Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4198 PROJECT PERFORMANCE AUDIT REPORT MADAGASCAR - FIRST MANGORO FORESTRY PROJECT (LOAN 1065-MAG/CREDIT 525-MAG) November 24, 1982 Operations Evaluation Deoartment This document has a restricted distribution and may be used by recipients only in the performance of their officiai duties. Its contents may not otherwise be disclosed without World Bank authorization. ABBREVIATIONS ADTPA - Air Dried Ton per Annum CTFT - Centre Technique Forestier Tropical FMG - Franc Malgache FOFIFA/CENDRADERU - Center for Agricultural Research and Rural Development FANALAMANGA - Mangoro Forest Company (mixed-capital company, currently 100% state owned) MAI - Mean Annual Increment OPS - Operations Policy Staff of the World Bank FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT MADAGASCAR - FIRST MANGORO FORESTRY PROJECT (LOAN 1065-MAG, CREDIT 525-MAG) TABLE OF CONTENTS Page No. Preface ............................................................ Basic Data Sheet ................................................... i Highlights ............ ............................................. iii PROJECT PERFORMANCE AUDIT' MEMORANDUM I. PROJECT SUMMARY .......................................... 1 Il. MAIN ISSUES ................., 4 A. Tree Growth .......................................... 4 B. Bank Involvement in the Mangoro Forestry Development.. 6 C. Additional Observations .............................. 9 Annex 1 - Comments from the Department of Forestry and Fishing Research ............................................... il Annex 2 - Comments from the Ministry of Agricultural Production and Agrarian Reform ........................................ 17 PROJECT COMPLETION REPOR'r I. Introduction ............................................. 25 II. Pre-project Developments ................................. 29 III. Implementation ........................................... 38 IV. Operating Performance .................................... 52 V. Institutional Performance and Development .... ............ 53 VI. Bank Performance ......................................... 55 VII. Environmental Impact ..................................... 57 VIII. Financial and Economic Reevaluation ...................... 58 IX. Conclusions .............................................. 59 Annexes 1-6 Maps IBRD 15266 (PCR) Mangoro Forestry Project IBRD 15290 (PCR) Project Location This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without WorId Bank authorization. -i- PROJECT PERFORMANCE AUDIT REPORT MADAGASCAR - FIRST MANGORO FORESTRY PROJECT (LOAN 1065-MAG, CREDIT 525-MAG) PREFACE This is a project performance audit report of the (first) Mangoro forestry project in Madagascar for which Loan 1065-MAG in the amount of US$6.75 million and Credit 525-MAG in the amount of US$6.75 million were approved in December 1974. The final credit disbursement was made in Decem- ber 1978 and the loan account was closed in April 1982 after cancellation of the undisbursed balance of US$8,838 and after the by one year extended Closing Date of December 31, 1981. The audit report consists of an audit memorandum prepared by the Operations Evaluation Department (OED) and a Project Completion Report (PCR) dated April 7, 1982. The PCR was prepared by the Eastern Africa Regional Office. The audit memorandum is based on a review of the Appraisal Report (590-MAG) dated December 6, 1974, the President's Report (P-1539-MAG) of December 5, 1974, and the Loan and Credit Agreements dated December 23, 1974. Correspondence with the Borrower and internal Bank memoranda on project issues as contained in relevant Bank files as well as documentation related to the follow-on project (Second Mangoro Forestry Project, Credit 1161-MAG, US$20 million) have also been consulted and Bank staff associated with the project have been interviewed. A copy of the draft report was sent to the Borrower on September 2, 1982. Comments received from the Goverament of Madagascar are attached as Annexes 1 and 2. The audit finds that the PCR adequately covers the project's salient features, and the PPAM generally agrees with the conclusions. Some controver- sial points need to be raised, however, concerning the timely estimation of tree growth and the Bank's involvement in the Mangoro forestry development. These issues, as well as a few other points, selected for their relevance for the follow-on and similar projects, are therefore elaborated on in the PPAM to underscore ootential lessons for the Bank Group. - il - PROJECT PERFORMANCE AUDIT BASIC DATA SHEET MADAGASCAR - FIRST MANGORO FORESTRY PROJECT (LOAN 1065-MAC, CREDIT 525-MAG) KEY PROJECT DATA Appraisal Actual Estimate Item (US$ m) (FMG m) (US$ =) (FMG m) Total Project Cost 17.2 4,000 20.2 4,601 I Cost Overrun 17% % Physical Overrun at Completion 35% Loan/Credit Amount 13.-/a Fully disbursed Date Physical Components Complete4b December 1979 June 30, 1979 Proportion of Time Underrun 10% Economie Rate of Return 13% 7% Financial Rate of Return 1O0 6% CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS (US$ million) Credit 525-MAG/Loan 1065-MAG FY75 FY76 FY77 FY78 FY79 FY80 FY81 FY82 Appraisal estimate 1.10 5.70 7.55 9.25 11.15 13.50 - - Actual - 1.50 2.60 6.20 8.60 11.85 12.26 13.50 Actual as Z of estimate - 26 34 67 77 88 91 100 OTHER PROJECT DATA Item Original Plan Actual First Mention in Files 1972 Government's Application for Loan 10/31/72 Negotiations 08/21-27/74 Board Approval 12/17/74 Loan/Credit Agreement Date 12/23/74 Effectiveness Date 03/24/75 07/08/75 Closing Date 12/31/80 12/31/81 Borrower Malagasy Republic Executing Agency FANALAMANGA Fiscal Year of Borrower January 1 - December 1 Follow-on Project Name Second Mangoro Forestry Project Credit Number 1161-MAC Amount US$20 million Credit Agreement Date October 29, 1981 MISSION DATA Date: No. of Manweeks Specializations Performance Types of Mission (Month/'?ear) Persons in Field Represented-/c Rt Trend/e Problems/f Identification 03//2 3 6 Preparation 01/13 4 + 1 17 Appraisal 4 12 Total 35 Supervision I 06/15 1 1 FO 2 2 F and T Supervision II 12/15 2 2 FO and AE 2 2 F and T Supervision I1l 07//6 1 1 FU 2 2 F and T Supervision IV 02/17 1 1 FU 2 1 F aoid T Supervision V 10/17 3 6 FO, AE and PPS I 1 Supervision VI 09/178 2 3 FO and AE I 1 Supervision VII 04/19 2 2 FO and E 1 1 Supervision VIII 11/79 1 4 E 1 1 Supervision IX 06/80 2 6 FO and E 1 1 (and Appraisal Phase Il) Supervision X 03/31 2 1.5 FO and E 1 1 Total 27.5 CURRENCY EXCHANGE RATE Name of Currency (Abbreviation) Franc Malgache (FMG) Average Exchange Rate: Appraisal Year Average 1974 US$ 1 = FMG 240.5 1975 US$ 1 - FMG 214.3 1976 US$ 1 = FMG 239.0 1977 US$ 1 - FMG 245.7 1978 US$ 1 = FMG 225.6 1979 US$ 1 = FMG 212.7 1980 US$ 1 = FMG 211.3 Completion Year 1981 US$ 1 = kMG 235.7 /a Credit of US$6.75 million Flus loan of US$6.75 million. /b See para. 3.01 and 3.16. Physical targets achieved ahead of time but project unit managed to extend project period and finance two additional planting seasons (June 1981). /c FO = Forester; AE - Agricultural Economist; E - Economist; PPS = Pulp and Paper Specialist. 7d 1 = Problem free or minor problems; 2 - Moderate problems; 3 = Major problems. /e 1 Improving; 2 - Stationery; 3 = Deteriorating. 7f F = Financial; T - Technical. - iii - PROJECT PERFORMANCE AUDIT REPORT MADAGASCAR - FIRST MANGORO FORESTRY PROJECT (LOAN 1065-MAG, CREDIT 525-MAG) HIGHLIGHTS The first Bank/IDA supported forestry project in Madagascar financed a time-slice of a long-term silvo-industrial development program in the Mangoro Valle-x. Following pre-investment activities and trial plantations supported in part by other external donors the project aimed at establishing new forestry plantations and providing related infrastructure, research and training. Over 47,000 ha of forestry plantations were established, exceeding the appraisal target by 35%. The targets for road construction and fire- breaks also were significantly exceeded. However, only a fraction of the small pasture development component could be realized. Modifications were introduced during implementation regarding tree planting operations, construc- tion standards and methods for roads and buildings, and research and expatri- ate consultancy. The project's production objectives and returns on investment are, however, unlikely to be achieved. Tentative tree growth estimates for all plantations established up to 1981, of which about one-third are pre-project plantings, averaged orly 5.3m3/ha/year. The yields for project plantings averaged 8.0m3/ha/year as compared with 13m3/ha/year anticipated at appraisal. These results, if confirmed under the on-going verification, are jeopardizing the originally envisaged pulp mill development despite the fact that some improvements may be possible in current and future plantings. The project's reestimated economic rate of return is 7% compared with 13% esti- mated at appraisal. A decision concerning investments in silvo-industrial facilities could not be reached by the end of the first project phase, mainly due to the lack of a reliable forestry inventory and the questionable viability of such facilities, particularly for pulp production, and the lack of interest among potential foreign partners. IDA approved a second-phase project in 1981 for implementation over a three-year period. The following points may be of special interest: - tree growth estimates becoming available recently indicate very disappointing results. These crucial estimates, which to a certain extent contradict earlier findings and are still subject to verifi- cation, have appeared at a rather late stage; a lesson to be learned from this experience is that strict monitoring of yields is neces- sary in forestry projects where the type of species planted is not indigenous or clearly proven to adapt adequately (PPAM, paras. 8 and 12-15; PCR, para. 3.20); - iv - it has not been possible to date to identify the type and organiza- tional arrangement of processing industries for the utilization of wood produced on project plantations. For this reason, and because forestry development is a long-term process, a final evalua- tion of the whole program of which the present project is a part must await the mnaturing of the plantations in another 5-10 years (PPAM, paras. 16-20; PCR, paras. 3.19 and 6.06); a follow-on project was approved by IDA in June 1981. The project was designed as an interim project to provide an opportunity for an assessment of future investment options but also contains a signif- icant plantation component, rendering it controversial in view of the reported poor yields of past plantings (PPAM, paras. 21-23; PCR, paras. 3.19 and 9.01); and construction standards for roads and houses were lowered during implementation, raising the question whether the case points to a wider tendency to over-design similar infrastructure components at appraisal (PPAM, paras. 24-25; PCR, paras. 3.13 and 3.26). PROJECT PERFORMANCE AUDIT MEMORANDUM MADAGASCAR - FIRST MANGORO FORESTRY PROJECT (LOAN 1065-MAG, CREDIT 525-MAG) I. PROJECT SUMMARY-/ 1. Beginning in the mid-1960s, the Malagasy Government undertook surveys and studies, assisted by UNDP, FAO and the Centre Technique Forestiers Tropical (CTFT) aimed ai: increasing the country's forestry production. Trial plantations were started in 1968 and a gradually increasing area was planted yearly thereafter. This project, approved for Bank/IDA financing in 1974, was designed to support a five-year time-slice of a forestry plantation program which constituted the basis for developing a silvo-industrial complex in the Mangoro Valley. It was anticipated that investment decisions concerning industrial facilities would be made later, in time for such facilities to become operational in the mid-1980s. 2. Total project cost amounted to FMG 4,601 million compared with the appraisal estimate of FMG 4,400 million. However, the US$ equivalent of actual cost was US$20.2 million, or 17% above the appraisal estimate of US$17.2 million. The higher cost overrun in dollar terms resulted from the actual exchange rate during the implementation period having averaged about FMG 228/US$ rather than the FMG 255/US$ estimated at appraisal. Costs were considerably higher than anticipated at appraisal for afforestation and the purchase of vehicles and equipment, about the same for project management, and considerably lower for roads, research, training, studies and pasture improve- ment. The IDA Credit and Bank Loan of US$6.75 million each (as planned) together financed about 67% of the project cost rather than 78% as appraised. The balance was financed by the Malagasy Government. The credit and loan became effective in July 1975, four months behind schedule due to political developments in the country and a delay in setting up the required institu- tions. The Credit was fully disbursed by December 1978. The loan account was closed in April 1982, about 15 months behind the original schedule,A/ after cancellation of the undisbursed balance of about US$8,838. 3. The project, in addition to supporting the establishment of plan- tations, also included the construction of firebreaks and implementation of a fire prevention system, the construction and maintenance of roads, the construction of headquarter buildings, research and staff training, the preparation of a second-phase forestry and other projects, and pasture improvement. 1/ Adapted from the I>CR. 2/ The original Clos[ng Date of December 31, 1980 was, however, extended to December 31, 1981. - 2 - 4. An area of over 47,000 ha was planted with trees, exceeding the appraisal target for the project by some 35%, but overall roughly in line with the original long-term planting program. Significant modifications were introduced in planting operations, in cooperation with the Bank, to alleviate trace element deficiencies, improve site selection, bring about better soil preparation for planting, and diversify into more promising plantation tree species. A total of 2,671 km of roads and track were built. This was 48% above the target in terms of road length, albeit construction standards were lowered during irmplementation to achieve this greater expansion of the road network. The standard of houses and buildings also was lowered so that over 2,000 units, or 78% more than planned, could be constructed. Over 1,000 km of firebreaks were established as compared to 250 km envisaged at appraisal. Pasture development, although very successful with the local villagers, remained nearly 60% below the target due to the high cost. Project activities continued about two years beyond the original completion date, largely because agreement could not be reached sooner on a second-phase project. 5. Training, executed internally by the project unit, was satisfac- tory. Research was carried out through the agricultural research institute, CENRADERU, now called FOFIFA. A four-year research contract becoming effec- tive in 1976 covered forestry research together with plantation trials and pasture-related agronomic research. A second-phase forestry project was prepared as required, but pre-investment work for other projects was not undertaken; the latter is not a serious shortcoming as funds and staff ear- marked for that purpose were put to good use elsewhere under the project. An expatriate forest adviser assisted project management for only one year instead of the originally proposed two, although his performance was very satisfactory. 6. To implement the project, a special unit, FANALAMANGA, was created. The unit has been competently staffed and has operated quite satisfactorily in most respects. Its reporting activities and relationship with other agencies and villagers in the project area have been given high marks. Regular project activities and special problems, as perceived by management, were handled competently. Initial difficulties with procurement, due to unfamilarity with procedures, were resolved in due time. FANALAMANGA's performance was less than satisfactory, however, in the monitoring of tree development on its plantations. Its trial inventory was greatly delayed and not fully processed, with consequences which are difficult to assess at this time. 7. Compliance with Loan/Credit Agreement covenants was generally good. One significant exception was a prefeasibility study undertaken in 1978 with UNIDO assistance without consulting the Bank. - 3 - 8. Project benefits will derive primarily from wood production as raw material for industrial use. Tree growth was estimated at appraisal at 13m3/ha/year mean annual increment under bark (MAI). The estimate was based on initial growth trials and experience in other countries. With such yields, annual available cutting volume for age class 15 trees would have been 1.17 million m3, sufficient to eventually supply a 200,000 ADTPA (air dried tons per annum) bleached long fibered sulphate pulp mill.L/ However, mainly due to locational factors (slope, soil quality, rainfall, etc.) an MAI of only 5.3 m3/ha/year is estimated to have been achieved for the 12-year pre-project and project period combined; the estimate for the seven-year project period was 8.0 m3/ha/year.2/ The estimated cutting volume after 18 years (in- stead of 15) ranges only from under 400,000 m3 to 700,000 m3. Some en- couragement can be derived from the fact that yields from pre-project plant- ings are much worse than from plantings established under the project, and that some further improvements can be expected for current and future plant- ings as experience gained to date continues to be incorporated in cultural practices applied in the area. 9. Project evaluation at appraisal assumed that a second plantation phase and establishment of a logging industry and a pulp mill would follow completion of this project. Taking the cost and benefits of the project and related follow-on investments into account, the financial rate of return at appraisal was estimated at 10% and the economic rate of return at 13%. 10. Given the continuing, and even heightened, uncertainty concerning tree growth and, consequently, wood supply for industrial processing, an evaluation of the whole silvo-industrial complex using the appraisal method- ology is problematic at best at this stage. The evaluation in the PCR is thus based on stumpage rates to avoid speculation about future developments. Using this method, the project's financial rate of return has been estimated at 6% and the economic rate of return at 7%. 11. When it became apparent, in the late 1970s, that the viability of establishing a pulp mill in Mangoro as originally envisaged was doubtful, the processing of a second-phase project was delayed. In June 1981, IDA finally approved a second credit to finance continued forestry development expendi- tures over a 3-year period. The Credit (1161-MAG; US$20 million) became effective in July 1982. The second phase aims at expanding the planted forest area by 18,500 ha (17.5% of project costs) and supports studies and project preparation to help resolve problems of silvo-industrial development (9.0% of project costs). Nearly three-fourths of project costs are related to planta- tion maintenance, administration, and provision of physical infrastructure. 1/ Meanwhile, studies have shown that the economic size of such a plant is larger, requiring about 1.4 million m3 per year. 2/ Tree growth estimates are still subject to verification due to the underlying low sampling rate (PCR, para. 3.20). - 4 - Since conclusive tree growth estimates were not available at the time of appraisal of the second-phase project, the assumptions used in the evaluation are similar to those used for the first phase. Il. MAIN ISSUES A. Tree Growthl/ 12. The central issue of this project is related to the disappointing growth of the trees planted in the Mangoro Valley. The first full inventory, undertaken in 1981 but still controversial because of the low sampling rate (0.007% vs. 1.0% recommended), produced an estimate of 5.3 m3/ha/year MAI for all 72,000 ha planted up to 1981 at Mangoro. This estimate includes 25,000 ha of pre-project plantings, most of which have been judged to be non-yielding, and about 47,200 ha of project plantings with an average MAI of 8.0 m3/ha/year. The MAI appraisal estimate was 13.0 m3/ha/year. A combination of factors contributed to the shortfall in yields, including: (a) planting on steep slopes where, because of erosion, soils have become unsuitable for afforestation; (b) trace mineral deficiencies, particularly of zinc, in most locations, often leading to stunted growth or death of trees; (c) occasional droughts; and (d) general adaptation problems of the main species planted, i.e, Pinus kesiya, which continue to manifest themselves in various symptoms as the trees grow older. 