FILEEC PDocufDocument of The World Bank FOR OFFICIAL USE ONLY tNo.P2104-JM REPORT AND RECOMMENDATICIN OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO JAMAICA FOR A FIRST RURAL DEVELOPMENT PROJECT June 8, 1977 This document has a restricted distribution and may be used by recipients only in the performance of their oficial duties. Its contents may not otherwise be disclosed without World Bank authorization. Currency Equivalents Currency Unit = Jamaican Dollar (J$) Basic Rate-/ Special Rate US$.01 = J$.0091 US$.01 = J$.0125 US$1.00 = J$.910 US$1.00 = J$1.25 J4.O1. = US$.011 J$.01 = US$.008 J$1.00 = US$1.100 J$1.00 - US$.80 1/ The Basic Rate is applicable to the import of all essential goods, all Government transactions and all transactions of the bauxite industry. The Basic Rate has been used in calculating Project costs. Government of Jamaica Fiscal Year - April 1 to March 31 Abbreviations ACB = Agricultural Credit Board AMC = Agricultural Marketing Corporating CIDA = Canadian International Development Agency FAO/OP = Food and Agriculture Organization Cooperative Programme IDB = Inter-American Development Bank JDB = Jamaica Development Bank JPSC = Jamaica Public Service Commission LDUC = Land Development and Utilization Commission MOA = Ministry of Agriculture ODM - Ministry of Overseas Development PCB = Peoples Cooperative Bank PLL = Project Land-Lease SSFDP = Self-Supporting Farmer's Development Programme USAID = United States Agency for International Development ZL.c Z?FICIAL USE ONLY JAMAICA - FIRST RURAL DEVELOPMENT PROJECT Loan and Project Summiary Borrower: Jamaica Amount: US$15 million Terms: Payable in 17 years, including three-and-a-half years of grace at 8.2% per annum. Project Description: The proposed project would support the Government's program to strengthen the rural economy and improve the living conditions of the rural population, so as to reduce rural-urban income disparities and curb rural-urban migra- tion. The project would be located principally in the Western Region, which has an especially pronounced poverty problem. It would concentrate on removing key constraints to rural development not covered by other Government programs presently under execution or planned. The por- tion of the project dealing with the reorganization of the Ministry of Agriculture would be national in scope. The project would contain the following principal compo- nents. (a) Support for Ministry_of Agriculture. Reincorporation of most agricultural services under the direct juris- diction of the Ministry; restructuring of the Ministry along functional, as opposed to project lines; and a regionalization of the Ministry's technical services. Project investment would provide for additional facilities required for regionalization, including accommodations for two new regional offices, 30 additional local offices and 40 staff houses for remote areas; 30 four-wheel drive vehicles; and training for Ministry personnel. * (b) Agricultural Settlement, Support of Government's Land Lease Program to reduce underutilization of agricultural land and rural unemployment by the Government's acquiring such underutilized land and leasing it to landleass people and farmers with inadequate land. Project activities would include acquisition of 4,000 acres (in addition to 12,687 acres already purchased); elaboration of detailed physical plans for nine settlement areas; construc- tion of settlement iinfrastructure, including 10 miles This document has a restricted distribution and may be used by recipients only in the performance of theit official duties. Its contents may not otherwise be disclosed without World Bank authorization. - ii - of access roads, 10 miles of village roads, and 40 miles of farm roads and tracks; construction of 820 farmhouses and the corresponding water and electriclty supply systems; selection and settlement of 1,400 families; provision of essential community facil- ities at the settlement sites to accommodate the settlement administration, social services and essential marketing requirements for agricultural inputs and outputs; land development (1,400 acres) and forestation (1,000 acres); and technical assis- tance to implement the settlement component. (c) Regional Infrastructure. Assistance to the Govern- ment's program to improve the economic and social infrastructure in the Western Region. Project activities would include the construction/reconstruc- tion of 70 miles of rural feeder roads; construction/ rehabilitation of nine parish markets; extension of 37 water supply systems; and construction of 6,000 waste disposal units. Estimated Cost and Financing Plan: Total project cost is estimated at US$31.4 million. Foreign exchange and local currency costs are estimated at US$8.5 million and US$22.9 million, respectively. Project financing requirements would be met by the Bank loan (US$15 million), and the Jamaican Government (US$16.4 million). The Bank loan would finance 48% of the project cost and, in addition to its foreign exchange content, would cover US$6.5 million equivalent of the project's local cost. - iii - Project Cost Summary: US$ Million … Local Foreign Total I. Support for Ministry of Agriculture Regional and local office 1.2 0.3 1.5 Staff housing 0.5 0.3 0.8 Training and technical assistance 0.3 0.3 0.6 Vehicles - 0.2 0.2 Subtotal 2.0 1.1 3.1 II. Agricultural Settlement Land acquisition 4.0 - 4.0 Farmhousing 1.6 0.5 2.1 Water supply 0.3 0.2 0.5 Electrification 0.1 0.1 0.2 Settlement roads 1.7 0.8 2.5 Community facilities 0.4 0.2 0.6 Soil conservation and forestation 1.2 0.1 1.3 Physical planning 0.5 0e1 0.6 Administration and supervision 0.6 0.1 0.7 Subtotal 10.4 2.1 12.5 III. Regional Infrastructure Feeder roads 2.3 1.2 3.5 Markets 1.9 0.7 2.6 Water supply 1.4 1.5 2.9 Sanitation 0.1 0.1 0.2 Sub-total 5.7 3.5 9.2 Base Cost 18.1 6.7 24.8 Contingencies: Physical 1.9 0.7 2.6 Price 2.9 1.1 4.0 Total 22.9 8.5 31.4 Estimated Disbursements: -----------US$ (000) FY78 FY79 FY80 FY81 Annual 3,600 4,800 5,200 1,400 Cumulative 3,600 8,400 13,600 15,000 - iv - Technical Assistance: Individual consultants will be retained to assist the Government in training Ministry of Agriculture personnel and in the administration and supervision of agricultural settlement. Rate of Return: The weighted average economic rate of return of the settlement and feeder road components of the project would be 17%. Staff Project Report: Report No. 1205-JM, dated May 16, 1977. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF TEE PRESIDENT TO THE EXECUTIVE DIRECI'ORS ON A PROPOSED LOAN TO JAMAICA FOR A FIRST RURAL DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed loan to Jamaica for the equivalent of Us$15 million to help finance a first rural development project. The loan would have a term of 17 years, including three- and-a-half years of grace, with interest at 8.2% per annum. 1/ PART I - THE ECONOMY2 Introduction 2. An Economic Report entitled "Current Economic Position and Prospects of Jamaica" was distributed to the Executive D:irectors on March 22, 1976. Small updating missions visited Jamaica in August 1976, January 1977 and again in March 1977. The findings of these missions are incorporated in this report. Country data sheets are attached as Annex 1. 3. During the decade following independence in 1962, the Jamaican economy grew at a fairly rapid pace, averaging 5.7% per annum. Growth was spurred by major developments in tourism and i-n bauxite and alumina production. Tourist visitors increased from 200,000 in 1962 to 500,000 in 1972, while over the same period bauxite production expanded from 8 million tons to 13 million tons and the output of alumina rose from 650,000 to 2 million tons. Large private capital inflows from abroad underpinned investments in these sectors and these same capital inflows enabled Jamaica to maintain a sound foreign exchange reserve position despite increasing deficits on the current account balance of payments. The decade of the sixties was, therefore, a period of 1/ Jamaica's per capita income, calculated on the Bank Atlas basis, was estimated as US$1,290 in 1975, thus placing it in the category of countries which under present policy would be extended loans by the Bank with a final maturity of 15 years, including three years of grace. However, recent developments have resulted in a substan- tial decline in Jamaica's per capita inccme measured in dollars. A major change in exchange rate policy (see para. 18) has resulted in an effective devaluation estimated at 18%. Aside from this indi- cation that the 1975 figure was overstated because of an overvalued exchange rate, it is now estimated that, because of recent highly adverse changes in the economic situation, real per capita income in 1977 will be about 20% below the 1975 level. It is clear that Jamaica now falls in the US$520 - 1,075 income category and thus should be accorded the terms recommended for the proposed loan. -2- rising incomes and rising expectations. However, the growth of investment during this neriod bypassed the agricultural sector, the traditional source of Jamaica's income and employment opportunities, agricultural production stagnated and there was increasing migration to urban areas. Moreover, the relatively capital-intensive nature of investments during this period did not permit a sufficient expansion of permanent urban employment opportunities despite continued high levels of emigration. Finally, the pattern of develop- ment tended to worsen the already extreme inequality of Jamaica's income dis- tribution. 4. Two other results of the pattern of investment during this period were to prove significant for the future growth of the country. The first was an increase in the external dependence of the economy, both in terms of markets (especially bauxite/alumina and tourism) and sources of supply of consumption, intermediate and capital goods. The second was an increase in the degree of concentration of merchandise exports. Bauxite and alumina exports, which already accounted for over one-half of total exports in 1966, increased to more than 75% by 1974. Thus, by the early 1970s, Jamaica was suffering from serious unemployment and the social tensions generated by this and by worsening income distribution. In addition, the economy had become heavily dependent on external economic developments and on decisions made out- side the country. 5. The Government which came to power in 1972 under the banner of democratic socialism was strongly committed to reducing the inequality in the distribution of income, alleviating unemployment and reducing the country's external dependence. It embarked upon a development program emphasizing greatly increased government ownership of and control over the country's productive resources and promised expanded popular participation in decision making. Economic diversification, employment and redistribution of income were set forth as priority goals, with economic growth considered as an important, but subsidiary, goal. Emphasis was to be given to increasing employment and income opportunities for the poorer segments of the population through expanded public investment in labor-absorbing sectors of the economy and to increased social benefits. Evolution of the Government's program has witnessed a con- siderable expansion of public ownership in the basic sectors of the economy, including significantly increased participation in the tourism and bauxite/ alumina industries, both of which were largely foreign owned. 6. External factors have complicated implementation of the structural changes sought by the Government. The completion of a major investment cycle in tourism and mining resulted in a sharp drop in foreign capital inflows beginning in 1972. This was followed by the increase in the world price of petroleum in late 1973 (which raised Jamaica's petroleum import bill to US$195 million in 1974 from US$73 million in 1973) and by the world recession of 1974-75 which had serious repercussions on Jamaica's tourism and mining sector receipts. These events made balance of payments and fiscal management increasingly difficult as imports continued to grow rapidly and special employ- ment programs were expanded to alleviate the most serious effects of the growing level of unemployment. Balance of payments and demand management measures were - 3 - introduced in 1972 and again in 1973, including a small devaluation of the Jamaica dollar, the imposition of import controls and measures to limit the expansion of credit to the private sector. These measures proved to be inade- quate to stem the weakening balance of payments performance. The Government was able to counteract the abrupt rise in the price of petroleum in 1974 by increased bauxite taxes and royalties. This yielded an additional US$150 mil- lion in foreign exchange receipts. 1/ While this was temporarily sufficient to offset the rise in oil prices, and the higher prices for other imports, it did not resolve the underlying weaknesses in the country's economy. 