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World Bank Document RESTRICTED Report No. P-994 Public Disclosure Authorized This report is for official use only by the BankGroup and specificallyauthorized organizations or persons. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibilityfor the accuracy or completenessof the report. INTERNATIONALDEVELOPMENT ASSOCIATION Public Disclosure Authorized REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF DAHOMEY FOR A Public Disclosure Authorized COTTON PROJECT February 1, 1972 Public Disclosure Authorized FILECOPY IDTIERNATIONALDEVELOPMENT ASSOCIATION REPORTAND REC(I'TH,ENDATIONOF THE P2ESIDENT TO THE EXECUTIVEDIREECTORS ON A PROPOSEDCREDIT TO THE REPUBLICOF DAHOMY FOR A COTTONPROJECT 1. I submit the following report and recommendation on a proposed credit to the Republic of Dahomey in an amount in various currencies equivalent to US$6,100,000 on standard IDA terms to help finance a project for developing cotton production. PART I - INTRODUCTION 2. Dahomey has been independent since 1960 and a member of the Bank Group since 1963. In 1966, the Government requested IDA assistance for an agricultural development project in the Hinvi area of southern Dahomey. The purpose of the project was to develop 6,000 ha. of oil palms and 6,000ha. of food crops. In 1969 the Associationmade a $4.6 million credit (144-DA), and Fonds dtAide et de Cooperation (FAC) of France made a grant of the same amount, to finance a palm oil factory, maize storage silos, palm plantings, food crop development and related infrastructure. The difficulties encountered with this project and the actions proposed to deal with them were reported to the Executive Directors in my memorandum of September 13, 1971 (IDA/R70-63). Agree- ment on those actionswas reached in Washington in September of this year with a delegationled by H.E. Chabi Mama, Minister of Rural Development and Cooperation. Disbursementsare much behind schedule,but they can now be expected to accelerate. (See Annex I for a summary statement of IDA credits as of December 31, 1971). 3. In 1967, the UNDP financed a survey of Dahomey's land transport requirementsand the Bank acted as ExecutingAgency. As a result of the survey, a $3.5 million DevelopmentCredit (215-DA)for highway mainte- nance and engineering was made in 1969. Execution of this project is proceeding satisfactorily, including the engineering studies which are expected to lead to a road project in 1973. 4. A long-term program for cotton developmenthas been carried out since 1964 wfithfinancial support from FAC and the Fonds Europeen de Developpement(FED) of the European Communities. The proposed project, which would be financed concurrentlyby IDA and FAC, -wasidentified by the Bank's PermanentMission in Western Africa (PMT14A)and appraisedin January/February1971. The DevelopmentCredit Agreement and the other legal documentswere negotiated in TArashingtonin September 1971. Representativesof FAC participatedin the negotiations. - 2 - 5. Presentation to the Executive Directors was delayed because institutional arrangements regaarding the marketing of cotton seed and the management of credit had to be further discussed in December at the request of the Government. Final agreement was reached with the Government in mid-January. The credit has been increased by $400,000 over the amount originally negotiated to take account of the increase in project costs in terms of US dollars resulting from the currency re- alignments of 1971. 6. As discussed briefly in Part II below and more fully in the Economic Memorandum attached as Annex II, Dahomey faces serious economic problems at two levels. The first is the fragile financial position of the public sector. This is in part the result of ineffectualmanagement, aggravatedby frequent changes of government. The need now is to re- establish control over the volume and directionof public spending and to increase revenues. The second is that the Governmenthas not developed an economic strategy which would make the best use of a narrow resource base and has actually contributedto a growing disparity of incomes between town and countryside. The two are of course interconnected. The narrow resource base means a narrow revenue base; even with strong financialmanagement the scope for public savings will be limited for a number of years. As it is, weak financial managementhas hampered efforts to develop new resources. The Bank Group's approach must be tackled together. In close collaboration with the IlF, Bank missions have been discussingwith the Governmentmeasures to regain control of expenditures and improve revenue collection,to reorder spending prioritiesand to introduce more effective developmentplanning. By lending for projects to increase productionin the rural areas, as in the case now proposed, the Bank Group, in collaborationwith multilateraland bilateral sources of financial and technical assistance,particularly the European Econo- mic Communityand France, can help to strengthenthe resource base and improve income distribution. In the course of the next two fiscal years it is hoped to bring forward proposals for the rehabilitation and improve- ment of the Parakou-Malanville road, which is part of the main North-South artery and an integrated rural development project in the south. Also under preparationis an educationproject that would be a first step towards relating the education system to manpower needs. PART II - THE ECONOMY 7. Prior to independence in 1960, Dahomey was part of the large French West Africa Federation,which provided part of the costs of public services and offered wider prospects for employmentthan could be found in Dahomey. Dahomey produced many of the educated elite of French West Africa and provided many of the civil servantsin both the federal and other local administrations. In the years followingindependence they became unemployedor unwanted and returned to Dahomey, a small country, poor in natural resources,faced with latent regional antagonismsand hard pressed to establish a viable political framework. In these circum- stances, political instabilityhas been reflected in an unsatisfactoryuse of governmentresources and the lack of an effectiveapproach to economic development. - 3 - 8. Dahomey has virtually no mineral resources or manufactures which could be a source of substantial foreign exchange earnings. The only physical resource available at present is cultivableland. Progress in the use of this resource has been slow and per capita income of village people has been stagnant. The disparity between rural and urban incomes has been growing, leading to rapid urban growth which constitutes one of the main problems facing Dahomey. 9. Efforts to accelerateagricultural development since independence have focussed mainly on export crops. Oil palm, one of Dahomey's tradi- tional assets, has received assistancefrom various foreign sources and in particularwas the main object of the first IDA-financedproject. Modern cotton cultivation was introduced around the middle of this century. This crop is presently one of Dahomey's main assets. It gives satisfactory returns, and the farmers are interested in its development. Furthermore,modern cotton cultivationalso benefits food crops grom in rotation with it. However, the comparativeadvantage now enjoyedby cotton is likely to diminish and greater attentionwill have to be given to food crops such as rice and maize, some of which could be exported to neighboring countries,and to cattle raising. As indicated with respect to the Hinvi project, there have been difficulties in developinga program to encourage food crops productionby subsistencefarmers. Nevertheless, such efforts are important and, in the project area, a study to be financed under the proposed project is expected to lead to a crop diversi- fication project. In the south, we hope it will soon be possible, in the light of experience derived from the Hinvi project and its continuing food crop program, to identify a project for agricultural development on an integrated basis, and we are prepared in principle to assist the Govern- ment in preparing and financing it. Finally, we also hope that livestock resources in northern Dahomey can be developed. 10. The developmentof human resourceshas been very poorly related to the developmentpotential of the country. Formal education,which absorbs the bulk of a relativelylarge educationbudget, has been provid- ing training almost exclusivelyfor clerical employmentand fosteringhopes of a differentand better life in the cities. The number of literate unemployed continuesto increase and the Governmentis always under pressure to create jobs for them. Uhat may be most needed as a basis for sustained economic development is to provide manpower training which would make possible a better use of availablephysical resources. That would mean a major reorientation of the education system. In this pers- pective, the first educationproject now under preparationwould include a manpower survey and curriculumdevelopment for primary and secondary education. 11. In infrastructure, due to the small size of the country and its location,most projects have a regional aspect. The improvementof the North-South axis would yield appreciablebenefits to both Dahomey and Niger. -4- It should, however, be followfed by smaller projects for the improvement of feeder roads, which would be to the advantage of the rural areas. Some investments may also be justified in regional
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