The World Bank

Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 4944 Public Disclosure Authorized PROJECT PERFORMANCE AUDIT REPORT

PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN

WADI HADRAMA&T AGRICULTURAL PROJECT

(CREDIT 615-YDR) Public Disclosure Authorized

February 16, 1984 Public Disclosure Authorized

Operations Evaluation Department

This document has a restricted distribution 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. WEIGHTS AND MEASURES

Metric System British/US System

1 millmeter (mm) = 0.0394 inch 1 meter (m) = 3.2808 foot 1 kilometer (km) = 0.6214 mile 1 square kilometer (km 2 ) 0.3861 square mile 1 hectare (ha) = 2.4711 acre 1 cubic meter (m3 ) 35.3147 cubic foot 1 million cubic meter (Mm 3 ) 810.7000 acre foot 1 kilogram (kg) = 2.2046 pound 1 metric ton (ton) = 2,204.6000 pound 1 liter per second (1/sec) = 0.0353 cubic foot per second

GLOSSARY OF ABEREVIATIGNS

ADF - Agricultural Development Fund CA - Credit Agreement ERR - Economic Rate of Return HPO - Hadramawt Project Organization LAC - Local Advisory Committee MAAR - Ministry of Agriculture and Agrarian Reform ?MS - Machinery Renting Station MUV - Manufacturing Unit Value index NBY - National Bank of Yemen NCFT - National Company for Foreign Trade NCET - National Company for Home Trade PCMVF - Public Corporation for Marketing Vegetables and Fruits PCO - Project Completion Overview PCR - Project Completion Report PDRY - People's Democratic Republic of Yemen PWC - Public Water Corporation PWD - Public Works Department TSP - Triple super-phosphate WHPI - First Wadi Radramawt Project WHPII - Second Wadi Radramawt Project FOR OFFICIAL USE ONLY

PROJECT PERFORMANCE AUDIT REPORT

PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN WADI hADRAMAWT AGRICULTURAL PROJECT (CREDIT 615-YDR)

TABLE OF CONTENTS Page No.

Preface ...... 1 Basic Data Sheet ...... ii Highlights ...... iii

PROJECT PERFORMANCE AUDIT MEMORANDUM ...... 1

I. SUMMARY ...... 1

II. MAIN ISSUES ...... 4

A. Measurement of Project Benefits ...... 4 B. Sustainability of Project ...... 6

III. CONCLUSIONS ...... 11

IDA OVERVIEW OF THE GOVERNMENT OF PDRY PROJECT COMPLETION REPORT 13

PROJECT COMPLETION REPORT ...... 29

I. Background ...... 31 II. Formulation ...... 33 III. Implementation ...... 40 IV. Agricultural Impact ...... 56 V. Economic Analysis ...... 61 VI. Institutional Impact ...... 63 VII. Special Issues and the Successor Project ...... 65 VIII. Bank Performance ...... 70 IX. Conclusions -...... 71

Annex 1 - Tables 1 - 22 Annex 2 - Technical Assistance Agreement between PDRY and FAO

Ma IBRD 11614 (PPA)

PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN WADI HADRAMAWT AGRICULTURAL PROJECT (CREDIT 615-YDR)

PREFACE

This is a performance audit of the Wadi Hadramawt Agriculcural Project, for which Credit 615-YDR in the amount of US$7.0 million was approved on February 17, 1976 under the special procedure. The Credit was closed on December 31, 1982 following a delay of three years. The Credit was fully disbursed and the final disbursement was made on September 10, 1982. The First Project was followed by the Second Wadi Hadramawt Project (Credit 1346-YDR, in the amount of US$9.0 million), which was approved on April 12, 1983.

The audit report consists of a memorandum prepared by the Opera- tions Evaluation Department (OED), a Project Completion Report (PCR), and a Project Completion Overview (PCO). The PCR, of January 1983, was prepared for the Borrower by the. Project Manager, and the PCO, of June 1983, was prepared by the Europe, Middle East and North Africa Regional Office. The audit is based on a review of the Appraisal Report (No. 847a-YDR) dated January 12, 1976, the President's Report (No. P-1711a-YDR) of January 29, 1976, the Development Credit Agreement dated April 22, 1976, the PCO, and the PCR together with a review of correspondence with the Borrower and internal Bank memoranda on project issues as contained in relevant Bank files, and interviews with Bank staff who had been associated with the project.

An OED mission visited the People's Democratic Republic of Yemen in July 1983 and held discussions with government and project officials, the manager and other officials of the date processing plant, and officers and members of cooperatives. These discussions and visits to project works and sites in the Wadi Hadramawt also contributed to the conclusions of.the audit.

The audit suggested some minor technical changes to the PCO, which were accepted and included therein. On the basis of the above procedure, the audit agrees with the major findings of the PCR and PCO. However, in the memorandum the audit analyzes the sustainability of agricultural development in the Wadi Hadramawt and elaborates on problems of measurement of benefits of the project.

OED wishes to acknowledge the very valuable assistance and information provided to the audit mission by government and project officials and the cooperatives which contributed importantly to the compilation of this report.

A copy of the draft audit report was sent to the Borrower on November 7, 1983 for comments; however, none were received. PROJECT PERFORMANCE AUDIT BASIC DATA SHEET

PEOPIE'S DENOCRATIC REPUBLIC W YENER WADI HADRANA5T AGRICULTURAL PROJECT (CREDIT 615-TDR)

XEY PROJECT DATA Appraisal Actual or Actual as I of Esciate Estumated Actual Appraisal Estimate

Project Coasts (USS million) 7.7 11.2 L5 Credit Amount (US adIlion) 7.0 7.0 L00 Disbursed - 7.0 - Repaid ) to November 30, 1983 - 0.0 - Outstaling ) 7.0 - Date Negotiations 12/15/75 L2/10-17/75 - Date Board Approval 02/17/76 02/17/76 - Date Effectiveness 07/21/76 09/16/76 - Dace Physical Components to be Completed 06/30179 06/30/82 - Proportion than completed (Z) 83 100 - Months to physical completion 40 76 190 Closing Date 12/31/79 12/31/B2 - Economic rate of return (Z) 17 S/ 57

CUMLATIVE DISBURSEMENTS n76/77 77178 T78/79 FT79/80 F80181 Fgl/82 FY82/83

Appraisal estimate (USS million) 0.221 2.080 4.806 7.0 7.0 7.0 7.0 Actual (USS million) - 0.390 0.794 2.536 4.250 5.812 7.0 Actual a I of appraisal (Z) 0 19 17 36 61 33 100 Dace of Final Disbursement: March 25, 1983/b

MISSION DATA

month/ No. of Mandays Specializations PerfoEmance Types of Mission Year Persons In Field Represented je Racing /d Trand/e Probleam/f

Appraisal 01/75 4 20 TOcal 4 20

Supervision I 09/76 2 4 e.g 1 1 K Supervision II 05/77 3 4 b.eg 2 2 N Supervision III 03/78 2 4 ce 2 1 M Supervision IV 08/78 2 1 c 3 2 N,0 Supervision V L2/78 2 6 e.g 2 2 K Supervision VI 11/79 3 6 c.g 3 2 0.F.M Supervision VII 04/80 2 6 eg 2 1 0 Supervision VIII 11/80 3 4 C.eg 2 1 0 Supervision IX 05/81 3 7 c,e.g 2 1 0 Supervision 1 12/81 2 7 e.g 2 1 0 Supervision Xx 05/82 2 3 e.g 2 1 0

Total 26 52

Completion/S

OTBER PROJECT DATA

Borrower Cowernment of the People's Democratic Republic of Temen (PDRT) Coarseatr PDY Executing Agency Ministry of Agriculture and Agrarian Reform Fiscal Tear of Borrowar January 1 to December 31

Name of Currency (abbreviation) emSni Dinar (TD) Currency Exchange Rates: Appraisal Tear Average USS1.00 - ID 2.9 Intervening Tears Average USS1.00 - TD 2.9 Completion Tear Average USS1.00 - YD 2.9 Follow-on Project iame Secod Wndi Hadramswt Agricultural Development Project Credit Humber 1346-YD Amount (USS million) 9.0 Credit Agreement Date April 23. 1983

Is In 1982 prices (O. in 1978 prices). /b Date of approval of the last disbnrsement application. 7c a * Agroladustries Specialist: b - Agricultural Economist: c - Financtal/Credit Specialist; d - Livestock Specialist; e - Agriculturist- f - Marketing Specialiat: and g - Irrigation Engineer. /d 1 problem-free or minor problems; 2 - moderate problems: .nd 3 - major problems. Te'1 Improving; 2 - stationary: and 3 - deteriorating. 7 F * financial: H - managerial; 0 - other. Thare was no formal completion mission. - iii -

PROJECT PERFORMANCE AUDIT REPORT

PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN WADI RADRAMAWT AGRICULTURAL PROJECT (CREDIT 615-YDR)

HIGHLIGHTS

The project aimed to increase agricultural production by 70% on about 8,000 ha of cropland which were being irrigated by groundwater in the Wadi Hadramawt, a low-rainfall valley located in the mid-section of the People's Democratic Republic of Yemen, about 100 miles north of the Gulf of Aden. Production was expected to be increased through use of improved technology which was to be promoted by a newly established extension service and supported by improved input supplies. The project also included development of infrastructure in the Wadi and a feasibility study to evaluate the potential for further development of groundwater resources in the area and to provide future development plans for these resources.

Estimated cost of the project was US$7.7 million. Of this total, US$7.0 million would be financed by Credit 615-YDR and the remaining US$0.7 million by the Borrower. At completion, total project cost amounted to US$11.2 million - a 45% cost overrun. This overrun was mainly due to the increased cost of labor (wages), infrastructural development, and construction of a date packing plant which was more than double the size originally planned. The project also experienced a considerable completion delay of three years, representing a time overrun of about 90%. The principal reasons for the time overrun were the difficulty in hiring expatriate consultants and qualified local staff, and the unanticipated time required to establish the extension service.

Most of the project's components were completed more or less as planned; however, the date packing plant was more than doubled in size, as already noted, and three pilot farms to test new production technology were established which were not included in the original project design. Success- ful establishment of a new extension service is especially noteworthy, considering the remoteness of the project area.

So far, the project has had only a limited impact on production. Gross value of production (constant prices) has been increased by only 10% compared with 118% estimated at appraisal. The reestimated rate of return is 8%. At appraisal, the rate of return to the project was estimated at 17%. The current estimated return has benefited from an increase in real prices (actual and forecast) of products produced by the project.

At appraisal, it was expected that 30,000 people would benefit from the production improvements of the project and 40,000 people (some of the same people who would benefit from production) would benefit from development of village water supplies. At completion, there is no information on the number of people who benefited from the project; however, considering the - iv -

scope of the project implemented, the number is likely near the appraisal estimate, but the level of benefits from production increases is certainly less than expected, on the average.

Full benefits of the project will not be realized until the completion of the Second Wadi Hadramavt Project. The feasibility study financed under the first project provided the basis for designing and financing a second project which is expected to increase irrigation intensity in the project area from 50Z to 93%. This irrigation development, together with the development and adoption of new production technology which would be promoted by the extension service established under the first project, could have a significant impact on production and welfare in the area.

Points of special interest are:

- the experiences and lessons learned during project implementation have led to a dialogue on policy issues between IDA and the Bor- rower which seeks to improve agricultural sector performance as a whole (PPAM, para. 8; PCO, para. 60; and PCR, para. 9.01).;

- because of high production cost and high exchange rates which are supported by worker remittances and resource transfers from other countries, many agricultural crops are not economically profitable (PPAM, para. 27);

- a shortage of local and expatriate engineering staff and poor supervision of civil works by staff of other involved agencies caused delays in construction and lowered the quality of roads and village water supply systems (PCO, para. 11); and

- lack of timely and effective monitoring and evaluation resulted in incomplete knowledge and assessment of project benefits (PPAM, paras. 9 and 12).

A lesson to be learned from the project is that in countries with a low educational base, it takes considerable time to develop institutions (e.g., extension services) that are necessary to reach reasonable development goals (PCR, para. 8.01). PROJECT PERFORMANCE AUDIT MEMORANDUM

PEOPLE'S DEMOCRATIC kiPUBLIC OF YEMEN WADI HADRAMAWT AGRICULTURAL PROJECT (CREDIT 615-YDR)

I. SUMMARY 1/

1. The main objective of the project was to increase annual agricultural production by 70% on about 8,000 ha of groundwater irrigated cropped area in the Wadi Hadramawt through improved input supply and application of improved technology which would be promoted by a new agricultural extension service and project management over a period of three years. Project components included: (a) construction of a small date packing plant to improve quality and reduce spoilage losses, (b) experimental programs to define inputs for the improvement of date production and for sand dune fixation through green shelterbelts in the project's western boundary, (c) construction of 120 km of feeder roads which would connect 19 villages to the main road, (d) provision of drinking water for two towns in urgent need of a potable water supply and, (e) a feasibility study to explore groundwater *-uifers in the Wadi Hadramawt and to evaluate the Wadi's development potential.

2. The project, estimated to cost US$7.7 million, was to be financed by a US$7.0 million IDA Credit (615-YDR) and US$0.7 million equivalent in local currency provided by the People's Democratic Republic of Yemen (PDRY). Project completion was delayed by three years. It was implemented during the five-year period from aid-1977 to mid-1982; expected completion was June, 1979. Unavailability of expatriate experts and qualified local counterparts, and the time required to assemble extension service personnel and provide them essential training were the main reasons for the delay in implementation.

3. Project components were implemented as follows:

(a) Thirty-three tractors with a complement of implements were purchased by the Machinery Rental Service (MRS) and financed by medium-term subloans from the National Bank of Yemen: 40 pumpsets and engines for cooperatives and some implements for state farms were also purchased.

1/ Adapted from the PCR. -2-

(b) Fertilizers and pesticides were provided to cooperatives and state farms which permitted their use to increase from negligible quantities in 1976/77 to about 1,000 tons of urea, 280 tons of TSP and 2 tons of pesticides in 1981/82.2/

(c) An agricultural extension service was established - the first in PDRY - and staffed with 25 college graduates and 9 technicians who were trained and provided with the necessary offices and equipment.

(d) Training under the project included: nine months for fourceen extensionists in Cyprus and for the manager of MRS in Syria; completion of an M.Sc. degree program for the head of the plant protection section in England; one month for the mechanic and the electrician of the date packing plant in France; and completion of an M.Sc. degree program in food technology for the Co-Manager in England.

(e) Experimental programs for sand dune fixation were carried out through green shelterbelts, 3 / and the program for the improvement of date production was implemented as appraised.

(f) A date packing plant with a 2,000-ton capacity in a 150-day season was completed and tested by December 1980. Its performance has been satisfactory, but it has been under-utilized, with only 410 tons and 470 tons of dates processed in 1981 and 1982, respectively. 4 /

(g) Twenty feeder roads with a total length of 115 km were constructed.

(M) The Shibas and Qat'u domestic water supply schemes were completed.

(i) The feasibility study was successfully carried out.

(j) Although not included in the original plan, three pilot farms of about 50 ha each, similar to those planned under the Wadi Hadramawt II Project (WHPII), were successfully established at El-Suwairy and Al-Gara.

4. Total project cost at completion amounted to 3.834 million YD (US$11.12 million), representing a cost overrun of 53%. The overrun was

2/ Although environmentally hazardous pesticides - Dieldrin and DDT - were specified as appropriate for use at appraisal, none were used.

3/ At appraisal, the location of the shelterbelts was wrongly noted; this error was corrected after further evaluation of prevailing winds during implementation.

4/ In 1983, after project completion, 800 tons were processed. -3- mainly due to increased labor, construction and transport costs for feeder roads, domestic water supply schemes, and the date packing plant. The increased costs were met by the Government's contribution. Of the final cost, the share of different components was:

Component Percentage of Project Cost

Fertilizer 6 Road Construction 24 Management and Training 18 Domestic Water Supply 16 Feasibility Study 11 Date Packing Plant 10 Irrigation Equipment 7 Agricultural Machinery 5 Experimental Programs 3

100%

5. According to official production statistics, production of all crops in the Wadi Hadramawt increased with the exception of sesame. Ac- cording to these estimates, crop yields increased as follows:

Crop Percentage Increase Local Wheat 93 Mexican Wheat 55 Sorghum 46 Vegetables 44 Alfalfa 36 Sesame 28

Yield increases were due to increased use of inputs, activities of the extension service, and abandonment of wheat cultivation in marginal areas; however, all of these increases likely are not due to the project (PCO, para. 24 and PPAM, paras. 9-11).

6. There were no procurement problems, except that the 40 pumpsets and engines were over-sized and not the most efficient for their planned use in the Wadi Hadramawt. Eventually, they were used for other projects and replaced by those of a more suitable size. 5 1 Most Credit covenants were met, but many with a considerable delay. Although prices of fertilizer and pesticides have been raised, they have not been raised sufficiently to fully recover total cost (CA, Sec. 3.07(b)). A number of reports and audits were not sent to IDA according to covenants, or they were sent late.

5/ The Bank should have reviewed more carefully the pump specifications before approving disbursements for these pumps. -4-

7. Inadequate production planning and producer prices, taxation and marketing policies, and the organization of cooperatives all contributed to limit the production impact of the First Wadi Hadramawt Project (WHPI); gross value of production in Wadi Hadramawt increased by an estimated 10% compared with 112% expected at appraisal.6 1 Part of the shortfall, however, was due to the contraction in area planted which was not attributable to the project. As a result of this under-achievement and higher project cost, the reestimated rate of return is 8% compared with 17% estimated at appraisal.

8. The feasibility study indicated the technical and economic feasibility of increasing the water extraction rate by 50% above the 150 Hm 3 extracted in 1980. Partly on the basis of this study, WHPII was designed as the first five-year phase of a 20-year strategy aimed at increasing agricultural production in the Wadi through raising the irrigation intensity from 50% to 93% in the total command area of 14,500 ha. WHPII will benefit directly about 900 farming families organized in 65 farming units of about 50 ha each, encompassing a total area of 3,225 ha evenly distributed in 15 sectors along the Wadi. The experiences and lessons learned during project implementation have led to a dialogue on policy issues between IDA and the PDRY Government which aims at determining changes required to improve overall agricultural sector performance. The result of this dialogue should have an impact on achievements during implementation of WHPII. Moreover, experiences of WHPI resulted in the incorporation in WHPII a series of measures aimed at increasing the role of producers in decision-making and the gradual removal of production disincentives. These measures are: (i) the substitution of a land betterment tax for the present tax on agricultural production, (ii) the provision of long-term land use rights by farmers to encourage tree crop production, (iii) allowing cooperative members to have long-term leases on irrigation pumps and farm machinery in order to give them more control over their use instead of hiring this equipment from the Machine Renting Station, (iv) official authorization for producers to sell modest quantities of produce, and (v) establishment of retail outlets for input supplies outside of the cooperatives.

II. MAIN ISSUES

A. Measurement of Project Benefits

9. As noted in paragraph 7, recent (1982) estimates of production indicate that output has not increased in the Wadi as was expected at appraisal, a result that occurs quite frequently with complex projects like WHPI in countries that have limited implementation capacity. However, as pointed out in the PCO (para. 16), a crop-cutting sample survey which was carried out under the project estimated that yields of most crops were higher

61 PCD estimate, p. 24. The estimated increase in production according to the PCR is 24% (para. 11). -5-

than official statistics, especially yields of vegetables and alfalfa which were about double official statistics. The PCO attributes the differences in estimates of grain yields to tax policy. Cereals are taxed at a higher rate (15%) than vegetables (5%) or alfalfa (untaxed). Thus, official data may suffer from under-reporting. This may be true, but differences in yields for cereals are of such a small magnitude that they could easily be due to sampling error. However, sampling error likely does not explain the large differences in estimates of yields of vegetables and alfalfa. In estimating the economic rate of return (ERR) of the productive components of the project, the PCO assumes that official trends represent a valid measure of the project's impact because official estimates at the start and finish of the project are equally biased by tax policy. This may be a reasonable assumption. It is unfortunate that a crop-cutting sample survey was not taken at the beginning of the project. At appraisal it was expected that the Farm Management/Production Economist consultant would obtain baseline data and establish a monitoring system to measure project achievements. Due to problems noted in paragraph 2, he was not hired until early 1982 when he undertook the crop-cutting sample survey over a period of about three months. Thus, the survey covered only winter crops.

10. The PCO (para. 36), in calculating its estimate of the ERR, assumes that only one-half of the apparent increase in wheat yields (crop-cutting sample survey) was due to the project. Although it is quite arbitrary, the audit, lacking contrary evidence, accepts this assumption.

