements of imported inputs are set out in Annex IV. (i) Cocoa Sector - The rehabilitation program would include improving GCMB's storage facilities, workshops and transport capacity and expanding capsid control and input distribution activities, con- centrating on areas not infected with SSVD. To support this program, the Credit would provide essential inputs (insecticides and sprayers) for cocoa farmers, and vehicles, workshop equipment and building materials for GCMB; (ii) Timber Sector - Logging and mechanical wood-processing facilities of about 24 privately-owned timber companies and two state-owned com- panies (Mim and TVLC) would be rehabilitated and their timber trans- port capacity improved with provision of spare parts, materials and balancing equipment; (iii) Gold Mining - The program would include rehabilitation and mainten- ance of three state-owned gold mines (Prestea, Tarkwa and Dunkwa) of SGMC with emphasis on repair and overhaul of underground ore extrac- tion and haulage facilities and equipment, rehabilitation and modifi- cations to increase the capacity of the processing mills and repair of the dredges through provision of spare parts, equipment and con- sumables; and (iv) Ports - Improvement works at the ports of Takoradi and Tema would include rehabilitation of the cargo handling equipment, provision of floating craft and improvements of the existing port superstructure to enable the ports to handle cocoa and timber traffic more effi- ciently. Due to lack of maintenance and the nonavailability of spare parts in recent years, the present loading rates for exports in the Ghana ports is very low, resulting in high shipping costs which inhibit exports. While the proposed ERP financing (US$4.8 million) would arrest further deterioration and make some improvement, an additional amount of about US$10.0 million would be urgently needed during 1984 and 1985 to make a more significant impact on port efficiency. The IDA has identified these additional needs which cover tugs, barges, cargo-handling equipment like tractors, trailers and forklift trucks, dredging and some civil engineering works (Annex IV, Page 7). Government is making efforts to secure cofinancing for these items. To the extent these efforts fail, the IDA would consider financing some of these items under a transport BEST COPY AVAILABLE - 35 - rehabilitation project covering both ports and highways, presently under preparation. Estimated Cost and Financing 88. The total foreign exchange requirement for the two-year rehabilJta- tion program as described in para. 87 above is estimated at approximately $285 million in mid-1983 prices, consisting of $130 million for cocoa, $80 million for gold, $60 million for timber and $15 million for ports. These estimates include both capital costs of rehabilitation and improvement and the i.ecurrent requirements of imported inputs. The proposed Credit would provide $76 million, of which US$38 million equivalent would be from the Special Fund, representing about 27 percent of total foreign exchange requirement. Ghana is expected to finance about half (8143 million) of the total financing require- ment from foreign exchange generated from the respective export industries. The balance of about $66 million would need to be provided through other external financing, both official and private sources. The Government has embarked on a major effort to secure additional financing from other donors to support this project, and a number of donors have shovn considerable interest in cofinancing this project during the Consultative Group meeting held in Paris in November, 1983. In antic;pation of such cofinancing, a standard cross default clause has been included in the draft Credit Agreoments (Section 4.01(f) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). Even in the unlikely case of cofinancing not materi- alizing, financing from the IDA and the Government alone would make the project viable but the scope of the program to be financed under the project would be reduced proportionately. However, because of the importance of technical assistance especially in view of training and institutional building aspects of such assistance, the Export Rehabilitation Technical Assistance Project would be fully implemented even if the scope of the program under this proposed project is reduced. Credit Allocation 89. The sectoral foreign exchange requirements for short-term rehabilita- tion, proposed allocations under the proposed Credit, the agencies responsible for implementation and the beneficiaries are summarized in Table 2 below. TABLE 2: SECTORAL ALLOCATION OF ERP (us$ millions) Two-Year Allocation Agency Responsible Requirements under the ERP for Implementation Beneficiaries Cocoa 130.0 23.9 GCMB Cocoa farmers Gold Mining 1/ 80.0 23.6 SGMC SG4C Timber 60.0 23.7 NIB Timber companies Ports 15.0 4.8 GPA Cocoa farmers, timber companies TOTAL 285.0 76.0 and other exporters and importers. 1/ State Gold Mining Corporation (SGMC) only. BEST COPY AVAILABLE -36 - Project Implementation 90. The project would be implemented by the respective sector agencies: the Ghana Cocoa Marketing Board (GCXB) with respect to the cocoa component; the National Investment Bank (NIB) in collaboration with the Ministry of Lands and Natural Resources for the timber component; the State Gold Mining Cor- poration (SGMC) for the gold mining component; and the Ghana Port Authority (GPA) with respect to the port component. A substantial (about 120 man-years) amount of technical assistance would be provided under the proposed Technical Assistance Project to ensure adequate management capability. US$52.3 million equivalent of the propoeod Credit for the coooa, gold mining and port com- ponents would be onlent to GCMS, SGMC and GPA at an interest rate of 11.6 percent per annum with a repayment period of 15 years after 5 years of grace. US$23.7 million equivalent would be made available to NIB for purchase of foreign exchange by timber companies on terms and conditions satisfactory to IDA to carry out the timber component of the project. Execution of subsidiary agreements between the Borrower and the respective implementing agencies satisfactory to the IDA would be a coMition of effectiveness of the proposed Credit (Section 5.01(b) and () of the draft Development Credit Agreement and Section 5.01(b) and (d) of the draft Special Fund Credit Agreement). Proceeds of the Credit for the Technical Assistance project would be made available to the respective implementing agencies as loans with a repayment period of 15 years after 5 years of grace. Such loans would be made on an interest free basis until such time as the respective implementing agencies become financially capable of paying appropriate interest on the loans (Section 3.01(c), (d) and (e) of the draft Development Credit Agreement for the TA project). The financial situation of the agencies would be reviewed annually by the Government and IDA. In order to enable the restruc- tured GCM and SCMC to start with an improved financial position, the Govern- ment has agreed to convert the outstanding debts of these agencies into long- term loans with terms and conditions satisfactory to IDA (Schedule 5, paras. B 1(a) and B 3(a) of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). 