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DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION

Not For Public Use

Report No. P-1628a-UV

REPORT AND RECOMMENDATION

OF THE

PRESIDENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT

TO

THE REPUBLIC OF UPPER VOLTA

FOR A RURAL ROADS PROJECT

June 16, 1975

This report was prepared for official use only by the Bank Group. It may not be published,qL:oted or cited without Bank Group authorization. The Bank Group does not acceptre.;ponsibility for the accuracy or completeness of the report.

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Currency Equivalents

Currency Unit = CFA franc (CFAF)US$1.00 = CFAF 225CFAF 1 million = US$4,4h40

Fiscal Year:

January 1 - December 31

System of Weights and Measures: Metric

Metric = British/AS Equivalents

1 meter (m) = 3.28 feet (ft)1 kilometer (km) 2 = 0.62 mile (mi)1 square Idlometer (km ) = 0.386 square miles (sq mi)1 metric ton (m ton) 2,204 pounds (lb)

Abbreviations and Acronyms

AAVV Autorite pour l'Am6nagement des Vallees des VoltasDPW - Directorate of Public WorksDRF - Drought Relief FundFAC - Fonds d'Aide et de CooperationFED - Fonds Europeen de DeveloppementHAER - Service de l'Hydraulique et de l'Amenagement des Espaces RurauxMPW - Ministry of Public Works, Transport, and Urban DevelopmenLORD - Organisme Regional de D6veloppementRDF - Rural Development FundRMWA - Regional Mission in Western AfricaSERS - Service d'Entretien des Routes SecondairesUNDP - United Nations Development ProgrammeUSAID - United States Agency for International Development

INTERNATIONAL DEVELOPMENT ASSOCIATION

REPORT AND RECOMMENDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT

TO THE REPUBLIC OF UPPER VOLTAFOR A RURAL ROADS PROJECT

1. I submit the following report and recommendation on a proposeddevelopment credit to the Republic of Upper Volta for the equivalent ofUS$7.5 million on standard IDA terms to help finance a rural roads project.

PART I: THE ECONOMY

2. The basic problems of economic development in Upper Volta were setout in a report entitled "The Economic Development of Upper Volta" datedNovember 27, 1970 (R70-237 and R71-2). An updating memorandum of January 13,1972, was distributed to the Executive Directors on March 2, 1972 (R72-47).An economic mission visited Upper Volta in March/April 1974; its draft reportwas discussed with Government for comments and will be distributed to theExecutive Directors shortly. The mission's main findings are incorporatedin this report.

Background

3. With a GDP per capita of about US$70 in 1972, Upper Volta is one ofthe 25 "least developed countries" identified by the United Nations. Thecountry's economic structure is typical of a situation of extreme under-development: agriculture and livestock provide a living for over 90 percentof the population, but, with very low productivity, account directly for lessthan 50 percent of GDP; manufacturing, closely linked to agriculture, providesonly 10 percent of GDP; the remainder comes from the service sector, whichincludes the Government; exports, usually a dominant growth factor in mostAfrican countries, represent only between 7 and 9 percent of GDP; despitemodest investment rates (8 to 10 percent), the resource gap was about 8 per-cent of GDP until 1971, nearly doubled in 1972, and reached an unusuallyhigh level of 20 percent of GDP in 1973.

4. A number of years of sparse rainfall since 1968 culminatingin a severe drought in 1973 have resulted in a serious setback in agriculturalproduction and overall economic stagnation. This is all the more serious be-cause in the years since 1960 growth had been very limited, probably notexceeding one percent per year per head. Compared to 1969/70 agriculturalproduction declined by 15 percent in 1970/71 and by 17 percent in 1972/73.The most serious crop failures and livestock losses occurred in the northernand central parts of the country, thus accentuating existing income dispari-ties between regions. Emergency food imports were about 40,000 tons in

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1971/72, 60,000 tons in 1972/73, and over 100,000 tons in 1973/74. Climaticconditions in 1974 were normal, and crop production for 1974/75 should regainthe levels achieved in 1969/70. The drought has brought out more clearlythan ever the basic problem facing Upper Volta's rural sector: uneven popula-tion distribution with respect to available resources throughout the countryand excessive population pressure in the central region (the Mossi Plateau);about 61 percent of the total population, or 3.5 million people, live inthis region which comprises only 32 percent of the total area and is muchless favorably endowed than the south and southwestern regions from the view-point of both rainfall and soil quality. This explains why the bulk of themigrants to other parts of the country and to neighboring countries come fromthis region.

Financial Developments

5. Despite the persistently large trade deficit, the overall balanceof payments has been in surplus over the six years, 1968-73. Even in 1974,the Central Bank's provisional figures show a surplus of US$10 million.Net foreign assets tripled between 1968 and the middle of 1974 to reach overUS$70 million or about 8 months worth of imports of goods and non-factorservices. This was made possible by the increasing flows of both externalaid and private transfers, mainly Voltaic workers' remittances from theIvory Coast. In February 1974, the prices of refined petroleum productsdoubled at delivery point in Upper Volta. Though consumption of petroleumproducts is small, representing 6 percent of total imports (1972) and a verylow percentage of all the inputs used in the economy, they are the only sourceof modern energy in the country and, therefore, little room exists for reducingconsumption. The hydroelectric potential is under study, but seems to be verylimited. Higher petroleum prices, combined with other rises, particularlyin import prices and in local wages, have set the economy on an inflationarypath, which is in sharp contrast with the past. As a result of these develop-ments, effective April 1, 1974 most workers received wage increases rangingfrom 3 percent to as much as 38 percent.

6. Over the past six years the Treasury's liquidity position has re-mained comfortable as a result of three factors: a policy of strict budget-ary austerity applied since 1967 by the military regime, the continuation ofFrench budget subsidies, surpluses accruing from autonomous public institu-tions, especially the Price Stabilization Fund for Agricultural Products andspecial aid received in connection with the drought. The Government'scurrent budget turned from a deficit of CFAF 200 million in 1966 into a sur-plus of CFAF 300 million in 1967, and since then a surplus of betweenCFAF 300 and 900 million has been generated every year. The Government wasthus able to liquidate the stock of unpaid bills by 1969, and the publicsector as a whole has been able to gradually build up substantial reserveswith the Central Bank. These were negative in 1966 and close to CFAF 10billion or 4-5 months of imports in mid-1974.

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7. This remarkable financial performance has been achieved at a cost,however, with undesirable consequences that have, to some degree, hinderedeconomic development in three related ways: first, by excessively cuttingback operating funds of the Government's economic services; second, bylimiting Government agencies capacity to participate in the financing of newdevelopment projects; third, by making more difficult the needed follow-upon a number of projects financed largely by external aid. Thus, while it isessential for a country like Upper Volta to control carefully current expen-ditures, it would seem nevertheless that the time is opportune now for a moreaggressive and development-oriented expenditure policy. The first manifestexample of this new orientation is the establishment of a new entity, theCaisse Nationale de Depots et d'Investissements, which is designed to mobilizesavings from both public and private bodies and channel them into economicallyand financially profitable undertakings. This institution started operationsin January, 1975 and has already committed CFAF 2.5 billion for developmentprojects mainly in the industrial and public utilities sectors and the roadssector.

Foreign Aid

8. Over the 12 years from 1960 to 1972, foreign aid disbursementstotalled about CFAF 91 billion ($360 million) or an annual average of$30 million. About 90 percent of total aid disbursements have been grantsand the remainder loans, of which 90 percent on concessionary terms. Capi-tal aid has constituted the largest component accounting for about 65 per-cent of total aid, followed by technical assistance (20 percent).

