AFRICAN DEVELOPMENT FUND LANGUAGE: ENGLISH

ORIGINAL: FRENCH

MADAGASCAR

TULÉAR FISHING COMMUNITIES SUPPORT PROJECT (PACP)

APPRAISAL REPORT

DEPARTMENT OF AGRICULTURE ONAR AND RURAL DEVELOPMENT July 2005 NORTH, EAST & SOUTH REGIONS

TABLE OF CONTENTS

Pages Project information sheet, Currency equivalents, List of tables, List of annexes, List of acronyms and abbreviations, Socio-economic indicators, Executive summary, Project matrix i-x 1. PROJECT ORIGIN AND HISTORY...............................................................................1 2. AGRICULTURAL SECTOR ...........................................................................................2

2.1 Main characteristics .................................................................................................2 2.2 Sector performance ..................................................................................................3 2.3 The country’s agricultural strategy ..........................................................................3 2.4 Main institutions working in the sector ...................................................................3 2.5 Poverty profile .........................................................................................................4 2.6 Gender issues ...........................................................................................................4 2.7 HIV/AIDS control....................................................................................................5 2.8 Rural sector financing .............................................................................................5 2.9 Programs intervening in the sector ..........................................................................7

3. FISHERIES SUB-SECTOR .............................................................................................8

3.1 Main characteristics .................................................................................................8 3.2 Constraints and potential..........................................................................................9 3.3 Sub-sector policy ...................................................................................................10 3.4 Institutions intervening in the sub-sector...............................................................10 3.5 Programs intervening in the sub-sector..................................................................11

4. THE PROJET..................................................................................................................11

4.1 Design and rationale of project ..............................................................................11 4.2 Project area and beneficiaries ................................................................................13 4.3 Strategic context.....................................................................................................14 4.4 Project objectives ...................................................................................................14 4.5 Project description .................................................................................................14 4.6 Production, market and prices................................................................................19 4.7 Environmental impact............................................................................................20 4.8 Project costs ...........................................................................................................21 4.9 Financing sources...................................................................................................22

5. PROJECT IMPLEMENTATION...................................................................................23

5.1 Executing Agency..................................................................................................23 5.2 Institutional arrangements......................................................................................23 5.3 Implementation and supervision schedule .............................................................24 5.4 Procurement arrangements.....................................................................................26 5.5 Disbursement arrangements...................................................................................28 5.6 Monitoring/evaluation............................................................................................28 5.7 Financial and audit reports.....................................................................................29 5.8 Coordination of aid ................................................................................................29

6. SUSTAINABILITY AND RISKS OF THE PROJECT.................................................29 6.1 Recurrent expenditure............................................................................................29 6.2 Project sustainability..............................................................................................30 6.3 Main risks and mitigative measures.......................................................................30

7. PROJECT BENEFITS....................................................................................................31

7.1 Economic and financial analysis assumptions.......................................................31 7.2 Financial analysis...................................................................................................32 7.3 Economic analysis .................................................................................................32 7.4 Impact analysis.......................................................................................................32 7.5 Sensitivity analysis.................................................................................................33

8. CONCLUSIONS AND RECOMMENDATIONS .........................................................33

8.1 Conclusions............................................................................................................33 8.2 Recommendations..................................................................................................34

This report was written by Messrs. Ould-Tolba Mohamed, Principal Agro-Economist, ONAR.2, Mission Head (Extension 2452), Louis-Philippe Mousseau, Senior Environmentalist, ONAR.0, one fisheries consultant and one micro-finance consultant, following a mission to Madagascar from 19 July to 4 August 2005. Questions on this project should be referred to the authors or to Mr. A. Abou-Sabaa, Division Manager ONAR.2 (Extension 2675) and Mr. B.B. Sidibé, Director ONAR (Extension 2037).

AFRICAN DEVELOPMENT FUND

P.O Box 323 –1002 TUNIS BELVEDERE, TUNISIA

TEL : (216) 71 33 35 21

FAX : (216) 71 33 29 92

PROJECT INFORMATION SHEET (July 2005)

The information given hereunder is intended to provide guidance to prospective suppliers, contractors and all persons interested in the procurement of goods and services for the projects approved by the Board of Directors of the Bank Group. More detailed information and guidance may be obtained from the executing agency of the Borrower. 1. COUNTRY : MADAGASCAR 2. NAME OF PROJECT : Tuléar Fishing Communities Support

Project (PACP) 3. PROJECT AREA : Tuléar – South-West Madagascar 4. BORROWER : Republic of Madagascar 5. EXECUTING AGENCY : Ministry of Agriculture, Livestock and

Fisheries (MAEP) 6. PROJECT DESCRIPTION

The sector goal of the project is to help reduce rural poverty in Madagascar. The specific objective of the PACP is to promote the sustainable development of traditional maritime fishing through consolidation of beneficiary organizations and State services, joint and responsible management of fishery resources and adequate equipment of fishermen. The Fishing Communities Support Project has four components: (i) Capacity-building; (ii) Development and sustainable management of fishery resources; (iii) Development of production; and (iv) Project coordination and management. 7. PROCUREMENT OF GOODS AND SERVICES The procurement of goods, works and services shall be done as follows:

(i) National competitive bidding for procurement of construction works on wharfs (UA 1.513 million), vegetable gardens (UA 0.075 million) and the rehabilitation of project offices (UA 0.008 million).

(ii) International competitive bidding for procurement of equipment for the Tuléar

Training Center (UA 136,000).

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(iii) National competitive bidding for procurement of vehicles (UA 46,000) and transport boats (UA 44,000).

(iv) International shopping for the procurement of FCDs (UA 158,000 broken

down into two contracts of UA 79,000 each).

(v) National shopping for the procurement of office furniture (two contracts of UA 38,000 each), computer equipment (UA 43,000), sundry technical equipment (several small contracts worth UA 93.000) and motorcycles (UA 15,000).

(vi) Competitive bidding based on shortlists for the procurement of the services of consultancies, NGOs and individual consultants for training of beneficiaries (UA 315,000), academic training of engineers (UA 255,000); training of fisheries managerial staff in project management (UA 228,000), technical assistance (UA 1.985 million), studies (UA 300,000 ) and audit services (UA 61,000).

(viii) Agreement between the Project and IH.SM (UA 286,000) for the procurement of research and development services as well as training and supervision of NGOs responsible for setting up marine reserves on the field.

(ix) National shopping for procurements related to the functioning of the project (UA 882,000). The maximum amount per contract shall not exceed UA 20,000.

8. TOTAL COST : UA 7.080 million

- Foreign exchange : UA 5.301 million - Local currency : UA 1.779 million

9. BANK GROUP LOAN

ADF : UA 6.325 million 10. OTHER FINANCING SOURCES

- Government : UA 0.714 million - Beneficiaries : UA 0.041 million

11. APPROVAL DATE : 16 November 2005 12. ESTIMATED START-UP DATE : August 2006 - 6 years AND DURATION 13. CONSULTANCY SERVICES REQUIRED : Individual consultants, Technical

assistance for credit, services of auditors and NGOs.

14. ENVIRONMENTAL CATEGORY : Category II.

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CURRENCY EQUIVALENTS (August 2005)

UA 1 = Ar 2,946.58

FISCAL YEAR

1st January – 31 December

LIST OF TABLES

Page

Tableau 4.1 Summary of estimated project costs by component 21

Tableau 4.2 Summary of estimated project costs by expenditure category 21Tableau 4.3 Financing sources 21

Tableaux 4.4 Expenditure by category and by financing source 22

Tableau 5.1 Expenditure schedule by component 23

Tableau 5.2 Expenditure schedule by financing source 24

Tableau 5.3 Implementation and supervision schedule 24

Tableau 5.4 Procurement arrangements 25

Tableau 6.1 Recurrent expenditure schedule by financing source 28

LIST OF ANNEXES

No. of pagesAnnex 1 Location map of project area 1

Annex 2 Organization chart of project 1

Annex 3 Terms of reference for key project staff 2

Annex 4 Presentation of Vola Mahasoa (MFI) 2

Annex 5 Terms of reference of the study and technical assistance for institution of micro-credits 2

Annex 6 Summary of the Environmental and Social Management Plan 5

Annex 7 List of goods and services 3

Annex 8 Summary of economic analysis 1

Annex 9 Report review process 1

Annex 10 Summary of Bank Group operations 4

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LIST OF ACRONYMS AND ABBREVIATIONS ACEP : Credit and Savings Alliance for Production ACORDS : Support Project for Rural Communities and Organizations to Develop the South ACP : African, Caribbean and Pacific countries APEM : Association for the Promotion of Business in Madagascar Ar : Ariary BFV-SG : Banque Malgache-Société Générale BNI-CL : Bankin Ny Indostria - Crédit Lyonnais BOA : Bank of Africa CHC : Community Health Center CMB : Compagnie Malgache de Banques CNLS : National AIDS Control Council DPRHCIR PRHPRH : Department of Fisheries and Fishery Resources DFS : Decentralized financing structures DGDR : Directorate General for Regional Development DID : Développement International Desjardins EEZ : Exclusive Economic Zone ENEM : National School of Maritime Education ENETA : National School of Agricultural Technical Education FCD : Fish concentration device FP-IA : Flood Plains, irrigation areas GHDI : Gender-specific Human Development Index HDI : Human Development Index HPI : Human Poverty Index ICAR : International Agricultural and Rural Credit ICRD : International Center for Research and Development IDF : International Fund for Development IH-SM : Fisheries Institute of Maritime Sciences) KB8M : Federation of Women’s NGOs MAEP : Ministry of Agriculture, Livestock and Fisheries MCIE : Decree governing the adaptation of investments to environmental needs MEFB : Ministry of the Economy, Finance and the Budget MFI : Micro-finance Institution NCOR : National Center for Oceanographic Research OB : Outboard PD : Participatory diagnosis PNRC : National Shrimp Research Program PRSP : Poverty Reduction Strategy Paper RDAP : Rural Development Action Plan RDRD : Regional Directorate for Rural Development RDSP : Rural Development Support Program SRPRH : Regional Service for Fisheries and Fishery Resources SAGE : Environmental Management Support Service SRPRH : Inter-regional Fisheries and Fishery Resources Service STABEX : Stabilization System for ACP Export Earnings UNFPA : United Nations Population Fund VTC : Vocational Training Center WCS : Wildlife Conservation Society

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EXECUTIVE SUMMARY I. PROJECT ORIGIN AND HISTORY 1.1 The Government of Madagascar has made poverty reduction its primary objective. In all provinces, excluding the capital Antananarivo, more than 80% of the people in rural areas live below the poverty line. Hence, in 2004, 83% of the 12.9 million poor people in Madagascar (out of a total population of 17.5 million inhabitants) were living in rural areas. It is such concentration of poverty in rural areas that justifies the priority given to rural development by the Government in the Poverty Reduction Strategy Paper (PRSP) and by the Bank in its Country Strategy Paper (CSP). 1.2 Fishing plays a crucial role in the rural sector and in Madagascar’s economy in general (7% of GDP and 500,000 jobs). Traditional fishing is the driving force behind the excellent performance of the fishery sector. It provides about 90% of the country’s fish needs and constitutes the only source of income for an estimated 59,000 fishermen. However, it is beginning to experience growth difficulties. Production has stagnated at 70,000 tons per year and the yield cannot exceed three tons per year and per canoe. Fishing is concentrated in the lagoons, leading to overfishing of lagoon species and the degradation of marine and coastal ecosystems. Fishermen’s organizations are very poorly organized with no access to credit. The lack of accurate statistics on the sector undermines implementation of a real sustainable fishing development policy. 1.3 Faced with this situation, the Government of Madagascar applied for assistance from the African Development Bank to finance the Fishing Communities’ Support Project in Tuléar Province. The Bank requested the FAO to design the project. The present report was drafted on the basis of the FAO’s preparation report, the results of the mission to update this report (May 2005) and those of the project appraisal mission (July 2005). Furthermore, the Bank has several ongoing or envisaged projects in the project area. This concentration of projects in the area will increase the synergy between Bank interventions in the country and heighten the impact of its projects on poverty reduction. 1.4 The implementation of the PACP will benefit from the Bank’s long experience in Madagascar’s rural sector and its recent experience in agricultural project implementation. According to the last Portfolio Performance Annual Report (2002-2003), the main problem with the Bank Group’s portfolio performance in Madagascar is the slow pace of project implementation. Substantial efforts have been made jointly by the Bank and the authorities to improve on the performance of the agricultural portfolio. These efforts led to faster implementation of this portfolio from 2004. Hence, the disbursement rate for all agricultural projects surged from 9% at the end of 2003 to 42% as at 15 September 2005 (see Annex 10). The experience acquired by MAEP services in improving the quality of this portfolio and the presence of an ADB office in the country will enhance implementation of the PACP. II. PURPOSE OF LOAN The ADF loan, amounting to UA 6.325 million will cover 89.3% of total project costs, representing 93% of expenditure in foreign exchange and 78.5 % of expenditure in local currency.

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III. OBJECTIVES OF THE PROJECT The sector goal of the project is to help reduce rural poverty in Madagascar. The specific objective of the PACP is to promote the sustainable development of traditional maritime fishing by consolidating organizations of beneficiaries and State services, joint and responsible management fishery resources, and adequate equipment of fishermen.

IV. PROJECT DESCRIPTION The components of the project are: (i) Capacity-building: this entails strengthening organizations of beneficiaries, giving special assistance to women; consolidating a micro-finance institution; promoting HIV/AIDS prevention activities; and supporting the training of fisheries engineers and technicians ; (ii) Sustainable resource development and management: this component will promote sustainable resource management through the establishment of marine reserves; the enhancement of information on traditional fishing; the operation of new fishing areas and the development of fish farming activities; (iii) Development of production: this entails providing credit to fishermen for the procurement of equipment; training them in new fishing techniques; setting up fish concentration devices; and building wharfs in the project area. The credit activities shall be financed by the MFI (Vola Mhasoa) which shall, to that end, receive a credit line fully financed by the State and technical assistance financed by the loan; (iv) Project coordination and management: the Tuléar Regional Service for Fisheries and Fishery Resources (SRPRHSRPRH) shall be responsible for implementing the PACP. It shall be given the necessary human, financial and material means for implementing the project.

V. PROJECT OUTPUTS The project outputs are as follows: (i) Creation and consolidation of fishermen’s organizations in 92 villages in the project area; (ii) Training of 2,000 women in processing techniques, training of 30 women’s organizations in the management and farming of village vegetable gardens and the organization of 3,000 women to gain access to credit; (iv) Training of 40 fishery engineers and 30 shipwrights; (v) Training of project management staff; (vi) Creation of 50 marine reserves; (vii) National framework survey and production surveys; (viii) operation of new fishing areas; (ix) Dissemination of breeding techniques for farming of sea cucumber and algae; (x) Tests to fatten rock lobsters; (xi) Procurement of outboard engines, fishing appliances and coolers through credit; (xii) Setting up of 25 Fish Concentration Devices; (xiii) Training of 500 fishermen in new octopus fishing techniques; (xiv) Construction of 20 wharfs; (xv) Building of the project management capacity of the SRPRHSRPRH and the DPRH. VI. PROJECT COSTS The total cost of the project, net of taxes and customs duties, is estimated at Ar. 20.863 billion (or UA 7.080 million), of which Ar. 15.621 billion is in foreign exchange (UA 5.301 million) and Ar. 5.242 billion in local currency (UA 1.779 million).

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VII. FINANCING SOURCES The Project shall be financed by the ADF, the Government of Madagascar and beneficiaries. The ADF shall bear 89.3% of project costs, representing UA 6.325 million to finance 93% of expenditure in foreign exchange and 78.5% of expenditure in local currency. The country’s contribution shall represent 10.7%, of which 10.1% shall be borne by the Government and 0.6% by beneficiaries. The Government’s contribution amounts to UA 0.714 million while that of beneficiaries is UA 0.041 million. VIII. PROJECT IMPLEMENTATION The project shall be implemented over a period of 6 years by the SRPRHSRPRH based in Tuléar and under the supervisory authority of the Ministry of Agriculture, Livestock and Fisheries. A Guidance and Monitoring Committee shall be set up to supervise the project. NGOs shall be recruited to perform tasks in the villages relating to the consolidation of fishermen’s organizations, the technical training of beneficiaries, the constitution of marine reserves, the organization of women to farm and manage vegetable gardens, and participatory monitoring/evaluation. The regional HIV/AIDS coordination committee shall execute disease prevention activities. Surveys shall be conducted by the Department of Fisheries while research activities will be carried out by the IH.SM. IX. CONCLUSIONS AND RECOMMENDATIONS 9.1 Fishing is crucial to the rural sector and the economy of Madagascar in general (7% of GDP and 500,000 jobs). Traditional fishing is the main driving force of the sector’s excellent performance. However, this activity is beginning to experience growth difficulties due to overfishing of the lagoons, the poor structuring of farmers organizations, no access to credit and the absence of truly reliable statistics. 9.2 The project will help to halt the current dwindling production in traditional fishing areas threatened by overfishing, consolidate fishermen’s organizations and State services, and provide fishermen with credit. It will produce an additional annual yield of 800 tons of octopus and 3,000 tons of fish. The project will substantially increase and safeguard fishermen’s incomes. Its economic rate of return is estimated at 20%. It ranks among the priorities of the Government of Madagascar, features in the Bank’s country assistance strategy and will generate synergy with other Bank projects in the same area with regard to impact on poverty. A participatory approach was adopted during the design and implementation of the project. The creation of marine reserves to be managed by village communities is the concrete outcome of this approach. The implementation of the PACP will benefit from the Bank’s long experience in Madagascar’s rural sector and its recent experience in agricultural project implementation. 9.3 In the light of the foregoing, it is recommended that an ADF loan, not exceeding UA 6.325 million be awarded to the Republic of Madagascar, subject to the fulfillment of the conditions specified in the loan agreement.

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REPUBLIC OF MADAGASCAR FISHING COMMUNITIES SUPPORT PROJECT

PROJECT MATIX (New results-based matrix) HIERARCHY OF

OBJECTIVES EXPECTED OUTCOMES SCOPE/

BENEFICIARIES PERFORMANCE INDICATORS TIME-FRAME FOR

TARGETED OBJECTIVES ASSUMPTIONS/

RISKS 1. SECTOR GOAL LONG-TERM INDICATORS 1. Help reduce rural poverty 1.1 Reduction of poverty in

project area 1.1 The project area population of about 70,000 persons

1.1 Measurement of the poverty rate in the project area (Source: Poverty Profile)

1.1 Reduction of the poverty rate in the project area from 76% to 70% in 2012

2. Specific project objectives MEDIUM-TERM INDICATORS 2 Promote the sustainable development of traditional fisheries by consolidating organizations of beneficiaries and State services, and ensure joint and responsible management of fishery resources and the adequate equipment of fishermen.

2.1 Increased income for fishermen 2.2 Increased income for female fishmongers 2.3 Sustainable management of fishery resources

2.1 The project area population of about 70,000 persons 2.2 The project area population of about 70,000 persons 2.3 The project area population of about 70,000 persons

2.1 Variation in yields per boat of fish 2.2 Variation in the incomes of female fishmongers 2.3 Average size of octopuses caught (Source: Project reports)

2.1 Increase in the production of motorized canoes from 3 to 12 T/year by the end of the project 2.2 A 30% increase in the incomes of female fishmongers by the end of the project 2.3 Increase in the size of caught octopuses from 400 to 1,000 g in the reserves

Project implementation may be undermined by the lack of human and financial resources in the country. This risk is mitigated through technical assistance and financial support provided by the Project(Paragraph 6.3.4).

