Liberia - Decoris Oil Palm Project

Document of The World Bank FOR OFFICIAL USE ONLY Repwt No. 9572 PROJECT COMPLETION REPORT LIBERIA DECORIS OIL PALM PROJECT (LOAN 1765-LBR) MAY 17, 1991 Agriculture Operations Division Country Department IV Africa Regional Office 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.  LIBERIA DECORIS OIL PALM PROJECT Currency Equivalents Currency Unit - United States Dollars Weiights and Measures i metric ton = .98 long ton 1 long ton - 2,240 lb = 1.016 metric ton 1 hectare (ha) = 2.47 acres 1 acre = 0.405 hectare 1 kilometer = 0.62 mile 1 mile = 1.609 kilometer Abbreviations ACDB - Agricultural and Cooperative Development Bank ADB - African Development Bank CDC - Commonwealth Development Corporation DOPC - Decoris Oil Palm Company EEC - European Economic Community ERR - Economic Rate of Return FB - Fresh Fruit Bunches FRR - Financial Rate of Return GOL - Government of Liberia IBRD - International Bank for Reconstruction and Development (World Bank) IFC - International Finance Corporation IRHO - Institut de Recherches pour les Huiles et Oleagineux LPMC - Liberia Produce Marketing Corporation LPPC - Liberia Palm Products Corporation NPC - National Palm Corporation SCDEPALM - Societe pour le Developpement et lihexploitation du Palmier a Huile UDW - Usine de Wecker VDK - Vanderkerchov Fiscal Year July 1 - June 30  THE WORLD BANK FOROFCLUE LY Washington, D.C. 20433 U.S.A. Ohice di Di,eevG.s, OStMic W ivahatGwsm MAy 17, 1991 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Liberia Decoris Oil Plm Project (Loan 1765-LBR) Attached, for information, is a copy of a report entitled "Project Completion Report on Liberia Decoris Oil Palm Project (Loan 1765-LBR)" prepared by the Africa Regional Office. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment This document has a restricted distribution and may be used by recipients only In the performance of %heir official duties. Its contents may not otherwise be disclosed without World Bank authorition.  FOR OFFICIAL USE ONLY PROJECr COMPLETION REPORT LIBERIA DEC0An IS OIL PALM PROJECT (LOAN 1765-LBR) TABLE OF CONTENTS Page No. Preface ..................................... i Evaluation Summary ........... ................ iii PART I PROJECT REVIEW FROM BANK'S PERSPECIVE Projel Identity ......................... 1 Background ................ 1 Project Objectives and Description ......... . 1 Project Design and Organization ........... . 2 Project Implementation ............. . 3 Project Results .............. . S Project Sustainability .............. . 6 Bank Performance ............. . 7 Borrower's Performance .......... . 8 Consulting Services ............. . 9 Project Documentation and Data ........... . 9 PART II BORROWE,R'S PERSPECTIVE ....... 11 PART m STATISTICAL INFORMATION Related Bank Loans/Credits ...... ......... 13 Project Timetable ....................... 14 Loan Disbursements ..................... 15 Project Implementation ................... 15 Project Costs and Financing ...... ......... 16 Project Results ......................... 16 Status of Covenants ..................... 17 Use of IBRD Resources .. ................ 17 MAP IBRD No. 14275R 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.  j PROJECT COMPLETION REPORT LIBERIA DECORIS OIL PALM PROJECT (LOAN 1765-LBR) PREFACE This is the Project Completion Report (PCR) for the Decoris Oil Palm Development Project in Liberia, for which Loan 1765-LBR in the amount of US$12.0 million was approved on October 30, 1979. The project was co-financed by the Commonwealth Development Corporation (CDC), which provided a loan equivalent to US$15.0 million; by the African Development Bank (ADB) which provided a loan equivalent to US$8.0 million; and by the European Economic Community (EEC) which provided a Special Action Credit equi- alent to US$2.0 million. The loan was closed on schedule on December 31, 1987. An amount of US$7.4 million (62% of the loan) remained undisbursed at the time of loan closing and was cancelled with effect from the same date. The last disbursement was made on July 23, 1987. The PCR (Preface, Evaluation Summary, Part I and Part III) was prepared by the Agriculture Operations Division (AF4AG) in the Western Africa Department of the Africa Regional Office. The Borrower was not sent Parts I and m, nor could they provide Part II because the Government collapsed as a result of the ongoing civil war. Preparation of this PCR is based on the Staff Appraisal Report, the Loan Agreement, Supervision Reports, correspondence between the Bank and the Borrower, and internal Bank memoranda.  