Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 16857

PERFORMANCE AUDIT REPORT

GHANA

AGRICULTURAL SERVICES REHABILITATION PROJECT(CREDIT 1801-GII)

July 1, 1997

Operations Evaluation Department

This document has a restricted distribution and may be used by recipients only in the

performance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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Currency Equivalents (annual averages):

Name of Currency: Cedi

1986 US$1.00 151 (appraisal)1987-93 US$1.00 422 (average)1994 US$1.00 915 (completion)

Abbreviations and Acronyms

ADC Agricultural Development Corporation (South Korea)AfDB African Development BankAESD Agricultural Engineering Services DepartmentAPCC Agricultural Policy Coordination CommitteeASRP Agricultural Services Rehabilitation ProjectCRI Crops Research InstituteERP Economic Recovery ProgramFAO Food and Agriculture Organization of the United NationsGIDA Ghana Irrigation Development AuthorityGOG Government of GhanaICR Implementation Completion ReportKfW Kreditanstalt fur WiedaraufbauMEC Monitoring, Evaluation, and Coordination DivisionMOFA Ministry of Food and AgricultureMTE Midterm EvaluationMTR Midterm ReviewNGO Nongovernmental organizationO&M Operation and MaintenanceOED Operations Evaluation DepartmentPAR Performance Audit ReportPCU Project Coordination UnitPPMED Policy, Planning, Monitoring, and Evaluation DepartmentSARI Savannah Agricultural Research InstituteSDR Special Drawing RightsSOE State Operating EnterpriseT&V Training and visit (Extension System)TA Technical AssistanceUNDP United Nations Development ProgrammeURADEP Upper Region Agricultural Development ProjectVSD Veterinary Services DepartmentVORADEP Volta Region Agricultural Development Project

Fiscal Year: January 1 to December 31 Weights and Measures: Metric System

Director-General, Operations Evaluation : Mr. Robert PicciottoDirector, Operations Evaluation Department : Ms. Elizabeth McAllisterDivision Chief, Agriculture and Human Development Division : Mr. Roger SladeTask Manager : Mr. E. B. Rice

FOR OFFICIAL USE ONLYThe World Bank

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

Office of the Director-GeneralOperations Evaluation

July 1, 1997

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

Subject: Performance Audit Report on GhanaAgricultural Services Rehabilitation Project (Credit 1801-GH)

Attached is the Performance Audit Report on Ghana, Agricultural Services Rehabilitation project(ASRP), prepared by the Operations Evaluation Department. ASRP was supported by a credit for US$17million equivalent approved in FY87. The credit was closed in FY94, after one extension of the closingdate, and a small undisbursed balance was canceled. The project had parallel financing from the AfricanDevelopment Bank and German KfW, which provided specialized commodity imports to support thereform program, and from UNDP, which financed technical assistance for planning.

The main objective of ASRP was to initiate a self sustaining process of rehabilitation in theMinistry of Food and Agriculture (MOFA) so that it could give more effective support to the agriculturalsector. In particular, it aimed at strengthening the institutional capacity of MOFA to formulate andimplement agricultural policies, plans and programs, and extending agricultural policy reforms alreadyunderway that would eliminate subsidies and divest the ministry of its commercial services, includingfertilizer marketing, tractor hire services and veterinary services. The project's investment componentswere aimed at restoring the capacity of four of the ministry's primary services: planning, research,extension and irrigation. The project was also to finance preparation of a series of follow-on Bankoperations in agriculture.

Despite a slow start, Bank disbursements lagged only a little behind the expected profile andmost project components were completed on schedule. There were serious shortfalls in physical progresstoward the research and irrigation area targets, and the planning component produced the expectedreports but mostly without involving ministry staff. In contrast, the extension component got off to aquick start and piloted training and visit (T&V) methods that were later expanded to the national levelunder one of the follow-on projects. Government embraced the policy agenda and maintained the agreedschedule for staging reforms. An inter-ministerial coordinating committee was formed, which attractedhigh-level attention and achieved a consensus on key sector issues.

The results for the capacity-building exercises highlighted in the appraisal report weredisappointing in three of the four services-especially in the planning department. The project had only aminor impact on the research department through the rice and cotton research programs, and failed toreorient the agenda of the irrigation department to small scale, participatory schemes. The extensioncomponent was the only unqualified success, fulfilling the modest role of a pilot for the new nationalsystem. Nevertheless, there were impressive gains in terms of overall institution-building, through theformation of the coordinating committee, the preparation of a medium-term sector development strategy,

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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and the generation of five successor projects which would continue the work at the subsector level. Thepolicy reforms aimed at removing subsidies and divesting state enterprises and were carried out asagreed. They were not followed immediately by the projected recovery of private enterprise because thepreconditions for successful privatization were not satisfied.

The overall outcome of ASRP is marginally satisfactory, a qualified rating reflecting the failureto make significant progress to capacity-building targets specified in the appraisal report. Institutionaldevelopment itself can be rated modest, reflecting in part the positive effects of the T&V pilot. Bothratings are lower than those given in the ICR, which was less concerned about the lack of progresstoward specified institutional targets. Yet, if capacity building is taken seriously ex ante, it must be takenseriously expost. The audit accepts the ICR ratings for sustainability as likely and Bank performance assatisfactory, though there were serious lapses in supervision. Borrower performance is rated satisfactory,giving special weight to government's success in pushing through the tough policy agenda.

Lessons that are drawn from this project include: (i) subsidy removal and divestiture opens theway for privatization of services, but other preconditions must be met before the private sector responds;(ii) the unsophisticated technical messages provided through the T&V extension system can have apositive impact on relatively primitive cropping systems; and (iii) Bank indifference during supervisionto M&E designs proposed at appraisal can be fatal to their chances of successful implementation.

Attachment

Contents

Principal Ratings and Key Staff Responsible for Project.................................................... 3Preface..... .................................................... 5

1. Introduction ................................................... 7

2. Project Objectives And DesignA. Objectives ................................................... 8B. Design...................................................... 8

3. Implementation ........................................ .... 10

4. Outcomes ..................................................... 12

5. Findings and LessonsA. Findings.................................................... 22B. Lessons .................................................... 26

AnnexesA. Basic Data Sheet ......................... .............. 27B. Project Costs................................................. 29C. Information Requirements under ASRP ................................ 31D. Comments from Ghana's Ministry of Food and Agriculture ......... .......... 33E. Comments from the Africa Regional Office.. ............................. 35

MapAgricultural Services Rehabilitation Project (IBRD 26697R)

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Principal RatingsPrincipal Ratings

Outcome Marginally Satisfactory

Sustainability Likely

Institutional Development Modest

Bank Performance Satisfactory

Borrower Performance Satisfactory

Key Staff Responsible for ProjectDirector Division Chief Task Manager

Appraisal B. Alisbah A.K. Seth J.C. ColeImplementation C. Koch-Weser A.K. Seth, L. Campbell,

E. Lim J.M. Joyce T. Haile-Mariam,C.G. Ranade

Completion 0. Lafourcade C.C. Cook G. Alibaruho

ICR Prepared by: G. Alibaruho

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Preface

This is a Performance Audit Report (PAR) on the Agricultural Services RehabilitationProject, Ghana, involving a Bank credit in the amount of SDR 13.3 million (US$17.0 millionequivalent). The credit was approved on June 30, 1987. It was closed on June 30, 1994 after oneextension of the closing date. The small undisbursed balance of about SDR 24,000 was canceled.

The PAR is based on the Implementation Completion Report (ICR) prepared by theAfrica Regional Office and submitted to the Board on May 12, 1995, Government's subsequentcomments on the ICR, the Staff Appraisal Report, the President's Report, the Credit documents,a study of project files, and discussions with Bank staff. An Operations Evaluation Department(OED) mission visited Ghana in May-June 1996 and discussed the effectiveness of the Bank'sassistance and project execution with the Ministry of Food and Agriculture (MOFA) and otherrelevant agencies. MOFA's kind cooperation and valuable assistance in the preparation of thisreport are gratefully acknowledged.

The ICR provides a good account of the operation of the project and the performance ofthe Bank and project executing authorities, although it makes several factual errors. Thediscussions in the ICR of capacity building in MOFA's Policy, Planning, Monitoring, andEvaluation Department, and of the privatization campaign, have been expanded in this report.

Following standard OED procedures, copies of an initial and a revised draft were sent tothe government for comment. The comments received from MOFA on the revised draft arereproduced as annex D. Outstanding differences with the Region are indicated in the text, andthe Region's most recent comments comprise annex E.

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1. Introduction

1.1 In April 1983 the Government of Ghana (GOG) launched a series of major economicreforms identified as the Economic Recovery Program (ERP). In response, the Bank approvedseveral short term credits to provide critically needed imports and immediate rehabilitationworks for key sectors, and stepped up its economic and sector work. Bank policy advice andmobilization of donor assistance played a key role in defining the GOG's policy framework thatunderpinned economic recovery. The GOG's program was then supported by a series ofStructural Adjustment Credits. As part of its sector work, the Bank in 1984 undertook anAgriculture Sector Review, which in a report issued the next year outlined the main elements ofa strategy to promote agricultural development.

