Burundi - Agricultural Services Sector Project

Docuemnt of The World Bank FOR OCCIAL USE ONLY Report No. P-4961-BU MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 25.1 MILLION TO THE REPUBLIC OF BURUNDI FOR AN AGRICULTURAL SERVICES SECTOR PROJECT APRIL 26, 1989 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contets may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit Burundi Franc (FBu) us $1.00 X FBu 155 FBu 100 z US $ 0.645 WEIGHTS AND MEASURES Metric BritishlUS Equivalents 1 meter (X) - 3.28 feet (ft.) 1 cubic meter (m3) 35.3 cubic feet 1 hectare (ha) - 100 ares - 2.47 acres 1 kilometer (km) - 0.624 mile 1 square kilometer (km2) - 0.386 square mile (sq. a.) 1 kilogram (kg) 8 2.20 pounds (lb.) 1 liter (1) 0 0.26 U.S. gallon (gal.) 0.22 Imperial gallon (imp. gal) 1 metric ton (m t) - 2,204 pounds (lb.) GLOSSARY OF ABBREVTATIONS COOPEC - Savings and Credit Cooperatives IDA - International Development Association ISABU - National Research Institute/Inatitut des Sciences Agronomiques du Burundi MOAL ' Ministry of Agriculture and Livestock MRDH - Ministry of Rural Development and Handicraft RDC - Regional Development Company GOVERNMENT OF BURUNDI FISCAL YEAR January 1 to December 31  FOR OMCIL USE ONLY BURUNDI AGRICULTURAL SERVICES SECTOR PROJECT Credit and Prolect Summary Borrower: Republic of Burundi Beneficiaries: Farmers in the Ngozi, Kayansa, Gitega, Muramvya, and Karuzi Provinces. Savings and Credit Cooperatives, Buyenui and Kir4miro RDCs and the Ministries of Agriculture and Livestock (MOAL), and of Rural Development and Handicraft (MRDH). Amount: SDR 25.1 million (US$ 33.1 million equivalent) of which SDR 7.04 million (US$9.3 million) of quick disbursing funds. Terms: Standard IDA, with 40 years maturity Onlendina Terms: Not applicable Financina Plan: S----- US million --------- Total IDA Credit 33.1 Government 5.4 Belgian Assistance 0.8 French Assistance and/ 0.4 European Development Fund COOPEC 0.3 40.0 Economic Rate of 19 percent (on 70 percent of total project costs). Return: Staff Appraisal Reports Burundi Agricultural Services Sector Project Report No. 7557-BU map: IBRD 20866 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.  JIDORANDUN AND RECOHMEIDATIOI OF THE PRESIDENT OF THE INTERNATIOR&L DEVEWPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF BURUNDI FOR AN AGRICULTURAL SERVICES SECTOR PROJECT 1. The following memorandum and recommendation on a proposed development credit to the Republic of Burundi for SDR 25.1 million (US$33.1 million equivalent) is submitted for approval. The proposed credit, which would include a quick disbursing component of SDR 7.04 million (Us$9.3 million), vould be on standard IDA terms and 40 years maturity and would help finance the reorganization of agricultural services in Burundi. Parallel financing would be provided by France and the European Development Fund (US$0.4 million) and Belgium (US$0.8 million) for technical assistance. 2. Tragic events shook Burundi in August 1988. A mission visited Burundi in October to assess the situation and its likely evolution. It concluded that the current Government approach -- working toward reconciliation and building national unity -- represents the best hope of peacefully resolving the long standing etonic issues which have affected the country. The return in December of refugees who fled Burundi in August is a positive sign. The Association's assistance to Burundi will continue supporting Government's efforts to ensure that the benefits of economic development accrue to all Burundians. This proposed agricultural services sector project is an important etep in this long-term strategy. 3. Background. Agriculture employs over 90S of Burundi's 5 million inhabitants and provides 50S of GDP and 902 of foreign exchange earnings, 801 of whi2h from coffee exports. Population density in Burundi is very high (180 per km+) and average farm size is only 0.7 ha. So far, Burundian farmers have been able to incresse food production in line with population growth estimated at 32 per year by taking Into cultivation previously unused lands, by adapting their farming system to schieve increasingly higher cropping intensities, and by shifting from cereals and legumes to higher yielding tuber crops. This has, thus far, minimized the use of cash inputs, but it has also meant that crop yields per acre have not notably increased end nutritional status has deteriorated. Agricultural