Document of

The World Bank

FOR OFFICIAL USE ONLY

GG~14 I o6 - h '-

c^A- A -Sr- M4L1 Report No. 6522-MLI

STAFF APPRAISAL REPORT

REPUBLIC OF MALI

OFFICE DU NIGER CONSOLIDATION PROJECT

February, 1988

Agriculture DivisionSahelian Departrent Africa RegionAfrica Region

This document has a resticted distribution and may be uwed by reipients only in the performance oftheir official duties. its contents may not otherse be d_osed without WodiI Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit - CFA Franc (CFAF)US$1.0 - CFAF 314

CM? 1 million * US$3,185US$1.0 - SDR 0.7778

1 SDR - US$1.28563

WEIGHTS AND MEASURES

1 Hectare (ha) - 10,000 m21 Square Kilometer (km) = 100 ha1 Metric Ton (mt) - 1,000 kg

ABBREVIATIONS AND ACRONYMS

BEP - Bureau des Entreprises Publiques (Public Enterprise CoordinationOffice)

BCEAO - Banque Centrale des Etats d'Afrique de l'Ouest (Central Bank forWest African Monetary Union)

BDM - Banque de Developpement du Mali (Development Bank of Mali)BNDA - Banque Nationale de Developpement Agricole (National Development

BAnk for Agriculture)CAA - Caisse Autonome d'Amortissement (Debt Amortization Office)CFA - Centre de Formation Agricole (Agricultural Training Center of Office

du Niger)CCCE - Caisse Centrale de Cooperation Economique (French Aid Loan Agency)DIGIS - Directoraat Generaal Voor Internationale Samenwerking (Dutch Aid

Agency in the Ministry of Foreign Affairs)FAC - Fonds d'Aide et de Cooperation (French Aid Agency)IER - Institut d'Economie Rurale (Agricultural Research Institute)KfW - Kreditanstalt far Wiederaufbau (Federal Republic of Germany Loan

Agency)ODR - OpOrations de Developpement Rural (Regional/Commodity Development

Agencies)ON - Office du NigerOPAM - Office de Commercialisation des Produits Agricoles du Mali (National

Cereali Marketing Board)ORSP - Office de R4gulation et de Stabilisation des Prix (Price

Stabilization Fund)PRMC - Programme de Restructuration des Marches C6rdaliers (Food Aid

donors supported program to restructure cereals sub-sector)SUKALA - Sugar Company of Kala (Company Sucribre du Kala Superieur)WAMU - West African Monetary Union

FISCAL YEAR

May 1 - April 30

FOR CFFICI4L LU ONY

REPUBLIC OF MALI

OFFIZE DU NIGER CONSOLIDATION PROJECT

TABLE OF CONTENTS

Page

DOCUMENTS CONTAIkIED IN THE PROJECT FILE ............................... iii

CREDIT AND PROJECT SUMMARY ............................. .............. vi

I. BACXGROUND#*.*&a# ..* .............. 1

A. Introduction .................................... 1B. The :tural Sector ..*........... ...... 1

II. TEl IRRIGATION SUBSECTOR................... 2A. Resources and Prospects for Irrigation Development....... 2B. The Office du Nigeri.......g...... .... 5C. Experience with Past Lending............................. 6

III. THE PROJECT*~# .....o...... ... ... .*o.................. 7

A. Objectives, Design, Justification and General Description 7B. The Project'Area ......................................... 8C. Detailed Features.................................... . 8D. Project Implementation ........................................ . 18E. Monitoring, Planning and Evaluation ...................... 20F. Environmental Impact ..... .......................... ...... 20G. Safety of Dams .............................................. 21H. International Water Rights .............................. 21I. Cost Estimates and Financing ............................ 21J. Procurement and Disbursements ............................ 25K. Accounts and Audit .......... 27L. Markets and Prices ....................................... 28M. Cost Recovery and Recurrent Costs ........................ 29

IV. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS ................. 31

This report is based on the findings of an IDA appraisal mission which visitedMali in June/July 1986. The mission consisted of D. Lallement, MissionLeader/Economist, Messrs. A. Seznec, Agronomist, H. Plusquellec (part-time),Irrigation Advisor, L.T. Mpoy-Kamulayi (part-time), Lawyer, IDA, and J. MarieFleury, Financial Analyst, C. Maguerez, Management and Training, J.P.Chirouze, Civil Engineer, G. Manuellan, Irrigation Engineer, and D. Murphy,Operations Assistant, Consultants. The report was written and processed byD. Lallement. Data processing assistance and secretarial support were givenby L. Tran, M.C. Tsang and J. Nickerson.

This document has a restrcted dtrbutoa and may be used by recipients only in the perfonnaceof their offcial dutles. Its contents may not otherwise be dbclosed without World BDank authoriaon.

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ANNEXES

2-1 Irrigation Subsector: Estimates of Land Resources Suitablefor Irrigation

2-2 Background on Office du Niger3-1 Schedules of Divestiture of ON's Activities3-2 ON's Pricing Policy3-3 ON Indicative Organizational Charts3-4 ON's Projected Financial Restructuring3-5 ON's Summary Investment Plan3-6 Project Implementation3-7 Schejule of Technical Assistance3-8 Project Costs by Summary Accounts, and Project Financing3-9 Preliminary Financing Plan3-10 Disbursement Schedule and Profile3-11 Farm Budgets3-12 Economic Analysis

MAP

IBRD No. 20622: Mali Office du Niger Consolidation Project

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MALI

OP'TICE DU NIGER CONSOLIDATION PR JECT

DOCUHCNTS CONTAINED IN THE PROJECT FILE

A. Rrnorts Related to the Sector

1. Options and Investment Priorities in Irrigation DevelopmentsThe Case of Mali. SCETAGRI/GERSAR, June 1985. 3 Vols.

2. Hopti Area Development Project. Staff Appraisal ReportNo. 5042-MLI

3. Office du Niger Technical Assistance Project Project CompletionReport, dated June 21, 1982, Audit Report 4414.

4. Cereal Market Policy Reform in Mali. Club du Sahel, July 1986

S. Reports Related to the Proiect

1. ON - Esquisse du plan directeur hydraulique.SOGREAH, septembre 1981

2. ON - Rehabilitation des casiers Blanc, N'Debougou et SiengoEtude de factibilite (17,000 ha). SOGREAH, janvier 1982

3. ON - Regulateur du canal du Sahel en point A -R4gulateur du point B - porte de garde du canal Graber-Nord;Expertise des ouvrages. SOGREAH, avril '982

4. ON - Projet de rehabilitation de l'infrastructure hydraulique del'Office du Niger: Zone dependant du Canal du Sahel. SOGREAH,juillet 1983

5. ON - Projet de rdhabilitation de l'infrastructure hydraulique del'Office du Niger: Zone du Canal principal GrUber-Nord.SOGREAB, octobre 1983

6. ON - Reseaux hydrauliques des p6rimbtres irrigues de l'Office duNiger. Travaux d'entretien urgents. SOGREAH, 1983 et 1984

7. Barrage de Markala. Avant Projet Detaill6 pour laRAparation et l'Entretien du Barrage. SOGREAH, Janvier 1983

S. ON - Assistance technique pour la gestion de l'eau. Octobre 1982- septembre 1985. Compte rendu dactivitd. SOGREAH, octobre 1985.

9. ON - Projet GEAU - Gestion de l'eauTome III - Expdrimentation Agricole

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Universit6 Agricole de Wageningen, juin 1984

10. ON - Projet GEAU - Gestion de 1VeauTome I - Rapport principalUniversit# Agricole de Wageningen, octobre 1984

11. ON - Projet d'lintensification de la riziculture dansle secteur du Retail. CCCI 1985

12. ON - Requete de financement au FED. ON, juin 1985

13. ON - Projet de r4habilitation de la zone de Nd6bougou.Etude de Factibilite - AGRAR and YD%RO'ECHNIK, 1985

14. ON - Plan d'opdration du projet ARPON. ON, mal 1985

15. Rapports du Cabinet DIARRA sur l'O.N.

Mission d'Assistance - Rapport de SynthesoAnalyse des comptes de tresorerie au 30 avril 1984Analyse des comptes clients au 30 avril 1984 - sArie ALaalyse du Compte EtatBilan au 30 avril 1985

16. Evaluation de la situariton de tresorerie de mai 1985& avril 1987. SEDES, 1985

17. Projet de consolidation de l'Office du Niger.Rapport de pr6paration. D. Lallement et A. Arafa,novembre 1983

18. Office du Niger - Prospects for Agricultural Development.Tom Bredero, June 1985

19. Etude de restructuration financibre.Alain Teyssoniare de Gramont, I.C. Techno Transfer,juillet 1985

20. Evaluation et proposition de d6veloppement des associationsvillageoises b l'Office du Niger. Mamadou Cisse.

21. Mission de Pr4-dvaluation du Projet de ConsolidationAide-M4moire. D. Lallement, fevrier 1986.

C. Workina Pacers

1. Etude de rdorganisation des structures de gestion, d'exploitationet de formation. Charles Maguerez, consultant, Juillet 1985/Ao6t1986.

2. Evaluation de la Consolidation de la Regie d'Entretien. Jean-PaulChii:ouze, Consultant, juillet/aott 1986.

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3. Evaluation Qes Travaux Urgents sur le R4seau Hydraulique.J.P. Chirouze, G. Manuellan, Consultants, juillet/aott 1986.

4. Barrage de Markala - PAparations et Entretien. Rapport d'Evaluation.Pernando Posse Hernandez, Consultant, Juillet 1985; note deM. Porrier, SOGREAH, Ao6t 1986.

5. Eva'%ation des Travaux de Udhabilitation des CanauxGru'aer-Nord et Siengo, et de rdam6nagement des phrimbtres de Siengo(3076 Ha), G. Manuellan, Consultant, September 1986

6. Prolrauue de Travaux Ruraux. A. Sezuec, Septembre 1986

7. Proposition d'am6lioration de la Gestion de l'eau. G. Manuellan,Consuitant, H. Plusquellec (IDA), Septembre 1986

'. Proposition d'amelioration de la production agricole et de larecherche d'accompagnement a l'Office du Niger. Alain Seznec,Septembre 1986.

9. Evaluation du developpement de l'elevage sur les zones de l'Officedu Niger. Jean-Frangois Letang, Consultant, AoUt 1985

10. Analyse Financibre. J.M. Fleury, Consultant, D. Lallement Z,septembre/octobre 1986

11. Agricultural Credit, D. Lallement, November 1986.

12. Terms of Refe-ence for the Studies, D. Lallement, November 1986

13. Detailed Financing Plan, D. Lallement, L. Tran, November 1986

14. Detailed Project Costs, D. Lallement, L. Tran, November 1986

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REPUBLIC OF MALI

OFFICE DU NIGER CONSOLIDATION PRO.CT

CREDIT MAD PROJECT SUMMARY

Borrowers Government of Mali

nfleficiariost Office du Niger (ON), National Agricultural Credit Bank(BNDA), farmers.

Credit Amounts SDR 38.1 millionof which:IDA: SDR 31.0 million (US$39.8 million equivalent)SFAs SDR 7.1 m Ullion (US$9 million equivalent)

Terms: Standard IDA termsStandard SPA terms

Flow of CreditProceeds: Borrower to Office du Niger (US$21.0 million): 3Z

interest rate, 10 years of grace on principal, 30 yearmaturity; and US$24.8 million as a grant.Borrower to BNDA (US$3.0 million): 31 interest rate,five years of grace on principal, 15-year maturityBNDA to farmers: Short-terms 101 interest rate,

12-month maturityMedium-term: 5Z downpayment, 91interest rate, 1-year grace onprincipal, 5-year maturity

BNDA to VillageAssociations: Short-terms 9? interest rate,

18-month maturityMedium-terms 52 downpayment, 81interest rate, 1-year grace onprincipal, 5-year maturity.

Proiect Descriptions The Project is conceived as the first phase of along-term program aimed at rehabilitating the Office du Niger ana atincreasing agricultural production and productivity in the Inner Niger Deltaregion. In order to ensure the financial and economic viability of therehabilitation investments, the project calls Lor continuing a series ofpolicy reform including the gradual divestiture of some of ON's activities,liberalization of trade and introduction of market-determined pricing forpaddy and rice, increased security of farmers' land tenure rights, andprovision of credit to farmers and traders. The reorganization of the ON,together with the recruitment of consultants and technical assistants, would

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help ON develop in-house managerial and technical competence and improve itsdelivery of services to farmers. Another important feature of the projectwould be ONf's financial restructuring and the tightening of its financialmanagement, which would enable the Offies to break even, i.e., to eliminateits financial deficit, in about three years. The project's main investmentswill consist oft the consolidation of the maintenance unit, long overduerepairs on the irrigation network, repairs and maintenance of the diversiondam, the rehabilitation of 3,100 ha, and labor intensive rural works on3,500 ha. These investments will be complemented by a program to improveapplied research, resource management, training and extension. Finally, theproject will finance studies including feasibility studies for the subsequentphases of the rehabilitation program.

Estimated Costs: (Net of identifiable taxes and duties)

Local Forsign Total------- US$ million --------

1. Financial Restructuring 3.2 0.5 3.72. Line of Credit to BNDA 1.4 0.9 2.33. Preparatory tasks - 1.7 1.74. Consultant Services and

Technical Assistance 0.2 4.1 4.35. Investments:

Consolidation of maintenance unit 0.7 8.7 9.4Urgent repairs 0.6 2.3 2.9Markala Dam repair and maintenance 0.3 9.0 9.3Rehab. of Gruber Nord/Siengo canals 1.8 9.9 11.7-hab. of Siengo perimeter 1.3 10.2 11.5Rural works 3.7 0.4 4.1

6. Applied Research, improvedresource management, trainingand extension 0.1 2.3 2.4

7. Studies and Training 0.2 0.3 0.5

Total Base Costs 13.5 50.3 538

Physical Contingencies 1.2 6.9 8.1

Price Contingencies 4.3 7.4 11.7

Total Project Costs a/ 19.0 64.6 83.6

a/ Includes repayment of US$ 1.5 million PPF advance.

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Local or aln Tot&l-------- us$ 8illion ---̂ ----

1. IDA 3.7 36.1 39.8

2. SIA 1.9 7.1 9.0

3. SJF/I. 1.3 17.7 19.0

4. FAC - 2.0 2.es. ccci a ~~~~~~~~~0.4 0.4S. CCCt _ . .3

6. DI¢IS - 1.3 1.37. ON/rarere a.o 8.0

S. 9 rn n 4a. - 4.1

Total 19.0 64.6 83.6

h&SLUIe Disbursmants foro IDa nd SPA creditls

MYg t FYO Y91 FY92 FY93 FY94 PY95 PY96 FY97

ace Ca cacswc JS$ million -_--__________ a-a--a----

Annul 0.8 4.2 3.8 5.1 7.5 7.5 3.4 3.4 1.1 1.)

cumulative 0.8 5.0 8.8 13.9 21.4 28.9 34.3 37.7 38.8 39.8

SFA

Annual 4.8 2.8 1.1 0.3Cumulstive 4.0 7.6 8.7 9.0

Including initial deposits into special accounts

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Economic Rate of Returns 162 (calculated on 332 of project costs).

Benefits and risks: The most easily quantifiable benefits will be anincrease in annual rice production of about 40,000 tons after 10 years,representing an import substitution equivalent to about US$ 8.0 million,and a 45? increase in farmers' net annual incomes. Less easilyquantifiable benefits include the establishment of a viable irrigationauthority capable of managing the long-term rehabilitation and developmentprogram, and the consolidation of the productive capital represented by theirrigation infrastructure at the Office. Upon completion of therehabilitation program, the Office could become a major source of econ'micgrowth for the country. ON's staff and senior Government officials wereclosely associAted with project preparation and appraisal in order toensure the success of the proposed reorganization of the ON. Failure ofthis effort, including the possible failure of the technical assistance andstaff training prograua, is the major risk. The other important risk,namely that farmers would not intensify agricultural production as rapidlyas necessary to make the rehabilitation investments viable, should beminimized if the agricultural support program is well implemented. If thereorganization fails or if agricultural production lags, the rehabilitatiornprogram would be scaled down. Another important risk is that thegovernment will be unable to fulfill its financial obligations. To reduce.this risk, part of IDR financing will be used to finance a) theGovernment's payments for non-incremental recurrent expenditures for thefirst two years of the project; and b) a study on taxation to assessshether farmers can finance more than the present plan provides.

RUPUBLIC OF MALI

OFFICE DU NIGER CONSOLIDA`ION PROJECT

I. BACKGROUND

A. Introduction

1.1 In late 1981, the Government of Mali requested that IDA considerfinancing the rehabilitation of 17,500 ha at the Office du Niger. Thefeasibility study had been financed under the Technical Assistance Project,Credit 864-MLI, reviewed below (pars 2.15). After preappraising theproject in December 1981, IDA concluded that several policy changes shouldtake place before a major investment were undertaken. These changesincluded: a reorganization of ON's management; the establishment of secureland tenure for farmers; and the liberalization of pricing and marketingpolicies for paddy and rice.

1.2 Progress made by the Government on policy reforms led to thestart of preparation of the proposed project in late 1983 with assistancefrom IDA and consultant engineers. ON's management and staff, as well asGnvernment officials, were closely associated with the preparation work.The project concept and description were discussed in detail with theGovernment and other donors at a meeting held in Bamako in April 1986. Anappraisal mission visited Mali in June/July 1986; other donors, namely CCCEand DIGIS, were closely associated with its work in the field. A ProjectPreparation Facility of US $1.5 million (No. P379-HLI) from IDA wasapproved ori June 23, 1986, to complete project preparation and initiate thereorganization of ON.

B. The Rural Sector

1.3 In 1986, the population of Mali was estimated at 7.5 million, ofwhich 802 live in the rural areas; 902 depend on agriculture for theirlivehood. The country is mostly arid and semi-arid, covers 1.24 millionkm, 55Z of which lies in the Saharan zone (less than 200 mm rainfall). Therest of the country is divided as follows: Sahelian zone (200-350 mm):172; Sahelo-Sudanian zone (350-800 mm)s 151; and the Sudano-Guinean -zone:132. About 652 of the total population lives in the zones which receivebetween 350 mm and 800 mm of rainfall. Except in years of above normalrainfall, Mali suffers from a chronic food deficit. Availability ofcereals per capita has declined since 1970. Except for the Sudanian andSudano-Guinean zones, all other areas are in deficit even in normal years.The major crops are sorghum, millet, groundnu:s, cotton, maize, and rice.Livestock is important, both in the production system and in the economy.

