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Doe:t Of The World Bank FOR OFFICIAL USE ONLY Report No. P-4497-ET REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN AN AMOUNT EQUIVALENT TO SDR 32.3 MILLION (US039.0 MILLION) TO ETHIOPIA FOR A FOURTH LIVESTOCK DEVELOPMENTPROJECT March 26, 1987 This document has a resticted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

World Bank Document€¦ · exploitation of geothermal energy. The country's main potential lies in agriculture, for which the natural conditions of several &reas are favorable. Nearly

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Page 1: World Bank Document€¦ · exploitation of geothermal energy. The country's main potential lies in agriculture, for which the natural conditions of several &reas are favorable. Nearly

Doe:t Of

The World BankFOR OFFICIAL USE ONLY

Report No. P-4497-ET

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT

IN AN AMOUNT EQUIVALENT TO SDR 32.3 MILLION (US039.0 MILLION)

TO ETHIOPIA

FOR A

FOURTH LIVESTOCK DEVELOPMENT PROJECT

March 26, 1987

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

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CURRENCY EQUIVALENTS1

Currency Unit - Ethiopian Birr (Br)US$1.00 - Br 2.07Br 1.00 = US$0.48

FISCAL YEAR (FY)Government: July 8 - July 7

WEIGHTS AND MEASURESMetric System

1 meter (m) 5 3.28 feet (ft)1 kilometer (km) = 0.62 mile (ml)1 kilogram (kg) = 2.20 pounds (lb)1 metric ton (m.ton) = 2,205 pounds (lb)

LIST OF ABBREVIATIONS AND ACRONYMNS USED

AFDB - African Development BankAFRDMD - Animal and Fishery Resources Development Main DepartmentAIDB - Agricultural and Industrial Development BankAISCO - Agricultural Inputs Supply CorporationAMC - Agricultural Marketing CorporationCBE - Commercial Bank of EthiopiaESC Ethiopian Seed CorporationIAR - Institute of Agricultural ReasearchILCA - International Livestock Center for AfricaMOA - Ministry of AgricultureMOF - Ministry of FinanceMPP - Minimum Package ProjectNVI - National Veterinary InstitutePADEP - Peasant Agricultural Development ProjectSORDU - Southern Rangelands Development Unit

l/The currency equivalent between the US dollar and the Ethiopian birr hasbeen constant from 1973 to the date of this report.

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FOR OMCLAL USE ONLY

ETHIOPIA

FOURTH LIVESTOCK DEVELOPMENT PROJECT

CREDIT AND PROJECT SUMMARY

Borrower: Ethiopia

Beneficiaries: Ministry of Agriculture Animal Fisheries ResourceDevelopment Main Department; Agricultural Input SupplyCorporation (AISCO); and Agricultural IndustrialDevelopment Bank (AIDB).

Amount: SDR 32.3 million (US$39.0 million equivalent)

Terms: Standard IDA tenms

RelendingTerms: AISCO and AIDB (new IFAD Loan) at annual interest

rates of 2 percent (4 percent starting FY89), fiveyears amortization period following one year grace;Government assuming foreign exchange risk.

Cofinancin2: IFAD (Ln.031-ET), US$2.0 million equivalentIFAD (new loan), US$5.7 million equivalent

Project Description: The project would address, as the first phase of along-term program, the three essential elements inimproving peasant sector animal production--health,nutrition, and support services. Increasing exportsof live animals and hides and skins, and strengtheningthe Ministry of Agriculture (HOA) are major projectobjectives. The project would finance six majorcomponents: (i) animal health development, includingfield services in areas of high agricultural potentialand a national component, including expandedlaboratory services, vaccine production, veterinarydrug imports, and epidemiology analysis; (ii) animalnutrition development, including intensive small-scalefattening and forage systems adaptive research;(iii) research, survey, and pilot activities songsemi-nomadic pastoralists in the Southern Rangelands;(iv) agricultural credit to support peasant livestockdevelopment, expanded drug inventories, and small-scale fattening; (v) NOA institutional development,and (vi) a major live animal export trade developmentstudy. Technical assistance would support appliedresearch, financial administration and accounting,veterinary epidemiology, vaccine production, seedproduction, socio-economics, laboratory management andoperation, and livestock development and training.The project would finance civil works, vehicles,equipment, veterinary drugs and vaccines, seedproduction, agricultural credit, technical assistance,training, and incremental operating costs. Theproject would be implemented by existing institutions.

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

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US$7.2 million equivalent of the IDA credit would beonlent to the Agricultural Inputs Supply Corporationfor financing and distribution of veterinary drugs andvaccines. The IFAD loans would be onlent to theAgricultural and Industrial Development Bank tosupport agricultural credit operations.

Benefits and Risks: Quantified project benefits accrue from better animalheath and nutrition. Unquantified benefits wouldinclude increased crop production due to the increasedsupply and efficiency of oxen for cultivation,increased crop yields resulting from the improved soiland water conservation, and increased production andsupply of domestic fuel wood from conservation-relatedproject activities. Substantial increased employmentbenefits would also flow from project activities. Atfull development (year 10), an estimated 770,000 farmfamilies, the vast majority of whom currently live inabsolute poverty, would benefit from projectactivities. Some risk is associated with thepossibility in some areas of livestock numbersincreasing without a corresponding increase inofftake, thereby exacerbating the soil erosion anddegradation problem. The probability of thishappening is considered minimal. Impacts arising frompossible increases in livestock numbers relative toavailable feed supply would be monitored and evaluatedduring a mid-term review of project implementation.

Estimated Cost:Local Foreign Total-a_____ sS$ million ----

1. Animal Health Development 10.2 13.2 23.42. Animal Nutrition Development 2.4 2.8 5.23. Southern Rangeland Development Unit 2.1 2.6 4.74. Agricultural Credit 3.1 3.2 6.35. KOA Institution Building 2.2 3.1 5.36. Live Animal Export Trade Study - 0.5 0.5

Total Base Cost 20.0 25.4 45.4

Physical Contingencies 2.7 3.6 6.3Price Contingencies 1.4 4.1 5.5

Total Costs1 24.12 33.1 57.2

1/ Includes US$865,000 equivalent PPF Advance.

2/ Includes taxes and duties of US$5.3 million

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Financing Plan:Local Foreiln Total--- - US$ million -------

IDA 10.0 29.0 39.0Government 10.5 - 10.5IFAD 3.6 4.1 7.7

Total 24.1 33.1 57.2

Estimated Disbursements from IDA Credit

(US$ million)

IDA FY 88 89 90 91 92 93

Annual 7.6 9.7 9.5 6.1 4.3 1.8Cummul. 7.6 17.3 26.8 32.9 37.2 39.0

Economic Rate of Return: 26 percent

MAP: IBRD No. 19693

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INTERNATIONAL DEVELOPMENT ASSOCIATION

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

FOR A FOURTH LIVESTOCK DEVELOPMENT PROJECT

1. I submit the following report and recommendation on a proposeddevelopment credit to Ethiopia for SDR 32.3 million (US$39.0 millionequivalent) on standard IDA terms to help finance a fourth livestockdevelopment project.

PART I - THE ECONOMY

2. The last economic report on Ethiopia (No. 5929-ET), entitled"Ethiopia, Recent Economic Developments and Prospects for Growth andRecovery", was circulated to the Executive Directors on February 25,1987. The report's findings are reflected in the following paragraphs.

Structural Characteristics

3. The boundaries of Ethiopia embrace a wide diversity of culturesand have contained a long history. Centuries of tradition have beenovertaken recently by fundamental social and political change. With apopulation of about 43 million in 1985, Ethiopia is the third mostpopulous country in Africa (after Nigeria and Egypt). It is also one ofthe poorest and, in terms of social indicators, one of the leastdeveloped. About 89 percent of the total population is rural. Thecountry's land area extends over 1.2 million square kilometers and may bebroadly divided into two main geographical zones--the highland plateau ofcentral Ethiopia and the surrounding lowlands. Its capital city, AddisAbaba, located in the central highlands, has a population estimated at1.5 million.

4. Agriculture accounts for nearly 50 percent of GDP, 90 percent ofexports, and 85 percent of total employment. Crops account for about80 perccnt of the gross value of production and livestock for most of therest. The main food crops are teff (a locally consumed cereal), maize,barley, sorghum, wheat, pulses, and oilseeds. Coffee, the principalexport crop, generates over 60 percent of the country's export earnings.Other export crops include oilseeds, pulses, cotton, sugarcane, fruitsand vegetables. The country's livestock herd is the largest in Africa;the official export of live animals has begun to increase in recent yearsbut is still very low compared to the potential. Ethiopia's knownnatural resources include gold, platinum, copper, soda ash, and potash.Some petroleum exploration has taken place in the past, but no petroleumreserves have yet been proven. None of these minerals has been exploitedon a large scale, and in most cases the potential for commercialexploitation remains to be established. There are prospects for the

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exploitation of geothermal energy. The country's main potential lies inagriculture, for which the natural conditions of several &reas arefavorable. Nearly 95 percent of the land under cultivation is operatedby individual farmers who have user rights to landholdings averaging twohectares or less. Manufacturing industry, which accounts for about 10percent of GDP, is heavily dependent on agriculture; agro-based industryconstitutes around 70 percent of large- and medium-scale industry.Public sector control and ownership cover almost all large and medium-scale manufacturing, banking and insurance, shipping, railway, airways,utilities, and a large proportion of construction. Handicrafts and smallindustry are operated by private owners. Domestic trade, especiallyretail trade, and road transport are still largely in private hands.

5. GNP per capita is estimated at around US$110 (1984), and anestimated 60 percent of the population lives below the absolute povertylevel. Health services are limited and require major improvements tocombat high rates oL morbidity and infant and maternal mortality,worsened by the drought. Life expectancy is still only about 46 years.Housing and sanitation facilities, especially in the towns, are poor andneed urgent attention. Despite Ethiopia1s rich endowment of fertile landand substantial agricultural potertial, its wide variation in topographyand extremely rugged terrain have been serious obstacles to internaltransportation, and economic development in general. Nearly three-quarters of Ethiopia's farms are more than half-a-day's walk from all-weather roads.

