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Repot No. 9691.

PROJECT COMPLETION REPORT

CHAD

COTTON EMERGENCY PROGRAM(CREDIT 1716-CH)

JUNE 21, 1991

Agriculture Operations DivisionSahelian DepartmentAfrica Region

This documeL. bas a restricted distribution and may be used by recipients only in the performance oftheir ofricial duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENS

1,00 US$ 225 CFAP1.000 CFWA - 4,44 US$

WEIGHTS AND MEASURES

Metric System

FISCAL YEAR

Government: January 1 - December 31

ABBREVIATIONS

BEAC - Central BankCAA - Caisse Autonome d'Amortissement

(Government Amortization Fund)CCCE - Caisse Centrale de CoopOration EconomiqueCEP - Cotton Emergency ProgramCFDT - French Company of 'otton and TextileCOTONTCHAD - Cotton Society or ChadCPSC - Caisse de Stabilisation des Prix du Coton

(Cotton Stabilization Fund)CRS - Comit6 de R4flexion et de Suivi de la Filiere

Coton (Cotton Filiere Commlttee)EDF - Furopean Development FundFAC - Fonds d'Aide et de Cooperation

(French Aid Corporation)GNP - Gross National ProductIDA - International Development AssociationIMF - International Monetary FundIRCT - Cotton Research InstituteONDR - National Rural Developexet OfficePCU - Program Coordination UnitR and D - Research and DevelopmentUNDP - United Nations Development Programme

FOR OMCAL USZ ONLyTHE WORLD SANK

Washi ngon, DC 20n33

OlHe& of tzctw-r~SOpw tsim Evuiuuue

June 5, 1991

MEMORANDUM TO TIME EECUTIVE DIRECTORS AND THE PRESIDEIT

SUBJECTs Project Completion Report on ChadCotton Emerrencv Protram (CredLt 1716-CH)

Attached, for information, is a copy of a report entitled "ProjectCompletion Report on Chad - Cotton Emergency Program (Credit 1716-CH)" preparedby the Africa Region with Part II of the report contributed by the Borrower. Noaudit of this project has been made by the Operations Evaluation Department atthis time.

17

Attachment

ThiTs dm Ament has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may rot otherwise be disclosed without World Bank authorization.

FOR OFMICIAL USE ONLY

PROJECT COMPLETION REPORT

CHADCOTTON EMERGENCY PROGRAM

(CREDIT 1716-CH)

TABLE OF CONTENTS

Page No.

Preface . . . ..Evaluation Summary . .............. . . .ii

PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE . . . .

1 * The Project . . . . . . . . . . . . . . 12. Background. . .. . .1 . .3. Program Description and Objectives . . . 24. Program design and organization - Role of the

Bank and of Other Donors . . . . . 35. Program Implementation . . . 46. Program Results . . . . 67. Program's sustainability. . .. 78. Borrower's Performance . . . . . . . . 89. Bank's performance . . . . ......

PART II: PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE 11

1. Data Contained in Part III . . . . . . . . 112. The Analysis Contained in Part I . . . . . 113. Evaluation of the Bank's Performance and

Relations with the Borrower . . . . . . . 114. Evaluation of the Performance of Co-financiers

and Relations with the Borrower . . . . . 125. Performance of the borrower . . . . . . . 136. Lessons learned . e.. . . ... 13

Applications by category . . . . . . . . . 14

PART IIT: STATISTICAL INFORMATION . . . . . . .15

Credit Data . . . . . . . . . . s15Mission Data . . . . . . . . . . . . . . s15Related Bank Loans and/or Credits . . . . . . 17Project Timetable ..... . . . . . 18Project Costs and Financing . . . . . . 19Actual Disbursement by Quarter . . . . . . . . 20

Attachment

MAP: IBRD No. 19729

I This document has a restricted distribution and may be used by recipients only in the perfo.manceof their official duties. Its contents may not otherwise be di.closed without World Bank auth,orization.

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PROJECT COMPLTION REPORT

CRAD.COTTON E _RCUICY PROGM

(CR 1716-Cua

MFACE

This is the Project Completion lsport (PCI) for the IrgecRehabiltation Program for the Cotton Subsector ( Cotton kurgen cprogr)in Chad, for wbich Credit 1716-C In the amat of US$1. mllion wasapproved on Jum 3,1986. The Credit was closed on schedule, on April 30,1989. it was fully dLaburued and the last disbureseent was on October 31.1988.

The PC& was jointly prepared by the Agriculture OperationsDivision of the Sahelian Departmt in the Africa Rleion (Preface,Evaluation SIary, Parts I and 111), and the Borrover (Part II).

The Bak's final supervision mission of the project Vas carriedout in March 1989. Preparation of this PCi vas started in May 1990 ad isbased, inter lia, on the President's Report, the Credit Agrement,supervAosion reports, correspondence between the lank and the Borrower, andintenal Bank morada.