7. Imports continued to rise at a rapid pace in 1975 (20% in nominal terms) reflecting large wage and salary increases in the private sector and an expansionary fiscal policy designed to ameliorate the increasingly serious un- employment problems. At the same time, direct foreign investment declined further in 1975 and private capital remittances increased, reflecting growing concern about the political and economic future of the country on the part of some members of the propertied classes. Jamaica was rescued from a potentially critical balance of payments situation in 1975 by a near doubling of receipts from sugar exports due to a sharp rise in international sugar prices and by an unprecendented level of external medium- and long-term borrowing by the public sector. However, despite gross external public borrowing totalling US$247 million, Jamaica's foreign exchange reserves fell by US$81 million in 1975. 8. The balance of payments situation reached crisis proportions in 1976. Serious labor problems in the mining industry together with soft world demand for aluminum substantially reduced the production and export of bauxite and alumina. Thus, despite sharply higher prices; for both these products, total export receipts of the industry fell by about 12%. Receipts from sugar exports in 1976 were nearly halved due to much lower international prices for sugar. Moreover, Jamaica did not benefit from the recovery of tourism evident in the rest of the Caribbean during the year. Thus, despite strict controls which resulted in a 17% drop in imports, the current account balance deteriorated further in 1976, with the deficit equal to nearly US$300 million. 9. Adverse developments on capital account made the balance of payments situation even more difficult. Foreign commercial bank lending to Jamaica prac- tically ceased and capital flight accelerated sharply. Direct private invest- ment inflows were negative for the third consecutive year. A large part of the 1/ The Government's action to increase bauxite taxes and royalties followed the failure to reach agreement with the companies on a renegotiation of the e tax clauses in the original company contracts. The companies objected to the tax increase and three US-owned companies requested arbitration before the International Centre for Settlement of Investment Disputes (ICSID). Recent agreements between two of these companies and the Jamaican Govern- ment have resulted in the discontinuance of the pending ICSID arbitration proceeding. The third proceeding is still pending; however, negotiations between the company and the Government have been completed and it is expected that the proceedings before ICSID will be discontinued in the near future. A fourth company instituted proceedings in the Jamaican courts. - 4 - credits received by the public sector were government-to-government loans from Jamaica's CARICOM partners (Trinidad and Tobago, Barbados and Guyana) and Venezuela). The IMF extended a total of US$64 million in credits to Jamaica under its oil and compensatory facilities. Despite these credits, the net in- flow on capital accounts was only US$97 million for the year, compared with US$230 million in 1975. As a result, foreign exchange reserves declined drama- tically. By mid-December, the country had lost US$270 million in reserves; gross official reserves had fallen below US$30 million and the Central Bank of Jamaica was forced to close the foreign exchange markets. The markets were partially reopened in January to permit payment for imports already landed in Jamaica or in transit and for government and government-guaranteed debt-service payments. 10. The balance of payments difficulties have been accompanied by, and in part reflect, problems of budgetary management. Growth in current expendi- tures over the past few years has consistently outstripped that of current revenues as a result of Government attempts to maintain employment and income levels. Subsidies to recently acquired public enterprises and to several other public entities, including the sugar and banana industries and the public transport system, also helped contribute to the rapid growth in expenditures. The consequent reduction in public sector savings significantly increased the difficulty of financing the growth in public sector capital expenditures. 11. Measures were introduced in February 1976 in an attempt to improve the fiscal situation, but these proved to be inadequate. Bauxite levy receipts failed to increase due to reduced demand for bauxite and general tax revenues were adversely affected by the deepening internal recession and the decline in imports. Moreover, continued rapid growth in unemployment caused the Govern- ment to adopt more expansionary fiscal and credit policies around mid-year. As a consequence, the overall deficit of the Central Government for fiscal year 1976/77 was about 14% of GDP. With the sharp decline in lending by foreign commercial banks, an increasing proportion of the deficit had to be financed domestically. Since domestic liquidity was shrinking in large measure because of heavy capital flight, the Bank of Jamaica had to finance nearly two-thirds of the overall deficit, equivalent to about 9% of GDP. 12. While prior to 1973 Jamaica had enjoyed a history of relatively stable prices with inflation averaging no more than 5-6% annually, the problem of inflation in Jamaica has assumed major importance in recent years. In 1973, prices began to increase rapidly, with an increase of around 18% that year, followed by 27.3% in 1974. The rate of increase began to slow in mid-1974 and the increase in 1975 was about 17%. Price inflation subsided in 1976 with the cost of living index rising by less than 10%. The acceleration of infla- tion was triggered initially by expansionary fiscal and monetary policies as well as by a small devaluation in January 1973 and thereafter by external factors which became increasingly important following the oil price increase late in 1973. Inflation was also propelled by large wage adjustments. Between 1973 and 1975, the industrial wage index rose at an average annual rate of 46%, considerably more than retail prices and far above gains in productivity. In February 1976, the Government established a system of wage guidelines as part of a stabilization program. IHowever, major exceptions to these guidelines were - 5 - permitted and enforcement measures and mechanisms proved inadequate. The reduced rate of inflation in 1976 was probably due to a combination of factors including price controls on essential consumer goods, deceleration of inter- national inflation and the monetary effects of capital flight. 13. Real GDP is estimated to have fallen by about 6% in 1976, following a drop in excess of 2% in 1975. Unemployment has increased sharply, especially in the tourism sector, rising well above the 11% rate that had persisted over the past few years. Amelioration of the chronic problem of high unemployment -' is paramount among the development objectives of Jamaica and an increasing proportion of government expenditures is being diverted toward temporary work programs for the unemployed. Since a lower rate of net emigration is likely over the next several years, the task of expanding employment opportunities has become all the more urgent. 14. Several economic measures were adopted in January 1977 to deal with the economic crisis. These included sharp reductions in import quotas and extremely tight controls over all foreign payments, increases in taxes, a six-month moratorium on wage increases, and a freeze on prices of essential goods. Planning for an emergency program to increase production, especially in agriculture, manufacturing and constrction, was begun. The Government's immediate objective was to relieve balance of payments difficulties by restricting imports through a quota/licensing system and by exercising controls over payments for services of various types. Priority for the use of scarce foreign exchange was to be given to government and government- guaranteed debt service, essential consumer goods (especially food) and fuel imports, and to imports of raw materials for high value-added and export- intensive industries, in that order. Overall demand management policies were designed to minimize the adverse effects on employment and to place the greatest burden of sacrifice on those most abLe to pay. Thus, tax increases, wage and price restraints and import controls were all focussed most heavily on the middle- and high-income segments of the population. Budgetary opera- tions were to remain expansionary in the hope of preventing further increases in unemployment and avoiding any significant retrenchment in the Government's move toward democratic socialism. It was hoped that the domestic production of goods and services could be increased quickly to prevent excessive shortages and inflationary pressures from arising. The intention to nationalize selected private sector enterprises, announced at the same time, was designed to give the Government greater control over the direction of credit and the distribu- tion of essential imports and to assure the supply of needed inputs for the vital housing program. 15. Projections of the balance of payments indicate that the avail- ability of foreign exchange for imports will be extremely limited this year in the absence of additional foreign borrowing. Although export proceeds, including the bauxite levy, are expected to increase due to recovery of world aluminum markets, declines in both tourism receipts and capital inflows will more than offset these increases. Since payments have been delayed on private unguaranteed debt from the beginning of the year, the prospects of Jamaica borrowing in international markets are at the moment slight. Imports were - 6 - therefore budgeted at US$660 million for 1977, 30% below the 1976 level and over 40% below that of 1975. A large part of this reduction was expected to come out of nonessential consumer goods imports. Nevertheless, the near-term implications for domestic production and employment are severe. 16. By early April 1977 it had become obvious that the projected level of imports was not sustainable. Import licenses valued at over 70% of the total import quota for the year had been issued during the first quarter, largely to clear goods already received in Jamaica or in transit when the controls were announced. Shortages of imported goods were beginning to force the closure of firms and layoffs of workers were becoming increasingly frequent. At the same time, an analysis of the private debt indicated that service payment obligations in 1977 would reach nearly five times earlier government estimates. 17. Moreover, preliminary drafts of the emergency production plan made it clear that rapid expansion of output could not be counted on to alleviate shortages and inflationary pressures over the short term. In the agricul- tural sector, which is being given highest priority, prospects for quick increases in output are not promising, as the countryside is still plagued by a drought which has affected the island for the past three years. Short- term supply response of the manufacturing sector appears to be constrained by a lack of entrepreneurial capacity and a lack of confidence on the part of investors. The construction sector seems to offer the best hope for rapid increases in production and employment, and at a relatively low import compo- nent. While a sizable housing program could be mobilized fairly rapidly and would help alleviate the unemployment problem, it would require a consider- able amount of investment by the Government. 18. The certainty of drastic curtailment of output and employment during the rest of the year caused the Government to take further actions to relieve the import constraint. On April 22, a dual exchange rate system was established, with a new "special" rate of J$1.25 = US$1 to function alongside the old "official" rate of J$0.909 = US$1. In addition, the Government announced that budgetary financing by the Bank of Jamaica for FY77/78 would be limited to J$250 million (compared with J$272 million in FY76/77) and that prices and wages would continue under restraint after the current prices and wages freeze ends on June 30. 