The Drought

6. The drought and famine in 1984/85 caused human suffering on anunprecedented scale--nearly 8 million people. In response to theGovernment's appeals for assistance and its efforts in dealing with thecrisis, UN agencies, bilateral donors, multilateral agencies and non-government organizations provided a record US$470 million in reliefassistance, more than in previous years (para. B). The Government'shopes for some respite from the drought situation were raised by improvedrainfall in 1985186, but actual food production proved well belowexpectations. It is too early to say whether the increased interest ofdonors in Ethiopia due to the drought will be successful in generatingsignificantly increased concessionary aid for long-term development. Thedrought relief effort, as well as the Government's programs torehabilitate drought-prone areas and to resettle drought victims in thewestern provinces, has severely strained the Government administrationand temporarily directed manpower and financial resources away from otherdevelopment activities.

Recent Macroeconomic Developments

7. Since the 1974 revolution, Ethiopia has made considerable sccialprogress, as reflected by significant increases in literacy and schoolenrollment and a modest rise in life expectancy. The literacy rate rosefrom 7 percent in 1973 to more than 40 percent in 1981, and the primaryschool enrollment rate increased from 19 percent to 47 percent over thesame period. These achievements, however, have not been accompanied bycommensurate economic growth. During the decade ending 1983/84, GDP grewat an average annual rate of only 2.7 percent in real terms, compared toan estimated population growth rate of 2.9 percent.

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8. The economy witnessed a setback during the three years from1980/81 to 1982/83, with GDP growth declining to an average rate ofaround 3.1 percent per annum, compared with the highs of around 5.5percent per year during 1978179 and 1979/80. This adverse trend becamemore pronounced during the past two years owing to the recent drought.GDP declined by 3.7 percent in 1983/84 and by 6.5 percent In 1984/85.The principal causes for the setback in economic growth in recent yearswere droughts and inappropriate policies (para. 14) that affected agri-culture, and capacity constraints (notably ln industry), owing to lowrates of investment in the past. The ratio of total investment to GDPhas remained for many years at around 11 percent, due largely toconstraints on domestic as well as external resources. Domestic savingshave averaged around 3.4 percent of GDP during the four years ending1983184, partly reflecting the basic consumer needs of a low-incomecountry and the high expenditure on defense and security. Domesticsavings turned negative in 1984/85 with total consumption exceedingoutput. Apart from the recent increase In emergency aid arising from thedrought disaster, official development assistance averaged only aroundUS$9 per capita per year as compared to over US$20 per capita fordeveloping countries in Africa.

9. The external current account deficit has continued to widen; Itreached US$416 million in 1983/84, equivalent to 8.6 percent of GDP. Thesltuation further deteriorated in 1984/85 with depressed exports andincreased imports; the current account deficit reached the equivalent ofabout 13 percent of GDP--the highest in the past decade. Meanwhile, netexternal reserves turned negative during 1984185, owing to heavy draw-downs, but ended with a positive balance in June 1985. The external debtservice ratio increased significantly to about 22 percent. However, therecent coffee price boom and the fall in oil prices have reduced thecurrent account deficit to 6.8 percent of GDP in 1985186 and increasednet foreign assets to four months of imports as of the end of 1985/86.Also, GDP grew by 11.3 percent in 1985/86 as a result of the recovery ofagriculture from drought.

10. Notwithstanding poor growth trends, the Government's fiscal andmonetary management has been generally prudent. The country has arelatively competent public service and, in general, its ministries,departments, and most public enterprises are reasonably well managed.The overall budget deficits remained below 5 percent of GDP for theperiod 1978179 to 1981/82, and modest current account surpluses wereachieved in these years. But since then the fiscal deficit has followedan uneven path. During 1982183, the overall budget deficit rose to alevel equivalent to about 13 percent of GDP, principally due to a neardoubling of capital expenditure and an increase in current expenditure,reflecting in large part a Government decision to settle arrears due toparastatals in one year. The overall deficit was brought back to a levelequivalent to 6.2 percent of GDP in 1983/84. Despite heavy drought-related expenditures in 1984185, the Government controlled the fiscaldeficit to the equivalent of about 8 percent of GDP, imposing cutbacks oncurrent expenditure and special drought levies. The overall deficit fellto 6.5 percent of GDP in 1985186.

11. The inflation rate (as measured by the Addis Ababa retail priceindex) had dropped from an average of 13 percent during 1978/79 and1979180 to about 5 percent during the five-year period ending 1983/84.

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But during 1984185 it rose to an annualized rate of about 18 percent,largely reflecting food price increases caused by food shortages, whichbecame more pronounced after July 1984, owing to the drought. Due toincreased food supplies, inflation was negative 10 percent in 1985/86.

12. Despite the growing internal and external imbalances notedabove, there has been little or no change in Ethiopia's economic policyframework. Official pronouncements have stressed from time to time theneed to: revitalize agriculture through increased investment, guaranteedproducer prices, and diffusion of improved technology to farmers; restoreconfidunce among entrepreneurs engaged in small-scale industry; andattract foreign investment and technology to develop the country'sresources. Other noteworthy steps include a Joint Venture Codeintroduced in January 1983 to promote joint ventures between foreigninvestors (public or private) and Ethiopian public enterprises, and theformulation of proposals to simplify and rationalize the system of directand indirect taxes and to make the tax system more income-elastic. Butactual progress in these directions has been very slow.

13. There are a number of issues that require urgent attention.It is yet unclear whether the projected levels of investment can befinanced, given the low domestic savings rate, the claims of the droughtand other priorities for recurrent expenditures, and the limited inflowof official development assistance (para. 8). While the Government hasbeen reasonably successful in financial management, greater effort isneeded to raise domestic savings and external concessionary assistance tosupport investment and growth. Likewise, with the value of merchandiseimports running at double the value of merchandise exports, a majorexpansion in exports and import substitution are called for, in order toreach a more sustainable external current account deficit. Higher coffeeprices in the short term and projected lower oil prices in the mediumterm have improved the prospects in this regard, but Ethiopia's currencyis still overvalued despite recent depreciation. The overvalued exchangerate and the lack of an effective package of export incentives havetended to reduce margins for producers of export commodities in localcurrency and have inhibited the growth of exports.

14. As regards sectoral issues, several other factors apart from thedrought appear to have impeded agricultural growth. Some initiativeshave been made toward improving the Government's agricultural andmarketing policies, and a serious dialogue with the Bank is in process.Other constraints include the low use of improved seeds and fertilizer,inadequate agricultural extension and research, and restrictions oninter-regional grain movement by private operators. The precise role ofthe private sector is yet unclear--the business climate does not appearto be conducive to savings and investment, particularly in industry.Although there has been a remarkable increase in literacy and generaleducation, economic growth in all sectors is constrained by a shortage ofmanagerial, technical and professional skills, indicating the need forstepping up higher education.

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Medium-Term Prospects

15. The Ethiopian economy remains hampered by its weak infra-structure (notably roads), low productivity in agriculture, heavydependence on one export commodity (coffee) subject to internationalexport quotas, a small industrial base, and shortages of skilledmanpower. Apart from this set of unfavorable initial conditions, theavailability of domestic resources for investment is constrained by theGovernment's outlays on internal security, while import capacity isconstrained by stagnating exports and by low levels of external resourcetransfers. The drought has caused a major setback to the economy.

16. Ethiopia's rapid population growth also poses severe problemsfor the future. Population growth, currently estimated at around 2.9percent per annum, implies a doubling of Ethiopiari population in 26years or less and threatens to absorb most of the gains in economicgrowth and social welfare foreseeable in the next decade. The demand forfood, energy, and social services would increase dramatically and wouldlead to adverse consequences in the ecological balance. The net impactcould be stagnation or possibly a decline in the living standards of theEthiopian people. Unless steps are taken to reduce fertility through anexpansion of family planning services, there will be little significantimprovement in per capita income or living standards. Ethiopia needs amultisectoral population policy; this implies an expansion andstrengthening of basic maternal and child health services, into whichfamily planning must be integrated.

17. Two areas of policy reform warrant immediate attention:improving agricultural pricing and marketing policies and adjusting theexchange rate to support export expansion and import substitution.Ethiopia needs to orient economic policy toward expanding the directlyproductive sectors, particularly agriculture and industry, and toincrease economic efficiency in the use of resources. The incentivestructure in the agricultural sector needs to be improved in order tostep up agricultural growth, and the business climate for private small-scale enterprises, particularly in industry, should be made morefavorable for increased investment, output, and exports. In general, theauthorities have to make greater and more flexible use of macro-levelpolicy instruments (e.g., exchange rate and price policies) and less useof direct, administrative controls. The attainment of higher growthrates would also depend on raising the operational efficiency of publicenterprises and on alleviating skilled manpower shortages through betterincentives and greater emphasis on higher and technical education. Thereis also a need to develop a more realistic macroeconomic framework forthe Government's three-year plan (beginning mid-1986) within theframework of the Ten Year Perspective Plan and to present a well-balancedportfolio of viable projects. The financing of increased publicinvestment would call for greater efforts In domestic as well as externalresource mobilization. Despite several constraints and limited room formaneuverability on the part of Ethiopia's economic policymakers, condi-tions exist for a GDP growth rate of nearly 4 percent per annum over themedium term, provided the Government makes a concerted effort to increasesavings and investment and to pursue policies that foster acceleratedgrowth.