iii PR Cr COMPLETION REPORT LIBERIA DECIS OIL PALM PRQT!ECr (LOAN 1765-LBR) EVALUATION SIJMMARY Introduction 1. Liberia has a dualistic economy. Its agricultural economy coexists with an enclave sector which is export-oriented and produces besides iron ore, rubber and forest products. The enclave sector provides about 70% of export earnings, generates about 25% of GDP and about 15% of all government revenues. Total population is about 1.7 million. About 60% of the population is dassified as agricultural households. Soils are generally fertile and the climate is suitable for a variety of field and tree crops. With the decline in demand for iron ore which was a dominant prod-:ct for export earnings government began to make serious efforts to diversify the etnomy and emphasize development of its export oriented tree crop production. However, with the collapse of the government and the continuing civil war situation is likely to have serious impact on the tree crop sector. Objectives 2. The project objectives were to help the Government to diversify, strengthen and widen the base of Liberia's economy. At the same time, it was to increase the export potential of the country and income earning capacity of smallholders. The project was expected to lead to an additional annual production of 24,000 tons of palm oil and 4,300 tons of palm kerneL About US$11 million in net foreign exchange was expected to be realized per year from the export of palm oil. Permanent employment was to be provided for about 1,000 people in the Decoris area, and cash incomes of 1,000 smallholder farm families were expected to increase from US$100 to US$950 a year at full development. Roads and bridges under the project were to provide about 30,000 people in the nearby villages access to health, educational and market facilities. The project design was consistent with the Government's and the Bank's balanced approach to Liberia's diversification needs and with its agricultural development strategy. Implementation Experience 3. At the beginning, the Government delayed establishing the Decoris Oil Palm Company's (DOPC) Board and its by-laws, acquiring land for the nucleus estate, making compensation payments to the settlers and initiating the roads and port components. Field progress (plantation & nursery) was satisfactory up to about early 1982. Subsequently, a variety of factors including inadequate and irregular Government budgetary contributions and slow progress of the roads/bridges component hindered implementation of both the estate and smallholder plantations. The smallholders lacked self-reliance and the farmgate price provided them no incentive to improve their farm  iv practices. This led to a serious time lag in execution of the smallholder plantation component and produced an indifferent quality of the fruit. The estate part was also well behind schedule, though better managed agronomically. The procurement of the oil mill was greatly delayed due to disagreement between the Government and the Bank and amongst the different Government ministries. A small interim mill was established in 1986 but due to shottfalls in production, and inadequate level of prices offered to the farmers, even this mill could not obtain adequate raw materials for full production. Overall, the expatriate project management and the counterpart manager performed reasonably well, but other local staff were inadequately trained. Project implementation suffered chronically from shortage of funds particularly in the later years, due to inadequate and irregular amount of Government contributions and frequent/prolonged suspension of extrnal donor disbursements. The Bank failed to advance loan funds through a special account perhaps due to concern about Liberian handling of such accounts. At the project appraisal stage, the Bank had failed to fully anticipate t K - risks facing the project and the international palm oil price movements. Consequently, it failed to design the project on a more modest scale for a first stage development consistent with local financial capacity and perhaps concentrating only on estate plantation with a smaller mill. Results 4. Project objectives were not realized. The project's viability was questioned even at the appraisal stage. Its relatively marginal Economic Rate of Return (ERR) was known to be contingent upon a timely project execution. Actually, the estate plantings took seven years instead of four and the area planted was 88% of the appraisal estimate. The smallholder plantings were also delayed and reached less than 60%o of the appraisal target. Overall, nucleus estate and smallholder plantings were 5,882 ha against the estimated 7,500 ha (78% of SAR target). Instead of an annual income estimated at $3 million in the last 2 years of the project, actual income reached less than half a million. A June, 1986 Bank million estimated the Economic Rate of Return (ERR) at 9.5%. Due to serious financial shortfalls in later years, the project was grinding to a halt in the latter half of 1985, seriously compromising its future by failing to maintain planted trees and the interest of the smallholders through an adequate buying price of ffb. The large mill was not constructed and the road and storage tanks remained in abeyance. The project maintained a low profile in the final years (1986-S7) with little skeleton maintenance taking place. Meanwhile, several efforts to rescue the project were unsuccessfuL Even if a restructured project could have been completed in two additiona; years, its economic rate of return would have