3. Components SHORT-TERM INDICATORS 3.1. Capacity-building (UA 1.338 million) 3.1.1. Organisation of beneficiaries 3.1.1.1 Beneficiaries organized

into associations and cooperatives

3.1.1.1 The 92 villages of the project area for a population of 70,000 inhabitants

3.1.1.1 Number of associations and cooperatives set up and number of members (Source: Project reports)

3.1.1.1 At least one organisation in 40 villages at mid-term and in 92 villages at the end of the project

3.1.2 Introduction of new products and the opening of new service points by the MFI

3.1.2.1 Credit mechanism defined and portfolio performance satisfactory

3.1.2.1 The 92 villages of the project area (70,000 inhabitants)

3.1.2.1 Number and amounts of credits and repayment rate (Source: MFI reports)

3.1.2.1 Credits shall be awarded in the third year of the project

3.1.3. Special support to women 3.1.3.1 Women trained in the processing of fishery products 3.1.3.2 Trainers trained in new processing techniques 3.1.3.3 Equipment procured for the VTC of Tuléar 3.1.3.4 Women given access to micro-credits 3.1.3.5 Vegetable gardens developed

3.1.3.1 2,000 women 3.1.3.2 20 trainers 3.1.3.3 CFFP 3.1.3.4 3,000 women 3.1.3.5 30 women’s organisations

3.1.3.1 Number of women trained 3.1.3.2 Number of trainers trained

3.1.3.3 List of procured equipment

3.1.3.4 Number of women with access to micro-credits 3.1.3.5 Number of vegetable gardens developed (Source: Report of the project and of the MFI)

3.1.3.1 700 women trained at mid-term and 2,000 at the end; 3.1.3.2 20 trainers trained at the end of the 2nd year; 3.1.3.3 Equipment procured at the end of the 2nd year 3.1.3.4 1.000 women receive credits at mid-term and 3,000 at the end of the project 3.1.3.5 15 gardens developed at mid-term and 30 at the end of the project

3.1.4 HIV/AIDS prevention 3.1.4.1 HIV/AIDS prevention activities conducted

3.1.4.1 30,000 beneficiaries including 15,000 women

3.1.4.1 Number of activities realized (Source: Project report)

3.1.4.1 Reach out to 15,000 persons at mid-term and 30,000 at the end of the project

3.1.5 Training of engineers and technicians

3.1.5.1 Fishery engineers trained 3.1.5.2 Shipwrights and OB mechanics trained

3.1.5. 1 40 engineers including at least 10 women 3.1.5.2 15 shipwrights and 15 mechanics

3.1.5.1 Number of engineers trained per gender 3.1.5.2 Number of shipwrights and mechanics trained (Source: Project reports)

3.1.5.1 40 engineers, including 10 women, trained by the end of the project’s 5th year 3.1.5.2 15 shipwrights and 15 mechanics trained by the end of the project’s 5th year

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3.2. Sustainable management of fishery resources (UA 2.142 million) 3.2.1 Resource development 3.2.1.1 Marine reserves

constituted

3.2.1.1 50 marine reserves near 50 villages

3.2.1.1 Number of marine reserves constituted and proclamation of a protected zone in the project area (Source: Project report)

3.2.1.1 20 reserves constituted at mid-term and 50 at the end of the project; and creation of a protected area at the end of the project

Fishermen do not agree with proposed development plan; This risk is mitigated by: (i) the results of Andadavadoka; (ii) farmer guidance services; (iii) alternative activities to octopus fishing (Para. 6.3.1)

3.2.2 Conduct of the framework survey1 and the production surveys

3.2.2.1 Fish populations and species counted 3.2.2.2 Production is estimated

3.2.2.1 Nationwide framework survey 3.2.2.2 Project area for the production survey

3.2.2.1 Framework survey report 3.2.2.2 Production survey reports (Source: Project report)

3.2.2.1 A report at the end of the project’s 3rd year 3.2.2.2 A production survey report at the end of each year starting from year 2

3.2.3 Exploratory fishing 3.2.3.1 Exploratory fishing for lobsters and fish conducted

3.2.3.1 Taolagnaro region Tuléar region

3.2.3.1 Number of exploratory fishing tests conducted (Source: Project report)

3.2.3.1 60 exploratory fishing tests conducted at mid-term and 120 at the end of the project

3.2.4 Promotion of aquaculture 3.2.4.1 Farming of sea cucumber introduced 3.2.4.2 Algae farming introduced 3.2.4.3 On-site lobster fattening tests conducted

3.2.4.1 50 fishermen breeding cucumbers 3.2.4.2 100 women for algae cultivation 3.2.4.3 10 on-farm tests conducted

3.2.4.1 Number and production of cucumber sites 3.2.4.2 Number and production of algae production sites 3.2.4.3 Number of lobster fattening tests conducted (Source: Project report)

3.2.4.1 20 cucumber production sites at mid-term and 50 at the end of the project; 3.2.4.2 30 algae sites at mid-term and 100 at the end of the project 3.2.4.3 5 lobster fattening tests conducted in the 3rd and 4th years of the Project

3.3. Development of production (UA 1.257 million) 3.3.1 Procurement of production means

3.3.1.1 Traditional canoes equipped with outboard engines 3.3.1.2 Canoes fitted with fishing gear

3.3.1.1 The 92 villages of the project area (70,000 inhabitants) 3.3.1.2 The 92 villages of the project area (70,000 inhabitants)

3.3.1.1 Number of canoes equipped with OB engines

3.3.1.2 Number of boats fitted with fishing gear (Source: Project report)

3.3.1.1 15 canoes equipped with OB engines at mid-term and 50 at the end of the project 3.3.1.2 500 canoes fitted with fishing gear at mid-term and 2,000 at the end of the project

The experience of MFIs in Africa raises fears about the poor performance of the micro-credit component; this risk is mitigated by the sound performance of Vola Mahasoa and the technical assistance to be provided by the Project (Paragraph 6.3.2)

3.3.2 Installation of FCDs 3.3.2.1 FCDs installed 3.3.2.1 The 92 villages of the project area (70,000 inhabitants)

3.3.2.1 Number of FCDs installed (Source: Project report)

3.3.2.1 10 FCDs installed at mid-term and 25 at the end of the project

The FCDs may be destroyed by cyclones (Paragraph 6.3.3)

3.3.3 Training of fishermen in new fishing techniques

3.3.3.1 Fishermen trained in new techniques

3.3.3.1 60 villages with 45,000 inhabitants

3.3.3.1 Number of fishermen trained in new techniques

3.3.3.1 200 fishermen trained at mid-term and 500 at the end of the PACP

3.3.4 Construction of wharfs 3.3.4.1 Wharfs constructed 3.3.4.1 20 villages for a population of 20,000 inhabitants

3.3.4.1 Number of wharfs built and in accordance with the MCIE decree (Source: Project report)

3.3.4.1 10 wharfs at mid-term and 20 at the end of the project’s 4th year

3.4 Project coordination (UA 1.314 million) 3.4.1 Provision of human and material means

3.4.1.1 The human and material means are in place 3.4.1.2 The accounting system is in place

3.4.1.1 The 92 villages of the project area (

3.4.1.2 The 92 villages of the project area (70,000 inhabitants)

3.4.1.1 Number of managerial staff 3.4.1.2 Number of vehicles; Number of transport boats (Source: Project report)

3.4.1.1 7 managerial staff members recruited in year 1

3.4.1.2 4 vehicles and 2 boats procured in Year 1

1 The framework survey will provide the benchmark situation in terms of production

1. PROJECT ORIGIN AND HISTORY 1.1 The Government of Madagascar has made poverty reduction its main objective. In all provinces, excluding the capital Antananarivo, more than 80% of the people in rural areas live below the poverty line. Hence, in 2004, 83% of the 12.9 million poor people in Madagascar (out of a total population of 17.5 million inhabitants) were living in rural areas. This concentration of poverty in rural areas justifies the priority given to rural development by the Government in the Poverty Reduction Strategy Paper (PRSP) and by the Bank in its Country Strategy Paper (CSP). 1.2 Fishing is crucial to the rural sector and the economy of Madagascar in general, accounting for 7% of GDP and creating about 500,000 direct and indirect jobs. Traditional fishing plays an important role in this sub-sector, satisfying the country’s protein needs (more than 90% of local consumption) and earning foreign exchange (about US$16 million per year. In most cases, it is the only source of income for an estimated 59,000 fishermen. It is traditional fishing that has the brightest development prospects in the fisheries sub-sector; furthermore, the fisheries master plan to increase fish consumption from 7 to 8 kg/inhabitant in 2008 depends very much on traditional fishing.. 1.3 However, despite the importance of traditional fishing to the national economy, this activity is beginning to experience growth difficulties. Production has stagnated at 70,000 tons per year and the yield cannot exceed three tons per year and per canoe. Fishermen are poorly equipped. The boats they use can only withstand short tides that hardly exceed 6 hours, most of which is spent moving from the village to the fishing area. A vast majority of fishermen limit their fishing to the lagoons. Only 16% declared that they operated beyond this limit. The concentration of fishing in the lagoons is leading to overfishing whose effects are becoming visible, such as the depletion or even disappearance of some fish species and the degradation of marine and coastal ecosystems. Traditional fishermen have no access to credit and this considerably limits the development prospects of this sub-sector. 1.4 Faced with this situation, the Government of Madagascar applied for assistance from the African Development Bank to finance the Fishing Communities Support Project in Tuléar Province. The FAO sent a sector identification mission to Madagascar in 1999 at the request of the Bank. The mission identified the PACP as a potential component of the cooperation program between the Bank and the Republic of Madagascar. After two field missions in 2001 and 2002, the FAO produced a project preparation report. However, the Bank’s pursuit of the project study process was slowed down by the political crisis experienced by the country in 2002. 1.5 The Government of Madagascar identified traditional fishing as one of its priorities under the current CSP and the 10th ADF (2005-2007). The PACP, indeed, features on the list of projects retained in the CSP. Faced with this situation, the Government of Madagascar applied for assistance from the African Development Bank to finance the Fishing Communities Support Project in Tuléar Province. A request was made to the ADF for financing. The present report was drafted on the basis of FAO mission conclusions and investigations conducted in May 2005 by the FAO mission to update the preparation report and in July 2005 by the appraisal mission. Furthermore, the Bank has several ongoing or envisaged projects in the project area. This concentration of projects in the area will increase the synergy between Bank interventions in the country and increase the visible impact of its projects on poverty reduction.

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1.6 The implementation of the PACP will benefit from the Bank’s long experience in Madagascar’s rural sector and its recent experience in agricultural project implementation. According to the last Portfolio Performance Annual Report (2002-2003), the main problem with the Bank Group’s portfolio performance in Madagascar is the slow pace of project implementation. Substantial efforts have been made jointly by the Bank and the authorities to improve on agricultural portfolio performance. These efforts were aimed at building the capacity of project implementation organs, rigorously monitoring the implementation of annual work programs, improving accounting systems and speeding up the processing of procurement and payment files by Bank services. These efforts led to faster implementation of agricultural projects from 2004. Hence, the disbursement rate for all agricultural projects surged from 9% at the end of 2003 to 42% as at 15 September 2005 (see Annex 10). The experience acquired by MAEP services in improving the quality of this portfolio and the presence of an ADB office in the country will enhance implementation of the PACP. 2. AGRICULTURAL SECTOR

2.1 Main characteristics 2.1.1 Madagascar is essentially an agricultural country. The cultivated surface area is about 3.5 million hectares, of which 2.9 million are used for annual tillage crops and 0.6 million for perennial crops. About 1 million hectares are irrigated more or less and about 75% of the population lives in rural areas. Agriculture is not intensive and fertilizer consumption has stagnated at 3kg/ha/year. The agricultural sector accounts for about 35% of GDP, 12% of exports and 8% of imports. 2.1.2 Madagascan agriculture is dominated by rice cultivation (2.3 million tons/year) and to a certain extent, cassava (2.2 million tons/year) and maize which together cover more than 75% of cultivated land. Export crops, especially vanilla, cloves and coffee cover about 17% of cultivated land and are farmed in eastern Madagascar. Industrial crops such as sisal, cotton, sugar and groundnuts cover 8% of cultivated land. The livestock sector accounts for about 15% of agricultural GDP, produces 150,000 tons of meat per year and involves more than 60% of the country’s households. 2.1.3 Fishing and aquaculture are an important sub-sector in Madagascar’s economy, accounting for 7% of national GDP and creating about 500,000 direct and indirect jobs and close to 3000 additional jobs each year. It supplies the national market with at least the same quantity of protein as beef, which is 7kg/inhabitant/year. For certain rural communities, fishing is the only source of income. 2.1.4 The main agricultural exports are cloves, vanilla and fruit. They are subject to wide price fluctuations on the international market and have a limited potential. Export earnings from the fisheries sector reached $161 million in 2001, or 24% of the country’s total sales. Such earnings do not include the sale of fishing permits (US$ 1.016 millions for Asian countries and US$ 2.475 million for the European Union on average in 2002-2004). The agricultural trade balance is almost balanced, with exports having more unit value than imports.

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2.2 Sector performance 2.2.1 Agricultural production cannot keep pace with population growth (2.9% per year): the food production index per capita fell by 23 % between 1990 and 2000. The population suffering from hunger increased from 59% in 1993 to 65.4% in 2001. Food availability per capita has declined, despite recent recovery: cereal production per capita and per year fell from 224kg in 1990 to 176kg in 2000. Between 1991 and 2000, national paddy production rose by only 6%, maize by 17%, cassava by 7%, sweet and Irish potatoes by 5% and beans by 4%. These increases in production stem more from the extension of cultivated surface areas than from any increase in yields. 2.2.2 The fisheries sector is growing steadily in terms of quantity and export value and product prices are less variable than those of other products (vanilla, cotton, etc.). The shrimp farming sub-sector, which accounts for this performance, is booming. Meanwhile, overfishing has started in areas closer to the coast and output has stagnated in such areas. 2.3 The country’s agricultural strategy 2.3.1 From 1999, the Government embarked on a Rural Development Action Plan (RDAP) which has five rural development objectives, reiterated in the Poverty Reduction Strategy Paper (PRSP), namely: (i) ensure sound management of the rural sector through definition and implementation of institutional reforms and the statutory framework; (ii) Encourage the emergence of businessmen who are rural development partners; (iii) increase and promote agricultural production with optimal use and sustainable management of resources and infrastructure; (iv) ensure sufficient food availability for all regions; and (v) develop social infrastructure to improve access to social services. 2.3.2 The Government drafted the PRSP in March 2003 through a participatory approach and updated it in 2005. Furthermore, it decreed tax exoneration for several inputs and production equipment and took measures to attract foreign investors to Madagascar. Various instruments are currently undergoing revision and should be completed in 2006, namely: (i) the Agricultural Development Strategy; (ii) the Policy Letter for Flood Plains – Irrigation Areas (FP-IA); (iii) the Law on the management and maintenance of irrigation areas; (iv) the setting up of an irrigation systems maintenance fund (FERHA); (v) the Land Law; (vi) Laws governing professional organizations to enable them to carry out commercial operations as well as economic interest groups; and (vii) the fisheries master plan. 2.4 Main institutions working in the sector 2.4.1 Implementation of the country’s agricultural policy is the responsibility of the Ministry of Agriculture, Livestock and Fisheries (MAEP) which comprises a Cabinet, a Secretariat General and a Directorate General for Regional Development (DGDR). The Ministry is responsible for designing, implementing and coordinating State policy in the areas of agriculture, livestock, fisheries, land and other real estate property. 2.4.2 The Director of Cabinet directly supervises the Department for Partnership Development (promotion of investments, relations with the private sector, support to privatization, communication, information and documentation) and the Monitoring/Evaluation Department (monitoring-evaluation, environmental monitoring, agricultural statistics).

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2.4.3 Attached to the Secretariat General are three Central Services (the Fisheries Surveillance Center, the Internal Audit Service and the Food Security Service) and nine departments (Legal Affairs, Administration and Human Resources, Finance and Budget, Agricultural Production, Animal Production, Fisheries and Fishery Resources, Rural Investments, Animal and Plant Health, Land and Real Estate Services). 2.4.4 The DGRD heads the (central) Department of Farmer Professionalization and the 22 Regional Directorates for Rural Development (RDRD). The latter comprise nine regional services corresponding to nine central departments placed under the authority of the Secretary General. In the project area, regional directorates are found in Tuléar (DRDR of Atsimo-Andrefana) and Taolagnaro (Fort Dauphin, DRDR of Anosy). There are rural development districts in the sub-prefectures and rural development counselors in the local councils. However, such districts and counselors are not found all over the country. This setup was put in place under the Government’s decentralization drive whose objective was to transfer implementation of development projects and programs to the regions. 2.5 Poverty profile 2.5.1 Madagascar’s poverty line was evaluated at Ar. 197,720 per year and per individual in 2001. About 69.6% of Madagascans live below the poverty line. The intensity of poverty2 is 34.9% and the Human Poverty Index (HPI)3 was 0.467 in 1999. Poverty is predominant in rural areas where it affects 85% of the population and in particular small farmers who are generally the poorest people in the country. Poverty has the same impact on men and women who head households. 2.5.2 The gender-specific human development index (GHDI) shows a discrepancy in development between men and women to the detriment of the latter. Adult illiteracy affects more women (38.4%) than men (25.2%); women experience greater difficulties in getting access to credit due to their lack of collateral and poor level of education. More than 75% of the women work in the informal sector compared to 68% of the men. Conversely, women hold only a third of the jobs in the public service and the formal private sector, that is salaried jobs that guarantee a stable income. 2.6 Gender issues 2.6.1 The main problem faced by Malagasy women is their high illiteracy rate. Female illiteracy has many effects on the health of women and their families. The percentage of young girls aged 15 -19 who are already mothers rose from 24.6% in 1992 to 30.7% in 1997, and the situation is particularly serious among young uneducated girls. There is a great number of women heading households in rural areas (47%). The income of women heading households represents only 70% of the incomes of their male counterparts. In 2001, the annual average salary for women was estimated at Ar 517,000 while that of men, with comparable levels of education and job seniority, was Ar 836,600. About 43% of women, representing close to half of the female population, earn less than the statutory minimum wage, compared to only 25% of men.

2 The intensity of poverty measures the gravity of the situation of the poor and determines the percentage variation between the average income of the poor and the poverty line. 3 The HPI value shows deficits in most basic human capacities (living long, acquiring knowledge and enjoying adequate standards of living). The value which varies from 0 to 1, makes it possible to establish comparisons in time and space.

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2.6.2 After the Peking Conference, Madagascar decided to draft a gender policy. A national plan and regional plans are currently being implemented. The goal of the national plan is to mainstream gender as a crosscutting concept into all development interventions with two specific programs (improvement of economic efficiency, improvement of legal and social conditions). Under this plan, an annual work program should be implemented very soon, the main constraint to such implementation being the lack of financing. 2.7 HIV/AIDS control 2.7.1 The HIV/AIDS prevalence level at the national level is only 1.1%, but could reach 16% in certain areas. The most affected age group is the 17-27 age bracket. More than 60% of those who have contracted HIV/AIDS are women, due to their greater physiological predisposition and the vulnerable status of women (informal polygamy is widespread). No HIV surveys have been conducted within the population. However, since 1987, the date of identification of new HIV cases, the HIV prevalence rate, measured from volunteer blood samples doubled after 5 years and tripled after 10 years. 2.7.2 The Government of Madagascar has set up a National AIDS Control Council (NACC). Based in Antananarivo and attached directly to the Presidency of the Republic, this council is responsible for: (i) drafting an operational strategy at the national and regional levels; and (ii) implementing a multi-sectoral AIDS prevention project jointly financed by the World Bank ($21 million) and the Government ($1 million). The NACC is represented by regional coordination committees in Madagascar’s 22 regions and local committees at the village level. Local HIV/AIDS control plans inspired by the national AIDS control plan are implemented at this level (communication campaigns using the media, setting up of sensitization groups built around village counselors to promote a common understanding of the disease and prevention methods, award of funds to grassroots communities to promote their activities, promotion of screening). 2.8 Rural sector financing Banking system 2.8.1 In its economic policy, the Government of Madagascar set the objective of ensuring sustained economic growth, partly by increasing the contribution of private investment to poverty reduction. One way of attaining this objective was financial sector reform through a liberalized monetary policy and liberalization of the banking sector under Law No. 98/005 as amended by Law No. 99/030. These legal provisions made it possible to set up Madagascar’s financial system, comprising 7 commercial banks, 2 financial establishments and 4 insurance and social security establishments, in addition to the Central Bank of Madagascar. Apart from Compagnie malgache de banque, all banks that are fully private or privatized under the recent restructuring measures are affiliated to foreign banks. As at the end of 2004, their outstanding deposits amounted to Ar 1,607 billion and their net total credit was Ar 792 billion for a total cumulative balance sheet of Ar 2,011 billion. On the whole, Madagascar’s banking system is very solvent and well capitalized and all the banks respect the prudential norms defined by the Banking and Financial Supervision Commission. 2.8.2 Commercial banks essentially fund import-export activities for cash crop sectors (vanilla, rice and fish farming). They intervene minimally in agriculture (except for the Bank of Africa - BOA), and not at all in traditional fishing which the banks consider a high-risk

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activity because of difficulties in obtaining guarantees. Through its network of more than 50 branches which ensure, inter alia, the financing of rice season credits, the BOA maintains business relations with micro-finance institutions (MFIs). Apart from current account operations (deposits, transfers, etc) it grants refinancing facilities to MFIs which enable them to develop their own credit activities. The cumulative amount of assistance given by the BOA to MFIs amounted to Ar 12.4 billion as at 31 December 2003. Micro-finance sector 2.8.3 The absence of the banking sector in rural areas encouraged the development of micro-finance institutions in Madagascar from 1990-1995. Three groups of actors contributed to such emergence, namely: (i) the Government through financial sector reform and the creation of grassroots financial systems that are closer to users and customers with no access to traditional banking; (ii) donors who implemented several donor programs from 1990 (Agence Française de Développement, World Bank, German Cooperation, UNDP/UNCDF, European Union, ADF), (iii) specialized international technical operators who have brought into the country their know-how and experience from interventions in Africa and other continents. 2.8.4 As at 31 December 2003, the overall results scored by MFIs concerned the creation of 380 funds with a membership and/or self-management, a total number of 190,488 members and clients (including 36,994 active clients), total deposits amounting to Ar 19.8 billion and credits awarded to the tune of Ar 2.12 billion; pending credits are evaluated at Ar 1.75 billion or 8.3% of outstanding credits. Despite this remarkable growth over the last few years, the influence of the MFI sector remains low. As at 31 December 2002, only 5% of Malagasy households had access to financial services (savings and credit) provided by MFIs. The borrowers ratio (number of borrowers relative to the number of households) over the last few years is even lower. The sector is facing a certain number of constraints and experiencing shortcomings that could slow down its development. These include: (i) the inequitable and insufficient geographical coverage of the territory with supply imbalance between the rural and urban sectors; (ii) the limited capacity of MFIs; and (iii) insufficient supply of training and advisory support services for MFIs. 2.8.5 The above constraints notwithstanding, Madagascar and its private sector are showing a real determination to transform micro-finance into a rural sector development mechanism and investing in the development of decentralized financing structures (DFS). Hence, a National Micro-finance Strategy is being developed and should be incorporated into Madagascar’s PRSP. Moreover, favorable political and economic conditions, the resumption of growth and better control of inflation have convinced donors to envisage supporting this sector which arouses such growing interest in investors and banks. 2.8.6 It should be noted that there is an MFI in Tuléar Province called Vola Mahasoa. Set up in 1993 with the technical assistance of the Association for the Promotion of Business in Madagascar (APEM) and the International Center for Development and Research (ICDR), Vola Mahasoa is the main micro-finance institution (MFI) intervening in rural areas in the South West. It operates under the category of non-mutual institutions: distribution of credits by salaried employees to joint surety groups. It is financed by the AFD (technical assistance and operational subsidy), the European Union through a credit line with concessional rates and the UNDP. Vola Mahasoa is the financial operator retained for the credit component of the Bas Mangoky Farm Area Rehabilitation Project financed by the ADF. This MFI also intervenes in the fisheries sector by awarding credits to women who are fishmongers or process fishery products.