19. The new "special" exchange rate represents a devaluation of 37.5% from the old rate. All foreign exchange transactions of the Government and the bauxite/alumina industry; imports of essential foods, medicines and pharmaceutical products, petroleum and fertilizer imports; and certain basic raw material imports are to be processed at the old exchange rate. All other purchases and sales of foreign exchange are subject to the devalued rate. In view of the expected mix of transactions in the two markets, the effective devaluation is estimated by IMF staff on a preliminary basis at only 18%. While this adjustment does not fully correct for the previous overvaluation of the Jamaican dollar, it is intended to protect the purchasing power of the lower income segment of the population from excessive increases in the prices of basic necessities. At the same time, it increases the international - 7 - competitiveness of Jamaican goods and services (other than bauxite and alumina), including tourism and manufactured goods. In addition, the Govern- ment's budget will benefit since a large part of the subsidies to the sugar, banana and tourism industries have been elimin.ated. 20. The Government's fiscal policy for 1977 remains a matter of concern. * Largely because of the erosion of the tax base which relies heavily on import and corporate profit taxes, the overall budget deficit for the fiscal year beginning April 1, 1977 is expected to exceed the 14% of GDP level estimated for fiscal 1976/77, unless additional revenue measures are taken. If the Government is successful in obtaining the US$220 million in external credits it is seeking, the unfinanced gap would fall to about US$275 million which would have to come from the Bank of Jamaica or from additional revenue measures. In his speech on April 22, the Prime Minister stated that Bank of Jamaica financing of the deficit would be Limited to J$250 million (US$275 million) approximately equal to the unfinanced gap expected under the above assumptions. The combination of a massive public sector deficit financed largely by the Bank of Jamaica and a sharp reduction in imports will probably result in strong inflationary pressures once again. 21. Expenditure estimates presented to Parliament on April 29 emphasize the maintenance of permanent public employment and continuation of the special employment and income supplement programs. Expenditures will continue for projects supported by external lending agencies and some quasi-governmental and certain private sector entities (e.g., Sugar Industry Authority, Banana Board, Transport Board, Hotel Corporation, Air Jamaica) will continue to receive subsidies, but at a reduced level. Projects such as the major expan- sion in oil refining and new bauxite mining and alumina production are under- going further review in light of the current crisis and may be eliminated. Substantial increases are provided in connection with the emergency production plan for projects concerned with the production of foods for domestic consump- tion, basic consumer goods and housing. 22. The maintenance of internal price stability is a critical element of the current adjustment process in Jamaica. In the absence of an incomes policy to restrain wage and price increases after the present wage/price freeze ends on June 30, the benefits of increased international competitiveness of Jamaican products achieved through devaluation would have been quickly eroded. In recognition of this threat, the Government has stated unequivocally that wage/price guidelines would be established and made effective as of July 1 to restrain such wage increases. The exact formulas have yet to be worked out, but the Government's commitment to an effective incomes policy is clear. 23. The devaluation and related measures announced oni April 22 are a positive step toward building a firm basis for future viability of the economy. The major uncertainties remaining are the magnitude of the inflationary impact of the budget deficit, the effectiveness of the wage and price restraint to be instituted after June 30 and the ability to mobilize additional external resources. Unless further action is taken, it is likely that Jamaica will - 8 - experience additional falling output and income, mounting inflationary pres- sures, growing scarcities and a continuing exodus of professional and com- mercial talent. The needed domestic policy measures would help restore confidence in the country's economic management, thereby encouraging addi- tional capital inflows and assisting the rescheduling of at least part of the large debt repayments due over the next couple of years. A priority short- term objective is to relieve the present restraint on imports sufficiently to limit the decline in output and the related increase in unemployment. 24. The difficulties remaining and the magnitude of the adjustments still required are substantial. The managerial and administrative demands of Jamaica's policy of emphasizing direct controls could well exceed the bureaucracy's capacity, and, in fact, there are already signs that difficulties along these lines are being encountered. Although there are still obvious shortcomings in the Govern- ment's economic program, the economic team is aware of them and understands the seriousness of the situation. It appears to be receptive to suggestions and willing to consider alternatives. It has entered into detailed discussions with IMF about further economic policy measures and the possibility of a Standby Agreement. A Fund mission visited Jamaica last month and it is anticipated that further negotiations will be held in Jamaica later this month. 25. There are several additional policy measures that Jamaica could take to stabilize the economy and consolidate a sound basis for economic growth. These include: (a) increase public sector revenues, shifting away from import taxes as the major revenue source; (b) implement a stringent wages policy (to take effect when the present wage freeze expires on July 1) coupled with some form of forced savings; (c) introduce policies which could promote export growth and provide more effective rationing of imports. The production program emphasizing import substitution and export promotion should, of course, be continued. Adoption of these policies should enable Jamaica to attract addi- tional external capital inflows and contain the impending drastic curtailment in imports. It should be pointed out that even with the adoption of these policies, the Jamaican economy will be subject to serious foreign exchange constraints for the foreseeable future. Local cost financing is justified on the basis of estimates that capital inflows into Jamaica, if restricted to foreign exchange components of projects, would not be sufficient to meet the foreign exchange requirements of the total public investment program and estimated debt servicing liabilities. 26. Despite the critical balance of payments situation of recent months, the Government has not defaulted on the servicing of the public or public- guaranteed debt, and the Government's foreign exchange budget accords the highest priority to the servicing of this debt. Although there have been delays in repaying unguaranteed private sector debts, many of these obliga- tions belong to a category of debt that would under normal circumstances have been rolled over. 27. Jamaica has the resources to enable it to both sustain positive rates of growth of per capita income and achieve a wider distribution of the benefits of growth once the domestic economy has been stabilized and the country's international competitiveness has been restored. The country's external debt problems appear manageable. The estimated total debt out- standing (disbursed only) in mid-March amounted to approximately US$1.3 bil- lion. (Excluded from this figure is an estimated US$220 million in normally -9- revolving outstanding trade credits.) Of this, about US$440 million was direct public debt, US$360 million was government guaranteed and the remain- ing US$500 million was private nonguaranteed debt. In relation to present foreign exchange earnings, the debt service ratio on the public and publicly guaranteed debt is estimated at about 16% for 1977. However, in view of the current abnormally low level of exports and the low level of new debt assump- tions, it is anticipated that the debt service ratio will decline gradually over the next several years. 28. Jamaica's longer term balance of paymnents prospects at present appear only fair, but bauxite, sugar and tourism give the country a substantial export base on which to build. Demand for these products tend to be cyclical and the industries have structural problems, some of which are amenable to domestic policy and others which are not. However, Jamaica's factor endowment does not limit the sources of its future growth to these products. With appropriate policies, prospects for positive production responses in agriculture and manufacturing, both for the domestic market (as import substitutes) and for export, are good. Thus, while the country is now experiencing grave financial difficulties, with the adoption of additional positive measures along the lines recently enacted, there do not seem to be insurmountable obstacles to reestablishing balance of payments viability. Jamaica can thus be regarded as creditworthy at this time for additional Bank lending in the amount pro- posed. PART II - BANK GROUP OPERATIONS IN JAMAICA 29. To date the Bank has made 14 loans in Jamaica totalling about US$138 million after cancellations. Of this amount about US$81.5 million (59%) has been for infrastructure investments in transportation, electric power, water supply and sewerage; the remainder has gone into education (17%), sites and services (11%), agriculture (7%) and population (6%). The proposed loan would be the third loan in the agricultural sector. The preceding two loans in the agricultural sector have been for agricultural credit. There have so far been two IFC investments in Jamaica; a loan in 1961 to a pre-mix concrete company and an equity/loan investment in 1968 in a hotel project. Annex II contains a summary statement of Bank loans and IFC investments as of March 31, 1977 and notes on the execution of projects in Jamaica. Future Bank Lending 30. Bank lending in Jamaica is aimed essentially at providing continued transfers of long-term external capital to help finance the capital imports associated with the country's public sector investment program. The Bank pro- gram has been developed taking into account the role of other external lending agencies--IDB, CIDA, ODM, USAID and the Caribbean Development Bank (CDB)--and the Government's development strategy. Bank lending supports Government pro- grams conducive to increasing production and employment; achieving a wider distribution of the benefits of growth; and improving the country's social and economic infrastructure where inadequate facilities are presently con- straining development. It is also an important objective of the Bank lending - 10 - program to strengthen the public sector institutions associated with Bank- financed p-:-oJets by supporting policies designed to improve the quality of management, -_heir operating procedures and finances. 31. After a lull in Bank lending in 1972/73--due largely to institutional constraints and slow project preparation--the pace of Bank operations picked up in FY74 and 75, with an increased emphasis on projects in the social sec- tors. Slow project preparation and unsettled economic conditions have con- tributed to a renewed lull in Bank lending operations. The most recent Bank loan, for a Second Population Project (Loan No. 1284), was approved by the Executive Directors on June 8, 1976. The Bank's share of external public debt outstanding and disbursed was about 8% in 1976 and its share of external public debt service was about 6% in 1976. 32. In line with the Government's development strategy, the proposed project as well as future Bank projects will place increasing emphasis on the agricultural sector to support efforts to promote exports, stimulate import substitution, strengthen the balance of payments, increase employment and raise living standards in the rural areas. It is expected that the revitali- zation of the agricultural sector will also help check the population drift from the countryside into the cities. The Bank has already made two loans to the Jamaica Development Bank (JDB) for relending to the agricultural sector. A third agricultural credit project for the JDB to help meet the financing requirements for commercial farming and agro-industrial development is under consideration. A possible sugar rehabilitation project is in preparation, which will include the rehabilitation of factory milling equipment. 33. In accordance with the Government's increased emphasis on the pro- ductive sectors and the development of small-scale industry, a project to assist small-scale enterprise is contemplated. The project is likely to include credit to entrepreneurs, technical assistance and institutional development. 34. In infrastructure, a second electric power project for expansion of the Jamaica Public Service Company's (JPSC's) transmission and distribution facilities has been appraised. Important objectives of the project would aiso be to improve the reliability of the JPSC system and to strengthen the company's finances and operations. 35. In the social sectors, the Bank has been active in financing two education projects, two population projects (the second of which contains an important nutrition element) and a sites and services project. The Bank expects to continue to support programs to improve social and physical infra- structure in Kingston and other urban areas. Looking further ahead, it is expected that a third education project will be prepared for possible Bank financing. The possible scope and content of the project, however, has not yet been defined. 