Niger - Small Rural Operations Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-4624-NIR MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 7.1 MILLION TO THE REPUBLIC OF NIGER FOR A SMALL RURAL OPERATIONS PROJECT February 22, 1988 This document bas a reshicled diskiidion and way be used by redpieals only in the perlonmasoe of their o0icial dasw lls codseo may vt othewise be disdosed wWodt Wedd Bmnl andtamdonb  CURRENCY AND EQUIVALENT UNITS Currency unit = CFA Franc (CFAF) US$ 1.00 = CFAF 295 WEIGHTS AND MEASURES Metric System ABBREVIATIONS DDRM Direction de D6veloppement Regional et des Microrealisations (Directorate of Regional Development and Small Rural Operations) FAOICP Food and Agriculture Organization/Cooperative Program NGO Non-Governmental Organizations SPPF Special Project Preparation Facility SRO Small Rural Operations GOVERNMENT*S FISCAL 'EA October 1 - September 30  FOR omCL USE ONLY - ii - NIGER SMALL RURAL OPERATIONS PROJECT CREDIT AND PROJECT SUMMARY Borrowers Republic of Niger Beneficiary: Ministry of Planning Amount: SDR 7.1 million (US$9.3 million equivalent) Terms: Standard, with 40 years maturity OnLending Terms: Not applicable Financing Plan: Government $ 0.9 million IDA $ 9.3 million Switzerland (SF12.5 million) $ 7.8 million TOTAL $ 18.0 million Economic Rate of Return: Bottomland Model 222 Pump Irrigation Model 302 Staff Appraisal Report: No. 6910-NTR Maps IBRD 20646 This document has a restricted distibution and may be used by recipients only in tIb" rflAN e of their offlcial duties. Its contents may not otherwine be disclsed without Word Baik authe .7;ution.  IlEiMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF NIGER FOR A SMALL RURAL OPERATIONS PROJECT 1. The following memorandum and recommendation on a proposed development credit to the Republic of Niger for SDR 7.1 million (US$9.3 million equivalent) is submitted for approval. The proposed credit would be on standard IDA terms with 40 years maturity and would help finance a project for Small Rural Operations. The project would be cofinanced by Switzerland for SF10.8 million (US$7.8 million equivalent). 2. Backaround. Past experiences with rainfed projects in areas with rainfall of 600 mm/year or less (including IDA-financed Dosso and Maradi II projects) have been disappointing. In recognition of these failures, an SPPF-financed rural sector study has been launched to reassess the agricultural potential of the meager resource ba3e, and to devise measures to realize such potential. In addition, a survey of the agricultural research system is well under way, aiming to prioritize research themes and to make the research institutions more effective. Since the natural resource endowment of the rainfed farming area is quite variable, site-specific small rural operations (SR10) provide effective development opportunities where local relief, soil, market or other conditions are favorable, and if institutional capacity to exploit such opportunities exists. Accordingly, with FAO/CP assistance, a project has bten prepared including a feasibility study of selected models of SROs, and the undertaking of three pilot SROs under a PPF. While these three operations did not fully meet expectations, important lessons have been learned about the need for careful preparation with the beneficiary comunity and effective follow-up by local staff. Subsequent IDA-financed SROs in the Maradi II project and similar operations in other projects financed by other donors have proven to be reasonably successful. 3. Rationale for IDA Involvement. IDA is helping the government to carry out structural adjus2tment measures which aim, among other things, to improve the efficiency of resource use in the rural sector. The supply response to the adjustment program will, however, depend on technically and economically viable solutions for long-term development of the rural sector and on the institutional capability to assist farmers in maximizing their long-term resource potential. The proposed project aims to strengthen the institutional capability to exploit potential where local conditions are favorable, albeit on a small scale, by making use of existing technologies, to improve rural income and to protect the fragile environment. In addition, IDA has a major role to play in helping the Government to harmonize rules to be applied to SROs, particularly regarding beneficiaries' contributions and arrangements for renewing medium-term equipment, since the other donors already active in SROs are reluctant to take the lead.  - 2 - 4. Project Obiectives. The proposed project would help the Government improve its institutional capability to prepare, appraise, execute and evaluate small rural operations (SROs) as well as to provide effective extension once SROs become operational. The project would strengthen the capabilities of the provincial and district technical staff who would assist farmers in the design, preparation and execution of SROs. The project is seen as the first phase of a program of IDA support to SROs which would eventually have a national scope. 