13. An alarming aspect of the problem is that forestry experts are not able to clearly attribute the degree of retarded growth to individual factors. Furthermore, adverse effects which were not observed earlier, occur as the trees grow older, reducing the prospects of enhanced growth towards the end of the growing cycle, even of those trees originally well established. While progress has been made in reducing new planting in non-yielding areas, i.e., areas where harvesting would not be worthwhile because of the poor stands, such areas to date have not been eliminated completely. The latest survey shows most of the pre-project plantings as being in non-yielding areas compared with 19% for the project period. 1/ This point is also extensively covered in the comments received from Government (Annexes 1 and 2). - 5 - 14. Timing of Tree (:rowth Estimate. It is disconcerting that firm indications of likely poor yields did not become available earlier. One explanation, namely that yields in young trees are difficult to determine, carries considerable weight considering the fact that many international experts visited the young plantations without being overly alarmed by signs of stunted growth. However, since the difficulties in judging tree growth are well known to foresters, special efforts to carefully monitor yields through extensive sampling would have been required. FANALAMANGA staff was not successful in carrying out these responsibilities. In fact, the 1979 inventory results, delayed as they were, blurred rather than clarified the picture and, to some extent, misled authorities as they failed to direct the necessary attention to this key problem area. Bank supervision failed to provide the necessary pressure and guidance and thus may have contributed indirectly to creating the information gap.L/ Together with project manage- ment, supervision staff concentrated mainly on areas planted as success indicators and not enough on monitoring yields. One clear lesson to be learned from this experience is that the Bank should insist on strict moni- toring of yields in forestry projects where the type of species planted is not indigenous or clearly proven to adapt adequately. 15. Actual vs. Ant:;cipated Tree Growth. Plenty of expert advice was obtained during the late 1960s and early 1970s and, generally, the findings were positive and encouraging. Surveys and experiments were conducted and trial plantations were established, leading up to the formulation of the Bank/IDA project. The question can be asked how was it possible that a majority of the pre-project plantations must now be considered to have been established in unsuitable areas and how it happened that yield prospects have been so disastrously misjudged.2/ The yield problem is a fundamental one and not just a result of initial silvicultural mistakes which can be easily corrected. The trees simply do not grow sufficiently in many parts of 1/ The Region comments as follows: "Although the 1978 trial inventory was not a success, this was due in part to the fact that FANALAMANGA did not follow Bank guidance (PCR, para. 4.04). In addition, the trial inventory was followed shortly thereafter by the decision to carry out a full- fledge inventory by experts with professional skills. Thus, we do not believe there was much scope for improving Bank supervision. However, if a clear or comprehensive monitoring system had been designed at the outset to face the risk of a delayed start-up of the follow-on project, many significant delays would have been avoided and the supervision mission's pressure and guidance would have been more effective." 2/ These statements are based on the findings of the latest available forestry inventory. Regional staff caution that, since the inventory findings are still somewhat controversial and subject to verification, the statements may be premature. the project area no matter how well they are cared for.lI Even today, with more than 12 years of experience, there is doubt that large-scale new planta- tions with acceptable yields can be established in the vicinity of the project area; smaller pockets of suitable locations have been located, however. With hindsight, it can be said that the pro,ject might have benefitted from a larger research and consultancy inputS- Research activities carried out under the project produced some good results with respect to disease control but were less successful in clarifying fertilizer response and in promoting other measures aimed at enhanced tree growth. The amount spent for research and training was below th.e levels anticipated at appraisal. Moreover, if the expatriate consultaney had been prolonged rather than cut short, the tree growth problems might have come into sharper fOcus at a more appropriate time. The last, alheit overoptimistic, yield estimate produced by the expatri- ate forestry expert dates back to mid-1976 and it is conceivable that the 1979 inventory would have been more successful had he been available to assist. Extreme caution must thus be exercised in the future when expert opinion regarding forestry yields, not backed up by long-term practical results under field conditions, is being used to justify a massive forestry investment program. B. Bank Involvement in the Mangoro Forestry Development 16. Forestry-based industries are a new development in the M4angoro Valley, hence, investment planning has been an exceedingly difficult task. In addition ta unproven yields, the long growing period of trees, as is the case with forestry investments, has aggravated problems related to determining appropriate end uses of wood and forecasting associated production costs, markets and prices. Consequently, when a decision was made in the early 1970s to establish large-scale plantations, alternative development models were discussed but, understandably, no decisions and investments related to wood processing were made. It was expected that information becoming avail- able during the 1970s would facilitate the planning of transport and proces- sing infrastructure so that by the time raw material would become available in the mid-1980s, the infrastructure would be in place. 1/ See footnote 2/ page 5. 2/ The audit considers the research and consultancy inputs made available under the project as highly beneficial to the project. It wishes to emphasize, therefore, that an expansion of these inputs beyond appraisal levels could reasonably have been expected to be fruitful. Instead, there was a regrettable shortfall in spending for these purposes below appraisal targets. - 7 - 17. In retrospect, events did not occur as expected. A viable proces- sing industry has not been identified, partly because of the uncertainty about tree growth and partly for reasons related to adverse world market conditions. Furthermore, it has not been possible to bring prospective foreign partners into the discussions on future development, nor are the prospects for future involvement of essential foreign partnerships promising in Madagascar. The original target date for logging and processing operations to begin in 1985 has thus become illusory, and even the revised date of 1988 will not be met unless essential investment decisions, e.g., on the type of end product to be produced, are made soon. Although the follow-on project provides support for investment planning, it has suffered delays and is encountering ojerational difficulties (para. 21). 18. Initial Bank Involvement. It is appropriate to distinguish between the circumstances facing the Bank at the time the decision to participate in the project was made, and the experience gained to date on the basis of which an interim assessment of that decision might be attempted. The Bank faced a situation in the early ]970s when forestry development ranked high in Govern- ment priorities and, given the paucity of development projects in the Madagas- car agriculture and forestry sectors, it was not foregoing more attractive proposals by considering this project. The appraisal, though having to work from a scanty factual basis, did take into account the results of experimental plantings and the investigations undertaken with the assistance of UNDP/FAO and CTFT, a French bilateral research organization. Available market studies indicated international market potential. With the assumptions underlying the appraisal analysis, pacticularly a potential yield of 13 m3/ha/year, the project was judged to be viable. 19. There undoubtedly were substantial risks associated with the pro- ject. Government's strategy, in supporting such a relatively large, long-term and capital intensive venture with sizeable maintenance and follow-on invest- ments, in itself constituted a high risk factor. The technical risks associa- ted with converting existing grassland on extremely poor soils into commercial forests, using species without extensively documented local growing history, were especially high. The risky nature of Malagasy forestry development was also evident from the poor performance of other plantations in the country and from the absence of an experienced wood products export industry.!/ Proposed means to alleviate those risks included research and continued experimentation to promote tree growth, and the possibility to adopt alternative end uses of the harvest from the plantations in the event of changed market conditions. 1/ The Region does not agree "that managerial and economic risks were evident from the poor performance of other plantations in the country. There are many excellent plantations in other parts of Madagascar". 20. Eight years after the appraisal the results look disappointing. The project's risks turned out to be formidable and the means to cope with them not quite adequate. In retrospect, the yields of non-project plantings were completely misjudged and yields of project plantings overestimated by 40%, according to currently available, but tentative, inventory data. The foreign investment climate is not as favorable in Madagascar as originally anticipated, and world market prospects are more uncertain. Decisions on silvo-industrial investments have proven intractable so far. While the audit finds these adverse circumstances to be of great concern, it recognizes that forestry development is a long-term process and that final evaluation of the whole program has to await the maturing of the plantations in another 5-10 years. 21. Continued Bank Involvement. The project was supposed to be comple- ted in late 1979, with a second-phase planting (and possibly mill investment) project to follow. In fact, the essential physical targets (afforestation, roads, fire breaks and buildings) were achieved on schedule. The processing of the second phase ran into difficulty, however, as a result of disagreements between the Bank and Government about plans for silvo-industrial development. A UNIDO study (1978) indicated that, under changed market conditions, a pulp mill, to be viable in Mangoro, would have to be somewhat larger than origi- nally proposed and Government wanted to proceed on that basis. The Bank, however, refused to endorse plans for the construction of a larger pulp mill, for good reasons, as can be seen now. When an IDA credit was finally approved in 1981, it was a compromise stopgap measure designed to gain further time (i.e., 3 years) for assessing tree growth and conducting studies related to the processing industry to be established.L/ However, additional plantings (18,500 ha) were also included. 22. In retrospect, the second-phase project appears correct in principle because it has served to keep the dialogue going with all parties concerned and to preserve, for the time being, the existing forestry institutions. The 1/ The Region considers this ".....an interim project designed to give the Government an opportunity to undertake a systematic and thorough assess- ment of the future investment options." Specifically, it is a condition under the project that a "Feasibility Study" be carried out under an existing agreement with UNDP (Document No. MAG/80/002/C/01/12, dated October 3, 1980), with FAO acting as the executing agency. While no IDA Credit funds are involved, IDA obtained assurances that the consul- tants employed for the study will be satisfactory to IDA, reports and information will be provided, views exchanged, and meetings held with IDA participation. The study is to be completed by June 30, 1984. - 9 - planting of completely new areas at this stage, however, must be questioned.l/ There is no guarantee that tree growth in the new areas will be better, nor will this additional area generate sufficient wood supplies for what experts believe to be the minimum viable size of a pulp plant; for major alternative uses, existing stands are already adequate. Had the results of the tree growth survey been available at appraisal, the follow-on project either would have been designed differently or not approved at all. 23. The audit concludes that, in the follow-on project, even greater emphasis should have been given to the design and expeditious execution of end use studies for wood produced at Mangoro and the consolidation of existing plantations.2/ The latter includes the disposal of trees in non-yielding areas and the salvaging of threatened stands. While the project still can (and probably will) be modified in the direction indicated, the loss of time since achieving the initial planting target in 1979 and the controversies surrounding the tree lnventory and, of late, the on-going silvo-industrial studies, have hampered forestry development at Mangoro. To avoid recurrence of the experience with the First Mangoro Forestry Project in the future, the Bank ought to require more rigorous monitoring standards than were applied there and set stricter intermediate planning targets for time-slice forestry projects for which (a) crucial information is to be generated during the initial years of the project, and (b) the planning process for all related investments has not been completed when beginning project implementation, i.e., the prevalent case. C. Additional Observations3/ 24. The project exceeded its physical targets by 48% for roads and 78% for houses and buildings. It is explained in the PCR (paras. 3.13 and 3.26) that cost savings were achieved for these components by (a) undertaking construction by force account instead of by contractor, and (b) accepting deviations from the appraisal norms, i.e., switching to lower-grade standards. The audit has reservat:ions about attributing cost savings to force account activities vis-a-vis zontractor work without a detailed explanation. Of 1/ OPS advises: "The forestry related issue should be resolved before proceeding further with the industrial studies and [IDA] should obtain some independent assurance that, if properly maintained from here on, the plantations will grow on to produce logs of merchantable size. Some consideratiokn needs to be given to appropriate thinning schedules. If such assurance is not forthcoming, planting should be stopped alto- gether." 2/ OPS states: "The impact on economic viability of the Mangoro Project needs to be re-assessed on the basis of both lumber and pulp production alternatives." The focus of the on-going studies may thus turn out to be too narrow. 3/ Further remarks on this point are also included in Government comments (see Annex 2). - 10 - particular interest would be to know whether the method of accounting used by the organization undertaking the construction work accurately attributes all capital and overhead costs to the tasks performed and what the actual savings achieved by not employing contractors were, both financial and economic. 25. The feature of lowering construction standards during implementation would imply that either the project was overdesigned at appraisal or quality or safety were being compromised during implementation. There is no evidence that the latter is the case. This experience suggests, therefore, that there could be a tendency in similar projects to overdesign infrastructure compo- nents and evaluations and audits should focus on this aspect more closely in the future. 26. A final observation concerns the use of residual Bank loan funds. In the last (eighth) year of disbursement, about US$1.6 million was disbursed for the purchase of vehicles and equipment, accounting for 47% of total expenditures for vehicles and equipment and resulting in overdisbursement for this purpose compared with appraisal estimates of 62%. Since these expendi- tures were not needed to achieve the immediate planting targets, which were already exceeded by about 20% at that time, such disbursements at the end of the implementation period must be viewed with skepticism.L/ Theoretically, the equipment could have been used for non-project related purposes or even sold after the closing date of the Loan. The practice is of less concern in projects where progress is satisfactory, follow-on investments are contem- plated and the risk of controversies developing around any of the investment phases is minimal. 