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2.8.7 Vola Mahasoa (VM) is growing exponentially: credits awarded surged from Ar 119.6 million in 1999 to Ar 780 million in 2004. According to audited financial statements of the last three financial years, Vola Mahasoa made appreciable improvements in all its operational parameters which complied with the standards established by the Central Bank of Madagascar. For the 2002-2004 period, the total balance sheet spiraled from Ar 980 million to Ar 1.8 billion, representing a 93% increase, due to the sharp rise in interest rate resources generated from credits and the high mobilization of external resources. The net income has also risen vertiginously over the last three years and represents more than 6% of the balance sheet for 2004. This is due to operational expenditure control and the application of a rates policy that takes into account the cost of borrowing, services and functioning. Besides, the loan recovery rate has remained satisfactory (90 % to 100 %). These indicators show that VM is a thriving MFI. Malagasy Fisheries and Aquaculture Board 2.8.8 The micro-credit component of the project shall be financed by the Government of Madagascar with funds from the Malagasy Fisheries and Aquaculture Board. This structure is responsible for managing funds such as proceeds from taxes, sale of permits, fines and counterpart funds from fishing agreements. This fund which is endowed with the equivalent of US$ 6 million in 2005 is constantly replenished with 80% of all collected revenue and serves to finance fisheries development activities. 2.9 Programs intervening in the sector 2.9.1 The RDSP, supported by the World Bank, finances: (i) productive investments selected according to technical, financial (less than Ar 200,000,000 or $100,000/project), economic and social criteria; (ii) assistance to producers (extension service, technical support, training, study trips, adapted research) related or not to investments financed in the component; (iii) capacity-building activities for farmers’ organizations and rural communities; (iv) building planning capacity at the national and regional levels; and (v) project management and supervision. The RDSP financed the procurement of about twenty fiberglass fishing boats in the Taolagnaro area. 2.9.2 The Community Development Program, which is also supported by the World Bank finances: (i) small projects submitted by associations or councils through an Investment Fund for Development (IFD); (ii) capacity-building actions for commune workers; (iii) direct fund transfers, on a pilot basis, to 300 councils to enable them execute their communal development plans; and (iv) project management and supervision. 2.9.3 In the provinces of Tuléar and Fianarantsoa, the EU’s ACORDS Program (€60 million) intends to: (i) lay the foundation for integrated regional development that combines investment in public and productive infrastructure with the opening up of development centers; (ii) build local capacity to plan, manage and maintain public investments; (iii) improve community access to social services (health, education), water and sanitation; and (iv) substantially increase agricultural incomes by raising productivity and protecting flood plains. The program intends to help communes (or groups of communes) that show proof of good governance and present investment programs for development (about 25% of councils). It is currently being implemented and should be fully operational in the course of 2006.

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3. FISHERIES SUB-SECTOR 3.1 Main characteristics 3.1.1 Geography and resources: Madagascar has a relatively narrow continental shelf with a breadth of 20 to 30 km North West and 2 to 5 km in certain areas on the East coast. Its surface area, with a depth of 0 to 100 m, is about 117,000 Km2. The natural conditions of the continental shelf on the west coast are particularly conducive to traditional fishing on account of the configuration of the coast and the climate which, apart from cyclones, is conducive to traditional fishing for a good part of the year. The exploitable maritime resource potential is estimated at 180,000 tons for coastal fishing and 140,000 tons for ocean fishing. Coastal resources are mainly exploited by industrial fishing units which catch 14,000 tons of fish and 8,000 tons of shrimps and by traditional fishermen using unmotorized dugout canoes, with or without outriggers, who produce 70,000 tons and the so-called small-scale fishing that is intermediary to these two types of fishing and produces 600 tons per year. The available potential for developing coastal research should stand at about 85,000 tons; it is estimated that this potential is rather concentrated in the Western region, off the coast of Tuléar. Ocean resources are mainly fished by foreign tuna boats that capture 10,000 tons per year. Here also, there is also a very high potential that could be tapped by national fishermen. 3.1.2 This sub-sector is of major socio-economic importance. Indeed, it: (i) constitutes the country’s primary source of protein (7 kg per capita and per year) ; (ii) directly employs 500,000 fishermen and marketing agents and constitutes the main source of income for the coastal communities in the south-western extremity of the country; (iii) contributed more than US$ 161 million to foreign exchange earnings in 2001, representing more than 20% of total export earnings for the same year. One of the objectives of the new Fisheries Master Plan (2004-2008) is to increase fish consumption per capita from 7 to 8 kg. Since Madagascar receives absolutely no imports of fishery products and very few industrial fishing landings, traditional fishing accounts for more than 90% of supplies to the national market. The increase in fish consumption per capita necessarily requires the development of traditional maritime fishing. 3.1.3 Traditional maritime fishing: This type of fishing is practised at the national level by about 59,000 fishermen using 54,000 poorly-equipped canoes with a limited scope of activity. Traditional fishing is conducted mainly along the coast. It is carried out in the same areas within the reefs, notably in the South West regions (Tuléar Province). Since the radius of action for fishing canoes is less than 10 km, the coastal region is currently under-exploited and the yields are very low (2 to 3 tons of fish per year and per canoe, 1 and 2 kg per fishing day and per fisherman for octopus and rock lobsters respectively. However, traditional fishing is the only source of income for coastal communities, especially in Tuléar Province where droughts have driven the population from the hinterland to the coast. Indeed, there are about 19,500 fishermen using 15,000 boats in these areas. Over the last few years, the South-West region has increasingly gained prominence in the fisheries sector. Its exports more than doubled from Ar 15,800 million (US$ 7.9 million) in 1988 to Ar 32,600 million (US$ 16.3 million, about 21,000 tons) in 2001. This region specialized in the export of octopuses, squids and crabs; the percentage of octopuses in exports of cephalopods (octopuses and squids) was predominant at 91.7%, or 4 449 tons, in 2001. It has a virtual monopoly in the export of algae, seashells and slipper lobsters; almost 90% (300 tons) of lobster exports come from Tuléar Province.

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3.1.4 This performance is due to overfishing of the same fishing areas which has virtually led to the extinction of certain species such as holothurians. Other species, such as octopuses and rock lobsters, are threatened by overfishing. With regard to rock lobsters, a measure has been enforced limiting the first catch size to 20 cm. However, for this measure to be effective, it has to be accompanied by the search for new fishing areas. For octopuses, the NGOs WCS and Blue Venture have, in collaboration with IS.HM, conducted a management experiment in Andavadoka village located 250 km north of Tuléar. This management experiment was conducted in conjunction with the village community which willingly accepted the closure of 20% of its fishing grounds for 7 months, from November 2004 to June 2005. When the fishing areas were reopened, the average weight of catches rose from 400 grams to 1,100 grams. This experiment gained much popularity in the neighboring villages that participated in "first day fishing” after the fishing grounds were reopened. These villages are now calling for the same experiment to be replicated in their own fishing areas. Given the result obtained, the Government organized a workshop from 28 to 30 July 2005 in Tuléar on the management of octopus resources. All operators of the sub-sector as well as fishermen attended this seminar to which national and international octopus experts were also invited. The results of this experiment were presented at this workshop which made proposals calling for suspension of fishing for two months of the year and limitation of the size of caught octopuses to a minimum of 350 grams. However, for the Andavadoka experiment to be efficient, it has to be extended to a good number of villages and accompanied by measures such as the introduction of motor boats to facilitate fishing beyond the barrier reefs and the development of income-generating activities such as aquaculture and market gardening. 3.1.5 Quality control of fishery resources: The Animal Products Quality Control Program financed by the European Union and which started in 1997 and ended in December 2001, led to: (i) the setting up of a competent authority to conduct health control of animals destined for export, in particular fishery products; (ii) the scaling up of reference laboratories to conduct health control tests; and (iii) provision of assistance to enterprises to comply with the necessary conditions governing procedures and standardization of processing units on land or at sea. 3.2 Constraints and potential 3.2.1 Traditional fishing essentially faces the following constraints: (i) obsolescence of traditional fishing equipment, notably small (3 to 5 meters) unmotorized dugout canoes with very limited radius of action; (ii) the landlocked nature of fishing areas which can only be accessed by sea, notably in the Taolagnaro region; (iii) the absence of facilities for offloading fish under hygienic conditions in compliance with international standards; (iv) the lack of credits for women who process part of the production and for fishermen; (v) the limited capacity of grassroots organizations, where such organizations exist; (vi) the lack of human and financial resources in the central and provincial fisheries services; (vii) the absence of fisheries statistics to ensure rational resource management; (viii) the precarious living conditions of fishing communities in terms of hygiene, education, health and access to drinking water; and (ix) very ad hoc research/development that is not conducive to the design of the technological packages tailored to traditional and small-scale fishing, whereas there is urgent need to develop these forms of fishing in order to address the problem of overfishing of coastal resources.

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3.2.2 These constraints notwithstanding, traditional maritime fishing presents good development potential because: (i) professional organizations are beginning to emerge in fishing communities that could in the long run take over the destiny of such communities and defend their interests; (ii) there is a very active and sometimes organized female population that has taken over the processing and marketing of fishery products; (iii) since domestic and external demand for fishery products exceeds supply, the size of the Antananarivo urban market is a major asset in the development of traditional fishing; (iv) the external markets in the southern part of the Indian Ocean where prices are more attractive than in Madagascar constitute an interesting outlet for exports; (v) there are NGOs active in fisheries development that could serve as partners in the development of the sub-sector; and (vi) fishing communities are willing to preserve and enhance management of the resource. 3.3 Sub-sector policy The Fisheries Master Plan prepared in collaboration with the FAO assigns the following objectives to the fisheries sub-sector: (i) raise the living standards of traditional and small-scale fishermen; (ii) play the dominant role in satisfying local animal protein needs by ensuring the regular supply of fish to the domestic market; (iii) create jobs (fishermen, boat owners, fishmongers, persons engaged in product processing and conservation, transporters, etc.); and (iv) participate in increasing the country’s foreign exchange earnings. The plan outlines the sub-sector development strategy based on untapped potential and the dynamism of the sector as noted during the last decade. It proposes several action programs that could be realized or initiated. In the South-West of the country, which is the priority area of the plan, activities will focus essentially on traditional and small-scale maritime fishing as well as community development. 3.4 Institutions intervening in the sub-sector 3.4.1 The sub-sector, placed under the supervision of the Ministry of Agriculture, Livestock and Fisheries (MAEP) is under the responsibility of the Department of Fisheries and Fishery resources (DPRH) which is responsible for implementing the fisheries policy. This department is composed of: (i) the Monitoring/Evaluation and Statistics Division; (ii) the Industrial Fishing Development Service; (iii) the Small-scale and Traditional Fishing Development Service; (iv) the Aquaculture Development Service; and (v) the Industrial Aquaculture Service. At the regional level, the Ministry is represented by the Regional Directorate for Rural Development which has authority over the regional services for fisheries and fishery resources (SRPRH) and the fishery and fishery resources districts (CIRPRHs) in the Communes or Fivondronana. In Tuléar, the decentralized service covers three districts, namely: Tuléar, Morombé and Taolagnaro. The SRPRH comprises: three technical divisions (industrial fishing, small-scale fishing and aquaculture); a statistics division and an administrative and financial division. The development of the sub-sector requires the training of new skills. 3.4.2 Apart from their routine duties, the SRPRHs and CIRPRHs are responsible for: applying the MAEP policy for developing fishery and fishery resources; ensuring compliance with current regulations governing fishing, marketing and consumption; collecting all statistical data on fishing, marketing and local consumption. As concerns statistics, the District, through its employees, provides guidance to the survey officers working in the villages. The important role that the SRPRHs are called upon to play within the context of decentralization requires that these services be consolidated.

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3.4.3 Many establishments are involved in fisheries research and education, but most of the infrastructure is concentrated in four Malagasy towns: (i) Antananarivo: FOFIFA (National Centre for Agricultural Research and Rural Development - CENRADERU), the National Center for Environmental Research (CNRE), the University of Antananarivo the with the School of Agronomic Sciences (EESA) and the Faculty of Science and Animal Biology; (ii) Tuléar : the University of Tuléar with the Fisheries and Marine Sciences Institute (IH.SM). This institute has 11 university lecturers who all hold a PhD in science, 3 assistant lecturers and 21 associate researchers. It participates in many research/development programs including a program to cultivate sea cucumbers in collaboration with the University of Brussels and several other programs aimed at preserving the environment. The institute provides academic training (masters and doctorate), training for fishery engineers, vocational training for fishery technicians, and customized vocational training at the request of enterprises. (iii) Nosy Be: the National Oceanographic Centre (CNRO), the Vocational Training Centre (VTC) for training fishermen (DRH/GTZ project); (iv) the University of Mahajanga with its department of marine biology, the National Technical School of Agriculture (ENETA), the National School of Maritime Education (ENEM) and the National Shrimp Research Program (PNRC) and (v) the Tuléar Technical Training Center which trains youths in various trades. 3.5 Programs intervening in the sub-sector 3.5.1 Few programs and projects currently intervene in the fisheries sub-sector in the South-Western part of the country. However, mention can be made of the RDSP (World Bank) which intervened directly in the traditional fishing sub-sector by financing the procurement of about 20 fiberglass boats in the region of Taolagnaro. 3.5.2 The Fishing Sector Project funded by the FAO was implemented in the PACP project area. Its activities included the development of Fish Concentration Devices (FCD). The main lesson learnt from this experience is that ownership by beneficiaries and adequate maintenance are crucial to the success of FCDs. 4. THE PROJECT 4.1 Design and rationale of project 4.1.1 The severity of poverty in rural areas justifies the priority given to rural development by the Government in its Poverty Reduction Strategy Paper (PRSP drafted in 2003 and updated in 2005) and by the Bank in its Country Strategy Paper (CSP 2005-2009). The Tuléar Fishing Communities Support Project (PACP) falls within this framework. It was identified in the CSP as a potential component of the cooperation program between the Bank and Madagascar under the 10th ADF. The PACP will help to increase traditional fishing yields. Such increase in production will have a direct impact on poverty reduction in the project area. The PACP will help fishermen to procure new fishing means and gain access to credit while engaging in sustainable management of fishery resources. These factors will help to safeguard the incomes of project beneficiaries and reduce the incidence of poverty in PACP areas.

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4.1.2 The various options were studied during project design in terms of project coverage, credit mechanisms for the financing of facilities, and project implementation modalities. The project area was limited to the South-West region as concerns development actions to be implemented directly with the communities. The Fort Dauphin region, which was initially included during the preparation phase, was retained only for a limited number of research activities. This reduction of the project’s geographical area was due to the state of roads which makes project implementation difficult over a larger area. Moreover, the area retained is one in which Bank projects are currently under way (Bas Mangoky irrigation area) or envisaged in the near future (the rural water supply and sanitation project; the Manombo Farm Area Integrated Management Project; and the road project). The concentration of projects in this area increases the synergy between the Bank’s interventions in the country and lends greater visibility to the impact of its projects on poverty reduction. As concerns credits, it was envisaged during the preparation phase that the FAO will use the guarantee fund mechanism to finance equipment. However, this option was finally abandoned. An option that was more consistent with best practices in the micro-finance sector was retained, which entailed developing new credit products within an existing MFI using a credit line from the Government and the technical assistance necessary for the introduction of such products and the opening of new service points. With regard to project execution modalities, two options were examined, namely: the setting up of a Coordination and Management Unit under the supervision of the CIRPRH and execution of the project through the Regional Service for Fisheries and Fishery Resources (SRPRH) based in Tuléar. The second option was retained, first of all, to accompany the decentralization/deconcentration initiated by the Government of Madagascar and, secondly, to comply with the Paris Declaration on the use of existing national project execution capacity. However, the SRPRH will be reinforced to help it execute these new responsibilities. 4.1.3 In its design, the PACP is based on lessons learnt from previous experiences in Madagascar and other countries. The FCD technique proposed by the project was tested by the Fishing Sector Project financed by the FAO. The results of this project, notably in terms of ownership by beneficiaries and maintenance of FCDs will be used to carry out this activity. The techniques for breeding sea cucumbers and cultivating algae that will be developed by the project have been designed and tested by IH.SM and only require dissemination on the field. The motorization of traditional canoes envisaged under the project was successfully done under similar conditions in projects financed by the Bank in other countries (Senegal, Mauritania and Cape Verde). The creation of marine reserves envisaged under the project has been experimented successfully in the PACP area by IH.SM and two international NGOs in collaboration with the CIRPRH. Lastly, the proposed credit mechanism is based on Madagascar’s long experience in this domain with several donors (credit line of the National Maize Project financed by the Bank, the Decentralized Rural Credit Project in the South West financed by the AFD, the Support Project to Institutionalize networks of agricultural savings and loans mutual funds funded by the AFD, the Rural Micro-finance Program financed by the EU) and the MFI proposed to manage credits has recorded an excellent performance in the past. 4.1.4 A participatory approach was adopted in the design of this project. Proposed investments were identified through a participatory approach with beneficiaries during the FAO mission. These choices were confirmed with the communities concerned by the Bank’s preparation and appraisal missions. The were discussed with the development partners present in Madagascar. Project implementation will also follow a participatory approach notably in the development of marine reserves whose limits and reserve period will be defined in collaboration with the communities that will guard the reserve during this period. Furthermore, the project will

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strengthen organizations of beneficiaries so that they can become real partners in the participatory development and decentralization process initiated by the Government of Madagascar and supported by its various development partners. 4.2 Project area and beneficiaries 4.2.1 The project will concentrate on an area of about 8,000 Km² on the environs of Tuléar, capital of the Region and Province, a town that benefits from some relative development from tourism and fishing as well as the presence of a merchandise port. This area was chosen because of the potential it holds for the development of traditional fishing, the existence of a dynamic population of fishermen and fishmongers, and private enterprises that have invested substantially in the collection and marketing of fishery products. 4.2.2 The project area extends along the West coast of Madagascar from Soalara situated 30 Km south of Tuléar to Morombé which is 280 Km to the North. Its climate is relatively dry and hot with only one rainy season in winter (rainfall of 400 to 800 mm/year). The project area has about 70,000 inhabitants distributed among 92 villages, along the coast from Soalara Port to Morombé (the 3 sub-prefectures of Morombé, Tuléar I and II). The population density in the area is 10 inhabitants/km2. The project area is mainly inhabited by the Vezo, a fishing community par excellence. 4.2.3 The people in the area are poor. In Tuléar Province, the human development index is 0.382 while the GHDI is 0.360. In the project area, the illiteracy rate among fishermen is the highest and reaches 62 %. A good number of women head households in rural areas (47% of households). 4.2.4 The main fishing activities in the project area are: (i) fishing for cephalopods in the northern region, practised by women (seashore fishing) in the lagoon, and for fish (black demersal fish and noble fish) and apneic octopuses beyond the barrier reef situated 1-2 Km off the coast; (ii) fishing is practiced in the south of the project area. Fresh produce is sold in Tuléar or on the local markets. In contrast with the northern region, some female fishmongers have coolers for storing fish. Very often a fishmonger may sell for others. 4.2.5 In some villages, there are associations of fishermen’s groups set up to benefit from the purchase of fishing equipment under the PACP. With the funds put at the disposal of the project, the association procures canoes which are made available to members who do not own canoes. These associations are mainly composed of members of the same family and many fishermen are excluded. There is also a federation of fishermen’s associations in Tuléar that was set up with the support of fishery services. 4.2.6 In certain villages, Vola Mahasoa works with associations of female fishmongers, composed of several female fishmonger groups which pay a certain amount to the parent association (about Ar 150,000 or about $75). The credits awarded by Vola Mahasoa to female fishmongers vary from 16 to 83 Euros, with weekly repayment over a period of 4 months. The interest rate is 3.5% per month (degressive method, i.e. 21% of the annual interest rate). Credits are awarded to an association of female fishmongers and there are two levels of joint surety, that of the group and that of the association. Recovery is generally 100% at maturity.

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4.2.7 The HIV/AIDS prevalence rate stands at about 1.17% in Tuléar Province. Tourist sites have a high prevalence rate: 4 to 5% in Saint Augustin. Fishermen are also a high-risk socio-professional category. In Tuléar Province, 124 AIDS prevention actions were financed under the multi-sectoral AIDS control project implemented by the NACC. 50% of Tuléar’s council areas benefited from at least one intervention. The objective of Tuléar’s Coordination Committee is to cover all the council areas in the region. 4.3 Strategic context 4.3.1 The primary objective of the Government of Madagascar is poverty reduction. The poverty reduction strategy paper (PRSP drafted in 2003 and revised in 2005) is the reference document in this area for both the country and all development partners. The PRSP has identified three strategic options that should guide poverty reduction efforts, namely: (i) restoring the rule of law and promoting good governance; (ii) stimulating and promoting broad-based economic growth; and (iii) stimulating and promoting human, material and broad-based social security systems.

4.3.2 The objectives and actions provided for under the PACP tally with objectives (ii) and (iii) of the PRSP and with the objectives of the Fisheries Master Plan. The envisaged project will, in particular, help to increase the incomes of the rural poor. Consequently, it will have an immediate positive impact on poverty reduction in the PACP area of intervention. Lastly, the project is in accordance with the Bank’s country assistance strategy which focuses on the PRSP strategic option relating to the promotion of broad-based economic growth. 4.4 Project objectives The sector goal of the project is to contribute to rural poverty reduction in Madagascar. Its specific objective is to promote the sustainable development of traditional maritime fishing through consolidation of organizations of beneficiaries and State services, joint and responsible management of fishery resources and adequate equipment of fishermen. 4.5 Project description 4.5.1 The Fishing Communities Support Project has four components, namely: (i) capacity building; (ii) development and sustainable management of fishery resources; (iii) development of production; and (iv) project coordination and management. The project components are described below. A. Capacity-building component 4.5.2 The objective of capacity building is to organize fishermen and provide the necessary guidance and training services so that their organizations can manage their joint heritage, get access to credits and defend members’ interests. Another objective is to provide technical assistance for the setting up of a credit system for communities in the project area, boost women’s activities and help to consolidate the HIV/AIDS prevention mechanism set up by the Government of Madagascar. Lastly, capacity-building will enable the fisheries administration to train fishery engineers, shipwrights and outboard motor mechanics who are indispensable to the long-term development of the fisheries sector.

