Document of

The World Bank

FOR OFFICIAL USE ONLY

Et¢-r~p., N.F1E . OPY SSS (atl i!y;)e ( JN )Report No. 9997-GUIR(:pc'rLt No. J9-4JTye (CABALCET, J(_,' X:34;:S4 / J8173/ AF1A(;

STAFF APPRAISAL REPORT

REPUBLIC OF GUINEA

NATIONAL AGRICULTURAL EXPORT PROMOTION PROJECT

May 29, 1992

Agricultural OperationsOccidental and Central Africa Department

This document has a restricted distribution and may be used by recipients only in the performance of

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CURRENCY EQUIVALENTS

Currency Unit = Guinean Franc (GNF)US$ 1.0 = GNF 710 1/SDR 1.0 = USS 1.37 2/

WEIGHTS AND MEASURES

Metric System

ABBREVIATIONS AND ACRONYMS

APDF - Africa Private Development Facility (IFC)AEF - Africa Enterprise Fund (IFC)CCCE - Caisse Certrale de Cooperation Economique (France)CCIAG - Chambre de Commerce, d'lndustrie et d'Agriculture de Guin6e

- Chamber of Commerce, Industry and AgricultureCICM - Centre International de Credit Mutuel

- International Center for Mutual CreditCLIFEL - Comite de Liaison Interprofessionnel pour les Fruits et legumes

- Interprofessional Liaison Committee for Fruits and VegetablesCOLEACP - Liaison Committee Europe/Africa - Caribbean - Pacific, for the Promotion of

Tropical Fruits, Off-Season Vegetables, Flowers, Ornamental Plants andSpices

DND - Direction Nationale de la Decentralisation- National Directorate for Decentralization

DNGR - Direction Nationale du Genie Rural (MARA)- National Directorate of Rural Engineering

EEC - European Economic CommunityIFC - International Finance CorporationFAC - Fonds d'Aide et de Coop6ration (France)IRAG - Institut de Recherche Agronomique de Guinee (MARA)

- Agronomic Research Institute of GuineaMARA - Ministere de I'Agriculture et des Ressources Animales

- Ministry of Agriculture and Animal RessourcesMCTT - Ministry of Commerce, Transport and TourismMIPME - Ministere de l'lndustrie et des PME

- Ministry of Industry and SMEsMPF - Ministry of Planning and FinanceNGO - Non-Governmental OrganizationPCPEA - Projet Cadre de Promotion des Exportations Agricoles

- National Agricultural Export Promotion ProjectPDMCG - Projet de D6veloppement du Mouvement Coop6ratif en Guin6e

- Cooperative Development Project of GuineaPESRPP - Public Enterprise Sector Rationalization and Privatization ProjectPNIR - Projet National d'lnfrastructure Rurale

- National Rural Infrastructure ProjectPNVA - Projet National de Vulgarisation Agricole

- National Agricultural Extension ProjectPPF - Project Preparation FacilityPSPP - Private Sector Promotion ProgramSAL - Structural Adjustment LendingSENATEC - Service National d'Appui Technique et d'Enregistrement des Cooperatives (SED)

- National Service for Technical Support and Registration of CooperativesSME - Small and Medium Enterprise

FISCAL YEAR

January 1 - December 31

1/ Represents the exchange rate at appraisal in May 1991. The exchange rate is establishedthrough an auction system and was GNF 922 to the U.S. dollar at negotiations in May1992.

2/ As of May 8, 1992.

FOR OFiCIL USE ONLYREPUBLIC OF GUINEA

NATIONAL AGRICULTURAL EXPORT PROMOTION PROJECT

TABLE OF CONTENTS

DOCUMENTS CONTAINED IN THE PROJECT FILE ................................. i

CREDIT AND PROJECT SUMMARY ........................................... ii

KEY FEATURES OF THE RURAL SECTR ....................................... v

I. INTRODUCTION .......................................................... I

II. INCENTIVES FRAMEWORK .............................................. 2

A. Country Economic Background ...................................... 2B. Reform Program ............. ................................... 2C. Investment Climate .............................................. 3D. Regulatory Framework ........................................... 4E. Institutional Set-Up .............................................. 6F. Banking System and Credit ....................................... 8

Ill. SECTORAL SETTING ................................................... 9

A. Agricultural Sector ........................................ 9B. Agricultural Export Sub-Sector ...................................... 9C. Constraints to Agricultural Exports .. 11

1. Regulatory and Institutional Constraints ............... 1 12. Technical Constraints ............... 12

D. Government Agricultural Strategy ..................... 13E. Export-Oriented Agricultural Operations .. 14

1. Public Projects .142. Nucleus Estates. 14

F. IDA Agricultural Sector Strategy.. 15G. Lessons Let int from Previous Bank/IDA Involvement .. 16

IV. THE PROJECT .16

A. Project Rationale, Objectives, Strategy and Summary Description .16B. Detailed Features .18

1. Institution Development .182. Support to Production .193. Special Programs .234. Project Management ...... .. ............................... 25

C. Project Costs and Financing .................................. 261. Cost Estimates .................................. 262. Financing .................................. 283. Procurement .................................. 294. Disbursement and Revolving Funds .315. Financial Mgt, Accounting and Audit Requirements .32

D. Project Organization and Management .. 33

This report is based on the findings of an IDA Appraisal Mission which took place from May 5 to25, 1991, consisting of Messrs. Jean-Claude Balcet (Mission Leader, AFlAG), Bertrand de Chazal(AFlAG), Yovan Grouitch (AFlAG) and Siaka Bakayoko (AF1AA). Mr. Jakob Meerman (AF3AG)was the Peer Reviewer and Mr. Jean-Jacques Deschamps (AF1 IE) the Project Advisor. Mr. MichaelJ. Gillette is Department Director (AFI), Mr. Theodore Nkodo (AFI AG) Chief of the AgricultureOperations Division, and Mr. Jean-Claude Balcet (AFI AG), Task Manager. Ms Hortense Ngudl6provided most of the assistance for the secretarial work.

I 'r- -1 .tor * . -^ A s * * ** *-. I

Table of Contents (Cont'd) .............................................. Ele

V. PRODUCTION. MARKETS AND PR!CES .35

A. Fresh Pineapples .................................... ....... 36B. Fresh Mangoes ....... 37C. Mango Pulp ........ .......... ............................... 38D. Non-Traditional Commodities .38E. Summary .................................................... 39

VI. BENEFITS. JUSTIFICATION AND RISKS .................................. 39

A. Project Benefits .39B. Economic Justification .40C. Budgetary and Balance of Payment Impact .41D. Environmental Impact .41E. Risks .41

VII. ASSURANCES. CONDITIONS AND RECOMMENDATION .42

ANNEXES

1. Description of Nucleus Estates2. Chamber of Commerce, Agriculture and Industry of Guinea (CCIAG)

Appendix 1. Current SituationAppendix 2. Changes Proposed under the ProjectChart 1. Organizational ChartChart 2. Proposed Export Promotion Division

3. Description of Professional Organizations4. Letter of Agricultural Export Development Policy (LPDEA)5. Terms of Reference of the Resident Technical Assistance6. Private Investment Fund

Table 1. List of Potential Investment ProjectsTable 2. Estimated Operating Budget of the Fund Management CompanyChart 1. Processing Chart

7. Cost EstimatesTable 1. Summary Accounts by Project componentTable 2. Project Components by YearTable 3. Summary Accounts by Year

8. Technical Assistance and Management/Services Contracts9. Disbursement Schedule and Profile10. Project Implementation Schedule11. Supervision Schedule12. Project Organizational Chart13. Monitoring and Evaluation System14. Production, Markets and Prices

Table 1. Pineapple Yield LevelsTable 2. Mango Area (Replaced/Grafted) and ProductionTable 3. Area Under PineappleTable 4. Pineapple ProductionTable 5. Pineapple Production Costs (Nucleus Estates and Outgrowers)Table 6. Pineapple Input Costs and Labor Requirements (Independent

Smallholders)Table 7. Mango Production Costs (Estates)Table 8. Mango Input Costs and Labor Requirements (Smallholders)Table 9. Farmgate Price for Pineapples and MangoesTable 10. Export Forecasts for New-Traditional Commodities

MAPS

IBRD No. 23527 and 23528

{i)

REPUBLIC OF GUINEA

NATIONAL AGRICULTURAL EXPORT PROMOTION PROJECT

Documents Contained in the Proiect File

A. BACKGROUND DOCUMENTS AND REPORTS

1. Diagnostic Review of the Investment Climate, FIAS, September 1988

2. Private Sector Support Program, President Report, IBRD, April 1990

3. Impact of Structural Adjustment Reforms on the Industrial Sector, World Bank,June 18, 1990

4. Country Economic Memoranium (two volumes), World Bank, November 1990

5. Studies by COLEACP (Comite de Liaison pour les Exportations de Fruits Legumes etFleurs de Pays ACP) concerning fruit exports from Guinea, May 1991:

- Etude approfondie du marche de la CEE- Etude relance des productions fruitieres en Guinee, M. Pie- Etude socio-economique, Malik Conde- Etude contrOle de qualite, M. Beaudoin- Etude de la chatne de froid, M. Roubaud- Etude du transport maritime, M. Couvert

6. Lettre de Politique de Developpement Agricole (LPDA), October 1991 (three volumes)

B. PREPARATION DOCUMENTS AND WORKING PAPERS

1 . Revue des Institutions, Michael Fromageot-Langstaff, September 1990

2. StratOgie commercials pour les produits de la filiere horticole en Guinee, M. Boyer-Vidal, BDPA/SCET AGRI, December 1990

3. Revue des Aspects Agronomiques des Cultures d'Exportation, Jean-Pierre Capo-Canellas, January 1991

4. Analyse des Principales Filieres A I'Exportation, M. Graindorge, January 1991.

5. Assistance A l'elaboration d'une Lettre de politique de developpement des exportationsagricoles, John Macrae, March 1991

6. Etude de faisabilite d'une Societe Guin6enne d'lnvestissement, Pierre De Raet etFrancis Nyirjesy, April 1991

7. Cooperatives, Ms. Lisa Matt, April 1991

8. Audit institutionnel de la CCIAG, Claude Metman (Chambre de Commerce et d'Industriede Paris) et Michael Fromageot-Langstaff, April 1991

9. Audit Financier de la CCIAG, Price Waterhouse-Conakry, April 1991

10. Etude d'Impact sur I'Environnement du PCPEA, Nicolas Egli, mai 8 1992

(ii)

REPUBLIC OF GUINEA

NATIONAL AGRICULTURAL EXPORT PROMOTLON PROJECT

Credit and Proiect Summary

Borrower: The Government of Guinea

Beneficiaries: arivate/sermi-rivate entities: Guinean Chamber of Commerce (CCIAG),Interprofessional Uaison Committee for Fruits and Vegetables (CLIFEL),selected nucleus estates, Mutuel Credit Company (CICM), and PrivateInvestment Fund Management Company; and aovernment oroiects/services:National Extension Project (PNVA), National Institute of Agronomic Research(IRAG), Cooperatives Development Project (PDMCG), National CocperotivesService (SENATEC) and National Directorate of Rural Engineering ('NGR).

Credit Amount: SDR 15.2 million (US$20.8 million equivalent)

Terms: Standard IDA terms, with 40 years maturity

Proiect Descriotion: The project aims to strengthen the incentives framework and remove theobstacles to the supply response in the agricultural export sector. In thissector that offers promising investment opportunities, it will assist in theapplication of the policy measures designed to create an enabling environmentand increase the operational context for private sector activities. The mainstrategic orientations will be to: la) support professional organizations tostrengthen the bargaining power of private operators vis-a-vis theAdministration and enhance their business capabilities; (b) provide the requiredsupport services to strengthen the operational context in which privateinvestments are made; (c) assist private Guinean operators to establishpartnerships with external investors to secure technical expertise, marketoutlets and funding for their export businesses; and (d) support smallholdersand Small-and-Medium Enterprises considered the agents for the long-termdevelopment of the sector; in the short-to-medium term, priority will also begiven to the nucleus estates which are better equipped to generate the criticalmass of production and can be relied upon to provide extension to surroundingoutgrowers. The following project components will support the abovestrategy:

(a) institution buildina. by strengthening professional organizations dealing with theexport sector;

(b) sugport to exoort oroduction by providing specialized technical services(research, extension, management assistance, etc.) to producers (small andlarge, including producer groups and cooperatives); this component will includeaccess roads to open up producing areas;

(c) special oroorams (Mutuel Credit and Private Investment Fund schemes)addressing financial constraints to agricultural exports; and

(d) proiect manaaement through a project management contract with a privateconsultant firm (the "Project Manager") that will have full delegation ofauthority (mattrise d'ouvrage deleguee) to implement the project.

The project will be implemented in close liaison with the proposed EEC-fundedFruit Promotion Project which will include a specialized line of credit andspecific production-oriented components, such as quality control andproduction of planting material. The project's institution building andmanagement components will have national scope and encompass allagricultural export industries, with the exception of rubber, palm oil and cottonwhich are being developed under specialized filiAre' projects. The projectproduction support components will cover, as core zone of intervention, thearmer 'banana triangle- prefectures in Maritime Guinea and the Fouta Djallon.

ii)

Estimated Protect Costs Loca u rco Totat U Of49! ----- UNliffan ........ Bast Costs

A. Institution Develoamnt

1. Institution Support Cowa. 0.3 1.0 1.3 62. Chamber of Commerce 0.2 0.4 o.e 33. Professional Organizations ia L. 0L5 31

Subtotal 0.7 1.7 2.4 12

B. Production Support

1. Extenion 0.8 2.0 2.8 142. Adtiv Resarch 0.6 1.7 2.3 113 Ssll/M.dium Enterpriess 0.3 1.0 1.4 64 Prod. groups/Coops 0.6 0.9 1.5 75. Access Ro ds 1.0 LA 434 271

Subtotal 3.3 8.0 11.3 55

C. Srecial Prosrams

1. Mutuel Credit 0.4 0.7 1.1 52. Private Investment Fund 0L4 1.6 2.0 10

Subtotal 0.8 2.3 3.1 '5

D. Proiect Prepar:tfon and Management

1 Project Management 0.9 1.1 2.0 92. Project Preparation Facility f 0L2 1.7 1.9 9

Subtotal 1.1 2.8 3.9 18

Total Base Costs 5.9 14.8 20.7 100

Phvical Contingencies 9.4 1.0 1.4 7Price Contingemcies 1.4 1.1 2.5 12

Total Project Costs (including taxes) 7.7 16.9 24.6 119

Taxes 1.9 _ 1.9

Total Project Costs (net of taxes) 5.8 16.9 22.7

17 Inctuding tIve PPF advances against the present credit totalling USS 1.5 million, and one PPF advance againstCr. 1626-GUI amounting to USS430,000.

Financina Plan Local Forei n Total----- usg r li on.-----

Goverment 2.3 0.2 2.5IDA 4.7 16.1 20.8FAC -0.6 0.6Beneficiaries 9 0 0 6

Total 7.7 16.9 24.6

Estimated Disbursements from the IDA Credit

IDA Fiscal Year

nnual 2.8 3.5 4.6 4.2 2.6 1.9 1.2Cuwmlative 2.8 6.3 10.9 15.1 17.7 19.6 20.8

Internal Rate of Return (production cowponents): 17X

(iv)

Benefits and Risks

Benefits. The main project benefits will accrue from supporting a development strategytargetted on private operators, in a sector that offers promising development opportunities. Theproject will aim .t getting the reform mrreasures effectively applied in this sector, thereby helping tocreate an enabling environment in the entire economy. In this respect, it will be a necessarycomplement to the Government's reform program supported by the Bank under the on-going SAL 11 andPrivate Sector Promotioti (PSPP) programs and proposed Public Enterprise Sector Rationalization andPrivatization Project (PESRPP). The project's goals which are geared to the short-to-medium term willalso complement those pursued under other Bank projects aimed at the long-term development of theagricultural sector, in particular the on-going Research and Extension project (FY89) and the proposedCredit and Cooperatives project (FY95). The institution-building component -- aimed at private sectorinstitutions - will render the strategy operational. Increased export activities will result: (a) at themicro-level in increased incomes for the private operators (small and large) doing business in thevarious agricultural export industries; and (b) at the macro-level, in the establishment of a broader basefor economic growth, including diversification of the sources of foreign exchange.

Ris. The major risk is that the business climate may not improve on account offactors outside the project's control. This risk wil' be minimized by: (a) the effective application ofpolicy measures requested as part of the IDA-supported Private Sector Promotion Program (PSPP);these measures are designed to strengthen the incentives framework; (b) the overall support andcoaching provided under the project to private-oriented activities that will act as catalyst to restoreconfidence amongst investors; and (c) the strengthening of the Chamber of Commerce and professionalorganizations that will help empower the private sector and defend its interests vis-A-vis theGovernment.

Another risk, also in great part outside project control, is the continued reluctance ofcommercial banks to provide term credit for agricultural export businesses. This risk will be mitigatedby: (a) the application of specific policy measures requested as part of the PSPP and PESRPP programs(concerning in particular the establishment of bank guarantees and the strengthening of the judicialsystem); (b) the implementation, under the project, of a private investment fund scheme under whichadvisory support and equity funds will be provided; and (c) the establishment of a specialized line ofcredit, es part of the proposed EEC-funded Fruit Promotion Project.

A technical risk is that the advanced techniques required to produce non-traditionalcrops and adapt to the requirements of the rapidly evolving external markets not introduced in a timelyfashion. To address such a risk: (a) on the production side, the project will provide specializedtechnical support so that appropiate technologies be incorporated into research programs anddissseminated to producers in a timely fashion; the nucleus estates will be instrumental to achieve thelatter objective; and (b) on the marketing side, the project's institution support component will providethe necessary commercial information and help Guinean operators establish partnerships with foreignpartners.

An operational risk is that the public projects which will be used for the execution ofcertain components may not have the required operational capacity and that their objectives (whichare long-term) may not coincide with project objectives (which have shorter horizon). This problemwill be circumvented by: (a) precisely specifying the tasks to be performed as part of theimplementation contracts; (b) providing the required operating facilities under these contracts; and (c)ensuring close monitoring of contract execution. A final operational bottleneck may be the insufficientsupply of fertilizer and planting material to smallholders. This bottleneck is specifically addressed bythe proposed EEC-funded Fruit Promotion Project; it will also be eased as estates produce plants ona commercial basis and supply inputs under seasonal production contracts to outgrowers, and as small-and-medium size enterprises (SMEs) establish themselves with project support to provide productionservices and inputs.

Iv)

REPUUIC OF GUINEA

NATIONAL AGRICULTURAL EXPORT PROMOTION PROJET

KEY MFTURE9 OF THE RURAL $EC-OR

1. OUl*m 4.7 6.6

Rural as % of Total Y 84 76Rural Famlse '000 611 7 0

2. E v GDP/Heeo ottotal Population 9 310 390Agriculturl GDPlHead ofRural PopulAtion 6 140 188Agtbultural GDP as % of Total 30 29

3. Land UseTotal Land Area m2 246 246Perennial Crops '000 he 130 210Annual Crops '000 ha 910 1,330

4. Area ForewtedDense Forest '000 ha 800Wooded Savanna 000 ha 1,700Bush Savanna '000 ha 12,000Shrub Sevens and Fallow '000 ha 6,150Mangrove '000 ha 260

5. outp3nRice -O 0t 376 4a0Maize 000 t 60 45Cassava 000t 220 500Coffee 'Coot 14 7

6. Tradeiatd Exports * m 186 761

Agrcultural Expoit I 3 STotal Imports t m 257 615Agrcultural imports 6 13 18

7. Goverment ExbonditureTotal Expendltures * m 640Recurrent Budget $ m 212 285Capital Budget * m 174 2S5

REPUBLIC OF GUINEA

NATIONAL AGRICULTURAL EXPORT PROMOTION PROJECT

STAFF APPRAISAL REPORT

1. INTRODUCTION

1.01 Guinea's agricultural export potential is indisputable. Historical analyses andcomparison with neighboring countries suggest that it produced -- and could still produce -- a widevaried' of crops for domestic consumption and export. Recently, Guinea's development strategy foragriculture has concentrated on food crops to substitute for imports and achieve Food security, andon a few commercial crops (cotton, coffee; now, oil palm and rubber). Whilst the supply response forthese crops appears significant, it will be insufficient to ensure a substaitive and balanced growth forthe sector. Also, additional foreign exchange will be needed in the medium term to supplementtraditional sources of export earnings (mining exports) that are necessarily limited. Guinea thereforewill have to turn to agricultural exports to sustain and diversify its economic growth and generate newforeign exchange revenues.

1.02 Since the beginning of 1986, Guinea has embarked on a major program of economicreforms supported by IDA, which has led to the gradual elimination of major economic distortions(paras 2.03 to 2.05). Under this program, the following measures are favorable to exports: trade andprices have been liberalized, the banking sector has been revamped, a favorable Investment Code isin place, and the Government has adopted a flexible exchange rate policy. The latter is perhaps themost important condition for competitiveness on external markets. These measures have contributedto keeping the cost of local factors down (especially non-tradables, such as land and labor) andswitching the terms of trade in favor of agricultural producers. In parallel, an ambitious investmentprogram is bringing about the badly-needed rehabilitation and expansion of the country's economicinfrastructure (primary roads, port and airport infrastructure, utilities; more recently, feeder roads andtelecommunications). Under the on-going administrative reforn. program, a large number of parastatalshave been privatized and the Administration continues to be streamlined.

1.03 The reform program has already generated substantial improvement in economicperformance emanating principally from the private sector, with significant increases in agriculture,construction, transport and trade activities. The favorable context it has brought about accounts inparticular for the incipient response of agricultural export activities. Weak private sector developmentand the Administration's limited capacity for economic and financial management, however, continueto hamper the full realization of Guinea's growth potential. As a result, Guinean exporters are yet tomove decisively toward regaining the markets Guinea had at Independence when it was a majorexporter of bananas and pineapples, and toward making a dent on the international market for the non-traditional exports for which Guinea has potential. As part of the ongoing reform program, theGovernment aims to alleviate the above constraints in r; der to deepen and consolidate the adjustmentprocess. The major thrust of the program is to strengthen the incentives framework for private sectoractivities whilst continuing to reform public sector management. The proposed National AgriculturalExport Promotion Project is consistent with this general thrust as it would contribute to increase anddiversify agricultural growth through private sector promotion.

1.04 The project was identified in January 1983. Technical preparation was carried outunder several PPF advances which served to finance a feasibility study, specialized short-termconsultancies to prepare specific dossiers and a management contract to establish a project preparationunit (para 4.41). IDA Credit 1955-GUI was used to finance studies leading to the preparation of theLetter of Agricultural Export Policy (LPDEA, para 4.01), and Credit 1234-GUI funded specializedconsultancies to prepare the Private Investment Fund component. The European Development Fund

(EDF) financed, in parallel, a set of studies focussing on quality control, transpo.' and marketing offresh fruits. In the course of preparation, close collaboration was maintained with IFC in particular overthe Daboya Plantation Project, and with the Africa Private Development Facility (APDF) which willprovide advisory assistance to private investors in connection with the establishment under the projectof the Privats Investment Corporation. Appraisal took place over May 15-25, 1991 and negotiationsover May 4-8, 1992. Board presentation is scheduled for June 23, 1992.

II. INCENTIVES FRAMEWORK

A. Country Economic Backaround

2.01 Following Independence from France in 1958, Guinea during the First Republic adopted"dirigiste" development policies whic;i sought tu modernize and industrialize the predominantlyagricultural economy under the gui.-ance of the State. Whilst these policies altered traditionalproduction patterns, they failed glaringly to bring about the anticipated industrialization and to sustaineconomic growth or social development. GDP is estimated to have grown on average at less than therate of population growth (2.8%). From 1960 to 1974, GDP grew by only 2.4 percent per annum,representing an overall decline of 4 percent in per capita terms over the period. Whilst the 1975-80period was marked by growth of about 3.5 percent per annum with the start-up of major new bauxiteoperations, growth declined again from 1980 as the new mines reached full capacity and most of therest of the economy continued in its inexorable decline. By 1985, per capita income estimated atUS$250, had declined to below the level at-ined in the previous decade and placed Guinea amongstthe poorest countries in the world.

2.02 Guinea's wide range of natural conditions allowed diversified rural production whichsustained nearly three-fourth of the country's population and accounted for over half of GDP in 1960.Plantation agriculture (principally bananas, pineapples, palm kernels and coffee) provided much ofexport earnings and public revenue. Although data for the period are unreliable, it is evident thatGuinea's per capita agricultural output declined substantially over the 1960-85 period. Theperformance of export crops during that period was particularly poor (para 3.04). Whilst exports tothe Eastern Bloc partners, with whom Guinea developed increasingly close trading arrangements,partially compensated for the loss of convertible currency markets, this shift In agricultural tradingpatterns diminished long-term ability to regain access to markets with more stringent qualityrequirements. Growth in food production also fell below the rate of population growth, which lead toincreasing food imports (over 1 00,000t in 1985; at present over 250,000t).

B. Reform Proaram

2.03 Since the beginning of 1986, the Govemment of Guinea has undertaken an ambitiousprogram of economic reforms aimed at reversing the extremely poor economic management whichcharacterized the country from Independence to 1984. The ongoirg Structural Adjustment (SAL)program was designed to: (a) change the Guinean economy from a highly centralized, inefficientcommand economy to one where resource allocation decisions would be based primarily on marketsignals; and (b) lay the foundation for growth through enhancing efficiency in production and in publicsector management in the context of the State's new role in promoting development. Its mainelements are: (a) retrenchment of the State from directly productive sectors and restructuring of thepublic sector through a comprehensive administrative and public enterprise reform; (b) resourceallocation policies consistent with the establishment of a liberal economy, through, inter alia, realisticexchange rate, interest rate, and price/trade policies; and (c) macroeconomic policies consistent withlong-term fiscal and balance of payments equilibria.

-3-

2.04 The first phase of the SAL program (1386-88) entailed radical departure from thepolicies of the past and required a systemic change. It was a "shock treatment" for the economy,concentrating on removing the most glaring distortions in the incentives environment. It involved amassive devaluation, extensive privatization, price/trade liberalization, and the creation of a comr. ircialbanking system. It was supported by a first Bank Structural Adjustment Credit, a Special AfricanFacility, and two annual arrangements under a Structural Adjustment Facility. The present phase ofthe SAL involves a much mnore complex and difficult process of reforming institutions and changingattitudes both within the Administration and the private sector. This phase is supported by the SecondStructural Adjustment Credit (SAL II, Cr. 1926, FY88), the Second Economic Management SupportProject (EMSP II, Cr. 1963, FY89), as well as the Private Sector Promo!ion Program (PSPP, Cr. 2148,FY91); the second tranches of SAL II and PSPP are yet to be released. The Bank is preparing a PublicEnterprise Sector Rationalization and Privatization Project IFY92L) that would aim to support the finalphase of privatizating and restructurating remaining parastatals. In November 1991, the IMF agreedto go ahead with its Enhanced Structural Adjustment Facility (ESAF), following approval by the IMFand the Bank of the Policy Framework Paper (PFP). However, a joint Bank-Fund mission of February1992 found that the Government had been unable to meet the performance criteria included in theESAFtPFP program. The IMF is to resume discussions in July 1992. The Paris Club meeting for Guineascheduled for April 1992 has also been postponed until the IMF Board approval.

2.05 To date, the supply response to the reforms has been encouraging but not dramatic.Moreover, the nature of this growth has been in some ways disquieting. Growth in agriculture forinstance has not been accompanied by major productivity improvements. The most vigorous growthhas taken place in anci9lary sectors - transport, trade, construction and utilities -- driven by exterralfinancing. In additiun, 'scause of the severe supply rigidities in the productive sectors, this growthhas only come at the cost of persistent inflation, which further jeopardizes its sustainability.

C. Investment Climate

2.06 As part of the reform program, the Government has, since 1985, taken significant stepsto foster a favorable environment for private sector development, including a new Investment Codeintroduced in January 1987. However, application of the reform package has been uneven. As aresult, the enthusiasm that Guinea had initially aroused from potential investors has now abated, andthe investment climate remains far from favorable. The major instrument of the Bank for assisting theGovernment in improving the investment climate has been the Private Sector Promotion Program(PSPP). A number of important reforms pertaining to the investment climate were undertaken prior todeclaring the PSPP effective in March 1991. These included the simplification of enterpriseestablishment procedures (para 2.10), the clarification and rationalization o' access to investmentincentives, the liberalization of labor regulations (para 2.12), and a streamlining of the institutionalframework for investment promotion (para 2.13). Key amongst the reforms to be adopted prior tosecond tranche release are: (a) practical steps to operationalize the institutional reforms previouslyagreed upon; and (b) the continued implementation of the customs reform. In addition, under theproposed IDA Public Enterprise Sector Rationalization and Technical Assistance Project, t* 1Government will prepare a comprehensive program of legal reform aimed at strengthening the overalllegal system including the judiciary. To this effert, legal expert services and training in selected legalfield would be provided. Further actions needed to complement these efforts are also considered underthe proposed IDA Third Economic Management Project currently scheduled for appraisal in October1993.

2.07 The bulk of Guinea's formal private sector is now comprised of a nucleus of recentlyprivatized State enterprises, involving the active participation of foreign interests. The privatized firmscover a wide range of activities, including agro-processing. Whilst all of them have benefitted fromspecial investment conventions outside of the new Investment Code, many have experienceddifficulties with public authorities. The latter, in a number of instances, have reportedly failed torespect their commitment under existing privatization agreements. Restructuring of these companies'

-4

labor force, in particular, has remained constrained by continuous intervention of the Ministry of Labor,as well as by the intrusive role of trade unions. Under present circumstances, therefore, these firmshave little incentive to expand, and planned investments have generally been cut back or canceled.

