Document of

The World Bank

FOR OFFICIAL USE ONLY

Repowt N. P-3696-GB

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE-

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT OF SDR 16.2 MILLION

TO THE

REPUBLIC OF GHANA

FOR AN

EXPORT RERABILTTATIoN TECHNICAL ASSISTANCE PROJECT

December 12, 1983

This docunt has a riesred dslmalb and may be used by recipients only in the pofefnace ofthewr Uffi. duties. ts coteaats omy nt oeheiws be dislosd witkout Woid Bank authoration.

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CURRENCY EQUIVALENTS

Currency Unit = CedisUS$1 = 30 Cedis 1/1 Cedi = US$0.36 17US$1 = SDR 0.944037

FISCAL YEAR

Government of Ghana: January 1 - December 31(effective January 1, 1983)

ABBREVIATIONS AND ACRONYMS

AGC - Ashanti Goldfields CorporationCSD - Cocoa Services DivisionERP - Export Rehabilitation ProjectFAO - Food and Agriculture OrganizationFPIB - Forest Products Inspection BureauGCOB - Ghana Cocoa Marketing BoardGDP - Gross Domestic ProductGPA - Ghana Port Authority -

GTMB - Ghana Timber Marketing BoardMLNR - Ninistry of Lands and Natural ResourcesNIB - National Investment BankPNDC - Provisional Nationall Defence CouncilSGNC - State Gold Mining CorporationSSVD - Swollen Shoot Virus DiseaseTEDB - Timber Export Development Board

1/ Effective October 10, 1983.

BEST COPY AVAILABLE

FOR OFFICIAL USE ONLY

GHANA

EXPORT REHABILITATION TECHNICAL ASSISTANCE PROJECT

CREDIT AND PROJECT SUMMARY

Borrower: Republic of Ghana

Amount: SDR 16.2 million (US$17.1 million equivalent)

Terms: Standard

ProJ ectDescription: The proposed project aims at strengthening the institutional

capability of the key organizations in the export sector sothat they can play effective roles in rehabilitation of theexport industries. Specifically the proposed project wouldprovide about 120 man-years of technical assistance to assistthe Government in implementing a number of export sectorpolicy and institutional reform measures; to carry out relatedsector studies; and to build local capability through stafftraining. The proposed project also aims at ensuring adequatemanagement capacity of the cocoa, timber, gold miningorganizations and the ports authority to execute the proposedExport Rehabilitation Project. The proposed project entailsthe risks that the institutional objectives are not fullyachieved due to the generally difficult country economicsituation and demoralization of local staff and that there aredelays in recruiting technical assistance personnel ofrequired calibre. To minimize the risk, early actions arebeing taken by Government to expedite appointment of technicalassistance personnel and to improve the living conditions oflocal staff.

ExecutingAgencies: The Government of Ghana, Ghana Cocoa Marketing Board (GCMB),

State Gold Mining Corporation (SGMC), and Ghana PortsAuthority (GPA).

RelendingArrangements: Approximately $14.2 million equivalent of the proposed Credit

for the Cocoa, Gold Mining and Port Sectors would be onlent bythe Borrower to GCMB, SGMC, and GPA as loans with a repaymentperiod of 15 years after 5 years of grace. Such loans wouldbe made on an interest free basis until such time as therespective agencies become financially capable of payingappropriate interest on the loans. The Government wouldretain the remaining proceeds of the Credit to carry out thetechnical assistance component for the timber sector.

This document has a rcstricted distnrbution and may be used by recipients only in the perfoi nance oftheir cmTicial duties. Its contents may not otherwise be disclosed without World Bank authorization

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Estimated Cost: 1/

-- --US$ million------Foreign Local Total

Cocoa Sector 3.8 0.6 4.4Timber Sector 2.0 0.3 2.3Mining Sector 7.4 0.9 8.3Port Sector 0.6 0.3 0.9Project Preparation(under PPF) 0.3 - 0.3

Sub-Total 14.1 2.1 16.2Price Contingency 1.5 0.3 1.8

TOTAL 15.6 2.4 18.0

Financing Plan:

Foreign Local Total

IDA 15.6 1.5 17.1Borrower - 0.9 0.9

Total 15.6 2.4 18.0

Estimated Disbursements:

IDA Fiscal YearUSS million

FY84 FY85 FY86 FY87 FY88

Annual 2.0 5.2 5.0 3.0 1.9Cumulative 2.0 7.2 12.2 15.2 17.1

Rate of Return: Not applicable

Appraisal Report: None

1/ Net of taxes from which the project would be exempt.

INTERNATIONAL DEVELOPMENT ASSOCIATION

REPORT AND RECOMMENDATION OF THE PRESIDENT OF THEINTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE EXECUTIVE DIRECTORS ON APROPOSED EXPORT REHABILITATION TECHNICAL ASSISTANCE PROJECT

TO THE REPUBLIC OF GHANA

1. I submit the following report and recommendation on a proposed Creditto the Republic of Ghana of the equivalent of SDR 16.2 million (US$17.1million equivalent) on standard IDA terms to help finance a proposed ExportRehabilitation Technical Assistance Project.

PART I - THE ECONOMY 1/

2. An economic report entitled "Ghana: Policies and Program for Adjust-ment" was distributed to the Executive Directors in October 1983 (4702-GH).Part I of this Report contains the principal findings of the report. Basiceconomic data and selected social indicators are sunmarized in Annex I.

3. The Ghanaian citizens once enjoyed a fairly high standard of livingcompared with citizens of most other West African nations. However, a declin-ing gross national income has combined with high population growth (estimatedat 3 percent a year) to cause a substantial erosion in real per capita income.At least 18 percent of the labor force is estimated to be unemployed, under-employment is widespread, and almost half the population of 12 million is nowestimated to live in absolute poverty. The country's basic-needs indicatorsnow appear to be on a par with those of other Sub-Sahara African countrieswith comparable per capita incomes. Thus, despite the growth in health faci-lities, modern health services are available to only about a third of thepeople and fewer in rural areas; only 35 percent have access to safe water.Although the education system is well established and elementary education hasbeen free since 1962, 50 percent of adult men and 70 percent of adult womenhave had no formal education.

4. On December 31, 1981, Flight Lt. Rawlings replaced the Governmentheaded by President Limann. After a difficult first year in office duringwhich the new Government, Provisional National Defence Council (PNDC), essen-tially pursued a holding strategy, recent policy measures announced by theGovernment show a firm resolve to come to grips with the country's economicproblems.

1/ This Part is the same as Part I of the President's Report for theExport Rehabilitation Project which is being submitted to the ExecutiveDirectors for their consideration simultaneously with this proposedproject.

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Basic Structural Characteristics

5. Ghana is endowed with considerable natural and human resources. Thecountry has valuable mineral deposits, particularly gold, but also diamond,bauxite and manganese. The large hydroppmer potential has only been partlytapped to generate electric power for the country as well as for export toneighboring countries. Recently some oil deposits have been discovered andoff-shore oil exploitation is under way. Ghana has sufficient arable land togrow various kinds of food cereals and starchy staples and possesses consider-able fishing resources. The country is also rich in forest resources.

6. Agriculture is the largest sector of the economy, accounting forabout 51 percent of GDP, although only about 11 percent of the land area iscultivated, divided equally between cocoa and food crops. Nearly 70 percentof the population derive an income from agriculture or related activities.The basic staple foods are maize, rice, millet, yam, cassava, and plantainbut, except for cassava, yields of these crops have stagnated. Food produc-tion in 1980 was only 88 percent of that in 1975. Prolonged droughts in1975-77 and 1982-83, inadequate support services, poor transport facilitiesand lack of fertilizers and other inputs contributed to the decline. In thelast five years, Ghana has had to import 10 to 15 percent of its cerealconsumption (mainly rice and maize). Most foodstuffs other than cereals andstarchy staples are either unavailable or can be purchased only on the blackmarket.

7. Ghana is typical of a developing country that depends on primaryproducts for exports. Cocoa (of which Ghana is the world's third largestproducer) contributes about 60 percent of total export earnings; productionhas been declining, however, and world cocoa prices are depressed. Timber isalso an important export. Although production has been declining for the pasttwo decades, mining is still Ghana's second largest foreign exchange earner,contributing 10 to 15 percent of the total. Diversification of the exportbase, although emphasized by every Government over the past 25 years, has notmade much headway.

8. Industrial production and services account for 17.5 and 32 percent ofGDP, respectively. Manufacturing--including textiles, steel, tires, oil re-fining and simple consumer goods--contributed 9 percent of GDP in 1980 (downfrom 14 percent in 1971) and provided full- or part-time employment to about12 percent of the labor force. Manufacturing in Ghana remains heavilydependent on imported inputs, however. As a result, the goal of import sub-stitution through industrialization has met with little success and imposed aserious burden on the economy.

9. Ghana used to import all of its petroleum, mostly in the form ofcrude oil, which is refined domestically and used chiefly as a source of fuelfor the transport sector. Recently, some oil deposits have been discoveredand commercial exploitation has commenced. Production of crude is now about1,200 barrels per day, equivalent to 7 percent of Ghana's requirements.Hydroelectric power meets most of Ghana's non-transport commercial energyneeds.

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Recent Economic Developments

10. Despite relatively abundant natural resources and human capital,Ghana's economy has been ailing for many years. Prominent among the symptomsare: declining per capita income, persistent high inflation, a greatly over-valued exchange rate, widespread smuggling and other illegal economic acti-vities, large public-sector deficits, a difficult balance of payments situa-tion, low productivity, low domestic saving and declining investment, deterio-rating infrastructure, severe under-utilization of productive capacity, highunemployment, a brain drain of skilled professionals, skewed income distribu-tion, and much-weakened institutions. Real GDP has declined every year since1975, except for 1978, and real per capita income has fallen by 25 percentsince 1975. Per capita income in current prices was estimated at $350 in1982. Per capita food availability is 30 percent lower than in 1975. Thereasons for these difficultLes are manifold. Political instability andpersistent mismanagement of the economy by successive Governments, an over-extended parastatal sector, sharp increases in oil prices, adverse terms oftrade for Ghana's major exports, and declining export production are among themost important factors.

11. Inflation has been rampant since the mid-1970s. The consumer priceindex increased by an average of 80 percent a year after 1975, and reached thetriple digit level (116 percent) in 1981, despite extensive Government use ofprice controls. Large public deficits, excess liquidity, and shortages ofgoods all contributed to the rise in prices. Fixed wage earners and cocoafarmers have suffered the most, while traders, import licensees, speculators,and farmers with marketable crops have been the main beneficiaries.

12. Budget deficits grew, as the Government proved unable to sustain aprogram of stabilization begun in 1978, when Government expenditures were cutby about one-third in real terms and the deficit was reduced to 5 percent ofGDP (compared with 12 percent in 1977). An increase in the minimum wage inNovember 1980 and a serious shortfall in revenues--due to a dramatic fall incocoa duties to 5 percent of total revenues (from 47 percent in 1978/79) andto a nizri-vying of the Government tax base--widened the deficit to 04.7 bil-lion, or 10 percent of GDP, in 1980/81. 1/ In 1981/82, the deficit amountedto about 05 billion--i.e., 50 percent of estimated expenditures for the yearand equivalent to the entire revenue collection.

13. Balance of payments difficulties persist. Capital inflows have vir-tually dried up, due to political uncertainties. Commercial lending was notfeasible due to lack of creditworthiness and accumulation of large arrears,while official aid was reduced in response to lack of action on macroeconomicpolicy. Without capital inflows, imports and service payments were perforceheld to the level of export earnings, which were also declining in quantityand value. Export earnings in 1981 were estimated to be 33 percent lower thanin 1980 ($766 million v. $1.1 billion). The overvalued exchange rate acted asa strong disincentive to production for export, since the cost of productionfar exceeded the price received at the official exchange rate. Overvaluation,

1/ Through 1982, the fiscal year was July-June.

along with shortages of consumer goods in rural areas, also resulted in a widevariety of illegal and unproductive economic activities. Domestically pro-duced and imported goods were smuggled to the Ivory Coast and Togo for saleagainst the hard CFA, with tremendous losses (unofficially estimated at over$100 million a year) to the country's external account. International reces-sion also contributed to the poor export performance. Because of weak demand,world prices of cocoa plummeted and prices of other primary exports wereequally unfavorable. The international oil crisis compounded Ghana's pro-blems. Imports of crude oil and petroleum products preempted almost half thecountry's export earnings.

14. Ghana has held its current account deficit low (it actually showed asmall surplus in 1979), but at the cost of severely restricting imports. Theimport-GDP ratio, which stood at 20 percent in 1974, declined to only 3.6 per-cent by 1981 at the official exchange rate. This has created chronic andextremely acute shortages of raw materials, spare parts, and investment andconsumer goods, resulting in stagnation in production and consumption andsharp deterioration in the physical infrastructure. Production in the manu-facturing sector is only one-fourth of installed capacity. An estimated70 percent of road vehicles are presently out of service, while more than athird of railway locomotives are awaiting spare parts for major repairs oroverhaul. The entire road network is deteriorating rapidly and is alreadyunusable in many places. All this has badly affected the export mining andforestry industries as well as the efficiency of the ports.

15. Capital formation was quite rapid in the 1950s, but became increas-ingly negative thereafter. By the 1970s, gross investment averaged only8.9 percent of GDP, suggesting that net investment may have been negative.Gross investment is currently estimated at an extraordinarily low 2 percent ofGDP, compared to 21 percent for Sub-Sahara Africa as a whole. In an infla-tionary environment, with very little scope for productive investment andnegative real interest rates for savers, domestic savings are also low--about3 percent of GDP compared to 23 percent for the rest of Sub-Sahara Africa.The binding constraint, however, is lack of foreign exchange rather thandomestic resources for investment.

16. State enterprises have been assigned a large role in production anddistribution of goods and services ever since Independence. However, theirperformance has been distressing both in terms of output and profitability.They have generated serious pressures on fiscal and monetary policies. Themain problems are inefficient and frequently changing management, Governmentcontrol over prices, lack of required inputs, machinery and spare parts, heavyoverhead expenses on redundant labor, and lack of strict accountability.

17. Ghana originally had a large reservoir of trained manpower, but inrecent years there has been a tremendous exodus of professional workers tocountries where salaries and living conditions are better. It is reportedthat one-third of all secondary-school teachers have migrated to Nigeria,Liberia, Sierra Leone and elsewhere. The outflow of managerial and profes-sional personnel has further thinned the administrative talents at seniorlevels of the civil service, which has been demoralized by relatively lowsalaries, an economic system that penalizes them severely compared with other

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segments in the society, and uncertain and adverse working conditions. On theother hand, unskilled manpower is in oversupply, and redundancy and over-staffing are special problems at lower levels of Government administration.

Economic Developments in 1982/83

18. Soon after it came to power, the Rawlings Government took some extra-ordinary measures to arrest the slide in the economy. These included demoneti-zation to siphon off excess liquidity, and severe restraint on Governmentexpenditure and monetary growth. It was rewarded with some moderation ininflation; the consumer price index rose only 30 percent in 1982, compared to116 percent the previous year. The budgetary deficit during the last sixmonths of 1982 was contained at 02.5 billion--at least no worse than in thepreceding 12 months and lower in real terms and as a ratio of current GDP.But this improvement was achieved at a substantial cost: the wage/non-wageratio of recurrent expenditures became more skewed and development expendi-tures as a proportion of total Government spending declined significantly.Furthermore, export earnings continued to slide (to $627 million in 1982) andexternal capital flows, both official and private, slowed to a trickle. Newloans and grants from all bilateral and multilateral sources amounted to only$45 million in 1982. Net transfers from all external sources were stilllower--$38 million, or enough to finance only 6 percent of the country'salready depressed imports. Consequently, imports had to be held to$694 million, down by 35 percent over 1980. This is less than $60 per capita,or about half the corresponding level for Senegal and one-fourth that forIvory Coast. In nominal value, non-oil imports were lower in 1982 than in1974.

19. The foreign exchange shortage, combined with the border closing,dried up remaining supplies of raw materials and spare parts and reducedproduction levels throughout the economy still further. Inadequate rainfallexacerbated Ghana's economic problems. Cereal production registered a short-fall of 332,000 tons. The Volta Lake Reservoir fell to an historic low,resulting in the shutdown of all five potlines of VALCO Aluminum Smelter andfurther reducing foreign exchange earnings. Furthermore, a steep fall inworld cocoa prices meant that the unit export value of cocoa in 1982 was only$1,594/ton, 37 percent lower than in 1981. To make matters worse, some onemillion Ghanaian citizens -- about 10 percent of the population -- wereexpelled from Nigeria in early 1983 as a result of Nigeria's own economicdifficulties. Their requirements added severe pressure on the economy. Foodshortages became acute and market prices shot up. Absenteeism on farms, minesand offices became more pronounced with adverse effects on productivity thatwas low to begin with.

Economic Recovery and Short-Run Outlook

20. On April 21, 1983, the Government announced the 1983 budget, a short-term stabilization program, and a series of economic reforms, including a longoverdue reform in the exchange rate. A new system of export bonuses andimport surcharges resulted in de facto devaluation of 809 percent; subse-quently, a unification of the exchange rate at cedis 30 per US dollar becameeffective on October 10, representing a 990 percent devaluation since April

1983; and at the same time, the interest rates were adjusted upwards by 35 to40 percent.

21. The new economic recovery program is designed to begin the process ofcorrecting structural imbalances and rehabilitating the economy. If imple-mented successfully, the program will realign relative prices in favor ofproduction and export sectors, reduce budget deficits and thereby the under-lying inflationary pressures, and facilitate the flow of imports needed topermit the growth of export production. Thus, among other important measuresannounced in April were an increase in cocoa producer prices to provide incen-tives to farmers, a doubling of gasoline producer prices as a step towardsmore realistic pricing of petroleum products, greater balance in Governmentbudget and emphasis on productive sectors in the allocation of foreign anddomestic resources. Water, power, railway and telecommunication tariffs wereraised substantially. A price and incomes policy was instituted whereby theminimum wage was doubled and civil service salaries were raised by an averageof 60 percent.

22. The 1983 budget reflects the impact of adjustments in the exchangerate and attempts to restore tax bases. Government revenues are expected torise from 04.6 billion in 1982 to 014.6 billion in 1983, an increase of217 percent. The Government is also committed to eliminating subsidies topublic sector enterprises and keeping a tight rein on other expenditures.Despite the increases in wages and salaries, therefore, the deficit isexpected to fall from 04 billion in 1982 to 03.4 billion in 1983 -- i.e., from50 percent of the 09.2 billion spent in 1982 to 24 percent of a projectedexpenditure of 018.1 billion.

23. In the export sector, the changes in exchange rates and price incen-tives will have a favorable impact, but it is unlikely that export earningswill increase much in the immediate future. Cocoa exports, in particular, areunlikely to respond quickly, since infrastructure constraints, inelastic worlddemand, and agronomic problems related to past neglect will continue tooperate in the short run, and production and exports are likely to increase byonly 5 to 10 percent a year for the next few years. A more vigorous recoveryis projected for mining and timber, permitting total exports to rise fromabout $582 million in 1983 to an expected $960 million in 1985, with con-tinuing recovery thereafter.

24. While the stabilization program will, with adequate external assis-tance, provide some relief from the present economic crisis, it has also beenconceived as a first step in a longer-term process of returning the economy toa more satisfactory growth path. Thus, a critical next step will be prepara-tion of a comprehensive economic rehabilitation program to be initiated duringthe stabilization period and continued for three to four years thereafter. Aprogram to rehabilitate the roads, ports, railway and transport infrastructurewill also be needed. Other necessary tasks include improvement of parastataloperations, a review of the role of the private and public sectors, andstrengthening Government capacity for planning and economic management.

