Senegal - Irrigation Technical Assistance Project

Docmnent of The World Bank FOR OFFICIAL USE ONLY Report No. 8993 PROJECT COMPLETION REPORT REPUBLIC OF SENEGAL IRRIGATION TECHNICAL ASSISTANCE PROJECT (CREDIT 1632-SE) SEPTEMBER 7. 1990 Agriculture Operations Division Sahelian Department Africa Regional Office This document has a restricted distribotion and may be used by recipients only in the perfonnance of their offical duties. Its contents may not otherwise be disclosed without World Banbk athoriZtion.  PROJECT COMPLETION REPORT REPUBLIC OF SENEGAL IRRIGATION TECHNICAL ASSISTANCE PROJECT (CREDIT 1632-SE) Monetary Unit : CFA Franc (CFAF) 1 US$ 8 300 CFAF SYSTEMS OF WEIGHTS AND MEASURES: METRIC Metric US Equivalent 1 hectare (ha) = 2.47 acres LIST OF ACRONYMS CCCE Caisse Centrale de Cooperation Economique (France) CNCAS Caisse Nationale de Credit Agricole du SEn4gal. CPSP Caisse de P4riquation et de Stabilisation des Prix FAC Fonds d'aide de cooperation (France) FAO Food and Agriculture Organization NPA Nouvelle Politique Agricole odMs Organisation de Hise en Valeur de la Vallee du Senegal SAED Societe d'Am4nagement et d'Exploitation des Terres du Delta du Fleuve S6nEgal et des Vallees du Fleuve Senegal et de la FalEme SOMIVAC Societe de Mise en Valeur de la Casamance SOFISEDIT Societe Financiere Senegalaise pour le Developpement de l'Industrie et du Tourisme. UAC Unite d'Atelier Central (Main Mechanical Workshop for SAED) UNDP United Nations Development Program USAID United States Agency for International Development FISCAL YEARS SAED: July 1 - June 30 Government: July 1 - June 30  FORt OFmCIAL USE ONLY THE WORLD BANK Washmgton. DC. 20433 U.S.A. aWc nE Ogete.pq Pwatm Rvah*abw' September 7, 1990 KEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report - Republic of Senegal Irritation Technical Assistance Proiect (Credit 1632-SE) Attached, for information, is a copy of a report entitled "Project Completion Report - Republic of Senegal Irrigation Technical Assistance Project (Credit 1632-SE)" prepared by the Agriculture Operations Division, Sahelian Department, Africa Regional Office. No alidit of this project has been made by the Operations Evaluation Department at this time. Attachment Ths document has a =ttd distibution and may be usod by cipbnts only in the perfomace I of ther offiial dutis Its coateuts may n othewe be discosed without Wodd Dank a_n- |n.  FOR oFCAL1 USE ONLY PROJECT COMPLETION REPORT REPUBLIC OF SENEGAL IRRIGATION TECHNICAL ASSISTANCE PROJECT (CREDIT 1632-SE) TABLE OF CONTENTS Page No. PREFACE ............ i BASIC DATA SHEET .... ..... ..... .................. & ........ Li EVALUATION S10UMMARY ......... ............................... iv I: BACKGROUNDs ORIGIN & OBJECTIVES ................ ..... ......... 1 Background ........ .... ..1.......... 1 Project Objectives ........ . 2 II: PROJECT FORMULATION ...................... 2 Project Description ........................ ............... 2 Project Design ...... . 3 IIIs PROJECT IPLENTATION .......................................... 4 Project Implementation .............................................. 4 Project Results .. ............................ ........ 4 Status of Disengagement . ........................................ 4 Project Sustainability .................................... . 5 IV: ISSUES RAISED AT EACH STAGE OF PROJECT CYCLE ................ 5 Identification/Preparation ..... ....* . ... .00*400* .............. 5 Appraisal .................................................... 6 Board Presentation ....................... .. .... . 6 Credit Effectiveness ............................................6 V: PERFORMANCE . ............... ................................. 6 Bank Performance . ............................................... 6 Borrower Performance ............................................ 8 ANIMEX: Status of Covenants Attachment I - Comments from the Borrower This document has a restricteo 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.  PROJECT COMPLETION REPORT REPUBLIC OF SENEGAL IRRIGATION TECHNICAL ASSISTANCE PROJECT (CREDIT 1632-SE) PREFACE Thia is the Project Completion Report (PCR) for the Irrigation Technical Assistance Project in Senegal, for which Cr. 1632-SE in the amount of US$4.7 million was approved on October 29, 1985. The credit was closed on December 31, 1988, one year behind schedule. Only US$2.9 million was disbursed and an amount of US$1.8 million was cancelled. The PCR was prepared by the Agriculture Operations Division of the Sahelian Department of the Africa Regional Office and is based, inter alia, on the President's Report, the Credit Agreement, supervision reports, correspondence between the Bank and the Borrower, and internal Bank memoranda. This PCR was read by the Operations Evaluation Department (OED). The draft PCR was sent to the Borrower for comments and they are attached to the Report (Attachment I).  - is - PROJECT CONWLTION REPORT SEQGAL TRRIGATION TECHNICAL ASSISTANCE PROJECT (CREDIT 1632-SE) BASIS DATA SHEET A. KEY PROJECT DATA Proiect Timetable Date Date Date Planned Revised Actual identification -- 06/81 Preparation -- -- 1982-1985 Appraisal 06185 -- 06/85 Negotiations 07185 -- 08/85 Board Presentation 08185 -- 10/29/85 Credit Signature -- -- 12107/85 Credit Effectiveness -- __ 05/01/86 Completion 06/30/87 -- 12/31/88 Closing 12/31/87 __ 12/31/88 B. CREDIT DIS WRsDHFRnS CUJMLATIVE ESTIMTD AND ACTUAL DISBURSUIEBTS (US$ Million) Year as ST s 89 quarter 4 4 1 2 8 4 1 Appraeisl Estimate 8.2 4.60 Actesl 0.5 1.054 1.ll 1.601 2.277 2.57 2.942,021 Actual as X f Est. 16.6 21.6 60.5  - Wii - C. t AppraIsal Ov.rrn Esti mate Actual Underrun MI) Proj3et Cost 16.1 13.3 91 IDA CredIt 4.86 2.9 60 (Cancel led) (1.96) () Cefinanciere CCC/FAC a3.3 10.0 a3m UNDP 0.4 0.9 226 USAID 0.1 - - Oters 0.5 - D. STAFF INPUTS MAN-IEEKS) 1975 17 S079 1930 1962 193 1964 19865 1U 1967 1968 1989 Tots I Preparatlon 0.8 2.0 0.2 57.2 13.4 5.6 60.0 129.6 Appraisal 4.6 7.3 11.9 Uv490414"st E5.2 F.2 So-rvlion 7.9 1.7 4.5 6.0 19.7 3tsrv 6.0 0.1 0.1 6.6 Tot" 173.2 E. ISSIOM DATA montb/ Mo. of Days In Spectial .atiosn Prtormance Rating Typ of Year Pe rono Fl-l Repr u ntd/ Statue /b Trend/e Pro mid Preparation 1 10/61 1 7 *,l Preparat7on 2 1/62 6 10 *,i,e,Of# I, F Preparation 3 68/2 1 1 e Preparation 4 3/64 1 2 t F Preparation C 12/65 1 1 F, I Preration 0 2/86 2 4 *, I, C Preparation 7 4/86 1 7 * I, F, C Appraisal 1 0/85 1 7 I I, F, C Post-appraleal 2 10/86 2 10 *,t I, F Supervision 1 3/87 1 7 * 1 2 I, F Supervision 2 7/88 1 6 t 2 a , F Supervision/ Completion a 3/99 1 c - - - /a Key to epecialtises o n oag iet, to Irrigation en,Ineer, on ecorelet, t. financial aalyst, o operations assistant. /b lu.No problems, 2a Itoderat problems, Su Serious problem /c laiprovlng, 2mttioary, Smorsening /d Problin: Cs coftnancing, to Institutional, Fs f inanial  - iv _ PROJECT CONPLETION REPORT REPUBLIC OF SENEGAL IRRIGATION TECMNICAL ASSISTANCE PROJECT (CREDIT 1632-SE) EVALUATION SUTJiHRY Introduction 1. The project was the third in a series of projects designed to assist irrigation development in the Senegal River Valley. Irrigation development in the Senegal River Valley has been one crucial axis of Government's strategy to raise rural income, and create productive employment in the valley, enhance the country's food security (by increasing the production of rice, mostly), fight desertification, and discourage migration to the cities. Obiectives 2. The main objective of the project was the financial and institutional rehabilitation of Societe d'Amdnagement et d'Exploitation des Terres du Delta du Fleuve Senegal et des Vallees du Fleuve Senegal et de la Fal4m6 (SAED) (as well as the physical rehabilitation of infrastructure managed by SAED), so that SAED could implement its disengagement from production-related activities, and become a viable institution, capable of designing and managing the further development of private irrigated agriculture in the valley. The project was, therefore, designed to support the implementation of Government's 'Nouvelle Polltique Agricole' (NPA) in the Senegal River Valley. implementation Erxerience 3. Aside from the implementation of the studies planned, which was successful, project implementation was marred with several problems. Planned maintenance work was delayed, due to the fact that during periods of time, disbursements were suspended by the Bank because of Srregularities in payments or accounting procedures by SAED, or unsatisfactory compliance with conditions of disbursements on the part either of SAND or Government. Financial rehabilitation has not been achieved in spite of large additional funding from the French Caisse Centrale de Cooperation Economique (CCCE); as a result, SAND's cash flow situation is still critical. Restructuring of SAID has not kept pace with disengagement from production-related activities, which is already well advanced. Personnel deflation has accordingly only remained minimal. 4. Project shortfall in expenditures financed by the IDn credit stemmed from the fact that (a) many project studies were financed by other donors rather than from the IDA credit as foreseen at appraisal; (b) maintenance works were not fully undertaken mainly because of the weak organization of the SAID's organization and maintenance services; and (c) fewer subprojects than  - v - expected were initiated by deflated public sector staff. Despite this cost underrun, credit closing date was extended by one year at the request of the Government to allow for on-lending for staff resettlement subprojects which were approved just before the original closing date but not yet financed. Sustainability 5. It is somewhat doubtful whether after completion of the disengagement process (whose initiation was one of the project main achievements), SAED's improved structure and management will long withstand its persistent financial difficulties. Sustainability of the rehabilitation process is, therefore, questionable. Government's uncertain codmitment to continued operation of SAED further threatens sustainability. A test of political commitment will come in the next months with the materialization of the proposed cuts in redundant personnel, or on the contrary, with the postponement, or reduction in scope, of these personnel cuts. On the other hand. the new organigram of SAED, which decentralizes much of the responsibilities into the hands of the local wdelegationsg, makes efficient operation a real possibility, once the financial and personnel problem will have been solved, and the disengagement process completed (notably, by the privatization of SAED's main