Report No. 590-MAG FC Madagascar: Appraisal of the FILE COPY Mangoro Forestry Project December 6, 1974 General Agriculture Division East Africa Region Not for Public Use Document of the International Bank for Reconstruction and Development International Development Association This report was prepared for official use only by the Bank Croup. It may not be published, quoted or cited without Bank Group authorization. The Bank Croup does not accept responsibility for the accuracy or completeness of the report. CURRENCY EQUIVALENTS US$ 1.00 - Malagasy Francs 255 (Fmg) FiPg 1.00 - US$0.00392 WEIGHTS AND MEASURES Metrie System 1 hectare (ha) = 10,000 m2 (2.46 acres) 1 kilometer (kI) - 0.62 miles 1 square kilometer (km2) = 0.39 square miles (100 ha) 1 oubic meter (m3) = 35.3 cubic feet 1 metrie ton (mt) 0.98 long ton ABBREVIÂTIONS ADÂ - Air dried ton = ADTPA - Air dried ton (metric) per annum BISP = Bleached long fibered sulphate pulp CTFT = Centre Technique Forestier Tropical DF - The Directorate.of Forestry MAI = Mean annual increment MRD - The Ministry of Rural Development m3(r) ub - Cubie meter round wood under bark FISCAL YE&R January 1 - December 31 MADAGASCAR MANGORO FORESTRY PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS .. ...... .............. . i - iii I. INTRODUCTION .., ....................* 1 Il. BACKGROUND .*. .................. 2 A. General ........te...,,,,,,...... 2 B. Forest Reso,rces and Industries ............. 2 C. Government Forest Services ................... 4 III. THE PROJECT AREA ..................... 4 A. General ............ *. * ........... 4 B. The Mangoro Valley Afforestation Program ..... 5 IV. THE PROJECT ............ . .. .. .. . ..................... . 6 A. General Description ......................... 6 B. Detailed Features .................... 7 C. Project Cost . .10........ e . D. Financing .................,., , , .... il E. Procurement ...... ........... et. 12 F. Disbursement . ........... , . , ......... . 12 G. Accounts and Audit ........ 13 V. ORGANIZATION AND MANAGEMENT ...................... 13 VI. PRODUCTION, MARKETS AND PRICES .................... 15 A. Yields and Production ......* ...... ... 15 B. Markets and Prices ..... . .. . , .,......... , 15 VII. BENEFITS AND JUSTIFICATIONS ....................... 16 A. Financial Evaluation . .............. -... 16 B. Economic Evaluation ................... 17 This Project was prepared by Government with the assistance of both FAO and IBRD. The report is based on the findings of an appraisal mission which visited Madagascar in November/December 1973 composed of Messrs. L. Ljungman and W. Stolber (IBRD), J.Easton (FAO) and A. Huber (Consultant). TABLE OF CONTENTS (Cont'd) Page No. VIII. AGREEMENTS REACHED AND RECOMMENDATION ......... 18 ANNEXES 1. The Development of Forest Resources in Madagascar 2. Project Developments Table 1. Physical Work Schedule Table 2. Planting Schedule Table 3. Total Manpower Requirements Table 4. Building and Housing Standards and Unit Costs Table 5. Vehicles and Equipment Required for the Project 3. Project Costs Table 1. Project Costs 4. Estimated Schedule of Disbursement 5. Project Organization, Research and Training 6. Production and Yields Table 1. Summary of Yield Data in Some East African Countries Table 2. Annual Planting Schedule, Projected Yield and Cutting Schedule 7. Industrial Development Table 1. Pulp Mill: Financial Rate of Return 8. Markets and Prices Table 1: The Outlook for Consumption of Pulp and Paper to 1985 9. Government Cash Flow Table 1: Government Cash Flow from Project Table 2: Foreign Exchange Costs and Export Value of Output of Program 10. Economic Evaluation Table 1: Cost in the Economic Analysis Table 2: Internal Rate of Return TABLE OF CONTENTS (Cont'd) CHART Project Organization (World Bank 9134) MAPS The Project Area (IBRD, 10923) Plantation Areas in Madagascar (IBRD, 10924) MADAGASCAR MANGORO FORESTRY PROJECT SUIMARY AND CONCLUSIONS i. One of the main objectives of the Malagasy Government is the expan- sion of marketable agricultural production in order both to satisfy the basic needs of the rural population and to help generate foreign exchange earnings. Exports of forestry products will have a special significance in this context, as the country has considerable areas of unutilized land which although unsuitable for either livestock or crop production, have a good potential for forestry development. The Government afforestation program now underway is thus designed to take advantage of this unutilized land and to concentrate investments in an industry where Madagascar has a distinct comparative advantage. It is also expected to help control the serious erosion problem which has turned large areas of valuable land into savannas with limited agricultural potential. The proposed Project would form part of a Government afforestation program now being implemented in the Mangoro Valley which offers encouraging prospects for establishing large scale plantations in Madagascar, and Government has given this program the highest priority. ii. The proposed Project would over five years provide for the planting of 35,000 ha of pine plantations as well as for the development of infrastruc- ture and forest services within the Project area. The afforestation program would include surveying of the area to be planted, land preparation, the establishment of nurseries, fertilization, planting, weeding and disease control. Provision would also be made for the construction of firebreaks and for the institution of fire control measures. Two types of roads would be constructed: service roads connecting the divisional headquarters with the public all-weather road network, and plantation roads. About 56 km of service roads would be constructed and maintained; plantation roads consisting of about 840 km of truck roads and 910 km of tracks would also be provided for over the Project period. Provision would be made for the purchase of the equipment necessary for the road building program; this would also be used in the establishment and maintenance of plantations, firebreaks and other infra- structure. A Project Headquarters would be located at Moramanga, and provi- sion would be made for construction of offices, a central warehouse, and a garage and workshop. As the headquarters would serve as a permanent home for a large number of the over 1,600 laborers to be employed, provision would also be made for the construction of permanent staff housing, prefabricated housing units for laborers, water reservoirs, cooperative stores, and a school, dispensary and village hall. A small pasture improvement program to assist farmers in the Project area is also included. iii. The Project would be executed by FANALAMANGA, a parastatal corpora- tion to be established by Government which would be built on part of the exist- ing organization of the Directorate of Forestry. The Director General of FANALAMANGA would have overall responsibility for Project implementation, and would be responsible to a Board of Directors which vould have full responsi- bility for policy and financial matters. As a contribution to its equity capital, Government would make available to the corporation: (i) the existing plantations and facilities in the Project area; (ii) Government's own con- tribution to the cost of the Project; and (iii) an amount equivalent to the proceeds of the Bank Loan and IDA Credit. Three Assistant Project Directors - the Plantation Director, the Engineering Director and the Financial Director - would supervise the day-to-day operation of the Project. For organizational purposes the Project area would be divided into three divisions, each with its own headquarters. iv. The proposed IDA credit of US$6.75 million and the Bank loan of US$6.75 million would finance the foreign exchange costs (US$4.5 million) and 71% of local costs (US$9.0 million). This would represent about 78% of the total estimated Project costs of US$17.2 million. Procurement of equipment and vehicles (US$2.0 million), fertilizer (US$0.9 million), and civil works contracts (US$2.1 million) in orders exceeding US$30,000 would be by international competitive bidding. Most of the infrastructural work and the afforestation would be executed under force account, as due to the remoteness of the area and the nature of the work it would not be likely to attract either local or international competitive bidding. v. It is expected that when fully established the plantations would provide a source of raw material for a pulp industry to be established in Moramanga by 1985. At full production the mill would be able to process an estimated volume of 1.5 million m3. It is estimated that about 2% of the pulp output would be marketed domestically, and the remainder would be sold in Europe. To meet this demand logging operations would eventually be carried out on about 6,000 ha per annum and the area would be reforested once logging operations had been completed. At full development (after 21 years), the annual value of production is expected to reach Fmg 18,000 million (US$56 million). After deducting the cost of production, the net annual incremental economic benefits attributable to the program would be about Fmg 10,000 million (US$31 million). vi. The internal rate of return of the program is estimated to be 13% over 33 years. Sensitivity tests indicate that the economic rate of return is relatively insensitive to change in levels of cost and benefits within reasonable ranges. Additional employment as a result of this Project would be about 1,600 man-years annually. This figure would increase in the later phases of the program as a result of the logging operation and the labor re- quired in the operation of the pulp mill. Spillover effects are also expected to accrue to small-scale farmers in adjacent areas as they increase their agricultural production to supply the program's labor force. Unquantified benefits would include the prevention of erosion, soil improvement, benefits from the training and research programs, and the upgrading of the rural road system. The Project would also be of substantial environnental benefit to the Mangoro Valley, as it would help prevent further soil erosion, and improve water retention and fertility. - iii - vii. This would be the first Bank Group financed project to Madagascar for the forestry sub-sector. Four loans or credits totalling US$32.7 million have previously been approved for agricultural projects. These include two credits for irrigation: US$5.0 million for the Lake Alaotra Irrigation Pro- ject in 1969 and US$15.3 million in 1972 for the Morondava Irrigation and Rural Development Project. The two irrigation projects were slow getting underway, and the Morandava Project has encountered significant cost over-runs. The Beef Cattle Development Project has experienced management difficulties as well as serious conflicts with villagers in the vicinity of the ranches; the Bank and Government have been engaged in a mutual effort to resolve these problems, however, and considerable progress has been made over the past year. The Village Livestock and Rural Development Project was recently approved by the Association. viii. The Project is suitable for an IDA credit of US$6.75 million and a Bank loan of US$6.75 million to the Governnment of the Malagasy Republic. MADAGASCAR MANGORO FORESTRY PROJECT I. INTRODUCTION 1.01 One of the main objectives of the Malagasy Government is the expan- sion of marketable agricultural production in order both to satisfy the basic needs of the rural population and to help generate foreign exchange earnings. Exporte of forestry products will have a special significance in this context, as the country has considerable areas of unutilized land which although unsuitable for either livestock or crop production, have a good potential for forestry development. The Government afforestation program is designed to take advantage of this unutilized land and to concentrate investments in an industry where Madagascar has a distinct comparative advantage. It is also expected to help control the serious erosion problem which has turned large areas of valuable land into savannas with limited agricultural potential. The proposed Project would form part of a Government afforestation program now being implemented in the Mangoro Valley. The Mangoro plantations offer encouraging prospects for establishing large scale plantations in Madagascar, and Government has given this program the highest priority. 1.02 This would be the first Bank Group financed project to Madagascar for the forestry sub-sector. Four loans or credits totalling US$32.7 million have previously been approved for agricultural projects. These include two credits for irrigation: US$5.0 million for the Lake Alaotra Irrigation Pro- ject in 1969, and US$15.3 million in 1972 for the Morondava Irrigation and Rural Development Project. The two irrigation projects were slow getting underway, and the Morondava Project has encountered significant cost over- runs. The Beef Cattle Development Project has experienced management dif- ficulties as well as serious conflicts with villagers in the vicinity of the ranches; the Bank and Government have been engaged in a mutual effort to resolve these problems, however, and considerable progress has been made over the past year. The Village Livestock and Rural Development Project was recently approved by the Association.