been much less than the 12% estimated at appraisa and might have been negatve. Sustainability 5. The project as originally designed and approved by the Bank and other donors could not be sustained. With about US$22 million already invested and financial and other difficulties bringing the project to near collapse, efforts were made by DOPC with the Government's and the Bank's assistance to devise a restructured project for completion. Attempts to privatize DOPC by attracting an international company with experience in palm oil plantation and marketing failed in the prevailing economic circumstances of the country and low palm oil prices in the world market. Another  v altemative considered included financing by a local bank-Agricultural and Cooperative Development Bank (ACDB)-and constructing the mill Li two stages. Tsis also did not materialize by the time the Bank loan was closed in December, 1987. Even with a rescue package and modifications to the project, it would probably not have been sustainable. Because of the time lag (9 years instead of 4), reduced area of oil palm and low level of oil prices, only a very low rate of economic return could be expected. 6. Fidinp and Lessons Learned (a) Sound agronomic conditions do not necessarily ensure success of an agricultural project; appropriate pricing and marketing arrangements are also essential. (b) SmallJholder investment is socially desirable but fraught with risks, particularly if the farmers lacked motivation, investments have a long gestation period and incentive prices offered are inadequate. (c) A project with a modest but successful beginning has a better prospect in the long-run, than one with an ambitious beginning which raises the risks. (d) Project investments inevitably require external as weHl as Government and other local contnbutions. Without assurance of counterpart funding and its timely release, a project is doomed from the start to falter and fail. (e) Expatriate project management firms should be expected not only to provide good managers and field staff but also sufficient back-up support from their headquarters, particularly in areas where their field staff are found to be weak and in technical matters beyond their (field staft) competence. (f) It is a matter of judgement whether to scuttle a project and its investments mid-stream or to rescue it. Sustaining a non-sustainable project on grounds of sunk costs cannot be beneficial for any country.  I PROJECT' REVIEW FROM BANK PERSPECTIVE PART I Project Identit Project Name: Decoris Oil Palm Project Loan No.: 1765-LBR RVP Unit: Africa Country: Liberia Sector: Agriculture Sub-Sector: Tree crop-Estate & Smallholder Background 1. The growth of Liberia's economy remained heavily dependent on the performance of the enclave sectors consisting of iron ore mines, rubber plantations, and forestry concessions. Another dimension of structural imbalance was the disparity between traditional agriculture and the (monetized) modern sector. The Government's Four-Year Development Plan (1976-1980) identiried the basic long-term objectives as diversification of production, dispersion of sustainable socio-economic activities throughout the country, ,preater involveMLnt of Liberians in development activities, and equitable distribution of the benefits of economic growth. In line with these obje..tives, the Government attached high priority to agriculture and rural development. In this sector, the Government's objectives were to diversify and modernize agricultural production, increase productivity, improve associated rural economic activities such as marketing and processing, and provide social and other basic infrastructure. 2. The strategy for agricultural development involved: (i) establishment of larger industrial estates with associated smallholder participation for oil palm, coconuts and sugarcane run by public sector corporations; (ii) encouragement of smailholder rubber, coffee and cocoa production; and (fii) implementation of integrated agricultural development projects to raise income and living conditions of traditional farmers. In this context the Government recognized that larger-scale tree-crop estates could make an important contribution to expansion of exports and Government revenues. The Decoris Oil Palm Project which is being reviewed here and which included a nucleus estate and a smallholder component was a good example of this strategy. 3. The Bank supported the Government's objectives and provided assistance to help in broadening the economic base and in overcoming infrastructural constraints to growth. In line with the priorities in the Ciovernment's Plan, increasing emphasis was given by the Bank to agricultural and rural development projects. Bank financing included two agricultural projects involving subsistence farmers, a rubber apd a forestry project. Project Objectives and Description 4. The project was intended to hel'p the Government in its efforts to expand and diversify the country's economy and export base with a view to reducing heavy dependence  2 on iron ore. The project was to provide permanent employment for about 1,000 persons and directly increase the income levels of about 1,000 smallholder farm families through the development of 7,500 ha of high yielding oil palm on a nucleus estate and associated smallholder farms. The project would also help strengthen the institutional capability of the country through provisions for staff training and an organizational studY to determine a suitable institutional arrangement for the longer term development of the oil palm sub- sector. 