Document of

The World Bank FLE COpY

FOR OFFICIAL USE ONLY

Report No. 1774b-ET

ETHIOPIA

SECOND AGRICULTURAL MINIMUM PACKAGE PROJECT

STAFF APPRAISAL REPORT

November 18, 1980

Eastern Africa Regional OfficeNorthern Agriculture Division

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

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CURRENCY EQUIVALENTS

Currency Unit = Ethiopian BirrUS$0.483 = Birr 1.00US$1.00 = Birr 2.07

US$483,000 = Birr 1.0 million

WEIGHTS AND MEASURES(Metric System)

1 kilogram (kg) = 2.205 pounds (lb)100 kilograms (kg) = 1 quintal (qt)1 metric ton (mt) = 2,205 pounds (lb)1 hectare (ha) = 2.4711 acres (ac)1 kilometer (km) = 0.62 miles (mi)

ABBREVIATIONS

AED - Agricultural Extension Department (of MOA)AIDB - Agricultural and Industrial Development BankAIMS* - Agricultural Input and Marketing ServiceAGMC - Agricultural Marketing CorporationARDD - Animal Resources Development Department (of MOA)ARDU - Arussi Rural Development UnitASC - Audit Services CorporationCADU* - Chilalo Agricultural Development Unit (now ARDU)CPSC - Central Planning Supreme Council (in brief - Supreme Council)CY - Crop Year

DA - Development AgentDAP - Diammonium phosphateEPID* - Extension and Project Implementation Department (of MOA)ERA - Ethiopian Roads AuthorityESC - Ethiopian Seeds CorporationPA - Peasant Association

FTC - Farmers' Training CenterIAR - Institute for Agricultural ResearchMOA - Ministry of Agriculture

MPP - Minimum Package Program (started 1970)MPP I - First Agricultural Minimum Package Project (1973-77)MPP II - Second Agricultural Minimum Package ProjectMSFD - Ministry of State Farm DevelopmentPACDD - Peasant Association and Cooperative Development Department

(of MOA)PPD - Planning and Programming Department (of MOA)SIDA - Swedish International Development AuthorityTSU - MPP Technical Support Unit (in MOA)TSO - Technical Support Officer (head of the TSU)USAID - United States Agency for International DevelopmentWADU - Wolaita Agricultural Development Unit

* - Now replaced by other agencies,

GOVERNMENT OF ETHIOPIAFISCAL YEAR

July 8 - July 7

FOR OFFICIAL USE ONLY

ETHIOPIA

SECOND AGRICULTURAL MINIMUM PACKAGE PROJECT

STAFF APPRAISAL REPORT

Table of Contents

Page No.

I. BACKGROUND .............................................. 1

A. The Agricultural Sector ............................ 1B. Land Reform ........................................ 2C. Agricultural Services .............................. 3

II. THE MINIMUM PACKAGE PROGRAM ............................. 5

III. THE PROJECT ....................... 8

A. General Description ................................ 8B. Detailed Features .................................. 11C. Project Costs ...................................... 20

D. Financing .......................................... 21E. Procurement ........................................ 22F. Disbursement .................... 22G. Accounts and Audit ................................. 24

IV. ORGANIZATION AND MANAGEMENT ............................. 27

V. PRODUCTION AND BENEFITS ................................. 32

A. Yields and Production .............................. 32B. Adoption Rates .................... 33

C. Markets and Prices ................................. 33D. Farmers' Benefits and Income Distribution .... ...... 34E. Government Budget .................................. 34

VI. BENEFITS AND JUSTIFICATION .............................. 36

VII. AGREEMENTS REACHED AND RECOMMENDATION ................... 39

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

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SCHEDULE - ANNUAL WORK PLAN

TABLES 1: New Wereda Openings and Expansions to Full Coverage SinceCompletion of MPP I

2: Incremental and Cumulative Number of Adopting Farms3: Ministry of Agriculture Manpower Projection for MPP4: Summary of Project Costs

CHARTS 1: Project Organization Chart (World Bank - 21406)2: Ministry of Agriculture Organization Chart (World Bank - 21407)3: Project Implementation Schedule (World Bank - 21564)

MAPSProject Area (IBRD 13068R)Major Food Crop Economies (IBRD 10233R)

MATERIAL AVAILABLE IN IMPLEMENTATION VOLUME

ETHIOPIA

SECOND AGRICULTURAL MINIMUM PACKAGE PROJECT

I. BACKGROUND

A. The Agricultural Sector

1.01 Ethiopian agriculture is practised in varied ecological conditionswhich permit a large number of crop and livestock activities. Ethiopiansmallholders have a high level of traditional skill, but lack adequate sup-porting factors which promote optimum production, namely good marketing sys-tems, access roads, credit, extension and veterinary services and improvedseeds, as well as fertilizer and other farm inputs. Although 80% of Ethiopiansderive the main part of their income from farming, agriculture contributesonly about half of GDP, but over 90% of exports. In 1976/77, agriculturecontributed about US$1.5 billion of GDP. Crops account for about 80% of thegross value of agricultural production and livestock and livestock productsfor 20%. Coffee is the single most important crop contributing over half ofagricultural GDP and up to three quarters of export earnings when prices werefavorable in 1977/78.

1.02 Although cereals account for about 50% of crop production, thecountry is a net importer of grain and grain production fluctuates from yearto year. During drought years, production may be insufficient for man anddomestic animals and famines have occurred in the drier parts of the country,notably in 1973/74. In the worst affected areas (Wello, Tigrai and parts ofGondar and Shewa provinces), increased farming intensity has resulted in theprogressive shortening of fallow periods, cultivation on slopes, removal oftree cover, soil degradation and declining yields. In the past, large-scalemechanized farming was developed in limited areas, while smallholder agricul-ture remained backward. Smallholder production in the main cropping areas,which are in the highlands, can be characterized as being based on rainfedcultivation on small, scattered irregular plots, making extensive use of landwith low cultivation standards and yield levels, using little or no fertilizerand suffering high field and storage crop losses. There are about 3 million

* such smallholdings.

1.03 Livestock plays an important role in most Ethiopian farms but lit-tle research has been done in Ethiopia on improving overall farming systemsto develop animal husbandry as an integral part of the farm. The principalrequirements in the livestock sub-sector are for improvements in animalmanagement, animal health and animal nutrition.

1.04 Further information on the economy and agricultural sector isavailable in the grey cover Economic Memorandum dated April 22, 1980 (ReportNo. 2609a-ET).

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B. Land Reform

Peasant Associations and Cooperatives

1.05 Under the land reform decree of March 4, 1975, rural land was

nationalized and user rights for a farm family were limited to 10 ha. Mostcommercial farms were taken over by Government; some were settled by small-holders, but many are being cultivated as state farms. To implement the

reform and promote future development, farmers have been organized into over25,000 peasant associations (PA) created by law each with about 270 farming

family members. Private tenancy, which was common in the southern part of

the country, has been abolished.

1.06 Membership in PAs is not compulsory, and since 1976, the year after

the land reform, has been open to any farmer. The functions of the PAs areto distribute the land and administer public lands within their areas, to

build schools, clinics and similar institutions to cultivate the land them-

selves and to undertake villagization programs. They have the duty to safe-guard the political, economic and social rights of peasants, to establishcooperative societies, women's associations and peasant defense squads, and

have the power of issuing and implementing internal regulations to achievethese aims. The PAs have legal personality and can both sue and be sued.

Each PA is represented by a delegate to a wereda 1/ level PA, and this asso-

ciation is in turn represented by delegates to an awraja 1/ PA. A nationalpeasant association, the All-Ethiopia Peasants Association, has been formedwith delegates from the awraja associations.

1.07 Peasant associations are empowered and encouraged to set up co-operatives comprising from one to ten PAs. Two main kinds of cooperatives

are envisaged: service cooperatives which have, inter alia, the functionsof marketing produce, giving credit, providing storage and supplying farminputs and consumer goods, and agricultural producers cooperatives or coop-

erative farms, with the means of production controlled if not actually ownedby the cooperative and members paid according to their work. Few producercooperatives have been established as yet, but they are expected to becomeincreasingly important as the cooperative movement develops.

1/ The administrative divisions of Ethiopia are, in descending order of

size, the administrative region (15, including Addis Ababa), awraja(102), and wereda (586). The local terms "awraja" and "wereda" areanglicized in this report by the addition of 's' to denote the plural.

C. Agricultural Services

Ministry of Agriculture

1.08 The Ministry of Agriculture (MOA) provides extension services tofarmers through its Agriculture Extension Department (AED). In addition toits responsibility for the extensive Minimum Package Program (MPP), MOAis responsible for a number of more intensive limited area agriculturalprojects such as the Wolaita Agricultural Development Project (WADU-Credit486-ET), the Arussi Rural Development Unit (ARDU, formerly Chilalo Agricul-tural Development Unit, CADU) and for various activities under the IDA-assistedDrought Areas Rehabilitation Project (Credit 485-ET). Services to PAs andcooperative societies are provided by MOA's Peasant Associations and Coopera-tives Department (PACD). These two operating departments, together with theAnimal Resources Development Department (ARDD), are the main units dealingwith peasant agriculture and are supported by nine service departments includ-ing Planning and Programming, Training, Finance, Legal and Engineering. TheTraining Department has responsibility for the Farmers Training Centers whereasresponsibility for the agricultural training institutes has been transferredfrom MOA to Addis Ababa University. This structure at headquarters in AddisAbaba, however, is not repeated in the regions where decentralization policyunder the National Revolutionary Development Campaign (or "zemetcha") 1/introduced in October, 1978 has placed MOA staff under the immediate controlof the administration head at each administrative level, namely the region(formerly a province), awraja and wereda. At these three levels, the MOAstaff form part of the zemetcha team responsible for implementing the zemetchaprogram of which MPP is the core with respect to peasant agriculture. Contactwith MOA HQ is maintained by the field offices reporting on technical andadministrative matters through MOA's region head to the permanent secretaryof MOA.

1.09 The HQ of MOA was reorganized in July 1979, and at the end of 1979was still in the process of settling down, with some headquarters staff notallocated to permanent posts and with responsibilities and functions stilloperating flexibly. However, the reorganization has the potential to strengthenservices to the peasant sector. Under the former arrangement, the Extensionand Project Implementation Department (EPID) was a semi-autonomous agency ofthe Ministry of Agriculture and Settlement with some duplication of functionswith the main Ministry. At the reorganization, about half the headquartersstaff of EPID was allocated to AED and PACDD with the remainder going to MOAservice departments and positions in the field. The new MOA's work load wasreduced at the reorganization firstly by the creation of two new ministriesfor the sector, namely State Farm Development and Coffee and Tea Development,and secondly by transferring responsibility for new settlements to the Reliefand Rehabilitation Commission. The Ministry of State Farm Development is ofimportance to the peasant sector since state farms produce seeds for theEthiopian Seed Corporation which are distributed by MOA to PAs. The Ministryof Agriculture is therefore now primarily concerned with the predominantpeasant sector in the country, but also has responsibility for soil and waterconservation and forestry.

1/ Zemetcha is the Amharic word for campaign.

The Institute of Agricultural Research (IAR)

1.10 The IAR's work is divided into the following principal fields:animal science, pasture and forage, field crops, soils, horticulture, plantprotection, coffee and diversification, socio-economic studies, agriculturalengineering, home science and food technology. It has seven main field sta-tions which are not well distributed over the country's ecological regionsand some of which are of doubtful usefulness. The linkage between researchand extension is poor, partly because IAR's lines of research are not suffi-ciently directed towards meeting the immediate needs of small farmers, andpartly because there is no formal mechanism for liaison and exchange of viewsat the field level between IAR and MOA. Staffing constraints also limit re-search effectiveness. IAR has been supported for several years by an FAOfunded research project which is due to end in 1982.

Agricultural Marketing Corporation (AMC)

1.11 The AMC is a state corporation established in 1976 to market cereals,oilseeds and pulses to stabilize prices and to assure proper food distribution.AMC receives assistance from the IDA supported Grain Storage and MarketingProject (Credit 789-ET). AMC also procures and distributes fertilizer,seed and pesticides to farmers under the MPP, having assumed the functions ofAIMS which was liquidated. Following the split in 1979 of the Ministry ofCommerce and Tourism into two separate ministries for foreign and domestictrade the Supreme Council reviewed the role and functions of AMC (as well asthose of its sister agency the Ethiopian Grain Agency) and introduced a numberof changes aimed at strengthening the ministry's participation in the nationalgrain market through decentralized purchasing units. AMC is now under theMinistry of Domestic Trade which has overall responsibility for the initiation,planning and follow-up of domestic trade policy and the formulation of thestrategy and priorities in this area. It also has the responsibility forthe management of state trading enterprises, the enforcement of Governmentprice policy, the licensing of wholesalers and retailers, the study andanalysis of the domestic market and the regulation of domestic trade andpractices. However, AMC's role in the proposed project would continue asbefore with respect to the procurement of agricultural inputs and their dis-tribution to MOA stores around the country.

Agricultural and Industrial Development Bank (AIDB)

1.12 AIDB, established in 1970 as a government owned development bank,is the main source of credit to farmers. In addition to its agriculturaldepartment, it has departments for industry, finance and banking, legal andevaluation, and research. As of June 30, 1979, AIDB's medium- and long-termresources were Birr 766 million (US$370 million), of which about 13% was inforeign resources of which IDA contributed about 52%. In addition to a US$11million IDA credit granted in 1974 for industrial and agricultural subproj-ects, AIDB has administered about US$6.5 million in IDA credits approved forfive agricultural projects, including MPP I, and contractor credit totalling

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US$4.0 million under the IDA assisted Fifth and Sixth Highways Projects.Processing of a proposed fourth IDA credit (US$38 million) for AIDB was heldup on country grounds after appraisal in early 1979. As it has few fieldoffices of its own and limited capability to evaluate loans to farmers, AIDBuses MOA to carry out these functions. Since the land reform andnationalization AIDB has been awaiting reimbursement from Government for thebad debts which thereafter arose in its agricultural portfolio, but recentlythe Government has decided to replenish the Bank's equity portfolio by anissue of Government Bonds. AIDB is required to play a major role in theagricultural economy, and its responsibilities have now been defined byProclamation No. 158 of March 29, 1979 entitled, "A Proclamation to Providefor the Re-Establishment of the Agricultural and Industrial DevelopmentBank."

