World Bank Document

ReportNo. 716a-CM FILECoPY Appraisalof Niete RubberEstate Project Cameroon Public Disclosure Authorized

May 20, 1975 Western Africa RegionalOffice

Not for PublicUse Public Disclosure Authorized Public Disclosure Authorized

Document of the International Bank for Reconstructionand Development Public Disclosure Authorized International Development Association

This report was prepared for official use only by the Bank Croup. It may not be published, quoted or cited without BankCroup authorization.The BankCroup does not accept responsibility for the accuracyor completenessof the report. CAMEROON

NIETE RUBBER ESTATE PROJECT

CURRENCYEQUIVALENTS

US$ l = CFAF 225 CFAF 1 = US$ 0.0044 CFAF 1,000,000 = US$4444.44

WEIGHTS AND MEASURES (Metric System)

1 hectare (ha) = 2.47 acres 1 kilometer = 0.624 miles 1 kilogram = 2.204 pounds 1 metric ton = 2,204.6 pounds 1 liter = 1.057 U.S. quart

ABBREVIATIONS

CCCE : Caisse Centrale de Cooperation Economique (France) CDC or CAMDEV : Cameroon Development Corporation ENSA : Ecole National Superieure Agronomique FAC : Fonds d'Aide et de Cooperation HEVECAM Societe Hevea - Cameroun IRAT Institut de Recherches Agronomiques Tropicales et de Cultures Vivrieres IRCA Institut de Recherches sur le Caoutchouc en Afrique PAMOL Societe Pamol Cameroun (Unilever Group) SATET Societe Africaine de Travaux et d'Etudes Topographiques SAFACAM Societe Africaine Forestiere et Agricole - Cameroun SOCAPALM Societe Camerounaise de Palmeraies SEDA Societe d'Etudes pour le Developpement de l'Afrique SOSUCAM Societe Sucriere du Cameroon SOCFIN Societe Financiere

HEVECAM'S FISCAL YEAR

July 1 to June 30 CAMEROON

NIETE RUBBER ESTATE PROJECT

Table of Contents

Page No.

SUMMARY AND CONCLUSIONS ...... i - v

I. INrTRODUCTION ......

II. BACKGROUND ...... 2

A. General ...... 2 B. Agricultural Sector ...... 3

III. DEVELOPMENTOF ESTATE AND OUTGROWERAGRICULTURE. 4

IV. THE PROJECT ...... 6

A. Project Area ...... 6 B. Summary Description ...... 8 C. Detailed Features ...... 9 D. Organization and Management ...... 12 E. Accounts and Audit ...... 15

V. COST ESTIMATES AND FINANCIAL ARRANGEMENTS...... 15

A. Cost Estimates ...... 15 B. Financial Arrangements ...... 17 C. Procurement ...... 19 D. Disbursements ...... 19

VI. PRODUCTION, MARKETING AND FINANCIAL RESULTS .... 20

A. Yields and Production ...... 20 B. Marketing and Prices ...... 20 C. Financial Results ...... 21

VII. BENEFITS AND JUSTIFICATION ...... 21

VIII. AGREEMENTS REACHED AND RECOMMENDATION ...... 23

This report is based on the findings of an IDA mission which visited Cameroon in November/December 1974, and whose members were Messrs. Losson, Leduc, Palein, and Winston; Mr. Forget (Legal staff) was with the mission part of the time. ANNEXES

1. Draft Scope of Work for a Master Plan for SouthwestRegion

2. The Project Area and Features of Niete Estate

Table 1: Soil Analysis of the Northern Part of the ConcessionArea Table 2: Schedule of Operations Table 3: ProductionSchedule Table 4: Staffing Schedule Table 5: Labor Force Table 6: ExploitationSchedule Table 7: Tapping Specifications Table 8: ConstructionProgram

3. La Societe Africaine Forestiereet Agricole - Cameroun (SAFACAM)

Appendix 1: Draft Agreement

4. Audit Terms of Reference

5. Cost Estimates

Table 1: Project and Program Costs Table 2: Summary Cost per Hectare for AgriculturalDevelopment Table 3: Land Clearing and Road Construction: Civil Works by Contractor- Completionby Estate Force Account Table 4: Land Clearing and Road Constructionby Estate Force Account Table 5: Salaries and Costs of ProfessionalStaff Table 6: Wages and Costs of NonprofessionalStaff Table 7: Housing Costs

6. Cash Flows

Table 1: HEVECAM Income Statement Table 2: HEVECAM Sources and Applicationof Funds Table 3: Government Cash Flow Table 4: EstimatedQuarterlv Disbursementsof IDA Credit Table 5: HEVECAM Sources and Applicationof Funds (5,800 ha)

7. Natural Rubber: Trends and Outlook

Table 1: World Productionand Consumption

8. Economic Rate of Return Calculation

Table 1: Price Structure and MarketingMargins for One Ton of Rubber Table 2: Economic Rate of Return Calculation Table 3: Economic Rate of Return Calculation (5,800 ha) MAPS

1. Population, Rainfall, Transportation and Project Area -IBRD 11484 2. Niete Rubber Estate Concession - IBRD 11485

CIIARTS Organization Chart - IBRD 9584

CAMEROON

NIETE RUBBER ESTATE PROJECT

SUMMARY AND CONCLUSIONS

Background i. The Government of Cameroon has requested the assistanceof IDA and the French Caisse Centrale de CooperationEconomique (CCCE) in financinga rubber estate in the southwestof the country. The project vas prepared by the Societe Africaine Forestiereet Agricole--Cameroun(SAFACAM). This report is based on the findings of an IDA appraisalmission in November/ December 1974. ii. Initially,Government asked IDA and CCCE to appraise the establishment of a 15,000 ha rubber estate. The proposed objective appears to be economicallysound but inflationmakes it impossibleto produce a firm and realisticfinancial plan for the 16 years needed to develop such a large undertaking. It is thereforeproposed to provide finance for five years, encompassingthe planting of 5,800 ha of rubber as well as preparatory work for subsequentdevelopment. As Government sees the project appraised in this report as a first step in establishinga 15,000 ha estate, the financialand economic data show the projectedresults both of the larger estate and of the proposed project. iii. If for any reason Government'splans did not materialize,the area of rubber planted under the projectwould constitutean economic unit, although its completion,i.e. bringing all 5,800 ha into full production,would require a total of seven years and some US$11 million (net of taxes and contingencies)in addition to the cost of the five-yearproject. The Government would assume responsibilityfor providing, or causing to be provided,these funds, since IDA can give no commitmentat this stage. At a later stage, however, the Bank Group and CCCE would consider financingeither the remaining development of the 5,800 ha, or further expansion, on the basis of the preparation work financed during the first phase. iv. The project would also provide for preparation of a major long-term developmentplan for the southwestregion. In outline, this plan would aim at developing some 100,000 ha or more of nuclear estate and outgrowercom- plexes, over some 25 years, in a region that is now sparsely populatedand undevelopedbut suitable for a range of tree crops includingrubber.

Descriptionof the Proiect v. The project comprises the first phase of development--1975/76 through 1979/80--ofa large rubber estate. It would include: - ii -

(a) clearing 5,800 ha and planting them with high yielding rubber; preparationof land for a further 1,700 ha to be planted in 1980/81 in a second phase of development; and maintenance of the 5,800 ha of plantings for the duration of the five-year project development period;

(b) conducting establishmentand yield trials with different clones of rubber, and agronomic research if required;

(c) constructinghousing, health, education,and the social facilitiesfor about 3,000 estate families; and service roads for the estate;

(d) establishinga commissariatto ensure food supplies to estate employees,and also to supervise trials with foodcrops;

(e) establishingand staffing a state-ownedcompany to own and operate the estate; and employing a suitably qualified firm to:

(i) manage the new company,

(ii) prepare a follow-up project, including the continuation of pedological and topologicalstudies, and

(iii) train Camerooniansat all levels of responsibilityon the estate; and

(f) preparing a master plan for the developmentof the Kribi region which emphasizes the productionof perennial crops.

The estate would be owned and operated by a Government-ownedcorporation, HEVECAM. The Government recognizesthat it will take time for Cameroonians to be trained for senior management positions in the rubber industry. There- fore, HEVECAM would employ the management services of SAFACAM, a Cameroonian estate-operatingcompany which itself is affiliatedwith SOCFIN, a well- known internationalcorporation specializingin tropical estate production and sales. The Association has reviewed and approved a draft of the management contract,whose signing would be a conditionof credit effectiveness. HEVECAM's senior management wculd comprise a Director General and the managers of the Technical, Industrialand Administrativedepartments, whose qualifications and experiencewould be satisfactoryto IDA.

Cost Estimates and FinancialArrangements vi. The project cost is estimated at US$23.2 million, net of taxes (US$5.3million). The foreign exchange component would be about US$16.6 million, or 72% of total cost net of taxes. Total cost includes physical contingenciesand provisions for price increasesamounting to 42% of the base cost estimates,which are at end-1974 prices. - iii -

vii. The proposed IDA credit would be for US$16 million, made to the United Republic of Cameroon on standard terms, and would cover 56% of total costs including taxes and US$0.8 million of corporate fees which would be fully paid by Government-CCCEwould lend US$4.45 million equivalentto Government,for a term of 20 years, including 10 years of grace, with interest at 5.5%; the CCCE loan would finance 16% of total costs. Governmentwould finance the remaining 28% of total costs. About US$15.1 million of the proceeds of the IDA credit togetherwith the CCCE and Government contributions would be made available to HEVECAM as equity (45%) and a subloan (55%). The equity contributionof US$12.2 million would consist of US$3.5 million IDA funds, US$7.7 million Governmentfunds, and US$1.0 million Caisse loan funds. The subloan of US$14.8 million would consistof US$11.6 million IDA funds and US$3.2 million of CCCE loan funds, and would be made by the Government to HEVECAM under a Project Financing Agreement that is a conditionof effectivenessof the credit. The proposed subloan would be for 30 years at a 5-1/2% interest rate; no interest would be charged during the 15-year grace period. Hence, the effective interest rate on the subloan over 30 years would be below 2%. The above financial arrangementsreflect the fact that in rubber projects yields only begin in PY 8 and do not reach their maximum before PY 18. The arrangementswould enable HEVECAM to meet its operating costs as well as debt service obligations and to build up adequate balances out of self-generated funds. viii. Some preparatory work, involving advance contracting and amounting to a maximum of US$0.4 million, had to be initiatedprior to Board Presenta- tion since, otherwise,a whole year of plantingwould have been lost. IDA and CCCE would finance such expendituresretroactively to the extent that eligible payments are made before signing.

Procurement ix. Procurement would be through internationalcompetitive bidding (ICB) under IDA guidelines except for items mentioned below and individual contracts not exceeding US$60,000, which would be let locally under competi- tive bidding proceduresadvertised locally that would be agreed with IDA. Goods manufacturedin Cameroon and in countries which are a party to Central African States Customs Union (UDEAC)would be granted a preferenceof up to 15%, subject to standard provisions, and prequalifiedCameroonian contractors a preferenceof 7-1/2%. Contracts for manual clearing of land, if arranged, would be under these procedures. Otherwise, clearancewould be mechanized and carried out on force account, as would road building and other construction. Assuming that land clearanceis mechanized,goods and services subject to ICB -- largely machinery, vehicles and equipment and fertilizers -- are estimated to cost US$5 million. This comparativelysmall amount reflects the large componentof project costs that comprises labor and management. A minimum amount of land-clearingequipment, costing US$0.38 million, has already been ordered under ICB, with IDA and CCCE approval, because delivery is expected to take 12 months and otherwise the project might have been delayed. Arrangementsfor the provisionof managementservices by SAFACAM would be acceptable to IDA. - iv -

Disbursement x. Disbursementsby IDA and CCCE would be in the proportions 58:17. Proceeds of the IDA credit would be disbursed to cover 58% of total expenditures of the following items: (a) civil works and plantations--US$4.8mil- lion; (b) equipment and materials--US$2.2million; (c) administration-- US$2.5 million; (d) food crop development--US$300,000;(e) technical assistance--US$580,000;(f) project related studies--US$120,000;and (g) master plan--US$700,000. US$4.8 million, representingcontingencies, would be unallocated. Disbursementswould be on a standard documentedbasis including, where appropriate,periodic work certificates,the full documentation for which would be retained bv the Borrower and made available for inspection by the Association during the course of supervision. Any unused balance would be used to finance similar activitieswhich have been reviewed in the appraisal of this project.

Benefits and Justifications xi. The project would contributeto the realization of important Government socio-economicdevelopment objectives. First, at peak production, the completed 5,800 ha estate would produce 13,000 t of rubber (77% of Cameroon's present output), a level that could be sustained for more than 20 years without major replacements. Net foreign exchange earnings of US$7 million would be generated each year, decreasing Cameroon's still heavy reliance on two major export crops--cocoaand coffee, whose export prospects are limited. Second, the project, being labor intensive,would provide secure employment to 3,000 employees and their families--10-12,000 people in total--mostof them from the north, and considerableimprovement in their standards of living. Satellite foodcrop production, trade and transport activitieswould a'so develop. Third, it would help spread the benefits of developmentmore evenly among regions by opening up an area with good potential for successful establishmentof other estate and smallholder plantationswhich would ultimately form a whole new agroindustrial complex in the hinterland of the port of Krîbi. xii. The economic rate of return on the project is estimated at 14%. Sensitivityanalysis indicates that a cost increase of 10% would reduce the rate to 12.5%; a 25% iricreasewould reduce it to about 11%. A combined 10% increase in costs and 10% decrease in benefits would decrease the return to 11%. A combinationof 20%'cost increase and 20% benefit decrease would reduce the rate to nearly 8%. The rate of return is expected to be satisfactory. xiii. The above calculationsare based on the assumption that: either (a) the proposed project is planned and executed as the first phase of a 15,000 ha estate, in accordancewith Government'spresent intentions;or (b) that the estate is not enlarged beyond the 5,800 ha covered by the proposed project and that the decision to do this will be taken early enough, say in the first or second year, to enable the phasing of development to be planned and executed in the most economic way. In both cases the rate of v -

return is the same to the nearest percentagepoint, since there are only minor economies of scale in the developmentof such large areas. Detailed tables (in the annexes) have been prepared on the assumption that the full 15,000 ha would be developed. xiv. It is possible that changes in market prospectsmay lead to a decision to restrict the size of the estate to 5,800 ha only in the 4th or 5th year of the project. In this case, the rate of return would fall to about 11% because the timing of investmentswould have been appropriate to the larger estate and heavier in the early years. Separate rate of return and cash flow calculationshave been prepared on this assumption. xv. The progress of the project, and of the preparationwork for a possible second phase, would be reviewed annually with Government and CCCE, in order that a decision on the final size of the estate can be arrived at as early as possible. xvi. The project would entail the risk that, as a pioneeringventure in an unexploited region, there can be no certainty that a satisfactorylabor force would be created. It is highly probable that labor from overpopulated areas would be attracted by the regular wages offered by the estate. The danger is that, if proper measures are not taken to make their lives satisfactory, they would return to their home villages. The project provides for the housing, health and education facilitiesthat would be the best safeguard against such risk. Recommendation xvii. Subject to the assurances and conditions set forth in Chapter 8, the project is suitable for an IDA Credit of US$16 million.

I. INTRODUCTION

1.01 The Governmentof Cameroon has asked the assistanceof IDA and the French Caisse Centrale de CooperationEconomique (CCCE) to finance part of the costs of the first phase of developing a large rubber estate near Kribi in the sparsely populated and undevelopedsouthwest of the country. The Kribi region is suitable for tree crops, and the project would initiate a 25-year developmentprogram for exploiting this potential.

1.02 Initially,Government asked IDA and CCCE to appraise the establishment of a 15,000 ha rubber estate. The proposed objective appears to be economicallysound but inflationmakes it impossibleto produce a firm and realistic financial plan for the 16 years needed to develop such a large undertaking. It is thereforeproposed to provide finance for five years, encompassingthe planting of 5,800 ha of rubber as well as preparatory work for subsequentdevelopment. As Government sees the project appraised in this report as a first step in establishinga 15,000 ha estate, the financial and economic data show the projected results both of the larger estate and of the proposed project.

1.03 The project was prepared by and would be implementedby the Societe Africaine Forestiere et Agricole--Cameroun(SAFACAM), a company registered in Cameroon. SAFACAM is a member of an internationalgroup of plantationcompa- nies, and owns a rubber estate in Cameroon. It was assisted in project preparation by: SATET for topographicstudies, ENSA for pedological studies, IRCA for rubber agronomy, and IRAT and SEDA for food crop agronomy. 1/ This report is based on the findings of an IDA mission which visited Cameroon in November/December1974, and whose members were Messrs. Losson, Leduc, Palein, and Winston; Mr. Forget (Legal)was with the mission part of the time. The mission worked closely with the CCCE evaluation team, composed of Messrs. Cantournetand Bailliez,who visited the country at the same time. Two staff members of SAFACAM were present during the entire mission.

1.04 The Bank Group has given assistance to five agriculturalprojects in Cameroon, as follows: (1) the CAMDEV plantationproject (Loan 490-CM for US$7.0 million and Credit 100-CM for US$11.0 million) in 1967; (2) the SOCAPALM oil palm plantationproject (Loan 593-CM for US$7.9 million) in 1969 and (Loan 886-CM for US$1.7 million) in 1973; (3) the SEMRY rice project (Credit 302-CM for US$3.7 million) in 1972; (4) a livestock project (Loan 973-CM for US$11.6 million) in 1974; and (5) a cocoa project (Loan 1039-CM for US$6.5 million) in 1975. Until 1973, the CAMDEV project exper- ienced cost increases,lower than expected income from nonprojectplantings, and excessive overheads. In 1973, economy measures were introducedwhich, coupled with better management and commodity prices, have improved CAMDEV's cash position to one of considerablestrength. The SOCAPALM project started well, but had to be reappraised due to inflation, and because one of two

1/ See Frontispiecefor full names of these organizations. - 2 -

development sites was found unsatisfactory. The project was reduced from 9,000 to 8,500 ha, but estimated production and economic benefits remain unchanged as both yields and prices of oil palm products are now expected to exceed appraisal forecasts; the project is on schedule. The Semry rice project started on schedule and is progressing satisfactorily. The livestock project is only now getting under way. The cocoa project became effective in February 1975.

II. BACKGROUND

A. General

2.01 The United Republic of Cameroon comprises a French-speaking eastern part (with 80% of the population), and an English-speaking western part. The country covers about 475,000 km2 . Population in 1972 was estimated at 6.1 million, growing at about 2.1% per year. Migration to the cities, where unemployment is growing rapidly, accounts for their annual growth of about 7%. There are also interregional movements from overpopulated areas to fertile but empty zones. Per capita GDP is estimated at around US$230 (1973).

2.02 Cameroon's natural resources are varied, although not abundant. Soils and climatic conditions permit cultivation of a wider range of crops than is commonly found in West Africa; the forest areas of the southeast contain large untapped timber resources, and in the north there is good potential for livestock. While the main opportunities for development lie in the expansion of agricultural production, Cameroon also has an industrial potential. This includes not only the production of import substitutes for a growing domestic market, but also the processing of alumina and agricultural and forestry products for export. A bauxite project is in its early stages of preparation, while offshore oil and gas exploration has so far yielded only modest results.

2.03 Commerce, transportation and transit services are also important economic activities: Cameroon is a relatively large country with its main economic centers separated by vast underpopulated areas, and the country serves as a main export route for landlocked Chad. As a result, large investments in port and inland transport infrastructure are prerequisites to promoting agriculture, forestry, and industry, and strengthening Cameroon's role as a regional trade center.

2.04 In the early 1970s, economic growth slowed down to less than 3% per year or little more than population growth. This was caused by (i) low export prices for cocoa and coffee during 1971-72 and a drought in the north, and (ii) a decline in private investment due to the relative stagna- tIon of the agricultural sector, in addition to the completion of the most obvious lmport substitution projects during the preceding decade. The Gov- ernment reacted by stepping up public investment, whose volume increased by 50% to reach annual averages of about US$200 million (constant 1973/74 -3-

dollars) during the Third Development Plan (FY 72-76) and resulted in a substantialdrawdown of Treasury reserves and a major increase in foreign borrowing. Fortunately,the availabilityof well-preparedhigh priority projects enabled Cameroon to obtain most of the lncreased inflow of foreign capital from public aid donors on concessionaryterms. However, the terms of trade are now deterioratingand foreign exchange reserves seem to have diminished rapidly during the first half of PY 75, announcing an era of more severe balance of payments and public finance problems.

B. AgriculturalSector

2.05 Agriculture plays a major role in Cameroon's economy, providing a livelihoodfor almost 80% of the population and accounting for 32% of GDP and 70% of the value of exports. Cameroon is largely self-sufficient in foodstuffs except for rice and wheat which are being imported in increasing amounts, and to a lesser extent sugar and meat. The agriculturalsector can be divided into two major subsectors, the traditionaland the industrial plantation. The traditionalsubsector, accounting for 90% of agricultural output, is comprised of 950,000 smallholderscultivating plots averaging about 2 ha with family labor. Smallholdersproduce for subsistence,for the local market, and for export (cocoa, coffee, cotton and groundnuts).

