Document of

The World Bank

Repor No. 14448-IVC

STAFF APPRAISAL REPORT

COTE D'IVOIRE

AGRICULTURAL EXPORT PROMOTION AND DIVERSIFICATION PROJECT

JUNE 1, 1995

Agriculture and Environment Operations DivisionWest Central Africa DepartmentAfrica Region

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS

Currency Unit = CFA franc (CFAF)US$1.00 = CFAF 481

WEIGHTS AND MEASURESMetric System

ABBREVIATIONS AND ACRONYMS

ADB - African Development BankANADER - Agence Nationale d'Appui au Developpement Rural (National

Agricultural Services Agency)APDF - African Project Development FacilityAPEPCI - Association des Producteurs et Exportateurs d'Huiles Essentielles et Plantes a

Parfum de C6te dI'voire (Association of Ivorian Producers and Exporters ofEssential Oils)

CAA - Caisse Autonome d'Amortissement (Government Debt Management Agency)CIDA - Canadian International Development AgencyCIRAD - Centre International de Recherche Agronomique pour le Developpement

(French International Center for Agricultural Research and Development)EU - European UnionGTZ - Gesellschaft ffir Technische Zusammenarbeit (Germany)IDEFOR - Institut de DOveloppement des Forets (Ivorian Agricultural and Forestry Research

Agency)MINAGRA - Ministere de l'Agriculture et des Ressources Animales (Ministry of Agriculture

and Animal Resources)OCAB - Organisation Centrale des Producteurs Exportateurs d'Ananas et Bananes

(Pineapple and Banana Producers' and Exporters' Organization)OPA - Organisations Professionnelles Agricoles (Agricultural Professional

Organization)SMPA - Societ de Manutention de Produits Agricoles (Agricultural Produce Handling

Company)UPEFL - Union des Producteurs Exportateurs de Fruits et Legumes (Fruit and Vegetable

Producers' and Exporters' Association)UPHCI - Union des Producteurs Horticoles de C6te d'Ivoire (Ivorian Flower

Producers' Association)

GOVERNMENT FISCAL YEARJanuary 1 - December 31

COTE D'IVOIREAGRICULTURAL EXPORT PROMOTION AND DIVERSIFICATION PROJECT

STAFF APPRAISAL REPORT

TABLE OF CONTENTS

PAGE

I. BACKGROUND .......................................................... 1

A. Overview of Role and Evolution of Agriculture ........................................................ 1

B. Recent Sectoral Performance .......................................................... 2

C. Export Potential and Constraints to Export Development ........................ ..................3

D. Lessons Learned from Bank Group Involvement ....................................................... 7

II. THE PROJECT .......................................................... 7

A. Project Strategy And Rationale .......................................................... 7

B. Project Objectives And Summary Description ......................................................... 10

C. Detailed Project Description ......................................................... 11

1. Export Promotion and Diversification Actions ...................................................... 11

2. Support to Agricultural Producers' and Exporters' Organizations ......................... 15

3. Export Facilities Upgrade ......................................................... 17

4. Project Management ......................................................... 17

III. PROJECT COST AND FINANCING ................................................ 18

A. Project Cost Estimates ......................................................... 18

B. Project Financing ......................................................... 18

C. Procurement ........................................................ 19

D. Disbursements ........................................................ 22

E. Accounting, Financial Reporting, and Auditing Arrangements .................................. 23

IV. PROJECT ORGANIZATION AND MANAGEMENT ....................................................... 23

A. Project Implementation Arrangements ........................................... 23

B. Reporting Arrangements ......................................................... 24

V. PROJECT JUSTIFICATIONS ......................................................... 25

A. Benefits ......................................................... 25

B. Risks ......................................................... 26

C. Environmental Impact ........................................................ 26

VI. AGREEMENT AND RECOMMENDATIONS ......................................... 27

ANNEXES

1. Pilot Phase Results Matrices

2. Terms of Reference for Farmer Association Development Specialist

3. Terms of Reference for Export Development/Sales Specialist

4. Eligibility Criteria and Cost Sharing Mechanisms

5. Key Project Monitoring Indicators

6. Detailed Cost Tables

7. Economic Projections

8. Procurement Implementation Schedule

9. Estimated Disbursement Schedule

10. Summary of Project Manager's and Professionals' Responsibilities

1 1. Analysis of Freight Impact

This report is based on the findings of a Bank appraisal mission which visited Cote dIvoire in April 1995, comprising Messrs.Ousmane Sissoko (Sr. Financial Analyst, Mission Leader), Nicaise Ehoue (Agriculturist) and Leandre Gb6li (AgriculturalEconomist). The Project Lead Advisor, Ms. Lynn Engstrand, and Peer Reviewers, comprising Messrs. Richard Anson, Jean-FrancoisBarres, Richard Henry and Michel Simeon, have reviewed the project from the Initial Executive Project Summary. Mr. Jean-ClaudeBalcet, Ms. Cynthia Cook and Mr. Olivier Lafourcade are the Section Chief, managing Division Chief and Department Director,respectively, for the operation.

COTE D'IVOIRE

AGRICULTURAL EXPORT PROMOTION AND DIVERSIFICATION PROJECT

Credit and Proiect Summary

Borrower: Government of Cote d'lvoire

Beneficiaries: Agricultural Producers/Exporters and Professional Organizations

Credit Amount: SDR 3.70 million (equivalent to US$5.83 million)

Terms: Standard IDA terms, with 40 years maturity

Project Description: The project's objectives would be to diversify and expand private agriculturalexports with a view to supporting the Government's export-led growth strategy,through: (a) export market development activities for non traditional agriculturalproducts allowing for diversification out of traditional export crops; this would beachieved by scaling up actions initiated under an eighteen-month old pilotoperation as part of project preparation; (b) support to producers' and exporters'organizations; and (c) upgrading of export facilities. The diversification ofagricultural exports is further intended to reduce the country's excessivedependence on traditional crops such as cocoa, coffee and timber. The projectwould have the following components:

(a) Export Promotion and Diversification Actions through assisting Ivorianproducers in: (i) market research, customer identification, meeting qualityrequirements, trial shipments, obtaining pre-export finance and follow-up of salesand export shipment; (ii) product development and quality control via adaptiveresearch; (iii) establishment of business partnerships for private operatorsengaging in the production and export of products proven to have an importantexport potential for the country, such as desiccated coconut, cashew nut, tropicalcut flowers and potted plants, essential oils and fruits and vegetables, etc. Thiscomponent is built on the results of the pilot project tested from November 1993through April 1995;

(b) Support to Producers/Exporters' Organizations by strengthening existingprivately-controlled professional organizations: producer groups, exporterassociations, cooperatives, etc., and promoting the creation of new farmerassociations and the establishment of an Interprofessional Group of Producers' andExporters' Associations. The interprofessional group of associations will not onlyrepresent the interests of its members but is also expected to become the majorvehicle for non traditional export market development;

(c) Upgrading of Export Handling Facilities through rehabilitating theinfrastructure in critical areas such as the existing fruit wharf in the Port ofAbidjan and undertaking minor works for handling and specialized storagefacilities at the airport for allowing better transit conditions for the export ofperishable produce.

- ii -

This component will be carried out under parallel financing from grants of theEuropean Union; and

(d) Support to Project Management which will be carried out by qualifiedprivate professionals experienced in agricultural export and farmer organization asdone efficiently during the pilot phase.

Benefits: The project will directly benefit an estimated 100 private enterprises/exporters andreach indirectly by project completion at least 10,000 growers of non traditionalcrops who, without this project, would have little or no hope to develop successfulexport sales on their own. It will have major impact on agricultural professionalorganizations as it will contribute to streamlining existing associations and helpingestablish new ones. It will empower these organizations to effectively lobby theGovernment for necessary changes related to their activities while enhancing theability of these organizations to represent producers/exporters. The developmentof non traditional crop exports will enhance job creation throughout the countryfor those producers/exporters engaged in such activities. It will further move thecountry from a position of being highly dependent on traditional crops (such ascocoa, coffee, cotton, etc.) to a position of producing high value, branded Ivorianproducts which sell at high prices in the off-season markets of Europe and othercontinents. This is expected to bring about a significant improvement in thecountry's export receipts. The project will also result in sigrificant additionallocal value-added because of the expected increase in local demand for processedproducts which would be a side outlet for non exportable products. In addition tothe above benefits, the project will enhance the skills and knowledge of farmersand exporters significantly and carry many farmers from subsistence level farmingto a position of profitable producers of high value export crops.

Risks: The major foreseeable risk is likely to be a slower than expected private sectorsupply response if conflicting interests were to delay the hoped-for improvementsin the incentive framework for agricultural exports. If the implementation of theGovernment's plan to progressively liberalize sea and air freights were delayed andtariffs were not adjusted, there might also be a risk that freight costs could priceIvorian products out of the international market. Such risks would be reduced,however, through the removal of major economic and sectoral constraints as partof the reforms agreed upon under the Economic Recovery Credit (ERC) whichbecame effective in November 1994, and those to be supported through theproposed Agricultural Structural Adjustment Credit (ASAC), in addition toincreased involvement in lobbying actions by the recently created Air FreightCommittee. There is also a risk that government agencies attempt to interferewith project activities. The strengthening of professional organizations andeventually their grouping into an interprofessional group of trade associationswould empower them to better represent and defend their interests, remain self-reliant and ensure an effective project implementation.

COTE D'IVOIRE

AGRICULTURAL EXPORT PROMOTION AND DIVERSIFICATION PROJECT

I. BACKGROUND

A. Overview of Role and Evolution of Agriculture

1.01 The agricultural sector contributes about 33 percent of Cote d'Ivoire total GDP and 66percent of its total export revenues (including agroindustrial products). It also provides employment tomore than two-thirds of the country's labor force. During the first twenty years of independence, Coted'lvoire stood out as an exceptional agricultural performer. Real agricultural GDP grew at 4.5 percent p.a.during the 1960s and at 3.3 percent p.a. during the 1970s. This expansion was led by export crops andtimber which grew at about 7 percent a year, about twice the growth rate of food crops and livestock. Theperformance of the agricultural sector provided the underpinning of the country's remarkable economic andsocial development. During the period 1965-1975, total GDP grew at 7.7 percent p.a. on average, wellahead of an annual population growth rate of 4 percent.

1.02 The good performance of the agricultural sector was the result of a combination offavorable factors. The country's rich endowment in relatively fertile land, in particular in the Forest region,and abundant rainfalls provided a favorable environment for the low cost production of tree crops such ascoffee and cocoa. High intemational prices for the country's main export crops allowed the Government toset (administratively-fixed) attractive producer prices even after a substantial taxation. The country'spolitical stability encouraged the immigration of productive labor from neighboring countries. High levelsof public investment in basic infrastructure and in direct agricultural production (oil palm and rubberplantations) and processing (cotton) provided small farmers with access to markets, technical packages,inputs and credit. Substantial investments were also made in research and extension. Because agriculturalproduction was essentially based on small farms, the growth of the rural economy was broad-based andliving standards in rural areas improved substantially, despite economic policies biased in favor of theindustrial sector and urban populations.

1.03 Following two decades of growth the performance of agriculture along with the economyin general deteriorated sharply in the 1980s. The agricultural GDP average growth rate fell to 1.2 percentp.a. during the 1980-91 period, and was a negative 1.2 percent over the 1980-86 period. This decline wasmainly due to faulty macroeconomic and sectoral policies. At the end of the 1980s, it was compounded bya steep drop in the price of CMte d'Ivoire's main export crops on intemational markets. The above factorscombined to drastically reduce the profitability of agriculture. At the same time, severe budgetaryconstraints forced the Government to drastically scale back public investments and services in favor of therural sector.

1.04 The crisis of the 1980s uncovered constraints which, although unheeded during the yearsof economic growth, seriously impaired the ability of the sector to adjust to changing intemal and extemalcircumstances. Inadequate pricing policies introduced a wedge between incentives to farmers and thecountry's comparative advantage for the various crops. The heavy public investment programs of theprevious decades had created large, ineffective and costly bureaucracies more intent to preserving theirprivileges than to providing services to farmers. The gray area between public and private interests had

-2 -

permitted the creation of substantial rents which heavily taxed primary producers. Agricultural parastatals,good at starting-up the production of a new crop and promoting its adoption by smallholders, were muchless effective at fostering the diversification of production in their command areas. They were alsoinflexible with regard to production packages proposed to farmers, often disregarding technologies lesssophisticated but better suited to small-holders circumstances. Because of their monopoly position, theywere not interested in improving their efficiency since they were able to pass on processing and marketingcosts to primary producers. These rigidities, combined with the explicit (through export taxes and taxationof inputs) and implicit taxation (through the overvaluation of Real Effective Exchange Rate - REER) ofagriculture, depressed rural incomes and limited the ability of farmers to finance widespread technologicalchange. Finally, the Government's policies were inadequate to ensure the sustainable management of thecountry's natural resources, in particular the conservation of its fast disappearing tropical forests.

1.05 External Trade. The value (in current terms) of agricultural exports, including processedproducts, declined by almost 50 percent from 1985 (CFA franc 1,000 billion) to 1992 (CFA franc 473billion). However, the share of agriculture in total export fell only slightly during the period, from 66percent to 60 percent of total exports, underlining both the overwhelming importance of agriculture in totalexports and the negative impact of the fall in commodity prices on world markets. In 1992, cocoa exports(beans and processed products) represented 54 percent of the value of total exports (against 45 percent in1985), in spite of the fall in their unit price. C6te d'lvoire's main agricultural imports are cereals (rice,wheat floor) and animal products (meat, milk and fish). Because of the impact of the economic recessionon domestic demand, the total value of food imports has steadily declined since 1985. In 1992, it amountedto CFA franc 112 billion (4 percent of GDP).

B. Recent Sectoral Performance

1.06 Evolution of Competitiveness. The evolution of the Ivorian economy in the latter half ofthe 1980s is characterized by two inter-related developments whose effects have been to seriously erodecompetitiveness. The price indeces for C6te d'Ivoire's principal exports (all of which are agriculturalcommodities) fell precipitously and negative Terms of Trade (TOT) trends were most severe for its twomost important exports, cocoa and coffee. Regarding cocoa, this was partly due to faulty pricing policieswhich over-encouraged cocoa production, causing a glut in world markets, and speculation on theinternational market. For all other commodities, C6te d'Ivoire is a price-taker in world markets, and thecountry was hurt by the worldwide fall in primary commodity prices that characterized much of the 1980sand early 1990s.

1.07 TOT evolution is a primary determinant of the real effective exchange rate (REER). From1986 to January 1994, the REER appreciated significantly, causing a major decline in the competitivenessof Ivorian exports. Under a flexible exchange rate system, the exchange rate automatically adjusts torestore the economy to competitiveness and bring major macroeconomic variables back into approximateequilibrium. As a member of the CFA franc zone, C6te d'Ivoire's currency is fixed relative to the Frenchfranc, so any attempt to adjust parity requires an inter-governmental decision. This has not happened untilJanuary 12, 1994 when the decision was taken to realign the CFA franc parity from CFA franc 50 to CFAfranc 100 per French franc, or a devaluation of 50 percent in foreign terms.

1.08 Up to January 12, 1994, C6te d'Ivoire had elected to pursue a policy of internaladjustment, adjusting wages and prices, and severely slashing public investment. Internal adjustmentoccurred to varying degrees for major commodity sub-sectors, but it only minimally restoredcompetitiveness. Moreover, what little increases in competitiveness that occurred were unsustainablebecause the most important measures taken -- cutting producer prices -- were at the expense of farmers.

- 3 -

For CMte d'lvoire, internal adjustment was a recipe for contraction, not growth. Since farmers are amongthe poorest elements of Ivorian society, such a strategy was also highly inequitable. The above problem isbeing resolved by the change in the parity of CFA franc that has opened the way to a series of majorreforms notably a substantial raise in producer prices. However, export taxes continue to be heavy.

C. Export Potential and Constraints to Export Development

1.09 Potential for Diversification Out of Traditional Export Crops. Since the beginning of the60s, the Government has been aware of the necessity to diversify agricultural production to avoid relyingexcessively on cocoa and coffee, the two major export crops, and to promote a greater degree of food self-sufficiency. Diversification policies were resolutely proactive. They relied more on the belief of directState intervention to promote infant industries (permitted by comfortable budgetary surpluses) than onestablishing an enabling environment for private sector expansion. They were supported by large publicsector investments (particularly for sugar, oil palm and rubber; also for rice; not for pineapple and bananaswhich have always been privately controlled industries), and included a high degree of protection of thenascent domestic production. Large parastatals were created to manage the public investments, withbroader mandate to ensure the socio-economic development in their command areas.

1.10 Over the years, while production may have developed well technically in some cases, theeconomy of the diversification filieres has clearly deteriorated. Competitiveness was seldom attained, andnever preserved, because of inflated costs and lack of incentives to streamline operations and increaseproductivity. The Government failed to remove protection that may have been justified in the phase ofestablishment of production, and the attendant distortions that had crept into the filieres. The cash andfood crop parastatals became gradually plagued with management and financial problems due in part totheir redundant staff and the multiplicity of the task assigned to them. Their financial deficits grew moreserious over the years as the Government became less and less able to pay subsidies.

1.11 The results of diversification efforts to date are mixed, and their scope has remainedmodest in relation to the country's large production base and comparative advantage. The fifieres underprivate control (pineapple and bananas) have suffered greatly from the overvaluation of the REER and thelack of an enabling environment. Nevertheless, they have been able to adjust and remain at the cutting edgeof competitiveness, especially in the case of bananasfiliere in which major efforts have been made to renewand expand facilities. It is of no surprise, therefore, that their competitiveness would have improveddramatically in the wake of the devaluation. The filieres still controlled by the State are a mixed bag.Some filieres have brought in some degree of adjustment in their operations (cotton, rubber) while otherhave largely resisted adjustment (oil palm, sugar). In the wake of the devaluation, most of these fiWibreshave regained financial profitability. At this time, efforts should aim at consolidating such profitability andmaking it sustainable. This can only be achieved by resolutely moving toward completing the privatizationof parastatals such as Palmindustrie, etc. as part of broader policies geared to redefining the role of theState and of the private sector in agricultural development.

