Madagascar - Cyclone Rehabilitation Project

Do=ume of The World Bank FOR OMCIAL USE ONLY (CA?2 /5-426- 5 Rpuwt No. P-3874---AG REPORT AdhD RECOMIENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPME NT ASSOCIATION TO THE EXECLGTIVE DIRECtORS FOR A PROPOSED CREDIT OF SDR 14.8 MILLION (CSS15.0 MILLION EQUIVALEN-T) TO THE DEMOCRATIC REPUBLIC OF XADAGASCAR FOR A CYCLONE REHABILITATION PROJECT October 11, 1984 T-b deemeet bm a res&iMd is&SM in my be u4 by rdpieats ey i the gum o dweUr dail dXIeds fr I y mmiw udewuw be dibdusd wIIh Wod k __  CURRENCY EQUIVALENTS Currency U-it M !alagasy Francs (FXG) US 1.00 F'AG 560 FflG 100 US$ 0.1785 FXG 1,000,000 USS 1,785 WEIGHTS AND MEASURES (Metric System) 1 meter (a) = 3.28 feet 1 kilometer (km) - 0.62 miles 1 square meter (m2) = 10.76 square feet 1 square kilometer (ku2) - 0.386 square miles I bectare (ha) * 2.47 acres 1 liter (1) 0.26 US gallons I cubic meter (m3) 264 US gallons GLOSSARY OF ABBREVIATIONS AND ACR0N'Z4S ASECK& Age=ce pour la Securite de la Navigation AMrie=ne en Afrique et a Madagascar (Agency for Security of Aeronautic Navigation in Afr.ca and Madagascar) BFV BankY Fampandrosoa=a Ny Varotra (National Bank for Commerce) B^D Ba=ky Ny Tantsaha Mpamokatra (National Bank for Rural Development) CFC Centre de Formation de la Comptabilitg (Accou=tancy Training Center) CNC Natiocal Coordination Coumittee DGP Direction G&Erale du Pla: (Directorate General of Planing, Office of the Presidency) Farita-y Local government unit: ( province7) Firaisa=a Local goverzme=t unit: grnup of foko=tany (-districtc) Fivondrona-a Local government u-it: gro.iz nf firaisana (mu-icipalityf) FIFABE Socigtg pour le Dgveloppement de i2 Plai-e de la Betsiboka (Betsiboka Development Corporacion.) JIRAMA Jiro sy Rano Malagasy (Water and E'ectricity Authority) SEI[AD Societe d'Equipement Immobilier de Madagascar (Madagascar Housing CorporatUon) SEPT Sociftg d'Exploitation du Porr de Toamasina (Operating Company of Toamasina Port) UNDP Uzited Nations Developuent Programme UNESCO U:ited Nations Education and Scientific Organization USAID United States Age=cy for Imter=ational Development FISCAL YEAR January 1 - December 31  FOR OMCIAL USE ONLY MAAGASCAR Cyclone Rehabilitation Project Credit and Project Summary Borrower: Democratic Republic of Madagascar Beneficiaries: Ministry of Public Works, Ministry of Transport, Supply and Tourism, Agency for Security of Aeronautic Navigation in Africa and Madagascar (ASECNA), Operating Company of Toamasina Port (SEPT), Betsiboka Development Corporation (FIFABE), and Madagascar Rousimg Corporation (SEIMAD). Amount: SDR 14.8 million (USS15.0 million). Terms: Standard IDA terms. RelendiM terms: The Government would releand USS1.0 million of the proceeds of the credit to ASECNA for part of the rehabilitatioc of Mahajanga airport, at 10 percent interest per annum for 20 years including 5 years of grace. US$2.0 million would be used to make housing credits to cyclone victims who would pay 12 percent interest per annum for 10 years including 2 years of grace. Project Description: Objectives: The proposed project is designed to (i) contribute to the physical and economic rehabilitation of the areas dnaged by cyclone Kamisy (of April 9, 1984), particularly by restoring essential facilities before the next cyclone season; (ii) support institutional arrangements appropriate for efficient coordination of reconstruction efforts; and (iii) help develop measures to minimize the potential damage from natural disasters that could occur to these and other vulnerable areas of the country. Comonents: (a) Rehabilitation of Mahajanga and Antsiranana ports; (b) Rehabilitation of Mahajanga and Antsiranana airports; (c) Rehabilitation of major roads affected by the cyclone (RN4, RN6, and RN8); Thb docuent hu a resrited distibutbn and my be used by recipients only in the perfonnrmc of thei Offcial dutis Its contents may not otherwise be dsclosed without World Bank authoration  - ii - (d) Repairs to schools and other public buildings, administrative offices and state owned housing; (e) Rehabilitation of FIFABE installations and equipment dAmAged by the cyclone 1: Marovoay; (f) Rehabilitation of JIRAMA's damaged power facilities in Mahajanga, Antairanana, Toamasina, Nossi-B, Ambatoboeni, and Marovoay; (g) 'Rousing credit to private owners for the reconstruction of their houses damaged by the cyclone; and (h) Consultant services, technical assistance, and urban planning, drainage study. Benefits: The project would assist in restoring economic activity in the regions of Mahajanga and Antsiranana. In particular, reconstruction to operational standards of the ports of Mahajanga and Antsiranana, and reconstruction of the Amboromalandy Dike which is necessary to restoring traffic flow on the RN4 route (Antananarivo-Mahajanga) and irrigation of 2,500 ha of rice fields. The repair and restoration of about 30 schools would provide accommodation for an estimated 15,000 pupils who are either currently deprived of adequate educational opportunities or accoimodated in over-crowded classrooms. The replacement of airport equipment will improve security, not only for local traffic, but also for international traffic, since Mahajanga Airport is an international traffic regulator. Finally, a general benefit for the rest of the country would be to equip Kadagascar with a framework for handling future emergencies of this kind. Risks: The jroject's major risks are those which relate to the need for timely execution and the timely availability of funds, local and foreign. To minimize these risks major emphasis has been placed on centralized coordination by the National Coordination Committee (CNC), reliance on execution by experienced agencies and closer monitoring mainly during the start-up period. Tn addition commitments have been obtained from the Government regarding the provision of counterpart funds. On the whole, the project presents an acceptable level of risk, considerimg the benefits which would be realized from it.  Estimated Project costs: -(USS uilion)- CkcE2>nent Local Foreign Total Ports 0.88 1.85 2.73 Airports 0.60 1.42 2.02 Roads 2.98 4.37 7.35 Public Buildings 2.96 2.19 5.15 Agriculture 0.17 0.43 0.60 JIRANA 0.78 1.38 2.16 Housing credit 0.80 1.20 2.00 Consultant services 0.68 1.06 1.74 Total Base Cost 9.85 13.90 23.75 Physical contirgencles 1.18 1.75 2.93 Price contingencies 0.44 0.63 1.07 Total Contingencies 1.62 2.38 4.00 TOTAL PROJECI COST (incl. Taxes) 11.47 16.28 27.75 Fiancing Plan: ---USS million)- Local Foreign Total IDA Credit 0.7 14.3 15.0 Credit 663-MAG 0.3 0.4 0.7 Credit 1002-MAG& 0.7 1.3 2.0 Credit 1391 and SF46fAG* 0.2 0.3 0.5 Government or Cofintnciag: Investsets 5.0 5.0 Taxes and Duties 4.5 4.5 Total 11.4 16.3 27.7 Estimated Disbursements: (USS silion) IDA Fiscal Year 1985 1986 1987 Annual 8.0 4.0 3.0 Cumulative 8.0 12.0 15.0 Staff Appraisal Report: None !LaE: IBRD No. 1849l * Savi:igs from these credits are being utilized to start urgent road works, repairs to school buildings, and to finance equipment and supplies utllized by JIRAMA in the rehabilitation of electricity in the affected areas.  