91. In order to provide interministerial coordination and policy guidance on all matters related to the project, and to monitor its progress, an Inter- ministerial Export Rehabilitation Committee has been established, headed by the PNDC Coordinating Secretary and consisting further of the Secretaries for Finance and Economic Planning, Lands and Natural Resouz as, Transport and Communication, Governor of the Bank of Ghana, Chief Executive of the GCM and the Chairman of the National Policy Implementation and Monitoring Committee. A project coordinating unit has been established in the Office of the PNDC L;oordinating Secretary to ensure an early start-up of the project activities and to coordinate with the project implementing agencieL. In order to ensure an early start-up of the project, the Ministry of Trade has issued 50 percent of the import licenses required for imports under the ctooa and timber cectors of the project. Upon completion by the consultants of the detailed procure- ment lists for the gold mining and ports sectors, the Ministry of Trade would issue necessary import licenses for these sectors promptly. The remaining import licenses necessary for the project implementation would be issued in a timely manner (Section 3.07 of both the draft Development Credit Agieement and the Special Fund Credit Agreement). BEST COPY AVAILABLE - 37 - 92. To be eligible for assistance under the timber component of the project, an application must: (a) be in respect of an ongoing viable enter- prise; (b) relate exclusively to the short-term rehabilitation of firms; and (c) be capable of generating foreign exchange earnings within six months after delivery of equipment and thereafter be capable of generating foreign exchange earnings of at least 30 percent of the credit allocation per annum. In addi- tion, for the state-owned timber companies (i.e., Kim and TYLC) to participate in the project, they would have to continue to employ technical assistance for the duration of the project and five man-years of such technical assistance would be financed under the proposed Technical Assistance project. The applicant firms would need to obtain a commercial bank guarantee that counter- part cedi funds would be available to finance imported items as well as to cover required working capital. A Technical Evaluation Committee would be established in the NIB to review applications and ensure that the above- mentioned criteria are applied. NIB would also be responsible for monitoring progress of the timber component of the project. NIB would be paid a nominal administration fee (the Schedule, para. 9, the draft Project Agreement). In order to facilitate disbursements under this credit component, a special account would be established by NIB with a commercial bank on terms and conditions satisfactory to the Association (Section 2.07, the draft Project Agreement). An amount of US$3 million would be withdrawn by the Government and deposited into the special account upon effectiveness of the Credit. On receipt of satisfactory evidence that expenditures financed out of the special account were eligible for financing, the special account would be replenished by IDA through further disbursements. The establishment of the special account would be a condition of Credit effectiveness (Section 5.01 (d) and (e) respectively of the draft Development Credit Agreement and the draft Special Fund Credit Agreement). The detailed implementation mechanism for the timber component is shown in Annex V of this report. 93. Items for the cocoa sector under the project (Annex IV, Page 3) are based on the Cocoa III Prefeasibility Study and the UNDP Technical Assistance Project for GCMB for which the Bank Group is the executing agency. In the mining sector the SGMC has engaged the services of Rio Tinto Zinc Consultants (RTZ) with financing provided under a Project Preparation Facility advance to help !'C in finalizing a detailed list of items to be procured under the proposed project as well as specifications, procurement schedule and implemen- tation plan. Similarly in the ports sector, even though the list of items to be procured has been agreed between the Government and the IDA, the list needs to be further refined and the specifications and installation schedules provided with the help of port consultants to be engaged by GPA. Some of the equipment and spare parts in the ports sector (approximate cost US$1.8 million) to be financed by the Credit are intended for use by the Ghana Cargo Handling Company (GCHC) which is a public sector company providing compiementary port services. Details of these components will be finalised when the procurement lists and schedules, as noted above, are agreed with IDA. GPA, as executing agency for the ports sector, will procure these items and pass them to GCHC. The value of these items will be treated as Govern- ment's equity contribution to GCHC, with necessary adjustments being made in GPA's accounts. Under the relevant subsidiary agreement, Government will ensure that GCHC will use the equipment and materials provided efficiently to improve port operations in cooperation with GHA. BEST COPY AVAILABLE - 38 - Procurement and Disbursement 94. For the cocoa sector component of the project, contracts for goods costing $100,000 equivalent or more would be procured through ICB according to the Bank Guidelines. Goods costing less than $100,000 equivalent but in the aggregate not to exceed $2 million equivalent, may be procured through negotiated purchases after obtaining at least three quotations from estab- lished and reliable suppliers. For the timber component, equipment and vehicles costing $500,000 equivalent and more, and spare parts costing $250,000 equivalent and more, would be procured through ICB according to the Bank Guidelines. Equipment and vehicles and spare parts costing less than the above amounts, respectively, may be procured through negotiated purchases after obtaining at least three quotations from established and reliable suppliers. For the gold mining component, goods costing $300,000 equivalent or more would be procured through ICB according to the Bank Guidelines. Contracts for goods costing less than $300,000 equivalent but up to the aggregate amount of $3 million or contracts for goods which can be supplied only by a limited number of suppliers, may be financed through direct invitation to bid issued to such suppliers; the aggregate amount of these two types of contracts shall not exceed $10 million. For the ports sector, contracts for goods costing $100,000 equivalent or more should be procured through ICB according to the Bank Guidelines. Contracts costing less than $100,000 equivalent, but not exceeeing $500,000 equivalent in aggregate, may be purchased through negotiated purchases after obtaining at least three quotations from established and reliable suppliers. Proprietary items under the project (including proprietary items for the gold mining sector up to the aggregate amount of $10 million equivalent) may be procured on a negotiated basis on terms and conditions satisfactory to IDA. Contracts of less than $10,000 equivalent would not be eligible for financing under the Credit. The Credit would be disbursed against 100 percent of foreign expenditures against full documentation. The Credit is expected to be fully disbursed by June 30, 1966. 95. Proceeds provided under the IDA Special Fund Credit for the project may be used to finance expenditures for goods produced in, or services supplied from, any of the following countries: a) any Part II member of the Association and b) those countries who at the time of signing the Credit Agreement had notified or advised the Administrator in writing that they intended to make a Special Fund Contribution in a minimum amount conforming with paragraph 4 of the IDA Special Fund Resolution, or c) which had notified or advised the Association in writing that they intended to make a Special Fund Contribution in such minimum amount to the FY84 Account and had advised the Association in writing that such Special Contribution was to be treated in the same manner as a Special Fund Contribution for purposes of any future adjustment of the voting rights of the members of the Association. Mid-term Review 96. The proposed Credit including US$38.0 million equivalent from the Special Fund would be disbursed in two tranches: US$38 million of the proposed Credit would be available for disbursement after the Credit is declared effec- tive; the remaining US$38 million would be available for disbursement after review of performance in