Rwanda - Agricultural Services Project

Document of The World Bank FOR OFFICIAL USE ONLY Repot No. P-5039-RW t MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 15.5 MILLION TO THE RWANDESE REPUBLIC FOR AN AGRICULTURAL SERVICES PROJECT MAY 8, 1989 This docment has a resicted ditibution and may be used by reipients only in the performance of their offiil dudes. Its conten may not otherwise be discloed witbout World Bank autorizatoo  CURRNCY .1MALUENTS Currency Unit - Rwandese Franc (RP) US $1.00 - RF 77 RF 100 - US $1.30 US $1.29 - 1 SDR The U.S. dollar/Rwandese franc rate is subject to change. Conversions in the Staff Appraisal Report were made at US$ 1.00 -R 77, the average exchange rate at the time of appraisal in October 1988. WIXONT An0 NAURsm Metric British/US Equivalents 1 meter (a) - 3.28 feet (ft.) 1 cubic meter (m3) - 35.3 cubic feet 1 hectare (ha) v 100 ares - 2.47 acres 1 kilometer (kam) 0.624 mile 1 square kilometer (km2) 0.386 square mile (sq. m.) 1 kilogram (kg) 2.20 pounds (lb.) 1 liter (1) - 0.26 U.S. gallon (gal.) 0.22 Imperial gallon (imp. gal.) 1 metric ton (a t) - 2,204 pounds (lb.) 3LOSSAY OF ABBRVIATIONS GOR - Government of Rwanda IDA - International Development Association ISAR a Institute des Sciences Agronomiques du Rwanda (Agricultural Research Institute of Rwanda) HINAGRI Ministry of Agriculture, Livestock and Forests NWGs 3 Non-Governmental Organizations SSS - Selected Seed Service GOYRRUHERT OF RVANI) FISCAL TMAR January 1 to December 31  FOR OMCIAL USE ONLY AICULTURAL SCS R SC Credit and Prolect Summary Borrowers Government of Rwanda Beneficiariess M nistry of Agriculture Livestock and Forests, Farmers in Cyangugu, Gisenyi, Kibuye, Kigali and Kibungo prefectures Amount: IDA credits SDR 15.5 million (USS 19.9 million equivalent) Termst Standard Flnancla Plan: -- US$ million-- 0OR 10.2 IDA 19.9 TOTAL 30.1 1conmic 1at of Returnt NA. However, conservative adoption rates of now cultivation practices (4 pe. cent yearly) and modest production Increases ( 1 percent annually), would lead to an ERR of 15 percent. Staff Apraisal Revort: Rwanda Agricultural Services Project Report * No. 7599-RW IBRD 21291 This document has a rasticted distrbution and may be used by recipients only in the performance of their official duties its contents may not otherwise be disclsed without Wodd Bank authorzation.  DR~~AND OF TM O PRESIDENT OF THE INTERATIIU&L DEVEOIPENT ASSOCI&TIOM TO Tin EZECUTIVE DIRECTORS ON A PROPOSED CRrIT TO THE RWANDSE REPUBLIC FOR N AGRICULTMRAL SRVICES PROJECT 1. The following report on a proposed development credit to Rwanda for SDR 15.5 million (US$ 19.9 million equivalent) is submitted for approval. The proposed credit would be on standard IDA terms and would finance the reorganization of agricultural services in Rwanda. i. Background: With a population density of 250 persons per km2 (400 per km2 of arable land) Rwanda is the most densely settled country in continental Africa. Its estimated population of 6.0 million is growing at a rapid annual rate of 3.7 percent. Agriculture is the mainstay of tho economy contributing about 80 percent of the total value of exports and 40 percent of GDP at current prices. As much as 95 percent of the population lives in the rural areas. The agriculture sector performed relatively well until 1983 with growth rates of 5.8 percent per annum between 1974-1980 and 3.5 percent per annum between 1980-1983. Food production appears to have kept up with population growth until 1985. In 1986 the growth rate of the fooderop sector fell to about 3 percent. The most important factor in the blow down in agricultural growth is the pressure of population on scarce land resources. Over half the 1 million farm holdings are less than 1 ha. Fallow land is in limited supply and there is overgrazing by livestock. Farmers have so far managed to increase overall production through area exp&asion and increased cropping intensities but with limited use of modern inputs. As a result, soil fertility Is threatened and there is indeod evidence that yields for most crops are at best stagnant. With the possibilities for area expansion and Increased cropping intensity coming to an end, indications are that future increases most come from productivity gains. To achieve this goal, the development of relevant agricultural technology and its dissemination through better agricultural support services Is essential. Agricultural services in Rwanda (extension, adaptive and on-farm research, input supply, marketing) are poorly organised and underdeveloped. Extension is characterized by poorly coordinated donor interventions, unwieldy institutional and financial structures, and ill-adapted themes. Adaptive research is insufficient in qnantity and quality and the use of modern inputs is limited. Local and interregional trade is insufficiently developed partly because of the small private sector and an inward looking -- subsistence oriented -- outlook by both Government and farmers. 