mechanical workshop, the Unite d'Atelier Central (UAC)). Findknkg and Lessons Learned 6. The main lessons learned from this pro4ect are as follows: (a) Correct identification of the policy framework, and agreement on this with the government of the borrowing country, are crucial to the success of any project. (b) Commitment and capacity of the government to sustain the objectives of the project should be closely monitored. Signs that this commitment is wavering, or the capacity was misevaluated, should be sufficient to put the project seriously in question, on the Bank's part, at any point during the life of the project. Cancellation of a loan should possibly be seen as a justified action, for instance if crucial conditions are not met or met very unconvincingly. (c) Projections of benefits should not be based on unrealistic expectations of unflinching commitment on the part of the borrower, especially when the borrower has expressed reluctance or doubt with respect to his engagements (cf. financial assumptions for rehabilitation of SAED). (d) There should be a clear assignment of responsibilities within the borrowing party's agencies, with respect to the project. Ideally, a project manager should be appointed. (e) Quality and frequency of supervision missions are crucial. In particular. only supervision missions will be able to give an assessment regarding points (b) and (c).  PROJECT CcrPIESlON REPORT REPUBLIC 0 SENEGAL IURGATION TECUNICAL ASSISTANCE PROJECT (CREDIT 1632-SI) I. BACKGROUND: ORIGIN AND OBJECTIVES Background 1. After 1974 Senegal vent through a decade of growing unreliability in agricultural production and deteriorating terms of trade, whose adverse effects on output, domestic incomes, fiscal and export revenues were compounded by severe droughts in 1979-80 and 1983-84. In this context, which determined financial crises in the beginning of the 80s, the Government of Senegal formulated a new agricultural policy ('Nouvelle Politique Agricole (NPA)') which aimed at combining the elimination of costly and ineffective government intervention in production, and a new cereals policy entailing consumer and producer price increases. In the Senegal river valley, NPA resulted in a revision of the role of the regional irrigation development parastatal, SAED. In a series of contract-plans ('Lettre de Mission') issued to SAED for three-year periods starting in July 1981, SAID was asked by the Government to implement the transition in the Senegal river basin, from publicly (SAED-)controlled and SAED-assisted farming production to privately managed agriculture. Under the second 'Lettre de Mission' (1984-1987), SAID was asked by the government to start *disengaging' from productiou-related activities, and size down its operations accordingly. However, the dismal financial situation of SAED at that juncture was prejudicial to continued operatiot; SAED's bankruptcy, and subsequent inability to operate, would have severely disrupted irrigated production in the valley. The successful rehabilitation was also made crucial, because of the additional irrigation development potential brought about by the construction of the dams of Diama and Manantali on the Senegal river; failure to perform such development would have rendered the benefits from the dams well inferior to their costs. 2. As part of its NPA, Government, with the support of the Bank, therefore decided to address the issue of SAND's financial, institutional, and physical rehabilitation. At the same time, studies would be performed that could prepare SAED's disengagement from production-related activities, in the framework of the NPA. This is why the original design of the operation (an irrigation development project) was altered and the scope of the operation was reduced to a technical assistance project. 3. The Irrigation Technical Assistance Project (ITA Project) was the third irrigation project financed by the Bank Group in Senegal. The first investment came in 1973 with the Senegal River Polders Project (Credit 350-SE). This credit of US$ 4.5 million financed the development of over 3200 ha at Dagana in the upstream portion of the river's delta, and improvement of irrigation over 1780 ha at Debi and Lampear. The project exceeded planned costs, and the partial water control scheme at Debi and Lampsar proved too risky in case of severe droughts. A subsequen: project that would allow for complete water control and double cropping (after the opening of the Diem dam), was  -2- therefore financed by IDA, the Debi-Lampsar Irrigation Project (Credit 775- SE). This project had a strong impact on rice production, and had a positive impact on participating farmers' financial situation. The IRR was, however, very poor (-4X), and below the appraisal estimate, because of costs overruns, a fall in the price of paddy, and the fact that exclusively rice was grown, and not in combination with tomatoes, as according to project design. Project Obiectives 4. The specific objective of the project was to make SAED an institution capable, by mid-1987, of taking effective responsibility for the development of irrigated agriculture in the Senegal River Valley. This objective implied a successful financial rehabilitation of SAID, a contract between the Government and SAND to ensure the financing of SAED's public