RESTRICTED
Report No. P-886
FILE ŁO?Y
This report was prepared for use within the Bank and its affiliated organizations.
They do not accept responsibility for its accuracy or completeness. The report may
not be published nor may it be quoted as representing their views.
INTERNATIONAL DEVELOPMENT ASSOCIATION
REPORT AND RECOMMENDATION
OF THE
PRESIDENT
TO THE
EXECUTIVE DIRECTORS
ON A
PROPOSED DEVELOPMENT CREDIT
TO THE
FEDERAL REPUBLIC OF CAMEROON
FOR A
PORT PROJECT
December 10, 1970






INTERNATIONAL DEVELOPMENT ASSOCIATION
REPORT ANTD RECOTMMENDATION OF THE PRESIDENT To THE
EXECUTIVE DIRECTORS ON A PROPOSED CREDIT
TO THE FEDERAL REPUBLIC OF CAlVEROON
FOR A PORT PROJECT
1.        I submit the following report and recommendation on a proposed
credit in an amount in various currencies equivalent to US$1.5 million to
the Federal Republic of Cameroon to assist in financing a port project.
PART I - HISTORICAL
2.        The Government of Cameroon requested the Associationfs assistanc_
in financing the development of the port of Douala. A Bank Group reconn.i: s-
sance mission visited the country in November 1968, and in the following
year the Government, with the advice of the Association, contracted for the
services of consultants for a port development study. In April 1970 an
appraisal mission visited Cameroon.  Negotiations were held in Washington
on October 27 - 30 with a delegation led by Mr. Barthele'my Teham, Deputy
Director of Programs in the Ministry of Planning.  This would be the seveinth
Bank/IDA operation in Cameroon - the first for ports, and the fourth in
transport.
3.        The following is a summary of Bank loans and IDA credits to Cameroon
as of November 30, 1970:
Loan or        Fiscal                                 Ar2ount (US$ millicn.)
Credit Number Year     Borrower   Purpose          Bank    IDA    UndishurLei
100 CM         1967    Cameroon   CA1IDEV                 11.0        3.1
490 CM         1967    CAMDEV     CAlvDEV           7.0               6.9
593 CM         1969    SOPASE     Oil Palm          7.9               6.9
604 CM         1969    SNEC       Water Supply      5.0               3.C
161 CMI        1970    Cameroon   Education               10.5       iO.5
180 CM         1970    Cameroon   Roads                    7.0
663 CM         1970    Cameroon   Roads            12.0              12.0
687 CM         1970    Regifercam Railway           5.2               5.1
Total now held by Bank and IDA         37.1   28.5
Total undisbursed                      33.9   20.1       54.0
4.        Rates of disbursement in the agriculture sector, to CAI]DEV (100 CvT
and 490 CM) and to SOPAME (593 CM) are slightly behind schedule, but neither
the delays nor their causes are serious.  The lag in disbursement is largely
a reflection of normal accounting delays of between five and six months ifo
reimbursement of plantation development expenditure. For SOPAME, disburse-
ment is $0.3 million behind schedule because of the Governmentfs advance
payment of equity contributions to SOPAME amounting to more than $700,000.
This payment, made in 1969, had not been expected until 1970/71.






- 2 -
5.        The education project (161 C0M) was originally scheduled to bec2ei
effective on December 30, 1969. Conditions for effectiveness were not ful-
filled until April 29, 1970. There have been delays in implementation due to
difficulty in agreeing upon a choice of architects.  The supervislon misslon'
of April 1970 set up a revised implementation schedule which so far has b3en
followed, and which calls for full disbursement of the credit by June 30, '1974.
As a result of the October supervision mission, it may in fact be possible t-,
accelerate Droject implementation in the near future.
6.        Construction of the water supply project (604 C0l) began three months
late,in November 1969, the date of loan effectiveness.  Since then, the rate
of construction has followed expectations. Performance by the borrower has
been excellent. Project costs will be below the appraisal estimate, due
mainly to devaluation of the French and CFA francs. It is expected that die-
bursements for al'l project works will be completed before June 1971, and tia-c
the savings will be used later to finance additional extension of the water
distribution systems in Douala and Yaounde; the possibility that savings
would be used in this way was covered in the appraisal report.
7.        There are no IFC investments in Cameroon, and no loans, credits or
IFC investments are scheduled for presentation to the Executive Directors
during the next few months.
PART II - DESCRTPTION OF THE PROPOSED CREDIT
8.        Borrower:          The Federal Republic of Cameroon
Amount:            $1.5 million equivalent in various currencies
Purpose:           To construct at Douala-Bonaberi a new deep-wa';or
quay; to construct and improve facilities fo-
the log-handling area of the port; to provide
a small suction-cutter dredger; to study the
feasibility of establishing new timber-handling
facilities; and to institute modern accounting
methods in port operations.
Amortization:      In 50 years including a 10-year period of grace,
through semi-annual installments of one-half of
one percent from June 1, 1981 through December 2,
1990, and one and one-half percent from June 1,
1991 through December 1, 2020.
Service Charge:    3/4 of one percent per annum
Estimated Economic
Return:            24 percent on the overall project






