FILE CO'PY

DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

Public Disclosure Authorized Not For Public Use

Report No. P?-1659-AL

REPORT AND RECOMMENDATION

OF THE Public Disclosure Authorized PRESIDENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

TO THE

Public Disclosure Authorized DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA

FOR A

TECHNICAL ASSISTANCE PROJECT

(RURAL DEVELOPMENT)

June 13, 1975 Public Disclosure Authorized

This report was prepared for official use only by the Bank Group. It may not be published, or cited quoted without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. Currency Unit = Algerian Dinar (DA)

US $ 1 = DA 3.85

DA 1 * US $ 0.25

DA 1,000 a US $ 250.00 DA 1,000,000 - US $ 250,000

Fiscal Year January 1 - December 31 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMh;NT

REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA FOR A TECHNICAL ASSISTANCE PROJECT (RURAL DEVELOPMENT)

1. I submit the following report and recommendation on a proposed loan to the Democratic and Popular Republic of Algeria for the equivalent of US$8.0 million to help finance a technical assistance project for rural development. The loan will have a term of 10 years, including 3 years of grace, with interest at 8.5 percent per annum.

PART I - THE ECONOMY

2. An economic report entitled "Economic Development and Prospects of Algeria" (155-AL) was distributed to the Executive Directors on June 4, 1973. An economic mission visited Algeria in April/May 1974 and returned in September to complete a review of the country's second Four-Year Plan (1974-77). Its report will be issued shortly. Country data sheets are attached as Annex I.

3. In 1966, Algeria's Revolutionary Council defined the fundamental objectives which the country intended to pursue during the period ending 1980. These are: (i) to expand and organize the productive base enabling the economy to reach, by about 1980, a stage of self-sustained growth with full employment; (ii) to achieve economic independence, which implies that the country would rely first on its own resources for development, although international economic relations would be expanded and diversified; and (iii) to improve income distribution, particularly among regions. These objectives, and the strategy which has evolved towards their implementation, take into account the country's physical and socio-economic potential, and form a set of coherent choices to which the leadership is deeply committed.

4. To attain the objectives defined in 1966, Algeria has adopted a long-term strategy with four main aspects. The first is industrialization, which is viewed as the principal means of achieving the long-term growth and employment objectives, as the scope for expanding agriculture rapidly is limited by physical and social constraints. Several essential functions are assigned to industry in this perspective: to produce and process natural resources, particularly the sizeable reserves of hydrocarbons (oil and gas), for export to earn foreign exchange; to produce modern equipment for use in all economic sectors; and to provide essential consumer goods required to raise the living standards of the population. The second aspect consists of structura,l institutional changes which are viewed as the means of keeping the economy in Algerian hands and of imparting dynamism to investment and produc- tion. The main structural reforms are the application of central planning to the economy as a whole, the expansion of the role of public enterprises in industry and services, the Agrarian Revolution involving land and livestock redistribution to poor farmers and the introduction of cooperative management in agriculture, decentralization in favor of local government, and the par*i- cipation of workers in the management of state enterprises. The third aspect is the acceleratIon of trairing and education to meet the skilled manpower needs of the economy, i;,Drove e,mployment opportunities, and develop an authen- tic Algerian culture. The fourth aspect is the adoption of austerity in con- sumption so as to genera;e national savings for investment and avoid excessive recourse to external scurces.

5. In the seven years $967-73 which constituted the first phase of im- plementing the above strategy, structural reforms and investment were pushed with vigcr. The Government acquired nearly complete control of economic ac- tivitv through the systematic nationalization of foreign assets, including 1 S -f Pi. r.- L i.- ..--,. Lv- We c_reation aiid <.,.a, of public enterprises. Total investment increased from 15 percent of GDP in 1966 to nearly 40 percent in 1973, public sector investment rising from 9 per- cent to 36 percent with more than half going to industry. In agriculture, farms left vacant by departing foreigners in 1962 (about 2 million hectares) have been managed by their workers under central planning and control, and since 1971 the private sector (about 5 million hectares of cultivated land and 20 mi;2ion hectares of steppe pasture) has been progressively brought under the provisions of the Agrarian Revolution. Education and training were rapidly expanded and improved. The school population rose from 1.5 million in 1966/67 to 2.9 million in 1973/74 while the education and training systems were progressively modified to improve their efficiency, their relevance to economic needs and their accessibility to the largest number of Algerian children and workers.

6. However, Algeria's strategy also yielded some less satisfactory results. First, the reaL growth of output was below target (about 6 percent per year as against a target of 9 percent) in the 1970-73 period, mainly be- cause of delays in implementing many projects or in bringing their output to design capacity, and due to poor agricultural performance. Second, the sectoral imbalance in invcstrm nt caused bottlenecks in lagging sectorc such as construction, transportation, communications and housing. Third-, while unemployment in non-agricultural sectors declined from 27 percent in 1966 to 12 percent in 1973, the number of emigrated workers increased to about 440,000 in 1973 when emigration was officially stopped. In agriculture, production performance, especially of state farms, has fallen short of expectations and has been accompanied by an increase in underemployment: about 9 percent of the agricultural labor force was officially considered to be "seriously under- employed" in 1973 compared with 4 percent in 1966. Thus, in 1973, providing jobs for unskilled labor continued to be a worrisome problem in Algeria, while the shortage of skilled and experienced nationals was a primary res- traint on investment and efficient management. Fourth, due to sharp differ- ences in sectoral and regional development, disparities in income levels and living standards have persisted; for instance in 1973, per capita consumption was estimated at $130 on average in rural areas compared to $450 in urban areas. The differences are smaller than in many other developing countries due to the strong income and price controls and substantial free social services; they are nonetheless keenly felt in the country. - 3 -

7. The large increase in oil Drices during the last quarter of 1973 boosted Algeria's receipts from 'ts main export product, crude oil. Crude oil output and exports declined in quantity by about 10 percent between 1973 and 1974, due to production difficulties in the last four months of 1974. Thus export receipts from hydrocarbons rose from $1.4 billion in 1973 to an estimated $4.3 billion in 1974. The additional $2.9 billion (8190 per capita) which Algeria derived from hydrocarbons in 1974 greatly improved the balance of payments. Despite a steep rise in the import bill due to sharp increases in import requirements in volume (30 percent) and prices (35 percent), Algeria has been able to repnay in advance a part of the commercial bank loans it ha.l corntracted eariier, and to increase its foreign exchange reserves by about S550 million during the year. There has been a corresponding improvement in the domestic financial situation, particularly in the position of the Treasury which captures most oil revenues, but due to import price rises and domestic pressures, price inflation has accelerated to a rate probably exceeding 10 percent per year. The financial improvement has been accompanied by an ac- celeration of GDP growth in 1974. The decline experienced in crude oil output was more than offset by the sharply increased level of investment, new output from industrial projects and the recovery of agricultural production from the low level of 1973. Real GDP growth is estimated to have been around 7 per- cent, and due to the gain in terms of trade and the oil price increase, gross domestic income rose by 30 percent. With the liberalization of consumer goods imports, private consumption increased by an estimated 17 percent.

8. The improvement in Algeria's financial situation and prospects has led the Revolutionary Council to accelerate the pace of development and struc- tural reform during the second Four-Year Plan (1974-77). The plan estimates, on the basis of implementation capacity likely to be available, that total investment should reach at least DA 85 billion ($20.4 billion)in 1973 prices during the 1974-77 period, and thus be about 2.3 times larger than during the 1970-73 plan. The plan also specifies a higher (maximum) investment target of DA 110 billion ($26.4 billion), with supplementary projects to be undertaken if implementation capacity can be raised above the estimated level. The share of industry and hydrocarbons in total investment would decline to 44 percent in 1974-77 from 54 percent in 1970-73, while the relative importance of other sectors would increase. The share of agriculture would remain roughly con- stant at 13 percent of total investment, with an average annual rate of growth of agricultural production at 5 percent over the second plan period. Sizeable allocations are made for regional development. Based on the expected outputs from sectoral development programs, the plan's target for GDP growth is set between a minimum (11.2 percent a year) and a maximum (12.5 percent a year), which correspond to the two levels of investment. The projected growth of investment and output would, according to the plan, create enough new jobs to improve the employment situation substantially. The plan estimates that the unemployment rate in non-agricultural sectors would decline to around 4 per- cent in 1977, while there would be a marked reduction of underemployment in agriculture. -4-

9. The plan also provides for an acceleration of consumption growth and a reduction of regional disparities. It estimates that private consump- tion should rise by 11.3 percent a year in 1974-77, compared to a growth rate barely equal to that of population (3.3 percent) in 1970-73. On a per capita basis, the growth rate of private consumption would be higher in rural areas (9.6 percent a year) than in urban areas (5.5 percent a year) as a result of increases in expenditures on rural development and social services. While the plan projects import requirements to rise at constant prices by 21 percent a year in response to the rapidly rising demand for investment and consumption, it expects AP-pc-,t receipts to be large enough to lea-ve a small zu-plus on goods and non-factor services for the 1974-77 period as a whole. Thus, the plan does not anticipate any foreign exchange constraint, nor any difficulties in domestic financing. However, it does foresee that the resource balance would deteriorate after 1974 and turn into deficit by 1977.