2.06 Prospects for developing smallholder agricultureare promising. Development of this sector has been thus far hampered by the weakness of extension and credit services. Agricultural credit consists largely of short-term marketing loans for the main export crops and production credit for participantsin specific export crop development programs. The Fonds National de DeveloppementRural (FONADER)was recently created to expand and coordinate rural development programs and agriculturalcredit in close association with extension services. However, its establishmentis too recent to judge its effectiveness. The prospects for plantation crops are also favorable, as discussed in Chapter 3.

2.07 The government capacity for project preparation and implementation in the rural sector is weak. Recently, however, the Government has taken a variety of measures aimed at creating stronger and more effective regional or crop development agencies, and plans to increase substantiallyinvestment in agriculture. While rural investment accounted for less than 15% of total capital outlay during the Third DevelopmentPlan (FY 72-76), agricultural and livestock projects may absorb about 20 - 25% of the Fourth Plan currently being prepared. It would be practically impossible to achieve this Govern- ment objective without taking advantage of the opportunity to invest in plantation crops.

2.08 The Bank's strategy in the rural sector aims at developing both industrialplantations and smallholder schemes. In the past, Bank Group lending to CAMDEV (FY 67) and SOCAPALM (FY 69) was followed by loans or -4 -

credits for rice irrigation (FY 72), a livestock project (FY 74), and a cocoa project (FY 75). The proposed rubber project is expected to be followed by rural development projects in FY 77 and FY 78.

III. DEVELOPMENTOF ESTATE AND OUTGROWER AGRICULTURE

3.01 The main estate crops are oil palm and rubber: about 60,000 t of palm oil (includingthat from wild palms) and 17,000 t of rubber were produced in 1973/74. The existing estates are concentratedin the western and coastal lowlands in two state-owned plantations: CAMDEV--30,000ha; SOCAPALM--7,000ha planted and a further 7,500 ha to be completed by late 1977; and two private plantations: SAFACAM--6,000ha; PAMOL--7,000ha. CAMDEV and SOCAPALM have carried out extensive oil palm plantings in recent years under projects partly financed by the Bank Group; by 1985, palm oil production is expected to exceed 100,000 t, most of which will be consumed locally. Establishmentof smallholdersatellite oil palm plantationsaround industrialestates is an objective of the Bank-financedoil palm projects.

3.02 To a large extent, Cameroon'srubber plantationsare based on the experienceof the Southeast Asian industry. Although planting and cultivation methods have gradually been adapted to local conditions, there is a need for more adaptive research and also for a better knowledge of rubber technologyon the part of Cameroonianpersonnel. The proposed project would help in both these respects.

3.03 At present the estate crops are being developed mainly by state- owned companies because the small private estate sector, which is foreign- owned, is reluctant to increase substantiallyits own investment 1/; and there is not much likelihood that a nationally owned private estate sector will come into existence in the foreseeable future. Further, the state- owned companies are successfulventures with efficientmanagements. For these reasons, it would be realistic to plan for further development to be carried out by state-owned companies,bringing each to the size of a large, modern estate company. An Association of planters, including the existing companies,is being formed, and it would be logical and desirable for the new rubber estate company, HEVECAM, to become a member. It is envisaged that the associationwould provide common services related to imports and exports, air transport,etc., and provide a medium for exchange and disseminationof know-how and other matters of common interest.

3.04 The present project would be only the first step of a much larger program for the southwest region. This region extends about 100 km along the southern coast, from some 30 km north of Kribi, to the border with

1/ Exceptionally,SAFACAM is investing about 10% of net receipts to extend its estate at Edea. -5-

continentalEquatorial Guinea, and inland about 45 km (see Map 1). The climate is suitable for a range of tree crops, including rubber; experimen- tal plantings of rubber made many years ago are today healthy and remarkably well developed. The land is flat or gently undulating,with soils suitable for rubber, and is almost completelyunpopulated. This lack of population is due to the density of the forest, and historicalfactors such as tribal conflictswhich, however, are no longer a barrier to development. As a conservativeestimate, at least 30% of the total area of roughly 500,000 ha--say 150,000 ha--shouldbe suitable for tree crops. Developmentof the area should begin with estates, as the labor needed, togetherwith their families,would form the core of a permanentpopulation for this empty but fertile area. A series of second generationprojects would encourage outgrowers,once the base for their successfulestablishment had been laid.

3.05 This phasing of developmentis justifiedbecause (a) nuclear estates are necessary in any case, (b) they support developmentof infrastructureand the acquisitionof agronomic know-how, and (c) outgrower developmentcan be accomplishedat a much lower cost if postponeduntil nuclear estates are well established.

3.06 From now to the turn of the century, it is possible to envisage successive "rollover" projects developing some 100,000 ha or more. Oil palm and coconut as well as rubber would be considered for development. At completion, such a program could provide some 50,000 or more jobs for wage-hungry persons coming from overcrowdedand impoverishedareas. This would directly or indirectlysupport 300,000 or so people. To feed this increasingpopulation, there would have to be substantialfood crop development, exploitationof the rich-but-neglectedfishing resourcesof the coastal area, and promotion of commercialpoultry and pig raising. Because the area is infested by tsetse fly, cattle productionis not envisagedfor the initial developmentperiod; this infestation,however, poses no serious problems of human health.

3.07 The total investmentin estate and outgrower developmentis ten- tatively and roughly estimated at CFAF 100 billion (US$444million), of which about half might be financed by retained earnings. Generatingfi- nance for future investmentsand for its own renewal is one of the attrac- tions of investmentin estate crops.

3.08 To take advantage of and preserve the opportunityoffered by the Kribi area, a master plan for developmentof the area should be prepared as soon as possible. This plan would be based on a land-use survey and in addition should:

(a) take account of the need to achieve a balanced development of industrialestates and outgrowers;

(b) consider the creation of a specializedorganization for land clearance,which would be required on a large scale; and - 6 -

This transport study would have to consider, in particular, the roles to be played by Douala, the country's maith port, and Kribi harbor, or alternative sltes; firm recommendations should be ready by the end of 1978, before further planting programs were finalized. The general scope of and arrangements for the master plan were agreed with the Government during negotiations (Annex 1).

3.09 There are an estimated 3,000 forest-dwelling pygmies in Ocean Department whose way of life might be impinged upon by such a large-scale developmentprogram. An assurancewas obtained from Government that the welfare of the pygmies would be considered in the preparation of the master plan.

IV. THE PROJECT

A. The Project Area

Location and General Features

4.01 The project area lies within the northern section of 40,000 ha set aside by Government 25 km east of the coastal town of Kribi, and to the south of the Kribi-Ebolowaroad. The northern boundary of the concession begins at Angale, and extends 20 km to Elon. A corridor along the road has been excluded to allow for settlement by food crop farmers. The precise boundaries of the concession are shown on Map 2. The 40,000 ha parcel was declared by Government to be "collectivenational endowment" land under Decree 74/615 of July 2, 1974. An assurancewas obtained that all facilities and title to or rights in respect of land required for the carrying out and operating of the projeer would be provided promptly, and free of restrictions,encumbrances, and liabilitieson its use thereof. No difficultiesare foreseen.

4.02 Detailed topographicand soil surveys have already identified about 10,000 ha of land in the north of the concession that would be suitable for project plantings. lhe proposed site lies about 20 meters above sea level, io gently undulating,and has some swampy areas in its lowest parts. Tre area has been heavily logged, and as a consequence the predo- minant vegetation is light forest. In general, climatic and soil conditions compare favorâblywith those in the major rubber-producing countries of the Far East.

4.03 The east-west boundary points of the concession area are situated, respectively,on isohyets 2,700 mm and 2,400 mm. Dry months are January and February,when precipitationis about 25% of the monthly average. Tem- peratures average about 260C, and the range is small. Winds that threaten damage to rubber trees may occur after or before the rainy season; this risk would oe reduced in the project by the selection of clones resistant -7-

to wind damage, the careful alignmentof the planting blocks with regard to wind direction, and high density of plantingsper hectare.

Communications

4.04 The estate center would be connectedwith the national road network via a 12-km access road to be buîlt under the project. A good unpaved road connectswith Kribi, 33 Ionto the west, and with Ebolowa 138 km to the east. The connectionwith Ebolowa offers a convenientroute to Yaounde, for liaison with Government,and for transportcoming by this route from the north. The most immediatetransport problem concernsheavy trucks traversing the route from Kribi to Douala, via Edea. The road has both dirt and asphalt sections. Dirt sections,which are in very poor condition,are scheduledto be asphalted by the roads department;but the asphalt section between Edea and Douala is also in poor condition. The bridge across the Sanaga River, at Edea, is being replaced;until completion,in perhaps three years, the railway'sper- mission would have to be secured to allow heavy trucks supplyingthe estate to pass over the available span. An airstrip exists at Kribi and another would be cleared (PY3) on the estate; considerableuse of air transportis envisaged for personnel and light materials. The relative advantagesof shipping throughKribi or Douala are finely balanced. Kribi is at a river mouth, and requires lighterageto service ocean-goingships anchored offshore. Douala has direct loading at the quays but the additionalcost of road transport to Douala would be significant,particularly in the rainy season. For costing purposes, it has been tentativelyassumed nevertheless that rubber exports would go to Douala. Future transport facilitieswould be studied as part of a regional plan (para 3.08). During negotiations, assuranceswere obtained from the Government that it would take all measures necessary to improve the roads and bridges to assure year-round through- traffic between Douala and Kribi by December 31, 1976, and that permission would be granted to use the present bridge.

Power

4.05 A high-voltageline on the national grid is scheduledto be con- structed from Edea, where a power complex exists, to the Kribi area. It is assumed that this source of electricitywould be available eventually to supply the estate processing factory; if not, the installationof a generatorat the factory would be possible at only slightly higher cost. Mobile generatorswould be used in the early years for the estate villages.

Labor and Social Services

4.06 During the first year or two of development,a nucleus of laborers could be recruited and trucked to work daily from Kribi and the few small villages along the road to Ebolowa. Later in the project period, however, labor for land clearance, planting and maintenance would have to be recruited from the more populatedregions of Cameroon. The principlesto be followed in recruitmentare set out in Annex 2. Consideringthat wages would be much -8-

higher than from alternative employment in the recruitment regions, there is every reason to anticipate recruitmentof an adequate work force.

4.07 At present, the project area has neither the housing nor social infrastructureto accommodatea large population. Schools and hospitals as well as adequate housing would have to be provided; in addition, a full range of social activities such as sports, cinema, etc., would be organized under the project. From experience on other estates in Cameroon, such amenities are known to be an important feature in attracting and keeping a satisfactory work force.

4.08 All salaries and wages paid by the estate would be subject to relevant Government legislation. The minimum legal wage (presentlyCFAF 224/day--US$1.00)would be the predominantwage during the planting period. In later years, after tapping begins, the system would permit skilled workers to earn substantialbonuses.

B. Summary Description

4.09 The project comprises the first phase of development--1975/76 through 1979/80--ofa large rubber estate. It would include:

(a) clearing 5,800 ha and planting them with high yielding rubber; preparationof land for a further 1,700 ha to be planted in 1980/81 in a second phase of development;and maintenance of the 5,800 ha of plantings for the duration of the five-year project developmentperiod;

(b) conducting establishmentand yield trials with different clones of rubber, and agronomic research if required;

(c) constructinghousing, health, education, and the social facilities for about 3,000 estate families;and service roads for the estate;

(d) establishinga commissariatto ensure food supplies to estate employees, and also to supervise trials with foodcrops;

(e) establishingand staffing a state-owned company to own and operate the estate; and employing a suitably qualified firm to:

(i) manage the new company,

(il) prepare a follow-up project, including continuation of pedologicaland topologicalstudies, and - 9 -

(iii) train Camerooniansat all levels of responsibilityon the estate; and

(f) preparinga master plan for the developmentof the Kribi region which emphasizesthe productionof perennialcrops.

The estate would be owned and operated by a Government-ownedcorporation, HEVECAM,which would employ the management services of SAFACAM,a Cameroon- ian estate-operating company which is itself affiliatedwith SOCFIN, a well- known internationalcorporation specializing in tropical estate productioh and sales (Annex 3).

Phasing

4.10 Governmentsees the proposed 5,800 ha project as a first step in establishinga 15,000 ha estate. If for some reason Government'splans did not materialize,the rubber planted under the project would need to be brought into full production,requiring seven years and further investment. Rubber trees must be maintained for six years before being tapped, and thus those planted in PY 5 would not be prepared for tapping until PY 12. A decision on the scale and type of processingfacilities would be made in PY 6. The Governmentwould assume responsibilityfor creation of a completed estate (para 5.08).

C. Detailed Features

The Planting Program_(Annex2)

4.11 Land clearingwould start one year in advance of planting. The schedule for the planting program would be as follows:

Hectares Cleared and Planted

1975/76 1976/77 1977/78 1978/79 1979/80 Total

Cleared /1 300 700 1,500 2,500 2,500 7,500

Planted - 600 900 1,800 2,500 5,800

/1 Net of roads, housing sites and boundaries; these togetherwould add some 16% to the figures given.

Of 2,500 ha cleared in 1979/80, 1,700 ha would be made ready for planting the followingyear in the second-phaseproject if such further planting is confirmed to be justified. - 1o -

4.12 For agronomic reasons, felling of the primary forest and clearing of planting lines would preferably be done by hand labor. Such work has been satisfactorilycarried out by Cameroonianprivate contractors in other parts of the country, and this means would be the first choice for clearance of the proposed estate. If private contractorsshould not be attracted at a reasonableprice, or should prove unsatisfactory,the estate management would have the option of clearing the land on force account using mechanized equipment. Some crawler tractors would be needed in any case, since they could be used for road constructionand civil works, and thus two tractors are expected to be delivered in Year 2. Should clearing by mechanized equipment prove necessary, a total of 13 heavy-duty tractors would be provided under the project.

4.13 The estate would be divided into four sectors of about 3,750 ha each, and each of these into four divisions of 900-1,000 ha. Planting par- cels would be units of about 100 ha, which would be aligned to conform with the topographyand thus take account of steep slopes or streams. As far as practical, the planting lines would be on an east-west axis, the prevailing wind direction. Planting would be on a 7.5 x 2.4 m grid, giving an initial density of 555 trees per hectare. Simple earthwork drains would be con- structed as needed.

4.14 Planting material would be produced by the estate. As an advance measure, a budwood garden was prepared and planted in 1974/75. No problems are expected in obtaining adequate supplies of rubber seed for root stocks, cover-crop seed, and budwood for budding the root stock, as these are available from IRCA and other rubber estates in Cameroon. Four clones would be used for budding: PR 107 (45% of plantings),GT 1 (30%), PB 86 (15%), and PB 5/51 (10%); these proportionsmight be varied on the basis of experience. The PR 107 clone is favored because it thrives on relativelyacid soils such as found on the estate site.

4.15 The favored planting technique would be to plant seed directly in the sail, with up to 16 seed at each planting point so that a progressive selection of the seedlings could be made. This method has the advantage of siinplicity, as the single seedling eventuallyremaining would be available for budding at any time from eight to 18 months after initial planting. The seedling would be budded with one of the clones listed in para 4.14. However, this system is not free from the risk of damage by animals, such as rats and other rodents, that eat rubber seedlings. For this reason, one-third of the plantings would be with root-stock seedlings grown in plastic sacks in a nursery and with two seedlings to the sack. These seedlingswould be budded, and the less vigorously growing plant of the two would be removed in due course.

4.16 Following planting of the cover crop, further operationswould be the maintenanceof the plantings -- mostly by hand weeding and machete slashing, and perhaps by mechanized equipment. Natural losses and thinnings would reduce the initial stand of 555 to a satisfactory450 plants/ha on average at maturity. Clone Field Trials

4.17 Selectionof the four clones to be used for the plantationis based on 20-year yield data from numerous locations. There are other clones that have promising characteristices,and which might prove to be better suited to conditionsin all or part of the project area. A preliminarylist of 13 such clones has been selected and it is proposed that field trials involvingplant- ing 5-10 ha with each of these clones should be institutedunder the project. Details are in Annex 2.

Utilities.Rousing and Amenities,and Infrastructure

4.18 Constructionof a central village, starting in 1976/77,would provide accommodationsfor managerialstaff and labor; offices and stores; and initiallyone school and one wing of the project hospital. The processing facilitieswould eventuallybe located close to the village site but would not be needed until PY 8. Five satellitevillages -- of 16 sched- uled -- would be built with work beginningin 1975/76. The central village would be equippedwith a permanentwater supply and initiallya temporary electric power source. This latter would be replacedwith a permanent power source (see para 4.05). Each satellitevillage would have electricity, water supply, shelter for storage and markets, and a social meeting hall. Amenities for staff would be two club houses, with appropriatefacilities; constructionwould be initiatedunder the proposedproject.

4.19 About 120 km of plantationroads would be built under the project, includingthe main access road (para 4.04). Most project plantingswould be accessible from a good existing logging road, and satisfactoryarrangements have been made for the use of this road (it would in time become redundant). Plantation roads would be built to minimum standards,and upgraded in later years (Annex 2, Table 2).

Food Supply Unit

4.20 A commissariatwould be needed to supply the estate population, possibly amounting to eventually 25,000-30,000people, with foodstuffs. A preliminarystudy by SEDA, under FAC finance, recomended that HEVECAM should test over several years the feasibilityof organizedfood productionin the concessionarea. To this end, plots would be prepared and planted with foodcrops such as rainfed rice (especiallyin swampy areas not suitable for rubber), malze, rootcrops,plantain, vegetables, groundnuts, and fruit. It would be decided by PY 5 whether and to what extent food productionwould be organizedwithin the concession. Subject to this decision, the commissariat would operate along the followinglines:

- Commercialchannels would be utilized to establisha regular supply of specific foods, in general from major sources of production for each product: rice from Semry, oil from Mbongo, sugar from Mbandjok, etc. - 10 -

4.12 For agronomie reasons, felling of the primary forest and clearing of planting lines would preferably be done by hand labor. Such work has been satisfactorily carried out by Cameroonian private contractors in other parts of the country, and this means would be the first choice for clear- a*ce of the proposed estate. If private contractors should not be attracted at a reasonable price, or should prove unsatisfactory, the estate management would have the option of clearing the land on force account using mechanized equipment. Some crawler tractors would be needed in any case, since they could be used for road construction and civil works, and thus two tractors are expected to be delivered in Year 2. Should clearing by mechanized equipment prove necessary, a total of 13 heavy-duty tractors would be provided under the project.

4.13 The estate would be divided into four sectors of about 3,750 ha each, and each of these into four divisions of 900-1,000 ha. Planting par- cels would be units of about 100 ha, which would be aligned to conform with the topography and thus take account of steep slopes or streams. As far as practical, the planting lines would be on an east-west axis, the prevailing wind direction. Planting would be on a 7.5 x 2.4 m grid, giving an initial density of 555 trees per hectare. Simple earthwork drains would be con- structed as needed.

4.14 Planting material would be produced by the estate. As an advance measure, a budwood garden was prepared and planted in 1974/75. No problems are expected in obtaining adequate supplies of rubber seed for root stocks, cover-crop seed, and budwood for budding the root stock, as these are available from IRCA and other rubber estates in Cameroon. Four clones would be used for budding: PR 107 (45% of plantings), GT 1 (30%), PB 86 (15%), and PB 5/51 (10%); these proportions might be varied on the basis of experience. The PR 107 clone is favored because it thrives on relatively acid soils such as found on the estate site.

4.15 The favored planting technique would be to plant seed directly in the soil, with up to 16 seed at each planting point so that a progressive selection of the seedlings could be made. This method has the advantage of simplicity, as the single seedling eventually remaining would be available for budding at any time from eight to 18 months after initial planting. The seedling would be budded with one of the clones listed in para 4.14. However, this system is not free from the risk of damage by animals, such as rats and other rodents, that eat rubber seedlings. For this reason, one-third of the plantings would be with root-stock seedlings grown in plastic sacks in a nursery and with two seedlings to the sack. These seedlings would be budded, and the less vigorously growing plant of the two would be removed in due course.

4.16 Following planting of the cover crop, further operations would be the maintenance of the plantings -- mostly by hand weeding and machete slashing, and perhaps by mechanized equipment. Natural losses and thinnings would reduce the initial stand of 555 to a satisfactory 450 plants/ha on average at maturity. - 13 -

cases that might increase the obligationsof Government under the Credit Agreement; an assurance on this point was obtained from Government during negotiations. In other respects, HEVECAM would function as a normal commercial entity.

Management

4.25 HEVECAMwould be managed by a Director General, who would have full autonomy in day-to-day operations. Below the Director General, there would be four departments: Medical; Administrative, charged with accounting, purchases and sales, and personnel; Industrial,charged with the factory, workshops and garage; and Technical. The key positions are those of Direc- tor General and Managers of the Technical,Administrative and Industrial Departments;assurances were obtained at negotiationsthat appointment to these positionswould be subject to IDA's approval. The field organization would have four sector chiefs, each in charge of about 3,750 ha of rubber; and 16 division chiefs, four for each sector. The field organizationwould initially be managed by the Director General, with advisory support from the Technical Director. Eventually, since the estate may expand to a large size, it probably would be desirable to create a Deputy Director/FieldMan- agerts post; this post is shown on the Organization Chart (IBRD-9584) but has not been costed into the proposed project.

