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Document of

The World Bank

FOR OmCIAL USE ONLY

Report No. 13196

PROJECT CONPLETION REPORT

ALGERIA

AGRICULTURAL CREDIT PROJECT(LOAN 3009-AL)

JUNE 23, 1994

Agriculture Operations DivisionCountry Department IMiddle East and North Africa Regional Office

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

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PROJECT COMPLETION REPORT

DEMOCRATIC AND POPULAR REPUBLIC O1' AIGEP7 T,

AGRICULTURAL CREDIT PROJE<

_LOAN 3009-AL)

CURRENCY EQUIVALENTS

Currency Unit = Algerian Dinar K

]\t Appraisal (October 1988) JUSSi = DA a

Annual Average: 1989 US$1 - DA '1

1990 : USl A -

1991 US$ i DA 18

1992 :T, _-\ 22,

WEIGHTS AND MEASURES

Metric System

GLOSSARY OF ABBREVIATIONS

BA Banque d'Algerie (Algerian Central Bank)

BADR Banque de l'Agriculture et du D6velopp>-"t RuP-v'Agriculture and Rural Developm-nt Pank

CEO Chief Executing OfficerCNP Conseil National de la Planifij->tion

DAS Domaines Agricoles Socialistes

DTAF BADR's Financial and Accounting DepRrtment

EAC Exploitations Agricoles Collectives (Collertive F -

EDIMA Regional Agricultural Marketing Board

EFSAL Enterprise and Financial Sector Adjustment l.oan

ERSL Economic Reform Support Loan

FDP Fonds de Participation

GDP Gross Domestic Product

JEXIMBANK Export-Import Bank of Japan

MIS Management Information System

M&LT Medium- and Long-Term Loans

ONAPSA National Agricultural Marketing Boari

PPF Project Preparation Facility

SYBU Universal Banking System

TA Technical Assistance

BADR's FISCAL YEAR

January 1 - December 31

FOR OFFICLIL USE ONLYTHE WORLD BANK

Washington, D.C. 20433U.S.A.

Office of Director-GeneralOperatlon. Evaluation

June 23, 1994

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on AlgeriaAgricultural Credit Project (Loan No. 3009-AL)

Attached is a copy of the report entitled "Project Completion Report on Algeria--AgriculturalCredit Project (Loan 3009-AL)" prepared by the Agricultural Operations Division for the Maghrebof the Middle East and North Africa Regional Office (MNlAG). There is no Project Review fromthe Borrower's perspective (Part II).

The outcome of the project is rated as unsatisfactory. The attempt to combine a quick-disbursing loan for a commodity import program with financial intermediary lending (FIL) did notwork. The FIL objectives were to upgrade the Agricultural and Rural Development Bank (BADR)and to extend credit for farm equipment to newly privatized farmer groups and individuals. However,the equipment was selected by the Government before the groups were privatized and some $35million of tractors were left unsold.

While institutional development objectives at BADR were achieved in part, notably theintroduction of a computerised management information system, BADR's financial performance hasbeen disappointing. Delays in upgrading BADR's accounting system led external auditors to issuea disclaimer regarding the bank's accounts and a later assessment by external auditors under a relatedBank operation found that BADR was bankrupt. The sustainability of project benefits is uncertain,since BADR's continued operation hinges on the Government's continued willingness to provideinfusions of equity.

The Project Completion Report is of acceptable quality, considering the lack of data. Anaudit is planned.

Robert Picciottoby H. Eberhard Kopp

Attachment

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

PROJECT COMPLETION REPORT FOR OFFICIAL USE ONLY

DEMOCRATIC AND POPULAR DEMOCRATIC REPUBLIC OF ALGERIA

AGRICULTURAL CREDIT PROJECT

(LOAN 3009-AL)

TABLE OF CONTENTS

Page

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (i)

Evaluation Summary . . . . . . . . . . . . . . . . . . . . . . . . . (ii)

PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE VIEW 1

Project Identity . . . . . . . . . . . . . . . . . . . . 1

Project Background . . . . . . . . . . . . . . . . . . . 1

Project Objectives and Description . . . . . . . . . . . 3

Project Design and Organization . . . . . . . . . . . . . 4

Design . . . . . . . . . . . . . . . . . . . . . 4Preparation and Appraisal . . . . . . . . . . . 4Negotiations and Effectiveness . . . . . . . . 4

Project Implementation . . . . . . . . . . . . . . . . . 5

A) Credit Component . . . . . . . . . . . . . . 5

B) Institutional Development Component . . . . 7

C) Project Costs, Disbursements, and Audit . . 12

Project Results . . . . . . . . . . . . . . . . . . . . 12

Project Sustainability . . . . . . . . . . . . . . . . . 13

Bank Performance ... . . . . . . . . . . . . . . . . . 14

Borrower and Guarantor's Performance and compliance

with covenants . . . . . . . . . . . . . . . . . . . . . 15

Project Relationship ... . . . . . . . . . . . . . . . 16

Lessons Learned . . . . . . . . . . . . . . . . . . . . 17

PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE . . . . . . . . . . 19

Overview of the Project . . . . . . . . . . . . . . . . . . . .

Project Development and Implementation . . . . . . . . . . . . .

World Bank Performance during the Project . . . . . . . . . . .

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III: STATISTICAL INFORMATION . . . . . . . . . . . . . . . . . . . 20

Table 1 Project Timetable .. 20

Table 2 Cumulative Estimated and Actual Disbursements,

and by category . . . . . . . . . . . . . . . . . 21

Table 3 Equipment Purchased Financed by the Loan . . . . . 22

Table 3 Status of Covenants .. 23

Table 5 :Use of Bank Resources

A) Staff Inputs ... . . . . . . . . . . . . . . 23

B) Mission Data ................ . 24

Table 6 Related Bank Loans ... . . . .. . . . . . . . . 26

Table 7 Project Cost and Financing . . . . . . . . . . . . 26

MAP: IBRD 19976R

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

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DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA


(LOAN 3009-AL)

PREFACE

This is the Project Completion Report for Algeria's Agricultural

Credit Project (Loan 3009-AL) for which a loan of US$110 million to the

Agriculture and Rural Development Bank (BADR, the Borrower) with the guarantee

of the Democratic and Popular Republic of Algeria, was approved on December

13, 1988. The legal documents were signed on August 31, 1989 and the loan only

became effective on March 29, 1990, because of cross-effectiveness with the

Japan EXPORT-IMPORT Bank's loan of the same amount. The original closing date

was September 30, 1992. The last disbursement of loan proceeds was made on

October 5, 1992, but it was agreed to leave the loan account open until

January 31, 1993. The loan account was finally closed on May 10, 1993 with a

cancellation of US$ 31,667,275.50.

The Project Completion Report was jointly prepared by the

Agriculture Operations Division for the Maghreb of the Middle East and North

Africa Regional Office (Preface, Evaluation Summary, Parts I and III) in

cooperation with the Borrower.

Preparation of the PCR started end January 1993. Parts I and III

were prepared on the basis of information available in the Division's and the

Bank's central files. The main sources of information were: the appraisalreport No 7080-AL, dated November 21, 1988; the Loan Agreement; supervision

reports; correspondence between the Bank and the Borrower; internal Bank

memoranda; and consultation with implementing officials and staff during a

completion mission performed in May 1993. At that time comments were made by

the Borrower which are reflected in parts I and III, but were not confirmed in

writing by BADR (Part II).

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(LOAN 3009-AL)

EVALUATION SUMMARY

Project Background

1. Prior to the 1986 oil price collapse, the Algerian economy was

guided and directed by a socialist central planning system driven by

nationalistic policies in the pursuit of economic independence. The powerful

central planning body, the Conseil National de la Planification (CNP) gavepriority to the dominant socialist public sector, and macroeconomic policiesadopted at that time were characterized by large public sector deficits, price

controls, and goods rationing. Centrally managed public enterprises,

operating under pervasive price controls, allocated resources inefficiently.

In agriculture, highly subsidized credit was passed on to inefficient and

badly managed State-owned cooperatives. In the early 70s, the Bank attempted

to renew its lending program in Algeria's agriculture sector with a view to

initiating a change in macroeconomic policies, and the hope was to have a

project that could be processed rapidly within the Bank and disbursed quickly

after signature of the loan. A proposed agriculture credit project wasrejected both by the Algerian Authorities who did not then need the Bank's

money or advice, and by the Bank's Management who realized that with such adistorted policy framework, and without a coherent country strategy forAlgeria's financial sector development, the rural development bank, BADR could

never hope to achieve its supposed objectives.

2. In 1986, Algeria's economical environment worsened, as a

consequence of the dramatic fall in world oil prices. This in turn spurred

Government to implement a wide ranging program of economic and structural

reforms to transform the centrally planned economy into one based on the

decentralized operation of markets. The idea of an agricultural credit project

resurfaced, based on the same concept as the earlier rejected project, of

importing commodities to be distributed by state-owned marketing boards.

Confronted with such a deeply distorted policy framework and an inefficient

financial sector, it would have been advisable to provide a more powerfulinstrument in support of a broad range of policy and institutional reforms.Though such an instrument was in preparation, the Bank decided nevertheless toencourage Government in its move toward a market economy, and to take the risk

of showing support for such reforms through a sectoral project of limited

scope. The hope was that such an effort would pave the way to more extended

Bank support.

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Proiect Obiectives and Description

3. The project was prepared at a crucial moment of important changesin the political orientation of Algeria's economy. Thus, project objectivesmust be seen at the three following levels: (i) at the Borrower's level, tostrengthen BADR and helping it to carry out its new mandate of channelingfunds to private farmers with an effective staff and management system; (ii)at the agriculture sector level, to provide independent farmers andcooperatives with agricultural and agro-industrial equipment to improveproduction and productivity; and (iii) at the macro-economical level, to helpGovernment implement its reform program, especially in the field of positiveinterest rates, privatization of the banking sector, and liberalization ofprices and imports. To achieve the above objectives, the project supportedBADR's activities in agricultural credit operations and institutionaldevelopment. The project comprised the following components: (a) CreditComponent: BADR's two-year time slice program of medium and long-term lendingfor on-farm investments for about 21,000 farms, and investments in agro-industry for small-scale private firms which, prior to the 1986 economicreform, had been starved of credit; and (b) Institutional Development,including a Management Information System , training, and technicalassistance.