5. Prcject Description. The proposed project would seek to achieve the above objectives by financing: (a) equipment, vehicles and operating costs associated with preparation/appraisal/execution of SROs by the provincial and district staff; (b)) training for the technical staff in project analysis and extension and for beneficiaries in functional literacy; (c) technical assistance needed to support a decentralized financiil management system and to strengthen project analysis capability at the provincial levels; (d) in grant form, investment proposals submitted by farmers which meet the selection criteria, including bottomland improvements, small irrigated perimeters, soil conservation and watershed management, social forestry and village tree nurseries; (e) complementary studies to improve preparation capabilities. The project, to be carried out over 5 years, provides funds for civil works; vehicles, equipment and furniture; agricultural inputs: conaultants' services, studies and audits; operating costs; training; and goods and services for unidentified SROs. The total cost of the project is estimated at US$18.0 r.illion equivalent, with a foreign exchange component of US$7.9 million (44Z). A breakdown of costs and financing plan are shown in Schedule A. Amounts and methods of procurement and disbursements, and the disbursement schedule are shown in Schedule S. A timetable of key project processing events and the status of Bank Croup operations in Niger are given in Schedules C and D, respectively. A map is also attached. The Staff Appraisal Report, No. 6910-NIR dated February 22, 1988 is also attached. 6. The Government recognizes that the proliferation of procedures and institutional set-ups in the Ministry of Planning is not an ideal situation and agreed to IDA's proposal to conduct an organizational study, aiming to recommend ways to harmonize procedures imposed by different donors, including the possibility of creating an autonomous structure of funding. The study is being financed by Swiss bilateral funds and started in December 1987, according to the terms of reference and by the consultant approved by IDA. The project's organizational structure would be amended once a decision on a new organizational structure is made by the Government in consultation with IDA. Until then, the project will be coordinated and supervised by a unit in the Directorate of Regional Development and Micro-realization (DDRM) in the Ministry of Planning, which is currently responsible for promoting SROs. Provincial and district Governors will play a decisive role in the approval of proposed SROs and in mobilizing technical services for assisting local groups in the preparation and implementation of SROs. This is in line with the decentralization policy of the Government and the Governors have been increasingly empowered with  decision-making and execution responsibilities that were formerly the prerogative of central ministries. 7. Agreed Actions. The principal actions on which agreement has been reached with the Government are thats (i) as a condition for the provision of medium term assets, including anizals, to any group of producers, the group would open and pay into its Capital Replacement Account an amount of at least 52 of the delivered cost of such assets, and such payments would be vekified by the DDRM unit; (ii) the Governrent would convene regular meetings at least once a year with local representatives of the donors involved in SRO-type operations, to discuss their investment programs, rules and procedures, evaluation of past activities, etc., in order to improve coordination and programming; and (iii) upon completion of the organizational study, the Government would review with IDA the recommendation of the study and not later than December 31, 1990, the Government would carry out those recommendations approved by IDA. Conditions of Effectiveness are that (i) the project accounting system and procedures satisfactory to IDA have been established and that the Financial Director has been recruited; and (ii) the Government has presented to IDA the first year program of SROs to be financed after project start-up. B. Justification. Given the decline of uranium revenues and Niger's limited resource base, the development of agriculture is essential to future growth. Small rural operations, designed to be rasponsive to local conditions, and for which appropriate technology is available, appear to be tbe most feasible means of generating income in the short-term. In the meantime, the quest for medium-term approaches to rural income generation will le pursued through improving national services, particularly research and extension. 9. Risks. The technical risks associated with the proposed investment are minimal because they involve well-known and simple techniques. The project, however, faces a few other risks. First, low motivation and poor qualifications of local staff may slow the pace of development. The risk is expected to be minimized by substantial training, which has already started, combined with the increasingly effective authority of the Governors. Second, assets created under the project may not be adequately maintained because beneficiaries lose interest. This risk would be reduced by insisting on the cash downpayment for medium-term assets and by establishing a development contract between beneficiaries and local authorities laying down all the obligations and responsibilities. In addition, work would be designed in such a way that maintenance would not require skills, materials and tools not readily available at the village levels. Finally, coordination with other donors and NGOs may prove difficult. This risk would be reduced by regular coordination meetings to be held by the GovLrnment and by the organizational study to recommend how the harmonization of rules and procedures imposed by various donors would be achieved.  - 20. Recommendation. I am satisfied that the proposed credit would comply with the articlos of agreement of the Association and recoumend that the Executive Directors approve the proposed credit. Barber B. Conable President Attachments Washington. D.C. February 22, 1988  Schedule A NIGER SMALL RURAL OPERATIONS PROJZCT ESTIMATED COSTS AND FINANCING PLAN Estimated Costs a/ Local Foreign Total -