5. The project was located in Maryland County where the ecological conditions were considered suitable for oil palm cultivation. The project was to be carried out by the specially established Decoris Oil Palm Company (DOPC) for implementation over a 7-year period (1980-1987). It included: establishing and operating a 5,000 ha nucleus estate, providing extension services and credit facilities to develop 2,500 ha of smallholder farms, training DOPC staff and smallholder both on-the-job and abroad, constructing an oil mill with a processing capacity of 30 tons of fresh fruit bunches (ffb) per hour, establishing a fruit collection system, constructing main access and feeder roads and tracks, constructing and installing storage and port facilities, and providing technical assistance and consultant services. Project Design and Organization 6. The project was the result of a practical and most interesting form of regional cooperation in West Africa. It was prepared by SODEPAIM, an Ivory Cost corporation and tested seeds were to be imported from Ivory Coast. The project aimed at the creation of an agro-industrial complex for the production of palm oil. Project design was technically sound, and the establishment of a separate (autonomous) company with an experienced expatriate team for management and operation of the complex during the implementation period of the project was well thought-out. Provision was made for gradual Liberianisation through on-the-job training and visits abroad. The nucleus estate idea, both for providing extension, collection and processing services to the smallholder production and for proiding a minimum assured quantity to the oil mill was essential. In view of the inaccessibility of the project area which was dissected by a network of rivers and creeks, provision for roads, tracks, culverts and bridges in the project was practicaL Another item in the project design which was often absent from such projects in Liberia was the inclusion of a fruit collection system to service both the nucleus estate and smallholder plantations. In view of the distance from Monrovia (the capital) and the need to export at reasonable cost abroad, the project correctly provided for the construction of storages and port facilities at Harper. Since there was no oil crushing facility in the area, a 30 ton/hour mill was provided. The size of this mill, and the expected yield from the palm trees on which it was '- ed was perhaps too optimistic. The appraisal mission failed to make allowances for the poor agricultural husbandry of the farme' in LAberia, particularly in the subsistence sector. Due to delays in procurement decisions, this large mill was never established. Instead a smaller mill with 1.5 ton/heur crushing capacity was procured in consonance with the reduced acreage and yield. Towards the end, when discussions on a project rescue operation were conducted (1986-87), consideration was being given to a two stage large mill, with one line of 10 ton/hour, to be followed later at full plantation development of a second 10 ton/lour capacity.  3 7. During project preparation, the issues that required particuiar attention of the Bank and the Government were the need for establishing a new ent.ty, the Decoris Oil Palm Company (DOPC) for the project, the mix and phasing of the outgrower and estate components, compensation payments to the settlers mechanical versus hand clearing of forcsts, and the type and extent of expatriate management assistance for the project. The Liberian Produce Marketing Corporation (LPMC) and the Liberian Palm Products Corporation (LPPC) were the two public institutions then involved in the oil palm development in the country. These institutions suftered from inadequate management and lack of cxperienced technical and accounting systems. Because of these weaknesses, and in spite of the concern expressed by the Government about a plethora of institutions ia the samc sub-sector the Bank pushed for setting up a separate autonomous entity, the DOPC. At the same time, provision was made under the project for a study to determine the most suitable framework for the development of the sub-sector. DOPC acquitted itself well and the project would have failed to make whatever progress was actually made had the Bank not insisted on its creation. & In retrospect, in spite of the generally satisfactory design of the project it should he mentioned that the appraisal mission did not adequately address the isolated nature of the project area which lacked basic infrastructure. Also it failed to realize that