1.12 Pursuing diversification efforts is a necessity as they are key to ensuring a balancedgrowth of agriculture for the long-term. Diversification should be pursued by broadening the scope foractivities to non traditional exports destined for the intemational market, and to food crops destined to thedomestic (or sub-regional) market or to substitute imports (rice in particular). CMte d'Ivoire hasundoubtedly a comparative advantage to producing a wide array of non traditional exports. Thiscomparative advantage is due to: (a) its climate which endows the country with the capacity to produce theentire range of tropical products that can be found elsewhere at the same latitude in the world; (b) arelatively efficient infrastructure base (telecommunications, roads, seaport, airport) that facilitates

exchanges with foreign countries; (c) the relative proximity of the vast and expanding European market; (d)historical links with the European continent, reflected in the facilities of entry that African products stillenjoy on this market; and (e) the existence of an agro-industrial base that permits to produce processed andsemi-processed products.

1.13 Non traditional exports can be classified into fresh products and processed products.There are presently significant exports flows of non traditional agricultural commodities in fresh, and largepossibilities for expansion of these exports, inter alia: (a) ornamental flowers: CMte d'Ivoire has alreadydeveloped a good image as an exporter for these commodities whose exports are very lucrative; it is worthnoting that CMte d'Ivoire is the only exporter of ornamental pineapple (ananas fleur) for which there is aninteresting potential market; (b) fresh fruits: there is a large array of fruits currently produced, or with aninteresting production potential, suited for export in fresh; this includes mangoes, avocados, guavas,papayas, grenadines, passion fruit and mangosteen; at this time, only mangoes are exported in significantquantities, and producers are still ill-equipped and ill-organized for production and export of the othercommodities; (c) fresh vegetables: the European market offers an interesting outlet at certain periods of theyear for vegetables such as eggplant, chilly, melon and string beans; some Afiican countries have alreadytaken advantage of this market; in addition, there is a growing African community in Europe whichconstitutes an incipient but growing outlet for certain tropical vegetables such as the n'drowa variety ofeggplant, cassava leaves and okra (in fresh or dried form), etc.; and (d) sundry products: with an exportedvolume of 30,000 tons per annum, CMte d'Ivoire is the first exporter of cola nuts in the world; while thetraditional demand of Sahelian countries is sustained, exports increasingly go as well to the internationalmarket which is fast expanding especially in dried nuts form; raw cashew nuts have substantial productionpotential and a growing export market; CMte d'Ivoire currently exports about 15,000 tons yearly to theinternational market; with the reopening of the processing unit in Korhogo and the creation of newplantations, the quality of production should increase markedly; and silk production (sdriciculture) thatCIDT started under a pilot operation is testimony that other opportunities for diversification still exist.

1.14 Traditional food crops also represent an opportunity for diversification, both for thedomestic and international markets. On the domestic market side, the expansion of urban centers (inparticular the Abidjan metropolitan area), offers a growing outlet for products of the urban belt (agricultureperi-urbaine). The demand concerns in particular cassava and sundry vegetables. While marketingsystems are fairly well organized, there is large scope for increase in production out of greaterintensification and better use of organic waste. On the international scene, there is a growing demand forAfrican products mostly on the part of African and Caribbean communities living abroad. In recent years,market networks have come into existence for such products as yams, plantains, cassava (fresh and inprocessed form such as attieke), okra, chilly, red palm oil, dried fish, etc., for which C6te d'Ivoire has acompetitive edge over other potential suppliers.

1.15 Remaining Major Constraints to Export Development and Possible Improvements. Thepotential for export development in CMte d'lvoire continues to suffer from institutional and regulatory aswell as technical and commercial constraints that constitute important bottlenecks to fully restoring thecountry's competitiveness. On the institutional front, a number of government institutions were establishedduring the last few years with the objectives of export promotion. To date, such objectives remainunattained because of rigidities in their operations, lack of dynamism to identify foreign buyers' demand forIvorian products and lack of operating means and adequate expertise to conduct business. As a result, theChamber of Commerce and Industry, the Chamber of Agriculture and the Centre de CommerceInternational d'Abidjan are all experiencing serious difficulties in providing an effective support to thedevelopment of the country's exports by private businesses. Regulatory constraints are also known to bechiefly responsible for inordinate excessive shipping costs for both sea and air transports due to existing

monopoly in maritime transport of goods from C6te d'Ivoire and that granted to airliners Air Afrique andAir France for all air cargo transports. Transportation and VAT issues are further detailed in paras 1.18through 1.24 below.

1.16 Inadequate professional experience and expertise of producers and exporters are anothermajor constraint to developing exports of Ivorian non-traditional agricultural products. The localproducers and sellers of non-traditional products, for the most part are relatively small enterprises whichsimply do not have the resources or the experience and expertise to enter into the intemational marketplaceto identify customers, their needs and requirements or to form necessary business relationships to makesales. In general, the Ivorian non traditional and small crop producers are not equipped and experienced inconducting market research, identifying potential regional and overseas customers first and then producingto meet the specific needs of these customers, and to carrying out the demanding negotiations and pricingthat is required for successful international business transactions.

1.17 The most important technical constraints have to do with the poor state of transportlogistic (e.g., the fruit wharf) and the lack of specialized storage facilities at the harbor and the airport ofAbidjan for perishables.

1.18 Transport. Maritime shipping costs from Cote d'Ivoire are extremely high in comparisonto developing countries and to Africa because of existing monopolistic situations. As agricultural exportsare the most important foreign exchange earner for the C6te d'Ivoire, seeking ways to lower maritimeshipping costs is a crucial ingredient of competitiveness. Maritime shipping costs are especially importantfor perishable commodities such as bananas and pineapples, as well as bulky wood products. For suchcommodities, ocean freight currently constitutes 20-30 percent of the CIF price. Government interventiondominates the maritime shipping sector, and this has resulted in inefficiencies and elevated costs. C6ted'Ivoire has extended the UNCTAD Code of Conduct (40-40-20 rule) meant for conference liner traffic tototal general traffic (i.e., conference and non conference ) and to bulk and specialized traffic. This practicelimits competition and increases freight prices, particularly for exporters of bulky products. The SocieteIvoirienne des Transports Maritimes (SITRAM), a parastatal, holds the monopoly of Ivorian traffic rightsbetween West Africa and Northern Europe, the Atlantic coast of the United States, and on refrigerated andbulk transport for all destinations whereas Ivonian traffic rights to mediterranean European ports have beengranted to the private shipping line SIVOMAR. Freight rates are negotiated by a government dominatedagency, the Office Ivoirien des Chargeurs (OIC), which also has the responsibility of apportioning cargospace to shippers.

1.19 Up to 1993, the French firm SCAC-Delmas-Vieljeux (SDV) held a defacto monopoly forshipping of Ivorian banana and pineapple exports to Europe, as SITRAM owns no refrigerated vessels andhad passed on its traffic rights to SDV. However, the Banana and Pineapple Exporters' Organization(OCAB) resolved not to accept SDV's terms (then US$121 per palette of 900 kg). In December 1993,OCAB decided independently to contract two ships via competition and was able to secure a rate as low asUS$65 perpalette. Faced with OCAB'sfait accompli, the Minister of Transport granted to OCAB -- onFebruary 1, 1994 retroactive to the date of signature of the contract -- a special authorization to contractships directly for the 1994 campaign for 50 percent of its shipments.

1.20 Liberalization of maritime traffic continues to be a major concern of Ivorian exporters. Inthe long-run, C6te d'Ivoire risks continued loss of export market share due to erosion of pricecompetitiveness. From 1985 to 1991, the Ivorian share of the EC banana market fell from approximately5.3 percent to slightly over 3 percent. Although still the main exporter of fresh pineapple to the EC, CMted'Ivoire has gone from a over 90 percent of market share in 1985 down to just over 60 percent by 1991.

- 6 -

Every effort needs to be made to lower ocean transport costs through increased competition. Moreover, theevery day management of the cargo allocation by OIC entails delays, inefficiencies, and opportunities forrent-seeking behavior.

1.21 Under the ERC which became effective in November 1994, the Government has committeditself to eliminate restrictive practices in the maritime transport sector. As a result, exporters should beallowed to seek direct agreement with shipping companies to take advantage of much better transport ratesthat competition brings about.

1.22 Against this background, transport monopolies appear to constitute the single mostimportant remaining constraint to the competitiveness of Ivorian agricultural export across the board. Themonopoly enjoyed by the national carrier SITRAM for sea transport, which is indeed aggravated by avirtual monopoly and low capacity of Air Afrique/Air France for air cargo transport, result in excessivetransport costs with deleterious effects on agricultural export operations. An Air Freight Committee wasrecently established to ensure proper planning of exports by air taking into account the limited loadingcapacity of current air carriers and maintain the dialogue with the Government to ascertain a proper follow-up of the treatment of the above issues.

1.23 Value-Added Tax. Current VAT policies and practices and possible future reforms havemajor implications for the competitiveness of agricultural sector exports as the VAT content in the coststructure reaches up to 10 percent for some products. A major issue which needs to be addressed is that ofthe extension by option of the field of application of VAT on a number of agricultural, forestry andfisheries products destined to exports, thus enabling them to claim the VAT refund on inputs.

1.24 Under the FY 91 Competitiveness Sector Adjustment Loan (PASCO), exporters for thoseagricultural, fishery and forestry products not yet subjected to VAT were to be allowed to opt for VAT andthus be entitled to a credit for VAT paid on their inputs. Under the PASCO second tranche conditionality,the Government has accepted to open the VAT option for bananas, pineapples, flowers and ornamentalplants only, claiming that there are no other major non traditional exports at present. To further improvethe export incentive framework, it is critical that an undistorted incentive system be established once andfor all, and that potential non traditional exporters should not have to lobby the Government to get theirproduct eligible for VAT option and thus get the VAT refunds to which they are entitled.

1.25 Prospects for Supporting Export Promotion and Diversification. C6te d'Ivoire'scompetitiveness for export crops has been greatly enhanced by the recent change in the parity of the CFAfranc. The actual mobilization of the potential, on a scale that will make a difference, will require on thepart of national entrepreneurs to make the most out of every single export niche. Support on the part of theGovernment will be required both to strengthen the incentive framework and remove the obstacles to supplyresponse. This will include, inter alia: (a) institution building, by strengthening professional organizations;(b) improving the fiscal and regulatory framework for export activities; (c) support to export production byproviding specialized technical services (adaptive research, seed production, etc.); (d) assistance to exportmarketing, in particular assistance to establishment of partnership with foreign investors to secure technicalexpertise, market outlets and financial advisory services for export businesses; and (e)rehabilitation/upgrading of export infrastructure at the port and airport. As part of the preparation of theproposed project, a pilot operation tested real export opportunities for a number of non traditional crops(desiccated coconut, papaya solo, cut flowers, essential oils, etc.) and worked with more than 60agricultural producers and their associations over an eighteen-month period. The operation has received anenthusiastic response on the part of the above producers especially for commodities such as papaya solo,yams and other ethnic food products, as well as for essential oils and desiccated coconut. A few firm

- 7 -

orders have been secured and pilot shipments have permitted to test packaging materials and transportationmethods, in particular containerized transport by sea in controlled atmosphere for papayas and flowerpineapple (ananas-fleur). The operation has also laid the ground for addressing the air freight problemthrough the establishment of an Air Freight Committee and assisting the development of professionalorganizations for fruits and vegetables and essential oils. Overall, the results of the operation areencouraging, and augur well for the eventual large scale development of non traditional exports. (Annex 1)

D. Lessons Learned from Past Bank Group Involvement

1.26 Experience of several developing countries in Africa, Latin America and Asia whereagricultural export promotion and diversification has been supported by the Bank, has demonstrated thateven modest success in increasing a country's share of world markets can translate into considerablegrowth. It is also showing that the future is in non traditional exports, while also giving evidence thattraditional exports still need to be part of an outward-oriented strategy. Moreover, unrestricted access toimported inputs, investment licensing, financing and realistic exchange rates proved to constitute criticalfactors in creating an enabling environment for an outward-oriented development benefiting agriculturalproduction. An important ingredient for successful entry into the international market has often been thepresence of a catalytic mechanism that facilitated the establishment of partnerships between localagricultural producers and foreign investors and their subsequent response to world market demands. Animportant lesson learned in the failure of developing fruit and vegetable export market in a number of Bankexport projects has been the lack of identification of customer and product requirements beforehand.Foreign market development proved to be an essential ingredient for export promotion projects in Kenyaand Burundi while excessive complexity and division of responsibility for implementation has been a majorfactor that adversely affected the performance of Kenya's export promotion project. The aboveconsiderations are largely taken into account in the proposed project design as most of them are and can bemet for C6te d'Ivoire.

II. THE PROJECT

A. Project Strategy and Rationale

2.01 Strategy. The proposed project would support the Government's outward-oriented strategyin favor of agricultural export promotion and diversification. Such a strategy fosters primarily theproduction and marketing of non traditional agricultural products -- as opposed to traditional commoditiessuch as coffee, cocoa, cotton and timber -- while paying due regard to traditional exports through seekingto enable an overall appropriate and improved incentive and regulatory framework. It relies on theGovernment's recognition that the driving force for growth in the country will come from increasedagricultural production and export. It also draws on the new opportunities for the restoration of theagricultural export sector competitiveness which are now emerging following the CFA franc devaluation ofJanuary 12, 1994.

2.02 Major highlights of the Government's strategy involve the following:

(a) continued implementation of macroeconomic reforms and specific policy measures beingcarried under relevant ongoing structural and sectoral adjustment operations, to furtherbenefit agricultural exports;

- 8 -

(b) an "exporters-first" philosophy to be promoted through an improved institutionalenvironment to benefit both local and foreign private investors;

(c) empowerment of the private sector to implement an export-led strategy withoutGovernment interference;

(d) a clear recognition of the need for establishing an institutional framework in the form oftrade associations to represent the non traditional producers and the export sector. Theseassociations, in addition to providing direct support to their membership in the form oftraining and technical advice, will also represent the agricultural producers/exporters vis-a-vis the Government, donors and in the marketplace for promoting Ivorian agriculturalproducts; and

(e) support to specific actions aimed at: (i) increasing the country's share of exports mainlynon traditional products; (ii) improving quality and competitiveness of agricultural exportsthrough simplifying and/or removing regulatory and logistic constraints to agriculturalexports; (iii) setting up services to supply market intelligence and secure commercialpartnerships between local and foreign businesses; (iv) providing credit facilities (not toexceed CFA franc 15 million per borrower) to small private agricultural exporters of non-traditional products through the establishment of a National Agricultural Promotion andDiversification Fund which is a revolving fund with an actual initial appropriation of CFAfranc 1.25 billion (about US$2.6 million); and (v) ensuring the protection and effectivemanagement of he country's natural resources.

2.03 Link with the Sector Adjustment Operations. The present operation would complement anumber of adjustment operations supported by the Bank, most notably the Competitiveness AdjustmentLoan (PASCO), the Financial Sector Adjustment Loan (PASFI), the Economic Recovery Credit (ERC) andthe upcoming Agricultural Sector Adjustment Credit (ASAC) and Private Sector Development Credit(PSD). Under the PASCO, a number of measures aimed at the promotion of non traditional exports wereadopted, of which the following are of direct relevance to the proposed operation: (a) settlement by theGovernment of VAT arrears to exporters, i.e., reimbursement of VAT paid on inputs for all eligibleexports; (b) extension of VAT eligibility (and hence reimbursement of VAT paid on inputs) to certainagricultural exports (bananas, pineapples and flowers and plants; extension to other products is scheduled);(c) elimination of the statistical tax of 2.5 percent for inputs used in export production; and (d)improvement in the system of temporary admission of inputs for export products.

2.04 More generally, the PASCO has introduced a series of reforms that facilitate thedevelopment of private sector activities, like the elimination of price controls (with a few exceptions), thereduction of the level and dispersion of tariff rates, the reduction of the number of VAT rates, themodification of the Investment and Labor Codes. The upcoming Private Sector Development Creditaddresses specifically issues of interest to exporters, like the streamlining of customs/port procedures,remaining VAT deduction issues, and the reform of export promotion institutions and payment of overdueVAT credit arrears. Similarly, the PASFI has contributed to strengthen the financial system through therecapitalization of commercial banks, the closing of unprofitable state banks, the securitization ofgovernment arrears to the banking and insurance sectors and the introduction of legal reforms to facilitatethe calling of collateral and reduce the cost of legal action. Although term credit to the private sectorremains a challenge, these measures have contributed to reestablish the confidence of private operators onthe financial system so as to enable it to play its proper role in the promotion of private sector activities,including export promotion.

2.05 The ERC has been the vehicle for the introduction of reforms in the maritime transportsector, aimed at increasing competition in such services and reduce transport costs. Maritime transportissues are being resolved under the ERC will thus contribute to create an appropriate incentive frameworkfor the success of project activities. These measures are not only of extreme importance to the currentoperation but they will also increase, overall, the competitiveness of Ivorian agricultural exports in foreignmarket.

