Tanganyika - School Construction and Equipment Project

REST RI CTED FILE, COPY Report No. P-35 This report wos prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATIONS OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF TANGANYIKA FOR A SCHOOL CONSTRUCTION AND EQUIPMENT PROJECT December 2, 1963  REPORT AND RECO-VIENDATIONS OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A FROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF TANGANYIKA FCR A SCHOOL CONS2RUCTION AND EQUIPMENT PROJECT L. I submit herewith the following report and recommendations on a proposed development credit to Tanganyika for an amount in various currencies equivalent to $4.6 million, to help finance a school construction and equipment project. PART I - INTRODUCTION 2. In March 1962, the Government of Tanganyika requested an IDA credit to finance part of a comprehensive school and university expaneion program. Subsequent discussions between IDA and Tanganyika resulted in a revised request which focussed on secondary school expansion as the highest priority educational project, as did the Bank's earlier Survey Mission Report and other studies, including a study by UNESCO, undertaken for the Government of Tanganyika. An IDA mission to Tanganyika in May and June 1963 appraised the project and, after further modifications were made in the project, negotiations took place in Washington in October. 3. The proposed credit would be the first operation by either IDA or the Bank in Tanganyika, Tanganyika is, however, a beneficiary and a guarantor of the $24 million loan to the East African Common Services Organization (formerly the East Africa High Commission) in 1955 for railways. PART II - DESCRIPTION OF THE PROPOSED DEVELOPMENT CREDIT 4. The main characteristics of the proposed credit would be as follows: Borrower: Republic of Tanganyika. Amount: Various currencies equivalent to $h.6 million. Purpose: To help finance the construction and equipment of two new secondary schools and the extension and equipment of 53 existing secondary schools. Term and Amortization: 50 years with no amortization for the first 10 years. Repayment to be in 80 instalments, 1/2 of 1% of the principal amount to be repaid semi-annually beginning November 15, 1973, and ending May 15, 1983, and 1-1/2% semi-annually thereafter to May 15, 2013.  - 2 - Service Charge: 3/4 of 1% per annum on the principal amount of the credit disbursed and outstanding. Payment Dates: May 15 and November 15. PART III - APPRAISAL OF THE CREDIT The Economy of Tanganyika 5. A report entitled "Current Economic Position and Prospects of Tanganyika,"t No. AF-13a, dated November 29, 1963, is attached (No. 1). 6. Much of Tanganyika is a sparsely populated, arid plateau with poor soils. Of the 10 million inhabitants, 98% are African and population growth is about 2% per annum. The majority are subsistence farmers with varying degrees of participation in the market economy, mostly through cash crops of cotton, coffee, oilseeds and cashews. Through an attempt to create villages and cooperatives, the Africans are being encouraged to play a greater role in cash crop agriculture, processing and trade. The remaining 2% of the population, who are Asian and European, own and operate estates which produce sisal, coffee, tea and pyrethrum, accounting for almost one-half of the countryts agricultural exports; they are also active in commerce and government service. However, the civil service is being rapidly Africanized and it is expected that most European officials remaining after 1964 will be under temporary contract. 7. Agricultural production has grown substantially over the last decade; export volume has increased although export prices have remained stable or have even fallen. After a setback due to drought and floods in 1961/62, production and incomes recovered in the second half of last year, strong demand and higher world market prices for sisal supplying much of the impetus. Agriculture can be further developed through in- creased productivity and improved water supplies; growth is likely to be fairly slow during the next few years, however, due to inability to expand capacity rapidly, particularly in sisal. Mining - chiefly diamonds - and manufactures, although strongly encouraged by the Government, remain relatively insignificant. The infrastructure is generally adequate, with the important exception of educational facilities and roads. 8. Per capita money income is still very low, probably less than t50 equivalent. Nevertheless, taxes have been raised in every budget since internal self-government was achieved in 1961 and now represent some 25% of money GDP, a very considerable proportion. There is very little scope for further increase and, since the greater part of government revenues are absorbed by necessary current expenditures, the contribution of domestic savings to public investment is limited in present circumstances to about one-fourth. 9. Although Tanganyika's foreign debt is mounting rapidly under the present Plan, the burden of debt servicing has hitherto been held down to manageable proportions, thanks to non-conventional terms obtained for  - 3 - most of the new debt. Including a contingent liability for a third of the debt of the East African Common Services Organization, debt service amounts to about 6% of export receipts in 1963. However, Tanganyika has her major development effort still ahead of her, and the securing of aid on soft terms by access to IDA sources would therefore seem appropriate, particularly since the contingent liability for borrowings by EACSO, for example for the railways, much of which may well be on conventional terms, will increase appreciably over the next decade. The Project 104 An appraisal of the project is contained in the attached report TO-390b, dated November 26, 1963 (No. 2)o 11. The project consists of the construction and equipment of two new secondary schools and the extension and equipment of 53 existing secondary schools of various types in Tanganylka. The estimated cost of construction and equipment, including a 10% contingency reserve, is 86 million, of which the proposed credit would provide just over 75% (about the same proportion as external resources contribute to the financing of Tanganyika's present development plan taken as a whole). Approximately three-fifths of the proposed