the subsistence farmers from whom a lot was expected in the project lacked the minimum enterprise necessary for the project's success. Since it takes many years (7-8) for the palm trees to provide substantive yields, it is difficult in any case to motivate the farmers who very often are not interested in long-term investments. The appraisal mission had, however, quite imaginatively provided incentives through free rice and modest cash allowances to the farmers and it worked to some extent. Concerning the port facilities and size of the oil mill, project design could have been better. The Bank appraisal mission's estimates of transport costs and variation in palm oil prices (both local and international) were too optimistic. Eventual larger drops in international prices were not anticipated by the mission. The inclusion of the roads and provision for their design by consultants was a plus point in the project. However, later agreement by the Bank to leave this matter in the hands of :he Public Works Ministry caused substantial delays in the planning and execution of this component. Project Implementation 9. While it was agreed with the Government that DOPC will be organized along sound commercial lines, there were considerable delays in doing so. Some delay can be attributed tc the change in Government that took place in April 1980. However, the Government's earlier reluctance to set up a new entity for the project may have been reflected in its procrastination in setting up DOPC's Board and by-laws. On the ground of consolidation of all activities in the sub-sector, the Government in later years decided to set up a National Palm Corporation (NPC) and attempted to do away witb the autonomous nature of DOPC and its operations. However, when concern was expressed by the Bank and attention was drawn to the Government's obligations under the Loan Agreement, DOPC was allowed to function as before. 10. At appraisal project costs were estimated at US$48.8 million with the Bank financing 25% of the costs. In early 1987, the Bank supervision mission estimated the cost is likely to be about US$43.4 million (89% of SAR). However, the performance is not  4 balanced since this expected reduction in costs was due to lag in project implementation (9 years instead of 4), reduced plantings and building of palm oil mill of lesser capacity than anticipated at appraisal. 11. Implementation of the nucleus estate and smallholder plantation had varying degrees of success. The estate plantings were carried out in seven years, instead of the four recommended by the Appraisal Report. These plantings reached 4,412 ha in 1986/87, as compared to 5,000 ha estimated at appraisal, or an implementation rate of 88%. Smallholder plantings also lagged in time, reaching a total of 1,470 ha, as compared to the appraisal estimates of 2,500 ha or less that 60%. Agronomically the plantation work in the estate was well done, while that in the smallholder farms left much to be desired. Farmers who expected everything to be done by the project authorities, poorly maintained their fields with consequent deterioration in yields. Due to financial difficulties, the project was unable to pay a remunerative price to smallholders who had therefore no incentive to improve their farming practices. The project management introduced inspections and tied the issue of free rice and cash grant to better weeding and maintenance. This had the desired effect on some farmers. The farmgate price for smallholders was also critical for ensuring adequate supply of fruits to even the small mill commissioned in 1986. A supervision mission in February, 1987 reported that the price which was being paid to the farmers was 5 cents per bunch, about 20%1o to 33% of what he should have received based on the prevailing sales price of palm oil in the local market of US$450/500 per ton. For the farmers, crushing the fruit artisanally, and selling the oil to neighbors brought better returns. 12. The procurement of the. large mill was inordinately delayed due to bid evaluation and award problems which took a disproportionate amount of DOPC's, the Government's and the Bank's time. Meanwhile, in order to process available fruits and generate some income, as mentioned already a smaller mill was set up. The delay in the procurement of the larger mill was at least partly due to unclear advice given by the, Bank. In the beginning, the Bank left the decision concerning eligibility of UDW bid (whose tender was found unsealed) for bid evaluation at the discretion of DOPC. DOPC evaluated UDW bid with other bids and found it to be the lowest evaluated bidder. However, on the ground that VDK bid which was the second lowest and which according to DOPC had better technology and more experience, DOPC accepted VDK offer, though the price was US$1 million higher than UDW. The Bank then rightly took the position that the UDW bid could have been rejected at bid opening on technical grounds, but once it was accepted for evaluation, it must be awarded the mill contract if its bid was the lowest. The Government took