Liberia - Second Bong County Agricultural Development Project

Document of The World Bank FOR OFFICIAL USE ONLY |FIE COPY Report No. 4681-LBR STAFF APPRAISAL REPORT LIBERIA SECOND BONG COUNTY AGRICULTURAL DEVELOPMENT PROJECT February 15, 1984 liEE COPY Western Africa Projects Department Agriculture Projects Division B 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.  LIBERIA SECOND BONG COUNTY AGRICULTURAL DEVELOPMENT PROJECT Currency Equivalent Currency Unit United States Dollars SDR 1 US$1.05928 Weights and Measures 1 metric ton (mt) = 2,204.6226 pounds (lbs) 0.9842 long ton (lg ton or 2,240 lbs) 1 hectare (ha) = 2.4711 acres (ac) 1 acre (ac) = 0.4047 hectare (ha) 1 kilometer (km) = 0.6214 miles (mi) 1 mile (mi) = 1.6093 kilometers (km) Abbreviations ACDB - Agricultural and Cooperative Development Bank ADP - Agricultural Development Project BCADP - Bong County Agricultural Development Project CARI - Central Agricultural Research Institute CDA - Cooperative Development Agency CMEU - Central Monitoring and Evaluation Unit CSU - Cooperative Service Unit CSD - Commercial Services Division DCS - District Cooperative Society DPD - Department of Planning and Development GOL - Government of Liberia LCADP - Lofa County Agricultural Development Project LPMC - Liberian Produce Marketing Corporation MEU - Monitoring and Evaluation Unit MOA - Ministry of Agriculture MPW - Ministry of Public Works MRD - Ministry of Rural Devlopment MIA - Ministry of Internal Affairs SSU - Schistosomiasis Surveillance Unit SRSP - Smallholder Rice Seed Project WARDA - West Africa Rice Development Association Fiscal Year July 1 - June 30  FOR OFFICIAL USE ONLY LIBERIA SECOND BONG COUNTY AGRICULTURAL DEVELOPMENT PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. THE AGRICULTURAL SECTOR ........................................ 1 A. Introduction .......................................... 1 B. Background .......................................... 1 C. Agricultural Sector Characteristics .. 1 D. Agricultural Institutions ................................. 2 E. Sector Development Strategy ................................ 5 II. THE PROJECT AREA ............................................... 6 A. Location and Area Characteristics .... 6 B. Roads and Communication . . .................................. 7 C. Farming System . . ........................................ 7 D. Evaluation of Bong County Agricultural Development Project Phase I ........................................ 8 III. THE PROJECT .12 A. Project Rationale, Objectives and Summary Description 12 B. Detailed Features ....15 - Crop and Farm Development.. .. 15 - Input Supply, Credit and Marketing Services ... 17 - Roads and Workshop. . . 18 - Health Services ....19 - Project Management, Administration, Monitoring and Evaluation .. .... .... e * . v . * . ... 1 9 - Technical Assistance and Consultancy Services. 19 - Support to MOA Central Services ....20 - Project Preparation Facility ....20 C. Cost Estimates . . . ............ 20 D. Proposed Financing ....22 E. Procurementocuremt... 24 F. Disbursements. . . 25 G. Accounts and Audit ....27 This report is based on the findings of an appraisal mission consisting of Messrs. Cole, Gray, Headworth, Husain, Krishnan and Locatelli (IDA) and Weatherell (consultant) which visited Liberia in February/March 1983. Mr. C. Dickerson of IFAD participated in the appraisal and Ms. A. Bagai provided the secretarial support. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - IV. PROJECT IMPLEMENTATION ....................... 27 A. Project Organization and Management .27 B. Sub-Project Selection and Monitoring Procedures .28 C. Agricultural Extension and Training .30 D. Cooperative and Credit Organization .31 E. Infrastructure .32 V. PRODUCTION ASPECTS AND TECHNIQUES .33 A. Crop Development ..33 B. Production Specifications . .34 C. Yields ..35 D. Farm Labor ..37 E. Role of Women ................. 37 F. Environmental Considerations ..38 VI. DEMAND, MARKETING, PRICES AND FINANCIAL ANALYSIS .38 A. Demand .38 B. Markeing .39 C. Prices .40 D. Financial Analysis .42 - Farm Incomes .42 - Financial Implications for Government .43 VII. BENEFITS AND JUSTIFICATION .43 A. Overall Benefits .43 B. Economic Rate of Return .44 C. Sensitivity and Risks ............................fi.45 VIII. AGREEMENTS REACHED AND RECOMMENDATIONS ......................... 