1.2 The strategy signaled a shift of attention back to the neglected small farm sector, aftertwo decades of government investment in state farm and cooperative enterprises, large irrigationschemes and public marketing agencies. The short term emphasis of the new strategy was onimproving farmer incentives and the availability of inputs to exploit existing capacity, whilerehabilitating road infrastructure and transport. The medium term emphasis was on strengtheningthe capacity of public sector institutions to plan, coordinate and implement programs within thesector. Physical facilities and working conditions in the then Ministry of Agriculture and its tenregional offices had deteriorated to the point where buildings were dilapidated, office supplieswere often unavailable, and most field services were immobilized.

1.3 At the time of the Sector Review, one of two area agricultural development projectsfinanced by the Bank had just been completed (the Upper Region Agricultural DevelopmentProject [URADEP]), and another was at midterm (the Volta Region Agricultural DevelopmentProject [VORADEP]). These were representative of a large group of donor-supported activitiesin the rural areas-initiated both before and during ERP-which were either area or service-based but uncoordinated among themselves and designed around individual donor-determinedstrategies for small-scale farm development. The lack of coherence was most obvious in theproliferation of extension services: the Ministry's specialized departments were each armed withtheir own extension capability for promoting programs and independent services were createdfor the area development schemes. The largest extension service belonged to the Ghana CocoaMarketing Board and was dedicated exclusively to this premier export crop.

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2. Project Objectives And Design

A. Objectives

2.1 The basic objective of the Agricultural Services Rehabilitation Project (ASRP), approvedin 1987, was to initiate a self sustaining process of rehabilitation so that the Ministry of Food andAgriculture (MOFA) could give more effective support to agriculture. In particular, it aimed at(i) strengthening the institutional capacity of MOFA to formulate and implement agriculturalpolicies and programs; (ii) extending the agricultural policy reforms already underway,particularly with respect to elimination of subsidies and divestiture of the ministry's commercialservices; and (iii) rationalizing and improving efficiency in the delivery of those services whichwould remain in the public domain. The Bank's funds of US$17 million equivalent (SDR13.3million) were complemented by substantial parallel financing from the African DevelopmentBank (AfDB)/Fund (US$25 million) and German KfW (US$8.5 million) for specializedcommodity imports supporting the agricultural policy reforms-in particular, as originallyconceived, fertilizer (AfDB) and veterinary supplies (KfW). The Bank's funds were alsocomplemented by a United Nations Development Programme (UNDP) grant of US$1.5 millionfor technical assistance (TA) to MOFA.

B. Design

2.2 The project included a wide array of policy conditions, pilot investment operations andTA activities. On the policy side, government agreed to (i) progressively remove all subsidies onfertilizer over four years; (ii) start charging full costs for drugs administered by the VeterinaryServices Department (VSD); and (iii) privatize several services and agencies under the MOFAumbrella, in particular fertilizer trade, tractor hire operations, import and sale of veterinary drugs(and some vaccines), and most if not all of a group of 18 state owned enterprises belonging to theministry. These substantial steps toward liberalization of markets would complement majorreforms already underway in foreign exchange rates and crop prices, all aiming to restoreprofitability to those agricultural subsectors which could effectively compete in internationalmarkets (one of the implicit targets was to shift farm enterprises from nontradable to tradableproducts). By agreeing to the full set of these politically sensitive measures, government signaledits acceptance of abandoning the command economy put in place during the previous twodecades.

2.3 The TA and investment operations were initially aimed at restoring the capacity of threeof the primary ministerial services: agricultural research, agricultural extension, and irrigation.The emphasis was on low-cost cropping systems. Research, for example, would focus on thecultivation of dryland cotton in the north and river valley paddy in the center and south, bothactivities focused on the needs of small-scale farmers. Details of the individual components arediscussed in chapter 4 on outcomes. The TA had two other major targets. One was to build acapacity within MOFA to develop its own policies, programs and projects, supported by efficientmonitoring and evaluation services. The existing Economic Research and Planning Services unit

1. Agricultural research was not under the control of MOFA, but the Council on Scientific and Industrial Research of theMinistry of Industry, Science and Technology.

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in the ministry would be remodeled, expanded and upgraded to become the Policy, Planning,Monitoring, and Evaluation Department (PPMED). This component would be financed mostlyby the UNDP grant, and carried out by a consultant team selected and administered by the Foodand Agriculture Organization (FAO). The second was to finance a series of studies that wouldlead to subsequent operations for the Bank and other donors. Agricultural credit, research,extension and food security were the four subsectors specified during appraisal.

2.4 From the perspective of most ministry staff, the immediate objective of ASRP wassimply the equipment and modernization of their offices: air conditioners and fax machines inpublic rooms, vehicles for extension and veterinary staff, computers where needed andparticularly for PPMED, etc. A Project Coordination Unit (PCU) was established in MOFA, andsomewhat later a procurement/accounting specialist (a Ghanaian from VORADEP) wasappointed to the unit to help manage the gradual build-up of project-identified goods andservices. In 1989 the Bank agreed to allow several other ministry departments to be includedunder the ASRP umbrella, including in particular crop services and fisheries. In this sense, ASRPprovided a pool of funds to facilitate the upgrading of the ministry and to provide staff withacceptable working conditions.

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3. Implementation

3.1 The IDA Credit was made effective in December 1987, three months later than planned.Operations got off to a slow start. Supervision Reports and the Implementation CompletionReport (ICR) attribute initial delays to PCU staff being overwhelmed by the Bank'sprocurement, disbursement and reporting requirements. But, as stated in government's section ofthe ICR, the PCU was on a "learning curve" and these problems were eventually overcome.Subsequently, many of the procurement tasks under already approved budgets were turned overto the implementing agencies, and progress accelerated. Some activities moved quickly out infront-extension in four pilot regions gained and never lost the lead-and others laggedbehind-the most troublesome to Bank supervision was the small scale pilot irrigationcomponent. But overall progress was reasonable, Bank disbursements lagged only a little behindthe expected profile, most project components were completed on schedule, and actual costs atcompletion of US$56 million were only five percent over target. The next paragraphs describeespecially difficult implementation problems.

3.2 Small Scale Pilot Irrigation. This component was intended to upgrade the capacity of theGhana Irrigation Development Authority (GIDA) and shift its priorities from large, capitalintensive schemes that generated losses each year to small schemes costing a maximum ofUS$5,000/ha with substantial farmer participation in management and cost recovery. It was themost expensive component in the original cost tables, responsible for 29 percent of total baselineprojections, and ended with a slightly higher share of actual costs (32 percent, excluding parallelfinancing; see annex B).

3.3 Three factors explain the delays in carrying out this component. First, the process ofselecting a "twin" for GIDA under the TA program took twice the time expected, partly becausefinal approval of the South Korean Agricultural Development Corporation (ADC) wasinterrupted by persons in government who complained that a Chinese agency had not been short-listed. In fact, the Korean team arrived in late 1988 even before the contract was signed, a riskymaneuver that nevertheless allowed them to start mobilizing resources and help catch up with theoriginal schedule. Second, the process of identifying six sites suitable for either pumping orgravity-feed during wet and dry season irrigations took GIDA and its Korean advisors almosttwo years longer than anticipated. Government insisted the selected sites be representative of allthe agroecological zones of the country, a condition that led to field visits to over 100 sites, withidentification of 72 of them. This group was eventually cut to 14, of which 12 were fullyprepared and reduced again to a short list of 6. The third reason was that GIDA determined thataverage costs at all short-listed sites were going to exceed the US$5,000 ceiling and, in the viewof the Bank (but not of GIDA), undermine the economic prospects of the schemes. The Bankeventually approved two sites, where worked commenced in 1992 three years behind schedule.The two schemes were eventually brought into production in the main wet season of 1994. Bythat time the Bank had shifted its attention to a completely different low-cost irrigationstrategy-that had not been anticipated at appraisal (and is described in chapter 4 under low riskwater conservation).

3.4 Cotton Research. This small component (4.5 percent of appraisal costs) was managed bythe Savannah Agricultural Research Institute (SARI, formerly the Nyankpala AgriculturalExperiment Station). SARI had (and has) no cotton breeding capability, and its research trials

11

were intended only to develop improved small scale, nonmechanized cultivation practices usingvarieties already imported from C6te d'Ivoire and other West African countries by cotton-ginning companies-which contracted with small scale producers for provision of inputs anddelivery of seed cotton. SARI carried out trials at its main station near Tamale and threesubstations. But it was unable to advance to farmers' fields, ostensibly because the ginneries didnot encourage their contract farmers to dedicate portions of their fields to this experimentalwork. Some observers claim that the SARI officers in charge could have been more aggressive indeveloping a farmer outreach program. Nevertheless, when ASRP was completed in 1994 thenew cotton practices recommended by SARI had still not been tested under field conditions, andthe suitability of the recommendations for widespread commercial application had still to beconfirmed.