\ 1.03 This Project was prepared by Cavernment with the assistance of both FAO and IBRD. The report is based on the findings of an appraisal mission which visited Madagascar in November/December 1973 composed of Messrs. L. Ljungman and W. Stolber (IBRD), J. Easton (FAO) and A. Huber (Consultant). - 2 - II. BACKGROUND A. General 2.01 The island of Madagascar - which acihieved independence in 1960 as the Malagasy Republic - is situated in the Indian Ocean some 400 km off the south- eastern coast of Africa. It has a total area of about 592,000 km2, extending about 1,000 km from north to south and averaging about 500 km in width. The climate and other physical conditions vary widely from the tropical climate of the lowland coastal areas to drier sub-tropical conditions on the central plateau where about 60% of the population is concentrated. The population of Madagascar, estimated at 7.5 million in 1973, is growing at an annual rate of about 2.5%. Over 85% of this total live in rural areas, and the average den- sity is about 13 per km2. 2.02 Madagascar's rural economy is divided between a small prosperous modern sector and the traditional sector living close to subsistence. Overail per capita Gross Domestic Product (GDP) was estimated at US$136 in 1970, al- though incomes in rural areas averaged only about US$80. Overall per capita CDP increased by little more than 1% per annum between 1966 and 1971. Tne major factor in this disappointing performance was the fact that agricuJltural output increased at only 2.9% annually, only slightly ahead of the rate of population growth. 2.03 Agriculture is the most important sector in the economy of Madagascar. it directly supports about 80% of the population, contributes about one-third of GDP, and is the source of about 85% of foreign exchange earnings. Basic food crops are rice, maize and manioc, while the major agricultural exports are coffee, cloves, vanilla, pepper and beef. Forestry contributes about 2% of GDP and forest products valued at US$2.0 million accounted for about 1% of both total imports and total exports in 1971. About US$0.2 million of these exports represented sawlogs and lumber. Government revenues in 1971 from forestry amounted to some US$0.4 million. B. Forest Resources and Industries (Annex 1) 2.04 About 17.0 million ha (30% of the total land area) within Madagascar is classified as forest land, and of this about 4.0 million ha has been de- marcated as state forests. About 12.4 million ha represent productive in- digenous forests and about 0.25 million ha pine and eucalyptus plantations. Some 3.0 million ha of the total forest area is degraded to such an extent that it has no productive function, and the balance is stocked with a wide variety of hardwood species, most of which have no commercial value. The value of these forests is also severely limited by the remoteness of the areas and the difficulty of the terrain, both of which make access difficult and the extraction of the small anount of merchantable timber relatively ex- pensive. -3- 2.05 Madagascar has extensive tracts of unutilized and sparsely populated land which because of altitude, the unsuitability of soils and widespread ero- sion have very low potèntial for either cropping or animal husbandry. Large areas within these tracts are well suited to forest development, however, and as they are also within relatively easy reach of the country's ports, Madagascar has a potential comparative advantage for the export of forest products. These areas are suitable for the establishment of either pine or eucalyptus plant- ations, but in view of their significantly better wood quality, pines are generally preferred for commercial plantations. 2.06 By 1973 about 65,000 ha of commercial pine plantations had been established; these were located mainly in three areas: Matsiatra (30,000 ha), Mangoro (18,500 ha), and Antsirabe (7,500 ha). In addition to these planta- tion programs, a national reforestation scheme was initiated in 1964 to provide timber for rural needs. About 200,000 ha of eucalyptus have been established in small stands - often on private land - to provide firewood for use by the railways and wood for local construction. As the cost of a reforestation pro- gram is significantly higher in natural forest due to the inaccessibility of the areas and the high costs of land clearance, most of these programs have been carried out in open grassland. The total volume of hardwood saw timber extracted annually from Malagasy forests is estimated at 400,000 m3 roundwood under bark ((r) ub). 2.07 Forest-related industries are in the early stages of development. Most of the logs are converted to lumber in the forest by handsawing (pit- sawing), and only about 100,000 m3 are converted in the country's 59 sawmills, many of which operate at substantially less than full capacity. Pitsawing is not only inefficient but produces a product much inferior to that turned out by the sawmills. Three forest based enterprises have been established since 1967: a modern sawmill, a State-owned fibreboard plant, and a pulp and paper factorv. The fibreboard plant at Moramanga has a capacity of 3,750 m tons per annum, but total output in 1972 was only about 1,000 m tons. The pulp and paper mill in Tananarive has a rated capacity of 10,000 tons of paper per year. It relies on imported pulp for 75% of its raw material require- ments and produces a wide variety of papers. Total output in 1972 was 7,000 m tons, the majority of which was sold to commercial outlets in Madagascar. In addition to these major industries, some 13 small factories produce joinery, furniture, boxes, and parquet flooring; there is also a match factory in Moramanga which produced a total of about 72 million boxes in 1972. A private particle board mill is now under construction in Tananarive. 2.08 The Government is investigating the possibilities of establishing a pulp mill producing about 120,000 air dried tons per annum (ADTPA) of un- bleached sulphate pulp in Matsiatra about 300 km south of Tananarive. The construction of this mill would have no adverse affect on the feasibility of the bleached pulp mill which is expected to be constructed to process the output from the forests established under the Project (para 3.04). The local wood resource base at Matsiatra is sufficient to support the proposed mill and the markets for the output of the two milis would be substantially different. -4- C. Government Forest Services 2.09 Overall responsibility for forest organization and management rests with the Directorate of Forestry (DF), one of the five Directorates in the Ministry of Rural Development (MRD). The DF has competent staff and its performance record compares favorably with that of other Government agencies within Madagascar and forest services in other African countries. The DF is responsible for formulating forest policy, administering the State forests, maintaining the provincial forest service, and implementing the large-scale industrial plantation program. In addition, it is responsible for national parks and wildlife protection, fresh water fisheries and soil conservation. These activities are carried out through three service departments: (i) reforestation and forest industries management; (ii) national parks, wild- life and fisheries; and (iii) soil conservation. In connection with its soil conservation responsibilities, the DF supports a broad program of forest protection and control which is carried out by the provincial forest service. In 1973 the DF was composed of 15 professional foresters, 30 assistant forest- ers, and 400 forest rangers and guards. It also has a small research organi- zation staffed with about 5 professionals. 2.10 The total budget allocation for the DF in 1973 was Fmg 1.6 billion (USS6.3 million). About 60% of this was used to support afforestation projects throughout the country. Fees, taxes and other revenues are collected by the DF but are paid directly to the Ministry of Finance; in 1973 these revenues were Fmg 90 million (US$0.4 million) derived from stumpage fees (66%), re- forestation taxes (28%) and sale of pulpwood (6%). Royalties for extraction of hardwood from the State forests are based on the estimated net profit of the sales of the logs. Royalties for long fibred pulpwood have been about Fmg 710 (US$2.80) per m3. The stumpage fee varies between 25% and 33% of the estimated net profit and generally averages about Fmg 250 (US$1.00) to Fmg 1,200 (US$4.71) per m3, which is an acceptable level. Concessionaires are required to pay a reforestation tax and must also deposit with the DF a sum of Fmg 50/ha as a guarantee against any damage which is not restored according to the terms of the concession license. III. PROJECT AREA A. General 3.01 The Project would be located in the Mangoro Valley, which is centrally located near the eastern coast of Madagascar and about 75 km east of Tananarive. The Project area is defined by an established perimeter within which areas have been generally selected for plantîng (Map, IBRD 10923). The land which would be planted under the Project is currently unoccupied and unencumbered by land claims; according to Malagasy law it is therefore considered Governnent land, - 5 - and is under the direct control of the DF. The gross area within this perimeter comprises about 190,000 ha in a 20 km wide strip extending about 130 km north from the town of Moramanga. The area lies at an altitude of between 900 and 1,100 meters and is surrounded by high mountain ridges. Annual rainfall varies between 1,200 and 1,600 mm with a marked four-month rainy season (December- March). The terrain is gently undulating with heavily degraded and eroded lateritic or ferrallitic soils. The forests which originally existed in this area have been repeatedly cut and burned, and this has resulted in the almost complete denudation of the land. It is now typically covered by fire-resistant grass or by heather. Two main rivers - the Mangoro and the Sahabe - provide the major sources of water. As a result of the sparse population and the gen- erally low agricultural potential, there are few roads in the valley, but the railroad from Moramanga to Lake Alaotra runs adjacent to the area and then connects with the Tananarive-Tamatave railroad. 3.02 There are now about 11,000 people living in 36 small villages scattered vithin the Project area; these villages are, however, outside the areas identified for afforestation under the Project. The villagers are mainly subsistence farmers who have an average of about 1.7 ha of cultivable land. Their main livelihood is rice farming, although some cattle are kept as work animals and for milk production; it is estimated that there are currently about 8,000 head of cattle within the area. Employment possibilities are few: the only cash incomes are derived from the sale of handcrafts and from some tempo- rary work in the ongoing afforestation program. Much of the land in the Mangoro Valley is almost totally unsuitable for agricultural production other than ex- tensive poor quality grazing for cattle, and there is little likelihood that the land could effectively support a larger agriculturally-based population than is now settled there, as any increase in grazing would aggravate the already serious erosion problem. In accordance with current practice, valley bottoms would continue to be used for rice cultivation, and neither these areas nor the better grazing lands would be included in the area to be planted under the Project. There is a possibility, however, that some marginal grazing areas could be affected by the afforestation program, and should this happen, the owners of the land would be compensated by Government in accordance wlth Malagasy law. It is expected, however, that any interference with local land use patterns as a result of the Project would be minimal. B. The Mangoro Valley Afforestaticn Program 3.03 The Project would be part of the on-going Government afforestation program which aims to plant 96,000 ha of pine plantations in the Mangoro Valley. By the end of 1973 some 18,500 ha of pine plantation had been estab- lished, and another 6,500 ha were scheduled to be planted in the early part of 1974. The methods of plantation establishment used thus far were developed jointly by the DF, UNDP/FAO and a French bi-lateral research organization Centre Technique Forestier Tropical (CTFT); as they have proven to be generally success- ful, they would be continued under subsequent plantings. - 6 - 3.04 It is expected that when fully established the plantations vould provide a source of raw material for a bleached pulp industry to be estab- lished in Moramanga. However, the first plantings in the Mangoro Valley were carried out in 1969/70, and a fifteen year growth period must be allowed before the trees can be cut. Logging operations in this area are therefore expected to begin in 1985. A provisional pulpwood mill site with a suîtable water supply has been chosen 20 km from Moramanga near the railway from Tananarive to Tamatave; the mill would thus be about 270 km from the port at Tamatave. It is projected that the mill would be fully operational by 1985 when the first sawn timber from the Mangoro plantations becomes availi able. IV. THE PROJECT A. General Description 4.01 The Project would comprise part of the Government afforestation program now being carried out in the Mangoro Valley which will ultimately involve the establishment of about 96,000 ha of pine plantations. The Project would over five years (1974/75-1978/79) provide for the planting of 35,000 ha out of this total area, as well as for the development of infrastructure and forest services within the Project area. FANALAMANGA, a corporation to be established by Government, would have overall responsibillty for Project administration. Specifically the Project would include: (a) Afforestation of 35,000 ha; (b) Fire control and maintenance of ail plantations within the Project area; (c) Construction and maintenance of service and plantation roads; (d) Construction of a Project Headquarters, three divisional headquarters, and staff and labor facilities; (e) Research, training and tht preparation of future forestry projects as well as other projects within the agricultural sector; and (f) Pasture improvement on about 2,000 ha within the Project area. - 7 - B. Detailed Features (Annex 2) Afforestation 4.02 The Project would provide for the afforestation of a total of 35,000 ha over the Project period; about 7,000 ha would be planted in each of the five years. The afforestation program would include surveying of the area to be planted, land preparation, the establishment of nurseries, fertilization, planting, weeding and disease control. 