Document of

The World Bank

FOR OFFICIAL USE ONLY FIlE tOP'

Report No. 1933a-TU

TURKEY

FOURTH LIVESTOCK DEVELOPMENT PROJECT

STAFF APPRAISAL REPORT

May 12, 1978

Projects DepartmentEurope, Middle East and North Africa

Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

US$1 = Turkish Lira (LT) 19.25

LT 1 = US$0.0519LT 1,000,000 = US$51,948

WEIGHTS AND MEASURES

1 kilogram (kg) = 2.20 pounds

1 metric ton = 1,000 kilograms

1 metric ton = 0.98 long ton

1 meter (m) = 1.09 yards1 kilometer (km) 2 = 0.62 mile1 hectare (ha) = 10,000 m = 2.47 acres

1 decare = 0.1 ha 2 0.25 acre1 square kilometer (km )=

100 ha = 0.386 square mile1 liter (1) = 0.264 gallon

ABBREVIATIONS

AI - Artificial InseminationDANB - Directorate of Artificial and Natural Breeding and

Record Keeping of MINAGEBK - Meat and Fish Organization

EDLD - Encouragement and Development Loans Division of TCZBGDAA - General Directorate of Agricultural Affairs of MINAGGDAR - General Directorate of Agricultural Research of MINAGGDVS - General Directorate of Veterinary Services of MINAGGOT - Government of TurkeyIDPD - Intensive Dairy Production Division of LDPLDP - Directorate for Livestock Development Projects of MINAGMINAG - Ministry of Food, Agriculture and LivestockSEE - State Economic EnterpriseSOF - Special Operational Fund

SPO - State Planning Organization

TCZB - Agricultural Bank of TurkeyTSEK - Milk Industries OrganizationVSD - Village Development Subproject

FISCAL YEAR (GOT)

March 1 - February 28

FISCAL YEAR (TCZB)

January 1 - December 31

/1 The Turkish Lira was devalued toUS$ = LT 25.00 as of March 1, 1978.

FOR OFFICIAL USE ONLY

TURKEY

FOURTH LIVESTOCK DEVELOPMENT PROJECT

STAFF APPRAISAL REPORT

TABLE OF CONTENTS

Page No.

I. THE LIVESTOCK SUBSECTOR .............................. 1

A. Background ...................... 1B. The Subsector in the Economy .... ......... . 2

General ................................ 2

Livestock Productivity ..... .......... . 3Potential for Livestock Improvement ......... 4

C. Government Policy ...... ............. . 5General ................................ 5Milk and Meat Marketing ..... ........... 6Price Incentives ...... ............. 6Newer Technology ................- 7

II. THE PROJECT.10I. TEPOET ........................................ 1

A. Introduction . ............. I", ......... 10B. Brief Description ............................. 10C. Detailed Features ............................. 11

Project Area ................................ 11On-Lending Program .......................... 12On-Farm Development ......................... 15Technical Services ........................... 16-Technical Studies ........................... 18Training .................................... 18

D. Cost Estimates ................................ 19E. Financing ..................................... 20F. Procurement ................................... 21

Livestock ................................... 21Tractors and Machinery ...................... 22Vehicles ....................... 22Constructions, Tools, Seed and Fertilizer 23

G. Disbursements ................. ................ 23H. Environmental Impact .......................... 24

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bankt authorization.

TABLE OF CONTENTS (Continued)

Page No.

III. PROJECT IMPLEMENTATION ............................. 24

A. Organization and Management .... ............... 24B. On-Lending Policies and Procedures .... ........ 26C. Technical Services ............................ 29D. Technical Studies ............................. 29E. Training ...................................... 30F. Accounting and Auditing ....................... 31G. Monitoring and Evaluation ..................... 31

IV. TECHNICAL COEFFICIENTS ............................. 32

A. Pasture and Feedstuff Production .... .......... 32B. Livestock Development Models .... .............. 33

V. MARKETING AND FINANCIAL ANALYSIS ........ .. ......... 33

A. Production .................................... 33B. Prices ........................................ 34C. Marketing ..................................... 34D. Producer Income and Financial Rates of Return .. 35

Subborrowers and Incomes ..................... 35

VI. BENEFITS AND JUSTIFICATION ......................... 37

A. Aggregate Economic Return ..................... 37B. Beneficiaries ................................. 41C. Project Risks ................................. 42

VII. AGREEMENTS REACHED AND RECOMMENDATIONS ............. 43

TEXT TABLES

5.1 Producers' Benefits and Financial Rates of Return ........ 366.1 Economic Rate of Return .................................. 40

ANNEXES

1. Estimated Schedule of Disbursements2. Total Project Cost and Phasing3. Income Comparisons and Investments Financed by the Project4. Selected Documents and Data Available in the Project File

TABLE OF CONTENTS (Continued)

CHART

World Bank-18657 Implementation Schedule

MAPS

IBRD 13431R Areas Covered by Bank-Financed Projects andPublic Infrastructure in the Livestock Subsector

IBRD 13432 Project Areas of Second and Fourth Livestock Projects

TURKEY

FOURTH LIVESTOCK DEVELOPMENT PROJECT

I. THE LIVESTOCK SUBSECTOR

A. Background

1.01 The Government of Turkey has requested a Bank Loan to assist infinancing a six-year repeater project to consolidate and expand the moderni-zation of village livestock production in eastern Turkey which was initiatedunder the Second Livestock Development Project (Credit 330-TU), and to extendto the east the improved dairy production concepts which were developed inwestern and central Turkey under the First and Third Livestock DevelopmentProjects (Credit 236-TU and Loan 1265-TU, respectively). The project isexpected to comprise the main part of Turkey's Fourth Five-Year Plan for devel-opment of the livestock subsector. It seeks generally to develop Turkey'sextensive livestock resource, which is one of the largest in Europe and theMiddle East, in order to maintain the country's self-sufficiency in livestockproducts and to improve incomes among village families in eastern Turkey whoown the bulk of the livestock resource and constitute the majority of thatregion's rural poor.

1.02 The Bank and IDA have previously made eight loans and seven creditsto Turkey for agriculture as follows: Grain Storage, Loan 27-TU (US$3.9million); Seyhan Irrigation, Loan 63-TU (US$25.2 million), Credit 38-TU(US$20.0 million), Fruit and Vegetable Export, Loan 762-TU (US$10 million),Credit 257-TU (US$15.0 million); Intensive Dairy Production, Credit 236-TU(US$4.5 million); Irrigation Rehabilitation Completion, Credit 281-TU(US$18.0 million); Second Livestock Development, Credit 330-TU (US$16.0million); Seyhan Irrigation, Stage II, Loan 587-TU (US$12.0 million), Credit143-TU (US$14.2 million); Ceyhan Aslantas Multipurpose, Loan 883-TU (US$44.0million), Credit 360-TU (US$30 million); Corum-Cankiri Rural Development, Loan1130-TU (US$75.0 million); Agriculture Credit and Agroindustries, Loan 1248-TU(US$53.4 million); Third Livestock Development Project, Loan 1265-TU (US$21.5million).

1.03 The preparation of the project was undertaken by the General Direc-torate of Livestock Development Projects (LDP) of the Ministry of Food, Agri-culture and Livestock (MINAG) assisted by two FAO-CP missions which visitedTurkey in August 1976 and March/April 1977 and by a Bank mission which visitedthe country in April 1977. This report is based on the findings of a missionwhich visited Turkey to appraise the project in October/November 1977 com-prising Messrs. N.A. Worker, F.J. Tellez, W.H. Spall, S.K. Bhatnagar (Bank)and S. Guss (Consultant).

B. The Subsector in the Economy

General

1.04 Livestock is a key resource in Turkey, contributing about 30% of thegross value of agricultural production and 8% of GNP. The livestock populationis amongst the highest in Europe and the Middle East. Current estimates indi-cate the country has about 41.1 million sheep, 18.8 million goats, 14.8 mil-lion cattle and buffalo, 2.3 million horses and donkeys and 41.7 millionpoultry and turkeys. Despite this extensive resource, analysis of publishedfigures indicates that the number of grazing animals has increased slowly atonly about 0.7% annually since the early 1960's, due mainly to competitionfrom crop farming and the inability of animal producers to modernize and toincrease their productivity, although this slow increase has been partlyoffset by considerable growth in poultry and broiler numbers.

1.05 Principal livestock outputs include milk, meat, eggs, wool, mohair,hides, draft power and transport. Manure is an important by-product forfertilizer and fuel. Pig products are insignificant because of religiousobjections. The First (1963-67), Second (1968-72) and Third (1973-77) Devel-opment Plans had targets for growth of livestock products of 5.6, 4.8 and 5%per annum, respectively. Actual growth over the period 1963-75 was about 2.5%per annum. This barely matched human population increase and was far belowthe current anticipated demand for all commodities except eggs.

1.06 External trade in livestock and livestock products is limited,virtually all production being used domestically. Imports (mainly pedigreestock for breed improvement) averaged about US$2.2 million per year overthe years 1971-75 and exports (mainly live sheep and cattle for slaughter,and mohair) averaged only some US$33.5 million per year over the same period.The latter figure probably underestimates the true situation due to illegalexports to Iran and Syria which, although not quantifiable, are considered tobe appreciable. Demand projections for livestock products made during theBank's recent Agricultural Sector Survey indicate that Turkey will move fromits present state of relative self-sufficiency to one where in 1985 it isestimated it would need to import over 30% of its milk and meat and over20% of its wool and mohair requirements, unless there is a major change inhistorical production and consumption trends.

1.07 Apart from its important direct contribution to the value ofagricultural output and to the national food supply, the role of livestockin village family life in Turkey is paramount. Livestock ownership iswidespread within rural families as most communities have access to commongrazing lands. Livestock products, notably milk and its products, comprisea main source of food and income for most farm families, particularly thesmaller ones. Livestock is thus not only a significant component of theagricultural sector but is vital in the lives of the rural poor. Since thegreatest number of livestock is owned by such families, the developmentof the livestock subsector represents an important means for raising incomesof this group and for promoting more equitable income levels generally.

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Livestock Productivity

1.08 Livestock production throughout Turkey is largely traditional.

Modernizing influences are limited mainly to innovations introduced under the

first three Bank-financed Livestock Projects (paras. 1.20-1.23). The prin-

cipal characteristic of the subsector is its low productivity. Animals

subsist mainly on residues from cereal crops, on volunteer growth on fallowed

crop lands, and on natural grazing on the poorer, non-cultivable areas. It

is a rational system which utilizes feed resources with no alternative use.

It is inefficient, however, in that this essentially low-quality, maintenance

diet is insufficient to meet the production needs of animals. Further,

because farmers generally lack access to technical services, credit and other

inputs, they make little attempt to supplement the quality of the feed or to

manipulate its supply to match animal requirements. Technical coefficients

thus tend to be uniformly poor and output exceptionally low.

1.09 Statistics from municipal and Meat and Fish Organization (EBK)

facilities, which account for 100% of official and an estimated 60% of total

slaughter, indicate that the average adult carcass of cattle killed in these

facilities weighs only 80 to 90 kg, with a markedly declining trend over

recent years. Young cattle average only 30 to 35 kg carcass weight and in

recent years have formed a steadily increasing proportion of total cattle

slaughtered, to a point where they now represent almost one half of the total

kill. The average of all cattle slaughtered is currently only some 57 kg

carcass weight. Such low slaughter weights, combined with an 18-month calving

interval and depressed weaning and offtake rates (41 and 18%, respectively),

result in a beef output of only some 135,000 tons annually from the national

herd, or only one ton of carcass per 100 cattle. Sheep and goats enjoy a

small comparative advantage over cattle because they can use low-quality feed

resources somewhat better. Weaning rates of sheep and goats (50 and 56%,

respectively), offtake (27 and 23%, respectively) and carcass weights (16 to

17 kg for mature animals and 8 kg for young) tend, relatively, to be better.

There is still room for improvement, however, as total sheep and goat meat

production, estimated at about 190,000 tons per year from 58 million head,

is only one ton of carcass per 300 animals.

1.10 Dairy productivity is also low. Even though milk and its products

are traditional in the diet 1/, milk production is non-specialized and tends

to be an incidental by-product of livestock keeping. The principal exceptions

are the intensive dairy units established under the Bank-assisted First Live-

stock Project and the repeater Third Project (paras. 1.21-1.22). Levels of

production are poor for all species. Average output per lactation is only

some 580 kg for cows, 48 kg for sheep and 70 kg for goats. The low product-

ivity of cows is of particular concern to village families who are heavily

dependent on cows, with their longer lactation characteristics, to supplement

1/ Annual per capita consumption of milk and milk products is estimated

by FAO at about 110 liters, considerably less than Ireland's annual

consumption of 218 liters per capita but more than Greece's 56 liters

per capita (FAO "World Dairy Economy in Figures").

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milk from sheep and goats which tend to be seasonal breeders and to lactatefor only 3 to 4 months. It is also of concern to Government who, inattempting to maintain milk supplies to the rapidly expanding urban centers,is faced with the difficulty that growth in dairy cattle numbers and intotal cow milk production has increased over the past 15 years at a ratewhich is only about one-half that of the national population increase,with the result that milk shortages in the main centers of urban growth arebecoming increasingly acute, particularly in winter.

Potential for Livestock Improvement

1.11 Overall, the livestock subsector is presently operating at only some10-20% of its potential. The scope for improvement is therefore large. Thereare two main reasons for this low productivity:

(i) poor genetic merit of local breeds; and

(ii) inadequate management, particularly veterinary health careand feeding.

These aspects need addressing and the correct emphasis needs to be accordedto each if the potential of the industry is to be realised.