47 ANNEXES 3-1 Design Standards for Feeder Roads 3-2 Project Costs - Project Component by Time 3-3 Project Costs - Summary Account by Project Component 3-4 Estimated Schedule of Disbursements 4-1 Organogram 4-2 Staffing BCADP, MOA and ACDB 4-3 Project Implementation Schedule 5-1 Projected Crop Development and Farmer Participation 5-2 Incremental Crop Production 6-1 Economic Prices 6-2 Crop Budgets 6-3 Farm Models 6-4 Government Cash Flow 7-1 Economic Costs and Benefits - Phase II 7-2 Economic Costs and Benefits - Phase I & II Map: IBRD No. 17191R  - iii - LIBERIA Second Bong County Agricultural Development Project Selected Documents and Data Available in Project File File Code A. General Reports and Studies Liberia Recent Economic Developments and Medium-Term Prospects, World Bank Report No. 4178-LBR, December 30, 1982. B/R Agricultural Sector Review, World Bank Report in 4 volumes; Report No. 4200-LBR, May 6, 1983. B/R B. Reports and Studies Relating to the Project BCADP Phase II Preparation Report, Report prepared by RMWA, Abidjan, July 1982. 220183 BCADP Annual Report 1981/82. Y Budget Report BCADP Phase I, First Draft of Project Completion Report, March 1983. See WAPAB BCADP Annual Budget 1983/84. Y Budget Report Draft Proposals for Cooperation between BCADP and The Liberian Rural Communications Network, July 1983. 220164 C. Appraisal Working Papers and Drawings 220191 1. The Project Area 2. Tree Crop Development 3. Foodcrop Development 4. Terms of Reference for Agricultural Extension/Training and Treecrop Planning Manual Studies 5. Input Supply, Credit and Marketing Services 6. Produce Marketing and Prices 7. Roads and Workshops 8. Wells, Latrines and Buildings 9. Farm Models 10. Project Costs 11. Financial and Economic Evaluation   - iv - LIBERIA Second Bong County Agricultural Develolment Project Credit and Project Summary Borrower: The Republic of Liberia Amount: SDR 6.4 million (US$6.7 million equivalent) Terms: Standard Project Description: The project seeks to increase farmer productivity and income by consolidating the experiences and achievements of the first phase project (Cr. 700-LBR) and extending agricultural ser- vices to lower Bong County as well as to part of the adjacent Gibi Territory. The project would include: (i) supply of agricultural inputs to improve production of upland and swamp rice, cassava, other food crops and coffee; (ii) expansion and improvement of extension services and staff training; (iii) agricultural research and developnent of improved plant production material; (iv) strengthening of cooperatives and the Agricultural and Cooperative Development Bank (ACDB) to improve input supply, credit and marketing services; (v) maintenance of secondary and feeder roads and construction or rehabilitation of feeder roads and tree crop tracks; (vi) schistosomiasis monitoring and control services; construction of wells and latrines; and (vii) support to the Ministry of Agriculture central services. About 7,500 farm families would obtain higher incomes as a result of the crop improvement and credit programs; an even greater number of the rural popula- tion would benefit from improvements in the road network and health services. In addition, employment would be created by the increased business activity induced by the project. It is estimated that about half the rural families in the county would benefit in some way from the project. The normal risks associated with this type of project would be minimized since it would be building upon the institutions and experience of the first phase project. The main risk is that institutional developments envisaged under the project may not take place as quickly as supposed. However, in view of the high priority given by the Government to rural develolment and of the technical assistance and training support being provided, this risk has been reduced to acceptable levels.  