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PART II - BANK GROUP OPERATIONS IN ETHIOPIA

18. Bank Group lending to Ethiopia since 1950 has totaled aboutUS$962 million (less cancellations) as of September 30, 1986, consistingof 39 IDA credits totaling about US$743 million, 12 Bank loans totalingabout US$109 million, and 5 IFC commitments totaling US$15.7 million.Much of the lending (US$228 million) was committed between fiscal years1974 and 1978. Subsequently, the compensation issue led to a two-yearinterruption in new lending. Since F71973, lending has been on IDA termsonly. IBRD's Phare of total public debt outstanding and disbursed as ofDecember 31, 1984 is estimated at about 3 percent, and IDA's at 27percent. Their shares of total debt service in FY1985 are estimated at 9percent and 6 percent, respectively. Bank lending focused on theconstruction of trunk roads, power, and telecommunicationa Zacilitiesuntil the late 1960s, when Bank lending gradually shifted to agricultureand education. Since 1973, 13 credits totaling US$238 million havesupported agriculture, and some have attracted cofinancing or othercomplementary assistance. Credit 1088-ET of February 2, 1981, togetherwith cofinancing from Sweden and the International Fund for AgriculturalDevelopment, assisted the agricultural minimaum package program, a majorpart of the Government's efforts to assist peasant agriculture. Theproposed project would be the third in FY1987; a forestry project wasapproved July 3, 1986.

19. Project implementation in Ethiopia, although subject to somedifficulties, is generally quite satisfactory. Ethiopia's overall recordcompares favorably with other countries in the Eastern Africa Region.Financial problems, rising labor costs, and occasional shortages ofcons_ruction materials have detracted from efficient project implemen-tation on occasion. However, the Government and the project managementunits geneially have been successful in resolving these problems.Efforts to recover from the drought and to implement the resettlement andvillagization programs have recently placed a particularly heavy burdenon the administration. Ethiopia's disbursement performance on projectsassisted by the Bank Group has also been generally satisfactory. TheFY86 disbursement rate for Ethiopia is 16.06 percent as compared to 27.8percent for Eastern Africa Region and 25.02 percent Bank-wide.

Assistance Strategy

20. We are assisting the Government to:

(a) improve its policy framework with a view to increasingagricultural production and exports through economic andsector studies, advice on agricultural pricing andmarketing policies, and assistance in implementing itsDrought Action Plan;

(b) improve the policy framework and institutional structurefor domestic and external resource mobilization andallocation through advice on tax reforms, as well asbetter planning and monitoring of foreign aid;

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(c) improve the policy framework and institutional structurefor public and private sector efficiency, through adviceon price policy reforms and a clearer role for theexisting private sector; and

(d) accelerate human reoource development through adviceon population policy, education, and skilled manpowerdevelopment.

In our economic work, we are focusing on resource mobilization issues,public investment reviews, export incentive issues, and human resourcedevelopment. We have been carrying out studies of the agriculturalsector, including a joint study with the Government on farmers'incentives and marketing efficiency, and also studies of the industry,education, and population, health and nutrition sectors. In our lendingwork, we plan to continue emphasizing the productive sectors andessential infrastructure to help address the country's capacityconstraints and deteriorating terms of trade. A peasant agriculturaldevelopment project is being considered to help increase the productivityand incomes of small farmers. We are making concerted efforts to arrangecofinancing for proposed projects. Informal discussions are underway,but no decision has been taken concerning a possible donor conference onEthiopia, either a UNDP Round Table or a resumption of the ConsultativeGroup.

PART III - THE LIVESTOCK SUB-SECTOR

21. With a per capita GNP of about US$110, Ethiopia is one of theworld's poorest country. Absolute poverty characterizes life for themajority of Ethiopia's predominantly rural population. Agriculture isparamount, and its satisfactory growth is critical not only for improvingand stabilizing food supply, but also for accelerating export andindustrial growth.

22. While GDP growth averaged about 2.5 percent annually during thedecade ended 1983/84, agriculture grew by a little over one percentannually, significantly less than the annual population increase of 2.7percent. Agriculture's share of GDP dropped from around S percent in1976177 to 41 percent in 1984/85, primarily due to drought.

23. Livestock production is estimated to contribute about one-third ofagricultural GDP and about 15 percent of total GDP, but its role in theeconomy is more important than the figures suggest. Hides and skins arethe second largest export earner, averaging around 12 percent of totalexport value. Although varying among regions, the livestock role includesproviding draft power, food, cash and food reserves, transportation, dungfor fuel and fertilizer and, especially in pastoralist areas, socialprestige. In the predominantly cereal producing areas, livestock are acritical component of the crop production process. In the hoe-cultureproduction systems of the western lowlands, livestock are not critical tothe crop system but they are still important in the small-holder economy.Amongst the eastern and southern pastoralists, livestock are the basis of

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the economy, and heavy losses, as experienced in 1984/85, result in seriousdeprivation and hunger. Per capita meat consumption is high by developingcountry standards. Beef accounts for about 51 percent of all meatconsumption followed by sheep meat (19 percent), poultry (15 percent), andgoat (14 percent).

24. Ethiopia's livestock population is the largest in Africa,comprising an estimated 27 million cattle, 42 million sheep and goats, 7million equines, 1 million camels, and 50 million poultry. They aredistributed throughout the country but the greatest concentrations occur inthe highlands where 90 percent of the people live. Ethiopian livestockproductivity indicators are up to one-third lower than the tropical Africaaverage. Annual cattle liveweight gains are low, and mortality is high.Cows do not reach maturity until at least three and mostly four years ofage, calve every second year and produce only around 250 kg of milk perlactation. Lambing percentages are reasonably good, but lamb mortality ishigh. Forage supplies come largely from unimproved pastures and fallowgrazing, but crop residues are also important. An estimated 85 percent offorage intake is used to meet maintenance requirements, leaving little forproduction. In poor harvest years, animals are underfed and losses high.

25. The main constraints to improving animal production are poornutrition, widespread disease incidence, and weak sectoral supportservices, especially extension. Other constraints include lack ofappropriatc manpower education and training, weak domestic and exportmarketing, inadequate infrastructrre, sociological considerations,insufficient credit, and an inadequate data base for planning improvedservices. Animal diseases and parasites are widespraad, depressingfertility and growth, increasing mortality, and restricting exportopportunities. Ethiopia is fortunate that East Cost Fever, a seriousdisease of many other African countries, is not present. The factorsconstraining adequate disease control include the system of formulatingpolicy, lack of equipment and transport for the field services, a weaktsetse trypanosomiasis unit, an uncoordinated disease surveillance system,inadequate training of professional staff, absence of a disease monitoringprogram; recurring drug shortages, budget constraints and staff managementand supervision. The most pressing of these factors would be addressedunder the proposed project.

Institutional Setting

26. The Ministry of Agriculture (MOA) in 1984 was decentralized toform eight zones encompassing from one to three provinces. Each zonaloffice of MOA is headed by a General Manager, supported by four technicaldepartmernts: Animal and Fishery Resources Development, Cooperative andAgricultural Development, Rural Infrastructure, and Natural ResourcesConservation Department. Extension staff are being progressively deployedto bring them closer to the farmers they serve. Under the proposedproject, veterinary staff would be redeployed in a similar manner. TheAgricultural Inputs Supply Corporation (AISCO), established in 1984 as anautonomous agency within MOA, is responsible for procuring and distributing

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inputs required by the agricultural sector. To date it has focussedlargely on peasant sector fertilizer inputs. The Government has now agreedthat AISCO shall procure the national _equi'rements for imported veterinarydrugs. The Ministry of State Farms is responsible for large-scalecommercial agriculture including several livestock enterprises.

Bank Group Assistance in the Agriculture Sector

27. The Bank has considerable experience in lending for agriculturaldevelopment in Ethiopia. Two minimum package projects (Cr.416-ET and Cr.1088-ET) were aimed at increasing agricultural production in the highlands.Coffee Projects (Cr.290-ET and Cr. 1429-ET) supported processing, culturalpractices and disease control. The Agriculture Marketing Corporation's(AMC) storage and marketing activities were strengthened under Cr. 789-ET.Other projects were for Drought Rehabilitation and Land Settlement (Cr.485-ET), Irrigation (Cr. 1337-ET), Agricultural Research (Cr. 1521-ET) andDrought Recovery (Cr. 1576-ET). An IFAD project (Loan 131-ET) isstrengthening the operational capacity of the Agricultural and IndustrialBank, and channeling funds for on-farm development through cooperatives. Aproposed IDA Credit for the Small-Scale Irrigation and Conservation Project(cofinanced with IFAD) has been negotiated and is scheduled to be submittedto the Board shortly.

28. The objectives of IDA assistance to Ethiopian agriculture are toincrease domestic food production primarily in the peasant sector; improvethe incentive framework, marketing conditions and general economic andinstitutional environment for agricultural development; and increaseforeign exchange earnings and savings. Some projects have attractedadditional cofinancing (SIDA, IFAD, AFDB) or other complementary assistance(WFP, ILO). Project implementation has generally been satisfactory, butdue to an unsatisfactory farner incentive and marketing framework, economicbenefits have generally been low. A growing recognition of theseconstraints has resulted in Government's willingness to considerintroducing measures to resolve the marketing and pricing issues.

Past Experience in the Livestock Sub-Sector

29. The First Livestock Project focused on commercial dairying andprocessing. The project suffering from the effects of revolutionaryturmoil, institutional difficulties, high cost overruns and slowimplementation, failed to achive its objectives (Project Performance AuditReport No. 4001, June 23, 1982). The Second Livestock Project focused onmarketing infrastructure and meat processing. Although the hides and skinscomponent was comparatively successful and the infrastructure establishedcontinues to function in many cases, the Project did not succeed inintroducing modern techniques of slaughter, marketing and organizedmovement of livestock to a traditional society (Project Performance AuditReport No. 0977, June 21, 1982). The Third Livestock Project concentratedon rangeland development in lowland pastoral areas. Implementation wasseriously affected by the conflict with neighboring Somalia and the lack ofa sound technological base fcr improving rangeland productivity. Lessonsfrom the Second and Third projects led to the decision to focus theproposed project on production in the highland potential areas. During1983-84, the Government, with the assistance of consultants (financed underCredit 603-ET), completed a comprehensive analysis of the livestock sub-

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sector, which reviewed the existing situation, identified the mainconstraints to improving production, and proposed strategies for livestockdevelopment in the main production systems. Eight priority projects wereidentified, three of which--animal nutrition, small-scale fattening, and anational health project--have been combined into the proposed project.