10. From the viewpoint of physical implementation capacity, the minimum targets for investment, GDP growth and employment appear to be within reach, and the new orientation of the development strategy in favor of lagging sectors and regions, is highly desirable in view of the difficulties that have ap- peared with past heavy emphasis on industry. However, the estimate of imple- imentation capacity on which the plan's investment target are based implies that short-cuts will continue to be taken in the preparation of many projects with adverse consequences for implementing them and bringing them to planned output. In part for this reason, but also because of the high proportion of projects with long gestation periods in the investment program (e.g. hydro- carbon production' petrochemicals, and heavy metal, mechanical and electrical industries), the delay between investment and the accrual of benefits is expected to lengthen temporarily. Indeed, the Incremental Capital Output Ratio (ICOR) implied by the plan's minimum projections of investment and out- put tends towards 5.0 by the end of the plan period compared to less than 4.0 on average in the 1967-73 period. Further, while the employment situation will probably improve substantially between 1973 and 1977, the investment cost per additional job is high. On the basis of Plan estimates in 1973 prices, it is about $38,000 in 1973 prices in the non-agricultural sectors, and around $25,000 in agriculture (counting the reduction of agricultural underemployment). At the same time, and in spite of the large planned effort to accelerate further education and training, the supply of skilled nationals will continue to be significantly short of projected needs at the high, and especially at the middle, levels of qualification. The Government is taking a number of measures to alleviate the problems created by this situation, in- cluding the introduction of improved financial and other procedures to bring about better operational results on the part of enterprises, and the extensive use of international cooperation for helping in project implementation and carrying out extensive on-the-job training of nationals. It expects that the management of assets should improve progressively after the current plan period when the supply of skilled nationals would catch up with needs and the beneficial effects of organizational improvements are increasingly felt. 1t. While the planned growth of investment, output and private consump- tion will lead to rapidly rising import requirements in 1975-77, there is an unusually wide margin of uncertainty surrounding the prospects for hydro- carbon export receipts which are to finance most of these recuirements. This uncertainty concerns the strength of external demand for crude oil and natural gas, the policies that Algeria and other OPEC countries may follow concerning the volume and prices of oil production, and the technical problems still being encountered in oil production and large-scale gas liquefaction for ex- port. For instance, whereas the 1974-77 plan expected that during the plan - p,r4.nd Algeria's crud^ output would rise 'iy '. 7 percent per year aind .;: chasing power of Algerian crude on international markets would remain at the level reached at the end of 1973, these crucial assumptions have not been borne out by developments in 1974 and early 1975 due to technical and economic factors. Crude oil output has declined to an annual rate of 45 million tons in early 1975 compared to 50 in 1973, because of technical difficulties. The realized price of crude exports has also declined from an average $13 per barrel in early 1974 to $12 in early 1975, while Algeria has experienced an increase in import prices of the order of 35 percent. Thus, the purchasing power of Algerian crude in terms of its import prices has fallen in this period by more than 30 percent. Meanwhile Algeria has continued to implement the high investment strategy of the plan, implying a rapid increase in import requirements. As a result of these developments, the external resource balance, which experienced a surplus of about $220 million in 1974, may show a deficit tentatively estimated at more than $1 billion in 1975. To finance this deficit and keep reserves at the level needed for confidence and liquiidity, Algeria is planning to borrow up to $2 billion from external sources in 1975. De- pending on the level of hydrocarbon export receipts in 1976 and 1977, Algeria may have to reduce substantially the growth of investment and private consump- tion from the high annual rates planned for the 1974-77 period so as to keep import and external borrowing requirements within manageable limits. While Algeria's economic and financial prospects are particularly difficult to fore- cast beyond 1977, since these will depend on uncertain domestic and external factors (mainly the rate of investment, its efficiency, and the level of hydrocarbon export receipts), it seems likely that Algeria will continue to have sizeable external borrowing requirements until the early 1980's, when the large export projects concerning gas and petrochemicals are expected to make a substantial contribution to export receipts.

12. Algeria's total external debt, outstanding and disbursed, was about $3.2 billion ($5.0 billion including undisbursed) at the end of 1973, and declined somewhat in 1974 since the country made advance repayments on some of the loans contracted in 1972-73 with foreign commercial banks. Debt serv- ice, excluding these advance repayments, is estimated to have fallen from 11.3 percent in 1973 to 9.6 percent in 1974 of export of goods and non-factor services. It is projected to rise to about 15 percent of exports in 1977. In later years, depending on the investment strategy which Algeria may choose and the level of hydrocarbon export receipts, the ratio would rise further in -0- a range cormprised betw;:eii 15 and 19 percent of exports by 1980. It would fol- low a decl,inig trend -Ln thn '9"s- when the large ,as and petrochemical proj- ects generate increasing. exports. Algeria's external borrowing needs are large .n the next few years, buL can be accommodated in view of the considerably en- hanced capacity to carry debt which it has acquired as a result of the new relationship between the prices of hydrocarbons and other commodities in world markets, and c F the long-term prospects for gas and petrochemical exports.

PART i- - BMIK GROUP OPERATIONS

13. Lending to Algeria resiumed in FY73 and, to date, the Bank has lent $182 million for five loans in transport, power and education. Annex II con- tains a summary statement of Bank loans as of April 31, 1975, and notes on the execution of ongoing projects. To date disbursements have been low ($4.3 million) mainly reflecting the fact that loans to the railways and power sec- tor, as well as the port loan, were declared effective with some delay. In- creasing familiarity with Bank procedures is expected to lead to a better record on this account.

14. Bank lending to Algeria initially focused on infrastructure projects to allevIate the serious constrJints that inadequate infrastructure5 in par- ticular transport, imposed on the development of productive sectors. In the future activities will be broadened in the medium-term to improve returns on investments and to spread the benefits of growth and will focus oln technical assistance and institution building. The Bank's project lending would empha- size the value of thorough project preparation and support the Government's efforts to increase the efficiency of economic institutions. The two projects being presented this fiscal year, for industrial credit and rural development, are the first steps in This direction. The proposed project would initiate Bank involvement in the effort to implement the Government's policy of devel- oping the poorer regions of the country and to develop instituoLions Lo serve the agricuiltural sector. The proposed industrial credit project beifig pre- sented simultaneously aims at improving the quality of project preparation. Over next two years tne Bank lending program would continue to broaden this effort and envisages projects in education, industry, transport, industrial credit and agricultural c:.edit as well as follow-up projects to the proposed project.

15. In connection w:,th the Bank's proposed lending program substantial technical assistance may be needed and requested by the Government; a joint Bank/ITiF technical assistance mission visited Algeria in the spring of 1974 at the request of the Government to study the financial planning system, and ir. late 1974 the Economic Development Institute held a course in Algeria deal- ing with1 various aspects of financial planning at the central government, banking and project levels. Considerable interest was shown by the authori- ties in this course, and at their request, the EDI is planning to organize a program of courses over the next two years with the Government bearing the cost. PART ilI RJRAL DEVE-LOPMENT

16. Algeria has a land area of 2.4 million square kilometers. Almost 90 percent is desert and steppe. Farmland, other than pasture and grazing land, constitutes only 3 percent of the area. Sixty percent of the population live in rural areas and over 40 percent are principally employed in agri- culture. Of these, four-fifths are involved in traditional agriculture. A primarily subsistence sector based on food crops and traditional stockfarming, it consists of generally small family farms situated on less fertile land and using traditional techniques. A modern state sector, which consists of 2,000 state farms, employs 20 percent of the agricultural labor force and accounts for about 45 percent total agricu7ltural production. In this sector aross pcoduct per torker is three timnes higher titan in the traditional sector. Algeria's agricultural production has not been satisfactory, particularly in the state sector, consIdering the productive potential and technology used in this sector. This can be explained by a number of factors at the farm level, including poor financial planning and management, inadequate technical advice, lack of workers' incentives, welfare obligations, inappropriate size or loca- tion of production units and lack of credit discipline. Moreover, agricul- tural pricing policies, inefficient marketing organizations, and the system of highly centralized farm management and control have not been conducive to higher production.

17. Income disparities between regions, underemployment in the tradi- tional sector and the limited availability of alternative employment opportuni- ties in the countryside have contributed to substantial migration from rural areas into already overpopulated urban centers, resulting in urban unemploy- ment and emigration. In order to deal with existing disparities and to slow down rural-urban migration, the Government has initiated a number of programs directed at rural areas and, in particular, the traditional sector. These include: a) special programs designed to provide basic economic and social infrastructure to the country's most disadvantaged regions. Initiated in 1966, these programs have amounted to approximately DA 8.3 billion and have affected 12 regions; b) a program of rural development amounting to DA 357 million in the 1969-73 Plan designed to provide employment to the rural un- employed and to upgrade public lands for both rainfed and irrigated agricul- ture, through projects implemented at the local level; c) a program of rural improvement to increase agricultural productivity and was budgeted DA 64 mil- lion in the 1969-73 Plan. Within the context of the 1974-77 Plan, special programs, totalling about DA 1 billion, will be implemented in the 300 most disadvantaged communes; 1/ (d) the Agrarian Revolution the Government has made a large-scale nationwide effort to address the social and economic needs of the rural poor instituted in November, 1971.

1/ Until June 1974, Algeria was administratively divided into 15 wilayate (regions), 90 dairate (subregions), and 691 communes (districts). It has since been decentralized into 31 regions, 160 subregions and over 700 communes. - 8 -

.8. The Agrarian Revolution constitutes no single self-contained budget ..tem nor is it coordinated by one government agency. The policy and legisla- tion are formulated by a National Commission of the Agrarian Revolution, -whose membership includes all ministries involved and whose chairman is the '7inister of Agriculture and Agrarian Reform. This Ministry also provides the principal technical support through its Department of Agrarian Revolution. Its administration is priacipally the responsibility of the regional and local authorities.