2.08 Other investment in the formal industrial sector has been also been somewhatdisappointing. Although close to 100 private firms so far have qualified for benefits under the 1987Investment Code, only a small fraction are fully operational, Present industrial activity remainsconcentrated essentially in the wood processing, metal products, and food/agro-processing subsectors,which account respectively for an estimated 30, 40, and 15 percent of industrial value added. In theshort-to-medium term, only the food/agro-processing subsector offers realistic prospects for exportgrowth. However, despite recent efforts to export fresh fruits, cut flowers and other agro-basedcommodities (paras 3.06 and 3.07), the contribution of this sub-sector to Guinea's export earningsremains low. A review of the policy environment indicates that formal private sector activity,particularly in manufacturing and export industries, is still hampered by constraints related to: (a) theregulatory framework; (b) the weak investment promotion structure; and (c) the lack of financialfacilities. These constraints are briefly reviewed in the next paragraphs.

D. Reaulatorv Framework

2.09 Although important legislation has been adopted in recent years as part of theGovernment's efforts to promote private sector development, the legislative framework regulatingbusiness activity still retains inconsistencies and weaknesses that compromise its effectiveness. Thecombination of ambiguity in the legislation, and lack of guidelines and procedures for its implementationstill confer arbitrary powers on government officials. There are few established rules of the game, andthe settlement of disputes usually leads to negotiations with public officials on a case-by-case basis.This contributes to erode investors' confidence in Guinea's business environment.

2.10 Establishment orocedures provide an illustration of the discrepancy that still existsbetween legal principle and accepted practice. The Law provides that any business not subject toexplicit nationality restrictions or that does not first have to comply with technical standards shouldbe free to establish itself in Guinea by simply incorporating at the Trade Registry. However,incorporation procedures are onerous and time consuming. Moreover, the right of free establishmentis not always honored. Although the 'agr6ment technique" (license to operate) or the "carte decommergant" (business license) are no longer officially required, oftentime in practice investors stillhave to secure the prior approval of technical ministries responsible for the specific sectors in whichthey plan to invest. Under the PSPP, a one-stop window (the "Centre de Formalites des Entreprisesw)has been established at the Conakry Court House. The creation of such a service undoubtedlyrepresents an improvement, but it still needs to be made operational.

2.11 Land and Provertv Titles. By law, all land in Guinea belongs to the State, and privateentrepreneurs -- whether local or foreign -- need permission to lease it. However, most investors aregranted leases which are not clearly defined and frequently lead to lengthy disputes thereafter. Inother cases, companies seeking to expand existing operations have been unable to obtain leases onneighboring plots, as requests for land occupation rights are either denied or remain unanswered.Worse yet, poor record keeping has at times led to the granting of leases on land and buildings todifferent parties at the same time. Such problems, which arise from both lack of appropriate propertyownerstiip lejislation and poor administration of land registration, constitute a major irritant for privatefirms, particularly for foreign investors unfamiliar with the local context. To remedy this situation anew Land Code ("Code Foncier") was approved in April 1992, following several years of preparation.The Code recognizes the right of individuals to own land. Approval of the Code constitutes animportant step in the right direction. The Government now needs to get it effectively applied.

2.12 Labor Reoulations. The new Labor Code provides for private enterprise freedom to hireand fire labor. Before the code was adopted, the Ministry of Labor's prior approval was required,

which represented a time consuming and restrictive process. In line with the provision of the code,the role of the National Manpower Office (ONEMO) as been redefined as that of a labor statistics unit.However, the contracts for expatriate employees must be still be approved by the Ministry of Labor.S!nce there are no set criteria for the approval of such contracts, nor are there any rules governing theirrenewal, investors may face arbitrary denials both for new contracts and for renewals. Such problemshave contributed to further alienating foreign investors. The guidelines for implementing the provisionsof the new Labor Code have been finalized recently. The application of these guidelines should resultin a welcome improvement, in that, in particular, it will curtail the discretionary power of the Ministryof Labor and its arbitrary intervention as intermediary between employers and employees.

2.13 Investment Code. Although a welcome improvement over the old code, the 1987 codewas still fairly complex. Moreover, some of the Code's eligibility criteria were imprecise, leading toproblems of interpretation and complicating the evaluation of individual applications. The situation hasbeen remedied recently under the PSPP. Offending articles have been eliminated and others haveclarified, which makes for more streamlined procedures. The code offers a large array of incentiveswhich can be awarded either individually or simultaneously to eligible firms. However, although mostof the eligibility criteria are intended to be performance-based, the National Investment Commissionlacks the resources and the procedural framework to effectively monitor compliance with the Code'sprovisions. Applying for eligibility under the Code involves first the completion of the establishmentprocedures. Once established, a firm normally has to wait another 80 days to have its applicationprocessed. In practice, longer delays are common. As a result of the long processing time and of theuncertainty surrounding implementation of the Code's provisions, investors often elect to circumventthe Code altogether and "negotiate" special incentives packages entirely outside the Code framework.Thus, duty and tax exemptions have been awarded on an ad hoc basis, which has served only todistort the general incentives structure and encourage rent-seeking on the part of individual promoters.Furthermore, implementation of these exemptions is not monitored systematically, since neither the

customs nor the tax department keeps an accurate inventory of all special conventions and exemptionsgranted by the Government. This absence of strict monitoring has lead to lack of control andwidespread abuse of the system.

2.14 Customs Services. Customs services in Guinea have traditionally been notoriouslycorrupt and inefficient. Poor customs management has been a hindrance to the development ofbusiness activities and has represented a shortfall in resources for the national budget. The situationhas improved somewhat recently with the adoption of the new Customs Code beginning 1991. Sincethat time, the Customs Administration has proceeded with the strengthening of its value assessmentunit and the establishment of the roving customs teams ("brigades mobiles"). The installation of thecomputerized SYDONIA system is expected to accelerate the process of capacity building. Thesedevelopments are positive, as they will contribute to improving the business climate and increasingcustoms receipts.

2.15 Judicial/Leaal System. The bottomline constraint to investing and doing business inGuinea at present is not so much that there are still few rules of the game in the economic arena. Infact, on paper the absence of regulations may be seen as an advantage over a complicated regulatoryframework. The problem is that the rules oftentime remain unapplied, due to the inefficiency and lackof enforcement capacity of the judiciary system. It has to do also with the general spirit under whichregulations are implemented. Regulations are often seen as an obstacle to circumvent for one'simmediate profit, rather than procedures to be adhered to for the benefit of the public community.Moreover, although official rules may be few, there are many unwritten rules that one has to complywith in practice. Another negative aspect is that, in the absence of regulations, activities are assumedto be forbidden whereas, in keeping with the spirit of the reforms, they should be held completely free.This leads to arbitrary controls over certain activities by oversight ministries. Finally, once newregulations are enacted, in practice, the old regulations oftentime continue remain in force althoughthey may have been abolished on paper. Eradicating the biased mentality of both civil servants andprivate operators, and overhauling the judiciary system are long-term tasks which are essential if

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private initiative is to be encouraged. The Government has on several occasions publicly expressedcommitment to this undertaking. The proposed Public Enterprise Sector Rationalization and TechnicalAssistance Project (FY92L) which includes support to the legalfjudiciary system will be the vehicle forthe Government to move decisively on this front (para 2.06).

E. Institutional Set-up

2.16 There are at present in Guinea several Institutions with a stated promotional role forforeign investment, Small and Medium Enterprises (SMEs) and export activities: (a) the National Officefor the Promotion of SMEs under the Ministry of Industry (MIPME), recently reestablished as the Centerfor Creation and Development of Enterprises (CCDE); in theory, CCDE is responsible for promoting andassisting SMEs within Guinea; (b) the National Center for the Promotion of Private Investment (CNPIP)under the Ministry of Planning (MPF); CNPIP was created in 1986 and is responsible, in principle, forthe promotion of foreign investment in Guinea; and (c) the Chamber of Commerce. LIrdust...andAariculture of Guinea (CCIAG) for private sector development in general. In additioii. the NationalInvestment Commission at the Ministry of Planning also intervenies for investors seeking to qualify forbenefits under tne Investment Code (para 2.13). Fcr agricultural exports, another government entityis involved: the Quality Control Service ("Service du Conditionnement") at the Ministry of Agricultureand Animal Resources (MARA). Although the respective roles of these institutions may seem cler r onpaper, in practice, their activities are ill-delineated and have little focus, which often results inoverlapping responsibilities and conflicts of interest. Moreover, they have limited operational capacity,and - with the exception of the Chamber of Commerce - are not appropriate mechanisms to enlistprivate sector participation since they are either services of the Administration or State-controlledentities. This lack of private sector institutions results in inadequate checks and balances in theeconomic arena wherein unfavorable rules and practices are often imposed on the private sector whichis unable to properly organize itself and defend its interests.

2.17 It is clear that all above functions assigned to individual institutions are eventuallyrequired to ensure adequate promotion of exports. In this regard, the issue is not so much to delineatethe responsibilities amongst the various existing institutions, but to avoid undue governmentinterference in the export promotion functions and ensure that the private sector can gradually assumecontrol over them. To achieve this objective, it is recommended to rely on professional organizations(including the Chamber of Commerce) that can alone enlist private sector participation.

2.18 Chamber of Commerce. The Guinean Chamber of Commerce, Industry and Agriculture(CCIAG) was re-established in 1985, after an eclipse of over twenty five years, and is the onlyinstitution currently representing the private sector at large. The Chamber has a three-pronged role(Annex 2): (a) internal liaison amongst the private sector community, by organizing dialogue andconsultation among members; (b) external representation, acting as a spokesman on behalf of theprivate sector vis-a-vis govemment authorities; and (c) trade promotion, for Guinean products, servicesand enterprises, on both national and foreign markets. The Chamber can therefore play a key role instrengthening the private sector and in opening the latter to the international market, particularly in itssearch for market outlets and potential partnerships.

2.19 However, the Chamber is faced with a number of problems: (a) inadequate status forits staff; the Secretary General and the permanent staff are civil servants seconded and paid by theirrespective ministries; (b) lack of financial resources: the sole source of funding comes from initialadmittance fees (annual membership fees cre not claimed); the ucentimes additionnels", a parafiscaltax which should be levied to supply the Chamber's budget, has not yet been enforced; and theChamber does not yet have the capacity to undertake activities, consistent with its mandate, thatwould generate resources, e.g. management services for equipment of public interest (bondedwarehouses for instance), organization of fairs and trade events, windows for delivery of officialdocuments, etc.; (c) inadequate facilities, in terms both of office space (the CCIAG is temporarilydomiciled at the People's Palace, after having been compelled to move out of several previous

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locations) and equipment; and (d) lack of interface with other promotion organizations both in Guineaand abroad.

2.20 The above difficulties are a legacy of the past and are partly due to the peculia; historiccontext in which the Chamber was born, at a time when professional organizations were consideredpart of the Administration. As such, the Chamber was often used in the past, as a political forum bythe Government which has decreased its credibility vis-A-vis private operators. The situation has nowchanged irreversibly. The Chamber is no longer a mere service of the Ministry of Commerce. It isgaining stature and power as an independent body with more active representation of the privatesector. As part of project preparation new statutes have been prepared for the Chamber. The consularassembly is due to discuss and vote on these statutes shortly. In parallel, in March 1992, the Headof State took the unprecedented decision to cancel a 1986 decree designating the president of theChamber. The latter therefore had to resign and elections are planned to select a new president.These are major developments which set the stage for the Chamber to become a truly independent anddemocratic institution.

2.21 Professional Oraanizations. The few professional organizations that are involved in theagricultural export sector have been created recently and still have limited functioning capacity. Thevertically-organized ones concern the following export sub-sectors ("filieres") (Annex 3): (a) fruit,vegetable and flower sub-sector (horticultural filibre); (b) coffee/cocoa sub-sector; and (c) fishing sub-sector. The horizontal ones have activities cutting across sub-sectors, such as the National Union ofRoad Carriers (UNTRG) or the Union of Forwarding Agents. The common objectives of theseorganizations are to: (a) represent and defend the interests of their members; (b) act as a lobby vis-a-vis the authorities; and (c) help organize their respective sectors/sub-sectors, in all segments ofeconomic activity (production, processing/packaging, transport, marketing, etc.). The Chamber ofCommerce has a mandate to promote professional organizations so that they be both verticallyintegrated and horizontally interlinked in order to ensure coherence and coordination of their activities.

2.22 Producer Grouos and Cooneratives. Despite a traditional society in Guinea that favoredcooperative organization, colonial efforts to impose formal cocperative structures generally resultedin failure. Between 1910 and 1958 several cooperative structures of this type were created. Theywere generally imposed by the colonial government to develop and deliver services in the rural areas.Membership was required and financial contributions were equivalent to a rural tax. Exceptions wereCOBAG (Cooperative Banani&re), and several other cooperative organizations producing and marketingbananas and pineapple. These cooperatives were member driven and formed to address issues of priceinstability for their products on the world markets. The fact that they survived after Independence istestimony to their solid grassroots support. During the First Republic, the Government clearly favoredState-sponsored cooperatives created as collective organizations with social rather than economicgoals. They were viewed as a means of providing services to and extracting goods from the ruralpopulation, and were driven by the requirements of outsiders rather than the needs of the membership.At that time, cooperatives were in fact closely identified with the Party-State organization and manycooperatives formed solely to gain access to subsidized goods/services provided by the State.

2.23 A new Cooperative Law was enacted in 1988, and a special service (SENATEC) wascreated at the Secretariat of State for Decentralization (SED) to handle cooperative registration,statistics/surveys of the cooperative movement and further development of the legislation. Althoughit represented some progress over the old text of 1960, the new law still had the major shortcomingof not providing for a truly independent cooperative movement. As a result, present cooperatives arestill to a large extent a legacy of the Sekou Toure years, with a number of new ones created only togain access to outside assistance or credit which often hinges on the formation of formally-recognizedgroups. Positive developments have also occurred, as grassroots production groups have emerged incertain areas to pool efforts in support of specific activities (coffee in Forest Guinea or pineappleproduction in Maritime Guinea). This process has taken place in the regulatory framework establishedby the 1988 Cooperative Law, often in a haphazard fashion as the rules were not enforced and

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cooperatives were acknowledged on an ad hoc basis (often arbitrarily) by the prefectures and/orSENATEC. As a general rule, the existing cooperative and farmer group structures lack managerial andfinancial skills, access to improved technology and credit, knowledge of marketing outlets and generalknowledge of how to do business in an increasingly competitive environment. Recently, theGovernment has shown understanding of this situation and willingness to support the emergence oftruly cooperative businesses. A Cooperative Development Project (PDMCG) has been created with IDAfinancing to deal with pilot field activities concerning cooperatives, and the Cooperative Law is beingrevised.

F. Bankina System and Credit

2.24 As part of the reform program, credit and banking activities were liberalized and a newbanking law was enacted. This was accompanied by the reorganization of the Central Bank and theestablishment of the new banks. In 1985-86, three new banks were given licenses to operate in thecountry (BICIGUI, BIAG and SGBG) and in 1988 a fourth one (UIBG). All these banks were createdwith partial or full private shareholding, and affiliated to large French banks. Among them, BICIGUIwas set up with material and technical assistance from IDA (Cr. 1 234-GUI) and participation in sharecapital from IFC, with specific mandate to: (a) make available externally-funded project financing toproductive sectors; and (b) open a network of up to ten branches in the county's interior. The newbanks were granted special tax incentives and other privileges on a case-by-case basis under separateagreements with the Central Bank. Progress achieved in the five years since the establishment of anew banking system has been impressive. Total local currency deposits in the banking sector grewfrom GNF 8.0 billion at the end of 1986 to GNF 34.4 billion by the end of 1990, with outstandingcredit to the private sector growing GNF 42.3 billion at end 1990.

2.25 Beyond the above figures, the mere fact that the Government has succeeded inreorganizing the financial sector and making customary banking services available to private sectoroperators and to the public at large is a major achievement of the reform program. Such services weretotally unavailable several years before. Among the new services, private firms have had mostlyunconstrained access to foreign exchange required to finance their imports through the newly-established weekly auction at the Central Bank. At the same time, the banks were given responsibilityof a number of externally-funded lines of credit targeted to priority sectors including agriculture. Suchlines are highly subsidized (e.g. 15% for the CCCE line, 11 % for the EEC line against a 24% normalrediscount rate) and are supported by local guarantee schemes with only a limited fraction of thecommercial risk bei. d borne the banks.

2.26 The recent progress however, should not mask the continuing deficiencies of thesector. Overall, financial markets are still notably shallow. Generally, the banking system'sparticipation in day-to-day economic activity is weak. Despite the growth in overall credit activitynoted above, credit to the private sector is still essentially limited to the short-term financing ofinternational trade, with critically-needed term credit being mostly unavailable to private operators,especially in the agricultural sector. The key factor in the banks' extremely cautious lending practicesis without doubt the unfavorable environment in which these banks are operating. Banks areparticularly constrained by: (a) the absence of past credit records on local operators coupled with a lackof financial discipline on the part of local promoters; and (b) the generally deficient functioning of thejudicial system and legal void surrounding the issue of bank guarantees. The latter problem probablyconstitutes the major limitation to banking activity in Guinea. It renders banks unable to enforce theirrights as creditors through foreclosures or other court-approved actions, due in particular to debtor-judge collusion and rampant corruption in the judiciary (para 2.15). The absence of proper landregistration and property ownership legislation further compounds the problem, by making it in effectimpossible for banks to secure their loans with matching collateral (para 2.1 1).

2.27 Credit Mutuel and Credit Rural. Improved financial sector policies, in particular theliberalization of interest rates, have created an opportunity for development of grassroots financial

intermediaries like Credit Mutuel. In September 1988, the International Center for Mutual Credit(CICM) set up the first mutual credit operation in Guinea in Labd (Fouta Diallon), to be followed in 1989by a second branch operation in Kindia (Maritime Guinea), and more recently in Gueckedou (ForestRegion). Credit Mutuel in Guinea is following a classical mutualistic approach of mobilizing savingsinitially, followed by lending operations to members only out of mobilized savings. Interest rates forlending operations are positive in real terms, and interest rates on deposits are competitive with marketconditions. The initial start-up costs and technical assistance have been provided by CICM underFrench financing (Fonds d'Aide et de Cooperation). As of December 1990, resource mobilization byCredit Mutuel in Labe amounted to GF 160 million, in spite of stiff competition from BICIGUI, andlending operations are progressing at an equally successful pace. This early positive result clearlydemonstrates the public appeal of the Credit Mutuel system. An expansion program therefore has beenestablished for the creation of additional credit unions in the Maritime Region along the Conakry-Laberoad axis.

2.28 In 1989, the Credit Rural project began operating in Guinea, as a pilot operation in tworural prefectures, Koundara and Telim6le. The project does not mobilize its own resources, but onlendsto individuals externally supplied funds from Caisse Centrale de Cooperation Economique (CCCE),operating within small groups, with the joint guarantee of the group members. The pilot project wasvery successful in loan recovery, through intensive follow-up of borrowers by project management.The project management cost is extremely high at present, but this trend is expected to reverse asmore Guineans become trained operators. The Government and CCCE decided to pursue this initialexperiment for another two years, until end-1 992, in order to adequately assess its impact.

Ill. SECTORAL SETTING

A. Agricultural Sector

3.01 With its abundance of water resources, rich ecological diversity, and favorable climate,Guinea has the potential to produce a large variety of agricultural products for both domestic andinternational markets. The rural sector is the mainstay of Guinea's economy, providing a livelihood toover 75% of the population and generating about 30% of GNP. Agricultural production is stillpredominantly based on smallholder farming and largely subsistence-oriented. Approximately 1.5million ha is cultivated annually by about 770,000 families.

3.02 Four distinct agro-ecological zones are found in Guinea. Lower or Maritime along thecoast annually receives between 2,500 and 4,000 mm of rain, and produces rice, groundnuts andfruits. Middle Guinea comprises the Fouta Djallon plateau (culminating at about 1500 m) where soilsare less fertile, rainfall less abundant (1500 to 2000 mm) , and temperatures lower than on the coast.In this region, fonio is the staple food and fruits and vegetables grow in abundance; it contains abouthalf of the country's livestock. Upper Guinea where rainfall averages 1,200 to 2,000 mm is animportant cereal producing region, especially along the Niger River and its tributaries. Cotton ispotentially important. The Forest Region in the South consists of tropical forests and hilly terrainreaching about 1700 m (Mount Nimba). Rainfall is relatively constant throughout the year (at averageof about 2500 mm) and permits two harvests. This region offe.s the richest agricultural conditionsin Guinea, especially for perennial crops (oil palm and rubber).

3.03 While agricultural statistics are still sparse and contradictory, the results of theGovemment's recent reform effort appear encouraging. Private sector activity has expanded, foodproduction has increased significantly, small-scale enterprises are developing, and rural per capitaincome is rising. Increases in agricultural production, however, have been accompanied by lesspositive trends. Although agriculturia exports are slowly rising, they still only account for less than 5%of total export eamings and are well below pre-independence levels. In contrast, food imports now

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account for 15% of the total import bill. Of particular concern are rice imports which have doubledsince 1985 and tripled in the last ten years. Production increases have been primarily due to anexpansion in land area and not to an increase in yields. While land under cultivation only representsabout one quarter of total arable land, the practice of leaving land fallow implies that land capacity hasnearly reached its limits, and that further growth will have to result from intensification of agricultureon better soils rather than from extension of cultivated areas. This process will need to beaccompanied by a more market-oriented approach wherein commercial crops (in particular thosedestined for export) should play an increasing role and greater attention devoted to the preservationof natural resources.

B. Agricultural Exoort Sub-Sector

3.04 Evolution of Exoorts since Indeoendence. At Independence, Guinean agricultureaccounted for 60% of export earnings, and provided substantial quantities for the export markets, interalia: 100,000 tons of bananas (for which Guinea ranked first world exporter), 20,000 tons of coffeeand 20,000 tons of palm kernels. In contrast, at the end of the First Republic in 1984, agriculturalexports had dwindled to minute quantities: 300 tons of coffee, 2,400 tons of palm kernels, 600 tonsof pineapples, 100 tons of mangoes and no longer any bananas. Exports have now regainedsomewhat but remain small and well below potential. This evolution is illustrated by the next table.

Votume of Agricultural Exoorts(metric tons)

1960 1970 1974-1980 1981-1985 1986-1988 1989-1990

Banana 55,000 20,000 1/ 8,930 V - -

PineappLe 5,000 8,200 3,990 620 590 1/ 2,000Mango n.a. n.a. 800 180 i/ 200 300Coffee 16,000 4,650 1,960 580 4,965 9,000Palm Kernel 23,000 13,025 11,985 6,080 3,300 2/ 3,500Cotton - - - - - 2,500

Source: AIRD. Dec. 1989; Boyer-Vidal, Dec. 1990; and John Macrae, April 1991.

1/ Figure for 1971g/ Banana exports were about 100,000 tons in 1956 and halted in 19793/ Average for 1987-1988i/ Average for 1982-19842/ Average for 1986-1987

3.05 Present and potential export crops. Of the traditional export commodities, only coffee,cocoa, cotton, and rubber have present and/or potential importance in Guinea. Qoffee productionreaches around 13,000 tons, on about 110,000 ha. Because new planting material has beenintroduced only recently (mainly through the RC2 project, para 3.17) and because most of post-harvestoperations are performed manually, coffee quality is still low. Production is forecasted at about 25,000tons in 1996/97 and 40,000 tons by the year 2000. Cocoa production is officially estimated at theinsignificant level of 200 tons; but the real production level is likely to be closer to 2,000 tons, partof which is smuggled outside the country as is the case for coffee. Cotton production was introducedrecently as part of a specialized "filiere" project under Compagnie Francaise Des Textiles (CFDT)management in Upper Guinea and the Western part of the Fouta Djallon (para 3.17). Production,presently around 2,500 tons, is targeted at 20,000 tons by the year 2000. Lastly, rubber, a newexport crop in Guinea, is being developed under the SOGUIPAH project currently under way in theForest Region (para 3.17). Exportable production of rubber is estimated at some 1 G,000 tons of rubberby the year 2000. The project would also produce 8,000 tons of palm oil for the domestic market.

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3.06 Amongst fruits, ineapples have traditionally been produced in abundance in Guinea,but exports remain low (2,000 tons). Guinean varieties are appreciated and the crop would beprofitable at current prices if exports were shipped by sea. Export flows could grow with better exportorganization and market penetration (para 5.07). Manooes exist in great abundance in the coastalregion and parts of Middle Guinea. The grafted varieties have been preserved and are still widespread,although trees are old and need to be replanted. Total production far exceeds export quantities whichremain very low (300 tons) (para 5.10). Of all export crops, banana cultivation has declined the mostmarkedly. The plant stock is no longer of sufficient quality for the export market and only a limitednumber of planters now master this complex crop. Production meets local demand but is not exported.Qranaes are grown commercially for the domestic and regional fresh fruit market (Conakry and Dakar).This crop has additional possibilities for the concentrate juice market, and flowers and leaves of certainvarieties are being used by! SOPAG of Labe for perfume essences (para 3.20).

3.07 A number of non-traditional fruits as well as vegetables have potential given thefavorable agro-climatic conditions prevailing in Guinea. The concentrate juice company SAIG-Mamou(para 3.20) created in 1990 has introduced gassion fruit cultivation. The crop has potential to be veryprofitable under Guinean conditions. Guava. Iims, graefruit and pagavas are all fruits with morelimited but significant production potential. The tropical fruit potential is complemented by off-seasonfresh vegetables and cut flowers that were recently deve. )ped for exports by Guinee-Fleurs (para3.20). In addition to the melons and cherry tomatoes exported by Guin6e-Fleurs before this companyhad to close down recently, other vegetables have market potential both domestically and for export.The avor.ado's situation is particularly auspicious in that it is a perennial and requires relatively littlecare and labor. Supply of avocados is plentiful and production cost is low, but existing varieties arenot suited for the international market.

3.08 EXDOrt potentia. Estimates suggest that Guinea's agricultural exports could in themedium-to-long term (year 2000) reach 75,000 tons annually for coffee and fresh horticulturalproducts, and 30,000 tons for other perennial. Together with processed products, this would beequivalent to a-round US$130 million, i.e. ten times the present value of Guinean agricultural exports.This potential can be distributed as follows: (a) coffe: 40,000 tons, given the important rehabilitationefforts presently underway and planned; (b) fresh fruits and vegetables: 35,000 tons by focussing onpineapples and mangoes (para 5.16); (c) Drocessed fruit (uice, juice concentrate, fruit pulp, dried fruit,fruit paste, jam): currently at a marginal level, should show a sharp increase, with a potential ofapproximately 5,000 tons of processed products (equivalent to 15/20,000 tons of fresh products); (d)flowers and essential oils, with high value for insignificant volume, could reach about 15% ofagricultural exports value; and (e) other croDs: perennial (palm kernels, cocoa and rubber) and variousother export products (e.g. cotton, spices, ginger) could amount to 30,000 tons.

C. Constraints to Aaricultural Exgorts

1. Reoulatorv and Institutional Constraints

3.09 Agricultural exporters are confronted with difficulties similar to those experienced byall businessmen at present in Guinea due to the prevailing adverse business climate. The regulatoryand institutional framework in particular is not conducive to developing export businesses, on accountof the following shortcomings: (e) an organizational gap due to lack or weakness of professionalorganizations; (b) the complexity, lack of flexibility and multiplicity of procedures for registration ofexporters and completion of export activities; (c) the continued existence of arbitrary taxes with nolegal basis and levied in haphazard fashion, although some of these taxes have already been eliminated(the 2% export tax and the packaging tax; the latter amounted from 3% to 20% depending on thetype of product exported); (d) the absence of an appropriate legal framework in certain areas (e.g. forjoint ventures, the absence of 'Groupement d'lnteret Economique"-G.l.E. which is particularly usefulin export markets), and/or the non-enforcement of existing regulations (e.g. the temporary importsystem); (e) the existing bilateral trade agreements which often are imprecise and outdated, and serve

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no purpose in opening up new export markets; and (f) an inefficient quality control. Concerning thislatter problem, the department in charge (the "Service du Conditionnement" at the Ministry ofAgriculture) has neither the facilities nor the procedural framework to undertake quality control.Arbitrary interference of this service -- reminiscent of Sekou Toure's economic police corps -- is ahindrance to private operators' business and does not lead to actual improvement in the quality ofexported products; poor quality in turn is causing a negative image for Guinean products on foreignmarkets detrimental to the establishment of a steady flow of exports.

2. Technical Constraints

3.10 Agricultural exports can regain momentum only if a number of technical constraints thatcurrently hamper export activities are removed. These constraints are related to the degradation ofthe operational environment (i.e. infrastructure/service facilities that are taken for "granted" in othercountries) that has occurred during the First Republic. The main technical constraints to be addressedby the project are listed below; they concern the steps required prior to international marketing:agronomic research, production techniques, post-harvesting operations, processing and transport.