2.06 As for the ASAC, it will introduce relevant reform measures in the agricultural sectorwhich will aim at liberalizing trade and prices, increasing private sector efficiency and reducing theGovernment's role in the sector. The ASAC will continue to broaden and deepen the trade policy reformmeasures initiated and agreed by the Government under PASCO to help restore the competitiveness of theIvorian economy by: (a) reducing and eventually eliminating any restrictions (licenses, quotas) on theimportation of agricultural and agro-industial commodities other than those related to health reasons, andsubstitute it by a transparent protection mechanism based on reasonable levels of tariff duties; and (b)adjusting the export tax on cocoa and coffee, taking into consideration the fiscal needs of the country. Itwill further support the full liberalization of consumer prices in the agricultural and agro-industrialsubsectors initiated under the PASCO and the ERC and contribute to streamlining the Government's role inthe economy. ASAC support to policy actions is being or will be complemented with IDA investmentoperations in agricultural services, rural financial services and export promotion.

2.07 Given the common interest to deepen the Bank Group's understanding of the constraints todynamic private sector development in C6te d'lvoire, IFC and the Bank had prepared a Private SectorAssessment which was discussed with the Government and the private sector in June 1994 during a seminarwhich was used as the launching pad for the upcoming PSD Adjustment Operation. Close coordinationwith IFC of activities to be supported under the project will be further pursued (para 2.22). IFC has beeninvolved in textiles, food processing and agribusiness sectors with investments geared to the development ofexport-oriented and import substitution projects and the expansion of small and medium-sized companies.Total commitments held by IFC as of March 31, 1995 were about US$86 million. In keeping with theeconomic changes brought about by the recent devaluation, IFC is expected to pursue increasingopportunities in agribusinesses in addition to export based manufacturing and small business sectors.

2.08 In the short-term, the devaluation will also have a more favorable effect on the rural thanthe urban poor. While farmers suffered greatly from declining incomes prior to January 1994, thedevaluation will provide them with a much needed boost in their incomes through increased producer priceswhich constitute the most efficient and direct means to alleviate poverty in rural areas in the short term.While volumes of traditional exports would grow at rates consistent with their international demand,rapidly expanding non traditional exports would provide a source of dynamism over the medium to longrun.

2.09 As highlighted in the June 1994 CAS, protecting the environment and managing theresource base has become a major objective for sustainable development in Cote d'Ivoire. The Governmentis confronted with serious environmental problems such as deforestation, loss of biodiversity, soildegradation, water pollution, and management of industrial and domestic waste. The Government hasdrafted a National Environment Action Plan (NEAP) expected to be approved shortly. An OrientationDocument was already discussed during a seminar held in November 1994. Following therecommendations of the United Nations Conference on Environment and Development in 1992, this planwill be among the first in Africa to address the full range of global as well as national environmental issues.To provide greater focus on environmental policy, the Government intends to draw up an environmental

- 10-

code. It will also install and manage an environmental data base to monitor trends in environmental qualityin both urban and rural areas.

2.10 Rationale for IDA Involvement. In line with the Country Assistance Strategy (CAS), theproposed project will be a vehicle to support private investment and private sector involvement inimproving the performance of non traditional exports and streamlining the role of the private professionalorganizations in the agricultural export sector. It fits well in the Bank's post-devaluation country strategyas it would complement sectoral reforms initiated under the Economic Recovery Credit (ERC) and to becarried out under the future Agricultural Sector Adjustment Credit (ASAC) which aim, among other things,at liberalizing trade and prices, increasing private sector efficiency and reducing the Government's role inthe economy. Combined with an appropriate institutional and regulatory framework which will be in placeunder the Government's planned strategy, the project is further anticipated to be an important catalyst forincreased private sector involvement in agricultural promotion and diversification.

B. Project Objectives and Summary Description

2.11 Project Obiectives. The project's objectives would be to diversify and expand agriculturalexports and sales and contribute to private sector development, with a view to supporting the Government'sexport-led growth strategy, primarily through: (a) export promotion and diversification actions orientedprimarily toward the growth of non traditional agricultural products and the development of markets forsuch products by scaling up actions initiated under a pilot phase; (b) strengthening existing associations ofagricultural producers/exporters and promoting the establishment of an interprofessional group ofproducers/exporters' associations and the creation of new farmer associations; and (c) upgrading of criticalexport handling facilities. The diversification of agricultural exports is further intended to contribute toreducing the country's excessive dependence on traditional crops such as cocoa, coffee and timber.

2.12 Project Summary Description. In support of the above objectives, the project would havethe following components:

(a) Export Promotion and Diversification. Actions through assisting Ivorian producers in: (i)market research, customer identification, meeting quality requirements, trial shipments and obtaining pre-export finance and follow-up of sales and export shipment; (ii) product development and quality control viaadaptive research; (iii) establishment of business partnerships for private operators engaging in theproduction and export of products proven to have an important export potential for the country, such asdesiccated coconut, cashew nut, tropical cut flowers and potted plants, essential oils and fruits andvegetables etc. This component, which will be a scaled-up version of the pilot project (November 1993through April 1995), will provide hands-on assistance to producers/exporters in identifying regional andoverseas buyers and in making sales contracts. It will assist in establishing Ivorian brands, logos andlabels/packaging. Financial advisory services and training for entrepreneurs in the agricultural exportsector will also be provided to facilitate access to the banking sector's facilities through assistance inpreparing credit applications and helping secure export financing and guarantee arrangements, especiallyfor smaller agricultural export businesses. The project would thus help establish a necessary link toencourage financing by local banks and foreign commercial partners and enhance producers/exporters'knowledge in cost accounting and export finance;

(b) Support to Producers/Exporters' Organizations by strengthening existing privately-controlled professional organizations: producer groups, exporter associations, cooperatives, etc., andpromoting the creation of new farmer associations and the establishment of an Interprofessional Group ofProducers' and Exporters' Associations. The interprofessional group of associations will not only represent

- 11 -

the interests of its members but is expected to become the major vehicle for non traditional export marketdevelopment;

(c) Upgrading of Export Facilities through rehabilitating the infrastructure in critical areassuch as the existing fruit wharf in the Port of Abidjan and undertaking minor works for handling andspecialized storage facilities at the airport for allowing better transit conditions for the export of perishableproduce. This component will be carried out under parallel financing from grants of the European Union;and

(d) Support to Project Management which will be carried out by qualified privateprofessionals experienced in agricultural export and farmer organization as was done efficiently during thepilot phase.

C. Detailed Project Description

1. Export Promotion and Diversification Actions

2.13 The results of pilot activities, which preceded the project and were designed to test actualexport sales and market development operations and possibilities for agricultural diversification by asample of over 60 enterprises, have indicated that an important potential for export exists in CMte d'Ivoirefor non traditional products such as desiccated coconut, cut flowers and potted plants, essential oils andfruits and vegetables, cashew nut, cola nut, etc. as detailed in the matrices in Annex 1. The pilot phasetested successfully, over an eighteen-month period, a methodology which focused on assuring that thebuyers on regional and overseas markets are identified first, that their needs and requirements are translatedback to Ivorian producers and that the producers can successfully meet the needs of buyers.

2.14 The methodology also ensured that support is provided for demand-driven servicesrequested by producers and exporters of non-traditional products. The pilot operation has further beeninstrumental in hosting a large number of requests for market identification services which were beingsought from various donors and defining a coherent approach for seeking solutions to common problemsexperienced by producers and exporters of non traditional products with respect to establishing businessrelationships with foreign buyers, product quality improvement, etc. It has received an enthusiasticresponse on the part of the above producers and exporters. The methodology is now well established andwill be scaled up during the project implementation period.

2.15 Results of Pilot Operation. The pilot project's methodology involved working one-on-onewith Ivorian producers and exporters to develop export sales and markets for non traditional agriculturalproducts. The Ivorian clients served by the pilot project range from fairly sophisticated operations whichare technology and know-how intensive to inexperienced entrepreneurs who have nevertheless a vision ofserving export markets with locally produced agricultural products. The pilot operation has also laid theground for addressing the air freight problem through the establishment of an Air Freight Committee andassisting the development of professional organizations for fruits and vegetables and essential oils.

2.16 Just as the clients served by the pilot project are diverse so are the services provided by thepilot project's professional staff. These services range from international market research to participationin international trade shows alongside the Ivorian producers and exporters. In addition, the staff provides awide range of strategic and business planning and advisory services which would otherwise be unavailableto local business people. Farmer organization and arrangements for adaptive research have also beenmajor areas of assistance. The pilot phase further demonstrated that there does exist a demand from the

- 12 -

private Ivorian producers and exporters for the full range of services described above, and that it can bescaled up as it currently operates to continue achieving 'bottom line" results for Ivorian producers andexporters.

2.17 In view of its positive results, the pilot activities will be scaled up during the projectimplementation period. Producers and processors of the above high-value commodities would continue tobenefit from project assistance to match their request for the above services and for other services includingresearch on product development and quality enhancement and control, advice on acquiring new andimproved genetic materials as well as other inputs and the required information on their appropriate usagewill be also provided to producers. Overall quality enhancement, including intemational standardcertification and product quality management and modem food quality and safety standards, is expected toensure high quality export products under the project. Assistance in the establishment of businessrelationships and market development will also be a major project action.

2.18 Detailed eligibility criteria and cost sharing by project beneficiaries are presented in Annex4. Project beneficiaries under the above component will be primarily Ivorian businesses and corporationsgoverned by Ivorian law as well as producers/exporters' associations and professional organizations. Theywill be producers and exporters who have demonstrated the basic technical know-how and masteredproduction requirements. Eligible activities will include: market development and market research;feasibility studies; research on product promotion, quality control, processing and storage; productshipping tests and financial advisory services and training to prepare sound financial packages and provideadvice and training in simple accounting and business management. The project will contribute to promotethose products for which a demand and/or market are proven to exist so that project action ensures theattainment of improved production and product quality along with the mastery of export operations.Project beneficiaries will contribute to direct costs associated with their requested operations to the tune of40 percent for promotion actions and market research, 40 percent for financial advisory services and 20percent for adaptive research. In order to benefit an optimal number of producers/exporters, specific limitson total project funding to any single beneficiary over the implementation period will be observed by theproject management; these will not exceed the equivalent of US$25,000 and US$50,000 respectively forindividual businesses and corporations and US$100,000 for producers/exporters' associations andprofessional organizations. The support on behalf of a single beneficiary under the project will be normallylimited to two actions or three in exceptional cases.

2.19 Support to Non-Traditional Export Crop Market Development. This will be providedunder the project through assisting Ivorian producers in: (a) market research, customer identification,meeting quality requirements, trial shipments and packaging assistance, and obtaining pre-export financeand follow-up of sales and export shipments; (b) product development and quality control via adaptiveresearch; and (c) establishment of business relationships for private operators engaging in the productionand export of products proven to have an important export potential for the country, such as desiccatedcoconut, cashew nut, tropical cut flowers and potted plants, essential oils and fruits and vegetables etc.This component will provide assistance to producers/exporters in identifying regional and overseas buyersand in making sales contracts. The exploration of new markets in the region and overseas and thedevelopment of new products would also be undertaken through product market promotion activitiesincluding participation and booking stalls in fairs abroad. Moreover, market information systems will beinitiated under the project by the Project Coordinator to have instant access to commodity prices, gradingand packaging requirements as well as demand and supply indicators. During project implementation,alternatives will be explored to maintain such systems. Additional market development work will becarried out under this component to establish Ivorian brands, logos and labels/packaging to carry throughwith the identity and image of Ivorian product quality. In addition, to enhance the exporters' knowledge of

- 13 -

international trade, workshops on export and international trade regulations will be organized usingexpertise of international specialized institutions such as COLEACP (Comite de Liaison Europe, Afrique,Caraibes), the International Trade Center (ITC), etc.

2.20 Financial Advisory Services and Training. Typically, smaller agricultural enterprises inCMte d'Ivoire lack access to formal financial services. This situation has not changed despite theoverliquidity position of the country's banking sector following the change in parity of the local currencysince January 1994. The banks' risk aversion is particularly important for new businesses as will be thecase for many project beneficiaries engaged in non traditional crops. Indeed, such businesses normally donot have a robust track record nor the experience in putting together sound financial arrangements. Duringthe pilot phase, however, the banking sector has been responsive when such businesses were introduced andfollowed up by the Project Coordination team's financial staff. Hence, the provision of financial advisoryservices to help prepare sound financial packages is included in the project and expected to continue tomake these businesses more attractive to the banks.

2.21 To meet the standards of banks and intemational financial institutions, between two andthree person/months of specialist inputs are usually required for finalizing packages including adequatetechnical, market and financiaUeconomic analyses and securing business partnerships and funding. Theunit cost of such services per dossier may be as high as $100,000 when provided by most majorinternational consulting firms or financial agencies while the project will secure the basic expertise requiredto perfonn such activities cost-effectively.

2.22 As IFC has a long-standing relationship with CMte dIvoire and has been involved inexport-oriented projects (para 2.07), project beneficiaries who may be eligible for APDF's services and/orIFC's lending will be referred to those agencies. The project has indeed established a close workingrelationship with APDF - a UNDP project with IFC as executing agency and ADB as regional sponsor --which is providing advisory services to medium and larger enterprises with the objective of helping Africanentrepreneurs develop viable projects. It is also considering with IFC, through the Africa Enterprise Fund(AEF) which finances projects costing between $250,000 and $5 million, ways to involve the latter intaking equity participation in some promising non traditional producer/exporter businesses. It is alsoworking directly with producers and exporters of essential oils, cashew nut and fruits which are benefitingfrom IFC's lending. By focusing on smaller enterprises, the project activities will contribute to widen thearray of advisory services available to agricultural producers/exporters and rather complement those ofstructures such as APDF. The wealth of infornation gained by the project on the sector's businesses isfurther proving to be extremely important in complementing IFC/APDF's knowledge of smaller businesses.

2.23 The Government's National Agricultural Promotion and Diversification Fund (para 2.02),which is one of the many government funds directed at segments such as small businesses, school leaversand women's enterprises, will be an additional source of funding to be raised by smaller exporters for thenext couple of years. This is likely to be a temporary source of funding since the Government isconsidering to revisit by December 1997 its credit and fund policies and the suitability of instruments tosupport them. Following the Agricultural Sector Review and ASAC discussions, the Government concurredthat no additional allocation to the Fund will be made; a comprehensive review of the role and performanceof the Fund will be carried out by December 31, 1997.

2.24 The availability of financial advisory services under the project will help foster thoseoperations whose economic viability, financial sustainability and environmental soundness are established.Thus, assistance to help smaller exporters in obtaining pre- and post-shipment finance from banks would beprovided together with training and advisory services for preparing credit applications and helping secure

- 14 -

other export financing arrangements, especially for smaller agricultural export businesses. By providingenterprise-specific advisory services to and assisting smaller exporters in structuring sound financialarrangements as part of their project designs, the project would help establish a useful link for obtainingfinancing by foreign commercial partners in addition to local banks. Training will also be provided toenhance those businesses' knowledge in cost accounting and export finance. The project's financialspecialist will be in charge of the above advisory and training services. For areas requiring special skills,he will resort to competent specialized firms' assistance which is available locally. To this effect, shortterm consultancies will be provided under the project.

2.25 Adaptive Research and Extension. Adaptive research will be conducted to find solutionsto agricultural producers and exporters' concerns in areas such as production techniques, post harveststorage, product processing and packaging. Specific research priorities and subjects will, among otherthings, cover the following: (a) desiccated coconut: quality upgrade and control to match exportrequirements; (b) essential oils: refinery techniques and quality control; (c) cashew nuts: kernel extraction,improved salting and grilling techniques; (d) cola nut: storage and drying techniques; (e) tropical cut-flowers and potted plants: storage techniques and development of new varieties; and (f) tropical fruits andoff-season vegetables: processing techniques, extended storage and transport conditions, development ofnew varieties. Research studies will be contracted out through short term consultancy assignments toqualified individual researchers and national research institutions.

2.26 IDEFOR -- one of the major local research institutions -- has developed the requiredexpertise in the above research activities mostly for produces such as lime, cashew nut, pepper,mangosteen, papaya and mango. Unfortunately, due to financial constraints, most of these activities werereduced these past years. Under the project, annual research programs will be relaunched and establishedin close liaison with producers/exporters and their professional organizations with the objectives that thesebeneficiaries bear part of the cost -- through contributions in kind including inputs and labor on trial farmsand cash for about 20 percent of the cost -- and continue to negotiate directly with the research institutions.To procure the technical assistance and the specialized service, the research institutions could enter intocontracts with a few reliable private larger producers and cooperatives, with a view to conducting trials inreal conditions on their farms. As vegetables and legumes have not been part of their area of concentrationof local research institutions, a partnership arrangement between IDEFOR and CIRAD or anotherinternational research institution would be worked out to secure a qualified researcher who will be stationedin the field for a two-year period during which he would be paired with a local researcher who will takeover the research activities to the completion of the project.

2.27 For a long time SODEFEL (the Ivorian Agency for Fruit and Vegetable Promotion) wasthe main company in charge of horticultural extension. After the dismantling of SODEFEL in 1992,extension activities were entrusted to CIDV (the Ivorian Agency for Food Crop Promotion), replaced byANADER, a mixed company, established in 1993 under the IDA-financed National Agricultural ServicesSupport Project (Cr. 2636-VC). ANADER is now the Government's principal implementing agency withregard to extension, adaptive research and support to farmers' organizations. To allow small farmers meetexport standard requirements, specialized management and technical support will be needed. In this regard,the project would contribute to develop expertise in horticulture within ANADER to carry out thisspecialized extension program. As was the case under other Bank's operations, contractual arrangementswill be made with ANADER under the proposed project.

2.28 Total costs of the above component for Export Promotion and Diversification Actionswhich will be financed under the project amount to US$6.26 million.

