Document of FILE COPYThe World Bank

FOR OFFICIAL USE ONLY

Repo,t No. P-2838-KE

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON

A PROPOSED CREDIT

TO THE

REPUBLIC OF KENYA

FOR A

FISHERIES PROJECT

June 4, 1980

This document has a restricted distrIbution and may be used by recipients only in the performance oftheir officlal duties. Its contents may not otherwise be disctosed without World Bfank authoriation.

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CURRENCY EQUIVALENT

Currency Unit - Kenya Shilling (KSh)KSh 1.00 - US$0.133US$1.00 - KSh 7.5

(As the Kenya Shilling is officially valued at a fixed rate of 9.66KSh to the SDR, the US Dollar/K Shilling exchange rate is subject tochange. Conversions in this report were made at US$1.00 to KSh 7.5which is close to the recent average exchange rate.)

ABBREVIATIONS

CBK - Cooperative Bank of Kenya, Ltd.ICDC - Industrial and Commercial Development CorporationKFC - Kenya Fishnet Company, Ltd.KFI - Kenya Fishing Industries, Ltd.NOCD - Ministry of Cooperative DevelopmentMENR - Ministry of Environment and Natural ResourcesmOw - Ministry of Works

FISCAL YEAR

Government of Kenya and CBK - July 1 - June 30

FOR OFFICIAL USE ONLY

KENYA

FISHERIES PROJECT

CREDIT AND PROJECT SUMMARY

BORROWER Republic of Kenya

BENEFICIARIES : Ministry of Environment and Natural Resources (MENR),The Cooperative Bank of Kenya Ltd., (CBK) andCooperative Societies

AMOUNT . US$10.0 million equivalent

TERMS Standard

RELENDING The Borrower would onlend about US$3.4 million of theTERMS proceeds of the credit to CBK for up to 10 years, at 6%

p.a. CBK would in turn relend to the cooperative societiesat 9% p.a. for up to 10 years. The loans would enablethe societies to acquire the equipment for shore facilitiesand the fishing and transport craft. Cooperative societieswould lend to their members at 10% p.a. for up to eight yearsto finance boat purchases.

PROJECT The principal objective of the proposed Project wouldDESCRIPTION : be to increase the incomes of fishermen by increasing

marketed fish production; post-harvest losses would bereduced and fish quality improved by providing storage andpreservation facilities. Improved fishing craft and gearwould enable fishermen to increase fish catches and produc-tion. The proposed pilot Fish Farming Development Centerwould also contribute to increasing marketed fish produc-tion. If successful, the Center would be the nucleus of asecond phase expansion for the development of outgrower fishponds. The project would also include funds for research,training, and studies. The majority of the prospectiveProject beneficiaries currently earn the equivalent of aboutUS$80 per capita per year. At full development, beneficia-ries' annual per capita incomes could be expected to haveincreased by about 50%. The principal risk the Projectwould face is that the ice plants and refrigerated storeswould not be managed efficiently. This risk will be miti-gated if the cooperatives receive the support and confidenceof most of the fishermen in the areas they are serving. Thecooperatives' ability to provide improved services would bea significant motivating factor.

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

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ESTIMATED COST Local Foreign Total----- US$ Million -----

Shore Facilities 1.6 1.5 3.1Fishing Craft and Gear 0.6 0.5 1.1Fish Farming 0.7 0.9 1.6Training Research and Studies 1.7 2.3 4.0Management Monitoring and

Evaluation 0.9 0.4 1.3Sub-Total 5.5 5.6 11.1

Physical Contingencies 0.5 0.5 1.0Price Contingencies 1.5 1.3 2.8

Total Project Cost 7.5 7.4 14.9of which Taxes and Duties 1.6 - 1.6Project Cost Net ofTaxes & Duties 5.9 7.4 13.3

FINANCING PLAN Local Foreign Total----- US$ Million -----

Government of Kenya 3.1 - 3.1Fishermen 0.2 - 0.2IDA 2.6 7.4 10.0

5.9 7.4 13.3

ESTIMATEDDISBURSEMENTS : FY 1981 1982 1983 1984 1985 1986 1987

Annual 0.2 0.6 1.2 1.5 2.0 2.0 2.5Cumulative 0.2 0.8 2.0 3.5 5.5 7.5 10.0

RATE OF RETURN : 16%

APPRAISALREPORT : Report No. 2864-KE, dated May 14, 1980

MAP IBRD 14619

INTERNATIONAL DEVELOPMENT ASSOCIATION

REPORT AND RECOMMENDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS

ON A PROPOSED DEVELOPMENT CREDITTO THE REPUBLIC OF KENYA

FOR A FISHERIES PROJECT

1 . I submit the following report and recommendation on a proposeddevelopment credit to the Republic of Kenya on standard terms, for the equiv-alent of US$10.0 million to help finance a fisheries project. The Governmentwould relend about US$3.4 million of the proposed credit to the CooperativeBank of Kenya Ltd (CBK) for up to 10 years, with interest at 6% p.a.

PART I - THE ECONOMY 1/

2. A report entitled "Kenya Economic Memorandum" (Report No. 2441-KE)dated March 1979 has been distributed to the Executive Directors. A sum-mary of social and economic data is in Annex I. A Basic Economic Reporton Kenya is now under preparation.

Long-Term Economic Growth and Prospects

3. Kenya became an independent nation in 1963. During the entireperiod since then the country has experienced remarkable continuity in bothpolitical leadership and development strategy. That strategy has been topromote rapid economic growth by means of public investment, encouragementof both smallholder and large-scale farming, and promotion of acceleratedindustrialization, by providing incentives for private, including foreign,investment in modern industry. The Kenyan development model can be charac-terized as "mixed", in the sense that it incorporates a diversity oforganizational forms and incentives and combines private enterprise with asignificant amount of government participation and guidance. While the deathin 1978 of President Kenyatta, who had led the nation since Independence, hadbeen anticipated with concern because of possible political disruption anddiscontinuity in Kenya's development, it is clear that the country has madea smooth transition to new leadership and that the future will see continuityin both the political and economic spheres. Recent peaceful elections provideadditional confirmation of this.

4. Kenya's first decade as an independent nation was one of remarkablegrowth and structural transformation. Total GDP grew at an annual average

1/ This section is substantially the same as the President's Report on aFourth Loan to the Industrial Development Bank (Report P-2736-KE of March5, 1980).

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rate of 6.6% during 1964-73. Both agriculture and manufacturing grew rapidly,4.7% and 8.4% per annum respectively. The expansion of agriculture was

stimulated by redistribution of large estates to smallholders, rapid diffusionof hybrid maize, and growth of smallholder output. Growth of manufacturingwas very largely made possible by the expansion of domestic demand due torising agricultural incomes, while investment for domestic production wasbeing encouraged by high levels of protection, a liberal attitude towardsforeign investment, and active government promotion of and participation inmanufacturing ventures.

5. Despite this rapid growth, Kenya remains a poor country, stillheavily rural and dependent upon agriculture. Average per capita income in1978 was US$320 and agriculture accounted for about a third of GDP (1975-77)

and 60% of export earnings (1977). Since the growth of the industrial sectorhas been largely confined to the major urban areas, agriculture remains theprincipal source of income in the rural areas where over 80% of the populationlive and work. Thus, while the country has made substantial economic progressin an atmosphere remarkably free from social unrest, it still has significantproblems of poverty and under-employment. It is estimated that about one-fourth of the population have incomes which place them below the absolutepoverty line. Moreover, while Kenya's post-Independence growth record hasbeen impressive, a number of problems have been emerging which will make itmore difficult to sustain the rapid growth of domestic product and furtheralleviate poverty. These are: the extremely rapid growth of population, theinward-looking pattern of industrialization, and the slow growth of and lackof diversification of exports.

6. The most fundamental problems Kenya faces are posed by the rapidgrowth rate of population, currently estimated by the Government to be 3.9%per year, which is among the highest in the world. This is, ironically, theresult of Kenya's past success in raising living standards, which has resultedin a steady decline in mortality and has probably resulted in an increase inthe country's already high fertility rate.

7. With rapidly increasing population, pressure is beginning to 2mount on Kenya's limited arable land. Of Kenya's total area, 583,000 kmi,520,500 km is categorized as potentially agricultural; however, only 13%can be regarded as high potential land, with 6% medium and 81% low potential.Thus, less than 20% of the land area has good arable potential. While pres-sure on the land was alleviated during the years following Independence bythe opening up of a large part of the land previously owned by Europeansto settlement by Kenyan smallholders, much of the high-potential land isnow densely settled. Because of traditional ethnic landholding patternssome higher potential land is not fully utilized. Mounting pressure on landis resulting in increasing subdivision and landlessness in high potentialareas, and in settlement in semi-arid areas ill-suited to farming. Thelatter also poses a serious threat of environmental degradation.

8. Rapid population growth is felt most seriously through the increas-ing pressure on available agricultural land, but has already created and iscreating other problems as well. First, there is the strong likelihood that,

unless population growth slows dramatically or ways are found to increase therate at which income earning opportunities in agriculture expand, excess rurallabor will be pushed into urban areas. Even if the non-agricultural formalwage sector (which employs less than 15% of the total labor force) grows veryrapidly, it will probably be unable to absorb all the new urban labor force

entrants because of its small base. The result could be rising urban unemploy-ment and underemployment. Second, considerable budgetary pressure has already

been created by rapidly rising population and the concomitant growth of demandfor social services, especially education. Finally, efforts to improve the

distribution of income will be impeded by the relative lack of access toland and education for the children of the poorest section of the population.

9. A second problem area has developed in the manufacturing sector.The rapid growth of industry in the past has been largely based upon invest-ments in simple import-substitution industries by multinational companies. Toa lesser extent manufacturing production has also catered to the export marketin neighboring countries, particularly in the protected East African Community(EAC) market. However the scope for further induistrialization along theselines is limited as most of the easy import-substitution possibilities havebeen exhausted and the EAC preference for Kenyan goods has been abolished.The past pattern of industrialization has left the industrial sector increas-ingly dependent on imported raw materials, components and spare parts andtherefore vulnerable in case of a shortage of foreign exchange. To maintaingrowth it will be necessary to reorient industry toward increased use ofdomestic inputs and increased production for export.

10. An additional problem is the slow growth and lack of diversificationof exports which have consistently grown at a slower pace than GDP. From1964-74 the volume of exports expanded at an average annual rate of 4.6%.However, over the past five years export volume has grown slowly. In 1978,export volume was only 3% above the 1974 level. To some extent this is areflection of production problems in agriculture and industry, but it is alsoan indicator of the need to direct more resources toward export-orientedactivities.

Economic Performance 1974-78

11. Kenya's growth performance since 1974 has been especially vulnerableto swings in the country's international terms of trade. Thus, the growthrate fell sharply during 1974-75 when the dramatic increase in petroleum andother import prices required restrictive economic policies, acceleratedrapidly in 1976-77 as the impact of the "coffee boom" following frost damage

in Brazil worked its way through the economy, and began to decelerate in 1978with the decline in coffee prices toward more normal levels.

12. Fiscal and monetary policies were, in combination with incomespolicy, reasonably effective in restraining the growth of aggregate demandduring 1974-76, thus protecting the balance of payments and keeping exter-nally generated domestic price increases from getting out of hand. However,throughout this period there were increasing pressures on the Government toexpand its expenditures emanating primarily from increased school enrollments

and abolition of fees for the first four years of education; concerns about

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national security; and the need to replace East African Community (EAC)Corporations with national entities. With the "coffee boom" of 1976-77, theGovernment decided to greatly expand budgetary outlays, both recurrent andcapital, to ensure that the additional revenues would be used for developmentpurposes. As a result, the budget deficit rose from less than 5% of GDP in1976/77 to an estimated 9% in 1978/79. At the same time, the monetary authori-ties were doing little to limit the effect of rising foreign exchange reserveson commercial bank liquidity and expansion of credit to the private sector.As a result, domestic credit grew by an average of nearly 30% in 1977 and1978. The combination of the expansionary monetary and fiscal policy and thehigh agricultural incomes produced a resurgence of domestic demand and a rapidrise in import levels. By the latter half of 1977 time coffee prices hadpassed their peak and begun to decline. As a result the trade deficit rosesharply in 1978 and the foreign exchange reserves were rapidly depleted. Thebalance on current account deteriorated from an exceptional surplus of US$58million in 1977 to a deficit of over US$650 million in 1978, while reservesfell by US$200 million. In order to prevent further depletion of the country'sforeign exchange reserves, the Government introduced a program of importrestrictions in late 1978. As a result, imports declined sharply and bothKenya's revenue gap and current account deficit were reduced. This, togetherwith increased external borrowing, resulted in a recuperation of about KE 70million in gross reserves. However, the prospects for 1980, and indeed forthe next several years, are for continued strong pressure on the country'sbalance of payments.

Fourth Five-Year Development Plan, 1979-83

13. The emphasis of the Fourth Five-Year Development Plan is on restor-ing growth to the levels that prevailed before 1974, while alleviating povertythrough creation of income earning opportunities and provision of socialservices to meet the basic needs of the population. The Plan correctlyidentifies the key problems that Kenya faces and sets forth a developmentstrategy appropriate to their solution. It is sharply focussed, explicit inits recommendations, and shows a sound awareness of constraints on develppment.

14. The Fourth Plan recognizes the strong link between agriculturalgrowth and poverty alleviation. One of the most significant changes pro-posed in the Plan is increased access to land through legalizing subdivisionof high-potential large farms. In addition, the Plan proposes that a NationalLand Commission be established to review ways of encouraging land use inten-sification and labor absorption. The Plan also proposes that marketing andpricing policies pay closer attention to the structure of domestic and inter-national prices and the marketing system be made more competitive and effi-cient to improve prices to farmers. Research and extension services are tobe more closely linked to the needs of small farmers. Finally, in additionto projects to increase larger scale commercial and smallholder production,a series of integrated rural development projects in semi-arid areas is pro-posed to redress the neglect of these areas.

15. The major thrust of industrial policy will be to effect a transitionfrom import substitution to a strategy emphasizing industrial efficiency andexport diversification. This will involve further rationalization of tariffs

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and elimination of quantitative restrictions on imports over a five-yearperiod. This policy will be very difficult to carry forward over the nextfew years when, because of balance of payments problems, there is likely tobe considerable pressure to increase, rather than reduce, protection.

16. The Plan proposes no fundamental change in Kenya's traditionallyliberal policy on foreign investment with the important exception that re-view and approval of projects for which special concessions or Governmentparticipation are being sought will rely more on economic criteria and will becentralized in the Ministry of Finance. On the whole, the Plan calls for amore limited role for Government in terms of direct participation and inter-vention. However, efforts will be made to restructure industrial investmentincentives to encourage employment and decentralization. Finally, while thereare doubts in Kenya about how dynamic a role the informal sector can play inthe development process, the Plan is more specific in its recommendations foraid to small firms (provision of financial and technical support and endingof unnecessary licensing and other restrictions) than the previous Plan.

17. The Fourth Plan acknowledges the heavy burden rapid populationgrowth places on the economy and places high priority on the promotion offamily planning. The target for new acceptors during 1979-83 is 700,000,compared to 280,000 recruited during 1974-78. In order to achieve this, thenumber of field educators will be more than tripled (from 430 to over 1,300)and the number of fixed delivery points doubled (from 315 to 630). AlthoughKenya is doing more to promote family planning than most other African coun-tries, the rate of population growth is projected to remain extremely high(3.9%) because of strong cultural and traditional factors and even greaterefforts will be required to bring about a significant decline in fertility.

Economic Prospects

18. In spite of the generally well-conceived policy measures proposedin the Fourth Plan, it will be very difficult to attain the Plan's targets,especially the target GDP growth rate of 6.3% per annum. This is largely dueto balance of payments and budgetary problems which are likely to be moresevere and long-lasting than was foreseen at the time of Plan preparation.The balance of payments position is likely to remain difficult throughoutthe Plan period for three reasons. First, the terms of trade are projected todeteriorate through 1982, largely due to oil price increases and unfavorableexport prospects. Second, there has been a significant increase in the levelof commercial borrowing to finance large expenditures for successors to theEAC corporations and other large projects. Finally, prompted by growingpolitical tensions in Eastern Africa and the realization that the country hadspent very little on defense since independence, Kenya carried out a majorprogram to re-equip its armed forces in 1977-78. The equipment has beenpurchased on credit, the repayment of which will have a substantial impacton the balance of payments throughout the Plan period.