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECGIMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE DEMOCRATIC REPUBLIC OF MADAGASCAR FOR A CYCLONE REHABILITATION PROJECT 1. *I submit the folloving report and recommendation on a proposed Development Credit to the Democratic Republic of Madagascar for SDR 14.8 million (US$15.0 million equivale-t) on standard IDA terms to help finance a Cyclone Rehabilitation Project. The Borrower would relend US$1.0 million of the proceeds of the credit to ASECNA for part of the rehabilitation of Mahajanga airport at 10 percent interest per annum for 20 years including 5 years of grace. The Borrower would utilize US$2.0 million for housing credits to cyclone victims at 12 percent interest per annum with a repayment period of 10 years including 2 years of grace. In addition US$3.2 million from other credits would be utilized in the respective sectors for which those credits were granted and on the same terms and conditions as agreed in those credits. PART I - THE ECONOMY 2. A report entitled -Current Economic Situation and Prospects- dated March 20, 1983, was distributed to participants of the Madagascar Consultative Group Meeting of April 27-29, 1983 and is available as document MAG (83-4). An economic mission visited Madagascar in March 1984 and an updating economic report is under preparation. Country data sheets are provided in Annex I to this report. Background 3. Madagascar, with a population of 9.4 million and a GNP per capita of about US$300 in 1983, is among the poorest countries in the world. It is a sparsely settled country, with a population density of about 15 persons per square kilometer. Although generally well endowed with natural resources and a variety of soils, there are considerable regional variations in ecology and climate. The central plateau, the most economically advanced region, has a subtroFical to temperate climate. The South is the poorest region with an arid climate and infertile soils. The eastern region has a tropical climate and, although rich agriculturally, crops are frequently devastated by cyclones. Agriculture accounts for about 35 percent of GDP; about 85 percent of the population lives in rural areas, and agricultural products account for about 80 percent of the country's export earnings. Economic Developments in the 1970s 4. During the past twenty five years, Madagascar's development has been sluggish and erratic. For about a decade following independence in 1960, the economy grew at an average annual rate of 3 percent. Agriculture  - 2 - was responsible for much of this GDP growth while manufacturing, under increased protection, gained in relative importance. For the period 1970-1983, however, there was, on average, virtually no growth i- real GDP. With an average population growth of about 2.8 percent per annum, per capita real income in 1983 was about 28 percent below its 1973 level. 5. This slow development was true for all sectors of the economy. Agricultural output lagged conspicuously, and yields tended to stagnate or decline; the country became i-creasingly dependent on imports, especially of rice, rt5 meet food requirements; and the volume of agricultural exports virtually stagnated. Manufacturing output showed a mDdest expansion. The sector remained heavily dependent on imported inputs, however, and operated at low levels of capacity utilization. There was little expansion in the country's transport network and indeed the existing transport facilities (road and rail) were subject to increasingly serious deterioration. 6, The poor economic performance stemmed in large measure from inappropriate economic policies. These policies can be summArized along two mait themes. First, in the beginnlg of 1972, the Government greatly extended its control over economic activity by taking over nearly all the larger entreprises, excluding the private sector from all commerce with the agricultural sector, and imposing numerous controls, especially on prices and movements of goods. Under these political and economic conditions, prlvate sector Initiative was discouraged. Second, the Government embarked on a strategy which accorded high priority to the development of industry with protective policies that neglected agriculture and, in effect, fostered the growth of an inward-looking and sometimes uneconomic manufacturing sector. The adverse effects of these policies were compounded by the deterioration in the terms of trade follovimg the world oil price increases. 7. Through 1977, the poor growth and development performance and the extensive institutional cha3ges which were being effected were nevertheless accompanied by continued caiutious policies regarding the balance of payments, public finances and external debt. The external resource gap was kept at low levels (about 3 percent of GDP from 1970 to 1978), the overall Government budget deficit fluctuated around 2.5 percent of GDP and recourse to external borrowing was strictly limited. Total external public debt (outstanding and disbursed) at end 1977 was equivalent to about 13 percent of GDP, compared to an average of about 22 percent for low income developing countries, and the ratio of debt service payments to export earnings, including non-factor services, at end 1977 was only about 3 percent. The Public Investment Boom of 1978-81 and its Impact 8. In 1978 the Government adopted a significantly different economic policy orientation, undertaking a large expansion in public sector investment with greatly increased reliance on external sources for its financing. Investment outlays increased by about 13 percent per annum between 1978-80 and the share of investment in GDP, which had been about 14 percent since the early 1970s, rose to around 21 percent in 1979 and 1980. The increased investment resulted in increased imports and coincided  - 3 - with virtually stagnant export earnings and a further deterioration in term debt obligations in 1980. Foreign exchange shortages also grew increasingly severe through 1981 and 1982, largely as a result of the rapidly growing burden of external debt service. 9. With the rapid expansion in external borrowing and a hardening of average terms, Madagascar's public external debt service obligations Increased dramatically from about US$19 million in 1977 (equivalent to about 3 percent of exports of goods and non-factor services in that year) to about US$265 million in 1982 (equivalent to about 72 percent of exports of goods and NFS). In 1981 and again in 1982 Madagascar sought and obtained a rescheduling of a part of debt service obligations due. These rescheduli-gs reduced payments due in 1981 and 1982 by over 50 percent so that actual service payments on- external public debt made in 1982 were equivalent to about 35 percent of export receipts. 10. The Central Government's finances in 1978-82 clearly reflect the investment boom and the subsequent efforts to restore equilibrium. Total expenditures more than doubled between 1978 and 1980 and declined slightly in 1981 and 1982, when the inflation rate was much higher. The overall Central Government deficit swung from 4 percent of GDP in 1978 to a peak of 17 percent in 1980 and then down to 6 percent in 1982. Recurrent expenditures contributed little to the swings since expenditures and revenues moved roughly in line. The main cause of the changes in the deficits was the capital budget, which more than quadrupled between 1978 and 1980 and then declined by 57 percent from 1980 to 1982. However, other Government expenditures, mostly deferred payments and, up to 1982, subsidies on rice, accounted for 10-12 percent of total expenditures. Despite considerable growth in nominal terms, both revenues and recurrent expenditures generally declined in real terms after 1980. The growth of revenues has been greatly slowed by the deterioration of the economic situation, although a number of measures were taken to increase taxation in 1982. 11. The investment boom and the ensuing stabilization policies are also reflected in the money and credit figures as well as in the rate of inflation for the years 1978-83. Net domestic credit tripled in nominal terms from 1978 to 1982, most of the increase being due to net government borrowings from the Central Bank. The Government's share of domestic credit rose from 31 percent at end 1978 to 58 percent at end 1982. The official cost of living index for Antananarivo, Madagascar's capital and largest city, which is likely to understate the actual price rises, showed an 18 percent increase in 1980, about 31 percent in 1981 and 1982, and an estimated 18 percent increase in 1983. The implicit GDP deflator shows a parallel development: a 15 percent increase in 1980, a 25 percent increase in 1981, a 34 percent increase in 1982, and a 22 percent increase in 1983. 