services are largely ineffective, generally employing inadequate research and extension methods. Until recently, agricultural research has been guided more by academic requisites than by farmers' needs. Extension has suffered from the lack of relevant technical packages, especially for foodcrops and, as a result, extension services have too often been limited to ensuring compliance with Government decreed national objectives in a top-down approach. In addition, extension efforts are diluted by a heavy burden of unrelated non-extension duties. The use of agricultural inputs is limited to improved seeds, some fertilizer, pesticides and tools. The existing seed production and distribution system is chaotiz and few of the improved" seeds outperform traditional varieties under actual farming conditions. Problems encountered on the institutional side have been fourfold. First, the creation and subsequent expansion of Regional Development Companies (RDCs) to implement area-based integrated rural  - 2 - development projects caused confusion as to the role of the central ministries and, to some extent, led to dual services. Secondly, the integrated vocation of RDCs led them to take on varied activities including social services, construction work and commercial activities and to compete with the private sector in some of these activities. The high cost of RDC operations increasingly led to questions of financial sustainability. Third, both extension and research services have been top down, taking insufficient account of farmer requirements and failing to learn from progressive farmer initiatives. A more participatory attitude would not only result in efficiency gains, but would also help to lessen social tensions. Fourth, separate financing of RDC counterpart expenditures through earmarked resources (i.e., the coffee pricing system) led to unaccountability of resource use, difficulties in sectoral investment planning and programming and, in some instances, wasteful allocation of scarce Government resources and a growing level of subsidies. The Sectoral Adiustment Program 4. The Government adopted on June 28, 1988 a new Agricultural and Livestock Sectoral Policy which addressed the above-mentioned issues. The sectoral policy builds on the Government's statement on agricultural policies attached to the Second Structural Adjustment Program approved by the Executive Directors in June 1988. The proposed operation would assist the Government in implementing two key components of its agricultural sector policy: (i) reform of the national input policy through the gradual elimination of subsidies and the unification of the fiscal policy on inputs; (ii) the restructuring of Buyenzi and Kirimiro RDCs through: transfer of extension activities to MOAL's services, phasing out and progressive transfer of RDCs input production, marketing, and other commercial activities to the private sector and cooperatives; and (iii) reform of agricultural staff's salary structure. These policy reforms would be supported by a quick disbursing component to be disbursed in two tranches (see para. 9). Rationale for IDA Involvement 5. The project is part of IDA's strategy to support the GOB's structural adjustment program. It addresses key policy measures in the agricultural sector and would complement the agricultural sector component of the Second Structural Adjustment Program as well as actions undertaken by the Muyinga Agricultural Development Project. It will be a follow-up to three ongoing IDA projects: Ngozi III, Kirimiro and Technical Assistance III. IDA's involvement in the design of Integrated Rural Development projects was instrumental in the creation and development of existing RDCs as implementing agencies of the Ngozi and Kirimiro projects. IDA's involvement in adopting the lessons learned from operating the RDCs since their creation is therefore equally essential. The project would be the first step of a long term structural adjustment of the agricultural sector which would focus ons (i) transfer of agriculture investments to the private sector; (ii) close monitoring of the cost/benefit ratio of agricultural services, rural development infrastructure and land protection; (iii) concentration of budgetary resources on public service activities (extension, research); and (iv) divestiture of commercial activities (input supply, marketing). The proposed project would apply these principles to the reorganization of Buyenzi and Kirimiro RDCs and would be complemented by a CoffeelExport Crops Project currently under preparation.  -3- Proiect Obiectives 6. The purpose of this hybrid operation is to deepen the adjustment process in the agricultural sector. The policy-based component would promote the involvement of the private sector and cooperatives in sustainable agricultural input delivery through the gradual suppression of subsidies, and improve efficiency while reducing the financial costs of agricultural services through the reorganization of their delivery system (switch from area development companies to a national service). It would also support a reform of the salary structure of the agricultural staff. The investment component would : (i) develop MQAL's analytical and long term progravming and budgeting capability, and sector management capacity; (ii) design and establish a national extension system based on the training and visit printiple capable of responding to farmers' needs and constraints and of developing rechnologies adapted to various ecological and farming systems; (iii) strengthen agricultural research on fertilization and pest control; and (iv) rehabilitate the cooperative movement and promote the development of savings and credit cooperatives (COOPECs). Proiect Description 7. The project would be a hybrid operation consisting of a quick disbursing component supporting the adjustment program and an investment component. The investment component would include: (a) Strengthenin. of MOAL's central services throughs (i) support MOAL's rlanning Directorate; (ii) creation of a Financial and Administrative Unit; and (iii) strengthening the recently created General Directorate for extension; (b) Strengthening of agriculture research throught (i) Strengthening of the phytosanitary control service In ISABU; (ii) Support to a National Fertilizer Research Program; (iii) preparation of a program to reorient agricultural research; (c) Reorganization and strengthenint of regional agricultural services through: (i) Reorganization and Strengthening of Extension services in S provinces under Buyensi and Kirimiro RDCs; (ii) carrying out, with the support of ISABU a program of adaptive and on-farm research in the five provinces; (ii) carrying out a staff training program; (iv) strengthening livestock services in Buyenzi and Kirimiro; and (v) support to land protection and development; (d) Management of Buvenzi and Kirimiro RDCs' reorganization through: (i) strengthening RDCs' promotion activities; and (ii) monitoring and evaluation. (e) Promotion of Communal Development and of Rural Youth enwloyment through pilot programs in Ngozi and Muramvya provinces.  - 4 - (f) Strenathening of the Cooperative Movement through: (A) support to HRDH's Cooperative Department in the promotion of an w-Atonomous cocoperative movement; (ii) support to Savings and Credit Cooperatives (COOPEC); 8. The project, to be carried out over 5 years, provides funds for civil works, vehicles, furniture and equipment; training and studies; technical assistance; and incremental operating costs. The total cost of the project is estimated at US$40.0 million with a foreign exchange component of US$29.3 million (73Z). A breakdown of c>ats and the financing plan are shown In Schedule A. Amounts and methods of procurement and of disbursements and a disbursement schedule are shown in Schedule B. A timetable of key processing events a-d the status of Bank Group operations In Burundi are given in Schedules C and D. A map is also attached. The Staff Appraisal Report, No. 7557-BU dated April 26, 1989 has been distributed separately. Agreed Actions 9. The Government has agreed on the followings (a) establishing and staffing a Financial and Administrative Unit in MOAL by credit effectiveness; (b) submitting a study on RDC garage operation by April 1991; (c) returning the responsibility of services activities from the RDCa to MOAL's General Directorate for Extension before December 1992 while at the same time reinforcing budget control at the central level; (d) Implementing a cost recovery mechanism for livestock inputs before January 1992; (e) including operating costs of the provincial services in the agricultural sector public expenditure program, with total financing by January 1995; and (f) eliminating, in steps, fertilizer subsidies by June 1991. Tranche release conditions for the policy