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4.5.3 Organizations of beneficiaries: Community-based organizations will be created (where they do not yet exist) in each village of the project area (a total of 92 villages). These organizations will be strengthened through guidance and training of their members. They will be the main interlocutors of the project and of the fisheries administration in the villages. The project will finance the guidance and training services necessary for the constitution and/or consolidation of these community-based organizations. 4.5.4 Assistance for provision of credit: Technical assistance will be given to provide the expertise needed to manage the new credit products and open new service points. Such technical assistance will comprise two types of activity: (i) a study conducted for the purpose of making a socio-economic diagnosis in order to define the best modalities for guarantees and the introduction of new credit products, design a program for extension of the activities of branch offices and define the technical and financial conditions necessary for such extension; (ii) organizational and training support to technicians and MFI credit agents on procedures needed to introduce credit and savings products and on management, training of borrowers and the collection of new credit products. Technical assistance will be entrusted to an operator specialized in micro-finance. 4.5.5 Specific support to women: The following actions will be financed for women: (i) training in the processing of fishery products (2,000 women); (ii) training of instructors from the Tuléar Women’s Training Center in new processing techniques and equipment to consolidate the Center; (iii) micro-credits to 3,000 female fishmonger for the development of fish drying and marketing activities; and lastly (iv) the development of 30 village vegetable gardens to diversify women’s activities and improve nutrition in the village and the training of 30 women’s organizations to manage and operate these gardens. 4.5.6 HIV/AIDS control: The project will finance 35 HIV/AIDS prevention actions in fishing communities, following NACC modalities. The following activities will be implemented within the framework of these actions: (i) training of association or group members; (ii) sensitization of local authorities and notables; (iii) communication activities; (iv) group guidance activities, conducted separately for men and women. 4.5.7 Training of engineers and technicians: In a bid to contribute to the renewal of fishery staff, the project will provide support to IH.SM for the training of 40 fisheries engineers specialized in sustainable resource management. It will also support the Tuléar Technical Training Center to open a section for the training of shipwrights to use fiberglass and plank. Such support will be given through the creation of a boat construction workshop and the recruitment of a naval architect to serve as lecturer for 18 months. Support will also be given to open a section for the training of outboard motor mechanics. Since the technical center already has an instructor specialized in mechanics, the assistance will comprise the procurement of tools for the training. Prototypes of fiberglass and plank canoes produced during the training will be tested in about 20 fishing communities for demonstration purposes.

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B. Development and sustainable management of fishery resources component 4.5.8 In general, fishing takes place in the coastal waters within the reefs and concentration on the same fishing areas has led to overfishing of resources, notably octopuses, and the degradation of marine and coastal ecosystems. Indeed, despite the increased fishing effort, traditional fishing output seems to have stagnated; some species have become rare and others are becoming extinct (holothurians or sea cucumber), thereby compromising resource renewal. The project will therefore undertake resource development and management actions. 4.5.9 Development of octopus fishing areas: The Andavadoka experience described in Paragraph 3.1.4 will be replicated in the project area. Ten areas will be developed per year for a period of 5 years, making a total of 50 areas. These areas shall be selected in collaboration with the Fisheries and Marine Science Institute of Tuléar (IH.SM), the NGOs WCS and Blue Ventures, village communities and sector operators. WCS which has already participated actively in the Andavadoka experiment will train the NGOs that will be recruited to sensitize fishermen and monitor development measures; the IH.SM will be responsible for scientific monitoring. Such development will entail collaborating with all stakeholders concerned to close huge segments of the fishing areas on a rotational basis for a determined period of time depending on the biological cycle of the octopuses (reproduction and growth periods). 4.5.10 Framework survey and pilot production survey: The last framework survey on traditional fishing dates back to 1990. The Project will finance a national framework survey for the purpose of making an exhaustive inventory of fishing units (fishermen, canoes and fishing appliances, villages) and constituting a sampling framework of the population under study. The framework survey will provide the basic elements for a national fisheries development plan. A pilot survey to evaluate catches will then be conducted in the project area, on a representative sample of the area to evaluate production. This last survey will be conducted annually to monitor production trends and ensure better resource management all through the life of the project. One international bio-statistician consultant (24 months), one national bio-statistician consultant (36 month) and a national computer consultant (18 months) shall be recruited under the project to support the CIRPRH in the design, implementation and results analysis of surveys. The operating costs and the equipment needed to conduct these surveys will be financed by the project. 4.5.11 Operation of new fishing areas: The coastal resource potential (fish) that can be caught through traditional fishing if it is modernized is estimated at 85,000 tons. Moreover, there are indications that an untapped stock of rock lobsters exists beyond the barrier reef. The project will finance fishing activities designed to train fishermen to operate in the fishing areas (in the Tuléar region) located beyond the barrier reef. In the Tôlagnaro region, the project will focus first of all on locating rock lobster stocks found beyond the reefs. This activity shall be conducted with the IH.SM to ensure the scientific monitoring of operations and with one private operator. To that end, the project will procure a boat, appliances and other fishing gear (depth sounders, GPS…) as well as the necessary expertise through a regional expert, a professional skipper, with confirmed experience in various types of fishing (lobsters caught using traps, demersal fish and pelagics). 4.5.12 Promotion of aquaculture: The project will lend assistance to the IH.SM to undertake lobster fattening trials on larvae captured in natural environments based on the results obtained in certain Asian countries (India). Besides, this institution developed

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methods for growing sea cucumber and red algae. The project will lend support in the dissemination of these methods to the fishermen concerned. Algae cultivation will be practiced by women. C. Production development component 4.5.13 This component comprises activities relating to the procurement of production means, the training of fishermen in new octopus fishing techniques, the setting up of FCDs and construction of wharfs. 4.5.14 Procurement of production means: The project will assist fishermen with credits for financing the following equipment: (i) 50 outboard engines with 5 to 10 HP to equip Vézo canoes that can take a team of four to six persons carrying out line fishing (hand line, longline, rip hook and trolling line) or using 100m gill nets and endowed with coolers that have a capacity of 500kg; (ii) the equipment of 2,000 boats with fishing equipment, identical with the ones currently in use; and (iii) the procurement 200 insulated vessels (coolers) for small-scale operators engaged in traditional fishing. 4.5.15 Credit activities shall be financed by Vola Mahasoa (VM) which shall receive a credit line amounting to UA 362,000 financed entirely by the Government with funds from the Malagasy Fisheries and Aquaculture Board. The State shall grant the credit line to VM as a payable loan and within the framework of an agreement that this institution signed with the Government. VM will also receive technical assistance from the project for the study and award of these credits (Paragraph 4.5.4). 4.5.16 The marketing of fishery products and other small commercial activities, as well as fishing implements (nets, hooks, etc.) shall be financed by the 5 branch offices (Bezaha, Ankililoaka, Sakaraha, Tuléar and Betioky) of Vola Mahasoa (VM). The credit system to be applied will entail forming joint surety groups (JSG) of at least 5 fishermen. JSG members accept mutual guarantees for each other if one member defaults. They are located at close physical proximity to each other, accept to undergo training on the VM methodology and to be re-evaluated at the end of each cycle. They will receive loans of US$ 50 to US$ 200 which will be repaid over a maximum period of 12 months. The interest rate is set at 3.5% per month (degressive method, i.e. 21% of the annual interest rate) and shall take into account the objective of cost coverage and sustainability. VM could also mobilize savings from fishermen and female fishmongers since the recently adopted legislation allows non-mutual MFIs to collect savings. Recourse to JSGs to guarantee the repayment of credits is a method that has already been successfully tested with the clients of VM and those of other micro-finance institutions. 4.5.17 The financing of fishing equipment (outboard engines, fishing gear, coolers) for US$ 500 to US$ 2,500 shall be done through pilot credit actions that shall also be conducted by Vola Mahasoa. Before acceding to credit, the fishermen’s solidarity groups shall bring a capital contribution (in cash) of 10% of the credit amount and open savings accounts in Vola Mahasoa. The loans shall be awarded for a maximum period of 36 months, but the repayments shall be done on a monthly basis. 4.5.18 Training of fishermen in new octopus fishing techniques: Octopus fishing as practised in Tuléar entails catching the octopus with a sharpened pole or harpoon on the barrier reef, which leaves wounds on the animal and destroys the barrier reef and the natural

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habitat of octopuses because fishermen tread on and fragment the coral. The catch is sold at 3 to 4 Euros per kilogram depending on the weight. However, there are alternative fishing methods that make it possible to catch octopuses without wounding them, while protecting their natural habitat at the same time. In this case, the catch is sold for up to €10/kg. The project intends to train 500 Malagasy fishermen in such fishing techniques. 4.5.19 Installation of FCDs: The project will finance the setting up of 25 fish concentration devices (FCDs) beyond the barrier reef, based on trials made by the FAO which obtained interesting results in certain coastal areas. The FCDs will be located in areas where there is octopus fishing management to enable fishermen in such areas to have an alternative activity. The beneficiaries will be involved in the design and installation of FCDs and shall be responsible for their maintenance. 4.5.20 Construction of wharfs: Wharfs will be constructed in 20 villages with high production. Each wharf shall comprise a fully-serviced platform with a surface area of about 150 m² and a ground surface, latrines and a small house for a generating set. The platform shall have facilities (water supply, electricity, septic tank, waste management system) that will make it possible to treat incoming production under healthy conditions that comply with European standards. Wharf sites shall be chosen in agreement with fishermen and operators. A study shall be conducted by a consultant for the design of a model wharf. The wharfs shall be ceded to rural councils which shall entrust their management to private operators. D. Project coordination and management component 4.5.21 Project coordination and execution shall be the responsibility of the Tuléar Regional Service for Fisheries and Fishery Resources (SRPRH), in accordance with the accepted principle of recourse to national structures for the implementation of projects and programs. This option is in conformity with the Paris Declaration on Harmonization as well as the Decentralization/deconcentration Policy initiated by the Government of Madagascar. Moreover, it was discussed and accepted by development partners. The SRPRH is organized as follows: (i) a service head; (ii) three technical division heads (industrial fishing, traditional fishing and aquaculture); (iii) a head of the statistics division; and (iv) a head of the administrative and financial division. 4.5.22 Nevertheless, the Government and the Bank have acknowledged that the SRPRH has insufficient capacity to execute the project and have agreed to use loan resources to reinforce it by recruiting technical assistance (a participatory development expert, an environmentalist, a procurements expert, an accountant and a monitoring/evaluation expert) provided by a consultancy firm, and support staff (secretaries, drivers) on Government financing. The project will offer training opportunities to CIRPRH and SRPRH managerial staff in project management and execution in order to help create project execution capacity in fishery services at the regional level in Tuléar Province and at the national level. Moreover, the Government and the Bank have agreed that the profiles of the service head and division head for traditional fishing should be adapted to take into consideration the new extended mandate of the SRPRH and that appointees to these positions should consequently go through a rigorous selection procedure that is competitive and accepted by both parties. 4.5.23 Furthermore, the Project will provide logistic and financial support to consolidate the SRPRH and help it to execute its new missions. Such support will include the financing of its functioning, the procurement of 2 off-road vehicles and 2 rowboats for transport, the

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procurement of accounting software and the services of an external auditor. The procurement of off-road vehicles is justified by the lack of transport means at the SRPRH and the CIRPRH and the need for such means to execute the project. The Government and the Bank have agreed that all fisheries sector interventions shall henceforth be coordinated in Tuléar Province by the SRPRH. 4.6 Production, market and price 4.6.1 The increased fish production under the project will stem from the increased productivity of units equipped with an outboard engine which will be able to fish in deeper waters beyond the barrier reef, as well as an increase in the productivity of traditional fishing units that accede to input credits. The increase in octopus production will stem from increased productivity in the coral reef areas following the creation of marine reserves. Considering the support given by the project to enhance the productivity of fishing boats, catches per fishing unit will evolve as follows: (i) catches for the 50 motorized traditional canoes that can fish further off the coast will be 12 tons/year on average and per boat, compared to 3 tons currently; and (ii) catches for traditional canoes whose owners accede to credit will be 3.6 tons per year, compared to 3 tons currently. Additional production generated by the project in a full operational year would be about 3,000 tons of fish and 800 tons of octopus. A substantial part of the production is purchased by enterprises based in Tuléar, which have their own marketing circuits and use their own transport trucks to move to fishing villages where they also bring ice for preservation of fishery products. The share of the production that is not purchased by enterprises is sold fresh in Tuléar market by fishermen’s wives or is dried and sold later. 4.6.2 The catches cover a wide variety of species which can be classified, in commercial terms, into three main categories: (i) octopuses; (ii) first quality fish; and (iii) second-quality fish. First quality fish is line fish of high commercial value caught with lines and nets. On average, within a year and out of the 3,000 additional tons of fish to be produced through the project, 2000 tons will be first quality fish and 1000 tons will be second quality fish. 4.6.3 Domestic market: The domestic consumption of fishery products is high, currently standing at 7 kg per capita per year. The additional output of 3,000 tons of fish per year (4% of traditional fishing output) from the project could be easily sold on the home market. 4.6.4 World market: Madagascar could export its yield of first quality fish to EU countries so long as it complies with their health norms. The Lomé Convention enables ACP (Africa, Caribbean and Pacific) countries to export to EU countries without paying customs taxes on raw or processed products so long as they are caught by an ACP or EU fleet or processed in an ACP or EU country. On the whole, it should be noted that demersal species are the main types of fish exported unprocessed for consumption in industrialized countries. Octopuses are currently exported to Mauritius and the Reunion, but other promising markets (e.g. Japan) could import this product if the fishing techniques are improved. 4.6.5 Prices of fishery products: The national market for fresh fishery products is dominated by female retailers. Prices vary considerably depending on the location and the number of fish landings. The average price for fresh products is Ar 10,000/Kg (US$ 5/Kg) for first quality fish, Ar 800/Kg (US$ 0.4/Kg) for second quality fish, and Ar 8,000 to 20,000 Ar/Kg (US$ 4 to 10/Kg) for octopus.

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4.7 Impact on the environment 4.7.1 In keeping with the ADB’s environmental and social assessment procedures and considering that the activities planned under this project will have a significant positive impact on the sustainable management of fishery resources, the Tuléar Fishing Communities Support Project (PACP) was classified in Category 2. This classification was endorsed by the National Environment Authority (NEA) and the National Association for the Management of Protected Areas (ANGAP). The direct and indirect negative effects will easily be minimized through systematic application of mitigative and land reclamation measures. Such interventions will help to optimize the project’s environmental performance and ensure its conformity with the Environmental Charter of Madagascar and the Decree on the establishment of compatibility between investments and the environment (MECIE). A summary of the Environmental and Social Management Plan (ESMP) is found in Annex 6. 4.7.2 The specific objective of the PACP is promotion of the sustainable development of traditional maritime fishing by building the capacity of Government bodies at the central and provincial levels and of fishermen’s organizations; the planning and sustainable joint co-management of fishery resources and coastal ecosystems; and the development of small-scale fishing beyond the coral reefs by providing fishermen with adequate equipment and infrastructure. The project area is included in the marine and coastal eco-region of South-West Madagascar which is characterized by a huge network of coral reefs that are among the most extensive, richest and southernmost in the world. This ecosystem is largely under-represented in Madagascar’s current national network of protected areas. 4.7.3 In terms of positive social impact, the project’s components will make it possible to achieve better social cohesion through consolidation of fishermen’s organizations, reduce poverty through increased employment particularly for women, promote local development and access to credit which will curb migratory flows to the capital, improve nutrition and public health (ex: HIV/AIDS prevention campaign), raise the incomes of fishermen, increase their knowledge of new fishing and marketing techniques and their participation in the participatory resource co-management mechanism. The construction of wharfs will improve hygiene, thereby reducing post-catch losses and creating product value added. Lastly, there will be institutional and human capacity building in the planning and sustainable management of fishery resources and statistics. 4.7.4 As concerns the environmental impact, there will be better planning and a rational and sustainable management of fishery resources based on detailed studies to assess available fishery stocks at the provincial level and the scope and nature of fishing activities currently undertaken by various operators. This knowledge of the status of fishery resources is an absolute prerequisite to all fishery development and regulatory measures aimed at ensuring resource sustainability. It will lead to a better understanding of the current impact of informal traditional fishing activities. Moreover, the project will work with the CIRPRH, IH.SM, environmental NGOs and fishing communities in the project area to create marine reserves whose boundaries and reserve period shall be clearly defined in order to curb the extinction of certain species (octopuses), encourage regeneration (sea cucumbers) and promote stockbreeding (rock lobsters) thereby easing pressure on ecologically sensitive areas (coastal areas). Such participatory and integrated co-management of fishery resources will sensitize the target communities to their responsibilities, increase fisheries surveillance and allow the integration of environmental factors (e.g. cartography of spawning areas, fragile ecosystems

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(like mangroves), identification of threatened and major species) into development plans. Such integration will have a tangible impact on the protection of ecosystems and species. The project will also provide more adapted and selective equipment (environment-friendly, as opposed to current equipment and practices – e.g nets made from mosquito nets, sharpened poles) that is compliant with the regulations in force. This will open access to fishing areas to which fishermen had no access hitherto, thereby easing pressure on the lagoons. 4.7.5 The potential direct and indirect negative risks on the biophysical environment are concentrated in Component 3 on Production Development, namely: (1) the encouragement of traditional fishing activities may have a spillover effect on a fragile ecosystem, characterized by its vast lagoons, coral reefs and mangroves; (2) the proliferation of organic waste (fish waste), plastics and used oil from overfishing and the wharfs; (3) deforestation due to the construction of canoes from wood; and (4) the construction and operation of 20 wharfs. The mitigative measures for the risks identified include the creation of marine reserves, the preparation of a management plan with village organizations, the installation of fish concentration devices (FCDs), better surveillance of fishing equipment and environmental sensitization of fishermen to the need to protect coral reefs and manage various waste, promotion of boats made from fiberglass and integration of septic tanks and waste management into the technical design of wharfs. 4.7.6 Land reclamation activities are aimed at speeding up all environmental management activities in the marine and coastal eco-region of South-West Madagascar. The measures include the recruitment of an environmentalist in the SRPRH who shall assist the consultative bodies and working groups in the area of protection and sustainable management of biodiversity; develop and conduct environmental awareness raising for children in and out of school; coordinate economic, ecological and biological co-viability studies of the IH.SM for in-situ re-introduction of sea cucumbers and rock lobsters into fattening enclosures and tanks. He shall work closely with WWF, ANGAP, UNDP-GEF and IH.SM to prepare studies and the environmental action plan for zoning of protected marine areas in Tuléar. The capacity of the IH.SM laboratory to analyze wastewater from processing enterprises shall be reinforced under the project. 4.7.7 The environmental unit in the CIRPRH shall ensure statutory compliance of the project with the rules and procedures defined in the MECIE decree. From the operational standpoint, the environmentalist attached to the SRPRH shall be responsible for implementing and monitoring of ESMP, including the preparation of Environmental Commitment Programs (ECP) and environmental monitoring of mitigative measures. He/She shall draw up the annual work plan and half-yearly status reports. The estimated cost of ESMP implementation stands at UA 236,000 for the project’s duration of six years. It is included in project costs.

4.8 Project costs The total project cost, net of taxes and customs duties, including provisions for physical and financial contingencies, is estimated at UA 7.08 million (Ar 20,863). The provisions for physical contingencies are 10% for works and 5% for goods services and functioning. Financial contingencies were calculated based on inflation, and they represent 8% of project costs. Expenditure in foreign exchange is estimated at UA 5.301 million (Ar 15.621 billion) representing 75% of project costs and expenditure in local currency is estimated at UA 1.779 million (Ar 5.242 billion), or 25% of project costs. Tables 4.1 and 4.2 below, present project costs by component and by expenditure category.

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Table 4.1 Summary of estimated project costs by component

(MGA Million) (UA '000) COMPONENTS L.C. F.E. Total L.C. F.E. Total

% F.E.

% base-line costs

1. Capacity-building 680 2 796 3 476 231 949 1 180 80 19 2. Sustainable res. dev’t and mngment 1 542 4 087 5 628 523 1 387 1 910 73 31 3. Fishery production 970 4 609 5 579 329 1 564 1 893 83 31 4. Project coordination & management 1 512 2 033 3 545 513 690 1 203 57 19 Baseline costs 4 703 13 524 18 227 1 596 4 590 6 186 74 100 Physical contingencies 289 867 1 156 98 294 392 75 6 Financial contingencies 250 1 230 1 479 85 417 502 83 8 TOTAL PROJECT COSTS 5 242 15 621 20 863 1 779 5 301 7 080 75 114

Table 4.2

Summary of estimated project costs by expenditure category (MGA Million) (UC '000)

EXPENDITURE CATEGORY L.C. F.E. Total L.C. F.E. Total %

F.E. %

Baseline costs

INVESTMENT 3 204 12 428 15 632 1 087 4 218 5 305 80 86 A. Works 798 3 116 3 914 271 1 057 1 328 80 21 B. Goods 49 1 730 1 780 17 587 604 97 10 C. Consultancy services 1 603 5 538 7 141 544 1 879 2 423 78 39 D. Training 477 1 343 1 819 162 456 617 74 10 E. Micro-credits 276 702 978 94 238 332 72 5 OPERATION 1 500 1 096 2 595 509 372 881 42 14 A. Salaries 174 - 174 59 - 59 - 1 B. Project operation 1 245 558 1 802 422 189 612 31 10 D. Functioning of dept. of fisheries 81 538 619 27 183 210 87 3 Baseline costs 4 703 13 524 18 227 1 596 4 590 6 186 74 100 Physical contingencies 289 867 1 156 98 294 392 75 6 Financial contingencies 250 1 230 1 479 85 417 502 83 8 TOTAL PROJECT COSTS 5 242 15 621 20 863 1 779 5 301 7 080 75 114

4.9 Financing sources The project shall be financed by an ADF loan for the sum of UA 6.325 million (89.3% of cost), the Government of Madagascar for the sum of UA 0.714 million (10.1% of project costs) and beneficiaries for the sum of UA 0.041 million (0.6% of project costs). The tables below show the breakdown of financing by financing source and expenditure category. The contribution of beneficiaries corresponds to their payment of 10% of the amount of the credits that will be awarded to them. The Government’s share will finance 90% of the credit, 40% of the academic training of fishery engineers, two off-road vehicles for the framework survey, rent for project offices, staff salaries and part of the operating expenses. Other costs, net of taxes and customs duties shall be financed with the loan.