PART IV - THE PROJECT

30. The proposed project was appraised in March/April 1986, and theStaff Appraisal Report No. 6341 dated March 9, 1987, is being circulatedseparately. A supplementary project data sheet is attached as Annex III.Negotiations were held in Washington from December 15-19, 1986. Thedelegation was headed by Ato Bekele Tamirat, Vice Minister for Finance.

Objectives and Rationale for Support frc'o IDA

31. As the first phase of a long-term program to build an efficientanimal health service, the proposed project is intended principally toimprove livestock production. This is to be achieved by improving animalnutrition and supplying drugs needed to control animal diseases. Simul-taneously, activities will be undertaken to strengthen the capacities ofthe Ministry of Agriculture and relevant agricultural support services.Other objectives include increasing foreign exchange earnings by expandingexports of live animals and hides and skins and reducing possibleecological degradation by improving the incentives for increasing theofftake of animals. Increased crop production is expected from thebenefits of strengthened draft power and improved soil and waterconservation practices. The objectives served by this project areconsistent with our strategy to support improvements in agriculturalproduction and exports, as outlined in para. 20, and will contribute to amore efficient use of resources available to small farmers.

Project Area

32. Project activities will focus predominantly on high-potentialareas within four of the more productive agricultural development zones.While the national dimensions of the animal health component will covermost of the country, the animal health field services will be concentratedin 140 districts in the following regions: Shewa, Welega, Ilubabor, Kefa,Gojam, and Harerge. The animal nutrition activities will be implementedlargely in Shewa, Harerge, and Gojam. Thus, the project covers about halfof the country's population and half the total land area.

Pro_ject Description

33. Animal Health. Veterinary services will be strengthened on twolevels--field activities targeted toward peasant-owned livestock in theproject area and animal health services with a national focus. Fieldservice development will build on the existing veterinary service by makingexisting staff more effective through regular training and supervision,redeploying them closer to farmers, and providing appropriate equipment andtransport; ensuring a reliable supply of drugslvaccines; improvingdiagnostic support; and, ultimately, concentrating on controlling only the

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most economically important diseases and ensuring sustainability of theservice through improved cost recovery. On a national level, a veterinaryepidemiology unit will be established, vaccine production facilitiesexpanded, laboratory facilities improved, drug procurement and distributioncapability strengthened, and research into tsetse and trypanosomiasis alsostrengthened. Incremental national requirements for veterinary drugs willbe supplied during the five years of project implementation, after whichthe Government will cover these expenditures.

34. Animal Nutrition. Improvements in animal nutrition will beobtained by expanding farm forage production, introducing small-scaleanimal fattening schemes, and improving the utilization and management ofcommunity grazing land. To do this the project will rely on implementationof simple land-use plans by small farmer organizations as described inpara. 44. A research unit will develop new approaches to increasing farmoutput within existing farm systems. The Ethiopian Seed Corporation willparticipate in developing forage seed and seedling production.

35. Southern Rangelands Pilot Project. This component will test anumber of innovations aimed at improving the productivity of Ethiopia'spastoralists. Hany innovations were developed under the previous ThirdLivestock Project and are now ready for wider application and testing.Based on the findings from these activities, funds will be included forpreparation of a follow-up rangeland development project.

36. Agricultural Credit. Credit for medium-term loans will be madeavailable through the Agricultural and Industrial Development Bank (AIDB)for a range of livestock development activities. Funds will be lent toService Cooperatives to finance the purchase of veterinary drug suppliesand on-lent to an estimated 8,500 individuals for purposes such as:purchase of cattle, sheep, and fodder under the small-scale fatteningprogram and animals, tools and equipment to increase productivity andimprove transfer marketing. Support will be provided to AIDB for trainingstaff in the appraisal of livestock loans and for staff transport.

37. Institutional Development. The proposed project will providesupport for strengthening the institutional capacity of MOA, AISCO, AIDB,and ESC. Institutional development will include local and overseastraining, technical assistance, limited equipment, and incrementaloperating costs.

38. Livestock Export Trade Study. A study will be undertaken byAFRDMD with the assistance of internationally recruited consultants underterms of reference satisfactory to IDA to identify ways of increasinglivestock export markets, including recommendations on an appropriatepolicy framework. The study will be completed by December 31, 1988. Studyrecommendations will be reviewed with IDA by March 31, 1989.

39. Technical Assistance. In addition to specialized servicesrequired to assist with implementation of project components,internationally recruited as well as local consultants will be retained forthe following activities: reviewing drug procurement practices; preparingdetailed plans and specifications for the construction and equipping of acentral veterinary laboratory; evaluating and recommending improvements inSORDU's pond construction program; conducting specialized training courses;

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and undertaking a study of the feasibility of forming a union of existingpeasant service cooperatives. In addition to project-financed technicalassistance, the Government will, not later than June 30, 1987, employ afarm management specialist, a livestock training consultant, an audiovisual specialist, a forage seed production specialist, a molasseslureaconsultant, a service cooperative consultative planning advisor and aforage briquetting technician.

40. Training. For animal nutrition, the project will providesubstantial staff training and development. Regular in-service training ofall project related staff will follow the systems successfully proven underT & V agricultural extension projects. Special training will be given tozonal planning teams who will prepare service cooperative development andland-use plans. All project veterinary staff and those associated with theanimal nutrition component including development agents will complete aninitial three-week orientation course outlining the project objectives.Short-term training will be given to Service Cooperative staff managing thedrug sales and inventory control. Overseas study tours and short-termfellowships will be provided under the project. IDA agreement will berequired for the courses and staff selected for overseas training.Preparation of the training program is well advanced, and the first yearactivities have been agreed. Agreement has also been reached on theoverall training program fellowship selection criteria.

Project Implementation

41. The main project implementing agency will be within the Ministryof Agriculture's Animal and Fishery Resources Development Main Department(AFRDMD). The Vice-Minister of AFRDMD will be the ex-officio projectmanager, assisted by a deputy manager for animal health and one for animalnutrition. The Southern Rangelands Development Unit (SORDU), a semi-autonomous unit under the Vice-Minister of AFRDMD, will implement theSouthern Rangelands Pilot Project. The responsibility within HOA foroverseeing the production of forage seed and seedlings will be transferredby July 7, 1987, from the Department of Community Forest and SoilConservation to AFRDMD. AIDB will, in cooperation with MOA, implement thecredit activities.

42. Drug Procurement and Distribution. AISCO will import anddistribute all veterinary drugs and vaccines. Funds will be on-lent toAISCO under the prtject for drugs, stores, equipment, vehicles, andconsultant services (see para. 52). Completion of a financing agreement,satisfactory to the Association, between the Government and AISCO is acondition of credit effectiveness. The Government will ensure that AISCO,at the beginning of each fiscal year, has at its disposal adequate localfunds to cover its operating costs. The distribution and sales of drugsand veterinary equipment procured by AISCO will be through existing MOAclinics, Service Cooperatives, and private pharmacies. The margin to becharged for drugs and vaccines (20 percent for AISCO and 20 percent overthe AISCO price for retailers) will be reviewed annually by the Governmentin consultation with IDA. The review process will be completed by March 31each year. Procedures agreed between the Government and IDA for the saleof drugs and vaccines will be followed.

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43. Animal Health. An annual work plan detailing the sub-districts tobe served each year will be agreed upon by the Government and IDA not lessthan three months prior to the beginning of each fiscal year. Those to beserved in each region during the first year have been agreed upon duringnegotiations. MIOA will introduce, not later than July 7, 1987, a vehiclecost accounting program to monitor the cost-effectiveness of various typesof vehicles. It will begin to implement, not later than July 7, 1987, apolicy of reviewing the condition of MOA vehicles if they have served fiveyears or traveled 140,000 km and again at eight years or 200,000 kms.

44. Animal Nutrition. This compo-nent will be implemented throughsmall farmer organizations. These include Peasant Associations of about240 families each; Service Cooperatives, which provide inputs, consumergoods, marketing and credit to groups of 4-5 Peasant Associations; andProducer Cooperatives, which have an average membership of about 70families and are intended to encourage farmers to pool their resources andoperate crop and livestock production communally. To implement the animalnutrition component, Service Cooperatives in the project area will beassisted to prepare development plans addressing special constraints andprescribing the resources and services needed to progressively develop theagricultural and livestock potential of the area within each jurisdiction.District level planning teams with technical representation from MOA willassist in preparing plans for livestock production and management includinghealth and nutrition improvements. Responsibility for supervising theimplementation of these plans will rest with district or field agents ofMOA assigned to each Service Cooperative participating in the project.

45. Seed production will be handled as follows: requirements for thefirst year of the project will be imported; most forage seeds and seedlingswill be grown at MOA centers or on plots of individual Peasant Associationsunder the supervision of MOA technical teams; and minor requirements foroats and vetch seed will be the responsibility of the ESC. During thefirst three years of the project, seeds will be subsidized to provide therequired incentive for farmers to take up the new and technically complextask of producing seed. Under the project farmers will either be paid incash by MOA for the forage seed produced (at prices set annually inconsultation with IDA) or compensated as part of a food-for-seed program tobe operated by a selected donor agency. The pricing strategies for seedproduction will be included in the mid-term review with the view to phasingout of the subsidy. The Government will conduct a study to determine theneed for a facility to conduct microbiological studies and produce legumeinnoculum.

46. In order to establish and oversee a program of applied research todetermine financially viable and technically feasible systems for forageproduction and utilization, a Cooperation Agreement will be entered into bythe participating agencies: HOA's Forage Systems Development Unit; theInstitute of Agricultural Research; and the International Livestock Centerfor Africa. Execution of this Agreement is a condition of crediteffectiveness.