3.11 AQronomic research is still highly degraded, having suffered from complete lack ofexternal support during the Sekou Toure years. This problem is compounded by the fact that no datais available concerning the new products required by European markets. As a result, the researchestablishment cannot meet the needs of export producers -- relating to planting material, improvedtechniques or appropriate cultivation methods -- even in the case of traditional crops !such as coffeeor mangoes. This reason alone explains the bulk of the technical problems encourinered for instanceby SAIG (recently created at Mamou for the production of concentrated juice, para 3.20) that stemfrom the lack of reliable technical data on passion fruit cultivation under conditions prevailing in Guinea.Efforts are being made to revamp agronomic research, inter alia under the IDA-funded Research andExtension (PNRVA) project; but it is a long-term undertaking and substantive improvement will onlybe obtained with a time lag. In the meantime, shortcuts should be found to reduce the lead time. Thethrust of the project research component would geared to this objective (paras 4.20 and 4.21).

3.12 Farm production. Pressure on fertile lands is undoubtedly increasing in areas that haveexport potential (especially near Conakry) and land tenure needs to be given greater attention (this isthe rationale for the project Pilot Land Registration Scheme, under the proposed Bank RuralEnvironment Protection project, para 3.24). Although this sets a limit to the potential for increase inproduction through area expansion (notably the creation of new large production units), the area stillavailable and/or undercultivated remains substantial. Climatic conditions in certain areas favorable topineapple production (Kindia region) impose irrigation and lengthen the cultivation cycle. This negativefactor, however, can be substantially compensated by high yields, providing good managementtechniques are utilized.

3.13 Although Guinean farmers have a good basic knowledge of fruit, vegetable and coffeecultivation, as testified by results achieved in the past, current yields and product quality are extremelylow, due to the following: (a) extension services during the First Republic became totally inoperativethrough lack of resources and expertise; (b) inputs- such as fertilizers and especially phyto-sanitaryproducts, are only used in minute quantities; and (c) maintenance of old glantations and establishmentof new ones have virtually ceased (particularly in the case of coffee and mangoes). The on-goingResearch and Extension project, together with the measures taken to liberalize input distribution shouldgo a long way toward improving the situation. However, significant results can only be expected witha time lag, given the present status of plantations which is highly degraded. Under the project,therefore, solutions will be sought to reduce delays, particularly by providing specialized extensionservices (paras 4.17 to 4.19), and by supporting private initiatives for the supply of inputs and servicesto the agricultural export sector (Small and Medium Scale Enterprise component of the project, para4.22).

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3.14 Post-Harvestino/ProcessinafrTransport are yet other constraints, particularly for freshfruits. The main problems are: (a) the poor condition of feeder roads giving access to plantations: thisproblem is exacerbated by the dispersion of production (for Instance, there are around 100,000 fruitpioducers in Maritime Guinea who have micro plantations scattered over large areas); (b) lack oforganized post-harvestina/orocessina services (with adequate facilities for field transport,regrouping/collecting centers, packaging, etc.). This results in poor quality products that can f'ardlyfind outlets on the international markot. This holds true also for coffee which is still dried anddehusked manually in a traditional fashion, and not properly sorted; it explains the fall in the priceobtained by Guinean robusta coffee on the international market; (c) cold storage. Forwardil.g freshproduce through Conakry is an additional problem due to the lack of cold storage facilities between theprocessing centers and the port/airport; and (d) international transgort. Air transport to Europe iscostly and irregular due to the small volumes being shipped. Given Guinea's geographic position.transport in bulk by sea (refrigerated boats) remains the only solution to drastically cut costs; but thisrequires shipments of critical mass at regular intervals, as vwas done for bananas in the late fifties. Inthe meantime, refrigerated containers could be used as they require lower volumes and can be shippedby regular boats. But the cost of using port facilities is high, due to high tariffs, excessive length ofrequired stay of boats, theft and other incidental costs. The Bank is addressing this problem as partof the proposed Transport and Urban project (FY93L).

D. Government Aaricultural Strateav

3.15 The Government's strategic objectives in the rural sector, as stated in the Letter ofAgricultural Development Policy (LPDA, October 1991), are to: (a) promote food security and reducefood imports; (b) promote agricultural exports; (c) provide the essential support services to the ruralproducers; and (d) ensure a rational management of natural resources. To reach these objectives, thestrategy adopted by the Government is to: (a) pursue the macroeconomic reforms agreed under theSAL and sector adjustment programs to reinforce the market economy (para 2.04); (b) continue todisengage the State from productive activities and services that can be taken over by the privatesector, and concomitzntly undertake an active promotion of private sector activities; (c) improvebusiness conditions to attract private investment, in particular in rural areas; (d) provide agriculturalservices to the farming community, especially applied research, extension and planting material; te)improve rural infrastructure to open up productive areas; and (f) build up local administrative capacity,inter alia by encouraging the development of producer groups, cooperatives and informal creditinstitutions, and by decentralizing MARA's services.

3.16 The Public Investment Program in support of the above strategy until recently was tofinance mostly area-based integrated development projects and crop-based ("fili6re") projects. Theseprojects had their own management structure, parallel to that of the Administration, and generally littleor no provision was made for sustaining their activities after project completion. The Government hasrecognized this shortcoming, and is now designing agricultural support services projects with a nationalperspective to ensure a cohesive approach to provision of services to farmers and their sustainabilityin the longer term. National services are expected to consolidate and take over project structurescreated with external assistance as part of area-based and/or 'filiere' type projects, once the donorfinancing has come to a stop. At the same time, the Government is providing incentives and supportfor private sector development, including transferring responsibility for public services to privateoperators whenever they have sufficient capacity to take over.

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E. Exoort-Oriented Aaricultural Operations

1. Public Proiects

3.17 The three large export-oriented projects of the Public Investment Program concern palmoil/rubber, cotton and coffee respectively: (a) the Palm Oil and Rubber Proiect (SOGUIPAH) aims atmeeting the domestic demar,d for palm oil (10,000 tons to be produced on 2,500 ha) and developingexports of rubber (17,000 tons to be produced on 8,000 ha) at an investment cost of about FF650million over 1986-1995. The project is managed by SOCFINCO and should eventually be privatized;(b) the Cotton Develo ment Proiect covers Upper Guinea and the Western part of Fouta Diallon. It waslaunched in 1987 by the Compagnie Francaise des Textiles (CFDT) with CCCE financing at a cost ofFF 50 million. Whereas Guinea did not produce cotton before that date, the target at full developmentof the CFDT project is 15,000 tons; and (c) the Coffee Recovery Proiect (RC2) financed by CCCE (FF76 million over two phases) was launched in 1988 in the Forest Region, with the objective of: (i)developing the capacity to produce improved planting material at village level (through village-runnurseries); (b) providing extension si,pport to introduce improved production technologies; and (c)assisting the development of producers' groups so that they gradually take charge of collection andprimary processing. The project also aims at promoting the emergence of professional organizationsin the coffee sub-sector.

3.18 The other projects in the PIP that involve exports comprise: (a) three pilot projectsconcerning respectively smallholder pineapple production groups at Friguiagb6 (FF10 m, of whichFrench FAC FF1 m, and EEC FF8 m), smalliholder vegetable development at Dalaba (FAO FF3.5 m), andfarming intensification/diversification at Timbi Madina (FFZ, m, of which FAC FF3.6 m); (b) two projectsfocussed on rural credit: the Credit Mutuel scheme (FF9.3 m, of which FAC FF3.6 m and CentreInternational du Credit Mutuel FF5.2 m) and the Rural Credit project (FF8.6 m, of which CCCE FF5 mand EEC FF1.5 m); (c) several area-based integrated rural development projects (DERIK/Kissidougoufinanced by KfW/GTZ DM12 m, PAG/Guekedou financed by IDA/ADF/IFAD US$23 m), and PDR/Upperand Maritime Guinea financed by EEC ECUS70 m); and (d} two nationa! projects that have actions inthe export producing areas (Research and Extension US$31 m of whi%n IDA US$15 m, and RuralInfrastructure/PNIR US$92 m of which IDA US$40 in, USAID US$33 m and KfW US$7 m). Atpresent, the EEC is preparing a Fruit Promotion project (about ECUS10 m) that would includeproduction of planting material and support to quality control, as well -. a specialized line of credit;CCCE plans to fund an extension to the Friguiagb6 project which would include technical assistancefor storage/shipping/marketing activities (about FF5 m); USAID would support a project focussed onthe promotion of traditional export products, such as palm products, cola nuts, honey, etc., and UNDPwould extend it's general operating assistance to the Chamber of Commerce under a new US$0.8million project.

2. Nucleus Estates

3.19 There are half a dozen major privately-run projects currently being implemented in theagricultural sector (see next paragraph). These are generally of the nucleus estate-cum-outgrowerstype, with core plantations aiming at generating the critical mass of production and providing the basicproduction support and processing/packaging/transport facilities. The estates are critical to theagricultural sector in the short-to-medium run because they are the only operators that can expandproduction quickly enough to benefit from economies of scale and give the required momentum to thesector. But the majority have problems at present, mainly on account of the difficult environment inwhich they operate. They are also a few small projects (Small and Medium Enterprise-SME type) incertain production niches that have interesting potential (organic food, dried fruits, jam, etc.). Thecreation of new SMEs of this type should develop quickly if the incentives framework is right.

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3.20 The main large private projects -- with which the project would contract (para 4.19) -- are the following (see Annex 1): (a) GuinAe-Fleurs, a private 40% Guinean and 60% French(GREGORI) joint-venture established at Linsan (Mamou prefecture, 230 km from Conakry) in August1987 which pioneered the exportation of cut flowers (chrysanthemum) and vegetables for theEuropean market; this firm is now being liquidated following the withdrawal of GREGORI; (b) SocieteAgro-Industrielle de Guinie (SAIG), created in Mamou in 1988, as a mixed capital company (GuineanGovernment and majority participation of private partners, SIAS being the largest) to produce fruit juiceand concentrate (mainly passion fruit and mdngo) for the export market, with processing capacity of30,000 tons of fresh fruit equivalent; SAIG has faced difficulty following the bankruptcy of SIAS; ithas obtained financial support for an emergency recovery program; (c) Societe des Plantes Aromatiauesde Guinee (SOPAG) in Labe is a former State factory for the production of essential oils for perfumesthat was taken over in 1987 by the group TECOTEX-Cavallet; (d) Societe Libvo-Guineenne deD6veloooement Aaro-lndustriel (SALGUIDIA) is a parastatal whose capital is shared equally by theGuinean and Libyan governments. The company has an estate of about 2,000 ha of prime land (900ha irrigated) in one of the regions best suited for pineapple production and a processing unit of 12,000tons of capacity; (e) SOBRAGUI-Aariculture, a company of the Belgian group UNIBRA (that has majorityin the SOBRAGUI brewery in Conakry) operating on 300 ha rented SALGUIDIA mostly for theproduction of pineapple (150 ha), passion fruit (50 ha) and papaya-solo (40 ha); and (f) Aarafruits.operating on the government estate of Daboya (total area of 400 ha) to produce pineapples for exportwith production targets of 17,000 tons for 1995, with in addition 3,000 tons of mangoes to becollected amongst the outgrowers; IFC is to contribute to the financing of this program.

F. IDA Aaricultural Sector Strateav and Lendina Program

3.21 At the macro-policy level, IDA advocates continued support to the Government's effortsto create a functioning market-oriented economy in the agricultural sector, to allow potential investorsto take advantage of investment opportunities in agriculture, concerning in particular agriculturalexports and agri-business activities for which Guinea has comparative advantage. IDA thereforeadvocates a more aggressive policy of private sector promotion which entails: (a)building/strengthening private sector institutions concurrently to disengaging/streamlining theAdministration; (b) effective application -rather than mere enactment-- of measures, demanding non-interference by the Government when the legislation remains unclear or incomplete; and (c) coachingthe private sector and acting as a catalyst to restore confidence amongst private investors. In parallel,IDA continues to emphasize the necessity to streamline government support servic3s, with focus onadministrative and financial management of the line ministries to remedy the mismanagement ofdisbursements, procurement and personnel matters. IDA also places great importance on naturalresource management, the immediate task being to complete the National Environmental Action Plan(NEAP) and help organize a subsequent donor conference.

3.22 In support of the above sectoral strategy, IDA advocates a lending program for Guinea'sagricultural sector, with a three-pronged orientation: (a) strenathenina basic suooort services (not onlytechnical services such as research, extension, seed production, rural infrastructure, etc., but alsoadministrative and financial services); this would be accompanied by disengagement of theAdministration whenever the private sector can take over; (b) sugoortina Drivate sector develoomentin specific areas where there are business opportunities (agricultural exports, agri-business, etc.). Thisincludes promoting professional organizations (including cooperatives and production groups) thatwould be established without the Administration's involvement. As a corollary to (a) above, it alsoinvolves actively promoting private sector take-over of activities presently performed by theAdministration, in particular as part of the privatization of the remaining parastatals (SALGUIDIA inparticular); and (c) oreservina the environment and managina natural resources (especially fisheries andforests).

3.23 The above program is geared to the long-term, i.e. IDA has a commitment toundertaking repeat operations over 10-15 years. This holds true for technical services (research and

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extension), but, more importantly, for private sector promotion. The legacy of 26 years of SekouTour6's socialist regime cannot be obliterated in the life span of a project and more lead time isrequired to revive commercial agriculture. IDA will continue implementing 'structuring' projects,national in scope and designed to serve as framework for investment operations in given sub-sectors.Although these projects are not policy operations, they will aim at supporting sector-wide strategiesand will be used as vehicles to induce the required policy changes.

3.24 IDA now supports national projects in all major sub-sectors of agriculture and IDAlending program is being brought to bear on the most important facets of agricultural development inGuinea. These projects are: (a) the Livestock Sector Restructuring Project (PRSE, FY86, Cr. 1725-GUI,US$9.8 m)); (b) the National Seeds Project (PSN, FY88, Cr.1864-GUI, US$9 m); (c) the NationalAgricultural Research and Extension Project (FY89, Cr. 1955-GUI, US$18.4 m); this project includesthree different sub-projects with which the proposed project will contract: {i) the extension sub-project(under the National Extension Project-PNVA), (ii) the research sub-project (under the National Instituteof Agronomic Research-IRAG), and (iii) the cooperatives sub-project (under the National CooperativesService-SENATEC and the Cooperatives Development Project-PDMCG); (d) the Fisheries and ForestryResource Management Project (FY90, Cr. 2068-GUI, US$8 m); and (e) the National Rural InfrastructureProject (PNIR, FY90, Cr. 2106-GUI, US$40 m). IDA has in its pipeline, in addition to the proposedproject, three other projects which should complete the set-up: (a) a rural environment protectionproject (FY93S); (b) an agricultural services project (FY94L); and (c) a rural credit and cooperativesdevelopment project (FY95L). The proposed agricultural services project would be the vehicle forsecond generation assistance in extension and research, with a focus on privatization andadministrative/financial management of government services.

G. Lessons Learnt from Previous Bank/IDA Involvement

3.25 T 3ank/IDA export crop projects have generally concerned specific crop(s), withemphasis on production arrangements. Only few have primarily focussed or, marketing aspects andfewer have addressed the operational environment of the agricultural export sector as a whole. Thishas accounted for a number of the project failures that have been encountered, especially in countrieslike Guinea where the enabling environment and the operational context -- taken for granted in someother countries -- just did not exist. A case in point is the Guinea Daboya Flantation Project (FY74)designed to produce pineapple on a nucleus estate, which failed pitifully because down-streamactivities (marketing in particular) were handled by a parastatal that had neither the proceduralframework nor the capacity to operate effectively. Other failures have been explained by pooroperational management, especially where large inefficient parastatals were involved (e.g. HEVECAMand SODECAO projects in Cameroon). The project will avoid the above dangers by focussing onprivate operators, addressing down-stream activities as well as production, and taking a comprehensiveview at the export crop sector.

IV. THE PROJECT

A. Proiect Objectives, Strateav. Summary Description and Rationale

4.01 Proiect Obiectives. The project's overall objective is to strengthen the incentivesframework and remove the obstacles to the supply response in the agricultural export sector. It will,in a sector that offers promising investment opportunities, assist in the application of policy measuresdesigned to create an enabling environment for private sector activities, in particular the measuressupported under the IDA-funded Private Sector Promotion Project (PSPP). The Government strategyfor agricultural exports will be the agreed framework for project implementation. This strategy isgeared to the long term, and the project will support its first phase. The strategy is defined in theLetter of Agricultural Export Policy Development (LPDEA) which the Government has established as

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part of project preparation (Annex 4) and which was agreed at negotiations (para 7.01 (a)). TheLPDEA includes a comprehensive set of measures addressing the obstacles to export promotion, thoseInter alia falling under the generic heading of "business climate". Application of the measuresprescribed in the LPDEA will be monitored by the Project Manager (para 4.62). An assessment as towhether these measures are being implemented satisfactorily or not will be made at the project's Mid-Term Review, with the objective of requesting corrective measures if required (para 4.59).

4.02 Proiect Strateov. The project will focus on agricultural exports, as agriculture is theonly sector of the economy that has potential to generate new ports in the medium term. Theproject overall strategy will be to offer broad support to the private sector across export industries, andto improve the operational environment in which productive investments are made to make up forexternalities that are yet to exist in Guinea. The project's main thrusts will be to: (a) act as a catalystto cause authorities to continue revamping the regulatory framework -- and most of all deviseappropria.e application procedures -- to enhance incentives to export; (b) support professionalorganizations to strengthen the bargaining power of private operators vis-a-vis the Administration endenhance their business capabilities; (c) assist private Guinean operators to establish partnerships withexternal investors to secure technical expertise, market outlets and funding for their export businesses;and (d) support as a priority nucleus estates with outgrowers, so that the estates can quickly generatethe critical mass of exports needed to take advantage of economies of scale and pass on the servicesand technology of core plantations to surrounding smallholders. This latter aspect will ensure that thedevelopment of exports will not be skewed toward large foreign-assisted farmers but will also benefitthe smaliholders.

4.03 The project main strategic orientations, corresponding to the LPDEA orientations, arethe following: (a) at the institution level: to support the professional organizations (including theChamber of Commerce for its export-related activities), as key vehicles for institutional developmentin the private seeror; (b) at the aroduction level: to focus efforts on fresh pineapple and mangoes, asthey are the only .roducts than can be relied upon to generate the critical mass needed to give impetusto the export sector; the project will also concern as a second priority the industrial production of fruitpulp (mango and passion fruit) and fruit juice, to take advantage of side products that cannot beexported fresh; (c) at the commercial level: to export products of high quality, mostly to the West-European market; the project will also encourage some diversification to take advantage of (i) profitablecommercial niches for certain products (e.g. ginger, cherry tomatoes, cut flowers, chilies, essencesof perfume, etc.) whose market is small, but lucrative and fast-expanding, (ii) emerging new markets(sub-regional markets; East-European, CIS and Middle-Eastern countries, etc.) for lower qualityproducts, and (iii) off-season markets (e.g. quality vegetables during the winter); (d) at themanaaement level to target the smallholders and the Small/Medium Enterprises (SMEs) which areconsidered the agents for the long-term development of the sector; in the short-to-medium term,support will be given as a priority to the nucleus estates which are better equipped to generate thecritical mass of production and can be relied upon to provide extension to surrounding outgrowers; and(e) at the aeneral operational level, to provide the required support services still to be established inGuinea (research, extension, credit, access roads, etc.) which eventually will become the responsibilityof the beneficiaries.

4.04 Proiect Summary Description. In support of the above strategy, the project will includethe following components: (a) institution buildina, by strengthening professional organizations dealingwith the export sector; (b) support to export production, by providing specialized technical services(research, extension, management assistance, etc.) to producers (small and large, includingcooperatives); this component will include access roads to open up producing areas; (c) specialnroarams (Credit Mutuel and Private Investment Fund) addressing financial constraints to agriculturalexports; and (d) groiect manaaement and monitorina of sector activity. by funding a projectmanagement contract with a private consultant firm (the "Project Manager"); the latter will havecomplete delegation of authority ("mattrise d'ouvrage ddldgude") up to US$150,000 for expenditures

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financed by the IDA Credit and GF50 million for expenditures financed by local counterpart funds. Thedetailed features of these components are in section B below.

4.05 The project will be implemented in close liaison with the proposed EEC-funded FruitPromotion Project (Lome IV). The latter will include a specialized line of credit and specific production-oriented components, such as quality control and production of planting material (para 3.18). Theproject's institutional, training and management components will have national scope and encompassall agricultural export industries, with the cxception of rubber, palm oil and cotton which are beingdeveloped under specialized "filire" projects. The project investment support components will cover,as core zone of intervention, the former "banana triangle' prefectures in 4varitime Guinea and thefoothills of Fouta Djallon (Forecariah, Coyah, Dubreka, Kindia, and Mamou) mainly for fruits, and theprefecture of Dalaba in the Fouta Djallon, mainly for vegetables.

4.06 Rationale for IDA Involvement. As part of the SAL program and under the PrivateSector Promotion Program (PSPP), IDA is supporting broad economic reforms that have generatedsignificant growth qince 1986, mainly as a result of private supply response in trade, utilities andservices. The project will be a necessary complement to this program as a means to elicit furtherprivate supply response in agriculture, thereby helping sustain growth in the medium term. The projectwill also complement efforts undertaken under the SAL to diversify sources of foreign exchange. Theproject will be part of IDA's strategy to take a comprehensive view at agricultural development, byassisting the Government in implementing the sector-wide policy changes and investments requiredto further strengthen the incentives framework for productive activities.

B. Detailed Features

1. Institution Develooment

4.07 One of the major thrusts of the project is to promote the development of privately-controlled professional institutions in the agricultural export sector, so that the private sector caneffectively: (a) defend its interests vis-a-vis the Government; (b) build up its technical capability; and(c) take over economic responsibilities that thus far have been assumed by the Government. As partof the overall objective to establish a functioning market economy, the project will aim to eliminateinterference in private activities by government services and concomitantly empower private sectorinstitutions. Under the institution strengthening component, support will be extended to privately-cpntrolled institutions, including the Chamber of Commerce (paras 4.10 to 4.12) and the professionalorganizations involved in agricultural exports (para 4.13). This support will be provided by the ProjectManager, in part with assistance of the EEC-affiliated Committee for Liaison with African, Caribbeanand Pqcific Countries (COLEACP), and through the Chamber of Commerce and the lnterpro'.sionalLiaison Committee for Fruits and Vegetables (CLIFEL).

(a) Institution SuDDort by the Proiect Manaaer

4.08 The institution support provided by the Project Manager (para 4.62) is envisioned asthe major vehicle to carry out the task of institution strengthening. It is expected, in particular: (i) tosupport existing professional organizations (including the Chamber of Commerce for its export-relatedactivities) and (ii) to help establish the partnership arrangements between private Guinean nationalsand foreign investors that are required to revive the agricultural export sector. To achieve the aboveobjective, the project will provide funding for: (i) three person-years of resident technical assistance(one economist/institution specialist) for three years, see Terms of Reference in Annex 5); (ii)specialized short-term consultancies, in such fields as pricing and costing, import/export regulations,marketing, etc.; (iii) backstopping in Europe to transmit relevant market information and assist incommercial operations; (iv) a substantial training program for private sector operators; and (v) supportto partnership establishment.

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4.09 The above assistance will be scught from two sources: (a) the Liaison Committeebetween Europe and African/Caribbean/Pacific countries. COLEACP is an interprofessional institution,with legal statutes of International Association, created under the auspices of the EEC in 1977 andspecialized in the promotion of tropical fruits, off-season vegetables, flowers, ornamental plants andspices. It will in charge of all institution support activities related tc the fruit and vegetable "fili4re";and (b) the project management contract (paras 4.37 and 4.62), through which, in particular theresident technical assistant and assistance to partnership establishment will be provided.

(b) Chamber of Commerce (CCIAG)

4.10 The Guinean Chamber of Commerce, Industry and Agriculture of Guinea (CCIAG, seeAnnex 2) is the only broad-based institution currently representing the private sector. It appears suitedto potentially serving the latter providing it is able to undergo the required reforms. Based on theconclusions of the financial and technical audits funded by the PPF, the CCIAG should be restructured,including the creation of an Export Promotion Division. Under the proposed project it will receivesupport to strengthen its activities in the export sector. As part of a parallel UNOP project it willreceive broader support to develop its overall operating capacity (para 3.18).

4.11 The project will fund logistical support, training activities and incremental operatingexpenditures, with view to assisting tha Chamber of Commerce in the establishment and initialoperation of the Export Promotion Division and a "one-stop window' for export formalities. Theproject's funding of incremental operating costs will be done on a declining basis as CCIAG's capacityto generate its own revenues increase. These revenues will initially come mostly from the proceedsof a parafiscal tax ("centimes additionnels"); they should come increasingly also from members'subscriptions and sale of specialized services.

4.12 At negotiations, assurances were obtained that CCIAG be restructured in a mannersatisfactory to IDA (para 7.01 (b)). A condition of disbursement against the component is (i) issuanceof the decree establishing the new statutes of CCIAG, (ii) election of the President by the members ofthe Consular Assembly, (iii) recruitment of the Secretary General by the Executive Committee, throughcompetitive selection, (iv) application of the labor law to all CCIAG's staff, and (v) preparation of aworkable financial restructuring program, including provision for the gradual repayment of CCIAG'sdebts (para 7.03 (a)).

(c) Professional Oroanizations

4.13 Professional organizations to be supported under the project deal with entire exportchains ("filiAres") covered by the project, such as coffee, fruits and vegetables, or with specific'horizontal' activities in support of exports, such as transport and forwarding activities (Annex 3). Theproject's support under this component would aim both at strengthening existing professionalorganizations - most of which have been created only recently -- and assisting the creation of newones. This component would be executed by the Interprofessional Liaison Committee for Fruits andVegetables (CLIFEL), in close liaison with the Chamber of Commerce that has mandate to promoteprivate sector institutions. Support would entail (i) providing specialized short-term consultancies tohelp organize the main professional organizations; (ii) making basic operating equipment (includingcommunication equipment) available to CLIFEL, and (iii) funding the latter's incremental operating costson a declining basis.

2. Sunoort to Production

4.14 At the production level, the project's primary objective is to assist private operators tocircumvent the technical and management constraints to running viable export-oriented agri-businesses, so that a critical mass of products can be made available quickly for export. The projectwill not fund the core productive investments which are the responsibility of private investors. It will,

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however, finance peripheral operations required to support core investments, including assistance tosmaliholders in the case of nucleus estate-cum-outgrowers projects. To help remove some of the majortechnical constraints, support productive investments and elicit the critical mass of exports, the projectwill provide specialized extension/research services, management assistance to producers (includingcooperatives) and access roads.

(a) Soecialized Extension

4.15 Independent Smaliholders. Although in the project zone there is a tradition of exportcrop cultivation (this area at Independence produced large quantities of export products, in particularbananas, para 3.04) smallholders' production a.id post-harvest practices are now outdated andunsuited to producing for the export market. Specialized management and technical support istherefore needed to help farmers meet export production standards. This extension support will beprovided through the IDA-financed National Extension Project (PNVA) (para 3.24). As part of PNVA,two 'horticultural" subject matter specialists with expertise in fruits and vegetables will be posted ineach of the six prefectures covered by the project. They will be supervised by a coordinator postedat the PNVA headquarters in Conakry. The horticultural subject matter specialists will work closelywith the other subject matter specialists, to ensure that horticultural activities are fully integrated inthe extension program. They will train end supervise the PNVA extension agents in the area wherethey work.

4.16 The above specialized extension program will be carried out through annual contractualarrangements with PNVA. These contractual arrangements will cover all incremental expendituresrelated to the program, i.e. (i) specialized short-term consultancies (four staff-weeks annually for theproject duration) to assist in organizing the annual work program and training the subject matterspecialists, (ii) the salaries of the subject matter specialists and the coordinator, (iii) training costs,including local and overseas training seminars/workshops for subject matter specialists and extensionagents, (iv) one vehicle, motorcycles and some office equipment/furniture for the coordinator and thesubject matter specialists, and (v) incremental operating costs incurred by PNBVA. The draft generalfive-year convention ("convention cadre") between the project and PNVA was agreed at negotiations.

4.17 Outorowers. The revival of Guinean exports is primarily constrained by the present lackof a critical mass of exportable products, say 300 tons per week. This prevents the port of Conakryfrom being serviced regularly by low-cost refrigerated boats specialized in the transport of fresh fruitsand vegetables, and greatly increases transport costs to Europe. Until development eventually tricklesdown to all producers in the export sectcr, the bulk of this critical mass of production in the short-to-medium run is likely to be provided by a handful of large operators. Another constraint is the presentlack of expertise of small producers to produce and evacuate their production efficiently and in a timelymanner. To alleviate the above constraints, the project will use the private nucleus estates toundertake extension activities in the vicinity of their plantations, so that the technical expertise andeconomies of scale of the estates can be passed on to the outgrowers. Together with the assistanceprovided to producers through PNVA (para 4.15) and PDMCG (para 4.24), this will contribute togenerating the required critical mass of production, and will prevent the development of the agriculturalexport sector from being skewed in favor of large planters.

4.18 There are currently half a dozen or so large plantations with a production nucleus ofbetween 100 to 500 ha (either private or privately-controlled with some government participation, andone parastatal, Annex 1) that incorporate, or have the potential to incorporate, areas of similar sizaunder outgrowers at the periphery of core plantations. The project will use these nucleus estates, andany other private organization having the required capacity (including smaller estates, exporters) toprovide customized extension support to surrounding outgrowers or contract farmers. This extensionsupport will be provided under services contracts that will encompass: (i) delivery of extension adviceto the outgrowers, and (ii) assistance in organizing the logistics of outgrower production (includingsupply of inputs, provision of mechanized services, etc.). These activities will be undertaken by the

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staff of the estate, and supervised by the estate's management. These staff will consist of a handfulof technicians and extensionists (typically half a dozen per nucleus estate) with status of privateemployees of the estate being contracted. Close liaison will be maintained with the PNVA and PDMCGprojects in establishing their work program, so that there be no duplication of activities. In fact, therisk that such duplication may arise is minimal, as the areas concerned will be well delineated; also,the approach to extension will be quite different from that of the PNVA project, with focus onmanagement/marketing aspects as much as production technology, and low farmer-to-technician ratio.