- 15 -

2. Support to Agricultural Producers' and Exporters' Organizations

2.29 Under the project, support will be provided to promote the establishment of agriculturalprofessional organizations specialized in a particular product or group of products and to groups ofhomogeneous producers. Similarly, the strengthening of existing organizations will also be supported.This will help the Government implement its Agricultural Export Promotion and Diversification Policythrough promoting privately-controlled organizations including producer groups, exporter associations,cooperatives, etc. To this end, the project would provide the required assistance through national andinternational consultancies.

2.30 Support to the Development of Professional Associations. Because of the current lowefficiency and level of organization of key agricultural professional organizations, project assistance willfocus on strengthening and fostering the development of those existing organizations and helping establishnew ones for producers involved in non traditional export crops. In the initial phase, project efforts will beconcentrated on producers involved in non traditional crops with high export potential including primarilycommodities such as fresh cut flowers and potted plants (UPHCI), tropical fruits and vegetables (UPEFL),essential oils (APEPCI), etc.

2.31 Services of a farmer organization specialist will be made available under the projectthrough technical assistance for a period not to exceed three years to help establish agricultural producer'sand exporter's associations involved in the above crops. Such an action will be complemented bymanagement and legal assistance required for the formal establishment of nascent associations and byassistance in developing their work programs and training their members in simplified cost accounting andmanagement principles.

2.32 The project will also provide technical support covering the provision of advice on exportquality requirements and grading norms, labels, market development/representations, planning of airshipments and adaptive research through contracting out the execution of such services by local andinternational institutions and NGOs specializing in these fields.

2.33 Project assistance will be in inverse proportion to the degree of organization of beneficiaryassociations. The project's assistance will be required in all of the above areas for newly createdassociations involved in non traditional export such as UPEFL (est. 1993) and the association of essentialoil producers (APEPCI) which has been recently created.

2.34 Strengthening of agricultural producers' and exporters' associations. Producers of nontraditional export crops have imnportant common interests in dealing with major export issues but the verydiverse nature and division of their activities lead them to seek crop specific solutions only which are givinglittle dividends. This situation has resulted in a weak bargaining and lobbying capability affectingindividual producer groups in representing their interests. Following extensive discussions and severalroundtables organized by interested exporter groups and governmental agencies, and in light of experiencegained under the pilot phase, it was felt by such groups that forming themselves, over time, into aninterprofessional group of agricultural exporters' associations could be a relevant structure to betterrepresent them, address their concems with regard to the main constraints to export development anddiversification, and engage in trade lobbying actions. The interprofessional group will also be responsiblefor proposing norms, standards and labels for quality products and arranging promotion campaigns as wellas market development actions.

- 16-

2.35 Apart from OCAB1 which is efficiently organized and self-reliant but deals with bananaand pineapple only, no other producer association has yet achieved an adequate level of development inC6te d'lvoire. Moreover, there is no such association capable of implementing the promotion and technicalsupport being envisaged under the proposed project. Hence, promotion and strengthening of agriculturalprofessional organizations will be an important initial action to be carried out under the project. This willalso be a basis to draw upon for current and future membership in the interprofessional group ofagricultural exporters' associations.

2.36 An appropriate legal framework exists in CMte d'Ivoire for the establishment of such aninterprofessional group which will be governed by the laws of September 21, 1960 and December 26, 1974on civil and trade associations. Once formally established, the interprofessional group of agriculturalproducers and exporters' association will be a major vehicle for promoting non traditional agriculturalexports. Its members will be constituted by existing professional associations involved in agriculturalproduction and export and/or related activities who will be free to join and membership will be extended tosuch future associations. The establishment of the interprofessional group is likely, however, to takebetween two to three years to become effective as it will have to draw upon a foundation of fairly weakexisting professional organizations yet to be strengthened. The required process of training, sensitizationand education of future member associations will be undertaken under the project.

2.37 In addition to representing the interests of its members and engaging in the trade lobbyingactions, other major advantages of the establishment of the interprofessional group would include: (a)ensuring the sustainability of project action once the project is over since the interprofessional group will bea permanent professional organization; and (b) ensuring that an institutional capacity which may be used asa vehicle for coordinating and implementing other possible donor assistance is in place. Indeed, aninterprofessional group must not become an instrument to create barriers to new entrants or limitcompetition and its statutes will include limitations to prevent such a situation. During negotiationsassurances were obtained that a feasibility study would be carried out to determine the need to establish theinter professional group and specify the modalities of its finctioning. The terms of reference for the studywould be agreed upon with IDA and the recommendations of the study will be implemented in agreementwith IDA.

2.38 Under the project, assistance and short-term consultancies will be provided to promote theformal establishment of the interprofessional group through legal advice to prepare its statutes andoperating principles and assistance for establishing the manual of procedures and an accounting system.Investment costs including technical assistance, office fittings and equipment and operating costs for theabove component are estimated at US$2.88 million.

1 OCAB is a producer's association fully established (in 1992) under the 1960 Association Act and constituted by 20 exportstructures comprising cooperatives, associations and corporations. It has a modem and effective management structureincluding a general assembly, a board, a management committee and an executive secretary in charge of day-to-daymanagement. OCAB represents its members vis-a-vis the government authority and defines the code of ethics for itsmembers. Its other main finctions include: (a) coordination of production and exports on the basis of the demand in foreignmarkets, (b) promotion of Ivorian fruits on foreign markets, (c) negotiation of shipping contracts, and (d) assuring qualitycontrol and fruit packaging.

- 17 -

3. Export Facilities Upgrading

2.39 During project preparation and processing extensive discussions with the Government andproducers/exporters including OCAB -- the most developed and influential private export professionalorganization of the country -- concluded that there is a dire need for improving the country's exportinfrastructure through rehabilitating the fruit wharf and securing additional handling and storage facilitiesfor fresh produces at Abidjan airport. Construction of a new wharf was not found to be warranted andviable in view of the current level of transactions involving 339,000 palettes in 1994. However, therehabilitation of the existing wharf is increasingly becoming critical in view of its steady deteriorationduring the last several decades and subsequent difficult handling conditions and costs. The management ofthe wharf which is currently under the responsibility of OCAB which subcontracted it to SMPA -- a privatehandling service -- will be maintained following the planned rehabilitation. The Port Autonome of Abidjanwho owns the wharf will continue to levy the harbor tax currently ranging between CFA franc 5 to 7 per kgof exported product and use these revenues for maintaining the rehabilitated wharf.

2.40 Current export facilities at the Abidjan airport are also acknowledged to be inappropriatefor temporary transit and storage required before shipment of fresh produces such as fruits, vegetables andflowers and especially for perishables which cannot stand maritime transport or because they may not be involumes that warrant such a means of conveyance. To cope with this problem which is further aggravatedby frequent delays and cancellations of air flights with deleterious effects on fresh produces, theconstruction of additional handling and specialized storage facilities for fresh produces at the airport willneed to be undertaken during project execution. Airport infrastructure upgrade will be managed by theairport authority ANAM (Agence Nationale de l'Aviation Civile et de la Met6orologie) which will alsocollect the required fees for maintenance and subsequent rehabilitation. The following activities will becarried out under the project:

(a) Studies to (i) define the exact scope and timetable of the infrastructure rehabilitation workfor the fruit wharf in the Abidjan harbor, and (ii) demonstrate the feasibility of theestablishment of additional handling and specialized storage facilities for fresh fruit at theairport; and

(b) Execution of rehabilitation works in the existing fruit wharf at the Port of Abidjan forproducer groups, and the construction of handling and specialized storage facilities forexport of fresh products at the airport. Major rehabilitation works pertaining to the fruitwharf will involve improvement of the flushing and draining systems, strengthening of thedike and platform slope, refurbishing of existing merchandise sheds, etc.

2.41 The total cost of the above component is estimated at US$3.74 million and will be financedthrough grants of the European Union.

4. Project Management

2.42 Details on project management and implementation arrangements are presented in theProject Organization and Management, chapter IV. The costs associated with project managementestimated at US$1.52 million will be financed under the project.

- 18 -

III. PROJECT COSTS AND FINANCING

A. Project Cost Estimates

3.01 Total project cost (including direct taxes of US$1.73 million), is estimated at aboutUS$16.40 million or CFA 7.89 billion, of which US$7.50 million or 46 percent is foreign exchange. Pricesare as of April/May 1995. Cost estimates do not include the contributions to the equity of exportingenterprises which would be made by owners or would-be owners. They include the cost of projectpreparation work for: (a) activities financed under the IDA PPF for a total US$400,000, which are beingcarried out and would be refinanced under the credit; (b) Canadian technical assistance financed from agrant from CIDA for a total equivalent to US$ 1 million; and (c) activities financed under a Japanese grantfor a total equivalent to US$0.6 million. Price contingencies have been calculated on the basis of foreigninflation rates of 1.5 percent for 1995, 1.8 percent for 1996, 2.6 percent for 1997, 2.5 percent for 1998through 2000, and local inflation rates of 8 percent for 1995, 3.2 percent for 1996, 3.0 percent for 1997and afterward. Physical contingencies of 10 percent have been calculated on the cost of equipment andinfrastructure. All disbursements by IDA would be net of taxes. Project cost estimates are summarizedbelow. Details are presented in Annex 6.

Summary Project Cost

Percent Percent ofCFAF million USs million Foreign Total Base

______ ________ Exchange Costs_Local Foreign Total Local Foreign Total

A. Export Promotion and 1,412 1,323 2,735 2.93 2.75 5.68 48 38Diversification Actions _ ll

B. SupporttoProducers/Exporters, 691 556 1,247 1.43 1.16 2.59 45 17Organizations

C. Export Facilities Upgrade 1,113 474 1,587 2.31 0.99 3.30 30 22D. Project Management 454 178 632 0.94 0.37 1.31 28 9E. Project Preparation 96 866 962 0.20 1.80 2.00 90 13

Total Baseline Costs 3,765 3,397 7,162 7.83 7,06 14,89 47 100.0Physical Contingencies 249 102 351 0.52 0.21 0.73 29 5Price Contingencies 267 108 375 0.56 0.22 0.78 29 5

Total Project Costs 4,281 3,607 7,888 8.90 7.50 16.40 46 110

B. Project Financing

3.02 In addition to the IDA Credit of US$5.83 million (35.6 percent of project costs), financingwould be provided by other cofinanciers including CIDA (20.9 percent) and the European Union (22.8percent), on the basis of parallel financing. About US$0.6 million (3.7per cent) financed preparation workunder Japan's grant for agricultural export promotion. CIDA has indicated its interest to cover the cost ofadditional expatriate expertise from Canada that would be required during project execution in addition toits participation during the project preparation. Similarly, the European Union is interested in financing theproposed fruit wharf rehabilitation and handling and specialized storage facilities for perishables at theairport. The project would not result in a major demand on public funds: the Government will be

- 19 -

responsible for taxes and duties and part of operating costs for a total of US$1.09 million (6.7 percent).Producers and exporters would also share in the costs to the tune of US$1.71 million (10.4 percent); theircontribution represents up to 18 percent of total project costs excluding bilateral technical assistance andinfrastructure financed through grants. Assurances on the project cost sharing were obtained atNegotiations. The project financing plan is as follows:

Project Financing Plan

Local Foreign Total Percent of TotalUS$ million ll

IDA 3.48 2.35 5.83 35.6CIDA 0.40 3.02 3.42 20.9European Union 2.64 1.10 3.74 22.8Japan 0.00 0.60 0.60 3.7Government 1.02 0.07 1.09 6.7Agricultural Producers/Exporters 1.37 0.34 1.71 10.4

Total 8.90 7.50 16.40 100

3.03 Project Sustainability. The project would enhance the capacity of the agricultural exportsector to respond to the country's export promotion and diversification objectives. Through strengtheningfarmer organizations and helping establish an interprofessional group of such organizations, the projectwould contribute to build a local capacity that would further ensure that actions initiated under the projectare carried out and pursued upon project completion. Effective and sustainable farmer participation will beassured as producers and exporters will be voting and paying members of their existing and futureprofessional organizations and of the interprofessional group that they will own and from which they willdemand high levels of continuous services. Project benefits will be also maintained after project completionin view of the importance of the private sector's effective involvement and participation in project activitiesand costs.

C. Procurement

3.04 C6te d'Ivoire's procurement regulations were a major constraint to the implementation ofBank-financed projects because of delays due to extended reviews by governmental agencies ofprocurement procedures including invitation to bid, evaluation, and contract award. In June 1993,following a comprehensive review of the country's procurement regulations carried out during the CountryImplementation Review (CIR), the Government decided to cut down on time required for internal reviewsand adapt its procurement documents to be consistent with Bank's guidelines in Bank-financed projects.The Prime Minister's office and the Ministry of Finance have also issued written instructions (letter of July28, 1994) imposing strict monitorable deadlines at each step of internal reviews by their officials involvedin procurement. These measures are expected to improve substantially procurement implementation in thecountry.

3.05 Under the project, contracts for consultancy services for technical assistance, for studiesand training by local and international consultants would be made in accordance with Bank's guidelines forconsulting services. Vehicles, for a total amount of US$0.24 million and numbering 10 in total, can onlybe packaged in small lots of 2-3 units and will be procured at about 2 years interval under National

- 20 -

Competitive Bidding (NCB) method of procurement. Office equipment for a total amount of USS0.16million and publicity and informative materials for a total amount of US$0.17 million will also be procuredthrough NCB. National Shopping (NS) with quotations from at least three reputable firms will be usedonly for miscellaneous equipment and some of individual computers for contract values less than $20,000and an aggregate value of US$0.10 million. Purchase of fuel, consumables and materials required foroperating vehicles and equipment throughout the project and up to an aggregate amount of $200,000 willbe procured by direct purchase. Contracts for stall renting and occupancy at foreign trade fairs for a totalof amount US$0.17 million will be made on the basis of direct contracting since such costs arepredetermined by the host countries. International Competitive Bidding (ICB) will be used for all contractsfor goods of US$200,000 or more.

3.06 The proposals for advertising, draft bidding documents, bid evaluation, and awardproposals for contracts for goods of US$100,000 or more, individual consultants of US$50,000 or moreand consulting firms for US$100,000 or more would be subject to prior review by IDA. The reviewprocess would cover about 80 percent for goods and of the total value of contracts financed by IDA. AnIDA selective post-review of awarded contracts below the thresholds would be done for about 1 in 4contracts for both goods and services.

3.07 The Project Management would be in charge of carrying out project procurement.Procurement information would be collected and recorded as follows:

(a) prompt reporting of contract award information by the Project Management; and

(b) comprehensive quarterly and annual reports to IDA by the Project Management,indicating:

(i) revised cost estimates for individual contracts and the total project;(ii) revised timing of procurement actions including advertising, bidding, contract

award, and completion time for individual contracts; and(iii) compliance with aggregate limits on specified methods of procurement.

3.08 Assurances on the procurement arrangements were obtained from Government atNegotiations. Contracts for pre-project consultancy services by local and international consultants werefinanced from the proceeds of a Japanese grant for agricultural export promotion and of PPFs for theproject. The procurement implementation schedule is presented in Annex 8. The planned procurement issummarized in the following table:

-21 -

Procurement Table(US$million)

NCB OTHER NBF TOTAL1. Works 3.69 3.69

2. GoodsVehicles 0.38 0.04 0.42

(0.24) (0.24)

Office Equipment 0.27 0.12 0.17 0.56(0.16) (0.07) (0.23)

Publicity/Informative materials 0.29 0.35 0.64(0.17) (0.20) (0.37)

3.Consultants

Consultancies 2.89 3.87 6.76(2.10) (2.10)

Training 0.61 0.61(0.56) (0.56)

4. Miscellaneous

Operating Costs (fuel, consumables) 0.43 0.43(0.20) (0.20)

Incremental Recurrent Costs2 2.89 2.89(1.73) (1.73)

Project Preparation Facility 0.4 0.4(0.4) (0.4)

Total 0.94 7.69 7.77 16.40(0.57) (5.26) (5.83)

Note: Figures in parentheses are the respective amounts financed by IDA Credit.

2 This item corresponds to staff salaries and travel allowances, office supplies and communications, office equipmentmaintenance and repair, fuel, vehicles insurance, maintenance and repair, and ofrice rent.

- 22 -

D. Disbursements

3.09 The proceeds of the proposed IDA Credit will be disbursed as follows:

Disbursement of IDA Credit

Category Allocation in US$ million Percent of Expenses Financed1. Vehicles, Equipment and

Materials 0.72 80 percent local costs100 foreign costs

2. Consultants' Services and 1.29 100Trauiing

3. Agri-business Services 0.96 60 percent local costs100 percent foreign costs

4. Adaptive Research Services 0.25 80 percent local costs100 percent foreign costs

5. Operating Costs 1.63 Declining basis: 80 percent untilend 1998 and 40 percentthereafter

6. Refinancing of PPF. 0.40

7. Unallocated 0.58

Total 5.83

3.10 To ensure that funds for project implementation are available as and when needed, aSpecial Account in local currency would be established at CAA with an initial deposit equivalent toUS$350,000, to cover about four months of expenditures, to be withdrawn from the Credit Account afterCredit effectiveness. The Special Account would be replenished monthly or more often when the totaldisbursed amounts to one third of the initial deposit, whichever is sooner. Disbursements will be fullydocumented except for expenditures for operating costs, training and contracts for goods and consultingfirms costing less than US$100,000 equivalent. Statements of Expenditures (SOEs) will also be used forcontracts for individual consultants costing less than US$50,000 equivalent. The training program will beincluded in the Annual Work Program (para. 4.04) and approved annually. All expenditures above 20percent of the initial deposit to the Special Account would be eligible for direct payment by IDA. Allsupporting documents will be retained by the Project Management and made readily available for review byperiodic IDA supervision missions and external auditors.

