Afghanistan - Fruit and Vegetable Export Project

The World Bank FOR OFFICIAL USE ONLY Report No. 6103 PROJECT COMPLETION REPORT AFGHANISTAN FRUIT AND VEGETABLE EXPORT PROJECT (CREDIT 779-AF) March 21, 1986 Projects Department Europe, Middle East and North Africa Regional Office 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. ABBREVIATIONS ARI - Afghan Raisin Institute ASC - Afghan Seed Company AVEC - Afghan Vegetable Export Company EPB - Export Promotion Bank GDP - Gross Domestic Product IDA - International Development Association PCR - Project Completion Report THE WORLD BANK FOR OFFICIAL URI ONLY Washington, D.C. 20433 U.S.A. Offace of Duector-Ceneal Operateam fvaluatt4n March 21, 1986 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report - Afghanistan Fruit and Vegetable Export Project (Credit 779-AF) Attached, for information, is a copy of a report entitled "Project Completion Report - Afghanistan Fruit and Vegetable Export Project (Credit 779-AF)" prepared by the Europe, Middle East and North Africa Regional Office. Under the modified system for project performance auditing, further evaluation of this project by the Operations Evaluation Department has not been made. Attachment 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 Word Dank authorization. FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT AFGHANISTAN - FRUIT AND VEGETABLE EXPORT PROJECT (CREDIT 779-AF) TABLE OF CONTENTS Page No, i Basic Data Sheet... . . . ..... .........999 . i Evaluation Summary ..................................... 111 I. INTRODUCTION........................................ 1 II. PROJECT PROCESSING.................................. 2 III. PROJECT IMPLEMENTATION..,........ .................. 4 IV. IDA's PERFORNANCE.................................. 4 V. CONCLUSIONS ..................................... 4 Map IBRD 13175 (PCR) This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contenst may not otherwise be disclosed without World Bank authorization. - PROJECT COMPLETION REPORT AFGHANISTAN - FRUIT AND VEGETABLE EXPORT PROJECT (CREDIT 779-AF) PREFACE This is the Project Completion Report (PCR) of the Fruit and Vege- table Export Project in Afghanistan, for which Credit 779-AF in the amount of US$18.0 million was approved on March 21, 1978. The Credit was closed as scheduled on June 30, 1985; an unused balance of US$16.9 million was can- celled as the Project targely was not implemented due to internal strife in the country. The date of final disbursement was January 20, 1981. The PCR was prepared by the Europe, Middle East and North Africa Regional Office, and is based in part on a review of the Staff Appraisal Report (No. 1782-AF) dated February 21, 1978, the President's Report (No. P-2248-AF) dated March 9, 1978, the Credit Agreement cf September 27, 1978, correspondence with the Borrower, internal Bank memoranda on project issues as contained in relevant Bank files, as well as interviews with officials in the Bank who have been associated with the project. In view of the unsettled conditions in the country, a copy of the draft PCR was not sent to Afghani- stan for comments. This project has not been subjected to an audit by OED. - it - PROJECT COMPLETION REPORT AFCHANISTAN - FMUIT AND VEOSTABLE EXPORT PROJECT (CREDIT 779-AP) BASIC DATA SHEET KEY PROJECT DATA Actual or Actual as Appraisal Estimated of Appraisal Estimate Actual Estimate Project Costs (US$ million) 27.0 n.a./a Credit Amount (US$ million) 18.0 18.0 - Disbursed (US$ million) 18.0 1.1 6 Cancelled (US$ million) - 16.9 Date of Board Approval - 03/21/78 Credit Agreement Date - 09/27/78 Date of Effectiveness 12/27/78 05/15/79 157/b Date Physical Components Completed 12/84 n,a./a Proportion Then Completed (2) 100 5 5 Closing Date 06/30/85 06/30/85 100/b Economic Rate of Return (2) 38 n.a.sa STAFF INPUT /c Fy75 FT76 FY77 FY78 FY79 FY80 FY81 TOTAL Identification/Preparation 1.6 13.0 13.1 27.7 Appraisal 26.9 59.6 86.5 Negotiations 11.8 11.8 Supervision 6.5 20.7 7.6 0.7 35.5 TOTAL 1 13.0 40.0 779 20.7 7.6 0.7 161.5 CUMUILATIVE DISBURSEMENTS FY79 FY80 FY81 sYR2 FY83 FY84 Appraisal Estimate (US$ million) 2.8 6.6 11.1 13.9 17.1 18.0 Actual (US$ million) - 1.1 1.1 1.1 1.1 1.1 Actual as 2 of Appraisal Estimate 0 16.5 9.8 7.8 6.4 6.0 Date of Final Disbursement January 20, 1981 MISSION DATA Date No. of Speciali;ations Performance Types of Mission (no./yr) Persons Represented /d Rating /a Tread/f Problesh Identification 05/76 5 E,A,A1,C,0 - - - Preparation A 10/76 - - - - - Appraisal 06/77 5 9,H,F,A,AI - - * Post Appraisal/i 12/77 3 E,0,S - - - Supervision I 03/78 2 A,E 2 3 P,M Supervision II 06/78 2 A,O 2 3 0,M Supervision III 07/78 2 E.0 2 1 0 Supervision IV 11/78 2 E,0 2 2 H OTHER PROJECT DATA Borrower Democratic Republic of Afghanistan Execiting Agency Ministry of Commerce /i Fiscal Tear of Borrower March 21 - March 20 Name of Currency (Abbreviation) Afghant (Af) Currency Exchange Rate Appraisal Year Average US$1.00 * Af47.5 Intervening Years Average US1.00 - At45.9 Completion Year Average US1.00 - Af50.6 (1984 average) Follow-on Project Name Agricultural and Rural Development Credit Number 928-AF Credit Amount (US$ million) 16. 