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1.4 The overall potential for agricultural production in Mali islimited by low &nd erratic rainfall, fragile soils prone to erosion anddeclining fertility, and low-yielding traditional crop and livestocktechnologies. Nonetheless, Malian farmers are among the most proficient inWest Africa and there is scope for expanding agriculture in the south andin the west. Productivity can be increased largely through the integrationof livestock and agriculture and through improved water management anddevelopment. In addition, with the Inner Delta of the Niger River, Malihas the largest physical scope for expanding irrigation of all the Saheliancountries. Major issues in the rural sector include the very high rate ofpopulation growth, which offsets any gain in production and increasespressure on the scarce land resources; the reform of rural and agriculturaldevelopment institutions; the diversification of agricultural acmtivitiesaway from traditional low-priced cereals to high value export crops inareas where this is feasible; and the generation of private and publicsavings for investment in resource conservation and agriculturalproduction.

II. THE IRRIGATION SUB-SECTOR

A. Resources and Prospects for Irritation Development

1. Physical resources.

2.1 In the sahelian context, Mali is relatively well-endowed withirrigable land, recently estimated at 500,000 hectares (Project File A.1).This estimate takes into account soil and water resources, and the economicviability of irrigation investments in the areas covered. Annex 1 presentsthe typology and distribution of these resources by hydraulic region. Only183,000 ha have to date been equipped with primary irrigationinfrastructures. Only 130,000 hectares are actually cultivated. Theremaining 53,000 hectares have either been abandoned for lack ofmaintenance or were never fully equipped. Most of the irrigated area iscultivated under rice; sorghum and millet is cultivated in flood recessionareas, and to a lesser extent as a second crop. Sugar is grown on one5,000 ha. plantation. Vegetable growing has been expanding rapidly inrecent years.

2. Prospects for Irrigation Development

2.2 The scope for expanding irrigation is limited by the followingmajor constraints, all of which may, however, be alleviated over time.First, the high cost of new irrigation investments is exacerbated by theabsence of experienced local contractors and the limited number of projectswhich might attract foreign contractors. Second, the farmers' experiencewith intensive irrigated agriculture and maintenance of irrigationinfrastructure is limited; this tends to lower returns on investment andaccelerate the pace of deterioration of irrigation networks. Third, worldcommodity prices are depressed, in particular for cereals which have beento date the main crop cultivated in irrigated perimeters. And, fourth, the

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financial resources required for the rehabilitation and development ofMali's irrigation potential are enormous.

3. Irrigation Development Strateay

2.3 The strategy is fourfold. First, to give priority torehabilitation of the existing irrigation infrastructure, and limit newinvestment to small schemes. Second. to improve extension services andfarmers' training in all irrigated perimeters in order to increaseproductivity. Third, to promote crop diversification in order to increasereturns on irrigation investments. And fourth. to promote domestic andforeign private investments. The project would contribute to theimplementation of this strategy. The lands to be rehabilitated in ONrepresent about two-thirds of possible rehabilitation investments. Theproposed applied research, and training and extension programs should leadto substantial increases in cereal production as well as identification ofcrop and technological alternatives. In addition, funds have been includedin the project to promote private domestic and foreign investments in theOffice du Niger area.

4. Government Policies

2.4 In pursuit of food self-sufficiency after the 1972174 drought,substantial public investments were made in irrigation, mostly in low-costsemi-controlled schemes for rice production. Public regional developmentauthorities (ODRs), and notably the three largest irrigation agencies, theOffice du Niger (ON), Operations Riz Mopti (ORM), and Operation Riz Segou(ORS) were given far-reaching responsibilities; these agencies implementedthe Government's policy of subsidized inputs and equipment, controlledproducer prices, and commodity marketing by public agencies. Theeffectiveness of these policies has been limited. Productivity inirrigation schemes has remained low, thereby contributing little to theself-sufficiency objective. Inadequate funding for recurrent expendituresresulted in poor infrastructure maintenance. Overstaffed and inefficientirrigation authorities became an increasing burden on public finances.

2.5 Since 1981, the Gover.anent has initiated policy reforms to reducethe size of the public sector, increase its efficiency, and liberalizemarketing and pricing policies. A study of all the ODRs was carried outunder the IDA-financed Technical Assistance Project (in 1984 and 1985).The preparation and appraisal work for the Mopti Area Development Project,approved in 1985, and for the proposed project to the Office du Nigercomplemented the case analyses. Except for measures taken in connectionwith specific donor-supported institutions such as ON and ORM, few of thereforms recommended by the ODR study have been yet initiated; a plan ofaction has just been completed.

2.6 By contrast, cereal pricing and marketing have been liberalized.Strong Government intervention dominated cereal pzicing and marketingpolicies in the 1970s. Intervention was made through the ODRs, which hadthe responsibility for primary marketing, and through the National CerealsBoard (OPAM), which had responsibility for national food security stocks,

market stabilization, and procuring cereals for public institutions. OPAMalso became the principal channel for procuring and distributing food aid.OPAM's intervention was made possible through (a) monopsony rights over thecereals purchased by the ODRI, such as the paddy/rice produced at Office duNiger; (b) below-market official prices; and (c) heavy subsidization ofOPAM activities. Domestic controls were complemented by strongintervention in external trade, notably through a ban on cereals exports,and the levy or suspension of import taxes depending on the domestic supplysituation. Like many other African countries, Mali adopted a system ofofficial producer and consumer prices, with the objective of protecting lowincome consumers regardless of the negative impact on producers. In 1979,it established a complex system of BarOmes, which established the producer,wholesale, and consumer prices as which the ODRs and OPAM could buy andsell, as well as the subsidies which each institution would receive fromthe Price Stabilization and Regulation Office (OSRP) to offset losses.

2.7 In 1982, Government initiated a process of liberalization ofcereal pricing and marketing policies. This process was supported by majorfood-aid donors, through the Cereals Marketing Restructuring Program(PRMC). Private trade was permitted for coarse grains in 1982/83, and forpaddy and rice in 1985186, but official panterritorial prices, published ina Presidential Decree at the beginning of each harvest, were maintained.These panterritorial prices have now been abandoned (November 1987).Although not imposed on private traders, these official prices were adoptedby public institutions, including ON. For the 1985/86 campaign, the paddyproducer price was set at CPA F 701kg, which happened to be in line withthe import parity price. For the 1986/87 campaign, the same price wasmaintained, in spite of the high level of cereal stocks in the country, andlow market prices. At the consumer end, the formerly heavy consumersubsidies have been eliminated, but OPAM has been unable to compete withprivate merchants. On the trade front, the ban on cereals exports has beenlifted, and the import tariff on zice of 322, which had been lifted duringthe 1981-84 drought, was reestablished in January 1987 to cope withunusually low world rice prices and the appreciation of the CFA francagainst the dollar. Most recently, in November 1987, the Governmentannounced a reduction in the role of OPAM, the elimination of officialproducer prices, and of the bargme system for public institutions. Thereforms to be pursued under the project are described in para. 3.5(b).

5. Institutions

2.8 The two Ministries of Agriculture, and of Natural Resources andLivestock, share responsibility for agricultural development in Mali. TheMinistry of Aariculture supervises th. principal irrigation authorities,notably ON, and the Minister is Chairman of ON's Board. In that ministry,the Department of Rural Works (G4nie Rural) has overall responsibility forirrigation planning and development, while irrigation authorities have mainresponsibility for design, construction, operation and maintenance. TheInstitut d'Zconomie Rurale (IER) is responsible for agricultural researchand seed certification. Research on rice is carried out at the Koaoniresearch station, located in the northern part of ON. The station'sirrigation and drainage network is deficient; it is poorly equipped and the

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chronic shortage of funds has hampered varietal research and field testing.The station is being rehabilitated undez the Mopti Area Development Projectwith cofinancing from the Netherlands. The Oo6ration SemencesSelectionnees (OPSS) is concerned with seed rice production. It isill-equipped and managed, and generally produces low quality seeds.

2.9 The National Agricultural Credit Bank (BNDA) was established in1981 with financial and managealal assistance from CCCU. BNDA is well-runand has been expanding its activities rapidly while maintaining a soundfinancial situation. During its 1986 fiscal year, it granted over 1950loans to farmers directly or through village associations, for aboutUS$ 6.0 million for short- and medium-term credit. The record on creditrepayment is good, about 95Z in Mali Sud and Hopti zones where most of thecredit is distributed. Under the project, BNDA is to expand its activitiesin Office du Niger.

B. The Office du Niger

2.10 Physical Characteristics. The Office du Niger was established in1-32 to develop 350,000 ha in the Inner Niger Delta north/northeast of thecity of Sdgou (Map No. 20118). ON's irrigation system (Map No. 27821)comprises a diversion dam at Markala on the Niger River, 235 km of feedercanals, about 720 km of distribution canals, and 760 km of drains. By1960, about 53,000 ha of irrigation perimeters had been developed; another5,000 ha were developed in the 19608 for two sugar cane plantations whichhave now been transfeieed to SUKALA, a sugar company created in 1985.Today, only 43,000 ha aro cultivated, mainly for rice and dry-seasonpastures. Yields are low, 2 t/ha on average, due to poor irrigation,extensive cultivation techniques, and low-yield varieties. Paddyproduction fell considerably in the late 19709, reaching a low of 65,000tons in the early 1980s; it has since been increasing slowly. Moredetailed data on the irrigation network and production are given in Annex2-2.

2.11 Legal Framework. Mandate, and Orianization. The Office du Nigeris an Industrial and Commercial Public Enterprise (EPIC). ON has had moreoperational autonomy than Administrative Public Enterprises (EPA), but notsufficient autonomy to carry out its mandate efficiently (para 3.06 (a)).Until 1985, ON's mandate included not only the construction, operation andmaintenance of irrigation facilities as well as extension and appliedresearch, but also commercial activitiess input procurement anddistribution, agricultural credit, paddy and rice marketing and processing.The current organization chart, which indicates unduly heavy centralservices and an unduly layered hierarchy of field staff administration, isshown at Annex 2-2.

2.12 ON's Financial Situation. Since the early 1980s, ON's financialsituation has been poor. The majority of ON's revenues come from watercharges collected from farmers and from rice sales to OPAM, and recently,to private operators. Because the fixed price and marketing system (para2.6) was insufficient to cover costs, ON received a government subsidy paidby ORSP. By 1983, ON's short-term debt to both the banking system and

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suppliers had reached about $10 million, due to losde in revenues fromdecreasing production and collection of water charges, and poor financialmanaement. Improvements took place at various tines, but ON's financialsituation deteriorated badly again in 1987, reaching in November 1987 thesame indebtedness level as in 1983, largely because of unsold stocks ofrice. This situation exists in spite of the fact that the short-ternm debtsto the banking sector and major suppliers had been cleared in the contextof Mali's entry into the West African Monetary Un±on and thanks to a CCCCloan in 1985. The transfer of the sugar activity to SUKALA, a newly createdcompany, alleviated ON's operations; the transfer of assets will bereflected in the 1986/87 accounts. Since 1983, however, ON's financialmanagement has improved. The accounts have been completed and corrected byexternal accountants through fiscal year 1984/85, and the 1985/86 accountshave been completed and reviewed. Proposals to restructure ON's financesare included in the project (paras. 3.7-3.8). Details are given in ProjectFile C.10.

2.13 Recent DeveloDmeni., and Prospects for Rehabilitation. Since1979, _he Government has undertaken several projects to rehabilitate ON.Besides the IDA-financed Technical Assistance Project, (para 2.13),7,600 ha have been partially rehabilitated with assistance from theNetherlands, 200 ha with CCCE assistance, and technical assistance to thefinancial and technical departments has been provided by FAC. Details onthe investmaint program are given in para 3.9 and Annex 3-5. As a result ofdiscussions with the Bank and other donors, the Government decided toundertake major reforms in support of the rehabilitation of ON, asexpressed in the decisions announced in March 1985. ON's mandate has beenredefined and will be limited to activities directly related to themanagement of the land and water resources with most comercial activitiesto be progressively transferred to farmers or other economic agents(para 3.5(a)). The divestiture of some of ON's responsibilities hasactually been initiated with the partial transfer of paddy threshing,transport, and marketing to farer:s and private traders. The principle ofa contract-plan between the Government and ON has been accepted. TheGovernment has articulated a policy designed to assure farmers' land tenurerights, in lieu of the current practice whereby farmers cultivate landunder annual contracts with ON. With these measuree, which werepre-conditions for the appraisal of the proposed project, and the recentrecruitment of technical assistance to strengthen the financial management,the prospects for a successful rehabilitation of ON are good.

C. ExDerience with Past Lending

2.14 To date, IDA credits total about US $43.9 million for irrigatedagriculture in Mali. The Second MoDti Rice Prolect of 1978 (total costsUS $52 million; IDA: US $15 million) had as its objectivess production ofan additional 34,000 T of paddy through additional polder construction,training and extension, input supply and credit. Problems included: poorchoice of rice varieties; design deficiencies; lack of quality seeds.equipment, credit, and oxen at the required tire; and low producer priceswhich discouraged investment by farmers. On the positive side, theadaptive research and studies provided data on seed varieties, land

preparation techniques, flooding patterns and water management which wasused in the follow-up Mopti Area Development Project of 1985. Under theMali Sud II Proiect, 1,750bha of small-scale perimeters are being developedand studies to rehabilitate another 5,000 ha are underway.

2.15 The Technical Assistance Proiect to Office du Niger of 1979(total costs US $14.2 million; IDA US $4.5 million) was to strengthen theON's technical and administrative services; to prepare the rehabilitationof 17,000 ha; to test cost-effective rehabilitation methods on 1,500 ha; torepair certain canals and drains; and to test various farming systems.Implementation was difficult and results were mixed due to: inadequatesupport from tha Government and ON to the consultant and technicalassistants; inadequate design of the rehabilitation works and agronomictests; and insufficient attention to socio-econoinic and policy factors.Still, the project had positive results: it opened up ON to theinternational financing community; much socio-economic information wascollected; and a policy dialogue became possible with the Government andother donors. The PPAR issued on March 29, 1983 (Report No. 4414)concluded that parastatal issues can only be resolved through a high-levelpolicy dialogue. Other lessons learnt are that full support fromGovernment and the implementing agency is necessary prior to appraisal;production incentives must be established; farmers must partic'pate in allactivities related to the irrigation infrastructure; the i_-r'gation boardmust relinquish productive activities to other economic agents; andtechnical assistance must be integrated into the institutional structuresand their terms of reference designed accordingly. These lessons have beentaken into account in project design.

III. THE PROJECT

A. Objectives. Design, Justification and General Description

3.1 Obiectives and Design. The broad objective of the project is torestructure the ON in order to increase agricultural productivity and, inthe long term, establish a sustainable production syst6m. The project hasfour main short-term objectives: to strengthen ON's managerial capacity;to restructure its finances; to improve the maintenance and ptoductivity ofthe existing physical infrastructure and perimeters; and to rehabilitatepart of the network and some perimeters. The project constitutes the firstphase of a long-term rehabilitation and development program for the ON.Sectoral policy reforms necessary to ensure the program's viability wouldbe supported.

3.2 Rationale for IDA Involvement. In their present dilapidatedstate, the ON's irrigated perimeters are being operated far below theirpotential. Attainment of that potential, and the process of institutionaland other reforms necessary to realize it, is a complex long-termundertaking. While significant steps have already been taken (para 2.13),DA's continuous involvement, together with other cofinancers, is necessaryto help Government and ON sustain the reform path.

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3.3 General Description. The project, to be implemented over nineyears, will consist of:

(a) continuing the process of sectoral policy reforms to ensure therational use and development of the resources entrusted to ON.These reforms will include the progressive divestiture of ON'scommercial activities to other economic agents, the promotion ofmarket-determined pricing and marketing policies, theestablishment of land tenure security, and the promotion offinancial intermediation;

(b) institutional reforms, including the streamlining of therelationship between the Government and, the Office throughimplementation of a contract-plan, tile strengthening of ON'smanagement and human resources, and the promotion of villageassociations;

(c) ON's financial restructuring;

(d) investments to maintain, rehabilitate, and modernize part of theirrigation network and perimeters, including the consolidation ofthe maintenance unit, urgent repairs on the irrigation networkand structures, the repairs of the Markala dam; therehabilitation and modernization of the Gruber Nord and SiengoCanals, the rehabilitation of the Siengo command area, and arural works pilot scheme;

(e) applied research, improved resource management, agriculturaltraining and extension; and

(f) consultant services and studies.

B. The Proiect Area

3.4 The project would cover the 43,000 ha of irrigated perimetersthat have been described in para 2.10. The institutional, maintenance, andtechnical support components will benefit the entire area, but the repairand rehabilitation components will benefit 20,000 ha only, located mostlyin the Sahel system, in the zones of Niono, N'Debougou, and Molodo.

C. Detailed Features

1. Sectoral Policy Reforms

3.5 The project will support the continuing process of reform in fourareast

(a) the Droaressive divestiture of some of ON's resDonsibilities toother economic agents. ON will progressively transfer some ofits commercial activities (input distribution, transport of paddyand rice, and custom ploughing) to farmers associations and/orprivate entrepreneurs already active in the project area, andfully transfer agricultural credit to BNDA. ON would continue

input procurement to maintain the benefits from InternationalCompetitive Bidding, although farmers would be free to deal withalternative suppliers. An increasing share of paddy producedwill be custom-milled by ON for traders or farmers. Moreover, asproduction increases and a new rice mill in the Macina becomes aviable proposition, ON will desist from investing in new capacityand will endeavor to attract private investors into milling. Ifthe new Macina rice mill can be privately financed, a divestitureplan for the existing ON rice mills would be implemented. It wasagreed at negotiations that by December 31, 1988 the Governmentwill submit to IDA a plan to privatize the rice mills. Theschedule of divestiture to be included in the contract-planbetween the Government and the ON (para 2.13) ic shown at Annex3.1; it will be adjusted if necessary through the periodicreviews of the contract-plan. The measures to strengthen theOffice, promote village associations, and foster private sectorinitiative included in the project will support the process ofdivestiture.