4.19 The above contracts will be established individually with each nucleus estate/servicescompany. They will be customized to respond to the specific circumstances surrounding outgrowerproduction in given areas where extension is to be provided. They will typically provide for technicalassistance in varying amounts (a few months every year) and will cover the cost of incremental costsover a maximum of three years in each case, with the objective that the private firms being contractedtake over at the end of such a period. Execution of these contracts will be based on detailed annualwork plans to be agreed between the project and the recipient of the contract. In all cases, thecontract payment will be contingent on meeting quantitative targets agreed at contract signature. Thedraft generic contract ('contrat cadre") was agreed at negotiations, and an assurance was obtainedthat an estimated amount of US$2.5 million from the proceeds of the IDA Credit will be earmarked forextension activities to outgrowers undertaken as part of the above services contracts (para 7.01 (c)).

(b) Adantive Research

4.20 The objectives of the adaptive research program to be funded under the project will beto rapidly find practical solutions to the most urgent technical problems that plague export productionat present (such as the prevalence of cryptogamic diseases and the lack of improved planting material)and to develop low-cost appropriate agro-processing technologies. These objectives will be achievedby adapting to conditions prevailing in Guinea relevant findings obtained in other countries with similaragro-climatic conditions. The component will be contracted out to the National Agronomic ResearchInstitute (IRAG). Annual research programs will be established in close liaison with professionalorganizations and, before these organizations are fully developed, with key operators in the exportsector, with the objective that eventually these organizations bear related costs and negotiate directlywith IRAG. At the beginning of the project period, the trials will be implemented as a priority withinthe nucleus estates and/or outgrower plantations.

4.21 To execute the component, the project will provide through a convention with IRAG:(i) six person-years of resident technical assistance: one expatriate scientist specialized in fruitproduction financed by the French FAC and one expatriate technician specialized in the implementationof agronomic trials financed by IDA (each for three years, see Terms of Reference in Annex 5X (ii)three person-months of specialized technical consultancies (two annually in the fields of soil science,entomology and phytopathology, and one for agro-processing), and (iii) specialized services (e.g.laboratory tests). The project will also fund the renovation of 280 m2 of laboratory and office space,two vehicles, technical equipment, training, and the incremental operating costs of IRAG. To procurethe technical assistance and the specialized services, IRAG will have to establish contractualarrangements with one or several foreign research institutions; it will also have to enter into contractswith a few reliable private large producers and cooperatives, with view to conducting the agronomictrials under real conditions. The general convention ('convention cadre') for the execution of theprogram to be established between IRAG and the project has been agreed at negotiations.

(c) Small and Medium Enterprises (SMEs)

4.22 The few SMEs that exist at present in the horticultural sector are small production unitsthat have generally been established on former banana plantations with the help from technical staffof the Ministry of Agriculture. These staff are technically equipped to handle agricultural operations,but they lack the required management/marketing expertise and the investment funds. Therefore,

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production SMEs as a rule face financial difficulties, especially when they initiate new lines ofactivities. A few small agro-industrial units also exist for primary processing of horticultural products(drying of fruits/chili, manufacturing of jam, etc.), and there are opportunities for the creation ofcompanies that would provide services to producers in the export sector, e.g. management/marketingadvice, supply of inputs (planting material, small equipment, fertilizer), processing/storage/transport,etc. Under the project, these SMEs will receive advisory assistance with a focus on management andmarketing activities. The component will be executed by the Project Manager. To this end, the Unitwill be staffed by a high caliber Guinean technician and an expatriate agronomist with the requiredmanagement expertise (the latter for three years, see Terms of Reference in Annex 5). In addition,specialized short term consultancies will be provided to address specific problems that SMEs mightencounter.

4.23 In addition, SMEs -- as well as producer group and cooperatives -- will receive furtherproject support for provision of technical assistance (both expatriate and local) and study/prosectiontrips abroad to help them develop projects of a pilot nature designed to initiate new lines of activitiesand/or test new practices/methods that have broader interest for operators in the agricultural exportsector. The criteria to be applied for the granting of the above support will be sufficiently precise toallow for a clear and transparent decision-making process. But minimum red tape will be involved bothin evaluating the proposals and in granting the funds once proposals are approved. An envelope ofUS$250,000 from the proceeds of the IDA credit will be earmarked for the above purpose, and willbe released in yearly tranches of US$50,000. This envelope will be managed by the Project Manager(para 4.37). The beneficiaries are be expected to provide a contribution equal to subsistence and localhotel/travel costs. The project contribution will not exceed US$10,000 for each proposal. Thisassistance will substantially alleviate the absence of ready funding for specialized technical support,thereby encouraging private investment in productive activities of a novel nature. The criteria to beused in reaching decisions to allocate the funds have been agreed at negotiations.

(d) Producer Groups and Cooperatives

4.24 The component aims at improving private sector supply response in the agriculturalexport sector through the development of producer group and cooperative-based enterprises. Theselatter will be a response to market conditions that cannot be addressed by individually-ownedenterprises, due, inter alia, to a limited resource base, restricted individual economic/business influenceand scale of the enterprise. The cooperatives are considered private entities -- like any other privatesector operators -- which should be independent from the Administration and free of governmentinterference. They should play an important role, in particular for processing and marketing ofhorticultural products, as they did at Independence when they accounted for the bulk of Guinea'sagricultural exports. The component will be implemented mainly through the Cooperative DevelopmentProject (PDMCG), in close liaison with the National Extension Project (PNVA) and the SME component.A small sub-component will also be entrusted to the National Cooperatives Service (SENATEC). ThePDMCG has national scope and statutes of "Projet Publicu (a financially and administrativelyautonomous entity, created for a fixed duration, i.e. up to December 31, 1994). PDMCG is a pilotproject that has been established as part of the Cooperatives component of the IDA-financed Researchand Extension Project (Cr. 1955-GUI). SENATEC is the service at the National Directorate ofDecentralization (DND) that addresses the policy issues and the corresponding application of policymeasures related to cooperative development; it is also in charge of statistics and records concerningcooperatives (para 2.23).

4.25 The execution of the component will be demand driven. The rationale is that thedevelopment of producer groups and cooperatives can only be achieved from the grassroots up, bysupporting the emergence of commLi.ity-type associations. The project will foster this process byaddressing some of the most pressing constraints to the development of these entities, includingabsence of managerial/financial skills and lack of access to improved/appropriate technology. To thisend, the proposed project will provide the additional financing required for PDMCG to develop its

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activities in the project zone. It will fund in particular the PDMCG's installation in Kindia, and thedeployment and operation of its staff in the project zone. The project will also provide limited supportto SENATEC so that it continue to follow up the development of the cooperative legislation and tosurvey the producer groups and cooperatives in the export sector. The component will be implementedon a pilot basis for three years, under the tutelage of the National Directorate of Decentralization. Theobjective is that the core batch of producer groups and cooperatives assisted under the componentserve as focal point for developing the associative movement on a larger scale under the proposed IDARural Credit and Cooperatives Project (FY95L) (para 3.24).

4.26 The following items will be funded as part of the component: (a) one resident technicalassistant for three years (see terms of reference in Annex 5): this expert will be based in Kindia andwill assist the PDMCG's Director in daily management of the project field activities with a focus onfinancial/administrative management and marketing; he will be a staff of the Friedreich EbertFoundation, an NGO that has done excellent work in an advisory capacity with the Government inrecent years; as part of his activities he will have to identify and refer to the Project Manager thoseproducer groups and cooperatives which can qualify for resources earmarked for pilot activities (para4.23); (b) sixteen person-weeks of short-term consultancies to provide specialized support to SENATECfor data collection and development of the legal framework; (c) incremental investments for theinstallation and operation of PDMCG and SENATEC (several vehicles, basic equipment and furniture);(d) training, mostly for field staff; (e) incremental operating expenditures of PDMCG and SENATEC,including the salaries of PDMCG staff who will not be on the payroll of the Administration.

(e) Access Roads

4.27 One key constraint to developing agricultural exports is the lack of rural roads that willopen up producing areas and permit to evacuate production efficiently. The IDA-financed NationalRural Infrastructure Project (PNIR) has a program of road rehabilitation in several of the prefecturescovered by the project. The bulk of these roads, however, are secondary roads linking prefecturesbetween themselves and/or 'prefectures to sub-prefectures, and only a minute fraction concern tertiarytracks destined to provide access to producing areas. The project will finance such access roads (i.e.roads of Bf and C standard following the PNIR classification), with the objective of making these roads"passable" throughout the year and ensuring their adequate maintenance thereafter. Approximately550 km of such roads will be financed in the project zone. Implementation of this component will beentrusted to the PNIR project. Road works will be contracted out to small and medium scaleenterprises that are being promoted under that project. Technical supervision will be the responsibilityof the Rural Engineering Directorate (Ministry of Agriculture) which is the executing agency for thePNIR.

4.28 A central principle underpinning the implementation of the access roads component isthat beneficiaries would participate, financially or in kind, to the execution of the road works. Therationale is that, in this manner, they would develop a feeling of ownership, and therefore acceptresponsibility to properly maintain the roads to retain the investment fully productive. The actualparticipation of the beneficiaries will be a prerequisite for the rehabilitation of roads under thecomponent. In fact, the more the beneficiaries will participate, the more they will become eligible forcounterpart funding by the project, within budgetary limit. Based on the above principle and followingthe experience gained under the PNIR, the participation of the beneficiaries was set at a minimum of15%. An assurance to this effect was obtained at negotiations (7.01 (d)).

3. Soecial Proorams

4.29 To alleviate two other key constraints to agricultural exports, i.e. lack of access tocredit and insufficient investment funds, the project will fund two special programs: (i) expansion ofthe Credit Mutuel system, and (ii) support to the creation of a Private Investment Fund scheme. Theseprograms are described in the subsequent paragraphs.

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(a) Mutual CrCdit

4.30 Insufficient credit is currently a constraint to increasing export-oriented agriculturalproduction in Guinea. The existing financial markets both formal and informal are not adapted toservice small farmers needs for input purchases and crop marketing. High transaction costs and theabsence of guarantees against commercial risks virtually eliminates the formal financial intermediaries,and high interest rates in the informal sector loans are not attractive for commercial farmers. CrdditUnions present a viable alternative source for the cash crop farmers. After two decades of progressivedevelopment in Africa, Credit Unions have proved their ability to maintain their credibility, particularlyduring the recent financial instability in Africa. The main characteristics of Credit Unions are theirability to self-finance their grassroots operations, which are privately owned and managed. Anobjective of the project will therefore be to promote a type of Credit Union organization alreadyworking in Guinea, to provide credit to export producing farmers. At present, Credi; Mutuel is the onlyorganization that meets these conditions. An objective of the project therefore will be to assist CreditMutuel to expand its operations in export producing areas. The project's support will be for threeyears, as it is envisaged that the proposed IDA-financed Rural Credit and Cooperatives Project (FY95L)will provide relay financing thereafter.

4.31 The project will provide support to the establishment of the CrEdit Mutuel system inthe prefectures of Mamou and Kindia that have substantial export potential and are not yet served byCredit Mutuel. The project will provide the logistical support, staff training and management supportfor the creation and initial operation of these new branches (in Kindia in conjunction with the proposedEEC-funded Fruit Export Promotion project), as part of a management contract with Credit Mutuel.Specific items to be financed are (i) one resident technical assistant for three years, (ii) costs relatedto the training of local staff both locally and overseas, and (iii) sharing of operating costs. The draftmanagement contract with Credit Mutuel was reviewed at negotiations and an assurance was obtainedthat it be funded from tha proceeds of the IDA Credit (para 7.01 (c)).

(b) Private Investment Fund

4.32 To help meet the large financial needs required for a resurgence of agro-exportindustries, one of the objectives of the project will be to help direct savings to private productiveinvestments by facilitating the intermediation of equity funding. This will be done through assistancein the creation of a Private Investment Fund scheme.

4.33 The scheme will aim at stimulating the financing of high return productive investmentsthrough: (i) the creation of an initial closed-end private investment fund (under the legal entity referredto below as Investment Fund) with a target capitalization of US$5 million by PY3 by private Guineanand foreign shareholders, possibly including private sector-oriented multilateral or bilateral financialinstitutions; to that effect, IDA has been in close contact with the Africa Enterprise Fund (AEF)administered by IFC; the investment fund may also be funded with resources from debt-equity swapoperations; and {ii) the creation of a separate Fund Manaaement Comoanv. whose majority shareholderwill be an international private financial institution or investment bank (the Fund Promoter) with ex-perie,lce in developing countries. The management and operations of the Investment Fund will be leftentirely to the private sector. The role of the Fund Management Company will be to mobilize andinvest the capital of the shareholders of the Investment Fund, manage and ultimately liquidate theresulting investment portfolio in order to realize capital gains, provide financial services to projectinvestors, and increase the amount of capital under management through the creation of new privateinvestment funds. It is expected that the scheme will directly support a number of the highest qualityprivate investment projects under development, notably in export-oriented and/or high value addedprojects (see Annex 6, Table 1). Assuming that the initial phase of the first 3-4 years is successful,the Fund Management Company would expand the scheme by the end of the five-year period of theproject by attracting and mobilizing additional resources.

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4.34 The Investment Fund scheme will be established through a two-stage process,following the selection through competitive bidding of an international financial institution (the FundPromoter) interested in sponsoring the operation in Guinea (Annex 6 Chart 1). As part of the firstphase (8-10 months following the selection of the Fund Promoter), the Government will request theFund Promoter to complete a feasibility study, including a series of essential steps towards the formalestablishment of the scheme (e.g. the preparation of a prospectus for distribution to potential investorsand consultation with the Government on the final texts of the tax regime and other regulatingconditions that must be in place). The feasibility study will be reviewed by the Government and IDA,with the view to deciding whether or not to go ahead with implementation of the scheme as part ofphase two of the scheme. At that stage, the Fund Management Company will be legally created, withthe Fund Promoter as its majority shareholder; and the Fund Management Company will enter into afive-vear manaaement contract with the Fund Promoter. Under this contract, the Fund Promoter willprovide a resident director and home office backstopping for the Fund Management Company. Thelatter will immediately proceed with the solicitation of subscriptions to the capital of the InvestmentFund Company and the execution of a long-term management contract between the Fund ManagementCompany and the Investment Fund. The five-year contract will be subject to a mid-term reviewfollowing eighteen months of start-up. The resulting decisions will be taken as part of the Mid-TermReview for the entire project which will take place approximately six months thereafter (para 4.59).If the mid-term review of the component determines that performance criteria have not been met andthat the component is not viable, the Government may opt to cancel the five-year loan agreement inconsultation with IDA.

4.35 The project will assist in establishing the above scheme by financing (i) the feasibilitystudy, {ii) part of the operating expenditures of the Fund Management Company under the five-yearmanagament contract, since the relatively small size of the initial Investment Fund will not generatesufficient revenues for the Fund Management Company in the form of management fees andcommissions on dividends and capital gains to cover all operating costs, although these costs will bekept to a minimum (e.g. the Fund Management Company will be staffed by only one executive, aninvestment banker; see estimated operating deficit of the Fund Management Company in Annex 6Table 2), and {iii) consulting services to assist the Government in the monitoring of the scheme,especially the performance of the Fund Management Company. The funding under (ii) above will beprovided through onlending of part of the proceeds of the IDA Credit (maximum of US$1.6 million)under a subsidiary loan agreement with the Fund Management Company. The terms and conditions(including the interest rate and foreign exchange risk) of the subsidiary loan agreement will need to besatisfactory to IDA. The signature of this agreement will be a condition of disbursement against thiscomponent (para 7.03 (b)).

4.36 The above type of private investment fund scheme is yet to exist in Guinea and it willfill a gap in the institutional framework for financial activities in the country. IDA's assistance, asasponsor and catalyst' of the scheme, is vital given the risks and the uncertainty that prevail in Guinea.This assistance is justified in view of the large retums expected to accrue to the national economy aspart of the private projects to be financed under the scheme, including increase in employment, foreignexchange and fiscal revenues. The scheme has been very well received in Guinea, both by the publicand privat 3 sectors. Se:rsral categories of potential investors in the Investment Fund have beenidentified. On the investment side, project sponsors are interested in the scheme not only as a sourceof additional equity funds but also as a source of much-needed professional advisory services. Thescheme is also well perceived by commercial banks in Guinea, as a means to improving the financialintermediation climate. Finally, it has attracted the interest of several private-sector orientedmultilateral and bilateral agencies as a novel attempt to promote and develop the private sector, as wellas a factor to strengthen confidence amongst foreign investors.

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4. Proilot Manaaement

4.37 Daily management of the contracts established as the means to execute projectcomponents will be entrusted to a private consultant firm (the "Project Manager') under a managementcontract with the Ministry of Planning (para 4.62). The management contract to be funded by the IDAcredit for the entire project duration will include: (a) an expatriate agronomist for three years (seeTerms of Reference at Annex 5), to assist in the implementation of the Small and Medium Enterprisecomponent whose responsibility will befall on the Project Manager (para 4.22); (b) an expatriateeconomist/institution specialist for three years (see Terms of Reference in Annex 5), to assist in theexecution of the Institutional support component which will also be the responsibility of the ProjectManager (para 4.08); (c) short-term consultancies for accounting and financial support; (d) short-termconsultancies to help implement the Monitoring and Evaluation system; (e) office facilities, operatingequipment and vehicles; and (f) operating costs, including the salaries of the Project Manager's staffand the operating costs of the Project Steering Committee (para. 4.61). The Project Manager will havecomplete delegation of authority (umattrise d'ouvrage d6legu6e") for any project commitment ordisbursement up to US$150,000 as far as IDA financing is concerned and GNF50 million as far asgovernment counterpart funding is concerned.

C. Proiect Costs and Financina

1. Cost Estimates

4.38 The total cost of the proposed project over the 1992-97 period, including allincremental capital and operating expenditures, is estimated at GNF22.7 billion (US$24.6 million), ofwhich GNF 15.6 billion (US$16.9 million) or 69% in foreign exchange and about GNF 1.7 billion(US$1.9 million) or 8% in taxes and duties.

4.39 Base costs have been estimated at May 1991 prices using the prevailing rate ofexchange of GNF 710 to the U.S. dollar effectiva at that date. These costs have been readjusted toreflect the situation prevailing at negotiations in May 1992 when the rate of exchange was GF 922to the U.S. dollar. Physical contingencies of varying amounts have been allowed on investment andoperating costs items, except for long-term technical assistance, PPF-financed activities, staff salariesand special items (e.g. pilot activities). The average physical contingency amounts to 7% of basecosts, with individual rates ranging from 5% up to 15%. Price contingencies have been applied tobase costs over an estimated implementation period of five years (1992-97). Price contingencies onforeign exchange costs based on the Bank's projections of international price increases have beenincluded at an average of 3.9% from 1992 to 1997. Price contingencies on local costs are based onannual price increases of 17% for 1992, 12% for 1993, and 8% from 1994 onward, to reflect currentinflation trends in Guinea. Total price contingencies amount to 12% of base costs.

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4.40 Project costs are summarized below and details are given in Annex 7.

Prolect Cost Sumnarv

GlEF Mitlion US$ Mittion ___________

X Foreign X TotalLocal Foreign Total Local Foreign Total Exchange Base Costs

A. Institution Development

1. Institution Support Coap. 185 932 1117 0.3 1.0 1.3 83 62. Chamber of Comerce 218 334 552 0.2 0.4 0.6 60 33. Professional Organizations 225 293 518 0.2 0.3 0.5 56 3

Subtotal 628 1559 2187 0.7 1.7 2.4 71 12

B. Production Suwort

1. Extension 714 1852 2566 0.8 2.0 2.8 72 142. Adaptive Research 526 1579 2105 0.6 1.7 2.3 73 113. Small/Mediun Enterprises 325 911 1236 0.3 1.0 1.4 67 64. Prod. groups/coops 536 822 1358 0.6 0.9 1.5 60 75. Access Roads 964 2250 3214 1.0 2.4 3.4 70 17

Subtotat 3065 7414 10479 3.3 8.0 11.3 70 55

C. SDecfal Programs

1. Credit Mutuel 355 648 1003 0.4 0.7 1.1 65 52. Private Investment Fund 350 1474 1824 0.4 1.6 2.0 81 10

Subtotal 705 2122 2827 0.8 2.3 3.1 75 15

D. Project Precaratfon and Manacement

1. Project Management 864 977 1840 0.9 1.1 2.0 53 92. Project Preparation Facility 175 1580 1756 0.2 1.7 1.9 90 9

Sibtotat 1039 2557 3596 1.1 2.8 3.9 71 18

Total Baseline Costs 5437 13652 19089 5.9 14.8 20.7 71 100Physical Contingencies 374 951 1325 0.4 1.0 1.4 71 7Price ContingencIes 1333 967 2300 1.4 1.1 2.5 42 12

Total Projects Costs 7144 15570 22714 7.7 16.9 24.6 68 119... UUUU....u u. .... u 33... 3333.u.u_ . _ .=====3 ... 3. .. UU33===u===~

4.41 Proiect Preparation Facility. Five PPF advances of US$250,000 each for the first three,and US$350,000 and US$400,000 for the last ones were granted to the Government in March 1989,July 1990, February and July 1991, and February 1992 respectively. These advances totallingUS$1,500,000 were used to finance: (a) a project feasibility study; lb) specialized consultancies toprepare specific dossiers (contractual arrangements for project execution, audit and institutional surveyof the Chamber of Commerce, design of the Private Investment Fund scheme, etc.); and (c) theestablishment and operation of a project preparation unit to enable th Govemment to fully participatein project design and start-up activities. The proposed credit -- the first IDA credit for Guinea'sagriculture in FY92 - will also refinance a PPF advance of US$430,000 that should have beenrefinanced by Cr. 1626-GUI (First Agricultural Services project). This advance was used, inter alia, tofinance background studies that led to the identification of the proposed project.

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2. Financino

4.42 Project costs will be borne by the co-financiers in the following amounts andproportions:

Financina Plan by Disbursement Catebory

Item DAJ fQ Beneficiaries Government Total Foreign Local laxExchanse (Without

Taxes)-us$ Miltion) ----------------------

1. C£vtL Works 3.7 - 0.7 0.4 4.8 3.4 0.7 0.7

2. Vehicles 0.8 - - 0.8 0.7 0.1 -

3. Goods nd Eauicment 0.8 - - - 0.8 0.7 0.1 -

4. Technical Assistancea) Short-term 1.7 - - 0.5 2.2 1.9 0.3 -b) Resident Z-Q 0.6 6 2.0 0.6

Subtotal 3.7 0.6 - 0.5 4.8 3.9 0.9

5. Mont./ServMces Contracts 7.9 - - - 7.9 5.2 2.1 0.6

6. Trafning 0.8 - 0.4 1.2 0.8 0.3 0.1

7. Operating Costs 1.2 - 1.2 2.4 0.6 1.3 0.5

S. PPF Reffnancing 1.9 - - 1.9 1.6 0.3 -

Net Financing Recufrements 20.8 0.6 0.7 2.5 24.6 16.9 5.8 1.9

Share of FinancgnaWith Taxes 85 2 3 10 100 69 24 7Without Taxes 92 2 3 3 100 73 27 0

4.43 The proposed IDA Credit of US$20.8 million will finance about 85% of total projectcosts, including US$4.7 million equivalent of local costs. It will contribute the following proportionsof project funding: (a) 100% of vehicles, goods/equipment and management/services contracts,including the studies and consultancies financed under the PPF advance; (b) a large fraction of short-term consultancies (80%), expenditures associated with pilot activities (75%), resident technicalassistance (75%), civil works (75%) and training expenditures (67%); and (c) on a declining basis,50% of incremental operating expenditures. A summary account is given in Annex 7.

4.44 FAC financing amounting to US$0.6 million (2% of project costs) will be under parallelarrangements. FAC will finance the long technical assistance for horticultural research (fruits). Localfunding will amount to the equivalent of US$3.2 million or 13% of total project costs. This will includeUS$700,000 equivalent of participation by beneficiaries, i.e. 15% of the cost of access roads and 20%of the expenditures associated with pilot activities. The Government will finance all taxes, and 50%of operating expenditures on an increasing basis.

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3. PrgcUreme-nt

4.45 The following arrangements have been established for goods and services to beprocured under the project.

trocurement Arranoements j/

I t!m ICB LC Other Cot ?i Total-------------------------USS MilLion-

1. Civil Works 3.4 0.7 0.7 4.8(3.0) (0.7) - (3.7)2. Vehictes 0.6 - 0.2 0.8(0.6) (0.2) (0.8)3. Goods and Eauiment - 0.6 0.2 . 0.8- (0.6) (0.2) (0.8)4. Technical Assistance

a) Short-Term - 2.2 2.2(1.7) 0.7)b) Resident - 2.0 0.6 2.6

-- (2.0) - (2.0)Subtotal - 4.2 0.6 4.8- (3.7) - (3.7)S. Mgmt./Services Contracts - 7.9 -7.9

- (7.9) -(7.9)

6. Trainion - 1.2 - 1.2- (0.8) (0.8)

7. Oceratina Costs - 2.4 - 2.4- (1.2) - (1.2)

8. PPF Refinancing - 1.9 - 1.9- (1.9) - (1.9)Total 4.0 1.3 18.0 1.3 24.6(3.6) (1.3) (15.9) - (20.8)

1 Amounts in parentheses indicate IDA financing1 Contribution by beneficiaries (USS0.7 mitlion) would be done mostly in kind. The value of their work/inputswould be estifated at government tariffs. Paraltel financing by FAC (USS0.6 Million) would be done underFAC's own procedures.

4.46 Civil Works. The contracts for the renovation of buildinas will be awarded through thefollowing procedures: (a) LCB procedures for the building designed to house the Export PiomotionDivision (including the one-stop window) of the Chamber of Commerce (US$95,000), and theAgronomic Institute's (IRAG) buildings at the Foulaya Research Center (US$95,000); and (b) prudentshopping - on the basis of comparison of price quotations solicited from at least three local contractors-- for the rehabilitation of several office buildings of the National Extension Project (PNVA) (aboutUS$12,000); these buildings are small in size and scattered geographically, and therefore the contractswill not attract bidders under LCB. The contracts for rehabilitation of accegs roads will be awardedon the basis of ICS for a total of US$3 million and LCB for a total of US$500,000. The biddingpackages will correspond to lots varying in size from US$250,000 to US$500,000 for ICB andUS$100,000 to US$250,000 for LCB. The contractors will have to bid separately on these lots, withno discount allowed for joint offer for more than one lot. The remainder of the road financing willconsist _f the 15% contributed ex-ante by the beneficiaries (US$0.7 million). This contribution willbe made mostly in kind, using labor-based methods. The value of the workrinputs of beneficiaries willbe estimated at govemment tariffs.

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4.47 Vehicles. Goods and Eguipment. Vehicles will be procured on the basis of ICB (onecontract of about US$600,000), except a small number of them required immediately upon projectstart-up (up to an aggregate ceiling of US$200,000). These latter will be procured by prudentshopping on the basis of comparison of price quotations solicited from at least three different suppliers.The category noods and eauipment concerns mainly technical equipment, office equipment and officefurniture. These items will be procured through grouped bidding packages to allow for LCB; five suchpackages will be established for a total amount of about US$600,000, three for about US$100,000each (CCIAG, professional organizations and PDMCG) and two for about US$150,000 each (ProjectManager and IRAG). The remainder (about US$200,000) concerns items for which bulking will notbe feasible and/or items that will not be needed immediately upon project start-up. These items willbe procured through prudent shopping on the basis of price quotations from at least three differentsuppliers.

4.48 Technical Assistance and Training (Annex 8). Resident technical assistance will beprovided for: (a) institutional support to the Chamber of Commerce and professional organizations(three person-years, US$600,000) and assistance to Small and Medium Enterprise component (threeperson-years, US$550,000); (b) support to the National Institute of Research for horticultural research(three person-years, US$450,000; in addition, three person-years will be procured separately by FACfor fruit research at an estimated cost of US$550,000); and (c) assistance to the CooperativeDevelopment Project (three person-years, US$450,000). The above assistance will be procuredfollowing IDA guidelines for the re^ruitment of consultants, on the basis of the establishment of ashort-list of qualified firms -- except for the cooperative development contract which will be awardedon a sole source basis to a NGO that has worked closely with cooperatives in Guinea in recent years.Technical assistance under (a) will be procured as part of the project management contract (see para4.49). Short-term technical assistance will be very specialized and encompass a wide spectrum ofexpertise. There will therefore be a need to retain flexibility for individual hiring of consultants withgiven expertise. As a result, a significant part of the short-term consultants in these categories -- foran aggregate value not exceeding US$750,000 -- will be hired directly based on annual work programsestablished by the implementing agencies and approved by IDA. One contract for about US$500,000will be passed with COLEACP (an EEC-affiliated International Association, para 4.03) for institutionaland marketing support specifically to activities in the fruit and vegetable filiire". The remainder willbe included in the contracts for long-term technical assistance and/or management/services contracts.Trainina activities will be procured following the same procedures as resident technical assistance. Thegreater part - for an aggregate value not exceeding US$750,000 - will be procured directly based onwork programs established yearly by the implementing agencies; the remainder will be included in thelong-term technical assistance contracts and/or the management/services contracts. In all cases,contracts for short-term consultants and training activities exceeding US$250,000 will be procuredfollowing the same procedures as those for resident technical assistance. To the extent possible,procurement of short-term consultants will be grouped to allow for this procedure.