3.11 A Project Account in local currency will also be opened at CAA for the Government todeposit its share of funding. The requirements in local currency to be provided by the Government will beestablished yearly and advances will also be made yearly on the basis of disbursement forecasts for the next

-23 -

twelve months. Replenishments will be made no later than March 31 of each year. Assurances wereobtained on the above at Negotiations. Opening of the Project Account at CAA with an initial deposit ofCFA franc 100 million will be a condition of Credit Effectiveness.

3.12 The Credit funds are expected to be disbursed faster than the standard disbursement profilefor agricultural projects in C6te d'Ivoire, in view of the shorter implementation period for this operationwhich, in essence, is a private sector support operation including institution building and time-boundtechnical assistance. Disbursements are expected to be completed by June 30, 2001.

E. Accounting, Financial Reporting, and Auditing Arrangements

3.13 The Project Management would establish and maintain separate project accounts inaccordance with internationally recognized accounting principles and practices satisfactory to IDA. Itwould provide interim and annual financial statements to reflect its financial position and that of theproject. All project accounts, the special account and financial statements would be audited by independentauditors acceptable to IDA. The audit report would specifically include the auditors' opinion on the SpecialAccount and on the reliability of Statement of Expenditures (SOEs) as a basis for IDA credit disbursement.The audit report would also include an assessment as to whether goods and services have been procuredfrom eligible sources, and an opinion on the proper utilization of goods and services under the project. Theauditors' reports would further include a statement on the adequacy or otherwise of the accounting systemand internal controls. The cost of audit would be paid from the IDA Credit. The audited statements,accounts, auditors' long-form reports and short-form opinion reports would be submitted to IDA not laterthan six months after the end of each fiscal year. Assurances to the above audit requirements wereobtained at Negotiations. The appointment of auditors satisfactory to IDA will be a condition of Crediteffectiveness.

IV. PROJECT ORGANIZATION AND MANAGEMENT

A. Project Implementation Arrangements

4.01 Since the project early preparation stages, the Government has agreed to the principle ofproject management by private professionals involved in agricultural export. This materialized throughsetting up a Project Coordination Unit fully staffed with qualified and experienced professionals withprivate employment status for project preparation. This team including a coordinator/project manager andtwo senior local professionals who specialize in export promotion and project management will beredeployed to carry out new responsibilities in line with the project objectives. Such staff will constitutethe project management team. Project staff will also be complemented with three crop specialists to berecruited through local competition to provide technical and market development advice to individualproducers/exporters and their associations. The overall supervision of project implementation will beentrusted to the Ministry of Agriculture and Animal Resources.

4.02 Under the project, the project manager's contract will be made for a period of two yearsrenewable annually depending on demonstrated performance. The above local professionals will also berecruited on two year contracts renewable annually upon satisfactory performance too. The professionalorganizations participating in the project will contribute from membership fees to share in the operatingcosts, as of project year 3 and onward. The project manager's and the local professionals' responsibilitiesare summarized in Annex 10.

- 24 -

4.03 The project management team will be assisted by a team of intemationally recruitedtechnical assistants including an export development and sales specialist with financial/export financeexperience, and a farmer organization specialist who will be paired with the above local professionals.Such technical assistants will further provide assistance in: (a) promoting the establishment of professionalorganizations and of their interprofessional group; (b) preparing the training programs and organizingtraining sessions; (c) designing the data base management; (d) setting up appropriate accounting andfinancial management systems for the agricultural professional associations and the future interprofessionalgroup; (e) providing guidance and advice to local professional staff with the objective of helping develop alocal expertise that could overtime become the foundation of a specialized private service for export marketdevelopment; and (f) and more generally provide the required training to transfer their knowledge, know-how and responsibilities to the local professional staff. The technical assistants will be accountable to thisrespect and their performance will be evaluated on, among other things, the extent to which such transferactually takes place. Ad hoc technical assistant assignments in export logistics and air freight advisory willbe carried out too. The terms of reference of the above technical assistants are presented in Annexes 2 and3. The above technical assistants' contracts will be financed through bilateral donors' grants for a period oftwo years which may be eventually extended for a duration not to exceed twelve months upon satisfactoryperformance. Appointment of project management team with key personnel to be satisfactory to IDA at alltimes during project implementation would be a condition of Credit effectiveness. To ensure that theprovisions of the Project Implementation Manual and Operational Plan are observed by the projectmanagement, the draft document was discussed at negotiations and found acceptable. The adoption of afinal document acceptable to IDA would be a condition of Credit effectiveness.

B. Reporting Arrangements

4.04 Annual Work Programs (AWPs). The Project Management would establish an annualwork program for each project year, for IDA's review and approval. The objectives of the programs wouldbe (a) to facilitate comprehensive review of project implementation progress, (b) to make possibleadjustments and/or modifications as experience is gained, and (c) to serve as a planning and monitoringsystem. The draft AWP would be prepared and submitted to IDA by the Project Management every yearby September 30 for the following year and by September 30, 1995 for the first year. The program wouldinclude: (a) a budget for project activities with the details for each component including the trainingcomponent; (b) monitorable targets for project activities; (c) commitments and expected disbursementsunder the IDA credit; and (d) a discussion of any major issues and problems affecting the projectimplementation and proposed follow-up actions.

4.05 Quarterly Progress Reports (OPRs) and Annual Progress Reports ( APRs). These wouldbe prepared by the Project Management. Copies of QPRs would be submitted to IDA no later than onemonth after the end of each quarter. APRs would be made available to IDA no later than March 31 of thefollowing year. APRs would incorporate information on and comparison of achievements against targetsset out in AWPs to enable a meaningful review of the project performance to be made by all interestedparties.

4.06 Mid-Term Review and Implementation Completion Report (ICR). To facilitate a timelyand meaningful dialogue between the Government and IDA, and help effect mid-course corrections thatmight be required, the Government would, not later than June 30, 1998, carry out jointly with IDA acomprehensive mid-term review of the project. The review would cover: (a) overall project performanceand agreed key performance indicators; (b) evaluation of project success and problems to draw lessons tobe taken into account in the future expansion of project activities; (c) assessment of the project

- 25 -

sustainability; and (d) evaluation of consultants' and technical assistants' performance. The key mid-termreview indicators are presented in Annex 5. Promptly after completing the mid-term review, theGovernment would carry out the recommendations arising out of the review as agreed between theGovernment and IDA. The Government would also prepare and submit to IDA an ImplementationCompletion Report (ICR) not later than six months after the end of the project. Appropriate assuranceswere obtained at Negotiations.

4 07 Monitoring and Evaluation. Project monitoring would be carried out through field visits aswell as written reports. Monitoring field visits would be undertaken as frequently as feasible by the projectmanagement and IDA in the course of project implementation. Written reports would commence with thepreparation of Annual Work Programs (AWPs) and annual project budget prepared well ahead of thecommencement of each project year. The project MIS reports would therefore be designed in such amanlier as to make them suitable to serve as a management tool and for submission to IDA. The QPRs andAPRs would similarly be action-oriented, drawing attention to exceptions and issues requiring correctiveaction.

4.08 General oversight and monitoring of project activities will be carried out through aSteering Committee to be in charge of reviewing and approving once a year the project's budget and annualwork program including all major contracts. Appropriate assurances were obtained during Negotiationsthat the Steering Committee composed of five members will comprise representatives of technical ministriesincluding the Ministry of Agriculture and Animal Resources and the Ministry of Finance and that of theprivate sector and be maintained with functions and responsibilities acceptable to IDA throughout theexecution of the Project. Existing and future professional associations will also be involved in projectexecution through thematic technical committees regrouping their representatives to review and follow upthe project actions and priorities and advise the selection of beneficiaries of project support programsincluding promotion of professional organizations and export diversification actions. The establishment ofthe Steering Committee would be a condition of Credit effectiveness.

4.09 The project impact would be evaluated, by reference to the objectives set out for theproject, during and after the project period. This may be done by qualified and experienced university stafflocally. The project management would further arrange to continually assess changes in the projectmonitoring indicators. Assurances were obtained on the above reporting arrangements at Negotiations.

V. PROJECT JUSTIFICATIONS

A. Benefits

5.01 The project will directly benefit over an estimated 100 private enterprises/exporters andreach indirectly by project completion at least 10,000 growers of non traditional crops who, without thisproject, would have little or no hope to develop successful export sales on their own. It will have majorimpact on agricultural professional organizations as it will contribute to streamlining existing associationsand helping establish new ones and will thereby empower these organizations to effectively lobbyGovernment for necessary changes related to their activities while enhancing the ability of theseorganizations to represent producers/exporters. The project will also foster improved links betweenproduction and markets, and result in increased exports of agricultural products. The development of nontraditional crop exports will create many new jobs throughout the country for those producers/exportersengaged in such activities. It will also bring new technology and training to farmers and other professionalsin the trade. It will further move the country from a position of being highly dependent on traditional

- 26 -

commodity crops, such as cocoa, coffee, cotton, etc. to a position of producing high value, branded Ivorianproducts which sell at high prices in the off-season in cold countries of Europe and other continents. Thisis expected to bring about a significant improvement in the country's balance of payments position. Theproject will also result in substantial local value-added because of increased local demand for processedproducts which would be an additional outlet for non exportable products. In addition to the abovebenefits, the project will enhance the skills and knowledge of farmers and exporters significantly and carrymany farmers from subsistence level farming to a position of profitable producers of high value exportcrops.

5.02 The economic rate of return calculated on the incremental exported agricultural productionfor nine major non traditional crop channels comprising grated coconut, cashew nuts, essential oils, tropicalflowers, fruits and vegetables was estimated at 17 percent. The concemed crops are high value-addedagricultural products which fetch fairly high selling prices on international markets. The robustness of theabove rate is further explained by the impact of the unprecedented 50 percent devaluation of the localcurrency which is having a favorable impact on net margins and the relative share of local productionfactors costs such as that of labor. Detailed assumptions and computation of the rate of return arepresented in Annex 7.

B. Risks

5.03 The major foreseeable risk is likely to be a slower than expected private sector supplyresponse if conflicting interests were to delay the hoped-for improvements in the incentive framework foragricultural exports. If the implementation of the Government's plan to progressively liberalize sea and airfreights were delayed and tariffs were not adjusted, there might also be a risk that freight costs could priceIvorian products out of the international market. Such risks would be reduced, however, through theremoval of major economic and sectoral constraints as part of the reforms agreed upon under theEconomic Recovery Credit (ERC) which became effective in November 1994, and those to be supportedthrough the future Agricultural Structural Adjustment Credit (ASAC), in addition to increased involvementin lobbying actions by the recently created Air Freight Committee. There is also a risk that governmentagencies attempt to interfere with project activities. The strengthening of professional organizations andeventually their grouping into an interprofessional group of trade associations would empower them tobetter represent and defend their interests, remain self-reliant and ensure an effective projectimplementation.

C. Environmental Impact

5.04 The environmental analysis of the project concluded that it entails no significant negativeenvironmental impacts. The industries in the sector are not polluting, the expected increases in cultivatedareas will take place on cleared land, with no impact on natural forests. The main environmental issueassociated with the project is the expected increase in the utilization of agricultural chemicals andpesticides, in order to meet the quality standards required for exports. A closer analysis of the latter issueshowed that CMte d'lvoire is well advanced in terms of the control of pesticide distribution, thus reducingthe likelihood of negative environmental impacts. In certain cases, the project will have positiveenvironmental impacts by creating incentives for planting tree crops and maintaining the existing vegetationthat yields valuable gathered products (i.e., shea nut and kola). In addition, the project may createincentives for the stabilization of agriculture by promoting environmentally sound cash crops and byincreasing household income in rural areas through the marketing of high value specialized agriculturalproducts. The project is classified under environmental category B.

- 27 -

VI. AGREEMENTS AND RECOMMENDATIONS

6.01 During negotiations agreements were obtained from the government:

(a) to open a Project Account and use of its proceeds (para. 3.11);(b) on procurement arrangements (para. 3.08);(c) on project implementation in accordance with the procedures established in the

Project Implementation Manual (para. 4.03);(d) to establish a Project Coordination Unit and a Steering Committee with

qualifications and responsibilities acceptable to IDA (paras. 4.03, 4.08).(e) on accounting and audits requirements (para. 3.13); and on reporting

arrangements (para. 4.09);(f) to carry out of a feasibility study to establish an interprofessional association of

agricultural producers/exporters (para. 2.37).(g) to carry out a comprehensive mid-term review of the project, jointly with IDA,

not later than June 30, 1998 (para. 4.06); and(h) on project cost sharing (para. 3.02).

6.02 Conditions of Credit effectiveness are as follows:

(a) to open a Project Account at CAA with an initial deposit of CFA franc100 million (para. 3.11);

(b) to appoint independent auditors satisfactory to IDA (para. 3.13);(c) to establish a Project Coordination Unit and a Steering Committee with key

personnel satisfactory to IDA (paras. 4.03, 4.08); and(d) to adopt the Project Implementation Manual acceptable to IDA (para. 4.03).

6.03 Recommendation. With the above assurances and conditions, the project is suitable for anIDA Credit of SDR 3.70 million, on standard IDA terms with 40 years of maturity.

COTE D'IVOIRE

AGRICULTURAL EXPORT PROMOTION AND DIVERSIFICATION PROJECT

Pilot Phase Results Matrices

Product Actions Results to date Expected results at end of pilot Perspectives for further developmentphase during actual project

Papava * Detailed inventory and * Identification of three small * Financing for additional * Small scale (5-10 ha) plantations aretechnical audit of existing plantations which should plantations. optimal. An additional 1,500 tonsplantations (14 sites). begin export-quality would require the creation of around

production over the coming * Scaling up of current sales 10 additional plantations to be assisted* Assistance in the year. by participant to levels to 2 during project.

preparation of two to 3 tons per client (yearlyfinancing plans for export * One financing plan accepted level of 100 to 150 tons). * Euroe: Quality of product justifiesoriented plantations. (15 M FCFA) by the ambitions to secure a portion of the

National Diversification * Testing (samples) of brand market (more than 9,000 tons and* Market development Fund. on US and European growing), principally supplied by

assistance to a small markets (principally Central and South American origins.plantation on European * One client per country has Germany, Austria, Beneluxmarkets. been selected. Each is and Scandinavia). * N. America: Possibility of developing

currently receiving weekly a niche market on the East Coast if* Test with five European shipments of between I and * Development of new product passes regulatory hurdle.

clients (France & 2 tons. Quality considered customers on these markets.England). comparable to Brazil origin.

* Identification of pesticide* Development of a brand * Contacts made with a New and other product testing

(box design, fruit sticker) York upscale distributor and requirements andthrough local applied arts with regulatory authorities implementation withinstitute and carton in view of test shipment. producers.supplier.

* New brand: Plantation* Subcontract for Santa Mara will be

complementary production launched in 1995.with Korhogo researchstation. * Research station currently

supplies I ton weekly. _

0 s

o X

0"e-

Product Actions Results to date Expected results at end of pilot Perspectives for further developmentphase during actual project

Ethnic specialty * Birmingham Food & * Distribution of market * Scaling up of volumes, * Development of a significant volumevegetables Drink (England) trade fair information to trade fair optimization of logistic and on the Caribbean, African and Asian

stand consisting mainly participants. other costs for existing deal consumer segment in the Europeanof African and Asian fresh with British importer: from Union: cumulative volumes could reachproducts (yams, plantain, * First shipments of yams by yams to plantain, cassava, up to 5,000 tons or more.cassava, etc.) sea container (20'-10 tons) to green coconut, taro, etc.

London. Expected * Enhancement of product quality.* Commercial mission with frequency: weekly. FOB * Development of a "brand" to

two exporters organized selling value of 4,000 to protect Ivorian supplier from * Development of sea logistical expertiseon the London and 5,000 USD per containers. direct competition from one- for the exporters operating in thissurrounding market shot suppliers. product segment.(direct sales contacts). * Prospects for 19 different

products to be based on the * Preparation of a financing * Development of trade in traditional* Shipment of samples to London market with weekly plan for existing exporters. products with Senegal, Gabon and

prospective importers on volumes varying between I other regional markets on specificthe London market. to 2 tons (air freight) and 5 * Identification of additional product lines.

to 10 tons (sea freight). exporters in this product* Commercial mission to group.

Ghana by two exportersand project to study yam * Market development withexport industry. Senegalese importers

following the Dakar trade* Commercial mission by fair.

British importer to IvoryCoast (financed byimporter).

* Participation in DakarIntemational Trade Fairof various traditional foodexporters andorganization of an Ivorianproducts week in theSCORE supermarkets.

OD

0 ti

Product Actions Results to date Expected results at end of pilot Perspectives for further developmentphase during project

Off season * Identification of potential * Five operators working on * Detailed product spec. sheet * Volumes of 200 to 500 tons pervegetables producers of high quality irrigated plantations and performance evaluation product niche could be developed

products. dispersed throughout the in various regions of CMte through the displacement of Centralcountry participate in the dlvoire. and South American as well as South-

* Organization of a product product test. East Asian origins.introduction test for four * Test sales of approx. 20products (melon, okra, * Production tests are on tons on diversifiedhot pepper and egg- schedule. Orders secured in European mnarkets.plant): variety selection, England and France forpackaging, direct market products traditional imported * A first year program oftesting. from Mexico and Central around 100 tons per

America. successful product for nextyear.

* Identification and * Preparation studies on the * Financing plan for existing * Diversification of varieties wouldpreliminary contacts with industry. cooperative. pernit market penetration on newexporters. European markets (England).

* Test shipments withexisting coop (direct salesto importers).

* Training program for coopoutgrowers.

D04

F-h X

ot%1

Product Actions Results to date Expected results at end of Perspectives for further developmentpilot phase during actual project

Cashew nuts * Market development work * Majors buyers willing to * Pilot quality management * Extension of existing unit if efficientin Europe. purchase plant's production. training program. quality solutions are developed.