12. The balance of payments has also been affected by the investment spending of 1978-80, but the sluggishness of exports and the problems in reducing imports have made restoration of external equilibrium especially difficult. The current account deficit began to rise rapidly from less than 2 percent of GDP in 1978 to over 18 percent in 1980. Transactions with the rest of the world were financed by a total exhaustion of reserves, an unprecedented degree of foreign borrowing, and by incurring substantial  - 4 - arrears on external payments obligations. The Government began to take some measures to restore equilibrium in 1981 and took stronger actions in 1982, notably by tightly restricting imports and by negotiating arrangements with the IMF and the Paris Club. It succeeded in reducing the overall deficit to FMG 31.4 billion (US$90 million) in 1982, thanks to the agreements reached with the IMP and the Paris Club as well as some exceptional balance of payments financing, but it failed to restore equilibrium in the current account, whose deficit in 1982 was still US$350 million (9.5 percent of GDP). 13. The main reason for the failure to improve the current account was that capital goods imports, which were tied to the existing financing arrangements and on-going projects, continued at very high levels through 1981 and 1982. The total volume of imports grew by 33 percent in this period, and import price increases were also substantial, increasing at roughly the same rate. The foreign exchange shortages that began in 1980 and grew much worse in 1981-82 obliged the Government to restrict imports where it could. The categories of raw materials and spare parts and of non-food consumer goods suffered most, though the Government ensured that energy imports covered essential needs. Food imports increased because of bad weather, including serious floods, that reduced the rice harvests. The sluggish export performance aggravated difficulties. During 1978-1982 the volume of exports stagnated. Coffee, the main export, was seriously affected by the international market situation, first by a drop in prices in 1981 and then by the 100 quota restrictions. Recent Developments 14. Since 1979 the drop in industrial production, including mining, has been especially sharp. Production at end 1982 had dropped to 70 percent of the level in 1979, lower than in any year of the 1970s. Output in every branch of production was lower in 1982 than in 1979. A particularly serious aspect was that the output of some basic consumption items (soap, shoes, matches, batteries) had dropped by well over one half since 1979. Although final data for 1983 are not yet available, it appears that there has been a modest pick-up in manufacturing activity. 15. The performance of the agricultural sector since 1979 was less disappointing than in the immediately preceding years, but was nevertheless unsatisfactory. Output grew by 7 percent in 1979, fell by 1.5 percent in 1981 and continued to grow by 2.5 percent per year in 1982 and 1983. In addition to poor weather, there have been shortages of inputs such as fertilizers, pesticides and improved varieties of seeds. Rice production did not increase between 1979 and 1982 but most export crops had somewhat higher outputs in 1982 than in 1979. In the case of coffee the increase was only about 2.5 percent, but output reached the highest level so far obtained. Clove production almost tripled between 1979 and 1980 and declined slightly thereafter. Vanilla also picked up from a low level in 1979 and almost doubled by 1982. These three crops accounted for over 70 percent of merchandise exports. 16. The Malagasy Franc was pegged to the French Franc until April 1982 when it became pegged to a basket of ten currencies weighted on the basis of Madagascar's external trade during 1973-1980. Following movements  - 5 - in the -weighted basket- the Central Bank of Madagascar adjusts the Malagasy franc exchange rate on a daily basis. Furthermore since the adoption of the ten currency basket pegging there have been a number of discrete devaluations of the Malagasy franc. As a result the nominal trade weighted exchange rate for the Malagasy franc has depreciated by about 40 percent between the 1st quarter of 1982 and June 1984 (using 1978 as the base). In real terms (i.e. after adjusting for differing relative price movements between Madagascar and its main trading partners) the effective exchange rate has depreciated by about 23 percent between the 1st quarter 1982 and June 1984. In June 1984 the real effective exchange rate of the Malagasy Franc was therefore, estimated to be about 5 percent below its level in 1978, i.e. before the upsurge in external borrowing and the deterioration on external account. 17. Over the last couple of years, the Government has shown its willingness to take a number of significant stabilization and recovery policy measures. The measures represent a major reversal in the thrust of policies and, therefore, were politically very difficult. The fact that the Government has been willing to undertake them shows that a significant reassessment has taken place. The Malagasy Government's stabilization and recovery efforts have been supported by successive IMF stand-by arrangements. The latest arrangement, in addition to establishing performance targets for external borrowing, domestic credit, reduction in external arrears and maintenance of exchange rate adjustment, requires increases in the prices of major agricultural products, further measures to liberalize the marketing of these products and progress towards a market-determined system of interest rates. Madagascar has met the June 1984 IMF stand-by target. PART 11 - BANK GROUP OPERATIONS IN MADAGASCAR 18. IDA credits to Madagascar amount to US$428.05 million (including US$29.9 million from the Special Fund) and Bank loans total US$32.57 million. Since 1975, about 40 percent of Bank Group lending has been for transport, 28 percent for agriculture, 15 percent for electric power and petroleum, 6 percent for industry and water, 4 percent for technical assistance, 4 percent for education and 3 percent for urban development. IFC has three investments in Madagascar in textiles, footwear and fisheries. The first investment was made in 1977 when IFC participated in financing the SOTERA textile mill. Recently SOTEMA encountered problems of cotton allocation, and transferring payments on its loan to IFC. But these problems appear to have been satisfactorily resolved. Last year IFC made its third investment in the Nossi-Be fisheries project. Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of March 31, 1984. 19. Bank Group assistance to Madagascar has been concentrated in the key areas of infrastructure (including urban and social infrastructure), agriculture and energy. In infrastructure, six Credits have provided for the construction of all-weather highway links between the island's different regions and for road maintenance and road rehabilitation. There  - 6 - have been projects to improve Madagascar's main port of Toamasina, and to support the railway's modernization efforts. Urban infrastructure development has benefited from a water supply and sanitation project (US$20.5 million) for the capital city of Antananarivo which was signed in May 1980. In the social sectors, education has been the major recipient of Bank assistance with two credits totaling US$18.8 million. In addition, studies for urban development financed by the UNDP with the Bank as Executing Agency have led to preparation of an urban development project (US$12.8 million) approved in FY 1984. A first US$5 million DFC credit was made to the Industrial Development Bank of Madagascar (BNI) in 1980. In addition, a credit of SDR 9.4 million for an accounting and audit project was made in June 1981. 