3.5 Privatization of Fertilizer Marketing. A special unit in the Crop Services Department ofMOFA was created in 1988 to manage removal of the fertilizer subsidy and privatization.Initially, the unit received large numbers of applications from prospective wholesalers andretailers who wished to enter the trade. But the applicants were ignorant of the probable impactof the removal of the subsidy on fertilizer demand, as well as of the difficulties of handling,stocking and storing fertilizers from one season to the next. Unit staff traveled frequentlythroughout the country promoting the program and educating the actual and potential applicants.But their efforts were largely frustrated. Within two years practically all the retailers hadwithdrawn their applications and, on the wholesaling side, only four companies have replacedgovernment and this group is itself dominated by one among them, which controls over 50percent of all imports.

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4. Outcomes

4.1 The level of success of the multiplicity of components varies widely, and any overallrating depends on the weighing of the individual parts. The ICR rates the overall outcome assatisfactory, with sustainability as likely, institutional development as substantial and Bank andborrower performance also as satisfactory. The audit does not support all of those ratings, asdiscussed at the end of this chapter. One reason for the downgrading is the almost completefailure to progress toward one of the prominent goals of the project, which was to create an in-house capacity in PPMED to develop policies, programs and projects. The first section belowdiscusses this component in detail and the subject is referred to again at the end of chapter 5 onlessons.

4.2 PPMED. Measured by the installation of computers, training in word processing andother computer applications, expansion of the statistical data base and a facility for rapid

2retrieval, this component could be called a success. But the good news ends there. The mainfailure was the lack of involvement of PPMED professional staff in most of the importantplanning and monitoring operations that were carried out under the project, the opposite of whathad been intended.

4.3 This component must be weighted heavily in any ex post assessment of results,especially of institutional development. It is the leading component of Schedule 2, theDescription of the Project, in the Development Credit Agreement (page 14):

Part A: Policy Formulation, Planning, Monitoring and Evaluation1. Reorganization and strengthening of PPMED to enable it to:(i) develop sustainable policies, monitor their impact and take the lead in thedevelopment of an agricultural sector investment program including the directionof donor support for the program; (ii)... (emphasis added).

4.4 The outcome was poor on all of these implicit indicators. FAO makes the same point inits Terminal Report for the UNDP project:

"the staff of PPMED has been distanced from much of the real policy work of thedepartment"3

and it then concludes:

"It is strongly recommended that Government undertake a long-term steady andsustained effort to build PPMED into an institution capable of providing timely andrelevant policy advice and analysis pertaining to agriculture and food policies"4

which was the premise of the UNDP operation designed ten years earlier.

2. PPMED also takes pride in having substantially cut the turnaround time for delivering its market price reports.

3. FAO. AG:DP/GHA/86/008 Terminal Report. Strengthening Agricultural Planning in Support ofthe Government'sAgricultural Sector Rehabilitation Programme, Ghana, Project Findings and Recommendations. Rome, 1995, page 28.

4. Op. cit., page 30.

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4.5 The fault can be attributed to several overlapping factors: an extremely weak teamfielded by the consulting firm without adequate support from its Washington headquarters orsurveillance by Bank supervision; the assumption of the directorship of PPMED by a well-regarded academic, who appears not to have given sufficient priority to staff upgrading, optingrather for contracting out most local assignments to better-trained university consultants; andBank supervision staff who became increasingly involved in high-level negotiations withgovernment on subsequent reforms and adjustment operations, considerations which created anurgency to get jobs done and crowded out any original intentions to use the project as a trainingground for the young professionals of PPMED. The quality of that professional cadre wasrelatively weak to begin with, a fact recognized by all. But by in-house and overseas short termtraining the intention was to gradually upgrade those skills. Nevertheless major opportunitieswere missed to involve the staff in key assignments.5

4.6 The record was not uniformly poor, of course. In fact in the arena of upgrading thestatistical data base, by, among other activities, broadening and strengthening the sample survey,the consultant team carried on the good work initiated during an earlier FAO operation. Also, the

reports produced by the university-based staff were usually of good quality. Finally, PPMEDdispatched staff to take up residence in other departments and all regional offices, a welcome andunprecedented move to strengthen inter-office coordination.

4.7 The signature document produced by PPMED during the project period was the MediumTerm Agricultural Development Strategy issued in 1990. This should have been a high profileexercise for staff of the newly created Policy Planning and Analysis Division of PPMED, but itwas not involved at all (with the exception of the director). Government recruited Ghanaian andexpatriate consultants to carry out most of the work, supported by Bank staff.

4.8 Other joint products of this period were the master plans and/or preparation reports for along series of projects subsequently approved by the Bank's Board: a Rural Finance Project(1989), National Agricultural Research Project (1991), National Agricultural Extension Project(1992), National Livestock Services Project (1993) and Fisheries Subsector Capacity BuildingProject (1995). PPMED's Project Planning and Budgets Division was created in 1987, alongwith the Policy Planning and Analysis Division, with the intention of involving staff indeveloping projects. But none was involved-by the director or the Bank-in the detailedpreparation work of any of these Bank-financed projects. This was not a case of indifference byBank staff to getting the divisional staff included: it was mostly the result of lack of interest, bythe American consultant assigned to that division, and, again, failure of departmental leadershipto insist on an inclusive arrangement.

4.9 Another example of this almost universal exclusion of PPMED staff from priorityactivities was the experience of the Monitoring, Evaluation and Coordination Division (MEC)with preparation of a Midterm Evaluation Report (MTE), issued in 1991. In this case, MEC staff

5. In Annex D the government takes exception to the criticisms of the PPMED component in a draft of this report.Some of those criticisms have been removed from the final text. The draft had rated the project outcome asunsatisfactory, but that rating has been raised in the final report.

6. Although one of the Ghanaian consultant teams' major efforts, supported by PPMED's Director and the Americanconsultant firm, to develop an input-output model for Ghana's agricultural sector, was never successfully implemented incomputable form or transferred to PPMED and was thus largely wasted. FAO had been critical of this initiative, ongrounds that it required too many resources to develop and maintain.

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helped prepare the terms of reference for the MTE, but became progressively disappointed by itslack of involvement in the field work and eventually quit participating. The MTE was issuedover the name of the principal Ghanaian consultant, with only incidental reference to MEC. Itwas used by the Bank as a basic input into the Midterm Review (MTR) of 1991, in which, again,MEC played a marginal role.7 Other elements of a depressing monitoring and evaluation (M&E)experience are discussed in chapter 5.

4.10 The ICR reported in 1995 that the government intended to maintain apropriate fundingfor Operation and Maintenance (O&M) of PPMED in the post project period. None of thefollow-on subsector specific Bank projects provided funds for generalized institutional support toPPMED, 9 and UNDP/FAO has not followed-up with another operation. At audit in 1996 therewas criticism within PPMED that the O&M budget was in fact deficient and PPMED was unableto keep up especially with improvements in computerization10 and staff replacement.

4.11 Agricultural Policy Coordination Committee (APCC). While the project failed itscommitment to PPMED, it made a strong contribution to establishing a coordination mechanismat a higher-level of policy development. A key institutional change envisaged under andsupported by ASRP to help improve sectoral policy, expenditure and investment decisions wasthe creation of APCC, comprising senior membership from all major ministries and agencies in-the sector. The APCC was established and is functioning effectively in coordinating sector-widepolicies and public expenditure plans. The committee is chaired by the Ministry of Finance andEconomic Planning and serviced by MOFA as secretariat. Bank staff argue that, despite theprominence given to PPMED at appraisal, ASRP can be credited with the higher-level attentionpaid to policy matters and the consensus that was formed on critical issues, and that these gainswere of equal or greater importance to sector developments in the early years of ERP. Successhere easily compensates for the disappointments at PPMED.

4.12 Extension. In contrast to the planning component, the extension componentaccomplished its primary objective. This was to introduce a "modified" version of the trainingand visit (T&V) extension system to a small number of regions to serve as pilotsl1 for a

7. Government (MOFA) had carried out two earlier "midterm reviews" in 1989 and 1990, the first of which led to theexpansion of project coverage that year (para. 2.4). The Bank felt the 1990 MTR was of inadequate depth, and called foranother exercise preceded by the MTE. MEC was not involved in any of the three MTRs, and, as discussed in the text,only marginally involved in the MTE.

8. In fact, the ICR completely misjudges the performance of the PPMED component. The following leading sentence frompara. 3.06 is misleading in the extreme:

Capacity Building in MOFA: The more successful aspects of the ASRP include the strengthening of capacityfor: policy analysis and decision-making processes; formulation of sector strategy and programs; projectcoordination, implementation, monitoring and evaluation.

9. Though the National Agricultural Extension Project, the National Livestock Services Project and the FisheriesSubsector Capacity Building Project each provide support to PPMED specifically to oversee and support monitoringand evaluation activities in those subsectors. This distinction is important in understanding the Region's criticism (ofpara 4.10) in annex E (page 2 of the memo dated June 18, 1997).

10. Condemned to the PC "286" level of obsolescence, so to speak. The ministry budget provides recurrent costs, but notfor replacements.

11. Actually T&V had already been "piloted," and "modified," in the URADEP and VORADEP programs. URADEPveterans think of ASRP and the National Extension Project as sequels to their own, earlier work in importing anddomesticating T&V.

