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) rehabilitation 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 assistance. 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. Rice availability,including imports,was estiriatedto be 120-130kg per capita in 1978, considerablybelow the average requirementof 160-180kg per capita. Additional losses occur in milling and storage due to inadequate,obsolete and poorly maintained facilities. Moreover, poor roads and shortages of trucks and cargo-boatsadd to the probLems of transportingadequate food supplies to the deficit areas from the few provinces which produce surpluses. This general picture was ulntilrecently further complicatedby a pricing policy which impaired incentivesto rice farmers. But the situation should improve with the recent increase of more than 150% in the official price of rice.

1.05 Paddy is processedmainly at the village level, using labor- intensive handpoundingor small private huller mills. The Government's policy is to channel paddy increasinglythrough larger rice mills which are located at the district level and generallymanaged by the prDvincial authorities. A number of mills in this category remain idle or operate far below their capacity due to lack of spare parts, and absence of trained techniciansand efficient management. The paddy supply for these mills comes mainly from an agriculturaltax collected in the form of paddy, and from direct purchase or barter against basic consumer goods valued at official prices.

1.06 Feedgrains and Livestock. Apart from rice, general shortagesalso exist in feed grain and thereforemeat production. Maize, the most important feed crop, is grown on only about 25,000 ha. Expansion is limited by inadequate price incentive and farmers' unfamiliarity with the crop. Only about 5% of production is procured by the Government and used for animal feed; the balance is used for human consumptionor fed to backyard livestock.

1.07 Much of the livestock,buffalo in particular,were destroyedor eaten during the war. Each farm family has on average 1 or 2 pigs or cattle, and less than 10 poultry. Livestock weaning rates are low, cLue to low availability and poor quality of feed, and the presence of debilitating diseases. Supply of pork (a favorite in the local diet) is far below the demand, particularlyin the urban areas.

1.08 Coffee. The crop was first introduced in Laos during the colonial period. Before 1970, about 7,000 ha were planted, almost all concentrated on the Boloven Plateau in the south. During the war, much oi the coffee area was destroyed or abandoned. Attempts are now being made to rehabilitate plantations,but despite the above-averagesoil fertility,y:Lelds are low (about 600 kg/ha) as many of the stands are over-aged or have not been pruned correctly. Only one existing mill located in Pakse provides hulling/ peeling, polishing and grading facilities,but due to insuffLcientequipment and lack of spare parts and managerial skills, the mill operates well below - 3 -

capacity. Consequently, handpounding is widely practiced, which, along with defective drying techniques and poor storage facilities, results in damaged beans, and therefore poor quality coffee and low export prices. In 1977, coffee (primarily Robusta) production was about 3,100 tons, of which about 1,500 tons were exported to convertible currency areas /1 at a value of $3.7 million (or 50% of the country's 1977 agricultural export earnings).

1.09 Forests are one of the Lao PDR's main sources of wealth. They cover about 40-50% of the country's total area, but their potential is still not known precisely in the absence of an accurate national forest inventory. Between 1974 and 1979, timber production significantly decreased and export earnings (logs and sawn timber) declined from $13 million to less than $8 million p.a. Lack of equipment and fuel, weak management of wood processing industries, internal marketing difficulties and border problems with Thailand contributed to the decline. The Government, with assistance from Sweden and ADB, among others, is providing sound forest management and export earnings are improving gradually.

C. Government Policy

Government Objectives

1.10 The Government's primary objectives in the agricultural sector are:

(a) Self-sufficiency in Food Production. Historically, Laos has been self sufficient in staple food production, but recently due to political upheavals, organization and marketing problems inadequate price incentives and bad weather, food production has failed to keep up with demand. Consequently, imports of rice have steadily increased since 1976 and were about 100,000 tons in 1978. The Government's objective is to reverse this trend.

(b) Increased Foreign Exchange from Timber and Coffee. Laos has a chronic trade deficit and extremely low export earnings, which have stagnated at about $10-15 million p.a. in recent years. Increased exports earnings are required to reduce the trade deficit and to help finance development investment.

Government Strategies

1.11 The strategies proposed for attaining these objectives are as follows:

(a) Cooperative Farm Development. The Government intends to promote cooperatives and to develop state farms for the production of

/1 An undetermined amount was reportedly traded with socialist countries in exchange for other goods. - 4 -

industrial crops and livestock. The authoritiesenvisage three stages in the developmentof cooperatives. In the first stage, joint farming is to be promoted by establishing"farmers associations"or work brigades to facilitate the exchange of labor and the sharing of tools and draught power. In the second stage, arrangementswill be made to cultivate the land collectivelyand to share the crop in proportion to the days worked by each farmer. In this stage land would be rented from members. The final stage is to conv-ertthese farmers' groups into formal cooperativesoperating as collective farms. However, members may retain part of their land and some animals for themselves. Since 1978, the pace of implementationof this strategy has been progressivelyadjusted according to circumstances.

(b) Improved Technology for Food Production. The Government's efforts to achieve food self-sufficiencyfocus on: (i) expanding the area of rice land under irrigation, (ii) increasing rice and feed grain yields on cooperativesby using improve.dseeds, fertilizers,pesticides and on-farm practices, and by strengthening extension services, (iii) decreasingpaddy losses by establishing appropriate storage, transport and milling facilities,and (iv) increasingmeat productionby developing livE!stock multiplicationunits that can supply animals to cooperatives and state farms for fattening. Priority has been given to Vientiane province where about 17% of the country's population live.

(c) Export Development. Foreign assistance has recentlybeen received, inter alia, from the Asian DevelopmentBank (ADB) and Swedish bilateral aid (SIDA) for the rehabilitationof thE forest industries. With regard to coffee, the Government:has a two step approach: (i) in the short term, improving coffee processing techniques and rehabilitatingthe Pakse coffee mill in Champassak province; and (ii) in the medium term, increasing production through developing research and re/new planting with high-yielding material, and rehabilitatingexisting mature areas.

(d) InfrastructureDevelopment. The Government is concentratingon improving road and river transportand on developing rural electrificationschemes to remove transportationconstraints to increasedproduction, processing and exports.

1.12 The major constraint the Government faces in implementingthese strategies lies in the severe shortage of qualified and experienced staff to prepare and manage developmentprojects. Until recently,irnadequate price incentives were also a major constraint. But with the new procurementprice for rice, farmers appear to have an adequate incentive to increase production. - 5 -

1.13 Even with the present shortageof trained manpower,however, considerable scope exists for improvingproduction through increased low-level technical support to farmers, arrangementsfor distributingimproved seeds, fertilizers and pesticides,and through rehabilitationof milling, storage and transport facilities.

Bank Group Involvementin the Sector

1.14 The first two IDA-assistedprojects support the food self-sufficiency objective of the Governmentby helping to: (i) increase the production of rice and feedgrain8by expanding rice land under irrigation, increasing seed production, and developine çoppezotive farming ustng appropriate agronomicpackages, and (ii) tncrease mçet production through the establishmentof a large feed grain farm and of pig multiplicationunit9. About 70% of the proceeds of the first credit (760-LA)are for expandingthe rice area under irrigation,and 10% for improved seed production. About 45% of the proceeds of the second credit (924-LA)are also for seed production and for cooperativefarm developmentin Vientiane province. Moreover, the first IDA credit aims at establishingseveral pig multiplicationunits and the second credit provides further supportwith the developmentof a 3,000 ha feedgrainfarm.

1.15 Includingadditional irrigation or flood control componentsin the third IDA project was not feasible since the absorptive capacityof the IrrigationDepartment is already strainedwith the implementationof two IDA and one ADB project and various other bilaterallyassisted programs. Like- wise, the Se Bang Fai flood control and irrigationdevelopment, initially identified in December 1977 as a possible main component for the second IDA-assistedproject, and again later as a possible future IDA-assisted project, was ultimatelyreformulated into a UNDP-funded three-year technical assistance project signed in February 1979 for which the Bank is Executing Agency. The Bank has subcontractedthe Mekong Secretariatto conduct the studies and execute the pilot works that may pave the way for a large integratedflood control and irrigationproject.

1.16 The proposed third IDA-assistedproject would follow up the objectives of the first two projects, with the emphasis still on the food self- sufficiencygoal of the Government. The technicaland institutionalachieve- ments of the first two projects would be strengthenedand complementedin Vientiane Province, and assistance for rice productionwould be extended to the major producingprovinces of Savannakhetand Champassak. A coffee- processing componentwould increase foreign exchange earningswhile further supportingthe technicaland administrativestructures of agro-basedindus- tries.

ExperienceWith Past Lending

1.17 The first IDA credit to the Lao PDR was signed on January 5, 1978 and became effectiveApril 5, 1978. The second IDA credit was signed on -6-

June 15, 1979 and became effective October 17, 1979. Both these projects are 4 A irected towards assisting the Ministry of g 'urc i Ir t o years since effectiveness of the first project, disbursements have amounted to only 40% of the appraisal estimates. The initial delays resulted mainly from the Government's -unfamiliaritywith the Bank Group's procedures and the late arrival of specialists. The pace of project irnplementation is now improving and current corimitmentsto reimburse are expected to increase disbursement to about 55% of the appraisal estimates, by end-June 1980. The second project deals mainly with the Ministry's Department of Agriculture md does not add heavy additional work for the Department of Irrigation which is responsible for implementing the largest element of the first project. The pace of implementation for this project is satisfactory as the firsi: two bids, totalling $2.5 million, have recently been awarded.

2. PROJECT AREAS

A. Location

2.01 The proposed project would be located in the major paddy producing provinces of Vientiane, Savannakhet and Champassak (see Maps IBRD 14763 and 14764). These provinces account for more than 30% of the country's total population. Each of them has an outlet for trade with neighboring Thailand:

- Tha Deua/Nong Khai for Vientiane Province (river crossing);

- Savannakhet/Mukdahan for Savannakhet Province(river crossing); and

- Ban Vang Tao/Chong Mok for Champassak Province (landi crossing).

The two latter outlets can now be used more easily than in the past few years, when they were opened only intermittently. In Vientiane province, the project would focus on rehabilitation of existing rice mills in urban centers, construction of a new mill in the more isolated district of Sanakham, and the provision of associated storage and transport facilities. A new provincial workshop would also be built in the vicinity of Vientiane City. In Savannakhet, most project activities would center on urban ,listrictswhere rice milling and workshop facilities would be rehabilitated or developed. In two rural districts, the project would provide technical services and agricultural inputs to farmers in pilot cooperative schemes. In Champassak, the project would provide for construction of a new coffee inill in the major coffee producing district and the rehabilitation of worksho? facilities in Pakse. It would also assist pilot cooperative schemes in four rural districts. 2.02 Over 50% of the country'smanufacturing enterprises are concentrated in Vientiane province, for which the availabilityof power from the Nam Ngum dam provides a favorablebasis for industrial expansion. Savannakhetprovince *wpQrts its power from Thailand and is currently consuming less than 30% of the first-st.e ceiling (5,000kWh) agreed upon between the two countries. Pakse district, in Champassak province, is supplied by a small hydro power station.

B. AgriculturalBackground

Lowland rice covers about 91,000 ha of Vientiane, 109,500 ha of Sovannakhetand 82,500 ha of Champassakprovince, while upland rice is grown on about 13,000, 19,000 and 14,000 ha, respectively. Traditionally,the province of Savannakhethas been self-sufficientin rice and the province of Champassakhas been a surplus region. Only very small amounts of maize, groundnuts and soybeans are grown. Glutinous rice is the staple and is supplementedin the diet with vegetables,and small quantitiesof pork, poultry, fish and fruit. Most of the land is farmed by smallholderswho have customary settler and cultivationrights. Data on farm and family size, agriculturalpractices, crop and livestockproduction are limited,but the average farm family is estimated to have approximately6-7 persons with 1.5 to 2 ha of lowland rice land and a smaller area of upland soil. In addition to rice, farmers usually have a few coconut and fruit trees around the house. They may rear one or two buffalo, a few pigs and poultry.

2.04 Due to climatic conditions,most of the coffee plantationsare concentratedon and around the Boloven Plateau in the provinces of Champassak and Saravane; 92% of the total planted are under coffee of about 6,500 ha is cultivatedby smallholders,the remainingarea is state farms. Present distributionof production is about 10% of a local variety (Mik), 55% Robusta, and 35% Arabica.

C. Soils

2.05 The lowlands have alluvial hydromorphicand acid soils which are cultivatedwith glutinouspaddy. Part of the upland areas are still under forest, while considerableareas are croppedwith upland rice under shifting cultivation (slash and burn) which is wasteful of forest, soil and water resources. The higher elevation soils in Vientiane province are generallylow fertilityyellow podzolics. The spurs of the Boloven Plateau in Champassak province present differentcharacteristics. Deep, basaltic red soils of rather high fertility are often encounteredon these slopes. They are planted to coffee and fruit trees. - 8 -

D. Climate

2.06 In the low plains of the three provinces,high temperature, humidity and rainfall characterize the climate. Mean temperatures range between about 210 C in December/January and 300 C in April. Rainfall is governed by the monsoon which generally commences in May and ceases in October. Although annual average rainfall is about 1,800 mm/year, it is irregular both in onset and in distribution (80% of rainfall occurs in the five-month wet season). Without irrigation double cropping rice is generally not possible. The climate on the Boloven plateau is more humid and cooler. Ir Paksong mean temperatures range between 180 C in January and 220 C in April. The annual average rainfall on the plateau, about 4,000 mm, is the highest figure recorded in the Indochina peninsula. The high humidity in I'aksong would affect coffee quality less than the combination of high humidity and high temperatures in Pakse (see para. 3.16).

3. THE PROJECT

A. Project Objectives

3.01 The objectives of the proposed project would be to:

(i) increase the production and improve the distribution of glutinous rice, by rehabilitating and developing milling, storage, transport facilities, and by training technicians and skilled labor and strengthening managerial capabilities in the provinces of Vientiane, Savannakhet and Champassak;

(ii) increase foreign-exchange earnings from coffee through a program of quality improvement that involves developing new processing, storage and transport facilities in the province if Champassak;

(iii) develop a sound maintenance base for the equipment provided under the project, by establishing a new workshop in Vientiane province and rehabilitating existing workshops in the provinces of Savannakhet and Champassak;

(iv) strengthen provincial extension services in Savannakhet and Champassak and support cooperative activities by introducing an improved technology package to about 2,400 farm families; and

(v) carry out a feasibility study of cheap power supply development to support agro-processing plants and rural electrification programs. - 9 -

B. Brief Description

3.02 A summary of components to be included under the project is given below:

(a) rice-mill rehabilitation and development in the three major producing provinces of Vientiane, Savannakhet and Champassak. Complementary to assistance by several United Nations agencies /1, rehabilitation of 5 medium/small and 3 small rice-mills;/2 electric power supply to 6 medium and 2 medium/small rice-mills; construction of one 2-ton/hour diesel-powered mill in Vientiane province and one 4-ton/hour electric-powered mill in Savannakhet province, increasing by 21% the total existing milling capacity; provision of spare-parts to 63 existing mills; provision for appropriate primary and secondary storage facilities including associated water and land transport facilities, and a training and fellowship program for provincial staff;

(b) coffee-processing development in Champassak province. Construction of a 3-ton/hr (1-ton Arabica and 2-ton Robusta) coffee mill, including appropriatestorage and transportfacilities and a training and fellowshipprogram for provincial staff;

(c) rehabilitationof provincialworkshops (vehiclesand agricultural and heavy equipment). Constructionof a provincial workshop in Vientiane and rehabilitationof two existingworkshops in Savannakhetand Champassak,including provision for operational spare parts and staff training;

(d) cooperativefarm developmentin Savannakhetand Champassak provinces:

(i) developmentof a pilot agriculturalextension service in each province through a staff training program and the purchase of vehicles and office equipment;and

(ii) purchase of farm equipment, fertilizersand pesticides for distributionto pilot cooperativefarms covering about 2,000 ha in each province;

/1 FAO-TCP/8/LAO/01/E,UNDP-financed LAO/78/016 and UNCDF-financed LAO/78/C03 project.

/2 Big: 2-ton/hr and above; medium: 1 ton/hr; medium/small: 0.5-ton/hr; small: 0.25-ton/hr. - 10 -

(e) technical assistance (to be funded by UNDP). 232 man-months of technical specialist services to be divided largely among eight key personnel as follows: (i) 32 man-months for one rice milling engineer and 62 man-months for two technicians; (ii: 28 man-months for a coffee-processing specialist; (iii) 72 man-months for three qualified mechanics; (iv) 28 man-months for a rice agronomist; and (v) 10 man-months of short-term consultant services; and

(f) Rural Electrification Study. Consultancy services to study the least cost method of meeting the electricity requirements to support agro-processing plants, pump irrigation and rural eLectrification programs.

3.03 The relative contribution of the various project components to project base cost is presented in the following table:

Total % of Category base cost base cost ($'000)

Rice mill rehabilitation and development 7,431 54 Coffee processing development 1,884 14 Workshop rehabilitation and development 1,340 10 Cooperative farm development 1,444 10 Technical assistance 1,315 9 Rural Electrificaton Study 400 3

Total base cost 13,814 100

C. Detailed Features

Rice-Mill Rehabilitation and Development

3.04 Background. At the present time, paddy is processe¶ either in the villages, using handpounding or huller type mills, or at the district level in larger commercial-type mills. Huller mills, used mainly for home consumption requirements, are concentrated in the major rice producing districts and process about 40% of paddy production in Vientiane and about 5% in Savannakhet and Champassak. These mills are not controlled by the Governnent and the owners are usually paid both in cash and in kind (byproducts). Overmilling is a common practice which results in heavy losses and reduces the nutritive value of the rice. Milling returns are poor, around 54%. Since few spare - il -

parts are available, most of these mills are periodically out of service. Handpounding continues to be very widely practiced ranging from 85% in Savannakhet and 75% in Champassak, to about 20% in Vientiane.

3.05 Commercial-type mills have capacities of 0.5 tons paddy/hour or more and are manufactured in Thailand or Japan. They are either under joint management between the State and the private sector or owned by the Government. Equipment is generally old and obsolete, and milling returns are low, around 62%, for the Government standard quality of 35% brokens. A FAO/TCP project provided emergency repairs for 24 mills in 1979: 4 in the province of Vientiane, 11 in Savannakhet, and 9 in Champassak. The only modern mill (3-ton/hr) in the LAO PDR is now being built at Nong Teng near Vientiane, under a UNDP-financed project. In addition, a UNCDF-financed project will assist the Government in constructing a new 3-ton/hr mill in Pakse and in rehabilitating 5 mills in the three project provinces. However, a number of commercial-type mills remain idle or operate far below their capacity due to a lack of trained technicians, inadequate management and insufficient transport and storage facilities. Moreover, most units are diesel-powered, which is less economical than electrical power because of high operating and foreign exchange costs. Finally, despite the impact of the FAO/TCP emergency project, a shortage of spare-parts still exists.