20. Bank Group lending for agriculture has included three livestock development projects, four irrigation projects, two forestry projects, an agricultural credit project and a cotton project. Technical assistance support is also being provided under two free-standing projects, one to study investment alternatives in the Plain of Antananarivo area, and the other designed to strengthen institutional development of key sector institutions and to support agricultural policy reform. In addition, the Bank appraised and is supervising a rice intensification project for IFAD. 21. Energy projects have received growing Bank Group attention. IDA participated with several co-lenders in the financing of the large Andekaleka hydroelectric project, which was successfully completed in June 1982. A US$12.5 million project for petroleum exploration promotion is supporting the Government's efforts to develop a domestic supply of hydrocarbons and to improve planning in the energy sector. A heavy oil exploration project (Tsimiroro), in the amount of SDR 10.7 million was approved by the Executive Directors on November 16, 1982. Both projects are proceeding well. 22. The program for Madagascar is being broadened to include sectorial lending in support of current imports of a priority nature. A first project for industrial imports is well advanced and a second project, similar in design but for agriculture, is under preparation. Both projects are geared to relatively extensive commitments by the Government to policy reform - both at sectoral and at the macro-economic levels. In addition projects for a broad program of irrigation and ports/railways rehabilitation are at advanced stages of preparation. Both projects would involve substantial cofinancing. Further lending in the next two or three years is also foreseen for technical assistance, vocational education and energy development (petroleum and fuelwood). 23. In the past, problems have arisen in the execution of several Credits. The main problems encountered included delays, cost overruns, deficiencies in management and inadequate financial performance of beneficiary agencies. Recent problems have centered on difficulties linked to the country's economic crisis, notably the acute shortage of foreign exchange and budget funds and institutional problems related above all to the parastatal system. Nevertheless, the Fourth Highway Credit is completed and construction under the Fifth Highway Credit is well advanced Disbursement of the Second railway credit was suspended on June 25, 1982 pending Government action to correct major deficiencies affecting the  railway's finances. They were resumed in December 1982 after the Government had implemented a satisfactory financial recovery program and have been virtually completed. More recently, difficulties with covenanted financial rates of return in the Water/Sanitation Credit have resulted in an action program to improve the financial management of the state water and power company, JIRAMA. Due to difficulties occasioned by a poor choice of consultants and disorganized municipal finances, the sanitation component of the Credit has been very slow in starting. 24. Experience with project implementation in agriculture has been mixed, reflecting difficulties in the agriculture sector in general over the last few years. Performance under irrigation projects (for cotton and rice) has been particularly disappointing, due to the following major factors: (i) the weakness of the parastatal managing institutions; (ii) the poor incentive structure, both at scheme level and in the official pricing systems; and (iii) inadequate arrangements for maintenance and cost recovery on the schemes. Performance in the livestock and forestry sectors has generally been satisfactory with both implementing agencies (FAFIFAMA and FANALAMANGA, respectively) developing into effective institutions with technically competent and dedicated management. Experience with the agriculture technical assistance project has been positive, although serious delays in approving contracts have been encountered. In general, most projects have been adversely affected by the worsening economic situation and particularly by shortages of foreign exchange. 25. Since the start of our program in Madagascar, four Credits have been completed and audited by the Operations Evaluation Department. The Audit Report No. 1622 of December 1976 on the first Lac Alaotra Project concluded that the project was generally successful. However, the Impact Evaluation Report No. 3600 of August 1981 concluded that earlier assessments of project performance had been over-optimistic, and that the actual economic rate of return was probably negative. The Audit Report No. 1559 of April 1977 on the Beef Cattle Development Project concluded that the project had contributed little to Madagascar. The Audit Report No. 2143 of July 1978 concluded that the Third Highway Project was well justified and had a good rate of return despite substantial cost overruns. Report No. 2299 of December 1978 concluded that the physical objectives of the Tamatave Port Project were satisfactorily achieved but pointed out that the institutional objective was not accomplished during project implementation because of inadequacies in the staffing of the port authority. PART III - CYCLONE KAMISY AND THE REHABILITATION PROGRAM Cyclone Damage and the Main Affected Zones 26. Madagascar has been hit during the past cyclone season, December 1983 to April 1984, by some ten cyclones of which the last, cyclone Kamisy, which hit the Island on April 9-13 was particularly destructive. Kamisy first hit the City of Antsiranana on April 9, then Mahajanga on April 11 before crossing the Island from West to East to Toamasina. Due to the extreme violence of the winds (more than 250Km/h) and very heavy rainfalls,  severe damage was caused I= the provi=ces of Antsira=ana and Mahajanga to ports, airports, roads, buildings, irrigation schemes and the power =etwork. 27. The province (Faritany) of Anmtsiranana (Diego Suarez) is located at the extreme -orth of Kadagascar. Its capital city, Antsiranana, with a population of 70,000, Is one of the four maim ports of the country. It is also Madagascar's main naval facility. 28. The province (Faritany) of Mahajanga ls located on the northwest coast of the island. Mahajanga City lies on the Mozambique Channel. at the estuary of the Betsiboka River. The port of Mahajanga is the second main port of Madgascar, carryitg 11 percent of the country's total traffic, both international and coastal. Its capacity, however, is limited as the port's use is restricted by the condition of the road to Antananarivo CRN4) and because of draft restrictions. 1* Mahajanga province there Is major agricultural infrastructure such as the irrigatioc zone around Marovoay (100km south of Mahajanga), which is the country's second most important rice surplus area after Lac Alaotra and the main cotton producing zones of Madagas3car which support an important textile isdustry. Rehabilitation Costs 29. Damage to infrastructure, crops and economic activity caused by cyclone KmiLsy was estimated at up to USS250 million (para. 37). The most urgent rehabilitation needs are In the two hardest hit areas, lahajanga and Antsira3asa. Only the cost of these urgent rehabilitation works, included in this project, have bee- estimated. Estimates of damage to buildings, housing and agricultural installations is only partially available. 