11. Another problem in calculating the benefits of the project is the fact that irrigation development in Wadi Hadramawt has taken place since the project was initiated. It has been estimated by the consultant for groundwater development that in 1981 pumped flow from new wells in the entire valley amounted to 4 Mm3 more than in 1977/78.71 Because the proportion of this additional water used in the project area itself has not been determined, the cost of this development has not been charged in reestimating the ERR. Further, the PCO estimates the ERR of the date packing plant to be 20% at project completion, that of crop production components to be 4%, and the overall rate to be 8% (PCO, para. 8).8/ The reason for the high rate of return for the date packing plant, which is operating at about 40% of its capacity, is the difference between the buying and selling price of dates. A farm management study of date production indicates that the net return to producers of dates is negative when labor is charged at the market wage rate. Since labor is reported to be scarce in the Wadi Badramawt, the market wage likely is a good estimate of the economic wage. Thus, if the date packing plant is charged the economic rate for producing dates, the ERR of

7/ Final Report: Volume I - Specific Study Report 1 - Hydrogeolo3y, 1981, p. 13.

8/ Note that the PCR estimates the ERR at completion at 4% for the crop component, 23% for the date packing plant, and 12% overall (paras. 5.08 and 5.09). -6-

the plant is reduced. However, if the price of dates to producers is increased, the rate of return to the crop production components of the project is increased accordingly, and overall net benefits in the project remain the same.

12. Problems of estimating the net economic benefits are not unique to this project, they are inherent to most Bank projects, especially those for rural development. If better estimates of project benefits are desirable, this points up again the need for setting up a good project monitoring and evaluation system at the outset of project implementation. It is commendable that under WHPII a monitoring and evaluation system is to be established in the Project Unit to periodically collect production, price, and cost data related to the project. It is essential that the M & E section be established very early in the project and not put off to mid-term or wrap-up of the project due to over-concern with physical project implementation, as is usually done. At the time of appraisal of WHPII, terms of reference for a plrning, monitoring, and evaluation specialist were just under preparation.

13. Finally, the audit agrees with the PCO statement (para. 63), *... it would appear reasonable to withhold final judgement about this first project until a later date when, in conjunction with the successor project, the combined impact could be measured.- Such a judgement, in fact, is related to the following section.

B. Sustainability of the Project

14. At project completion, measurement of the benefits of a project usually assumes and indeed requires that project benefits will be forthcoming a number of years beyond the final disbursement date because long-term investments in physical capital and institutional development extend the life of the project beyond that date. For WHPI, this extended period amounts to twenty years (see Annex 2 of PCO).

15. The question arises: will the project be sustainable and its expected benefits realized? Sustainability relates to such things as: (a) institutional capabilities -existing at project completion, (b) appropri- ateness of technology, (c) budget support of the project by the Government or project-related Government agencies over the post completion years, (d) policies followed by the Government that affect the project such as prices and taxes, and (e) international competition. Projects such as WUPI, which are followed by a second phase, add-on, or similar projects, obviously have a sustainability advantage, especially if the follow-on project is designed to correct problems and/or build on the experience gained through their implementation.

16. Institutional. With respect to institutional sustainability, there appear to be both positive and negative factors existing in 1983. On the positive side, an extension service was established in 1980 and presently employs 25 extension officers with college degrees and nine technicians. Fourteen of these employees, including the Director of the Extension Service, - 7 - received nine months of training in Cyprus in modern agricultural extension techniques. Further, many extension officers function within the four cooperatives and seven state farms which operate in the Wadi Hadramawt where they should be most effective.

17. The extension service was established by the Hadramawt Project Organization (HPO), the management unit of the project, and was under their direction until 1982 when it was transferred to a newly established Depart- ment of Research and Extension in the Ministry of Agriculture and Agrarian Reform. Because the extension service was not established and staffed until 1980, it has not had much time to develop and sharpen its methods. Thus, it is not likely that it has had much impact on developments under the project; increases in crop production have been much less than expected. Its major impact is expected to occur in the future.

18. WHPII provides for the hiring of five additional extenasion officers and for training abroad of ten officers in the practical extension methods. The appraisal is not explicit aa to whether this represents further training for those who received training under WHPI or whether the training would be. needed due to expected turnover in staff. The appraisal report is silent about how the extension service will function in conjunction with BPO in the period ahead. It should be noted, however, that the extension service is expected to be integrated into a national extension service (see also para. 22). The extension service's role and participation in project implementation and area development needs to be closely monitored in the future to ensure its essential contribution to continuing the work begun under WHPI and to meeting the production and other objectives of WHPII.

19. A major factor in the relatively successful implementation has been the performance of the expatriate project manager who has taken the responsibility for all facets of project implementation from tendering and procurement to recommending personnel for overseas and local training. At appraisal, for purposes of training and institutional development, a Yemeni Co-director or Co-manager was to be appointed. Over the period of implementation, several were appointed, but they did not remain with the project. Further, one received training in food technology under the project, which was inconsistent with the apparent objectives of training local counterparts in project management. Today there is no Yemeni who is prepared to take over the management of WHPII. The expatriate who served as manager of WHPI is now expected to continue as mana,er of WHPII for at least two years. WHPII contains a substantial training component, but this component does not include specific management training. On-the-job training in management can be effective only under the right circumstances, one being the increasing delegation of authority (e.g. increasing the trainee's authority); such action appears not to have been followed in WHPI. The appraisal report for WHPII is nct explicit on the appointment of counterparts and their training. If management expertise is to be developed in PDRY to carry out the continuing objectives of WEPI and those of WHPII, management development will need to be closely monitored and not allowed to take its own course as it was in WHPI. - 8 -

20. With respect to other expatriates and training of counterparts, the engineer and extension specialist could not be hired on time, and the first ones hired stayed only a short time. It was only toward the end of the project that an appointed engineer was willing to stay with the project and is now expected to serve as project engineer in WHPII. Apparently because of the discontinuity in the tenure of the project engineer, the counterpart engineer was unable to obtain sufficient on-the-job and/or supplemental training to serve as engineer in WHPII. On the other hand, a Yemeni who received external training in agricultural extension methods is now serving as Director of the Extension Services in Wadi Hadramawt.

21. Appropriate Technology. Agricultural production technology employed by cooperative and state farms in the Wadi Hadramawt was not ad- vanced much under the project, nor was it expected to be. Mechanized production and new irrigation techniques were introduced on a limited scale, but the main improvement in production technology (technique) was the considerable increase in the use of fertilizer and pesticides, although most of the funds for these inputs were not provided through the project (PCR, para. 3.03). Pilot farms established under the project have provided valuable technological information that has either been used in designing or is expected to be used in implementing WHPII.

22. - Information on optimum crop production technology is lacking in the Wadi Hadramawt. WHPI provided equipment to the research sub-station in the Wadi in anticipation that some progress would be made in providing information from applied research. Very little applicable research information has been provided because of lack of personnel with adequate training and essential research equipment. This lack of information on the best technological package for crops grown in the area will hold down the benefits of irrigation facilities that are expected to be developed under.WHPII since the project makes no provision for correcting this deficiency. However, IDA is presently assisting in the formation of a national research and extension project which would have a branch in the project area.

23. Budget Support. If past performance is any indication, lack of budget support will not likely be a threat to the sustainability of agricultural development in the Wadi Hadramawt. WHPI experienced a 49% cost overrun which was financed entirely by the Government (PCR, para. 3.37). At appraisal, the Government was expected to contribute just 10% of total project cost; at completion it had contributed 37%. However, the Government's ability to finance development projects and sustain development by providing recurrent resources will depend, in large part, on the tax revenues (duties and excise taxes) and foreign exchange earnings that are related to workers who are employed abroad. Remittance by workers employed outside of PDRY amounted to about 50% of Gross Domestic Product in 1980. With the expected lack of growth or even decline of oil production in the area, the Government cannot depend on rising revenue due to private remittances. The Government has planned to increase development expenditures for agriculture by 12% over the period 1981-85. -9-

24. Government Policies. Government policies will have a continuing impact on agricultural development in the Wadi Hadramawt. Prices of most agricultural products are either fully or partially controlled in PDRY and 60% of agricultural producers' output must be sold through designated marketing agencies. Further, production is directly taxed at 10% to 15% of production value, and cooperatives exact a production charge of up to 25% of the value of production. On the other hand, extension services, pumpsets and irrigation water are subsidized. During the implementation of WHPI, prices of most agricultural commodities increased significantly except those for cotton, dates and bananas, for which PDRY has an apparent economic advantage (PCR, para. 7.04).

25. Subsidies were substantially reduced in the course of the implementation of WHPI and are expected to be further reduced under WHPII, under which an irrigation improvement charge is to be assessed. This charge is expected to recover 80% of the capital cost of on-farm irrigation development and will supersede the present taxes on production. These changes, if implemented as expected, will put charges more in line with actual costs and make farmers' returns more consistent with economic benefits of production. The efficiency of production should, therefore, improve. But further action needs to be taken with respect to subsidies for machinery rental, credit and fertilizer, and charges collected by cooperatives from farmers. Subsidies for machinery rental range from 20% to 50%, depending on the source of the estimate. Fertilizers are subsidized at about 13% of cost, and insecticides are heavily subsidized. 9/ Perhaps the biggest distortion in production incentives is due to charges made by cooperatives which range from 8% to 25% of the value of production and bear little relationship to the cost of services provided by the cooperatives.

26. While such incentives/disincentives are important for commodities where farmers have a choice in plantings, they are less important for cereals, which are controlled to a large degree by production plans. However, according to official data, over the implementation period of WHPI, the acreages planted in cereals declined while those planted in vegetables and alfalfa increased, which would be expected as the result of charges by cooperatives amounting to 8% for vegetables and alfalfa and ranging from 18% to 22% for cereals, unit values basis. 1 0 /

27. Relative Cost and International Competition. From casual observa- tion and some reasonable analysis, it is apparent that crop production in the Wadi Hadramawt is relatively high-cost. This is due mainly to the harshness of the climate; in particular, lack of rainfall. Rainfall averages 60 mm per year and is erratic. Temperatures range above 40*C in the summer and pan evaporation is around 3,000 mm per year. Thus, all crop cultivation is

9! This was in violation of the Credit Agreement, Section 3.07 (b).

10/ Such incentive/disincentive conflicts are being corrected under WHPII (see PCO paras. 60 and 61). - 10 - dependent upon some form of high-use irrigation; the most reliable source of irrigation is groundwater. However, cost of developing this groundwater beyond its present stage is high. Recent estimates range from US$8,000 to $10,000 per ha. At current cost and prices, the rate of return to irrigation development under optimistic assumptions about future production is fairly low. The estimated rate of return for WHPII is 12%. Combining the costs and expected benefits of both projects could reduce the ERR to below 10%. This reduced rate could be the result without taking into account the cost of infrastructural development - power, highways, schools and other groundwater - that is taking place in the Wadi Hadramawt, financed by IDA and other external donors and lenders, and which is or should be raising the level of agricultural output in the Wadi. This increased output likely is being attributed to WHPI under the benefit analysis of the PCO and PCR.

28. A recent study 11 has shown that production of major crops, except tomatoes, is highly protected in the Wadi Hadramawt. Prices received by farmers are above export value, and, because many inputs are heavily subsidized, effective protection and subsidy coefficients are greater than one, indicating positive subsidies. Further, the study estimates that the country has an economic (comparative) advantage only in the production of tomatoes. Of course, because of seasonality of production and market constraints, the Wadi Hadramawt could not be expected to specialize in tomato production and to import all of its other food and feed needs. Furthermore, the study cited deals only with present and average production relationships. It did not evaluate economic advantage under improved technology or changing exchange rates. Crop production technology that is used in the Wadi Hadramawt is not optimal, as is already noted.

29. Because of remittances of workers employed in other countries and the large amount of foreign aid received by PDRY in recent years, the country has been able to maintain a constant foreign exchange rate since 1973 while experiencing large merchandise trade deficits. If the value of the Yemeni Dinar is reduced vis-a-vis foreign currency in the future because of declining remittances and levels of aid, the profitability of agricultural products would increase in terms of their foreign value or border prices. Of course, with lower worker remittances, domestic demand for agricultural products would decrease, but a large difference would still exist between production and consumption of agricultural products, and production of food and fiber in the Wadi Hadramawt could become economically viable under relatively high internal production cost. However, the level of living in the PDRY, ceteris paribus, would decrease. In sum, there is a measure of uncertainty surrounding future agricultural development in the Wadi Hadramawt.

U/ ULG Consultants Ltd., -Study on Agricultural Prices and Subsidies, Volumes I and II, Warwick, England; January, 1982. - 11 -

III. CONCLUSIONS

30. The total benefits of WHPI to date have not been up to expecta- tions. The final impact will only be known when WHPII is successfully implemented, at which time the full effect of the feasibility study and subsequent irrigation development will come to fruition.

31. Presently, the measurement of the benefits is hampered by conflicting and sparse data. The follow-on project makes explicit provision for monitoring and evaluation, and it is expected that better information on the overall benefits of WHPI and WHPII will be available at completion of the latter. However, a system to monitor the project benefits must be established at the outset, first, to obtain base period data and thereafter, to systematically measure project impact.

32. The cost of irrigation development in the Wadi Hadramawt is high and production of most crops is not economically viable under the present technology employed and foreign exchange rates. With better extension and research information and lower worker remittances, which might result in a lowering of the value of the Yemeni Dinar in multinational trade, the economic viability of many crops grown in the Wadi Hadramawt would improve. - :2 -

an - 13 -

PDRY

WADI HADRAMAWTI/ AGRICULTURAL PROJECT (Credlt 615-YDR)

IDA Overview of the Government of PDRY Project Completion Report

The Project

1. This first IDA-supported project in the agriculture sector in PDRY set the stage for development in various wadis of PDRY. The project as originally designed had aimed at increasing agricultural production on about 8,100 ha of irrigated land in Wadi Hadramawt through provision of agricultural equipment and supplies, extension services and construction of feeder roads. The project also included construction of a date packing plant to reduce spoilage and generate additional income in the area and a rural water supply component for improving living and health standards in the wadi. A groundwater development study for Wadi Hadramawt was financed by the project to determine the potential of groundwater which is the only known resource available for substantial development of irrigated agriculture in PDRY.

Project Implementation

2. The project for which the IDA credit was signed on April 22, 1976, was to be implemented over a three-year period and accordingly the project completion date was set at June 30, 1979. The credit which was to become effective on July 21, 1976, was actually declared effective on September 16, 1976. The physical implementation of the project was completed substantially in June 1982, three years behind the schedule. The credit closing date had, therefore, to be extended twice from December 12, 1979, as agreed upon in the DCA, to December 31, 1982.

3. The slippage of project implementation behind the original schedules is attributed mainly to the causes listed as followsz

(a) Delay in the initial start-up of activities. (b) Shortage of staff and lack of continuity of expatriate staff. (c) Shortage of labor and corresponding high wage rates. (d) Delay in arranging local funds in excess of the appraisal estimate.

4. The project, which was originally appraised in 1975 for a total investment cost including physical and price contingencies of USt7.7 million, was actually implemented at a total cost of US$11.2 million resulting in a

1/ The name "Hadramawt" is the same as "Hadramout" used in the Government's report. In all IDA's documents and most of the Government's communications, the project has been called "Wadi Hadramawt Agricultural (Development) Project". - 14 -

cost overrunl/ of 44%. IDA's credit amount as allocated in the credit agreement remained unchanged.

5. The declaration of the effectiveness of the credit was delayed by only about one and a half months and did not contribute significantly to the delay in the initial start-up of the project implementation activities. However, due to lack of suitable housing accommodation, remoteness of the project and difficult living conditions in the wadi, the Government not only failed to recruit the expatriate staff directly as originally intended but also could not provide adequate strength of the local staff per schedule for the project implementation unit. The Government, therefore, decided to recruit the staff through FAO for which a technical assistance agreement was signed on December 26, 1976. Even FAO could not mobilize a full team of foreign experts until about the end of 19772/. Consequently, the project moved very slowly without making any significant progress during the initial period of one and a half years.

6. The implementation of the project received further set back due to the lack of continuity of the expatriate staff assigned by FAO. Only the project manager remained continuously on the post. The expatriate extension expert departed in March 1978 and that position could not be filled until August 1979. The post of the expatriate irrigation engineer remained vacant for three months in 1978 and then from October 1978 to March 1980. The project implementation, therefore, could not continue unabated.

7. A general shortage / of labor developed in the project area which adversely affected the execution of civil works and farms' developments. Wages rose in an unprecedented manner (about five times). These factors not only caused delays in mobilization of the work force but also raised the cost of all project components which were labor intensive.

8. The increase in the cost of implementation of the project resulting from inflation over the prolonged period of implementation and from the high labor wage rates put a heavy strain on PDRY's financial resources. The local cost component, which at appraisal was proposed to be financed by the Government, was only US$0.7 million or 9% of the total project cost. Because of the cost overrun, the Government had to provide about USt4.2 million or 39% of the final total cost from its own resources towards completion of the project. These unplanned allocations which the Government had thus to make for the project took more time for processing and that added further to the delay in the project implementation.

1/ The PCR's figure of 53% (para. 4 of Summary) is erroneous. f/ Dates the experts joined the project are: Project Manager, November 1977 Irrigation Engineer, November 1977 Extension Expert, December 1977 3/ Large scale migration of male labor occurred after 1976/77 from the Wadi to Gulf states, especially Saudi Arabia. - 15 -

9. The accomplishment of the project compared to the goals set at appraisal for the implementation of civil works are as follows:

Appraisal Actual

1. Construction of feeder roads (km) 120 115 2. Water supply (population served) 39,000 40,200 3. Construction of date packing plant (capacity) 700 t/yr. 2,000 t/yr.A1 4. Irrigation Improvement - Established 3 pilot farms in cooperatives on pattern proposed for the follow-up project. 5. Sand dune fixation Tubewells (No.) 2 2 Shelter belts 2xl0mx5km 2xl2mxl.7km

11 Plant capacity is 2 t/hr. Assumed 7-hr./day working for 150 days.

10. The original proposal at appraisal was to replace 100 old and worn out centrifugal pumps (6 1/s capacity) for the existing shallow wells in the project area and thus provide assistance to small farmers in maintaining their sources of irrigation water supply. The Government proposed quite early during project implementation, and IDA concurred, to procure 50 vertical shaft turbine pumps (30-35 1/s capacity) instead. The idea behind the change was to consolidate several small shallow well schemes to larger deep tubewell irrigation schemes. This was contrary to the appraisal concept in that only the existing shallow wells should be maintained and additional pumping from the deep aquifer should be done after the status of the deep aquifer had been determined. Hydrogeological investigations and a feasibility study for exploitation of groundwater to increase irrigated agriculture in the wadi were included in the project. It was, therefore, premature to have invested in deep tubewells during the course of the first project at the cost of improving or at least maintaining pumping from the shallow wells. As a result of this change, the objective of providing assistance to small farmers in improving their dug well pumping units could not be fully achieved.

Technical Problems

11. Due to a shortage of engineering staff, both expatriate and local, the qupervision of civil works executed by others (MOC1/ for roads and PWCa' for water supply) was not done effectively. Lack of adequate cross drainage facilities on the rural roads could have been avoided, and layouts of water supply lines could have been decided sooner had there been a continuously working engineering unit in the project. The posting of only one irrigation engineer, and even that on an intermittent basis, was not enough to ensure speedy and quality execution of the civil works.

I/ Ministry of Construction, Government of PDRY. 2/ Public Water Corporation. - 16 -

12. SOGREAH had set up and installed a system of hydrological monitoring devices in the wadi. This program was not continued after the departure of the consultants because (1) the Government did not provide the required number of counterparts to the consultant team of experts who could follow up on the monitoring of hydrological data and (2) the project did not include specifically the establishment of its own organization for that purpose.

13 The project was designed essentially for execution by labor-intensive methods. However, due to the shortage of labor and increased wage rates resulting from migration out of PDRY, the costs of certain components increased manyfold. An example is the construction of rural roads which at appraisal were estimated at about YD 2,100/km, but for which the actual cost of implementation was YD 6,767/km on the average over the period of construction.

Production

14. The project's primary production objective was to increase yields of existing crops, mainly by means of expanded use of fertilizer, to a lesser extent through improved mechanization, pest control and generally improved cultural practices in conjunction with a new extension service. In te SAR, no explicit allowance was made for shifts towards higher value crops2J. In the case of wheat, a major portion of the projected yield increase was to come from a considerable substitution of HYV's for local varieties.

