Chad - National Livestock Project

Document of The World Bank FOR OFFICIAL USE ONLY CaZ /IF/ 2. - C22> Report No. P-4772-CD MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 13.2 MILLION TO THE REPUBLIC OF CHAD FOR A NATIONAL LIVESTOCK PROJECT April 22, 1988 This document has a resticted 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.  CURRENCIES Currency Unit = CFAF US$1 - CFAF 277 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS ADF African Development Fund FAC Fonds d'Aide et de Cooperation of France DGIS Directorate General for International Cooperation of the Netherlands MAGOVET Magasin General d'Approvisionnement en Produits et Materiel Veterinaires MEHP Ministere de l'Elevage et de l'Hydraulique Pastorale SOTERA Societe Tchadienne d'Elevage et Ressources Animales FISCAL YEAR Government: January 1 - December 31  FOR OFFIACIL USE ONLY CHAD NATIONAL LIVESTOCK PROJECT CREDIT AND PROJECT SUMMARY Borrowert Republic of Chad Beneficiary: Ministry of Livestock and Rural Water Supply (MEHP) Amount: SDR 13.2 million (US$18.6 million equivalent) Termss Standard IDA terms, with 40 years maturity Onlending Terms: Part of the proceeds of the Credit (US$2 million) would be passed on to a commercial bank for on-lending to the private sector at interest rates based on the discount rates of the Bark of Central African States (BEAC) plus a maximum of 5% overhead charges and 6 months to 10 years repayment period according to the type of subloan. Financing Plan: Government: $ 1.0 million Producers: $ 1.4 million MAGAVET: $ 1.5 million French Bilateral Aids $ 1.3 million Dutch Bilateral Aids $ 1.8 million African Development Fund: $11.6 million IDAt $18.6 million TOTAL $37.2 million Economic Rate of Return: Not Applicable Staff Appraisal Report: No. 6972-CD Map: No. 21015 A 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 authorO:- r.  MEMORANDUM AND RECOMIENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF CHAD FOR A NATIONAL LIVESTOCK PROJECT 1. The following memorandum and recommendation on a proposed development credit to Chad for SDR 13.2 million (US$18.6 million equivalent) is submitted for approval. The proposed credit would be on standard IDA terms with 40 years maturity and help finance a national livestock development project. The project would be cofinanced by ADF for SDR 8.2 million (US$11.6 million equivalent), by FAC of France for SDR 0.9 million (US$1.3 million equivalent), and by DGIS of the Netherlands for SDR 1.3 million (US$1.8 million equivalent). 2. Background. Agriculture is the mainstay of the Chadian economy, contributing in 1985 about half of the GDP. Livestock production, already contributing about 40Z of agriculture's share in GDP and 30Z of merchandise exports, is one of the few sectors with an immediate growth potential, as the necessary livestock population, husbandry skills, markets and feed resources exist to permit an expansion. However, this potential is constrained by policy, institutional and infrastructural deficiencies. The policy constraints, already being addressed by Government as part of the preparation of this project, concern: (i; the inadequate cost recovery and inefficient distribution network of the parastatal veterinary distribution company (MAGAVET), resulting in severe scarcity of veterinary pharmaceuticals; (ii) the cumbersome system of livestock export procedures involving export quotas, the monopoly of the livestock export company (SOTERA), the complex system of export formalities and the high levels of export taxation, which severely hinder livestock exports and depress producer prices; and (iii) the system of common land tenure and Government's policy of free pastoral water, which preclude rangeland conservation. The institutional and infrastructural deficiencies concern (i) poor organization, diminished staff skills and lack of operating funds of the extension service, which consequently does not reach the producers; (ii) Government's weak central planning and coordination capabilities resulting in poor aid coordination and sometimes inconsistent policies; and (iii) MEHP's dilapidated infrastructure and dearth of equipment and transport facilities. The proposed project would provide Government with the technical and financial resources to sustain a process of policy reforms, underpinned by project activities. 3. Rationale for IDA Involvement. The project would be fully consistent with the development strategy agreed upon between the Government of Chad and IDA and would complement regional activities financed by other donors. 1DA's involvement would be essential in having the Government focus on policy and coordination efforts. It would complement the policy reforms envisaged under the proposed Financial Rehabilitation Credit  - 2 - (FY89S) by defining and implementing, for the livestock sector, more appropriate policies in the areas of parastatals, public finance and fiscal administration. The project would further complement the IDA Cotton Emergency operation (FY86) in its pursuit of diversification of the country's production and export base beyond cotton farming. 