4.49 Manaaement/Services Contracts (Annex 8). A substantial fraction of the IDA credit(38%) is earmarked for the procurement of discrete management/services contracts that will be usedas a means to execute certain components of the project (para 4.64). The main such contracts willbe the following: (a) a contract for project management (US$2.6 million for the management servicespart); (b) a services contract with the Credit Mutuel Company to execute the mutual credit componentof the project (US$1.2 million); and (c) a management contract with the Fund Management Company,covering a fraction of the expenditures incurred by this company in managing the investment fundduring the project period (US$1.6 million). The above contracts will be awarded competitivelyfollowing IDA guidelines, on the basis of the establishment of a short list of qualified bidders -- exceptfor the Credit Mutuel contract awarded to that firm. The rationale for awarding the contract to theCredit Mutuel company on a sole source basis is that this company at present is the only one in Guineawhich has embarked on the establishment of a Credit Union organization, and therefore is equippedto promoting this type of organization as envisaged under the project (para 4.30). The contract withthe Fund Management Company will be financed by onlending the IDA funds to this company (para

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4.35). In addition to the above contracts, a small number of services contracts (about six to eight) fora total amount of US$2.5 million will be awarded on a sole source basis to individual nucleus estatecompanies to undertake extension activities. The rationale for awarding these contracts on a solesource basis to these nucleus estates is that they already produce a significant amount of products ontheir own plantations and have production contracts with outgrowers in the vicinity of their plantations.They are therefore the only operators really equipped to provide the customized extension support tooutgrowers envisaged under the project (para 4.18). All above contracts will be paid based on strictmonitoring criteria. Agreement on these criteria and on the contractual documents (including lettersof invitation and draft contracts) has been obtained at negotiations.

4.50 geratinjg Costs. Operating costs corresponding to incremental salaries/travelallowances, vehicle/equipment operation and maintenance, and office suppl.es will be financed by IDAfollowing government procedures which have been found acceptable. The IDA contribution will be ona declining basis, at the rate of 100% for payments made through December 31, 1993 and 67%thereafter. The remainder will be covered by the National Budget for government entities, and by theirown resources for the Chamber of Commerce and the professional organizations. The two latterinstitutions are expected to gradually generate additional operating resources.

4.51 General Rules and Review. A major difficulty in completing efficient and timelyprocurement of goods and services under IDA-financed projects at present in Guinea is the longprocessing and approval lead time required and the uncertainty surrounding the implementation of theprovisions of the Procurement Code, due partly to rent seeking on the part of government staff. Thisdifficulty will be substantively circumvented under the project through the complete delegation ofauthority for project procurement granted to the consultant firm recruited as Project Manager (para4.62). Within its financial delegation (US$150,000), the Project Manager will oversee all projectprocurement activities directly, and, in particular, ensure that all required IDA procurement rules (e.g.LCB or local consultation) are duly applied. The LCB procedures to be followed under the project willinclude local advertising, public bid opening, establishment of clear evaluation criteria, and award tothe lowest-evaluated bidder. Foreign bidders will not be excluded. The aggregate value for LCB andprudent shopping has been specified in the Credit Agreement. All bidding packages for IDA-financedgoods and services estimated to cost more than US$250,000 equivalent will require prior approval byIDA, as will the final award of the related contracts. These packages will represent about 80% of thetotal value of goods and services financed by the IDA Credit. Prior approval will also be required forthe procurement of computer equipment and the recruitment of all technical assistance, regardless ofthe related contract amounts or the source of financing. The other contracts will be subject to randomreview by IDA after contract award.

4. Disbursements and Revolvina Funds

4.52 Disbursements. Disbursement of the IDA Credit of SDR 15.2 million, equivalent toUS$20.8 million, is shown over a 7-year period starting July 1992 (Annex 9). Project disbursementsfollow IDA's standard profile for West Africa Region agricultural projects, but start at a higher level asthey include US$1.9 million used for PPF refinancing. The proceeds of the IDA Credit will be disbursedas follows:

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Disbursement of IDA Credit

USS Mitlion X of Expendit.Catesory Eauivatent To be Financed

1. Civil Works 3.0 100 (Foreign currency)80 (National currency)

2. Vehicles, goods and equipmentexcept for the Chamber of Counerce 1.4 100

3. Vehictes, goods, equipment,training and operating expendituresfor the Chamber of Commerce 0.6 100

4. T.A., training and ugmt./ servicescontracts except for the Chamber ofComuerce and the Private Fund Scheme 9.0 100

S. Private Investment Fund Scheme 1/ 2.0 1006. Operating expenditures 1.0 Declining basis g/7. PPF Refinancing 1.9 1008. Unaltocated 1.9

Total 20.8

1/ Two onlending agreementsO 100X for payments made through December 31, 1993, and 67X thereafter.

4.53 As this is the case for the procurement of goods and services (para 4.51), a majordifficulty in making timely disbursements under IDA-financed project in Guinea to date has been thelong delays for processing withdrawal applications, on account of different reasons notably rentseeking by government staff. This problem will be eliminated under the project, except for largepayments over US$150,000, by the delegation of authority given to the private consultant firm actingas Project Manager to approve (through signature by the National Coordinator) all withdrawalapplication up to US$1 50,000 (paras 4.54 and 4.62). Disbursements will be fully documented exceptwith respect to (i) payment under any contract of less than $20,000 equivalent, (ii) local training, and(iii) operating costs, which will be made on the basis of statements of expenditure (SOEs). Thesupporting documentation will be retained by the Government and made available for ex-postinspection by IDA missions. The yearly financial statements will be submitted to IDA before June 30of each fiscal year. Provision has been made under the project for the necessary technical assistanceto design and set up the accounting systems required to efficiently maintain project accounts.

4.54 Revolvina Funds. A special account in U.S. dollars will be opened in a commercial bankwith an initial deposit of US$ 500,000. This account will be used to finance payments under US$500,000 and will be replenished monthly on the basis of replenishment applications. 1+ will bemanaged by the Project Manager. An assurance to this effect was obtained at negotiations (para 7.01(e)). The National Coordinator will be authorized to sign on expenditures up to US$150,000 which isthe financial delegation for foreign currency expenditures to be granted under the project managementcontract (para 4.62). Above this amount the Minister of Planning or his delegate will have to sign.IDA will replenish the above account upon receipt of satisfactory evidence of disbursements forallowable expenditures. Should any disbursements be made from these accounts for items not eligible,the Government will be required to deposit the corresponding amount into the account. Disbursementsagainst this account will be monitored through monthly statements giving details of all withdrawalsand deposits, as well as the opening and closing balances.

4.55 To ensure efficient and timely project implementation, the Government will open a localcurrency account (the "project account") at a local bank. Requirements in local currency to be met bythe Govemment will be established yearly and will form the basis upon which the local currencyaccount will be replenished. The Government will deposit its share of funding on the project account,quarterly and in advance on the basis of disbursement forecasts for the next three months. Anassurance on the above was obtained at negotiations (para 7.01 (f)). The National Coordinator willbe authorized to sign on payments up to GNF50 million which corresponds to the delegation ofauthority to be granted for expenditures in national currency under the project management contract(para 4.62). Beyond this amount the Minister of Planning or his delegate will have to sign. A condition

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of Credit effectiveness is the opening of the project account and the initial deposit by the Governmentof GNF250 million, equivalent to about half of its financial contribution for PY1 (para 7.02 (a)).

5. Financial Manaaement. Accountina and Audit Reauirements

4.56 The Project Manager will be responsible for the preparation of annual project accounts(pars 4.65). It will assist the Chamber of Commerce and the professional organizations in an advisorycapacity for all accounting, administrative and financial matters related to project financing. Becauseof the shortage of local competence in the field of finance and accounting, steps will be taken to alsosecure, as part of the project management contract, qualified services to: (a) design and implementa computerized accounting (general and cost accounting) and budgetary systems; and (b) train nationalstaff in the use of this system.

4.57 Financial Procedures and Systems. The Project Manager will assume responsibility forpreparing and consolidating all project accounts, preparing and monitoring the overall project budget,analyzing the variances, ensuring that payments to contractors for executing project components arein compliance with project objectives and budget, and preparing disbursement applications and records.It will maintain accounting records for project activities, consistent with sound accounting pr? riceswhich will reflect fairly, in accordance with internationally accepted accounting principles, th e iverallfinancial situation of the project. All accounting and financial operations (including the project annualbudget) will be fully computerized.

4.58 Audit. The project financial statements and Statements of Expenditurds (SOE-'I willbe audited annually in accordance with internationally accepted auditing standards by a qualifiedindependent audit firm acceptable to IDA. Audited accounts and the audit reports (Short Form Reportwith all required information, the Special Report on the utilization of IDA Credit, and the ManagementLetter) will be submitted to IDA within six months of the end of each fiscal year. Assurances to thiseffect were obtained at negotiations (para 7.01 (g)). The audit will include specific verification of thelegitimacy of all expenditures and an opinion on the reliability of the SOE procedures and utilization ofgoods and services financed under the project. The auditors will also provide a Long Form Report,including detailed comments on the financial, general and cost accounting systems, and an assessmentof the operational efficiency of the project.

4.59 Regorting. The Project Manager will be responsible for monitoring projectimplementation along the agreed implementation schedule (Annex 10), including physical andinstitutional objectives. It will prepare semi-annual progress reports to be submitted to the Governmentand IDA through the President of the Steering Committee (para 4.61). These reports, based onmandatory semi-annual supervision of each component, will assess progress (physical, financial,budgetary and institutional) against agreed annual programs of operations and targets. They will serveas basis for IDA supervision missions (Annex 11). The National Coordinator -- through the Presidentof the Steering Committee - will communicate to IDA, before October 31 of each year, the project'sprogram of operations and detailed annual training program for the following year. The work plan forthe first year has been agreed at negotiations. The Project Manager will also be responsible to preparethe Mid-Term Review in PY3 and a Project Completion Report after the Credit closing date. The Mid-Term Review will aim at assessing the project results based on, inter alia: (a) the following monitorableindicators showing project impact on the agricultural export sector: volume of exports generated,number of operators involved and amount of investments achieved or under way; (b) progress inimplementing the project institution-building components; and (c) global judgement on the generalevolution of the sector, taking into account, inter alia, effective implementation of the prescribed policymeasures. Assurances on the above reporting requirements were obtained at negotiations (para 7.01(h)).

D. Proiect Oraanization and Manaaement

4.60 The objectives in establishing the management mechanism for the project are to

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ensure: (a) maximum participation by the private sector; (b) operational autonomy in daily projectimplementation; (c) adequate dialogueAnterface between the private sector and policy-making bodies;and (d) proper monitoring and evaluation of project activities, including strict control of projectaccounts. To achieve the above objectives, the project will be implemented as follows: (a) the overalladministrative tutelage ("Mattrise d'Ouvraae") will be vested with the Ministry of Plan and Finance(MPF), with other departments having specific technical tutelage as indicated below; (b) projectmanagement will be delegated by the MPF to a private consultant under the project managementcontract ("Mattrise d'Ouvraae D4leaude") (para 4.49); and (c) project implementation will be carriedby executing agencies (either private entities or government projects) under execution contracts (eitherfor direct execution, or to act as intermediary for execution ("Mattrise d'Oeuvre")). The technicaltutelage of project components will be vested with several government departments as follows: (a) theMinistry of Commerce, Transport and Tourism (MCTT), for the institution building and SMEcomponents; (b) the Ministry of Agriculture and Animal Resources (MARA), for the agriculturalextension (PNVA and Nucleus Estates), adaptive research and access roads components; (c) theCentral Bank (BCRG) for the Credit Mutual and Private Investment Fund components; and (d) theNational Directorate for Decentralization, for the Cooperatives component. Annex 12 presents theproject's organizational structure.

4.61 Steerina Committee. Project oversight will be vested in a Steering Committee ("Comit6de Pilotage") chaired by the Minister of Planning or his delegate. The committee will act as a Boardof Directors, i.e. it will decide on project implementation policies, approve project work program andbudget, and clear project accounts. It will be chaired by the Ministry of Planning (or his delegate) andbe composed of representatives of all parties (private as well as government) involved in projectimplementation. It will meet every six months, and whenever the need will arise. Creation of theCommittee, with composition and membership agreeable to IDA, is a condition of Credit effectiveness(para 7.02 (b)).

4.62 Proiect Manaaer. Project management activities will be entrusted to a privateconsultant firm (the "Project Manager"), under a project management contract with the Ministry ofPlanning. This firm will be selected through short-list based competitive bidding (para 4.49). It willhave a complete delegation of authority ("maltrise d'ouvrage d6lEgu4ee) for any project commitmentor disbursement up to US$150,000 as far as IDA financing is concerned, and GNF50 million as far asgovemment counterpart funding is concerned (paras 4.54 and 4.55). The Project Manager will havethe following main responsibilities: (a) oversee the execution contracts, at operational, administrativeand financial levels, and ensure the reconciliation of the administrative and financial data with theoperational data; (b) evaluate the project impact on the agricultural export sector as a whole, and ontargeted groups within the sector; and (c) monitor the overall evolution of the agricultural exportsector. It will also be responsible for: (a) monitoring implementation of the policy measures agreed aspart of the Letter of Agricultural Export Policy (LDPEA) (para 4.01); (b) serving as interface betweenthe project and external technical agencies/policy-making bodies; (c) executing two project components(institution building and Small/Medium Enterprises); and (d) preparing the Project Interim Review (PY3)and the Project Completion Report (para 4.59). At the end of the project, the project managementcontract will be terminated, and the 'non-project" responsibilities of the Project Manager will be takenover by the professional organizations. The Project Manager will be given the resources (through theproject management contract) to acquire the monitoring/evaluation, accounting/financial and technicalcapability required to deliver its duties (see description of the project management component, para4.37).

4.63 The project management team will be headed by a National Coordinator, assisted bya Technical Coordinator. These two staff will be recruited nationally and have status of privateemployee of the selected consultant firm (see Terms of Reference in Annex 5 . The NationalCoordinator will have overall project management responsibility. He will play a key role in helpingoversee the evolution of the regulatory and institutional framework, and, in this regard, will serve asinterface between the Govemment, external agencies/policy-making bodies, private sectororganizations and the donor community. He will also be directly responsible for the institution building

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component and for specific dossiers in which the Government is still involved in variois capacities(SALGUIDIA, SAIG, Daboya, etc., para 3.20). The Technical Coordinator will have generalresponsibility for the project technical oversight and for monitoring the evolution of the export sector.The project management team will have three other high level staff, two based at the projectheadquarters (Conakry) and one at the project branch (Kindia, to be created). Two of these staff willassist in the project technical supervision. The last one will be in charge of the Monitoring andEvaluation {M&E) system. In this capacity, he will be responsible for: (a) preparing a series of criticalpath analysis for each execution contract, as well as those components directly managed by theProject Manager; (b) monitoring the latter components; and (c) programming the M&E work plan andtimetable for each execution contract and project component. He will also assist the TechnicalCoordinator in providing data on the evolution of the agricultural export sector.

4.64 Execution Contracts. Procurement and payment of the execution contracts will be thesole responsibility of the Project Manager, up to its financial delegation (para 4.62). The Minister ofPlanning which has tutelage over the project, will be involved only for expenditures beyond that level.The execution contracts will consist of managJement/services contracts and administrative/techn;calconventiors as described below. The following management/services contracts will be established(para 4.49): (a) a services contract with Credit Mutuel; Cb) a management contract with the FundManagement Company; and (c) several services contracts with nucleus estates to provide extensionservices to outgrowers. In addition, administrative/technical conventions will be established betweenthe Project Manager and other government projects and/or institutions to execute the followingcomponents: (a) extension support to smallholders, with the National Extension Project (PNVA); (b)research support, with the National Institute of Agricultural Research (IRAG); (c) support tocooperatives, respectively with the Cooperative Development Project CPDMCG) and the NationalCooperatives Service CSENATEC), at the National Directorate for Decentralization (SED); and {d) accessroads, with the National Directorate of Rural Engineering at MARA. The draft texts of the aboveconventions and contracts have been agreed at negotiations.

4.65 Monitorinn and Evaluation {M&E) (Annex 13). The Monitoring and Evaluation systemwili be the key internal management tool for the Project Manager. In developing and implementing thissystem, the project will work in close collaboration with the professional organizations, as the objectivewill be to hand over its M&E capability to these organizations at the end of the project. Whereappropriate Ci.e. in those cases where the executing agency will have already a M&E system in place)the systematic collection and processing of relevant data will be the responsibility of the executingagency. Availability of this data in appropriate form will be a condition for disbursing the yearlytranche of the contract. This data will contain information on key management indicators for use bythe Project Manager. In those cases where there is no M&E systen, in operation, part of the monitoringactivities will consist in assuring that adequate data will be prepared by the executing agency's staff.This data will be processed by the Project Manager, and serve as basis for establishment of the yearlywork programs. It will be reviewed during each of the mandatory bi-annual supervision missionsconducted by the Project Manager (para 4.59).

4.66 Monitoring activities will aim at providing the Project Manager with permanentinformation on the execution of each execution contract, as well as those components directlymanaged by the Project Manager. This will be accompanied by an appropriate analysis ofimplementation problems. Evaluation activities will be the periodic evaluation of the project's effectson the increase in agricultural exports, and on the welfare/development status of targeted producers(nucleus estates, outgrowers, independent producers, and farmers groups/cooperatives). Under routineevaluation activities, a series of surveys will be undertaken amongst the target groups to determinethe rate of adoption (and repeated use) of new technologies, as well as the perceived conceptions ofthe adaptive research component. Quick diagnostic surveys will be carried out as necessary. Thesesurveys, along with the export statistics of each nucleus estate (with breakdowns by estate andoutgrower production and ratios of production/exportation) should enable the Project Manager toperiodically assess the effect oi the project on export production and ultimately the "post-project"situation. Special attention will need to be focussed on local marketing of the outgrowers surplus

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production (i.e. that surplus which does not meet export standards). The permanent monitoringinformation, along with results of periodic surveys and studies, will form the basis of the preparationfor the Mid-Term Review in PY3 and the Project Completion Report at the end of the project period.

V. PRODUCTION. MARKETS AND PRICES

5.01 For Guinea, more so than other countries, the limiting factor to the development ofhorticultural exports (mostly fresh exports) is undoubtedly external market outlets. Guinea is thecountry nearest to Europe by boat for tropical products, and once low cost/regular shipment by seabecomes possible and dorr.astic handling is organized, production can follow suite quickly providedmarket outlets can be secured. Amongst the perishable commodities, pineapples should receive priorityas they are the only commodity which can rapidly reach the critical export volume (300 tons per week)to permit regular transportation by sea to Europe at acceptable cost. The targets set below forpineapples (25,000 tons), and -- as a second priority -- mangoes (8,000 tons), are conservative andcan be exceeded readily. These targets can be met by well-managed production over approximately4,000 hectares by the year 2000 (half of this area for each crop) (paras 5.05 and 5.10), whereas inMaritime Guinea alone more than ten thousand hectares of prime land suited for such a production isavailable.

5.02 The assessment of the market potential for Guinean horticultural products has takeninto account only Western European markets. In the near future, exports to other international markets(e.g. East European, CIS and Middle Eastern countries) and the sub-regional market (e.g. Senegal) arelikely to be small in value. However, they should not be overlooked in the medium-to-long run,especially since quality standards acceptable on these markets are likely to remain lower than inWestern Europe. Moreover, Guinea is a muslim country with special ties with the Arab world, andtherefore may enjoy special access to Arab markets. Diversification should therefore also be pursuedas new market opportunities emerge.

5.03 The viability of horticultural exports hinges on a good balance between fresh andprocessed products. The latter will employ the crop varieties which cannot be exported, therebyproviding the value-added needed to make the industry viable. In this respect, the project will beinstrumental in establishing the necessary inter-connections among the various agents in the sector,notably between producers and agro-processing units (those at Maferinya (SALGUIDIA) and Mamou(SAIG) in particular) (para 3.20). At the production level, several types of operators are distinguished:(a) the nucleus estates (Annex 1); (b) the outgrowers associated to these nucleus estates (smallholdersand medium size producers); and (c) the "independent" smallholders. The project field activities willfocus on the four prefectures in Maritime Guinea and two in Middle Guinea which have the greatestpotential for horticultural products. Project resources for extension activities will be channeled tooutgrowers through the nucleus estates (para 4.18), and to the independent smallholders through theNational Extension project (PNVA) (para 4.16).

A. Fresh PineaDples

5.04 Yields. At present, pineapples are produced mainly by small planters and productiongroups. For smallholders this production is a subsidiary activity that does not conflict with their mainfarming activity which is foodcrop production (mainly bottomland rice) -- neither in terms of croppingarea (the pineapples are grown at the periphery of the bottomlands), nor in terms of cropping calendar.It is expected that, over the project period, some of the smallholders will specialize in pineappleproduction, those in particular who will enter into production contracts as "outgrowers" with nucleusestates or exporting companies. These outgrowers are expected to grow on average 2 ha, whereasthe "independent" smallholders would only devote 1/2 ha to the crop. Current exportable yields,especially amongst independent sinallholders remain low, from about 25 tons/ha for nucleus estatesto only 10 tons/ha for independent smallholders. These yields would increase substantially under the

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project, to 40 tons/ha for estates, 35 tons/ha for outgrowers and 20 tons/ha for independentsmaliholders (Annex 14 Table 1 . This increase would be accompanied by a substantive improvementin quality and reduction of post-harvest losses.

5.05 Area crooped. The impetus for area expansion is expected to be generated by the oldestate plantations (especially Daboya and SALGUIDIA, para 3.20) that would be rehabilitated and thenew estates that would be established. Outgrowers and independent smaliholders are expected tofollow suite, as the industry becomes organized with assistance of the estates and the Research andExtension project. This would result in a substantial increase in the area cropped (Annex 14, Table 3),but still represent only some 1,355 ha under cultivation in 1996/97 and 2,050 ha in the year 2000,i.e. a small fraction of the total area suitable for pineapple production in Maritime Guinea (900 ha ofirrigated land in the SALGUIDIA plantation alone).

5.06 Production. Total production in 1990/91 was estimated at a low 5,000 tons, of which3,500 tons by smallholders and 1,500 tons by large/industrial plantations. Fresh exports to Europeamounted to approximately 1,100 tons. These exports are forecasted to increase to about 17,000tons during the project period and to 25,000 tons in the year 2000, along the schedule presented inAnnex 14 Table 4. The large plantations, which would collect the production of neighboringoutgrowers, would account for the bulk of exports. One bottleneck might be the insufficient supplyof fertilizer and planting material to smallholders. This bottleneck would be addressed by the proposedEEC-funded Fruit Promotion Project to be implemented in parallel to the present project. The difficultywould be eased also as estates would produce plants on a commercial basis and supply inputs underseasonal production contracts to outgrowers in the vicinity of their plantations, and as small-and-medium sized enterprises (SMEs) would establish themselves with project support to provideproduction services and inputs to independent smallholders.

5.07 Markets and Prices. Once low cost/regular transportation is established, increases infresh pineapple exports in the medium-to-long run hinge on the penetration of the West Europeanmarket. West Europe imported 245,000 tons of fresh pineapples in 1988. It offers a market whichis still expanding, albeit at a much slower rate. Average growth of demand, which was around 20%annually between 1983 and 1985, is estimated at 3% from 1990 to 1995 and 2% subsequently untilthe year 2000. The production objectives set for Guinea correspond to a notional market share of7.5% by the year 2000. This objective is within reach, as Guinean exporters with the assistance ofthe project would ensure quality and regularity of shipments, promote new varieties (such as Baronnede Rothschild and Victoria Queen) and establish efficient distribution networks (in particular withsupermarkets). In the long run, a potential exists for further increases in exports given the foreseeabledevelopment of East European and CIS markets.

5.08 On the French mark-et, where the demand currently ranks first in Europe, top qualityproducts shipped by sea command a wholesale price of about 6 FF/kg. Prices for Queen typepineapples shipped by air at a more mature stage and intended for buyers with high purchasing power,are around 11 FF/kg, but quantities involved are small. At a price of 6 FF/kg, the derived farmgateprice is about 205 GNF/kg (Annex 14, Table 9). Taking into account production costs (including familylabor requirements for smallholders, see Annex 14. Tables 5 and 6), such a farmgate price level wouldbring a notional return per hectare that should give substantial incentive for producers to adopt orexpand pineapple production. This return is estimated at: (a) GNF1.5 million per ha for estateplantations; (b) GNF2.5 million per ha for outgrower plantations; and (c) GNF1.6 million per hectarefor small independent planters.

B. eshMe

5.09 Yields. Present mango production in Guinea remains more akin to a "gathering ratherthan a plantation activity. Smallholders collect only a minute fraction of the fruits and sell them - ata cost reflecting the opportunity cost of their labor -- to transporters/exporters at the road nearest totheir village. The bulk of the fruits is left to rot on/under the trees. This represents a loss because a

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significant fraction of the fruits are of grafted varieties that could be exported; it also increases theincidence of cryptogamic diseases (antracnosis in particular). Under these circumstances, present yieldfigures -- less than a ton per hectare -- are hardly relevant. With good management (efficienttreatment, proper pruning, application of fertilizer, etc.) and introduction of early varieties (to avoidcryptogamic diseases as they mature before the start of the rain) exportable yields are expected toreach 7 t/ha for estate plantations, with small plantations reaching a conservative 4 t/ha.

5.10 Crooned Area and Production. The prcduction capacity of existing plantations ofgrafted mangoes is estimated at some 15,000 tons. But, only around 300 tons find their way tointernational export markets, whilst unrecorded but substantial quantities are shipped to Senegalthrough the Fouta Djallon. Over the project period, it is estimated that around 200 ha would bereplanted and 500 ha would be grafted, along the schedule indicated in Annex 14 Table 2. Given thatthe management of plantations would greatly improve, exportable quantities are forecasted to reach5,000 tons in 1996/97 and 8,000 tons by the year 2000. These figures are conservative: theyrepresent small areas under cultivation if yield targets are met, i.e. about 1,400 ha and 2,300 harespectively assuming production at par by small and estate plantations. Targets could easily beexceeded if, inter alia, new varieties matching market requirements are introduced and correspondingmarket outlets are secured. Mango production by the individual smallholder is expected to cover aminimal area (1/4 ha); the individual estate-type plantation would likewise remain relatively small (5ha).

5.11 Markets and Prices. The European demand for fresh mangoes has grown at the highannual rate of around 20% in recent years, and amounted to 30,000 tons in 1988. Growth isexpected to continue at a sustained -- albeit lower -- rate in the future. Forecasts are 10% between1990 and 1995, and 7% thereafter. Guinea in addition would face stiff competition as its productionperiod (April to July) coincides with that of other African suppliers, such as Mali and Burkina Faso; butit would have an edge regarding costs as it would export by sea rather than by air which is arequirement for the other countries. Prevailing wholesale prices in Europe during the Guineanproduction period are between 12 FF/kg for high grade fruit shipped by air and 9 FF/kg for standardquality fruits shipped by boat. The notional farmgate price derived from the wholesale price for seashipment (Annex 14 Table 9) at about 560 GNF/kg allows for very substantial net returns (GNF3.4million per ha for estates and GNF2.0 million for smallholdings) which should give great incentive toexpand production. It is worth noting that the price paid by Guinean exporters at present (F ound 50GNF/kg) is only a minute fraction of the computed farmgate price, because heavy production lossesare incurred (production is collected manually and hand-carried to the nearest paved road in traditionalbaskets). The rehabilitation of access roads undertaken as part of the project would go a long waytoward remedying this situation.

C. Manao Pul

5.12 The following targets have been set for the production of mango pulp: 1,500 tons for1996/97 and 1,900 tons in the year 2000, equivalent to 4,000 tons and 5,000 tons of fresh fruitsrespectively. These targets are conservative even assuming no replanting or grafting of trees, sincethe current production capacity is about 15,000 tons of fresh fruits. However, all mango varieties arenot equally suited for processing, and appropriate varieties will have to be planted if the trendenvisaged is to be sustained. Mango pulp will be produced at the SAIG and SALGUIDIA plants, withfruits bought from small planters. The SAIG plant which was rehabilitated in 1989 has a capacity of30,000 tons of fresh fruits that far exceeds the targeted volume; SALGUIDIA has another 12,000 tonsof capacity (Annex 1).

5.13 The demand for mango pulp on the European and Middle-Eastern markets is sustained.The pulp is used in particular to produce milk products (such as yogurts) and exotic beverages. Thisdemand was estimated at 10,000 tons in 1988; it is expected to grow at a rate of 5% annually duringthe 90s. Guinea could reasonably anticipate supplying around 10% of the total market. Current pricesare approximately FF 5,500 per ton CIF Rotterdam of pulp with 15-16% dry material. Provided the

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SAIG Mamou plant functions normally, this price should allow for a substantial increase in the currentprice of about 30 GNF/kg paid to smaliholders for second category products, thereby insuring adequateav.ilability of supply.

D. Non-Traditional Commodities

5.14 Guinea has a comparative advantage for non-traditional commodities for which theWest-European market is growing rapidly, Inter alia, (Annex 14. Table 10): essential oils for perfumery(already exported by SOPAG). melons, cherry-type tomatoes and cut flowers (exported by Guin6e-Fleurs), concentrated passion-fruit juice (to be exported by SAIG; see summary description of theseestates in Annex 1), organic products (including dried fruits, produced by several SMEs), and otherproducts such as papayas, off-season green beans, asparagus, limes, guavas, litchees and ginger.