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nationwide project that was already in the Bank's pipeline. Although Ghanaians assert that theirmodifications have substantially altered the style of the T&V system, in fact apart from doublingthe interval between training sessions, and shifting from individual to group contacts, extensionin Ghana is little different from traditional T&V. It is popular among the extensionadministration and field staff, who are conversant with the principles of T&V and committed tomaking it work.

4.13 One can argue that the decisive factor in explaining its popularity has been the increasedmobility of the front-line staff and their supervisors. Indeed T&V had to compete with at leasttwo other donor-supported extension-based programs that flourished in the late 1980s, onefinanced by the United States Agency for International Development (the AgriculturalProductivity Promotion Programme) and another by the international nongovernmentalorganization (NGO) Global 2000, both of which put a premium on adequate mobility forextension field staff. Global 2000 had the extra feature of combining extension with credit, sothat farmer adoption of technologies could be reinforced by the availability of subsidized loans,at least as long as the subsidies were continued. Initially, T&V and Global 2000 were on acollision course, because one of the fundamental principles of T&V is that the extension serviceshould not deal with credit and inputs, whereas with Global 2000 the same staff were obliged todeliver technology, inputs and credit. The T&V model has prevailed in that competition. Frontline agents support Global 2000 and other credit programs by sensitizing the farmers to theavailability of special credit programs and helping select suitable borrowers, but they are nolonger involved in lending and recovering funds. Within a year of ASRP startup governmentrequested the Bank to approve an expansion of the extension pilot to one district in each of fouradditional regions. By the time the new national extension project became effective in 1993,most of the country had already at least begun the process of converting to T&V methods undera single unified extension program (cocoa continued to be the important exception 2). Given thepressures in the Bank to bring T&V to Ghana, the ultimate outcome might have been the samewhether or not ASRP financed a "pilot" starting in 1988. But there is little doubt that the pilotdid accelerate the process, and offered useful lessons that were incorporated in the preparationand appraisal of the national project.

4.14 Research. There were four subcomponents for research, one of which, TA to supportintensified rice research, was dropped early in the project period. A related subcomponent wascalled the valley bottom rice program, in this case research dedicated to improving paddycultivation in the small valleys of southern and central Ghana. This program was administered bythe Crops Research Institute (CRI) headquartered at Kumasi, although at two of the four sitesthat were eventually developed CRI turned over management responsibility to allied researchagencies. The objective of this component was to develop improved methods for managingstream and river water in these small valleys to secure one good paddy crop in the rainy seasonand a follow-on crop of cowpea or ratoon paddy where possible. Water management meantdifferent things in different parts of the country: at the two sites near Kumasi (Besease, Aframso)the project used bunds to protect against floods and provide better drainage to remove excessrain water; at the single site near Tamale (Yipeligu) the project used bunds to conserve rainwater. In each case, the research agency developed a small area donated by the local village totest new water management techniques along with improved varieties, tillage, rotations, pest

12. The ICR errs in stating that COCOBOD Teceived some ASRP extension finance.

16

management and other husbandry practices. Nearby farmers were formed into groups andencouraged to extend the proven results to neighboring fields. 13

4.15 After five years the program has little to show. The total area exploited in and around thetrial sites, instead of expanding to the full potential of the valleys,14 is shrinking and there is nosign of reversing that trend. Altogether the total area dedicated to these trials now amounts toless than ten hectares at each of the four sites.15 Given the earlier interest and concern shown forthis activity, the present condition is disappointing.16 Part of the explanation is that the budgetfor the valley bottom rice component was never substantial, never included any promotionalfunding to support expansion onto farmer fields (i.e., it was conceived only as a researchoperation) and, at the Tamale site, was cut off after three years on the suggestion of adisillusioned Bank supervisor. As mentioned above (para. 3.4), the failure of the smallholdercotton research program to extend to farmer fields exhibits the same sense of inconsequentialresearch results.

4.16 Finally, the research activities included preparation and appraisal of a national researchplan and follow-up project. The Bank assigned a larger role to this component than to the twocrop-specific activities, discussed above, for the long-term development of research services.Progress here overshadowed that other poor performance. Preparation was supported by theInternational Service for National Agricultural Research. Implementation of that follow-onproject is proceeding well. The valley bottom rice research received only minor support from thefollow-on project and, at least at the time of appraisal, the cotton research received no support atall.

4.17 Irrigation. The twinning arrangement between GIDA and ADC worked reasonably well.The ICR refers to complaints from GIDA staff over the lack of communication between Koreansand Ghanaians, and lack of full participation by Ghanaians in operational decisions. That attitudeapparently reflected a vocal minority: most of the GIDA staff felt they benefited from the localand international training and on-the-ground demonstrations of water management techniques.Two activities which were embedded in the ADC contract were to carry out on-farm -demonstrations on four of GIDA's large scale irrigation schemes, and also to cooperate withGIDA in managing the small scale pilot irrigation project.

4.18 The latter was actually an integral part of the ADC training program: selection of thelong and short lists of potential scheme sites, the preparation of engineering designs, and .

implementation of the schemes were all conceived as training exercises to equip GIDA tocontinue at other sites on the list after departure of the Koreans.

4.19 The small scale pilot project was not successful. As mentioned above (para. 3.3), onlytwo schemes were started under ASRP, and a third is presently being financed by another Bankproject. There are no immediate plans to continue with the other schemes. The higher thanexpected costs convinced the Bank that at projected yield levels these small scale investments

13. At Yipeligu SARI never developed its "own" fields: the experiments were always run on farmer-operated fields.

14. The potential is approximately 100 ha at Besease and 500 ha at Afromso.

15. CRI is running micro-trials of about one hectare each in 40 locations, but this is entirely a research operation.

16. The ICR is more complimentary about the valley bottom program because it mixes it up with the low risk waterconservation scheme described in para. 4.20.

17

could not be justified. Also, the rush in the last two years of the ADC contract to finalize workon at least two sites forced GIDA and the Koreans to telescope the original, drawn-out plans forparticipatory planning and execution. Of the two sites that were developed, the one dedicatedto paddy (Kikam, 27 ha) is a failure and the other, upland maize site (Sata, 34 ha) is limpingalong having reached only 60 percent of the originally planned area of 56 ha. Kikam is atubewell site near the coast, and at the time of the audit mission the pump was disactivatedbecause farmers had refused to pay the costs. Even though the twinning program provided GIDAprofessional support which was put to good use, the fact that the small scale pilot program has atleast for the time being been deferred means that the central objective of the twinningarrangement was not achieved. The US$6.4 million combined costs of the institutionalarrangement and the pilot investments achieved organizational reform and improved skills atGIDA, but, in terms of this component's key physical target, resulted in establishing only 34producing hectares-mostly maize-at Sata.

4.20 That disappointment is partly balanced by the much more dramatic results of anirrigation subcomponent that was not anticipated at appraisal, the low risk water conservationtechnology. This "innovation" of water harvesting actually has a long history in the Upper EastRegion (though not for paddy). It was picked up by the project in 1992 at the urging of adynamic ex-official of MOFA who saw it as a much preferred alternative to the so-called lowcost investments under the small scale pilot. Bank supervision swung its support behind thisinitiative, after the excessive costs of the GIDA small scale pilot were revealed. The technologyis simple. Long bunds are built on contours on the seemingly flat, wide "valleys" of the northernplains, for the purpose of not only preventing sheet erosion but holding the rain runoff topreserve moisture during stressful periods, especially in the September flowering period, andhence to save the wet season paddy crop. Yields in erratic rainfall years are reported to havedoubled and tripled over nonbunded fields. The bunds are punctuated by spillways and otherdrop structures which allow excess water to pass: otherwise the parallel bunds are spaced to keepa three to four inch depth of water between the bunds after the occasional torrential rains (withonly a one inch drop in the depth of water from the uphill side of a bund to the downhill side ofthe next higher bund). This is the same principle as the water conservation orientation of thevalley bottom rice research at the Tamale site, except the "low risk" scheme is being applied tothousands rather than ten hectares. The low risk sites are reckoned to cost only a fraction of costsof the small scale pilot irrigation schemes. 19 The program is sponsored by the exofficial, hiredback by the ministry on contract, together with the Agricultural Engineering ServicesDepartment (AESD) of MOFA. ASRP kicked this program off, although the real expansion, toaround 1,500 ha total paddy in 1995 (and 500 ha of upland crops), came after the completion ofthat project.

4.21 Policy Conditionality. Whereas performance of the investment programs was uneven,government's progress on the policy conditions was remarkably good, given the potential forpolitical backlash. The audit mission was particularly sensitive to the issue of whether the Bank

17. The original contract was for three years (1988-91), and was extended for one year (1991/92).

18. Doubts have been raised whether the Koreans' style lent itself to leading GIDA toward more participation. ADC hadbeen selected above candidates from India and the Philippines (and China) not because of its participatory skills butbecause it had a good track record and its position as an operating arm of a ministry matched the GIDA position exactly.

19. Officers involved with the water harvesting schemes claimed costs were as low as US$25/ha. GIDA told the auditmission that that real figure was closer to US$2,500.