(b) the promotion of market-determined pricir,g and trading for paddyand rice. Five reforms will be included in the contract-plan(para. 3.6(a)), and implementation will be monitored under theproject. First, the government will implement trade policymeasures, including the collection of import duties on rice, theprograzmming and control of all food aid imports, the introductionof a variable tax on imported rice into a variable tax linked toworld market price fluctuations, and the monitoring of all importduties. Second, ON would continue purchasing paddy from farmers,but in competition with private traders. As the private sectordoes not yet have the financial and storage capacity to purchaselarge quantities of paddy, and is likely to deal in rice ratherthan paddy, it is expected that ON will continue purchasing largequantities of paddy for several years. Third, ON would set itsown paddy producer price, in relation to world market prices. Todo so, it will set up a system for obtaining weekly import andwholesale rice price data, and will obtain information on volumesof imports and domestic demand and supply from the Ministry forthe Supervision of Public Enterprises, which monitors cerealsmarkets. At the beginning of each cropping season, ON willannounce a floor price calculated from a formula which will takeinto account import prices, import duties, domestic demand andsupply data, and transport and processing costs. ON will thendetermine and publish its paddy producer price before theplanting season, and will possibly vary its price during themarketing season as experience is gained; the likelihood is thatthe price would be low immediately after harvest when thedomestic cereal supply is high, and then increase subsequently.This pricing policy will be implemented progressively over athree-year transition period during which the minimum producerprice will be maintained at FCFA 70/kg, and the floor price willbi adjusted above the minimum, market conditions permitting.This transition period will be used to test pricing formulas, and

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to monitor production costs and market behaviors. Details on themthodology and on the application of this pricing policy aregiven in Annex 3.2. Fourth, ON would sell its rice by invitingtenders from private traders or other trading agents (OPAM,consumer cooperatives, etc.). Some experience with such atendering system was carried out over the last two years and gavepositive results. The prices obtained were in line with theimport price. Fifth, ON would extend its milling operations tocustom-milling for private traders at a milling chargeestablished at a competitive level. Assurances were obtained atnegotiations that the Government and ON will adopt theabove-mentioned pricing and,marketing policies. A statement onthe Government and ON's pricing and marketing policies asindicated above has been included in the'contract-plan.

(c) Land Tenure. First, regarding the legal framework, assuranceswere obtained at negotiations that a new decree will bepromulgated (draft Decree 290) to specify (i) Government's andON's respective rights and obligations as to the lands,buildings, and physical structures, and (ii) even more important,that farmers will be given permanent and transmissible landtenure rights after a probationary period of no more than twoyears. The decree also specifies the criteria that ON will applyto grant land leases or titles to farmers as well as farmers'rights and obligations for water uses and infrastructuremaintenance, and the process of appeal in case of litigation.The draft decree and model land tenure contracts were reviewedduring negotiations and were found acceptable. The decree wasapproved by Government in January 1988, and the model contractswith farmers were adopted at the same tine; this was a conditionof Board presentation. The attribution of new occupancy titleswill be monitored through the project implementation schedule.Financing for legal assistance has been included in the projectto assist ON design leases for private entrepreneurs. Second,regarding land consolidation, as the perimeters arerehabilitated, landholdings will be consolidated andredistributed among farm families, from an average of 5-6 ha to3 ha for a representative family of 10 members. There will beample land to accomodate all existing farm families.

(d) Promotion of financial intermediation. The National AgriculturalCredit Bank, BNDA (para 2.9), will become the main channel forinstitutional credit to farmers, village associations, andtraders in ON, and for tapping rural savings. IDA has alreadyreviewed the terms of reference of a study, which is beWigcarried out with PPF financing, to clarify ON"s portfolio ofoutstanding loans and establish both farmers' debt repaymentplans, and the arrangements between ON and BNDA until BNDA cantake over all credit-related activities from ON. A line ofcredit of US $3.0 million to BNDA to expand lending to farmers,village associations, and traders has been included in theproject as a supplement to the agricultural fund of about

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US $4.5 million equivalent already in place from a DutchGovernment grant.

2. Institutional Reforms

3.6 The institutional reforms to be pursued under the project &Lm atstreamlining relations between the Government and ON; developing ON'smanagerial autonomy and accountability, improving its service deliverycapacity; and strengthening its relstions with farmers. These reformconsist of:

(a) Streamlining the relationshil between the Government and ON,through: first, an amendment to ON's statutes. Given ON's newmandate and the principles established by the Government in March,1985 (para 2.13), ON's statutes were amended in January 1988 toensure its operational autonomy in accordance with the newlegislation on Public Enterprises (law 87-51) which was adoptedby Parliament in June 1987, ON's relations with the Governmentare specified in the contract-plan. ON's Director General,although appointed by Presidential Decree, is to be selected byand accountable to the Board and have full managerial autonomy.The amendment of ON's statutes was a condition of Boardpresentation. Second establishment of a contract-plan betweenthe Government and ON. The contract-plan is established forthree-year periods, but reviewed annually by Government and ON inconsultation with IDA and other cofinancers. Assurances wereobtained at negotiations that the contract-plan would be) soreviewed, by November 30 of each year, and that any amendmentswould be satisfactory to IDA; satisfactory implementation of thecontract-plan would be required to continue disbursements of theIDA and SFA Credits. The contract-plan includes five mainschedules for ON: the management reorganization objectives, theinvestment plan for the next ten years, and detailed investmentprograms for the next three years; the financial restructuringplan; the target performance Indicators on staff reduction,divestiture, and production, including the financial andproductivity ratios; and the urgent measures to be taken in 1988.It includes two main schedules for the Governments the budgetarycontribution to pay for investments made or services rendered byON; and a statement of the pricing and marketing policiesapplicable in ON. During negotiations, the draft contract-planprepared by the Government was examined and comented upon by IDaand other co-financers. The Government approved the contract-plan, uhich was a condition of Board Presentation on January 13,1988.

(b) Measures to orianize and strengthen ON's management andoperational systems. Three measures are presently envisaged.First, reduction of the number and size of administrative units,mostly at headquarters. Second, regrouping of thefunctional units into three line departments: the agriculturaluroduction department would include the office for agronomic

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research and development, the agricultural training center, andthe five production zones in charge of extension; the hydraulicmanagement department would include the engineering design andplanning, works supervision and water management functions; andthe maintenance department would include the workshops and themaintenance units of the zones to constitute an autonomousmaintenance unit. Third, streamlining of the production zonestructure to focus on three main functions: extension, trainingand promotion of village associations. Annex 3.4 presentspossible organizational charts that illustrate how these threemeasures may be implemented. To assist with the implementationof these measures, ON is recruiting management consultants to becofinanced by FAC and IDA. A proposed internal reorganization,based on the consultants' work, will be submitted to IDA forreview by June 30, 1988, and a reorganization accsptable to IDAwill be implemented by June 30, 1989. Further staff reductionswill not be held up pending the reorganization, but will be madeas divestiture progresses according to the schedule to beincluded in the contract-plan (para 3.6 (a) above).

The cotisolidation of ON's structure will be supported by thestrengthening of ON's management systems. A cost-accountingsystem and a planning, budgeting, and management control unit areto be established. The objective is to equip the DirectorGeneral and key operational managers with a reliable andresponsive information system, and to eliminate the massivecollection of irrelevant information. FAC-financed technicalassistance to design and establish the relevant systems has beenrecruited from a consulting firm; financing for computerequipment and staff training has been included in the project.

(c) Measures to strengthen ON's human resource management willincludes first, an assessment of the profiles and training needsof existing staff to perform ON's new mandate; second, thepreparation of a further staff reduction plan to increase ON'sefficiency; and third, the preparation of a career developmentplan and policy. The staff training program will include bothin-house training in, for instance, the new management systems,and technical training in Mali and abroad for longer-term careerdevelopment. The management consultants will assist ON inimplementing these measures. In addition, an independent studyon staff remuneration financed under the PPF will assess the needfor remuneration readjustments. To assist the implementation ofthe staff reduction plan, funds for severance pay, earlyretirement, or training in new economic activities (mechanics,blacksmiths, small civil works etc.) have been included in theproject.

(d) promotion of village associations (VA's). Based on thesuccessful experience in other parts of Mali, properly trainedvillage associations can be expected to take on increasedresponsibilities for production-related activities (input

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distribution, water management, etc.), and for communityinvestments (health centers, depots, etc.). ON will be assistedin the promotion and training of village associations by thespecialized government literacy programs and by experiencedHalian consultants. Details are given in Project File B.21.

3. ON's Financia?, Restructuring.

3.7 Irrigation infrastructure, land, rice mills, and buildings areowned by the state and managed by ON, but there is no clear definition ofON's responsibility regarding the financial management of these assets. YetON's financial structure must enable it to maintain those assets, as wellas to break-even on its current account, maintain its credibility with thebanks, etc. ON's financial restructuring would have four main elements.First, the state-owned assets would be integrated into ON's accounts sothat it can be fully accountable for their operation and maintenance. ONwould constitute provisions for the depreciation of these assets, whichwould be fully reflected in user charges. ON's services for the managementof these assets (maintenance of the primary irrigation infrastructure,including the operation and maintenance of Markala Dam, extension andapplied research) would be paid for by the State, in the form of an annualpayment out of the state budget. The accounting and financing arrangementswould be part of the contract-plan, and an assurance was obtained atnegotiations that, by March 31, 1988, Government would conclude with ON anagreement satisfactory to IDA detailing all assets transferred in ownershipto ON, and the legal, financial and accounting regime of all suchtransferred assets as well as the assets remaining in the public domain.Second, ON would balance its operating accounts from the sale of allservices. Water charges to farmers would be doubled over 7 years, at fulldevelopment ona rehabilited perimeters (para 3.39); assistance provided byON to BNDA for credit administration (para 3.16) would be charged at a feeof 62 of the loans extended; and milling services would be recovered eitherthrough a direct charge to traders for custom-milling or through the salesprice of rice. Any other service rendered, e.g., occasional landpreparation, would be paid for by customers. A study of taxation has beenitcluded in the project to assess whether, provided the projected increasesin net farm incomes are realized, further cost recovery from ON farmers forextension services and the maintenance of the primary infrastructure wouldbe appropriate (para 3.19). Third, ON would increase its overallproductivity, through the measures envisaged under the project to improveits organization and management and train its staff. A productivityincrease of 102 a year, observed in other restructuring projects incomparable circumstances, is envisaged. The highest productivity gains areexpected from the reduction in overhead services and from thereorganization of extension and infrastructure maintenance services.Milling yields (ratio paddy/rice) are expected to increase from 63 X to 67Z in 10 years. Fourth, ON's long-term debt would be renegotiated with theCMA (Caisse Autonome d'Amortissement) in order to lessen the financialcharges during the period of financial restructuring, and have ON benefitfrom the soft terms at which the Government initially contracted thelong-term debt to finance ON's investments. The average terms envisaged

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are a 3Z interest rate, a 30 year maturity, including a 10 year graceperiod on principal.

3.8 With these four elements in place, ON would break-even in threeyears, and would have a net cumulative cash-flow of about US$3.3 million infive years. Detailed financial projections, which were established fromthe 1986/87 budget available at ,.he time of appraisal, are given in Annex3-4. Payments from Government for part of the maintenance of the primaryinfrastructure, for extension services and applied research at ON have beentaken into account in ON's projected cash-flow, in accordance with theproposed financial restructuring plan. The present level of Governmentpayments for these services of about US$ 1.5 million a year is expected toincrease to US$ 2.2 million at full development. However, total paymentsexpected from Government for the first three years of the project wouldincrease to about US$ 9.0 million, i.e. an average of US$ 3.0 million ayear, to cover the actual costs of services rendered by ON, and therescheduling of ON's debt. This increase is considered as the adjustmentcost to ON's financial restructuring as proposed in para 3.7 above. As thecurrent budgetary situation of Mali may make it difficult for theGovernment to pay these amounts, the project would pay part of Government'spayments on a decreasing basis for the maintenance of the primaryirrigation network, extension services and applied research, as well asON's recurrent expenditures for several activities being divested the firstyear, or activities related to the staff reduction plan (US$ 3.2 million intotal). The proposed financial restructuring plan will be an integral partof the contract plan.

4. Investments-Related to Irrigation Infrastructure and Perimeters

3.9 Investment Plan of office du Niger. The Office du Niger, withassistance from IDA and several cofinancers (PAC, CCCE, DIGIS, KfW,EEC/EDF), has prepared an indicative plan through 1995 and detailedinvestment programs for the 1986-1991 period. Annex 3.5 summarizes theindicative plan and shows how the project fits into the plan. The projectonly includes the infrastructure investments to be financed by IDA, the SPAand SJP/FRG, and institutional development components to build up theOffice du Niger. On-going projects financed by CCCI, and DIGIS, and thoseplanned by KFW and FED are included in the indicative plan, but not in theproject. A preliminary estimate of the indicative plan is aboutUS$170 million. This plan is acceptable in terms of the scheduling ofinvestments, the complementarity of the various components, the technicalstandards envisaged, and ON's implementation capacity; but further analysisof the projects that would make up the plan is required before a definitivejudgment can be mode. Accordingly, assurances were obtained atnegotiations that all investments will be reviewed in consultation with IDAand other donors in the context of the annual reviews of the c6ntract-plan,and that ON will undertake only those investments whose technical,financial, and economic viability have been established.

3.10 Project investments. The investments selected for the projectwill secure the primary hydraulic infrastructure, prevent the further

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deterioration of the distribution network, and increase the productivecapacity of the perimeters. They will consist oft

(a) The Consolidation of the Maintenance Proram. In the absence ofany private domestic firm with experience in irrigation civilworks in Mali, and the difficulties of attracting foreign firmsat a reasonable price, the least-cost solution for maintainingthe irrigation network is to consolidate ON's force accountcapacity. This will be done by creating a single force accountcapacity with full managerial autonomy, and improving the design,programming, and monitoring of the maintenance of irrigationinfrastructures by the hydraulic department. A study, to beundertaken by ON and consultants with PPF financing, will analyzethe maintenance program, audit the equipment fleet and workshops,and propose the managemet:t system for the consolidated forceaccount un.t. In a first phase of implementation (3 years),technical assistance will be provided by a civil works entreprisefor at least two years to reorganize the unit ane train staff,and parts and equipment will be purchased to repair andcomplement the existing fleet; minor repairs of the workshopswill be made. In a second phase, the workshops will beoverhauled and heavy equipment renewed. Disbursements forInvestments in the second phase would be conditional on thesuccess of the first phase, which would be assessed as part ofthe joint annual review of the contract-plan in mid-1990.Details are given in Project File No. C.2. If the first phasefails to achieve its objectives, other maintenance systems wouldbe assessed, including divestiture of the force account unit.

(b) Ur ent ReDairs of Irrigation Infrastructure. Urgent repairs madenecessary by the prior lack of maintenance would be carried outon the most deteriorated sections of the network, principally onthe Sahel and Molodo canals. The works include the consolidationof embankments, repairs of the regulating structures, and theopening of an access track along the canals. Less urgent repairswould be carried out as part of the annual maintenance program.Details are available in Project Pile C.3.

tc) ReDairs and Maintenance of the Markala Dam. The proposedinvestments will improve the safety and efficiency of the dam.The pillars, which were repaired downstream in 1977 and 1982,will be repaired upstream. The electro-mechanical equipment,including the generators, will be overhauled and/or replaced forthe first time since 1948. The maintenance workshop will berepaired and re-equipped. The technical documentation for theequipment will be updated, and an operation and maintenancesystem designed. Staff will be trained for the operation andmaintenance of the dam. A detailed list of the works to becarried out is available in Project Pile No. C.5.

(d) Rehabilitation and modernization of the Gruber-Nord and SiengoCanals which are respectively 15.1 and 13.9 km, and of the Siengo

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Main Drain which is 28 km. The main works consist of theremodelling of the cross sections and embankments, and theconstruction of feeder roads along the canals. All (nbankmentswill be compacted and re-surfaced with laterite. The drain willbe dredged and the vegetation cleared out. In order to simplifythe operation of the canals and increase the stability of theflow conditions, the manual upstream control system will beconverted to an automatic downstream systea, by modernization ofthe regulation structures. The technical norms to be appliedare summarized in Project File C.4. A study to update thedetsiled design, the costs and the bidding documents inaccordance with the modernization agreed upon at appraisal wasundertaken under the PPF; the results were made available as acondition for Board Presentation.

(e) Rehabilitation of the Sienao command area. The main works on the3,100 ha perimeter will includes land preparation, pre-levellingto a maximum gradient of O.52, the construction of peripheral andinternal bunds, and on-farm works to include the tertiary andquaternary distribution and drainage system, with one headworkper hectare. Plot size would be about 40 x 50 m. This wouldreduce on-farm cost, by eliminating one quaternary out of two (atleast where slopes are nearly horizontal). Design details aregiven in Project File C.5.

(f) Rural works pilot scheme. In the areas excluded from theconsolidation project, ON will undertake rural works on thetertiary/quaternary irrigation system and peripheral bunds, atthe rate of about 500 ha per year; the estimated volume ofearthmoving is 156 m21ha, or 210 man-days/ha. This scheme willtrain farmers in the maintenance of canals and drains, and shouldreduce the subsequent rehabilitation cost. The project willfinance the necessary equipment.

5. Applied Research, Improved Resource Management, and AgriculturalTrainina and Extension

3.11 (a) ARplied Research. In agreement with the National ResearchInstitute (IER), applied research will be carried out onshort-cycle/short-straw rice varieties, fertilization,cultural practices and implements, crop diversification,irrigation technologies, and pasture regeneration anddevelopment. The results would be used in the extensionprogram and to design the subsequent phases of therehabilitation program. The detailed program is to beprepared by ON, IER, and consultants with PPF financing. Thesigning of a contract, acceptable to IDA, between ON and IERwould be a condition of disbursement for the appliedresearch category.

(b) Improved Resource Management. To improve land management,two studies will be carried out to define criteria for

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optimal land usest an aerial photography to the 1115000scale and update of land-use maps to the 1/10,000 scale; amorphopedological study and update of soil maps to the1/10,000 scale. The terms of reference have been reviewedby IDA. To improve water management, FAC-financed technicalassistance (combination of permanent staff and short-termconsultants) to the hydraulic department will be continuedin order to improve the data base on the hydraulic network,design and operate an efficient water management system, andtrain staff. Equipment will be financed to computerize thedata base and proceed to the necessary measurements and toequip the water management unit with two mobile units to dominor repairs on hydraulic structures. To protect theenvironment, a tree-planting program will be initiated alongthe canals close to villages, and on plots unsuitable forcropping. Water quality will be tested periodically forfertilizer pollution.