19. The budgetary situation will also be tighter than foreseen in thePlan. First, the balance of payments problem will constrain the rate ofgrowth of the economy and of revenue. Second, the President has recentlyannounced several measures which are not included in the Plan but which willhave significant direct budgetary consequences. These measures include:

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(a) provision of free milk for students in the first seven years of school;

(b) elimination of school fees for the fifth and sixth years of elementaryschool; (c) initiation of a national literacy campaign; and (d) a 10% increasein employment in the public and private sectors in exchange for agreed wage

restraint. Finally, the increased military expenditures will also increasebudgetary pressure.

20. In order to deal with the balance of payments problem, the Govern-ment has slowed the growth of credit, limited import license approvals, andin December 1978 introduced import deposit regulations. These measures haddirect impact on import levels for 1979. In addition, the Government hasadopted a comprehensive economic program aimed at keeping the loss of foreignexchange reserves below US$133 million for 1979-80 combined and at gradually

reducing the rate of inflation to less than 10% in 1980/81 (compared to 13.7%in 1978). The Government's program has been incorporated into a stand-byarrangement with the International Monetary Fund; the agreement, which is for

a period of two years, involves the upper credit tranches, through the fourth,including the use of the Special Fund Facility, and will make an amount equiva-lent to about US$157 million available to Kenya. In addition, Kenya has beenpermitted to purchase the equivalent of US$89 million under the Fund's com-pensatory financing facility. The first drawing under the stand-by agreementhas already been made and subsequent drawings are scheduled quarterly, endingMarch 31, 1981.

External Debt

21. The recent expansion of government and government-guaranteed commer-

cial borrowing has adversely affected the debt service ratio, which has risenfrom 5% in 1977 to an estimated 11.2% in 1979. This includes service paymentson a notional 50% share of the debt of EAC corporations. The debt serviceratio is expected to increase to about 16% in the mid-1980s, and declinegradually thereafter. Debt service payments to the Bank are 14.9% of totaldebt service payments; the IDA share is 0.9%. The Bank's share of total debtservice payments is expected to rise to about 22% by 1985, while IDA's sharewould rise to 1%. The Bank is presently holding 22% of Kenya's total outstand-

ing external debt, and IDA 9%. The Bank's share is expected to rise to 26%and IDA's to 15% by 1985. The expected rise in Bank exposure is due largelyto anticipated repayments of loans with short maturities. An additional

factor, however, is the gradual switch by other donors from loans to straightgrants (including conversion of some loans to grants). Because of the long-term balance of payments constraint, Kenya's development program will requiresubstantial financing in excess of public savings and available non-Bank Groupexternal capital combined and we therefore expect to continue our practice offinancing a substantial portion of total project costs, including some localcosts when necessary.

East African Community (EAC)

22. The recent developments in the East African Community were outlinedin a report to the Executive Directors dated December 29, 1977 (R77-312).Dr. Victor Umbricht, the independent mediator appointed by the Partner States,

has visited East Africa on numerous occasions and prepared reports on the

results of his fact-finding work on the EAC Corporations and the General

Services, and the methodology adopted in appraising the assets and liabili-

ties. In late March 1980, the mediator presented to the three Governments

his proposals for the allocation of these assets and liabilities, for their

consideration. The next step would be the start of negotiations among the

three Governments based on the mediator's proposals. According to his terms

of reference, the mediator would be available to assist in arriving at a

definitive settlement. The mediator's report and recommendations on the

future structure of the East African Development Bank (EADB) have been

accepted by the Partner States. The revised EADB Charter along with the

Treaty amending and reenacting the new Charter have been submitted to the

* three Governments for signature as they are constitutionally ready; this is

expected shortly.

PART II - BANK GROUP OPERATIONS IN KENYA

23. To date, Kenya has received 35 Bank loans, including three on Third

Window terms, and 30 IDA credits amounting to US$1136.0 million, which support

57 operations. In addition, Kenya has been one of the beneficiaries of 10

loans totalling US$244.8 million which have been extended for the development

of common services (railways, ports, telecommunications, and finance for

industry), operated regionally for the three Partner States of the East

African Community. Annex II contains summary statements of Bank loans and

IDA credits to Kenya and to the East African Community corporations, and notes

on the execution of ongoing projects as of April 30, 1980.

24. The Bank has assisted the Government in its efforts to restructure

the economy through increased lending in directly productive sectors, particu-

larly agriculture. While recent sector and economic work has also focused

on the adjustments which Kenya must make to deal with the changed interna-

tional economy, the upcoming Basic Economic Report is expected to comprehen-

sively address the issues of income distribution, population growth, and

appropriate long-term agricultural and industrial policies.

25. Significant progress has been made in giving the Bank's lending

program a rural focus, and in concentrating on employment and income distri-

bution objectives. Projects approved since July 1979 include a Third Power

Project, the Baringo Pilot Semi-Arid Areas project, a Second Integrated

Agricultural Development Project, a Fourth Line of Credit to the Industrial

Development Bank, and a Structural Adjustment Credit to help address Kenya's

balance-of-payments difficulties. A Technical Assistance Credit for export

promotion to complement the Structural Adjustment Credit will be presented to

the Executive Directors for approval shortly. In addition, a railways project,

a fourth agricultural credit project, and a cotton processing and marketing

project have been appraised, while an urban transport project, a fifth education

project, a second structural adjustment credit, and a second population

project are under preparation.

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26. Overall, project implementation performance is satisfactory; how-ever, progress on the Group Farm Rehabilitation Project has been slow due toadministrative difficulties and reluctance of group owners to participate.Kenya has also experienced serious cost overruns, most notably on road cons-truction proiects, but Government has made funds available to complete theseprojects. Current cost estimates for the Bura Irrigation Settlement Project(now in the preliminary stages of implementation) indicate that heavy costoverruns are likely to be incurred; the financial consequences are underdiscussion with the Government and the co-financers.

International Finance Corporation (IFC)

27. IFC has committed a total of US$42.9 million for four companies inKenya: Pan African Paper Mills, Ltd.; Kenya Hotel Properties, Ltd.; TourismPromotion Services (Kenya) Ltd.; and Rift Valley Textiles (Ltd.). A creditline for medium- and small-scale enterprises was extended to the CommercialBank of Kenya. As of April 30, 1980, IFC held for its own account US$31.6million comprising US$23.6 million of loans and US$8.0 million of equity.A summary of IFC Investments in Kenya is included in Annex II.

PART III - THE AGRICULTURAL SECTOR

Background

28. In spite of the rapid expansion of manufacturing in Kenya, agri-culture remains the most important sector of the economy. Over 80% of thepopulation is classified as rural and depends on agriculture for a livelihood.A broad distinction can be made between the large farming sector, includingGovernment farms, and the approximately 1.5 million smallholdings in Kenya,most of which are farmed by their owners. Maize is the staple crop, but arange of other crops are grown by smallholders, most of whom also have a fewhead of livestock; some of them are also engaged in aquaculture.

29. During the period 1972-78, agriculture grew at an average annualrate of 2.6% in real terms, lower than the average annual growth rate of 4.7%it achieved from 1964-73. Agricultural output also grew more slowly than theeconomy and the industrial sector, which grew at over 5% and 8% respectivelyduring 1972-78. The share of agriculture in total GDP declined from about35% in 1972 to 30% in 1978. Poor weather conditions and high prices of inputsafter worldwide price increases in 1973 were the main reasons for the slowgrowth during 1974-76. This trend was reversed in 1977 when, as a result ofthe boom in world coffee prices and good weather, agriculture grew by over 9%.In 1978 agricultural growth declined again to under 2% per annum, owing to thecumulative effect of a drop in world prices for coffee and tea, and adverseweather. Kenya is a net importer of certain agricultural products includingfish.

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30. Kenya's 1978 GDP in current market prices was K Sh 42.5 billion,of which about K Sh 288 million (US$38.4 million) was contributed by thefisheries sub-sector. Although this contribution is less than 1% of GDP, theGovernment recognizes the importance of fisheries to employment and nutrition.In the 1979-83 Development Plan, the Government seeks to increase total annualfish landings by 30%, to about 60,000 tons by 1983.

The Fisheries Sub-Sector

31. Kenya has 640 km of coastline on the Indian Ocean, numerous lakesand several thousand fishponds but little is known about potential fisheriesresources. Average annual fish production was stable at about 30,000 tonsfrom 1971 to 1975, it increased to about 41,000 tons in 1976 and 1977, andto 46,000 tons in 1978. Freshwater fisheries provided about 80% of totalproduction, marine fisheries 20%; the Kenyan waters of Lake Victoria aloneaccount for over 85% of all freshwater catches. Fish farming is relativelyundeveloped and there seems to be potential for a higher output than isnow being harvested.

32. Fish consumption varies greatly among population groups, but it ishighest near the main bodies of water and in the cities. Average annual percapita fish consumption, about 3.5 kg in 1978 is significantly lower thanin neighboring countries; 1/ insufficient supply seems to be one reason forthis. Kenya exports high value shellfish and imports cheap processed varie-ties, but continues to be a net importer.

33. It is estimated that fishing provides the main source of income toabout 31,000 active fishermen and to numerous traders. Approximately 3,000smallholders are said to be engaged in fishfarming. Both marine and inlandfishing methods are generally traditional, labor-intensive, and limited toshallow waters. Most of the catch comes from about 7,000 small craft landingbetween 20 and 50 kg per fishing day each. The marketing and processing offish is mainly in the hands of private dealers and prices to fishermen rangebetween 20% and 30% of the retail value. Most fish is consumed fresh for lackof adequate preservation facilities. Few fishing cooperatives are able toprovide effective marketing services to their members (para 43).

Freshwater Fisheries

34. The Kenyan waters of Lake Victoria and Lake Turkana account forabout 95% of total fresh water landings, the smaller lakes and rivers account-ing for the balance. In Lake Victoria, Tilapia and Haplochromis predominate,and stocks of Engraulicypris, an anchovy-like fish, are now believed to besubstantial. While the data are inadequate, there is some evidence of over-fishing in the shallower waters as total catch is at best stable; catch perunit of effort and the average size of fish caught seem to be declining.

1/ Average per capita fish consumption in Uganda and Tanzania is estimatedto be more than 10 kg per year.

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35. An estimated 18,000 fishermen operate about 4,000 canoes, varyingin length from seven to ten meters. The larger canoes are used for transportof people, fish, and goods while the narrow beamed, "sesse" canoes are theprincipal fishing craft. There are also a few dug-out canoes. Water and windconditions are generally favorable for small boat navigation o'nd gillnets areused to catch Tilapia and other high value species. Spoilage, however, maystart even before the fish are landed, since the fishermen do not use ice atany stage.

236. With an area of 6,405 km , Lake Turkana is the largest body of inlandwater in Kenya. Commercial fishing by traditional methods began in the 1960sand fish landings have increased steadily from less than 1,000 tons in 1964to an estimated 15,600 tons in 1978. Estimates of sustainable yields varywidely. A fishermen's cooperative society was organized in 1971, and operateswith Norwegian bilateral assistance.

Marine Fisheries

37. Most of Kenya's ocean coast is fringed by coral reefs close toshore, and consequently the area of smooth bottom suitable for shallowwater trawling is limited. The Fisheries Department reported marine produc-tion of about 4,600 tons in 1978, an increase of 8% over the 1977 figure.About half the catch was demersal species, one-fifth pelagic species, and therest crustacea, sharks, oysters, squid and game fish. The bulk of productionis harvested by artisanal fishermen using about 2,000 small sailing craft.They fish at the reefs with handlines, drifting gillnets, trolling lines and,in inlets, with traps. Sea and wind conditions along Kenya's coast are favor-able for coastal navigation since major storms are unknown and there are manynatural harbors.

38. Traditional boatbuilding on the ocean coast is sharply differentfrom that on Lake Victoria. South of Mombasa, most of the traditional craftare dug-out canoes propelled by sail and paddle, which can operate onlyduring the fair season of northeast monsoons, or within the area protectedby reefs. North of Malindi, particularly in and around the Lamu Archipelago,a vigorous boatbuilding tradition exists. The fishing boats, known locallyas "mashuas" are solidly and skillfully constructed; they are seaworthy andcost-effective, operating almost exclusively under sail. Nonetheless, meteor-ological conditions limit the operation of these "mashua" dhows to less than200 days a year, and usually to within five miles of the shore. Ice supplieswould allow fuller exploitation of the existing fishing capacity and mechanizedfishing with more seaworthy craft powered by simple inboard diesel enginescould also lead to further expansion of fishery activities.

Aguaculture

39. Fish farming was introduced in Kenya some 25 years ago, but it isstill at an early stage of development. Except for some commercial troutfarms on the slopes of Mount Elgon and Mount Kenya, most fish farmers growTilapia in the Western and Nyanza provinces, principally for home consumption.

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The number of Tilapia ponds smaller than one acre has been officially esti-mated at about 9,000. Most of them, however, have been abandoned for lack

of technical knowledge and proper extension service. Although a few well-

managed farms may have attained yields of 3 tons/ha per year, overall yields

are estimated to average about 300 kg per ha per year. No reliable statistics

are available for the total production of fish ponds.

40. The Government Station located at Sagana, Central Province, was

established in the early 1950s by the Department of Fisheries to conduct

research on Tilapia farming. By 1959 a total of about 15 ha of experimentalponds had been developed, but the station is located in an area unsuited towarm water fish growth--soil and water acidity is too high, and water tem-

pera-tures too low. The research carried out at Sagana is of little practicalrelevance and no technical basis for extension has been established. Theextension workers, moreover, are not properly trained, and cannot teachfarmers effectively (see para 42).

Services to Fisheries

41. General. Primary responsibility for the development of fisheries

is vested in the Department of Fisheries of the Ministry of Environment andNatural Resources (MENR). A number of other Ministries carry responsibilityfor certain activities which bear directly on fishing operations and trials.The Ministry of Cooperative Development (MOCD) has a Fisheries Section which

is responsible for fishermen's cooperatives; the Ministry of Works (MOW) isresponsible for feeder roads linking fishing centers with arterial highwaysand railheads; the Ministry of Transport and Communications (MTC) is respon-

sible for harbors and fish landing facilities on the lakes.

42. Research Extension and Training. The Department of Fisheries' staffof 432 includes 24 graduates who occupy most of the senior positions, and 200

fish scouts and 65 Fishery Assistants who are involved in extension work. Theratio of fishermen to extension officers is roughly 120:1, which would appear

adequate; this ratio, however, excludes the requirements for fish farming.Furthermore, the effectiveness of extension officers is impaired since most of

them have inadequate technical background and require intensified in-servicetraining, particularly in fish farming. Extension services also suffer frominadequate recurrent budgetary support, which seriously affects staff mobilityand effectiveness. Government has responsibility for fisheries research,and a national fisheries research unit has been established; this unit will beexpanded during the current Plan period. The proposed Wildlife and FisheriesTraining Institute at Naivasha will accept its first students in 1981.

43. Cooperatives. About one-quarter of the estimated 31,000 fishermenare members of one of 34 fishermen's societies. Over half of these are on

Lake Victoria, one-quarter on the ocean coast, and the balance on other

major lakes. Several marine fishermen's societies are commercially viable,but others, many of which are on Lake Victoria, are financially weak and have

so far been unable to provide adequate service to their members. Many limitthemselves to collecting a 10% commission from the fishmongers who buy fish

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at their landing beaches. Because the turnover of these societies is low,commissions are hardly sufficient to cover their administrative expenses andno funds are available to provide services to their members. On average, itis estimated that fishermen's societies market about 15% of the total catch.

44. Credit. Credit to fishermen and fish farmers is available throughinstitutions in the organized credit market and through individuals, mainlyfishmongers, operating in an informal market. Institutional credit is mainlyunder the Fishermen Loans Scheme whereby MENR may make provision for loans tofishermen to finance vessels, gear, nets, and other equipment. The Schemehas been in operation for more than 10 years. It is administered by a Loansto Fishermen Central Committee. The present ceiling for loans for specificpurposes is set at KSh 20,000 (US$267). The interest rate is 6.5% per annumand the rate of default from past operations is high with most loans stillunrecovered or completely lost. The Cooperative Bank of Kenya Limited (CBK),was established to mobilize the financial resources of the cooperative movementand to use the funds for lending to members. About 1,000 cooperative unionsand societies (about 80% of those registered) are members and shareholders.CBK is the on-lending vehicle for three Bank Group financed projects, 1/and will also be used for the proposed project. CBK's profitability in fiscal1978 was satisfactory, its liquidity high and its capitalization adequate.