- 3 -
PART III - THE PROJECT
9.        A report entitled "Federal Republic of Cameroon - Appraisal of FirFt
Douala Port Project" dated December 3, 1970 (PTR-60a) is attached.
10.       Cameroon's port capacity can no longer keep pace with the growth of
traffic, and Douala-Bonaberi, which handles over 85 percent of the foreign
trade, is becoming increasingly congested.  The Government appointed a Frencr'-
German consulting group to make an extensive study of alternative port deve1cep
ment programs. The consultants' investigations, called the Cameroon Port OJtudy,
center around a comparative analysis of port development schemes in Douala ard
Victoria, about 50 km to the Twest, and will be completed during the second
half of 1971. The Bank has advised the Government on the consultants, tearm
of reference, and has indicated its readiness to consider participating in
financing, probably during FY 72, the resulting investment program.
11.       The results of these studies will not become available before la;e
in 1971, and the Government accordingly asked the Bank Group in September 1968
for financial assistance in providing additional port capacity to handle i' rc-
diate needs. The project, which has been designed for this purpose, is based
on detailed designs by consultants. It consists of the following:
- At Douala-Bonab6ri, the construction of a new deep-water quay,
approximately 200 meters long and 8.5 meters deep;
- In the log-handling area at Douala, the construction of a
shallow-draft quay and of sloping concrete aprons; the paving
of 20,000 square meters of roads and timber-stacking areas;
and the shifting of an existing 20-ton overhead crane to the
edge of the new shallow-draft quay;
- The dredging of approximately 100,000 cubic meters in front cf
the log-handling area to facilitate movement of barges and
floating logs;
- The acquisition of a small suction-cutter dredger to carry out
dredging work and to maintain attained depths;
- The installation of buoys to form three mooring stations for
timber-loading ships;
- Acquisition of mobile and floating log-handling equipment;
- A feasibility study of alternative schemes for timber handling..
- Elaboration of a modern, accrual-basis accounting system for
the port of Douala-Bonaberi, and preparation of an inventory
of its assets.






- 4 -
12.       Dou7-a's log deT.ot is -urrently manla-ed by a prinrate company Under
a government contract which divides responsibility between the company and
the Port Directorate. This arrangement has not worked satisfactorily, and
the Government has agreed to establish a new company, partly public, partly
private, which would operate the log depot under a concession agreement in
accordance with sound commercial principles. The company will acquire all
mobile and floating log-handling equipment now owned by the Government and
will procure and finance the new equipment for the log depot, costing
$600,000, included in the project.
13.       The total cost of the project is equivalent to $2.8 million.   The
proposed credit from the 4ssociation of $1.5 million would cover the foreign
exchange component of civil engineering works, the dredger, and consultantst
services.  The new log-handling company would finance the cost of log-han&'˝ng
equipment amounting to $600,000, and the Government would cover the remainlin,
cost of the project, equivalent to $700,000 in local currency.
14.       All contracts, other than those related to the log-handling equi-;
ment, will be awarded on the basis of the Bank Group procurement guidelines.
Disbursements from the credit account will cover the estimated foreign
exchange component of 65 percent of all civil engineering works, the c.if.-
cost of imported equipment, and the actual foreign exchange cost of advisory
and consulting services. It is expected that approximately $260,000 will have
been disbursed by June 30, 1971, and the balance by December 31, 1972. Cotnsul.-
ants acceptable to the Bank will assist the Government in evaluating bids and
supervising construction of the Bonaberi quay.
15.       Cameroonts Directorate of Ports and Navigable Waterways which will
carry out the project is a Department of the Federal Ministry of Transport
and Communications, and is also subject to control by the Ministry of Financ.e.
Powers delegated to the Port Directorate are limited and insufficient to
coordinate other port services, such as Customs and Labor Control.   The bud--
getary and accounting system of the Port Directorate is inadequate and needz
reform in order to provide a basis for revising rates and exercising stronger
financial control.
16.       In view of these problems, the Government intends to set up an
autcnomous port authority when the future needs of Cameroon ports have been
studied. Meanwhile, the Government has agreed to take certain actions to
improve the portts operation - specifically, it will:   delegate to the Port
Director adequate powers for flexible and efficient management of oorts, and
appoint a competent, experienced Port Cormmander (Credit Agreement, Sectior 4.02
(a)(b)); consult the Association on any substantial change in port organize-
tion and on any modification of rates or charges (Sections 4.03 and 4.06 (a)>
ensure that ports and their approaches are adequately dredged (Section 4.04);
observe operating ratio limits which are determined in agreement with the
Association and in accordance with the results of financial analyses (Section
4.06 (b)); and accumulate in the Port Renewal Fund reserves adequate for
future port capital expenditures (Section 4.07).






17.       The interi-M project proposed here is kept to a minimum. It is 1-19-
tified on the basis of the projectts overall economic rate of return, caluulaferi
at 24 percent. It is of high priority because of the urgent need to rell-eve
the bottleneck in the country's transport systen which is affecting other
sectors of the economy and retarding the development of the promising tixiihe'
industry. The efficient functioning of the port of Douala directly affects
the two existing Bank/IDA operations in transport -- the road improvements in
south and central Cameroon, and the improvement of the Douala-Yaaunde railway.
This project is designed in such a way that its results will not conflict With
the recommendations for longer-term development which will come out of the
broader Cameroon Port Study.
PART IV - LEGAL 121STRhUENTS AIND AUTHORITY
18.       The Draft Development Credit Agreement betwTeen the Federal Republi^
of Cameroon and the Association, the Recommendation of the Committee prov1 ded
for under Article V, Section 1 (d) of the Articles of Agreement, and the text
of the resolution approving the proposed credit are being distributed to the
Executive Directors separately. Except for the sections noted in paragra-,n l.o
above, the Draft Development Credit Agreement follows the nornal pattern of
agreements for projects of this kind.
PART V - THE ECONOMY
19.       An Economic Memorandum dated December 8, 1970 is attached, and a
basic data sheet is annexed to this report.
20.       Economic developments in Cameroon have continued to be favorable.
The growth rate of GD& has averaged 5.3 percent per annum for the 1965-69
period, but is expected to decline somewihat over the next five years, chiefly
because of lower export prices. Agriculture, which presently provides 80 per--
cent of Cameroonls exports, will continue to play the central role. Of all
economic sectors, the timber industry has the most promising growth prospect.-
In order for forestry exploitation to proceed, however, deficiencies in the
transport systemn, such as congestion in the port of Douala, must first be
removed.
21.       The Government will have to rely on external assistance for the
financing of a major portion of public investment. The debt service ratio
is accordingly expected to rise fron 3 percent in 1969 to approximately 6.5
percent in 1975/76. In view of this moderate level of debt service and modest
export prospects, Cameroon is creditworthy for some additional Bank lending.
However, since the country is poor and will need substantial capital imports
for a considerable time, a heavy build-up of conventional debt should be
avoided and a blend of assistance from the Association is appropriate.