9. Foreign sources have financed more than two-thirds of total actualinvestment expenditures under the first Development Plan (1967-70), and areexpected to finance about four-fifths of total estimated investment (CFAF 63.2billion) under the second Development Plan (1972-76). The major sources ofaid have been the "Fonds d'Aide et de Cooperation" (FAC) of France, and the"Fonds Europeen de Developpement" (FED) of the European Economic Community.These two agencies together have provided between 1960 and 1972 about 75 per-cent of all foreign aid to Upper Volta, principally in the form of grants.French aid has been quite diversified; for example for the period 1969-73,about half the total was capital aid for specific projects; one fourth,technical assistance; the remainder, "equipment grants" to the Government'sbudget. French capital aid in 1972 was distributed as follows: infrastruc-ture (65 percent), production development, i.e., agriculture (26 percent),general studies (16 percent), and social equipment (15 percent). FED aidhas been entirely grant, mainly for capital projects. Highest prioritywas given to agriculture (52 percent) and social sectors (42 percent) in thefirst FED (1958-1963); to road construction (about half) in the second FED(1964-68); to some large agro-industrial projects, such as the sugar plantat Banfora in the third FED (1969-74). IDA is gradually becoming one of themain sources of aid with total commitments as of May 31, 1975, of $39.7million (not including this project). Other aid agencies and countries withsizeable programs now include UNDP, USAID, and the Federal Republic ofGermany.

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10. Outstanding external public debt at the end of 1973 was US$120million, including an undisbursed amount of US$89 million. This figureincludes a loan of $44.5 million from the People's Republic of China. Thestatus and terms of this loan are not known as yet. The ratio of debt servicepayments to exports of goods and non-factor services was about 6 percent in1973, and is not expected to vary much in the near future. The Association'sshare of total external debt (including undisbursed) at the end of 1974 wasabout 18%. The Association only began lending to Upper Volta in 1969 andtherefore its share in debt service is still insignificant.

Development Policies and Prospects

11. The three plans, 1966-1970, 1971 (interim), and 1972-76 undertakenso far have generally been well conceived, well oriented documents taking arealistic view of the country's meager resource base. As the First Plan,the current Plan (1972-76) is essentially a set of sectoral projects, andits target is very moderate, i.e., an annual real growth rate of GDP of 3.5percent. The Plan correctly assigns highest priority to rural developmentand in this sector, specific attention is paid to a program for the developmentof the river valleys following the Riverblindness eradication campaign thateffectively started at the end of 1974. The Government also attaches highpriority to the exploitation of manganese deposits in the northern regions,an undertaking that would require construction of a rail link of 350 Km.between Ouagadougou and the prospective mine at Tambao. For the first twoyears of the Plan, 1972 and 1973, financing commitments reached almost 100percent of targets, while projects execution met about three-fourths of theobjective, which should be considered as a relatively good performance. Ex-ternal financing of capital expenditure has apparently not been the majorobstacle in carrying out the Plan so far; on the other hand, lack of operat-ing funds, limited administration capacity, inadequate preparation of pro-jects, and most recently adverse external factors as diverse as drought,world inflation, and delays in deliveries of material and equipment fromoverseas, are very real obstacles to the smooth execution of projects.

12. Foreign capital and technical assistance will continue to play adecisive role in the development of Upper Volta. The economic mission'sestimates show that a moderate increase in the real value of foreign aid,relative to the 1972 level, should occur over the next six years (1975-1980),and that this should be sufficient to meet the costs of economic expansionat a rate -- about 2 percent per annum of GDP growth per capita in realterms -- which is considered consistent with the country's absorptive capacityin the medium run. However, if this aid is to be truly effective, there willbe need for better coordination within the Government and for some relaxationof present budgetary limits over development expenditures. On the other hand,foreign aid should continue to be provided on concessionary terms, in viewof the present level of poverty of the country and its limited growth poten-tial. External debt service at present absorbs about 6 percent of UpperVolta's export earnings, and although this figure is fairly low in absoluteterms, it is high in relation to the country's very limited savings capacity.Although Upper Volta should be expected to make a more significant contribu-tion to the financing of public investment, this will necessarily remainmodest, and external lending agencies must continue to finance a high pro-portion of total costs, including local costs of development projects.

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PART II: BANK GROUP OPERATIONS

13. To date the Bank Group's contribution to Upper Volta's development

has consisted of eight IDA projects totaling $39.7 million on which a little

over US$7.65 million has so far been disbursed (Annex II). The first tele-communications project, for which a credit of US$0.8 million was made in1969, was completed in September of 1974. The West Volta Cotton project,

for which a credit of US$6.2 million was made in 1970, has not proceeded as

well as planned mainly because of drought conditions which led farmers to

favor food crops over cotton growing. Linked with this was a credit of

US$2.8 million approved in 1972 for upgrading to gravelled surface two roads

in the project area; an increase of US$1.35 million in the amount of this

credit was approved by the Executive Directors in March 1974 to take intoaccount increases in project cost due to currency realignments and to costoverruns on the road construction component. The rural development fund

project, for which a credit of US$2.2 million was approved in 1972, is nowmaking some progress after a slow start resulting from delays over project

prefinancing and staff appointments; a similar project for Drought Relief(US$2.0 million) was approved in December of 1972. Further credits of

US$2.85 million for an education project and US$4.5 million for a second

telecommunications project were approved in June 1973, and the projects are

now getting underway. The Bougouriba rural development project (US$8 million

credit approved in June 1974) has been delayed by difficulties in recruiting

expatriate staff, but these are being overcome, and the project should be

started satisfactorily in the near future. Finally, the Livestock Development

Project (US$9.0 million) was approved by the Executive Directors on May 27,

1975.

14. The Bank Group's strategy in Upper Volta is dictated by the extreme

poverty of the country and the need to raise productivity in agriculture and

livestock on which the bulk of the population depend for a livelihood. Some

basic infrastructure is required for the operation of the economy, and the

IDA projects for telecommunications, and road construction and road better-ment are designed to help in providing this. For the rest, IDA lending isdirected primarily to projects in agriculture, education and rural village

improvements with special emphasis on operations which will favor movementsof people away from the overpopulated central plateau with poor soils tothe southwest where ecological conditions are much better. Within thisbroad strategy, the campaign for the control of riverblindness in the VoltaRiver Basin, for which the Bank has been mobilizing the necessary externalfinancing, should open up new opportunities for investment in land settlementand agricultural development, and the Bank Group stands ready to assist inthe identification, preparation and eventual financing of suitable projectsin this field. Meanwhile, a special unit has been created with the assist-ance of the French Government to prepare schemes for the development of someof the river valleys.

15. In addition to the proposed project, a number of projects are underconsideration for IDA financing. Consultants are currently preparing and

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evaluating the West Volta Cotton Project with a view to the preparation of

a follow-up project which would probably take the form of an integratedrural development project. A second Rural Development Fund operation and

additional highway financing based on studies carried out under the earlier

project (Credit 316 UV) are further possibilities for the next two years.

PART III: ROAD SECTOR

Roads and Agricultural Development

16. As stated previously (para. 3), the country's economy depends on

agriculture which provides a livelihood for more than 90 percent of the

population. Agricultural development is however limited by three majorfactors: sparse rainfall, ranging from 1,000-1,300 mm annually in the south

to only about 500-800 mm in the north; generally poor soils, except for some

regions in the south and west; and the prevalence of debilitating diseases,

in particular bilharzia and onchocerciasis (Riverblindness), which affect

large segments of the population. In addition to the constraints imposed bynature, one of the primary factors inhibiting the development of agriculturalproduction is the poor condition (due primarily to inadequate maintenance)and in many cases the total absence, of rural roads.