Implementation Experience

4. On the Credit Component, the Ministry of Agriculture hadestablished the list of goods to be imported before the agricultural sectorwas privatized. Thus, some of the heavy equipment (tractors) previouslyordered for big socialist cooperatives was no longer adapted to the smaller,newly privatized farmers' groups. When the cost of imported equipment trebled,due to devaluation and to import tariffs, such equipment was left unsold. TheMinistry of Agriculture also designated the monopolistic public marketingentities which would import (ONAPSA) and distribute (EDIMAs) such equipment.The relationship between BADR, these public marketing boards and the sub-borrowers was not clearly defined, in terms of who would reimburse BADR andwho would supervise the sub-borrowers. The Procurement process has beenhandled in accordance with the loan agreement and Bank's guidelines duringproject implementation, with sustained contribution from ONAPSA and efficientsupport from Bank staff. The initial risk was that the Bank guidelines wouldnot be followed either because Government would challenge them or would notunderstand them. ONAPSA had good technical staff, and starting in early 1989,fruitful cooperation with Bank staff was established. The results of theProcurement process, however, are mixed as many items imported (e.g.,tractors) did not match the market needs and conditions of projectbeneficiaries, and because procurement procedures used under this project areusually not applicable to lines of credit. Agro-industry was undoubtedly themost promising sub-sector of Algerian agriculture: consumer demand wasenormous, profits were substantial, and the existing private agro-industrialfirms were well managed and eager to grow. As early as July 1989, half a dozenof these projects were submitted to BADR for analysis and processing.Unfortunately, only one went through, due to: (i) the discouraging long delaysin sub-loan processing, as a result of a conflict of authority between BADR inthe one hand, and the National Chamber of Commerce, which had the monopoly for

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approving private investors' investments, and the Ministry of Commerce, whichhad the monopoly for delivering import licenses, on the other hand. Thisbureaucratic bottleneck should have been resolved at negotiations; (ii) thevery unfavorable macro-economical environment, not conducive to long terminvestments; (iii) the majority of the requests had to be turned down becauseof unsettled land ownership, unclear partnership arrangements, andinsufficient financial participation by the investors; (iv) reluctance of theinvestors to accept Bank procurement guidelines; and (v) the investors'reluctance to bear the exchange risk, in a very shaky socio-economicenvironment.

5. Concerning the Institutional Development Component, three majorelements can explain the limited results (within the project time frame)obtained in reaching the project's institutional development objectives:first, BADR's critical financial situation; second, changes in top levelmanagement and conflicting instructions received by higher level authorities;and third, the slow initial implementation, as the revised work programstarted in mid-1990 (when, coincidentally and because of late effectivenessand slow initial implementation, the first disbursement of loan proceedsoccurred). In spite of that, some institutional objectives have beenreasonably well implemented. The most successful achievement has been theimplementation of a computerized data processing system covering BADR'soffices and branch network. Also successful, have been the drafting of aGeneral Policy Statement, and of a Medium-Term Strategy for Lending, as thesetwo activities were considered the backbone of BADR's institutional recovery.As a result, BADR imposed strict discipline in granting its funds to farmers.The result was a sharp increase in the repayment rates of seasonal credits(not financed by the Bank) since 1991. Because of the priority given to thecomputerization of BADR, and because of the sequential order in which thevarious tasks had to be performed, the implementation of training activitiesand the adoption of an adequate accounting system have only been initiatedduring the last months of the project, but are now actively implemented.

Results

6. Concerning the Credit component, project files do not provideinformation concerning the number of project beneficiaries or investmentsfinanced, nor the impact of these investments on their revenues. Moreover,the lack of detailed information in BADR accounts precludes any analysis ofthe portfolio, or of the level of recovery. Unless this information isfurnished by BADR in its Part II of the PCR, it must be assumed that, withexception of SOTRAPOT, the single agro-industrial investment financed by theproject, whose results were positive, the impact of the project is unknown(see end of para. 10(d)). With regards to BADR credit activities, however,some encouraging results on seasonal credit recovery in 1991 were given by theApril 1992 supervision mission: a recovery rate of 82.7% for the EAC and of75.4% for the individual farmers, a sharp improvement from the 35% figure in1988/89. This gives an indication that, starting in 1991, the cooperatives andfarmers were selected with more rigorous criteria and thus were in better

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financial condition. One problem is that the tractors purchased under theProject did not benefit farmers clients of BADR, and most of these tractors

have not been sold.

7. As for the Institutional Development Component, it was known at

appraisal that reaching project targets was a long-term objective. Moreover,

the legacy of 25 years of central planning had riddled the economy with deep-

rooted distortions and inefficiencies that have proven extremely difficult andtime consuming to correct: BADR's CEO had justifiably complained about these

distortions as BADR was instructed to operate under free market conditions,

but was not given the financial autonomy to do so. In spite of these

difficulties, the results obtained by BADR's new management in a very shorttime limit (May 1990-May 1993) is notable: BADR is in the process of

implementing a modern computerized operating tool which, when completed in

late 1994, will help this bank better achieve its economic function once the

structural adjustment process will be completed. Today, this process is

slowly underway, in spite of huge financial and human inputs under an EconomicReform Support Loan (recently completed), a Technical Assistance Project andan Enterprise and Financial Sector Loan, EFSAL. The merit of the BADR project

was that it courageously supported initiation of the first reforms in the

financial and agricultural sectors, thus paving the way for future and morepowerful instruments.

8. As an activity financed by the EFSAL, an audit of the Algerianbanking sector has been carried out recently by the international auditingfirm Coopers and Lybrand. The audit report, presently in the hands of theCentral Bank, has not yet been released, but summarized conclusions concerning

BADR have been obtained, and confirm the two following points: (i) BADR's

financial situation is preoccupying, and a massive injection of cash would be

needed to allow it to regain a competitive position; and (ii) as a banking

institution, BADR has done substantial progress in the way it operates. It has

made a good investment choice (the full computerization of its operations,

extended to its national network of almost 300 units, unique among the banking

sector in Algeria), and has made important investments in physical resources(hardware and software) as well as in human resources (training) which puts

BADR above its competitors. The auditors estimate that to complete itscomputerization program would cost BADR an additional US$ 6.0 million.

Sustainability

9. Concerning the credit component, the project had a limited impact

in the development of Algeria's agriculture (nor was it the project'sintention to have one): this component was to be implemented over a two year

period, and was considered by the Bank at the time of project design as the

price to be paid for participating in the country's financial policy reforms.Nevertheless, recent information indicate that credit conditions presentlyapplied are nearing market conditions and that increased discipline in loan

allocation has improved annual recovery rates. But it has not solved the

problem of past arrears. Also, the project was powerless in redressing BADR's

financial situation which remains worrisome: the recent audit of the Algerian

banking sector confirms that BADR is bankrupt, and that massive recapitaliza-

tion would be needed to allow BADR to compete successfully. But such an issue

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must be dealt with on a macro-economic level under the auspices of theEnterprise and Financial Sector Adjustment Loan, EFSAL. On the contrary,concerning the institutional development component, the project certainlyhelped BADR modernize its organizational structure and acquire an efficientmanagement tool which places it on this ahead of the other Algerian commercialbanks and will enable it in the near future to operate more efficiently oncethe country's structural adjustment process will have reached a further stageof implementation, eliminating major economic distortions and allowing BADR'scustomers (public or private, agricultural or non agricultural enterprises) toperform satisfactorily and make profits.

Lessons Learned

10. The key lessons of the project, for both the Bank and theBorrower, can be summarized as follows:

(a) Project Justification: Bank guidelines on Financial SectorOperations suggest that the project should not have been initiatedbefore an environment conducive to the efficient development ofthe country's financial system could be created. If for lendingprogram purposes it was decided to allow the project to proceed,it should have been necessary to re-orient its objectives, torestructure or eliminate the credit component and to concentrateon institutional strengthening, supporting more actively therevised timetable and priorities set up by the new BADR'smanagement, thus paving the way for further restructuring underthe auspices of the on-going EFSAL.

(b) Project Design: an important objective of the project was topromote the development of BADR and a secondary objective was thecommodity import program, which was added as an incentive at theGovernment's request. A line of credit, however, is not theproper vehicle for such an import program. A clearer definitionshould have been given to this second component: it should havebeen considered (i) either as a Structural or Sectoral AdjustmentLoan in which case the condition of funds release could have beendefined without concern for the final beneficiaries, or (ii) as aclassical agricultural credit focusing on final beneficiaries, inwhich case the role played by the participants (BADR, ONAPSA,EDIMAs), should have been redefined (BADR) or eliminated (ONAPSA,EDIMAs) and greater attention paid to the.sub-borrowers duringproject appraisal and during its execution;

(c) Co-Financing Arrangements: If the co-financing institutionwishes to manage its own funds, the processing of both loans mustbe done at the same time and with tight collaboration between theBank and the other institution. Also, parallel cofinancing (bycomponent) is definitely the best option rather than pari-passu asused under this project. Both loans must be negotiated in closecoordination and have similar effectiveness conditions. Ifunexpected complications arise between the Borrower and the otherinstitutions, such co-financing arrangements should be canceled or

- vii -

modified with more flexible cross-conditionalities (the Bank maythen manage the proceeds of the cofinancier's loan on behalf ofthe other institution if requested); and

(d) Condition of Negotiation: It is understood that therestructuring of a financial institution would require itsrecapitalization, resulting in a large immediate cost to thebudget (in the case of BADR, approximately US$0.7 billion); thisin turn would require solutions likely to have macroeconomiceffects extending well beyond the scope of an agricultural creditproject. However, if the socialist farms' uncollectible debtscould not be paid back by the Treasury, at least a limitedsolution should have been found to BADR's liquidity problem, suchas temporarily raising the ceiling of borrowing from the CentralBank without cost, up to a certain level. Another lesson is thatagreement on reporting requirements should be reached atnegotiations, in particular when technical assistance is needed tooverhaul the unreliable information system of the borrower.