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PROJECT CONPLEtSION *RPORT

CHADCOTTON EMERGENCY PROGRAM

(CRIT lil6-CK)

mm UT$SM4E19tRY

Proram Objectivea

The Cotton Emergency Program (CEP) is the first phase of a MediumTerm Restructuring Program designed to restore oustainability of cottouproduction in Chad. This program covered two years, 1986/87 and 1987/88,and was designed to reduce the financial deficits in the cotton sub-sector;important arrears vis-a-vis the banking system had been accumulated byCotontchad, the national company entrusted with processing and export ofcotton, and these amounted to levels beyond the repayment capacity of bothCotontchad and the Government of Chad. The CEP focussed on a) reducingCotontchad's production costs; b) improving Cotontchad's management; c)improving fanm level productivityg d) identifying follow up measures to beexecuted in a subsequent phase of the restructuring program.

Program ml_ementation

Program implementation was good, and the Program's Coordination Unitperformed well. In addition, creation by Government of a Cotton Committeeto design and to monitor the program's implementation was very useful andhelped among others, to ensure coordination among donors, and betweendonors and the Government. However, early implementation was difficult dueto the Borrower's lack of familiarity with Bank procedures, and also to thefragile political situation of the country, reflecting the consequences ofa recent war. While cost reduction measures - the program's principalaim - were fully implemented, implementation of other measures, namely toimprove productivity within Cotontchad and at the farm level, was lesssatisfactory. Perhaps, this reflects the emergencyg nature of theprogram. The program preparation timetable was too tight to provide a goodappreciation of the magnitude of Cotontchad's management and farm levelproduction problems.

Program's Results

Program results were very successful. Cotontchad's financialsituation particularly during 1987188, the second year of the CEP,outperformed the program target. Against an objective of a negative cash-flow of ClAP 4.6 billion, the actual deficit was only CFA? 1.8 billion. Inaddition, Cotontchad's adherence to the recommendation to purchase farminputs through bids provided important savings to the sector. Thus, theimpact on the farmers of the elimination of input subsidies was, to a largeextent, mitigated by the lower cost of inputs. However, improvement ofCotontchad's management was limited, as was the performance of ONDR, thenational extension agency. Measures to address these questions have beenformulated and represent an important. -omponent of the second phase of theRestructuring Program currently under 4.cecution.

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Sustainabilitv of the Proaras

The Restructuring Program has been successful and is being mustainedin a second phase. Cost reduction measures have been intemnalized withinCotontchad and together with management improvement, continue to be animportant component of the ongoing Restructuring Program. On extension,the CEP has paved the way for a progressive improvement. A more cleardivision of responsibilities has been established between Cotontchad andONDR, with the latter focusing on giving advices more tailored to farmers'needs.

Lessons Learned

Despite the success of the CEP, in retrospect, it appears that theprogram was too ambitious. Thi is so not because of the large number ofactivities included in the program, but because of the timing of theirimplementation. For instance, improvement in both Cotontchad managementand farm level productivity as well as diversification of agriculturalproduction were expected to be realized during the two-year program. Yet,the program was an emergency operation; that is it had to be preparedquickly; in addition, Bank staff had little familiarity with the Chadianconditions because operations had been suspended for many years due to thewar.

Aside from the cost reduction measures which indeed have been wellidentified and planned, the CEP should have focused during the last year ofthe CEP, not before, on a diagnosis - without attempting to find quicksolutions - of Cotontchad's management issues and of the agriculturalextension services. This may have generated recommendations to beimplemented during the subsequent pilase. Unfortunately, the diagnosis wasattempted too early, thus ineffectilely. and will have to be pursued duringthe second phase.

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PROJECT CQWLTIOI REPORT

CHDCOTTOI DIIKOCT PROM

(CREDIT 1716-CEN

PART I: PROJECT REVIEW FROM BANK'S PERSP)rTTVF,

1. The Proiect

Names Emergency Rehabilitation Program for the Cotton SubsectorCredit ts 1716-CDVP: Africa RegionCountrys ChadSector: Agriculture

2. Background

2.01 The cotton subsector plays a key role in the performance of theChadian economy. In 1985, for example, cotton accounted for S0 percent ofChad's exports and 25 percent of government revenue. The subsector absorbs50 percent of domestic lending, constitutes the principal source of incomefor two fifths of the population, and represents one third of the country'sindustrial activity.

2.02 In the arly eighties. the Chadian economy was back on the road torecover5 following the hostilities of 1978-1981. By 1983/84, GNP stood at78 percent of its pre-war (1977) level, and the government had started toreplenish its reserves of foreign exchange and revenue. But the economythen started to experience severe setbacks, starning with the devastatingdrought of 1984/85, which resulted in a food shortage estimated at 300,000tons, but mainly as a consequence of poor performance in the cottonsubsector.

2.03 Under the combined influence of falling prices and a lower USDollar, cotton ezport prices fell from CPAF 800/kg in 1984 to CYAF 400/kgin 1985. The subsector's deficit was up to CFAF 18.1 billion ($40 million)in 1984185 and CEAF 19.2 billion ($53 million) in 1985/86. Moreover, by1986, Cotontchad, the parastatal agency handling cotton marketing. was indebt to the tune of almost CFAP 50 billion ($138 million). The prospectsfor an upturn in cotton prices were bleak, since world market stocks hadnow reached 10 million tons, or the equivalent of eight months'consumption.