The Marketing System

17. Agricultural production falls into two main categories, crops grown

for export, mainly cotton and groundnuts, and those grown for domestic con-

sumption, primarily cereals; the mechanism for marketing and price-settingvaries according to these categories. In the case of export commodities,

producer prices and exporter margins are officially set by the Caisse deStabilisation des Prix des Produits (CSPP), and the products are marketed

mainly by private traders who are licensed by CSPP, and who sell to exporters.The impact that may be expected from road improvement in this case is limited

to the savings in transport costs. With respect to the marketing of cereals,

total production of which accounts for about 80 percent of the country's agri-

cultural output, the situation is different and road improvement would havea much wider impact. Minimum producer prices for cereals are set by the

Ministry of Finance prior to the marketing season, but except for this

restriction, products are sold freely. Private traders predominate and

competition prevails in the most accessible areas. In regions where poorroad conditions allow limited access, the pattern is different; in such cases,the unreliability of transport and the resulting high costs of the servicetends to discourage traders from collecting produce, and farmers are conse-

quently less inclined to generate marketable surpluses. The lack of competi-tion means that the few traders who do enter these areas to collect producederive high profit margins. In these circumstances, road improvement should

both increase producer prices commensurate with the reduction of transport

costs to the market and generate substantial production increases.

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Highway Network and Traffic

18. For administrative purposes, the road system is divided into two

categories: classified (about 8,700 km) which are grouped into national,

departmental, and regional roads; and unclassified (about 7,800 km) which

consist only of tracks. Functionally, the system is divided into trunk roads

and rural roads. For the purpose of this project, the rural network consists

of departmental and regional roads, and tracks.

19. The network of trunk roads (about 4,450 km, of which 575 km paved)

radiates from the capital city Ouagadougou and the main commercial center

Bobo-Dioulasso, and is generally adequate for current needs. The majority

of the unpaved roads are gravel-surfaced and are considered to be of all-

weather standard, but sections are often closed to heavy traffic for short

periods after major rains. The rural roads are essentially dry-weather

facilities which become impassable during the rains; a large number of these

roads have deteriorated over the past decade due to lack of proper mainte-

nance.

Road Transport Industry

20. The road transport industry is highly fragmented, consisting of one

large fleet operator and many very small firms or owner-operators. The

industry is supervised by the Transport Division of the Ministry of Public

Works, Transport, and Urban Development (NPW) but there are at present no

significant barriers to entry or other regulations inhibiting growth. The

bulk of goods traffic in the country is carried by an estimated 8,100 heavy

vehicles; on rural roads, small vehicles continue to account for much of the

commercial traffic.

Highway Administration

21. Within the Ministry of Public Works, Transport and Urban Develop-ment (MPW), the Directorate of Public Works (DPW) is responsible for the

planning, design, construction, and maintenance of roads and bridges. DPW

is divided into four divisions for planning and design of new works; mainte-nance of national roads; equipment and mechanical workshops; and the newly

established division for rural roads (SERS). DPW also operates a technical

training school in Ouagadougou (Centre de Formation des Techniciens desTravaux Publics) for foremen, mechanics, and operators.

22. DPW's maintenance division which is responsible for national roads

has been supported over the past several years by about US$5.0 million worth

of highway equipment provided by FAC which covers most of its needs. Mainte-

nance of rural roads is the responsibility of local authorities, but they have

had neither the funds, equipment, nor personnel necessary to undertake the

work required. Responsibility for these roads has now been taken over by SERS

(established in January 1975).

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23. SERS has four sections for administration, studies, construction

and improvement, and maintenance. SERS will rely for the establishment of

priorities of rural road construction and planning of annual programs on a

Bureau of Planning and Programming (Development Credit Agreement Section

3.02) to be created within DPW. The Bureau will serve as a liaison between

the Ministry of Public Works and the Ministry of Planning, and will be respon-

sible for the country's entire road network, primarily for: (i) collecting

and evaluating traffic and inventory data on a permanent basis; (ii) formulating

and coordinating with the various Government agencies the priorities for road

improvement; and (iii) analyzing sector issues for developing transport policy

recommendations and future investment plans. The Government has requested

the United Nations Development Programme (UNDP) to help establish the Bureau,

and to provide two experts for about three years, as well as overseas fellow-

ships for local staff. UNDP has indicated its willingness in principle to

provide this assistance, and would wish the Bank Group to act as executing

agency. Early establishment of the unit is important to improving DPW's insti-

tutional capacity. Assurances were obtained from Government at negotiations

that the Bureau will be established not later than June 30, 1976 (Development

Credit Agreement Section 3.02), the expected starting date for the physical

implementat'on of the project. The receipt of a firm commitment from the UIDP

or such other source of technical assistance as shall be acceptable to the

Association to provide the borrower with the technical assistance needed to

establish and maintain the Bureau of Planning and Programming referred to

above, is a condition of effectiveness of the project. (Development Credit

Agreement, Section 6.01).

24. Most of DPW's foreign assistance staff is provided by FAC; there

are at present 31 FAC experts at various levels, including three Division

Chiefs, some accountants, and several highway technicians supplementing the

84 local staff. The Government is presently making a major effort to train

Voltaics to take over positions in DPW now held by forelgn staff.

Financing Highway Maintenance

25. Maintenance of national roads is financed through allocations frorm

a Road Fund established in 1968, as well as through supplementary appropria-

tions from the current budget, and by contributions from FAC. Total alloca--

tions to DPW Lor this purpose ranged from CFAF 550 million (US$2.5 million

equivalent) in 1968 to CFAF 693 million (US$3.1 million equivalent) in 1974.

26. According to the law establishing the Road Fund, 59 percent of all

Government revenue from taxes, duties, and other levies on gasoline and diesel-

oil are to be allocated to the Fund and used exclusively on the national net-

work. Revenues increased from US$5.2 million equivalent in 1970 to US$6.1

million equivalent in 1974, representing about 10 percent of the current

budget. However, the Ministry of Finance, in line with its general policy

of fiscal austerity, has not been making allocations to the Road Fund as

stipulated by law, and between 1970-74, allocations ranged between only 46

percent and 57 percent of the revenues accruing to the Fund. The reduced

allocations have not been detrimental to the national road network and the

Association feels that they were justified given the priorities created as

a result of the drought.

27. For maintenance of rural roads, the annual allocation to DPEW ontermination of the proposed project should be about CFAF 200 million (US$0.9million) to assure effective operations. This additional expenditure formaintenance of rural roads would not appear to be an excessive burden on publicfinances and could be met from the revenues from fuel taxes which, as indicatedabove, are only partly used for the maintenance of national roads. During nego-tiations Government agreed to allocate CFAF 200 milllon for rural road maintenancein the first year after project completion, and that this amount will be aug-mented in line with cost increases, and adjusted to reflect the evolution ofmaintenance requirements on the rural road network (Development Credit Agree-ment, Section 4.04). Although the initial financing requirements of the feederroad maintenance program will not initially be an unbearable burden on publicfinances, it is not negligible in comparison to the requirements of the nationalnetwork and could conceivably increase very substantially as the scope of thefeeder road operation increases. Alternative sources of revenues should there-fore be sought. They could possibly come from the budget of the local communi-ties who will directly benefit from the feeder road improvement maintenanceprogram, or alternatively the local communities could participate in the executionof the work through self help programs. In addition to providing relief to thepublic finances these alternatives would ensure that local communities arecommitted to the feeder road program. The Government will review thesealternative financing methods and discuss its findings with IDA no laterthan June 30, 1976.