Ethiopian Seed Corporation

1.13 Government recognizes the critical need for improved seeds andin 1978 established the National Seed Council for policy formulation andcreated the Ethiopian Seed Corporation (ESC) for implementation of the NationalSeed Multiplication Program (NSMP). The ESC acts as a semi-autonomous body inthe Ministry of State Farms Development, although the Government is in theprocess of establishing it as an autonomous public corporation with separatelegal personality. The NSMP and ESC are receiving comprehensive technicalassistance, equipment and training under a three year UNDP/ FAO project whichstarted operations in July, 1979. However, while this project is making avaluable contribution towards establishing ESC's capability, the fundingprovided (US$542,260) is not sufficient to enable ESC to fulfill all itsfunctions, namely: (i) establishment of a foundation seed program; (ii) seedcleaning; (iii) seed quality control; (iv) provision of advisory trainingservices; (v) research and development, and (vi) development and enforcementof national seed legislation. Further funding and some technical assistancefor ESC is therefore required.

II. THE MINIMUM PACKAGE PROGRAM

2.01 Very little agricultural extension work in Ethiopia was done before1967 when CADU, the smaller forerunner of ARDU, was started (see map - ProjectArea). This was a comprehensive agricultural package program that includedresearch, extension, marketing, credit and input supplies, implemented origin-ally with relatively large numbers of expatriate technical staff. Its mainimpact was significant increases in cereal yields through the use of fertil-izer, improved seeds and some extension services. Other similar projects werestarted in the next two years including the Wollamo (now Wolaita) AgriculturalDevelopment Unit (supported by two IDA credits), but it was recognized that itwould not be feasible to implement such limited area-specific projects through-out the whole country because of the high cost and manpower needs and so theMPP was initiated in 1970.

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First Agricultural Minimum Package Project (MPP I)

2.02 EPID was created in 1971 to improve peasant farmer production, andto carry out the Minimum Package Program started in 1970. An IDA credit(MPPI, Credit 416-ET, US$21.0 million) was approved in 1973 to support theprogram. The basic unit of development was the Minimum Package Project Area(MPPA), which typically contained about 10,000 farm families and extended 5 kmon either side of a 75 km stretch of all-weather road. An MPPA was dividedinto five extension areas, each with a market center and a 1 ha trial anddemonstration field. The market center provided the base for marketingassistants and extension agents, and for storage of inputs and grains. Creditfor seasonal inputs was provided to individual farmers by AIDB which collectedat least a 25% downpayment and 1% per month interest. IDA funds for farminputs were onlent to AIDB at 7-1/4% interest and AIMS purchased the necessaryinputs. Since AIDB had limited capacity to appraise and supervise loans andcollect repayments, and because AIMS did not have the facilities to handlefarm inputs in the field and distribute them to farmers, these functions werecarried out by EPID acting as agent of AIDB and AIMS. In return EPID received1-1/2% of the 12% annual interest charged to farmers. AIMS has since beenliquidated and its functions taken over by AMC.

2.03 Given the difficult conditions in the country MPP was quite success-ful during the period when it was supported by IDA under MPPI (1973-77). Asof December 1977, fertilizer and seed sales were 112% and 170% respectively ofappraisal estimates. Mean yield increases over the period, based on fieldsurveys, are reported as 31% for teff, 29% for wheat, 21% for barley, 24% formaize, 35% for millet and 26% for sorghum. Though these increases are belowappraisal estimates for those crops for which estimates were made (teff,wheat, maize and sorghum), they nevertheless represent a considerable improve-ment over the "without project" situation. Moreover, the overestimate ofyields was more than offset by unforeseen price increases, so that except forbarley, for which fertilizer application was uneconomic, farmer benefit/costratios remained in the 2:1 range. As of December 1977, the numbers of MPPareas and centers opened were 122% and 128% respectively of appraisal estimates.An encouraging start has also been made with seed multiplication by peasantassociations, and the number of registered service cooperatives establishedsince the land reform rose to about 250 by January 8, 1978, with about another250 unregistered societies.

2.04 This is not to say that the Program has been without difficulties.The security situation in Eritrea and parts of Sidamo, Bale, Hararge and Tigreresulted in the closure of an estimated 15% of the MPP centers. Transport offertilizer and other inputs to other MPP areas was also temporarily delayed bythe cutting of the Addis Ababa - Djibouti railway line and the requisitioningof trucks for military purposes, but the situation has since improved andinput transport is no longer a problem. Credit repayments were initiallygood, but the 1975 land reform led many farmers to believe that there was nonecessity to repay their loans. A strong campaign was mounted by EPID tocorrect this and although the situation in the last two seasons is obscured bylack of complete field records, recent reports indicate that the situation isimproving. Improved seed is still in short supply, and the construction ofroads and stores lagged behind appraisal estimates. Staff shortages and high

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turnover at EPID were major problems and these factors contributed to poorrecord keeping and accounting. The MPP I Credit was closed fully disbursed onMarch 31, 1978. The project completion report is dated May 15, 1979, and aproject performance audit report was circulated to the Executive Directors onMay 30, 1980.

Second Agricultural Minimum Package Project (MPP II)

2.05 After the completion of funding by IDA under MPP I it was intendedthat further IDA assistance would be provided under the proposed MPP II.Government submitted a detailed proposal and the appraisal mission for MPP IIvisited Ethiopia in April/May 1977, but country issues delayed final processingof the project for two and a half years. During this period, however, theGovernment and especially EPID was hopeful that further IDA assistance wouldeventually be provided to facilitate the extension of the Minimum PackageProgram. Consequently the implementation schedule in EPID's project pro-posal of December, 1976, which was adopted without significant change duringappraisal, was followed as far as EPID's reduced funding would allow through-out the two years 1978/79 - 1979/80. The need now is not so much for fundingof the original MPP II program but for completing this program on a moreintensive scale, especially with respect to staffing of field offices to amore adequate level and civil works (buildings and rural roads).

2.06 A major change that has occurred in the interim is the reorganiza-tion in July, 1979 of the former Ministry of Agriculture and Settlement(MOAS), by which EPID, which was semi-autonomous within MOAS, has been re-absorbed into the new Ministry of Agriculture's routine line structure (seepara 1.09). In parallel the introduction in October, 1978 of the new structurefor implementing economic development (under the National RevolutionaryDevelopment Campaign proclamation) has decentralized responsibility fordevelopment so that MOA staff are now primarily responsible to the administra-tive heads of regional, awraja and wereda offices. Consequently, the MinimumPackage Program is now integrated with the overall development strategy forrural areas both conceptually and in terms of its staffing and administration.However, in formulating the present proposal for IDA funding a distinction hasbeen made between those staff and facilities required for executing MPP andother staff and facilities required for non-MPP purposes.

2.07 In terms of program expansion, since the last IDA involvement underMPP I, the major development has been that whereas at the end of MPP I MPPareas were established in 280 weredas (but under the then concept these areascovered only a relative small part of each wereda - see Project Area map) theprogram has been extended in the interim to cover 440 weredas, althoughphysical presence, facilities and the scale of operations is not yet verysignificant in the 121 new wereda offices opened since 1978. The proposedproject would provide for development of these new wereda offices into fullystaffed and fully functioning MOA extension and input supply services and forexpansion of the older MPP offices.

2.08 Although the minimum package concept worked well in the limitedareas of its operation under MPP I, certain shortcomings became apparent asthe program was extended to more farmers, particularly with the changed con-ditions following the land reform in 1975. Most seriously little attempt had

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been made to adapt the package to the many varying ecological and socialconditions of Ethiopia. The program relied on the impact of fertilizeralone to convince farmers of the possibility of increasing their output,since this was considered the one innovation that could have a noticeablylarge impact on yields. More recently, however, MPP staff have appreciatedthat other less obvious innovations (such as timely planting, correct plantpopulation, weeding and pest control) could have comparable production impact.Such awareness has resulted both from observing demonstration plot resultsand from evidence from other countries. Also many farmers live in areaswhere the use of fertilizer is not recommended because soil and climaticconditions are such that crops would not respond adequately to fertilizeruse. Therefore, while continuing to recommend the use of fertilizer inappropriate areas, MPP would in future put more emphasis on other innova-tions that could be used either with or without fertilizer. Thus, two basicpackages would be extended: (a) a package involving fertilizer and otherinnovations (fertilizer package), and (b) a package involving other innova-tions only (non-fertilizer package). The other innovations would includeuse of improved seed, pesticides and implements, better soil preparationtimely planting, planting in rows, use of mulch and manure, better cropprotection and storage, and soil and water conservation. The greater staffingstrength of the program, to be completed under MPP II, would permit sucha broader approach.

2.09 MPP I had used the better farmer, selected by EPID, as the pointof contact between EPID and the farmers. Now, with the peasant associationsand cooperatives emerging as forces for development in the rural areas, MOAuses them as the main contact point. The PAs and cooperatives in turn electfarmers to receive special training (for soil conservation, for example) andto hold demonstrations on their fields.

2.10 Government, which has expressed its strong commitment to ruraldevelopment, now wishes to complete expansion of the program to a much largerproportion of the farm population, increasing the range of innovation offered,while the peasant associations are given an important role to play. IDAassistance is sought to meet these objectives. This proposed second phase ofIDA involvement in the program would support the current trend of Ethiopia-sdevelopment, and would assist this major vehicle of the government's agricul-tural development policy.

III. THE PROJECT

A. General Description

Description

3.01 Over the two fiscal years 1980/81 and 1981/82, the proposed projectwould assist the Government to complete the expansion of staff and services inthe 440 weredas in which the on-going Minimum Package Program (MPP) currentlyoperates. The primary objective of MPP is to increase smallholder production

through provision of farm inputs on credit and extension and support services.

Since smallholders produce over 95% of total crop output, MPP is also the

primary means of increasing overall national production. The project would

lay the institutional and technical foundation for continuing successful

operation of this core program in the Government's rural development strategy. 1/

Specifically, the project would provide:

(a) staff and staff training, vehicles, buildings and equipmentfor the Ministry of Agriculture's headquarters and field

offices;

(b) farm inputs on credit, including fertilizers, improvedseeds, pesticides and tools, and animal husbandry inputs

in selected areas;

(c) buildings, equipment and technical assistance, (i) to

assist the Ethiopian Seed Corporation to produce basic

seed, and (ii) to expand seed multiplication and

cleaning at the peasant association level;

(d) low cost rural roads;

(e) applied research, training of IAR staff and field demon-

strations to assist with the development of improvedseeds and technical packages for MPP farmers, and

(f) field staff, vehicles and equipment for an expanded soiland water conservation program in the worst affected areas.

3.02 The project is in the nature of an interim assistance to Ethiopia,

following the gap in IDA-s participation in MPP, and is therefore restricted

to a major strengthening of the program over a two-year period pending pre-

paration of a possible third MPP project. Input and extension services would

be provided in 440 out of Ethiopia's 586 weredas. The remaining 146 weredas

are outside the scope of the program and the project because they have little

settled agriculture, or because they lie in regions with security problems, or

because they are in areas covered by ongoing intensive agricultural develop-

ment schemes. By early in the project's second year the Ministry of Agricul-

ture would have staffed the Minimum Package Program up to full planned strength

1/ The proposed project was prepared in 1976/77 by the Extension and Project

Implementation Department (EPID) of the then Ministry of Agriculture and

Settlement with assistance from the IBRD Resident Mission in Eastern

Africa (RMEA). It was appraised in April/May 1977 by a joint IDA/USAID/

SIDA mission whose report was updated and reviewed in April/May 1978

by a follow-up appraisal mission composed of Messrs. Martin, Lister,

Liebenthal and Ahmad (IDA) and Mr. Hirabayashi (USAID), assisted in the

field by Messrs. Sherper (USAID) and Ehrenstrahle (SIDA). Further delays

in project processing caused by country issues made additional updating

missions necessary by RMEA staff during November, 1979 to January, 1980.

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and by the end of the project would have provided much of the physical infra-structure (except some buildings) to enable the program to operate at a satis-factory level in the 440 weredas. The project would finance MP], activities inall 440 weredas with incrementality being determined on the base year 1977/78,the last year of MPPI. For operating costs the incremental costs of bothyears of the project were based on the 1977/78 cost level. For fertilizer, themain farm input, incremental costs were computed from fertilizer use estimatesfor year 1 (1980/81) over the base year and for year 2 on expected use in theprevious year, with appropriate allowances for stocks and contracted supplies.

3.03 The project would be executed by MOA with the exception of: part ofthe rural roads component which would be carried out by the Ethiopian RoadsAuthority (ERA); the Ethiopian Seeds Corporation (ESC) component, which wouldbe carried out by ESC under the Ministry of State Farm Development; and partof the research component to be executed by IAR. The Permanent Secretary ofMOA would be the project manager and project implementation would be facili-tated by creation of a MPP Technical Support Unit (TSU) reporting directlyto the Permanent Secretary. This unit would be headed by an internationallyrecruited Technical Support Officer satisfactory to IDA whose appointmentwould be a condition of credit effectiveness. Assurances were obtained onthis point during negotiations. The proposed candidate for the position hasseveral years experience in senior technical assistance positions in theProgram under the SIDA aid program and would be acceptable to the Association.As under MPP I AIDB would be responsible for agricultural credit and AMCwould be responsible for procuring farm inputs for distribution by MOA.However, whereas under MPPI MOA (as agent of AMC and AIDB) dealt with indi-vidual farmers with respect to input supply and credit, the revised arrange-ment of supplying inputs and credits only to PAs and cooperatives wouldcontinue under the project. Ultimate responsibility for project implementa-tion, and especially responsibility for inter-agency coordination, would liewith the Central Planning Supreme Council (para. 4.01).

Annual Work Plans

3.04 The exact content of the program would be determined each year inan annual work plan (AWP) prepared by MOA, which would be agreed with theAssociation in advance of the year concerned. The AWP for 1980/81 was pre-sented and discussed at negotiations and provides a satisfactory basis for1980/81 operations. An assurance was obtained at negotiations that the AWPfor FY1981/82 would be submitted to IDA for approval by May 1, 1981. AWPscomprise MOA's fiscal year work program and cost estimates and are accompaniedby the supporting information listed in the attached schedule. Approval byIDA of Annual Work Plans, or parts thereof, would be on the basis of mutuallyagreed criteria including availability of qualified staff, farm inputs, veteri-nary services, transport and storage, and would be a condition of disburse-ment of IDA funds for items covered by the AWP during the period to which thework plan relates. The Association may also suspend disbursements for anywereda which is not accessible to its representatives. An assurance to thiseffect was attained at negotiations.