36. As indicated in Part I, Jamaica faces some critical economic problems and we will be closely watching the direction of its economic policies in the months to come. Presentation of further lending operations to the Executive Directors will only be made after economic policies have been adopted which would strengthen Jamaica's creditworthiness. - II - PART III - SECTORAL BACKGROUND A. The Rural Sector Socio-Economic Conditions 37. The rural sector in Jamaica embraces about 60% of the island's two million people. It contributes approximately 15% to the GNP, over 50% to national employment and about 16% to export earnings. 38. The standard of living in the rural areas is substantially lower than in urban areas, the average per capita income of the rural population (estimated at US$230) being only a tenth of the average urban income (about US$2,440). About 80% of the rural population have an income less than one- third of the national average (relative poverty) and at least a third of the rural population earns less than the income considered necessary to provide minimum calorie requirements (absolute poverty). Housing conditions, parti- cularly on old sugar and banana estates, are grossly substandard. The aver- age occupancy rate is 1.7 persons per room. Only about 10% of the rural dwellings have electrical connections and approximately 3% have piped water. Almost 50% of rural homes depend on public standpipes for their water supply and close to 10% lack sewage disposal facilities. With respect to transpor- tation facilities, the rural areas are interlaced with a relatively dense network of roads (1.4 miles of road per square mile). However, most of the road network consists of unengineered earth or gravel tracks which often become impassable during the wet season. This not only results in high costs for vehicle operation and road maintenance, but it impedes regular freight and passenger traffic. Social services are also poor. The number of persons per physician in the rural areas is twice that for the urban areas and infant mortality and the incidence of malnutrition among children under five years of age is significantly higher in the rural areas. Access to primary and vocational schools in rural areas is limited; nearly 20% of the rural popu- lation have not received any formal schooling and fewer than 10% reach the secondary level. 39. Within the rural sector, agriculture is the dominant activity, pro- viding 60% of rural employment and about 50% of rural production. Its con- tribution to the national economy is highlighted by providing 30% of total employment, 7% of GNP and 13% of export receipts. However, because of rising internal demand for agricultural products and a poor performance of export crop production Jamaica has become a net food importer since the mid-1960s. B. The Agricultural Sector 40. Resources and Land Use. Out of a total surface area of 2.7 million acres, about 1.5 million acres in Jamaica is designated as land in farms, the remainder being mostly forest. A third of the agricultural land in farms is - 12 - either unused or is of very limited agricultural potential. In effect Jamaican agriculture is thus based on about one million acres of land. Of this, only about 25% is flat to undulating, the remainder being very hilly and requiring good conservation practices if it is to be utilized intensively. There is ample rainfall (about 2,000 mm annually on average) but its distribution is uneven and partial droughts are frequent. Of the million acres of agricul- rural land about 60% is utilized for crops and 40% for pasture, half of it unimproved grassland. The largest proportion of cropland is under sugarcane (32%), followed by coconut (19%), citrus, coffee, cocoa and other tree crops (20%) and bananas (16%). The remainder (13%) is used for various food crops (legumes, yams, pineapples and vegetables) and tobacco. The national herd comprises about 280,000 head of cattle, 200,000 each of sheep, goats and pigs, and 4 million poultry. 41. Structure. Jamaican agriculture has traditionally consisted of two sectors, namely: (a) the export-oriented, large-scale plantation sector engaged in the production of cash crops and beef cattle, and (b) small-scale farmers, producing food crops and livestock largely for domestic consumption. In recent years economic, social and political factors have been changing this dualistic pattern into a more diversified structure. Thus, the importance of the plantation sector has declined, while, at the same time, a small- to medium-sized, more capital-intensive commercial farm sector has emerged. Parallel to this, many of the smaller holdings are no longer farmed full time and serve primarily as rural dwellings. 42. Farm Size. The agricultural land is very unevenly distributed among 192,000 holdings. About 15% of the land is in 150,000 farms of less than 5 acres, 22% in 37,000 farms of 5 to 25 acres, 3% in 1,755 farms of 25 to 50 acres, 5% in 1,815 farms of 50 to 100 acres, 13% in 800 farms of 100 to 500 acres, and 42% in 630 farms of 500 acres and above. Two-thirds of the farms over 500 acres are owned by Government and the bauxite companies. The skewed distribution of land, and considerable underutilization of resources that has resulted, has been a major impediment to the development of agriculture and the rural areas. In recent years Government has, however, distributed sizable tracts to about 20,000 smallholders and landless laborers under its Project Land Lease (PLL). However, this program has not yet resulted in much increased agricultural prodution, and is hampered by administrative difficulties, the lack of good support services and adequate physical infrastructure in the settlement areas concerned. 43. Production. Traditionally, Jamaica's agriculture has been export oriented, with sugarcane and bananas being the most important crops. In recent years, however, agricultural exports have declined considerably, al- though this has been compensated for to some extent by increasing production of crops for the domestic market. Sugar output has declined from a peak of 500,000 tons in 1966 to 360,000 tons in 1975 owing to a number of complex problems. Total banana production for 1972 and 1975 is estimated to have been 275,000 and 250,000 tons, respectively, but exports declined sharply from a peak of 127,000 tons in 1972 to 70,000 tons in 1975, partly because an in- creasing share was syphoned off for domestic consumption. Similarly exports of fresh citrus products decreased, though total production has increased slightly. - 13 - 44. In spite of the potential productivity of its tropical pastures, Jamaica imports 80% of its milk and 40%o of its meat. Jamaica's beef produc- tion capability is limited, mostly because of beef cattle's relatively low return per acre and the lack of suitable processing and distribution facili- ties. An increasing proportion of Jamaica's requirement for meat is being met by an efficient broiler industry based on inported feed mostly in the hands of five companies who deal with about 300 contracted farmers. Layers are kept in small commercial flocks. Dairies are concentrated mainly in the eastern part of the island, and marketing outlets in the western portion are poor although a new plant is being built in Montpelier. Lack of refrig- eration and pasteurization facilities results in large sales of raw and condensed milk. 45. Administration. Numerous Government agencies are involved in the agricultural sector and this poses complications. The Ministry of Agriculture (M0A) has principal responsibility, but a number of other government institu- tions control important subsectors. Marketing is under the responsibility of the Ministry of Commerce and Trade and the Commodity Marketing Boards, credit is largely under the Ministry of Finance, and irrigation is under the Ministry of Public Utilities and the Ministry of Mining and Natural Resources. A further complication is that the MOA is organized along commodity and specific program lines, with most of its qualified staff assigned to offices in Kingston. At the local level, 13 semi-autonomous Land Authorities - relics of the former Ministry of Rural Land Development and operated under the juris- diction of locally elected officials - are responsible for agricultural ex- tension and for certain regulatory functions. This fragmented administrative structure has contributed greatly to the unsatisfactory performance of the industry. In addition to ineffectively using human and financial resources, this structure has made it impossible for Government to formulate and implement consistent agricultural policies and impossible to provide effective support services to the agricultural sector. 46. Credit. The main sources of institutional credit for agriculture are the commercial banks, the Jamaica Development Bank (JDB), the Agricultural Credit Board (ACB) with its affiliated People Cooperative Banks (PCBs), and the Commodity Marketing Boards. These agencies do not coordinate the supply of credit. Most Government-sponsored schemes carry negative interest rates and are beset with recovery difficulties. Sufficient credit for small farmers is available from the Self-Supporting Farmers Development Programme (SSFDP) which is partially financed by the Inter-American Development Bank (IDB) and from the ACB. The only source of general development credit for commercial farmers is the JDB. 47. Marketing. Export crops are marketed by various Commodity Marketing Boards which work independently of each other and periodically need sizable Government subsidies to cover their financia:L losses. Most of the domestic food crop marketing is handled in a relativeLy effective but costly manner by small traders (higglers) who engage in collezting and wholesaling as well as retailing. About 20% of the domestic marketing of food crops is performed by the Agricultural Marketing Corporation (AMC), which also functions as Govern- ment's price stabilizing and support agency. It buys produce at 207 buying - 14 - stations throughout the country, offers guaranteed minimum prices for 32 domestic food crops and as a result is often forced to sell it at heavy financial losses. The most important marketing facility in the rural areas are the parish markets. They serve both as market outlets for the local producers and higglers as well as supply points for consumers in rural centers and for wholesalers servicing urban centers. These existing markets, however, have proven to be inadequate for handling the increased output of domestic food crops. Another limitation is the poor rural road system which denies the small producer in remote locations an economic access to the market. Development Issues and Government Policies 48. The performance of the agricultural sector has not been commensurate with its physical potential. Over the last decade, production has remained stagnant causing a decline in agricultural output and food production per capita. This has been particularly evident for export crops, which have been decreasing at an annual rate of 5% in constant prices. Although food crop production has increased in the last few years, it has not kept pace with domestic demand. As a result, food imports have increased at an annual rate of 5% in constant prices to reach J$120 million in 1974. The unsatisfactory performance of the agricultural sector may be broadly attributed to: (a) inertia regarding the application of improved farm practices and failure to intensify land use and cropping patterns; (b) past governmental neglect of the agricultural sector; (c) the reluctance of the plantation sector to adjust to changing socio-economic conditions; (d) highly skewed land distribution; (e) the lack of adequate agricultural support services, especially extension and applied research, and particularly for small- and medium-sized farmers; (f) deficient infrastructure and social services in the rural areas; (g) deficient marketing arrangements for both food and some export crops; and (h) interrelated problems of low capital formation and the private sector's reluctance to invest in agriculture. 49. Government is aware of the problems outlined, and, with Bank assis- tance, undertook in 1973, an in-depth agricultural sector study, which resulted in a Cabinet-approved policy for improving agricultural production, rural infrastructure and enhancing rural living conditions. Based on the recommen- dations of this study, the Government has initiated an agricultural development program which has the following objectives: - 15 - (a) intensification of land utilization by introducing a progressive land tax and by reactivating the Land Development and Utilization Commission (LDUC), which requires owners of idle or underutilized holdings in excess of 50 acres to either intensify land use, or to rent or sell the property to the Government for subsequent distribution to landless people or small holders on a lease basis (Project Land Lease); (b) increasing credit availability through programs administered by ACB and JDB; (c) introduction of improved farm inputs and practices through subsidies for better planting materials, fertilizers, and soil conservation; (d) encouragement of production of sugar, bananas, and citrus by subsidies and of food crop production by provisions of sub- sidized marketing services through AMC and guaranteed minimum prices; (e) expansion of food crop and livestock production on state- run Food Farms and through the Government-owned Agricultural Development Corporation (ADC); (f) improvement in the effectiveness of MOA by centralizing its policy functions and decentralizing its program implementation and service functions; and (g) improvement of rural infrastructure. 