carrying out specific undertakings under the project (as set out in Schedule 4 of both the draft Development Credit Agreement and BEST COPY AVAILABLE - 39 - the draft Special Fund Credit Agreement). The review would take place end- December 1984 (Section 3.04 of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). The release of the second tranche would be subject to satisfactory review by IDA. The review would, in rarti- cular, examine the following performance criteria: (a) size and composition of the FY85 Development Budget and the Foreign Exchange Budget and their con- sistency with the medium-term investment program; (b) maintenance of an adequate level of cocoa producer prices; (c) reduction in staffing of the GCKB; (d) formulation of alternative strategies for the state-owned timber companies; (e) achievement of managerial and financial targets set for the SGMC under the management contract; and (f) progress in appointment of tech- nical assistance personnel under the proposed Technical Assistance Project (Schedule 4 of both the draft Development Credit Agreement and the draft Special Fund Credit Agreement). Accounts, Audit and Evaluation 97. The project implementing agencies (i.e., GCMB, NIB, SGMC and GPA) would maintain records and separate accounts in respect of the respective sector components and have the accounts and financial statements audited each fiscal year by independent auditors acceptable to the Association. The audited accounts and the audit reports would be furnished to the Associaton not later than four months after the end of the fiscal year. The project implementing agencies would also maintain records adequate to record and monitor the progress of the respective sector components and prepare and furnish quarterly progress reports to the Association. There would be a quarterly review of progress of the project by the Interministerial Export Rehabilitation Committee, which wculd also prepare and submit to the Association within six months of project completion, a completion report on the costs and benefits resulting from the project. Counterpart Funds 98. Local currency funds generated by the sale of foreign exchange provided by the proposed Credit would be deposited into a special counterpart funds account to be established in the Bank of Ghana. An assurance has been obtained at negotiations that such counterpart funds would be utilized to finance part of the recurrent or capital cost of priority projects included in the Government's Development Budget (Section 3.03 of both the draft Develop- ment Credit Agreement and the draft Special Fund Credit Agreement). Benefits 99. Two sets of benefits are expected to flow from this proposed project: (i) net incremental foreign exchange earnings of about US$42 million per annum from the cocoa, gold mining, and timber subsectors, and (ii) strengthening of domestic institutions to sustain the export expansion effort in the post- project period; the concurrent Technical Assistance Project has been designed to ensure that all relevant institutions in the four subsectors are suffi- ciently strengthened that a reversal in the export expansion would be unlikely. BEST COPY AVAILABLE - 40 - 100. The estimated incremental foreign exchange earnings represent conservative estimates. In the cocoa subsector the projet would finance the rehabilitation and inputs requirements of about 300,000 acres, and an incremental annual production of about 12,000 tons has been estimated; this would result in net foreign exchange earnings of about US$12 million per annum. This is a conservative estimate since it does not take account of the improvements in the quality of the cocoa from the better evacuation and storage faciliLties financed by the project. In the timber subsector, total export production is estimated to increase from 110,000 m3 to about 450,000 m3 per annum, resulting in net foreign exchange earnings of about USS10 million per annum. In the gold mining sector, the SGMC mines are expected to increase their annual gold output from about 72,000 oz to about 165,000 oz over a three-year period as a result of mine rehabilitation under the project. Net incremental foreign exchange earnings from the gold mining component would amount to about US$20 million per annum. The investment for improving the capacities of the ports of Takoradi and Tema are complementary for facili- tating the export expansion effort, particularly in cocoa and timber sectors, and would result in savings in operating costs of exporters and demurrage charges as well as speeding up delivery of Ghanaian exports in the foreign markets. It is not possible to accurately calculate the rates of return for each component of the project. However, on the basis of foreign exchange costs and benefits, and assuming that the total local cost of the project would be about 20 percent of the total foreign exchange cost, the economic rate of return for the entire project is estimated to be approximately 20 percent, and even with extreme assumptions should not be less than 15 percent. Although these are crude estimates, these calculations are useful in defining the downside risks, and the substantial human resource input through the Technical Assistance Project has been designed to minimize these risks in the immediate future while creating the required capacity in the relevant domestic institutions to sustain the export promotion drive over time. Risks 101. In spite of the above, the project is not free of risks. This residual risk is to be expected considering the gargantuan nature of the tasks: (i) to reverse the rapidly declining production through asset rehabili- tation, new management structures, adequate producer and staff incentives, and new investments; (ii) to convert this additional production into foreign exchange through improved domestic logistics and world market penetration; (iii) to create new and streamlined institutions; (iv) to develop credibility in the stability of the policies underlying the Economic Recovery Program; and (v) to carry out all these activities in a coordinated fashion. The other residual risk would be that the Government may be unable to implement the economic recovery program or that it may modify and alter it in midstream or take other policy actions that may counteract the attainment of its main objectives. So far the Government has demonstrated its commitment to the recovery program by fully implementing a number of drastic policy reform measures in spite of severe economic and political difficulties. A mid-term review would take place in December 1984 to ascertain continued progress under the ERP and the release of the second tranche of the proposed Credit would be contingent on satisfactory progress. BEST COPY AVAILABLE - 41 - 102. There would also be a number of project-specific risks. The poten- tial risks of the cocoa component mainly center around the political and practical problems of large-scale staff reduction. The Government is strongly committed to reducing operating costs of GCMB and is expected to design acceptable adjustment assistance programs for displaced workers. The reduc- tion program would be phased over five years to ease the transition. The principal risk of the timber component would be that commercial banks may not be willing to increase lending to timber companies because many of them had to operate on substantial overdrafts in the past. With the recent adjustment in the exchange rate and the institutional reforms proposed under the project, the finances of export timber companies are expected to improve. The Bank of Ghana has indicated that sufficient cedi funds would be available for the purchase of inputs and if necessary it would introduce a "pool" system to ensure a timely supply of cedis. PART V - LEGAL INSTRUMENTS AND AUTHORITY 103. The draft Development Credit Agreement between the Republic of Ghana and the Association, the draft Special Fund Credit Agreement between the Republic of Ghana and the Association acting as the Administrator for the Special Fund, and the draft Project Agreement between the Association and the Administrator on one hand, and GCMB, NIB, SGMC and GPA on the other hand and th- Recommendation of the Committee provided for in Article V, Section 1 (d) o. the Articles of Agreement of the Association are being distributed to the Executive Directors separately. 