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B. Detailed Features

MOA Headquarters and Field Offices

3.05 The project would provide for the further staffing and equipping of

MOA's 13 regional offices, 80 awraja offices and 440 wereda offices, many of

which are now rented and few of which have stores. Many of the wereda office

buildings were established as EPID Centers under MPP I and for MPP II only 30

awraja and 13 regional office buildings would be constructed, plus 60 stores

attached to MOA offices. 1/ The staffing of the old EPID Centers has already

been expanded but would be increased further to provide full coverage for the

whole wereda.

Manpower and Training

3.06 Since MPP I ended in 1978 the Government has supported the program

sufficiently to permit staff training and recruitment to continue to expand

MPP coverage. Over the past three years the supply of qualified staff avail-

able to the program has improved, but further recruitment would be a major

feature of the project until full staffing is achieved early in Year 2.

Projected staffing is summarized below and detailed in Table 3 attached.

Staffing as Percent of

In-Post Projected Staffing Program Requirement1981/82 1982/83 1981/82 1982/83

season season Present season season

Degree Level 335 453 453 74 100 100

Diploma Level 1,064 1,400 1,400 76 100 100

FTC Level 1,038 1,430 2,486 42 58 100

Bookkeepers 2/ - 150 440 - 34 100

Total 2,437 3,433 4,779 51 72 100

Following closure during the mid-1970s of the major educational institutions,

enrollment and graduation numbers have now returned to normal and adequate

graduates at the degree and diploma level would be available to MOA to more

than satisfy the recruitment demands of MOA at these two levels. The output

capacity of the training institutes which supply middle level diploma staff

has been expanded over the last two years to meet requirements (Table 3).

Recruitment by August, 1981 (early in Year 2 of the project) at these two

levels would total 164 graduates and 476 diplomates and would fully staff the

program. These requirements take into account expected staff turnover.

1/ Wereda offices are either adequate for present purposes or additional

space will be rented.

2/ See paras. 3.07 and 3.35.

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3.07 At lower levels of pre-service training, where requirements over theproject period total 1,697, the MOA operates twelve Farmers Training Centersand allocates them for up to half of each year for pre-service training

purposes. MOA would annually recruit the staff required to fully occupy theFTCs for the 6-month pre-service training period, namely 790 recruits. Book-keepers are trained at the commercial school of Addis Ababa and under theproject they would be recruited from these special government courses to beposted to each wereda office. During the project period about 529 bookkeeperswould be recruited, which allows for expected staff turnover. Under MPPI

marketing agents were given bookkeeping training and performed this function,but now many of these staff are being promoted. MOA would appoint one spe-cialist bookkeeper to each wereda to release other staff to carry out theirtechnical functions and to improve bookkeeping standards. By the end of theproject period the estimated staffing requirements of the MPP at all levelswould have been met and there would be adequate surplus availability ofqualified staff from the various training establishments to ensure that anyunforeseen requirements can also be filled.

3.08 The Training Department of MOA would coordinate and monitor theproject's training requirements to ensure that adequate staff are available tothe project. In addition to the pre-service training detailed above theTraining Department's responsibility includes in-service refresher courses forkey personnel at Farmers Training Centers. At MOA headquarters all technicalassistance personnel would be responsible for training counterpart staff andeight volunteer accountants would be used in four mobile teams to train andupgrade field staff especially the new bookkeepers. The Training Departmentwould be strengthened by the addition of two internationally recruitedspecialists (a course planner and and teaching materials specialist and aconsultant for about 12 months on training systems). Assurances were obtainedat negotiations that these appointments would be made in consultation withIDA, and that the head of the Training Department would be satisfactory to theAssociation.

Technical Assistance

3.09 The project would provide 37-1/2 man years (20 posts costing US$1.83million) of internationally recruited staff of which 15 man years (8 posts -US$1.4 million) would be financed by IDA/IFAD (average cost including contin-gencies US$96,000/man year). The remaining 22 man years would be financedby the SIDA grant and would include 16 man years of accountant trainers (at$19,300 per man year) recruited through volunteer agencies. These accountantswould work mainly around the field offices to train new staff, particularly inwereda offices. Of the 20 project positions, 3 staff are already in post and12 are under recruitment by SIDA. This level of internationally recruitedstaff will strengthen MOA in key areas and is needed to consolidate the MOA

reorganization and further provide for the training and supervision ofthe large numbers of new staff to be recruited by MOA. With this complementof internationally recruited staff MOA would be able to implement the projectefficiently. Of the eight posts which would be financed by IDA/IFAD, fourappointments would be subject to the prior approval of IDA. These would bethe Technical Support Officer, Evaluation Economist, Chief Accountant and

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Status ofAppointment

Posts UnderMan Financed by: In- Recruit- NewYears IDA/IFAD Other 1/ Post ment Post

I. Ministry of Ariculture

MPP Technical Support Unit

Technical Support Officer 2 x x 2/

Planning and Programming Dept.Evaluation Economist 2 x x 3/Agricultural Planner 2 x xM&E Systems Development and Training 1 x x

Finance Dept.Chief Accountant 2 x xSystems Analyst 2 x xSystems Planning 1/2 x xAccounting Trainers 16 x (8) x (8)

Cooperative and Peasant Association Dept.Cooperative Accountant 2 x xMarketing and Credit Accountant 2 x x

Agricultural Extension Dept.Agronomist 2 x xSoil Fertility 2 x xGrain Storage 2 x xSeed Multiplication and Processing 2 x xFarm Implements and Tools 2 x xSoil and Water Conservation 2 x *) x

Animal Husbandry Dept.Livestock Products Marketing 2 x x

Training Dept.Course Planner and Teaching Materials 2 x xTraining Systems 1 x x

II. Ethiopian Seed CorporationSeeds Specialist 2 x *) xSeeds Processing Engineer 2 x xSeeds Production 2 x *) x

54 1/2 8 21 7 17 5

1/ SIDA except those asterisked where staff already in post are financed by FAO.2/ Although at present located in Finance Department.3/ Identified but not yet in-post.

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Agronomist. Appointments to the first three of these four posts would be

conditions of effectiveness. Appointments to the remaining four postsfinanced by IDA/IFAD would be made in consultation with IDA. The minimumpackage program as a whole requires 54-1/2 man years of expert assistance (29posts) over the project period indicating that 18 man years and 9 posts arerequired by the baseline program when the project's requirements are deducted.

Farm Inputs

3.10 The project would provide incremental farm inputs (base cost US$17.2million) to be offered on credit. The main input would be incremental fertil-izer (25.9 thousand tons with a base cost of US$13.9 million distributed), 71%

of which would be procured in year 1 for CY 1981 crops. Other farm inputsinclude agricultural chemicals, veterinary supplies, tools and equipment. Theincremental use of DAP and urea in 1981 over that used in 1977/78 is estimatedto be 45.5 thousand tons. However, 1980/81 carryover stocks are expected tobe some 27.1 thousand tons in excess of normal requirement (taken as 22

thousand tons), for which reason it is proposed that the Association wouldfinance 18.4 thousand tons in the first year. In 1981/82 it is anticipatedthat the incremental use over 1980/81 will be 7.5 thousand tons, which amountwould be considered as eligible for IDA financing. 1/ These estimates aresummarized as follows:

Thousand mt

1. Estimated Fertilizer use by MPP farmers CY1981 66.1Less MPP use in 1977/78 -20.6

Incremental use CY1981 (crop year) 45.5

2. Estimated opening stocks 1980/81 49.1Less carryover stocks -22.0

Excess stock 27.1

3. Net additional requirement for incremental use 18.4

4. Estimated fertilizer use by MPP farmers CY1982 73.6Less CY1981 use -66.1

Increment 7.5

5. Total incremental requirement 1980/81 and 1981/82 25.9

These estimates would be updated by the Government, using actual. 1980 fertil-izer use data, and receipt by IDA of satisfactory new estimates would be acondition of disbursement for fertilizer.

1/ Assuming a mean fertilizer use per adopting farmer of 1.9 qt DAP, plus0.2 qt urea on maize only. Fertilizer costed at the 1979/80 tender pricefor AMC supplies of US$320/ton c and f, plus $202/ton for inland costs -i.e. US$522/ton distributed to MOA, PA or cooperative stores.

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MPP fertilizer flows, actual and projected, are shown below:

Thousand mt1977/78 1978/79 1979/80 1980/81 1981/82

I. Diammonium Phosphate (DAP) .... .Projected...

Opening Stock (with MOA) 8.5 14.5 59.8 45.8 20.0Procured by AMC for MOA 25.5 75.3 40.5 33.3 65.8

Sub-Total (available DAP) 34.0 89.8 100.3 79.1 85.8

MPP use 19.5 30.0 54.5 59.1 65.8Closing Balance 14.5 59.8 45.8 20.0 20.0

II. Urea

Opening Stock (with MOA) NA NA 4.5 3.3 2.0Procured by AMC for MOA 1.4 4.4 5.2 5.7 7.8

Sub-Total (available Urea) NA NA 9.7 9.0 9.8

MPP use 1.1 NA 6.4 7.0 7.8Closing Balance NA NA 3.3 2.0 2.0

The estimates allow for carryover stocks to be reduced to a more reasonablelevel of 22 thousand tons (of which 2 thousand tons is urea).

3.11 Fertilizer would be provided in areas where the road networkwould permit its transport and where ecological conditions are such that thefarmer would benefit from its application. (Adoption rates are discussed inpara. 5.03.) Pesticides would also be supplied to supplement MOA's existingcrop protection program (mainly for control of insect attacks and diseaseoutbreaks in those areas where MOA can ensure proper application). Theproject would also supply on credit (in kind) improved seeds and tools, suchas ploughs and seed cleaners. Since crop losses from poor storage are veryhigh (often as much as 50%), the project would supply on credit the materialsto improve on-farm storage, such as chemicals to control pests and simplerat-proofing.

Animal Husbandry

3.12 Since livestock is an integral part of the farming system in theproject area, MOA would continue to implement a modest MPP livestock devel-opment program designed to relieve the major constraints to increased small-holder livestock production. Its exact scope would be determined by the rateat which trained staff would become available, but it is estimated that opera-tions would start in about 80 new weredas over the project period. Projectactivities would include farmer training at FTCs in animal husbandry, con-trolled breeding with improved bulls, treatment of animals against majordiseases and improved animal nutrition. Selected farmers would establishdemonstration production units and undergo training in animal use, care,disease control, feeding and housing. The genetic quality of local livestockwould be improved through upgrading with superior stock or through artificialinsemination. Improved breeding stock, including crossbred in-calf dairy

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heifers and high grade or purebred bulls, rams, bucks and poultry would besold to farmers on credit initially at subsidized prices to encourage adoption.

3.13 To increase the supply of crossbred dairy heifers and improved bullsthe project would provide for the equipping and stocking of an additionalheifer breeding ranch with a capacity to produce 350 heifers a year. It wasagreed at negotiations that disbursement against this item would be subject toprior IDA approval of detailed plans, including analysis of the technical andfinancial viability of the proposal.

3.14 Artificial insemination centers would be established at 14 locationswith mobile teams to cover high density livestock areas. The semi-autonomousArtificial Insemination Service in MOA's Animal Resources Development Depart-ment (ARDD) would be responsible for this component. The expansion of thebreed improvement program would be restricted, through the mechanism of theannual work plan to be approved by IDA (Schedule), to areas with satisfactoryveterinary services and suitable ecological conditions. Regarding animalhealth, the Animal Health Services team in ARDD would organize the supply ofmedicines for general health care sufficient for a maximum of 10% of thecattle and sheep population in each wereda. Surveys of internal parasites andticks would be carried out in each wereda and farmers would be instructed inparasite control. To support animal health care the project would fundincremental imported veterinary supplies, mainly veterinary medicines whichunlike vaccines are not manufactured in Ethiopia and the scarcity of which hasin the past restricted the effectiveness of animal health services. Foddercrop trials would be carried out on demonstration plots to improve animalnutrition. Livestock market centers would be established in about fiveweredas each year and an internationally recruited livestock products market-ing specialist would assist ARDD in this work.

Soil and Water Conservation

3.15 Ethiopia loses an estimated one billion tons of soil (equivalent to60,000 ha one meter deep) every year from soil erosion, and in some parts ofthe country large areas have been abandoned as being unfit for cultivation.Since the magnitude of the stabilization and reclamation task far exceeds thelikely supply of trained manpower and other resources, the project would startintensive conservation programs in 120 weredas where the needs are greatest.Each selected wereda would be staffed with one full time Conservation Agent(CA) who would be a specially trained development agent. To keep the work-load manageable the CA would concentrate on about 10 PAs in each year. Inthe remaining 320 weredas selected for less intensive programs, DevelopmentAgents (DA) would implement the program as part of their regular duties, andwould receive specialized in-service training, to enable them to do this, inaddition to the regular 6-month FTC course. The project would also providetraining for two agents of each peasant association. These peasant associa-tion agents (PAAs) would play a key role in extending conservation measuresto be carried out by farmers. The principal soil conservation measures wouldbe grass strips and reforestation; the main water conservation practices would

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be pond construction and spring development. The Relief, Rehabilitation andSettlement Commission (RRSC) also has soil and water conservation responsi-bilities, but in specific catchments to avoid overlap with MOA's operations.

Improved Seed Production

3.16 The project would provide for two levels of improved seed produc-tion:

(a) Ethiopian Seed Corporation (ESC) - capital equipment,staff and incremental operating costs to develop ESCto its full immediate capability. This component wasoriginally prepared and appraised by USAID as a separateproject in 1979 with the assistance of the seeds expertand team leader of the FAO/UNDP assisted seeds project.The USAID appraisal document was then reviewed and updatedby IDA and ESC staff, mainly to reduce costs and toeliminate some longer term activities which can be takenup later; and

(b) Peasant Associations seed multiplication and cleaning -

seed multiplication by the PAs, started by EPID in1976/77, would continue to be supported under theproject through the provision on a grant basis oflimited amounts of equipment and materials such asknapsack sprayers, fertilizer, bags, twine andbiocides. In addition, also on a grant basis, PAswould be supplied with the necessary equipment andmaterials to clean and treat their seed, namely handoperated winnowers, simple seed dressing equipment,and the necessary chemicals. Project staff wouldinspect standing seed crops during the growing sea-son, although initially this would be the responsi-bility of PAs, until inspectors are trained.