4.26 The Director General and other senior staff would be provided under contract by la Societe Africaine Forestiere et Agricole-Cameroun(SAFACAM) as part of a management and technical assistance agreement (Annex 3, Appendix 1). Most, if not all of these persons would be expatriatesbecause there are few Cameroonianswith the requisite experience and those that have are engaged in other estate enterprises. Although SAFACAM would not be prevented from recruiting personnel from these other enterprises,it could meet only a small portion of its requirementsin this way. All personnel supplied by SAFACAM would be subject to the approval of HEVECAM's Board and, once appointed, would be considered as employees of HEVECAM.

4.27 Under the technical assistance agreement, the Director General would call on SAFACAM for assistance in drawing up annual work programs and other directives including:

- definition of the areas to be planted;

- specificationof planting and maintenance techniques;

- establishment and management of estate services;

- development of infrastructureand installations;

- specificationof tapping and other production techniques;and

- training schedules. - 14 -

SAFACAM would also provide visiting experts to make inspectionsof project activities every six months and report their observationsto HEVECAM. Such experts probably would be recruited from estate companies affiliated with SAFACAM.

4.28 Under the contract, SAFACAM would be remuneratedaccording to a formula based on a fixed annual fee and the level of investmentsmade during the previous year. It is considered that this formula, which is of the kind generally used in the industry, would provide a balanced incentive for good management. The initial contract would be for eight years, renewable every four years. IDA has reviewed and approved a draft of the management contract, whose signing would be a condition of effectiveness. This contract and any proposed modificationswould be acceptable to IDA, and assurances on this point were obtained during negotiations. Details are in Annex 3.

Staff, Labor and Training

4.29 Project staffing schedules are at Annex 2. Supervisoryand professional staff would increase from five in PY 1 to 25 in PY 12. Profes- sional and experiencedstaff likely to be supplied from outside Cameroon are expected to rise from three in PY 1 to 15 in PY 5, and thereafter to decline to five by PY 12, although the actual pace of Cameroonization would depend on the success of training programs and overall Government policy. SAFACAM would undertake a contractualobligation to train Cameroonians to replace expatriates in line with an agreed schedule (para 4.32).

4.30 The number of junior staff and workers would increase from 178 in 1976 to about 2,300 in 1980, at completion of the 5,800 ha plantings, and to full employment of about 7,500 in 1998 assuming completion of a 15,000 ha estate. Experience on other rubber estates in Cameroon is that a satisfactory labor force can be successfullytrained for plantation work, including tapping which is the most important labor function on a rubber estate. Apart from clerical staff, which would be mostly trained outside the project, SAFACAM would organize appropriate training programs for its work force.

4.31 The estate staff would include doctors and other personnel for the medical services, and these would be provided for under the project. Teachers for the project schools would be provided and paid for by the Ministry of Education,and an assurance that this would be done according to a schedule agreed with IDA was obtained from Government at negotiations.

Recruitment and Training of Universitv Graduates

4.32 Developmentof the Kribi area will call for the training of substantial numbers of Camerooniansin rubber agronomy, technology,and estate management. It would be very desirable to give young university recruits on-the-job training and experience that would give them a sound introduction co the industry, and enable management to prepare training and career pro- e.nsfor future leaders. For management posts, university graduateswould - 15 -

be recruitedand trained for at least one year in the field, in assignments that would allow them to learn the day-to-daywork of the estate. For the technicaldepartment, science-curriculum graduates would be recruited and, after their first year in the field, would be sent abroad for a stay in the established technicaldepartment of an estate company. The training program would be submitted to IDA from time to time, with review by supervision missions, and an assuranceon this point was obtained at negotiations.

E. Accounts and Audit

4.33 HEVECAM would maintain records consistentwith sound accounting practices and adequate to reflect its operationsand financialcondition. The accounts would be audited by both the Governmentauditor and by an independentprofessional firm of auditors. Such an arrangementis prac- ticed by SOCAPALM, an oil palm company financed by the Bank (para 3.01), successfully. During negotiations,assurances were obtained that: (a) an independentfirm satisfactoryto IDA would be employed to audit HIEVECAM accounts; (b) the form of audit would be agreed with IDA; (c) copies of HEVECAM's accounts and the auditors'reports thereon would be submitted to IDA within four months of the end of each financialyear; and (d) that the auditor's report would be of such scope and in such detail as IDA may reasonably have requested. Further details on the audit arrangementsare at Annex 4. HEVECAM's financialyear would be July 1 to June 30.

V. COST ESTIMATES AND FINANCING ARRANGEMENTS

A. Cost Estimates

5.01 The cost of this first phase of rubber development, including regional studies,would be CFAF 5,220 million (US$23.2million) net of taxes. The total cost would be CFAF 6,415 million (US$28.5million) including taxes (US$5.3million) as summarizedbelow: - 16 -

CFAF Million US$ Million Foreign Local Foreign Total Local Foreign Total Exchange

Pl&ntation Development 723 523 1,246 3.3 2.3 5.6 42 Materials and Equipment 84 753 837 0.4 3.4 3.8 90 Buildings and Construction 336 275 611 1.5 1.2 2.7 45 Fi*ed Expenditures:

Professional Staff: - Expatriate 185 277 462 0.8 1.2 2.0 60 - Local 69 17 86 0.3 0.1 0.4 20 Other Local Staff 87 16 103 0.4 0.1 0.5 16 Water and Power 27' 49 76 0.1 0.2 0.3 65 Other Administrative 185 226 411 0.8 1.0 1.8 55

Food Crop Development 52 78 130 0.2 0.4 0.6 60 Project Related Studies 20 30 50 0.1 0.1 0.2 60 Technical Assistance (SAFACAM) 45 182 227 0.2 0.8 1.0 80 Regional Studies 83 192 275 0.3 0.9 1.2 70

Base Cost Estimate 1,896 2,618 4,514 8.4 11.7 20.1 58

Physical Contingencies 95 131 226 0.4 0.6 1.0 58 Expected Price Increases 703 972 1,675 3.1 4.3 7.4 58

Subtotal 798 1,103 1,901 3.5 4.9 8.4 58

TOTAL PROJECT COST 2,694 3,721 6,415 11.9 16.6 28.5 58

5.02 Cost estimates are based on prices ruling at the end of 1974, and on recent experience of rubber development projects in Cameroon and other Aftican countries. They exclude import duties; a confirmation of Govern- ment's intentions to exclude project imports from such duties was obtained during negotiations. The cost estimates also provide for: (a) a physical contingency of 5%; and (b) expected price increases at the following annual colnpoundedrates for both local and foreign costs: for building and civil warks, 16% in PY 1, 14% in PY 2, 12% in PY 3 to 5; for equipment, including vehicles, and all other costs, 12% in PY 1, 10% in PY 2, and 8% in PY 3 to 5. Total contingencies amount to 42% of the estimated base costs. - 17 -

B. FinancialArrangements

Proposed Financing

5.03 The project would be financed by Government, IDA and the French CCCE. The proposed financing plan is summarizedbelow:

Project Component IDA CCCE Government Total …---US$ Million------

PlantationDevelopment 3.2 .9 1.5 5.6 Materials and Equipment 2.2 .6 1.0 3.8 Buildings and Construction 1.6 .4 0.7 2.7 Fixed Expenditures 2.5 .7 1.8 5.0 Food Crop Development 0.3 .1 .2 0.6 Project Related Studies 0.1 .1 - 0.2 TechnicalAssistance 0.6 .2 .2 1.0

Subtotal 10.5 3.0 5.4 18.9

Regional Studies 0.7 .2 0.3 1.2

Total Base Costs 11.2 3.2 5.7 20.1

Contingencies 4.8 1.2 2.4 8.4

Total 16.0 4.4 8.12/ 28.5

Percentages (includingtaxes) 56%L/ 16% 28% 100% /1 Government'sshare includes US$0.8 million of corporatefees to be fully paid by Government. Excluding these fees, IDA's financingshare would be 58%. 5.04 Excluding taxes of about US$5.3 million, or about 18% of project costs, the IDA credit would finance about 69% of project costs net of taxes, almost equivalentto the foreign exchange costs; CCCE's contribution,about 19% net of taxes; and Government'scontribution about 12% of project costs net of taxes.

5.05 Part of Government'scontribution would be made as equity payments from its developmentbudget. Conditionsof effectivenesswould be that: (a) a first equity contributionof CFAF 300 million had been paid by Government, i and (b) a schedule for the payment of the remainder of Government'scontribution had been agreed by Governmentand IDA, and (c) a CCCE loan agreement to Government,satisfactory to IDA, had been concluded. To ensure that adequate funds would be available,an assurancewas obtained from the Gov- ernment that HEVECAM's cash and bank balances, includingundrawn overdraft facilitiesguaranteed by Government,would at all times cover HEVECAM's expendituresduring the four-monthperiod following,but in any event be not less than CFAF 300 million. This assurance is essentialbecause rubber prices have a long history of fluctuatingsubstantially, and a drop to the levels of the late 1960's could cause severe financial strains for HEVECAM. - 18 -

5.06 The proposed IDA credit would be for US$16 million, made to the United Republic of Cameroon on standard terms, and would cover 56% of total costs including taxes and US$0.8million in corporate fees which would be paid by Govern- ment. CCCE would lend US$4.45 million equivalent to Government, for a term of 20 years, including 10 years of grace, with interest at 5.5%; the CCCE loan would finance 16% of total costs. Governmentwould finance the remaining 28% of total costs. About US$15.1 million of the proceeds of the IDA credit togetherwith the CCCE and Government contributions would be made available to HEVECAMas equity (45%) and a subloan (55%). The equity contributionof US$12.2 million would consist of US$3.5 million IDA funds, US$7.7 million Government funds, and US$1.0 million Caisse loan funds. The subloan of US$14.8 million would consist of US$11.6 million IDA funds and US$3.2 million of CCCE loan funds, and would be made by the Government to HEVECAM under a Project FinancingAgreement that is a conditionof effectivenessof the credit. The proposed subloan would be for 30 years at a 5-1/2% interest rate; no interest would be charged during the 15-year grace period. Hence, the effective interest rate on the subloan over 30 years would be below 2%. The above financial arrangements reflect the fact that in rubber projects yields only begin in PY 8 and do not reach their maximum before py 18. The arrangements would enable HEVECAMto meet its operating costs as well as debt service obligations and to build up adequate cash balances out of self-generated funds.

Advance Contracting and Possible Retroactive Financing

5.07 Some preparatorywork, involving advance contracting and amounting to a maximum of US$0.4 million (para 5.09), had to be initiated prior to Board Presentationsince otherwise a whole year of planting would have been lost. IDA and CCCE would finance such eligible expendituresretroactively to the extent that payments are made before signing.

Project and Program Completion

5.08 If for any reason Government's plans to expand the estate to 15,000 ha did not materialize, the rubber planted under the project would constitute an economic unit, although its completion,i.e. bringing all 5,800 ha into full production, would require a total of seven years and some US$11 million (net of taxes and contingencies) in addition to the cost of the five-year project. The Government would assume responsibility for providing, or causing to be provided, these funds since IDA can give no commitment at this stage; an assurance to this effect was obtained at negotiations. At a later stage, however, the Bank Group and CCCE would consider financing either the remaining development of the 5,800 ha, or further expansion,on the basis of the preparationwork financed during the first phase. - 19 -

C. Procurement

5.09 Procurementwould be through internationalcompetitive bidding (ICB) under IDA guidelines except for items mentioned below and individual contracts not exceedingUS$60,000 which would be let locally under competitivebidding proceduresadvertised locally that would be agreed with IDA. Goods manufac- tured in Cameroon or in countrieswhich are party to Central African States Customs Union (UDEAC)would be granted a preferenceof up to 15%, subject to standard provisions,and prequalifiedCameroonian contractors a preference of 7-1/2%. Procurementfor clearing land by contractorhand labor, if arranged (see para 4.12), would be under these procedures. If not, most land clearing,road building and other constructionwould be done on force account (US$4 million). Assuming that land clearanceis mechanized,goods and services subject to ICB -- largely machinery,vehicles and equipment and fertilizers -- are estimated to cost US$5 million. This comparativelysmall amount reflects the large componentof project costs that comprises labor and management. A minimum amount of land-clearingequipment, costing US$0.38 million, has already been ordered under ICB, with IDA and CCCE approval,because delivery is expected to take 12 months and otherwise the project might have been delayed. Arrangementsfor the provisionof managementservices by SAFACAM would be acceptable to IDA. An assurancewas obtained at negotiations that the above procurementarrangements would be followed.

D. Disbursement

5.10 Disbursementsby IDA and CCCE would be in the proportions58:17. Disbursementswould be on a standard documentedbasis, includingwhere appropriateperiodic work certificates,the full documentationfor which would be retained by the Borrower and made availablefor inspectionby the Associationduring the course of supervision.

5.11 Proceeds of the IDA credit would be disbursed to cover 58% of total expenditures of the following items, excluding corporate fees which would be fully paid by Government: (a) civil works and plantations - US$4,800,000

(b) equipment and materials - US$2,200,000

(d) food crop development - US$300,000

(e) technicalassistance - US$580,000

(f) project related studies - US$120,000

(g) master plan - US$700,000 - 20 -

US$4.8 million, representing contingencies, would be unallocated. Any unused balance would be used to fînance similar activities which have been reviewed in the appraisal of this project.

VI. PRODUCTION, MARKETING, AND FINANCIAL RESULTS

A. Yields and Production

6.01 Project yield estimates are based on results obtained over many years from plantîngs of the clones that would be used on the estate. A yield and production schedule is at Annex 2. At peak yields during the 1990's, the estate's yearly output is estimated at about 34,000 tons of rubber, double Cameroon's 1974 output, but a negligible percentage of world production which is now 3.5 million tons (Annex 7).

6.02 Yields are estimated to increase gradually frorn150 kg/ha in the first year of tapping ( PY 8 ) to 2,300 kg/ha after 10 years; to remain at the latter level for a further eight years; and thereafter to decline to 2,000 kg/ha by the end of the tapping period ( PY 36 ).

B. Marketing and Prices

6.03 It is assumed that project production would be exported as block rubber. Block rubber has the advantage that its technical qualities can be specified accurately; because of this it is in demand by manufacturers. Other tvpes of rubber could also be produced but a decision on this would be taken at a later stage in project development when market demand for special types of rubber could be evaluated better. A final decision would not be needed until 1981 when construction of the estate's processing plant would have to beg in.

6.04 Marketing arrangemlentswould be made by SAFACAM, if so requested by HEVECAM. Specifie arrangements would not need to be made before the contract comes up for renewal, and proposals would be submitted to IDA for approval before adoption; an assurance to this effect was obtained during negotiations.

6.05 The market for natural rubber is discussed in Annex 7. Over the past 25 years, world consumption of natural and synthetic rubber has expanded at 6.2% per year, and natural rubber alone at 2.5%. The price of rubber has fluctuated sharply in recent years, in response to economic conditions and the effect of the oil crisis on synthetic rubber: from 16.5t/lb (USe per pound) in 1972, the price of natural rubber rose to about 444/lb in July 1973, and then feli back to 30j!lb in December 1974. No drastic changes are expected in the short term. Long term prospects are favorable for - 21 -

natural rubber, and the expectedworldwide expansionof rubber production, including that of the project, could be accommodated. Taking account of the possibilityof lower chemical prices in the 1980's,a long run equilib- rium price of natural rubber is forecast at around 35/lb (in 1974 dollars); at this price it would be competitivewith forecast prices for synthetic rubber.

C. FinancialResults

6.06 Statementsof income and sources and applicationsof funds for HEVECAM are at Annex 6. Net annual income, after debt service and income tax, would become positive by Year 11, and would increase to a peak of about CFAF 1.3 billion by Year 20. Assuming that HEVECAM would first build-up a working capital balance of about CFAF 0.6 billion, cash revenues could then contributeto investment costs over the last five years of the 15,000 ha estate program (Annex 6). Assuming CFAF 8.9 billion to be required to complete the program, the overall financial rate of return to Governmentwould be 14%. (It will be noted that this is the same as the economic rate of return -- para 7.02 -- because no shadow prices have been used and taxes that are a cost to HEVECAM are revenue to its sole owner, Government.)

6.07 The Governmentcash flow (Annex 6), taking into considerationtax revenue from project operations,shows an annual net surplus by Year 13. Assuming that Governmentwould bear the net investmentcost for completing the full 16-yearprogram, a cumulativesurplus would start in Year 19. These figures are conservativebecause they ignore revenues from indirect taxes, as these revenues are difficult to estimate.

VII. BENEFITS AND JUSTIFICATION

7.01 The program would contribute to the realizationof important Government socio-economicdevelopment objectives. First, at peak production, the completed5,800 ha estate would produce 13,000 t of rubber (77% of Cameroon's present output), a level that could be sustainedfor more than 20 years without major replacements. Net foreign exchange earnings of US$7 million would be generated each year, decreasingCameroon's still heavy reliance on two major export crops -- cocoa and coffee,whose export prospects are limited. Second, the project, being labor intensive,would provide secure employment to 3,000 employeesand their families -- 10 - 12,000 people in total -- most of them from the north, and considerable improvement in their standardsof living. Satellite foodcrop production, trade and transportactivities would also develop. Third, it would help spread the benefits of developmentmore evenly among regions by opening up an area with good potentialfor successful establishmentof other - 22 -

estate and smallholderplantations which would ultimately form a whole new agroindustrialcomplex in the hinterland of the port of Kribi.

7.02 The economic rate of return on the project is estimated at 14%. Sensitivity analysis indicates that a cost increase of 10% would reduce the rate to 12.5%; a 25% increase would reduce it to about 11%. A combined 10% increase in costs and 10% decrease in benefits would decrease the return to 11%. A combination of 20% cost increase and 20% benefit decrease would reduce the rate to nearly 8%. The rate of return is expected to be satisfactory.

7.03 The above calculations of the economic rate of return are based on the assumption that: either (a) the proposed project is planned and executed as the first phase of a 15,000 ha estate, in accordance with Gov- ernment's present intentions;or (b) that the estate is not enlarged beyond the 5,800 ha covered by the proposed project and that the decision to do this will be taken early enough, say in the first or second year, to enable the phasing of development to be planned and executed in the most economic way. In both cases the rate of return is the same to the nearest percentage point, since there are only minor economies of scale in the development of such large areas. The detailed tables in the annexes have been prepared on the assumption that the full 15,000 ha would be developed.

7.04 It is possible that changes in market prospects may lead to a decision to restrict the size of the estate to 5,800 ha only in the 4th or 5th year of the project. In this case, the rate of return would fall to about 11%, because the timing of investmentswould have been appropriate to the larger estate and heavier in the early years. Separate rate of return and cash flov calculationshave been prepared on this assumption (Annexes 6 and 8).

7.05 The progress of the project, and of the preparationwork for a possible second phase, would be reviewed annually with Government and CCCE, in order that a decision on the final size of the estate can be arrived at as early as possible. Assurances to this effect were obtained during negotiations.

7.06 The project would entail the risk that, as a pioneering venture in an unexploitedregion, there can be no certainty that a satisfactorylabor force would be created. It is highly probable that labor from overpopulated areas would be attracted by the regular wages offered by the estate. The danger is that, if proper measures are not taken to make their lives satisfactory, they would return to their home villages. The project provides for the housing, health and education facilities that would be the best safeguard against such risk. - 23 -

VIII. AGREEMENTS REACHED AND RECOMMENDATION

8.01 During negotiations,the following principal assurancesor agreements were obtained:

(a) concerning the general scope of and arrangementsfor a master plan of the Kribi region, with firm recommendations on transport requirements to be ready by 1978 (para 3.08);

(b) all facilitiesand title to or rights in respect of land required for the carrying out and operating the project would be provided promptly, and free of restrictions, encumbrances or liabilities on the use thereof (para 4.01);

(c) to take all measures necessary to improve roads and bridges tb assure year-round through traffic between Kribi and Douala, via Edea, by December 31, 1976; and heavy trucks would be given permission to use the present bridge over the Sanaga River (para 4.04);

(d) the Government Commissioner's right of delay would be restricted to cases that might increase the Government'sobligations under the Credit Agreement (para 4.24);

(e) appointmentsto the positions of Director General and Managers of the Technical,Administrative, and IndustrialDepartments would be subject to IDA's approval (para 4.25);

(f) the contract for SAFACAM services and any proposed modifications would be acceptable to IDA (para 4.28);

(g) the Ministry of Education would provide and pay teachers for the project schools according to a schedule agreed with IDA (para 4.31);

(h) the training program would be submitted to IDA for review from time to time (para 4.32);

(i) that Governmentwould exempt HEVECAM from import duties on project development items (para 5.02);

(j) IIEVECAM'scash and bank balances, including undrawn overdraft facilitiesguaranteed by Government,would at all times be sufficient to cover the forthcomingfour months' expenditures and in any event not less than CFAF 300 million (para 5.05); - 24 -

(k) Government would assure the provision of finance for the maintenance and productive exploitationof trees planted under the project and appropriateprocessing facilities (para 5.08);

(1) proposals to establish marketing arrangementswould be submitted to IDA for approval (para 6.04);

(m) the progress of the project would be reviewed annually with IDA and CCCE (para 7.05).