11. Some of these lessons have already been incorporated in the on-going EFSAL (Loan 3353-AL) approved by the Bank in June 1991. Theimplementation of the EFSAL-supported reforms is generally progressing in theright direction albeit at a considerably slower pace than expected, due toserious social and political unrest resulting from six years of economicstagnation. Consequently, Government had to reduce the extent and the pace ofthe reform program, priority being given to the enterprise sector. As for thefinancial sector, the restructuring of the five commercial banks, includingBADR, will be based on diagnostic studies of portfolio and institutionalissues yielding action plans to be approved by the Central Bank. A ruralfinance reform project is planned for FY 98 if macro-economic conditions havestabilized in Algeria.




(LOAN 3009-AL)

PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE

Project Identity

Name Agricultural Credit ProjectLoan Number 3009-ALRVP Unit MENA RegionCountry Democratic and Popular Republic of AlgeriaSector AgricultureSub-sector Agricultural creditBorrower Agriculture and Rural Development Bank'Guarantor Democratic and Popular Republic of Algeria

Proiect Background

2.01 Prior to the 1986 oil price collapse, the Algerian economy wasguided and directed by a socialist central planning system, driven bynationalistic policies in the pursuit of economic independence. Given thecountry's national and ideological roots and the wounds it sustained duringthe war of independence, it is easy enough to understand why the fundamentalcharacteristic of Algeria's economic orientation was then to secure totalindependence from foreign intervention, not only in the field of equityparticipation but also in technology transfer and consultation, and thisirrespective of the economic costs involved. Buoyed by substantial oil and gasrevenues (which then seemed capable of giving the country its financialindependence), investment priorities aimed at setting up a large industrialsector to the detriment of agriculture, whose share in GDP declined from 15%in 1965 to 6% in 1984. This gave rise to serious food supply problems andcritical dependence on food product imports, exacerbated by one of the highestrates of population growth in the world. The powerful, highly centralizedMinistry of Planning - transformed after 1986 into the not less powerfulConseil National de la Planification (CNP) - gave priority to the dominantsocialist public sector, and macroeconomic policies adopted then werecharacterized by large public sector deficits, price controls, and goodsrationing. Centrally managed public enterprises operating under pervasiveprice controls, allocated resources inefficiently. In an atmosphere of laxfinancial discipline, public enterprises borrowed heavily to cover the

I/ Banque de l'Agriculture et du Developpement Rural d'Algerie

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resulting operating losses and resorted to soft loans and capital transfersfrom the Treasury to finance investments, leading to large Treasury borrowingrequirements, high monetary growth, and inflationary forces.

2.02 In agriculture, the CNP also gave priority to the socialistfarming system which had been codified by the 1974 Agrarian Revolution(creation of the state-owned and State-run Domaines Agricoles Socialistes,DAS). Highly subsidized credit was passed on to these inefficient and badlymanaged DAS through a financial public entity, first the Banque Nationaled'Alg6rie (BNA) until 1982, then the Banque de l'Agriculture et duDeveloppement Rural (BADR). The decision to grant funds, requestreimbursement or pardon past loans remained at the political level of the CNP.In spite of being called a bank, and in spite of having the monopoly to passTreasury funds to the DAS, BNA and BADR have actually functioned as merebranches of the Ministry of Finance.

2.03 In the early 70s, the Bank attempted to renew its lending programin Algeria's agriculture sector and a modest US$ 8.0 million loan was grantedin 1975 to support a limited technical assistance project for ruraldevelopment (Loan 1159-AL). The Bank was also interested in becoming involvedin agriculture credit with a view to initiating a change in macroeconomicpolicies, and the hope was to have a project which could be processed rapidlywithin the Bank and disbursed quickly after signature of the loan. With theseaims in mind, a commodity import program was identified for the publicmarketing entities (offices), as these entities already had investmentprograms approved under the second Development Plan (1974-77). Between October1973 and February 1976, five missions visited Algeria but to no avail. Theproposed project was finally rejected both by the Algerian authorities who,then, did not need Bank's money or advice, and by the Bank's Management, whorealized that with such a distorted policy framework, and without a coherentcountry strategy for Algeria's financial sector development, BADR could neverhope to achieve its supposed objectives.

2.04 In 1986, Algeria's economical environment worsened, as aconsequence of the dramatic fall in world oil prices (crude petroleum pricesper barrel fell from US$ 26.7 in 1985, to US$ 13.6 in 1986). This spurredGovernment to implement a wide ranging program of economic and structuralreforms to transform the centrally planned economy into one based on thedecentralized operation of markets. In agriculture, the DAS, which hadcontinuous operating deficits, were dismantled in 1987 and replaced by smallerquasi-private voluntary groups of farmers, the EAC (Exploitation AgricolesCollectives) and the EAI (Exploitations Agricoles Individuelles). As landrights are limited to the usufruct, no land market has developed yet.Parallel to that, Government passed in 1986 a Banking Law which, ifimplemented, would lead to drastic changes in the banking profession,transferring greater financial responsibility to the banks (without, however,giving them adequate financial or managerial autonomy). The idea of anagricultural credit project resurfaced, based on the same concept of commodityimports to be distributed to the newly created EAC and EAI by the state-ownedmarketing boards. Confronted with such a deeply distorted policy framework andan inefficient financial sector, it would have been advisable to provide amore powerful instrument in support of a broad range of policy and

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institutional reforms. Though such an instrument was in preparation, the Bankdecided nevertheless to encourage Government in its move towards a marketeconomy, and to take the risk of showing support for such reforms throughsectoral project of limited scope. The hope was that such an effort would pavethe way to more extended Bank support.

Project Obiectives and Description

3.01 The project was prepared at a crucial moment of important changesin the political orientation of Algeria's economy, as the transition from asocialist centrally-planned economy to a private sector market-orientedeconomy - even though gradual in time and limited in scope - required dramaticand courageous modifications of the country's political orientation. Thus,project objectives must be seen at the following three levels: (i) at theBorrower's level, to strengthen BADR and help it to carry out its new mandateof channeling funds to private farmers with an effective staff and managementsystem; (ii) at the agriculture sector level, to provide independent farmersand cooperatives with agricultural and agro-industrial equipment to improveproduction and productivity; and (iii) certainly the most important objective,at the macro-economic level, to help Government implemnent its reform program,especially in the field of positive interest rates, strengthening of thebanking sector, and liberalization of prices and imports. After two decades oflimited Bank intervention in the financing of Algerian agriculture, thisproject was seen by the Bank as an important first step in resuming itsinvolvement and support for crucial policy changes.

3.02 Project Description. To achieve the above objectives, the projectsupported BADR's activities in the areas of agricultural credit operations andinstitutional development. The project, as agreed upon at negotiations,comprised the following credit and institutional components:

(a) Credit Component. BADR's two-year time slice program of medium andlong-term (M&LT) lending for: (i) on-farm investments for about 21,000 farms,including the newly created EACs, providing them with mostly imported farmingequipment, according to a pre-established list detailed in the Staff AppraisalReport; and (ii) investments in acro-industry, for small-scale private firmswhich, prior to the 1986 economic reform, had been starved of credit.

(b) Institutional Development. This included: (i) ManagementInformation System (MIS): the review and upgrading of the accounting system,followed by the design and establishment of a computerized managementinformation system. This included technical assistance, hardware, and relatedsoftware and training for staff; (ii) Training: a complete training programfor BADR staff, including technical assistance to develop a strategy and long-term program; and (iii) technical assistance (TA): short-term TA to design theabove master plans for the MIS and training programs, as well as for BADR'smedium-term strategy; on-the-job training for lending in agro-industrialactivities; and external auditing.

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Proiect Design and Organization

4.01 Design. The initial concept of the project - a structural orsectoral adjustment type of operation with a commodity import programsupporting long-term policy changes - was adopted as early as 1975, when theBank was trying to buy its way into Algeria's economic development program. In1986, when Government decided to initiate its program of macroeconomicreforms, the dialogue between the Bank and Government was renewed, and thedecision to join these two components, despite the lack of logical linkbetween them, resulted from a compromise. For the Bank, financing an importcommodity program was the price to pay for participating, with a line ofcredit to BADR as a vehicle, in financial policy reforms. For Government,reluctant as it was to accept foreign intervention, the price to pay for thesequickly available foreign exchange resources was the Bank-sponsored, technicalassistance-oriented, institution building component. The concept of an importloan is not, in itself, detrimental, as projects of a similar type have beensuccessful in reaching their objectives. This was not the case for the presentproject, for many reasons, including a lack of consensus between the partieson project priorities and objectives, and the use of an inappropriate vehicle(line of credit) for the Loan.

4.02 Preparation and Appraisal. The project was prepared by variousGovernment entities. Concerning agricultural equipment imports, the Ministryof Agriculture and Fisheries presented a list of equipment, which had beenprepared before the privatization of the agricultural sector. The CNP gave themonopoly for purchase and distribution of this equipment to public entitiesunder its control: at the national level, the Office National desApprovisionnements et des Services Agricoles (ONAPSA), would be in charge ofprocurement and purchase, and at the regional level, distribution would bemade by the Entreprises de Distribution du Materiel Agricole (EDIMAs). Asexpected, BADR, the Borrower, prepared a draft plan for required institutionalchanges.

4.03 On the Bank side, the project was processed smoothly. Anidentification mission was sent in September 1986 and recommended theallocation of a Project Preparation Facility of US$ 750,000 to financetraining, technical assistance and office technology. (Approved by the Bankin January 1987, the PPF only became effective a year later, and only US$80,000 was actually spent, thus defeating its purpose). A preparation missionfollowed in February 1987,and the appraisal mission took place in October1987.This mission was impressed by the speed with which reform measures hadbeen imposed. The reforms put considerable pressure on BADR, which had tostart dealing with a private sector largely innocent of sound bankingtechniques. This required dramatic changes not only in methods (a technicalproblem) but of mentality (a human problem, and more difficult to tackle). Inthe Post-Appraisal Issues Paper, the Bank's participation in the project wasquestioned, as the unprecedented shift in policies resulted in enormousuncertainties both for the agricultural sector and for BADR. The decision toproceed was made with full knowledge of the high risk involved.