4.03 Surveying. A broad survey of the total area to be planted has already been carried out, and under the Project more detailed soil and topo- graphical surveys would be made. Soil surveys would, for example, provide information on necessary soil treatment and fertilization measures. The sur- veys would be made by special teams recruited within Madagascar. Boundaries would be agreed with villagers now living in the Project area, and assurances to that effect were obtained at negotiations. This process is already under- way, and is not expected to delay the implementation of the Project. A map would be drawn up illustrating boundaries, preliminary road locations and prominent geographic features. 4.04 Land Preparation and Fertilization. As much of the soil in the area to be planted is degraded and compacted, subsoiling would be essential to break up these layers to a depth of about 50 cm in order to assure root penetration and moisture retention. This soil preparation would be done by a crawler tractor with a disc harrow and ripper, although on steeper slopes it would be necessary to utilize hand labor. In areas where there is a heavy heather growth, the use of a roller chopper would be necessary before soil preparation. Soils to be planted are deficient in phosphorus and potassium, and consequently would be spot fertilized before planting using 140 kg per hectare. 4.05 Nurseries. The annual plantation program would require about 12 million plants, and seven nurseries would be established to meet this need; these nurseries would be relocated every second year in order to minimize the transport costs of seedlings. Two types of seeds would be used: Pinus kesiya would be obtained from selected stands in Madagascar, and Pinus elliottii would be imported; no difficulties in procuring an adequate quan- tity of seeds are anticipated. Provision would be made for some sprinkler irrigation of the nurseries, and for the application of fertilizers where necessary. 4.06 Planting, Weeding and Disease Control. Planting would be done by hand during the rainy season (December-March). About 70% of the area would be planted with Pinus kesiya and the remainder with Pinus elliottii. Past experience indicates that a 10% failure rate can be expected, however; these areas would be replanted either in the same planting season or in the next year. Limited weeding operations would be carried out. An inspection team would make regular inspections to identify and control any insect or fungal attacks on the plantations. - 8 - Road Construction 4.07 Two types of roads would be constructed under the Project: service roads connecting the divisional headquarters (para. 4.11) with the public all- weather road network, and plantation roads. The objective is to lay out and implement a road system during the plantation establishment period which could be subsequently upgraded to allow for logging operations. About 56 km of gravelled service roads would be built and maintained. Plantation roads would consist of both truck roads and access tracks. The truck roads would be designed to the minimum standard necessary to allow for establishment of the plantations and fire control and would form part of a continuous road system throughout the area. The tracks would provide access to individual ridges. About 840 km of plantation truck roads and 910 km of tracks would be constructed and maintained over the Project period. Fire Protection 4.08 Firebreaks would be constructed throughout the Ptoject area. As the plantations would be established on the plateau and on the upper slopes of the hills, the valley bottoms would serve as natural firebreaks. Plantation roads would also serve as firebreaks.. These natural firebreaks would be connected with constructed breaks which would further subdivide the planting areas. Some 82 km of firebreaks would be constructed in each year of the Project period. Firebreak maintenance would include early burning of natural fire- breaks along the perimeter of the valley bottoms at the end of the rainy season, and the yearly burning, mowing and grading of artificial firebreaks in order to keep them free of combustible material. About one-half of the firebreaks would require mechanical clearing. This maintenance program would be carried out not only in Project plantations, but also on about 25,000 ha within the Mangoro Valley already planted under the Government afforestation program; expenditures for the existing program would be small and could not be readily separated from maintenance expenditures attributable to the Project. 4.09 A comprehensive system of fire prevention and control would be insti- tuted throughout the Project area. One permanent fire fighting unit would be set up in each of the three divisions under the supervision of the Divisional Forestry Officer (para. 5.04). Nine fire towers would be constructed at 15 km intervals throughout the Project plantation area; fire control maps indicating water supplies would be drawn up, and a communications system established. Provision would also be made (para. 4.12) for vehicles and fire fighting tools and equipment. Project Management 4.10 Administration. Provision would be made for the salaries and other costs of all Project staff. These would include not only the administrative staff (Director General, Forestry Specialist, Assistant Project Directors, etc.), but also teachers, fire contral chiefs, technical and financial sup- porting staff, health and educational workers, as well as clerical staff and drivers. Also included would be provision for the running costs of Project administrative vehicles. - 9 - 4.11 Buildings and Housing. The Project Headquarters would be located at Moramanga, and provision would be made for construction of offices, a central warehouse, a garage and workshop. For purposes of administration, the Project area would be divided into three operating divisions - North, Central and South - each with a Divisional Headquarters (para 5.03). The Headquarters for the Central Division has already been built and no further construction would be necessary there. Some additional investment would be made in the South Division to upgrade an existing sectional headquarters to divisional level, and an entirely new headquarters would be built for the North Division. Investments would include office buildings, workshops, stores and garages. As the headquarters would serve as permanent home for a large number of the over 1,600 laborers to be employed, provision would also be made for the construction of permanent staff housing, prefabricated housing units for laborers, water reservoirs, cooperative stores, and a school, dispensary and village hall (Annex 2, Table 4). Equipment 4.12 The Project would require investment in equipment for several dif- ferent Project activities including road building, land clearance, construc- tion and maintenance of firebreaks, planting, and construction of headquarters units. Equipment to be provided would include bulldozers, graders, tractors, trucks and various other vehicles. Provision would also be made for office and workshop equipment for the Project and the Divisional Headquarters. Details are given in Annex 2, Table 5. 4.13 The Project workshops would be responsible for the repair and main- tenance of Project vehicles and equipment. Major repairs would be carried out in the Central Division workshop, which would also include a central spare parts store. Research and Training 4.14 Forestry research in the Project area has been carried out under the direction of the National Forestry Research Center of the DP. Project research would support the work already being carried out on a national level, and would include yield and growth studies, establishment of seed orchards, fertilization and disease control, and calculation of yield tables. Funds would be provided for equipment, vehicles and consultants to carry out these studies. The national research staff would not be financed as part of the Project, but would continue to be covered by the research budget of the DF. Consultants would be employed to prepare plans for a second phase project in the Mangoro Valley and for other future projects within the agricultural sector. Assurances were obtained at negotiations that the consultants financed under the Project as well as their terms of reference would be subject to the prior approval of Bank/IDA. 4.15 The Project would include provision for the training of Project staff in methods of establishing large scale plantations as well as in forest manage- ment. A training center would be set up at the Central Division Headquarters which would be staffed by a professional forester assisted by 3 foresters from the DF; courses would be given for those staff not in professional positions. Provision would be made for staff, equipment and vehicles for the training center. - 10 - Pasture Improvement 4.16 The Project would provide US$100,000 for the improvement of about 2,000 ha of pasture within the Project area through the introduction of stylo. The use of stylo for pasture improvement has been successfully tested within Madagascar, and this program should substantially increase the carrying capa- city of the natural pastures used by the villagers for communal grazing. Although the Project funds would be used mainly for pasture improvement, some additional components for improved cattle feed may also be introduced. Ecology 4.17 The Project plantation program would be of substantial environmen- tal benefit to the Mangoro Valley. The area selected for afforestation is degraded, and the tree cover would reduce further erosion and improve soil fertility and water retention. The boundaries of the plantation areas would be drawn so as to minimize any conflict with local land use patterns. As- surances were obtained at negotiations that sound environmental practices would be followed under the Project, and that the necessary steps would be taken by Governnent to monitor water quality and flow on the Mangoro River in order to minimize any possible adverse ecological effects from the construc- tion of the proposed pulp mill. C. Project Cost (Annex 3) 4.18 Total Project cost is estimated at Fmg 4,400 million (US$17.2 mil- lion). The foreign exchange component is estimated at US$4.5 million. - 1i1 - Foreign Local Foreign Total Local Foreign Total Exchange % - Fmg million----- --------US$ '000------ Afforestation 622 199 821 2,439 780 3,219 24 Service and Plantation Roads 331 136 466 1,296 532 1,828 29 Fire Protection 266 20 286 1,044 79 1,123 7 Project Management Administration 478 25 503 1,876 98 1,974 5 Buildings & Housing 434 54 488 1,703 211 1,914 il Equipment 157 325 482 615 1,274 1,889 67 Research, Training and Studies 83 124 207 325 486 811 60 Pasture Improvement 25 - 25 98 - 98 - Subtotal 2,396 882 3,278 9,396 3,460 12,856 27 Contingencies Physical 50 46 96 194 181 375 48 Price 804 222 1,026 3,110 859 3,969 22 Total Project Cost 3,250 1,150 4t4OO 12,700 4.500 17,200 26 Costs have been estimated at prices prevailing in July 1974. Taxes and duties on Project items are negligible, and have therefore not been included. A physical contingency of 10% on the cost of equipment, housing, buildings and service road construction has been included. Price escalations are equivalent to a cumulative annual price contingency of about 14%, and over the Project period represent 31% of baseline costs. D. Financing 4.19 The financing of Project costs would be shared in the following amounts and proportions: - 12 - US$'000 z IDA 6,750 39 Bank 6,750 39 Government 3,700 22 1 7L200 100 The proposed IDA credit of US$6.75 million would be on standard terme to Government, and the Bank loan of US$6.75 million would be for a period of 25 years including a ten-year grace period. Together these would finance the foreign exchange costs (US$4.5 million) and about 71% of local coste (US$9.0 million), or about 78% of total Project costs. Government's contribution and an amount equivalent to the proceeds of the Loan and Credit would be made available to FANALAMANGA as a contribution to its equity capital (para 5.01). The Project would provide up to US$100,000 in retroactive financing to cover Project expenditures for salaries and administrative costs incurred from November 1, 1974 to the date of Project effectiveness. E. Procurement 4.20 Procurement of equipment and vehicles (US$2.0 million), fertilizer (US$0.9 million), and civil works contracts (US$2.1 million) in orders exceed- ing US$30,000 would be by international competitive bidding in accordance with Bank/IDA guidelines; orders would be bulked whenever possible. Orders of less than US$30,000 would be obtained under Government procurement procedures which are satisfactory. The infrastructure work (except service roads