8.02 Conditionsof effectivenesswould be:

(a) the management contract between HEVECAM and SAFACAM had been signed (para 4.28);

(b) a first equity contribution of CFAF 300 million had been paid by Government, and a schedule for the payment of the remainder of Government's contribution had been agreed to by Government and IDA (para 5.05);

(d) a Project Financing Agreement, satisfactoryto IDA, had been entered into by Government and HEVECAM(para 5.06).

8.03 With the foregoing assurances and conditions, the project is suitable for an IDA Credit of US$16 million. ANNEX I Page 1

CAMEROON

NIETE RUBBER ESTATE PROJECT

Draft Scope of Work for a Master

DevelopmentPlan for SouthwestRegion

Background

1. The southwestregion extends about 100 km along the southern coast, beginning some 30 km north of Kribi, to the border with continentalEquato- rial Guinea, and inland about 45 km (see Map 1). The total area of this region is around 500,000 ha. The climate and soils are generallysuitable for a range of tree crops includingrubber, oil palm, and coconut. The land is flat or gently undulating. The region is almost completelyunpopulated, due to the density of the forest and historicalfactors such as tribal con- flicts which, however, are no longer a barrier to development.

2. Interest in developmentof the region has been kindled by its choice for location of a large Government-ownedrubber estate,preparation of which envisages 15,000 ha. The first 5,800 ha of this programwould be financed as a separate five-yearproject, which would also finance the preparation of the master plan outlined herein. During the feasibilitystudy and appraisalof the rubber estate, it became apparent that comprehensive planning for the future developmentof the region should begin as soon as possible.

3. To begin with, the Government's15,000 ha rubber estate program, being labor intensive,would provide secure employmentto 7,000 employees and their families -- 25-30,000 people in total -- most of them from the poorest regions of Cameroon, and considerableimprovement in their standards of living. Satellitefoodcrop production,trade and transportactivities would also develop. It would open up an area with good potential for successfulestablishment of other estate and smallholderplantations which would ultimatelyform a whole new agroindustrialcomplex in the hinterland of the port of Kribi. As a conservativeestimate, at least 30% of the total area -- say 150,000 ha -- should be suitable for tree crops. Develop- ment of the area should begin with estates, as the laborersneeded, together with their families,would form the core of a permanentpopulation for this empty but fertile area. A series of second generationprojects would encourage outgrowers,once the base for their successfulestablishment had been laid. This phasing of developmentis justifiedbecause (a) nuclear estates are necessary in any case, (b) they support developmentof infrastructure and the acquisitionof agronomicknow-how, and (c) outgrowerdevelopment can be accomplishedat a much lower cost if postponed until nuclear estates ANNEX I Page 2 are well established. From now to the turn of the century, it is possible to envisage successive"rollover" projects developingsome 100,000 ha or more. At completionof such a program, the region would support some 300,000 or more people and there would have to be substantialdevelopment of food, meat and fishery production. The transportrequirements for imports and exportswould be very large.

Mode of Development

4. The main estate crops are now oil palm and rubber. The existing estates are concentratedin the western and coastal lowlands in two state- owned plantations: CAMDEV -- 30,000 ha; SOCAPALM-- 7,000 ha planted and a further 7,500 ha to be completedby late 1977; and two private plantations. CAMDEV and SOCAPALM have carried out extensiveoil palm plantings in recent years under projects partly financed by the Bank Group; developmentof outgrower oil palm around existing estates is also an objectiveof the Bank Group projects. The creation of HEVECAM, to own and operate the Government's proposed 15,000 ha estate, adds a third state-ownedplantation company. Estate crops are being developedmainly by these state-ownedcompanies, because the small private estate sector, which is foreign-owned,is reluctant to increase substantiallyits own investment;and there is not much likelihood that a nationally owned private estate sector will come into existence in the foreseeablefuture. Further, the existing state-owned companies are successfulventures with efficient managements. For these reasons, it would be realistic to plan for furtherdevelopment to be carried out by state-ownedcompanies, bringing each to the size of a large, modern estate company. They could share technicaland commercial services.

Master Plan

5. To take advantageof and preserve the opportunityoffered by the Kribi area, a master plan for developmentof the area should be prepared as soon as possible. This plan would be based on a land-use survey and in addition should:

(a) take account of the need to achieve a balanced development of industrialestates and outgrowers;

(b) consider the creation of a specializedorganization for land clearance,which would be required on a large scale; and

Land Use Survey

6. The land-use survey would be based on the assumptionthat oil palm and coconut as well as rubber would be consideredfor development. Re- cognized sampling and analyticalprocedures would be followed, specifically ANNEXI Page 3 including topographic,pedologic and climatic studies. Preparationof soîl and water surveys should be preceded by considerationof the quality and extent of the detail already in existence. Then the best location for the various types of tree-crop estates could be specified and areas reserved for food crop farming. Once the pattern of land use is known, more detailed planning would be possible as to where population centers should be located, etc. The basic surveys and mapping would likely take some time, and these should get underway as soon as possible.

Study of InfrastructureNeeds

7. The long-term infrastructureneeds of the southwest region would be determinedby the size and phasing of the developmentprogram. Forecast plans to provide essential utilitieswould be the responsibilityof the appropriateministries. Since the region has neither the housing nor social infrastructureto accommodatea large population,the development program would also have to provide for schools and hospitals as well as adequate housing. The transport part of the infrastructurestudy would have to consider, in particular,the roles to be played by Douala, the country'smain port, and Kribi harbor. The relative advantages of shipping through Kribi or Douala appear to be finely balanced. Kribi is at a river mouth, and requires lighterage to service ocean-going ships anchored offshore. Douala has direct loading at the quays, but is some 200 km from Kribi and the cost of road transportwould be considerable. Kribi is quite congested at present, but expansion is underway. Expansion of general cargo operations could probably be accommodatedwith the present lighterage operation up to a level about three times current volumes, i.e., an additional 40,000 tons of agriculturalexports could probably be handled when the present work is completed in a year or two. Beyond this capacity level, ut appears likely that either comparativelycostly investment at Kribi, or developmentof an alternativesite, would be required. The least-cost evacuation method for rubber and other agriculturalcommodities thus depends upon the period under consideration,the additionallandward costs of evacuation through Douala, and the inconveniencecosts of the less frequent service which can be expected at Kribi. In the longer term, developmentof the agriculturalsector in the Kribi region at a significantrate -- in excess of that being experiencedin the already settled areas of the Douala-Yaounde corridor and West Cameroon -- seems likely to produce a demand for new port facilities in the Kribi area. The transport survey would have to consider the alternativesand be ready with firm recommendationsby the end of 1978, before further plantings under the Government'srubber estate program are finalized.

Review of Perennial Crop DevelopmentPotential

8. It would be essential to support the master plan with a survey of the tree crop industries under considerationfor development. Such a survey, includinghistorical developmentin Cameroon, structure of the industry, market prospects, etc. has already been carried out for rubber, in connection with Niete estate. A review of the oil palm industry should consider, in ANNEXI Page 4 particular,the probabilitythat palm oil and kernels produced in the southwest would be high cost and perhaps not competitiveon world markets; thus the absorptivecapacity of the domestic market would be of crucial importance. The role of a coconut industry should be similarlyreviewed.

$pecializedOrganization for Land Clearance

9. The long-term developmentprogram for perennial crops would be conceived in terms of a continuous land clearanceoperation involvingvarious types of plantations. In a desk study, a 15-projectseries of estate-outgrower complexeswas phased into annual clearing programs averaging about 5,000 ha per year over 20 years. In terms of timing, as an illustrative example, it might be possible to prepare and commence an oil palm program in the southwest region in 1979, after the Niete Rubber Estate has passed out of its initial start-up period. The most efficientway to handle a long- term "rollover"land clearanceprogram would be to have a specializedorganization. The methods to be used cannot be prejudged, as the question of jnanualversus mechanized clearancehas not yet been answered. The form of organization,and the best planning approach,would be some form of con- sortium, or interim committee,of the three companies to be involved in the southwestdevelopment.

Ancillary Studies

10. Preparationof the Government's15,000 ha rubber program proved the desirabilityof taking a long-term viewpoint toward the related problems of labor supply for the estates and food supply for the estate famdlies. The master plan would essentiallybe a continuationand expansion of the demographicand food supply planning begun in connectionwith Niete estate.

Welfare of Pygmies il. There are an estimated 3,000 forest-dwellingpygnies in Ocean Departmentwhose way of life might be impinged upon by a large-scaledevelop- ment program. The welfare of the pygmies would be consideredin the preparation of the master plan.

Coordinationwith Niete Rubber Estate Project

12. The master plan would initiallyconcentrate on the general com- position and phasing of a long-term program for perennial crop development. The next step would be a review of the draft plan, followed by a final revision. At this point, it would be appropriateto draw-up specific terms of reference for preparationof investmentproposals. The crucial decision would be to establish prioritiesin terms of what estate project should be the next to be "rolled" into the action program. ANNEX I Page 5

Ministries Involved

13. Cameroon has a substantialcapability for developmentplanning. Thus, the master plan could be prepared by the establishedGovernment planning agencies,with the assistanceof consultants. Various ministries would be involved,and it would be desirable for the Ministry of Planning to be assigned a coordinativerole. In particular,but not exclusively, the followingministries would be involved:

- Planning and TerritorialDevelopment

- Agriculture

- Equipment (Housing and Lands)

- Mines and Power

- Transport

- Territorial Administration

- Employment and Social Insurance

- CommissariatGeneral on Tourism (under Ministry of Industry)

- Post and Telecommunications

- Public Health and Social Welfare

- National Education

- Industrialand CommercialDevelopment

14. In addition, it would be necessary for the three publicly-owned estate companies,CAMDEV, SOCAPALM and HEVECAM, to be involved in the planning effort from the beginning.

Timetable

15. The plan and investmentproposals would be prepared accordingto the followingsequence and tentativetimetable:

(i) Draft land-use plan completed

(ii) Draft Transport plan completed

(iii) Review of draft plan completed ANNEX I Page 6

(iv) Final plan and terms of reference for preparation of investtment proposals completed

(v) Investment proposals coinpleted ANNEX 2 Page 1

CAMEROON

NIETE RUBBER ESTATE PROJECT

The Project Area and Features of Niete Estate

Climatic Conditions

1. The chosen site for this rubber estate, the Lobe River Basin, lies geographicallyabout 3° latitude North and 10° longitudeEast. The soil is good, typical ferrallitic,derived from metamorphicrocks, and comprisingat various levels and in variable quantities iron oxide con- cretions. The hydrographicnetwork is not very dense.

2. The site is gently undulated,at altitudes of generally between 10 and 30 meters, with the exception of a few rocky hills which are excluded from the planting areas. The dominant vegetationis dense, moist forest. The climate is typically equatorial,and characteristicallyhot and humid. There are four seasons, with two relativelydry and two wet seasons annually. The dry periods have less than 100 am of rainfall monthly, but are not drastic since each dry season lasts only for one to two months maximum.

3. The extreme West and East areas are on the isohyets 2,700 and 2,000 mm, respectively. Average rainfall, computed from ORSTOM publications, follows this pattern (monthsand mm/month):

Total J F M A M J J A S O N D Annual

50 100 200 200 300 200 100 100 400 450 200 50 2,350

4. This equatorialclimate is marked by a symmetry of the annual rainfall pattern:

December to February: first dry season March to June: first rainy season July to August: second relativelydry season September to November: second and most important rainy season.

5. Average temperatureof the area oscillatesyear-round between 25°C and 26°C, with a steady average minimum of 220 and average maximum between 270C and 31°C. This is an extremely regular temperaturepattern. ANNEX 2 Page 2

6. The climate differs from the climate prevailing in other areas of the Cameroon where rubber and oil palm estates are planted. The other areas are governed by a transitionalregime between equatorial and tropical climate, with only one dry and one wet season annually. The Kribi area climate, with its two wet seasons, offers a much greater flexibility for the organizationof planting times and is rather similar to the Malaysian climate where rubber and palm growth has been so successful. However, the Malaysian and Indonesian (Sumatra)areas enjoy a relativelyhigher number of sunshine hours annually than does the West African coast, where overcast skies generally prevail even during relativelydry seasons.

Population and Labor Force

7. The total recorded population of the Akom II district, in which Niete Estate is to be devloped, is only 8,940 persons. The population density is 3.5 persons/km . This very thin population is distributed exclusively along the existing roads, mainly the Kribi-Ebolowaroute. The interior of the district is practicallyuninhabited. Some 3,000 pygmies are estimated to live in the whole of Ocean Department, and some of these no doubt would inhabit or make use of land of Akom II district.

8. Except for some small-scale logging by private companies,economic activity in the area is meagre. Some gravel deposits in the interior are being exploited,and there is artisanal fishing along the coast. The town of Kribi itself, on the coast, has a tourist industry. Fishing would have to be promoted by the Estate management to supply the estate population with fresh fish at low cost. This could be approachedalong the lines of an extension and marketing service.

9. The existing populationbelong to various ethnic groups from other parts of the country. The small numbers of crop farmers in the district, and in surrounding areas of the department, are not likely to provide enough labor for the estate needs. Many would probably choose not to become wage laborers, especiallysince the existing crop farmers would benefit quickly and substantiallythrough the expansion of food cropping for sale to the estate.

10. It will thus be necessary to recruit the bulk of the estate labor force in overpopulatedparts of the Cameroon, essentially the northern area and the higher areas in the west. Other existing estates in Cameroon have been developed with such imported labor, and their experience shows that problems of adaptationcan be readily handled provided that necessary efforts are made for a pleasant and warm reception. At nearby Dizangue Estate, a 6,000 ha rubber estate belonging to SAFACAM (see Annex 3) where conditions of life and work are similar to those anticipated for the Niete Estate, no recruitingefforts have been necessary for many years; an adequate choice of recruits is provided by people who come to the estate seeking employment. ANNEX 2 Page 3

11. Recruitingfor Niete Estate would require initial investments to establishchannels of labor supply, but these costs would soon begin to diminish as satisfiedworkers begin to write relativesin their home villages. It is envisagedthat regular flows would soon begin to be established. Some people from nearby areas would likely become periodic workers, and thus would form a valuable reserve labor pool. With time, the core of a permanent workforce would be formed by satisfied laborers, especially those established permanently with their families and coming from the farther North. It can be expected that, after a number of years, some salaried employeeswould wish to establish themselvesas farmers, taking advantageof the land availabilityin the neighborhood;this would be to the overall advantageof the region, and should not be discouraged. The pattern of recruitmentand settlementdescribed above is now a classic long- term phenomenonwhich has been observed followingthe creation of estates in empty regions. The result is a highly satisfactoryform of balanced regional development.

12. The labor force is likely to come mainly from two regions. The North, with its large populationand scarcity of resources,is a proved source of satisfactoryrecruits for estate labor forces. Ethnic groups of proved adaptabilityare the Toupouri, the Moudang, the Massar, the Guidar and the Kissagas. Enterprisessuch as SEMRY (rice production),SOSUCAM (sugar production),SOCAPALM (oil palm estates) are very satisfiedwith their workers from these ethnic groups. The second source of labor supply would be the West and Northwest, includingthe areas of Bafoussam,Foumbam and the English-speakingregion of Bamenda up to Wum. This latter region has supplied the labor populationfor developmentand operationof some 30,000 ha of rubber and oil palm owned by the CamneroonDevelopment Corpora- tion. The recruitmentof labor amongst the most importantand active ethnic group, the Bamileke, is not likely to be substantialand/or permanent. How- ever, since Bamileke are prone to establish themselveson their own, and are good traders, a sizeable group would likely settle around the estate to grow and sell foodstuffs.

13. Recruitmentwould be based on the followingbasic principles:

- Recruitmentshould be done only in rural zones. It is known that laborerswho have tasted urban life have difficultyin readaptingto countrywork and life.

- Preferably,recruitment campaigns should be made durîng the first quarter of the calendar year, when agricultural work is at a low ebb.

- Recruitmentin a given area would be made after authorization of the Ministry of Labor and in cooperationwith the Labor Inspector. ANNEX 2 Page 4

- Agreement of all local authoritiesshould be obtained (Sous Prefet, village chiefs, municipal counsellor and, eventually,religious authorities).

- An information campaign should be undertaken in each village where recruitmenttakes place, to explain plantation work and the type of existence to be expected on the estate. The informationgiven must be accurate and realistic to avoid later difficultiesdue to misunder- standings as to what to expect.

- When arriving on the estate, the laborer should find his lodging prepared, with a bed in place, and be given a small cash advance against his first pay.

- Several laborers from the same village should be recruited together and put together in the same village to avoid feel- ings of isolation.

- A first contract would be signed on arrival, normally for two years. Fare for the return trip would be provided by the estate; for married laborers, the cost of travel would include the immediate family (wife and children). Further contracts would be of indeterminatelength, with travel at the laborer'sexpense.

- The recruitmenteffort should be carefullyorganized from the beginning, as satisfied laborers would be expected to become effectiverecruiting agents throughwriting and word-of-mouthcontacts with their home villages.

14. Medical Care. The provision of medical care, especiallyfor emergencies,is a valuable morale builder for an estate labor force. Dispensary services should be offered 24 hours a day, with a doctor on call.

15. Food Crop Growing by Estate Workers. On Niete Estate, as on industrial estates in general, the possibilitiesfor growing subsistence crops are constrained. Firstly, villages are located in the middle of productionblocks serviced by the village labor force, and thus the available land for farming is often rather distant from the village. Secondly, such cropping is usually done by women in West Africa. On estates, married women often prefer to work on the estate, and thus bring in a second salary. Also, a proportionof female estate workers are single. At the SAFACAM Dizangue rubber estate, women represent 18% of the labor force. However, Dizangue has been an establishedestate for a long time. In the early years of developmentat Niete, a very small proportionof workers are likely to be women. Thus there is not likely to be much subsistence foodstuffcropping. ANNEX 2 Page 5

16. Housing. As noted above, laborers expect to find on arrival a prepared lodging with minimum facilitiessuch as a source of water, toilet, kitchen, etc. But experienceindicates that estate workers are not interestedin the luxury of constructionmaterial. Sensitivematters include an adequate size of the lodging quarters and the existence of markets, shops, school and other social facilitiesand activitiessuch as cinema, football teams, etc. The project would provide adequate facilitiesto meet the expected demand in these regards.

Food Crop Development

17. On the whole, food production in Cameroon is more-or-lessbalanced. But the Kribi area (Ocean Department is far from the main food production areas). Further, a curtain of towns (Yaounde,Eseka, Edea, Douala) lies between Kribi and the agriculturalzones to the North. When the Niete Estate labor force grows to 7,500 -- corresponding to some 25,000-30,000 people -- it would be difficult and costly to bring in the majority of supplies from distant points.

18. Over the next seven years, the implementationof the project is likely to increase the demand of the Kribi area for foodstuffby 20%. Under the present structure of farming, the expected increase in food production is practicallynil (0.2%).

19. The food crop output of the existing smallholdersin the area could be improved by a better collectingsystem, an improved feeder-road network, and minimum extension services. But smallholderoutput will remain small, and probably will not cover more than 25% of the necessary tonnage of food for the rubber estate. Most of it would come from the Lolodorf area, about 100 km from the estate.

20. There is scope for allocatingsome land within the estate for subsistence food productionbut on a rather limited scale. Further, there are constraintsthat would hold down production as discussed in para 15.

21. It will be decided within five years, when the estate population will have grown to a substantial size, whether to create within the concession grounds, in the neighborhoodof the estate, a food production unit that would supply the village markets with basic staple foods, in sufficientquantity, to complementthe local available output plus the laborers' own production. The estate managementwould have a double target: In addition to satis- fying basic food needs, food productionwould aim at avoiding large im- balances between supply and demand that would result in excessive price increases and possibly a classic wage-increase/cost-of-livingspiral.

22. A study of food productionhas already been carried out under the responsibilityof SEDA (Societe d'Etudes pour le Developpementde l'Afrique), with finance of CFAF 4 million provided by FAC. A small second phase of this study is incorporatedin the proposed project. ANNEX 2 Page 6

Planting Material and Expected Yields

23. It has been decided to plant four clones, chosen from proven varieties with large plantations in existence and 20-30 years or more of accumulatedexperience in a number of countries (mostlyAsian, of necessity).

24. PR 107 is considered the probable best choice, and assigned an estimated 45% of the estate plantings,because of its affinity for the predominantlyacid soils in the project area (pH 4.5). The GT 1 clone, assigned 30%, is the most universally grown variety and is favorably in- clined to soils of medium acidity (pH 5-5.5). The PB 86, assigned 15%, would essentiallydisplace the PB 107 clone on soils of only slight acidity (pH 5.5-6). The PB 5/51 is considered a very promising variety for the project area, but its performance is not as well documented as the other three varieties chosen, and it is assigned only 10% of the plantation area. The clone RRIM 600 would have been included in the selected list but for its tendency to break under high winds, as proved on other plantations in Cameroon.

25. The best available evidence on yields for the clones chosen comes from data on industrialplantations in Cambodia,where record yields were obtained. For PR 107, medium yield over 23 years was 2,320 kg/ha, with maximum yields of 2,700-3,000kg/ha from the 15th to 22nd year. The GTI and PB 86 have produced equally well on industrial scale plantations. It seems reasonable to assume, since the project plantings would have a relatively high density and selectivity of planted seedlings should insure vigorous trees, the average yields obtained under project plantings would be within 85% of the average obtained in Cambodia, and at least 70% of the maximum. Therefore, over a 28 year life, assumed project yields are 2,030 kg/ha on average and 2,300 kg/ha during the years of maximum productivity.