v- Estimated Costs: Project Item ----- (US$ million) ----- Local Foreign Total Crop and Farm Development 4.9 2.0 6.9 Agricultural Research 0.1 0.1 0.2 Input Supply, Credit and Marketing Services 1.7 1.4 3.1 Roads and Workshop 1.6 2.0 3.6 Hea-Lth Services 0.4 0.3 0.7 Project Management and Administration 2.2 0.7 2.9 Monitoring and Evaluation 0.3 0.1 0.4 Technical Assistance & Consultancy Services 0.1 0.4 0.5 Support to MOA Central Services 0.1 0.3 0.4 Total Base Cost 11.4 7.3 18.7 Physical Contingencies 0.2 0.3 0.5 Price Contingencies 1.4 1.7 3.1 Total 13.0 9.3 22.3 Project Preparation Facility Reimbursement 0.2 0.4 0.6 Total Project Costs 13.2 9.7 22.9 less Recurrent Costs of Phase I 4.9 0.6 5.5 Total Financing Required 8.3 9.1 17.4 Financing Plan: Local Foreign Total _ IDA 3.4 3.3 6.7 39 IFAD 3.0 2.8 5.8 33 ADF 1.0 3.0 4.0 23 Government 0.9 -- 0.9 5 TOTAL 8.3 9.1 17.4 100 Estimated Disbursements: FY85 FY86 FY87 FY88 FY89 Annual 2.1 1.6 1.5 1.3 0.2 Cumulative -- 3.7 5.2 6.5 6.7 Rate of Return: 22% Project Completion Date: June 30, 1988  LIBERIA BONG COUNTY AGRICULTURAL DEVELOPMENT PROJECT II I. THE AGRICULTURAL SECTOR A. Introduction 1.01 The Government of Liberia (GOL) has requested IDA assistance in the financing of a follow-up project to the IDA-assisted Bong County Agricultural Development Project I (Cr. 700-LBR) which closed on December 31, 1983. The proposed follow-up project was prepared by project staff and RMWA in 1982 and appraised in February/March 1983. B. Background 1.02 Economic Setting. Liberia has a total area of 111,000 kmi2, of which about 5% is cultivated, and a population of 1.9 million growing at 3.4% per annum. The economy is dualistic with a traditional sector which is mainly agricultural, and a modern foreign-controlled enclave sector which is export oriented and produces iron ore, rubber and forestry products. The traditional sector employs over 70% of the total labor force but contributes less than one-fifth of GDP. Average per capita income is estimated at US$520 but this conceals wide disparities - US$1,620 in the enclave sector and US$160 in the subsistence sector. Liberia's economic performance has deteriorated in recent years due to internal structural Droblems and weak international prices for major exports viz. iron ore, rubber and timber. Real GDP grew at only 0.7% between 1974-79 and has been negative since 1980. Political uncertainties following the coup of April 1980 led to a large capital flight and freezing of external credit lines, leading to a liquidity squeeze in the economy. The same negative factors reduced the growth of government revenues and adversely affected implementation of development programs and projects in all sectors. However, with assistance and advice from bilateral and multilateral institu- tions, fiscal policy has improved recently. C. Agricultural Sector Characteristics 1.03 Role and Structure of the Sector. Agriculture is the largest sector in the economy contributing about 32% to GDP, 14% from the monetary sector including forestry, fishing, rubber, cocoa, coffee, large scale palm planta- tions, and poultry, and 18% from the traditiona'l sector, which includes rice, cassava, sugarcane, corn, other minor crops and palm produce from wild groves. Growth in the agricultural sector, which averaged 3.9% per annum in 1974-79, fell in 1980/81 due mainly to a decrease in world demand for forest products and natural rubber. Rubber production was about 82,000 mt in 1981, 93% of that in 1974. Value added from coffee (exports 10,000 tons), cocoa (exports 5-6,000 tons) and palm products, which together account for 8% of total  -2- exports, grew at 3.6% per annum in 1974-80 but declined in 1981 due to a fall in world coffee and cocoa prices. Coffee and cocoa exports include an undetermined quantity coming in from neighboring countries due to price differentials and use of the dollar as the domestic currency in Liberia. 1.04 Farming Systems. The farming structure comprises: (a) rubber con- cessions and foreign-owned oil palm plantations with relatively high produc- tion efficiency; (b) Liberian-owned commercial farms primarily producing rubber with yields half of those in concessions; and (c) traditional farms with low productivity, producing predominantly for subsistence. About 90% of all agricultural households (160,000) are in the traditional sector and grow rice as the staple food along with cassava and other food crops; a quarter of households also grow coffee and cocoa. Over 90% of rice is grown on uplands, and the rest in swamps. D. Agricultural Institutions 1.05 The Ministry of Agriculture (MOA) is the principal institution responsible for planning and implementation. However, MOA cannot perform efficiently, the major constraints being a lack of trained staff yet gross overstaffing in most categories; inadequate logistical support; and weak planning and administration. A Central Monitoring and Evaluation Unit in MOA is funded under the Lofa County Agricultural Development Project II (LCADPII) (Cr. 1242-LBR), but further assistance is required to improve planning and is included in the proposed project (para 3.22). 