The Road Construction Industry

28. Since 1968, an average of about CFAF 2.5 billion (US$11 millionequivalent) has been spent on road investments. All major contracts havebeen carried out by foreign firms, many of which operate throughout WestAfrica. There is only one local contractor of any importance involved inroad construction works, and his firm's activities are limited to supply andhaulage of materials, and construction of culverts. On the other hand, 15domestic entrepreneurs who have the potential to carry out some of the civilworks called for in the project, had contracts with DPW in 1973. TheGovernment will use local contractors as widely as possible in carryingout the annual rural roads improvement program (see para. 36).

Training of Local Entrepreneurs

29. To help develop the domestic industry, the Government in 1970created the Office de Promotion de }'Entreprise Voltaique (OPEV) and gaveit responsibility for training and assisting the management of small- andmedium-sized domestic enterprises. OPEV has a training center which providescourses in accounting, management and elementary technology for home construc-tion; about 275 Voltaics have been trained so far.

30. Since its creation, OPEV received technical and financial assistancefrom France through AFCOPA (Association Francaise de Formation de Cooperation

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et de Promotion Artisanale) (CFAF 180 million); from Germany (DM 925,000 or

CFAF 85 million); and as of February 1975, from UNIDO (US$530,000 or CFAF 119

million).

PART IV: THE PROJECT

31. A report entitled "Appraisal of a Rural Road Project" (No. 738-UV)

is being circulated separately. A credit and project summary, including a

breakdown of costs is contained in Annex III, and the project area is shown on

the attached map (IBRD 11504). The project is based on a study financed by

FAC and carried out by BCEOM (France) in 1972 and on additional project prep-

aration done by RMWA. A field appraisal took place in December 1974 and

negotiations were held in Ouagadougou from May 21, 1975 through May 24, 1975.

The Voltaic delegation was led by His Excellency, MIahamadou Ouedrago, Minister

of Public Works, Transport and Urban Development.

The Project Area

32. The proposed project is concentrated in the West and South of the

country, on the Mossi Plateau and in the Sahelian area. There is a marked

regional bias towards the agricultural development frontiers in the areas

of the West Volta, the White Volta and Banfora and Bougouriba. There are

2,100 km of existing rural roads to be maintained under the project and

1,200 km of roads to be improved.

Project Description

The proposed project would cover a three-year period and consist

of:

(a) Improving and subsequent maintenance of about 1,200 kmof rural roads, and maintenance of about 2,100 km ofexisting rural roads;

(b) strengthening of SERS through technical assistance to MPWfor implementation of the above road program, and procurementof highway equipment; and

(c) consulting services for an evaluation study of the impactand effectiveness of road components included in agricul-tural and rural development projects financed by theAssociation over the past five years.

Project Execution

34. Physical execution of the project is expected to start in mid-1976,and to take about three years to complete. DPW will be responsible for over-all execution. SERS will submit to the Director of DPW annual work programs

prepared by the Bureau of Planning and Programming in coordination with SERS'studies group. DPW will present this program for approval to an InterministerialTechnical Committee (ITC) which the Government plans to create shortly. It is

intended that ITC will be chaired by the Minister of Public Works and consist

of representatives of Ministries and local agencies which have a direct interest

in rural roads; ITC will be similar to a committee which was created for the

Drought Relief Fund project, and which is functioning satisfactorily. The

Government has provided assurances at Credit negotiations that ITC will be

established not later than June 30, 1976 (Development Credit Agreement, Section

3.04(a)). Once SERS' annual program is adopted by ITC, it will be submitted

to the Association-for approval; the Association will satisfy itself that the

roads selected for improvement meet agreed criteria (Development Credit Agree-

ment, Section 3.04(b)).

35. In order to create a legal basis for budgetary appropriations for

improvement and maintenance works, all roads included in the project which

are not yet classified must be upgraded into this category. Accordingly,the Government provided assurances at negotiations that it will fulfill the

required administrative and legal procedures for classifying such roads.(Development Credit Agreement, Section 4.03).

36. Road improvement and maintenance works will be carried out by SERS'

own forces, with some support provided by contractors and community self-

help programs. In view of the scattered nature of the operations and the

flexibility required in conducting them, this method of execution is expected

to provide the lowest cost solution. Contractors (most likely small domestic

entrepreneurs) would be involved in the construction of minor works, mainlydrainage and crossing structures, and in haulage of road surfacing materials.(See para. 41).

37. Regarding the proposed community action programs, basically similarlabor-intensive work methods were used extensively in execution of the RDF/DRF

projects, but the degree of participation of the population as well as the

technical results were uneven among the various project areas. In the presentproject, labor-intensive activity can be applied most effectively in day-to-day

patching and repairs, clearing of ditches and culverts, and minor earthworks.The extent to which SERS intends to make use of labor-intensive methods,

local contractors and self-help schemes will be described in the work program

to be submitted to the Association for its approval (para. 34).

38. Consultants should be engaged in time to permit them to a start on

the evaluation study not later than September 1976. (Development Credit Agree-ment, Section 3.03). SERS will be assisted by the Bureau of Planning and

Programming in supervising the study.

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Training

39. Although the proposed project does not finance a specific trainingcomponent, it does provide a medium for the development of a wide range oftechnical skills. To carry out the project SERS will require about 120foremen, mechanics, plant operators, equipment overseers, and laborers; thesepersonnel would all be recruited and trained locally at DPS's technicaltraining school in Ouagadougou (Centre de Formation des Techniciens desTravaux Publics). In addition, the duties of the technical assistanceexperts under the project would include on-the-job training of qualifiedlocal counterparts.

Cost Estimates and Financial Arrangements

40. The total cost of the project net of taxes but including con-tingencies is US$8.5 million. The proposed Credit of US$7.5 million willfinance 88 percent of total project costs net of taxes, i.e., all theforeign costs (US$6.8 million) and US$0.9 million equivalent of the localcosts. The remaining local costs of the project (US$1 million equivalent)plus about US$1.7 million equivalent in taxes, will be provided by theGovernment.

Procurement and Disbursement

41. Equipment, materials, and spare parts and supplies amounting toUS$4.1 million will be procured on the basis of international competitivebidding in accordance with Bank Group guidelines. Items which would not bebulked into packages costing US$40,000 equivalent or less and which would notbe sufficient to attract the interest of foreign bidders could be purchasedthrough local suppliers in accordance with Government competitive biddingprocedures acceptable to the Association. Manufactured items in this categoryare available from local representatives of international suppliers, service isadequate and prices are competitive, the total amount of such purchases wouldnot exceed US$250,000. Contracts for selected minor works (mainly drainageand crossing structures) and haulage of materials, will be awarded on thebasis of competitive bidding advertized locally following procedures which areacceptable to IDA. A small part of project cost (US$0.7 million) would be forstaff salaries and operating costs which are not suitable for competitive bid--ding. Studies will be executed by consultants selected in agreement with, andunder terms of reference and conditions satisfactory to the Association.

