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The World Bank Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized ReportNo. 2842-LA LAO PEOPLE'S DEMOCRATIC REPUBLIC Public Disclosure Authorized AGRICULTURALREHABILITATION AND DEVELOPMENTPROJECT III STAFF APPRAISAL REPORT Public Disclosure Authorized April 18, 1980 Public Disclosure Authorized Projects Department East Asia and Pacific Regional Office This documenthas a restricteddistribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit = New Kip (NK1) NK 1.00 = $0.10 $1.00 = NK 10 NK 1.0 million = $100,000 WEIGHTS AND MEASURES Metric System 1 kilogram (kg) = 2.20 lb 1 metric ton (1,000 kg) = 0.98 long tons 1 kilometer (km) = 0.62 miles 1 hectare (ha) = 2.47 acres ABBREVIATIONS AN» ACRONYMS DIC - Department of Industry and Commerce (Province? DLI - Department of Light Industry (MIC) DOA - Department of Agriculture (MOA and Province) DOC - Department of Cooperatives and State Farms (MDA and Province) DOE - Department of Equipment (MPW) DOI - Department of Irrigation (MOA) DPW - Department of Public Works (Province) EDL - Electricity Department of Laos (MIC) MIC - Ministry of Industry and Commerce MOA - Ministry of Agriculture lIPW - Ministry of Public Works PEC - Provincial Executive Committee ADB - Asian Development Bank FAO - Food and Agriculture Organization SIDA - Swedish International Development Authority UNCDF - United Nations Capital Development Fund UNDP - United Nations Development Program LAO DESIGNATIONS Khoueng - Province Muong - District Tasseng - Subdistrict Ban - Village Houei - River GOVERNMENT OF LAO PDR FISCAL YFAR January 1 - December 31 FOR OFFICIAL USE ONLY LAO PEOPLE'S DEMOCRATICREPUBLIC AGRICULTURALREHABILITATION AND DEVELOPMENTPROJECT III STAFF APPRAISAL REPORT Table of Contents Page No. 1. BACKGROUND . 1 Project Background .i.. 1 Agricultural Sector .i.. 1 General . 1 Agricultural Production .... 1 Government Policy .... 3 Governnent Objectives . 3 Government Strategies .... 3 Bank Group Involvement in the Sector . 5 Experience with Past Lending . 5 2. PROJECT AREAS. 6 Location. 6 Agricultural Background. 7 Soils . 7 Climate . 8 3. THE PROJECT. 8 Project Objectives . 8 Brief Description . 9 Detailed Features ... 10 Rice-Milling Rehabilitation and Development . 10 Background .... 10 Rehabilitation of Existing Mills . il Electricity Supply to Mills . 12 Spare Parts for Existing Mills. 12 New Rice Mills .... 13 Storage Facilities .... 13 Transport Facilities .... 15 Training and Fellowships . 16 Coffee Processing Development . 16 Background. 16 Location of the New Mill. 17 Civil Works/Buildings .... ........ 18 This report is based on the findings of an appraisal mission that visited the LAO People's Democratic Republic in September/October 1979, consisting of Messrs. J.P. Delsalle, M. Tarafdar and R. Southworth (Bank), and U. Kokolay (Consultant). This document has a restricteddistribution and may be used by recipientsonly in the performance of their officiai duties. Its contents may not otherwise be disclosed without Worid Bank authorization. - ii - Page No. Equipment ........................ 18 Transport . 18 Training and Fellowships . 18 Workshop Rehabilitation and Development . 18 Background . 18 Civil Works/Buildings . e 19 Equipment and Spare Parts . a . 19 Training . 19 Cooperative Farm Development . 19 Background . 19 Training and Fellowships . 21 DOA Equipment . 21 Provision of Agricultural Inputs . * . 21 Technical Assistance . .. ... .. ... .. .. 21 Rural Electrification Study. 23 Implementation Schedule . .. 23 Project Costs . 24 Financing * . .. 26 Procurement . 27 Disbursement. .. 27 4. PROJECT ORGANIZATION AND MANAGEMENT . 28 Institutional Background . .. 28 Project Organization and Management Concept . 28 Annual Work Programs . .. .. .. .... .. 29 Accounting and Auditing . 29 Monitoring and Evaluation . 30 5. TECHNICAL ASSUMPTIONS . 31 Rice Milling and Storage Technical Specifications and Expected Outputs . 31 Coffee Picking, Drying and Processing - Technical Speci- fications and Expected Outputs . 33 Workshop Technical Specifications and Expected outputs. 34 Cooperative Farm Technical Specifications and Expected Yields . .*. 34 6. MARKETS, PRICES AND FINANCIAL ANALYSIS . 35 Collection, Marketing and Prices . 35 Paddy Procurement ... 35 Coffee Procurement . .. .. ... 35 Price Review ... ............ 35 Impact of Rice Mills on Farm Budgets . 35 Impact of Coffee Processing on Farm Budgets . .. .. 36 Cooperative Farm Budgets . 36 Cost Recovery ... ....... 37 - iii - Page No. 7. BENEFITS, JUSTIFICATIONS AND RISKS . 38 Benefits, Justifications. .---.-.------.--- 38 Rice Milling Rehabilitation and Development . 38 Coffee Processing Development . 39 Workshop Rehabilitation.. 39 Cooperative Farm Development . 