50. This program is indicative of the Government's commitment to rural development but its ultimate success will depend on the ability of the public sector to effectively implement the proposed schemes; provide adequate tech- nical services, especially for the development: of the small-farm sector; and maintain a favorable investment climate to facilitate the expansion of the medium-sized commercial farm sector. PART IV - THE PROJECT Project Background, Objectives and Concept 51. The proposed project originated from a comprehensive agricultural sector study undertaken by Government in 1973 with Bank assistance. It would implement some of the major policy recoimmendations which emerged from this study. The project was identified and prepared by MOA and related Jamaican institutions. Preparation assistance has been provided by several FAO/CP and Bank missions. The project was appraised by a Bank mission in December 1975 and loan negotiations were held in Washington in December 1976. The economic uncertainties over the last year and the time required for their assessment, contributed to delays in project processing. - 16 - 52. The proposed project would have three principal components: the reorganization of MOA; the settlement of 1,400 farm families; and the improve- ment of rural feeder roads, water supply systems, parish markets and sanitary facilities. It would complement Government's rural development policy by increasing agricultural production and income and improving the quality of life, and thereby reduce income disparities and curb urban migration. 53. Because of existing financial and administrative constraints, the project investments would concentrate on the Western Region, which has espe- cially pronounced poverty problems but also has immediate development possi- bilities. After successful completion of the proposed project, Government intends to initiate similar projects for the remainder of Jamaica. The proj- ect in itself does not provide a fully balanced and integrated investment package, but concentrates on removing key constraints to rural development not covered by other Government programs presently under execution or planned. A considerable portion of project investment would be for building institutions and productive structures. This is because the basic problems of rural devel- opment in Jamaica are institutional and because of the complementary character of the project. The settlement component, which accounts for almost half of the project investment, is designed to create a technically and financially viable farm-size structure and to reestablish confidence and interest in small-scale farming. In order to meet these objectives the component would provide for (a) farms of a size capable of generating full employment for the farmers family, (b) a farmers income which meets both his short-term minimum needs and his long-term income expectations, (c) essential social and economic infrastructure in the settlement areas to attract qualified settlers on a lasting base and to allow an unimpeded development of production and marketing. Project Area 54. Except for the reorganization of the MOA, the proposed project invest- ments would be confined to the Western Region (frequently referred to as Corn- wall County), which includes the parishes of Trelawny, St. James, Hanover, Westmoreland and St. Elizabeth. The region comprises an area of about one mil- lion acres or one-third of the total area of Jamaica. It has almost half a million inhabitants or about one quarter of the island's total population. Eighty-six percent of them are classified as rural and about half of these find employment in agriculture. The urban population lives in a few towns, of which Montego Bay, a major tourist center, and Savanna-la-Mar are the largest. They depend largely on employment in the service, construction and mining sec- tors. Living conditions in the project area are similar, by and large, to those in the rural area of the rest of Jamaica, except that the poverty is more pro- nounced. Thus, unemployment is estimated to be well over 25% and only about a third of the male population over 14 years of age is fully employed. The average annual per capita income is estimated to be approximately US$175 but close to 50% of the population are thought to have annual incomes of less than US$100. Malnutrition is widespread and social services are meager. As a result, there is a substantial migration, particularly of the able-bodied, to the metropolitan area of Kingston. - 17 - 55. Much of the project area is hilly to mountainous and only one-third of it (330,000 acres) is actually under cultivation. Land distribution is highly skewed. Large farms generally concentrate on export crops and cattle while small ones produce mostly food crops and small livestock for domestic consumption. Because of the predominance of sigarcane and cattle, the region produces about 40% of Jamaica's sugar and about 43% of its beef. Project Components 56. The first component of the proposed project would facilitate imple- menting the reorganization of MOA as proposed in the "Review of Reorganization of the Ministry of Agriculture" by the Ministry of Public Services. It contemplates a reincorporation of most agricultural services under the direct jurisdiction of MOA, an internal restructuring of the Ministry along functional lines (as opposed to the presently existing project-oriented structure) and a decentralization and regionalization of the Ministry's technical services. The Government's formal approval of the reorganization plan would be a condi- tion of loan effectiveness (Section 5.01(b) of the draft Loan Agreement). Project investment in support of this program would provide for: (a) additional facilities required for regionalization, including accommodation for two new regional offices, 30 additional local offices and 40 staff houses in the remoter areas; (b) 30 four-wheel drive vehicles to be used in areas with difficult access; and (c) an extensive training program for most of the Ministry's professional, technical and clerical staff. The Ministry would complete the details of the training program and submit the final program to the Bank within six months of the signing of the loan (Section 3.05(b) of the draft Loan Agreement). 57. The second project component would support Government's existing PLL, which aims at reducing widespread underutilization of agricultural land and rural unemployment by acquiring underutilized farms larger than 50 acres and then leasing the land for 49 years to farmers with inadequate land (PLL II) or to landless people (PLL III) so that they may reach a minimum annual net farm income of J$2,000 after a development period of about 5 years. This component would include: (a) acquisition by the Government of about 4,000 acres for settlement purposes (in addition to 12,687 acres already purchased) within six months of loan signing (Section 3.12(b) of the draft Loan Agreement); (b) preparation of detailed physical plans for the development of the nine settlement areas incluaded in the project. The plans not prepared by the time of loan signing would be completed within one year of loan signing (Section 3.05(a)i of the draft Loan Agreement); - 18 - (c) construction of settlement infrastructure, including 10 miles of access roads to the settlement sites, 10 miles of village roads, and 40 miles of farm roads connecting the village sites with the farming areas. The Government would provide the necessary funds to maintain the roads constructed under the project (Section 3.01(b) of the draft Loan Agreement); (d) construction of 820 farmhouses in a program jointly carried out by the Ministry of Housing, MWA and local contractors. JDB would act as a collection agent for the mortgage payments made by the settlers (Section 3.08(b) of the draft Loan Agreement); (e) construction of potable water and electricity supply systems for the settlements. The Government would make appropriate arrangements with JPSC and the National Water Authority to provide a timely supply of electricity and water for the settlements (Section 3.06 of the draft Loan Agreement); (f) selection and settlement of 1,400 families with adequate farming qualifications; the adoption of satisfactory guide- lines and operating policies for settlement including a land rent review mechanism would be a condition of loan effectiveness (Section 5.01(a) of the draft Loan Agreement). The annual land rent paid by settlers is at present 2% of the commercial price of land, which is below commercial rates. The proposed guidelines would provide a mechanism for a review of land rents paid by settlers after a five-year development period with a view to adjusting rents to a rate comparable to the then prevailing commercial rates and instituting adequate cost recovery; (g) provision of essential community facilities at the settlement sites to accommodate settlement administration and of market- ing facilities for agricultural inputs and outputs. In addition, the Government would provide for essential social services (Section 3.07 of the draft Loan Agreement); (h) soil conservation and forestation measures for 1,400 acres to immediately provide each settler with a minimum of one acre of readily cultivable land; and (i) technical assistance from MOA to implement the settlement component through the provision of site managers and adequate supporting services in each settlement area (Section 3.05(a)ii of the draft Loan Agreement). 58. The settlers' credit requirements for farm and crop development (estimated at about US$2.7 million) would be provided by JDB with funds from the existing Self-Supporting Farmers' Development Program financed partially by IDB. The Government would assure the availability of adequate credit funds (Section 3.08(a) of the draft Loan Agreement). 19 59. The third project component would assist the Government's program to improve the economic and social infrastructure of the Western Region. The component would include: (a) construction/reconstruction of 70 miiles of rural feeder roads; (b) construction/rehabilitation of nine parish markets to accomodate 3,000 vendors present. Present user rates for the markets would be reviewed and adjusted to recover operation and maintenance costs, as well as capital expenditures, at an annual interest of 8% (Section 3,09(i) and 3.09(iii) of the draft Loan Agreement); (c) extension of 37 existing water supply systems and the construction of four new systems servicing a total of about 15,000 rural families. Prevailing user rates for water would be reviewed and adjusted to recover, to the extent practical, operation and maintenance costs and, to capital expenditures, taking into account the payment capacity and preparedness of the users to pay (Section 3.09(iii) of the draft Loan Agreement); (d) construction and installation of 6,000 waste disposal units in a program jointly undertaken by the Ministry of Public Health and Environmental Control, the Parish Councils and individual householders. Costs, Financing and Disbursement 60. The total cost of the proposed prDject would be US$31.4 million (J$28.5 million) exclusive of interest during construction, but including physical and price contingencies. The estinated foreign exchange content would be US$8.5 million (J$7.7 million), or 27% of total project costs. The cost structure by major components would be as follows: US$ million % of Total Support for Ministry of Agriculture 4.1 13 Agricultural settlement 15.7 50 Regional Infrastructure 11.6 37 Total 31.4 100 61. Project investment per beneficiary family would be about USa20 for the reorganization of MOA, US$120 for regional infrastructure and US$6,000 for the settlement component. The inveStmEnt per beneficiary family for the settlement component was calculated exclusiLve of land acquisition costs and using the Basic Exchange Rate. Computation of costs using the Special Exchange Rate would bring the investmenlt cost per beneficiary family to about US$5,000. The costs for the settlement component include land preparation, housing, - 20 - water and electricity supply, settlement planning and administration roads and community facilities. Although the settlement investment costs are relatively high, the planned investments are essential in view of the extensive infra- structure investments that must be made in areas that in the past have received little or no such investment. The proposed farm unit size (5 to 8 acres) and the proposed level of infrastructure investment are essential for creating farm-generating income capacity and living conditions sufficient to attract qualified settlers on a permanent basis. 