3. The IDA financed Gitarama Agricultural ProductionIMINAGRI Institutional Strengthening project (Cr. 1669-RW) which becam effective September 1986 was prepared to respond to the above problems. The objective of the Gitarama component was to test, on a pilot basis, a modified T&V extension system adapted to local conditions which could be replicable on a national basis. An additional aspect was the promotion of private sector participation in input supply and marketing. The Gitarama project has been largely successful to date and important lessons have been learned such as the need to more clearly define  - 2 - and develop adaptive research, the importance of an effective internal monitoring and evaluation system and the need to streamline the agricultural services structure to more effectively utilize scarce university trained personnel. 4. Proiect Obiectivest The project aims to improve agricultural productivity, farmer incomes and nutritional status through better and more cost effective delivery of agricultural services on a national scale. Its immediate objectives are to build on the Gitarama and other project experience to a) strengthen adaptive and on-f arm research; b) improve the delivery of extension services to farmers with a particular emphasis on reaching women farmers; c) strengthen the production of selected seed; and d) promote greater private sector participation In the marketing of agricultural inputs and produce. 5. Proiect Description: The project would be implemented over a five year period by MINAGRI and would comprise: a) reorganization and streamlining of extension services in all or parts of five of Rwanda's ten prefectures including implementation of a new structure integrating extension, adaptive research, and monitoring and evaluation. The project would upgrade extension staff through training and support improvements in extension methodology and content; b) strengthening of adaptive and on-farm research through better diagnosis of problem at the farm level, inclusion of farmers and local authorities in problem identification and solving, and implementation of on-farm and multilocal trials of new techniques and technologies provided by research; c) support for monitoring and evaluation through the Implementation of a decentralized management information system; d) strengthening of seed production and distribution through support to the Selected Seed Service (SSS) to improve seed quality control and certification, reactivation of the National Seeds Committee for supervision of seed regulation, improved cost recovery for seed production, and rationalization of production including improved management of six seed farms developed under previous IDA supported rural development projects. The project would support the development of a multi-purpose farm for seed multiplication and adaptive research trials in Bugarama, Cyangugu prefecture which would also serve as a base to encourage the contracting of small farmers for seed multiplication; e) promotion of private sector participation in agricultural input supply and marketing through assistance to cooperatives and private enterprises to procure Inputs, obtain credit, and improve enterprise management. NOOs and the Union of Cooperative Banks (Banques Populaires) would be contracted to provide the needed services. Total project cost is estimated at US$ 30.1 million with a foreign exchange component of US$ 11.2 million or 37 percent. Proposed IDA financing amounts to US$ 19.9 million (66 percent of project costs). A breakdown of costs and the financing plan is shown in Schedule A. Amounts and methods of procurement and disbursement and a disbursement schedule are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operations in Rwanda are given in Schedules C and D respectively. The Staff Appraisal Report No. 7599-RW dated May 8, 1989 is being distributed separately. A map is attached. 