* Direct technical assistance. * Plantation extension and varietyselection to maximize yields.

Desiccated * Direct market * Development of a marketing * Securing orders for 2,000 * Doubling of present industry outputCoconut development work on the handbook for SICOR tons from North American from 11,000 to more that 20,000 tons

Canadian and US markets. addressing specific North suppliers. over project duration.America quality needs.

* Participation at the * Optimizing transit time to * Diversification to higher value fancyInstitute of Food * Contact with major less than 28 days to in-land cuts.Technologists 94 trade fair American agents operating destinations on the Eastin Atlanta. in the coconut industry. One Coast. * Diversification to other coconut by-

week mission by one agent products.* Test shipment of one in month following IFT. * Successful ISO 9000 pre-

container sent to Discussion in progress. audit review.prospective Canadianpartner. * Bake tests being carried out

in Canada by Quaker and* ISO 9000 diagnostic by Christie Brown among

quality expert. others: quality and shortertransit times compare well toPhilippines, the leader.

Impressive qualitymanagement system maypermit ISO certification inthe short term.

(D

0 l-X

Product Actions Results to date Expected results at end of pilot Perspectives for further developmentphase during actual project

Citrus oils, * Discussions among trade * Creation of APEPCI - the * Documented industry * Development of sufficient productiuices and other members for the creation Essential oils and Extracts product standards. capacity and stable high quality outputextracts of a trade association. trade association. would permit the setting-up of direct

* Contract with existing lab sales, partnerships and additional* Participation at [FT 94 * Industry-wide consensus on facilities for systematic units.

(Atlanta) and Food limiting Bergamot oil output product testing and follow-Ingredients Europe 94 on a saturated market. up of product quality. * Diversification to high-value aromatic(London) trade fairs. plant extracts.

* First contact with the * Startup of a quality* Audit of Quality producers end customers management training

management procedures in (over 60 contacts in each program in collaborationthe perspective of ISO trade fairs) in Europe and with Codinorm.9000 certification and the North America.setting of industry product * Direct sales to end-users.standards. * Improved relationships and

service from current * Identification and* Assistance in search for brokers. development of additional

extension project financing extension projects.for an individual company. * Co-financing agreement

securing 900 M FCFA(US$1.7 million) projectdue for implementation in1995.

* Industry standard settingprogram in collaborationwith Codinorm (newlyformed standardassociation).

0

OQ~

-h X

a -

Product Actions Results to date Expected results at end of Perspectives for further developmentpilot phase during proposed project

Cut flowers. * Participation in the Miflor * Necessity of a coordinated * Industry promotion * Product diversification.foliage and 94, IPM-Essen 94, industiy strategic marketing activities and marketpotted plants Floralies of Nantes, plan: organization of a diversification test * Quality management programs.

Plantec 94 exhibits of seminar in collaboration shipments with selectedseveral individual with COLEACP. producers.producers.

* Follow-up on the trade * Quality management* Organizational support to association's activities (ex: training for line employees.

the existing trade first horticulturalassociation. organization member of

COLEACP).* Development of financing

plans for three companies * Financing of a smalloperating in the sector. plantation of semi-finished

plants (15 M FCFA).

Air freiehted * Direct industry * Slightly improved service. * First direct lobbying * Gradual liberalization of freight andProducts representations to Air activities concerning the reduced cost of shipment to diversified

Afrique during post- * Documented file on air tariff reduction problems. European destinations.devaluation capacity freight constraints.shortage. * Formalization of the air * Development of chartered cargo routes

* No concessions by Air freight exporters' managed by the exporters' association.* Meeting of exporters and Afrique and further association.

formnation of an informal compressing of exportexporters' conunittee. capacities. * Development of a charter

cargo scenario.* Participation in the 94/95

Air Afrique's air freightplanning process.

* Inclusion of a study on theair freight constraints.

aq

0f

AMVEX 2Page 1 of 2

COTE D'IVOIRE

AGRICULTURAL EXPORT PROMOTION AND DIVERSIFICATION PROJECT

TERMS OF REFERENCE

FARMER ASSOCIATION DEVELOPMENT SPECIALIST

RESPONSIBILITIES:

The major responsibility of this individual will be to work in the various crop systems, includingbut not limited to cashew nuts, cut flowers, fresh fruits and vegetables, essential oils, and anyothers as designated by the project management to develop trade organizations for thefarmer/producer groups. It will be necessary that this individual assist in the formation of newassociations and assist existing associations to become viable industry groups which speak out onbehalf of the farmer constituents.

Once fanner associations/groups are formed, the candidate should then work with each individualgroup to develop a strategy and plan a course of action from year to year to support itsmembership. The candidate would help in the formulation of strategy and plans as well as assistin selecting management staff for the associations. In addition, the candidate will work with allthe associations to form an interprofessional group which will function as a federation ofassociations. This will also require formulation of strategy and tactical planning. Furthermore,the candidate will provide the required training to transfer knowledge, know-how andresponsibilities to local professional staff and will be accountable to this respect; his performancewill be evaluated on, among other things, the extent to which such transfer actually takes place.

The candidate will be also evaluated on the number of farmer association which he/she developsover the life of the project and the ultimate effectiveness of these associations in representing itsmembership.

QUALIFICATIONS:

Ideal candidate will be an excellent communicator and persuader. Must be energetic, enthusiastic,tenacious and committed to the project. Will be a strategic thinker and a practical implementer.Position requires hands-on-style, highly organized individual with excellent organization andselling skills.

ANNEWX 2Page 2 of 2

PROFESSIONAL SKILLS AND EXPERIENCE REQUIRED:

Must have at least 5 years professional experience in organizing and working with trade orindustry associations, preferably in agriculture. Work experience must have involved tropicalagriculture and the candidate should be thoroughly familiar with tropical farming, farmer concernsand the agricultural situation of West Africa and preferably Cote d'Ivoire.

The candidate should have the ability and skill to persuade farmers to join these organizations andto participate as members. Must speak French, having high level of written and oralcommunication skills and be willing to work in remote, rural areas with farmers.

ACADEMIC TRAINING:

Require agricultural and/or business degree from recognized university at the graduate level.

Language requirement: Fluency in French

DURATION OF ASSIGNMENT: 2 years renewable for a third year upon demonstratedperformance.

ANNEX 3Page 1 of 2

COTE D'IVOIRE

AGRICULTURAL EXPORT PROMOTION AND DIVERSIFICATION PROJECT

TERMS OF REFERENCE

EXPORT DEVELOPMENT/SALES SPECIALIST

RESPONSIBILITIES:

The major responsibility of this individual will be to work one-on-one with private farmers andexporters to identify potential customers in Europe or North America and to assist thefarmer/exporter to establish a business relationship with the potential customer which leads toexport sales. The candidate will work with Ivorian farmers to produce crops which meet thepotential buyer's specifications. This may involve existing crops or newly introduced crops. Thecandidate will assist th- producer to meet buyer requirements including the grading and packagingof products and with shipping arrangements. Assistance will also be provided to individualproducers/exporters in seeking pre-export finance and export documentation, particularly in thearea of food quality and safety (pesticide testing and certification). He will provide guidance andadvice to local professional staff with the objective of helping develop a local expertise that couldovertime become the foundation of a specialized private service for export market development.

The candidate will thus provide the required training to transfer knowledge, know-how andresponsibilities to local professional staff and will be accountable to this respect; his performancewill be evaluated on, among other things, the extent to which such transfer actually takes place.

He will be also evaluated on the number of export projects which he/she develops over the life ofthe project and the monetary values of these exports.

QUALIFICATIONS:

Ideal candidate will be an excellent communicator and persuader. Must be energetic, enthusiastic,tenacious and committed to the project. Will be a strategic thinker and a practical implementer.Position requires hands-on-style, highly organized individual with excellent financial andcomputer skills.

PROFESSIONAL SKILLS AND EXPERIENCE REQUIRED:

Must have at least 7 years professional, private sector work experience with at least 2 years profitand loss responsibility. Work experience must have involved tropical agriculture and thecandidate should be thoroughly familiar with European and North American distribution channels

ANNEX 3Page 2 of 2

for fresh fruits, vegetables, cut flowers and horticultural products. He should have good technicalexpertise in the areas of crop production, post harvest systems as well as shipping and logisticsexpertise.

The candidate should have the ability and skill to manage a complex project. He must be able toassist and train local entrepreneurs in the fields of financial and strategic planning. He must speakFrench, having high level of written and oral communication skills and be willing to work inremote, rural areas with farmers.

ACADEMIC TRAINING:

This position will require a business graduate degree (MBA, CPA or equivalent) from arecognized university.

Language requirement: Fluency in French and good command of English.

DURATION OF ASSIGNMENT: 2 years renewable for a third year upon demonstratedperformance.

ANNEX 4Page I of 4

COTE D'IVOIRE

PROJET DE PROMOTION ET DIVERSIFICATION DES EXPORTATIONSAGRICOLES

1. Criteres de selection des beneficiaires du projet.

Le projet vise la promotion de cultures de diversification a haute valeur ajoutee destin6esprincipalement A l'exportation. Les beneficiaires en seront les entreprises personnellesivoiriennes et societes privees de droit ivoirien ainsi que les associations deproducteurs/exportateurs et autres organisations professionnelles du secteur agricoled'exportation.

Les types d'activites eligibles comprendront:

(a) la promotion commerciale et recherche de marches;

(b) les etudes de faisabilite;

(c) les actions de recherche pour la promotion, le contr6le de qualite, latransformation et la conservation des produits;

(d) les tests d'expedition;

(e) les services d'appui technique pour la recherche de financement, le conseil encomptabilite/gestion et etude juridique, la formation.

a) Criteres techniques.

Les beneficiaires du projet doivent avant tout etre des producteurs ayant demontre leursavoir-faire et ma7trisant les donnees techniques de la production consideree (productionet conditionnement). Ils doivent donc avoir deja acquis une experience, et etre capables dedemontrer, chiffres .A l'appui, leur capacite a offrir des produits de qualite marchandeexport. Cette condition est primordiale d'autant que le PPDEA n'est pas un projet derecherche agronomique et n'entend pas initier des productions pour lesquelles des facteurstechniques ne sont pas encore bien ma1tris6s. Certes, un appui technique peut toujours etreoffert, mais pour des producteurs deja bien avertis. Le projet doit donc evaluer la capacitetechnique de ses beneficiaires d'une facon realiste et surtout s'abstenir de les encourager aprendre des risques inconsideres. I1 doit veiller A ce que les conditions d'exploitationoptima soient bien reunies sur le site de production: qualite des terres, disponibilite del'eau, climat favorable, etc. Des conditions de production marginales ne seront donc pasacceptables.

ANNEX 4Page 2 of 4

b) Criteres commerciaux.

Le projet entend promouvoir des productions pour lesquelles un marche existe. II convientdonc de proceder a une etude de marche prealable pour s'en assurer et identifier lescircuits commerciaux possibles et existants. En principe, le promoteur doit deja avoir unecertaine experience dans ce domaine, mais le projet peut l'appuyer pour obtenir demeilleures conditions et mieux ma7itriser les techniques d'exportation (conditionnement,formalites administratives et financieres, detaxes a l'exportation, etc.)

c) Criteres personnels.

Le promoteur doit consacrer l'essentiel des ses activites a la bonne marche de son projet. IIdoit en principe resider sur son exploitation ou a proximite, la diriger et la surveillerpersonnellement. S'il s'agit d'une societ6 (ou groupement, ou cooperative), il faudra bienconnaTtre la personne responsable de l'exploitation (proprietaire ou gerant) pour s'assurerde ses competences techniques et de gestionnaire. L'experience, les resultats deja acquissont des facteurs plus importants que la formation universitaire.

d) Criteres financiers et montants limites d'intervention du PPDEA.

I1 est essentiel que les performances anterieures soient bien connues, que les grands6quilibres du bilan soient maintenus et que la rentabilite du projet soit assuree.

Chaque beneficiaire du PPDEA sera tenu de faire un apport personnel dont la quotitemoyenne sera:

(a) pour les actions de promotion et recherche de marche: 40%; soit une contributionannuelle d'environ de 30% les deux premieres annees, de 40% sur les deux ann6essuivantes, et de 50% la derniere annee.

(b) pour l'appui a la recherche: 20%; soit une contribution annuelle d'environ 10% dudemarrage du projet a la fin de la seconde annee, puis de 20% la troisieme annee,30% la quatrieme annee et 40% la derniere annee.

(c) pour les services de conseil financier: 30%; soit une contribution annuelled'environ 40% du demarrage du projet a la fin de la seconde annee, puis de 40%sur deux ans a partir de 1998, et de 50% a la derniere annee du projet.

Par ailleurs, des montants limites d'intervention seront de rigueur afin de toucher unnombre optimal de beneficiaires. Ainsi, les plafonds ci-dessous seront de rigueur enfonction du statut juridique des beneficiares:

ANNEX 4Page 3 of 4

(a) pour les entreprises personnelles, la totalite des appuis sollicites aupres du PPDEAne pourra exceder un plafond de $25.000 pour un meme beneficiaire pendant la dur6ed'execution du PPDEA;

(b) les societes privees pourront beneficier d'une limite d'intervention du PPDEAn'excedant pas $50.000 par beneficiaire;

(c) pour les organisations professionnelles agricoles, la limite ci-dessus ne pourraitexceder $100.000.

2. Modalites d'appui pour le financement des projets

Un des objectifs principaux du projet est de foumir une assistance technique a un ensemblede promoteurs (directement ou par l'intermediaire de leursassociations/unions/organisations professionnelles) cherchant a developper leur productionpour satisfaire une demande exterieure. Dans ce cadre, Le PPDEA pourra aider lepromoteur a rechercher les financements complementaires necessaires pour led6veloppement de son exploitation.

Le PPDEA aidera le promoteur a presenter une etude de factibilite de son projet dedeveloppement. A cette occasion, seront revues tous les aspects techniques, commerciaux,economiques et de gestion du projet. Ces etudes de factibilit6, avec les comptes detaillesde l'exploitation existante, doivent servir a l'evaluation du projet par une institutionfinanciere.

Le PPDEA ne sera pas dote d'une ligne de credit speciale. En effet, il existe deja des lignesde credit disponibles pour des promoteurs du secteur prive mises en place par desorganisations financieres bilaterale ou intemationales. Ces lignes sont pour le moment sousutilis6es en raison de la difficulte a identifier des projets et des promoteurs. Les banquescommerciales peuvent aussi offrir des financements d'appoint pour la majorite despromoteurs prospectes a ce jour par le PPDEA. Enfin, le Gouvernement a mis en place lefonds de diversification cite ci-dessus dote de 1,25 milliard de FCFA. La contrainte aud6veloppement de ces projets n'est pas le manque de financement, mais la capacite despromoteurs A les mobiliser.

3. Modalites d'appui en matiere de conseil en gestion

D'une facon generale, le PPDEA devrait pouvoir disposer d'un kit de procedurescomptables et de gestion a suivre pour le mettre a la disposition des projets qu'ilencourage. Ce kit pourrait egalement comprendre les indicateurs de gestion techniques etfinanciers A suivre d'une facon reguliere.

De meme, le PPDEA devrait disposer de competences en matiere juridique et fiscale. IIpourrait en effet avoir a conseiller les promoteurs dans des domaines varies allant de lacreation d'entreprises (choix des types de societe, statuts), modalites de financement a

ANNEX 4Page 4 of 4

1'exportation ( techniques bancaires, credits documentaire, role des transitaires), et optionsfiscales (TVA, detaxe a 1'exportation, avantages du code des investissements).

Les demandes en ces domaines peuvent etre tres variables d'un projet a un autre et il seraittrop onereux pour le PPDEA de recruter un ou plusieurs experts. Par consequent, lePPDEA fera appel i un cabinet de la place specialise, sous une forme d'abonnement, pourrepondre aux besoin du projet a la demande des promoteurs. Eventuellement, le PPDEApourrait demander i ce cabinet des prestations en matiere de formation donnee a unensemble de promoteurs sur des sujets specifiques.

ANNEX 5Page J of ]

COTE D'IVOIREEXPORT PROMOTION AND DIVERSIFICATION PROJECT

KEY PROJECT MONITORABLE INDICATORS

| Pilot Md-ten Project Year 5_________ Evaluation ____o

1. GENERALExport sales volume per product

Desiccated coconut 9 000 T 1400T 17 000 TCashew nuts -raw/extracted 15.000/50 T 16,000/600 T 14,000/1,000 T............................................................... .............. .. ........................................ . ....... ..................... ..... . ....... t...................Essential oils and extracts (citrT and others) IIOT 200 T 250TTropical flowers, foliage and plants 1,400 T 1,90 T 2,200 TMango , , , , . - - - - -- -- -- 5,400 T 8,150 T 8,650 TPapaya 400 T 800 T 1000 TOff-Scason vegetables 1.0 T .T. . . 350 .TEthnic specialties 1,700T 3000T 4,000 T

No. of exporters identified/participating in project 60 80 100No. of non traditional crop producers reached 5000 7 000 10 000

2 MARKETDEVELOPMENT INumber of exporter/importer relationships formed .40 80

Number oftnal shipments ' 20 0 150...................................................................................................... --. -.--.-....- --.''.''''''''''''''''''':''''1''''''''''''''''''' '

Trsde sho s orgai zed 10.... ... ., ,, .. 45............4. ... ....... . 5 4Numboerofparticipants . . - -. 40 100 200Exporters' parlticipation to cost 30% 40a/s 50%...... .. .. .. .. ............. ...... --.---. ...... - - -- .. . .. -,-'''' -'''''' ''1.''.''. ''.'' '' '''' .. .. .. .. .. .. ....... .. .. ... .............. %

New packagigs/brands developed 1 , - J, 15 25

Promotional events and matrenal 2 10 25.. . ...... .. ... .... ...... ... ...... .. .. ......... .. .. . . . ...... . . . ... .... . . ....... .. . . . ... .. . .. . . . .. .. . . .. . .. --------- '''''''' '''''-'-'''

3 ASSISTANCETOPROFESSIONAL ORGANIATIONS I |New trade associations formed J 2 4 1. 7

Membership levels and strategic plans developed 29/2 40/4 . 75/7.