4. Project Obiectives. The proposed project would represent the first five-year stage of a long-term program to strengthen Chad's livestock sector. The project's main objective would be to increase national livestock production, producer income and Government revenue on a sustainable basis. This would be achieved through a combination of policy reforms and investments that would lead to improved access by producers to livestock health and extension services, and by merchants to export markets. A subsequent objective of the project would be to improve rangeland utilization and resource management. The project would strengthen the private and public sectors in the areas of their respective comparative advantages, i.e., the private sector in input supply and the prcvision of services to individual herders, and the public sector in extension, sanitary control and policy planning and coordination. The project would further institute policy changes aimed at export promotion and improved cost recovery. 5. Proiect Description. The project would combine policy reforms with investment and inst:tution building activities. The policy reforms already implemented or still to be implemented under the project would seek to (i) improve cost recovery for preventive and curative animal health services rendered by the public sector; (ii) liberalize and privatize the import and distribution of livestock inputs and most veterinary services; (iii) reform the livestock export circuits and liberalize marketing and export of livestock on hoof, by abolishing the export quota and SOTERA's monopoly, and simplifying the fiscal and administrative regulations affecting livestock marketing; (iv) freeze the recruitment of staff at the Ministry of Livestock and Rural Water Supply and improve their efficiency; and (v) define appropriate land tenure and water management policies to achieve long-term resource conservation. These policy reforms would be underpinned with investment activities to strengthen the sectoral institutions and improve their infrastructure. The project would provide funds to (i) create and strengthen livestock producer groups for an expanded role in basic animal health care, water and resource management and rehabilitation of approximately 100 water points; (ii) improve input distribution by strengthening MAGAVET's wholesale functions, increasing its working capital, expanding its regional network and creating a line of credit to help about 40 veterinarians and/or livestock technicians establish private veterinary pharmacies and clinical animal health services and private traders to take up meat export; (iii) strengthen the Farcha Laboratory to carry out producer-oriented research on rangeland conservation, integration of livestock into the mixed farming system and the economics of disease control methods; (iv) introduce efficient extension methods in the Livestock Service and retrain its staff, rehabilitate MEHP field facilities and provide them with basic veterinary and extension equipment and appropriate transportation; and (v) strengthen  - 3 - MEHP's capability for planning, coordination and project monitoring and for water development, and construct and equip an additional office for MEHP in N'Djamena. The project, to be carried out over 5 years. provides funds for civil works; vehicles and equipment; training and studies; technical assistance; veterinary drugs; a line of credit; and incremental operating costs. The total cost of the project is estimated at US$37.2 million equivalent with a foreign exchange component of US$25.1 million (67Z). A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and the disbursement schedule are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operations in Chad are given in Schedules C and D, respectively. A map is also attached. The Staff Appraisal Report, No. 6972-CD dated April 22, 1988, is also attached. 6. Agreed Actions. Following credit negotiations, Government has implemented the following main policy reforms: (i) the introduction of full cost recovery for all non-compulsory vaccinations and clinical treatments and the earmarked use of these revenues for non-salary operating costs; (ii) the opening of MAGAVET to private investors and the abolition of its distribution monopoly; (iii) the abolition of the export quota system and the export monopoly and control functions of SOTERA; and (iv) the introduction of simpler export procedures. Furthermore, the Government has agreed to implement the following measures: (i) the recovery of the marginal costs for compulsory vaccinations by May 31, 1990; (ii) the abolition of MAGAVET's import monopoly before December 31, 1990; (iii) the stabilization of HEHP staff numbers at the level of January 1, 1988; and (iv) the preparation and promulgation of a conservation oriented pastoral land use policy before December 31, 1990. Project related agreements include: (i) the establishment of a Pastoral Organization Unit in MEHP; (ii) the employment of key advisors on terms and conditions acceptable to IDA; and (iii) the employment of a National Project Director, a Director of MAGAVET and a Head of the Pastoral Organization Unit with qualifications and experience acceptable to IDA. 7. Benefits. The principal benefit from the proposed project would be a more appropriate policy framework and stronger institutions in input delivery, extension, marketing and export. This would result in an increased production of meat and, consequently, in increased government and producer revenues, and in an increased production of milk, leading to better nutrition. Export possibilities for the increased production of meat are good, especially in the Nigerian market. The accompanying efforts in resource conservation would provide essential elements of a long-term strategy in this domain. The poor quality of productivity data in Chad and the nature of the project preclude a conventional economic analysis based on a rate of return calculation. An alternati-ze type of analysis, more compatible with the quality of Chadian data, demonstrates however that significant results can be achieved within a seven to nine years time frame. 