1/ In the Region's view: "Although such skepticism would normally be quite justified, in this case the heavy disbursement at the end of the project period was made so as to enable the project entity to continue, in spite of Madagascar's very difficult foreign exchange situation, operating and maintaining its existing assets until Phase II could be effective. When project requirements were assessed during the appraisal of Phase II the existence of the recently purchased equipment was taken into account. Madagascar's foreign exchange situation had deteriorated drastically during the project period - and the apparent [over-disbursement] at the end of the project, when Phase II had already been agreed on, repre- sented a conscious shift in resources, undertaken with the agreement of the supervisory staff. In retrospect, in our view, the decision seems reasonable and appropriate." - ll - Annex l Page 1 October 27, 1982 E-407/83 French (Madagascar) OED JCB:cc CO1êMENTS RECEIVED FROM GOVERNMENT The Democratic Republic of Madagascar FOFIFA Department of Forestry and Fishing Research No. 362-MPARA/CEN/DRFP/10 Tananarive, October 14, 1982 Mr. Shiv S. Kapur Director, Operations Evaluation Department World Bank Dear Mr. Kapur: Thank you for your letter of September 2, 1982. Attached plea:,e find my comments on the reports, together with some production figures in our possession that have already been included in our final report. Thanking you for demonstrating so much confidence in us. Yours, etc. /s/ A. Rakotomanampison - 12 - Annex 1 Page 2 FANALAMANGA PROJECT - COMMENTS ON THE PROJECT PERFORMANCE AUDIT AND COMPLETION REPORTS I have the following comments to make on the above reports: The main point at issue in the Mangoro project is that of the production of the established plantations. The various estimates made in this connection have all been inaccurate since there has been no proper inventory to furnish reliable data. Because of this lack of data, of which no one was really aware until the information was actually needed, errors have been made all round, a fact that unfortunately did not become obvious until the mill feasibility study was undertaken. The inventory now in progress will provide a more accurate picture, but we should point right away that the findings of the Department of Forestry and Fishing Research are not all that optimistic. On the oldest forest parcels, production figures vary between 30 - 190 m3 per ha. It should be stressed that the various treatments considered involve a number of techniques (soil preparation, planting density, fertilization, etc.) which should be taken as a whole and not broken down according to the different factors involved. There is little doubt that Mangoro soils are poor. The serious lack of trace elements, such as zinc, is but one of a number of deficiencies in the area. But we feel that once these deficiencies have remedied, the soils can be used for reforestation. This Department has carried out a number of trials on different soi" types, with a view to devising the proper fertilizer formula. We are putting forward a formula that has proven satisfactory on the parcels and now has to be confirmed by geographic diversification trials. It should be stressed, however, that fertilization and planting density have to go hand in hand if a stand is to be productive. -13 - Annex 1 Page 3 With respect to production levels, the extent to which the low yields gives cause for concern depends on which original estimate was used. At the time of the Forest Inventory Project (MAG 8), a forestry economics expert indicated that a production of 13 m3/ha/year over barkwas feasible and desirable if the projeci: was to show a good return. During the MAG 29 studies, another expert gave 13 m3/ha/year under bark as acceptable in the light of the various plantations already existing in Madagascar, although it is true that those plantations are located on soils and in ecological conditions very different from those found at Mangoro. Another point 1:o emphasize is that in any forestry operation the final results cannot be determined until the trees reach maturity. Where Fanalamanga is concerned, the oldest parcels are now 13 years old. While our findings are provis:ional, it is guaranteed that they will be repeated, both in time and in space. Lastly, with such a vast reforestation program, unforeseeable problems are very likely to arise, from time to time, problems that cannot be solved.from one day 1:0 the next. To handle these situations, we need more scientific resourceis in terms of research personnel and facilities. Since the researchers have to follow the development of the plantations virtually from day to day, they would thus be able to concentrate their research on the most essential aspects of the program. This strengthening of the research element would have repercussions on efficiency of outside consultants and experts. - 14 - Annex 1 Page 4 FERTILIZATION AND PLANTING DENSITY SUMMARY OF FINDINGS I. A number of trials have been carried out at FANALAMANGA, the most significant being: Trial No. 1 - Fertilization (Factorial P-K-CaMg) with the basic formula 38 g PS05 - 24 g K20 and 100 g dolomite per sapling. Trial No. 3 - Density trial, same formula Trial No 5 - Phosphorus quantity trial. O - 30 - 37 - 60 and 120 g P205 per sapling tested in sub-blocks with potassium (24 g K20) or dolomite (150 g) Trial No. 17 - Fertilizer quantity trial: O - 70 - 135 and 200 g of PK 21-18. Trial No. 26 - Fertilizer trial (Factorial NPK) on 4 species. Basic fertilizer 52 g PS205 and 24 g K20. Trials Nos. 32 Trace elements trial with 30 g PS05, 24 g K20 and 33 and various trace elements. The findings from these trials, which were carried out on a wide variety of soils, served as the basis for the following starter fertilizer formula for Pinus kesiya saplings: 30 g P205 30 g K20 02 g Zn Leaf tests, and measurements taken up to the age of 12 years, reveal that the use of this fertilizer results in proper growth rates on most of the reforested sites. - 15 - Annex 1 Page 5 When the fertilizer used contains approximately these proportions, we may expect a production at 10 years of 130 m3 - 240 m3/ha of wood (over bark). Production decreases when less fertilizer is used: in trial 17 the following results were obtained (at 9 years): no fertilizer 100 m3/ha 75 g of 21-16 105 m3/ha 130 g of 21-165 140 m3/ha 200 g of 21-16 180 m3/ha In Trial 2 (souil preparation) a production of 30 m3 per ha at 10 years was obtained without fertilizer. II. Planting density occurs at severals levels in forestry production. Our trials at FANALAMANGA yielded the following results: Trials Nos. 1, 2 and 4 : 2,000 saplings/ha Trials Nos. 5, 12 and 17 : 1,850 sapliiigs/ha Trials Nos. 9, 26, 32 and 33: 1,600 plants/ha The only trial in which lower densities were used was the density trial. The following volumes were obtained at these trials: Reference Fertilized MAI no. 1 190 to 210 m3/ha at 9 years 21 - 23 m3/ha/year no. 2 150 m3/ha at 10.5 years 14 m3/ha/year no. 5 240 m3/ha at 10 years 24 m3/ha/year no. 17 180 m3/ha 10 years 18 M3/ha/year no. 9 120 m3/ha at 10 years 12 m3/ha/year no. 1 2000 saplings/ha 144 m3/ha 14 m3/ha/year 1600 saplings/ha 123 m3/ha 12 m3/ha/year 1330 saplings/ha 110 m3/ha 10 m3/ha/year 110 saplings/ha 90 m3/ha 8 m3/ha/year - 16 - Annex 1 Page 6 With the appropriate quantities of fertilizer and proper density (over 1,800 saplings/ha), we may expect a production of over 14 m3/ha/year over bark. For the FANALAMANGA plantations, we recommend the following formulas: Planting density: 2,000 saplings/ha Starter fertilizer: 30 g P205 30 g K20 02 g Zn per sapling This formula is applicable to most of the reforestation soils. Exceptions will have to be made in just a few areas, the pertinent studies being under way. - 17 - Annex 2 Page 1 November 10, 1982 E-455/83 French (Madagascar) Operations Evaluation OTS:ms Democratic Republic of Madagascar Ministry of Agricultural ]'roduction and Agrarian Reform Office of the Secretary General Antananarivo, October 18, 1982 No. 812/MPARA/SG Mr. Shiv S. Kapur Director, Operations Evaluation Department World Bank Subject: Project Performance Audit Report, First Mangoro Forestry Project (Loan 1065 and Credit 525-MAG) Reference: Your letter of September 2, 1982 Dear Mr. Director: Further to your letter under reference, I have the honor to forward herewith a memorandum commenting on the Project Performance Audit Report. Yours, etc. /s/ Raphael Rabe - 18 - Annex 2 Page 2 COMMENTS ON PROJECT PERFORMANCE AUDIT REPORT 1. TREE GROWTH Two essential facts have to be borne in mind concerning tree growth in the project. (a) Soil fertility The soils in the Mangoro Valley have been divided into five fertility classes. Whereas to begin with trees were planted in all five classes, since 1977 there has been a clearcut trend away from planting on slopes (fertility classes IV and V) pending the findings of studies under way. (b) Choice of species Since a recrudescence was observed in dieback of Pinus kesiya, a species initially believed suited to the ecological conditions of Mangoro, a policy of diversification has been adopted in the light of the results achieved in the various trials carried out in the project area. Where the report speaks of poor yields, this statement needs to be adequately qualified. 2. MISTAKE IN ESTIMATING TREE GROWTH The yield problem is certainly fundamental, and it was a deficiency in the management of the project not to have required an inventory of the old plantations between 1977 and 1981. A pre-inventory of these plantations was made in 1979 to provide a quick basis for the permanent project forest inventory system. This permanent inventory is designed with a view to returning to the same seed spots every three years from the sixth year after planting onward (6 - 9 - 12 - 15 - 1 Paris) to determine the increments. The sixth year after planting was chosen as the starting point for the inventory because: - 19 - Annex 2 Page 3 (a) the increase in volume in the initial years is very small so that one should wait till it reaches or exceeds 5 m3/ha before starting the inventory; (b) depending on the fertility class, the plantation does not really begin to produce until after three to five years (effective period required for establishing the plantation). N.B. As long as the plantation has not reached the age of maturity, it cannot be said that the volume achieved at an intermediate age can be considered a satisfactory estimate of its productive potential. For young plantations, the calculation can only be based on the increase in height or on the height reached by the stand at a given age. The inventory of the plantations established in Phase I is planned for Phase II. Regarding the plantations started since 1975, it seems premature to assert thet "yield prospects have been so disastrously misjudged" and that "The trees simply do not grow sufficiently in many parts of the project area no matter how well they are cared for." Many young plantations are doing quite well, while as regards old ones which have not been able to benefit from the experience gained and the findings of trials and research, valid solutions for improving the yields of part of them are already known and are only awaiting implementation. The findings of research regarding fertilization and young plantations and corrective measures for old plantations on certain soils are most promising. - 20 - Annex 2 Page 4 3. FOLLOW-ON PROJECT For those who have followed and are familiar with the project, it is superfluous to point out that the recent plantations are distinctly better than the older ones (comparison of heights reached by stand, relative homogeneity); this is thanks to the results of the trials and research and the adoption [of appropriate measures*] after technical discussions involving all those with responsibility for the project. The search for ways and means to improve the mediocre plantations, and deciding what to do with the poor ones, have been a constant concern for the different managers, as is evidenced by the orientation given to the research and trials. Although the ultimate solutions have not yet been found as we are still too close to the problem, much has been learned and will continue to be applied. 4. OTHER COMMENTS The margins taken by the contractors and the additional expenses entailed for them by the fact that they come from regions far from the project area make their costs high compared with those of the company using its own or locally hired personnel. The exceeding of the appraisal targets was due to: - the fact that Phase I lasted longer than planned; - the abandoning for the time being of the slopes, which has meant that the plantations have been spread out over a wider gross area. *Phrase to this effect presumably intended, but accidentally omitted from French original. (Tr.) - 21 - Annex 2 Page 5 The construction standards adopted in the design stage were far from ambitious, but unavoidable changes in the project meant that certain sacrifices that did not compromise safety had to be accepted, examples of which are: - accepting certain road gradients at some points; - avoiding construction of large works; - using a mix of permanent and semipermanent materials in the housing: baked and unbaked bricks, mixed plaster instead of all-cement plaster. The equipment list for the project took into account the items passed down from the pre-project phase. These had been fully amortized even before the end of Phase I (1979). Certain items acquired during the project are also well on the way to being amortized. Moreover, the equipment and vehicles procured new will not only be used for the new plantations but also for forest inventory maintenance and fire protection purposes. - 23 - MADAGASCAR MANGORO FORESTRY PROJECT COMPLETION REPORT April 7, 1982 Eastern Africa Projects Central Agriculture Division - 25 - MADAGASCAR MANGORO FORESTRY PROJECT COMPLETION REPORT I. INTRODUCTION Sector Setting 1.01 This report was written by Mr. A. de Largentaye who conducted the completion mission which, jointly with the last supervision mission, visited Madagascar in early March 1981 (see Basic Data Sheet). A draft version of this report was circulated in July 1981, but was finalized only in January 1982 to take into consideration recent changes in the estimates of tree growth (para. 3.20). 1.02 Agriculture dominates the Malagasy economy, contributing about 40% of GDP, accounting for about 80% of export earnings, and directly supporting over 80% of the population. The forestry sector at present contributes a very minor percentage of GDP, but is of importance as a source of domestic fuel wood and charcoal, and potentially, of exportable products. 1.03 One of the main objectives of the Malagasy Government over the last five years has been the expansion of marketable production of agricultural commodities in order, inter alia, to generate foreign exchange resources. Agricultural exports, including exports of forestry products, have a special significance in this context, because alternative means of meeting the country's growing foreign exchange requirements are limited. 1.04 About 17.0 million ha (30% of Madagascar's land area) are classified as forest land consisting mainly of indigenous tropical hardwood and some pine and eucalyptus plantations. The table below summarizes in approximate figures the current forestry resources of Madagascar: - 26 - Forestry Resources (1981) Million Yield Production ha m3/ha million m3 per year per year "Savoka" (degraded indigenous forests) 4.3 - - "Productive" indigenous forests 12.4 .4 5 Pine plantations .1 - - Eucalyptus .2 10.0 2 Total 17.0 10.4 7 Although most of the indigenous forests have low yields, they nevertheless serve an important function in providing domestic fuel and timber and maintaining water catchment. Pine plantations do not provide wood for two reasons: (a) a large fraction of the plantations are still young and immature; and (b) wood industries have not yet been developed to use the available supply. 1.05 The man-made forests in Madagascar are mainly pine and eucalyptus plantations. As land clearing and plantation costs are high in natural forest areas, plantations have been carried out in open grassland areas. The existing eucalyptus plantations have been established for fuel wood, originally mainly for railway use. The 200,000 ha of eucalyptus are mostly in small stands, often on private land, and are managed under a coppice system, providing mainly fuel wood (including charcoal) and poles. A continuation of eucalyptus plantation on a large-scale would be justified only as raw material for industrial uses such as pulp and paper or chromite reduction. High-yielding eucalyptus plantations have been successfully established, particularly E. grandis in the Moramanga-Perinet area (para. 3.11), but these require good soils for their best development. 1.06 In various areas with low agricultural potential where soils are degraded the Government gives priority to the establishment of pine plantations. The availability of such sparsely populated land in large blocks relatively close to the sea gives Madagascar a comparative advantage for the industrial production of wood based products for export. There are three large pine plantations in Madagascar, listed below, and of these - 27 - three, the Government has developed mostly the Mangoro forest since 1973. By contrast, the Matsiatra pine forest, started in the early 1960s, has not been developed in recent years. Although the Matsiatra forestry project was designed to produce pulpwood, water shortages, relatively poor access, and a limited plantation area lead, in 1975, to abandon the idea of a pulpmill project in the Matsiatra area. Other pine plantations (see Map IBRD 15290), in particular Haut Onive (only several hundred hectares planted) and Antsirabe were virtually stopped in order to concentrate on the Mangoro project: Pine Plantations in Madagascar (hectares) 1973 1980 Antsirabe 7,500 10,000 Matsiatra 30,000 30,000 Mangoro 18,500 65,000 Other 9,000 n.a. Total 65,000 n.a. 1.07 Forest related industry in Madagascar is in an early stage of development. The estLmated 7.0 million m3 (roundwood) total annual wood consumption in Madaga;car is used approximately as follows: Annual Use of Wood (1981) Million m3 m3 per Use of wood % capita Fuel 5.6 80% .60 (of which charcoal) (1.0) (14%) (.13) Industrial use 1.4 20% .15 Total 7.0 100% .75 - 28 - Increasing prices of charcoal in Madagascar indicate that demand is outstripping supply. This is probably also true for fuel wood generally, especially around urban areas. Regarding sawn lumber, official statistics show a declining volume of mechanically sawn wood, from about 100,000 m3 per annum in 1974 to about 20,000 m3 today. There are a variety of reasons for this decline, namely lack of trained staff, lack of spare parts, logging and transport problens. On the other hand, handsawing (pit sawing) may still account for about 150,000 m3 per annum 1/. Small volumes of wood are also used for the production of pulp, hardwood and matches. 1.08 Until 1979, overall responsibility for forest organization and management rested with the Directorate of Water and Forest (Direction des Eaux et Forêts) in the Ministry of Rural Development and Agrarian Reform (MDRRA). In 1979 the MDRRA was reorganized with the principal objective of providing better support to the regional and local institutions through decentralization. The new water and forest service still has control of lnational projects" which are financed with external assistance but has no control of the regional forestry services. 1.09 In the 1980 investment budget, forest operations accounted for about FMG 480 million (16% of MDRRA total). These figures do not include the amount of foreign assistance on small specific projects. The Mangoro project alone has represented more than 44% of total Government investment commitments in the forestry sector over recent years. 1.10 Out of a total forestry staff of approximately 500 in the whole country, there are 20 professionally qualified foresters (Ingénieurs des eaux et forêts), 46 forestry technicians (Ingénieurs des travaux), about 440 forestry assistants (Adjoints techniques et Agents techniques), and 30 foremen. Many of the senior officers are not performing forestry functions. Forestry training has been inadequate lately. In particular, there have been no new professionally qualified foresters since 1972. Bank Agricultural Lending Program in Madagascar 1.11 To date, the Bank Group has supported eight agricultural development projects in Madagascar. Credits and loans for three projects are fully disbursed: the Lac Alaotra Irrigation Project (US $5.0 million), the Beef Cattle Development Project (US $2.8 million) and the First Forestry Project (US $13.5 million). Five other projects are under implementation: the Morondava Irrigation Project (US $15.3 million); the First Village Livestock and Rural Development Project (US $9.6 million); the Mangoky 1/ Demand for sawn lumber is not well known. The appraisal report of the second phase Mangoro project, issued in 1981, states that demand is high, whereas the preparation report of the first phase project, issued in 1973, showed a rather limited domestic demand for mechanically sawn lumber (para. 2.13): 48,000 m3 per annum of hardwoods and 6,000 m3 of pine lumber (supplementary note, p. 5). - 29 - Agricultural Development Project (US $12.0 million); a Technical Assistance Project for the Study of the Plain of Antananarivo (US $2.3 million); and the First Agricultural Credit Project (US $10.0 million). The Second Forestry Project (US $24.2 million) was approved in June 1981, and a Second Village Livestock Project (US $15.0 million) was negotiated in December 1981. Several other projects are under preparation, in mixed farming, irrigation, various crop production sub-sectors and agricultural services. A Technical Assistance Project has been appraised. Experience with past projects has been mixed. The Lac Alaotra Project was implemented on time, albeit with some problems, but the performance for SOMALAC, the project implementation agency, has deteriorated considerably since the completion of the Project *. Production yields are low, and the maintenance of irrigation infrastructure poor; a rehabilitation project for the region is under preparation. The Beef Cattle Development Project encountered many serious problems (para. 2.17); the First Village Livestock Project encountered very serious delays, principally due to institutional problems which required the renegotiation of the credit. The Morondava Project also encountered serious problems, mostly managerial. The Mangoky Project is off to a good start technically, but major institutional problems are now arising. The First Agricultural Credit Project became effective only in August 1981. II. PRE-PROJECT DEVELOPMENTS Origins of the Project 2.01 The origins of the Mangoro forestry project go back to the mid-1960s. The aims of the Malagasy Government's forest policy in the 1960s were the preservation of existing forests, particularly with a view to protection of water catchment areas, prevention of soil erosion and the expansion of forest production. The Government's 1964-68 Development Plan included a chapter on forest development and aimed at an increase in the value of forest industrial production from about $2.0 million in 1960 to about $7.0 million irn 1968. 