5.15 Unlike pineapples, most of the above products have high sale price per unit, as theyare intended for buyers with a high purchasing power. They can therefore bear transport costs by airand still remain profitable, in particular for SMEs, cooperatives or smallholders who can put in theintensity of labor required. The prerequisite will be in all instances to produce quality products in atimely fashion. Altogether, it is expected that the non-traditional commodities will account for asubstantial part of horticultural exports with export quantities of 3,000 tons in 1996/97 and 5,000tons in the year 2000, corresponding to a FOB value (1991 constant terms) of US$7.5 and 12.5million respectively.

E. Summao

5.16 The following two tables summarize the estimated quantities and FOB values for themain export commodities targeted by the project. The notional share of the European market thatGuinea would have by the year 2000 (7.5% for pineapple, 9.5% for mango and 10% for mango pulp)are reasonable if marketing conditions are met; in fact, it might end up being lower as some productsmight be re-shipped to other markets (East European and CIS countries). On the above basis, the totalestimated FOB value of the targeted crops is US$ 24 and 37 million for 1996/97 and the year 2000respectively.

Estimated Export Quantities of Main Taraceted Crons vs European Demand

Base Demand I/ Growth rate Future Demand Guinean Share

90/95 95/2000 1995 2000 1996/97 2000-----tons--- ------- ----------- ------tons-*--- -------tons-----

0

Pineappte 245,000 3X 2 301,000 332,000 17,000 25,000Nango (fresh) 39,000 10X 7X 58,000 85,000 5,000 8,000Mango (Putp) 10,000 5X 5X 15,000 19,000 1,500 1,900

Other Commoditfes 29,000 - - - - 3,000 5.000

1/ Estimate for 1988

-40 -

Estimated FOB Value of the Main Tarceted Croos 1/

Unit Price Present Situation 1996/9 Year 2000

S/kg Sm Sm Sm

Pineapple 0.6 0.7 10.2 15.0Mango (fresh) 1.0 0.3 1.0 8.0Mango (Pulp) 0.6 - 0.9 1.1

other Commodities - 0.5 7.5 12.5

Total - 1.5 23.6 36.6

1/ FOS value, in constant 1991 USS, assuming no change in selling prices.

VI. BENEFITS JUSTIFICATION AND RISKS

A. Proiect Benefits

6.01 The main project benefit would accrue from supporting a development strategy targetingprivate operators, in the agricultural export sector -- a sector which offers promising developmentopportunities in the short-to-medium term. The project will act as a catalyst for an effective applicationof the reform measures, thereby helping to create an enabling environment not only in this sector butthroughout the economy. In this respect, it will be a necessary complement to the Government's reformprogram supported by-the Bank under the on-going SAL Il/Private Sector Support (PSPP) and proposedPublic Enterprise Sector Rationalization and Privatization Project. The project's goals which are gearedto the short-to-medium term (in particular those pursued under the special programs that are pilot innature) will complement those pursued under other Bank projects aimed at the long-term developmentof the agricultural sector, in particular the on-going Research and Extension project (FY89) and theproposed credit and cooperatives project (FY95). The instit'jtion-building component -- aimed at privatesector institutions - will render the strategy operational. Increased export activities will result: (a) atthe micro-level in increased incomes for the private operators (small and large) doing business in thevarious agricultural export industries; and (b) at the macro-level, in the establishment of a broader basefor economic growth, including diversification of the sources of foreign exchange.

6.02 The target population benefitting from the groduction comoonents (except the accessroads) will be: (a) the independent small producers assisted by the Agricultural Extension (PNVA) projecton behalf of the project; (b) the outgrowers working under contract with the nucleus estates; (c) theworkers employed by the nucleus estates, the Small-and-Medium Enterprises (SMEs) and the producergroups/cooperatives supported by the project; and (d) all the population employed on jobs created inthe agricultural export industries targeted by the project. It is estimated that this population will numberapproximately 15,000 persons; these persons are mostly under-employed at present. The access roadwill benefit the population at large in the areas they will help open up. The soecial oroarams (CrdditMutuel and Private Investment Fund) will concern specific target groups. These groups will generallyoverlap with those targeted under the production components - in this fashion they will benefit fromthe operational synergy created in the project areas. Therefore, they are not taken into account here.The institution comoonent will benefit private operators at large. It is expected that, through themultiplier effect, indirect benefits from this component will accrue to larger segments of the population,as the agricultural export sector will organize itself and serve as engine of growth for private sectordevelopment. The size of the latter target groups cannot be quantified.

41-

B. Economic Justification

6.03 Owing to the diversity of project components, no attempt has been made to calculatean Economic Rate of Return (ERR) for the project as a whole. Rather, the ERR has been estimated forthe subset consisting of the production components (including the access roads). The benefits fromthe Institution component, and the special programs that are pilot in nature, cannot be realisticallyquantified. Therefore no ERR has been computed from these components.

6.04 The basic assumption used in the computation of the ERR for the productioncomponents is that the full incremental production of independent smallholders and outgrowers, as wellas that of producer groups/cooperatives and SMEs supported under the project, can be attributed to theproject. In contrast, only a fraction of the incremental output of the nucleus estates can be taken intoaccount, as their production is not directly supported by the project. Therefore their incremental outputis only used in the sensitivity analysis. This is a conservative approach, especially in view of the factthat certain production components, in particular the access roads, will benefit not only the projecttarget groups but also the rural population at large. The labor input has been shadow-priced at differingrates of the market value depending on the anticipated calendar for cropping activities (e.g. full pricingfor the picking of mangoes that takes place during land preparation for food crops, and less than fullpricing for certain tasks on pineapple that do not conflict with the food crop calendar). The marketvalue varies across the six project prefectures, from GNF 750 (less than one dollar) per person-day inthe Fouta Djallon where labor is relatively abundant and labor opportunities are scarce, to GNF 1,500(over 1.5 dollar) for certain areas of Maritime Guinea where labor is attracted to Conakry and price isaccordingly pushed upward. On the above basis, taken into account the net benefit streams over a 40year period (estimated productive life of tree-crop plantations), the ERR of the production componentsis estimated at 17%, and the Net Present Value (NPV) of the benefits discounted at 10% (the estimatedopportunity cost of capital in Guinea) is approximately GNF 7 billion. If investment costs increase by10% and benefits decrease by 25%, the ERR falls to 13%. In contrast, if costs decrease by 10% andbenefits increase by 25%, the ERR increases to 22%.

C. Budaetarv and Balance of Payment Imoact

6.05 The project budgetary impact, net of taxes, during the project implementation periodis estimated at the equivalent of US$0.6 million, i.e. about US$100,000 per year which should bemanageable even under the Govemment's anticipated tight budgetary constraints. The project's long-term budgetary impact will be minimal, as the bulk of project activities will be taken over by the privatesector following project completion and therefore the Government's budgetary support will be phasedout gradually. This is particularly the case of road maintenance that should be undertaken increasinglyby local communities, and research/extension activities by the nucleus estates, producergroups/cooperatives and private companies. With reference to the Chamber of Commerce, it isexpected that, with the 'centimes additionnels- and self-generated revenues, it will become financiallyindependent as of project completion. The same situation will prevail for the professional organizations.The project impact on the country's balance of payments will be high-ly positive. The streams ofincremental foreign exchange benefits have been computed for horticultural products over a 40 yearperiod. The NPV of these benefit streams computed at the expected rate for intemational inflation(3.9%) is US$120 million.

D. Environmental Imoact

6.06 Developing export crops on a commercial basis in the context of Guinea meansintensifying agriculture. This will contribute to decreasing the incidence of itinerant cropping which isdestructive to the environment. Intensifying smallholder horticultural crops will typically involvebottomiands development. Such a development will be done using the abas-fonds complex" approachaimed at managing the entire watersheds of the areas being targeted, and therefore be highly beneficialfor the conservation of the environment. This approach been successfully implemented In the IDA-financed Gueckedou Area Development project (Cr. 1635-GUI) recently completed. Rehabilitation ofthe mango plantations will enhance the protective function of the mango trees. This rehabilitation will

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involve mostly grafting existing trees with no uprooting. The creation of new plantations will notinvolve any land clearing. Potential health hazards due to chemical treatments will be avoided, as phyto-sanitary control will be tightened under the proposed EEC-funded Fruit Promotion Project and issuanceof quality labels will only be given to products that are free of chemicals. Road rehabilitation will notinvolve any land clearing, and will be carried out in a manner consistent with the provisions of the Bankguidelines for environmental preservation. An environmental assessment for the project was completedas part of preparation. It includes a mitigation plan along the above lines that was incorporated inproject design.

E. Riska

6.07 The major risk is that the business climate may not improve on account of factorsoutside the project's control. This risk will be minimized by: (a) the effective application of policymeasures requested as part of the IDA-supported Private Sector Promotion Program (PSPP); thesemeasures are designed to strengthen the incentives framework; (b) the overall support and coachingprovided under the project to private-oriented s~_ivities that will act as catalyst to restore confidenceamongst investors; and (c) the strengthening of the Chamber of Commerce and professionalorganizations that will help empower the private sector and defend its interests vis-A-vis theGovernment.

6.08 Another risk, also in great part outside project control, is the continued reluctance ofcommercial banks to provide term credit for agricultural export businesses. This risk will be mitigatedby:.(a) the application of specific policy measures requested as part of the PSPP and PATSEP programs(concerning in particular the establishment of bank guarantees and the strengthening of the judicialsystem); (b) the implementation, under the project, of a Private Investment Fund scheme under whichadvisory support and equity funds will be provided; and (c) the establishment of a specialized line ofcredit, as part of the proposed EEC-funded Fruit Promotion Project.

6.09 A technical risk is that the advanced techniques required to produce non-traditionalcrops and adapt to the requirements of the rapidly evolving external markets are not introduced in atimely fashion. To address such a risk: (a) on the production side, the project will provide specializedtechnical support so that appropriate technologies be incorporated into research programs anddisseminated to producers in a timely fashion; the nucleus estates will be instrumental to achieve thisobjective; and (b) on the marketing side, the Project Manager through the /institution support componentwill provide the necessary commercial information and help Guinean operators establish partnershipswith foreign partr,ers.

6.10 An operational risk is that the public projects which will be used for the execution ofcertain components may not have the required operational capacity and that their objectives (which arelong-term) may not coincide with project objectives (which have shorter horizon). This problem will becircumvented by: (a) precisely specifying the tasks to be performed as part of the implementationcontracts; (b) providing the required operating facilities under these contracts; and (c) ensuring closemonitoring of contract execution. A final operational bottleneck might be the insufficient supply offertilizer and planting material to smallholders. This bottleneck is specifically addressed by the proposedEEC-funded Fruit Promotion Project; it will be eased also as estates will produce plants on a commercialbasis and supply inputs under seasonal production contracts to outgrowers, and as small-and-mediumsize enterprises (SMEs) will establish themselves with project support to also provide productionservices and inputs.

VIl. ASSURANCES, CONDITIONS AND RECOMMENDATION

7.01 Assurances Obtained at Neaotiations

(a) the Letter of Agricultural Export Policy Development (LPDEA) will be the framework forproject implementation (para 4.01);

- 43 -

lb) CCIAG will be restructured In a manner satisfactory to IDA (para 4.12);

IC) proceeds from the IDA Credit will serve to finance services/management contracts with(i) selected nucleus estates (US$2.5 million) (para 4.19), and (ii) the Cr6dit Mutuelcompany (US$1.2 million) (para 4.31);

(d) a contribution amounting to at least 15% of total rehabilitation cost, to be paid upfront,will be requested from the beneficiaries of the access roads component (para 4.28).

le) the Government will open a special account in foreign currency in a commercial bankunder terms and cornditions acceptable to IDA, for deposit of proceeds from the IDAcredit (para 4.54);

(h) the Government will open a project account in local currency and deposit on it its shareof the project funding quarterly and in advance, based on annual budgets anddisbursement forecasts for the next three months (para 4.55);

{i) audited accounts and the audit reports will be submitted to IDA within six months ofthe end of each fiscal year (para 4.58); and

:) the Project Manager will be responsible for preparing (i) semi-annual progress reports,{ii) the Mid-Term Review report, and (iii) the Project Completion Report (para 4.59).

7.02 Conditions of Credit Effectiveness

(a) opening of a project account and deposit on this account of a minimum amount ofGNF250 million, equivalent to the Government's counterpart funding for the first sixmonths of project implementation (para 4.55); and

(b) establishment of the project's Steering Committee with composition and membershipacceptable to IDA (para 4.61);

7.03 Conditions of Credit Disbursement

(a) against the CCIAG component: (i) issuance of the decree establishing the new statutesof CCIAG, (ii) election of the President by the members of the Consular Assembly, (iii)recruitment of the Secretary General by the Executive Committee, through competitiveselection, (iv) mandatory private employee status for all staff, and (v) preparation of aworkable financial restructuring program, including provision for the gradual repaymentof CCIAG's debts (para 4.12); and

(b) against part of the expenditures (up to US$1.6 million) incurred under the five-yearmanagement contract between the Fund Promo,er and the Fund Management Company:signature of the corresponding subsidiary loan agreement with the Fund ManagementCompany under terms and conditions (including interest rate and foreign exchange risk)satisfactory to IDA Ip-Ara 4.35).

7.04 Recommendation. With the above agreements, the project will be suitable for a creditof SDR 15.2 million (US$20.8 million equivalent) to th, Government of Guinea, on standard IDA termswith 40 years of maturity.

- 44 -Annex 1

Page 1 of 2REPUBLIC OF GUINEA

NATIONAL AGRICULTURAL EXPORT PROMOTION PROJECTDescriotion of Main Nucleus Estates

Guinee-Eleurs. This is a private 40% Guinean and 60% French (Gregori) joint-ventureestablished at Unsan (Mamou prefecture, 230 km from Conakry) in August 1987 which haspioneered the exportation of cut flowers (chrysanthemum) and vegetab,es for the Europeanmarket. It is a medium size operation whose investment, financed in part with a CCCE loan,consists largely of agricultural equipment, including irrigated equipment, unheated greenhousesand transport/storage facilities (including a cold storage in Conakry). Out of 200 ha leased,the area under cultivation consists of 3.5 ha of greenhouse and 140 ha of irrigated land.Flower production has rapidly become marginal, with the focus being increasingly placed oncherry tomatoes and melons. Production capacity is now arourid 550 tons of which 60percent exported. Guinde-Fieurs has particular advantage in terms of its low overhead,diversified production and nearby presence of smallholders (who can provide labor andadditional production). At some stage, the company has experienced technical difficulties,which have been compounded by the lack of avail.bility/cost of packaging material. Thesedifficulties have been overcome. However, the recent withdrawal of Gregori has resulted inserious financial problems which unfortunately may lead to the complete halt of operations.

Socidt6 Aoro-industrielle di Guinee. SAIG was created in Mamou in 1988, as a mixed capitalcompany to produce fruit juice and concentrate (mainly passion fruit and mango) for the exportmarket. Total processing capacity is 30,000 tons of fresh fruit equivalent, to be supplied bynucleus plantations and outgrows,rs. The GNF550 million capit^I is distributed as follows:private Guinean and French investors (35% and 45%, mainly SIASS), PROPARCO (subsidiaryof CCCE, 10%) and the Guinean Government (10%). Total investments made to date(including the renovation of a processing unit) amount of FF41 million. Production has startedin April 1990, but the processing unit had to close six months after following bankruptcy ofSIASS, the main shareholder. In addition to the latter's lack of financial capacity, the reasonsfor SAIG's difficulties are primarily connected to the bad business environment prevailing InGuinea and the lack of support services (research and extension). SAIG has recently obtainedfinancial assistance for an emergency program that should permit to redress the situation andgive lead time to seek a new partner (Sobragui Agriculture has expressed interest). Prospectslook good given the high production potential of SAIG's nucleus and outgrower plantations andthe sustained demand on the European market for its two

Societe des Plantes Aromatiaues de Guin4e. SOPAG is a former State factory for theproduction of essential oils for perfumes that was privatized in 1987. It was taken over by theFrench group TECOTEX-Cavallet, which owns 51 % of the capital, the rest being sharedbetween the State (39%) and private Guinean investors (10%). The factory has been entirelyrehabilitated under IDA financing (Cr. 1234-GUI) and has been operational since 1987. Itproduces extracts intended for both the perfume and food flavoring industries, especially fromthe following flowers: karo-karounde (a flower grown only in the Fouta DOallon whose essenceis used by Guerlain), jasmine and orange. It also produces smallholder-processed orange peeloil. These products are high value-added and command a small but sustained export market.The company is currently in difficulty, but it should be a viable enterprise in the long run dueto: (a) the low cost of labor for a labor intensive process; (b) the uniqueness of Guineanproduction of 'Karo Karound4" and orange essence that may eventually command a premiumin the market; and (c) the climatic factors that are particularly propitious to introducing anddeveloping new floral plants.

- 45 -Annex I

Page 2 of 2

Soci4td Ubvo-Guineenne de Develoooement Aoro-Industriel. Salguidia is a parastatal whosecapital amounting to GNF700 million is shared equally by the Guinean and Ubyan governments.The company has an estate of about 2,000 ha of prime land 140% irrigated) in one of theregions best suited for pineapple production. It also has a processing unit with capacity toprocess 10,000 tons of fresh pineapple and 2,000 tons of citrus. The productive assets arein excellent condition, in particular the irrigation system and the small canning unit that wererehabilitated in 1986/87 with CCCE financing. However, the company has experiencedfinancial problems since the beginning of its operations. This is due to the fact that thecompany has always operated at very low capacity. The current area under production is only50 ha and the annual production around 350 tons, the bulk exported to Ubya. Salguidia hasattempted, with limited results, to increase its processing quantity by buying fruits tooutgrowers. Overall results as of the date of creation of the company have been disappointing.The reasons are well known (bad management, poor marketing, lack of a networking ofoutgrowers, etc.) and could easily be remedied if the management of operations wereprivatized, given the exceptionally good production potential of the region.

Sobraoui Aariculture. In 1987 the Govemment decided to get into partnership with the Belgiangroup UNIBRA for the rehabilitation of the SOBRAGUI beer and soft-drink factory. As part ofthe agreement, it was requested that this company would seek to produce its raw materiallocally to spare foreign exchange. SOBRAGUI therefore rented 300 ha of land to Salguidia.As it rapidly appeared that the production of maize was. unviable, SOBRAGUI decided to tumto export crops to generate foreign exchange. Following a trial period in 1989/90, SOBRAGUIis currently implementing a production program that includes 150 ha of pineapple, 50 ha ofpassion fruit, 40 ha of papaya (solo variety), and several hectares of chilies, melons and cherrytomatoes. At full development, production is forecasted at about 5,000 tons of fruits andvegetables (of which 3,200 tons of pineapple), the best quality for export and the rest for the

* domestic market. It is also planned that around 1,300 tons of pineapple be bought from local. smallholders. Given the operational support provided by SOBRAGUI and the large production

potential of its estate, the company has excellent chances of success, provided theenvironment is favorable.

Aarafruits. This concerns the govemment estate of Daboya a total area of 400 ha that wasdeveloped with the assistance of IDA from 1977 to 1981, with a view to producing pineapplesfor export. Well documented reasons - related to its statutes as a State enterprise and the lackof an environment propitious to exporting perishable products - lead to disastrous results rightfrom the start of the project. The Govemment for years thereafter tried to redress the situationto no avail, and finally agreed to search for a partner. This resulted in the establishment of acontract end-1 990 with Agrafruits-Guinde, a subsidiary of the Franco-Swiss group Agracom,that at some stage marketed an important fraction of the Ivorian production on the Europeanmarket. Agrafrult development plan calls for the rehabilitation of the irrigatioii system, and theestablishment of new plantations following techniques that have proved successful in Cated'lvoire. Pineapple production is forecasted at 6,000 tons at full development, with in addition1,700 tons of pineapple and 3,000 tons of mangoes to be collected amongst the outgrowers.

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Annex 2Page 1 of 4

REPUBLIC OF GUINEANational Agricultural Export Promotion Project

Chamber of Commerce. Industry and Aericulture of Guinea (CCIAG)

Appendix 1. Current Situation

Statutes Created in 1985 as an institution with financial administrative autonomy under thetutelage of MICA

Membership voluntary basis; approximately 3,000 members (2,000 in Conakry), among whom anumber of Professional Organizations

Organizations General Assembly (Assemblee Consulaire): comprises 101 delegates (70 initially electedand subsequently an additional 30 co-opted on a regional basis and the President); meetsat least twice a year and elects the Executive Committee every four years

Executive Committee (Bureau Executif): 19 members all elected (except the President andSecretary General of the Chamber who are appointed by the President of the Republic,the latter on an exceptional basis) and all private operators working for CCIAG on anunpaid basis (except the Secretary General); elects 4 Vice-Presidents among its membersand meets once a month and/or at the request of the President

Permanent staff: 14, 11 of whom are professionals including the Secretary General; 5 ofthe latter are currently civil servants seconded from and remunerated by their respectiveMinistries: MICA (3), MARA (1), MPCI (1); the remainder are hired on a privatecontractual basis

Local branches: 36; all managed by private operators; each branch is usually composedof a President, a Vice-President and a Treasurer (on an unpaid basis) and a Secretary

Role in line with a Chamber's traditional responsibilities, i.e.: establishment of dialoguebetween members, representation as a spokesman for the private sector vis-a-vis theGovernment, and promotion of -le private sector at both national and international levels

Ressources current only source of income: initial entry fees subscribed by members and some privatecontributions on a voluntary basis; CCIAG has no budget for equipment or forpromotional activities

Assitance UNIDO (US$337,000 UNDP funded) covering training, technical assistance andcomputer equipment; USAID: training programs, study trips, participation ininternational fairs

Intemational CCIAG is connected to other Chambers of Commerce both in the sub-region andrelationships abroad

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Annex 2Page 2 of 4

REPUBLIC OF GUINEA

National Agricultural Export Promotion project

Chamber of Commerce. Industry and Agriculture of Guinea (CCIAG)

Appendix 2. Proposed Changes under the Proj-1

1. New statutes (a) election of the President of the Chamber by the Consular Assembly(Assemblde Consulaire). This clause, although provided by the current (1985) statutes of theChamber, has not been enforced, for reasons due to circumstances and on a temporary basis; (b)appointment of the Secretary General by the Executive Conimittee, through competitive selectionbased on objective criteria of both competence and experience; (c) private employee status forall permanent staff; and (d) admission of foreigners at all levels of CCIAG.

2. Enhanced responsibilities: (a) promoting the Private Sector and defending the latter'sinterests vis-a-vis the Government; (b) assisting private Guinean operators to establishpartnerships with external investors to secure technical expertise, market outlets and/or fundingfor their export businesses; and (c) organizing training programs for the Pri-vate Sector in generaland exporters in particular. The corresponding capacity building would be secured primarilythrough: (a) 'twinning" arrangement with a foreign Chamber of Commerce located on a targetmarket for Guinean products; this arrangement would include technical assistance; (b) provisionof operating facilities and (c) training for the Chamber's staff.

3. Adequate financial resources: CCIAG would be granted "centimes additionnels" (aparafiscal tax levied on turnover) on a regular basis, this providing resources for the Chamber'soperational and promotional costs. CCIAG would also generate additional and increasingresources through admittance fees from new members, membership fees and payment of servicesby private operators. The Chamber's budgetary forecasts for operational, promotional andinvestment costs reflect declining Project funding and gradual increase of CCIAG own financialparticipation, with the objective of complete by project.

4. New oryanizational structure: The Chamber would incorporate a new, Export PromotionDivision, including three specialized sections: (a) Technical Export Standards dealing the withidentification of exporters and exportable I roducts and specification of export standards; (b)Foreign Trade Regulations and Procedure-, --ticularly with reference to access to target marketsfor Guinean exports; and (c) Business Partnerships, in charge of both business and joint ventureopportunities on foreign markets. A One-Stop Window for export procedures would also bedomiciled at the CCIAG as an independent unit under the Export Promotion Division.

National Agriculturtl Exoort Prolect

Guinean Chamber of Comerco. Industry and AEricultttt (CIA)

Chart 1. Orsnlzatlonal Chart

SECRETlY GEUIL

CENTRALSECRETMRIATj.

GENERALSERVICES

FI . . .. .. .. .. .....ADMINISTRATIVE STUDIES, EXPORT ECONOMIC LEGAL coAND FIKANCIAL INFORMATION PROMOTION PROMOTION AND DIVISIONDIVISION I AND DOCLUHENTATIOW -----. DIVISION ... DEVELWPHENT

DIVI ISbN IDIVISIONiL-------------------- ................... ....DVSe

TRADE AND TRAINING INDUSTRY AGRICUTURESERVICES SECTION SECTION AND CRAFTSSECTION SECTION

|~ ~~~~~~~~~~~~~SC I

New structure to be created under the project(see, next Organizatlal Chart)

OQ

National ALricultural Export Prolect

The Gufnean Chamber of Commeree. Industry and Aaricultur. (CCIAG)

Chart 2. Pr^osed Export Pranotian Divison

STUDIES; EXPORT ECO0IMICINFORMATION PROMOTION PROOTION ANDAND _... I DIVISION ......... DEVELOPMENTDOClUIENTAIION DIVISIONDIVISION

.................. ..... .............

| fE-STOP

TECHIUICAL FOREIGII TRADE BUIIIESSSTANDARDS REGULATIOIIS PMTKERSH IPSSECTIO AN1 D PROCEDURES SECTION1

p.

a -

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Annex 3Page 1 of 2

REPUBLIC OF GUINEA

NATIONAL AGRICULTURE EXPORT PROMOTION PROJECT

Presentation of Professional Organizations

A. Overview

1. In the export sectors concerned by the project, most of the existing professionalorganizations have been created only recently and still have weak operative capacity. The mainorganizations are: (a) in the fruit and veaetable sector, four associations have been formed: (i) CLIFEL,the Interprofessional Liaison Committee for Fruits and Vegetables; (i) the Federation of Horticulturists,which deals with fruits, vegetables and flowers; (iii) AGRIFEL, the Federation of Fruit and VegetableProcessors; and (iv) REFLEG, a Union of Fruit and Vegetable Exporters; (b) in the coffee/cocoa sector,three associations have been launched: {i) the Union of Coffee/Cocoa Producers; ii) the ProfessionalAssociation of Coffee and Cocoa Exporters (APEC); and (iii) the Coffee/Cocoa InterprofessionalCommittee, which has given birth to a Permanent Technical Secretariat, domiciled at the Chamber ofCommerce; and (c) in the fishino sector: the National Union of Guinean Fishermen, grouping togetherboth industrial and non industrial fishing.

2. With the exception of CLIFEL, REFLEG, the Fishermen's Union and the Federation ofHorticulturists, most of these organizations remain in an embryonic state and are yet to become fullyoperational. All have written statutes - often of a oifferent type - which have been filed for registrationwith the National Directorate for Decentralization (DND). Each of these associations was createdunder the auspices and is a member of the Chamber of Commerce. Professional organizations havealso been established in other sectors of activity, such as the National Road Transporters NationalUnion (UNTRG), the Guinean Association of Women Entrepreneurs (AFEG) and the Guinean Union ofBusinesswomen (GFAG).

3. The common objectives of these associations are to : a) represent and defend theinterests of their members; b) act as a lobby vis-a-vis the authorities; and c) contribute to theorganization of their respective sub-sectors at each stage of the export chain: production, post-harvesting, processing, packaging, transport and marketing. The Chamber of Commerce has animportant role to play in favor of these professional organizations by : a) fostering their creation; andb) supporting their activities, with a view to ensuring both vertical complementarity within each sectorand horizontal linkage across sectors.

B. Interorofessional Liaison Committee (CLIFEL)

4. The Comite de Liaison Interprofessionnel des Fruits et Legumes was created in April1991 under the aegis of the Chamber of Commerce. The objective of this Committee is to serve asinterface between the profession (producers, processors and exporters of fresh and processedfruits/vegetables on one hand, and carfiers, forwarders and other participants in the export process andthe authorities on the other hand. The Committee also acts as official spokesman of the Fruit andVegetable sector vis-a-vis foreign professionals (e.g. the EEC affiliated COLEACP). CLIFELencompasses the whole horticultural profession and consists of three separate groups : (a) theproduction group, represented by the Guinean Federation of Horticulturists; (b) the export group whichwill be represented by REFLEG provided the latter succeeds in regrouping all the fruit and vegetableexporters together; and (c) the processing group, represented by the Federation of Fruit and VegetableProcessors IAGRIFEL). Each of these member Associations appoints delegates to CLIFEL who electsan Executive Committee. The first constituent assembly of CLIFEL was held on April 25, 1991.

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Annex 3Paae 2 of 2

C. Federation of Horticulturists

5. The Federation of Horticulturists was initially created in 1986 under the name of FruitFederation, by the fruit producers of the former official cooperatives (mainly of pineapples andmangoes in the maritime region), as a private cooperative association recognized by the DND. TheFederation's name was recently altered in order to include producers of vegetables and flowers. Theobjective of the Federation is to promote the following groups of activities: (a) production, processing,transport, storage and marketing of agricultural products originating exclusively from cooperatives; (b)supply of inputs and equipment required for farm production, including seeds, fertilizers, transport andagricultural equipment; (c) acquisition, construction and equipment of buildings, workshops andwarehouses; (d) access to agricultural credit which can be granted to the Federation; and (e) moregenerally, all economic, social and training activities in line with the cooperatives' objectives. One ofthe major unions within the Federation is the Prefectoral Union of Kindia Cooperatives, which groupstogether eight fruit cooperatives and three cooperatives of vegetable producers. These cooperativesbenefit from a long tradition of cooperative activity and have well defined statutes. They have overone thousand members, with over 15,000 ha of farming land, and representing a potential in excessof 100,000 tons of fruit and vegetables.