30. Damage to the transportation network includes the ports and airports of Antsiranana and Mahajanga, and the road netwrrk of Mahajanga and Antsiranana Provinces, with the most urgent rehabilitation and repair costs estimated at about US$10.0 million. Damage by sector and tI'a related rehabilitation and repair costs are as follows: Ci) Ports - Botl the ports of Antsiranama and Mahajanga sustained beavy damage to harves, sheds and other buildimgs; vital equipment such as tugboats, beacons, navigational aids, were sunk or badly damaged. Rehabilitation and repair costs were estimated to be about US$2.5 million; (il) Airports - Traffic has been restored in precarious conditioa and substantial repair works are required to both Antsiranana and Mahajanga freight terminals, sheds, technical, meteorological and staff housimg buildings which lost part or all of their roofs. The navigational aids and meteorological equipment were destroyed and msat be replaced. Correspondimg costs are estimated to be about US$1.5 million; and (iii) Roads - The Cyclone ve:,* heavily affected the road network of Mahajanga and Antstranana Provinces, causing considerable damage on RN4, 1N6 and RN8 and interrupting traffic for about two weeks. Major repair works are needed urgently, mainly on the RN4 stretch along Lake Amboromalandy where a flood-gate bridge has been washed away and a dike damaged along its entire length. Repair works are estimated to cost around US$6.0 million;  - 9 - 31. In both towns of Antananarivo and Mahajanga. urban Infrastructure ws badly hit. Nmerous public boLldings lost part or all of their roofs. The cost of damage to schools, hospitals, administrative offices and State ownd housine is estimated for those two towns at around USS5 million. The damage to electric power systems was mai:ly to the medium voltage and lo voltage networks of seven towns. In addition, numerous buildi3gs were damaged: thermal power plants at Mahajanga, offices at Marovoay and Antananarivo. and various buildings at Antsiranana. The cost of repair works are estimated to be about USS2 minlion. 32. Tn agriculture, the damage Involved primarily resulted from the rupturing of dikes leadig to floodlng of villages and the deposit of sand on fields and Iu irrlgation canals , washouts in bank of Canals, deterioration of bighways and access roads, and damage to various feeder roads and access roads In additiLon to damage to buildigs. Most of this damage occured In the Marovoay region, a major rice producing area near Mahajanga, whose production and trade is largely handled by the agricultural parastatal FIFABE. The cost of infrastructure damage caused to FIFABE In the Marovoay region is estimated at over USS3 million. t: addition followizg the torrential rains and the breaches in the banks of the Betsiboka and the other rivers about 70 percent (7.000 hectares) of the area devoted to cotton cultivation in the Mahajanga region was flooded. The loss of cotton under cultivation and future effects on production have not been estimated. MaWKLM and Funding Relief and Rehabilitation 33. The Immediate Relief Effort. The emergency relief effort imediately after the cyclone was eificiently handled by the Conseil National de Secours (CNS), chairea by the Minister of Tnterior, and other Government agencies. Removal of debris started immedlately and most of the essential water supply and power networks were restored to operating condition within days. The response of the Government (through the CNS), and of the affected communitles, professional associations and international relief organiszations was immediate and efficient, providing medicine, food and tents. The financial resources of the CNS were, however, extremely limited (about FMG 140 million in May 1984) and totally inadequate to cope with the disaster. 34. International Support. In the weeks after the cyclone, steps were taken to prepare for the rehabilitation program. All Government agencies were asked to prepare documents establishing the extent of damage and an approximate cost of rehabilitation; an appeal for assistance war launched to f-reign governments and aid agencies. At the time of appraisal, their responses were as follows: (a) A U.N. mission visited Madagascar for the purpose of assessing the damage and making recommendations for the rehabilitation program. UNDP made available US$60,000 whilch have been used for import of construction materials; (b) KFW is financing major rehabililtation projects for the FIFABE irrigation system, already started;  - 10 - (c) The African Development Bank (AfDB) has expressed interest in financing the complete rehabilitation of the FIFABE irrigation system and of the RN6 between RN4 junction and A_tsohihy; (d) The European Development Fund (FED) provided tents (USS280.000), 1,750 tons of rice and construction materials (USS280,000). They are ready to finance the complete rehabilitation of the Vohemar-Ambilobe road and to envisage a contribution to the Namakhia Bridge reconstruction (on the Hahavavy River to the West of Mahajanga); (e) The CaIsse Centrale de Cooperation Economique (CCCE) (France) was prepared to finance rehabilitatios of damaged dikes of HASYMA (cotton fields) with available counterpart funds; (f) The Fonds d'Aide et de Cooperation (FAC) (France) intend to finance detailed engineering and supervision for rehabilitation of the Ports of Mahajanga asd Antsiranana and to contributs building materials for certain educational buildings; (g) USAID has agreed to finance the importation of construction materials for rehabilitation of housing; and (h) UNESCD has selected 5 subprojects totalling US$2.7 million: gi) construction materials for 220 school buildings in the Faritany of Mahajanga, Antsiranana and Toamasina; (ii) 5,000 school desks and other furniture; (iii) equipment for a technical high school in Mahajanga; (iv) 100 tool kits for villages to rebuild schools; and (v) assistance of an architect to design cyclone resistant prototype educational buildings. Bank Experience in Reconstruction Projects 35. In recent years, the Bank has participated in a limited number of rehabilitation projects following earthquakes, cyclones and civil wars. The proposed project takes into consideration the lessons learned from these previous operations by: (a) limiting project scope and rehabilitation targets; (b) shorte-ing the implementation period; (c) streamlining project design and administrative procedures; and (d) requesting from the Government the establishment of a National Coordination Committee. PART IV. THE REHABILITATION PROJECT Background 36. On April 16, 1984 President Ratsiraka telexed the Bank tLat cyclone Kamisy had killed some 50 persons in the north of Madagascar, left 70,000 persons homeless and caused damage to infrastructure, crops and  - 1i - economic activlty estimated at up to USS250 million. In reply to the President's appeal for Bank assistance an appraisal mission visited Madagascar from May 25 to June 5, 1984, to assess the damage to infrastructure and assist the Government in preparing an outline for the reconstruction program and a framework for the proposed project, including inastitutioal arrangements. Negotiations vere beld in Washington from September 21 to 24, 1984. The Malagasy delegation was led by Mr. Rem& Rasata Rainiketamanga, President of CNC. No Staff Appraisal Report has been prepared. Approach, Objectives a-d Rationale 37. The proposed credit would finance urgent works in priority sectors, thus providing al initial impetus to the reconstruction effort. This approach would support a coherent rehabilitation process and provide a foundation for the restoration of economic activities. The project would also assist the Government in handling the rehabilitation management, planning and financing issues steiming from the destruction caused by the cyclone. The project wa defined by selecting critical items wbich encompass the most e .atial and urgent investments necessary for the reconstruction of shelter and key facilities. Other contributions to the rehabilitation program, such as mentioned in para. 34 above, will complement and will not overlap with the proposed project. The proposed project is expected to be completed in two years. 38. The IDA contribution to the overall rehabilitation program would alm at: (a) contributig to the physical and economic rehabilitation of the areas damaed by the cyclone and particularly by restoring essential facilities before the next cyclone season (January-April 1985); (b) supporting a streamlined institutional arrangemet appropriate for efficient coordination; and (c) helping de7elop measures that could be applied to minimize potential damnage from natural disasters in these and other vulnerable areas of the country. The project components were selected on the basis of: (a) their priority as assessed by the Government and the Bank; (b) the necessity of immediate restoration of some activities; (c) their location in areas which would permit appropriate execution and supervision; and (d) the absence of other finacing. 