3.06 Rehabilitation of existing mills. Under the proposed project, spare parts, essential materials, and incremental operation and maintenance expenses would be provided for the rehabilitation of an additional eight mills. Building repairs would involve cement flooring and corrugated tile roofing. Total cost would.be about $120,000 with the following breakdown:

Medium/ Total Small small Total per base cost Province 0.25 ton/ha 0.5 ton/hr province ($'000)

Vientiane 3 3 6 72.9 Savannakhet - 2 2 47.5

Total 3 5 8 120.4 - 12 -

3.07 ElectricitySupply to Mills. Diesel fuel is imporl:edat high and continuallyescalating prices, while electricityis produced locally (hydro power) at a low price ($0.01/Kwhin Vientiane and Champassak provinces),or imported from Thailand at $0.0155/Kwhin Savannakhetprovince. Where possible, diesel engines of mills in the three provinceswou:Ld be replaced by electric motors using cheap hydro power. Electric motors, sl:ep-down transformers,power cable and accessorieswould be provided at a base cost of about $77,000 which would be distributedas follows:

Number of mills Total Province to be electrified base cost Medium-small Medium ($'000)

Vientiane 2 - 17.4 Savannakhet - 6 59.2 Champassak - - /a -

Total 2 6 76.6

/a Provided under UNCDF LAO/78/CO3 project.

3.08 Spare Parts for Existing Mills. The project would supply spare parts and essentialmaterials for rice mills now operating, or to be rehabilitatedunder the project. This subcomponentwould cover spare parts requirementsfor about four years for 63 mills in operation and would cost $206,000with the followingbreakdown:

Medium- Medium Big Total Total Province Small mills small mills mills mills number base cost (0.25 t/hr) (0.5 t/hr) (1 t/hr) (3 t/hr) of mills ($'000)

Vientiane 8 15 3 5 31 92.0 Savannakhet 5 2 8 - 15 57.0 Champassak 8 9 - - 17 57.0

Total 21 26 il 5 63 206.0 - 13 -

3.09 New Rice Mills. The project would provide for (i) the construction of a diesel powered 2-ton/hr mill in Vientiane province (Sanakham), and an electric powered 4-ton/hour mill in Savannakhet, and (ii) additional equipment and buildings for the electric powered 3-ton/hour mill to be constructed in Pakse under UNCDF LAO/78/C03 project. In spite of higher operating costs, a diesel unit would be more suitable than a steam boiler mill in Sanakham, a remote district with no maintenance facilities for sophisticated equipment. These self-contained compact type mills would be equipped with all milling and accessory equipment (weighbridge, small vehicles, forklift, laboratory and office equipment) and spare parts for about three years of operation. They would also include staff quarters and operational storage facilities for paddy and rice as described in para. 3.10(ii). The UNCDF project (LAO/78/C03) signed on September 5, 1979 will finance the Pakse mill up to a total amount of $0.5 million. The total cost of new rice mills financed under the proposed project would be about $2.1 million which includes operation and maintenance expenses. The cost in each province would be:

Total base cost ($'000) Without With Province Location Number operational operational storage storage

Vientiane Sanakham 1 (2-ton/hr) 480.0 696.0 Savannakhet Savannakhet 1 (4-ton/hr) 779.0 1,103.0 Champassak Pakse 1 (3-ton/hr) 180.0 /a 288.0 /a

Total 3 1,439.0 2,087.0

/a For operation and maintenance and additional equipment and buildings only.

3.10 Storage Facilities. At the present time, paddy storage facilities in the villages are built and operated by farmers. They are mainly small granaries adjoining the houses. Most are of poor quality and about 10% to 12% of production losses occur due to insects, rodents, birds and moisture. Apart from existing facilities at mills, very little storage is available at the district or provincial level, and what exists is often of poor quality. Centrally managed storage which include storage in large mills, does not exceed 13,500 tons in Vientiane province, 7,500 tons in Savannakhet and 7,000 tons in Champassak. Usually, collection and distribution of paddy is difficult due to a lack of trucks and boats, and the low density and poor condition of the road network (Chart IBRD 20512 shows the movement of paddy and rice). The.proposed project would develop collecting storage, operational storage, and reserve security storage as follows: - 14 -

(i) Collecting storage would be provided in the villages to allow for safe preservation of the paddy not yet brought to the mills by the end of the 3-month harvest season (No-vember-January) (para. 3.11). It would be managed by village or çooperative officials. Storage units are designed for flat storage, in bulk or in sacks, and can be used for other crops while not containing paddy. The units are raised about one meter above the ground. Floors and walls are of timber, and roofs are of asbestos. Walls have timber columns. Each unit, 24 meters long, 10 meters wide and 4.15 meters high, would provide storage for 500 tons of paddy, at a cost of about $26,000. Existing individualstorage would continue to be fully used. The collecting storage facilitiee provided under the project would be sufficient to store all paddy to be processed in government-controlled mills and amounts to about 0.5% of annual paddy production in the three provinces. Total new collecting storage capacity installed under the project would te 18,500 tons at a cost of $962,000 with the following breakdown:

Collecting Number of Total base cost Province storage capacity 500-ton units ($'000) (tons)

Vientiane 7,500 15 390 Savannakhet 6,000 12 312 Champassak 5,000 10 260

Total 18,500 37 962

(ii) Operational storage. Paddy transferred to the mills but not processed during the six month transport season (para 3.11) would be stored nearby. These stores would be managed by staff from the mills. Operational storage requirements have been nalculated to complete the needs of the government-controlled mills. Paddy storage buildings would be 15 x 45 m warehouses of 1,080-ton capacity with concrete block or brick walls, asbestos roof and timber trusses. Rice warehouses of the same type (15 x 45 m and 1,200-ton capacity) would also be provided under the project. Operational storage buildings would cost $648,000 and would be associated with the new mills to be constructed under the project (included in cost table in para. 3.09). Total operational storage capacity would be 3,240 tons paddy and 3,600 tons rice with the following breakdown: - 15 -

Operationalstorage Paddy Rice Total base cost Province (tons) (tons) ($'000)

Vientiane 1,080 1,200 216 Savannakhet 2,160 1,200 324 Champassak - 1,200 108

Total 3,240 3,600 648

(iii) Reseree/securitystorage. In addition to operationalstorage, reserve security storage facilitieswould be installed in the districtsnear the new mills. They would be managed by provincial Departmentsof Industry and Commerce (DICs). They would provide the necessary flexibilityin handling government stocks, import or surplus distribution. Storage buildingswould be for 1,080-ton paddy or 1,200-tonrice with designs similar to operationalstorage units. At Nong Teng, in Vientiane province, a bin-type 1,000-ton pilot silo would also be erected. Total additional reserve/security storage provided under the project would be 15,040 tons for a total cost of about $1.56 million with the followingbreakdown:

Reserve security storage Total Province capacity base cost (tons paddy) ($'000)

Vientiane 7,480 808 Savannakhet 4,320 432 Champassak 3.240 324

Total 15,040 1,564

3.11 Transportfacilities. The road network serving most villages in the three provincesis sparse and generally in poor condition, although some of the existing road links between larger villages are adequate for low current traffic needs. Tracks leading to the smaller villages are frequently impassable to freight and passengervehicles during 2 or 3 months in the wet season, although they continue to be used by farm carts and bicycles. Large-scaletransport of paddy from producing areas to the mills can be made by truck or boat. Cargo boats are much cheaper to operate than trucks and can be constructedat existing shipyardsin each province. The transport fleet has been designed with the following constraintsand objectives: - 16 -

(i) the transportseason lasts 6 months (December to May) from the beginning of harvest until the beginning of the rainy season; and

(ii) cargo boats are used as much as possible to transportpaddy from producing areas near navigable rivers.

In the off-season,the fleet would be used to transport consumer goods, farm inputs and other cargo. Its main features would be as follows:

Trucks Cargo Boats 6-ton 10-ton 10-ton 30/40 ton 60/80-l:on Number Number Number Number Number Total of of of of of base cost Province units units units units units ($'000)

Vientiane 9 6 - 4 2 916 Savannakhet 10 - 6 - 2 597 Champassak 9 - 4 4 4 820

Total 28 6 10 8 8 2,333

Three sizes of cargo boats would be constructed;ten ton boats with 75 hp marine diesel engines at a unit cost of $12,700, 30-40 ton boats with 120 hp engines at a unit cost of $23,000, and 60-80 ton boats with 240 hp engines at a unit cost of $43,700. Unit costs for 6-ton and 10-ton trucks would be $17,300 and $32,200, respectively. The unit costs for trucks and boats include a 15% provision for spare parts. Three 1.5-ton pickup trucks and five motorbikeswould also be provided in each province for the general use of the provincial Department of Industry and Commerce (DIC).

3.12 Training and Fellowships. The training to be provided at a total base cost of $82,500 would be of three main types: (a) milling and storage methodology for about 30 technicians from each province for 6 weeks each; (b) specialized training for the organization of storage and transport, operation and maintenance of new milling equipment, and use of by-products for 5 technicians from each province (6 months each); and (c) rice milling technology for two or three staff from each provincial DIC (abroad).

Coffee Processing Development

3.13 Background. At the present time only one coffee mill owned by the Government and located at km 4 of Road 13 at Pakse in Champassak province provides hulling/peeling,polishing and grading facilities. It is located in an area too hot for storage of clean beans. Nominal capacity is about - 17 -

3,000 tons per annum, but due to a lack of spare parts, operational capacity was until MIay 1979 only about 300 tons a year. Consequently, over the last 3 years, more than 90% of the coffee produced in the Boloven Plateau has been hulled by handpounding techniques. These factors result in considerable physical damage to the coffee beans.

3.14 Moreover, the most widespread berry picking technique is "strip- picking," under which the number of berries picked while ripe rarely exceeds 60% (see para. 5.05). This method results in serious deterioration in the quality of clean coffee, especially for the export arabica. Coffee berries are usually dried on the ground, which lengthens the drying period and ultimately lowers the quality of coffee.

3.15 Storage of cherries and handpounded coffee prior to delivery is routinely undertaken by the farmers for periods ranging from 6 to 18 months. Given the poor quality of storage facilities, and despite the favorable climatic conditions of the coffee-producing regions, very severe quality deterioration occurs after more than 6 months of storage. Handpounded coffee or dry cherries are transported to a subdistrict store, and, after weighing, are shipped to the Pakse Coffee Mill. After processing, coffee again suffers adverse storage conditions due to unfavorable climatic conditions and poor quality of storage facilities.

3.16 Location of the New Mill. The proposed project would relocate the Pakse coffee mill from Pakse to a new site on the Boloven Plateau at km 42 on road 24, where more suitable climatic conditions would reduce the risk of quality deterioration in processing and storage. An economic analysis justi- fying this relocation has been made and agreed with the Government. The new mill would have a 1-ton/hr processing line for Arabica and a 2-ton/hr line for Robusta. Total base cost would be about $1.9 million, which includes $184,000 for operation and maintenance during the first three years of operation. The cost breakdown is:

Total base cost Components ($'000)

Civil works/buildings 727 Equipment /a 888 Incremental operation and maintenance 184 Transport /a 60 Training and fellowship 25

Total 1,884

/a Includes a 15% provision for spare parts. - 18 -

3.17 Civil works/buildings. The total covered area for coffee mill and storage facilities (four stores) would be about 4,500 sq m. IUnitcosts have been estimatedat $160 per sq m. Total base cost would amouni:to $727,000.

3.18 Equipment. The two milling lines would be equipped with peeling, polishing and grading facilitiesas well as weighing scales and quality control and office equipment. An automatic ventilation systen would also be provided for the storage buildings. The mill would be equipped with electric engines, power being provided by a 250 kw diesel generator. The total cost of the mill equipmentwould be $888,000,which includes 15% for spare parts.

3.19 Each of the stores would have automaticallycontrolled ventilating systems and self ventilating roofs to reduce temperaturesand to ensure optimum humidity for quality retention during prolonged storage. Strict quality control measures would also be introduced in subdistrictcollection centers through the provision of weighing and moisture metering equipment. The project would further provide for polypropyleneand polythene sheeting to improve drying facilitiesat the farm level.

3.20 Transport. Because of the poor existing transport facilities, the project would provide three new 6-ton trucks and one pick-up for a total cost of $60,000, which includes spare parts.

3.21 Training and Fellowships. Training would include (i) six-week training courses for ten technicians (15 man-months) to upgrade the technical level of DIC staff assigned to the main coffee producing subdistricts; (ii) six-month training courses for five selected technicians (30 man- months) in more specializedfields such as coffee agronomy and processing and coffee mill management;and (iii) three- to five-month training abroad in coffee selection, production and processing for two or three provincial DIC staff. Total base costs are estimatedat $25,000.

Workshop Rehabiltationand Development

3.22 Background. Provincialworkshops exist in Savannakhetand Pakse but due to a lack of spare parts and obsolete equipment their capacity for maintenance and repair of vehicles and heavy equipment is very limited. Operationallife of cars, trucks and heavy equipment is presently being shortenedby a widespread lack of routine maintenance and mainyvehicles are idle for months. The Mtinistriesof Agriculture (MOA) and Public Works (MPW) are the only organizationsto have workshops in Vientiane province. A new workshop for the MOA is now being built with the assistance of SIDA. These facilitiescan barely maintain and repair all the equipment belonging to the two ministries,but they cannot meet the needs of the provincial construction agency which was recently created to implement irrigationand flood control works throughout the province. - 19 -

3.23 In order to meet these various requirements, the proposed project would provide a provincial workshop in Vientiane and rehabilitate the existing ones in Savannakhet and Pakse. The cost breakdown would be as follows:

Vientiane Savannakhet Champassak Total ------($'000) ------base cost

Civil works/buildings 207 48.5 48.5 304 Equipment 382 300 300 982 Training 18 18 18 54

Total 607 366.5 366.5 1,340

3.24 Civil lWorks/Buildings. The project would provide for the construction of a 84 m x 30 m workshop in Vientiane and the extension of existing buildings in Savannakhet and Pakse. The new building would have concrete floors, metallic frame and asbestos roof. Unit cost of construction has been estimated at $60 per sq m. Total building cost would amount to about $303,000.

3.25 Equipment and Spare Parts. Basic equipment for the Vientiane workshop, additional equipment and tools for the Savannakhet and Pakse workshops, and vehicles and office equipment would be provided under the project. The workshops would be organized in 5 sections: (i) vehicles and heavy equipment repair, (ii) welding, metal sheet and blacksmith, (iii) electricity, (iv) machine shop, and (v) painting. In addition, spare parts would be provided for the first two years of operation of the workshops. Total equipment costs, including office equipment, vehicles and spare parts would amount to about $982,000.

3.26 Training. The training to be provided at a cost of about $54,000 would include 6-month training courses for 90 technicians and skilled workers (30 in each province) totaling 540 man-months. Fields of specialization would include: general car mechanics, diesel engine repair, electricity, welding and blacksmithing, machine operating and painting.

Cooperative Farm Development

3.27 Background. In accordance with the Government's objective of restructuring the economy along socialist lines, directives have been issued to all provincial authorities to promote cooperative farming and full state control over marketing of crops. The latest statistics on cooperatives are: - 20 -

No. of coop- No. of No. of ha % of total eratives la families paddy lowland paddy lowland

Vientiane province 468 20,795 24,976 27.4 Savannakhetprovince 250 13,510 17,711 16.2 Champassak province 457 28,020 50,407 61.2

/a Mostly at the earliest stage of development.

Members of cooperativesare provided with ready access to credit, technical advice and the use of cooperativemachinery. They also have the opportunity to buy basic consumer items and other goods at government controlledstores. The rate of development of active cooperativeswill depend on how quickly the Government is able to gain experience in setting up and managing cooperatives.

3.28 A key constraint in the Government'sprogram to increase crop production through developmentof cooperativesis the shortage of trained technicians. To develop technical services for farmers, governmenthas greatly expanded its short-termrural training courses for provincial extension technicians. Several small UNDP financed projects have been directed towards agriculturaltraining and the first two IDA-assistedprojects also included funds for expandingthe training program for agriculturaltechnicians, and for establishinga small core of provincialsubject matter specialiststo back-stop extension agents.

3.29 The technicalsupport componentof the proposed project would extend to the provincesof Savannakhetand Champassak the same technicalsupport now given in the first two projects to the province of Vientiane. Base cost estimates would be as follows:

Savannakhet Champassak Total ------($'000)------base cost

Training and fellowships 22 22 44 DOA equipment 360 285 645 Inputs for cooperatives 529 226 755

Total 911 533 1,444 - 21 -

3.30 Training and Fellowships. Three types of training would be provided: (a) some 40 technicians in each of the two provinces would receive 6-weeks of training (total of 120 manmonths) to upgrade technical and practical skills. The training would include practical agronomy, basic extension methodology and cooperative formation; (b) about 10 technicians in each of the provinces would be trained for 6 months (total of 120 manmonths) in more specialized fields such as timely harvesting, crop protection and rice, feedgrain and tree crop (mainly coffee) agronomy. These more highly trained technicians would become subject matter specialists who would train and es9ist the provincial extension agents; and (c) abroad training (3-5 monthfqeh) for 2 or 3 DOA selected staff in the disciplineof technical s%uVpqrge 3,gement of cooperativefarms,

3.31 DOA Equipment. Additional equipment would be provided for each provincial Department of Agriculture. It would include office, laboratory, agricultural implements and training equipment and some vehicles. Total equipment cost would amount to about $645,000.

3.32 Provision of Agricultural Inputs. About $755,000 would be provided under the project for fertilizers and pesticides required for developing 2,100 ha in pilot cooperative farms at a cropping intensity of about 133% in Savannakhet and 2,000 ha monocropped in Champassak. Provincial authorities would arrange for the procurement of materials and equipment with the assistance of the MOA. They would also be responsible for distribution of these items to the cooperative farms until procedures for extending credit through the National Bank of Laos are finalized under the first IDA-assisted project (Credit 760-LA). Reimbursement by cooperatives would be in kind (para. 6.13).

Technical Assistance

3.33 The portion of the project proposed for UNDP financing ($1.4 million) would provide for eight FAO specialists (232 man-months) to assist in training, implementation and management. The average man-month cost, including salary, expenses, fees, international travel and subsistence is expected to be $5,260. The eight specialists to be recruited by FAO under four separate agreements would be as follows:

(a) Rice Milling

(i) Rice Mill Engineer. This senior engineer would be contracted for 32 months. He would have at least five years experience in rice milling in developing countries and would be familiar with ICB procurement procedures. In close coordination with the Ministry of Industry and Commerce (MIC) and the provincial committees, he would be required to advise and assist in designing new plants, preparing detailed specifications for equipment, organizing the transport and storage network and - 22 -

in managing the units built or rehabilitatedunder the project. He would also assist in organizing training activities and supervise and coordinate the work of the two field-levelrice mill technicians.

(ii) Rice Mill Technicians. Two technicianswould be contracted for 34 and 28 months, respectively. They would have extensive experiencewith modern rice mill equipment including installation, operation and maintenance. Under the supervisionof the engineer, they would advise and assist the provincial Departments of Industry and Commerce (DICs) staff with installing and operating the new rice mills, rehabilitating and converting to electric power the existing mills, and training national staff for the rice mills constructedor rehabilitatedunder the project.

(b) Coffee Processing

Coffee Processing Expert. This expert would be contracted for 24 months. He would have at least five years experience in coffee processing in developing countriesand he would be familiar with ICB procurementprocedures. In close coordination with the MIC and the Champassakprovince staff, he would advise and assist in designing and preparing specifications for equipment. He would also assist in managing the new plant and in organizing training activities in improved harvesting and drying practices.