service activities, disenf;agement of SAED from unsound production-related service supply to farmers, and institutional overhaul of SAED -- including shedding excess personnel and equipment. The objective was not met within the timeframe proposed in the Regional Vice-President's cover memo to the July 1985 President's Report. The project, however, contributed to laying the ground for the restructuring of SAED, and to preparing SAED's disengagement. Detailed actions regarding SAED's restructuring and disengagement are part of the follow-through project, Irrigation IV (Credit No. 1855-SE). One important objective that was however met was preventing the full collapse of SAED. II. PROJECT FORMULATION Project Descritio 5. The Project, as agreed at negotiations, comprised the following components: Part As Carrying out of studies: (i) to determine measures necessary to reduce the scope of SAED's corporate purpose to planning and supervising agricultural development in the Senegal River Valley and maintaining collective irrigation network infrastructure; (ii) to assess and determine ways, means and incentives to induce private entrepreneurs to take over the activities to be relinquished by SAED; (iii)to assess the agricultural credit needs in the Senegal River Valley and to design a schedule, in cooperation with Caisse Nationale de Credit Agricole du Senegal (CNCAS), dealing with the types of credit required, the terms and conditions of such credit and the timing for opening CNCAS branches in the Senegal River Valley; (iv) to evaluate the type of agricultural equipment most adjustable to the changing agricultural conditions In the Senegal River Valley; and  - 3 - (v) to prepare a master plan for the long-term development oi irrigated agriculture in the Senegal River Valley. Part B: Physical rehabilitation of irrigation network and equipments (i) Replacement of defective pumping stations; (ii) acquisition of spare parts for the Delta pumping stations; (iii)overhaul and repair of agricultural equipment such as tractors, earthmoving and land preparation; (iv) maintenance of the Ross-Bethio and Richard-Toll rice mills; and (v) maintenance of the irrigation network. Part C: Rehabilitation of SAED's financial conditions. Part D: Provision of credit to staff laid off by selected rural development r- ncies. to assist them in setting up their own businesses. Project Design 6. The project's features were simple and design was limited to organizational and financial aspects. The financial design of the resettlement fund on-lending scheme proved valid, and 602 of that fund was disbursed. However, the fact that, within SAED, no one was specifically responsible for the implementation of the project, may explain why in spite of the need for maintenance work, only 30Z of the funds allocated to the category covering operational costs of maintenance were utilized. III. PROJECT IMPLEMENTATION Proiect Implementation 7. Some aspects of project implementation were satisfactory, such as the completion of studies, which were financed by other cofinanciers or passed on to Irrigation IV. The design of the program for disengagement of SAED (part of the 3rd Lettre de Mission) was completed later than planned (April 1986 instead of January 1986). The UNDP-financed Master Plan for the Left Bank will be finished early 1990, instead of mid-1989. A main shortcoming in the implementation of the project is the failure to perform planned maintenance work. This cen be attributed to a series of factors. One is the generally low-level of information, within SAED, about how each department could access project funds. A second factor are the disturbances of SAED's work during the life of the project, because of SAED's reorganization, and because of repeated changes (two in two years) in SAED's top management. A final factor was the fact that disbursements were suspended for most of the second year of project implementation (from 04129/88 to 11/16188) because of non-compliance of SAED with the requirement of a yearly audit, and subsequently, when the audit was supplied, because of the irregularities the audit evide4ced.  -4- Prolect Results 8. The final project objective was to make SAED effectively able to take responsibility for the design and management of further irrigation development in the Senegal River Valley. This objective was only partially achieved and had to be taken over by the follow-up credit, Irrigation IV. A preliminary objective of preventing SAIDs bankruptcy and subsequent prejudice to local agriculture, was achieved. The study prepared under the project for the disengagement ot SAED paved the way for a successful initiation of that process. The agricultural credit study made recommendations for agricultural credit component under the follow-up credit (Irrigation IV), which seems to be so far fairly successful. 9. A major shortcoming of the project was the failure to rehabilitate SAED's finances. SAED is still currently in a very precarious financial situation. It is owed over CFAF 1 billion by the State, CFAF 1.6 billion by the Caissse de Perequation et de Stabilizsation des Prix (CPSP) and around CFAF 1 billion by the farmers for water charges and other services. The consequences of this are an extremely low cash flow, implying very high financial costs. In addition, the current mode of recording accounts payable well after they are received (up to 2 months) from suppliers implies an under- reporting of actual liabilities, and probably contributed to a misevaluation of SAED's financial difficulties, at the time of appraisal. 