1.12 There is a general need for the genetic upgrading of all classesof indigenous livestock in Turkey but highest priority needs to be givento improving fertility, milk yield and growth rate in sheep and cattle--particularly in cattle, where the greater potential exists. Turkey has forsome years been importing pedigree stock of improved breeds such as Holstein,Brown Swiss and Jersey cattle and Merino sheep to serve as a nucleus forupgrading purposes. Under the First Livestock Project, over 3,000 pedigreeHolstein heifers and bulls were imported from western Europe and over 10,000pedigree Holstein and Brown Swiss heifers and bulls are expected to be importedunder the Third Project. These will supplement the existing 5,000 or sopedigree cattle on Government farms and will form the main source of nucleusstock for genetic upgrading.

1.13 To manage existing animals better and to cater for an increasingpopulation of improved animals, the current levels of health care and feedingneed raising, through improved technical services. At present there areseveral health and disease problems in the country (e.g. foot and mouth,anthrax, blackleg, etc.) which are constraining production, and their effectscan be expected to increase as production is intensified. Fortunately, mosthealth and disease problems are defined and are capable of being controlledwith adequate drugs, vaccines and veterinary staffing.

1.14 Important as veterinary problems are, poor nutrition is currentlyan even more limiting constraint and there is a need to expand the feedbase significantly. There is some potential for making better use of cropresidues, although they are relatively fixed in amount and generally effi-ciently utilized and have only limited possibilities for expansion. Better

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potential exists for increased feed production from natural grasslands, of

which there are some 26 million ha, through fertilization, oversowing and

better grazing management, but costs are high and returns to farmers appear

marginal because most of the land on which natural pastures are found is of

relatively poor quality.

1.15 By far the best possibilities for expansion of the forage base

lie in making more efficient use of fallow lands, of which there are over

8 million ha available annually. Fallowing is traditional, to conserve

soil moisture and build fertility. There have been few attempts to inte-

grate forages into the crop rotation to replace the fallow, although a suc-

cessful start has been made under the three Bank-assisted Livestock Projects.

The possibilities of this approach are considerable because the areas in

fallow are extensive and the average duration of fallow is about 14 months.

Integrating crop and livestock production on a rotational basis, through the

introduction of forage crops and legume-based pasture for grazing by livestock

in place of the fallow, would provide the additional feed necessary for

livestock production and improve soil fertility. Such a system would result

in livestock and crop production being complementary rather than mainly

competitive as they tend to be now, and would provide the enlarged feed base

needed by livestock and higher crop yields. This is considered the essential

long-term strategy for expanding the feed base for livestock.

C. Government Policy

General

1.16 Government's agricultural and livestock policies in the first three

Five-Year Development Plans have emphasized increased production in order to

satisfy both rising domestic demands and to encourage exports and thereby

increased earnings of scarce foreign exchange. Government has also become

increasingly conscious of income inequities in the country, particularly

between urban and rural dwellers and between the populations of western and

eastern Turkey. This has led to an awareness of the need to provide for

greater development of rural resources, particularly those in eastern Turkey,

which in turn has focused attention on the need to assist livestock producers

in the east who comprise the bulk of the rural population there. In each of

its three succeeding Five-Year Plans, Government has given increasing emphasis

to developing livestock resources. Government's attempts to stimulate live-

stock production have been mainly through a strategy of:

(i) expanding outlets for incremental production through

improved processing/marketing facilities;

(ii) increasing the profitability of livestock production

through price incentives; and

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(iii) improving the efficiency of production by the introduc-tion of new technology at the farm level through themedium of investment credit linked with technicalassistance.

Milk and Meat Marketing

1.17 Milk, meat and live animal marketing is currently being developedby Government in areas lacking such facilities and with potential for develop-ment. Under an extensive program to expand milk marketing, the Turkish MilkIndustries Organization (TSEK), a State Economic Enterprises (SEE) is cur-rently establishing a national milk grid at a cost in excess of LT one bil-lion. Under the program, which is financed almost wholly from local sources,TSEK is building about 150 collection/cooling centers and some 40 new pro-cessing plants (Map IBRD 13431R). The plan is well intentioned but hasserious shortcomings, the most important of which is the lack of feasibilitystudies supporting it. Decisions on the siting, number and size of plantshave sometimes not been based on technical and financial considerations, buton non-technical grounds. Most plants are operating at a small fraction ofcapacity (many are offering only a five-day service to farmers), and they areoverstaffed, with the result that they are making large losses. Governmentfeels the losses will be of short duration as the potential of the industryis large. However, it is considered that, before more of its program isimplemented, an in-depth review of the entire TSEK program is essential,and hence the review of TSEK and the milk industry sector included as acomponent in the proposed project (para 2.17).

1.18 A similar ambitious program to develop meat marketing is being under-taken by the Meat and Fish Organization (EBK), another SEE. Under the program,16 new slaughter facilities were completed or were near completion at the endof 1977. A further 28 plants are scheduled for completion by 1984 (Map IBRD13431R). Parallel with plant development, livestock markets are also beingdeveloped. Some 19 such markets have already been constructed and 10 to 12more are under construction for completion in late 1978. A feature of EBK'sactivities, which constrasts with those of TSEK, is that its operations appeartechnically sounder and better organized to serve the interests of farmersthan those of TSEK.

Price Incentives

1.19 Price increases in real terms for milk and meat in excess of 25%since the early 1970's have aimed at making dairying and fattening attractive.MINAG policy has been directed to stimulating financial returns to dairyproducers and fatteners to ensure increases in milk and meat output and toprovide encouragement to breeders to make needed long-term investments intheir herds and flocks. Floor prices paid by TSEK for milk and by EBK formeat determine to some extent minimum price levels for these products. Keencompetition exists between the public and private sectors for most milk andmeat produced and intermediaries frequently pay considerably above the minimumprices depending on season, quality and locality. TSEK pays price incentives

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for fat content and bulk milk pickups from cooperatives and extends feedstuffadvances for winter milk production. Through such incentives, Governmentseeks not only to expand output but to encourage farmers to specialize indairying, to supply better quality milk and to provide a more even seasonalspread of production. Similarly, incentive pricing for meat by EBK has aimedat lessening se-sonal swings in meat supplies and providing encouragement tofarmers to undertake long-term improvement in their fattening capacity. EBKpays premiums for better-finished animals, by which means Government hopesto gradually improve carcass quality. EBK also makes advances to fatteners.Government is currently considering the payment of premiums for heavier car-casses to encourage farmers to feed animals longer and to slaughter them atheavier weights. Low slaughter weights, and the high and increasing propor-tion of immature stock slaughtered, represent an area of major inefficiency inmeat production at the national level (para. 1.09). Government is currentlyconsidering adjusting its pricing policy to reverse both of these situations.

Newer Technology

1.20 Government's main efforts to modernize livestock production havebeen through the medium of the first three Bank-assisted projects (LivestockI, Credit 236-TU, for US$4.5 million; Livestock II, Credit 330-TU, for US$16million; and Livestock III, Loan 1265-TU, for US$21.5 million). These super-vised credit projects were the first large-scale livestock development proj-ects launched in the country. An essential feature of all three was theprovision of credit to farmers for on-farm development (including improvedlivestock, farm constructions, tractors, machinery, forage production, etc.),along with the necessary technical assistance and veterinary health servicesto ensure successful project implementation. This was achieved by closeand continuous cooperation between the two principal implementing agencies,LDP of MINAG, which was established by Government Decree in 1970 expressly forimplementing the technical aspects of Bank-assisted livestock projects, andthe Agricultural Bank of Turkey (TCZB) 1/, which undertook responsibility forthe credit aspects of such projects. LDP's efforts were also partly supportedin the field in the area of veterinary health by staff of the VeterinaryServices Directorate (GDVS) of MINAG.

1.21 The First Livestock Project 2/, which became effective in 1971 dur-ing Turkey's Second Plan, represented the first major attempt by Governmentto modernize dairying. The strategy was to establish a nucleus of over3,000 imported pedigree Holstein animals on private farms in and around thefour main milk consuming centers in western Turkey (Ankara, Istanbul, Izmirand Adana), in order to provide a source of breeding stock for genetic

1/ TCZB has acted as the credit channel in several Bank-financed projects.Full details of TCZB appear in Appraisal Report 987-TU, Turkey: Appraisalof an Agricultural and Agroindustries Project (April 12, 1976).

2/ Appraisal Report PA-36a, January 26,1971.

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upgrading of indigenous herds. The project, which was completed in February1978 1/, was successful in achieving this objective and also in setting upsome 150 demonstrations of modern dairying, in promoting modern dairyingthrough provision to farmers of credit and technical assistance, and inbuilding LDP, TCZB and GDVS infrastructure. The 150 farms established underthe project fell short of the 250-300 projected at appraisal due to a slowstart-up, a longer than anticipated project implementation period, and theinevitable steep price increases which accompany such delays in an infla-tionary economy such as that of Turkey. Again, because the project wasinnovative, involving the importation of improved dairy stock and the intro-duction of new technology, it was more acceptable to bigger farmers betterable to stand the risk, and consequently subloans were on average bigger thananticipated. Cattle imported under the project from western Europe adaptedextremely well to Turkish conditions. Calving rates and milk production, onaverage, exceeded appraisal estimates by a considerable margin. Animaldiseases on individual farms were well controlled and health problems wereminor, except in a few cases where farmers failed to follow recommendations.The GDVS tuberculosis and brucellosis control scheme, under which importeddairy animals on Government farms and in Government-related projects weretested and compulsorily slaughtered (with compensation), caused problems forproject farmers and was heavily resisted. They considered the scheme dis-criminatory and ineffective because native cattle were not tested unless theowners requested it, which they seldom did. Consequently, the testing programdid little to control these diseases regionally or nationally and it proved adisincentive to many project participants. Calf mortality was higher thanexpected in the early stages of the project, but later improved to a levelin line with appraisal estimates. The project has not yet reached fulldevelopment but already some 500 surplus Holstein bulls are being distributedeach year to local farmers for herd improvement. This number is expected toincrease at the rate of some 12-15% per year in the future. Also, within ayear or two, when project herds reach full development, significant numbersof high-quality heifers should also become available to the industry.

1.22 The Third Livestock Project 2/, which became effective in early1977 during the Third Plan as a repeater to the First Project, aimed atconsolidating and expanding the progress made under that project and atextending benefits to other areas of the country, notably Konya, Kayseriand Malatya. Over 10,000 pedigree Holstein and Brown Swiss heifers andbulls will be imported under the project in order to expand the nucleus ofimproved animals for upgrading purposes. Infrastructural development withinLDP, TCZB and GDVS, which was initiated under the First Project, will becontinued. A particular feature of this project is the small (5-cow)village farmer component in which an attempt is being made for the first timein Turkey to extend, on a pilot basis, credit and technical assistance to some300 small village producers. It is the intention that this pilot component

1/ Full details of project implementation are presented in CompletionReport, Turkey: First Livestock Development Project (August 9, 1977).

2/ Appraisal Report 1027-TU, May 10, 1976.

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will serve as a first step to expanded participation of small farmers infuture Bank-assisted livestock projects in the country. The project is makingsatisfactory progress overall, although the rate of subloan processing isslower than projected due to a delay by Government in meeting effectivenessconditions; also to start-up problems occasioned mainly by TCZB headquarters'delay in adequately briefing its branch offices. Counter-balancing this,however, is the fact that small-farmer interest in the project is greater thananticipated and a higher proportion than expected of early subloans has beenmade to small producers. The project is expected to develop from now onwithout further slippage and to close on schedule in June 1981.

1.23 The Second Livestock Project 1/, which became effective in 1972towards the end of the Second Plan period, comprises two subprojects, afattening subproject (FSD) and a village development subproject (VSD). Itrepresents Government's first attempt to encourage fattening on a wide scalein some 20 provinces throughout Turkey and to initiate village livestockdevelopment in three provinces (Erzurum, Kars, Agri) in eastern Turkey,through provision of credit and technical assistance to farmers. The FSDsubproject is completed and the VSD subproject is scheduled to be completedin mid-1978 and the project is expected to close in December 1978. In general,technical coefficients projected at appraisal are being met on most farms andexceeded in some cases. Health problems have been well contained but someserious disease outbreaks (e.g. foot and mouth, anthrax and blackleg) wereexperienced on a few individual properties, either because the health programwas not followed or because drugs and vaccines of poor quality were used.There is the possibility also that, because of veterinary staffing constraints,treatment in some cases was late or not provided. A disappointing aspect ofthe project has been the difficulty of developing the group action concept.It was envisaged at appraisal that some 430 farmer groups--tractor/machinery,irrigation, pasture improvement and bull groups--would be formed, but theconcept has not so far been widely accepted by farmers and only some 20tractor/machinery groups have been financed. Conceptually, the group actionapproach is considered to be sound and also relevant to the situation ineastern Turkey, but it will require more time and promotion in order to gaingeneral acceptance by farmers of the area who are conservative. In commonwith the First and Third Projects, the Second Project also experienced delaysin the early stages. Because it was located in eastern Turkey where recruit-ment problems were greater, delays in recruitment of qualified and experiencedstaff caused worse slippage than in the other two projects. Over two yearswere lost before staff numbers reached a level permitting the project to beimplemented. Even now, staff could be further strengthened, particularlyveterinary staff, to ensure increased technical servicing of project farms.Despite these shortfalls, both subprojects are generally attaining theiroverall technical objectives. They are also successfully building infra-structure, providing experience in farm development and building a livestockproduction information base to support future developments in the general areaof livestock improvement in Turkey.

1/ Appraisal Report PA-122a, March 15, 1972.