(c) Agricultural Extension and Training. The extension staffwill be reorganized and upgraded to improve delivery ofextension services. Details are given in Project File C.l.Emphasis will be placed on the clear definition of tasks anddistribution of responsibilities, in contrast to thecurrent, unduly hierarchical system that is essentially oneof control instead of informed supervision. ON will signspecial agreements with the Livestock and ForestryDepartments to integrate their extension staff into ON'sprogram. With financing from the Netherlands, the trainingprogram for the Aaricultural Training Center will beredefined by consultants recruited by DIGIS to focus on ONstaff training in irrigated agriculture, including watermanagement, and animal production. Technical assistance willcontinue for at least three years. The terms of referencefor the consultants have been reviewed by IDA; the proposedtraining program will be approved and monitored by allcofinancers. Farmers' training and extension will becarried out through individual contacts by extensionworkers. the technical themes will be intensification ofrice cultivation (seed-bed preparation, ploughing andlevelling under water, transplanting, fertilization, weedcontrol with water levels, adoption of shorterstraw/shorter-cycle varieties, a rigorous cropping andweeding calendar; improved water management); theintroduction of appropriate animal traction implemuits(puddlers, land planes); the integration of livestock intothe farming system (fodder production and conservation,improved animal husbandry; manure production andapplication); double cropping of rice, and cropdiversification (vegetable crops, short-cycle coarse grainssuch as maize or sorgho, fodder). Details are given inProject Files C.8 and C.9.

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6. Consultant Services and Studies

3.12 In addition to the technical assistance and consultant servicesprovided for each component, the project will finance short-term consultantservices for specific needs that may arise. In particular, ON will hireconsultant engineers from a similar irrigation authority to assist thehydraulic department design and monitor technical standards for therehabilitation and O&H of the irrigation system. In addition to themonitoring studies described in para 3.19, the project will also financethe following studies: (a) promotion of commodity diversification, byidentifying products and markets, and production and processingtechnologies. Po_antial private investors in irrigated agriculturedevelopment and agroindustries would be consulted to identify constraints,possible remedies and incentives sought for private domestic and foreigninvestment; an incentive package would be designed and investmentsencouraged and monitored under the project; and (b) feasibility studies forthe subsequent phases of the rehabilitation program, and possibly forprivate sector investments in Office du Niger, and other water developmentinvestments. The terms of reference and schedule for the studies are givenin Project File No. C.12.

D. Proiect Implementation

3.13 The Ministry of Agriculture, which is the technical supervisorybody of the Office du Niger, will be specifically responsible forimplementing the structural reforms. The Office du Niger will be theexecuting agency for all project implementation, except that theAgricultural Credit Bank will be responsible for the credit component underthe Project Agreement. Details on works execution and a schedule ofproject implementation is given as Annex 3-6.

3.14 The Office du Niger's Director General will have overallresponsibility for project management, and as such, will manage donors'coordination. He will have direct responsibility for reorganizing andstrengthening ON's management, and will be assisted in this task by theconsultants to the management control unit (para 3.6(b)). He will initiateand supervise the studies financed under the project. The head of thefinancial department will be responsible for implementing the financialrestructuring and supervising the design and implementation of the costaccounting system. The head of the hydraulic department will supervise allthe repair and rehabilitation investments, with assistance from bothconcultant engineers and the head of the agricultural productiondepartment. The latter will supervise the design and development of theapplied research, agricultural training, extension, and credit programs.Assurances were obtained at negotiation that ON will enter into specificagreements with the national Livestock Department, the Department ofNational Cooperation (DNC), and the National Literacy Directorate (DNAFLA)to integrate their activities into its training and extension program andfor the promotion of village associations.

3.15 The management of technical assistance and consultants willrequire particular care. Fifteen internationally-recruited specialists are

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currently planned for the first three years of the project, to support theimplementation of the various components. They include three PAJC-financedspecialists to the financial department, three FAC-financed tecbnicians tothe Hydraulic Department, and one for the workshops, one CCCE-financedtechnician for agricultural research, four SFA/SJF-FRG-financed specialistsfor ON's restructuring and for the consolidation of the maintenance unit,and three technical assistants financed by DIGIS for the agriculturalTraining Center. This number excludes the technical assistance recruitedt- implement bilateral projects (details are given in Annex 3-7). Althoughall technical as6istants will report to specific operational units, theDirector General will be responsible for their recruitment and forapproving their terms of reference. In addition, assurances were obtainedat negotiations that to secure punctual engineering or training support, inparticular for the hydraulic department, ON will enter into a twinningagreement, with support from IDA-financing, with an irrigation authority ofsimilar mandate, before June 30, 1988. This arrangement will avoid furtherburdening ON with resident technical assistance while maintaining thebenefits of a sustained service.

3.16 To implement the agricultural credit program, BNDA is to takeover from ON its own credit portfolio, and the agricultural input fundestablished through Dutch financing. Upcn completion of the study onfarmers' indebtedness (para 3.5(d)), BNDA will establish a contract with ONstipulating their respective obligations which will be submitted to IDA forapproval; it is a condition of disbursement for the credit component. Thecontract will specify the debt recovery plan, the assistance which ON willprovide BNDA to plan credit requirements, assess farmers' and villageassociations' credit eligibility, and, if necessary, to repay loansdirectly out of rice sales. The cost of ON's services would be paid byBNDA to ON as a fee (para 3.7) and would be recovered through a 6Z mark-upon the sale price of inputs and equipment purchased with BNDA credit, andincorporated in the corresponding credit amount, as presently practiced byBNDA and other development agencies. BNDA's current lending terms followBCEAO regulations and are approved by its Board for different activities.Seasonal credit for agricultural inputs, mostly fertilizer and seeds, isgranted at a 102 interest rate to individuals, 9Z to village associations.Medium-term loans, for agricultural equipment (draft oxen, ploughs,puddlers) will be made with a 5 downpayment, 92 interest rate toindividuals, 8? to village associations, and a 5 year maturity including aone year grace period. These rates are revie-ved periodically by BNDA'sBoard of Directors and adjusted to reflect changes in lending costs. Arevolving fund will be set up (para 3.31), which will be replenished by IDAagainst BNDA's statements of expenditures for loans extended to farmers.The proposed IDA on-lending terms, 3? initerest, 15-year maturity with a5-year grace period, are satisfactory for BNDA's overall profitability andcash flow given projections of other costs. These terms are similar tothose in other IDA-financed projects with BNDA, and were found to give apositive spread of about 7t. The estimated credit program is given inProject File C.ll.

3.17 Water Management. The present system of upstream command will bemaintained on the primary and secondary irrigation network, except for the

- 20 -

Gruber Nord/Siengo canals which will be modernized under the project andfor which a downstream command system, with automatic gates will beestablished. An upstream command system will be maintained on the tertiarynetwork, with a rotation system between tertiaries commanded by the samesecondary. ON's water management division in the Hydraulic Department willhave primary responsibility for water management and distribution theprimary and secondary canals. Farmers, through the village associations,will be responsible for water distribution on the tertiaries, andindividually, at plot level. On the rehabilitated and modernizedperimeters, the village association could become the 'billing unit", as theproposed modernization would make it possible to apply volumetric watercharges. This would also be a way of reducing present excessive use ofwater. Details on water charges are given in para. 3.38.

3.18 Status of Engineering. Detailed designs have been completed forthe Markala Dam, and for the GrUber Nord and Siengo Canals rehabilitation.The bidding documents for the Markala Dam are under preparation. Finaldesign and bidding documents for the GrUlber Nord/Siengo canals, including amodernization alternative, have been received. The final designs for therehabilitation of Siengo perimeters will be prepared by December 1988.Quantities and costs are based on detailed designs for the perimeterspresently being rehabilitated with CCCE-financing. No significant changein project costs is expected from the final design.

E. Monitoring. Planning and Evaluation

3.19 ON's Director General will have overall responsibility forproject monitoring. He will receive from the management control unit (para3.6(b)) all the periodic information necessary to monitor progress andcorrect deficiencies. Quarterly and annual statements will be sent to theGovernment, IDA, and other cofinancers. In addition, ON will commissionseveral ad hoc studies to IER with support from consultants if necessary,namelys a study of the evolution of village associations; a socio-economicstudy on the labor distribution in the farming system and the health andeducation situation, with special emphasis on the role of women; and astudy of farm incomes and taxation. IDA financing for these studies hasbeen included in the project. The terms of reference will be submitted toIDA for approval.

3.20 Joint reviews of project implementation will be carried out&anually by the Government, the Office du Niger and cofinancers, in orderto make any adjustments necessary. This review would be based on theschedule of performance indicators included in the contract-plan and wouldinclude progress made on policy reform, on implementation of thereorganization and financial restructuring of the Office, and in reachingthe physical objectives of the project.

F. Environmental Impact

3.21 The measures envisaged under the Project will improve theeLcurity of the Markala Dam and avert possible negative impact downstream.

- 21 -

The dam is equipped with a fish ladder to preserve the fish population.Improvements on the canals, drains, and perimeters will reduce the leachingof fertilizer into the drainage system; water quality will be monitoredperiodically. Herbicide use will be limited to applied research and a fewprogressive farmers in order to identify the most benign and economicallyviable ones. The tree planting program will limit wind erosion and treecutting in rainfed area. The annual treatment of predators' nests will beresumed when the proper institutional arrangements are established. Thenegative impact on the bird population is largely offset by the verypositive impact on yields, a priority in a Sahelian country. Existingprograms financed by the Federal Republic of Germany and the Netherlands tofight schistosomiasis and malaria have yielded positive results. Studiesare underway to see how to integrate them into ongoing primary health careprogram activities.

G. Safety of Dams

3.22 Although the existing Selingue and Markala dams were builtwithout Bank financing, both structures would be essential to the successof the proposed project. ON is responsible for operation and maintenanceof Markala. An assurance was obtained at negotiations that the Governmentwould make arrangements satisfactory to IDA for the two dams to beperiodically inspected in accordance with sound engineering practice inorder to ensure that no deficiencies occur in their condition, or in thequality and adequacy of maintenance or methods of operation, which mayendanger their safety; and that the Government would submit sucharrangements to IDA for review by December 1988.

H. International Water RiQhts

3.23 Mali has signed, like all the Niger river basin ripariancountries, the 1980 convention creating the Niger Basin Authority (NBA).The convention requires member states to inform the NBA Secretariat of anyworks on the river. The Government of Mali has notified NBA as requiredand informed the Association of NBA's response which supports the project.IDA has determined that NBA's response is satisfactory. During appraisalthe technical data relating to water consumption with the project werereviewed. The calculations made show that at full development, a globalsaving of water of l50Nm3 would be obtained due to better water management,conveyance efficiency in the irrigation system, and more levelledperimeters.

- 22 -

I. Cost istimtes an FlinncaLu

3.24 Total project costs are estimted at US$ 83.6 allJo. with aforeif eschange componet of 772. A suwnry of project costs Is shownbelow*

Proiect Cost Summary

N!_OFFICE NI NIGER

PRJECT COm SlmY

(CfW Nilli-n) ' _UTo ailliol) X T.t.lS~~~~ forign h

Local Forelin Total Locol Fot-lin Total ExftV* CostsMUMBUMu s.ages" 3338*383 3*a3* 3333233g 33s3333um3U83

A* AURICtLl. CREDIT ARtICILE 433.7 296.8 73.5 1.4 0.9 2.3 41 43. MAINTENANCE 227.8 2,716.7 2.9i1.4 0.7 1.7 9.4 92 1sC. URENT PEPAIRS ON I8I96. INSTUTU 178.7 732.3 911.0 0.6 2.3 2.9 80 S

. REN. NAALA an 90.1 2,915.6 2,905.8 0.3 9.0 943 7 s1,E. REHA3. I NMM,tI DPUIER\SIENBO CANALS 59.s 3*101,0 3.670,5 1.8 9.9 117 4 18F, REMNl SIMG9 PERIMETERS 413A 3161A.4 34.5749 1.3 1012 11.4 is 18B. RURaf EORKS 1,1592 136.8 14296.6 3.7 0.4 4.1 11 / 6H. SUPFIt TO ON

R I 0D VATER tNT.t MeLB.) 25.9 730.7 756.5 0.1 2.3 2.4 97 4I. FIINCIAL RESTRUCTURIA ON 1,019.6 14940 1,168*6 3.2 0.5 3.? 13 6J. COSULTANTSf TECH. ASSISTNCE

tRAININS 6.5 1,294.5 14360,9 0.2 4.1 4.3 95 7K. STI 52.7 81.1 M133. 0.2 0.3 0.5 61 1L. EPAATORY IWIRK 11.0 537.1 548.0 0.0 1. .7 IJ3

Total ALIE COSTS 4,248.0 157M.1 20.001.1 13.5 503 63.8 79 10niical Contingc 364.0 2v154.W 2.518.6 1.2 6.9 Sol 86 13Price Contingmits 1364.6 2,333 f 3W697.? 4.3 7.4 11.7 63 1t

Total ROC COm 5976.7 20240.7 26,217.4 19.0 64.6 83.6 77 131

Junt 4,1987 12S27

- 23 -

3.25 Cost estimates are based on July 1986 prices adjusted to the dateof negotiations. Couts were calculated net of all identifiable taxes andduties, and included contingencies amounting to US$ 19.8 million, or 242of the base costs. Physical contingencies were calculated at 15?, exceptfor items (technical assistance, studies) where quantities are clearlydefined or lumpsums estimated. Total. expected price increases during thedisbursement period - derived from the profile for irrigation projects inWest Africa - amount to 14? of. total *projeqt costs (182 of base costs)based on the following inflation. rates.

Local and Foreign Rates of Inflation (Z)

Year Local Foreian

1986 12.0 6.01987 7.0 3.01988 6.5 1.01989 6.5 1.01990 6.0 1.01991-95 6.0 3.5

Project costs are detailed in Annex 3.8.

3.26 The proposed detailed financing plan is given in Annex 3.9.DA/SIA and the SJF/FRG will jointly finance 100? of the urgent repairs onthe irrigation infrastructure, the repair work of the Markala Dam, theGruber/Siengo Canals rehabilitation, the first three years of rural works,and the support to ON for the financial restructuring, the strengthening ofthe research and extension and water management services, and training,The detailed list of goods is given in Project File C.13. Procurementarrangements are specified in para 3.29. All other items will be financedunder parallel arrangements for which detailed lists of equipment andservices, specifying the source of financing, have been prepared.

- 24 -

3.27 The proposed IDA credit of SDR 31.0 million (US$ 39.8 millionequivalent), and the proposed SEA credit of SDR 7.1 (US$ 9.0 millionequivalent) will finance 582 of estimated project costs net of taxwa. Otherexternal financers, i.e., SJF/Germany, and France and the Netherlands willfinance 27X of project costs. The Government and farmers' contributionswill represent 52 and 102 of project cost. respectively. The financingplan is summarized below:

Sources of Financing

2 of TotalAmount Proiect Coits

(US$ Million)

IDAJSFA 48.8 58SJF/FRG 19.0 22FAC 2.0 2CCCE 0.4 1DIGIS 1.3 2GOVERNMENT 4 1 5BENIFICIARIES 8.0 10

83.6 100

3.28 The proceeds of the IDA and SPA Credits (US$ 48.8 mi_lionequivalent) will be passed on by the Government to Office du Niger, in part(US$ 21.0 million equivalent) at 32 interest, with a 30-year maturity,including a 10-year grace period on principal, for investments on allinfrastructures entrusted to ON, and in part (US$ 24.8 million equivalent)as equity for the investments on the Markala Dam and for the financialrestructuring of ON. The line of credit to BNDA (US$ 3.0 millionequivalent) would be on-lent to BNDA by Government at 3t for a minimum of15 years for each portion of the loan drawn down.

- 25 -

J. Procurement and Disbursements

3.29 Procurement arrangements are summarized below, with the amountsto be financed by IDAISFA shown in parenthesest

Procurement Arrangements(US$ millions)

Items to be procured Procurement Method Total CostsICB k§B a/ Other bI

Civil works 36.1 c/ 2.0 3.4 41.5(27.4) (0.8) (28 2)

Vehicles andEquipment 12.5 0.5 13.0

(6.4) dt (6.4)

Electro-mechanicalEquipment e/ 10.4 10 4

(6.8) (6.8)

Farm inputs and Equipment 1.9 0.5 0.6 3.0(1.9) (0.5) (0.6) (3.0)

Consultants andTechnical Assistanceand Training fl 9.1 9.1

(2.6) (2.6)

Studies 8I 0.6 0.6(0.6) (0.6)

Operating Costs forirrigations infra-structure maintenanceapplied research andextension services, PPFSpecial Account 0.7 5.3 6.0

(0.7) (0.5) (1.2)

Total 61.6 2.5 19. 5 83.6

of which: IDA/SPA (43.2) (1.3) (4.3) (48.8)

a/ Rural works and possibly small constructions for ON, locallymanufactured farm equipment, and studies by local consultants,vehicles, and estimates to cost less than US$ 100,000.

- 26 -

bi Items listed under Other* are financed by bilateral donors undertheir respective procurement procedures, or by IDA. For goods andservices estimated to cost less than US$ 30,000 ON would proceed,through prudent shopping; for consultants, standard IDA procedureswill apply.

cl Urgent repairs and rehabilitation works. Specifications and, biddingdocuments to be prepared by ON's consultant engineer. Domesticcontractors will receive a 7.52 preference margin in bid evaluation.All major works will be awarded following ICB procedures, and subjectto IDA's prior review. The following three lots have been identifiedsLot I for the urgent repair worksg Lot II for the access road alongthe Molodo Fala/Sahel Canal; Lot III for the Gruber Nord/Siengo canalsand perimeter rehabilitation; civil works for the Markala Dam will besubcontracted through competitive tendering by the firms bidding forthe rehabilitation of the electrochemical equipment.

di Vehicles and equipment will be grouped in packages of US$100,000 ormore to allow ICB following IDA guidelines. Domestic manufacturerswill receive a 1SS margin in bid evaluation, or the amount of customsduties and other import taxes which a non-exempt importer would haveto pay, whichever is lower.

e/ Specifications and bidding documents being prepared by consultantengineer for Markala Dam. Separate bidding will be done for eachimplementation phase.

f/ All TORs for consultants and technical assistance, and studies forfinancing under the project will be agreed with IDA. The selection,qualifications and experience of consultants to be financed by IDwould be subject to prior review and approval, along with their termsand conditions of employment, in accordance with the guidelines.Local consultants would be recruited for some studies, for which thethreshhold would be $50,000.

ge The threshold for IDA prior review of procurement documentation willbe US$ 50,000 for goods and US$ 100,000 for works, which willrepresent a coverage of about 80S of the loan amount.