47. Agricultural and Industrial Development Bank. To achievesatisfactory performance, AIDB will: (i) Implement a training program,satisfactory to the Government, for loan officers in the appraisal of

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livestock loans; (ii) take all measures to ensure timely repayment byproject sub-borrowers; and (iii) enter into a Cooperation Agreement withMOA to facilitate lendilLg operations. Signature of a Cooperation Agreementbetween MOA and AIDB, satisfactory to IDA, is a condition of crediteffectiveness. Current data relevant to AIDB'S performance with respect todebt recovery will be included in the semi-annual reports to be provided toIDA.

48. Southern Rangeland Pilot Project. The pilot project activitieswill be implemented by SORDU in cooperation with ILCA. The completion of aCooperation Agreement between MOA and ILCA for implementing theresearch/survey activities, satisfactory to IDA, is a condition ofeffectiveness. Draft annual work programs for the following fiscal yearwill be prepared by SORDU and presented for IDA review by February 28 eachyear with the final annual work program, taking into account IDA'scomments, submitted by June 30 each year. SORDU will complete afeasibility study on the operational transfer of three existing ranches inthe pilot project area to pastoralist cooperatives by July 7, 1988, andconduct a feasibility study, not later than June 30, 1988, on the transferof ownership and operation of SORDU cattle transport trucks tocooperatively owned organizations. SORDU will, not later than July 7,1987, transfer the responsibilities for the stocker-feeder credit programto AIDB. IDA agreement with the SORDU annual work program is a conditionof disbursement for the pilot project activities.

Project Cost Estimates and Financing

49. The total cost of the project, including physical and pricecontingencies, taxes, and duties is estimated at fS$57.2 millionequivalent, of which the foreign exchange cost will be aboutUS$33.1 million equivalent, or 58 percent of total project costs. Costestimates are based on March 1985 prices updated to June 1986, based onrecent quotations by contractors and suppliers and considering inflationarytrends in local and foreign costs since March 19B5. Physical contingenciesof about 14 percent of the project base costs have been provided. Pricecontingencies on the base costs plus physical contingencies have beenprovided for local costs on the basis of annual inflation rates asprojected at 0 percent for FY87, 3 percent for FY88, FY89 and FY90, and 4percent thereafter, and for foreign costs at the following annual ratesfrom FY87 through FY93: 7.2 percent, 6.8 percent, 6.8 percent, 7.0 percent,7.1 percent, 4.0 percent, and 4.0 percent.

50. Initial project costs for intensive on-the-job sta-if training;procurement of imported forage seeds, field equipment and veihicles forveterinary and extension staff; consultant services to initiate projectactivities; and preparation of baseline surveys and pre-project overseasstudy tours are being financed under a Project Preparation Facility Advanceof US$865,000.

51. The proposed credit of US$39.0 million equivalent will financeUS$29.0 million of the foreign exchange costs and about US$10.0 millionequivalent of local costs, or about 75 percent of total costs, excludingduties and taxes. Tha Government will provide US$10.5 million equivalent,including duties and taxes. The International Fund for AgriculturalDevelopment will finance US$2.0 million equivalent of project costs under

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the existing Loan 131-ET. An additional loan of about US$5.7 million willbe provided. The fulfillment of the conditions precedent to theeffectiveness of the agreement between the Government and IFAD is acondition of credit effectiveness.

52. On-lending arrangements of the IFAD loan and the IDA credit havebeen agreed. The Government will on-lend the proceeds of the IFAD loan toAIDB for a period of five years, including one year's grace, at an annualinterest rate of 2 percent for fiscal years 1987 and 1988 and an interestrate of 4 percent per annum thereafter. AIDB will on-lend these funds toService Cooperatives at 5 percent per annum for fiscal years 1987 and 1988and 7 percent per annum thereafter. Individual farmers will receive fundsat 7 percent per annum during fiscal years 1987 and 1988 and 9 percent perannum thereafter. These rates are expected to be positive in real termsgiven that downward revisions of local inflation rates are justified inlight of recent information and analysis of inflation indicators. Theappropriate interest rates to be charged after 1988 will be agreed upon byIDA and the Government during the mid-term review. The main criteria forassessing the interest rate will be that they be positive in real terms andthe spread for the financial intermediaries be sufficient to cover allreasonable operating costs, risks and a profit margin. The execution of aSubsidiary Loan Agreement between the Government and AIDB specifying thesearrangements, is a condition of credit effectiveness. The Government willon-lend US$7.0 million equivalent to AISCO from the proceeds of the creditfor a period of five years, including one year of grace, at an annualinterest rate of 2 percent during the fiscal years 1987 and 1988 and aninterest rate of 4 percent per annum thereafter, for the purchase ofvehicles, equipment, facilities, training, and drug requirements for thefirst project year and incremental annual drug requirements thereafter.The appropriateness of the on-lending rate would be reassessed during themid-term review.

53. The foreign exchange risk under the above onlending arrangements(IFAD loan through AIDB and IDA Credit to AISCO) is borne by theGovernment. In the case of AIDB, this is consistent with lending terms asunder ongoing IFAD loans and IDA credits channelled through AIDB. Withrespect to AISCO, the assumption by the Government of the foreign exchangerisk is consistent with the objective of strengthening the capitalstructure of a fledgling institution whose operations are envisaged toexpand under the proposed and future projects.

Monitoring and Evaluation

54. MOA, AIDB, AISCO, and SORDU will prepare and submit semi-annualprogress reports, in a form satisfactory to IDA, within two months of theend of the reporting period. MOA will also prepare a Project CompletionReport no later than six months after the completion of the project. TheGovernment will, not later than December 31, 1989, prepare and submit amid-term review report to IDA for review and comment under terms ofreference acceptable to IDA. The Government and IDA will conduct a jointreview, including if necessary, a field review of project progress todetermine what changes, if any, are required to improve project impactduring the remainder of the project implementation period.

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Procurement and Disbursement

55. Procurement arrangements are sumuarized in Annex IV. Contractsfor vehicles, laboratory and work equipment, spare parts, and veterinarydrugs each valued at US$400,000 or more and totalling an estimated US$11.5million, will be procured under international competitive bidding (ICB)procedures following the Bank Group guidelines. Eligible domestic bidderswill be granted a margin of preference of 15 percent of the c.i.f. bidprice of imported goods or actual customs duties and import taxes,whichever is lower. Due to the small stale of construction activities, thecivil works contracts might not be attractive to international bidders.Therefore, the construction of laboratories, workshops, stores, and housingwill be done through local competitive bidding procedures satisfactory toIDA. Foreign firms will be eligible to bid. Contracts for goods valued atless than US$400,000 will be procured either through limited internationalbidding or by local competitive bidding procedures satisfactory to IDA.Small or off-the-shelf items costing less than US$50,000 each may bepurchased on the basis of comparisons. The total value of the itemsprocured under this procedure should not exceed US$3.0 million.Consultants will be retained in accordance with IDA guidelines.

56. Disbursements under the credit will be made against 100 percent offoreign expenditures and 75 percent of local expenditures for civil works,including project-financed buildings; 100 percent of foreign expendituresand 75 percent of local expenditures for vehicles and equipment, officefurniture and equipment, and imported seed; 100 percent of expenditures fortechnical assistance; 100 percent of foreign expenditures and 85 percent oflocal expenditures for training; 100 percent of total expenditures duringthe first year of the project, 60 percent of total expenditures in projectyears two and three, and 40 percent of annual expenditures thereafter forveterinary drugs and medicine expenditures; 100 percent of expendituresduring the first two years for imported vaccines; 75 percent ofexpenditures in project years one through three for operating costs and 50percent thereafter; and 100 percent for the Livestock Export Trade Study.The proceeds of the Credit will be disbursed over a seven-year periodincluding expenditures incurred under the PPF. Disbursement will be basedon full documentation with the exception of operating costs andreimbursement applications valued below US$50,000 for which statements ofexpenditures will be required. The Closing Date for the proposed Creditwill be December 31, 1992, six months after project completion. For thepurpose of the project, a Special Account will be opened in the NationalBank of Ethiopia, with an initial deposit of US$2.5 million.

Accounts and Audit

57. HOA, AISCO, SORDU, and AIDB will establish and mailta±n separateproject accounts. These will be audited annually by an independent auditoracceptable to IDA. Audited accounts will be sent to IDA, including auditsof the statements of expenditures, and the Special Account, within eightmonths of the close of each financial year.

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Cost Recovery

58. The project will finance the annual cost of veterinary drugs forthe MOA nationwide program. Veterinary drugs and medicines will be sold tofarmers at their purchase cost to the Government. No markup is included toallow for losses and handling. It is expected that total AISCO receiptsfor drug sales will be sufficient to cover all handling costs including anallowance for losses and drug expiry. AISCO will retain funds on arevolving basis to replenish stocks as required. Vaccines are currentlyprovided free. Imported vaccines will be sold by AISCO on the same basisas drugs. The Veterinary Epidemiology and Economics Unit will examine theeconomics of controlling the comparatively wide spectrum of diseases.During the mid-term review, the national vaccine program will be examined,and it is anticipated that the spectrum of vaccines provided free will bereduced. Farmers will be able to request the vaccines not included in thenational priority list and pay for them on a cost basis. The possibilityof introducing a small service charge for clinical services provided tofarmers will be examined. Due to the current level of direct and implicittaxes being paid by peasants, premature introduction of such a charge willbe an unreasonable burden on most peasant families.

59. Except for the ESC-produced oat seed, the costs of which will berecovered in full from farmers, grass and forage seeds and seedlings willbe provided free or on a seed-for-work program basis for the first threeyears of the project. The bulk of seed and a good proportion of seedlingsrequired under the project will be produced by farmers in the participatingareas. Farmers will be paid a fair price for these seeds to ensure anadequate incentive. The costs of the seed-for-work program will be met byMOA as a subsidy, but the process will be fully reviewed in consultationwith IDA during the mid-term review.

