Report No. 442a-IVC

Appraisal of .FILE COPYThird Oil Palm ProjectIvory CoastJune 12, 1974

Agriculture Projects DepartmentWestern Africa Regional Office

Not for Public Use

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Document of the International Bank for Reconstruction and DevelopmentInternational Development Association

This report was prepared for official use only by the Bank Group. It may not be published,quoted or cited without Bank Group authorization. The Bank Group does not accept responsibilityfor the accuracy or completeness of the report.

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CURENJCY EQUIVALENTS

US$1 = CFAF 250CFAF 100 - US$ 0.004CFAF 1 milion = US$ 4,000

WEI3HTS AND MEASURES

Metric SystemFISCAL YEAR

January 1, to December 31

ABBREVIATIONS

BEI Banque Europ6enne d'Investissement (European Investment Bank)ENDA Banque Nd3anale pour le D6veloppement de l'Agriculture

(National Bank for Agricultural Development)BSIE Budget Special d'Investissement etd'Equipement (The Development

budget)CAA Caisse Autonome d'Amortissement (an Ivorian public institution in

charge of the servicing and amortization of Ivory Coast publicdebt)

CCCE Caisse Centrale de Coopgration Economique (a French public institution,providing soft loans to developing countries)

CFAF Communaut6 Financiere Africaine Franc (the common currency of themonetary union)

CSSPPA Caisse de Stabilisation et de Soutien des Prix des ProductionsAgricoles(Agricultural Price Stabilization Agency)

FAC Fonds d'Aide et de Coop6ration (French Aid Fund)FED Fonds Europ6en de D6veloppement ( the aid fund of the European Economic

Community providing grants and soft loan assistance todeveloping countries)

FER Fonds d'Extension et de Renouvellement pour le developpement de laculture de palmier a huile (an investment fund for the renovationand development of oil palms)

FS Fonds Social (a fund created for rural habitat improvement)IRID Inatitut de Recherches pour les Huiles et Oldagineux. (French Agricultural

Oils Research Institute)PMWA IBRD's Permanent Mission, West AfricaSODEPALN Societ6 Pour le D6veloppement et ltExploitation du Palmier a Huile

(Ivory Coast Government-owned Company specialized in oil palm andcoconut development)

S30GESCOL Soci6t6 de Gestion Commerciale pour le Caoutchouc et les 016agineux(Belgian company which handles rubber, oils and agriculturalproducts - SOCFIN subsidiary company)

IVORY COAST

THIRD OIL PALM PROJECT

Table of Contents

Page No.

SUMMARY AND CONCLUSIONS .................... o.... i - iii

Is INTRODUCTION o.................................* 1

IT* BACKGROUND to....... ................1

A. General ............ .. ................ .... 1

B. Institutional Structure ................... 3C. The Oil Palm and Coconut Sector ........... 5

III. THE PROJECT .......... .... ................ 7

A. General .. ................................. 7B. The Planting Program ...................... 7C. Estate Development ... .... .... ......... .. 8D. Outgrower Field Development .... ........... 9

IV. ORGANIZATION AND MANAGEMENT .................... 9

A. General ............................ ....... 9B. Outgrower Selection, Size of Holdings and

Credit Arrangements ....................... 10C. Processing and Marketing .................. 12

V. OOSTESTIMATES*+AND FINANCING ................... 12

A. Cost Estimates .............. ... 12B. Proposed Financing ....................... 14C. Procurement and Disbursement .............. 15D. Accounts and Audit ........................ 15

VI. YIELDS, OUTPUT, MARKETS AND PRICES ............. 16

A. Yields and Output ......................... 16B. Markets and Prices .......... ........ to 16

This report is based on the findings of an appraisal mission whichvisited Ivory Coast in November-December, 1973, composed of Messrs.G. Losson, J. Tillier and T. Winston.

Table of Contents (Continued)

a _ .

VII. FINANCIAL BENEFITS AND OUTLOOK .................. 17

VIII. ECONOMIC BENEFITS AND JUSTIFICATION .... ......... 19

IX. RECOMMENDATIONS ................................... 20

Annexes

1. Progress of Agricultural Projects Financed by Bank Loans

2. SODEPALM Accounts and Financing

Table 1. SODEPALM/PALMINDUSTRIE/PALMIVOIRE: Audited Balance Sheetson December 31.

Table 2. PALMINDUSTRIE: Audited Balance Sheets on December 31.Table 3. SODEPALM: Oil Palm Estates, Estimated Cash FlowsTable 4. SODEPALM: Oil Palm Outgrowers, Estimated Cash FlowsTable 5. SODEPALM: Coconut Sector, Estimated Cash FlowsTable 6. PALMINDUSTRIE: Estimated Cash FlowsTable 7. Association en Participation: Updated Estimates of Profit

and Loss AccountTable 8. Summarized Overall Cash Position for SODEPALM and PALMINDUSTRIETable 9. FER: Anticipated Cash flows

3. Oil Palm Sector

Table 1. The Planting ProgramTable 2. Oil Mills

4. Technical Features

Table 1. Project's Oil Palm Planting ProgramTable 2. Projected Yields

5. Credit Arrangements

6. Project Costs

Table 1. Project Oil Palm EstatesTable 2. Oil Palm Outgrowers

Table of Contents (Continued)