... ............ . .................. .. ... ................ .......................................... .. .............................. .......... ................................. ....................... ..... ............. ...................Number and circulation of market information newvslettrs I / 203/150

..... .... .... .. . .... .... ..... .... .... .... .... .... .... ... .... .... . .. .... .... .... .... .... .... .... .... ..... .... .... .... .... .... ..... .... .... .... .... .... ..... .... .... .... .... .... ....Sectoral events organized ,,, ,,,,, , ,,, , , ,,I ,,,, ,.4 .8

i- A Tl SE RCH'''''''' ''''''''''''''''''-k ~ . ..... ........ ............................................ .......... .. ..... .......... ............. .......... ............. .............. ............. .... ...... ..............Number of export oriented research programs set up/ number participants 2 / 8 10/50 20 100~~~~~~....... ........ . ..... ........ ....................... .............................................................. ......... ....................... ............................... ... ............ ........ ..... ..................

% participationof exportersto program costs l 20% 40%

Pesticide testing and certification innplementation no . yes. ye................................ ............................... ! .......................................................................... ........................ I .. ..................... .... ......................

Number of CODINORM Ivonan labels issued 3 5

ISO or other international certifications obtained I I...[.. . .. . . . .. . . . .. . .. . . ... . ... . ........ .. ..... .. .. ..... .. . .... . . .. . .. ..... .. . . .... ....... .. .. . ....... .... .. ........... ------ .. . . . 6..............''''''''''''''' '''''''''''''''

Number of new products j 4 10 15

5. FINANCIAL ADVISORY SERVICES . . . . . . . .Numnber and value of successful export financing projects financed

Small busineses (less t 10eployee4s) 4/120 KUSD 15 / 500 KUSD 25 / 800KUSDMedium businesses (over 10 employees) 12/2.5 mUSD 4/I0.0 m USD 8/20.OmUSD

Va participation of exporters to costs 30% 40OV 50%.. . ............ . ..... ......................... ....... .. ................. . ...... ..... ...................... ..... .. ..................... ....................... ......... ........ .... . . .. ......... .....,. ... ..

6S. INFRASTRUCTURE6SRC,,,,,,,,,,,,,,,,,,,,,.................. . . . . .......................... .... . . ... . . . .......... ,,, ...................... . .. ............ ..........................

Fruit wharf rehabilitation , .no conmpleted

......................... . ..... .......... ,, ,, .. ....... .. ., .. . ...................... ............ ..... .... .. ... .. ......Upgrade of airport handlu and specialized storage facilities [ completed

New packa fcl;ities setup 2 6 '

Number |I Ca t utit zed 40% ~~~~~~~~~~~~~~75%

'i - i ~ R a.................................. ... ... .... ... .. ............... . .. ... .. . ... ... ................. ........ ........... ....Caacity.utilizd .. . . . . ,'' -''''''' 5

.................. ..Y.,,, . 1 .......... ...Progremss ir f eigt compeitive environment I

Number of charter cargo shipments 0 test flights . regularRelative freight rate levels (US cents/kg) 100 90 90Number of newvdiret tdestinations and avaiabie volume 0/8.500 T 2 12,000 T 5/15.000T

COTE D'IVOIRE

AGRICULTURAL EXPORT PROMOTION AND DIVERSIICATION PROJECT

Components Cost Summary

...................................................................I............"I.................... .......... ................"I..........I............................................* % %Totol

(CFA '000) (USS '000) Foreign Bow.LOCO Foreign Total Locl Foreign Total Eschuge Cost

A. EXPORT PROMOTION AND DIVERSIFICATION ACTIONSAdaptive Researdc 277,267 287,917 565,183 576.4 598.6 1,175.0 5I 8.Market Developnent 909,227 1,035,064 1,944,291 1,890.3 2,151.9 4,042.2 53 27.Financial Advisory Services 225,153 - 225,153 468.1 468.1 - 31

Subtotal EXPORT PROMOTION AND DIVERSIFICATION ACTIONS 1i411,6 471,322,981 2,734,627 2,934.8 2,750.5 5,685.3 48 38B. SUPPORT TO PRODUCERS/EXPORTERS ORGANIZATIONS 690,810 556,352 1,247,163 1,436.2 1,156.7 2,592.9 45 17-C. EXPORT FACILITIES UPGRADE 1,112,530 474,355 1,586,885 2,313.0 986.2 3,299.1 30 22.D. PROJECT MANAGEMENT 453,713 177,808 631,521 943.3 369.7 1,312.9 28 9' PROJECT PREPARATION 96,200 865,800 962,000 200.0 1,800.0 2,000.0 90 13Tota BASELINECOSTS 3;764,899 3,397,296 7,162,196 7,827.2 7,063.0 14,890.2 47 10i

Physical Contingencies 248,760 102,221 350,982 517.2 212.5 729.7 29 5Price Contingencies 267,421 107,791 375,211 556.0 224.1 780.1 29 5-

ToTal PROJECT COSTS 4,281,080 3,607,309 7,888,389 8,900.4 7,499.6 16,4000 46 i 0...............................................................................................................................................................................................................................................................................................................................

0 m

COTE D'IVOIREAericuitural Exoort Promotion and Diversification Protect

Expenditure Accounts Project Cost Sununary(CFA '000) (USS '000) Foreign Base

Local Foreign Total Local Foreign Total Exchange Costs

1. Investment CostsA. Civil Works 1,095,577 467,133 1,562,710 2,277.7 971.2 3,248.9 30 22B. Vehicles, Equipment

Vehicles 77,691 94,804 172,494 161.5 197.1 358.6 55 2Equipment 249,692 248,586 498,278 519.1 516.8 1,035.9 50 7

Subtotal Vehides, Equipment 327,382 343,390 670,772 680.6 713.9 1,394.5 51 9C. Traiing & Human Resources Development

Local Training 198,656 132,157 330,813 413.0 274.8 687.8 40 5Overseas Training - 30,815 30,815 - 64.1 64.1 100 -

Subtota.lTraidng&Human ResourcesDevelopment 198,656 162,972 361,628 413.0 338.8 751.8 45 5D. Technical Assistance

Local Technical Assistance 598,821 - 598,821 1,244.9 - 1,244.9 - 8Foreign Technical Assistance - 1,583,110 1,583,110 - 3,291.3 3,291.3 100 22

Subtotal Technical Assistance 598,821 1,583,110 2,181,931 1,244.9 3,291.3 4,536.2 73 30E. Studies 302,056 579,800 881,856 628.0 1,205.4 1,833.4 66 12

Total Investment Costs 2,522,491 3,136,405 5,658,896 5,244.3 6,520.6 11,764.9 55 79I. Recurrent Costs

A. PROJECT CONTRACTUAL STAFF SALARIESProfessional Staff 584,060 - 584,060 1,214.3 - 1,214.3 - 8Support Staff 189,820 - 189,820 394.6 - 394.6 3

Subtotal PROJECT CONTRACTUAL STAFF SALARIES 773,880 - 773,880 1,608.9 1,608.9 - 11B. STAFF TRAVEL EXPENSES

Professional Staff DSA 148,734 75,075 223,809 309.2 156.1 465.3 34 3Support StaffDSA 54,126 54,126 112.5 - 112.5 - I

Subtotal STAFF TRAVEL EXPENSES 202,860 75,075 277,935 421.7 156.1 577.8 27 4D. VEHICLES AND EQUIPMENT OPERATION AND MAINTENANCE

Vehicle Operation and Maintenance 60,603 75,951 136,553 126.0 157.9 283.9 56 2Equipment Operation and Maintenance 24,739 30,086 54,826 51.4 62.5 114.0 55 1

Subtotal VEHICLESAND EQUIPMENT OPERATION AND MAINTENANCE 85,342 106,037 191,379 177.4 220.5 397.9 55 3E. GENERAL AND ADMINISTRATIVE CHARGES 180,327 79,780 260,106 374.9 165.9 540.8 31 4

Total Recurrent Costs 1,242,408 260,892 1,503,300 2,583.0 542.4 3,125.4 17 21Total BASELINE COSTS 3,764,899 3,397,296 7,162,196 7,827.2 7,063.0 14,890.2 47 100

Physical Contingencies 248,760 102,221 350,982 517.2 212.5 729.7 29 5Price Contingecies 267,421 107,791 375,211 556.0 224.1 780.1 29 5

Totad PROJECT COSTS 4,281,080 3,607,309 7,888,389 8,900.4 7,499.6 16,400.0 46 110

8)

ot,z

COTE D'IVOIREArricu.1tural Export Promotion and Diversification Prolect

LocalfForeign/Taxes by financicrs(US$ -000)

Government IDA CIDA European Union Japanese Grant Producers/Exporters Total.

Amount % Amount %, Amount %: Amount %i Amount % ~ Amount %: Amount %

!I. Foreign 73.80491 1 2353.679 31.4~ 3019.882 40.3: 1107.55 14.8 600 8: 344.6872 4.6: 7499.602 45.7

~11. Local (Excl. Taxes) 279.1241 3.9 3479.006 48.5, 334.4471 4.7' 1714.51 23.9:: 0 0 1366.625 19.1: 7173.713 43.7~

:Ill. Taxes 738.5646 42.8 0 0: 66.19379 3.8:: 921.904 53.4: 0 0: 0 0:: 1726.662 10.S5

Total Pro ect: 1091.494 6.7 5 832i.6~85 K 3.6..... 3-4-20...5"2"3 2'0.9: 3743.963 22.8: 600 3.7: 1711.312 10.4: 16399.98 100

z~~~

IA'd

ANNEX 7Page I of 7

Republic of CMte d'IvoireAgricultural Export Promotion and Diversification Project

Economic Analysis

Assumptions

1.01 The computation of the Internal Economic Rate of Return (IRR) is based on the determination ofthe incremental agricultural product export by producers / exporters supported under the project through estimatingthe without- and with-project situations. A conservative approach was adopted in view of the projected exportsrepresenting the lowest levels of export the project can achieve during its lifetime. Agricultural export products arevalued at F.O.B. prices used in computing the net export margins. No further adjustment of the exchange rate waseffected in view of the unprecedented 50% devaluation of the CFA franc (from CFAF50 to lFrench Franc toCFAF100 to 1 French Franc) on January 12, 1994. Thus the foreign exchange premium is assumed to be equal tozero. Interest payments, amortization and taxes were removed from the financial costs to make up the economiccosts.

1.02 The opportunity cost of capital of 12% was used in the calculations. On the basis of whatprecedes, the IRR of the production component is estimated at 17 % for 15 years net benefit streams, and the NPVis approximately $5.7 million. Such a rate appears robust particularly in view of the results of the sensitivityanalysis which further shows that if the investment costs increase by 10%, the net benefits will decrease by 14%and the IRR falls to 13%; as the investment costs further increase by 20%, the benefits decrease by 28% and theIRR falls to 10% which is close to the preceding 13%. The IRR falls to zero only in the unlikely situtation whenthe investment costs increase by 69%. In contrast, if investment costs decrease by 10%, net benefits will increase by14% and the IRR will increase to 21%. On the other hand, if the net incremental benefits decrease by 10%/o, the IRRfalls to 12%, and decreases to 8% as the net benefits diminish by 20%. At a 41% decrease of net incrementalbenefits the IRR reaches zero and becomes negative at 44% decrease of benefits. Detailed projections by crop of theoverall project cash flows are presented below.

Pro*ect Economic Analysis by CropEssential Oils and Extracts (citrus and others)

Year Quantity wlo Project Quantity w/ Project Export Margin Cash Flow

(metric ton) (metric ton) (1 S.S/T) (US.S)

I 140 150 4505.19 45051.92 150 180 135155.73 160 200 180207.64 170 215 202733.65 180 250 315363.36 180 250 315363.37 180 250 315363.38 180 250 315363.39 180 250 315363.310 180 250 315363.311 180 250 315363.312 180 250 315363.313 180 250 315363.314 180 250 315363.315 180 250 315363.3

TOTAL 2 600 3 495 4032145.1

ANNEX 7Page 2 of 7

Proiect Economic Analysis by CronGrated Coconuts

Year Quantity w/o Project Quantity w! Project Export Margin Cash Flow

(metric ton) (metric ton) ($/T) (S)

1 12000 13000 170.22 170220

2 12 500 14 000 255330

3 13000 15000 340440

4 14000 16000 340440

5 15 000 17000 340440

6 15000 17000 340440

7 15 000 17000 340440

8 15000 17000 340440

9 15000 17000 340440

10 15000 17000 340440

11 15 000 17000 340440

12 15000 17000 340440

13 15000 17000 340440

14 15000 17000 340440

15 15000 17000 340440

TOTAL 216 500 245 000 4851270

Project Economic Analysis by CronEthnic Specialties

Year Quantity w/o Project Quantity w/ Project Export Margin Cash Flow

(metric ton) (metric ton) (U..S. /T) (U.S.)

1 1 900 2 100 195.4 39083.37

2 2200 2600 70940

3 2400 3000 106410

4 2700 3500 141880

5 3 000 4000 177350

6 3 000 4000 177350

7 3 000 4000 177350

8 3 000 4 000 177350

9 3 000 4000 177350

10 3 000 4000 177350

11 3 000 4000 177350

12 3 000 4000 177350

13 3 000 4000 177350

1 4 3 000 4000 177350

15 3 000 4000 177350

TOTAL 42 200 55 200 2309163

ANNEX 7Page 3 of 7

Proiect Economic Analysis by CropExtracted Cashew Nuts

Year Quantity w/o Project Quantity w/ Project Export Margin Cash Flow

(metric ton) (metric ton) (U.S.$/7) (US.S)

I 350 600 637.2 1593002 450 700 159300

3 450 800 2230204 550 900 223020

5 550 1 000 286740

6 550 1000 286740

7 550 1000 286740

8 550 1000 286740

9 550 1000 28674010 550 1 000 286740

11 550 1 000 286740

12 550 1 000 286740

13 550 1 000 286740

1 4 550 1 000 28674015 550 1 000 286740

TOTAL 7 850 14 000 3918780

Project Economic Analysis by CropTropical Flowers and Foliage

Year Quantity w/o Project Quantity w/ Project Export Margin Cash Flow

(mernc ton) (metric ton) (US./T) (US.5)

1 850 850 286.5 0

2 850 900 14324.32

3 850 1000 42972.97

4 850 1 050 57297.3

5 850 1100 71621.62

6 850 1100 71621.62

7 850 1100 71621.62

8 850 1100 71621.62

9 850 1100 71621.62

20 850 1100 71621.62

11 850 1100 71621.62

12 850 1100 71621.62

13 850 1100 71621.62

14 850 1100 71621.62

15 850 1100 71621.62Total 12 750 15 900 902432.4

ANNEX 7Page 4 of 7

Proiect Economic Analysis by CronMangoes

Year Quantity w/o Project Quantity w/ Projet Exrt Magin Cash Flow

(metric ton) (metric ton) (tJS.$SF) .7.(S.S)

1 7100 7 100 272.3 0

2 6 750 7 650 245114.5

3 6 750 8 150 381289.3

4 6 750 8 650 517464

5 6 750 8 650 517464

6 6 750 8 650 517464

7 6 750 8 650 517464

8 6 750 8 650 517464

9 6 750 8 650 51746410 6 750 8 650 517464

11 6 750 8 650 51746412 6 750 8 650 517464

13 6 750 8 650 517464

14 6 750 8 650 517464

15 6 750 8 650 517464

Total 101 600 126 700 6835972

Proiect Economic Analysis by CrovOff-season vegetable

Year Quantity w/oProject Quantity w/ Project Export Magin Cash Flow

(metric ton) (metric ton) (J. S $/T) (U.S )

1 40 150 245.3 26985.26

2 50 200 36798.09

3 50 250 49064.12

4 50 300 61330.15

5 50 350 73596.17

6 50 350 73596.17

7 50 350 73596.17

8 50 350 73596.17

9 50 350 73596.1710 50 350 73596.17

11 50 350 73596.1712 50 350 73596.17

13 50 350 73596.17

14 50 350 73596.17

15 J50 350 73596.17

Total 740 4 750 983735.53

ANNEX 7Page S of 7

Project Economic Analysis by CropPapaya

Year Quantity w/o Project Quantity w/ Project Export Margin Cash Flow

(metric ton) (metric ton) (U.S.$/ T) (U.S.$)

1 420 600 434.5 78,212

2 440 700 112,973

3 460 800 147,734

4 480 900 182,495

5 500 1000 217,256

6 500 1000 217,256

7 500 1000 217,256

8 500 1000 217,256

9 500 1000 217,256

10 500 1 000 217,256

11 500 1000 217,256

12 500 1 000 217,256

13 500 1 000 217,256

14 500 1 000 217,256

15 500 1000 217,256

Total 7300 14000 2,911,229

Project Economic Analysis by CronAir Pineapple

Year Quantity w/o Project Quantity w/ Project Export Margin Cash Flow

(metric ton) (metric ton) (U.S./T) (U.S. $)