5 Date of Board Approval 06/07/79 /a Project wa not Implemented due to internal strife in the country. Calculated in term of months from date of Board approval. 7c Input as staff weeks. Source: World Bank Planning and Budgeting Department. 7- A - Agriculturalist; Al - Agroindustries Specialist; C - Consultant; E - Project Economist; H - Rorticulturiet; S - Credit Specialist; 0 - Other Specialists. /a I - Problem-free or minor problem; 2 - Moderate problemas; and 3 - Major problems. 7f I - Improving; 2 - Stationary; and 3 - Deteriorating. /gi F - Financial; M - Managerial; T - Technical; P - Political; 0 - Others. h Project preparation effort was carried out by a consulting firm with UNDP financing and IDA acting as the executing agency. /L Pte-negotiation mission. 71 Through several Government agencies (see pare. 2.02). PROJECT COMPLETION REPORT .AFGHANISTAN - FRUIT AND VEGETABLE EXPORT PROJECT (CREDIT 779-AF) EVALUATION SUMMARY Introduction The project was the seventh IDA-financed operation in the agricul- tural sector in Afghanistan. It was directed at the horticulture subsector, which faced a number of constraints, principal among which were uncertain availability of irrigation water, continued preoccupation of farmers with wheat production, low level of fertilizer use, poor extension service and poor access to institutional credit, absence of trellised vineyards, and weak marketing infrastructure. Objectives The main project objectives were to increase and promote the export of raisins, vegetable seeds and fresh vegetables; increase production of grapes and vegetables; and develop operational capabilities in the project- related institutions. Implementation Experience The project was delayed nine months in getting underway due to a disagreement between the Government and IDA regarding selection of heads of implementing agencies and selection of consultants (para. 2.05). Once these issues were resolved by May 1979, when the credit became effective, the project still could not start up due to internal strife in the country. No missions could take place after November 1978 for security reasons. The credit was suspended in April 1980 and was closed as soon as the original Closing Date of June 30, 1985 was reached. As of November 1985, no Bank group financed projects were under supervision in Afghanistan. Results Since virtually no physical investments under the project were realized, none of the objectives was reached and no substantive results materialized. - iv - Sustainability There are no benefits to su%tain under this project. Findings and Lessons Even though the project was well conceived and appropriate, imple- mentation could not take place due to unforeseen political circumstances in the country. But even before the onset of civil strife, the project suffered serious setbacks during the early stages of execution which delayed start-up activities. Within a year after effectiveness, the credit was suspended; 94% of the credit eventually had to be cancelled (para. 5.01). AFGHANISTAN FRUIT AND VEGETABLE EXPORT PROJECT Credit 779-Ar PROJECT CONPLETION REPORT 1. INTRODUCTION 1.01 Agricultural Sector. Agriculture is the key sector in the economy of Afghanistan. At the time the project was prepared, the agricultural sector employed about 54% of the labor force and accounted for 50% of GDP. About 60% of export earnings came from agriulture, with fresh and dried fruits and nuts accounting for 45% of total export earnings. Farm incomes were low (US$100 per capita) and 50% of the rural population was estimated to be below the poverty level of US$89 per capita, as compared to the country-wide per capita income of US$160 in 1976. 1.02 Horticulture Subsector. Fruit and vegetable cultivation accounted for about 6% of the total 8.2 million ha of cultivated area, 10% of seasonally irrigated land and about 10-15% of permanently irrigated land. About 100,000 farmers were directly engaged in horticultural production, mostly vegetables, while nearly the whole agricultural labor force was engaged in some seasonal work in horticulture. The horticultural subsector, due to its nature of relatively high-labor intensity, provided substantial employment within the sector. 