N.D. Items to be financed under SFA and SJF/FRG. Procurement will belimited to Part II members of IDA or Part I members who havecontributed to the African Facility.

- 27 _

3.30 Disbursments. The ID credit would be disbursed over 10 years.in accordance with the profile For irrigation projects in West Africa, butthe disbursement of SFA and SJF/FRG funds vill be completed in 5 years.Separate lists of goods have been established for each of the threecredits. Disbursements under the following categories would be madeX

kmount Disburements as(US$ Million) Z of Exoenditures

IDA SPA IDA SPA

1) Civil Works 23.4 1.5 100185 a/ 322) Markala Dam 5.6 1.2 100 323) Vehicles, equipment,

parts 3.6 2.8 100 324) Agricultural Credit 2.0 - 100 -5) Consultant services 1.7 0.9 100 32

and Tech. Assistance6) operating costs

for irrigation infrastructuremaintenance, extensionand research - 1.2 - 16

7) Studies 0.4 0.2 100 328) Refunding of PPF 1.5 - 1009) Unallocated 1.6 1.2 - -

39.8 9.0a/ Disbursements on

3.31 Disburseaments for operating costs, agricultural credit, and forcontracts valued at less than $50,000 equivalent will be against statementsof expenditures. Supporting documents would be retained by ON and BNUM andmade available for review by IDA supervision missions and auditors. Otherdisbursements will be fully documented. In order to expeditedisbursements, one Special Account will be established under the SPAISJP ofCFPA 100 mi'Iion, and two under the TDA credit, one for Office du Niger ofCPAP 200 million, representing about 4 months of expenditures, and one forBNRD of CPA? 150 million corresponding to about 800 loans would beestablished in a commercial bank on terms and conditions acceptable to IDA.The Special Accounts will be replenished on a monthly basis or when amountswithdrawn are equivalent to one-third of initial deposit. IDA will notaccept withdrawal applications of less thtn $20,000 equivalent. Theestimated Schedule of Disbursement of the credits is shown in Annex 3-10,along with the profile for irrigation projects in West Africa.

K. Accounts and Audit

3.32 ON's record for keeping accounts has been very poor but hasimproved over the past two years. ON has recruited PAC-financed technicalassistance to design and implement a cost-accounting and management controlsystem. Assurances were obtained at negotiations that ON will maintain

- 28 -

separate sub-accounts for each cofinancer. A computerized system willassist in the preparation and processing of disbursement applications. Alimited review of the 1986 accounts was carried out by independent auditorsas a condition of Board presentation and was found acceptable by IDA. Inthe first two years of the project, ON's accounts will be audited twice ayear. The audit of the half-year accounts will be submitted to IDA withinthree months after the closing of the period. Subsequently, the auditor'sreport on the annual accounts and financial statements will be providedwithin six months of the closure of each financial year.

L. Markets and Prices.

3.33 The incremental rice production from the project would reachabout 40,000 tons a year and this is expected to be absorbed by thedomestic market. At full development, about 52 of incremental productionis likely to be consumed on-farm by ON's increasing population.

3.34 Marketina and Millin. Until the 1985186 cropping season, ON wasthe sole buyer of paddy from farmers, and OPAM had the marketing monopolyover ON's rice (para 2.7). The monopolies have not actually been enforcedsince 1984 when the President abolished the *economic police corps'. Sincethe end of the 1985/86 season, Government has authorized both privatetraders into ON and ON to sell to other agents than OPAM. The privatesector response has been positive; however, such constraints as traders'limited access to bank credit have yet to be removed. Regarding the likelydirection of prices, it is difficult to forecast the price effect on thedomestic cereal market which has been depressed by the combination of goodharvests and continued food aid imports.

3.35 With the removal of constraints on the liberalization of ricepricing and marketing policies envisaged under the project (para 3.5(b)),private trade is likely to gain increasing importance. Given the privatesector's financial, storage, and transport capacity, it can be expectedthat private traders might handle about 50 of marketed paddy productiontowards the end of the project. If ON's milling activity remainscompetitive, private traders would rather purchase rice than paddy from ON,so that ON may continue milling most of marketed paddy, whether from itsown purchases or custom-milled for the private sector.

3.36 Pricing. Rice produced at Office du Niger can compete withimports on which a 322 tariff is applied (para. 2.7). With the intensiveproduction system envisaged in the project, production costs will onlyincrease by one-third while productivity will more than triple. Given theuncertainties in world rice markets, it was agreed at negotiations thatimport tariffs could be adjusted in consultation with IDA. Details aregiven in Annex 3.2. With the pricing policy measures envisaged under theproject (para 3.5(b)), ON producer and wholesale prices are expected tofluctuate from year to year, and possibly seasonally, with an upper boundset by import parity prices adjusted by tariffs. Such prices would prevailwhen the domestic supply of cereals is limited, but prices could fall - asfar as a lower bound set by export parity - when the domestic supply ofcereals is abundant. These latter circumstances are rare, and the price

- 29 -

effect would be limited by the imperfect substitutability of other cerealsfor rice in consumer markets.

M. Cost RecoverY and Recurrent Costs

3.37 The principle of full cost recovery for operations andmaintenance is accepted in Mali. ON currently recovers costs through acharge of 400 kg of paddy/ha, except in the most deteriorated perimeters,where the water charge is 200-300 kg/ha. The record of farmers' payment ofwater charges has not been good, because of poor water delivery, low yieldsand low producer prices; as a result, farmers have had very low or negativegross margins. Repayment performance is improving where yields and watersecurity have improved, as in the perimeters recently rehabilitated withDutch assistance.

3.38 A charge of CFAP 28,000 (US$80)/ha, equivalent to 400 kg of paddyor 251 of farm incomes after credit repayment, would be established on anyperimeter the first year after rehabilitation. Water charges would then beincreased, in line with expected yield .ncreases, i.e. 252 in the firstthree years and 702 in the next three years, to reach CFA? 60,000 (US$175)per ha, after six years. This water charge will cover ON's water deliverycosts, including (i) the shate of operating costs for the Markala Damattributable to rehabilitated perimeters; (ii) the maintenance of thesecondary network; and (iii) a 202 contribution to capital expenditures onrehabilitation. This is deemed justified given the large potential incomefrom irrigated perimeters as compared to rainfed land. Water charges willbe calculated in financial terms but collected either in cash or in kind,at farmers' option, (using the price prevailing at the date of paymentdue). An additional share of capital expenditures would be recoveredthrough direct and indirect taxation of farmers and other economic agentsbenefitting from the increase in economic activity triggered by theproject. Recurrent costs for the maintenance of the Harkala Dam and theprimary network would be paid for from the Government's budget initially,with the possibility of increasing direct cost recovery from farmers oncethe fiscal study is completed (pars 3.7).

8. Benefits and Risks

3.39 Benefits to farmers. The direct benefits to farmers will consistof incremental income, and increased availability of rice, vegetables andlivestock products for family consumption. There should be a significantimprovement in family nutrition, health and standard of living. For theestimate of benefits three farm models have been designed which correspondto three degrees of intensification. The first model, UPl, corresponds tothe most intensive rice production system on a 3 ha farm, with averageyields per cropping season increasing from 2 T/ha to 4.5 T/ha at fulldevelopment after 6 years, and a cropping intensity of 125?; only 25 ofthe area is double cropped with rice, the rest being used for forage and/orvegetables. Only rice has been valued in the benefits, on the basis thatthe benefits from forage crops are integrated into rice yields, through theoxen workforce and manure. No reliable information was available to valuemilk and vegetable production. The second model, UP2, corresponds to the

- 30 -

second level of intensification on a 3 ha farm not yet fully rehabilitatedbut where improvements have been made through rural works. Yields reachonly 3.5 T/ha at full development, and the double cropping is limited to1202 of the area. The third model, UP3, corresponds to the extensiveproduction system currently practiced in the areas not rehabilitated, withyields reaching only 1.8 T/ha on a 6-6.5 ha farm. The yields, production,and incom, for these farm models is summarized below; details are given inAnnex 3.11.

CroppingYields Intensity Production Total Income

(T/ha/year) (2) (kg/farm) (CFAF/farm)

UPI 5.8 125 17,500 616,200UP2 3.5 120 13,700 552,000UP3 1.8 100 12,000 423,000

3.40 Economic Benefits. The main quantifiable direct benefit to theeconomy from project investments will be annual incremental rice productionof about 40,000 tons after 10 years, representing import substitutionequivalent to about US$8.5 million, and a 452 increase ln farmers' netannual incomes. In addition, the incremental benefits from the remainderof the ten-year investment plan, i.e., another 100,000 T, would be partlyattributable to the project, since it is the project that will give to ONthe capability to undertake the larger plan. An economic rate of returnhas been calculated for the rehabilitation of the Gruber Canal and commandarea, including a percentage of the costs on other components benefittingON at large, which represents 332 of project costs, and the rehabilitationcosts under parallel financing projects. The rate of return is estimated ina range of 13 to 16S, depending on the assumptions on the rate ofdeterioration of the irrigation infrastructure in the 'without project,situation. Increases in costs by 10 and 20X would lower the rate of returnfrom 16 to 13? and 10? respectively, while 10 and 20? increases in benefitswould increase the rate of return from 16X to 20 and 23X respectively. Thedetailed assumptions and the results of the sensitivity analysis are givenin Annex 3.12.

3.41 Other benefits and risks. A fiscal benefit from the project is areduction in annual Government expenditures for subsidies to the ricesubsector of about US$0.7 million equivalent. Less easily quantifiablebenefits include the establishment of a viable irrigation authority capableof managing the long-term rehabilitation and development program of theInner Niger Delta irrigation potential, and the improvement of farmers'capability for irrigated agriculture. Upon completion of therehabilitation program, and provided the production system can bed.wersified, ON could be a major source of economic growth for the country.The major risk for the project is the possible failure of ON'srestructuring, including the possible failure of the technical assistanceand staff training programs. To avoid this risk, Government officials andON staff were closely associated with project preparation and appraisal,and the consultants to assist ON's Director General implement therestructuring have been carefully selected. The other important risk, that

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farnere would not intensify agricultural production as rapidly as necessaryto make the rehabilitation investments viable, should be minimised if theagricultural support program is vell implemented. If the reorganizationfails, or if agricultural production lags, the rehabilitation program villbe scaled down. Another important risk is that the Government vill not beable to fulfill its financial obligations. To alleviate this risk, part ofIDA financing will be used to finance (a) on a declining basis, theGovernment's payments for non-recurrent expenditures for the flrst threeyears of the project; and (b) a study on taxation to assess whether farmerscan finance more than the present plan provides.

IV. AGRRZENTS TO BE REACUED AND RECOSERDMATIONS

4.1 During netotiations, the Government, ON and IDA agreed on theelements to be included in the final contract-plan. The final contrat-planand the revised statutes of Office du Niger were adopted by the Governmentin December, 1987. Special covenants bear ons

(a) paddy and rice marketing and pricing policies (para 3.5 (b))l

Cb) annual review of the contract-plan, with satisfactoryimplementation required for continuing disbursements of the IDAand SPA credits (para 3.06 (a));

(c) approval of ON's investments in the context of annual review ofthe contract-plan and implementation of only those investmentswhose technical, financial, and economic viability have beenestablished (para. 3.9);

(d) agreement between ON, and the livestock and Forestry Departments,and DNAPLA (para 3.11 (c)) on the integration of their extensionstaff into ON's programs ;

(e) maintenance and safety inspection of the Markala and SelingueDams (para 3.22);

(f) water charges increases (para 3.38).

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4.2 Conditions of Disbursements will bet

(a) for the credit component, that the debt study has been completedand that IDA has approved the agreement between BNDA and ON(para. 3.5 (d));

(b) for the second phase of the consolidation of the force accountmaintenance unit (para 3.10 (a)), that the first phase has beensuccessfully completed;

(c) for the applied research component, that a contract acceptable toIDA had been signed between ON and ZER (para 3.11 (a)).

4.3 With the indicated assurances and conditions, the project wouldbe suitable for an IDA credit of $39.8 million and an SPA credit of US$ 9.0million equivalent to the Government of Mali.

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ANNEX 2-1

ml

WVD ? mm OM49WflI F3W

stimate of Lad Resore Sut&,e for Iriatla

Gow Arz PtyslcaUy Irrgibl Not§deflk R,9F SM& ct to DeveJpt (ha) Potaia

1 Senqal Vanlq 45,000Terdiole4oladns 25,000 nFoodble .re terracs 22,515

2D,000 Flats

2 tiyr gar Valle 100,000 lsolodle and turam10,000 Flats 15,80D

3 Nier ffIe 250,00D Ihinly f slbzla 134,460

4 SE.xu 150,0o0 Ibly floodable aress 45,955

5 Sm4bPtI 900,000 800,OO ba of floxaleLive Delta aduvlals 147.035

00,000 hba o fFaluvas of tarice aptitude

6 Soutlm NhU 3D1,000 Foodable valls ad flats 17,890

7 Labe Area 280,000 I1ld 1O0,D00 ha ofnterdA drusmi 99,530

8 X a 110,000 Inc1Ud 30,000 valleys and80,000 floAbe a aluvEals of 10,455the Niger

9 Oth and Dogo camtrin 10000 No e stratifictIon -

T(XElL 2,2X0,100 493,640

- 34 -ANNEX 2-2

Page 1 of 3

MALI

OFFICE DU' NIGER CONSOLIDATION PROJECT

Background on Office du Niger

I. Irrigation Network

Total Length Rate ofNature of Works Works Dikes Degradation

(km) (km) (Z)

InfrastructureCanals 65 130 23Falas 170 300 12

Main CanalsCanaux 75 40Distributeur 153 20Partiteur 250 10

II. Evolution of Production a/

Cultivated Total Marketed EstimatedYear Area Production Production Yields

('000 ha) ('000 T) ('000 T) (kg/ha)

1968/69 29.9 43.6 25.3 14581970/71 35.8 69.7 38.0 19461971/72 38.5 69.6 46.3 18081972/73 37.6 74.3 46.8 18741973/74 40.1 83.1 54.8 20721974/75 40.8 86.0 65.0 21081975/76 39.9 85.5 63.9 21431976/77 39.6 89.4 65.5 22581977/78 37.9 101.0 58.0 26641978/79 35.4 95.0 52.3 26841979/80 35.1 62.3 50.7 17751980/81 35.0 62.3 n.a. 17801981/82 37.4 72.9 n.a. .19501982/83 37.4 66.6 n.a. 17501983/84 37.4 72.8 55.0 19401984/85 37.9 74.9 n.a. 19761985/86 38.3 80.6 n.a. 2100

a/ Estimates

Director 6entral's Office

Director 6 neral

D uty Director General

| "nag in ttonrol 2 Advi sor s crt ui | 0 W et seb ̂ . - ~~~~~~~~~dninistration orn latrnal Audit - Technical . k Rcruit tnU

.,: Budget and Budget Control Setttent

C4~~~~~~~~~~~~~~Cvw Statistics 1 -I-

A*ddinistrati n tFinnil T KhniCal DsOstWttnt~|

r | | 1 4 ̂trvlict Igtw

Accounting [| Administrative Procurent |Works an | ustra er gricultural 0 and finmtial and Socil | Supplies | Miatnr i"gt. and Marketing Studies and Cooprfati |ex

o.. External Relattons .^ -Personnel Ada. B -Purchases |~ Mater Mgt. "^ Industrial "^ -Projects *41 4tension _ ... .f Internal Rn ltions *, . > -Lnd dev. d and Rural al ' "' '

0 0~~~~~~~

* -.Cost kcuC. ting~ *go OCla -Stocks Iz -Equipmet Harketing 'm -anning m Development-Financial n es 1 I -Workshop/ c c4 & Eval. cq4 Research-and - 4e Co puter a Legl Affairs l arges Dwdopwnt

-Oino ) Supervised by Deputy General ManagerMolodo )N'Dbougu )Lurou uai )

so0 I

- 36 - IfXA 2-236 Ta~~~j_ 3 of 3

MALI

OFICE DU MM CON3OUAIOt PROJECT

'I Y l ll , a/J 1 1 11eI

111 I s//tGl>o .

E l CP r ~~~, .> l L _ _ 'ft.-

11~~~~~~~~~~~~~~~a l w _ . S

-e/ ' -;' _

K09W~ 9w

Et~~~~~~~~~~~~~~~Mf NOD-.0

_~~~~~~~~~~~~~~

DOo- I "owmw"u, I(ogp'in*-

Main! *!%a6Co0 w Om~1~0

- - K~~~~~~~~~~~~~cgaOn O D100

am ;;*-

0.0;wn Dam ~ ~ ~ ~ ~~~~~~~~~Neb

-37 - ANX 3-1

NWRHaS MUcwnz uJ -m --m&mt pww

Sdw*a2e of Divestiture

P__ PY2 PY3 PR4-10

I. Srvice iered forthe G,vemnt

1. P1ldi% and Des18n of e'LTmd and bter PascurcesDwe pnmt cm cOm

2. luvetmt on, and OR4 ofNlw3a Dm (I (1 (cm aQ cm

3. InCsbints ln, and ORMof, prhisy frrptkn

EltrIctu-e (maut,strutures and drains) CM/ C/ (1C/ Cm/ (ON/

coatrwtr contrwcts cn acto c8trCtoms4.' Agric. ale research

. Fanrs' trainitg dexts 1 l (ON (ON

nl. service Rmidered to Farmers

1. Divvof uwter tortiaries C1 ( cm (1 'c2. lirw ason, and 0614 of CZ

I - fr-inftfstnuctui (rs,anuctures nddrains) QJ cm (IN cm aQ

m. Activities to be Divetd

- pt prociaumt (2 ON ON ON cm- Input DiHstrutih ( 10( 101 341 50-410O

(Z by II/fllage Assoc.)- Paddy Traspart 80/20 60/40 40/60 2D/80 0/100

(1 by (1/Othes)- Agriulture Credit (14 an ama- Outcu Plw drg m/ fazr/ faS/rr f

entre- a3tre ente- altre-prm ps pres p7

_ l4te10D 75 75 75 50--hreshingD 80/20 100 100 100 100

(Z by C1/tW Assoc.)- He aCSttLM (1 fi 'au f

I wtbtr rate of divestiture of the rce utll tD be datendned at the tim of firstmelr *ieh CoiDzides #eth ccq*lat of first contact .