25. Ghana's growth prospects beyond the stabilization and rehabilitationphases will depend to a considerable extent on (a) the determination of the

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Government to sustain the kind of economic policies it has now begun eventhough some features may not be universally popular, and (b) an investmentplan that fulfills the key requirements of the economy. So far, the Govern-ment has resisted all pressures to rescind or modify its economic recoveryprogram despite serious economic and political difficulties. But an immediateinflow of food, fuel and other imports is essential, since shortages in theseareas could set back the Government's efforts to arrest inflationary tenden-cies and thus erode the success of devaluation. A minimum import program ofabout $1 billion f.o.b. is needed to begin the reconstruction program withsufficient momentum, and this will require a substantial infusion of foreignexchange, especially in view of the need to build up reserves and reducearrears. Also, allocation of these imports will have to be improved in orderto appreciably augment the supply of basic consumer goods, raw materials andspare parts that are prerequisite to increasing export production.

26. Beyond the short term, If the Government is able to maintain a morerealistic structure of prices and costs and a viable exchange rate, restraingrowth in public consumption, improve public revenue performance, reduce theinflationary tendencies associated with large public-sector deficits, and makea concerted drive to expand production and exports, particularly of cocoa andminerals, through more appropriate price incentives, support services, andmore assured supplies of necessary inputs, it should be feasible to achieverates of real growth in excess of 4 percent a year (or one percent per capita)after 1985/86. The attainment of even such a modest rate of growth after twoor three years would be a major turnaround. Of course, this presupposes amore stable political environment than exists at present. It also presupposesthat Ghana's own efforts will be supported by an augmented flow of externalassistance. Ghana's needs for external capital over the next few years aresubstantial and will call for a major effort on the part of the donor comrmunity. Unless concessional assistance is forthcoming, the possibility ofsuccessful stabilization and economic rehabilitation will be seriously dimi-nished and could adversely affect the country's stability.

Relations with IMF

27. At the request of the Government, an IMF mission visited Ghana fromMay 1 - May 25, 1983 to negotiate ad referendum, a stabilization program whichforms the basis for a one-year standby agreement. The elements of the stabi-lization program have been discussed in paras. 20-26 above. The ExecutiveDirectors of the IMF discussed the program on August 3, 1983 and approved astandby agreement amounting to SDR 238.5 million and also approved a drawingfrom the compensatory financing facility in the amount of SDR 120.5 million.

External Debt and Creditworthiness

28. An agreement on a long-ternm rescheduling of Ghana's medium-termexternal debt was concluded in March 1974. Under this agreement, all paymentsdue after February 1, 1972, in respect of pre-1966 debt obligations, are to bepaid over a period of 28 years beginning 1982, after a grace period of10 years, at 2-1/2 percent per annum. Ghana's medium and long-term externalpublic debt outstanding and disbursed at end-1982 is estimated at US$1,192million representing about 3 percent of GDP. The debt service ratio of public

and publicly guaranteed medium and long-term debt is about 9 percent ofexports of goods and non-factor services and is expected to rise modestlyafter the grace period on the rescheduled debt expires. Arrears on Ghana'sshort-term debt increased from US$245 million in 1977 to US$489 million byend-1978. By December 1980 these arrears had declined to US$332 million.However, 1981 saw a relapse with arrears increasing by $142 million. By theend of 1982, the short term arrears had accumulated to $580 million. Theeconomic recovery program aims to reduce these arrears in a phased manner.

29. Ghana is relying on official sources for most of the external capitalrequired to support its development program, and relatively little of itsmedium- and long-term borrowing is on commercial terms. Consequently, BankLoans and IDA Credits disbursed together represented about 22 percent of thecountry's estimated public external debt at end-1982. Net transfers over thelast decade averaged $25 to $30 million per annum but were $7 million in1982. Bank Group commitments on a per caplta basis amounted to $1.76 during1977-82 and lending dropped to less than a project a year during this period.Service payments on Bank Loans and IDA Credits in 1982 accounted for 25 percentof the country's external debt service, but they are projected to decline to17 percent of external debt service by 1987 as other sources of lendingrevive.

30. Ghana's extremely difficult economic conditions and its vulnerabilityto fluctuations In cocoa export earnings make it desirable that future debtservice obligations be kept as low as possible. Consequently, Ghana will haveto depend on IDA resources for Bank Group borrowing over the next few years.This is also consistent with Ghana's relatively low per capita Income. At thesame time, to help ensure a more adequate flow of foreign exchange Into thecountry, it would be appropriate to finance some local costs of projects.

PART II - BANK GROUP OPERATIONS IN GHANA 1/

31. Since 1962, when the Bank Group financed its first operation inGhana, the Bank has made 10 Loans totalling US$190.5 million and 21 Creditstotalling US$279.3 million. Included in the 21 Credits Is one whereby Ghanais a beneficiary of a Bank-financed regional clinker project covering threecountries (T-%o, Ivory Coast and Ghana). There are no IFC investments. AnnexIT contains a summary statement of Bank Loans and IDA Credits as ofSeptember 30, 1983.

32. Power generation and distribution represents the largest share ofpast commitments (27 percent) and the sector has been assisted by three powergeneration projects and three power distribution projects. Bank Group in-volvement in the sector started in 1962 with the Volta River project which

1/ This Part is the same as Part II of the President's Report for theExport Rehabilitation Project which is being submitted to the ExecutiveDirectors for their consideration simultaneously with this proposedproject.

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included the construction of the Akosombo dam, the country's first hydro powerplant (912 Mi) and the transmission grid. The project also helped to createthe Volta River Authority (VRA), the power generating company. SubsequentBank involvement in power generation included the Volta River expansion pro-ject in 1968 and Kpong Hydroelectric project in 1977. In power distribution,three Bank Group operations (in 1968, 1971 and 1977) helped to establish andexpand a low voltage distribution network and create the Electricity Corpora-tion of Ghana (ECG), the powver distribution company. Cofinancing was a majoroperation in our lending to the power sector and involved a number of donoragencies including Arab Funds, European Investment Bank, European DevelopmentFund, Canadian International Development Agency (CIDA), Development Loan Fund(USA), US Exim Bank, and Export Credits Guarantee Department (U.K.). Along-side power generation and distribution, griculture has been a major focus ofBank Group lending, receiving 22.5 percent of the Bank Group's lending toGhana. The lending program in agriculture has covered fisheries (1969),Eastern Region cocoa (1970), sugar rehabilitation (1973), livestock develop-ment (1974), Ashanti Region cocoa (1975), oil palm (1975), Upper Regionagricultural development (1976) and Volta Region agricultural development(1980). The main thrust of the Bank Group's lending operations in agriculturehas been to assist the country in achieving greater self-sufficiency in agri-cultural production, particularly food and raw materials for agro-industries,and rehabilitating the cocoa subsector. Earlier Bank Group projects in thesector were directed towards development of specific subsectors with emphasison smallholder development, while starting in late 1970's, more emphasis hasbeen given to a broad-based integrated agricultural development. Two suchprojects are currently under implementation, one in the Upper Region and theother in the Volta Region, which aim to increase farm incomes and the standardof living of a large number of smallholders by introducing improved farmingtechnology, providing farm support services and developing rural infrastruc-ture. Major donor agencies which provided cofinancing in our agriculturesector operations were Overseas Development Administration (U.K.), Inter-national Fund for Agricultural Development, and Arab Bank for EconomicDevelopment in Africa. The Bank Group is also executing a UNDP-financedtechnical assistance project designed to strengthen the management andoperation of the Ghana Cocoa Marketing Board.

33. Transportation is the third most important sector in the Bank Group'sprogram in Ghana (20.5 percent of commitments). Projects financed in thesector include three road projects (in 1973, 1975 and 1980) and a railwayrehabilitation project approved in 1981. The road projects focussed initiallyon rehabilitation and reconstruction of part of the country's main trunk roadsystem but, in light of rapid deterioration in the entire road sector prin-cipally due to acute shortages of imported inputs, later emphasis was placedon emergency maintenance to keep roads open for agricultural and exporttraffic. An ongoing railway project which is cofinanced with African Develop-ment Bank (ADB) seeks to remove the present transport bottleneck to Ghana'straditional exports (cocoa, timber and minerals), for the movement of whichrailways have a comparative advantage. A telecommunications project currentlyunder implementation aims at improving and expanding domestic telephoneservices in Accra and major urban centers. In the field of water supply twoprojects (in 1969 and 1974) have helped increase and improve the water supplyin the Accra/Tema metropolitan area and adjacent rural areas. The first

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project helped expand the water supply distribution network and seweragesystem in the Accra/Tema area and the second project which was cofinanced withADB and CIDA included construction of a reservoir at Weija, a treatment plantand a transmission pipeline. A third water supply project was approved by theExecutive Directors in March 1983 to help carry out emergency repairs andmaintenance on the pipeline from Kpong which presently provides two thirds ofthe Accra water supply. The project also includes substantial technicalassistance to strengthen the management and operations of the Ghana Water andSewerage Corporation and to increase its capacity for improving water supply,especially in the rural areas. In the manufacturing sector, two DFC opera-tions (in 1975 and 1979) have financed investment projects in manufacturingand agro-industry undertaken by small and medium enterprises. The mainemphasis of Bank Group lending in this sector has been to encourage enter-prises using raw materials and which are capable of contributing to foreignexchange earnings and savings. A related objective for the DFC projects wasto strengthen the institutional capacity of the National Investment Bank(NIB), Ghana's main development finance institution. The second DFC projectwhich includes cofinancing under an EEC Special Action Credit is providingforeign exchange working capital to help increase capacity utilization ofpriority enterprises, in addition to long-term capital investment. An energyproject aimed at strengthening Ghana's technical capacity to acceleratepetroleum exploration was approved by the Executive Directors in May 1983.

34. The serious economic difficulties which the country has experiencedin recent years have adversely affected implementation of a number of BankGroup financed projects. The dwindling revenue base of the Government hasconstrained its ability to finance the local costs of projects, and the lackof foreign exchange has resulted in a severe shortage of imported materialsand spare parts required for the operation and maintenance of projects; themass exodus of qualified Ghanaians to neighboring countries, and demoraliza-tion, absenteeism and low productivity among the remaining work force havealso adversely affected project performance. The unusually adverse conditionssurrounding Bank Group financed projects and their generally poor performancehave been described in greater detail in the Project Performance AuditReports. Overall, the main conclusion of the Reports was that macroeconomicand sectoral policy constraints were the major factors responsible for poorperformance of the audited projects. Because of delays experienced in theimplementation of a number of Bank Group projects in Ghana, the disbursementperformance is falling behind appraisal estimates. Annual gross disbursementshave averaged about 25 percent of outstanding Loan/Credit commitments and asof September 30, 1983 US$162.6 million remain undisbursed. The Bank Group hasheld periodic implementation reviews with the Goverament to identify stepswhich could be taken by Borrowers and the Bank Group to accelerate disburse-ment on ongoing Loans and Credits.

35. The principal objectives which will guide the formulation of ourassistance program to Ghana are: (a) to support the adoption of policiesdesigned to reverse the downward trend in the economy and return it to a pathof growth; (b) to help rehabilitate and improve capacity utilization of thecountry's existing assets; (c) to stimulate agricultural and industrial pro-duction, particularly for export promotion and efficient import substitution;and (d) to improve the country's essential infrastructure (transport, water,

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power) so as to relieve-major bottlenecks to increased production. We alsoplanta sqg vant-ialk ncrease in our economic and sector work to broaden anddeepen:our.understSading of the constraints which are likely to impede therecovery process, to provide direction to our future lending program and thedesign oL pro4ect components. In both our lending and economic and sectorwork atftiengtion will be given to ways of strengthening the institutions respon-sible for economic management and development spending. The Technical Assist-ance project which is the subject of this report is designed to support theGovernment's program to strengthen the institutions responsible for Ghana'smajor export industries.

36. In addition to the proposed Export Rehabilita ion Credit and theReconstruction Import Credit which was recently approved by the ExecutiveDirectors, a more broadly based program of rehabilitation of the country'seconomic assets will be required. In the near term IDA would support aprogram to rebuild the network of trunk roads including major bridge recon-struction and ports rehabilitation components, and provide assistance torehabilitate the power distribution system and the oil refinery. In agricul-ture, further assistance to the development of oil palm production is envi-saged as well as for cocoa given the overwhelming importance of this crop, atleast in the short term, for foreign exchange earnings. In brief, projectswith major rehabilitation components are likely to absorb the bulk of BankGroup resources for the next few years as these are likely to show the highestbenefits and quickest returns. For the outer years, the Bank will begin toexamine prospects for new productive investments including support for educa-tion, health and other important activities in the social sectors. The extentto which the Bank Group can provide financial and technical assistance tosupport such a broad-based program will be conditioned by the performance ofthe Government in carrying through its economic recovery program.

37. The Government of Ghana has requested the Bank Group to act as acatalyst to help muster external assistance through cofinancing and moregenerally in the context of strengthened aid coordination. At the request ofthe Government, the Bank Group reconvened a meeting of the Ghana ConsultativeGroup on November 23 and 24, 1983. The participants of the meeting haveendorsed the Government's economic recovery program and it is expected thatthe foreign exchange requirement for 1984 under the program will be sub-stantially met by the donors' contributions.

PART III - THE EXPORT SECTORS 11COCOA, TIMBER AND MINING

38. If Ghana's current economic recovery program is to succeed and theGovernment is to be able to sustain policy reform measures recently intro-duced, it will be essential to generate positive supply response from the

It This Part is similar to Part III of the President's Report for theExport Rehabilitation Project which is being submitted to the ExecutiveDirectors for their consideration simultaneously with this proposedproject.

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export sector to restore the country's foreign exchange-earning-capacity.Sustained economic recovery would require that the present. severe. shortage ofimported inputs be alleviated to rehabilitate the existing product$ve.assetsand improve utilization of the existing capacity. Since the expqrt-sectprremains the principal determinant of Ghana's import capacity, the Government'seconomic recovery program assigns the highest priority to increasing exportearnings by arresting and reversing declining production in key exportindustries.

39. The Government of Ghana has introduced, for the first time, anintegrated foreign exchange budget that is announced at the same time as thefiscal budget. IDA reviewed and was satisfied with the foreign exchangebudget for 1983. The foreign exchange budget presents the estimates ofexpected inflows of foreign exchange based on export projections, aid dis-bursements and other receipts. rhe outflows are orojected by taking intoaccount the import program, debt servicing and other payments. The set ofpriorities reflected in the sectoral allocation of foreign exchange were(a) export oriented sectors; (b) oil and petroleum products; (c) food;(d) Government revenue generating activities; (e) other production sectors;and (f) infrastructure. Of course, the foreign exchange needs of the economyare so enormous that it was not possible to accommodate the full demands ofeven these six areas. But the prioricization scheme underlying the foreignexchange budget at least ensured that the most pressing needs were financedadequately. The actual outcome of the budget will, however, depend on how farthe amount and the sources of financing assumed in the budget are realized.The budgeting exercise is expected to provide some semblance of order in themanagement of scarce foreign exchange. IDA has also reviewed the foreignexchange budget for 1984 and has been satisfied that adequate allocations offoreign exchange are made to meet the priority needs of export-orientedsectors, including their infrastructure requirements. IDA will review theforeign exchange budgets for 1985 and 1986.

40. IDA has also reviewed with the Government the size and composition ofthe 1983 development budget. The criteria goveining the development budgetwere (a) completion of ongoing projects with special emphasis on infrastruc-ture requirements of export-oriented and production sectors, and (b) adequatecounterpart financing of foreign aided projects. Although the amount ear-marked for development projects is totally out of line with the identifiedneeds of the economy, the overall budgetary deficit ceilings had to beobserved while formulating the development budget. IDA has carried out asimilar review of the 1984 development budget with the Government and has beensatisfied with the budget. The main consideration in making this review hasbeen whether the export-oriented sectors are being provided adequate localcounterpart funds for carrying out their directly productive activities andalso for complementary investments in the supporting infrastructure. The setof priorities in the sectoral allocation of foreign exchange as described inthe preceeding paragraph has also been a governing factor in this reviewexercise; in particular, the complementarity of export oriented sectors andGovernment revenue generating activities and infrastructure has been focussed.A similar budget review will be carried out for 1985 and 1986. A successfulreview of the foreign exchange and development budgets will be a condition forrelease of the second tranche under the proposed Export Rehabilitation Project

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(Schedule 1, para. 3 of both the draft Development Credit Agreement and thedraft Special Fund Credit Agreement for the Export Rehabilitation Project(ERP)).

41. Traditionally Ghana's export sector has played a significant role inthe country's economy, accounting for about a fifth of GDP and one third ofGovernment revenues and employing about 35 percent of the labor force. In1980 total export earnings amounted to US$1.1 billion. Major exports arecocoa, timber and minerals (gold, diamonds, manganese and bauxite) whichtogether constitute over 90 percent of total export earnings. As the tablebelow shows, there has been a substantial decline in the volume of exportsunder these sectors during the last decade. Cocoa and gold exports in 1982have been reduced to about 40 percent of the level attained in 1972 whiletimber exports have declined to 10 percent. The following paragraphs discussthe factors contributing to their decline and the Government's strategy forovercoming both physical and policy constraints and reviving the productionand exports of these sectors. Table 1 (page 14-18) sets out in summary theexport sector policy and institutional reforms that the Government proposes toimplement in conjunction with the proposed Export Rehabilitation Project (ERP)and the proposed Export Rehabilitation Technical Assistance Project. Thesereforms are discussed in detail in the following paragraphs.

EXPORT TRENDS OF SECTORS UNDER THE ERP

Export Index in 19821972 1975 1980 1982 (1972 - 100)

Cocoa (000 tons) 406 341 234 178 1/ 43.8Gold (000 ounces) 737 513 337 302 40.9Timber (000 cu.meters) 1,006 605 185 111 10.9

1/ 1982/83 season

A - The Cocoa Sector

Recent Trends

42. Cocoa is the predominant sector in Ghana's economy. It generates60 percent of export earnings, and 10 percent of GDP. It employs 24 percentof the working labor force and takes up more than half of the country's totalland under cultivation. Also up until 1981, the cocoa sector provided aboutone-third of Government revenues. In the mid 1960's, Ghana was the leadingproducer of cocoa in the world, producing some 566,000 tons (1964/65), aboutone-third of total world supply.

Table I

(Cocoa Sector)

Sector Issues Pmposed Changes Justification/Benefits Tlmetable for Action

Producer Price Oocoa producer price to be reviewed Financi incentives to CoCoa farmars Price increase proposal to MDAamuially in consultatimn with mA; arid increased production. Returns by January 31, 1984 and agree-a new price to be announced before from cocoa production beccmn more ment with ImD by February 28,March 31 each year. competitive with those from maize. 1984. Gbvernment lmletation

of the agreed price by Mbrch 31,1984 is a disbursaemt conditimnfor the cocoa sector Creditallocation. Smilar consultationsanl agrement with ICA for subsequentyears.

An independent Cocoa Producer Oommittee to be eatablished byPrice Review Qmmittee to be January 31, 1984.established, with fanmer and GCMBrepresentatives, to review anddetermine producer prices.

Foreign Exchange GCMB continues to be allowed to Increased production through timely StremnIJzd procedures to utilizeretain 10% of export proceeds availability of imported inputs (e.g. the retention funds recently intro-for importation of recurrent insecticides) and Improved efficiency duced by the Government will beinputs and essential spare parts. in haulage. munitored by IDA.

