Document of The World BankFIEC Y FOR OFFICIAL USE ONLY Report No. P-2754-TA REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE UNITED REPUBLIC OF TANZANIA FOR A PYRETHRUM PROJECT March 31, 1980 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. CURRENCY EQUIVALENTS Currency unit = Tanzanian shilling (Tsh.) US$0.12 = Tsh 1.0 US$1.00 = Tsh 8.30 US$1,000 = Tsh 8,300 WEIGHTS AND MEASURES _ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~4 1 meter (m) = 3.28 feet (ft) 1 kilometer (k) = 0.62 miles (mi) 1 sq. meter (m ) = 10.76 sq. ft 1 hectare (ha) = 10,000 m = 2.47 acres 1 kilogram (kg) = 2.204 pounds (lb) 1 metric ton (m ton) = 1,000 kg = 2,204 lb GLOSSARY OF ABBREVIATIONS APO - Assistant Production Officer EDF - European Development Fund GAPEX - General Agricultural Products Export Company GOT - Government of Tanzania ICB - International Competitive Bidding IERR - Internal Economic Rate of Return KILIMO - Ministry of Agriculture MDB - Marketing Development Bureau of Kilimo MOF - Ministry of Finance MOW - Ministry of Works NORAD - Norwegian Agency for Development PMO - Prime M:inister's Office RIMU - Road Improvement and Maintenance Unit TAN-ZAM - Tanzania-Zambia Highway TAZARA - Tanzania-Zambia Railway TECO - Tanganyika Extract Company TIB - Tanzania Investment Bank TPB - Tanganyika Pyrethrum Board UAC - Uyole Agricultural Center GOVERNMENT FISCAL YEAR July 1 - June 30 TPB FINANCIAL YEAR July 1 - June 30 FOR OFFICIAL USE ONLY TANZANIA PYRETHRUM PROJECT CREDIT AND PROJECT SUMMARY BORROWER: United Republic of Tanzania BENEFICIARIES: Tanganyika Pyrethrum Board (TPB) and Uyole Agricultural Center (UAC). AMOUNT: US$10.0 million equivalent TERMS: Standard RELENDING TERMS: US$4.0 million of the proceeds of the credit would be onlent to TPB at an interest rate of 10% per annum repayable in 10 years, including 5 years of grace; US$1.7 million would be channeled to TPB as equity; US$1.4 million would be passed on to UAC as a grant. The exchange risk will be assumed fully by the Borrower. PROJECT DESCRIPTION: The proposed project aims at increasing the production of pyrethrum in the highlands of the Mbeya and Iringa Regions of Southern Tanzania. Therefore, the project would finance (a) a program to increase smallholder pyrethrum produc- tion; (b) a program to strengthen pyrethrum research in Tanzania; (c) the strengthening of TPB's organization and infrastructure; and (d) the improvement and maintenance of district and feeder roads. RISKS: A risk faced by the Project would be a future collapse of pyrethrum export prices as a result of the development of new substitutes. However, current research is aimed mostly towards developing agricultural chemicals which would not compete with pyrethrum. Also the costs of licensing new insecticides protects pyrethrum's market position. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ESTIMATED COSTS: US$ '000 Local Foreign Total Program to increase and improve pyrethrum production 1,269 1,107 2,376 Program to expand pyrethrum research 590 987 1,577 Strengthening TPB's organization and infrastrtucture 1,376 1,704 3,080 Improvement and maintenance of district and feeder roads 614 1,905 2,519 Total Base Line Costs 3,849 5,703 9,552 Contingencies Physical 479 699 1,178 Price 998 1,447 2,445 Project Costs 5,326 7,849 13,175 TOTAL PROJECT COSTS 4,846 7,849 12,695 (net of Taxes and Duties) FINANCING PLAN: US$ Million Local Foreign Total IDA Credit 2.2 7.8 10.0 Government of Tanzania 2.7 - 2.7 (Net of Taxes and Duties) Total Project Costs 4.9 7.8 12.7 ESTIMATED DISBURSEMENTS: IDA Fiscal Year FY81 FY82 FY83 FY84 FY85 FY86 US$ Million Annual 0.3 2.3 2.4 2.4 1.9 0.7 Cumulative 0.3 2.6 5.0 7.4 9.3 10.0 RATE OF RETURN 17% APPRAISAL REPORT: Report No. 2749b,-TA, dated March 20, 1980 INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE UNITED REPUBLIC OF TANZANIA FOR A PYRETHRUM PROJECT 1. I submit the following report and recommendation on a proposed credit to the United Republic of Tanzania of US$10.0 million equivalent on standard terms to help finance a program to increase smallholder pyrethrum production, a program to strengthen pyrethrum research in Tanzania and the Tanganyika Extract Pyrethrum Board's (TPB) organization, and to improve and maintain district and feeder roads. US$4.0 million of the proceeds of the credit would be onlent to TPB under a Subsidiary Loan Agreement which would be on terms and conditions acceptable to the Association including an interest rate of 10% per annum, repayable in 10 years, including 5 years of grace. US$1.7 million of the proceeds of the credit would be channeled by the Tanzanian Government to TPB as equity and US$2.9 million to the Ministry of Works (MOW); US$1.4 million would be passed on to the Uyole Agricultural Center (UAC) as grant. PART I - THE ECONOMY I/ 2. A Basic Economic Mission visited Tanzania in August 1976. The Basic Economic Report was distributed in December 1977 (Report No. 1616-TA). A new Country Economic Memorandum will be issued later in this fiscal year. A summary of social and economic data is in Annex I. Profile of the Economy 3. Tanzania is one of the 30 least developed countries in the world with a per capita income in 1978 of US$230. The economy is still heavily dependent on agriculture: 90% of the labor force is engaged in agriculture and approximately 50% of GDP and about 70% of total exports are derived from agricultural production. The industrial sector is still small, producing about 10% of GDP, approximately the same percentage as 11 years ago. The service sector produces about 40% of GDP. Overall population density is low, though a few areas are considered overpopulated. Population growth is estimated at 3.0% per annum with both fertility and mortality at relatively high levels. 4. Since the Arusha Declaration in 1967 Tanzania has pursued a socialist development strategy. Banking, insurance, and most large-scale enterprises in manufacturing, plantation agriculture, transportation, and wholesale trade are under state control. There is extensive state intervention in economic activity, including import licensing, foreign exchange controls, price control, the reservation of some activities to the state or cooperative sector, and 1/ This section is essentially the same as that of the President's Report on the Tanzania Rural Development Bank Project, dated February 13, 1980. - 2 - detailed Government investment planning. The second major feature of Tanzania's development strategy is its strong emphasis on rural development and social programs to benefit the poor and reduce inequalities in income distribution. This is reflected in ambitious programs for the provision of rural water supplies and health services and in the decision to achieve universal entry into primary education beginning in 1977. Long Term Economic Trends 5. In the decade 1968-78 real GDP at factor cost grew at an annual average rate of 4.8%, or about 1.8% per annum per capita. While economic growth was severely disrupted by the economic crisis following the failure of rains and large increases in import prices in 1973 and 1974, the economy has recovered well with annual growth at 5 to 6% for 1976 through 1978. During this decade the service sector grew the fastest - 6.3% p.a., followed by the industrial sector - 4.0% p.a. and then agriculture - 2.7% p.a. 6. The Government has a good record of domestic resource mobilization. Between 1967-68 and 1977-78 the share of recurrent revenues rose from 15.1% to 19.3% of GDP. However, most of this increase occurred before 1975-1976. Since then revenue has been increasing at a rate below the GDP growth rate (in 1974/75 revenue was 22% of GDP). This increase was achieved through a combination of highly progressive direct taxes and proportional or moderately progressive indirect taxes. Except during the economic crisis in 1974-75, the rate of national savings has also been high: gross national savings fluctuated at around 16-17% of GNP from the mid-1960s through 1973, fell to half that level during the crisis years and recovered to the pre-crisis level in 1976 and 1977. These are high levels of savings for a country at Tanzania' s income level. 7. Some progress has also been made in achieving the Government's objective of a more equitable income distribution. Between 1969 and 1975 the average urban rural gap remained approximately constant, halting the trend towards an increasing gap in the early 1960s. It is likely that the gap has been slightly reduced since 1976 due to continued recovery of agricultural production and higher producer prices. However, regional income differentials in rural areas have tended to widen slightly. Within the formal urban sector there has been a dramatic narrowing of the post-tax income differential between the highest-paid government officials and minimum wage earners from 50 to 1 in 1961 to 8 to 1 in 1975. However, an informal sector has emerged comprising large numbers of unemployed and underemployed workers with earnings significantly below the official urban minimum wage. The policies of wage restraint and higher producer prices pursued since 1975 should have a bene- ficial impact on almost all dimensions of income distribution, and the basic needs oriented programs in rural water and health and in universal primary education (para. 4 above) are resulting in a significant redirection in public expenditures toward the rural poor. 8. Despite this impressive overall record of development, some pro- blems have begun to manifest themselves in recent years. Exports have failed to keep pace with the growth of the rest of the economy. The overall export index is down almost one-third since 1966. This poor performance in exports - 3 - is due to the poor growth rate of agricultural cash crops. While agricul- tural output has increased impressively in recent years (by an average of about 7% in the years 1976-78), most of this growth has been in the hard-to- measure subsistence sector, while the monetary sector has lagged well behind. Over the last decade subsistence growth has averaged 5.1% per annum while monetary sector growth has been only 2.3% per annum. This has led to a severe retardation of growth of exports of agricultural products. This failure of export growth has led to increasing dependency on foreign loans and grants to pay for imports. 9. A second problem that is becoming more serious is the deceleration of the growth of government revenues. While still at a high ratio to GDP compared to most other developing countries, government revenues have been growing more slowly than GDP in recent years. At the same time recurrent expenditures have been higher than budgeted. As a result, public sector savings have been well below expectations and the Government has had to rely more upon borrowing (both foreign and local) and external aid for financing development than was planned. Recent Economic Developments 10. During 1975-77 the Government followed a program agreed to at the time of the first Program Loan (No. 1063-TA) in late 1974. This program included redirecting investment to more productive sectors, higher agricul- tural producer prices, constraints on wages and salaries, price and tax increases to restrain consumption and tight control of imports. These poli- cies, aided by the boom in coffee prices, succeeded in keeping government spending under control with low levels of borrowing from the banking system and led to a balance of payments surplus of almost US$150 million in 1977. Food production increased and government stocks of most foodgrains reached record levels. In 1978 the Government was able to ease import restrictions and begin to import the spares and raw materials needed by industry, which had been running below capacity. 11. Unfortunately the price of coffee, Tanzania's major export, began to fall at the same time that imports were liberalized. Also, in October, 1978 war broke out with Uganda and the resulting imports of military equipment and domestic mobilization put an increasing strain on the balance of payments and the domestic budget. Consequently the current account showed a deficit of more than US$450 million in 1978 and the overall balance of payments was almost US$300 million in deficit. As a result, reserves were drawn down and the country was forced to delay payment of about US$60 million in import bills. 12. The situation has deteriorated further in 1979 and the Government's economic policies are facing a major challenge. The overall balance of payments is expected to be almost US$200 million in deficit and as a result arrears are expected to be about US$200 million by the end of the year. At the same time the domestic budget deficit has ballooned. The recurrent budget is expected to show a deficit of almost Tsh. 1 billion for 1978/79 and govern- ment borrowing from the banking system is expected to be more than Tsh. 3 billion, a major component in an almost 35% increase in the money supply. - 4 - Import licenses have been reduced by almost 40% from the 1978 level in real terms (following a 10% devaluation in January of 1979). The Government has been able to arrange for almost US$75 million in funds from the IMF from its first credit tranche, the Trust Fund and the Export Compensatory Fund, but negotiations for further assistance from the IMF have so far been unsuccessful. The 1979/80 budget calls for a reduction in the level of recurrent expenditure and borrowing from the banking system of Tsh 1.67 billion, but through the first quarter of this fiscal year borrowing was already Tsh 1.4 billion. A major problem is lack of budgetary discipline as spending agencies have been able to exceed their budgetary allocations with the Treasury continuing to honor their checks. The Government urgently needs to develop a comprehensive program to deal with the current crisis, as it did in 1974. The Bank has offered to help the Government in developing such a program. 13. Tanzania continues to attract large amounts of foreign assistance. Because of the very concessional tesrms on which this aid has been given to Tanzania and the Government's reluctance in the past to use higher cost commercial loans and supplier's credits, the overall debt service ratio has historically been low (less than 10%). However, the recent balance of pay- ments crisis has forced the Governmnent to utilize such loans and as a result the debt service ratio is estimated at 12% in 1979 and 15% in 1980. We expect it will remain in the range of 15-20% throughout the 1980's. In 1978 the Bank held 12% of Tanzania's external debt (for the Bank Group, it was 28%) and received 37% of Tanzania's debt service (40% for the Bank Group). We are projecting this debt service share to fall to about 21% in 1980 and to remain around 25% for the coming decade. 14. Tanzania's development will require resources in excess of domestic savings and external capital made available solely to finance the foreign exchange costs of projects. Given the Government's efforts to mobilize domestic resources and in view of our support for its increased emphasis on local cost intensive rural investments, the Bank Group will continue to finance a high proportion of total costs including, in appropriate cases, a portion of local costs. East African Community (EAC) 15. The recent developments in the East African Community were outlined in a report to the Executive Directors dated December 19, 1977 (R77-312). Dr. Victor Umbricht, the independent mediator appointed by the Partner States, has visited East Africa on numerous occasions and has now prepared reports to the Partner States on the results of his fact-finding work on the EAC Corpora- tions and the General Serv-ces, and the methodology adopted in appraising the assets and liabilities. The next phase of the mediator's work will be to make recommendations on the allocation of these assets and liabilities. The mediator's report and recommendations on the future structure of the East African Development Bank (EADB) have been accepted in principle by the Partner States and the revised EADB Charter along with the Treaty to enact the new Charter have been submitted to the three Governments for signature. - 5 - 16. The de facto breakup of the Community has had some impact on Tanzania's budget as new national entities had to take over the services formerly provided by the EAC Corporations. A major development related to the EAC difficulties was the closure of the border with Kenya. Kenya was a major trading partner of Tanzania and considerable adjustments have had to be made in locating new suppliers for some items and developing alternative outlets for some manufactured goods and agricultural products. PART II - BANK GROUP OPERATIONS IN TANZANIA 1/ 17. Tanzania joined the Bank, IDA and IFC in 1962. Beginning with an IDA credit for education in 1962, 40 IDA credits and 19 Bank loans, of which two on Third Window terms, amounting to US$759.5 million have so far been approved for Tanzania. In addition, Tanzania has been a beneficiary of 10 loans totalling US$244.8 million which have been extended for the development of the common services and development bank operated regionally by Tanzania, Kenya and Uganda through their association in the East African Community. IFC investments in Tanzania, totalling US$4.7 million, were made to the Kilombero Sugar Company in 1960 and 1964. This Company encountered financial difficulties and in 1969, IFC and other investors sold their interest in the Company to the Government. A new IFC investment of US$1.7 million in soap manufacturing in Mbeya was approved by the Executive Directors on June 8, 1978 and an investment of US$1.5 million in metal product manufacturing was approved on May 10, 1979. Annex II contains summary statements of Bank loans, IDA credits and IFC investments to Tanzania and the East African Community organizations and notes on the execution of ongoing projects. 