1.06 Agricultural Extension and Training. The MOA national agricultural extension service, although having adequate staff in numbers, provides little assistance to farmers primarily because of lack of logistical support and training. In contrast to MOA's extension services, the quality of extension services in the IDA financed agricultural development projects (ADPs) is much better. However, the creation of parallel ADP and MOA extension services has led to duplication of effort. Under the second phases of ADPs a major objec- tive should be the merging of the two services to create one cost effective extension service, as is in the case of the proposed project (para 4.03) and LCADPII. 1.07 Lack of trained manpower is a serious constraint. At present, there are two institutions providing higher and intermediate level agricultural trainilng: the College of Agriculture and Forestry (CAF), University of Liberia, and the Rural Development Institute (RDI) located in Bong County. CAF offers a degree course but financial constraints have affected training adversely. RDI, which is financed mainly by USAID, offers a two-year associate degree course. It is ideally situated near to the Central Agri- cultural Research Institute (CARI) in Bong County for its ultimate development into a major center of training for intermediate level manpower. A number of parastatal organizations, as well as the ADP's have their own training units for middle and lower level staff.  -3 - 1.08 Agricultural Research. Agricultural research is principally carried out at the Central Agricultural Research Institute (CARI) which is responsible for research on all crops except rubber which is performed by the conces- sions. USAID is financing a US$4.2 million project over a four-year period through 1984 to strengthen CARI but in spite of this assistance there are still serious constraints due to inadequate operating funds, lack of real autonomy and management inefficiencies. Useful work has been done on devel- oping improved rice varieties, vegetable varietal selection and cassava varietal testing, but little work on improved systems of upland cultivation, or, with the exception of rubber, on tree crops. Greater provisions for carrying out adaptive research are required and formal linkages should be established between CARI, MOA's national extension services, and the ADPs, to effect improvements in the technical packages and to incorporate farmer preferences more fully and quickly. MOA and donors are aware of these deficiencies which will be addressed in a second phase (ten years) of the USAID assisted project now under consideration. Under the proposed project assurances were obtained that IDA would be consulted in drawing up research programs (para 3.14). 1.09 Other government ministries directly involved in the rural sector include the Ministry of Rural Development (MRD) which is responsible for rural water supply program country-wide and has recently been given responsibilty for feeder road construction in six counties, including Bong County, and the Ministry of Public Works (MPW) responsible for maintenance of the road network including feeder roads. A Highway Maintenance Project (1984-86), which would raise MPW's capacity to maintain primary, secondary and feeder roads has been appraised. The Ministry of Internal Affairs (MIA) is respon- sible for the promotion of communal farms which have been established to increase food production, and generate funds for use by counties and districts for public works. 1.10 Liberian Produce Marketing Corporation (LPMC). LPMC which is the sole exporter of coffee, cocoa and palm kernel products, acts as Government agent for PL480 rice imports and operates a producer price support program for rice. The cost of the rice subsidy from 1979 until its removal in August 1981, was financed out of stabilization funds for coffee and cocoa, and LPMC reserves. This drain on its resources, compounded by the recent fall in the world market prices of coffee and cocoa placed LPMC in a financially vulner- able position from which it is recovering. However, its operational and administrative costs are high, and the marketing network is inefficient. Provision for reorganization of the system, which is necessary to reduce LPMC's marketing costs is included under LCADPII (para 6.03). 