Production Strategy A long-term strategy and SwoUen tong-rtm economdc viability of the Production strategy, SSVD controlShoot Virus Disease (SSVD) control cocoa sector, with the aim of conso- progran and compensation plan toprogram to be established, concen- lidating cocoa acreage by half and be prepared by June 30, 1984 andtrating rehabilitation In areas not mDre than doublirg present average then to he carried out accondingyet infected; a compensation yields. to a timetable satisfactory to IDA.systen introduced to encoragreplanting.

Sector Organization GCMB and extension services of CSD Improved operating efficiency of Restructuring bas been initiated;to be restructured as a cowmerciaL GCMB; greater financial discipline; completion of GCMB reorganizationentity. Outstanding GCMB debt to accountability of management and is a disbursement condition forbe switched to Govermnent long- performance monitoring. After the cocoa sector Credit allocation.term loans with a grace period to initial period, Gov't revenue toenable GCMB to finance development increase throaug corporate taxesexpenditures. ard GCMB dividends.

Table 1

(Continued Cocoa Sector)

Sector Issues Proposed Changes Justification/Benefits Tlmetable for Action

Staffing A five-year retrenchment program Reduced operating costs of GCMBI.B Staff retrenchment starting into be implemented, aiming at a increased share of cocoa revenues 1984 in a manner ard accordingaubstantial net reductici of for farmers. to timetable satisfactory to IDA.employees per anumu; adjustment Adjustment assistance program t6assistance for displaced workers. be submitted to IDA by March 31,

1984.

Privatization GOYM's cocoa plantations to be Reduced operating costs and improved Study of potential ard proouresprivatized by parcefling out along efficiency by GCMB; long-term ration- to be completed by June 30, 1984present workers and/or selling to alization of sector organization. and action taken by Decmaber 31,private investors. 1984.

GCMB to divest its three cocoa ditto Study of divestment proceduresproducts factories and insecticides to be aoopleted and action takenplant. by atwo dates.

GCXB to prepare a progran to ditto Progran to be revide with MDAincrease haulage of oocoa by by Jum 30, 1984, ard Inpein tedprivate tnrckers, especialy in a mwxr aid according to tIi-from depots to ports. tabl satisfactory to ML

GQB to prepare a study eiaminirg ditto Study to be reswle withalternative cocoa marketing MA by Jun 30, 1985, andarrangements, such as privatization actio taken by Derber 31, 1985.or altiple buying.

Table I

(Timber Sector)

Sector Issues Proposed Changes Justification/Benefits Timtable for Action

Sector Organization GTMB aboltshed and to be replaced Greater freedon and initiatives TEnB to be established byby an independient Timber Export for milers and exporters to export; April 30, 1984.Development Board (TEDB) establi- reduction in Government controlshed strictly as an export promo- and interventicn in export proce-tion body with representation of dures; improved market intelligenceproducing miUs as wel as (bv't. and prxrDtion.

Control on Industry Minlmun export price regulation Increased timber exports and simpli- Action oumleted. Effectiveabolished. fication of export procedures; implmtati of siipliffil

improved market oxnfidence in Ghana procedures to be nrritored by IDA.products.

Prior Govenament approval of ditto dittoexport contracts discontinued.

Grading and Inspection Forest Products Inspection Bureau Greater narket acceptability of Ghana lb be estahlished by April 30,(FPIB) to be establlshed as a self- products; higher foreign exchange 1984.regulating professional body to earnings through avoidance of unier-strengthen grading and inspection 1nwoicing; simplification of exportof export parcels. procedures.

Uniform timber grading rules to ditto Tb be acopted by March 31, 1985.be adopted

Foreign Exchange Ekisting procedures for retention Increased production aid operating Procedures have xeceitly bBeof 20X of export proceeds efficiency of mills through tinaly streamUnlldi considerably. Furtherstreamlined. availability of xecurrent imported Sf1CAti to be studied by

inpuits, M1nnh 31, 1984 and fmpleientaI byJum 3D, 1984.

State-onwne companies Alternative strategies for owner- Laog-rwu rationalization of sector Stedy to be aooleted byship and mangement of state-owned organization and increased viability September 30, 1984; alternativecompanies to be studied and of the state-cand sub-sector. strategies to be adopted byadopted, including the possibility December 31, 1984.of privatization aid umnagmitcontracts.

Table I

(Continued Timber Sector)

Sector Issues Proposed Changes Justification/Benefits Tismtable for Action

Concession Policy A general reveiw of forest con- optimal utilization of forest re- Review to be carried out bycession allocations to be carried sources and increased export produc- Jum 30, 1985 and action takenout ard follow-u action to re- tion. by December 31, 1985.allocate unontowmic concessions,with priority to export producers.

-J

Table I

(Mining Sector)

Sector Isues Pposed Cages Justification/Benefits Timetable for Artion

Sector Organization S9MC to enter into a mnagement Increased managerial and technical Signing of nunageint onitractcontract with an international capability of SGMC through large-scale prior to disbursement of themining oompany to manage injection of expatriate nmnagers niniqg axmpenxnt of proposedSGWC mines as a comercial entity necessary to implement the rebabilita- Credit except for $5 million worth

tion program. of urgently reuired liDort item;prelbinry ~wrk bas already begmu.

Foreign Exchange Foreign exchange retention by S(MC Increased production and operatirg Streanlied procedures recentlyincreased from 20K to 35X efficiency through availability of introduced by the Govmenut to(about $10 million/year at present necessary imported inputs on a timely utilime the retention funds illUproduction levels), with SGM basis. be evxitored by IDA. oallowed direct arce to retainedfuns.

Plan of Action S(MC to carry cut plan of action Enhanced worker norale and Action to be taken beforeto imprwv productivity including productivity. Deember 31, 1984.the introduction of work incentivescbemes, including food andproductivity bouse.

SCM Is Finances Governuent to convert SGMC's debts Tmproved finances of S9M. Action to be taken by June 30,to lo g-tenr loan with appro- 1984.priate grace periods.

Mbnitoring 9MC performance to be mnmitored Ehsuring accountabi Ity of manage- Anwal; first revie with IM inand reviewed aniually by Govern- ment and adequacy of policy measures Deamber 1984.ment, SMC and mLA. Cost of affecting SGMC.production of SGMC mdnes to bereviewed anualy and requiredfinancial measures taken byGovernment to maintain viability.

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43. The nexr ten years saw a steady decline with 1974/75 productiondropping to some 400,000 tons. Subsequently output has declined even morerapidly, with 1982/83 production of only 180,000 tons. Correspondingly, Ghanais now the third largest cocoa producer in the world, accounting for about 12percent of output. The immediate objective of the proposed project would,therefore, be to arrest this declining production. The impact of thisdeclining production on Ghana's economy was made even more acute by a fallingoff of international cocoa prices between 1977 ($3,790 per ton) and 1981($1,800 per ton).

Sector Constraints and Issues

44. Government policies in the past have been largely responsible forpoor production performance of cocoa in the past decade. The main factorsresponsible for the decline of cocoa output were inadequate producer prices,high marketing costs and institutional weaknesses of the Ghana Cocoa MarketingBoard (GCMB), the lack of imported inputs and deteriorating transport infra-structure as discussed below.

45. Price Policy. The cocoa producer price is determined by theGovernment and the adjustments allowed in the past have been far short ofgeneral price increases, making cocoa farming increasingly unprofitable bothabsolutely and relative to other crops. If the Government had followed a morerealistic price policy and let the producer price increase at the same rate asthe export price from mid 1960s onwards, the rate of decline in the realincomes of cocoa producers could have been arrested. Instead the instrumentof price policy was used to exact more taxes from the industry which increasedfrom an average of 18 percent of cocoa export proceeds in the early 1960s tomore than 50 percent by the late 1970s. A growing divergence between theofficial producer price and prices prevailing in the neighboring Ivory Coastand Togo provided increasing incentive to smuggle cocoa out of the country.Furthermore, the erosion of real income from cocoa has led to a shift offamily labor to food farming and has contributed to labor shortages, asfarmers are unable to hire casual labor during peak demand periods.

46. Input Supply Policy. The availability of insecticides and sprayingmachines has been erratic and in 1979-81 the absolute amount availabledeclined sharply. Repair facilities and spare parts for spraying machineshave also been almost non-existent. Surveys in 1974 and 1978 revealed that47 percent of the farms infected with capsids were not sprayed at all,36 percent once, 13 percent twice, only 4 percent thrice and none 4 times(which is the recommended frequency). The output response has, therefore,been disappointing.

47. Deteriorating Transportation System. Lack of adequate vehicles andspare parts and deteriorating roads and bridges increased difficulties inevacuating cocoa to the ports. The weakness of the transportation system ledto deterioration in the quality of cocoa beans purchased (storage facilitiesbeing deficient), difficulty in moving merchandise and farm inputs to cocoagrowing areas and depressed morale among cocoa farmers.

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48. Marketing and Extension Costs. The basic institutional setup formarketing, input supply and extension lacks efficiency and effectiveness.Staff of GCMB and Cocoa Services Division (CSD) which provides extensionservices has increased enormously over the years. The work force of CSD hasgrown from about 4,000 in mid-1960s to about 44,000 at present though cocoaproduction is now only 32 percent of the level in mid-1960s. A recent studyestimated that of the total of over 100,000 staff of GCMB (all divisions andsubsidiaries) and CSD, an estimated 46,000 were surplus costing 0377 millionannually. While there is surplus field and administrative staff, there is anacute shortage of qualified accounting and workshop staff.

Government Strategy and Short-term Rehabilitation Program

49. Given the importance of cocoa in the national economy, the Governmentconsiders rehabilitation of the cocoa industry as a priority and an essentialelement of Ghana's economic recovery program. Although the long-term projec-tion indicates that the real world price of L.ucoq is likely to fall, to whichthe Government is beginning to responid with an export diversification strategy,in the short to medium term the cocoa sector offers substantial potential forrecovery of exports, given the country's overwhelming reliance on cocoa forexport earnings. Ghana has a comparative advantage in the production of cocoaand Ghana's cocoa has traditionally enjoyed quality premium In the interna-tional market. With proper policy framework, especially adequate producerprice and input supply pollcies, a,id removal of evacuation bottlenecks, Ghanacan, as a short-term objective, arrest and reverse the decline in cocoa outputand, as a medium term objective, restore production to the level achievedduring the mid 1970's (i.e., 400,000 tons) through rehabilitation of existingfarms and improven capsid control and husbandry practices.

50. In recognirion of the importance of the cocoa sector, the Governmenthas prepared with the assistance of IDA a comprehensive study for the rehabili-tation of the cocoa sector. 1/ The study examined all major aspects of theGhanaian cocoa industry and proposed policy and instituticnal measures toimprove producer incentives, marketing efficiency and extension effectivenessincluding restructuring of GCMB. The study also identified required inputs,equipment, and materials for rehabilitation of the cocoa sector, which theBank Group originally intended to help finance under a third cocoa project.However, in view of the urgent need to initiate early measures, the Governmenthas prepared on the basis of the study a short term rehabilitation programwhich aims at implementing essential policy changes and providing requiredinputs to cocoa farmers and GCMB for a period of two years (1984-1985). Theprogram would be supported by the proposed Export Rehabilitation Project (ERP)and this proposed project. In contrast to the earlier two cocoa projectsfinanced by the Bank Group which were confined to specific geographical areas,the modified strategy under the proposed ERP would be to deal with the majorissues in the cocoa sector on a broad-based sectoral level and attempt toimplement a comprehensive reform package as discussed in detail in thefollowing paragraphs.

1/ Cocoa III Prefeasibility studies (in 12 volumes) carried out in 1982by Peat, Marwick and Mitchell (U.K.).

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Cocoa Sector Reform Measures

51. Producer Price Adjustment. Past studies on the cocoa sector haveshown that Ghanaian cocoa production is influenced mainly by real producerprices. In recent years, substantial increases in nominal producer prices forcocoa hlve taken place. In 1981, the producer price was raised from 04,000per ton to 012,000 per ton. However, high domestic inflation rates largelyeroded the impact of this three-fold increase and in 1982 the cocoa producerprice was still only one-third of that in 1963 in real terms. In May 1983 thecocoa producer price was again raised from 012,000 to 020,000 per ton.Assuming realistic exchange rates in the future, improvements in real cocoaproducer prices are possible with the recent increase in world cocoa prices,l/possible reduction in marketing costs and gradual decrease of Governmentreliance on cocoa for revenues.

52. The spurt in food prices over the last few years, particularly ofmaize, has improved relative financial returns from food farming and thereforeits attractiveness, as compared to cocoa, though returns to the economy fromcocoa are much higher than those from foodcrops. The market price of maizeincreased from 066 per ton in 1963 to 020,000 in 1982 while the producer priceof cocoa increabed from 0220 per ton to 012,000. With the drought in 1982 andbush fires in early 1983 and acute foreign exchange shortage, prices of maizenow range from 040,000 to 060,000 per ton. It is reasonable to expect thatafter the harvest this year and improved availability of imported foodstuff asa result of external support, the present high prices of foodstuff will comedown. Assuming the maize price settles at 020,000 per ton, the return permanday from maize (traditional cultivation) will be 0145 compared to 0118 fromrehabilitated cocoa at the present producer price of 020,000 per ton. With a25 percent increase in cocoa producer prices from the present level, thereturn per manday from rehabilitated cocoa would equal that from maize.

53. A regular review and adjustment of producer prices is essential tomaintain farmers' incentives for cocoa production. In view of the uncertain-ties of the international cocoa market and of the domestic inflation rate,particularly the prices of competing foodstuffs, it is not considered desirableto provide for an automatic adjustment of cocoa producer price based on apredetermined formula. Instead, an annual review and adjustment would beundertaken. Given the importance of cocoa to the economy and posslble con-flict between the commercial objectives of a restructured GCMB (paras. 54-56)on the one hand and producer incentives and price stabilization on the other,a Cocoa Producer Price Review Committee, independent of GCMB, would be estab-lished by January 31, 1984 to review and determine new producer prices(Schedule 5, para. B l (b) of both the draft Development Credit Agreement forERP and the draft Special Fund Credit Agreement). The Committee would bechaired by the PNDC Secretary for Finance and Economic Planning with member-ship of the Chief Executive of GCMB and at least one representative of cocoa

1/ Recently world cocoa prices have risen to $2,500 per ton. Assumingthe f.o.b. Accra prices ranging from $2,100 to $2,400 and an exchangerate of cedis 30 to US$1, cocoa producer prices are 28 to 32 percent off.o.b. prices.

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farmers. Beginning in 1984, and each year thereafter, the Government wouldsubmit its proposed prices by January 31 to IDA for revlew, would agrue on theprices by February 28, and would announce them by March 31 (Schedule 5, para.B I (b), the draft Development Credit Agreement for ERP and the draft SpecialFund Credit Agreement). The announcement of the 1984 cocoa prices would bo acondition of disbursement of the cocoa component of the Credit tor ERP(Schedule 1, para. 2 (d) and para. 2 (c), respectlvely of the draft Develop-ment Credit Agreement for ERP and the draft Special Fund Credit Agreement).On the basis of the current estimates of domstic Inflation in 1983 and thenucessity to provide enough incentives to farmers, a cocoa producer priceincroame of at least 50 percent seems warranted for 1984. In reviewingproposed prices, special attention would be paid to maintaining adequateIncentives for cocoa producers.

54. Reorganization of GCMB. The restructuring and reorganization of GCMBis crucial to cocoa sector rehabilitatlon. It Is proposed to integrate CSD,whlch Is responsible for providing extenslon servlce. Lo cocoa farmers, withGCMB. This Is needed in the interests of Integrated sector planning andoperation, tighter control over CSD activities, economy in the use of centralsupport services leading to a reduction in operating costs and easier avall-ability of resources for CSD.

55. The GCMB, which has previously operated vlrtually as a Governmentdepartment, would be reorganized as a commercial body running on a profit-making basis. This Is considered essential if the efficiency of GCMB is to beimproved, performance criteria worked out and accountability of senior manage-ment ensured. The basic principle is to give GCMB control over its resources(with effective monitoring by the Government through its representation on theBoard of Directors) so that it can institute proper planning and financialmanagement and be judged as to its performance at the end of the financialyear. The Government will continue to have its revenues from cocoa throughcorporate taxes and dlvldends paid by GCKB. However, GCMB should build up itsequity so as to be able to finance its development expenditures. Until GCMB'srevenues start to improve, its outstanding debt would be converted to Govern-ment's long-term loans with an appropriate grace period.

56. The proposal for the restructuring of GCMB was conveyed to IDA by theGovernment at negotiations. Subsequently a cabinet directive has authorlzedGCMB to proceed with the restructuring. The restructuring proposals are thework of a Steering Committee chaired by the PNDC Coordinating Secretary withmembership of PNDC Secretary for Finance and Economic Planning and ChiefExecutive of GCMB. The Steering Committee will also oversee theimplementation of the restructuring of GCMB, which will have to be legallyaccomplished prlor to disbursement under the cocoa component of the Credit forERP (Schedule 1, para. 2 (d) and para. 2 (c), respectively, of the draftDevelopment Credit Agreement for ERP and the draft Special Fund CreditAgreement). I

57. Although cocoa is the most important foreign exchange earner, thefailure by the Government in the past to provide sufficient foreign exchangeto import essential recurrent needs (particularly insecticides) has been oneof the major reasons for declining cocoa output. Given the importance of

- ?3 -

assuring timely inputs to cocoa farmers and essential spare parts for thecocoa evacuation vehicles, the Government has already authorized GCMB to haveaccess to at least 10 percent of its foreign exchange earnings through afozeign exchange retention scheme, and has agreed to maintain this scheme(Schedule 5, para. B I (g) of both the draft Development Credit Agreement forERP and the draft Special Fund Credit Agreement). Guidelines for the properuse by GCMB of retained foreign exchange would be evolved by the Government.

58. Reduction in GCMB Operating Costs. In order to allow cocoa farmersto have a progressively greater share of f.o.b. value and to ensure that GCMBremains commercially viable, serious efforts would be made to reduce GCMBoperating costs. Several steps would be taken in this regard during theproject period:

(i) Plantations run by both GCMB and CSD are a heavy burden at presentaccounting for over 20 percent of the operating costs of GCMB, CSD,Produce Buying Division (PBD) and Produce Inspection Division (PID)combined and employing about 18,000 staff. The Government has takeninitital steps to parcel out the plantations among the workerspresently employee there (who would no longer be GCMB employees)and/or sell these ?lantations to private investors or retain only aminority share. Ir order to assess the potential of these planta-tions and criteria and procedures for eventual divestment, a studywould be completed by June 1984 and, based on the results of thestudy, action by the Steering Committee completed by December 1984(Schedule 5, para. B I (d) of both the draft Development CreditAgreement for ERP and the draft Special Fund Credit Agreement).

(ii) There is a need to assess fully the financial viability of the threecocoa products factories and the insecticide formulation plantpresently operated as subsidiaries of GCMB and to examine how thesesubsidiaries should be set up as separate companies with privateinvestment. Although the Government has taken initial steps fordivestment, an in-depth study of these subsidiaries and proceduresfor their eventual divestment would be completed by June 1984 andaction by the Steering Committee on the recommendations of the studycompleted by December 1984 (Schedule 5, para. B 1 (d) of both thedraft Development Credit Agreement for ERP and the draft Special FundCredit Agreement).