26. Some experimentalplantings of rubber trees have been made in this area on a very small scale in the past. Several such plantings survive, for instance along the Lobe river and the Kribi-Ebolowaroad, and have been in- spected by rubber experts. Some of these plantings date as far back as 1915, and have survived in the forest as "wild" trees. They offer valuable evidence as to what growth for rubber can be expected. First of all, the dimensions of these trees are enormous, indicating that rubber is able to grow quite easily in the area. The trees are free of some general disease agents, such as Armillaria millea, Ganoderma, Fomes noxius and Phythphtora palmivora,which were detected on some cocoa trees in the area; their existence is considered normal for such a tropical forest. The rubber-tree root systems show normal growth, with no root diseases such as Fomes lignosus or Armillaria. The foliage is also quite healthy. This is a remarkable performance consideringthat these trees were abandoned, survived under conditions of competitiveforest regrowth, and never enjoyed any maintenancewhatsoever. This evidence adds a considerableconfidence factor to the generally favorable data on ecoclimaticconditions in the project region. ANNEX 2 Page 7

27. It is consideredhighly desirable to establishestate arboreta to test other clones on small plots of 5-10 ha each. The initial list of candidatesincludes the followingvarieties:

PB 217 AV 2037 PB 235 PB 252 IR 22

PR 228 RRIM 701 PR 251 RRIM 703 PR 255 RRIM 600 A small plot would be PR 261 planted to test the reaction of this clone to local wind conditions.

IIC28 This clone has proven itself particularlyvigorous and productiveon the SAFACAh estate at Dizangue.

28. Up to 1% of the total planted area would be allocated to arboreta in various locationsof the concessionarea for clone trials and field experiments. Agronomicresearch would be undertakenif and as required. CA4MER 0ON

N=Tr RUBBERESTATF; PROJECT

Soll Analysis of the Northern Part of the Concession Arpa

A. Characteristics

Soil Classification ext-re --- PpH To+al 6 - CLay % Silt % Sand H20 XMT N 0 0 OM°/ 0o0 - C,/;N

Cioocl Soil 21.- 11.1 65.6 5.05 4.32 0.39 13.3 12.9

Laterite beoki l,o crn 19.6 10.0 69.1 5.38 4.68 0.-33 18.7 13.8

!at,erite 10 - 40 cst 22.9 11.8 64.4 5.00 4.36 0.?7 19.4 12.8

'focky/'La.e.i-te Surface 25.l 11.6 60 .7 4.78 l4.l4 0.90 18.5 11.1

Gley 30.i 1(.8 50.o 5.02 hi.3M 1.14 22.6 12.1

B. Cations and Cation Exchanee

Joî1 C1ausificiol 4 :-----Erchargeable Cations-. ----- T- V/ Ca Mé K Total

(0.oo1 3oil 0.66 0.28 0.21 1.15 5.58 20.6

TLate:-jtp belotrr 40 cm .1.23 0. 38 0.23 1.89 6.58 28.7

Lateri.te 10 - I0, Ce., 0.72 0.28 0.22 1.21 551 22.0 N)

,Ro&v/aterit,e Surface 0.i 0.2'3 0.13 0.91 5.o 16.9

Gley 0.b.9 0.26 0.21 0.96 7.3( 13.2 H

1/ OrgainT matter. 2/ E:xchangfe apacity, 3/ Percent saturation. CAWROON

NIUTE RI3BBERESTATE PROJECT

Stl Analysis of the Northern Part of the Concession Area

C. Classifi ation of Soils on 58,000 `IRentice

A. B C D E F Slopes above 15% Saopes below 15% Lateritic gravels Laterte Deep soil with Gley with rocks, crust with rocks, crust between 10 and below no laterite or lateritic surface or lateritic surface h4 cm 4o0cm

1o,170 m 8,530Pl 8,ooo m. 8,o60 m 8,000 mn 1h,900m 18.1% 1h4.% 13.8% 13.9% 13.8% 25.7%

Samne.Analysis, Eliminating 4,650 m of ColumnnB

10,h70 m 3,380mn 8,o000 m 8 m,60n 8,o000n 14,900m

19.6% 7.3% 15.0 1i5.4 15.0% 27.9P

Good ------58.1% Classification Very good.--1-%--- 442_9% Ex4lude-l 26.9% ? ___-

Source: Pedologic Survey by Ecole Nationale Superieure Agronorn.que Depar-tment des Sciences du So' CQ CANEROON

NIETE RUBBER ESTATE PROJECT

SCHEDULEOF OPERATIONS (8ect r.es)

PF iect 1-cr ' 2 3 4 S 6 7 8 9 10 11 IZ 13 14 IS 16

Bud.od C-rdeS 5 5 5 Nur-ery - 4.3 7.2 tl.5 11.5 11.5 11.5 11.5

Field Freprpe.tio 300 700 1,500 2 5`0 2,500 2,500 2,500 2,500 Field CIe.rteg 300 700 1,500 2.500 2,500 2,500 2.500 2,500

Seed e1.stitS 300 400 1,OOO 1,700 1,700 1,700 1,700 1,700 Tr... Spntit' - 300 5SO 800 800 800 800 800 -

La.d C1ocrteg for - Vilt.gee - 12.5 25 37.5 3.5 37 .5 37_5 12.5 - Oeodqeertor 5 - 25 25 25 - 25 - -AirRffrd - _ 0- - VtItage-Feod tCrop A.ree (lotfeated) - 12.1 25 37.5 37.5 37.5 37.5 12.5

Me,toanene of Tree-, Ye.- 1 1, - - 600 900 1,800 2,500 2.500 2.500 2,500 1,700 .2 - - 600 900 1,800 2.500 2,500 2,500 2,SO0 1.700 3 - - - - 600 900 1,800 2,500 2.500 2500 2,500 1,700 à - - - - - 600 000 7.800 2,500 2,500 2,500 2,500 1,700 5 - - - - - 600 900 1,800 2,500 2,500 2,500 2,500 1,700 Fottcig tnto tappieg. Toor A6 600 900 1t800 2,500 2,500 2,500 2.550 1.700 7 ------600 900 1,800 2.50 2500 2,500Z» 2,500 1,700 Road PnteeoeCeP'Ye-r1- 5 _ _ 600 1,500 3,300 5,800 8.300 10,200 11,800 11,700 9,200 6,700 4.200 1,700 - 6-33 - - - - - 600 1,500 3,300 5,800 8,300 10.800 13 300 15,000 15.000 T-ail Ki. ... et 6 - 5 _ 600 1,S00 3,300 5,800 8,300 10,200 11,800 11,700 9,200 6,700 4.200 t,700 6-31 _ ------600 1,500 3.300 5,800 8.300 t0.800 13.300 I,w15,0 S,OOO Rood seeengtheetng, Year 6 ------600 900 1.800 2,500 2,500 2,500 2,500 1,700 _ _ -_ - - - - 600 900 18000 2,50 2 500 2.500 2 50O 1,700 Tre. YOfteOo.-Va6 ------600 900 1,60 ,000 2, 500 0 2,00 1700 T 0 1 _- Y 7 _ - 600 900 1,800 2.500 2.500 2,500 2,500 1,700 x 8-18 ------600 1,500 3.300 5,800 8.300 10,800 13.300 r, 19-33 - - - - - ______T.ppi.g, Ye-r 6 _ _ _ 6600 900 1.800 2.500 2,500 2,500 2,500 7- 1,700 ------600 900 1,000 2.500 2.500 2,500 2.500 1.700 8-13 ------600 1,500 3,300 5,800 8,300 10,800 12,700 1L..7 ------600 18-23 24-27

1I These yeare are fro- date of pl-nting, ir project yenrs Fis 2. 2/ On a-erag: 10 m of roade/ha plact.d 30 r of tr-ak/ha plarted ANNEX 2 Tab le 3

CAHEROON

NIETE RUBBER ESTATE PROJECT

Production Schedule (Tons)

Planting Schedule - ~~~~~~~~~~~~~~~~~~~~~~~~~Total 3 4 5 6 7 8 9 Project Year 2 15,000 ha 600 ha 900 ha 1,800 ha 2,500 ha 2,500 ha 2,500 ha 2,500 ha 1,700 ha

8 9o 90 675 9 540 135 1,800 10 720 810 270 3,975 Il 900 1,080 1,620 375 7,155 12 1,020 1,350 2,160 2,250 375 10,995 13 1,140 1,530 2,700 3,000 2,250 375 15,405 14 1,260 1,710 3,060 3,750 3,000 2,250 375 15 1,320 1,890 3,420 4,250 3,750 3,000 2,250 255 20,135 16 1,380 1,980 3,600 4,750 4,250 3,750 3,000 1,530 24,420 17 1,380 2,070 3,960 5,250 4,750 4,250 3,750 2,040 27,450 18 1,380 2,070 4,140 5,500 5,250 4,750 4,250 2,550 29,890 19 1,380 2,070 4,140 5,750 5,500 5,250 4,750 2,890 31,730 20 1,380 2,070 4,140 5,750 5,750 5,500 5,250 3,230 33,070 21 1,380 2,070 4,140 5,750 5,750 5,750 5,500 3,570 33,910 34,270 22 1,320 2,070 4,140 5,750 5,750 5,750 5,750 3,740 23 1,320 1,980 4,140 5,750 5,750 5,750 5,750 3,910 34,350 24 1,320 1,980 3,960 5,750 5,750 5,750 5,750 3,910 34,170 33,920 25 1,320 1,980 3,960 5,500 5,750 5,750 5,750 3,910 33,730 26, 1,380 1,980 3,960 5,500 5,500 5,750 5,750 3,910 33,570 27 1,380 2,070 3,960 5,500 5,500 5,500 5,750 3,910 28 1,260 2,070 4,140 5,500 5,500 5,500 5,500 3,910 33,380 29 1,260 1,890 4,140 5,750 5,500 5,500 5,500 3,740 33,280 30 1,200 1,890 3,780 5,750 5,750 5,500 5,500 3,740 33,110 31 1,200 1,800 3,780 5,250 5,750 5,750 5,500 3,740 32,770 32 1,200 1,800 3,600 5,250 5,250 5,750 5,750 3,740 32,340 31,760 33 1,200 1,800 3,600 5,000 5,250 5,250 5,750 3,910 31,010 34 1,200 1,800 3,600 5,000 5,000 5,250 5,250 3,910 30,420 35 1,200 1,800 3,600 5,000 5,000 5,000 5,250 3,570 28,970 36 1,800 3,600 5,000 5,000 5,000 5,000 3,570 27,000 37 3,600 5,000 5,000 5,000 5,000 3,400 38 5,000 5,000 5,000 5,000 3,400 23,400 18,400 39 5,000 5,000 5,000 3,400 40 5,000 5,000 3,400 13,400 3,400 8,400 41 5,000 3,400 42 3,400

96,730 853,500 TOTAL 34,140 51,210 102,420 142,250 142,250 142,250 142,250 ANNEX 2 Table 4

CAMEROON

NIETE, RUBBER ESTATE PROJECT

Staffing Schedule

Designation Project Year 1 2 3 4 5 6 7 8 9 10 il 12

Project Director A E E E E E E E E E E E E

Adniinistrative Manager A E E E E E E E E N N N N Accountant B - N N N N N N N N N N N Buying Officer B - N N N N N N N N N N Chief Personnel B - iN N N N N N N N N N

Technical Manager A - E E E E E E E E E E E Agronomist B - E E E E N N N N Technologist B ------E E E E N Mechanical Engineer B - - E E E E E E E N N N Surveyor C N N N N N N N N - - - - Sector Chief B - IE 2E 3E 4E 4E 4E 3E 2E IL Sector Chief B ------1N 2N 3N 4N 4N Assistants C IN 2N 3N 4N 5N 6N 7N 9N llN 13N 15N 16N

Industrial Department Manager A - - E E E E E E E N N N Garage Head Engineer B - - - - E E E E E E E E Tractor Engineer B E E E E E E E E E Workshop's Head B - - - E E E E E E E E E Building Engineer B - - E E E E N N N N N N Factory Engineer B ------E E Factory Assistant C ------N

Health Chief Officer A - E E E E E E E N N N Deputy Doctor B ------N Head Sickbay Attendant C - - - - N N N N N N N N

Expatriate Staff 3 5 10 12 15 15 14 14 il 6 6 5 National Staff 2 4 7 8 10 il 13 16 20 26 29 33

Category A - 3 3 5 5 5 5 5 5 5 5 5 5 Category B 1 3 8 10 13 13 13 14 14 13 14 15 Category C 2 3 4 5 7 8 9 il 12 14 16 18

TOTAL 5 9 17 20 25 26 27 30 31 32 35 38

1/ A. Senior Professional Staff B. Junior Professional Staff C. Division Chiefs ANNEX 2 Table 5

CAMEROON

NIETE RUBBERESTATE PROJECT LABORFORCE

Category Function Project Year 1 2 3 4 5 6 7 8 9 10 il

Sundry Labor Immature cultures 86 329 585 1,045 1,388 1,688 1,843 2,002 1,439 1,101 756 Cultures in Bearing ------22 58 125 228 Factories ------10 26 56 Overheads for central services 14 22 33 39 45 46 48 52 53 57 60 Workshop 2 4 6 8 8 8 8 8 8 8 8 Hospital 1 3 4 5 6 6 8 8 9 9 10 Division villages 10 17 21 25 29 31 35 38 40 42 44 Food Commissariat 1 2 2 3 3 4 4 5 5 6 6

Total 114 377 651 1,119 1,479 1,785 1,946 2,133 1,622 1,374 1,168

Specialized Budgrafters - 62 80 162 228 228 228 228 160 - - Labor Tappers ------15 125 334 709 Factories ------5 13 28 Workmen 10 22 37 150 157 158 158 159 159 159 159

Total 10 ô4 117 312 385 386 386 402 449 566 896 Headmen Division villages 6 23 36 65 86 101 109 119 96 85 98 Center village 2 2 4 6 7 7 7 8 10 12 16

Overseers Division villages 1 5 8 17 21 26 27 30 24 22 24 Center village - - 2 2 2 2 2 2 2 3 4

Sanitary Division villages - 1 2 3 5 5 6 7 5 5 6 Service Center village 2 4 6 6 8 9 10 il 10 9 il Deputv Division villages - 1 2 4 5 6 6 7 6 5 6 Assistants Center village 3 3 4 6 6 6 7 7 7 7 7

Office Division vil]lages 4 7 il 16 20 24 27 31 33 36 39 Personiel Center >.ia< 13 19 27 34 38 42 45 32 54 56 57

Chaturfeuit Division villages 1 1 2 3 5 6 7 9 9 10 14 Center village 9 17 30 36 44 45 46 50 47 48 51 Tractor drivers - 5 10 15 15 15 16 16 4 3 4

Workshop Specialists and Drivers 13 26 45 160 170 175 172 183 173 173 173

TOTAL GENERAL 178 491 957 1,810 2,296 2,638 2,819 3,059 2,551 2,354 2,574 ANNEX 2 Table

CAMEROON

NIETE RUBBER ESTATE PROJECT

Exploitation Schedule

Operations Projec. `'ear 8 9 10 il 12 13 14 15 16 17 18 19 20 21 22 23 24

MAINTENANCE Base - Young trees ha 600 1,500 3,300 5,800 8,300 10,800 13,300 15,000 15,000 15,000 15,000 15,000 15,000 14,400 13,500 11,700 9,200 - old trpes 600 1,500 3,300 5,800

TAPPING

ha 600 900 1,800 2,500 2,500 2,500 2,500 1,700 600 900 1,800 2,500 2,500 2,500 2,500 1,700 600 1,500 3,300 5,800 8,300 10,800 12,700 13,500 11,700 9,200 6,700 4,200 1,700 600 1,500 3,300 5,800 7,700 9,300 10,000 9,200 6,700 600 1,500 3,300 5,800 8,300

PROCESSING - DISPATCING FOR EXPORT

- Transport of ÀirvesL O 90 ;7, 1,800 3,975 7,155 10,995 15,405 20,135 24,420 27,450 29,890 31,730 33,070 33,910 34,270 34,350 34,170 - Processing " " " " - Export . " " " - Percontage of overhead charged 5 10 22 39 55 72 89 100 100 100 100 100 100 100 100 100 100 ANNEX 2 Table 7

CAMEROON

NIETE RUBBER ESTATE PROJECT

Tapping Specifications

Age of Trees Tapping Intensity Lower Yield Trees Tapped System Panel kg/ha Fer ha 6 300 S J/4 J/5 75 -150 cj 7 300 SJ/4 J/5 75 1 900 8 400 S J/4 J/5 75 1 1,200 9 450 S J/4 J/5 75 1 1,500 10 450 S J/4 J/5 75 1 1,700 il 440 S J/4 J/5 75 1 1,900 12 450 S J/4 J/5 75 1 2,100 13 430 S J/4 J/5 75 1 2,200 14 420 S J/4 J/5 75 1 2,300

15 410 S/2 j/4 / 75 1 2,300 + 2 St i.m 16 400 75 1 2,300 17 395 75 1 2,300 18 390 75 1 2,300

19 385 S J/3 J/4+2 stim 100 2 2,300 20 380 100 2 2,200 21 375 100 2 2,200 22 370 100 2 2,200 23 365 100 2 2,200 24 360 100 2 2,300

25 355 S/2 J/3 J/4 100 2 2,300 + 2 stit. 26 350 " 100 2 2,100 27 345 100 2 2,100 28 340 100 2 2,000

29 335 S-J/3-J/4+4 stim. 100 3 2,000 30 330 " 100 3 2,000 31 325 100 3 2,000 32 320 100 3 2,000 33 315 100 3 2,000

1/ Partial year of tapping. 2/ Use of anticoaguLent, Ethrel.

ANNEX 2 Table 8 Page I

CAMIEROON

NIETE RIUBBERESTATE PROJECT

QONSTRUCTIONPRO

Prolect Year I. 2 3 4 5 5 7 8 9 10 il 12 13 14 15 16 17 18

I. IODGINIG AND ACCOMMODATIONS

Bouses Type 6 L (12)* (28)* 36 52 32 28 24 (8)* - 8 - 16 40+12** 48+28** 48 32 12 8 Houses Type 2 t - 16 9 10 4 4 4 2 10 2 3 9 8 il 6 8 3 3 Houses Type I L/D - - 5 3 1 1 2 - _ - 1 2 2 1 1. 2 1 I Sanitary facilities - - 4 6 3 3 3 - - I - 3 5 7 6 5 2 1 Cottage Type C (4)» (4)* 5 - 2 1 1 - - - 1 4 4 - - - - Cottage TypeB B- - 2 3 3 - - 3 1 1 2 ------Cottage Type A - - 1 ------2 1 - - Cottage Type A _------

Il. GENERAL SERVICES

2 2 2 2 Central Office (250m )* - - 400m 25D- - 250m ------_ Central Warehouse I ------Garage ------Workshops (Temporary) - Wood ½Mech. JiStockroom - Vehicles 4 Mech. 4Stockroom Chemical preparation shed ------_ - - - Power - - ViII.Ceit. - - - - _ _ - Grid Connected------Center's pumping station 1 - - - - - 11 _ - - Villages' pumping stations - 1 1 1 1 1 - - I - 1 2 2 2 1 1 iangar - - - - - 1 ------Division and Sector Offices - - 1 1 1 1 1 1+<1) 1+(î) 1+(1) 1+(0) 1 1 1. - - - Water tank station ------1 1 2 2 3 2 3 2 - - Village truck sheds - - 1 1 1 1 - - - - 2 3 2 3 2 - -

III. SOCIAL BUILDINGS

Schools - - 1 2 1 1 I - - 1 - 1 1 1 2 1 1 1 Shops - - 3 3 2 2 2 - - - - 3 2 2 3 2 2 2 Markets - - 1 2 1 1 - - - - 1 2 2 2 1 1 1 Public halls - - 1 - 1 - 1 -2 - - - - - Hospitals - - - Pavilions 1-2 ------Pavilion 3 - - Pavilion 4 Clubs - - - First Tranche ------2nu Tranche - -

* Temporary ** Reconstruction

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4441 $$

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'G 0< ANNEX3 Page 1

CAMEROON

NIETE RUBBERESTATE PROJECT

Societe Africaine Forestiere et Agricole-Cameroun (SAFACAM)

1. SAFACAMis a limited company incorporated in Cameroon, and is a subsidiary of the French SOCFIN group (para 6). It was created in its present form on November 16, 1962, taking over part of the assets of an older pre- existing entity (SAFA). SAFACAM's capital is CFAF 820 million, divided in 164,000 shares which have a nominal value of CFAF 5,000 each. Mr. M. Bourges- Maunoury is honorary chairman; the Chairman is Mr. J. Rouland (since November 1, 1973).

2. SAFACAM's assets in Cameroon are essentially an estate of about 5,600 ha, planted with rubber and oil palm, situated at Dizangue near Edea. The oil palm vere only recently planted, and are not yet in bearing. Rubber production in the 1973/74 financial year was 4,315 tons. Dizangue is equipped with a modern factory capable of producing smoked sheets, block rubber and crepe.