3.17 During the project period ESC would not have produced any certifiedseed for farmers, since two years is required to multiply breeder seeds up tosufficient quantities for release, but would continue its ongoing practice ofcontracting with state farms for the production of seed of superior quality(clean, with reduced disease and weed seeds, and from selected high yieldingstrains) as an interim service to smallholders (about 8,000 tons of such seedwas harvested in 1979/80). ESC would also import breeder seed. Present pro-duction plans indicate that adequate teff, maize and wheat seeds of superiorquality to that now used by smallholders would be available to participatingproject farmers during the project period. In addition, steps are beingtaken to secure adequate supplies of superior quality sorghum, millet andbarley seeds for the near term. Imports of these three seeds in potentialshort supply will help alleviate the short-term problem. The issue of balancebetween the different seeds produced by ESC would be reviewed during earlysupervision of the project. Shortly after the end of the project the ESCwould have been established with the trained staff and facilities to produce

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and supply substantial quantities of certified seed. Since ESC contracts withstate farms for seed production assurances were obtained during negotiationsthat the requirements of MPP farmers would be given priority if allocation ofimproved seeds is necessary. Although ESC already operates successfully in asemi-autonomous manner, assurances were obtained during negotiations that theGovernment would, within three months of Credit effectiveness, complete theestablishment of ESC as a public corporation with full legal personality andaccounting and administrative autonomy. At the PA level seed multiplicationand cleaning/treating facilities would have been established to enable alarge number of PAs to provide for their own seed requirements by the annualmultiplication and distribution of clean material derived from certified seedoriginally supplied by ESC.

Applied Research and Demonstration Plot Program

3.18 Under MPP I the main research activity envisaged was a joint IARand EPID research program to be carried out in seven locations in differentecological zones. Only three stations have so far produced useful results(prior to 1974/75) but even those have now effectively ceased to operatebecause of insurmountable shortfalls in staffing and equipment, inadequateadministrative support and lack of research direction. The demonstrationplot program started by EPID in 1971 has been more successful. The resultsobtained so far have been incorporated in an extension Agents Handbook forAgronomy Crops and have been used in the preparation of MPP II.

3.19 Recognizing the importance of sound agricultural research for thefuture, the project would include:

(a) the training of IAR technicians necessary for theeventual reopening of suitably located existingstations and new stations to be sited in problemareas identified during the execution of the project;

(b) an enlarged and strengthened demonstration program byAED concentrating on:

(i) field testing of improved varieties;

(ii) refinement of the fertilizer and husbandryadvice;

(iii) more intensive farmers' field demonstra-tions of the effects on yield of good crophusbandry; and

(iv) more emphasis on efficient crop and storedproduce protection methods.

It was agreed at negotiations that disbursements for the training programwould be subject to the prior approval by IDA of a training plan, drawn up byIAR in consultation with MOA's Training Department, for the specific purposeof reviving the cooperative research program.

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Rural Roads

3.20 About 200 km of five rural roads would be constructed during theproject period by the Rural Roads Organization (RRO) of the Ethiopian RoadsAuthority (ERA) according to MOA's plan as already agreed with ERA andendorsed by the Supreme Council. They would mostly be dry weather roads withgravel surfacing where necessary of 4.0 to 6.0 m width according to RuralRoads design standard RR 30, but lower standard RR 10 roads may be constructedin some areas where RR 30 roads are not justified. The current MPP roadsprogram agreed by MOA and RRO provides for the construction over four years ofsix high priority roads (total length 413 km), identified by MOA with the helpof data from MOA's wereda socio-economic surveys, but MPP II would assist only5 of these roads started in the two project years. The roads would be con-structed by force account with existing equipment and with additional equipmentto be procured by ERA under the Credit and under the Sixth Highway Project(Credit 552-ET). The cost per kilometer would be agreed by Government and IDAas a condition of disbursement for the rural roads component. Procurementunder Highways VI as additions to current ICB tenders would facilitate therapid re-equipping of the two rural road construction units remaining from MPPI. The MPP II credit would finance equipment to establish two more construc-tion units and a rural road maintenance unit. RRO would use for constructionand maintenance the existing ERA equipment maintenance facilities set up withUSAID assistance and would apply for both construction and maintenance anoptimum mix of labor and equipment-intensive methods. Total construction costof the six roads (413 km) is estimated at Birr 17.19 million including con-tingencies of Birr 4.80 million or Birr 41,620 per km. MPP II would financeBirr 9.2 million base cost in the first two years. Since all MPP II roadsequipment would belong to ERA, not MOA as under MPP I, it is expected thatcoordination problems which delayed road construction under MPP I would beeliminated. RRO would carry out MOA's rural road program under the overallsupervision of the Supreme Council. In addition to the roads built by RRO,300 km of roads would be constructed by the peasant associations in self-helpschemes along present lines, for which MOA would continue to provide materials,tools, grants-in-aid and technical assistance where necessary. The peasantassociations would provide the labor for construction and would thereafter beresponsible for maintenance of these self-help roads. Self-help roads areestimated at Birr 0.9 million and maintenance costs at Birr 0.1 million, whichtogether with a physical contingency allowance at 10% or Birr 1.0 million onthe ERA roads, would give a total expenditure of Birr 11.2 million for ruralroads for the two years of the project.

Evaluation and Monitoring, Progress and Completion Reports

3.21 Evaluation and monitoring of the project would be the responsibilityof the Planning and Programming Department (PPD) of MOA which would bestrengthened by the addition of an internationally recruited evaluationeconomist and an agricultural planner; the appointment of the evaluation eco-nomist would be a condition of effectiveness. The first task of the evaluationeconomist would be to assist PPD to draft a work program for evaluation andmonitoring for review by IDA and he would be assisted in this work by a shortterm consultant on evaluation and monitoring systems. Assurances were obtainedat negotiations that Government would submit, not later than four months fromthe date of Credit signing, to the Association for review and comment:

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(i) a monitoring and evaluation work plan and schedule forthe project; and

(ii) proposals and a schedule for strengthening MOA's Planningand Programming Department to carry out the work plan.

3.22 Government would promptly after completion of the project, but nolater than six months after the close of the second project year, prepare acompletion report on the execution of the project, its costs and benefits andits major accomplishments, following guidelines to be agreed with IDA. Duringproject implementation GOE would submit quarterly progress reports on theproject within three months of the close of each quarter. At negotiationsassurances were obtained on these points concerning reporting requirements.

C. Project Costs

3.23 Project costs, including physical and price contingencies, areestimated to amount to Birr 160 million (US$77 million), of which the foreignexchange component would be 39%. Costs are summarized as follows:

Local Foreign Total Local Foreign Total---thousands of Birr--- ---thousands of US$---

MPP Administrative Costs

Capital 8,329 5,627 13,956 4,024 2,718 6,742Operating 75,551 15,709 91,260 36,497 7,589 44,086

83,880 21,336 105,216 40,521 10,307 50,828

Less MPP I Base-line costs 45,702 5,391 51,093 22,078 2,604 24,682

MPP II Project

Administrative Costs 38,178 15,945 54,123 18,443 7,703 26,146Soil and Water Conservation 5,603 2,798 8,401 2,707 1,352 4,059Rural Roads 3,311 7,897 11,208 1,600 3,815 5,415Farm Inputs 16,987 19,024 36,011 8,206 9,190 17,396Seed Multiplication-PA 2,873 597 3,470 1,388 288 1,676Ethiopian Seed Corporation 9,237 5,664 14,901 4,462 2,736 7,198Applied Research 350 150 500 169 72 241Base Costs 76,539 52,075 128,614 36,975 25,156 62,131Contingencies:Physical 3,827 2,604 6,431 1,849 1,258 3,107Price 17,555 7,184 24,739 8,481 3,471 11,952

Total Project Costs 97,921 61,863 159,784 47,305 29,885 77,190

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Costs were estimated at March 1980 price levels and cover incremental capitaland operating costs of the Agricultural Minimum Package Program for 1980/81and 1981/82. The operating costs for MPP I have been taken as EPID's operatingcosts for FY 1977/78, the first year when MPP I was fully operational, andescalated, as appropriate, to 1980 prices. A physical contingency of 5% ofbase costs has been included. Price contingencies for local currency expendi-tures are 15% for FY1980/81 and 13.5% for FY1981/82; and for foreign currency,9.75% for FY1980/81 and 8.5% for FY 1981/82. Taxes, which would not befinanced by the Association, have been included in the project costs and areestimated to amount to Birr 12.6 million (US$6.1 million).

3.24 The MPP administrative costs of US$26.1 million include US$6.7 mil-lion capital costs. The balance of US$19.4 million represents incrementalsalaries, travel and per diem, office costs, transportation, training, trialand demonstration costs, field supplies, animal husbandry costs, technicalassistance and miscellaneous expenses. Of the gross operating expenditure,77% is for MOA's field offices (namely 41% for weredas, 23% for awrajas and13% for administrative region offices), with 12% for MOA headquarters' costsand 7% for technical assistance.

D. Financing

3.25 The project cost would be financed by the Association, IFAD, SIDA,and the Government in the following amounts and proportions:

US$ million % Project CostLocal Foreign Total With Taxes Net of Taxes

IDA 20.0 20.0 40.0 52 56.3IFAD 9.0 9.0 18.0 23 25.3SIDA - 0.9 0.9 1 1.3Government 12.2 - 12.2 16 17.1

Sub-total 41.2 29.9 71.1 92 100

Taxes 6.1 - 6.1 8TOTAL PROJECT COST 47.3 29.9 77.2 100

The proposed IDA credit of SDR 32.0 million (US$40 million equivalent)would be on standard terms, and would finance 68% of the foreign exchangecosts of the project and 49% of the local costs, net of taxes. GOE requestedIFAD to assist in financing the project to the extent of US$18 million equiva-lent and IFAD's Board approved this assistance on May 7, 1980. IFAD's loanwould be on terms similar to IDA. US$12.1 million of the external funds(US$8.3 million IDA and US$3.8 million IFAD) would be onlent by the Governmentto AIDB. Signing of subsidiary loan agreement satisfactory to IDA betweenGovernment and AIDB would be a condition of effectiveness of the proposed

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credit. Conditions of effectiveness of the IFAD loan would also be conditionsof effectiveness of the proposed IDA credit and vice versa. SIDA, which hasbeen supporting the MPP activities since 1971, would continue to do so bygrants of about US$5 million per annum, part of which would be used towardsfinancing technical assistance for the project, and part towards the baselineoperating costs of the program, to which Government would also contribute.Over the two year project period, SIDA and Government financing of base costsincluding taxes would amount to an additional US$23.9 million, bringing totalprogram costs to US$101.1 million over the period.

E. Procurement

3.26 Contracts for civil works (US$5.6 million) would be awarded on thebasis of competitive bidding advertised locally in accordance with currentGovernment procedures, which are acceptable to the Association, or, when thisis not possible, by force account. Civil works are too small and at too manyscattered sites to be attractive to international contractors. Procurementof vehicles, equipment, fertilizer and other farm inputs and veterinarysupplies (US$29.2 million), in orders exceeding US$100,000, would be byinternational competitive bidding in accordance with Bank Group guidelines;orders would be grouped by compatible items wherever possible. Orders forthese items of less than US$100,000 would be filled locally or overseas inaccordance with current Government procedures which are acceptable to theAssociation. Agricultural seed (US$1.2 million) would be procured in severalsmall lots without competitive bidding by prudent shopping locally and over-seas. Consultant services financed by the Credit would be engaged in accord-ance with Bank Group procedures.

F. Disbursement

3.27 It is proposed that components of the project be jointly financedby IDA and IFAD and that disbursements be apportioned between them in theratio of approximately 69:31 and be made on the following basis:

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US $-MillionIDA IFAD Total

1. 80% of expenditures oncivil works; 3.1 1.4 4.5

2. 100% of foreign expendi-tures and 80% of localexpenditure on vehiclesand equipment; 8.6 3.9 12.5

3. (a) 100% of foreign expendi-tures and 75% of local expendi-tures for fertilizer; 7.0 3.1 10.1

(b) 100% of foreign expendi-tures and 80% of local expendi-tures for other farm inputsincluding improved seed, pesti-cides, farm implements andanimal husbandry inputs; 2.9 1.3 4.2

4. 25% of salaries and wagesof MOA for the Minimum PackageProgram, with the exception ofthe salaries and wages ofProduction Cadres. 3.1 1.4 4.5

5. 90% of the operating costsof Seeds, Applied Research,Rural Roads and Soil and WaterConservation components; 4.3 1.9 6.2

6. 100% of total expendituresfor internationally recruitedspecialists, other than thosefinanced by SIDA or otheragencies 0.9 0.4 1.3

7. Unallocated 10.1 4.6 14.7

40.0 18.0 58.0

Disbursements, with the exception of those for civil works carried out byforce account, for transportation and other local distribution costs underCategory 3 and for Categories 4 and 5, would be fully documented. Dis-bursements for civil works carried out by force account, with the exceptionof rural roads constructed by RRO, and for Categories 4 and 5 would be againststatements of expenditure certified by designated officials of the MOA,Ethiopian Seed Corporation, Ethiopian Roads Authority or other appropriateauthority. Disbursements for the operating costs of road construction would

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be made at rates per kilometer to be agreed with the Government for eachcategory of road based on experience under the Road Sector Project (Credit708-ET). Certification of the number of kilometers constructed would be madeby officials of the ERA. All documentation would be retained by the agenciesconcerned and audited annually by independent auditors acceptable to theAssociation, and would be held available for inspection by IDA/IFAD supervi-sion missions.

3.28 The Association and IFAD would finance part of the incrementaloperating costs of MPP II, using the operating costs of EPID for FY 1977/78,the last year of MPP I, as the base year, after having made an appropriateadjustment to bring such costs to 1979/80 prices. In order to minimizedisbursement problems, disbursements would be made against 25% of salaries andwages of the MOA insofar as they relate to the Minimum Package Program, withthe exception of salaries and wages of Production Cadres.

3.29 The following is the estimated schedule of disbursements of IDA andIFAD funds:

Fiscal Quarter Disbursements CumulativeIDA IFAD IDA IFAD

(in thousands of US$)

March 31, 1981 3,200 2,350 6,200 2,800June 30, 1981 3,700 1,700 8,900 4,050

September 30, 1981 12,500 5,600 21,400 9,650December 31, 1981 4,800 2,200 26,200 11,850March 31, 1982 4,400 2,000 30,600 13,850June 30, 1982 3,200 1,400 33,800 15,250

September 30, 1982 3,200 1,400 37,000 16,650December 31, 1982 2,000 900 39,000 17,750March 31, 1983 1,000 450 40,000 18,000

3.30 No disbursements would be made for expenditures against items in theAWP in respect of any fiscal year until such time as an Annual Work Plan orparts thereof for that year had been prepared by the MOA and approved by theAssociation (Schedule). The Closing Date would be June 30, 1983.

G. Accounts and Audit

3.31 EPID-s accounts were kept on a double entry system. The latestaudited accounts available are those for the year ended July 7, 1978. However,EPID's independent auditor, the GOE Audit Services Corporation, commented,inter alia, that:

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The system of internal control over cash and proper-ties of EPID is inadequate.