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1.24 TCZB 's contribution has been important in the success of theabove projects. Branch office management is generally highly competent,although its effectiveness is sometimes reduced by lack of transport andshortage of middle-level technical support staff. Under these circumstancescredit processing times can be protracted. Also, lending by TCZB to smallfarmers, the dominant farmer group numerically, has been negligible becausecollateral requirements have largely excluded such farmers, but TCZB hasrecently revised its eligibility requirements in order to cater more specifi-cally for small farmer lending. The revision provides for funds to be chan-nelled to selected small farmers 1/ known to LDP technicians to be reliableand receptive to change and for whom financially viable farm developmentplans can be made. These are considerations which have previously been givenlittle weight by TCZB and their wider application represents a breakthroughin small farmer credit. This initiative on the part of TCZB indicates Govern-ment's interest in and commitment to ensuring that investment credit wouldhenceforth be available to small farmers who have not previously had accessto it. It is the first time in Turkey that supervised investment credits ofany magnitude would be available to small farmers, and it is in this importantrespect that the project is expected to make its major impact.

II. THE PROJECT

A. Introduction

2.01 The Turkish Government has requested a Bank Loan to assist in finan-cing a six-year repeater livestock development project in eastern Turkey inorder to consolidate and expand gains made under the VSD subproject of theSecond Livestock Project and also to extend the improved dairy productionconcepts developed under the First and Third Livestock Projects. The feasi-bility studies for the project were undertaken by LDP assisted by two FAO-CPmissions and a Bank mission which visited Turkey between August 1976 and April1977. The preparation report was finalized by LDP and submitted to the Bankby the Treasury in September 1977. It was appraised in October/November1977.

B. Brief Description

2.02 The project, which is expected to comprise a part of the country'sFourth Five-Year Plan, seeks generally to encourage the development of Turkey'ssubstantial livestock resource, through the provision of investment credit toproducers for on-farm improvements and through the financing of associatedtechnical services. Specifically, the project will:

1/ A small farmer is defined in para. 3.08.

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(a) channel medium- and long-term supervised credits to vil-lage producers for on-farm development (including farmconstructions, pasture and forage crop production,improved livestock, animal health care, and tractor,machinery and tool purchases);

(b) develop lending to small farmers;

(c) import improved dairy stock to increase the nucleus ofgenetically superior animals for upgrading indigenousherds;

(d) strengthen agricultural extension and veterinary healthservices to participating farms and provide trainingfacilities for technical staff and farmers in modernlivestock management and veterinary health care;

(e) continue the services of internationally-recruited tech-nical specialists in livestock production; and

(f) finance an in-depth review of the milk industry withemphasis on TSEK, and also more general studies in thefield of livestock management and production.

C. Detailed Features

Project Area

2.03 The project area will include the whole of the provinces of Erzurum,Kars, Agri and Mus and selected counties in Hakkari, Van, Bitlis, Bingol,Diyarbakir, Erzincan and Gumushane (Map IBRD 13432). Selection of provincesand counties was made on the basis of surveys of livestock numbers and forageproduction potential by LDP staff; also on the local knowledge and recommenda-tions of GDVS veterinarians, MINAG extension agents and TCZB staff concerninggeneral area development potential, accessibility for technical servicing,availability of markets and human resource potential. There is a significantdeficit of milk and meat in market channels in the area, caused partly by anabsolute shortage of livestock products and partly by the constant movement oflivestock and livestock products out of the area to the large consumptioncenters in western Turkey. Selection of provinces was based partly also onpoverty grounds. The 11 provinces included are part of a group of 17 easternprovinces classified by the State Planning Organization (SPO) as having thelowest average family income in the country, which is 30% below the nationalaverage of the 67 provinces (Annex 4, C6). The 11 selected provinces areconsidered to be broadly representative of the 17 in terms of relative stageof development and poverty level.

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2.04 To facilitate project implementation, one combined regional/provincialoffice will be established in Van along with five provincial offices in Bitlis,Mus, Bingol, Diyarbakir and Erzincan. The latter offices will be supported byfour project technical groups 1/ located in Yusekova (Hakkari), Bayburt(Gumushane), Malazgirt (Mus) and Tatvan (Bitlis). These ten centers alongwith those already established in Erzurum 2/, Kars and Agri, are consideredadequate to implement the project. The regional/provincial office in Van andthree of the five provincial offices will be established and adequately staffed(paras. 2.14, 3.01) on or before December 31, 1978. The other two provincialoffices and the four project technical groups will be established and staffed(para. 2.14) as soon as possible thereafter and, in any event, not later thanDecember 31, 1979. Assurances to this effect were obtained at negotiations.

On-Lending Program

2.05 Credit will be made available by TCZB to creditworthy subborrowers(paras. 3.07-3.12) for on-farm development. About 50% of total subborrowersunder the project are expected to qualify as small farmers, and some 34% ofBank funds for on-lending 3/ are expected to be channelled to them (para.3.11). Five models are presented in Annex 4, C2, which are considered typicalof the various types of farmers expected to participate in the project. Themodels provide the basis for the financial and economic analysis of the proj-ect detailed in Chapters V and VI and summarized in Table 5.1 and para. 6.04.The different models will phase into the project at the rate of some 5% inthe first year 4/, 15% in the second year and 20% in each of the succeedingfour years. The rate of processing of farm plans, particularly those of smallfarmers, is expected to be relatively greater initially in Erzurum, Kars andAgri where VSD has already made an impact in over 300 villages. From pastexperience, overall start-up in the new areas can be expected to be relativelyslow, although steps have been taken to minimize this (para. 3.01).

2.06 The on-lending program will provide supervised credit for:

1/ The "project technical group" concept was successfully introduced in theSecond Project. It involved locating a technical group (basically, oneveterinarian, one agronomist and two middle-level assistants, with sup-porting transport) in a county seat or principal local secondary townconsidered to be of high development potential. It was instrumental inbringing farmers and technicians in closer contact and in increasingproject effectiveness significantly.

2/ Erzurum was the regional center of the Second Project. It will continueto serve as the regional office for the northeastern area under theFourth Project.

3/ Or 31% of the total Bank Loan.

4/ Commencing in the first quarter, 1979 (para. 2.19).

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(a) Karaman and Merino sheep improvement, involving theestablishment of 50-ewe units on about 2,700 farms;

(b) beef cattle improvement, involving the establishmentof 10-cow units on about 500 farms; and

(c) dairy cattle improvement on about 2,000 farms,involving the establishment of:

- 5-cow units on about 1,500 farms- 12-cow units on about 400 farms- 30-cow units on about 100 farms.

2.07 Karaman and Merino Sheep Improvement. Considerable improvement ispossible in the project area in Karaman and Merino flocks by culling unpro-ductive sheep and use of better sires, of which an increasing supply isbecoming available each year from government farms and private sources. Bybetter feeding, management and health care of the more productive stock, sheepproductivity can be expected to increase significantly. Higher productivityis expected to result from a combination of a 25% increase in individual flocksize and better technical performance (i.e. higher fertility, lower mortality,improved wool and milk production, better growth rates and higher slaughter orsale weights). These improvements will be effected by provision of suitably-termed investment credits and technical assistance for participating farmers.Particular emphasis will be directed to expansion of forage production andimproved forage utilization. While it is not envisaged that project farmerswill generally be able to fatten their own sheep and lambs, the project willprovide farmers with the opportunity to winter a higher number of male animalsand to sell them at heavier weights the following spring when prices offeredby fatteners for surplus animals are generally at a seasonal peak. The sheepimprovement component of the proposed project will focus particularly on thetraditional village sheep producer with a flock of some 50 breeding ewes,which is common throughout the project area. Projections for a 50-ewe modelare in Annex 4, C2. Projected productivity increases are based on averageincreases achieved in the Second Project. Of the approximately 2,700 unitsplanned in the project, about 2,400 will be Karaman flocks and about 300 willbe Merino. Of the total, about 65% are expected to be flocks owned by smallfarmers as defined.

2.08 Beef Cattle Improvement. Supervised credit will be provided forimprovement of some 500 beef breeding herds. The herds will be culled, non-productive animals will be slaughtered, and forage resources will be used tofeed selected animals better. The use of better quality sires, which arebecoming available in larger numbers from state farms and private sources,will be encouraged. Productivity increases are expected principally througha combination of an increase of about 25% in individual herd size and bettertechnical performance (i.e. higher fertility, lower mortality, higher milkproduction, better growth rates and higher slaughter or sale weights). Asin the case of sheep producers, expansion of forage production and improvedutilization will receive special emphasis. Breeders are not expected generally

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to fatten their cattle, but the project will provide the means for them towinter more animals, particulary male stock, and sell them at higher weightsin the following spring when prices for finishing cattle are generally atseasonal peaks. This will not only be financially attractive to the indi-vidual farmers concerned, but will also help offset the national tendenciesto kill a high (and increasing) proportion of immature cattle and to killmature cattle at less than optimum weights. Projections for a 10-cow breedingunit, which is considered representative of a typical village cattle producerin the project area, are detailed in Annex 4, C2. Projected increases inproductivity are based on mean increases achieved under the Second Project.Because specialized beef cattle breeding is not undertaken to any significantextent by small farmers, the number of such producers expected to benefitunder this component is negligible.

2.09 Dairy Cattle Improvement. Three dairy models--a 5-cow unit, a 12-cow unit and a 30-cow unit at full development--are presented in Annex 4, C2.These are essentially similar to the three models in current use in theFirst and Third Livestock Projects in western Turkey, where they have provedsatisfactory. The first model, of which there are expected to be some 1,500units, represents a small producer with an initial herd of three native cowschanging in year one to a herd of five Brown Swiss cows. The second model,of which it is expected there would be about 400 units, represents a producerwith 10 indigenous cows initially, converting to 12 Brown Swiss cows in proj-ect year two. The third model, of which there would be some 100 units, isthat of a farmer developing from an initial herd of 20 indigenous cows to 30Brown Swiss cows in the second project year. The latter model could alsorepresent a group of small farmers with a communal herd under joint managementwithin a village. This latter group-dairying concept is one considered tohave possibilities in certain areas where cooperation between village familiesis more customary and it is an innovative concept which will be introducedunder the project. Of the 5-cow units, about 55% are expected to be smallfarmers as defined. Of the 12- or 30-cow unit farmers, none is expected toqualify in this category, except in the case of the owners of communal herdsunder joint management, which are expected to number about 20 groups, or about100 owners in total (para. 2.13). Productivity increases are expected toresult from an expansion of herd size, a marked improvement in geneticquality (through use of imported Brown Swiss dairy cattle), and improvedtechnical performance, particulary milk production.

2.10 Under the dairy cattle improvement program about 12,000 improvedcattle will be imported, as stock of high dairy merit are not availablelocally. Imported heifers and bulls will be predominantly Brown Swiss 1/which are known to be well adapted to conditions in eastern Turkey. The bullswill be registered pedigree animals from about 12 months to about 24 monthsof age at the time of importation. They will be sons of proven sires of

1/ The possibility of importing small numbers of Holstein or other breedsis not ruled out for certain parts of the project area where, in thejudgement of VSD staff, they could be better suited than Brown Swiss.

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the same breed whose progeny have a positive rating (above average) in the

milk production testing program of the country of origin, and will be out of

dams with a certified lifetime average milk production of not less than 5,000

kg per year. Imported females will be pedigree, pregnant two-year heifers or

pedigree, yearling heifers. Pedigree heifer selections will be made from

registered pedigree dams with a certified lifetime milk production averaging

not less than 4,000 kg per year. All pedigree, pregnant heifers will be

certified as in-calf to pedigree proven sires or sons of proven sires of the

same breed whose progeny have a positive rating (above average) in the milk

production testing program of the country of origin. At the time of selec-

tion, all cattle will be certified in general good health and free from

tuberculosis, brucellosis, leptospirosis, trichomoniasis and vibriosis.

Before export, all cattle will be vaccinated against foot and mouth disease

(Types A and C) and brucellosis. During negotiations assurances were obtained

that only animals meeting the above conditions will be imported.

On-Farm Development

2.11 Farm buildings will be of simple and inexpensive construction.

Whenever possible, existing buildings will be renovated; new buildings will

not be financed under the project unless essential. Experience in the three

earlier Livestock Projects indicated that farmers had a tendency to over-

capitalize--they often failed to make use of existing structures which, with

renovation, could be made serviceable; also, when new buildings were necessary,

they often built structures which were too elaborate. These situations will

be carefully monitored in the project. It is considered that small farmers

will generally not need additional barn space as most already have it avail-

able and their investment in buildings will be restricted to renovations

or extensions to existing structures built at minimum cost by the farmer with

family labor. The need for new constructions on bigger farm units will be

considered on an individual basis, but it is expected that in all cases exist-

ing structures will be utilized to the maximum extent possible, and new struc-

tures will be financed under the project only after careful consideration of

cheaper alternatives. On larger units, where new structures are recommended

for financing by VSD staff, care will be taken to ensure that such structures

are simple and practical, and built using a maximum of family labor.