18. To support Tanzania's overall development strategy Bank Group lending operations are increasingly focusing on the rural sector and directly productive projects. Previous Bank Group assistance to the agricultural sector in Tanzania has included IDA credits totalling US$145.2 million and IBRD loans totalling US$37.0 million for fifteen agricultural and three rural development projects. Agricultural projects include one for agricul- tural credit, three each for livestock and tobacco, two for cashewnuts and one each for the production of tea, sugar, maize, fish, forestry products and cotton. Rural Development Projects have been financed in the Kigoma, Tabora and the Mwanza/Shinyanga Regions. Project Performance Audit Reports for the Flue-Cured Tobacco Project and the Smallholder Tea Project have recently been prepared. In both cases, the economic rate of return is satisfactory. However, implementation experience highlighted the weakness of the parastatals involved and the consequent need for considerable investment in institution- building. These lessons have been taken into account in the design of this Project. Furthermore, a number of recent Bank Group supported infrastructure 1/ This section is essentially the same as that of the President's Report on the Tanzania Rural Development Bank Project, dated February 13, 1980. - 6 - projects have bee.2 cKi-a ly linked with specific productive activities. For example, the Urban Water Supply Project (Loan No. 1354-TA) approved in January 1976, will support the Industrial Complex in Morogoro (Loans No. 1385-T-TA and 1386-TA) and the Morogoro Textile Project (Loan No. 1607-TA and Credit No. 833-TA). Other directly productive projects recently approved are the Mufindi Pulp and Paper ProJect (Loan No. 1650-TA and Credit No. 875-TA) and the Tanganyika Development Finance Company Limited (TDFL) Project (Loan No. 1745-TA). In addition, a Tourism Rehabilitation Project (Credit No. 860-TA), a Sixth Education Project (Credit No. 861-TA) and a Fifth Highway Project (Credit No. 876-TA) were approved by the Executive Directors in FY79. A fourth line of credit to the Tanzania Investment Bank (Loan No. 1750-TA), a credit for the Dar es Salaam Port Engineering Project (Credit No. S-24-TA) and a line of credit to the Tanzania Rural Development Bank (TRDB) have been approved this fiscal year. Projects which have been appraised include a Second Urban Water Supply Project, a Coconut Project, a Tea Processing Project, an Education Project and a Foodgrain Storage and Milling Project. A rural development project in Mara Region, a small scale industries project, an urban project, a harbours project, a railway project, and an agricultural services project are also under preparation. 19. Although the comparatively high undisbursed proportion of loans and credits, detailed in Annex II, is in large part a result of the recent approval of many of these projects, it also reflects the fact that overall project implementation has been slower than was projected. It is clear in retrospect that both the Bank Group and Tanzania have been optimistic re- garding Tanzania's absorptive capacity. The causes of the difficulties in implementation are varied. Some stem from the scarcity of suitably trained and experienced manpower, some reflect the problems in identifying agronomic input packages appropriate to the needs of smallholder farmers while others result from the strains associated with attempting a "frontal attack" on poverty. These problems have been compounded by frequent and drastic ad- ministrative changes, which -- though potentially the source of long-term benefits -- have certainly disrupted orderly execution of projects and made parts of earlier project concepts obsolete. Also, the Uganda war (para. 11) has had some impact on project implementation. In the early stages of the war, there was some diversion of equipment and manpower; however these problems have largely been solved. The problem over the medium term is the financial implications of the war. If general economic problems resulting from the war are not resolved, the availability of adequate local funds could become a major constraint to implementation. In general, difficulties have been most severe in agriculture, particularly in the smallholder rural sector. As our lending program has increasingly concentrated on this sector, these problems have become correspondingly more apparent and severe. By contrast, the "modern" sector projects have tended to fare better: the Tanzania Investment Bank, Mwanza Textile and Morogoro Industrial Estate Projects, for example, are proceeding well. 20. As the Bank Group's lending program has expanded, increasing attention has been given to measures designed to improve project implementa- tion. A course was conducted in Dar es Salaam in 1973 and again in 1978 on Bank Group procurement with the relevant Government officials. A special project implementation unit was set up in the Ministry of Agriculture and 11 Agricultural Development Services staff have been assigned to Bank Group financed projects in agriculture and rural development. The need to establish a close and continuous working level dialogue between responsible Tanzanian officials and Bank Group staff on implementation problems was one of the prime reasons for the expansion of the Resident Mission to two professionals in October 1976. In February 1977 a regular Government/Bank Group review of project implementation was established. Monthly discussions in Bank Group financed projects chaired by the Ministry of Finance (MOF) and attended by Bank Group staff and officials from implementing agencies deal in detail with individual problem projects and problems which are affecting project implemen- tation across a number of sectors. As a result of these efforts, there has been a noticeable improvement in project implementation. Actions agreed to during the reviews have been completed relatively quickly and coordination and communication between the MOF and the various ministries and agencies res- ponsible for project implementation has improved markedly. 21. The Government has become increasingly conscious of the importance of effective implementation. In addition to fully supporting the project implementation review system, MOF has set up a unit to oversee project per- formance. Furthermore, there have been more consistent responses to Bank suggestions and a willingness to openly discuss project problems raised by Bank staff. As a consequence, the disbursement records of Bank Group financed projects have improved somewhat over the last two years, and a recent analysis indicated that the Tanzanian disbursement performance is about equal to the Bank-wide average. While there is still a potential for further significant improvements, the Government is implementing its investment program, including Bank Group and other foreign aided projects, more effectively than in the past. PART III - THE AGRICULTURAL SECTOR AND PYRETHRUM SUBSECTOR Background 22. Agriculture contributes approximately 50% to the GDP, about half of it from subsisLence production. Agriculture and related activities thus constitute the largest single sector in the Tanzanian economy, and agricul- tural exports account for about 70% of total merchandise exports (see para 3). The major export commodities are coffee, cotton, sisal, tobacco, tea and cashewnuts. Over 90% of the population lives in rural areas and the vast majority is engaged in agriculture. 23. Most agricultural production is from family operated smallholdings. Estate production has diminished in importance and the state farm area remains relatively small. Large-scale agriculture is confined to the production of sisal, coffee, tea, sugar, wheat, rice and livestock products. Tanzania's livestock herd, which is largely traditionally managed, is grazed extensively over the 40% of the country free from tsetse fly. - 8 - 24. The recent performance of the agricultural sector has been somewhat sluggish. Over the period 1967-77, the average annual rate of growth of agri- cultural production was about 2.7%, less than the estimated population growth. The effects of this slow growth were exacerbated in 1973 and 1974 by a severe drought, which necessitated large foodgrain imports. Since 1976, agricul- tural production has increased in real terms at an average annual rate of 7%. However, cash crop production has remained stagnant and despite increased food-crop production, rising demand has resulted in a continued requirement for imports of maize, rice and wheat. 25. The Government of Tanzania has undertaken a comprehensive program to support the development of the agricultural sector in conjunction with efforts to achieve balanced regional growth and more equitable income distri- bution. Within these objectives, the Government is paying particular atten- tion to achieving self-sufficiency in food production. The proposed project fits well into this strategy, since, although pyrethrum generates only about 1% of current foreign exchange earnings, there is substantial potential for expanded output and earnings. 26. A major thrust in the Government's program for agricultural and rural development is the grouping of the country's rural populace into villages, villagization, in order to facilitate the provision of infrastruc- ture and services and to encourage self-reliance and a community approach to rural development. There are now about 7,700 registered villages, containing over three-quarters of Tanzania's rural population. The registered village is intended to be the country's primnary social, economic and political unit, with economic infrastructure owned by the village, economic services coordi- nated at village level and basic social services provided to each village. Early experience with villagization has been mixed, but it is too early to judge how effectively villages will be able to meet their ambitious goals. Agricultural Services 27. Agricultural research is undertaken by a variety of Government agencies, under the overall coordination of the Ministry of Agriculture (Kilimo). However, research priorities have not always been firmly estab- lished, research resources have not been allocated in accordance with develop- ment priorities and field testing has to be increased to improve the farming system in Tanzania's various agro-economic zones. Agricultural Extension services are provided by staff of the regional administrations and by staff of some cash-crop parastatals. Training of the extension staff is being provided by Kilimo. Field staff are under-trained, inadequately supervised and given limited managerial and logistical support. The situation has worsened in 1978 by the appointment of many of the better-trained extension staff as village managers. Their responsibility compared to the village management technicians' and to the extension staff's has not been fully clarified. Government agencies hold varying views on how extension should be organized in the future and these differences must be resolved if the exten- sion services are to be improved. Credit for the rural sector is provided - 9 - by the National Bank of Commerce (NBC), which is the sole source of short- term credit for marketing parastatals' produce, and by the Tanzania Rural Development Bank (TRDB), which provides short-, medium- and long-term credit to villages and farmers. The Association recently approved a project to strengthen TRDB's operations (para. 18). Rural Transport Services are inade- quate for the effi-cient movement of crops and inputs. Only 10% of the road network provides allweather service, the remainder are often impassable in the rainy season. Rural roads are in especially poor condition. In addition, the trucking fleet has been inadequate to service rural needs. The Government of Tanzania's actions to address these problems are directed mainly at the public sector; they include increased support for regional road constructior/ maintenance capacity and an IDA-assisted project to develop the public trucking industry (Credit No. 743-TA). Marketing and Pricing 28. Parastatal organizations for major crops and livestock are respons- ible for the marketing and processing activities. Since the Arusha Declara- tion the Government of Tanzania has progressively enlarged the role and scope of these institutions, placing severe strains on their physical and managerial resources. As a result, the marketing system suffers from lack of competition, high costs and poor services. The Government is aware of these problems and is beginning to develop programs to address them. The Bank Group is assisting in this process through its analysis of and support for parastatals involved in agriculture projects. 29. The control of producer and wholesale prices of all principal agricul- tural crops (except vegetables, fruit, fish and eggs) is an important tool of Government policy. The responsibility for the formulation of pricing recommend- ations rests with Kilimo; the Market Development Bureau (NDB) in Kilimo carries out annual price reviews for major crops, taking into account produc- tion costs, the need for incentives to producers, the financial position of parastatals and inter-regional equity. MDB is currently being financed by IDA, under the National Maize Project (Credit No. 606-TA) and would receive further IDA funds and long-term technical assistance under the proposed Grain Storage and Milling Project. Pyrethrum Production and Yields 30. The pyrethrum plant is a small perennial growing to some 60 cm in height. Its dried flowers yield an extract, the active ingredients of which (pyrethrins) have excellent insecticidal properties with no adverse environ- mental side effects. It has a wider spectrum of activity than many other insecticides and is effective against all common household insects. Despite its long use (about 150 years) pyrethrum does not seem to have caused the development of any significant degree of immunity in treated insect popula- tions. Its sensitivity to sunlight makes pyrethrum unsuitable for agricul- tural field use. However, because of its low mammalian toxicity it is used primarily in food-related industries, homes and public buildings, and in animal shelters, usually as a liquid spray or in aerosols. It is also used in - 10 - the form of creams and ointments, mosquito coils and sticks. The residue after extraction (pyrethrum marc) also has a commercial value as a cattle feed Ingredient. 31. An analysis of the future demand for pyrethrum must take into account the developrmient of syrnthetic substitutes (pyrethroids) derived from petrochemicalss However, while they have similar properties, no single pyrethroid can tully mati the natuiral product. In addition, the high costs of testing and registering new insecticides makes it unlikely that new com- pounds will be developed for the non-agricultural market. Finally, public control of insecticide use favors pyrethrum which has a long record of safe use. Therefore, despite some substitution pyrethrum remains competitive with pyrethroids. Taking these factors and the effects of income and population growth into account, world demand for pyrethrum is expected to remain at least at its 1976 level of about 20,000 tons of flowers. World production is not expected to approach this level for at least five years. 