2.04 Cotontchad had seen a serious deterioration in its operations.While its production costs had been below average for West Africa up to1984, there was a complete reversal of the situation in 1984/85, when itsproduction corts were amng the region's highest, considerably outpacingexport prices. The company's management audit system was inefficient,undesirable investments had been made, the necessary reorganizationAlmeasures (reduction of the number of plants in operation, restriction on

the size of the area cultivated to cotton, staff cuts) had not been takenin time, the company was paying out large subsidies (50 percent) onagricultural inputs, and government taxes had resched 270 percent with noprovioion for price stabilization.

2.05 Cotontchad was not in a position either to finance the 1986 cropyear or to moet its financial obligations, which already totaled CFAP 4.2billion for 1985186. loveover, the State was unable to make up thesubsector's deficits, which in 1985 and 1, exceeded government revenues.In November 1985, since the situation could have potentially seriousconsequences in the economic, social and political areas, the governmentcalled upon its donors for assistance.

2.06 The World Bank was appointed lead institution for the design of anemergency rehabilitation program for the cotton subsector, in connectionwith which the government had already introduced a number of measures.These include the replacement of Cotontchad's management personnel and theintroduction of an improved monitoring system for the company's financialactivities. In addition, the government set up a committee to study thecotton subsector, the Comit6 de reflexion sur la filiere coton, which wasentrusted with submitting for governmens approval a consistentrestructuring program for the subsector, and also with seeking donorassistance for the program's implementation.

3. Program Description and Objectives

3.01 The government's restructuring program is divided into a short-term and a complementary long-term phase. The first phase comprisesimmediate measures designed to rapidly improve the'financial situation ofthe cotton subsector. This would be completed by a second phase, to bebased on the results of studies carried out during the first phase, andwould consolidate the restructuring process, including diversification ofagricultural production.

3.02 The specific objectives of the Emergency Program were tot(a) reduce Cotontchad's production costs and financial charges;(b) improve the company's management; (c) improve productivity in thecotton subsector. The components of the Program were set out by theGovernment in a Development Policy Letter addressed to the World Bank. Thekey components are:

(a) At the producer levels

(i) HainteLrnce of cotton producer prices at the 1985/86level for the period 1986/87 and 1987/88.

(ii) Discontinuation of subsidips on agricultural inputs,starting in 1987188.

(iii) Restriction of the area under production to 75,000 haduring the program period, with a view to limitingproduction to 10,000 tons.

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(b) At Cotoatcbads levels

(i) Reduction of the number of operational ginning pli.ntsfrom 18 to 5.

(ii) Reduction of fixed costs through the sale ofnonessential assets.

(iii) Closing of the Bangui office.

(iv) Staff cuts.

(v) Reorganization of cotton collection centers.

(vi) Improvement of internal audit procedures.

(c) At the level of the Government and the R&D lnstitutionst

Ci) Suspension of certain of Cotontchad's tax obligations,including the taz on fiber exports and contributionsto the Caisse Autonome d'Amortissement (CAM);guaranteeing of Cotonchad's obligations to the CentralBank.

(d) At ONDR, the Chadian agricultural extension agency:

(i) Staff cuts and improvement of staff performance.

se) At IRCT-TCEAD, the research agency:

(i) Introduction of new cotton varieties to increasecotton ginning output.

(f) At the Calse de Stabilisation des Priz du Coton (CSPC)s

(i) Ensure financial autonomy, with discontinuiition ofCotontchad's contributions, in particular foroperating costs.

4. Program desian and organization - Role of the BaLX and of OtherDonors

4.01 The Government and donors responded quickly to the cotton crisis.cooperation among donors was good and the decision to p--spare the programwas appropriate. The design of the Emergency Program was based on the Dresults of two diabaostic studies financed by CCCE and the EDF,re- ;ectively. The two studies identified immdiate ways of reducing costsand improving management for the subsector's institutions. Bank'spreparation of the program took only two months, appraisal was conductedquickly in March 1986, and the program was negotiated in May 1986.

4.02 Agreement was reached at a Geneva Round Table Meeting that thecotton program would be prepared in two phases. The first phase, theEmergency Program, was to enable Cotontchad to "ride out' the crisis, via

immdiate measures to reduce its production costs and improve itsmanagement and accounting. This first phase covers the period 1986/87-1937/88. Preppration of a second phase, medium-term restructuring programfor the cotton sector, as well as any amendments to the Elergency Programwere to be based on a study financed by UNDP and executed by the Bank.

4.03. The Director of Cotontchad was responsible for start-up, assistedby a Program Coordination Unit (UCP) headed by a management control espert.The purpose and operational procedures of the UCP were discussed andapproved with the government at the time of the credit negotiations. TheUCP was entrusted with handling the technlcal monitoring of programimplementation, while for the extension (ONDR) and research (IRCT) agencieswhich are independent of Cotontchad, the general manager of the Ministry ofAgriculture was designated. The Comitd de Reflexion served as the liaisonbetween donors and the Office of the President of the Republic for mattersrelated to program implementation. Bi-annual meetings were also crganizedbetween donors and the Comite.