4.04 Negotiations and Effectiveness. The next phase of the projectcycle also started smoothly, with pre-negotiations successfully concluded in

Algiers in February 1988. However, it appears that the conditionalityrequested by the Bank to protect BADR against a changing environment was notadequate. This mainly concerned BADR's financial situation: until 1986, theCNP continued to set the volumes and destination of funds to socialist DAS,and the CNP and not the DAS continued to bear the financial risk. BADR, thusreduced to a mere branch of the Ministry of Finance for passing on funds, didnot concern itself with rules of creditworthiness or economic/financial ratesof return. This resulted in an accumulation, in BADR's balance sheet, of DA15.0 billion (US$ 3.2 billion) in arrears which had no chance of beingrecovered. The Bank should have insisted that the bad debts be removed fromBADR's balance sheet and transferred to the Treasury. Two events complicatedthe processing of the loan: an additional conditionality imposed by the Bankat the end of negotiations, and the excessively long period needed to processthe loan granted by the Export-Import Bank of Japan (JEXIMBANK).

4.05 Additional Conditionality. At the request of high-level Bankmanagement, an addendum to the Minutes of Negotiations was made, strengtheningBank's position regarding: (i) the exchange risk, the Bank requesting thatthis risk be borne by the sub-borrower instead of being included in theGuarantee Fund as previously accepted during pre-negotiations; and (ii) theinterest rates charged by BADR must be "adequate", i.e. raised by twopercent, this increase being a condition of Board Presentation. These twopoints were rejected by the Ministry of Finance. An exchange of viewsfollowed, the Bank withdrew these additional conditions, and the loan wasapproved by the Board on December 13, 1988. On the foreign exchange risk, theintention of the Government (as finally agreed with the Bank) was to ensurethat the Guarantee Fund enable some risk sharing between Government, BADR andsub-borrowers. The Fund was to cover part of the risk on the principaloutstanding and interest, for both the Bank loan and JEXIM Bank loan.

4.06 JEXIMBANK expressed interest in co-financing the project (as wellas Power III and Railways II projects) only few months before negotiations. Itwas JEXIMBANK's first co-financing experience with the Bank and its firstintervention in Algeria, and as might have been expected, there were majordelays in processing the loan due to two stumbling blocks: a legal issueconcerning arrangements for the settlement of possible future disputes, andthe choice of the Agent Bank. The JEXIMBANK loan was signed only in July 1990,26 months after the IBRD loan had been negotiated. The project thus becameeffective only in March 1990, because of a rigid cross-effectivenesscondition. This meant that contracts worth US$ 100 million signed in October

1989 sat for over a year before being processed (the first IBRD disbursement

was made on August 13, 1990).

Project Implementation

A) CREDIT COMPONENT

5.01 Public Marketing Agencies. There is a flaw in the design of thiscomponent because of the discrepancy between what is generally done in aclassic credit project and the concept of a commodity import program adopted

here. This flaw is reflected in the Loan Agreement. Generally, what anagricultural credit bank intends to do is to supply funds to farmers and otherclients. Thus the focus is on the farmer and the clientele of the bank: theirfinancial needs, the way eligible farmers will be selected, the level of theircreditworthiness, the justification for borrowing (is the investmenttechnically, financially, economically and environmentally sound): all thesebasic elements are detailed in Schedule 6 of the Loan Agreement. However,farmers, as such and as sub-borrowers, are in fact entirely absent from thisproject. Because of the nature of this component, only public entities havinga monopoly of importing and distributing agricultural equipment are involved.This is stressed in the Minutes of Negotiation and appears in Section 3.04 ofthe Loan Agreement (" The Borrower shall make legal arrangements, inconsultation with the Bank, with public agencies of the Guarantor for thepurpose of the procurement and distribution of goods required for investmentprojects".). In such arrangements, and as stated in the Minutes ofNegotiations, the obligations will be for BADR to finance the purchase ofgoods, and for the marketing agency to reimburse BADR. The following publicentities were designated by the Ministry of Agriculture: for purchasing,ONAPSA, and for regional distribution, the EDIMAs. As a result, the Ministryof Agriculture and its marketing affiliates were given the responsibility ofdesignating the sub-borrowers. By abandoning this prerogative, BADR alsoabandoned the security of recovering its loans.

5.02 Selection of Equipment. The Ministry of Agriculture, which,oddly enough, was not represented at negotiations and has not been an officialinterlocutor during project implementation, had established the list of goodsto be imported. This list had been compiled before the agriculture sector wasprivatized, and the small, newly privatized EAC could not afford to purchasesome of the agricultural equipment, mainly expensive heavy tractors.Unfortunately, this list had been approved by a previous identificationmission, instead of challenging some of the items proposed, such as thetractors: the flaw of this selection process was that it did not result fromclearly specified needs expressed by independent farmers, but had beencompiled more on political grounds than on technical viability. However, itmust be recognized that the distribution of equipment (except tractors) wenton smoothly till the November 1991 devaluation of the Algerian dinar (when thevalue of the dollar jumped from 8 to 21 dinars), and this after the equipmentcontracts were signed. This, together with the imposition of an import tariff,explains in part that approximately 3,000 tractors worth US$35.0 million, wereleft unsold in the EDIMAs warehouses. (since the end of the project, 900tractors have been sold in April and May 1993, but it is unclear if all ofthem will be sold by the end of 1993, despite the incentive given as a resultof a decision to reduce their selling prices from DA 550,000 to DA 400,000,and to reduce the interest on loans from 22% to 7%).

5.03 Procurement. The Procurement Process has been handled as plannedduring project implementation (i.e. in accordance with the Loan Agreement andBank's guidelines) and with the assistance of the Procurement Agency ofAlgeria, ONAPSA which provided sustained and efficient support. At the end of1988, ONAPSA had been designated by the Ministry of Agriculture as themonopolistic importer of agricultural equipment, and the risk was that Bankguidelines would not be followed either because Government would challenge

them, or would not understand them. ONAPSA had an excellent staff, andstarting in early 1989, fruitful cooperation with Bank staff was established.Working sessions took place in Algiers and in Washington to work out newbidding procedures which not only met, but in the case of bid evaluationcriteria, went beyond Bank requirements. Also, the review by the Bank ofprocurement decisions, as specified in Schedule 4 of the Loan Agreement, hasalways been respected. Under the project, the Bank accepted the signing ofSpecial Commitments concerning 26 letters of credit, by which almost US$ 142million worth of equipment was imported, and it is remarkable that this hasbeen done without any major complaints. The results of the Procurementprocess, however, are mixed as many equipment imported (e.g. tractors) did notmatch the market needs of project beneficiaries, and because procurementprocedures used under this project are usually not applicable to lines ofcredit.

5.04 Agro-industrial Investment Projects. Agro-industry wasundoubtedly the most promising sector of Algerian economy: consumer demandwas enormous, enhanced by a high population growth rate, profits weresubstantial, and many of the existing private agro-industrial firms were wellmanaged and eager to grow. An international expert accompanied the firstmissions and helped BADR analyze investment projects which had been preparedby private firms with professionalism and competence. As early as July 1989,half a dozen of these projects were submitted to BADR for analysis andprocessing. Unfortunately, only one went through, and five factors may explainthis unfortunately poor performance: (i) the discouraging long delays in loanprocessing, as a result of a conflict of authority between BADR in the onehand, and the National Chamber of Commerce, which had the monopoly forapproving private investments, and the Ministry of Commerce, which had themonopoly for delivering import licenses, on the other hand. This bureaucraticbottleneck should have been resolved at negotiations; (ii) the veryunfavorable macro-economical environment, not conducive to long-terminvestments; (iii) the majority of the requests had to be turned down becauseof unsettled land ownership, unclear partnership arrangements, andinsufficient financial participation by the investors; (iv) reluctance of theinvestors to accept Bank procurement guidelines; and (v) the investors'reluctance to bear the exchange risk.

B) INSTITUTIONAL DEVELOPMENT COMPONENT

5.05 Background. Until the promulgation in 1988 of amendments to theBanking Law , all banks in Algeria were Government owned and under thetutelage of the Ministry of Finance. Credit operations were highly centralizedwith the powerful CNP governing the allocation of Treasury resources, ofwhich over 95% went to socialist public entities. BADR, created in 1982, hadoperated in this context, and had the monopoly for channeling Treasury fundsto the socialist farms (DAS). Little attention was paid to thecreditworthiness of the DAS and other public sector agencies, as their loanswere implicitly guaranteed by Government. This guarantee was made good in 1987when the DAS were dissolved and their debts assumed, in theory by Government,but in practice by BADR, as these debts remained, unpaid, in BADR's

portfolio. Because BADR served automatically as the supplier of funds, it made

little effort to mobilize resources.

5.06 Project objectives and Initial Implementation. Undoubtedly, BADR'smanagement welcomed the project as a means to support them in their reform

process, and as early as the appraisal phase, a fruitful and intensecollaboration existed with Bank staff. A complete set of measures was agreed

upon, formalized in Schedule 2 of the Loan Agreement, with adequate deadlines,and confirmed in a detailed document called "Terms of Reference for

strengthening BADR", prepared by Bank staff and consultants, and handed to

BADR in May 1989. Respecting, but extending the requirements of the Loan

Agreement, the Terms of Reference divided the action plan into eight

activities: 1) General Policy Statement; 2) Operational Manual; 3) Technicalnorms; 4) Medium-Term Strategy for lending; 5) BADR Organizational Structure;

6) Revision of the Accounting Procedures; 7) Management Information System;

and 8) Master Plan for Training. Each of these activities was assigned to aspecial task force within BADR, and the supervision missions, which always

included high-level specialists, provided efficient guidance and reportedtheir satisfaction on the first phase of implementation.

5.07 Limiting factors to BADR's institutional improvements. Three major

factors can explain the limited results obtained in reaching the project'sinstitutional development objectives: first, BADR's critical financialsituation, second, the lack of managerial continuity, and third, slow initial

implementation resulting in insufficient time to complete institutionalimprovements envisaged at appraisal.

5.08 BADR's critical financial situation. In the context of the

country's sweeping economic and structural reform program, the new banking law

was part of an initial phase of a new institutional and legal frameworkdesigned to disengage Government from the direct management of the economy andto permit enterprises and banks to operate with greater managerial autonomy.It appears that such disengagement was not however replaced with anyappropriate new working framework (privatization was still prohibited then).