2.02 In 1966 the Gcvernment requested UNDP to help it solve two main issues: (a) lack of information on the quality and quantity of economically accessible marketable timber in the indigenous forest; and (b) the need for a thorough technical and economic study of the prospects for establishing a plantation based pulp and paper industry. 2.03 UNDP responded by financing two FAO projects entitled "Inventory and Development of Certain Forestry Perimeters", Phase I (MAG 8), and Phase II (MAG 29). MAG 8 was approved in January 1966 and was operational from * The experience of the Lac Alaotra project was reviewed in a 1981 OED Impact Evaluation Report which identified some important problems in implementation. A rehabilitation and management strengthening project for the region has been appraised. - 30 - November 1967 to December 31, 1971, whereas MAG 29 was approved in January 1971 and considered operational retroactively from January 1, 1970, to June 30, 1973. Basically MAG 8 addressed the first issue (para. 2.02) and consisted of a general reconnaissance of the forest resources, a detailed inventory covering about 450,000 ha, and an evaluation of the economic potential of these forests including studies of the possibility of establishing forest industries and recommendations for the improvement of log extraction methods and the preparation of a forestry development plan. 2.04 UNDP undertook to address the second issue in three successive stages, leading to project MAG 29: (a) Preliminary Assessment of the Possibility of a UNDP Forestry Project. In 1966 UNDP recruited consultants who selected four possible plantation sites, including the upper Mangoro valley, in addition to the Matsiatra plantations (para. 1.06) where the Centre Technique Forestier Tropical (CTFT) 2/ already had a forest research program. (b) FAO Reconnaissance Mission. In May 1967 an FAO reconnaissance mission, financed by UNDP, determined: (i) that the Mangoro area was the only viable plantation site; (ii) that only a large pulpmill could take full advantage of economies of scale; and (iii) that plantation trials were necessary before developing the full-scale project. (c) UNDP Project MAG 29. As a result of the reconnaissance mission, the main objectives of the subsequent UNDP project MAG 29 were: (i) to carry out a preliminary feasibility study of the prospects of a plantation-based pulp and paper industry in the Mangoro region; (ii) to make recommendations regarding the usage of the Matsiatra pine plantations (para. 1.06); and (iii) to initiate trial plantations. 2.05 The preliminary feasibility studies of MAG 29 concluded that a suitable mill site existed on the Mangoro river adjacent to the main railway line and highway to the port of Tamatave, now Toamasina (270 km by rail). The studies examined the viability of a 200,000 ton bleached kraft chemical pulpmill, the cost of which was estimated at about US $100 million. Gross profitability (i.e. annual gross earnings as a percentage of capital investment) for a mill of that size was estimated to be in the order of 14%. 2.06 The recommendations of UNDP and FAO regarding the Matsiatra plantations did not support earlier views in favor of a pulpmill. Although in 1970 the Covernment, with UNIDO assistance, had already undertaken a preliminary study on the prospects for establishing a pulpmill in the area, 2/ French Research Center for Tropical Forestry. - 31 - and concluded that gross prof itability would be 15% or 16%, FAO believed these figures were tco optimistic. Estimating that other industrial developments (a sawmill or, alternatively, an integrated sawmill, blockboard and wood woolmill) in the Matsiatra area would earn higher returns (23% and 31%, respectively), FAO concluded that, whether or not the Government succeeded in attracting an overseas sponsor for the proposed pulpmill in Matsiatra (which in the end it did not succeed in doing), it was feasible to proceed with immediate installation of a first phase sawmilling operation which could later either be integrated with a pulpmill or expanded. However, the Government did not follow this conclusion (para. 2.10) and until now the Matsiatra plantations have remained under-exploited. 2.07 MAG 29 also included trial plantations in the Mangoro area which began in 1968. Alongside Government and CTFT research plots, the project set up about 800 ha of large-scale trial plantations. As trials seemed promising, UNDP encouraged the Government to begin a pine plantation program of about 4,000 ha/year. Thus 18,000 ha were planted by June 1973. 2.08 The pilot trials and studies carried out in Mangoro provided the information needed for identification and preparation of a forest industrial development programme. Identification 2.09 An FAO/IBRD Cooperative Program identification mission visited Madagascar between February 22 and March 7, 1972, and identified a project to establish, as a first phase of the Mangoro afforestation program, 48,000 ha of pine plantations. Planting was to proceed at the rate of 6,000 ha a year starting during the November rains of 1973. The identification report, issued in May 1972, assumed stumpage rates of FMG 738 (US $2.8) per m3 and determined the financial rate of return of the plantations alone to be of the order of 7% to 9% and the economic rate of return of the integrated silvo-industrial project (estimated to cost a total of $142 million) to be of the order of 13%, with a value of annual export pulp sales of about $35.0 million. The report pointed out that the prof itability of the pulpmill could be improved by increasing its capacity to 300,000 tons per annum. It also recommended technical assistance for three positions, i.e. a forestry expert, a road engineer and an engineer/workshop manager. 2.10 Four main issues were pending after the identification mission: (i) Development of the Matsiatra forest zone. The new Government included in its National Development Plan (1974-77), published in May 1974, the construction of an unbleached pulpmill at Matsiatra, which could entail overcapacity and unnecessary competition if another pulpmill were developed in the Mangoro area. For this reason, among others, UNDP/FAO (para. 2.06) and Bank staff favored the development of a - 32 - sawmill project in Matsiatra. As the Matsiatra pulpmill project was considered unlikely to attract foreign investors, this issue was not considered very serious (para. 2.15). (ii) Lack of data on the growth rate of species. This issue was clarified in a further study by the UNDP project staff of various village plots of Pinus kesiya scattered throughout the Mangoro region (the eldest of which were about 15 years of age) and a comparison with Pinus kesiya data from other countries, which lead subsequent missions to assume a MAI (mean annual increment) under bark of at least 12 m3/ha, providing adequate soil preparation and fertilization. Pre-project plantations, however, were expected to have a MAI of only 9.6 m3/ha. (iii) International pulp market. The viability of the project appeared to depend particularly on the possibility of selling bleached kraft chemical pulp in the South African market in the mid-1980s. However, the market studies carried out as a result of this apparent dependence on the South African market revealed a growing demand and concluded that Madagascar would have no difficulty in selling its bleached kraft chemical pulp on the world market. (iv) The low rate of return of the plantations alone. However this low rate of return was accepted because of the higher rate of return of the integrated project, including plantations as well as the pulpmill. Preparation 2.11 The Malagasy Government which had been in power since independence (1960) was overthrown on May 13, 1972. The new Government made many changes, but did not modify policies for the forestry sector. Thus, the formal request for a loan to finance the Mangoro forestry project was issued on October 31, 1972. 2.12 The FAO/IBRD Cooperative Programme preparation mission lasted from January 25 to February 22, 1973. The preparation report was published with some delay in July 1973, because of uncertainty in international pulp prices. Although the socio-economic impact of the project on the local population was not considered by the preparation mission to be a serious issue, it requested specifîc guarantees from the Government on that aspect of the project (para. 2.17). 2.13 The preparation mission devoted special attention to the economic and market analysis of various industrial alternatives. Most of the primary forest products which could conceivably be produced in Madagascar from the Mangoro plantations were rejected for basic technical and economic reasons, leaving six selected products (see below) for which detailed economic and market analyses were carried out: - 33 - Forestry Products Selected by the Preparation Mission (1973) Products Category Products rejected selected 1. Wood and logs Pulpwood Sawlogs 2. Mechanical wood Plywood Sawn wood products Part icle board Fibreboard Blockboard 3. Pulp and paper Groundwood or mechanical pulp Bleached kraft products Semi-chemical and chemi- pulp mechanical pulps Bleached and unbleached sulphite pulps Unbleached kraft pulp 4. Papers Printing and writing papers Newsprint Linerboard The analyses confirmed that a large bleached kraft pulpmill was the most viable industrial deve:lopment. Exporting the output as pulpwood and sawlogs was shown to be highly uncompetitive; nor was sawn lumber a viable output, because no domestic market existed to absorb large quantities of sawn lumber (footnote of para. 1.07) and the export markets for this product were only marg:inally attractive if at all. Production of newsprint and linerboard was not retained because it required an investment as high as a bleached kraft puLpmill but with lower gross earnings. The preparation report confirmed that larger bleached kraft pulpmills (220,000 and 260,000 TPA) produced higher gross earning rates but conservatively based its financial and economic assessment on the less attractive 200,000 TPA capacity model. 2.14 The financial rate of return of the integrated investment program (plantations plus pulpraill) was 12%, the economic rate of return 13%. Because pulp prices (c.i.f. Rotterdam) had risen by 25% from US $186/ADT 3/ in March 1972 to US $232 in May 1973 (the latter figure was used in the calculations of the preparation report), and price and market prospects were favorable, the rate of return of the Mangoro plantations 3/ Air dried ton. - 34 - alone (para. 2.10 (iv) ) was no longer an issue. The pulpmill project could purchase the wood at stumpage rates of FMG 800 per m3 under bark ensuring a 10% rate of return to plantations and still earn a rate of return of 12.4% for the pulpmill alone. Appraisal - Negotiations - Board Approval 2.15 The appraisal mission visited Madagascar from November 22 to December 13, 1973, and concluded that the project had been well prepared. The mission confirmed that the bleached kraft pulpmill was the most attractive industrial development. World markets for bleached long fiber (pine) chemical pulp were expected to continue expanding. The prices of pulp had increased substantially since 1973, and market projections indicated a real price increase of about 2% annually up to 1985. In addition, the location of the pulpmill for the Mangoro project on a river and near a main road and railway compared well as against other similar projects in southern Africa. The mission therefore believed that the industrial component of the program was likely to attract foreign investors. By contrast the Matsiatra pulpmill project was considered unlikely to attract private investors and was therefore discounted as a serious potential competitor to the Mangoro project (paras. 1.06 and 2.10). 2.16 Based on the June 1974 c.i.f. price Northwest Europe of $340 per ADT (a 47% nominal increase since May 1973) and on the current exchange rate of FMG 255/US$, the financial rate of return of the overall silvo-industrial development program (including a second plantation phase, a logging industry and the pulpmill costing by itself $140 million) was estimated at about 10% over 33 years. Net foreign exchange earnings were expected to reach US $42 million at full development. By shadow pricing foreign exchange at 125% (FMG 320/US$) of the current rate (FMG 255/US$) and labor costs at 75% of the current wage rates, the economic rate of return was estimated to be 13% over 33 years. Thus, the financial and economic rates of return appearing in the appraisal report were in line with previous figures. Although the pulpmill still emerged as the most attractive industrial option, the appraisal report included, as a fallback position, the possibility of exporting the project output as roundwood or wood chips, with an economic rate of return of 10%. 2.17 At the request of the preparation mission (para. 2.12), the Government of Madagascar had carried out a special study to determine the economic activity, the area cultivated and grazed, the attitudes and the number of people living in and around the project perimeter, and the steps to be taken to accommodate local peoples' interests in the project area. The study enabled the appraisal mission to judge that, because the afforestation would not affect agricultural and grazing lands, and subject to proper consultation with the villagers, especially on plantation boundaries, the project's social benefits should outweigh its social costs and resistance by local people, which had plagued the Beef Cattle Development Project (para. 1.11), was not to be feared in this project (para. 6.03). These matters were incorporated in the legal - 35 - agreements 4/. A fulL fire protection scheme was included in the project design and provided an additional safeguard against possible incendiary damage by local people. 2.18 Although the land for afforestation was unencumbered hy land claims and therefore, under Malagasy laws, was state property, throughout preparation and appraisal, the Bank staff requested, prior to negotiations, a legal title stating the Government's full rights. Already in 1971, the Minister of Rural Development had attempted to obtain such a title for 100,000 ha of the project area from the Minister of Finance in charge of the state property services ("Service des Domaines"), in conformity with the seven step procedure stipulated in the laws on the allocation of state property to the public services ("affectation des biens domaniaux aux Services Publics"). By the end of 1973, i.e. two years after the procedure was initiated, it had only reached the second of its seven steps. During the appraisal, however, the forestry services found a shorter procedure, based on forest law. This procedure remained under the initiative of the Minister of Rural Development and did not require the intervention of the state property services ("Service des Domaines"), given that the project area was state property. At the Bank's request, the Ministry of Justice acknowledged during the appraisal that this procedure was in conformity with Malagasy legal and constitutional practices. As a result, the Minister of Rural Development was entitled to sign the decree (arrêté no 0701-NDE/FOR of February 28, 1974) including the full project area (190,000 ha) in the National Forestry Reserve under perpetual autonomous control by the Director of Forestry. 2.19 The appraisal mission noted the high technical and administrative standard of the Malagasy Forest Department which had proved its capacity to carry out an annual planting program of 6,000 ha per year. However, the mission confirmed that the limited number of local forestry professionals warranted some outside assistance, and a minor provision was made for technical assistance (para. 2.23). 2.20 During appraisal, Bank staff had worked on the assumption that the project would be implemented by a new, separate project unit within the Forestry Directorate of the Ministry of Rural Development. The principal objectives were to ensure that the implementing authority had an autonomous budget and appropriate authority to procure needed equipment efficiently. During negotiations, some important changes were made in the implementation arrangements, because, as the Malagasy pointed out, if the project entity was part of the Forestry Directorate, the procurement of equipment would be subject to prior approval by the minister. As a result, agreement was reached on the creation of a new parastatal agency, entirely separate from the ministry, to manage the Mangoro development. In the delegation's view the most appropriate legal basis for the entity was that of a Société d'Economie Mixte (para. 3.03), which enabled private interests to 4/ Section 3.08 of the Loan Agreement and Supplemental Letter No. 3. - 36 - participate in the subsequent development of an industrial processing complex. Approval by the Bank of the statutes of the project entity was made a condition of Board presentation. The statutes were agreed upon in November 1974, five weeks before Board approval. The newly created project entity, FANALAMANGA, was owned by the Governnent, except for 1% of the capital shares owned by the Central Bank of Madagascar. 2.21 The project was approved by the Board on December 17, 1974. Virtually all the comments made by the Executive Directors during the discussion were favorable to the project. Ilowever, the question was raised whether the Mangoro project was a high priority in the development strategy of Madagascar, given the large investment that the construction of a pulpmill would require, and whether Madagascar was not foregoing more fundamental development projects because of the Mangoro project's financing. It was stressed in the answer that, because Madagascar's development program unfortunately did not include many projects, the country was not giving up any other project. In summary, the Bank would gladly have been more involved in Madagascar if the country had developed more projects for financing. Project Description 2.22 As approved by the Board, the project included: (i) Afforestation of 35,000 ha of pine plantations, including surveying of the area to be planted, land preparation, establishment of nurseries, fertilization, planting, weeding and disease control. (ii) Construction of firebreaks and institution of a comprehensive system of maintenance and of fire prevention and control for all plantations in the project area. (iii) Construction and maintenance of service and plantation roads. (iv) Construction of buildings for project headquarters and three divisional headquarters. (v) Research, training and preparation of a second-phase project. (vi) Preparation of agricultural projects. (vii) Agro-pastural development in the project area. 2.23 The project was practically unchanged compared to its initial conception. The main differences concerned: Size: The afforestation programme covered 35,000 ha to be planted in five years instead of 48,000 ha in eight years as suggested in identification. This resulted from the higher - 37 - planting rate of the forestry services (7,000 ha per annum instead of 6,000) and the progress of the pre-project afforestation programme, which totalled 25,000 ha by the end of 1974. Technical Assistance: The proven competence of the local forestry services explains why only one expatriate position was fina]ly retained (for the research component), compared to three suggested by the identification (para. 2.09) and preparat:ion missions. It is significant that this positior (forestry expert) was requested by the Malagasy Government, and was rnot proposed by the Bank. Villager Compensation: The Loan Agreement (Section 3.08) specifically provided that boundaries would be agreed with villager<; living in the project area. Furthermore, US $100,000 were provided for the improvement of about 2,000 ha of pasture through the introduction of stylostanthes, a high yielding legume successfully tested in Madagascar. Finally, Supplemenital Letter No. 3 provided that social infrastructure (health and education) would be put at the disposal of the villagers and that, in the event of any loss or impairment of the villagers' rights caused by the execution of the project, compensation in accordance with the applicable laws and regulations of Madagascar would be given to said villagers. Cost: The cost of the project, according to the appraisal report, was US $17.2 million, compared to US $8.5 million (without contingencies) in the preparation report. The increase resulted from: (i) the inclusion of contingencies, accountirng for US $4.5 million; (ii) the updating of costs to last quarter 1974 prices, accounting for US $1 million; (iii) the provision of research, training and consultant fees, costing US $1.2 million; and (iv) higher labor requirements (1,975 workers employed, according to the appraisal report - para. 5.02), than in the preparation report (1,200 employed), accounting for US $1.9 million. Bank/IDA contribution: At negotiations, the Malagasy delegation requested and Bank/IDA agreed that Bank/IDA would increase their contribution from 76% to 80% of total project cost, as in the Village Livestock and Rural Development Project, approved in July 1974, and the Third Highway Project, approved in December 1973. For the Mangoro Forestry Project, the higher contribution entailed an increase of the Credit and Loan by $250,000 each (from $6.5 million to $6.75 million). - 38 - III. IMPLEMENTATION 3.01 On many aspects, the project had an excellent implementation record. The project unit FANALAMANGA achieved all physical targets ahead of time, and, despite limited foreign exchange and higher costs of imported equipment than expected, it managed to extend the project period and finance two additional planting seasons, which is an exceptional performance in Madagascar. Recent studies have shown, however, that FANALAMANGA, as all other forestry specialists involved in the project, were too optimistic on the expected project output. Effectiveness 3.02 The Development Credit and Loan Agreements set the date of effectiveness at March 24, 1975, i.e. three months after signature of the legal documents. There were two conditions of effectiveness to the Loan Agreement: the establishment of the project entity, FANALAMANGA, and the appointment of its Director General, with qualifications and experience satisfactory to the Bank. The Bank postponed the date of effectiveness twice; first from March 24 to May 31, 1975, in consideration of the political and administrative turmoil resulting from the assassination of the head of state on February 11, 1975; then from May 31 to July 31, 1975, because of administrative delays in establishing FANALAMANGA. 