104. In addition to the special features of the Development Credit Agree- ment, the Special Fund Credit Agreement and Project Agreement which are referred to in the text and summarized in Section III of Annex III of this Report, the conditions of the effectiveness of the Development Credit Agree- ment and the Special Fund Credit Agreement are: (a) execution of the Develop- ment Credit Agreement for the Export Rehabilitation Technical Assistance Project; (b) execution of the Project Agreement between the Association and the Administrator and the project implementing agencies; (c) execution of subsidiary agreements between the Republic of Ghana and the project imple- menting agencies; and (d) the establishment of the special account mentioned in para. 92 above. Conditions of disbursement would be: (a) SGEC to enter into a management contract with an international mining company to manage SGMC mines except for expenditures not exceeding $5 million; (b) a successful review by IDA of performance in carrying out specific undertakings under the project at the end of December 1984 for disbursement of the second tranche of the Credit; and (c) completion of restructuring of GCMB and putting into effect a revised cocoa producer price. 105. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association. BEST COPY AVAILABLE - 42 - PART VI - RECOMMENDATION 106. I recommend that the Executive Directors approve the proposed deve- lopment credit. A.W. Clausen President by Moeen A. Qureshi Attachments Washington, D.C. December 12, 1983 - 43 - Page 1 of 5 TABLE A GHANA - SOCIAL INDICATORS DATA SHEET GHANA REPERENCE GROUPS (tEIGHTED AVERAGES) a HDST (MOST RECENT ESTIMATE) /b 197/ l b RECENT b L LOil TNCOHE HEDDLF CIE 9 70- ESTUIAT APRICA S. OP SAHARA AFRICA %. OP SAHARA Ann (THOUSAND SQ. 0o TOTAL 238.5 233.5 233.5 ACRICITURAL 65.4 61. 62.1 CP PER CAr:TA (118) 190.0 260.0 400.0 254.6 1147.9 ENHEAC COMNION PER CAPITA (KILOGRAMS OF COAL EQuIVALENT) 104.0 266.0 268.0 79.8 724.2 P0PU.ATION AM VITAL STATISTICS POPULATION,ID-YEAR (THOUSANDS) 6804.0 3614.0 11830.0 URBAN POPULATION (2 OF TOTAL) 23.3 29.1 36.6 19.5 28. POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILL) 24.2 STATIONARY POPULATION (KILL) 85.4 YEAk STATIONARY POP. REACHED 2135 POPULATION TiENSITY PER SQ. EM. 28.5 36.1 48.2 29.5 56.5 PER SQ. Ek. ACR. LAND 104.0 140.2 134.6 94.1 131.8 POPULATION AGE STRUCTURE (2) 0-14 YRS 44.5 45.8 46.8 45.0 45.9 15-64 YRS 52.9 51.6 50.5 52.1 51.2 65 AND ABOVE 2.6 2.7 2.7 2.9 2.8 PoPULATION cROtrli RATE (2) TOTAL 4.4 2.6 2.9 2.8 2.8 URBAN 9.2 4.6 5.0 6.2 5.3 CRUDE BIRTH RATE (PER THDOS) 50.2 50.2 49.3 47.9 47.6 CRUDE DEATH RATE (PER THOUS) 20.3 16.9 13.4 19.2 15.2 CROSS REPRODUCTION RATE 3.4 3.4 3.4 3.2 3.2 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUS) .. 8.3 33.5/c USERS (Z OF MARRIED WOMEN) .. 1.5 4.0 .. I0( AMW NUTRITON INDEX OF FOOD PROD. PER CAPITA (1969-71-100) _ 93.0 101.0 72.0 87.8 95.7 PER CAPITA SUPPLI OF CALORIES (2 OF REQUIREMENTS) 92.0 98.0 88.0 88.0 97.1 PROTEINS (GLANS PER DAY) 43.0 51.0 44.0 51.2 56.0 OF WHICH ANIMAL AND PULSE 13.0 17.0 15.0/c 18.1 17.2 Cll[.D (ACES 1-4) DEATH RATE 30.6 24.6 18.9 25.7 23.6 1m LIFE EXPECT. AT BIRTH (YEARS) 44.8 69.9 54.5 47.4 51.9 Lu INFANT MORT. RATE (PER THOUS) 142.9 121.6 101.0 126.5 117.6 ACCESS TO SAFE WATER (%POP) TOTAL .. 35.0 35.0/e 24.7 25.4 URBAN .. 86.0 6.oW 56.8 70.5 RURAL .. 14.0 16.07 18.3 12.3 ACCESS TO EXCRETA DISPOSAL (2 OF POPULATION) TOTAL .. 55.0 56.0/e 28.1 URBAN .. 92.0 95.07 65.7 RURAL .. 4D.0 A0.07 21.9 POPULATION PER PHYSICIAN 21600.0 12910.0/ 7430.0 27420.6 12181.6 POP. PER NURSING PERSoN 5430.0/f 1070.04 780.0 3456.2 2292.0 POP. PER HOSPITAL BED TOTAL 1290.0 760.0 660.0/c 1183.2 1075.4 URBAN 300.0/f 770.0 830.Or 330.6 402.3 RURAL 47590.07f 890.0 730.0Fe 3177.5 3926.7 ADMISSIONS PER HOSPITAL BED .. HOUSING AVERASE SIZE OF HOUSEHOLD TOTAL .. 4.7 URBAN .. RURAL .. AVERAGE No. OF PERSONSIROCH TOTAL . URBAN .. RURAL .. ACCESS TO ELECT. (2 OF D1L.LINCS) TOTAL .. .. .. .. .. URBAN .. RURAL .. ANNEX I Page 2 of 5 TABLE 3A CARA - SOCIAL INDICATORS DATA SHEET cumHA REFERENCE GROUPS (WEIGHTED AVERAGES) HOST (1OST RECENT ESTDIATE)A RECENT Lb, L INCOME MIDDITCOlN E 196 1970 ESTIMATWJ AFRICA S. OF SAMABA AFRICA U. OF SAHARA EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 36.0 64.0 69.0 63.9 97.2 MALE 32.0 73.0 77.0 73.6 103.1 FEtXLF. 25.0 54.0 60.0 51.6 68.5 SECONDARY: TOTa. 5.0 14.0 36.0 12.5 17.2 MALE 9.0 21.0 44.4 16.7 23.5 FEMALE 3.0 8.0 27.0 8.1 14.2 VOCATIONAL (2 OF SECONDARY) 12.6 23.3 3.5/d 7.3 * 5.2 PUPIL-TEACHER RATIO PRIMARY 31.0 30.0 27.0/d 66.4 42.9 SECONDARY 16.0 17.0 19.0h 25.1 23.7 ADULT LITERACY RATE (2) 27.0/h 30.2 .. 36.5 37.1 CDUMPION PASSENGER CARS/THOUSAND POP 3.0 4.6 6.8/c 3.3 18.8 RADIO RECEIVERS/THOUSAND POP 42.7 81.6 162.6 45.3 97.8 TV RECEIVERS/THOUSAND POP 0.1/i 1.9 5.0 2.2 18.6 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 30.0 68.2 30.5 4.7 18.2 CINEMA ANNUAL ATTENDANCE/CAPITA 1.6 2.2 0.4 1.0 0.6 LAM PORCE TOTAL LABOR FORCE (THOUS) 2919.0 3421.n 4396.0 FEMALE (PERCENT) 42.6 42.1 41.1 34.5 36.1 AGRICULTURE (PERCENT) 64.0 S8.n 53.0 76.9 56.8 INDUSTRY (PERCENT) 14.0 17.0 20.0 9.8 17.5 0 PARTICIPATION RATE (PERCENT) amm TOTAL 42.9 39.7 37.2 40.9 37.0 KALE 50.0 46.6 44.0 53.0 47.1 ____ FEMALE 36.0 33.0 30.4 28.9 27.0 ECONOMIC DEPENDENCY RATIO 1.1 1.2 1.3 1.2 1.3 INCOgE DISTRIBUTION PERCENT OF PRIVATE INCOHE RECEIVED By HIGIEST 52 OF HOUSEHOLDS .. HICHEST 20% OF HOUSEHOLDS .. LOWEST 20Z 07 HOUSEHOLDS .. LOWEST 40? OF HOUSEHOLDS .. PDOEAT TAACET CROUPS ESTIMATED ABSOLUTE PORTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 307.0/d 165.9 534.2 RURAL .. .. i5o.07 87.4 255.9 ESTIMATED RELATIVE POVERTY INCOPE LEVEL (US$ PER CAPITA) URBAN .. .. 156.0/d 100.8 491.5 RURAL .. .. 130.07 64.6 188.1 ESTIMATED POP. BELOW ABSOLUTE POVERTY INCOME LEVEL (2) URBAN .. .. .. 39.5 RURAL .. .. .. 69.0 NOT AVAILABLE NOT APPLICABLE NOTES a The group averages for each indicator are population-weighted arithmtic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted. "Data for 1960 refer to any year between 1959 and 1961; -Data for 1970" between 1969 ad 1971; and data for "Most Recent Eatimte" between 1979 and 1981. /c 1977: /d 1978; /e 1975; /f 1962: f& Registered, not all practicing in the country; /h Age 6 and over; /i 1964; tl Public Schools only. 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Мlа11 •f!к 1i-рв[lме вк�вев[1м ■У лвд рва:илвl лlмсгlеlеР) и 411ulгввв п1 еи1 eqrlwlлt рт мвlиt Рги/дв в 1lвttd гвкв ef пвдlввl [вcllltlвв. hr вtвetвtlиL рГркв 19а[1. 19)tl, иМ 1flи дь[■. игlип bврцвИ lкlиlв УМрв Ргtкlрвl/lвгвгд 1wвlгвИ, в1д гrгвl hиРlиlв, lивl ег лгвl мврltвlв мд ввдlиl вУ rимlу иRвл. ргииrlди ае ver лтапlтгеп lркt.ll■r ывр/и1о .и lиtwr .ntP ид.г еивt. гв ес •n, _ - иг е ивМц - д■ п1 .W lr l1 1Мl1. 19)П. •N 1М1 [двlиlеи rг Nsв /и1 1W - тпиl иrУг вf вдьlв[1ем и ог dWlrrpв в[в. м в•1и в 1el вlТ [ы мувг в[ Мв. 11гыв 1о lлгип гевп[ of [вевl )- ыtlа е( пып и[еи1 ррlвеlопl вмt tn а мв • в •гив иг вlfк[ еиргвУlllу sf дви !р!!Ip иепi еив[гlиl [9п0. 