Table 4.3

Financing sources (in MGA million) (in UA million) SOURCES

F.E. L.C. Total F.E. L.C. Total % Total

STATE OF MADAGASCAR 1 001 1 104 2 105 340 374 714 10.1 BENEFICIARIES 94 26 120 32 9 41 0.6 ADF LOAN 14 526 4 112 18 638 4 930 1 395 6 325 89.3 TOTAL 15 621 5 242 20 863 5 302 1 778 7 080 100

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Table 4.4 Expenditure by category and financing source

(in UA million)

Government Beneficiaries ADF TOTAL EXPENDITURE CATEGORIES Amount % Amount % Amount % Amount %

INVESTMENT 518 8.5 40 0.7 5 535 90.8 6 093 86 A. Works 0 - - - 1 596 100.0 1 596 22.5 B. Goods 55 8.2 - - 611 91.8 666 9.4 C. Consultancy services 0 - - - 2 737 100.0 2 737 38.7 D. Training 102 14.7 - - 591 85.3 693 9.8 E. Micro credit 362 90.0 40 10.0 - - 402 5.7 OPERATION 196 19.9 1 0.1 790 80.1 987 14 A. Salaries 65 100.0 - - - - 65 0.9 B. Project operation 108 15.8 1 0.1 576 84.1 685 9.7 D. Functioning of fisheries departments 23 9.7 - - 214 90.3 237 3.3 TOTAL PROJECT COSTS 714 10.1 41 0.6 6 325 89.3 7 080 100.0

5. PROJECT IMPLEMENTATION 5.1 Executing Agency The MAEP, acting through the CIRPRH, shall be responsible for project implementation. It shall depend on the Regional Service for Fisheries and Fishery resources (SRPRH) based in Tuléar to implement other project activities. The SRPRH shall perform the following duties under the project: coordination of activities, programming and monitoring of project implementation and annual budgets, contract award and monitoring of contract implementation, financial management, monitoring/evaluation and drafting of project status reports. The SRPRH shall enjoy autonomy in the administrative and financial management of loan and government counterpart funds. 5.2 Institutional arrangements 5.2.1 A Guidance and Monitoring Committee (GMC), chaired by the South West Regional Chief shall be installed in Tuléar. Its membership shall comprise: the Regional Director for Rural Development, the Regional Technical Coordinator of the National AIDS Control Committee, a representative of the NEO, the Director of IH.SM, the Director of Vola Mahasoa, representatives of NGOs involved in project implementation and representatives of rural councils in the PACP project area. The GMC shall: supervise the functioning and progress of the project, approve annual programs and budgets, approve status and financial reports prepared by the project, and encourage partnership between all project stakeholders. The Head of the SRPRH shall provide the secretarial services of the GMC. 5.2.2 NGOs shall be recruited to work closely with the SRPRH and notably the participatory development expert and the Head of the Traditional Fishing Division who shall directly supervise their activities. They shall have teams in the villages and shall be responsible for: (i) the organization of beneficiaries: guidance and participatory diagnosis to ensure better understanding of village sociology and the priorities of beneficiaries, setting up of grassroots associations or cooperatives, and conflict management; (ii) training: training of the executive members of associations and cooperatives in management, technical training of

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women in the processing of fishery products, training of fishermen in new fishing techniques; (iii) creation of marine reserves through a participatory process; (iv) training of women in the management and operation of vegetable gardens; (v) participatory monitoring/evaluation of project actions. 5.2.3 The South West Regional HIV/AIDS Coordination Committee shall be responsible for implementing HIV/AIDS prevention actions. It shall be supported by regional coordinators and local village committees. 5.2.4 The framework survey and production surveys shall be conducted by the Department of Fisheries through its monitoring/evaluation and statistics division. It shall be supported by regional fisheries services and shall recruit short-term survey agents to conduct field surveys. 5.2.5 Research/development (exploratory fishery, dissemination of techniques for growing sea cucumber and algae, lobster fattening experiment under operational conditions) shall be entrusted to the IH.SM. The IH.SM and two NGOs that conducted the reserve creation experiment in Andavadoka village (WCS and Blue Ventures) shall train the staff from other NGOs (Paragraph 5.2.2) who shall be responsible for replicating the experiment in the villages of the project area. They shall also supervise the creation of reserves on the field. An agreement shall be signed to that end between the Project and the IH.SM, which shall collaborate with private operators within the framework of this agreement in exploratory fishery and with WCS and Blue Ventures in the constitution of marine reserves. 5.3 Implementation and supervision schedule 5.3.1 Supervision schedule: The project shall be supervised at least one and a half times per year. The first mission shall be a launching mission that will make it possible to finalize the program of activities for the start-up year with the SRPRH, train staff in procurement and disbursement procedures as well as Bank requirements in terms of audit reports and the submission of periodic status reports. A mid-term review mission is planned for the end of the third year. It will, in particular, make it possible to orient the project based on the experience of the three previous years. 5.3.2 Implementation schedule: The project shall be implemented over a period of 6 years (2007–2012). This duration is justified by the long period needed for the guidance and consultation process with beneficiaries to set up marine reserves and the need to assist the communities for as long as possible in this process to guarantee success and sustainability. The expenditure and project implementation schedules are summed up in the tables below:

Table 5.1 Expenditure schedule by component (in UA million)

COMPONENTS 2007 2008 2009 2010 2011 2012 TOTAL

1. Capacity-building 289 323 279 225 203 18 1 338 2. Dev’t & sust. mangmt of resources. 919 503 343 258 64 55 2 142 3. Fishery production 63 160 965 939 64 66 2 257 4. Project coordination & managemnt 544 155 157 162 160 166 1 344

TOTAL 1 815 1 141 1 743 1 585 491 304 7 080

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Table 5.2

Expenditure schedule by financing source (in UA million) Financing sources 2007 2008 2009 2010 2011 2012 TOTAL

1. Gov’t of Madagascar 98 117 127 138 130 105 714

2. Beneficiaries 1 7 8 9 8 8 40

3. ADF 1 717 1 018 1 609 1 438 353 191 6 325

TOTAL 1 815 1 141 1 743 1 585 491 304 7 080

Table 5.3 Implementation and supervision schedule

Activity/actions Responsibility Start Duration

Approval by the Board ADF November 2005

Signature of loan agreement Gvt/ADF January 2006

General procurement notice MAEP/ADF January 2006

Ratification of loan agreement MAEP July 2006

Loan effectiveness and first disbursement MAEP August 2006

Provision of technical assistance to support the SRPRH MAEP/ADF September 2006 3 months

Preparation of the first annual program MAEP/ADF November 2006 2 months

Program launching workshop SRPRH/ADF November 2006

Signature of agreement with IHSM SRPRH February 2007 3 months

Recruitment of NGOs SRPRH February 2007 2 months

Training of shipwrights and mechanics Technical Center September 2007 3 years

Training of fishery engineers IHSM September 2007 3 years

Framework survey DPRH/SRPRH August 2007 2 years

Development of protected sites SRPRH/IHSM/WCS

December 2007 4 years

Provision of credit SRPRH December 2007 4 years

Lobster fattening, growing of sea cucumber and red algae SRPRH/IHSM December 2007 3 years

Works on wharfs SRPRH June 2007 9 months

Audit SRPRH /consult. 2007 1 per year

Experimental fishing SRPRH/IHSM January 2008 2 years

Training of fishermen SRPRH February 2008 1 year

Installation of FCDs SRPRH Mars 2008 1 year

Supervision ADF 1½ times per year

Mid-term review SRPRH / ADF July 2008 3 months

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5.4 Procurement arrangements 5.4.1 Procurement arrangements are summarized in Table 5.4 below. All procurement of goods, works and services financed with ADF resources shall be made in accordance with ADF rules of procedure on procurement or, as the case may be, the Bank’s rules of procedure for the recruitment of consultants, using the relevant Bank standard bidding documents.

Table 5.4 Procurement arrangements

(in UA thousand) ITEMS ICB

NCB Shortlist Others Not Bank financed TOTAL

A. WORKS Wharfs - 1 513 - - - 1513 (1513) Vegetable gardens - 75 (75) - - - 75 (75) Office Rehab.&extension - 8 (8) - - - 8 (8) B. GOODS Technical equipment 136 (136) - - - - 136 (136) Off-road vehicles - 46 (46) - - 55 101 (46) Transport boats - 44 (44) - - - 44 (44) Office furniture - - - 76 (76) - 76 (76) IT equipment - - - 43 (43) - 43 (43) FCD and small equipment - - - 251 (251) - 251 (251) Motorcycles - - - 15 (15) - 15 (15) C. SERVICES Train fishermen / Instructors - - 315 (315) - - 315 (315) Academic training - - 255 (153) - - 255 (153) Training in management - - 228 (288) - - 228 (288) Technical assistance - - 1985 (1985) - - 1985 (1985) Studies - - 300 (300) - - 300 (300) Audits - - 61 (61) - - 61 (61) IHSM research agreements - - - 286 (286) - 286 (286) D. STAFF - - - - 65 65 E. FUNCTIONING - - - 882 (790) 40 882 (790) F. MICRO-CREDIT - - - - 402 402 TOTAL 136 (136) 1686 (1686) 3143 (3041) 1553 (1461) 561 7080 (6325)

Note : - Shortlisting applies only to the use of consultants; - “Others" refers to national shopping for suppliers at the national and international levels and the contract with IH.SM; - the figures in parenthesis represent amounts financed by the ADF

5.4.2 The SRPRH shall be responsible for preparing bidding documents, bid analysis reports and the contracts that it shall submit to the Bank for approval. Procurement of goods, works and services will be done in accordance with the following modalities: WORKS

(i) Construction works on the wharfs (UA 1.513 million), vegetable gardens (UA 0.075 million) and rehabilitation of project offices (UA 0.008 million) shall be procured through national competitive bidding. The low amount of works on the wharfs (6 contracts not exceeding UA 231,000 per contract), their dissemination over 20 sites and the landlocked nature of the areas concerned justify recourse to NCB. Market gardening (3 contracts not exceeding UA 25,000 per contract) and office rehabilitation/extension works (a contract of UA 8,000) are not expensive and can be awarded through NCB. There are enterprises at the national level that can carry out such works.

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GOODS

(ii) Technical equipment for the Tuléar Technical Training Center will be procured through international competitive bidding (a contract of UA 136,000).

(iii) Vehicles (a contract of UA 46,000) and transport boats (a contract of UA 44,000) shall be procured through national competitive bidding. There are enough local dealers to guarantee competition.

(iv) The FCDs (UA 158,000) shall be procured through international shopping (two contracts of UA 79,000 each), since they are specialized equipment.

(v) The office furniture (two contracts of UA 38,000 each), IT equipment (a contract of UA 43,000), various technical equipment (several small contracts for a total sum of UA 93,000) and motorcycles (a contract of UA 15,000) shall be procured through national shopping. These are small contracts and there are a sufficient number of enterprises selling such equipment on the local market.

CONSULTANCY SERVICES

(vi) The services of consultancies, NGOs and individual consultants for the training of beneficiaries (UA 315,000), academic training of engineers (UA 225,000), training of fishery sector managerial staff in project management (UA 228,000), technical assistance (UA 1,985 million), studies (UA 300,000) and audit services (UA 61,000) shall be recruited through a bidding process based on shortlists. The procedure for selecting consultants shall be based on technical evaluation of bids with consideration of their prices, except for audit services whose selection procedure will be based on the comparability of technical offers and selection of the lowest financial bid.

(vii) Research/development services as well as training and supervision services for NGOs responsible for developing marine reserves on the field shall be procured through an agreement between the Project and IH.SM (UA 286,000). The IH.SM is the only institution in the country that has the capacity to provide the envisaged research services. It developed the sea cucumber breeding techniques that the project intends to introduce under operational conditions. It is the only institution that has sufficient understanding of the problem of developing traditional fishing and the social environment of fishermen to carry out this mission. As concerns the training and supervision of NGOs responsible for setting up marine reserves, the IH.SM shall work in collaboration with the international NGOs WCS and Blue Ventures. The IH.SM and the two NGOs mentioned above are the only bodies that have carried out a successful experiment on the setting up of a marine reserve (Andavadoka village). It is this experiment that the PACP intends to replicate in about fifty new villages.

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OPERATION

(viii) Operation-related procurements (882,000) shall be done through national shopping. The maximum amount per contract shall not exceed UA 20,000.

5.4.3 General procurement notice: The text of the general procurement notice shall be discussed and adopted with the Government of Madagascar during negotiations and published in Development Business as soon as the loan proposal is approved by the ADB Board of Directors. 5.4.4 Review procedures: The following documents shall be submitted for consideration and approval by the Bank before they are published: (i) specific procurement notices; (ii) bidding documents or invitation letters to consultants; (iii) evaluation reports on bids made by enterprises, suppliers or consultants, with recommendations on contract award; and (iv) draft contracts, if modifications have been proposed in the draft contract in the bidding documents. 5.5 Disbursement arrangements A special account shall be opened in the name of the project in a bank acceptable to the ADF. This account shall receive only loan resources and shall be managed separately from the contributions of the Government of Madagascar. The special account shall essentially be used to pay operating expenses. It shall receive an initial advance based on the projected expenditure schedule for 4 months of activity drawn up by the SRPRH and given prior approval by the Bank. It shall be replenished periodically upon presentation of a disbursement request that is also prepared based on the projected expenditure schedule of 4 months and accompanied by supporting documents to justify the use of at least 50% of previous disbursements. The project shall use other disbursement methods and notably direct payments to pay bills that exceed UA 20,000. An account similar to the abovementioned special account shall be opened in a local bank to receive Government counterpart funds. 5.6 Monitoring/evaluation 5.6.1 Monitoring/evaluation conducted by the project shall focus on two aspects: physical and financial monitoring and project impact assessment. The participatory development expert recruited by the SRPRH shall be responsible for implementing these tasks which are explained in detail below. 5.6.2 Physical and financial monitoring: The participatory development expert shall be responsible for collecting and compiling data on physical implementation and financial execution. To that end, he shall have a master plan with quantitative indicators of project status. The master plan will make it possible to obtain the following information, on a quarterly basis, for each activity: physical objective, level of implementation, costs. The physical implementation indicators used shall be those of the matrix and shall relate to project activities. Cost elements shall be produced by the accounting service. The MFI shall submit a report every six months to the SRPRH on the credit portfolio financed under the project. All this data shall be used to draft the project status reports. 5.6.3 Impact assessment: Project impact assessment shall be the responsibility of NGOs responsible for project implementation in the villages. Such assessment shall be done in a participatory manner with beneficiaries. Its goal shall be to determine the level of the three

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indicators retained in the matrix for measuring attainment of the specific objectives of the project, namely: production per fishing unit, income levels of female fishmongers and the average size of octopuses caught in the reserves. These indicators shall be measured at the beginning, middle and end of the project during surveys conducted on a representative sample of project beneficiaries. The results of these two surveys shall be used to draft mid-term review and project completion reports. A consultant statistician shall be recruited by the project for a period of 12 months (3 times 4 months) to assist NGOs with the design, conduct and data analysis of such surveys and help the SRPRH to prepare mid-term review and project completion reports. 5.7 Financial and audit reports The SRPRH shall keep an accounting of the project in accordance with the Bank’s accounting and financial management requirements. It shall prepare financial statements and ensure that an independent auditor acceptable to the Bank audits project accounts every year. Such auditing will also concern the use of the resources in the special account and Government counterpart funds. The financial statements and audit report shall be forwarded to the Bank before 30th June of the year following the audit year. The services of the auditor shall be remunerated from the loan for the 6 years of the project. 5.8 Coordination of aid 5.8.1 Aid shall be coordinated at the national level by the Ministry of Finance, the Economy and the Budget. At the donor level, coordination is done through the Multi-donor Secretariat for Rural Development, a permanent consultative structure between the various partners of Madagascar in which all sector donors are represented. This structure enables them to share information and experiences, coordinate activities and harmonize interventions. The design of the project was discussed with sector donors and the multi-donor secretariat. 5.8.2 Two donors in particular have interventions in the project area. The European Union has financed a program on the quality of fishery resources and is currently funding fishery surveillance. The wharfs to be constructed by the project complement the resource quality program and sustainable resource management actions complement surveillance activities financed by the EU. The World Bank supports the RDSP which intervenes in rural development in general. Coordination with the RDSP shall be ensured on the field by the Regional Director for Rural Development who is responsible for coordinating all rural development activities in the region. 6. SUSTAINABILITY AND RISKS OF THE PROJECT 6.1 Recurrent expenditure The table below shows the evolution of recurrent expenditure, including the share financed by the Bank which declines substantially in the last year of the project. The recurrent expenditure of the project includes operating expenses and SRPRH staff salaries, the cost of research activities and survey costs. Project related operating expenses end with the project. Research and development activities will also be completed with the project. They will not generate any recurrent expenditure that the State will have to bear later. Hence, the only recurrent costs that will remain after the project are staff salaries (already taken over by the State) and the expenses of the annual production survey. These costs are low (about UA 18,000 per year) and are included in sector statistics costs that the Government has already taken over.

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Table 6.1

Recurrent expenditure schedule by financing source

In UA thousand 2007 2008 2009 2010 2011 2012 Total Government 43 31 31 31 31 30 197 ADF 191 129 122 118 119 111 790 TOTAL 235 160 153 148 150 141 987

6.2 Project sustainability 6.2.1 The project shall be executed by the permanent structures of the fisheries administration, namely the SRPRH at the regional level and the CIRPRH at the national level. They could monitor project activities beyond the implementation period. They will continue to provide guidance to fishermen as part of their traditional duties and this will enhance the sustainability of activities conducted under the project. 6.2.2 Once the practice of developing marine reserves has been adopted by fishermen, it could be continued by fishermen’s organizations without any need for major external intervention. The positive results this will produce in terms of production and product quality will guarantee its sustainability. 6.2.3 The wharfs shall be ceded to the rural councils which shall entrust their management to private operators (usually companies that purchase fish) who shall operate, manage and maintain them. This mode of management guarantees the sustainability of the facilities. 6.2.4 Vola Mahasoa proposes interest rates that enable it to cover its expenses and make a profit. Its collection rate ranges from 90 to 100%. It will receive technical assistance for the training of its credit officials. These factors guarantee sustainability for this institution which will build a customer base of fishermen that it could continue to finance even after the project ends. Hence, the sustainability of the credit system for fishing communities is ensured. 6.3 Main risks and mitigative measures

6.3.1 The beneficiary communities may not adhere to the resource development activities proposed by the Project; it may, indeed, be difficult for them to give up fishing along part of the coast during a period of the year because of their extreme poverty and lack of alternative activities to fishing. This risk is mitigated by the following factors: (i) the marine reserve experiment was conducted in a village of the project area and its positive results are known to a huge segment of the fishing population and this may encourage them to set up maritime reserves themselves. Besides, about 10 villages have already volunteered to create similar reserves after the Andavadoka village experiment; (ii) the guidance and training activities to be conducted in the villages by the NGOs recruited by the project will help to convince the villagers to engage in this initiative; (iii) the project offers alternative activities to octopus fishing (aquaculture, fishing beyond the reefs, market gardening).

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6.3.2 Previous Bank experience in Africa in the area of micro-finance has produced limited results and this could raise fears that the micro-credit component of the project will perform poorly. This risk is mitigated by the excellent results registered by Vola Mahasoa and the technical assistance it will receive from the project. 6.3.3 Climatic problems and especially the frequent cyclones in Madagascar pose a risk to project implementation. Fish concentration devices, in particular, could be swept away by cyclones. 6.3.4 The shortage of human resources and the structural shortcomings of the Malagasy administration could undermine project implementation. This risk is mitigated by the capacity-building measures envisaged under the project. The Government and the Bank have agreed to use the Tuléar SRPRH henceforth to execute projects and to reinforce it, if need be, so as to increase the sustainability of development projects and programs. 7. PROJECT BENEFITS 7.1 Economic and financial analysis assumptions The economic and financial analysis is based on the following assumptions:

- Only tangible benefits directly attributable to the project were quantified

and factored into the analysis. Such benefits are: (i) a rise in the incomes of beneficiaries due to increased production resulting from the equipment of their canoes with outboard engines; (ii) a rise in the incomes of fishermen who continue using traditional canoes but have access to credits for buying inputs; (iii) the rise in income that will result from increased production and improvement of the quality of octopuses (greater weight and improved quality) in the marine reserves.

- Three fishing models were taken into consideration in the economic and

financial analysis: (i) traditional boats newly-equipped with 5 to 10 HP outboard engines; (ii) unmotorized traditional boats whose owners have access to credit; (iii) marine reserve areas.

- The financial analysis is based on product and input prices observed on the

market. - The economic costs of equipment were derived from financial costs, net of

customs duties and various taxes. - Estimation of the economic prices of fishery products was done by

converting financial prices into economic prices using the import parity and export parity prices of products sold on the international market. Conversion factors were used to convert financial prices into economic prices for products not sold on the world market.

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7.2 Financial analysis 7.2.1 The financial rate of return was evaluated by analyzing the fishing model types described below. The gross margin was estimated for each of these models in a project situation and a non-project situation. The prices applied are those observed on the market. The table below presents the gross margins per fishing model in the “project” situation and the “non-project” situation for the three models. The amounts are expressed in Ariary.