2.12 Credit and technical assistance to encourage on-farm production of

feedstuffs will be a central feature of the project, as it was in the three

earlier Livestock Projects. Emphasis will be given to efforts to increase

yields from natural grasslands and, in particular, to promote introduction of

appropriate forage crops and pastures in place of fallow in the normal crop

rotation. The technology for these developments has already been perfected

under extensive conditions similar to those of eastern Anatolia in South and

Western Australia, and a first attempt to apply the technology was made under

the Second Project, with generally satisfactory results. Extended local

application requires further testing and demonstration, which will be done

under the general studies component of the project (para. 2.17). Sainfoin

and alfalfa appear the most suitable forage crops to integrate into the

rotation. Seed of both is generally available and VSD staff has some

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familiarity with them, as do also farmers. Preliminary yield data from trials

undertaken at the Ataturk University in Erzurum indicate dry matter yields of

sainfoin and alfalfa to be in the range of 2,000-5,000 and 5,000-10,000 kg perha per year, respectively, which is satisfactory. Similar yields have alsobeen obtained by better farmers in the project area. Some purchased concen-trates 1/ and other supplementary feeds will be financed for subborrowers in

the first project year as an investment cost, where in the opinion of thetechnical officer preparing the plan and the project manager it is considerednecessary, but the approach of the project generally will be to keep purchases

of concentrates and other supplementary feeds to a minimum. Use of land for

forage crops can reduce the production of other crops such as wheat or sugar-beet, but this need not be serious if fallow land is used for pasture orforage crop production, which the project will encourage. In each model an

allowance has been made for possible loss in cash crop income foregone in

producing forage.

2.13 Tractors and machinery are comparatively scarce in the project area

and this greatly limits farmers' abilities to expand crop and forage produc-tion because of the short growing season, which in many areas does not exceedfive months. Tractors and machinery will be financed for larger individualfarmers where technically and financially justified. It is anticipated about100 farm tractors will be financed by the project. Tractor and machinerygroups of smaller farmers will also be encouraged, as in the Second Project.Even though the group action concept in that project did not develop to theextent anticipated, the approach is innovative and is considered to have

potential and it should continue to be encouraged. The project will makespecial efforts to expand group action along the lines of the Second Project,and also to promote the development of group dairying. It is hoped that a

total of some 100 or more groups will be formed under the project.

Technical Services

2.14 Staffing of VSD as of November 1977 numbered 12 agronomists, 7 vet-erinarians and 40 middle-level technical staff plus 3 supporting headquartersstaff and 2 technical specialists 2/. This staff will be strengthened with

an additional full-time staff of 18 agronomists, 23 veterinarians, 20 middle-level technicians and 3 headquarters staff to provide a total full-time localstaff of not less than 66 professionals and 60 middle-level technicians; alsothe 3 technical specialists posts will be continued. About half of this addi-tional local staff (i.e. 9 agronomists, 12 veterinarians, 10 middle-level tech-

nicians and 2 headquarters staff) will be appointed not later than December 31,1978 in order to staff and service the Van regional/provincial office and

1/ Concentrates are freely available throughout most of the project area

although their quality is variable, since they are compounded mainlyfrom by-products of cereal, cotton and sugarbeet processing, of whicha considerable tonnage is available.

2/ Of three established posts, only two were filled as of November 1977.

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three of the five new provincial offices. Included amongst the local staffappointed by December 31, 1978 will be the project manager. It is expectedthat the project manager of the Second Project, who has discharged his dutiessatisfactorily, will continue in post as project manager. The other half ofthe local staff (i.e. 9 agronomists, 11 veterinarians, 10 middle-level techni-cians and one headquarters staff) will be recruited as soon as possible there-after and, in any event, not later than December 31, 1979, in order to staffthe remaining two provincial offices and the four project technical groups.Furthermore, general veterinary assistance will be provided by veterinariansof GDVS as in the Second Project. Assurances on general staffing and supportarrangements were obtained at negotiations. Specific assurances were obtainedthat:

(a) LDP will employ, or continue to employ, on a full-time basisfor the duration of the project a qualified and experiencedproject manager (para. 3.01); and

(b) LDP will employ for the duration of the project three full-time internationally-recruited technical specialists (para.3.05) approved by the Bank and under terms and conditionsacceptable to the Bank; and that if the contracts of technicalspecialists employed under the Second Project were extended,such extension will be undertaken in consultation with the Bank.

2.15 Recruitment of qualified and experienced staff constrained thedevelopment of the Second Project for its first two years (para. 1.23).The situation improved in the early part of 1976 and, in the interveningperiod the project has made satisfactory progress, particulary over thelast 18 months. However, there is still a need for strengthening technicalstaffing, particularly veterinary staffing, in order to provide a betterlevel of extension and veterinary services to participating farmers. Oneproblem has been MINAG's inability to offer adequate incentives to attracteasily the caliber of staff it needs. The present project will seek to over-come this problem by including additional incentives as part of the staffcompensation package. The principal additional incentive will be housingfor technical staff provided at nominal rental by the project (para. 3.03).Supplemental per diem payments provided to staff while on duty in the fieldwill be continued as in the earlier projects (para. 3.04). Such payments willbe financed from the Special Operational Fund--SOF (para. 3.13).

2.16 Lack of transport for VSD technical staff and TCZB branch managerswas a problem contributing to delayed implementation of the first three Live-stock Projects. The transport problem is currently widespread in all Govern-ment agencies and is not specific to LDP or TCZB. The main difficulty isthat there is a shortage of vehicles generally in the country. To ensureadequate transport for all staff involved in the execution of the project,about 80 vehicles will be provided over the first 36 months followingeffectiveness. About half of the vehicles will be assigned to VSD and halfto TCZB. Of the total vehicles, some 60 will be four-wheel drive crew-cabpickups and some 20 will be compact four-seater station wagons. Assuranceswere obtained during negotiations that Government will approve the purchase

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of these vehicles for project use and will also expedite all importationformalities into Turkey, including the issue of import licences, in the eventcontracts to supply the vehicles are awarded to foreign bidders under ICB(para. 2.25).

Technical Studies

2.17 The technical studies component will comprise two main areas ofstudy. The first involves an in-depth review of the milk industry, includingthe procurement, processing, distribution and wholesale/retail marketing ofmilk in both the private and public sectors, with particular emphasis on thepresent strategy and policies of TSEK, its organization and management and thefinancial viability of its main components. This will complement the studyplanned under the Third Project and will be an essential prerequisite topossible future Bank-assisted improvements of the national milk-marketingcomplex. The study will be undertaken by an international group of at leastfour specialists who will produce a report of sufficient depth and detail toserve as a preparation report for possible subsequent Bank appraisal (para.3.15). The second general study component of the project will comprise aseries of investigations in the broad area of livestock management and pro-duction to complement those programmed under the Second Project. The latterwork is now progressing, after initial delays due to staff constraints. Therecontinues to be a need, however, for additional management- and production-oriented studies and for surveys, practical field research and demonstrations,particularly in forage production and utilization, animal production andveterinary health care. Some of this work will be planned and implementedby LDP and GDVS staff as staff numbers are strengthened and some will beundertaken in collaboration with the agricultural and veterinary faculties atErzurum and Elazig which have expressed an interest in becoming involved andwhich have the capability in certain fields of making significant contribu-tions, particularly in the areas of animal breeding, animal nutrition, forageproduction and disease control (para. 3.16).

Training

2.18 Training under the project will be more fully developed than underthe Second Project (paras. 3.17, 3.18). While in-service training was gener-ally satisfactory in that project, training abroad of project technical staffand project-related staff was not developed as anticipated, due mainly tostaff constraints, although this position improved in the latter half of theproject as staffing was strengthened. Foreign language facility also limitedseveral staff from participating, a problem which the present project willmake special efforts to resolve through in-service language classes and care-fully programmed study tours of groups accompanied by interpreters. Twosuccessful tours were organized under the First Livestock Project to Spainand to India which proved the value of this approach. In-service technicaltraining of staff during project implementation will also be given emphasisand in this context the contributions of the technical specialists will becrucial, as in the three earlier Livestock Projects. Along with projectstaff training, farmer training will be emphasized through local study tours,

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field demonstrations and extension activities. In general, farmer trainingwas handled highly satisfactorily in the three previous projects. The possi-bilities of study tours abroad for selected individual leader farmers willalso be encouraged. Government so far has not been enthusiastic of such anapproach but it is felt to be one which should be explored, at least on apilot basis, in the project.

D. Cost Estimates

2.19 The total cost of the project, including taxes and price increases,is estimated as of December, 1977, at some US$83.2 million equivalent, ofwhich some US$24.0 million (about 29%) is foreign exchange. The estimatedforeign expenditure will be largely for imported livestock, vehicles, tractors,machinery, technical studies, overseas training and technical specialists.Price increases of US$31.6 million were allowed over the six-year life of theproject. They provide for increases of foreign costs of 7.5% per year in 1978and 1979 and 7.0% each year from 1980 to 1984, and increases of local costs of20% in 1978, 15% in 1979 and 10% each year from 1980 to 1984. The latter arebased on expected general price increases of 25% for 1978, 20% for 1979, 16%for 1980, and 12% for 1981-84 adjusted for lower rates of increase expectedfor major cost items including government salaries and expenditures, seeds,hired labor and other minor farm inputs. It is assumed that disbursementswill commence in the first quarter of calendar year 1979. Total project costsare summarized in the following table; a more detailed breakdown is in Annex2, and Annex 4, C3:

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Total Project Costs /1

ForeignLocal Foreign Total Local Foreign Total Exchange-- LT million----- -----US million------ %

Village Development

Livestock 135.5 221.5 357.0 7.0 11.5 18.5 62Tractors andMachinery 15.1 33.0 48.1 0.8 1.7 2.5 68

Farm Constructions 152.0 29.6 181.6 7.9 1.5 9.4 15Forage Crops and Feeds 154.4 18.0 172.4 8.0 0.9 8.9 10

Subtotal 457.0 302.1 759.1 23.7 15.6 39.3 40

Technical Services

Extension Services,Administration,Training and Studies 206.5 30.0 236.5 10.7 1.5, 12.3 13

Total Baseline Costs 663.5 332.1 995.6 34.4 17.1 51.6 33Price Increases

(61.2%) 477.3 132.1 609.4 24.8 6.7 31.6 -

Total Project Cost 1,140.8 464.2 1,605.0 59.2 24.0 83.2 29

/1 Discrepancies due to rounding.

E. Financing

2.20 The Bank Loan of US$24.0 million will finance the foreign exchangecost, estimated at 29% of overall cost. TCZB will finance some US$32.4million, or 39% of total cost, and farmer contributions would amount toabout US$9.0 million, or 11% of total cost. Government will contribute theremaining US$17.8 million, or 21% of total cost. Financing of investmentand technical assistance costs will be shared as follows:

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/1 Subborrower TCZB Government IBRD Total

Project Component Amount % Amount % Amount % Amount % Amount %___-------------------US$ million----------------------

On-Farm Investments 9.0 14 32.4 51 - - 22.0 35 63.4 100

Technical Services - - - - 16.8 92 1.4 8 18.2 100Training and Studies - - - - 1.0 71 0.4 29 1.4 100

Milk Industry Study - - - 0.02 10 0.2 90 0.2 100

Total Project Cost 9.0 11 32.4 39 17.8 21 24.0 29 83.2 100

/1 (i) Price increase added to each component; and (ii) discrepancies due to

rounding.

2.21 As in the three previous Livestock Projects, the Bank Loan of

US$24.0 million will be made to the Government of Turkey, which will assume

the foreign exchange risk. The Loan will be for 17 years, including a 4-yeargrace period, at an interest rate of 7.5%. Government will on-lend to TCZB inlocal currency the equivalent of US$22.0 million at not less than the latterlending rate which, together with a further LT 624 million from TCZB's own

resources (equivalent to US$32.4 million), will comprise the LT 1,047 millionfor on-farm lending (equivalent to about US$54.4 million). The project cashflow (Annex 4, C5) indicates that, allowing for contingent delays, a repayment

period to Government by TCZB in 17 years with a grace of 6 years is appro-

priate. Assurances were received during negotiations concerning the accept-ability of these terms and also that TCZB will provide the LT 624 millioncomplementary funds necessary to finance 51% of the on-lending program tofarmers. Government will make the remainder of the Loan monies (equivalentto US$2.0 million) available to LDP for technical services (including the costof technical specialists), technical studies and training. Assurances to thiseffect were obtained at negotiations.

F. Procurement

Livestock

2.22 Imported dairy cattle will be procured in about 20 shipments of 500-600 head. Orders for cattle for individual subborrowers will be determinedby local VSD technicians and sent through the regional or provincial managersto the project manager who will be responsible for organizing bulk procurementfrom foreign sources. Each shipment will comprise selected groups of animalsfrom numerous breeders in the country of origin. Because of the nature of theselection and assembly procedures, ICB is impracticable. Individual shipmentswill be procured on the basis of not less than three quotations from at leasttwo countries. Details of cattle procurements will be advertised in the localpress and also circulated to accredited representatives of those Bank membercountries able to supply them, and Switzerland. A similar procurement proce-dure was followed in the First and Third Projects satisfactorily. Supplierswill offer for selection only cattle equalling or exceeding the minimum

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performaiice and health specifications detailed in para. 2.10. Suitabledocumentation will be required to verify such specifications. Individualselection will be undertaken in the supplier country by the project manager,one project technical specialist and a veterinarian of GDVS. They will beassisted by one technical specialist and not less than two VSD technicians;the latter will be included in the procurement mission not only to assistthe mission but also to obtain further training and experience (para. 3.17).Purchase contracts will require the supplier to make satisfactory arrangementsfor delivery, and to assume responsibility for the cattle until delivered toproject farms. Contracts will also require suppliers to assume responsibilityfor ensuring that cattle meet all veterinary and other standards of theexporting and importing countries and of countries through which the cattletraveled while in transit. Assurances were obtained during negotiationsthat:

(a) bidding documents and purchase contracts will be sent to theBank for comment prior to their award;

(b) support will be provided by GDVS at all stages during procure-ment to assist with veterinary clearances; and

(c) Turkish border entry will be expedited.

2.23 Locally procured livestock will be purchased by individual farmersat livestock markets and by private treaty. All livestock will be inspectedand approved prior to purchase by project technicians responsible for super-vising individual farm plans. These procedures were followed in the SecondProject and were satisfactory.