62. The project would be financed by a government contribution of US$16.4 million (J$14.9 million) and a Bank loan of US$15 million (J$13.6 million). The Bank loan would thus finance 48% of total project cost and would cover the project's foreign exchange content of US$8.5 million, plus US$6.5 million of local cost. Local cost financing would absorb 43% of the Bank loan. Organization and Management 63. Overall responsibility for the project would rest with MOA, which would coordinate and supervise implementation through the existing Interminis- terial Standing Committee for Land Reform and Rural Development, chaired by the Permanent Secretary of Agriculture. This committee is functioning satis- factorily at present. A special Project Coordinator, attached to the Office of the Permanent Secretary, would assist in coordinating and supervising project implementation. MOA would be responsible for its own reorganization, and for the implementation of the settlement component. The Ministry of Works would implement the feeder road component; the Ministry of Local Government, the market structures and water supply systems; and the Ministry of Public Health and Environmental Control, the Parish Councils and the Ministry of Local Government, the sewage disposal units. Other agencies, including JDB, the Ministry of Housing, AMC, the Ministry of Education, the Rural Electrification Program and JPSC, and the Social Development Commission would provide supplementary services for settlement development and would be represented on the Interministerial Standing Committee (The organization and management of the Project are described in Schedule 5 of the draft Loan Agreement). Procurement and Disbursement 64. Items to be procured under the project include civil works, vehicles and services. Civil works, with a total estimated value of US$22 million, including contingencies, are individually small (the value of the largest single contract would be about US$0.4 million and the largest combination of contracts is expected to amount to no more than US$0.8 million) and geo- graphically dispersed, with construction extending to over three years; hence, they are unlikely to attract foreign bidders. Furthermore, the shortage of qualified local bidders, the desirability of labor-intensive construction methods and the hiring of small contractors located near the construction sites would limit the opportunity for local competitive bidding. For these reasons, smaller civil works with an individual or package value not exceeding US$50,000 (constituting almost two-thirds of the civil works) would be pro- cured on the basis of individually negotiated contracts or force account. The - 21 - remaining one-third would consist of those civil works with an individual or package value exceeding US$50,000 and would include construction of regional offices, markets and parts of the water supply schemes and community facilities and about two-thirds of the feeder roads. These would be procured after local competitive bidding in accordance with local procedures satisfactory to the Bank and without excluding foreign bidders. Individual civil work contracts or packages of contracts exceeding a value of US$250,000 and vehicles would be procured after international competitive bidding in accordance with the Bank's guidelines. Administrative services provided under the project are valued at US$1.8 million and relate to the implementation of a training program for the staff of 040A and for the planning, design, administration and supervision of the settlement component. An estimated two-thirds of these services would be carried out under force account by MOA. The rest would be contracted in accordance with Bank guidelines for consulting services (procurement proce- dures are described in Schedule 4 of the draft Loan Agreement). 65. The proceeds of the Bank loan would be disbursed to cover 55% of total expenditures for civil works, training, physical planning, adminis- tration and supervision, and 100% of foreign expenditures for vehicles. Expenditures incurred for the physical planning of agricultural settlements and the construction of markets and feeder roads after July 31, 1976 would be eligible for retroactive financing up to a total of US$1 million (paragraph 4 of Schedule 1 of the draft Loan Agreement). Disbursements are expected to extend over three-and-a-half years after loan signing. Agricultural Production and Markets 66. The incremental agricultural production from the project would result from the expected improvement in the efficiency of agricultural ser- vices, especially extension services, throughout the country, and from the nine settlements. Agricultural output from the settlement areas, estimated on the basis of site-specific farm models, is expected to increase gradually from J$0.3 million in the second project year to J$6.9 million in year 15 in terms of end of 1975 farmgate prices. During the initial years, most of the production would be for the farmers' subsistence. However, as production rises, an increasing share of the farm output would be sold, probably reaching 85% of total production by full development. About 40% of the production would be export crops and the remainder, by and large, vegetables and fruit for the domestic market. 67. The value of the incremental production from the settlement schemes at full development would correspond to about 4% of national agricultural output in 1974. The corresponding percentage would be 5% and 8% for domestic food crops and export crops. The additional bananas, citrus and coffee production would be equivalent to about 5%, 7% and 17% of the respective national totals in 1974. The domestic and export markets would easily absorb the incremental production, and the existing marketing system, based largely on small private intermediaries, Commodity Marketing Boards and the Government's AMC, would be capable of handling the additional production. - 22 - Benefits and Risks 68. The reorganization of MOA would benefit the entire farming community in Jamaica in the form of better support services. The related investments would not be directly recovered but would be justified in economic terms if, as a result, the aggregate national agricultural output increased annually by one-quarter of 1%. This is considered a realistic expection in light of the increased coverage and improved quality of services to farmers expected from the reorganization. 69. The direct beneficiaries of the settlement component would be the 1,400 families included in the program. They would receive full-time agri- cultural employment with very satisfactory income levels. Currently they are estimated to have an average family income of about J$500. Based on settle- ment site specific farm models, the annual family income from farm operations is expected to reach an average of about J$3,000 after five years at the end of 1975 prices and about J$7,000 at full development after 15 years. If the present Government cash subsidy program for agricultural inputs (land develop- ment, planting materials and fertilizer) and for prices of outputs (banana and citrus) would be discontinued, the projected average family income after 5 years would drop to J$2,000 and to J$6,000 at full development. The un- weighted average financial rate of return is estimated to be 37%, varying between 29% and 45% according to settlement sites. Excluding input and price subsidies the average would be about 20%. Expected income levels and finan- cial rates of returns are high and the proposed farm development would remain financially attractive and viable if key technical and financial parameters deviate from the basic assumption by a 20% to 25% margin. The direct economic benefits from the settlement component would consist of the incremental agricultural production, valued at J$6.4 million at full development in economic terms at constant end of 1975 prices. The economic rate of return for the settlement component, which accounts for about 50% of project costs, relating all on-settlement investments except land to the incremental net benefits from the farm operations would be 19%. The economic viability of settlement would remain satisfactory if volume or prices of output and input would deviate by a 20% margin from basic assumptions. In addition to these quantifiable benefits, the implementation of the settlement component would provide for the establishment of suitable administrative procedures for settle- ment, which is the Government's principal approach to correct the socially and economically incompatible land distribution pattern. It would also help in establishing suitable soil conservation and erosion control measures. The relatively high investment cost per beneficiary in the proposed settlement component is a result of the need for the acquisition of land for providing essential infrastructural facilities in the settlement areas on one side and the necessity for establishing farms capable of generating an income sufficient to attract qualified persons to full-time farming on a permanent basis on the other. The investment cost per beneficiary is therefore justified as a least cost solution for meeting the objective of the settlement component. 70. The feeder road component, which accounts for about 15% of project costs, would directly benefit about 15,000 to 20,000 acres of agricultural land and approximately 5,000 farm families in the remoter areas by providing - 23 - reliable access for marketing and communications, thus increasing their economic potential and possibly reducing urban migrationf. The selection of feeder roads to be included in the project would follaw a methodology which would assure that the economic rate of return for this investment would be no less than 10%. Assuming a 10% rate of return on the feeder roads, the weighted average rate of return on the feeder road and settlement components of the project would be 17%. 71. The market facilities constructed or rehabilitated under the project would strengthen the traditional, low-cost marketing system. They would mostly benefit small-scale producers and low-income consumers. The investment would be economically justified if there were a reduction of food losses due to spoilage in the order of 2% of throughput. Actual savings are expected to be in excess of 2%. Reduction in health hazards would be an additional benefit. 72. The extension and rehabilitation of 41 water supply systems and 6,000 waste disposal units would benefit about 17,000 rural families by improving their quality of life. Such facilities are also expected to reduce the incidence of water-borne diseases. 73. The project is bound to experience difficulties in the coordination of the various agencies involved, particularly as a major component is agri- cultural settlement. It will be essential to provide on a coordinated basis the supporting technical services, which in turn will depend largely on the timely and effective reorganization of MOA. Given, however, the Government's firm commitment to the proposed project, it is expected that the problems related to the reorganization of the Ministry and the coordination of project implementation will be satisfactorily resolved. The project's risks would therefore be acceptable. PART V - LEGAL INSTRUMENTS AND AUTHORITY 74. The draft Loan Agreement between Jamaica and the Bank, the Report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement and the text of a draft resolution approving the proposed loan are being distributed to the Executive Directors separately. 75. Special conditions of the project are listed in Annex III, Section III. Additional conditions of effectiveness would be a formal approval by the Government of a plan for the reorganization of MOA and the adoption of guide- lines for operating policies and procedures for the Agricultural Settlements, which would include a land rent review mechanism. 76. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. - 24 - PART VI - RECOMMENDATION 77. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments June 1, 1977 page I of 4 pages Lk"D ORIA (THOU ~ ~ ~ ~ ~ ~ vg~ I ...!. ;;.; . ,JAMACA Rt;FI8NCE COUNTRIES 31970) tOTAL 1*,0 MOST REC;NT TRflIDAD ASRtC, 4.8 190 1970 !STS46 t AND TOBAG0 CYPRUJS ISRAEL %NO PtR CtPITA (USSM 600,9 *70,0 1290,0 136040 1040,0 2240,0 .O.ULAT ON A.D v!YAL STATISTICS *OPLJtiTION (443D.KR. TILL3 106N 1.6 t-9 2.0 1.0 0.6 3.0 POPUL3tTIN DENSITY !EW StU,jtRC bM. 617*0 170,0 t86,O 200,0 69.0 143.0 ttl St. KMt. AitPICULtURAL LAND 330.0 384.0 418.0 70*,o 121.0 25n.0 VITAL STATISTTCS CRUD! 7RPp4 RATE (/THOU, AV) 37.0 35.S 32.2 32,5 24.2 25.5 CRUO! 0!ATW RATt C/TWOU,Avl 10,7 5.6 7.1 7.1 7,4 4 ?Nt9NT mORTAL!TY 9AtS t/T'OU) 51.0 32.2 26.3 34.4 29.4 2, 9 LIPE (OP!CTNNCY AT SIRTH CYRS) 64.6 67.8 69.5 - 68.1 70.2 70,2 DRISS t rPRODuCTION 'RTE 3.4 2.7 2,4 2,n 1,5 1,8 t3OULAO!06 GRvwt8 RtAE tt1 TOTAL t,4 * .4 * 3,8*/a 2,t * 1.0 * 3,4 /d VRRAAN . 6.2 ., 3,1 1.9 3.9 JRSRA aOPUL&TTnN CZ 7P TITAL) 23.4 37,1 , 24.1 35,; 82,1 NIE AT9JeTLRE 1 PE 1RC!NT3 O T 364 YEARS 4t,2 45e9 42.1 41.2 31,8 33.3 Ia t5 rt 64 YEARS 54,5 50,4 53.2 55.1 bO,6 60,2 /a Ss YlARS AN3 IV1Q 46,5 5,7 b,? 3,7 7.6 h,5 7 A;! 