- 6 -
PL-KIT VI - COiMIPLIANCE 11ITH ARTICLES OF AGRE22NT
22.      I am satisfied that the proposed development credit would comply w:ih
the Articles of Agreement of the Association.
PART VII - RECOII4ENDATION
23.      I recommend that the Executive Directors approve the proposed de7elop-
ment credit.
Robert S. McNamara
President
Attachments.
Washington, D.C.
December 10, 1970.






ATNNEX
BASIC DATA
Area:    183,524 square miles;  475,450 square kilometers.
Population (1970):   5.8 million (of which about 15,000 non-Africans)
Rate of growth: 2.2%
Density: 12 per square k<ilometer
Political Status:
East Cameroon - Independent January 1, 1960;
West Cameroon - Independent October 1, 1961;
Federation    - October 20, 1961.
Mlember - Equatorial African Monetary Union and
Franc Zone;
Equatorial African Economic and Customs Unior.
Associated Member - European Community.
Gross Domestic Product (Est. 1968/69):  CFAF 227.6 billion*
(subsistence 20%)
Per Capita:                   $163*
Primary sector                36 percent
Secondary sector              19 percent
Transport, Trade, Services    45 percent
Rate of growTth,              6.9 percent (at current prices)
1964/65 - 1968/69           5.3 percent (at constant prices)
Percent of GDP at Market Prices
1964/65-1966/67     1967/68-1968/69
Gross investment                  15.2                14.6
Gross savings                     10.0                10.4
Net import of goods
and non-factor services          2.1                 1.9
Current account deficit            5.2                 4.3
Government current revenue
(1964/65 and 1968/69)           15.6                16.9
* Based on exchange rate prevailing prior to August 10, 1969. At the
currently prevailing exchange rate, the per capita GDP would have
amounted to US$045.






- 2  -                              Arerq ge
annua lJ
inzrease
I'oney-, Credit aind. Prices (CFAF billion)  December 1964  December 1969  1964-1969
Money                                   20.99          35.68         11.2%
Quasi-money                              2.04           4.47         17-9'
Commercial bank credit to
private sector                        26.77          41.97          9.4%
Rate of change in domestic prices                               about 2.5%,
Public Sector Operations (CFAF billion)  1966/67  1967/68  1968/69  1969/70
Government current revenue             31.9     35.6     38.4     43.8
Government current expenditures        30.6     33.4     34.1     38.5
Current surplus                         1.3      2.2      4.3      5.4
Government capital expenditures         3.8      3.5      3.6      5,9
Public investment expenditures         11.8     13.1     13.5
External Public Debt (US$ million)
Total debt (including undisbursed
at December 31, 1968 with addi-
tions through Ilarch 27, 1970)    183
Total debt service (1969)             7
Debt service ratio                    3,
Balance of Payments (US$ million)      1968          1969*
Total exports of goods             196.9         229.4
Total imports of goods             187.6         204.8
Goods and services balance         -23.5         -11.6
Foreign aid disbursements           43.1          35.5
Conmmiodity concentration of exports   1964                1969
Coffee, cocoa, aluminium        26A, 19%,< 14%      20%, 38%, 11%ao
Gross foreign exchange reserves        1964 (Dec.)         1970 (May)
(US$ million)
35.9                74.2
IMF Position (US$ million)             May 31, 1970
Quota                             19.0
Drawing                           None
Based on average exchange rate during the year.
Exchange rates:   Before August 11, 1969: $1.00 = CFAF 246.85
After August 11, 1969: $1.00 = CFAF 277.71
December 10, 1970.
Wlestern Africa Department.






ME1ORANDUM ONi THE
ECONOMIC SITUATION AND PROSPECTS
OF TIlE
REPUBLTC OiF CAMEROON
Decemr,er '<. 1970
Viestern Africa Department






REPUBLIC OF CAMEROON
Page No.
A. Introduction .....................................   i
B.  Recent Economic Growth ........................... ii
C. Major Development Problems ....................... iii
D.  Sectoral Problems and Prospects .................. iv
E. Overall Growth Prospects ......................... ix
F.  The Financial Outlook ............................  x
This memnorandum is based on the findings of a Mission
led by Mr. Cornelis J. Jansen which visited Cameroon in March
and April 1970. The full report of this mission will be
distributed shortly.






CURRENCY EQUIVALENTS
Currency Unit:       CFA Franc (CFAF)
Before August 11, 1969:
US$ 1.00   = CFAF 246.85
CFAF 1,000 = US$ 4.o0
After August 11, 1969:
US$ 1.00   = CFAF 277.71
CFAF 1,000 = US$ 3.60
WEIGHTS AND MEASURES
1 Metric Ton (t)   = 2,205 lbs.
1 Kilogram (kg)    = 2.2 lbs.
1 Kilometer (km)   = 0.62 mile
1 Meter (m)        = 3.28 feet.