Mechanical Experts. One adviser would be contracted for 28 months and two others for 22 months each. They would have extensive experience in organizing and managing modern workshops for repair of light vehicles, trucks and agriculturaland heavy equipment. They would advise and assist the provincial technical staff in deslgning buildings, preparing specificationsfor procurementof workshop equipmentand operationalspare parts, installing new or additional equipmentand in day-to-daymanagement. They would also assist in training mechanics and in establishinggeneral maintenance regulationsand in preparing standard checklists for various types of vehicles and equipment.

(d) Rice CooperativeFarms

Rice Agronomist. The agronomist would be corntracted for 28 months. He would have at least five years experience in modern rice production technology and in irrigated farm management in developing countries. He woulcl advise and - 23 -

assist the provincial Departments of Agriculture (DOAs) and Departments of Cooperatives and State Farms (DOCs) in Savan- nakhet and Champassak in improving cultural practices for rice, grown under both rainfed and irrigated conditions, in training technicians and in developing pilot extension services.

(e) Short-Term Consultants

In addition, 10 man-months of short-term specialist services would be provided to help overcome specific technical constraints which may arise from time to time due to the severe lack of technically trained personnel in the country. These services would be provided for rice milling (6 man- months) and for coffee production and processing (4 man- months.

3.34 Assurances were obtained at negotiations that, as a condition of disbursement for each of the major components, the Government would appoint: (i) an engineer for rice milling: (ii) an expert for coffee processing; (iii) a mechanical expert for workshops; and (iv) a rice agronomist for cooperative farms, and that the remaining four specialists would be recruited not later than January 31, 1981 (paras. 8.01 (a) and 8.02).

Rural Electrification Study

3.35 The proposed project would also provide for $400,000 of consultancy services to carry out studies to identify least cost methods for the development of electricity supply for agricultural and rural needs. These would explore various alternatives for power supply including, inter alia, the feasibility of minihydro projects, wheeling of Nam Ngum power through Thailand by suitable development of transmission network in Lao PDR and generation based on biomass energy. The study would require approximately 45 man-months at a man-month cost of US$8,000, inclusive of salary, fees, international travel and subsistence. In addition, the contract would cover the cost of vehicles and survey equipment. Assurances were obtained at negotiations that suitable consultants would be selected by October 31, 1980 to undertake this study on terms and conditions acceptable to IDA (para. 8.01(b)).

D. Implementation Schedule

3.36 The rice milling and storage component would be implemented over a period of four years, the coffee processing, workshop and rural electrification study components over two years and the cooperative farm development in Savannakhet and Champassak over three and four years, respectively, as shown in Annex 1, Tables 1-5. Detailed design of the rice mills, the coffee - 24 -

processing plant and workshops as well as the procurementof vehicles and of constructionmaterials and chemicalswould begin in late 1980. Construction of the first civil works would commence in the dry season starting November 1980, with the remainderbeing spread over the following two to four years. Training and fellowshipswould be spread over the first two years, and constructionof cargo boats would be completedby end-1982. The pilot paddy areas developedunder the project would be about 2,000 ha ir.1981, 3,600 ha in 1982, 4,300 ha in 1983 and 4,800 ha in 1984, including dry season crop.

E. Project Costs

3.37 Total project costs are estimated at $18.8 million, of which $13.0 million or 69% is foreign exchange. Unit prices for equipment, vehicles, materials and supplies are based on March 1980 prices. There would be no taxes or duties on items imported for the project. Due to the very severe shortage of foreign exchange in the Lao PDR, IDA would finance the recurrent foreign exchange expendituresof the processing units built or rehabilitatedunder the project as well as the foreign exchange costs of fertilizersand pesticides used during the developmentphase of the project. Therefore, the total correspondingrecurrent expendituresalnounting to $2.1 million with foreign exchange at about $1.3 million have been included in the five-yearproject costs.

3.38 A physical contingencyfactor of 10% is applied to the components for equipment,and 15% for civil works. Additional costs due to expected price increasesover the implementationperiod account for about 24% of project base costs, plus physical contingencies,assuming thIefollowing annual inflation rates:

Annual inflatiDnrate (%) 1980 1981 1982 1983-85 lIaterials,equipment, civil works & services 10.5 9 8 7 UNDP-financedtechnical assistance 8 8 8 -

These inflationrates are appropriatefor both foreign and local componentsof the project. Salary levels and wages in the Lao PDR are government-controlled and all local expenditures(31% of project costs) would be made through the official marketing system. Details of cost estimates are provided in Annex 2, Tables 1 and 2 and are summarizedas follows: - 25 -

Total % Local Foreign Total Local Foreign Total base Foreign Inputs -- (NK million) ------($'000) ----- cost exchange

Rice Milling Component

Imported materials - 16.72 16.72 - 1,672 1,672 12 - Imported equipment - 25.04 25.04 - 2,504 2,504 18 - Labor /a 18.62 - 18.62 1,862 - 1,862 13 - Local material 13.33 - 13.33 1,333 - 1,333 10 - Abroad training - 0.60 0.60 - 60 60 1 - Subtotal 31.95 42.36 74.31 3,195 4,236 7,431 54 57

Coffee Processing Component Imported materials - 3.88 3.88 - 388 388 3 - Imported equipment - 8.90 8.90 - 890 890 7 - Labor /a 3.20 - 3.20 320 - 320 2 - Local material 2.66 - 2.66 266 - 266 2 - Abroad training - 0.20 0.20 - 20 20 - - Subtotal 5.86 12.98 18.84 586 1,298 1,884 14 69

Workshop Component Imported materials - 1.70 1.70 - 170 170 1 - Imported equipment - 9.79 9.79 - 979 979 7 - Labor /a 1.22 - 1.22 122 - 122 1 - Local material 0.69 - 0.69 69 - 69 1 - Subtotal 1.91 11.49 13.40 191 1,149 1,340 10 86

Cooperative Farms Imported materials - 7.55 7.55 - 755 755 5 - Imported equipment - 6.34 6.34 - 634 634 4 - Labor /a 0.24 - 0.24 24 - 24 } Local material 0.11 - 0.11 il - il } 1 - Abroad training - 0.20 0.20 - 20 20 } - Subtotal 0.35 14.09 14.44 35 1,409 1,444 10 98

Technical Assistance - 13.15 13.15 - 1,315 1,315 9 100 Rural Elec. Study - 4.00 4.00 - 400 400 3 100 Total base cost 40.07 98.07 138.14 4,007 9,807 13,814 100 71

Physical contingency 4.42 8.84 13.26 442 884 1,326 67 Expected price increases 13.31 23.18 36.49 1,331 2,318 3,649 64 Total cost 57.80 130.09 187.89 578 13_,009 18,789 69

/a Includes provision for local training. - 26 -

F. Financing

3.39 The proposed IDA credit of $13.4 million would finance 71% of total project costs. The credit would finance 89% of foreign exchange costs and 31% of local costs. UNDP would finance the remaining foreign exchange costs of $1.4 million (11% of foreign exchange costs), for technical assistance and support vehicles. The proposed financing arrangementsare shown below.

Government UNDP IDA Total $'000 % $'000 % $'000 % $'000 %

Rice-milling rehab. & develop. 2,241 30.2 - - 5,190 69.8 7,431 100.0

Coffee processing develop. 400 21.2 - - 1,484 78.8 1,884 100.0

Workshop rehab. & develop. 125 9.3 - - 1,215 90.7 1,340 100.0

Cooperative farm develop. 35 2.4 - - 1,409 97.6 1,444 100.0

Technical assistance - - 1,315 100.0 - - 1,315 100.0

Rural Elec- trification study - - - - 400 100.0 400 100.0

Physical contingencies 267 20.1 - - 1,059 79.9 1,326 100.0

Expected price increases 904 24.8 102 2.8 2,643 72.4 3,649 100.0

Total pro lect cost 3,972 21.1 1,417 7.6 13,400 71.3 18,789 100.0 - 27 -

G. Procurement

3.40 Equipment and materials, costing about $10.8 million would be procured after international competitive bidding in accordance with IDA Guidelines. Where contracts are estimated to cost more than $100,000, IDA's approval would be required before invitations to bid are issued and contracts awarded. However, to permit flexibility in the procurement of specialized equipment and materials, items costing not more than $50,000 each, but not exceeding $1 million in total, could be procured under local competitive bidding procedures acceptable to IDA. In addition, existing practices for procurement in neighboring countries of off-the-shelf items costing less than $10,000 each would be accepted, to facilitate start-up purposes, up to a total of $500,000.

3.41 Wherever international competitive bidding is required under the project, bids would be advertised in Bangkok and Vientiane where a growing number of international firms have sales representatives. The flow chart of current government procurement procedures is shown in Chart IBRD 19167.

3.42 Civil works, equipment installation and cargo boat construction required for the rice milling, coffee processing and workshop components, costing about $6.7 million, would be carried out by force account or be contracted on the basis of competitive bidding advertised locally among the small number of private or joint venture companies in the country. A few companies continue to operate with the permission of Government and are able to offer competitive prices for work that would otherwise be done by the ministerial or the provincial state construction agency. The works would not be suitable for international competitive bidding in view of their small size and scattered location and because of the difficulties in setting up support services and hiring labor.

H. Disbursement

3.43 Disbursements of the proceeds of the proposed credit would be made at the rate of:

(a) 100% of the foreign exchange cost of directly imported equipment, construction materials, fertilizers and insecticides, and operating costs, or 75% of local expenditures for the above imported items procured locally;

(b) 100% of the costs of training abroad and consultancy services; and

3.44 Applications for disbursements for equipment, construction materials, fertilizers, insecticides and for works carried out by contractors would be supported by normal documentation. Applications for force account - 28 -

work and the foreign exchange portion of operating costs woull be supportedby statementsof expenditurecertified by the project executive committeesin the provinces and the Ministry of Industry and Commerce. The supporting documentationwould be retained by the Borrower and held available for inspectionby IDA supervisionmissions.

3.45 The schedule of disbursementsand the proposed allocationof proceeds of the Credit are presented in Annex 3, Tables 1 and 2. It is expected that disbursementswould be completed by end calendaryear 1985, approximatelytwelve months after the end of construction.

4. PROJECT ORGANIZATIONAND MANAGEMENT

A. InstitutionalBackground

4.01 ProvincialExecutive Committee. The Government is decentralized. Each province is administratedby a seven member Executive Committee (PEC) which is directly responsibleto the Prime Minister through its chairman who is ranked as a minister. The PEC heads 22 departments covering all fields of activity in the province (see Chart page 68). Most departmentsare under the technical control of their correspondingnational ministries.

4.02 TechnicalMinistries. Three technicalministries would be involved in the various project components: (a) the Ministry of Industry and Commerce (MIC) for rice milling and marketing, coffee processing and export, and rural electrificationstudy; (b) the Ministry of Public Works (MPW) for provincial workshops and cargo boat construction;and (c) the Ministry of Agriculture (MOA) for Cooperative farm development. Each of these ministries is organized in nine Departmentsor Directoratesas shown for the MIC in Chart IBRD 21029.

B. Project Organizationand Management Concept

4.03 The proposals for project managementmust be viewed against the existing decentralization. To achieve its objectives,the project would require close coordinationof project activitiesby the provincial and national authorities.

4.04 The pattern of project management which, as shown in Chart IBRD 21028, is as follows:

(a) Coordinationat the Central Level. A project coordinating committee chaired by the Vice Minister for Industry,would be set up within the MIC. It would comprise members from the MIC's Department of Light Industry (DLI), the MOA's Department of Planning and the MPW's Department of Equipment and would be responsiblefor coordinationwith the three concernedprovinces as well as with the above Ministries; - 29 -

(b) ImplementingOrganization at the ProvincialLevel. Each of the three PECs would be in charge of implementingthe project. For that purpose, a project executive committeechaired by a member of the PEC would be appointedin each province. It would comprise four to six members distributedas follows:

(i) a financial officer from the provincialDepartment of Finance;

(ii) an administrativeofficer from the provincialDepartment of Administration;

(.it) a senior officer from the provincialDIC;

(iv) a senior officer from the provincialDepartment of Public Works (DPW); and, where necessary

(v) a senior officer from the provincialDOA; and

(vi) a senior officer from the provincialDOC.

Thése project executive committeeswould be responsible for direction,control and coordinationof project field operationsat provincial level. This organ- izational structurewould be supportedby a strong training and technical assistance program.

4.05 An assurancewas obtained at negotiationsthat Governmentwould appoint these project coordinatingand project executivecommittees not later than October 31, 1980 (para. 8.01(c)).

C. Annual Work Programs

4.06 Civil works and operationand maintenance,including staffing,would be the responsibilityof the provincial departmentinvolved. Assuranceswere obtained at negotiationsthat governmentwould make adequate arrangementsfor the timely provision of funds and resourcesrequired to achieve and maintain all civil works to be constructedunder the project and to staff, maintain and operate all other project-supportedfacilities (para. 8.01(d)). Additional staff requirements,amounting to about 800 are detailed in Annex 4. Not later than October 31 of each year, the Governmentwould present to IDA an annual work program for its review, detailing the proposed activitiesof the implementingprovincial agencies for the 12-monthperiod starting on the followingJanuary 1, including recruitmentand training of required personnel. The project would be implementedin accordancewith this program. During negotiations,assurances to this effect were obtained (para. 8.01(e)).

D. Accounting and Auditing

4.07 Each provincial implementingagency is subject to normal government control and auditing procedures. Project accountswould be audited by the State Auditors and supervisionmissions would work closely with the - 30 -

authoritiesto ensure satisfactoryquality of audits. IDA has furnished the Governmentwith auditing guidelines,proforma accounts and reporting requirements. During negotiations,assurances were obtained that: (a) separate accounts would be maintained for each of the components in each province; and (b) audited project accounts would be sent to the Associationwithin six months of the close of each financialyear (para. 8.01(f)).

E. Monitoring and Evaluation

4.08 Under the proposed project, coordinationof procurementand collation of project componentaccounts would be the responEibilityof the Financial Section of the DLI. Monitoring and evaluationof project activities would be carried out by a unit comprisingtechnical and financial staff from the MIC's Department of Light Industry,MOA's Department of Planning and MPW's Department or Equipment. Assurances were obtained at negotiationsthat this monitoring unit would be establishednot later than October 31, 1980 (para. 8.01(g)). - 31 -

5. TECHNICAL ASSUMPTIONS

Rice Milling, Storage and Transport Technical Specifications and Expecteu Outputs

5.01 Rice Milling. Current milling returns for handpounding and huller mills are about 54%, and about 63% for the commercial-type mills. Traditional handpounding and huller mills do not allow grading of byproducts, and the mixture of 39% brokens, bran and husk cannot be used as pig or cattle feed. The equipment of two new rice mills constructed under the project would be self-contained and would include a hopper cleaner, disc sheller, coarse bran sieve, husk separator, paddy separator, whitener, white rice grader (whole grain and various classes of brokens) and automatic bagging scale. Given the present government standard of 35% brokens, the milling return of these new units is expected to average in the future 67% white rice and 10.5% brokens and bran as by-products. This target implies timely harvests and appropriate drying practices.

5.02 Storage. The collecting and operational storage requirements have been estimated using the following assumptions: a six month dry season for transport, a three-month harvesting period, and 1,800 hours of milling (out of an annual total of 2,400 hours) during the transportation period. The storage facilities provided under the project and described in para. 3.10 (i) and (ii) are expected to reduce losses by insects, rodents, birds and moisture from 10-12% to 4-6% at the primary stage, and from 4-5% to 1-2% at the secondary stage.

5.03 Transport. To estimate the number of trucks and cargo boats required during the transport period the most suitable types of vehicles have been determined. Where possible cargo boats have been selected: sixty to eighty-ton boats for most transport on the Mekong river and 30/40 ton and 10-ton boats on narrower stretches of the Mekong and on the Se Bang Mouan, Se Done and Kha Mouane rivers. Six-ton trucks have been chosen for road transport with a few ten-ton units selected for Vientiane province where roads are better. A mix of trucks and boats has been selected that would keep mills operating at full capacity while minimizing the amount of collecting storage required. The breakdown of the assumed monthly capacity of trucks and boats is as follows:

Monthly Capacity Per Unit (Tons) Trucks Cargo Boats 6 Ton 10 ton 10 ton 30/40 ton 60/80 ton

Vientiane 450 750 - 435 875 Savannakhet 450 - 160 - 875 Champassak 450 - 160 435 575 - 32 -

5.04 Expected output. It is estimated that improved milling as well as transport and storage conditionswould result at full developmentin additional ouput of rice or equivalent as follows (as shown also in Annex 5):

% increase Without With in rice project project equivalent

Rice Equivalent from Milling (%)

(a) RehabilitatedDiesel Mills - Rice 54 /a 64 19 - Rice equivalent of byproducts 2 lb 4 /c 100

Subtotal 56 68 21

(b) New Mills - Rice 54 /a 67 24 - Rice equivalent of byproducts 2 lb 3.5 Id 75

Subtotal 56 70.5 26

Savings from Transport and Storage (%)

(a) Collecting Storage % paddy loss 10-12 4-6 - % savings in rice - 4 4

(b) Operational Storage % paddy loss 4-5 1-2 - Z savings in rice - 2 2

/a Average for huller milling, and handpounding. /b Estimated at 2% rice equivalentvalue. /c Estimated at 4% rice equivalentvalue. /d Estimated at 3.5% rice equivalentvalue. - 33 -

Coffee Picking, Drying and Processing - Technical Specifications and Expected Outputs

5.05 Picking. Most farmers in Champassak and Saravane "strip-pick" all their coffee at once rather than selectively harvesting only the ripe berries. As a result, about 40% of the harvested berries are either under or overripe. The proposed project would encourage farmers to pick only ripe berries, and to keep arabica and robusta varieties separate.

5.06 Drying. Farmers currently dry berries in simple solar-heated earth dryers which result in uneven drying and rapid fading of the coffee beans. They are also contaminated with dirt, small stones, and fungal spores. The proposed project would alleviate the present drying problems by providing farmers with sufficient woven polypropylene sheeting to construct simple, well-ventilated, raised drying area, and U.V. stabilized polythene sheeting to cover the drying area at night, or when it rains.

5.07 Processing and Storage. It is estimated that about 90% of the coffee produced in Paksong district is hulled by handpounding which is very labor-intensive, and results in the poor recovery of clean coffee (35% to 40%) and a high percentage of brokens. The proposed project would emphasize the procurement of dry cherries over handpounded beans and would organize bagging and collection at the sub-district level as well as transportation to the km 42 coffee mill. The collecting stores would also provide farmers with information from the quality control laboratory attached to the coffee mill on techniques to improve the quality of dry cherries. Separate reception stores for Arabica and Robusta would be constructed at the mill site with insulation and automatically controlled ventilation to maintain optimum storage conditions (75% relative humidity and temperature less than 200C). Processing equipment would include separate peeling (prehulling), polishing, cleaning and grading facilities.