3. At June 30, 1974, SAFACAMemployed at Dizangue 2,101 people. Senior staff totalled 11, of which five were Cameroonians and six were expatriates. Junior staff totaled 368, all Cameroonians. Labor totaled 2,100. About 10,000 people, including family members, live on the Dizangue estate.

4. For the last fiscal year, the balance sheet showed results as follows:

CFAF After amortization: 118,690,000

Provisions 47,843,400 Totalling 166,533,472 Net Profit: 157,403,413

The financial situation of the company (at June 30, 1974) is sound, with no loans to reimburse (neither long nor short term), and no outstanding bank overdrafts. Furthermore, these financial results encompassed an investment program of over CFAF 126 million during the 1973/74 financial year.

5. SAFA- Cameroon has embarked on a five-year investment plan, estimated at CFAF 550 million, to increase its assets by planting 1,000 ha of rubber and 1,000 ha of oil palm. This plan, according to cost estimates, would involve the reinvestment of 10% of rubber sale proceeds. ANNEX 3 Page 2

6. As a subsidiaryof the SOCFIN Group, SAFACAM is related to one of the most importantestate company groups in the world. SOCFIN comprises mainly the Societe des Plantationsdes Terres Rouges, Cie du Cambodge, Cie du Selangor, Cie de Padang, and SOCFIN Afrique. The Group controls about 130,000 ha of perennial crops in Malaysia, Indonesia,Vietnam, Cambodia and Kenya. This group specializesin the estate productionof rubber, oil palm and coffee, and is well endowed with technical and engineeringdepartments. This substantialreservoir of technical knowhow would be accessible to SAFACAM in the carrying-outof its obligations under the management contract with HEVECAM. An unofficialtranslation of the Draft Agreement is at Appendix 1. ANNEX 3 APPENDIX 1 Page 1

DRAFT AGREEMENT

WHEREAS:

The Government,under its economic diversificationand development program, has provided for the establishmentof a hevea agro-industrialunit in the Kribi region, hereinaftercalled "the project";

SAFA-Camerounhas been entrustedwith making a detailed technical and economic study of the project;

The study has been submitted to the Governmentand the latter has decided to carry out the project presentedto it as soon as a definite plan has been drawn up for financing the operation;

The protocol of agreement signed by the Governmentand SAFA-Cameroun prior to that study with a view to defining the positionsand intentionsof the two parties provided that the conditionsbinding the two parties and their reciprocal commitments would have to be determined by an agreement at the proper time;

The Government of the United Republic of the Cameroon entrusts Societe Hevea-Camerounwith the responsibilityfor setting up and operating the said agro-industrialunit;

Societe Hevea-Cameroundesires to have SAFA-Camerounbe responsible for managing the execution of the project;

NOW THEREFORE:

Societe Hevea-Cameroun,thereinafter called "Hlevecam",a development company with a capital of CFAF million, with headquarters in Kribi, Ocean Department, represented by the Chairman of its Board of Directors, party of the first part, and

Societe AfricaineForestiere et Agricole-Cameroun,hereinafter called "SAFA-Cameroun",represented by the Chairman of its Board Directors, partly of the second part,

HAVEAGREED

to conclude the followingagreement consistingof five titles: Title I. Managementof Project and Technical Assistance Title II. Staff Title III. Marketing of Production

1/ This is an unofficialtranslation for informationalpurposes only. ANNEX 3 APPENDIX 1 Page 2 Title IV. Financial Provisions Title V. Final Provisions

TITLE I: MANAGEMENT OF PROJECT AND TECHNICAL ASSISTANCE

Article 1. Purpose

Societe Hevea-Cameroùnentrusts to SAFA-Cameroun,and the latter accepts, the management of the establishment,maintenance and operation of a hevea agro-industrialcomplex in Ocean department,as defined in Annex 1 to the present agreement, I/ specifically,but not exclusively:

- definition of the perimeters of the land to be planted; - preparation of the land; - techniques of planting and maintenanceof plantations; - establishmentof the services and management of the complex; - developmentand/or constructionof the infrastructureand installations of the complex, particularlythe latex processing plant; - techniques of operating the plantations,particularly tapping; - marketing of the rubber.

Article 2. Management of the Project

SAFA- Cameroun shall appoint one of its highly qualified staff to exercise the powers conferred by statute on the Director General, to which staff member the Board of Directors shall delegate all other powers required for efficientmanagement of the project.

Article 3. Technical Assistance

3.1 Extent of the assistance

SAFA-Camerounundertakes to utilize properly and constantly, in carrying out the present agreement, all of its technical,managerial and rubber marketing know-how to establish and operate the plantation and ;ancillaryinfrastructure and to set up and efficientlyrun the latex processing plant described in Annex 1.

3.2 New attainments in technical know-how

SAFA-Cameroun shall use for the purposes of the project throughout the life of the present agreement all of its new attainments in the fields xnentioned in Article 1 with a view to giving the plantation and the plant the benefit of every possible improvement.

Moreover, SAFA-Cameroun,using all informationbearing on the ~establishmentand operation of hevea plantations,establishment and operation of the latex processing plant and the marketing of rubber, shall constantly

l/ This annex will repeat the description in the feasibilitystudy. ANNEX 3 APPENDIX I Page 3

bear in mind proposing to the Board of Societe Hevea-Camerounall practical improvements. When selecting the plant equipment,SAFA-Cameroun shall propose those types of plant it considers most suitable and the most advanced techniquesin terms of the economic situation and prospects of the natural rubber market.

3.3 Use of technical assistanceby Hevecam

Societe Hevea-Camerounmay use throughoutthe United Republic of the Cameroon the technicalassistance it will receive pursuant to paragraphs 3.1 and 3.2 above for all activitiesand all undertakingsunder its juris- diction. It may also extend the benefit thereof to other national development companieswhose purpose includes the cultivationof hevea and production of natural rubber.

Article 4. Preparationof annual programs and budgets

On the basis of the financing plan for establishmentof the complex, SAFA-Camerounshall assist the Societe Hevea-Camerounin drafting the annual works program and budget, which are to be ready by May 15 at the latest. The annual program shall include:

- the plantation areas considered; - the infrastructure,installations and general services to be set up; - constructionand expansion of the plant at the proper time; - the means to be used for planting, maintenance and operation -- staff, plants, fertilizers,materials, equipment; - training and/or alertness programs for Cameroonianstaff.

The program shall be accompaniedby an estimate of quarterly expenses. It shall also mention commitmentsto be assumed during the year for operationsregarding subsequentyears. It may be amended in the course of the year.

Article 5. Inspection

5.1 In addition to its own inspectionswithin the framework of its duties as manager of the project, SAFA-Camerounshall have periodicalin- spections,which shall take place twice a year, all aspects of the undertaking shall be examined: technical,accounting, financial and administrative. The inspectionsshall be carried out by experts belonging to SAFA- Cameroun or to companies in its group other than the staff in service in Cameroon. Observationsmade during these inspectionsshall be communicated to the Board of Societe Hevea-Camerounin writing.

5.2 SAFA-Camerounshall immediatelyinform the Board of Societe Hevea- Cameroun of any event which comes to its knowledge that might hinder execution of the project. ANNEX 3 APPENDIX 1 Page 4

TITLE II - STAFF

Article 6. Provision of staff by SAFA-Cameroun

6.1 To the extent that Cameroonianstaff with the required qualifications and experienceare unavailableand while they are being trained SAFA- Cameroun shall provide the project with staff from its own organizationor from companies in its group.

6.2 Assignmentof expatriate staff shall be subject to agreement by the Chairman of the Board of Societe Hevea-Cameroun. To that end, SAFA- Cameroun shall furnish the curriculumvitae of each of its employees it proposes to second to the project.

6.3 The number, qualificationand experienceof the expatriate staff needed are shown in the agreementsand financing conventionsof the project. Justificationfor any increases or reductions shall be submittedby SAFA- Cameroun to the Board of Societe Hevea-Camerounfor approval.

6.4 The staff seconded, like all staff assigned to the project, shall devote their full time to Societe Hevea-Cameroun.

6.5 Societe Hevea-Camerounassumes responsibilityfor all remuneration of the staff seconded by SAFA-Camerounor by companies of its group, including:

- remunerationof staff, includingvarious benefits and leave; - round-trip transportationof staff, families and baggage from their place of residence in their country of origin to their place of residence in the project area, according to their status; - benefits pertaining to the above move; - employer's contribution to retirement and to cover health risks; - social benefits.

Societe Hevea-Camerounshall provide the staff made available to it by SAFA-Camerounwith the benefits in kind attached to the position occupied, defined in its regulations,specifically housing, furniture, electricity,water, gas, vehicle for work, insurance.

6.6 The amounts received by the seconded staff shall be taxable under the laws in effect in the United Republic of the Cameroon. However, in the event of variation in the tax rate or tax base, the remunerationof expatriate staff shall be revised to maintain their value after deduction of taxes.

Article 7. Training of Cameroonianstaff

SAFA-Camerounundertakes to provide training and/or alertness courses for the staff of Societe Hevea-Cameroun. ANNEX3 APPENDIX 1 Page 5

TITLE III - MARKETING OF PRODUCTION

Article 8.

SAFA-Camerounwould undertake to assure the commercializationof production, if Societe Hevea=Camerounshould ask it to do so, under conditions to be determinedby agreementof the parties when the time comes.

TITLE IV - FINANCIAL ARRANGEMENTS

Article 9.

SAFA-Cameroun shall receive the following remuneration for the various services it renders Societe Hlevea-Camerounfor execution of the project under Title I of the present agreement:

9.1 A lumD sum of CPAF 30 million a year.

9.2 A payment fixed at 2% of the total investments for the past year as shown on the accounting documents approved by the Board of Societe Hevea- Cameroun.

9.3 The remunerationsindicated in paragraphs1 and 2 above shall be subject to current tax law. They shall be subject to no rebate whatever on that account.

Article 10. Payments

10.1 Payment of SAFA-Cameroun'sremuneration indicated in Article 9 above shall be made not later than September 30 following the financial year for which it is due, to an account to be indicated to Societe Hevea- Cameroun by SAFA-Cameroun.

10.2 It is stipulatedthat the financialyear begins on Julv 1 and ends on June 30 of the followingyear.

Article 11. Price revision

The sums included in the lump-sum payment of SAFA-Camerounindi- cated in paragraph 9.1 above shall be calculatedas follows in order to take into account the general economic trend:

K = Ko (o.15+ o.55 I + o.30 E_) Io Eo ANNEX 3 APPENDIX 1 Page 6

The definitionsare as follows:

K = revised amount of annual remuneration.

Ko = CFAF 30 million a year.

Io = value at of consumer prices of families not native to Douala published by the Departmentof Statisticsand National Accounts in its Monthly Bulletin of Statistics.

Eo = value at of the SYNTEC index published in France by the Union Chamber of Technical Research Bureaux.

I and E are the values of the same indices for the month of Januaryof the financialyear under consideration.

The above revision formula shall be used only if it shows a variation of 5% or more in the amount calculatedon the bases defined in Article 9.

TITLE V - FINAL PROVISIONS

Article 12. Life of the agreement

The life of the present agreement shall be 8 years. It may be tacitly renewed for successiveperiods of 4 years.

The party wishing to terminate or revise the present agreement shall so inform the other party by registeredletter with acknowledgment of receipt at least 6 months before each of the expiration dates indicated above.

The present agreementmav be terminatedby either party without notice in the event of nonperformance or serious offense by the other party.

Article 13. Arbitration

An attempt shall be made to settle by direct agreement any dispute arising between the contracting parties in the framework of execution of the p'resent agreement. Failing amicable settlement, all disputes shall be re- s,olved by an arbitral tribunal sitting at Douala, composed of 3 arbitrators appointed as follows: one arbitratorby each partv, the third arbitrator coopted by the other two from a list drawn up by mutual agreement between the two parties; the term of the arbitrators shall be equal to the life of 4he agreement. Each arbitrator shall have an alternate appointed in the same niannerand for the same term. The alternate shall replace the principal arbitrator in the event of the latter's impediment. The arbitratorsshall decide by majority vote. Their decisions shall be binding on the two parties. ANNEX 3 APPENDIX 1 Page 7

Article 14. Election of domicile

Societe Hevea-Camerounelects domicile at Kribi (UnitedRepublic of the Cameroon) B.P. _, Cable address: _

SAFA-Camerounelects domicile at Douala (United Republic of the Cameroon).

Article 15: Stamp and registrationfees

The present agreement is exempt from stamp and registrationfees.

Article 16.

SAFA-Camerountakes cognizance of the obligationsof the United R^epublicof the Cameroon and of the Societe Hevea-Camerounderiving from the tERD loan 1/ and project agreements and the financing agreementswith the French Republic and the Caisse Centrale de CooperationEconomique and under- takes to abide by the portions of those obligations that concern it.

1/ or, "IDA credit." ANNEX 4 Page 1

CAMEROON

NIETE RUBBER ESTATE PROJECT

Audit Terms of Reference

Reasons for the Bank Group's Auditing Reauirements

In any business or other enterprise the prompt and regular preparation of accurate accounts is an important means of ensuring that the enterprise is carrying out adequately the tasks assigned to it. Accounts are essential not only for the enterpriseitself, but also for lenders, who need reliable informationabout the financial condition of the organizationthey are helping to finance. As a lender, the Bank Group, in appraisinga project, has to be satisfied that the financial data presented are accurate and complete, and that, during the implementationof the project, the borrower will have adequate financial controls and follow proper accountingprinciples. These are the reasons why the services of auditors are required for Bank/IDA projects.

Definition of Audit

An audit is an authorizedexamination of the accounts and accounting system of an organization,whose purpose is to enable the auditors to report on the financialstatements of the organizationand to express an opinion on their fairness, consistencyand conformitywith accepted accounting principles.

The essential features of an audit are:

(a) to make a critical review of the system of bookkeeping, accounting and internal control;

(b) to make such tests and enquiries as the auditors consider necessary to form an opinion as to the reliabilityof the records as a basis for the preparationof accounts;

(c) to compare the financial statements with the underlying records in order to see whether they are in accordance with them;

(d) to make a critical review of the financial statements and to report whether, in the opinion of the auditors, the accounts are presented and the items are described in such a way that they show not only a true but also a fair view and give in the prescribedmanner the informationrequired by law. ANNEX 4 Page 2

Selection and Appointment of Auditors

The borrower is responsible for thie selection and appointment of auditors. The Bank Group requires, however, that the person or firm appointed should have experience and qualifications acceptable both to the Bank Group and to the.borrower.

The criteria employed by the Bank Group in judging the acceptability of auditors are that the auditors should be professionallv qualified and, in particular:

(a) be impartial and independent of the control of the entity subject to audit and of the person appointing them; in particular, the auditors shotildnot, during the period covered by the audit, be employed by, or serve as director for, or have any financial or close business relationship with the entity, except as independent professional advisers;

(b) be well-established and reputable, using procedures and methods in conformity with internationally recognized and generally accepted auditing practice and employing adequate staff with professional qualifications and suitable experience by international standards; and

(c) have exDerience of auditing the accounts of entities comparable in nature, size and complexity to the entity whose audit they are to undertake.

Before project auditors are appointed, therefore, the borrower should arrange that the Bank Group be furnished with sufficient information about the auditors to enable it to satisfy itself on the ahove matters. This information would normally include the name cf the firm (or Governnent department or agency) the names and qualifications of the principals, the approximate number of professional staff employed and some of the main audits carried out.

Professional and Government Auditors

The choice between professional and Government auditors will normally depend on the nature of the project and who is executing it. A non-revenue earning project being carried out by a Government department, following Governmnentaccounting and budgeting procedures, would normally be audited by the Government auditor. On the other hand, a revenue earning project executed by a company or corporation (whether wholly Government- owned or not), and using commercial accounting and budgeting procedures, would normally be audited by a professional firm. In some cases, the nature of the project calls for a joint audit by the Government auditor in collabora- tion with a professional firm. ANNEX 4 Page 3

To encourage the growth of domestic firms of auditors, the Bank, wherever possible, agrees to the appointment of a local firm, either alone or in conjunction with an international firm.

àuditProcedures

The procedures employed by the auditor should always be designed to çenablehim to arrive at an opinion on the fairness of the financial statements ,which are the subject of his report.

The extent of the auditor's tests of the accounting records is dependent on the system of accounts and internal check and control maintained by the company.

For this purpose, the auditor should examine:

(a) the organization and procedures for taking financial decisions and authorizing expenditures;

(b) the design, management and operation of the accounting system;

(d) the adequacy and competence of accounts staff;

(e) the effectiveness of related systems and procedures, such as inventory control, or data processing.

In the light of this examination of systems and procedures, the auditor should test the financial transactions of the organization, in conjunction with such evidence, documentary or otherwise, as may be necessary to enable him to be satisfied as to the authenticity and correctness of the transactions. their complete and proper record in the books of account, and their effect on the financial results. The evidence referred to above will include: documents such as checks, invoices, contracts, minutes of meetings, bank statements and confirmations by third parties of amounts payable or receivable; and information obtained by the auditor from enquiry, observation and physical inspection.

By means of similar tests, the auditor should satisfy himself as to the existence and basis of valuation of assets and liabilities, such as:

(a) land, building, machinery and equipment, including the provision for depreciation;

(b) inventories, including provision for obsolescence, spoilage or losses;

(d) cash and bank balances,

(e) amounts due to third parties (long and short-term loans and suppliers' accounts payable).

In addition, the auditors' examinationshould cover such items as capital commitments,contingent liabilitiesand events occuring after the balance sheet date (for example, material changes in the value of commodity inventories).

Audit Reports

The auditors should submit both short-formand long-formreports. These reports should be addressed to the Chairman of the Board of Virectors (or equivalent)and not to any member of the management.

The following is an example short-formreport:

"We have examined the balance sheet of __ __ as of 19 , and the profit and loss account and related statements for the year then ended.

Our examinationwas made in accordancewith generally accepted auditing standards,and accordingly included such tests of the accounting records, verificationof assets and liabilities,and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the accompanyingfinancial statementsand appended notes present fairly the financial position at

_ 19 , and the results of its operations for the year then ended, in conformity with generally accepted accounting principles,applied on a basis consistent in all material respects with that of the previous year."

When a qualified opinion is offered by the auditors, or when an opinion is disclaimed, the opinion paragraph of a short-formreport should be modified in such a way as to make clear the nature of the qualification or disclaimer. It should refer specificallyto the subject of the qualification and of the effect on the financialposition and results of operations, if reasonably determinable.

The report should include comments, if any, deemed appropriateby the auditor with respect to any material deficienciesor inadequaciesin the organization'saccounts or accounting system and recommendationsfor improvingaccounting procedures.

The long-form report is an extension of the short-form report and should give appropriatedetails (analyses,summaries, explanationsand comments) of items in the various audited financial statements. Thé audited financial statementswould normally include: ANNEX 4 Page 5

(a) balance sheet;

(b) profit and loss account;

(c) profit and loss (income and expenditure)statement for each major unit contributinga material part, say more than 20% of revenue of incurring more than say, 20% of costs, or such other criteria as the auditor shall determine;

(d) statement of sources and applicationsof funds.

A1i statementsshould, when practicable,show comparativefigures for the preceding year.

Comments and recommendationsin the long-form report would caver, for example:

(a) implementationof recommendationsmade in previous years;

(b) management organization;

(d) financial and field controls;

(e) payroll, procurementand sales procedures;

(f) inventory control and stock levels;

(g) adherence to public accountingstandards;

(h) efficacy of the internal audit procedures;and

(i) events after the date of the balance sheet significantly affecting the financial position.