15. Yields. The SAR base yields, as well as the projected and actual yield levels, are tabulated below:

Crop Yields; Projected and Actual (tons/ha)

Appraisal Actual Without Project With Project 1981/82

Wheat, HYV 2.0 3.0 2.2 Wheat, Local 1.2 2.0 1.5 Sorghum 1.0 2.0 1.2 Vegetables 7.8 14.8 10.2 Alfalfa . 35.0 65.0 47.6 Sesame 0.6 0.9 0.5

1/ Consultants for feasibility study for hydrogeological study and follow-up report. 2/ It was expected that, once the road to Mukkala on the coast was constructed, production of fruits and vegetables would be expanded. The road link, however, was completed after termination of the project. - 17 -

16. It needs to be pointed out, however, that the data in the first and last columns are the official statistics, derived from marketing data used for assessing crop taxes and cooperative shares. Comparison of the data in the last column with the results of a crop cutting survey crried out in 1982, suggests that, particularly for vegetables and alfalfal, actual yields were about twice as high as the official data indicated. However, since the principles of tax assessment remained the same during the course of the project, it has been assumed here that the bias in official yield estimates has also remained the same over the years, i.e., the changes in official yield data have been considered to be a valid basis of determining the project's impact.

17. In a period during which average national yields stagnated or declined, project area crop yields, with the notable exception of sesame, all increased. With the qualification stated in the preceding paragraph, it is quite obvious, however, that actual achievements fell considerably short of projections. In retrospect, these projections are now generally held to have been overly optimistic. Fertilizer was expected to be the primary source of yield increases. Since the average fertilizer application in the project area during 1981/82 was only 67% of the level recommended in the SAR, part of the shortfall in yields is caused by inadequate fertilization. Other physical causes include the following: (i) often untimely and inadequate tillage by the MRS-operated tractors and (ii) increased salinity of irrigation water in the upper aquifer of some subareas which, in instances, has depressed crop yields.

18. There is substantial evidence, however, that a more fundamental cause of limited fertilizer impact is of an institutional nature. During the period 1977/78-1981/82, the average price of fertilizer to the farmer rose from about YD 80/ton to YD 150/con (current prices), or an increase of about 85%. During the same period, the ex-farm commodity prices rose as follows: wheat, 80%; sorghum, 130%; sesame, 185%; vegetables, 100% and alfalfa, 235%. Although crop specific fertilizer allocations have not been recorded, it is to be expected that, in an economic system in which fertilizer allocations are crop specific and are not being adjusted for changes in relative profitability between crops, inefficiencies in resource use are bound to occur. It is, of course, quite likely-V that, official instructions notwithstanding, farmers would try to shift fertilizer use towards the most profitable crops; the degree to which this did occur is an indication of the inconsistency of Government policies (i.e. price signals and fertilizer allocation directives).

19. It is of interest to note that, whereas fertilizer use in the wadi increased from a pre-project level of less than 100 tonslyear to about 1,300 tons/year in 1981/82, total fertilizer use in PDRY during that period

1/ There is very little or no official control regarding the marketing of these produce. 2/ It is now officially admitted. - 18 - stagnated entirely. Though fertilizer consumption in the wadi in 1981/82 stood at about 50% of total national use, the average application rate there was about 100 kg nutrient/ha, which is still low by most standards.

20. At such application levels, yield responses, in the absence of inhibiting factors, are generally pronounced. Provided then that the crop/fertilizer price ratio is attractive, one should expect farmers to increase their fertilizer applications. For grains, alfalfa (green) and vegetables, these ratios are presently about 1.1, 0.3 and 0.8, respectively, and hence attractive by normal standards. The reasons then that not more fertilizer has been used are not confined to the physical constraints mentioned in para. 29, but include the simple fact that not enough fertilizer has been made available to the co mratives. The absence of input supply retail outlets in the project area..- should be considered to be an important factor contributing to low fertilizer use.

Cropped Areas

21. In the SAR, no explicit shift in cropped area towards higher value crops was anticipated, other than further substitution of HYV for local wheat varieties. Also, because of limited water availability, no expansion of total cropped area was anticipated. The official crop area statistics for the project area for 1977/78 and 1981/82 are tabulated below;

Cropped Area (ha)

1977/78 1981/82

Wheat, HYV 1,600 1,370 Wheat, Local 1,970 1,490 Sorghum 1,990 1,625 Vegetables 700 725 Alfalfa 440 560 Sesame 205 . 110 Totals 6,905 5,880

22. The decrease in overall cropped area was not foreseen in the SAR; about 1,000 hectares went out of production, all of it in the cooperatives. The contraction occurred mainly in the marginal wheat production areas. Why sturdier sorghum was not substituted for wheat is not clear; a possible explanation is rapid wage increases (from YD 0.5/day in 1975 to YD 3.0/day in 1982) rendering grain production in marginal areas unremunerative (during the same period, the wheat price less than doubled, the sorghum price rose by 130%). The area under state farms increased by about 100 hectares, though this was also the result of actions exogenous to the project.

1/ This holds for the entire PDRY. - 19 -

23. As far as changes in crop specific areas are concerned, it is clear that the anticipated substitution of HYV wheat for local varieties did not occur. The main reasons here are (i) an increising preference, as expressed in prices, for the long-straw local varietie' 'and (ii) agronomic problems with HYV wheat. The only crops of which the cropped areas expanded somewhat were vegetables and alfalfa. In both instances, these changes would have occurred without the project because, during the past years, the marketing policies for these crops had been somewhat relaxed; vegetable prices about doubled, fodder prices rose as much as three times. The price movements were not accompanied by a corresponding relaxation of acreage controls. This inconsistency of price signals and area allocation procedures provides another example of the inefficiencies generated by the agrarian policies of PDRY, for the area expansion of these crops would, in all probability, have been - different in the absence of controls (and in the longer run increased fodder and vegetable supplies would have established a new price/acreage equilibrium).

Impact on Output

24. It would seem erroneous to attribute to the project the area expansion of vegetables and fodder crops which, as explained above, was caused by Government policies and which would have occurred also without the project. The contraction of wheat production, though also not directly attributable to the project, needs partially to be accounted for in one way or another, because the reduction in marginal wheat areas has contributed to the increase in average wheat yields. Consequently, it has been assumed here that one-half of the increase in cereal yields is on account of area contraction; in the analysis, with-project cereal yields have been adjusted accordingly. Following this adjustment, the acreage contraction itself has not been counted against the project. On the basis of 1977 farm-gate prices, gross value of production between 1977/78 and 1981/82 rose by only 10% (constant YD).

Date Packing Plant

25. The project was to provide for the establishment of a date fumigation and packing plant in the project area. This was considered to be a suitable small-scale processing activity of a commodity with traditionally high spoilage losses. The plant, which was erected in 1980, had an estimated output of about 2,000 tons of dates/season. This size appeared justified, for statistics indicated that between 1,000 and 2,000 tons of fruit were regularly marketed in the project area. The actual cost of the plant was more than three times the SAR estimate, the increase being primarily attributable to late implementation.

26. In the 1981 and 1982 seasons, however, only about 400 tons of dates/season were processed. The reasons for this rather disappointing performance are many. Four agronomic factors are casually related to low and declining data yieldsz i.e. inadequate fertilization, overcrowding,

1/ Straw being used in much brick manufacture; private construction increased very rapidly on account of the vast expansion of workers' remittances. - 20 - insufficient irrigation and a serious date palm disease. More fundamental possibly are a number of institutional and policy constraints. Because of ill-defined usufruct rights (ownership of palms is generally vested in the cooperatives), farmers cannot be expected to do much more than merely maintain the trees. In date production, labor is by far the single most important input. The foremost cause for the decline in date production is therefore that, whereas unprocessed date prices were allowed to rise only marginally, labor costs during the past years increased by about 500%.

27. In spite of increased investment costs in the plant, and low throughput, the plant is expected to be economically and financially viable. This is explained by the fact that the SAR estimate of the price of processed dates proved to be far too low. At appraisal, virtually no indications were available as to what would constitute a reasonable price level. The prices realized in 1981/82 for different packages of processed dates were three to seven times higher than SAR estimates.

Credit

28. At appraisal, it was estimated that about 46% cC total project investment would be in short-, medium- and long-term loans respectively for fertilizer, farm machinery and pumpsets, and for the date packing plant. Because cost overruns for non-credit items were larger than for credit-financed ones, approximately 22% of total expenditure was in subloans.

29. The Credit Agreement specified that all subloans to the MRS, the cooperatives and state farms were to be implemented by the National Bank of Yemen (MBY). Initially, the latter proved extremely reluctant to do so. This is explained by NBY's policy of maintaining a sound financial position by being conservative in its lending operations. In spite of a blanket Government guarantee on loans to agricultural cooperatives, it only lends to those it considers financially sound and competently run. Therefore, the project subloans were administered by the project management, and were kept in the local NBY branch in the name of the project. Upon intervention by the Ministry of Finance, NBY accepted during the course of the project responsibility over accounts and subloan agreements; after that time, loan repayment was effected through automatic deductions from subborrower accounts. Full repayment, with interest, of all subloans has been maintained.

Subsidies

30. At the time of appraisal, most cash inputs into agriculture were heavily subsidized; the Government aggregate subsidy to cooperatives in the project area amounted to about 54% of total production costs, excluding labor.

31. The Credit Agreement stipulated that no fertilizer supplied to project farmers was to be subsidized. Actual prices paid by farmers changed somewhat in the course of the project; these generally covered the full cost and only part of the transport cost was subsidized. Given the project's objective of promoting fertilizer use on one hand and the very high transportation cost on the other, this small subsidy element appears justified. The Credit Agreement also specified a reduction in subsidies - 21 - concerning the use of agricultural machinery and pumpsets. MRS rental rates for tractors in 1978 were subsidized for nearly 60%; in 1982 rates had been revised to a level implying a subsidy element of only 20%. Similarly, whereas before the project the operation and maintenance of pumpsets was subsidized at a rate of about 65%, MRS rate increases have caused this to be reduced to about 25%.

32. By 1982, and partly as a consequence of project-induced price interventions, the overall subsidy to project cooperatives had fallen from 54Z of total production costs (excluding labor) in 1978 to about 20%.

Taxes

33. In the course of the project, Government imposed a 15% tax on the gross value of cereal production and a 5% tax on vegetable production. Because the project was expected to increase the output of both commodities, the SAR projected a near doubling of tax receipts in real terms in the course of the project. Because of the shift away from cereals towards lower taxed vegetables and untaxed fodder, total tax receipts actually declined in real terms.

34. In the course of the project it has been observed that the system of levying a direct tax on marketed agricultural products has several negative aspects: (i) in that it is a tax on output, not profit or gross margin, it tends to discourage input use; (ii) it discriminates against farmers who produce goods for sale through the official channels and encourages production of other untaxed crops, e.g. fodder, which may not have the highest Government priority; and (iii) tax collection is burdensome and adds to the disharmony between cooperatives and their members.

Beneficiaries

35. Although the cropped area contracted in the course of the project, the beneficiaries of the various project components--feeder roads, rural water supply--are considered to number about the same as estimated in the appraisal report, i.e. about 30,000-40,000 persons.

36. Incomes. The appraisal estimate of the per capita income growth attributable to the project was 23% in real terms. It is presently estimated that, in the course of the project, agricultural per capita incomes increased by about 60% in current terms, which would correspond to an increase of about 30% in real terms. Somewhat less than half of this increase cannot be attributed to the project (para. 36); project-induced increases in real per capita income are estimated to be between 15% and 20%. Part of this is still exogenously caused, because it includes changes due to the favorable development of the sector's internal terms of trade during the course of the project; there are no valid grounds on which these can be singled out.

Economic Rates of Return

37. The interpretation of the ERR tabulation in the Government PCR is difficult to follow and, since the project economist has left the PDRY, no clarification could be provided. New ERR estimates have therefore been - 22 - prepared based on the data displayed in Annexes I and II. Because of substantial changes in real price ratios, ERRs were calculated in constant 1978 and constant 1982 prices.

38. Investment Costs. (PCR, Table 14). Excluded from the ERR computation were: (a) the feasibility study, (b) the experimental program component and (c) the domestic water supply. Fertilizers and insecticides were considered as an investment item to the extent that their overall cost was incremental. All costs were adjusted to 1978 or 1982 values on the basis of the Bank's MUV index.

39. Incremental Benefits. Incremental benefits of crop production have been estimated on the basis of the principles mentioned in para. 36. Those of the date packing plant are based on a long-term seasonal throughput of about 600/700 tons. Input and output prices of dates are, in both instances, based on 1981/82 price levels, adjusted for inflation where necessary.

40. Below are displayed the SAR estimates as well as the two revised ones (in 1978 and 1982 prices):

Economic Rates of Return

Revised Appraisal At 1978 Prices At 1982 Prices

Project 21% 0% 8% - Crop Production 30% neg. 4% - Date Plant 11% 20% 20%

41. Converted to 1978 prices, i.e. to prices and price ratios nearest to those as perceived during appraisal, the project's overall ERR was about zero. On the crop production side, the current incremental operating expenditure was not covered by the increase in incremental output, causing the ERR of this component to be substantially below zero.

42. Because of the very steep rise in fodder and vegetable prices-M since 1978, combined with a much more modest increase in the average economic production costs, the ERR of the project when expressed in 1982 values, is about 8% and the surplus of benefits over incremental production costs is estimated in the crop production component. It will be understood that this shift in relative prices was not foreseen at appraisal and is exogenous to the project.

Performance of Consultants

43. Under an agreement No. UTFN/PDY/004/EDY, FAD provided expatriate experts (a Project Manager, an Extension Expert and an Irrigation Engineer) to assist the Government in the implementation of the project. In addition,

1/ The economic value of these non-tradables has been assumed to correspond to about their market price. - 23 -

short-term consultants in farm management/economics and date processing were also furnished by FAO under the same contract. Unfortunately, FAO could not provide experts, particularly in irrigation engineering and agriculture extension, in accordance with the schedules as set forth in the original agreement which had to be amended twice.

44. The consultants, who were engaged by the Government for carrying out the feasibility study for groundwater development for irrigation in the wadi, completed the study in accordance with the terms of referencel in a timely manner. The consultants' liaison with the Government during the study period was satisfactory. They used a computer model to analyze the groundwater status and behaviour during current exploitation and despite limited data base produced a good development plan for the wadi's water resources. It would have been very useful if the consultants had proposed to the Government ways and means to keep the computer model up to date by its regular calibration using fresh data.

45. The consultants' designs for improving water supply for irrigation

by pumping from the deep aquifer are sound. However, their irrigation - system's layout designs due to the incorporation of storage tanks and automation were expensive and not very practical under conditions as prevailing in PDRY. Furthermore, the consultants did not make full use of the shallow aquifer in planning the project, which is a valuable resource in a country having very limited water resources. These design concepts had to be modified during appraisal of the Second Wadi Hadramawt Development Project.

IDA Performance

46. Eleven supervision missions lasting 5-7 days each in the field at the rate of 2 per year were launched by IDA during implementation of the project. Three of those missions were combined with appraisals of other projects in the agriculture sector. The Government feels that the field supervision by the missions was efficieqt, comprehensive and effective. The Government, however, is of the opinion2 ' that "The project's main objective of about doubling agricultural production in three years through the supply of inputs and imparting improved technology through extension and project management is optimistic because three years were too short for an extension service - the first in the country - to be established from scratch and to have an initial impact. Five years were necessary. Also constraints, particularly at the start of a centrally planned agricultural economy were to be anticipated and allowed for." The first point has proven to be valid. Regarding anticipation at appraisal of constraints of centrally planned agricultural economies, the project being the first of its nature in PDRY, IDA

1/ The scope of work and the consultants' terms of reference were revised on January 7, 1981, financed by an IDA PPF advance to prepare detailed designs for the scheme of works conceived in the feasibility study. 2/ Para. 8.01 of the PCR is quoted verbatim. - 24 -

at appraisal had little experience to go by; nevertheless, it appears that in retrospect the rigidities commonly associated with centrally planned economies were insufficiently accounted for at appraisal.

47. The Government has stated that had IDA also specified preparation of detailed designs in the terms of reference proposed in the appraisal report, there would have been saving in the cost of the feasibility study. The usual sequence in the project cycle is the preparation of detailed designs after completion of the feasibility study. Inasmuch as preparation of detailed design is an additional work and is usually scheduled to follow the feasibility study, it is not understood how the cost of the feasibility study could have been reduced as argued by the Government.

48. IDA's response to the Government's procurement matters and other project implementation proposals was invariably prompt and effective. By supporting groundwater investigations and a feasibility study under this project, IDA has led the way towards long-term development of water resources in the wadi.

Government's Performance

49. Although constraints in the system limit the choices available, Government agencies in general took a pragmatic view of the suggestions from DA and accepted them to the greatest possible extent in project implementation. The rigidities inherent in the system, however, proved stumbling blocks throughout the course of implementation. Consequently, there were some delays in compliance by the Government with the credit covenants, particularly with reference to organization.

50. The project went through stages of total stagnation due to lack or absence of the expatriate staff. However, the entire blame for this occurrence cannot be put on the Government. The staff were to be recruited and managed by FAD (para. 54). The shortage of local staff on the project was due to nonavailability of trained and experienced technical staff in the country. The Government should have been well advised to recruit such staffl.' from countries in the region with surplus manpower until such time that trained staff could become available locally.

51. The Government was required (para. 20) to arrange local funds for the implementation of the project much in excess of those planned at appraisal, thus raising its contribution from 9% to 38%. These unforeseen financial contributions were made by the Government to the extent needed for the project, albeit involving delay in making budget allocations which subsequently caused progress on implementation to suffer.

Conclusions and Lessons Learned

52. The project made a substantial contribution to the institutional development of the agriculture sector in PDRY by:

I/ This approach has been taken by the Government in subsequent projects. -25 -

(a) establishing for the first time effective extension units in the country;

(b) introducing the National Bank of Yemen (NBY) to making agricultural loans;

(d) strengthening the Machinery Renting Station (MRS) in the area for the benefit of the farmers.

53. The project provided funds and facilities to carry out hydrogeological investigations and a feasibility study for the exploitation of groundwater for increasing irrigated agriculture in the wadi. Based on that study, a follow-up project has already been launched.

54. Under a fellowship program sponsored by the project, training was received by the Yemeni staff in extension, farm machinery and workshop management, plant protection technology, date packing and food technology in various foreign countries including Cyprus, Syria, U.K. and Tunisia.

55. The targets set for the construction of feeder roads and the water supply schemes to improve the rural infrastructure were fully met. A date packing plant has been installed in the project, although its capacity is underutilized at the present time (para. 25).

56. The adoption of the proposed high-yielding wheat varieties did not occur as anticipated because (i) of agronomic problems and (ii) because farmers preferred existing varieties for their higher yields of straw used for brick-making (para. 23).

57. Though not included in the original scope of work, two pilot farms (Al-Swairy and Al-Gara) were developed in the project area on the pattern similar to that proposed for the Second Wadi Hadramawt follow-up project. Experiences gained on those farms will be very useful for successful implementation of the second project in the wadi.

58. The economic impact of the agricultural production component of the project, though not of the date packing plant, has been substantially less than expected at appraisal. Expressed in 1982 constant YD, the revised ERRs of the overall project, the crop production component and the date plant were estimated at 8%, 4% and 20%, respectively, compared to IDA's Staff Appraisal Report (SAR) estimates of 21%, 30% and 11%, respectively. The increases in real per capita income are estimated to be between 15% and 20%, measured against an SAR estimate of 23%, but part of this increase is due to an exogenous improvement in the sector's internal terms of trade.

59. Part of the unsatisfactory performance of the crop production component under the project is attributable to unforeseen project cost increases. However, as explained below, the primary cause of the component's - 26 - shortfall appears to stem from rigidities of and conflicting signals given by Government's economic management of the sector. The importance of these structural constraints was insufficiently perceived at the time of appraisal, but during its course the project has been of invaluable use, both to the Government and to IDA, in identifying such limiting factors.

60. The redeeming fact of the project is that the identification of these constraints had led to a search, by Government and IDA, for realistic measures to remove these. At the sector level, this has led to an extremely fruitful ongoing policy dialogue with Government-1 .