4.04 The total project cost was $47 million, of which $15 million wasto be provided by IDA, the balance to be furnished by the Caisse Centrale(CCCE) for $15.6 million, and in grants from the European Development Fund(EDF) for $13.7 million), the French (FAC) for $0.8 million, and theNetherlands for $2.3 million. The IDA credit was to be released in twotranches, one of $10 million and one of $5 million. The first tranche wasto be released upon program start-up, and the second following a midwayevaluation of the program, designed to confirm that the following measureshad been finalizeds (a) audit of Cotontchad for fiscal 1985186; (b)adoption and promulgation of a decree abolishing input subsidies; (c)reduction of the number of operational ginning plants; (d) reorganizationof Cotontchad's financial and accounting operations; (e) settlement ofCotontchad's arrears.

4.05 The funds furnished by IDA were intended to finance (a) theagricultural inputs program for the cotton subsector; (b) activitiesdesigned to improve Cotontchad's management, including management control,mainly through internal audits and technical assistance, training, andstudies in preparation for the secoud phase of the restructuring program;(c) activities linked to the continuation and recrganization of theoperations of key institutions in the cotton subsector, in particular ONDRand IRCT.

5. P_ sram Im lementation

5.01 The credit was signed on July 18, 1986 and actual effectivenesswas in October 1986, after the Chadian Government had complied with therequired conditions. The principal aim of the Program - to identifymeasures to be taken immediately to improve Cotontchad"s financialsituation - wAs successfully implemented and owed much to the ableassistance of the UCP. In addition, the commitment of the top-levelChadian authorities to monitor the program was effective, including their

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readiness to act; for example, the government moved quickly to bring aboutchanges in Cotontchad's management and in the leadership of the Committeewhen difficulties started to appear in the program's implementation.Howevex, in practice the Hinistry of Agriculture played a minor role inpart b*eaA&i all IDA funding went directly to Cotontchad. This explainsperhaps the leis-than-satisfactory performance of ONDR in programimplementation.

5.02 The risks of poor proiect execution were, on the who.le, wellevaluated at the time of project preparation. Actual world prices ofcotton fiber were well above the program's conservative estimates, andmeasures which were politically too sensitive were excluded from theprogram. For instance, becauge the program was designed at a time whenChad's political situation was still very fragile, donors had accepted theGovernment's position that it was not politically feasible to include inthe cotton program a reduction in the producer price, although this measurewas economically sound.

5.03 At the prod,_at level, cotton prices were frozen at their 1985/86levels and subsidies on inputs were eliminated starting with the 1987/88season. The danger of farmers losing interest in cotton growing was wardedoff by the absence of alternative crops; however, the ceiling of cottonproduction to 100,000 tons - because variable costs of fiber were aboveworld prices - resulted in a rationing of inputs which proved difficult toimplement. The production target of 100,000 tons was not only surpassedduring the 1987,38 season, but the geographical distribution of cottonproduction was influenced by political factors rather than efficiency.

5.04 At the Government level, the suspension of Cotontchad's taxobligations during the program was fully adhered to, and th? politicalconsequences of adjustment (firing of personnel) were counteracted by theauthorities' realization that the economic and social costs of proceedingwlthout adjustment would be even higher. Lastly, the trend in cottonexport prices was more favorable than expected, a reflection of the factthat the estimates were somewhat conservative.

5.05 At Cotoutchad level, program execution was good, and the costreduction measures were implemented, including tlxe reduction of thecompany's non-essential assets and overheads, substantial staff cutbacks,etc. However, for Cotontchad's management, measures introduced were not asthorough and synergic as was hoped. A piecemept approach s.o management wasinadequately used when an integt:ated approach would have led toimplementation of more thorouG,h measures. It seems that implementation ofthe Bank's proposal to undertake a management audit would have given apreview of the magnitude of Cotontchad's management problems. Inretrospect, it appears that the Bank should have stood firmer on themanagement audit of Cotontchad, despite the aversion of both Cotontchad andCCCE to it.

5 06 For extension, ONDR did not appear to be at all effective in thefield. The Bank recognized early that this Was the weakest element of thesub-sector, but identifying solutions to its problems was difficult toundertake in the short-term. Thus, it appears that the program preparationtimetable was too tight," and also emphasis was put on financial issues

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and on immediate rescue measures. Insufficient attention was paid to sometechnical issues e.g. high costs of farm inputs, ineffective extensionservices, as well as organizational ones such as the overlappingresponsibilities b.tween Cotontchad and ONDR. In addition, the secondphase study which started in April 1986 when the Emergency Program wasbeing finalized appears to have been launched too early; few new ideas fora medium-term program were generated as the basic political constraintsremained the same, and little new information was available.