39 Risks . 39 8. AGREEMENTS . 41 ANNEXES 1. Implementation Schedule Tables 1 - Project Item Phasing 43 2 - Implementation Schedule for Rice Milling, Storage and Transport Facilities 45 3 - Implementation Schedule for Km 42 Coffee Processing Plant 47 4 - Implementation Schedule for Vientiane, Savannakhet and Pakse Workshops 48 5 - Cooperative Farm Development Tentative Phasing 49 2. Project Cost Phasing Tables 1 - Project Cost Phasing Per Component 50 2 - Project Cost Phasing Per Province 51 3. Estimated Schedule of Disbursements Tables 1 - Schedule of Disbursements 52 2 - Proposed Allocation of Proceeds of the Credit 53 4. Additional Staffing Requirements for the Rice-Milling, Coffee Processing and Workshop Components 54 5. Estimated Incremental Production or Quality Gain at Full Development 55 6. Financial Analysis and Cost Recovery Tables 1 - Impact of Milling on Average Rice Farm Budget 56 2 - Cooperative Farm Unit Budgets 57 3 - Proposed Rice Milling Charges 58 4 - Rice Milling Rent and Cost Recovery 59 5 - Proposed Coffee Processing Charges 60 6 - Cooperative Farm Rent and Cost Recovery 61 7. Economic Analysis 62 Tables 1 - Rates of Return 64 2 - Sensitivity Analysis 65 3 - Commodity Econonic Price Projections 66 4 - Total Project Incremental Costs and Benefits 67 8. List of Documents in Project File 70 - iv - Page No. MAPS IBRD 13979R1 - Lao People's Democratic Republic IBRD 14763 - Project Location - Vientiane Province IBRD 14764 - Project Location - Savannakhet and Champassak Province Table Annexed to Maps IBRD 14763 and IBRD 14764 69 CHARTS - Provincial Executive Committee Organization 68 IBRD 20512 - Domestic Movement of Paddy and Rice 68a IBRD 21029 - Organization Chart of Ministry of Industry and Commerce 68b IBRD 21028 - Project Organization Chart 68c IBRD 19167 - Organization Chart for Procurement Procedures (ICB) 68d 1. BACKGROUND A. Project Background 1.01 The Government of the Lao People's Democratic Republic (LAO PDR) lias requested an IDA credit to help finance an agricultural rehabilitation and development project in its three provinces of Vientiane, Savannakhet and Champassak. The proposed project would support the food self-sufficiency policy of the Government and follow up on the agricultural development goals of the first two IDA Credits (Credits 760-LA and 924-LA), through (i) rehabi- litation and development of the rice milling industry, including storage and transport, in the major paddy producing provinces of Vientiane, Savannakhet and Champassak; (ii) development of coffee processing facilities, including storage and transport, in Champassak; (iii) rehabilitation and development of provincial workshops in Vientiane, Savannakhet and Champassak; (iv) provision of agricultural extension and support services to cooperative farms in Savannakhet and Champassak; and (v) provision of technical assis- tance. IDA assistance would be focussed mainly on providing additional funds to enable the Government to implement the project, and building the technical and administrative capability of the central and provincial agencies. 1.02 The Government and IDA were responsible for preparation of the proposed Agricultural Rehabilitation and Development Project III. B. Agricultural Sector General 1.03 Laos, with a per capita GNP of $90, is one of the poorest nations in the world. The Lao economy is basically agricultural. The great majority of the rural population, accounting for about 400,000 families and 85% of the population, rely on agriculture for their livelihood and most live at a subsistence level. Agriculture, including forestry, directly accounts for more than 60% of GDP, and in recent years has generated about 60% of the country's export earnings in the form of coffee and timber. Because of the country's sparse population and the availability of cultivable land, cultivation techniques have been traditionally extensive. MIoreover, cropping intensity is low, fertilizer use very limited and average yields obtained for all major crops are low. The average cropped area per family is about 2 ha. Agricultural Production 1.04 Glutinous Rice. The staple food throughout the country is glutinous rice. It accounts for 70% of the total cultivated area, or about 680,000 ha. About 40% of the rice area consists of rainfed uplands where paddy yields are very low (about 1 ton/ha). In the lowlands, there is little controlled irrigation, and excessive flooding, interspersed with periodic drought, results in widely fluctuating paddy yields from year to year. The 1977 and 1978 paddy harvests fell by more than 30% below the plan targets of 790,000 tons and 910,000 tons due to disastrous drought and severe flooding, respectively.
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