197П, вМ 1%l Чев. Тгв в Ивв ef lовиыlд гвпи г 1rw-uold - ии1 rrЬвв впд ллl F.w1мlи ГrqL г_t_ом - д • еои ■св • в вгир • ч ив в гв • в! 9ктЧгв �л t и� о г!!U - Сиглnс ррlвем ргв1вг11аи ви Ьивд м 19р ввд [hвlr иtв wввlв. • Мвгдлг ог 1вдlвг ввf и и! вК Ьг 1к1вдМ Ч tо�рв в[1м г ви ••д и. ввд eh.1r игиllеr мд f.rtlllq [Ьв lrвввыlд 1ег ви[[веlевl ргрив. Гвtи. Рм1к[1ев ргввв[вгв [оГ мг[вllе! гвел еввРгlи of [hrw iвг в ивыr о/ мив г гппв - епtвl игtви вМ гчгвl вллflв l�lвУвг lегвlв вииlу llfo м[кlвкУ вt 61г[И lкгивlв! ulth юиs[гу в рг о ргии +вг гви п в лгв иеrр лвwпtИW сврlи bsw bьЛ. впд lвrlв 11lе ввреtиет вuHllв/вt вt 1)Л диlllМв, мрве[iл11. лввllсцв овсlвi гоrрглввввt в[мигr ввд гим. 7ы Мгвьигв for fвrcllle7 nи вlве 1rв- сУм lеиlв иипrрlМ Мг[в. аиrfц двгllм и(ег[[11[т •слNие и lnели Fow1 W Мвс hвllr деелв и llкегl�lимп[ е1__диlllпвв) - ии1. вгыв. ввд мв1 - рlмвtп! wггог�г•пи. гки [auarY 1в [мп виtlвед лм вt еми пtм гл.vмиив ф�в tq■ rtcn . кerlctes Ч trlк Wвгил вв ргпввtвр еоМlм[1мв of иг[в11tт вМ tвпliltr и.вдв !ег РгоJк[lм рТрил. е! [е[в1. rгыв, вад гигвl drlllylв млеltиll. �М�в[lмв�г l�в[1и� - 1n в вtвtlивгг pplвtlan [мл lв по lrвuth ■1nn tM Ylrtb nto 1в ри1 св tм ди[е гаи, вМ вlr С1и в!в LWGt[0! .емим г.ови. [мв[ем. тпи и.гн[.гн .■1r е[[ег гопиlеs лм �н ил1l..пг r[и. дкllм го еы лрlквовм иг.1 в! м1[ иt гвргдкеlав г.и, Мвв rrlrr к rТвг 1л ввд foвalo - каи ииl. ввlв ввв hввlо вкМ евn.л[1м а( rеив г.рlвеи ltв.lt вuetlf• Ю• виtlпввгl мто е е[ • врв в[ [ prWq ►wв1 и лрвlвtlоп .1n ив иtlиtвд ив [м lввlв af см Ргаlкевд еым[ее- ргlиг кмвlч К�в К ивркtМ и[1[л ot гы р..роlлгив [в [м г 1агм, впд м ли е[ дкilл е[ s м РорвLеtоиl пвгвЛl! меtии ehtlan■ уМ ы11 /.. гил мс .дlигм [ог и[г.ме игвw вг рГl.вгр иквеlrl гаг [.relllrr гвсв го гвРlееммt tвл1. еоиег/и uleA ввlлмl вдигвсlев иrolLoпt r/ иивд 1рр рглц 1Гиг вев[1ом 1в[lов 1в г.вемд - ih. у.вг .Мп в[в[lивгf вlкл вие рР11в вл M1er вг Mwe еМ вf[tеиl кhиl вр. рр в[1пп в1[г rl ме . гвеовдв импl - b[вl r1o впд fвиlв - Сврвtвд М вУвчвl гиавlвг! Nлlв[и 6м![т ив[1и гроlм вL м[ err )ввл а! • РРгид Ргlввг7 1овр+lееУвl М� и�. - М1е-тиt pplвtlan Мг Имh 4ltwвeor (1пП ыг[алв) е( ргиlди {ивиl, л[в[lеввl, ог [ввыг [гоиlу 1и[ГrеСlив [и � te[аГ вгиi 1%О, И76, вд 10вр деtв. plllв orrllr ef 12 и l7 rигв в1 ув1 еогмрМвкв sаьли вгг M1г . и. rleuleuмl l+M - Свврь[д вв вУвw (ог цГlCUlcaral lвМ lвпвиl{г вкlММ. 1( 196п. 1+ ид 1в дпв. 9еит1оиl лвлllмк_ (лмК о[ иеввдегs) ' гвгвсlгиL tмсl[веЧм еЬ lettм л ltrrгerr. м.вt) - дПдгм (lF1в тввгв), иг4в!-Мв ([3- 1к и ск tи , lиwсгtв , м к ег ргвlгвr М1еЬ вргви fпвврввд- М гмгв . иМ пllм •1 лвгг впд еrгГ) и рт[пltврв ег вl6>7вг on[l1 к и Чрп+вв[в af иеидвry lвв[1[У[lив. рриlвtlмt 19l0. 19111. вМ 19l1 дви. Nв1l-ивсыг гв[1о - Мввг •tl вкгпдвг + Taeal видввtв вlгоllвi 1в гЬриlв[lм 4мсh 1ви (г.гевпг} - eotat - 1Year1 lгаКп л[и of иtеl вtд- рг игs м вкс�ьввв.гl • 1в1 wYon д евкЬвл 1п еМ eew гиг ррlв[1ав [ог ]МJО-и. 1W0�0, ввд l97l1-111. гввРидlпе 1т1в. 1bриlв[1м сrмпп Lb (t.гдм) - вгмп - Wr1 eraкh гв[и sf огЬвв Yr(t tlелмт исе ( кмс) - 11[вле• вдвl[в (д1о и rW ввд огtи) и � Рвги сим аг 1v а, .М 19ПFl1. в рпмсвр в[ tогв�[ рлlвtlае увд 1! рввл вд wм. СгиМ !(гс1 Рви г аlюrвnдl -,lипвl 11л Nrthв рг аымвnе вf в1д+ /..т лр .смs лео. и Р. .r 19п! Чи. rnlцuиprtar CeN. bв[п !еи г[воиwWl - deмrl lиthв рг аhwввд а! оlдуевг лвм ег Гаи г гlиевввд lвсм - миврг евтв еиргlи воеог рриlв[1и: 116П, 17 , вМ !1!1 ии. свл ив[lq ив [М1 г е рвлвsу вllWвв оМпlвв[вв, hигив W Gгмв_bpMue[lм ltвtв - вwlвее пиМГ а! дwцп[лл в иивп ulll tмт 1n о[S1иГ! Мдlеlи. ыг-Т "р�а �.ei1r. рвгlед tf сы кРвгfвnси Рг•ипс цrвргlllе Wи eL[olwn г сыиивд tвсип - вlt е}ри of гвиlил !аг гвдlо !вп[i1q гвиr, uиlll llгв-гвпг вилlи опi41! 1в 196Р. 19)С. вМ вгпвдnкв и е➢гигв 1е рг ttrвввУ s! 19l1. llwпид мвlил 1о сап[гlвв иl ln рвгв Мм лfLсгвеlи е[ гвдL Fиtl ►1.r1• - веев вгв вовиl [пwwвдвl - Аемвl wh.r of веывсел впв wв !в вflвеС: двСв [к гкие 1ил rr ввt ы еиtлгМlв вlлсо вNС Elrtв-eeatr дмtеи иоЧг виврtеи nf и[lомl lN1l► рlвмln{ еив[гlи Лsllвlni 11свм(е{. кеlcr. тч !а[п..то (рг еь._и.м рлl.ги.1 - тч г.[.1v.г. [м влrwе е. frttr Рi.и1ц - п.пв (лт[мс о! гlвд иsиl - lегемгвlо ог rгг1Ч lммвl Pиtfc рег сыпввN а[ гпllд- гв�71 -ььi г.iг.) re w strtп-eиcrel Ч.1ем си 1п ееиtгьп вN 1с ри ве1м: wкlидм иllегввN тг гквlим 7в+Гв гмn qllвtгвеlи о! тг исв ио 1в Кfк[. n1i иггl-д .'.ие 1w нr овв [гыр• �lгвr �С1пr1вгlм I г Мовв+М рериlв[[nп) -[лои [ы вv �р FtrM AMU M1R11ltlдп lгеи 1�i ° в ! дгиn lвигиt миррог", д.}!мд вв ргlвдtед tпдг. n гом млеигс[.п г и ем (tм+-lt-ию1 - tndo. ..г р.г нг[[. риsllи[1пв д.иW ргlипtr си мегеlп! имлl мм. tc е. ем.ивw мпш игllеп о есtи. Рмкt[и •веlWво иN вМ и ы'дв111�' 1! 1[ qрил вс lип tиг clw в rиt. fевд вМ l. м евlвмвг lгвг ывtо. Grвodlclи юмг Pr1rr/ ввдв (еу. cloвr Аипв[ дс[ввдвел г 4 lи г 9иг - fWW м th т1Мвг К вцогеем lпвсоtl о( виlвг) Nleh вгв М1Ыв ви емиlд пи[гlвви le.l. сlсы[в ввИ д.г(ве с4 гиг, 1ве W1пе вд<1вв1w и drlrв-L сlиовв иг ю!!м мд ив вл ов[1уЧд). дlRгИ•tв ргвдК[1лв о! иееl ю.+егг 1в МЫIв иlсвв м.ве en мгlюаl вллР ргедие.г ргtю иtlh[в: 1%l-п3. 19Т7. вМ 19li Чса. 1Лl0! rOR1y [ьг еввtи ввррl7 К иlогlи (игсrпс ef тиоtгиекв) - Спврr[гд 1ги есв /оги (сМигNв) -►sвквlедl! вееlи ргиr, Lвсlдlп! веввl ивгq рвlwlвц о( м (аад wрРlеи wвсlввlв le wuscry рг юреи рг огеи вм ивврls/од ви[ мсlидfц harв+lм. вtвдвив. вtе.. еwвгlц Мг. А-в1lЛи wррllвв еаугlи дамсlс ргМксtи. lqмпв 1м pPrLttsв о! вll уи. 6[иlСlпи !о лгlол ееисгlи вгв овс ирги, ввд гмqи 1о ескk. we вигРllи .[c1w. м1r1 [ввд, вввдв, юорвгJlв; 19W, 19?О вtl 19!! 4и, �мnс1[1и .r.d и lоод рсквиtпR. вод lим !п еlвсгlыttи. rwlв (евми) - 7ив1в Lыг lегев и ргеи[ув о! и[в1 Wsr (вм. Mqotr..иe. игв и[lrеод И вю ые.д и pyr.falaet<в1 мвlл иг nолоl д■гlеиlил лгм[) - уугг еега 1п [влiпl. [иввсгтг Мив[(А< вЛ кttrlt7 ввд bиlch юовlдепов .тtгеrипtвl ееорлсвгв, ведr rtlпсв. l1вЫв! вв ргмсвр в! [scol lвlог [огевi t1E0, l9fi ввд 17И 1ви. л!в М ив д1в[г1ы[1ав af Pspulotlм, впд в11оvlв! 10 ргсмс fer ави IМив[л (игюпе) - tвыг !ки и в1о1вl. еооКгкtlи. Уввfвгигlвlе вс Mиwhld 1ого1; 1%1�3. 19)О вед 1Ч10 4и, вМ вИеегlеlq, wur ввд !и вв рговlавlе в[ ееевl Iвbr [seert l9l0, лг ирlсв иррlу К sreuln (вгвr ..г дв�) - t4oиla сесив[ а! рг еврtи 19Ю вМ 1ге1 дви. м[ вууll от !аи увг Му. пвс мррlг о( foee 1в Чl1W и вЬвгв. MKtee гlи L[в Мм -[ои1 rи овд lеиlв - лKLCLpaC1oO р lв9еlгими 1к вl1 еипсги. лиы имs у рурд ргкtде еет вИ1ив кгиlс! гвм • еирКвд и исв , иМ. вnд вовlв 1Лог [ам и вllеиви. с! 9t1 Rг.м ат [ои1 ргоиlв рм Чг ео[ ZO Rгив а! иW1 и1д рглеsцw а[ [оев1, и1в ид 4овlе ррLеlи п! в1l ул м t1и1 р[ 7i pw рм.1.. .! м1[м 1n мив .ыв1е м впlиl рг«ви. л... 19м. тр, .па 11l1 Чи. тыи .и sеви оп tш'в р•пlгlрпW гвw .имвоl. ал tеиг гып сми ег 7f ■гие еГ еогд ггоии мд 27 sг•вв лгlиеи! в!•-и. вег.ссвл е[ еы ррlвсиn, .W 1ае! е1о елв1. а о! ввlавl ргагвtв r и.veran гог сы wrld. PraM••е br ге0 ln сы f.r ввtWм пв fги мttивl воrмв. T1lyd Увг1д ►sед 'илry; 1%I-в3, 19111 мд 1vlг Чи. имиlе tьиrмст !■си - lвеtо о! евг евµи Моии .., 1 trs иtoI .ед 1.. -[теиlе шрll ое l..е тг [ке1 l.ьк г.к.. >"а�е1м к[ог 15 вУ А3 W wк и Мг1ги га и мlв ви л м ln lrra рг дvв: �%1-63. 197П ввд t97T 4tв. l![д2 tttS3llЧ![1аМ 1А11д (вwи N) ы+и Nи (ргг cno,wand) - Авп.в1 диеп. р,.г сговвввд [п ммив о аиев tncs. (ввс� 1л авh впд klod) - tbe.1M Ьр r1eWe 3 вр вглrв 1-ь лвл. и[пWлп и гпlв вве lгоиР: (пг ае ewe[ерlп! ргюк. гТ1в.[ ртык. Иоогиt Рвгип[, W лв[ {р ри рв[рос 91 cwerlи Чи Чгtлд ггав ltfr сд1м: 1чW. 197Р мд 19l1 доса. ыrыlве. NldL'М tOVOITr TMCtt fiWPS -jIGlвр.егвкт •t пtгсl вгв - М.г.lв в•выт о! Т•вл е! llte мцаи! �в еТГеиТТиеи вл иг1 УРгогlrсг ивwм о! parort! lеевlв. rtl к вtгм; 19в9, 17 О utl 19ч1 4tw, вповlд ы fn[м•Рл[вд vttb юмtдвг.Ыв евисlлп. Iп[впе Мгиllет !ви (лг егеsвМ )- ппв.иl еввемв о! tntмt. ивгвг мв G[lиеад 8bиl+ee tW.кr [всr.в (...1 (tl!3_ �г лstee) - игЧв ид лгвl - 1иг ее .!• wr ем.wи tи s1rcM; 19ьР, lsm .пе l9е1 Чw м.еlви рмпl 1.еп.. е. еые 1п[... 1.r.t ы Меи л.mtrl дееив ег 5в[о 14иг ( кмг а! 1веlм) - ек.1 rrlм вМ rrrвl - мtrletoиlLl No9rtв дие 91.а wип[иl ип-lоад гв9иlгиоRв 1г o9t гиов.г о! рврlл lceu . игtим, впе гигоl +tn мв.ввпl. а в ta вв[е а!lогдввlв. ивиг юр11 [1.r:ludи егввиl wг1к. +ил т иемсед Ъос 4с1вкМ lдвгlw lbьortv [веив [мl (д!S рг ювtс.) - rrбe ид гвлl - впсапгвlлМ w[ег euch вв сhг fм ргкесид hт.ыlи, вргlвlв. епд lигвl nlвelw Ригге! lпее! 1т1 Iв епвКдl[д К аигар рвг иР1и ипlиry r11в1 вв рге.есцм е! гмlг гирсеlvв ррlвсlеи. Ф м рвгииl lвсвве К еы евисг7• 9гыn 1ол1 1в Nrtred !м еы лл1 огые ом . PNlte lа.