5.08 Expected Output. Although top quality premiums are low for the robusta coffees, discounts are applied by the importing traders when particularly detrimental defects are found such as: (a) presence of small stones, mineral dust, husks and such, (b) high proportion of black beans, and (c) presence of excelsa coffee. Robusta coffee produced in Laos currently contains all of these (11% by weight) and has the further disadvantage of being mixed indiscriminately with arabica. These contaminants affect prices for unwashed arabica coffees in the same way. The expected improvement in quality and price benefit, detailed in Annex 5, would be as follows:

% Increase in sales price from improved Peeling, polishing, Husbandry and grading and sorting storage Total

Robusta coffee 14 - 14 Arabica coffee 14 3 17 - 34 -

Workshop Technical Specificationsand Expected Outputs

5.09 The workshops ta be rehabilitatedand built under the proposed project would be equipped to provide routine maintenance as well as major repair services. With routine maintenancevehicle life is expected to increase from six to eight years for cars and trucks and from 10-12 years for heavy equipment. Also the availabilityof facilities for major repairs is expected to decrease vehicle down-time substantially. It has been estimated that project facilitieswould increase overall vehicle availabilityby 15%.

CooperativeFarm Technical Specificationsand Expected Yields

5.10 The proposed project would improve traditionalproduction of glutinous rice and pave the way for the further developmentof non-glutinous high yielding varieties. The use of (a) improved rice variet:Les;(b) modern agriculturaltechniques associated with better water management;and (c) fertilizersand pesticides would increase average yields as follows on the selected pilot cooperativefarms:

Wet Season Dry Season Without With Without With project project pro:Iect project

Inputs - Varieties Local Improved/a Local Improved/b - Fertilizers (kg/ha) - Super triple (48% P205) 65 65 - Urea (46% N) - 65 to 130 -- 130 to 200 - Pesticides,fungicides - Variable - Variable

Yields (kg paddy/ha) 1,250 to 2,000 to 1,800 3,000 1,400 2,200 Expected increase (%) - 60 - 66

/a Glutinous Sampathong and IR 789

/b Non-glutinousC4-63/1, IR 22, IR 2823

The resulting incrementalpaddy production is shown in Annex 5. - 35 -

6. MARKETS, PRICES AND FINANCIAL ANALYSIS

Collection, Marketing and Prices

6.01 Paddy Procurement. All rice produced under the project would be consumed domestically. The Government's policy is to channel most paddy through government-controlled mills using the following methods: (a) expansion of cooperative farming, (b) direct purchase or barter of paddy produced on cooperatives against basic goods (salt, soap, agricultural tools, cloth etc.) valued at offical prices in government stores, and (c) collection of agricultural taxes in the form of paddy. In 1977, a drought-year, direct purchase and barter accounted for about 5% and tax collection for 3% of total production. Chart 20512 describes the domestic movement of paddy and rice. As a consequence of very low official price of paddy, too few and poorly located government stores, the shortage of available goods, and the low yield of the agricultural tax, official paddy procurement remained far from the Government target of 20% of total production in 1978.

6.02 In a recent move, the Government decided to allow farmers to use government mills while still retaining ownership of their grain, with the milling charges paid in paddy or by-products. The Government also increased the official price of rice by more than 150% to NK 3/kg (see para. 1.04). These new policies would help considerably to reach the 20% target once the appropriate collection, storage and transport facilities are set up. Assur- ances were obtained at negotiations that farmers using mills financed under the project would continue to be allowed to keep their grain and to pay milling charges in kind (para 8.01(h)).

6.03 Coffee Procurement. The Pakse mill is supplied primarily through the purchase, at the subdistrict level, of handpounded coffee beans delivered by individual farmers. Due to the present condition of the milling equipment at Pakse, only a small quantity of coffee is supplied as dry cherries.

6.04 The project would eliminate handpounding by farmers as only dry cherries would be procured. It would also improve the efficiency of all aspects of harvesting, collection, processing and storage for export. Coffee would be exported through the Ban Van Tao border crossing with Thailand which has recently reopened near Pakse.

6.05 Price Review. Assurances were obtained at negotiations that the Government would annually review and adjust, when necessary, farm gate prices for major crops, including coffee, to reflect rising costs and to maintain farmers' incentives to produce (para. 8.01(i)).

Impact of Rice Mills on Farn Budgets

6.06 With the project, farmers would benefit from higher milling returns, reduced storage losses and more valuable byproducts. Where they - 36 -

presentlyhandpound rice, farmers would also benefit from labor savings when using new or rehabilitatedmills. The impact of rice mills on the average farm budget is detailed in Annex 6, Table 1 and the potential increasesin farm net income are summarized below:

Estimated farm income gain (%) when moving from: Existing mills New mills

Handpoundingto 32 38 Huller mills to 31 37

Impact of Coffee Processing on Farm Budgets

6.07 Except for the labor savings resulting from eliminatinghandpound- ing, farmers would not benefit directly from the increasedvalue of output fostered by the coffee component if the official farm-gateprices for coffee (NK10/kg arabica and NK8/kg robusta) are not changed. To insure that farmers have adequate incentive to use improved harvesting and drying techniques,the possibilityof increasingofficial farm-gateprices would be considered in the future (see para. 6.05).

CooperativeFarm Budgets

6.08 Under the project, in addition to improved rice seeds selected at Salakham and multiplied at Na Phok seed farm (Credits 760-LA and 924-LA), fertilizers,pesticides and some farm equipment would be distributedto some 1,400 and 1,000 members of cooperativein Savannakhetand Champassak provinces, respectively. These inputs could be paid for in full from sales of rice at new official price levels as shown in the farm budgets detailed in Annex 6, Table 2. Rice farm models have been prepared for 2 ha (100% cropping intensity),2 ha (125% cropping intensity),and 1.5 ha (133% cropping intensity). Projected rice incomes are summarizedbelow:

Rice Cropping Intensity Net Farm Income % Increase Size ------(%) ------($) ------due to Farm model (ha) Without With Without With project project project project project

i 2.00 100 100 316 426 35 2 2.00 125 125 436 603 38 3 1.50 133 133 366 515 41 - 37 -

Cost Recovery

6.09 The general policy of the Governmentis to recover as much of the capital and 0&M costs as possible from the beneficiarieswithout impairing their incentives. The costs are recovered either directly through charges to the beneficiariesor indirectly through increased collectionof agricultural taxes.

6.10 Rice Milling, Storage and Transport. Farmers using facilities rehabilitatedor built under the rice milling componentwould be required to pay directly for capital and O&M coste. Assuming a 10% opportunitycost of capital over the life of the project, full co0t recovery of all investment and 0&M expenditures,excluding reserve security storage, would require a milling charge of $18.60/tonpaddy as shown in Annex 6, Table 3. These charges would be collected in kind (equivalentto 62 kg rice/ton paddy). Rent recovery and cost recovery indiceswould be:

Rent Recovery Cost Recovery Farmers moving from Index (%) Index (%) /a

Handpoundingto existing mills 40 59 Handpoundingto new mills 36 59 Huller mills to existing mills 42 59 Huller mills to new mills 37 59

/a When including reserve security storage.

Assuranceswere obtained at negotiationsthat the Government would annually review with IDA the adequacy of these milling charges (para. 8.01(j)).

6.11 Coffee Milling, Transport,and Storage Facilities. Since the coffee processed in the governmentmill will be wholly government-owned,the budget of the mill should allow for full recovery of investmentand O&M costs. Assuming a 10% opportunityof capital over the project life, a budgetary allocation of $95.0/ton (NK 950/ton),a shown in Annex 6, Table 5, would be required to fully cover these costs.

6.12 Workshop Facilities. The Governmentagencies that operate vehicles and heavy equipment receiving maintenanceor repairs in the provincialworkshops are currently required to make full payment at official prices. This practice is expected to continue with the project and charges should cover all costs for spare parts, labor, materials and overheads.

6.13 Cooperative Farms. Cooperative farmers would continue to reimburse the Government in kind for the agriculturalinputs they receive. The cost of the DOA equipment provided under the project would be partially recovered by - 38 -

the incrementaltaxes (paid in kind) that would be collected. Rent and cost recovery indices would be as follows:

Farm Model Rent Recovery Index (%) Cost Reccvery Index (%)/a

1 28 72 2 20 72 3 18 65

/a In calculatingthis index the incrementaltax assessment.was valued as an import substituteat USJ17.50/kgpaddy, as shown in Table 6, Annex 6.

7. BENEFITS, JUSTIFICATIONAND RISKS

Benefits,Justification

7.01 The rice milling and cooperativefarm componentswould contribute to the Government'sobjective of self-sufficiencyin food production,and would mainly benefit small rice farmers. By increasing rice production they would save foreign exchange that would otherwisebe spent on rice imports. The workshop componentwould also save foreign exchange by extending the life of governmentvehicles and heavy equipment and the coffee processing component would significantlyincrease foreign exchange earnings. Economic analysis was conducted for these componentsand for the project as a who:Le. For the analysis, tradablesgoods were valued at internationalborder prices plus local transportand all local goods except field labor were valued at market prices. Field labor was shadow priced at NK 14.00 or USJ87 50/man-day at the shadow exchange rate of NK 16 per dollar which is equivalent to the free market exchange rate. The average expected economic rate of return for the four components,which account for 98% of the project'sbase cost, is 32%.

7.02 Rice Milling Rehabilitationand Development. The major benefit of the rice-millingcomponent to about 80,000 small rice farmers would be the incrementalrice output from improvementsin milling, storape and transport facilities. These improvementswould result in additionalannual output of rice of about 5,600 tons at full development,out of which about 4,500 tons would result from increases in milling yields and 1,100 tons from better transport and storage. In addition, the value of byproducts would increase by 75% to 100%. The total value of incrementaloutput would ainountto $2.6 million at full developmentor 8% of annual rice irmportson average. Incremental costs associatedwith the project average about $0.6 million so the net annual incrementalvalue is about $2.0 million. The value of labor saved from reduced reliance on handpoundinghas been ignored under the assumption that paddy for the mills under the project would mainly come from huller mills. The economic rate of return of this component is 25%. - 39 -

7.03 Coffee ProcessingDevelopment. At full development,the coffee processing componentwould improve the quality of about 4,300 tons of clean coffee annually. This coffee, presently about 1/3 arabica and 2/3 robusta, is of extremelypoor quality and is currently sold to Singapore dealers at very low prices ($2.30/kgdelivered at the Thai border in 1978). Gains in quality and improvementsin monitoringprocedures would result in incremental foreign exchange earnings amounting to $1.3 million at full development. Associated incrementalcosts are estimated at $80,000/yearon average, giving a net annual incrementalvalue of about $1.2 million. Again, benefits have been calculatedwithout including the labor savings from the reduced reliance on handpoundingdue to the very low opportunitycost of labor for coffee farmers. Even so the economic rate of return is satisfactory at 40%.

7.04 Workshop Rehabilitation. The major benefit of the workshop component would be the foreign exchange savings from the extended life and increased availability of government operated cars, trucks and heavy equipment. At full development, net foreign exchange savings would average about $0.5 million. The estimated rate of return is 31% for this component.

7.05 Cooperative Farm Development. Incremental paddy production on project-supported cooperative farms in Savannakhet and Champassak provinces would amount at full development to about 4,000 tons for an import substitute value of $0.8 million. About 2,400 rice farmers would benefit from an increased output of rice, whether for home consumption or for sale or barter against basic goods. The economic rate of return for this component is 54%.

7.06 The project would also induce substantial nonquantified benefits. Local capabilities for cargo boat and industrial construction, mechanical engineering,repair and maintenancewould be strengthenedand developed. Moreover, the project would increase managerial capabilities in agro-industry and strengthen the LAO PDR administration. Through the support provided, a basis would be laid for further increases in food production. The ameliora- tion of coffee quality would improve the marketing image of LAO PDR coffee and pave the way for production increases of export coffee.

7.07 Finally, direct employment from the project would be about 800 full-time jobs (see para. 4.06).

Risks

7.08 The economic rate of return for the four project components are all satisfactory. The rate of return for the project as a whole and for the rice milling and workshop components in particular are, however, somewhat sensitive to delays in achieving benefits and to cost increases. For example, a - 40 -

two-year delay in achieving benefits would cause the rate of return of the entire project to drop to 17% and if this delay were combined with a decrease of 20% for all project benefits and an increase in costs of 20%, the rate of return would drop to 7% (see Annex 7, Table 1). Such sensit:ivityunderlines the need for a strong management, timely supply of equipmenl:,materials and farm inputs, and close monitoring of project progress.

7.09 At full development, the rice milling component accounts for about 56% of total project costs and 43% of project benefits; the overall economic performance of the project is thus heavily dependent on this component. At the new official price for paddy, farmers have sufficient incentives to use government facilities. As an additional incentive for part:Lcipation, the Government would let farmers keep their grain when they use government mills and pay the milling costs in kind (see para. 6.02). This airrangement would ensure that milling capacity would be fully utilized, should new changes occur in pricing policy. However, careful monitoring would be needed to evaluate progress in official paddy procurement and marketing.

7.10 Risks in the coffee processing component would also include under- utilization of milling facilities due to insufficient procurement of coffee. Close monitoring will be required so as to take adequate and timely measures regarding procedures and/or prices (see para. 6.05). The Government pricing policy is flexible for subsidiary crops such as coffee, and the corresponding risks are not estimated to be important. The project addresses itself to coffee processing but it is clear that quality gains in processing could be wiped out by other factors such as extended delays in shipment and delivery of export coffee. The location of the mill on the Boloven Plateau would contribute to reduce these risks.

7.11 Another major risk is that the implementation capacity of the provincial executing agencies might prevent the project from proceeding as planned. Experience gained with the first project indicates acute difficulties in coordination of agencies or departments and timely procurement of project items. Similarly, problems can be expected in the setting up of an efficient repair and maintenance organization for the equipment put into operation under the project. These risks would be reduced by concentrating project coordinating responsibilities under a single ministry, the Ministry of Industry and Commerce, and setting up a substantial training and technical assistance program. Despite these safeguards, supervision will need to be frequent with steady support provided by the Bank's resident mission in Thailand. - 41 -

8. AGREEMENTS

8.01 Agreement was reached at negotiations on the following main points:

(a) Government would enter into four separate agreements with UNDP and FAO to provide eight specialists (232 man-months) and appoint, not later than January 31, 1981, the four specialists not recruited as conditions of disbursement (paras. 3.33 and 3.34);

(b) Government would select by October 31, 1980 suitably qualified consultants to undertake the feasibility study for power-supply development under terms and conditions acceptable to IDA (para. 3.35);

(c) Government would appoint, not later than October 31, 1980, the project coordinating and project executive committees (paras. 4.04 and 4.05);

(d) Government would make adequate arrangements for the timely provision of funds and resources required by the project and to staff, maintain and operate all project-supported facilities (para. 4.06);

(e) Government would present, by October 31 of each year, to IDA for its review an annual work program detailing the proposed activities for the 12-month period starting on the following January 1 (para. 4.06);

(f) Government would maintain separate accounts for each of the components in each province and send audited project accounts to IDA within six months of the close of each financial year (para. 4.07);

(g) Government would appoint, not later than October 31, 1980, the interministerial unit responsible for monitoring and evaluation of project activities (para. 4.08);

(h) Government would continue to allow farmers using mills financed under the project to keep their grain and to pay milling charges in kind (para. 6.02);

(i) Government would annually review prices for major crops, including coffee (para. 6.05); and

(j) Government would annually review with IDA the adequacy of rice milling charges (para. 6.10). - 42 -

8.02 Agreementwas also obtained at negotiationsthat, as a condition of disbursementfor the respective components,the Governmenitwould appoint: (a) an engineer for rice milling; (b) an expert for coffee processing; (c) a mechanical expert for workshops; and (d) a rice agronomist for cooperative farms (para. 3.34).

8.03 With the above assurances,the project would be suitable for an IDA credit of $13.4 million. The Borrower would be the Lao People's DemocraticRepublic. 43 ANNEX 1 Table 1 Page 1

LAO PDR

AGRICULTURALREHABILITATION AND DEVELOPHENTPROJECT III

Project Item Phasing

Total project Unit no. of units Year 1 Year 2 Year 3 Year 4 Year 5

RICE-MILLING COMPONENT

1. Vientiane Province Milling facilities Rehabilitated rice-mills unit 6 - 6 Electricity supplied unit 2 - 2 New rice mill (2 t/hr) unit 1 - - 1 - Transport facilities 10 and 6-ton trucks unit 15 - 15 - - 60/80-ton cargo boat unit 2 - 2 - - 30/40-ton cargo boat unit 4 - 2 2 - Storape facilities Collecting storage ton paddy 7,500 - 1,500 2,000 2,000 2,000 Operational storage Paddy ton paddy 1,080 - - 1,080 - - Rice ton rice 1,200 - - 1,200 - - Reserve/security storage ton paddy 7,480 - 2,080 1,080 2,160 2,160 Training & fellowship Local training man-month 75 35 40 - - - Training abroad man-month 10 2.5 7.5 - - -

2. Savannakhet Province Milling facilities Rehabilitated rice-mills unit 2 - 2 - - - Electricity supplied unit 6 - 6 - - - New rice mill (4 t/hr) unit 1 - - 1 - - Transport facilities 6-ton truck unit 10 - 10 - - - 60/80-ton cargo boat unit 2 - 2 - - - 10-ton cargo boat unit 6 - 3 3 - - Storage facilities Collecting storage ton paddy 6,000 - 2,000 2,000 2,000 - Operational storage Paddy ton paddy 2,160 - - 2,160 - - Rice ton rice 1,200 - - 1,200 - - Reserve/security storage ton paddy 4,320 - - 1,080 2,160 1,080 Training & fellowship Local training man-month 75 35 40 - - - Training abroad man-month 10 2.5 7.5

3. Champassak Province Milling facilities New rice mill (3 t/hr) unit 1 - 1 Transport facilities 6-ton truck unit 9 - 9 - _ _ 60/80-ton cargo boat unit 4 - 2 2 30/40-ton cargo boat unit 4 - 2 2 10-ton cargo boat unit 4 - 4 - - Storage facilities Collecting storage ton paddy 5,000 - 1,000 2,000 2,000 Operational storage Paddy ton paddy ------Rice ton rice 1,200 - - 1,200 - - Reserve/security storage ton paddy 3,240 - - 1,080 1,080 1,080 Training & fellowship Local training man-month 75 75 - - - - Training abroad man-month 10 5 5 - 44- ANNEX 1 Table 1 Page 2

Total project Unit no. of units Year 1 Year 2 Year 3 Year 4 Year 5

COFFEE-PROCESSING COMPONENT

Milling Capacity Arabica ton/yr 1,750 - - 1,750 - - Robusta ton/yr 3,500 - - 3,500 - - Transport facilities 1.5-ton pick-up unit 1 - 1 - - - 6-ton truck unit 3 - 3 - - _ Storage facilities Dry cherries ton 1,900 - - 1,900 - - Clean coffee ton 1,900 - - 1,900 - - Training and fellowship Local training man-month 45 45 - - _ _ Abroad training man-month 10 5 5 - - -

WORKSHOP COMPONENT

New workshop unit 1 - - 1 - - Rehabilitated workshop unit 2 - 2 - - - Local training man-month 360 60 300 - - -

COOPERATIVE FARM COMPONENT

1. Savannakhet Province Farm Development WS paddy area ha 7,500 - 1,200 2,100 2,100 2,100 DS paddy area ha 2,500 - 400 700 700 700 Training/fellowship Local training man-month 120 30 90 - - - Abroad training man-month 5 - 5 - - -