61. At the project level, this had led to incorporating in the recently approved Second Wadi Hadramawt Agricultural Development Project (Cr. 1346-YDR), a whole series of new measures aiming at increasing the role and responsibilities of the producer in decision making and the gradual removal of disincentives. All these are, in essence, lessons learned in the course of the project now completed. More specifically, these measures include (i) the substitution of a land betterment tax for the present inefficient tax on production; (ii) the provision of long-term use rights to encourage tree crop production; (iii) allowing cooperative members to have long-term leases on irrigation pumps and farm machinery in order to give them more complete control over these factors of production which to date have been provided by the Machine Renting Station; (iv) official authorization for producers to directly sell modest quantities of produce and (v) the establishment of input supply retail outlets outside the cooperatives. All these measures are steps in the long-term process of enhancing the efficiency of PDRY agriculture by recognizing the central role of the primary producer.

62. At the country level, the lesson which the Bank learned during the implementation of its first assisted project in the Agriculture Sector is that the rigidities inherent in centrally planned economies are difficult to overcome; however, IDA's experience in the case of PDRY has been that, if issues are presented clearly and in a spirit of cooperation, Government is prepared to consider modifications in policies and practices. It is in this spirit that the Government has accepted to adopt the measures listed above (para. 60) in the follow-on project.

63. In summary then, it would appear that the long-term economic impact of the project should not be judged only by the quantifiable impact it has had so far. The investments made in physical and organizational infrastructure, the expanded knowledge concerning the deep aquifer gained by means of the feasibility study, and the. lessons learned as summarized above, are all elements without which it would not have been possible to implement the successor project. As a consequence, it would appear reasonable to withhold final judgement about this first project until a later date when, in conjunction with the successor project, the combined impact could be measured.

1/ Agricultural Sector Memorandum (Report No. 4006-YDR). PROJECT COMPLETION REPORT

PURY: WADI HADRAMAWT AGRICULTURAL PROJECT (Credit 615-YDR)

Economic Rates of Return (1978 Prices) (YD '000)

1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989-2003

A. Project Investment

Fertilizer and Insecticides 56.0 - 74.5 ------Machinery and Pumpaets - 121.0 55.1 57.1 ------80.0 Feeder Roads 310.0 139.7 127.2 131.9 121.5 ------Management and Training 139.0 123.7 113.4 117.6 113.4 ------Date Packing Plant - 177.1 161.2 ------Subtotals 505.0' 561.5 531.4 306.6 234.9 - - - - - 80.0 -

B. Incremental operating Cost.

Feeter Roads - 6.2 9.3 . 12.5 15.6 18.8 18.8 18.8 18.8 18.8 18.8 18.8 Fertilizera anI Insecticides - 73.8 67.2 124.3 130.5 130.5 130.5 130.5 130.5 130.5 130.5 130.5 Farm Hachinery- - 15.0 30.0 45.0 53.3 53.3 53.3 53.3 53.3 53.3 53.3 53.3 Bead ------Irri gion/2 - - (12.0) (24.0) (36.0) (36.0) (36.0) (36.0) (36.0) (36.0) (36.0) (36.0) LaborL - - (10.0) (13.0) (22.0) (22.0) (22.0) (22.0) (22.0) (22.0) (22.0) (22.0) Hanagement - - - - - 16.0 16.0 16.0 16.0 16.0 16.0 16.0 Date Packing Plant - - - - 83.0 112.0 129.0 129.0 129.0 129.0 129.0 129.0 SUbtotals - 95.0 84.5 142.8 224.4 272.0 289.6 289.6 289.6 289.6 289.6 289.6 C. Incremental Benefit.

Crop Production - 30.0 70.0 120.0 174.0 174.0 174.0 174.0 174.0 174.0 174.0 174.0 Date Packing Plant - - - - 135.9 198.5 231.7 231.7 231.7 231.7 231.7 231.7 Subtotals - 30.0 70.0 120.0 309.9 373.4 405.7 405.7 405.7 405.7 405.7 405.7

U. Net Incremental benefits (505.0) (626.5) (545.9) (329.4) (149.4) 101.4 116.1 116.1 116.1 116.1 36.1 .116.1

ERK; Entire Project. 0% Crop Productions neg. Date Packing Planti 20.0%

/I At VL 1.8/hr. (including depreciation). /2 At YU 4.0/1,000 m,. 72 At YU 0.5/day. ANNEX 2

PROJECT COMPLETION REPORI

PDRYi WADI HADRAHAWT AGRICULTURAL PROJECT (Credit 615-YDR)

Economic Rates of Return (1982 Prices) (YD 1000)

.1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989-2003

A. Project Investment

Fertilizer and Inaecticides 68.9 - 92.0 ------Hachinery and Pump Sets - 153.7 68.0 70.7 ------98.4 Feeder Roads 381.3 177.4 157.0 163.3 150.0 ------HanagimenL and Training 171.0 157.1 140.0 145.6 140.0 ------Date Packing Plant - 224.9 199.0 ------Subtatals 621.2 713.1 656.0 379.6 294.0 - - - - - 98.6 - b. Incremental Operating Costs

Feeder Moads - 7.6 11.4 15.4 23.1 23.1 23.1 23.1 23.1 23.1 23.1 23.1 Fertilizers and Insecticides - 90.8 82.7 152.5 160.5 160.5 160.5 160.5 160.5 160.5 160.5 160.5 Farm HachinerytA - 42.0 84.0 126.0 149.2 149.2 149.2 149.2 149.2 149.2 149.2 149.2 Seeda ------1a Irrigtion/2 - (30.0) (60.0) (90.0) (90.0) (90.0) (90.0) (90.0) (90.0) (90.0) (90.0) o LabomrL - - (50.0) (75.0) (110.0) (110.0) (110.0) (110.0) (110.0) (110.0) (110.0) (110.0) Hanagement - - - - - 19.7 19.7 19.7 19.7 19.7 19.7 19.7 Date Packing Plant - - - - 104.0 142.0 160.0 160.0 160.0 160.0 160.0 160.0 Subtotals - 140.4 98.1 T1.9 236.8 294.5 312.5 312.5 312.5 312.5 312.5 312.5

C. Incremental benefits

Crop Production - 73.0 150.0 225.0 323.4 323.4 323.4 323.4 323.4 323.4 323.4 323.4 Date Packing Plant - - - - 167.8 245.1 286.0 286.0 286.0 286.0 286.0 286.0 Subtotals - 75.0 150.0 225.0 491.2 568.5 609.4 609.4 609.4 609.4 609.4 609.4

D. Net Incremental Benefits (621.2) (778.5) (604.1) (313.5) (56.6) 274.0 296.9 296.9 296.9 296.9 198.5 296.9

RHi Entire Projecta 8.0Z Crop Productions 4.0% Date Packing Plant: 20.0% j At YD 5.0/hr. (in luding depreciation). At YU 6.0/,000 m At YD 2.5/day. - 29 -

People's Democratic lepublic of Yemen Ministry of Agriculture and Agrarian Reform

and

Food and Agiculture Organisation of The United Nations

IDA SUPPO WADI HADWOOUT AGRICULCURAL DEVLOPIUE FROJEC2

TF1/PDY/0O4/PDY - IDA CREIT 615-YDR

COMPLETION REPORT

ADEIf, JAIUAR 1983 3

m - 31 - PEOPL'E S DEKOCRATIC REPMLIC OP YEMEN MNISTY OF AGRICULTORE & AGRARIAN REPORM

Wadi Hadramout Agricultural Development Project

Comletion Report

I. Background

1.01 Wadi Hadramout consists of a main valley and several tributary valleys bisecting the limestone plateau of East-Central PDBY from west to east over a length of some 100 km. at a distance of about 170 km from the Indian Ocean. At an altitude of about 600 m, the valley and its tributaries are flanked by 200 - 300 m. high often vertical cliffs of the surrounding barron plateau, narrowing from about 10 km apart in the west to 2 km in the east, then taper in a south easterly direction into Wadi Masila to the seaw

1.02 Traditionally, the population in Wadi Hadranout (150,000 in 1973) thrived peitly on the subsistance production of dates and cereals through 'an elaborate spate irrigation system supplementee by groundwater from open wells with old fashioned 'dallous" driven by man or beast, and largely from remittances of its half- emigrant male population. During the fifties and early sixties an unprecendented expansion of ground water irrigation took place, with about 2000 open wells fitted with motor pumps over an area of 14500 ha., of which half came to be cropped annually, with a corresponding neglect and disuse of the spate irrigation system.

1.03 This expansion of groundwater was of more than local significance because Wadi Hadramout has about half of the area under perrenial irrigation in the country and most of the potential of its future expansion, Harsh natural conditions have restricted crop production in PEY to some 20,000 ha irrigated from groundwater or perrenial springs and an average of 50,000 ha - 32 -

country irrigated from erratic wadis in spate. No wonder, the 50% of imported 80% of its wheat requirement, 70% of edible oils, its maize, 45% of its meat and all its rice, sugar and tea.

1.04 Following independence and revolution in 1967 and agrarian reform and peasant uprisings in 1970-72 the PDRY government followed a persistent policy of: (a) Collectiving the meagre and scattered agriculture resource base into 35 state farms in 15% of the cropped area and 59 cooperatives over the remainder, with private farming restricted to remote areas;

(b) Operating a centrally planned system with areas of crops planted being pre-determined and the prices of inputs and outputs mostly controlled, and

(c) Devoting a considerable proportion of the country-s public investment to agriculture, which received 35% of the development budget over the 1973-1980 period.

1.05 Wadi Hadramout Agricultural Development Project was first conceived as a 300,000 $ allocation in the first IDA agriculture sectior project (Fisheries Credit 370-YDR), with the purpose of exploring groundwater resources and study of the feasibility of its further'exploitation. The FAO/0P mission invited to prepare consultants terms of reference for the feasibility study was able to identify a development project to aim at increasing agricultural production, through input supply and agricultural extension, the introduction of a date packdng plant and improvement of the infrastructure, to proceed simultaneously with the feasibility study. The project, which was in full accord with the objectives and components of the first five year plan (197u/75-78/?9), was swiftly prepared by FA0/CP, appraised by IDA, and an additional$7 million Credit approved. Similar IDA agricultural development projects soon followed in Wadi Tuban (Credit 768 7D!) and Beihan (Credit 1145 1M). - 33 -

1.06 The now 170,000 population of Wadi Badramout is fortunate in being the focus of attention of many financiers, spearheaded by IDA. Credits 370 and 615 were preceded by Credit 494 YDR which provided a Rural Development Centre and a Farm Machinery Training Centre in Seiyun, and by Credit 560-7DR which co-finances the Mukalla-Seiyun Highway. The 16 mega watt Wadi Hadramout Electric Power Station wts co-financed by IDA (Credit 892-YDR). The 36 million dollar Hadramout II, the first 5-year phase of a 20 year irrigation strategy identified by consultants and appraised by IDA, is on line for a 9 million dollar IDA Credit, and an equivalent sum is also earmarked for the Seiyun domestic water supply project. This is additional to investments on state farms by the Yemeni-Soviet Projects, and other government investment.

II. FOROLATION

Origin

2.01 The government of PDRY gave top priority to the agricultural development of Wadi Hadramout-as the most important groundwater irrigated area in the country. A preliminary soil and water stue7 contracted to a Soviet mission immediately after independence was conducted in 1969-71 and was the basis for thz establishment of state farms over 1500 ha under Yemeni-Soviet Projects, as well as the drilling of some boreholes in cooperatives. It was however, felt that available knowledge did not permit E reliable estimate on which to base a rational exploitation of the groundwater resource, which is the key to future expansion. An allocation of 300,000 dollars was thus provided by the IDA in its Hadramout Fisheries Project (Credit YDR 370) for a feasibility study of an agricultural/rural development project in Wadi Hadramout. The PAO/IBD Cooperative Programme was requested to assist the Government in preparing detailed terms of reference for the feasibility study to be contracted to a consulting firm, 34 -

Preparation, ApDraisal and Avoroval

2.02 An FAO/CP mission visited the country in November/Decefoer 1973 and found that sufficient data exist (a land and water study prepared with USSR assistance, an agro-socio-economic survey prepared by the consulting firm DAR-AL-RANDASAR, and some results of agronomic experiments at the Seiyun Research Station) to identify a rural development project which would aim at increasime - productivity and production on already irrigated land and to proceed concurrently with the feasibility study. The identi fI-. cation report was produced in March 1974, followed by preparat.o=, again by PAO/CP, in August the same year. Data from the Dar-Al- Handasah survey and others as indicated above were the main source used for farm models and projections. The project was appraised by an IDA mission in - Jan/Feb 1975.

2.03 Components excluded from the project at appraisal include (a) irrigation and land improvement on a pilot scale, involving rehabilitation of some weirs; levelling, canal lining and leaching on 150 ha, and the drilling and equipping of 20 boreholes to replace shallow wells in cooperatives (b) three mobile health units equipped for First Aid and transport of patients to hospitals and (c) vaccines and veterinary equipment. The title was change. from rural to agricultural development.

2.04 Negotiations took place on 10 - 20 December 1975, and a $7 million credit on standard IDA terms was approved on February 1?, 1976. Assurances were given by the government and included in the DCA. signed on 22 April 1976 on the following, amongst other issues:

(a) Establishment of EPO, recruitment of the required expertise and establishment of a Local Advisory Committee

(b) Execution and delivery of subsidiary loan agreement with -BY for channelling sub-loans - 35 -

(c) Procurement of all items involving foreign exchange, except for locally procured items to an aggregate sum of 50,000 $, through international competitive bidding in accordance with the nGuidelines for Procurement under World Bank Loans and IDA Credits".

(d) Increase of kmS rental and maintenance rates and abolition of subsidy on fertilizer procured by the project.

(e) HCU (New Public Corporation for Marketing of Vegetable= and Fruits - PCMF) to contribute 20% of cost of the date packing plant.

Project Descriotion 2.05 The project as agreed at negotiations and stated in the DCA consists of the following parts:

Part A: ARricultural Eauipment and Supplies (1) Purchase of about thirty five tractors and other farm implements and one hundred pumps and about one hundred and fifty diesel engines

(2) Purchase of about 1,900 tons of fertilizer and 20 tons of insecticide.

Part B: Civil Works

(1) Construction of about 120 km of feeder roads to connect villages in the Project Area with the main Qatn-Tarim Road

(2) Construction of two rural water supply works near the towns of Shibam and Qatn. - 36 -

Part C: Date Packing Plant Establishment and management of a date packing plant near the town of Seiyun with initial capacity to process 700 tons of dates per year.

Part D: Feasibility Study Completion of a feasibility study, initiated and partly funded under the Fisheries Project (IDA Credit 370-IDR), to explore groundwater sources and their potential in the valley and to prepare a scheme for their development.

Part E: Exoerimental Programs (1) An experimental program to stabilize sand dunes near the western boundry of the project area.

(2) An experimental program on crops at the Seiyun Research Sub-station.

(3) An experimental program to optimize yield from existing date palms on farms in Project Area.

Part F: Manaxement, Consultant Services and Training

(1) Project organisation, including an agricultural extension service, to ensure proper utilization of fertilizers and insecticides in the Project Area and to disseminate - r'ecommendations of the Seiyun Research Sub- station and the El-Kod Research Station.

(2) A three-year program of consultant services for project management including local counterpart staff, and for in-service and overseas training for local personnel in project related skills. 37 -

2.06 The main objective of the project was to increase agricultural production in the project area (about 8000 ha estimated to be cropped each year, cf which an estimated 1400 ha covered by date palms) which is irrigated from existing wells. This objective was to be achieved by providing the means to raise production in the area, which include the supply of fertilizer, pesticides, suppldnentary agriotltural and irrigation equipment, construction of feeder roads and imparting improved technology through extension service and project management during the projects three years implementation period. The production of wheat was anticipated to increase, through conversion to the Mexican high yielding variety coupled with expanded:fertilizer use, by 889o, Sorghum by 100%, alfalfa by 86, vegetables by 0 and seame by 509o. Production of dates was anticipated to increase by only 396 on account of a modest fertilization progrm, but additional benefit was expected from the introduction of a premium price on quality dates.

Organisation 2.0? Project implementation was agreed to be the responsibility of the Badranout Project Organisation (HPO) to be established in Seiyun under the Department of Planning and Statistics of the Ministry of Agriculture and Agrarian Reform in Aden (aAR). HPO was to be headed by a Project Director assisted by an agricultural extensionist and an irrigation engineer, the three to be experienced expatriates appointed for the projects duration of three years. The Project Director was to be also assisted by a Yemeni Co-Director and other local staff includjing an agriculturist, an engineer, an accountant, four extension and engineering supervisors, ten extension agent3 and some clerical staff. A local Advisory Committee headed by the Seiyun District officer and including heads of cooperatives and heads of other departments concerned with the project was to advise the Project Director on local a:.&.irs and to impart a sense of participation in project implementation among the district administrations and heads of the cooperatives in the project area. - 38 -

2.08 Road construction and the domestic water supply schemes were to be implemented through the Public Works Department (RWL) and Public Water Corporation (?.'C) either on force account or under negotiated contracts acceptable to the IDA. The consulting firm for the feasibility study and individual technical assistance consultants and experts were to be employed in accordance with the specified terms of reference under arrangements acceptable to IDA. The procurement of items involving foreign exchange to be through international competitive bidding as indicated in 2.04. The date packing plant was to be installed and managed by the PCMFV, which was to contribute 20% of its costs, equivalent to the estimated local capital costs.

Costs Estimates

2.09 Total project cost was estimated at 7.744 million dollars (2.656 million Y.Ilin), of which 7 million dollars (2401000 YD) credit under standard IDA terms. The credit was allocated to finance 100% of foreign expenditure on agricultural supplies and equipments 2276000 $ (780660 YD), the equipment for road construction and domestic water supply schemes 731000 $ (250733 !D) the- date packing plant 290000% (99470 ID) and 100% of the expenditure on construction of roads and water schemes 1226000; (450518 7D), feasibility studies 728000$ (249704 YD), experimental programs 1170000 (40131 ID) and management, consultants and training 1052000$ (360830 7D). Fifty thousand dollars were allocated for domestically procured items and 580000 dollars unallocated.

2.10 The government was to channel the allocation for agricultural supplies and equipment and the date packing plant to the beneficiaries through XBY which repays in 12 years time including two years of grace at 3% interest per annum. Cooperatives and state farms were to repay the short term sub-loans for fertilizers and pesticides at 6% per annum with maximum repayment period of one year, the HS, cooperatives and state farms to repay zediTur term sub-loans for tractors, implements and pupsets in 5-7 years at 51% interest per annum; and PCFV to repay the long term 39

sub-loan for the date packing plant in 10 years including 2 years of grace, at 5% interest per annum.

Benefits 2.11 The project was anticipated to increase the annual net value added of agricultural production in the area by 112%, which in terms of gross value amounts to on increase of 60%. Other benefits include shift toward higher value crops once the new road link to Nukalla is completed. The increased volume of public revenues and the downward adjustment in input subsidies were anticipated to reduce governments' annual subsidy to agriculture in the area from YD 367000 to YD 132000, or by 67%. The date packing plant was expected to supply the urban cons=mer with a quality product at modest additional cost, reduce spoilage losses and replace part of present imports. The feasibility study was expected to produce data which could result in a future development scheme in the area. Experimental work on sand dune fixation to result in the reclamation of some areas no longer cultivated. Establishment of EPO and technical assistance and training were expected to build up an important institution in the area.

2.12 Principal beneficiaries of the project were estimated as 5000 members of cooperatives, or an estimated 30000 persons. The feeder roads were expected to link 19 villages with the main west-east road. The water supply scheme was expected to contribute to the improvement of the health of about 40000 people. About 300000 man-days of work were expected to be created by the construction of feeder roads and water supply schemes.

2.13 The economic rate of return (ERR) to all project costs, excluding the feasibility study was estimated at 17%. No allowance was made for additional benefits of infrastructural elerents. The exclusion of the rural water supply schemes from project costs increased the ERR to 21%. The ERR to investment in the date packing plant was estimated at 11%. - 40 -

III, ILnMENTATION

Effectiveness, Start uD and Technical Assistance Agreement with FAO

3.01 Conditionsof effectiveness were execution and delivery of the Development Credit Agreement and the Subsidiary Loan Agreement with NMY and establishment of HPO. The effectiveness date was extended from 21/7/1976 to 10/9/1976 for these conditions to be met.