32. Kenya, Tanzania and RwandLa are the world's largest producers of pyrethrum accounting for over 90% of total production. Production in Tanzania began orginally on large-scale estates and it was not until the early 1960s that the crop was first introduced to smallholders. Presently, over 95% of Tanzania's production comes from the highland areas of the Iringa and Mbeya Regions of Southern Tanzania, and it is now grown almost exclusively by smallholders. It is currently estimated that about 20,000 smallholder families cultivate an average of 0.4 ha of pyrethrum each, giving a total area of about 8,000 ha of pyrethrum. Pyrethrum is grown at altitudes above 1,800 m, in areas with a well-distributed annual rainfall of at least 1,000 mm. Because of the steepness of the terrain cultivation is mainly by hand. 33. Annual production of dried flowers in Tanzania has fluctuated sharply in the past. It reached a peak of over 6,300 m tons in 1966/67, which, coupled with high production in Kenya, led to marketing.problems. The consequent reduction in world prices, together with rising agricultural wages, forced large-scale producers out of business, and production fell to 2,400 m tons in 1969/70. Between then and 1974/75, annual production fluctuated between 2,700 m tons and 4,700 m tonis. Since 1974/75, however, there has been a steady downward trend in production, which was only 1,600 m tons in 1978/79. This decline resulted from producer prices that were unattractive in relation to the prices of competing crops (particularly maize) and from a lack of improved planting material. 34. Pyrethrum plants flower in the first year after planting, come into full flower production in the second. and third years and produce declining yields thereafter. Recommended practice is therefore to replant every three years and also to rotate with either a grain crop or a period of fallow. Pyrethrum flowers require drying before they can be collected from farmers for processing. Rapid drying with a minimum of heat is desirable. Natural sun drying is employed as far as possible. In some areas, however, limited sunshine hours and wet weather for most of the year make natural drying difficult. - 11 - 35. While no systematic data exists on present smallholder yields, a study in 1974 put average annual dried flower yields (over the three-year productive plant life) at 270 kg/ha, but present yields are estimated to have fallen to an average of 200 kg/ha as a result of adverse climatic conditions and the aging of plants in the absence of replanting. For the same reasons, the average pyrethrin content of dried flowers (which is recorded at the processing plant) which was around 1.25% until about 1970/71 has declined to 1.1% in 1978/79. Services to Pyrethrum Growers 36. Pyrethrum research in Tanzania, which was halted in 1968 when world market prices declined, was resumed in 1974. It is carried out by the staff of the Uyole Agricultural Center (UAC), and focusses on the selection and multiplication of high-yielding plants which have flowers of a high pyrethrin content. The present research program is under-staffed and too small to produce results in a reasonable time. Extension services provided to pyrethrum growers are inadequate. The Mbeya and Iringa Regional Administra- tions, which until 1977 were solely responsible for pyrethrum extension, currently employ only about 160 field staff to cover over 1,000 villages. TPB employs 13 Assistant Production Officers (APOs). Each APO is responsible for about 1,500 growers. TPB's long-term objective is that its field staff act as specialist pyrethrum advisers to the regional extension staff, but the weakness of the regional extension service currently precludes this and it would be unrealistic to expect major improvements over the next few years. The Project would therefore provide only for a modest expansion of TPB field staff, to enable TPB to manage the proposed program for the distribution of planting material. Credit is not provided for pyrethrum production, since pyrethrum cultivation requires no material inputs other than planting material, which has been provided to farmers free of charge, and occasionally pesticides. If improved planting material were charged for, many farmers would not be able to afford the initial cost of establishing pyrethrum plots and would, therefore, continue to use their present inferior material. The scattered and isolated locations of pyrethrum producing villages, on the other hand, would make a cost recovery system prohibitively expensive. Pyrethrum Marketing and Processing 37. Primary marketing of pyrethrum is conducted by TPB which buys flowers from licensed growers on a cash basis. Both individual licenses (about 800) and group licenses (about 300, mainly villages) have been issued by TPB. Flower purchase is handled by TPB clerks operating in about 20 buying centers/stores, by TPB mobile buying centers in remote areas and by about 90 villages which have qualified as TPB agents since they are registered, equipped with adequate stores and have a literate Village Manager or Secretary. TPB's buying centers/stores are mainly rented, and are in poor physical condition. After purchase, flowers are transported to four main TPB stores on main roads, and from there to the processing factory. These transport operations are seriously constrained by the poor state of district and feeder roads and by the inadequate and poorly-managed TPB transport fleet. 12 - 38. Flower processing is currently undertaken by the Tanganyika Extract Company (TECO), which is a wholly-owned subsidiary of TPB located in Arusha. TPB is currently constructing a new processing plant at Mafinga in Iringa Region which is sited much more favourably with respect to the production areas9 and which will have a capacity sufficient to handle all flower produc- tion for the foreseeable future. The Arusha plant therefore would be closed for pyrethrum processing and its staff transferred to the Mafinga plant once the latter has been completed in 1980. Producer and Export Prices 39. The price paid to growers for dried flowers depends on the pyrethrin content of the flowers. The current grading system provides for five grades, ranging from flowers with less than 1.10% pyrethrin to more than 1.40%. Producer prices are set by the Government (para. 29). Flower prices paid to growers have been raised substantially in recent years. For example, a farmer producing the lowest grade, with a pyrethrin content of less than 1.10%, received Tsh 4.00 per kg of dried flowers in the 1977/78 marketing season. 1/ In the 1979/80 marketirLg season, the price is Tsh 5.50 and in the 1980/81 season will rise to Tsh 6.50. For flowers of higher pyrethrin content, the rise has been even greater. At current prices, pyrethrum is attractive to smallholders, and prices paid to producers for dried flowers are expected to remain at current levels in real terms through 1983/84, and thereafter, reflecting world market trends, to decline in real terms (para. 40). To also give TPB adequate margins, producer prices would need to fall by 2% per year in real terms and would! then stabilize in 1988/89 at levels equivalent to about 90% of present producer prices. Analysis of farmer returns indicates that pyrethrum production would remain attractive even at these reduced levels of producer prices. Also, production of dried flowers is expected to increase (see para. 41). In order to maintain pyrethrum producer incenti-ves the Government of Tanzania would continue to review and adjust producer prices annually taking into account the export price of pyrethrum, TPB's costs for its operations and the producer prices of other crops (ref. Section 3.07 of the draft Development Credit Agreement). 40. Supply of pyrethrum depends inter alia on climatic factors, and on changes in producer price policies. Pyrethroids, on the other hand, are in stable supply and pyrethrum supply instability, therefore, often forces insec- ticide manufactures to substitute pyrethroids in periods of short pyrethrum supply; these substitutions are not always reversed when pyrethrum supply increases. However, with the rising costs of oil prices, the costs of produc- tion of pyrethroids are going up since they are petro-chemical based compounds and raw materials account for 80% of production costs. This makes pyrethrum more attractive. Pyrethrum also benefits from tight regulation of insecticide 1/ TPD marketing seasons run from July 1 - June 30. - 15 - IV. THE PROJECT 46. A Staff Appraisal Report entitled "Tanzania Pyrethrum Project" (No. 2749b-TA) is being circulated separately. The Project was initially prepared by the Government of Tanzania with assistance from the Bank's Regional Mission in East Africa, as part of the National Agricultural Devel- opment Program (NADP), which was appraised in June 1977. While a decision was made at that time to divide the NADP into a number of projects, it was not possible to complete the appraisal of the then proposed pyrethrum project. After detailed reviews by consultants of various aspects of the Project, preparation was completed in February 1979 and the Project was appraised in April/May 1979. Negotiations were held in Washington in February 1980. The Government Delegation was headed by Dr. S.A. Madallali, Principal Secretary, Ministry of Agriculture. A Credit and Project Summary is at the front of this report and a Supplementary Project Data Sheet is in Annex III. Project Area 47. The Project would be implemented in the pyrethrum growing areas of the Iringa and Mbeya Regions of southern Tanzania (Map IBRD-14436). These areas range from 1,700 m to 2,700 m in altitude, with annual rainfall of 1,000-1,800 m. Typical pyrethrum-growing farms range from about 1.4 ha - 2.6 ha in different parts of the project area. In addition to pyrethrum, maize is widely planted, while wheat, peas, Irish potatoes, beans and sun- flower are also grown. 48. Although Mbeya and Iringa are, overall, among the wealthier regions of Tanzania, the pyrethrum growing regions are relatively poor because of their isolation and limited physical resources. The average annual per capita income (including subsistence) of pyrethrum-growing families is estimated at Tsh 650 (US$80) in 1979 prices. The absolute rural poverty level in Tanzania is put at about US$105 (in 1979 prices) so that the majority of pyrethrum- growing families (probably about 85%) have incomes below the absolute poverty line. General Description 49. The Project would, over a five-year period, aim to raise the cash incomes of smallholder pyrethrum growers in the highlands of Mbeya and Iringa Regions by assisting them to expand their output of dried flowers through the provision of planting material and improved research, extension, marketing and road transport services. Specifically, the Project would provide for: (a) the expansion of smallholder production through the production and distribution of planting material, improved pest control, the expansion of TPB's field staff, the improvement of drying techniques, the construction of new TPB market centers/stores and the expansion of TPB's transport fleet; - 16 - (b) the strengthening of UAC's pyrethrum research program through the construction and equipping of additional laboratory facilities, the funding of additional research staff and research operations, and the training of staff; (c) the strengthening of TPB's operations through the provision of long-term and short-term technical assistance and staff training, the constrtuction of new office accommodation for TPB and the provision of vehicles for TPB headquarters staff; (d) the improvement and maintenance of feeder roads in pyrethrum areas through the establishment and staffing of a Road Improvement and Maintenance Unit (RIMU) and the financing of the costs of RIMU's operations. Detailed Features (a) Smallholder production program 50. Improved planting material would be multiplied initially at ten bulking centers. The three existing bulking centers in Mbeya Region and the three in Iringa Region would be expanded and four new centers established in Iringa Region. The output of these bulking centers would be further multiplied at small village nurseries located close to villages where planting material is required. The resultant planting material would be distributed to farmers free of charge (see para. 36) in order to ensure that farmers do not continue to replant using their existing inferior material. TPB would continue to produce and distribute improved planting material after the end of the ProJect disbursement period (ref. Section 2.04 of the draft Project Agreement TPB). 51. During the first three project years, while production of improved planting material is building up, the production from seed and distribution to farmers of unimproved planting material would be financed. This would meet current needs for planting material in areas where it is in short supply. During the three years of this activity seedlings sufficient for 1,600 ha would be produced in village nurseries located close to the point of demand. This unimproved planting material would also be made available to farmers free of charge. As a result of this program, it is expected that the number of pyrethrum growers would be increased by 4,000. 52. To improve pest control, one hundred knapsack sprayers and a supply of insecticide would be held by TPB staff in areas vulnerable to 'thrips,' an L.tIestation which occurs sporadically in lower, warmer areas. Its incidence is insufficient to make routine spraying economic, but it can cause serious damage and spread rapidly if not controlled. The sprayers would be lent to farmers free of charge when neecded; however, the farmers would pay for the cost of the insecticides used. 53. Incremental TPB field staff. At present, only four of TPB's APOs (see para. 36) are fully trained to certificate level. Twelve incremental - 17 - certificate level staff and two diplomates would be employed by TPB in the first project year and a further four certificate-level staff in the second project year to enable TPB to supervise planting material production and distribution. This would still leave the level of extension service to pyrethrum growers less intensive than desirable. In view of that, Kilimo, TPB and the Mbeya and Iringa Regional Authorities would jointly review and discuss with the Association not later than June 30, 1982 the adequacy of extension services in the Project area, and if necessary, proposals for the improvement of such services (ref. Section 3.08 of the draft Development Credit Agreement). 54. Flower drying techniques. Present practices used for flower-drying in the Project area (sun drying, barn drying and artificial drying in small portable driers) are unsatisfactory since a considerable proportion of pyrethrum is lost with all these techniques. Under the Project three experts (a drying specialist, an economist and a draughtman) would be employed under terms and conditions acceptable to the Association (ref. Section 2.02(e) of the draft Project Agreement TPB) for a total of ten months to draw up proposals for the implementation of improved drying techniques for the various climatic zones of the Project area, and Tsh 2 million (US$250,000) would be provided under the Project to implement their recommendations. Disbursements of funds for the improvement of drying facilities would be made only after agreement has been reached between the Association and TPB on the detailed proposals for the implementation of the experts' recommendations (ref. Schedule 1 para 4(c) of the draft Development Credit Agreement). 55. TPB buying centers/stores. The present number, capacity and condi- tions of TPB's buying centers/stores are inadequate, leading to some deteriora- tion and spoilage of dried flowers, especially during the rainy season yhen the collection can be delayed. Stores (90 m in size, except for one 175 m store) would therefore be constructed during the first three years of the Project in twelve existing locations where facilities are inadequate, and in two new locations. 