1 3500 6000 62 155,926

2 3000 7000 249,481

3 2500 8000 343,037

4 2000 9000 436,592

5 1 500 9000 467,7776 1500 9000 467,777

7 1 500 9000 467,777

8 1500 9000 467,777

9 1500 9000 467,777

10 1500 9000 467,777

11 1500 9000 467,77712 1500 9000 467,777

13 1500 9000 467,777

14 1500 9000 467,777

I5 1500 9000 467,777

Total 27 500 129 000 6,330,587

ANNEX 7Page 6 of 7

Proiect Economic Analysis by CropTropical plants

Year Quantity w/o Projec Quantity w/ Projet Export Margin Cash Flow

(metnc ton) (metric ton) (U.S.SIT) (US. S)

1 650 700 1,189 59,4592 650 800 178,378

3 650 900 297,2964 650 1000 416,214

5 650 1100 535,1336 650 1 100 535,133

7 650 1100 535,1338 650 1100 535,133

9 650 1 100 535,13310 650 1100 535,133

11 650 1100 535,13312 650 1100 535,13313 650 1100 535,133

14 650 1 100 535,13315 650 1 100 535,133

Total 9 750 15 500 6,837,804

ANNEX 7Page 7 of 7

Proiect Economic Analysis by CropOverall Pro*ect cash flows

TotalCasvw Essential Oils Tropical Air Mangoes Ethnic Off-season undiscounted InVeStment Discount DIscounted

Year Gatd Coco Nuts & Extracts Fowers Pineapple Papaya Specialties Vegelables Cash Flow Factor Cash FlowU.S. U.S.$ U.S.$ U.S.$ U.S.$ U. S. $ U.S.$ U.S $ U.S.$ U.S.$ US.$ 12%S170,220 159,300 45,052 0 155,926 0 78,212 39,083 26,985 674,778 2,650,200 0.89 -1,763,769i

2 255,330 159,300 135,156 14,324 249,481 245,115 112,973 70,940 36,798 1,279,417 2,290,400 080 -805,9501,3 340,440 223,020 180,208 42,973 343,037 381,289 147,734 106,410 49,064 1,814,175 2,242,600 0.71 -304,9451,4 340,440 223,020 202,734 57,297 436,592 517,464 182,495 141,880 61,330 2,163,252 1,752,100 0.64 261,2951.5 340,440 286,740 315,363 71,622 467,777 517,464 217,256 177,350 73,596 2,467,608 1,776,900 0-57 391,92716 340,440 286,740 315,363 71,622 467,777 517,464 217,256 177,350 73,596 2,467,608 0.51 1,250,16717 340,440 286,740 315,363 71,622 467,777 517,464 217,256 177,350 73,596 2,467,608 0.45 1,116,220ie8 340,440 286,740 315,363 71,622 467,777 517,464 217,256 177,350 73,596 2,467,608 0.40 996,62519 340,440 286,740 315,363 71,622 467,777 517,464 217,256 177,350 73,596 2,467,608 0.36 889,844g10 340,440 286,740 315,363 71,622 467,777 517,464 217,256 177,350 73,596 2,467,608 0.32 794,50311 340,440 286,740 315,363 71,622 467,777 517,464 217,256 177,350 73,596 2,467,608 0.29 709,37812 340,440 286,740 315,363 71,622 467,777 517,464 217,256 177,350 73,596 2,467,608 0.26 633,37313 340,440 286,740 315,363 71,622 467,777 517,464 217,256 177,350 73,596 2,467,608 0.23 565,51214 340,440 286,740 315,363 71,622 467,777 517,464 217,256 177,350 73,596 2,467,608 0.20 504,92215 340,440 286,740 315,363 71,622 467,777 517,464 217,256 177,350 73,596 2,467,608 0.18 450,822

Tofid 4,31,270 3,918,780 4,032,145 902,432 6,330,587 6,835,972 2,911,229 2,309,163 983,736 33,075,314 5,689,925IRR 17%

ANNEX8Page I of I

COTE D 'IVOIREAtricultural Export Promotion and Diversfication Project

Procurement Implementation ScheduleEstimated Annual Contractual and Other Payments

(US$ Million Equivalent)

Pre- TotalProject Element Project 3Project ear _ Payrent Remarks

_ _ _ 1 2 3 4 5 _ _ _

Credit Timing (0.40) (1.35) (1.29) (1.05) (0.94) (0. 80) (5.83)SigvEffec/Close _

Consultancies 1.21 1.21 1.02 0.62 0.55 4.61TA and Consultancies (0.47) (0.52) (0.33) (0.37) (0.29) (1.98) Bankguidelines

___________ _______ ~~~~~~~~~~~~~~~~for_consultantsGLoodsVehicles 0.56 0.17 0.34 0.23 0.33 163 NCBEquipment and Materials (0.21) (0.10) (0.20) (0.13) (0.207 (0.84) _

Civil Works 1.82 1.87 3.69 NBF

MiscellaneousTraining 2.00 0.88 0.91 0.88 0.90 0.90 6.47 OtherIncr. Recurrent Costs (0.40) (0.67) (0.67) (0.52) (0.44) (0.31) (3.01) LS/OtherRefinancing PPF

TOTAL 2.00 4.47 4.16 2.24 1.75 1.78 16.40

IDA-Financed (0.40) (1.35) -(129) -05 (0-94) 50.80) (5.83

GOODS DETAILED DESCRIPTION

Items Unit PYI PY2 PY3 PY4 PY5 Total

4WD Vehicles unit I 1 1 3

Regular Vehicles unit 2 3 2 7

Micro-computers

& accessories unit 6 12 18

Software, Network, etc... lump sum 5 600 5 600

Copy machines unit 1 1 1 3

Phone & fax equipment (S) lump sum 21 300 11.300 32.600

Research Equipment (S) lump sum 33 400 34 200 35 100 36 000 36 900 175 700

Publishing & Informative

Materials (S) lump sum 11 600 11 900 12 200 12 500 12 800 60 900

Market Promotion

Materials (S) lump sum 66 900 68 400 58 500 60 000 36900 290 800

ANNEX 9Page I of I

COTE D'IVOIREAtricultural Promotion and Diversification Proiect

Estimated Disbursement Schedule(in USS)

IDA Fiscal Year and Quarterly Annual Cumulative CumulativeQuarter Ending Disbursements Disbursements Disbursements Disbursements in %

FY 96II

ZMar. 31, 1996 699 9601 699 960 1Jun. 30, 1996 116 660 816 620 ' 816 6201

.Sep. 30, 1996 174 990§ 991 6101 171

,'Dec. 31, 1996 233 320 1 224 9301 21Mar. 31, 1997 233 320 | 1 458 2501 25

"Jun. 30, 1997 233 320W 874 950 1 691 570! 29

FY98

"Sep.30,1997 291650, 19832201 34,Dec. 31, 1997 291 650 2 274 870 39,Mar. 31, 1998 349 980W 2 624 8045"Jun. 30, 1998 1291 650 1 224930 2 916500. 5o

a. FY99 , s

§Sep. 30, 1998 291 6501 3 208 150- 55

JDec. 31, 1998 291 6501 3 499 8001 60NMar. 31, 1999 408 3100 3 908 1101 67SJun. 30, 1999 466 6400 1 458 2501 4 374 750, 75

FY00 ^5

LSep. 30, 1999 291 650 4 666 4001 80

'Dec 31, 1999 233 320| 4 899 7201 84,Mar. 31, 2000 174 990 5 074 7101 87~Jun. 30, 2000 174 990l 874 950 S 249 700i 90

FY01 O

K.Sep. 30, 2000 , 17499 5424 6901 93IDec. 31, 2000 174 9901 5 599 6801 96kMar. 31, 2001 116 660. 5 716 340, 98JSun. 30, 2001 . > 116 660W 583 300 ; 5 833 0001 100

ts s.flo ~%'C'MCC. . ~ 4 00.0000400 . .__:w__ _____________

ANNEX JOPage I of I

COTE D'IVOIRE

AGRICULTURAL EXPORT PROMOTION AND DIVERSIFICATION PROJECT

SUMMARY OF PROJECT MANAGER AND LOCAL PROFESSIONALSRESPONSIBILITIES

1.01 The project manager will have the following management, coordination andmonitoring responsibilities under the project:

(a) implementing the project and coordinating and monitoring overall projectexecution;

(b) liaising with the Government (MINAGRA, ANADER), donors (IDA, CIDA,GTZ, etc.) and international professional organizations concerned withagricultural exports, including COLEACP, UNCTAD, ITC, AFNOR, etc;

(c) preparing the project's AWPs, annual budgets, accounts, progress reports,disbursement applications and procurement documentation;

(d) contracting and supervising the execution of contracts with specializedinstitutions and technical assistants for product quality improvement anddissemination of export standards (CODINORM), adaptive research(IDEFOR, CIRAD, etc.), technical agricultural advice (NGOs); and

(e) monitoring project implementation.

1.02. The senior local professionals responsibilities will include the following:

(a) helping the formal establishment of professional organizations;

(b) preparing the organizations' preliminary business plans including budgets andfinancing options;

(c) following up and advising on the efficient use of technical packages pertainingto specific export crop production;

(d) disseminating information on product quality requirements and other exportnormns;

(e) coordinating promotion actions including fairs, business tours and markettests;

(f) coordinating training activities and field demonstrations;

(g) assistance in data management and dissemination including memberships,production and price indicators; and

(h) helping liaise with other parties such as the Government, donors andinternational professional organizations.

ANWEX 11Page I of 4

COTE D'IVOIRE

Agricultural Export Promotion and Diversification Project

ANALYSIS OF FREIGHT IMPACT

The following calculations are intented to present an assessment of the freight impact on theprofitability of Ivorian agricultural products. The results indicate that, despite relatively hightransportation costs, Ivorian products are not likely to be priced out of the international market,especially for tropical fruits, flowers, bananas and pineapple. They also demonstrate thatprofitability of Ivorian products may be improved through lower freight tariffs policy as incompeting countries like Cameroon, Kenya and South Africa.

The following results are based on a piece of analysis using a mathematical programmingapproach. The analysis consisted of designing transportation linear programming models so as toproduce the optimal combination of agricultural products traffics which minimizes transportationcost on the overall market. In other words, this allows to measure exporting countriescompetitiveness with respect to freight tariffs.

Data Collection. The export sector is an area where information is very costly to share withoutsiders. This explains why, in absence of a formal study by professionals, it has not been easy toget precise information on maritime freight. However, It was possible to get information on theaverage maritime freight tariffs for banana and pineapple exported from Costa-Rica to Europe.

Air freight data were drawn from the study by Airport Planning Associates (APA), Inc., whichdealt with tropical fruits and flowers only. They were presented for eight exporting countriesincluding Cote d'Ivoire and six importing countries comprising both European and NorthAmerican countries which are the most representative of the market.

Method and Procedure. The analysis is based on the linear programming method - i.e., an iterativeprocess with an exhaustive computation of objective function values and the selection of the valuethat satisfies the objective function. The level of products import from producing countries thatderives the lowest transportation cost is the optimal level, say, the cost-efficient level ofagricultural products exchange.

The objective function is the minimization of cost associated with products traffic all over themarket. Given promoters' reluctance in information sharing, it was uneasy to know precisely theexact quantities flows of agricultural products. Nevertheless, it was possible to base the analysison importing countries' cost-efficient choice in placing an order for one unit (metric ton) of agiven product, provided all producing countries' geographic location and freight arrangements.The constraint in this model is that importing countries demands have to be met.

Results. The linear programming results are as follows:

AANEX 11Page 2 of 4

Optimal Distribution of Tropical Fruits Import~~~~~~~~~~~~~~~~~~. ............. ....... y. ... ...... .. .... . . ... .. ......... . .......... ... ... ... . . .... . .. ...

EXPORTING TROPICAL FRUITS AIR TRAFFICCOUNTRIES DESTINATION COUNTRIIES

New-York London Amsterda Paris Zurichm

................................... A................................... ................................... ..........................................................................................................

Cte d'IvoireQUantity (tons) (069

X Shadow price (0.099) (0.194) (0.536) (0.099)Rank ~ ~ ~ ~~~~32 2 3

,... ......... .............. ..................... .................. ......... ................ ........................ ........... q................................... ........ ................................................................

Brazil* ~~~~~~~~~~~0 0 0 00

SQuadioy(wp ) (0.727) (0.447) (0559) (0.969) (0.387)* *Sh~~~~~~Iowpnce 5 ~~~~~~~7 6 7 5

Costa-Rica* Quantity (tons) (0) (0.442) (0. 751) (0.92 7) (0.770)

* Rank 16 7 6 7

... ........ .......................... ............................ ............... ............ ................................................ ..... ............................. ..................................... ......................................................................

Kenya*Quantity (tons) 000 0 0

S Shadow price (2.258) (0.106) (0.232) (0.642) (0.105)7 4444

*Rank444

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......... ....... . . . . . . . . . . . . . ... ... ... -... . . .. . . .. . . .. . . .. . . .. . . .. . . .. . . .. . . .

0 ~~~0000* Shadow tns) (0.650) (0.05)) (0.230) (0.591) (0.065)

ShaR wpk c3 2 3 3 2

Zimbabwe* QuJatjty (tons)

* Shadow pnce (1.687) (0.369) (0.508) (0.841) (0.411)* Rank ~~~6 5 S 6

C am eroon ..... ..-...............-...........* Quantity (tons)01111* Shadow price (0.561) (0) (0) (0) (0)

* Rank 21111

The optimal distribution of tropical fruits table shows that if each importing country were to place an orderfor one metric ton of tropical fruits from the presented producing countries, they would make theirdecisions cost-efficiently. For instance, a potential fruits client from New-York would order from Costa-Rica in the first place. However, if for some reason he could not, his second best alternative would be toorder from Cameroon. He would rank his decision alternatives in light of the associated shadow prices.Shadow prices reflect the increase in transportation cost when electing to exchange one unit of agriculturalproduct. Shadow prices associated with the optimal levels of products exchange are zero, for they matchthe minimum-cost values of the iteration. This explains how the above table was designed. The lower theshadow price, the more cost-efficient the decision is. Exporting countries were ranked by destination in thatpattern in the above optimal import distribution table.

AANNX11Page 3 of 4

To this respect, Costa-Rica and Cameroon happen to be the most competitive producing countries on thetropical fruits export market for New-York and other destinations, respectively. By extending the analysis,one could draw a mean rank over all destinations and end up concluding that CMe d'Ivoire is the third mostcompetitive tropical fruits exporting country among seven potential competitors. Which means that despiterelatively high freight costs for Ivorian agricultural products, C8te d'Ivoire over-ranks a significant numberof exporting countries, due to its geographical location (the country is about 5,000 kilometers away frommost of European importing countries). Thus, if with the support of the Government, Air-Afrique could setits air-freight tariffs below their current monopolistic levels, members countries including CMte d'Ivoirewould gain a lot from agricultural export and become more competitive on European destinations.

Results for tropical flowers market were also obtained from the optimization analysis. They show the samepattern as those of the tropical fruits export market, and can be presented as follows:

ANNEX 11Page 4 of 4

Optimal Distribution of Tropical Fowers Import

EXPORTING TROPICAL FLOWERS AIR TRAFFICCOUNTRIES DESTINATION COUNTRIES................................................. ...... . ........................ ................ o:.:.:.. .. .; .

New- London Amsterdam Paris Frankfurt ZurichYork

Coted'lvoire* Qutity(town) f l.(1.700) (0.495) (0.617) (0.854) (0.117) (0.480)* Shadow price 6 q *Rank

BrazilQuantity (toTis)00 0 0 0 0* Quantitydtowpnc (0.712) (0.744) (0.969) (1.310) (0.450) (0.774)*Shadow price477777*Rank477777

Costa-Rica ( (0.680)* Quantity (tons)I 0000* Sbadow price (°) (0.3 78) (0.684) (0. 799) (0.314) (0.680)

'Shadowprice ~~~~~ ~ ~ ~ ~~3 6 3 6 6* Rank

7~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~. . .: . ... ... . . .... ...... .... ... ... .............. .....................

Kenya* Quantity (tons)' Shwiowprce (0.824) (0.3 76) (0.582) (0.846) (0.009) (0.386)

3 ~~~~2 2 4 2 2

South-Africa*~~~~~~~ ~~~~ Quan0ty(tos)

-Shadow R rice (0.580) (0.432) (0.594) (0-852) (0) (0.396)

* Quantity (tons)

* ShadowpRi (1.734) (0p489) (0630) (0798) (036) (a472)

* Rank244

:. .. .. -. .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............................. . . . . . . . . . . . ... ....... . . . . .. . . . . ...... .. .. ..................

* Quantity (tons) (0.752) (048) (063) (079) (0.276)(0

' Shadow pnce (0.2)1 1

• Rank7244

According to the above results, Cote d'Ivoire is less competitive within the tropical flowers market than it is in thefruits market, as it ranks at the average fifth over all destinations. Which means that although the Ivorian flowers do not priceout of the export market, high freight costs prevent it from taking advantage of being closer to European destinations than otherexporting countries like South Africa and Kenya. The latter enjoy comfortable positions of competitiveness due to relativelylow freight costs (about half of freight costs for products departing from C6te d'Ivoire). This explains why it is critical thatfreight tariffs be reduced in order to improve the country' s competitiveness.

Products traffic by sea was also an area of investigation in this analysis, but due to poor data, it was not necessary torun a GAMS program for a model comprising one destination (Europe) and two origins (C6te d'Ivoire and Costa-Rica), for thebanana and pineapple market. From the transportation costs data related to the two origins, it appeared that Cote d'Ivoire wasmore competitive for the European destination than Costa-Rica. However, such a conclusion could be misleading, because thewhole market needs to be pictured in order to get a better appreciation of the decision making process. In other words the areaof maritime transportation should be further researched to get sufficient data allowing to measure exporting countries'competiveness, as it has been done for products traffic by air.

IMANGING

Report No: 14448 IVCType: SftR