This left the banks in a very shaky situation: BADR's new management found

itself with the equivalent of US$3.5 billion in non- recoverable bad debts

with DAS, no cash, no credit policy, no accounting, and a staff not only

unaware of sound banking practices but unwilling to change their working

habits, to the point of refusing the idea of abandoning the centrally-plannedsocialist system. The Algerian authorities and Bank staff were aware of theseproblems but certainly no one then imagined the enormity of the technical,economic, social and political difficulties which would be encountered during

the transition from a centrally-planned socialist system to a market-orientedone. BADR was forced into bankruptcy, and its profitable activities were

paralyzed. Faced with a daily crisis situation, BADR top management had little

time or energy to devote to internal policy reforms.

5.09 Lack of continuity in managerial policies. As it is often thecase, political changes occurring during the execution of a project do reflect

in changes in the managerial set up of project's executing entities, both in

the choice of top level managers as well as in policy orientation imposed by

higher level authorities. Such changes were particularly dramatic in the case

of BADR, due to the transition from a socialist economy to a market-orientedone. Project objectives, set-up during preparation between certain Bank staffand Borrower's representatives, are not given the same flavor and level ofpriority by their successors. BADR had to suffer from contradictoryinstructions given by the Ministry of Finance and the Central Bank, mainlyregarding the adoption of a special chart of accounts for the bankingprofession. In May 1990 and fortunately for BADR, an excellent professionaltook over as Chief Executing Officer. He approved the already well advancedGeneral Policy Statement and the Medium-Term Lending Strategy, but proposed adifferent timing for the execution of the remaining project objectives, ofwhich, as top priority, the complete computerization of BADR's offices andbranch network.

5.10 Slow initial implementation. Because of delays in fulfillingJEXIMBANK effectiveness conditions (para 4.06), the first disbursement fromthe Bank Loan was only made in August 1990, twenty months after Boardapproval, time loss which has been compounded by other constraints slowing thepace of project implementation after loan effectiveness. Moreover, theinitiating point of the above mentioned work program also started in mid 1990with the following sequence: (i) completion of the computerization masterplan, then choice of program and equipment; (ii) adaptation of the imposedaccounting system into the data processing system; (iii) drafting of theoperating manuals and of the technical norms; (iv) the setting up and furtherexecution of an adapted training program geared towards the understanding andimplementation of the new accounting system and the computer networking; and(v) the daily production of management tools and reliable financialstatements. The time needed to complete such a sequence has beenunderestimated in the Algerian context.

5.11 Actions successfully implemented. Bank missions focused on theGeneral Policy Statement, and the Medium-Term Strategy Lending, as these twoactivities were considered the backbone of BADR's institutional recovery, anddeadlines for their execution were highlighted in the Loan Agreement: reviewby the Bank before June 30, 1990, and initial implementation before June 30,1991. Bank staff input was important as the proposal for these two documentswas drafted and submitted to BADR. In spite of a series of important changesat the Central Bank (an expanded leadership role in the country's financialsector, tougher regulations concerning interest rates and credit controls) andat BADR (new Board of Directors, the inefficient and disinterested governmentholdings called Fonds de Participation, and new CEO), the General PolicyStatement and the Medium-Term Strategy were submitted to and approved by theBoard of Directors in June 1990. By then, BADR was imposing strict disciplinein granting funds only to those who had no past overdue loans and who had alegal certificate or title to their land. The result was a sharp increase inthe repayment rates in 1991 seasonal credits ( 82.7% for the EAC and 75.4% forindividual farmers, against 71.1% and 58.1% respectively in 1990), but also asharp decline in the number of BADR loans granted (15,800 for seasonal creditsand 5,500 for M&LT credits against 46,700 and 15,800 in 1990 respectively).

5.12 Another area of relative success was the computerization of BADRoffices and branch network. Though the initial plan was only to adopt a

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limited Management Information System, the new CEO opted for this broaderobjective which would encompass BADR's 299 units: 12 headquarter'sdirectorates, 31 regional branches and 256 local branches. The initial MasterPlan was prepared as early as August 1988 and revised by specialistsaccompanying the October 1989 supervision mission. Successive supervisionmissions acknowledged the efficient work performed by BADR's Directorate forOrganization and Computerization, DOI. A leading consulting firm, STERIA, washired to help in the implementation of the final more extensive Master Plan,the first phase of which, decentralization to the Regional Agencies of datacollection and control, was executed in December 1990, with the purchase of 36minicomputers (UNISYS U6000). As of May 1993, 160 units have received thenecessary equipment and 50 are already fully operational. As a result of thesatisfactory execution of the corresponding training program, it is expectedthat 50% of the total network will be operational by the end of 1993, and thewhole process could be completed by the end of 1994.

5.13 Activities partly implemented. The tasks of drafting theOperational Manual, Technical Norms, and Organizational Structure were givento different task forces, and until mid-1990, the supervision missionsreported excellent progress. However, with the adoption in mid-1990 of a newtimetable for the execution of the revised work program, these task forceswere disbanded and the execution of these three documents was included in thecomputerization work program. The Operational Manual has been achieved and isnow part of the computer network, and by simple command included in the menu,available at each desktop. The Technical norms have also been achieved, butare of no practical use because the unit costs have not been updated. As forthe Organizational structure, it has been put on hold, awaiting the result ofa special audit of the Algerian banking sector financed by the Bank as part ofthe EFSAL activities.

5.14 A special case must be made for the implementation of a suitableAccountincq System, as this implementation has taken so long as to havedetrimentally delayed other activities. The system which existed before theproject was inadequate to run a bank: it was adapted to the needs prevailingat the time. For many years, if not decades, financial and accounting staffhad been used to a simplistic system, as there was no need to control the flowof funds as long as BADR remained only a transferring agent between theTreasury and the socialist farms. It was when BADR was instructed to act likean independent profit-oriented bank that the accounting system should haveimmediately adapted to the new needs. It is only at the end of 1991 that theCentral Bank gave instructions to adopt a special accounting procedure for thebanking sector, and this system was then introduced into the computer program,together with the corresponding operational manual. As of today, two differentchart of accounts are used: those units continuing to process accountingentries manually, do so under the old chart of accounts; Those units who haveadopted the computerized SYBU program, do so with the new official accountingsystem (to harmonize the financial statements, a device has been set up tointerface both systems). This inefficient transitional system should end whenthe whole network will have adopted the new system, which should occur at theend of fiscal year 1994. Until then, BADR's financial statements (andspecially the balance sheets) will require additional delays and adjustments.The external auditors contacted during the May 1993 visit, expressed their

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confidence regarding BADR's financial management, and are pleased that theirrecommendations have been implemented.

5.15 Training. This is an activity which has been diversely evaluated.In 1989, various specialized consulting firms submitted their proposals:FINAFRICA (Italy) proposed an action plan for the training of 250 controllers.Then a consultant (the Training Director of Morocco's Agricultural CreditBank, CNCA) and a Canadian consulting firm proposed a complete action plan foradapting training to present needs. These were all put on hold, as BADRmanagement argued that any action plan for training had to await thefinalization of the computerization preparation phase: the choice of program,method and equipment would decide the choice of the training program. For thatreason, such a training program was only initiated in August 1992, after theBank's last supervision mission took place (April 1992), which explains thenegative assessments of this component given by the Bank. However, such atraining program is being presently carried out, internally for theintroduction of the SYBU software program, through five training centers andfourteen training specialists, and externally, through contracts with nationaland international specialized firms. In 1993, BADR will train 3,800 staff, or611 of its global work force, and will allocate to training activities 4.1% ofits budget (against 1% requested by law). Concerning training in particular,as well as institutionally in general, BADR is well ahead other commercialbanks, and this has been recognized in a report on the Algerian banking sectorperformed in late 1992 by a private auditing firm.

5.16 Technical Assistance. A special case must be made for thiscomponent, as there is a diverging opinion between Bank's reports and BADR'sassessment. According to the Bank, the use of (mainly foreign) technicalassistance (TA) was considered essential for reaching the project'sobjectives, and this need was formalized in Schedule 4 of the Loan Agreement:in fact, the project's main objective was to help BADR in adopting a new andcompletely different strategy for lending and operating practices, and it wasobvious that this change would require external TA. Unfortunately, almostevery supervision mission's reports complain about the inadequate use of TA,the absence of which explaining the poor results achieved by the project,especially in training activities and financial management. It may well bethat, especially at the start of the project, national sensitivity and pridedid not favor such external interferences, and the supervision reports mentionfrequently the refusal by the CEO elected in mid-1990 to use external TA. Onthe contrary, according to BADR management, this refusal was not systematic,but selective: TA was required when necessary, and in strict relation to thetimetable set up for the implementation of the adopted plan of action.Consultants were indeed hired, but in sequence, first for the drafting andfurther implementation of the master plan for computerization (specializedfirm STERIA); then, for training, (STERIA again, for SYBU software program,and specialized entities like SIBF and CNPD for other training matters). Asfor the reorganization of the financial department, it has been done with thesupport of STERIA as well as of the external auditors.

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C) PROJECT COSTS. DISBURSEMENTS. AND AUDIT

5.17 Project costs were estimated at US$ 569.2 million, with US$ 546.0million for the credit component, and US$ 23.2 million for the institutionaldevelopment component. Concerning the financing, IBRD and JEXIMBANK were tofinance US$ 110.0 million each, BADR US$ 158.6 million, and the investors US$190.6 million. The only reliable information concerning costs and financing isgiven by Bank loan disbursement categories, but assuming as a firstapproximation that the same percentages of execution apply to BADR and theinvestors' shares, and taking into consideration that US$ 35.0 million ofimported goods were still not distributed, nor paid for by the investors, itmay be estimated that total project cost is US$ 413.0 million, or 72.6% ofappraisal estimate, of which 87% for the on-farm investments, only 7.0% forinvestments in agro-industry, 35.5% for electronic data processing, and 0.0%for training and technical assistance. Concerning Bank funds, the firstdisbursement was made in August 1990, 18 months later than expected atappraisal, but the average overall rate of disbursement of 69.1% is aboveaverage. The balance of US$ 31.7 million remaining in the loan account wascanceled in June 1993. Project accounts and the Special Account were auditedannually, with great difficulties and delays, but BADR's financial statementsremained unauditable for the whole duration of Project Implementation. Aspart of the EFSAL, an audit report on BADR by Coopers-Lybrand is under reviewat the Central Bank since June 1993 (see also para. 6.03 and 9.01).