19. Land reform measures lie at the heart of the Agrarian Revolution. They envisage the redistribution of land and livestock (mainly sheep) outside the state sector to poor f'armers and landless peasants. The redistributed _iod i-acludes sLdte or coimnunal land, properties of absentee landownels and private holdings in excess of a size sufficient to produce three times the annual income of a permanent farm worker in the state sector. Rights of appeal and compensation exist for all properties subject to redistribution. 'rhe total land and livestock to be redistributed will amount to about 1.5 million ha and 3 million sheep, and affect 150,000 beneficiaries; thus, about 15 percent of the agricultural population should benefit directly from land distribution measures. Furthermore, a large number of poor farmers will benefit from programs to develop rural infrastructure, forest management and alfa grass cropping. Land redistribution is being carried out within a net- work of cooperatives in various forms according to local technical and econo- mic needs: small production cooperatives (CAPRA), land development groups (CMV) and small multipurpose commuunal cooperatives (CAPCS). In addition, the pJanned construction of 1,000 agricultural villages will offer to their beneficiaries a full range of social services.

20. Completion of the first phase of the Agrarian Revolution during the 1970-73 Plan made it possible to allocate 700,000 ha of public land to 54,000 bereficiaries organized in 3,000 CAPRA's and 420 GMV's. In addition 430 CAPCS's have been set up. The second phase of the Agrarian Revolution, con- slsting of the redistribution of private land is ncw well under way; the third and fourth phases, involving forest management, cropping of alfa grass and redistribution of steppe sheep, have not yet begun.

PART TV - THE PROJECT

21. The project is based on a Government request in mid-1974 for Bank assistance in its rural development efforts, and on the findings of a Bank appraisal mission to Algeria in November 1974. Negotiations were held in June 1975. The Algerian delegation was led by Mr.. R. Hassam of the Ministry of Finance and included representatives from the 'Ministries of Interior and Agricult,ure and Agrarian Reform.

A. GENERAL

22. The proposed project responds to major priorities addressed by Government's rural development efforts. In recent years the Government has increasingly directed substantial resources into various rural development programs designed to improve the welfare of the rural poor. The Agrarian - -

Revolution, in which over DA 2 billion has already been invested, constitutes ,he Government's most ambitious and comprehensive effort to develop Algeria's rural areas with increased agricultural production, improved social services, higher family incomes, greater social equity and diminished rural migration as key objectives. However, these objectives are still largely in the process of being translated into coherent programs and projects which could lend them- selves to Bank financing. In addition, problems in absorptive capacity and in preparation and implementation have arisen. The proposed project is de- signed to deal with these factors; it focuses on selected priorities: to ex- pand the rural productive base, to strengthen the planning and implementation capabilities of local and regional administrations, and to develop needed rural institutions and services. The project would work with local-level authorities to prepare, test and implement different approaches to integrated rural development. It would concentrate, in particular, on the productivity of small farmers. The methods and solutions developed under the project would be designed for widespread replication elsewhere. The project's experimental character would necessarily embody a high degree of risk, where several al- ternatives would be tested, some of which might not be retained in rural development policies to be applied ultimately on a national scale.

23. The proposed project includes pilot schemes for the development of two disadvantaged and neglected areas whose populations are among the poorest of rural Algeria--the steppe and the mountain zone. At the national level, the project would also address two of the principal and interrelated cons- traints to rural development--agricultural extension and credit. In view of Algeria's limited trained manpower, the project would provide technical assist- ance to assure that best use be made of the substantial financial resources Government has now committed to rural development. Specifically, the project would provide the technical personnel and associated equipment required to plan, prepare, test, and ultimately begin to implement the following four selected sub-projects over a three-year period:

(a) Integrated development of the steppe zone of Ksar Chellala, most of which lies in the wilaya of Tiaret, mainly through pastoral improvement;

(b) Integrated development to benefit the population of the daira of Arris, located in the Aures mountains and in the wilaya of Aures, by providing selected social and economic services;

(c) Development of an agricultural extension system by testing an experimental program in the wilaya of Sidi-Bel-Abbes and by establishing specialized facilities for the training and technical support of extension workers; and

(d) Development of a study group within the National Bank of Algeria (BNA) to participate in the analysis and organization of and training for agricultural credit. 24. The project w3uld 'oe executed by four expert teams coordinated by a Coordinato- within the Ministry of Agriculture and Agrarian Reform (MARA). The project would be intograted wi-thin exist.ng Coverm-ent structures and pro- grams. it would require 52 Algerian specialists and 24 foreign specialists on a fU1l-t4 .2e basis and about '46 man-months of short-term consultant services. It would include small equipment needed by the experts to initiate each of the sub-projects. Ov.erall costs of the project are estimated at US$11.5 million equivalent, including contingencies. The proposed Bank loan of USS8.0 million, representing 70 percent of total project costs, would finence the foreig nxch-ange costs of the P-rcijc-;c. The igh share of foreign exchiange costs, not unusuai in techinical assistance projects, reflects the heavy input of techanical advisers. The United Nations Development Programme (UNDP) has been unable to participate financially in the project.

25. T}he proposed project could be tlhe first phase of an anticipated wider Bank involvement in Algeria's rural development in subsequent years. Necessary technical assistance would be Drovided to plan, prepare, test, and ultimately begin to imrnlement the four subprojects selected. As preparation is completed on one or more of the subprojects and if Government, in con- sultation with the Bank, decides to proceed with implementation, Bank fi- nancing may be considered for capital investment in later phases.

B. SUBPROJECTS

(a) Integrated Steppe Develop2ment

26. The Algerian steppe constitutes approximately 20 million ha, extend- ing east-west along a band of 1,000 km in length and 150-300 km in width, and marked by rainfall averaging from 100 to 400 mm. It contains about 2 mr,_- lion people, of which 35 percent are considered nomadic, and roughly 6 million .,heep, representi-ag dlOui 70 percent of the national total and an annual meat production of 40,000 tons.. The steppe has historically observed a social and biological equilibrium that is now breaking down due to (a' the increasing n-,,bers (3.2 percent growt:i rate per year) anrd sedentariza-.ion of the steppe Do-ulation, (b) the introducti'on cf cereal cu'Livation, accomoanied by mechan- 4cai tillage, to 250,000 ha each year and now totalling 3 million ha, (c) the disintegraticn of traditioinal Lribal arrangements concerning grazing rights, water points, and migration routes, and (d) the general shift from a subsist- ence to a market economy. Substantial degradatiorn of the steppe has resulted, as evidenced by the 200,000 ha per year lost to desert.ification; and progres- sive disintegration of traditional economic and social structures has also occurred. The Government now intends to reverse these processes under the Agrarian Revolution through the application of a Pastoral Code, which envisages the equitable distribution of the steppe's resources, the protection and regeneration of grazing lands, the organization of the pastoral population and the provision of necessary social and economic services .o this population, Lncluciing an investment program exceeding DA 1 billion over the 1974-77 Four- 'fe?r Plan, to be implemented within the third ephase of the Agrarian Revolution. 27. The 1-:4project would provide the personnel and associated equipment to plan. prepare and test the integrated development of the zone of Ksar Chellala, an area representi-n 8CJO000 ha of steppe and falling within the administrative jurisdictions of the wilayate of Tiaret, Djelfa, and Medea. The Ksar Chellaia zone was seleczed for the subproject because it typifies the social and ecological conditions of much of the steppe, it is centrally locat- ed within the steppe, it has already been the subject of substantial base-line studies and it is endowed with underground water resources to permit integrat- ed pastoral development. The zone has a rainfall of 250-300 mm and an alti- tude of 600-1,600 m. It is diviceed administratively into six communes whose total population is about 115,000 and composed of some 10 tribes. The sheep population is appioximately 300,600, of which about 30 percent are owned by nomads. The zone is important as an axis route for the annual nomadic migra- tions to the North. Between 100-150,000 ha are cultivated in cereals yielding an average 3-4 quintals per hectare.

28. The subproject would ain at improving the social and economic welfare of the area's pastoral population, particularly the poorest elements who are either sheepowners who possess less than 50 sheep per family or shep- herds who own no sheep. Such improvement would come through the introduction of a series of integrated technical and social measures, which once adequate- ly developed could be applied elsewhere in the steppe. New structures and techniques would be designed and tested to benefit the steppe population. The subproject would inclu,de planning, preparation, and testing of the follow- ing:

a. organization of the pastoral population following study of the major socio-economic considerations of establishing pastoral cooperatives, strengthening local administration, and comprehensive land-use planning of the zone;

b. rehabilitation of the soi's and regeneration of range land through rotation of grazing, selective replanting, local reforestation programs and the control of cereal cultiva- tion;

c. improvement of other conditions for livestock, including the number of water points, augmenting fodder resources by irrigation, providing sheep shelters, and improving veterinary services;

d. provision of social infrastructure to existing and new villages, including housing, health facilities, schools and water supply, to meet the needs of the nomadic poor as they sedentarize; and

e. diversification of the economic opportunities available to the pastoral population by establishing handicrafts and small- scale processing industries based on sheep by-products, - 12? -

improving the marketing systems, extending afforestration programs and creating new employment in the primary and secondary sectors elsewhere in the zone.

29. The subproject would require, over a three-year period, a team of specialists whose work would be divided into two phases. Phase I, lasting about one year, would involve:

a. analysis, updating and supplementing of existing baseline studies _. Lhe full K.sar Chella zone, IricLu -g st.dy of potentially irrigable soils, updating grassland maps, additional hydrological studies, inventory of existing flocks, elaboration of the agricultural census and district monographs, utilization of aerial photographs for land-use planning, socio-economic surveys including in-depth study of the target population and existing cooperatives, study of marketing systems, study of required social infrastructure, review of the existing administrative system and analysis of employment needs of the area and alternative forms of employ- ment possible;

b. initiation of field experimentation on three existinr. coopera- tives and a pilot farm, to be continued during Phase II, includ- ing testing methods for regeneration of existing cooperatives' rangeland by such means as restricted access, grazing systems, and selective seeding; testing irrigated and rainfed cultiva- tion of different fodder resources; experimenting with existing flocks to improve production by investigating dry season feed requirements, optimal lambing dates, or possibilities of fatten- ing lambs in the steppe; and by tes,ing and developing equipment adapted to the Steppe together with improved animal health mea- sures; and

c. preparation of an integrated development program for selected actions in three experimental comm,unes, including, at the macro level, land-use planning for the three experimental communes which would integrate the sectoral studies prepared during this phnase for application in the test zone and which would recognize the complementarity of the pastoral units, irrigation systems, and social infrastructure to be established; and at the micro level, planning of several selected cooperatives, both as social organizations and as management units, and preparation of management schemes designed to make best use of the area's natural resources.