and prefabricated houses) and the plantations would be established by the DF under force account, as due to the remoteness of the area and the nature of the work it would not be likely to attract either local or international competitive bidding. F. Disbursement (Annex 4) 4.21 Disbursements would be made first from the Credit account and then from the Loan account on the following basis: (a) 75% of both foreign and local expenditures for civil works by contractors and by force account; (b) 100% of foreign expenditures or 75% of local expenditures for vehicles, equipment and fertilizer; and (c) 100% of foreign and 75% of local expenditures for pasture improvement, consultant services for research and training, and for preparation of a second phase project as well as other future projects within the agricultural sector. - 13 - Disbursement would be made against statements of expenditure certified by the Financial Director and approved by the Ministry of Finance. In the case of imported fertilizer, vehicles or equipment, disbursement would be made against import documents. G. Accounts and Audit 4.22 At negotiations assurances were obtained that FANALAMANGA would set up and maintain records and accounts adequate to reflect its operations, resources and expenditures, and that it would keep separate accounts for the Project. Project accounts would be prepared by the Financial Director, who would supervise the three Divisional Accountants (para 5.06). Assurances were also obtained that Project accounts would be audited annually by inde- pendent auditors acceptable to Bank/IDA, and that all audited accounts would be submitted to Bank/IDA no later than six months following the close of the financial year. V. ORGANIZATION AND MANAGEMENT 5.01 The Project would be executed by FANALAMANGA, a corporation (Societe d'Economie Mixte) to be established by Government with substantial administra- tive and financial autonomy. During the Project implementation period the majority of the shares of FANALAMANGA would be owned by the State, but a small number would also be held by the Banque Nationale Malagasy de Developpement; the corporation's structure would allow for additional local or foreign private participation at later stages of development. As a contribution to its equity capital, Government would make available to the corporation: (i) the existing plantations, facilities and equipment of the Mangoro plan- tation scheme; (ii) Government's own contribution to the cost of the proposed Project, and (iii) an amount equivalent to the proceeds of the Bank Loan and IDA Credit as Government shall withdraw from Bank/IDA for project implemen- tation. Draft statutes of incorporation have been reviewed by Bank/IDA, and the establishment of the corporation as a legal entity would be a condition of Credit and Loan effectiveness. 5.02 The Director General of FANALAMANGA would have overall responsi- bility for Project implementation, and the appointment of a suitable candidate to this post would be a condition of Credit and Loan effectiveness. Re would be responsible to a Board of Directors, including representatives of the Directorate of Fores try (DF) within the Minis try of Rural Development, as well as representatives of the Ministries of Economy and Finance, Interior, Planning, Public Works, and Transport. The Board would have full responsi- bility for policy and financial matters. FANALAMANGA would be built on part of the existing organization of the Directorate of Forestry, and would take over the budget, personnel and functions of the exîsting Mangoro plantation scheme. The Director General would be supported for two years by an interna- tionally recruited Forestry Specialist who would advise on overall Project - 14 - planning and implementation. This consultant has been requested by the Governnent as at this time there are only a limited number of professional foresters available in Madagascar. 5.03 For organizational purposes the Project area vould be divided into three divisions (Chart), each with its own headquarters (para. 4.11). Each division would ultimately comprise tvo sections; only four sections vould be operated in the Project period, hovever, and the remaining two vould be set up under an envisaged second phase operation. As planting has already been carried out by Government in one section of the Central Division, the Project planting program would be restricted to three sections. The day-to-day opera- tion of the Project would be under the direct supervision of three Assistant Project Directors - the Plantation Director, the Engineering Director and the Financial Director - who would be stationed àt Project Headquarters in Moramanga. 5.04 The Plantation Director would be in charge of three Divisional Forestry Officers; the latter would oversee the afforestation program, fire control and village development (school, dispensary, cooperative store etc.). The Plantation Director would also have direct responsibility for Project research, training, the topographical and soil survey teams, and disease control measures; the staff concerned with these activities would be stationed at the Central Division Headquarters. 5.05 The Engineering Director would supervise three Divisional Engineers who would be responsible for construction and maintenance of roads and fire- breaks, maintenance of vehicles and equipment and operation of the stores and workshops. He would also oversee a Workshop Engineer and an Electrical Engi- neer who would serve all three division and who would be stationed in the Central Division Headquarters. The Workshop Engineer would, at the Government's request, be internationally recruited and provision would be made for a Malagasy counterpart. 5.06 The Financial Director would be responsible for Project accounts, cost control and procurement, and would supervise the three Divisional Account- ants. Assurances were obtained at negotiations that Government would cause FANALAMANGA to employ within seven months of the signing of the Credit and Loan agreements, a Plantation Director, a Financial Director, a Forestry Specialist, and a Workshop Engineer whose qualifications and experience would be acceptable to Bank/IDA. - 15 - VI. PRODUCTION, MARKETS AND PRICES A. Yields and Production (Annex 6) 6.01 The oldest plantations in the Project area are only five years old, and only limited yield data are available to calculate the expected production from the Project plantations during their fifteen year growth period. On the basis of experience from similar plantations both in Madagascar and abroad, it has been estimated that a gross mean annual increment over bark (MAI o.b.) of about 15-20 m3/ha/year could be achieved. This growth is in line with that of similar plantations elsewhere in Eastern Africa (Annex 6, Table 1). With allowances for the volume of bark and losses, the weighted net volume under bark would be 13 m3/ha/year for the Project plantations. 6.02 Pulp Mill Development (Annex 7). It is envisaged that the wood produced in the Mangoro pulpwood plantation program would be utilized in a mill expected to be in operation by 1985 (para 3.04). At present cost and price relationships, the best industrial alternative would be a mill with a nominal capacity of 200,000 ADTPA of bleached sulphate pulp. At full production such a mill would be able to process an estimated volume of 1.5 million m3 of wood per annum. To meet this demand logging operations would be carried out with- in the Project area on about 6,000 ha per annum and the area would be reforested once logging operations had been completed. Sufficient pulping tests have been carried out to ascertain that pulp produced from planted species will compare favorably on the world market with pulp from other fast growing pines. B. Markets and Prices (Annex 8) 6.03 Markets. The world market for bleached sulphate pulp and paper has changed significantly over the last two years. Markets in the 1960's were characterized by excess production capacity and by low profitability due to depressed prices, reduced production and increased manufacturing costs. Recently, however, there has been a fundamental change in the character of the market; this change has resulted in shortages of most types of pulp and paper and in rapidly rising prices. All evidence indicates that Madagascar should be able to successfully compete with other major pulp producing coun- tries in supplying a portion of a substantial increase in world demand in bleached long-fibered sulphate pulp (BLSP). Major competitors for this in- creased demand would be other tropical countries and North America. The increased capacity for the production of BLSP in East Africa by 1985 is estimated at less than 500,000 ADT, which in that year would represent about 20% of Europe's total estimated import requirements. 6.04 The major part of the total output from the pulp mill would be sold in Europe, and the remainder would be marketed domestically. The projected annual increase in domestic demand for paper and paper products is estimated at 5-6%. The demand for pulp is, however, ultimately limited by the capacity - 16 - of the only paper mili in Madagascar (para 2.07), and no additional mill is envisaged in the next two decades. The ultimate maximum output of the exist- ing mill will be some 14,000 tons of paper products per annum requiring 4,400 tons per annum of bleached sulphate pulp. 6.05 Prices. The last two decades have been characterized by stagnant current prices of pulp and slightly falling real prices. However, the upsurge in prices which has been evident since 1972 is expected to continue for some years, and in the future, real prices should remain substantially higher than the 1972 levels. Because of substitution possibilities, the recent price increases in oil products could possibly result in further real price increases for wood based products. The Project's economic evaluation is based on the price and cost levels prevailing in June 1974, conservatively assuming no real price increase. The CIF price of BLSP in Western Europe and the Western Mediterranean area vas at that time US$350 per ADT. The domestic price at the same date was US$400 per ADT. 6.06 In order to determine the pulp mill's net sales price for the Project output, allowances have been made for quality, cash discounts, insurance, freight, port charges and agents' commissions. The opening of the Suez Canal would improve the cost advantage which BLSP from Madagascar now enjoys on the European market. The quality of pulp and paper produced from Pinus kesiya is lower than that for Scandinavian and Canadian pulp, but compares favorably with pulp from the southern U.S. and southern Europe which sells at an histori- cal discount of $4.00 per ADT. Based on assumed markets, the weighted mill net price is estimated at US$260 per ADT. VII. BENEFITS AND JUSTIFICATION A. Financial Evaluation 7.01 As the amount and sources of the additional financing needed for the second phase of the afforestation program and the pulp mill have not yet been established, the impact of the Project on Government's cash flow has been confined to Project investment and stumpage revenues only. Current stumpage prices have been used to calculate the revenues at time of harvest- ing (about 15 years after planting; Annex 9, Table 1). Taxes and duties are negligible and have therefore not been included, and stumpage revenues from pre-Project plantations which would be maintained under the Project have also not been included. On these assumptions, Project costs would be recovered within 20 years at an interest rate of about 5%. The level of stumpage fees are in line with those prevailing elsewhere in the world, but these should be kept under consideration throughout the development period. 7.02 The Project plantation would have to be followed up by a second plantation phase and by the setting up of a logging industry and a pulp mill. This would involve further investment of some US$10 million for afforestation and logging and some US$140 million for the pulp mill at present prices. - 17 - A financial rate of return for this program has been calculated to establish whether the total development program, including the pulp mili, would be financially viable, independent of future sources of finance. At 1974 price levels, the rate of return would be about 10% over a 33-year period. 7.03 The net foreign exchange impact of the plantation program is de- tailed in Annex 9, Table 2. Although the program would have a negative foreign exchange impact from 1974 up to 1984, its net annual foreign exchange earnings would increase rapidly thereafter from US$5.8 million in 1985 to about US$42 million at full development (by the year 1995). B. Economic Evaluation (Annex 10) 7.04 The 35,000 ha of Project pine plantations would provide part of the necessary raw material for the successful operation of the bleached pulp mill to be constructed near Moramanga. The economic justification of the Project is based on the entire Mangoro afforestation program. This overall program comprises the plantation of a total area of 96,000 ha, logging operations over 6,000 ha of 15 year-old pines each year, and the subsequent processing of the wood in the projected pulp mill. The major quantifiable benefit thus stems from the expected production of long-fiber pulp. At full development (after 21 years), the annual value of production is expected to reach Fmg 18,000 million (US$56 million). After deducting the cost of production, the net annual incremental economic benefits attributable to the program would be about Fmg 10,000 million (US$31 million) (Annex 10, Table 2). 