A. Introduction.
1         Ciameroon is a large country covering h75,0C0  square kilometers
(about the size of France) with only 5.8 million inhabitants. Con-
siderable ecological diversity permits cultivation of a variety of
agricultural products:  coffee, cocoa, palm oil, rubber and bananas, in
the south, and cotton, groundnuts, rice and other cereals in the savannah
areas in the north. The high plateau between these two zones has good
grazing potential, while the southeast has large, not yet fully exploited
hardwood forests. Thanks to good growing conditions, nutrition is
generally at a satisfactory level. There are indications of cil, copper
and large bauxite deposits but as yet no definite nro=e'zts of comTmercial
exploitation.
2.        Cameroon celebrated this year the tenth anniversary of its
independence, and the ninth year of federation between French speaking
East Cameroon, with four-fifths of the population, and English speaking
W4est Cameroon. This first decade of independence has seen strengthening
of national unity and gradual centralization of government functions
under the firm direction of President Ahidjo. Since the Bassa and
Damileke insurrection was overcome in the mid sixties, the colntry has
been largely at peace, although the economic and social difficulties of
these areas have not been solved. The government has this year received
large popular support in an election in which the President was the
uno=osed candida.e.   The federal structure of the government ard the
existence of two official languages are a burden on the country's
adinistration which however appears to be gaining slowly in effectiveness.
3.        External political and economic relations are good.  Canmeroon
participates in a number of regional African political and economnic
groupings. Among these is UDEAC, a customs and economic union with
CAR, Congo (B) and Gabon. UDEAC is a constructive attempt at regional
cooperation although practical results have thus far been modest.
Caneroon has a common central bank together with the UDEAC mnembers and
Chad, and a common currency, the CFA franc. The latter is fully con-
vertible with the French franc. Ties with France are particularly close.
France is the source of substantial aid and technical assistance and of
nost of the foreign talent and capital in Cameroon's pzivate sector.
Since Cameroon became an associated member of the European Common Market,
she has been increasing her trade with other members of the EB  and is
furthermore obtaining sizeable financial assistance through the European
Development Fund.
B. Recent economic groarth.
4.        GPW grouth during the last five years on record is estimated
by the mission at 5.3 percent a year in real terns, Well above the estimated
population grorth rate of 2.2 percent a year. During the last twzo-three



- ii -
years the growth rate has been even higher than this average, probably
around 7 percent, chiefly due to favorable export priJces. GDP per capita
in 1963/69 was estimated at the equivalent of $164 but would be only
$146 at the exchange rate prevailing since August 1969. Agriculture
remains by far the most important productive sector of the economy.
Roughly 80 percent of the population still live in rural areas and most
of them depend directly on some form of agriculture for their livelihood.
The proportion contributed to GDP by agriculture however declined from
47 percent in 1959 to 36 percent in 1968/69. This relative decline is
chiefly due to rapid industrial and commercial development which was
stimulated by governmentts liberal attitude towards foreign private
investment. Completion of a number of import substitution projects and
a more bureaucratic government attitude vis A vis private investment
led to a marked drop in the number of new projects in the private sector
in the late 1960's although industrial production from existing capacity
continued to increase rapidly.
5.        Gross domestic capital formation is estimated at around 15
percent of GDP, financed for approximately two-thirds from gross national
savings. The gap, one-third of capital formation, was financed by an
inflolw of foreign aid which averaged $37 million a year in disbursements
in the five years ending in 1969.  Most of the aid was on grant or
concessional terms; France, the EEC and more recently the Bank Group
have been the most important sources.
6.        Over the last five years, there has been rapid expansion of
money supply and private credit, roughly at the same pace as the fast
growth of the modern part of the economy. Domestic prices have however
risen at a fairly slow rate, about 2 percent a year.
7.        Interest rates remained low under the impact of a central bank
discount rate of only 3.5 percent. The rediscounting facilities of the
central bank are the main factor determining the credit volume. Redis-
counted credit amounted to hO - 50 percent of total bank credit out-
standing. More realistic interest rates would be in the interest of
Cameroon's economic development although the monetary ties with other
countries limit Cameroon's freedom of action in this respect. At present,
lo0w interest rates on bank deposits are encouraging enterprises to keep
their liquid balances in Cameroon as lowi as is compatible with re-
discounting reeuirements and to borrow as much as possible from banks
in Cameroon. For their part the banks concentrate on rediscountable
credit to larger. financially strong customers and pay little attention
to smaller, indigenous entelprises. The low0 interest rate structure
and in particular the loiw deposit rates paid by the banks do not encourage
private savinegs.  Availability of low interest credit to a limited number
of enterprises encourages a type of production which is more canital
intensive than warranted by the scarcity of production factors in
Cameroon and discourages the development of small scale industrial and
agricultural enterprises.



3.        There is very little information on the balance of payments. The
mission estimates that the current account during the five years ending
1963/69 had a deficit avermaging close to 5 percent of GDP. The main
cause of this deficit is a large outflow of fact6r income payments,
chiefly those of the foreign-owmed enterprises and the large expatriate
cormunity. These outflows appear largely unavoidable, in view of the
scarcity of domestic private capital, and managerial and technical
personnel. Realizing this, the Cameroon government pursues its long-
term goal of increased Cameroonese participation in oimership and manage-
ment of private enterprises with moderation.
9.        Foreign trade has expanded at a satisfactory rate owing to
favorable export prices but also to increased export volume. Exports
and imports increased during the last three years at a yearly rate
of 11 percent. Exports and imports are both 21 percent of GDP with
a slightly higher percentage for exports in recent years. Exports
of cash crops are on the increase with the exception of banana exports
which have continued to decline sharply. Increased exploitation of
Cameroon's sizeable forestry resources has led to rapidly increasing
exports of tropical hardwoods. Aluminium exports declined slightly
because of the establishment of domestic industries using aluminium.
Import composition continued to shift in the direction of larger
imports of raw materials, intermediate products and capital goods which
now account for three-quarters of imports.   This is in line with the
increase in industrial production and total capital formation. In-
creased domestic production of foodstuffs and manrufactured consumer
goods has at the same time led to a lower proportion of these commodities
in total imports.
C.  Major development problems.
10.       The most important factor influencing the course of economic
events during the 1970's will be the expected fast grouth of total
population, and the accelerating rural exodus and urbanization connected
with it.  Overwhelmingly rural only a decade ago, Cameroon is e:.-pected
to have an urban population of 34 percent of the total by 1980 and an
even larger proportion in following decades.  This important fact is
changing the entire complexion of the country.  Light population pressure
has helped Cameroon in establishing and maintaining political, social
and economic stability.  In the next decade, these conditions might
deteriorate seriously unless a large volume of urban employment is
created and economic conditions in rural areas are improved. In the
Third Five Year Plan (1971/2 - 1975/6), which is now under preparation,
development or directly productive activities - agriculture, industry,
trade and related activities - should therefore deserve highest
priority.
11.       Neanwhile far too little is knoion about motivations and
characteristics of migrants to the cities.  In order to establish uhich
type of people move and for wYhat reasons, a study of the most important
mi-ration areas is needed. Such a study should help government in
<Jetermininp, by which measures inteimal rigration cculd be influenced.