Tractors and Machinery

2.24 Tractors, machinery and related agricultural equipment will beprocured through ICB according to standard Bank guidelines and assurancesto this effect were obtained during negotiations. Tractor and machinery/equipment orders for individual subborrowers will be grouped by local VSDstaff and sent through regional and provincial offices to the project managerwho will organize bulk procurement as in the earlier three projects, wherethis arrangement worked satisfactorily. Bidding documents will state thatsuppliers will guarantee adequate servicing and spare parts for tractors,machinery and equipment in the main project centers. Up to 15% domesticpreference, or the level of import duties, whichever is the lower, will beallowed local manufacturers bidding on tractors, machinery and equipment.

Vehicles

2.25 Difficulties were experienced in the earlier Livestock Projects inprocuring through ICB vehicles of the type assembled in Turkey; consequentlyvehicles used by the Projects were procured locally with local funds by LDPand TCZB. However, the number of vehicles procured was not adequate becauselocal supplies were limited. Generally, Government continues to prefer toprocure vehicles locally but, in order to avoid a recurrence of the earlier

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shortages of vehicles for project use, Government has agreed to procure them

through ICB if they are not available to purchase locally when needed. Provi-

sion has been made in the Loan for sufficient foreign exchange to enable

vehicles to be procured through ICB in this event. Assurances were obtained

at negotiations that if the vehicles needed in any project year could not be

made available from local sources in the first four months of that year,

they will be procured through ICB under standard Bank guidelines.

Constructions, Tools, Seed and Fertilizer

2.26 Because farm constructions are small-scale and dispersed and

utilize a maximum of family labor, they are unsuitable for ICB. Purchase of

the few materials required for such constructions will be by local shopping.

Sufficient competition exists to ensure fair pricing. Similarly, the 15

houses for project staff will be scattered over several provinces; they will

be constructed of local materials with local labor and their modest cost

(about US$400,000 total) and phasing do not warrant ICB. Bidding for their

construction will be through standard Government procedures, which are satis-

factory. Purchases of small tools, seed and fertilizer will be through normal

commercial channels. Supplies are generally freely available and adequate

competition exists for all items.

G. Disbursements

2.27 The Bank Loan of US$24.0 million will be disbursed over a six-year

period as follows:

(a) 100% of foreign expenditures on livestock, technical

specialists, technical studies and training;

(b) 100% of foreign expenditures, or 100% of local expenditures

ex-factory (less taxes and duties) on vehicles, tractors,

agricultural machinery and related equipment;

(c) 27% of amounts disbursed by TCZB for pasture, forage crop

and feedstuff production and purchase of supplementary

feedstuffs.

2.28 Disbursements will be made against normal documentation as in the

three earlier projects. The anticipated phasing of commitments under the

project is detailed in Annex 4, C5. Assuming project start-up by December 31,

1978, the estimated annual disbursements of the Bank Loan are as follows:

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Estimated Disbursements /I

Bank FY: 1979 1980 1981 1982 1983 1984 1985-------------------- US$ million -------------------

Annual 0.2 2.0 3.4 4.2 5.5 6.0 2.7Cumulative 0.2 2.2 5.6 9.8 15.3 21.3 24.0

/1 A quarterly schedule is shown in Annex 1.

H. Environmental Impact

2.29 Chemical fertilizers, pesticides and herbicides to be used underthe project are not anticipated to have any appreciable adverse effect onlocal ecology. They will be utilized under the supervision of project tech-nicians at the normally recommended dosage levels in a small proportion oftotal farms in the project area, which represent only a fraction of thetotal land of the area. Effluent from project barns and dairies, which willbe small in size by standards in many other parts of the world and alsoscattered, is not expected to have any negative environmental effect. Mostsolid residues from livestock operations will be spread back on the land asmanure, which will be beneficial.

III. PROJECT IMPLEMENTATION

A. Organization and Management

3.01 Basic project administration will be similar to the three earlierprojects, which was satisfactory. Overall management will be the responsi-bility of LDP. Detailed implementation of technical and financial aspectswill be undertaken, as in the Second Project, by VSD of LDP, which will beheaded by a project manager who will be located in Ankara and be responsibleto the General Director of LDP. Regional control will be through officesin Erzurum and Van, each of which will be under the control of a regionalmanager responsible to the project manager. Provincial offices in Erzurum,Kars, Agri and Erzincan, each with a provincial manager, will be coordinatedthrough the Erzurum regional manager; provincial offices in Van, Bitlis, Mus,Bingol and Diyarbakir, each with a provincial manager, will be coordinatedthrough the Van regional manager. Project technical groups formed under theSecond Project in the provinces of Erzurum, Kars and Agri will be coordinatedthrough their appropriate provincial office. The project technical group tobe formed in Bayburt (Gumushane) will be coordinated through the Erzincanprovincial office and those in Malazgirt and Tatvan through their respectiveprovincial office. The project technical group to be formed in Yuksekova(Hakkari) will be coordinated through the Van provincial office. Posting

- 25 -

of staff will be the responsibility of the General Director of LDP, acting on

the recommendations of the project manager. One or two experienced VSD stafffrom the Second Project will be posted to each of the new provincial officesand at least two senior and experienced staff from the Third Project will beposted to each of the VSD regional offices in Erzurum and Van to ealsure a

rapid spread of improved livestock production concepts within the project.Assurances on the latter arrangement were obtained at negotiations.

3.02 The duties of VSD staff will include:

(a) promoting the project to farmers and providing an initialscreening of those farmers interested in participating;

(b) preparing farm development plans for farmers approved ascreditworthy by TCZB;

(c) supervising plan implementation on individual farms andproviding extension assistance to farmers;

(d) providing veterinary and animal health services to par-ticipating farms (which will be further supported bytechnical staff of GDVS); and

(e) keeping records of overall project progress and encouragingfarmers to keep records of performance on individual farms.

3.03 The General Director of LDP, acting on the advice of the projectmanager, will organize the construction of the 15 housing units to be rentedto staff at nominal Government rates. Siting of the houses will be arrangedto ensure staffing in areas where there is high potential but to which staffis difficult to attract. Administration and maintenance of the units afterconstruction will be the responsibility of the General Director of LDP. Thesiting of the housing units, their construction schedule and the level ofthe nominal rental rates to be charged to project staff occupying them werediscussed at negotiations and assurances that construction of the 15 units

will be expedited to ensure their completion not later than December 31,1980, were obtained.

3.04 Per diem payments to VSD staff on field duty will be paid in partfrom the SOF. Payments will be administered by the General Director of LDP.Assurances were obtained at negotiations that not less than 80% of SOFresources will be used for expenditures on per diems, staff incentives and

side benefits.

3.05 Three internationally recruited technical specialists will beretained for the six-year duration of the project (equivalent to 18 man years)to provide technical support for VSD, TCZB and DGVS staff. Their appointment

will be finalized not later than December 31, 1978. They will be responsibleto the project manager. It is anticipated that one specialist will be located

in each of the Ankara, Erzurum and Van offices. They will provide technical

- 26 -

advice to regional and provincial managers, particularly in farm plan prepara-

tion and implementation. In collaboration with the project manager, they will

also play a leading role in the planning, implementation and supervision of

general studies in-livestock management and production and of the training

aspects of the project. Terms of reference for the technical specialists are

in Annex 4, Cl. The cost of the specialists is estimated at US$67,000 per man

year, of which US$36,000 is for basic salary and US$31,000 is for allowances

and expenses.

3.06 The Encouragement and Development Loans Division (EDLD) of TCZB

will be responsible for the credit aspects of the proposed project. EDLD's

role will involve establishing the creditworthiness of prospective sub-

borrowers, setting credit limits, providing subloans, and supervising subloan

disbursements and repayments. A close and cooperative working relationship

developed between staff of LDP and TCZB in the first three Livestock Projects

which was based on a protocol between LDP and TCZB which was negotiated be-

tween them and agreed to by the Bank. The existing protocol will be appro-

priately amended with respect to dates, areas of implementation, etc. of

the project. The signing of an amended protocol acceptable to the Bank is

a condition of effectiveness.

B. On-Lending Policies and Procedures

3.07 Total lending to farmers by TCZB will be around LT 1,047 million,

equivalent to US$54.4 million, derived from US$22.0 million equivalent of

the Bank Loan on-lent to TCZB by Government and US$32.4 million equivalent

from TCZB's own resources (paras. 2.19-2.21).

3.08 Any farmer owning livestock with experience in livestock production

and with a sound development plan for livestock improvement (except the pur-

chase of livestock for fattening), and who could meet the creditworthiness

criteria of TCZB (para. 3.11), is eligible for a loan. Potential subborrowers

should occupy, or have access to, an area of tillable land which, in the opi-

nion of the VSD technician preparing the farm plan, is adequate to produce the

incremental feedstuffs necessary to implement the plan. For the purposes of

the project, a small farmer is defined as one whose net annual pre-development

family income at December 1977 prices does not exceed LT 35,000 (US$1,820), at

least 75% of which is derived from farm activity. In addition to the above

criteria, to be eligible for a subloan, small farmers must be known to VSD

staff as bona fide farmers of good character, for whom viable farm development

plans can be prepared by such staff. Assurances were obtained during negotia-

tions that only farmers meeting the above criteria will qualify for loans.

3.09 Farmers will apply for a loan to the nearest office of TCZB or

VSD. After determination of the farmer's creditworthiness and credit limit

by TCZB, an appropriate development plan will be prepared by a VSD techni-

cian who will subsequently submit the plan to the regional manager and

technical specialist for review. In accord with TCZB's existing delegation

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of authority, plans for less than LT 150,000 credit will be reviewed by

the regional technical specialist, approved on the authority of the VSD

regional manager and sent to the local TCZB manager for credit approval

and funding, with copies to VSD and TCZB head offices. Plans for credit

in excess of LT 150,000, after review by the regional technical specialist

and regional manager, will be forwarded by the latter to VSD headquarters

and approved by the project manager. Applications will then be submitted

through EDLD to the board of TCZB for credit approval. This procedure was

followed in the three earlier projects and was satisfactory.

3.10 Of total on-farm investments, farmers will contribute, in aggregate,

up to 14%. Individual farmer contributions to investment plans will be at

least 20% in the case of medium-size to larger farmers and at least 10% in

the case of small farmers except, in special cases, where in the written

opinion of the technician preparing the plan and the project manager it is

justified, the small farmer's contribution may be reduced to 5%. Under the

Third Project, farmers were generally expected to finance at least 75% of the

cost of dairy buildings and associated structures as their contribution;

credit in excess of 25% for buildings was limited to special cases. In the

present project, most farm development plans will provide for only renova-

tions and/or extension of existing structures, financing of new structures

being limited to the larger units which will be built at minimum cost by the

farmer using a maximum of family labor. Cost of renovations and/or extensions

will be financed at the percentage applicable to other on-farm improvements.

However, financing for new structures will be limited to 70% of the total cost

of the structure, except in cases where small farmers are grouped in a com-

munal project (para. 2.09), in which case the higher 90 to 95% loan applicable

generally to small farmers will apply. Most farmers will be expected to pro-

vide family labor (possibly supplemented by hired labor in the case of the

larger farmers) as part of their contribution. Incremental labor costs asso-

ciated with expanding livestock numbers are expected to be minor, as utiliza-

tion of labor for livestock breeding and dairying is now relatively ineffi-

cient. With technical assistance and improved planning, it is considered

that the productivity of labor could be considerably increased at negligible

additional cost. Credit will be provided for incremental costs of labor and

forage cropping only in special cases where, in the written opinion of the

technician preparing the plan and the project manager, it is considered

necessary. Credit will similarly be provided, in special cases, for the

purchase of concentrates and other supplementary feed in the first projectyear as an investment cost. Assurances were obtained during negotiations on

the acceptability of these conditions.

3.11 TCZB's stringent collateral requirements have been a problem and

have generally constrained investment credits of any magnitude from reaching

small farmers. TCZB prefers a land title to secure its loans, but titles

are not always available. In the Third Project, TCZB agreed to secure loansup to LT 100,000 (this limit was raised to LT 150,000, effective February 6,

1978) with chattel mortgages on livestock and machinery plus the guarantee

of a creditworthy cosigner; loans over LT 100,000 (now LT 150,000) could be

secured partially by land title, and partially by a chattel mortgage on live-

stock and machinery, and/or a guarantee of a cosigner. However, lending

- 28 -

with only cosigners as security has in fact been minimal, mainly because TCZBregulations required two creditworthy cosigners which most small farmers havebeen unable to provide, and also because such lending has been discouraged bysome TCZB branch managers. Special arrangements have now been formulatedwith TCZB under the project to expand lending to qualified small farmersthrough liberalized loan collateral requirements. Under these arrangementsTCZB will (a) apply to the medium-size to larger farmers the loan securityrequirements currently applicable in the Third Project, and (b) for the smallfarmers, as defined (para. 3.08), provide loans up to LT 150,000 which willbe secured by chattel mortgages on livestock and machinery plus the guaranteeof one cosigner, and such cosigner could also be a small farmer who could befrom another village than that of the borrower and whose financial standingwill not be of primary importance. TCZB will direct and adequately train itsbranch managers to undertake such lending to small farmers. Funds for suchlending from Bank sources will amount to some US$7.5 million, or about 34% oftotal funds from Bank sources for on-lending to all farmers. As this willbe a first attempt to channel funds of any magnitude to small farmers, therecould be a shortfall in the number of small farmer applicants. To ensurethat every effort will be made by TCZB to encourage smaller farmers into theproject and to provide subloans to them, some US$5.5 million, or 25% of totalfunds from Bank sources for on-lending under the project, will be earmarkedfor small farmers and will be non-reallocatable and any amount not usedfor small farmer loans will be cancelled. Additional encouragement to TCZBto develop small farmer lending under relaxed security conditions has alsorecently been provided by the Central Bank of Turkey which has undertaken torefund to TCZB the equivalent of 3% on all general agricultural lending toenable it to meet the additional expenses involved in such lending and tocreate reserves against bad debts. An initial joint Bank-Government-TCZBreview of the small farmer lending program under the project will be under-taken not later than December 31, 1980 and similar reviews will be madeannually thereafter. Assurances on these conditions were obtained atnegotiations.