56. Transport. Twelve 7-ton trucks would be provided to TPB for the transport of dried flowers from TPB buying centers to its main stores. These trucks would have specially-constructed high-sided bodies, since pyrethrum flowers are bulky in relation to weight. Such trucks would be too specialized to be attractive investments either for private truckers or regional trucking companies. In addition, five four-wheel-drive vehicles and about 22 motor- cycles would be provided to be used for the collection from pyrethrum pro- ducing villages inaccessible to trucks and to improve the mobility of TPB's field staff. The motorcycles would be purchased by field staff on a credit basis from TPB, which would pay staff monthly operating allowances (ref. Section 2.05 of the draft Project Agreement TPB). (b) Pyrethrum Research Program 57. The present pyrethrum research program conducted by UAC is under- staffed, short of equipment and operating funds. It would be expanded and - 18 - strengthened under the Project; a full-time research officer would be recruited and a unit for the tissue-culture of plant material established, staffed and operated. A further three research off-stations besides the existing three would be set up and staffed to enable pyrethrum research trials to be carried out under the range of conditions in the Project area. In addition, a unit would be set up and staffed at the Mafinga plant to provide for the rapid analysis and feedback to research staff of the pyrethrum content of research planting material. Funds wouldl be provided for the training of Tanzanian research staff, for UAC to enable it to obtain long-term research support from an institution, probably a university with expertise in tissue-culture technique and for interchange cf information and planting material between UAC and other international pyrethrum research centers. Housing and transport would be provided for incremental staff, and the operating costs of the expanded research program would be met under the Project. The Government would continue, after the completion of disbursements under the Credit, to provide adequate funds for the continued operation of the expanded research program (ref. Section 4.03 of the draft Development Credit Agreement). (c) Strengthening of TPB 58. TPB's responsibilities have grown over the past few years; its capac. y to effectively deliver these would be strengthened under the Project. Three key staff would be recruited by TPB: a Financial Controller, a Planning and Production Agronomist to have responsibility, under the TPB Planning and Production Manager, for planning of the smallholder component, and a Field Agronomist, who would assist the TPB Iringa and Mbeya Regional Managers with day-to-day implementation. In addition, a Transport Officer, a Cost Accoun- tant, an Internal Auditor, a Planning Officer, a Statistician/Evaluation Officer and a Procurement Officer would be locally recruited and financed under the Project. A total of 6 months of short-term consultancies would also be provided for an improved transport management system for TPB to be formulated by the National Institute of Productivity in Dar es Salaam. Completion of this latter study, and agreement between TPB and the Association on implementation of its recommendations, would be a condition of disbursement against the funds allocated for the trucks, four-wheel-drive vehicles and motorcycles to be purchased by TPB (ref. Schedule 1 para. 4 of the draft Development Credit Agreement). Funds would be provided for the training of TPB's field and headquarters staff either locally or abroad. 59. A new TPB head office (of 1150 m ) would be constructed in Iringa; the present headquarters in Dar es Salaam is inadequate and too far from the growing areas. A new Iringa regional office in Njombe, a new Mbeya regiondl office in Nbeya town (both of 190 m ) and a new district office (100 m ) in Makete would be constructed. In view of the chronic housing shortage, a total of ten senior staff houses, fourteen middle-level staff houses and one junior staff house would be constructed. The Government would assist TPB as necessary to acquire the sites for these houses and offices (see also para. 67; ref. Section 3.11 of the draft Development Credit Agreement). I - 19 - (d) Road Improvement and Maintenance 60. The Project would finance the improvement and maintenance of about 200 km of selected feeder roads in the Project area; these roads were selected by the Government following a survey of over 400 km of roads. Criteria for inclusion in the program were the present road condition, the volume of pyrethrum traffic carried and the economic rate of return for each road. The roads included are almost equally divided between Iringa and Mbeya regions. The roads would be improved to standards which would permit all weather access by 7-ton trucks. It is expected that the road component would result in a 10% saving in pyrethrum content of flowers being transported over these improved roads. 61. The Road Improvement and Maintenance Unit (RIMU) would be established under the Project not later thati March 31, 1981. RIMU would carry out the road improvement program over a three year period (beginning in year two) by force account under the administrative control of MOW (ref. Section 3.03 of the draft Development Credit Agreement). During this period the RIMU would improve the selected roads and would also maintain the roads it has improved. The Project therefore would cover maintenance costs (approximately 10% of the road component) due to the difficulty of attempting to separate improvement and maintenance costs incurred by a unit set up to do both. Equipment and spare parts for the RIMU would be procured and housing, office and workshop accommodation constructed. A Roads Engineer, a Construction Supervisor and a Mechanical Supervisor would be recruited to manage the RIMU, which would also employ about 135 local staff. The RIMU would be based in Mbeya, the major town most convenient to its operations. The Project would finance the costs of RIMU's operations, including the salaries, wages and materials, such as cement, steel, lumber, tires, fuel oil and lubricants. 62. Other methods of implementing the proposed road improvement and maintenance component were explored during Project preparation and appraisal. In particular, it was decided that the regional Works Divisions in Mbeya and Iringa would not be able to handle the responsibility for the next few years. However, by the end of the road construction period they would have bene- fitted from considerable technical assistance from NORAD and the EDF. The future of the RIMU, the use of its equipment and the responsibility for the maintenance of the Project roads would therefore be determined towards the end of the Project period (ref. Sections 3.06 and 4.02 of the draft Development Credit Agreement). The Government would budget adequate funds for the mainte- nance, during the Project period, of all main and local main roads used for pyrethrum transport, and after the construction period for the maintenance of Project roads (ref. Sections 3.05 and 4.02 of the draft Development Credit Agreement). Project Costs and Financing 63. The total costs of the Project would be Tsh 109.4 million (US$13.2 million), of which US$7.8 million (60%) represents the foreign exchange costs. These costs include about Tsh 4.0 million (US$0.5 million) of taxes - 20 - and duties. Physical contingencies have been included at a rate of 20% on the costs of work and equipment for the research component and at a rate of 10% on all other costs except the lump sum for improved dryers. Price contin- gencies total 26% of Project base line costs. Included also are a total of 30 years of long-term technical assistance (US$70,000/year) and 20 months of short-term consultancy services (US$9,000/month), bringing the total to US$2.4 million. Details of Project costs are included in the credit and project summary. The proposed IDA Credit of US$10.0 million would finance about 79% of total Project costs - all the foreign exchange costs and 44% of local costs. The Government of Tanzania would provide the remaining US$3.2 million (US$2.7 million net of taxes and duties). 64. Part of the Credit woul,d be passed on by the Government to TPB in the Eorm of equity for the financing of the smallholder production component; the pyrethrum research program would be financed on a grant basis, and funds for the strengthening of TPB's operational capacity would be on-lent by the Government to TPB (see also para. 1). The division of funds between equity and loan for TPB is in accordance with the Government's policy that "non- commercial" parastatal investments be financed by grants or equity while 'commercial" investments, which are expected to generate a financial rate of return to the parastatal (for TPB see para. 43), should be financed by loans. Signing of a subsidiary loan agreement between the Government of Tanzania and TPB would be a condition of Credit effectiveness (ref. Section 6.01 of the draft Development Credit Agreement). Procurement and Disbursements 65. Vehicles, road equipment and associated spare parts financed under the Project would be bulked as far as possible and orders of US$100,000 and above would be procured on the basis of international competitive bidding in acc6rdance with Bank Group guidelines (ref. Schedule 3 Part A para. 3 of the draft Development Credit Agreement). In the evaluation of bids, qualified domestic manufacturers would be accorded a preference of 15% or the existing rate of duty, whichever is lower. Procurement of vehicles and road equipment which could not be bulked in packages of US$100,000 equivalent would be procured in accordance with the Borrower's competitive bidding procedures which are acceptable to the Association provided that the aggregate amounts of such purchases do not exceed US$300,000 equivalent (ref. Schedule 3 Part C para. 1 of the draft Development Credit Agreement). Tools, sprayers, in- secticides, fertilizers and nematocides for the smallholder production component, and tires, fuel, oils and other materials and supplies for the road component would be bulked to the maximum extent possible and also procured in accordance with the Borrower's competitive bidding procedures. Civil works contracts for the construction of buying centers/stores, offices, workshops, laboratory facilities and staff housing would be too small and scattered to attract international interest; procurement would therefore be by contracts awarded following locally advertised competitive bidding; foreign firms would be entitled to compete (ref. Schedule 3 Part C of the draft Development Credit Agreement). - 21 - 66. Disbursements would be on the basis of 100% of the foreign expend- tures and 85% of local expenditures on vehicles, road equipment and spare parts; 95% of the costs of construction of offices, houses, laboratory facili- ties, buying centers/stores and workshop; 100% of foreign expenditures for drying facilities; 100% of foreign expenditures and 85% of local expenditures on internationally-recruited staff, consultants and training; 85% of salaries of incremental TPB and UAC staff; and 85% of the local costs of operation (other than internationally-recruited staff costs) of the RIMU (ref. Schedule 1 of the draft Development Credit Agreement). All disbursements would be against contracts or on the basis of certificates of expenditure. Expenditures not exceeding the equivalent of US$140,000 for consultant services and the transport management study incurred after February 15, 1980 would be financed retroactively under the Credit (ref. Schedule 1, para. 4(b) of the draft Development Credit Agreement). Project Implementation 67. TPB, as strengthened under the Project, would have responsibility for implementation of the smallholder production component. UAC would have responsibility for carrying out the expanded research program, and the MOW would provide administrative and technical support to the RIMU which would implement the road component. The three institutions would carry out the Project in accordance with detailed annual work plans, which would be sent to the Association for review (ref. Sections 3.04 of the draft Development Credit Agreement, 2.03 of the draft Project Agreement TPB and 2.03 of the draft Project Agreement UAC). The Government would assist TPB, UAC and RIMU as necessary to acquire the sites for the staff houses and offices to be constructed under the Project (ref. Section 3.11 of the draft Development Credit Agreement). 68. - The Association would be consulted on the qualifications and exper- ience of candidates for the posts of Financial Controller, Planning and Production Agronomist, Field Agronomist, Research Officer, Roads Engineer, Construction Supervisor and Mechanical Supervisor. The experts, consultants and staff financed under the Project would be employed under terms and condi- tions satisfactory to the Association. The appointment of the Financial Controller would be a condition of credit effectiveness; the Research Officer, the Planning and Production Agronomist and the Field Agronomist would be appointed no later than September 30, 1980; the Road Engineer, Mechanical Superintendent and Construction Supervisor would be appointed no later than March 31, 1981. The positions of Planning and Production Manager, Iringa Regional Manager and Mbeya Regional Manager would continue to be filled at all times by suitably qualified staff (ref. Section 3.04 of the draft Project Agreement TPB). Accounts, Auditing, MonitorinR and Reporting 69. Separate accounts relating to expenditures under the Project would be kept by TPB, UAC and RIMU. These accounts would be audited by independent auditors acceptable to the Association (ref. Sections 4.01 of the draft Development Credit Agreement, 4.01 of the draft Project Agreement TPB and 4.01 of the draft Project Agreement UAC), and submitted within six months of - 22 - the end of each financial year. The auditors would specifically review and comment on the procedures used for control of disbursements against certifi- cates of expenditure. By August 31, 1981 TPB would, through the incremental staff financed under the Project (see para. 58), have up-dated its accounts and began the implementation of improved financial systems. The accounts of the UAC are currently up-to-date. 70. The progress of Project: implementation would be monitored closely by the Planning and Production Manager of TPB, who would submit detailed quarterly reports of physical implementation and the use of funds to the Executive Officer of TPB, the Director of Roads and Aerodromes (MOW), the Managing Director of UAC and the Principal Secretary of Kilimo, and to the Association. Reports on the progress of the research and road components would be made available to TPB by the Research Officer and the Roads Engineer, respectively. Within six months of the completion of disbursements, TPB would prepare and submit to the Association a Project Completion Report, analyzing the implementation of the Project and its impact in relation to its objectives (ref. Section 3.10 of the draft Development Credit Agreement). Project Justification 71. The proposed Project aims at raising farm incomes by about 17% to almost Tsh 3,000 (US$360) per family. These direct benefits from the Project would accrue to about 37,000 pyrethrum producing families (about 200,000 individuals) about 85% of whom are estimated to have incomes below the absolute poverty level. The Project is further expected to result in an annual incremental production of 37 m tons of extract and 424 m tons of marc by 1984/85 (the last year of disbursements) with an export value of Tsh 13.7 million (at January 1980 prices). At full development (1989/90), annual incremental production is expected to be worth about Tsh 27 million (in 1980 prices). 72. The Project would have a marginally positive effect on TPB's finan- cial position. With the Project, TPB's projected income statements show that, while TPB would make losses up to FY83, thereafter it would make positive after-tax profits ranging from 5% to 10% of net worth. Its long term debt/net worth ratio would reach a peak of 1.2:1 in FY82 and 83 and decline thereafter as TPB repays all its long-term debt by FY90. TPB's overdraft would be eliminated by FY90. TPB's projected cash flow indicates that TPB would experience a consistently positive cash inflow, over the period a cumulative net cash inflcow of Tsh 21.5 million. Overall, TPB's financial prospects would be satisfactory. The financial rate of return on TPB investments (in constant 1980 prices) is estimated at 8% and the pre-tax rate of return on equity at 9%. Ihe financial rate of return is acceptable and the rate of return on equity is satisfactory. The Project would have a strongly positive effect on the Government foreign exchange flows, but would require net continuing Government expenditures for road maintenance and for continuation of the expanded research program. - 23 - Economic Analysis and Risks 73. The major quantifiable benefits of the Project would be the in- cremental foreign exchange earnings from extract and marc exports, and road user cost savings resulting from the road component. The Project is also expected to generate unquantifiable benefits resulting from improved flower drying, better planting material produced by the research program and the TPB better able to service pyrethrum growers. The overall economic rate of return of the project is estimated at 17%. The smallholder production program, together with the costs of strengthening TPB, has a rate of return estimated at 18%, while the road component has a rate of return of about 11%. The rate of return for the project is relatively insensitive to changes in costs or benefits. A 10% reduction in benefits or increase in costs would reduce the rate of return to about 15%, and to about 12% if both events would occur simultaneously. 