7.05 The internal rate of return of the program is estimated to be 13% over 33 years. In calculating the rate of return to the economy, all foreign exchange costs and benefits were valued upward by 25% to reflect more accur- ately the economic value of foreign exchange to Madagascar. Labor costs were shadow rated at 75% of the current wage rate. 7.06 The Project would result in additional employment of about 1,600 man-years annually. This figure would increase in future phases of the pro- gram as a result of logging and mill operations. Spillover effects are ex- pected to accrue to small-scale farmers in adjacent areas who would sell agricultural products to the Project laborers. Unquantified benefits not included in the analysis are the prevention of erosion and the improvement of soils; benefits from training, research and studies; institutional improve- ments; upgrading of the rural road system; and pasture improvement. 7.07 The main risks attached to the Project involve the projected yield (MAI) in the plantation, and the price of pulp. If the yield were lower than anticipated, a greater plantation area would be needed to provide the raw material for the pulp mill, and/or the mill would have to be scaled down. The market price used in the economic evaluation is considered conservative. A substantial reduction in pulp prices is not likely in view of: (i) the - 18 - projected increase in future demand for pulp; and (ii) the limited possibil- ities for expanding mill capacity and wood resources in the world in the foreseeable future. Flexibility as to the type of pulp or paper products to be manufactured would be retained until the beginning of the second phase of the plantation program when growth and market conditions would be reevaluated. Comparative calculations at present price levels show that there are several alternative uses of the plantations' output for different types of pulp or pulp and paper mills with rates of return at acceptable levels. 7.08 In the unlikely event that neither the proposed pulp mill nor any other type of wood processing facility were built, the raw material from the Project plantations could be exported as roundwood or wood chips. There is an increasing demand for these products on the world market, and current indi- cations are that there should be little difficulty in marketing the Project output. If the output from the Mangoro plantations were to be exported as wood chips, it is estimated that the economic rate of return of the Project would be about 10%. 7.09 Sensitivity tests under various assumptions have shown that the economic rate of return is relatively insensitive to changes in costs and benefits (Annex 10). With a 10% increase in costs the rate of return would be 11%, and with a comparable reduction in benefits the return would be 10%; a combination of both would give a return of 8%. If foreign exchange were not shadow priced, the rate of return would be 11%. VIII. AGREEMENTS REACHED AND RECOMMDATION 8.01 During negotiations agreement was reached on the following points: (a) Plantation boundaries would be established in agreement with the villagers (para 4.03); (b) The consultants financed under the Project as well as their terms of reference would be subject to the prior approval of Bank/IDA (para 4.14); (c) Sound environmental practices would be followed under the Project and that the necessary steps would be taken by Government to monitor water quality and flow on the Mangoro River (para 4.17); (d) FANALAMANGA would set up and maintain records and accounts adequate to reflect its operations, resources and expenditures, and that it would keep separate accounts for the Project (para 4.22); - 19 - (e) Project accounts would be audited annually by independent auditors acceptable to the Bank/IDA, and that all audited accounts would be submitted to Bank/IDA no later than six months following the end of the financial year (para 4.22); and (f) Government would cause FANALAMANGA to employ within seven months of the effectiveness of the Credit and Loan agree- ments, a Plantation Director, a Financial Director, a Forestry Specialist and a Workshop Engineer whose qualifications and experience would be acceptable to Bank/IDA (pàra 5.06). 8.02 Conditions of Credit and Loan effectiveness would be: (a) Establishment of FANALAMANGA as a legal entity (para 5.01); and (b) Appointment of a suitable candidate to the post of Director General (para 5.02). 8.03 The Project is suitable for an IDA Credit of US$6.75 million and a Bank Loan of US$6.75 million to the Government of the Malagasy Republic. ANNEX 1 Page 1 MADAGASCAR MANGORO FORESTRY PROJECT The Development of Forest Resources in Madagascar A. Forest Resources 1. Of the total land area of Madagascar approximately 17.0 million ha is classified as forests. Of this about 12.4 million ha can be classified as productive indigenous forests and 250,000 ha is man-made pine and eucalyptus plantation. Forest Land '000 ha State forests, non-demarcated 7,800 State forests, demarcated Nature reserves and national parks 500 Classified reserves 2,400 Area for reforestation and soil conservation 850 Area planted to pines 50 Area planted to eucalyptus 200 Degraded forests 4,300 Forest under lease, private forests 900 and provincial forests TOTAL 17,000 2. The low standing volumes, the preponderance of non-merchantable species and the inaccessability of most indigenous forests limit their economic value. Moreover, the cost of a reforestation program to establish pine planta- tions is significantly higher in natural forests than in alternative open grassland areas because of high land clearance costs and inaccessability. The natural forests nonetheless serve an important function in providing domestic timber and fuel and maintaining water catchments. 3. Climatic conditions in Madagascar favor the establishment of pine plantations, and Government gives high priority to the establishment of such ANNEX 1 Page 2 plantations to utilize land with low agricultural potential. The availabil- ity of such land in large blocks close to the sea gives Madagascar a comparative advantage for production of pulpwood. This advantage has recently been even more emphasized by increased energy prices. Without taking account of a possible increased demand for pulpwood as substitute for oil based products, the projected world demand for pulpwood in the next ten years would have to be met from an increased raw material base either by new plantations or by increasing the production from or access to existing forests. 4. The man-made forests in Madagascar are mainly pine and eucalyptus plantations. The existing eucalyptus plantations have been established for fuelwood (mainly for railway use). A continuation of eucalyptus plantation on a large scale would be justified only as raw material for a pulp and paper industry. However, the growth rate of eucalyptus on marginal agricultural soils is too low to warrant a major plantation scheme for a pulp mill based on eucalyptus. The existing resources could, however, be utilized in a future pulp mill based on long-fibered wood (pines). 5. The major pine plantation schemes in Madagascar are: (i) Plantations of Pinus patula (and some Pinus kesîya) near Antsirabe Age Class Total (years) (ha) Less than 5 2,040 5 - 10 3,028 11 - 15 1,427 16 - 20 1,427 21 - 25 25 26 - 30 84 More than 30 228 All ages 7,651 (ii) Industrial Pine Plantations of the Haute Matsiatra. These plantations, situated in the Prefecture of Fianarantsoa, were originally meant to supply a 100,000 ADTPA pulp mill; some 35,000 to 40,000 ha were expected to be planted with Pinus patula. Studies were carried out by Societe d'Etude pour la Promotion des Industries de la Cellulose (SEPIC). By 1974 approximately 30,000 ha had been planted. ANNEX 1 Page 3 Pinus patula Plantations - Haute Matsiatra Year Planted Area (ha) Year Planted Area (ha) 1953/54 511 1961/63 930 1954/55 2,020 1963/64 1,505 1955/56 2,822 1964/65 1,001 1956/57 1,534 1965/66 1,010 1957/58 1,416 1966/67 1,167 1958/59 1,336 1967/68 1,725 1959/60 726 1968/69 1,810 1960/61 736 1969/70 2,086 1961/62 - 1970/71 - 1971/72 2,780 1972/73 2,785 1973/74 2,100 TOTAL 30,000 These plantations presently form the largest single block of commercial timber within Madagascar. However, due to limitations on additional available land in the area and the long distance from the coast, they cannot be developed to a size which would be sufficient for competitive export production. (iii) Industrial Pine Plantations of the Mangoro Valley. In 1967 it was decided to start a large reforestation scheme in the Mangoro valley in the Prefecture of Ambatondrazaka. Financing was arranged in 1968 by FNDE (Fonds National pour le Developpement Economique) and the project was started in July 1968. Basic research was carried out by the CTFT with FAO running a pilot project on a larger scale. Pinus kesiya was selected as the most promising species. By the end of 1973 approximately 18,500 ha had been planted, and this total is expected to be extended to some 96,000 ha in the future. Because of the availability of land in the area and its proximity and accessability to the coast, the Mangoro plantations offer the most encouraging prospects for developing large scale plantations. It is in this area that the proposed Project would be located. (iv) Industrial Pine Plantations of the Haute Onive. These plantations are situated in the Prefecture of I.M. Centrale. The original aim in 1968 was to create a large scale block of Pinus patula plantations by planting 3,000 to 4,000 ha annually. The selection of the Mangoro valley as the main source of pulpwood supply has put the reforestation of the Onive region in a secondary position. Although planting continues, the areas planted annually are on the ANNEX 1 Page 4 order of hundreds of hectares instead of thousands of hectares as originally planned. Many small scattered family farms occur in this region. Some 10,000 to 15,000 ha net plantable area seems to be available. 6. In addition to the plantations mentioned above, UNDP/FAO has es- tablished under its program of "Inventaire et Mise en Valeur Forestiere de Certains Perimetres" a series of trials with regard to industrial afforesta- tion. The UNDP/FAO pilot plantations in the Haut Mangoro examine the results of basic research on a large scale and help guide the industrial plantation program. B. Forest Industries 7. The forest industries are still in the early stages of development and a significant proportion of roundwood is presently converted by hand methods, (pitsawing) which is both wasteful of the raw material and unsatis- factory with respect to the quality of the product. There have been three important developments in recent years; the establishment of a pul§ and paper factory in 1967, a modern sawmill with a capacity of some 10,000 m in the same year and a fibreboard plant in 1971. Summary of Existing Forest Industries Tgype Number of Production Value of Number of Plants Capacity in 1972 Production Employees (Fmig Million) Sawmills 59 61,000 m3 48,000 m3 610 970 Fibreboard 1 3,750 m/t 1,000 m/t 17 43 Pulp and Paper 1 3,500 m/t 2,000 m/t N/A 425 Joinery, flooring, box- making and cabinet-making 13 - - 119 747 Match factory 1 - 100 Sawmills 8. The sawmills range in size from a capacity of 50 m 3 to 10,000 mn3 sawnwood per year, with most mills being relatively small. The largest mill with a capacity of 10,000 m3, situated at Majunga, is currently producing some 8,000 m3; overall capacity utilization in the industry is around 60-70 precent. Production is about 87 percent hardwood and 13 percent conifers and is mainly for local construction markets, box-making and furniture. 3 Prices in 1973 of sawn lumber varied from Fmg 14,000 to Fmg 25,000 per m ANNEX 1 Page 5 Board Industries 9. There is one fibreboard plant, which is a State enterprise, situated at Moramanga. The plant was established in 1971 with a capacity of 3,750 m3 per year of raw fibreboard using the "Deckle Box" discontinuous process. There is no facility for further finishing with decorative over- lays. Production in 1972 was 1,000 tons. Sales are made direct to whole- salers and retail distributors at ex-mill prices of around Fmg 730 per sheet of 3 m x 1.25 m x 3.2 mm. There are no exports of the products and imports are prohibited. The raw material supply is from State eucalyptus plantation situated in a radius of 20 km from the mill. There is no domestic production of particle board or plywood products at present; however a private particle board mill is under construction. A small plywood mill which commenced in 1966 went out of production in 1968. Pulp and Paper 10. The only pulp and paper mill in the country, situated near Tananarive, has a capacity of about 10,000 tons of paper. A total of 80 grades of paper and paper products are manufactured in the mill. Principal paper grades are newsprint, printing and writing paper, duplicating paper, kraft papers, tissue and various types of boards; principal manufactured products include coil and sewn notebooks, kraft bags, sanitary tissue products and envelopes. The plant commenced operation in 1967; production since that date has been as follows: Annual Output (Tons - all grades) 1967 3,800 1968 4,700 1969 5,500 1970 6,200 1971 6,800 1972 7,000 Almost all of the mill's production of paper is sold directly to commercial consumers in Madagascar including printing shops and two box-manufacturing plants. In addition to the domestic market, the company has been able to develop a small export market of some 300-400 tons annually; under the present cost price structure, however, this is not a particularly attractive proposition. With minor capital addition, the mill has an ultimate capacity of some 14,000 tons annually. Paper is produced from groundwood pulp, purchased chemical pulp and waste paper. Groundwood pulp is produced in the mill using pine billets from the Ambatolampy and Antsampandrano forests, supplied by the ANNEX 1 Page 6 3 Malagasy Government at a cost of around Fmg 2,137/m . 