Fishing model Pre-project situation

(Ariary) Project situation

(Ariary)

Traditional canoe equipped with OB engines

2,265,000

5,918,000

Traditional canoe whose owner has access to credit for the purchase of inputs

2,265,000 2,718,000

Marine reserve 60,000,000 137,760,000

7.2.2 The gross margin increases for the three fishing models. This increase varies from one model to another. The traditional canoe equipped with an outboard engine presents a particularly high financial rate of return (the gross margin increases by 161%). This rise stems from increased production (from 3 to 12 tons per year), owing to the fact that the fishermen, in this case, can now have access to new fishing areas and fish for longer periods during the day and for practically 200 days per year. The marine reserves also present a high financial rate of return (the gross margin increases by 121%). Such high financial rate of return stems from increased production and price increases resulting from improved product quality (greater weight and improved fishing techniques). The gross margin for the traditional canoe whose owner has access to credit increases by only 20%. 7.3 Economic analysis Economic analysis, which entails assessing the project rate of return for the entire project area, used the basic data of financial analysis. However, the financial prices were converted into economic prices to factor in the various distortions observed on the market, as explained above. The prices used for the goods and services produced and consumed by the project on the one hand, and investment costs, on the other hand, are constant magnitudes for the year 2005. Physical contingencies were factored into the calculation. On this basis, the economic rate of return (ERR) calculated through the economic cash flows table after an investment life period of 20 years, is estimated at 20%. The rate of return is well above the capital opportunity cost which is estimated at 12 %. 7.4 Impact analysis 7.4.1 The PACP will benefit 92 fishing villages with a total population of 70,000 inhabitants. The increase in fishery production, in addition to its impact on the incomes of beneficiaries, will improve nutrition in all villages of the project area. 7.4.2 The micro-credits will help about 3,000 women to develop petty trading in food products. They would be able to develop their business and satisfy their basic needs. Women’s organizations which so desire will receive training in fish conservation. About thirty villages will have vegetable gardens and this will help to improve nutrition in the villages.

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7.4.3 AIDS prevention through a number of additional actions in the intervention of the National AIDS Control Council will help to sensitize a greater number of people to the disease and its modes of prevention. It is estimated that about 30,000 people will have greater awareness of the disease by the end of the project. 7.5 Sensitivity analysis The revenue generated by the project could vary depending on the number of fishermen who have access to credit and the number of marine reserves set up. It can also vary depending on the variation in project costs and product prices. To take all these factors into consideration, project sensitivity is analyzed in the following situations: (i) 50 % of fishermen have no access to credit; (ii) 25 % of the villages do not adhere to the setting up of marine reserves; (iii) project costs increase by 10 %; (iv) product prices decline by 10 %. The rates of return that would result from such situations are presented below, as well as the envisaged assumptions. The most unfavorable situation would be that 50% of fishermen have no access to credit, generating and ERR of 15.2% which is still higher than the capital opportunity cost of 12 %. Assumptions ERR

50 % of fishermen do not have access to credit 15.2 %

25 % of villages do not adhere to the creation of marine reserves 15.7 %

Project costs increase by 10 % 17.6 %

Product prices decline by 10 % 17.0 %

8. CONCLUSIONS AND RECOMMENDATIONS 8.1 Conclusions 8.1.1 Fishing plays a major role in the rural sector and in the economy of Madagascar in general (7% of GDP and 500,000 jobs). Traditional fishing is mainly responsible for the excellent performance of the sector. However, this activity is beginning to experience growth difficulties due to overfishing of lagoons, the poor structuring of farmers organizations, no access to credit and the absence of truly reliable statistics. 8.1.2 The project will help to halt the current trend of dwindling production in traditional fishing areas threatened by overfishing, consolidate fishermen’s organizations and State services, and provide fishermen with credit. It will produce an additional yield of 800 tons of octopus and 3,000 tons of fish per year. The project will substantially increase and safeguard fishermen’s incomes. Its economic rate of return is estimated at 20%. It ranks among the priorities of the Government of Madagascar, features in the Bank’s country assistance strategy and will generate synergy with other Bank projects in the same area with regard to impact on poverty. A participatory approach was adopted in the design and implementation of the project. The creation of marine reserves to be managed by village communities is the concrete outcome of this approach. The implementation of the PACP will be informed by the Bank’s long experience in Madagascar’s rural sector and its recent experience in agricultural project implementation.

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8.1.3 In the light of the foregoing, it is recommended that an ADF loan, not exceeding UA 6.325 million be awarded to the Republic of Madagascar, subject to the fulfillment of the conditions specified in the loan agreement. 8.2 Recommendations It is recommended that an ADF loan, not exceeding UA 6.325 million, be awarded to the Republic of Madagascar to contribute to the financing of the project described in this report, subject to the fulfillment of the following conditions:

A. Conditions precedent to loan effectiveness. The loan agreement shall become effective subject to the Borrower’s compliance with the provisions of Section 5.01 of the General Conditions.

B. Conditions precedent to first disbursement. The first disbursement of the

loan shall be subject to the coming into effect of the loan agreement and fulfillment of the following conditions by the Borrower:

(i) Provide the ADF with proof of the creation of an Orientation and

Monitoring Committee chaired by the Regional head and composed of the Regional Director for Rural Development, a representative of the NEO, the Regional Technical Coordinator of the National AIDS Control Committee, the Director of IH.SM, the Director of Vola Mahasoa, NGOs involved in the project and representatives of rural councils in the PACP project area (Paragraph 5.2.1);

(ii) Provide the ADF with proof of the recruitment of the head of the SRPRH and the head of the traditional fisheries division of the SRPRH whose qualifications and experiences must have been approved beforehand by the ADF (Paragraph 4.5.21) ;

(iii) Provide the Bank with proof of the opening of a special account in a commercial bank acceptable to the ADF to receive loan resources, and an account opened in a commercial bank to receive Government counterpart funds (Paragraph 5.5).

ANNEX 1 Page 1 of 1

REPUBLIC OF MADAGASCAR

TULÉAR FISHING COMMUNITIES SUPPORT PROJECT (PACP)

Project Area

This map was prepared by staff of the ADB Group solely for the use of readers of the report to which it is attached. The denominations used and boundaries on this map do not constitute any value judgement by the ADB Group and its members on the legal status of a territory nor any approval or acceptance of its boundaries

ANNEX 2 Page 1 of 1

REPUBLIC OF MADAGASCAR

TULÉAR FISHING COMMUNITIES SUPPORT PROJECT (PACP)

Project Organization Chart

Directorate General for Regional Development Department of Fisheries and Fishery Resources (CIRPRH) Regional Directorate for Rural Development in Tuléar Province

Regional Service for Fisheries and Fishery

Resources (SRPRH) in Tuléar Technical Assistance of Project Industrial Fishing Aquaculture Traditional Fishing Division Statistics Division Administrative Division Division Division

ANNEX 3 Page 1 of 2

REPUBLIC OF MADAGASCAR TULÉAR FISHING COMMUNITIES SUPPORT PROJECT (PACP)

Terms of Reference for key project staff

I. Head of the Regional Service for Fisheries and Fishery Resources (SRPRH) 1. Main Duties and Responsibilities. Placed under the authority of the Monitoring and Guidance Committee and of the Ministry of Agriculture, Livestock and Fisheries acting through its Department of Fisheries and Fishery Resources and working in close collaboration with NGOs intervening within the PACP/TP Project, the Service Head shall be responsible for: (i) coordinating the activities of the various stakeholders in the project (SRPRH, NGOs, IH.SM, rural councils…) ; (ii) managing project funds in close collaboration with the accountant; (ii) preparing annual programs and budgets and ensuring their implementation on the field; (iv) preparing and submitting quarterly status reports to the Guidance and Monitoring Committee (GMC) and the Bank; (v) managing relations between the project and other administrations and between the project and the Bank; (vi) making new proposals to the GMC, MAEP and the Bank that could improve project execution or eliminate obstacles that undermine such execution; (vii) ensuring that project audits are conducted annually and that audit reports are forwarded to the Bank in time; and (viii) preparing and providing secretarial services at periodic meetings of the GMC and MAEP on the project and drafting the summary records of such meetings. 2. Job requirements. (i) Advanced training (Fisheries Engineer level), with more than 10 years of confirmed experience in fisheries and a minimum of three years in fisheries development projects; (ii) Familiarity with budgetary procedures; (iii) Knowledge of development institutions, and of the intervention criteria and procedures of a financial development agency; (iv) Ability to work in a team; and (v) Language proficiency: French compulsory and English desirable.

II. Head of the Traditional Fishing Division

1. Main duties and responsibilities. Placed under the authority of the Service Head and working in close collaboration with NGOs involved in the FSCP/TP, the Division Head shall be responsible for: (i) Disseminating new fishing techniques for rational and sustainable resource management and especially new octopus fishing techniques that do not affect the quality of the catch; (ii) Installing FCDs in collaboration with fishermen and IH.SM on the basis of exploratory fishery results; (iii) Targeting new fishery resources, notably pelagics such as tunnies and accessory species as well as demersal fish beyond the grand reef of Toliary; (iv) Training/guiding young fishermen on new fishing techniques; (v) assisting NGOs with supply of adequate fishing materials and equipment (production means); (vi) proposing new production means (motorized fiberglass canoes, selective and more efficient fishing equipment); (vii) sensitizing fishermen, fishmongers and collectors to the importance of hygiene; (viii) training, sensitizing and guiding fishermen on fish processing and conservation techniques and technology; (ix) Proposing an organized product collection system; (x) assisting the NGOs selected for the micro-finance system; and (xii) identifying the villages where wharfs will be constructed, in collaboration with the local councils and private enterprises engaged in marketing fishery produce. 2. Job requirements: (i) Excellent knowledge of fishing techniques and product processing; special experience in traditional fishing development and village participatory approach as well as familiarity with the physical environment and fishing communities (culture) of the south-west and southern coast of Madagascar; (iii) Advanced training in fisheries (fishery engineer level) with more than ten years confirmed experience in development projects; (iii) Ability to work in a team; and (iv) Languages: French and the aptitude to communicate in the local language are mandatory.

ANNEX 3 Page 2 of 2

III. Participatory development expert 1. Main duties and responsibilities. Placed under the authority of the Service Head and working in close collaboration with NGOs involved in the PACP/TP, the Participatory Development expert shall be responsible for: (i) participating in the selection of NGOs that shall be responsible for implementing the project on the field; (ii) ensuring that all project activities and particularly the setting up of marine reserves, are implemented following a participatory approach; (iii) ensuring that women’s needs in terms of credit, training in product processing and development of vegetable gardens are sufficiently addressed in the project; (iv) monitoring the implementation of preventive HIV/AIDS control sub projects; (v) monitoring the activities of the NGOs; (vi) conducting monitoring/evaluation in collaboration with the fisheries service and the NGOs; (vii) selecting villages where the marine reserves, wharfs and vegetable gardens will be developed; (viii) drafting project status reports; and (ix) consolidating organizations of beneficiaries and special training for women.

2. Job requirements. The participatory development expert shall: (i) hold an advanced diploma in rural sociology or related discipline and be familiar with the participatory approach and monitoring/evaluation; (ii) have at least 5 years of professional experience with solid field experience among communities, women and marginal groups; familiarity with fishing circles is desirable; (iii) be fully proficient in the French language and be able to communicate in the local language; (iv) have solid knowledge of monitoring/evaluation of development projects. IV. Accountant 1. Main tasks and responsibilities. Placed under the authority of the Service Head PACP accountant shall be responsible for: (i) doing project accounting; (ii) preparing financial statements; iii) submitting the audit to the Malagasy Government and the Bank; (iv) paying project suppliers and service providers; (v) managing project assets. 2. Job requirements. The accountant shall: (i) hold an advanced diploma in accounting; (ii) have at least 5 years professional experience in a similar position; and (iii) have excellent mastery of the French language. V. Procurements expert 1. Main duties and responsibilities. Placed under the authority of the Service Head PACP procurements expert shall be responsible for: (i) preparing and monitoring a procurements plan for the project; (ii) preparing the bidding documents in accordance with the standard formats of the Bank; (iii) sitting on procurements boards; (iv) preparing bid evaluation reports; (v) submitting all the procurements files to the Bank. 2. Job requirements. The procurements officer shall: (i) be a holder of an engineers diploma; (ii) have at least 5 years experience in the area of procurements; (iii) have good command of the French language.

ANNEX 4 Page 1 of 2

REPUBLIC OF MADAGASCAR

TULÉAR FISHING COMMUNITIES SUPPORT PROJECT (PACP)

Presentation of the Vola Mahasoa mirofinance institution

1. Presentation of Vola Mahasoa 1.1. Vola Mahasoa was set up in 1993 with the technical assistance of APEM and ICDR following a feasibility study conducted by CIDR between July and December 1992. Later on branches were opened in Bezaha in 1993, Ankililoaka in 1996, Sakaraha in 1997, Tuléar in 2000 (credit with education financed by the MicroStart /UNDP Program) and Betioky in 2004. 1.2. Vola Mahasoa is still officially under the CIDR which operates it, and of APEM which is the project owner. With the enactment of the law on MFIs (on 27 July 2005), VM will be transformed into a micro-finance institution with the status of a corporation approved by the monetary authorities. There are plans to gradually set up 4 groups of shareholders within VM’s capital:

- a group for founders (APEM and CIDR), who guarantee VM’s orientation as a development institution;

- a group for employees, whose participation in VM’s capital will strengthen their commitment to the institution;

- a group for “beneficiaries” (clients and la Maison des Paysans), who, together with APEM and CIDR, guarantee the maintenance of VM’s orientation;

- a group for private investors (bands and institutional clients), whose participation should increase VM’s equity capital and enable them to contribute their financial expertise to VM.

From the creation of the corporation, the composition of VM’s share capital will be made to evolve as follows:

In Ar million

2 004 2 005 2 006

APEM 144 300 47.5% 125 800 34% 139 400 34% CIDR 144 300 47.5% 125 800 34% 77 900 19% Employees 15 000 5% 37 000 10% 61 500 15% Clients and Maison des Paysans 37 000 10% 61 500 15% Banks and institutional clients 44 400 12% 69 700 17% TOTAL 303 600 100% 370 000 100% 410 000 100% TOTAL in UA 103 000 126 000 139 000 1.3. By involving all these various stakeholders, VM intends to build a balanced governance system that will enable it to reconcile its poverty reduction objective with the financial equilibrium imperatives binding on any private corporation. Pending publication of the regulations and the creation of the corporation, a technical committee sits as a board of directors every quarter to monitor performance and define the orientation of the structure. This technical committee is composed of the director of VM, 3 representatives of APEM (who chair the proceedings), 3 representatives of CIDR, and will in future include employees and clients. VM currently has four rural branches (Ankililoaka, Sakaraha, Bezaha, Betioky) and 7 offices in rural areas, representing eleven grassroots service centers devoted to the rural poor, especially farmers; an urban branch in Tuléar which particularly targets poor women organized into credit and solidarity associations and a head office in Tuléar that supports the branches. Each branch has a branch manager who may be assisted by 1 or several operational managers depending on the size of the geographical area covered by the branch, an administrative and financial assistant and credit officers.

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1.4. The management is composed of: a director, an internal controller, an administrative and financial officer, a network expert, and an administrative and financial assistant. The commercial staff (credit officers, operational managers and branch managers) is composed of 33 persons, and the support staff (administrative and financial assistants in the branches and in the head office) is composed of 11 persons. 1.5. Vola Mahasoa is the main micro-finance institution intervening in rural areas in the South West and it operates as a non-mutual institution. The objective is to extend Vola Mahasoa services to fishing communities following the methodology already used for the creation of branches in farming areas, including Bas Mangoky.

MMaaiinn ppeerrffoorrmmaannccee iinnddiiccaattoorrss oovveerr tthhee llaasstt tthhrreeee yyeeaarrss FFMMGG

31/12/2000 31/12/2001 31/12/2002 Implantation Number of branches 05 05 04 Number of members 4117 5411 5933 Percentage of women 26.25% 41.23% 44.85%

Loans

Number loans disbursed during the period 4432 6214 9041 Amount of loans disbursed during the period 1,828,000,000

(UA 124,000) 2,880,000,000 (UA 195,000)

3,811,000,000 (UA 258,000)

Number of active clients 4117 5411 5933 Percentage of women 26.25% 41.23% 44.85% Outstanding credits 718,482,000

(UA 48,000) 794,726,000 (UA 53,000)

1,292,772,000 (UA 87,000)

Average loan amount 412,000 (UA 28)

463,000 (UA 31)

421,500 (UA 29)

Savings (Tuléar Branch only) Number of savers 162 1 151 1 405 Percentage of women 100% 100% 100% Outstanding savings 3,939,500

(UA 267) 119,944,777 (UA 8,141)

101,802,466 (UA 6,910)

Portfolio status Outstanding loans > 1 day n. a. 22.73% 8.80% Risky loans > 30 days 9.97% 11.37% 5.72% Losses on loans 0.07% 5.41% 2.84% Operational and financial self-sufficiency Operational self-sufficiency 41.28% 51.71% 48.90% Financial self-sufficiency 41.54% 44.92% 63.67%

ANNEX 5 Page 1 of 2

REPUBLIC OF MADAGASCAR

TULÉAR FISHING COMMUNITIES SUPPORT PROJECT (PACP)

Terms of reference of the study and technical assistance for the extension of micro-finance services

1. Introduction

The setting up of a financing system for fishing communities and operators in the cephalopods sub-sector in Madagascar is crucial to the success of any development activity in the sector. However, there is currently no adequate financing system for supporting fishery sector operators. For all these reasons, the Fishing Communities Support Project in Tuléar Province (PACP/TP) intends to provided technical assistance to support and provide guidance to the micro-finance institution that will be retained to operate the micro-credit component of the project. Such technical assistance will also cover actions relating to the creation, guidance and training of solidarity groups. The design, implementation and management of such technical assistance shall be entrusted to an operator specialized in micro-finance. 2. Definition of the study on implementation of the credit program The setting up of a micro-finance program requires, first of all, the conduct of a study with three operational objectives. This entails conducting a socio-economic diagnosis to: (i) identify and analyze the main historical, geographical and demographical characteristics of the project areas; (ii) analyze existing forms of social organization, be they traditional or modern, and making use of the potential they represent to develop the micro-credit system; (iii) closely analyze existing economic activities and the manner in which they are currently funded; (iv) propose a diagnosis in terms of socio-economic potential and specify the development problems of the area as well as the possible role that a micro-finance establishment can play as a solution to these problems; (v) verify whether the joint credit methodology is actually appropriate to address the credit needs and provide the financial services of rural communities. The study will also make it possible to ensure the feasibility of a micro-credit system that is based on joint surety. Feasibility should be studied from four angles, as follows: (i) Methodological and technical feasibility should specify the main stages of the methodology for awarding credits to fishing communities and the functioning modalities of joint surety groups; the appropriate financing mechanisms to be developed to address the needs of fishermen and other operators in the sector; types of credit products (amounts, duration, interest rate, types of guarantee) taking into consideration the problems of the sector; any possible constraints in terms of all-season access to certain areas and reliability of communication infrastructure. (ii) Economic and financial feasibility should be verified from the preparation of household budgets/operating accounts and group surveys. (iii) Social feasibility should be verified by considering compatibility between the system’s mode of organization and the mode of social organization in place. It should also make it possible to verify the motivation of fishermen for the proposed approach. (iv) Institutional feasibility should confirm the modalities for attaching Vola Mahasoa to the developed micro-finance system. Besides, the quest for financial autonomy of the system should be a central issue, a question of survival. A program will also be designed for setting up branches as well as an action plan by defining quantitative and qualitative objectives; expected results; an installation strategy to be implemented; activities to be implemented; the necessary means, notably human and financial means and an implementation plan. 3. Definition of technical assistance for implementing the credit program

Apart from the financial services which are savings and credits, clients will benefit from non-financial services such as training sessions on group management and minimal functioning regulations. Technical assistance should help Vola Mahasoa to carry out a series of planned activities which include:

ANNEX 5 Page 2 of 2

- Densification of the customer base by limiting the number of outgoing members and increasing the number of new members;

- Opening of new branches in the project area;

- Design of new financial products (micro-enterprise credits, savings if the regulations

so require)

- Adaptation of the methodology to ensure more active participation of customers (as is the case with the Tuléar branch): creation of cross-cutting groups

- Installation of specialized software for monitoring accounting and credits.

The capacity-building of Vola Mahasoa will take a predominant place in the technical assistance program and the following essential points will be taken into account: (i) development of entrepreneurship; (ii) professional and managerial capacity-building; (iii) development of adapted financial products and services for the rural sector; (iv) promotion of memberships and savings; (v)setting up of an efficient control system; (vi) Quest for financial autonomy for the system; (vii) preparation of training modules for members of the various organs of the GCS.

ANNEX 6 Page 1 of 5

REPUBLIC OF MADAGASCAR

TULEAR FISHING COMMUNITIES SUPPORT PROJECT (PACP)

Summary of the Environmental and Social Management Plan

Name : Fishing Communities Support Project (PACP) Project Number: P-GA-AAF-002 in Tuléar Country : Madagascar Environmental category: 2 Department : ONAR Division: ONAR.2 a) Short description of project and main environmental and social components The sector goal of the project is to help improve the living standards of rural communities in Tuléar Province, reduce rural poverty, improve food security in rural areas and increase the contribution of traditional small-scale fishing to the local and national economy. Its specific objective is to promote the sustainable development of traditional maritime fishing and aquaculture through the institutional development of Government bodies at the central and provincial levels and of fishermen’s organizations, planning as well as joint and responsible management of fishery resources and coastal ecosystems, and the development of small-scale fishing output beyond the coral reefs through the provision of adequate equipment and infrastructure to fishermen. The Project has four components, namely: (1) Capacity-building with 5 sub-components: (1.1) consolidation of fishermen’s organizations in 92 villages of the project area; (1.2) technical assistance for the setting up of a credit system for fishermen; (1.3) special technical support for women’s groups, including the institutional development of the Tuléar Women’s Training Center in new fishery product processing techniques and equipment, access to micro-credits for female fishmongers and the development of village vegetable gardens; (1.4) support to HIV/AIDS prevention micro-projects; (1.5) training of 40 fishery engineers in sustainable resource management and of naval technicians and mechanics; (2) Development and sustainable management of fishery resources, with four sub-components: (2.1) development of 50 octopus marine reserves, in collaboration with the Fisheries and Marine Sciences Institute (IH.SM), village communities, commercial operators and NGOs; (2.2) conduct of the nation framework survey on traditional fishing and annual pilot surveys to evaluate production in the project area; (2.3) 120 exploratory fishery trials beyond the coral reefs; (2.4) promotion of aquaculture, notably the in situ fattening of rock lobsters and the raising and in situ replenishment of sea cucumbers; (3) Development of production with 4 sub-components: (3.1) procurement of production means, including outboard engines (50), fishing equipment (2,000) and coolers (200); (3.2) setting up of 25 fish concentration devices (FCD); (3.3) training of fishermen in new octopus fishing techniques; (3.4) construction of 20 wharfs with a surface area of 150 m² endowed with all facilities (water, latrines, septic tanks, etc.); 4) Project management, comprising capacity-building of the SRPRH for project implementation. The project is located in Tuléar Province (South West Madagascar), specifically on the coastal fringe between Soalara, 30 km south of Tuléar, and Morombe, situated 250 km north of Tuléar. The marine and coastal eco-region of South West Madagascar is characterized by the presence of an extensive network of coral reefs that are the most extensive, richest and southernmost in the world. This ecosystem is largely under-represented in the current national network of protected areas in Madagascar. This region is an area of major ecological interest (some reefs and lagoons are already in the process of being classified as protected marine areas) and economic importance (development of beach tourism). Currently, the lagoon situated between the barrier reef and the coast is overfished. Its climate is relatively dry and hot with a single rainy season in winter (400 to 800 mm/year). The project area has about 70,000 inhabitants, including 19,500 fishermen using 15,000 canoes, distributed among 92 villages and inhabited mainly by the Vezo, which are fishing communities par excellence.