The borrower should arrange for copies of the short- and long-form reports to be transmitted to the Bank Group together with the audited accounts. IvoJeetîanY 2 I 4 2 6 7 I 8 12 11 12 1U 14 15 16 1-5 1-16

1.t1.6a4 ae Yaat7eatotbo 27.0 62.7 76.3 12.6 131.9 32.4 132. 133.1 9.3 2.1 1.6 1.1 0.6 0.6 0.3 . 426.3 840.6 14.7 29.4 0.6 1.4 2.9 4.9 4.9 4.9 4.9 4.9 - - - . . . - . SaN op.oaat.oo 321.4 Oaalotîîid laboe 9.1 21.1 31.0 31.7 31.1 32.1 32.0 32.1 0.6 0.6 0.4 0.3 0.2 0.1 . - 14.0 - 355.8 Bridge, ccto.tt.G, etc. 96. 16.0 34.6 37.8 538.0 38.0 8.7 39.0 1.7 1.7 1.3 1.0 3.6 0.2 - 170.4 - 02 4. 00-11 coo. 0.1 0.3 0.4 8. 0.7 0.7 0.7 0.7 ------43.0 lovat coco 0.4 4.5 7.10 7...5. 7.5 7.5 7.3 - - . 2.Il ~~~~~~~~ ~~~~0.9 0.9 0.3 o 803.3 1,596.5 Bob-local t ^ i6 103.7 149.0 251.2 254.1 034.8 256.6 257.3 11.6 4 3.3 2. 1.6

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1 .793 33 4 1653 3 8cacalecaoa coous tîcelot 107.3 °3.0 1.5 18.4 7.0 4.1 8.8 9'3 6.6 8.0 1.7 9 128 18.8 15.0 20. 34.0 109.0 571.5 15.0 33.3 23.1 19.3 18.4 26.7 25.8 34.t 17.3 22.1 38.5 54.5 44.5 34.3 89.1 VebIolea 29.2 6.5 126.1 435.2 Orbar. 200. 23.8 45.3 29.3 7.2 27.6 11.3 33.0 6.6 7.2 35.3 11.3 26.0 12.5 -9c 838.7 1,778.5 lob-local 163.6 269.1 224.9 146.0 32.6 56.4 43.7 37.1 30.9 33.5 183.6 84.4 07.4 81.8 1301.8

Il1. Oofoaatooctcît 9921 1: 1.9 1: 09.5 47.0 8ta~~~~Oparaîlco Eqocpacl 0.1 8.~~~~~~2:1 8.7 83I 9.3 6.5 8.3' 5. 1 4,5 25 534.4 acct6 i_fo rovaotd mcocos 20.3 4.543 05.414 06.23 21. 53 70 04.5 399 10.3 12.4 08.9 39.0 15.0 17.9 08.9 19.3 83.4 003.2 1011- 44i.80. J 12.6 60.0 11.0 8.3 8.5 3.4 2.6 9.9 49.6 1.8 15.0 81.0 400.2 0.0.2 -dcail8 19.1 47.9 125.0 116.9 89.1 31.4 47.9 ,,444 18.9 23.0 13.1 70.9 93.1 I03.179.6 611.0 s b-8o9a3 39.5 35 171.7 21C.4 130.9 89.2 81.2 36.6 3.3 80.0 120.0 o70.5 121.9 123.7 9 5.0

88.0 33.0 093.7 7sildo 38.0 89.8 38.0 70.9 2. 67o.5 :87l.-0 60.0: ~ 343. aqolpuo 108.0 442.5 oc-CotaI 120.9 121.1 125.5 156,0

V. flo.toccdtcloa 384.3 67.1 14.5 14.3 14.5 14.5 11. 30.0 32.0 32.0 32.0I2. 32.0 32.7 0 32.0 32.0 32.0 143.0 ,405. cootactootla . tatOEopaooaca 3.1 3.3 1060 121. 143. 143.5 136.1 36.1 21.2 t.0 71. 38.2 38.0 3.0 50. 38.0 460.0 -eofsstiss^1local8erires 3.8 i S^lorles310 .4 21. .4 07. 3 29.2 35.7 44.1 55.3 77.2 94.5 118.4 186.4 116.4 118.4 010.4 86.3 1,0 34. îlbac aalarca. 9.3 14.0 20.7 27.3 01.4 34.4 36.8 40.8 42.9 44.3 46.7 49.4 32.5. 81.7 55.4 07.9 103.2 623.8 53.0 105.4 607.0 7oacpor 7.9 13.7 21.0 26.8 33.7 36.0 38.4 41.6 41.4 42.4 44.4 47.6 49.7 51.3 53.4 3.8 5.0 5.9 6.7 7.7 0. 0.8 6.7 00.0 1. 1. 11.5 11.9 10.7 19.9 128.0 .oOi-o SQ4_C 0.12 3.1 17,1 387 175.8 Boaltil 3.3 5.7 7.7 8.3 10.8 11.7 j: 125 1. 11.0 11. 12.8 13.9 150 1. ~~~~~~~~ ~~~~ ~ ~~~~2.3 31. 75.0 409.6 .at r aod nDsercie7 4.5 8.9 15.8 21.1 25.5 27.1 20.0 30.9 29.9 29.9 32.3 33.6 28.2 0 30.7 2.7 5.0 8.8 12.2 13.t 19.2 16.9 20.4 20.3 20.8 22.1 23.6 24.5 25.2 25.9 26.4 44.5 091.4 cocac

l71. Arocaoc 0844108 Irolodloo Prtoaoaplcc 3.0 3.0 3.0 49.7 8 7hi.Pilas otoc 20.0 02.0 2.0 2.3 3.8 3.6 3.3 3.5 3.7 3.7 .7 3.5 3.5 5.0 cf Sacoocd - 49.7 6 cf .6046 ODYorDuMea. 00.0 22.0 2.2 2.3 3.8 3.6 3.3 3.3 3.0 0.5 1.5 1.0 0.5 - - 708.5 3311.lcPOotJoPt. 43.8 47.4 50.9 49.0 49.1 50.7 34. 44 40. 44.0 40. 3. 33.8 35.4 3 217.4 ~~~~~~~~~~~~~36.9 341.1 4,239.3 1l27r1 localb 470.~~~~~~~~~~~~UC7707 .7 9380.6 1,10-3.9 1.021.4 0,444 1,11-7.9 1,318.9 802.3 832.6 715.1 730.1 529.8 503.8 333.9 275.0 7.0 08. ceaoel 02441.. 1i0.8 120.0 75.0 519.6 523.0 353.9 341.2 4,3U4.3 - 3,000.3 frojac- co5a olococa Coctcoa,claa 370.7 887.7 1,o35.8 I,10D.9 1,021.4 1,140.4 1,117.9 1518.39 -01.3 832.6 7S8.1 731.1 39.2 36.6 26.5 26.2 17.8 17.1 225.7 650.0 7h1.1101 îCtîoocit.l (St> 28.5 40.4 50.3 55.4 51.1 57.4 55.9 65.9 40.1 41.6 556.1 548.2 573.7 359.3 4,740.0 13.650.3 local 398.8 843.1 1,055.9 1,164.3 1,072.5 1.205.8 1,173.0 1,344.9 44a.4 873.2 824.3 787.7 1,675.1 1,675.1 hoep brOc -îdr /3 74.5 156.6 329.8 513.4 601.8 373.7 358.3 8,415.1 15,3I5.4 3 ."0050 673.7 1,004.7 1,384.7 1,677.7 1,674.3 1,205.8 1,173.0 1,344.6 642.4 873.2 824.3 767.7 556.0 349.2

2/ socl44aa vcaboea., aacaa., or-abopa ad Offloaa, vocar a447Dpoaso acplaacboc. J/ 0,,2344. ceaoba, ahol,a, .cboola, aaeloi cloba aSi boapîlol. y/ bar îfccl voabe, ,oo9ad_ Ioorezzaa ot 165 foc n 1. 14% for n 2. 12i for r 3 e2 codoca-5 i -caa foc aquimt Dd ooboc cosOco 12% (, 18% (. 2) -S 8% (n 3-5). CAeEOON

NIETE RUBBERESTATE PROJECT Srr~ Ooot lh. HI. oer Ai iult,ul Dnolo~nt

Proeoteat 1 3 4 6 7 ê Preparation Plantation ------Maintenance ------Cot pr ha

I. DIRECTCOSTS

A. Land Clearing and Roads 90,184 g 90,184

B. Land Preparation Labor 7,300 7,300 Covwe Crop 3,000 3,000 a.A7w tU3t 372 372 Small Equipment 100 100 Transport ?, 100 100

Subtotal 10,872 10,872

C. Plantation 54,363 3/1 54,363

D. Maintenance- of fields - Labor 18,341 7,538 8,505 7,446 6,4W7 2,1$0 1,059 51,576 - 1.aV l>put 130 130 260 - Fertilizer 9,000 9,000 9,000 6,000 33,000 - Chemicals 1,500 4,100 5,600 4,500 3,900 19,600 _ Small Equipment 251 103 117 102 89 l5,5L2 4,447 20,651 - Transport 2/ 501 433 434 407 231 1:0 65 2,201

Bubtota3 29,723 21,304 23,656 18,455 10,717 17,8(2 5,571 127,288 -of roade 321 321 321 321 321 298 4/ 1,903 Direct Conte 101,056 54,363 3C,044 21,625 23,977 18,776 11,038 18,160 5,571 284,610

II.

Heavy Equipment 27,829 8,231 ,/ 136 1.36 68 68 68 144 36,680 Saea 780 37 817 Transport Devices / 113 512 200 173 173 163 92 52 1,478

Subtotal 28,722 8,780 336 309 241 231 160 36 38,975

TOMDLoS 129,778 63,143 30,380 21,934 24,218 1),007 11,198 18,356 5,571 323,5S5 -

y/ W.±ghled average of land cl.ar±ng and read canutruction 1y contractor (table 3 ) nd by estate (Table h ). Incluing VêEilIe maintenance. '/ Weighted average of costs/ha fer direct aeed plating (2/3 r CFAF 4,400). and planting of aeeds bred in polybag (3/3 of 66,279). 4 Includes COFA298 for jpoad improvemnt. Inclides coât of watering oquipmnt. J Tvo-fifths of transport direct costs. ANN4EX5 Table 3

CAMEROON

NIETE RUBBERESTATE PROJEOT

LAND CLEARNG AND)ROAD CONSTRU0TIO

Civil Works by Contractor - Completion by Esltat. Force -Account

Costs per Ha (CFAF)

I. DIRECTCOSTS

A. Works by Contractor Land Preparation 60,000 Partial Construction of_- Roads 10,500 - Trails and Sidings -7,050 77,550

B. Works by Estate Topography (lPmandays) 1,460 Completion of Land Preparation - Labor (56.5 mandays) 21,,52 - Saw'1( (1 hours) 1,950 23,.302 Completion of Roads - Labor (0,3 nmandays) 110 - OperatTonHeavy Equipment- 270 HP tractor(0.165 h) 1,150 - 125 HP tractor (0.126 h) l20 - Grader (0.165h) 330 - 65 HP Compacter (0.165 h) 165 - Bridges,Culverts, etc. 23,000 ?"225

Miscellaneoususe of small equipment ( 5 CFAF per manday) 314

Transport (5 CaAF per manday) 31), 50,615 TOTALDIRECT COSTS 128,165

Il. MATEPRALAI4ORTIZATION

E-avy Equiprent 1,211 Saws 730 TOTAL 130,156 AWNUEX5 Table 4

CAMEROON

NIETE RUBBERESTATE PROJECT

Land Clearing and Road Construction bly Estate Force Account Costs_perHa CFAF

DIRECI COSTS

Topography (h.i .iandays) 1,606

Land Clearing, includine Tree Fellin- - Labor (3l.>.mandays) 11,6h3 - 270 HP tractorfor tree felling(4,555 h) 35,025 - 270 HP tractorfor trail opening(1,65 h) 11,657 - Saws (10 h) 1.,950 60,275- Road Construction - Labor (0.3 manday) 110 - Heavy Equipment- 270 HP tractor(0.165 h) 1,150 - 125 HP tractor (0.120 h) 420 - Grader (0.165 h) 380 - 65 HP Compacter (0.165 h) i65 - Bridges,Culvert- etc. 23,000 25,225 Miscellaneous Use of Small Equipment(5 CFAF/MD) 183

Transport (5 CFAF/MD) 133

TOTALDIPRECT COSTS 87,472

II. MATERIALAMORTIZATION

Heavy Equipment 27,611 Saws 730 TransportDevices 73

TOTAL 115,936 - a`~~NI?EX5 TaIble5

CAM'EROON NIETE wRUBBERESTATE PPROJECT

Salaries and Costs of ProfessionalStaff (CFAF'OO)

Expatriat~e National A B A B C Average annual wages 5,h00 h,200 6,000 3,000 1,200

Dependency allowances and other benefits 3,030 1,6o8 2,160 1,170 495

Travel allowance 1,OhO 7),4 220 220 _

R.etiremrentplan 810 527 52 52 52

Socialcharges 520 3)5 368 208 153

Totel 13,800 7,450 8,800 4,650 1,'jO

of which taxes 5,000 2,483 1,600 930 380

Total without t&xes 8,804 4,967 7,200 3,720 1,520 of which foreignexchange 8,280 4h,70 1,660 930 380

A. Serior ProfessionalStaff B. Junior ProfessionalStaff C. Division Chiefs

Notes The staffingschedule is at Annex 2, Table 4. A

CANENM

NIETERUBBElR STTE PRECT

------Daily ------5~~ M-othly ------Unskilled Labor Tapper/Grafter Driver Mechanic Clerk Tean Chef Overseer Asistszt Secretary I1rse Daily Plage 224 236 362 456 780 241 286 31,017

Preniua 74 163 138 151 218 138 195 7,738 Siocial Charges 29 39 50 58 102 36 3090 3,778

Total Wages 327 438 550 665 1,100 415 531 I42,533 26,600 26,600 Allocation for supervision and village administration coste 38 1 47 ?__ -0 -/ 10 Total daily coste 365 485 550 y 665 1,100 425 541 1&2,533 26,600 26,600 of which xes (15 o/o) 55 73 83 100 165 - 9/ - 5/ - / - 5/ - 5_ Foreign Exchange s8 78 88 106 176 68 87 6,805 4,256 4,256

1/1/2C0o 1ea-i hi s s niary 121 2/dU o_ Overseer's salarj ' 7 !AI/Lu o vi 'a e administration d±ily coste, i.e. of dafly csots Of Deputy las-st- ant, a ecretary fard lurse - j

j1/V15 of Team Chief SaJlary 28 1/60 of Overseer Salary 9 1/400 of village administration Oaily costs as defined in note 1/above = 10 Total j Amount doubled for heavy equipment drivers. 2/400 of village administration daily costs as defined in noteyabove. 5/ Included in taxes for wm2kill d labeor and Tapper/Crafter. MINEX5 Table 7

CAMERDON

NIETE RUBBERESTATE PROJECT

HousingCosts

Size of Lodging Per BuildinL, Unit _(,2) ProfesslonalStaff

Project Manager 13,860 220 Type A Houce 12,600 200 Type B House 9,283 '172 Type C House 5,085 11J Middle Level Staff

Type D House 1,296 72 Type E House 1/ 960 60

Labor

Type F House 2/ 1,200 24

SanitaryFacilite ,520

S<'hools a,S92 J l59 Marketing Faci~Lities

Shops 1,600 100 Market 2,500 200

Hospital 5/ 71,000 1,200 Estate Clubs

ProfessionalStaff 2E,000 -00 Middle Level Staff 20,000 L100

Mceting Houses 2J700 200

1/ t2wolodging units. 2/ Six lodging u4its. T/ Consists of:wash block two foentains ane 2h toilets. Tetil area: 1h0 m2. h/ Including f'urniture anl sanitary facilitiés. 7/ Including equipient.

NOTE: The satffing schedule in a t Annex 2, Table 4. The housingsche4»4e is at Annex 2, Table 8. Table I NIE1E ROBBERESTATE PL80ET

_evecaa Inone Stan1

Projeot Ye-r 8 9 1_ il 12 13 14 15- 16 17 18 19 20 21 22 23 24 25

Prodeetion Conta

1. _iell d1iotenace ani 3-rvcs i> Field Mainten.nçe 0.5 1.2 2.6 4.5 6.4 8.4 10.3 11.6 11.6 11.6 11.6 11.6 11.6 11.6 11.6 11.6 11.6 11.6 Har-e.ti.g 4.8 25.2 65.9 135.2 229.6 331.4 433.3 528.9 596.2 619.1 627.5 641.5 558.2 676.6 700.6 724.3 738.9 753.6 Transport 0.1 0.3 0.7 _ .t _ .0_ 84.4_ _8 49549 _495__5_1 5__ 35.4--4

Sub-tot-l 5.4 26.7 63.2 141.1 238.2 342.8 447.4 54S.9 612.6 635.6 644.0 658.0 674.8 693.3 717.3 741.2 755.9 770.6

2. _ro_seng. CstaL 2.0. 15.2 40.6 89.6 161.3 247.8 347.2 453.8 550.4 618.7 673.7 715.2 745.4 764.3 772.5 774.2 770.2 764.6

3. _xe xEmnditures 19.3 38.2 81.7 150.4 223.2 290.9 374.4 422.5 432.2 436.8 452.6 447.0 451.6 459.3 458.4 460,7 463.2 463.6

4. Reneual of Eng,ipcnt and M_eseîllnelou itaeau 184.3 87.6 96.3 79.5 80.5 71.0 88.5 51.9 83.2

5. a1tudies _° 0.ro2o 0.7 ... 1.2 __ 2.2 2.5 _ 3.0 3.0 _ 3 3.03.0--3.0___ ---- 3.0-__ . 3.3.0 3.0 3.0 3.0 3.0

Sub-total 26.9 90.8 192.7 383.3 625.2 884.5 1,172.0 1,424.2 1,59d.2 1,878.4 1,860.9 1,919.5 1,954.3 2,000.4 2,022.2 2,067.6 2,044.2 2,085.0

6. hsical _tonLn es (5) 1.3 9.6_ _ 9t_ 31.3 _ 44. 5a.6 ___71.2 79.9 _93- 93.0 96.0__97.7 _00._ 101.1 _03.4 102.2 104.

Total Produ. tio:. lCt 28.2 84.5 202.3 402.5 656.5 928.7 1,230.6 1,495.4 1,678.1 1,972.3 1,953.9 2,015.5 2,052.0 2,100.4 2,123.3 2,171.0 2,146.4 2,189.2

Net Salon . 14.1 105.2 280.4 619.3 1,114.7 1,713.0 2,400.1 3,137.0 3,80S.6 4,276.7 4,655.9 4,9S3.5 5,152.3 5,283.1 5,339.2 5,351.7 5,323.7 5,284.7

Oroos bonoe . - (14.1) 20.4 78.1 216.8 453.2 784.3 1,169.5 1,641.6 2,126.5 2,304.4 2,703.0 2,928.0 3,100.3 3,182.7 3,215.9 3,180.7 3,177.3 3,095.5

Deprooiation of Estate aai Factory 16.1 40.3 88.6 155.7 222.8 289.9 357.1 402.7 402.7 402.7 402.7 402.7 402.7 402.7 402.7 402.7 402.7 402.7

Annuel Net 1.,nne (Lons) before Debt Service (30.2) (19.9) (10.5) 61.1 235.4 494.4 812.4 1.238.9 1,723.8 1,901.7 2.300.3 2,525.3 2.697.6 2,780.0 2,813.2 2,778.0 2.714.0 2,692.8

Debt Service 184.1 175.9 167.3 158.1 148.5 138.3 127.5 116.2 10S.2 91.7

A-nual Net Inase (Lu9e) after Debt Service (30.2) (19.9) 1.539.7 1,725.8 2.133.0 2,367.2 2.549.1 2,G41,7 2,685.7 2,661,8 2.670.4 2,601.1

Inuoe Tan (537.) 30.S 117./ 247.2 406.2 619.4 769.5 862.9 1.066.5 1,183.6 1,274.5 1.320.8 1,342.8 1.330.9 1,335.2 1.300.5

Annuel Net To.mo..9 .L>Aval niet (30.2) (19.9) (10.5) 30.6 117.7 247.2 406.2 619.5 769.9 862.9 1.066.5 1,183.6 1,274.6 1,320.9 1,342.9 1,330.9 1,335.2 1,300.6 NlETE Rb3rbR E0STM PROJICOT

ll So5-d- A-ta-i of FtDd. (c.A8 Mdlli9D)

14 15 16 17 18 19 20 21 22 23 24 2S 1 2 3 4 5 6 7 8 9 10 il 12 13

1,203.8 12173.8 1,384.8 842,4 873.2 824.3 767.7 556.1 549.2 375.7 358.3 846 fr..fe- f .- 0 0870-t61 r- 002- C28 - 856.1 2/ 861.2 1,283.7 1,677.0 1,674.3 . 1068f 80.80= rntolv..t.6 340.5 537.1 549,2 373.7 558.3 0.6o _/ 19.0 836.1 881.2 1,283.7 1,677.0 1,674.3 1,205.8 1,173.8 1,384.8 842.4 873.2 824.3 4Z7.2 S,4-101*1 1,737.9 1,703.3 1,265,6 1,469. 2 1,56.3 1,677.3 1,723.6 1.745.6 1.733.6 20.4 76.1 186.3 il4.1 648.5 814.3 9et C..h IG9ffi 1,733.6 1,737,9 1,703.3 862.8 951.3 i.010.6 767.7 556.1 763.3 0,02z.z 1,172.6 1,245.6 1,469.2 1,586.3 1,677.3 1,723.6 1,7456 T011 S8urc.. 836.1 881.2 1,283.7 1,677.0 1,674.3 1,205.8 1,173.8 1,3S4.8

Al!!ICAT0NS 1,205.8 1,173.8 1,384.8 842.4 873.2 824.3 767.7 336.1 549.2 373.7 358.3 7.09.01 C0.1. 536.1 881.2 1,283.7 1,677.0 1,674.3 149.3 157.6 166.3 175.4 185.1 195.3 206.0 217.3 229.3 241.9 R6py 1 8co000=0t0 t 1022 1,5ZS.3 1.539.6 1.516.3 7.,03.6 1,461.4 (14.1) 20.4 78.1 186.3 214.1 648.5 665.0 1,108.0 1,302.9 1.410.9 1,492.0 Sg pîo(l .. ) 300.0 5.920.1 7.412.3 8,940.6 10.480.2 11,996.5 13.583.1 14,966.5 300.0 285.9 3S.3 384.4 570.7 570.7 570.7 784.8 1,433.3 2,098.3 3,206.3 4,509.2 C7GI-Oî P0710 2bO.0 300.0 300,0 300.0 300.0 300.0