в4lп ег всвМрве Lout.d rг ■•м еhвп 2Пр ьигв мл1 vleh вдjисввпг [ог вуыг еав[ ег 1t.1r1! !в reMs вгви. !м • ыии вry ы еаиlдвгЧ в■ ы1е! rlehln гиимЫе кеевв е[ [hee lкlreN ре 1ве(ео 6w Ми1и[в гмвп lлеав. уввl пис) �гЬи� ыи•о. [п ru*вl вгw гивппвУl. веенв иь.а иNт еие сМ hоимl[е ег ие лгв - лгюпг о[ popr ttм пЧв вд тил Ns вл �авг К- wмл о! tы Ьмв4еlд де ие Мвл и врмд в дfергерг[tart. Рп К � [ы Ч! и г.геЫв! еы tutlj е wиг rca.. дееив и Ев[лев 7ttв 1( иг о! loelan) - ии1 ,пЬвп влi гиг.1 -[мдlвг К рир roсв , игмw, .вд гагв •вг+-е у мсгw дlвлввl и лпмСврв ef eMfe гиР.есlл роРиlвсlом. tдг.и дlврвввl r7 1к1Wв сы еоllкеtеп д дирмвl. и1сУ ог Мгвеис смииг. •[ ►мгоlе re 7о[и1 Ови Уlтиlов Ьвrп и[ли впд ивtнв[п Ь! иаиг-Ъем вlвtwв ег [м гл ef Р1[ lев.n.1[ Миlлtв .вг Рrеlкеlеи lьрпвввt pr1.L. ..д цп1.г 1о.и11.с1и.. му l9г1 ��ST СОРУ А�А1���.Е 46 ANNEX I Pase 4 of s Gá& Bmqaz Dm GW M CAPITA IN 1 9W: USM MM NATICM PBOM IN 1992 AMAL RAIE CP MM Cowtant Pr:Loes) C~ Min. % 19n-M W at ~ t Pzicw 113e240 100.00 -o.e6 Groes Dowstic Investwnt 1,472 1.3 -16.40 0~ Nati~ saviDg 1,5B5 1.4 -16.45 Car~ Ac~ Balmoe -16.6 -0.09 - áq=t of G~ , M 2X9-0 1-77 -9.44 Import of GoodB, OS l".O 1.73 -M.22 ff.Lf M AND MM ME ~ t in 19S2 Force. 19E2 Cedis nn. % Kin. % AgrimitIre 44.031 51.2B 2.509 57.2 ináwt;17 6,440 7.50 0.671 15-3 Services 35,395 41.22 1.206 27-5 Total 83,856 100.0 4.0 loD-0 ewtral Govermeat cedis min. % of GDP in 19B1 Cedis Xin. % of GIP in 19S2 Reveme ma Grauts 4,85.3 6.33 5253.2 6,12 Total E~ iture and Net Ie~ 9,702.9 12.66 9220.1 10.74 OveraU Deficit (-) -4^7.6 -6.32 -3966.9 -4.62 CMTT AND FRICM 1976 19n 1978 1979 19w 19M 19B2 Y~ and Q~ -~ 1,903 3,044 5,131 5,942 7,949 12,029 15,072 Bmk erecht to Publie Sector 1,966 3,203 5,636 6,537 8,4M 14,043 1,714 Credit to Ftivate Seator m 796 90 1,342 1955B (Ilmcea~ er Index ~ra) and ~ -~ as & of MF 29.2 27.3 24.4 21.1 19.4 15.7 17.6 Gmeml Prioe Ind (19r7--1C0) 46.2 100.0 173-1 267.3 401.2 85B.6 1062.4 1/ Staff estimte ANNEX I Pae 5 of 5 - 47- DT.ANCB OF PAYMEIT.S MCf3ANDIE XPORTS (AVERAGE 1978-82) 1990 1981 192/ IN Min. (uss staion)- Cocoa Bens & Products 654.5 72.9 Trade Balance 184.3 22.3 98.2 Tiaber Io & Products 38.2 4.3 Exports 126B 7 Gold 135.1 15.0 Imports -1024.6 -7EB.7 -529.0 Diemmda 10.3 1.1 Menganese 9.6 1.1 Invisibles (Net) -168.0 -140.4 -114.8 All Other Goods 50.1 5.6 services -247.7 -223.3 -197.2 Transfers 79.7 82.9 82.4 Total 897.8 100.0 Current Balance 16.3 -162.7 -16.6 Capital Accounts Official Capital (Net) 187.9 57.3 149.7 EMERAL EFJ, DECMBER 1932 Private Capital (Net) 19.8 26.3 31.7 Arreers Paments 78.9 141.4 35.2 USM Min. Overall Balance 81.5 -262.5 56.4 Total Outstanding and Gross International Disbursed M&IJM 1648.6 Reserves (End of Period) 197.6 189.8 223.9 Total Outstanding ard Disbursed in.l. Short-term 1163.6 Fbzuary 1973 - June 18, 1978 IE SERVICB RATIO YOR 1991 tIS = 01.15 % Since August 26, 1978 Total Outstaning and Us= 02.75 and Disbursed MBTI 10.7 Total OutstandirAg and Disbursed il. pyment arrears 17.9 ID/IDA IDDING (Mrch 31, 1983) IM rDA Outstading and Dtursed 130.2 122.1 Undisbursed 18.9 94.2 Outstanding, incl. - -..Undisbuzsed 149.1 216.3 1/ Provisional estimates subject to change. Includes errors and omissions. / Actual data not available. EStimates onay.. September 19B3 - 48 - AE II 'HE SATUS OF BAR GMOP OPERATIONS IN GHANA Page 1 of 1 page SAm M OF BAN 10K S ALN IDA CREDIS ()e of September 30, 1983)* Toan or amut (US$) Credit Fiscal lass Cancelation 1/ Nnber Year Borrouer PurPse Bank MA thiabursed Six loans and twelve credits fully disbursed 118.5 89.9 531-GI 1975 Republic of Gbina O1 Palm 13.6 0.6 1122-i 1975 lost & Teleconunications Thleconuunicatione 23.0 9.2 1180-QH 1975 Republic of Ghena Nat '1 Invenent Bank 10.0 0.4 1182-Gi 1975 Republic of Ghana Second Higmy 18.0 0.1 129IT-GH2/ 1976 Republic of Ghena Agricultural Dev. 21.0 5.8 901-GI 1979 Republic of Ghana Second NIB 19.0 12.6 1009-GI 1980 Republic of Ghana Agricultural Dev. 29.5 25.9 1029-Q 1980 Republic of Ghana Third Highay 25.0 7.1 1170-H 1981 Republic of Ghana Railway 29.0 28.2 1327-GI 3/ 1983 Republic of Ghana Reconstruction CMDW 9.3 9.1 1342-QI 3/ 1983 Republic of Ghana Water Supply 13.0 13.0 1373-QI 1983 Republic of Ghana Energy Project 11.0 10.6 1393-GH 1983 Republic of Ghana Reconstruction Import 40.0 40.0 Total 190.5 279.3 of which has been paid 46.0 2.9 Total now outstanding 144.5 276.4 Amount sold 0.4 of which has been repaid 0.4 0.0 0.0 7btal now held by Bank and IDA 144.5 276.4 Total undisbursed 15.5 147.1 162.6 1he status of the projects listad above is described in a separate report an all Bank/IDA financial projects in execution, which is updated twice yearly and circulated to the Executive Directors on April 30 and October 31. * Tre has been no IFC operation in Ghana. 1/ Prior to exchange adjustnents. 2/ Interest subsidy fund (Third Window). 3/ Not yet effective. BEST COPY AVAILABLE - 49 - ANNEX III Page 1 of 2 pages GHANA EXPORT REHABILITATION PROJECT SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Date of first presentation to the Bank April 1981 (b) Date of departure of appraisal mission August 1981 (original) May 1983 (reappraisal) (c) Date of completion of Negotiations November 14,1983 (d) Planned date of effectiveness January 1984 Section II: Special IDA Implementation Actions None Section III: Special Conditions (a) Execution of the Development Credit Agreement for Export Rehabilitation Technical Assistance Project as a condition of effectiveness (para. 104); (b) Execution of the Project Agreement as a condition of effectiveness (para. 104); (c) Execution of subsidiary agreements between the Borrower and implementing agencies as a condition of effectiveness (para. 90); (d) Establishment of special account as a condition of effectiveness (para. 92); (e) The State Gold Mining Corporation (SGMC) to enter into a management contract with an international mining consortium to manage SGMC mines as a condition of disbursement of the mining component (para. 80); (f) SGMC and GPA to finalize procurement lists and schedules satisfactory to IDA (para. 93); (g) The Borrower to review with IDA FY85 Development and Foreign Exchange Budgets and other performance criteria prior to release of the second tranche of the Credit (para. 96); (h) Establishment of the Counterpart Funds Account (para. 98); (i) Maintenance of the Interministerial Export Rehabilitation Committee (para. 91); - 50 - ANNEX III Page 2 of 2 pages (j) SGKC to carry out a plan of action to improve its gold mines (para. 81); (k) The Borrower to restructure the Ghana Cocoa Marketing Board (GCHB) (paras. 54-56); (1) The Borrower to propose, agree with IDA and implement a cocoa producer price for 1984 as a disbursement condition for the cocoa sector allocation of the Credit and carry out an annual cocoa producer price adjustment in a manner satisfactory to IDA (para. 53); (m) The Borrower to carry out a five year GCMB staff retrenchment program and an adjustment assirtance program for the displaced GCMB staff (para. 58); (n) GCHB to carry out studies and recommendations of the studies on the financial viability and divestiture procedures of GCMB's cocoa plantations, cocoa products factories and insecticides formulation plants (para. 58); (o) GCMB to carry out studies and recommendations of the studies on its corporate planning and management system, alternative cocoa marketing arrangements, and the procedures for receiving at ports, storing and shipping of cocoa and cocoa products (para. 58); (p) GCMB to prepare and carry out a program to increase haulage of cocoa through private trucking (para. 58); (q) The Borrower to establish an independent Timber Export Development Board (TEDB) (para. 70); and (r) The Borrower to establish a Forest Production Inspection Bureau (para. 71). -51- ANNEX IV Page 1 of 7 pages GHANA EXPORT REHABILITATION PROJECT COCOA SECTOR Short-Term Rehabilitation Activities To be Supported Under ERP (i) Shed Building and Rehabilitation 1. Due to the lack of funding in recent years, there are a large number of locations where new sheds need to be built or existing sheds rehabilitated. As a result of the poor quality of storage facilities for cocoa, considerable quantities of cocoa are at risk of deterioration if not evacuated before the rainy season. It has been estimated that up to 10,000 tons of sub-standard cocoa could be avoided each year if good storage facilities were provided at all buying centers. Assuming the loss in value of sub-standard cocoa to be 50 percent of the selling price, this represents a potential increase in export earnings of $10 million a year. It is important, therefore, that provision be made for the supply of at least roofing sheets for shed building so that the most urgent repairs and rebuilding can be undertaken during the ERP program. 