2. Champassak Province Farm development WS paddy area ha 4,700 - 400 800 1,150 2,000 DS paddy area ha 55 - 5 10 15 25 Training/fellowship Local training man-month 120 30 90 - - - Abroad training man-month 5 - 5 - - -

TECHNICAL ASSISTANCE

Rice-milling engineer man-month 32 8 12 12 - - Rice-milling technicians (2) man-month 64 16 24 24 - - Coffee-processing expert man-month 28 4 12 12 - - Mechanics experts (3) man-month 72 12 36 24 - - Rice production expert man-month 28 4 12 12 - - Short-term consultants man-month 10 2 4 4 - -

RURAL ELECTRIFICATION STUDY

Short-term consultants man-month 45 5 20 20 - - 45 ANNEX I Table2 Page 1

LAO PDR

AGRICULTUEALREH&BILITATION AND DEVELOPMENTPROJECT III

Imoienientation Schedule fvr Rice M±iininR Storaae an,d Trans2ort Pacilities

Work item t Yearl j Year 2 t Year 3 Year 4 i Year 5 i

ComyonentTechnical Advisor i i t t i I I t t t i i t i i (Engineer expert inrice I I I t I t i I i I i t i t muiiing> Vientiane ProvinceIi t t I It i ii i i 1. Tech,nicalaes±stance li1 1 1Ii (Rico nill±ng techn±ct.an) I IIi 2. Rice mill rehabilitation, I i t i t I I I t I i i iI electrif. &provision of i 1 1 1 1 i spare parts - Procurement of equipmentl II ii li i and spare parts l fî i Itt i - Installation I ti i i i t l t - Operationi i 3. New 2-ton/hr rice milli i i I ti i t t i (San~akham)t I t t It t t I I i II i i Ii - Detailed designt H I tI i i t i - Procurement of equipmentt tt I Ii I & construcion mater±ial t i u nI I I Civil works/bu±ld±ngs i t - 't t t ii - Equipuentinstallation i I t l - Test operation I t t t t~t - Operationt I I t i t 4. Storage (collecting, opera-t i t l t t i t t tional &reserve/security>i )i t t t l - Procurement ofconstruc-i 11 1 1 1 t tii i tion miaterialst t t i t t t t - Civil works/buildings t it t 5. Transportt t i t t t i i i t i t t t t i i t t t t - Procurement of trucks & t t i i i i t l mnarinediesel engines t i ' ' t t i i i tt t - Construcion of cargo boatst 1 t t t t 6. Trainingi t t i i i t i t t t t t t t i t t t t t - Locali i i - Aboardt t t SavannakhetProvincei i i t t I t i t i i t t i t t t i t i I. Technical assistance t t i i t t i i t t (Rice muilling technician) t t ...... l..J i i t t t i i i 2. Ricemill rehabilitation, t t i i l i i i t t electrif. &provision of i I t i t t i t t t t t i i t i t t t t spare partsi t i t i t t i t i t t t t t t t t t t t - Procuremen of equipmenrt t i i i l iiiiitt t t t and spa re partst i t Ii iti t - Installation t~it i t tt i - Operationt t t t i - 46 -- a

Page 2

Work item Year 1 | Year 2 I Year 3 I Year 4 Year 5 I I I i I I I I I I I I I I I I I I I I I 3. New 2-ton/hr rice mill (Sanakham) i I i i I I i i J i J J I i i I i | - Detailed design i .I I i il i i 1111 -Procurement of equipment I F iI I i I I i I I i I I

& construcionmaterials J I I I | i i i I J J I i I I I - Civil workslbuildings J J I I I I i I i I I I - Equipment installation J i I 11 1r r ---1 i i I -Test operation J J I l I l 11111 -Operation i J I I I I I I I 4. Storage (collecting, opera- i I 1 1 i I tional & reserve/security) I l I iI i lii l 1 1 - Procurement of construc- | | I I i I I Iii tion materialsa i i i I i - Civil works/buildings I , : T

5. Transport i 1 l 1111|1i

- Procurement of trucks& i liiiI I J J i marine diesel engines - Construcion of cargo boatsl I i I J i J J I J I I i J 1T TI I I I I I I I I 6. Training 11111111111 - Local J I | - Aboard J J J V.L. II1IT111TII[iII I II I I iJ ' II I I I1 I 1 I I I Champassak Province I Ii I J J i I I I J J 1. Technical assistance l 1I11111 (Rice milling technician)

2. New 3-ton/hr rice mill | | | (Pakse) i I i I J i I i I I I J I i I i J i J i I - Procurement of additionall III! 1 I l iii equipment and constructionl III I i I J 1 Ii 1 i ii 1 J materials | | I III l 11111 - Civil works/buildings I

- Equipmentinstallation I I i L j - 1 J I J X r I I I I I l i i I i 3. Provision of spare pErts I II H Ij j 4. Storage (collecting, opera-

tional & reserve/security)J l I l j J I I I I - Procurement of construc- 1111 l l J J I j I

tion materials J I L I I I.. I I I I I J

- Civil works/buildings J I I II 1I1V1 1 1 1

5. Transport J III i J J l ii | |J J I - Procurement of trucks & J I i I . i i marine diesel engines i J L I |I J I I J I J I J

- Construcion of cargo boatas J 1 1 1 I | | I | I J *~~~~ I I I II J J 6. Training I i i I I J I J i J i i J I J i J J i i i - Local | | | I - Aboard i i i r.Lr T' F-r - -- --T r r T 1 ANNEX 1 - 47 - Table 3

LAO PDR

ACRICULTUURAL REHABILITATION AID DEMELOPMENT PROJECT III

Implenentation Schedule for km 42 Coffee Processinz Plant

I 1 1 I I Work item t Year 1 Year 2 I Year 3 t Year 4 | Year5 | .... I ~~~~I I 1 TechnicalAssistance I t I I t t I t I t t (Coffee processing expert) I I I I I I I I I I I I Detailed design of coffee mill J i I | t t | I I t t I t t t t Procurementof equipmentand ttttttttttl tttttttl tt construction naterials I t t. lI I I I t t t t t

Civil works/buildings I I I I I I I I I I I I I I I I I t t t t Ecuipment installation I I t I I t t t I t I t I t t t

Test operation i I I I I t t I I I t I

Operation I I I I !

Training l l l l l l l l Locaiin t t t t t t t t I t t Local II I II I I t I | ! ! AbroadI tt it '' t t t t t I ttt ANNEX 1

- 48 - Table 4

LAO PDR

AGRICULTURAL REHABILITATION AND DEVELOPMFNT PROJECT III

Implementation Schedule for Vientiane,Savannakhet & Pakse Workshops

VientianeWorkshop Technical assistance (Mechanicsexpert) i i l i Detailed design of workshop | | | l | | I Procurement of equipment, constructionmaterials andll iiiiiillillitllili operational spare parts i ,i i1 11 1 I t I J Civil works/buildings i t i h t i i t i i I t t i i Equipment installation i I t t I i i l I i t I t i t t t t t Operation i I I i I t I i i t i I I. II III Training i i t I

Savannakhet & Pakse llorkshops i| | | | | t | | |t i | t Technicalassistance (2 Mechanics experts) i I i I I I I I I I I i Procurementof equiment t i i i i i i i t t i i i i i I i I i i i construction materiais and||||| | | ||||||||| operational spare parts i t i 1111 ( If t t i Building extension i i i i II I i i i I i t i I t t t t t i Additional equipment t i i i i i i I i i I i t i t t t t I i t installation Training i i i I II. I IIII.ILI.I.II I I i i i t i t i i i - 49 - ANNEX 1 Table 5

LAO PDR

AGRICULTURAL REHABILITATION AND DEVELOPMENT PROJECT III

Cooperative Farm Development Tentative Phasing

Year 1 Year 5 (1980) Year 2 Year 3 Year 4 (onward) - Season DS WS DS WS DS WS DS WS DS WS

Savannakhet Province Pilot paddy area (ha) 150/a 450/a 400 1,200 700 2,100 700 2,100 700/b 2,100/b

Estimated no. of farm units Model 3 - 800 1,400 1,400 1,400

Total - 800 1,400 1,400 1,400

Champassak Province Pilot paddy area (ha) - - 5 400 10 800 15 1,500 25 2,000/c

Estimated no. of farm units Model 1 - 180 360 720 950 Model 2 - 10 20 30 50

Total - 190 380 750 1,000

/a Planned for 1980, by provincial DOA, not included in the project.

/b 2,100 ha WS and 700 ha DS paddy, at full development, distributed as follows:

Preproject (1980) 1981 1982 1983 1984 DS WS DS WS DS WS DS WS DS WS Phine district (Na Nhom) 75 250 200 500 400 1,000 400 1,000 400 1,000 Champhone district Lao Nat 40 100 100 200 200 500 200 500 200 500 Keng Koc 35 100 100 500 100 600 100 600 100 600

/c 2,000 ha WS paddy, at full development, distributed as follows:

Pholthong district : 1,000 ha out of 14,249 Champassak district : 500 ha out of 7,582 Mounlapamok district: 250 ha out of 3,222 Soukouma district : 250 ha out of 817. AC

y- 5 Il, ta 11 y-, 1 Y- 4 '-A 1 F. r. 1- ., 1 F. f gl, 1. la 1 F. E. L., Il 1 F. il, l, TI t, 1 Fr.

Ri- M 1 1 III, P-. 2 747 98 3 1 4 1, 2 68. 5 1 PIl 41:5 11.11 7:;. 1 3(P. Il,, 5. R 4 7 1) 3 51 2 9 5IR :'O 2 . 0 4 q 7. 8 4 0. 6 PbyiI1 I 12^ :5 -1:1I I 7. 1 14: 3 4 11 11 11,1 Ill: 1 I 1 41 1.' ICIl I' 2 6 .3 E,i"" I'd P'i- 1) 48i . Il . 5 5 3 55 40 9 .5 9

1 1, a 7 3 2, 44 1.0 4-il I. l 51 5 4 3.7 _2 4 j ti 1I l 5. 3 211.1. 7 78. I 1.4 4 42 6 8 89 35. 4 jjLA 1_1Ë, . 7 4IO 4 5 2. 0 1 61. 1 61 3. 1 2 6.3

khl, 1 Pl I h 7. 1 1 1. 1 11. 1 7 1 , 1, 4 1 - 1 Ilq.1 1 Il 11 1l17 I, - 1 Il 1. 1.4,71 4 21 Il : 1 Il 11 21 1 Il- 1 Il: 1 1 Il -1 Il - 41 7. 7. 7 4. 9. 51). 0 4 7 30 . 1 36 . M.I) 6 . 8 1 0 3 2 0. 60 6 . 5 6. 30 .7 n.p""d n'i- 3 78 . PIP.I, 7'41 4 . 1 1 9 82." 2 70 . 9 3, 3.7 7I. 6 1 14 . 1, W.3 1 54 .7 31,A 1 1 3.1 3'l. R 1 5 1. 9 M.5 7 3 . 1 3 2 . 4 10 5. 5

16- 141 2-1)9 31 1, /U 6 _16 5 %ilI l3 7 Il 46 . 21) 4P7*- 1, 59.8 208 3 . 5 ?6.1 2IY6 669*1 32 .5 401 *7 3 7. 8 5 39 .5 2 5 . 5 222 . l 986 321 *0 30.7

111,I, 1, 1I5:1 14 . 1 2 5.1 20. 1 4 i.5 1,41 1 7 171 1 1 1 l 1 .1 Il .1 22 - 1 Ilil.1 Il.. Il Il .1 1Il 1 . 1 l.1 2 1 1 . 41 I Il 112 , 1 1 12 2 11 , Il 1 9 -1 0.- liq.4 -5. 1 40. 5. 18 . 1 . 1 9. 3 8 I.5 6.3 375 IR .8 11. 191.l, 79.`I SI . I 3 7 .I L23.8 29.5 40. 3 3 1 . 7 8 4 . 0 38 299 ?9I:1 2 I(1)1 11,9, Il 4 '1 1 1 1 4 Il 7 90 . I , : il 29.9 Sb 1L1 1 ,I8, 13 3 19 25 1_7 . 0 12 2 9 . 9 23.R 53.7 4 44 2U l 9( 1 .I 11_ 2 Y. 8 79 .8 _Lï 52 1 60 . 2 5i 5 . 4 2 9 .5 3087 143oO 4 5 17 3 1- 7 14-2- 9 10 35 3464 28 - 4 1!:!-"': 1 1 ) 4_6 6 _1 (I 4 2 . 9 5 13 1 '4? 4. II 1 189 . 5 1 125 53620 7 7P, 1 2 7 14 6 1 89 3 . 4 3 8 1 1668 59 7. 5 1 7h43 3 i.9 9 1 7. 3 36 32 1 2805

(h) p-, CI- MI,1 12111;. 3 18- "A Il 4 1: Il1 1 23 1 'l-1 11 2 14 11 1 11 1 4 1 71 11 1.1 1,11.11 Il. 1 1 511:8 7.4 7 1 1 M. 6 54.1 747 1 24 y. i-I 79 7 1 1 1 i Il 11 I1^11 19 -1 7 11,- 1. 5 lo 0 5.4 5 100 fi 7 4 ,p- ,,J p, 2 4 6`1 8 7 In,n9 5 7 i .6 .7 9 30 8.1 21 .9 30. 0 7 3. 0 1 0. 1 -19.1 39 743 (b) 81 13 1_ 7 6O i.4 L) 11 7à7 4 18 943 1, 5(6.1) ilm.3 7 1 .7 1 91 386 !V*7 302 2 87 7 78 106. 5 73 - 1 30- 7 88.6 119&3

3-Q 10.1 1, 3 10 2 8 2 . 0 0 2 0 n0 3: 1"Il1 I 1 .5 50 1 1115 An5 E.p,,,d pî- 14 7 t1 i.1 13',l,. l I'.2 5 1. 7 44-4 Il., 114 74 8 1 .8 8.3 H.3 1or)0

- 1 !2 66 1 îB LL2 1 1 -Q 1 27 2P. 1 136.5 hl 3.1) 75L)q1 81 -R m lon.')

Pl M6. 9 :, ,, , ', l ,, ,', l ;,1 ,l I ,, ,Î 2-- 'l ,I i 76 7 1 17 l9 l -9 15 4(. II 7 O9 3 .3 0

s ah 1 l 11 1 4 81) 43b.2 48 11 90. 1 9 64 1b1) ALI.2 l 1).3 39b0 l 9 10 3 58 3 5 1Oo0

IC1 klrov,- 3 3 1 7 . 9 3"b1 81,1ll b:1 11 1 ':I ,8, 1 III,3 2 1 11 i4.2 372 0 7 3 9 3 5 5 qo0 7 . 6 7,1 q 3.1 9 1). 9 ( i5 40. 0 I7 Il 72 73-I qn.g 3 il3 1w (

S al, 1 43 11 4nj 1) 0 9 6 64 1I Il 3 91 A35.3 q 1- 1) 3 5R 1 on.0

21QU I 1, 5 385 17H8. 86.0 6O7 1 1 1, 16_ 20 .7 Hb. lq,.4 1 0 74 !00O

L- 5. 1 3 100. 0 1 43 1 3 100. 0 100.0 E.P"I,,d P'n 4.1 3 1 77 321-l' 98.7 J. 3 -' . 3 26 8A5 i. 3 8 9 a 1û 14'.5 11 II)0 - 1m 6 18 100. 0 7 71 7 71 347 100.0 S . b vl t Il 1 21 -1, 12 9'i e) _I Il. 1, Il8 -1 1_3 Z 279 !Pî 2 3 i222 2 -'2 e6 90. 0 6 1 1 6 1 1 1W 1) - 4 2 19.l 100 - 0 2

ù- 5I3.1 97.4 S.') I',.O 411. 1) 87.5 9.I -'17 7 0 I. 10.0 -. - 3 .9 , , ,,, ;;: : !'. 7 1 00:0 7 oo:' 2.3 [l2.0 114. 3 9ïl. 6 0.5 4 : O' 4 . 5 98. 9 I.R 6'.2 I4. 0 9 72 1 7 1 7 110.1) - 3 1 . 1 II l00.0 2 ( '00 0

1Il.3 732* i 9 7. 8 5.5 AL AjA 88 . 5 lo.,, 3w, _117 -0 9 71 5 0 iiL 100 0 - 110. 4 11,1. 4 1ffle 0 - i 58. 2 1 582 100 CI 9 100. 0 T-at (d) 4_19 2 02 1. 3 2, 069. 2 98.0 M _t 7. 0 75. l, S 3 31 5m, il,-9- 6 i - 67i.1 71 - 1 _l,)t) I) - 32 9H loil q 0 - 392. 9 392.

