Jordan - Second Agricultural Credit Project

RESTRICTED ^" C ij Report No. P-536 This report was 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 The report may not be published nor may it be quoted as representing their views.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 RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE HASHEMITE KINGDOM OF JORDAN April 20, 1967  INTERNATIONTAL DEVELCPtIENT ASSOCIATION REPORT AND RECOIMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE HASHEMITE KINGDOM OF JORDAN 1. I submit the follouing report and recommendation on a proposed credit in an amount in various currencies equivalent to US $3 million to the Hashemite Kingdom of Jordan to assist in the financing of the lending program of the Agricultural Credit Corporation (ACC). PART I - HISTORICAL 2. The first request for a credit by the Association for ACC was received from the Government in 1961. In the course of the next two years substantial changes were introduced on the Association's recommendation in ACC's policies and organization. The first Association credit was made in 1963 to the Government for relending to ACC in an amount of $3 million equivalent, corresponding to a two-year lending program. During this time ACC was expected to strengthen its staff and improve its pro- cedures to cope with an increased volume of operations. 3. In June 1966, an application for a second credit in the amount of $5.8 million was received. The project was appraised in September/October, 1966. In view of the shortage of IDA funds, negotiations were deferred until March 1967. Negotiations were held in Washington between March 27 and April 4, 1967. Dr. Najmeddin Dajani, Acting Vice President of the Jordan Development Board, represented the Government and Mr. Ibrahim Kaibni, Deputy General Manager of ACC, represented the Corporation.  - 2 - 4. The following is a summary statement of IDA credits to Jordan as at March 31, 1967: Amount (U.S. $ Million) Year No. Purpose IDA Undisbursed 1961 18JO Amman water supply 1.5 0.7 1963 43JO Water supply projects 2.5 1.0 1963 44JO Agricultural credit 3.0 - Total (less cancellations) 7.0 of which has been repaid - Total now outstanding 7.0 Total undisbursed 1.7 5. Progress under the two credits for water supply has been slow, chiefly as a result of delays in the search for under- ground water and in the engineering of urban distribution systems. The Association recently cancelled part of the initial amounts of both credits. In the credit of $2 million (18JO) for the Amman project an amount of $0.5 million initially allocated for additional water treatment facilities was cancelled by the Association as of January 1, 1967, as these facilities appeared no longer necessary. An adequate water source has not yet been ascertained for the town of Nablus, one of the four water supply projects financed under the $3.5 million credit made in 1963(43Jo). In view of the delays to be expected before the $1 million ear- marked for this project could be used, this amount was cancelled by the Association as of January 1, 1967. Further details on these two credits are set forth in my report of January 19, 1967 (IDA/R67-1). 6. The Bank is actively considering a loan of about $25 million to assist in the financing of a project for the extraction of potash from the Dead Sea. The Kuwait Fund for Arab Economic Devel- opment, the Agency for International Development and the Government of Jordan would share in the financing of the project. Negotiations are under way between the Arab Potash Co. and foreign firms with a view to firming up the latters' participation in the equity of the new company to be formed for the exploitation of potash and their  undertaking to assume a preponderant role in its technical and commercial management. IFC is considering an equity investment in the project. It has no other investments under active con- sideration in Jordan. 7. Apart from the proposed credit for ACC no projects are currently being considered for lending by the Association. Should, however, the technical problems facing the Nablus water supply project be satisfactorily solved, this project might merit reconsideration. PART II - DESCRIPTION CF THE PROPOSED CREDIT 8. Borrower: The Hashemite Kingdom of Jordan Beneficiary: Agricultural Credit Corporation Amount: Equivalent, in various currencies, to $3 million. Purpose: To assist in financing part of ACC's lending program for up to four years. Amortization: 50 years with no amortization during the first 10 years. From August 1, 1977, one-half of one percent of the principal amount would be repayable semi-annually for 10 years; and one and a half percent semi-annually thereafter to February 1, 2017. Service Charge: 3/4 of one percent per annum on the principal amount of the credit disbursed and outstanding. Relending Terms: The Government of Jordan would relend the proceeds of the credit to the ACC and the latter would undertake to repay the Govern- ment over a period of 10 years after 10 years of grace with interest at 3