39. Specifically, the objectives of the project are: (a) to restore the ports of Mahajanga and Antsiranana, to a minimum operational level; (b) to restore the airports of Mahajanga and Antsirarzna in order to maintain air traffic safety; (c) to rehabilitate sections of the roads RN4, RN6, and RN8; (d) to repair the public buildings of Mabajanga and Antairanana and to prepare a program based on an urban and drainage study for improvement of certain wards of Mahajanga in which there are unsanitary conditions; (e) to help FIFABE (the Island's second largest rice producer) maintain its production by reconstruction of the Amboromalandy Dike which protects the rice fields and by replacing lost transport equipment; complementary investments would be undertaken by AfDB and KFW to rehabilitate the FIFABE Irrigation system; (f) to repair the power plants and networks; and (g) to make housing credits available to home owners to assist them in repairing their houses. All these components are located in the provinces of Hahajanga and Antsiranana.  - 12 - Institutional Framework 40. For the rehabilitation effort, the ministries concerned are mainly Public Works, Agriculture and Transport. At the request of the Bank, the Minister of Finance has established, in the ministry of Public Works, a National Coordination Committee (CNC) composed of full time representatives of all ministries concerned. This Committee is headed by an advisor to the Minister of Finance. He is assisted by two experts to be financed under the project. The principal role of the Coordination Committee in the proposed project is to plan and coordinate with the executi=g agencies the preparation and implementation of sub-projects and to monitor their execution. The CNC would be responsible for verifying that sub-projects are prepared and implemented in accordance with the requirements of the Bank, including preparation of bid documents aad contract award. The CNC would approve reimbursement of project expenditures by reviewing the works performed and authorizing payments from the Special Project Account. The CNC would also represent the Borrower for _he purpose of loan disbursements. 41. Under the coordination of the CNC, the implementing agencies would be the existing institutions responsible for each sector: (a) the Ministry of Public Works for the ports (through SEPT), civil works for the airports, the roads and public buildings, and the urban drainage study for Mahajanga (through SEIMAD); (b) ASECNA for airport equipment (this agency is operating the Mahajanga airport); (c) the Hinistry of Education for the educational buildings financed by Credit 663-MAG; (d) FIFABE for the agriculture component; (e) JIRAMA for the power networks, to be financed by Credit 1002-MAG; and (f) BTI and BFV for the housing credit (administration of housing loans , recovery of loan charges) and SEIMAD for reconstruction supervision. 42. The Government would enter with ASECNA into a subsidiary loan agreement for the Mahajanga airport equipment which would be operated by ASECNA and into a -contrat particulier (special implementation agreement) for the rest of the airport component. The Government would also enter into implementation agreements (-conve-tions de travail-) with SEPT, SEIMAD and FIFABE. For the housing credit, the Goverment would use the services of two banks, BIM and BFV, as intermediaries. It would enter into subsidiary agreements with them. Project Description 43. The proposed rehabilitation project would consist of components in the following areas: (a) Ports (i) Mahajanga: rehabilitation of Vuilleman and Barriquand Wharves, repair of offices, housing and warehouses, repair or replacement of port equipment (navigational aids, launches, tugs and spare parts); and (ii) Antsiranana: rehabilitation of the old and new wharves, restoration of buildings and housing, and replacement or repair of port equipment (launches, tugs, navigational aids, and spare parts);  - 13 - (b) Airports (i) Mahajanga: Repair of air terminal, technical facilities, control tower, staff residences and hangcr; replacement of equipment (radio beacons, pylons, antennas, 1 GIF receiver, IVOR/DKE station and 2 power units); (ii) Antsiranana: Repair of air terminal, technical facilities under construction, hangar and quarters; replacement or repair of equipment (1 VOR radio transmitter, pylons and antennae, landing aids, generating set and fire engine); and (iii) restoration of Mahajanga and Antsiranana meteorological stations including repair of technical buildings and quarters, replacement or repair of various measuring instruments and repair of communication, telex and telepho=e equipment. (c) Roads (i) Rehabilitation of Amboromalandy Dike, bridge and spillway on RN4; (ii) reconstruction of the 12 km road linking Marovoay to the RN4 (RN8); and (iii) repair work on LN6 between Ambondromany, Port Bergg and Ambanja. Cd) Public Buildings C) Repair of educational buildings (about 15 schools in Mahajanga and 15 in Antsiranana); and (ii) repair of other public buildings, administrative offices and public housing (about 20 buildings in Mahajanga and 16 buildings in Antsiranana). Ce) Agriculture (i) Restoration of the FIFABE fleet by purchasing one tug and two barges; (ii) re-establishment of FIFABE spare parts stock (spare parts for diggers, pumps and power units); and (iii) repair of 15 FIFABE buildings at Marovoay and Mahajanga. (f) JIRAMA (i) Rehabilitation of power networks and plants in Mahajanga, Antsiranana, Toamasina, Nossi-Bg, Ambato-Boeni and Marovoay; (ii) repairs to various buildi-gs in Mahajanga, Antsiranana, Antananarivo, and other sectors; and (iii) re-establishment of JIRAMA vehicle spare parts stock. (To be financed under Credit 1002-MAG). (g) Housing Credit. Credit to be made available through Bf1 and BFV to private owners for the reconstruction of their houses, provided the damage was caused by the cyclone; the repayment period would be 10 years with two years of grace and an interest rate of 12 percent per annum, with maximum amount of FMG 1.5 million. The interest rate of 12 percent  - 14 - per annzm is belov the prevailing bank lending rates In Madagascar which vary between 15 and 20 percent (the rate of general price Increase in the economy for 1984 is estimated at 16 percent). A monthly income below !MG 70,000 would be required for eligibility. (h) Consultant Services (i) Urban planning, housing and drainage study for the low-income neighborhoods of Mahajanga: Amboboka, Tsararano, Tsaramandroso and Abattoirs; (ii) two experts assisting the National Coordination Committee; and (iii) assistance in supervising program execution. The project provides the Government with the opportuaity to reinforce its procedures for coping with natural disasters. For this reason the National Coordination Committee has been established and is being provided with technical assistance. Throughout project execution we will assist the Government in adapting the functioning of this committee so that it can be a model for coping with future emergencies. The Government program includes studies to provide techbical solutions for low cost cyclone resistant construction and the preparation of sub-projects to protect low-lying urban areas that are subject to flooding. Project Costs 44* The total cost of the project, including taxes, is estimated at US$27.7 million. Of the total cost of the project, 59 percent or US$16.3 million is estimated to be foreign exchange, as shown in the following table, and isn Annex 4: USS Million K Local Foreign Total Total Cost. Ports 0.88 1.85 2.73 9.8 Airports 0.60 1.42 2.02 7.3 Roads 2.98 4.37 7.35 26.5 Public Buildings 2.96 2.19 5.15 18.6 Agriculture 0.17 0.43 0.60 2.2 JIRAMA 0.78 1.38 2.16 7.8 Housing Credit 0.80 1.20 2.00 7.2 Consultant Services 0.68 1.06 1.74 6.3 Total Base Costs 9.85 13.90 23.75 85.6 Physical Contingencies 1.18 1.75 2.93 10.6 Price Contingencies 0.44 0.63 1.07 3.8 TOTAL1/ 11.47 16.28 27.75 100.0 1/ Goods, works and services procured under the project will be subject to taxation, the total cost includes custom duties and internal taxes amounting to US$4.5 million (16 percent). Baseline costs are expressed in June 1984 prices.  - 15 - 45. The cost breakdow- by major categories is as follows: USS million (a) civil works 15.2 (b) equipment 4.8 (c) housing credit 2.0 (d) consultants services 1.7 (e) contingencies 4.0 Total 27.7 This cost includes refinancing of the disbursed amount of a= IDA Project Preparation Facility (PPF) of US$1.0 million which was approved in July 1984 for project preparation, for recruitment of consultants for the National Coordination Committee (CNC) and for starting some repairs which should be done before the next rainy season. 46. Physical contingencies have bee= estimated at 15 percent for civil works and equipment. No physical contingencies were allowed for tech_ical assistance, studies or housing credit. Price contingencies on the local and foreign components were based on anticipated international inflation of 3.5 percent for 1984, 8 percent for 1985 and 9 percent thereafter. The resulting price escalation factor represents 3.8 percent of total costs. A more detailed breakdown is provided in Annex 4. Project Financing 47. In addition to the proposed IDA credit of US$15.0 million, three on-going projects would contribute funds towards certain urgent rehabilitation needs i- their respective sectors: (a) the Second Education Project (Credit 663-MAG) has a remaining balance of US$700,000 after completion of the project; these funds would be used for emergency school repairs; (b) US$2.0 million from the Water and Sanitation project (Credit 1002-XAG) would be used for rehabilitation of JIRAlA's facilities, and for the urban and drainage study of Mahajanga which Is necessary for proper rehabilitation; and (c) the Sixth Highway Project (credits 1391-AG and SF4-MAG) are being used to start urgent works which are expected to result in payments estimated at US$0.5 million before approval of this credit. 48. This drawing of funds from other projects will not affect the respective projects because (a) credit 663-NAG would otherwise have been closed at the end of 1984 with an undisbursed balance of US$700,000; (b) credit 1002-HAG has a remaining balance of about US$16.0 million which could not be fully utilized due to delays in project execution and to savings resulting from dollar appreciation; and (c) only small amounts would be utilized from credits 1391 and SF4 - MAG to start the road works as the new credit is expected to take over the disbursements for road works after January 1, 1985. Appropriate amendments have already been made to the Second Education credit and minor amendments are being made to the other two credits to permit disbursement from them.  - 16 - 49. Total IDA assistance would amou=t to US$18.2 million. The table below summarizes the f inancing plan: USS million Local Foreign Total Proposed IDA Credit 0.7 14.3 15.0 Credit 663-KAG (2nd Education Pr.) 0.3 0.4 0.7 Credit 1002-MAG (Water & Sanitation Pr.) 0.7 1.3 2.0 Credits 1391 and SF4-HAG (Sixth Highways Pr.) 0.2 0.3 0.5 Government or Cofinancing: Investments 5.0 5.0 Duties and Taxes 4.5 4.5 Total Financing Required 11.4 16.3 27.7 Project Implementation and Monitoring 50. Those parts of the reconstruction program included in the project are expected to be completed within two and a half years. This period is sufficient to execute the most urge=t investments necessary for the full restoration of economic activity i- the affected areas. In fact, most of this project would be completed within one year. A project implementation schedule is given in Annex 5. The implementing agencies (para. 41) have the capacity to execute the project quickly. They have experience with Bank projects and would be helped by consultants in the field and by the National Coordination Committee (CNC). As part of its coordinating role CNC would be responsible for review and approval of all documents before submission to the Association. Local coordination and supervision of the project would be performed by CNC with the help of consultants retained by the Ministry of Public Works and financed by the proposed credit. Implementation agreements, subsidiary agreements, subsidiary loan agreement and Contrat Particulier- between CNC and the executing agencies would define responsabilities for project execution (para. 42). Their signatures would be conditions of credit effectiveness (Draft Development Credit Agreement, Section 6.01 (a)). Procurement 51. Due to the availability of funds under existing credits and the PPF, the CaC has been able to carry out project design work and preparation of bid documents. One expert has been recruited for CNC and another one for the Ministry of Public Works. The consultants of the Fifth and Sixth Highway Projects are in the field and have completed design studies. The works for the roads and the public buildings have been started in August 1984. 52. The table on the following page indicates the planned procurement procedures and respective amounts. This distribution may be subject to some revision as the sub-projects and respective implementation arrangements are developed in detail.  - 17 - Procurement Arrangements Not Total Project Element LCBaI Otherbi Applicable Cost Civil Works 11.00 4.70 - 15.70 (7.70) (3.30) - (11.00) Equipment 2.00 1.90 - 3.90 (2.00) (1.90) (3.90) Housing Credit - - (2.00) (2.00) Consulting Services - 1.60 - 1.60 TOTAL 13.00 8.20 2.00 23.20 (9.70) (6.50) (2.00) (18.20) Notes - Cost figures shown in this table include contingencies and are rounded. - Figures in parentheses are the respective amounts that would be financed by IDA. a/ Local unrestricted bidding (Appel d'Offres ouvert local). b/ Force account, direct negotiatio=, amendments to contracts already signed, direct purchase and hiring of consultants. 53. Taking into account the necessity to expedite procurement, local uarestricted bidding procedures acceptable to IDA in which foreign firms are eligible to participate would be used for civil works. Road works would be carried out on the basis of amendments acceptable to IDA made to contracts for works being executed under the Fifth and Sixth Highway Projects (credits 938-MAG, 1391-MAG and SF4-MAG) awarded on ICB basis. All equipment would be purchased on the basis of LCB acceptable to IDA or by local shopping with at least three price quotations (if the expected price is below US$100,000), except technical equipment for airports which, because of standardization, would be purchased by direct contracting. 54. The following measures would be applied to streamline the procurement process as it relates to this project: (a) submissions from bidders would be reviewed by the National Coordination Committee which should issue a bid evaluation report within ten days; (b) the executing agencies would react to a bid evaluation report by issuing a decision within ten days of its receipt; (c) the Central Tender Comission would render its opinion on this decision within five days of its receipt; (d) all works contracts over US$1,000,000 each and equipment contracts over US$500,000 each would be subject to prior IDA review. Other contracts would be subject to selective post-award review; and (e) other procedures not routine in Madagascar but which have been used in Bank-supported projects, such as public bid openings and requirement of a performance bond or Bank guarantee, would also be applied. Disbursements 55. Retroactive financing of up to US$2.25 million (15 percent of the credit amount) would cover expenditures made after July 1, 1984, for items urgently needed to start the reconstruction effort. The Bank would  - 18 - disburse 100 percent of foreign expenditures and 65 percent of local expenditures for equipment, 65 percent of civil works net of taxes and 100 percent of foreign expenditures and 50 percent of local expenditures for consultant services. The schedule of estimated disbursements given in the Credit and Project Summary is based on a two and a half year implementation period (see Annex 5). 