3.02 Start up following the effectiveness date was slow in the first two years because of delays in the recruitment of technical assistance expatriate experts and unavailability of qualified local staff. A technical assistance agreement was signed with FAO on 26/12/1976, and the Project Manager assumed responsibility on 1/11/1977, but in view of the difficulty of living conditions and remoteness of the duty station, a steady team of three experts was maintained only on February 1980; two successive irrigation engineers and one extensionist having prematurely terminated their assignments. For the same reasons, the Co-Manager and a fresh graduate counterpart extensionist were the only technical local staff then available, but the situation improved in 1980 after the first batches of local agriculturists graduated from the Nasser College of the University of Aden. The project started to gather momentum by the end of 1978, and program towards achievi.G objectives was later sustained. Extension of the completion date to 30/6/1982-was made necessary by the slow startup. No major amendment or revision of project design was made.

Physical Progress Distribution of Inuts

3.03 Fertilizer distribution in the project area rose steadily from negligible quantities before the project to 1280 tons in 1981/82 of which 1000 tons urea and 280 tons TSP (Table 1). Although 1750 tons only, worth 469400 dollars C & F Aden were - 41 - procured from credit funds, yet 3953 tons worth 1236755 dollars C & F Aden were distributed during the 1977/78 - 1981/82 seasons, through the revolving fund established with the Seiyun Branch of NBY (Table 2). Assuming all fertilizer distributed was used in the project area in the same season, this corresponds to almost 100o application of urea and 90% application of TSP at the rates recommended in the appraisal report. It is possible that some of the fertilizer was used outside the project area, while most farmers tend to apply very large quantities of fertilizer to vegetables, at the expense of other crops. Fertilizer use has, however, become conventional to cooperative farmers in the project area, with very noticeable positive results.

3.04 Pesticides were provided by the goverment and were, therefore not procured from credit funds. Application rose from negligible before the project to 2 tons in 1981/82, when 792 cooperative farmers (less then a quarter of all farmers) sprayed 532 ha with pesticides, which, in quantity represents only 10% of that appraised. Unlike fertilizers, the safe and proper use of pesticides requires training, close supervision, and development of a system for their timely procurement, storage and distribution. Only limited results were expected as most of the newly recruited extension agents were on training abroad.

3,05 Tractors, pumpsets and implements were delivered to the RS,cooperatives and state farms as shown in table (. Deliveries differed from the appraisal in:

(a) at the request of IMS, 5 light tractors were replaced by 3 tractors of 60 h.p. MS was also provided with 2 mobile workshops which proved necessary but not originally included in the appraisal.

(b) In view of the need for further testing and demonstration of seed drills, reaper-binders and stationery . . threshers, not accepted by the state farms, these were delivered to the extension service for testing and 42 -

demonstrationS, and charged against experimental programs.

(c) In place of 150 diesel engines and 100 centrifugal pumps in the appraisal, 40 pumpsets for boreholes were procured. This deviation from the appraisal was not justified, as only half of these pumpsets could be used in the project area due to the electrification and the fact that these 66 h.p. pumpsets were of larger capacity than justifiable for most boreholes in the project area. Subsidies 3.06 The average cost of the first batch of fertilizer, both urea x TSP at Seiyun was 5.8 YD/bag, 35% of which transport from Aden and handling. It was sold to -farmers at 4 dinars per bag, which included 31% subsidy amounting 90% of the cost of transport. The average cost of later batches at Seiyun was 8.6 T.Din/bag, sold at 7.5 T.Din/bag with 13% subsidy amounting to 44% of the cost of transport. Pesticides were very heavily subsidized. No subsidy of medium term credit equipments was involved, as full repayments are being made to NB. IRS rates upto 30/6/1980 were 0.650 and 0.750 Y.Din for ploughing and disc harrowing, with a subsidy of 1.050 and 0.950 T.Din per hour for these two tractor operations, respectively. Rates increased on 1/7/1980 to a flat rate of- 1.750 ID with a 0.500 subsidy. Another increase on 1/7/1981 to 2.250 ID/tractor hour is reported by the MRS to correspond to real costs.

Extension and Training

.07 An extension service staffed with 25 Aden University agrloltural graduates and 9 technical assistants, all from the project area, was gradually assembled aad provided with equipnent and offices in Seiyun, as well as training abroad. About half the staff are stationed in Cooperatives where they work with guide farmers to demonstrate the package of improved irrigation and agricultural practices, mainly through pilot farms and demonstratio=i plots. The other half work as subject matter specialists and - 43 - technicians in the plant protection, irrigation, date production and information sections centred in Seiyun.

3.08 Practical and theoretical training in extension was provided to the Director of the extension service and 13 other extensionists for 9 months in Cyprus. The head of the plant protection section received M.Sc. training in plant protection technology at Reading University in England. Other courses abroad included training in farm machinery and workshop management for the manager and chief mechanic of IRS, in Syria and Tunisia, one month training for the mechanic and electrician of the date packing plant in France, H.Sc. and Ph.D. training for the ex-co-manager in food technology in England, and a training course arranged for 4 extensionists on date production in Tunisia.

3.09 Parmer training, mainly in plant protection, was carried out, rather intermittantly. More systematic training designed through the Rural Development Centre established under IDA Credit 494 7DR in Seiyun did not materialize. Such training, as well as the further strengthening of the extension service, would be indispensable for the effective operation of the extension service, and is envisaged under Hadramout II. Other activities carried out by the extension service include film shows, Radio talks, booklets., bulletimsand other audio-visual aids.

Experimental Prorammes Pilot Farm Units in Cooeratives

3.10 Although not originally included in the appraisal, 3 farms were established in areas in cooperatives where deep boreholes were drilled through government funds. These farms were conceived in response to constraints to production which the project was not designed to solve and were intended as pilot farms for Hadramout II to, 44 -

(a) to demonstrate irrigation with freshwater from boreholes on mechanically levelled fields with border strips and long farrows, improved conveyance network and, for testing purposes, sprinkler irrigation systems, jointly with the recommended fertilizer, pesticide and other technological inputs,

(b) to serve as tractor units, with an optimum size of about 50 ha permitting expanded mechanization, and

(c) to test institutional implications of tractor units with 12 - 15 members ha%ing full control of pumpsets, tractors, implements and irrigation network as a basis for reorganization of cooperatives in the project area.

3.11 Excellent production results have so far been obtained from the farm at Al-Swairy, in Tarim cooperative, which has an area of 53 ha and two production groups with a total of 12 members, and the farm at Al Gara in Shibam Cooperative, which has an area of 70 ha and two groups with '15 members. Average yields of 2.9, 57, 21 and 96 tons/ha were obtained from wheat, tomatoes, potatoes and alfalfa, respectively. The third farm at Tareba in Seiyun Cooperative rhich had a very good start in its first year ceased to receive project assistance afterwards in view of iti operation by the cooperative through direct labour, which was without immediate interest in its success. A big gun sprinkler on 8 ha in that farm continues to be operated under project snpervison,

3.12 Although the pilot farms were technically very successful and served a good purpose as demonstration farms, the institutional aspect of connecting farmers of each farm in a single borrowing unit to collectively control farm equipments under long term lease arrangements, is still met reluctantly by the local authorities, A top level decision meeting held at the time of writing this report, has approved, in connection with the policy dialogue with IDA in February 1983, the proposed long term lease arrangement for tractors and implements. The legal frame- 45

work for the proposed 50 ha units intended for approval at the Hadramout II negotiations would thus be expected to apply to the pilot farms as soon as approved.

Improvement of Dates Production

3.13 Five factors were identified to be technically responsible for low yields; these are inadequate irrigation, lack of fertilization, overcrowding, date moth infestation and post-Khalal fruit drop.

3 .14 To define inputs required to limit the negative action of the above factors and increase production, a programme to rehabilitate a 37 ha (popular forces) farm with 3000 date palms in SeiyLn was initiated in 1981. The popular forces far. was initially developed by a rich merchant in the early sixties, with standard spacing of 9 x 9 m between trees, intercropping, and a good proportion of high quality date varieties. Following agrarian reform and the peasant uprisings, the farm was neglected. Yields declined, due to inadequate water in a saline shallow well, neglect of the irrigation network, lack of irrigation, overcrowding along the canal due to uncontrolled suckering, date moth infestation, intrusion of sands and lack of flowering. Ultimately production was limited to about 250 palm tbree crowded along the irrigation ditch. A bore hole providing fresh water was drilled, the irrigation system rehabilitated, and a program of fertilization, desuckering, pest control, sand dune intrusion control and replanting was effectively followed. The farm is expected to be rehabilitated and attain full production, with adequate definition of inputs, in 1985.

* 3.15 Date moth infestation has, since appraisal, been identified as the cause of about 25% of production losses, and control successfully demonstrated by the Agricultural Research Centre to result from 2 biweekly malathion sprays of fruit bunches starting two weeks after fertilization, A campaign over 100 ha involving about 10000 palm trees was annually carried out in Sah cooperative, where dates are the main income source, and was - 46 - adopted by the farmers who took to the campaign and met all expenses. Coincidence of date moth control and wheat harvesting inhibited the campaign in other cooperatives in view of the high labour costs involved. An experiment in which pollen greins are mixed with insecticides could vertually eliminate labour costs and render date moth control inexpensive and possible over the whole wadi, gave preliminary positive results, and is being followed up.

3.16 Promising results were obtained from dusting date bunches at the discolouration stage with 180 grams of sulphur per palm tree to control post-Khalal fruit-drop in two successive seasons. Large scale demonstration of this result is recommended in areas and varieties exposed to post-Khalal fruit-drop.

Sand Dune Pixation

3.17 The experimental program to fix moving sand dunes near the project areas western boundary was implemented as in the appraisal, with minor modifications. Two boreholes were drilled at suitable sites, clote to the areas required for shelterbelts which were levelled by a bulldozer. Two shelterbelts at half Ica distance from each other, eastern and western, were planted, each consisting of three rows at 6 m. distance from each other, extending for 1.7 k= from the southern edge of the wadi in a northernly direction towards the other side, with seedlings planted at 3 m spacing within rows. Each shelterbelts was protected from creeping sands at the eastern, windward side, by a mechanical wooden micro-windbreak of 50 cm height parallel to the shelterbelts at 3 m distance. The first row of each shelterbelt was planted with species with large crowns and long branches dropping to the ground to form a compact screen against sand movement. The second and third rows consisted of tall tree species to form a windbreak for the protection of the area between shelterbelts. The western windbreak was designed to test the suitability of drought resistant species, and their performance and the eastern belt to test three levels of irrigation, intensive, - 47 - medium and low. The tree species used were: Prosomis cineraria Acacia nilotica, Albizzia lebbek, Tamarix aphylla and Parkinsonia aculeata. Planting was done in February-March 1979 & irrigation was carried out by tanker to ditches round individual plants, fortnightly in the first two months, monthly upto the end of the first year, bimonthly in the second year,and quarterly in the third and fourth years, Irrigation was terminated at the end of 1982.

3.18 Implementation deviated from appraisal in the following: (a) The underlying assumption of the program is wind and sand movement from the Ramlat Sabtayn desert in the west towards the wa.di in the east, hence the start with the westerm boundary of the project area, and design of the shelterbelts and the mechanical protection barriers to act against sand and wind coming from the west. It was found on implementation that wind and sand movement is on the opposite direction, with sands coming from the plateaux and far away North-eastern deserts of Southern Arabia. Corresponding changes of design were therefore made.

(b) Irrigation by tanker was found more practical and cheaper than canal construction. Also a nearby open well could provide all the required water, and the 2 horeholes were therefore handed to the Qatan Cooperative.

(c) The irrigation experiment schedule could not be followed, in view of remoteness of the shelterbelts site and difficulty of supervision.

(d) A shelterbelt length of 1.7 km was considered satisfactory by the consultant. - 48 -

3.19 In spite of prolonged draught and .heavy uncontrollable grazing of the shelterbelt, survival was high, and growth satisfactory. 1easurements made on 13 - 19 April 1981 on the two year shelterbelts indicated survival of 83% of Acacia nilotica and Parkinsonia, 72% of Prosopis cineraria and 64O of Tamarix. Growth in height and gross diameter averaged, respectively, 1.78 m and 1.64 m for Acacia, 1.49 m and 1.76 m for Prosopis, 1.75 m and 1.96 m for Parkinsonia and 1.25 m and 0.93 m for Tamarix. Prosopis and Acacia were consequently recommended as the most adapted for shelterbelts in the area, and planting was recommended to be as soon as possible after floods, to enable deeper root system development. The consultants report considered the experiment promising in soil conservation effect and, with a possible height upto 9 - 10 m, could give wind protection for a distance of 300 m between -dielterbelts. Furthermore, fodder to animals and fuel are amongst their benefits. Cost of shelterbelts was calculated at 1961 D/km.

Research

3.20 The Seiun Research Station was provided with equipment worth about 11000 US Dollars. An experimental program to further define fertilizer inputs for wheat and the demonstration of Ahkaf wheat variety was carried out in cooperation with the research centre. As the Seiyun Research Station is very poorly equipped in expertise, equipment and training allocations, such support, either through Hadramout II or another project, is indespensable for the development of the technology package to be adopted in the area.

The Date Packing Plant 3.21 A date packing plant with a capacity to process bulk and small packs at the rate of lJ tons/hour and - ton/hour. respectively, or 114 tons in a 7 hour shift, was erected, tested and delivered on 17/12/1980. The large size was justified by (a) PMCVF statistics which indicated -ICO - 2000 tons of project area production marketed outside the project area from 1973 to - 49 -

1977 and (b) economy of scale. The price difference between a j ton per hour plant which could only process 500 tons per year and a 2 ton plant, the only two sizes quoted, was also very small.

3.22 The plant, which'could.receive 2000 tons in a '150 day season processed, in-view of low deliveries, 4L11 tons in 1981 and 470 tons in 1982, of which 4 O tozmbulk and 50 tons small packets. The reasons for this low level of deliveries are:

(a) In view of the system of delivery through cooperatives only, which deduct a gross tax of at least 25% on dates, farmers are naturally reluctant to deliver their dates to the date packing plant.

(b) Dates production under existing condition in the wadi is declining for various technical, social and economic reasons to be dealt with in the Special Issues Chapter, para

3,23 Even under present under utilization of the plant and present production trends, assuming delivery of only 700 tons year, the calculated economic rate of return for the plant, based on the operational costs of 1982, amounted to 23%. This rate is more than double the appraisal estimate of 11% and is due to whole sale prices of processed dates three times higher than prices given to producers, a matter to be dealt with again under Special Issues. Cost of the plant was close to appraisal estimates (113000 YDcompared to an estimate of 100000 TD for a smaller plant). Cost of the building and construction was however, higher (285000 YD compared to an appraisal sum of 20000 only)

3.24 Technical performance in operating the plant is satisfactory, but badly needed services of a consultant to train management on purchase, reception & grading of dates were unfortunately postponed to the 1983 season in view of unatailability of a consultant. - 50 -

Civil Works Feeder Roads

3.25 The feeder roads program was implemented as appraised, with the exception of two roads, Al Garyah and Hadyah (total length 5 km), found to be satisfactorily served by two existing roads. Three roads not in1cuded in the appraisal were constructed, Ainal (2.5 kM), Eidid (2.5 km) and Howei.la (4.9 k--). = The actual total length of the 20 roads constructed 115 kas compared with 120 appraised for 19 roads (table 3).

3.26 Implementation was through PD, on force account for the first 18 km. In view of difficulties with the force accounts a piece work contract was signed with PWD at 6322 TD/km, later amended after 63.5 kms to 8175 ID for the following 15 km and to 9040 7D for the last 16 km. Total construction cost was 777,707 ID, at an average rate of 6767 YD/ka, which due to wage increase is about three times higher than the appraisal estimate of 2000 7D/km. Cost over-run on both equipments and labour is 192% above appraisal (table 4). In view of cost over-run, 75% of the PWD invoices (after the first 37 kas) were met by government contribution totalling 460560 7D; of which the equivalent of 158000 YD was covered by food contributions from WPP project 2265 PD7. Cost- over-run for both construction and equipment was 14091o.

3,27 Quality of construction was upto appraisal standards as specified in the contract with PWD. The number of man/days per km under the force account arrangement was 3048, effectively reduced to less than 800 man days/km under the piece work contract. The appraisal estimate was 1500 man days/km. - 51 -

Domestic Water Suoly Schemes

3.28 The schemes were modified to fit a master plan for the whole Wadi which assumed 3.1% population increase and consumption rise from the present 10 g.p.h per day to 50 g.p.b/day after 30 years. Consequently water main pipe diameters were enlarged. Also in view of the drilling of boreholes for domestic use and the development of schemes connecting new villages since the appraisal, further modifications were made. The scheme as implemented financed in Qatan one horehole connected to the new reservoir and 16.673 km pipeline connecting Al Qatan and 13 other villages with a 9448 population. In Shibam.the scheme financed two boreholes and a 700n3 reservoir at Yooja, with direct pumping (therefore rendering a low level reservoir un-necessary), and a 12.238 ka pipeline connected to 8 villages with a total population of 7474, In addition to Al Qatan and Shiban schemes, a 450=3 reservoir was constructed at Haula, and improvements of Al Ghurfa scheme benefiting 22300 more people were made.

3.29 A contract was signed with WC to finance the projects upto the appraisal estimate of 301000 7D IWC estimates, however, went upto 531000 in March 1981 in view of higher construction and transportation costs, and extra payments foi* equipments due to negative changes cn exchange rates. Actual cost went upto 622 thousand dinars in view of the drilling of a third borehole, further increase in transport costs, and delays in implementtt±ion. The schemes were completed and inaugurat d- on 30/11/1982 (table 4). - 52

Feasibility Study

3.30 Sogreah, the French Consultant contracted on 17/5/1977 with the feasibility study, produced in February 1979 an interim report of the Phase A groundwater study which indicated tecbnical and economic feasibility of considerably increased pumping beyond the 1978 level. Sogreah was therefore authorized in a meeting held in Aden on 4-5 November 1979 to proceed with the Phase B study of project preparation and to produce, in close liaison with PAO/CP and the government, an identification report stating alternatives for development, including economic evaluation of each alternative.

3.31 Progress of Phase B work was reviewed in a meeting in Aden on 23-24 Iaarch 1980; and a program was .devised so that FAO/GP would submit in June, 1980 an identificaer report which summarised Sogreahs provisional conclusions, indicated the scope of the proposed Hadranout II, and raised development strategies and socio-economic issues of the project which required government decision, to be considered in a July meeting in Rome. The contract with Sogreah, which overlooked detailed designs, was to be amended for that purpose, so that Sogreah may produce a dz aft preparation report and FAO/aP a final preparation report in accordance with IDA appraisal standards.

3.32 PAO/CP proposed- a 20 year development program aimed at intensifying irrigation by providing 30o more underground water to the existing command area of 14500 ha considered safe by the consultant. As a first phase of this strategy the identified project would intensify crop production and rehabilitate the irrigation network in about a quarter of the command area. Decision was required on measures to create conditions for successful project implementation including (a) provision of incentives to fard*ers (b) better supplies and better use of farn machinery and equipment, Cc) more efficient services for marketing and credit and (d) gradual reorganisation of cooperatives. - 53 -

3.33 Project preparation in line with FAO/CP proposals for development was approved by the Rome July meeting attended, as previously, by government representatives and those from Sogreah, IDA and YAO/CP. An addendum to the contract with Sogreah, financed from a 500,0000 IDA project preparation facility (PFF-150) was signed on 7/1/1981 to permit detailed designs. Sogreah could thus produce a draft preparation report and a final phase B report in December 1981, on the basis of which FAO/GP produced the final preparation report in February 1982. Hadramout II was consequently appraised by IDA in April 1982.

3.34 Total cost of the feasibility study was 1,889,247$.,nalloca- ted credit funds supplemented the initial appraisal allocation of 728,0009 and other sources provided as follows: (a) 300,0000 allocation from Credit 370 7DR (b) 1,195,2470 from Credit 615 !DR and (c) 394,000$ from PPP-150

Pro curement

3.35 Agricultural machinery and implements, irrigation and road construction equipment, the date packing plant, and consultants for the feasibility study were procured under ICB. Ten tipper trucks for road construction were purchased from 1NCBT and only 85O reimbursement was made because considered as locally procured. Domestic water supply equipment and fertilizers were procured under LIB. Road construction and water supply schemes were contracted locally to PWD and INC. Technical assistance experts were provided for by agreement with FAO, Construction of the date pking~ plant was through force account by PCMVI and experimental programmes were implemented directly by the project. - 54 -

Implementation Schedule

3.36 The delivery of fertilizers, agricultural machinery and road construction equipment was close to schedule. Road construction took 66 months compared with 34 scheduled, and domestic water schemes 36 months compared to 30 scheduled. The date packing plant was completed in 24 months compared to 18 months scheduled. 'he sand dune stabilization works were implemented in 36 months compared with 30 scheduled. Assembling of the team of experts took three years, and consequently project completion date was extended by two and half years, from 31/12/1979 to 30/6/1982.