10. Status of Disengagement. SAED is already well on the way to being Odisengaged from production-related activities, and focussing only on public- service type of interventions. In particular, 852 of soil preparation is now done privately. The Central Mechanical Workshop (UAC) is still operated and owned by SAED; but a study will soon explore ways to privatize it. SAED is totally 'disengaged' from the supply of inputs. Personnel reductions, however, have remained as yet small. Larger cuts, i.e., 300 staff members, are underway. The reinsertion fund provided to SOFISEDIT for on-lending under the Irrigation Technical Assistance Project was mostly useful for employees of other public rural development companies also affected by the new agricultural policies. Project Sustainability 11. It is doubtful whether the few positive results of the project are sustainable. Tne follow-up project (Irrigation IV), to some extent, howev3r, will contribute to improve sustainability. In particular, as it was noted above in para 6, SAED'S unresolved cash flow constraint is a direct threat to a sustainable financial equilibrium of SAED. It had been hoped that the project would first and foremost help to relieve this constraint. Other obstacles to SAED'S financial balance remain, that threaten sustainability. One of these is the lack of a credible commitment ou the part of Government to ensure SAED's continuing financial equilibrium. This lack of commitment is evident from repeated delays and postponements of payments due SAED out of Government's budget. Another obstacle is caused by CPSP's own financial difficulties, which prevent CPSP from paying SAED in time for the rice purchased from SAED's mills. Finally, farmers are a third very unreliable source of revenue for SAED. Two factors play a role in this. First, farmers are only beginning to consider SAID as other than a "soft creditor, with whom they can postpone payment at will, and second, the agricultural credit is only at its initial development, and many farmers lack access to funds to finance  5- their agricultural campaign. In terms of institutional reorganization, work begun under the project seems to have put SAED on much firmer ground. A final test of sustainability will be the capacity of management to overcome potential political opposition to its implementing planned personnel deflation. Iv. ISSUES RAISED AT EACH STAGE OF PROJECT CYCLE 12. Identification/Preparation. The Project was first designed as an irrigation development project (initially called 'Irrigation IV") but SAED's financial deficit immediately appeared as a major obstacle to the viability of such a project. The preparation involved CCCE, PAC. USAID and other donors. With SAED's recond 'Lettre de Mission' paving the way, in early 1985, for SAED's disengagement from production-related activities, donors agreed to proceed with a credit that would reflect this new direction for public support to irrigated agriculture in the valley. The project was, therefore, refocused on institutional rehabilitation of SAED and support for its disengagement process. The project accordingly became an *Irrigation Technical Assistance Project' and consisted in (i) financial and physical rehabilitation of SAED and its irrigation network and (ii) support studies for the disengagement and the definition of SAED' s new role after the disengagement. The government was at first very reluctant to see the initial project reduced to a rehabilitation operation, and it was only in June 85 (4 years after the start of preparation) that it agreed that the investment program should be implemented under a second, subsequent project. 13. Appraisal. The government, after appraisal, expressed its disagreement with the Bank's considering a successful implementation of the ITA Project a precondition for further Bank investments in the irrigated sector. The Bank never quite concurred, and in fact effectiveness of the ITA Credit became a condition for the appraisal of the subsequent Irrigation IV Project. 14. Boarl Presentation. A condition for Board presentation was for SAED to prepare for the settling of all its outstanding arrears with its creditors. For this, SAED was required to supply a list of all these creditors and the amounts owed each of them. An additional fund of US$ 2 million to finance the reinsertion of personnel laid-off by SAED and other public rural development corporation being restructured because of the NPA, was adrved to the Project after appraisal. US$ 500,000 were to be contributed to this fund by IDA. Another US$ 1 million was also added to the project for expanded maintenance activities of the irrigation network. 15. Credit Effectiveness. Because of delays by the Government and SAED in meeting conditions for Credit effectiveness, the project did not become effective until May 1986, seven months after approved. The conditions were that (i) SAED should not have any arrears older than 6 months with its creditors; (ii) government would settle its own arrears with SAED; and (iii) SAED's accounts should be satisfactory to external auditors. Arrears of government with SAED, in particular, remained an issue until April 1986, when government promised to pay SAED the remaining CFAP 535 million by mid-Hay. The conditions of effectiveness were thus "considered as complied with'.  - 6 - V. PERFORMANCE Bank Performance 16. While the Bank can be credited with supporting the Government, through this project, in reestablishing both SAEID's operations and irrigated production in general in the Senegal River Valley, the project's shortcomings and failures justify the criticisms of Bank performance that follow. (a)Project preparation was far too long. At the beginning of preparation, the Bank's view (cf. initial Project Brief, dated 11/17181) was that the bottlenecks to the development of irrigated agriculture in the valley were the technical inadequacy of large-scale perimeters (which had predominated in the Delta) and SAED's precarious financial situation. in spite of the fact that the policy context of Senegalese agriculture was at that time correctly addressed by the Bank through the first SAL (in particular, the key issue of overtaxation of agriculture for the benefit of urban consumers), the project brief cited above made no mention of this crucial policy issue. This is one factor that explains the length of preparation: the policy issues to be addressed were only slowly identified and put within a correct policy framework. It must be said, however, that agreement with the Government on this policy package (the "Nouvelle Politique Agricole', NPA) was also slow in being achieved. An additional element was that the poor level of institutional capacity within SAED was at first only partially recognized by the Bank. Consequently, the initial design of the project (whose purpose was to support SAED's second Lettre de Mission' for 1984-1987) included support for the irrigation development component of that *Lettre de Mission', without clearly recognizing that, at that point, SAED did not have the institutional and financial capacity to take responsibility for such development. Once this problem was finally recognized, it was Government's reluctance to focus on SAED's rehabilitation prior to any further development of irrigated perimeters that forced the Bank to postpone the operation until agreement was reached. But the Bank's own position would certainly have been much more persuasive if that recognition had come at an earlier stage of the project's design. (b)The various assumptions upon which the projections for SAED's financial rehabilitation were based were very optimistic. This has put one of the project's main objectives (financial rehabilitation of SAED) in jeopardy. In particular, it was assumed that the price of paddy that had been set by Government was sufficient to enable farmers to pay SAED for lOO1 of the costs of land preparation (when still performed by SAED) and 602 of the O&M costs for water distribution, as well as 1002 of the costs of inputs (until full disengagement). This assumption was put in question in the Project Completion Report (No. 7149) for the Debi- Lampsar Irrigation Project (Credit 775-SE). This report argued that, without the introduction of higher-value crops (such as tomatoes), it would be very difficult to find acceptable economic rates of return for irrigated agriculture on the type of large perimeters managed by SAED in the Delta (even with double-cropping). Furthermore, the project assumed rapid adoption of double-cropping, which has not happened. Another basic assumption which affected the financial balance of SAED was the rhythm of disengagement and personnel deflation. It was assumed for instance that the number of employees at SAED would go from around 965 down to an average of 600 in 1986187, when in fact on 12131/1988 SAED still had 944  -7- employees, only 22 less than in 1984185. Finally, the Bank misevaluated Government's commitment (or capacity) to provide SAED with sufficient resources to perform its public service function. A certain lack of such political commitment should have been clear all along the various steps of project preparation, appraisal, and effectiveness, when each time the conditions linked to Government settling its arrears with were only fulfilled well after the deadline, and each time through additional funding from the Caisse Centrale de Cooperation Economique (CCCE), rather than out of Government's own budget. For instance, a condition for Credit effectiveness was that Government should have paid all the arrears it owed SAED before December 31, 1985. In fact, after several postponements, the Bank considered the condition fulfilled on May 1, 1986, upon the promise from Government that the arrears would be paid by mid-Hay. Government was again in arrears with SAID as late as February 1987. In SAED's own evaluation of its financial situation in the "Document de SynthOse de la 3&me Lettre de Mission', it is argued, moreover, that SAED should have received from Government an additional CFAF 476 million for 1986/87 and an additional 330 million for 198711988. (c)The Bank did not express forcibly enough the importance of a successful institutional rehabilitation of SAID as a pre-condition for further development of irrigation under SAED's responsibility. It had been first proposed that