42. Credit funds will be disbursed as follows:

(a) 100 percent of c.i.fL. costs (Bobo-Dioulasso or Ouadougou) ofimported equipment, spare parts, and materials;

(b) 100 percent of foreign expenditures for consulting servicesand technical assistance;

- 13 -

(c) 50 percent of total expenditures (net of taxes) for directoperating costs for betterment and maintenance works by SERS'forces; and

(d) 80 percent of total costs (net of taxes) of works by

contractors.

Benefits and Justification

43. The economic justification of the project rests on two complemen-

tary factors: favorable conditions for road construction and low traffic

volumes. The first element results from the generally easy terrain in the

country and the abundance of natural construction materials which make it

possible to achieve major road improvements at very low cost. Traffic volume

is low and goods generally move in small vehicles, thus transport costs are

high; as a result, any road improvement tends to have a substantial impact

on the level of transport costs. The combined effect of the above factors

implies that relatively small expenditures on improvement and maintenance of

rural roads can be expected to have a significant impact on transport condi-

tions and in turn on agricultural production.

44. Institution-building is of primary importance, and the component

included in the project represents a major benefit which cannot be quantified.

It consists of: (i) establishment within DPW of a division for improving and

maintaining rural roads; and (ii) establishment of an ITC for coordinating

the development of agriculture and of rural roads. Also a Bureau of Planning

and Programming would be created at the level of the DPW.

45. The overall economic justification for the improvement works will

become available only as project execution progresses and specific roads are

selected; for roads which have been identified, a rate of return of between

10 percent and 18 percent has been ascertained. All roads selected will have

to yield an economic rate of return of at least 10 percent.

46. The economic justification of the maintenance component of the

project is based on vehicle operating cost savings only. It ignores any

attributable indirect benefits resulting from induced agricultural develop-

ment. The computed economic return is therefore very conservative, ranging

between 10-18 percent, depending on assumptions made about the rate of road

deterioration with no maintenance.

- 14 -

PART V: LEGAL INSTRUMENTS AND AUTHORITY

47. The draft Development Credit Agreement between the Associationand the Republic of Upper Volta, the recommendation of the Committee providedfor in Article V, section 1(d) of the Articles of Agreement of the Associationand the text of a Resolution approving the proposed Development Credit,are being distributed to the Executive Directors separately.

48. The draft Development Credit Agreement conforms to the normalpattern for credits for highway projects. Special features of interestare referred to in paragraphs 23 through 38 of this report. The receipt ofa firm commitment from the UNDP or such other source of technical assistanceas shall be acceptable to the Association to provide the borrower with thetechnical assistance needed to establish and maintain the Bureau of Planningand Programming referred to above, is a condition of effectiveness of theProject (Development Credit Agreement, Section 6.01).

49. I am satisfied that the proposed development credit would complywith the Articles of Agreement of the Association.

PART VI: RECOMMENDATION

50. I recommend that the Executive Directors approve the proposedcredit.

Robert S. McNamaraPresident

AttachmentsJune 16, 1975 By B. Chadenet

ANNEX Ipage 1 of 3 pagea

OW0RY DATA - UPR VOLTA

PaPIATION M5I?T2t, 00 ko 2 5 61 dlli~~~~on (ald-1972 )

57 Per helof arabi lend

SOCIAL INDICAYORS

Upper Volta HS fe- hur ntris.

mm P5R CAPIU us* (ATn5 &ASI,) 70 j 70 180o Z 260 I

DMDGRAPHICCrude birth ratO (per thousand) L 9 49 504 50 /c 4 d 1 lc.d 4.Crude death rate (per thousand ) 31 2 29 27 23 c 22Infant mortality rate (Per thoasand live birth.) 182 ..9 156IjLif e OXPcta.cy at birth (yar) 32 35 .d 37 /c.d 41 /.d 4 2

Grosa reproduction rate /2 3.2 7..d 3.3 L1d 2 9 380Population growth rete a 1.9 2.1 E 21 f 1 9 7 21Populotion growth rate - arban h 8Age structure (percimt) 5d

0-11 L2A 43 49 48 4215-61h 55 ( 54 149 51 /1 5i'6c end over 3 1k 3 2 5

Age depeodency ratio A 0. 0.9 1.0 1.0 0.9icononic dependency ratio 0.9 0.9 1.0 1.6 I.?

Urban population as peromnt of tota1 CSL 11 10 /JL 29 aFeilY plsnningl No of accptors umalative (thua.)

No. of asirs (5 of marriad easen)

Total labor force (thounda) 2,500 3,000 0 2,800 530 4p 1,600 /d.,Percentage ewploy.d in agriculture 9? 89 /d .. 85 1 73Percentage unaoP10yed 92 3 /d d 73

INCOMN DISTRIWJTt1ONPeracnt of national inoame roceined by highest 5%Percent of national income reosid by highest 20%Peroent of national income received by lowest 20%.Per.ont of national incose received by lowest 10%

IUSIRTIb OM OPF LAND ORgRSH3Powianmd by top lC5 of owners% owmed by enalleat 10% of omasra

IEALIN SDM MUTRITIONPopulation par physician 64 000 t 92,760 41,490 17,210 14940Pon:latian par nurding pereon 1,110 ! 4,230 3,860 4,320 2,410PoPulation per hospita1 bed 1,810 ,. 1,670 I, 1,380 /v 2,790 /I 730 /vPer capita calorie supply as % of raquirmanta Zi 85 /k 82 92 d9 97Par capita protein eupply, total (graa per dayTL 66, 7i 66 69 75 64

Of which, animal and puls. 22 m 23 , 44 j 28 ^Death rate 1-h year. a 223.8

EWOATION!" uMd /8 primary school enrofleent r.tio 8 13 20 15 /4Adjuated Zeaecondary school *nrollmont ratio 1 1 2 2 7Year. of aAhowling provided, firat and second level 13 12 12 14 13Vocational enoollnt as % of sec. school enrollment 21 15 40 5/a 12Adult literacy rate S 5 /a.z.a. 10 /.a..aa 10 am

NoUSw3"rarg No. of persons per rio (urban)

Peront of occupied unita witbout piped eaterAccess to electricity (as S of total population)Percent of tural pepulation connected to *leatricity

CONSDWHTIcOIdro -raciv-rs per 1000 pepultion 1 16 12 17 69Passenger cara per 1000 population 0.4 1 1 1 / 11Electric powar ceneption (kwh p.c.) 2 A 5 8 62 84Newsprint oonsouption p.c. kg per year 1.3 0.08

Notes Figurea rfar rither to the l-test pariode or to ea*oont of nvirontal temperature, body weigbta, andthe latest years. Latet periodr refer in principle to diatribution by go end ex af national populations.the years 1956-60 or l966-70, the latest years in prin- & Protein staard (requir_ nta) for all countries as astab-ciple to 1960 and 1970. liehed by USDA Zoononio Research Ssrvice provide for a minimo./ l The Per Capita GNP estimate is at ar ket prices for allowanco of 60 gram of total protein per dy, and 20 greas of

ycora other then 19O,calculated by the ase conversion animal and pulase protein, of bhish 10 gres ahould be nirnltechnique aa the 1972 World Bwnk Atla. protein The. etandards are somebat lmosr tb n tbose of 75

/2 Average number of daughters per aenan of reproductiv r w- of total protain NdW 23 gre.. of animal ptotin Yr anoage, average for the world, proposed by ?AO in the Third World Pood