5EtENnFNCv Q9TT1 O. I 1.0 10.o 0Pt 0o. 0.7 !C5Nt9tC DEPENDENCY 53ll 3.2 .7 1 5 53 0.9/a t,2 lTb '680)0 PLANNINGI ACCE!TIRSs (c'u.LArAvP, rWiO , a9.s 137.6 25 ., jS!R! ft OF 66R49E9 Al6) ., ,. ,, . E6PLOV.FNT Tt;;L LRNI P1RCE (THOUSAND5 bSOn** 600,0*" S20 -n** 350. 1la 265.0 of6, /a LARIR POPce TN :iRTC 3L0jRE tSI 36.0 3O0n 29.2 22,0 3-.o 8 N h7 J6EaPLlYOD C1 IF LA6R 6FIRCE) .. 17.5* 21.3.. 32.5 3 3.r TI INCOME 'TSTRTRJTIIN 81.4EST 5S n 'oIJSkwl0S 30,2 L /a 1 ,2 lb I3,4 /c "30805T 201 OF 1inJSEnL0S bI6.2 Ia ,, , , 9. T 3,h / LI8EST 200 Of itJStHOLOS 27 9 , . 7,9/b 7 Ft LOKEST 40t oF HIJ53 oLDS 8 92 /a , 19 h 9. 20T5 7s I3ST41PuT!I'N n! LAN) 30..N!98P S ;;Et0 r0 ;;; I00 o ! s #~5 ;;14,6 lb *. '' *- t E My 9SM1LLEST I0 S NFRS 3.6 /6 .. . - , M1ALTA AND LNUT0yTI0N Dt38U38Y30.N PER PWYS3CO4', ,, 2630.0 250 .0 /b z330,0 1420.G 410,0 /e OlRUtiTIN PEDR 0UR5IN3 PERS0 1990.0 Ic .. 740.0 4D0,n b1o.0 20n.0 le 3PULA0TPN PIP 4nSPIT4L RED 250.7 ?40,0 260.0 230*T 190.0 17 0.0 'eS r"a, SUPPLY IF I CALORIES tS 0F 4EQJIaEaE6TS) 91.0 1 30.n 114.0 91,0 99,0 136.0 R0nT!tN 1GR0t6 PER )Ay) 56.0 Sb.0 67.0 6 40 7180 92.0 .sO I1TC0 AV9T4L ANn POLSE 20.7 /b 29.0 /a 34 OLc 331 nIc 89,0 DEATH RA AT (/TWOL1) *9 1.4 6. 5 4,2 4.6 1 . A EDJCATTOY *DIUt;F3 FNDOLL.t'T 91T,1 0918*90Y SCO7DL 118,0 1303*0 3060 3 3. /d 82o /d 132.,n 5006k8A11 3C6231L 10.0 240 32.0 40,0/ 5 - 7.0 Td 3 3 .0 YEARS IF SCHI7N;L16 *09V24E1 3IRSTO iND SECOND LEVEL) 12,0o 1.n 13t,n I,n t2,o 12,0 VICA¶T1NAL ENROLLMENT0 CZ Of 5E0CON1AR90 9.el 9,0 .,90 .0Id 6. iJ LTERACY9RTE! 832.0 66,0 oc 88,0 85.0 84, 0 .40 ISING '!RSON9 P 0000 (JRRAN) 36,.1L*1.5 L.f ICCULPIED nWELLI-4GS t,07..T PIPED T E 313 79.0 78,0 b ., 6 ,n/r ,, .l ACCERS T03 ELECTRICITy C0 IP ALL DWELLINGS) ,, 27,n bb6.n .. 94,0 /fL RURAL '3WdLLINrS ECONNCTEn &qu0T t0 EL!ETRICtTY tXl .. .C. .. . 58,0 /f CONSUMPTION 96337 8E~~E3VEoS 10!6 TUIO ~~op) 8%,0 3 7 6,0 ., 7b.0 263,o 223.0 PASSENGER CARs (PER T4jj 87pl8 20.0 39,0 4 5-0 73.n b8,0 51-0 ELECtRICTTY 3w4/Y9 PER CAP; 332.0 I 1 0 3372.0 962.0 0N 'JE*SPRIN T (80,0R PEIR CAP) 2,.9 6, 4.4 5,9 2,7 33.6 S!005AND mEPI1030'JNS ON REVERSE Paeg 2 of 4 pages 0t11s ethansia noted, data for 1960 refer to any year between 1959 and 1961, for 1970 between 1968 and 1970 and for Moat Recen. t Estimtat between 1973 eas 1975. o p. to emigration population growth rate is higher than the rats of naturalinrae 05Data based on official definition which includes those wflling to work but noct actively ase king employse.nt. -cc tarsal ba- been asiected as the objective .contry becasee of its aicilaricy in population ai.e sod dependence on foreign trade. jAMAICA 1960 I 1958; lb 1961-62; Ic 1963; Id 1962. 1970 I 1964-66; /b Ineide only. MOST RECENT ESIMnA.TE: /e 1970-75; /b 1971; Ic 1972. TRINIDAD &. T01.Ar 1970 Is 19-64 years; lb including midwives; It 196i-66; Id Glosoaset maintained And aided nchel ny; /. Totsl, -rban and -rura; If Inside only; ~j 1966. CYPRUS0 1970 /A Ic-tic of .poplation onder 13 and 65 and aver to total labor icros; lb 1966, arban; Ic 1964-66; /d Excluding Turkishsche. 109AE1 1970 Ls Including data relating to contain territories mter on-petion by inc-clt mIlic-noy forces sIsce lon 1967; /b Ratio of population cedar 13 and 65 And aver to total labor force; Ic- Jewish wage earnere, urban Id Due to i-aigra- tico population growth rate ia higher than the rate of natoralinras /e R.i.eftrerd, not all practicing in the -onnry; /6 1966. i8, May cy, 1977 DWIflTWUN O? SOCIAL. ItlItATOiS Land done (thou us2) Pparlation see sursmne nere - Pp.plarlin divded by snhe.r ci prooti~c-og Total- Total -ufa-c . are cprising laed Area and inland waters. male and fat1l graduate n-.s, "traised` or 'certified" soes,ad Acri.. M-tPc treost estiste of agri-oItora1 Arcs oed cenperarily or psena- soc-iar peresnl with training orspvec. ses tly for crops, p -kra,tres 6 hitches gardens or to lie fallow. openoision ear h.apina1 bed - Populacios divided by -b.hr or beapital beds s.silahle in public- sAnd prints general and op-1taltnd hospital and lNP Pnr c-cot.(s$)01 - GNP pot c-apit c 3-a siae Ato..e-s norkepi-o rahabili-otle c-eer;seld.s surstg henn and esalsrst -n cscatdby san covraloc sethd .. World Bank Atlas (1973-75 bssie); -utodial end prenenit- tare. 1960; 1970 aed 1975 dat. per c-ants sanely af oalcrlas i of Cearn t) -tepute.d goon energy qoi-alat of net coad suppltaa avilable Is ceustry per capIta per day; Ponclation and vital statietie avilable espplies omepriac d-etic- prodaction , iparta lees esporte, end Pooclation feid-year million) As of Jolt, first: if not -vilahle, avraga c-bagss Lc stach; set soppliso.. ee-lde anise3 feed, ced,q-atities use d of two e-d-ye- na ti.atee; I1163, 1979 and 1975 data, In goad pro.....eing And busesa in diatrihbnion; reqoir-eneta wer eatisted by PAO base.d on phyaolegicel see dsI for etoI acivity AMd health conid- Population density -per scors Ins - Mid-year populetios per square kiloetr ering enirnusteral tomperacore, hody weighta, oge AMsd Se distributions of 1100 he-tares) of total area. papsiatine, end al11caig lIt far waste At b-u-s-hold level. Paeulation de...ity-per scer k. of saric. lasd - Computed a above for Per capit. aunply of pretein fere ear day) - Protein c-entet of per capita agricultureI lend only, net sopply of feed per day; net supply of feed Is defined a above; reqcire-- rests for all u-antrisa setsbliched by USDA Ecnoic ieaserch Sesvioes Vital a--ooi-Ca povoid con a miiaa alanecf 6i goene c total proteIn par dAy, -ed tr-de birth rate pet th-nsd,. averge- onul Icon births per thousad of 20 groofe .I ainl sod polse protein, of which 11 gre- should be anImal nid-ycer papulation; tes-yeersrirthnatic avrages oding to 1960 and 197i, protein; three standards are lewr thas those of 75 gran of ftal. protein and fiv-y-e averge ending In 1975 for -te rae...t aetiezte. end 23 gra of soistl protein aa -ovroge for the world, propused by FAG Cruds death rate p-o thousan.d. aereas.- otsul deaths per thaoaand of old-year in tbe Third World Food Sc-roy. population; tcs-ynurar,ithsetic avergea ceding is 1960 and 1970 and fit- Par c-anita proteis unpply from anima seAd culse - Pc-utrio sopply of food y..a . avrag edi.g c-c 1975 for no at rCe -ein-t. darived frm aonlsad pc-lees in ar"'pe day- cc-fast notltyvt /thosi A-.Anua deaths of icfasc.-soder on year of Age Death rats (/tic-l Aces 1-4 - On-oe deahs per thoucsc-d in oga gronp 1-4 pot thasased live hfvtha. years, to childres Is this age group; soggasted oasindicator of Life ac-eectasty at birth (yot) A- vr.ge oubeC of years of life reeli.i at -alstritien. hieth; ocually fiey raea esncding Is 1960, 1973 end 1975 fan develop- Ing osetAc Edocatimo iron env=dc-i- Ct - -utog. -c-ht of IIcs daughters a no ill hca- Adjusted -1eolneso tetic - s,jtta y school - Enrollmnt of all ages As pe- it her s-ssI reprcdsctiv period If abe noperie..es present ego-specific -teetgs of prImary achoai-age pepuaation; isolsd.e Childres agd 6-il ynora fettflity rcca; oooaly fiv--oa evereges coding in 1960, 1970 and 1975 hut adjuted for different lengths of primary education; far c-ntrias aith far d-evelape cnstrCs. sniosra edoc.siom, enoletny .....ed 100. ti.eesan pupils Are below Population cRothracet III - total - Composd annal groth octe5 at od-ynar or above the offcia schela. populatico far 1900-f, 1910-c ond 19701.45~. Adi-totd esrola1eo ostic. -.. se-oday schovi - Computed as abv; eodar population creth rate (Xi - orbes - Computed lu rowth face of tatal educationrasia at leas.t fear poeats of appreved poiary inetruota; populctios; different defisitioto of orb-0 reas toy affect cnpeubility of pravide general, ve...tional or teceho training instru-tioto far pupils data sm tgso etrc. of 12 to 17 yeats of age; ortespondeso- c-crse sa- gn...e-l1y c-tudsd. Urbano-uito (. of total) - istiu of -bho to total pepslc-tmon; difi-nret Yeats c-u schooling nrooidsd (fires And sec-ed level) - Total years of definitiss i orbo .Anna ma yffeCt toparshility of dsto omong c-truies. schooling; At sacootary level, voctionl instrution toy he partially or Ale asoosore1 (percent) - Children (0-14 yasra), obngaa(13-66 Yeare),v Paaisl- esralee fof a-eodary; - venatjiea isesiraione inc-lode as eira (Iysara and aver atp oteste ef sid-yeao papeltin tusi-lcduatri1 rt ether poagr 66cc- eperate. tedependestly or as Age depesdascy ratio -Rlathe of ppuation. ude I5Aend 65 adovr -a ths deparoneto.t of secondary isatitetmona of age 1 throgh 64. Adult1t .it.ray -tot (%3 - Litcate daIsti (able to read and unite) As per- icc.... :8:deendeocv yo rtic - R-ec-c of pop-lotion under 15 -d A5 cud -te c-c ucececf Cotol adult population sgd 13 yeats ato coot C-he 1ahor force in ofc group af t5-64 ysors. of birth-toi-cl devices under ...sPico of national fsnily pl-citg prng-a Person re tome (orhan) - Average cu-be- of person per room Ic oncupied tic-t inception. tenvetio-I dwellings Is urban areas; dwelligs occlude ...o-p-cans P oily rlon-isot ut (. of osciod wo )-PotCtetg-to oro woec ci Atrcuread us-ecpted parts. chiId-bealiC, ags (Il-hi y-av) who us bicth-C-ont-l d-vicCo toal earricd Ocutddelso ihn ie wtr(1-ctpind c-onntionai dwellcgc wbne- i~ san age group. Ic- orhac- osd ruraI Arnea. itht inside or outside piped -ea facilities as pr-cetage of all accapied dwellings. Earloynect Accast eltoiric fi ( f all - dw iiis,a) - Cnvetios-I dws11icgo with Total labor force (choua-dl - Ec-oiCalty active persoa, ccluding areed eletrofy Is ltivig qrtsaspeocnst of total duellioge it -hAc- and farces And csmaployed but eacluding hcsev,students, etc.; d.ffitccon rura Araa. It - v .t.u cov-tice are sac c-aallRalI d-Ilisga connected te electricity Cli - C_epsrd ac above fatol Laho for-c I aetculute %) -bgri-sltrollabor farce (is fatmiog, foc_otry. dwslling only.or C1 huntng sd fibiog as ettetageof ttal ahercooc.f.d. r- h on Ptn cr aleat wlto is take a )b, c-c vi a job on A give day, r_maled cut Radicr reeier !fe tha ea - 5cypee af o-ci-era Ceradio hbroc-dto.t ef a Jch, nd eekiig wok fora. spec ild inisan perId not eaCeedlcon to geanra- pobl Ic per thes.and of popc-lation; -oldre onlice...nd ree-tsrc- wek; any c-athecoparble hecueocontsdc-a to differsnt definitions is c-ntrien asd Is yasra ahes regiactation, of radio sets ai effect; cc - amployd ed sor- of data, e.g., enpicysst offt. Iccaetoi anpIe data far rcas-t years say c-ct he cenparehis A ce sont contrice eholiahsd .avYs, taspusary t-npioynet-cuac. ieeig PasseserL oars feet~ sh--- non) - P.Aaaeger oars srprise otar c-ate seating Ineediec-tihutias -Pertentage of private inctas (bo.th Is cash ead kied) lesta ight persona; seclu.des aolenc..s, hrarasa ad militory heete .yti-et 37., richest 20c, poorest 20%, and poorest All of hones-veils holds. ElectriciZ, ike/v net c-an) - nAsa1 tasateption. nf Icdsttrial, tsstt pshl o adpivtet, electricity in kilowatt bone pet .apita, g-netaly Distributios of land -erbp - Prcoc-cages of leod onsd by wealthieet 107. baa..d -n prodocmondata , wIthout altowa.c. for lasses Is grids hot allo- And p-Acts liT, of land nesars. Inc f-o imprts Asd apcrta of eetiiy a..Ith .d Ntition K~~~~~~~~~~~~ie-speist (kg/yr per eapi - Per caPita annea Iam,- ption in kilagrae lesith sea Nutrition es~~~~~~~~.timated fro dometic produetias pl18 set imports of seaprie., PoPeletiom pr shisrela - PopulatIon divided by n,usher of prC-tccing phylcassqolifedfrn A edtc-al -cb-I at utiv-rity level. ANNEX 1 Page 3 of 4 pages JAMAICA SELECTED ECONOMIC DEVEL0PlENT DATA Average Actual Eat. - Aver.ge 1970-12 1974 1975 1976 1977 NATIONAL ACCOUNTS Constant 1974 01$ Milliona A. % of G1P GDP 2300.0 2468.9 2412.2 2271.6 1.4 - 5.S 120.0 100.0 Gsans from Teems of Trade 0.3 0 127.1 77.3 - -39.2 0 3.4 a Gross -- eD.tic ancmes 2300.3 2468.9 2539.3 234899 2.1 - 7.5 105.3 103.4 Imports (incl. NFS) 1040.4 1098.2 1126.0 895.0 2.3 -20.5 46.7 39.4 Esports (import capacity) 941.8 971.3 950.2 782.8 0.4 -17.6 39.4 34.5 Cons-pti- 1722.3 1858.4 1905.8 1847.6 3.1 - 3.1 79.0 61.3 esmeot 726.2 737.4 682.2 613.5 -2.0 -10.1 28.3 27.0 National Saving 395.1 406.9 440.8 439.9 -0.4 - 18.3 19.4 Domestic S-sIng 578.0 610.5 633.5 501.3 -u.5 -20.9 26.3 22.1 MERCIAND7SE TRADE Current 05$ Millios _ o tal Input ts Food 76.0 122.3 129.9 10.1 15.0 -16.0 11.6 11.5 2thcr Co-sseer Goods 95.5 78.2 103.9 '21.7 3.1 -30.0 9.2 7.6 Prtr-l-e- 46.8 195.1 215.2 21 0.1 46.5 - 2.3 19.1 22.1 Other Inter-ediate Goods 165.7 288.2 328.7 319.8 18.6 - 2.7 29.3 33.6 Capital Goods 180.1 252.0 345.9 233.8 12.1 -30.7 30.8 25.2 Total Merchandise Imports (cif) 564.1 935.8 1123.4 951.5 16.6 -15.3 100.0 100.0 Eopor to Bauxlte-Alumina 225.3 518.2 499.2 440.5 17.3 -11.8 61.6 63.8 Sugar 37.9 81.4 153.7 a6.0 33.7 -4.0 19.0 12.5 Other 80.5 94.1 157.6 163.7 14.2 3.9 19.4 23,7 Total Merchandisc Emports (fob) 343.7 693.7 810.5 690.2 18.8 -14.8 100.0 00. Mrrcbandisr Trade ISdiOes Import Pric- Ioden 57.9 100.0 116.8 I15.' 