- 38 -ANNEX 3-2Pagp 1 of 7

MALI

O07IC DU NIGER CONSOLIDATION PROJECT

Paddy/Rice Pricina and Marketing Policies

General PrinciDles

1. The GovernmeAt is committed to extending to rice/paddy theliberalization policy adopted in the context of its program ofrestructuring cereals markets, and which was confirmed in the letter ofNovember 12, 1987 from the Ministry charged with supervising PublicEnterprises.

2. The measures set out below are part of the Rehabilitation Programfor the Office du Niger (ON), and are an integral part of thecontract-plan. They also take into account the fluctuations of domesticand International cereals markets, Including those for rice. In thisframework, the Government plans to adopt, for an interim period of' threeyears, a series of measures aimed ats

(a) setting up a policy of price incentives and a ritcelpaddymarketing policy that would take into account conditions of'competition and productivity by integrating. world and regionalprices, production costs and the remuneration of farmers on thedomestic market;

(b) ensuring farmers' adoption of intensive production methods;

(c) ensuring the financial equilibrium of the sector's partners,especially that of Office du Niger;

(d) ensuring the long term economic viability of investmentsundertaken by ON; and

(e) guaranteeing domestic market supply by taking the structure ofthis market into account, and particularly the existence of zoneof chronic deficit.

3. In accordance with the measures specified in paragraphs 7 and 8below, this interim period, which begins with the 1987/88 marketingcampaign, will be used by the Government, ON's financiers and PRMC donorsin order to:

during the first year:

(a) carry out a parallel study of production costs and a study aimedat defining, in a precise and operational manner, the mechanisms

- 39 -ANNEX 3-2Page 2 of 7

of variable taxation and price adjustment (within and betweenseasons); 1/

(b) apply a system of iiupqrt taxse, which would vary as a function ofvorkd market prices;

tc) analyze, during the review of the contract-plan scheduled forlate 1988, the different proposals and simulations by comparingthem with actual results obtained;

during the second year:

(d) award the bonus in its entirety to the Village Associations (para8) at the end of the campaign, depending on the sub.sector'sperformance;

during the third years

Ce) in addition to the measures defined in (d) and, if the variousstudies confirm the feasibility of such a measure, readjust thefarmgate floor price at the beginning of the season, inparticular to stimulate double cropping.

At the end of the interim period, the results of the application of theabove measures will be jointly evaluated (Government, Office du Niger,donors and PRMC donors). This evaluation will deal in particular withs

(f) incomes obtained by farmers in relation to their productioncosts;

(g) the formula for calculating producer prices;

th) the desirable level of taxes on commercial rice imports;

(i) the efficiency of customs services in collecting taxes;

(j) the efficiency of the various economic actors in bringing aboutthe transparency of the market and in satisfying the demand forrice;

(k) the evolution of producer and consumer prices inside Mali and inrelation to neighboring countries; and

tl) the justification and efficiency of the financing mechanisms(subsidies, credits, etc) that will have made it possible for thesector to reach equilibrium.

1/ see annex for proposed calculation formula established by World Bank.

- 40 -

ANNEX 3-2Page 3 of 7

4. This joint evaluation, will be the basis for defining ON's pricingand paddy/rice marketing policies for subs.quent years.

S. The conditions for the success of the proposed system are,s

(a) the financial restructuring of the ON and its eligibility forseasonal credit, which are the only guarantees that it. willindeed be able to market farmers' paddyS

(b) the execution of rehabilitation programs for rice mills and theestablishment of management systems allowing an increase inproductivity and an improvement in the quality of rice,especially through incentives for personnel.

Descripticg of measures

6. Control of external trade. The Government is committed tot

(a) the effective application of all customs tariffs on commercialImports, of which the level is maintained at 32S for the start ofthe 1987188 season;

(b) the suspension of all food aid imports in the form of rice aslong as the domestic cereals market is balanced or in a surplussituation, and the elimination of all distribution of free rice.Given the urgency of finding outlets on the domestic market forON's current rice stocks, the. Government has decided upon thefollowing measures, starting with th@ first months of the 1987188seasont

(i) scheduling of commercial imports starting with the secondquarter of 1988 after the liquidation on the domestic marketof existing rice stocks;

(ii) allocation of eventual food aid in 1988 (USAID, lO,OOOT;VFP, 15,OOOT, in accordance with prior coammitments) bychanneling them towards target groups (zones with chronicdeficits);

(c) the transformation of the tax collected by the PriceStabilization and Regulation Board 1OSRP) and/or of the IAS onsales of imported rice into a variable tax which would increase(or decrease) automatically according to the rise (or drop) ininternational rice prices, with a view to maintaining thecompetitiveness of domestic rice. The ways of applying thisvariable tax will be defined during the first quarter of 1988 inthe framework of a study undertaken by the Directorate ofEconomic Affairs with the support of consultants (under UNDPIIDAfinancing). This study will complement the CCCE-financed studyof the structure of production costs;

- 41 -ANNEX 3-2Page 4 of 7

(d) monitoring, in consultation with ON, the donors and PRHC donors,of the level of all customs tariffs (including variable tax(es))applied, in order to: .

(i) ensure protection of domestic production during the 'period.of rehabilitation of ON and of an increase in productivity;

(ii) guarantee that ON will develop its competitiveness inrelation to the international market (reduction of itscosts, improvement of its productivity with regard tomarketing, transport, storage and processing of paddy andrice); and

(iii) avoid an excessive increase in consumer prices and maintainprice hikes within the limits defined by the sector's needfor financial equilibrium.

The monitoring system will be defined in the framework of thestudy mentioned in (c) above.

7. Marketiny and storage of vaddy and rice.

The Government is committed to:

(a) llmiting the role of OPAM to that of managing national securitystocks (NSS) and to supplying deficit zones; in this framework,the composition of the NSS, will have to be redefined during 1988possibly to include rice and paddy;

(b) applying the free price policy defined in the marketing code topaddy marketed by the private sector;

(c) eliminating the 'barGme* (price scale), and applying the'homologation souple' (policy of flexible administred prices),which limits price control to the profit margin, to rice marketedby private wholesalers and national institutions (OPAM, ON, ORS,0DM);

(d) applying free pricing to retail trade, which will allow regionaland seasonal price variations.

The Office du Niger is committed to:

(e) selling rice at-mill, and carrying out these sales in thefollowing manners bidding invitations and/or flexibleadministered prices. Public institutions as well as privatetraders will be allowed to bid; lots will be small enough toallow small traders or consumer cooperatives to bid; sales willbe intended for domestic markets as well as for export. The ONwill study the scope for term sales so as to spread the risk ofprice fluctuations among buyers, consumers and producers.

- 42 -ANNEX 3-2Page S of 7

(f) buying all the paddy offered at the floor price, either farugateor at-mill, according to the methods indieeted in paras. 3 and 8.

8. Producers' Rurchase price for paddy.

(a) ON maintains a producer floor orice

(1) during the three-year interim period, the farmgate floorprice is at least 70 FCdA/kg for paddy, so as to avoid thenegative impact, upon farmers and upon production, of adecrease in the nominal price at the beginning of ON'srehabilitation period;

(11) for the 1987/88 season, the floor price is fixed at 70FCFA/kg of paddy;

(iii) for the last two years of the interim period, the coet priceof rice at-mill will be estimated annually as a function ofthe following factors:

a). farmgate floor price;

b) collection and transport costs, and incentive premiumfor the assumption by the Village Associations of thesetransferable tasks;

c) real costs of the three functions of processing,storage and marketing of paddy and rice, calculated onthe basis of a cost accounting system andinternationally recognized norms of productivity whichwill be set up and achieved in the framework of thepriority actions of the contract-plan; unit prices willinclude the portion of fixed prices attributable tothese three functions.

(iv) the difference between the average sale price throughend-of-season bidding and the at-mill cost price willconstitute a bonus to be distributed amongst producersthrough the Village A' dociations before the start of thefollowing season in order to foster the transfer of tasks;

(v) if domestic prices trends prove to be on the rise, as afunction of world market prices, an es-ante increase in thefarmgate price can be considered at the beginning of thethird season.

(b) Aooroval and Publication of the farmuate and at-mill floorprices. Each year by March 30 at the latest, ON defines a floorprice which it submits to its donors and to PRMC donors forcomment and then to the Government for approval in accordancewith the principles of consultation and approval set out in thecontract-plan. By April 30 of each year, at the start of the

- 43 -ANNMX 3-2Page 6. of 7

cropping season, ON announces the floor price to farmers,chambers of comerce and the press.

9. Financial conditions.

ON is committed tot

(a) taking the steS.s necessary to guarantee its eligibility forseasonal credit from the BC3AO, ie, reimbursement of at least 60Sof its seasonal credits by October 30 each year at the latest;

(b) not resorting to bank credit to finance the eventual deficitwhich would result from the marketing of paddy at the minimumfloor price (70 FCFA/kg) if market conditions do not allow it.

Government is committed tot

Cc) assuming, on the State budget, the costs of services performed byON for the State, such as extension, research/development,maintenance of the primary network (formerly included in the'barfme and paid by OSRP), and carrying out the necessarypayments according to the plan set out in the contract-plan(financing is provided for this in the IDA project, in orJer tolighten the State's expenses during the period of restructuringof public finances);

(d) assuming, on its own budget or with the help of outsidefinancing, the deficit that could result from the marketing ofpaddy at the floor price;

'e) setting up a tight monitoring system for the interim period, inaccordance with arrangements set out in the contract-plan(pro-approval of works, ex-post verification of works, monitoringof monthly expenses, spot checks of treasury management by theservices of the Ministry of Finance and the BCEAO);

(f) setting up, with the help of the PRMC and donors, a series of%ccompanying measures, includings -establishment in banks of aline of credit intended to back up credits to traders;-establishment, within village associations, of credit linesenabling them to set up village stocks that they can manage inaccordance with market signals; -eventual purchase by OPAM, withPIMC financing, of rice and/or paddy intended for the nationalsecurity stock.

10. The above arrangements are an integral part of the contract-planbetween the Government and ON. They will be evaluated in the context ofannual consultations, scheduled in the contract-plan, between theGovernment, ON, donors and PRMC donors.

- 44-ANNEX 3-2Page 7 of 7

Proposed Formula for Calculating the Floor Price

(i) Note the price of imported rice CAP Abidjan (or FOB Bangkokplus transport and expenses) for the 36 months preceedingthe month in which the calculation is made (A). The bestreferes,ce price is that of broken long grain rice 352 CAFAfrican port, published weekly in the journal 'March6utropicaux et m4diterraneensw, since it can be monitoredregularly and it about 102 below the price of RM 40 ricemarketed by ONI

(ii) estimate the cost of port transit and transport, includingstorage at customs and bank costs, on the basis of dataavailable at PRNC (supervising Ministry) for each 12-monthperiod (B);

(iii) add import taxes, taking the weighted average for each12-month period, based on data furnished by the customsservices (C);

(iv) calculate the simple average (D) on the total (A+B+C);

5v) deduct from (D) a 10 safety margin to establish the floorprice (E) equivalent to the border price. (NB: this price isdifferent from the market price);

(vi) apply to result (E) ON's processed rice/paddy yield (result(F));

(vii) deduct from (F) ON's costs of processing, storage andmarketing, net of income from the sale of bran. The result(G) becomes the at-mill floor Drice used by the ON;

(viii) deduct from (G) the transport costs from farmgate to mill.The result (H) is the farmgate floor Drice used by the ON.

Directorate Sesral 1l

I" sir istr H Itzov Wn 3s c Aricultural aIdr Cls laintncar- Finanial b rtmt Operations O"&rtant abrks*E i

Wrzt ; lwtutnt !=m tmt

I Proc ment Cost Personnel Staff Settlers_ r4I De atreItFizncn:l l Spplifs ACt§. t Social Trainin Affairs 0 ' .6~4Sel" t 6 I. i" .Z ° 5

Career * - 4 0 l

z.

,..i~~~~ .. ci U U- 14l

U01

zcml Ion~~~~~~~~~~*I

(1) Directorate eneral incleds tlw hrctor hwral, the Internal Al4tor and the Scretariat(2) The 6nral Studin wrvice dould derta&eJ rwvi all stiesin. The studies wvice of the

Hydraulic ekprtet old undertakelsopervise the studin related to irrilgtaolilladnageestad develpet.

(3) Zone sanrs directly respaud to the Director eeal kut the operatimmd lioe ofcosan mul be thrnh the Director for Agricualtal Operatiors.

o y

taintenance Morksand Equipomt Hydraulic |on 1 i

Dfpartr -t Dep rt:nt

+ I ;~~~~~~~~~~~~~~Scrtra DEFIA

4 itors. A 1< E- E iC.tE production Division

so 444 -A ON 0 uAqricultwal Supplie I Airic. Training t Rural PrI otian

sth . en pecialist

3 T , | Chas d; Casi!d r | J 1ZAF Ibnagersi

4UForaturs Fa rs".4 0

.W 4i on fa 0~~~~~~~ono.I -4i >~~~~~~~

I I~~~~~~

Ast.nsiaLn Mrs Asshacizationsr

Fairar' amrs Farmies

- 47 -

Annex 3-4Page 1 of 9

MALI

OFFICE DU NIGER CONSOLIDATION PROJECT

Financial Projections

The financial projections have been prepared on the basis of the1986/87 budget, which was the most reliable and detailed information at thetim of appraisal. However, it is to be stressed that the data base isweak, and as a result, the projections should be carefully wnitored asbetter data become available. Two sets of pojections were made, a firstset in current prices, using the projected rates of inflation used for thecalculation of project costs, and a second set in constant prices.

Hypotheses

The hypotheses used are the following:

1. The production of paddy was projected in accordance with theprojected rehabilitation program over ten years, including the proposedproject and the projects financed by other bilateral and multilateraldonors. The yields used are those retained for the proposed project (seeAnnex 3.1).

2. The paddy available for milling was estimated by deducting thequantities of paddy needed for self-consumption by farmers, (taking intoaccount a 5% a year population increase) from the total production ofpaddy.

3. The milling capaclty was maintained at Its current level of70,400 tons.

4. The quantities of custom-milled paddy were estimated using anincreasing rate of paddy purchased by traders of 101 in 1987/88, 20Z in1988/89, and constant at 301 thereafter.

5. The stocks of paddy held by ON at the end of each financial yeardecline from 28,000 T the first year to 20,000 T in the second year, andkept constant thereafter. The difference between the production and thestocks held by ON represents the stock sold by farmers at the end of thefiscal year, and would allow ON to reach a 1001 rate of utilization of itsmilling capacity (see 8 below).

6. The paddy milled by ON for its own account represents the paddyit purchases as determined by the difference between the milling capacityand the quantity custom-milled.

7. ON's paddy purchases were estimated taking into account the paddymilled by ON and the variations in stocks.

8. Rate of utilization of milling capacity: it will increase from821 in the first year to 1001 in the fourth year.

- 48 -

Annex 3-4Page 2 of 9

9. ON's productivity will increase by 101 a year for five years, and51 p.a. thereafter.

Results

With these hypotheses, the following results of the projectionscan be highlighted:

1. The increasing role of the private sector. The estimates showthat starting in 1989190 some of the paddy purchased by private traders ismilled also by the private sector. By year 10, about half on ON'sprojected paddy production (77,000 tons) would be milled in private mills,which assumes that there will be important private investments in ricemille.

2. ON must increase its productivity to remain competitive,particularly in view of the projected decline in the world price of rice(Annex 3.12).

3. ON will balance its operating accounts in four years. However,receipts from the milling activity will subsidize the other activities forfive years,until the rehabilitation program is sufficiently advanced toallow for substantial increases in water charges and revenues. This issummarized on the table, p.3.