Z) Pcpulation growth rates are for the decades ending in Survy.1960 and 1970. Soam tudies haea augeated that crde death rates of childrenZL RatiO of population ander 25 and 65 and over t-o popula- agea I through 4 may be ueed a. a first approximation inden oftion of ages 15-64 for age dependency ratio and to labor mlontrition.force of agea 15-64 for econonio dependency ratio. /8 Percantage enrolled of oor"eaponding population of chool ageF FiO reference standards repreaent physiologioal re- as defined fw each oountry.quiresants for noreal activity and health, taking

^ 19721 ab 1960-61; L 1965-70; / Batieate; / 1968; /f 1960-72 Z& 1960-71; h 52 citieel /i Over10,000 population; . Cap-Ve rt gion nd the cities of Seint-lZuie, Thies, Kaolock, Diourbl and Ziguinchar; a 1961;

/I 15-59 years; /E 60 end over; n Ratio of population under 15 end 65 and over to total labor force; o Ratio ofpopulation under 15 mad 59 end over to total labor fore; & 19711 & 1959j & Six urban communes and eightlocalitiee which can be coneidered aa urban; a 1970-7l; t 1963; IN Including midwives, assistant nurses andaaeistant tidwives; , Government hospital establiehshents; / 1964-66; x 1965; Z 1969; a 15 year andover; an Definition not available; Zab Nmployment in egriculture including livestock amounts to 96 percent of laborforce; / I. urban area, about 20 percent.

o Senegal has been selected as the objective country for Upper Volta einc. ite ONP is about three times that of Upper Volte's;they both are in the ease geographical area, Sahalian region, share a .*iollr monetAry systes, and have the sese economicgrowth rate in th. period 1960-71, and the sam liteamcy ratio 5 - 10 percent &a well.

82 March 13, 197(

ANNEX IPage 2 of 3 pages

ECONOMIC INDICATORS

GROSS NATIONAL PROMICT IN 1973/a ANNUAL RATE OF GRO'WTH (%, constant prices)

US$ M3.n. % 1950 -60 1960 -75

GOP at Market Prices 425.6 100.0 3.7 2.2 2.3

Gross Domestic Investment 59.0 13.9 4.5 2.6 1.7

Gross Natiornal Saving -9.3 -2.2Current Account Balanice -67.9 -15.9Exports of Goods, NFS 32-3 7.6 1.1 3.5 5.8

Imports of Goods, NFS 100.2 23.5 0.4 2.6 1.9

OtUTPUT, LABOR F'ORCE ANDPRODUCTIVITY IN' ]972

Value Added Labor Force V. A. Per WorkerUS. Mln. % '000 % US $ %

Agriculture 144.4 41.3 2,792 96.4 58 45

Industry 63.3 18.1 25 0.8 2 013 1 572

Services 141.7 40.6 81 2.8 1,778 1,389

Unallocated /b ..Total7Xverage

349.4 100.0 100.5 =7 100.0

GOVEERNtSNT FlNA!iCEGeneral Government

CFAF Billion) % of GDP179 973 1975 1969-7

Current Receipts 12.2' 12.2 11.8Current Ex'e'v.dture 10.5 10.5 9.8Curreat Surpluls -' 1.7 2.1Capital Expendit`ras 1.3 1.3 1.2Ex-ternal Assistance (net) 0.7 0.7 0.6

hiO,'EY, CPEDIT and PRIOCSS 1965 1969 1970 1971 1972 1973 1974Y illion CFAFoutstanding end periodt

Money and Quasi Money 6.41 8.07 9.37 9.93 9.9ut 14.-2 17-53

Bank credit to Public Sector 0.13 -2.24 -5.84 -4.45 -5.14 -6.13 -9.27

Bank Credit to Private Sector 4.03 5.69 5.63 6.11 7.31 9.16 .

(Percentages or Index Numbers)

Money and Quasi Money as % of GDP 7.6 10.L8 10.8 10.1 14..

General Price lndex (1963 = 100) 108.3 110.2 119.0 123 136-3

Annual percentage changes insGeneral Price Index 1.8 8.o 3.4 10.7

Bank credit to Public Sector . -71.1 -15.9 -15.5 -19.3 -51.2

Bank credit to Private Sector -1.1 8.5 19.6 25.3 67.9

NOTE: All convwrsions to dollars irn this table are at the average exchange rate prevailirng during the period

,Ccovqred/a Eonomic d.ta Sheet, IBRD

Lb Total labor force; unemployed are allocated to sector of their normal occcupation. "Unallocated" consists

mainly of unenployed workers seeking their first job.

not availablenot applicable

ANNEX IPage 3 of 3 pages

TRADE PAYHZNTS AND CAPITAL FLO'S

BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1969-72)/b

1970 1972 1973 US $ Mln %(Millions US $)

Exports of Goods, NFS 32.0 43.3 52.3 Livestock,and Livestock Products 7.9 43Imports of Goods, NFS -70.6 -116.8 4148.3 1) Live Animals 6.7 37

Resource Gap (deficit = -) ~~~~~~ ~~ -~m 2') Me'At O.A 4Resource Cap (deficit 3-T -)6O70.5 .-96.0 3) Hides and Skins 0.4 2

Interest Payments (net) 0.4 -1.6 -0.8 Cotton 4.7 26Workers' Remittances 17.3 25.0 28.5 1) Seed 0.4 2Other Factor Payments (net) * * . 2) Ginned 4.3 24Cther private Transfcrs (neta 7.6 8.2 15.3 All other commodities 5.6 31Balance on Current Account -14.0 -9T§ -53. Total I8 10.2 ,

Direct Foreign Investment 1.5 0.8 1 EXTERNAL DEBT, DECEMBER 31. 1973Net MLT Borrowing 1.0 2.7 17.4

Disbursements (2.2) (4.3) US $ MflnAmortization (1.2) (1.6)1Subtotal -11.5 -35.4 -35. Public Debt, incl. guaranteed 119.5

Capital Grants 22.3 32.5 54.8 Non-Guaranteed Private DebtOther Capital (net) 0.4 5.9 > -2.5 Total outstanding & DisbursedOther items n.e.i 2.7 _1. Increase in Reserves (+) 13.8 1 16.7 EBT SERVICE RATIO for 1973/c

Gross Reserves (end year) 36.4 47.5 62.7Net Reserves (end year) 31.7 39.3 55.2 Public Debt. incl. guaranteed

Non-Guaranteed Private DebtFuel and Related Materials 6.8 8.8 . Total outstanding & Disbursed 5.7%,

iMportsof which: Petroleum 3.8 5.0

Exportsof ,.hich: Petroleum . IBRD/lDA LENDING. ( Feb. 1975 ) (Million US S):

PATE 0$' ;j-7~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~'~~~~~~~ iBRO IDA~~~~~~~~~~~~~~~~~~~~~~~~ 1R DRATE OF KXCHA'5*3E _O IDA1969-71 US$1.00 - CFAF 276.00 Outstanding & Disbursed 6.91972 US$1.00 = CFAF 256.25 Undisbursed 24.11973 US$1.00 = CFAF 235.42 Outstanding incl. Undisbursed1974 US$1.00 = CFAF 222.25

/a Mainly pensions paid by France.7i; Officially recorded exports only.I Ratio of Debt Service to Exports of Goods and Non-Factor Services

__ Posterior to exchange adjustment and including Bougouriba Agricultural Project of US$E.0 million.

not available

not applicable

ANNEX IIPage 1 of 6 pages

STATUS OF BANK GROUP OPERATIONS Di UPPER VOLTA

A. On-going Projects

STATEMENT OF IDA CREDIT (as of April 30, 1'975)

(US.: million)^redit Amount (less cancellations)N,umber Year Borrower Purpose IDA Undisbursed

lLl-TTV 1969 Republic ofUpper Volta Teleconmunications 0.8

225-TTV 1970 Republic ofUpper Volta West Volta ootton 6.2 2.3

316-UiV 1972 Republic ofUpper Volta Roads .15 2.6

317- UV 1972 Republic of Rural DeveloninentTJpper Volta Fund 2.2 1.1

430-UT 1973 Republic ofUpper Volta Education 2.85 2.85

231-UV 1973 Republic ofUpper Volta Telecommunications 2.5 2.2

422-JV 1973 Republic ofUpper Volta Drought Relief 2.0 1.5

06-uv* 1974 Republic of Bougouriba Agricul-Upper Volta tural Development 8.0 8.0

* 1975 Republic of Livestock Develop-Upper Volta ment Project 9.0 9.0

TOTAL 39.7of which has been repaid -

TOTAL now held by IDA** 39.7

TOTAL undisbursed 32.05

* Not yet effective

Prior to exchange adjustment of US$0.2 million.