1,41Ï-9 illlb.9 1q1j. 0 281 . I 2 3 1 . I 1IlI. 1) 5 29. 1 l 1 1M. 1) - 61-5 5 0 -

K- 1 4 00. 0 4 00.1) 4 0. 0 40.q ]W.1 2'll'. I *'). 0 100. C - 1 0 - ta 1 71). 2 2,032.ll l, 3, I. 7 1 I 1 . 7 80. 5 6 11 _5LCI . 0 1 3 001). 3 IM 789.3 244mO __74.'I Bl.1 1, 360. 5 2, '05.6 3, 5 66. 1 1,195.5 1,005.1 2,200.6 45-7 948.0 844.7 1_7) I. 7 4 7. 1

1-1,11 j,j; pIlyf 1. 1 -d Il, i- 1-1,,P1111 Il 1 LAO PDR

AGRICULTURALREHABILITATION AND DEVELOPMENTPROJECT III

Pro-1ct Cost Phasing Pe- Pro-i-ce (S'Ooff

Total Projeot Sear i Tear~~~~~~~~~~~~~Y.2 Year 3 Ysa- 4 Te Local Fa-ig Ttoal F F.E.% Local Zer-ig Total F.E.% Loca Porego Total F.E.X Local F-etg Totl F.E.% Local Yeag T4 1 P.E.% Local.. Eearg T5t1 F.E.Z

VlENTIANE PROVICR Base Costs Rice =illing co.po.,eut 1,268.5 1,751.1 3,019.6 58.0 41.5 35.0 76.5 45.8 349.3 1,249.9 1,599.2 77.7 307.2 165.8 473.0 35.1 295.8 202.0 497.8 40.6 274.7 98.4 373.1 26.4 Workshop co=ponent 113.9 493.3 607.2 81.2 13.0 10 0 23.0 43.5 100.9 458.3 559.2 82.0 - 25.0 25.0 100.0 ------Sobototl Base Co.ts 1.382.4 2,244.4 3,626.8 61.9 54.5 45.0 99.5 45.2 450.2 1.708.2 2,158.4 78.8 307.2 190.8 498.0 38.3 295.8 202.0 497.8 40.6 274.7 98.4 373.1 26.4 Physica- contingencie: 157.7 257.8 415.5 62.0 6.0 6.0 12.0 50.0 56.1 192.1 248.2 77.3 34.7 24.4 59.1 57.5 32.1 25.5 57.6 44.3 28.8 9.8 38.6 25.4 Expected poio lotteBses 489.7 600.9 1,090.6 55.1 6.3 5.4 11.7 46.2 103.6 388.6 492.2 79.0 102.8 64.8 167.6 38.7 128.5 89.2 217.7 40.9 148.5 52.9 201.4 26.3 Tot.l 2.029.8 3.103.1 5,132.9 60.5 66.8 56.4 123.2 45.8 609.9 2.288.9 2,898.8 78.9 444.7 280.0 724.7 38.6 456.4 316.7 773.1 40.9 452.0 161.1 613.1 26.3 SAVANNAKHETPROVINCE Base Costs Rice oilliog ... =pon0t 1,110.1 1,525.3 2,635.4 57.9 41.5 35.0 76.5 45.8 359.2 1,194.5 1,553.7 76.9 310.8 147.3 458.1 32.2 259.8 88.3 348.1 25.4 138.8 60.2 199.0 30.3 Wo-kshop -oopo.net 38.3 327.9 366.2 89.5 8.0 5.0 13.0 38.5 30.3 297.9 328.2 90.8 - 25.0 25.0 100.0 ------Coop. fars cooponeot 21.5 889.4 910.9 67.0 3.0 17.0 20.0 85.0 18.5 126.5 145.0 87.2 - 459.3 459.3 100.0 - 143.3 143.3 100.0 - 143.3 143.3 100.0 Sobtotal B-so Costo 1,169.9 2,742.6 3,912.5 69.4 52.5 57.0 109.5 52.1 408.0 1,618.9 2.026.9 79.9 310.8 631.6 942.4 67.0 259.8 231.6 491.4 47.1 138.8 203.5 342.3 59.5 s Physical -onttngenci-s 128.8 293.7 422.5 69.5 5.2 10.5 15.7 66.9 48.0 201.1 249.1 80.7 36.3 36.8 73.1 50.3 28.8 25.0 53.8 46.5 10.5 20.3 30.8 65.9 Expetctd price - ocoasos 389.9 790.4 1,180.3 67.0 6.0 7.1 13.1 54.2 93.3 372.1 465.4 79.9 104.4 201.1 305.5 65.8 113.1 100.6 213.7 47.1 73.1 109.5 182.6 60.0 Total 1,688.6 3,826.7 5,515.3 69.4 63.7 74.6 138.3 53.9 549.3 2.192.1 2,741.4 79.9 451.5 869.5 1.321.0 65.8 401.7 357.2 758.9 47.1 222.4 333.3 555.7 60.0 CHO ASSAKCPROVINCE Base Coats Rice =illing c=poneot 816.1 959.6 1,775.7 54.0 25.5 20.0 45.5 44.0 171.9 675.9 847.8 79.7 262.6 108.9 371.5 29.3 203.5 91.6 295.1 31.0 152.6 63.2 215.8 29.3 Coffee processing -o.pon..t 586.1 1,298.3 1,884.4 68.9 54.5 40.0 94.5 42.3 429.4 1,126.4 1,555.8 72.4 61.0 27.0 88.0 30.7 20.6 50.8 71.4 71.1 20.6 54.1 74.7 72.4 Workshop ooopoooot 38.3 327.9 366.2 89.5 8.0 5.0 13.0 38.5 30.3 297.9 328.2 90.8 - 25.0 25.0 100.0 - Coop. ars component 14.0 519.4 533.4 97.4 5.0 35.0 40.0 87.5 9.0 277.3 286.3 96.9 - 38.5 38.5 100.0 - 72.1 72.1 100.0 - 96.5 96.5 100.0 Sobtotal B... Coset 1.454.5 3,105.2 4.559.7 68.1 93.0 100.0 193.0 51.8 640.6 2,377.5 3,018.1 78.8 323.6 199.4 523.0 38.1 224.1 214.5 438.6 48.9 173.2 213.8 387.0 55.2 PhyoOoal contingeocies 155.8 332.4 488.2 68.1 9.7 10.3 20.0 51.5 84.0 254.0 338.0 75.1 33.3 23.3 56.6 41.2 18.3 23.4 41.7 56.1 10.5 21.4 31.9 67.1 Expected price inoroases 451.3 825.0 1,276.3 64.6 10.8 11.6 22.4 51.8 148.2 538.1 686.3 78.4 107.4 66.9 174.3 38.4 95.0 93.3 188.3 49.5 89.9 115.1 205.0 56.1 Total 2,061.6 4.262.6 6.324.2 67.4 113.5 12l.9 235.4 51.8 872,8 3.169.6 4.042.4 78.4 464.3 289.6 753.9 38.4 337.4 331.2 668.6 49.5 273.6 350.3 623.9 56.1

Technicel Aa.istance /a - 1,416.9 1,416.9 100.0 - 281.3 281.3 100.0 - 529.1 529.1 100.0 - 606.5 606.5 100.0 Rtail E1ectriEication Study /a - 400.0 400.0 100.0 - 40.0 40.0 100.0 - 200.0 200.0 100.0 - 160.0 160.0 100.0 Total 5,780.0 13,009.3 18,789.3 69,2 244.0 574.2 818.2 70.2 2.032.0 8,379.7 10,411.7 80.5 1,365.5 2,205.6 3,566.1 61.9 1,195.5 1.005.1 2,200.6 45.7 948.0 844.7 1.792.7 47.1

1aIocladieg physîcl and price cootlogooclea. - 52 -

Table

LAO PDR

AGRICULTURAL REHABILITATION ANiD DEvwrr rbD

Schedule of Disbursements ($'000)

IDA Fiscal Year Semester Accumulated & semester disbursement disbursement

FY 81 First 200 200 Second 600 800

FY 82 First 3,300 4,100 Second 3,200 7,300

FY 83 First 1,300 8,600 Second 1,000 9,600

FY 84 First 800 10,400 Second 800 11,200

FY 85 First 800 12,000 Second 800 12,800

FY 86 First 600 13,400 -53 - ANNEX3 Table 2

LAO PDR

AGRICULTURALREHABILITATION AND DEVELOPMENTPROJECT III

Proposed Allocation of Proceeds of the Credit

Vientiane Savannaakhet Champassak MIC/ Total ltesf a4 X o p #naçci EDL Lb

1. Imported equipment, construction materials, fertilizers and insecticides (100%) 2,670 3,310 3,570 - 9,550

2. Training abroad (100%) 20 30 50 - 100

3. Imported items procured loc4lly (75Z) 110 60 180 - 350

4. Local costs for civil works, equipment installationand boat construction(409)/a 600 500 600 - 1,700

Subtotal 3,400 3,900 4,400 - 11,700

5. Feasibility study (100%) - - - 400 400

6. Unallocated 400 450 450 - 1,300

Total 3.800 4.350 4.850 400 13,400

/a Excluding O&Mcosts.

/b Electricity of Laos. - 54_

LAO PDR

AGRICULTMtAL REYABILITATION AND DEVELOPMENT PROJECT III

Additional Staffing Requirements for the Rice-Milling, Coffee Processina and Workshop Components

Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 <1980) onward

A. RICE-MILLINO COfIPONENT 1. Vientiane Province Rice-mill manager _ 3 4 4 4 Deputy manager - - 2 2 2 Accountant/adm. employees - 6 9 9 9 Shipnaster - 4 6 6 6 Relmsman, mechanics - 12 18 18 18 Driver - 30 31 31 31 Labor - 119 145 145 145

Subtotal - 174 215 215 215

2. Savannakhet Province Rice-mill manager - 2 3 3 3 Deputy manager - - 2 2 2 Accountant/adm. employees - 4 10 10 10 Shipnaster - 5 8 8 8 Helmasman, mechanics - 12 18 18 18 Driver - 20 21 21 21 Labor - 79 110 110 110

Subtotal - 122 172 172 172

3. Champassak Province Rice-nill manager - 1 1 1 1 feputy manager - 2 2 2 2 Accountant/adm. employees - 5 5 5 5 Shipmaster - 8 12 12 12 tHelmsnan, mechanics - 20 32 32 32 Driver - 19 19 19 19 Labor - 98 130 130 130

Subtotal - 153 201 201 201

Total - 449 588 588 588

B. COFFEE-PROCESSINGCOMPONENT Coffee-mill manager - - I 1 1 Deputy manager - - 1 1 1 Accountant/adm. employees - - 8 8 8 1lechanics - - 2 2 2 Quality assessor - - 3 3 3 Driver - - 4 4 4 Labor - - 28 28 28

Total - - 47 47 47

C. ORKVSHOP COMPONENT 1. Vientiane Province Mgmt & section supervisors - - 6 6 6 Adn. employees, drivers & miscellaneous - - 20 20 20 Skilled workers/assistants - - 69 69 69

Subtotal - - 95 95 95

2. Savannakhet Province Adm. enpLoyeesa drivers & miscellaneous - 8 8 8 8 Skilled workers - 17 17 17 17

Subtotal - 25 25 25 25

3. Champassak Province Adm. employees, drivers & miscellaneous - 5 5 5 5 Skilled workers - 9 9 9 9

Subtotal - 14 14 14 14

Total - 39 134 134 134

Grand total - 488 769 769 769 -55- ANNEX5

LAO PDR

AGRICULTURAL REHABILITATION AND DEVELOPMENT PROJECT III

Estimated Incremental Production or Quality Gain at Full Development

Without Under Project Project Incremental % increase situation situation effect /preproject

Rice Milling Component 1. Milled rice from (ton) - Rehabilitatedmills 3,890 4,610 720 18.5 - New mills 11,665 14,475 2,810 24.1 - Mills provided with spare parts 62,644 63,672 1,008 1.6

Subtotal (1) 78,219 82,757 4,538 5.8

2. Byproduct from (expressed in rice equivalent) (ton rice) - Rehabilitatedmills 144 288 144 100.0 - New mills 432 756 324 75.0

Subtotal (2) 576 1,044 468 81.3

3. Rice recovery from improved storage (ton) - Collecting storage _ 740 740 4.0 - Operational storage - 200 200 2.0 - Reserve security storage - 150 150 1.0

Subtotal (3) - 1,090 1,090 -

Total 78,795 84,891 6,096 7.7

Coffee Processing Component Robusta processed (ton) 2,900 2,900 - _ Incremental export value ($/ton) - 270 270 14.0 Arabica processed (ton) 1,450 1,450 - - Incremental export value ($/ton) _ 330 330 17.0

Cooperative Farm Component Incremental production (ton paddy) Farm Mbdel 1 2,375 3,800 1,425 60.0 Farm Model 2 180 285 105 58.3 Farm Model 3 4,200 6,720 2,520 60.0

Total 6.755 10.805 4,050 60.0 - 56 - ANNEX 6 Table 1

LAO PDR

AGRICULTURALREHABILITATION AND DEVELOPMENTPROJECT III

Impact of Milling on Average Rice Farm Budget

Without Proiect With Prolect Private Existing 1,000 kg paddy Hand- huller commercial New Farmer unit production pounding mills type ulls mills (1) (2) (3) (4)

Production (kg paddy) 1,000 1,000 1,OCO 1,000 Loss at storage (kg paddy) 130 130 70 70 Production milled (kg paddy) 870 870 920 930

Gross Income /a - Rice (kg) 479 461 5S5 623 - Rice equivalent of byproduct (kg) 17 18 25 31

Total (kg) 496 479 620 654

- Rice ($) 158 /b 152 tb 178.5 187 - Byproducts ($) 5 5 10.5 9

Total ($) 163 157 189.0 196

Average production costs ($) /c 18 18 l8 18

Average agricultural tax ($) / 9.5 9.5 9.5 9.5

Net Income ($) (1) 135.5 129.5 161.5 168.5

Less milling charges 26/e 19/f ]7/Q 17/R

Net Income ($) (2) 109.5 110.5 144.5 151.5

Z increase From (1) to (3) 22 From (1) to (4) 38 From (2) to (3) 21 From (2) to (4) 37

Labor consumption (man-day) 135 105 105 105

Labor remuneration ($/man-day) 1.0 1.1 1.4 1.4

/a Using milling rates shown in Annex 2, Table 23 of Project File. /b Valued vith a premium of 10% when compared to 35% broken white rice. /c Cost, excluding family labor, estimated at $18.0/ton paddy with average yield assumption of 1.3 ton paddy/ha. /d 14% of WS projection (assumed on a 2 ha farm size), after deduc:ting individual allowance of 120 kg paddy. /e Valued at the market wage of NK 14/man-day (or USC87.50/man-day). /f Estimated, at the free market, at NK 0.35/kg paddy (with byproc.ucts returned to the farmer); i.e. USC2.2/kg paddy at the free market exchange rate of NK 16 per dollar. /g Milling charges of $18.60/ton paddy, as in Annex 6, Table 3. - 57 - ANNEX 6 Table 2

LAO PDR

AGRICULTURAL REHABILITATION AND DEVELOPMENT PROJECT III

Cooperative Farm Unit Budgets

Without Project With Project Without additional inputs With additional inputs

Farm Models 1 2 3 1 2 3

Wet-Season Cropping Pattern Paddy (ha) 2.00 2.00 1.50 2.00 2.00 1.50 Paddy yield (ton/ha) 1.25 1.35 1.40 2.00 2.10 2.20

Dry-Season Cropping Pattern /a Paddy (ha) - 0.50 0.50 - 0.50 0.50 Cropping intensity (%) - 125 133 - 125 133 Paddy yield (ton/ha) - 1.80 1.80 - 3.00 3.00

Total paddy production (ton) 2.50 3.60 3.00 4.00 5.70 4.80 Production gross value ($) /b 400 576 480 640 912 768 Production costs ($) /c 47 98 86 144 234 198 Agriculture tax ($) /d 37 42 28 70 75 55

Return Net farm income before tax($) 353 478 394 496 678 570 Net farm income after tax($) 316 436 366 426 603 515 Labor consumption (man-days) 272 360 292 282 375 304 Labor remuneration: $/man-day 1.2 1.2 1.3 1.5 1.6 1.7

/a On existing irrigation by pumping schemes.

/b Valued at the expected new official price for paddy NK 1.6/kg, i.e., US¢16/kg at the official exchange rate of NK10/$.

/c Excluding family labor.

/d 14% of WS production after deducting individual allowance of 120 kg. I.AO PtR

Olt>TtT>ntiR^ 8t48>T8flO»EA A713DDEt8,t0PhhN7 I5>OJÉcT If

frteres yar I 2 3 4 S 6 7 8 9 >0 Il >2 >3 >8 >5 >6 >7 >8 >9 20 Star >90~~~~~~~~1)0 1981 >982 1983 1984 R9&5 1986 >91 rgf>98 8 >998g >g- 999 95 t92 1993 1994 1995 1996 1997 > 998 1999

'- 8c1>cb>1 tte.9/0>sctr Ifed 81>>a/Nea mlils

- Toc paddyfhr - 3.5 9.25 >2.25 >2.25 12.25 >2.25 12.25 12.25 >2.25 12.25 12.25 12.25 12.25 >2.25 >2.25 12.25 >2.25 12.25 12.25 _ 7.ossl (tes> .- 1.800 21,b6 28.300ü 28,600 28,88D 28.09 28,800 28.80O 28,800 28,90o 28,80D 20,809 28,800 28.880 2A,0O 28,800 28,800 29,8D0 2P,PD0

-' tqcp,n 286.0 1,801.9 - - - 52.2 >98-4 - - - 5/.2 >98.4 . - 57.2 198.4 - - - - Tilc> -28 544.90 1 9.9 13.0 - - 14. 5 35.9 11.3 - _. 1545 35.8 fi.3 _ 1 4.5 35.9 I>.3 3

SoOootsî 430.I° 1360.9 >13.0 - - 7>.7 23843 11.3 - _ 71.7 234.3 >1.3 _ _ 7>.? 234.3 1.3 --

048 Iccras. Costa ($ 000) /o 23.2 55.2 63.>1 63.61 83. 83.1 63.1 63.>1 63.> 63.1 63.1 63.1 63.1 63-1 63.616 63. 83.> 63. > 63.1 63.>

Total États 430.3 304.1 >60.2 63.> 63.1 134.8 297.4 >4.4 63.1 63.1 134.8 297.4 74.4 83.1 63.>1 >34. 297.4 14.4 63.1 63.1

R- 0003 - 2. 58.. 7 12 Oscosec> t rcpossd obolîno Itocos cf $>2itoo toMe <1d-0891 O 93.6 259.2 545.6 345.6 345.6 345.6 345.6 345.6 345.6 34S.6 345.6 545.6 345.6 345.6 345.6 345.6 345.6 345.6 345.6 taessct cOlos cf toto> oesVtA (5'000 - 2,598.3 /c

2. >l31o Pîc.ded sIth Stasr fart.

- Toc ppdd/tYr _ 3d.0 43.75 43.75 43.75 43.35 43.15 45.25 43.15 63.15 4 3.75 43.15 83.25 43.1> 49.75 43.35 435.15 43.75 43.35 - Alooal (tas> - 87,60 1008,800 >0.0800 >89,800 10W.088 >08.800 1W.0800 >00,800 >89,809 >00,800 >90O800 >89.880 >89,889 >89.808 >89,889 >89,890 >89,800 >00,889 189.800

Tlotl Cbat ($'000) - 40.4 59.4 59.4 59.4 59.4 59.4 59.4 59.4 59.4 59.4 59.4 59.4 59.4 59.4 59.4 59.4 59.4 59.4 59.4

froasot caotu c> total ro5t (S.0.01 - 486.9 P2

SO.6/son sdda 10,0005 - 52.6 6. 5 60.5 60.5 60. 60.5 68.5 60.5 69.5 60.5 69.5 60.5 80.5 60.5 60.5 60.5 69.5 68.5 60.5 froasco voaus c> total tsvesoe (S$O0Nl»- 498.9 /c

J. 0dd4>ttccl TCllccc c,c

Opracat>ca> 1IttorSgt Yfus>l tîOt Uese1t>îtto O l lP3 Éstacite - tea poddy/hr - 50.75 56.5 59.5 59.5 59.5 59.5 59.5 59.5 59.5 59.5 59.5 59.5 59.5 59.5 59.5 59.5 59.5 59.5 59.5 - Asocl (tosI - 1>8,600 132,400 139.600 139,600 139,680 139,600 139,600 139.600 239,bnO 139.600 139,600 139,600 139,600 139,806 139,600 139.600 139.690 139,600 139,600

Toa É1cos 00 >14.0 924.5 5>3.8 239.2 59.8 11.4 92.4 51.4 23.9 6.0 11.4 92.4 51.4 23.9 6.0 18.4 92.4 51.4 23.9 6.8

fotoset calot ot total touts (9 090> - 1,798.4 Jo

$1.5/ton tadd>8 (989°?- 177.9 198.6 209.4 209.4 209.4 209.4 209.4 209.4 209.4 2n9.4 209.4 209.4 209.4 209.4 209.4 209.4 209.4 209.4 209.4 f rcat.t vitl ocf total tavcntas (1.0001 - 1.714.1 Jo

4. .. _ddItI t c t

A.c> Coot.) - 510300 1271600 57.489 137.480 137,400 13724W >37,49O 137,400 137,401 1>37,400 137.400 137,400 137,400 137,40. 137,400 137,400 1 37,400 137,400 137.400 CaItloas >'0) 24. 1.31. 41.4 064.6 .. - - 2.0 1.208.6 4I.80 - 646.8 - - - :;:~~~~~~~~o:" .0 wto,^^^so es oo a :eo oes '!'.' oco lto !e. 300.5 900.^e5 340.Ae~ 340.5n5 3PS*40.S *53.3409 4.5 4.340.5