- iv -
12.       A related matter is the need for family planning. Until
recently policy malkers in Cameroon did not feel that population growth
presented serious econoric and social problems. This position is
certainly not justified any longer. A start writh family planning
activities, at least in the cities, is urgent. The recent appointment
of a minister of health and population is perhaps an indication that
government is taking a more positive approach to the problem.
13.       The rate of urban population growth is bound to be high even
if efforts to control migration and population growth wzere successful.
The resulting employment problem cannot be fully solved during the
1970's but to mitigate it and to add at the same time to the impetus
of general economic growth policies are needed which will stimulate
rapid growjth of labor intensive industry and agriculture and supporting
activities in other sectors. In the past, government has mainly relied
on the creation of a liberal investment climate to stimulate the private
sector. 'Tlis policv has been successful in the early 1960ts, but recently
investor interest appears to have dropped. The need for a more aggressive
private sector policy which retains the liberal features of past policy
will be discussed below.
14.       In spite of the need to emphasize agricultural development and
incdustrialization, in the development plan, there is no doubt that
infrastructure investments should account, as they did in the 1960's
for the largest proportion of public investment.  The transport network
is inadequate for existing traffic, slowzing dowJn production and export
growth.  There is also urgent need for investments in power, tele-
communications, urban amenities and education facilities.   However, since
infrastructure investments involve application of kno;vm technology they
are in many respects less complicated than the effective promotion of
industrial and agricultural development. The latter are not brought about
b-b mere government decision but require changes in behavior, 1mowledge
and motivation of large parts of the population. The question how these
changes are brought about has a different answer in each country; the
Cameroon planners wjill have to devote a large part of their energies to
find the approach which is appropriate for this country.
D. Sectoral problems and prospects.
15.       Agriculture.  The increase of agricultural production in the
five years ending 1968/69 is estimated at 3 percent a year in real terms.
Cash crop production grew close to 4 percent annually while the increase
of foodstuff production is notionally estimated at 2.2, the growth rate
of population. The latter estimate may be conservative, since there
has been a relative decline in foodstuff imports but the virtual absence
of production data makes a more accurate estimate impossible. Agricultural
development suffers from lack of concerted government action in project
preparation and implementation. At least partly this is due to the fact
that under the constitution agricultural development is entrusted to the



states. Improved coordination of agricultural policy at the national
level appears very desirable. There is furthermore need for strengthen-
ing of research activities for most crops and better coordination of
the numerous extension agencies.
16.       Agricultural production is largely in the hands of smnall farmers
who produce a combination of cash and subsistence crops. The countryts
employment problems suggest that continued emphasis on smallholders in
agriculture supplemented by labor-intensive large holdings should be
an important feature of Cameroon's development strategy. Although cash
incomes average only $90 per farmer, producer prices probably give
sufficient incentive to expand production if theres is enough credit and
technical guidance. This would follow from experience with cocoa and
cotton. However if credit is not tied in with closely supervised
productivity programs results are likely to be disappointing. For this
reason, the general agricultural credit institution contemplated in the
second plan would appear inadvisable.
17.       Emphasis on the development of food crops should be on yield
increase by improved cultivation and seeds and greater use of inputs.
IRAT, the research organization entrusted with food crops, is not yet
able to provide adequate guidance and should be requested to study these
matters more deeply and to improve its guidance of extension agencies.
The proposed monopoly state company for the marketing of food crops
may result in financial losses and therefore seems inadvisable; instead
it might be useful to work out a project for the improvement of food
storage facilities. Such a project could provide an important improvement
in marketing possibilities. Rice consumption is still low but likely
to grow fast. In addition to the proposed rice scheme in the north,
government should explore the feasibility of rice growing in the south
of the country as well.
18.       In order to keep the country self-sufficient in meat and raise
the incomes of cattle owners, government should investigate the use of
agricultural by-products (from cotton, oil palm, cocoa) for feed and
improve veterinary care. Exploration of coastal waters is recommended
to establish the potential of marine fisheries. A credit scheme to
motorize small fishing craft should be considered; such a scheme
should however not be undertaken unless strong credit supervision and
technical guidance are ensured.
19.       Export crops.  The expected decline of world market prices of
virtually all export crops adds to the need to cut production costs and
to stimulate diversification. In spite of the diversification which has
already been attained, the reliance on two crops, coffee and cocoa,
is still heavy (58% of exports). Government should furthermore improve
its contacts with the private sector on possible estate projects as a
useful complement to the predominant smallholder type of cultivation.