Environmental Impact

60. Overall, the project is expected to have a beneficialenvironmental impact. There is some possibility that overgrazing couldcause or accelerate land degradation if livestock herds in newly formedvillages are concentrated in village grazing areas or if the anticipatedincrease in cattle offtake does not occur, the probability of suchovergrazing is considered minimal considering that in many regionsovergrazing will not be an issue given the availability of sufficient feedto sustain a substantial increase in cattle without deleterious effects andthat improved conditions of cattle is expected to encourage farmers to sellsurplus animals. Furthermore, improved agricultural incentives beingdiscussed with the Government would encourage a shift towards gralnproduction. Impacts arising from possible increases in livestock numbersrelative to available feed supplies would, however, be monitored andevaluated during a mid-term review. The proposed adaptive research workshould lead to greater productivity and improved land utilization. Betteranimal nutrition, which will imply a necessity to own fewer animals, willhave a beneficial impact upon the rural environment, especially longer termcrop production and potable water supplies. Assistance to the NationalVeterinary Institute to increase rabies vaccine production will improve theenvironment in major towns and cities. Improved land use and management ofcommunity grazing areas, especially on steeper land, will have a beneficialimpact on controlling soil erosion.

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Benefits

61. Direct project benefits have been quantified only for the two maincomponents--animal health and animal nutrition. These benefits includeincreased availability of meat, milk, and ox-power due to reduced mortalityand higher liveweights at time of sale or slaughter and increasedproduction and offtake of meat and milk from all species. Increased cropproduction and possible increases in area cultivated, due to the increasedsupply and efficiency of oxen for cultivation arising from both animalhealth and nutrition activities, have not been quantified as it is notpossible to determine precisely the magnitude of such benefits. Also,increased crop yields resulting from the application of additional manureand from improved soil and water conservation have not been quantified.Additional benefits will flow from the pilot project activities in theSouthern Rangelands among drought-susceptible pastoralist groups. Projectimpact on rural development will be important, especially in the animalnutrition component for which the employment benefits have been quantified.At full development, animal nutrition activities will generate about 1.7million incremental labor-days annually in some 625 Peasant Associationsinvolving about 176,000 farm families. At full development, an estimated710,000 farm families will benefit from the animal health activities eachyear. The vast majority of these beneficiaries currently live in absolutepoverty.

62. The project economic rate of return is estimated at 26 percent,based on an analysis of the productive components, which comprise60 percent of total project costs. Should benefits decrease by 20 percentor costs increase by 20 percent, the rate of return will fall to 19 percentand 20 percent, respectively.

Risks

63. In general, this is a comparatively low risk project. There maybe a possibility in some areas of livestock numbers increasing without acorresponding increase in offtake, thereby exacerbating the soil erosionand degradation problem. This will be closely monitored and evaluatedduring a mid-term review of the project. The commitment to the projectdemonstrated by the Ministry of Agriculture and the efficient and earlyimplementation of project start-up activitios all point to implementationproceeding as scheduled. Current high prices for livestock and livestockproducts relative to those for grain provide an incentive for increasingofftake. Some risk may be associated with uncertainty among livestockowners about the impact of the Government's villagization program, but thisis expected to be minimal since livestock ownership is expected to remainprivate and current indications are that private exporters will continue tooperate. Moreover, the proposed Livestock Export Trade Study will providea basis for professional dialogue with Government on possible marketingarrangementss.

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PART V - RECOMMENDATION

64. I am satisfied that the proposed credit will comply with theArticles of Agreement of the Association and recommend that the ExecutiveDirectors approve the proposed credit.

Barber B. ConablePresident

March 26, 1987Washington, D.C.

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1986 SOCIAL INDICATOR DATA SHEET

ETHIOPIAReference Groups (MRE)

MostRecent Low-income Mid-income

1965 1973 Estimate S-S Africa S-S Afrtca

LABOR FORCETotal Labor Force (thou) 11047.3 13176.3 16583.1

Female (X) 35.8 35.3 33.2 35.7 37.5Agriculture (%) 86.3 83.6 79.8 a 78.9 59.4rndustry (%) 5.3 6.4 7.8 a 7.6 14.8

Particloation rate (%):Total 43.5 42.1 39.3 38.9 36.2Male 57.0 55.6 52.0 50.4 45.8Female 30.5 29.2 26.4 27.5 26.7

Age dependency ratio 0.9 0.9 0.9 1.0 1.0

HOUSINGAverage size of household:

TotaI 4.5Urban 3.5 4.2Rural ,, 4.5

Percentage of dwellings withelectricity:

Total .. .. . .

Urban 5B.2 bRural .I.

EDUCATIONEnrollment rates:

Primary: Total 11.0 16.0 46.0 60.1 98.5Male 16.0 23.0 58.0 69.6 107.3Female 6.0 10.0 34.0 51.3 90.7

Secondary: Total 2.0 4.0 13.0 12.5 21.0Male 3.0 6.0 17.0 16.5 28.5Female 1.O 2.0 9.0 9.0 16.9

Pupil-Teacner ratio:Primary 41.5 46.1 59.3 45.1 42.5Secondary 20.1 27.7 .. 23.0 27.7

Pupils reaching grade 6 (X) . .. .. 59.6 80.8

rNCOME. CONSUMPTION. AND POVERTYEnergy consumption per cap.(kg of oil equivalent) 9.7 20.9 16.7 54.6 530.7Percentage of private incomereceived by:

Highest 10% of households ..

Hignest 20% ..

Lowest 20% ..

Lowest 40% ..

Est. absolute poverty incomelevel (uSS Per capita):

Urban .. 115.0 190.0 c .. 689.6Rural .. 65.0 .. . 338.1

Est. pop. below absolutepoverty tncome level (%)

Uroan .. 60.0Rural .. 65.0

Passenger cars/thou pop. 0.9 1.5 - 36.0Newspacer circulation(per tnousand population) 1.3 1.0 0.9 3.6 7.4

EPO July 1986Mot avm,iabi

Note: Gou08 aVeAges drm ocemiation w11gHtm1. Country coVOtage deoends on data av aiagslity and in not unitorm. Unless otherwisenoted. 1965 refos to s%. year between 1912 ana igetS ?973 between 1970 and 7970: end most Milent estimate between 1912 and 10IN.a. 1SO. a. Addis Abtet only. c. 1981.

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Page 2 of 6

1986 SOCIAL INDICATOR DATA SHEET

ETHIOPIAReference Groups (MRE)

MostRecent Low-Income Mid-income

1965 1973 Eutimate S-S Africa S-S Africa

AREATotal land area (tAou SQ kim) 1221.9 1221.9 1221.9Agricultural (I of total) 48.0 48.7 48.4

GNP PER CAPITA fUSS) .. .. 110.0 210.0 1025.3

POPULATION AMW VITAL STATISTICSTotal population (thou) 25409.0 31284.0 42169.0Urban Pop. (% of total) 9.7 15.2 20.4 33.1Population growth rate(%):

Total 2.6 2.8 2.9 2.8Urban 7.4 6.1 6.2 4.8

Life expect. at btrth lyrsl 42.7 43.6 44.5 48.2 51.0Population projections:

Pop. in 2000 (mill) 5.i1Stationary op. (mill) 204.0

Population consity per sq kmof agricultural lana 43.3 52.6 71.3 55.9 45.6Pop. age structure (I]:

-14 yes 44.9 45.3 40.0 46.7 46.215-64 yrs 52.5 52.1 51.3 50.4 51.065 and above 2.6 2.7 2.7 2.9 2.3

Crud, birth ruts (per tnou) 43.5 43.2 41.0 46.8 46.3Crude death rate (per tnou) 20.3 19.5 24.0 18.3 15.8Total fertility rate 5.8 5.8 6.1 6.6 a.4Infant mort. rate (oer thou) 166.0 155.0 172.0 128.5 103.2Chtid Coeatn rate (per thou) 37.0 35.0 39.0 25.7 17.6Family planning:

AcCeptors, annual (tnou)Users ( of ma:rred women) 2.0 4.5 7. 1

FOGOD HEALTH AND NUTRITIONIndex of food production percapita (1974-76 - i00) 117.1 106.8 90.0 89.5 88.3Per caoita supply of:

Calories (X of requirmnts) 93.1 81.2 92.8 90.0 94.2Proteins (grams per day) 73.9 63.7 72.7 52.6 50.6

Pop. per physictan (thou) 70.2 83.6 88.1 a 39.2 11.3Pop. per nurse (thou) 5.8 6.4 5.6 a 3.3 2.6Pop. per hospital bed (tnou) 2.7 3.7 3.8 a 1.7 1.4Access to safe water

(% of population): Total 6.0 14.5 25.2 45.8Urban 61.0 82.C 61.8 7O.5Rural 1.0 3.9 t7.1 35.0

Population Growth Infant Mortality Primary School Enrollment2 x

5- 20 I 120-

100 I - 412- ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~I-

40 U

I- 0 I a

1945-73 1973-Ed 1960 1965 1970 1975 1910 1960 1965 1970 1975 1930

z3 CTHIOPIA a ErHIoPIArist rREr GROUP 0 FIRST LrjGROUP

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- 22- ANNEX IPage 3 of 6

3 Definitions of Social Indicators

The deth:letion of a particular social indicator may Infant (age 0-1) mortality rate Number of infantsvary among countries or within one country over per thousand live births who die before reaching onetime. For instance, differcnt countries define "urban year of age, in a given year.area" or "safc water" in different ways. Child (age 1-4) mortality rate - Number of deaths

of children. age 14, per thousand children in theAREA (thousand square kilometers) same age group in a given year. For most developingTotal - Total surface area comprising land area and countries these data are derived from models usinginland waters. I information on infant mortality rates.Agricultural (percentage of totcl) - Estimate of agri- Family planning - acceptors. (thousands) - Annualcultural area used for crops. pastures, market and number of acceptors of birth-control measures re-kitchen gardens or to lie fallow, as percentage of ceived under the auspices of a national family plan-total. ning program.