45. Commercial Services. A number of private companies and individualsare active in the fisheries sector. Commercial operators are mostly engagedin fish marketing, ocean fishing, and boat building. The Industrial andCommercial Development Corporation (ICDC) is a widely diversified holdingcompany which aims to promote foreign investment in Kenya. The Governmentof Kenya has a controlling interest in ICDC, which in turn holds 100% ofthe shares in Kenya Fishing Industries Ltd.(KFI), and 43% of the shares ofKenya Fishnet Company Ltd. (KFC). KFI owns a trans-shipment cold storagefacility in Mombasa and operates two trawling vessels. KFC manufacturesfishing nets for the domestic market and plant capacity is more than adequateto meet demand. Several private companies are engaged in wholesale and retailfish marketing, cold storage, and transport. The largest ones include SamakiIndustries (Kenya) Ltd., Kenya Cold Stores, Wananchi Marine Products, andOcean Products, while these are primarily fish traders, some of them operatetheir own commercial fishing vessels. Nearly all sales are made in Nairobi,Mombasa, and overseas. There are a few experienced builders of modern mechan-ized offshore vessels, producing mainly sport-fishing and leisure craft.

Marketing and Processing

46. Fisheries Department statistics show that, from 1970 to 1978, theprices of most fish species rose faster than consumer prices in general.Moreover, landed prices paid to fishermen generally appear to be more than

1/ The First and Second Integrated Agricultural Development Projects,(IADP I-Cr.650-KE/Ln 1303-T-KE), (IADP II-Cr 959-KE) and, the Small-holder Coffee Improvement Project (SCIP-Cr. 914-KE).

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twice as high as the prices recorded by the Department of Fisheries. Thelatter often reflect minimum prices payable to fishermen, rather than actualtransactions. In 1978, Kenya imported about 3,400 tons of fish and fishproducts, worth about KSh 18.0 million. Fishmeal and canned fish representeda large share of these imports. Exports, mostly crustacea, were reported atabout 600 tons, worth about KSh 9.0 million in 1978. No fish meal processingor fish canning is done in Kenya.

47. Freshwater Fish. The marketing system for the Lake Victoriahinterland seems to be competitive and relatively efficient, but the lackof infrastructure may contribute to keeping prices relatively high. Freshfish, particularly Tilapia, is preferred to processed fish, but only aboutone-third of the catch is consumed fresh because no ice is available alongthe Lake. Thus most fish are sundried, smoked or roasted. Within a few hoursof capture, the fish is delivered to the numerous landing beaches around theshore where private fishmongers buy up small quantities which they sell inthe adjacent area. Except for sorting sheds at various sites, the beaches arewithout shore facilities. Conditions of access roads are poor and, because ofrough handling methods, the quality of fish suffers considerably by the timeit reaches the consumer. There are at least three major retail markets forfreshwater fish in Nairobi. Smoked and dried fish is transported primarilyby bus, fresh fish mainly by private car.

48. Marine Fish. Marine catches are consumed in the fishing communitiesand nearby villages, in the larger towns and cities, and in the touristresorts along the Coast. Marine products, packed in ice, are also shippedregularly to Nairobi by train and by truck. Some lobster, shrimp, and tuna,are frozen in Mombasa for export. Four private companies own and operate iceplants in Mombasa and KFI has a cold store capacity of 1,800 tons (para 45).However, the only two ice plants outside Mombasa are inoperative.

49. In general, post-harvest losses are not as severe as they are onLake Victoria because marine fish deteriorates more slowly than fresh waterfish. However, in certain areas, notably the North Coast, the fishing effortis limited due to the lack of adequate handling and refrigeration facilities.Approximately one third of the fish supply for local consumption is sundriedor smoked, although the market value of processed fish is substantially lowerthan that of fresh fish.

PART IV - THE PROJECT

Background

50. In June 1979, the Government of Kenya requested the Bank Groupto consider the possibility of financing a Fisheries Project. The Project hadbeen prepared by the Department of Fisheries of MENR with assistance from theFAO/IBRD Cooperative Programme. The proposed Project was appraised by IDA inJuly-August 1979. Negotiations were held in Washington in April 1980, andthe Kenyan delegation was led by Mr. J. G. Shamalla, Permanent Secretary,

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Ministry of Environment and Natural Resources. A Credit and Project summaryis at the front of this report, and the Staff Appraisal Report No. 2864-KE ofMay 14, 1980 is being distributed separately. A supplementary Project DataSheet is at Annex III.

Project Description and Objectives

51. The principal objective of the proposed Project would be to increasethe incomes of fishermen by increasing marketed fish production; post-harvestlosses would be reduced and fish quality improved by providing storage andpreservation facilities. Improved fishing craft and gear would enable fisher-men to increase catches and productivity. The proposed pilot Fish FarmingDevelopment Center (para. 55) would also contribute to increasing marketedfish production. If its operation is successful, the Center could become thenucleus of a second phase expansion during which outgrower fish ponds couldbe developed. The Project would be carried out over about six years, andwould have the following components:

(a) development, expansion, and upgrading of shore facilitiesfor fish landing, storage, preservation, and marketing;

(b) provision of fishing craft and gear to fishermen;

(c) establishment of a Fish Farming Development Center;

(d) training, research, and studies; and

(e) management, monitoring, and evaluation.

Virtually all Project investments would be along the Lake Victoria shore inNyanza Province and along the ocean shore in Coast Province; these two areasaccounted for 51% and 10%, respectively, of the national catch in 1978.

Project Components

52. Shore Facilities. Eight fishing centers and nine fishing stationswould be developed at the main landing beaches along Lake Victoria shores andthree fishing centers and two fishing stations on the Indian Ocean shores.The principal purpose would be to make ice available for the marketing offresh fish. At present, virtually no artisanal fishermen have access to icein Kenya. The facilities would all be equipped with sorting sheds, insulatedstores, drying racks and smoke houses, insulated ice boxes, and fish boxes.The fishing centers would also be provided with offices, stores, and housingfor the managers because their capacity would be higher than that of thestations. In the Lake Victoria region, to facilitate access to the centers,about four km of approach roads would be constructed.

53. Ice plants, between 2-4, would be provided at four centers - HomaBay and Kisumu (Lake Victoria) and Lamu and Shimoni (coast) - and each indi-vidual ice plant would have a capacity of 1 ton/16 hours. Chillrooms wouldalso be provided for the storage of fish and ice. The investments would also

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include pick-up trucks and boats for transporting ice and fish. Power andwater lines would be extended and transformers provided where necessary toserve the plants, chillrooms and other buildings. Project investments alsoinclude working capital funds to allow the centers to meet start up expendi-tures, finance their prepaid expenses and inventory of fishing gear andsupply, and maintain their liquidity.

54. Fishing Craft and Gear. About 50 fishing motorsailers would bebuilt during the Project period. Each vessel would be powered by a 12 hpdiesel inboard engine, and would carry about 20 m of sail for economy andsafety. Standard equipment on each boat would include the rigging, propeller,shaft, bearings, and a spare parts kit. In addition, each boat would be fullyequipped with fishing gear. The fishing motorsailers would be operated bythe cooperative societies and their members would crew them. The motorsailerswould enable the fishermen to increase both their fishing range and theaverage number of fishing days per year. North of Malindi, where traditionalboat building is highly developed (para. 38), about 15 existing "mashuas"would be fitted with 20 hp inboard diesel engines, and all necessary equipmentincluded in the conversion package. About 25 traditional "mashuas" would bebuilt locally under the Project. These boats would be fully rigged and fittedfor fishing, including simple low cost gear. The converted sailboats andnew sailboats would be purchased on credit or cash by experienced fishermen(paras. 66 and 67).

55. Fish Farming. A pilot Fish Farming Development Center would beestablished at Kabonyo, in Kisumu district, Nyanza Province, or at some othersuitable location made available by the Government and acceptable to IDA (para59). The main objective of the fish farming program would be the experimentalproduction of a limited number of warm water species: Tilapia nilotica and acombination of Chinese carp and common carp. Twenty four rearing ponds, threespawning ponds, four nursing ponds and five storage ponds would be constructed.Civil works would also include structures for draining and filling the ponds,offices, stores, a laboratory, a garage, and a workshop and about 1.5 km ofaccess road would be developed to complete the production facilities of theCenter. Investments in vehicles and machinery to operate the Center andincremental working capital requirements during the development period wouldalso be provided. The Center would employ about 20 staff. An international-ly-recruited aquaculturist and a hatchery specialist would be hired and theirappointment would be a condition of credit disbursement against all Projectinvestments in this component. (Schedule 1, Part 4 c(i) of the draft Develop-ment Credit Agreement). The Center would be established within MENR underthe direction of a manager responsible directly to the Project Manager, with anadequate staff and budgetary allocation and otherwise on terms and conditionsatisfactory to the Association (para. 62) (Section 4.05 of the draft DevelopmentCredit Agreement).

Training. Research and Studies

56. (a) Fisheries Research - Lake Victoria. Specific research programs,including a study on the possibility of providing fish freezing facilities,would be formulated during the Project period and IDA approval of the programs

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would be a condition of disbursement against investments in this component(Schedule 1, Part 4(d) of the draft Development Credit Agreement). Equipmentneeded to carry out such research activities will include four-wheel drivevehicles, fishing boats, diving equipment, laboratory and office equipment,scholarships and maintenance and operating costs. Funds would also be providedfor a consultant's study on active management of Lake Victoria fisheriesresources, including recommendations on appropriate restocking methods.

57. (b) Boat Building--Training and Research. The boat building pro-gram is designed to train artisanal boat builders, who will produce most ofthe boats required for the Project. In addition, two prototype fishing boatswould be developed in an effort to adapt modern boat building methods andmaterials to the needs and preferences of Kenya fishermen. The principalinvestments would be a light truck, shop improvements and tools for theFisheries Department boatyards at Kisumu, Mombasa, and Malindi and toolingand materials for building the prototypes. An experienced naval architectsatisfactory to IDA would be recruited internationally for the training andresearch program. Investments for this component would include the labor forthe prototypes and 50% of the trainee stipends. Training would be confinedto modern methods and materials applicable to the design and construction ofboats produced for the project. Courses would last one year and graduateswould qualify for the acquisition of a set of tools suitable for practisingtheir trade in the private sector. Selected graduate trainees would produceprototype fishing craft designed to meet the evolving fishing and transportneeds of the lake and marine fisheries.

58. (c) Fish Farming - Research and Training. Besides testing thecommercial viability of warm water fish farming, the staff of the center wouldbe involved with the design and planning of a second phase expansion, carryingout applied research on fish farming, and giving basic training in fishfarming to staff of the Fisheries Department. The cost of the investments hasbeen allocated to production, research or training depending on the expectedutilization of resources. Substantial technical assistance would be requiredto ensure a sound technical base for future development. In addition to theaquaculturist and hatchery specialist (para. 55), consultants satisfactory toIDA would be employed for extension, and for the preparation of the secondphase expansion. Funds would be provided for studies on fish disease monitor-ing and control. The funds would be used to augment research programs beingundertaken by the University of Nairobi or another research institute in thecountry.

59. (d) Staff Training and Studies. About 30 staff would receiveformal training under the Project. Scholarships and in-service training wouldbe provided. A suitable site for the Fish Farming Development Center has beenidentified at Kabonyo and the Government is in the process of acquiring theland to make it available for this Project. However, should it be necessaryfor any unforseen reason to select another site, the Government would employan aquaculturist and an engineer to evaluate its technical suitability for warmwater fish farming. IDA's approval of the selected site would be a conditionof credit disbursement for the fish farming component (Schedule 1, Part 4,c(ii) of the draft Development Credit Agreement).

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60. (e) Lake Victoria Basin Development. The Project would includefunds for a regional development study for the Lake Basin Development Authorityarea including pilot activities arising out of the study. The study would bein accordance with terms of reference satisfactory to the Association. IDA'sapproval of the terms of reference and the pilot development projects would bea condition of credit disbursement for this component (Schedule 1, Part 4 (e)of the draft Development Credit Agreement).

61. Fishermen's Training. Traditional fishermen both on Lake Victoriaand on the Indian Ocean are highly skilled and sophisticated within the limitsof their boats and gear. There may be some scope, however, for improvingtheir productivity with only small technological changes. Under the Project,the Department of Fisheries would employ an experienced master fisherman toconduct fishing trials and introduce fishermen to simple, low-cost modernfishing methods.

Management and Implementation

62. While the Project is relatively small, its diverse components wouldrequire a considerable management and coordination effort. A project unitwould be established in the Ministry of Environment and Natural Resources tocarry out the Project in accordance with Terms of Reference satisfactory toIDA (Section 3.02(a) of the draft Development Credit Agreement). A ProjectManager would be responsible for implementing the Project and would reportto the Permanent Secretary, MENR. Three area managers, in Kisumu, Kabonyo,and Mombasa would each be responsible for carrying out Project activities inlake fisheries, fish farming, and marine fisheries respectively. They wouldreport to the Project Manager. The Project Manager would be assisted by afinancial controller, a procurement officer and a senior cooperative officer;they would be stationed in Nairobi. The required qualifications andexperience of all senior staff, and the job descriptions of all other staff,shall be satisfactory to IDA (Section 3.02 (d) of the Draft Development CreditAgreement). In addition, the appointment of the Project Manager would be acondition of credit effectiveness (Section 5.01 of the draft DevelopmentCredit Agreement). Junior staff to be employed by the cooperatives and theFish Farming Development Center are readily available.

63. The area managers in Kisumu and Mombasa and their staff would beresponsible for the erection of the shore facilities and would work closelywith the cooperative societies of each fishing center and station (para. 66).The latter would be operated by a cooperative society with technical assistancefrom the area manager and his team. Before a society starts operating a fish-ing center, the area manager would have to certify that it had adequate andcompetent staff, but if the certification were to be withdrawn, the facilitieswould then be operated by staff reporting to the area manager. The minimumacceptable standards would be those currently set by MOCD for approving creditto cooperative societies. The ice plants in Kisumu and Homa Bay, however,would be operated by the area manager and would be transferred to cooperativesocieties after no less than two years of uninterrupted operation. Thetransfer would be subject to the approval of the Project Manager, MENR, MOCD,CBK and the interested cooperative society (Sections 4.04 (b) and (c) of thedraft Development Credit Agreement).

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Monitoring and Evaluation

64. A senior Statistical Officer would be responsible for Project monitor-ing and evaluation. He would report to the Project Manager. His staff wouldinclude four statistical officers, and four field enumerators. The principalinvestments would be for means of transport, computing, and field equipment.A Project Monitoring and Evaluation Committee would also be established toreview the implementation of the Project. The Committee would consist ofabout five senior officials from MENR, MOCD, CBK and the Lake Basin DevelopmentAuthority. The Committee will meet at least once each quarter, to reviewreports on the implementation of the Project and make recommendations asappropriate.

Project Costs and Financing

65. Total Project cost is estimated at US$14.9 million, of which aboutUS$7.4 million or 50% represents foreign exchange costs. Project cost net oftaxes and duties is estimated at US$13.3 million. Project costs were esti-mated at prices expected to prevail in June 1980 and include adequate priceand physical contingencies. A detailed breakdown of Project costs as well asthe financing plan is given in the Credit and Project Summary at the front ofthis report. The proposed Credit of US$10 million to the Kenya Government,on standard IDA terms, would finance about 75% of net Project cost, including100% of foreign exchange cost and 35% of local expenditures (para. 21).Directly or through cooperative societies, fishermen would finance aboutUS$0.2 million or about 2% of net Project costs. The fishermen's contributionwould consist mainly of cash payments for fishing craft and gear. The Govern-ment contribution of US$3.1 million would finance 23% of net Project cost.

66. Expenditures for civil works at the fishing centers and stations,the Fish Farming Development Center, fisheries research, boatbuilding, stafftraining, studies, and Project management would be allocated to the budget ofMENR. The Government investments in the Fish Farming Development Center wouldtake the form of budgetary allocations from MENR (Section 4.05 of the draftDevelopment Credit Agreement). Expenditures for fishing centers and stationsexcept civil works, and for fishing motorsailers would also be channelledthrough MENR, who would be responsible for procurement, shipping, and installa-tion of all goods and services needed to establish the fishing centers andstations and to build the boats. It would, therefore, retain title to thoseassets until the cooperatives took possession of them. CBK would finance thecooperatives acquisition of the fishing centers, stations, craft, and gear aswell as their working capital requirements. The cooperatives would own andoperate the shore facilities and the motorsailers and sell the inboard engines,and the sailboats on credit or cash to members (Section 3.05(a) and (b) of thedraft Development Credit Agreement). Fishermen would make down payments ofabout 10% of purchase price.