IDA credit will be disbursed against local costs. Tanganyika is a poor country with meager resources, still in the early stages of development. Savings, while reasonable in the circumstances, cannot be increased in the short run. The lack of sufficient savings would mean that the additional expenditures represented by the project would indirectly result in an increased import demand. The proposed expansion is to be carried out over the five-year period July 1962 - June 1967 and would provide 62845 additional secondary school places. The two new schools would be government boarding schools; the 53 school extensions include 12 government and 27 voluntary agency boarding schools, as well as 8 government and 6 voluntary agency day schools. The two new schools would be constructed by contractors, selected after international competitive bidding. The extension work for government schools, which would be unlikely to attract international tenders, is to be carried out and supervised by the Public Works Division (MIinistry of Communications, Power and Works), whose staff is judged to be adequate for this purpose. The proposed additions to voluntary agency schools would be undertaken by the agencies themselves according to standards and specifications approved by the Public Works Division. 12. Inadequate school facilities at the secondary level constitute a major obstacle to the economic development of Tanganyika. There is a great and increasing demand for secondary school graduates in the administrative and professional fields, both private and public. The need for rapidly increasing the number of secondary school graduates is all the more pressing as the departure of expatriate officers is likely to continue. Over the next five years, the demand for secondary school graduates to be trained for instance as teachers, engineers, engineering technicians, agricultural technicians, etc. is expected to more than double, but there is little chance that, even after the completion of the proposed project, enough candidates will be available to fill the  - 4 - vacancies. There is no shortage of primary school graduates willing and able to enter secondary schools; on the contrary, according to present indications the demand for secondary school places is likely to exceed the supply in the foreseeable future. 13. The inclusion in the project of living quarters is deemed necessary because of the very low population density and the virtual absence of villages in Tanganyika. The "villagization program," sponsored by President Julius Nyerere himself, may over the long run bring students within commuting distance of the schools; however, for the present and immediate future, boarding schools are unavoidable if African pupils are to attend secondary school regularly. 14. The proposed project would provide for the extension of a number of voluntary agency schools, which are operated and staffed by the various religious organizations in Tanganyika, and which have traditionally played an important role in the country's educational and social development, The voluntary agency schools are integrated in every respect with the government school system - their curricula are the same and their teachers receive the same salaries. While the voluntary agencies would be responsible for carrying out the extension work under the project on their own schools, we are satisfied that the Government has sufficient powers and will continue to approve and supervise the agencies' program. 15. The Government is aware of the need for adequate and qualified teachers, supervisors and administrative staff. Recent recruiting efforts have been made to obtain overseas personnel in order to fill the existing gaps until a sufficient number of Africans have been trained,and to enable the country to carry out its secondary school expansion program successfully, The United Kingdom, the United States, the Nordic Council, Canada and Australia have given undertakings that qualified teachers would be made available to Tanganyika. In the event the total number falls short of requirements, the U.S. Peace Corps has indicated its interest in filling the gap. 16. The Government's secondary school expansion program, the bulk of which is included in the proposed project, was started in July 1962. About one-fourth of the construction work is well under way or has been completed. Student enrollment in the new facilities commenced in 1963. PART IV - LEGAL INSTRUMENTS AND AUTHORITY 17. Attached is a draft Development Credit Agreement between the Republic of Tanganyika and the Association (No. 3). Development Credit Regulations No. 1, dated June 1, 1961, would be applicable without amend- ment to this agreement. As in the other IDA credit for education, the borrower would be obligated to cause the project to be carried out with due diligence and efficiency, in conformity with sound technical standards and with due regard to economy, and to cause the schools included in the  project to be operated in accordance with sound educational practices (Section 4.01 (a)). The architects' briefs, designs, specifications, tender and contract documents and work schedules in connection with the construction of the two new schools are to be satisfactory to the Association (Section 4.01 (d)). The borrower is to furnish the Association with information on its school system and school construction programs, with the Association afforded an opportunity to comment on the latter (Section 4.02). In other respects the draft agreement conforms generally to the pattern of other IDA credits. 18. The recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association is attached (No. 4). PART V - COMPLIANCE WITH ARTICLES OF AGREEMENT 19, I am satisfied that the proposed development credit will comply with the Articles of Agreement of the Association, PART VI - RECOIP1ENDATIONS 20. I recommend that the Association make available a development credit to the Republic of Tanganyika in an amount in various currencies equivalent to $4.6 million for a total term of 50 years, with service charge of 3/4 of 1% per annum, and on such other terms as are specified in the attached draft Development Credit Agreement, and that the Executive Directors adopt a Resolution to that effect in the form attached (H4o. 5). George D. Woods President Attachments Washington, D.C. December 2, 1963