6. Rationale for IDA Involvements A primary objective of IDA's agricultural strategy in Rwanda is the strengthening of national capabilities in research, extension, policy formulation, planning and programming as a means of improving agricultural performance. An additional aspect is the expansion of markets through promotion of increased private sector activity. To this end,  - 3 - IDA has recently finarced two operations in extension and research which address key national issues of agricultural services--the National Research Project (Cr. 1546-RW) and the Gitarama project (Cr. 1669-RW). Support for the proposed project would be a continuation of IDA's strategy and of the assistance essential for assuring productivity increases. IDA's involvement would also contribute to donor coordination in eventually replacing a patchwork of donor supported rural development and extension projects by a national approach to agricultural services. 7. Agreed Actions: During negotiations agreements were reached on the following: a) evaluation of fertilizer pricing policy during the project midterm review, to take place no later than November 30, 1992, to improve recovery of fertilizer costs including retail margins; b) evaluation of the agricultural services approach, also at the project mid-term review, and development of a timetable for the integration of other donor-financed extension and rural development projects into the agricultural services framework; c) no later than January 1, 1993, GOR would shift the financing of its share of project operating costs from the development to the recurrent budget where it would be identified as a line item. Further, during the project midterm review GOR and IDA would evaluate the Government's public expenditure program and budgetary procedures for the agricultural sector to ensure their adequacy for continued funding of the recurrent cost of the agricultural services; d) GOR would recover the full direct costs of seed production by the end of project year 3 based on a Schedule agreed with IDA; e) no later than June 30, 1990, MINAGRI will submit for IDA review and comment draft technical criteria on seed production and certification and, no later than January 31, 1991, issue a ministerial decision governing seed production and certification which also empowers the SSS to effectively control seed quality and certify seed; f) appointment of one project administrator and one central level financial manager acceptable to IDA for the Agricultural Services and Gitarama projects; g) maintenance at all times of a core staff (at the minimum the project administrator and his staff) at the central level that will provide support to the field services. Prior to credit effectiveness: h) GOR would formally appoint the prefecture coordinators, appoint the project administrator and recruit the financial manager and the adaptive research officer; i) ISAR and the extension services (NINAGRI) would sign an accord with terms and conditions acceptable to IDA detailing the respective duties of each party with regard to adaptive research; J) GOR would open the counterpart fund account in the National Bank of Rwanda and deposit an initial amount of RF 15 million corresponding to four months of its portion of expenditures (excluding salaries and transport allowances) for the project. 8. Benefits: Project benefits are expected to be: a) increased productivity and output for an estimated 168,000 farm families and, as a result, better nutrition and incomes. An additional 400,000 farm families will also benefit from improved supervision and coordination of prefecture wide agricultural activities by the prefecture teams to be financed under the project; b) a strengthened field service expected to provide the framework for future coordinated donor support to extension and adaptive research; c) savings of up to US$ 3 million a year in the running costs of a more streamlined extension and adaptive research service when this is eventually extended over the whole country. The project economic rate of return is based on an indicative calculation of the order of magnitude of benefits needed to produce a 15 percent  ERR and the likelihood of attaining these benefits. If the net incremental benefits due to Improved agricultural services were to reach RF 1020 million (US$ 13 million) per year by project year 1S I.e., 9 percent above the estimated *\vithout projactI case, discounted economic benefits would equal discounted costs and the ERR would be 15 percent. Conservative adoption rates of new cultivation practices (an average 42 yearly) and rtdest pzoduction increases (1S annually) would lead to a 15S ERR. Evidence from Bank-financed extension projects in other sub-saharan Africa countries (e.g. Togo and Central African Republic) indicate adoption rates for now extension themes of 10-50 among farmers sampled. 