83% of project costs have been included in the economic analysis. 74. The Project is not expected to have any undesirable environmental effects. However, a major risk faced by the project would be a future collapse of pyrethrum export prices as a result of the development of new substitutes, since the existing pyrethroids cannot match natural pyrethrins in terms of knock-down, kill or flushing-out effect. Also, current research is aimed mostly towards developing agricultural chemicals which would not compete with pyrethrum. Finally, the cost of licensing new insecticides protects pyrethrum's market position. A further major risk is that implemen- tation would proceed at a slower pace than anticipated, as a result of insti- tutional deficiencies within TPB, RIMU or UAC. This risk has been minimized by inclusion of substantial amounts of technical assistance for the agencies involved. Analysis also indicates that the rate of return would remain acceptable even if expected benefits are lagged by two years. PART V. LEGAL INSTRUMENTS AND AUTHORITY 75. The draft Development Credit Agreement between the United Republic of Tanzania and the International Development Association, the draft Project Agreements between IDA and TPB, and between IDA and the UAC and the Recommenda- tion of the Committee provided for in Article V, Section l(d) of the Articles of Agreement are being distributed to the Executive Directors separately. 76. Annex III contains special features of the draft Development Credit and the Project Agreements. Additional conditions of credit effectiveness are: (1) that a subsidiary loan agreement satisfactory to the Association, shall have been signed between the Government of Tanzania and the Tanganyika Pyrethrum Board and (2) that a financial controller with appropriate qualifi- cations and experience shall have been appointed after consultation with the Association (ref. Section 6.01 of the draft Development Credit Agreement). Conditions precedent to the disbursement of funds allocated for improved drying facilities and vehicles would be that agreement has been reached - 24 - between the Association and TPB on the implementation of the experts' recom- mendations on improved drying facilities and on a study on TPB's transport management system, respectively (ref. Schedule 1 para. 4(a) (B and C) of the draft Development Credit Agreement). 77. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association. PART VI - RECONMENDATION 78. I recommend that the Executive Directors approve the proposed Credit. Robert S. McNamara President Attachments Washington, D.C. March 31, 1980 -25- -Jfni pace . of 6 CASLE 3A .ANlZALA - SOCIAL 119tCATORS DATA SHEET TANZANCIA2E GOUS 1AO..USCI.E 4121A -kAD 7AtEA (-XOUSASC SQ. KM.) 4- OST 3ZCz2C ESTtIXATI) mOCAL 945. SAME SAKE 57t dIG WR;ICULIUJRAL 510.1 MOST ICEIC GZCCAPSIC 2ClOC L!4CoKE 1960 /b 1970 Lb ESCIMATE b &0ION _c GtOU? ld 2101P /t c:ir 'U CAP?'A (CS$) 70.0 120.0 230.3 306.1 209.6 -67.5 ENElCY CONS-S:yC0N ?ER cUAtPA I.L.GOaM3S GF COAL CUtVhLNC1) 4L.0 62.0 6d.0 80.6 83.9 262.1 ?O?3tATIO AND TtTAL. STATIStICS PO?LIO8, ALD-St.AA (h2.L-ONS) :0.2 13.3 16.4 318A POPULATtON (7PCIEIT 01 TOTAL) 4.8 6.9 9.2. 17.1 L6.2 24.6 POPULAtIOKN POJEC=tONS POPULATON M YL'R ZOOO (MILLIONS) 32.0 STATIONARY POPFAT1ION (MILLIONS) 94.0 TEAR STATIONARY ?PO0LATION LS UL&CIED 2145 POPULACTION DENIS ITT ?ER SQ. cm. 11.0 14.0 17.0 18.4 49.4 45.3 ?ER sQ. iQ. ACtCECL-URAJ LAND 21.0 Z6.0 32.0 50.8 252.0 149.0 POPULATION ACE STSUCTZ (PERCENT) 0-L4 RS. 46.. 46.5 46.0 44.1 43.1 45.2 15-64 (15. 51.3 51.1 51.0 5Z.9 53.2 51.9 S5 YTS. A2X ABOVt 2.6 2.4 3.0 2.8 3.0 2.8 POPUlLATION GROW RT (PEKC7 ) TOTAL 2.2 2.7 3.0 2.7 2.4 2.7 U&.AN 5.0 6.3 8.5 5.7 4S6 4.3 :tDE B T!H &An (?tU SOiSAN3) 47.3 47.0 4S.0 46.3 42.4 39.4 CRLE DEATH RATE (1E THOUSAIS) 2Z.0 19.0 16.0 17.2 15.9 11.7 'ROSS REYPOOUCTION RATE .. 3.2 3.2 3.1 2.9 2. 7 FAMILY FlINING ACCEPTORS, ANNUAL (TRCUSANDS) .. .. 93.6 USRS (?ERCENT OF MARI= WOMES) .. .. .. .. 12.2 13.2 'OOD AnD MTlRITTON '-YE OF OOD ?RODUCfTON PM CAPITA (1969-71-100) 95.3 104.0 93.0 94.3 98.2 99.6 .3R CAPLTA SUPPLY O0 CALORIES (YP1CENT or 8EQUIREsaTS) 69.0 88.0 66.0 89.5 93.3 94.7 ?PM52.MS (GRAMS ?2t DAY) 42.0 43.0 47.1 55.8 52.1 S4.3 Of WttCB ASI.XbL AXD PULSE 22.0/h 23.0 20.0 17.9 13.6 17.4 CHILD (A.IC3 -4) MORTALITY BATE 32.0 25.0 20.0 22.3 18.5 11.4 HE.ALTH * .L'EXPECTANCT XT TS (TmAS) 42.0 47.0 51.0 47.0 49.3 54.7 ISNAMY MORATALITY iASE (PR hOUSAYD) *- 155.O 125.0 .. 105.4 68.1 *CC_SS tO SAFE WATSE (YERCEIN o0 ?OPLATION) OTAL '' UL.0 39.0 20.3 26.3 34.4 'J5AM .. Sl.O 88.0 53.9 58.5 57.9 RURAL .. 9.0 36.0 10.1 15.S 211.2 ACCESS 7O E0CRETA DISPOSAL ( PE7C-S- OF POPULATION) ,OTAL .. .. 17.0 22.5 16.0 40.8 MtBAN *.... 1'8 .0 62. 5 65. 1 71.3 RHRAL .. .. 14.0 13.9 3.5 27.7 ?POCLA:-:0 ?P ?ElyS:CA21 ":000.0/t 20677.3 'S490.3/1 17424.7 11396.4 6799.4 POP'IA--GN PER S,-NC ?'SON 3300.0/tt 4641.0 3300.07, .506.6 5552.4 1522.1 POP0'LATION ?ER. &OSPLTAL 3ED .OCAL 575.0/S 684.0 .. 502.3 1411.1 726.5 CPSAN .. .. .. 201.4 197.3 272.7 IUXAI. .. .. .. 1403. 6 2445.9 1404.4 AOCISSIONS ?!R SOS?t-AL 3E3 .. .. .. 23.4 24.8 27.5 HOUSING AVYAGEt SIZE OF SOUSELOLD T,7AL . L 9 .S.4 lOCAL .. AS3.1 . . 4.9 4.9 5.1 IURAL * 4-5/8 5. 3 5.- 5. 5 AVMEAGE a4a1 OF ?!RSONS ?ER ROOM IOTAL .. .. .. 1215AM .. .. .. . .. WiRAL .. .. .. . .. ACCESS TO IL!CRIIC'T "?ERCE47T 3F GWiL-;NGS) O.AL .. .. .. .. 22.5 28.1 235AM .. .. .. .. 17.6 .5.1 1LL .. . .. ~~~~~- . .. 9. 8 -26- Annex I Faso 2 of 6 ,?ABLE 3A TANZANItA - SOCIAL NDIECATORS 0ATA S-dEE- 'rX'2AN2A ~~.tEFRE7LCZ CRCUI7S ( AZ4IST!0 .iE.RAOES -M'OST 1AT RECENT E ZS- 1A C ) - SAllE ShZ NZE IGER .1OST RECEN4T M OCRA?HIC INC0KZ -64COM 1960 lb 1970 lb ESTIMATE /b REC7.0N 'c CRCt;? /4 GOU? /a ED'UCATION ADJl.STt OLI'1ET RATIOS PRfiAY: TOTAL 28.0 38.0 70.0 59.0 63.3 d2.7 MALE 37.0 46.0 79.0 64.2 79.1 87.3 TDMALE 20.0 30.0 60.0 44.2 48.4 75.8 SECONDARY: TOTAL 2.3 3.0 3.0 9.0 16.7 :1.4 LALIE 2.0 4.0 5.0 12.0 22.1 33.0 FEALLE 1.0 2.0 2.0 4.4 10.2 15.S VOCATIONAL EnOL. (' 0Y SEC0KONAIl) 23.0 .. .. 7.0 5.6 9.d 7U? 1L-TEAC5EX RAT,O M-ARL Y 45.0 46.0 50.0 42.2 ^1.0 3'.1 SECONcDA 20.0 19.0 20.0 22.9 21.7 23.4 ADMT LI ZRACI RATE (PERcMT) 9.5/i 2S.11j 66.0 20.8 31.2 54.0 PASSLNGER A-. S ?E. 'MEOUSAND POPULATTON 3.0 2.5 2.8 4.0 2.8 9.3 RADIO R.ECEIVERS PFr THOUSAND ?0PU'LATION 2.0 11.0 19.0 44.3 27.2 76.9 rV RECEIVERS FMll TEOUSA,n POPULATION .. 0.3 .. 2.9 2.4 13.5 NEWSPAPER ("3ArLY CMEtAL INTEREST") CIRCULATION PER rEDUSANO POPULATION 3.0 5.0 4.5 5.6 5.3 18.3 C7NEILA ANNUAL ATTENDANCE PER CAPITA 0.5 .. 0.2 0.4 1.1 2.5 LABOR FORCG' TOTAL LA3CR FORCE (CTOUSAMMS) 4573.0 5769.0 5488.0 F-ALZ (PERCENT) 37.1 36.6 36.3 31.9 24.8 29.2 'CR.CULT! (t1ClSIE) S9.3 86.0 O 4.0 77.6 69.4 62.7 INTUSTR? (PERCENT) 3.8 5.0 6.0 7.9 10.0 11.9 PARTICIPATION RATE (PERCENT) MOTA.L 46.7 43.5 42.2 40.8 36.9 37.1 KALE 56.9 55.7 54.3 53.9 52.4 48.3 FMMALE 32.5 31.5 30.3 25.6 18.0 20.4 ECONOMIC 0EPENDLNCY RAT'O 1.1 1.1 1.2 1.2 1.2 1.4 IYCO1 DISTRI1O'TION ?ERCENT OF PRIVATE LNC0t 9CE IrED aY RlIrHEST 5 PERCENT OF E0USER0LDS .. 33.5 .. .. .. 15.2 RICHEST 20 PECENT OF HOUSEHOLDS .. 63.3 .. .. .. 48.2 LOWEST 20 PERCENT OF EOUSEI'iOLDS .. 2.3 .. .. .. 6.3 LOWEST 40 ?ERCENT OF ROUSEaOLDS .. 7.8 16.3 POVERTY TARGET GROUPS ESTIY.ATED A350LUTE POVEgTYf IYCOME LVEVL (USS PER CAPITA) .AN- .. .. 117.0 187.6 99.2 241.3 iIRAL' .. .. 89.0 96.8 78.9 136.6 ES. IY'AT7D aIA:: vE ?0vZRT1 INCCOM LEV.LL (USS PREi CAPITA) URBSAN .. .. 97.0 138.4 91.9 !79.7 RURAL .. .. 61.0 71.0 54.3 103.7 ESTDIATE7D POP tLA.::N SELOW AB3SOLUTE POVERTY INCOM L'_VEL (PERCENT) UR3AN .. .. 25.0 34.5 46.1 24.8 SiSAL .. .. 85.0 4a.7 53.9 37.; Nor avdalable INo applUcabla. NrOTES a -he ad,.s 4ed group averages for each indicator are populato-'omeighted geozetz-c means, excluding Ohe extreme values o' che lIndicator and che most poquiated counr:y in eacr group. Coverage of zour.n:ies among the indicarors depends on availabili:7 of dara acid is aor unlfor2. /b Unless othervise noted, data for 1960 refer to any Fear betveen 1959 and !961; for '970, ere-een 1969 aod 1971; and for Moor Fecenc Estiaate, zetweer 1974 and 1977. .c -A-frica Souch of Sahar; (d L2vw bncoe (52690 or less Per capita, 1976); ' .nwer Middle 7:corn ';2S1-550 per capi:a, L976); If M.io'and 7anzania; j L967; :h ;961-3; i 962; RFass- cered, nor all practice In the 7ouatry. MSosC R cer s3iaCre Of GNP p.r capira is for L978. auguat ; 979 -27- TTOMo 400!A0 MIA Page 3 of 6 N0.C.- A1t4544 tb. loc ... Ao.o free .otoo e-o0Slly judWo cm. vemt Woo40riltatw ad 0018M.4. It .4so84 '.1. 4. "olo fb.o cbor ' uoy 0. 4 lis?.- -oaal 11y bevalblo o..s.4o of h.4 10.6 of o.a.ertoe104 JftaiOlob o.4 ooo-pa. 0. by difteet oeo.rU1. t. ..14.otiog oh. 4.0... 040 -o.T.eot.o4L.o.. -o 1 -1 o-4.tib.. 00.00 Of besetIlod * 01--0 toad." * d "os00OteI.o s.0101 to), 4.010... boOn.. oniao.. Th looo o0 o,.. fo Web04 104i400" *0 pnopL.tob-bghto4 zooetri. s.e-. to Irdi.g oh. ool osleb of th. 141i-1. O4 Ch. -ta .ogolood *oo L. 1 -h' Co.oo.goo ,.s,0i.s Ch. Iol.o4p.O ...LOyof 4.'. sod I. -a'sIoo . C.ao 1-k.0 'f u, Ioo .oo ., o Cot." Oil1. 01.1p.otolo amd tedleat., of aobee- -. -Ur* -od .oo,o.. 8t.WOs.I hosol. 10.4.. 410- bt11 O04 p..-7 o. 0 low1. poel,ooo-o.t.g400 vome011t wobe 0i14d0f 040 ONCI0IO of 00000 oIobe.. Tn.Total - TO -r4. r-0 -OWTl01t la-d At.. Mt4 IsIad Mt000. 01 . .0 n.1 - 104404 by 0.10 obv.ov_.Ol .6., of h0.p11.L 404. - 5w4t .000 0001000 Of gL0W1tx01 at"owetd tU@tOo1y o,IA&lbe1O Ia 411 aed P01.t0 soor..1 Sad speew.1100 b"ital .0 go- o .raeub"C.o.y for "N.o, 400. 0A.06.0 d kstbtoho. 044.0 or- to b4bL.UOCiC. 0ORC C.- H.OPItlto a......tbL.Me. pa.soaomf.y .0.10.4 by 11. foLIce. at loas0 - P4704010. 1.0*4k11.5... ... 1t4o t1o" p.ly odi.. coxv Or. wet 10410404. Rural .p1.. 54we ?.b 1.01sf. 54114 ad -A1- 179 IPlO 147A (US$) - tOP pot -Pt -4u t at0400 =CTft Moobot polo... 00I ab*UrS Mt p.o.msbtly etaffd. by a k"tyloL. (Weot by a todlol on 00100.1.0.4 by om -"C`Eoolo.0104 .s 4.01A 0.04 I0.1 (1971-f7 4."1*)1 oltOetno. .10.U0. ct.) ohiob off, io-vatleet 000mo"0I0 Ot 5 1960. 1970. 41977 40.Pt-"l. . Ile.4d0.4 rs. of -d..14 foolulCt. 401.10. . 40o.lol Wed - Total tabb, of d4.A4.Lo. or 0t d.koolo INKICT C05sfPr407W PO CIAPT- oo..1 ..Wo. of o,ommealca W.vy f, 40Ipt." AIylio by oS. o.or of W0owL. 104.1 .o liait., P.Cotlslo. 04t.10. a"0 004 wyero-.. 044400 o4 se- tbooo,J .1u.Iootyl 10 bilo.900w` of 0041 oqtW000 Per =0911.. _______ A-rU00 .100 of hoo.hold (oCoog. Per h000..4010 - taoW. 40boo -d4 fto-1- P09114t10 AND? V'ITAL STAflOTICS A hoo...l tILoi.Co. of A &Trop of 1o4Aellooo h.4 B.C.0 11,10 4-41100 Totlro1..o. 1-00 (lIot -A. of 211y I.- If .ot AN1bo.s C4.1' 010 Neal.. A 0g,or 10400 Oy 0- Oy W0e 4. 14..d. L.0 00lg r too_ 4po oot.o;190 40 .od 197 00-0 t40 40..00401d tor .00*.01Po.."... SotIotloat .L 441ltlOo Of 400.- 0r4 oootc orot of 000.1) -410o tbo to totl PO.poI- Mid1-YtT. lion; flffn.o d.fiolllo of Orbs" -to toy offoot oOfpt"WliIy A-.!.!o o."Or of ...oo. .Iro .- t.I. ol... 00 r%a.l - Al..gaoo.- dfdt o onea.too oOO o o ...1it. - 14.0. -0.4 tota,Octpto Aaoolo PoT *o. 40. - 1114-yoor popolotlo.POT "-C.T k4Xtmto: (100 'o"C"...) .4.ot,ld part.. Poe So. 04. gart-1ll-9 1.04 - Coto-d - ab.0. f.r Lgl,t ." _oo Coo..tlolos_ lgoot .1001ct 11 1.0 , at. -d P...-41. oo.~~~~~~~~~~~. ~~~~of 0..1l. 5140, 004 10001 d4.111.4. -r.ootilo.1 I1..4or. . .otutgd (65 WeP.oa ott oP.-otagea of .14- ESUCITII4 P.Do.olotood ab(otol oa..0 r. -,hr 1sooo ?Ti-ar snoo - ctotl. ottf_nlo _ Total o.4 ..l eaoTOI000 of .11 Sba. - gru rv.1 of oo104too.-ytpo.ltoofr10-0 :.pao-v ioa Ao Poeooo- *o 0-9,1. primotiy achool-not 1%148-0. ..4 1970-75. poporotloo; ooo.olly 10,. blT..o -1p.. . Ch,ooo fr. Crolo b,00h rotb (C.r tbo-.-,) - A-01 1100 4i,04. pot tho.o..4 of ti180oo.t 1-.h40. of pT0.tOey 04.catl-0 00 00001r10. 110h otipOla ..- .11-hoa popollIool oo-01 r1010olI& *OTosof abd41040 1960 004 1.1C00 -C.ollt 007 eaced 100 p-zota 0104. -n p.p11. ... 4.1.0-I 1170 toO 110.-poo o000040 004144I1 1975 tot -Ctweet4. oCtmot.. W.b.o the offial cMI .t4 45.. =ob Ion oe(ot1300)- 0.14.10jTt0fha f.4 Oocor v 1h001 - 000.1. -Ao fn1. - Coo... l oO .-4,; a..,V0.." *tod- Iop.P.I.Cloo; .o-y..1 .aeio--Cia -.*oog -dig 10 1960 .00d 1970 110 14010 01 .0 .1 ot Y.o of lppront po-lOrLaacr-00100100 PCo- 0.4 0I.-re., .S tO d414 14 1975 f00.0at r-L b0C001o. 0140 ...o-al -Co.tloa. Of teacher 7100 -%0t00Z10 f or p.pil. Cr,.. roO,oboOlm oat.- AtorogO , 00.:o d4b.oboo A . i.11 boor o.-01ly of 12 to 17 y-. of S0ao; gorO.-psoefloo 00.r00s... tn-roly 10 00? 00.01 oooodmotolo 900114 if h. Oop.rItoao. P---. 0 aolodod. ._Eift,1 f_otilify rat..; oo.olly flo-yea wrg. 04I 1960. oolo'orloo (010 f.co., P0.04t0.01 l.011-041-0 I. 1970. .04 1975. .1.4. 10..1 1.lorOl or lbo pvo-oo. .004 oporolo 144.PoWoo.ly 511091010 f 41ct4-ootrol 4001.. 15004 ft...oo of batlo-al f4All1 Pw11-0o.o4.Lr:To. - prianrY. 00 .5.0.?,ar - 70101 todm: -C& Oo 1. P1.I.go prot.g. pon, o 0000.40 -J.. 0100404 by .0.. of. Itasaro 10 144 10,00- -0b14 Ao of 4414-bo.1100 oa 1-0 .?) . too 41rt-c.1To 04,11 lro,o. (rottet) - Lit-iot. 040010 .4 10 C.0 C.04A -it.) 0 40-11. 10.1 000,1.4od la aeb .40 00r09. a .1045of11.1 Adool pop'lotl4. .Gd 1$ Y0010 0d 0-01. 104, o tol ood.ollo pt 101 (1970-100) -`1.6. So of pot Pojosot 400 (Per10..0 t o.ol.-d o t- aeg.ooo oar 04 t-pri0. -..v00 040 -pit.0 onI PT0o0a o .11 M fod 4110. ioo I... tha .1441 parma.; oo.ld- 540.1.c0, 44.1.. .4 -.1111.17 for.v .s0:aoly of ol-IorlO (pot.-C of rO lt -Cu.Mood too ooilo0. p.rV "o. 01_11010O 009910 14.911,I. 40"1161A inOlC-v"4o 10 VC1 1. 40004r0... I-o (.O.r th-011d po -)rso,.o4 Jo rpobo..1 of ooo a.111, o.s -o,.4 .oj. L. ;otok. 0.1 opl. old aoo.. toad. S.".. ftooITorLA 14-0000.0. .0M1 70010C h-5 b.9OhT.trtoe of v.Alo .00. no J. 4,00-1.i M... It foo toce-sio. -t Io..... .. dit1b.to- oc. to- .f.t; 8.10 10- 000o.0 Year. *7 001 b. isobo .1. -01.,sr. qolonet. 00?o ...Umted bY ?AC 4..4 o physioloo14al 00o4 I" or.- b.411a" .4 111000.. 0*1 ocIo .04 Ch11 E100d4f1a4 .o11boono.. o,r.Cooa. body TVroolot Co thousan boooler1o) - -V r.oU0-* for 010040.01 00 $-.At 0.14400 *40 Mtd so d1410400-0t0.0 poof ...loo. .04 L.10-s.o 10 p.r- p_roolba por 400.00p00 .11. .0.10". .0110.-5d TV 100.10.0 I4tem 0.00for 40080* ora.oo14 1041 tro..d 14 a-r obos C0l1a10of TV 00c0 o 14 offoc,. PotCoojI. oool of 0,0-10(0000 00- 40 - f-U.10 1.14.1 of Par 00.,~ 11 T100100in (Per 000.0d pnov.t-lool - 154.. 14. -0TO0110.1 109114000 .oppl of Io., P., day.A--o toly of food 10" fol 1.o "nn izlly .0.001 t - 141001 -p0 7. lflood be C p01104101 pOhI- 0000. O rollinc fot .11 toont.i.. .01.411.4d by 10A P-%d1. f0. 101100 4.e-d prlo.rly Co rosotI LACtoo. Z~.- 1. -oo1400od t * a .11eaa. of S0 grom of total prot.La po" MsY . 20 01000 40 401"if it Cpor It ... C 00. cu.. tOok Of -01.0. .0 poo, Prot..on, Of .40th 100,S- W0.14 40 .01.1 pr10.0.. 1000".0001 00000 1- 0100o,o*0 4 0- tOo ~.r of ticket. Th.o00o..g4.or.I-00 t4." 10. of 75 Ctin. of total prl.U.a 5 o1 d14 4 70Y.10044 0.010 .0 10 ~ i 4,004 110.aa d .011. 23 too of 10s`1 7701..0 400404 10414 oh. -I p00900.4 by -it.. TAO 1010 It =0 rto-d 14.d 0o0o Pot 10.11. orotolO 0.001, fyo. solOol .04 011.. - POot~~~~~~~~~1... _otly of 1004 D.05.00M 8.11,04 Or. .a10.l..4 po400 1 p0s pot "Y. T0.t1 I.40 fo... (th040.04) - tosoooalto11 00100 per.00 -..110410 0.04 4114 1... 1-0) OstSlov roe.(ocr 040.404) - josl 4.0040 "C1 1040- fot,.. 404 -0MIeyd h.t 000100410 40..0-1-.. seAool.t. ate. D*ti41- 004L 14 4 B.-I I"004 -k .0. Co caild1m I4 chi. o8 400,9. 11=0 L. -01000 or011 . 1 10 0.tlb Peal. YoO.o) - Foa labor fo.. 0prOo.. of 1004.1 104r olo OLO1Tlt og?1,,11'orO loortool~~~~~~~~~L - 44o f.rts I4 14.-10g. f-batT.y, 40.t:10 .0d 11.h10g .Io 090170100041-h (Yrooro - A--Sg. .Nebr Of psoro of 11g. 0 oroot of 101.1 1W.00 forl.. 1004 b0 1C41701 .00I7 ILI0-Year = S.ro. 00410 L. 1960. 1970. .407 000:0011 -cbot ; b140 71..1 14 oOT01O. Lo'mi0140:00144=j 00 1oloMt WV.11 fr.C. (p., th-ood.o - 4A.01 tootb. of 141.01 balo st:o.lort mc.010) - tota.04. .01 (no.. - TotL. -I... *04 Ot 10 Of t00901110000 1100 41410. 