49 -

AUf 3- 4Pap 3 of 9

au

ftj1!eci (bsmt kAmots 1986/7 - 1991/92

6/7 87/8 88/89 89/90 90/91 91/92

0_0o 3195 3022 2849 2772 2584 2376

lhtme u a 1753 1685 1618 1550 1482 1414Aprfcibl Servms 1442 1343 1231 1222 1102 962

_ Reves 1267 18 2047 2316 2750 3077

azmr iita 1001 1102 127 538 1972 23Paymts by gmnt 266 783 780 778 778 779

Net Readt A -128 -1143 -8 -456 +166 4641

mUIixig etnbats 701 6o 643 655 626 597

Operat%g R_ 8m 2 118D0 106 1371 1390 1296

met Relit B +19 4495 4443 +716 +764 4699

Net Operating Remr A + B - M -359 4+ 4930 +30

- 50 -

ANNEX 3-4Page 4 of 9

MALI

OFFICE DU NIGER CONSOLIDATION PROJECT

Pinancial Projections 1986/87 - 1994/95

(in current prices)

*~ ~ ~ ~~~~nKq as 1

bn6su~ ~ ~~~~~~l 87A11 0884l9 8919 90/91 9119R2 92993/999919irad4an6e 1 2 3 i 5 6 7 8 9settfi.i.t 4t1AWta lmode 110L10 16??77 113.92 121.29 128.81 131i.S7 114.?6 1S.4S 16U.6ettlclmnt idlatla ntn. 10000 1.0 103.02 104.1 106.39 11012 113,9? 117.X 122.09

Pregra d pradvIt6 ladlu 1.00? 100.00 9W11 01.00 7290 6561 59.15 56,10 5329 5063bmt (imp 6305 630? 64.60 65.40 66.20 ? 67.0 6.0 7.0 6.XPrix 4 P (a rlx at.) 71 6? 63 60 58 56 55 54 53PriX* 4ii pdy (CT/g) 70 7w 71.40 711 72.14 74.47 77.1 778 a.5 146PrIxdo riz(aprixut.) id 141 142 14 15 142 10 138 135Nix i viz id 167.10 1".0 1473 1991i8 154.16 156.83 1S9.M5 162.31 165.12

idUta de pad (xzl0D t) 86.6 90.4 94 115.2 136.2 164.8 185.8 198.6 1986spmnible Vw id 51.2 52.8 S559 73.8 92.7 119.1 137. 148.2 112

Nddya aup.r l'ON id 51.2 .47.5 14.? 183 426 34? 29.1 25.9 259fa* dpris pr wmp Id L.0 5.3 11.2 22.1 27.8 35.7 41.3 44.5 44.SStRock p yfiasei We id 28.4 20. 20.0 0 20.0 20. 20. 2 20.0 20.0StWek i fin do tide 4 1.1 ls 1.1 1.1 1.1 Id 1.1 1,1 1.1tiu ub e cpte p6 re Wd 57.9 SL9 44.7 8.3 I2.6 34.7 29.1 25.9 25,9tu wink Awdu tiers Id 0.0 5.3 11.2 22.1 27.0 35.7 41.3 4.5 914.5

cpit6di 'sinmm d Id 70.9 70. 70.9 704 70.4 ?7 70.4 74 70.4

- 51 -

ANNEX 3-4

Page 5 of 9

MALI :

OFFICE DU NIGER CONSOLIDATION PROJECT

Financial Projections 1986/87 - 1994/95(in current prices)

2 rimUu. FIOUTIUB 24d81

am"g u 701 605 643 5 62 5 G0 6i 610am tg1 1605 16s 1-50 1492 1414 1424 144 14"OMrdeu .grIule d . 1M2 1343 1231 1222 lt 9 2 9f5 87 832lts ret.wj tu a LT. i &U 72 178 293 432 7 3 740 8" 8

wjratuatud' Ii 06 24 111 2 106 1I8 126 103 f8 86

M AV" d-emloitatiu Id 4064 4122 4121 4356 4401 425 446 4678 4775dmtauartIust d 4 454 610 795 97 11 129 143 1524

kimnas do pwnuua ulow WI 1001 1102 1267 13 172 2B 2406 50 26101imu * u 'ltitrm d'urdAtlu Id 10 179 200 22 24 2 290 3W 321rutao I 1i U8 50 655 1 606 510 514 517

lacettet aw doe tiardued'wsgw M 15000 0 79 16 332 417 536 620 667 667mgwwu ted Jer Mm W 2m4 1iN 91t 103 973 7 i0 515 486dm id 749 72 691 662 6 60 60 612 617

T101 aett fd'ehat. id 5 37 3 43 47m 4917 584 5H122 522

BWEllIft0'EflMU id -, -347 -298 4 372 626 5 44 t7

52 AN~~~~~MNEX 3- 452 - Pase 6 of 9

MALI

OFFICE DU NIGER CONSOLIDATION PRIECT

Financial Pr,jectionus 1986/87 - 1994/95(in current prices)

3ISUPtK JKEJ1EII

EflowS"

#b SW w UI Is 0 0 *I 15 1" 1 i nh bwmmt upr om ?IImwutuintab MI JO 474 410 538 4142 46 1445 556

Ap so 811 53 Ml 1 1 0Z *11I on 4w 15 46-uera 0 15 15 15 15 15 15 15 15

,OWL de bob & *f.* L a -75 1it a 1 it 11X is 4

wAut riz 3 3 3 3 3 3-* daut? 4 aur t_ 50 71 7 4 15 11 12 0? 9ewd.psuiat* s , 4 1

7T01 1s1 31as 67 a 5i *4 11 15 pi

rgeb buk t'ti .uut 3a 1i M l1 i IS 1 189" is 191&VW at LT M1 53 42 1 2 13 1117 3inEVr4ta 1. Wm.L) (1MP -U 1is -3 71 47 19 -10 -m -i

ViLt *e_ (autU l -a 15 a 7 4n - - -2. -5A* ViAit a L.l. (UPOWNt I I I 0 I I I 0 I I I(AurvuiIta.LT. amw 1M I I I I I I I I 0

1t ruuru il 74 99 54 as31 a 1 28 as

SUK a IA - -22 is a a7 311 118 141Sdde*truwri.uiude -76 175 1510 no5 no 23 250 319 so6

a dimp Nn m o.rmdesduain wik 0 714 542 is lo a5 4 415 3RI 35

BW a LT. IS aZ 21m It S w Ml

1hgdmrm d 17 15. 143 12 115 15 33 93 U

1_tuum ̂eavu Ad II 375 15 13 - 111 3 1141 376~rta4Lt. d 011 375 49 212 5a39 39 997 Ibtdims t I N 3 3 R 191 4

- 53 -ANNEX 3-4Page 7 of 9

MALI

OFFICE DU NIGER CONSOLIDATION PROJECCT

Financial Projections 1986/87- 1994/95(in constant prices)

L 1

- -' 5/8792M'A 189 969iU 91. 91t9 92493 93/94 94/9UIuIfr'.I. 1 2 3 1 5 6 7 8 9Lust fletast dWlatielam. lI WIN IN 1tW 1N 180VA 136W3 WIN WIN" W

ufticiadt d'itltima ita. WIN 13. WI 10.4DN WIN WIN 13.3O 13.0 WI0N WINO-. .ks de r.dug tit 10"a I WI1 90.41 81.N0 72.90 1a.1 59.15 5.10 53.29 58a3BPdm.. l 63a f 3 14.1W .51 a u. 6UR 17.00 6.0 67.3iX dio f (aPrix .a) a8 78 78 70 8 78 70 7 0

Prix #a PeI* a) 78 0mou ma ma N 7 I&* am m* 0t. aPix du rlt (a rix aL) 141 12 1f 1iS 142 14 136 135

izx #J rlz I 16?.J 111.21 1423 1MM 114.3 12.4t,13." 137.10 13S25

PiwtiR e 4d (xPo= t) LS 9Q.4 15.4 115.2 135ii 164.8 18U 198, 13.Di.pule W ing, iW 51.2 52.8 559 73.8 9? 119.1 137.8 114. 141.2

* osow wi I'011 1t 51.2 7.5 14.7 '13 12.6 3.7 29.1 25.9 2i9PAy* putk w u. id 00 5.3 11.2 22.1 27.8 25.? 41.3 14.5 1.Stalk PO fin* tiae 1W 214 218 2Q1 218 20. 20.8 21 218 210SW riz fta derik id 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1

kiu e wr qtee pKw id 5.4 R5.9 44.7 13 42.6 3.? 291 25.9 25.9IHtiu p r du tiers id 8 5.3 11.2 2L1 27.8 55? 41.3 14.5 44.5

pin d'we ea A 78.1 70.4 70.4 70.4 70.4 74. 78.4 78. 70.

.,

- 54 -ANNEX 3-4Page 8 of 9

MALI

OFFICE DU NIGER CONSOLIDATION PROJECT

Finacial Projections 1986/87 - 1994/95(in constant prices)

2fKII ME= MM

nam-CS

0aur4iudlg EVA 70 61 564 51 6 13 116 39 375.t mtmvm Ii 175 15a7 142 12 110 10on 33 93 'aaim" rgwwuwvl ru 14 142 1in IN 106 is '78 5 51 sWAereb:tsw p* a LI. I LOU 72 171 29 4 9 ,61' 711 M, 82M

w .rreta LT. id 211 20 217 192 156 11 117 117

781 4hwgu d latiu id 1 6 3 M M7 M M M 3dWa srlmmtb id 1 12 5 7 5 935 159 1161 1219

m av4w EV 101 1102 126? 1531 1972 2236 M1 2S0 2610hw" & 'tti

bum dutreu IA 160 16 176 IN 12 200 260 20 200ulwrslt i1 106 565 50 4156 412 31 352 35

lleutt SW d tierdedumelg id 1500I 0 79 16 R 417 536 620 667 Mrpuruste& aId2 b04 1( lf 89m 99 915 6 533 1 3dim id 7 M 07 56 1 1 4a 3M 3

181L rautte 'p.t. Ui156 3656 3617 t156 439 77 53 54 45

mEmlCEfI'lOU id -6 -23 -9 25 707 91 1i0n 9 103

- 55 ANNEX 3-4Page 9 of 9

MALI

OFFICE DU NIGER CONSOLIDATION PROJECT

Financial Projections 1986/87 - 1994/95(in constant prices)

U~WL K ToRmt

MIiS

qtbaMru fiu 3IM 0 0 0 8i 212 2% 3 2 30Iuwwtur..ee 74Iiw.tlumme 611 395 160 63 265 3616 3766 1211 4R

du erea m1 375 430 2655 1N6 36 1111 3Ws KOrm 0 100 100 100 1s is 100 1l0 100

&"It.*bemlde* T.*f . 201 -8 -14 6 4 -2 a 3 4pw ur tt ld iauk 2 0 0 0 0 0 0 0pw d z -8 1 1 1 -3 -3 -3 -3

fWr demPuw uru -14 -16 5 -7 -17 3 6 -2

0Ta a*#. log 2"91 42 12 26 0 49 1529 m

Ihr brue aaWiumqt 2 t1 4 t 1is? 19 26 2t27 Vfut aLT oil Is 4506 "130 2 301 2962 924 133EWunt a C.T. W*v ) Io'(1 ) -910 192 -209 2 -2 - -421 -234 0lltt udew (qrnebtim) 26 -9 1962 -2 2 -6 -4 -4 -24 0ufrecradIt aC.I. MtsttanI ) 0 0 0 0 0 a 0 0 0 0(OM alaita.T.uwAle) l 0 0 0 0 0 0 0 0 0

t10x rowm 03 590 47 ? A 2 32 434 4 26"? 252

SLCK EI1LDE -83 2916 165 10 30 24 6 12in 11Sol i tr MMe -3 2133 2 3 369? 394 4493 6m2 6

4."iNE S CIEII#ES 8 PRM( t0I61MS

r d' (wip NVI 70 642 64 4 is 437 41 3 3isiW & tiwum d 116 1o 112 1278 1160 106 93 93 " udew ve.ril Id 142 1a lo6 100 8 70 632 57 43

Ia_tUrN Ai W I m11 375 40 "J3 25 3716 366 11M1 374WitaLT. id 811 35 U4 430 0 01 2962 924 303

&wIimc_ t id 0 0 0 0 a u 7 69l 217 71

- 56 -

ANNEX 3-5'Page I of 3

MALI

OFFICE DU NIGER CONSOLID)ATION PROJECT

Sumary of Office du Niger's Investment Plan

The Office du Niger investment plan, as presented on Table 1,includes the repairs of the Markala Dam, the rehabilitation of the existingirrigation infrastructure, the consolidation of the maintenance unit, andpossibly the overhaul and expansion of the rice mills 1/. The summaryinvestment plan presented below includes both investments included in theConsolidation Project and investments under implementation or planned underparallel financing.

Table 2 coapared the elements, sources of financing and costsbetween the investment ;lan and the project. It includes, in addition, theproject software comporents.

1/ The consultant study has not yet been completed.

- 57 -

ANNEX 3-5

Page 2 of 3

Table 1

Sumary of Office du Niger's Investment Plan

1985/86 - 1990/91

Estimated Cost Main Source of(US$fMillion) Financing

1. Rehabilitation of Markala Dam 10.6 IDA/SFA/SJF-GRM

2. Consolidation Points A & BRegulating Structures 1.9 CCCE/Other

Cofinancers

3. Sahel Irrigation System

- Complementary Rehab. ofKL Canals n.a. DIGIS

- Rehab. of Retail Canal &1315 ha of perimeters 16.4 (available) CCCE

- Rehab. of Gurber Nord & Siengocanals and Drains 4.4 IDA

- Complementary Rehab. of N'sand G's Canals n.a. DIGISRehab. of N'Debougou Canal and2100 ha of perimeters 8.0 KfW

- Rehab. of Siengo 3100 haperimeters 13.6 IDA

- Urgent Repairs on KouroumariMolodo network 4.4 Unidentified

4. Macina System

- Urgent Repairs 11.3 FED& Rehabilitation (Studies

underway)

5. Consolidation of Maintenance Unit 11.7 IDA SFA/SJF

- 58 -

ANNEX 3- 5Page 3 of 3

MALI

OFFICE DU NIGER CONSOLIDATION PROJECT

Table 2

Comparison Between the Plan and Project Investments

Investments FinancingPlan ProJect Plan Project

A. Infrastructure

Rehabilitation ofMarkala Dam X X IDA/SJF/ISFA

Consolidation of X MinimalPoints A & B repairs

CGCE

Consolidation(unidentified)

Sahel System:(canals & perimeters)

IL's X DIGISRetail X CCCE

* Gruber Nord/Siengo X X IDAN's & G's X DIGISN'Debougou X KfWMolodo, XKouroumari X Unidentified

Mac$na System:(canals & perimeters) X FED

B. Software

TA Organization X IDA, PACTA Financial Dept. X FACTA Hydraulic Dept. X IDA, FACTA Research X CCCETraining X DIGISCredit X IDA

C. Estimated Cost(US$ Million) 170 83.6 44.0

D. IDA Contribution - 232 of Estimated cost of investment program.

- 59 -

ANNEX 3-6Page 1 of 2

MALI

OFFICE DU NIGER CONSOLIDATION PRCJECT

PROJECT IMPLEMENTATION

The project would be constructed over a period of nine yearsas experienced in irrigation projects in West Africa, beginning with theconsolidation of the force account maintenance unit and the urgent repairson the irrigation infrastructure and the first phase of the Markala Damrepairs in the 87/88 dry season. The rehabilitation of the Gruber Nord andSiengo Canals would start only in the dry season of 88/89, and therehabilitation of the Siengo perimeters in the dry season of 89/90.Rehabilitation works on the main canals would proceed over a 6 to 7 monthsperiod maximum (November through May), but the rehabilitation of perimetersand works on the tertiary canals would be confined to five months only(Kid-December through April) to avoid interference with the wet seasoncrop. For the rehabilitation of the Siengo perimeter, a rate of 600 to 800ha a year is envisaged, to take into account that another 2000-2500 ha willbe rehabilitated under parallel-financing projects. Rehabilitation ofsecondary and tertiary canals would proceed in parallel with therehabilitation of the perimeters so that irrigation benefits will begin toaccrue shortly after investments are made.

Works on the Markala Dam would be confined over the six months oflowest river flows (mid-January through mid-June). The works would becarried out in two phases. In the first phase, the works would bearessentially on the most important electro-mechanical equipments, vhile thesecond phase would be almost entitrely limited to the gates, and wouldinclude limited electrical work. Implementation of the works in two phasesis necessary as it was not possible to carry out a complete dry inspectionof the gates.

All civil works would be carried out by contractors, except forsome the repairs on the secondary and tertiary networks which will becarried out by force account in the context of the consolidation of themaintenance unit.

The project implementation schedule is summarized on Table 1.

MALI

OFFICE DU NIGER CONSOLIDATION PROJECT

Table 1

Project Implementation Schedule

87/88 88/89 89/90 90/91 91/92 92/93 93/94 94/95 95/96

- - I of Task Completion -- -

Preparatory Tasks 100

PHASE I PHASE IIForce Account 13 32 53 83 98 100Maintenance Unit

Consolidation 100Urgent Repairs

0%

Markala Dam Repairs PHASE I PHASE 53and Maintenance 6 33 57 59 73 88 100

Rehabilitation Gruber 39 65 69 80 100Nord & Siengo Canals

Rehabilitation Siengo 19 43 68 95 100Coimmand Area (%/ha) 615 1385 2135 2925 3076

Rural Works (Z/ha) 14 28 42 54 71 85 100500 1000 1500 2000 2500 3000 3500

Technical Assistance/ 90 92 94 96 98 100Consultants I

- 61 -

ANNEX 3-7Page 1 of 2

MALI

OPFICE DU NIGER CONSOLIDATION PROJECT

CONSULTANT AND TECHNICAL SERVICES ASSISTANCE

The total costs for the Technical Assistance and ConsultantsServices component has been estimated at US$ 4.6 million, corresponding toabout 32 man-years. IDA, including the SFA and SJF/FRG would only finance18Z of this component, i.e., about five to six man-years, over the firstthree to four years of the project. Other technical assistance andconsultant services are to be financed by other donors, namely FAC, DIGISand CCCE, under bilateral agreements already signed with the Government ofMali.

The technical assistance and consultant services to be financedby IDA, SPA, and SJF/PRG, will be complementary to other services andlimited to (a) the management and human resources specialists responsiblefor assisting with ON's restructuring; (b) the consultant servcies for theconsolidation of the maintenance unit; and (c) engineering services to theHydraulics Department under a twinning arrangement. The latter arrangementwas designed to avoid the perimanent presence of technical assistants, whichhas often proved counterproductive. The firm selected under ICB willprovide short-term services, as the needs arise.