(iii) Serious overstaffing exists in almost all the Divisions of GCMB andCSD, which has been one of the important factors contributing to highoperating costs. Under the project, a five-year program for staffreduction would be undertaken. The annual target for net reduction(net of essential new recruitment) of the current staff on thepayroll of GCMB and CSD has been initially agreed to be 5,500 for1984 (this excludes employees of plantations, cocoa productsfactories, PBD district organization and formnulation plant for whichaction will be taken after studies are completed (see (i) and (ii)above). As an important element of the economic recovery program,the Government is strongly committed to reducing overstaffing in thepublic sector and has established a Mobilization Committee to retrain

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redundant workers for redeployment to productive sectors especiallyin food farming. An adjustment assistance program for displacedworkers of GCMB is under preparation by the Government and thisprogram would be submitted to the Association for its review andcomments by March 31, 1984 (Schedule 5, para. B 1 (c) of both thedraft Development Credit Agreement for ERP and the draft Special FundCredit Agreement). Progress in implementing the staff reductionprogram would be one of the performance criteria for release of thesecond tranche of the Credit for ERP (Schedule 4, para. (iii) of boththe draft Development Credit Agreement for :3RP and the draft SpecialFund Credit Agreement).

(iv) Significant possibility of reduction in operating costs existsthrough greater reliance on private haulers, particularly from depotsto port. At present about 30 percent of long distance haulage is byprivate haulers. Although the Government has taken steps for furtherincrease of private haulage, GCMB would prepare a program to increasefurther private sector haulage of cocoa by June 30, 1984 for reviewwith IDA (Schedule 5, para. B 1 (d), of both the draft DevelopmentCredit Agreement for ERP and the draft Special Fund CreditAgreement).

(v) GCMB should be able to reduce costs by improving its storage of cocoaand cocoa products before export. Assurances were given that GCMBwould prepare a study on the procedures for receiving at ports,storing and shipping of cocoa and cocoa products by June 30, 1984 andimplement the results by December 30, 1984 (Schedule 5, B 1 (d) ofboth the draft Development Credit Agreement for ERP and the draftSpecial Fund Credit Agreement).

Cvi) To operate efficiently as a private institution, GCMB would undertakea study to develop a corporate planning and management informationsystem. Assurances were given that this study would be completed byAugust 31, 1984 and the results implemented by February 28, 1985(Schedule 5, para. B. I (d) of both the draft Development CreditAgreement for ERP and the draft Special Fund Credit Agreement).

(vii) A long run possibility of reducing marketing costs through privati-zation of cocoa marketing and introduction of multiple buying systemexists. However, the full implications of privatization and intro-ducing the multiple buying system need to be carefully studied. Astudy of alternative systems for marketing would Lo completed by June1985 for review with IDA and the results carried out by December 31,1985 (Schedule 5, para. B 1 (d) of both the draft Development CreditAgreement for ERP and the draft Special Fund Credit Agreement).

59. Production Strategy. Implementation of the production supportcomponents of the ERP would be within thc. framework of a long-term strategyfor cocoa rehabilitation and replanting. This strategy involves consolidationof cocoa acreage to about half of the present acreage which are not infectedwith Swollen Shoot Virus Disease (SSVD) with efforts to obtain more than twicethe present average yields. The rehabilitation under ERP would concentrate on

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the selected areas with about two-thirds of the resources going to these areasand the remaining one-third to other areas (even this one-third would be care-fully allocated to areas which are not infected with SSVD and have somepotential). Additionally, a two-year interim strategy for SSVD control wouldbe mounted, emphasizing control of isolated outbreaks in priority areas forrehabilitation and forming a buffer zone between the Eastern and CentralRegions on the one hand and the priority areas on the other. After thisoperation is completed, the strategy would be to move into Eastern and CentralRegions gradually for SSVD control, consistent with availability of resources.For successful implementat0on of the interim and longer-term strategy for SSVDcontrol, the Government would formulate a policy of compensation payments tococoa farmers for replanting the trees cut down. Agreement has been reachedat negotiations regarding strategy discussed above and assurances have beengiven that the Government would prepare such a strategy and a plan of compen-sation payments for review with IDA by June 30, 1984 (Schedule 5, para. B 1(f) of both the draft Development Credit Agreement for ERP and the draftSpecial Fund Credit Agreement).

B - The Timber Sector

General

60. Forests represent a very significant national resource in Ghana.Covering about 8.2 million ha., some 34 percent of total land area, theycontain valuable redwoods and other species, highly prized in European andother markets for veneer, plywood and lumber. In addition, Ghana's ruralpopulation (about 7.2 million people or 68 percent of the population) dependon the forests for fuelwood, building poies, and timber for housing. Fuelvoodconsumption is estimated at 10 million m annually, or six times irdustriallog consumption. The forests also play a crucial role in protecting watercatchment areas and preventing soil erosion, sedimentation of reservoirs anddownstream flooding effects.

61. Historically, the sector has generated about 5 percent of total GDPand 8 percent of foreign exchange earnings, ranking third (behind cocoa andminerals) in exported commodities. However, in recent years production andearnings from3the sector have been declining. In 1965 los production was1.5 million m ; by 1972 this had decreased to 1 million m . However, duringthe past decade production has furiher fallen off and now stands well belowtl-e 1972 'Level e.g., 0.1 million m in 1982. Exports of wood and woodproducts were valued at US$20 million in 1965 and had increased to US$90million by 1976 but has fallen to less than US$20 million by 1982.

62. A number of constraints have adversely affected the ability of theforestry sector to make its full potential contribution to Ghana's economicdevelopment, the most serious of which have been the grossly overvalued cedi,government controls and regulations on the timber industry, weak supportinginstitutions and infrastructure, lack of managerial and professional manpowrer,and the shortage of spare parts and imported inputs. Although currently theworld timber trade is depressed, there is a large and increasing demand for

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tropical hardwood products, a significant proportion of which is expected tocome from Africa. The high proportion of Ghana's timber products which wereexported in the 1960's and 1970's confirms that Ghana's products were wellreceived. The dramatic decrease in export sales during the last few years hasnot been due to a decline in export demand so much as to a combination ofsteadily reducing log production and mill outputs due to factors discussedabove. Appropriate government policy, and technical and financial assistanceare now required to reverse this trend and restore the sector to its formerproductivity and profitability.

Structure of the Timber Sector

63. The sector comprises a private subsector, with some 150 logging firmsand more than 80 mills, which have traditionally supplied more than 60 percentof Ghana's total timber exports, and a state-owned subsector consisting offour major companies, representing the balance of exports. Altogether thesector employs about 70,000 people, or about 15 percent of the employed laborforce.

64. The private subsector is engaged in all aspects of production, fromlogs through lumber, plywood, veneer, and remanufactured items. While, ingeneral, the private sector exhibits better management, sounder financialpractices and overall better physical facilities than the state-owned com-panies, these firms continue to suffer from lack of spare parts, materials andother imported inputs. As a result capacity utilization averages less than50 percent; vehicle and equipment maintenance is impossible in the absence ofspare parts; and thus, production and exports have declined in recent years.

65. Of the four state-owned companies, two (African Timber and PlywoodCompany and Gliksten West Africa Company ) are operating under poor managementand wiith extremely outdated equipment, often inappropriate for the given lineof production. The rehabilitation of these two firms will require consider-able long-term capital investment. The other two firms (Mim Timber Companyand Takoradi Veneer and Lumber Company) are better managed and on sounderfinancial footing and assistance of a shorter term nature could likely restoremuch of their profitability. However, a thorough study of the viability andalternative strategies for the state-owned companies is warranted.

Government Strategy

66. Government policy for the forestry sector is to increase productivityto the maximum extent, consistent with environmental protection, includingsafeguarding cover on water sheds, maintaining animal life and the welfare ofthe population, and the long-term preservation of the forests, includingreforestation as necessary. Government strategy for the private subsector isto facilitate rehabilitation of selected mills to generate foreign exchangequickly, and for the state-owned mills to rehabilitate them seeking minorityparticipation from the private sector, both domestic and foreign, includingthe possibility of entering into management agreements with large inter-national companies.

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67. Several studies have been carried out by the Government as a basisfor rehabilitating the timber industry. These include a FAO study on theforestry sector which identified a project to help rehabilitate the stateowned companies, to establish pulpwood plantations and to strengthen theforestry sector institutions; an EEC study on Ghanaian timber marketingorganization and procedures undertaken by P-E International Operations (U.K.)which recommended specific policy and institutional changes required topromote Ghanaian timber exports; and a timber industry rehabilitation studycarried out by a consortium of three international banks to assess rehabili-tation requirements with emphasis on the private sector timber companies. Onthe basis of the above studies and with assistance of the Bank Group, theGovernment has prepared a short-term timber sector rehabiliation program whichaims at increasing the utilization of the existing production capacityespecially among the private companies through provision of spare parts,equipment and materials. The program would be supported by the proposedCredit for ERP.

Timber Sector Policy and Institutional Reforms

68. Many of the policies and institutions dealing with the sector havebeen counter-productive to the objective of increasing timber production andexports. Indeed, the principal factors contributing to the sector's markeddecline during the past decade stem from excessive and/or inappropriategovernment controls. UJntil recently, the Ghana Timber Marketing Board (GTMB)exercised complete control over timber export production and prices. GTMB'sprincipal functions were: (a) to control and supervise production of woodproducts whether for export or domestic sales; (b) to determine which speciesmust be turned into finished or semi-finished products prior to export; (c) toset prices; (d) to approve and allocate import and export licenses, includingcoutract approval; and (e) to inspect export parcels to ensure correspondencewith approved export contracts. In addition, GTMB had responsibility forexport promotion and research and statistics. In effect, these assistancefunctions suffered from GTMB's overwhelming preoccupation with its controlfunctions.

69. In order to alleviate immediate physical constraints, the proposedERP would provide spare parts, materials and equipment to enable selectedtimber companies to increase production and exports. However, there would becritical bottlenecks to increasing timber exports unless timber marketingorganizations and procedures were restructured so as to enable timbercompanies to export with a minimum amount of Government control and regula-tion. Specific changes in the timber sector to be implemented in conjunctionwith the proposed ERP are as follows

70. Restructuring of Marketing Organizations and Procedures. GTMB hasbeen abolished, and an independent Timber Export Development Board (TEDB)whose membership would include both concerned Government Ministries andrepresentatives of mills producing for export, would be established by April30, 1984. In the interim period, the Ministry of Forestry would carry outessential functions for timber production and exports (Schedule 5, para. B 2(a) of both the draft Development Credit Agreement for ERP and the draftSpecial Fund Credit Agreement). The primary function of TEDB would be to

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obtain, collate and disseminate to the industry, information concerning Ghanaspecies, export markets and current prices, export opportunities andprospects. The TEDB would operate solely as a market promotion and marketintelligence advisory body to serve the industry and would not be responsiblefor controls on the industry. Various negative controls on timber exportshitherto exercised by the Government have been abolished. These consistedmainly of the practice of requiring Government's examination of draft timberexport contracts and the minimum export price regulations. In order to assistthe Government in setting up TEDB, the proposed project would provide consul-tant studies to assess the initial requirements of TEDB as well as an interna-tionally recruited expert to help establish TEDB and train staff (Sections3.02 and 3.03 (a), the draft Development Credit Agreement for TA Project).

71. Inspection and grading of timber products would be strengthened bythe establishment of a Forests Products Inspection Bureau (FPIB) as a self-regulating professional body overseeing all functions of grading and gradingregulation. The FPIB would establish standard grading rules to facilitategrading and inspection, improve claim handling and minimize fraudulent prac-tices. The FPIB would be established by April 30, 1984 (Schedule 5, para. B 2(b) of both the draft Development Credit Agreement for ERP and the draftSpecial Fund Credit Agreement). Necessary consultant services for the properestablishment of FPIB and technical assistance to help manage this new insti-tution and train staff are included in the proposed project (Section 3.02, thedraft Development Credit Agreement for TA Project).

72. Foreign Exchange Availability. The present Government policy allowstimber exporters to retain 20 percent of export proceeds to be used for impor-tation of spare parts and materials, which has helped to obviate the need toapply for normal import licenses to procure recurrent imports. In practice,however, there were considerable procedural delays due to the requirement toobtain specific approval from the Ministries of Trade and Finance and the Bankof Ghana before the exporter could utilize the funds and now allows all itemsjudged to be necessary for the exporters' work to be included in the automaticimport license acquisition. This is an improvement over the previous systemunder which the utilization of the funds was limited to the import of urgentlyneeded spare parts and consumables. The Government has recently streamlinedthe procedures to avoid delays. A proposal on further streamlining procedureswould be reviewed by IDA by March 31, 1984 and the recommendations of suchreview would be carried out by June 30, 1984 (Schedule 5, para. B 2 (e) ofboth the draft Development Credit Agreement for ERP and the draft Special FundCredit Agreement).

73. State-owned Companies. With one or two exceptions, the large state-owned timber companies suffer from management weaknesses and under-capitali-zation and their rehabilitation would require restructuring in the ownershipand management of the companies. Given the potential of the state-ownedcompanies in Ghana's timber exports, a study would be carried out to examinethe viability and alternative strategies for the future of the state-ownedcompanies including the possibility of privatization and management contracts.The study which would be financed under the proposed project would be com-pleted by September 30, 1984. Government would review the results of thestudy with IDA and adopt alternative strategies for these companies before

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December 31, 1984 (Schedule 5, para. B 2 (c) of both the draft DevelopmentCredit Agreement for ERP and the draft Special Fund Credit Agreement). Inorder to optimize the utilization of forest resources there is a need torationalize the allocation of concessions. Government would, with technicalassistance provided under the proposed project, review with IDA concessionallocations by June 30, 1985 with a view to cancelling those concessions whichare uneconom_c and reallocating them to other producers, with priority givento export producers. The Government action on the reallocation of the conces-sions would be completed by December 31, 1985 (Schedule 5, para. B 2 (d) ofboth the draft Development Credit Agreement for ERP and the draft Special FundCredit Agreement).

C - The Mining Sector

General

74. Ghana's mineral industry is the second most important foreignexchange earner after cocoa, with mineral exports accounting for about15 percent of the country's foreign exchange earnings. The sector has asignificant impact on communication, power and transportation demands, andprovides education and social services throughout the country. Although acomplete assessment of Ghana's mineral wealth is impossible because of the lowlevel of exploration carried out so far, the country is well endowed withmineral resources. In addition to gold which is by far the most importantmineral providing nearly 90 percent of total mineral exports and employingover 16,000 people, diamonds, manganese and bauxite are the major mineralsproduced for exports. Diamonds of industrial quality have been extracted fromalluvials in the Akwatia area in the Eastern province since the 1920's. How-ever, production has been declining due to the depletion of existing reservesand the existing low price of industrial diamonds. Manganese ore reserveshave been estimated at 20 million tons in the Nsuta mine in the Westernregion, whc:re an oxidization plant is being constructed to process about400,000 tons of carbon-based ores annually. Bauxite has been mined since1943 in Awaso in the Western region, and reserves are estimated at 16 milliontons. Increased production of bauxite has been constrained by the inadequaterail capacity on which shipment of bauxite has to depend.

Structure of Gold Mining

75. The country's known deposits of gold, with proven reserves of about5 million oz, are in the Ashanti Region (at Obuasi and Dunkwa) and in theWestern Region (Tarkwa and Prestea). Gold is produced by two companies:Ashanti Goldfields Corporation (AGC), a joint venture between Government andLonrho (U.K.) which operates an underground mine at Obuasi, and the State GoldMining Corporation (SGMC), a wholly Government-owned company, which operatestwo underground mines (at Tarkwa and Prestea) and an alluvial dredging mine(at Dunkwa). The SGMC was created in 1961 to take over the ownership ofseveral gold mines which were about to be closed down by their private ownerswho were operating at a loss due to Low gold prices. The SGMC decided tocontinue operation of the mines and maintained the existing workforce of about

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8,600 workers despite loss of productivity and overall efficiency. At presentabout 65 percent of Ghana's gold production comes from AGC while the SGMC isproducing the balance.

Sector Issues and Constraints

76. Ghana's gold production has steadily declined for a number of yearsand the decline was most marked during the last decade when total gold outputdecreased from 740,000 oz in 1970 to less than 360,000 oz in 1980. Majorfactors contributing to the decline were: (a) erosion in the finances of themining companies resulting from the grossly distorted exchange rate regime inthe past and the spiralling inflation which have critically affected thefinancial viability of the companies; (b) lack of management autonomy whichhas not permitted operating the individual mines of SGMC as commercial enti-ties, resulting in lack of definition of responsibilities and performancetargets and inadequate mine planning and financial control; tc) shortages offoreign exchange which have not permitted to meet recurrent imported inputssuch as maintenance, spares, replacement equipment and necessary rehabilita-tion of existing mines and plant facilities; (d) progressive departure of mostforeign management and technical personnel resulting in poor management andlow productivity and high absenteeism of mine workers due to generally severeeconomic conditions; (e) the use of over-aged production equipment in opera-tion with low productivity, health and safety standards; and (f) lack offinancing necessary to explore promising deposits and to develop new mines.Generally, the erosion caused by overvalued exchange rates and inadequateretention of foreign exchange from exports have led to rapid decapitalization.

Government Strategy and Rehabilitation Program

77. Ghana's gold subsector has the potential to significantly increaseits role as a major foreign exchange earner for the country owing to therelatively high grade of its known deposits, and vast gold mineralizationincluding relatively shallow alluvial type deposits. Also, gold mining canachieve high profitability due to present gold prices, the recent devaluationof cedi, and the structure of mineralization quite favorable for mining.Although gold mining in Ghana has been on the decline for about two decades,it can be resuscitated to its potential if satisfactory management autonomyand necessary financial and technical assistance are provided. The Governmenthas recognized the serious economic implications of the decline of gold pro-duction in Ghana and, as an important element of its economic recoveryprogram, has prepared a short-term program for rehabilitation of the SGMC andAGC mines. The program for SGMC aims at restoring SGMC's gold production tothe level achieved in 1979 by increasing output from the present 72,000 oz to165,000 oz per annum over a three-year period through rehabilitation of under-ground facilities, mining equipment, dredges, processing mills and provisionof spares and consumables. Specific production targets for each of the SGMCmines and rehabilitation input requirements are shown in Annex IV of the draftPresident's Report for ERP. The mining component of ERP would provide foreignexchange to support the SGMC rehabilitation program. A program for increasedgold production from the AGC mine has also been prepared which envisagesincreasing output from 250,000 oz annually at present to about 350,000 oz overa period of four years. It is expected that this investment program would be

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implemented with commercial sources of financing and IFC's participation iscurrently under active consideration. The future of the mining industry inGhana will depend to a considerable extent on the investment of new capital.In order to promote foreign investment and ensure that investment conditionsin the country as a whole and in the mining industry in particular arecomparable or better than in other countries, an investment code was pro-mulgated in 1981.

Sectoral Policy and Institutional Reforms

78. In order to address major sectoral issues which have constrainedefficient operation of the SGMC, the Government has in principle agreed toimplement the following policy reforms in conjunction with ERP and theproposed project.

79. Foreign Exchange Retention. In order to ensure that SGMC does nothave to rely on normal Government foreign exchange allocation to meet itsrecurrent imported inputs and to enable SGMC to meet part of the financialrequirement for its rehabilitation out of its own resources, the foreignexchange retention by the SGMC has been increased from the previous 20 percentto 35 percent of its export sales. At the current level of production thiswill allow SGhC to retain about $10 million per annum, which will enable theSGMC to meet its recurrent import needs from its own resources. The Govern-ment and the SGMC would maintain the policies and procedures for the renten-tion funds satisfactory to IDA (Schedule 5. para. B3 (c) of both the draftDevelopment Credit Agreement for ERP and the draft Special Fund CreditAgreement).