ANNEX 6 Page 2 of 5

The projects beneficiaries include the Ministry of Agriculture, Livestock and Fisheries (including the Department of Fisheries and Fishery Resources (CIRPRH) and its various divisions in charge of monitoring/evaluation and statistics, promotion of small-scale and traditional fishing, promotion of aquaculture), the Regional Directorate for Rural Development in the South West (representing the MAEP in Tuléar), the Fishery and Marine Sciences Institute (IH.SM), organizations of fishermen situated in the project area, and all stakeholders in the small-scale fishing sector (ex: collectors, associations of female fishmongers). NGOs (Blue Venture, World Conservation Service, Reef Doctor and World Wildlife Fund for Nature) are involved in the project area in the development of marine reserves and the protection of biodiversity. b) Main environmental and social impacts The positive environmental and social impacts include, for the 1st component: the attainment of greater social cohesion due to the creation and strengthening of fishermen’s organizations to manage community infrastructure; poverty reduction through increased employment especially for women and youths; local development and access to credit which reduces migratory flows to the capital; the attainment of food self-sufficiency and the improvement of nutrition and public health (ex: HIV/AIDS prevention campaign) and institutional and human capacity-building of the CIRPRH in the planning of sustainable fishery resource management and fishery statistics. The 2nd component will lead to better planning as well as rational and sustainable management of fishery resources based on detailed surveys of fishery stocks available at the provincial level and the magnitude of catches made by the various operators. Such knowledge of the status of fishery resources is an absolute prerequisite to any fishery development and regulatory measure to ensure resource sustainability. Furthermore, the project will work closely with the CIRPRH, IH.SM and environmental NGOs and fishing communities of the project area to set up marine reserves whose boundaries and reserve period shall be clearly defined in order to curb the extinction of certain species (octopuses), encourage regeneration (sea cucumbers) and promote stockbreeding (rock lobsters) thereby easing pressure on ecologically sensitive areas (coastal areas). Such participatory and integrated co-management of fishery resources will sensitize the target communities to their responsibilities, increase fisheries surveillance and allow the integration of environmental factors (e.g. cartography of spawning areas, fragile ecosystems (like mangroves), identification of threatened and major species) into development plans. Such integration will have a tangible impact on the protection of ecosystems and species. The 3rd component will lead to an increase in fishermen’s incomes through the use of adapted and selective equipment (environment-friendly, as opposed to current equipment and practices – e.g nets made from mosquito nets) that is compliant with the regulations in force, the possibility of having access to fishing areas to which fishermen had no access hitherto, thereby easing pressure on the lagoons and coral reefs; an increase in fishermen’s knowledge of new fishing techniques; an increase in their knowledge of product marketing; the construction of wharfs, which will improve hygiene, reduce post-catch losses and create value-added to products. All these activities should lead to an increase in the contribution of fishery resources to the national economy. The potential direct and indirect negative risks on the biophysical environment are concentrated in the third component which is the Development of Production, namely: (1) the encouragement of small-scale fishing activities may have a spill-over impact on a fragile ecosystem, characterized by its vast lagoons, coral reefs and mangroves; (2) the proliferation organic waste (fish rejects), plastics and used oils from overfishing and the wharfs; (3) deforestation due to the construction of canoes from wood; and (4) construction and operation of 20 wharfs. c) Land reclamation and mitigative measures The Government of Madagascar has endowed itself with a legal and statutory framework for environmental protection. The Malagasy Environment Charter is the legal transcription of the national environmental policy (NEP) and contains the general principles of environmental management. From the statutory standpoint, the Decree governing compatibility of investments with the environment (MECIE) defines the rules and procedures for assessing environmental impact. At the institutional level, the Ministry of the Environment is responsible for coordinating the

ANNEX 6 Page 3 of 5

environmental policy, while the National Environmental Authority (NEA) is the operational structure that coordinates and coordinates the NEP, the National Environmental Action Plan (NEAP) and the implementation of MECIE. The direct and indirect environmental risks cited above were examined in detail during project appraisal. Mitigative measures were taken for the following specific risks: (1) Increased fishing pressure in the project area: a negative direct and significant impact of this project will be an increase in fishing pressure on hitherto unexploited areas, thereby reducing fishing pressure on the lagoon. This additional pressure and its geographical expansion could have a significant impact on marine ecosystems of the marine and coastal eco-region in the South West which is noted for its vast lagoons, mangroves and coral reefs. The mitigative measures proposed to minimize this impact include the creation of marine reserves; the establishment of development plans to be jointly managed with village organizations; better surveillance of fishing equipment and catches by all partners including the CIRPRH, IH.SM and environmental NGOs; the organization of information and sensitization campaigns for fishermen by WCS and Blue Venture on the dangers of indiscriminate exploitation of fishery resources and the need to protect and ensure the sustainable use of fishery and biological resources. Furthermore, the development vegetable gardens will help raise the incomes without depleting the natural resources; (2) Proliferation of waste generated by intensification of fishing (organic matter and plastics, used oils): risk of pollution from petroleum, pumping residue and leakages from boats is to be expected in the case of fishing with motorized canoes; the project will undertake sensitization programs on the collection and efficient management of residue; (3) deforestation due to the construction of canoes from timber: the sub-component on the development of fishery production will promote the introduction of boats made from fiberglass that have a life of 10 to 15 years (in stead of traditional canoes made from farafatsy, a local tree specie currently used to manufacture canoes that last for 1 or 2 years); (4) lastly, the construction of 20 wharfs with a surface area of 150 m² should not entail any major environmental risks. Pursuant to the MECIE Decree, an Environmental Commitment Program (prior environmental analysis) will be conducted for each of these facilities. It should be noted these facilities will not be situated directly on the coast but beyond the sandy fringe. Moreover, it is taken for granted that the technical design of these facilities will include the installation of septic tanks for wastewater. The organic waste will serve as input for poultry production. Moreover, the following two land reclamation measures were integrated into the design of the project: (1) a senior environmentalist shall be absorbed into the SRPRH. Such absorption, in addition to the compliance of the project and its activities with the Madagascar’s legal and statutory framework (preparation of PREE and environmental monitoring of wharfs), will galvanize all the activities of environmental management partners. Furthermore, the environmentalist will, in conjunction with the NEA, participate in and support the Environmental Management Support Service (SAGE), the National Association for the Management of Protected Areas (ANGAP), WCS, WWF and Blue Venture, Issue Tables (ex: Regional Development Committee (RDC) and Regional Programming Committee (RPC)), and the Working Group on Rural Development (WGRD) and its sub-group on protection and sustainable use of biodiversity in the project area. Such coordination, consultation and synergy are called for by all stakeholders in the fisheries and environmental sectors. He will also work closely with the IH.SM, WWF and UNDP-GEF in the preparation of studies and environmental action plans (mapping of actors and interventions) with a view to zoning protected marine areas in Tulear and preparing a concept paper for financing by GEF. He shall work with the Ministry of Education and the Environment, WWF, WCS and Reef Doctor in the area of environmental education for children in and out of school, including the preparation and dissemination of a teaching manual adapted to the Tuléar’s marine ecosystem. He shall join the IH.SM in coordinating the study on economic, ecological and biological co-viability for the in situ re-introduction of sea cucumbers and rock lobsters in fattening enclosures or tanks. Lastly, he shall ensure coordination in conjunction with all State and non-State bodies as well as donors (ex: GTZ/EU: Support to Rural Communities and Organizations in the South (ACORDS), World Bank: Rural Development Support Project (RDSP), etc.) ; (2) capacity-building for the IH.SM laboratory so that it can test wastewater from enterprises processing fishery products.

ANNEX 6 Page 4 of 5

d) Monitoring and additional initiatives program The environmental unit in the CIRPRHPRH shall be responsible for the statutory compliance of the project with the rules and procedures defined in the MECIE Decree. From the operational standpoint, the environmentalist attached to the SRPRH shall be responsible for environmental management work plans, including preparation of the ECPs and environmental monitoring, the definition and monitoring of a certain number of environmental indicators (jointly with the IH.SM, WCS and WWF), including the ecological status and monitoring of coral reefs, human and socio-economic diagnosis, environmental education and sensitization. The technical review and approval of environmental commitment programmes by the MAEP, based on the technical opinion of its environmental unit, is an absolute prerequisite to all commencement of work. Furthermore, NEA regional directorate in Tuléar has engineers and specialists to keep track of file and monitor activities that pose a risk to the environment. ESMP results and implementation problems shall be identified in the quarterly and half-yearly status reports. ADB supervision missions shall also monitor ESMP implementation. In terms additional initiatives, it should be noted that there are a multitude of biodiversity management and protection interventions in the project area. In addition to IH.SM interventions realized jointly with WCS and Blue Venture to create marine reserves in Andavadoaka, the WWF/ANGAP/French Fund for the Global Environment (FFEM) collaborate in the preparation of studies and an action plan for the creation of a protected marine area in Tuléar, WWF/SIDA will conduct a study on improving the livelihood of small-scale fishermen in Tuléar, WWF/NORAD will finance the promotion of small-scale fishing between Androka and Tolanaro, the MacArthur Foundation/ANGAD/IH.SM shall ensure the training of 81 managers and technicians for protected marine areas in Madagascar, the World Bank/RDSP supports fishing, aquaculture and environmental protection, UNDP-GEF support micro-credits to small producers and community enterprises and the protection of priority intervention sites on the coral reefs of the South West. e) Institutional arrangements and capacity-building requirements The CIRPRH of the MAEP shall have responsibility for project implementation. It shall act through the SRPRH of Tuléar, which shall implement the project on the field. The SRPRH shall be strengthened through the recruitment of a consultant environmentalist. The environmentalist shall be responsible for the implementation and monitoring of the ESMP. He/She shall prepare a half-yearly status report for the Project Guidance Committee, including the NEA. Selection of the environmentalist shall be subject to the prior approval of the Bank and shall be based on qualifications and experience. The services of consultants and NGOs for technical studies technical assistance shall be procured through a bidding process based on shortlists. The procurement of laboratory equipment to enhance the capacity of the IH.SM laboratory shall be procured through national shopping. f) Public consultations and dissemination of information The ESMP preparation, like the project, was designed to be implemented through a participatory process in which all activities will be carried out only after consultation of beneficiaries and/or in collaboration with them in order to heighten their sense of partnership and ownership of the project. Such partners include State authorities (Ministry of the Environment and Education, NEA, SAGE, ANGAP and their regional directorates), fishery sector operators (fishermen, fishmongers), research institutes (IH.SM), multilateral donors (World Bank, European Union, UNDP), bilateral donors (AFD, GTZ), international environmental NGOs (WWF, WCS, Blue Venture, Reef Doctor), private operators (product exporters, ex: COPEFRITO). Their ideas and opinions were incorporated, as far as possible, in the final version of the ESMP. At the start of the project, the final version of the ESMP and its annual work plan will be presented and endorsed by the Guidance and Monitoring Committee(GMC) chaired by the Head of the South West region.

ANNEX 6 Page 5 of 5

g) Estimated costs The cost of integrating environmental and social considerations are estimated at UA 236,000 for the project duration of six years. This cost mainly covers the following mitigative and land reclamation measures: study and technical assistance to support fisheries and environmental issues tables in Tuléar, zoning of protected marine areas in Tuléar and support of environmental education in schools and the general public (UA 178,000); capacity-building for the IH.SM laboratory (UA 58,000). These costs were integrated into the project costs. Furthermore, the cost of mitigative measures for the 20 wharfs (septic tanks, waste management sites, etc.) have already been integrated in their technical design. The cost of recruiting an environmentalist is provided for in the technical assistance to be given to the SRPRH. h) Implementation and reporting schedule The measures identified in the ESMP will be implemented in parallel with the project implementation schedule since all the proposed activities have to be integrated into the planning and implementation of the project. The results attained and the problems encountered shall be the subject of quarterly/annual status reports which shall be forwarded by the SRPRH to the Bank as soon as possible.

ANNEX 7 Page 1 of 3

REPUBLIC OF MADAGASCAR

TULÉAR FISHING COMMUNITIES SUPPORT PROJECT (PACP)

LISTOF GOODS AND SERVICES (Amounts in UA million)

A. CAPACITY-BUILDING COMPONENT

ITEMS Units Quantities Gov’t Benefic’s ADF I. Investment costs A. Feasibility study to set up the micro-credit system Unit 1 - - 64 B. Tech. assistance to set up the micro-credit system Unit 1 - - 458 C. Training of instructors in new processing techniques STAFF DAY 120 - - 48 D. Equipment to consolidate the Tuléar Women’s Training Center Unit - - 1 E. Micro-credit to promote marketing activities WOMEN 2 150 80 9 - F. Vegetable gardens for women Unit 30 0 - 75 G. HIV/AIDS prevention HIV/AIDS PROJ. 35 0 - 42 H. Technical assistance to make canoes from fiberglass STAFF-MONTH 18 - - 169 I. Equipment for the Tuléar Technical Center LUMP SUM - - 136 J. Training of fishery engineers Unit 40 102 - 153 TOTAL 182 9 1 147

B. RESOURCE DEVELOPMENT AND SUSTAINABLE MANAGEMENT COMPONENT

ITEMS Units Quantities Gov’t ADF I. Investment costs A. Development of fishing areas 1. Services of international NGOs to train local NGOs YEAR 4 - 94 2. NGO services in the creation of reserves MONTH-VILLAGE 1 800 - 502 3. Communication LUMP SUM - 15 4. Liaison boat Unit 2 - 25 5. Procurement of BLU Unit 5 - 23 6. IT unit Unit 2 - 3 7. Portable computers Unit 2 - 4 S/T Development of fishing areas - 666 B. Framework survey and pilot production survey 1. National biostatistics consultant STAFF-MONTH 36 - 28 2. International biostatistics consultant STAFF-MONTH 24 - 223 3. National IT consultant STAFF-MONTH 18 - 14 4. Salaries of survey agents STAFF-MONTH 960 - 115 5. Perdiem of national consultants STAFF-DAY 690 - 14 6. Perdiem of international consultant STAFF-DAY 150 - 6 7. Perdiem of survey agents STAFF-DAY 1 900 - 15 8. Computer equipment and photocopiers LUMP SUM - 8 9. Material for training survey workers LUMP SUM - 2 10. Off-road vehicles Unit 2 55 - 11. Motorcycles UNIT 8 - 15 S/T Framework survey and pilot production survey 55 439 C. Exploratory fishery 1. Services of skipper MAN-DAY 24 - 57 2. Boat for exploratory fishery Unit 1 - 19 3. Equipment for exploratory fishery boat LUMP SUM - 9 S/T Exploratory Fishery - 85 D. Agreement with IHSM LUMP SUM 1 - 286 E. Laboratory equipment of the IH.SM (ESMP) LUMP SUM 1 - 58

ANNEX 7 Page 2 of 3

ITEMS Units Quantities Gov’t ADF F. Study, technical assistance on environmental issues (ESMP) LUMP SUM - 178 Total cost of investment 55 1 712 II. Recurrent costs A. Operation of fishing area development 1. Operation of liaison boat development YEAR 6 5 43 2. Liaison boat insurance Unit 6 0 2 3. Salary of liaison boat pilot MONTH 72 3 - S/T Operation of fishing area development 8 45 B. Framework survey & production survey 1. Computer and office supplies for the survey LUMP SUM 1 9 2. Fuel, lubricant and maintenance for the survey Kilometres 2 100 3 25 3. Transport fares (by bush taxi) for the survey Unit 200 1 7 4. International transport fares (by air) for the survey Unit 3 - 8 5. Domestic transport fares (by air) for the survey Unit 30 1 6 6. Fuel for supervision of Department MONTH 120 5 43 7. Maintenance of vehicles for supervision of Department MONTH 144 2 21 8. Vehicle insurance YEAR 12 3 26 9. Salaries of drivers MAN-MONTH 144 11 - 10. Functional of the regional fisheries service LUMP SUM 8 69 S/T Framework survey and production surveys 34 214 C. Operation of exploratory fishing 1. Insurance of exploratory fishing boat YEAR 6 0 2 2. Pilot of exploratory fishing boat MONTH 72 11 - 3. Functioning and maintenance of exploratory fishing boat YEAR 6 6 54 S/T Operation of exploratory fishing 18 57 Total recurrent costs 60 315 TOTAL 114 2 027

C. FISHERY PRODUCTION COMPONENT

ITEMS Units Quantities Gov’t. Benef. ADF I. Investment costs A. Outboard engines Unit 50 97 11 - B. Fishing equipment FISHERMAN 1 150 185 21 - C. Procurement of FCDs Unit 25 - - 158 D. Training in FCDs YEAR 1 - - 9 E. Training of fishermen in new octopus fishing techniques PERSON 50 0 - 200 F. Study and surveillance of wharfs - - 58 G. Construction of wharfs Unit 20 - - 1 513 Total Investments 282 31 1 938 II. Recurrent costs G. Functioning of FCDs LUMP SUM 5 1 - Total recurrent costs 5 1 - TOTAL 287 32 1 938

ANNEX 7 Page 3 of 3

D. PROJECT COORDINATION AND MANAGEMENT COMPONENT

ITEMS Units Quantities Gov’t ADF I. Investment costs A. Station wagon off-road vehicle Unit 1 - 27 B. Pick-up off-road vehicles Unit 1 - 19 C. IT units Unit 10 - 15 D. Portable computers Unit 2 - 4 E. Office furniture LUMP SUM - 76 F. Technical assistance for project implementation STAFF-MONTH 300 - 290 G. Training in management LUMP SUM 0 228 H. Accounting software Unit 1 - 9 I. Rehabilitation and extension of offices LUMP SUM - 8 J. Audit of accounts YEAR 6 - 61 Total Investment costs 0 737 II. Recurrent costs A. Salary of Service Head Month 72 6 - B. Salary of the Head of the Traditional Fishing Division Month 72 6 - C. Salary of the Head of the Aquaculture Division Month 72 6 - D. Salary of the Head of the Industrial Fishing Division Month 72 6 - E. Salary of the Head of the Statistics Division MONTH 72 6 - F. Salary of the Head of the Fin. Management Division Month 72 6 - G. Salary of the Head of the Personnel Division Month 72 6 - H. Salaries of secretaries (2) Month 144 6 - I. Salaries of drivers (4) Month 144 6 - J. Project staff transport expenses DAY 7 200 28 255 K. Transport expenses for MAEP staff on project missions DAYS 1 080 6 57 L. Fuel Month 72 3 26 M. Maintenance of vehicles Month 72 1 10 N. Office supplies Month 72 1 13 O. Computer supplies Month 72 0 4 P. Electricity Month 72 1 7 Q. Mail expenses Month 72 2 18 R. Telephone Month 72 2 21 S. Leasing of offices Month 72 28 - T. Vehicle insurance Unit 24 6 51 U. Air transport Month 72 1 13 Total recurrent costs 132 475 TOTAL 132 1 212

ANNEX 8 Page 1 of 1

REPUBLIC OF MADAGASCAR TULEAR FISHING COMMUNITIES SUPPORT PROJECT (PACP)

S U M M A R Y O F E C O N O M IC A N A L Y S IS (A r M illio n ) N o n -p ro jec t s itu a tio n P ro jec t s itu a tio n

1 2 3 to 20 1 2 3 4 5 6 7 8 9 10 1 1 12 1 3 14

P ro d u c tio n F irs t q uality f is h 4 ,3 2 5 4 ,3 2 5 4 ,32 5 4 ,52 9 4 ,8 3 2 5 ,3 1 6 5 ,36 8 5 ,4 6 7 5 ,54 3 5 ,6 9 4 6 ,16 8 6 ,0 2 4 5 ,95 2 6 ,1 68 6 ,02 4 5 ,9 52 6 ,16 8S ec on d q uality f is h 4 7 7 4 7 7 47 7 50 0 5 4 5 6 0 8 62 0 6 4 3 66 1 6 9 6 80 5 7 7 5 76 0 8 0 5 77 5 7 6 0 80 5O c topu s 4 ,0 5 0 3 ,3 7 5 2 ,70 0 4 ,05 0 3 ,6 9 9 3 ,6 7 2 4 ,10 4 4 ,6 4 4 4 ,96 8 5 ,2 9 2 5 ,61 6 5 ,8 8 6 6 ,04 8 6 ,1 56 6 ,21 0 6 ,2 10 6 ,21 0S u b -to ta l P ro d u c tio n 8 ,8 5 2 8 ,1 7 7 7 ,50 2 9 ,07 8 9 ,0 7 6 9 ,5 9 6 1 0 ,09 2 1 0 ,7 5 4 1 1 ,17 2 1 1 ,6 8 2 1 2 ,58 9 1 2 ,6 8 5 1 2 ,76 0 1 3 ,1 2 9 1 3 ,00 9 1 2 ,9 2 2 13 ,18 3P ro d u c tio n c o s ts In v es tm en ts O u tboard en g in es - - - - 3 9 3 9 3 9 7 7 7 7 1 1 6 27 0 7 7 11 6 2 7 0 7 7 1 1 6 27 0F u n c tio n in g F uel - - - - 7 1 3 1 8 2 5 3 1 4 3 7 8 7 1 6 7 7 8 7 1 67 7 8O il - - - - 0 0 0 1 1 1 2 1 1 2 1 1 2Ic e - - - - 2 4 4 5 6 1 8 5 10 5 1 4 6 26 3 2 3 9 22 7 2 6 3 23 9 2 2 7 26 3R ep & M ain t O B E Y ear1 - - - - 3 3 3 5 5 8 1 8 5 8 1 8 5 8 1 8R ep & M ain t O B E Y ear 2 - - - - - 8 8 8 1 5 1 5 2 3 5 3 1 5 2 3 5 3 15 2 3R ep & M ain t O B E Y ear 3 - - - - - - 1 0 1 0 1 0 2 0 2 0 3 0 7 0 2 0 3 0 70 2 0Inc en tives F is h erm en Y ear 1 - - - - 3 3 3 5 5 8 1 8 5 8 1 8 5 8 1 8Inc en tives F is h erm en Y ear 2 - - - - - 3 3 3 5 5 8 1 8 5 8 1 8 5 8Inc en tives F is h erm en Y ear 3 - - - - - - 2 2 2 3 3 5 1 1 3 5 11 3F is h ing eq u ipm en t - - - - - - 2 - - 5 - - 5 - - 5 -S u b -to ta l F u n c tio n in g - - - 0 3 7 7 4 10 8 1 4 3 18 0 2 5 4 43 2 4 2 7 41 7 4 3 2 42 7 4 1 7 43 2S u b -to ta l C o s t o f P ro d u c tio n - - - 0 7 6 1 1 3 14 7 2 2 0 25 7 3 7 0 70 1 5 0 4 53 3 7 0 1 50 4 5 3 3 70 1O th e r c o s ts