Proiect Results

6.01 Concerning the Credit component, project files do not provideinformation concerning the number of project beneficiaries or investmentsfinanced, nor the impact of these investments on their revenues. Moreover, thelack of detailed information in BADR accounts precludes any analysis of theportfolio, or of the level of recovery. Unless this information is furnishedin BADR's own PCR (Part II of this report), it must be assumed that, withexception of SOTRAPOT, the single agro-industrial investment financed by theproject, whose results were positive, the impact of the project is unknown.With regards to BADR's credit activities, some encouraging results on seasonalcredit recovery in 1991 (that the Bank did not finance) were given by theApril 1992 supervision mission: a recovery rate of 82.7% for the EAC and of75.4% for the individual farmers, a sharp improvement from the 35% figure in1988/89. This gives an indication that, starting in 1991, the cooperatives andfarmers were selected in 1991 with more rigorous criteria and thus were inbetter financial situation. One issue is that the tractors purchased fromYugoslavia under the Project did not benefit farmers clients of BADR and mostof these tractors have not been sold to farmers.

6.02 As for the Institutional Development Component, it was known atappraisal that reaching project targets was a long-term objective. Moreover,the legacy of 25 years of central planning had riddled the economy with deep-rooted distortions and inefficiencies that have proven extremely difficult andtime consuming to correct: BADR's CEO had justifiably complained about thesedistortions as BADR was instructed to operate under free market conditions,but was not given the financial autonomy to do so. In spite of these

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difficulties, the results obtained by BADR's new management in a very shorttime limit (May 1990-May 1993) is notable: BADR is in the process ofimplementing a modern computerized operating tool which, when completed inlate 1994, will help this bank better achieve its economic function once thestructural adjustment process will be completed. Today, this process isslowly underway, in spite of huge financial and human inputs under an EconomicReform Support Loan (recently completed), a Technical Assistance Project andan Enterprise and Financial Sector Loan, EFSAL. The merit of the BADR projectwas that it courageously supported initiation of the first reforms in thefinancial and agricultural sectors, thus paving the way for future and morepowerful instruments.

6.03 As an activity financed by the EFSAL, an audit of the Algerianbanking sector has been carried out recently by the international auditingfirm Coopers and Lybrand. The audit report, presently in the hands of theCentral Bank, has not yet been released, but summarized conclusions concerningBADR have been obtained, and confirm the two following points: (i) BADR'sfinancial situation is preoccupying, and a massive injection of cash would beneeded to allow it to regain a competitive position ; and (ii) as a bankinginstitution, BADR has done very substantial progress in the way it operates.It has made a very good investment choice (the full computerization of itsoperations, extended to its national network of almost 300 units, unique amongthe banking sector in Algeria), and has made important investments in physicalresources (hardware and software) as well as in human resources (training)which puts BADR above its competitors. The auditors estimate that to completeits computerization program, it would cost BADR an additional US$ 6.0 million.

Proiect Sustainability

7.01 Concerning the credit component, it may be said that the projecthad a limited impact in the development of Algeria's agriculture (nor was itthe project's intention to do so). This component was to be implemented over atwo year period, and was considered by the Bank at the time of project designas the price to be paid for participating in the country's financial policyreforms. Nevertheless, recent information indicate that credit conditionspresently applied are nearing market conditions and that increased disciplinein loan allocation has improved annual recovery rates. But, it has not solvedthe problem of past arrears. Also, the project was powerless in redressingBADR's financial situation which remains worrisome: the recent audit of theAlgerian banking sector confirms that BADR is bankrupt, and that massiverecapitalization would be needed to allow BADR to compete successfully. Butsuch an issue must be dealt on a macro-economic level under the auspices ofthe Enterprise and Financial Sector Adjustment Loan EFSAL. On the contrary,concerning the institutional development component, the project certainlyhelped BADR modernize its structure and acquire an efficient management toolwhich places it ahead of the other Algerian commercial banks and will enableit in the near future to operate efficiently and in a sustainable manner oncethe country's structural adjustment process will have reached a further stageof implementation, eliminating major economic distortions and allowingBADR's customers (public or private, agricultural or non agriculturalenterprises) to perform satisfactorily and make profits.

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Bank Performance

8.01 Preparation Phase. The Bank has been anxious to participate in the

development of Algeria's agricultural sector since the early 70s, and a firstattempt to develop an agricultural credit project, initiated in October 1973,

failed from a lack of consensus on conditionalities. But the idea of financing

a commodity import program was maintained, as it would mean a project which

could be processed rapidly within the Bank and quickly disbursed. It appears

that this sense of urgency still existed also when the project came back out

of the drawer in 1986. The project timetable was somewhat accelerated: the

pre-appraisal mission scheduled for July 1987 was delayed to October 1987, but

upgraded to an appraisal mission. Moreover, to gain time, a Bank delegation

went to Algeria pre-negotiate the Loan (together with the Power III and

Railways II Loans), with the intention of bringing these three loans to the

Board before the end of the fiscal year. This rush had the following negative

consequences: (i) Co-financing arrangements with JEXIMBANK were left totally

in the dark, though it was useless to rush internal loan processing without

taking care of the co -financier's loan, as the two were to be linked by across-effectiveness clause. In fact, the JEXIMBANK loan became etfective only

in July 1990, more than two years after the IBRD loan; (ii) Additional

discussions would have been necessary to try to resolve, even partly, thequestion of BADR's liquidity, helping BADR to operate correctly in a free

market environment. The unresolved question of the arrears from the socialist

sector debt (over US$ 2.5 billion, 22% of BADR's assets, and 3% of the

country's GDP) has weighed very heavily on BADR's operations. (iii) The

adoption of the 1973 commodity import operation (with its pre-established

list of goods to be imported over a two-year period) created an ambivalence as

to the nature of the project:was it a sector loan type of operation, with the

importation of goods to be left to the Borrower, or was it to be a classical

operational credit project, in which case, more attention should have beenpaid to: a) the sub-borrowers (who are they, what are their needs, what is the

status of the other elements of the support package such as research,extension, marketing); and b) since the participation of intermediate

marketing agencies such as ONAPSA and the EDIMAs was imposed, the role of

these participants should have been defined more clearly. In this respect,

Annex 4 of the Staff Appraisal Report is confusing: it is not clear who

reimburses BADR, the importing agency or the sub-borrowers.

8.02 Supervision. Knowing that the execution of the project would be achallenge, the Bank made a real effort to strengthen supervision, not only

quantitatively but also qualitatively. In the initial phase of execution (1989

and 1990), the missions included a variety of high-level specialists who

enthusiastically provided very useful recommendations, and some of them wouldhave been willing to stay as long-term consultants (or in line positions) to

help implement these recommendations. Bank staff at headquarters also made an

important contribution, drafting terms of reference and action plans in a wide

variety of fields. Also, special attention was given to compliance with Bank

Guidelines regarding the bidding process of over US$142.0 million worth of

equipment imported without a major dispute. However, more attention could havebeen given to the credit component. A first warning was given during thefifth supervision mission in December 1990, but it is only at the seventh andlast supervision mission of April 1992 that the problem in the relationship

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between BADR and the marketing agencies, and between the marketing agenciesand the sub-borrowers (US$35.0 million worth of unsold equipment in the EDIMAswarehouses) is more seriously flagged. It also seems that the intensity ofsupervision had dwindled by the middle of 1991, along with staff enthusiasmfor the project.

8.03 Should we have done the Proiect? This question was first posed atthe return of the Appraisal mission, considering the expected uncertainty andhigh level of risks resulting from the Algerian Government's decision tolaunch a sweeping reform program. The Yellow Cover Review Meeting of January1988 decided to accept the challenge, in spite of the recommendationscontained in the Bank's Operational Directives concerning financial sectoroperations: it was known that support to such an ambitious program wouldrequire a full array of lending instruments (country economic sector work,financial sector adjustment loan, technical assistance loan). Concerning theagro-industrial sector, when it became evident that conflicts existing betweenBADR and the Chambre Nationale de Commerce were paralyzing progress, animmediate elimination of the bottleneck should have been requested fromGovernment. Concerning the credit component, and as suggested by the fifthsupervision mission in December 1990, the pre-established list of equipment(in particular tractors) should have been revised in 1991, in the light of thenew economic situation and the changing of needs of different types offarmers. In any event, when in the middle of 1991, the glut in equipment sales(especially tractors) became evident, disbursements for Category 1 should havebeen suspended, until proof could be provided that such investments wereprofitable. A greater degree of flexibility and adaptability to the changingeconomic environment would have been necessary, re-orienting projectobjectives, restructuring or eliminating the credit component andconcentrating on the institutional strengthening, supporting more actively therevised timetable and priorities set up by the new management, thus paving theway for further restructuring under the auspices of the now on-going EFSAL.Nevertheless, according to BADR management, the answer is yes, this loan wasuseful, as all managers having participated to the May 1993 discussions, haveexpressed their gratitude to the Bank and to Bank staff for having helped BADRacquire a modern management tool and improve their operations.

Borrower and Guarantor Performance. and Compliance with Covenants

9.01 The overall performance of BADR was mixed and it varied amonglevels of hierarchy and sectors of activity. It is true that the intensity ofthe reorganization proposed was received with apprehension by all staff, andsome may have opposed such sweeping changes, either from political conviction(feeling that the agriculture sector must be subsidized to compensate forcalamities or economic distortions, consumer prices being kept artificiallylow while only the cost element follows the rule of the market), or by sheerresistance to behavioral changes. This is in contrast with the very positiveattitude of managers and the successive CEOs, who must be credited foraccepting the challenge and for having moved BADR, albeit slowly, in the rightdirection. However, three setbacks must be noted: (i) late performance intraining activity; (ii) the very poor performance in financial management,since, at least until 1990 (the audit report of the 1991 BADR accounts has notyet been received), the accounts were in such a shamble that no portfolio

- 16 -

review could be made, and the auditors refused to give an opinion (disclaimerbeing a serious case in the auditing profession); and (iii) the reluctance touse technical assistance, which has been a leading cause of shortfalls inperformance.