1.03 The subsector was faced with a number of constraints, which resulted in low yields and slow growth in productivity. Principal among these were uncertain availability of irrigation water, continued preoccupation of the farmers with wheat production, low level of fertilizer use, poor extension service and poor access to institutional credit, absence of trellised vineyards, and weak marketing infrastructure. 1.04 The Seven Year Plan. The targets in the seven-year development plan (197b-83) called for a 4.2% increase in annual income from fruit production and a 2.9% yield growth, which compared with 0.8% and 0.25% annual growth respectively during the previous seven year period. The high export growth of 9% per annum over the previous seven years (1969-76) was at the expense of a decline in domestic per capita consumption as the area cultivated was almost unchanged. Substantial efforts to increase fruit production were therefore necessary to maintain and increase exports in the face of rising domestic consumption. - 2- 1.05 IDA Strategy. IDA's agricultural strategy recognized that special efforts would be required to help Afghanistan, which is among the 29 least developed countries designated by the United Nations. IDA's objectives were to establish a basis for financing projects which would expand production, promote institution building, increase the foreign exchange earning capacity, improve absorptive capacity, and enlarge government resources for development. 1.06 In early 1976, the Government of Afghanistan requested IDA to assist in financing a fruit and vegetable export project to improve horticultural production and provide markets for fruits and vegetables. The Fruit and Vegetable Export Project was the seventh IDA financed operation in the agricultural sector with Credits totalling US$69 million. The project was prepared within the framework of the seven-year plan and IDA's overall objective to develop the horticulture subsector. 11. PROJECT PROCESSING 2.01 Project Identification. The project was identified by a IDA Horticultural Subsector Survey Mission which visited Afghanistan in May 1976. The mission identified the following areas of activity: (a) establishment of a Fruit and Nuts Trade Regulatory Commission; (b) a Fruit Marketing Corporation; (c) a Vegetable Export Corporation; (d) development of production of improved vegetable seeds and nursery stock; and (e) promotion of fruit juice concentrates. 2.02 Project Preparation. The preparation study was carried out by international consultants funded by UNDP, with IDA as the Executing Agency. The report was issued on April 25, 1977. It included the following six components and was to be implemented by five government agencies: (i) Raisin Marketing - expand and reorganize the Afghan Raisin Institute (ARI) to enable it to implement a comprehensive quality control program. At full development, about 60,000 tons of raisins were expected to be processed annually; (ii) Vegetable Seed Multiplication and Fruit Root Stock Production - provide the Afghan Seed Company (ASC) with facilities, equipment and technology to multiply vegetable seeds for export under contract to an international seed firm and to produce fruit rootstock, principally grapevine seedlings, to meet domestic needs; (iii) Vegetable Export - establish a government supported Afghan Vegetable Export Company (AVEC) and equip it to export 8,500 tons of vegetables annually; (iv) Agroindustries Credit - provide investment financing for the development of horticulturally based agroindustries through the Export Promotion Bank (EPB); -3- (v) On-tarm Credit - provide medium- and long-term credit, primarily for trellising about 900 ha of vineyards for raisin and grape production, through the Agriculture Development bank of Afghanistan (AgBank); and (vi) Raisin Marketing Credit - provide a line of short-term credit to farmers through EPB to enable them to phase their raisin marketing over a longer period and participate in the ARI quality Control Program. About 69 man-years equivalent of technical assistance was included in each component. Internation4lly qualified experts would be hired to assist in implementing the project and to train local personnel in management and technical skills. 