16.9 8.5 isport Prior Index 98.2 100.0 134.8 140.6 21.0 4.3 Terms of Trade Ides 100.5 100.0 115.4 11.0 3.6 - 3.8 VALUE ADDED oY SECTOR Constant 974 3s$ Millions As ',' of GDP Agric-lt-re l12.5 190.1 193.0 136.3 3.5 - 3.5 8.C 8.2 Mining 307.4 345.6 255.7 2'8.1 0.a -14.7 10.6 9.6 Other 1800.1 1933.2 1963.5 1862 92 - A 81.4 82.2 Total 2300.0 2468.9 2412.2 2271.6 7.6 _ 5.8 810.4 100.0 PUBItC FrNANiCS Csrreot Receipts 505.8 719.0 702.8 703.8 7.5 - 29_1 31.0 Curront Expenditcren 410.6 610.4 613.8 687.7 9.4 12.0 25.4 30.3 Pobllo Sector Savings 95.2 108.6 89.0 :6.1 -2.0 -81.2 3.7 0.7 Public Sector Investment 205.6 307.6 367.0 091.4 11.2 -23.3 15.2 12.4 Central Government Central Govercnmnt CURRENT EXPENDITURE DETAILS 1974 1975 1976 INvESTMENT PROGRAM DETAILS 1974 19i5 1976 (As % ci Total Cucrent Espenditure) 82 33.7 29.9 .As 7. of Total Capital Ex e-dit-rr) General Administratio- 37.9 38.7 36.4 iconomic Services 59.0 57.3 42.3 Social and Commnity Serviocs 20.2 17.3 23.9 Social Services 26.7 31.3 29.4 Economic Ser-iees 13.7 13.3 9.8 C-seral Services 9.7 5.,1 0.4 Other Other 2.6 6.9 9.9 PINAN1CING CF P-JELIC SEtTOR ONVfi0lIENI yRCGRA"1 SELECTED INDICATORS 1965-70 1970-75 1976 FAsCINo O PI1 INVESdiENr R A 6 As 7 of Total C-pital Expendit... I Arerage ICOR 4.5 4.7 - Public Sector Savin 35.4 24.3 5.7 Import Elasticity 0.8 1.0 3.5 Domestic Borrosing (net) 35.7 40.7 58.2 Imports/GDP 41.7 46.2 39.4 Excernal Borrowing (net) 28.2 34.5 30.9 Exports/CDP 39.5 36.0 34.5 Other 0.7 0.5 5.2 Valus Added Per Worker EMPLOYMENT AND OUTPUT Total Employed i1974 Price- and E-change RNtes) PER 3ORKER Thousands % of Total L-S$ R of Average 1969 1975 1969 1975 1969 1975 1969 1975 Agric-lture 232.8 223.3 37.7 32.8 662.4 864.3 21.1 24.4 Manufacturing 68.4 74.7 11.1 11.0 3549.7 5350.0 113.0 156.6 Public Administration 54.7 99.0 8.9 14.5 2972.5 2692.0 04.6 76.0 Other 261.1 283.8 42.3 41.7 3872.9 6099.4 123.3 172.1 Total or Average 617.0 680.8 1OO0. 100.0 3141.0 7543.2 000.0 100.0 Net applicoble. Country Programs Depart-ent II - nil or negligible. Lstin America and Caribbean Regional Office T~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~3 .iy , lseP ANNEX 1 Lo8, 4 of A pegno JAMAOICA BALANCE O PAYMENTS, EXTERNAL ASSISTANCE AND DENI' ?in current US$ filioOs) 19 70 1 9 71 1972 tua19 IY73 719 74 19 75 t5 19769 SUMMHARY BALANCE OF PAYMENTS Bxports 7incl. DFS) 521.6 543.0 568.7 631.6 971.3 1109.9 987.7 14.5 -11.0 mporLs (incl. NFS) 598.0 632.8 660.8 780.7 1098.2 1315.7 1130.3 15.9 -14.1 Resource Nlec- 7 .76.4 -89.8 -92.1 -149.1 -126.9 _ 205.9 -142.6 5.7 -30.7 Ittere t I'll) -5-7 _10.7 -11.9 -21.9 -33.0 _47,7 - 66.9 34.6 40.3 Oth0c Fqctor Servce- In.ome (net) -92.5 -92.1 -107.7 -36.2 -34.6 -57.6 - 54.2 - 5.9 Ctt_rent Tr__e fr, 0ncE) 22.1 20.6 241.7 26.4 23.'. 28.7 17.5 6.3 -39.0 Dalencecon Currentt AYYoOIIEC -T12 -i7)T_ -M -17507 -1T_ -282.5 -246.2 5.9 Private Direct ID-V-tleYt (c-t) 154.1 101.9 17.4 33.7 23.3 -1.9 - 8.8 -5Q.1 - Public M< torns Disbur6men,tr 18.0 28.4 48.1 148.3 187.F 246.7 148.7 54.9 -39.7 -_Rem yote -893 -10.9 -0-.1 -16.9 -55.6 -31.9 -119.6 17.8 55.5 Net DOehorentt 9.7 17.5 29.0 131.4 156.2 ; r 99.1 013.2 -53.9 Cnpitel Tr-nteot-ons n.e.i. 10.0 96.6 95.0 -14.8 51.9 -11.4 , -132.8 Ch-tge Ln Net Rt er-e- (- IEoee...) -21.3 -44.0 45.6 30.5 -59.4 81.0 288.7 ANDUCD let. 1970 1970 1972 1973 ~~~~7.t.1974 193 97 GRANT AND LOAN COHHITMENDTS 1970 1971 1972 1973 1974 1975 2;7g DEBT AND DEBT SERVICE 1970 1971 1972 1973 4 9 LS t1976 Officisl Gri nts & G-tnt-like L.o-c 6.2 8.7 3.0 - - - - PObliS Dubt Out. & Disb,tctl 129.0 147.9 177.0 396.0 474.8 647.4 799.0 Public 9ILT Lo.e Itnter.et o- Pubtic Debt 5.7 10.7 12.3 17.4 32.8 49.9 47.2 IBRD 5.7 13.5 - 9.3 46.5 15.0 6.9 Repuy-tt oc P Iblic Debt 9.3 t0.9 19.1 16.9 31.6 31.9 1.8 6 IDA - - - - T.tel Pubitc Debt Serctce 14.0 21.6 31.4 34.3 64.4 R0.9 9508 Othr MIultilater.l - 2.1 - 6.9 19.0 7.2 22.2 Other Debt S-rvice (-et) .. .. .. Cover,oeent 17.9 26.9 34.8 27.8 10.9 39.3 148.1 Total Debt Se ce (ni t) .. .. .. . Supplers - 13.5 9.6 2.2 _ 1.9 Plntncial -cst,ttioN- rlvete - 15.9 60.7 109.8 138.4 142.7 20.7 B-rden cn Eeport E-rOiNEg (/) Bonde - . 10.0 14.0 - 10.2 PublLt ItoaT __ne2. 70.67 .- 2.4 2.0 46.9 Pablic Debt Serelco 2.7 4 0 5 4 6 6 7 3 9 7 ToteS Pel,Sic 9141.2tacen ~)W 7)~ TT- 0~7 )TI7T2 209.1 254.9 Tot-l Deb ccc .. ~~ . - TDS,Dirct I-toLt. Ic 20.4 20.9 94.5 10.2 19.2 12.5 15.2 Acerage Tc.tc- of Public Debt Int. a- % Prior Teat DO&D 4.0 7.9 8.3 9.8 10.7 10.3 7.3 Debt YSattsteAnin on Dcc. 31. 1936 A-ort. ao 2 Pricr Year DO&D 3.7 8.4 12.9 9.5 10.3 6.7 7.5 Diruhreed SOnly Percent lR uEItt DbEY 993. EXTERNAL DEBT IBRD Dcbt Out, & Dtsbu-d 29,8 33.7 34.8 36.6 37.8 44.1 58.7 dWerld Bank 58.7 7 3 " /. Puhlic Dcbt 0&D 23.0 22.7 19.7 12. 0 . 6. 7.3 ID'A " ts 2. Ptibli Debt Service 11.7 13.2 12.1 a2 8 7 I 6 6 6 4 Other Multilat-rol 12.5 1.6 llu - -et. 228.2 29.6 Suppliern 17.5 2.2 Ein-neiul Inetitutios 384.9 48 .2 DunAn 0~~~~~~~~~~~~~~~~~~~~13.9 0.5 Public Debt n.-i. 53 646 ToteD Pubtic MhLT Loons 798.9 100.0 not applti-ble. - nil -t ttgliiblc. Co-tnry Pcogrem- Dleparteent ou ntt uvutleblo. tacic A-erica a-d C-ribbhha Regionsl Office M.y 315, 1977 ANNEX II Page 1 of 3 STATUS OF BANK GROUP OPERATIONS IN JAMAICA A. Statement of Bank Loans (as at March 31, 1977) ----US$ million---- Loan Fiscal Amount No. Year Borrower Purpose (less cancellation) Bank Undisbursed 5 loans fully disbursed 1/ 44.3 690 1970 Jamaica Population 2.0 0.2 727 1971 Jamaica Education 13.5 7.9 899 1973 Jamaica Highways 9.3 2.6 1003 1974 Jamaica Sites & Services 15.0 11.8 1004 1974 Jamaica Development Bank Agriculture 5.5 2.2 1032 1975 Jamaica Highways 13.5 9.4 1043 1975 Jamaica Airports 12.5 7.9 1146 1975 The Water Commission Kingston, Jamaica Sewerage/Water 15.0 14.3 1284 1976 Jamaica Population 6.8 6.8 Total (net cancellation) 137.4 of which has been repaid 11.9 Total now outstanding 125.5 Amount sold 1.6 of which has been repaid 1.4 0.2 Total now held by Bank 125.3 Total undisbursed 63.1 B. Statement of IFC Investments (as at March 31, 1977) Type of -----US$ million----- Year Obligor Business Loan Equity Total 1961 Jamaica Pre-Mix Ltd. Pre-mix concrete 0.2 0.2 1968 Pegasus Hotel of Jamaica Ltd. Tourism 2.2 0.7 2.9 Total gross commitments 2.4 0.7 3.1 Less cancellations, terminations, repayments and sales 1.2 1.2 Total commitments now held by IFC 1.2 0.7 1.9 Total undisbursed - - - 1/ A telecommunications loan (481-JM) was made in 1967 to the Jamaica Telephone Company and cancelled in the same year. ANNEX II Page 2 of 3 C. Proiects in Execution Ln. No. 690 Population Project; US$2.0 million of June 18, 1970; Effective Date: November 2, 1970; Closing Date: March 31, 1977. The project is substantially completed. All loan funds have been committed and disbursements will be completed in the near future. Ln. No. 727 Second Education Project; US$13.5 million of March 25, 1971; Effective Date: July 30, 1971; Closing Date: December 31, 1977. Project implementation is about three years behind appraisal schedule due to a change in government, high turnover in project unit staff and a lack of project implementation machinery. However, project implementa- tion now seems satisfactory. As a result of initial delays in getting the physical aspects of the project underway, the construction of schools will not be completed before August 1977. Thus, the Closing Date, originally December 31, 1975, has been extended to December 31, 1977. Due to sharp increases in prices and wages in the construction sector since appraisal, a substantial construction cost overrun of about US$15 to 18 million, or about 60% to 65% of appraisal estimates, can be expected. Counterpart funds are available, however, to allow project implementation to proceed satisfactorily. Ln. No. 899 Road Improvement and Maintenance Project; US$9.3 million of June 1, 1973; Effective Date: August 31, 1973; Closing Date: December 31, 1978. After some initial delays and quality control problems, the resurfacing and resealing program is proceeding satisfactorily. The tech- nical assistance and training programs of the consultants are also proceeding satisfactorily. Total project costs are estimated to be about 50% above the appraisal estimate due to increased costs of asphaltic overlay; nevertheless, the project is estimated to have a rate of return of about 30%. Ln. No. 1003 Sites and Services Project; US$15.0 million of June 13, 1974; Effective Date: September 9, 1974; Closing Date: December 31, 1978. The project is nearly one year behind schedule. Delays were caused by initial start-up problems and political violence which halted work on one site. The industry component of the project has been revised to give greater emphasis to small-scale enterprise. Ln. No. 1004 Second Agricultural Credit Project; US$5.5 million of June 13, 1974; Effective Date: October 3, 1974; Closing Date: December 31, 1977. Project funds have been entirely committed. ANNEX II Page 3 of 3 Ln. No. 1032 Third Highway Project; US$13.5 million of JuLy 26, 1974Z Effective Date: September 27, :9jj Closi DecemGber 1 1977. Construction has been delayed due to adverse weather conditions, redesign of some sections and labor problems. Although most project elements are now proceeding satisfactorily, the delays that have been encountered will undoubtedly lead to an as yet undetermined escalation in prcject costs. Ln. No. 1043 Airport Development Project; US$12.5 million cf October 2, 1974; Effective Date: March 14, 1975; Closing Date: Jun 30e, L1973 All major contracts have now been awarded, but earlier delays encountered during the design and award phases, mean that the project comple- tion date will slip from 12 to 18 months, ane the project cost will probably exceed appraisal estimates by about 10%. Though execution of work in progress has been slower than expected, the Government's tight fiscal situation makes the revised construction schedule more acceptable. The Airports Authority's aggressive management has improved this institution's financial position in spite of reduced traffic and high inflation. Nonetheless, the Authority will be unable to supply its contribution to the project financing plan. The short- fall will be made up by the Government with aelp from the Venezuelan Investment Fund. Ln. No. 1146 Kingston Sewerage and Water Supply Project; US$15 million of July 23, 1975; Effective Date: June 24 1976; Closing Date: September 30, 1979. Delays are being experienced in negotiating consultant contracts. This is in turn causing some delay in proceeding with major components. Ln. No. 1284 Second Population Project; US$6.8 million of June 17, 1976; Effective Date: August 30, 1976; Closing Date: December l1, 1980. The loan became effective two weeks ahead of schedule. A good start in the implementation of the project has been made. In civil works and procurement of special equipment, the project is ahead of the schedule in the Appraisal Report by about a month. The Cornwall County Program, which is the main component of the project covering nearly 25% of the population of Jamaica, is being implemented on schedule. ANNEX III Page 1 of 2 SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Time taken to prepare project: September 1974-September 1975 (b) Agency which prepared project: Jamaican Ministry of Agriculture prepared the project with the assis- tance of other government agencies and several FAO/CP and Bank missions. (c) Project first_presented to the Bank: July 1974 (d) First Bank mission to review project: July 1975 (e) Departure of appraisal mission: November 30, 1975 (f) Completion of negotiations: December 10, 1976 1/ (g) Planned date of effectiveness: August 31, 1977 Section II: Special Bank Implementation Actions None. Section III: Special Conditions 1. A formal approval by the Goverrnent of a plan for the reorganiza- tion of the Ministry of Agriculture would be a condition of loan effectiveness (para. 56). 2. The adoption of guidelines for operating policies and procedures for the Agricultural Settlements, which shall include a land rent review mechanism would be a condition of loan effectiveness (para. 57b). 3. The traininig program for Ministry of Agriculture employees would be cuil,kieted and submitted to the Bank within six months oL loan signing (para. 56c). 4. The Government would acquire 4,000 acres for settlement purposes within six months of loan signing (para. 57a). 1/ The uncertain Jamaican economic situation ovec the last year, and the time required for its assessment, contributed to delays in project processing. ANNEX III Page 2 of 2 5. Settlement plans not prepared by the time of loan signing would be completed within one year of loan signing (para. 57b). 6. The Government would provide the necessary funds to maintain the roads constructed under the project (para. 57c). 7. The Jamaica Development Bank would act as collection agent for the mortgage payments by the settlers (para. 57d). 8. The Government would cause the Jamaica Public Service Company and the National Water Authority to provide a timely supply of electricity and water for settlement (para. 57e). 9. The Government would assure the availability of adequate credit funds (para. 58). 10. User rates for food markets would be charged which would recover opera- tion and maintenance costs, as well as capital expenditures at an annual interest of 8% (para. 59b). 11. User rates for water would recover operation and maintenance cost and, to the extent practical, capital expenditures, taking into account the pay- ment capacity and preparedness of the users to pay (para. 59c). 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