5.07 Procur e nt and disbursement took place in conformity with theWorld Bank's guideline. Initially, Cotontchad had wanted to avoid usingBank procedures, and had had difficulties in applying them correctly. Butthose difficulties were subsequently overcome, thanks to the skill of theProgram Coordinator, to the rapidly-created Bid Evaluation Committee, andalso to a World Bank mission which, right from the effective date, hadhelped Cotontchad to prepare all of the tidding documentation.Disbursement of the second tranche too'v longer than planned with nineteenmonths after effectiveness instead of nine. But this stemmed from the factthat in tte course of the Program, the Dutch Government decided to provideadditional financing for agricultural inputs, making the release of thetranche less urgent although release conditions were met. Nevertheless,following a reallocation of the credit funds, the credit was fullycommitted by the closing date. Total program cost was $60 million of which$43.2 million were provided by the other co-financiers, against appraisalestimates of $47.4 million. This actual cost of the program represents anincrease by 26? over appraisal estimates. This is due first to increasesin the parity of SDR vis-a-vis the US Dollar - IDA contribution increasedby 12Z from $15 million to $16.8 million - and in the parity of otherEuropean curre6cies such as the French Franc and the ECU vis-a-vis the USDollar. In addition, some changes in the respective contributions of othercofinanciers took place. EEC contribution in French Francs was increasedby as much as 25 due to larger than expected STABEX funds and Frenchcontribution (CCCE and FAC) in US Dollar equivalent was slightly increased.

6. Pro8ram Results

6.01 Cotontchad's production costs declined quite spectacularly, withthe production costs of fiber falling from CFAF972 per kg in 1985186 toCFAF610 per kg ln 1986/87, and to CFAF495 per kg in 1987/88. Cotontchad'snegative cash flow, estimated by the program at CFAF4.6 billion for1987/88, was CFAF1.8 billion, a deficit 2.5 times lower than the programestimates. In addition, Cotontchad implemented the recommendation topurchase farm inputs via bids. This provided important savings to farmersas the cost of such inputs decreased sensibly. It should be noted,however, that market prices for cotton rose more favorably thananticipated, contributing significantly to Cotontchadts financialsituation.

6.02 Another positive, but non-quantifiable, consequence of the programwas that Cotontchad came to realize the importance of keeping a close checkon production costs and on improving management. Those two objectives now

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form an integral part of Cotontchad's guLdelines, and with the introductionof tools to monitor its technical and financial parameters on a monthlybasis, Cotontchad ls pursuing the improvement of its managoeant in thecontext of the second phase of the restructuring program.

6.03 The Emergency Program has succeeded less well in improvingagricultural productivity, reflecting the weakness of the eztension agency,and also the difficulty to address the related issues in the short-term.However, by the end of the Emergency Program, and during the early periodof the subsequent phase, important measures were introduced including,among others, more flexible technical advice to the farmers (as opposed toone or a few technical input packages), introduction of less expensiveinsecticides, and decentralization of the decision-making process withinONDR. Still, human resource capacity within ONDR and also in Cotontchadremains an important constraint which will need to be addressed vigorouslyin subsequent phases of the restructuring program. Technical assistance,audits, and the Government's readiness to arrange for the creation of ateam of local experts to direct program execution clearly helped improveefficiency within the sub-sector, but cannot be sustainable substitutes forthe low level of manpower.

6.05 The settlement of Cotontchad's arrears to the Central Bank (BEAC)was also a thorny problem, for which a solution was not identified duringthe Program's design. While the Bank supported a rescheduling of thearrears under terms similar to IDA credits, its principal co-financierwanted a faster repayment period, including the earmarking of a largeportion of externally mobilized resources from STABEX, the IMF, and theBank's special funds for Africa to pay for the arrears. An interim planfor the settlement of arrears was agreed with the BEAC in 1986, whichrescheduled the repayment period over ten years including a five-year graceand a two-year moratorium on interest. But it was recognized by allparties that this rescheduling term was not satisfactory, because itexceeded Cotontchad's and the Government's capacity to pay, and thus neededto be renegotiated. By the end of the Program, BEAC agreed to rescheduleonce more part of the arrears, while Cotontchad's arrears vis-a-vis thecommercial banks were repaid through a special credit from CCCE.

7. Program's sustainability

7.01 The Emergency Program was designed as the first step in a broaderprocess of reform and institutional development. There is still much to bedone, but the political coumitment is still strong and Cotontchad appearsto have internalized the objectives of the adjustment program. The cottoncommittee continues to play an important role and donors continue tomonitor closely the follow-up program's implementation. The Program'sachievements have been sustained and the long-term objective of making thecotton sector viable is likely to be achieved. The second phase of theprogram, now in progress and supported by the Financial RehabilitationCredit, is designed to further develop the measures initiated during thefirst phese.

7.02 It is to the Emergency Program's credit that Important constraintsof the sub-sector have been identified, e.g. the need to pursue upgradingof Cotontchad's management, staff training, organization of the extensionservices. These elements constitute important components of the subsequentphase of the program, and which include the establishment of anorganizational system of management at Cotontchad, decentralization ofONDR's operations in the cotton-growing region, and the preparation of testoperations in support of the farmers, to serve as a basis for anintervention strategy. Moreover, the formulation of a producer pricepolicy represents an important component in the second phase, and stressesa closer relationship between market prices of fiber and producer prices.