18

bullied the government into accepting and implementing these reforms. It appears that the degreeof arm-bending was small, and that in most cases the government embraced these actions asnecessary to the overall recovery program. Government is more likely than the Bank now to callinto question the timing of the actions, but that is a hindsight view and the schedules agreed in1987 appear to have been endorsed by all parties.

* Removal ofthe fertilizer subsidy. This was accomplished on schedule in three separatesteps from 1988 to 1990. The biggest fertilizer price shock was absorbed when the cediwas devalued by 90 percent in 1984. But when ASRP was appraised in 1986,government still held a monopoly of fertilizer imports and sales, and charged thefarmers only 30 percent of import and distribution costs. By 1990 that 70 percentsubsidy had been reduced to zero. Removal of the subsidy was a precondition for thenext step: privatization of the fertilizer trade.

* Privatization offertilizer marketing. Here too government carried through with itscommitment, to remove itself entirely from the trade (apart from leasing out most of itswarehouses). It turned over the import/wholesale functions to the small group of firmsmentioned in para. 3.5 in a series of steps taken between 1988 and 1991, and tried toencourage private retailers to fill the vacuum in the rural towns and villages. Theresults of the combination of the sharp and continuing reduction in the value of thecedi, subsidy removal, and the privatization program initially had traumatic effects onfertilizer usage, cropping patterns, areas sown and yields, raising questions about theappropriateness of the mechanism and scheduling of subsidy and privatization actions.In the last two years those downward trends have been reversed. Nevertheless,measured simply by fulfillment of agreements, performance against both of thesetargets was very satisfactory.

* Privatization oftractor hire services. This was also carried out, in a series of steps thatstarted with tractor services, then combine harvester services and finally land clearing.The existing AESD fleet was auctioned or retired. AESD feels the transformation hasbeen a good thing for its professionalism. It has rid itself of the management of alegion of operators and mechanics, which was crowding out its engineeringresponsibilities while huge losses were being incurred.

* Cost recovery from the sale ofveterinary supplies. This was carried out in principle,although charges have not been raised to fully cover costs and the purchasing power ofthe Revolving Fund that was established has eroded with rapid inflation of the cedi.KfW has objected to the management of-and to lax Bank supervision of themanagement of-the Fund, which benefited from the sale of the supplies importedunder KfW's program (para. 4.31).

* Privatization ofmost veterinary services. Here there has been little progress, due to thedifficulty ministry veterinary staff anticipate after leaving the service in privatelyfinancing the establishment of rural clinics. Some private services have beensuccessfully established at urban sites, where they support poultry and other high valueenterprises and domestic pets. VSD still manages the veterinary clinics in rural areas. Itdoes not intend to privatize vaccinations against most contagious livestock diseases.

19

VSD did get out of the import business, so that all drugs and vaccines are nowimported by private enterprise (which sells to VSD what it needs). 2 0

* Divestiture of State Operating Enterprises (SOEs). This function was removed fromthe project and turned over to the Divestiture Implementation Committee. Neverthelesssome of the SOEs whose tenure was most strongly defended have been privatized,including the URADEP and VORADEP Farmers' Services Companies and the GhanaCotton Company.

4.22 Other Activities. A number of other studies, seminars, investments and developmentprograms were financed by ASRP, not all of them identified at appraisal. As suggested above,one of the substantial benefits of the project was the provision of a pool of funds to enableministry staff to handle sudden, unexpected expenses or to pursue attractive new initiatives.These included:

* a food security study, anticipated at appraisal, which was delayed by several years andultimately set aside at the draft stage on the grounds that its main recommendationswere politically unacceptable;

* the training of staff, and the supply of vehicles and laboratory equipment forsurveillance of locust and grasshopper outbreaks from neighboring countries;

* the rehabilitation of hatchery/fish holding tanks, fishing inputs and specializedequipment for the Fishery Department's marine research vessels; and

* the installation of cotton fiber testing equipment at SARI, which will help strengthenthe functional bond between the research staff and the cotton companies.

4.23 Ratings. The audit provides grounds for some downgrading of the ratings of the ICR.The overall outcome is now rated only marginally satisfactory. Three of the four main capacityexercises had outcomes that fell well short of explicit appraisal targets, especially the work withPPMED but also with research and GIDA. The Operations Evaluation Department (OED) doesnot accept that the financing of a series of preparation reports for subsequent projects has enough

21to do with capacity-building to warrant the higher rating. Although the ASRP reports preparedthe way for capacity-building activities in the next generation of projects, that is not the same asbuilding up the capacity in PPMED to prepare such reports. That was not done at all.

4.24 In irrigation, the main thrust of the twinning contract was to put GIDA in a position tocontinue to shift resources to small scale, low cost, "sustainable" investments, and this exercisewas largely futile. There were welcome changes at GIDA-reorganizations, overseas trainingprograms, etc.-that can be attributed to the twinning program. But that does not fully offset thepoor results on the principal objective. Part of that intent was to enhance the participation of

20. Part I of the ICR errs in saying that the veterinary services have been privatized.

21. The ICR refers to the frequently mentioned claim that ASRP was the "seed" that produced the field of follow-onprojects. That statement is correct, but in and of itself not a sign of capacity building. This argument applies specifically tothe research component. The Region insists that disappointments with the two "very small" research activities weredwarfed in importance by successful preparation of a follow-up research project (see annex E, page 2 of the memo datedJune 18, 1997).

20

irrigators in designing and managing their schemes, and improve cost recovery from large andsmall scale schemes alike. That did not happen either. On the two small scale sites developed, atKikam farmers have not made their payments and have abandoned the canals and at Sika theyfeel GIDA is ignoring their interests. At Sika, GIDA did not have enough funds to extend theconcrete lining on the main canal, despite an obvious and increasingly serious leakage problem.This has left the farmers with an unexpected and unwelcome maintenance burden. GIDA argueswith good justification that it was never fully funded to carry out the ASRP assignments,especially after the IDA credit was closed.

4.25 Only in agricultural extension can one point to the successful achievement of theproject's specific and explicit institution-building objectives.

4.26 The strong efforts by government to carry out the policy conditionalities enhance theimage of this project. Of course, the impact of subsidy removal, cost recovery and divestiture onprivate sector behavior must be assessed to determine whether the reforms were fully effective.At appraisal, some reduction in fertilizer sales and usage was anticipated. But not the drop thatoccurred in the first three years. That was triggered mostly by the increase in the cedi price ofimported fertilizer following devaluation, rather than by the removal of the subsidy. The trend,once observed, should have prompted a reassessment of the timing of the subsidy cuts so as notto aggravate a deteriorating situation. But the downward trend has now been reversed. Fertilizersales, when measured by the nutrient content of the higher analysis fertilizers currently available,are regaining the level of the mid-1980s, suggesting that the long-run objectives of the reformwill be reached.

4.27 The audit lowers the ICR's rating for institutional development from substantial tomodest. Most of the explicit appraisal targets were missed, though some important other gainswere recorded. Since the policy reforms are durable and the improvements that were made in theresearch, extension and irrigation services are likely to continue, the ICR's sustainability ratingis left as likely.

4.28 The audit accepts the ICR rating for Bank performance as satisfactory, although thathides some rather unimpressive contributions. The quality of the project at appraisal wasacceptable. But supervision was divided not only between the Bank's headquarters and fieldoffice, but also between different substantive officers, such that there was no unifying vision orcommanding view of the wide array of project activities. There were important lapses insupervision reporting. No one, for example, ever talked professionally with the consultantcontract officer working on M&E during the two and a half years he was in Accra. So thefrustrations of an incapacitated and irrelevant M&E service were not reported to the Bank. Littleattention of any sort is given to PPMED in the succession of supervision reports, except foroccasional references to meetings of the Tripartite Committee overseeing the PPMEDcomponent on behalf of the UNDP, FAO and the Bank. There is not even a hint ofdisappointment with the exclusion of PPMED staff from high profile activities. The comment inthe completion mission's Aide Memoire-appended to the ICR-that actions taken after the1991 MTR led to "substantial improvements in the implementation performance" is notsupported by the evidence in the rest of the files. In fact, there is a gap in those files at BankHeadquarters and its Field Office after the MTR. For two years there was no full supervision

21

reporting. The many errors in the ICR text cited in footnotes in this audit report are indicative of22

a general lack of detailed familiarity with project activity, at least in its closing years.

4.29 On the positive side, Bank staff used this project as one of their vehicles to expand thedialogue with senior government officials The increasing array of Bank-supported operations isevidence of an effective and growing partnership in Ghana's recovery program. Bank staff wereconcentrating on the larger scene, and apparently were prepared to dismiss poorly performingcomponents.