Tolal Project Costs and Credit Disbursement

3.37 Total project cost increased, in view of higher labour and transportation costs, from 2,401,000 YD to 3,834 YD, with cost over-run of 1,433,000 YD, or 49o met by gove-r-ent contribution. Of the above added costs, 34% were road construction costs, 22% domestic water supply schemes met by I4C and 20% date packing plant construction costs met by PCM.VF Increase in foreign currency components above appraisal allocation was feasibility study (467,247$), management,mostly experts and training (502,0000) and civil works (249,0000). Reallocation from agricultural supplies and equipments, which cost 826,0000 less than appraised, and from unallocated funds covered cost over runs. - 55 -

Expenditures on different cateiories compared with almraisal is shown below in 1000 Y.Din. 1 % .343 Y.Din.

Appraisal Actual Category Credit Gov. Total % Credit Gov. Total %

1. Agric.Supplies 781 126 907 39 497 97 594 16 2. Civil Works Feeder roads 370 18 388 15 450 481 931 24 Domestic water 301 22 323 12 303 319 622 16

3. Date packing Plant 100 20 120 5 113 285 398 10 4. Feasibility study 250 - 250 9 410 30 440 12 5. Experimental Programs 40 3 43 2 95 21 116 3 6. Management 361 66 427 16 533 200 733 19 7. Unallocated 199 - 199 7 Total 2401 255 2656 100 2401 1433 3834 100

3.33 Disbursement of Credit funds is shown below in US$ 1000

Cumulative Disbursements Calendar Year Appraisal Actual

1976 663 1977 3506 - 1978 6116 2513 1979 7000 3313 1980 - 5247

1981 - 5982 1982 7000 - 56 -

IV ASricultural ImhPact

Honitoring

4.01 As the project did not include a monitoring component, Department of Agriculture statistics are the only consistant source for an objective assessment of the proects agricultumal impact. Comparison of data obtained from the crop cutting survey at project completion with those of the appraisal would be inconsistant, and will inflate the projects' impact. Official statistics, on the other hand, tend to deflare yields, as they are based on the marketing figures used for asseng cooperative share and crop tax. Nevertheless, the difference between official figures for the 1982 yields of Nexican and local wheat,which were 79% and 75% respectively, of tbe survey figures after allowance was made for family consumption, could be further narrowed to 10-12% only when a 10% allowance was made for sampling error., winnowing, transport and other losses and, in the case of local wheat, for the amont kept by the farmer as seed.- The deviation was, however, irreconcilable in the case of vegetables which indicated much higher yields in the crop cutting survey, and more than double in the case of alfalfa, which is marketed privately.

4.02 Appraisal estimates for yield increases with the project in ton/ha, irere, for Mexican wheat, from 1.8 to 3,0, for local wheat from 1.2 to 2.0, for Sorghum from 1.0 to 2.0, for vegetable from 5.5 to 13.5 on average, for alfalfa from 30 to 65 and for sesame, from 0.5 to 0.9. Even when allowances as in para 4.01 are taken, the only consistant data for comparing yields before and after the project are the official figures. - 57 -

4.03 It is also to be noted that, whereas the appraisal anticipated yield increases even without the project, yields have actually declined during the period from appraisal to project effectiveness,

Croped areas 4.04X The appraisal report allowed for increase in cropped area only as far as planned for the state farms, -from 300 to 1500 ha. And though no allowance was made for shifts in cropping patterns towards higher value crops, the project was anticipated to facilitate the transition of a subsistance economy into the production of marketable surpluses and a shift towards higher value crops once the new road link to the coast is completed.

4.05 Inconsistency in some of the cropped area figures here and in progress reports is, because no estimate of the area under alfalfawas =mailable and hence excluded from 1977/78 season but not in later years. As the present figures were obtained and analysed independently by the farm management economist, they are to be taken as the correct figures in case of inconsistency, which would be very minor.

4.06 Comparison of official figures for cropped areas in 1977/78 with the 1981/82 seasons indicates (table 7):

(a) Total cropped area decreased by 15%, from 6901 ha, of which 89% in cooperatives and 11% in state farms, to 5878 ha, of which 86% in cooperatives and 14% in state farms. Cropped area, in cooperatives has decreased by 1104 ha, or 18% and state farms increased from 763 ha to 844 ha, instead of the planned 1500 ha,

(b) Most of the decrease occurred in the 1981/82 season, in areas of marginal productivity of local wheat (U68 ha), BYV wheat (336 ha) and sorghum (350 ha) in Seiyun and Shibam cooperatives. The total area under wheat in cooperatives was decreased by 24%. - 58 -

(c) A slight shift to alfalfa and vegetables is indicated by official figures. The actual shift could be larger than implied by the figures, particularly as regards alfalfa, which is freely marketed. Overall changes in cropping pattern are: HYV wheat, constant at 23%, local wheat from 29% to 25%, Sorghum from 29% to 28%, vegetables from -10%to 18%, alfalfa from 6% to 10% and sesame from 3% to 2%.

Production

4.07 In spite of the reduction in area, total production of all crops with the exception of sesame, has increased. The percent increase is as follows:

Crops Cooperatives State Farms Total

Wheat, MV 22.08 78.6 32.35 Wheat, local 46.77 -100.00 45.55 Sorghum 18.97 30.00 19.99 Vegetables 8.83 193.50 50.00

Alfalfa 37.84 - 30.00 27.05 Sesame -37.15 19.05 -30.83

4.08 The yield of all crops, in both cooperatives and state farms, increased, in tons/ha, as follows:

1977/78 1981/82 Total Grop SMIeas e Crops State Farm Total Crops F Total percent Wheat, H7V 1.35 1.70 1.40 2.19 2.10 2.17 55.00 Wheat, Local 0.76 1.00 0.76 1.47 - 1.47 93.42 Sorghum 0.85 0.58 0.81 1.26 0.80 1.19 46.91 Vegetables 7.35 6.19 7.05 8.15 15.19 10.22 44.96 Alfalfa 35.00 35.00 35,00 47.64 47.64 47.64 36.11 Sesame 0.43 0.11 0.40 0,51 O,62 0.51 27.50 - 59 -

4.09 Yield increases are due to (a) use of fertilizers and pesticides (b) improved MRS tractor services (d) activities of the newly established extension service, and (d) abandonment of wheat cultivation in areas of marginal productivity particularly of local wheat. While increase in yield due to input supply is attributed to the project, the increase due to abandonment of areas of marginal productivity could have taken place without it.

4.10 .In respect to dates production, reliable data are not is available, but it/reasonable to assume a 3% increase in orchards with irrigated and fertilized intercrops. Also, an increase of 25% was estimated to result from sustained spraying of 10,000 palms against the date moth in Sah cooperative. Rehabilitation of the popular forces far with 3000 date palms in Seiyun, is expected to realize a yield of 40 kg per palm tree at full development in 1985.

Value of Production 4.11 The value of agricultural production for the project area has increased by 514.2 thousand IYinars at market prices, as indicated in table 9. With the exception of sesame in cooperatives and alfalfa in state farms, all other crops increased in value. The same financial prices were used to evaluate the production for both 1977/78 and 1981/82. Therefore, the effect of inflation was eliminated in order to express the change in value in real terms. When economic prices (of the World Bank) were used, instead of market prices, as indicated in table 1O, the total increase in the economic value of all crops anounted to 349.6 thousand Dinars, representing 24% of the economic value in 1977/78. The increase in cooperatives amountcd to 20% and in state farms 63%. 60 -

Hadramout II 4,12 In additicn to the immediate impact of the project, impact through the successful conclusion of the feasibility study and its results, mainly Hadramout I, has to be considered here. Hadramout I was actually conceived in the process of preparing temsof reference for the feasibility study, as a preparatory phase for the expected Hadramout II. Actual expenditure by IDA on the feasibility study, including the allocation from credit 370 YDR and the PPF-150, reached about 1.9 million dollars, or 27% of the whole credit for Hadramout I. At the same time, a good part of Hadramout I activities and expenditures are part of Hadramout II preparation, such as the cost of extension of the project and technical assistance agreement with PAO from 1/7/1982 to 31/12/1983.

4.13 The area of pilot units for Hadramout II already implemented is 185 ha or about 6% of the proposed area for Radramout II. In addition to the direct impact 0f the plo* farms on production, they t::4ered a dialogue in the project area on the constraints which inhibited Hadramout I and other investment projects, such as cooperative organisation and other issues. The resolution of these policy issues would help to agitate the presently stagnant agriculture and create eonditions conducive to the successful implementation of Hadranout II and future investment projects in the area and the contry at large.

4.14 Hadramout II aims at increasing agricultural production in 65 farming units of 50 ha each through increasin- irrigation intensity from 52 to 93% and providing inputs for expanding mechanisation and improved production. Project cost is 36 million dollars, with an IDA credit of 9 million under negotiations, a KFAM) credit of 10.6 million dollars already initialled, and a 12.2 AFSED credit in line. Effectiveness of these credits is expected to take place during 1983 and early 1984. The expected economic rate of return is 12%. - 61 -

4.15 The establishment of a design unit and construction units for Hadramout II and implementation of about another 6% of the proposed area in the interphase between Hadramout I and the effectiveness of Hadramout II could reduce the proposed implementation period of the project of 6 years by half, with evident implications on economic returns.

V. Economic Analysis

Costs of the Project

5.01 During the five years of project implementation, from 1977 to 1982, the total cost of the project amounted to 3,334.000 Y.D. Of this 133,000 Y.D. were expenditure on 10 diesel pumpsets not actually used in the project area due to electrification and on the extension of the technical assistance agreement with FAO through 1983, thus not strictly part of Hadramout I expenditure, therefore deducted in the calculation of the rate of economic return (table 15 ).

5.02 The official inflation rates of the World Bank were used to estimate the deflated costs of the project during different years of implementation, as indicated in table 15. The total deflated costs (in terms of 1977 prices) amounted to 3,031,000 7D of which 6% fertilizers, 7% farm machinery and pu=psets, 26% feeder roads, 19% management and training, 12% feasibility study, 3% experimental progranmes, 11% the date packing plant and 16% domestic water supply schemes.

Value of Production

5.03 Total value of production as discussed in para 3.11 and shown in tables 9 and 10. - 62 -

Accreate Iruts Used 5.04 'Using the input technical coefficients per hectare for the various crops presented in table 4 of annex 11 of the appraisal report and the cropped areas presented in table 7 of this report, the physical amounts of the different inputs were calculated and presented in table 1l. In the case of chemical fertilizers, the actual amounts distributed to cooperatives .and state farms during 1981 were used for the 1981/82 instead of using the input coefficients.

5.05 The financial cost of these inputs amounted to 1073 thousand dinars in 1981/82 as compared with 857 thousands in 1977/78, an increase of 25.16%, as indicated in table 12. O cooperative fields, the increase in the financial cost of inputs amonnted to 24-.58% while on state farms, it amounted to 29.15%. As the same input prices have been used to evaluate the physical inputs for the two seasons under comparison, these percentage increase in the value of inpubr repzent tbAe real increase in the amounts of inputs used.

5.06 Using the economic deflated prices of inputs proposed by the World Bank, the economic costs of inputs have been calculated and presented in table 10. The tota- economic cost of inputs for all crops amounted to 1126.7 thousand dinaxs in 1981/82 as compared with 891.7 thousands in 1977/78.

Economic Rate of Return 5.07 Based on the performance during the 'ive year period of the project the economic rate of return has been calculated for the remaining twenty years expected life. Table 11 presents suzi-ary of all cost itens of the project, the operational costs for the remaining life, ad the expected incremental beneZ:Jts. The cost of investment in the date packing plant, the operational costs, the incremental benefits, and the calculations of the rate of return for the date packing plant have been presented in a separate report (Economics of the Date Packing Plant-FN/PDY/004/ FMR-8). This analysis has been so far limited to crop production,- 63

Calculations of the rate of return are made on two steps. First, taking into consideration only those cost components related to crop production. Second, adding those costs related to the date packing plant.

5.08 As most of investments made by the project are not expected to have dire ct impact on increasing agricultural production but more of social development, then, from table 16 only those costs related to agriculture have been considered. For the first calculation of the rate of return, investments in fertilizers and insecticides, farm machinery and punp sets, nanagement and training, and for the experimental programs were taken into consideration. Incremental costs of agricultural inputs for crop production and agricultural labour were considered. Incremental benefits are represented by the increase in economic value of crop production including estimate of the increase in date prtduc.- tion in the popular force farm in Seiyun which is expected to reach maximum production in 1984/85. Based on these items, the economic rate of return amounted to 4%.

5.09 For the second calculation of the rate of return, investment economic cost, operational cost, and the incremental benefits of the date packing plant have been included. The calculated rate of return in this case amounted to about 12%. For the date packing plant alone, the economic rate of return amounted to 233/o.

VI Institutional Inhaact Institutions Established under the Project

6.01 The extension service, assembled by the project, with 25 graduates and 9 technicians provided with adequate training and all important facilities, has since the beginning of 1982 been operating independently of the project. It is the first such service in PDRY, to be established within the newly established department of research and extension in the Ministry of Agriculture, and could serve also a model for similar services - 64I being established in other agri-cultural areas, mainly within the context of IDA financed projects.

6.02 Other institutions established directly under the project are the date packing plant, Hadrarnout Project Organisation, which will be extended into fadramout II and would ultimately constitute the irrigation department in Hadramout, and the pilot farms, with their institutional implication on cooperative reorganisation referred to elsewhere. Also, the Shiban and Qatan water companies under formation for the operation of the domestic water schemes implemented under the project will be amongst the institutiorsgenerated by the project.

Gooidination Between Agencies 6.03 Project activities designed in the appraisal to be through other agencies were carried out smoothly with the full coopermtion of the agencies concerned, namely NC for procurement of a equipments, PCIVF for the date packing plant, PW) and PWC for feeder roads and domestic water supply schemes, Seiyun research station for cooperation in experimental programmes, and the department of agriculture and the cooperative for extension and pilot farns, and coordination of the feasibility study, particular. ly in the distribution of Eadramout II Sectors within the project area.

6.04 Coordination of the work of the different departments was through the advisory committee specified in the appraisal report, which perforned very satisfactorily. This committee will continue to function in Hadranout II, with necessary changes in its composition and terms of reference. The interest support and cooperation of the local executive and party authorities was indispensuble for the successful operation and conclusion of the project. - 65 -

6.05 Central govG=ment authorities gave full support to the project, as evidenced by financing of cost over-rn in implementing feeder road construction, domestic water supply schemes, and construction of the date packing plant, which led fo =;-fold increase in government contribution from 255000 YD in the appraisal to 1,43.000.

Agriculiral Credit 6.06 Although credit to MRS, state farms and cooperatives was to be implemented by 1NBY as specified in the DCA. and subsidiary loan agreement, NBY, which only possessed the facility to implement the financial aspect of these subloans, was extremely reluctant to do so. These subloans were administered by the project, for the fertilizer revolving fund and for agricultural machinery and pumpsets and kept in the Seiyun branch of 1BY in the name of the project. BY accepted responsibility over accounts and subloan agreements only after intervention from the Ministry of Finance, after all subloans were delivered. Full repayment of subloans is so far maintained.

6.07 The consultant firm, Sogreah, implemented the feasibility study satisfactorily, in accordance with the terms of reference specified in the contract and its addendum. EPO, with its small team of technical and administrative staff, local and exatriat, was adbquate for the job, and worked cohesively as a team.

VII Special Issues and the Successor Project

7.01 It became clear during project implementation that certain factors relating to production planning, producer prices, input supply, subsidies, taxes, marketing policies and cooperative organisation constituted constraints which limited the designed impact of project investments. The project was not designed to solve these constraints which also inhibited the designed response to other agricultural investments in the country at large. These constraints were raised in relation to Hadramout II - 66 - preparation in the FAO/CP identification and preparation reports. The government was fully aware of them, and several policy meetings and committees, at both the political and executive levels, and several policy reforms, actual or pending, were taken in this respect.

7.02 The need to review PDRY agricultural polities was also formulated in a Development Credit Agreement, (768-YDR) of 1978, according to which a "Study on Agricultural Prices, Subsidy and Taxation Systems in PDR' was carried out by UIG Consltants in early 1982, and a policy dialogue between the government and IDA on those critical issues, with the objective of determining means to improve overall sector performance, was initialed in April 1982. It was then accepted in principle that several important policy changes regarding taxation, cost recovery, input subsidies and farmers' organisation would find concrete embodi- rient in Hadramout II. Proposals for specific Policy actions 4ere presented in the World Bank's Agricultural Policy Menorandum (Report No. 4006-YDR) of September, 1982.

7.03 The following specific proposals submitted by IDA in relation to Hadranout II were fully accepted by the government

(a) Gradual conversion of the present production tax to taxation based on unit area.

(b) Introduction of a land or irrigation development charge as partial cost recovery for the projects public investment in boreholes, irrigation distribution s7stem, land levelling and boreholes.

(d) 10-20% contribution by benefidiaries towards the cost of far= machinery and pumpsets to be eligible for such credit. 67

(e) Conversior of charges for irrigation and agricultural equipment and inputs supplied through cooperatives from a percentage of total production to charges based on actual costs.

(f) Arrangement for long-term lease of farm machinery for qualified groups constituting the proposed 50 ha farm units to ensure timely farm operations, proper equipment use and to promote larger financial sources mobilization.

(g) The testing of practical aspects of such ar=angemente at pilot farms established under Badranout I.

(h) Consideration of conversion of the present large cooperatives in the project area to smaller coopext-- tives.

(i) Long-term lease (usufruct rights) for new or rehabilitated orchards.

(j) Eligibility of farmers in cooperatives to sell minor quantities of selected scarce fruits and vegetables directly on the market.

(k) Establishment in Seiyun of an agricultural supply store by the Agricultural Supplies Corporation for the sale, on cash basis, of essential agricultural inputs and tools.

Dates Prices and The Date Packing Plant 7.04 IDA's main policy proposals concerning planning and product pricing are (a) to liberalize planning so that acreage controls are imposed on part of the total areas only; and (b) to raise prices of these products which are currently priced below "World levels". Dates, which are the main product of Wadi Hadramout, are considered, with cotton an. bananas, to qualify fcr producer price increases, as PDRY hascowarative advantage in producing ther, and their current producer prices are below border levels. - 68 -

7.05 A study of the economics of dates production in Wadi Hadramout by the projects farm management economist (U TF/PDY/ 004/FR 2) explained that direct labour constitutes 78% of the direct costs of datesproduction, of which 54% is hired labour and 46% family labour. Under present conditions dates are produced in Wadi Hadramout at an average economic loss of 3.912YD per date palm, (Table 17) and of 0.266 YD per kg of dates (Table 18). Financially if family labour is not considered as wages, the average loss in the Wadi is reduced to 0.667 ID/palm tree (Table 19) and 0.038 YD per kg (Table 20).

7.06 In addition to the 5 technical factors identified in the experimental programmes (para 3.13) to contribute to decline in yields, namely inadequate irrigation, lack of fertilization, overcrowding, the date moth and post-Khalal fruit drop, the arbitrar7 and excessive cooperative share of the crop, often reaching 50%, which is unrelated to costs born by the cooperatives in relation to date production, and the uncertainty due to the lack of a legal frame-work of ownership or fructuse rights of beneficiaries from the date palms, have equally contributed to the present decline of dates production. The present reduction of the tax to a uniform 25% does/R8stitute a substantial improvement.

7.07 Even under the present under utilization of the date packing plant, it can realize a 23% rate of return if it processes only 700 tons/year or a third of its capacity (Report No UTN/QDT/004/ FM8). Thishscause dates are purchased at an average of 100 and 212.5 ID/ton of bulk and premium dates and sold at 350 7D and 875 7D/ton of bulk and premium dates, respectively. This huge profit margin can also act as a huge mismanagement margin, with the plant seeming profitable under conditions of gross mismanagement and inefficiency. - 69 -

7.08 A comprehensive solution is proposed for the problems of dates production and the date packing plant which reconciles IDA's proposal for a substantial increase in producer prices for dates and the governments reluctance to do so, in so far as the present prices of processed dates should be the producer's prices for processed dates, by transferring the ownership of the date packing plant to a specialized cooperative of dates producers, or a dates marketing board, and at the same time abolishing the production tax and limiting producer's payments to the cooperative to the cost of actual services rendered by the cooperative or board. At the same time, it is -also proposed that a date-palm improvement tax of 100 fils per palm tree against legalised frustuse rights on orchards or palm trees, to be applied concurrently with the above measures and deposited with the cooperative or board for the purpose of planting new orchards and implementation of the program to control the date moth, poot-- Khalal fruit-drop etc and to 'support research on such problems. Applied as a flat rate on each palm tree covered by fructuse rights, productive or unproductive, it could generate about 70,000 TD/year which -producers will pay willingly if relieved from taxes and sharing with the cooperative.