9.02 Performance by the Guarantor has also been mixed, but it takesinto account the extreme difficulties encountered in the execution of theeconomic restructuring process going on in the country. Nevertheless, theGuarantor has made some good efforts to comply with its obligations asstipulated in the Guarantee Agreement, in particular those regarding theinterest rates, which have been gradually raised by the Central Bank (Banqued'Algerie), almost eliminating the remaining subsidy factor for someprivileged crops or activities, and the exchange risk, assumed by theGuarantee Fund. However, BADR could have improved the results of its ownfinancial restructuring if Government had given better support to BADR'smanagement and allowed BADR to operate with a more balanced financialstructure. Since BADR became administratively and financially independent(though still a public entity), it has been left without support andorientation, its only link with Government being the badly conceptualized andinefficient holding instrument called Fonds de Participation (theirinefficiency has been recognized, and they will disappear). BADR's need forfinancial restructuring has now been recognized. These two issues, along withmany others to which adequate solutions could not be found under the presentproject, are now taken care of under the EFSAL.

Project Relationship

10.01 The relationship between the Bank and the Borrower remainedcordial throughout the life of the project. The reciprocal manifestation ofesteem between BADR' top management and Bank staff has remained genuine, inspite of differences of opinion and priorities. BADR's successive CEOs mayhave been annoyed by the constant repetition of recommendations, while Bankstaff may have been disappointed by the poor results due, according to them,to non-compliance with these recommendations, especially concerning thereluctance to use TA. Relations could have become strained after the refusalby the Bank to extend the Loan closing date, but the delicate decision toclose the Loan was handled tactfully by Bank staff, and it was clearlyunderstood by BADR management. BADR also understood that some targets notreached under the present project would be taken care of under the EFSAL andthat the Bank does not exclude renewing its dialogue in the future for asounder rural finance operation in Algeria. Relations between the Bank and theGuarantor have also been good, though not very frequent. BADR might have kepttoo much distance from both the Ministry of Finance, for matters dealing withits shaky financial situation, and with the Ministry of Agriculture,concerning matters related to the farmers and their needs. The Bank couldhave perhaps fostered a better coordination on this. As for the relationshipbetween the Bank and JEXIMBANK, the initial phase has been difficult, as eachco-donor had to understand and adapt to the other's set of rules. Subsequentlyhowever, an effective team spirit developed with a constant exchange ofinformation and common decision making, including at loan closing.

- 17 -

Lessons Learned

11.01 The key lessons of the project, for both the Bank and theBorrower, can be summarized as follows:

(a) Proiect Justification: Bank guidelines on Financial SectorOperations suggest that the project should not have been initiatedbefore an environment conducive to the efficient development ofthe country's financial system could be created. If for lendingprogram purposes it was decided to allow the project to proceed,it should have been necessary to re-orient its objectives torestructure or eliminate the credit component and to concentrateon institutional strengthening, supporting more actively therevised timetable and priorities set up by the new BADR'smanagement, thus paving the way for further restructuring underthe auspices of the on-going EFSAL;

(b) Proiect Design: an important objective of the project was topromote the development of BADR and a secondary objective was thecommodity import program, which was added as an incentive at theGovernment's request. A line of credit, however, is not the propervehicle for such an import program. A clearer definition shouldhave been given to this second component: it should have beenconsidered (i) either as a Structural or Sectoral Adjustment Loan,in which case the condition of funds release could have beendefined without concern for the final beneficiaries or (ii) as aclassical agricultural credit operation focusing on finalbeneficiaries, in which case the role played by the participants(BADR, ONAPSA, EDIMAs), should have been redefined (BADR) oreliminated (ONAPSA, EDIMAs) and greater attention paid to the sub-borrowers during the appraisal and the execution of the project;

(c) Co-Financing Arrangements: If the co-financing institutionwishes to manage its own funds, the processing of both loans mustbe done in a coordinated manner between the Bank and the otherinstitution. Also, parallel cofinancing (by component) isdefinitely the best option rather than pari-passu as used underthis project. Both loans must be negotiated in close coordinationand have similar effectiveness conditions. If unexpectedcomplications arise between the Borrower and the otherinstitution, such co-financing arrangements should be canceled ormodified with more flexible cross-conditionalities (the Bank thenmay manage the proceeds of the cofinanciers loan of the otherinstitution if requested); and

(d) Condition of NeQotiation: It is understood that therestructuring of a financial institution will require itsrecapitalization, resulting in a large immediate cost to thebudget (in the case of BADR, approximately US$0.7 billion); thisin turn will require solutions likely to have macroeconomiceffects extending well beyond the scope of a limited agriculturalcredit project. However, if the socialist farms' uncollectible

- 18 -

debts could not be paid back by the Treasury, at least a limitedsolution should have been found to BADR's liquidity problem, suchas raising temporarily the ceiling of borrowing from the CentralBank without cost, up to a certain level. Another lesson is thatagreement on reporting requirements should be reached atnegotiations, in particular when TA is needed to overhaul theunreliable information system of the borrower.

11.02 Some of these lessons have already been incorporated in the on-going EFSAL (Loan 3353-AL) approved by the Bank in June 1991. Theimplementation of the EFSAL-supported reforms is generally progressing in theright direction albeit at a considerably slower pace than expected, due toserious social and political unrest resulting from six years of economicstagnation. Consequently, Government had to reduce the extent and the pace ofthe reform program, priority being given to the Enterprise Sector. As for thefinancial sector, the restructuring of the five commercial banks, includingBADR, will be based on diagnostic studies of portfolio and institutionalissues yielding action plans to be approved by the Central Bank. A ruralfinance reform project is planned for FY 98 if macro-economic conditions havestabilized in Algeria.

- 19 -


DEMOCRATIC AND POPULAR DEMOCRATIC REPUBLIC OF ALGERIA


(LOAN 3009-AL)

PART II : PROJECT REVIEW FROM BORROWER'S PERSPECTIVE

(This part not yet received from BADR)

- 20 -

PART III : STATISTICAL INFORMATION

AGRICULTURAL CREDIT PROJECT (LOAN 3009-AL)

1. Project Timetable

Activity Original Plan Revisions Actual

Appraisal 10/87 10/19/87Negotiations 02/88 02/88 & 07/88Board Approval 06/88 06/14/89

Loan Agreement 12/88 06/89 08/31/89Loan Effectiveness 06/89 12/89 03/30/90Closing 09/30/92 09/30/92Completion 03/92 01/93

- 21 -


2. CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS

DISBURSEMENTS BY YEAR(IN '000 US$)

APPRAISAL ESTIMATE ACTUAL ESTIMATE ACTUAL AS %--------------------------------------------------------

S E M E S T E R AMOUNT CUMULATIVE AMOUNT CUMULATIVE APPRAISAL------------------------------------------------------- __-------------------

JUNE 30, 1989 4.0 4.0 0.0 0.0%

DECEMBER 31, 1989 10.0 14.0 0.0 0.0%

JUNE 30, 1990 15.0 29.0 0.0 0.0%

DECEMBER 31, 1990 15.0 44.0 18.0 18.0 40.9%

JUNE 30, 1991 20.0 64.0 27.1 45.1 70.5%

DECEMBER 31, 1991 15.0 79.0 21.3 66.4 84.0%

JUNE 30, 1992 15.0 94.0 6.1 72.5 77.1%

DECEMBER 31, 1992 16.0 110.0 72.5 65.9%

JUNE 30, 1993 110.0 3.5 76.0 69.1%

110.0 76.0

DISBURSEMENTS BY CATEGORY a/(IN '000 US$)

C A T E G O R Y --- ESTIMATE --- ACTUAL AS %---------------------------------

APPRAISAL ACTUAL APPRAISAL------------------------------------------------------------ __--------------

1. EQUIPMENT FOR ON-FARM INVESTMENTS 73.0 71.0 97.3%

2. AGRO-INDUSTRIAL EQUIPMENT 24.7 1.5 6.1%

3. ELECTRONIC DATA PROCESSING 10.0 3.5 35.0%

4. TRAINING 1.8 0.0 0.0%

5. CONSULTANTS' SERVICES 0.5 0.0 0.0%---------------------------------

110.0 76.0 69.1%

a/ The amounts in Categories 6 "PPF" and 9 "Unallocated" appearing inSchedule 1 of the Loan Agreement, have been transferred to Categories