3.12 Subloans to project farmers will be made at not less than 11%interest per annum for 10 to 12 years with 2 to 4 years of grace dependingon plan size. 1/ This rate is negative but it falls within the frameworkof interest rate revisions which were recently implemented with the IMFstabilization package. Also, taking into account that some 50% of projectbeneficiaries will be small farmers with per capita family incomes at or belowthe estimated relative poverty level for Turkey (Annex 3), the 11% effectivecost of medium- and long-term borrowing under the project is consideredacceptable, pending the outcome of a further wider interest rate policyreview which is being undertaken by the Government. Debt service of sub-borrowers will be in equal installments. Grace periods for small farmerswill be generally more favorable than for larger farmers, but each casewill be evaluated individually by project technicians, depending on

1/ Subloans under the First Project were made at 9% per annum for 12 yearswith 4 years grace; under the Second Project at 9% per annum for 7 to 12years with 1 to 4 years grace; and under the Third Project at 11% perannum for 10 to 12 years with 2 to 4 years grace.

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net income generated in the investment plan. No subloans to project farmersin excess of US$80,000 will be made without the prior approval of the Bank.The appropriateness of the interest rate charged by TCZB for project subloansand other terms and conditions will be reviewed in the light of changingconditions by TCZB, the Borrower and the Bank at such time as TCZB, theBorrower or the Bank may request. Assurances on these terms and conditionswere obtained at negotiations.

3.13 As in the First and Third projects, TCZB will place 0.5% of theinterest received from farmers on all funds on-lent under the project in theSOF, to be made available to LDP for partial payment of miscellaneous expensesincurred in project execution. Expenditures from this fund will be authorizedby the General Director of LDP or any other person duly designated by him forsuch purpose. Assurances to this effect were obtained during negotiations.Terms of Reference for the SOF are in Annex 4, Cl.

C. Technical Services

3.14 Technical assistance to farmers participating in the project will beprovided by VSD staff with support from GDVS veterinarians. VSD staff will begrouped to work from the nine provincial offices under the direction of theprovincial managers who will be responsible to the two regional managers, whowill in turn be responsible to the project manager (para. 3.01). This typeof organization is essentially similar to that of the three earlier projectswhere it worked satisfactorily. The GDVS supporting service will be based ona protocol between LDP and GDVS along the lines of that in the three earlierprojects. The existing protocol will be amended with respect to dates, areaof implementation, etc. and will include a clause that testing for brucellosisand tuberculosis will be carried out on project farms only on the basis of aprogram to be drawn up by LDP/GDVS which is satisfactory to the Bank. Signingof an amended protocol by LDP and GDVS satisfactory to the Bank is a conditionof effectiveness. Such a protocol will include provision for vaccinationagainst brucellosis within three to six months of birth of all calves born onthe farms of subborrowers and will specifically exclude testing on projectfarms of cattle previously vaccinated against brucellosis.

D. Technical Studies

3.15 Organization of the milk industry study will be the responsibilityof the General Director of LDP who will recruit the specialists, finalizedetails of their work program including field visits and report writing, andwill make available all necessary local facilities needed by the group duringthe period of its work in the country. The group will commence work not laterthan May 1, 1979 according to a work program and timetable acceptable to theBank. Individual specialists, who will be acceptable to the Bank, will berecruited under terms and conditions acceptable to the Bank. Assurances onthis and on general arrangements for the organization and implementation of

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the milk industry study were obtained at negotiations. Terms of referencefor the proposed study are in Annex 4, Cl.

3.16 The technical studies component in the broad area of livestockmanagement and production will be organized by the project manager, withwhom the three technical specialists will collaborate closely in the planning,implementation and supervision. Staff of LDP and GDVS will also be involvedin the planning and implementation of the studies. Studies will commencewithin the first half of calendar year 1980. Prior to their implementation,annual plans of such studies will be sent to the Bank for comment. The firstand subsequent plans will be submitted in the third quarter of the year priorto implementation. Studies executed in collaboration with the universitieswill be undertaken on the basis of a protocol to be drawn up prior to thecommencement of the work which will be satisfactory to LDP, the universityconcerned and the Bank. Assurances to this effect were obtained at negotia-.tions. Progress and results of the general studies component will be reportedin the semi-annual reports prepared by the project manager (para. 3.22). Itis expected that, under this component, a preparation report for a possiblefuture Bank-assisted livestock project will be developed. Terms of referencefor the livestock production studies component are in Annex 4, Cl.

E. Training

3.17 The training component will consist of:

(a) in-service training of LDP, GDVS, TCZB and other project-related staff at all levels;

(b) local training of farmers through study tours, field demon-strations and extension activities;

(c) group study tours abroad for LDP, GDVS, TCZB and other project-related staff working in the public sector, and leader farmers;such trips, of which there will be not less than six, will becoordinated as far as possible with missions travelling abroadon cattle procurement; and

(d) study leave for individual staff of LDP, GDVS, TCZB and otherproject-related Government staff to undertake advanced trainingin livestock production, forage production, animal health,animal breeding, agricultural credit, agroindustries andrelated fields.

3.18 The project manager will be responsible for organizing the trainingprogram and in ensuring its timely execution. He will be assisted in thisrespect by the technical specialists who will play a key role in the planning,implementation and supervision of training, in recommending suitable staff fortraining and in identifying suitable programs and centers of study. Selectionof trainees and study programs will be the responsibility of the General

- 31-

Director of LDP. The training program will become fully operational by thebeginning of the second year of the proposed project and operate through thesixth year. A draft of the overall training program for the duration of theproject will be drawn up by the project manager and sent to the Bank forcomment by April 30, 1979. Assurances on this were obtained during negotia-tions. Terms of reference for training are in Annex 4, Cl.

F. Accounting and Auditing

3.19 EDLD will open a separate account for the project, as it did forthe previous three projects. Each six months, a summary of the accountwill be included in the semi-annual project report prepared by the projectmanager and submitted to the Bank through TCZB (para. 3.22). The account willbe audited annually by the Sworn Bank Controllers of the Ministry of Finance,which procedure is satisfactory. Copies of the certified accounts and auditreport in English will be sent to the Bank within seven months of the end ofTCZB's financial year. Assurances on these matters were obtained duringnegotiations.

3.20 The project manager will maintain accounts of VSD expenditureson technical services, studies and training, as in the Second Project, anddetails will be included in the reports prepared by him to the Bank (para.3.22). This arrangement worked satisfactorily in the three earlier projects.The accounts will be subject to annual audit by the Financial Inspectors ofthe Ministry of Finance, which is satisfactory, and copies of the certifiedaccounts and audit report in English will be sent to the Bank within sevenmonths of the end of LDP's financial year. Assurances on these procedureswere obtained during negotiations.

3.21 The accounts of the SOF will be maintained by the General Director,LDP. He will be responsible for providing the Bank with a detailed accountingof expenditures from the Fund by March 31 of each project year. Assurances tothis effect were obtained at negotiations.

G. Monitoring and Evaluation

3.22 Routine records will be kept on all farm plans, as in the earlierprojects. In addition, VSD staff will monitor the progress of not less than20% of farm plans intensively in the course of implementation. Staff willcollect and analyze sufficient technical and financial data to evaluate theeffects of the project and to follow its progress against the project imple-mentation schedule (Chart 18657). The project manager will submit six-monthlyprogress reports to the Bank through TCZB who will include a summary of theproject account (para. 3.19) and forward the report to the Bank within twomonths from the end of each six-month period. Quarterly reports were prepared

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in the earlier projects but for eastern Turkey, with its long winters duringwhich farm development activity stops, semi-annual reports are consideredadequate. In addition to the latter reports, the project manager will preparea draft completion report for submission to the Bank within three months ofthe Closing Date of the project. LDP is already familiar with completionreport requirements as its Intensive Dairy Production Division (IDPD) satis-factorily assumed major responsibility for the completion report of the FirstProject. Assurances were obtained during negotiations on the acceptabilityof the monitoring, evaluation and reporting procedures.

IV. TECHNICAL COEFFICIENTS

4.01 Farms to be developed under the project are represented by fivebasic models (para 2.06 and Annex 4, C2). All farms will have in common:some dairy, cattle or sheep activity at the preproject stage; adequate rain-fed land or access to irrigated land to provide for near self-sufficiencyin forage; and improved management through technical servicing.

A. Pasture and Feedstuff Production

4.02 In the project, emphasis will be given to increased alfalfa orsainfoin production, for both green feed and hay. These forages will supple-ment straw and native pasture and, in combination with them, are expectedto provide the principal production requirements. Concentrates will be usedsparingly to complement these feeds, usually only during the winter months.Forage crops have been fully costed and imputed to the project. Increases inpasture, forage crop and feedgrain production will be achieved mainly by moreeffective use of fallow lands, but some reduction in output of cash crops suchas sugarbeet will be inevitable and this has been allowed for in the analysis.Wheat production is continued, with modest increases in yields through fertili-zation. It will be largely utilized on the farm as a food staple. Somemeadow lands, which are extensive in eastern Anatolia, will be reseeded andfertilized for pasture, making the farm model largely self-sufficient forroughage. Assumed crop yields are as follows:

Yield (t/ha)-Without Project With

Crop Years 0-20 Project

Sugarbeet 30.0 -Wheat: non-irrigated 1.0 1.5Wheat: irrigated 1.5 -Meadow (hay) - 0.5Alfalfa (hay) 7.5Sainfoin (hay) 3.5

/1 Based on mean yields currently being achieved by upper quartile offarmers in the project area.

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B. Livestock Development Models

4.03 Production and other technical coefficients are based mainly onthe performance of the beneficiaries under previous and on-going projects.Net sales of cow milk is expected to increase from 600 to some 3,500 kg percow annually at full development, while net sales of sheep milk is expectedto increase from 35 to 50 kg annually per ewe reflecting mainly the smallergenetic improvement which is expected in sheep. Output prices of livestockincrease slightly at full development to account for the improved stock. Theincremental herd values are credited to the last year in the financial andeconomic analyses. Selected coefficients for cattle, the main livestockcomponent, are as follows (details are shown in Annex 4, C2).

WithoutProject ---------------Year-------------

Coefficient Years 0-20 1 2 3 4 5

Cattle weaning rate (%) 65 80 85 90 90 90Calf mortality (%) 20 15 15 10 10 10Cow mortality (%) 10 5 5 5 5 5

Dairy ImprovementLactation yield (kg/cow) 700 3,000 3,200 3,500 3,800 3,800Net milk sales (kg/cow/yr) 600 2,700 2,900 3,200 3,500 3,500

Beef Cattle ImprovementLactation yield (kg/cow) 700 1,500 2,000 2,000 2,000 2,000Net milk sales (kg/cow/yr) 600 1,000 1,000 1,100 1,200 1,400

V. MARKETING AND FINANCIAL ANALYSIS

A. Production

5.01 Considerable production increases are expected in liquid milk, cattleand sheep for breeding, wool and forage crops. The increases will result fromimproved livestock, better animal husbandry and general farm management throughthe application of suitably-termed credit and technical assistance, as in theSecond Project. The key to livestock production increases is the expandedforage base, principally through the better utilization of fallow lands, whichcurrently produce very little useful livestock feed between successive cerealcrops. This more efficient land use and the resulting additional forageshould allow farmers to increase their overall feeding and to become lessdependent on purchased feeds, particularly concentrates. Five models -- asheep improvement, a beef improvement and three dairy improvement models --have been used to illustrate project impact. Each has its own individual mixof cropping, livestock and physical inputs (Annex 4, C2). At full development(year 12) incremental production from the project is estimated to be:

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Without At Full %

Product Unit Project Development Increase

Cow Milk Million 1 8.7 61.1 602Sheep Milk Million 1 3.5 6.2 77Dairy Cattle Thousand Head 4.1 11.3 275Breeding Cattle Thousand Head 1.5 3.0 100Sheep Thousand Head 70.2 97.2 38Wool Tons 226.0 604.0 167

5.02 The total value of annual incremental production at full develop-ment, using December 1977 farmgate prices, is estimated at US$23 million, ofwhich US$13 million will be from milk.

B. Prices

5.03 Project input and output prices are based on local and farmgateprices as of December 1977 gathered in the project area from producers, tech-nicians working in the Second Project, commercial houses and foreign bidders.For economic analysis, financial prices of tradeables were adjusted on thebasis of projections in real terms provided in the list of the Bank's EconomicAnalysis and Projections Department and, for non-tradeables, allowances weremade for transfer payments.

C. Marketing

5.04 The project is expected to stimulate milk supplies in the projectarea where there is currently a chronic shortage of milk for processing ofsome 100,000 tons per annum 1/ which cannot be supplied from adjacent areaswhere there is also a shortage. Demand projections indicate, furthermore,that due to current increases in the demand for milk of 5.4% annually, defi-cits in milk are expected to amount to 2.6 and 4.9 million tons nationally in1985 and 1990, respectively 2/. Incremental milk production from the project,totalling some 55,000 tons per annum at full development should be readilyabsorbed, as buyers for both public and private sector plants and privatedealers are active throughout the area. Most of the milk currently producedin the project area is consumed as milk products such as cheese, butter,

1/ Mission estimates based on excess capacity of existing processing plantsin the project area as of December 1977, and FAO/CP study 36/77 TUR 22,August 1977 (Annex 4, B3).