B. STATEMENT OF IFC INVESTMENTS (as of April 30, 1975)

NIL

ANNEX IIPage 2 of 6 pages

C. PROJECTS IN EvXECUTION

Credit 225: West Volta Cotton Project. US$6.2 Million Credit ofDecember 30, 1970; Closing Date June 30, 1976

The project is in the final stage of a cotton production developmentprogram in West Volta, which originally started with FAC financing in 1963.It consists of both expansion of the area under cotton cultivation on some

46,000 farms and improvement of yields through credit and extension services,

and provision of better communications and processing facilities. The proj-ect also includes funds for detailed engineering of secondary roads and prepara-tion of the Bougouriba Agricultural Development Project.

Plagued by very poor weather conditions during the past three yearsand a severe drought last year, seed cotton production in the project arearemained below expectations (about 20,000 t as against 50,000 t estimated inthe appraisal report) and the areas under cotton also remained stagnant.Improved rainfall distribution in 1974/75 increased yields to about 25,000 t.which however is still low.

Because of the low production, the existing ginneries in Bobo-Dioulasso and Koudougou work at only 50 percent capacity, and therefore the

construction of an additional ginnery at Hounde, estimated in the appraisalreport at CFA 256 million, is for the time being not justified. Withfavorable weather conditions and improved prices, the project areas may

reach the 40,000 t production goal in 1978, at which point the present gin-neries would have to work at full capacity.

Although the production goals as set out in the appraisal reporthave not yet been reached, the project is having a favorable impact on the

rural population of the project area and therefore a follow-up rural develop-ment project is being considered.

Credit 316: Road Project. US$4.15 Million Credit of June 26, 1972(as amended on March 25, 1974); Closing Date December 31,1975

Originally the project comprised (a) the reconstruction of theSolenzo Koudougou (70 km) and the Hounde-Bereba (27 km) roads, and (b) fea-sibility studies for about 400 km of primary roads, and engineering of thosesections found to have the highest priority.

The pre-selection of contractors for part (a) above took place inNovember 1972. Four bids were received in 1973, the lowest being about 25

percent higher than the appraisal estimate. Construction of the SolenzoKoudougou road began in March 1974. This road should be completed shortly.Construction of the Hounde-Bereba road is now deleted from the project as

cotton production does not merit the construction of the ginnery and withoutthe ginnery there is no justification for the road. Government suggestionsfor alternative road projects are being considered presently.

ANNEX IIPage 3 of 6 pages

Regarding (b) above, the Government proposed four roads to be

studied and the Association agreed to only two, from Bobo-Dioulasso to Hounde

and Bobo-Dioulasso to Banfora (a total of about 190 kim) as these were the

only roads considered likely to show a satisfactory rate of return. Feasi-

bility studies have been completed and detailed engineering is now underway.

Due to currency realignments and to cost overruns on the road

construction part of the project, the dollar cost of the project increased.

Consequently, to enable completion of the project, on March 25, 1974 the

Association approved an increase of US$1.35 million in the amount of the

Credit from US$2.8 million to US$4.15 million. It is expected that the proj-

ect will be completed and the credit fully disbursed by the present closing

date.

Credit 317: Rural Development Fund Project. US$2.2 Million Credit of

June 26, 1972; Closing Date September 30 1976

Between 300,000 and 450,000 people are benefiting from the project.

The Rural Development Fund (RDF) Division has been established within the

Banque Nationale de Developpement (BND) to execute the project; it started

operating in September 1972. BND's performance and project management are

satisfactory. It has just completed its first annual program on the basis of

proposals made by the Organismes Regionaux de Developpement (ORD). The main

components of this program are dug and tube wells, village warehouses and

development of bottomlands. Execution of the project which started slowly

mainly due to delays over project prefinancing and staff appointments has

gained momentum during the 1973/74 season. Experience has shown that the

project concept is sound, in that financing small projects can have a direct

and beneficial effect on the poorest 40 percent who are willing to co-

operate fully in contributing their labor. It is also encouraging to see

how a fairly complex management set-up involving the expertise of various

governmental institutions (iER, PW, Agriculture and the ORD) can be used to

make a combined effort in rural development. A follow-up project, RDF II, is

presently under preparation.

Credit 430: Education Project. US$2.85 Mlillion Credit of September 28,

1973; Closing Date June 30, 1978

The Credit was approved on June 21, 1973 and signed on September 28,

1973. It became effective on June 27, 1974.

The project consists of two parts:

Part A

Reconstruction and equipping of 40 rural education centers (CERs)

and equipping of 80 such centers; organization equipping and servicing of 150

cooperative groups (GPS) of former CER students as the pilot phase of a

ANNEX IIPage 4 of 6 pages

scheme to create some 500 such groups; creation of three rural developmentcenters; related technical assistance for project implementation and evalua-tion; a feasibility study of a system to train managers for rural developmentprojects.

Part B

Provision of science facilities for 21 secondary schools.

While progress on Part B of the project which is under the Ministryof Education has been satisfactory, there have been no disbursements underPart A. This is mainly the result of the weakness in project management. Therural education part of the project is particularly complex because it involvesthe coordination of two other donors, the FAC and the FED. In addition,certain changes proved necessary in the concept of rural education: (a) thelinkage of the centers to specific rural development activities; (b) fullparticipation of the communities in the objectives of the centers.

The Project is under continuous supervision from the RMWA inAbidjan and the Government, FAC, FED and the Bank are working to strengthenproject management.

Credit 431: Second Telecommunications Project. US$4.5 Million Credit ofSeptember 28, 1973; Closing Date June 30, 1978

The Credit was approved on June 21, 1973 and signed on September28, 1973. It became effective on May 23, 1974.

This credit, the second made to Upper Volta for telecommunications,finances the major part of Upper Volta's 1974-77 telecommunications expansionprogram. The project comprises provision of automatic and trunk switchingequipment, local distribution networks and subscribers' apparatus, microwavelinks, auxillary construction and equipment, consultants services and trainingof personnel. The executing agency for the project is the Office des Posteset Telecommunications de Haute-Volta (OPT) an autonomous public entity.

The execution of the project has been progressing on schedule. Allmajor contracts were awarded by the end of 1974. It should be completed byDecember 1977. As compared to appraisal forecasts, project costs have in-creased only slightly on the project's local cost components, and theIDA Credit is judged sufficient to cover the project's foreign exchangerequirements. The financial results for the year ending December 31, 1973were satisfactory, though the actual rate of return was 8 percent compared tothe appraised rate of return of 10.4 percent. OPT financial outlook for theyears 74-77 is projected to deteriorate, however. OPT is aware of this, andis currently studying several financial policy alternatives.