2.03 Appraisal. Based on the preparation report, an appraisal mission visited Afghanistan in June 1977. The appraisal mission made no significant changes in the project components included in the preparation report. The principal objectives of the project were to; (a) improve and expand existing marketing channels for the export of raisins, vegetable seeds and fresh vegetables; (b) increase production of grapes and vegetables, and raise labor productivity by providing credit for fertilizers and on-farm investment; and (c) develop and strengthen the institutions responsible for implementing the project. 2.04 The total project cost was estimated at US$27.t) million, of which IDA would finance US$18.0 million (65%). The proceeds of the credit were to be allocated as indicated in the following table; Project Cost and Allocation of the Credit IDA Credit 1/ IDA Credit Component Total Cost Allocation as Z of total cost --------US$ million----- 1. Afghan Raisin Institute (ARI) 4.7 4.0 85 2. Afghan Seed Company (ASC) 1.2 1.2 96 3. Afghan Veg. Export Company (AVEC) 1.4 1.0 71 4. (Agroindustrial Credit) 2.6 2.0 77 6. Agricultural Bank on farm Credit 5.9 2.7 46 Raisin Marketing 3.6 5. Technical Assistance 5.11/ 4.0 78 Unallocated 3.1 Contingencies 3.1 Total 27.6 18.0 65 1/ IDA Credit was to cover 100% of foreign exchange costs (US$15.0 million) and 25% of local costs (US$3.0 million). 2/ Including contingencies. -4- The total estimated cost of technical assistance was US$5.1 million of which IDA would finance US$4.0 million. UNDP agreed to cofinance the balance of the technical component (US$ 1.1 million), with IDA as the executing agency. 2.05 Negotiations and Effectiveness. Negotiations were completed in December 1977 without any major issues being raised. The major condition to be met prior to Board approval was the establishment of AVEC. This was carried out and the credit was approved by the Board on March 21, 1978. however, the credit agreements were not signed until September 27, 1978. The delay was in part due to disagreements on certain required revisions to IDA's legal agreements. The situation was exacerbated by the political turmoil which resulted from a change of government in April 1978. The number of agencies involved in effecting the required revisions also contributed to the delay in signing of the agreement. In addition to these problems, the Government objected to the requirement for prior consultation with IDA before appointing new heads to the various project entities. A compromise solution was reached whereby IDA agreed not to intervene in selection, but merely to be informed of appointments made by the government. The Government only later objected to the technical assistance component as being too large and not giving government a sufficient role in the selection process of international consultants. IDA maintained its position not to reduce the size of the component and to remain as executing agency. The government eventually agreed to this position and all outstanding issues delaying effectiveness were resolved by early 1979. III. PROJECT IMPLEMENTATION 3.01 Start up: From March to November 1978 four supervision missions visitea Afghanistan, mainly to resolve the issue of the size and execution of the technical assistance component. No further supervision missions were possible due to security reasons. The selection of consultants for the technical assistance component was completed and a contract was signed in April 1979. However, due to politicaL conditions, little work was done and the contract was suspended in May 1980. 3.02 The credit was suspended in April 1980 and an undisbursed balance of US$16.91 million was cancelled on the original Closing Date June 30, 1985. IV. IDA's PERFORMANCE 4.01 The project was identified and prepared in accordance with the needs of the borrowing country. Every effort was made.to geL the project off to a good start under the political conditions then prevailing in Afghanistan. The four supervision missions were necessitated by the delays in signing and effectiveness of the Credit. After the last supervision in November 1978, annual updates to the supervision summaries were made based on verbal reports received during the annual meetings. V. CONCLUSIONS 5.01 The project was well conceived and appropriate. However, thi. project suffered serious setbacks during the early stages of execution which delayed its implementation. Within a year after effectiveness, the credit was suspended and the undisbursed balance was cancelled on June 30, 1985, the original Closing Date. No substantive ex-post assessment of th project is possible. ISLAMIC REPUBLIC OF IRAN -z -- g 9 - tik o0z5 z CoZj ir,. -p a nr fil U11 1 cn ' ><o O 3 -... 0