The Shift to Himher Value Croos 7.09 The very substantial shift from planned wheat cultivation in areas of marginal productivity in Seiyun and Shiban Cooperatives, which amounted to 250 of the whole wheat area in 1977/78 and which contributed effectively to overall higher yields/ha from the areas more suited to wheat cultivation in Qatn and Tarin Cooperatives, is an indication of the sensible decisions that could be taken by farmers under a liberalized planning system and of the need/follow policies which facilitate the shift to higher value crops in those areas. - 70 -

7.10 The reports produced by the farm management economist (UTP/PDY/004/PMR 3) on wheat production indicate that the net economic revenue per ton of wheat for the whole Wadi is -0.662, I), but it is 70 and 104 ID in QatrL and Tarim Cooperative and -43 and -338 YD in Shiban and Seiyun Cooperatives (Table 21 ). The corresponding net revenue per feddan is -0.636YD for the whole Wadi, 68 and 139 TD for Qata and Tarin Cooperatives, and 38 and -252 TD for Shibam and Qatn Cooperatives, respectively (Table 22). The net economic revenue per feddanfcom other crops, with similar variation between cooperatives are: Sorghum -85, alfalfa 4-1, potatoes 279 and. onions 701 7D.

7.11 To facilitate the shift to higher value crops the farm management economist proposed abolition of the subsidy to wheat producers and free marketing of stra* (U /?DY/OO4/FMR 3).

VIII Bank Performance

8,01 The project's main objective of about doubling agricultnm=l production in three years through the supply of inputs and imparting improved technology through extension and project management is optimistic because tbree years were toc short for an extension service - the first in the country - to be established from scratch and to have an initial impact. Five years were necessary. Also constraints, particularly at the start of a centrally planned agricultural economy were to be anticipated and allowed for.

8.02 T -.ra 7 (d) of the consultants terms of reference for the feasibility study, in anner 7 of the appraisal report, specified that, based on the results of Part A of the study, a scheme for the development of additional groundwater along with its preliminary designs, layout and cost estimates be prepared. The addendum to the contract with Sogreah would have not been requirc' if detailed designs were also specified, with obvious saving in the cost of the feasibility study.- - 71 -

8,03 IDA's criticism of the project management's free distribution of pesticides procured by the project for the purpose of large scale demonstration of date moth control in 1978 inhibited the project from further subsidy, and hence expansion, of the use of pesticides. IDA was also firmly against fertilizer subsidy in Hadranout I but its present position as regards pesticide and fertilizer subsidy has been rodified.

8.04 Field supervision of the project through missior was efficient, comprehensive and effective. It contributed substantially to the satisfactory implementation of various project components, which were in full accord with government priorities expressed in the first five year plan.

II Conclusions

9.01 The main conclusions of Hadranout I are Hadranout II and the policy dialogue aimed at improving overall sector performance, whose main issues will find concrete embodiment in Hadramout II.

9.02 A comprehensive solution of the problems of dates production and the date packing plant in line with para 9.01 is proposed within the policy dialogue as follows:

(a) formation of a specialized cooperative (or marketing board) for dates in Wadi Eadramout for all dates producers.

(b) legal fructuse rights for existing beneficiaries of all dates palms or orchards.

(c) abolition of the 2566 tax to the government and cooperatives. Any services by the cooperative to be repaid on the basis of the cost of actual service, and not as a share of the crop. - 72 -

(d) transfer of the ownership of the date packing plant to the cooperative, (or marketing board).

(e) payment of producers for purchased dates to be in two instalments, the first on delivery at current prices of raw dates received by the date packing plant, and the second instalment after processing and marketing and the deduction of processing and marketing costs.

(f) beneficiaries to pay a flat rate of 100 fils against the fructuse rights of any date palm, with the exception of newly planted palms which would be exempted for 15 years, as a dates orchards improvement tax, to be deposited with the cooperative and used for the promotion of new orchards, date noth and fruit- drop control, research and similar purposes. About 70,000 YD/year would be expected.

9.03 ks Hadramout I which was responsible for the procurement of fertilizers provided on credit to cooperatives is now termiated. arrangements have to be made with the AJricultural Services Corporition for the effective provision of fertilizers and pesticides in the Wadi in 1983.

9.04 In view of inadequate provision of the Seiym Research Station it is recommended that a project be formulated for the comprehensive support of the station with expertise, equipment and intensive training, abroad and in-service, to proceed along with Hadramout II. - 73 -

Annex I

List of Tables

Table 1: Distribution of fertilizer to Cooperatives 1977/82

Table 2: Fertilizer Procurement 1977/82. Fimncing and prices Table 3: Feeder roads Table 4-: Cost of feeder roads and domestic water schemes Table 5: Total project costs Table 6: List of Equipment Table 7: Cropped area in 1977/78 and 1981/82 Table 8: Production in 1977/78 and 1981/82

Table 9: Value of production at market prices Table 10: Value of production at economic prices

Table 11: Aggregate inputs used Table 12: Rinancial cost of inputs Table 13: Economic cost of inputs Table 14: Project costs at current prices Table 15: Project costs at economic prices Table 16: Economic rate of return Table 17: Economic summary of dates production per palm tree Table 18: Cash summary of dates production per palm tree Table 19: Economic summary of production of I kg of dates Table 20: Cash suamary of production of I kg of dates Table 21: Economic summary for the production of one ton of wheat Table 22: Economic summary for the production of wheat per feddan Showing Fertilizer Distribution in Project Area. 1977 - 81 (in Tons)

1977 1978 1979 1980 1981 Urea TSP Urea TBP Uren TSP Urea TSP Urea TSP

Cooperatives 1.' Tarim 207.0 21.30 105.9 5 107.65 19.0 226.00 12.00 220.25 29.00 2. Eeiyun 116.0 68.05 50.0 - 93.85 - 281.75 60.00 152.00 - 3. Ehiban 19i9 11.50 45.0 5 67.00 9.75 41.00 5.50 181.50 22.50 ho Qatn 1720 5100 10.0 - 99.00 - 170.00 12.00 316.00 123.00 5. Sah 20.0 18.50 - 22.00 . 24.00 15.00 24.50 26.50 Total Coops. 534.9 170.39" 210.9 10 449.50 28.75 742.74 104.50 894.25 .201.00

StateFarms 1. 15th July 7.5 6.5 15.0 -. 14.0 - 20.00 - - 11.60 2. Al-Swairy - 12.0 10.0 6.25 12i0 - 27.00 12.00 16.00 11.75 3. Al-Rudud 8.5 7.5 5.0 10.0 - 12.50 5.00 18.50 7.00 4. Ba-Alal 100 18.5 - 7.5 - 21.00 - 17.00 13.50 5. Juaima 10.0 5.0 - - 20.0 5 27.50 9.50 24.85 18.60 6. Bahran - - - - 5.0 - 31.50 13,0o 18.25 7. Bor - - - 17.0 - 24.00 - 14,90 - .IMashhad ------T:>tol State 26.0 33.5 51.0 11.25 85.5 5 182.50 27.75 104.25 80.70 Farns Grand Total 560.9 203.85 261.9 21.25 535.0 33.75 925.25 132.25 998.5 281.70 Showing Quantities and Cost of Fertilizer Procured against IDA Credit and RevolvinG (197? - 1982)9und

A0TUAL PIANNED

Purchasee By 197? 1978 1979 1980 1981 1982 Urea TSP Urea TSP Uroa TSP Urea TSP Urea Urea TSP

IDA Credit

Quantity (tons) 401.1 200 - - 150 - 850 200 - - -

Unit Oost C&F 185 212 - - 273 - 273 399 - Aden Coat of each 2 Fortilizr 74200 42400 - - 40950 - 232050 79800 - - - Total Cost in Dollars 116600 - 40950 311850 - lo viLn& Yund

Quantity (tons) - - 515.7 100 286 100 100 629 1000 100 Unit coat CP - - 185 212 185 212 - 399 305 305 399 Aden 0ost Af each Foortilisor - - 95400 21206 52910 21206 3990 191845 305000 39900 Tctal Oost i - 11600 74110 Dollars11607104 39900 191845 . 344900 - 76 -

Table 3 Shwoing A=raisal and Actual Peeder Road ,Construction on 31.12.82

Village connected Appraisal length with main Road Population of feeder road (EK) Cobbled Stablized,

1, Al Karieh 1500 3 - - 2. Koda Mishta 2000 11 9.057 3. Thibi 2500 2 0.852 - 4. Suwairy 4500 3 1.569 0.140 5. Taribah 5500 10 6.998 - 6. Boor 2800 3 2.005 0.600 7. Modudah 3000 5 2.605 0.726 8. Shuhuh 900 6 9.430 0.267j 9. Juayma 2000 8 9.982 1.065 10. Tifit ) Mosheh ) 3500 9 6.037

11. Al Garrah 1000 5 2.990 - 12. Ghusseis 1500 8 9.577 - 13. Xaynan 1200 8 5.020 0.621 14, Hadiah 700 2 - - 15. Al-Aneen 3000 5 4.961 - 16. Ebasha'a 1800 18 18.000 17. Al-Jawada 1000 11 7.587 0.330t 18. Ard El Sugair 600 3 4.230 19. Ainat - 2.537 - 20. Howeila - 4.918 0.231 21. Bidid - 2.597 -

Total length 120.00 110.952 3.980 Aprpaisal and Actual Costs of Feeder Roads'x Domestic Water Schemes in 1000 in Y.Din. (1 0 0.343 Y.Din)

Yeeder Roads Water Schemes Financed By Cost Over-run Cost Over-run Appraisal Actual Appraisal Actual Actual Percent Actual Percent

IDA 103586 132951 29365 28% 147147 198201 51054 35%

Government 17836 19940 2104 12/0 21952 63800 41848 191%

Total 121422 152891 31469 26% 169099 262001 92902 55%

CONSTRUO1'ION

IDA 266511 317147 50636 19% 154007 104970 -49037 Government - 460560 460560 - 255200 255200

Total 266511 777707 511196 192% 154007 360170 206163 139%

Grand Total 387933 930598 542665 140% 323106 622171 299065 93%

Oivil Works 711039 1552769 841730 118% (Both) -78 -

Table 5 Schedule of Project Components in 1000 7D - 1 0. 0.3437D

Appraisal I Actual % Category & them Credit Govt. Total Credit Govt. Total Total

Catemory I Fertilizer & 540 .60 400 163 63 226 6 Pesticides Agric. Machinery 247 43 290 173 18 191 5 Irrigation Equipt. 127 23 150 161 16 177 7 Category II Roads Equipment 102 18 120 133 20 153 4 if Construction 250 - 250 317 461 778 20 Water Equipment 118 22 140 198 64 262 7 i Construction 80 - - 80 105 255 .360 9 Category III Date Packing Plant2 Equipment 80 20 - 113 285 98 1o Category 1V Feasibility Study 200 - 200 410 30 440 11 Category V Research 7 1 8 4 1 5) Sand dine . Stabilization 14 13 27 13 5 18 3 Pilot farms - - - 78 15 93 Category VI - Experts & Consultants 200 - 200 413 - 413 10 - Training abroad 85 - 85 2 - Vehicles for magt. 26 4 30 12 1 13) - Equipment & - 65 70 23 3 26 6 Vehicles for Etn. services etc. - - - -196 196 Loa2 balaries etc total cost 1365 700 2065 Physical 220 - 220 Price 385 - 385 Tot&1 Cost IM 2401 269 2670 2401 1433 3834 100 Total Cost $ 4959 744 7744 7000 4178 11173 100 - 79 -

Table 6 List of Equipent Page 1

Appraisal (in Y.Din) Actual (OM Aden in Z) Now Unit Cost Total Cost No. .Unit Cost Total Cont

1. To MRS Wheel Tractor 5 3200 16000 - - - 35 b.p. Wheel Tractor 60 h.p 28 4830 134400 31 8035 249075 Wheel Tractor 85 h.p. 2 6300 12600 2 11655 23309 Disc Plough, 2 disc 10 700 7000 10 ) rever- sible 3-4 discs 10 1000 10000 10 514I3E: Chisel plough, 5 tyne 10 500 5000 10 Offset disc harrow 20 600 12000 20 Spring tyne culti- vator 20 500 10000 20 508 10156 sprayers 50 200 10000 46 540 21580 Spare parts for tractors 20% 33000 20% 51518 Mobile workshops - - - 2 40966 Sub-Total 2 000 447960 2. To State Farms Seed drills 5 700 3500 - - Ridger 5 300 1500 5 756 3750 Ditcher 5 200 1000 10 ) 871 8715 Purrower 5 300 1500 - Parm blade 5 400 2000 5 582 2910

Tipping Trailer, - 3 ton 5 1000 5000 5 1403 708 Threshing Machine 5 2000 10000 - - - Chuff cutter 10 200 2000 - - - Reaper binder 5 800 4000 - - - Mower 5 500 2500 5 720 : Misc. Small equipts 2000 - - - Sprayers 10 500 5000 - - - Sub-Total 26550 80- Page 2

Appraisal (YD) Actual (C&F Aden Z

Total Unit Total NN'Cost Unit Cost Zf"Cost cost 3. To Cooperatives ktmps 100 450 45000 40 5766 230656 Diesel Engines 150 700 105000 38 7148 271588 4. To PD (Feeder Roads) Tipper truck 10 ton 10 8000 80000 10 24472 244716 Water tinker, 2000 gallon 2 7000 14000 2 55100 55100 Motor grader 1 14000 14000 40466 46466 Wheel Loader 1 1200C 12000 1 23666 47332 Sub-Total 120000 387614 5. To PWC (Water Schemes) Tzick, 5 ton 1 5000 5000 1 -16054 16054 Pick-up 1 3000 3000 1 rX94 7684 Borehole cosin 10000 Pumps 4 1500 6000 3 6425 19275 Diesel engines 4- 1500. 6000 2- 5538 11076 A/C pipes 85000 365451 Pipe fittings 20000 124891 Hisc. tools 5000 igger loader - - - 1 33433 33433 Sub-Total 140 . -78b4 6. The Date Packing Plant 100000 32816 7. Egaip-ment for management, research, etension and pilot farms Bus 1 13199 13199 4-Wheel Drive Toyota 1 9352 9352 I n " land Rover 1 7558 ?558 Pik- 1 446-1 44E1 Motor Cycles 125 CC 12 250 3000 16 578 9243 i i 250 C ) 2 852 1704 .. esearch.equipment & lements 8000 11763 Audiovisual aids Photo-Lab and Cameras 16898 81 -Page 3

Appraisal (YD) Actual (CAF in US9) Unit Total Unit Total No. Price Cost Price Cost

Land Planes 5 ) Bucket scraper 5 )43928 Seed drills 3 5898 17695 Stationery thresher 2 3461 6921 Reeper binder 2 3839 7677 Disc plough in Z Sterling 3 667 2001 Ridger " " 3 1685 5055 Disc harrow " it 3 1328 3978 Tractor-HMounted Sprayers n Dan Kron. 3 7044 21132

M.B. Ploughs U12 3 11021 33063 Tipper Trailer N 3 14738 44202 a. Management (in USE)

4-Wheel Driver Toyota - - 1 9352 9352 U 1. 3000 15000 3 8206 24618 Office equipment 12000 - - - 27000 - 82 -

Table? Cropped Area (in bectate)

1977/78 1981/82 Crops Coops. State Farm Total Coops. State Farn Total

Wheat, H7V 1360 .240 1600 1024 347 1371 Wheat, Local 1956 12 1968 1488 - 1488 Sorghum 1744 243 1987 1394 231 1625 Vegetables 523 178 701 513 213 726 Alfa3ta 370 70 440 510 49 559 Sesame 185 20 205 105 4 109

Total 6138 763 6901 5034 844 5878

Table 8 Production (in tons)

1977/78 1981/82

CropCrops State Total Coops. State I?ars FarS Total

Wheat, HV 1837.0 408.0 2245.0 2242.6 728.7 2971.3 Wheat, Local 1490.4 12.0 1502.4 2187.4 - 2187.4 Sorghun 14.76.3 141.5 1617.8 1756.4 184.8 1941.2 Vegetables 384.1.8 1102.4 4944.2 4181.0 3235.5 7416.5 Alfalfa 17626.8 3334.8 20961.6 24296.4 2334.4 26630.8 Sesame 79.0 2.1 81.1 53.6 2.5 56.1 Sub-Total 26351.3 5000.8 31352.1 34717.4 6485.9 41203.3 Dates 9600.0 - 9600.0 9992.0 - 9992.0

Total 35951.3 5000.8 40952.1 44709.4 6485.9 51195.3 - 83 -

Table 9 Value of Production at Market Prices (in 1000 7D)

1977/78 1981/82 Crop Coops. State Total coops. State Total Farns . Parms Wheat, H7 187.4 41.6 229.0 228.7 74.3 303.0 Wheat, Local 152,0 1.2 153.2 223.1 - 223.1 Sorghum 44.3 4.2 48.5 52.7 5.5 58.2 Vegetables 280.5 80.5 361.0 305.2 236.2 541.4 Alfalfa 528.8 100.0 628.8 728.9 70.0 798.9 Sesame 23.9 0.6 24.5 16.2 0.8 17.0 Sub-Total 1216.9 228.1 1445.0 1554.8 386.8 1941.6 Dates 432.0 432.0 449.6 - 449.6 Total 1648.9 228.1 1877.0 2004.4 386.8 2391.2

c/ease over - - - 355.5 158.7 514.2

Table 10 Value of Production at Economic Prices (in 1000 YD)

1977/78 .1981/82 Crops Coops. State.Farm Total Coop. State Farn Total

Wheat, HYV 117.6 26.1 143.7 143.5 46.6 190.1 Wheat, Local 95.4 0.8 96.2 140.0 - 14.0o Sorghum 81.2 7.8 89.0 96.6 10.2 106.8 Vegetables 172.9 49.6 222.5 188.1 145.6 333.7 Alfalfa 370.2 70.0 440.2 510,2 49.0 559.2 Sesame 19.4 0.5 19.9 13.1 0.6 13.7 Sub-Total 856.7 154.8 1011.5 1091.5 252.0 1343.5 Dates 432.0 - 43.0 449.6 - 449.6 Total 1288.7 154.8 14&3.5 1541.1 252.0 1793.1

Increase over - - - 25"_4 97.2 349.6 1977/78 - 84 -

Table 11 Agregate Inputs Used

1977/78 1981/82 Type of Inputs Units Coops State Total Coops State Total . farms -f arms

Tractors for land prepara-r 1000 56.8 7.5 64.3 46.0 8.6 54.6 tion hrs Seeds tons 370.9 30.8 401.7 283.7 39.7 323.4 Irrigation water Xb 90.2 12.2 102.4 80.7 12.5 93.2 Fertilizers Urea tons 100.0 70.0 170.0 894.3 104.3 998.5 TSP tons 87.0 42.0 129.0 201.0 80.7 281.7 Tractors for threshing hours 6348 733 7081 8112 1191 9303 Labour 1000 days 435.4 66.3 501.7 385.7 73.0 458.7

Table 12 Financial Cost of Invuts (in 1000 7D)

1977/78 1981/82 Type of Input Coops State Total Coops State Total f arms 'farms Tractor for land preparation 142.0 18.8 160.8 115.1 21.4 136.5 Seeds 52.1 5.9 58.0 49.7 5.9 55.6 Pumping water 521.3 72.5 593.8 648.3 94.0 742.3 Fertilizers 16.8 10.1 26.9 98.6 16.6 115.2 3hsecticides Tractors for threshing 15.9 1.8 17.7 20.3 3.0 23.3 Sub.-Total 748.1 109.1 857.2 932.0 140.9 1072.9 Changes fron 1977/78 - - 183.9 31.8 215.7 Labour 66.3 66.3 - 73.0 73.0 Change from 1977/78 - - - - 6.? 6.7 - 85 -

Table 13 Economic Cost of Inputs (in 1000 7D)