EPID has not maintained proper books of accountsupported by adequate documentation. We were there-fore unable to ascertain the following to our satis-faction.

(a) That EPID has proper title to all the assetsincluded in its books, and that all these assetswere in its possession at 7 July, 1978;

(b) That the stocks as reported represent the actualstock on hand at the financial year end;

(c) That the debtors and advances stated in theaccounts represent legitimate receivables,and whether they are fully realizable;

(d) That the amount shown as advances to the FarmServices Division is properly accounted for;

(e) That the contribution less cost and advance makingup the Rehabilitation Programme are correctlystated;

(f) That all contributions stated as donated fromthe various donors have been fully reflectedin the accounts; and

(g) That expenditures as shown in the accompanyingnotes are correctly stated.

In view of the foregoing, we are unable to form anopinion as to whether the attached Statement of Con-dition, together with Notes thereon, present fairlythe financial condition of EPID, Common ServicesDivision, as at 7 July, 1978, in conformity withgenerally accepted accounting principles appliedon a basis consistent with those of the precedingperiods."

3.32 The accounts to July 7, 1979, the date when EPID's functions wereincorporated into the reorganized Ministry of Agriculture, should be finalizedshortly, and their audit is expected to be ready by March 31, 1981.

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3.33 The reason for poor accounting in the past is said to be due to thepoor quality of the support staff available and to the unwillingness in the

past to adopt improvements suggested by the SIDA consultants. Contributingfactors were that security conditions were poor at times and there were frequentstaff changes.

3.34 As a result of some two years' work by three SIDA consultants, a newsimplified system of accounting was introduced into the Ministry of Agricul-ture, effective July 8, 1979, and the main accounts in Addis Ababa are kepton a small NCR computer. While it will not be possible to rectify all theprevious faults, the position for future recording should be satisfactory,especially in the field of control over fixed assets and cash. In the past,much of the bookkeeping and loan work was carried out in the field by theDevelopment Agents. In order to release the DAs for more technical duties,it is proposed that the Project will include the financing of the salariesof 440 bookkeepers who would have a rudimentary training in accounting and whowould be responsible for the elementary accounting and loan records in thewereda offices. The training of these bookkeepers would be assisted by eightvolunteers to be recruited by SIDA who would visit the weredas and givefurther assistance in the field.

3.35 In previous years, EPID produced elaborate and detailed budgetsbased on the annual work plans, but this has not been done in respect ofthe current fiscal year - a very much less detailed budget having beenprepared. Under the project, detailed work plans would be required on anannual basis, from which detailed budgets will be prepared as was previouslydone. With the introduction of the new system of computer accounting, properbudgetary control should be possible, which in turn will help in the prepara-tion of future work plans and budgets. Advisers will continue to be employedunder the project in the Accounting Department of MOA and will continue toimprove the system of accounting and monitor its implementation.

3.36 With the new system of accounts now in force, it is expected thatMOA should experience little difficulty in producing accounts on time. Thedisbursement of parts of the Credit against statements of expenditure shouldnot produce great problems. AIDB, AMC and ERA are the beneficiaries of IDACredits and no problems are anticipated in the field of accounting. Similarly,none is expected from ESC. However, as mentioned above there are staff con-straints in MOA's auditors, the Audit Services Corporation (ASC), and it isunlikely that ASC will be in a position to carry out full audits in a timelyfashion, although it should be easier to audit statements of expenditure (SOE)more promptly than complete accounts of MOA and ESC. Therefore, duringnegotiations it was agreed that the Government would cause the Ministry ofAgriculture and other agencies executing project components to:

(i) maintain separate accounts reflecting all expenditureson account of which withdrawals are requested from theCredit on the basis of statements of expenditures; and

(ii) have such accounts audited by independent auditors acceptableto IDA and furnish such accounts, duly audited, to theBank within six months of the end of each fiscal year.

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3.37 With respect to the accounts of the main implementing agencies, itwas agreed that the Government would cause the Ministry of Agriculture andthe Ethiopian Seed Corporation to:

(i) maintain adequate books of account to properly reflect theiroperations and financial condition;

(ii) furnish the Association with copies of their draft financialstatements within six months of the end of the financialyear; and

(iii) have their financial statements audited by independentauditors acceptable to the Association and furnish suchaudited statements together with the auditors' report, to theAssociation within nine months of the end of the financialyear. However, MOA's audited MPP accounts for 1978/79 wouldbe furnished to the Association no later than March 31,1981; and those for 1979/80 no later than June 30, 1981.

IV. ORGANIZATION AND MANAGEMENT

MOA Headquarters

4.01 The Minimum Package Program is the core of the zemetcha for thepeasant sector and comprises over half of MOA-s work program. The project(i.e. that incremental part of the program assisted by IDA, IFAD and SIDA)would be implemented by the Ministry's normal staff and overall control ofthe project would rest with the Permanent Secretary of MOA. The MPP TechnicalSupport Unit, to be established under the project, would report directly tothe Permanent Secretary and would assist project implementation (para 3.03).In conformity with the administrative structure, the Supreme Council hasultimate responsibility for MPP execution, specifically this responsibilitylies with the Deputy Secretary General of the Supreme Council assisted by thehead of its Agriculture Department. The main responsible departments of MOAimplementing the project would be the Agricultural Extension Department, thePeasant Association and Cooperatives Department, the Animal Resources Develop-ment Department and the Engineering Department. The first two of thesedepartments contain about half of the former EPID's staff, the remainderhaving been assigned to MOA's service departments. These departments aresupported by the service departments such as for Finance, Training andEngineering. The MPP has been assisted in the past by several internationallyrecruited staff financed from mainly SIDA funds and this assistance would becontinued and expanded under the project (see para. 3.09).

MOA Field Offices

4.02 The principal link between MOA Headquarters and the field is theAdministrative Region offices of which there are 14 in the country (notincluding Addis Ababa). Arussi Region is not included in the project sinceit has a separate project assisted by SIDA, namely ARDU, and therefore there

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are 13 MPP II Regions. These offices have been strengthened and have anincreasing measure of autonomy to achieve decentralization of MOA managementand admininstration to the regional level in accordance with the strategy ofthe economic zemetchas. During the project the regional offices would befurther strengthened and would gradually take over full responsibility fromheadquarters for the detailed design of field activities, budget preparation,

administration and accounting, local procurement, and staff recruiting andin-service training. The regional office would supervise the next in lineawraja offices (of which there would be 80 in the project) and provide special-ists for these when needed; the regional offices would in turn be able to callupon headquarters technical specialists to assist in the design of regionalprograms. They would be staffed by the regional head and deputy head, anadministrative officer, 8 junior specialists, 4 accountants, 2 assistantaccountants and an internal auditor.

4.03 The awraja offices would have the function of technical support andsupervision of the 440 wereda level offices. In particular they would assistin the design of trials and demonstrations, disburse petty cash, assist intraining courses at the Farmers' Training Centers, and assist liaison betweenMOA, the awraja administration and other Government representatives. Theywould be staffed by the awraja head, an administrative head, a team leader,8 awraja specialists and appropriate supporting staff.

4.04 The basic organizational unit would be the wereda office, 440 ofwhich have been opened. During the project period wereda staffing would beincreased to provide each wereda with a wereda head, a cooperative agent, aPeasant Association Agent, and from one to four DAs (depending on the size ofthe wereda), a home economics agent, bookkeeper, guards and gardeners. TheDAs would be responsible mainly for advising farmers through the peasantassociations; they would set up the demonstration plots and demonstrations onfarmers' fields. Details of individual wereda work plans and strategies aredevelopped from wereda socio-economic surveys of all weredas. To achieve widercoverage by the wereda office under the new system, motorcycles are being sup-plied in addition to the horse, mule or bicycle that is the standard form oftransport, though more of these too would be funded under the project. Thedemonstration plot program would provide the basic data for gradually refiningtechnical packages for the guidance of farmers. An internationally recruitedagronomist and a soils expert would be engaged to assist with this work.

Other Implementing Agencies

4.05 The Ethiopian Seed Corporation component would be implemented by ESCwhich would be legally established as an autonomous public corporation no laterthan three months from the date of effectiveness. An assurance to this effectwas obtained at negotiations. ESC already has two internationally recruitedexperts assisting development of the program funded from the UNDP/FAO SeedsProject, but one additional expert (a Processing Engineer) would be recruitedto assist the implementation of the IDA funded ESC component. Regarding thecomponents to be carried out by ESC, the Government would pass on the relativeportions of the IDA/IFAD Credits to ESC as a grant, since ESC has only beenrecently established and would not be in a position to service a loan. The

rural roads component of the project would be implemented by the Rural Roads

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Organization (RRO) within the Ethiopian Roads Authority according to plans

agreed with MOA and endorsed by the Supreme Council. Implementation would be

consistent with procedures adopted for rural roads construction under the IDA

assisted ongoing Road Sector Credit (Credit 708-ET). Responsibility for

overall coordination of project implementation at the ministerial and commis-

sion level, where more than one agency is involved, would rest with theSupreme Council.

Credit and Marketing

4.06 The system that would be used under the project would differfrom the MPP I system in the following main respects:

(a) farm inputs would be purchased by AMC (not AIMS whichwas liquidated);

(b) the terms of on-lending from Government to AIDB forfarm inputs would be 8% per annum interest (cf. 7-1/4%)and two years' grace with repayments by the end ofthe fifth year;

(c) peasant associations and cooperatives would be theborrowers and not individual farmers; and

(d) the down payment on seasonal inputs would be at

least 15% (formerly 25%) and on medium-term (2 year)inputs at least 10%.

However, since AMC is a relatively new agency which does not yet have a

large network of outlets, it will still rely on MOA to distribute farm inputs.Similarly, AIDB would still rely on MOA for loan appraisal and supervision,

and its responsibilities would be limited to maintaining the loan accountand bearing the risk of defaults. The annual interest rate on seasonal

and medium-term loans would be 12%. This compares with commercial bank

interest rates of 9-10%. It would be the same as the 1% per month charged

under MPP I. Inflation in Ethiopia has been running at about 19 percent perannum for the last three years and it has been estimated that it will be 15

percent in 1981, 12 percent in 1982 and 11 percent in 1983. It is felt thatit would discourage PAs and farmers from availing themselves of credit, ifrates were to be raised at this juncture, especially when comparing rates

charged by commercial banks, and bearing in mind that, for the latter part ofthe project, the interest rate would be marginally positive. For its service,MOA would continue to receive one eighth of the 12% interest charged to

farmers, leaving 10-1/2% net interest for AIDB. Since AIDB would obtain itsfunds from the Ministry of Finance at 8% interest, it margin would be 2-1/2%.

4.07 Credit would not be given by AIDB to any peasant association that

had repaid less than a level acceptable to the Association of the previousyear's loans. At present Government set this level at 95%, but would confirm

the level at Credit signing. At negotiations, assurances were obtained thatthis repayment level criterion would not be changed without the prior approvalof IDA. However, if crops fail or some other extraordinary circumstances

occur to the extent that in the opinion of MOA such a repayment level is

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unreasonable for certain borrowers, MOA and AIDB would agree on a lower figurefor these borrowers. Since the smooth functioning of the project's inputsupply mechanism would depend upon close collaboration between AMC, AIDB andMOA, the signature of a credit administration agreement, satisfactory to theAssociation, between the three parties, spelling out their respective respon-sibilities, would be a condition of effectiveness of the proposed Credit.

4.08 The latest information (October 1978) shows that for the last four

years loan repayments have averaged about 70-75%, with the number of loansincreasing during these four years from 50,000 to 240,000. However, whilefully detailed figures as at October 1979 are not yet available, indicationsare that total repayments are now running at more than 80%. As from 1978/79,loans were made only to PAs and cooperatives, thus reducing the number ofloans to about 62,000, which should help to bring the overall repayment ratecloser to the Government-anticipated 95%. MOA is pursuing an aggressivecampaign at wereda level for the repayment of old loans, concentrating pri-marily on the follow up of the larger outstandings, but following througheventually on all loans, tracing, where necessary, movements of borrowers fromone part of the country to another.

4.09 As more cooperatives are formed, increasing use would be made ofthem to handle inputs and credit, although it would still be necessary forMOA to evaluate loan applications. MOA would forward the cooperatives'applications to AIDB, and if approved, AMC would deliver the inputs to thecooperative on credit from AIDB. In the course of time, cooperatives wouldrelieve MOA of its temporary role in the supply of inputs and the collectionof credit repayments, thereby allowing it to concentrate on its primary roleof extension. Cooperatives which fulfill these functions would collect the1-1/2% margin presently paid to MOA. This will take a long period of time,however, and the speed and success with which it will be implemented willvery much depend on the MOA's ability to develop sound training and super-visary services for the cooperatives.

4.10 These arrangements are based on Government's policy of channellingall agricultural credit through AIDB, of arranging farm inputs and cropmarketing through AMC, and of using the MOA to provide extension services andto implement and coordinate agricultural development programs. They are alsobased on Government's policy of developing peasant associations throughthe establishment of service cooperatives. It is recognized that MOA willhave to improve the accounting procedures on wereda, peasant association andcooperative levels and provision for adequate staff has been included in thecost estimates. Training of such staff would be undertaken by MOA's TrainingDepartment, Finance Department and PACDD.

Short Term Loans

4.11 The present method for dealing with farm inputs such as fertilizers,etc., is for MOA to estimate the quantities of inputs required and to informAMC, which is responsible for the procurement. AMC then orders them and paysfor them by means of a loan from local banks, and then distributes them toits marketing outlets. In the meantime, MOA will have appraised the different

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loan applications from Peasant Associations and Cooperatives, and will havereported on them to AIDB. MOA delivers the inputs to the peasant associationor cooperative. At this point MOA receives cash or a downpayment and the AIDBloan is considered to have been disbursed. There are two main disadvantagesto this system; (i) MOA makes the estimate of the quantities required withoutsufficient wereda-level enquiries having been made, and (ii) AMC is left hold-ing the financial burden of any unsold stocks - both AIDB and MOA disclaimingany responsibility for carrying these. Both these shortcomings would beaddressed when drawing up the credit administration agreement between AIDB,AMC and MOA (para. 4.07).