3.03 FANALAMANGA was established on June 4, 1975, but, because of changes in its statutes, a draft of which was examined during negotiations, the Bank did not give its approval immediately. The major change, a reduction of the amount of Government equity capital from FMG 2,000 million to FMG 500 million, was necessary to enable the Central Bank of Madagascar to participate with equity, and thus to establish FANALAMANGA as a Société d'Economie Mixte (para. 2.20) 5/. The reduction in equity was to be made up by an interest-free loan from Government to FANALAMANGA, later to be converted into equity. As a result, there would be no increased financial burden on FANALAMANGA. The Bank's Legal Department requested that the date of the transfer of the loan into equity be specified as not later than the end of the Project Development Period, to conform with the legal agreements. This request was met by the Borrower on July 15, 1975, and the Bank declared the Development Credit and Loan Agreements effective on July 18, 1975. 3.04 The other condition of effectiveness, the appointment of the Director General of FANALAMANGA, was met with the nomination of a highly qualified forester, as reported by the supervision mission which returned from Madagascar on June 7, 1975. The nominee, currently still the Director General of FANALAMANGA, was trained at the Ecole Nationale des Eaux et Forêts of Nancy, the top French forestry academy, and was previously "chef 5/ The reasons for this change remain unclear. - 39 - de service" in the Department of Forestry and Soil Conservation in the Ministry of Rural Development. The curricula vitae of the senior staff of FANALAMANGA (plantation director, financial director and workshop engineer) were sent to the Bank at the end of June 1975, within the agreed time limit (Section 4.03 of the Loan Agreement) (para. 5.02). Start-up 3.05 The main problemn during the start-up period was the scarcity of funds. This resulted in part from the postponements of the date of effectiveness, but was made more acute by some errors in procurement. 3.06 Errors in procurement were made in the beginning of the project although the Bank staff had exercised special care to inform the Borrower of Bank/IDA procurement guidelines. FANALAMIANGA handed two tender documents, one for vehicles and equipment (mainly tractors, bulldozers, graders, etc.) and one for fertilizers and petroleum fuel, to the supervision mission that visited Madagascar in October 1975. The supervision mission report states that the format of documents was satisfactory. The documents were reviewed by the Projects Division in Washington; however, no formal clearance was transmitted to the Government. In March 1976, after the requests for proposals were issued, the Bank received complaints from manufacturers of vehicles and equipment that the technical specifications were too restrictive. Bank staff then found that the tender documents reviewed in Washington did not include the technical specifications which were the subject of complaints. As requested by the Bank staff in April, the Borrower issued a statement to the effect that equivalent equipment to that specified in the tender documents would be considered eligible and that the deadline for receipt of tenders would be postponed to June 30, 1976. The mishandling of the procurement was due to the inexperience of the local staff with regard to the Bank procedures at the beginning of the project, and to the difficulty of spotting inaccuracies in detailed technical specifications from Washington. The resu:Lt was delay in receipt of equipment of about six months. This is an instance of what might have been avoided through close supervision by experienced Bank staff based in the country (see also paras. 3.28 and 6.07). Revisions 3.07 There were no major revisions of the Project during implementation. Some relatively minor changes are reviewed below. 3.08 The appraisal report envisaged the organization of the plantations in three divisions, in which 1,000 to 4,000 ha would be planted each year in four plantation operational areas. This would have required periodic resiting of laborers' villages, which was contrary to new Government directives on housing standards. In July 1975, FANALAMANGA therefore proposed to double the number of operational areas and reduce their size, thus increasing the number of villages and avoiding the necessity to move - 40 - villagers every third year. A favorable side effect was that it would no longer be necessary to move the nurseries every third year. While the initial capital outlay on permanent housing and, to a smaller extent, on road network was expected to be more than envisaged at appraisal, over the long-term there would be a net saving on housing and nursery establishment costs. Although Bank staff had initial reservations on this proposal because of the increased cost of housing and road building, the proposal was examined and approved during the second supervision mission (December 1975). 3.09 Poor growth of trees, recorded on four to six-year-old plantation trials, created serious concern in 1975, the first year of the project period. Based on FANALAMANGA's findings, the first two supervision missions identified the following causes: (i) infertile soils on steep slopes, over 30%, where soils were degraded and low cost mechanical soil preparation was not possible; (ii) soil preparation: the soil required more thorough preparation than the subsoiling, disc harrowing, and manual loosening of the surface soil, recommended in the appraisal report; (iii) dieback appearing throughout the project on four-year-old Pinus kesiya plants although only small areas (unquantified) had been destroyed; and (iv) lack of fertilization: by the end of 1975 only 20% of all plantations (totalling about 32,000 ha, with the pre-project plantations) had been fertilized with binary PK (phosphorus, potassium) and scarcity of fertilizers was still delaying fertilizations. The pronounced effect of fertilizer and soil fertility on the growth rate of trees is summarized in the following table (from the terminal report of the expatriate forestry adviser, dated May 31, 1976): Mean Annual Increment Under Bark Over 15 Years in m3/ha Pinus Kesiya Planted in 1975 and 1976 Soil preparation Mechanical Manual Soil fertility classes I Il III IV IV V Fertilized plantations 19.2 16.2 13.7 10.8 7.9 5.1 (average) (14.3) (6.0) Unfertilized plantations 13.3 10.7 8.5 6.3 3.9 2.6 (average) (9.1) (3.0) - 41 - 3.10 The expatriate forestry expert estimated the mean annual increment (MAI) under bark in mid 1976 to be 10.4 m3/ha on average for the total area planted (37,500 ha). This was below the appraisal estimate of 12 m3/ha, and somewhat below the average Il m3/ha expected from both the project and pre-project plantations, given the lower pre-project yields (para. 2.10 (ii) ). Consequently, towards the end of 1975, FANALAMANGA undertook the following measures, recommended or agreed to by the Bank supervision missions: (i) To stop planting infertile steep slopes and plant only flat, fertile sites as from the planting season 1976/1977. (Flat, fertile sites were understood to mean sites with slopes under 13%, and steep slopes were all those over 25% corresponding to soil fertility Classes V and VI.) However, moderate slopes between 13% and 25% also continued to be planted in the hope that late fertilization would compensate the poor fertility of the soils (presumably Classes III and IV). The forestry adviser pointed out in his terminal report that the restriction of plantations to land under 25% slope would not enable to plant 96,000 ha within the project perimeter and theref ore plantations would have to be made in areas outside the project area. This issue was addressed in relation with the silvo-industrial development (para. 3.12). (ii) To improve soil preparation. Although disc-ploughing in addition to subsoiling was initially envisaged in 1975, this required additional disc-ploughs and more powerful crawler-tractors which were expensive and in short supply. To compensate for the shortfall of equipment, the project management resorted to manual cultivation within a 50 cm radius around each planting spot ("placette de plantation") in addition to the mechanical soil preparation recommended at appraisal. However, the impact of this measure was not 'quantified in terms of mean annual increments. (iii) To undertake research and consult international specialists on the cause of dieback. As a result, this cause was virtually identified very quickly (end of 1975). The forestry research institute determined that dieback was due to a deficiency in a trace element (zinc) and confirmed this in 1978 by trials and experiments. Zinc chloride was procured and treatment by aerial spraying began in 1979. At the completion of the project (end June 1981), about 40,000 ha of Pinus kesiya plantations had been treated, leaving about 7,000 ha ta be treated during the second phase project. Beginning in the 1980/1981 planting season, new plantations of Pinus kesiya received zinc chloride along with their initial fertilizer dose. - 42 - (iv) To plant other pine species, more resistant to dieback, rather than Pinus kesiya alone. Pinus kesiya had been chosen mainly because seeds were available locally. The project unit decided to limit plantations of the vulnerable Pinus kesiya to the unexposed southern division and plant more resistant species in the exposed areas (central and northern divisions). The proportions to be planted from the planting season 1976/1977 would be 30% P. kesiya, 15% P. elliottii, 55% P. caribaea, which would have given the following dis tribut ion: Actual and Planned Distribution of Pine Species in 1976 (ha) Species Actual Planned Total 1976/77 through 1974/75 1975/76 1980/81 P. kesiya 6,190 5,470 10,683 22,343 P. elliottii - - 5,341 5,341 P. caribaea - - 19,486 19,486 Total 6,190 5,470 35,510 47,170 Unfortunately, up-to-date figures on the breakdown of plantations by pine species are not on file (para. 3.21) to compare with the above planned figures, but, although seeds were received one planting season late (for 1977/78 instead of 1976/77) (para. 3.32), the program of diversifying species appears to have been carried out successfully. The last supervision report, for example, states that: "Nowadays P. kesiya constitutes less than 20% of the area planted". (v) To procure fertilizer urgently through local bidding for the ongoing plantations (para. 3.31) and apply late booster fertilization doses to unfertilized plantations. Fertilizers could increase mean annual increments by three to five m3/ha, as shown in the table in para. 3.09. However, fertilizers remained in short supply until 1976, when internationally procured fertilizers were received. As from the 1976/77 planting season, all newly planted trees, except Pinus caribaea which does not require fertilization according to - 43 - trials arid observations carried out by the forestry research institute FOFIFA, received the dose of fertilization recommencled at appraisal (100 g of binary P-K). Subsequent trials appear to have confirmed the adequacy of this dose. Unfertilized plantations were gradually late-fertilized. By 1981 29,450 ha had been fertilized, representing 63% of the area requiring fertilizer (46,710 ha 6/). 3.11 Because of the poor quality of soils in the Mangoro forest area, only pine species had been retained for plantation at appraisal. However, as a result of indications that the size of a viable pulpmill should be increased, which the supervision mission of November 1977 supported, plantations of fast grc,wing Eucalyptus grandis, with a higher MAI than pine, appeared as a possible way of increasing the output of the Mangoro forest and meeting the requirements of a larger pulpmill. The mission therefore recommended to extend plantations (para. 3.12), inter alia, to areas south of the initial project area endowed with good forest soils appropriate for E. grandis, and suggested planting 18,000 ha of this species. An eight year felling rotation, with an estimated MAI under bark of 25 m3/ha, was envisaged based on the results achieved in the existing plantations at Sandrangato and Perinet, south and east of Moramanga, respectively, of up to 50 m3/ha MAI (under bark) on the best sites (para. 1.05). FANALAMANGA carried out introductory planting of a few dozen ha of E. grandis in the south on good forest soils during the last two years of the project. The second phase project provides for large-scale trials of 500 ha of E. grandis. 3.12 Modification of the Project Area. The supervision mission of November 1977 concludecl that plantations too far north would entail prohibitive log transport costs to the projected site of the pulpmill. As a result, FANALAMANGA agreed as far as possible not to extend the plantations to the extreme north of the project area and to prospect for new areas nearer to the projected site of the pulpmill. Survey teams prospected areas to the east, west and south of the project area during 1978 and identified new (additional) areas totalling over 20,000 ha net to compensate for the unp].anted northernmost part of the initial project area. Like the initial project area, these new areas were unoccupied and unencumbered by land cdaims, and considered state forestry property. However there is no evidence that the Bank required specific action, as it did at appraisal, to include the new afforestation areas in the National Forestry Reserve (para. 2.18). 6/ Total area planted 72,292 ha - P. caribaea plantations 19,486 ha - Slopes 13% and over 6,096 ha Area requiring fertilizer 46,710 ha - 44 - 3.13 A minor revision also occurred on the construction of roads. In December 1975 the bids received showed that the estimated cost of road construction by contract had risen from FMG 3.6 million per km at appraisal to FMG 25 million per km. Therefore the Bank accepted, in October 1976, FANALAMANGA's costed proposal to undertake road construction by force account instead of by contract. This had a significant impact on the overall cost of the project (para. 3.26). 3.14 Because the Borrower considered it expensive, technical assistance was terminated earlier than expected. At the Borrower's request (para. 2.23), the Loan and Credit Agreements provided for financing of a forestry expert, the idea being to ensure a smooth transition from the UNDP-FAO project, by recruiting one of its staff for two years. In addition to initial financing problems, agreement was difficult to obtain because the Borrower was reluctant to pay FAO's overhead costs, charged at 14% of the specialist's salary. Finally agreement was reached, but for a contract of only one year instead of two. 3.15 A final revision concerned the use of the earthball technique instead of plastic tubes in nurseries. The earthball technique consists in transplanting seedlings into a clay mixture compressed into an oblong ball without a container. Provided the technique is correctly carried out, it is less costly in inputs and labor than the techniques of transplanting seedling in plastic tubes. The staff of FANALAMANGA persuaded the supervision mission in July 1976 that their nursery staff could use the earthball technique with satisfactory results. Hence, the use of plastic tubes envisaged in the appraisal was abandoned and the earthball technique was applied successfully. Implementation Schedule 3.16 Overall, the project was implemented faster than expected at appraisal, despite delays incurred during the first three planting seasons (1974/75, 1975/76 and 1976/77) for reasons explained above (date of effectiveness, procurement and plantation reorganization) and delays in the latter years (para. 3.19). Progress on the different components of the project (para. 2.22) are reviewed below and summarized in Table 3. 3.17 Afforestation (Table 3). By the middle of 1979, with a total of 34,635 ha planted, the project target of 35,000 ha had virtually been attained. At the completion date (June 30, 1981) 47,170 ha were planted, exceeding the target by 35%. However, land preparation was a bottleneck until 1976 when equipment was received and the decision was taken not to plant steep unfertile slopes where mechanized land preparation was not possible (para. 3.10 (i) ). Subsequently, land preparation was carried out exclusively by mechanical subsoiling, exceeding the appraisal targets. In addition, manual plant hole preparation, begun in the planting season 1974/75, was intensified from 1975/76 with a view to increase yields (para. 3.10 (ii) ). Production of seedlings in nurseries was globally adequate although the project suffered shortages of certain species during - 45 - two planting seasons. To plant 7,000 ha a year at the rate of 1,400 plants per hectare and replace 10% failures, 10.8 million new plants a year are required. This figure was exceeded from the beginning of the project. However, as a result of the decision to diversify pine species in 1975/76 and the difficulty of finding seeds (para. 3.10 (iv) ) there was a temporary shortage of Pinus elliottii and Pinus caribaea until 1977 and even then, production was limited because of low germination rates. However, adequate supplies of the two species are available since 1978. The fertilization program, as discussed above, fell behind schedule as a result of the shortage of fertilizer in the early years. At the closing date of the project (December 31, 1981), there was still a substantial backlog of unfertilized plantations (para. 3.10 (v) ). Supervision reports do not mention the status of weeding operations, which, according to the appraisal report, were to be carried out manually to eliminate grasses where heavy vegetation hindered the growth of seedlings. Brushwood clearing, to eliminate heavy growth of heather where necessary before land preparation, was carried out over a limited area, as most heather growth occurred in the northern division where planting was stopped after 1977 (para. 3.12). The most specific disease control action was research on and treatment against dieback of Pinus kesiya, described in paras. 