30. Phase II would involve continuation of research and testing initiat- ed under the first phase and implementation of the integrated development program. on a selective basis in the three experimental communes. The sub- project wo-Ld test under local conditions recommended structures and tech- niques, including resettlemenit and organization of the target population in different forms of cooperatives; riethods of flock management; stocking capa- city of different kinds of pasture and during different seasons; timing of various systems of grazing rotation and restriction; use of irrigation to supplement fodder supplies; .unctioning of the multipurpose communal coopera- tives (CAPCS) in the provision of inputs and marketing of outputs and the supply of such services as credit, extension, and veterinary; alternative forms of employment and social infrastructure and services best adapted to the local environment and population. In addition, on the basis of experience acquired from the three experimental communes, the subproject findings would be summarized and an integrated development plan for the full Ksar Chellala zone would be prepared.

31. The subproject would provide for five foreign specialists, including a range management specialist, grassland specialist, agronomist, livestock specialist and rural works engineer to work full-time during 2-3 years. Moreover, it would require over the three-year period seven Algerian spe- cialists including an agronomist, a grassland specialist, two livestock spe- cialists, a sociologist, agro-economist and rural works engineer, as well as the participation during 72 man-months of a team of field investigators for sociological surveys, livestock census and water points inventory. In addi- tion, the subproject would provide for 74 man-months of short-term consultant services, including the participation of an hydrologist, economist, soils specialist, photo-interpretation expert, specialist in cooperative book- keeping, sociologist, handicrafts specialist, industrial processing expert and forestry specialist. The subproject would include the auxiliary equipment consisting of sheep shelters, water points, and fencing materials, required on the cooperatives to be used during Phase I and II. Assurances were obtained during negotiations that Government and the Bank, prior to initiation of Phase II, would jointly review whatever capital investments would be required during Phase II. Agreement between Government and the Bank on the necessary capital investment would be a condition for disbursements during Phase II.

(b) Integrated MIountain Development

32. The mountainous areas of Algeria are among the country's poorest regions. Characteristic of such areas are steep slopes, substantial soil erosion, poor soil fertility, inadequate surface and underground water, low levels of rainfall, and a continental climate of frost and snowfall. ilis- torically, such areas have also suffered from over-population, and high pop- ulation densities persist today under continuing adverse natural conditions. The mountainous areas are dominated by small marginal farms. The larger and richer state farms are few. Substantial unemployment predominates, forcing emigration to the cities and abroad. The social and economic infrastructure is inadequate. An increasing gap is thus evident between the aspirations and needs of the mountain poor and the opportunities which the ecology and economy of such areas can provide. - 14 -

33. The subproject woul- involve integrated rural development of the Aures mountain region, which is a3iiong the most disadvantaged mountain areas in Algeria. The area haS been selected because (a) it is extremely poor but nonetheless has a Dotential :'or development, (b) it typifies the problems of the mountain zone and thus has potential for replication, and (c) it has strong administrative support. It covers about ' millior. ha, of which less than 250,000 ha are arable. The population is about 400,000 and is growing at more than 3 percent per year. Rainfall var-es between 200 and 450 mm, and frost and snowfall characterize the winter months. The Aures mountains fall within the administrative jurisdiction of the wilava of Aures. Most of the : 1. -. 1 1v-Ivcd eni subsistence agriculture, mainly fruit and cereal cultivation complemented by small-scale livestock activities. There is virtually no industry in the area. Approximately 30 percent of the active rural male population work outside the region, of which two-thirds in Europe. Primary school attendance is 50 percent of those eligible, as compared to the national average of 66 percent, and the literacy rate is 27 percent.

34. The subproject would concentrate on the population (approximately 104,000) of the daira of Arris in the heart of the Aures mountains. The daira is roughly 415,000 ha, of which approximately 40,000 ha are arable, divided into about 2,000 ha of fruit trees and 38,000 ha of cereals and fal- low. The average landholding of an extended family is about 4.5 ha, which is generally divided into'3--4 different plots. The population density is thus about 2.5 inhabitants per hectare of arable land, about two and one half times the national average. Because of its fragmented small holdings the daira has been virtually unaffected by the creation of state farms or of cooperatives of the Agrarian Revolution. The gross product per capita of the daira is roughly DA 175, as compared to the average of DA 330 in the wilaya and the national average of DA 1,200. The unemployment rate, which does not include the underemployment fouind throughout much of agriculture, is as- timated at almost 40 percent. Despite the efforts of Government instituted through a special development program in 1968, the social and economic in- frastructure of the daira remains iniadequate. There are 258 primary school classrooms and one secondary scliool. The daira has four health centers and 13 consultation rooms. Nkost of the villages in the daira have neither water supply nor sewage systems. The road system is inadequate, and several valleys remain inaccessible to mo.:or traffic.

35. The subproject would provide the personnel and associated equipment needed to plan, prepare, and begin to implement an integrated development project designed to improve the welfare of the target population of the daira of Arris, through increased employment, improved economic opportunities and extended social services. It would seek to discourage emigration, in line with Government policy, and thus indirectly relieve rhe increasing burden on the cities of the North. The experience gained would be applied to other poor mountain areas. 36. The development effort wou&d be directed toward (a) intensive devel- opment of the daira itself and (b) development of selected areas adjacent to the daira. Resettlement of the target population to another more richly endowed region is not considered as a viable alternative, because such efforts have failed in the past and are not supported by Government. The project would exploit possibilities within the daira to improve the social and economic well-being of the target population. Possible opportunities for development include agricultural improvements, such as the introduction of new tree crops and horticultural pract'ces, intensification of vegetable farming where water resources permit, bee-keeping, poultry, and small-scale livestock development cad ;i. Zaqchniques of zereai cum.-t.on; minor irriga- tion, involving small diversion and control dams and related works; creation of small-scale industries, such as f-uit-processing, furniture and building materials factories; development of handicrafts and of tourism; public work projects, including reforestation and road construction; possible mining activities; and establishment of requisite social services including schools, health facilities water suDply and drainage systems, improved housing and necessary public buildings. Such support services as agricultural credit, extension, and marketing services for agriculture, local-level contracting companies for construction, and planning and administrative support for local- level government, would also be developed.

37. Because of the limited agricultural potential of Lhe daira of Arris, the subproject would not be restricted to the target area but would also include investment opportunities in adjacent areas which might benefit the employment or income needs of the target population. Thus, possibilities would be explored in the foothills and on the plains, where water and soil resources are more plentiful, for intensified agriculture, possibly to be implemented by cooperatives of the Agrarian Revolution (CAPRA's) whose members would be drawn from the target population. Opportunities for small-scale industrial activity, desfgned to benefit the target population, would also be explored elsewhere in the region.

38. The subproject would provide a team of specialists for a three-year period whose work would be divided into two phases. Phase 1, lasting about one year, would consist of' fitial studies and inventories. Resource surveys, covering the necessary land-use, soi-, hydrological, climate and geologic studies would be initiated or supplemented; aerial photographis would be used as required; existing services, including credit, marketing, input supply, and social services, would be analyzed; socio-economic surveys, including in-depth study of the target population, its social structure, migratory patterns, and employment practices, would be conducted; the existing adminis- trative systemT, including its resources in equipment and personnel, would be reviewed; and selected tests to determine representative costs and benefits would be conducted. These initial studies and inventories would serve to identify the principal opportunities for and constraints to development of the target population and area, on the basis of which a comprehensive develop- iment plan could then be formulated, Phase , following completion of the devclopmert plan, would also involve detailed .reparation. Tnis wouid in- clude detailed description of the selected components setting forth the resources required, Liming, and Lenefit analysis. The socio-economic and technical studies necessarv to accomplish the development plan would be prepared. These might include feasibility studies, detailed engineering studies, village development sche-Ines, individual farm budgets, and detailed design of small-scale industrial Drants. Detailed cost estimates and attendant benefits would be calculat-:d. The niecessary support services would be de- signed. Organizational and managerial arrangements of the development proj- ect and its components, including -ndication of needed administrative changes or reinforcement, would be formulated. A system to monitor and evaluate the program would be devised.

^ P-e ',uring the euaini;ig 2 ,;s .;J Inav_ve C:. of detailed preparation and initiation of subproject implementation, as and whien individual subproject components were prepared. The specialists required during implementation would particiLpate as advisors in organization and man- agement of the program as planned and prepared in Phase I.

4n. The subproject would provide for five foreign specialists to work during the full three years, including an agriculturist, economist, rural works engineer, forestry specialist, livestock specialist, and community development planner during Phase l. The composition of the permanent team during Phase II would be modified as necessary to reflect the needs of the project as prepared. The subproject would include over the three-year period 11 Algerian specialists in agriculture, economics, civil engineering, rural works engineering, sociology, and architecture, as well as the periodic assist- ance of Algerian topographic and water resoLLrces slurvey teams. The subproject would require 24 man-months of short-term consultant services, including the participation of foreign experts in agricultural extension, horticulture, bec-keepingt hydrology, scciology, mining and fruit processing during the first year. Assurances were obtained during negotiations that Government arid the Bank wou!ld jointly :ceview, prior to initiation of each phase, the reports and recommendations concluding the Phase I, and prior to initiation .Jihase II, revie.w whateve.: capital investments would be required during Phase II, for which (overnment would assume responsibility. Agreement be- tween Government and the Bank on the necessary capital investment would be a condition for disbursements during Phase II.