1/ Chemical pulp is purchased primarily from France, the United States and Sweden; in May 1973 the c.i.f. prices ranged from US$200 per ton for unbleached kraft pulp to US$250 per ton for bleached. 2/ The mill is protected in the domestic market by more-or-less blanket prohibitions on imports of competitive grades and by a price structure which sets domestic prices at some 15-30 percent above the cost of an equivalent import. 3/ 11. A pulp mill utilizing the Matsiatra pine plantations is being inves- tigated. The mill would produce some 120,000 ADTPA of unbleached long-fibered sulphate pulp. The viability of the project has not yet been demonstrated and no sponsor is on hand. If unbleached and not bleached sulphate were manufactured, the project would not be in competition with the Mangoro project. Staff and wood resources are sufficient for both projects (Annex 8). 12. Other Forest Industries. Some 13 small factories produce joinery, furniture, boxes and parquet flooring and jointly employ some 750 persons. There is one match factory, operated by the State, which commenced production in 1966 and currently employs around 100 persons and produces some 72 million boxes annually. 3 1/ ..... . .m/ S tumpage 710.50 Felling and X Cutting (1 m x 2 m billets) 162.50 Debarking and stacking 122.50 Extraction to roadside 155.50 Other costs 100.00 1,250.00 Rail transport: 3 60 km at Fmg 5.20/ton-km (1 ton: 1 m') 312.00 Road transport: 30 km at Fmg 15/ton-km 450.00 Rail and lorry loading/unloading 125.00 2,137.00 (US$9.3 million) 2/ The quantity of chemical pulp imports is currently around 4,000 tons a year. 3/ The State has a 35 percent share in the equity of the company. August 20, 1974 ANNEX 2 Page 1 MADAGASCAR MANGORO FORUSTRY PROJECT Development of Project Infrastructure 1. This Annex describes the technical aspects of all physical works to be carried out under the Project. The works would include (see Table 1) afforestation; the construction and maintenance of service roads, plantation roads and tracks; the construction of buildings and housing for the head- quarters units; and construction and maintenance of firebreaks. Cost esti- mates are shown in Annex 3. A. Afforestation 2. The plantation establishment methods to be followed under the Project are those currently being used for the establishment of plantations within the Project area; these were developed jointly by the DF, UNDP/FAO, and a French bilateral research organization, Centre Technique Forestier Tropical (CTFT). The specific planting procedures to be followed are de- scribed below. The planting schedule is shown in Table 2 and labor require- ments in Table 3. Surveying 3. A topographic survey of each years planting area would be carried out based on aerial photography at a scale of approximately 1:25,000. Plani- metric base maps would be made at the same scale showing the main features such as rivers, swamps, existing forests, villages, rice fields, grazing lands, roads, railroads etc. Special attention would be given to low lying areas subject to flooding and to steep slopes. The area to be planted would then be delineated, detailed field checks made, and a final map drawn. Al- though preliminary road locations vrould appear on the map, a more detailed field survey would follow. 4. Soil surveys in the Project area have been undertaken with the assistance of UNDP/FAO. A special team would be required to continue this work, mainly to arrive at a broad soil classification based on the soil types, the topography etc. This classification would comprise both chemical and physical soil factors and would assist in preparing the plans for soil treat- ment and fertilization. A basic soils map would be prepared; this map and growth data from permanent sample plots would be used for yield predictions. It has been assumed that basic soil research would be carried out by the newly formed Centre National de Recherches Forestieres. ANNEX 2 Page 2 Nurseries 5. Some 11 million plants would be needed for the annual planting program of 7,000 ha; this is based on the assumption that 1,400 trees per ha would be planted and that 10% of the net area would require replanting. In order to meet this need some seven nurseries would be established. These nurseries would be used for two years and then be relocated in order to reduce the cost of transport of seedlings. Two types of seed would be used: Pinus kesiya and Pinus elliottii. The P. kesiya seed presently comes mainly from a selected stand of 50 ha at Ambatofinandrahana near Fianarantsoa. The annual cone production is about 50,000 kg of cones. The seed yield is about 2% by weight, giving a total annual output of 1,000 kg seed. Each kg contains about 50,000 seeds with a viability of some 50%. The 50 ha stand thus produces seed sufficient for the production of some 25 million seedlings. It can be seen that no rigorous selection of seed trees can be applied in order to produce the 11 million plants required. The DF has therefore embarked on a program of establishing seed orchards. Seeds for P. elliottii would be imported from South Africa and Mauritius and no problems are envisaged in procuring an adequate supply. 6. Approximately 20% would be seeded directly in plastic tubes while the remaining 80% would be seeded in seed beds and later transplanted - 50% into tubes and 50% into clay blocks. Seeding would occur in March-July. Sprinkler irrigation would be applied and fertilizer added if the growth of the seedlings were retarded. Land Preparation 7. About 80% of the land available for planting would be prepared mechanically. In other areas (i.e. with over a 30% slope), the use of such equipment would not be appropriate. Much of the soil in the Project area has been degraded and compacted. Sub-soiling would break up the compacted layers and assist root penetration as well as moisture availability. A crawler tractor with attached two-teeth ripper would be used, the teeth set 2.70 meters apart (equalling the planting distance). The surface soil would have to be loosened after ripping. This would normally be done by hand tools, but where possible it would be carried out by a disk harrow attached to the ripper. In certain areas a heavy growth of heather would require the use of a roller-chopper before any soil preparation and ploughing could be carried out. A crawler tractor would be used for this operation. Fertilization 8. Fertilization has proven to be indispensable for a rapid growth of the pines on the degraded soils of the Project area, and it also results in more homogenous stands. Trials have demonstrated that the main deficient minerals are phosphorus and potassium. Their combined application has the maximum effect on growth: the application of phosphorus has an immediate effect while that of potassium has a later impact. Nitrogen has only a ANNEX 2 Page 3 limited effect at best when applied close to planting time. Large-scale trials have been conducted by UNDP/FAO in pilot plantations, including trials to determine the minimum amount necessary to achieve a high yield. The use of the cheaper potassium chlorite instead of the more expensive potassium sulphate does not appear to have the toxic effect anticipated. The results of these trials have already caused a reduction in the rather high cost of fertilization, but further trials will be needed. A mixture of PK 21 - 16 would be used for the Project plantations, applying approximately 140 kg/ha after ripping or hand pitting. Planting and Replanting 9. At present a planting distance of 2.70 by 2.70 meters is being used (approximately 1,400 plants per ha). A wider spacing would result in heavy branch forming and more competition from weeds in the early stages of development. With a narrower spacing the trees appear to suffer from competi- tion at a later stage. Project planting will be done during the rainy season from December until March. An extension of the planting season, if feasible, could reduce the nursery and planting costs, but it remains difficult to fore- cast the rainfall during this period as precipitation differs from year to year. Experiments on this aspect will continue as the Project proceeds. 10. There will normally be some failures after planting. It has been estimated that some 10% of the seedlings would need to be replaced; this could be done during the same planting season or during the next year. Oc- casional scattered failures are not normally replanted as the newer seedlings would probably become dominated by the larger trees planted eaflier. Only when complete failures occur in areas larger than some 1,000 m , or if there is a low establishment in areas larger than some 2,500 m2, would the additional cost of replanting be warranted. Weeding 11. As most of the plantation area is covered by grasses, only occasional weeding would be carried out where heavy vegetation hinders the growth of the seedlings. Weeding would not be mechanized. Herbicides are expensive and are too dangerous as grass and pine trees are structurally closely related. Weed- ing would be carried out on 30% of the planted area. Pruning and Thinning 12. Pruning is not necessary in a pulpwood plantation. Although it might reduce fire risk at the age when trees are susceptible to crown fires, the reduction in fire risks is considered too low to warrant any pruning. As the plantations would be established on a pulpwood rotation of 15 years and as a sufficiently wide planting distance has been adopted, no thinnings would be carried out. ANNEX 2 Page 4 Protection against Insects 13. Few insects have been observed which cause significant damage on the kesiya pine plantations. Borocera spp. (Lasicompidae) and Deborrea spp. (Psychidae) caterpillars do occur on needles of some pines in Madagascar. In South Africa P. patula plantations have shown some damage from lepidopteras such as Nudaurelia cytherea capensis Stoll. and Neocleora herbuloti Fletcher. Regular inspections of the plantations would be carried out and close contact maintained with the various research organizations knowledgeable about entomology. Provision for an inspection team has been included in the Project cost estimates. Protection against Fungi 14. Thus far no serious problems have been encountered with regard to fungi attacks. Regular inspection of the plantations would be carried out and close contact maintained with the various research organizations dealing with mycology. Provision for an inspection team has been included in the Project cost estimates. B. Service Roads 15. Plantation work in the Project area would be carried out in one of the two sections of each division. A service road would connect the divi- sional headquarters with the all-weather public road network. The sectional headquarters would also require a service road connecting them with the divisional headquarters. By the beginning of the Project period, service roads to the Central Divisional and sectional headquarters would already have been constructed. About 56 km of service roads would be constructed under the Project to connect the North and the South Divisions' headquarters with the public all-weather road network. The service roads would be all-weather gravelled roads of 3.5 meter traffic lane width, witlh overall road width of 6.5 meters. The cost of this standard of road in Madagascar is estimated to be Fmg 3,625 (US$14) per meter. C. Plantation Roads and Tracks Road Construction 16. The objective of the road program is to lay out a road system during the plantation establishment phases which would be adequate for the planting program and which could be subsequently upgraded for logging without incurring heavy costs. A survey team would determine the road alignment. ANNEX 2 Page 5 17. Only those truck roads necessary for plantation establishment, maintenance and fire protection would be constructed under the Project; the remainder of the alignments would be used as access tracks for planting. Up- grading of the roads and some 75% of tracks would take place when logging operations commence in 1984, as at that time all-weather surfaces would be necessary. 18. Location and Terrain. The area is characterized by large stretches of plateau (ridge) land over which road construction costs would be comparative- ly low. Full advantage will be taken of this, and most of the roads would be aligned on the plateau. The valleys subdividing the plateau are shallow and the height difference between valleys and ridges is generally within the range of 50 - 100 m. Road links would have to be established between the ridges and the valley areas. In general, the slopes leading into the valleys are in the range of 20 to 50 percent, and there would be no difficulty in aligning roads through these. Except for isolated river beds, there are no areas of surface rocks. 19. Types of Road. Plantation roads are classified as primary and secondary truck roads and plantation tracks. The primary and secondary roads would comprise the main road system through the entire area. The tracks would lead off from the roads and be confined to individual ridges. 20. Density of Roads. The density of truck roads in the plantation area would be 14 m/ha. The density of tracks would be 24 m/ha, thus giving an overall density of 38 m/ha. In addition of this, truck roads would be built connecting the plantation areas with headquarters and the public road system. 