3.10 (iii) and 3.18. 3.18 Other components (Table 3). The appraisal report provides that 12% of the net plantation area should be constructed as firebreaks (in addition to the unplanted valley bottoms which act naturally as firebreaks), representing 840 ha per annum or 84 km per annum of firebreaks 100 m wide. As shown in Table 3, this target has been exceeded since 1975/76. Fire watch towers have also been built in adequate numbers. However recent visits by FAO-consultants (late 1981) have pointed out that firebreaks were insufficiently maintained. Over the past three years fire has destroyed about 260 ha in 1978, L70 ha in 1979 and 60 ha in 1980, altogether 590 ha. This total represents Less than 1% of the total area planted but, according to the last Bank supervision mission, should not be allowed to increase substantially. Roads were somewhat behind schedule in the early years but, together, length of roads and tracks exceeded targets by 1979. The building component was completely rescheduled because of the plantation reorganization (para. 3.08). Project headquarters were completed in 1979 (para. 3.34). Research was carried out through the agricultural research institute, CENRADERU, now called FOFIFA, with which a four year contract was signed in the first half of 1976. This contract covered research in forestry, mainly to determine means of overcoming dieback of P. kesiya and to continue the existirtg plantation trials, and research in agriculture and livestock to improve local methods of production in relation to the agro-pastural component (para. 2.23). The expatriate forestry adviser (para. 2.23) was also financed under the research component. The project unit, FANALAMANGA, carried out most of the training actions by itself in a timely way (para. 5.04) as well as the preparation of the second phase project (the preparatic,n report was completed in May 1979). No other projects were prepared with funds from Credit 525 MAG or Loan 1065 MAG, which were instead reallocated for other expense-items of the project. The - 46 - agro-pastural development component, although very successful with the local villagers, remained far below the targets and behind the schedule of appraisal due to the cost of pasture improvement, which was far higher than estimated at appraisal (FMG 40,000/ha in December 1975 instead of FMG 10,000/ha, mainly because of the increased cost of fertilizer). This did not have any damaging effect on the attitude of the villagers toward the forestry project. The program of pasture improvement is scheduled to continue during the second Mangoro forestry project. 3.19 In the latter years, the project was delayed because of disagreements between the Bank and the Government of Madagascar on the silvo-industrial development (para. 6.06). At appraisal the project was expected to be completed in December 1979 and followed by additional plantations for a possible pulpmill starting to operate in 1985, using fifteen-year-old trees of the plantation (begun in the 1969/70 planting season). Hence, a second phase project was identified in October 1977 and was to be appraised in May-June 1978. In the meantime, at the Government's request, UNIDO/FAO were to start a prefeasibility study on the pulpmill scheme (para. 4.02). Ilowever the magnitude of the investment in a pulpmill became an issue within the Bank in early 1978 when estimates pointed to a $250 million pulpmill cost, almost double the appraisal estimate ($139 million). Bank staff decided in May 1978 to wait until October and see, in the light of the UNIDO/FAO report, whether other smaller silvo-industrial investment possibilities should be considered. In September 1978, however, the Government repeated its intention to build a pulpmill and stated that there was therefore no problem in the utilization of the output of the forest, thereby ruling out the examination of alternative investments to the pulpmill. Shortly afterwards the FAO/UNIDO mission submitted its report, concluding that the pulpmill would cost $387 million but seemed a viable project nonetheless. Discussion between the Bank and the Government did not resume until June 1979 when the Government showed signs of concern over the ways of financing such a large investment, and willingness to consider alternative possibilities. In October 1979 it was agreed that plantations should continue by a short three-year second phase project which would give time to determine the most appropriate silvo-industrial development and to find the financial partners. The second phase project was finally appraised in May/June 1980, two years later than was initially expected, with the result that the first phase project had to be extended for two additional planting seasons (1979/80 and 1980/81). Tree Growth Estimates 3.20 Forestry inventories are not mentioned in the appraisal report as they were to be carried out only during the second phase project. However, the preparation report recommended the establishment of permanent sample plots to study yields. Thus, FANALAMANGA established sample plots in early 1976 and measurements were carried out in 1977 and 1978 leading to estimate the mean annual increment (MAI) under bark (u.b.) in 1979 at 10.5 m3/ha, on average, for the total area planted, with the distribution shown in the following table. This estimate was close to the 10.4 m3/ha estimate of 1976 (para. 3.10): - 47 - Estimated Output of the Mangoro Forest Plantations up to March 1979 Plantations as of March 1979 (ha) Estimated Production MAI (u.b.) (m3 per (Mr3/ha) Pre-project Project Total annum) Slopes over 25% 0 3,426 2,670 6,096 0 Slopes 13 - 25% 7 6,088 5,039 11,127 77,889 Slopes 13% 13 15,608 26,450 42,058 546,754 and under Total 25,122 34,159 59,281 624,643 Assuming that most plantations were carried out on flat land after 1976, and that the distribution of the plantation at the completion of the project is as shown below, the average MAI (u.b.) would remain virtually at the same level (10.6 m3/ha instead of 10.5 m3/ha): Output of the Mangoro Forest, as Estimated in 1979, for Plantations up to 1981 Plantations up to 1981 (ha) EstLmated Production MAI ('u.b.) (m3 per (m:3/ha) Pre-project Project Total annum) Slopes over 25% 0 3,426 2,670 6,096 0 Slopes 13 - 25% 7 6,088 9,816 15,904 111,328 Slopes 13% and under ,3 15,608 34,684 50,292 653,796 Total 25,122 47,170 72,292 765,124 - 48 - The first opportunity to verify estimates of MAI (u.b.), disregarding the 1978 trial inventory (para. 4.03), was the full inventory carried out by FAO consultants under the second phase project in 1981. The results, summarized in the table below, show substantially lower MAI (u.b.) (5.3 m3/ha) for the overall plantations than previously estimated, although plantations made after 1976/77 with a MAI (u.b.) of 10.0 m3 probably indicate that the corrective measures taken within the project (para. 3.10) were effective. However, there are three reasons why the 1981 estimates should still be confirmed. Firstly, the 1981 estimate show a great difference with previous yield estimates; secondly the sampling rate of the 1981 inventory was very low, .007%, whereas the second Mangoro forestry project appraisal report provides that forest inventories should be carried out with a sampling rate of 1%; and thirdly the FAO consultants have found that fertilizer has had no effect except on very flat sites, which contradicts earlier findings (para. 3.09). Output of the Mangoro Forest, as Estimated in 1981 by FAO Consultants Plantations (ha) Estimated MAI (u.b.) 1976/77 After Production (m3/ha) and before 1976/77 Total (m3 per annum) 0 28,100 2,000 30,100 0 6 10,000 2,100 12,100 72,600 12 7,700 14,400 22,100 265,200 45,800 7/ 18,500 64,300 337,800 (Not included in inventory) 8,000 42,400 72,300 380,200 Reporting 3.21 Reporting by FANALAMANGA has been consistently satisfactory. In addition to the usual provisions on reporting requirements included in Section 3.06 of the Loan Agreement, specific reporting requirements were suggested by the Bank staff in a letter dated May 26, 1976, to cover the 7/ This figure is, in fact, 3,000 ha more than reality (see Annex, Table 5). - 49 - following items: (i) highlights, technical and administrative; (ii) staffing; (iii) plantations (area broken down by species, area and age); (iv) progress in all fi.elds during the period examined and cumulative; (v) inventories (vehicles, equipment, stocks); (vi) finance (including claims on the Bank); and (vii`) miscellaneous. FANALAMANGA followed these recommendations, except: in the plantation area breakdown by species and age, which would have been useful (para. 3.10 (iv) ), and usually submitted all the required half-5'early and yearly reports in time. Accounts and Audit 3.22 Throughout the project, FANALAMANGA presented complete and accurate accounts, which, after 1977, were reviewed periodically by Bank staff from RMEA. Auditing was performed satisfactorily by a local auditor, Ms. Madeleine Ramoholimnihaso. However, some accounting statements are missing in the Bank's files (para. 3.25). Costs (Table 1) 3.23 Total expenditure on the Mangoro forestry project expressed in US$ exceeded by 17% the project costs as estimated at appraisal (Table 1). However, considering that actual areas planted exceeded project targets by 35% (Table 3), the project achieved 8% lower costs than anticipated ($451/ha achieved compared with $491/ha at appraisal). 3.24 This result is the more remarkable given the cost-inflation experienced during the implementation period. Table 4 shows that the cost of fertilizers and 4 Wl) vehicles increased in real terms during the project period. The same is no doubt true of fuels and lubricants (although price data is not recorded in the project file for these items) given that the project began shortly ifter the first oil price hike of late 1973 and lasted beyond the second one of 1979. Cost increases were also suffered on house construction as a result of the reorganization of FANALAMANGA (para. 3.06). 3.25 Table 1 shows that most of the cost overruns occurred in afforestation, which cost 331% of the appraisal estimate. Although the accounts that would enable to understand such a large cost overrun are not on file (para. 3.22), a partial explanation lies in: (i) 35% physical overrun of the area planted; (ii) inflation which was presumably severe in fuel and lubricants, a large cost factor in soil preparation; (iii) the FANALAMANGA reorganization, which increased the cost of nurseries; and (iv) the unforeseen cost of the zinc treatment and the higher cost of internationally procured seed. 3.26 On the other hand, major savings were achieved by: (i) undertaking road construction and house building by force account instead of by contractor (para. 3.13), which explains the cost overrun on vehicles and equipment in Table 1; and (ii) accepting deviations from the appraisal - 50 - norms (wattle and clay houses rather than cement houses, tracks instead of secondary roads). These two initiatives, which the Bank's supervision missions agreed on, enabled the project to exceed the appraisal's physical targets for houses and roads (see Table 3). Other savings were made by reducing physical targets. For example, physical targets were not attained for fertilization (para. 3.10 (v) ). In the case of pasture improvements, the project improved only 875 ha of pastures, instead of 2,000 ha (para. 3.18). Savings were also achieved on consultants for research and training and preparation of agricultural projects, by relying more heavily on the services of the Government forest research institute CENRADERU, now called FOFIFA, and the staff of FANALAMANGA. 3.27 The shrewd cash management of foreign expenditures, especially towards the end of the project period, when shortage of foreign exchange resulted from delays on the decision to start the second Mangoro forestry project (para. 3.19), was one of the features of the good performance of FANALAMANGA. Although overall expenditure was in excess of 17%, the project did not run out of the foreign currency provided by the IDA Credit and Bank Loan despite the extension of the project period by two planting seasons. As mentioned earlier, this was made possible by substituting local for imported products and consultants, and by ensuring that the foreign currency provided by IDA and IBRD was available for imported goods. In this manner, the overall expenditure overrun could be covered by the Government alone in local currency, and indeed the Government's contribution to the project, which actually totaled FMG 1,528 million, was far beyond the FMG 944 million (including contingencies) expected at appraisal. Disbursement 3.28 Disbursements began only in 1976, one year behind schedule; they picked up in the second half of 1977 as a result of large procurement orders and were slowed down again after June 1980, as shown in the Basic Data Sheet. In addition to the errors made in the procurement of equipment, the initial delays in disbursement were partly caused by some lack of coordination between the Government's Trésor, in charge of submitting claims to the Bank, and FANALAMANGA, who prepared the claims. Also, claims were sent by mistake to headquarters when they should have been sent to RMEA in Nairobi until this was discovered by the Bank's staff on December 2, 1975. All these delays could probably have been avoided with closer supervision on disbursement matters in the early stages of the project (see also paras. 3.06 and 6.07). Subsequently, however, the disbursement procedures were well understood and, overall, were carried out smoothly. The slow disbursement during the latter part of the project is the result of FANALAMANGA's effort to conserve the foreign currency for the extended period of the project (para. 3.27). - 51 - Peformance of Consultants, Contractors and Suppliers 3.29 The performance of the expatriate forest adviser who stayed one year with the project was very satisfactory. He was requested by the Government to ensure continuity with the work previously performed by UNDP/FAO in the Mangoro forestry zone. He assisted the Director General in planning the planting program, especially the reorganization of the plantation layout (para. 3.08), ensured relations with the research institute CENRADERU, made a correct diagnosis of the physiological origin of the dieback of P. kesiya, and initiated the forest inventory, pointing out the low rate of growth of trees planted on slopes, where soils were degraded (para. 3.09). His termination report is a valuable document. There can be no doubt that the expatriate adviser's qualification and experience with the previous UNDP/FAO Mangoro projects proved useful. The same must be said of the local staff, especially of the Director General of FANALAMANGA and the Director of CENRADERU, as well as of the three Project Division Chiefs (in charge of the Northern, Central and Southern Plantation Divisions), who had been closely involved in the pre-project operations in the Mangoro zone, and whose competence compensated for the early departure of the expatriate forest adviser (para. 3.14). 3.30 There were no problems with suppliers. In fact, the local representatives of Catierpillar and Mercedes were judged so effective by the Director General of FAlNALAMANGA, that he did not accept a supervision mission's recommendation to grant FANALAMANGA the statute of direct importer for fear of losing the suppliers' maintenance and repair services. In the latter period of the project (1980 and 1981) FANALAMANGA experienced difficulties with the increasingly stringent price revision and payment conditions imposed by suppliers. The period for which prices were fixed were not long enough to enable to respond to bids and the payment conditions required the use of letters of credit with a financial cost. 3-31 Fertili7-rq were urgently needed in the early stages of the project implementation (para. 3.10 (iv) ). Consequently the Bank agreed to allow FANALAMANGA to make the first order directly from a Government supplier. Subsequently, however, international competitive bidding rules were applied normally. The second contract was won by a local importer (CPCM) and the third by a West German supplier. The large quantities purchased required the construction of a special warehouse. One problem encountered was ripped bags; future orders will request double packing. There were also local transport probleins, for which the railways were responsible, not the suppliers. 3.32 There were no problems in the procurement of zinc chloride for treatment of the P. kesiya dieback (para. 3.10 (iii) ). 3.33 With Bank approval, the procurement of seeds of P. elliottii and P. caribaea was not submitted to international competitive bidding. A problem arose when the two expected suppliers of P. elliottii seed, Mauritius and South Africa, were no longer available (para. 3.10 (iv) ). - 52 - The Bank staff helped in finding new suppliers. In 1976 a first order was placed with a Dutch firm, SETROPA, but it could not guarantee the origin of its seeds nor their germination rates, which proved unsatisfactory. In 1978 purchases were from four other firms, but germination rates sometimes remained disappointing. There is now the possibility of obtaining P. elliottii seed from Zimbabwe and P. caribaea seed from Fiji. 3.34 There was two contractors involved in the project. Firstly, CENRADERU, now FOFIFA, conducted forestry trials (fertilizer, soil preparation, tree density) through a four year contract with FANALAMANGA (para. 3.18). FANALAMANGA and CENRADERU had very close working relations and FANALAMANGA as well as Bank supervision missions were very sattisfied with CENRADERU's research work. In the case of dieback, CENRADERU contributed possitively to finding the appropriate remedy quickly (para. 3.10 (iii) ). However, if the recent low yield estimates (para. 3.20) are confirmed, some of the research findings, especially on the effect of fertilizer which CENRADERU studied carefully, may have to be further scrutinized. The other contractor was employed in the project for building the project headquarters in Antsirinala and performed quite satisfactorily. The headquarters were completed one month ahead of schedule (para. 3.18). IV. OPERATING PERFORMANCE 4.01 The operating performance of FANALAMANGA was overall very good although it cannot avoid being clouded by the results of the recent forest inventory (para. 3.20). If confirmed, these results may lead to question the sampling methods of FANALAMANGA, which throughout the project appeared reliable and consistent with the findings of the forest adviser (paras. 3.10 and 3.29). 4.02 That said, the quality of FANALAMANGA's half-yearly and annual reports on physical and financial progress reflect a high standard of self-monitoring. Special mention should also be made of FANALAMANGA's relations with the research institute CENRADERU or FOFIFA (para. 3.34) and with villagers. Regarding villagers, the senior staff of FANALAMANGA devoted the necessary time and effort to ensure that, through the opening of roads, pasture improvement and employment of the local population, the latter received sufficient benefits and became supporters of the Project; hence, there was no case of resistance to the project from the local population. 4.03 Most covenants in the Loan Agreement were complied with. In addition to the standard covenants on contractors (no problem), insurance of imported goods (no problem), and reporting (good performance), the following covenants (with reference to the section number of the Loan Agreement) were complied: Section 4.03 (b) - recruitment of senior staff; Section 3.03 - consultants, indeed the qualification of the local staff - 53 - made this covenant almost irrelevant; Section 3.07 - monitoring of Mangoro river water. Section 3.07 also contained a covenant requiring that the Bank be informed of any arrangements concerning the construction of the plant. The only instance of non compliance occurred in 1978 when the Government requested a large prefeasibility study from UNIDO on the silvo-industrial development of the Mangoro program without informing the Bank (para. 3.19). To the extent that this study confirmed the advisability of an enlarged pulpmill (270,000 tons per annum capacity) and thereby supported the Government's reluctance to investigate smaller silvo-industrial alternatives, this non compliance contributed in disrupting and delaying discussions with Bank staff on the second Mangoro project (para. 6.06), and entailed financial difficulties for FANALAMANGA (para. 3.27). 