2/ Turkey Agricultural Sector Survey (1976) estimates. FAQ, through theInternational Schemes for Meat and Dairy Development (1976), indicate asomewhat lower increase in demand annually (4%) -- Annex 4, B2.

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yoghurt and ayran; very little is consumed as liquid milk. Most of the milkproduced in the eastern villages is either processed in the home or in thenearby village by private milk traders. Only 1% of total milk producedcurrently in the project area reaches milk processing plants (with theexception of Kars, which is 3%). As there is a large unsatisfied localdemand for wool and breeding and fattening stock, no difficulties areenvisaged in marketing the incremental outputs of these.

D. Producer Income and Financial Rates of Return

Subborrowers and Incomes

5.05 Increases in income for the various subborrowers participatingare estimated to be as follows:

Per Capita Annual

/1 Income /2

Farm Size Number of Without WithType of Farm (Head) (Decares) Subborrowers Project Project

------- US$-

Sheep Improvement 50 Ewes 90 2,700 244 326Beef Improvement 10 cows 130 500 308 607Dairy Improvement 5 cows 140 1,500 260 636Dairy Improvement 12 cows 290 400 573 1,347Dairy Improvement 30 cows 660 100 816 2,927

5,200

/1 At full development.T2 From all farming activities; from livestock activities alone these income

levels will be slightly lower in the with-project situation, much lowerin the without-project situation, as there is a shift away from croppingincome towards livestock-related activities. Official statistics givethe range of family size as 5.5 to 6.0; mission estimates show familysize in rural eastern Anatolia ranges up to over 20 and an average of8.0 was considered appropriate for calculation purposes (Annex 4, C6).

5.06 Producers' benefits, classified for each farm category, and the finan-cial rates of return derived from the models are summarized in Table 5.1. Allincomes are expected to at least double, with the exception of the ewe breedingactivities which will increase by 34% which is relatively modest but typicallyreflects sheep-related activities in eastern Anatolia. All financial rates ofreturn indicate that it should be financially rewarding for farmers to undertakethe investments and to introduce the supporting technology. Sensitivity testsare in general satisfactory. The analysis indicates that in the worst general

Producers' Benefits and Financial Rates of Return

Estimated Net Operating Estimated Net OperatingIncome from Livestock Income from all Farming

Activities Activities

Unit Size Without Project With Project Without Proiect With Projectat Full Before After /2 Before After 2 Before After 2 Before After /2 Financial Rie A

Development Taxes Taxes - Taxes Taxes Taxes Taxes Taxes Taxes of Return snitivity Tet---- ___________---------------------- -- US$ --------- --------------------- w

30-Cow Dairy 2,213 2,213 21,517 18,182 6,530 5,518 23,413 19,784 23 20-19-15-1512-Cow Dairy 2,068 2,068 8,540 7,597 4,582 4,076 10,779 9,589 42 36-38-28-245-Cow Dairy 566 566 4,810 4,449 2,078 2,078 5,091 4,709 43 37-38-29-2410-Cow Beef 1,901 1,901 4,286 3,965 2,462 2,462 4,857 4,493 36 33-33-24-2450-Ewe Sheep 1,673 1,673 2,364 2,364 1,953 1,953 2,608 2,608 24 21-19-8-14

/1 Full development reached in year 4 for the 5-cow unit, year 7 forthe 10-cow beef improvement and year 6 for all others.

/2 Income tax calculated on the basis of sliding scale according tolaw for incomes other than from personal earnings. Farm incomesunder LT60,000 are exempted from tax.

/3 Calculated on income from all farming activities before taxes./4 Financial rate of return as investment costs increase 10%, operating

expenditures increase 10%, gross returns decrease 10% or there existsone year lag in start-up, respectively. U,

January 30, 1978

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situation (a one year lag in all revenue-producing activities under the with-project situation and all on-farm investments completed), no financial rate ofreturn will fall below 14%. In the case of the 50-ewe model only, the worstsituation (a 10% reduction in gross returns) will result in a financial rateof return of 8%. The trends in prices paid to farmers and in the technicalcoefficients indicate that the best estimate of the basic rate of return ismore likely to be the case than the lower values indicated by the sensitivitytests.

5.07 The breakdown of the number of subborrowers and their income levelswith comparisons to the poverty level is shown in Annex 3. It is estimatedthat 50% of the subborrowers are expected to be at or below the relativepoverty level in December 1976 terms. Of the total funds on-lent under theproject for on-farm investments amounting to about US$54.4 million, someUS$18.8 million, or about 35%, will be utilized for subloans to small farmersas previously defined. Funds for such lending from Bank sources will amountto some US$7.5 million, or about 34% of total funds from Bank sources foron-lending to all farmers.

VI. BENEFITS AND JUSTIFICATION

A. Aggregate Economic Return

6.01 The project is expected to generate the following annual productionoutputs 1/:

With Projectat Full Development Percent

Without Project Year 12 Increase------------US$ million-------------- ---%----

Cow milk 1.6 11.6 625Sheep milk 0.8 1.5 80Wool 0.6 1.6 167Livestock 3.5 10.7 204Wheat 3.8 4.0 5Sugarbeet 3.2 0 -100

6.02 The bulk of the benefits derive from the incremental production ofcow milk and from the production of livestock for breeding or finishing byother producers. The irrigated areas allocated to sugarbeet production areshifted to the production of forage crops while the production of wheatincreases slightly through modest increases in fertilization to compensate forareas dedicated to forage crops.

1/ More detailed data are in Annex 4, C7.

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6.03 The rate of return to the economy has been calculated on the basisof five farm models assumed to be representative of the different participatingsubborrowers. The following assumptions underly the rate of return calculations:

(a) domestic prices of non-traded goods and labor were adjustedby the standard conversion factor (0.82) to translate themto border prices; 1/

(b) all on-farm project components and their costs have been phasedin at the rate at which the individual category of farms entersthe project, i.e., year 1, 5%; year 2, 15%, years 3-6, 20%.Annex 4, C5 shows the expected number of farmers being phasedin, classified by farm categories. Other project componentswere phased in as follows: costs of training and studies werecharged over the six years of the project; costs of the newfield offices were phased into the project over the first yearof implementation; cost of vehicles and housing for field staffwere spread over the first three years of the project; and themilk industry study was assumed to be implemented in the firsttwo project years;

(c) investment and operating costs were calculated using December1977 prices, adjusted to represent costs at the farm level.Relative costs and prices were assumed to remain unchangedso that any changes resulting from increases in the generalprice level in the economy would be self-compensating;

(d) current yields and farm gate prices have been applied incalculating the returns, adjusted on the basis of Bank pro-jections. The same technical coefficients have been appliedto all farm models within the same farm category, with theexception of the mortality and calving coefficients, and con-centrate requirements;

(e) benefits and costs were adjusted for all apparent transferpayments such as taxes, duties, tariffs and the social benefitpayments to labor;

(f) family labor was costed at the same value as that of itsnearest alternative which is LT 25,000 annually for a skilledlivestock farmhand in rural areas, equivalent to employmentof 280 days at LT 90/day (or US$4.68/day); and

(g) a project life of 20 years was assumed in the analysis ofall project components. Incremental herd values were creditedto the benefit stream of the farm models at the end of theproject life.

1/ This is equivalent to using a shadow exchange rate of LT 23.5 per US$1.0.

- 39 -

6.04 Based on these criteria and on the data of Table 6.1, the economicrate of return of the project is estimated to be 20%, with the followingranges for the sensitivity tests:

On-Farm ProjectOn-Farm Operating Operating Cattle Sheep Livestock Rate of

Investments Expenditures Expenditures Milk Milk Output Return

+ 5% - - - - 19.7+10% - - - - - 18.8

- + 5% - - - - 19.7+10% - - - - 18.7

- + 5% - - - 20.4- +10% - - - 20.0

- +10% +10% - - - 17.9- - 5% - - 19.2- -- -10% - - 17.7

- -- -10% -10% - 17.4- -- - - - 5% 19.7

- - - - - -10% 18.6+10% +10% - - - - 16.8

6.05 The sensitivity tests show a relatively small variation in the eco-nomic rate of return as a result of 10% variations in costs or returns. Anincrease in real terms of 10% in either on-farm investments or operatingexpenditures reduces the economic rate of return to about 18%. Decreasesin real terms in milk output affect negatively the rate of return somewhatmore than return from livestock (17% as compared with 19% for a 10% decreasein milk and livestock returns, respectively). An increase of 10% in realterms in the operating expenditures of the project unit has no significanteffect on the rate of return.

6.06 A concurrent increase of 10% in both on-farm investments and operat-ing expenditures decreases the rate of return to about 17%. Cow milk priceswould need to decrease to LT 4.00/1 and sheep milk to LT 4.95/1, or overallnet milk yields at full development decrease from 3,500 to 3,150 1/cow/yearand from 50 to 45 1/ewe/year, before the economic rate of return would fall to17%. The probability of milk prices decreasing appreciably is very unlikelygiven the overall milk shortage. Also, production data from the First andSecond Projects indicate a much higher likelihood of the higher outputbeing obtained rather than the lower.

Economic Rate of Return(LT Million)

----------------------------------------------------------------__ ----------- __ ------------------ YYe ------------------- ____________________________-____________----------------------------------------

it- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Icrennnea&l Econonic BeneOfits1. Cnttle milk 6.50 24.0 54.9 89 159 6 163.8 178.6 187.6 191. 2 192 9 193. 4 193 4 193.4 193 4 193.4 193.4 193.4 1932.4 193.4 193.42. Sheep Ilk 0.5 2.9 4.3 86. 8 9.3 11.6 12.2 112.2 112.2 12.2 12. 2 12.2 12.2 12.2 12. 2 12. 2 12.2 12. 2 12. 2 12. 23. Livestock 7.5 23.0 39.8 60.1 85.7 110.0 113.2 132.1 136.6 137.9 138.3 139.8 139.8 139.8 139.8 139.8 139.8 139.8 139.8 503.64. Wool 0.8 3.2 6.6 10.3 14. 17. 8 18.5 188 18.9 199 18. 9 18. 9 18 9 18.9 18.9 18 9 18 9 18 18 9 18 95. W'heat 0.2 0.8 16 2.5 3.3 4.1 14. 4.1 4.1 4.1) 4,1 4.1) 4..1 4.1 41 4.1 41. 4.1 4.16. Slgarbeet (2.7) (12.0) (21.0) (31.4) (42.0) (42.0) (42.0) (42.0) (42.0) (42.0) (42.0) (42.0) (42.0) (42.0) (42.0) (42.0) (42.0) (42.0) (42.0) (42.0

Total 12.3 41.0 86.2 137.8 229.9 265.3 284.6 312.8 321.0 324.0 324.9 326.4 326.4 326.4 326.4 326.4 326.4 326.4 326.4 690.2

On-Farmn InveatmRnt81. Livestork 16.7 49.8 66.5 66.5 66.5 66.5 - - - - - - - -2. Machinery 1.8 5.4 7.2 7.2 7.2 7.2 - _ _ _ 1.8 5.4 7.2 7.2 7.2 7.23 Farm Bnildi.g. 7 7 23.2 30.8 30.8 30.8 30.8 - -4. mi.cella.eoe 7.2 21.6 28.9 28.9 28.9 28.9 - -

Total 33.4 100.0 133.4 133.4 13.4 133.4 - - - - 1.8 5.4 7.2 7.2 7.2 7.2 - - - -

Incremental operating Coate1. On farme 0.4 7.5 27.1 53.5 82.2 112.5 140.1 143.1 145.5 147.8 145.2 145.8 147.3 149.3 146.2 145.1 145.5 147.1 142.1 145.4 82. Technical Rervice. 20.7 30.5 30.5 27.3 27.3 27.3 25.2 25 2 25.2 25.2 25.2 25.2 25.2 25.2 25.2 25.2 25,2 25.2 25.2 25.23. Training ann etodine 2.6 2.6 2.6 2.6 2.6 2.6 - - -4. Milk markating tndy 1.5 1.5

Total 25.2 42.1 60.2 83.4 112.1 142.4 165.3 168.3 170.7 173.0 170.4 171.0 172.5 174.5 171.4 170.3 170.7 172.3 170.3 170.6

Economic Rota of Ratorn: 20.4

Senaicivity Tact.Inveet .. cL ... t ploe 107.: 18.7Operating ... te Ploe 507,: 17.9Project ben. fite - milk niece 10%: 17.4

- liveetock mince 107.: 18.6Standard convereion factor = 1.0: 23.7

April 18, 1978

- 41 -

B. Beneficiaries

6.07 The direct beneficiaries of the project are the approximately5,200 farm families (about 41,600 persons) who increase their farm income,mostly from livestock sources. They will have not only a higher incomebut a more even annual distribution of income. Employment in livestockactivities will be provided for 5,200 farm families plus about 100 familiesproviding labor, benefiting a population of some 42,400 persons. Betterutilization will be made of the labor of the farm families directly involved.

6.08 Indirect beneficiaries include the suppliers of goods and serviceswidely scattered throughout the project area, especially those dealing withfarm building construction, machinery services and feedstuff supplies.

6.09 The incremental milk production of over 55,000 tons annually atfull development will provide milk for an additional 500,000 indirect benefi-ciaries at the present level of per capita national consumption (110 litersannually). This contribution is considered particularly important sincethe major part of this production is expected to be marketed in small urbanclusters within rural areas where milk is scarce.