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20o       A large part of the cocoa acreage is covered with old trees,
whose productivity is declining.  'hM government's ambitious replanting
scheme (360,000 ha. in 20 years' time) is not off to a good start because
of insufficient preparation and organization. The reason why progress
to date has been slow is the lack of a pre-investment study which
establishes an economically and technically feasible scheme indicating
the most suitable areas and the required organization of the scheme.
Government contemplates undertaking such a stuldv.
21.       Since coffee production is already larger than the quota under
the International Coffee Agreement, the future growth rate of production
should not exceed the foreseeable rather slow growth rate of world
consumption. Development action in this field should therefore aim
primarily at improving the economic results of coffee production or
acreage presently planted to coffee or on a reduced acreage. For this
purpose a pre-investment study should be undertaken to determine which
areas planted to arabica coffee deserve rehabilitation. A general
program to obtain quality improvements on arabica as well as robusta
through better cultivation methods and increased use of inputs should also
be studied.
22.       Banana production is unlikely to rise again to its earlier
level in view of uncertain market prospects and the difficulties of
conversion to better varieties. Production, mostly from the fairly
small foreign owned plantations, --11 probably rise only slightly above
the present level.
23.       Cameroon has good groEing conditions for rubber;   government
should investigate in consultation with private interests whether suitable
plantation areas in East Cameroon can be identified. No further
expansion of oil palm estate acreage appears recommendable in view of
world markets prospects. However, the possibilities for increased
smalIholder production based on the processing and marketing facilities
of the existing estates and aimed at the domestic market should be
investigated.
2L.       Increased forest exploitation is hampered by transport
difficulties. Production could be expanded in a short time from the
present level of 700,000 tons of logs to 1.5 million tons during the
third plan if there were no transport bottleneck. However the lack of
logging roads in the forest areas in southeast Cameroon, the lack of
rolling stock and the poor track condition of the Yaounde-Douala railway,
and technical and managerial deficiencies of the Douala port ill
effectively restrain production growth. Actual production during the
third plan is likely to remain below its potential level. The following
pre-investment studies appear of prime importance: (i) forest inventories
in the southeast of the country; (ii) studies of three major logging
roads in the areas (Belabo-Yokadouma, Yaounde-Abong IMang, Mbalmayo-
Moloudou); (iii) studies of improvements in the Douala port and
establishnent of logging ports south of Douala.



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25.       IndustryT. Industrial production increased by about 13 percent
during the five years ending 156:3/69. The contribution to GDP rose during
the decade from 6-7 percent to close to 13 percent. There is scope for
continued industrial growth during the third plan on the basis of
import substitution of light consumer and intermediate products and
increased processing of domestic agricultural and fcrestry products for
export. However the recent drop in investor ir.terest points to the need
for improvement in industrial policy and institutions.  The recent
establishment of a separate Ministry for the Development of Commerce
and Industry promises increased attention to these matters. The mission?s
tentative recommendations for governiment action on industrial developmnsi
are as follows:
26.       Government should determine the type and location of priority
industries, degree of protection, role of state institutions in industrial
financingand degree of direct intervention in industrial projects.
Priority should be given to labor intensive industriss with high domestic
raw materials conponents. A special unit should be established to seek
out and study industrial possibilities and establish and maintain contact
with the private sector in Cameroon and abroad.  A critical review should
be made of the governmrent's investment code in the light of past
experience and ,;imple e,riteria for approval und-.r the code 0.obablished.
The system of priie co)ntrol also needs review. Wheie prices cannot be
adequately supervised, controls should probably be abandored; wAhere
they are retained, the controls should duly allow for production cost
fluctuations.
27.       To alleviate the shortage of skilled and professional manpower
at all levels, technical and commercial training should be impro-ved and
expanded. Moreover, production advisory services, purchasing and
marl:.ting assistance, accounting adnice and trainln, sci' ties z'ouli
be provided to young Cameroon industrialists. A special un_ut to provide
this adviue should be set up. The industrial estate program needs
review.  The most important parts of the program (the Donuala and Yaounde
estates) probably deserve priority but the need for estates in other
centers may for some years to come not be urgent.
28.       In the field of industrial finance, duplication of efforts of
the D3anque Ca,,rounaise de DWvelopponent (BC6) and the Societe :&ationale
d'Investissement (SNI) should be avoided. Consideration should also be
given to seDaration of seasonal short-term operations of BCD from its
long-term development credits. Both banks should strengthen their
ability to appraise industrial projects and become more aggressive in
their lending policies, particularly regarding the fostering of Camerounese
entrepreneurship.
29.       Transpor.   In the past, gcvernment has rightly devoted a lar-2r
proportLon of public investment to transport infrastructure than to any
other sector of the economy. Poles of economic activity are set wide
apart and wzere poorly connected at the time of independence. Develcpmert



- viii -
efforts .n this sector dchring the last decade were aimed at the con-
struction of a network serving the five main poles of economic
activity: the coastal region with the port of Douala and Tiko-Victoria
where most of the industrial activity is located; the densely populated,
rich agricultural Baniloke arma; the region around Yaounde, the capital
of Cameroon; the North which is also densely populated and has con-
siderable agricultural potential; and finally the vast tropical forest
area of the South East with its huge timber resources. Cameroon
moreover serves as a transit country for landlocked Chad and to a lesser
extent, the Central African Republic. Although a large part of the
transport infrastructure to serve the various regions now exists further
substantial investments are required.   The most pressing need is
:.~i'.ec  o:: th:? Douala port c,p;1c` t1v. Studies on a lonr-term so]utlon
are underway. Both physical expansion and improvements in port organiza-
tion will be required. The lack of transport links in the forest area
in the southeast has been mentioned. A highway program other than in
the forest area of CFAF 10 billion has been identified. NIost of the
projects are already under discussion with interested aid donors.
Highway maintenance is improving ouwing to establishment of a central
pool of maintenance equipment. However, in view of growing traffic,
budgetary provisions should be increased. Government has thus far
refrained from regulating the activities of trucking companies. A
proposal to introduce such regulation should be carefully considered
since it could lead to a stifling of competition among road usars to the
detriment of the rest of the economy.
30.       With regard to the railway the most important task is improve-
ment of the Douala-Yaounde connection.  An economic study of the real-rn-
ment of this connection will be financed as part of the Bank railwayi
project. Selected improvements rather than complete realignment will
probably be the economic solution. Finance of CFAF 5 billion for the
last section of the Transcameroon railway has been arranged, wVhile a
further CFAF 8 billion are needed for infrastructure on other lines,
rolling stock etc. Proposed investments totalling CFAF 27 billion for
modernization and extension (Yaounde-Yakadouma) of the existing network
would appear premature. Road alternatives appear more promising than
the proposed extension of the network.
31.       Power. Cameroon's rivers have sizeable hydro-electric potential.
This has led to the establishment near Edea of the ALUCAM aluminium
factory -which used imported alumina. This factory uses 80 percent of
electricity produced in Cameroon. The possible doubling of its capacity
and rapid expansion of other demand (by 1 percent a year) have led
to a sizeable power program.  Ihe first project, of which financing is
under consideration, aims at regularization of water flow-f which i11
perait full use of ALUCAM s existing production cap.acity as well as
meeting increasing other electricity demand. Increasing capacity of
major transmission lines and establishment of small thermal plants in