4.04 Only in two minor cases did FANALAMANGA show signs of clumsiness: the first procurement bids and the trial inventory of 1978. The first case is discussed in para. 3.06. The trial inventory took three years to process and produced very scanty results (para. 3.20). However, FANALAMANGA did not have the trained capacity to carry out a full inventory and used the opportunity of a trial inventory to train its personnel, which was appropriate. The full inventory, after all, was to be carried out during the second phase, not during the first phase project. In addition, much of the delay occurred because of very slow computer processing in the University of Madagascar, outside FANALAMANGA. Admittedly, however, had FANALAMANGA followed the Bank supervision missions' advice to hire a reliable foreign firm rather than use the overloaded computer facilities available locally, the delays could have been avoided. On the other hand, the supervision missions were probably right to accept FANALAMANGA's decision given the trial nature of the exercise and the scarcity of foreign exchange in the latter years of the project. V. INSTITUTIONAL PERFORMANCE AND DEVELOPMENT 5.01 The good institutional performance of FANALAMANGA is the more outstanding as institutional problems are the common rule of almost all other agricultural projects in Madagascar (para. 1.11). FANALAMANGA quickly established a full set of departments and engaged a qualif ied staff to carry out its operations effectively. The four main reasons and features of the rapid establishment and good institutional performance of FANALAMANGA are reviewed in the following paragraphs. Staff ing 5.02 In addition to the employment of the Director General of FANALAMANGA, which was a condition of effectiveness (para. 3.04), the senior staff of FANALAMANGA, including a local workshop engineer, a qualification rare in the country, were recruited by June 1975, within the agreed time limit. In addition, FANALAMANGA was staffed with personnel - 54 - from the pre-existing governmental operations in Mangoro. As a result, staffing in June 1976 was almost complete, as shown in the following table: June 1976 Appraisal Senior staff 7 9 Technicians 32 38 "Agents de maitrise" 160 190 (foremen or supervisors) Specialized workers 371 395 Workers 1,300 1,380 Total 1,870 2,012 Statutes 5.03 During negotiations, the Malagasy delegation proposed that the project be carried out not by a project unit within the Ministry of Rural Development, as discussed during the project appraisal, but by a Société d'Economie Mixte, a corporation comprising both Government and private interests (para. 2.20). As a separate entity from the Ministry of Rural Development, FANALAMANGA has a separate budget, and the authority to handle large procurement orders on an independent basis, conditions which the Bank considered important at appraisal. The results of the project have shown that FANALAMANGA made reasonable and effective use of its autonomous powers. Training 5.04 Performance of FANALAMANGA was good practically from the beginning. Hence, as there was virtually no need to develop the institution or improve its performance, the training activities were simply geared to maintaining the high level of performance. The training activities consist of: (i) fire protection - every year, one month before the high fire risk period, the fire personnel (about 120 people) receive refresher training; (ii) workshop refresher training - every year about ten of the forty workshop workers receive refresher training in Antananarivo from the main suppliers of vehicle and equipment; (iii) forest inventory personnel receive within FANALAMANGA ten day refresher courses twice a year on topography, photo interpretation and cartography; and (iv) accounting courses - in 1980 the financial director organized a three week seminar for 15 members of his staff at the project headquarters. In addition one accountant was sent for a one month long accounting course in a specialized public training corporation outside the institution. - 55 - Lack of Political Interference 5.05 Compared to other projects in Madagascar, the implementation of the Mangoro forestry proje,t seems to have benefitted from the lack of political interference. There are several reasons for this, an important one being the mentality of the senior project staff and the senior foresters of the Foreslry Directorate of the Ministry. Another important reason is that the impLementation of the project required relatively little interference with potentially disrupting socio-economic forces. For example, the project dîd not have a direct impact on a large number of farmers, nor did its irmplementation include any form of marketing. In short the project implementation was essentially technical. By contrast, difficulties appeared when the project required a political decision regarding silvo-industrial project development (para. 3.19). 5.06 Of the four reasons explained above (staffing, statutes, training, and lack of political interference), the key factor for FANALAMANGA's good institutional and operational performances was the high standard of its senior staff, in particular of the Director General. Because of the growing shortage of highly qualified staff in Madagascar, the replacement of the senior staff is now a potential problem. There have been no new professionally qualified foresters (Ingénieurs des Eaux et Forêts) since 1972. The workshop engineer and the financial director could easily earn twice their current salaries outside FANALAMANGA. Many of the key officers appear to be retained niostly by the team spirit existing among FANALAMANGA's staff and the satisfaction resulting from the project's achievements. VI. BANK PERFORMANCE 6.01 The basis of the analysis of Bank performance outlined below is firstly identification and resolution of issues, and secondly, project supervision. Issues 6.02 Did the Bank foeus on the right issues? In retrospect, there were four main issues: (i) the support of the local villagers; (ii) land tenure; (iii) the creation of a separate project entity; and (iv) the development of a silvo-industrial complex to process and market the project output. Tree growth should not be considered an issue but rather a well recognized risk, as mentioned in the appraisal report, para. 7.07 (see also paras. 2.10 (ii) and 8.01 of this report). The four issues were correctly identified at appraisal, and, as the following comments will show, three of them were adequately solved at an early stage, while the fourth slowed down the progress of the project, not because of poor Bank performance, but because it had a highly political connotation. - 56 - 6.03 Support of Local Villagers. As a result of the Bank's unfortunate experience in the Madagascar Beef Cattle Development Project (see' OED Report No. 1559. ADril 11. 1977). the preparation mission required a socio-economic study from the Government as part of the preparation of the project (para. 2.17). However, conditions in the Mangoro forestry zone were more favorable than the conditions prevailing in the Beef Cattle Development Project area. The Mangoro forestry zone is sparsely populated (11,000 people living in 2,000 households in 1973) and the villages are concentrated in the valleys. It might therefore appear that, given the more favorable conditions, the Bank was overcautious on this issue. However, the completion mission believes the Bank was not overcautious, and bases its opinion on the observation that the project director was highly aware of the issue and spared no effort to ensure the population's support, devoting the necessary time to maintaining good relations with the village chiefs and notables, in addition to the roads, health and education benefits which the project provided to the local population. Thus, it is the mission's view that the good relations between the project and the local population fully justify the Bank's precautions. 6.04 Land Tenure. The Bank staff was successful in obtaining that the afforestation zones be gazetted before starting the project (para. 2.18), although the issue was granted much less significance when plantations were carried out outside the initial perimeter (para. 3.11). 6.05 Creation of a Separate Project Entity. In retrospect, the effectiveness of FANALAMANGA's management is sufficient evidence that the establishment of a project entity with a separate budget and authority for procurement was appropriate. The Bank's legal services contributed in drafting the statutes which were agreed in early November, thereby satisfying in time a condition of Board presentation. The establishment of FANALAMANGA, a condition of effectiveness, occurred late, on June 4, 1975, but this was due to political turmoil beyond the Bank's control. 6.06 Silvo-industrial Complex. The issue of the development of a silvo-industrial complex had been thoroughly examined during the preparation (para. 2.13), but it was raised again in 1978 as part of an early consideration of IDA support for the next phase of the program (para. 3.19). Although it caused considerable delay in the preparation of the second phase of the project, these delays were undoubtedly justified by the magnitude of the investment at stake and the necessity of convincing the Government to examine options other than a pulpmill. Did the Bank give the wrong impression that it was fully supporting the idea of a large pulpmill and thereby contribute to commit the Government to this idea? Clearly, the Government was already strongly attached to the idea of a pulpmill before the Mangoro project was even started, as evidenced by the statements in the 1974-1977 Development Plan providing for a pulpmill at Matsiatra (para. 2.10). Bank staff, in the appraisal report, did not exclude the option of exporting wood chips and roundwood as a fall back position to the pulpmill (para. 2.16). Subsequently, the rising cost of the pulpmill led the Bank to point out to the Government that other - 57 - investment options to foLlow-up on the forestry project should also be considered. The difficulty in reaching agreement with the Government was the main cause of the delays incurred in the latter part of the project (para. 4.02). Supervision 6.07 The Bank's performance in project supervision was overall very satisfactory, and made relatively straightforward by the thorough preparation of the project, the competence of the Director General of FANALAMANGA, as well as good understanding and collaboration between the Bank and project staff. The continuity of Bank staff was one factor of success. The Bank also showed open mindedness and flexibility in several cases of problem resolution mentioned in the report, including the procurement of fertilizer under conditions of urgency (para. 3.31), the reorganization of the plantation layout (para. 3.08), and the use of earthballs rather than plastic tubes in the nurseries (para. 3.15). However, as mentioned in paras. 3.06 and 3.28, one difficulty arose for lack of bank assistance in preparing the first procurement document. Despite the project director's best efforts to act in accordance with the Bank's written guidelines, mistakes resulted from the fact that the project staff was not well acquainted with Bank procedures at the beginning of the project. Assistance frcm locally based Bank staff could probably have avoided these predicable mistakes. 6.08 The good standard of the Bank's supervision performance is not diminished by recent yield estimates (para. 3.20). Indeed, the supervision missions took the necessary steps to monitor tree growth adequately, as reflected in the following actions: (i) measures recommended at an early stage (para. 3.09) effectively improved yields, as shown by the higher yields of the younger plantations (para. 3.20); (ii) adequate monitoring of sampling, which were carried out on schedule (para. 3.20); and (iii) proper advice concerning the computer data treatment of the trial inventory (para. 4.04). Therefore, although the recent yield estimates are creating doubts on previous yielcl forecasts based on the samplings, the completion mission believes that these estimates do not bring into question the quality of the Bank's supervisions which relied confidently, and with reasons, on FANALAMANGA's technical capacities. VII. ENVIRONMENTAL IMPACT 7.01 The Project was beneficial to the environment of the Mangoro Valley. Tree cover reduces erosion and improves soil fertility and water retention. Special care was taken to avoid land use conflicts (para. 2.23). However, the ultimate environmental impact of the Mangoro afforestation program will depend on the nature of the silvo-industrial development program stiLl to be decided. - 58 - VIII. FINANCIAL AND ECONOMIC REEVALUATION 8.01 The financial and economic evaluation models used at appraisal included the whole industrial development, which was assumed to be a large pulpmill, and showed a financial rate of return of 10% and an economic rate of return of 13% (by shadow pricing the exchange rate and wage rates at 125% and 75%, respectively, of their official and market values). However, it would now be meaningless to use the same model, given the expected low output of the forest (para. 3.20) and the consequent unlikelihood of establishing a large pulpmill. It is also too early to judge what other industrial developments are posssible, although this should be known in the course of 1982. For the time being it is therefore only possible to carry out the economic and financial reevaluation of the project by disregarding the subsequent industrial development and considering the plantations alone. This required developing a model based on stumpage rates (Annex). 8.02 The table below shows the rates of return of the plantations alone, at appraisal and at completion, based on actual costs. Two stumpage rates are used: FMG 710/m3 (US $2.78), the stumpage rate used at appraisal, which gives a low rate of return; FMG 1,550/m3, based on an opportunity cost of capital of 10%, assuming appraisal cost estimates. The actual rates of return are considerably lower, not because of costs, which in fact are lower on a per hectare basis (para. 3.23), but because of the lower output of the forest (6.8 million m3 after 18 years of tree growth instead of 10.0 million m3 after 15 years, as assumed at appraisal) reflecting the pessimistic 1981 estimates on yields (Annex, Table 5, and para. 3.20). To obtain a financial rate of return of 10%, the stumpage rate would now have to be FMG 3,000/m3 in 1974 FMG, equivalent in 1981 to FMG 5,710/m3 or US $22.00/m3. This is considerably above the level of reasonable stumpage rates for pulpwood today (approximately US $5.00 to US $10.00). Rates of Return (RR) of Plantations Alone Stumpage rates (in 1974 FMG) 710 1,550 Financial Economic Financial Economic RR RR RR RR At appraisal 3 % 5 % 10 % 12 % Actual 1 % 2 % 6 % 7 % - 59 - IX. CONCLUSION 9.01 The 1981 forest inventory showing poor yields will no doubt require confirmation, as explair.ed in para. 3.20. If the poor yields are confirmed, the forest output will be substantially lower than expected at appraisal and many possible downstream developments will be in jeopardy, including the developmernt of a bleached kraft pulpmill, and possibly even the continuation of plantations. Low yields were considered one of the main risks at appraisal and are not, as this report has shown, the result of any apparent shortcomning in project implementation. However, if poor yields are confirmed, future Bank missions will probably want to look into more details and determijne why the project sampling and research findings were so misleading. 9.02 That a project imaplemented with great efficiency should yield such poor results would indeed be very disappointing. Many experienced visitors agreed that the accomplishments of FANALAMANGA were outstanding, even by international standards. The Governnent showed great commitment to the project and the project entity responded with imagination, competence and diligence to a host of varied problems described in previous paragraphs of this report, reflected Un relatively higher yields for trees planted during the project, despite the poor performance of the pre-project plantations. 9.03 One fundamental question should be answered in conclusion to this report: should a forestry project be undertaken with uncertain information on the expected yields? It is the mission's opinion that the risk of obtaining disappointing yields can never be completely eliminated. The appraisal mission, having noted the risk, could only rely on the studies of many highly qualified foresters who worked in the pre-project phases and showed that the project was worth the risk. Therefore, with the information available in 1974, the Bank was probably right to undertake the project. - 61 - Table/Tableau 1 Page 1 MADAGAS CAR Mangoro Forestry Project Projet Forestier Mangoro Project Cost and Financing Coûts et Financement du Projet (in US$ 17) (en $E.U. 1/) Actual Appraisal estimate/ % of Estimation de l'évaluation Total appraisal actual cost /Effectif % Foreign/ /Total coût évaluation Components Local Devises Total effectif 2/ Composantes Afforestation 2 4 .8 3.2 10.6 331% Boisement Roads 1.3 .5 1.8 ) ) Routes 1.3 ) 49% Fire protection 1.0 .1 1.1 ) ) Lutte contre l'incendie Project management Gestion du Projet Administration 1.9 .1 2.0 1.8 90% Administration Buildings and housing 1.7 .2 1.9 2.5 132% Bâtiments et logements Vehicles and equipment .6 1.3 1.9 3.5 184% Véhicules et équipements Research, training Recherche, formation and studies .3 .5 .8 .3 38% et études Pasture improvement .1 - .1 .2 200% Amélioration des pâturages Sub-total 9.3 3.5 12.8 20.2 158% Sous-total Cont ingencies: Imprévus: Physical .2 .2 .4 Physiques Price 3.1 .9 4.0 Prix Total 12.6 4.6 17.2 20.2 117% Total Financing: Financement: a) Bank/IDA 13.5 13.5 100% a) BIRD/IDA b) Borrower 3.7 6.7 181% b) Emprunteur Sources: Appraisal Report and Table 1, Page 2/Rapport d'Evaluation et Tableau 1, Page 2. 1/ Exchange rates used: FM4G 255/US$ at appraisal and FMG 228/US$ for actual costs/Taux de change utilisés: FMG 255/$E.U. à l'évaluation et FMG4 228/$E.U. pour coûts effectifs. 