21. Specifications. During the plantation establishment period, the road specifications would be kept to minimum levels. Sufficient road right- of-way would be reserved along truck roads and tracks to serve the dual pur- pose of firebreaks and allow widening when upgrading takes place. A maximum gradient of 8% would be adopted which would enable vehicles to traverse the slopes without unduly reducing average speeds. These specifications are summarized in the following table: ANNEX 2 Page 6 Road Width Road Right Maximum Designed Speed (kph) On Ridges On Slopes -of-Way Gradient On Ridges On Slopes Primary truck roads 6-7 m 5 m 20 m 8% 60 30 Secondary truck roads 5-6 m 5 m 11 m 8% 40 20 Tracks 3.5 m - 6 m 8% 30 20 22. Road Program. The annual plantation road program would be as follows: Primary truck roads 63 km Secondary truck roads 105 km Tracks 182 km 23. Methods of Construction. A motor grader of 150 hp would be used for the construction of the roads along the ridges. For the primary and secondary roads, parallel side drains would be formed by the grader; it is not considered necessary to form side drains for the traclcs. 24. The estimated average slope over which the slope roads would be con- structed is 40%. This would entail earth-moving of about 8.4 m3 loose earth per meter of road. A 180 hp bulldozer wou;d be suitable for this construction. After bulldozing, slope roads would be levelled by a 150-180 hp grader. A dressing of 2 cm thickness has been allowed for in the cost estimates. Sand is freely available in the valley bottoms. 25. Drains and Bridges. Cross drains would be needed along the slope roads at intervals of about 50 m. These would likely be constructed from timber which is available from departmental eucalyptus plantations in the area. The poles will be hand hewn into rough squared sections; five square sections fastened together with wooden cross-ties would form a drain across the road width. The cross drains would be replaced by concrete culverts when the roads are widened and upgraded for the subsequent logging operations. 26. A number of wooden bridges of 10-ton carrying capacity have already been constructed and the methods used would be continued under the Project. The timber would be obtained from the departmental eucalyptus plantations. The density of bridges would be 0.70 m/km of truck road. The wooden bridges would be replaced with permanent constructions when the roads are upgraded to take the heavier log transport vehicles. ANNEX 2 Page 7 Road Maintenance 27. Some 480 km of roads and 513 km of tracks have been constructed in the Central and South Divisions. The road maintenance program for the Project would include maintenance of the existing 480 km of roads as well as the roads constructed during the Project period. All primary and 20% of the secondary roads would require annual maintenance. Road surfaces would be graded twice a year using a 150 hp motor grader. Side drains would be cleaned manually. D. Buildings and Housing 28. Provision would be made under the Project for the construction of a Project headquarters, offices, workshops, stores, dispensaries, schools, village halls, fire watch towers and vater reservoirs and for housing of staff and laborers (Table 4). The headquarters for the Central Division has already been established. Under the Project a headquarters would be constructed for the Northern Division and a sectional headquarters would be upgraded into a headquarters for the Southern Division (see Map IBRD 10923). Provision would be made for the following structures: Number New Upgraded Project headquarters offices 2 Divisional headquarters office 1 1 Workshops 1 1 Stores 1 1 Dispensaries 1 1 Cooperative stores 1 1 Schools 1 - Village halls 1 - Fire watch towers 9 - Water towers 2 - Water dams 2 - Staff houses (hard houses) 44 - Laborers houses (prefabricated) 1,110 - The unit costs are shown in Table 4 and the total costs in Annex 3, Table 1. ANNEX 2 Page 8 E. Fire Protection 29. The main fire danger to the plantations would be from grass fires spreading along the ground. Such fires can be controlled by cleared or burned fire lines which prevent the fire from spreading. To be effective, these firebreaks must be sufficiently wide to prevent sparks from being blown across. The width of firebreaks therefore largely depends on the likely wind force in the area during the fire season. 30. The siting of the plantations on the ridges and upper slopes of the hills would simplify the problem of firebreak construction. The valley bottoms - which are being excluded from the planting area because of the impeded drainage in these areas - would be used as natural firebreaks. The primary and secondary roads would also serve as firebreaks along the ridges. 31. It would be necessary to construct firebreaks to join the valley firebreaks with those on the ridges and to sub-divide compartments. Internal firebreaks would be constructed on some 12.0% of the net plantation area. The firebreaks would normally be 100 m wide - which is considered reasonable in relation to the climatic conditions of the area. The proportion of the area reserved for firebreaks and their widths would be subject to modification as the planting proceeds and more detailed studies of the terrain and wind force become available. It is expected that some 82 km of firebreaks would be constructed during each year of the Project. 32. Firebreak Construction. The firebreaks would be cleared of com- bustible material. In some areas this would be done by mechanically clearing strips of 6 m width along both sides of the firebreak and then burning off the grass and herbaceous cover in the area between the strips. The clearing of the 6 m wide strips would be carried out by using a 100 hp motor grader. Mechanical cultivation of the area between the strips would be carried out by a wheeled tractor with a disc plough or by crawler tractor with roller- chopper, depending on the vegetation. In other areas where the grass and shrub cover is more tenacious, the whole area would be mechanically cultivated. It is estimated that about one-half of the firebreaks would require all-over mechanical clearing. 33. Firebreak Maintenance. The firebreaks would require yearly mechanical clearing of the 6 m wide strips along the perimeter and all-over mechanical clearing of about one-half of the area; the area between the strips would re- quire burning-off or mowing. 34. Fire Control. The rainfall pattern is such that there is no sharply defined fire risk season. A fire hazard is likely to occur during the period from June to October (100 days/year), although the danger would not be con- tinuous throughout these months. Simple weather stations maintained at divi- sional headquarters would collect data in order to compile a fire hazard index. Danger areas would be delineated and water supply points located ANNEX 2 Page 9 and recorded on fire control maps. These maps would also record the location of the the forest gangs during the periods of fire hazard to facilitate quick call-out in areas of emergency. 35. Fire control would be organized on a divisional basis under the direct supervision of the assistant divisional foresters. Fire towers would be erected at 10-15 km intervals throughout the plantation areas; nine towers would be built under the Project. The total requirement for the Project area of 96,000 ha would ultimately be 24 towers. The divisional fire control offices would have direct radio linkage between fire towers and stations. Additional radio linkage would be provided by walkie-talkie sets carried in the fire control vehicles. 36. During period of fire hazard one permanent fire fighting crew would be located in each section, and the crew would be on duty for fire fighting during approximately 100 days a year (para. 34). During the rest of the year they would carry out protective burning of firebreaks. Each crew would have one firetruck with water tank on trailer and one landrover. They would also have pack pumps and other fire fighting tools. Equipment 37. The Project would require investment in equipment which would be used for the above mentioned activities. Equipment would include bulldozers, graders, tractors, trucks and various other vehicles. (Table 5). The Project vehicles and equipment would be repaired and maintained in the divisional workshops. A central spare parts store and a workshop for major repairs would be situated in the Central Division's headquarters. August 20, 1974 MADAGLAS CA R MANG00R FORFSTRY PWPJ'rT Physical Work Schedule Unit 1974 1975 1976 1977 1978 1979 Total Service Roads km 19 37 - - - - 56 Plantation Truck Roada km 56 168 168 168 168 112 840 Plantation Tracks km 60 182 182 182 182 122 910 Buildings No 8 15 - - - - 23 Houses Hard No 15 29 - - - -44 Prefabricated No 370 740 - - - - 1110 Surrey ha 2330 7000 7000 7000 7000 4670 35000 Plants millions 3.6 10.8 10.8 10.8 10.8 7.2 54 Land Preparation Mechanical subsoiling ha 1630 4900 4900 4900 4900 3270 24500 Mechanical brush clearing ha 700 2100 2100 2100 2100 1400 10500 Manual hole pithing ha 700 2100 2100 2100 2100 1400 10500 Manual planhole preparation ha 1630 4900 4900 4900 4900 3270 24500 Fertilizer application 100 g/plant, 140 kg/ha ton - 980 980 980 980 980 4900 Planting ha - 7000 7000 7000 7000 7000 35000 Weeding ha _ 1400 1400 1400 1400 1400 7000 Firebreaks Length km 20 58 58 58 58 38 290 , Area ha 190 580 580 580 580 390 2900 CD ANNEX 2 Table 2 MADAGASCAR MANGO-RO FORESTR« PROJECT Planting Schedule (Net planted area, in ha) North Central South Total Project Planting Season Division Division Division Per Year Accumulated Section 1 Section 1 Pre-Project Phase 1969/70 3,000 3,000 3,000 1970/71 5,500 5,500 8,500 1971/7z 3,000 1,000 4,000 12,500 1972/73 4,000 2,000 6,000 18,500 Section 2 1973/74 4,O00 2,500 6,500 25,000 ProJect Section 1 1974/75 1,000 4,000 2,000 7,000 -32,000 1975/76 2,000 3,000 2,000 7,000 39,000 1976/77 3,000 2,000 2,000 7,000 46,oOo 1977/78 3,000 2,000 2,000 7,000 53,000 1978/79 3,000 2,000 2,000 7,000 60,000 Project Phase 2 Section 2 Section 2 1979/80 3,000 3,000 6,000 66,ooo 1980/81 3,000 3,000 6,000 72,000 1981/82 3,000 3,000 6,000 78,000 1982/83 3,000 3,000 6,000 84,ooo 1983/84 3,000 3,000 6,000 90,000 1984/85 /1 /1 /1 6,000 96,000 /1 Sections best suited for planting the additionally required 6000 ha to be selected later on the basis of management, age class distribution and logging considerations. ANNEX 2 Table 3 MADAGASGAR MANGORo FORESTiRY PROJECT Total Manpower Requirements Mandays Per ha Survey ind Technical Support 0.7 Nursery Work including 31 new Nurseries per year 8.5 Soil Preparation 10.9 Fertilizing 5.3 Planting Including Transport 7.8 Reolantir.g 0.0 Weeding 1.2 Firebreaks Construction 0.6 Firebreaks -!anten&nce 1.1 Plantation Roads Construiction 0.2 Construction of Bridges, Darfms etc. 3.1 Materi.al Supply and Haintenaince of Bridges, Dams, Buildings, Housing etc. 3.0 Mri-ntena,nce of Plantation Roads 0.1 IJorkshop, Equipiiient Supply and Repairs 6.0 Fire Control (FuI Staff for 3,500 ha) 1.9 Administration and Overihead 6.7 Total 58.0 ANNEX 2 Table h MADAGASCAR MANGORD FORETRY PROJECT Building and Housing Standards and Unit Costs Cost per Unit Number Cost per Total Cost of m per Unit m2 ('000 Fm) ('000 FDEI Buildinrs: (life 50 years) General Direction: - Office I 250 1711 4250/ - Office II 340 17 5780 - Central Warehouse 300 17 5100 - Garage and Workshop 200 10 2000 Divisional Headauarters: - Office 102 17 1734 - Garage and Workshop 300 20 6000 - Warehouse 200 17 3400 - Fire Watchtower - - 200 - Dispensary/Maternity 80 20 1600 - Cooperative Store 60 20 1200 - Village Hall 150 15 2250 - School 100 20 2000 - Water Tower - - 2000 Housing: Hard Housess (life 50 years) - Grade Ai 100 25 2500 - Grade A2 80 25 2000 - Grade B & C 50 20 1000 - Grade D +500 + 700 36 20 720 Prefabricated Houses: (lite 10 years) - Grade 125 to 450 21 12 252 - Grade 120 14 12 168 - Grade 105 (seasonal) 7 9 63 /1 According to corrigendum received from Madagascar Forest Service aXter completion of Project appraisal the unit costæ should read: 250 m2 A 30,000 %mg/m2 = 750 7,500,000 Filg. ANNEX 2 Table 5 MADAGASCAR MANGORO FORESTRY PROJECT Vehicles and Equipment Requirements for the Project Number Unit Cost Total Cost ---------'000 Fhg- Bulldozer 150-180 HP 1 21,391 21,391 Bulldozer 100 HP 6 12,921 77,526 With Ripper 6 242 1,452 Grader 150 HP 2 12,307 24,614 Grader 100-200 HP - 7,951 _ dJheel Tractor 3 2,011 6,033 With Plow 3 261 786 Loader 1 5,141 5,141 2.5 T Truck - 2,182 - 5 T Truck - 4,575 - .ire Truck 2 4,606 9,212 7.5 T Truck - 4,242 - 'Jireless Set Stationary il 360 3,960 Walkie-Talkie 6 91 546 Rubber Widheel Roller 3 6,872 20,616 Sheep Foot Roller 1 1,697 1,697 Stone Crusher 3 3,955 11,865 Pile Driver 3 2,545 7,635 Low Bed 2 4,848 9,696 Metal Roller 3 6,496 19,488 Roller Chopper 3 848 2,544 dIater Tank Trailer 3 1,102 3,306 Office Equipment - - 12,120 dorkshop Equipment - 24,240 Limousine 7-9 HP 2 1,576 3,152 Limousine 4-6 HP 5 970 4,850 Commerciale 3 1,212 3,636 Ambulance 3 848 2,544 4 WiD Landrover Long Ch. 18 1,673 30,114 4 4D Landrover Glass - 1,818 - Pickup Canvassed 9 848 7,632 Nursery Irrigation Set 7 970 6,790 Other 1Iursery Equipment 7 48 336 322,922 July 17, 1974 ANNEX 3 Page 1 MADAGASCAR MANGORO FORESTRY PROJECT Project Cost Estimates 1. The Project costs presented below are based on July 1974 prices. Labor and machinery requirements are based on past experience in the Project area. 2. The labor requirement for afforestation, road building and fire control are shown in Annex 2, Table 3. The average number of laborers employed under the Project is about 1,630 per year. The cost of labor is based on the Government's detailed labor grade system. The weighted average unskilled labor wage is Fmg78,350 per year. This includes paid leave and social insurance of 32% on net salaries. The permanent laborers are assumed to be working 250 days a year and being paid 360 days a year. The non- permanent laborers are also assumed to be working 250 days and paid for 310 days including paid leave. 