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certain secondary centers is also under study. To cover electricity
needs in the longer run, two major hydro projects, Nachtigal (250 MW)
and Song Loulou (125 MW), are being studied. Tne urgency of these
projects depends to a large extent on the question whether ALUCAMI
does in fact double its generation capacity.  The government will have
to study carefully which sequence of the two projects will lead to
better spread of investment over time.
32.       Education. Cameroon's schools are not yet able to meet the
economy's demands for trained people. Expatriates fulfill half of the
executive functions in the public stector and t:no-thirds of those in
the private sector as well as numerous middle level positions. In
all sectors of the economy there is moreover a lack of sicilled workers.
Government has made strong efforts to expand first of all primary
education which has led to relatively high participation rates, viz.
6h percent of the respective age group in East Cameroon and 57 percent
in West Cameroon. Education expenditures amnount to 19 percent of
government current expenditurest if it were not 'or the contributions
made by foreign technical assistance and missionary agencies the
proportion would be even higher. In spite of these large expenditures,
the output of the education system is disappointing in quality and number.
As several other African countries, Cameroon suffers from the short-
comings of an imported education system which provides a type of instruc-
tion that is not attuned to the social and economic needs of the country
and wqhich is furthermore characterized by high drop-out and repetition
rates. Considering the large total number of pupils in the system,
the annual number of secondary and higher level graduates is small and
expenses per graduate are consequently extremely high. A basic clioice
is required in Cameroon's development strategy for education. Further
increases of participation rates would become !crbid1in,ly e--per:3:Dve
in view-f of the increasing size of the younger age groups, wihile the basic
needs of the economv for trained people wsould not be satisfied any
better than at present. Education policy should aim at improvement of the
efficiency of the system and, more specifically, at increased output of
secondary and higher level graduates with the technical, commercial and
professional qualifications which the country needs. Cameroonts second
development plan (1966 - 1971) indicates that government is aware of these
requirements and intends to reform education. The Bank Group first education
project aimed at furthering the same objectives. In primary education there
are two essential tasks, the construction of facilities for primary teacher
training, and the reform of curricula to fit Cameroon's cultural, social
and economic requirements. In secondary and technical education there
should be expansion of school facilities and also a reform of curricula.
These general guidelines for reform and rationalization should be worked out
in a comprehensive national education plan.
E. Overall growth prospects.
33.       The Government's Third Five Year Plan (1971/72 - 1975/76) is
still under preparation, so that the government's assessment of prospects



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and intentio  in the de,-elopment field are only very incompletely knonm.
The miSionls calculations indicate that economic growth during the
first half of the 1970's is likely to be about h percent a year compared
with the 6_7 percent real gro-th rates attained  n the late 1960's.
The reason for the slowTdown is a deceleration of export growth caused
by the expected fall of average export prices, the lack of agricultural
and industrial projects and the effects of the transport bottlencek.
'De growth rate of total export value during the years 1969/70 -
1975/76 is estimated by the mission at only 2 percent a year. How%rever,
large investments under way or about to be undertaken in highway and
railroads, power generation, telecommunications, education and public
administration will stimulate economic growth.  Tentatively it is
estimated by the mission that investment during the Third Plan period
c f ':,'F  20D b-Lllion ($'120 rllion) -culd be required tc aohi.--re
the feasible economic growth rate as compared to actual investment in the
second plan of an estimated CFAF 140 billion ($504 million). In view
of heavy infrastructure requirements and flagging private interest about
half of the total investment - about CFAF 100 billion ($360 million) -
would have to take place in the public sector as compared to an estimated
LO percent during the Second Plan.
F. TL-e financial outlook.
34.       As far as the private sector is concerned, lack of financial
means has thus far not been a serious constraint on developrent. Due to
the close connections ,.ith the business w-orld in France and the ease
witlh iwhich funds can be transferred to and from Caneroon, investment
opportunities have Gcnerally been met by domestic and foreign private
fnance. However recently the private capital inflow has dropped making
it less evrident that any shortage of domestic private savings Till be
met by sufficient inflow, from abroad.  This points up the earlier mentioned
need for a more active industrial policy and good understanding betw-jeen
the government and the private sector. It also underscores the need to
consider to what extent a raise in the interest rate structure could
hel-7 in mobilizing a greater amount of private savings.
35.       The feasibility of a public sector development program of CFAF
100 million during the third plan depends crucially on the governmentts
ability- to raise public savings.  Since the contribution to public develop-
ment f-inance from the agricultural stabilization funds and the public
enterprises is for various reasons likely to be limited, te mhst
important factor is the prospects for increased budgetary savings. The
outlooki for en increase in budectary surpluses is however not bright.
Tecent rapid growth of revenues and budgetary savings was largely due to
the hich level of foreign trade and related activities.  Revenue growth
-s likely to taper off on account of the expected fall in export prices
after 1970 and a ccnc-rrent slowdo.wn in modern sector activity.  Current
emer,ditures meanwihile ha7we been rising rapidly.  Tf these trends in
revenues and e?roenditures aie allot-;ed to continue, budeLary savings