4.30 The Region does not agree with OED's qualified rating of overall outcome as"marginally satisfactory." It maintains that OED has dwelled excessively on minor issues, whileignoring or downplaying substantial positive aspects-and ignoring as well earlier Regionalcomments. OED feels secure in its position that these "minor" issues, including capacity buildingin PPMED, dominated the appraisal process and cannot be dismissed now simply because thecomponents did not work. The most recent Regional memorandum, taking issue with the allegedlack of balance in the report, is reproduced as annex E. It offers an interesting alternativeperspective on interpreting project results. It could have acknowledged that OED has alreadymade a substantial adjustment by raising the rating from "unsatisfactory": precisely in

recognition of the Region's well-argued points.23

4.31 The government also did not agree with the earlier draft, although it concentrated itscritical remarks on the sections referring to poor performance in managing the PPMEDcomponent. Many of those assertions were substantially modified in the subsequent draft of thereport, although the overall critique of management was maintained. MOFA's formal commentson the redraft are short and non-confrontational (annex D).

4.32 Borrower performance is rated as satisfactory. It suffered from the same lack of visionand inattention to the grand design that weakened Bank performance. But government's effortsto implement the policy conditionality, despite the political risks, offset those failings.

4.33 AfDB and KfW The parallel financing was accomplished, though not without difficulty.The AfDB ultimately disbursed US$27 million, but only 23 percent went to fertilizer imports(against the appraisal projection of 80 percent). Other major items financed were: tires and tubes(34 percent), fishing gear and outboard motors (22 percent), and livestock inputs (6 percent). Ofthe total, US$6.2 million was disbursed through PCU as part of the project. The rest wasassigned to the Bank of Ghana, which sold the commodities at auction. KfW disbursed all of theUS$8.5 million programmed, though much more slowly than anticipated and in the face ofincreasing concern about the misuse and erosion of the Revolving Fund.

22. In the official files placed in the Bank's archives, there are seven folders covering the period 1985-September 1990,and one folder covering October 1990 to April 1994.

23. Three specific criticisms in the Region's recent memorandum are answered in footnotes in this text (footnotes 9,21, and 26). The points made in the Region's earlier memorandum have already been answered, explicitly orimplicitly, in arguments throughout the audit report.

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5. Findings and Lessons

A. Findings

Privatization

5.1 The project provides three examples of schemes for privatization that did not worksmoothly and where the results were less beneficial than anticipated at least for the early years:fertilizer trade, tractor hire services and veterinary services. In each case the intent was toremove the ministry from a service where in principle the private sector was expected to dobetter. The underlying notion was that government's intervention in these businesses in theprevious decades was uniformly ill-advised. In each case, the Ghanaian examples show thatgovernment was in these businesses for good as well as bad reasons, and the reforms tried to gotoo fast, without establishing the preconditions for privatization.

5.2 For fertilizer, there were at least two factors that discouraged private merchants fromtaking over the retail functions. First, was the impact of devaluation and subsidy removal ondemand for fertilizers. Clearly, this was not a propitious time for a prospective retailer to enterthe fertilizer market. Some components of that market held up well: specialty crops such astomato could clearly justify fertilization even at unsubsidized rates. But this was no longer thecase for maize and other field crops. The input/output price ratios changed dramatically too.Previous to the reforms three 100 kg sacks of maize could buy twelve 50 kg sacks of the mostpopular fertilizer formula; in early 1996 they could buy two sacks. A recent study of theprivatization scheme, carried out by the International Fertilizer Development Center-Africa,shows a "value cost ratio" for the popular 15-15-15 formula of 1.1, indicating that the yieldresponse to fertilizer barely covers its cost. 2 4

5.3 The second factor discouraging private sector involvement was that it did not haveavailable storage to handle the stocks of fertilizer, particularly in the more remote areas whichhad previously been served by trucks dispatched from ministry storage depots. Fertilizer thatcould not be sold in the main growing season had to be stored until the next. Without properstores, the fertilizer not only deteriorated but often damaged the walls of the rooms where it waskept (or blew them apart!) due to the alkalization of the atmosphere. Many first-time merchantsare reported to have appealed to the ministry to reclaim the fertilizer, with no refunds, simply toprotect the home storage space. The situation was made the more precarious by the absence ofcredit facilities to help merchants finance construction of appropriate storage.

5.4 For tractor hire services, much the same route was followed: the ministry abandoning theservice but the private sector failing to take up the slack. In this case the results of privatizationwere not as dramatic, because most of the tractor fleet was already in private hands and mostcontract work was already at commercial rates. But the initial impact on tractor use was as severeas in fertilizer, since the imported price of replacement parts and tractors soared with devaluationand with them the price of contract work. Private contractors could not raise prices enough to

24. IFDC-Afica. Ghana Fertilizer Privatization Scheme: Private sector roles and public sector responsibilities in meetingneeds offarmers. Fertilizer Sector Studies in Africa, vol. 5. 1995, page 42.

23

cover import costs, and many of them have simply retired ("put on blocks") most or all of theirfleet. Bank staff say that is a good thing, that the fleet had been propped up by distorted prices.Some government officers called it a disaster.

5.5 The situation at the time of the audit in early 1996, especially in northern Ghana, wasthat large scale as well as small scale farmers were severely curtailing the use of both fertilizersand tractors, shifting to varieties that do not respond to high fertilizer doses, and to bullocks andhoes for clearing and cultivation. Dealers in hybrid maize seed could not sell their seed: farmerswere requesting varieties that did not depend so much on fertilizer. In fact, many of the poorerareas of rural Ghana were regressing to subsistence farming: from maize and rice to sorghum,and from larger to smaller planted areas. Large scale rice farming had almost disappeared. At theSata irrigation scheme, most of the 56 farmers could not afford tractor services in 1996 and wetseason plantings had declined substantially.25 The ministry and NGOs were all recommending ashift to bullock power.

5.6 Though they may reflect appropriate adjustments to changing economic conditions,these dramatic shifts were not anticipated at appraisal-which looked forward to the creation ofa vibrant, market-driven agriculture. The argument for subsidy removal and privatization wassound. It held that Ghana was still largely in a prefertilization, premechanization mode ofproduction, and putting prices right at the early stage would pay off handsomely in developingefficient usage of these inputs as development proceeded.26 But the reforms in the short-termaccelerated the contraction of the agricultural econony.27 This is not an apology for governmentservices. But it does suggest that the drive for privatization should have been handled moreslowly, absorbing first the full shock of the devaluation, then the gradual removal of subsidies,then the campaign to establish private sector competitors. The assumption that the new dealerscould supply accessible-let alone remote-farming communities at affordable prices proveduntenable. It is important to recall the reforms were staged, over three or four years. So thelessons here are to expect and plan for a reaction time that is considerably longer, and to promoteprivatization as vigorously as divestiture.

5.7 That is the progression that has been followed in veterinary services. As mentionedabove (footnote 20), the ICR errs in claiming that these services have already been privatized.That is not yet the case, at least at the time of the audit mission. VSD still operates almost all ofthe rural clinics. It is trying to prepare a credit program with the Agricultural Development Bankthat will support ministry veterinary officers who are willing to resign in order to start privatepractice, but need capital to get going. DVS will remain active until this conversion process iswell underway.

25. The ridges prepared for maize at the Sata irrigation scheme cannot be reshaped easily by hoe or bullock. They weredesigned for tractor service.

26. Fertilizer was so cheap that some farmers had been using it in excess to kill weeds.

27. The Region says this is an untenable assertion (see annex E, page 2 of the memo dated June 18, 1997).Nevertheless it is an assertion made by all Ghanaian officers in interviews on this subject. The conclusion that thereforms moved too fast is one of the few points on which the author of government's critique of the first draft of theaudit report agreed with OED's findings (see para 4.31). The Bank's consultant's report on the fertilizer tradedocuments and comments on the precipitous decline in fertilizer sales (see footnote 24).

24

T& V Extension

5.8 T&V has come under criticism recently for its simplistic approach to dealing withcomplex farming systems and with relatively sophisticated farmers. In most of rural Ghana,however, especially in the north, farming systems are still so primitive as to warrant an agenda ofsimple messages repeated often. This may not be the optimal approach to niche farming withhigh value crops, or to the development of new cropping systems. The valley bottom rice andlow risk water harvesting campaigns are examples of promotional programs where T&V isinadequate, at least until the new systems have been established. What is needed at first in theseinstances is a collaborative effort bringing together farmers, extension agents and specializedservices such as CRI and AESD to prime the pump, often with the support of subsidizedequipment and/or credit. But in most of the villages visited during the audit mission thesecampaigns were not active, and the simple technologies that the T&V front line staff wereshowing groups and individual farmers seemed to be making a positive contribution. Of coursethe visits did not provide a test as to whether the new technologies were actually adopted. Also,there were signs at the time of the audit that government would not be able to maintain the highcosts of the T&V mobile field cadre. If mobility is removed from T&V much of the value of thistravel-intensive routine is lost.