component are as follows: First Tranche: (i) submission of satisfactory financing plan for 1989 and 1990 for the Buyenzi and Kirimiro RDCs; (ii) increase by 25X of the consumer price for fertilizer sold by Buyenzi and Kirimiro RDCs; (iv) establishment of a Fertilizer Policy Committee; Second Tranche: (i) design of a national program on seed production and marketing; (ii) implementation of the tranwfer of administrative and financial responsibility of RDC extension staff In at least one province in each RDC; (iii) the design of a national regulation on pesticide usage; (iv) adoption of the 1990-1993 public expenditure program for the agricultural sector; (v) starting to implement the results of a study on the salary structure of MOAL's staff by August 1990. Benefits 10. The project is expected to improve the living conditions and the nutritional situation in five provinces inhabited by about 35Z of Burundi's population through better linkages between extension and research. The needs of the growing number of small marginal farms, of young farmers (school leavers) and of women farmers would receive special attention. The reorganization of Government's interventions in the agricultural sector would improve the cost-effectiveness of public expenditures and reduce public expenditures for agricultural services by about 162. It would improve the quality of sectoral programs and creato favorable conditions for a growing involvement of the private sector and cooperatives in commercial activities. The rate of return on fertilizer promotion, rice development and pest control has been estimated at 19X.  Risks 11. At the country level, the major risks are those inherent In opening up a heretofore tightly controlled society. The Government's determination to build national unity, and the support of these efforts by the international counuluity, should help minimize these risks. At the project level, the major risks are those derived from the scarcity of qualified Surundian staff. To minimize this risk, the project would rely on an intensive training program, support from consultants, linked with a local technical assistance program, and on the involvement of NGOs. Another unknown would be the willingnesJ of the private sector and cooperatives to accept the risks associated with Input distribution and food crop processing and marketing. The project's phased approach in assuming these marketing risks has been designed to facilitate private sector participation. Recoemendation 12. 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. April 26, 1989  -6- BURUNDI Schedule A AGRICULTURAL SERVICES SECTOR PROJECT Page 1 of 2 Proiect Costs Summarv (US$ illion)1I Local Foreign Total A. MOAL's CENTRAL SERVICES 2.65 5.10 7.75 B. REGIONAL AGRICULTURAL SERVICES 1. Kirimiro RDC 2.11 3.23 5.34 2. Buyenzi RDC 1.45 2.67 4.12 3. Rural Youth Program .31 .56 .87 4. Communal Development .30 .56 .86 Sub-Total Regional Agricultural Services 4.17 7.03 11.19 C. RESEARCH 1.48 2.11 3.59 D. COOPERATIVE DEVELOPMENT .92 2.49 3.41 P. SUPPORT TO ADJUSTMENT 9.30 9.30 Total Baseline Costs 9.22 26.02 35.24 Physical Contingencies .65 1.21 1.85 Price Contingencies .90 2.05 2.95 Total Project Costs 10.76 29.28 40.04 of which Taxes 1.18 .00 1.18 1/ Based on exchange rate US$1- PBu155  -7- Schedule A Page 2 of 2 BURUNDI AGRICULTURAL SERVICES SECTOR PROJECT Fisancing Plan ~~-------- $US Million----____ IDA Credit 6.4 26.7 33.1 Goverrment 4.3 1.1 5.4 Bilgian As,istanvA - 0.8 0.8 French Assistance and - 0.4 0.4 European Development Fund COOPEC 0.1 0.2 0.3 10.7 29.3 40.0  Schedule B BURUNDI Page 1 of 3 AGRICULTURAL SERVICES SECTOR PROJECT PROCUREMENT METHOD AD DISBURSEMENT Procurement Method Total Project Element ICB LCB Other N.A. Cost (IDA) --------- USS million------------------------- _, Construction 1.2 1.2 (1. 1) (1. 