6.10 The annual incremental output of livestock (7,200 head of dairycattle, 1,500 head of breeding cattle and 27,000 head of breeding ewes) at

full development will assist to meet the scarcity of high quality stock inTurkey needed for herd and flock buildups. Annual incremental output of theproject represents in the case of cattle about 1% of the region's output,and in the case of sheep, 0.5% (Annex 4, C8).

6.11 Other non-quantifiable benefits and beneficiaries include thefollowing:

(a) genetic improvement of the national herd through upgradingof indigenous livestock with improved exotic breeds--the2,900 breeding bulls produced annually by the project atfull development, for example, will provide for mating ofa potential 87,000 local cows per year 1/;

(b) introduction of newer methods of husbandry and managementresulting in better land utilization and overall higheranimal productivity;

(c) establishment of infrastructure at the national level,providing trained manpower, technical studies and servicesdirected to development of eastern Turkey;

1/ Assuming a 4-5 year working life for each bull, the potential could beas high as 348,000-435,000 cows over the working life of 2,900 bulls.

- 42 -

(d) increased supplies of milk for processing by Governmentplants which are currently operating under capacity,thereby increasing their efficiency of operation; and

(e) institutionalization of credit facilities in Turkey's poorestareas, especially by giving small farmers access to medium-and long-term investment credits which are currently notavailable to them.

C. Project Risks

6.12 A risk which could affect project viability concerns possibledelays in the implementation of the package of investments and on-farm activi-ties on each individual farm. There are examples in the earlier LivestockProjects in which occasionally a farm plan was started and commitments weremade by the subborrower and a key input (foreign shipments of livestock ormachinery) was delayed. Fortunately, such examples were few but, for reasonsoften beyond the control of the project implementing agency, this situationcould still occur and it could have serious consequences in individual cases.The financial analysis (para. 5.06 and Table 5.1) has taken into account,under the sensitivity tests, the conservative alternative of a one-year lagin the implementation of the package, with satisfactory financial viability.With the accumulated experiences of LDP in purchases of foreign livestock,tractors and machinery in the three earlier projects, delays in arrivals offoreign shipments are expected to be minor.

6.13 The risk of reduced small-farmer participation could also be important.The success of the small-farmer component will depend upon the willingness ofsmall farmers to enter the project and upon the commitment of TCZB to the con-cept of small-farmer lending. Small farmers, particularly in the new projectareas, can be expected to be somewhat hesitant to enter the project untilthere is a demonstration of project concepts on the farms of larger subbor-rowers. This was the experience in the three earlier Livestock Projects inwhich leader farmers, who were usually the best established financially, wereinvariably the ones to show the greatest initial interest in participating inthe project. What is considered to be a reasonable allowance for this hasbeen made in the phasing of the farm development component. Again, unlessTCZB fully commits itself to the undertaking and it instructs its branchmanagers accordingly, there is a danger that small-farmer lending will notdevelop as envisaged. For this reason it was considered essential to earmarka non-reallocatable sum for small farmer subloans and to ensure that any fundsnot so used will be cancelled.

- 43 -

VII. AGREEMENTS REACHED AND RECOMMENDATIONS

7.01 Agreement having been reached on the principal issues referred toin Chapters II and III, and subject to the conditions of effectiveness in

paras. 3.06 and 3.14, the project is suitable for a Bank Loan of the equivalentof US$24.0 million to the Government of Turkey for a term of 17 years at 7.5%interest per annum with a grace period of four years.

- 44 -

ANNEX 1

TURKEY

FOURTH LIVESTOCK DEVELOPMENT PROJECT

Estimated Schedule of Disbursements

IBRD Fiscal Year Disbursed During Quarter Cumulative Disbursementsand Quarter --------------------US$'000…----------------------

1979March 31 100 100June 30 100 200

1980September 30 200 400December 31 600 1,000March 31 400 1,400June 30 800 2,200

1981September 30 800 3,000December 31 1,200 4,200March 31 600 4,800June 30 800 5,600

1982September 30 1,000 6,600December 31 1,400 8,000March 31 800 8,800June 30 1,000 9,800

1983September 30 1,500 11,300December 31 1,800 13,100March 31 1,000 14,100June 30 1,200 15,300

1984September 30 1,800 17,100December 31 2,000 19,100March 31 1,000 20,100June 30 1,200 21,300

1985September 30 1,200 22,500December 31 1,500 24,000

-,43- AMEX 2

FOURTH LIVESTOCK DEVELOPMECT PROJECT

Total Project Cost and Phasing(LT million)

----- ~--------------------------------------- Year- -------- _---______________________________

1 2 3 4 5 6 Total

Item L F L F L . L F L F L F Local Foreign

I. VILLAGE DEVELOPMENT

I.1. Cattle and SheepBase cost 6.8 11.1 20.3 33.2 27.1 44.3 27.1 44.3 27.1 44.3 27.1 44.3 135.5 221.5price increases 1.6 1.3 9.1 6.6 15.9 12.4 20.3 16.4 25.2 20.4 30.3 25.2 102.4 82.3

Subtotal 8.4 12.4 29.4 39.8 43.0 56.7 47.4 60.7 52.3 64.7 57.4 69.5 237.9 303.8

1.2. MachineryBase cost 0.8 1.6 2.3 5.0 3.0 6.6 3.0 6.6 3.0 6.6 3.0 6.6 15.1 33.0

Price increases 0.1 0.2 0.4 1.0 0.9 1.9 1.1 2.5 1.4 3.1 1.7 3.8 5.6 12.5Subtotal 0.9 1.8 2.7 6.0 3.9 8.5 4.1 9.1 4.4 9.7 4.7 10.4 20.7 45.5

I.3. BuildingsBase cost 7.6 1.5 22.8 4.5 30.4 5.9 30.4 5.9 30.4 5.9 30.4 5.9 152.0 29.6

Price increases 1.8 0.2 10.2 0.9 17.9 1.7 22.7 2.2 28.2 2.7 34.0 3.4 114.8 11.1Subtotal 9.4 1.7 33.0 5.4 48.3 7.6 53.1 8.1 58.6 8.7 64.4 9.3 266.8 40.8

I.4. MiscellaneousBase cost 7.7 0.9 23.1 2.7 30.9 3.6 30.9 3.6 30.9 3.6 30.9 3.6 154.4 18.0Price increases 1.8 0.1 10 4 0.5 18.2 1.0 23.1 1.3 28.7 1.6 34.5 2.0 116.7 6.5

Subtotal 9.5 1.0 33.5 3.2 49.1 4.6 54.0 4.9 59.6 5.2 65.5 5.6 271.2 24.5

II. TECHNICAL SERVICES

Base cost 24.3 6.1 35.6 4.4 35.6 4.4 32.9 2.1 32.9 2.1 32.9 2.1 194.2 21.2Price increases 5.0 0.7 15.0 0.9 19.8 1.2 23.8 0.8 29.6 1.0 35.6 1.2 128.8 5.8

Subtotal 29.3 6.8 50.6 5.3 55.4 5.6 56.7 2.9 62.5 3.1 68.5 3.3 323.0 27.0

III. TRAINING AND STUDIES

Base costs 2.0 1.0 2.0 1.0 2.0 1.0 2.0 1.0 2.0 1.0 2.0 1.0 12.0 6.0Frice increases 0.5 0.1 0.9 0.1 1.2 0.3 1.5 0.3 1.8 0.4 2.2 0.5 8.1 1 7

Subtotal 2.5 1.1 2.9 1.1 3.2 1.3 3.5 1.3 3.8 1.4 4.2 1.5 20.1 7.7

IV. MILK INDUSTRY STUDY

Base costs 0.1 1.4 0.1 1.4 0.3 2.8

Price increases - 0.2 - 0.3 0.1 0.5Subtotal 0.2 1.6 0.2 1.7 0.4 3.3

Total - Base cost 49.3 23.7 106.2 52.1 128.9 65.8 126 2 63.5 126.2 63.5 126.2 63.5 663.5 332.1

Total - Price increases 10.9 3.1 46.3 11.4 73.9 20.2 92.7 25.8 115.0 32.0 138.5 39.7 477.3 132.1

Grand Total 60.2 26.8 152.5 63.5 202.8 86.0 218.9 89.3 241.2 95.5 264.7 103.2 1,140.8 464.2

Notes: Individual items may not total to these figures due to rounding. All figureshave been rounded to nearest LT 0.1 million, and items of less than LT 50,000are indicated by " - " in the table. A blank cell indicates that the item is

May 12, 1978

TURKEY

FOURTH LIVESTOCK DEVELOPMENT PROJECT

Income Comparisons and Investments Financed by the Project

Percent ofWithout Project Expected Number On-Farm Investments Investments

Unit Size Family Income of Subborrowers Investments to Small Farmers to Small Farmersat Full Number of from all Below the Relative for Farm /2 Financed by 13 Financed by /3

Development Subborrowers Farming Activities Poverty Level 1 Category - the Project - the Project ---- US$-------- LT Million ---LT Million---

50-Ewe Model 2,700 1,953 1,755 268.0 156.8 6510-Cow Beef Model 500 2,462 0 79.3 -

5-Cow Model 1,500 2,078 825 414.0 204.9 55 0"12-Cow Model 400 4,582 0 246.830-Cow Model 100 6,530 0 203.8

5,200 2,580 1,211.9 361.7 35

/1 The small farmer definition agreed with Government for creditpurposes is LT 35,000 of annual family income in December 1977terms (equivalent to LT 28,000 in 1976 terms). The 1976 rela-tive poverty level for a rural family amounts to US$218 percapita in 1976 terms, equivalent to LT 27,992 per family (Annex 4,C6). Thus, all small farmers as defined would have incomes ator below the relative poverty level for Turkey.

/2 Including price increases, and estimated phasing-in of the sub-borrowers (Annex 4, C5)

/3 Including price increases, estimated phasing-in and adjustedby the corresponding farmer contributions (Annex 4, C5).

May 12, 1978

-47- ANNEX 4Page 1

TURKEY

FOURTH LIVESTOCK DEVELOPMENT PROJECT

Selected Documents and Data Availablein the Project File

A. Selected Reports and Studies on the Sector or the Subsector

Al. IBRD, Turkey, Agricultural Sector SurveyReport 1684-TU, draft green cover, dated September 13, 1977.

A2. IBRD, Turkey, Country Economic MemorandumReport 1272-TU, October 21, 1976.

B. Selected Reports and Studies Relating to the Project

Bl. CP FAO/IBRD, Back to Office Report on Dairy Industry Component,A. Olkinoura, July 28, 1977.

B2. CP FAO/IBRD, Concept Definition Report, Report 19/77 TUR 20,May 25, 1977.

B3. CP FAO/IBRD, Technical Note on the Dairy Industry Component,Report 36/77 TUR 22, August 26, 1977.

B4. IBRD, Appraisal of Second Livestock Development Project,Report PA-122a, March 15, 1972.

B5. IBRD Appraisal of the Third Livestock Development Project,Report 1027-TU, May 10, 1976.

B6. General Directorate of Livestock Development Projects, MINAG,Preparation Report of Fourth Livestock Project, Ankara,November, 1977.

B7. IBRD, Appraisal of an Agricultural Credit and AgroindustriesProject, Report 987-TU, April 12, 1976.

C. Selected Working Papers

Cl. Terms of Reference.

C2. Farm Budget Data.

C3. Cost Estimates, Phasing and Price Increases.

C4. Tax Rates.

-48- ANNEX 4Page 2

C5. On-Farm Credits, Repayment Streams and Sensitivity Analysisto Interest Rates.

C6. Relative Poverty Levels and Income Distribution.

C7. Economic Benefits by Farm Size and Rate of Return.

C8. Livestock Numbers and Output.

TURKEYFOURTH LIVESTOCK DEVELOPMENT PROJECT

IMPLEMENTATION SCHEDULE

IBRD FISCAL YEAR 1979 1 980 1981 1982 1983 | 984 1985

CALENDAR YEAR 1979 1980 1981 1982 1983 1984 1985

I Implem.entation of Farm Development Plans i

by Subborrows: 1 I _T _ F_Cattle and Sheep _ 1211 (69) (100) (108) (1117) (121 l_ (LT MILLION

Mach,mery I r I I n m ipm L ILIONI(3) (9) (12) (13) _ 14) (151 _ L L

Farm Constructons M M" I(I I1 ) _ I( _ ( LT M I L L O N)111 (3)5 6) (6 1) 167)I (74) 1 I

MI,sceflaneo.s (ii i n m nm -m LT MILLIO7N)(11) (37) (54) 659) (67) (71)

11 Technical Services:

Technical Specialhst:Candidates Proposed ior IBRO ApprovalContracts FormalizedSpecia'lists..n Post- - m- - -- m- umm--mm

Local Staffing: a/Purchae at Vehicles (33( 31)

Station Wagons (0

Crew Cabs _t(20) (20) _ 20)

Hoas,ng- - -

III Technical TrainingandStudiesProposals

Submitted tr IBRD for Co mnenrant__lglil :

Study Tours/Study Leaw Implemented m -_ _ _ _ - - - -

Milk Marketing Stcdy - - - m -m

IV Reporting:

Semiann-aa Reports by Project Manager -r _ _ _ _ _ _ m

Accounts and Audit ReportsTCZ8 )EDJLIJ

LDP (Technical Services, Studies andTraining Accocnts)

aJ To brinq total staff to 95 b/ To bring total staff to 126 World Bank -18657

25. R w v4 45-

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VA i *'~~~~~~~~loM1J5 Van Go/u o~~~~~~~~~~~~~ COUNTY HEADQUJARTERS

r ®EIAZIG ' !®'s. ~~~~~~~~~~~~~ A ~~~ / -~~~ COUNTY BOUNDARIES

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