(c) Agricultural Extenlsion System Development

41. An agricultural extension system has not yet been established in Algeria but is included in the 1974-77 development Plan. Small private farmers and newly formed cooperatives of the Agrarian Revolution, representing 80 percent of the agricultural work force, thus have negligible access to the body of agricultural knowledge and techniques currently available. To improve agricult4ral production they must now relinquish traditional concepts, acquire new skills, and adopt new anAd improved practices. Most are illiterate and need assistance to adjust to new agricultural technologies. At present, however, dissemination of new informationi is weak, and effective liaison between farmers and existinrg support services is minimal. Traditional farmers, in turn, have difficulty in identifying and articulating their pro- duction problems to Government agencies of which they are often ignorant qx suspicious. Algeria's agricultural production has suffered accordingly. - 'I7 -

42. A well-structured agricultural extension system is therefore needed to convey new agricultural information to farmers and translate farmers' needs to agricultural technicians. Algeria's 1974-77 Four-Year Plan empha- sizes the need to build up such a system. Its global objectives would be to assist and encourage farmers and cooperatives to improve production by adopt- ing improved agricultural practices, which it would attempt to achieve by (i) providing an essential link between farmers and their technical support services, including agricultural research, credit, inputs supply and market- ing; and (ii) assisting farmers in gaining a better understanding of coopera- tives and other farmer associations.

43. The subprojec.L ..- Ild psovide for deveiopiLL*u of an agricultural extension system by testing an experimental program in the wilaya of Sidi-Bel- Abbes and by developing specialized facilities for the training and technical support of extension agents. It would:

a. define extension methods most relevant to the Algerian socio- economic system and Algerian agriculture;

b. identify and develop profitable and low-risk technical packages of improved farm practices adapted to the small farmer and his environment;

c. evaluate and strengthen existing agricultural institutions and services as required, with special emphasis on research, credit, input supply and marketing and indicate any new services needed to support an extension system integrated within present struc- tures; and

d. strengthen the technical and administrative capabilities of the National Center for Agricultural Education (CNPA), to be respon- sible for training, supervision and coordination of a national extension system.

44. The subproject would require over a three-year period a team of specialists, whose work would be divided into four phases. Phase I, lasting about seven months, would involve initial organization and orientation of the team. Preliminary studies of the selected trial zones, including existing agricultural conditions and practices, socio-economic structures, and agri- cultural support systems, would be initiated. In particular, the team would identify improved technical practices to be extended to farmers during Phase II. A work plan for Phase II would be prepared, including specification of recommended methods, procedures and hypotheses to be tested through research and investigation. To test these methods, procedures and hypotheses, student extension agents would be recruited, for whom a short-term basic extension orientation program would also be prepared.

45. Phase II, lasting approximately 14 months, would include implementa- tion of the orientation program and in-service training for the student exten- sion agents. It would involve development of improved and cost-effectiveo - ja

agricultural practices identffifd during Phase I. it would constitute the principal research effort and woluld include studies of: the different target groups, the most effective approaches and methods of extension, the recommend- ed characteristics and use of extension agents and village level workers, the support requirements of exten ion agents, and the integration of the extension effort with cisting develop.nt progr-ams, complementary social services and other agricultural services including credit, marketing and research. The studies would serve to pzepare a preliminary plan for an extension agent train- ing program and a report on the agricultural support system as it relates to extension and recommended improveennnts.

46- Phase III, during a period of four months, would involve final de- sign of the extension agent training pDogrami, continuation of monitoring and assistance to student extension agents, and preliminary design of a full sys- tem of extension support services. Phase IV, during the final year, would constitute implementation of the full-scale training program and establish- ment of the extension support services required. The study and experimenta- tion initiated during Phase II in the trial wilaya would be continued as needed during Phases III and IV. Tts evaluation would provide continued in- put to the program design.

47. The subproject would include the following nine full-time foreign specialists over the three-year period: two agricultural education and train- ing specialists, two agrieultural extension specialists, an agricultural economist, sociologist, organizational specialist, curriculum development specialist, and mass media specialist. The project would provide for 12 Algerian specialists over the three year period, including four agricultura- lists, two agronomists and livestock specialists, a horticulturalist, vege- table production specialist, agro-economist, and rural sociologist. One student extension agent would also be assigned to each commune of the trial regions selected. In addition, the project would provide for 48 man-months of short-term cuaib;liing services, including the participation of evaluation specialists, an economist, citrus specialist, agronomist, livestock and poultry specialist, cooperative education specialist, and management spe- cialist. The subproject would include the lecessary demonstration equipment required by the specialists. Assurances were obtained during negotiations, that Government and the Bank jointly review prior to initiation of each phase, the reports and recommendations concluding the previous phase and, prior to initiation of Phase III, r-eview the training facilities required for the extension agent training program, the provision of which would be the respon- sibility of Government. Agreement between Government and the Bank on the necessary training facilities would be a condition for 'disbursements during Phase IV.

(d) Agricultural Credit Study Group

48. Sole responsibility for agr. cuizural credit in Algeria rests with the National Bank of Algeria (BNA). During 5973-74 seasonal credit was provided to state farms amounting -t DA ' ,688 million, to cooperatives amounting to DA 204 million, and to private farms amounting to approximately DA 70 million. Mediu.-m- and long-term credit allocated in 1973 totalled DA 477 million for the state sector, DA 227 million for the cooperative sector and DA 130 million fo-- the p:ivate sector. The terms of lending vary with interest rates from 2.5 to 4 percent.

49. Certain difficulties mark the provision of agricultural credit in Algeria. First, agricultural cred,t to the majority of the agricultural sector has been available until recently only in disproportionately small and irregular amounts. The private sector, which prior to the Agrarian Revo- lution represented about 55 percent of total production and 80 percent of the agricultural work force, has had access to only 4 percent of total sea-

scnal zrcdit, 's com ;M:' --J Lci pS. 'C:Cn-tfc allocated to the . .- _ Any effort to increase agricultural production through improved technical packages, extension services, supply of inputs and marketing facilities will be seriously hindered unless sufficient credit is made available. Second, agricultural credit has turned out in recent years to serve frequently as a method of subsidization and appears often not to be considered as an actual lending operation. Credit recovery for all sectors of agricultural production has been extremely poor. Less than 65 percent of 1972-73 seasonal credit to state farms has been recovered, the vast majority of cooperatives have not repaid their outstanding loans, and credit repayment of the traditional pri- vate sector is estimated at only 10-15 percent. This poor record is due to the unsatisfactory financial performance of most units of production (see para 16). The majority are chronically deficitary, and are thus in no posi- tion to repay outstanding ioans. In addition, BNA has not always been able to assess the financial requirements and repayment capacities of various units of production and to undertake the necessary supervision.

50. The concern aroused by these problems has led BNA to take steps towards their solution. It expects to increase its lending to the private sector. It plans in the near future to extend its network of agencies to the commune level and to double its personnel, in order to appraise and administer credit requirements of the private sector and to supervise more closely the operations of all sectors. It envisages a training program to upgrade the quality of all its staff. It has begun to introduce a provision- al plan of financing to impose a new sense of credit discipline on all state farms and CAPRA's.

51. The subproject provides for assistance to study group within the central offices of BNA to review BNA's policies and procedures. The study group, now under creation, would eventually number 25 and would be divided into sections on preparation of technical reports on credit to the agricul- tural sector, data processing, and training. The sections would contain re- spectively nine, seven and six professional personnel. The group would generally be involved in the study, not the implementation of policy and procedure. The subproject would include provision of a foreign specialist for two years to each of the three principal sections. Each specialist would (a) organize the structure and work program of the section in which he works, (b) review the existing situation in BNA relevant to his section, (c) modify or develop the appropriate systems or programs as required, (d) train counterpart Algerian staff, and (e) in general, provide the necessary organizational and technical guidance and impetus.

52. The analytical section would deal with specific questions of agri- cultural credit such as lending po'Licies, including methods of credit recovery, imoroved credit discipline, methods of credit appraisal and such as use of norms and weighted averages. In addition, it would assess demand for various kinds of credit. As soon as practicable, the recommended policies and methods would be applied in selected areas or sectors on a trial basis. The data processing section would work principallv to develop systems to collect, classify, sya.n__ze ar.d ultimately aii:',- - ci&S naiaount of *±on that will become available as BNA builds up and extends its network. The training section would plan and prepare for the training of personnel required at all levels to staff the greatly expanded network of BNA agencies.

C. PILEMENTATION

Organization and Management

53. The project would be executed by the four sub-project teams; the Ministry of Agriculture and Agrarian Reform (MARA) would be responsible for coordination. A project coordinator would be designated within MARA, to be assisted by an internationally recruited adviser and to be endowed with the necessary powers and means to assure project implementation. The functions of the Coordinator and of his staff would include: (a) monitor and reviewq of the work and operations of the sub-project teams, (b) logistical and ad- ministrative support to the four sub-project teams, (c) liaison between the sub-project teams, the Government agencies concerned, and the Bank for the project's operations and (d) secretarial support to the Technical Commission referred to below. Toward this end, it is proposed that the Coordinator would (a) expedite the provision of Algerian personnel to the project tonms as needed, (b) approve all short-term consultant contracts and any changes in the assignment of permanent staff, (c) approve and forward to the Bank monthly reimbursement claims from the sub-project teams, (d) receive and review monthly progress reports from the sub-project teams and prepare quarterly progress reports to be forwarded to the Bank and technical commission, and (e) communicate with and visit the sub-project teams and those to whom they are responsible on a regular basis. In matters of policv and procedure, the Algerian delegation indicated during negotiations that the project would be guided by an interministerial'Technical Commission. This commission would include representatives of the various agencies involved.