2/ For comments please see para. 3.23 in text/Pour commentaire veuillez lire para. 3.23 du texte. February 11, 1982 le Il février 1982 - 62 - Table/Tableau I Page 2 MADAGASCAR Mangoro Forestry Project Projet Forestier Mangoro Actual Project Expenditures by Fiscal Year Dépenses Effectives du Projet par Année Fiscale (FMG million unless otherwise indicated) (FMG millions sauf indication contraire) Nov. 741 Estimate/ Total June 761 1980/81 US$/ nov. 74/ Estimation Total Total Components juin 76 1976/77 1977/78 1978/79 1979/80 1980/81 FMG $E.U. Composantes Afforestation 343.7 227.2 363.2 509.0 484.4 495 2,422.5 10.6 Reboisement Construction de Roads and fire routes et lutte protection 18.1 42 7 65.6 60.1 59 285.4 1.3 contre le feu Administration 45.1 50.5 58.9 72.7 95.3 83 405.5 1.8 Administration Construction et entre- Buildings and tien des logements housing 6.7 46.4 85.8 185.1 132.3 117 573.3 2.5 et bgtiments Equipement, véhicules, Vehicles and entretien et pièces equipment 71.6 15.5 292.2 12.3 32.3 376 799.9 3.5 détachées Research, training Recherche, étude and studies - 9.8 11.4 23.8 3.1 30 78.1 .3 et formation Pasture improvement - .6 7.8 14.8 11.2 2 36.4 .2 Amélioration de pâturage Total 485.2 392.9 859.0 883.3 818.7 1,162.0 4,601.1 20.2 Total Exchange rate Taux de change (FMG/US$) 231.6 242.4 235.7 219.2 212.0 235.7 228.1 (FMG/$E.U.) Total in US$ 2.1 1.6 3.6 4.0 3.9 4.9 20.2 Total en dollars E.U. Source: Annual report of FANALAMANGA and last IBRD supervision report/Rapports annuels de FANALAMANGA et dernier rapport de supervision BIRD. February 11, 1982 le Il février 1982 - 63 - Table/Tableau 2 MADAGASCAR Mangoro Forestry Completion Report Projet Forestier Mangoro Project Organization and Objectives Organisation et Objectifs du Projet Appraisal/ Actual/ Evaluation Réalité Project objectives or focus: Objectifs ou cible du projet: Afforestation (ha) 35,000 47,170 Boisement (ha) Project organization and performance: Organisation et résultat du projet: Project unit (FANALAMANGA) New/Nouveau Good/Bon Bureau du Projet (FANALAMANGA) Institution building: Recruitment of Achieved/ L'Institution: Focus of effort senior staff/ Réalisé Priorité Recruitement des cadres Means Condition of Fulfilled/ Moyens effectiveness/ Satisfaite Condition d'en- trée en vigueur Wider sector effort None/Aucune None/Aucune Visée sectorielle Consultants use and performance: Emploi et performance des consultants: Identification Good/Bon Identification Preparation Good/Bon Préparation Appraisal Good/Bon Evaluation Project executives Good/Bon Cadres du Projet Project adviser Good/Bon Conseiller du Projet Special studies None/Aucune Etudes spéciales Researchers Good/Bon Chercheurs Focus of effort Tree growth/ Priorités Croissance des arbres Means Pre-project Moyens plantations/ Plantations de l'avant- projet Achievement of objective Poor/Maigre Réalisation de l'objectif February 11, 1982 le 11 février 1982 Table/Tableau 3 Page I MADAGAS CAR Mangoro Forestry Project - Phase 1 Completion Report Projet Forestier hangoro - Phase I Rapport d'Achèvement Physical Work Schedule of the Project 1/ Réalisations Physiques du Projet 1/ Key Indicators Principaux Indicateurs Actual % Sub-total appraisal/ 2/ /Total Evaluat ion 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 partiel 1979/80 1980/81 Total réalisé en Z Planted area (ha) Surface plantée (ha) Appraisal - 7,000 7,000 7,000 7,000 7,000 35,000 - - 35,000 - Evaluation Actual - 6,190 3/ 5,470 1/ 6,200 4/ 7,995 8,780 34,635 6,935 5,600 47,170 135 Z Réalisé Roads (ha) Routes (ha) Appraisal: Service roads 19 37 - - - - 56 - - - - Evaluation: Routes de service Primary/secondary 56 168 168 168 168 112 840 - - - - Principales/Becondaires Plantation tracks 60 182 182 182 182 122 910 - - _ _ Pistes Total 135 387 350 350 350 234 1,806 - - - - Total Actual: Service roads - - - - 5.5 12 17.5 9 21 47.5 - Réalisé: Routes de service Pritsary roads - 34 165 21 16 3 241 64 60 365 - Routes principales Secondary roads - 34 79 70 42 78 303 62 - 365 - Routes secondaires Plantation tracks - 130 293 184 448 574 1,629 265 - 1,894 - Pistes Total - 200 537 275 511 667 2,190 400 81 2,671 148 Z Total Firebreaks (km) Pare-feu (km) Appraisal 20 58 58 58 58 38 250 - - - - Evaluation Actual - 34 256 179 51 88 608 247 243 1,098 379 Z Réalisé Buildings and houses Bâtiments et logements Appraisal: Exploitation 8 15 - - - - 23 - - - - Evaluation: Bâtiments Houses: Logements: Hard 15 29 44 - - Dur Prefabricated 370 740 - - - - 1,110 - - - - Préfabriqué Total houses 385 769 - _ _ - 1,154 - _ _ _ Total logements Actual: Exploitation: Réalisé: Bétiments: Brick and concrete - - - 2 4 10 16 5 3 24 ) Dur Waffle and clay - - - 3 10 3 16 6 - 22 ) 200 Z Semi-dur Houses: Logements: Brick and concrete - - - - 41 162 203 147 30 380 - Dur Waffle and clay - 156 624 34 101 9 924 103 56 1,083 - Semi-dur Prefabricated - 41 485 - - - 526 29 - 555 _ Préfabriqué Total - 197 1,109 34 142 171 1,653 279 86 2,018 175 Z Total Table/Tableau 3 Page 2 Actual % Sub-total appraisal/ 2/ /Total Evaluat ion 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 partiel 1979/80 1980/81 Total réalisé en X Pasture improvement (ha) Amélioration de pâturages (ha) Appraisal - 400 400 400 400 400 2,000 - - 2,000 - Evaluat ion Actual - - 14 55 362 248 679 203 1 883 44% Réalisé Survey (ha) Reconnaissance (ha) Appraisal 2,330 7,000 7,000 7,000 7,000 4,670 35,000 - - 35,000 - Evaluation Actual - 7,000 7,000 7,000 11,400 14,200 46,600 10,500 6,000 63,100 180 Z Réalisé Plants (millions) Plantes (millions) Aooraisal 3.6 10.8 10.8 10.8 10.8 7.2 54.0 - - 54.0 - Evaluation Actual - 11.4 13.9 11.9 . '5.1 67.3 ô .9 G.G0 ^ 157 I R i Land preparation (ha) Préparation du sol (ha) Mechanical (sub-soiling): Mécanique (sous-solage): Appraisal 1,630 4,900 4,900 4,900 4,900 3,270 24,500 - - 24,500 - Evaluation Actual - 4,130 4,310 7,445 7,815 10,500 34,200 6,700 3,215 44,115 180 Z Réalisé Manual (hole-pitting): Manuelle (trouaison): Appraisal 700 2,100 2,100 2,100 2,100 1,400 10,500 - - 10,500 - Evaluation Actual - 1,200 1,270 - - - 2,470 35 2 2,507 24 7 Réalisé Total: Total: Appraisal 2,330 7,000 7,000 7,000 7,000 4,670 35,000 - - 35,000 - Evaluation Actual - 5,330 5,580 7,445 7,815 10,500 36,670 6,735 3,217 46,622 133 Z Réalisé Mechanical bush clearing Débroussallage Appraisal 700 2,100 2,100 2,100 2,100 1,400 10,500 - - 10,500 - Evaluation Actual - 700 560 460 1,395 - 3,115 245 930 4,290 41 Z Réalisé Manual plant hole preparation Placettes Appraisal 1,630 4,900 4,900 4,900 4,900 3,270 24,500 - - 24,500 - Evaluation Actual - 2,860 5,170 5,990 5,900 8,580 28,500 6,430 2,230 37,160 152 X Réalisé Fertilization Fertilisation Appraisal - 7,000 7,000 7,000 7,000 7,000 35,000 - - - - Evaluation Actual - 400 1,650 6,900 7,250 4,850 21,050 3,300 5,100 29,450 84 Z Réalisé Zinc treatment (actual) - - - - - - - 5,650 19,050 24,700 - Traitement zincique 1/ Source: FANALAMANGA, iBRD/IDA Phase I and Phase Il appraisal reports. Reporting periods '! Source: F.\NALAMANGA, BIRD/ADI et rapsorts d'évaluation des projets Phase I et Phase 11. are July I - June 30. Figures from the Phase I appraisal report referred to calendar Les périodes d'activité vont du ler juillet au 30 juin. Les chiffres du rapport years aod have been adjusted in the table to correspond to FANALAMANGA reporting periods. d'évaluation Phase I correspondent aus années calendaires et ont été ajustés dans ce tableau pour correspondre ana périodes d'activités de la FANALAMANGA. 2/ Activities started in November 1974. 2/ Les activités ont commencé au novembre 1974. 3/ Below target because of old equipment ln insufficient numbers, difficulties in spare parts 3/ En-dessous des objectifs à cause de la vétusté et de l'insuffisance e- nombre de supply and reorganization of FANALAMANGA. l'équipement, la difficuilté d'obtenir des pièces détachées et la réorganisation de la FAN ALAMANGA . 4/ Below target because of delays in obtaining equipment. 4/ En-dessous des objectifs à cause des délais d'obtention de l'équipemet. February 11, 1982 le il février 1982 - 66 - Table/Tableau 4 MADAGASCAR Mangoro Forestry Completion Report Projet Forestier Mangoro Prices Prix (Expressed in 1974 US$ 1/) (Exprimés en $E.U. de 1974 1/) Inputs/Moyens de Production 2/ 4 Wheel drive Stumpage station wagon Zinc Pine rates/ glass/ chloride/ seeds/ Prix Véhicules à 4 Fertilizer Chlorine Semences sur pied Bulldozer roues motrices /Engrais de zinc de pins Units m3 solid wood 150 HP 1 unit/ 1 t 1 t 1 t Unités under bark/ 1 unité (PK 21-16) m3 de bois plein sous écorce Estimated at Estimation à appraisal l'évaluation (1974) $ 2.80 $ 84,000 $ 7,130 $ 198 n.a. n.a. (1974) Prevailing prices at completion Prix à l'achève- (1981) $ 3.55 3/ $ 73,700 $ 8,375 $ 246 $ 558 $ 63 ment (1981) 1/ 1974 prices are obtained by dividing the price in FMG by the prevailing exchange rate, FMG 255/US$. 1981 prices are expressed in 1974 US$, first, by deflating the price in FMG according to the Madagascar consumer price index which was 258.3 in March 1981 and 144.2 in 1974, and then by applying the exchange rate of FMG 260/US$ prevailing in 1981/Les prix 1974 sont obtenus en divisant le prix en FMG par le taux de change applicable, soit FMG 255/$E.U. Les prix de 1981 sont exprimés en $E.U. de 1974, obtenus d'abord en ajustant le prix en FMG d'après l'indice des prix de détail de Madagascar qui était de 258,3 en mars 1981 et de 144,2 en 1974, et ensuite en appliquant le taux de change applicable en 1981, soit FMG 260/$E.U. 2/ Input prices are obtained from the appraisal report of the first phase project and the working papers of the appraisal report of the second phase project/Le prix des moyens de production est tiré du rapport d'évaluation de la première phase et des documents de travail du rapport d'évaluation de la deuxième phase du projet. 3/ Based on stumpage price studies for Kenya/D'après des études du prix sur pied au Kenya. February 11, 1982 le Il février 1982 Table/Tableau 5 Page 1 MADAGASCAR Mangoro Forestry Project Projet Forestier Mangoro Project incrementai Timber Production PiuducLbiûL de Bois ppiémentaira Rfsultant d- Pr-c- t Pre-project 1974 (Appraisal year)/ Avant-projet 1974 (Année de l'évaluation) Yield (m3 under bark Cropping Area /ha) per Area intensity cropped annum/ development (ratio) (ha)/ Rendement Output Price Value (ha) /Taux Superficie (m3 sous ('000 m3)/ (1974 US$)/ /Superficie d'abattage abattue écorce/ha) Production Prix Valeur (ha) (proportion) (ha) par an ('000 m3) (1974 $E.U.) 1. Without project 1. Sans projet (estimation (appraisal estimate) 24,600 - - 13 - 2.8 - de l'évaluation) 2. Without project 2. Sans projet (estimation (completion estimate) 24,600 - -- - 3.6 - à l'achèvement) 3. With project 3. Avec projet (estimation (appraisal estimate) 24,600 - - 13 - 2.8 - de l'évaluation) 4. With project 4. Avec projet (estimation (completion estimate) 24,600 - -- - 3.6 - à l'achèvement) February 11, 1982 le Il février 1982 Table/Tableau 5 Page 2 MADAGASCAR Mangoro Forestry Project Projet Forestier Mangoro Project Incremental Timber Production Production de Bois Supplémentaire Résultant du Project 1981 (Completion year) 1// 1981 (Année d'achèvement) 1/ Yield (m3 under bark Cropping Area /ha) per Area intensity cropped annum/ development (ratio) (ha)/ Rendement Output Price Value (ha) /Taux Superficie (m3 sous ('000 m3)/ (1974 US$)/ a, /Superficie d'abattage abattue écorce/ha) Production Prix Valeur C (ha) (proportion) (ha) par an ('000 m3) (1974 $E.U.) 1. Without project 1. Sans projet (estimation (appraisal estimate) 24,600 - - 13 - 2.8 - de l'évaluation) 2. Without project 2. Sans projet (estimation (completion estimate) 24,600 - - - - 3.6 - à l'achèvement) 3. With project 3. Avec projet (estimation (appraisal estimate 1/) 59,600 - - 13 - 2.8 - de l'évaluation 1/) 4. With project 4. Avec projet (estimation (completion estimate) 72,300 - - 5.3 - 3.6 - à l'achèvement) 1/ Completion year was estimated to he 1979, n ot 1981, at a ppraisal/L'année d'achèvement devait être 1979 et non pas 1981, d'après l'évaluation. February 11, 1982 le Il février 1982 Table/Tableau 5 Page 3 MADAGASCAR Mangoro Forestry Project Projet Forestier Mangoro Project Incremental Timber Production Production de Bois Supplémentaire Résultant du Project Full development (1990s)/ Développement complet (Années 1990) Yield (m3 under bark Cropping Area /ha) per Age of Area intensity cropped annum/ trees development (ratio) (ha)/ Rendement (years)/ Output Price Value (ha) /Taux Superficie (m3 sous Age des ('000 m3)/ (1974 US$)/ /Superficie d'abattage abattue écorce/ha) arbres Production Prix Valeur (ha) (proportion) (ha) par an (années) ('000 m3) (1974 $E.U.) 1. Without project 1. Sans projet (estimation (appraisal estimate) 24,600 7% 1,640 13 15 320 2.8 896,000 de l'évaluation) 2. Without project 2. Sans projet (estimation (completion estimate) 24,600 - - - - - 3.6 - à l'achèvement) 3. With project 3. Avec projet (estimation (appraisal estimate) 96,000 7% 6,400 13 15 1,248 2.8 3,494,400 de l'évaluation) 4. With project 4. Avec projet (estimation (completion estimate) n.a. 6% n.a. 5.3 18 n.a. 3.6 n.a. à l'achèvement) February 11, 1982 le Il février 1982 - 71 - Annex/Annexe Page i MADAGASCAR Mangoro Forestry Project Model for tile Calculation of the Financial and Economic Rates of Return The model was built to calculate and compare the financial and economic rates of return of the project as they appeared at appraisal and at completion. The benefits of the project are the volume of unfelled trees resulting from the pre-project and project plantations. Pre-project plantations were included in the benefits as in the appraisal report. Costs are those incurred during the project, plus the costs of maintaining the plantations after t:he project until the trees are sold, assuming no further plantations are made. Pre-project costs are considered sunk costs, as in the appraisal report. Post-project maintenance costs are estimated on the basis of costs incurred during the project period (Appraisal Report, Annex 3, Table 1). Un:Less otherwise indicated, the following figures give the percentage of average annual project costs retained as annual maintenance costs for t:he post project period. The percentage of foreign exchange (F. E.) indicated was used in shadow pricing for the economic evaluation (completion mission estimates). Annual Mainl:enance Costs as % of Annual Project Costs Afforestation: Only one year of weeding after the completion of the project. Roads and fire control: 47% (20% F.E.). Administration: 50% (5% F. E.). Building and housing: 20% (10% F. E.). Vehicles and equipment: 15% (67% F. E.). Research training and studies: 25% (60% F. E.). Pasture improvement: 60% (0% F. E.). Physical contingencies: 10% on roads (other than service roads), buildings and housing, vehicles and equipment (50% F. E.). - 72 - Annex/Annexe Page 2 Post project maintenance costs are gradually reduced as the forest is sold. For calculating the economic rate of return, shadow pricing was applied based on the appraisal report scenario, i.e. 125% on foreign exchange and 75% on labor 1/. As a result, total costs are increased by 2% during the project period. Post project economic costs are therefore obtained by increasing financial costs by 2%. The output is considered exportable and therefore increased, like the exchange rate, by 25%. 1/ The labor component is obtained from the appraisal report, Annex 2, Table 3, assuming that the indicated man-days per ha should be applied to 7,000 ha per annum, that there are 250 man-days in a man-year and that the average annual wage was FMG 78,350 in 1974 (Appraisal Report, Annex 3, para. 2). February 11, 1982 - 73 - Annex/Annexe Table/Tableau- 1 ?1ADAGASCAR Mangoro Foiestry Project Projet Forestter Mangoro Plroject Financial aud Economic Evaluation Evalulation Financière et Economique du Projet (Based on Appiaisal Estimates) (D'après les estimations de l'évaluation) (1974 FltG million) (million de FMG aux prix de 1974) Incremeutal benefits Incremental benefits /Re-néfices Net /Bénéfices Net Costs/CoGts supplémentaires economic supplémentaires econiomic Financial kenefits/ Financial benefits/ 1/ cash flow/ Bénéfices 1/ cash flow/ Bénéfices Financial/ Economic/ Financial/ Economic/ Trésorérie économiques Financial/ Economic/ Trésorérie économiques Financiers Economiques Financiers Economiques financière nets Financiers Economiques financière nets (Sl.umpage rate: MIG 710/m3 unler bark) (Stumpage rate: FMi 1,550/m3 unïer bark) (Pr x sur pied: FMG 710/m3 sous écorce) (Prix sur pied: FMG 1,550/m3 sous écorce) 1974 319 339 (319) (339) (319) (339) 1975 1,356 1,468 (1,356) <1,468) (1,356) (1,46S) 1976 473 465 (473) (465) (471) (465) 1977 443 427 (443) (427) (443) (427) 1978 455 439 (455) (439) (455) (439) 1979 328 304 (328) <309) (328) (309) Total 3,374 3,447 1980 179 183 (170) (I1P) (179) <183) 1981 176 180 (176) (180) (176) (IR0) 1982 176 180 (176) (180) (176) (180) 1983 176 180 (176) (180) (176) (180) 1984 176 180 (176) (180) (176) (180) 1985 176 180 466 5S3 290 403 1,019 1,273 842 1,093 1986 176 180 520 650 344 470 1,136 1,420 960 1,240 1987 176 180 555 694 370 514 1,21? 1,515 1,036 1,335 1988 176 180 766 958 590 778 1,672 2,090 1,496 1,910 1989 100 103 782 97R 682 875 1,708 2,135 1,608 2,032 1990 100 103 792 90n 692 887 1,728 2,160 1,628 2,058 1991 100 103 801 1,001 701 898 1,74g 2,185 1,648 2,082 1992 36 36 811 1,014 775 978 1,769 2,211 1,733 2,175 1993 36 36 819 1,024 775 988 1,789 2,236 1,753 2,200 1994 36 36 803 1,003 775 967 1,753 2,191 1,717 2,155 Rates of Return/ Rates of Return/ Taux de Rentabilité Taux de Rentabilité Financial:/ Economic:/ Financial:/ Economic:/ Financière: Economique: Financière: Economique: 3% 5% 107 12I 1/ The physical output is shown in the Appraisal Report, Annex 6, Table 2/La production en volume est indiquée dans le Rapport d'Evaluation, Annexe 6, Tableau 2. February 11, 1982 le Il février 1982 MADPA C.ASCA R Mangoro Forestry Project Pro ject Forestier M1angoro Oetailed Project Costs (Appraisa1 flsti.ates) Détail des Coûts do Projet (Estisatiua d, lvlaln (1974 PMG illlion) (en million de PFMG as. pris de 19743 e Fina.tt.1 co.ta ol hich: ttoscoCsts/ /Coûts finascière dont: Coûts icooosiqses Roads asd lire B.tldings Vehic1es Research, Contro1/ and asd traising Posture Roates et ho.sing/ eq.ip.ent! and st.diesl improvement/ Physical lotte Bâti-,ets Véhicales Recherche, Aê,lior.tios costisgecices Foreign Foreig. Afforestatlos/ castre et et Sormattos des /I.prêv.s es-h.sge (Sages)! (Oth.r)/ exchasge (Wages>! Bois.e.et lioteodie Administration Iogeentst equtpeseot et études pèt,arages physiqoes Totl1 IDfle.îe (Salatres) (Astres) /Dlevises (Salaires) Total Project Perisd! Pêrlode do Projet 1974 28.5 93.4 3 3 .3 98.6 10.2 37.0 2.0 15.5 318.5 (79.9) (238.6) (99.9) 3 3 9.5 1 97 5 164.4 286.0 104.3 309.0 3 54 .7 53.7 5.0 90.2 1,356.3 (572.03 (127.2) (657.1) (715.03 (95.4) 1,467.5 1976 164.4 92 .7 103.7 22.0 31.9 53.7 5.0 - 47 3. 3 (95.5) (127.2) (250.6) (119.4) (q5.4) 465.4 197 7 164.4 98.6 99.0 22.0 31.8 2 3 .4 5 .0 -4431. 2 (62.8) (127.2) ( 2 53 .2) (78.5) (95.4) 427.1 1978 164.4 108.0 100.4 22.0 31.3 23.4 5.0 -455.0 (64.3) (127.2) (263.5) (90.4) (95.4) 4 39 .3 1979 135.0 73.9 63.6 15.4 21.2 15.5 3.0 -32 7 .6 ( 53.6r) (127.2) (146.9) (47.0) (95.43 309.2 Total 821.1 7 52 .6 503.3 488.0 481.5 206.7 25.0 95.7 3, 37 3.9 (929.1) (636.0) (1,909.9) (1,160.2) (477.0) 3 ,4 47 .0 Foot Proj.ct Period (l.ia tena-ce) Aprês Projet ( Pt at eten) 1980 2.8 70.0 50.0 20.0 15.0 10.0 3.0 9.0 179.8 - - - - - 183.0 1981 - 70.0 50.0 20.0 15.0 10.0 3.0 8.0 176.0 - - - - - 180.0 1982 - - - - - - - - 176.0 - - - - - 190.0 1983 - - - - - - - - 176.0 - - - - - 190.0 1984 - - - - - - - - 176.0 - - - - - 180.0 1985 - - - - - - - - 176.0 - - - - - 180.0 Fost Froject Period (MaIntenance and Sel ling) Aprè Projet (Ent raties et veste) 1986 - - - - - - - -176.0 - - - - - 180.0 19A7 - - - - - - - - 176.0 - - - - - 180.0 1988 - - - - - - - 176.0 - - - - - 182.0 1989 - - - - - - - - 130.0 - - - - - 1n3.n 1990 - - - - - - - - 100.0 - - - - - 103.0 1991 - - - - - - - 100.0 - - - - 103.0 1992 - - - - - - - - 36.0 - - - - - 36.0 1993 - - - - - - - 36.0 - - - - - 36.0 1994 --------36 .0 - - - - 36.0 February 11, 1982 le Il février 1992 e e ci v o - -< --- - _ r; .7v>_«~>~4çCCs s >r hv°b~r - OClCJ'CC C L- a: - Ll CC C W~~~e0 O L 0v _-- Œ.D v « .r 0.O C _ O fl Lfr v v oc. .O - _ cL C _ C * u--e _r. \ 3J rrctement fero-chrom-pton = onPrères << Somoo Troasn,iss,on poles and roilwoy ties-SIl Forents eno 4 Poteaux et troaerses Forûis _ Cinchono Forit,ny boundarres Anoloho o QCinqun n Limites des FarianyL + Train,ng centers Othir on-nodeipine plantations Antloha 6l0 Centres de foration roAuts plontations de pins <>$t / Q~~~~~~~elondr air MohûjançaX t 040~~~~~~~~~~~~~M roontsouio Mahoj nqa -. Pr e KILOMETERS 0 50 100 150 200 MILES O 50 100 ô 1 S g4 < \ r (r 16-- Cf-n) C<~~~~Maroinor Mornor1kony M 4ononoro Besoiomb 4 X i kel 0Trso'oonsn Soorie,no-lvongo g&NOM Moesnînsor 4BO~~~~~~~~~RAHA ( nocirivoa Atsinanona M o0 z arn m bq u e 'tS Xorofonirbe \ be Mozambique Mornrrr/r1 18' ~ ~ ~ ~ ~ ~ q 8 ovn MANGOORO - I /, + le . / ) O/Amb=rauaronolo ( 5;7aflie f _ '=t TauTomosino Arr,born,nianaln ~~~Fonandrono __ __ _____^v \- Anlsorsîo A ' Manobris__/ 5Y1@ 7 h~~~~ , ANTANANARlÉgl Prn ohîbînony A N D / A N i ~~~~~~~~~~~~~~- oromona Belo Sur A M ondrrrsozo_ o Moi{>ooitr t Andotosmn L Voa Tslrlbshinc&t,5~~ - Moh|onoIIr!o -20 !1p_ iS7i ~~~~~~~~~~~~~ancinjary V. THIS MAP IS BASSO ON IBRD 15290,SEPTEMBER 1980, o F-- cTIT-LE H/AVE BEEN CHANGEO AND PROJECT INFORMA TION ADOEO. -22' 22'- P.- f ( . W >oh be ~ VoWlpeno ,id r-irnms -lf e -es-ers v if Thidenoirneti ss idrd rire ci f u o R rafangainG do n-i -,ply. on tihr tîrni of \\ /\ ABe, aka l /| ldtsiiri °i Oin endo sémeni 24' 2 J- o ° Tf Berakete MMoir aenrirsnaOJ A F R I C A iOCEAN X Taolor~~~~~~~~~~~~~lonro OCEANY f P ,.o,nrvot MADAGASCAR 412- 44- 46 48- o