10.1. lbOr f.r..... MpotO.o00 of 1401 000010 p000 -10 A.40.. 05 _f.00?000 fooel1s(-001 1. 44roo lN. .- rLO'. .4)ot.l P_rtlaloit0 70100 ref laclIagao-o 6,05.1.1 pOo p1.(oa.o.o.-4tTl)01 .01. 00004 10 reo..tore of Ch. "PopI.C1i .04 1o tlo. .-d.0 *080.007 aep"y (It-1odot troatd .000.45 00004001 00000.104 bet levota doocodeao, ... i - 0*010 of PoPo10tlso r4r 1.1 fd 65 0W .4 06 10 veo-tNa000c0d vare1 00h 00 14.0 fT- P0000004 401040100, 0901400 Lb.0 10cr forts 1. 4.0 go-ot of 1346,ar... .0d OWNAMy -01i0) so petc.tegoo. .0 1401: lopOt; popyo.l.00. 14020 .000 Art hPOts.boy 40.0.100 IA .0 bo" t004Wei"900.10 of :01.:. lco-o(W01 h 0I.4 .04d 1) tooto-l by 01040t 5 -ooO1 Wt.. tfh1at M-Ot to r00,0.1 Utr' -oo blo -C... talt0..01*0 1pot. p0010-.1 2 plortal -4 po.ron of p.110t taply 1401 140 taoo0I 04410ofb. 400.-014 4 d.1 40t MO st of 4o.ols .po04 a dir"Tiooo oo-O,1 port of 140 to in 1014414 04. 14.1.11' 0000to o= ,t.11 01Leto o ooalo :010 -,4*. 004 011-d. .40-1*t0 0001 ocs 1-1o (tUSS -o C-i.)1 - 0044 Mo -rt1- 707.1- Io5o 01PIl 111 040 0 .1 00.04 by AsOctao0.10. Pooory 1010- 1.001 10 Ch.. 10.0 1001 b010000610 010100 4Imnolat P".-E00.g. of Chai0 .. T00c011- MPopCOW.l . OsorC. .1rntio-.l1y . tqio.c14 p10 o*oooci.I 00-fool raqolZoat 10001 Olopotl 4 1414 0"Tosl'M lo daadplepos. 0t14 0? .1140 .1f-ed.bl.. 11000.of W."0. - oor od .0 00..001 by00..40t 070t. too.C .t4r11To00,:on.Iol(0 aoo1. -100o .2* or flOe 04.1 I ol ofola Oo.1.too.101,. p!!I70 10.000 1.. - 1 1-1 41 11$$~ ,Lc 1g. r144 C0.tl? 900,1.110 ror 060110 Popotso41,00 bY -Wfso Of P00t411014 p.r 4.91t. p.T0.-I 10000. of :0to. CC--y. py.l0140 O,*0.1f 104 1lOS 0.04041 004.1 Ma-lOtol 100.1. IoO10oto roou.tl- o100 000r1 1400 10001 (prolln 040.4 ot Prolo.IIo oslo ot 10 -.1.trool 00100 Pt ...10.1 "ro.15, oc ".101110 P00-" *1440...? tO stee-C. P 100.M10 004 social D."4 D01.ioa ZO O... 0. 011.U W Pro)Ol-tos 50p.r.0 rAALAK7A ~~~~~~~~~~~~~~~~~Anoowx I TANZANIA0 Page 4 91 Ieaonsisle tecoteeeao.t Data Sbiest 1 97 7 I_ I_ ~~~~Atuval ;96 97 urvtuluual _Projected A9/r-ge Z kwuOaal ravAt. tl.ttr. Share of 1972 1? 194 17 1976 197? 7 9 1979 1980 1985 1b990 1 972-7 7 1977-85 -98-9 -p A. 93tMOt)NAL ACM)UNTS (0tie121US $ at 1917 Pric.a) 1. clO 2171.9 2466Z2 3004.7 Y119.4 1314.1 3542.4 3714.1 3890.2 4069.7 5105.8 6502.3 5.0 4.7 4.9 100.0 2 (Gatus tree T-enn vf Trade (rl) -161.0 --207.5 -348.9 -345.7 -u9.9 -116.1 -135.2 -174.5 -223.4 -251.8 -270.4 . . . -3.3 3 c -t.s ourts Itues 2612 9 2454.7 2655.8 2773.? 12')4.2 3426.3 3598.9 3715.6 3846.2 4854.1 6223.9 5.6 4.4 5.1 96.7 4. Iupert 1084.7 1010.8 895.4 839.4 751.0 802.4 1063.9 904.8 924.7 1102.8 1330.4 -5.9 4.1 3.8 22.7 5. Eupurts- VaIuae 1054. 7 1004.5 741.3 734.5 824.5 686.3 674.7 700.8 746.4 907.0 1164. 7 -8.2 3.5 5.1 19.4 6. ip-trn - 3 d o-luttd 893.? 003.3 546.5 493.7 681.1 686.3 539.5 526.3 522.9 655.2 906.3 -5.2 -0.6 6.2 19.4 7. Re.r_-e Cap - IT adjusted 191.0 207.5 348.9 345.7 69.9 116.1 524.4 378.5 401.8 447.6 444.2 . . . 3.3 8. 3akt.1l C_s_ptlts Z163.0 1986.3 240,.1 2555.0 2654.9 2986.6 3404. 5 3421.1 3540.6 4371.5 5448.3 6.6 4.9 4.5 84.3 9. Iuust'e"'t 640.9 682.2 755.7 669.3 635.7 671.9 718.9 673.1 7U7.4 930.0 1219.8 1.0 4.2 5.6 19.0 10. N.sIsaul SI I ugs 434.4 464.5 304.1 314.2 676.4 537.1 325.0 412.0 416.6 617.9 951.7 1.1 1.8 9.0 15.2 11. .-.tle Sinugs 449.9 468.4 252.7 210.7 639.3 439.7 194.4 294.6 305.6 482.5 775.6 -0.4 1.2 10.0 12.4 12. COP at atrecet IIS 1564.1 1860.2 2239.1 2564.4 2761.4 3542.4 4335.7 4686.5 5393.1 9941.7 18603.0 11.8 13.8 13.3 0. Sr14:c-lw soiLqrf (Share ef 62P at 1977 Prices)- 1. Islle-ry 5.3 17/5 16.0 15.1 14.4 13.8 13.0 12.7 12.3 12.3 13.2 1.3 3.1 6.4 2. Agritul Cts. 51.1 54.0 46.8 48.L 50.4 51.0 50.8 50.4 50.1 48.3 41.1 4.7 3.8 4.4 3. Serlcuc- 32.7 28.5 37.2 36.4 35.3 35.2 36.2 36.8 37.6 39.3 39.6 6.3 6.0 5.1 C. PR I (S 1. tCspsrt Ylces Izelco 24 4 43.3 64.2 63.6 . /6.7 100.0 91.0 95.9 102.5 142.2 140.8 22.4 4.5 6.0 2. Isijiet iiPole.lY. t.uA 43-- 54.i 111.1 94.4 92.8 106.0 113.8 121.7 146.3 196.6 240.7 18.4 6.8 5.0 3. its o Trade 84.7 80.0 73./ 47.2 82.7 180.0 80.0 75.1 70.1 72.2 76.1 4. CDP OsfloCas (US 60 56.4 70.1 74.5 82.2 t2.1 100.0 116.1 120.5 132.5 194.7 286.1 12.1 8.7 6.7 5. Au...jge XluWhosge [wtt cW/0s0) 7. 143 7.021 7.143 7.414 0.379 8.274 7.689 D. StL.Etct41l IN90A1AtEMS 1972-77 1 978_85 1985-9U 1. IGIIR 4.40 3.93 3.72 2. Ote-set ElautioIty -0.22 0.11 0.77 3. Oseraoi. Uu otutlc lasoAgs Rote 17.2 7.3 11.4 4. Aveagr1e NatluouI Osilgo Rtto 19.0 10.9 13.8 5. PLta,glual NutzPlual S_siegS gLte -17.24 0.27 0.25 6. l..orr,/Cup 29.8 23.2 20.9 7. otec-- -tel,/UP 2.40 18.9 19.4 8. Rususree QAp/GDY 7.8 9.4 8.0 E. pollfl.C P190716'- . Artual ostoal Ert. (NillIs- Tlhtrltlgo) 1965/66 1972/73 1973/74 1974/75 1975/7t 1976/77 1977/78 1978/79 1. C-urettt Seceaun 716 2357 3023 3946 3919 5250 6082 6702 1.1 'I- Rcveauc 602 1927 2510 3161 3302 4644 5317 5721 2. tuce-,t gop-odlture 707 2223 2785 3961 3716 5022 5847 7670 3. Uc -eiutt SacLegs 9 134 238 -15 203 228 235 -969 4. urelgt. Crant- . . 62 214 377 469 626 709 1250 5. Suej,Iaa Acallable for F;loanellug Oelop,"ent oupte-diure .. 196 452 312 672 894 944 291 4. Occelaptuot ElPe-dft.tr 238 956 1642 2225 2253 2763 3585 5057 7. O_seoll DiefIIt . 760 1190 -1863 -1581 -186 -2641 -4776 8. Plcuoclog of thv DI7tlit Octeunal I.esa.a f3 456 467 661 564 777 6bO 1200 Danoeutfe gorrowfoga-: onklet lyatec zeg269 521 934 570 .. 464 3195 (Ither .. 25 202 368 447 .. 1517 581 ] I- 1966 prLica and 1977 Ildex ban. year. 8'AIOA _ co.ral lsverbuaout Jattuary 3, 19b0 Annex I TANZANIA Page 5 of 6 Balance of Payments and I0ternal Assistanice (Mtllion US$) Aetnlal Preliminary Pro,jection 1972 1973 1974 1975 1976 1977 1978 1979 1980 1985 1990 A. Sunanary of Balance of Payments 1. Exports (inel. NFS) 384.3 434.6 476.0 467.0 632.1 686.3 613.9 672.0 765.2 1289.4 2222.0 2. Imports (inel. NFS) 466.1 546.8 779.8 793.8 697.1 802.4 1210.7 1155.3 1353.2 2170.2 3335.5 3. Resource Balance -81.1 -112.2 -303.8 -326.8 -65.0 -116.1 -596.8 -483.3 -588.0 -880.8 -1113.6 4. Net Factor Service income -5.9 7.4 -5.2 -7.3 21.5 -18.7 -24.6 -47.5 -66.5 -137.0 -266.8 1. Net Interest Payments of which: 3.2 11.2 8.9 -3.1 -17.9 -16.4 -15.8 -37.8 -55.9 -119.8 -239.2 (Interest oni Public N & LT Loaas) (-11.1 (-12.5) (-13.6) (-16.2) (-19.5) (-22,1) (-24.7) (-27.8) (-35.0) (-121.8) (-250.2) 2. Direct Investament Income 3. Workers Remittance (Net) -9.1 -18.6 -14.1 -4.2 -3.6 -2.3 -8.8 -9.7 -10.6 -17.1 -27.6 4. Other Factor Service Income (Net) 5. Current ransifers (Net) -4.2 5.0 45.2 92.9 55.4 116.1 175.0 195.0 218.4 384.9 678.3 6. Balance on Current Accounit . -91.9 -114.6 -263.8 -241.2 -31.1 -18.7 -446.4 -335.8 -436.1 -632.8 -702.0 7. Private Direct Investment 0.0 0.0 0.0 0.0 0.0 5.0 5.4 5.7 6.1 8.6 12.0 8. Capital Grants 14.0 18.6 6.5 34.9 2.9 13.9 0.0 0.0 0.0 0.0 0.0 Public M & LT Loans 9. Disbursements 1/ 109.5 113.6 161.3 249.5 122.4 177.8 173.2 210.5 10. Amortization i7 -34.2 -23.7 -18.8 -18.0 -21.9 -26.4 -26.8 -54.8 11. Net Disbursements 1/ 75.3 89.9 142.5 231.5 100.5 151.4 146.4 155.8 12. Use of IMF Resources 0.0 0.0 60.3 25.2 23.7 8.8 17.0 30.0 13. Short-terum Capital Transactions 7.2 -17.9 7.5 -5.1 -38.3 35.1 60.0 120.0 14. Capital 'Iransactions, n.e.i. 54.8 49.0 -47.4 -30.1 -10.8 -26.0 0.0 0.0 15. Change in Reserv.s (- = inicrease) -59.4 -25.0 94:4 -15.2 -46.9 -169.5 229.0 24.3 B. Grants and l.oans Comlittuent 1. Official Grants 2/ 9.8 23.6 51.1 127.8 119.0 130.0 200.0 216.0 2. Public 1 & LT Loans 65.4 107.1 260.4 151.8 194.1 197.3 225.3 269.9 2.1 IBRD - - 65.0 30.0 37.0 53.0 25.0 66.0 2.2 IDA 10.8 22.6 61.2 10,.0 52.0 49.2 73.5 63.0 2.3 Other Multilateral 3.3 1.8 7.1 18.0 10.8 33.5 27.6 18.2 2.4 Governments, of which: 47.1 82.8 127.1 93.7 82.7 61.3 98.3 30.0 Centtrally planned economies 4.9 3.0 76.5 5.4 - - 2.6 - 2.5 Suppliers - - - - - - - 80.0 2.6 Financial Institutions 4.2 - - - 11.7 0.3 - 10.0 2.7 Bolnds 2.8 Public l.oans, n.e.i. 3/- - - - - - - 2.8 3. OLtber M 6 LT Loans (whlere available) 26.4 18.6 5.6 2.9 6.0 - - C. Memorandum Items 1. Grant Element of Total Commitmenlts 49.2 83.4 63.1 56.4 66.6 56.8 45.5 32.8 2 Average Interest 3.6 0.6 2.3 3.0 2.2 3.2 4.5 5.4 3. Average maturity (Years) 28.1 47.8 32.2 31.9 38.8 35.1 32.8 25.5 1/ Includes financing of projected balance of payments deficit (1979-1990) oni blend Bank/IDA terms. 2/ Excludes technical assistance granits. EAIDA 3/ Represents co.wsitments to cover projected balance of paysmeuts deficit. January 2, 1980 Annex I TANZANIA Page 6 of 6 1/ DebtI and Creditworthiness Actual 1972 1973 1974 1975 1976 1977 1978 A. Medium and Long-Term Debt (Disbursed Only) (US $ Million) 1. Total Debt outstaniding (DOD: End of Period) 441.7 557.1 728.3 917.1 1029.2 1123.4 1213.1 2. Including Undisbursed 835.5 987.3 1280.5 1359.0 1555.9 1649.3 1806.4 3. Public Debt Service 43.3 39.3 32.4 34.1 41.6 48.4 49.6 3.1 Interest 11.1 12.3 13.6 16.2 19.5 22.1 24.7 4. Other M & LT Debt Service .. .. .. .. B. Debt Burden 1. Debt Service Ratio 11.3 9.3 6.8 7.3 6.6 7.1 7.8 2. Debt Service/GDP 2.8 2.1 1.4 1.3 1.5 1.4 1.1 3. Public Debt Service/Goversment Revenue 14.7 10.3 6.6 6.4 7.6 7.0 5.8 C. Terms 1. interest on Total DOD/Total DOD 2.5 2.2 1.9 1.8 1.9 2.0 2.0 2. Total Debt Service/Total DOD 9.8 7.1 4.4 3.7 4.0 4.3 4.1 D. Dependency Ration for K & LT Debt 1. Gross Disbursements/bmports (incl. NFlS) 23.5 20.8 20.7 . 31.4 17.6 22.2 14.5 2. Net Transfer/lmports (incl. NFS) 16.2 16.4 8.3 29.2 14.4 4 3. Net TransCer/Gross Disbursements 68.8 79 . * 92.8 82.1 A.M E. Exposure 1. 1BRD Disbursements/Gross Total Disbursewents 16.9 19.1 10.4 21.0 14.0 17.2 17.8 0 2. Banxk Group Disburseiaeats/Gross Total Disburset ents 19.4 21.8 14.0 28.2 37.2 37.8 31.6 3. IBRD DOD/Total DOD 12.2 13.4 12.4 15.4 15.1 16.3 17.3 4. Bank Group DOD/Total DOD 23.1 23.3 21.1 24.2 25.7 29.3 31.3 5. IBBD Debt Service/Total Debt Service 10.2 15.3 20.4 26.4 . 34.1 33.1 40.5 6. Banik Group Debt Service/Total Debt Service 11.1 Ib.3 22.5 28.4 36.5 35.5 43.5 Oulttanding December 31. 1978 Amoutit Percent (US $ Million) F. Ext.rnal Debt (Disbursed Onhly) 1. IB81) 209.9 17.3 2. Bank Group 319.2 31.3 3. Other Multilateral 61.2 5.0 4. Governments 714.1 58.9 of which Centrally Planned Economies 311.3 26.2 5. Suppliers 16.5 1.4 6. Financial Institutions *Ih.8 1.5 7. Bonds 20.3 1.7 8. Public Debt, n.e.i. 1/ 3.1 6.3 9. Total Public N & LT Debt- 1/ 1213.1 100.0 10. Total Public Debt (inel. undisbursed)- 18Oo.4 148.9 C. Debt P'rofile 1. Total Debt Service 1979-83/Total DOD Enid of 1978 60.57. 1/ Includes Tanzania's notional share of 407. of EAC debt. EAIDA 2/ Represents DOD on loans to cover projected balance of payments Lcur it. January 2, 1980 ! - 31 - ANNEX II Page 1 of 17 THE STATUS OF BANK GROUP OPERATIONS IN TANZANIA A. STATEMENT OF BANK LOANS AND IDA CREDITS TO TANZANIA AS OF JANUARY 31, 1980 (US$ million) Amount less cancellation No. Year Borrower Purpose Bank 1/ TW IDA 1/ Undisbursed Five loans and thirteen credits fully disbursed 77.2 91.2 287-TA 1972 Tanzania Smallholder Tea 10.8 1.1 371-TA 1973 Tanzania Fourth Education 10.3 1.8 382-TA 2/ 1973 Tanzania Livestock 18.5 2.4 454-TA 1974 Tanzania Cotton 17.5 9.0 460-TA 1974 Tanzania Tanzania Investment Bank 6.0 0.2 1014-TA 1974 Tanzania Cashewnut 21.0 2.7 495-TA 1974 Tanzania Sites and Services 8.5 2.1 507-TA 1974 Tanzania Highway Maintenance 10.2 3.1 508-TA 1974 Tanzania Rural Development 10.0 5.5 1041-TA 1974 Tanzania Sugar 9.0 0.9 580-TA 1975 Tanzania Dairy 10.0 6.1 1128-TA 1975 Tanzania Textile 15.0 2.3 1172-TA 1975 TIB Tanzania Investment Bank 15.0 1.5 601-TA 1976 Tanzania Technical Assistance 6.0 2.9 606-TA 1976 Tanzania National Maize Program 18.0 10.7 607-TA 1976 Tanzania Fifth Education 11.0 7.1 1306T-TA 1976 Tanzania Power 30.0 11.3 1307-TA 1976 Tanzania Forestry 7.0 4.0 652-TA 1976 Tanzania Fisheries 9.0 7.9 658-TA 1976 Tanzania Tobacco Processing 8.0 1.3 1354-TA 1977 Tanzania Urban Water Supply 15.0 10.S 1385T-TA 1977 Tanzania Morogoro Industrial Complex 11.5 4.3 1386-TA 1977 Tanzania Morogoro Industrial Complex 11.5 4.2 703-TA 3/ 1977 Tanzania Rural Development (Tabora) 7.2 5.7 732-TA 1977 Tanzania Second Sites and Services 12.0 11.4 743-TA 1977 Tanzania Trucking 15.0 11.0 1498-TA 1977 TIB Tanzania Investment Bank 15.0 7.9 801-TA 1978 Tanzania Second Cashewnut 27.5 11.5 802-TA 1978 Tanzania Tobacco Handling -14.0 13.8 803-TA 1978 Tanzania Rural Dev. (Mwanza/Shinyanga) 12.0 11.2 1607-TA 1978 Tanzania Morogoro Textile 25.0 24.9 833-TA 1978 Tanzania Morogoro Textile 20.0 18.7 860-TA 1979 Tanzania Tourism Rehabilitation 14.0 14.0 861-TA 1979 Tanzania Sixth Education 12.0 12.0 875-TA 4/ 1979 Tanzania Mufindi Pulp and Paper 30.0 30.0 1650-TA 4/ 1979 Tanzania Mufindi Pulp and Paper 30.0 30.0 876-TA 4/ 1979 Tanzania Fifth Highway 20.5 20.5 1745-TA 1979 TDFL Tanganyika Development Finance Co., Ltd. 11. 05 11.0 1750-TA 1979 TIB Tanzania Investment Bank 25.O0-/ 25.0 S-24-TA 4/ 1979 Tanzania Dar es Salaam Port Engineering 2.5 2.5 Total 276.7 41.5 431.7 364.3 of which has been repaid 8.2 - 7.6 Total now outstanding 268.5 41.5 424.1 Amount sold 0.1 of which has been repaid 0.1 Total now held by Bank and IDA 1/ 268.5 41.5 424.1 Total undisbursed 125.2 15.6 223.5 364.3 1/ Net of exchange adjustments. 2/ Includes Norwegian participation of $6.2 million of which $5.6 million has been disbursed. 3/ Amount excludes Canadian participation of $4.8 million. 4/ Not yet effective. 5/ Excludes $15.0 million EEC Special Action Credit being administered by IDA. - 32 - ANNEX II Page 2 of 17 B. SUMMARY STATEMENT OF BANK LOAkNS FOR COMMON SERVICES GUARANTEED BY KENYA, TANZANIA AND UGANDA AS OF JANUARY 31, 1980 (US$ million) Loan Amount (less cancellations) No. Year Borrower Purpose Bank 1/ Undisbursed Five loans fully disbursed 93.4 638-EA 1969 EAHC Harbours 35.0 0.5 674-EA 1970 EARC Railways 42.4 0.4 865-EA 1972 EAHC Harbours 26.5 0.9 914-EA 1973 EAPTC Telecommunications 32.5 1.8 1204-EA 1976 EADB Development Finance 15.0 5.9 Total 244.8 9.5 of which has been repaid 52.9 Total now outstanding 191.9 Amount sold 24.4 of which has been repaid 24.4 0.0 Total now held by Bank 1/ 191.9 Total undisbursed 9.5 9.5 1/ Net of exchange adjustments. - 33 - ANNEX II Page 3 of 17 C. PROJECTS IN EXECUTION I/ (AS OF JANUARY 31, 1980) There are currently 37 projects under execution in Tanzania. AGRICULTURAL SECTOR Credit No. 287-TA - Smallholder Tea Project: US$10.8 million Credit of March 3, 1972; Date of Effectiveness - July 26, 1972; Closing Date - December 31, 1980 After initial serious management problems, the Tanzania Tea Authority (TTA) has finally reached a satisfactory level of senior staffing and this has had a clear impact on the working of TTA and resulted in improved control over field activities. Factory engineers have been appointed for all factories. Because of weak extension and poor farm practices in the past, about 1,600 ha of the 9,671 ha planted since 1971 must be infilled or rehabil- itated, and yields have been lower than anticipated. In line with the 1976 survey of the tea industry, additional planting has been carried out and effective rehabilitation and infilling has been achieved except in the Bukoba area. Recommendations of the survey regarding crop yields, husbandry tech- niques, field organization, TTA structure and extension activities are also being implemented. Furthermore, market trends in tea have taken a favorable turn. In general, progress on the project is improving. The closing date has been postponed to allow sufficient time for completion of the Mwakaleli factory. Credit No. 382-TA - Second Livestock Development Project: US$18.5 million Credit of May 23, 1973; Date of Effectiveness - September 28, 1973; Closing Date - December 31, 1980 This project was the subject of an in-depth review in November 1976 and again in January 1979. Although progress has been made in alleviating the financial problems of the meat processing parastatal (TPL), in correcting some of the deficiencies in the livestock marketing parastatal (TLMC), and in adopting some of the decentralized management recommendations in the ranching parastatal (NARCO), TPL will still need to improve its overall efficiency, and NARCO its unsatisfactory financial situation. The most serious issue is the 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution and in particular to report any problems which are being encountered and the action being taken to remedy them. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. - 34 - ANNEX II Page 4 of 17 lack of adequate financial support from the Treasury; this issue was taken up during the last review and the Tanzania Livestock Development Authority (LIDA) is organizing a meeting between NARCO, the Commissioner for Public Investment (CPI) and the Tanzania Rural Development Bank (TRDB) to address the issue of equity contribution. In summary, although progress has been made, major problems remain and will require continued attention. The closing date of the Credit has been postponed by 12 months to December 31, 1980 in order to complete the ranch development program. Credit No. 454-TA - Geita 'Cotton Project: US$17.5 million Credit of January 17, 1974; Date of Effectiveness - April 5, 1974; Closing Date - December 31, 1982 The project continued to show good progress since the appointment in October 1977 of a new Project Manager. However, in view of the failure of the crop technical packages to give economic responses, the project must now be considered to be an infrastructure and adaptive research project rather than an agricultural production project. A major objective is now to develop a more soundly based and productive agricultural strategy. The most signifi- cant progress has been in the trial program with about 50 well distributed and supervised trial sites and improved credit recovery. Recruitment of staff has been more vigorously pursued since the Project Implementation Reviews began. Project problems remaining are the lack of senior staff, the shortage of extension staff, delay in deliveries of some equipment and financing of road construction. The project will continue to be kept under close review. Loan No. 1014-TA - Cashewnut Development Project: US$21.0 million Loan of June 24, 1974; Date of Effectiveness - September 26, 1974; Closing Date - December 31, 1981 Construction of the five factories and ancillary facilities is pro- ceeding well in accordance with the revised completion schedule. Processing plant and machinery has been delivered to two factories, and is under shipment for the remaining three. The project faces problems with regard to expected marketed production reaching potential processing capacity. This continued decline in the marketed production is, however, puzzling in view of the price increase and the attractive returns per labor day. An intensive analysis of the cashewnut production issue is to be carried out by the Government agencies responsible for review of agricultural production in Tanzania. The take over of the industry by the Cashewnut Authority (CATA) and the consolidation of its activities are proceeding; its management has improved since the appointment of a new General Manager last year. - 35 - ANNEX II Page 5 of 17 Credit No. 508-TA - Kigoma Rural Development Project: US$10.0 million Credit of August 21, 1974; Date of Effectiveness - November 20, 1974; Closing Date - December 31, 1980 Progress has been made in improving control of materials flow for civil works, promotion of a coffee production program, labor-intensive road works, project accounting and disbursement performance, and increasing farmer demand for inputs. However, project implementation continues to be slow. Little construction work has taken place over the last five months of wet season agricultural activities. Trials were planted late in two of the three districts due to misallocation of project finance vehicles. Little action has been taken on procurement. As recommended in the mid-term review of this project, agreement has been reached on a number of proposed amend- ments to the legal documents in order to make the project design more flexible. Credit No. 513-TA and Loan No. 1041-TA - Kilombero Sugar Development Project: US$9.0 million Credit and US$9.0 million Loan of September 27, 1974; Date of Effectiveness - February 14, 1975; Closing Date - December 31, 1980 Project work is virtually completed except for purchase of some vehicles and completion of the sugar survey and the training program. In view of this, the closing date has been postponed by 12 months. Kilombero Sugar Company's (KSC) land development on behalf of outgrowers continues and is expected to exceed appraisal estimates due to lower than expected cane yields. A new management advisory agreement for a further two years with emphasis on agriculture will be financed by the Netherlands. Phase III of the Sugar Study has been started and should be completed shortly. With regard to the Sugar Development Corporation's request to Treasury to consider KSC's proposals as to its debt-equity ratio, the Treasury has decided to provide KSC TSh. 100 million as equity and TSh. 100 million as loan from Dutch/Danish sources. The loan will be at an interest rate of 7% p.a. with 30 years repayment including 5 years of grace. The Subsidiary Loan Agreement is under preparation and is expected to be signed by the Treasury shortly. Credit No. 652-TA - Fisheries Development Project: US$9.0 million Credit of July 12, 1976; Date of Effectiveness - October 12, 1976; Closing Date - December 31, 1981 The Project is progressing at a slower pace than anticipated and fishing operations are now expected to begin by early 1980. Eight vessels for the coastal commercial centers are already under construction, and procurement of engines and fishing gear is in progress. Tender documents for the procure- ment of steel boats for the Kigoma Commercial Center are being finalized. The recent outbreaks of cholera at Lake Tanganyika have caused a setback in Project activities on the Lake, particularly the Ujamaa Village Program, and steps have been taken to speed up the identification of suitable villages and the preparation of investment plans. - 36 - ANNEX II Page 6 of 17 Credit No. 606-TA - Naticnal Maize Project: US$18.0 million Credit of January 29, 1976; Date of Effectiveness - May 28, 1976; Closing Date - December 31, 1982 Although the project has made some satisfactory progress with regard to village participation, delivery of inputs and concentration of high poten- tial maize regions, it is beset by a number of problems which must be overcome if the project is to achieve its primary objective. Following a midterm review of the project, the Government submitted in September 1978 draft pro- posal for a three year Intensification Phase in six regions where potential for increasing production exists, extending the project period from July 1979 to June 1982. The project has therefore been redesigned in order to intensify the project activities during the remaining period. The redesign of the project has been agreed upon by the Government, BADEA (the co-financier) and the Association. Credit No. 580-TA - Dairy Development Project: US$10.0 million Credit of August 15, 1975; Date of Effectiveness - November 13, 1975; Closing Date - April 30, 1981 The project status deteriorated during 1978. The large scale para- statal farms have been poorly managed, production is below expectation and financial prospects are dismal. The ujamaa component proceeds slowly and the Tanzania Rural Development Bank is actively investigating alternative means of assisting village milk production and consumption. The foot and mouth disease control investigation has commenced. The project will continue to be kept under close review. Loan No. 1307-TA - Sao Hill Forestry Project: US$7.0 million Loan of July 12, 1976; Date of Effectiveness - October 12, 1976; Closing Date - June 30, 1982 Although the project got off to a slow start, physical progress has now been satisfactory for the past two years. The nurseries are well stocked and maintained, and the current planting program on schedule. Progress on fire protection, road construction and building is satisfactory. Procurement of equipment needed for the next season is, however, delayed and project accounts need updating. These are partly due to staffing problems; the position of financial controller and workshop foreman became vacant as well as the position of assistant project manager and silviculturist/economist. Government is approaching bilateral agencies for recruitment assistance. 37 ANNEX LI Page 7 of 17 Credit No. 658-TA - Tobacco Processing Project: US$8.0 million Credit of September 16, 1976; Date of Effectiveness - February 15, 1977; Closing Date - December 31, 1981 Improvements to the existing line were completed except for instal- lation of the main circuit breaker equipment. Building work at Morogoro is proceeding satisfactorily. TAT/TTPC are preparing a properly coordinated building program to cover the balance of the project, and proposals are awaited from the Treasury rationalizing the financial and functional responsi- bilities of these entities. TAT's financial position is critical due to high bank overdrafts. The Treasury has agreed to reimburse TAT TSh. 29 million representing the local contribution it has spent on the project. In addition, TAT has also claimed TSh. 13 million from the Treasury to meet the cost incurred by them during 1977-78. TTPC's accounts for 1976/77 have been audited and the report is expected shortly. Credit No. 703-TA and Credit No. 703-TA-5 - Tabora Rural Development Project: US$12.0 million Credits 1/ of May 11, 1977; Date of Effectiveness - November 11, 1977; Closing Date - June 30, 1983 The level of regional commitment to the project has been good and overall project performance is satisfactory; disbursements are on schedule. However, some delays have been experienced in the delivery of equipment and vehicles procured under the project, and shortage of trained extension agents in the Region continues to hamper the crop development component. These delays should not be over-emphasized since project management has been effective in getting the project initiated. Credit No. 801-TA - Second Cashewnut Development Project; US$27.5 million Credit of June 14, 1978; Date of Effectiveness - October 2, 1978; Closing Date - December 31, 1984 This credit became effective on October 2, 1978. Project implemen- tation is progressing satisfactorily. Credit No. 802-TA - Tobacco Handling Project: US$14.0 million Credit of June 14, 1978; Date of Effectiveness - January 5, 1979; Closing Date - April 30, 1983 The project has made a slow start. Procurement of vehicles and equipment is also lagging. However, progress on recruitment of technical assistance has been good. The Building Engineer, Financial Systems Develop- ment Assistant and Transport Officer are all in post. Three suitable can- didates have been identified for the five posts of Regional Accountant and advertisement of the other two have been done. 1/ Credit No. 703-TA-5 (US$4.8 million) is financed under the special CIDA arrangement; Credit No. 703-TA is an IDA Credit of US$7.2 million. - 38 - ANNEX II Page 8 of 17 Credit No. 803-TA - Rural Development Project (Mwanza/ Shinyanga): US$12.0 million Credit of June 14, 1978; Date of Effectiveness - March 5, 1979; Closing Date - December 31. 1984 While some of the senior support staff have been recruited, most key posts remain to be filled, and although good progress has been made in the livestock, water resource and forestry components, the expected implementation of an experimental program of agricultural extension has not been initiated. Future supervision missions will pay particular attention to progress made by the agricultural extension staff towards improving the extension system. The effects of the Uganda war are stilL being felt in the project's area causing problems for the supplies situation. EDUCATION SECTOR Credit No. 371-TA - Fourth Education Project: US$10.3 million Credit of April L3, 1973; Date of Effectiveness - July 2, 1973; Closing Dat:e - December 31, 1980 Physical implementation, particularly the execution of civil works, has improved considerably and overall completion of the project has reached 95%. However, to allow sufficient time for completion, the Closing Date has been postponed to December 31, 1980. Total project cost is now estimated at about TSh. 109 million, an increase! of approximately 5% over the appraisal estimate of TSh. 104 million. The Government does not foresee any financial problem in providing the required additional funds. Three Community Education Centers out of eight have started operating programs for village development, education and training for youth and adults. The two Vocational Training Centers are in operation at almost full capacity. The technical assistance and fellowship programs are approaching completion and matching funds dis- bursed. Savings under the technical assistance and fellowship component of the project are estimated at approximately US$1.3 million. Credit No. 607-TA - Fifth Education Project: US$11.0 million Credit of January 29, 1976; Date of Effectiveness - March 23, 1976; Closing Date - June 30, 1982 Progress in physical implementation is satisfactory. Construction of extensions to fifteen secondary schools is progressing well and construc- tion of 1,500 houses for Village Management Technicians, although delayed, shows some improvement. In fact, housing construction is in line with VMT training which will be extended until mid-1980 as a result of the reassignment of over 500 VMTs as Village Managers in January 1978. There are delays in recruitment of experts by UNESCO to assist a secondary school facilities survey and in recruitment of accountancy experts for the National Board of Accountants and Auditors. Implementation of a separate review of accountancy training and a survey of primary schools are progressing slowly. Despite these delays, project completion can be expected by the initial Closing Date of June 30, 1982 and no financial problems are envisaged at present. - 39 - ANNEX II Page 9 of 17 Credit 861-TA - Sixth Education Project - US$12.0 million Credit of January 22, 1979; Date of Effectiveness - June 25, 1979; Closing Date - June 30, 1985 This credit became effective on June 25, 1979. The Ministry of Labor has appointed a representative to the Project Unit and is working with the Ministry of Educatton on a plan for coordinating project implementation. TOURISM SECTOR Credit No. 860-TA - Tourism Rehabilitation Project US$14.0 million Credit of January 22, 1979; Date of Effectiveness - August 24, 1979; Closing Date - June 30, 1983 This credit became effective on August 24, 1979. Project implemen- tation is progressing satisfactorily. Recruitment of project coordinator is being finalized and the consultants for the rehabilitation of project lodges and hotels, have been appointed. TRANSPORTATION SECTOR Credit No. 507-TA - Highway Maintenance Project: US$10.2 million Credit of August 21, 1974; Date of Effectiveness - November 20, 1974; Closing Date - December 31, 1980 After a slow start, project implementation improved and all equip- ment procured through ICB has been delivered. However, rehabilitation, regravelling and routine maintenance activities have been seriously affected by the war in Uganda and by the termination of some expatriate technical assistance. However, it is necessary to recast the project by amending its scope to address the problems which have been encountered in its implementa- tion; these changes will bring the project in line with the Fifth Highway Project. The Closing Date has been postponed to December 31, 1980 to allow for completion of the project and the disbursement. The technical assistance contract with the consulting firm "ORT" expired in November 1979, and the Government is now recruiting individual experts to complete the project. Credit No. 743-TA - Trucking Industry Rehabilitation and Improvement Project: US$15 million Credit of November 3, 1977; Date of Effectiveness - April 3, 1978; Closing Date - June 30, 1983 Implementation planning is progressing well. Initial progress in the recruitment of technical assistance has been good, with 24 people in post or approved out of a total of 29. The project is experiencing some problem with equity contribution for the proposed project transport companies. The Treasury proposed to provide the balance of the equity contribution for - 40 - ANNEX II Page 10 of 17 1979/80. The National Transport Coordination (NTC) has submitted a report to the Treasury regarding the availability and distribution of vehicle spare parts in recent years. NTC has also commissioned a study of the role and objective of the National Institute of Transport. The design of the transport data collection system is progressing well. Credit No. 876-TA - Fifth Highway Project; US$20.5 million Credit of March 2, 1979; Closing Date - December 31, 1984 This Credit is not yet effective. It is a continuation of the Highway Maintenance Project (Credit No. 507-TA) aimed at maintaining the national trunk road system and will draw upon experience gained during the previous project. PORTS SECTOR Credit No. S-24-TA - Dar es Salaam Ports Engineering Project: US$2.5 million Credit of February 27, 1980; Closing Date - June 30, 1980 This Credit is not yet effective. URBAN SECTOR