Monitoring and Evaluation

5.9 The Bank's plans for M&E coverage of this project were ignored. During appraisal in1986 the Bank had sent one of its M&E experts to plan a system for assessing the impacts of thegovernment's reform program in agriculture, in particular the effects on private sectorproduction of the exchange rate and pricing reforms. His proposal is set forth in an officememorandum28 and his short list of essential indicators is repeated in an annex in the StaffAppraisal Report (see annex C of this audit). These include inputs, production and prices. Indiscussions during the audit mission with the first chief of MEC29 and with the consultantadviser on M&E, it was clear neither had been aware of the earlier plans or the agreed list ofindicators. Bank supervision had apparently never followed up. In fact, the ability in MEC todeliver this type of information deteriorated. Shortly after project start-up, the director ofPPMED instructed MEC to abandon the work it had been doing on farm budgets, so that eventhe modeling of input/output relationships was no longer available to provide the key indicatorsto be tracked. PPMED's large field enumeration team still collects production and price data, theformer based on crop cuts. But in the absence of simultaneous questioning about input use, theproduction function relationships cannot be determined and the essential analytical feature of theindicator list becomes inoperative. MEC was never instructed to monitor ASRP, even though itwas created under its umbrella. Its absence from working parties on the three MTRs (footnote 7)and the MTE (para. 4.9) are evidence of its marginal position. A recent MTR on the NationalAgricultural Extension Project makes the following comment, in a section entitled "The Need forStrengthening Monitoring and Evaluation," about the difficulty in getting PPMED support for animpact evaluation of extension:

28. Ronald Ng to Dennis Casley, Chief AGRME. "Ghana: Agricultural Sector Rehabilitation Project Back-to-OfficeReport." July 2, 1986.

29. Who subsequently joined the Bank.

25

But this would require the active involvement of PPMED in contrast to the laidback and passive role PPMED has played in monitoring and evaluating theimpact of, not only this project, but also other projects managed by MOFA.o

5.10 It should be mentioned that the M&E expert on the consultant team resigned midwaythrough his last year because he felt the team was simply not accomplishing any of its objectives,and he himself as well as MEC were not provided the support they needed from the PPMEDdirectorship and the consultant team leader to mount an effective M&E program. Much of theresponsibility for this poor outcome can be attributed to indifference by the Bank subsequent toappraisal.

Capacity Building

5.11 In terms of enabling the ministry to initiate new activities and recover some of its earlierstrengths the project was successful. The fact that it financed preparation of a series of newprojects is an important outcome. What is much less impressive is the progress towardsestablishing a permanent capacity to carry on these operations in the absence of follow-on donorcontributions. The same point was made above with respect to the most successful operation,which was the extension component (para. 5.8). Sustainability of the capacity building efforts atGIDA are also suspect, because the consultant services were mostly aimed at shifting GIDA to asmall scale irrigation portfolio, and that has not yet happened. Also, the two research programs-in cotton and valley bottom rice-are feeble operations which do not appear able to survivewithout new external funding.

5.12 But the real failure in capacity building is the PPMED. This is not a criticism directed atPPMED staff, since most of them were prepared if not eager to get involved. Rather it was themanagement of PPMED which failed to mobilize those capabilities, and neither the consultantteam nor the FAO and Bank supervision teams pushed in that direction.3 1 Since the first goallisted for the project was to create this capacity, the poor results are particularly worrisome forthe Bank.

5.13 The PPMED failure here seems to be partly attributable to the pressure to get the biganalytical and reporting jobs done, which did not allow for the patient work with in-servicetraining to teach MOFA staff how to handle new jobs. Government and Bank supervision wereeager to produce a Medium-Term Agricultural Development "Program" in 1990, at a time whenit appeared that a sector program that would embody most of the investments projected in thatdocument would be approved by the Bank. (It was not, and the document was relabeled"Strategy.") A year later, the Bank encouraged rapid progress with the MTE on ASRP, to serve

30. "Mid Term Review: National Agricultural Extension Project." Page 18.

31. There is ambiguity in the reports as to whether the consultant terms' shift from policy analysis and planning to datacollection was deliberate. In the team leader's Terminal report prepared in 1992, he claims the Tripartite Review heldin September 1990 highlighted that the original project focus had been altered "in order to concentrate on developmentof the PPMED database rather than moving immediately to strengthening planning capabilities as outlined in theProject Document. The change in focus was necessitated by the weak database of MOA which became a limiting factorin pursuance of original project objectives." (Terminal Report by the consultant for FAO; page 4). However in FAO'sown Terminal Report dated 1995 it refers to an evaluation mission fielded in September 1991 that "strongly"recommended that a successor mission prepare for "providing activities to strengthen PPMED's institutionalcapabilities in policy analysis and investment project preparation" (op. cit. footnote 3). The latter suggests the swingaway from these skills had gone too far.

26

as a background for the MTR which the Bank had scheduled for 1991. Since FAO was primarilyresponsible for managing the PPMED consultancy, the Bank had a reason for stepping back andletting FAO do its job. But that does not excuse the Bank's inaction in the face of clear evidencethat the capacity-building initiatives planned for PPMED were not working.

5.14 The consultant firm must also bear some of the blame. Interviews with Ghanain andBank staff suggest the team leader was inappropriate for the job, and did not demonstrate anyclear vision of where he wanted to help steer PPMED staff other than making them computerliterate, issuing their marketing reports in a timely fashion, and broadening the statistical service.Unfortunately, the consultant team member primarily responsible for statistical support fell illand was evacuated. She was not replaced. The team leader and several short term visitors fromthe firm's headquarters were able to maintain momentum, but the team had other problems. Asmentioned in the last section, the long term M&E advisor resigned in protest about the team'smismanagement. And the other long term member of the consultant team, who was advisor tothe Project Planning and Budgets Division, was not involved in the processing of the new streamof Bank supported projects. This is one of the least successful TA experiences that OED hasexamined in agriculture. At the core of a capacity development component, its failure is all themore glaring.

5.15 This experience raises the question whether the Bank overestimates its capacity tosupport institutional development. In the Agricultural Sector Review of 1985 the Bankconcluded that MOFA needed broad and sustainable reforms and the Bank was in a position tohelp across the spectrum. The question is whether those objectives were too ambitious, orwhether parts of this project were just under-managed.

B. Lessons

5.16 Subsidy removal and divestiture open the way for privatization of services, but otherpreconditions must be met before the private sector responds. Entrepreneurs are unlikely torapidly assume these functions, and government must prepare the way.

5.17 The unsophisticated technical messages provided by the T&V extension system can havea positive impact on relatively primitive cropping systems.

5.18 Bank indifference during supervision to M&E designs proposed at appraisal can be fatalto the chances for successful implementation.

27 Annex A

Basic Data Sheet

AGRICULTURAL SERVICES REHABILITATION PROJECT (CREDIT 1801-GH)

Key Project DataAppraisal Actual or Actual as % of

Expectation Current Estimate Appraisal EstimateTotal Project Costs (US$ m) 53.3 53.2 100Loan Amount (US$ m) 17.0 17.0 100Cancellation - .03 -Institutional Performance ... ModestFollow-on Operation Several Many... Not available.- Not applicable.

Cumulative Estimated and Actual DisbursementsFY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 Total

Appraisal Estimate(US$ m) 1.5 2.6- 8.3 12.9 16.1 17.0 - - 17.0

Actual (SDR m) 1.1 2.5 6.0 9.8 14.0 15.9 16.8 17.0 17.0Actual as % of Appraisal 73 96 72 76 87 94 99 100 100Date of Final Disbursement: September 8, 1994- Not applicable.

Project DatesPlanned Actual

Preappraisal 10/30/86 10/30/86Appraisal 11/22/86 11/25/86Negotiations 04/13/87 04/13/87Board Presentation 05/21/87 05/21/87Signing 06/22/87 06/22/87Effectiveness 09/22/87 12/18/87Project Completion 12/31/92 06/30/94Loan Closing 06/30/93 06/30/94

Annex A 28

Staff Inputs (weeks)Stage ofProject Cycle Planned Revised FinalThrough appraisal ... . 181Appraisal through Board Approval ... ... 38Board approval through effectiveness ... ... 1Supervision 124 235 174Completion 20 20 24Total ..... 418

... Not available.

Mission DataDate No. of Staff days Specializations Performance Rating Types ofproblems

(month/year) persons in field represented " rating trendThrough Appraisal 04/85-12/86 24 151 Re, Ag, Ex, Fa, - - -

Ae, Me, IdAppraisal Through 01/87-05/87 9 21 Re, Fa, L, Ex, - - -

Board Approval Ag, AeBoard Approval 06/87-12/87 2 9 Re, Ae - - -

throughEffectiveness

Supervisionb 03/88-08/93 22 145 Re, Ag, Ex, Fa, 1-2 1 ImplementationAe Delays

Completion 05/94-12/94 1 23 Ec 2 2 -

- Not applicable.a. Re = Rural engineer; Ag = Agriculturalist; Ex = Extension specialist; Fa= Financial analyst; Ae = Agricultural

economist; Ec = Economist; Me = Monitoring and evaluation; Id = Institutional development; L = Lawyer.b. Project files do not support clear identification of supervision missions during much of the project period.

Responsibilities were split between Headquarters and the Field Office, and between individuals. Many visits werenot formally reported in supervision format. This probably explains why the ICR did not list individual missions, asrequired. Much of the data on this row, taken from the ICR, cannot be confirmed.