4.12 Loans would be made to peasant associations and cooperatives. Whenthe loans become due MOA will collect the principal, together with interestand any late payment fees etc., deduct its handling fee and deposit the balancein the local bank to the credit of AIDB. Since AIDB's role would largely belimited to bearing the risk of default, the 2-1/2% margin between its borrow-ing rate (8%) and lending rate (12% less 1-1/2%), should be sufficient to makethe operation attractive. Until early 1980 AIDB used to collect a 5% bad debtcharge paid in cash with the down payment, but the Government asked AIDB tostop this practice since it was thought to unfairly penalise borrowers whorepaid on time. Consequently, at negotiations an assurance was obtained thatAIDB would, from its operating income, make adequate provision for bad debtson new loans to peasant associations and cooperatives at a level of not lessthan five percent of such loans, or some other level acceptable to the Asso-ciation.

4.13 It is to be hoped that over a period of years the cooperatives willbe able to apply directly to AIDB for credit, receive inputs from AMC anddistribute them to their members, collect downpayments and perform the otherrelated services presently performed by MOA. It would be necessary for MOA toattest initially to the cooperatives' creditworthiness and ability to act.The taking over of such activities from MOA by the cooperatives would relieveMOA of some of its time consuming administrative work, leaving it free toconcentrate on its extension functions.

Medium Term Loans

4.14 In addition to the short term loans described above, AIDB wouldgrant 2 year loans to peasant associations and cooperatives to cover thepurchase of such items as improved bulls, dairy cattle, rams, bucks, poultry,beehives and farm implements. The loans would carry an interest charge of1% per month and be repayable in two equal annual installments. A minimumdownpayment of 10% plus a 5% bad debt service charge would be required. Asfor short term loans, the program would initially be administered by MOA,which would receive a similar handling fee of one eighth of the interest pay-able.

Producer Cooperatives

4.15 The development of producer cooperatives is part of Government-srural development strategy and 34 such cooperatives have been registered.These cooperatives are to collectively farm the land under their control and

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the cooperatives income is to be shared between the members. The means ofproduction, such as oxen, tools and equipment, are not necessarily pooled butmay be hired out to the cooperative by their owners. This new program isstarting slowly and although MPP serves all cooperatives, the project is notespecially designed to serve producer cooperatives.

V. PRODUCTION AND BENEFITS

A. Yields and Production

5.01 Without project yields have been taken from the Crop ProductionSurvey 1978/79; I/ while fertilizer package yields (when applied at rate of1 qt DAP/ha) are the weighted average yields achieved over a five-year period(71/72 - 75/76) in demonstration fields. 2/ The assumed weighted mean yieldsare:

Teff Sorghum Barley Wheat Maize…---qt/ha-----------------

Without project yields 7.8 9.3 7.4 8.3 9.7Fertilizer package yields 11.8 20.7 15.7 15.6 39.2Non-fertilizer package yields 9.2 13.5 9.0 9.7 26.3

The non-fertilizer package yields are the weighted average control yieldsin the demonstration fields mentioned above, where good husbandry practicesare assumed to have been applied. The fertilizer package (i.e. fertilizerand other inputs) would be promoted for crops in accessible areas from whicha reasonable return to the cash outlay can be expected. The non-fertilizerpackage would be offered in more remote areas and where conditions (e.g.semi-aridity) do not favor fertilizer use.

5.02 At the end of the project period (July, 1982) the MPP would serveover 360,000 farm families as compared with 210,000 in the base year (1977/78).National smallholder cereal production in 1977/78 amounted to 3.4 million metrictons 3/ from 3.9 million ha under cereal crops cultivated by over 3 millionfarmers. The average cereal yield was 8.6 qt/ha and the national averagecereal acreage per farm is assumed to be 1.23 ha. Smallholder cereal pro-duction would reach 4,050,000 metric tons in 1981/82 due to increasedacreage (estimated at 1.25 percent per annum) and provided that (i) 387,000

1/ Ministry of Agriculture, Statistics Section, Planning and ProgrammingDepartment.

2/ EPID Publications No. 5, 23, 31 and 39. (Number of demonstrations:Teff 892, Sorghum 132, Barley 338, Wheat 368 and Maize 306).

3/ Crop Production Survey 1978/79, MOA, June 1979.

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"fertilizer-package farmers" apply the recommended amount of fertilizer (i.e.about twice the present amount) and good husbandry practices on a combinedcereal acreage of 642,000 ha (this would result in a weighted average yield of20.4 qt/ha), and (ii) that an additional 46,000 farmers apply only goodhusbandry practices on a combined acreage of 45,000 ha resulting in a weightedaverage yield of 13.7 qt/ha (compared with 8 qt/ha obtained by traditionalfarmers). The total number of smallholder farmers in the project area isestimated to increase to 3,150,000 1/ by 1981/82 and the area devoted tocereal production to 4.03 million ha.

B. Adoption Rates

5.03 Adoption rate assumptions are based on historical evidence from MPPover the past nine years. Extrapolation suggests that 50% of the estimated3.2 million farmers in the project area might have adopted either package overa period of 13 years starting 1980/81, following a trend line that builds upslowly, but at an increasing rate, to a peak in Year 6, after which the rateof increase decelerates. During the brief two year project period markedincreases in adoption rates cannot be expected, but the period afterwardsshould experience faster rates of adoption increase, thus building on theproject's expansion and consolidation achievements. It is assumed that 80% ofthe adopting farmers in the Central, Western, Sidamo and Bale zones, 50% inthe Hararge and 20% in the Northern zone would adopt the fertilizer package,and the remainder the non-fertilizer package. In the ongoing weredas adoptionis assumed to occur at the decelerating rates experienced after year 6,consequently it is estimated that by 1981/82 nearly 14 percent of the farmersin the enlarged project area would participate, i.e. 327,180 in the oldestablished weredas and 105,900 in the new ones out of 3,150,000 total farmers.

C. Markets and Prices

5.04 Between about a quarter and three quarters of increased production,depending on the zone, would be consumed on the farm. The remainder would besold in traditional markets or marketed by AMC. AMC would use the marketingcenters that EPID set up under MPP I but during the project period thesemarketing centers would be taken over progressively by cooperatives. Theywould sell their produce direct to AMC, thus eliminating MOA's marketingactivities entirely as desired. EPID constructed a number of stores to handleboth inputs and production and these will also be taken over by the coopera-tives when they are capable.

5.05 When revising grain marketing and creating AMC, GOE arrangedfor price levels to be reviewed from time to time in the interests of bothfarmers and consumers. Since GOE recognizes that it cannot enforce fixedprices, it allows AMC to fix its own prices within certain predetermined

1/ Of which nearly 14 percent would be participating farmers.

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levels and guarantees to reimburse AMC for losses that might be incurredin maintaining prices within these limits. Because of the varying distancesbetween production areas and the main markets, prices paid to producersvary slightly according to region, but the average minimum producer priceswould be Birr 37 per quintal of teff, Birr 27 per quintal of wheat, Birr 22per quintal of barley; Birr 18 per quintal of maize, and Birr 22 per quintalof sorghum. Official market prices are currently below international grainprices, but the Government reviews these prices annually and has raisedthem in recent reviews. Free market prices have been well above officialprices in recent years, e.g. teff at Birr 80-110 per quintal. Fertilizer hasbeen costed at the 1979 price to farmers of B.65/quintal, which compares withthe cost to AMC in that year of B.80/quintal. Future supplies of fertilizerare expected to cost over B.100/quintal distributed, and in view of the highcost of this subsidy to Government, an assurance was obtained at negotia-tions that fertilizer subsidy levels would be reviewed and that GOE wouldsubmit its proposals to the Association and review them with the Associationnot later than the project completion date of June 30, 1982.

D. Farmers' Benefits and Income Distribution

5.06 For the calculation of farmers- benefits and for the economicanalysis (Chapter VI), six farm models were prepared to reflect the differentcropping patterns and average farm sizes in the six main ecological zonescovered by the project. In descending order of farm population, these are:Central Highlands (Shewa and Gojam Regions), Western Highlands (Wellega,Illubabor, Kefa and Gemu Gofa Regions), Northern Highlands (Tigre, Wello andBegemdir Regions), and the three smaller southeastern highland zones of Sidamo,Hararge and Bale. Each farm model was analyzed in three situations correspond-ing to the traditional farm, the application of the fertilizer package and ofthe non-fertilizer package. Over five years, the average net income of adopt-ing farmers, including subsistence but excluding income from non-crop farmingactivities, would rise from its present level of about US$135 per farm familyto US$265 for farmers adopting the fertilizer package and to US$155 for farmersadopting the non-fertilizer package, representing increases of about 95% and15% respectively. The incremental farm family labor required to achieve thisincrease would average about 15 mandays. This may be compared with an esti-mated absolute rural poverty level for Ethiopia of US$65 per capita, or $377per household (assuming 5.8 members). Even if account is taken of changingcrop price levels since 1977, and if farm income is adjusted upwards to allowfor non-crop incomes, it is clear that the project would result in a sub-stantial increase in the incomes of some of Ethiopia's poorest farm familieswith a relatively small increase in the amount of farm family labor required.The project would also indirectly benefit urban consumers through increasinggrain production, thereby helping to stabilize prices.

E. Government Budget

5.07 Government's revenue from the rural sector comes mainly from taxeson farmer's income which is levied at the rate of Birr 10 per farmer earning

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from Birr 100 to Birr 600 (the class in which most, if not all, of the project

beneficiaries fall) and an annual rural land use fee generally levied at therate of Birr 5 per farmer. In addition, part of the taxes levied on consumer

goods and imports would be attributable to the rural sector, but this is dif-ficult to quantify. Agricultural income taxes and land-use fees were raised

in October 1978, as a result of which revenue from these two sources more than

doubled in the 1978/79 fiscal year (from Br 37.5 million in 1977/78 to Br 87.0

million). By comparison, the recurrent costs of MPP I are about Br 27 million

and the present subsidy on farm inputs about Br 28 million -- Br 55 million in

all. At present, direct revenue from the rural sector exceeds the costs of

the ongoing MPP by about Br 32 million per year. Naturally, many otherrelevant comparisons could be made; for example, other Government programs,

especially infrastructure and social services, could be considered to have a

claim on revenues from the rural sector.

5.08 MPP II would worsen the Government's cash flow by about Br 22 million

p.a. at 1979 prices, by 1982/83, taking account of incremental taxes and duties

on projects costs, outputs, beneficiaries incremental consumption, and net

lending to AIDB. If inflation were also taken into account, the incremental

net deficit would increase, since agricultural income taxes and land-use fees

are fixed in nominal terms. In accordance with its declared policy of self-

sufficiency, Government intends to abolish input subsidies, and if it does so,

the annual net deficit would fall.

5.09 A net transfer of resources to the rural sector is justified since

in the past the rural sector was relatively neglected and it produces the bulk

of the country's output. Since many other services (such as health, educa-

tion, transport, etc.) which are also directed at the same target group, apart

from agricultural extension, have claims on the Government's budget, such a

transfer is probably best effected through subsidization of these services,

rather than of productive services which could generate a surplus available

for cost recovery. This is still under discussion within Government and a

final decision has not been taken. Because of the crucial importance of this

issue for the future of the program, an assurance was obtained from the

Government that before June 30, 1982 it would review the Minimum Package

Program to determine how its recurrent costs can best be met, and what level

of cost recovery from farmers would be appropriate. Without prejudice to this

study and for the purposes of showing the effect of the project on the Govern-

ment cash flow, it has been assumed that from end 1983 an annual levy will be

made on all participating farmers of Birr 12 each, which is considered an

acceptable level, to be collected by the peasant associations to pay for the

extension services. A levy at this rate would raise about Birr 16 million

(constant 1979 prices) by 1990 and reduce the deficit attributable to MPP II

to Birr 1 million (Birr 27 million including MPP I recurrent costs). Although

the Government is naturally reluctant to increase the rural tax burden, the

abolition of rents paid by tenant farmers has resulted in an increase in rural

incomes that could legitimately be tapped for the development of the rural

sector, and such a levy would be consistent with a policy of self-reliance.

Given that the project would reach about 20% of Ethiopia's farmers in 1985,

effective subsidization of this group would not only make them relatively pri-

vileged but, given fiscal constraints, would reduce the ability to replicate

the project in subsequent phases.

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VI. BENEFITS AND JUSTIFICATION

6.01 The project's main direct benefit would be increased cereal produc-tion. Based on projected import parity prices (Assab), this productionwould result in gross foreign exchange savings in year 10 of about US$500million per annum. Allowing for the foreign exchange component of operatingcosts, net foreign exchange savings would be about US$310 million a year. TheGovernment attaches great importance to the proposed project as a means ofassisting smallholders who are mostly below the country-s absolute povertylevel and who would be the main direct beneficiaries of the project. Anothermajor benefit of the project would be the establishment of sound institutionalarrangements in MOA and ESC for future MPP operations.

6.02 The employment impact of the project would amount mainly to in-creased family labor required on the farm and would total as follows:

Project Year1 3 5 10

Man days (millions) 0.29 1.59 5.58 20.00

In terms of skilled and semi-skilled employment, the project would providein MOA additional jobs as follows:

Degree level - 118Diploma level - 336Lower levels of trained staff - 1,258Bookkeepers 440

Total 2,152

There would also be considerable unquantified additional off-farm employmentcreated to handle the farm inputs required by the expanded program and tohandle, transport and process the project's incremental production. Ruralroad construction, particularly the self-help roads, would employ severalhundred additional persons temporarily in each area through which a roadpasses.

Economic Rate of Return

6.03 In analyzing the economic justification of the project, the costsand benefits of the animal husbandry and soil and water conservation com-ponents were excluded, due to the pilot nature of the former and the dif-ficulty of estimating the benefits of the latter. Forty percent of thecosts of rural roads were excluded to reflect non-agricultural use of theseroads. The analysis is thus based on US$54.8 million of costs representing89 percent of project base costs plus a 5 percent physical contingency.The economic life of the project was assumed to be 15 years.

6.04 Fertilizer prices were derived from IBRD projections, as wereimport parity prices for grains. The import parity farm gate price for

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wheat was used to value all grains since, when domestic supplies are short,wheat is the predominant food grain imported. The small incremental quantitiesof pulses and other minor crops which would be produced by farmers under theproject were not included in the analysis. Farm models representative of thesix main regions were used to estimate the value of base year and incrementalproduction. Foreign exchange was valued at a shadow exchange rate of US$1 =

Birr 2.90, compared to the prevailing rate of exchange of US$1 = Birr 2.07.This is equivalent to using to standard conversion factor of 0.72 for allnontraded inputs and outputs. Incremental farm family labor was valued atzero on the assumption that the large numbers of people concerned would nothave an alternative productive source of employment during the project's life.