80. Management Autonomy. The SGMC would be given full managementautonomy and its mines would be allowed to run as a commercial entity under amanagement contract. Given the presently weak institutional capabil'ty of theSGMC, the Government has agreed to engage an internationally experiencedmining management company to run the SGMC and train the local counterpartstaff. It is envisaged that a total of about 60 man-years of such managerialand technical personnel would be financed under the proposed project. Theprogress under the management contract would be monitored periodically by theGovernment and IDA. The necessary planning and preparation work requiredbefore the Government would be in a position to invite management contractproposals from international mining companies has already started with fundsprovided under a Project Preparation Facility advance. The appointment of aninternational mining management company and signing of a management contractsatisfactory to IDA would be a condition of disbursement of the Credit for themining component of ERP with an exception of $5 million which would 'e neededinitially to meet urgent import requirements of ERP (Schedule 1, para. 2 (f)and para. 2 (d), respectively of both the draft Development Credit Agreementfor ERP and the draft Special Fund Credit Agreement).

81. Work Incentive Scheme. There is an urgent need to improve the livingcondition of the mine workers as the scarcity of food has caused seriousabsenteeism and low productivity among mine workers and it is evident that therehabilitation of the mines would be impossible without improvements in thefood supply situation. The SGMC would introduce a plan of action to improve

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productivity in its mines specifying, inter alia, a work incentive schemeincluding direct provision of food and special bonuses to reward higherproductivity. Such a scheme would be carried out before December 31, 1984(Schedule 5, para. B 3 (a), of both the draft Development Credit Agreement forERP and the draft Special Fund Credit Agreement).

82. SGMC's Finances. The Government recognizes that the poor financialperformance of the SGMC has been partially due to the grossly distortedexchange rate regime in the past. While the recent devaluation has signifi-cantly corrected the distortion and the new exchange rate should initially besufficient to restore the viability of the company, its effects will have tobe carefully assessed once the cost-price relationships in the economyfollowing the measure have settled down. In order to enable the restructuredSGMC to start with an improved financial position, the Government has agreedto convert SGMC's outstanding debts into a long-term loan with terms andconditions satisfactory to IDA by June 30, 1984. In addition, the cost ofproduction of SGMC mines and the profitability of the company would bereviewed not later than December 31, 1984 and thereafter annually (Schedule 5,para. B3 (b) of both the draft Development Credit Agreement for ERP and thedraft Special Fund Credit Agreement).

PART IV - THE PROJECT

Background:

83. The proposed Technical Assistance Project is being presented inparallel with the Export Rehabilitation Project (ERP) which is described inthe accompanying President's Report. The project is intended to support theobjectives of the ERP by providing various technical assistance and consultantservices required to implement the ERP including a number of important policyand institutional changes. Because of the progressive deterioration in theeconomic conditions of the country over the past decade, there has been asteady drain of qualified managerial and professional skills from the country,which is severely constraining the capacity of the Government to implement theeconomic recovery program. In particular the Government recognizes the needto strengthen the management and institutional capability of the export sectorand has requested IDA to finance a technical assistance project to be imple-mented in conjunction with the ERP. The project was formulated in the courseof preparing the ERP in close collaboration with the Government and concernedsector agencies. The project was appraised by an IDA mission which visitedGhana in June 1983. The Credit negotiations took place in Washington betweenNovember 7 and November 14, 1983 with the Ghana delegation led by Mr.J. G.Renner, Secretary for Lands and Natural Resources, and included representa-tives from the Ministry of Lands and Natural Resources, SGMC and GCNB. ACredit and Project Summary is shown at the beginning of this report andsupplementary project data and information at Annex III.

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Project Objectives:

84. The primary objective of the project is to help strengthen the insti-tutional capability of the key organizations in the export sector so that thay

can play a more effective role in the development of Ghana's major exportindustries and thus make a positive contribution to Ghana's economic recoveryover the longer term. Specifically the project seeks to (a) ensure adequateinstitutional capability in the cocoa, timber and gold mining industries tocarry through a number of sector policy and institutional reform measures asdiscussed in Part III of this report and (b) to strengthen the capacity of theexport sector organizations to effectively manage and implement the componentsof the proposed ERP.

Project Description:

85. The proposed project would include the following technical assistanceand studies:

(a) Cocoa Sector - About 31 man-years of technical assistance would beprovided to the Ghana Cocoa Marketing Board (GCMB) to help implementthe cocoa sector policy and institutional changes; provide directsupport to GCMB's senior management in ensuring efficientimplementation of the cocoa component of the ERP; and train localstaff. In addition 23 man-months of assistance would be provided toundertake various sector studies;

(b) Timber Sector - About 10 man-years of technical assistance would beprovided to the Ministry of Lands and Natural Resources to establishthe Timber Export Development Board (TEDB) and the Forest ProductsInspection Bureau (FPIB), train local staff and ensure adequatecapacity of the National Investment Bank (NIB) to administer thetimber sector component of the ERP. In addition 6 man-years oftechnical assistance would be provided to two state-owned timbercompanies (Mim and TVLC) and about 19 man-months of assistance to theGovernment to carry out various timber sector studies and reviewprogress of the ERP.

(c) Gold Mining Sector - About 60 man-years of technical assistancewould be provided to the State Gold Mining Corporation (SGMC) under amanagement contract to strengthen its managerial and technicalcapability to implement the mining component of the ERP, to improvelocal management capability and train local staff. In addition about33 man-months of assistance would be included to monitor progress ofthe SGMC management contract and carry out feasibility studies onlong-term investment projects in the sector.

(d) Port Sector - About 4 man-years of technical assistance would beprovided to assist the Ghana Port Authority (GPA) in implementing theport component of the ERP and in improving port operations andmanagement including training. In addition, about 6 man-months ofassistance would be provided to carry out port management studies.

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Details of technical assistance positions and consultant studies tobe financed under the project are shown in Annex IV of this report.

Project Cost and Financing:

86. The total cost of the project net of local taxes from which theproject would be exempt is estimated at US$18.0 million consisting of US$15.6million in foreign exchange and US$2.4 million equivalent in local currency.The cost estimate for the technical assistance component is based on the ratesof similar internationally recruited experts employed In Ghana and elsewherein West Africa and the average man-month cost in 1983 prices for long-termassistance is estimated at US$10,500 including salary, housing, allowances,overheads and relocation expenses of appointed staff. The average man-monthcost for short-term assistance is estimated at US$13,000. Price contingencieshave been calculated at the rate of 5 percent per year, which is in line withsimilar technical assistance contracts in Ghana. The proposed IDA credit ofUS$17.1 million would finance 95 percent of the total project cost including100 percent of the foreign exchange portion. The Government would finance theremaining 5 percent of the total cost.

Project Implementation:

87. The project would be implemented over a period of four years (1984-87). The responsibility for implementation of various project componentswould lie with the respective organizations which would be employing technicalassistance personnel. The proceeds of the Credit would be made available tothe implementing agencies by the Borrower in cases where the implementingagencies are public corporations (i.e. GCMB, SGMC, GPA) rather than theGovernment itself, as loans with a repayment period of 15 years after 5 yearsof grace. Such loans would be made on an interest free basis until such timeas the respective agencies become financially capable of paying appropriateinterest on the loans. The financial position of the agencies would bereviewed annually by the Government and IDA. All technical assistancepositions under the project would be filled or undertaken by persons or firmswith qualifications and experience and on terms and conditions satisfactory toIDA. The Interministerial Export Rehabilitation Committee (see para. 91 ofthe President's Report on ERP) assisted by a project coordinating unitestablished in the Office of the PNDC Coordinating Secretary would be chargedwith the responsibilities for ensuring coordination of project activities,resolving policy matters and exercising central monitoring of progress ofproject components.

88. In the mining sector, technical assistance to the SGMC would beprovided by an international mining and management company to be selected bythe Government in accordance with the Bank Group guidelines and employed undera management contract for a period of four years. The management contractwould include an incentive provision whereby the international mining companywould be entitled, in addition to the basic fee, a management bonus withrespect to the production in excess of the agreed targeted level. As apreparatory step, the Government has engaged the services of Rio Tinto ZincConsultants (RTZ) with financing provided under a Project Preparation Facilityadvance to review the present management structure of the SGMC and definerehabilitation priorities and management strategy. The RTZ study which is

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expected to be completed by February 1984 will provide detalled management andoperating performance targets to be achieved over a period of four years,terms of reference for the management contract, and detailed requirements andqualifications of internationally recruited specialists including a trainingspecialist, on the basis of which the Government would solicit proposals frominternational mining companies. The management contract between SGMC and aninternational mining company is expected to be signed and field work cancommence in October 1984. Finalization of the management structure satisfac-tory to IDA including the terms of reference for the Internationally recruitedmanagers and specialists and the conclusion of a management contract whichwould include a training component satisfactory to IDA would be a conditionof the Credit disbursement for the mining component under ERP except for$5 million for urgently needed import items (Schedule 1, para. 2(f) andpara. 2(d), respectively, of the draft Development Credit Agreement for ERPand the draft Special Fund Credit Agreement). The RTZ study would alsoprovide specifications of spares and equipment to be financed as part of theproposed ERP including an implementation plan. In addition to technicalassistance under the management contract, the project would provide about8 man-months of consultant services to assist the Government in carrying outperiodic monitoring and evaluation of progress under the management con-tract. In addition, about 25 man-months of consultant services would beprovided under the project to enable the SGMC to carry out feasibility studieson shaft sinking at Prestea and Tarkwa and development of alluvial depositsand tailings, which could lead to medium-term investment projects to beimplemented with external financing.

89. In the cocoa sector the GCMB has been provided with managerial andtechnical support by a team of consultants from Peat Marwick and Mitchell(PMM-U.K.) for the last two years under a UNDP Technical Assistance Project ofwhich the Bank Group is the executing agency. The main objective of this UNDPproject which will be completed by June 1984, has been to improve the organi-zation of GCfB, staff training, accounting system and financial control, cocoaevacuation system and vehicle management and maintenance. Since the PMMconsultants have been engaged to assist GCHB in the areas to be supportedunder the proposed project and to ensure continuity, it is expected that PMMwill be retained by the Government to provide necessary technical assistanceunder the proposed project. This would include the following positions: anAdvisor to Chief Executive, an Advisor to Produce Buying Division, a FinancialAdvisor, an Accountant, a Procurement Advisor, an Estate Advisor, four VehicleWorkshop Advisors, an Agronomy Advisor and two Sprayer Workshop Advisors. Theterms of reference for these positions are outlined in Annex V. The mainresponsibility of the advisors would be to assist GCMB in implementing thereorganization and cost efficiency measures outlined in paras. 54 to 57 above,to develop and carry out training program for local staff, and to ensure thatthe counterpart Ghanaian managers are performing in all aspects as the jobrequires and to provide continuous feedback to the advisor managers in pursuitof this aim. The advisors would be employed for two to three years dependingon the positions involved. In addition, the proposed project would financethe following studies in the cocoa sector which would be carried out either byindividual consultants or consulting firms under the auspices of the GCMB:(a) financial viability of cocoa plantations and procedures for divestment;

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(b) financial viability of cocoa products factories and insecticides formula-tion plants and procedures for divestment; (c) corporate planning and manage-ment information system; (d) procedures for receiving at port, storing andshipping cocoa; (e) alternative systems for cocoa marketing and input deliverysystems. The outlines of these studies are shown In Annex VI. The timetablesfor undertaking the above studies, roview with IDA and necessary folLow-upactions are summarised in Table 1 (Pagoe 11 to 15 of this report).

90. Technical assistance to tho timber sector would include a ManagingDirector for TEDB, a Managing Director, Grader Registrar and a Grader Trainerfor FPIB and a Timber Industry Advisor for NIB and would emphasize the train-ing of local staff. In addition five experts would be provided to the state-owned timber companies (i.e., a Transportation Engineer and a CaterpillarDiesel Specialist for Mim Timber Company and a Production Manager, a ForestryEngineer and an Accountant for TVLC). The proposed project would also provideassistance to the Ministry of Lands and Natural Resources to carry out studieson organizational and staffing requirements of TEDB and FPIB and Governmentstrategies for state-owned timber companies; and to review progress of the ERPtimber component. The terms of reference for the technical assistancepersonnel and consultant studies are shown in Annex VII. The timetables forcompletion of the studies and follow-up actions are set out in Table 1 (seepages 14-18 of this report).

91. Technical assistance to the port sector which would include trainingof local staff would be provided by port consultants to be selected by GPAfollowing the Bank guidelines for the use of consultants. The port technicalassistance would be carried out in three phases. First, the consultants(about 2 man-months) would help GPA finalize the list of items to be financedunder the ERP and prepare specifications, procurement and training schedules.Secondly, in order to prepare a plan of actions to improve port operations andstrengthen management, a team of port experts (about 4 man-months) will assistGPA in carrying out a port management study to be completed by September1984. This study will focus on measures for improving port efficiency ingeneral, and on streamlining the present organizational arrangements whereport functions are divided between different public companies with insuffi-cient coordination among them. The third phase will consist of (a) review ofthe management study findings by IDA, the Government and the port agenciesconcerned, and (b) implementation of an action program ar ording to a time-table agreed with IDA based on the above review (Section 2.08, the draftProject Agreement). To assist GPA in implementing this phase, 48 man-monthsof residential experts will be provided under the proposed project.

Monitoring

92. A project coordinating unit within the Intermini. serial Export Reha-bilitation Committee would have the overall responsibility for monitoringprogress of the proposed project in collaboration with the respective projectimplementation agencies. It is expected that most of the long-term technicalassistance personnel under the project will be appointed and deployed in thecourse of 1984. The status of appointment of such personnel will be reviewedin December 1984 and progress in carrying out the proposed project satis-factory to IDA would be needed before release of the second tranche of the ERP

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Credit (Schedule 1, para. 3 of both the draft Development Credit Agreement forERP and the draft Special Fund Credit Agreement).

Disbursement

93. The proposed Credit would be disbursed to cover the costs of techni-cal assistance as follows: (i) US$ 4.4 million for the cocoa component; (ii)US$8.2 million for the gold mining component; (iii) US$2.4 million for thetimber component; (iv) US$0.9 million for the port component; and (v) US$0.3million for refund of the Project Preparation Facility advance.US$0.9 million would be unallocated.

Credit Effectiveness

94. In view of the integral nature of this project with ERP, the proposedCredit would become effective only when the IDA Credit and the Special FundCredit for ERP become effective (Section 5.01(b), the draft Development CreditAgreement).

Project Justification and Risks

95. The proposed project would make a major contribution in assisting theGovernment to strengthen the management capability of the key export sectororganizations, which is essential if the Government's economic recoveryprogram is to be implemented successfully. Specifically the technical assis-tance under the project would enable the Government to carry through a numberof export sector policy and institutional reform measures to be undertaken inconjunction with the ERP, which are needed to arrest and reverse the declinein export production and to lay the foundation for longer term development ofthe export sector. The proposed project would also ensure adequate managementand technical capacity of the export industries to implement the respectivecomponents of the ERP and help build local capability through training. Giventhe present institutional weaknesses of public sector organizations and thecountrywide shortage of qualified managerial skills, the risk to Ghana by notproviding t-_ required technical support would be substantial and couldundermine the objectives of the ERP with serious negative impact on Ghana'seconomic recovery.

96. The proposed project entails special risks that, in light of theunusually difficult country economic conditions, Ghana may not be able toattract technical assistance personnel of required calibre and that there maybe delays in their appointments. Another risk would be that the trainingobjective of the technical assistance may be jeopardized due to the lack ofqualified counterpart staff and general demoralization of local staff at alllevels. A special effort would be made in the course of the project imple-mentation to ensure that the above risks are minimized. To this end earlyaction is being taken by Government with funds provided under the PPF toexpedite appointment of technical assistance personnel. In the cocoa sectorexisting technical assistance arrangements would be utilized to avoiddelays. The Government is committed to improving the living conditions andmorale of local staff and has recently doubled the minimum wage and granted asubstantial across-the-board salary increase for the public sector

- 38 -

employees. While the primary focus of the proposed project is to ensureadequate management capacity to implement the ERP and initiate associatedpolicy changes, it is recognized that long-term institutional objectives couldbe realized only if continuous technical assistance were provided over alonger period. The need for longer term external support to strengthen theexport sector institutions will be reflected in designing future Bank Groupprojects.

PART V - LEGAL INSTRUMENTS AND AUTHORITY

97. The draft Development Credit Agreement between the Republic of Ghanaand the Association and the draft Project Agreement between the Associationand GCMB, SGMC and GPA, and the Recommendation of the Committee provided forin Article V, Section 1 (d) of the Articles of Agreement of the Associationare being distributed to the Executive Directors separately.

98. In addition to the special features of the Development Credit Agree-ment and the Project Agreement, which are set forth in Section III of AnnexIII of this Report, the conditions of Credit effectiveness are; (a) executionof the Development Credit Agreement and the Special Fund Credit Agreement forthe Export Rehabilitation Project, (b) execution of the subsidiary agreementsbetween the Republic of Ghana and the implementing agencies, and (c) executionof the Project Agreement.

99. I am satisfied that the proposed Credit would comply with theArticles of Agreement of the Association.

PART VI - RECOMMENDATION

100. I recommend that the Executive Directors approve the proposed deve-lopment credit.

A.W. ClausenPresident

by Moeen A. Qureshi

AttachmentsWashington, D.C.December 12, 1933

Mt3 Wrt AVMILAIWLLANNEX I

- 39 - Page 1 of 5 pages

TA BLK t

SOCIA sCL UlltCATnES TIA?A sMETtI;A RE,vaEEe tm'r,c C-SSQtTE1W A%ltRlAs) r.

MOST CMSC RFCE.UT ESt'TfATZ) lb70fb RDCM Low rNCME !@lI.FX IICOIE

I9a 197i tST?!Tw AFRICA S. oC SAHARtA AFRICA S. OF SAltAR- (yIBAM SQ-. 00

TOTAL. 23.5 2338.5 238.5£CRtIMIURA. 65.4 61.4 62.1

pw s CIIATA Cs) 190.0 240.0 600.0 256.6 1147.I

(ILOOtASc OF OAL EqTLrEWTLr) 106.0 266.0 260.0 7.8 724.2

IOH3AfT0N AIID VITAL STTISTICP0PATIOt.FP1SYEAR (TNOCSlASS) 6306.0 8616.0 l1130.0

gtUl POPULSAtION (: OF TOtAL) 23.3 29.1 38.6 19.3 28.3

POFPLATIOW tWIECrlOSvoIATIoUN t YlAR 2000 D MILL) 24.2STAnORKRT POPUJlON (CALL) 35.6TZAR SITATINRT POP. REACED 213

PCs SQ. Ot. 28.5 36.t 48.2 2".5 56.3PE sq. me. AGR. LaND 106.0 140.2 186.5 94.1 131.8

POPLATION AGIE STSCUUE CZ)0-16 IRS 6.5 £5 46.8 £S.0 5.9

15- TitS 52.9 51.6 30.5 52.1 51.265 AID AgaPE 2.6 2.7 2.7 2.9 2.8

OPunLATION frRATE (C)TOe 4.4 2.4 2.9 2.8 2.8UR3 9.2 4.6 3.0 6.2 5.3

CmOD DIlTM RATE PCER HSWS) 50.2 50.2 .9.3 67.9 67.6tDWE DEATh W-kTE (PER WOS) 20.3 16.9 13.6 19.2 15.2

GROSS eWPcrTo RATE 3.4 3.4 3.6 3.2 3.2

FArLT FLAMINGACCEPTORS. AFIWAL (TiCS) .. 8.3 33.IcflIERS CZ Or Kalain 16ME.) ... 3 07

PMOAD - t Er*TIONzM5t or Fon PROD. PtM caTs(l946-n-lCcO) 93.0 101.0 72.0 $7.8 95.7

IE CAPITA SuEPT OFLORIES t or RSQCEITS) 92.0 98.0 88.0 88.0 97.1

PDOTEIS (iAS MM DAT) 43.0 51.0 44.0 51.2 56.0OF' W1CH ASl0L AlJID PSE 13.O 17.0 15.0kc 13.1 17.2

GR.O CACES 1-4) DEATH RATE 30.6 24.6 18.9 25.7 23.6

LifE EDCT. Ar *tRS YEARS) 64.8 49.9 56.5 67.4 S1.9lAStr MITf. RATE (PM 'THOUS) 142.9 121.6 tO1.0 126.5 117.6

ACCMES TO SAFE VAMES CtIC)TAL .. 33.0 33.01. 26.7 25.4138*3 .. 86.0 s6.G7f 56.8 70.3RUMAL .* 14.0 14.07; 18.3 12.3

AES TO ETA DISPOSAL(2 or POPMATION)

taL .. 55.0 56.10/ 28..R .. 92.0 ,s.Y7' 65.7t. . 40.0 O.d7; 21.9

mpar..lTa ?a -ur!sczu 2t6JO.0 12910.04 7630.0 27420.6 t1218.'FOr. MM nSPTT m i 0O9f ioo. 780.0 3456.2 2292.0

po. PER 8EOS7TLTOTAL 1290.0 760.0 660.0/c 1163.: 1073.4OWlI 300.0/f 770.0 sio.o7;S 3!0.6 402.3UIUAL 47s9M.o71 890.0 7l..7; 3177.5 39s .7

ADMISSION Ra ROsprTAL. MD.