67. The Government would onlend about US$3.4 million to CBK at aninterest rate of 6% p.a. CBK would in turn lend to cooperative societies at9% p.a. Loan maturities would be up to 10 years depending on the purpose ofindividual loans and the expected life of the equipment financed. Cooperativesocieties would lend to their members at 10% p.a. for up to eight years to

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finance boat purchases. These terms are consistent with currently prevailinglending terms in agriculture and with the Cooperative Act of February 1977.Maturities of the loan from the Government to CBK would be scheduled so as tomatch maturities of individual loans from CBK to the participating cooperativesocieties. This provision would be spelled out in the Subsidiary Loan Agreement(see below) to prevent temporary shortfalls in CBK's cash flow. The participat-ing cooperatives would be the direct obligors and ultimate borrowers of over90% of the Project credit funds.

68. The inflation rate in Kenya (defined as increase in the GDP de-flator) rose from 15.7% in 1976 to 19.6% in 1977 but declined to 13.7% in1978. Over the three year period 1979-81 the inflation rate is expected tomoderate from about 12% to about 10%, thus the proposed rates would be mar-ginally positive in real terms. In May 1979, the Government undertook toreview the current and future level and structure of interest rates, parti-cularly those relating to lending in the agricultural sector. The review isin progress and the Government, after consulting with IDA, would apply to thisproject any relevant change in general interest rates implemented as a resultof this review (Schedule 6, Part 2 of the draft Development Credit Agreement).The execution of a Subsidiary Loan Agreement satisfactory to IDA, between theGovernment and CBK would be a condition of credit disbursement for the shorefacilities and for fishing craft and gear (Schedule 1, para 4(b)) of the draftDevelopment Credit Agreement).

69. Procurement and Disbursement. Civil 'works contracts for fishingcenters and stations (US$1.2 million), and fish farming (US$2.7 million) wouldbe carried out by local contractors to be selected under local competitivebidding procedures which were examined during appraisal and are satisfactory.In order to attract competition and execute the work expeditiously, civilworks for the Lake Victoria shore facilities would be tendered as one contract.Two contracts would be required for civil works for the Indian Ocean shorefacilities: one for Shimoni and Vanga in the south, and because of itsremote location, another for Lamu. Generators, ice plants, chillrooms, bulkcontracts for 10 or more vehicles, and inboard engines (US$1.5 million) wouldbe procured by international competitive bidding according to Bank/IDA guide-lines. Vehicles and equipment would be purchased with an initial supply ofspare parts. The tender documents would require that qualified suppliers berepresented in Kenya by a responsible firm capable of maintaining andrepairing the machinery without delay. Supply contracts would also providefor the installation of the equipment and training as appropriate. Mis-cellaneous items such as fuel tanks, electrical cable, piping, small tools,ice boxes, fish boxes, chlorinators, pumps, scales, workshop, office equipmentand furniture (US$0.3 million) would be purchased off the shelf as part ofinstallation contracts. The East African Power and Lighting Company Ltd.would be requested by the Government to construct the power line extension andsub-stations at Kisumu, Homa Bay, and Lamu. Materials and tools for boatbuilding (US$0.5 million) would be purchased by the Fisheries Departmentaccording to Government regulations which are satisfactory. Technicalassistance contracts (US$1.8 million) would be entered into on terms andconditions satisfactory to IDA (Section 3.03 of the draft Development CreditAgreement). Unit costs of technical assistance are estimated at US$3,300 toUS$7,500 per staff/month.

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70. Funds from the Credit account would be disbursed according to thefollowing schedule: (a) 65% of expenditures for civil works; (b) 100% offoreign expenditures and 70% of local expenditures for vehicles, boats,equipment, and machinery; (c) 100% of foreign expenditures and 70% of localexpenditures for boat building materials and boat construction; (d) 40% of thelocal operating costs of the Fishing Centers and of the Fish Farming Develop-ment Center; (e) 100% of expenditures for technical assistance, studies andstaff training; and (f) 65% of operating costs of Project management, research,and training programs, including local staff salaries.

71. Disbursements against (a), (b), (e), and finished products in (c)would be fully documented. Disbursements against (c), except for finishedproducts, and (f) would be made against statements of expenditures, thedocumentation for which would not be submitted to IDA but would be retainedby the Borrower for inspection by supervision missions.

72. Accounts and Audit. The Project Financial Controller in MENRwould establish and maintain adequate books and records of the receipts andpayments in respect of the Project and the assets and liabilities created byProject transactions, in such a way as to enable separate identification ofall Project accounts from other accounts of the Ministry. He would preparesemi-annual Reports and submit them to the Permanent Secretary. MOCD, CBK,and the cooperative societies participating in the Project would also maintainseparate Project accounts. Project accounts prepared by the Project financialcontroller would be forwarded to IDA, not later than six months following theend of the financial year to which they relate. Independent auditors accept-able to IDA would continue to be appointed to audit Project entities andaccounts and arrangements satisfactory to IDA would be made for the audit ofexpenditures made against certificates of expenditure (Sections 4.02 and4.03 of the draft Development Credit Agreement).

Benefits, Risks and Justification

73. The principal economic benefits resulting directly from Projectinvestments would consist of increased marketed production of fish. Fisher-men, traders, and consumers would share the benefits. The increase wouldreflect incremental catches in the Indian Ocean, production of the FishFarming Development Center, and reduction of post-harvest losses in the marineand Lake Victoria fisheries. Refrigeration and improved handling and trans-port are also expected to increase the quality of fish and its value. Thevalue of annual incremental benefits is estimated at about US$2.1 million atfull development in Project year 6. No significant foreign exchange benefitsare expected to result from Project investments. However, while immediateexport prospects are uncertain, some of the Project incremental productioncould be exported.

74. The benefits to fishermen from the proposed Project would be two-fold. Cash benefits would accrue to fishermen selling a higher proportion oftheir catch at better prices than at present, because of Project investmentsin refrigeration and transport. Fishermen who operate the project mechanizedboats would be expected to increase their average cash incomes as a result of

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larger catches. About 80% of the prospective Project beneficiaries currentlyearn the equivalent of about US$80 per capita per year. The Project wouldtherefore address the needs of the poorer members of Kenyan society. At fulldevelopment, beneficiaries' annual per capita incomes could be expected tohave increased by about 50%. Employment creation would be modest.

75. The overall economic rate of return from Project investments isestimated at 16% over 20 years. The economic rate of return from the invest-ments in Lake Victoria fisheries is estimated at 16%; Indian Ocean fisheries18%. The analysis includes the direct economic benefits and all Projectinvestment costs, except research, studies, and training costs not related tothe quantified economic benefits, such as training of fish farming extensionstaff. Fishermen's labor costs were included in the analysis. Hired laborwas valued at the market wage rate; the labor of self-employed fishermen wasvalued at twice the market wage rate to reflect the relative scarcity ofentrepreneurs and foreign exchange costs were valued at US$1 = K Sh 10.5.The establishment of the Fish Farming Development Center is only a pilotoperation to test the commercial viability of warm water fish farming inKenya, and assemble operational and organizational data to plan furtherexpansion. The proposed size for the Center was determined on the basis ofthe least cost at which the results of the experiment would be conclusive.

76. Project investments in marketing and artisanal fisheries are notexpected to have any adverse environmental impact. Traditional boatbuildinghowever requires substantial amounts of timber. Good quality hardwood isstill available on the Coast in fair supply, but it has become scarce in theLake Victoria region. Modern boat building methods introduced under theProject would contribute to conserve the diminishing supply of first growthtropical hardwoods. With modern adhesives, high strength, and low weighthulls can be built with less wood and lower grade wood than traditionallyrequired. Low grade wood is in abundant supply in Kenya and is readilyrenewable.

77. Risks. The Project's design is basic and simple, a feature which isexpected to minimize risk. Incremental production targets are modest and wellwithin the most conservative estimates of resource availability. With theexception of the fish farming component, Project success does not depend on newor untried technology. The principal risk the Project would face is that theice plants and refrigerated stores would not be managed efficiently. Thisrisk would be mitigated if the cooperatives receive the support and confidenceof most fishermen in the areas they are serving. The cooperatives' provisionof improved services under this Project is likely to motivate the fishermensignificantly.

PART V - LEGAL INSTRUMENTS AND AUTHORITY

78. The draft Development Credit Agreement between the Republic ofKenya and the Association, and the Recommendations of the Committee providedfor in Article V, Section 1(d) of the Articles of Agreement of the Associationare being distributed to the Executive Directors separately.

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79. Features of the draft Development Credit Agreement of specialinterest are given in Section III of Annex III to this report. The appoint-ment of a Project Manager is a condition of effectiveness of the credit.(Section 5.01 of the draft Development Credit Agreement.)

80. I am satisfied that the proposed credit would comply with theArticles of Agreement of the Association.

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

Robert S. McNamaraPresident

AttachmentsWashington, D.C.June 4, 1980

ANNEX I- 23 -

lZlYA - SOCIAL INDICATORS DATA SHEET

REFERENCE GROUPS (ADJUSTED AV RACES

LAND AREA (THOUSAND SO.NYA. - EtOST RECENT ESTIMATE) /-

TOTAL 2.6 SAME SAME NEXT HIGHERAGRICULTUlRAL 59.4 MOST RECENT GEOCRApHIC INCOE INCOXfE

1960 lb 1970 /b ESTIMATE Jb REGION /c GaCUP Id GROUP ;o

GNP PER CAPITA (US$) 110.0 170.0 320.0 306.1 209.6 467.5

EDCY CONSUMPTION PEl CAPITA(RELOCRNS5 OF COAL EQUIVALNT) 143.0 135.0 152.0 80.6 83.9 262.1

POPULATION AND VITAL STATlSTISTICSPOPULATIONZ _lD-EAR (MUaIONS) 8.0 11.3 14.6UUAN POPULATION (PERCENT Of TOTAL) 7.4 10.2 11.8 17.1 16.2 24.6

POPULATION PROJECTIONSPOPULATION IN YEAR 2000 (MILLIONS) 30.0STATIOKIUY POPULATION (MILLIONS) 94.0YEt STATIONARY POPULATION IS UEACllD 2135

POPULATION DENSITYPER SQ. KM. 14.0 19.0 25.0 18.4 49.4 45.3PER SQ. Dl. AGRICULTURAL LAND 142.0 191.0 246.0 50.8 252.0 149.0

POPULATION AGE STRUCTURE (PERCENT)0-14 YRS. 46.5 45.8 47.0 44.1 43.1 45.2

15-64 YILS. 51.0 51.6 50.0 52.9 53.2 51.9

65 YRS. AND ABOVE 2.5 2.6 3.0 2.8 3.0 2.8

POPULATION GROWTH LATE (PRCENT)TOTAL 3.2 3.4 3.8 2.7 2.4 2.7

UBAN 5.8 6.6 7.0 5.7 4.6 4.3

CRUDE BIRTH LATE (PER THOUSAND) 51.0 50.0 51.0 46.3 42.4 39.4CRUDE DEATr RATE (PER THOUSAND) 19.0 15.0 14.0 17.2 15.9 11.7GROSS REPRODUCTION IATE .. 3.4 3.8 3.1 2.9 2.7

FAMILY PLANNINCACCEPTORS, ANNUAL (THOUSANDS) .. 30.9 48.4USERS (PERCENT OF MARIED WOMEN) .. 2.2 .. .. 12.2 13.2

FOOD AND NUTRITIONINDEX OF FOOD PRODUCTION

PER CAPITA (1969-71-100) 103.0 102.0 89.0 94.3 98.2 99.6

PER CAPITA SUPPLY OFCALORIES (PERCENT OF

REQUIREMENTS) 103.0 98.0 91.0 89.5 93.3 94.7PROTEINS (GRAKS PER DAY) 75.0 71.0 59.6 55.8 52.1 54.3

OF WHICH ANIMAL AND PULSE 32.0 29.0 22.8 17.9 13.6 17.4

CHILD (AGES 1-4) MORTALITY RATE 25.0 18.0 14.0 22.3 18.5 11.4

HEALTFLIFE CCECTANCY AT UIRTR (YEARS) 47.0 52.0 53.0 47.0 49.3 54.7INFANT MORTALITY RATE (PERrHOUSAND) 126.0/f 119.0 .. .. 105.4 68.1

ACCESS TO SAFE WATER (PERCENT oFPOPULATION)

TOTAL .. 15.0 17.0 20.3 26.3 34.4URB,N 100.0 100.0 53.9 58.3 57.9

RURAL .. 2.0 4.0 10.1 l5.8 21.2

ACCESS TO EXCRETA DISPOSAL (PERCENTOF POPULATION)

TOTAL .. 50.0 55.0 22.5 16.0 40.8URBAN .. 85.0 98.0 62.5 65.1 71.3

RURAL .. 45.0 48.0 13.9 3.5 27.7

POPULATION PER PHYSICIUN 10000.0 7830.0j 8840.0/A 17424.7 11396.4 6799.4POPULATION PER NUR5ING PERSON 2320.0/f. 1

700.0o5 l

0 70.QL&jh 2506.6 5552.4 1522.1

POPULATION PER HOSPITAL BEDTOTAL 830.0/f 770.0 760.0/i 502.3 1417.1 726.5URBAN .. .. .. 201.4 197.3 272.7

RURAL .. .. .. 1403.6 2445.9 1404.4

ADMISSIONS PER HOSP1TAL BED .. .. .. 23.4 24.8 27.5

HOUS INCAVERAGE SIZE OF HOUSEHOLD

TOTAL .. 4.7 .. 4.9 5.3 5.4URBAN 4.7 4.9 4.9 5.1RURAL 4.7 5.5 5.4 5.5

AVERAGE NUMBER OF PERSONS PER ROOMTOTAL .. .. ..URBAN 2.5/f .. ..

RURAL .. .. ..

ACCESS TO ELECTRICITY (PERCENTOF DWELLINGS)

TOTAL .. .. .. .. 22.5 28.17R8AX .. .. .. .. 17.8 45.1

RURL .. .. .. .. .L 9.9

ANNEX I24 - Pate 2

IIYA - SOCIAL INDICATORS DATA SHEET

ErIfTA RECRENCE GROUPS (ADJUSTED AyERAGES- MOST RECENT ESTIMATE)

- tlZ SAtE NEXT HICHERMOST RECZNT GDOGRAPHIC INCOhI INCOME

1960 /b 1970 lb CST7TE /b RZGION lc GtOUP td GROUP /e

EDUCATloNADJUSTED ENROLLMENT RATIOSPInM : TOTAL 47.0 64.0 105.0 59.0 63.3 82.7

MALE 64.0 74.0 112.0 64.2 79.1 87.3FEMALI 30.0 53.0 96.0 44.2 48.4 75.8

SECONDARY: TOTAL 2.0 9.0 15.0 9.0 16.7 21.4MALU 3.0 12.0 19.0 12.0 22.1 33.0FEM&1Z 2.0 5.0 11.0 4.4 10.2 15.5

VOCATIONAL ENROL. (Z Of SECONDARY) .. 2.0 2.0 7.0 5.6 9.8

PUPIL-TEACHll RtATIOPIMARY 42.0 34.0 33.0 42.2 41.0 34.1S CONDARY 15.0 21.0 24.0 22.9 21.7 23.4

ALT LITERACY RIATE (PERCENT) 20.0/f 30.0 40.0 20.8 31.2 54.0

CONtSUMPTIONPASSLNGER CARS PER T OUSAUD

POPULATION 8.0 9.0 7.3 4.0 2.8 9.3RADIO RECEIVERS PE THOUSAND

POPULATION 9.0 .. 38.0 44.3 27.2 76.9TV RECEIVERS PER THOUSAND

POPULATION .. 1.5 3.0 2.9 2.4 13.5NEWSPAPER ("DAILY GENERALINTEREST") CIRCULATION PERTOtUSAND POPULATION 13.0 14.0 10.0 5.6 5.3 18.3CIEMMA ANNUAL ATTO'IDANCQ PM CAPITA 1.0 .. 0.4 0.4 1.1 2.5

LABOR TORCEA -L LAROR IFOILCE (TROUSANDS) 3300.0 5100.0tj 6100.0F.MALZ (PERCE11T) 34.8 33.6 33.3 31.9 24.8 29.2AGRICULTUVR (PERCENT) 85.8 82.1 79.0 77.6 69.4 62.7INDSTRY (PEtCENT) 5.1 7.1 9.0 7.9 10.0 11.9

PARTICIPATION RATE (PFECENT)TOTAL 41.2 40.6 39.2 40.8 36.9 37.1MALE 54.5 53.8 52.3 53.9 52.4 48.8FEMALE 28.2 27.4 26.1 25.6 18.0 20.4

ECONOMIC DPELDEINCY RATIO 1.2 1.1 1.2 1.2 1.2 1.4

INCOME DISTRIBUTIONPECENT o0 PRUVAZE INCCVECEIVED BY

RIGHEST 5 PMtCENT OF EOUSEHOLDS .. 20.2/k .. .. .. 15.2HIGHEST 20 PERCCNT OF HOUSEHOLDS .. 52.6/k .. .. .. 48.2LOWEST 20 PERCENT OF HOUSEHOLDS .. 3.97% .. .. .. 6.3LOWEST 40 PERCENT OF ItOUSEHOLDS .. 11.77k .. .. .. 16.3

POVCRTY TARGET GROUPSESTIMATED ABSOLUTE POVERTY INCOMELEVEL (USS PER CAPITA)

URBAN .. .. 122.0. 187.6 99.2 241.3RURAL .. .. 93.0 96.8 78.9 136.6

ESTIMATED RELATIVE POVERTY INCOMELEVEL (USS PER CAPITA)

UBAN .. .. 125.0 138.4 91.9 179.7RURAL .. .. 71.0 71.0 54.8 103.7

ESTIMTED POPULATION 8ELOW ABSOLUEPOVERTY INCOME LEVEL (PCNT)

URBAN .0 .. 2.0 34.5 44.1 24.8RURAL .. .. O.O 48.7 53.9 37.5

Not availableNo applicable.