9. Riskst The main project risk is the limited availability of university trained personnel to man the adaptive research service and the higher echelons of the extension service. To minimize this risk, a great deal of emphasis will be placed on continuous on-the-job training to upgrado post secondary staff and render them capable of performing specialized tasks. A second risk is that donors may be slow or unwilling to work within the nw framework thereby reducing expected savings from adoption of the structure countrywide. MINAGRI is undertaking an effort to convince donors and this appears to be yielding results. The ministry needs to be more specific however on how each donor project should fit into the new system and the time frame for doing this. The project midterm review will provide MNAGRI with the opportunity to develop the required specificity on Implementation. Continued IDA dialogue with donors on the proposed system is providing support to MIIAGRE and should help minimize this risk. 10. Recommendation: I am satisfied that the project would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. Barber B. Conable Attachments Washington, D.C. May 8, 1989  _ 5 _ Scheule A Prolect Cost Smz les"A _a Extension, Adaptive Resoerch and Monitoring & Evaluation Services (including support invetments in Livestock and Forestry) 11.0 6.0 17.0 Strongthening of Seed Production and Distribution 1.0 0.8 1.8 Promotion of Private Sector Participation In Marketing, Input Supply, and Cooprative Developmnt 2.3 0.9 3.2 Central Adminstration 0.6 1.2 1.8 Studies 0.4 0.1 O.S TOTAL BASELINE COSTS 15.3 9.0 24.3 Physical Continencies 1.0 0.9 ' 1.9 Price Contingeles 2.6 1.3 3.9 TOTAL PROJECT COSTS1I 18.9 11.2 30.1 Financins Plan Government 9.0 1.2 10.2 IDA 9.9 10.0 .19.9 TOTAL 18.9 11.2 30.1 1/ Includes direct taxes of about US$ 1.3 million.  - 6 - 8chedule B Poge 1 of 2 (tJS 8 mllloM) IC-B ICB a*LS o/ Oe VA Total Civil Works 0.8 b/ 4.7 5.S (0.7) (4.5) (5.2) Vehicles, Iquip., Material, Input. 3.4 0.5 3.9 (3.2) (0.5) (3.7) Training, Studiea, TA 3.4 3.4 (3.3) (3.3) Support to NGOs & Prom. activitles 2.5 c/ 2.5 (2.3) (2.3) Support to Forest and Coffee Nurseries 2.9 f/ 2.9 (2.7) (2.7) Sslaries, Transporta- tion All 5.9 5.9 (0.0) (0.0) Vehicle operating & other operating 0.1 (5.9) d/ 6.0 (0.1) (2.6) (2.7) TOTAL COSTS 4.2 4.7 0.6 S.9 14.7 30.1 TOTAL DA FINANCING (3.9) (4.5) (0.6) (5.6) (5.3) (19.9) a/ The figures between parentheses represent IDA's share. bl Construction cost of 3 quays (points d'accostage) to be awarded following ICB. c/ Includes the cost of activities to be carried out by IWACU, the Banques Populaires end KORA for US$ 2.2 million of which IDA's share Is US$ 2.1 million. dl Includes vehicles operating costs for US$ 4.1 million of which IDA's share is US$ 1.7 million. e/ International and Local Shopping. f/ Development of Forest Nurse-ies for USS 2.4 million and Coffee Nurseries for US$ 0.5 million of which IDA share is US$ 2.2 ndllion and US$ 0.5 million respectively. The nurseries will be established through umupanda cosmunal labor and IDA would finance materials (seeds, plastic sachets) small implements and some operating costs.  -7- Schedule 3 Page 2 of 2 ATCULTURAL SEV,.IC_ESPOJC DUsbuTsements Categorv aSS million 2 of Expenditures Civil Works 4.7 952 Equipment, Vehicles, Material and Inputs 3.4 1002 Foreign, 95Z Local Expenditure Training, Studies, TA 2.9 1OOS Support to NGOs & Prom. Activities 2.1 952 Investment in Forest and Coffee Nursery Development 2.4 952 Operating costs excluding salaries and transportation allowance 2.4 752 in Yi; 602 in Y2U 502 in Y3; 352 in Y4; 02 in Y5. Unallocated _2.0 TOTAL 19.9 Diaburseneut schedule Estimated DisbursDemtst (US$ llion) IDA Fiscal Year if 19 199192 1993 1994 1995 1996 Annual 0.4 1.9 3.9 4.8 4.3 3.8 0.8 Cumulative 0.4 2.3 6.2 11.0 15.3 19.1 19.9  - 8 - Schedule C AG3XCULTO3 SDCES ~3cr