advantage of the lack of clarity in the earlier Bank advice; there was also considerable disagreement between the various ministers. In the end, after a laps_ of about 2 years, the contract was awarded to UDW but the large mill was never constructed. By that time, the financial condition of the Government and DOPC had become weak (Commonwealth Development Corporation (CDC) and Bank loans were under suspension for some time as a consequence of debt service problems). Also due to the lack of progress in plantation and its poor care, and lower international palm oil prices, a large mill at that time was hardly justified. On hindsight, it appears that the mill size was not correctly iesigned by the appraisal mission. The procurement delays, however, did not make much difference to the ultimate failure of the project, since other reasons (including financial constraints and poor farmer response) did not allow sufficient fruits to be made available for crushing even by a much smaller mill.  5 13. Implementation of the project suffered chronically from shortage of funds. The Government's contributions were falling short of requirements and were irregular in timing. This was at east partly due to the Government's own financial difficulties and the strong dollar value at the time. Except for the CDC which was advancing funds, donor contributions were (until suspended in the later years 1985M7) provided on a reimbursement basis only. The Bank considered establishing a Revolving Fund and discussed it with the Government, but this procedure was never used in the project for the Bank LAn Tis was certainly a serious deficiency in the Bank's supervision of the project. In liberian conditions, this would have made a lot of difference in the execution of the project, particularly in its agricultural component, where the staff and laborers could not be paid timely, some had to be laid off and weeding and maintenance suffered. 14. The project management, staffed at the higher level by a Malaysian firm, performed reasonably welL After the fist project manager resigned quite early in the project, the second project manager, who remained the General Manager for the rest of the time, did well as an estate manager. He was strong on the plantation side but weak on the financial side. The first financial controller was not satisfactory and left the job for health reasons. The successor was not competent either. The financial management of this troubled project was consequently very poor. The supervision missions were critical of the Malaysian r,roject management firm, not giving enough support to the Decoris staff in spite of direct request for assistance. A mission in December 1984 mentioned the mini- mill evaluation as a case in point. According to this mission, the Decoris staff who seemed quite capable of planting oil palm and managing staff, seemed completely at sea on contractin& procurement and marketing. The Government was also unhappy with the Malaysian firm's back-up support, and during negotiations for the second term it was able to reduce the fees. Project Results 15. One of the few things during project execution which was correctly foreseen by the appraisal mission was the serious implication of any lag in execution of the project's viability. The slow implementation of estate plantings had a negative influence on the project's cash flow. If plantings were completed as estimated at appraisal and the estate's mill had been erected, income from the sales of palm oil in project years 6 and 7 (1985/87) would have reached an estimated US$3 million. Actual income reached less than half a million. On the other hand, while field establishment costs remained within appraisal estimates, administrative and general expenses were higher, resulting in an additional strain to the cash flow. Decoris had to rely more and more on Government's fund transfers which were always insufficient. For example in 1986/87, on a budget of over US$3 million, the Government promised US$60,000 per month, and even this amount was not regularly paid. As a result of the cash flow constraints, the project was unable to offer an attractive price to smallholders for their fruit, unable to hire sufficient harvesters for its mature plantings, and unable to extend proper maintenance to all plantings. As reported by the project manager in December, 1986, the cumulative effect of all these deficiencies was that the project was able to collect enough fruit to sustain only one shift of the small mill in operation. Even the local demand for palm oil estimated at between 125 to 165 tons per month could not be satisfied fully. By December, 1986, an investment totalling over US$20 million had been made and was at stake. A February, 1987 supervision mission came to the sad conclusion that the project  6 was in serious jeopardy that even if the project survived, it was compromising its future by not maintaining properly planted trees (mature and immature) and by antagonizing smallholders by its unattractive buying price. 