AVERAE SItfE Or SE.OLOTOMS . 4.7waif. .t. .. ..

rEA .. .. . ..

AVERUAE No. OF PSOWSIROSITOTs^L,... .. ..

ma ,. .. . ..

AcS :0 tECT. ( r 0IS2LISCS

TOTAL

RI ___ ____ _ _____

5LnI COPY AVAILABLE ANNEX I

-40- Page 2 of 5 pagesS L C IA

- SOC?A .I ICATOS DATA SPrET

MOST (NST RECCET ESTDATEN) lb

/b REC UT LOW ICME UDOLErTCGqE1960o 1970- 9ST24AT ArRICA S. Or SAHARA AIRICA S. Or SAIARA

ADjtSTC ENItoLLtErT RATIOSPR WAIT: TOTAL 38.0 64.0 69.0 63.9 97.2

mgLE 32.0 73.0 77.0 ".6 103.1TENAL?. 25.0 5b.0 60.0 51.6 86.5

SECONDARYS TOTAL 3.0 14.0 36.0 12.5 17.2MALE 9.0 21.0 *4.0 16.7 23.5PWALE 3.0 8.0 27.0 6.1 14.2

VOCATIONAL Z OF SECONDARY) 12.6 23.3 3.5/d 7.3 5.2

MUPML-TEACHER RATIOPRIMARY 31.0 30.0 27.0/d 46.4 42.9SECONDARY lk.0L 17.0 iJ.07d 25.1 23.7

ADULT LITEXAC RATE CZ) 27.0/h 30.2 .. 36.5 37.1

conrsirionPASSCNCER CARS/THOUSA%O POr 3.0 4.6 3.8/ .3 18.8RADIO RECEIVERSITHOSAW.n POP *2.7 81.6 162.6 43.3 97.8TV RECEPERS/THOUISA.D POP 0.1/1 1.9 5.0 2.2 13.6NEVSPAPER CDAILY GEERAL

lUTERWr) CIRCULATIONPER TNOUSAND pOPULATION 30.0 48.2 30.5 6.7 18.2

CINDIA AWNtAL ATTENDANCE/CAPITA 1.6 2.2 0.4 1.0 0.6

TOTAL LABOR FORCE (TiUs) 2919.0 3421.0 4396.0IDEALZ (PERCENT) 42.6 42.1 *1.1 34.5 36.1

AGRICULTtRE (PERCENT) 66.0 538.0 53.0 76.9 56.8IDUSTRY (PERCEENT) 14.0 17.0 20.0 9.8 17.5

PARTICZPATION RATE (PERCETr)TOL*2. 2.9 39.7 37.2 40.9 37.0MALE 50.0 66.6 64.0 53.0 £7.1

ALE 36.0 33.0 30.4 28.9 27.0

-ECONOMIC DEDENCY RATIO 1.1 1.2 1.3 1.2 1.3

IT Or DISTRIDUTIOVPEREMNT OF PRIVATE INCOMEREcEIVD By

RIcGRST s: or HOUSEIHOLDS ..

IOVEST 2O0 OF l}DUSEHOLDS --

LOWEST 6: OF HOISENICLDS

P0932 TARGT CROUPSEST IMAED ALSOLUTE POVERTY INCCMELEVEL (US$ PER CAPITA)

R3AM. . 307.01d 16.S9 54.2RURA - o50 174 87.4 255.9

ESTDtATED REtATIVE POvERtY INCOvELEVEL (CSS PER CAPITA)

UILRA . . 156.01d 100.8 491.5RIIIL . . t30.0Ti 64.6 o88.1

ESTIATED POP. ULOW ABSOLVTEPOVERTY IHCOME LEVM tZ)

URRA.N .. .. 5

ROIL 69.0 .RRL.. . ._ 9._0 _

NOT AVAILABLEMOT APPLICABLE

|. The group a--ages for each tadicator are rop.lattaw-wetgohted arithletic ousne. Coverae ot countrtes among thetndIctors depeds on avallabilIty of data and Is not antfor..

lb Untles otherwtae noted. Data for 1960- refer to dan year between 1959 snd 1961; Data for 1970 betwee 1969 and1971; ad data for Mast Recent Ecttmtet between il79 and 1981.

/e 1977; ld 197F; to 175; /t 1962: t Regstoered. qnt all practicing tn the country; /b Agl 6 and aver; It 1964;I Pube Sehoole only.N

Iby 1983

ANNEX I

-41 - Page 3aof5pagesWmsf mewlait .a51aWme

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mie wileo h r .me em. is tiaa wi the teeh a., ted erlsea tie ems o Emcstts rw A~.1doL18 oot"tSnameee- uit emmin. ti . saLiesmt miterL Aem-it.is..1-Wse se t .--mL.e e "-Im ml teselefldaieeae0leise steeaeayaeaSC-m-Ces eMgai n mlmai semed teem s0-seo TepM .m Semna msaa.te.4 -the ei.e-MmmIeekeeemium s h nte ae m eamtei sppassejle eleM e metamstcmth hat -lsh peJmttofites psmrisetmi-eeempveimdlmsweiisetadm"tmtdeeinet0

leer tUtirmi netr"eWeratd- h m atattamaipLsine smem pap - im a9- helen . -Lm heall -Vm nheiW --

... ,e*e*e el.h esoo.etmte maii.a et a lete Ned Irinipleaaeimi

nt.n W. tle asPleitate. M, emi o-Saat eabbrtiLa . leenaido. atcmse)-VestL iemtitsmitmhe1eta m.ttaei I eee.t .(cidm (0-dyeLs),etliasem ll. itimim tei"heTi *f ia.e5r-. ti mmtr .a-mesani -apeMt. amn-

yamo.tw psittwletljS Isremd Ittoo..aa Itoae tce

Pee-tetime C.-%ml ftce m peu- I - ta -*.w tiieth rMs. s.C aitmi Mess 1wt--e rat C-e - L2t--ee aact.s tooe it imi maw alit)epamiltwam Lt. hId-Ic ;ccaItt. an'1-' . 5. eem s .im 11 s.eLl seL Pass WMte snod 1i jeero ad tsar.

Olssebat' eme iee ma-eel at mei." dantel yertheam sa mlai-Ue temma ae tmmm meite Psaqece is NWs sm ftsempetctat sIc, ii? . -m -I-, -es t. eaOOll m esdtee estm i etsi; sre1w lm mm mm.h ersa.

teiseImpeUiteprsdIIme mreema Ieme ertmllm5 b te -stet ee -h.mamd wm.Ieses - Ml tee roloa-cfmi oar medI

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TV555m iTVeem ot ..t.Leca. eeet er eeemrcwcsma yerte...na .r.,.mses rye..s mm

leeSsea mm clendr rtr baic. mesastlm tm~e eeeme teeom4 05 . aes1ti ieegsi e et tr teat f- lmedm h r

Ste. (Mie letLi9 : ob~% LM.-d1"Pe asmwsm.e ettw

me,a etetemea-CeetdIem.'uTfTeCinlhsees maeelpstI mse.lwelg ee

met,tdmh.esa eal ismetemtid ne teeP-d, fle.-msepeemiml ItS. 1570met 1161 data

ti a m dbriacsea plooC .selesle m allotevc&eles Leogoneteens ZedmeecIpeecet I bear oft.,m is ewle *at- tamte-Ib. e.lent

Fir mcli. telde . mlo Pmei w1-s. ~e ml - nee.maet lprtessI Ssst date.

tmaiastt le elI-rmsieete5e.4t d.rct aicFtesf. -tlta etn L.es .m emlt ime. mate* ed as i-.e tamer otem

paM. .. atoebl, at -.sa Cmes eeth meeSeees.¶tc150 e sad.Ilti deem, th-me .e hese - tlWad pace ises tee rabases e -lar iee fles .5 ?1O ere m steal0 tpel.hea"2C e esftatemIeires. ssmseam en Roo pmalsa. ieeeo.1 Sits seAo.

me stEel was as -_ em... iee eec- ait", I1t.am h- CSI h eetiee eaIm aime ne

blit osma laM I--- t Past . 'i S flts -c C ee egs ieteet te nLtpmem. e.$ettmem lens thee,Iseee,mm hrt C temdb lbs so. eemisetems. .e wtitmeis. titasmerrd lt st aineeplm:flae -oethee w0meieec eeto. P.5 Itoooas*md onmCho iStoo.e

at elm dale dr ite i-eee tlao _t-Mblam toess tI- 5-5 151 tphim. hea,mehelt6e.

Sem.sesei th 'Lk a.. mC-ss C .. msl tets; eae ae nttetd S,.m ae.l.e ae ISts bo e.im- - abye v-*-are Ifle atfleleesl...e Iwt etem;Im.-V.10a I.em dat. aeic eeei r meli Pa e-e sela e 0ae siesati

acesml lepimesmet. elac se esei. *din.1 on emmi Sire. emoefm, -allestmhle.I..bonear g,1? tsnlnheesrmt 'mee ele dsr&m btCmeem ra let ictmeee It- eem ,Iced ... t eetct ie .a

lees ofee- emesireaPts ts eeelsaes 1se rstimce Pas.iasm Smit Pim.he .mmeiee ymaceu- teP"t. .I L.a ra aeSeaete.Jtel hmmm eme me ati-rretm ammtelee ems daeeir ltm ot.iriU MtU--- of ... L. ~~~-e-t.O

.em MIT th aeeet- a ene e- meeprsms mtash t=itltewe h Is-ltymteem =meets.1

_asta eof swltr ngllsi.le.t Is

- 42 - iANNEZ I

Page 4 of 5 pages

QIAN FI~tEEC DA!IA.

GNPQ F CAPrEA IN 1912: U3W -/

MM IATCAL E1CU D 1982 ANU RiE OF GROH_3K Constant Prices)

C*is n. , 1 9?7-

GNP at larket Prices 113,240 1CO.C0 -0.86Gross Thasstic Investment 1,472 1.3 -16.40Gross lational Saving i,595 1.4 -16.45Current Account pJance -16.6 -0.09 -Eport of Goods, N 2009.0 1.77 -9.44Import of Goods, m 1959.0 1.73 -. 2

OC!RJT MD LAR FORCEOutput 191 Iabor Fnroe, 1992c,dis EIn. % Kin. %

Agrwlbcle - 44,031 51.28 2.9 57.26,440 7.95 0.671 15.3

Sevices -35,395 41.22 1.206 27.5

Total 1D,866 lt.0 4.386 10D.0

Central Govem tntCad! Kin. d of UP in 19B1 }of G? in 19

Total Pevenue and Grnts 4,855.3 6.33 5253.2 6.12Total xbpendituze and N.'et Iendixg 9,702.9 12.66 92M.1 10.74

emli Deficit (-) 4,847.6 -6.32 -3966.9 -4.62

MU, MEDr AM iCES1976 1977 1978 1979 198B 1981 192

IY'w and Qpzasi-avny 1,993 3,044 5,131 5,942 7,949 12,029 15,a72Bnk Credit to Paiblic Sector 1,966 3,203 5,636 6,537 8,48 14,043 1,7142Bnk Credit to Private Sector 3E5 560 739 796 940 1,342 1 ,55

CParzcntages or Tnde Nw=bers)

d Quasioney as & of GIP 29.2 Z7.3 24.4 21.1 19.4 15.7 17.6Ceoeal Price Index (1;Th1lco) 46.2 102.0 173.1 257.3 401.2 868.6 1062.4

1/ Staff is3zate

S Epc~o 1963

BEST COPY AVAILABLE ANNEX I

Page 5 of 5 pages

- 43 -

__A___OF P___ _ NF}RONDISE LTMI, (AVI EWE 19;8-Q)

1983 l9B1 ~1WM 1/Sa Minm. %

coae asans & products 654.5 72.9Trade Ba3ance 182.3 Z-3 9.2 Thiber I & Products 3.2 4.3- Ets 1&.9 766.3 67.2 Gold 135.1 15.0lints -1024.6 -7S-7 -529.0 Diamonds 10.3 1.1

lanBanese 9.6 1.1lmvisibles (Net) -168.0 -140.4 -114.8 AlU Other Goods 50.1 5.6Services -247.7 -2.3 -197.2Tiunsfers 79.7 82.9 82.4 Total 87.8 I7O.8

COrrent B92an 16.3 -162.7 -16.6

Cta AccmtsOfficial Capital (NJet) 187.9 57-3 149.7 mn&L ], M m- 1992Piivate Capital (Net) 19.8 26.3 31.7kreeraP~r~nts 78.9 141.4 35.2 1; lI.

Overall Balance 81 .5 -262.5 56.4 Total Outstandirzg andGross InMesasael d -TU * 1648.6R3erves (&: of Period) 197.6 183.8 225.9 Tobtal O tandirig and

rhused ica. Scort-term 1163.6

Pebruaz 19'i - Je 18, 19M %r SEVIC ?I F'R 191tt1 .15.

Smoc AUZst 26, 19781 TotEal Otstmixng and-$ 2.75 and Disb1med MM 10.7

Total Outstmnding and]sbaursed incl. prnt arrears 17.9

IJ/mD I ('-rsch 31, 183)

otstmAiig andDisbrsed tO.2 1Z.1nidisbzsed 18.9 94.2

Oztstwiding, inc.Uodisbjrsed 149.1 216.3

1/ Provisinal etimates subject to -dn8.2/ TIncldes errors anrd oiss ims.3/ .Actal data not available. Fstimtes OnY..

Septober 1t9

- 46 - BEST COPY AVAILABLE-CAIIPage 1 of 1 page

SLAMM OF BANK ION AND ID aflS (As of Sepgin r 30, 1983)*

M or kvnt CU$)dit Fiscal J.ess (to)____ /

--de erBroe Less Caneflation I1Pupose Bank A, xislNred

loans and tblve credits fully dishised 118.5 89.9-( 19.5 Republic of Ghana QU1 Palm 13.6 0.6E2-M 1975 Post & Teleemunications 2Delsuuir tior s 23.0 9.2

10-Q} 1975 Republic of Ghana Nat'l Investrmit Bark 10.0 0.41S2-M J1975 Republic of Ghana Second Higlhy 18.0 0.1I-41T-GH2/ 1976 Republic of Ghana gricultural Dev. 21.0 5.8.-GH 1979 Republic of Ghana Second NIB 19.0 12.61I-ll 1980 Republic of Ghana griciutural Dev. 29.5 25.9,9-GH 1980 Republic of Ghana Third HIgluy 25.0 7.1O-GH 1981 Republic of Gbana RaFiwy 29.0 28.2

---7-GH 3/ 1983 Republic of Ghtn Reconstnrction CTlM) 9.3 9.1-GR S3/ 1983 Republic of Ghana Water Sapply 13.0 13.0

-3-al 1983 RePulic of Ghana E1er Project 11.0 10.6'3-GH 1983 Republic of Ghna Reconstruction laport _ 40.0 40.0

Total 190.5 279.3of which has been paid 46.0 2.9

Total rxr outstanding 144.5 276.4

mount sod 0.4of which has been repaid 0.4 0.0 0.0

Total r belld by Brk and MA 144.5 276.4

Tbtal undisbursed 15.5 147.1 162.6

lle status of the projects listed abe is described in a separate report on all Bank/I financIAl projectsexecution, kidch is updated twice yearly and circalated to the Executive Directors i 4Vril 30 andober 31.

There hIE been no IFC operaticn in Gma.Prior to ehnge adjustments.Interest subsidy furd (Third Windwr).Not yet effective.

- 45 -ANNEX IIIPage 1 of 2 Pages

GHANA

EXPORT REHABILITATION TECHNICAL ASSISTANCE PROJECT

SUPPLEMENTARY PROJECT DATA SHEET

Section I: Timetable of Key Events

(a) Date of first presentation to the Bank: April 1981(b) Date of departure of appraisal mission: August 1981 (original)

May 1983 (reappraisal)(c) Date of completion of Negotiations: November 14, 1983(d) Planned date of effectiveness: January 1984

Section II: Special IDA Implementation Actions

An advance of US$300,000 under the Project Preparation Facilitygranted to prepare the mining component of the project.

Section III: Special Conditions

(a) Effectiveness of the Development Credit Agreement and the SpecialFund Credit Agreement for the Export Rehabilitation Project to be acondition of effectiveness (para. 94);

(b) Carrying out of a study and its recommendations on the Timber ExportDevelopment Board and the Forestry Products Inspection Bureau (paras.70 and 71);

(c) Carrying out of a study and its recommendations on the alternativestrategies for the ownership and management of the State-owned timbercompanies (para. 73);

(d) Carrying out of studies and their recommendations on (i) viabilityand divestiture of cocoa plantations, cocoa aproducts factories andinsecticides factories, (4i) private trucking of cocoa, (iii)corporate planning and management information system, (iv) alterna-tive cocoa marketing systems, and (v) procedures for receiving atports, storing and shipping of cocoa and cocoa products (para. 58);

(e) Carrying out of a study and its recommendations on shaft sinking andtailings in the mines at Prestea and Tarkawa and alluviat deposits inDunkwa area (para. 88);

- 46 -ANNEX IIIPage 2 of 2 pages

(f) Contracting an international mining company to manage the State GoldMining Corporation (para. 88); and

(g) Carry out of a study and its recommendations on port management atthe Tema and Takoradi ports (para. 91).

ANNEX IV

Page 1 of 4 pages

GHANA

EXPORT REHABILITATION TECHNICAL ASSISTANCE PROJECT

Summary of Technical Assistance and Consultants RequirementsAnd Estimated Costs

A. Technical Assistance Personnel B. Consultant Studies Estimated Costs (A + B)

No. man-years (man-months) Foreign Local Total

(US$ milions)

Cocoa Sector 14 31 23 3.8 0.6 4.4

Timber Sector 11 16 19 2.0 0.3 2.3

Mining Sector tbd 60 33 7.4 0.9 8.3

Port Sector 4 4 6 0.6 0.3 0.9

Project Preparation under

PPF (Mining Sector) - - 17 0.3 -- 0.3

Total -- lll 98 14.1 2.1 16.2

Note: Details of the requirements for each sector are shownon the following pages of this Annex.