54. A separate team would be constituted for each sub-project. Each team would be managed, with the exception of the credit sub-project, by an Algerian sub-project director, and assisted by an expatriate team leader appointed by a consulting firm following aDproval by the Government and the Bank. The credit subproject would be managed by the director of the study group appointed by the Department of Agricultural Financing of BNA. Close interdisciplinary coordination and cooperation would be essential for each sub-project and would be one of the principal tasks of the team leader. Each sub-project team on matters of substance would report and be responsible to the regional administration and to the technical ministry directly con- cerned. The Governors of wilayas concerned, as the heads of Government at the regional level, would assume regular responsibility for the implementation of the first three projects. The Director of the Department of Agricultural Financing of the National Bank of Algeria (BNA) would be responsible for the implementation of the credit sub-project.

55. Each sub-project would be executed by an integrated team of Alger- ian and foreign specialists employed on a full-time basis, and by short-term ccs.i taiits. The foreign specialists and short--term consultants would be provided by consulting firms to be selected in accordance with procedures acceptable to the Bank. A separate selection process is envisaged for each sub-project out of which would result a contract between Government and the consulting firm selected. The terms and conditions of each contract, and the terms of reference for all consulting services, would be approved by the Bank. The consulting firm for each sub-project would be responsible for the sub- stantive work, with special emphasis on the integration and training of the Algerian specialists. Each sub-project team would submit a monthly progress report to the coordinator, who would, in turn, prepare a quarterly progress report to the Bank. In addition, full substantive reports would be submitted by the foreign specialist at the end of each sub-project phase or at other specified intervals. Government and the Bank would jointly review the work of each sub-project team and the terms of reference of the respective consult- ing firm's contract at the end of each phase and would modify the terms of reference as required. Assurances were obtained during negotiations that the Government would provide for current operating costs for vehicles of Algerian personnel, housing, offices, office equipment, administrative and secretarial personnel, and equipment for the coordinator and each of the four sub-projects. Vehicles for the foreign experts would be provided by each consulting firm. Vehicles for local personnel would be financed directly from the loan.

56. The advisor to the coordinator would be recruited by Government, with the assistance and agreement of the Bank. If necessary, in order to find a sufficiently qualified individual, the Bank would recruit on a fixed- term contract and second to Government the required individual for the period of the project.

Procurement and Disbursement

57. The selection of Consultants would be made according to Bank pro- cedures. Procurement of vehicles for Algerian personnel, whose foreign ex- change costs are estimated to be about US$180,000, would be on the basis of international competitive bidding but limited to firms that have service facilities in Algeria. Bulking of orders for experimental and demonstration equipment would not be practicable, since such equipment would be purchased in small and very diversified lots over the project. Purchases-would be handled in accordance with local procedures, which are satisfactory to the Bank. - 22 -

58. Disbursemerts from the loan would be on the basis of 100 percent of foreign exchange costs l-or coastulting services and associated equipment. Each of the consulting firms selected, upon award of contract, would be paid 10 percent of the total amount contracted to defray start-up costs. There- after, disbursements would be made tc the firms on the basis of monthly invoices subm'tted to the coordinator less an apportioned amount of the or- iginal start-up cost allowance. O'fices, office equipment and the salaries of all Algerian personnel would be financed by Government.

PART V - LEGAL INSTRUMUNTS AND AUTHORITY

59. The draft Loan Agreement between the Democratic and Popular Republic of Algeria and the Bank, the Report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement and the text of a draft resolution approving the proposed loan are being distributed to the Execu- tive Directors separately.

60. A condition of disbursement for Phases II, III and IV respectively of the steppe, mountain and extension sub-projects would be that the Govern- ment and the Bank reach agreement on the necessary capital investments for each phase (paras 31, 40, 47 and paragraph 4 of Schedule 1 to the draft Loan. Agreement.

61. A condition of effectiveness of the loan would be the designation of the project coordinator (para 52 and Section 5.01 of the draft Loan Agreement).

62. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank.

PART VI - RECOMMENDATION

63. I recommend that the Executive Directors approve the proposed loan.

Robert S. McNamara President

Attachments June 10, 1975 1XUR,PiTA -ALU4,iKA

hex%jLim R M 11 (.id-1972) Per IcxZ.f ar.hl. land

SoCAL IKDICAIVM

Algeria ~~~~Refer'enceCountries

OFP 2 IAYITAUS$ (A7Wa BAilS) /1 4.130/a. 220 /a~ 370 / 3,620 L/.

ra~teS (Par tkMa.ond) 4.19/b 45 / ~ 38 /c.d 16.7 Crude deat)h rate (per tcou,"nd),. 17 A 12 130. Infant Xrt.l-ty ratn (Pe' thousand lse birthe) .. 86 f, Weo 80 Wh ~ 18.2 exPectenC;, At birth (yoars) .. 52 58 55r 71.2 Iroen reprvductLim ztat 12 .3. 3.3 2.6 4.J 1.3 fpul.latio growth rate 1. 5 3.2 3..01.L 1512 0 fPoplation gronth rate - ura L., 7L.Ak 6 L./ 425 204 Age eteu.tura (percent) 0411, 1.Lg. 47 1.3I 41 8 23.7 15' 64 ~~~~~~~~~~52/18 i 53 53.9 62.9 65 and ovr ./ 5 /4.3 r 13.1, D,enedency rati.i 4 23 l<1 1.3 /a 1.6 /a Urban population an percent 6t total 31 /k 39 A8 32r 3 :L78.? 70L. Yaeily plaeiqgI v.~ of aceeptors cumul.tiv. (thou. LO,.0 .1.L. No. f user (%of married o.en) ... 8 8.2 I force ithusands) .. 2,600) /ru 13,200 11,500 2'1 Percentage Weloyed in agriculture .. 50 4u- 5b v 9

RM AoTMERniIilal income reoai,od by hilgheot S% ... Percent 25 ZX 10 4 of national income r:eeivd by highest 20% .. 51 b ~ 60 W Percent of national 8.neooe reteived by lowert 20% .. Pecn . !W Z. MfnionaLIncome received by lowast 4.0% .. 1? 0

NW,= "I'XM MIR. ~~~~~~~~~~~~~~~~~~~~~~~~53 %.o,ned by lleet 10% of owmere ... .0.9

WY-1.1UPARPS01cian 9purai 1 9,0 8 2,220 P parvsat.o ~~~7860 750 sng preon .. 2730 i 5,390 4. 1,880/ab 37 Ppolautice per ho"spita bed 310 /a, 31.0/a, 80 ed 190 31.0/0. Far capita calorie eeppiy as I of requirsaenta 92 / 80 8 113 /- 123 Li.& Par capIts protein supply, total (gra5s 65 Of okch, 76.103 anulel per day /ILaP 22622 66 Death rate 1-4 years aZ 12 15 h 0.8

eecoonparmy ohonI erollimnt ratio 86 75 11/hai III11 Adjste p1.orym schol enrollment ratio 1. 71 112, 28 178 Years f ooling poovided, first and saecon level 13-15 13-15 10 U I.4 vocational er.,llumt as I of eaC. school er.rllmxnt 29 /8,( 20 l0 481,ok 1IL 23 La Aft11 Iiteracy rat. I . 25 /r. 75 .~55/a 99 /8m

MgE No. of Peracn3 per reoo (.rbat) .. 2.6 /4rj 1.90. gp Percet o occupied nilt3 aithout piped water .. 77r k.a 66 /ah.so 61./49 iceet lectricity (me %of total population) .. 31.L 23 11L 9 iS Percent of f.ral ~ populatic. connectud to alectricity I. 2 j 6 /A 18 Lg 9, A

L-.etor per 1.20 poplel-'e 9. 1.7 La 9 0 L. 92 a Passenger care par 100 Ppobo.tion 16 10 Blectric /8 lotI aj 2179 power ccms.uption (kwh p.c.) 123 162 Li 255 Li 0hj/8 3 0132L9 Newsprint conaw;ption p.c. kg per year 0.6 0.01 Li 1.7aL 2.?2L 11.? Notes.' Figures refer eIther to the Ietnat periodis or to account OX ueet.R WOionaoY Waighte, ENd the lot.ot years. .Latae perIod. refer 1. principle to distrib.ution by age anedsea of natioral the populations. Yeara 1956-60 or 19o6-70,the latest yerar In prin- /6 Protein atandar~ds (requiremensa) for all.oouobrIa cl.ple to 1960 aa,eat.b- sod 1970. inahad by U36 lemonlni Rtsaarcb Service provide f4 a mionium ..The ?or Capita G2bFeatLiato i- at cerit prlc,. fur allowance of 60 verne of total protein per day, and 20 grama of y,c.r ath., thon 1960,calculot.d by the came cooverolon MAMImaMAn ple. protein, of -hloh 10 crmsa should be animal technique as the 1972 World Bo,k Atlioo. protein. Thee satndiards arm ao..wbat bow 11hentWee of 75 Averuge numebr a. of deoghtere per wean c-f reproductive gram of total protein an 23 geam of animal prtotin as aM aog. average for the world, proposed by TAOin the ThArd Wbrld Food P8bpu.1a'Lion growth retec aeye for the decodes ending In surmeya 1960 u,id 1970. om Itudlee have ecggosta,: that crude death ratoo of d,ildren & atio of population cder 15 ond 65 and over to thoe. agee through 4. nay ho uoed as a fir t approzintion * I ton IPo,r force frv,e age i t. 6h. . alnutrition. index of ?A0 refereoce standlards represent phy.i.iogl-l2 ~. / Percentage enrolled of co,aupeoding popilation of school Age quirceents for normal activity and heo.ib, LolinP as daf trad for such country.