Family planning - users (percentage of married wom-GNP PER CAPITA (USS) - GNP per capita csti- en) - Percentage of marricd women of child-bearingmates at current market prices. calculated by the age who arm practising, or whose husbands areconversion method used for the World Bank Atlas, practising, any form of contraception. Women of19Y6. child-bearing age are generally women aged 15-49.

although for some countries contraceptive usage isPOPULATION AND VITAL STATISTICS measured for another age group.Tot. population - mid-year (millions)Urban population (percentage of toral) - Different FOOD, HEALTH AND NUTRrrIONcountries follow different definilions or urban popu- Index offoodproduction per capita (1974 - 76 = 100)lation. Such differences may affect comparability of - Index of per capita annual production of all fooddata among countries. commodities. Production excludes animal feed andPopulation growth rare (percent) - total and urban - seed for agriculture. Food commodities include pri-Annual growth: rates of total and of urban popula- mary commodities (for example, sugarcane insteadtions. of sugar) which are edible and which contain nu-Life expectancy at birth (years) - Number of years a trients (for example, tea and coffee are excluded).newborn infant would live if prevailing patterns of Commodities include nuts, fruits, pulses, cereals,mortality for all people at the time of its birth were r vegetables, oil se:ds, sugarcane and sugar beets,to stay the same throughout its life, livestock, and livestock products. Aggregate produc-Population projections tion or each country is based on national average

Population in 2000 - The projection of population producer price weights.given total population by al ' and sex. fertility and Per capita supply of calories (percentage of require-the demographic parameters of mortality rates, and ments) - Computed from energy equivalent of netmigration in the base year 1980. until the population food supplies available in country per capita per day.reaches a stationary state. Available supplies comprise domestic production,

Stationary population - The projected population imports less exports. and changes in stock. Netlevel when zero population growth is achieved: i.e., supplies exclude animal feed, seeds for use in agri-the birth rate is constant and equal to the death rate, culture, quantities used in food processing, and loss-the age struzture is stable, and the growth rate is es in distribution. Requirements were estimated forzero. 1977 by the Food and Agriculture OrganizationPopulalion densit,u agriculiural land - Population per (FAO) based on physiological needs for normalsquare kilometer (100 hectares) of agricultural area. activity and health considering body weights, envi-Population age struerre (percent) - Children 0-14 ronmental temperature, age and sex distribution ofyears. working age 15-64 years. and peopie of 65 populaLion.years and over as percentages of population. Per capita supply of protein (grams per day ) - ProteinCrudle hirth rate - Annual live births per thousand content of per capita net supply of rood per day. Netpopulation. supply of food is defined as above. Requirements forCruide death rate - Annual dcaths per thousand all countries established by United States Depart-population. ment of Agriculturc provide for minimum allow-Twrualfertilitr rate - The average numnber or children ances of 60 grams of total protein per day and 20that would be born alive to a woman during her grams of animal and pul e protein. These standardslifetime if during her childbearing years she were to are lower than those of 75 grams of total protein andbear children at each age in accordanc with prevail- 23 grams of animal protein as an average for theing age-specific fertility rates. world, as proposed by FAO.

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23- ANNEX IPage 4 of 6

Population per phvsician - Population divided by group of individuals who share living quarters andnumber of practising physicians qualified from a main meals. A boarder or lodger may or may not bemedical school at university level. included in the household for statistical purposes.Population per nursing person - Population divided Percentage of dwellings with electricity - toat, urban.by number of practising graduate nurses, assistant and rural -Conventional dwellings with electricity innurscs, practical nurses and nursing auxiliaries. living quarters as percentage of all dwellings.Population per hospital bed - Population divided bynumber of hospital beds available in public and pri- EDUCATIONvate. general and specialized hosp;tals, and reha- Enrollment Ratesbilitation centers. Hospitals are establishments Primary School Enrollment- rotal, male andfemalepermanently staffed by at least one physician. Es- - Gross enrollment of all ages at primary level as atablishmems principally providing custodial care are percentage of primary school-age children. Whilenot included. many countries consider primary school age to beAccess to safe water (percentage of population) - total. 6-11 years, others have wider age groups. Differ-urban, and rural - People (total, urban, and rural) with ences in country practices in the ages and durationreasonable access to safe water supply (includes treat- or school are reflected in the ratios given. For soficed surface waters or untreated but uncontaminated countries with universal education. gross enrollmentwater such as that from springs, sanitary wells, and may exceed 100 percent since some pupils are youn-protected boreholes). In an urban area a public foun- ger or older than the country's standard primary-tain or standpost located not more than 200 metcrs school age.from a house may be considered within reasonable Secondary School Enrollment - total. male andaccess of that house. In rural areas reasonable access female -Computed in a similar manner. but includeswould imply that members of the household do not pupils enrolled in vocational, or teacher traininghavc to spend a disproportionate part of the day secondary schools, for pupils usually of 12 to 17fetching water. Absent aad incomplete responses, and years of age.large variations bet-ween countries, may affect he Pupil-teacher ratio - primary, andsecondary - Totalvalidity of the overall results of the country and students enrolled in school divided by the totalregional comparisons. In addition, certain definitions number of teachcrs.and classifications such as urban and rural, reason- PercenrWe pupis reaching grade six - The percen-ablc access to safe water in rural areas, safe water tage of a cohort of 1,000 pupils starting pnmarysources (when they are not subject to laboratory school that persist into grade six.control) vary considerably from country to countryand thus affect cornparability of the data. INCOME, CONSUMPTION, AND POVERTY

LABOR FORCE Energy consumption per capita (kilograms of oil equi-Total labor force (millions) - Economically active valent) - Annual consumption of commercial pri-persons, including armed forces and unemployed but mary energy (coal and lignite, petroleum, natural

excluding housewives and students. Definitions in gas, and hydro, nuclear and geothermal electricity).various countries are not comparable. Private income distribution - Income (both in cashFemare (percent) - Female labor force as a p.rcen- and kind) accruing to percentile groups of house-tage of total labor force. holds ranked by total household income.Agriculture (percent) - Labor force in farming, Passenger cars (per thousand population) - Includesforestry, hunting and fishing as a percentage of total motor cars seating fewer than eight persons; ex-labor force. cludes ambulances, hearses and military vehicles.Industry (percent) - Laib: force in mining, construc- Newspaper circulation (per thousand population)tion, manufacturing and electricity, water and gas as Average circulation of "daily general interest news-a percentage of total labor force. paper," defined as a periodical publication devotedParticipation rate (percent) - total, male, andfemale primarily to recording general news. It is considered- Participation rates are computed as t:he percentage to be -daily- if it appears at least four times a weekof population of all ages in the labor force. These are Estimated absolute povertv income level (USS perbased on International Labour Office (ILO) data on capita) - urban and rural - Absolute poverty incomethe age-sex structure of the population. le%s, is that below which a minimal nutritionallyAge dependency ratio - Ratio of population under 15, adequate diet plus essential nonfood requirementsand 65 and over, to the working age population (age are not affordable. These estimates are very approx-15-64). imate measures of poverty levels, and should be

interpreted with considerable caution.HOUSING Estimated population below absolute porerty incomeAlerage si:e of household (persons per household) - level (percent) - Percentages or urban and ruralotoral. urban,. andl rural - A household consists of a populations who live in "absolute poverty."

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-24 -

ANNEX IPege 5 OF 6

ETHIOPIA - ECONOMIC INDICATORS

GNP Per Capita 11.i (1984)

ANNUAL RATE aF OROWTH OF COPGROSS DOMESTIC PRODUCT IN FT 1986 3A T CONSTANT FACTOR COST MU

(Flscal Yearn)

USS Min. X 1981-SB 1983 1984 1986

GDP at Market Price. 4855.9 100.0 8.1 5.1 -3.7 -6.5Investment 622.5 16.8Grog. Domestic Savings -251.5 -6.2Resource Balance -774.0 -16.0Exports of Good. and NFS 657.9 11.5Imports of Goods and WFS 1331.9 27.5

OuTPUT IN 1985 3JIValue AddedUSS Mln. X

Agriculture 1921.6 44.3Industry 894.5 16.0Services 1722.7 39.7Total at Factor Cost 4338.8 100.0

GOVERNMENT FINANCE

Central GovernmntBr. clln -Xof GDP

FT 198617 FT 19B6 1982-84Current Receipts 2401.1 24.0 20.9Current Expenditures 2364.6 21.6 21.2Current Surplus 36.8 0.4 4.3Capital Expenditures 12765. 12.7 8.3

MONEY, CREDIT AND PRICES 1980 1981 1982 1983 1994 1985(Fiscal Years) (MhlliironEr. outtandinW ad perioar

Money and quasi-money 2332.1 2377.6 2643.7 3040-6 3383.7 3840.1Bank Credit to Central Government 968.1 1127.9 1190.8 1980.8 2291.4 2620.7Bank Credit to Private Sector and

Finmnciml Institution. 1644.2 1721.8 1944.3 1741.7 - 1881.9 1962.3

Ms(Percentages)loney as % of GDP 27.3 26.7 28.8 30.4 33.7 389.

Annual percentage changes In:General Price Index 4.6 6.1 5.6 -0.4 8.4 19.0

Bank Credit to Public Sector 12.3 14.4 6.6 67.8 15.8 14.3Bank Credit to Private Sector 34.6 4.7 12.9 -10.4 6.9 2.2

Note: All conversions to dollars in this table are at the official exchango rate ofUS1600 = Birr 2.67

All Fiscal Years are from July 8 to July 7.

3/ Provisional Data for 1986.