NOTES

/a The adjusted group averageis for each indicator are population-weighted geoSecric means, excluding the extromevalues of the indicator and the soat populated country in each group. Coverage of countries among theindicators depends on availability of data and Is not uniform.

/b Vnless otherwise ooted. data for 1960 refer to any year between 1959 and 1961; for 1970. between 1969and 1971; and for Kost Recent Estiuste, between 1974 and 1977.

/c Africs South of Sahara; /d Low Incom ($280 or less per capita, 1976); 1e Lower Middle Income5T281-550 por capita, 1976); 7f 1962; Li Registered, mot all practicing in the country; /h 1978;/I 1972; Labor force age 15-50 year.; /k urban only.

Most Recent Estimate of GNP per capita is for 1978.

August, 1979

- 25 - ANNEX IDEFIITION O? SOCUL MICATCRS

Noe lhohthe data, are dron from, sources isnerelUy juldged the mast authoritative and reliable, It should. also be nOted that they Nay tot be intern.- Page 3tion y opaal bees... Of the lack Of standard,se definiticon end concepts used bY dLifferent countries ID col-lecting the dat.. The lAte are, aOfnetbe1ees,use ful, to describe orders of mageltude, idilcate, trend. end characterize terets mjor differences between countrie..

The ad4I.stIsruuy, rergp rowrsawn indicator are popuLatioe-veiahted geometric means, excluding the extraom values of the indicator an,d the eeot populatedcountryioacgniT i to lack of datr, grop averages of all, Indicators for Capital Surplus Oil Exporters and of Indicators of Access to deter and EscretaDtsosoal. dousing, Loos Ditiuinadtvryfor other country groups ar pop.Itioc-weighted iscentric maca without exclosion of the exrOem ve.loss endthe soot populated country. ie h cove ocountries -Ang t. Lf. dctrs,,:dev Indsn bainhltod5adi o nfsa cto utb oriin relation aVerages of one Indicator to ~ ~ ~ ~ rags W _~ to par.=

iodicator a atie wn te coutry and reforenCe groov.

LaND ARiA (thousend sq.ha.) Moses to LoOrea;Z Disotsal, rlerent I ofo-lt f)totalurban, en rurl My -oalsrface eras comprising lend are A end lend eaters. Zae fpol ttl hn n ua)sre yeceadsoa as

Mgiutua ost reent estimate of acricultural area used temprarily percentages of their respective populations, Ecreta disposal my includeor permanently for cropa, pastures, earhet end kitchen garviss or to the collection and disposal, sith or citbaut treatment, of human, ecretalie fallo., and cate-eater by watear-borne ayetem or the use of pit privies sod sinjil

Insta.latione.GNPM CPrJA (S*)- iNP per capita. estimatsa at cu-ret maret prices, P.2tf§on ,~ioian Ppsalation divided by somber of praccioig poysiciano,

oaduflatw.byiasom convrsic e athod an MarIA lank Atlas (19175-fl basis); ifiId 9 iii,iJial achnel at university level.1960, 1970, and 1977 data. - ~~~~~~~~~Ponaaton Per purin Peso - Popelatiom divided by numter of practicing aal.

c Ftpl APrIA AmmalcomuMim of ommercal mwUam Wa U 1fsr Ie,practical tLrees, *ed assistant nurse..CU CPIa- eai ss.tc o as-i san Eivosaiti9 t ital Bed -to tal rbee edral- Population (total, urban,

I= kilogras otLL oa equlvLlm pw cLawpta; 1960,rural.) divi"ded b-y their repetie slrohspital beds av,ilable incha0pel 197 sia triiy i ioomso olsueen e aia public and private general and specialized bcstpital end rehabilitation centers.

ipio, and i~~~~~~~6 data. Ho~~~~aspita.ls ars stablisksote permnanetIr ataff.d by ma least one physician.POPUIATI I.~~~~~~~~~~~~~~~~Htablishentst providing principally custodial care are net included. RuLral

A n - a ens) - As of .lsl 1; 1960, 1970, sad hospitals, however, isslud health and medical. centrer not puerentenly staffe12T* M. ~ ~~~~~~~~~~~~~~~by a phsician (hot by .a sdinal assistant, -mea, midwife, sto..) which offer

Urban Posslatio sat of ot ) -ratio of urban to tota peplAtIone; in-patient accadtien end provide a limited rane of medical fecilitia..differentwdef icMAs 4cne area eq affect comparability opf dtata e~lp,,jgjtlj4-Ttl wmetr of admissions to or discharges fromesag ceuntriee; 1960, 1970, end 1973 data. ohjhIdiAWyiie f beds.

Fot!FTa ear - Curret popeltisn projections are based on KPJSm3ot& oati by age, end can ead their mortality and fertility Averge in ofHushld (nereon_ Merhosehld - otal ura,ad uat

ras,Projetisa parsons for ecrtaliby ratep e.rsise of those AMbSseodoaseso rsp ftsitsi sh sarelvn quaters nlevels sesseda life sepetanwsyt birth Increasing with counatry' their main meals. A hoarder or lodger eqW or may not be included in theper capita income levwl, end f ale life "ectssq stsbilizing at houseold for statistical psarpeess.77.5 Years. The parewtere far fertility rate also haee three levels Avrg nel be of_nereo. rca totl urban. an url-vrage nuaberassmiag decline in fertility according to inca level and pant ofprospr omi rs,adrrl ope covntoAL deellings,feamlt claosngq performase. Bach Conntry is then aOinab d ame of thass respectively, DalLings seclude non-peomanet structures end unocoupied parts.nine ombieticas of martel.ity and fertility treads for projection Moan. #M to .atict !Iecn of delns-toa,urban. an rural,-Co

purposes. reo~~~~~~~~~~~tionidelnswt sbetri.t nlvn quarters as perrentage of

9tfti4gy.p~tIon - in a stationery population there is no grwi total, urben, and rural dwellings respectively.iiiiiI.WSfl iEtne7 is equal to the death rate, and also the agestruture ramise constant. Thi isachieved only aftar fertility rates EDUCATIONdecline to the replacement level of omit net reproduction rats, eken 31jdErlletRiosack generation of n* replaces itself eaatly. The stationery pope- P6i=I7chhf iliI7al ed fmae ios tota ,el and femle. suro.ittioc sice es estimated on the basis of the projected characteristics cato!l ae7tteprmr ee asI percentages of resPectIve prtesryofte oplation is the year 2000, and thereto of decline of fertility coboal-eqs populations; cor.May noludas ohildron ted -S-1 yoers but

ste to epacmet level. sd,.ustsd for different length. of prisary eoato;for coutries -thYear satiosey ouuatlonIs reached - Tb. year when, stationary population universal1 educatioc enrollment eq exceed 100 percent aicow some pupila

Yiea h'asbee reahe. ire below o,r aove" the officlIa school age.

tupflpt s ixoder school . totalmale an Yfemal - Computead as tboco cecoodaryNijj7IdMyea .- pouation par squar kilometr (100 heotares ( of duabnrqie tlatfu er f approved primary isrcin

ute.) are provides general voctional, or teacher treunlog instructions for pupils.ter s. he. sewicultural lend - Conputod us above for agriultural lend usull Iof 1.2 to 17 year of age; crapdns uso, re generally

only. ~~~~~~~~~~~~~~~~~~encouded.Po~ -iu Ae trctre(percent) - Children (i-lb yearc ( working-age VoainlerlmnA cn o eodr)-Vctoa notitutione nld

7l-h yas,en retired (b years end over) as percentages of mid-yea ehia, nuti,orohrpor which operate Indepeodently or as

population; 1960, 1970, end 197? data. departments of secodaryax. institutions.Population Growth Pate peorcent) - tota - Annuaml crosh rates of tctal mid- Pi-taeraio-piry ndscdry-Total. students ecrolied is

yea populations for 19730-60, lM0-7, end 197-73. PriLmar n secondary, levl dvided yumes of teachers in the corre-PONaitio irowth Ptjpret-uba-Ancaer-uth rates of urban spcndd.n level.

poulations fr-15.0 ~-i n 1970-77. Adl ieayrts pZerent) - literate adults aoble to rend sod cite) ashad jg tet .Czr thous w) - Annua live births per thousand of mid- A~pafpretaeo tota adult population aged .5 years and -ovr.

yew op LtueI1y9b'17G so-d 1977 data.Crude Death Rate (new thousand) - Annual deaths per thousad of mid-year coijigopTi -

population; ISbo, 1970, end 1977 data. Pesesra Cus$e huad volutioc) - Passegr car comprise enter cr9fur z oa te - Average number of daughters a women sill hear setn eethan sight persons; secude amb-alacs, erseed eulitery

in her -r repr sutove period if she.o ine presant age- vehiles.aapecific: fertility rates; usually five-year everages ending in) 1960, Rai22svesnwtnaadcplation.) - All types of reeier for radioi970, td 1975. bracat tognrlpbicprtoan of population; excludes Inicen..sd

Family Pleannin - AcOectrs. Aoa tosns Annual. number of receivrs in countries end in years when raginoration, of radio ets -ac1acceptors of birth-costrldvce ne aupicsof naticeal family e"ffAt; late for recent years eq out he comparble since nust countriesplanning proVrIA. abolished licemaitg.

Family Plnnina - Users (nercent of married awmn)-Percentage of caot-led T ecivers (pr tcued op Loato) - TV receiovrn for broadcast to general.s #vsl-bosrogeoage 15-14 .1.ysrc bh a irvh-ccntrol devices pulic per thbousand opuatin; nrides unlicensed TV reeivers in votries

to all married enmm. in same age group. end in years when regitration of TV sets an . in effect.Heesoaner Circ lato (new thuad toj.laol - Show the average oirvu.latoic

FOOD ADRffIOofdalgeeaineetewpapr ,dfned:a a prbdical publicationine ;o=oo ;~- -io - capita, 1962-71100) - idex of paw capita denoted primarily to reordfing gamuel cows. It is considered to be "Uialy'enaiprouction of fl ood commdities. psroductionu excludes ...ed end if it appeers at least four tims a wean.

feed.end Is on calendar Year basis. Commdities cover primary goods TinsM =nsa Attendancepa Caiace er ed on ohs number of ticketse..sugarcane instead of sugar) which er edible end contain nutrient sldrcgteya,ildngdMisin to drive-in obi s sod ecbils

(eg.offee and te are excluded). Aagreate prdodution of -k cOuntry units.is based cm eatiosal avrg rocrpiceocghsPer capita supefclories(ecn f rex,lr.t) - Zqcatsd from iArz POWE

ensvg qulvaat o net ond spplie avalala in co-untry per .. pita 1ta Frce t~housands) - FtoomaiclLy artive persons, including armadprday. Avallable, supplies comprise, damstic producetion, Imprts less focsedunqoe u excludlng housewives, students, etc. Deftintons

eparts, *ad changes in stach. Net suppliesoclude animal feed, seeds, in verious coutries re not oopearabis.quantities used in food processing, end lessee in distribution. Reqira- en=~) - Poale labor force us percentage, of total Labor forc..wante were eflimactd by FAD based on pOqrsi"cLg Dowlned for coema M1h pj rce t) - Lbor, frcea in fanLing, furestry, hosting andantIvity and health considering enliroomeotal tmpperatura, body weights, ItIEiiiiiaspecnaige of total labor force.age_ad see distributions of popolation, and allowing ID percnt for sot)r " - Labor force Is mining, cdenstrctin, manufacturig end

cmo at household level. c riot cane smd gAs as peroentage of total labor fos.-Per capita supply of potein ~ozym Per- dA) . Prvtsin content of per Petcpto as(ecn)-ttl ale andeMa PartIcipation or

capita set suppy of fod per lay. ret -uplay of feed is defined an activity rates artwstda totalmae edf_l Labor force an per-shove. Reuirets for aLl countries esuablished by UMA provide for ceneas of total, male end feale population of all. ages repectively;talman 2lowsnce of do gram of total. protein par Day and. 20 geMa of 1960,1970, sad 1975 data, These are 1101e participation rates reflectinganimaal sad pulse protein, of otich 10 gra should be animal protein. ae seotructure of the. popuilation

0 end long tic trend. A lo estimatesThese standards a,re lower then those of 73 awnm of total protein and are, fromk national Sources.23 er ef anlmall poteis as as average for the coIn, poun..ed by PAO Oxi RtoofpL.lto odr15ad09edovrtin the Third WorlAycd Honervy. t r a a age group of l5-6" years.