Is 1972; t' A6 l961-70 ectbcete; /A 19-65-70; /d Derived free saanpl.e sur,ve o1ticete3 (24.0,000 perooco), excluding 17 seoter provinces; /8. 196!; 7f Algerian population only'; /a1968; i 1965-67; Li 1960-721 L 195L-60; /~k of 55 tht coot joporteAt Communes bari_ng local ealf-governmentl 1960-66; I~ For the definition of urba, see Dar.gtrnhic TorbaooL 1972, P. 155; /o Administretive Centers of provinces and districto (v~ilmyetl, /o Ooer end lac' Centere); 2,000 population; ~R EntLmaLe; /8 1960-61 UN ectilete, based an resulto of a pos.-Ceosal Beople wurvey taben fren and of 19650to Sprin.g of 1961, excluding populatlon of the two Departeect. of the SAWo,, nobering 587,569 at 1960 cooon; /r 19-66; La 1961.-Jce 1971.; /t~ 86 percent being MOe; /u Excluding alllar2. personnel end In bar~-cks 231.,668 nationals abroad of whon 229,020 are economically` aCtive,aleo excluding 1,200,000 fecele mainly occupied in Agriculture ; /v 1971; /. 15 years end over; Ic Households; a Disposable income; /8 1969; /as P-rcono1 Or. gov_eront eervi Ce oni3y; /ti inclUdi.g snoitant nurses and aldwivee; /ao 1962; lad Including rural hoopitals; /re .l-vrncrt hoseplt.le only; lsf 1961.-66; /aA 1969-70; /) 197 LB rat1c*te whicEh Not ."devr-age studento; ichic rlate -rcotional /.plok Not Including vo-ntlOnal ohort-tern crroo; l Peraninseix years >4u ... 11 0,o ~vczci._ c.nc- tak.rs th.at TIy C-. .t,d &~- -,it.; /=c B.fluLic:, Pt! ,. -= I; Lin. . rural; lao Ferceoniage of dwellings; /8p Including vacant dwollingai La Inside or .utaids.

France 1s selected e0 the objecti,o country because it Ie a representative of the .IC Counotries, to which the Algerian ec-onoy wili1 probably be cloaely linked. EC~ONOMIC DEVEIOPMRNrT DATAPae2o3Pgs

Actual Eat Er__roetd1966- 1973 .. 1975 - 1980 - 19661973 ~~ ~ 1975 19 77 j12§B-0 1977 1980 1985 16 94 18 94 18 NIATIONAL ACCOUNTS :9 23 T;-- 2316 Amounts in 1973 Fric,s &Exch e~tesR AvrgAnulGohRae AsPcetoGD Gross Domestic Product 4,37 ,4537'YPel3s'40 .7 9 8 ,As. 8ercenof 2.0 -13.0 18. 1 18'.0 Gains from Terms of Trade (-e) - 504 0 1,769 1,432 1,809 2,941. 1D0:0 GrossDmestic ncome 77 9'~7~~ 920 1T20 TC734 7 9,9 13.1 10.5 7.9 W.- T-O.0o

Import (incl. NFS) 975 2,669 3,481 4,031 4,954 6,068 15.5 16.7 8.5 5.1 25.2 35.6 37.1 38.0 Exports (import cak!acIty 1,171 2,057 3 643 3,222 4,135 6,205 8.4 19.1 14.0 5.4 30.3 37,3 Resource Gap -196 -712 -L. -805 81l9 13 . .- 51 17 -09

62.4 60.8 Consumption ExKpenditures 3,020 5,214 6,091 6,523 8.013 9,941 8.1 11.3 8.8 8.0 78.2 38.3 Investment 1 (ind. stocks) 647 2,872 3,514 4,202 5,046 6,268 23.7 15.1 8.3 7.5 16.7 36.0 37.6 39.2 Domestic Savings 842 2,260 3,677 3,397 4,227 6,405 15.2 17.0 13.5 7.7 21.8 39.4 38.4 National Savings 807 2,414 3.S52 3,548 4,249 6,281 16.9 15.2 12.1 8.1 20.9 As Percent of Total TRADE L' at Carrent Frices

Tmports - 36.2 Capital goods 965 1,699 2,174 3.143 4,760 36.2 Other soods anf~ RPS 1.704 3.000 3,940 5,551 8.407 63.8 63.8 100.0 100.0 Total goods and NITS 2,669 4.699 6,014 8,694 13,167

Exrports 88.4 90.6 Ol anJ gas Droducts 1,488 4,348 4,164 6.423 12,203 ilhths~~~~ect.~~and U~~~~S58 .5 R649 8_7 1.26 Total goods and NiTS T,-.7 4,YBiB ~~io, 11.6- 10.0

Merchazndise Trade indices 12.73 - 100 Export Price Index 63,7 100.0 262.4 268.3 312.0 412.5 6.7 32.8 9.0 6.5 Import Price index 98.5 100.0 135,0 149.2 175,5 217.0 0.3 15.1 7.8 7.0 Terms of Trade Index 64,7 100.0 194.4 179.8 177.8 190.1 6.4 15.5 1.1 -0,4

VALUELADDED BY SECTOR Annusal Data at 1973~ Prices end Exchange Rates Average Annual. Growth Rates As Percent of Total 8.3 5,4 Agricu1tur. 5Yt34- 883 707 757 840 l.9 62 3511.9 Hydrocarbons 947 1,421 1,322 1,523 1,793 2,591 6.0 6.0 13.1 21.7 16.1 16,8 27.4 28,9 Industry 862 1,874 2,242 2,485 3,220 4,459 10,1 14.5 11.5 19.7 48 9 Other Services 2,,,W I,j86 .3948 ~3224 5,495 7,5.5.8L4 11.3 11.1 46.7 48,2 Total 4,367 7,471 8,196 9,138 11,266 15,435 8.0 10.8 11.1 !f7? 100.0 0~-

PUBLIC FINANCE As Percent of GDP (Central Government) 1973 1974 Current Receipts 2,641 5,665 35,3 58.2 CretExpenditures 1.459 _L79 19.5 18.1 Bugtry Savings 1,182 3,916 15.8 40.1 Public Sector Investment 2,717 4,666 36,3 47.8

US *million P end ER CURRENT EXPENDITURE DETAILS Actual Eat. DETAIL ON Current % of Total1 As %Total Current Expend.) 1969 1973 1974 PUBLIC SECTOR 1970/73 Education 24.4 28,5 28.2 INVESTMEN2TPROGRAM Ct,hcr Social Services 22,1 18.0 16,8 Agrieulture (mncl. 13.6 Economic Services 11.5 11.1 12.3 irrigation:and vaterworks) 1,030 Administration and Defense 31.5 24.4 23.1 gd'.icati0n 644 8,5 Oth.er 10.5 18.0 19.6 Industry and Energy 4,059 53.8 To&al Gurrent Expenditures 100.0 too. 0 1oo.o Transport end Infrastructure 735 9. 8 Other 1.077 14.3 ______Total Expenditures 7,546 1 7

,ELECTED) INDiICATORS 1966- 17- 95-FINANICITh 40.1 (Ca-lculated from 3-year averaged data) 1973 1977 1980 Current Budget Surplus 3,023 23,1 Average ICOR 3TT 5" -31 Pomest6c Borrowi.ng 1,741 Import Elasticity 1,9 1.9 0,9 Ey: 1 Eo%Mnfin elnet) 11 1. Marc,inal National Savings gate 42.0 39. 44,4' Deposits with Treasury& Postal system 530 7.0 Total VIneneng 7,546 100.0

Value Added Per Worker (1973 - Prices & Exc. Rates) LA.XORFORCE AND Total Labor Force 73 -MTiYPER WORKCER 1966 -73 I .. llas Preto vrg 1966 - 1966 1973 196 1973 Growth Rate 1966 1973 1966 1973 Grow-th Rate Agriculture 1,270 1,450 64 55 1.9 410 410 19 15 0,0 Hydro-arbons 14 30 1 1 11.5 67,643 47,367 3.097 1,686 -4.9 Industry(.ther) 156 402 8 15 14.5 5.526 4,662 253 166 -2.4 Service. 560~ 778.U .28. 1224.8 34.3 4,hL[& .162.. .LfA. 3.4 3.7 Total 2,000 2,660 100 100 4.2 2,164 2,810 100 100

not applicable - nil or negligible 1! Projections are based on Sh I9T-77 i xettosi not available --less than half the - for minimum nyesatmeLnta1 tgorono XPV E obalwpa informat 4oitat .. ets .,oe so pa x caiosi smallest unit shown bior17 withrecent respect tO 0th q-. ty prc AlMX 1 Pege 3 of 3 pagee

bALWCE OF PAYENTSl ErrIE?NAL ASSLSTANCE AND Dl5T lOococOtS in cilhlrn? of U.S. 1oflars at -urrent pri.e.