ANNEX IIPage 5 of 6 pages

Credit 442: Drought Relief Project. US$2.0 Million Credit of December 7,1973; Closing Date June 30, 1976

The Credit was approved on November 13, 1973 and signed on December7, 1973. It was declared effective on April 24, 1974.

This Credit is one of six credits made available to the six Saheliancountries to help people in drought-affected areas to re-establish theirself-sufficiency through redevelopment and improvement of their farms andherds. The project is being executed by the Rural Development Fund Divisionwhich was established within the Banque Nationale de Developpement to executethe on-going IDA-financed Rural Development Fund Project.

The project consists of four sub-projects; (i) construction andequipment of 150 wells; (ii) construction of three earth dams; (iii) purclhaseof road equipment for repair of feeder roads; (iv) construction of six seedstorage warehouses. The Project area is that part of Northern Upper Voltaaffected by the drought.

The procurement phase is completed and the execution of the tube-well drilling program, the most important component of the project, will St.!''shortly. The well drilling program was delayed for almost one year due todefault by suppliers of vehicle parts and drilling pipes, which are essentialto the assembling of the drilling rigs. It is anticipated that ouly oneof the originally planned three dams will be constructed due to price increasesin the other sub-projects. Management has the project well in hand, but itis doubtful that the project will be completed on time due to the late arrivalof new drilling rigs.

Credit 496: Bougouriba Agricultural Development. US$8.0 MillionCredit of July 19, 1974; Closing Date May 31, 1979

The Credit was approved on May 30. 1974 and signed on July 19,1974. The Credit is not yet effective and no disbursements have taken place.Delays have been due primarily to problems in recruiting key staff. However,the Project Director has been appointed and preparatory work is proceeding,and the credit should become effective very shortly.

The project, to be carried out over a four-year period, is the firstmajor effort to develop the natural and human resources of the Bougouriba ORD.The project will concentrate on the areas presently free of onchocerciasis.The project includes food crop and cotton development; a program for prophylac-tic vaccinations of livestock, provision of agricultural credit and extensionservices, well construction, feeder road improvement, intensive staff training,applied research and road studies.

ANNEX IIPage 6 of 6 pages

Credit Livestock Development Project, US$9.0 million

Credit of June , 1975; Closing Date

The Credit was approved on May 27 and signing is expected sihortly.

The project, to be carried out over five years, is a broadly based

program to assist cattle production in the Dedougou and Bobo-Dioulasso

Regional Development Agencies (ORDs) through group ranch development, the

improvement of veterinary services, livestock marketing, meat processing and

the provision of technical assistance. It will help about 300,000 traditional

cattle producers and, in addition will introduce commercial ranching to the

traditional sector.

ANNEX IIIPage 1

UPPER VOLTA - RURAL ROAD PROJECT

Credit and Project Summary

Borrower: Republic of Upper Volta

Amount: US$7.5 million equivalent

Terms: Standard

Project Description: The project, carried out over three years, 1967-1979would comprise:

(a) a three-year program for improvement and subse-quent maintenance of about 1,200 km of ruralroads, and maintenance of about 2,100 km ofexisting rural roads;

(b) strengthening of SERS througlh technicalassistance to MPW for implementation of theabove program, and procurement of highwayequipment; and

(c) consulting services for an evaluation studyof the impact and effectiveness of roadcomponents included in. agricultural andrural development projects financed by theAssociation over the past five years.

Benefits andJustification: Quantifiable project benefits would include the

following: (i) immediate direct benefits resultingfrom savings in vehicle operating costs; (ii) in-direct joint-product benefits related to increasedagricultural production in some areas, or to newagricultural development in others. Institutionbuilding is of primary importance, and the componentincluded in the project represents a major benefitwhich cannot be quantifieds It consists of: (i) estab-lishment within DPW of a division for improving and

ANNEX IIIPage 2

maintaining rural roads; and (ii) coordinating thedevelopment of agricultural and of rural roadsthrough the ITC. Concurrently with the implementa-tion of the project the United Nations DevelopmentProgramme (UNDP) will be financing a Bureau of Planningand Programming at the level of the D.P.W.

Estimated Cost: The project is estimated to cost US$8.5 million netof taxes (in June 1975 prices), with foreign exchangecosts of US$6.6 million (78 percent). Taxes andcustoms duties are estimated at US$1.7 millionequivalent. Details of cost estimates are summarizedbelow:

(In '000 US$)

Local Foreign Total

A. Equipment and Materials

- Equipment 30 1,709 1,739- Materials 20 678 698

50 2,387 2,437

B. Spare Parts and Supplies 300 1,688 1,988

C. Staff

- Technical Assistance 40 242 282- Head Office 70 16 86- Field Staff 437 - 437

547 258 805

D. Works Contracted 350 350 700

E. Studies - 192 192

Total A - E 1,247 4,875 6,122

F. Contingencies

- Physical (about 5%) 70 232 302- Price Escalation 520 1,535 2,055

Total F 590 1,767 2,375

GRAND TOTAL 1,837 6,642 8,479

(rounded) (1,900)(6,600) (8,500)

ANNEX IIIPage 3

Financing Plan: The proposed Credit of US$7.5 million will finance88 percent of total project costs net of taxes,i.e., all the foreign costs (US$6.6 million) and

US$0.9 million equivalent of the local costs. Theremaining local costs of the project (US$1.0 millionequivalent) plus about US$1.7 million equivalent in

taxes, would be provided by the Government.

EstimatedDisbursements: Bank Fiscal Year Annual Cumulative

----- (US$ '000)…_____

1977 3,600 3,6001978 2,400 6,0001979 1,500 7,500

ProcurementArrangements: Physical implementation of the project is expected

to start in mid-1976. The project will be executedby SERS' own forces, with support provided by con-tractors and community self-help programs. Equipment,materials, and spare parts and supplies amounting to

US$4.1 million will be procured on the basis of inter-national competitive bidding in accordance with Bank

Group guidelines. Items which could not be bulked

into packages costing US$40,000 equivalent or lessand which would not be sufficient to attract the

interest of foreign bidders, could be purchased throughlocal suppliers in accordance with Government competi-

tive bidding procedures acceptable to the Association.Manufacture items in this category are available fromlocal representatives of international suppliers,service is adequate and prices are competitive; the

total amount of such purchases would not exceedUS$250,000. Contracts for selected minor works(mainly drainage and crossing structures) and haulage

of materials, will be awarded on the basis of

competitive bidding advertized locally following

procedures which are acceptable to IDA. A small partof project cost (US$0.7 million) would be for staffsalaries and operating costs which are not suitable

for competitive bidding. Studies will be executed

by consultants selected in agreement with, and underterms of reference and conditions satisfactory to the

Association.

Staffing: Of the eleven positions to be created in the SERS(theDepartment of Rural Roads), eight can be filled-by

Voltaic personnel. The remaining three positions,

two road engineers and one accountant for equipment

ANNEX IIIPage 4

management, will be provided by foreign expertsfinanced by IDA, each for a period of two years.Foreign experts would have qualified counterparts,provided by Government who would replace them aftertwo years. In addition, 25 man-months of consultingservices are provided to do the expost evaluationstudy.

EconomicRate of Return: Between 10 and 18 percent.

Appraisal Report: No. 738a-UV of June 6, 1975.

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