- 62 -

ANNEX 3-7Page 2 of 2

mul

OFIN WD NIQ3R Pa El

Scbecile of Tehiical Assistme and Q,Omtant

Year3i.t Positicm 1 2 3 4 5 6

Studw St_c__M_tpen .tFA)

Cantrofler ______Alyt FA,

am.geut Spec. (SFA/M)

RumPmrmMwm 1 Reire Spec. (SFA/SM

hctiWhcmtt(A)______

- w a_t oeer -

Studies ___Hydraulic Bgme Ihter 1gmit )

Srcim IwDi (MA)____

1.kfntsuc Whitw Study (3) (MDP)- P mmit Public rs Rginew (S/SlM)

Sites ftinher (SPA/SMForemam (FAC)

Agriiltial eratis Rmearch and Dmelopmet (OOCE) _ _

Tramer, Sr. CPA _

Trainer, Jr. - jter rgt (DIGS)Trainer, Jr. - production

system (m 15 __ _ __ _

ru

P*O.wt C.uMGUt by yen

otals IuL(M Cti u TtaMls lUi tiin)cc~~ llilliu', Cm aiU( i.21h

6A787/UAS WM 8/9 0M 9m n2/ n3/ Total NM P/US 11 n /1M 2 S 92M 4 %M5 tal~~ onnu~~mm,Bsm aommm=wBoom mmr amams,

*As .MLIla WMIT A3ICE - - 218.S 228.3 239.4 251.6 - - - - - 0* 7 *. - - 3. 3. INUSTEE 46*0 510.9 640.* SS.4 5624 56.6 671 340 - 3,3.1 0.1 1.6 2.1 2.7 1.3 1.8 1*9 9.3 - 12.3

C.oI UN IR SW OIS 1L.TII IUCIIE 0.01.140.9 - - - - - - - 19140.9 0*0 3.6 - - - - - - - 3S65. .Nf(A Il - 212.6 1.007.2 2.t 75.2 500.7 52.3 444.4 - 376.1 - 0.7 3.2 2.9 0.2 1.4 1.9 1.4 - 12.0E. IENI. a 101. 3NIES1 9 GNIILS - - 1I845.4 19296.? 206.3 .5 79.2 - - 4.9294 - - 5.9 4.1 0.7 2.7 2.3 - - 15.7

IA .I IU 1 - - - 926.2 1134.2 19222.5 1268.9 255.3 - 4360.1 - 2.9 3.3 3.t 4.9 0.3 - 15S. NM.1 - - 303.9 241.2 255.6 270.5 26.4 303.2 321.0 1.91 - - 1.0 0. 0. 0.t 0.9 1.0 1.0 6.3N. tlt3 10 a

(0. I 3, tlUR Mot .5.) .. - 523.5 8.3 26.0 24.9 252.4 97.7 - - .3 - 1.7 0.0 0.1 0.1 0.3 0.3 - - 3.I.t FVL MCIIS II 8.6 749.4 52.0 - - - - - - 1t30o.0 0.0 2.4 1.l - - - - - - 4.2

J. CITIMS. lEtH. MeIS A lTA13SIMB 187.4 5M3.2 485.3 289.3 42.0 31.4 32.7 34.0 MA4 1,730.7 0,6 1.t 1.5 4.9 .1 0.1 0.1 0.1 .1 5.

K. 5113E5 - 4.*6 45.7 33.1 27.0 28.1 59 16.6 17.4 131.3 - 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0*.1 6L. 11071? Sn5.6 - - - - - - - - 5S3.6 1. - - - - - - - - 1.3

total IEC CST 510.7 3755.1 4,918.5 4,9.4 2,607.9 3,961.2 3.0S2.3 1.140.5 373.3 26,217.4 2.6 12.0 15.7 15.3 1.3 12.6 12.3 35.3*2 OMmo xmmm amm m m in m

_m 4. tW 12025

(~~mi

SFA Mli SJF FMC oOc DM1S aN/MB. GM. TOMY

A.L Jiauicwael SdIt 3.0 - - - - - 0.0 3.0adBi. "' - - {tlt 2.9 4.0 5.2 - - - - 0.2 12.3C. UkgaRt4rs al

Irrg. Tnf. 1.2 - 2.3 - - - - 0.1 3.6D. ReDbi. biadoi I 1.9 5.4 4.5 - - - - 0.2 12.0L Riieb. & MbIm6

&i.erIS1en, canal8 - 13.6 - - - - - 2.1 15.7 0'

F. Rdu"ib.S9ibuap.shint.xr - 11.2 - - - - 4.0 0.3 15.5G. bnal ika lilot Sche 0.7 - 1.5 - - - 4.0 0.1 6.3IL &Wort to cm

OMD ltwr t Fit.ush4j 0.6 0.1 2.3 - - - - - 3.0I. upport to aN

Fii-^S^lalbs rtructurfag 1.2 - 2.2 - - - - 0.8 4.2J. Ckru1int ms

T.A., Tratnzag 0.4 0.6 0.9 2.0 0.4 1.2 - - 5.5K. Studles 0.1 0.4 0.1 - - - - 0.0 0.6L. Prepammcy Ibrks - 1.5 - - - 0.1 - 0.3 1.9

Total 9.0 39.8 19.0 2.0 0.4 1.3 8.0 4.1 83.6

I

- 65 -

ANNEX 3-10

MALI

OFFICE DU NIGER CONSOLIDATION PROJECT

Estimated Schedule of Cumulative Disbursements

Regional Profilefor Irrigation IDA SPA TOTAL IDA/SFAProjects (X) on (US$ mili'o) --

Year 1 5 FY88 0.8 - 3.6 7.3

Year 2 21 FY89 5.0 _/ 4.8 a/ 9.8 20.1

Year 3 41 FY90 8.8 7.6 16.4 33.6

Year 4 59 FY91 13.9 8.7 22.6 46.3

Year 5 73 FY92 21.4 9.0 30.4 62.3

Year 6 83 FY93 28.9 37.9 77.7

Year 7 90 FY94 34.3 43.3 88.7

Year 8 95 FY95 37.7 46.7 95.7

Year 9 99 FY96 38.8 47.8 98.0

Year 10 100 FY97 39.8 48.8 100.0

,a| PPP and Initial Deposits Into special Accounts

Estlmated closing dates: SFA Credit: June 30, 1992IDA Credit: March 31, 1997

Office du Niger P. 66 ANNEX 3-11Farm Budgets

A0 Al A2 A 4 AS AG-A20

UP1 plop l FlU l plop FlU?W FlU?.

productlnclU/lan 630000 654500 679000 619000 997500 1155000 1225000autoubca.en * 175000 175000 175000 175000 175000 175000 175000

________ -------- -------- -------- - -- -- -- _ _ _ - -- ......... _. ________

pred ee _ rclleU 455000 479500 504000 644000 822500 980000 1050000

Couts production 274250 273740 286120 303050 S26760 345440 361245

Credit eourt to r 19375 19079 19372 19665 20251 20544 21425

Credit ayn toeo 0 31500 $1350 96350 106000 117425 0

sort* brute 336375 330181 292158 399935 5444899 671591 842331

odevanoes 0.3. 64000 86800 89600 115500 147000 176400 226100

war$. nette 252375 24361 202558 284435 397489 495191 616231

_orse* ntt.ljour travatl 701 615 487 652 635 998 1167ide. apr.s auto*. 215 173 66 251 467 646 836

ars. brattha 112125 106510 91299 121192 155568 186553 221666

X rzdevrace/larg brute 25 26 Si 29 27 26 27

Un2

producticalUP/eai 525000 546000 567000 703500 752500 903000 959000auto>omam. 175000 175000 175000 175000 175000 175000 175000

prodommerciale 350000 371000 392000 52s500 577500 728000 784000

Couts production 220500 218665 229720 2 U 325 2541M 5 271140 283595

Credit court term 15750 15357 15552 15748 16139 16334 17020

credit n.y.u tore 0 31500 81350 96350 106000 117425 0

matt brute 288750 280479 240378 346070 G76227 498101 658386

Padevanoca 0.3. 64000 88800 69600 92400 98000 100800 106400

mrse notto 204750 193679 150776 253676 276227 397301 551986

asrse n tteljour travail 569 489 362 582 585 801 1045ides apr.s autoo. 83 47 -53 180 217 446 714

marsg brutelha 96250 90477 75118 104872 107493 138361 ;73259

I r.devanc.lmarge brute 29 31 37 27 26 20 16

UPS

produation/JfWlan 756000 756000 756000 840000 640000 840000 640000autooeea. * 175000 175000 175000 175000 175000 175000 175000

prod.ceercia2l1 581000 581000 581000 665000 665000 665000 665000

Couts production 265100 265100 265100 273500 273500 273500 273500

Credit ceurt tren 17550 17550 1753 17550 17550 17550 17550

Credit smyen torn 0 15750 40675 4U175 53000 58713 0

mars_ brute 47S350 457600 432675 500775 495950 490238 534950

ledevenoes 0.1. 126000 126000 126000 126000 126000 126000 126000

merse nette 347350 331600 306675 374775 369950 3f4238 422950

Mans n tteljour travail 579 553 511 625 617 67 705iLen apres autoo. 287 261 219 333 325 315 413

mars brutlba 7/892 76267 72113 63463 62658 81706 91492

X redevsaelmars brute 27 28 20 25 25 26 23

___________________________________________________________________________________________________________________________--

- 67 -

ANNEX 3-12Page 1 of 5

MALI

OFFICE DtT NIGER CONSOLIDATION PROJECT

ECONOMIC ANALYSIS

The economic analysis has been made on the Gruber Canal andcommand area of 127,000 ha, which represents about 24% of ON's perimeters.Exact data are available only for the part of the area, i.e. the Siengodistributeur and command area included in the project. For therehabilitation of the area to be rehabilitated by KfW, data have beenextrapolated from the Siengo perimeter, and for the area which requires acomplement of rehabilitation under the Dutch financed project, data havebeen extrapolated from the rural works included under the project.

Without Project Situation

For the "without project situation", the following assumptionshave been made:

(c) No investments are made. The level of expenditures for themaintenance of the network, for extension, and for farm leveldevelopment remains at the present level.

(d) The level of production decreases by 0.5% for 10 years, from1.8 T/ha to 1 T/ha.

With Project Situation

Costs include:

(a) All directly related rehabilitation and production costs duringthe nine years investment period.

(b) All of the rehabilitation costs of the Gruber-Nord canal whichis the main Distribution canal for 12,700 ha.

(c) 8X of the rehabilitation and maintenance costs of the Markaladam, whose capacity is estimated sufficient to serve 150,000 ha.

(d) 47% of the cost of the access track included in the urgentrepairs, along the Sahel canal/Molodo Fala.

(e) 24% of the consolidation of the maintenance unit.

(f) 8% of the technical assistance, training, and overhead costs ofthe Office du Niger, which will last beyond the projectimplementation period.

- 68 -

ANNEX 3-12Page 2 of 5

The costs of the research and development program and studieswhich will apply to subsequent phases of the rehabilitation program or tothe long-term development of the Office have been excluded from theanalysis, as well as the cost of the financial restructuring which has nodirect impact on production. Price estimates include 15% of physicalcontingencies. The analysis has beer carried out for a 20-year period.This could justifiably be extended to 30 years, based on the nature ofcivil works and standard Bank practice for irrigation projects.

Benefits. Only direct benefits on rice production have beenincluded. Other benefits, such as the incremental value of milk and meatproduction, the incremental value of fodder and vegetable crops, and theincremental wood production have not been included. Other benefits whichcannot be quantified include avoidance of the further deterioration of thenetwork, i.e., the preservation of the production capital at the Office duNiger.

Key Economic Asstmptions

The following assumptions have been made in calculating thecosts and benefits:

(a) Prices are border prices, and exclude all taxes and duties.Local costs are converted to border prices by applying thestandard conversion factor, estimated by Country Operations atO.95.

(b) Labor. Incremental farm lab)or is valued at FCFA 600 per day,which reflects the opportunity costs of hired labor during peakseason. By comparison, the official minimum agricultural wage(SNAG) varies from FCFA 600 to 1200 per day according to area.Incremental labor costs were calculated from farm modelestimates of increased annual labor requirements per hectare forthe more intensive production system (UPI and UP2).

Economic Price of Paddy

The economic price of paddy was calculated on the basis ofimport parity prices, with the reference market of Bamako for 45% ofproduction (half via Dakar and half via AbIdjan), and the reference marketof Segou for 55Z of production (via Abidjan). Local costs have beenconverted into border prices using the standard conversion factor. Perstandard Bank projections, world rice prices are expected to rise fromUS$ 185/ton in 1985 to US$ 233 in 1990, then decline to US$ 214 in 1995.These projections have been applied to the economic price of paddy.Details are on Table 1.

Results of the Analysis

The results of the analysis, based on the assumptions listedabove are shown in the table below:

wFiE lU _NM P5 K IDLITATI

166.1f [5hI amn jNN%SIIN

CF^F IiliM

1a16 tm t9w 9"0 att IV? am 1w. ao-am 91-215

13 N _IUT NM is 12o.1 41.3 313.6 1743.0 311.U0 4164.0 474.0 5372. .0 54666 56.6Aw? a NOlL_. NM 2l7.0 16.5 1269* 3.3 51.5 30.3 12.3 '

U3137 tNlKU . NEFlS 336.t 312.8 4.S 13M. 3162.5 41".3 46.3 S172.0 566.0 546. 546

IUEKIENTL Cum

INE N S OWAECN It MAT 1 - -T7. - - - - - - - -UNh It m - - 266. 3.0 11.4 - - - _ _ _

. "P _l1 - 9. 132.6 170.0 132.6 132. 11326 131. 14.6C - -N - 150.0 .0 115.6 15.# - - - -_

NWIl PENEIm .4KM - - 3t1.t 175.3 - - - _ _ _ _IISUIIEE 511m35 14KM - - - 176.1 - . 362. - - - -NAME CAA ) - 15. "O5 3.0 4.6 29. 33.4 24. - - -C_. ElNhEtlII (26) 9.3 132 124.3 57.2 103.6 14.1 1t'.1 U1 - - 3.6UIII IECUIWE (IV 12. 37. 2.6 1t. 1.5 0.7 6.7 . 6.7 - -91 t2W - 177. - - - - - - - - -If IEA EVWIIIW U. iU) - 31 5 1. 1.6 13 5. - - - -So

mt U 3_ 3. 33 330 _ _ _ _ _ _ * _ U _NE EIIT, II. IN 3_3 _ _ _ _ _ _ _ _ _ _1- - - 14.30 . 3. 3. 15.5 -, - -

MuK. U 3I139.9 159. 3156 31.t 29. 3331.3 39.6 24.93 125.7* - 3.

E IStu U ILUE l 16.9 23.3 113.3 23.5 54+0 m79.o6 1 1114#4 1114*4 1114.4 U134AuL 1m N4.3 3A4 t32.2 217.9 43.3 429. 5W7. 5Ut 1.t U1.t 57.tm s.o

i1 W t 5.2 112*.9 1.6 456*4 372.3 1221.6 16t0. 193.5 163. 149. 1t3.5

P11131M mTIIhEI 57.9 2361 516*9 596.3 647 499.7 46.4 166.t 11.2 - 75

WMtiUtlU 11 CM M.t 213.9 9.6 4.1 475.5 49. SUt.1 36*39 297.6 8.3 183.5

MET NM. ZaI IL mull -3.3 -15761. -360.1 -2M.1 -10131.0 *-66.6 -63.3 13.14 364 377.2 31.6

e Iim t etm~r-sam iruly./6b lirtue Swumw ftri f.ew heto 2? to A to billw oxtuasimna met ulatnu

Int~ Rom of Rtrn of lt Stmn

C.m 16.33:

- 70 -

ANNE 3-2

Page 4 of 5

Senitivity tests were carried out, the results of which areshown below:

Table 2

INTIEIN1 RATES OF KEMN OF NET S

3.tOT UP 10 UP 202 UPSOZ N M 102 MN 20M WM 50ZU6 LAS IE LAB 2 YERS LB 3 YERS

C.TOT 16.353 19.868 23.388 34.353 12,792 9.111 -4.338 12,415 10.065 8.479UP 102 13.119 16.353 19.549 29.261 9.793 6h297 -7.244 10.079 8.212 6.936UP 20Z 10.357 13.391 16.353 25.162 7.193 3.812 -10.15k 8.023 6.560 5.550UP 502 3.812 6,537 9.111 16.353 0.85S -2.467 -21.208 2.83 2A450 2.07DMEI lO 20.25 24.175 28.157 40.940 16.351 12.390 -1.307 15.121 12.176 10,223NW IV 25.142 29,677 34,353 49.952 20.746 16.353 199 18.335 14.629 12.226MM11 502 55s.91 66.633 79.427 1t5.731 46U589 38.249 16.353 34.048 25.715 20.h2

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IBRD 202

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OFFICE OF NIGER CONSOLIDATION PROJECTM A U R I T A N I A / j ; f- OFFICE DU NIGER CONSOLIDATION PROJET

. . . . . . . . . . . . .. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~IRRIGATION PERIMETER - TO BE REH4ABIUITATED UNDER THE PROJECT

PERIMFTRF D'IRRIOATION - A REHAJIItTER DANS LE CADRE DU PROJET

. ...... . PJ~~~~~ RCE MAiLLS A SUGAR MILLS------- ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~400 LE~~~~~~~~~~~~~~~~~~~IS RIZERIES LES USINs SIICRIIeS- EXSTNG PROJECTS

PROJETS EXISTANTSIETFEDFTURE PROJECTS

__ _ _ _ __ _ _ _ __ _ _ _ _PROJE FTSPILRS IE TFE

ISOATR -- rNDbo3t-4 -;s;' " PTNl EXISTfRE RIOBE DNGE DEUASPlRT.MAU

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IRRIGATION4 DEVELOPMENT REGIONREION DE DEVELOPPEMI ENT DE FIRRIGATION

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OFFICE ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~INTERNATIONAL BOUNDARIESPRONITERES INTERNATIONALES

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POTENTIEL EN TERRES IRRIGABLES (DONNEES DE L'ATLAS PJI.R. T. MALI)

I. YOUNG ALLUVLAL SOILS (IRRIGABLE LAND PF FLOOD PROTECTION4 PROVIDED)I. AELEVNONS RECENIES INONDABLES (IRRIOAUEES SOUS RESERVE DE CONARROIE DES INNDATIONS)

*m.~VALLEY DOILS COMPLEX (SUITABLE FOR PADDY AND GTENRE IBRRIATED CROPSM.10 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ACCORDING DO SITE CON4DITODNS)

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It. OLD ALLUVIAL SOILS (LOCALLY DUITADLE BOB IRRIGATION AND MANLY StATABLEPOE OTHER CROPS THAN PADDY)

U.ALLUVTONS ANACIENNES (PARTIELLEMENT IRRIGABUES ErTRBINCOPALEMIENT APTES ADA UTRES CULTURES OUE CELLE DU) EIZ

TERRACES (TOPOGRAPHY AND COARSE SOIL TEXT UED IMTATIONS)TEREASSES A CONTEASNTES DR TOPOGRAPNIE ET DE TEXTRE GROSSIEREOLD ALLUVAUMS POORtLY DRAINED OR SANDYALLUVIONS ANCIENNES MAIL DRANEES OU1 SABLEUSES

OLD ALLUITUM (SCATTERED SANDY AREAS AND COARSE SOILS WIThl TDSIRE LIMTATIONS)4' ~~~~~~~~~~~~AIUVTONSU AMNOCNNES IOCALEARNT SABEEUSES

Un. MISCELLANBOUS IDENTIFIED IRRIGABLE LADSIr. RESSOURCES DLiIESSIENII

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