8. Borrower's Performance

8.01 The Government has demonstrated its commitment to the success ofthe program by setting up. on schedule, a very capable Project CoordinationUnit (UCP), and also proceeding to make all necessary staff changes at theprogram implementation level. Performance of the UCP was good, asreflected in the esecution of measures foreseen. But performance at ONDRand IRCT were limited although coordination was greatly improved betweenONDR and Cotontchad. The decision making process within the Ministry ofAgriculture and ONDR was slow but significant improvements have beenintroduced in this area under the second phase.

8.02 The Cotton Committee's role was weak during the early phase ofproject implementation, particularly when the report of the second phasewas ready for discussion and this seriously delayed preparation of thesecond phase. However, the bi-annual meetings of Government and donorsconvened by the Committee and the Minister of Planning to evaluate progressin implementing the Program were valuable and provided a forum for theCommittee to disseminate information to the rest of the Government and todonors not directly involved in the Program's financing. The Committee,including the leadership character of its head, has proved to be veryinstrumental in fostering coordination in the project's implementation, andit continues to play such an important role in the current ezecution of thefollow-up program.

9. Bank's performance

9.01 Technical assistance was efficient, particularly within the UCP.The Bank's appraisal mission paid insufficient attention to technical andorganizational issues related to cotton production, perhaps reflecting thelack of involvement of technical specialists knowledgeable about cotton onthe team. But as the Program's supervision unfolded, the Bank made animportant contribution to some technical issues, e.g. an analysis ofagronomic recommendations which led to the proposition and adoption ofdifferent types of insecticides with the results of providing importantsavings to farmers.

9.02 Supervision was difficult in the early period of the Programbecause Cotontchad, and also the Government were totally unfamiliar withthe Bank's procedures. Important efforts were devoted to establishingdialogue between the Government, the Central Bank, Cotontchad, and the

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Bank; later superviuions benefitted from them. Also, coordination betweenthe Bank and the prlncipal co-financLer was somewhat hlndered both by themedium-term study whlch appeared to the CCCI as a mechanLsm to "check upon the dLagnosLi study carried out by CPDTICCCE, and by the Lisue of therepaymeat of the arrears for wilch the Bank and the CCCE have dLfferentviews. However coordinatLon between the donors has gradually improved,wlth joLnt supervlslon mLsLons being undertaken. Thls represents anLmportant legacy, as coordlnatLon among donors ln the follow-up program hasbeen effective.

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PROJECT CML3TON RWOK

ClADCOTTON RGEC PROGRAM

(CREDT 1716-cE)

PART 11: PROJEC REVIEW fl B I BOUMIEkS FPERSECTIV

1. Data Contained in Part III

The table attached hows applications of the proceeds of IDA Credit1716-CD in ter.s of the categories contained in Aanex 1 of the CredltAgreement.

Without disputing the indication in Table 3 of Part III of the PCR tothe effect that the value of the SDR role 132 between appraisal and theclosing date, we would note that the value of the credit in local funds,estimated during negotiations in May 1986 at CPAP5.4 billion, was inpractice CFAPS1. billion, a reduction of 51.

The other assistance made available to and/or consumed during theemergency program was as follows.

- CCCEICOTONCHAD CPAP 4.680 billion- European Commiuty 6.110 billion- Netherlands 0.722 billion- VAC 0.790 billion

2. The Analysis Contained in Part I

Part I of the report is in our opinion simultaneously succinct,comprehensive and objective, as regards not only the essential stages ofthe project but also the thought processes of the principal partiesinvolved.

The chronology and analysis of the facts as presented thereforerequire no additions or corrections on the basic issues.

3. Evaluation of the Bank's Performace and Relations with the Borrower

Two periods may be distinguished heres up to the supervisionmission in October 1987, the borrower felt that the Bank had reservationsabout the actions taken by those responsible for the cotton sector.PurthorFore, sharp differences were clearly apparent between the positionsof the Bank and the ideas ezpreossed by the CCCL.

After the supervisLon mission in January 1988 mutual confidenceslowly increased, and better and clearly more constructive attitudesdeveloped among the various partners. Relations between the Bank and thecotton sector are now excellent.

Imple entation before 1988 was not poor; simply, things wereespecially hard during that period.

- 12 -

Part I of the report correctly points out that the Chadianauthorities replaced ineffective managers at the appropriate times; thesemeasures and similar steps tnken at the Bank may explain the satisfactorydevelopments referred to above.

As regards the approach to the cotton sector's problems, the Bankirom the start took a more global (macro?) view than the majority of theother partners, who were more concerned with the financial rescue ofCOTONCHAD. The borrower would observe that the Bank was the firstinstitution to concern itself atbout the agricultural aspects of theseproblems, thereby laying the foundations for the program contract which weto follow.

Bank staff were always in the forefront of activities, and bothduring and between supervision missions the attention given to the issuesinvolved resulted in a number of proposals made by the Bank being agreedand implemented.