16. The financial situation of the project started to deteriorate very badly from 1985. A Government contribution amounting to only US$50,000 was made in July 1985 after a long lapse. The only available funds in the first half of 1986 were the EEC grants for roads and small mill construction, and some draw-downs from the Bank and CDC as and when suspension of disbursement was not in force. A Bank supervision mission at end - June 1986 found DOPC cash balance to be about US$90,000 which was only sufficient to maintain the operation on a very low profile of salary and wages for one more month. Only minimum maintenance was carried out at the time. The project's heavy equipment could not be operated due to shortage of spare parts and fuel. Shortage of funds resulted! in suspension of land clearing and most of the contract work, and the number of workers had to be reduced. The small mill had a capacity of almost 1200 ton oil per annum but due to lack of storage capacity, appropriate port facilities,and very limited domestic market, only 40% of mill capacity could be exploited and even the sale of this limited quantity was not secured. The June 1986 Bank mission estimated the financial rate of return (FRR) at 11.3% and the economic rate of return (ERR) at 9.5%. In February, 1987 a Bank mission reported that the project, which continued to suffer financially, was undertaking no new development and was on a skeleton maintenance regime. C-onstruction of roads, storage tanks and the large mill was also in abeyance. The small mill was producing only on one shift basis, and some sales were being made domestically, generating modest income. The management and the staff were demoralized and their focus, as well as that of the Bank staff, was on designing a feasible rescue package for the project. Project Sustainability 17. By 1986, with the financial difficulties, lag in plantation development and procurement delays for the large mill, the project was grinding to a halt. It was also evident that unless the project and its finances and management were restructared the project was not sustainable. With about US$22 million already invested by DOPC and debt-service obligations imposing additional burden, DOPC, with the assistance of the Bank staff, attempted to devise altemative packages for project completion and future sustainability. This would have been achieved more easily if DOPC could be privatized and its management and operations were taken over by an experienced private (international) company. The Government enacted the necessary laws to facilitate privatization. A few international companies were approached and assistance by IFC was explored, but perception of the political and economic instability of Liberia at the time was discouraging to the private sector. With low intemational palm oil prices, high cost of DOPC production and insecurity about the Government allowing possible oil export revenues to be put in escrow abroad for project expenses and profit repatriation, it was not surprising that there were no takers. The other alternative explored by DOPC and the Bank staff was the scaling down of the project, bringing all plantation areas to full production, constructing a 20 ton/hour mill in two stages, guaranteed provision of about US$6 million by the Liberian Agricultural Credit and Development Bank (ACDB) to meet the project's cash flow requirements and possible conversion by the Government of part of the loans as equity.  7 18 It would be worth considering the financial implications and economic benefits of the project rescue and sustenance plan which did not materialize. The total required investment in the project was estimated by a Bank mission in February, 1987 to be US$43A million (compared with the appraisal estimate of US$48 million) with only about 78% of the 7500 ha. planted. The investments were to be completed in two years. In 1989/90 when the larger mill was to go into production, the expected income for that year was estimated at about US$3.2 million growing to US$10.9 million in the peak year 1995J96. The ERR was expected to be considerably less than 12% estimated at appraisal and could even be negative. The reasons for the above were the lag in implementation (9 years instead of 4 years), the reduced area of oil palm, and the then prevailing low level of oil prices on the world market. Since all Bank operations in the country remained suspended since then and no Project Completion Mission visited Liberia for this project, it was not possible to know the final fate of the project. It is unlikely that the project had a beneficial economic impact for the country. Bank Performance 19. The main strengths of the Bank's performance on this project were its insistence during both appraisal and project execution stages on fair compensation for the settlers displaced by the project and being pragmatic about the land clearance issue. The Bank's anxiety about adequate compensation and alternative land for rehabilitation of the displaced people reflected its social concerns while pursuing economic goals. The mechanical clearing of land was a practical measure pursu