a successful implementation of the Irrigation Technical Assistance Project would be a pre-condition for the Bank to finance a subsequent irrigation development operation (Irrigation IV). Eventually, faced with great reluctance on the part of Government, the Bank backed down and merely made effectiveness of Irrigation Technical Assistance a pre-condition for the appraisal of Irrigation IV (and the stringency of this condition was further diluted by accepting a fairly loose fulfillment of the conditions of Credit effectiveness, as discussed above). Furthermore, during project implementation, while disbursements were suspended several times for irregular procurement practices or failure to submit timely audits, the fact that SAID was proceeding less than diligently on matters of disengagement and personnel reduction, as well as for introducing sound accounting practices, never caused the Bank to take similar action. What is more surprising is that the subsequent project, Irrigation IV, went on taking over the same objectives as Irrigation Technical Assistance, without much questioning as to why these objectives had not been achieved by the first project that had addressed them. This can of course be understood because appraisal of the second operation intervened immediately after effectiveness of the previous one, thus leaving no time for any evaluation of the results brought about by the implementation of the first operation. (d)There were only two supervision missions of this specific operation (3187 and 7188). This must have appeared to be justified by the similarity between the Irrigation Technical Assistance Project and parts of the Irrigation IV project; but it probably contributed to the fact that, in fact, resources committed under Irrigation Technical Assistance to the rehabilitation of SAID have remained largely unused, and resources from Irrigation IV were used instead.  Borrower Performance 17. As was indicated by the long delays before appraisal and credit effectivenses, the Bank did not find that the Senegalese Government or SAED were sufficiently committed to achieving the objectives of the project. On the part of Government, unwavering support would have been needed to definitely secure the financial basis of SAED as a public service organization. This support would have needed to be not only financial (i.e., setting arrears swiftly, which never happened, and henceforth regularly budgeting the costs of SAED's public service operation), but also political, giving management at SAED the political strength to proceed decisively with personnel deflation. In fact, until March 1989, personnel deflation had affected a very low 2Z of staff. 18. On the part of SAED, there was a distinct reluctance to implement regular audits of its own accounts; to implement improved cost accounting procedures; and in general, to clarify and attempt to resolve the obvious mismatch between its current assets and its current liabilities. Organizational problems, and the failure to share information widely enough about access to the Project's funds, hindered use of these funds, while the needs for them were high. The lack of individual responsibility at SAED's level, as far as this project is concerned, and the frequent changes in management over the life of the project are additional explanations of this poor implementation. 19. SAED's new management must, however, be commendeds in spite of the financial and organizational difficulties that still plague SAED, it has taken the disengagement process seriously, and has been able to impress upon farmers the fact that the new mode of participation of SAED in the valley's agricultural development, and the new economic incentive framework, were durable and to be reckoned with.  -9- ANNE Status of Covenants Covenant Suet Deadline Statue Loan A6reeM2gt Section 8.01 (b) Payment by Goveorm at a Goverment still total ot CFAF 2,420 mIIIon to currently In arroars cover the public ervice costs with SAIED. through 1 9-U through 1980 Section 8.01 (c) ReinSertio4 fun Fulfilled Soction 8.04 Prorm of' dl i _n.ayemt of SAED 01/31/36 Fultilled 0/J1 (1) & (il) from production-reoated l atvities full cost-recovry by SAED on agred inpu and agricultural services. Section 8.04 Full cost-r eov ry on 0 A N ot 07181/67 Fulfilled (tii) Irrigation network from ftrmere Section 8.04 Sebtl- entf all arrears older 038/1/8 Not fultilled (Iv) than 6 months to creditors. (but wm considered fultilled at credit etfectivenoes.) Section 8.06 Potpo nt ot any maintnenace Fulfillod. works on SAED' rice sIll only In conforilty with rsults ot twdy Section 8.06 Are e nt at SAID'o two-yer Fulfilled with delays. (1) Investment progrm every April 80. Section 8.06 Third lottre do miesion to be 06/80/87 Fulfilled with delays. (ii1 1) prepared  - 10 - Attachment I WORLD BANK TMSS OEDD1 248423 WORLD RANK CAISC B 212632F PARIS, 25JUL90 14:39 WORLD BANK WASHINGTON ATTN: MR. DONALDSON, OED SUBJECTs PROJECT COMPLETION REPORT SENEGAL IRRIGATION TECHNICAL ASSISTANCE (CREDIT 1632-SE) AFTER REVIEW OF REPORT, WE HAVE NO COMMENTS, EXCEPT FOR THE FOLLOWING ITEM: PERTAINING TO THE LACK OF OPPORTUNITIES FOR SAED PERSONNEL BECAUSE OF FUTURE CONSTRAINTS, IT WOULD BE USEFUL TO REFER TO PERTAINING PARAGRAPHS (PAGE IV, LAST SENTENCE, AND PAGE 6 LINE 10) FOR THE PROJECT COMPLETION