D. Union of Fruit and Venetable Exvorts (REFLEG)

6. The Regroupement des Exportations de Fruits et Legumes de Guin6e was created in1987 on the initiative of the Chamber of Commerce. Its statutes were registered in 1990 as a privatenon-profit organization. REFLEG's objectives are to: (a) propose and implement all measures andactions aimed at developing the production and exports of fruit and vegetable export activities; in thisregard, it aims to act as main government counterpart representing the private sector; (b) establish andpromote a quality label on foreign markets, disseminate amongst its members packaging not ms andquality required on the international markets; (c) negotiate with the producers, on an annual basis,farmgate prices for major export speculations; (d) negotiate with carriers (road, air and sea) freightcapacity and rates for each campaign; (e) negotiate at best possible price the purchase of equipmentand packaging material essential to the members' activities; (f) seek grants and loans from donors andfinancial institutions; and (g) inform and train its members in cooperation with national and internationalpromotion institutions, in all fields related to production and marketing.

7. REFLEG is composed of thirteen private export companies. During the 1989-1990export campaign, REFLEG claims that its members exported close to 2,800 tons of fruit, out of a totalof 3,000 tons official exports.

E. The Guinean Association of Women Entreoreneurs (AFEG)

8. The Association de Femmes Entrepreneurs de Guinee is a non-goveMment organizationof a socio-economic type created in 1987. AFEG's objective is to regroup on a free and voluntarybasis, women entrepreneurs, with a focus on training and strengthening of their productive activities.AFEG specifically aims at: (a) fostering the development and ensuring co-ordination of women'sproduction initiatives, in order to promote activities at grass-root level; (b) study and establish actionplans designed to improve production; (c) present these action plans to donors for funding; (d) organizetraining seminars on management, marketing and production; and (e) encourage exchange ofexperience with other women's organizations both in Guinea and abroad. AFEG claims to have over370 members and has opened branches in Kindia, Mamou and Lab&. It has already implemented avariety of activities, particularly in training, participation in national and international trade fairs,creation of professional sub-groups and setting-up of small processing and preserving units forvegetables, fruits and other agricultural products, some of which for export.

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Annex 4Page 1 of 7

REPUBLIC OF GUINEA

NATIONAL AGRICULTURAL EXPORT PROMOTION PROJECT (PCPEA)

Letter of Aaricultural Exoort Development Policy (LPDEA)

The Government of the Republic of Guinea has prepared a Letter of AgriculturalExport Development Policy (Lettre de Politiaue de D6veloopement des Exoortations Aaricoles -LPDEA) which has involved close co-operation between the Guinean ministries/institutions(public and private) concerned, and with the donors. This Letter is a follow-up of the Letterof Agricultural Development Policy (Lettre de Politiaue de Dovelogoement Aaricole - LPDA,September 1991) and deals specifically with the agricultural export sub-sector. Its overallobjective is to define a development strategy for agricultural exports, including the policymeasures to be taken in order to create/improve the incentives framework in this sector. Itserves as basis for the conditionality and for implementation of the PCPEA, the latter being theinstrument for supplying the means to remove the constraints to exports and support theGovernment's strategy.

The LPDEA (I) is part of the national adjustment program and (Il) maps out astrategy and attendant measures designed to eliminate the main constraints to agriculturalexports.

-. THE LPDEA IS PART OF THE NATIONAL ADJUSTMENT PROGRAM

Under the national adjustment program, the Government has agreed to thefollowing reforms that affect the agricultural export sector.

A. Macro-economic. These measures implemented since 1986 focus on: (a)disengaging the State from productive sectors and streamlining the public sector; (b) assistingthe emergence of a liberal economy, particularly through implementation of realistic exchangerate, interest rate, price and trade policies; (c) redressing fiscal and balance of paymentsdisequilibria; (d) reorganizing the banking sector; and (e) adopting a new investment code. Inaddition, the Government has launched a large investmemn program, particularly to address theneed of basic infrastructure.

B. Private sector. Reforms specifically related to the private sector E e addressedmainly under the Private Sector Promotion Program IPSPP) which is currently beingimplemented by the Government with the assistance of the World Bank. The PSPP aims atsupporting a series of reforms intended to improve the general investment climate in Guinea.Its objective is to assist in setting up a regulatory, incentives and institutional frameworkdesigned to improve the business environment and encourage local and foreign investmentsin productive sectors.

Under the PSPP, the Government has agreed to: (a) simplify the legal andregulatory framework (procedures for the creation and registration of companies; liberalizationof work regulations; enforcement of private property regulations, particularly with respect tocommercial real estate); (b) increase efficiency of the overall incentives set-up (by enforcingthe new customs and investment regulations; eliminating distortions concerning advantagesgranted outside the scope of the Investment Code; streamlining the Customs Department);

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Annex 4Page 2 of 7

(c) improve efficiency of the investment promotion Institutional framework; and (d) upgradefinancial policy and operational framework (by reforming the interest rate in order to increaseresource mobilization at local bank level; rationalizing the credit system; improving theregulatory and judiciary environment of banking operations and reinforcing BCRG's follow-upcapacity of the banking system).

C. Aaricultural sector. The Government's general strategic orientations andadjustment measures in the agricultural sector are presented in a Letter of AgriculturalDevelopment Policy (LPDA) (September 1991). The LPDA is a policy document that is meantto serve as a comprehensive framework for the development of the agricultural sector(including agriculture, animal husbandry, forestry and fishing). It aims specifically at: (a)defining the major development orientations in the sector consistent with the national priorities;(b) establishing a program of actions, including the required regulatory and institutionalmeasures and specific operations in support of these measures; and (c) proposing projects tobe incorporated into the 'rolling' Public Investment Program (PIP). The LPDA was designedwith a view to be completed by other Letters of Development Policy in a number of specificsub-sectors such as agricultural exports.

Under the LPDA the Government agrees to five sets of strategic options andattendant measures to be taken: (a) privatization, liberalization, and State disengagement; (b)decentralization, emergence of producers' associations and local communities, transfer ofresponsibilities to local collectivities; (c) food security, revival and diversification of exports;(d) economic and financial equilibria; and (e) rehabilitation of the productive basis andprotection of the environment.

II. THE LPDEA DEFINES THE STRATEGY AND MEASURES TO PROMOTE AGRICULTURALEXPORTS

The Government's strategy regarding agricultural exports aims at: (a) creatingan enabling environment for exports at regulatory, institutional and operational levels; and (b)eliminating or reducing the specific constraints prevailing in each export sub-sector (fruits andvegetables, fishing, industrial crops - coffee, cocoa, rubber, cotton, etc.). A golicy and oroiectactivity matrix for the agricultural export sector is attached. This matrix lists the constraintsthat have been identified, the policy measures and actions already taken, the policy measuresand actions to be taken, together with the main institutions concerned and the activitiesanticipated under on-going projects and programs.

A. The main strateoic orientations

With view to promoting agricultural exports, the Government agrees to thefollowing strategic orientations: (a) at the institution level, to support the professionalorganizations (including the Chamber of Commerce for its export-related activities), as keyvehicles for institutional development in the private sector; (b) at the groduction level apartform cotton and rubber which are being developed under fili6re-typeo projects, to focus effortson coffee and, in the horticultural sub-sector, on fresh pineapple and mangoes, as they are theonly products than can be relied upon to generate the critical mass needed to give impetus tothe export sector; a second priority should be the industrial production of fruit pulp (mango andpassion fruit) and fruit juice, to take advantage of side products that cannot be exported fresh;(c) at the commercial level to export products of high quality, mostly to the West-Europeanmarket; a second priority should be market diversification to take advantage of (i) profitablecommercial niches for certain products (e.g. ginger, cherry tomatoes, cut flowers, chilies,sences of perfume, etc.) whose market is small, but lucrative and fast-expanding, {ii) emergingnew markets (sub-regional markets, Eastern Europe, some Middle-East countries, etc.) forlower quality products, and (iii) off-season markets (e.g. quality vegetables during the winter);

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Annex 4Page 3 of 7

(d) at the manaaement level. to target the smaliholders and the Small/Medium Enterprises(SMEs) which are considered the agents for the long-term development of the sector; in theshort-to-medium term, support should also be given a priority to the nucleus estates which arebetter equipped to generate the critical mass of production and can be relied upon to provideextension to surrounding outgrowers; and (e) at the aeneral operational level to provide therequired support services still to be established in Guinea (research, extension, credit, accessroads, etc.) which eventually will become the responsibility of the beneficiaries.

To implement the above strategy, the Govemment agrees to take the measureslisted in the attached matrix and presented below.

B. The reaulatory, fiscal and administrative environment

In order to create an enabling environment for agricultural exports, theGovemment agrees to take the measures in the following areas:

(a) Exchanae reaulations. The compulsory remittance of foreign currencyeamings by exporters to the authorities, the ban on foreign currency accounts and restrictedquotas for foreign currency allocated for trade missions are viewed as constraints by exporters(Matrix Section Al).

(b) Customs reculations. Regulations related to the temporary importation ofinputs intended to be re-exporte I (particularly packaging material) are not consistently enforced(Matrix Section A2).

(c) Land reaulations. The lack of land ownership rights deprives privateoperators of collateral for bank loans (Matrix Section A3U.

(d) Export orocedures. Private operators confront complex and burdensome(therefore costly) administrative export procedures. These procedures in addition have to becompleted in a variety of institutions (Matrix Section 61).

(e) Non-enforcement of enacted measures. The Government does not havethe means and/or the will to enforce and see to the effective follow-up of enacted regulations,thus contributing to the deterioration of the general business climate (Matrix Part A).

C. The institutional framework

The Govemment agrees to revamp and strengthen the operationai capacity ofkey institutions responsible for representing and/or promoting the interests and activities of theprivate sector, particularly in the field of agricultural exports. This regards inter alia:

(a) The Chamber of Commerce ICCIAG). The CCIAG is currently the onlyInstitution emanating directly from and representing the Guinean private operators. TheGovemment agrees (i) to give adequate statutes to CCIAG to guarantee its independence vis-a-vis the Government and means commensurate with the need to perform its role as a catalystfor private initiative and to foster dialogue between the Govemment and private operators, and

(ii) to give specific responsibilities with respect to export promotion, information on foreignmarkets and training (Matrix Section 82).

(b) Professional Organizations. Most of the Professional Organizations thatcurrently exist in export sub-sectors have been created recently and are in embryonic state.The Govemment agrees that (i) they be strengthened and that they operate freely lii) newones should be created in export sub-sectors that are not yet structured, (iii) Interprofessional

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Annex 4Page 4 of 7

Committees be created for each type of activity (production, processing, and marketing) sothat inter-sectorial "horizontal" links be organized, and (iv) the Chamber of Commerce wouldbe used to foster the emergence of these organizations (Matrix Section B3).

(c) Cooperatives. The cooperative movement is still in embryo. TheGovernment agrees (i) to foster the development of independent and operationally-orientedcooperatives, (ii) to assist them to increase their organizational and manigement capacity,Oiii) to make the Cooperatives Development Project (Projet de Developpement du MouvementCooperatif en Guinee-PDMCG) operational, and (iv) to delineate MARA's and SED'sresponsibilities regarding agricultural cooperatives (Matrix Section B4).

(d) Financial intermediation. In this field there is a two pronged deficiency: (i)a lack of equity funds in the hands of Guinean investors, and (ii) insufficient access to financialservices and credit in rural areas. The Government agrees to take the required measures inthese two areas (Matrix Part C).

D. The onerational environment

Guinean exporters are confronting constraints -- both of a general and technicalnature - that prevent the development of their export businesses. The Government agrees totake the required measures to remove these constraints.

(a) The aeneral constraints are related to the business climate in Guinea, whichis insufficiently conducive to the development of private sector activities (exports in particular).The Government agrees to foster a climate of confidence in order to stimulate Guinean privateinvestments, and to attract and retain foreign investors. The government notes that this is allthe more important that the revival of agricultural exports relies on the active participation offoreign private partners from whom is expected technical, financial and commercial support,together with the necessary credibility to give impetus to exports (Matrix Part A and Section61 mainly).

(b) The technical constraints are present at every stage of the exportindustries. They concern inter alia production technology (improved varieties, phyto-sanitarycontrol, etc.), extension, post-harvesting, storage, processing, transport and marketing. Asregards transport the excessive cost of both domestic and international transport is a stronghandicap to exporters. Furthermore, adequate solutions will need to be found to address thespecific problem related to inputs, regarding both financing and organization of a distributionnetwork. The Government agrees to take appropriate action to remedy the above situation(Matrix Section D).

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VATIONAL AGRICULTURAt EXPORT PROMOTION PROJECT (PCPEAIrouCY AND PROJECT ACTIVITY MATRIX foR THE AGRICULTURAL EXPORT *ECTOR DCl)

CONsTAfTAST POLICY MEASURES ANDIOR ACTONS RPOtOCy JASUJES ANJKR ACrS IECT ACTIVTETAltEN TO BE TAKEN

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Annex 5Page 1 of 3

REPUBLIC OF GUINEA

NATIONAL AGRICULTURAL EXPORT PROMOTION PROJECT

Terms of Reference of Resident Technical Assistants

1. National Coordinator (nationally recruited)

Title/Accountable to: National Coordinator of the PCPEA, Head of the Project Management Unit,reporting to the Minister of Planning.

Location/Duration: Conakry. Frequent visits up-country and occasional trips abroad. Five-yearappointment.

Resoonsibililin: National Coordinator (NC) to assume the task of project management as specified inthe project management contract (contract to provide in particular for full delegation of authority overproject implementation up to US$ 150,000). In this connection, NC to be responsible of all operationalaspects of project implementation, and, more broadly, of the monitoring of the regulatory andinstitution framework of the agricultural export sector. NC to be specifically responsible for the follow-up of the project institutional components (Chamber of Commerce and professional organizations), aswell as important dossiers in which the Government is involved in various capacities. To the aboveeffect, NC to assure liaison with technical departments and professional organizations responsible forpolicy-making in the agricultural export sector, and interface with donors intervening in the sector.Lastly, NC to be responsible for preparing semestrial progress reports, as well as Mid-Term Review inPY3.

Qualifications: Agro-economist, with at least 10 years of experience of project or corporatemanagement in the field of rural development or agricultural export promotion.

2. Technical Coordinator (nationally recruited)

Title/Accountable to: Technical Coordinator of the PCPEA, reporting to the National Coordinator ofPCPEA.

Location/Duration: Conakry. Very frequent visits up-country and periodic trips abroad. Five-yearappointment.

Responsibilities: Technical Coordinator (TC) to assume the task of supervising the project production(research, extension, SME promotion, access roads) and financial intermediation components (MutualCredit and Private Investment Fund). TC to be also responsible of project Monitoring and Evaluationactivities, as well as preparation of technical supervision reports of the components which he willsupervise. TC to liaise, for relevant technical matters, with all other projects and private operatorsestablished in the agricultural export sector.

Qualifications: Agricultural Economist or agriculturalist with at least ten years of experience intechnical project or corporate management in the rural development or agricultural export promotionsectors, as well as knowledge and experience of private investment financing techniques.

3. Institution Soecialist (internationally recruited)

Title/Accountable to: Advisor to the National Coordinator, reporting to the latter.

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Annex 5Page 2 of 3

Location/Duration: Conakry, with visits tci local L ranches of the Chamber of Commerce andprofessional organizations, and occasional trips abroad to accompany delegations. Three-yearappointment.

Resoonsibilities: support the Chamber of Commerce and professional organizations fromadministrative, legal and operational standpoints, with a view to assisting their emergence/establishment, reinforcing their operational capacity, strengthening their ability to promote the privatesector, and improving their effective role/ image as a catalyst for economic development andinstrument for dialogue with authorities. The expert would focus on export promotion, as a newservice to be developed for the benefit of private operators. His/her job would involve substantialtraining for the Chamber's and professional organizations' staff on one hand and private sectoroperators on the other.

Qualifications: Senior professional with expertise on chambers of commerce and/or professionalorganizations, with at least ten years of experience (Experience in Africa would be highly desirable).

4. Small and Medium Enterorises (SMEs) specialist (Internationally recruited)

Title/Accountable to: Advisor for Small and Medium Enterprises (SMEs) at the Project ManagementUnit. Reporting to the National Coordinator.

Location/Duration: Conakry, with visits within the country and occasional missions in the sub-regionand abroad. Three-year appointment.

ResDonsibilities: (a) provide support as needed to SMEs both for their establishment and for theircurrent management (from technical, administrative/financial and commercial viewpoints). SMEssupported will be both production and service related; (b) coordinate the specialized studies and short-tern consultant missions carried out under the project that relate to SME development; (c) assist inthe search tor potential partners for Guinean SMEs and subsequent establishment of partnershipsbetween them; (d) follow up and coordinate the different agricultural and agro-industrial componentsas they impact on SME development; and (e) assist in the management of the Pilot Action Fund andin particular vet proposals established by SMEs prior to approval, and supervise implementation ofthese projacts thereafter.

Qualifications: Senior agronomist with large experience in export crops, preferably acquired in theprivate sector. Ten years of experience, with minimum of five years in Africa, preferably in the field.

5. Research Specialist (Internationally recruited)

Title/Accountable to: Advisor for fruit research at IRAG Fruit and Vegetable Division, reporting to theGeneral Director of IRAG.

Location/Duration: Foulaya with frequent short-term missions within the country and to Conakry.Three-year appointment with possibility of extension. This position would be funded by the FrenchFAC.

Resoonsibilities: Assist in implementation of the Fruit and Vegetable Division at IRAG; design andequip offices and laboratories, recruit and train employees; set up of the fruit research programs, inclose cooperation with professional organizations, nucleus estates and the Agricultural Extensionproject (PNVA); subsequently assist in the implementation of these programs.

Qualifications: Senior Agronomist (with fruit specialty ) with at least ten years of expdrience in fieldof expertise, of which five in Africa. The expert would be seconded from and back-stopped by a largeOrganization specialized in Tropical Agriculture Research.

6. Horticultural Technician (Internationally recruited)

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Annx 5Page 3 of 3

TitlelAccountable to: Advisor at IRAG Fruit and Vegetable Division, reporting to the Director of IRAGthrough the Director of the Foulaya Research Center.

LocationlDuration: Foulaya with frequent short-term missions within the country and to Conakry;three-year approintment.

Responsibilities: (a) advise in the design of a program of adaptive research trials for fruits andvegetables, with focus on project areas; (b) subsequently provide assistance in the implementation ofthis program; and (c) train counterpart staff in the area of field experiments. These responsibilities willinvolve close contacts with nucleus estates, cooperatives and the PNVA, with a view to definingcontracts/conventions with them to establish the trials. Special attention will be devoted toestablishing an operational team of technicians within the Foulaya Center with capacity to undertakeresearch trials in the field.

Qualifications: Agricultural Technician/Agronomist with at least ten years of experience in adaptiveresearch for horticultural crops, of which at least half acquired in Africa in the field.

7. Producer Groups/Coogeratives Snecialist (Initernationally recruited)

Title/Accountable to: Advisor to the Director of the Cooperative Development Project (PDMCG),reporting to the latter.

Location/Duration: Kindia, with frequent trips to Conakry and the six project prefectures in Maritimeand Middle Guinea. Three-year appointment.

Responsibilities: Assist the PDMCG Director in implementing the PDMCG field activities, with focuson product marketing and financial/ administrative management. His/her duties will include assistanceto the selection of the cooperatives to be supported by the PDMCG, support for the establishment ofthe cooperatives selected (legal statutes, organizational structure, etc.) and assistance toestablishment/implementation of administrative and financial management systems. He/she will alsovet requests for funding under the Pilot Action Fund emanating from cooperatives. Subsequentely,he/she will establish a system to monitor the activities of the cooperatives selected and contribute tomore general studies aimed at defining ways to market the cooperatives production. As part of his/herduties, the expert will have to undertake the training of the PDMCG's field staff. He/she will work inclose relationship with the staff of the Agricultural Extension project (PNVA) that will deal withcooperatives production activities.

Qualifications: Senior specialist of producer groups/cooperative management, with solid knowledgeof marketing and administrative/financial systems. At least ten years of experience in that field, ofwhich five years in Africa.

- 62 -

Annex 6Page 1 of 3

REPUBLIC OF GUINEANATIONAL AGRICULTURAL EXPORT PRCY40TION PROJECT

PRIVATE INVESTMENT F|N

Table 1. List of Potential Investrtnt Prolects

Total Costs l/ Equity neededNumber -------- -

GNF billion US, million USS millionTwaJ if Project

New Project 19 40.3 57.6 26.9Extension/rehabilitation 11 15.4 22.0 7.3Extenwion fottlowing debt

restructuring 5 4.0 7.0 2.9

Total 398 37.1

Sectors of Activity

Agro-Industry (export) 13 17.7 25.3 8.1Fishing 2 2.5 3.5 1.8Mining 51 4.3 20.4 12.8inputs/Packing iteriat 2 0.7 1.0 i.0Storage 2 10.1 14.5 5.3Iuport/substitution 6 7.1 10.2 4.3Other 5 7.3 10.4 4.2

Total 35 59.7 85.3 37.1

*/ Not including revolving fiuMd

- 63 -

Annex 6Page 2 of 3

REPUBLIC OF GUIE

NATIONAL AMICUtTURAL EXPORI PRONUTION PROJECT

Private Investment Fund

Processina Chart

Selection of Fund Promoter( through short-list cometitive bidding)

Signature of Signature oflot Stbsidiary Loan agreinterim contract

Estabtishment of Fund Management Campany(majority participation of Fund Prxmoter)

Signature of 2nd subsidiary Signature of five-yearLoan Agreement management/services contract

Upon first disbursement of funds under Loan Agreement,Nanagement Company starts operating

IEstablishment of Investment Fund

(mobilization of capital from private Guinean investors,private foreign investors, institutional investors, and

debt/equity swaps)

Signature of long-term management contract betweenManagement Company and Investment Fund

- 64 -Annex 6

Page 3 of 3

GUINEA

NATIONAL AGRICULTURAL EXPORT PROMOTION PROJECT

Private Investment Fund (Ct'd)

Tablo 2. Estimated Ocerating Budget of the Fund Manasement Conmoan

C000s, constant 1991 USS)

...................................................................

93/94 94/95 95/96 96/97 97/98 TotalPY1 PY2 PY3 PY4 PYS

1. Oeratins Revenues

1. Mnagement Fees 38 113 150 150 150 601

2. Cameission on Dividonds 0 5 16 53 63 137

3. Commission on Capital Gains - - - - -

4. Advisory Services 9 29 42 46 51 177

Total 47 147 207 228 251 880

:1. Goeratina Exoenes

1. Foreign Personnel 300 300 300 300 300 1.500

2. Local Personnel 40 40 40 40 40 200

3. Rent 36 36 36 36 36 180

4. Equipment and Vehicles 127 31 31 69 31 289

5. Travel 20 20 20 20 20 100

Total 523 427 427 465 427 2,269

Operating Deficit (476) (280) (220) (237) (176) (1,389)

3/ The financial projections are based on a target capitalization of S5 million fully paid-in byyear 3. end on break-even cash flow assumptions for the management company achieved at the end ofyear 7 It is assumed that the average project in the investment portfolio will ear an annual 12percent on equity. and that capital gains will be realized after an average investment period of 7years, with investments sold for 2 times retained earnings. The table does not include costs to beincurred by the selected Fund Manager (12 man-months) prior to the formal establishment of thePrivate Investment Fund. The yearly cost estimtes represent a S-year average of total costs inconstant dollar.

REPUBLIC OF GUIIFANATIONAL AGRICULTURAL EXPORT PRONOTION PROJECT

su nmry Acwunt by Project CoaponantGSF million

Institut Cha br Profess Small/md Private Project Project Physical Priceton sup. of lonaI Adaptive Enterpri Coopera Access CrEdit Investa Hansmg Prep. Contingencies ContingenciesContact Comrce Org. Ext. Research sea tives Roads Nutual ent Fund nt Facility Total I X1. INYSTIENT COSTS

A. CIvit wrks 0 72 0 10 10 0 0 3214 0 0 0 0 3405 1S 16B Vehicles 26 52 83 82 55 23 125 0 52 0 95 0 593 10 aC. gods *nd Equipmnt 0 100 103 13 330 0 8S a 0 0 0 0 631 10 50. Technicel Assistance1. Short Term Cosultents 4 0 47 117 371 164 81 0 0 214 0 0 1435 10 132. Residnt Experts 487 0 0 0 838 467 389 0 0 0 0 0 2181 0 9_......... ...................... ........ ........ .............................................................................................

Sib-total 928 0 47 117 1209 631 470 0 0 214 0 0 3616 4 11E. Nat.Sservices Contracts 32 0 0 1836 0 n 0 0 942 1610 1745 0 6237 S 13F. Training 130 9? 0 209 44 249 178 0 10 0 0 0 917 10 15 10. Project Prep. Fceltity 0 0 0 0 0 0 0 0 0 0 0 1756 1156 0 0H. Pilot Action ur&d 0 0 0 0 0 260 0 0 0 0 0 0 260 0 0Total INESTHT COMT 1116 321 233 2270 1744 12 85 3214 1004 1824 180 1756 17415 7 11 a

It. REOUIENT COSTS...................

A. Slaeri 4 Trvtl Allow. 0 n 110 168 96 0 283 0 0 0 0 0 729 0 280. Vehicle/Equipat OAI 0 38 8 110 92 0 130 0 0 0 0 0 458 15 12C. Other Incr. Operating C. 0 121 88 19 173 0 86 0 0 0 0 0 487 15 22Total CUEUT COSTS 0 23 28 297 361 0 499 0 0 0 0 0 1674 9 22Total ASELIN! COSTS 1116 s5s 519 2567 2105 1235 1357 3214 1004 1824 1840 17M 19069 7 12PhY Ical ContingencIn 68 49 149 138 35 as 482 53 102 97 0 1325PrIcc Contingncfes 136 77 69 286 249 127 161 539 97 184 376 0 2300 7................... ..... ...... ...... ;i.......... ....... ..................................................................................Total PRECT COSTS 1320 693 637 3001 2492 1397 1606 4235 1154 2110 2313 1756 22714 7 10

Taxes 14 63 70 132 107 0 100 635 134 174 302 0 1731 9forelin ExcbaW 1073 390 342 2076 1791 1007 930 2852 715. 1674 1132 1580 15571 7S/21/1992

REPUBLIC OF GUINEANATIONAL AGRICULTURAL EXPORT PROMOTION PROJECT

GNF miltion

Project Caq2onents by Year

Ban Costs Total...................................................................................

CNF USS92/93 93/94 94/95 95/96 96/9? Mllion Million

A. institution Development1. Institution Sup. Coop. 309 283 283 121 121 1117 1.22. Chmiber of Commerce 294 83 66 74 35 552 0.63. Professional Org. 293 77 64 63 21 51 0.6..............................................................................

Sub-totaL 896 443 413 258 177 2187 2.4

B. Pro(cbotion Support1. Extension 846 1204 307 110 99 2566 2.82. Adaptive Research 850 504 448 148 155 2105 2.33. Smll/Nedius Enterprises 320 296 296 162 162 1236 1.34. Prod. groups/coops 604 375 379 0 0 1358 1.55. Access Roads 643 63 643 642 o43 3214 3.5

...... ;;..... .......................................................................

Sub-total 3263 3022 2073 1062 1059 10479 11.4

C. Special Program1. Credit Mutuel 487 258 258 0 0 1003 1.12. Private Investment Fund 809 302 244 264 205 1824 2.0

................... ............................ .......................................................................

Sub-total 1296 560 502 264 205 2827 3.1

0. Project Prep. & Mnag_emnt1. Project Management 429 318 357 379 357 1840 2.02. Project Prep. FacilIty 1756 0 0 0 0 1756 1.9

..... ............ ................................................................

Sub-total 2185 318 357 379 357 3596 3.9

Total BASELINE COSTS 7640 4343 3345 1963 1798 19089 20.7Physical Contingencies 433 288 234 192 178 1325 1.4Price Contingencies 210 479 599 465 547 2300 2.5

...................................................................................

Total PROJECT COSTS U83 5110 4178 2620 2523 22714 24.6

Taxes 436 386 366 273 270 1731 1.9foreign Exchange 6311 3391 2629 1668 1572 15571 16.9

5/21/1992 I O0

REPUBLIC OF GUINEANATIONAL AGRICULTURAL EXPORT PROMTION PROJECT

Susary Accounts by Year

Totals Including contingencies Totals Including ContingenciesGNF million US$ nillion

92/93 9 ./94 94/95 95/96 96/97 Totat 92/93 93/94 94/95 95/96 96/97 Total1. INVESTMENT COSTS....................