6.05 Because the project is a time-slice of an ongoing nationwide programto assist peasant smallholders, it is difficult to quantify precisely thebenefits related specifically to the project. Furthermore, ultimate benefitswould depend on the continuation of the Minimum Package Program, for which theproject would lay the institutional and technical foundation. A preciseeconomic rate of return would thus not be very meaningful. However, anindirect analysis was carried out to determine by how much production wouldhave to increase to give a clearly acceptable economic rate of return, and toassess the likelihood of that increase.

6.06 The analysis shows that to realize a 20% economic rate of return,the incremental gross value of food grain production due to the projectwould have to reach Birr 550 million per year by the tenth year of projectdevelopment, assuming a gradual buildup of project benefits from 4 percentin year two (after completion of MPP II) to 28 percent in year 5 and 100percent in year ten. The buildup of benefits is proportional to the mostlikely rate of adoption by farmers. Base year (1978/79) production onthe 1.4 million farms which are expected to adopt either fertilizer ornon-fertilizer packages by year ten was about 2.4 million tons and, at animport parity farm gate price of Birr 615 per ton for wheat (in terms of1979/80 constant prices), is valued at about Birr 1,500 million. Thus therequired increase in the gross value of production by year ten is 36 percentof the base year's farm gate production of food grain crops. Allowing forthe projected rise in the real farm gate price of wheat from Birr 615 toBirr 726 per ton by 1990, the increase in production required by year tento achieve a rate of return of 20 percent would be 30 percent, or an averageannual growth rate of 2.7 percent. This increase is expected to be exceededif the project as designed is implemented as projected. Projections indicatethat food grain production should increase to about 4.1 million tons byyear ten, which would imply an average annual growth rate of about 5 per-cent. However, this level of increase assumes continued investment anddevelopment of the program after the project period, at a much higher rate ofexpenditure than during the project, and should be treated with caution.

Sensitivity Analysis

6.07 Sensitivity analyses were carried out to determine which variableswould be most crucial to the success of the project. For all variablestested, it turns out that deviations from expected values would be unlikely

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to be so large as to reduce the economic rate of return below the estimatedopportunity cost of capital in Ethiopia of 10 percent. For example, benefitswould have to fall by more than 50 percent before the rate of return fallsbelow 10 percent. Since benefits are estimated in terms of gross value ofproduction, this means that either farm gate prices or incremental yieldswould have to be less than half their expected values, which is consideredunlikely. Capital and recurrent costs would have to increase by more than130 percent, which is also unlikely. Farmer adoption rates, based onhistorical experience, are assumed to be modest in the first five yearsafter project startup, and therefore there is room for a delayed or initiallyineffective implementation during the two project years to be made up laterby relatively small increases in the adoption rates achieved thereafter.Thus, the projected adoption rate at full development, and therefore economicbenefits over the project's assumed life, are relatively insensitive toimplementation problems occurring in the early years. Even if no benefitsare achieved for the first four years, with costs incurred on schedule, therate of return would still exceed 10 percent. Finally, the economic rateof return is insensitive to assumptions about the economic price of labor.The shadow wage rate would have to be more than ten times the market wage ofBirr 1 to 2 per day before the economic rate of return would fall to 10percent.

Risks

6.08 In a project of this complexity and scope covering a large part ofthe country's rural sector, at a time when major expansion in the MinimumPackage Program is taking place, there are clearly risks that the projectwould not be implemented on the schedule expected, nor on the scale proposed.To reduce the risk of delays in implementation, the project provides for thetimely review of annual work plans in advance of the normal Government budgetcycle (para. 7.01). Delays could also result from a shortage of suitablyexperienced staff, since the project provides for the recruitment of largenumbers of new staff who must be rapidly absorbed to become effective. Thisrisk has been reduced by the provision of 37-1/2 staff-years of internationallyrecruited technical assistance (para. 3.09). There are risks that suppliesof farm inputs will be inadequate, and that there may be access problemsin the more recently opened parts of the project area. These risks would bereduced by giving MPP farmers priority when allocating seed supplies (para.3.17) and the generally improved logistical and security situation whichprevails today compared to the MPP I period. Finally, there is the pos-sibility that peasant associations and cooperatives will fail to act aseffective extension and credit channels. However, the project provides theinstitutional backup to reduce the chance of this type of failure, and againthe present situation represents a marked improvement over the former practiceof having to deal with hundreds of thousands of individual peasant farmers.On balance, the risks are considered acceptable, given the nature of theproject and its expected impact on Ethiopia's smallholder population.

Environmental Effects

6.09 It is unlikely that any components of the project would have asignificant adverse effect on the environment of the country. Increasing foodgrain production requires the use of improved seeds and chemical fertilizers

- 39 -

together with biocides, but the level of application of these chemicals in

the country will be relatively modest. The soil and water conservation

component, although small in comparison with the total soil and water con-

servation requirements, would make a significant contribution to arresting

further deterioration of natural resources.

Role of Women

6.10 The project extension programs would be designed with particular

attention to the training of women. Programs would be initiated to help

women set up their own associations to promote income-generating activities

such as village handicrafts. Emphasis would also be given to the introduction

of labor saving devices in those activities traditionally the province of

women, attention would be specifically given to improved milling facilities,

and more efficient household management. Other areas of interest would

include nutritional standards, preventative health care, sanitation practices,

child care and birth control.

VII. AGREEMENTS REACHED AND RECOMMENDATION

7.01 During negotiations, assurances were obtained on the following main

points:

(i) The Annual Work Plan for 1981/82 would be prepared following

guidelines as agreed and would be submitted to the Association

for approval by May 1, 1981 (para. 3.04);

(ii) the Technical Support Officer, Evaluation Economist, Chief

Accountant, Agronomist and Head of MOA-s Training Department

would have qualifications and experience and be employed on

terms and conditions satisfactory to IDA (paras. 3.08 and

3.09), and appointment of other internationally recruited staff

would be made in consultation with the Association (para 3.09);

(iii) with respect to overdue accounts, in addition to the usual

reporting procedures, the Government would submit MOA's

accounts and credit reports on the Minimum Package Program

for 1978/79 not later than March 31, 1981 and for 1979/80

no later than June 30, 1981 (para. 3.37);

(iv) the Government would submit to the Association, not later

than four months from the date of Credit signing, (a) a

monitoring and evaluation work plan and schedule, and (b) pro-

posals and a schedule for strengthening MOA's Planning and

Programming Department (para. 3.21);

(v) the Government would review the cost effectiveness of the

program, with particular reference to fertilizer subsidies and

cost recovery, and would submit the findings and discuss the

review with the Association not later than the project

completion date of June 30, 1982 (para. 5.09).

(vi) AIDB would not supply credit for farm inputs to anyPeasant Association or Cooperative that had repaid less

- 40 -

than a level acceptable to the Association of the previousyear's loans unless in the opinion of MOA extraordinarycircumstances make such repayment impossible for certainborrowers in which case MOA and AIDB would agree on alower level for those borrowers (para. 4.07).

(vii) Government would ensure that priority is given to therequirements of MPP farmers when allocating seed suppliesproduced on state farms for the Ethiopian Seed Corporation(para. 3.17).

(viii) The Ethiopian Seed Corporation (ESC) would be legallyestablished as an autonomous public corporation not laterthan three months from the date of effectiveness (para. 4.05).

(ix) The Association may suspend disbursements for any weredawhich is not accessible to its representatives (para. 3.04).

7.02 In addition to normal requirements, conditions of effectivenessof the proposed credit would be:

(i) conditions of effectiveness of the agreement betweenGovernment and IFAD (para. 3.25);

(ii) signature of a credit administration agreement between AMC,AIDB and MOA satisfactory to the Association (para. 4.07);

(iii) signature of a subsidiary loan agreement between the Govern-ment and AIDB satisfactory to the Association (para. 3.25);

(iv) appointment of the Technical Support Officer, EvaluationEconomist and Chief Accountant (para. 3.09).

7.03 Conditions of disbursement of the Credit, in addition to standardconditions, would be:

(i) for items covered by AWPs, approval by IDA of the AWP,or parts thereof, on the basis of agreed criteria(para. 3.04);

(ii) for disbursement for the proposed heifer breeding ranch,IDA has approved the detailed ranch plans, includingtechnical and financial analysis (para. 3.13);

(iii) for the IAR research training component, approval by IDAof a detailed training plan (para. 3.19);

(iv) for fertilizer, that demand estimates satisfactory to theAssociation have been made (para 3.10); and

(v) for rural roads constructed by ERA, that a cost per kilometerhas been agreed by the Government and IDA (para. 3.20).

7.04 The proposed project is suitable for an IDA credit of SDR 32.0million (US$40.0 million) to the Government of Ethiopia.

- 41 -SCHEDULEPage 1

ETHIOPIA

SECOND AGRICULTURAL MINIMUM PACKAGE PROJECT

Annual Work Plan

Contents of Work Plan

1. The MPP fiscal year work program and cost estimates shall constitutethe annual work plan provided it contains substantially the information listedbelow.

Supporting Information

2. The work plan shall either contain or be accompanied by the followinginformation:

(a) a description and estimated total and incrementalcapital and operating costs of the proposed fieldprogram, including:

(i) the incremental and total number of awrajaand wereda offices (by type) included andtheir location;

(ii) the incremental and total number of coop-eratives, peasant associations and farmersinvolved by Administrative Regions;

(iii) quantified targets set by AdministrativeRegions for crop development (by crop),seeds multiplication, demonstration plotsand farmer demonstrations (by type ofwereda and aggregated) soil and waterconservation (by weredas), animal hus-bandry (by weredas), home economics, androad development (including maps);

(iv) a table comprising the estimated demandfor farm inputs (by Administrative Regions),sub-divided between incremental and existingfarmers and identifying incremental fertil-izer to existing farmers, with their expectedsupply, including fertilizer (by type), im-proved seeds (by crop) and animal husbandryinputs;

- 42 -SCHEDULEPage 2

(v) a description of the veterinary servicesavailable in weredas proposed for the live-stock breeding program;

(vi) stocks of fertilizer (by type) for MPP carriedover from the previous year and new orders byAdministrative Regions;

(vii) a description of the proposed arrangementsfor timely distribution of farm inputs.

(b) any proposed variation from agreed procurementprocedures;

(c) details of staffing arrangements to execute theprogram including:

(i) current staffing status of the Ministry ofAgriculture headquarters in Addis Ababa(approved posts, staff in-post and vacancies)by departments and skilled categories andproposed recruitment during the fiscalyear;

(ii) a table comparing approved MPP posts, staffin-post and vacancies (including estimatedturnover) for staff at the degree, diplomateand vocationally trained levels with the esti-mated supply at each level and specifyingsources of recruitment;

(iii) details of staff training programs by insti-tutions, including course content and durationfor in-service courses.

(d) schedule of status of loans, showing overdues (byRegion), by number of accounts, amount and age ofarrears, and summary of forecast movements on loanaccounts for the year;

(e) details of the building program by type of buildingand location;

(f) capital budget based on agreed requirements forHeadquarters, Regional offices, awrajas and eachtype of wereda office, in such detail that replace-ment and incremental expenditure can be identified;

(g) details of proposed funding of the Annual Work Plan;

- 43 -SCHEDULEPage 3

(h) details of the evaluation and monitoring programand the schedule for completion of major aspectsof the E & M program.

Criteria upon which Annual Work Plans shall be consideredfor Finance under the IDA Credit and the IFAD Loan

3. The work plan shall be feasible in the areas included, given theavailability of farm and animal husbandry inputs, credit, transport and stor-age, qualified staff, veterinary services, administrative infrastructureand farmer organizations.

- 44 -TalI

ETHIOPIA

SECOND AGBICULTURAL MINIMUJM PACKrAGE PROJECTI

New Wereda Openings and Expansions to Full Coverage Since Completion of MPP I

1977/78Weredas

Administrative Partly ServedRegion by MPP? I 76/77 77/78 78/79 79/80 Total

Wereda Type: A B C D Tortal A B C D Total. A B C D Total. A B C D Total A B C D1. Eritree

New Wereda -------5-5 14 - 5 53.Ring arealI/

4 - 5-9 4-5-9

2, TigraiNW - 21- 3 7 3 - -- 3 2 4--266 25 6 112 4NA -2 2 -- i 4 351 - 9 ~ 16 4- -o 2 21 1 133~33

3. Wello

NW 2 -1- 38 322 -7 14 - 2 -131 5 43113 3RA ----- 2 -3- 5 4 11 17 2-1 471 8 15519319

4. GonderNW ----- - -13 4 .1 - 3 4 6 I 4 -I1792NA - - -- 42 61I -- 1-- 26 13 -~ 1 741

5. GojamNW 3 2--5 - -11 2 5 -- - 77 14 1- -- 11 4 21815 3RA - - - - - -- - 33 - - 1 7 - 12 710 - 1316 2o20

6. WellegaNW ----- - 2-2 4 34 - 18 2 3 1-62 591318 49NA 31 ----- -6 -3 913 2 2 1 -513 1 7 54172 3 156731

7. ShoeNW - - 123 ----- 1- 2 47 4 2 2311 5 25921NA - -1 12 3 136 13 1 46 2031 351102 0 85Others 2/ -427 0 - _ _ _ _ 8 - 1 - 42 77

8. KeffaNW 2 -- 1 3 1 4 4 1211 4 5 -- 9 10 9 1323RA ----- -- 44 8 1 1 -1 -2 13 -- 2211 562312

9. IllubaborNW 3 1-- 4 22 -- 4 6 1 -71 11 4 ~15RA ----- 3 -126 10 1 43 19 13 2 2 -41 664319 31.9

10. Gama GofaNW - -- - 112 10 - 121 44 - 1 1136 - 2439 2NA ----- 341-8 - 2 1 -3 3 6 2(G12

11. SidasoNW I - I 13 2 3 -5 12 --- 1 6 4 -41 9NA ----- 1 -124 7 1i114 7 2 - 125 4 13816 2516

12. BaleNW - ----- - 4151i4 - -41 514NA ----- -6 39 -63 9

13. Harrarge

NW ----- 2- - -2 6 -1I--i 1 2- - -220o -53RA 17-----I- 224 -3 1 15 3 43 818 4 112

TotalNW 3 2 1 2 8 10 5 6 9 30 18 15101 8 62 22 18 13 7 60 53 40 30 36 159RA - - I 1 2 16 1322 26 7/ 13 20 17 34 4 33 25 2732117 62 5867 93280GRAND TOTAL 280 3 2 2 3 10 26 182835 10 7- 31 35 27 52145 55 43 4039 177 115 98 97 129435 I/

--440 4/-I/ This line indicates progressive conversion of MP~P I EPfID Centre partial wereda coverage in 280 weredas to full coverageby inclusion of "ring areas" around I4PP I core service areas.2/ Weredas in Yerer end Kereyu awrajas.