1.11 Agricultural Credit. There are three main sources of institutional agricultural credit: (i) Agricultural and Cooperative Development Bank (ACDB); (ii) agricultural project entities, and (iii) commercial banks. ACDB was established in 1978 and provides short-, medium-, and long-term loans to individual farmers, farmers organizations and rural industries. It also provides facilities for mobilizing rural savings. ACDB has a weak capital base; its share capital is $3.9 million of which Government has contributed $3.8 million (97%), loans portfolio $2.7 million, and deposits $4.3 million. ACDB's accumulated losses, total $1.5 million. ACDB is projecting a profit,  - 4 - for the first time, for 1983 and, through its participation in this project, est-Lmates that the accumulated deficit should be wiped out by 1986. Balance Sheets and Profit and Loss projections and a discussion on ACDB's organization and management are in Working Paper No. 5. ACDB has a mandate, as yet unful- filled, to provide credit to small farmers; it is weak in its lending opera- tions to the agricultural sector, and it is seriously undercapitalized. Participation in this project would provide an excellent opportunity for ACDB to take a positive step in the direction for which it was established. Bong and Lofa ADPs provide credit to smallholder farmers with ACDB serving as bankers to the projects and to participating cooperative societies. Under the proposed project, ACDB would be strengthened to handle the credit component (para 3.16). Commercial banks lend mainly to concessions and commercial farms, and this represents about 20% of their total loans portfolio. Money lenders, mainly traders, relatives and rich farmers, play an active and important role in providing non-institutional agricultural credit, but in the absence of a rural debt survey, it is difficult to quantify their activities. 1.12 Cooperatives: The cooperative movement consists mainly of hundreds of small Town Cooperative Units (TCU) and Cooperative Service Units (CSU), based on traditional farmer work groups (Kuu), with average membership of 20-30 farmers, affiliated to larger cooperative societies. Although not registered as societies, TCU and CSU, which are the lowest tier in the co- operative structure, play an important role in cooperative development, input supply, marketing and credit. They provide the necessary linkage between farmers at village level and District Cooperative Societies (DCS). A main function of the larger cooperatives is to buy cocoa, coffee, palm kernels and, to some extent, rice from farmers and to sell those to LPMC. A few of the larger cooperatives in ADP areas are also involved in credit delivery and recovrery. Generally, however, the cooperatives are not well managed and weak. In June 1981, Government established a new autonomous Cooperative Development Agency (CDA) with full responsibility for all cooperative activi- ties. Unfortunately, budgetary provisions to date have been inadequate and without sustained commitment and support from Government, CDA will not be able to function effectively. Some assistance to CDA is provided for in the project (para 4.11). 1.13 Other Projects. Apart from the IDA financed Lofa and Bong ADPs, the pilot phase of the Nimba County ADP financed by the Federal Republic of Germany will be completed in 1983 and a follow-up project is planned. The International, Fund for Agricultural Developnent (IFAD) is funding the Small- holder Rice Seed Project (SRSP) for the production of improved rice seed for sale and distribution to farmers throughout Liberia. USAID is assisting Government with the development of a rural communications system (Liberian Rural Communications Network) which will set up four regional broadcasting stations and develop a rural programming capacity attached to the Liberian Broadcast System.  - 5- E. Sector Development Strategy 1.14 Objectives. Government's sector objectives are: (a) increased participation of poor farming families in agricultural development; (b) in- creased farmer productivity and income; (c) diversification of agricultural production; and (d) an expansion of agriculture as a principal base for self- sustaining development. Public sector allocations for agriculture have increased from about 4% of the development budget in 1970 to about 30% in 1980/81, and are projected at about 30% in the Second Plan (1981/85). The increase is reflected mainly in agricultural development projects in Lofa, Bong and Nimba counties; rubber, oil palm, forestry, research and training projects; and establishment of parastatals for tree crop production and processing. This reflects GOL's intention to diversify the economy away from overdependence on iron ore earnings to agriculture and increased emphasis on food crops and cash crops, particularly on export crops that could be partly processed in Liberia. 