29 Annex B

Project Costs (US$ million)Appraisal Estimate Actual/Latest Estimates

Local Foreign Local ForeignNo. Item Cost Cost Total cost cost Total1. PPMED 0.2 2.0 2.2 0.2 1.0 1.22. MOFA Head Office 0.0 0.0 0.0 0.2 0.8 1.03. Agricultural Research 0.4 2.6 3.0 0.6 2.0 2.64. Fisheries 0.0 0.0 0.0 0.1 1.3 1.45. Agricultural Extension 0.7 1.5 2.2 0.5 1.3 1.86. Irrigation Services 1.0 4.2 5.2 1.7 4.7 6.47. Veterinary Services 0.4 1.2 1.6 0.5 2.0 2.58. Plant Protection 0.1 0.7 0.8 0.1 0.4 0.59. CIDUa 0.1 0.3 0.4 0.1 0.6 0.710. VORADEP 0.1 0.7 0.8 0.2 0.6 0.811. PCU 0.5 0.7 1.2 0.3 0.5 0.812. Refunding of Project

PreparationAdvance 0.1 0.4 0.5 - 0.05 0.05

13. Contingencies 0.6 1.3 1.9 - - -

14. Vaccines and Drugsand KfW - 8.5 8.5 - 8.5 8.5

15. Fertilizers andChemicals AfDB - 25.0 25.0 - 25.0 25.0

Totalsb 4.2 49.1 53.3 4.5 48.7 53.2- Not applicable.a. CIDU = Crop Services Department of MOFA.Source: Implementation Completion Report, page 21, with corrections.

Acul/aes siae

1

6

31 Annex C

Information Requirements under ASRP for Monitoring Effectsof the On-going Economic Recovery Program

1. Area of major crops for main and minor seasons, including pure, mixed-predominant, andmixed: subsidiary areas for each major crop (Source: Crop Statistics Section-ERPS).

2. Production of major crops for main and minor season (Source: Crop Statistics Section-ERPS).

3. Disposal of major food crops for subsistence and sale (Source: Crop Statistics Section-ERPS).

4. Regional food balance (production + import + food aid - exports demand) for major foodcrops (Source: Crop Statistics Section-ERPS: FAO Early Warning System).

5. Prices of major crops (monthly and annual averages) at farm gate, retail and wholesale, atrural, semi-urban and Accra markets (Source: Farm Management and Market IntelligenceSections-ERPS).

6. Prices of major cropping inputs (monthly and annual averages) at farm gate, retail andwholesale at rural, semi-urban, urban and Accra markets (Source: Market IntelligenceSection-ERPS).

7. Agricultural input usage = amounts of composite fertilizer (15=15=1 5), TSP, urea andothers, insecticides and herbicides.

8. Use of agricultural inputs = percentage of farmers using each kind of inputs e.g., fertilizers,insecticides, and herbicides (Source: Farm Management Section-ERPS).

9. Use of hired laborers = percentage of farms using hired laborers, amount (Mondays) used,and average wage rates (Source: Farm Management Section-ERPS).

10. Farm budgets of major farming systems--cash portion only, including non-paid labor input(Source: Farm Management Section-ERPS).

11. Adoption of modern agricultural practices = recommended varieties, levels of inputs,cultivation practices and post-harvest technologies (Source: Extension Service-MOA).

12. Percentage distribution of Household Income/Expenditure and Net Balance, by Rural, Semi-Urban and Urban Enumeration Areas with reference to Poverty Line and possibly byOccupation Group (Source: Statistical Services Board-ERPS).

The responsibility for collating these items of information and for preparing the progressreports rests with the Policy and Planing Section in ERPS of the Ministry of Agriculture. Initiallythe reports should be submitted annually.

Source: Staff Appraisal Report, Annex 3-1, Attachment 2, pages 56, 7. April 22, 1987

33 Annex D

MINISTRY OF AGRICULTURE

My Ref No.

Your Ref No. Policy Planning

Tel ACCRA 665421 Monitoring

Cable: AGRICOSTATS & Evaluation

...................................... .............. ..........REPUBLIC OF GHANA P.O. Box .... .............

...................................... Accru

DR ROGER SLADE,AGRICULTURE AND HUMANDEVELOPMENT DIVISION,OPERATIONS EVALUATION DEPT.THE WORLD BANKWASHINGTON D.C. 20433USA

Dear Sir,

RE: AGRICULTURAL SERVICES REHABILITATION PROJECT(CREDIT 1801 - GH)

DRAFT PERFORMANCE REPORT

Reference your Draft Performance Report on the Agricultural

Services Rehabilitation Project (Credit 1801-Gh) which was received

on March 10, 1997, I wish to indicate that we take particular note

of the PPMED failure - the failure of the Agricultural Services

Rehabilitation Project to,"create an in-house capacity in PPMED to

develop policies, programs and projects".

The Management of PPMED wants to assure you that the

Department will ensure the active participation of its enthusiastic

professional staff in all policy and project related issues

affecting Ghana's agricultural sector.

The Department hopes for the Bank's support in its efforts to

assert her position.

Yours faithfully,

for: DIRECTOR LTC-r PLANNING,MONITORING AND EVALUATION

SALOME DANSO (MS)ASSISTANT DIRECTOR

35 Annex E

THE WORLD BANKIFC/M.I.G.A.

OFFICE MEMORANDUMDATE: June 18, 1997

TO: Ms Elizabeth McAllister, Director, OED

THROUGH: Mr. Callisto Madavo, Vice President, Africa Region

FROM: Serge Michailof, Country Director, AFC10

EXTENSION: 3-3322

SUBJECT: Ghana Agricultural Services Rehabilitation ProjectOED Perfomance Audit Report

Please find attached the Region's formal comments on the OED Performance AuditReport for the Ghana Agricultural Services Rehabilitation Project (Credit 1801-GH).

cc: MessrsIMme: Slade, Rice (OED); Chausse, Schreiber (AFTA3): Keane (AFC 10)

Annex E 36

THE WORLD BANKIFC/M.I.G.A.

OFFICE MEMORANDUM

DATE: June 18, 1997

TO: Mr. Serge Michailo , Country Director, AFC 10

FROM: Jean-Paul C , ask Manager, AFTA3

EXTENSION: 36758

SUSJECT: Ghana Agricultural Services Rehabilitation ProjectOED Perfomance Audit Report

The revised final draft of the OED Performance Audit Report (PAR) on the GhanaAgricultural Services Rehabilitation Project (ASRP, Credit 1801-GH) does notadequately take into account the detailed comments provided by our staff (seememorandum from G. Schreiber through Jean Paul Chausse to Mr. Roger Slade, dated 27January 1997) and the Region does not agree with OED's proposed rating for projectoutcome of "marginally satisfactory".

OED's covering Memorandum to the Executive Directors and the President itself statesthat there "were impressive gains in terms of overall institution-building, through theformation of the [agricultural policy] coordinating committee, the preparation of amedium-term sector r'.velopment strategy and the generation of five successor projectswhich would continue the work [initiated under the ASRP] at the subsector level.... [and]the policy reforms .... were carried out as agreed." As the Region emphasized in itsprevious comments to OED, the PAR rating on overall project outcomes reflects anunreasonably narrow view of project objectives. Getting Government out of commodityproduction, trading and processing, liberalizing the marketing of fertilizers and veterinarydrugs, and shifting the focus to rehabilitating and strengthening its basic agriculturalservices were important achievements. These have resulted in a leaner civil service,substantial savings of public financial resources (on subsidies and operating losses), andthe gradual regeneration of effective basic services for small holders.

While a number of critical statements contained in the previous draft have been removedor modified after the Region challenged their validity and provided evidence in support ofits challenge, a number of other remain that are, in the Region's view, either unjustified,given undue weight in the overall context of the project's broad scope, or inadequatelybalanced by failure to provide recognition to positive and desired outcomes andachievements.

Three examples will suffice to illustrate these points:

37 Annex E

Paragraph 4.10 states that "none of the follow-on subsector ... projects provided funds forgeneralized institutional support to PPMED...". Footnote 9 to that paragraph notes thatthe subsequent Extension, Livestock and Fisheries Projects all provided support to

PPMED. Since these are, in fact, the three main subsectors covered by the Ministry, thePAR criticism is misplaced.

In discussing the research subsector, the PAR goes to great lengths in paragraphs 4.14and 4.15 to point out disappointing results with two very small adaptive researchactivities funded under ASRP. Only after having established a basic tenor of failure, doesthe PAR then, in a short paragraph 4.15, mention that the project supported a much moreimportant activity in this subsector, the preparation of a national research plan andfollow-up project, and that this was successfully achieved.

With regard to the gradual removal of the fertilizer subsidy and the privatization offertilizer marketing, the PAR argues that this had "traumatic effects on fertilizer usage,cropping patterns, areas sown and yields" (paragraph 4.21, second bullet) and that "thereforms... accelerated the contraction of the agricultural economy" (paragraph 5.6).These are untenable assertions, as the Region has pointed out before. Moreover, thepolicy change has indeed resulted in a welcome shift from low- to high-analysisfertilizers.

cc: Mr. Schreiber (AFTA3)

섭」ULY 1 996

IMAGING

Report No.: 16857Type: PPAR