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Annex IPaoe B of a

BALANCE OF PAYMENTS ESTIMATES

1983 1984 1986 MERCHANDISE EXPORTS(Millions USS) (Fiscal Year Averago 1983-85)

USS Min. iXExports Goods. NFS 561.8 811.9 549.2 Coffee 246.4 66.3Imports of Goods, NFS 961.7 1115.8 1082.0 Pulse 10.8 2.6Resource Cap (deficit = -) -409.9 -653.9 -532.8 Ollseeds 9.9 2.4

Hides L Skins 48L4 11.9Investment Income (net) -13.8 -19.2 -31.0 Oihlsed cake 6.5 1.4Private Transfers (net) 84.9 107.2 144.9 Other 87.5 21.4Balance on Current Acct. -338.6 -415.9 -420.9 Total 468.5 166.6

Official Transfers (net) 92.5 161.9 298.4P-ivate ULT Capital (net) 0.0 0.0 6.6Public JLT Borrowing (net) 203.5 204.1 159.6

Disbursements (263.3) (268.8) (256.1) EXTERNAL DEBTAmortization (49.8) (64.7) C 96.5) DECEMBER 31, 1985 US S Mln

Short-term Capital -9.6 1069 42.3 Total outstanding &Disbursed 298.6

Changes in reserves(- * incr eas) 71.5 42.3 -46.3 DEBT SERVICE RATIO

Minor Items (ncl. errors) -19.4 -3.3 -33.1 FOR FY 1986Net For. Assets (end year) 107.3 64.8 112.4 XPetroleum Imports 184.4 156.2 136.7 Total OutstandingPetrolum Product Imports 7.3 28.2 51.0 A Disbursed 21.5

Rate of Exchange Since 1973

US31S00 = Br. 2.07Br.1.6W = USZI.48

IBRDOIDA LENDING, (March 31, 1986) (Million USS) -

IORD IDA

Outstanding and Disbursed 39.8 428.4Undisbursed - 304.8Outstanding inl. Undisbursed 733.2

O = not available

January 1987

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Annex IIPage 1 of 2

A. STATUS OF BANK GROUP OPERATIONS IN ETHIOPIASTATEMENT OF BANK LOANS AND IDA CREDITS

(As of September'30, 1986)

AmountLoan or (USS Million)Credit Less Cancellations Undis-Number Year Borrower Purpose Bank IDA 1 bursedl

Twelve loans and twenty five credits fully disbursed 108.6 388.6

Cr. 707-ET 1977 Ethiopia2 Revised Amibara 25.0 3.0Cr.1275-ET 1982 Ethiopia Agric. & Indust. Dev. Bank 30.0 22.5Cr.1366-ET 1983 Ethiopia Urban Development 20.0 15.2Cr.1386-ET 1983 Ethiopia Petroleum Exploration 7.0 2.6Cr.1404-ET 1983 Ethiopia Second Road Sector 70.0 53.1Cr.1429-ET 1984 Ethiopia Coffee Processing & Marketing 35.0 28.0Cr.1509-ET 1984 Ethiopia Sixth Telecommunications 40.0 36.5Cr.1520-ET 1984 Ethiopia Sixth Education 70.0 67.8Cr.1521-ET 1984 Ethiopia Agric. Research 22.0 21.2Cr.1522-ET 1984 Ethiopia Technical Assistance 4.0 3.5Cr.1576-ET 1984 Ethiopia Drought Recovery Program 30.0 12.8Cr. 1676-ET 1986 Ethiopia Port Eng'g & Construction 5.5 5.5Cr.1704-ET3 1986 Ethiopia Energy 62.0 62.0Cr.1722-ET3 1986 Ethiopia Forestry 45.0 45.0

Total 108.6 854.1of which has been repaid 71.0 10.9Total now outstanding 37.6 843.2Amount sold 6.0of which has been repaid 6.0

Total now held by Bank & IDA(prior to exchange adjustments) 37.6 843.2

Total Undisbursed 378.7

1, Credit 1275-ET and higher are denominated in SDRs and are shown in US$ equivalents,based on the exchange rate in effect at the time of negotiations.

21 US$1.7 million disbursed under former Cr.418-ET, Amibara Irrigation, has been repaid cout of the proceeds of the new Credit.

3/ Signed but not yet effective.

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Annex IIPage 2 of 2

B. STATEMENT OF IFC INVESTMENTS(As of September 30, 1986)

US$ MillionFiscal Type of AmountYear Obligor Business Loan Equity Total

1965 Textile Mills of Dire Dawa I Textiles 1.5 1.0 2.5

1966 Ethiopia Pulp & Paper Co. Paper - 1.9 1.9

1968 HVA Metahara, S.C. Sugar 5.5 3.5 9.0

1970 Textile Mills of Dire Dava II Textiles 0.4 0.2 0.6

1973 Textile Mills of Dire Dawa III Textiles 1.5 0.2 1.7

Total Gross Commitments 8.9 6.8 15.7

Less cancellations,terminations, repaymentsand sales 8.9 6.8 15.7

Total Commitments now held by IFC - - -

Total undisbursed

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Annex IIIPage 1 of 2

ETHIOPIA

FOURTH LIVESTOCK DEVELOPMENT PROJECT

Supplementary Data Sheet

Section I - Timetable of Key Events

(a) Time taken to prepare project: Twelve months

(b) Project Prepared by : The Government with IDA assistance

(c) Idcntification mission : August 1985

d) Appraisal mission March 1986

(e) Negotiations : December 15-19, 1986

(f) Planned date of effectiveness: (120 days after credit signing)

Section II - Special IDA Implementation Action:

Provision made for a Project Preparation Facility advance ofUS$865,000 to finance project start-up activities (para. 50).

Section III - Special Conditions

Conditions of Effectiveness

(a) The completion of a financing arrangment, satisfactory toIDA, between the Government and AISCO (para. 42);

(b) The completion of Cooperation Agreements between MOAIIARIILCAfor implementing the Forage Systems Development Unit'sapplied research program and research activities related tothe Southern Rangeland Pilot Project (paras. 46 and 48);

(c) The completion of a Cooperation Agreement between AIDB andMOA for implementing the credit component (para. 47);

(d) The fulfillment of the conditions precedent to theeffectiveness of the agreement between the Government andIFAD (para. 51).

(e) The execution of a Subsidiary Loan Agreement betweer. theGovernment and AIDB (para. 52); and

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Annex IIIPage 2 of 2

Condition of Disbursement

(a) For the Southern Rangelands Pilot Project, agreement by IDAto SORDU annual work program (para. 48).

Other Conditions

(a) A livestock export trade study will be completed by December31, 1988, and will be reviewed by IDA not later than March31, 1989 (para. 38);

(b) The Government will employ, not later than June 30, 1987,technical assistance staff (para. 39);

(c) The Government will ensure that AISCO at the beginning ofeach fiscal year has at its disposal adequate local funds tocover its operating costs (para. 42);

(d) The Government will implement a policy reviewing thecondition of MOA vehicles if they have served six years ortraveled 140,000 km and again at eight years and 200,000 kmand introduce a pilot cost accounting system not later thanJuly 7, 1987 (para. 43);

(e) The Government will cause AIDB to take all measures necessaryto ensure timely repayment of subloans under the project andinclusion of current data relavant to its performance withrespect to debt recovery in semi-annual reports to beprovided to IDA (para. 47);

(f) SORD0 will complete a feasibility study on the operationaltransfer of three existing ranches in the pilot project areato pastorlist cooperatives by July 7, 1988, and conduct afeasibility stddy on the transfer of ownership and operationof SORDU cattle transport trucks to cooperatively ownedorganizations not later than June 30, 1988 (para. 48); and

(g) SORDU will, not later than July 7, 1987, transfer theresponsibilities for the stocker-feeder credit program toAIDB (Para. 48).

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- 30 -

ANNEX IV

ETHIOPIA

FOURTH LIVESTOCK DEVELOPMENT PROJECT

Procurement Schedule I/(US$ million)

NotItem ICB LCB LIT Other Applicable Total

1. Civil Works 5.4 5.4(4.6) (4.6)

2. Vehicles 3.0 0.4 3.4(2.0) (0.4) (2.4)

3. Equipment,Material and 8.5 2.0 3.0 0.6 14.1Veterinary Drugs (7.8) (1.5) (2.5) (0.5) (12.3)

4. TechnicalAssistance and 5.0 3.0 8.0Training (5.0) (2.5) (7.5)

5. Incremental 17.0 17.0Operating Cost (10.7) (10.7)

6. Livestock Export .6 .6Trade Study (.6) (.6)

7. Agricultural 7.7 7.7Credit [7.71 [7.71

8. Refunding of PPF 1.0 1.0(0.9) (0.9)

Total 11.5 7.4 3.4 7.2 27.7 57.2( 9.8) (6.1) (2.9) (7.0) (13.2) (39.0)

[7.7J [7.71

1/ Figures in parentheses are the estimated amounts to be financed by IDA,figures in brackets are the estimated amounts to be financed by IFAD.

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/ FOU

,I . .F R I T R CA

KNARIOUM

U) ( A_ .s' '''

PILOT PROJECT T AREA A

K ,{4D E R,. Y A /

L I D i sr~~~~~~~~~~~~~~~~~~~~~~C. ,t .,, ,~GO

w -X::~~~~~~~~~~~~~~k

| 9 a r '','"WELEA

@ l - - - { C r gr;roz v - -

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Page 37: World Bank Document€¦ · exploitation of geothermal energy. The country's main potential lies in agriculture, for which the natural conditions of several &reas are favorable. Nearly

i ,1 | , ~~~~~~~~~~~~~~~~~~~~~~~~IBRD 19693C ~ ', t ^4' E T H I 0 P I A

( FOURTH LIVESTOCK DEVELOPMENT PROJECT\ .w* /8etrvPROJECT

AREAKEFA Project Areas

Agro-ecologicol Zones of ihe Central

Highlands (above 1500 nleten)!

ERITREA - ~~~~~~~~~~~~~~~~~~~~~~Hugh Potential

Law Potential to.

j i '7-' lsahyets (rainfall) in millimeten

~ i - &1| .All-weather Roads

;-. Dry--eotker Roads

-.7 A6 - 84, F. Riven

r_[ Present Irrigated AreasMain Forest Areas

f -.; -~- Province Boundaries

I --Ž!L:;.*; . -InIernat,anal Boundaries

-- _ * \ 0 100 20D 3D0

Ifto , g } T I G R " Y \ < ' KILOMETERS

r 4ND E R 4to\ o

-~~~~~~~~~~~~~ .,r , s \lnb V,' , DJIBOUTI .,!t

NDER'i'' ~ ~ ~ ~ ~ ~ ~ HREG

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S ' M AI A

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