O th er c os ts - - - 3 ,01 6 3 ,6 7 1 5 ,5 3 3 4 ,74 4 1 ,5 0 2 75 4 7 5 4 75 4 7 5 4 75 4 7 5 4 75 4 7 5 4 75 4O U T F L O W S - - - 3 ,01 6 3 ,7 4 7 5 ,6 4 6 4 ,89 1 1 ,7 2 3 1 ,01 1 1 ,1 2 4 1 ,45 5 1 ,2 5 8 1 ,28 7 1 ,4 55 1 ,25 8 1 ,2 87 1 ,45 5

C a sh F lo w 8 ,8 5 2 8 ,1 7 7 7 ,50 2 6 ,06 2 5 ,3 2 9 3 ,9 5 0 5 ,20 0 9 ,0 3 2 1 0 ,16 1 1 0 ,5 5 9 1 1 ,13 4 1 1 ,4 2 7 1 1 ,47 3 1 1 ,6 7 4 1 1 ,75 1 1 1 ,6 3 5 11 ,72 8

IR R = 2 0 .0%

ANNEX 9 Page 1 de 1

REPUBLIC OF MADAGASCAR

TULÉAR FISHING COMMUNITIES SUPPORT PROJECT (PACP)

REPORT REVIEW PROCESS

APPRAISAL

19/07 to 05/08/05

MEETING OF INTERNAL WORKING GROUP

29/08/05

MEETING OF INTER-DEPARTMENTAL WORKING GROUP

02/09/05

APPROVAL BY POPR

10/09/05

MEETING OF HIGHER LOAN COMMITTEE

26/09/05

PRESENTATION TO THE BOARD

16/11/05

ANNEX 10 Page 1 of 4

REPUBLIC OF MADAGASCAR

TULÉAR FISHING COMMUNITIES SUPPORT PROJECT (PACP) SUMMARY OF BANK GROUP OPERATIONS

Sector / Project Approval date Date of signature Net amount of

loan/grant Amt disbursed Undisbursed amount

Disbursement rate (%) Situation

Agriculture Analaiva Sugar Project Phase II (ADB) 15-Mar-83 11-Apr-83 16 461 690.56 16 461 690.56 0 100% Completed Anacardes Agro-Industrial Complex (ADB) 15-Dec-83 08-Mar-84 8 606 087.97 8 606 087.97 0 100% Completed Oil Palm Tree Agro-Industrial Complex (ADB) 12-Dec-84 09-May-85 2 650 624.09 2 650 624.09 0 100% Completed Rice cultivation rehabilitation studies (grant) 19-Nov-84 15-Dec-84 300 124.64 300 124.64 0 100% Completed Rice Field Irrigation Scheme 16-Aug-77 23-Sept-77 4 633 157.70 4 633 157.70 0 100% Completed Rice Farming II (ADF) 30-Oct-81 14-Dec-81 9 091 046.21 9 091 046.21 0 100% Completed Oil Palm Tree Agro-Industrial Complex 17-Dec-84 09-May-85 5 553 611.68 5 553 611.68 0 100% Completed Rehab’tation of Basse Betsiboka Rice-Farming Areas (ADF) 27-May-88 28-May-89 10 817 634.82 10 817 634.82 0 100% Completed National Maize Project (ADF) 18-Apr-89 28-May-89 6 323 111.18 6 268 946.80 54 164.38 99% Completed Tsiribihina Irrigation Scheme I (ADF) 26-June-87 03-Mar-88 9 756 455.23 9 756 455.23 0 100% Completed Institutional Support to DPRA (GRANT) 29-Oct-91 13-May-92 9 671 046.00 9 671 046.00 0 100% Completed Milk Production in 10 Urban Centers (ADF) 29-Oct-91 13-May-92 7 230 000.00 7 230 000.00 0 100% Completed Young Rural Entrepreneurs Project (ADF) 12-Nov-98 17-Dec-98 7 350 000.00 3 030 665.67 4 319 334.33 41% Underway Environmental Program - phase I (ADF) 24-Aug-92 12-Jan-93 11 050 000.00 11 050 000.00 0 100% Completed Bas-Mangoky Farmland Rehabilitation Project (ADF) 20-Oct-99 17-Dec-99 10 000 000.00 5 985 048.98 4 014 951.02 60% Underway DIR Institutional Development Project (GRANT) 23-Aug-89 28-Sept-89 2 111 290.09 2 111 290.09 0 100% Completed Preventive Locust Control Project (ADF) 29-Mar-01 08-May-01 5 760 000.00 527 021.51 5 232 978.49 9% Underway DIR Institutional Development Project (GRANT) 23-Aug-89 28-Sept-89 2 256 514.56 2 256 514.56 0 100% Completed Preventive Locust Control Project (GRANT) 29-Mar-01 08-May-01 1 160 000.00 162 4000 997 600 14% Underway

Total Agriculture 130 782 394.73 116 073 518.14 14 708 876.59 89% Finance Credit line (ADF) 22-Mar-79 17-May-79 3 971 700.68 3 971 700.68 0 100% Completed Industry Fertilizer production (ADF) 25-May-92 12-Aug-92 5 619 792.21 5 619 792.21 0 100% Completed Multi sector Emergency Program (ADF) 07-Sept-82 22-Sept-82 10 748 675.63 10 748 675.63 0 100% Completed Urgent Infrastructure Repairs (ADF) 19-Nov-84 05-Dec-84 1 040 525.36 1 040 525.36 0 100% Completed Supplementary Financing Mechanism (ADF) 02-Dec-98 17-Dec-98 1 418 000.00 1 418 000.00 0 100% Completed Supplementary Financing Mechanism (ADF) 01-July-99 13-July-99 1 561 000.00 1 561 000.00 0 100% Completed Second Structural Adjustment Program (ADF) 17-Sept-97 02-Oct-97 21 740 000.00 21 740 000.00 0 100% Completed Structural Adjustment Loan III (ADF) 27-Apr-00 20-May-00 16 000 000.00 15 987 426.10 12 573.90 100% Completed Structural Adjustment Program (ADF) 17-Jan-89 10-Feb-89 27 597 298.95 27 597 298.95 0 100% Completed Cyclone Gretelle and Fabriola Emergency Program (ADF) 16-July-97 05-Aug-97 6 235 000.00 5 119 806.85 1 115 193.15 82% Completed Toliary Town Protection Project(ADF) 12-Nov-97 05-Dec-97 6 440 000.00 3 408 552.65 3 031 447.35 53% Underway Institutional Support to Adjustment (ADF) 26-Feb-91 09-May-91 1 380 000.00 1 380 000.00 0 100% Completed Fourth Structural Adjustment Loan (ADF) 17-Sept-03 07-Nov-03 25 000 000.00 18 129 842.35 6 870 157.65 73% Underway Study on the update of cyclone control measures (ADF) 16-July-97 05-Aug-97 188 000.00 125 331.61 62 668.39 67% Completed Study on regular. Riv. Fiherenana Project in Tuléar (ADF) 27-May-88 28-May-89 1 528 946.00 1 528 946.00 0 100% Completed PRIBG 5 860 000.00 0 5 860 000.00 0% Underway

Total Multi sector 126 737 445.94 109 785 405.50 16 951 040.44 87% Social Health sector pre-investment studies (ADF) 29-Oct-86 04-Feb-87 580 000.07 580 000.07 0 100% Completed Consolidation of Educational Structures (ADF) 27-Nov-86 16-Dec-86 12 347 589.26 12 347 589.26 0 100% Completed Health Project (ADF) 31-Mar-81 11-May-81 7 368 416.00 7 368 416.00 0 100% Completed Education III (ADF) 02-Dec-98 17-Dec-98 16 000 000.00 487 416.45 15 512 583.55 3% Underway Education III (ADF) 02-Dec-98 17-Dec-98 500 000.00 3 024.90 496 975.10 1% Underway Health Project II (ADF) 07-July-99 13-July-99 12 440 000.00 997 398.92 11 442 601.08 8% Underway Health Project II (ADF) 07-July-99 13-July-99 750 000.00 377 023.02 372 976.98 50% Underway HIV/AIDS Project 6 000 000.00 0 6 000 000 0% Underway

Total social 55 986 005.33 22 160 868.62 33 825 136.71 40% Transport Rehabilitation of RN 7 (ADB) 22-Nov-83 08-Mar-84 19 658 500.26 19 658 500.26 0 100% Completed Construction of RN 7 (ADF) 10-Nov-83 08-Mar-84 14 698 462.14 14 698 462.14 0 100% Completed Development of Canal des Pangalanes (ADB) 18-Jan-84 08-Mar-84 10 541 560.03 10 541 560.03 0 100% Completed Development of Canal des Pangalanes (ADF) 25-Jan-84 08-Mar-84 18 409 830.27 18 409 830.27 0 100% Completed Cyclone Damage Repair Project (ADF) 31-Oct-00 18-Dec-00 6 520 000.00 - 6 520 000.00 0% Underway Study on the Rehabilitation of RN6 (ADF) 12-Mar-85 09-May-85 528 777.06 528 777.06 0 100% Completed Construction of the Bealanana-Antsahabe road (ADF) 04-Apr-77 04-May-77 3 399 564.08 3 399 564.08 0 100% Completed Construction of the Bealanana-Antsahabe road (NTF) 23-Feb-77 04-May-77 5 870 681.49 5 870 681.49 0 100% Completed Construction of the Malaimbandi-Mahabo road (ADF) 17-Dec-84 02-Sept-85 9 022 102.10 9 022 102.10 0 100% Completed Road Rehabilitation and Maintenance (ADF) 15-May-90 30-Nov-90 6 493 417.00 3 301 778.23 3 191 638.77 51% Underway Rehabilitation of RN1 bis (ADF) 09-Jan-02 13-Dec-02 10 100 000.00 0 10 100 000.00 0% Underway Studies on the Rehabilitation of National Roads RN34,RN35 & RN41 (ADF) 02-Dec-98 17-Dec-98 1 340 000.00 740 396.52 599 603.48 55% Completed Study on RN6 and RN1bis (ADF) 07-July-99 13-July-99 772 888.06 772 888.06 0 100% Completed Rehabilitaion of RN1 bis (GRANT) 09-Jan-02 13-Dec-02 230 000.00 0 230 000.00 0% Underway Road Rehabilitation and Maintenance (FSN) 15-May-90 30-May-90 6 000 000.00 1 047 904.35 4 952 095.65 17% Underway Road Project in Toliary Province (loan) 31 500 000.00 0 31 500 000.00 0% Underway Road Project in Toliary Province (GRANT) 1 890 000.00 0 1 890 000.00 0% Underway

Total Transport 146 975 782.49 89 175 241.94 57 800 540.55 61% Water and sanitation Potable Water Supply Project in the South (ADF) 22-Dec-86 04-Feb-87 5 101 639.71 5 101 639.71 0 100% Completed DWSS in Rural Areas in the Grand South (ADF) 11-Apr-01 08-May-01 7 930 000.00 244 542.35 7 774 920.39 2% Underway DWS Study – Sanitation in 8 Urban Centres (ADF) 18-Dec-89 08-Feb-90 855 657.00 822 309.81 33 347.19 96% Completed

Total Water and Sanitation 13 887 296.71 6 168 491.87 7 808 267.58 44% Overall Total 483 960 418.09 352 955 018.96 131 005 399.13 73%

ANNEX 10 Page 2 of 4

ACCOUNT AUDIT SITUATION OF ONGOING PROJECTS (AS OF 15

SEPTEMBER 2005)

Projects Audit FY2003 Audit FY2004

Rural Entrepreneurs Project Audit conducted and the report forwarded to the Bank.

Auditor recruited

Preventive Locust Control Project

Audit conducted and the report forwarded to the Bank.

Bidding process for the recruitment of the auditor was launched; the selection process is underway

Bas Mangoky Farm Area Rehabilitation Project

Audit conducted and the report forwarded to the Bank.

Auditor recruited.

Health II Project Audit conducted and the report forwarded to the Bank.

Audit conducted and the report forwarded to the Bank.

Support Project for Communicable diseases (HIV/AIDS, Tuberculosis)

Project is not yet effective. The audit is therefore not yet due.

Project is not yet effective. The audit is therefore not yet due.

Education III Project Audit conducted and the report forwarded to the Bank.

Auditor recruitment process is underway.

Cyclone Damage Rehabilitation Project

No disbursement. The audit is not yet due.

No disbursement. The audit is not yet due.

Road Rehabilitation and Maintenance Project

Audit conducted and the report forwarded to the Bank.

Audit conducted and the report forwarded to the Bank.

RN1 Rehabilitation Project bis No disbursement. The audit is not yet due.

No disbursement. The audit is not yet due.

Road Project in Tuléar Province Project just became effective. The audit is therefore not yet due.

Project just became effective. The audit is therefore not yet due.

Drinking Water Supply and Sanitation Project in the Grand South

The audit was not due. The project had not yet started.

Audit conducted and the report forwarded to the Bank.

Institution Building Project for Good Governance

Project is not yet effective. The audit is therefore not yet due.

Project is not yet effective. The audit is therefore not yet due.

ANNEX 10 Page 3 of 4

Bank portfolio in Madagascar 1. The current portfolio comprises 12 projects that are underway, representing a total commitment of UA 136 million. The main sectors benefiting from current Bank financing are transport (46%), the social sector (26%), agriculture (18%), water and sanitation (6%) and multi-sector (4%). According to the Bank Group’s 2002-2003 Annual Portfolio Performance Review (APPR), the Bank Group’s disbursements to Madagascar reached UA 17 million in 2000, UA 15 million in 2001, UA 6 million in 2002, UA 8 million in 2003, and UA 33.47 million in 2004. These figures indicate that in 2002 disbursements to Madagascar fell sharply, probably as a result of the political strife that rocked the country from December 2001 to July 2002. However, disbursements have been rising again since 2003. 2. Under ADF-IX, the Bank Group approved total financing of UA 69.90 million for the following projects: (i) fourth structural adjustment loan (UA 25 million), (ii) road project in Toliary Province (loan of UA 31.15 million and a grant of UA 1.89 million); (iii) institutional development project to promote good governance (grant of UA 5.86 million); and (iv) the support project to combat communicable diseases HIV/AIDS/STI, Tuberculosis). 3. According to PPAR 2002-2003, the portfolio performance deteriorated slightly between 2002 and 2003. Indeed, the proportion of risky projects (RP) grew from 56% in 2002 to 60% in 2003. This increase mainly stems from potentially problematic projects (PPP) whose share in the portfolio surged from 11% in 2002 to 40% in 2003. With regard to problem projects (PP), their share in the portfolio fell sharply from 44% in 2002 to 20% in 2003. According to PPAR 2004, the proportion of RPs declined to 45% in 2004. This fall can mainly be attributed to the decline in PPPs which fell to 18% of the 2004 portfolio, while the proportion of PPs has remained relatively stable (28% in 2004 compared to 20% in 2003). 4. The key message emerging from the analysis of these trends is twofold. First of all, the steady decline in the proportion of RPs since 2002 indicates that portfolio performance is improving, even though this proportion is still above 35% which, according to Bank Group policies, constitutes the threshold beyond which a country’s portfolio performance is considered unsatisfactory. Secondly, the fact that PPPs remained predominant among the RPs indicates, depending on the service, the majority of portfolio projects should attain their development goals. 5. In March 2005, the Bank Group prepared a portfolio performance improvement plan. The report noted that the political crisis experienced by the country in 2002 and the limited capacity of project execution organs are mainly responsible for the decline in portfolio performance. Staff instability in the executing organs also contributed in weakening these structures (case of Education III Project and the Project to repair the damage caused by the cyclones Eline, Gloria and Hudah), and the unfruitful results of various bidding processes initiated (Project to repair the damage caused by the cyclones Eline, Gloria, and Hudah). According to project executing agencies, the quality of supervision conducted by the Bank has also contributed to the unsatisfactory portfolio performance. Hence the executing organs of the various projects cite the Bank’s delay in giving "no objection" notices as well as the Bank’s quality of communication which has not always facilitated their work.

ANNEX 10 Page 4 of 4

6. The main problem with the Bank Group’s portfolio in Madagascar is the pace of interventions which is rather slow. Performance in the submission of audit reports and quarterly status reports is satisfactory for the moment. One of the Bank’s major challenges in Madagascar during ADF-X will be to ensure a substantial improvement in the implementation of operations so that they can attain their development goals as soon as possible. 7. The measures taken to improve on portfolio performance mainly focused on the organisation of special supervision missions during which procurements files were processed on the field and the project management re-organized (case of the Education III Project; the procurements officer was replaced; the supervision mission of December 2004 processed about 18 procurements files on the field), and the restructuring of project components (case of the Project to repair the damage caused by the cyclones Eline, Gloria and Hudah). 8. Resolute efforts were initiated by the Bank Group in collaboration with the authorities to improve on the agricultural portfolio performance. These efforts were aimed at building the capacity of project execution organs, preparing action matrices for implementing each project, with a clear indication of tasks to be performed, deadlines, parties responsible and rigorous monitoring of the implementation of these actions as well as improvement of the accounting systems. The result was an acceleration in the implementation of agricultural projects from 2004, as shown in the following table on disbursement trends:

Disbursements as of 31/12/

2002 Disbursements as of

31/12/ 2003 Disbursements as of

31/12/ 2004 Disbursements as of

15/09/ 2005

Projects Loans & grants Amounts % Amounts % Amounts % Amounts %

Bas Mangoky Project 10,000,000 346,374 3 996,294 10 3,987,034 40 6,343,707 63

PROJER 7,350,000 505,199 7 999,504 14 1,836,344 25 3,121,339 42

PLCP Loan 5,762,000 0 0 191,683 3 349,046 6 527,022 9

PLCP grant 1,160,000 0 0 0 0 53,390 5 163,168 14

TOTAL 24,272,000 851,573 4 2,187,480 9 6,225,814 26 10,155,236 42 Only the Preventive Locust Control Project (PLCP) still has late disbursements. However, the research/training component which accounts for this delay has just started. The project’s commitment rate as of 25 September 2005 is more than 31% and disbursements will speed up in future. 9. On the basis of the above measures and improvements, projections indicate that the proportion of risky projects in Madagascar should inch down from 45% in 2004 to 40% in 2006. The disbursement rate should increase from 24% in 2004 to 53% in 2006.

Annex

REPUBLIC OF MADAGASCAR

TULEAR FISHING COMMUNITIES SUPPORT PROJECT (PACP)

CORRIGENDUM

1. In addition to a few minor modifications, the following amendments were made to the Project Appraisal Report. 2. In paragraphs 4.5.10 and 5.2.4, indicate that the Information Systems Department will incorporate the results of the framework survey into the national agricultural statistics system, and that support under the project also concerns the DPRH and DSI. 3. In paragraph 4.5.10 replace “one international bio-statistician consultant” with “one international statistician consultant”. 4. Paragraph 4.5.22 becomes: “Nevertheless, the Government and the Bank have acknowledged that the SRPRH has insufficient capacity to implement the Project, and have agreed strengthen it by recruiting, using the loan resources, three individual consultants (a participatory development expert, an environmentalist, and a procurement expert) and accounting assistance provided by a consultancy firm, as well as by recruiting support staff (secretaries, drivers) with Government financing. The Project will offer training opportunities to DPRH and SRPRH managerial staff in project management and implementation in order to help create project implementation capacity in fishery services at the regional level in Tuléar Province and at the national level. Moreover, the Government and the Bank have agreed that the profiles of the service head and division head for traditional fishing should be adapted to take into consideration the new extended mandate of the SRPRH, and that appointees to these positions should consequently go through a rigorous selection procedure that is competitive and accepted by both parties.” 5. In paragraph 4.5.23, replace “The Government and the Bank have agreed that fisheries sector interventions shall henceforth be coordinated in Tuléar Province by the SRPRH” with “The Government and the Bank have agreed that all fisheries sector interventions in the south-west region shall be coordinated by SRPRH.” 6. In paragraph 5.1 replace “The MAEP, acting through the DPRH, shall be responsible for project implementation” with “The MAEP, acting through the Directorate General for Regional Development and with the technical support of DPRH, shall be responsible for project implementation.” 7. In paragraph 5.4.1 (viii) replace “an agreement” with “two agreements”. 8. Condition (iii) becomes: “Provide the Bank with proof of the opening of a special account acceptable to the ADF to receive the loan resources, and an account opened in a commercial bank or the Public Treasury to receive Government counterpart funds (paragraph 5.5)”.