Nevertheless, this desire to direct events sometimes led toproposing solutions that had been devised (and perhaps even tested) insituations quite different from those in Chad, and thus were difficult toapply.

4. Evaluation of the Performance of Co-financiers and Relations with theBorrower

For reasons pertaining to the history of the situation, the CCCZwas, like the Bank, one of the principal forces behind the emergency cottonprogram.

The CCCE's approach was to promote the rescue of COTONCEAD whilealso resolving the matter of the arrears to BEAC. This approach was morein line with the concerns of the borrower.

Relationships between the Borrower and CCCE were good, helped fromthe beginning by the existence of a local CCCE office much livolved in thepreparation of the emergency program.

The European Community was the main donor over the program period,essentially through the STABEX compensatory financing arrangements. TheEEC ensured that all the STABEX financing benefitted the cotton sectoreffectively, thereby showing a good grasp of the seriousness of thefinancial situation and a desire to help resolve the problem.

The other resources received by the sector were the result ofbilateral agreements with Chad. These donors displayed much understanding,flexibility and good will. A number of them, in view of the serioussituation in the sector, have even continued assistance which initially wasprovided on an interim basis.

- 13 -

S. Performance of the borrower

Nominally speaking, the borrower was the State, represented by theMinistry of Planning and Cooperation. In practice, those interacting withthe Bank were evidently more numerous, and, in addition to governmentofficials, the various sector representatives brought together under theaegis of the Comit# de R6flexion et de Suivi (CRS) de la Fili4re Coton werein periodic or even permanent contact with the Bank.

Nevertheless, what might seem a mosaic of diverging interests wasinspired by a common determin*tion tot

- succeed without mortgaging the futures- respect commitments undertaken;- act responsibly and pragmatically.

Even if some actions occasionally deviated from this intent, theoverall results achieved were satisfactory.

The Government took the necessary measures, which were sometimessevere, within the deadlines established and saw to it that the CRS appliedthe reconmendations approved by the donors. This attitude did not by anymeans rule out local contributions and initiatives, or the discussion andeven questioning of recommendations when these appeared to be of doubtfulutility.

The same spirit of cooperation and efficiency has prevailed duringthe preparation and implementation of the current program contract.

6. Lessons learned

Apart, obviously, from benefitting from the rescue of the cottonsector, COTONCHAD became aware of the advantages of the bidding competitionsystem for purposes of awarding significant contracts. One of the cl6arestexamples relates to the cost of inputs made available to farmers. While in1985/86 the cost oz inputs was CFAF48,000 per ha (the farmer beingresponsible for 50Z and CSPC for the other 50X), current production costsare of the order of CFAF26,000 per ha, entirely paid by the farmer. Theimpact on the farmer of his gradual assumption of the entire cost of theinputs has thus been very significantly mitigated.

The advantage of having a reliable forecasting tool was also oneof the lessons learned from this phase.

- 14 -

CREDIT 1716,CD

APPLICATIONS BY CATEGORY

CPA? million

1 lTires and parts . . .. . ...... .. . . 3382 Agricultural inputs . . .. . . . .. .. . . . . . 1,6413 Petroleum products . . . . . . . . . . . . . . . 29894 Consultants . . . . . . . . . . . . . . . . . . . . 130

5,098

- 15 -

PRWoCT COMWION 3sP1RT

COADcorroU DI3IOCT PROGRM

(CREDIT 1716-C _

PART IIIs STATZIM LZE.UAi

* CHADs ZMXREECT RUAILITAION PROGRAM FOR TEM COTTON SECTORCUDID DATA

Amounts (US $H)Loan/Credit Original Disbursed Cancelled Repaid OustandingIDA 1716-CD 1S .16.8 £/ --- ...France 16.4 16.5 b/EDF 13.7 18.4 b/The Netherlands 2.3 8.2 b/

a/ SDR has risen by 13Z vis a vis the dollar between appraisal and the closing dateb/ Parity of US follar vis-a-vis CAFW has decreased by SZ from 360 CFAF to 331 CPAP.

Loan/Credit DatesOriginal Actual or Re-estimated

, InitiatingHemorandum NA NA

, Letter ofDevelopment Policy --- NA Hay 1986

*Negotiations ------- May 1986 May 1986*Board Approval ------- June 1986 June 1986*Credit Agreement ------- July 1986 July 1986* Effectiveness -- _-- July 1ftM October 1986credit Closing ------- April 1989 July 1989

*Actual Completion ------- October 1989 October 1989

CMUTLATIVE LOANICREDIT DISBURSEDENTFY87 FY88 --7Y89 FY90

Ci) Planned 10 15 --(ii) Actual a/ 4.28 9.54 16 .6 16.81(iii) (ii) as Z of Ci) 43 64 99 100