DATE: 31DEC88. WE APOLOGIZE FOR THE DELAY OF OUR REPLY. SINCERELY, J. JAUJAY  - 11 - Office of the President of the Republic General Secretariat Delegation for Economic Planning and Policy Dakar Republic of Senegal. August 4, 1990 No. 473/PR/SG/DPPE/DP/DPG PD/afn Mr. Graham Donaldson Chief, Agriculture, Infrastructure and Human Resources Division Operations Evaluation Department The World Bank Washington, D.C. Sir: With reference to your letter of June 11, 1990 concerning the completion report on the Irrigation Technical Assistance Project, I now enclose the comments which I have just received from SAED, the executing agency of the project in question. Very truly yours, /s/ Abdoul Aziz DIOP The Minister Delegation for Economic Planning and Policy  - 12 - Ministry of Rural Development Republic of Senegal Soci6t4 d'Am5nagement et d'Exploitation des Terres du Delta du Fleuve Sen6gal et de la Fal6m6 (SAED) Directorate General. COMMEnS ON THE IRRIGATION TECHNICAL ASSISTANCE PROJECT CREDIT 1632-SE July 26, 1990  - 13 - After reading the report we would make the following comments: I - GENERAL COMMENTS Problems with the mobilization of funds were encountered throughout project implementation despite the project's clearly-defined objectives to rehabilitate SAED, improve its management capacity and provide it with the financial and human resources needed to enable it to implement its disengagement from production-related activities. The PCR is nonetheless correct in saying that despite these difficulties SAED's new management team must be given credit for successfully getting the disengagement process under way in earnest by involving small farmer organizations and persuading them to take their affairs into their own hands as a means of achieving the effective agricultural development of the valley. II - SPECIFIC OBSERVATIONS. POINT BY POINT _I.1 We have no particular comments to make on paragraphs 1 and 2. 11.2 With reference to paragraph 3 and the suspension of disbursements following irregularities in payments attributable to the fact that procedures were formulated in such a way as to be open to several possible interpretations: This was what prompted us to decide, at the time of the last supervision mission of the Irrigation IV Project, to prepare precise and detailed PETFs which will be examined and mutually agreed upon by the Bank and SAED. This will doubtless help avoid the confusion and the irregularities in question. It is true that financial rehabilitation was not fully achieved despite large amounts of additional funding from CCCE in accordance with the third contract-plan (Lettre de Mission). The reasons for this were as follows: - an underestimate of arrears to suppliers: CFAF 900 million instead of CFAF 1,400 million, i.e., a gap of CFAF 500 million.  - 14 - - debt recovery from the farmers, estimated at CFAF 980 million, fell short of expectations: SAED finally recovered only CFAF 300 million and had to grant the farmers a four-year moratorium on the items acknowledged by the latter. - an overestimate of projected revenue from the sale of spare parts: CFAF 50 million compared to the CFAF 245 million expected. - the long delay in the availability of CCCE funding (14 months later than scheduled), which caused a significant deterioration in SAED's financial situation. A new rehabilitation plan is proposed in the fourth contract-plan, however. This is based on an exhaustive and detailed evaluation of SAED's needs, using very carefully compiled financial statements. This should ensure SAED's financial rehabilitation once and for 9 all. However, if this achievement is to be permanent, SAED will have to be assured of a sufficient and regular supply of funds to enable it to perform its public service mission properly. Finally, by the time the PCR was published, SAED had already embarked -- nine months before, in fact -- on the first phase of its staff reduction operation, which took place on June 30; 1989, involving 201 permanent staff and 84 "permanent" temporaries. On July 31, 1990 the second round of cuts will take place, involving 202 permanent staff and 6 civil servants who will return to their original government agency. With reference to the onlending of funds for staff resettlement projects, SAED has never been involved in the implementation of this project component.  - 15 - IT.3 Project imUlementation In light of the personmel cuts SAED has made, i.e., increasing from 284, as of June 30, 1989, to 492 as of July 31, 1990 and to 722 as of June 30, 1991, SAED earnestly requests funds from the World Bank for this redeployment of staff. II.4 Sustainability of nroiect imnact In order to ensure the sustainability of the project, it is essential that SAED continue to receive support for its rehabilitation and disengagement efforts in the form of sufficient funds to perform its overall management functions and guide integrated rural development activities more effectively. This is what the Government plans to do within the framework of the ASAL currently under negotiation. This is expected to create an environment that will be extremely supportive to the new decentralized SAED, with departmental "delegations" entrusted with real authority that will enable them to take on responsibility for development projects and programs in the field.