2. The schedule of shed building and rehabilitation assumes that 90 new sheds will be built and 140 sheds rehabilitated each year. The existing development department of GCMB would not be capable of undertaking such an ambitious program. The anticipated technical assistance program includes an expert in this field and until he has been able to implement the necessary operating and control procedures and assist in the training and'or recruitment of the necessary staff, it is unlikely that more than 20 new sheds would be built and 50 sheds rehabilitated in each of the first two years. An alloca- tion of $0.5 million each year for the purchase of roofing sheets would ensure that this program could be completed, subject to assurances from Government for the allocation of locally produced cement and reinforcing rods. Priority should be given to the provision of sheds and rehabilitation in the area designated by CSD for special attention. (ii) Vehicle Workshops 3. The provision of adequate vehicle workshop facilities would result in an annual saving of $2.8 million in replacement vehicle costs. It is essential, therefore that the workshop building program is undertaken. Under the ERP program it is suggested that regional workshops be built at Koforidu and &gona Swedru. The mobile workshops and lubrication units should also be provided. In addition, the spare parts for all workshop vehicles should be provided for the two year period of ERP. The reduction of the building program to this level would reduce costs to $2,350,000. - 52 - ANNEX IV Page 2 of 7 pages (iii) Capsid Control 4. For the introduction of an effective capsid control program, an effective distribution system has to be established for the sale of insecti- cides, mistblowers and fuel oil mixture. Also, effective mistblower repair facilities have to be established. Hence, the expenditure of $1.9 million has to be included under ERP. 5. Failure to include these items will have a twofold effect. Firstly, if no distribution and repair and maintenance facilities are established, the utilization of $8 million for insecticides and mistblowers, under RIC, is likely to be ineffective. Secondly, if the insecticide is misapplied the incremental increase in cocoa crop will not be achieved. This would result in a loss of revenue of: 1984/85 - $36 million 1985/86 - $80 million At the higher level forecast the losses would be even greater. 6. It is estimated that insecticides already imported in 1983 (including those financed under the Reconstruction Import Credit) would be sufficient to meet the demand until the end of 1984. However, for 1985, assuming that about one million acres would be a realistic target for spraying and half of this acreage will be sprayed with Unden (four sprays a year totalling 1.7 liter/acre) and half with Gammalin (four sprays totalling 2.27 liter/acre), the total requirement would be 850,000 liters of Unden and 1,135,000 liters of Gammalin. The proposed credit would finance about 30 percent of this require- ment (250,000 liters of Unden and 340,000 liters of Gammalin). The total requirement for spraying machines is estimated at 90,000; there are about 40,000 serviceable sprayers in the system and an additional 25,000 would be imported in 1983 (including 20,000 financed under the Reconstruction Import Credit). The shortfall is, therefore, about 25,000. The proposed Credit would finance about 15,000 sprayers (60 percent of the gap) split equally over 1984 and 1985. - 53 - ANNEX IV Page 3 of 7 pages GHANA EXPORT REHABILITATION PROJECT Cocoa Sector Short-term Rehabilitation Requirements Lai mwml Two-Year (1984-85) ERP alm Requirements Funding Deficit Storage m Roofing sheets 29.6 1.5 28.1 Workshops Base Workshops 2.0 - 2.0 Regional Workshops 2.1 2.1 - o Volta Workshop 0.3 - 0.3 Workshop Equipment 1.5 1.5 - Workshop Vehicles 1.3 1.3 - Ira Spare Parts 0.6 0.6 - co Law Capsid Control Insecticides 21.1 5.1 16.0 Sprayers 13.1 4.8 8.3 Spares 3.4 3.0 0.4 Workshops 1.9 1.9 - Input Distribution Warehouse and Equipment 2.4 1.5 0.9 Distribution Vehicles 4.8 0.6 4.2 Spares and Tyres 1.8 - 1.8 Non-Haulage Vehicles New Vehicles 11.7 - 11.7 Spares and Tyres 5.4 - 5.4 Crop Related Costs Bags 4.4 - 4.4 Haulage 4.2 - 4.2 Miscellaneous Recurrent Costs 20.0 - 20.0 131.6 23.9 107.7 Other Sources of Financing Foreign Exchange Retention 55.1 Stabex 10.0 Insecticides in Stock 10.5 Sprayers in Stock 4.5 80.1 Additional Funding Required 27.6 смАнА ' ���� �®�� Г{��'�Г7��Е ехгоыт иемлегьlтАтгом гкаест - ткеsткr спгrомкмт tlMU1lТ Теи1 CAPITAL 11СW1ккмсмт Е.4Тl1ИТе (lППП'■1 еврfиl еlиlрмпе Rа1иЫ1(tae(оп rrerencatlre lрапв 5и ге senlees гог.п ШиLеки Свмгаl 4иь- Рогиt Нвиlце 4иЕ- гаг.■t квиlакв Гими1 5и6- Чогk гдаоаа7 гиgыпУ и1 пе Yaheelas цll Тип.ооге т_eal ие пе увысlвв nett тоеаl tеиtрввпе У■hlct■в мt11 Тип■■оге Тои1 wЧгевl 5ье теи! 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Уг(vatиly лпJ Рив11с1у пмед Сиврап(as w� 00 Ф С':i �1 1'lrrt yГlurtly гаГ aв+liLen.r 1п гоlueltlcлtlnn � х +: .iucuuJ prlnNty 1nr JУм1дt.1ПСС 1п гаплп111tве1nп р.( е1 .eut гrы mwn.lud еиг гаhап111ьп1ип О 4 гt1 V 'iy Р7 ОС Ф и ANNEX IV 55 Page 5 of 7 pages GHANA EXPORT REHABILITATION PROJECT SGMC Short-Term Rehabilitation Program Production Targets Year 0 Year I Year 2 Prestea Tonnage 180,000 240,000 360,000 Recovery Grade 4.5 4.5 4.5 Fine Ounces 36,000 48,000 72,000 Footage Developed 9,600 18,COO 18,000 Tarkwa Tonnage 180,000 240,000 360,000 Recovery Grade 3.5 3.5 3.5 Fine Ounces 31,500 42,000 63,000 Footage Developed 10,800 18,000 24,000 Dunkwa Yardage Dredged 3,456,000 4,608,000 5,760,000 Recovery Grade 1.5 1.5 1.5 Ounces Recovered 10,800 14,400 18,000 -56- ANNEX IV Page 6 of 7 pages GHANA EXPORT REHABILITATION PROJECT SGMC Short-Term Rehabilitation Program Funding Requirements (US$000's) Prestea Tarkwa Program ERP Program ERP Requirements Funding Requirements Funding Underground Plant and Machinery 2,835 1,600 4,311 3,000 Treatment Plant and Machinery 1,327 900 2,553 2,000 Surface Plant and Machinery 1,052 800 654 600 Vehicles and Trucks 2,319 1,400 1,636 1,000 Housing and Amenities 1,673 400 1,702 400 Spare Parts and Consumables 8,821 3,000 8,635 3,500 2:1100 19 4910,0 Dunkwa Program ERP Requirements Funding General Capital Expenditures 3,130 1,000 Replacement Parts Spare Parts and Consumables 4,258 3,400 General Dredge Rehabilitation 2,000 - Housing and Amenities 600 600 9 ,988 5.002 - 57 - ANNEX IV Page 7 of 7 pages GHANA Export Rehabilitation Project Port Sector: Short Term Rehabilitation Requirements and ERP Details Immediate Requirement ERP FUNDING During 1984/85 TOTAL FUNDS BY AGENCY US$(000) Foreign Foreign A. Ghana Ports Authority (GPA) Cargo equipment and spare parts 1,055 1,055 Marine equipment and spare parts 4,370 270 Civil works 1,000 800 Dredging (contract dredging & spare parts) 2,100 200 Takoradi dry dock and slipway - repair 1,000 300 Subtotal 9,525 2,625 Contingencies 1,195 275 Total 10,720 2,900 B. Ghana Cargo Handling Company (GCHC) Cargo handling equipment and spare parts 2,805 1,730 Contingencies 365 170 Total 3,170 1,900 C. Takoradi Lighterage Company (TLC) 1/ Floating craft and spare parts 830 Equipment and spare parts 155 Subtotal 985 Contingencies 125 Total 1,110 TOTAL FUNDS 13,315 4,355 CONTINGENCIES 1,685 445 GRAND TOTAL 15,000 4,800 1/ These TLC needs are additional to the suppliers' credit of t2,000,000 already arranged by TLC. - 58 - ANNEX V Page 1 of 5 pages GHANA EXPORT REHABILITATION PROJECT Proposed Implementation Mechanism for the Forestry Component 1. Although overall responsibility for implementation and administration of the proposed Credit would rest with the Ministry of Lands and Natural Resources (MLNR), the National Investment Bank (NIB) would be responsible for the administration of the input supply sub-component. 