Ëtto> Cotto (S'0001 24.-0 §14 241.8 313.5 346.5 340.5 387.3 340.S 340.5 305 364.5 .54>.> 389.5 340.5 340.5 340.5 '17.3 340.5 349.5 340.5

lretoeltcaflo0 cf total toast (510 7V - 4,753.3 Lo

o 230.8 574.2 618.3 618.3 61R.3 618.3 618.3 618.3 0>8.3 61K.3 6>8.3 618.3 618.3 618.3 618.3 618.3 618.3 6>1.3 618.3 Pc coent colos cf total rtetoor (S1'Oû) - 4.7R5.3Jo

1 5. fsotcosd >91 >lOo Él,artst - >4511>08 1 512.0to fspdsIy - IttO'os S 1.5/otn poddo -to lotcîpzt 0.4/toa I S poddo v P -Tîonsacrr > S 4.3/lt4 paddy o Total I 518.6/ton p.ddy

/n AttcÀ toklot >ctco cccorssteîo<.a de et t>tcr 1(>ad s>>>>.- /b P-ro..t cotu- . la 1980 dl-coo.ttd at 101 sera th llft le ttl, p-tJ-et (aattaatad opsaltst cot t cr,ptrst> ,C:haoshe t se rhe prp-e.t caras of rec--l, -coid bt abo-t aqoal to th pteae calots-r af tatal c_ a. - 59 - ANNEX 6 Table 4

LAO PDR

AGRICULTURALREHABILITATION AND DEVELOPMENTPROJECT III

Rice Milling Rent and Cost Recovery ($)

(1) (2) (3) (4) (5) (6) (7) (8) Incremental net income Savings in Incremental Rent Cost per unit /a family labor Management & Project milling recovery recovery 1,000 kg paddy before mill- and milling uncertainty component charges index index producing unit ing charges charges allowance /c rent in kind (Z) /d (2) /e

Handpounding to existing mills 26.0 (26.0)/b 5.2 46.8 18.6 40 59

Handpounding to new mills 33.0 (26.0)/b 6.6 52.4 18.6 36 59

Huller mills to existing nills 32.0 (19.0) 6.4 44.6 18.6 42 59

Huller mills to new mills 39.0 (19.0) 7.8 50.2 18.6 37 59

/a From Annex 6, Table 1. /b Labor for handpounding valued at estimated market wage of NK 14/man-day; i.e. US¢87.50/man-day. /c Valued at 20% of Col (2). /d Equals Col (6) divided by Col (5). /e Equals Col (6) divided by (6) + reserve security storage (see para. 6.09) over 20 years at 10% interest and converted to per ton basis ($12.8/ton). LAO PDR

AORICULTURALRE8AYILITATION AND DEVELOPHENTPROJECT 1I

Propoeed Cottee ProcessigR CharRes ($)

19 20 prolecryear 1 2 3 4 5 6 7 8 9 10 Il 12 13 14 15 16 17 18 1995 1996 1997 1998 1-999 Year 1980 1981 1982 1983 1984 1985 1986 1981 1988 1989 1990 1991 1992 1993 1994

Annual Processiug 4,340 4,340 4,340 4,340 4,340 4,340 4,340 (ton coffee beans) 1,768 3,970 4,340 4,340 4,340 4,340 4,340 4,340 4,340 4,340 4,340

Capital Costs ($000) - 171.7 - - 203.6 171.7 - - Equipaent and matertals - 960.7 - - - 171.7 203.6 - - 171.7 - 203.6 86.7 - - - - 86.7 - - - Civilworkh 92.0 750.0 80.5 - - - 86.7 - - - -

- 171.7 _ _ 290.3 171.7 - _ Subtoral 92.0 1,710.7 80.5 - _ 171.7 290.3 - - 171.7 - 290.3 80.1 80.1 80.1 80.1 80.1 80.1 80.1 80.1 06F Increm. Cost ($000) - - 40.7 76.5 80.1 80.1 80.1 80.1 80.1 80.1 80.1 80.1 9 2 2 1 7 6 8 251.8 80.1 80.1 370.4 251.8 80.1 80.1 Total Co.ts ($'000) .0 1,710.7 1 .2 .5 80.1 251. 370.4 80.1 80.1 251.8 80.1 370.4 80.1

Present value of total costa ($'000): 2,867.4 la

Revenue at the Proposed Hilling 412.3 412.3 412.3 412.3 412.3 412.3 412.3 412.3 412.3 Charge of $95/too ($'000) _ - 168.0 377.2 412.3 412.3 412.3 412.3 412.3 412.3 412.3

Present value of total revenues ($'000): 2,846.0 /b

la Present values in 1980 discounted at IO (o.c.c.) over the life of the project. /b Charges set so the present values of revenue woûld be about equal to the present value of total costn.

Ir M - 61 - ANNEX 6 Table 6

LAO PDR

AGRICULTURALREHABILITATION AND DEVELOPMENTPROJECT III

CooperativeFarm Rent and Cost Recovery /a (s)

(1) (2) (3) (4) (5) (6) (7) (8) Incremental Incre- Management Incre- net family mental and uncer- Project mental Rent Cost 1 ha income be- family tainty com- tax as- recovery recovery Family fore tax labor allowance ponent sessment index index model /b cost lc /d rent /e /f % /R % Ih

No. 1 71.5 4.4 7.2 59.9 16.5 28 72

No. 2 100.0 6.7 10.0 83.3 16.5 20 72

No. 3 117.0 5.3 11.7 100.0 18.0 18 65

/a All values are in 1980 constant prices.

/b From Annex 6, Table 2, converted from 2.0 and 1.5 ha farm »del to per hectare basis.

/c Valued at an estimatedequivalent market wage of NK 14 per day (i.e., USe87.50 at the free market exchange rate of NK 16 per dollar).

Id Valued at 10% of Col. (2).

/e Equals Col. (2) - [Col. (3) + Col. (4)].

/f Farm tax as in Annex 6, Table 2, valued at the expected new official price for paddy (NK 1.6 or USe16.00/kg).

/g Equals Col. (5) divided by Col. (4).

1h Equals incrementaltax assessmentvalued as import substitute,i.e., NK 1.75 or US017.50/kg divided by cost of DOA equipment amortized10 years at 10% interest. ($25.50 for farm models 1 and 2, $30.50 for farm model 3). - 62 -

ANNEX 7 Page i

LAO PDR

AGRICULTURAL REHABILITATION AND DEVELOPMENTPROJECT III

Economic Analysis

Methodology

Standard cost benefit analyses for each component is shown in Table 1 with a project life of 20 years and the following assumptions:

(a) Exchange Rate. Traded goods are valued at their international market price for 1980 adjusted for transport to Lao border points. Nontraded items except field labor are valued at estimated market prices converted at the shadow exchange rate of NK.16/$ which is equivalent to the free market exchange rate. Incremental labor of cooperative farmers has been shadow-waged at NK14 per man-day which is assumed to be the return of labor on his privately held lot. This figure, converted at the current free market exchange rate of NK16 per dollar, gives a shadow-wage of USe87.50 per man-day.

(b) Commodity Prices

(i) Rice and Paddy Prices. The latest projection for Thai white rice with 5% brokens have been discounted by 20% to derive the value in 1980 prices of incremental rice output with 35% brokens which is the official goverr,ment standard quality. The import substitution value of the incremental output (see Table 3) also includes $30/ton for transport from Bangkok to Thanaleng. The import substitution value of paddy has been projected in the same way fromi a 1980 value of S$115/ton f.o.b. Bangkok.

(ii) Coffee Price. LAO PDR coffee price projections were derived by discounting Bank projections for Guatamalan Prime washed coffee to account for historical price differences between Guatamalan Prime washed and Robusta and Arabica varieties. For the "without project" situation, additional discounts were applied for the poor quality of LAO PDR coffee. With the project, quality improvements would increase the export price by 14% for Robusta and 17% for Arabica. These increases would remain constant over the life of the project (see Table 3). - 63 - ANNEX 7 Page 2

Sensitivity

Under the above assumptions,the rates of return and net present values (at a discount rate of 10%) of each componentare as follows:

E.R.R.(%) NPV ($million)

Rice milling component 25.5 6.1 Coffee processing component 40.1 5.2 Workshop component 30.8 2.0 Cooperativefarm development 54.3 2.8

The standard rate of return for the entire project is 32% and the net present value is$16.1million. It is moderately sensitive, as shown in Tables 1 and 2 to the timing and level of benefits and to increases in investment costs. - 64 - ANNEX 7 Table 1

LAO PDR

AGRICULTURAL REHABILITATION AND DEVELOPMENTPROJECT III

Economic Analysis - Rates of Return (%)

Rice Coffee Cooperative Total milling processing Workshop farms project

Standard ERR/20 yrs 25.5 40.1 30.8 54.3 32.1

Costs + 10% 21.6 36.5 22.9 46.2 27.3

Costs + 20% 18.2 33.5 16.2 39.6 23.4

Costs + 30% 15.4 30.8 10.3 34.0 19.4

Costs + 20%, benefits - 10% 14.5 30.0 8.2 32.3 18.9

Costs + 20%, benefits - 20% 10.6 26.5 (1X3) 25.1 14.3

Costs + 30%, benefits - 30% 3.8 20.4 - 13.4 6.4

Benefits slipped 2 yrs 14.2 24.9 11.1 23.4 16.9

Benefits slipped 2 yrs, and - 20% 9.1 20.5 2.4 16.7 11.4

Benefits slipped 2 yrs and - 20% and costs + 20% 5.0 17.1 (7.5) 11.2 6.9 - 65 - ANIEX 7 Table 2

LAO PDR

AGRICULTU'RALREHABILITATION AND DEVELOPMENTPROJECT III

Sensitivitv Analysis

Elasti- Appraisal Crossover z city value value a Change /b

Rice Milling Incremental output from new and rehabilitated mills /c 5,000 t/yr 2,900 t/yr -42 3.3

Savings from improved storage C 1,090 t/yr - /d - 1.6

World market price of rice S421/ton 5276/ton -34 3.3

Development period 5 yrs 8.4 yrs +68 -1.5

Costs le $11.5 mil. $17.6 mil. +53 -1.9

Coffee Processing Incremental output /c 4,340 t/yr 1,515 t/yr -65 1.6

Premium for improved coffee /e Robusta 14% 4.9% } -65 1.6 Arabica 17% 5.9%

Development period 5 yrs 13.1 yrs +162 -0.62

Costs /e $2.8 mil. 8.0 mil. +186 -0.54

Workshops Savings from servicing vehicles /c $0.441 mil. 0.166 mil. -62 1.6

Savings from servicing heavy equipment /c $0.730 mil. 0.455 mil. -38 2.7

Development period 2 yrs 4.2 yrs +110 -0.9

Costs /e $6.4 mil. $8.3 mil. +30 -3.3

Cooperative Farms Incremental paddy output /c 4,050 t/yr 2,005 t/yr -51 2.0

Development period 4 yrs 9.5 yrs +138 -0.7

Costs le $2.9 mil. $5.7 mil. +97 -1.0

/a Value of variable tested which makes the net present value (discounted at 10%) equal to zero.

/b Percentage change in net present value (discounted at 10%) with respect to a 1% change in the variable tested.

/c At full development.

d Net present value for rice mill component includes benefit streams for both storage and mills. With no benefits from storage net present value would still be positive.

/e Present value of costs (discounted at 10%). ANNEX 7 - 66 - Table 3

LAO PDR

AGRICULTURAL REHABILITATION AND DEVELOPMENTPROJECT III

Commodity Economic Price Projections (in 1980 $ /a

Commodities 1980 1981 1982 1983 1984 1985 1990

White Rice ($/ton) 5% brokens, /a 430 442 458 488 504 f.o.b. Bangkok (constant 1980 $) 35% brokens, 374 384 396 404 412 420 433 c.i.f. Thanaleng /b

Paddy ($/ton)

f.o.b. Bangkok 155 159 165 176 181 c.i.f. Thanaleng 175 189 195 198 202 206 211

Coffee ($/kg) Guatemalan Prime Washed /a 2.05 1.95 1.85 1.85 1.95 2.10 2.30 (c.i.f. New York constant 1977 $) (C.i.f. New York, 2.72 2.59 2.45 2.45 2.59 2.79 3.05 constant 1980 $)

Lao PDR coffee

Without project c.i.f. New York /c 2.12 2.02 1.91 1.91 2.02 2.18 2.38 f.o.b. Pakse /d 1.89 1.79 1.68 1.68 1.79 1.95 2.15

With project Robusta (f.o.b. Pakse) 2.15 2.04 1.92 1.92 2.04 2.22 2.45 Gain/kg /e 2.26 0.25 0.24 0.24 0.25 0.27 0.30

Arabica (f.o.b. Pakse) 2.21 2.09 1.97 1.97 2.09 2.28 2.52 Gain/kg /f 0.32 0.30 0.29 0.29 0.30 0.33 0.37

/a Commodity Price Index, May 1979. /b 0.8 times 5% brokens, plus $30/ton for transport cost. /c 0.78 times Guatemala Prime Washed quotations. /d After deducting $0.23/kg for transport costs. /e 14% increase over the "without project" price. /f 17% increase over the "without project" price. C32905/J59366/D2799/52-55 WS

LAO PMR

AGRICULTURAL RERABILITATION AN0 DEVELOPMENTPROJECT III

Total Pro1ect tcremental Costs & Benefits ($'000)

PrcYna- I 2 3 4 5 6 7 8 9 10 Il 12 13 14 15 16 17 18 19 20 Yero 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1998 1991 1992 1993 1994 1995 1996 1997 1998 1999

Costs (iocluding phly-cal .ontiR.enc.e. ) Rie oilling rehab. & developaent 864.5 4,626.9 1,637.3 1,267.8 902.8 728.3 1,524.4 621.1 639.2 684.9 632.2 2,078.2 705.0 728.3 552.9 608.2 1,567.3 753.1 596.3 552.9 Coffee prooeoolng developoent 139.0 1,803.6 204.6 78.0 81.6 253.3 371-9 81.6 81.6 253.3 81.6 371.9 81.6 253.3 81.6 81.6 371.9 253.3 81.6 81.6 Workahap rehab. 5 developoent 117.0 1,728.1 789.7 660.5 660.5 665.1 873.8 660.5 660.5 660.5 665.1 873.8 660.5 660.5 660.5 665.1 873.8 660.5 660.5 Coop-rative fora dav_lopoert 139.0 886.2 660.5 281.6 265.1 268.0 271.3 315.9 268.0 268.0 268.0 306.2 613.2 268.0 268.0 268.0 271.3 315.9 268.0 268.0 268.0 Total Icres .. ta1 Coato (A) 1,259.5 9.044.8 2.913.2 2.271.4 1.912.9 1.918.0 3.086.0 1,631.2 1649.3 1866.7 1.685.1 3.937.1 1.715.1 1.910.1 1.563.0 1.626.2 3.128.9 1.934.9 1.606.4 1.563.0 Benefits /n Rice ailliog rehab. 4 developoet - 831.8 1.834.7 2,412.3 2.510.7 2.559.5 2,559.5 2,559.5 2,559.5 2,559.5 2.638.7 2.638.7 2,638.7 2,638.7 2,638.7 2.638.7 2.638.7 2,638.7 2,638.7 2,638.7 Coffee p-ocoaaiog developaent - - 453.7 1,019.0 1.157.4 1.258.6 1,258.6 1,258.6 1,258.6 1,258.6 1.403.3 1.403.3 1,403.3 1,403.3 1.403.3 1.403.3 1.403.3 1,403.3 1,403.3 1,403.3 ° Workshop rehab. 6 developoent - 456.6 1,171.0 1,171.0 1,171.0 1,171.0 1,171.0 1,171.0 1,171.0 1.171.0 1.171.0 1,171.0 1,171.0 1,171.0 1,171.0 1.171.0 1.171.0 1,171.0 1.171.0 1.171.0 Cooperativ_ far- developa.et - 327.2 604.9 725.3 818.1 834.3 834.3 834.3 834.3 834.3 854.5 854.5 854.5 854.5 854.5 854.5 854.5 854.5 854.5 854.5 Total Incremental Benefits (B) - 1.615.6 4.064.3 5.327.6 5.657.2 5.823.4 5.823.4 5,823.4 5.823.4 5.823.4 6.067.5 6.067.5 6.067.5 6.067.5 6.067.5 6.067.5 6.067.5 6.067.5 6.067.5 6.067.5 Net Benefita (B) - (A) (1.259.5)(7,429.2) 1.151.1 3.056.2 3.744.3 3.905.4 2.737.4 4,192.2 4,174.1 3.956.7 4.409.4 2.130.4 45 4.157.4 4.504.5 4,441.3 2.938.6 4.132.6 4.461.1 4.504.5

/a EIpre.sed in constant 1980 $.

'Il1 - 68 -

LAO PDR

AGRICULTURAL REHABILITATION AND DEVELOPMENT PROJECT III

Provincial Executive Committee Organization

Department of Planning - Department of Finance /a - Department of Education /a - Department of Defense /a - Department of Interior /a Department of Information /a - Department of Justice /a - Department of Agriculture, Irrigation, Forestry and Meteorology /a - Department of Industry and Comnmerce /a Department of Public Works and Transport /a Provincial Department of Post and Telecommunications /a Executive Department of Taxes and Levies Committee Department of Health /a (7 Members)- Department of Labor and Unions Department of Women Department of Credit (BNL) Department of Researches Department of Statistics Department of Administration Department of Personnel Department of Protocol Department of Sports and Cults /a

/a Each of the concerned Departments is placed under the technical supervision of the corresponding Ministry. LAO PDR AGRICULTURAL REHABILITATION AND DEVELOPMENT PROJECT Ill DOMESTIC MOVEMENT OF PADDY AND RICE

Surplus f rom Other îmports Provinces

District and Central Government Army Store Sub-District Rice Mills Store

FarmeersPaddy o ViIIage Lustrsct District rovnca District Store atere Store Stfre Rice Milsa

WorCdBank - 2051C

Private | Vlage Sales Reserve

| | _ l l l | | ~~~~~~~~~~Sub-District | District | Provincial I Village I e. s II Dficit |I Officials | Officials Officiais | Marke Nlho || Vlagers ||Producers of || Urban Urban | Ravv Materials | ef-Employed | ef-Employed

World Bank -20512 LAO PDR AGRICULTURAL REHABILITATION AND DEVELOPMENT PROJECT111 ORGANIZATION CHART OF MINISTRY OF INDUSTRY AND COMMERCE

Minister Vice Minister for Industry Vice Minister for Commerce Minister's Cabinet

DeatetDepartment Department Departmen Department Department of Department ofDeateteprmn of Planningand oeatmnf Light enof of Statistics of Finance Industry of Mining of Electricity Internal Commerce External Commerce Control Personnel

Finance Statistics Administrative Technics Construction Control Prod. Section Section Section Section Section Section

World Bank - 21029 LAO PDR AGRICULTURAL REHABILITATION AND DEVELOPMENTPROJECT 111 PROJECTORGANIZATION CHART

Minister of Minister of Industr" Minister of Agriculture ------_ and Commere -_ ------Public Works Cabinet Cabinet Cabinet

tion Committee L..