1.15 Constraints. Major constraints on realization of sector development objectives, apart from the depressed world market for Liberia's major exports, are the inadequate road infrastructure; weakness of institutions, particularly MOA, and other institutions such as CARI, ACDB and the Cooperatives; tech- nological constraints (principally lack of technology addressing the labor constraint); and shortage of inputs. 1.16 Sector Strategy. In the recent agricultural sector review 1/, strategic emphasis is placed on the potential major sources of growth in the medium term -- namely upland rice, rubber and forestry products -- and on crops with significant long term potential, viz, swamp rice and possibly oil palm, cassava and coconut. In addition to these sub-sectors mentioned above, area specific development projects or programs are recommended to consider other tree crops, including relatively small components of coffee, cocoa, citrus, and minor food crops. Thus, the medium-term sector strategy is to complement export promotion with import substitution of rice. Other elements of the sectoral strategy are implementation of a gradual sectoral approach through improvement of existing national institutions; decentralization of agricultural programs; strengthening and focussing of adaptive research to help resolve technological constraints; coordination among Ministries and agencies for improved infrastructure; and improvement of support services such as extension, training, processing and marketing, input supply, credit, etc. through strengthening of public sector institutions, development of cooperatives and encouragement of the private sector. 1.17 Bank group lending supports Government's objectives of increased smallholder participation and increase in their productivity and income through integrated projects (Lofa County ADP-Cr. 577-LBR Phase I and Cr. 1242- LBR, Phase II; Bong County ADP-Cr. 700-LBR and the proposed project); export promotion through increase in smallholders production (Rubber Development 1/ Liberia: Agricultural Sector Review, May 6, 1983. Report no. 4200-LBR.  - 6 - Project Cr. 786-LBR/Lnl544-LBR) and tree crop components in ADPs; improved forestry management (Forestry Project-Cr. 839-LBR); and diversification of production base (Decoris Oil Palm Project-Ln 1765-LBR). This strategy is in line with sector needs. II. THE PROJECT AREA A. Location and Area Characteristics 2.01 Location and Population. The project would be extended to cover the whole of Bong County and part of Gibi Territory 1/ (Map IBRD 17191R) - a total area of 9,500 km2, or 8.4% of the country. Total population in 1982 was estimated at 229,000 with a population density of 25 persons per km2. About 70% of the population, or 161,700 people within some 21,400 rural households, are engaged primarily in agriculture. Average family size is estimated at 7.5 persons. The basic level of the rural structure is a village, or township, comprising a number of households headed by an elected town chief who is also chairman of the council of elders. 2.02 Soils and Climate. The topography of the area varies from gently rolling to hilly and is characterized by a dense dendritic drainage pattern with narrow, poorly drained valleys. Upland soils are for the most part acid, highly leached and of moderate to low fertility. They cannot sustain con- tinuous cultivation of annual crops for long and are best suited to tree crops such as coffee and rubber with, in the better areas, cocoa and citrus. Valley bottoms consist of deep soils with sandy loam top soils; although drainage conditions vary these soils are generally suitable for swamp rice cultiva- tion. Where water supplies permit, two rice crops can be taken annually but more usually the valley bottoms are suitable for one crop of rice in the wet season and a vegetable, legume or maize crop in the dry season. Average annual rainfall ranges from 1,700mm in central Bong to 2,500mm elsewhere, falling in a single wet season from March to November and followed by a three to four months relatively severe dry season. Average temperature is about 80