ANNEX IVPage 2 of 4 pages

GHANAEXPORT REHABILITATION TECHNICAL ASSISTANCE PROJECT

Details of Technical Assistance and StudiesA. Cocoa Sector

Technical Assistance Studies/ConsultantsPositions No. Years man-years man-months Completion by

(Assistance toGCMB) Advisor to Chief

Executive 1 3 3 - Financial viabilityof cocoa plantations

Advisor to Produce and procedures ofBuying Division 1 3 3 divestment 8 June 1984

- Financial viabilityFinancial Advisor 1 3 3 of cocoa productsAccountant 1 2 2 factories and insec-

Procurement Advisor 1 2 2 ticides formulation 4Estate Advisor 1 2 2 plants and procedures X

of divestment 4 June 1984

Agronomy Advisor 1 3 3 - Corporate planning andTraining Supervisorl 1 1 management information

system 6 August 1984

Vehicle Workshop - Procedures for storageAdvisor 4 2 8 and shipping 2 June 1984

Sprayer Workshop -Alternative systemsAdvisor 2 2 4 for cocoa marketing 3 June 1985

Total Cocoa Sector 14 31 23

ANNEX IVPage 3 of 4 pages

B. Timber Sector

(a) Assistance to Managing -Review of GovernmentMinistry of Lands Director 1 2 2 strategies for state-and Natural (TEDB) owned timber companies September 1984

10and concession policy June 1985

Resources (MLNR) Managing Director 1 2 2(FPIB)

Grader Registrar 1 2 2 -Review of progress .4 June 1984 and(FPIB) of ERP thereafter

annually

Grader Trainer 1 2 2 -Study of FPIB, TEDB(FPIB) requirements 5 October 1984 S

(b) Assistance to NIB Loan Admin. Officer 1 2 2

(c) Assistance tostate-ownedtimber companies- MIM Timber Transportation Eng. 1 1 1

Diesel Specialist 1 1 1

Training Supervisor 1 1 1

- TVLC Production Manager 1 1 1

Forestry Engineer 1 1 1

Accountant 1 1 1

Total Timber Sector 11 16 19

ANNEX IVPage 4 of 4 page

C. Mining Sector

Technical Assistance Studies/Consultants

man-months completion by

(a) Assistance to Ministry of Review and Monitor- semi-Lands and Natural Resources ing of Progress 8 annually

under EFRP

(b) Assistance to SGMC

- SGMC Headquarters 60 man-years of management and Feasibility- Tarkwa Mine technical assistance including studies on shaft-- Prestea Mine training through a single sinking an. tailings- Dunkwa Mine management contract with an in mines at Prestea 25 Decmber

international mining firm and Tarkwa end 1984(positions to be specified at the development oftime contract negotiations on the alluvial deposits in 0basis of proposals to be made by Dunkwa area.various firms)

SGHC Total 33

D. Port Component

Assistance to Ghana Experts in port Port managementPort Authority (GPA) management and 4 4 4 studies 6

operations

Port Total 4 4 4 6

ANNEX V- 51 - Page 1 of 6 pages

GHANA

EXPORT REHABILITATION TEcCHNICAL ASSISTANCE PROJECT

Terms of Reference for Technical Assistance to GCHB

1. - Advisor to Chief Executive of GCMB

An advisor to the Chief Executive will be employed for a period ofthree years:

(i) to dc:velop good management practice by the Board, the Chief Executiveand his management team;

(ii) to act as project manager for the GCB restructuring program and toensure, with the Chief Executive, that implementation proceedsaccording to plan. and training of local staff is properly planned andcarried out.

(iii) to plan and control the design and implementation of the GCBmanagement information system includirg that needed to provide:

- top-level planning, monitoring and control of the entire cocoasector;

- information for the development of price recommendations;

(iv) to assist with the establishment of the Planning, Monitoring andResearch Department. He will supervise the activities of externalconsultants working in the development of the information sysL..m andwill assist the director of the department in the design andinstallation of the departmental organisation.

The adviser must have experience (a) as a Chief Executive or Genera'lManager of a major profit-oriented quasi-governmental or nationalised industryor (b) as a consultant in management and strategic planning to such seniorexecutives with experience in the design and implementation of computerisedinformation systems. It is important that the new GCB be controlled at theexecutive level im accordance with the best management practice. In the areasof overall planning, (long and shert range), organisation, authoritydelegation and decision taking, motivation, information, cvntrol, co-ordination, management training and development, the Chief Executive and hisdeputies must perform effectively and consistently. The Chief Executive'sAdviscr would set out guidelines for good management procedures in the aboveareas, and would monitor continuously the actual management process includingthe relation beteween executive management and the Board, advising on improvedprocedure, information etc. as necessary. There will clearly need to bemutual trust and respect between the four senior executives and the adviser,so this person should be carefully selected. Although reporting to the ChiefExecutive, he must have tree access to the Chairman of the Board at all timesand would attend all Board meetings in his role 2s adviser to top maaagement.

- 52 -ANNEX VPage 2 of 6 pages

2. Advisor to Produce Buying Division

An adviser to PBD executive and haulage management is recommended forthree years:

(i) to develop good management practice by the Exec-utive Director (ED)and his senior managers by active participation in decision makingand the management process by advising and assisting with thefollowing:

- short and medium term planning and scheduling, thesetting of targets and objectives,

- decision taking within the limits of authority delegated to theED,

- monitoring PBD performance against targets and ensuring thatcorrective action is taken where needed,

- training and development of senior managers in PBD,

- formulation of policy recommendations,

- coordination of PBD management effort at Read Office and in theregions; advising on forimal and informal committees and meetingstogether with the terms of reference and procedures for conductir.gthese,

- ensuring the appropriateness of management information bothfinancial and statistical,

- ensuring that organisation structure and the staff establishmentis appropriate throughout PBD; ensuring that staff inventoriesespecially in the regions are factual, and in accordance withestablishments,

- active and regular liaison with other GCB divisions in thedevelopment of improved PBD performance, particularly Personneland Administration (staff training and development), InternalAudit (verification of the purchasing and evacuation operation),Computer Services (computerised assistance, particularly inpurchasing and evacuation), Finance and stores (financing,accounts policy and practice, supply and distribution of inputsand tools of trade); Procurement (supply of inputs and tools oftrade);

(ii) to provide detailed guidance on the organisation, scheduling andoperation of PBD haulage. The adviser will be expected to ensure,jointly with the Haulage and Transport MSanager (HK), the properoperation of the fleet of cargo and articulaced trucks in the regionsand at the ports. He will be based in Accra and will travelextensively to&the regions in setting up and controlling the regionalhaulage activities. He will be responsible for ensuring theestablishme it of procedures for planning, scheduling, controlling and

- 53 -ANNEX VPage 3 of 6 pages

costing the movement of haulage vehicles throughout the country, andfor ensuring, with HM, that these are implemented by regional andport haulage managers. He will liaise closely with the procurementadviser (see Section 5) in the scheduling and control of vehiclesallocated for the distribution of inputs from Tema and Kumasi, andset up przcedures and guidelines for the backloading of regionalhaulage vehicles and input vehicles, where appropriate, to improvevehicle utilisation. He will be responsible for advising on thedetailed planning and control of the day-to-day movement of thehaulage fleet in the regions, at the ports, and, in conjunction withthe procurement adviser, at the main GCMB stores at Tema (to beestablished), Nsawam and Abuakwa (Kumasi). He will supervise theintroduction of the necessary procedures, and will train the haulageofficers responsible for detailed vehicle planning and control;

(iii) to provide guidance to Regional eanagers on the implementation of theregional organisation and staffing, and its replationship with PBDhead office and functional heads (e.g. haulage) in Accra.

He should spend initially about 70% of his time on haulage matters laterdiminishing to perhaps 30% - 40%.

3. Financial Adviser

A financial adviser to the Director of Finance is recommended forthree years:

Ci) to plan and supervise, as necessary, the upgrading of the existingfinance and accoutlcing system and to produce up-to-date statutoryaccounts for year ending September 30, 1983 by the end of June 1984and for year ending September 30, 1984 by the end of 1984;

(ii) to supervise the modification (where needed) and the implementationof new accounting procedures in PBD, central GCB and other GCB units;

(iii) to ensure that revised funding and taxation arrangements arising fromthe GCB restructuring are correctly incorporated in the GCB financeand accounting system;

(iv) to advise on the possible computerization of financial and accountingprocedures;

(v) to oversee the rationalisation of regional accounting proceduresresulting from the merger of GCB and PBD in the regions; and

(vi) to review and supervise the improvement of the budgeting andreporting procedures;

(vii) to plan and carry out training of local staff in the variousfinancial units.

-54- ANNEX VPage 4 of 6 pa

4. Accountant

An accountant is required for 2 years to manage the modification asappropriate and implementation of the new accounting procedures (prepared bythe World Bank/UNDP team) in PBD, central GCB and other Divisions, departmentsand subsidiary companies and train local staff on the new accountingprocedures. In addition, GCB will need to appoint, on a contract basis, atleast 8 qualified accountants to actually install the new procedures.

.5. Procurement Adviser

A procurement adviser is recommended for 2 years: Ci) to criticallyexamine and improve existing procurement, clearing and forwarding procedures;(ii) to train staff in the use of the revised procedures; (iii) to ensurequick disbursement of ERP funds; (iv) to devise procedures for an improvedinput warehousing and distribution system; (v) to oversee all arrangements inconnection with the establishment of a GCB warehouse complex at Tema Port.The warehouse will receive and distribute all inputs not fortarded direct todestination from port transit storage. The procurement adviser will ensure,jointly with the ufficer in charge of the warehouse complex, that alloperating procedures are designed and correctly implemented, and that thebuilding and its associated vehicles and equipment are installed as planned.He will also ensure, in conjunction with the PBD adviser on haulage managementthat vehicles assigned to the warehouse complex or merely loading andunloading there are operating effectively and in accordance with schedules.He will be expected to advise on the design and application of stock controlprocedures throughout GCB.

6. Estates Adviser

An -estates' adviser is required for 2 years:

gi) to devise, and assist with the implementation of, an efficient andeffective organisation structure for:

- property management and maintenance

- property development and construction (particularly cocoa storagesheds)

in major Divisior's and subsidiary companies throughout GCB and forcentral GCB maintenance and for overall control;

(ii) to actively assist with, and supervise, the shed rehabilitation andconstruction program, ensuring that contractors perform according tospecifications and plans;

(iii) to devise and implement an effective training program for the aboveareas.

7. Agronomy Adviser

An agronomy adviser to the Executive Director (ED) of Cocoa ServicesDivision is required for 3 years:

55 ANNEX VPage 5 of 6 pages

(i) to help plan and monitor programs for pest and disease control, newplanting and replanting, and yield improvement;

(ii) to actively assist the Executive Director with the management of thesubstantial reorganisation envisaged for CSD and in the selection andtraining of senior field personnel. The adviser will be required toprovide technical and managerial support in the overall control ofthe Cocoa Services Division (CSD) and in particular to guide the EDin the implementation of the proposed change program in thedivision. In summary he will be required to:

- monitor progress against plan by field visits, reports andpersonal interviews in all the divisions' activities and to assistthe ED to correct adverse trends,

- ensure overall that the correct inputs for the regions aresupplied and distributed promptly,

- liaise with the appropriate Government authorities to ensure thatadequate technical support is given to CSD.

The adviser should play an active role in the ED's decision making.In the early stages the adviser would tend to act jointly with the ED, but asthe ED's effectiveness increases, the adviser would move to a more seccndaryrole, monitoring all CSD activity, but only taking the initiative when the EDfails to do so. The adviser should be a qualified agronomist with experienceof management at a senior level.

In addition to his role as adviser to the ED he will be expected toadvise and support the Regional Cocoa Officers (RCO) concerned in themanagement and technical control of all the important regional activities ofCSD. He would:

- actively assist the RCO's to ensure that regional objectives areachieved and policies are observed,

- monitor progress against plan, by reports and field visits, in allregional activities of the CSD; he will be concerned both withstandards of work and the productivity of staff and will activelyassist the RCO's to bring both up to the level desired,

- ensure adequate and prompt supply and distribution of inputs,

- assist RCO's in training managers and technical staff, liaising asnecessary with Head Office.

The adviser would also be expected to advise the ED and assisc withthe planning and control of all extension activities (including farmrehabilitation and SSVD control) and devise monitoring procedures which wouldeffectively measure performance in these areas.

-56 - ANNEX V

Page 6 of 6 pages8. Vehicle Workshop Advisers

Four vehicle workshop advisers are recommended for 2 years each:

(i) to upgrade the operations of existing regional workshops and inparticular to:

- design and implement procedures for the control of work, stockand stores, and workshop costs,

- train and develop managers, foremen and tradesmen,

(iii) to establish, equip and staff the new base workshops at Tema,Takoradi and Abuakwa (Kumasi), in conjunction with the officers incharge. The four advisers should be allocated to workshops asfollows:

one each for

- Kumasi (regional), Abuakwa (base), Sunyani (regional)

- Tema (base), Volta (small regional)

- Takoradi (base), Awaso (regional)

- Koforidua (regional), Agona Swedru (regional).

It should be noted that workshops will underta'.e the mechanical andelectrical maintenance and overhaul (at base workshops) of allvehicles and otner equipment such as scales, coffee processingmaclhines and forklift trucks.

9. Sprayer Workshop Advisers

Two sprayer workshop advisers are considered to be the absoluteminimum necessary for a period of 2 years each:

(i) to supervise workshops and stores;

(ii) to train staff and develop officers in charge of depots (the completeworksbop and store complex);

(iii) to develop, document and implement efficient procedures for workcontrol, stock and stores -control and the ordering of spare parts andtools, at Swedru, Bunso, Kumasi, Bechem, Jasikan and Tarkwa.

One of the two advisers should also supervise the establishment of anew depot at Sefwi 'Wiawso.

57 ANNEX VIPage 1 of 2 pagi-

GHANA

EXPORtT REHABILITATION TECHNICAL ASSISTANCE PROJECT

An Outline of Cocoa Sector Studies

The following consultant studies would be undertaken under theproposed project to assist GCMB to address key institutional issues of thecocoa sector.

1. Cocoa Processing Company Ltd., and Abuakwa Formulation Plant

A study is required to determine the current and long term viabilityof the Cocoa Processing Company Ltd., which comprises the three factories:

- Cocoa Products Factory (Tema)

- Cocoa Products Factory (Takoradi)

- West Af rican 1ills

and of the Abuakwa Formulation Plant. The study should establish current andforecast product markets, costs, income, profits and capital developmentcosts. The method of costing raw material (cocoa beans) for CPC Ltd. shouldalso be reviewed and recommendations made. The existing cost effectiveness(particularly of staff) would be reviewed and assessed. For this work aprocess engineer and a financial analyst would be required for a total ofabout four man montas. The study should be completed by June 1984.

2. Corporate Planning and Management Information

A study is recommended to design a corporate planning and managementinformation system for senior GCB management. During the study the consultantwould, among other things:

- review and establish the information needs of GCB senior management,

- review existing management information and procedures for itsgeneration,

- develop, with management, a corporate planning and monitoring systemfor GCB,

58 -ANNEX VIPage 2 of 2 pages

plan the implementation of the new system, proposing the organisationstructure and staffing for Planning, Monitoring and ResearchDepartment (PMRD),

- develop outline procedures specifying all main work routines; and

- assist with the selection and training of staff for PMRD.

In addition, a study would be performed to identify all feasiblecomputer applications in GCB, with emphasis on financial and operationsreporting systeus. The above work is estimated to require about 6 man monthsand should be completed by August 1984.

3. Procedures for receiving at port, storing and shipping produce

A study is recoamended of the procedures, reports, organisations andstaffing involved with the receipt at port, the storage and shipment ofproduce, using the findings of Cocoa III Prefeasibility Study Background PaperJ, Sections 2.8 and 3.11 as a basis:

() to identify redundant and inefficient procedures and reports, andhence staff, in the above system;

(ii) streamline procedures and reports, organisation structure andstaffing in the units concerned;

(iii) to recommend more efficient and effective ways of employing GhanaCargo Handling Company to move produce within the port.

The Study which should be completed by June 1984, would require onesystems analyst for about two months.

4. Coffee and Cocoa Plantations

A study of those plantations not recommended for abandonment by therecent study undertaken by the University of Science and Technology, Kumasi,is proposed to assess their long term viability as profitable enterprises.The study would check yields currently assumed by GCB and CSD, estimatecapital needs, and project income and costs under realistic Ghanaianconditions. The study would also investigate the possibility and methods ofsale or of parcelling out the plantations among farm workers currently workingthere. Before the study can commence, some surveying of the plantations willbe required. The study which should be completed by June 1984 would requireone agronomist and one financial analyst for a total of about 8 man months.

5. Cocoa i4arketing and Input Delivery Systems

A study is recommended to identify and evaluate alternativearrangements for cocoa marketing and the delivery of illputs. The study wouldinvestigate the prospects and implications of the privatisation of cocoamarketing and input supply with particular reference to the reintroduction ofthe multiple buying system, and would recommend appropriate action. Capitalneeds and operating coscs for the various total systems considered should becarefully assessed. The study, which should be completed by June 1985 wouldrequire a marketing specialist for about 3 man months.

ANNEX Vll59 Page 1 of 12 page-

GHANA

EXPORT REHABILITATION TECHNICAL ASSISTANCE PROJECT

Terms of Reference forTechnical Assistance to the Timber Sector

INSTITUTIONAL REQUIREMENTS

1. Managing Director - Forest Products Inspection Bureau

The Managing Director will be contracted for a tlhree year periodcommencing as soon as possible. Initially, he will function within theForestry Department heading the Interim Timber Grading Section (ITGS) andreport to the Chief Conservator of Forests through the Utilization Division.He will work in close liaison wih Ministry of Lands and Natural Resourcesduring this critical period. His goal after one year will be the founding ofthe Forest Products Inspection Bureau (FPIB). Ultimately he will beresponsible to the Board of Directors of FPIB for its administration.

The Managing Director will plan, organize, staff, direct and controlthe takeover of the grading functions from GTNB. He will budget for anddetermine the necessary association dues and salary administration burdels,etc. to fund the ITGS and FPIB and obtain the necessary approvals for thefunding 1/ from XFEP as required. He will ensure that the following functionsare performed:

Ci) establishment of standard grading rules and their publication;

(ii) establishment of grader certification, and registration procedures;

(iii) establishmrnt of necessary grading regulation and control proceduresfrom forest log tagging and stamping through all product grademarkinig and documentation;

(iv) establishment of grader training programs;

(v) dissemination of information to Government, industry, TEDB, and themedia;

1/ The interim source of funding will be from royalties currentlysupporting GT4B which is to be phased out of existence. The funding currentlyutilized by GT.14I will be directed to supporting the grader trainers and otherstaff to be hired from all available sources for ITGS, and later FPIB.

- 60 - ANNEX VIIPage 2 of 12 pages

(vi) founding and administration of FPIB within one year of the signing ofhis contract, ensuring a mirLimum tenure of two years within FPIB;

(vii) evaluation, development and training of staff for managementsuccession;

(viii) provision of monthly accounting statements and audited annual reportsto the Board of Directors, with explanation of variances to budget.

The Managing Director will be located initially within the offices ofthe Forestry Department Utilization Division, but will determine the bestcentral location as the staff increases. The Managing Director will be asenior administrator, with at least 10 years experience in the wood productsindustry. He will posses a high level of integrity and proven leadershipcapabilities. Tropical hardwood experience would be an asset but notmandatory. A minimum of 8 years organization and staffing of multi-branchoperations is essential.