Rural El«trification . 1t ~~~~~~~~~~~~~~~~~~~~~~~~~~~~Study,

Deparnent of Department of ___ Department of Planning _ _ Light Inrustry Equipment

. F~~~~~~~~~iniancial Section *_.Statistics Section_ -Pnocurement and t i -Monitoring Accounting Unit _ and Ew.luation

Il o

Vientiane Province Savannakhet Prov. ChampassakProv. Project Executive Project Executive Project Executive Committee Committee Committee

Province Department Province Department of Province Departments Province Department Province Departnent of Province Department of Province Iepartment of of Public Works Industry and Commerce of Agriculture and of Public Works Industry and Commerce Agriculture and Coop. Industry and Commerce Workshop Manager Rice-Milling, Storage Cooperatives Agriculture Workshop Manager Rice-Milling. Storage Agriculture Extension -Workshop Staff and Staff and Transport Sfaff Extension Agents and Staff and Transport Staff Agents -Rice-Milliang Stoaage and Transport Staff

t_t t t I -Coffee-processing à ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Staff

b Direct Functional Line 4-. - - _ Coordinating Line ~- World Bank -21028 LAO PDR 111 AGRICULTURAL REHABILITATION AND DEVELOPMENT PROJECT ORGANIZATION CHART FOR PROCUREMENTPROCEDURES (ICB)

MINISTRY OF FINANCE Contr_t -_ o ~~/ ~ lud9etControl (Bureau of the Budget) / >/ - Appropriates Funds for an Approved Annual Expenditure // o, Program

' \ TECHNICAL MINISTRY

%\\\ Technical Department \\\ -Prepared Technical Specifications for Procurement EXTERNALTRADE BANK Approval of Annual -Gets Minister Together with Representative Program Expenditure of Ministry of Finance, Documents -Prepares Draft Tender Verifies Import-Export and Draft Invitations to Bid Request Corporation's o -Sends these Documents to the Against Budget Allocation and Commerce Ministry of Industry Opens Letter of Credit up the Procedure of -Follows R ens ter or Bid Opening and Advertising, Withdrawals from theCredit of Contract Selection 'c' -Informs or asks for IDA Approval

e MINISTRY OF INDUSTRY AND COMMERCE f e' Import-Export -Advertises and IssuesTender \\°r Society Documents 1 c',. Societv --~~~~~~~~~~ReceivesBidt from Suppliers -Organizes Bid Evaluation Commissionm / -Prepares Contracts and Contacts À_ \ ~~~~~~~~~~~~~~SupplierChosen. -Signs Contracts for Purchase -Requests External Trade Bank to make Payment to Supplier -Takes Delivery of Irmported Goods -Arranges Delivery to Technical Ministry

Ministry of Industry and Commerce N.B. (1) Division of the Directorate of External Trade within the

Worid Bank - 19167 1020 `>1040 ThOh,, -p onap flac Baccpmepared Pt, ttoe 1060 - o COO

s: : 'T -d-- CHINA ~ ootNteo ntn o ftt

ELEVATIONtMetert n 0 o> 2 >1

- - ROADSUNDER CONSTRUCT pw g ih g . 'ix '' .2S~~~~~~~~~~~~~~~/o.

PONAEOUNAtESo < .- 9Pnto '. n-/'«'" 0 - 199~~~~~~~~~~~~~~~~~~~~.

I IER AIRPORTS~TAIAN L2.0102°0 200\99 J 94ù 26°

MILE'~~~~~ ~TA ILN ( $h(kmk_

LAO~LAPEPL' PEOPLESRDEMORATICPEPUBLI DEMOCRATIC REPUCEABLIC r

1 ~60~ ~~ ~ ~~~~~~~~~~~~~~~~~~~4 ~

______~~~~~~~~~~~~~~~~IBRD14763 <* > 102° I03> 10 DECEEMBER1979 f 2 , C H I N A LAO PEOPLE'S DEMOCRATIC REPUBLIC AGRICULTURALREHABILITATION AND DEVELOPMENTPROJECT Ii

RURMA t,oC,1 X> PROJECT LOCATION BURMA < :S) RICR MILLING INFRASTRUCIURE. PRIMARYPAVED ROADS S\\ 1---| ZrA éVIET t½ BIG SIZE MIL GRAVEL OR LATERITE ROADS THAILANi ,S ------R BROVNCALBOUNDARIES S th - INTERNATIONAL BOUNDARIES (:vChorqxSp, c RIVERS t' ~~~~~~~~~~~~~~~~20'-

=> >/~~~~~~LUANG - /,-) 2° PRABANG _

-Z 9 Ri EstA Y Ch-g Lo

0 MYS Thooeos. V ENG LA R Tre~rgXIANG KHO C AE

i TgXIANGi) - B NAMO•jANG

-)ÇYAIGNABOURI J b > X/ _KAN 1v G / ~ \

Nt' e er T105j.-

0 W0 k ; 0ff

yVS T H V-g KA I L g A N D >\B

J / ANAKHAM PAKMfA KB I VANi V ENG

I~ ~~ ~ ~ ~~~ ~P. K, 8 IA SA

M. L0 20 40 60 B0 100

This trop Iresbten preporeabp toctWorîd Bsr,kSsstaff et&olS,oeîyfor tro convtneorCe of tpe leaderst0f rte report te sOhîP ut,s sttoot,ed Thedenoirorotions tsd ar,d the 0 20 40 60 80 100 Oooodar,ts shown on tlds mrapdo flot oopîIy on thtt part of the Wortd Bank and 'te aff,lt,etes any tudgenot onthe t lega stato 0f aofC terr,torp or top endorosementor K LOMETERS acr eptasoceof Oooh6Potndarrefs

10/e 102° 103° 104°

IBRD 14764

l0$> \ 106°lOS DECEMBER 1979

\ oko'lBs N - 0 Sfmphg\BSOBO Do-"g Ho vu/.f C H I N A

Phono B ong =o i ,( BùRMA A

- ~21 B Tong, K H A - f «PnS'D 9 <

7T DB Nong Bofl, - 9 _r "l THAI 7 VNE 17'~~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~ s ~-,( î NAM

-- é C t rJS X B~~~~~~~~~~~~~~onNo,nn,o- -~ ORMOCE,Ri\Ipj( B K.ngkobo j| 2

a~~~~Ongi- ` - - L 3 iPholn D (S B.;Non 0,, n,iete

Sovannokhe Z K,N AI A A Y S i A

BonSebong Nm j N udft n "

6'~~~~~~~~~~~~~~~~~~~~~~~.-N1'

LAO PEOPLE'S DEMOCRATIC REPUBLIC --- '--I

AGRICULTURALREHABIlLTATION Bon Bo<0, AND DEVELOPMENTPROJECT ml( PROJECTLOCATION Southern Provinceof Savannakhet and Chompassak oonJ o RICE MILLING INFRASTRUCTURE:

MEDIUM SIZE MIlIt( af f i,»:, T n A MEDIUM / SMALL SIZE MILL

X i > »Sinabn / COFFEEO SMALL INOUJSTRY HULLER MILL _ Pk 15'h _ COFFEE PRODUCING AREA 15° (D NEW COFFEE PROCESSING PLANT h.kph.)) T T A P E U

PRMARY PAVED ROADS

GRAVEL OR LATERITE ROADS / B-nNongon TRAIL UNDERCONSTRUCTION OR \ot -= BEING UPGRADED Kh 2; > _ S -S 3//7 < BRIVOIIOROB

AREAS OF 1000m ELEVATIONAND OVER BonHongdon B S>ropn _._ -- PROVINCIAL BOUNDARIES / C S A K INTERNATIONAL BOUNDARIFS

\Sophongy _2 9 /B. Fonton tt D E M O C R A T IC

-14°9 \. < Hofnottk Roon \ ;)K A M P U C H EA

O 10 20 30 40 50 4C

Th,s,ap to- ben -repan-d byoe Wo,td D.nk s-rftf ncts ththvot convnienc O 2 0 0 of ,ne rtadeloef tnn ,eportfot wh,fhnto no rtaonod Tht deno,n,,ttt,o,,st,sed nd the | ,nR 1S0 20 40 6n 80 100 Oootdon,Osshtowmtortn,otapt to noft-p,y ot- the pa-r of the Woo,ttS-A 00,0 KIadETERS eff,t,atet.an! ttdotnenft,, (hoetegototarn 0f a,nt,,torvrO oornneKontor çKILOMLTER5 acetptence of suchhbondarnes Â*> j) g 107

- 69 -

LAO PDR

AGRICULTIIRALREHABILITATION AND DEVELOPMENTPROJSCT III

PR0JECT LOCATION

Table annexed to Mips I3RD 14763 ond 14764

Reh1bilttttion Eiectric power supply Provision of apare parts Construction new mill Collecting Reserve storsge Sr. Nu. 1,u,tta/Niam Sïize/Mill Location/Name Size/Mill Location/Name Size/Mill Location Size/Mill Storage/LocAtion location

Vienctian Prevince

I. uanmol;lno Med/omall Sanakham Med/small Sanakham 2 tons/hr Xasy Nomg-teng 2. lakoean Med/snnnl Paksane Med/small Vsngvisng Naxaythong 9, Taulekhem Med/small Toulakhom 4ed/amall Kheoudon Vientimne 4. Van Vieng ()1 Small Vang-Vieng (1) Small Toulakom 5. Van Vteng (2) Small Vang-Vieng (2) Smell Xsythany 6. Van Vieng (3) Smali Veng-Vieng (3) Smell Pakaane 7. lastxcapheng Med/small Flatxaiphong Med/amall X&y-Fang 8. That Luang Med/lmall That Luang Med/small 9. Kweng-Thong Big 1o. Chitjalieun Big 11. Km 10 Big 12. B. Souan mon Big 13. Koleo /a Big Kaoleo Big 14. Seikr-t /a Medium Seiket Medium I5. That-nuong Medium 16. Pak-sane Medium 17-21. Sanakham 5 amall 22-24. Vientiane 3 med/amall 25-27. Naxaithong 3 med/small 28-29. Kaithany 2 med/small 30-31. Ba-oh 2 medlsmall

Total 3 merd/amail and 3 small 2 med/small 31 nille One unit 2 T/hr 14x500 * 7.500 T 1.000+6.480T

S,uaenekht e vPr.i_co

i. nopon1 Med/snall Kobay Medium Kobay Medium Savannakhet 4 tons/hr Champhone Savannakhet 2. Na Nhum Med/small Soesavath Medium Soesavath Medium Mongpenh 3. Tek6eung Medium Teksoung Medium Chepone 4. Chanharaun MSdium Chanchareun Medium Songkhone 5. Lao Chareum Sedium Lao Chareun Medium Athsephanthong 6. Tangiap-xuane Medium Tangiap-xuane Medium Nakay 7. Naoo /a MSdium Naseng /a Medium Naseng Medium 8. Nakay /a Medium Nakay Mediuo 9. Nanghom Small 10 Laochia Small il. Thaal-ng Small 12. Outha Small 13. Kengkok Small 14. MSng penh Med/smal1 15. la Nhum Med/small

Toetl 2 mod/smail 6 modium 15 mills One unit 4 T/hr 12xS00 - 6.000 T 1.0S0x4-4.320 T

Champausa.k Province

1. Sahaseng la Medium Sahaseng Medium Pakse /a 3 tons/hr Nong Hay Moungkau 2. Tektai /a Medium Tektai Medium Phong Thong Champassak 3. Moung Kau (Coop.) Medium N.ng Tay Moung Khong 4. imbnua Medium Saphay 5. Nong-Hay Medium Solo 6. Lao-Kasikorn /u Sedium Lao-Kasikorn Medium Bane Kamg 7. Lao-Sembe.. /u MSdium Lao-Somboun Medium Champassak 8. Moung-Katu Medium Done Tolat 9. Chanpassak Medium Soukouma 10. Phiafay Smail Noungkhong 11. Paksong Small 12. Souvannakhili Small 13. Nalong Small 14. Saphay Small 15. Soukouma Small 16. MounIpamok Small 17. Poumoktone Small

Total - 17 millt - - 10x500 - 5.000 T 1.080x3-3.240 T

/a Rice-milling rohabilitation te bh finan-d under UNCDFLAO/78/C03 project signed on September 17, 1979. - 70 - ANNEX 8 Page i LAO PDR

AGRICULTURAL REHABILITATION AND DEVELOPMENT PROJ.ECT III

List of Documents in Project File

M4ap/ diagram/ Table chart Appendix

ANNEX 1 BACKGROUNDDATA

Distribution of Administrative Units per Province 1 Commercial Imports by Main Product 2 Exports of Main Commodities 3 Merchandise Exports and Imports, 1977 4 Distribution of Credit by the Banking System (1975-78) 5 Outstanding Agricultural Credit by Province, 1977 6 Vientiane Province - Population and Land Use 1978 Statistics 7 Savannakhet Province - Population and Land Use 1978 Statistics 8 Champassak Province - Population and Land Use 1978 Statistics 9 Paddy Production Estimates for the Five Major Producing Provinces 10 Coffee Production Estimates il Paksong District - Coffee Area Distribution 12 Vientiane Province - Climate Data-Monthly Average 13 Savannakeht Province - Climate Data-Monthly Average 14 Champassak Province - Pakse Climate Data Monthly Average 15 Champassak Province - Paksong Climate Data Monthly Average 16

ANNEX 2 RICE MILLING COMPONENT

Vientiane Province - Milling and Storage Capacity Development - Phasing of Activities 1 Savannakhet Province - Milling and Storage Capacity Development Phasing of Activities 2 Champassak Province - Milling and Storage Capacity Development Phasing of Activities 3 Transport Capacity Estimates per Transport Unit 4 Vientiane Province - Paddy Transport and Storage Facilities Requirements 5 Savannakhet Province - Paddy Transport and Storage Facilities Requirements 6 Champassak Province - Paddy Transport and Storage Facilities Requirements 7 Capital Costs - Rehabilitation of Existing Rice Mills 8 - 71 - ANNEX 8 Page 2

Map/ diagram/ Table chart Ap,endix

Capital Costs - Electrification of Rice Mills 9 Capital Costs - New Rice Mill - Vientiane Province 10/a Capital Costs - New Rice Mill - Savannakhet Province 10/b Additional Capital Costs - New Rice Mill - Champassak Province 10/c Capital Costs - Paddy Primary (Collecting) Storage Facilities 11 Capital Costs - Paddy Secondary Storage Facilities 12 Capital Costs - Transport Facilities 13 (2 pgs) Capital Costs - Spare Parts for Existing Rice Mills 14 (4 pgs) Investments - Phasing of Activities 15 /a Total Capital Expenditure and Phasing 16 Detailed Annual Operating Expenditure per Type/Size of Mill 17 Total Milling Incremental Operating Expenditure and Phasing 18/a/b Detailed Annual Operating Costs per Transport Unit 19 (2pgs) Total Transportation Incremental Operating Expenditure Costs and Phasing 20 Training and Fellowship - Total Cost Estimates and Phasing 21 Total Incremental Operating Costs 22 Comparative Milling Extraction Rates 23 Expected Increase in Milling Extraction Rate and Paddy Recovery 24 New Plants - Technical Specifications - 1 Paddy Collecting Storage - Specifications - 2 500-ton Unit Paddy Collecting Store Lay-out - IBRD 20590 - 500-ton Unit Paddy Collecting Store Detailed Drawings - IBRD 21034 - 1,080-ton Unit Paddy Oerational Store Detailed Drawings - IBRD 21035 - Flow Chart of 2 to 4 ton (Paddy/hr) Rice-Mill - IBRD 20592 - Site Plan for Pakse 3T/hr Rice-Mill - IBRD 21032 - Front, Side and Back View of 2I/hr Sanakham and 3T/hr Pakse Rice-Mill - IBRD 21033 - Site Plan for Savannakhet 4rThr Rice-Mill - IBRD 21030 - Frong, and Back View of 4T/hr Savannakhet Rice-Mill - IBRD 21031 -

ANNEX 3 COFFEE PROCESSING COMPONENT

Pakse Coffee Milling Facilities - Preproject Situation 1

/a Included in the main text as Table 1, Annex 1. -72 - ANNEX 8 Page 3

Map/ d iagram/ Table chart Appendix

Capital Costs - Civil Works and Buildings 2 Capital Costs - Quality Control Laboratory Equipment 3 Capital Costs - Pre Hulling and Polishing/ Grading Equipment 4 Capital Costs - Coffee Mill Accessory Equipment 5 Total Capital Expenditure and Phasing 6 Total Milling Incremental Operating Expenditure and Phasing 7 Farmer Assistance - Training and Fellowship Total Cost Estimates and Phasing 8 Analysis of the Location of the Coffee Mill - 1 Milling Equipment Specifications - 2 Ground Plan of new Coffee Mill - IBRD 20589 - Prehulling Flow Diagram for Arabica/Robusta - IBRD 20593 - Polishing, Grading and electronic Sorting flow Diagram - IBRD 20591 - Coffee Store Lay-Out - IBRD 20588 -

ANNEX 4 WORKSHOPCOMPONENT

Provincial Workshops Pre-Project Situation 1 Capital Costs - Workshop Equipment 2 (2 pp.) Capital Costs - Workshop Accessory Equipment 3 Capital Costs - Civil Works/Buildings 4 Total Capital Costs and Phasing 5 Training - Total Cost Estimates and Phasing 6

ANNEX 5 COOPERATIVE FARMIDEVELOPMENT COMPONENT

Provincial DOA Pre-Project Staffing and Equipment 1 Provincial DOA Additional Equipment - Cost Estimate and Phasing 2 Detailed Cost of Audiovisual Equipment Kit 3 Training and Fellowship - Cost Estimates and Phasing 4 Estimated Fertilizer Requirements and Costs 5 Farm Models - Various Rice Cropping Estimated Operating Costs per ha 6 Cooperative Farm Unit Budgets 7/a Cooperative Farm Development Tentative Phasing 8/b Agricultural Input Requirements, Costs and Phasing 9 Total Capital Expenditure and Phasing 10 Cooperative Farm Incremental Paddy Production and Value 1l

/a Included in the main text as Table 2, Annex 6. /b Included in the main text as Table 5, Annex 1. - 73 - ANNEX 8 Page 4

Map/ diagram/ Table chart Appendix

ANNEX 6 TECHNICAL ASSISTANCE

Cost Estimates and Phasing for Technical Assistance 1 Technical Expert Terms of Reference - 1

ANNEX 7 PRICE AND MARKETING

Historical Coffee Price Data 1 Commodity Price Projections 2/a Coffee Prices and Mlarkets 1 Agricultural Tax and Credit Regulations 2

ANNEX 8 PROJECT COST

Total Project Cost Estimates 1 Physical and Price Contingencies Distribution 2

ANNEX 9 ECONOMIC ANALYSIS

Economic Analysis - 1 Rates of Return 1/b Rice Milling Incremental Costs 2 Rice Milling Incremental Benefits 3 Paddy and Rice Storage Incremental Benefits 4 Rice Milling Incremental Costs and Benefits 5 Coffee Processing Incremental Costs and Benefits 6 Workshop Incremental Costs and Benefits 7 Cooperative Farm Development Incremental Costs and Benefits 8 Total Project Incremental Costs and Benefits 9/c

/a Included in the main report as Table 3, Annex 7.

/b Included in the main report as Table 1, Annex 7.

/c Included in the main report as Table 4, Annex 7.