8. Risks. Risks concern MEHP's lack of efficiency, poor motivation of the MEHP staff and a recurrence of drought. However, these risks would  -4- be mitigated by a well-defined input of technical assistance, a sizeable training component. a heavy emphasis on producers groups and the national coverage of the project, which would foster the interaction between the dry north and the humid south and therefore render the subsector less vulnerable to drought. 9. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. Barber Conable President Attachments WAshington, D.C. April 2z, 1988  -5- Schedule A CHAD NATIONAL LIVESTOCK PROJECT ESTIMATED COSTS AND FINANCING PLAN Estimated Costs a/ Local Foreign Total - __----_US$ million------------- Pastoral Associations 1.4 2.6 4.0 MAGAVET 1.3 3.8 5.1 Research 0.6 1.6 2.2 MEHP Field Services 4.1 8.5 12.6 MEHP Central Services 2.1 4.2 6.3 Base Cost 9.5 20.7 30.2 Physical Contingencies 0.9 1.7 2.v Price Contingencies 1.7 2.7 4.4 Total Project Costs 12.1 25.1 37.2 a/ Inclusive of taxes and duties of US$3.7 million. Financing Plan Local Foreisn Total ------------ S$ million------------ IDA 6.5 12.1 18.6 ADF 2.8 8.8 11.6 FAC 0.2 1.1 1.3 DGIS 0.2 1.6 1.8 MAGAVET 0.5 1.0 1.5 Government 1.0 - 1.0 Producers 0.9 0.5 1.4 Total 12.1 25.1 37.2  6 Schedule B CHAD NATIONAL LIVEST')CK PROJECT PROCUREMENT METHOD AND DISBURSEMENTS Project Element Procurement Methodll ICB LCB Other N.A Total Cost ---------------(US$ million)----------------- Civil Works 5.7 5.7 - (0.1) _ _ (0.1) Vehicles and Equipment 8.0 0.5 0.2 2/ - 8.7 (1.8) (0.2) - - (2.0) Technical Assistance - 5.4 21 5.4 - (3.2) - (3.2) Training and Studies - 2.7 - 2.7 (2.5) - (2.5) Drugs 3.9 - - 3.9 (2.6) _ - - (2.6) Operating Costs - 0.2 21 7.9 21 8.1 - - (5.5) (5.5) Subloaa -- 2.0 2.0 - - (2.0) 2.0 PPF - 0.7 0.7 - - (0.7) (0.7) Total 11.9 6.2 8.5 10.6 37.2 (4.4) (0.3) (5.7) (8.2) (18.6) 1/ Amounts in brackets concern IDA financing. 21 Includes amounts for items financed by other donors under their own procedures. Disbursements Category Amount % (US$ million) Civil Works 0.1 100 Vehicle and Equipment 2.0 100 Technical Assistance 2.6 100 Training 1.6 100 Studies 0.5 100 Drugs 2.3 100 Operating Costs 5.0 On a Declining Scale 1/ Subloans 1.8 100 PPF Refund 0.7 Amount Due Unallocated 2.0 Total 18.6 1/ 100% for first US$2.0 million; 901 for subsequent US$1.6 million and 80% for final US$1.4 million. Estimated IDA Disbursements IDA Fiscal Year 1988 1989 1990 1991 1992 1993 1994 Annual 1.7 2.6 3.3 3.9 3.2 2.4 1.5 Cumulative 1.7 4.3 7.6 11.5 14.7 17.1 18.6  -7- Schedule C CHAD NATIONAL LIVESTOCK PROJECT Timetable of Key Proiect Processinft Events (a) Time taken to prepare: 12 months (b) Prepared by: Government with FAOICP assistance (c) First IDA mission: July 1986 (d) Appraisal mission departure: July 1, 1987 re) Negotiationss January 12 to 15, 1988 (f) Planned Date of Effectivenesss July 1988 *g) List of relevant PCRs and PPARss Chad Livestock I (PPAR No.3373) Chad Livestock II (PPAR No. 5370)  Schedule D THE STATUS OF BANK GROUP OPERATIONS IN CHAD A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of February 29,1988) Amount in US$ millions (less cancellations) a/ Loan or Fiscal Purpose IDA b/ Undisbursed a/ Credit No. Year 2 credits have been cancelled and fully repaid cl 12 credits have been fully disbursed. 43.59 - 489-CD 1976 Sategui Deressia Irrig. 8.00 0.05 811-CD 1978 Third Education 8.30 3.71 1716-CD 1986 Cotton Program 15.00 8.77 1728-CD 1987 Highway Maintenance 20.00 18.40 1775-CD 1987 Agricultural Rehabilitation 17.40 17.99 1872-CD 1988 Economic and Financial Management a/ 12.80 13.61 62.53 TOTAL 125.09 Of which has been repaid 1.98 Total now outstanding 123.11 TOTAL now held by IDA 118.03 Amount sold 5.08 of which repaid 5.08 TOTAL undisbursed 62.53 a/ Prior to exchange adjustments. b/ Credit No.1716-CD and higher are denominated in SDRs and are shown in US$ equivalent based on the exchange rates in effect at the time of negotiations. c/ The Second Livestock (US$11.5) and Third Highway (US$7.6) Projects were cancelled before becoming effective on October 16, 1980. Supplemental credits were approved for the First and Second Education Projects and for the Sategui-Deressia Project. d/ Not yet effective. B. STATEMENT OF IFC INVESTMENTS* (as of October 15, 1987) NONE *Chad is not a member of IFC.  14 _ , \_ 16- 1 20 I TUIYSJA ' ' ,> /,_~~~5 .N '**s.y * _ 2 LIBYA E usic N ALGEnA)~~~~~~~~~~~~~~~~~ j~~~OF EGYPT -22 C A NIGER C H A D D \, X - C - NATIONAL LIVESTOCK PROJECT [ .- f SUDAN Livestock Service Infrastructure and *- :.'& Location Pastoral Pilot Area JN >li_ . . 9 Pilot area pastorial association C A N