56. All disbursements would be fully documented and prepared by CNC. Because of its growing familiarity with the Bank portfolio in Madagascar, the Treasury should be able to transmit requests to IDA without undue delay. The resident mission is alsc. expected to help in this regard. 57. To ensure prompt availability of funds for the project, a separate Special Account (revolving fund) would be established in the Central Bank, with an initial deposit by IDA of USS3.0 million. The Special Account opening balance was calculated as the equivalent of three months of IDA disbursements from the proceeds of the proposed credit plus 20 percent. The Borrower would also open in its Central Bank a Project Advance Account with an initial deposit of FMG 1 billion. At the beginning of each quarter, the account would be replenished up to this amount. Establishment of these Accounts would be a condition of credit effectiveness (Draft Development Credit Agreetment, Section 6.01 (b)). Accounting, Auditing and Reporting 58. CNC would maintain individual accounts which would record each sub-project of the rehabilitation program. Annually, the CNC would provide the Bank with accounts and financial statements including the opinion of an independent auditor acceptable to IDA. Also, on an annual basis, the CNC would supply the Bank with a copy of the audit of the Special Account including the opinion of the auditor. 59. CNC would also be responsible for preparation of quarterly progress reports to be addressed to the Association. The regular reporting of project progress to be provided by CNC on a quarterly basis would consist of the following: (a) implementation schedules by component; (b) disbursements during the preceding quarter and cumulative, with a breakdown for each sub-project; (c) documentation attested by the executing agency; and (d) a qualitative description of progress in the overall rehabilitation program and in the IDA supported project. In addition to this quarterly progress report CNC would monthly send to the Association, by telex, a very short report giving the status of each component, the contracts signed with their amounts, the problems to be resolved and the solution recommended. A Project Completion Report would be prepared by CNC and sent to IDA within six months of the close of disbursements. Benefits and Risks 60. The benefits of this project are related to the reconstruction of infrastructure which has been destroyed or damaged by the cyclone. This reconstruction is needed as quickly as possible to restore economic activity in the regions of Mahajanga and Antsiranana. In particular, the reconstruction of the Amboromalandy Dike is required to restore the traffic  - 19 - on the RN4 (Antananarivo-Mahajanga) and irrigation of 2,500 ha of rice fields. The repair and restoration of about 30 schools would provide accommodation for an estimated 15,000 pupils who are either currently deprived of adequate educational opportunity or accommodated in over-crowded classrooms. The replacement of airport equipment will improve the security, not only for local traffic, but also for international traffic, since Mahajanga Airport handles international traffic in the region. Finally, a general benefit for the rest of the country would be to equip Madagascar with a framework for handling future emergencies of this kind. This would be achieved through the institutional framework established for the project (paras. 40 and 41); the National Coordination Committee would be maintained with experienced staff. In the preparation of the PCR the effectiveness of this approach in responding to similar emergencies in the future would be assessed. Moreover, rehabilitation works financed under this project would be designed on the basis of methods for reducing vulnerability of buildings. 61. The foreseeable risks in this project are principally those which relate to the need for timely execution and the timely availability of funds, local and foreign. CMC will have to prove its ability to prepare, coordinate and execute sub-projects in a timely manner, but this risk will be reduced by the recruitment of two experts financed by the proposed credit. There is also a risk of delays in the procurement process. This risk has been taken into consideration in the scaling and phasing of the project, its reliance on components to be executed by experienced agencies (Ministry of Public Works, ASECNA, etc.) and closer monitoring and supervision. The last risk concerns the timely availability of funds and the start up support necessary for the rehabilitation. Bank experienem in other reconstruction projects strongly suggests the need for streamlined disbursement procedures and close monitoring in the start-up period. The commitments which would be obtained from the Government regarding the provision of counterpart funds (Draft Development Credit Agreement, Section 3.01 (a)), special procedures put into place to speed up the procurement process (para. 53), the retroactive financing proposed for the IDA credit and frequent supervision missions are seen as a means of supporting the start-up process. PART V - LEGAL INSTRUMENTS AND AUTHORITY 62. The draft Development Credit Agreement between the Democratic Republic of Madagascar and the Association, and the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association, are being distributed separately to the Executive Directors. 63. Special conditions to the Credit are listed in Section III of Annex 3 to this report. Additional conditions of effectiveness of the proposed Credit are: (a) the establishment at the Central Bank of the Special Account and of the Project Advance Account; and (b) signing of implementation agreements, subsidiary agreements, subsidiary loan agreement and Contrat Particuliere as indicated in para. 50.  - 20 - 64. 1 am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association. PART VI - RECoMUENDATION 65. 1 recommend that the Executive Directors approve the proposed credit. A.W. Clausen President Attachments WashinRton D.C. October 11, 1984  - 21 - Annex 1 TABLE C rscE I of 5 HADAGASCAR - SOCIAL INDICATORS DATA SHEET HADACASC REFERENCE GROUPS (tEIGHTED AVERAGES) j. MUST (HOST RECNT ESITEATE) lb RECENT LOW INCOHE AFRICA mIDDLE IN-COM 196q0b 1970m k zst riTb soUTN OF SAHARA AFRICA S. OF SAMARA ARE (TUO SAND Sq. U) TOTAL 587.0 187.0 537.0 ACRICJLTURAL 361.2 363.7 370.5 CGN Fm CAPITA (VS$) 130.0 190.0 320.0 249.1 1112.9 KNOtt CONSIWTIUM PER CAPITA (KILOCRANS OF OIL EQUIVALENT) 27-0 60.0 41.0 62.6 529.0 PoPuLATION AD VITAL SUTlSTICS POPULATION,HID-YEAR (THOWSANDS) 3474.0 6785.0 9199.0 URBAN POPULATION (2 oF TOTAL) 10. 14.1 19.5 19.2 29.7 POPULATIUII PROJECTIONS POPULATION IN TEAR 2000 (HILL) 16.1 STATIONARY POPULATION (KILL) 34.1 POPULATION HONETM 1.9 POPULATION DENSISY PER SQ. EN. 9.3 11.6 15.3 32.5 55.8 PER SQ. N. AGRI. LAND 15.2 18.7 24.2 119.2 111.5 POPULATION AGE STRUCTURE (2) 0-14 US 41.6 42.6 43.9 45.6 45.4 15-64 YRS 55.Z 53.9 52.9 51.5 51.7 65 AND ABOVE 3.2 3.3 3.3 2.9 2.9 POPULATION GROUTH RATE (C) TOTAL 1.6 2.1 2.5 2.8 2.8 URBAN 4.9 5.0 5.2 6.2 5.2 CRUDE BIRTH RATE (PER THOUS) 46.7 45.2 46.7 48.6 47.0 CRUDE IDEATH RATE (PER THOUS) 26.6 21.9 17.8 17.7 15.2 GROSS REPRODUCTION RATE 3.0 3.0 3.2 3.2 3.2 FAMILY PLANNING ACCEPTORS. ANNUAL (TNOUS) . USERS IS OF HARRIED VOEE) .. .. . YODM AND UnRItION INDEX OF FOOD PROD. PER CAPITA (1969-71-100) 89.0 102.0 94.0 65.8 31.6 PER CAPITA SUMY OF CALORIES (2 OF REQUIREMENTS) 100.0 107.0 109.0 86.4 98.2 PROT