1 to 5

- 22 -


3. EQUIPMENT PURCHASED FINANCED BY THE LOAN

SPEC. LETTER L.C. COUNTRY UNIT AMOUNT

COMMT. CREDIT DATE - TYPE OF EQUIPMENT - COST DISBURSED

(US$) 000' US$

A) CATEGORY 1: TRACTORS, VEHICLES, AND ON-FARM EQUIPMENT

G-01 118.333 05/17/90 FRANCE 3000 CHARRUES 3310.0 4539.2

G-02 118.338 05/17/90 ITALY 5000 POUDREUSES A DOS 25.2 1645.5

120000 KNAPSACK SPRAYERS 13.5

G-03 118.331 05/17/90 FRANCE 500 ROTOHERSES FLEXIBLES 443.0 208.8

G-04 118.327 05/17/90 HOLLAND 1000 BINEUSES 1027.6 497.5

G-05 118.334 05/17/90 FRANCE 100 POUDREUSES MECA. 1802.1 86.3

G-06 118.335 05/17/90 ITALY 1000 CHARRUES A SOC 1378.6 1320.9

G-07 118.320 05/17/90 GERMANY 200 PLANTEUSES DE PDT 2521.5 492.8

G-08 118.322 05/17/90 ITALY 1000 BINEUSES 1197.1 574.1

G-09 118.321 05/17/90 TUNISIA 600 ATOMISEURS 452.8 1776.6

300 PULVERISATEURS 100L 3318.0

G-10 118.328 05/17/90 HOLLAND 5 EXTRACTEURS DE SEMENCE 23640.0 140.0

5 BATEUSES DE SEMENCE 32360.0

G-11 118.330 05/17/90 FRANCE 1000 CULTIVATEURS 608.6 844.9

1000 ROTOHERSES 1168.6

G-12 118.324 05/17/90 ITALY 1500 MINITRACTEURS EQUIPES 12950.0 9386.7

G-13 118.325 05/17/90 JAPAN 3000 CARS MAZDA 5189.0 7472.0

G-14 118.329 07/30/90 GERMANY 200 REPIQUEUSES PLANES 2600.0 259.5

G-15 118.332 05/17/90 ITALY 1500 MOTEURS 2106.6 1477.2

G-16 118.336 05/17/90 HOLLAND 10 CHAINES DE CONDIT. DE PDT 51000.0 510.4

G-17 118.337 05/17/90 ITALY 1500 FRAISES ROTATIVES 1170.5 843.3

G-18 118.326 05/08/90 YOUGO 1600 TRACTEURS A ROUE 9126.0 7298.8

G-19 118.323 05/08/90 YOUGO 1400 TRACTEURS A ROUE a/ 10381.8 6293.3

G-20 120.166 10/12/90 ITALY SPAREPARTS 831.8

G-22 120.327 19/12/90 YOUGO 321000 TIRES 35.6 14414.0

15000 TIRES 203.5

21000 TUBES 4.0

20000 TUBES 22.2

G-23 120.165 19/12/90 USA 1000 GROUPES MOTOPOMPES 3420.8

2000 POMPES IMMERGEES

G-24 2103.0

G-25 120.670 17/01/91 JAPAN 2000 GROUPES ELECTROGENES 4164.0 3781.0

G-26 PULVERISATEURS 612.0

TOTAL CATEGORY 1 70830.4- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --_ _- - - - - --_ _

- 23 -


4. STATUS OF COVENANTS

See PCR (Part I) para. 9.01

5. BANK RESOURCES

A. STAFF INPUTS

FY87 FY88 FY89 FY90 FY91 FY92 FY93 TOTAL

Preappraisal 22.6 12.3 34.9

Appraisal 35.0 35.0

Negotiation 16.1 5.9 22.0

Supervision 26.1 26.6 17.2 15.3 1.6 86.8

Completion 6.2 6.2TOTAL 22.6 63.4 32.0 26.6 17.2 15.3 7.8 184.9

- 24 -

Page 1 of 2

AGRICTURAL CREDIT PROJECT (LOS 3009-AL)

B. M I S S I O N D A T A /'

YEARS TYPE OF MISSION TOTAL MISSION ORGANIZATIONS AND

DAYS MEMBERS FUNCTIONS

1973 PROG LOAN OFFICER

OCT IDENTIFICATION 14 7 R. STORCH PROG LOAN OFFICER

7 MOMBRU

1974

NOV IDENTIFICATION 9 4 BART PROG DIRECTOR PROG.

5 HOMSI PROG LOAN OFFICER

1975

25/2 07/3 RECONNAISSANCE/IDENTIFICATION 21 7 HORST V. OPPENFELD PROJ AGRICULTURIST

7 F. HEIDHUES PROJ ECONOMIST

7 MARCEL HASSID FAO AG. CREDIT SPEC.

JUNE IDENTIFICATION 52 10 MARCEL HASSID FAO AG. CREDIT SPEC.

10 F. LUCANI FAO ECONOMIST

10 FREDET CONS LIVESTOCK SPEC.

10 CLAESSENS CONS HORTICULTURIST

10 PURVIS CONS FARM MANGT. SPEC.

2 FUKUDA-PARR PROG LOAN OFFICER

1976

FEB IDENTIFICATION 9 2 H. SCHULTE PROG DIVISION CHIEF

7 HORST V. OPPENFELD PROJ AGRICULTURIST

1987

FEB PREPARATION 62 13 LAURIE EFFRON EMPA2 ECONOMIST/MIS. LEADER

13 LORETTA SONN FAO ECONOMIST

13 JEAN SOLEILLE CONS AGRICULTURIST

13 CHRISTIAN BARTOLI CONS FINANCIAL SPEC.

10 ZDENEK DRABEC EM2CO ECONOMIST

SEP APPRAISAL 52 21 LAURIE EFFRON EMPA2 ECONOMIST/MIS. LEADER

5 CLAUDE BLANCHI EMTAG ADVISOR

7 ZDENEK DRABEC EM2CO ECONOMIST

15 LORETTA SONN FAO ECONOMIST

4 CARLOS GOIS EMPA2 PROCUREMENT ADVISOR

FEB PRE-NEGOTIATIONS 14 5 HASSO A MOLINEUS EM2CO ECONOMIST

4 MICHAEL FOWLER LOAEL DISBURSEMENT OFFICER

5 MORAG VAN PRAAG CONS DISBURSEMENT SPECIALIST

1988

DEC SUPERVISION 2 2 CARLOS GOIS EMPA2 PROCUREMENT ADVISOR

I/ Data from 1973 to 1976 are here for historical reasons only. Time lag between1976 and 1987 is due to the hiatus in the Bank's relations with Algeria, whichrestarted in 1986.

- 25 -

Page 2 of 2


B. M I S S I O N D A T A

YEARS TYPE OF MISSION TOTAL MISSION ORGANIZATIONS AND

DAYS MEMBERS FUNCTIONS

1989

JAN FIRST SUPERVISION MISSION 59 10 LAURIE EFFRON EMPA2 ECONOMIST/MIS. LEADER

10 NICK KRAFFT EMPA2 ECONOMIST

7 CLAUDE BLANCHI EMTAG ADVISOR

7 0. SACAY EMTAG ECONOMIST

7 C. BARTOLI CONS FINANCIAL SPEC.

4 P.GUIGOU CONS AGRO INDUSTRIAL SPEC.

7 M COUTANT CONS CREDIT SPEC.

7 ANTOUN MOUSSA ITFUS COMPUTER SPEC.

APR SUPERVISION 6 LAURIE EFFRON EMPA2 ECONOMIST/TASK MANAGER

MAY SUPERVISION 7 CARLOS GOIS EMPA2 PROCUREMENT ADVISOR

JUNE SECOND SUPERVISION MISSION 37 14 LAURIE EFFRON EMPA2 ECONOMIST/TASK MANAGER

6 CLAUDE BLANCHI EMTAG FINANCIAL ADVISOR


11 P.GUIGOU CONS AGRO INDUSTRIAL SPEC.

OCT THIRD SUPERVISION MISSION 54 9 LAURIE EFFRON EMPA2 ECONOMIST/TASK MANAGER

9 CLAUDE BLANCHI EMTAG FINANCIAL ADVISOR

9 LAVISTA FINANCIAL ANALYST

9 R. FARRUGIA CONS ACCOUNTING/COMPUTER SPEC.

9 P. GUIGOU CONS AGRO INDUSTRIAL SPEC.

9 A. ZINOUN CONS TRAINING SPEC.

1990

JULY FOURTH SUPERVISION MISSION 18 6 LAURIE EFFRON EMPA2 ECONOMIST/TASK MANAGER

6 BERNARD DUSSERT EMPA2 FINANCIAL ANALYST


DEC FIFTH SUPERVISION MISSION 52 13 BERNARD DUSSERT EMPA2 FINANCIAL ANALYST


13 C. BARTOLI CONS BANKING/FINANCIAL SPEC.

13 A. VOLLE CONS COMPUTER SPEC.

1991

JULY SIXTH SUPERVISION MISSION 27 9 LAURIE EFFRON EMPA2 ECONOMIST/TASK MANAGER



1992

FEB SUPERVISION VISIT 1 1 LAURIE EFFRON MN1AG ECONOMIST/TASK MANAGER

APRIL SEVENTH SUPERVISION MISSION 12 4 LAURIE EFFRON MN1AG ECONOMIST/TASK MANAGER


4 MR. SAHATDJIAN CONS AUDITOR/FIN. ANALYST

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - _ _ - - - - - - - - - - - - - - - _ - - - - - - - - - - - - - - - - - - - - - -

- 26 -


6. RELATED BANK LOANS

(NOT APPLICABLE)

7. PROJECT COST AND FINANCING(IN '000 US$)

APPRAISAL PRESENT PRESENT

AS %

ESTIMATE ESTIMATE APPRAISAL

I. PROJECT COST

A) LENDING PROGRAM

ON-FARM INVESTMENTS 460.0 400.0 86.96%AGRO-INDUSTRY 86.0 6.0 6.98%

SUB-TOTAL A) 546.0 406.0 74.36%

B) INSTITUTIONAL STRENGTHENING

TRAINING 3.0 0.0 0.00%M.I.S. 19.7 7.0 35.53%TECHNICAL ASSISTANCE 0.5 0.0 0.00%

SUB-TOTAL A) 23.2 7.0 30.17%TOTAL PROJECT COST 569.2 413.0 72.56%

II. PROJECT FINANCINGA) IBRD 110.0 76.0 69.09%B) EXIMBANK 110.0 76.0 69.09%C) BADR 158.6 150.0 94.58%D) INVESTORS 190.6 111.0 58.24%

TOTAL PROJECT FINANCING 569.2 413.0 72.56%

2r 0 4" 6"' r 1

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0 . ~ ~ ~ ~ ~ ~ ~ ~ ~ d .

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) * ° KILOMETERS

; v \ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 50 100 15

.0 * MILE5100

32 ____________~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~3'

ALGERIA ALGERS

FIRST AGRICULTURAL CREDIT PROJECT M (PPREMIER PROJET DE CREDIT AGRICOLE Areo of p

BANK FOR AGRICULTURE AND RURAL DEVELOPMENTBANQUE DE L'AGRICULTURE ET DEVELOPPEMENT RURAL

LOCATION OF BADR OFFICES A&arIMPLANTATION DU RESEAU BADR A L G E R I A

C HEADOUARTERS 0 REGIONAL OFFICES * BRANCH OFFICES WILAYA BOUNDARIESAGENCES PRINCIPALES SUCCURSALE AGENCES LIMITATION WILAYA \N/

6 _ _ sX o- r ~~~~~~~~~~~~~~~~~~~~4° o ./Ol

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