Actual Estimated ProJected

5UIS,RY RALA.9CEOF PAYMIETS

-p-rto (incl. NFS) 1,142 1,006 1,440 2,057 4,918 4,813 6,289 7,257 13,464 24,505 T-cort- (incl. NFS) 1,538 1,504 1,836 2,669 4,700 6,015 7,377 8,694 13,167 23,672 F:-_urco 9alance (SX-H) 218 -1,201 -1,088 -1,437 297 833 T rest (net) 5 - 16 - 29 -60 -46 -81 -179 -293 -667 -582 *thr -151 - 75 - 46 -48 -53 -50 - 68 - 77 - 85 -117 'Wo-ors5 Rc.:ittanco 178 192 224 214 241 266 290 313 387 543 f:rert Tr,,.r-era (ot) 38 -60 22 64 95 95 95 95 95 95 V'zCe-onC-.ret Accounts -451' -:22 _ _ _ _ -X - 32 -5 --:7Z22 zz -245 3B - °~~: - ,a& '77-R/

Pci-rutc F-roct Thcn-treat 46 -46 18 48 55 64 74 84 104 89 Official Capi:al Qrants 17 199 16 3 -76 0 0 0 0 0

Public ImLT L..os Di.borsmeflt. 89 226 290 1,066 470 1,032 1,651 2,307 1,869 2,129 -lepavuonts o11 _lD2 -La. -288 _.8l -M9 -677 1-1sl -2-61 Oc?t lisbarsomOnte 16 154 180 912 -162 751 1,202 1,630 218 - 232

~~~:ctDi~~~~~~~~b-16 -t, 154 ISO 9 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Atcl etne

'C tal ---rcosactions c.e.i. 77 154 184 116 -87 1810 AetV7 1973 19B4 rhCioge in *et Resaves 170 - 4 -173 -617 -550 1i6 AD DdBT SEVscI ' "PubliDebt Out. h Disbbued 1918 2,072 2,252 3,164 3.143 19411 ANDLtA?1 OOHITMEYTS n f Nih:ll .rAI. & irant-like 17 199 16 3 3 Interest r Publi Dabt 11 26 Repay7mento cnl Public Debt 73 72 110 154 Thahic WILT Loans Total Public Debt Service 84 98 157 233 4Ar IBRD _ 25 158 0th r Debt S.rmice (not) - - - - 7DA - Total Debt Serfvie (ret) 84 98al1 157 233 Ot,lrr O-er NWatilate,al Burden on Export 84rsicnp () .S.-ser,s.e.,tr *' '' 244 92 S-pplier. .. . 542 250 Public Debt Service 7.4 9.7 10.9 11.3 7inancial In-titutio-a ...... 1,301 50 Total Debt ServIce 7.4 9.7 10.9 11.3 o,dns TDS-Direct Dnvest. rne. 17.6 13.7 11.0 11 3 7,A Pablic Loans n.e.i. Total Public NH&TLoans .. . --; Average Teros of Public Debt

Actual Debt otstasrding on . 31. 73 _nt. as S Prior TYareDD&D 0.6 1.4 2.3 3.5 4.1 UXTERNALDEBT D b d Nerent Amort. as %'Prior Tear DD&1 3.8 3.8 5.3 6.8 e 'lorld Balik t. X u. IDA ------rBRD Debt Out. &Disbured Other %btlitiateral 4.8 0.2 5 as S Public Debt 0D . 0.6 0.3 O.5 G-vsrcconts 824.0 26.0 ' u Public Debt Seice Boppli ro 1,153.0 36.4 *inanc:.i Uc".: z.aciocs 1,045.0 33.0 IDA Debt Out. &Dikbursed Po.do 78.7 2.5 aa S Public Debt O&D Pablic btats n.e.i 50.5 1.6 am S Public Debt Serviec .otal. Public NhLT Debt 3,16T 'TX1f1

(th-er VAL- Debts Sh..rt-t-r De-t (diSb. onlv)

cot applocable e staff etiDte not *-- Iable - ail or negligible ro- ~la:3b1e... separately -- less tbhn half th* b - dclad in total aellest unit ebown ANN X( II Page 1 of 3 pages

TrE STATUS OF BAK GROUP OPERATIONS IN ALGERIA

A. STATMENT OF BiANK OANS AND IDA CREDITS (as at April 30, 1975)

Loan or US$ million Credit Amount (less cancellations) Number Year Borrower Purpose Bank IDA Undisbursed

Tlhree loans fully disbursed 80.5

9102 AL 1 973 The Democratic and Highways 18.5 1G.5 Popular Republic of Algeria

913 AL 1973 The Democratic and Education 6.O 6.0 Popular Republic of Algeria

995 AL 1974 The Democratic and Port 70.0 70.0 Popular Republic of Algeria

996 AL 1974 Railways-SNCFA Railways 49.0 49.0

997 AL 1974 Power-S'IELGAZ Power 38.5 36.3

TOTAL 262.5 177.8

of which has been repaid 76.4

Total now outstanding 186.1

AmVount sold 34.8

of which has been repaid 34.5 0.3

Total nof held by Bank 185.8

Total undisbursed 177.8 177.8

A.. STATEMlXJT OF IFOC INVES TMTTS - None (not a member) ANNEX II Page 2 of 3 pages

C. PROJECTS IN EXECUTION

Loan 912-AL Highway ProJect; US$18.5 million Loan of June 19, 1973; Closing Date: December 31, 1976.

The highway improvement works and procurement of project equipment are progressing well. Due to the Government reassessment of highway develop- ment priorities, the preinvestment studies were delayed. However, the coor- dinating consultants are now appointed, feasibility study consultants will be selected shortly and the studies are expected to start about September 1975.

Loan 913-AL Education Project; US$6.0 million Loan of June 19, 1973; Closing Date: December 31, 1976.

Implementation of this project initially suffered delays due to ineffective liaison with the Bank. The Government has now appointed a liaison officer and communications were improved. No withdrawal applications have yet been presented to the Bank.

Loan 995-AL Port Project; US$70.0 million Loan of June 10, 1974; Closing Date: December 31, 1978.

Work is progressing satisfactorily, and consultants are supervis- ing construction. The Loan only recently become effective following the con- clusion of a special agreement between the Algerian Government and Kreditan- stalt fur Wiederaufbau, to which effectiveness of the Bank loan was linked. In May a disbursement application for US$11.6 million was received; it is presently being processed in the Bank.

Loan 996-AL Railway Project; US$49.0 million Loan of June 19, 1974; Closing Date: December 31, 1978.

The physical execution of the project is being carried out on time. Maintenance of locomotives and rolling stock has still to be reorganized in order to achieve agreed operating targets. Consulting studies financed under the loan should help SNCFA to improve the availability of locomotives and rolling stock in the near future.

1f These notes are designed to inform the Executive Directors regarding the progress of reports in execution, and in particular to report any prob- lems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. ANNEX II Page 3 of 3 pages

Loan 997-AL Power rj _ct; US$385 million Loan of June 10, 1974; ClosingDate: December 31, 1978..

The project is showing reasonable progress, although some delays have occurred in evaluation ar.d award of main contracts. Difficulties have arisen between the borrower and the management consultants which may lead to a transfer of part of the assignments to other consultants. ANNEX HII Page 1 of 2 pages

ALGERIA - TECHNICAL ASSISTANCE PROJECT (RURAL DEVELOPMENT)

LOAN AND PROJECT SUMMARY

Borrower: The Democratic and Popular Republic of Algeria

Amount: US$8.0 million

Terms: Repayabl.e over 10 years, including a 3 year period of grace at 8-1/2 percent.

Project Description: The project provides over a three-year period technical assistance and associated equipment to plan, prepare, test and begin to implement the following subprojects: (a) integrated development of the steppe zone of Ksar Chellala; (b) integrated development of a poor, densely populated mountainous region in the daira of Arris in the wilaya of Aures; (c) development of an agricultural extension service; and (d) assistance to the Banque Nationale d'Algerie (BNA) to improve the technical capacity of the institution to provide agricultural credit.

Estimated Cost: US$ thousand (for detailed breakdown, Local Foreign Total see Annex IV)

Technical Services 1,769 5,323 7,092 Associated equipment 1,053 755 1,808 Subtotal 2,822 6,078 8,900

Contingencies 676 1,922 2,598

Grand total 3,498 8,000 11,498

Financing Plan: US$ million

IBRD 8,000 Govt. of Algeria 3,498

11,498

Estimated Disbursements: 1975 1976 1977

Annual 2,500 2,500 3,000 Cumulative 2,500 5,000 8,000 -.NN.4rX Il` Page 2 of 2 pages

Procurement Arrangements: The procurement of vehicles for Algerian staff will be on the basis of ICB but limited to firms that have service facilities in Algeria. Associated equipment vould be procured on the basis of local competitive bidding.

Consultants: All contracts for consulting services would be sub- ject to prior approval of the Bank. The foreign experts for all four subprojects would be provirded by consulting firms. The advisor for the project roordination unit would be recruited on an in- dividual basis.

Experts for the subprojects would be provided as follows:

Estimated Man- Years over Algerian Foreign 3-year Period

Integrated Steppe De- velopment 7 5 36 Integrated Mountain Development 11 6 51 Agricultural Extension 12 9 63 Agricultural Credit Study Group 23 3 50

Total 52 24 200

In addition about 146 man-months of short-term con- sultancy services by foreign specialists, 35 graduates of the Instituts de Technologie Moyenne d'Agricul- ture, and periodic assistance of topographic and water resources survey teams would be provided.

Rate of Return: Not applicable. hiIi sv

~~d,(Ir~ -4:1I A ~ ~ ~ f1U7 I

¶ECHIrVCAL ASSISTANC.V11C ,TCT (IJ'.L DtSJELO?MpT)

.3STL4ATEMD -R0OJECr COSTS

DA (000) us$ (coo)

For- For- Local eign Total Local eign Total

TcThnical Services (Including local qnd _oreigr. personnel) 7,375 22,191 29,566 1,769 5j323 7,392

Trqnsport 2,088 1,272 3,360 501 305 306

Or!ice Services FE *Emuipment - 1,88 1452 - ? 52

Dcr.onstration and Fxperiment.atioh 7 1,876 2,293 100 50 5 Eouipment

Total 11,764 25,339 37,103 2,822 6,078 ?l9)Y

Contingeencies

Price (14 percent) 1,109 4,061 5,170 266 97L 1,?I,O

Physicea (15 percent) 1,709 3,952 5,661 hlo 948 1,^3

Total Contingencies 2j818 8,013 1,0831 676 1,922 2,523

TOTAL PFOJECT COT 14,582 33,352 47.,934 3s,98 8,000 11,?.9$ I I B RD 11465

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