2. Registrar of Graders - Forest Products Inspection Bureau

The Registrar of Graders will be contracted for a two-year periodcommencing as soon as possible and will report to the Managing Director withinthe ITGS and later the FPIB. His responsibilities will include:

hi) establishment of grading rules. With the aid of the Grader TrainingSupervisor, and key personnel on temporary short loan from industry,the Registrar will establish the industry standard grading rules forlogs, lumber, veneer and plywood, and draft the grading rulessuitable for publication. He will apply international gradingstandards wliere possible, assess existing rules in use in Ghana andthe major market places for products exported from Ghana. He willappraise any special features of Ghana timber and products anddevelop special grades unique to Ghana if practical and if an aid toexport marketing;

(ii) establishment of an examination and certification procedure forgraders. With the aid of the grader Training Supervisor theRegistrar will set the standards for different levels of graders, setwritten examinations, and set standards for scrutinizing of hands-ongrading examination;

(iii) establishment of registration procedures for graders, the issuing ofcertificates, and the control of grading standards by ensurigexamination and re-registration every two years;

(iv) establishment of product grade spot checking, randomly and onlocatiozL, to ensure that grading standards are upheld;

(v) establishment of stamping, tagging, and marking procedures of allproducts and control records procedures to ensure that fraud iseliminated;

(vi) staffing of the certification and registration section of FPIB under

ANNEX VII- 61 - 'Page 3 of 12 pages

the guidance of the Managing Director, and the development andtraining of the staff for succession;

(vii) assignment of certified graders to forest and mill operations andliaison with mill management for their grading needs;

(viii) assist the Grading Rules Committee of the FPIB in the ongoing re-.evaluation of the grading rules and the settling of any disputes.

The Registrar will be located initially within the offices of theForestry Department Utilization Division.

The Registrar will be an intermediate/senior administrator with atleast 6 years experience in the hardwoods industry, specifically withexperience in Africa hardwoods and previous working experience in Africa. Hewill have an excellent knowledge of grading, and the administracion proceduresinvolved. He will show a proven record of dealing with mill. managementpersonnel and administering a staff of independent self-reliant certifiedgraders.

3. Grader Training Supervisor - Forest Products Inspection Bureau

The Grader Training Supervisor will be on contract for two yearscommencing as soon as possible and reporting to the Managing Director withinthe ITGS and later the FPIB. He will work in close cooperation with theRegistrar in helping to establish the grading rules (refer to 2-i);examination and certification procedures (2-±i); registration procedures (2-iii); stamping, tagging and making procedures (2-v); and assistance of thegrading rules committee (2-vii 2. He will ensure chat the grading rules arepractical, easy to understand, teach and administer, and therefore he will becognizant of all possible rule incerpretations which will enhance his trainingcapacity. The Training Supervisor will be responsible for establishing anindustry-wide training prngram. He will staff and teach a nucleus ofcertified graders to train graders on location at three larger mills and incentral committees. His responsibilities will also include the assignment andsupervision of Grading Trainers as required throughout Ghana. He will liaisewith educational authorities as required to setup short courses and nightschool courses as indicated.

The Grader Training Supervisor will be located initially within theoffices of the Forestry Department Utilization Division. The Grader TrainingSupervisor will be an intermediate level supervisor with at least 3 yearstraining experience, 2 to 5 years forest industries experience, and a goodknowledge of grading tropical hardwoods. He will be capable of inspiringconfidence and enthusiasm in the grading trainers on his staff.

ANP"'-X VII- 62 - Page 4 of 12 pages

4. Managing Director - Timber Export Development Board

The Managing Director will be contracted for two years commencing assoon as possible. Initially, he will be responsible to ML&NIR and the ForestryDepartment to establish the Timber Export Development Board. The ManagingDirector will plan, organize, staff, direct and control the establishment ofTEDB with the goal of servicing the forest products industry and developingthe export market. The Managing Director's functions will include:

(i) developmetit of a budget for TELB, and approval for the funding 1/from MFEP. Ongoing funding of TEDB to be from a small royalty onexports;

(ii) establishment of a marketing intelligence and statistics unit whichwill retrieve information and data Initially from Ghana's mainmarkets and ultimately from potencial new markets,

(iii) analysis of the intelligence and statistics to make marketingprojections;

(iv) the dissemination of market intelligence, statistics, analysis andprojections co the industry frequently and responsibly, aiming toissue a weekly bulleting containing these kinds of information;

(v) the establishment of an Export t4arket Development and InformationSystem with officers or agents located initially in the U.K. andGermany/Wlasrern wurope, and ultimately in other new market areas asrequired. These agents will be actively engaged in informationretrieval, promotion and the servicing of customers as required.They will also provide assistance with complaints and claims, andwill provide data on wood characteristics, uses, etc. to the marketplace;

(vi) liaison with marketing associations and key producers to assist inthe rapid development and servicing of export markets;

(vii) provision of monthly accounting statements and audited annual reportsfor the Board of Direccors, with explanations of variances to budget;

(viii) evaluation, training and development of staff for managementsuccession.

The tanaging Director will be located in Accra to take advantage orthe international communications systems available.

1/ The interim source of funding will be from royalties currentlysupporting GTHB which is to bc phased out of existence.

-63 - ANNEX VIIPage 5 of 12 pages

The Managing Director will be a senior administrator with 10 to 15years of experience in marketing African hardwoods, and with a minimum ofseven years experience in marketing management. He will have provenleadership qualities, and willingnest to serve the industry. He will also becapable of inspiring his market development assistants to promote Ghanaproducta and monitor Gliana's industries' willingness and ability to meet salesobligations responsibly.

5. Timber Industry Advisor - National Investment Bank

The TimberIndustry Advisor will be contracted for a period ofeighteen months with a contract provision for an extension of an additionalsix months if necessary . He will be located within the NIB offices where hewill coordinate and assist the efforts of the ERP Technical EvaLuationCommittee in the short-term.

The Timber Industry Advisor's functions will include:

(i) assistance in finalization of the implementation procedures byMinistry of Lands and Natural Resources (ML&NR), N1B, and World Bank,and development of the implementation schedule and coordination ofthe efforts of ML&NR and NIB;

(ii) monitoring of procedures during the initial stage to ensure theeffectiveness of the implementation, and recommendation of clanges ifrequired;

(iii) assistance in ensuring that the commercial bank approved applicationscomply with the ERP criteria;

(iv) technical evaluation of the commercial bank approved applications asa member of ERP Technical Evaluation Committee, and assisting withthe economic considerations which will be performed by the tIL&NR andNIB economists;

(v) assistance in ranking the commercial bank approved applications inorder of priority for loan approval, thus ensuring that the maximumforeign exchange will be generated by the ERP loan;

(vi) familiarization with all significant aspects of each application forpresentation to the Loan Review Panel;

(vii) performance of the secretaiial funiction for the Loan Review Panel;

(viii) provide technical advice to exporter loan applicants when deemednecessary;

ANNZX V11- 64 - -Page 6 of 12 pages

The Timber Industry Advisor will be a senior engineer or a graduatedforester with a minimum of 12 years experience in the saw milling and-timberindustry. He will need intimate knowledge of the forest operations,sawmilling, veneer and plywood industries and extensive experience inpreparing and appraising applications for capital expenditures. He willdisplay good communication and interporsonal skills with mill owners, managersand government officials.

PRIMARY MANUFACTURERS' REQUIREM4ENTS

1. Transportation Engineer - Mim Timber Company Ltd.

The Transportation Engineor will be contracted for a two year periodbeg'.nning in the first quarter 1984. He will be responsible to the ManagingDirector, on location in Him, for the following functions:

(i) rationalization and assessment of the existing transportation fleet,logging equipment, road building anid mill transportation vehicles toidentify, on the basis of economics and local. conditions, thevehicles which are able to remain in service, those which arerepairable, those which should be sold "a'- is", and those whichshould be scrapped or used for parts;

(ii) verificatl.on of new equipment and spares requirements and prioritiesfor sequencing their purclase, and the purchase of approprite spares;

(iii) determination of priorities for the rehabilitation of the existingvehicles and equipment and the spares requirements;

(iv) specification and requisitioning of new vehicles and equipment underthe ERP and thie spares requirements;

(v) supervision of the overall mobile equipment rehabilitation program;

(vi) training of maintenance supervisors and operating personnel.

The Transportation Engineer will be an intermediate level employeewith several years of practical hands-on mechanical experience after tradestraining and qualification, and at least five years of supervisory experience.

2. Diesel Specialist - Mechanical Foreman - Mim Timber Company Ltd.

The Diesel Specialist will be contracted for a two-year periodbeginning the first quarter 1984. He will be responsible to theTransportation Engineer, on location in Him, for the following functions:

ANNEX VTI-65 - Page 7 of 12 pages

(i) assist the Transportation Engineer in the assessment of the mobileequipment by determining the condition of the diesel engines andCaterpillar equipment (refer to 1, i);

(ii) assist the Transportation Engineer in the determination of thepriorities for the rehabilitation of the existing vehicles andequipment and spares requirements by determining the diesel engineand Caterpillar ejuipment spares requirements (refer to 1, iii);

(iii) assist the Transportation Engineer in the requisitioning of dieselengine and Caterpillar spares;

(iv) supervision of the rehabilitation and repair of the diesel andCaterpillar equipment;

(v) evaluation and training of the diesel and Caterpillar mechanics.

The Diesel Specialist will be a qualified specialist with a minimumof four years experience in CaterpilLar equipment.

3. Production Manager - Takoradi Veneer and Lumber Co. Ltd.

The production Manager will be contracted for two years beginning assoon as possible after approval of loan requests from Takoradi Vreneer andLumber Comqny (TVLC). He will be responsible to the Managing Director forthe following functions:

(i) operacion of the plymill, sawmill and door factory with the goal ofmaximum ongoing profitability;

(ii) budgeting and scheduling produccion to meet mar-ker requirementsrespcnsiv.ely and plan raw material purchases and ensure optimum stocklevels;

(iii) implenentation and mensuration of the operational criteria of:

- minimum use of all raw materials;- maximum production of high grade and high value items;- maximum recovery;- minimum unit production cost;- minimum inventories; and- maintaining a high standard of personnel awareness of the criteria

(iv) evaluation of existing staff, training and succession, anddevelopment of an effective and enthusiastic teaa which operatessynergistically;

(v) assurance of high safety standards and ongoing safety training;

(vi) improvement of operating procedures utilizing existing equipment;

- 66 ~~~~ANNEX VII- 66 - - Page 8 of 12 pages

(vii) identification of production bottlenecks; sources of unjustifiabledown-time; inefficient labour utilization; potential profitimprovement; and the preparation of special maintenance and capitalplans to increase profitability thereafter, while obtaining the milloperating people's commitment to the plans.

The Production Manager will be an intermediate administrator withabout 15 years experience in forest products manufacturing and a minimum offive years as a mill production manager.

4. Forestry Engineer - Takoradi Veneer and Lumber Co.

The Forestry Engineer will be contracted for two years beginning inthe first quarter 1984. He will report to the tanaging Director and beresponsible for the management of all 'orest operations including:

(i) ensuring that the mill is adequately supplied with logs in accordancewith mill production program and forest logging plan;

(ii) preparation of an annual logging plan with stock maps for the part ofthe concession which is to be logged the following year;

(iii) supervision of entire forest operations including road constructionand maintenance felling and hauling with minimum damage to tQenatural forest;

(iv) supervision of log grading;

cv) rationalization and assessment of the existing logging road system,its rehabiLitation and future expansion needs;

(vi) liaison -ith the production manager to determine the mill log inputrequirements to aid in planning che harvesting program, speciesrequirements and availability, etc.;

(vii) estimate standing wood volumes and species composition (throughinventories on a sample basis) within the existing concessions;

(viii) analysis of current and future log supply requirements, in order todevelop policies regarding TVLC's short, medium and long term logsupply;

(ix) Cormulation of plans for the long term regeneration and conservationof natural timber resources of the existing concessions for thepurpose of sustained yield management, taking inco consideration datafrom (vii) and (viii) above;

(x) liaison with forest department as required;

(xi) rationalization of the mobile equipmenc needs of TVLC and assessmenrof the existing fleet and its rehabilitacion;

ANNIEX V II- 67 - Page 9 of 12 pages

(xii) overseeing that plant and vehicles used in the forest operation areutilized with maximum efficiency and serviced regularly;

(xiii) evaluation of existing staff, training and succession; and

(xiv) assistance to the administrative accountan_. in preparing monthlyoperating budgets special maintenance and capital plans, etc. and the,reporting of variances to budget to the Managing Director.

5. Administrative Accountant - Takoradi Veneer and Lumber Co. Ltd.

The Administrative Accountant will be contracted for a tvo yearperiod beginning in the first quarter 1984. He will be responsible to theManaging Director to evaluate and implement necessay revisions to the existingaccounting system ensuring thac the following is performed:

(i) operation of an effective cost accounting system which responsivelyreports total and unit costs in detail for all cosz centers. Theprofit and loss statements will show budget amounts, monthly results,variances from budget, last month's and year-to-date results;

(ii) preparation of monthly and annual balance sheets showing monthlybalances, budget, variances from budget, last month's and vear-to-date balances;

(iii) preparation of monthly cash flow projections;

(iv) measurement of the profitability contribtition of each product toenable the Managing Director to respond to mark-et changes and enhanceprofitability;

(v) project appraisal;

(vi) special maintenance and capital summaries showing the anticipatedeffects on profitability;

(vii) evaluation of the existing accounting and payroll department staff,training and succession;

(viii) testing and confirming the viability of the input daca to theaccounting system.

The Administrative Accountant will have a leasc 15 yea-s ininduscrial accounting with five years of administrative experience in the woodproducts industry.

- 68 - ANNEX VIIPage 10 ot 12 pages

STUDY - STRATEGY PROPOSALS FOR THE FORESTRY SECTOR AND ERP REVIEW

1. Object. The object of Lhe studv is to review the existing situationand formulate proposals for the development of Government medium-term and longterm strategy and investment plans for the forestry sector and forestryindustries, both privately-owned and state-owned, including renovation andmodernisation of the capital base of the entire industry, the role and optionsfor the future of the state-owned timber companies and investment proposalsfor possible private participation, both domestic and foreign, in state-ownedcompanies, including the possibility of linked management and/or marketingagreements.

The team appointed will review in the field the progress in theimplementation of the ERP short term forestry component approvals; formulateplans for the medium (1986-1987) and long term (1988-1989) rehabilitation andjustifiable expansion of the entire forestry sector, including detail andcosts of vehicles, spares, and equipment needed; quantify benefits arisingfrom that further rehabilitation of the seccor, both privately-owaed andstate-owned sub-sectors, and the justification for proposals made; reviewcontinuing restraints upon the forest industries and make recommendations forovercoming them; check and report upon the flow of foreign exchange arisingfrom exporcs of forest products of all types; review the existing exportmarketing system, including grading and export developmenc arrangements, andif necessary make recommendations for improvement; and consider whether anyfurther studies are needed and, if so, formulate terms of reference, teamcomposition, cost and duration of any such study recomitended.

2. The team will consist of two consultants, one of whom (Consultant A)will have had long experience at a senior level of managing forestryindustries in Africa and knowledge of the marketing of African timber andtimber products and of planning, financing and implementing such projects; andone consultant (Consultant B) with long experience as a professional forestryengineer, pre'erably with consultancy experience in that field. In both casesexperience of accounting and costing systems in forestry industries would bean advantage.

3. Forestry Consultant A will:

(a) monitor the implementation of the ERP forestry sector, short-termprogram and check and report upon the flow of foreign exchangeearnings compared to projections made in the report;

(b) check and report the extent to which constraints upon the industryhave been removed and/or overcome.

(c) in particular review and report upon the marketing system changeseffected by following the ERP recommendations, and the benefits ordetriments that have arisen as a consequence, and make furtherrecommendations if necessary;

- 69 - ~~~~~ANNEX VII- 69 - Page 11 of 12 page-

(d) report upon the situation so far as is possible regarding thesmuggling of timber out of Ghana and under-invoicing, estimating ifpossible the extent to which foreign exchange is thereby lost toGhana, and make further recommendations if necessary;

(e) formulate mediun and long-term strategies to complete therehabilitation, modernization anLd expansion of the sector in 1986 to-1989, i.e. a four-year investment plan;

(f) review the role and options for the future of the state-owned timbercompanies, and review the investment proposals for possible privatesector participation, both domestic anid foreign, in the state-ownedcompanies.

4. Forestry Consultant B will:

(a) assess feasible production/export targets of forestry produccs firmsover a four-year period (1986-1989), focussirng on improvedutilizatioa of capacity with breakdown becween the private and publicseccors;

(b) specify the four-year equipment rehabilitation reiuirements of thefour major state-owned companies, and privaLe companies, after priorindustry questionnaire assistance by t4L&NR;

'c) assess ar.d analyse from the foreign exchange viewypoint, the three-year import requirement for relhabilitation, modernization andexpansion of both sectors, with emphasis on the private sector,taking into account Government's import program and externalfinancing possibilities, both private and public;

Cd) quantify the benefits and justification of the rehabilitation,modernization and expansion of the sector, quantifying incrementalforeign exchAnge earnings;

(e) review by ML&NR the exiscing short-term criteria for private tim'bercompanies to qualify for firancial assistance under ERP, and makefurther recommendations if necessary for the mediuma and long-term;

(f) recommend the implementation mechanism *or the ERP forestryrehabilitation and modernizacion proposals, and procuretaenr anddisbursemean procedures consistent with program credit operations,bearing in mind that ERP Mediurn and long-term credit should becompletely disbursed within two years.

5. Forestry consultants A and B will be expected to cooperate fully onall overlapping terms of reference and provide a joint report covering allmatters mentioned in the objecc of the study and points specified in paras. 3and 4 of these TOR.

_ 70 - ANNEX VIIPajge 12of 12 page-

6. The time needed for the study is estimated to be 112 days, consistingof 6 days travelling, 2 days briefing, 62 days field work and 42 days reportwriting and printing. During the field work the team should be provided witha vehicle to enable them to visit mills and other facilities

FORESTR'i DEPARTMENT REVIEW AND STUDY OF FBIB AND TEDB REQUIREMENTS

1. Objective. The objective of the study is to:

(a) review current staffing and funding of the Forestry Department withthe view to assess the ability of the staff provided to fulfill thedepartment objectives effectively;

(b) review and evaluate entire complex of stumpage rates and governmentfees and taxes on the forestry and forest industries sector;

(c) assess effectiveness in collection of Government forest revenues anddetermine level of revenues assessed and collected 'or the currentand two previous years;

(d) examine what part of Government forestry revenues goes into generalgovernment treasury and what proportion remains in the forestrysector;

(e) examine if forestry revenues at the disposal for forestrydevelopments are sufficient for staffing of the ForcsLry Department;

(f) determine progress on national inventory which was to be carried outwith assistance form UNDP/FAO;

(g) examine Forest Department's control of concession operations and towhat extent the existing regulations are being enforced for thepurpose of ensuring sustained yield management of the concessionareas;

(h) consider the staffing and funding of the proposed Forest ProductsInspection Bureau; and

(i) consider the staffing and funding of the proposed Timber ExportDevelopment Board.

2. The consultant team will consist of two consultants. One (consultantA) will be a graduate forestry officer with experience in concessionmanagement preferably under West Africa conditions and with experience offorestry accouncing procedures. The other member of the team (consultant B)will be a person with experience in the organization and work of a typicaltimber inspection bureau operating internationally.