Pe ain rti n co from, eslel end pulse - Proltein suppl of foodda-i-d ro 9odas and P"le inga e day. EM DRMn

Chld(me - tctll.tr Pats ne thousd. - -nliah e .s ~ ssewacroa Ic ohi ahad kind) - Recsived. by richestin age grop 1-h Years, to children in thLis ag group; for mast dowel- 3 st inheet 20 percent, poores WU pneret, and poorest 's0 percenteping conetri.e data derived frma Life tables. of boousebsiA

.M.Esmctacm atBith reas)- Aveage number of pe-ar of life LtdiIoicerrIc levl 05 !or&c ?ia - 'urbanadrua

b~inidgabdith(A07I97O,and 197. dana.Absolute poverty nalelistticaevlbomikaminimaInfantHortaity Rae (pe theuand ( Annul deahe of infants under aonotritionallY adequte diet dluo esseotial non-fond requiromeotc 5 o

Yerof oge19 per II.bosed lIve births, affordable.toor.ct.iSafe water' r o-ost of- coocanoc - tota1 uran and rua.-Otounted. R.tive Povrty ZosIvL- bP ervpt we sod rurl

'cober of peopie total, ura,sdrrlnb reasonable oeco..t tturelaltir poet oslvlI n-or faerage p.r 25p1.acafe ontor supply includes trcatsd curfoo antere or ntrcetcd hot pesoa 1acoma of the country. Urban, level ;n der--d frt ;.he ruLl Ic...I

-ootaminated -or ouch us that from. Protected brhle pricgo, rich sd.uatmant for cigher cost of Ilvizg n. urban areas.and -sitay %ello ( as percenoagec of their reepecti"e popultoo n EtmcdPlti-= Ioo Below Abelut. Poverty Zacma evl orust - -ban andan urban, area a public fouantain or otsndpoet located not mare then 200 ral-Pret if popauatioc ,orban and rua'os r 1boute -or'neartr from a house mar be cossidrd. as beieg within reaom.asla waccssof tnst houe T. rura areas reas onable ana..J -. Ild imply that thehousewuife or flmers, of the household As non have to sPa a diepropa- P-assaic end Social Date liisiLooticoate per of tho day Is fetching ohs SlaLy-. swater Deads. Aosom oAsly-o and Prcojctions Departaot

-26 - ANNEX I

Economic D-oioe.t DoCt Sheet

1977A972c1973 botu l .. eliSin ry Projected Ave A "e Annul X te of . Shore of

_72 1973 1974 1975 1978 1977 1978 1979 1980 1983 1990 _ CDP

A. MIRatlonl Acco ItI(Million 989 at 1976 prieso)

1. GDP 23.5 3084.5 3216.4 3237.2 34715.5 3680.9 4169.9 4474.9 4699.1 6166.1 8280.8 5.0 5.8 6.1 100.02. Gais. frn I7 +1T0.3 +145.0 445.9 37 3 _ 253.7 45.6 10.9 25.7 7.7 . . . . 6.93. GY 3063.8 3229.5 3261.4 3199.9 3415.5 3936.5 4215.5 4485.8 4724.8 6173.8 8375.4 5.1 5.6 6.3 106.94. saperte 1429,5 1394.2 1475.6 1177.0 1127.6 1293.1 1807.6 1721.6 1671.9 1944.5 2504.8 -2.0 1.1 5.2 35.25. Experts - Volu .. 1066.7 17.+5.4 1200.4 1861.8 11L42.4 1194.2 1205.9 1239.2 1282.1 1682. 5 219.0 1.7 4.9

5.4 32.2

6 eCports - TT djoat.d I267.0 '290.4 1245.4 10D.3 11425.4 1440.0 1251.5 1250.1 1307.8 1690.2 2282.7 2.6 4.4 6.2 39.17. rIeorte Cap - 7T djootad 162.5 103.8 230.2 172.7 -14.6 -144.9 556.1 471.5 364.1 254.3 222.1 . . . 398 Tote1 G-aWt oo 2457.7 2634.5 2519.3 2713.8 267.1 2933.9 3721.9 3835.5 3918.3 4986.0 6801.0 3.6 4.3 6.4 79.79 evoa-nC-t 788.6 698.6 972.3 658.8 713.7 857.8 1049.6 1121.8 1170.6 1442.1 1796.6 2.2 4.6 4.5 23.3

10. Neticol S-nogs 613.0 478.8 592.9 423.7 630.2 912.4 460.0 639.0 770.8 1163.8 1597.8 8.3 14.2 6 5 24.811. Dn-sti S-etea 606.1 39.9 742.1 46.1 725.4 1002.6 493.4 650.3 806.5 1187.8 1574.5 10.6 13.3 5.8 27 212. GDr 0torrent 05S 2019.9 2368.1 2847.9 3151.4 3415.5 4427.8 5507.9 6442.8 9164.3 14079.8 22504.9 17.0 14.4 9.8

S. Sooter Outat(Shre of G0P at the 1976 priee)

1. Naoe-C-oriog Ledotry 10.8 11.4 12.0 11.9 13.3 14.1 31.7 31.7 31.6 30.3 28.4 10.7 4.7 4.72. Agnicolture 36.8 36.1 33.3 35.1 33.9 34.4 14.9 15.4 15.4 I8.7 20.1 3.3 7.1 10.03. Other 52.4 32.3 52.7 33.0 52.8 51.3 53.4 52.9 53.0 52.9 51.5 4.3 5.2 5.5

C. Pricee

1. Export PrieL Index 31.5 60.8 83.4 92.5 100.0 132.6 129.4 142.0 154.4 201.0 268.6 20.8 6.5 6.02. tpeet Itotx 44.2 34.0 80.4 95.9 100.0 109.: 122.9 140.2 150.1 199.7 252.7 19.8 7.2 4.83. Ter.e of Teed. 116.5 112.6 103.7 9f.5 100.0 121.5 105.4 101.3 102.9 100.7 104.34. GDP Deflator (US0) 7091 7688 88.5 97.5 100.0 120.3 132.1 144.0 195.0 228.3 271.8 11.4 8.1 3.65. Aversge Exhchnge Rote

(U5M/ka) 2.800 2.897 2.900 2.700 2.390 7.416 Z.59 2.66

D. Selected idtcotoee 1965-70 1972-77 1978-65 1985-90

1. CL3R 3.0 4.8 4.6 3.92. Iport Eloatitity 1.0 -0.34 .07 0.863. A-eroge D-etiC SaLyga Rtte 19.0 29.0 16.9 19.34. Average lotiol S-Lang Ret 18.6 18.6 16.8 19.75. Kloginel Natenol Seei o R.t. 0.22 9.38 0.42 0.166. Importo/GDP 29.9 40.9 35.0 30.77. terea ta/GDY 20.3 23.3 24.1 22.58. Ro-roe Gp/GDY 9.7 2.8 7.1 3.2 Ar. A-n1ol

Cr. Do teE. ft1oinmt 1970 1975 1976 1977 1978 1970-78

(Tbeeed.)

1. l.bor Force Tota 6400.02. 8. Eaploy_et 644.5 891.1 837.5 902.5 911.5 4.47

- . lbi- Fl- cc. PrI y.Ktr dilijon) 1970/71 1971/72 1972/73 1973/74 1974/75 1975.76 97/77 1977/78

1. R.correot Deranges 124.0 141.6 149.0 190.4 226.3 269.2 311.1 474.62 lecorreor Epeodltr. 119.4 128.7 139.6 162.7 207.4 246.6 205.1 431.13. 63crre-t S-rple. +13.5 +12.9 +9.4 +27.7 +18.9 +22.4 +29.0 .43.54. D velopnt Projeet

E cDing- & otherHi..cI .a.eo.. Receipt 0.4 0.4 0.6 0.3 - - 6 .4 2.0

5. ForeIgn Greet. 0.8 1.8 0.5 3.2 8.2 7.0 10.5 17.26. SorpiA, Available foe

Fin ncios OteilopseetE.peoditore- 14.7 15.1 10.3 31.5 27.4 29.4 45.9 62.7

7. Oroelop-ent Er dit-ree 46.5 51.9 61.8 67.4 94.2 126.3 124.7 236.99. Greroil Deficit -51.7 -36.8 -51.3 -35.9 .66.8 -96.9 70.9 474.

9. Fin ocieg of the DeficitLtorool Loeee 10.9 11.5 24.7 14.5 20.1 43.7 29.8 50.0

Detest IcL.ong-ter- Borrowing 8.1 15.6 21.3 18.0 15.5 52.8 25.0 90.0Shor--teem BorrowIng 13.0 1.1 6.8 2.9 12.7 32.5 29.7 5.5Greete 0.03 0.02 0.02 - - - - -

nses. _D C.h -I^-(I.crrae -) -2.4 -8.5 +1.5 +5.6 + 8.4 -32.0 -5.8 +28.6

i/ R.esd on 1964 prioe.. -A8, OctrG.ttb-r 23, 1979

- 27 -ANNEX t

KENYA

Balance of Payments and External Assistance(Hillion USS)

Actual Prelimininrv Proiected1972 1973 1974 1975 176 1977 8 1979 1980 1985 1990

A. Suarv of Balance of PD=ntf

1. Exports (Incl. NFS) 560.0 698.6 1005.5 963.6 1142.4 1569.7 1475.5 1630.0 1818.2 3132.5 5449.62. Imports (leel. NFS) 632.0 752.6 1237.3 1128.3 1127.8 1412.4 2090.8 2210.9 2296.6 3556.6 5822.33. Resource Balance -72.0 -54.0 -231.8 -164.7 14.6 157.3 -615.3 -580.9 -478.4 -424.1 -372.74. Not Factor Service Ieame -34.1 *101.9 -101.1 -111.8 -130.4 -170.3 L42.4 -133.8 -180.1 -282.2 -352.94.1 Net Interest Payments of ubiob: -15.7 -16.5 -18.6 -21.4 -27.1 -30.7 -25.8 -76.1 -102.2 -144.0 -118.1

(Interest on Public N & LT Loam) (-20.2) (-22.1) (-25.0) (.26.2) (-30.7) (-38.4' (-39.4) (-52.5) (-65.6) (-147.8) (-193.4)4.2 Direct Investomet Iecem (Net)4.3 Workers Remittance (Net) ) -18.4 .85.4 -82.5 -90.4 -103.3 -139.6 -111.6 -57.7 -77.9 -138.2 -234.84.4 Other Factor Sarvlcq In.ci (Not)5. Current trTaufers (Net) 38.1 22.2 19.3 50.0 32.3 71.3 103.1 119.7 133.0 239.9 408.26. Ba&ance mo Current Acco.mt .68.0 -133.7 -313.6 -226 -83.4 58.2 o54.6 -594.9 -525.6 -466.5 -317.57. PriFate Diract MRvat_nt 4T 89.4 *TTI 39.7 5S.2 74.4 77.7 87.0 95.8 179.3 288.88. Capital Crants 44.4 8.3 22.9 30.6 40.3 40.0 - - - -

PubIlic N & Lt Lo n9. Dibursentl I 79.2 86.4 92.8 119.7 188.0 180.8 414.6 454.3 541.3 695.1 941.7

10. Amortixstiok 17 V1 -13.7 -15.9 -18.3 -16.0 -30.9 -43.1 -76.9 -96.3 -161.1 -306.3 391.011. Net Disbursonmat 1/ 65.5 70.5 74.5 103.7 157.1 137.7 537.7 358.0 380.2 388.8 550.712. Use of nFl Resources 0.0 -0.6 53.5 51.6 18.9 43.7 7.7 114.4 76.1 -40.0 -30.013. Short-term Capital Trasactions 5.6 15.1 31.1 31.1 17.4 7.7 - - - - -14. Capital Trasactios, n.a.i. -65.1 -17.6 -14.6 -24.3 -101.3 -45.7 38.2 62.1 - - -

15. Chane in Reserves (- - increase) -25.2 -31.4 29.7 -5.9 -104.2 -22§.,) 193.2 -26.6 -26.6 -61.7 -492.0

B. Grants end Loans Gitments

1. Official grants 31 44.4 8.3 22.9 30.6 40.3 40.02. Public Y & LT Loeps 101.0 98.1 170.1 396.0 211.9 321.22.1 I8RD 29.0 34.0 10.4 193.5 31.0 84.02.2 IDA 28.0 - 33.5 25.5 14.0 36.02.3 Multiiaterol - 1.1 3.6 7.2 10.8 39.32.4 Governmnts 24.4 61.4 1Z2.6 74.4 35.3 61.3

of vhich centrally planned economies - 0.3 - - - -2.5 Suppliers 2.3 . - 4.0 56.5 -2.6 Financial Institutions 17.3 1.6 - 91.4 64.4 100.72.7 Bonds _- -2.8 Public Losas, n.e.i.3. Other N & LT Loans (where *vatlable) 41 33.0 23.2 6.9 3.6 7.5 -

C. NeMorand. Item

1. Grant tleent of Total Comitments 5/ 44.8 43.6 66.5 23.0 23.0 36.52. Average Interest (Percent) 4.3 4.3 2.1 6.9 6.4 5.23. Average Mnatkrity (Years) 29.2 27.6 36.7 24.6 17.5 25.6

/ Include, financing of projected balance of paymnts defIcit (1978-1990)on mediu/h-ard blend terms.2/ Includes repayment on military loans.1/ Eacluden technical ssistance groats.4/ Repesents a wtionAl 50 peweent of loan comwitmento for UAC projects-/ Represents grant elment of loans. EON, CPt A

October 23, 1979

- 28 -ANNEX I

KENYA

Debt and Creditworthiness

Actual1972 1973 1974 1975 1976 1977

A. Medium and Lpne-term Debt nisbhursed Cnly)(US$ Million)

1. Total Debt Outstanding (DOD: End of Period) 2/ 475.1 549.8 633.2 694.5 820.9 970.52. Including Undisbursed 2/ 799.2 820.2 990.6 1289.8 1445.2 1765.5

3. Public Debt Service 3/ 33.8 38.9 44.6 43.8 63.2 72.5

3.1 Interest 20.2 22.1 25.0 26.2 30.7 38.8

4. Other M & LT Debt Service .. .. ..

B. Debt Burden

1. Debt Service Ratio 6.0 5.6 4.4 4.5 5.5 4.62. Debt Service/GDP 1.7 1.6 1.6 1.4 1.9 1.63. Public Debt Service/Government Revenue 8.1 7.9 7.5 6.0 8.2 7.3

C. Terms

1. Interest on Total DOD/Total DOD 4.3 4.0 3.9 3.8 4.0 4.0

2. Total Debt Service/Total DOD 7.1 7.1 7.0 6.3 8.2 7.5

D. Dependency Ratios for M & LT Debt

1. Gross Disbursements/Imports (incl. NFS) 12.5 11.5 7.5 10.6 16.7 12.82. Net Transfer/Imports (incl. NFS) 10.4 9.4 6.0 9.2 13.9 10.93. Net Transfer/Gross Disbursements 82.7 81.6 80.3 86.6 83.6 76.2

E. Exposure

1. IBRD Disbursements/Gross Total Disbursements 39.9 49.1 33.0 63.4 45.2 24.92. Bank Group Disbursements/Gross Total Disbursements 48.5 70.7 48.9 70.5 53.0 35.3

3. IBRD DOD/Total DOD 19.1 23.6 24.9 33.4 37.9 35.64. Bank Group DOD/Total DOD 30.9 38.2 39.9 48.3 52.0 49.25. IBRD Debt Service/Total Debt Service 21.6 28.7 27.2 34.5 46.7 48.26. Bank Group Debt Service/Total Debt Service 23.1 30.6 28.6 36.4 48.4 50.1

Outstanding Dec. 31. 1977Amount Percent

(US$ Million)F. External Debt vDisbursed Only)

1. IBRD 276.3 28.52. Bank Group 388.2 40.03. Other Multilateral 20.8 2.14. Governments 403.6 41.6

of which centrally planned economies 0.1 -5. Suppliers 29.2 3.06. Financial Institutions 84.6 8.77. Bonds 44.1 4.58. Public Debt, n.e.i. _ _9. Total Public M & LT Debt 1/ 970.5 100.010. Other M & LT Debt 2/11. Total Public Debt (incl. Undisbursed) 1751.1 180.412. Total M & LT Debt (incl. Undisbursed)

1/ Includes Kenya's share of a notional 50 percent of EAC debt.2/ Excludes military debts.

3/ Includes repayment on military loans.

EAN, CPIAApril 4, 1979

- 29 - Annex II

THE STATUS OF BANK GROUP OPERATIONS IN KENYA

A. Statement of Bank Loans and IDA Credits as of April 30, 1980

US$ MillionAmount (Less Cancellations)

Loan or Banki/ TW IDA_/ UndisbursedCredit # FY Borrower Purpose

Eight (8) Loans and sixteen (16) Credits fully disbursed 101.0 116.7826 1972 Kenya Nairobi Airport 29.0 0.6932 1974 Kenya Highways 29.0 0.1477 1974 Kenya Livestock 21.5 16.9993 1974 Kenya Tea Factories 10.4 1.71093 1975 Kenya Group Farm Credit ) 7.5 7.5537 1975 Kenya Group Farm Credit ) 7.5 3.71105 1975 Kenya Site and Service ) 8.0 6 61132 1975 Kenya Agriculture - Forestry 9.9 3.2-1133 1975 Kenya Transportation - Pipeline 20.0 0.31147 1976 TRDC Hydroelectric Development 57.6 0.41148 1976 IDB DFC II 10.0 0.31167 1976 Kenya Mombasa & Coastal Water Supply 35.0 9.61184 1976 Kenya Education III 10.0 8.7650 1977 Kenya Integrated Agri. Development ) 10.0 5.31303-T 1977 Kenya Integrated Agri. Development ) 10.0 10.01304-T 1977 Kenya Wildlife and Tourism 17.0 13.4651 1977 Kenya Rural Access Roads ) 4.0 1.81305 1977 Kenya Rural Access Roads ) 4.0 4.01389 1977 Kenya South Nyanza Sugar 25.0 14.0692 1977 Kenya Agricultural Credit III ) 20.0 3.21390-T 1977 Kenya Agricultural Credit III ) 5.0 5.01438 1977 IDB DFC III 20.0 13.7722 1977 Kenya Bura Irrigation Settlement ) 6.0 3.51449 1977 Kenya Bura Irrigation Settlement ) 34.0 34.0

750 1978 Kenya Small Scale Industry 10.0 9.91520 1978 NCC Second Nairobi Water Supply 30.0 28.1791 1978 Kenya Second Urban ) 25.0 24.9

1550 1978 Kenya Second Urban ) 25.0 25.0797 1978 Kenya Education IV 23.0 22.0S-12 1979 KPC Olkaria Engineering Loan 9.0 6.01636 1979 Kenya Sugar Rehabilitation 72.0 72.01637 1979 Kenya Rural Water Supply 20.0 19.9

858 1979 Kenya Narok Agricultural Development 3.0 13.0 13.01680 1979 Kenya Telecommunications 20.0 19.91684 1979 Kenya Highway Sector 90.0 90.0914 1979 Kenya Smallholder Coffee Improvement 27.0 27.09591/ 1980 Kenya Second Integrated Agriculture 46.0 46.096MO 1980 Kenya Baringo Pilot 6.5 6.5

17991/ 1980 Kenya Kenya Power Company 31.0Q./ 31.0181731 4/ 1980 IDB DFC IV 30.0 30.0

9992/ 1980 Kenya Structural Adjustment Credit 55.0 55.0

Total 737.4 32.0 366.6 693.7Of which has been repaid 27.7 - 1.6

Total now outstanding 709.7 32.0 365.0Amount sold 11.8of which has been repaid 10.2 1.6

TOTAL now held by Bank and IDAlI 708.1 32.0 365.0TOTAL undisbursed -i7.6 28.4 238.7 693.7

1/ Prior to exchange adjustment.2/ Includes US$1.6 million undisbursed grant participation.3/ Not yet effective.4/ Not yet signed.5/ Net of Loan S-12 ($9.0 million).