MISSION DATANo.of No.of Staff Date of

Honth, Year Weeks Persons Weeks ReportPreparation --- 8Appraisal b/ --- March 1986 NA NA No reportSupervision 1 --- October 1986 2 2- 4 Nov. 3 1986Supervision 2 --- Feb/Mar 1987 1 3 3 April 15 1987Supervision 3 --- June 1987 1.5 3 4.5 July 10 1987Supervision 4 --- October 1987 3 2 6 Jan. 20 1988Supervision 5 --- Oct/Nov 1988 1.5 2 3 Nov. 15 1988Completion H-- March 1989 2 2 4 April 11 1989

b/ Appraisal was based on a quick but well conducted study by CFDT and CCCE

FOLLOW-ON ADJUSTSEJUT OPERATIONSCHAD- Adjustment Credit, Credit No. 1945-CD approved onJuly 26 1988 in the amount of US $ 37.5 million

16

MISSION DATA

No.of No.of Staff Date ofMonth, Year Weeks Persons Weeks Report

Preparation --- 8Appraisal b/ --- March 1986 NA NA No reportSupervision 1 --- October 1986 2 2 4 Nov. 3 1986Supervision 2 --- Feb/Mar 1987 1 3 3 April.15 1987Supervision 3 --- June 1987 1.5 3 4.5 July 10 1987Supervision 4 --- October 1987 3 2 6 Jan. 20 1988Supervision 5 --- Oct/Nov 1988 1.5 2 3 Nov. 15 1988Completion --- March 1989 2 2 4 April 11 1989

bl Appraisal was based on a quick but well conducted study by CFDT and CCCE

FOLLOW-ON ADJUSTMENT OPERATIONS

CHAD - Adjustment Credit, Credit No. 1945-CD approved onJuly 26 1988 in the amount of US$37.5 million.

17

TABLE ls Related Bank Loans and/or Credits

Credit Purpose Year Status CcomentsApproved

1.Agric. Sector. Strengthen and coord. 1987 In progressRehab. Program institutional and

technical capacitywithin the sector

2.Financial Rehab. Improve Cotoutchad's 1988 In progress Satisfactory execution,Program perfoma=nce and cotton except on the productian

production, and overhaul side, where researchproducer pricing policy and extension are still

tentative.

A

.~~~~~~~~~~~~~~~~~~~~~

- 18 -

TABLE 2t Project Timetable

Item Date Planned Date Proposed Actual Date

Identification October 1985

Preparation February 1986

Appraisal mission March 1986

Negotiations May 1986

Approval June 1986

Signature July 1986

Effectivenes July/August 1986 Sept 1986

Credit closingdate April 1989 April 1989

Credit completion October 1988 October 1988

- 19 -

TABLE 3: Project costs *nd financing

Project costs and financing in CFAF (millions)

1/ IDA 5,4" 5,098 b/

Inputs 4, MS 4, 96.Techn.Assist. 432 130Audits, studies.

2/ CCCE 5,000 4,680

3/ EDF 4060 6,110

4/ Netherlands o0 2,722

5/ France 232 70W

TOTAL 17,032 19,400

b/ Due to depreciation of dollar vie-s via FCFA

20

VP - AFRICAPROJECT ID 3CHDPA025

LOAN/CREDIT NUMBER: C17160ACTUAL DISBURSEMENT BY QUARTER

(US$MILLIONS)RUN ON 04/05/90

Year/DSB FY DSBQTR Month Disbursed amount

87 2 86/12 2.163 87/03 .564 87/06 1.56

DSB FY 87 4.2888 1 87/09 1.04

2 87/11 2.023 88/02 .83

88/03 .824 88/05 .51

88/06 .05

DSB FY 88 5.2689 1 88/07 1.00

88/09 .762 88/11 .55

88/12 3.523 89/01 .01

89102 .6889/03 .10

4 89105 .42

DSB FY 89 7.0590 2 89/11 .22

DSB FY 90 .22*Total ID 3CHDPA025 16.81

ATTACIHME

LIST OF PERSONS FROK BORROVER AGENCIES

GOVER!O? OF CHAD

Minister of Finance - Mr. L. GouaraMinister of Agriculture - Mr. Mbailemdena

DONOR AGENCIES

Caisse Centrale de la Cooperation EconomiqueMr. J. F. Richard35-37 rue Boissy d'Anglas, 75379 Paris Cedex 08, France.

French Aid Corporation (Fonds d'Aide et de Cooperation)Mr. Gerard Pince20, rue Monsieur, 750007 Paris, France.

French Company of CLtton and TextileMr. G. Estur,13 ruc de Monceau - 75008, Paris, France.

European Development FundMr. M. B. Smaghi200, rue de ia Loi, 1040 Brussels, Belgium.

Cotton Society of ChadMr. Dansalah, Director General.B. P. 1116, N'DJimena, Chad.

Cotton Filiere Committee (Comitd de R4flt ion et de Suivi de la FiliereCoton)Mr. Beremadji,Project DirectorN'Djamena, Chad.

Government of the Netherlands Aid AgencyMr. P. Marres,Ministry of Foreign AffairsP. 0. Box 20061, 2500 EB The Hague, Netherlands.

Central BankMr. Adam Hadji, National DirectorB. P. 50, N'Djamena, Chad.

European Economic Commission200, rue de Ia Loi, 1040 Brussels, Belgium.

IBRD 1r~~~~~~4 16- la- 22- 2 4-

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