during the Third Plan are likely to be very small or even negative.
Determined action to reverse these trends should therefore be an
essential part of the Third Plan. The need to take such action is
perhaps somewhat obscured by the very favorable revenue growrth of recent
years and the rise in external reserves (from the equivalent of
? menths of imports in 1065 tc b ionths by siay 1970).  This favorable
financial situation is in the mission's view of temporary nature.
Basic improvements in taxation and expenditure policy are required to
help finance economic growth in the 1970's.
36.       The mission is not equipped to give more than suggestions with
rewiard to possible measures to increase revenue.  As far as personal
income taxes are concerned, there is scope for low-ering the currently
rather high exemption limit, raising the progression in the rate, and
reducing the numerous tax exemptions. There is furthermore scope for
raising the rate of company taxes in East Cameroon, which is at present
only 25 percent (35 percent in IJest Cameroon).  Mhe generous fiscal
exemptions under the investnent code also need review. Simplified approval
procedure under the code combined wnith lowJer fiscal benefits could
probably result in more rapid revenue growth.   Customs duties, the most
important element of government revenue, could yield more revenue by
speedier and more accurate collection.  The mechanization of customs
administration should help in this respect. Simplification of the
tariff structure and discarding of the outdated "valeur mercuriale",
for exports (the fixed price basis for determination of export duties)
could also lead to more efficient collection and ccntribute to greater
net revenue from customs duties.  Tentatively the mission suggests that
overall revenue growth close to 5.5 percent a year during the early
1970's should be feasible if appropriate action is taken.   This would
be higher than the mission's forecast of overall GDP growth rate of
somewhat over 1h percent a year. While in the past revenue has been
quite responsilre to economic growth, this may not be the case in the
Third Plan period, so that new fiscal measures may be required to
achieve this revenue grow1th rate.
37.       P^st current expenditure growith wias to a very large extent
due to increased personnel expenditures. Tne 12 percent annual growJth
in the number of public servants appears far in excess of government's
needs for staff and therefore extremely wasteful.   A reduction in
expenditure growth from about 10 percent throughout the 1960's to about
h.5 percent a year should be feasible wzithout harm to economi6 develop-
ment or general administrative efficiency of the government. Tentatively
it is suggested that budgetary and staffing provisions for general
administration, defense and justice which nowJ account for half of the
total, are plentiful at the present level.    Furthermore a review of
the generous allowances of all types, whilch add 60 percent to government
salary payments, needs to be repie,ed. Restrnint in these areas sh1 ouald
still allowi sizeable growTth (at least 6 percent a year) of those current
ex-enditures wjhich are oriented towTards social and economic development.



- XLi -
38.       If these tentative revenue and expenditure objectives suggested
by the mission were accomplished, public savings during the Third Plan
would amount to CFAF 50 billion ($180 million) in public savings. Service
on existing and estimated new external debt during the period is likely
to amount to CFAF 17 billion ($61 million).   This would leave a net
domestic contribution of CFAF 33 billion ($119 million) to the financing
of public investment during the third plan. While tnis is not a very
high proportion, determined fiscal action and austerity will be required
to achieve this much.  Takino into account that certain types of invest-
ment are unlikely to obtain external project assistance and therefore
will have to be wholly financed with government funds, the mission fore-
cast means that Government wSill probably not be able to meet all local
expenditures on all projects that do obtain foreign aid. This means
that foreign aid dcncrj shouldl be prepared to cover part of local costs,
particularly for projects which do not have a high foreign exchange content.
39.       External financing and creditworthiness.  Cameroon's develop-
ment policies and efforts deserve increased support of external assistance.
It is exoected that investment in the first half of the 1970's will
remall at 14 - 15 percent of GDP and that about one-third of investment
will need to be financed with external resources. On the basis of the
foregoing it waould appear that during the third five year plan a total
of ;FAF 67 billic2 (US$2h1 million) would be needed in the form
of disbursed foreign resources. This amount compares with foreign aid
di ,Ibursements in the five years ending in 1969 of CFAF 46 billion
(:;i56 million).  The pipeline of foreign aid in early 1970 wias
OFAF 38 billion ('3137 million).  It consisted chiefly of undisbursed
financing of the second section of tlhe Transcameroon railway and undis-
bursed portions of recent Bank and IDA loans.  Aid for new power,
transnort, agriculture and education projects currently under active
discussion adds up to perhaps another CFAF 25 - 30 bLllion ($90 - 108
million). The amount of funds still to be secured duri,ng the third plan
depends on the required size of the pipeline at the end of the plan i.e.
the volirne of projects under implementation or fairly committed at that
time. Major uncertainties are the proposed large investments in the
power sector, investment needs of the Douala port, and transportation
facilities in the southeast of the country. If the assumption is made
that the pipeline at the end of the Ihird Plan should be as large as at
its beginning, and that no significant reduction of foreign reserves
(equivalent of L; months of imports in May 1970) is desirable, approximately
another CEAF 37 - 42 billion ($133 - 151 million) in project aid would
need to be secured during the third plan.   To make project commitments
of this marlitude possible, strenuous efforts will be needed to identify
and prepare projects particularly in agriculture, forestry, roads,
po-;.e r and the norts.
i ~_,.    Cameroon' s e,-ternal public debt has increased rapidly. It
amoumted to $183 million at the end of Wurch 1970. The debt service ratio
is licely to rise from 3 percent in 1969 to 6.5 percent in 1975/76, tak-ng



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into account service on existing and estimated new public debt. In
making these projections it has been assumed that grant aid disbursements
will remain at a level of CFAF 5 billion a year or close to 40 percent
of the total inflow, that Cameroonts traditional aid donors wxill continue
to offer relatively favorable terms on official loans and that meanwhile
Cameroon, in order to avoid rapid exhaustion of its debt servicing
capacity, will keep supplier's credit financing within strict limits.
The forecast debt service ratio is still not very high and a modest
increase in conventional debt would appear therefore justified.
However in view of the country's poverty and modest growth prospects,
Cameroonts needs for external capital are expected to extend over a
considerable length of time. A continued rapid build-up of conventional
debt should be avoided and it is therefore very desirable that most
foreign assistance would be extended on concessional terms.