1977/78 1981/82 Type of Inputs Coops State Total Coops State Total farns famns

Tractors for land preparation 130.7 17.3 148.0 105.8 19.7 125.5 Seeds 40.2 5.1 45.3 40.8 4.7 45.5 Pumping water 575.2 80.0 655.2 715.3 103.8 319.1 Fertilizers 16.8 10.1 26.9 98.6 16.6 115.2 Insecticides Tractors for thresing 14.6 1.7 16.3 18.7 2.7 21.4 Sub Total 777.5 114.2 891.7 979.2 147.5 1126.7 Change from 1977/78 - - - 201.7 33.3 235.0 Labour - 119.3 119.3 - 131.4 131.4 Change from 1977/78 - - 12.1 12.1

Table 14 Project Costs at Current Prices (in 1000 1]D - 10 - 0.343 7D)

77/78 78/79 79/80 80/81 81/82 Total

Pertilizer& Pesticides 56 20 148 - - 224 Parm Hachinery and pumpsets - 136 68 68 - 272* Yeader roads 310 157 157 157 150 931 Management and Training 139 139 140 140 140 698** Peasibility studr 110 110 110 110 - 440 Experimental Programs - 16 16 42 42 116 Date Packing Plant - 199 199 - - 398 Domestic Water Supply -. 123 123 188 188 622 Total 615 900 961 705 520 3701 Cost of 20 Diesel pumpsets procured through project funds but not used in view of electrificationdeducted Cost of extension of Technical Assistnce Agree-nt with PAO through 1983 deducted - 86 -

Table 15 Project Costs at deflated prices

77/78 78/79 79/80 80/81 81/82 Total Percent Pertilizer and pesticides 56 17 115 - - 188 6 Parm 1Machinery and pumpeets - 117 53 49 - 219 7 Pee.der roads 310 135 122 112 112 791 26 Management and Training 139 120 109 100 105 573 19 Feasibility study 110 95 86 79 - 370 12 Experimental Programmes - 14 12 30 31 87 3 Date Packing Plant - 171 155 - - 326 11 Domestic Water Supply -' 106 96 135 140 477 16 Total 615 775 748 505 388 3031 100

Table 17 Ecozomic sunmar per productive date palm (in Dinars)

Item Sah Tarim Seiyun Shiban he Wadi Coop Coop Coop Coope i

Labour cost 2.288 2.545 4.996 2.244 3.906 Material cost 0.389 1.021 1.351 1.015 1.112 Sub-Total I 2.677 3.566 6.347 3.259 5.018 Depreciation 0.669 0.892 1.587 0.815 1.255 Sub-Total II 3.346 4.458 7.934 4.071 6.273 Cooperative share* 0.593 0.791 1.113 0.472 0.787 Total cost 3.939 5.249 9.047 4.547 7.060 Value of dates 2.348 2.855 3.195 1.249 2.311 Value of trimmed leaves 0.024 0.308 1.258 0.642 0.837 Gross Revenue 2.372 3.163 4.453 1.891 3.148 Net Revenue -1.567 -2.086 -4.584 -2.656 -3.912

* Calculated as 25% of the gross revenue, Isment ata .r fratum e 14.. ~in144 .)14 ften earg 3 6 0Tcar

56 17 11> iasetidem puop beok ifa 49 vender road. 510 135 122 112 112

19 135 109 1 10 TeUibil t studr 110 95 86 79 - trerimntal ' 14 12 50 st Data Paekuc PIaG 171 155 - .

supp6 - 10 96 135 110 Toal 615 77 748 505 380

Ingdöa road. - 6.2 9.5 12.5 15.6 10.5 18.0 10.0 18.8 18. 8.8 10. 18.8 18.8 18. 1. 1.0 1 las 18.. 18.8 38.8 ss.a 1a.8 1s.8 Oro Production 47.0 94.0 141.0 188.0 255.0 255.0 235.0 253.0 255.0 255.0 25550 5.0 25.0 255.0 235.0 25.0 235.0 255.0 '. 235.6 1. 111.* 3s.8 135.8 331.8 kgr. labour 2.4 4.8 7.5 9.7 12.1 12.1 12.1 12.1 12.1 12.1 12.1 12.1 12.1 12.1 12.1 12.1 12.1 12.9 12.1 12.1 12.1 12.1 12.1 11.1 11.1 Ian mat - - - - . 24.0 24.0 24.0 4.0 24.0 24.0 24.0 24.0 24.0 24.0 24.0 24.0 24.0 2. 23.. 24.0 24.8 24.8 24.8 24.8 Date pakglaa. - - - - 110.2 150.3 471.7 171.7 171-7 171.7 47197 171*1 171.7 171.7 171.7 171.7 191.7 171.7 311.7 11 .? m m 37aj i7j.r Ij ltirel Wat sIy - . - - - 24.0 24.8 24.3 24.8 24.8 24.6 24.8 24.6 24.0 24.0 24.8 24.8 24.& lj.g 2#.@ sub-Total 49.4 15.0 1>7.6 210.2 572.9 465.0 .4 .4 . 4m 44 46 4e. 42 4 44..4 486.4 424 24.s4824.426. uplieaa lt - - - - - 7.5 16.5 7.5 29.5 7.5 16.5 7.5 59.6 95.5 16.5 7.5 7.5 7.5 *. 446'4 486'4 .4 . . 8 ?Äal 49.4 105,0 1>7.6 20.2 72.9 472.5 502.9 493.9 315.9 49.9 502.9 493.9 545.9 501.9 502.9 493.9 49.9 493.9 MU . 7.3 e. 16.5 15.5 7.1 ferita 134.9 493.9 493.9 517.9 MA2.8 3.8 493.9 Orop frduation 69.9 139.0 09.6 2M9.7 549.6 551,0 352.5 3»-7 155.7 5.7 M5.71 557 53.7 M 3.7 55.7 5.7 53.7 535.7 J.G Pakir* plant - - -- - 167.5 24>.1 266.0 2.2.0 affi.0 200 2W-'1OG-O 206.0 206.0 205.0 206.0 2US.O 15.7 31. 3 .7 31.7 $s., - 151.7 111.7 retat 69.9 139.8 209.8 279.7 517.4 596.1 630.3 639.7 659.7 659.7 639.7 659.7 639.7 659.7 659.7 639.7 639.? 639.7 2686. 2a.# 2*6.j 2e. 2t.0 2o6.# 286.9 619.1 819.7 638.1 639.1 639.7 63.1 639.7 - 88 -

Table 18 Cash Summary per Productive Dat Palm (in Dinars)

Sah Tarim Seiyun Shibam The Item Coop Coop Coop Coop Wal

Labour expenses 0.036 0.919 3,043 1.602 .2*W6 Material expenses 0.160 0.478 0862 0.515 0.653 Sub-Total 0.196 1.397 3.905 2.117 .2.713 Cooperative share* 0.593 0.791 1.113 0.4735 .0.787 Total expenses 0.789 2.188 5.018 2.590 3.500 Receipts from dates* 2.113 2.570. 2.876 1.124 2.080 Receipts from trimmed leaves* 0.022 0.277 1.132 0.578 0.75 Gross Receipts 2.135 2.847 4.008 1.702 2.853 Net Receipts 1.346 0.659 -1.010 -0.888 .0,667

* Calculated as 25% of the gross revenue Assuming 10% kept for home consumption and gifts

Table 19 Economic summar= per kiloppam of dates (in fils)

Tarim Sei7in Shibe m Item CoopmSah Coop Coop Coop

.Labour cost 111 106 310 291 226 Haterial cost 19 4-3 84 132 64 Sub-Total I 130 149 394 4£23 290 repreciation 32 37 99 106 73 Sub-Total II 162 186 493 529 363 Cooperative share 29 33 69 - 61 45 Total cost 191 219 562 590 408 Value of dates 114 119 198 162 134 Value of trimmed leaves 2 13 78 83 48 Gross Revenue 116 132 277 245 182 Net Revenue -75 -87 -285 -345 -226 -89 -

Table 20 Cash Summary per Nilogram of dates (in Fils)

Item Sah Tarim Seiy= Shibam The :mCoop Coop Coop coop Wadi Labour expenses 2 38 189 208 119 Material expenses 8 20 54 67 58 . Sub-Total 10 58 243 275 157 Cooperative share 29 33 69 61 45 Total expenses 39 91 312 336 202 Receipts from dates 103 107 179 146 120 Receipts from trimmed leaves 1 12 70 75 44 Gross Receipts 104 119 249 221 164 Net Receipts 65 28 -63 -115 -38

Table 21 Economic Surma per ton of Wheat in Wadi Hadranout (in Dinars)

Qatz, Shiban Sei7un Tarim The voop Coop Coop Coop Wadi Value of grain 170.000 170.000 170.000 170.000 170.000 Value of straw 252.338 30?.703 379.518 267.263 282.035 Gross revenue 422.338 477.703 549.518 437.263 452.035 Labour cost 186.521 328.367 655.266 186.782 278.155 Machinery cost 68.575 69.644 90.545 44.793 66.948 Draft animal cost 0.276 3.911 8.695 4.829 3.315 Material cost 18.378 30.454 33.822 17.152 21.081 Sub-Motal 273.750 432.376 788.328 25.556 369.529 Coop. Deductions: Taxes 17.000 17.000 17.000 17.000 17.0100 Pees 59.021 48.981 81.913 61.708 64.367 Other 2.308 2.573 - 1265 1.801 Sub-Total 78.329 88.559 98.913 79.973 83.168 Total cost 352.079 520.935 887.241 333.529 452.697 Net revenie 70.259 -43.232 -337.723 103.734 -0.662 -90-

Table 22 Economic S=mary'r per Peddan of Wheat in Wadi Hadramout

(in Dinars)

Item Qata Shibam Seinm Tarin The Coop Coop Coop Coop Wadi

Value of grain* 165.410 148.410 126.990 227.970 163.710 Value of straw* 245.525 268.625 283.500 358.400 271.600 Gross revenue 410.935 417.035 410.490 586.370 436.310 Labour cost 181.485 286.664 489.484 250.475 267.863 Machinery cost 66.723 60.799 67.637 60,068 6a.471 Draft animal cost 0.269 3.414 6.495 6.476 3.221 Material cost 17.882 26.586 25.265 23.001 20.301 Sub-Total 266.359 377.463 588.881 340.020 355.856 Coop. Deductions: Taxes 16.541 14,841 12.699 22.797 16.371 Fees* 57.427 60.225 61.189 82.750 61.985 Other 2,246 2.246 - 1.696 1.734 Sub-Total 76.214 77.312 73.888 107.243 80.090

Total Cost 342.573 454.775 662.,769 447.263 435.946 Net revenue 68.362 -37.740 -252.279 139.107

Value calculated at the price of 170 fils/kg for grain and 175 fils/kg for straw

* Cooperative fees are 89o of grain and 20% of straw - 91 -

Annex 2

Technical Assistance Agreement between PDRY and FAO

Dear Sir, Technical Assistance to the IDA Supoorted Wadi BadriAnout AanfimQlral Proiect - UEMNIZ/PDY/OO-/PDY - 921200 I have the honour to refer to the request of your Government to amend the Letter of Agreement of the above project transmitted through the PAO Representative's Office in the People's Denocratic Republic of Yemen for technical assistance to be financed by your Government under a Funds-in-Trust arrangement in regard to a project aimed at increasing agricultural production in Wadi Hadranout. The project involves renewal and increase- of agricultural machinery, construction of feeder roads, fixation of sand dunes. improvement of rural watei- supplies, date production, processing and packing and completion of a groundwater feasibilit7 study. FAO is prepared to accede to this reauest of your Government and to carry out the aforementioned (hereinafter referred to as 'the Project") in accordance with the ter_sset out hereunder: 1. PAO will arrange for the services of the following personnel: (a) Project Director. The Project Director would be responsil1e for all detailed planning, arrangement of all procurements through concerned governmental agencies, and timely project implementation. He would prepare annual programmes and budgets, appraise loan requests, approve all disbursements and be responsible for implementation. In addition to his supervisory, managerial and administrative functions, he would be responsible for: i) giving technical advice for the rehabilitation of agriculture in the project area, with special attention to wheat cultivation; ii) organizing agricultural production with a view to naximizing it; iii) planning and executing the experimental programme for improving date cultivation and sand dune fixation; iv) the date packing plant; and v) the in-service training in Yemeni personnel. H.E. The Minister of Planning Hinistry of Planning Aden, People's Democratic Repu1blic of Yemen 92 -

(b) Extension Ezrert: The Extension Expert would assist the FrovineIar -irector of Extension to organize an extension service programme in the area, and train the local extension agents. He would be responsible for determining the yearly fertilizer and chemical requirements and for their proper distribution and use through the respective farming organisations. He would render technical advice to the farming orgaiza- tions through the extension agents, would also organize field demonstrations, farmers' training and the use of media for extension. He would also maintain close liaison with the central research -station at EI-Kod and the Seiyun substation, and with the department of Extension and Research in Aden. In cooperation with the farm management econoist he would organize crop yield sampling and monitoring of production.

(c) Civil Engineer (Specialized in Irriation).. The Civil Engineer would be responsIble for: i) demonstration and training in improved irrigation methods including distribution channels and land levelling; ii) rendering advice on pumpset maintenance and replacement through close coordination with MRS; iii) supervision of construction of feeder roads; iv) supervision of construction of rural water supply schemes; v) supervision of construction of works for sand di=e fixation; and in-service training of Yemeni personnel. The Engineer would also maintain a close liaison with the consulting firm in the underground water feasibility study, with the irrigation department and train national staff assigned to irrigation. (d) Date Processir Consultant: The consultant will advise on d.ate purchasing, sorting and grading procedures, plant management and train national staff in these fields. (e) Farm Management/Production Economist: The officer would be responsible for: i) organising and supervising the collection, compilation and analysis of input/output data of selected crops at farm level; - 93 -

ii) on the basis of the above data: (a) establishing representative farm budgets, reflecting the various forms of fam organisation and typical cropping and livestock management patterns; (b) analysing the financial and economic aspects of demonstration technological innovation; (c) determining labour constraints; (d) detemining additional input and credit requirements; (e) studying the economics of the demonstration fams in which selected mechanization and improved irrigation practices are applied; (f) detemining optimal production and farm income levels taking into consideratio= the conclusions of the consultant study on national agricultural price and incentive policies. iii) establishing or up-dating baseline data and t monitoring system to neas-are project ach:ievemens in term of input use, production and income; iv) studying the economics of date production and of the date packing plant and assessing the economic aspects of technical inprovements for date production to be proposed by project consulta=bs& v) preparing a technical report two nths ahead of the 1TE date of his assignment. 2. All fo-r experts should be graduates, preferably have a posU graduate degree in their respective fields and have at least ten years experience, except the Project Director who should have at least 15 years. They should speak English and preferably Arabic. In addition to the above qualificationz, the Director and the Extension Expert should be agriculturists and the Egineer should be an irrigation engineer.

3. Experts and consultants will be recruited for the peri6ds specified in Annex I. The extension of the contracts of the experts will be subject to the concurrence of the People's Democratic Republic of the Yemen authorities and FAO.

4. PAO experts will assist the project national staff in the implementation of the project in accordance with the tems and conditions of the Development Credit Agreement between the Government of PDRY and IDA.

5. The experts will be recruited by PAO in accordance with the terms and conditions of service applicable to FAO personnel. They will in all respects be treated as PA0 staff members and will be directly responsible for FAO for the performance of their duties. - 94-

6. The Fellowships Programme will be implemented by FAO as . planned in Annex II and in accordance with the FAO Rules and Regulations. The Hadranout Project Organization will nooinate the national trainees in time to enable the timely im-plemren- tation of this programme.

7, It is estimated that the cost of carrying out the technical assistance component of this project including a charge of 14% (13% as from 1.1.1982) to cover A'R70s technical and administrative expenses, will be approximately US% 1,348,319. In addition to the funds made available to the project (US$ 881,911) you are requested to make payments of US$466,408 to PAO/UN General Dollar Account, Banca Commerciale Italiana, PAO Branch, Via delle Terme di Caracalla, 00100, Rome, Italy, indicating that the sum is for Trust Fund PDY.4 (PDY) Accou- Code No. 9212.00. 8. All costs incurred by PAO in connection with the project will be charged to the Trust Fund. These costs may include expen-. diture such as, but not limited to, the cost of repatriation of the experts, and/or their dependents, payment of terminal enoluments of the experts and travel costs of the experts and their families arising in connection with transfer or reassignment; medical costs and other payments due to the experts under the regulations asd rules of FAO, 9. If actual costs incurred are less than those estimated, FAO will refund to your Government the unspent balance. FAO will not enter into financial commitments or disburse any funds for implementing the project until funds have been received to cover such commitments or disbursements; in exceptional circun- stances your Government may be required to deposit an additional amount in the event that the amount originally deposited should prove insufficient to cover the full cost of the project.

-10. The funds provided by the Government for the project shall be administered in accordance with the Financial Regulations of PAO. Statement of account showing the Trust Iund will be supplied to you annually and a final statement will be sent to you on completion of the project. 11. This technical assistance is being provided under, and is subject to, the terms set forth in the Revised Standard Technical Assistance Agreement (with the exception of Article III "Administrative and Financial - Obligations of FAO") which your Government signed on 4 March 1969. - 95 -

If your Government is agreeable to these terns, I should appreciate it if you could sign the attached copy of this letter and return it to us. Please advise me when the funds have been deposited so that PAO can take innediate acticn to recruit the experts required. Accept, Sir, the assurance of my highest consideration.

E.H. West Deputy Director-General

SIGNATURE: ...... (For the Government of PDRY)

TITLE: Rovision II Trust Pund Froject Ho. UTUN1/PDY/004/PDY Codet 9.9100.9212.00 Titlei Technical Assistance to the Wadi Hadramout Agrioultural Project on PAO Development Oredit

Total 1977 1978 1979. 1980 1981 1982 m/m S 0 M/m/m 0 m/M 0 /M 0 / m/M 8 10. PERSONEL SERVICES 01. Project Manager (Di) 62.0 2.0 12.0 12.0 12.0 12.0 12.0 02. Extonsion Expert (P4) 39i0 - - 9.0 12,0 12.0 6.0 0. Irrigation Enginour (P4) 56.8 1.6 9.0 11.2 11.0 12.0 12.0 04. Consultante 9.0 - 2.0 - 1.0 - 6.0 05. Farm Manat./Eoonomint (PS) 6.0 - - - - - 6.0 Component Total 172,8 842j087 3.6 15,261 23.0 100,460 32.0 107,904 36.0 163t462 36,0 203,400 42.0 243,600

20. Official Duty Travel 59,008 - 8,146 9,170 11,692 15,000 15,000

30. Contractual Services 1,710 - 161 292 49 - 1,208 40. General OperatinG Bxpenuea 14905 17 -. 29 4,059 5P000 5,000 50 Supplion and Materiale 2,680 - - - 188 1,250 1,250 60. Furniture and Equipment ------00, Fellowships (See Annex II for Detail) .266,089 - 2,515 9,875 92,099 161,600 p Sub-Total 1,106487 15,278 116j767 119910 190,125 316,749 427,658 90. Project Servicing doet 11N 2939 16,347 16,788 26,617 44,345 55,596 (14;9 and 1%1 for 1902) ORAND TOTAL 1,340,519 17,417 135,114 136,698 216,742 361,094 403,254

r,I Rovision II Trust Pund Projetit No,t UTII/PDY/004/PDY Godel 9.9100.9212.00 Titlot Technical Assistance to theTladi Hadramout Agricultural Project on IBRD Development Credit

Total 1979 1980 1981 1982

M/n 4 M/M r/MM Mm/M 0 M/M

80 Fellowships Field of Study and Training

01 Plant Protection .1,8. (UK) 16 27,000 - - - . 6 10,000 10 17,000 02 Food Technology M.So. (UK) 17 30,000 - - 5 7j901 12 22,099 - - 03 Workshop Hanagement (Syria) 19 4,489 3.5 2,515 5.5 1,974 - - - - 04 Farm Maohinery Repaire & Maintonance (Tunisia) 6 6,500 ------6 6,500 05 Dates Produotion (Tunisia) 12 15,000 ------12 15,000

06 Group Training (Oyprus) 126 123,100 - - - - 70 60,000 .56 63,100

07 To be opecified later 36 60,000 - - - - 36 60,000

Oomponent Total 222 266,089 3.5 2#515 10.5 9,675 8 92,099 120 161,600 ...... ___RRD 11614(PPA) * .* JuhE1983

PEOPLE.S DEMOCRATIC REPUBLIC OF YEMEN

* " AGRICULTURAL PROJECT Wadi Hadramowt

- ese ,*1'

114

- 0 1.00 ..... 4 ,..

£ r Iu

---- OIaSo.eS -i (e~..--. I' IS ea.s