- 30 -ANNEX II

B. Summary Statement of Bank Loans for Common Services InvolvingKenya. Tanzania and Uganda as of April 30, 1980

Amount (less cancellations)Loan No. Year Borrower Purpose Bank 1/ Undisbursed

------US$ million-----

Five loans fully disbursed 93.4

638-EA 1969 EAHC Harbours 35.0 0.5

674-EA 1970 EARC Railways 42.4 0.1

865-EA 1972 EAHC Harbours 26.5 0.9

914-EA 1972 EAPTC Telecommunications 32.5 1.0

1204-EA 1976 EADB Development Finance 15.0 5.9

Total 244.8 8.4

of which has been repaid 56.4

Total now outstanding 188.4

Amount sold 24.4

of which has been repaid 24.4 0.0

Total now held by Bank 1/ 188.4

Total undisbursed 8.4 8.4

1/ Net of exchange adjustments.

- 31 -ANNEX II

C. Prolects in Execution 1/(As of April 30, 1980)

There are currently 35 projects under execution in Kenya.

AGRICULTURAL SECTOR

Loan No. 993-KE - Tea Factories: US$10.4 million Loan of June 5, 1974;Effective Date: September 23, 1974; Closing Date: June 30, 1980

Although international tea prices have dropped from the extra-ordinarily high figures in 1976/77, growers continue to show considerableinterest in tea as a cash crop. Yields continue to rise, and from 1979/80onward the appraisal projections are likely to be exceeded. The projectfactory building program is behind schedule and, due to cost escalations,funds from the Bank and Commonwealth Development Corporation (CDC) loans willcover only 12 of the 17 factories included in the project. However, the OPECSpecial Fund has agreed to finance the foreign exchange cost of 3 factoriesunder the project, and CDC has agreed to provide additional financing for theremaining 2 factories. CDC has also advanced financing for their Fourth Plancovering factories outside the project, and by June 1980 a total of 15 fac-tories (12 under the project and 3 others) will be operative. The standardof Kenya Tea Development Authority's management continues to be high, andinstitutional improvements together with strengthened staffing should furtherimprove performance. An economic analysis of the project indicates thatdespite substantial cost increases the economic rate of return on investmentsin new tea factories is over 40%.

Credit No. 477-KE - Livestock: US$21.5 million Credit of June 5, 1974;Effective Date: December 2, 1974; Closing Date: December 31, 1980

Project implementation has been slow and recruitment of ranches isvery much behind appraisal estimates. In spite of the satisfactory livestockprice structure which was adopted in early 1978, removing the most seriousconstraint to ranch development and viability, recruitment of ranches continuesto be slow. Some progress has been made in organization of the pastoralistsin the range development components. In addition, Government services inranch water development planning and in the company ranch sector have beenimproved. Only two commercial ranch loans and eight company ranch loans wereapproved in 1978/79, and the Agricultural Finance Corporation's disbursementsfor coast company ranches are being held up pending agreement on satisfactory

1/ These notes are designed to inform the Executive Directors regardingthe progress on projects in execution, and in particular to report anyproblems which are being encountered, and the action being taken toremedy them. They should be read in this sense, and with the under-standing that they do not purport to present a balanced evaluation ofstrengths and weaknesses in project execution.

- 32 - ANNEX II

security arrangements. Group ranch loan processing also remains slow, andunless there is a substantial improvement in extension services in the pas-toral areas, particularly in Masailand, the project goals of adoption of morecommercial and efficient livestock production will be difficult to achieve.The project -ontinues to be kept under close review.

Loan No. 1093-KE/Credit No. 537-KE - Group Farm Rehabilitation Project:US$7.5 million Loan and US$7.5 million Credit of March 26, 1975;Effective Date: September 30, 1975; Closing Date: December 31, 1981

The Project faces major problems. Few new farms have come underrehabilitation in the past two years for a variety of reasons: legal, social,political, and financial. Physical rehabilitation work on participatingmixed farms and coffee estates is satisfactory. Coffee estates are achievingrecoveries in yields, and mixed farms are generally expanding areas croppedand improving grazing. However, achievement of a satisfactory rate of finan-cial rehabilitation on most mixed farms is in doubt. The recommendations ofthe Large Farm Sector Study (financed under the Project) have prompted Govern-ment to make a major review of its policies, and although reaching a consensushas proved difficult, Government expects to take a position on the large farmsector in the near future. Upon clarification of Government policy, the Bankand the Government expect to undertake a joint review to see whether theoriginal project objectives can still be attained. Pending this review, nofurther recruitment of mixed farms will take place.

Loan No. 1132-KE/Credit No. 565-KE - Second Forestry PlantationProject: US$9.9 million 1/ Loan and US$10.0 million Credit of June 27,1975; Effective Date: September 25, 1975; Closing Date:December 31, 1981

The Project is a continuation of the first Kenya Forestry PlantationProject (Loan 641-KE), to complete the Government's target long-term afforesta-tion program of 130,000 ha of sawlog and 24,000 ha of pulpwood plantations by1980. The planting program is proceeding steadily; the cumulative total todate is 25% below target, due to a variety of reasons, including bad weatherand poor management. The building and labor housing programs are both con-siderably behind schedule. There has been little progress in the implemen-tation of most of the covenants of the Credit Agreenment, particularlyregarding the sawmilling sector, the national land use study, the gazettingof nature reserves and the study of stumpage rates for sawlogs. Governmentis now providing very adequate budgetary allocations. Procurement is proceed-ing normally. Disbursements and total Project expenditure are both ahead ofschedule. The Credit is now fully disbursed and the Loan should also be fullydisbursed before the end of 1980.

1/ Net of cancellation; an amount of US$0.1 million was cancelled onJuly 20, 1979 since items which were to have been financed underthe loan were not procured in accordance with Bank guidelines.

33- ANNEX II

Loan No. 1303T-KE/Credit No. 650-KE - Integrated AgriculturalDevelopment Project: US$10.0 million Loan and US$10.0 millionCredit of July 9, 1976; Effective Date: March 15, 1977;Closing Date: December 31, 1981

The changed focus of the project towards assisting large numbersof subsistence farmers rather than.progressive smallholder farmers has led toa number of difficulties, but the objective of improving the productivity andincomes of smallholder farmers continues to be met. Late release of creditfunds in the past led to delayed application of farm inputs and expected yieldincreases were therefore not achieved; measures have now been taken to ensureavailability of credit funds at the appropriate time. Steps are also beingtaken to improve the low rates of credit repayment and loanee reparticipation.The overall balance between numbers of loanees and infrastructural support--staff, storage and transport--at cooperative union level has been improving,and active efforts continue to be made to improve input supplies and marketingsystems.

Loan No. 1389-KE - South Nyanza Sugar Project: US$25.0 millionLoan of April 15, 1977; Effective Date: November 3, 1977;Closing Date: March 31, 1983

Agricultural development has advanced well; land clearance has beencompleted in about 51% of the area, and 3,725 ha have been planted. Yieldsfrom outgrowers' cane have been higher than anticipated, probably because ofexcellent and well distributed rainfall and heavy fertilizer applications.About 20% of the drainage component has been completed, and the benefits canalready be seen. Although several components are slightly behind schedule,progress is generally satisfactory. The standard of management of the sugarcompany continues to be good, and coordination among the various agenciesinvolved in the project is improving.

Loan No. 1390T-KE/Credit No. 692-KE! - Third Agricultural CreditProject: US$5.0 million Loan and US$20.0 million Credit of April 15,1977; Effective Date: September 14, 1977;Closing Date: December 31, 1980

Disbursements have been delayed because of a backlog in updatingloan reimbursement requests by the Agricultural Finance Corporation (AFC).The lack of consolidated information on AFC's lending trends toward differentcategories of farmers and the current high arrears situation also pose pro-blems. However, the disbursement situation is improving, and cumulativecommitments in the smallholder and medium-scale farmer categories now accountfor almost all funds available for on-lending under the project.

- 34 ANNEX II

Loan No. 1449-KE/Credit No. 722-KE - Bura Irrigation SettlementProject: US$34.0 million Loan and US$6.0 million Credit of June 22,1977; Effective Date: June 27, 1978; Closing Date: June 30, 1984

Despite a slow start-up, project implementation is pLoceedingsatisfactorily. However, a detailed review of cost estimates indicatesthat the Project will experience serious cost overruns; the revised estimateis about 65% above the appraisal figure, and there seems to be little scopefor reduction. The Government has indicated that it will proceed with theProject despite the significant burden on its finances. A revised financingplan is under review by the co-financiers. No supplementary IDA financingis proposed.

Loan No. 1636-KE - Sugar Rehabilitation Project: US$72.0 millionLoan of December 20, 1978; Effective Date: September 20, 1979;Closing Date: March 31, 1985

Progress has been made in equipment procurement, and selection andappointment of consultants for factory rehabilitation, road works, drainageand irrigation is in progress. Coordination of project activities has improvedconsiderably, but a proposal, now under Government consideration, to withdrawexecutive power from the Kenya Sugar Authority could have a negative impact onproject implementation if brought into effect.

Credit No. 858-KE - Narok Agricultural Development Project: US$13.0million Credit of December 20, 1978; Effective Date: June 28, 1979;Closing Date: December 31, 1983

Early stages of implementation are proceeding satisfactorily,although slow progress in land adjudication will limit the number of farmerseligible for loans during the first season. Engineering consultants have beenselected for the roads component.

Credit No. 914-KE - Smallholder Coffee Improvement; US$27.0 millionCredit of June 11, 1979; Effective Date: April 11, 1980;Closing Date: March 31, 1984

This Credit became effective on April 11, 1980.

Credit No. 962-KE - Baringo Semi-Arid Areas Project: US$6.5 millionCredit of March 12, 1980; Effective Date: June 10, 1980;Closing Date: October 31, 1984

This Credit is not yet effective.

Credit No. 959-KE - Second Integrated Agricultural Development ProjectUS$23.0 million Credit of April 25, 1980

This Credit is not yet effective.

- 35 -ANNEX II

EDUCATION SECTOR

Loan No. 1184-KE - Third Education Project: US$10.0 million Loanof December 31, 1975; Effective Date: March 17, 1976;Closing Date: June 30, 1982

Physical implementation of the project is now about 3 years behindappraisal schedule. Revised total project cost are estimated at KShs 163.0million or about US$22.0 million representing a cost overrun of about 27%in terms of local currency. Government is taking measures to counter costoverrun and difficulties in making available their financial contributions byconsidering the curtailment of project items and phasing activities over theyears involved in the project implementation period. Achievements of educa-tional project objectives continue to be satisfactory, especially in the fieldof curriculum development for basic education. But achievements would benegatively affected if delays in construction works relative to facilitiesserving primary teacher training, development of mass media programs and thedevelopment of a more efficient distribution system for primary school equip-ment would continue and prevent those facilities to become operational bythe project's Closing Date.

Credit No. 797-KE - Fourth Education: US$23.0 million Credit of June 7,1978; Effective Date: August 25, 1978; Closing Date: December 31, 1982

Physical implementation of the project has slowed down and is nowabout 14 months behind appraisal schedule due to slow progress in the startof construction (except in the case of the Faculty of Agriculture). Revisedtotal project cost increased to about KShs 300 million representing approxi-mately 17% cost overrun in terms of local currency. The Technical Assistanceprogram as well as the pursuance of educational objectives under the Creditare proceeding satisfactorily.

WATER SUPPLY SECTOR

Loan No. 1167-KE - Mombasa and Coastal Water Supply; US$35.0 millionLoan of October 15, 1975; Effective Date: January 13, 1976;Closing Date: June 30, 1980

Project completion is now forecast about 21 months behind schedule,and it is unlikely that lost time can be recovered. However, some majorcomponents may well be operational several months ahead of the overall com-pletion date (now estimated to be 11/80). Although there is a substantialcost overrun, this is not seen as a major problem since Government is fullycommitted to earliest project completion. Regarding key personnel vacanciesrequiring the Ministry of Water Development's (MWD) attention, MWD is fullyaware of this situation and, while progress is slow, remedial action is beingtaken. An extension of the Closing Date (by 12 months) may be necessary.

- 36 - ANNEX II

Loan No. 1520-KE - Second Nairobi Water Supply; US$30.0 millionLoan of March 27, 1978; Effective Date: December 20, 1978; ClosingDate: December 31, 1982

Impiementation started on schedule but completion is now forecastabout 18 months behind schedule due to difficulties with tender evaluationsand delays by the Borrower in contract administration and in concludingsatisfactory arrangements for construction supervision. Most supply contractsfinanced by other donors and the construction contracts being financed bythe Bank now have been awarded. Good progress is being made on detaileddesign and tendering for the remaining contracts. Bid prices to date havebeen favorable, but due largely to the delays there is an estimated increaseof 50% in local currency costs and 12% in total costs. Water supply andsewerage operations are in sound financial condition. However, the Borrowerhas been slow in fulfilling financial covenants pertaining to external audits.

Loan No. 1637-KE - Rural Water Supply Project: US$20.0 millionLoan of December 20, 1978; Closing Date: July 1, 1985

This loan became effective January 24, 1980. New tariffs have beenintroduced, and management consultants are assisting with implementation ofthe first phase of the program to strengthen the organization and managementof the Ministry of Water Development (MWD). Key project staff have beenappointed. Preparation for construction of schemes is about eight monthsbehind schedule, but MWD is planning to revise the implementation scheduleto compensate for delays.

TRANSPORT SECTOR

Loan No. 826-KE - Nairobi Airport: US$29.0 million Loan of June 2, 1972;Effective Date: July 7, 1972; Closing Date: December 31, 1979

Construction of the new Nairobi Airport was essentially completedin December 1977, and it has been open to traffic since March 14, 1978.The loan is 98% disbursed. The airport is performing up to expectations.Establishment of a commercial accounting system is now underway. The principalproblem areas are in hiring and training sufficient staff for operation andmaintenance, both of which are constrained by a Kenya-wide shortage of skilledpersonnel. A training program, prepared with UNDP assistance, was recentlyapproved by the Bank. Completion of disbursements is expected shortly. Theproject completion report is under preparation.

Loan No. 932-KE - Fifth Highway Project: US$29.0 million Loan ofSeptember 6, 1973; Effective Date: November 9, 1973; Closing Date:June 30, 1980

Implementation started 18 months behind schedule due to changes indesign standards by the Ministry of Works and financial constraints. Con-struction of 593 km of roads has been completed, and work on the Kisiani-Bondo road is continuing. In view of heavy cost overruns, tenders for the

- 37 - ANNEX II

construction of two roads were delayed; agreement was ultimately reached to

delete the Thuchi-Nkubu (51 km) road from the project. The Closing Date,

which was postponed from December 31, 1977 to December 31, 1979, has been

postponed further June 30, 1980 to allow time for completion of the Kisii-

Mogonga road where construction has recently begun.