2. NIB would establish a Technical Evaluation Committee (TEC) which would include the Chief Economist, MLNR, and a Forestry Adviser to be financed under the project. A Loan Review Panel consisting of the Principal Secretary, MLNR, and the Managing Director, NIB, would also be established and the Forestry Adviser would act as secretary. 3. The procurement process would start when MLNR invite executives of the forest products exporters to a presentation advising them of the project criteria and loan procedures. At the same time, NIB would invite representa- tives of the commercial banks to a meeting for a briefing on procedures. 4. Applications must fulfil the following criteria to be eligible for financing under the project: (a) the application must be in respect of an ongoing viable enLqrprise; (b) the investment must relate exclusively to short-term rehabilitation of the borrowing company through funding mobile equipment, with spares, vehicles spares, and occasional key machine replacements; and (c) the investment must be capable of generating foreign exchange earnings within six months after delivery of equipment, and, thereafter, the investment must be capable of generating foreign exchange earnings of not less than 30 percent per annum of the total amount of the loan. 5. Forest products exporters would submit their applications for loans for the purchase of approved inputs to their commercial banks who would appraise financial and technical aspects, using technical consultants as necessary. Applications recommended by the commercial banks would then be forwarded by the commercial banks to NIB for sanction under the project; at the same time, the commercial banks would guarantee the availability of working capital and undertake to pay NIB in cedis on presentation of import documents. The NIB Technical Evaluation Committee would, within seven days, evaluate the applications for compliance with project eligibility criteria and attach its recommendations for consideration by the Loan Review Panel. The Loan Review Panel would, within seven days, approve or reject the applica- - 59 - ANNEX V Page 2 of 5 pages tions, and forward approved applications to the Bank of Ghana, at the same time notifying NIB and the commercial banks of its decision. On receipt of advice from the Bank of Ghana of the value of foreign exchange funds the commercial banks, in conjunction with their client exporters, would proceed tn open letters of credit as necessary. The suppliers would be informed in the usual way and arrange supply according to the contract and present shipping documents through their bankers. Disbursements would be made against c.i.f. costs of eligible imports, subject to documentary evidence that expenditures had been incurred on or after signing of the Credit. To facilitate disburse- ments a special account would be opened by NIB with a foreign correspondent bank satisfactory to the Association. Establishment of this account would be a condition of effectiveness. Cedi payments would be made upon receipt of goods into a counterpart funds account to be established by NIB for the Ministry of Finance. The Ministry of Finance would use these funds for priority development projects included in the economic recovery program. All local charges, like duties, transport and handling fees would be financed by the importer directly. - 60 - ANNEX V Page 3 of 5pg IMPLEMENTATION SC-EDULE Task Year 1984 1985 Quarter 4 I 2 3 4 I 2 3 4 Finalization of Implementation Procedures by ML&NR, NIB and World Bank Technical Assistance . Package Personnel Hiring *i) ML&NR - Loan Procedures Data to Exporters ii) NIB - Loan Procedures Data U To Commercial Banks 1li) Exporters - Applications -- - -- To Commercial Banks Commercial Bank Evaluations - - *--- - iv) Comm. Bank Applications . . and Guarcntees to ERP Technical Evaluation Committee at NIB v) Tech. Eval. Committee Review . and Recommendation vi) Loan Review Panel . Approval and F.E. Release to Bank of Ghana vii) Bank of Ghana Forwards - - . F.E. Releases to World Bank Viii) World Bank Allocates F.E. to Commercial Banks and an to Exporters via L/C's Progress Payment Releases - -- - - - NIB Quarterly Reports 1 2 3 4 5 6 7 8 9 Equipment Delivery F.E. Generation - - - - *For numbered items refer to Diagram 12-1 Flow Chart. - 61- ANNEX V Page 4 of 5 panes DIAGRAM 12-1 ERP LOAN ADMINISTRATION AND FLOW CHART WORLD BANK Foreign Exchange Funds Releases ML&NR BANK OF GHANA ERP LOAN COORDINATING i1) Approved Loan AUTHORITY Applications LOAN REVIEW PANEL (i) ERP Loan Procedures Minister of Lands & Quarterly i Information to Selected Natural Resources, Reports Forest Products Exporters M.D. National Inv. Bank (4 Loan Applications in viil Foreign Exchange Compliance with ERP Criteria Allocations NATIONAL INVESTMENT BANK ERP TECHNICAL I EVALUATION COMMITTEE I ERP LOAN I (ii) - ML&NR Economist I ACCOUNTING I - NIB Economist I AND I- - RP Loan I "" rocedures I - Loan Administration Officer I REPORTING Information I (Technical Assistance Package) SECTION I to Commercial - Other Staff as req'd. _ Banks-- (iv) Commercial Bank (iv) Approved Applications Cedi Fund Guarantees and Import Licence Applications COMMERCIAL COMMERCIAL COMMERCIA COMMERCIAL BANK BANK BANK BANK 2 1izi (viii) Application L/C's to RejectedI Suppliers Rjected --1 Abroad FOREST PRODUCTS EXPORTERS - 62 - ANNEX V Page 5 of 5 pages EXPORTERS' PROCUREMENT SCHEDLLE Task Year 1984 1985 Quarter 4 1 2 3 4 I 2 3 4 *1 1) ML&NR - Loan Procedures Data to Exporters Exporters Obtain Pro Forma Invoices Exporters Develop Economics and Prepare Applications for ERP Loan Funds iii) Exporters Applications - -. to Commercial Banks v) Tech. Eval. Committee Review and - -- Recommendation * Exporters Release Purchase Orders Suppliers Ship Goods ...... ..- Exporters Receive -. Goods *2 Progress Payment . -- --- Releases F.E. Generation *2 -1 * I For numbered items refer to Diagram 12-1 Flow Chart. *2 Dotted line on left indicates optimistic position. GHANA: EXPORTS OF PRINCIPAL COMHODITIES (Volume) Actual Estimated Projected Product Units 1975 1979 1980 1981 1982 1983 1984 1985 (thousands) Cocoa Tons 341 229 234 204 255 190 225 240 Gold Ounces 513 368 337 335 302 340 342 412 Diamonds Carats 2372 1007 897 944 650 785 850 950 Manganese Tons 373 N.A. N.A. 143 97 272 363 363 Logs and Timber Cu. Meters 605 285 18) 219 111 242 454 489 Prices $ (US Per Unit) Cocoa 1648 3222 3385 2179 1594 1750 1850 1700 Gold 181 206 564 472 385 400 446 497 Diamonds 4.6 10.8 11.1 8.7 7.2 6.8 7.0 7.0 Manganese 39.9 N.A. N.A. 55.9 32.0 55.0 55.0 55.0 Logs and Timber 111.1 148.8 181.6 164.4 144.1 150.0 175.0 180.0 Value (Hillions of US$) Cocoa 562.0 738.0 792.7 434.8 406.5 332.5 416.3 408.0 Cold 72.9 75.8 190.1 158.3 116.4 144.0 153.0 205.0 Diamonds 11.0 10.9 10.0 8.2 4.7 5.3 6.0 6.7 Mangaiese 14.9 10.6 9.6 8.0 3.1 15.0 20.0 20.0 Logs and Timber 67.2 42.4 33.6 36.0 16.0 36.3 79.6 88.0 TOTAL 731.7 1041.0 1159.6 766.0 872.7 533.1 674.9 728.7 * OB � lрур � �й5 l.d } ..� t-н. -, - �� "_ -_ _ . �•\_ __-.м мМh�`WM- � �_ �� г .... .� 1 Е . . -- -. �_._. �r-�.W1ik . ид. v�• ' Г,,,�.ti� r ...��- ��.в'вптJ� �-Т�Г�.� '1���\�`� �,,/ М �� 1в1л tмi. '� :` 1 rs:'���} �' , t т дп. 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