1 S « 5. 1.bl 1. Z.ood.-- 0.18 of -li.1 .1.46.. I 2/ IGIDdCFAF 30021000 E-rLe. 7fGdiD7 3H80, 60166.10..I. .51.6 1787 600 .1l1110 b.f1.-0.0< i83t. 0893.h 1605.- 3 848 78b1 1, 1hi. 6 _.. b-f 6 11to dp a e6. b.b.0,6.1 *bo,t PcojactYaar ~ ~ ~2 ~ ~3 ~ ~4 ~ ~~13 6 7 O 9 10 il 12 13 14 13 16 17 18 19 20

OUrNiOFS Net Tranofart. Hevecax1/ 831.1 881.2 1,283.7 1,677.0 1,674.3 1,205.6 1,173.8 1,364.8 842.4 673.3 634.3 427.2 19.0

Regtna... Stes. 117.6 123.5 101.0

Debt Service 7.3 -- 20.3 -- 38.35 -60.2 - 83.0 62. 62.2.0.0 2.80.0 13.4 14.0 41.9 16.2 176.1 203.5 237.3 -248.4 270.0 279.0

Sob-total 981.2 1,025.2 1,423.2 1,737.2 1,731.3 1,287.8 1,233.6 1,466.8 924.4 955.' 961.7 573.2 172.9 161.2 176.1 203.3 227.3 249.4 270.0 279.0

IN31LO0S

ISA Cradit 330.1 370.1 766.7 937.0 954.1

CCCE L.s. -91.7 -136.4 219.0 ' -263.6 263.1

Sob- total 421.6 726.3 1,037.7 1.222,6 1,219.2

Revenes f-oo Taxation -£nI -cjet Sprtoa179.0 143.0 276.0 303.0 337.0 323.0 343.0 270.0 192.0 206.0 310.0 249.0 252.0 206.0 393).0 316.0 312,0 309.0 314.0 320.0- - f .nIcoeIeec 2/ 30.3 117.7 247.2 071.2 619.4 769.8 862.9 1,066.5 1,183.6 1.274.5 - f Exports 37-. ----- 1. 3. 5. 9. 126.6 163.4 70.2. 4 5. 5 26~0. 271.7 Su"S-total 179.5 145.0 326.0Ç 300.0 337.0 323.0 243. 270.7 197.5 ~ 2U.8 213.1 425.4 569.3 816.8 1,074.8 1,286.4 1,400.4 0,620.0 1,758.3 1,866.2

Total mufcus 603.6 673.3 1,233.7 0l,322.6 1,356.2 323.0 343.0 270.7 097.5 "3.'.P 273.1 425.4 569.5 806.0 1,074.8 1,286.4 1,400.4 1,620.0 0,758.3 1,866.2

urpio- (deficlt) (380.43 (151.7) (187.3) (214.4) (203.1) (964.6)(,1.) (1,191.1) (726.9) (734.43 (686.63 (147.63 416.6 657.6 696.7 1,062.9 1,173.1 1,370.6 1.488.3 1,587.2

CunolOîlvO Oc-plo- (dnficîr) (380.4) (532.1> (709.6> (934.0) (1,134.1) (2,093.9) (3,111.7) (4,307.6)(3,534.7) (5,769.1) (6,457.7) (6,605.33 (6,186.9) (3,331.3) (4,634.6> (3,231.7) (2,370.6) (1,008.0) 4&U.3 2,067.5

1/ S.e Tabla 2, thOn(ccx 2/ ..a Table 1, thlo Annen. Annex 6 Table 4

CAMEROON

NIETE RUBBER ESTATE PROJECT

Estimated Quarterly Disbursementsof IDA Credit (US$ '000)

Project Year Quarter Cumulative Disbursement at End of Quarter

1 1 367 2 734 3 1,100 4 1,467

2 1 2,100 2 2,733 3 3,366 4 4,000

3 1 4,877 2 5,753 3 6,629 4 7,506

4 1 8,569 2 9,632 3 10,695 4 11,759

5 1 12,819 2 13,879 3 14,939 4 16,000 Annex 6 CAMEROON Table 5

NIETE RUBBER L'STATE PROJECT

Hevecam Sources and Applications of Funds 1/ (5,800 ha)

(CFAF Million)

Project Year 1 2 3 4 5 6 7 8 9 10 il 12 13 14 15 16 17 18 19 20 21 22 23 24 25

SOURCES

Net Transfer from Goveroneot 2/ Pro3ect Costs 856- 881 ],283 1,678 1,312 604 580 677 416 292 356 46 less Hevecan Reinvested Cash t.ros __ _ 46 856 881 1,283 1,678 1,312 604 580 677 416 292 356 -

Hevecam Net Cash Income 37 173 293 403 461 460 127 583 577 583 586 605 576 575 558

Total Sources 856 881 1,283 1,678 1,312 604 580 677 416 292 393 219 293 403 461 460 '07 583 577 583 586 605 576 575 558

APPLICATIONS

Proiect Costs Agricoltural Development 46 138 216 382 288 147 121 114 86 65 55 14 Materials 164 269 225 147 13 23 18 31 12 16 78 Infrastructure 40 54 172 214 131 47 50 46 22 23 49 Fa-tory 121 121 Fixed Expenditures 165 142 230 277 323 323 323 291 239 139 Food Crop 39 37 36 Agronom.ical Studies 20 22 2 2 SAFACAM Fee 37 43 47 51 45 40 40 42 37 35 36 30 Physical Cuntingoncies (SJ) 24 35 47 55 40 29 28 32 20 14 17 2 Expected Price Increase 60 139 307 514 472

Sub-total 556 881 1,283 1,678 1,312 604 580 677 416 292 356 46

Repayment af Government Loua 149 158 166 175 185 195 206 717 229 242

Hevecam Cash Loss (27) (27) (28)

Surplus (Doficit) 300 ------(27) (27) (28) 37 173 293 403 461 311 349 417 402 398 391 399 359 346 316

Cumulativc Surplus 300 300 300 300 300 300 300 273 246 218 255 428 721 1,124 1,585 1,896 2,245 2,662 3,064 3,462 3,853 4,252 4,611 4,957 5,273

1/ ):'cludes conts ot regional studics. 2,' Icl.dOs CFAF 300 nilliua for fu.il,,g Ilevecam'c initial cash bhu-ncc. / Salvage value of equipment. ANNEX 7 Page 1

CAMEROON

NIETE RUBBER ESTATE PROJECT

Natural Rubber: Trends and Outlook

1. Over the past 25 years the world 1/ market for elastomers- both natural and syntheticrubbers - expanded at an average rate of about 6.2% per year. A slower expansionof demand in two major consuming countries - the United States and the United Kingdom - was more than offset by an above- average growth in all other countries. On the supply side there was a sharply different pattern for the two types: natural rubber supply increased by 2.5% per year while synthetic rubber supply grew at about 10.5%. Con- sequently, natural rubber's share of the market declined from 65% in 1950-52 to 33% in 1970-72. Natural rubber's share declined faster in the United States than in any other consuming area; in contrast, synthetic rubber's gains were common to all consuming countries, both developed and developing. In 1972, synthetic rubbers held 78% of the total market in the United States, down to 65% in Japan, 64% in Western Europe, and 27% in India.

2. The bulk of rubber is used in the manufacture of tires and other automobile parts. In all developed countries, demand for rubber in these end-uses expanded much faster than available supply of natural rubber. The gap was met by the rapidly expanding petrochemicalindustry: first styrene-butadienerubber (SBR) and then polybutadiene (PB) and polyisoprene (PI). SBR has been by far the most important substitute,accounting for about 60% of total synthetic rubber production. Polybutadieneis second in importance,followed by polyisoprenewhich is the closest man-made approxi- mation of natural rubber. One key to the success of the syntheticrubber industry was the seemingly unlimited availabilityof chemical monomers at continuouslydeclining prices. Syntheticrubber prices declined sharply (by over 40%) during the sixties and natural rubber prices followed suit, although fluctuationswere wider for natural rubber. Demand for all elastomers, which ls by nature a derived demand, is quite insensitiveto price changes, but very sensitive to changes in aggregate economic activity. Synthetic rubber producers can make speedy adjustments to variations in market demand, through capacity expansion and/or higher utilizationof existing capacity. In contrast, natural rubber producers cannot so easily transfer resources in and out of rubber production. Although no clear consensus exists as to the actual area of competitionbetween natural and synthetic rubber, it is evident that changes in relative prices do encourage substitutionof one type of rubber for another.

1/ Excluding the centrally planned countries, as conventionallydefined for purposes of commodity analysis. ANNEX 7 Page 2

3. In the past two years, natural rubber prices have fluctuated fairly rapidly, responding to two sets of circumstances. The first rise, in 1972-73, was the result of the world-wide economic boom; this boom began to taper off in the second half of 1973. World consumptionof natural rubber lncreased by 4% in 1972; net exports of natural rubber, however, remained at the same level as in 1971, as stocks in developed countries vere heavily drawn upon. Stagnationof import demand kept prices down throughout most of the year, until stock replenishmentsand anticipatorybuying, fos- tered by monetary uncertainties,caused a sudden reversal of the trend in the closing months of 1972. The price rise continued throughoutmost of 1973. The upturn in industrialproduction in developed countries created a strong demand for rubber, and speculativebuying also continued in 1973. Natural rubber prices - in terms of RSSI, CIF, New York - increased from 16.5 ct/lb in April 1972 to about 44 ct/lb in July 1973.

4. Towards the end of 1973, as the industrialslowdown was beginning to affect demand for all elastomersand prices of natural rubber were weakening, the availabilityof chemical feedstockswas severely curtailed by the oil crisis. Synthetic rubbers became scarce, their prices increased sharply, and natural rubber prices rebounded to new peaks. RSSI, CIF New York, averaged at 55.5 ct/lb in January 1974. These prices reflected the scarcity of all elastomers,but also the expectationthat the oil crisis would drastically increase the cost and price of synthetic rubber. Heavy specula- tion came to characterizethe natural rubber market.

5. During 1974, with crude oil becoming progressivelymore available and chemical feedstocksagain in adequate supply, the price of oil and the economic slowdown became dominant. The productioncosts of the basic type of synthetic rubber - SBR 1500 - increased from 12-13 ct/lb to about 23 ct/lb and its market price from 17 ct/lb to 32-33 ct/lb. The very high price differentialbetween natural rubber and general-purposesynthetic rubber could no longer be maintained and natural rubber prices - in terms of RSSI, CIF New York - declined to 40 ct/lb in June 1974. As car productiondeclined sharply, consumption of rubber in tires and other automobileparts declined substantially. On a world basis, consumptionof all elastomersremained at about the same level as in 1973, and, during the last 3-4 months of 1974, the supply-demandsituation completelyreversed itself to one of extra supply. Prices of general purpose synthetic rubbers declined by 10-15% in the second half of 1974, and natural rubber prices continued to slide down- ward to about 30 ct/lb in December, despite some attempts to support the market through productioncutbacks and stockpilingby the Malaysian government.

6. No drastic changes are expected over the short-term. Demand for all elastomers is expected to increase only marginally in 1975. There is substantialover-capacity in the synthetic rubber industry. Natural rubber, however, will marginallybenefit from the above-averagegrowth of some end- uses in which it had a relative advantage over synthetic rubbers - heavy ANNEX7 Page 3 truck and farm equipment tires - and from the growth of radial car tires, where the proportion of natural rubber is greater than in crossply tires. Demand for natural rubbers is, therefore, expected to increase moderately above 1974 levels.

7. Looking ahead to the end of the decade, world consumptionof all rubbers is projected to grow at an average annual rate of 5.4% between 1973 and 1980 1/. Over the same period, world supply of natural rubber is forecast to grow at some 5.6% per year. Improvementsin yield are expected to account for most of the growth in rubber output in the seventies. Pro- duction capacity of syntheticrubbers is forecast by industry specialists to be around 8.8 million tons by 1977, and extrapolationwould put capacity at 10.0 million tons by the end of the seventies. To meet total elastomers demand by 1980, the industry would have to increase its capacity ratio from a normal level of around 75% to about 85%. It can, therefore, be expected that syntheticrubbers will be in relatively tight supply. It is unlikely that natural rubber producers would then encounter serious difficultiesin disposing of their supplies. In fact, a larger than expected increase in natural rubber output - for example, through technicalmeans such as more extensive use of production stimulants 2/ -- could possibly allow natural rubber to marginally increase its share of world total rubber consumption. In addition, reduction in the rate of growth of natural rubber utilization in centrally planned countries is anticipated to increase availabîlities for the rest of the world. Analysis of the relationshipbetween crude oil, basic chemicals, and general-purposesynthetic rubber costs indicates that, assuming crude oil prices in 1980 will be about US$8.65 per barrel (in 1974 dollars), SBR prices should be in the range of 29-34 ct/lb. Correspondingly, RSSI (CIF New York) should be selling at 31-36 ct/lb in 1974 terms. In 1980 dollars, the price of natural rubber is expected to be in the range of 51-59 ct/lb.

8. Beyond 1980, the prospects of natural rubber appear to be quite favorable on the demand side. Total demand for all rubbers is forecast to grow at about 6% per year between 1980 and 1985. The potential supply of natural rubber - with existing acreage and available production technology--

1/ Projected on the basis of the relationshipbetween total elastomer consumption and industrial production. Regression analysis shows that a one percent increase in industrial production in OECD countries is associated with a 1.18 increase in the demand for all elastomers. About 98% of the variation in elastomer consumption us explainedby the growth in industrial production. OECD -- Organizationfor Economic Cooperationand De- velopment -- includes the industrializedcountries of western Europe, North America and Japan.

2/ The main stimulant is Ethrel, a brand-name chemical,which acts as a decoagulantwhen applied to trees and thus increases latex flow. ANNEX 7 Page 4 is projected to grow at 3.7% per year between 1980 and 1985 (see Table 1). This implies that the 1985 market share of natural rubber outside the centrally planned countries would decrease to about 29% because of insufficientsupplies. To maintain 32% of the market -- a feasible objective in terms of the technical-economicpotential of natural rubber -- producers should increase their output at 5.5% per year between 1980 and 1985. This likely shortfall in natural rubber availabilitiesin the 1980's indicates the need for increasing natural rubber supply faster than what appears to be possible under present expansion plans.

9. From the point of view of future prices, the prospects of natural rubber appear to be favorable only if one assumes that crude oil prices will remain at US$8.65 per barrel, in 1974 dollar terms, and that no major shifts of the petrochemicalindustry will take place in the 1980's. A drop in the price of oil would again make feedstocks cheaper and increase the relative competitivenessof general-purposesynthetic rubbers. Similarly,a large uncoordinatedexpansion of petrochemicalscapacity in oil-producingcountries would increase the supply of these products and -- other things being equal -- depress their prices to the advantage of synthetic rubber manufacturers. To allow for the possibilityof lower chemical prices in the 1980's, the long-run equilibriumprice of natural rubber is forecast to be around 35 ct/lb in 1974 constant dollar terms. N3TE RUBBLRESIETA PROJECT NMturulRLubb.er World Produ&tiom md CoauMawtton

GROWTH RATES ACTUAL PROJECTED 1973 1980 1954-56 1964-66 1967-69 1970-72 1973 1980 1 985 /3 to 1980 to 1985

------1,000 metric tons------% per annum---

A. PRODUCTION

NaturalRubber 1,902 2,356 2,734 3,094 3,492 4,800 5,750 4.6 3.7 SyntheticRubber 1,020 3,043 3,968 4,960 5,927 8,400 n.a. 5.1 --

Total 2,922 5,399 6,702 8,054 9,419 13,200 n.a. 4.9 --

B. NET IMPORTSOF CENTRALLY PIMNNED COUNTRIS

NaturalRubber 178 545 680 648 759 750 800 -- 1.3 Synthetic Rubber 2 20 --- 23 ------

Total 180 565 680 671 759 750 800 -- 1.3

C. AVAILABLESUPPLY

NaturalRubber /2 1,724 1,939 2,125 2,483 2,800 4,100 4,950 5.6 3.8 SyntheticRubber 1,020 3,043 3,968 4,960 5,927 8,400 n.a. 5.1 --

Total 2,744 4,982 6,093 7,443 8,727 12,500 n.a. 5.3 --

D CONSUMPTION

Natural Rubber 1,701 1,887 2,102 2,417 2,700 4,000 4,800 5.8 3.7 SynthetioRubber 994 2,992 4,025 4,880 5,825 8,300 11,700 5.2 7c1

Total 2,695 4,879 6,127 7,297 8,525 12,300 16,500 5.4 6.o

E. SHARE OF NATURAL IN WOPLD CONStMPTION(%) 63.1 38.7 34.3 33.1 31.7 32.5 29.1

/1 Excludingcentrally planned countries. 7! --Aijustedfor governmentstockpile deliveries. 75 Preliminary.

Source: International Rubber Study Group and Economic Analysis and Projections Department. ANNEX8 Page 1

CAMEROON

NIETE RUBBERESTATE PROJECT

Economic Rate of Return Calculation

Project and Program Life

1. Estate activities including clearing, planting and exploitation, are assumed to be 38 years for the 5,800 ha project and 42 years for the full 15,000 ha program. Tapping is assumed to start in the sixth year after planting and to continue for 34 years.

Casts

2. Costs include both investment and operating costs, but exclude price contingencies, taxes and dutiés. The current foreign exchange rate of CFAF 225 = US$1.00 is used.

3. Full costs of roads and trails, hospital schools and social facilities have been charged to the project since the area is almost uninhabi- tated. Full costs of housing also have been charged to the project since the costs of corresponding facilities in recruitment areas would be negligible.

4. Costs of agronomical studies and for the regional development plan, which might benefit a series of later projects, have been excluded.

5. Land transferred to HEVECAM by Government is assumed to have no economic value.

6. For calculating the rate of return of the project, under the assumption that a decision to restrict the estate to 5,800 ha is taken in the 4th or 5th year (see paras 7.03-7.04 of main text), additional assumptions are as follows:

(i) area cleared during PY5 would be 800 ha, thus bringing total area cleared to 5,800 ha, about 40% less than under the 15,000 ha program;

(ii) after PY 4, annual costs of equipment are estimated at 40% of the costs required for the full program;

(iii) beginning PY 5, infrastructure costs, including buildings to house overhead services, social buildings and staff housing, have been assumed to be about 60% of the amounts under the full program, excluding costs of heavy equipment operation; ANNEX 8 Page 2

(iv) full costs of the first two phases of factory building and equipping are kept, while that of the remaining two phases are excluded, in line with the reduced output to be processed under the 5,800 ha project as compared to the 15,000 ha program;

(v) fixed expendituresare estimated to remain constant after PY 4.

Benefits

6. Yields: assumptionsand levels are detailed in paragraph 6.01.

8. Price: A price rounded to CFAF 164/kg, including an export duty of 4.90% of the FOB price for all rubber exports, is used (see Table 1, this Annex).

9. Under the 5,800 ha assumption, equipment is assumed to be disposed of at PY 5 and the correspondingamount has been entered into the benefits that year. Salvage value is estimated as follows: equipment used in PY 1, 10% of original costs; in PY 2, 25%; in PY 3, 50%; and in PY 4, 75%.

Rate cf Return and SensitivityAnalysis

10. The project'8 economic rate of return is 10.15% (under the assumption of para 5) and the program's 13.55%. The effect on the rates of return of increasing and reducing costs and benefits is:

Economic Rate of Return (%)

Project Program

Costs plus 10% 9.0 12.4 Costs plus 15% 8.4 11.8 Costs plus 25% 7.2 10.9 Benefits plus 15% 12.0 15.2 Benefits plus 25% 13.0 16.2 Benefits minus 25% 6.2 10.0 Costs plus 10% and Benefits minus 10% 7.4 11.0 Costs plus 20% and Benefits minus 20% 4.4 8.2 Ânnex 8 Table 1

CANERON

NIETE RUBEERE3STTE PROJECT Price Structure ana Marketing Margins foi One Ton of Rubber (AversKeQuality) (CFA!)

OIF price/ton 185,022 Frieght 15,000

Insurance (0.25 o/o of CIF x 110 o/o) 509 Trading (1.00 o/o of CIF) 1,850 iOB Value 167,663 Harbour and Randling Charges l,l0O Transportto Harbour 1,&00 164,763

Rport Duty (4.90o/o of FOB) 8,215 tx-Factorw Value 156,548 34 35 3 7 50 9 42 p.393230330I 2 3 4 S 0 7 3 9 12 22 10~-L 13 14 5 16 17 19 19 20 2 22 2 3'5 6 2 20 28 - 52 30 33

57 00 i14 36257 423 -6 707 291 252 192 042 I10 60 '0l 62 647 59 523 40l2e0 Il 7poo.13~~~~~~~~~~...~ ~ ~ 1 21 58 120 203 290 60 46 521 522 542 99 74 79 0 el4 653 -7 -8 el7 65 0 09 I20 706 694 009 710 06 94 64 647 59 519 40 23 8 7' 13I13l3 0 474 308 310 423 466 512 314 30 322 351 393 440 501 529 540 342 559 574 l00 000 05 63 05 -7 601 -6 696 -0

53 40 47 20 5 30 30l 50 30. 14324002 140 33 59 43 77 50 58 166 24 27 .2 150 37 7 40 70 54 0 70 74 Il 69 72 60 I1 I5 59

osil 43 40 2~ os 0 34 50 I. 12 310 ¶~~~*34~ ~ 50 45 140 I71 107 63 70 67 50 3 67 56 139 îoo loi 70 7 20 21 I' os t' Iî 'il oil

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