3. Equipment costs are based on quoted prices in Madagascar and do not include any taxes or custom duties. The vehicle and equipment require- ments are shown in Annex 2, Table 5. 4. Buildings, housing and service road construction are assumed to be awarded to local competitive bidding. The costs for the components are calculated from quoted Madagascar local prices shown in Annex 2, Table 4. 5. A detailed contingency calculation has been made taking account for recent price increases. A physical contingency of 10% has been included on service roads, buildings and housing and equipment. In view of the adequate past cost records on which to base cost of plantation establishment and roads, and due to the divisability of this work, no physical contingency has been included on those items. 6. The price escalations used for the Project cost are estimated to be as follows: Equipment Civil Works 1974 14 18 1975 il 15 1976-80 7.5 12 This corresponds to a cumulative annual price increase of about 14% during the Project period. ANNEX 3 Page 2 7. The Project cost calculated às mentioned above is Fmg 4,400 million (US$17.2 million). The foreign exchange component is US$4.5 million and the labor component would be about 30%. The yearly Project costs are shown in Table 1. October 10, 1974 MADAGASCAR N1anacro Foacrestr Pro1cct Proicat Coats V' (92'g xnflli 8 8 -. 'V t- ~~~~~~~TablelI 88 g g 8 8 8 ° 5« °_ 88 I \O 8 OC g ag I O 3 i~~~ ~~~~~ O gt *~~~~~ i O a i i S° 8 S ` e0 g H 0 a~~~~~~~~~~~~~~~~ a II m t ~~ ~~ ~~~~~g g O c g c0 i1 t t ,tO- te FI _' S N g g c c ec t t I B t : ' g ' `9 t- C O O Ô 1 8 8 S O t- a & e o g N- g . c N N'~ INo#1 5 MADAGASCAR MANGORO FORESTRY PROJECT Foreign Exchange Costs and Export Value of Output of Program (Fmg million) Pulp Mill Maintenance Firebreaks, Investment Overhead Total Fcreignge of Pre- Roads Maintenance Logging and Administration Wood Foreign Exchange Project & Road & Fire anid Log Operating Workshop Purchase Exchane Value of Balance Year Plantation Plantation Maintenance Control Transport Cost Research Antsirabe Cost±/ Output Balance (us$ mill.) 1974 15.6 1.0 32.5 7.2 -56.3 ( 56.3) ( .2) 1975 515,7 30 o99.6 o.4 - - 20.1 - 638.8 - ( 638.8) ( 2.5) 1976 514.7 3.0 11.1 1.0 - - 15.0 - 84.8 - ( 84.8) ( .3) 1977 54.7 3.0 11.2 1.8 - - 10.2 - 80.9 - ( 80.9) ( .3) 1978 54.7 3.0 11.9 2.8 - lo.4 - 82.8 - ( 82.8) ( .3) 1979 72.7 3.0 27.3 3 - 10.2 - 116.2 - ( 116.2) ( .5) 1980 45o.5 3.0 57.8 4.o - - 9.6 - 524.9 - ( 524.9) (2.1) 1981 46.6 3.0 11.8 4.7 - 290.9 9.6 - 366.6 - ( 366.6) (1.4) 1982 46.6 3.0 12.0 5.4 - 1,393.8 9.6 - 1,470.4 - (1,470.4) (5.8) 1983 46.6 3.0 12.4 5.9 - 6,120.6 9.6 - 6,198.1 - (6,198.1) (24.3) 1984 46.6 3.0 698.4 6.6 - 9,187.0 10.1 - 9,951.7 - (9,951.7) (39.0) 1985 55.14 1.9 83.7 7.3 668.2 4,314.7 9.7 - 5,140.9 6,630,0 1,489.1 5.8 1986 269.2 - 81.1 10.4 891 9 1,946.5 9.7 101.1 3,309.9 9,945.o 6,635.1 26.o 1987 19.6 - 81.1 lo.4 946.1 2,055.6 9.7 224.5 3,347.0 11,934.0 8,587.0 33.7 1988 19.6 81.1 io.4 695.3 2,055.6 9.7 - 2,871.7 13,260.0 10,388.3 40.7 1989 19.6 - 332.9 lo.4 1,022.9 2,055.6 9.7 - 3,451.1 13,260.0 9,808.9 38.5 1990 31.6 - 103.1 lo.4 1,040.0 2,055.6 9.7 - 3,250.4 13,260.0 lo,oog.6 39.3 1991 217.0 - 81.1 lo.4 1,o48.6 2,055.6 9.7 - 3,422.4 13,260.0 9,837.6 38.6 1992 19.6 - 1144.9 10.4 1,057.1 2,055.6 9.7 - 3,297.3 13,856.0 10,558.7 41.4 1993 19.6 - 81.1 lo.4 1,067.2 2, 188.9 9.7 3,376.9 14,188.0 10,811.1 42.4 1994 19.6 1406.5 lo.4 1,075.7 2,201.0 9.7 3,722.9 14,288.0 10,s6s.1 41.4 1995 26.9 - 81.1 lo.4 1,087.0 2,213.1 9.7 - 3,428.2 14,354.0 10,925.8 42.8 1996 269.2 - 103.1 02 14 1,087.0 2,213.1 9.7 - 3,692.5 14,361.0 lo,668.5 41.8 1997 19.6 81.1 10.4 1,o87.0 2,213.1 9.7 -3,4209 14,361.0 10,940.1 42.9 1998 1976 - 81.1 10.4 1,087.0 2,213.1 9.7 - 3,420.9 14,361o0 10,940.1 42.9 1999 19.6 118.6 10.4 1,087.0 2,213.1 9.7 - 3,458.4 14,361.0 10,902.6 42.8 2000 32.9 - 39.14 lo.4 1,087.0 2,213.1 9.7 - 3,392.5 14,361o0 10,968.5 43.0 2001 217.0 -30.5 1o4 1,087,0 2,213.1 97 3,567.7 14,361.0 10,793.3 42.3 2002 19.6 - 32.9 io.4 1,087.0 2,213.1 9.7 -3372.7 14,361.0 10,938.3 43.1 2003 19.6 . 30.5 o.14 1,087.0 2,213.1 9.7 - 3,37023 14,361.0 10,990.7 43.1 20024 19.6 I3.5 o.14 1,087.0 2,213.1 9.7 - 3,370.3 14,361.0 10,990.7 43.1 2005 29.1 - 30.5 lo.4 1,087.0 2,213.1 9.7 - 3,379.8 14,361.0 10,981.2 43.1 2006 327.9 - 30.5 lo.4 1,087.0 2,213.1 9.7 - 3,678.6 14,361.o lo,682.4 41.9 (D X Difference as coapared with Project Cost Table (Annex 3) is due to the fact that the cost 'o table covers only the first six months of the year. » / It is assumed that the program's share of local consumption would have to be imported without the Project. July 12, 1974 ANNEX 10 Page 1 MADAGASCAR MANGORO FORESTRY PROJECT Economic Evaluation 1. The internal rate of return of the entire Mangoro afforestation program is estimated at 13% over 33 years. Quantifiable benefits and costs stemming from the program are presented in Tables 1 and 2; the data from which these estimates were derived are presented in Annexes 3, 7 and 8. Basic assumptions used in the analysis includet (a) Economic life of the Project was assumed to be 33 years. (b) Planting expenditures for the pre-Project period (25,000 ha) were treated as sunk cost. Maintenance of these plantations was, however, included. (c) The opportunity cost of earlier plantations was considered to be zero. (d) The adjusted weighted average mill net price used was Fmg 83,200/ADT (US$260/ADT). (e) Foreign exchanged was valued upward by 25% to Fmg 320/US$ (the rate used for the Project was Fmg 255/US$) to more accurately reflect the value of foreign exchange to Madagascar. (f) The cost stream includes all economic cost stemming from the program (investment and operational cost including maintenance) and a 10% physical contingency allowance was included on the cost of buildings, service roads, equipment and a 5% allowance on the investment in the pulp mill. (g) Unskilled labor was shadow priced at 75% of the current wage rate. (h) Taxes are not included in the calculation. 2. The sensitivity of the rate of return to changes in some of the basic parameters is illustrated below: ANNEX 10 Page 2 Internal Rate Assumption of Return The Basic Run 13 (a) Foreign exchange valued at Fmg 255/US$ il (b) Foreign exchange valued at Fmg 255/US$; labor not shadow priced. 10 (c) 10% increase in cost. il (d) 10% reduction in benefits. 10 (e) 10% increase in cost and 10% reduction in benefits. 8 (f) 10% increase in benefits. 15 (g) One-year delay in benefits. 10 (h) The basic run including sunk cost. 12 October 10, 1974 MADAGASCAR MANGORO 1FOESTRY PROJECT Cost in the Econn ec Analysis (Ftg million) Pulp M111 Maintenance Firebreaks, Investment 3 Overhead of Pre- Roads Maintenance Iogging and Administration Wood / Project & Road &Fire and Log Operating Workuhop Purchase Physical Total Year Plantations-J Plant. aintenanceJ Control ort Cost Research Antairabe Contingency/ Cost 1974 136.8 12.8 101.1 3.1 - _ 56.6 - 18.1 328.5 1975 1,055.4 40.1 309.3 13.0 - - 170.9 - 107.1 1,695.8 1976 197.2 40.1 69.1 17.8 - - 168.2 - - 492.4 1977 196.6 40.1 70.2 23.1 - - 165.0 - - 495.0 1978 196.0 40.1 74.1 30.6 - - 167.6 - - 508.4 1979 212.9 40.1 118.2 35.1 - - 162.3 - 8.6 577.2 1980 793.9 40.1 203.6 44.4 - - 152.3 - 72.7 1,307.0 1981 168.4 40.1 76.7 50.6 - 522.6 162.2 - 26.1 1,046.7 1982 168.4 40.1 79.1 56.6 - 2,440.1 154.8 - 122.0 3,061.1 1983 168.4 40.1 81.4 62.4 - 13,395.9 162.2 - 669.8 14,580.2 1984 168.4 40.1 1,156.9 68.5 - 18,019.9 148.5 - 901.0 20,503.3 1985 186.1 26.5 286.2 74.4 1,158.9 8,638.9 115.9 - 242.2 10,729.1 1986 400.3 - 275.3 97.5 1,592.0 4,453.5 88.2 399.2 40.2 7,346.2 1987 87.0 - 275.3 97.5 1,715.0 4,630.1 88.2 887.5 10.1 7,790.7 1988 87.0 - 275.3 97.5 1,506.6 4,530.7 88.2 - 10.1 6,595.4 1389 87.0 - 670.1 97.5 2.061.7 4,530.7 88.2 - ic. 7"*.e 1990 127.4 - 1,110.3 97.5 2,098.5 4,530.7 88.2 - 14.1 8,o66.7 1991 334.7 - 275.3 97.5 2,119.5 4,530.7 88.2 - 33.9 7,479.8 1992 87.0 - 375.2 97.5 2,140.4 4,674.9 88.2 - 10.1 7,473.3 1993 87.0 - 275.3 97.5 2,160.6 4,796.5 88.2 - 10.1 7,515.2 1994 87.0 - 786.1 97.5 2,181.5 4,872.4 88.2 - 10.1 8,122.8 1995 112.0 - 275.3 97.5 2,207.3 4,960.2 88.2 - 12.6 7,753.1 1996 400.3 - 202.7 97.5 2,207.3 4,960.2 88.2 - 40.2 7,996.4 1997 87.0 - 275.3 97.5 2,207.3 4,960.2 88.2 - 10.1 7,725.6 1998 87.0 - 275.3 97.5 2,207.3 4,960.2 88.2 - 10.1 7,725.6 1999 87.0 - 333.8 97.5 2,207.3 4,960.2 88.2 - 10.1 7,784.1 20C0 132.2 - 113.6 97.5 2,207.3 4,960.2 88.2 - 14.6 7,613.6 2001 334.7 - 102.4 97.5 2,207.3 4,960.2 88.2 - 33.9 7,824.2 2002 87.0 - 105.9 97.5 2,207.3 4,960.2 88.2 - 10.1 7,556.2 2003 87.0 - 102.4 97.5 2,207.3 4,960.2 88.2 - 10.1 7,552.7 2004 87.o - 102.4 97.5 2,207.3 4,960.2 88.2 - 10.1 7,472.7 2005 119.6 - 102.4 97.5 2,207.3 4,960.2 88.2 - 14.6 7,589.8 2006 459.6 - 102.4 97.5 2,207.3 4,960.2 88.2 - 45.8 7,961.0 J Including building and bousing, equipment, survey and technical support, nurseries, soil preparation, fertilization, planting and replanting and weeding. - Service roads, plantations roads and bridges, logging roads and maintenance of roads and buildings. S Net of interest. 0 10% on roads, buildings, equipment and 5% on Pulp Mill investments (5% are already included in Pulp Mil1l's investment). O July 10, 19714 ANNX 10 Table 2 MADAGASCAR MANGORO FOREÏSTRY PROJECT Internal Rate of Return r (Fmg million) Project Total Incremental Incremental Year Costa Benefî.ts Net Benefits 197>4 â329 - ( 329) 1975 1,696 - ( 1,696) 1976 492 _( 492) 1977 495 -( 495) 1978 508 - ( 508) 1979 577 - ( 577) 1980 1,307 ( 1,307) 1981 1,047 ( 1,047) 1982 3,061 ( 3,061) 1983 14,580 (14,580) 1984 20,503 - (20,503) 1985 10,729 8,320 ( 2,409) 1986 7,346 12,480 5,134 1987 7,791 14,976 7,185 1988 6,595 16,640 10,045 1989 7,546 16,6>40 9,094 1990 8,067 16,640 8,573 1991 7,>480 16,640 9,160 1992 7,473 17,380 9,907 1993 7,515 17,805 10,290 1994 8,123 17,930 9,807 1995 7,753 18,013 10,260 1996 7,996 18,02L 10,025 1997 7,726 18,021 10,295 1998 7,726 18,021 10,295 1999 7,784 18,021 10,237 2000 7,614 18,021 10,407 2001 7,82>4 18,02'1 10,197 2002 7,556 18,021 10,465 2003 7,553 18,021 l,0468 2004 7,473 18,021 10,548 2005 7,590 18,021 10,431 2006 7,961 18,021 10,060 Internal Rate of Return 12.7 over 33 years 1/ Foreign exchange shadow priced at Fmg 320/US$ with labor cost at 100%. July 15, 1974 MADAGASCAR MANGORO FORESTRY PROJECT ORGANIZATION CHART 1/ 1/ DIRECTOR GENERAL Forest,v Ad/,so _ I - - - 1:1 2/ | Sumey & I I I 1/ ] 1/ -X Electrical Eng. Survey& Disease Plantation Direntor Finance Director s Engineering Control Di|ector 2/ INrnnp Eng. NOR1IH DIVISION Fo,nst Oncnet Fre Control Aconat okhp So NORTH DIVISION |VDeputy Ferest Dn-nîopn{ent - CENTRAL DIVISION DIVISION...eIemomum..,oeam.m..u.....,,.. N~ORTH~It~5 * 111 l1111IIIuaImIImIIIUETA DIVISION SOUTH DIVISION NORTHIIIuuIIIoIIIIutumIIuIIIIIeIIIuIuu1~~.~ D eeeeoemuoueVo.o.eeoueemuSIoomueommomeuuoomeoeeeoou SOUTH DIVISION 1/ Offie in Moarananga 2 Stationcd n the Centr.1 D_iigan Wvorîd Bank-9134 MADAGASCAR --- ,jvre,O4os MANGORO FORESTRY PROJECTPl,w --. A-, -P1 ro. ns s ci SessP _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 9~~~~s sRe P s.d sl-. , i B AA AA R AI 19-7 3,209 A9 1971- 72 3,900 7s4 197 -73 9,8O0 lT 55 -95274 95 TOs,g< j555 555905 O Ot ~ 5< -- .l> 79 s-ss11DAL ~ ~O H I IA L A sMA NDIALAZAs- '2 MANDIALAZA~~~~ANILNAOB .-........ s-' -< Y~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ /---- I - MAROVOAS~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~l 4t 4'4 4'g 4a- 'Cr MAY 1974 MADAGASCAR Diego Sucrez MANGORO FORESTRY PROJECT + I`NE PLANTATIONS NOSSI-BE b bibe Ei - Mangoro Project Area + + Hlaut Onive Hel-ville rO >4"Voher d E13 Antsirabe 'f Ambora t Motsiatra L 3' $ ExISTING RoADS / \ 14 - Bituminous surfaced roads / Ai-A l weather rocadsj elno ) ------ Non permanent roads Railroods Antisohihy lAntaloho >4' All weother airports -- +--- -- ---Rivers 5e/r y' Morocerserr\ gr r e - MILES Majunga > Port Be e t,n 50 15 1iOEÉ50 20m 250 -rr43 % XMandrisoro \ 80010100o° v~-~~ Morovoay 1- SMop,kony Morrbnonark.16 0 ' ~~~~~Amboto° 0 0, jW ç Besaioomhy KM 380.2 -4 3g W |~~~~~~~~~~~ Moet rea,ro Bomrokely S sororonarro Soorrerno-aIvorgo7b ' 4 l~~~~~~~~~~~ ~ ~~~~~~Andtrrry 3 | Andiorolno 5ro05° dr-Y~~~~~~~~~~~~~~~~~~~~~' \o ° l3 'Andrrorro 4Fenerive F Maintironadl +9 MANGORO 5 / AmbavondnozakMarrok tr , Ci G n n e / \ ~~MorTSrr o w f /0nrdi a MoirrrrrirorroKM 165- V`on Abotordr-eko MAVGORO t Anrorohe Marond/o APEA ( /oa d Tamotave Arjozor \ r sFanoarian A",. rick evi Tsiroanomandidy d3 0 P nt n/ c / n a n o < n e Fa9°aka dros ronja <. e y4ooorr t-dr Moro 22mogo O - Bo u Pu-3zob Ios FJ oen \ 6rIc~ / M oukrbe Vtrrer dsrrrtrh Ao ru 'be o Va c Bon ~ ~ ~ ~ ~ ~ ~~~ e0t FW~~~~~~~~~~~~ ) S anta h rt/I 1//Vuae Mbrundrr ieo v o ce n 22'm. o o Murooovo Mnche olo-b-ndy ...doc Monnjary < 9.i ( > j r~~~~~~~~~~ ~ ~ ~~~~~~~~~~~Farafangana imply endoruerrrr, or accrptrorce hy rhe Fianci~~~~~~~~~~~~~~~~~Wrdiadodo /iee W~~~~~~. b 0 Btca° /vrdtémittlce g TulEarO + \ ongok h B O h(Vorgoindrorro ay -ongy-ku-Sd SS!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~fign -MI \- Beyl th, Tule 5Abo be Fort Daphn` ,': _: . MAÀ AGASCAR 41',. 44' 46S a