Credit No. 495-TA - National Sites and Services Project; US$8.5 million Credit of July 12, 1974; Date of Effectiveness - October 3, 1974; Closing Date - December 31, 1980 Infrastructure construction has been completed satisfactorily on all project sites. Construction olf health facilities in Dar es Salaam is completed and ready of occupation. Education facilities for the Dar es Salaam sites have been completed; the rest of the community facilities in the project are nearing completion. Progress on the lending program administered by the Tanzania Housing Bank is slow although satisfactory progress is being made in the implementation of the action program to improve it. Total project cost is estimated (at current exchaLnge rates) at US$15.9 million, compared to the appraisal estimate of US$16.7 million. The closing date has been postponed by six months to allow for completion of the remaining construction activities. Credit No. 732-TA - Second National Sites and Services Project: US$12.0 million Credit of November 3, 1977; Date of Effectiveness - April 3, 1978; Closing Date - June 30, 1982 Progress on implementation is satisfactory for the residential com- ponents although overall implementation progress is slow. Preparation of the small scale industry component is also making satisfactory progress. All project staff have now been appointed. The Consultants' report on the Land Rent and Service Charge Study was approved by the Government in January 1978 - 41 - ANNEX II Page 11 of 17 and a pilot test of the new Urban Charge System for cost recovery proposed in the study was carried out in Morogoro. However, progress in the implementa- tion of this system in other areas is slow. Disbursements are substantially behind appraisal estimates. These issues will be reviewed during the next supervision mission. WATER SUPPLY SECTOR Loan No. 1354-TA - Urban Water Supply Project: US$15.0 million Loan of January 5, 1977; Date of Effectiveness - March 2, 1977; Closing Date - June 30, 1981 Of the five main contracts for water supply works in Morogoro, con- tract for exploratory drilling at Mindu Dam site is completed, two contracts for plant (pumping and treatment) are in the stage of final inspection of goods prior to shipment to Tanzania, and two construction contracts were awarded in December 1978 and March 1979. Completion of the water works expansion is expected in February 1981, 21 months behind schedule, but a pilot operation is scheduled to commence in November 1980. Project cost is now estimated at US$27.6 million, 43% over the appraisal estimate of US$19.2 million. In December 1978, the Government approved an increase in its contri- bution to the project to cover the financing gap. Some progress has been made towards creation of a parastatal national urban water supply authority and increase in tariff to maintain their levels in real terms at the level exist- ing in July 1976. Progress in project implementation and the expected large increase in project costs will have to be closely monitored. POWER SECTOR Loan No. 1306-T-TA - Kidatu Hydroelectric Project Phase II; US$30 million Loan on Third Window Terms of August 12, 1976; Date of Effectiveness - March 1, 1977; Closing Date - December 31, 1981 The project is financed by IBRD, SIDA and KfW. All contracts have been awarded. Project construction is on schedule at all sites. TANESCO has obtained approval on its tariff increase. Current estimated project cost is US$97.8 million compared to appraisal estimate of US$89 million, a cost overrun of 28%. This is mainly due to underestimation of the project costs by the engineering consultants. KfW has already increased its contribution to the project and SIDA has indicated that it would be prepared to increase its allocation to cover its proportionate share of the cost overruns. Plans to make any additional contribution by the Bank to bridge the gap is being reviewed. It is expected that US$7.0 million from the EEC Special Action Fund will be allocated to this project. - 42 - ANNEX II Page 12 of 17 INDUSTRIAL SECTOR Credit No. 460-TA - Tanzania Investment Bank Project: US$6.0 million Credit of February 13, 1974; Date of Effective- ness - April 18, 1974; Closing Date - June 30, 1980 This Credit has been fully committed. Because of a reallocation of funds from a subproject previously approved to a new one still under implementation, the credit is still not fully disbursed and the closing date has been postponed to June 30, 1980. Loan No. 1171-TA - Tanzania Investment Bank: US$15.0 million Loan of November 12, 1975; Date of Effectiveness - February 20, 1976; Closing Date - December 31, 1980 This loan is fully committed and disbursements are proceeding satisfactorily. Loan No. 1498-TA - Tanzania Investment Bank: US$15.0 million Loan of December 28, 1977; Date of Effectiveness - April 3, 1978; Closing Date - June 30, 1983 This loan is now fully committed and disbursements are proceeding satisfactorily. Loan No. 1750-TA 1/ - Tanzania Investment Bank: US$25.0 million Loan of August 20, 1979; Date of Effectiveness - February 5, 1980; Closing Date - June 30, 1984 This loan became effective on February 5, 1980. Loan No. 1128-TA - Mwanza. Textile Project: US$15.0 million Loan of June 19, 1975; Date of Effectiveness - October 6, 1975; Closing Date - July 1, 1980 The project provides for expansion of an existing textile mill and is designed to increase annual fabric production capacity by 20 million linear meters. Project implementation performance has been acceptable and all tech- nical installations are now operating satisfactorily. The National Textile Corporation (TEXCO), the holding company for state-owned textile mills, has agreed to institute an immediate action program to improve the operating performance of existing mills. The project was technically completed in October 1978 with a savings of about US$1.7 million. In order to utilize this amount for rehabilitation of the existing facilities, which are essential parts of the project, the Closing Date was postponed by one year to July 1, 1980. 1/ In addition, a US$15.0 million EEC Special Action Credit in support of this project is being administered by IDA. - 43 - ANNEX II Page 13 of 17 Credit No. 601-TA - Technical Assistance Project: US$6.0 million Credit of January 9, 1976; Date of Effectiveness - September 14, 1976; Closing Date - June 30, 1980 Total commitments as of September 30, 1979 were US$4.8 million of which US$4.1 million, US$0.4 million and US$0.3 million were for consultancy services, training and project unit services, respectively. The procedures for processing proposals have been streamlined and it is expected that the pace of commitments and disbursements will be increased. Loan No. 1385-T-TA/Loan No. 1386-TA - Morogoro Industrial Complex: US$11.5 million Loan on Third Window Terms and US$11.5 million Bank loan, both of April 6, 1977; Date of Effectiveness - July 6. 1977; Closing Date - December 31, 1982 Project implementation is proceeding satisfactorily in spite of some initial delays in the appointment of consultants and start-up of pro- curement. Although there will be some delays in the start-up of individual components of the Industrial Complex, completion of the project is still scheduled for July 1982. Revised capital cost estimates are only slightly higher than those contained in the Appraisal Report. Credit No. 833-TA/Loan No. 1607-TA - Morogoro Textile Project: US$20.0 million Credit and US$25.0 million Loan of June 29, 1978; Date of Effectiveness - May 7, 1979; Closing Date - June 30, 1985 This loan and this credit became effective on May 7, 1979. Prep- aration of tender documents are progressing satisfactorily and no delay in project completion is anticipated. Credit No. 875-TA/Loan No. 1650-TA - Mufindi Pulp and Paper Project: US$30.0 million Credit and US$30.0 million Loan of April 6, 1979; Closing Date - December 31, 1983 This loan and this credit are not yet effective. Loan No. 1745-TA - Tanganyika Development Finance Company, Ltd. (TDFL) Project: US$11.0 million Loan of July 27, 1979; Date of Effectiveness - November 1, 1979; Closing Date - December 31, 1983 This loan became effective on November 1, 1979. About 70% of the loan amount has been committed. - 44 - ANNEX II Page 14 of 17 EAST AFRICAN COMMUNITY There are currently five projects in execution in the East African Community. 1/ Loan No. 638-EA - Second Harbours Project: US$35.0 million Loan of August 25, 1969; Date of Effectiveness - December 16, 1969; Closing Date - December 31, 1977 Loan No. 865-EA - Third Harbours Project: US$26.5 million Loan of December 18, 1972; Date of Effectiveness - April 16, 1973; Closing Date - June 30, 1978 The Second Harbours project included financing for five general cargo berths and a single bay tanker terminal for the Port of Dar es Salaam; two general cargo berths and a bulk cement wharf for Mombasa; tugs, lighters, cargo handling equipment, offices, housing and general improvements for both ports. The Third Harbours project included three new deep water berths, modernization of two berths and a lighterage quay, a training school build- ing and central repair area for I)ar es Salaam; modernization of several berths and a lighterage quay, construction of a tug berth, cold storage facilities and a training building in Mombasa and improvement of a lighterage quay in Tanga. Construction of all major project elements has been completed and a joint project completion report was issued in January 1979. Because of shortage of funds under both loans, the following minor project elements have not been submitted for Bank financing: the second phase of modernization of the lighterage quay and a training school for Dar es Salaam; modernization of the lighterage quay and a training school for Mombasa. Locally financed contracts have been awarded for these project elements with the exception of the modernization of the lighterage quay in Mombasa. General cargo throughput has increased above appraisal forecasts for Dar es Salaam, and cargo handling productivity has improved with increasing throughput; however, port labor productivity has stagnated in Mombasa where general cargo throughput has declined considerably. Legislation to establish a Tanzania Harbours Author- ity and a Kenya Ports Authority has been enacted. Management of Ports in 1/ Since October 1, 1977, the East African Community loans (excluding the East African Development Bank) have been disbursed on the basis of separate national gluarantees. The agreed allocation of undisbursed balances for each lcan, as proposed in a report to the Executive Direc- tors dated December 29, 1977 (R77-312) and approved on January 12, 1978, is given in this Annex. The closing date for Loans 638-EA, 674-EA and 865-EA have passed. However, since the amount allocated to and guaran- teed by each Partner State is clearly identified under the terms of the Agreement signed on January 25, 1978 as proposed in the above report (R77-312), we are continuing disbursements. - 45 - ANNEX II Page 15 of 17 both countries is competent. Some US$34.5 million of Loan 638-EA and US$25.6 million of Loan 865-EA has already been disbursed. The agreed allocation of undisbursed funds at October 1, 1977 between the countries concerned is given below: For Loan No. 638-EA (US$ million) Kenya 0.7 Tanzania 0.6 Total 1.3 For Loan No. 865-EA Kenya 1.7 Tanzania 0.3 Total 2.0 Loan No. 674-EA - Third Railways Project: US$42.4 million Loan of May 25, 1970; Date of Effectiveness - October 30, 1970; Closing Date - June 30, 1978 The original purpose of the project was to complete the Railways' 1969-1972 Development Program, including track improvement, procurement of rolling stock and other equipment, and to finance studies of the economic feasibility of certain railway lines and services. The physical execution of the original project has been seriously delayed due to administrative and political problems within the Community. In November 1974, the Executive Directors approved a reallocation of the uncommitted balance of the Loan to be used for consultant services and emergency investments in track material. All three countries have now enacted legislation to establish their own Rail- ways Corporations. The agreed allocation of undisbursed funds at October 1, 1977 among the various countries concerned is given below: $ Million Kenya 2.0 Tanzania 3.8 Uganda 1.9 Total 7.7 On January 12, 1978, the Executive Director approved the utilization of US$1.2 million equivalent to finance the East African Mediation effort. This amount, in addition to US$0.5 million provided by UNDP for this purpose, is expected to cover the total estimated cost of the mediation service. - 46 - ANNEX II Page 16 of 17 Loan No. 914 EA - ThiraL Telecommunications Project: US$32.5 million Loan of June 22, 1973; Date of Effectiveness - September 19, 1973; Closing Date - December 31, 1979 The project included provision for procurement of local telephone exchange equipment, cables and subscriber apparatus, microwave and UHF/VHF systems and multiplex equipment, interurban cables and wires, automatic switching and signalling equipment, telegraph, telex and data equipment, and training. All project items except the microwave radio system have been completed; this system is likely to be completed by mid-1980. The slippage of the project's completion was due to initial delays in procurement caused by staffing and other problems associated with the relocation of headquarters. About US$30.7 million of the loan had been disbursed to date. The agreed allocation of undisbursed funds as at October 1, 1977 among the countries concerned is as follows: $ Million Kenya 2.4 Tanzania 3.5 Uganda 0.1 Total 6.0 Loan No. 1204-EA - East African Development Bank: US$15.0 million Loan of March 1, 1976; Date of Effectiveness - June 7, 1976; Closing Date - March 31, 1980 The environment within the Community has continued to have a nega- tive impact on EADB operations. Level of operations both for appraisal and supervision has been depressed, but there has been some improvement in the state of the portfolio with the arrears affected portfolio falling from 50% as of June 30, 1977 to 43% as of June 30, 1979. Some US$9.1 million of the loan has been disbursed to date, and the uncommitted balance amounts to US$3.0 million. - 47 - ANNEX II Page 17 of 17 D. STATEMENT OF IFC INVESTMENT IN TANZANIA AS OF JANUARY 31, 1980 Fiscal Year Obligor Type of Business Amount in US$ Million Loan Equity Total 1960 and 1964 Kilombero Sugar Company Food Processing 3.96 0.70 4.66 1978 Highland Soap and Soap Manufacture 1.38 0.36 1.74 Allied Products Limited 1979 Metal Products Limited Household Utensils 1.33 0.18 1.51 Total gross commitments 6.67 1.24 7.91 Less cancellations, terminations, repayments and sales 3.96 0.70 4.66 Total commitments now held by IFC 2.71 0.54 3.25 Total Undisbursed 2.71 0.54 3.25 - 48 - ANNEX III Page 1 of 1 TANZANIA PYRETHRUM PROJECT SUPPLEMENTARY PROJECT DATA SHEET I. Timetable of Key Events (a) Time taken to prepare the credit 18 months 1/ (b) Project prepared by Government/RMEA (c) First presented to the Bank May 1977 1/ (d) Appraisal mission April/May 1979 (e) Completion of negotiations February 1980 (f) Estimated date of effectiveness August 1980 II. Special Bank Implementation Akctions None III. Special Conditions 1. Special conditions: (a) Establishment by MOW of a roads improvement and maintenance unit (RIMU) not later than March 31, 1981 which shall carry out the roads component of the Project by force account (para. 61). - (b) Review and discussion with the Association of detailed proposals regarding the responsibility for the maintenance of the Project roads and the future use of the equipment of the RIMU (para. 62). (c) Review and adjustment of pyrethrum producer prices annually taking into account the pyrethrum export prices, TPB's costs of its operations and the producer prices of other crops (para. 39). 1/ See para. 46. - 49 - ANNEX III Page 2 of 2 (d) Review and if necessary improvement of the adequacy of extension staff jointly by Kilimo, TPB and the Mbeya and Iringa Regional Authorities not later than June 30, 1982 (para. 53). 2. Conditions of effectiveness: (a) Signing of a subsidiary loan agreement satisfactory to the Association between the Government of Tanzania and TPB (para. 76). (b) Appointment of a Financial Controller after consultation with the Association (para. 68). 3. Conditions of disbursement: That agreements have been reached between the Association and TPB on the experts' and consultants' recommendations on: (a) improved drying facilities (para. 54), and (b) TPB's transport management (para. 58).