Loan No. 1133-KE - Mombasa-Nairobi Oil Product Pipeline Project:

US$20.0 million Loan of June 27, 1975; Effective Date: December 31,

1975; Closing Date: December 31, 1980

Construction was completed in October 1977 and commercial operations

commenced in January 1978 as originally planned. The final project cost

overrun is only US$9.5 million or 11%, the increase being primarily due to

escalation in construction costs. KPC's long-term financial prospects are

quite satisfactory although there could be cash flow problems in the initial

few years of operation because of the preponderance of short and medium-term

loans in the financing package. About 99% of the loan has been disbursed.

The Closing Date has been postponed to December 31, 1980 to allow time

for completion of procurement of equipment related to the operation of the

pipeline.

Loan No. 1305-KE/Credit No. 651-KE - Rural Access Roads Project:

US$4.0 million Loan and US$4.0 million Credit of July 9, 1976; Effective

Date: October 7, 1976; Closing Date: June 30, 1981

Progress on the Pural Access Roads Program was reviewed in depth

by all donors and discussed with Government during the annual review meeting

held in June 1979. The project is about 15 months behind schedule but is now

progressing satisfactorily. All eight Bank-financed construction units are

fully equipped and are now operational. By March 15, 1980, 481 km of access

roads had been constructed, of which 71 km were gravelled. Annual output

averages 30 km per annum for all units, about 15 km below the appraisalestimate. Output had declined due to shortage of laborers, particularly in

Kiambu District, and poor work organization in Nakuru District. To resolve

these problems, the Ministry of Works has requested local governments to

supply more labor to construction units, and has designed a Swiss-financed

engineer to supervise works in the Nakuru area.

Loan No. 1684-KE - Highway Sector Project: US$90.0 million Loan of

April 30, 1979; Effective Date: June 18, 1979; Closing Date:

June 30, 1985

Implementation of the Government's Highway Sector Plan has beendelayed because a critical shortage of funds has caused a reduction in the

highway work program. While this has not yet affected the project appreciably,

the continuation of this trend in FY81 could touch projects included in the

Sector Loan. In general, detailed engineering has been completed for road

construction and upgrading scheduled to start in FY80, and the designs for

roads to start in FY81 are completed or under preparation. The road main-

tenance program for FY80 is in line with appraisal estimates except for a

- 38 -ANNEX II

90% reduction in resealing of paved roads; however, the Ministry of Transportand Communications is planning to request funds this year from the loan tohelp clear the backlog of resealing.

POWER SECTOR

Loan No. 1147-KE - Gitaru Hydroelectric Project: US$57.6 million Loan 1/of July 25, 1975; Effective Date: January 29, 1976; Closing Date:June 30, 1980

Construction of the project was completed satisfactorily inJune 1978 on schedule and within estimated cost. On the basis of contractsawarded for civil works and electrical and mechanical equipment, present esti-mates show that the project cost in Kenya shillings is likely to be about 1%lower than the appraisal estimate. Due to the devaluation of Kenyan currencyin October 1975, however, the project cost saving expressed in US dollarequivalent will be about 15% of the appraisal estimate. This will result in asaving in the Bank loan of about US$4.0 million, in spite of the increase madeon June 15, 1977 in the percentage of civil works expenditures to be financedunder the Bank loan from 60% to 80%. At the request of the Borrower, US$3.5million of the loan has been cancelled. A further cancellation of US$1.9million has been made along with a postponement of the Closing Date toJune 30, 1980.

Loan No. S-12-KE - Olkaria Geothermal Engineering Project: US$9.0million Loan of December 1, 1978; Effective Date: April 30, 1979;Closing Date: June 30, 1981

Drilling is proceeding on schedule; specifications for the newdrill rig and accessories have been completed and tenders are being evaluated.Miscellaneous supplies and equipment have been purchased under InternationalShopping procedures. This project is refinanced under Loan No. 1799-KE.

Loan No. 1799-KE - Olkaria Geothermal Power Project: US$40.0 million 2/Loan of April 25, 1980

This Loan is not yet effective.

1/ Net of cancellation; US$3.5 million of the original US$63.0 million Loanwas cancelled on October 19, 1978, and US$1.9 million on November 30,1979.

2/ This includes $9.0 million for the Engineering Loan (S-12-KE) to berefinanced under this project.

- 39 -ANNEX II

INDUSTRIAL SECTOR

Loan No. 1148-KE - Second Industrial Development Bank Project:US$10.0 million Loan of JulY 25, 1975; Effective Date: October 9,1975: Closing Date: June 30, 1980

The second Bank loan of US$10.0 million became effective on October9, 1975. US$9.7 million of the Loan had been disbursed as at April 30, 1980.The Closing Date has been postponed to June 30, 1980.

Loan No. 1438-KE - Third Industrial Development Bank Project: US$20.0million Loan of June 22, 1977; Effective Date: November 10, 1977;Closing Date: July 1, 1982

This loan was declared effective on November 19, 1977. Twelve sub-projects have been approved. As at April 30, 1980, US$17.5 million hadbeen committed and US$6.3 million had been disbursed.

Credit No. 750-KE - Small Scale Industry Project: US$10.0 millionCredit of November 28, 1977: Effective Date: June 26, 1978;Closing Date: December 31, 1982

Kenya Industrial Estates (KIE) continues to make progress in insti-tutional development, particularly as regards financial discipline, projectappraisal procedures and operating performance. KIE's management is determinedto implement agreed policies to improve profitability, but continued attentionis required in a number of areas; a comprehensive plan of action for reducingarrears is particularly important. Nineteen subloans totalling US$887,574have been committed, but no funds have been disbursed as yet under the lineof credit. A small amount has been disbursed, however, under the technicalassistance component.

Credit No. 999-KE/EEC Special Action Credit No. 56-KE - StructuralAdlustment Credits: US$55.0 million Credit and US$15.0 million EECCredit of April 10, 1980

These Credits are not yet effective.

TELECOMMUNICATIONS SECTOR

Loan No. 1680-KE - First Telecommunications Project.: US$20.0 millionLoan of April 11, 1979; Effective Date: August 16, 1979; Closing Date:June 30, 1983

This loan became effective on August 16, 1979. Initial delays inprocurement of goods are likely to cause about a year's delay in projectcompletion.

- 40 -ANNEX II

URBAN SECTOR

Loan No. 1105-KE/Credit No. 543-KE/ - Sites and Services Project:US$8.0 million Loan and US$8.0 million Credit of May 6, 1975; EffectiveDate: September 25, 1975; Closing Date: June 30, 1980

Overall project execution continues to be satisfactory but there aremounting delays in implementation. Infrastructure has been completed for thefirst 1,000 plots and most beneficiaries have constructed satisfactory houses.Infrastructure for an additional 2,700 plots is about 30% complete and con-struction of infrastructure for the remaining 2,300 plots is expected to beginsoon. Cost recovery continues to be good. One primary school is now opera-tional, but designs for the remaining schools are behind schedule. One healthcenter is under construction; however, the Bank does not plan to disburseagainst its costs as its design was too expensive and was not approved by theBank. The design of the other health center should be submitted for approvalsoon. Tenders have been invited for all other community facilities. Technicalassistance components are completed or scheduled for completion in conjunctionwith the project. Project costs for the first phase remain close to appraisalestimates but are expected to exceed original estimates for the remainingcomponents because of delays incurred.

Loan No. 1550-KE/Credit No. 791-KE - Second Urban Project: US$25.0million Loan and US$25.0 million Credit of May 5, 1978; Effective Date:October 3, 1978; Closing Date: December 31, 1983

Progress in implementation of physical components of the project isgenerally satisfactory. Consultants for detailed design and engineering ofPhase I sites in all three cities (Nairobi, Mombasa and Kisumu) are makinggood progress. Appointment of consultants for Phase II sites has now beencompleted and design work is underway. The Housing Development Departmentsare operational in all three cities with most key posts filled. Recruitmentof other staff is underway. Progress on studies included in the projectis slower than expected. Municipal finance reforms have been delayed pendingCabinet approval of a paper on the subject.

WILDLIFE AND TOURISM SECTOR

Loan No. 1304T-KE - Wildlife and Tourism Project: US$17.0 million Loanof July 9, 1976; Effective Date: November 10, 1976; Closing Date:June 30, 1982

After initial delays, project implementation is accelerating.Officers for the Project Management Unit have been appointed, and six keyWildlife Planning Unit positions have been filled. The Ministry of Transportand Communications has appointed various consultants for the design andconstruction of all physical project components. The draft final report ofthe Tourism Pricing Study has been reviewed with Government and consultantsin the field, and the final report is expected to be submitted soon. The

- 41 -ANNEX II

Very Large Herbivores Study is in progress. Satisfactory agreements have beenon guaranteed minimum returns, thus meeting the disbursement condition relatingto this component. The anti-poaching units are fully staffed and deployed,and initial effectiveness of the units appears satisfactory. Draft amendmentsto the Wildlife (Conservation and Management) Act of 1976 to fulfill therequirements of the supplementary letter giving detailed proposals for anti-poaching operations have been approved by the Ministry of Wildlife and Tourismand are now in the final stages of processing.

East African Community

There are currently five projects in execution in the East AfricanCommunity. 1/

Loan No. 638-EA - Second Harbours Project: US$35.0 million Loanof August 25, 1969; Date of Effectiveness: December 16, 1969;Closing Date: December 31, 1977

Loan No. 865-EA - Third Harbours Project: US$26.5 million Loan ofDecember 18, 1972; Date of Effectiveness: April 16, 1973;Closing Date: June 30, 1978

The Second Harbours project included financing for five generalcargo berths and a single buoy tanker terminal for the Port of Dar es Salaam;two general cargo berths and a bulk cement wharf for Mlombasa; tugs, lighters,cargo handling equipment, offices, housing and general improvements for bothports. The Third Harbours project included three new deep water berths,modernization of two berths and a lighterage quay, a training school buildingand central repair area for Dar es Salaam; modernization of several berths anda lighterage quay, construction of a tug berth, cold storage facilities and atraining building in Mombasa and improvement of a lighterage quay in Tanga.Construction of all major project elements has been completed and a jointproject completion report was issued in January 1979. Because of shortageof funds under both loans, the following minor project elements have notbeen submitted for Bank financing: the second phase of modernization of thelighterage quay and a training school for Dar es Salaam; and modernizationof the lighterage quay and a training school for Mombasa. Locally financed

1/ Since October 1, 1977, the East African Community loans (excluding theEast African Development Bank) have been disbursed on the basis ofseparate national guarantees. The agreed allocation of undisbursedbalances for each loan, as proposed in a report to the ExecutiveDirectors dated December 29, 1977 (R77-312) and approved on January 12,1978, is given in this Annex. The Closing Dates for Loans 638-EA,674-EA and 865-EA have passed. However, since the amount allocatedto and guaranteed by each Partner State is clearly identified underthe terms of the agreement signed on January 25, 1978, as proposedin the above report (R77-312), we are continuing disbursements.

- 42 -ANNEX II

contracts have been awarded for these project elements with the exception of

the modernization of the lighterage quay in Mombasa. General cargo throughput

has increased above appraisal forecasts for Dar es Salaam, and cargo handling

productivity has generally improved with increasing throughput; however, port

labor productivity has stagnated in Mombasa where general cargo throughput has

declined considerably. Legislation to establish a Tanzania Harbours Authority

and a Kenya Ports Authority has been enacted. Management of ports in both

countries is competent. Some US$34.5 million of Loan 638-EA and US$25.6

million of Loan 865-EA has already been disbursed. The agreed allocation of

undisbursed funds at October 1, 1977 between the countries concerned is given

below:

For Loan No. 638-EA (US$ million)

Kenya 0.7Tanzania 0.6

Total 1.3

For Loan No. 865-EA

Kenya 1.7

Tanzania 0.3

Total 2.0

Loan No. 674-EA - Third Railways Project: US$42.4 million Loanof May 25, 1970; Date of Effectiveness: October 30, 1970;

Closing Date: June 30, 1978

The original purpose of the project was to complete the Railways'1969-1972 Development Program, including track improvement, procurement of

rolling stock and other equipment, and to finance studies of the economic

feasibility of certain railway lines and services. The physical execution

of the original project has been seriously delayed due to administrative and

political problems within the Community. In November 1974, the Executive

Directors approved a reallocation of the uncommitted balance of the Loan to be

used for consultant services and emergency investments in track material. All

three countries have now enacted legislation to establish their own Railways

Corporations. The agreed allocation of undisbursed funds at October 1, 1977

among the countries concerned is given below:

(US$ million)

Kenya 2.0Tanzania 3.8Uganda 1.9

Total 7.7

- 43 -ANNEX II

Loan No. 914-EA - Third Telecommunications Project: US$32.5 millionLoan of June 22, 1973; Date of Effectiveness: September 19, 1973;Closing Date: December 31, 1979

The project included provision for procurement of local telephoneexchange equipment, cables and subscriber apparatus, microwave and UHF/VHFsystems and multiplex equipment, interurban cables and wires, automaticswitching and signalling equipment, telegraph, telex and data equipment,and training. All project items, except the microwave radio system, havebeen completed; this system is likely to be completed by mid-1980. -Theslippage in the project's completion was due to initial delays in procurementcaused by staffing and other problems associated with the relocation ofheadquarters. About US$30.8 million of the loan has now been disbursed.The agreed allocation of undisbursed funds as at October 1, 1977 among thecountries concerned is as follows:

(US$ million)

Kenya 2.4Tanzania 3.5Uganda 0.1

Total 6.0

Loan No. 1204-EA - East African Development Bank: US$15.0 millionLoan of March 1. 1976; Date of Effectiveness: June 7, 1976;Closing Date: March 31, 1980

The environment within the Community has continued to have anegative impact on EADB operations. Level of operations both for appraisaland supervision has been depressed, but there has been some improvement inthe state of the portfolio with the arrears affected portfolio falling from50% as of June 30, 1977 to 43% as of March 31, 1978. Some US$9.1 million ofthe loan has been disbursed to date, and the uncommitted balance amounts toUS$3.0 million.

- 44 - ANNEX II

D. STATEMENT OF IFC INVESTMENT IN KENYA AS ATApril 30, 1980

Fiscal Year Obligor Type of Business Amount in US$ MillionLoan Equity Total

1967, 1968and 1973 Kenya Hotel Properties Hotels 5.2 0.7 5.9

1970, 1974,1977 and 1979 Pan African Paper Mills Pulp and Paper 17.2 6.3 23.5

1972 Tourism PromotionServices Hotels 2.4 - 2.4

1976 Rift Valley TextilesLtd. Textiles 6.3 2.8 9.1

1977 Kenya Commercial BankLtd. Capital Market 2.0 - 2.0

Total Gross Commitments 33.1 9.8 42.9less cancellations, terminations,repayments and sales 9.5 1.8 11.3

Total Commitments now held by IFC 23.6 8.0 31.6

- 45 -ANNEX IIIPage 1

KENYA - FISHERIES PROJECT

SUPPLEMENTARY PROJECT DATA SHEET

I. Timetable of Key Events

(a) Time taken to prepare: About 15 months.

(b) Preparation by: Department of Fisheries, Ministryof Environment and Natural Resources

(c) Initial discussions withIDA: June 1977

(d) Appraisal mission departure: July 1979

(e) Negotiations: April 1980

(f) Planned date ofeffectiveness: October 1980

II. Special Bank Implementation Actions

None

III. Special Conditions

(1) The required qualifications and experience of all senior staffand the job descriptions of all other staff shall be satisfactoryto IDA (para. 62).

(2) The Government would submit to IDA for approval the terms ofreference and qualifications of consultants and internationallyrecruited experts engaged for the Project and would consultwith IDA on their appointment (paras. 55-58).

(3) The management of the ice plants in Kisumu and Homa Baywould devolve to cooperative societies after no less than twoyears of operation with the approval of the Project Manager,MENR, MOCD, CBK and the interested cooperative (para. 63).

(4) The appointment of the Project Manager would be a conditionof credit effectiveness (paras. 62 and 79).

- 46 -

ANNEX IIIPage 2

(5) Special conditions of disbursement would include:

(a) for the fish farming component:

(i) the appointment of an acquaculturist and ahatchery specialist (para. 55);

(ii) the establishment of a Fish Farming DevelopmentCenter (para. 55);

(iii) IDA's approval on a site for the Fish FarmingDevelopment Center (para. 59).

(b) for the shore facilities and fishing craft component -the execution of a Subsidiary Loan Agreement satisfac-tory to IDA between the Government and CBK (para. 68).

(c) for fisheries research on Lake Victoria - IDA's approvalof detailed programs (para. 56).

(d) for development studies and activities in the Lake VictoriaBasin - IDA's approval of the Terms of Reference for suchstudies and activities (para. 60).

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