A. Clvil Works 989 807 848 888 931 4463 1.1 0.9 0.9 1.0 1.0 4.8B. Vehicles 439 0 93 152 16 700 0.5 0.0 0.1 0.2 0.0 0.8C. Goods and Equipment 584 63 29 23 25 724 0.6 0.1 0.0 0.0 0.0 0.8D. Technical Assistance1. Short Term Consultants 424 325 305 349 364 1767 0.5 0.4 0.3 0.4 0.4 1.92. Resident Experts 751 797 838 0 0 2386 0.8 0.9 0.9 0.0 0.0 2.6........... ............................... .......... ............................................................. ................ ..... Sub-Total 1175 1122 1143 349 364 4153 1.3 1.2 1.2 0.4 0.4 4.5 0%

E. Mgmt./Services Contracts 2471 2186 1180 749 741 7327 2.7 2.4 1.3 0.8 0.8 7.9F. Training 258 324 277 132 155 1146 0.3 0.4 0.3 0.1 0.2 1.2G. Project Prep. FaciLity 1756 0 0 0 0 1756 1.9 0.0 0.0 0.0 0.0 1.9H. Pilot Action Fund 52 52 52 52 52 260 0.1 0.1 0.1 0.1 0.1 0.3Total INVESTMENT COSTS 7724 4554 3622 2345 22S84 20529 8.4 4.9 3.9 2.5 2.5 22.3It. RECURRENT COSTS

A. Salaries & Travel Allow. 225 242 250 114 103 934 0.2 0.3 0.3 0.1 0.1 1.0B. Vehicle/Equipment O&U 158 157 153 63 53 584 0.2 0.2 0.2 0.1 0.1 0.6C. Other Incr. Operating C. 175 160 152 98 82 667 0.2 0.2 0.2 0.1 0.1 0.7Total RECURRENT COSTS 558 559 555 275 238 2185 0.6 0.6 0.6 0.3 0.3 2.4Total PROJECT COSTS 8282 5113 4177 2620 2522 22714

............................................................................... ..... ..........

fz -U:O I

- 68 -

Annex 8Page 1 of 2

fPM LIC OF U11EA

NATI0|^ M$ICULUMAL MMOR MMtoAol PRaWM

Technflica AssIstnoe nd U n oenmt/Sacvices ContraqtS

A. T etnicdl Assistance Contra ts

1. Institution Sucoort (Project Management Unit)

PUrDeO to provide apport to privete sector controlled institutions involved in agrifuttural xportUtiTaT~, In particular the Chiwber of Ccemerc and the professional organizations in the fruit/vegetablesector.

DQ crlotions - 3 person-years of resident T.A. S 600, 000- Short-term consultancies S 50000

Training activities S 100.000- Promotlonal activities S 50.000- Provision of comercil inforaution S 50,000- Pertnership assIstance

Total S1,000,000

Procure gt " thod: Short-list international competitive bidding (contract to be procured jointly with theprWoJe t-"Nlegament contract).

2. Institution SUDOort (COLFACP)bgs tto rovide support to private sector institutions nd w private operators for fruft nd vagetable

oggrcrStIon: - Short-term consultancies S 250.000- Training activities S 150OOC- Promotional activities S 50.000- Provision of coamercial informatfon S 50 00

Total S 500.000

trorur nt MMtod: Sole source procurement with the EEC-affilfated Liaison Coemfttee Europe-Art ca r Sef n ciffc for the Promotion of Tropieal Fruits, Off-Season Vgetables, Flors, OrnnmmtalPlants and Spices (COLEACP).

3. Acronomic Research Contraet

PuMoc o to provide specialized upport to the National Institute of Agronomic Resarch (IRAG) for adptiveWorticuRtural research.

Degcrftfln: - 3 person-years of resident T.A. S 450,000- Short-teru corsultancies S 150.000- Laboratory analyses S 50 0Q0

Total S 650,000

Procuremnnt Method: Short-list nternational coopetitive biddfng.

4. Smellt/Mdifu Enterorise (SME) Contract

EPcr.gs: to provide support to satlt/mdius scale enterprises fn the agricultural export sector.Re crl211on: - 3 person-years of resident T.A. S 550.000

- Short-term consultanfes S 230.000- operating expenditures S 70W0

Total S 650,000

mothu r: short-list international copetitive bfdding (contract to be procured jofntly wfth theProJ et n gement Contract).

S. Producer arOUqs/COOgeratIves Sucoort Contract

PurMohh to provide specialized support to the Cooperatives Devlaopmmnt ProJect (P0100) with focus onmarKeting/mnagement activities.

DescCfRtfen: - 3 pnron-yars of resident T.A. S 450,000

-LW: Sole source procurnt with Foundatfon Friedrich Ebert (Gerun MWO).

- 69 -

AnnexmPage 2 of 2

inIC OF 1URUA

BaTIOUIL AlCtOriL EXPOTY PRWSTIo PROJECT

Technfeat Assietatn ed Nme entlSbetvics Cantrwft

8. Services/Manacement Contracts

1. *ProTeelt Mansaent ContractPurpge: to provide technicl, operational and financiaL/accounting support to the Project Management Unit.D seriotgon: - Short-term consultnwcies S 430,000

- Trafning S 200.000- Staff aloraes $ 600,000- Opratng expenditures 6 940 0

Total $2, TMW.O

N&tb Z : Short-list internattonal copetitive bidding (cant act to Include Inst1tution support*n9 S" c-Oncraczas

2. Services C.owtract for Mutual Credit ComonentPurose.: to provide technicaL oprational nd finanicial/accounting support to flopement the Mutuat Creditco_pnnt in the prefectures of Mou nd Kindie.Descriotion: - 2 person-years of resident T.A. S 300,000

- Short-term consultancies S 215,000- Building rehabilitation nd office equipment S 210.000- Staff salaries S 90.000- Incrental operating expenditures $ 380.000Total $1,19f,000

Procurement Method: Sol source uith Centre International de Crddit Mutual (CICO

3. Interim Contract-with Eud Manescer

Purose: to provide short-term consulttnces to assit in the *stablishmnt of the Private invest_nt Fund

Descrfotfon: - Short-term Consultancies S 380,000

Procurement Method: Short-list based international copetitive bidding.

4. Lanes_m_nt Contract with the Fund luMaemnt Conv

Purose: to pravide financial resources to cover a fractionr of the ependitures incurred by the FundMPiiugment Cowany in manging the private investmnt fund scheme.Descriotion: - Resident T.A. CresiduaL w4p. over S years) $1,430,000

- Vehicles and quipmnt S 135,000- Operating expenditures Cresidal of 1st year) A 55 000

Total $1,620,000

Procurement Method: Short-list based international comptitfve bidding.

S. Services Contracts for Agricultural Extension

Purosa:ato provide specialized extension for hortIcultural activities to outgrows t he periphery ofnueu eStates.DeserfIi: - Staff salares S11,200,000

Short-term consultniefs S 680,000- Vehicle and equipment S 280000- Operating costs S 310 000

Total $2,470,000

Procurement Moth-d: Six to eight contracts procured umidr *ole source procurement uIth nuctes estates.

- 70 -

Amex 9Page 1 of 1

REPUBLIC OF GUINEA

NATIONAL AGRICULTURAL EXPORT PROMOTION PROJECT

DISSURSEMENT SCHEDULE AND PROFILE

A. Estimated Disbursement Schedulo

IDA's IDA's Proejct's Estimated Profile Stndard Profi(e S/fL. Se ts Per Semester Cumitative Per Semester CutwLative

USS itlion X US Sillion X

1993 1 2.2 11 - 0It 2.8 14 0.6 3

1994 1 4.6 21 2.1 10II . 6.3 30 3.7 18

1995 I 8.6 40 6.2 30II 10.9 52 7.9 38

1996 1 13.0 63 10.4 50II 15.1 72 12.9 .62

1997 I 16.4 79 14.6 70it 17.7 85 17.1 82

1998 I 18.7 90 17.1 82II 19.6 94 18.7 90

1999 1 20.2 97 19.6 94-I 20.8 100 20.4 98

2000 I 2 0.8 100

A/ Guin6e agriculture project (05/17/91)

B. Disbursement Profile

21

19

17-

iaa - h

14 13

* 12--. 11; 10

a

4-a2

I0133 1994 I 1906 I IM9 I 1997 I 1906 U 1999 U 2OO

IDA Phism Yew0 EaIim t Sn.

- 71 -Annex 10

Page 1 of 2

REPUBLIC OF GUINEA

NATIONAL AGRICULTURAL EXPORT PROMOTION PROJECT

IMPLEMENTATION SCHEDULE

Task Comtletion Date Acencv Resvonsible

Approval of LPDEA At negotiations MARA/CCEF(Completed May 1992)

Approval of funding of nucleus At negotiations MARA/MPF/BCRGestates, Credit Mutuel and Fund (Completed May 1992)Management Company contracts

Establishment of steering committee Before Credit effectiveness MPF

Signature of project management contract Before Credit effectiveness MPF

Selection of Fund Manager and Before Credit Effectiveness BCRG/MPFsignature of interim contract

Signature of the institution Before Credit Effectiveness MCTT/MPFsupport contract with COLEACP

Signature of contracts with two Before Credit effectiveness MARW/MPFnucleus estates (AGRAFRUITS andSOBRAGUI Agriculture)

Launching of ICB for vehicles Before Credit effectiveness PMU

Establishment of detailed I & E system Before Credit effectiveness PMU

Budget forecasts and work plan for CY93 September 1992 PMUto be submitted to MPF

Signature of contract with Credit Mutuel October 1992 BCRG/NPFCompany

Signature of conventions with PNIR, PNVA December 1992 MARA/HPFand IRAG

Launching of ICB for two first road lots December 1992 PMU/PNIR

Signature of conventions with PDMGG December 1992 DND/MPFand SENATEC

First bi-annual progress report December 1992 PMU

- 72 -Annex 10

Page 2 of 2

REPUBLIC OF GUINEA

NATIONAL AGRICULTURAL EXPORT PROMOTION PROJECT

IMPLEMENTATION SCHEDULE

luk Cgmtetion Date Acency Resoonsible

Arrival of Institution January 1993 PMUSpecialist (project management contract)

Arrival of Small/Medium Enterprise January 1993 PMUpecialist (project management contract)

Arrival Research Specialist and Research January 1993 PMU/IRAGTechnician (IRAG Convention)

Establishment of PCPEA kindia Branch January 1993 DND/MPF

Signature of contract with January 1993 DND/MPFFriedrich Ebert Foundation

First bi-annuaL supervision missions First Semester 1993 PMU/executing agenciesof each component

Arrival of cooperatives Specialist March 1993 PMU/PDNCG(Friedrich Ebert Foundation Contract)

First audit of accounts March 1993 PMU

Arrival of resident expatriate director April 1993 PMUof the Fund Management Company

Signature of main contract with Fund May 1993 BCRG/PMUManagement Company

Launching of ICB for two more roads Lots May 1993 PMU/PNIR

Signature of two more contracts with June 1993 MARA/MPFwith nucleus estates

First comprehensive budget forecasts June 1993 PHUnd work plan for CY94

Interim Evaluation of Fund Management December 1994 DND/MPFScheme

Project Midterm Review No later than June 1995 PMU

Legend: PHU - Project Management UnitMPF - Ministry of PlanMing and FinanceMARA - Ministry of Agriculture and Animal ResourcesBCRG - Central bank of the Republic of GuineaPDNCG - Cooperatives Development ProjectOND - National Directorate for DecentralizationCOLEACP - EEC-Affiliated Liaison Committee with ACP CountriesSENATEC - National Service for Cooperatives

REPUILIC OF GUINEA

NATIONAL AI3ICILTUR. EXPIT PMIT01 PROJECT

IDA Stuervision Schdutle

Project Year Nission No. Activity Expected Skill Requirements SWPY1 I Project Start-Up Activities Task Manager 12(FT93) Procurement Review Agriculturalist

Financial Management Environment SpecialSistEstablishment of AE lint Financial AnalystReview of Enviroruental Nitigation Plan M&E Specialist

2 Organization/Management Task Manager oLaunching of Field Activities Financial AnalystExtension Specialist

___________________ ~~~~~~~~~~~~~~~Agronomist/Research Specialist _______

PY2 1 Implementation of Field Activities Task Manager 8(FY94) Financial Analyst

2 Review of Field Activities Task Manager 7Review of Financial Performance for 1993 Financial AnalYstReview of Training Activities Traininc Speciatist

PY3 1 Interim Evaluation of Investment Fund Scheme Task Manager 8(FY95) Procurement and Financial Review Credit SpecialistFinancial AnalYst

2 Mid-Tern Review Task Manager 15ConfirmationJReorienting of Project Design Financial AnalystAgriculturalistMAE specialistEnvirornmental Specialist

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ institution Specialist

PY4 1 liplementation of Field Activities Task Manager 6(FT96) Review of Training Training Specialist

2 Review of Financial Management Task Manager 6_Iplementation of Field Activities Financial Analyst

PY5 1 irptementation of Field Activities Task Manager 6(FY97) Review of Environmental Impact AgriculturistEnvironmental Specialist

2 Implementation of Field Activities Task Manager 8Review of Financial Management Financial AnalystPCR Training Specialist

______________ M KE Speciatist

_ x>

REPUBLIC OF GUINEANATIONAL AGRICULTURAL EXPORT PROMOTION PROJECT

Project Organizational Chart

A~dMWMW AIN F ANCE

! a

t ~~~~~~~~~~~~~~~~~* SIEERI4cWB O IEE* | {(COMITE OE PIOTA

. .

, : , .... . w ..... . , a- -- - - .. .-- -!---.~~~~~~~~~~~~~~~~~* XRJC [M3 XAO&j tERr'

z b ~~~~~~~~~~~* rat

Vahlkd MRM~*SJJIS OF COMMRCE aNTOA.IETOA *MINISTY Of AMRCUL7URE aCf'AD~wwbp ~~~~TRANSPOR MD TOURSM aOF DECENTR1ALIZATION A?QNUAL,RESOURCES a

IXUGp Cth Nd _ aM d)CR a

SENSTECNTWRSE N Re it C

E" NCOOPERPTaES aFa

COLEACPREEC - N d) P b r L _

SENATEC NaftW SSYLOPENT COrPRATVES EXCESIO NULhUPWA mowwftftftvPROECT ERVCE POJET ESATE

VW Nm*" Msftft ol AWtutLffS Rnmvh ~ ~ ~ ~ ~ ~ PNVA

PE FR Nr(e o "qoua RwOf) k*awkCIoIS mowaI CDCAl aeC

- 75 -Annex 13

Pdge 1 of 2

REPUBLIC OF GUINEA

NATIONAL AGRICULTURAL EXPORT PROMOTION PROJECT

Monitorina and Evaluation System

1. Both mvni ring and evaluation activities are perceived as internal management toolsfor project managers ana not as an external control mechanism. Participation by the whole team isessential if they are to be effective tools. With this in mind, once the project is operational, generaltraining in fundamental principles of M&E will be provided for the entire team by a specialized short-term consultancy mission which, inter alia, will emphasize the participatory nature of monitoring, theessential need for teamwork and a problem solving approach within a management information systemframework.

2. The project should continue to build up its information system which started informallyduring the pre-project stage in order to become the center for information in the agricultural exportsector. Strong links have already been established with the newly emerging professional associations,and some of the project's potential beneficiaries, who are an important source of information formonitoring purposes. The continuation of infr mation sharing and exchanging will be a key elementin the ultimate success of the project. By proje. ._ end the 'profession should have become the centerof information, and, to this end, a gradual and systematic transfer to them of all export information willneed to be made by the project management. Progress towards this, along with future plans toachieve it, should be reviewed during the Mid-Term Evaluation (FY3).

3. Monitoring activities will aim at providing the Project Management Unit (PMU) withpermanent information on the execution of each convention/contiact, as well as those componentsdirectly managed by the PMU, with appropriate analysis of implementation problems. The objectiveof routine evaluation activities will be to periodically survey the project's effects on the increase inagricultural exports and of the welfare status of targetted producers. Quick low cost diagnostic studieswill be carried if and when necessary. While the main objective of the M&E system is to serve projectmanagement, ultimately its successful implementation would facilitate both the Mid-Term and theProject Completion reviews.

4. Thus the major tasks in monitoring and evaluation will be as follows:

a) preparing a series of critical path analysis for each convention/contract, as wellas those components directly managed by the PMU;

b) planning and programming (on the base of the critical path analysis) themonitoring work timetable for each convention/contract and projectcomponent;

c) monitoring all components by assuring the systematic collection andprocessing of relevant data;

d) planning and supervising a series of periodic evaluation surveys;

e) initiating short low cost diagnostic studies where appropriate;

f) providing an overall view of the business and administrative climate inrelation to the agricultural export sector;

- 76 -

Annex 13Page 2 of 2

relation to the agricultural export sector; and

g) assisting in the preparation for Mid-Term Review and Project Completion Report.

5. Reviewing these tasks only serves to further emphasize the important need forteamwork but, given the.r key nature, it is also deemed essential that a member of the PMU benominated to assume full responsibility for these activities. He should have major responsibility fortasks au to "dw and full participation in Oew through g". In order to keep the PMU small and dynamicno further staff is envisaged and all surveys will be contracted out to local consultancy firms. An up-to-date directory of such firms listing any specialist skill should be maintained by the PMU. Whenestablishing this directory a quick sui vey of training and support needs for each firm should be carriedout; the possibility of providing them with project support under the SME component should bestudied. It is important that a sociologist should be identif;ed (ideally attached to a local consultancyoffice) at an early stage. Occasionally he/she could be called upon to contribute in survey design andtesting, and more importantly in analyzing any unexpected reactions by the target population. Mostshort diagnostic studies should be carried out by PMU members and every field trip should include timespent with groups and individuals from the targetted population using a problem sc:ving approach andestablishing maximum beneficiary "feed-back", in order that management can adjust or fine tune eachcomponent if and when necessary. Such an approach will greLtly enhance dialogue between the teamand target groups and make diagnostic work easier.

6. Given the number of conventions/contracts and different operators supported by theproject a key element will be the systematic collection and processing of relevant data from thesediverse sources. Training in methodology and approach will be provided by the project in this area(see following paragraph). The project will support but not substitute for the executing agencies.Thus in those components where a M&E system is in place, this collection will be the responsibility ofthe executing agency. Where no such system is in place the executing will need to assure thatadequate data is prepared by their sta'f which will be systematically collected and processed by thePMU technician with a view to producing appropriate informaticn on key management indicators. Allinformation will be collated by the M&E officer, the findings should form the basis for establishingyearly work programs and should be reviewed during each joint supervision mission (PMU andexecuting agencies). Renewal of yearly contracts could be conditional on performance in providingsuch data.

7. Under the M&E component, the project will provide ten person-months of specializedshort-term consultancies to assist in the planning and implementations of the proposed M&E activities.These will be a continuation of the specialized mission, undertaken as part of project preparation,whose purpose were to assist in the design of M&E system. Once the project is operational, the firstof these consultancies will assure a) general training (via a mini-workshop) for the entire PMU team,and b) specific training in planning M&E work-sheets for the M&E officer in order to strengthen thePMU's own project supervision capacity. Further specialized on-the-job training, as well as M&Etraining visits to neighboring countries and participation in regional/sub-regional M&E workshops willbe provided for this officer.

- 77 -Annex 14

Page 1 of 8

REPUBLIC OF GWINEA

NATIONAL AGRICULTURAL EXPORT PROMOTION PROJECT

PRUC; N4. MARKET AND PRICES

Table 1. Pineaoole Yield Levels

Current '996i97Situation 1992/93 1993/94 1994/95 1995/96 Onuard

------------------------------------- tons/ha -------------------------------------

Nuctetz Estates(Gross Produced) (35) (40) (45) (50) (55) (55)Net Exportable 25 28 35 37 40 40

Outarowers(Gross Produced) (25) (30) (40) (45) (50) (50)Net Exportable 15 23 30 30 35 35

I ndeendentS taIholders(Gross produced) (20) (20) (25) (25) (30) (30)Net Exportable 10 12 15 17 20 20

Table 2. Manao Area (ReslantedlGrafted) and Production 1/

CurrentSituation 1992/93 1993/94 1994/95 1995/96 1996/97

-...................................... ha --------------------------ha--------

DanLo areaReplanted - 50 75 100 150 200Grafted 20 50 100 200 500

------------------- -------------------- tons ----------------------------------

Productfio (net exportable) 300 600 1,200 2,500 3,500 5.000

j/ Estimtes for project areag/ 8,000 tons as target for the year 2000

- 78 -Annex 14

Page 2 of 8

REPUBLIC OF GUINEANATIONAL AGRICULTURAL EXPORT PROMOTION PROJECT

Production, Markets and Prices (Cont').J

Tblt 3 Area Under Pineantle: Present Situation, Prolect Years and Year 2000

------ Project Years---------------------------Present

situation 1992/93 1993/94 1994/95 1995/96 1996/97 Year 2000-------------------------------Hectares------------------------------

Nulust Estates

Daboy 15 110 170 220 300 340 450Salguidia ro 95 155 210 270 340 450Sobragui Agriculture 65 95 120 130 170 250Other estates t5 20 25 35 45 75SubtotaL 100 290 440 575 735 895 1,225

Outsrowers

Daboya 15 40 95 110 120 130 150Salgufdia - 30 40 45 60 80 150Sobragui Agriculture - 60 75 80 80 95 150Other Estates - 10 10 10 15 15 25Subtotal 15 140 220 245 275 320 475

Independent Smaltholders Q 80 t05 115 120 140 350

Grand Total 155 765 935 1.130 1 355 2.050

N.B The tigures concern the totol area planted. It is estimated that each year one third is underproduction for nucleus states and outgrowers, and one half for independent smaltholders.

TIbtl 4 P1neanole Production: Present Situation. Prolect Years and Year 2000

-------- --------------------Project Years--------------------------Present

Situation 1992/93 1993/94 1994/95 1995/96 1996/97 Year 2000-.....................--------Tons----------------- _- _-_

NISteus Estates

Daboy 125 1.000 2000 2,700 4,000 4,500 6,000Salguidia 580 900 1.800 2,600 3,600 4,500 6,000Sobraguf Agricultur - 600 1.100 1,500 1,700 2,300 3,200Other Estates 175 250300 500 600 1.000

Subtotal 830 2,675 4,850 7,100 9,800 11,900 16,200

Outurowers

Daboyc 75 300 950 1,100 1,400 1,500 1.700SalguIdia - 250 400 450 700 VI0 1,700Sobraguf Agriculture - 450 750 800 950 1,100 1,700Other Estates - 50 100 100 200 200 300

Subtatat T7 12050 2,200 2.450 3 250 3,750 5 00

Indepenrynt SmlIholders 2f8 1.000 L20 1400 35

Grand Totat l 10 47 10 550 14250 17 050 252100

LJL Production (net exportable) f. computed under following yield assuwptions: (a) nucleus estates: 55tons gross per hectare of hicih 70M or 4 tons exportable; Cb) outgrowers: 50 tons gross per hectare or 3IMo exportable; and (c) fndapenderit mi lholders: 30 tons gross per hectare or 20 tons exportable.

- 79 -Annex JA

Page 3 of 8

REPUBLIC OF GUINEANATIONAL AGRICULTURAL EXPORT PRONOTION PROJECT

PRODUCTION, MARKETS AND PRICES (cogtd)

Tabte 5 PIneaccie production Costs (Estates and Outarorers) I/

NucLeus Estates Outgrowers-------------- 000 GNF/Ha ------------

1. Production of Plantina Material

- Inputs 225 225- Mechanized Work 25- Labr 30 40

2. Land Preparation

- Inputs 875 610- Mechanized Work 330 215- Labor 5 15

3. Preoaration of Plantina Material

- Mechanized Work 170 50- Labor 150 55

4. Plantfin

- Nechanized Work 40- Labor 35 35

5. Crop Culttivaion (before flowerina)

- inputs 2,465 2,150- Mechanized Work 400- Labor 250 85

6. Chemical Treatment

- Inputs 30 30- Mechanized Work 30- Labor 20 90

7. CrOp Cultivation (after floNerina)

Irm- ute 120 --Lilbo 20 22

S. Irripation

- Equipnent am-tizatfon and 0 & M 905 905- Labor 270 180

9. Harvestina and Sortfna

- Mechanized work 160- Labor 120 120

Total Production Costs b/ MO S/

) Labor valued at OGF 1200 per person-day.Or GF/Kg 166 assun g exportable yield of 40 tons/ha.

S/ Or ANF/Kg 134 assu ing exportable yield of 35 tonrs/ha.

-80-Annex 14

Page 4 of 8

REPUBLIC OF GUINEANATIONAL AGRICtLTURAL EXPORT PROMOTION PROJECT

PRODUCTIOH MARKETS AND PRICES (Cont$d)

TYblt 6 P£inelf Input Costs and LaDor Reoutremnts (Indecendant SmatIholders)

Irput Cost Family Labor(6000 GUF/ha) (Person-days/he)

1. Plantina Material 159 24

2. Lw.d PromrAtion 223 2

3. Ptlntfn 131 90

4. Crop Cuttivation (Before flowering) 1566 23

S. Chemical Treatment 50 40

6. CrOp CultivatIo (After flowering) 22 12

7. Irrij tfg na. n.s.

8. Harvestu n 50 50

Total -T 201 / 261

s/ 110 GNF/KG (0.12$/KG) of moetsry cost awning an exportable yield of 20 tons/per hectare

- 81 -

Annex 14Page 5 of 8

REPUBLIC OF GUINEANATIONAL AGRICULTURAL EXPORT PROMOTION PROJECT

PRODUCTION, MARKETS AND PRICES (Cont d)

Table 7 Mango Production Costs (Estate Plantation) /

('000 GNF/ha)

A. Estsblishment Costs

1. Nursery

- Inputs 23- Labor (41 person-days) 49

Subtotal 72 (i.e. 720 GNF/plant)

2. Land Preparation

- Inputs 42- Mechanized work 125- Labor (13 person-days) 16

3. Plantina (including irrigation in year 1)

- Nechonfzed work 217- Labor (16 person-days) 19

Total Establishment Costs 491

B. Production Costs

1. Crop Cultivation

- Inputs 236- Labor (22 person-days) 26

2. Harvestina

- Inputs 19- Mechanized work 120- Labor (30 person-days) 36

3. Amortization of establishment costs b/ 49

Total Production Costs 486 Q)

) Labor priced at prevailing market rate of 1,200 GNF/person-dayAmortization over 10 years

g/ i.e. 69 GNF/kg at exportable yield of 7 tons/ha.

-82 -Annex 14

Page 6 of 8

REPUBLIC OF GUINEA

NATIONAL AGRICULTURAL EXPORT PROMOTION PROJECT

PRODUCTION, MARKETS AND PRICES (Cont'd)

Tsbt*l Nanso Inrut Costs and Labor Reauirements (Smitholders)

Input FamilyCost Labor

A. Plantation Establishment ( 000 GNF/ha) (Person-day/ha)

1. Plantina Material(1000 GNf x 100 plants) 100

2. Land Prer aratlon

- Inputs 23- Mechanized Work 96- Lbor 39 40

3. Plantina 50

- Labor 4 4

Total 262 I

S. Cr_ _rdUCtfo

1. Amortfzation of Establishment Costs I/ 32

2. Croo Cultivatfon

- Input 37- Labor 79 43

3. Harvestina IV

-Lbor 40 40

Total 83

IV Amortization over 10 years; family labor valued at 1,000 GNF/person-day.k/ Including transport to point of collection.£/ 68 GNF/kg. at xportable yield of 4 tons/ha, vatui-s family labor at 1,000

GNF/person-day.

- 83 -

Annex 14Page 7 of 8

REPUBLIC OF GUINEA

NATIOIAL AGRICULTURAL EXPORT PROMOTION PROJECT

Prodution. Narkets ad Prices

TabLe 9 - Formeat* Price for PineoaRle And llro

Shipmnt by air Shipmnt by seaA.----------- FF/kg----------------

- Wholesto Price 11.00 6.00- Iqporter's commission (8) (0.88) (0.48)- Forwarding, storage nd (0.50) (0.82)

transport to market- Freight nd inrurance (5.35) (1.55)

- FOB Conakry 4.27 3.15

--------------GNF/kg ----------------

- FOB conakry 5.76 4.25- Export/packaging tax n.a. n.s.- Airport/port handling, (36) (36)

storage and forwardingDamestic transport (16) (16)

- Packaging and treatment (168) (168)

- Farmqate prico 356 205

B.M

, ------------- --'f/ 4.......... ----------------

!h- holesale price 12.00 9.00- lporter's commission (81) (0.96) (0.72)- Forarding storage nd (0.50) (0.82)

transport to mrket- Freight nd inurance (5.35) (1.55)

- FOB Conakry 5.19 5.91

. .-.--.----- - .GF/kg ---------------

- FOB Conakry 6.90 7.16- Export/packaging tax n.s. n.s.- Airport/Port handling, (36) (36)

storage and forwarding- Dometic tranport (16) (16)- Packagin and treatment (185) (185)

- Farmate price 464 560-s.__ _

-84-Annex 14

Page 8 of 8

REPUBLIC OF GWINEA

NATIONAL AGRICULTURAL EXPORT PRONOTION PROJECT

PRODUCTION, MARKETS AND PRICES 5Ct d)

Table 10 Exgort Potential for Selected Non-Traditional Commodities I

(Europe narket)

1996/97 Year 2000------------ Tons/Ha --------------

A. Perlshable Products

1. Fresh Fruits /Papaya (solo) 500 1.000Tomato 500 1,000Lime (Tahiti) - 500Other Fresh Fruits 500 1.000

2. Fresh VegetablesSherry Tomtoes 1,200 2,000Nolon (Honeydew) 1,200 2,000GInger 100 500Other Fresh Vegetables 1,000 2,000

3. Ornamental Flowers - -........ .......... .......

Sub-Totat Perishable 5,300 10,500

S. Processed Products k/

1. Fruit Juice Concentrates 6,000 10.0002. Other Fruit Juices 3,000 5.0003. Dried Fruits 500 1.000

Sub-Total Processed 9,500 16.000

IV All products except pineapples end mangoes in freshk/ All products except mengo pulp In fresh equivalent

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S E N E G A L 1I io 8d

GUINM A L I ~~NATIONAL AG

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