Ada wereda which has been fu-lly covered before is not included here asa new wereda or a rngN area since this waredcL was a comprehensive project area -USAID.4/ Includes Ada vereda, since comprehensive program was withdrawn.

November, 1979

E T H I O P I A

SECOND AGRICULTURAL M¢NIMM PACKAGE PROJECT

Incremental and Cumulative Number of Adopting varms bv Year (nOO Holdings)

Project Year 1 2 3 4 5 6 7 8 9 10 11 12 131980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 TOTAL

I. Newly Opened WeredasNorthern 7.3 12.2 20.7 38.9 62.1 175.2 64.5 47.5 4o.2 37.7 35.3 34.1 32.9 608.6

Central 4.7 7.9 13.4 25.2 40.2 113.5 41.8 30.7 26.o 24.2 22.9 22.1 21.3 393.9

Western 4.9 8.1 13.8 26.0 41.4 117.1 43.1 31.7 26.8 25.2 23.6 22.8 21.9 406.4

Hararge 0.5 0.9 1.5 2.7 4.4 12.3 4.5 3.3 2.8 2.7 2.5 2.4 2.3 42.8

Bale 0.3 0.4 0.7 1.4 2.2 6.3 2.3 1.7 1.4 1.4 1.3 1.2 1.2 21.8

Sidamo 1.6 2.6 4.4. 8.3 13.2 37.2 13.7 10.1 8.5 8.0 7.5 7.2 7.0 129.3

Incremental 19.3 32.1 54.5 102.5 163.5 461.6 169.9 125.0 105.7 99.2 93.1 89.8 86.6 1602.8

Cumulative 19.3 51.4 105.9 208.4 371.9 833.5 1003.4 1128.4 1234.1 1333.3 1426.4 1516.2 1602.8

II. Old Weredas (MPP I)

New Adopters27 27(e of total) 5.3 3.9 3.3 3,1 2.9 2.8 2.7 2.7 2.7 2.7 2.7 2.7 2.7

Incremental 14 12 11 10 -10 10 9 9 9 9 10 10 10 133

Cumulative 14 26 37 47 57 67 76 85 94 103 113 123 133 .133

Total (incl.base) 304 316 327 337 342 357 366 375 384 393 403 413 423 423

Grand Total Adopters 323 366 433 545 714 1,191 1,369 1,503 1,618.1i726 1,829 1,929 2,026 2,026

- 46 -

Table 3Page 1

ETHIOPIA

SECOND AGRICULTURAL MINIMUM PACKAGE PROJECT

Ministry of Agriculture - Manpower Projection for MPP

Project Year: 0 1 2 TotalFiscal Year: 1979/80 1980/81 1981/82 Recruitment

---------------- Graduates --------------

I. Degree Level

Alemaya College of Agriculture Output 200 440 440Available to MOA @ 50% 1/ 100 220 220

Required:Dept. Heads & Team Leaders (HQ) 13 13 13Team Leaders (Reg. Office) 26 26 26Experts: (HQ) 48 48 48

(Reg. Off.) 82 198 198Junior Experts: (HQ) 21 23 23

(Reg. Office) 65 65 65Awraja Heads 80 80 80Sub-Total 335 453 453Turnover (5%) 17 23 23Total Requirement 352 476 476

In-post 335 352 453To be recruited 17 124 23 164Surplus (Shortfall) ofPotential Recruits 83 (96) 197

II. Diploma Level

Output from Four Agric. Institutes 500 880 880Available to MOA @ 50% 1/ 250 440 440Required:Awraja Team Leaders 80 80 80Awraja Junior Specialists 336 800 800Wereda Heads 440 440 440Animal Health Asst. 70 80 80Sub-Total 926 1,400 1,400Turnover (5%) 46 70 70Total Requirement 972 1,470 1,470

In-post 1,064 1,064 1,400To be recruited Nil 406 70 476Surplus (Shortfall)of Potential Recruits 4/ 342 34 370

(Continued)

- 47 -

Table 3Page 2

Project Year: 0 1 2 TotalFiscal Year: 1979/80 1980/81 1981/82 Recruitment

---------------- Graduates --------------

III. FTC Level

Output all MOA/FTCs (6 months) 21 392 3/ 790 790Available to MOA (100%) 392 790 790Required:

Cooperative Agents and PA Organizers 490 715 880Development Agents 660 965 1,166Home Economics Assts. 150 220 440Sub-Total 1,300 1,900 2,486Turnover (10%) 130 190 249Total Requirement 1,430 2,090 2,735

In-post 1,038 1,430 2,090To be recruited 392 660 645 1,697Surplus (Shortfall) - nil nilof Potential Recruits

IV. Bookkeepers (Commercial School of Addis Ababa)

Output 750 313 + 66 +Available to MOA 1/ 150 313 66Required 440 440 440Turnover (15%) - 23 66Total Requirement 440 463 506In-post - 150 440To be recruited 150 313 66 529Surplus (Shortfall) (290) - -

1/ Availability figures for MOA recruitment are Supreme Council allocations.

2/ Assumes about half annual capacity would be used for pre-service training,with rest for farmer training and staff refresher courses.

3/ For 6 months January - June 1980 assumes only half normal course conductedin anticipation of IDA-assisted MPP II.

4/ Not applicable since staff would be recruited and trained by MOA asrequired.

ETHIOPIA

SECOND AGRICULTURAL MINIMUM PACKAGE PROJECT

SUMMARY OF PROJECT COSTS(in thousands of Birr)

YEAR I YEAR II TOTAL GRAND DUTIES ANDLocal Foreign Local Foreign Local Foreign TOTAL TAXES

Ministry of Agriculture - MPP II 19241.2 10087.3 18937.0 5857.4 38178.2 15944.7 54122.9 3897.3

Soil and Water Conservation 3156.2 1889.1 2447.2 908.9 5603.4 2798.0 8401.4 1212.5

Rural Roads 877.6 3688.9 2432.9 4207.9 3310.5 7896.8 11207.3 1269.8

Farm Inputs 10682.2 12860.5 6305.1 6163.0 16987.3 19023.5 36010.8 1006.2

Seed Multiplication - PA 1581.9 375.1 1290.8 222.2 2872.7 597.3 3470.0 57.0

Ethiopian Seed Corporation 7031.9 4222.8 2205.3 1440.9 9237.2 5663.7 14900.9 3119.0

Applied Research 175.0 75.0 175.0 75.0 350.0 150.0 500.0 50.0 l

BASE COST 42746.0 33198.7 33793.3 18875.3 76539.3 52074.0 128613.3 10611.8

Physical Contingencies - 5% 2137.3 1659.9 1689.7 943.8 3827.0 2603.7 6430.7 530.4

SUB-TOTAL 44883.3 34858.6 35483.0 19819.1 80366.3 54677.7 135044.0 11142.2

Price Contingencies 1/ 6732.5 3398.7 10822.3 3785.4 17554.8 7184.1 24738.9 1454.8

51615.8 38257.3 46305.3 23604.5 97921.1 61861.8 j 159782.9 12597.0

US Dollars @ 2.07 24935.2 18481.8 22369.7 11403.2 47304.9 29885.0 77189.8 6085.5

1/ Price contingencies - local currency 1980/81 - 15.0%; 1981/82 - 13.5%.- foreign currency 1980/81 - 9.75%; 1981/82 - 8.5%.

ETHIOPIASECOND AGRICULTURAL MINIMUM PACKAGE PROJECT

Project Organization Chart

NRDC- N ATIONAL REVOLUINRCENTRALPLANNING DEVELOPMENT CAMPAIGN

SUPREME COUNCIL INRDC) "Zemet

National Mi nstrifsan,ry of Ministry OfSationk: of. . Ministry of State Farm Coffee & Tea Ministry of Ministry of Transport & Ministry of Education

Ethn.p,. Finance Development Development Domestic Trade Communications |0

* . S cine & e ..

Iec

olog

............. | Commission ..... rural Roa ds

.. r' ' ~~~~~ ~ ~~ ~ ~ ~~~~~~~np,utt s

I~~~~~~~~~~~~~~~~~~ . . . . . . .s .: ........Ethiopian Seed Institute of

0 .14px. W. ,por.t..n Agricultural Research

4 l + ' ii . I h I Universityof l l I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Uivrstyo

||. SeesFinnce AGRICULTURAL Training Centers Allemaye Collaeg Vocato

Cream ROGRA MEP)Seeds MINIMUM PACKAEICredit 0 PROGRAM IMPP) j

_...........................................................................; _____--. ' I.'.160.1.

Needs/Data O 1 InSe IncraL1ce Traang of Staff

| tt_ ~~~~~~P-eervioe Training IDge ee)|

Pra-service Training (Diploma Level)

April 1980 World Bank - 21406

Iti-,

ETHIOPIASECOND AGRICULTURAL MINIMUM PACKAGE PROJECT

Ministry of Agriculture Organization Chart

Audit ~ ~ ~ ~ ~ ~ ~~ul~~~~~~~~~~~~~~

1~ ~ ~ ~ ~ ~ ~ ~~~~~~Srie 33

I tI I

gat ServicesPlanningandProgresrarming Land Uset

PeaantAssciaio Trcuhtnic Aima l Rsorcs ildife anPadin

Deprten 3Supaorsi t Deniten 2angeen D4asies2

|~~~~~~~~~~~~~~~~~~~~~~~~Sie Lega Sevee. 3rPublic Relations TraiAing Seprv ent

Services 40

AdminiD bration Fithsemeeabutfol

Anipr 1rd Plan90 WO in Set vices Serving 3

{ ano Coop¢raives | | AEgrcultjrual | [ Animal Resources | Vhr e,ucs | | Yi9dlife Con- PlLaningUr

| Depart-et 32 || Department D ar rwne ntm257 Deamn 2 Deart_ _ _8

Regional Offic of Agriculture 5°6l

- _ 14 (13 in MPP 11)

Awraja Office o1 Agriculture _ ~22

| Wereda Office ot Agriculture ||

Numbers in bo.es indicat. staff positions. In Decemnber 1979 in HO these -vre about fullystaffed, and in field offices about half filled.

April 1980 World Bank -21407

- .51 -

Chart 3

ETHIOPIASECOND AGRICULTURAL MINIMUM PACKAGE PROJECT

Implementation Schedule

Project Years 1979/80 1980/81 1981/82 1982183

Ethiopian Fiscal Years (starting July 8)

Annual Work Plan

Preparation by GOE *

Submission to IDA/RMEA

Conditions of Effectiveness

Signature of Credit Admin. Agreement

Appointment of Three Consultants

Effectiveness of Agreement with IFAD

Credit Effectiveness

Procu rement

Vehicles

Road Construction Equ ipment

Farm Inputs:

Fertilizer

Ordering

Delivery

Seeds

Biocides

Implements

Animal Husbandry Inputs _ -

Project Components

Civil Works:

Docu mentat ion _ - _

Construction _ _

Demonstration Plot Program

Soil and Water Conservation

Rural Road Construction _ - - -

Self-Help Road Construction _ - - - rSeed Multiplication:

ESC _

PA's

Monitoring and Evaluation

Quarterly Reports I F

Completion Report

Reviews

Cost Effectiveness and Fertilizer Subsidy

Audits

MOA

ESC

SOE8

*)Completed World Bank-21564

May 8, 1980

-52-

ETHIOPIA

SECOND AGRICULTURAL MINIMUM PACKAGE PROGRAM

MATERIAL AVAILABLE IN IMPLEMENTATION VOLUME

ANNEXES

1 Wereda Coverage, Technical Packages,Yields and Adoption Rates

Table 1 - New Wereda Openings and Expansions to Full CoverageSince Completion of MPP I

Table 2 - Past MPP ParticipationTable 3 - Incremental and Cumulative Numbers of

Adopting Farms by Year

2 Farm Models

Table 1 - Summary Farm Models at Full Project BenefitTable 2 - Farm Models - Supporting Data

3 Manpower, Training and Staffing Requirements

Table 1 - Ministry of Agriculture - Manpower Projection

for MPPTable 2 - Farmer Training Center CapacityTable 3 - Expatriate Staff at MOA HeadquartersTable 4 - Staffing by Class of Wereda

4 Project Costs

Table 1 - Summary of Project CostsTable 2 - Project Base Costs by Category of Disbursement

5 Government Cash Flow

6 Estimated Schedule of Disbursement of IDA Credit

7 Implementation Schedule

8 Economic Analysis

Table 1 - Summary of Costs for the Economic AnalysisTable 2 - Summary of Economic AnalysisTable 3 - Projected Economic Import Parity Prices for Wheat

9 Extension Methods under MPP II

- 53 -

ANNEXES (Continued)

10 Soil and Water Conservation

Table 1 - Conservation Staffing RequirementTable 2 - Estimated Quantities of Conservation Works

11 Agricultural Credit

12 Input Supply and Marketing

13 Agricultural Research

14 Improved Seed Production

Table 1 - Estimated Improved Seed Requirementsand Supplies

15 Cooperative Movement

16 Animal Husbandry

17 Detailed Costs

Table 1 - MOA - MPP II Administrative Costs - SummaryTable 2 - MOA - Headquarters Costs for MPP IITable 3 - MOA - Field Costs - Costs Per Type of Wereda ModelTable 4 - MOA - Field Costs - Wereda OfficesTable 5 - MOA - Field Costs - Awraja OfficesTable 6 - MOA - Field Costs - Regional OfficesTable 7 - MOA - Animal Husbandry - Costs for MPP IITable 8 - Soils and Water ConservationTable 9 - Rural Roads ComponentTable 10 - Farm InputsTable 11 - Seed Multiplication in Peasant AssociationsTable 12 - Ethiopian Seed Corporation

18 Rural Roads Components

Table 1 - Rural Roads Components in Major IDA AssistedAgricultural Projects and the IDA Road SectorProject

Table 2 - Rural Roads Components and other Major AgriculturalProjects

Table 3 - Annual Rural Road Construction and MaintenanceProgram (km)

Table 4 - Road Construction and Maintenance EquipmentTable 5 - Rural Roads Design StandardsTable 6 - MPP Rural RoadsTable 7 - Description of Rural Roads

l > 0 P 0 : / 2 g E T H I ° p A --- L6 Rr.ETHIOPiA

E j :A: \S J5K-s\" lSECOND MINIMUM PACKAGE PROJECT

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7 z ETHIOPIA

SECOND MINIMUM PACKAGE PROJECT

MAJOR FOOD CROP ECONOMIES

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