1) Land protection vorks 1.9 Ia 1.9 (1.8) (1.8) Equipment .8 .3 .1 lb 1.2 (dG) (.2) (.1) (1.1) Vehiclus 2.4 .1 Ic 2.5 (2.4) (.1) (2.5) TraWinin 2.2 Id 2.2 (1.9) (1.9) Reseaz':h, Studies 5.0 Id 5.0 (4.5) (4.5) Technieal Assistance 7.2 Id 7.2 (5.9) (5.9) Operating Costs 9.5 9.5 (5.0) (5.0) Quick Disbursint Component Inputs 4.5 4.8 9.3 (4.5) (4.8) (9.3) Total 7.7 1.5 19.4 11.4 40.0 (33.1) (7.7) (1.3) (17.3) (6.8) (33.1) Notes figures in parentheses are the respective amounts financed by IDA la force account /b direct contracting Ic international or local shopping Id in accordance to IDA's guidelines  -9- Schedule B Page 2 of 3 BURUNDI AGRICULTURAL SERVICES SECTOR PROJECT Disbursement Table Category Amount (US$ million) 1. Civil Works 100 S of foreign and 80 X of (a) MOAL and RDC Services 2.18 local expenditures (b) ISABU, Facagro .05 (c) COOPEC .24 2. Equipment and Vehicles 100 X of foreign and 80 2 of (a) MOAL and RDC Services 2.24 local expenditures (b) ISABU, Facagro .45 (c) MRD Cooperative Department .41 sd) COOPEC .20 3. Consultant Services 100 2 of total expenditures (a) MOAL and RDC Services 5.06 (b) TSABU, Facagro .05 (c) MRD Cooperative Department .46 4. Trainina. Research. Studies 100 S of foreign and 80 X of (a) MOAL and RDC Services 5.21 local expenditures (b) ISABU, Facagro .24 (c) HRD Cooperative Department .24 (d) COOPEC .42 5. Oeratina Expenses 90 2 in PY1; 802 in PY2; 60 2 (a) MOAL and RDC Services 2.79 40 2 in PY4; and 20 Z in PYS (b) ISABU, Facagro 1.23 (c) WIT Cooperative Department .41 (d) COOPEC .25 (6) Inputs 100 Z of total expenditures (a) Fertilizers 4.50 (b) Phytosanitary products 2.80 (c) Vet. products and agri. tools 2.00 (7) Unallocated 1.71 Total 33.12  - 10 - Schedule B BURUNDI AGMCLTURAL SERVICES SECTOR PROJECT Page 3 of 3 Estimated Disbursements --.--_---------------------------- USS Million ------------------------------------ FY90 FY91 FY92 FY93 FY94 FY95 FY96 IDA Annual 2.8 7.3 8.7 5.5 4.5 2.6 1.7 Cumulative 2.8 10.1 18.8 24.3 28.8 31.5 33.1  - 11 - Schedule C BURUNDI AGRICULTURAL SERVICES SECTOR PROJECT Timetable of Key Project Processing Events Time taken to prepares 4 years Prepared bys Government with consultinr- firm and IDA Input Appraisal mission departure: November 1987 Post-appraisal mission departure: Hay 1988 Negotiations: March 13, 1989 Planned date of effectiveness: September 1, 1989 List of relevant PPARs: 1531, 4576, 3314 and 5683  Scbedule D - 12- page 1 RUN TINEt 04112189 AT 12.19.35 STATUS OF BIllllt OPTIIKS IN R1M1I SPM25 - SUMY STATENT OF LIONS AND IDA CREDITS (LOA DAA AS OF 2/30/89 - NIS DATA AS OF 04)1210) Awnt in US uillion 1l"s canllations) Loan or Fiscal Nodis- Cloing Credit No. Yw ourromr Purpoe Dan IDA bursd Dte Credits 22 Crdits(s) closed 199.68 C11920-DUl 1982 DRUNDI III.R1D 11011 111 16.00 5.32 0313119R13) C14560WUI 1984 N I THIRD TAS CREDIT 5.10 2.92 03/31/89() CIS30-DiW 1995 9URU1 l HI(YS.IV 18.10 11.00 0614189 C15930-WBu 15 9I TRYIAS I DISYSIN. 12.30 7.84 1213118 ClUOO-WI 19U8 NM1 FORESTRY It 12.90 10.53 09130191 C12-9u1 1986 511 MATER SUM. 11 9.50 5.91 12131191 C179tBUI 1981 9U1Rml0 ECO.NIT.IPtI9.ENTER. 7.50 6.70 12131192 CtIOOl- 1987 011N1M01 TELECON 11 4.90 5.02 12)311" C18570-UUI 1989 IIURIIIII ARIC.NUYINBA 10.00 9.94 06130/" C11620-9U1 1989 91_I IEALATIPO. I 14.00 13.00 06/30193 CIUIo-DUt 1998 NRWIDI EDUEC.Et.P 31.50 28.15 0613019 CII890-CII} 1998 OIMIRNEI Wu 8.0 7.53 12131194 C19190-8111 199 1 NMI SAL I 10.00 47.65 12111 C196M0111 1999 Mun1 i Wm1 11 21.00 21.28 12131/95 TOTAL numb Credits 14 260.60 112.69 Loans I Loans(s) closed 4.90 All closed fwr NMlI0 TOTAL nuwber Loans 0 TOTALMSI 4.80 450.28 of which repaid 4.80 6.97 TOTAL held by Bank & IDA 443.31 Aount sold 8.45 of which repaid 2.97 TOTAL undisbursed 102.69 IIOTES: t Not yet effective St llt yet siqned IUI Total Approved, Reymnts, and Outstanding balance reprsent both active and inactive Loans and Credits. (RI indicates 4orally revised Closing Date. the eNot Aproved and Bank Repaymnts are historical value, all othes are mrket value. The Sicning, Effectivef and Closing dates are based upon the Loan Deartunt offical data and are not taken fros t e Task Budget file.  - 13 - Schedule D p.2 JURUNDI AGRICULTURAL SERVICES SECTOR PROJECT . B. Statement of IFC Investments in Burundit Expressed in US $ (As of October 31, 1988) Year Obligator Type of Business Amount US $ Million Loan Eauity Total 1981 Verreries du Burundi Glass Container 4.8 0.8 5.6 Total gross commitments less cancellations, terminations, repayments and sales 0.1 0.1 0.2 Total commitments now held by IFC 0.1 0.1 0.2  BURUNDI AGRICULTURAL SERVICES PROJECT RWANDA PR NOD JECT AREA ( < ,- - Kt L;0 PRtOJECT 1 *i ARt. .,A<- PROVINCa CAPITALS bk_ * NATIONAL CAPITA. PROVINCE BOUNDARIES - COMMUNE BOUNDARIES INTERNATIONAL BNOUNAIES KR ~~~~~~~~~~~~~~TANZANIA ZAIRE C ANKUZ j .* *bb$sIMURAMVYJ-^< ,Kl*W A4,19.11"~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~4 Vo - | t > > WRURI / t ! t t--.-t =: = t / 6 \; / ffi<~~~~~~~~~~~~~~~~~~' KEWA Z t: ; t r 2 Et ~~~~~~~~~~~~~~~~~~~~TANZAIA t