7. Estimated Schedule of Disbursements

8. Market and Price Outlook fcr Palm Oil

Table 1. Prices for Palm Oil: Malayan bulk, 5% cif European portsTable 2. World Production, exports and consumption actual and

projected

9. Oil Palm Outgrowers: Cost a:,d Return Per Hectare Planted in 1975

10. Project Cash Flows

Table 1. Oil Palm EstatesTable 2. Oil Palm Outgrowers

11. Estimated Government Project Cash Flows

12. Economic Rate of Return Calculation

Table 1. Projected Palm Oil and Kernel Prices in 1974Constant Terms

Table 2. Economic Rate of Return

MAPS

IVORY COAST

THIRD OIL PALM PROJECT

SUMMARY AND CONCLUSIONS

Background

i. The Government of the Ivory Coast has asked the Bank to finance partof the costs of completing its oil palm development program East of theSassandra River. The proposed loan of US$2.6 million would be the Bank'sfinal contribution toward the ongoing program which has been under way sincethe middle 1960's, under the responsibility of an association of companies,SODEPALM, PALMINDUSTRIE and PALMIVOIRE (the Participation). The project wasprepared by the Participation. The appraisal was made by a Bank mission inNovember/December 1973.

Project Description

ii. The project, which aims at further diversifying agricultural produc-tion in forest and fringe savannah areas, and increasing farmers' income andthe country's foreign exchange earnings, would be carried out from 1974 to1979 and would comprise:

(a) planting 5,000 ha with high yield potential oil palm by out-growers, with the help of SODEPALM's technical and supervisedcredit services, to bring the total area of oil palm outgrowingsto 30,000 ha;

(b) planting or replanting 5,520 ha with high yield potential oilpalm, of which 400 ha would be with new hybrid lines onSODEPALM estates.

Project Execution

iii. The principal entity involved in the proposed project is Societepour le Developpement et l'Exploitation du Palmier a Huile (SODEPALM), whichwas founded in 1963 to develop the oil palm and coconut industries. It iswholly owned by Government. It owns oil palm and coconut estates, and isresponsible for providing credit and supervision for the oil palm and coconutoutgrowers. PALMINDUSTRIE, which is 73% owned by Government, owns the palmoil mills and ancillary installations needed to process the production fromestates and outgrowers. PALMIVOIRE, owned 40% by Government and 60% byprivate interests, manages the SODEPALM oil palm estates and PALMINDUSTRIEmills. PALMIVOIRE supplies all staff above the estate manager level. Itsoperating standards and performance are very good. The oil palm outgrowerprogram, as well as coconut estates and outgrowers, is outside the scopeof the Participation, and SODEPALM has its own competent organization forthese. The financial condition of the entities involved in the project issound. Despite production costs that are 20% higher than anticipated, thefinancial results for the Participation and for outgrowers have been betterthan expected due largely to higher than anticipated prices for palm products.

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iv. On January 1, 1974, in accordance with existing loan covenants,qualified Ivorian citizens were appointed as Director and Deputy DirectorGeneral of SODEPALM/PALMIVOIRE, to replace former expatriate incumbents.SODEPALM/PALMIVOIRE intends to retain the services of seven high level expa-triates to fill key positions for which suitable Ivorian replacements have notyet been found. Consequently, all key managerial positions continue to befilled satisfactorily.

Cost Estimates and Financial Arrangements

v. Project cost, net of import duties, is estimated at CFAF 2.7 billion(US$10.8 million), of which the foreign exchange component is about CFAF 1.3billion (US$5.1 million) or 47%. Cost estimates are based on February 1974prices, and reflect the now ample experience with the national oil palm program.Contingencies follow current Bank guidelines and in the aggregate account for35% of base line cost estimates.

vi. It is envisaged that the Bank and CCCE would share in equal pro-portions the equivalent of the project's foreign exchange cost. This wouldrequire a Bank loan totalling US$2.6 million, equivalent to 24% of totalproject costs and about 50% of the estimated foreign exchange cost. The loanwould be to SODEPALM/PALMIVOIRE, and would be disbursed during the five-yearperiod 1974-78. The term of the loan would be 15 years, with a five-yeargrace period for principal payments. The balance of project costs not coveredby IBRD and CCCE loans would be financed by SODEPALM, from self-generatedfunds. A summary of the financing plan is given below:

Financing Plan

Estates Outgrowers Totals$_000 x - US$ 000 % US$'000 %

IBRD 2,600 29 - - 2,600 24CCCE 2,600 29 - - 2,600 24SODEPALM 3,710 42 1,940 100 5,650 52

Total 8,910 _ 1,940 100 10,850 100

vii. Financial Arrangements for Outgrowers. As under the ongoing program,outgrowers would receive both credits and grants from SODEPALM. About CFAF80,000/ha (US$320/ha) would be credit for seedlings, land clearing, maintenanceof plantings, and fertilizer, and would be repayable in 9 years after a seven-year grace period. Outgrowers would contract to sell all their produce toSODEPALM, which would deduct payments due from the sales price. About CFAF16,700/ha (US$67/ha) would be a grant, comprising the cover crop, wire netting,and labor costs related to supply of seedlings. This is much lower than theCFAF 63,800/ha and CFAF 48,300/ha provided as grants, respectively, under thefirst and second projects. A reduction in individual grants is now possiblebecause the experience with ongoing programs is demonstrating that well planted

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and maintained oil palm can compete successfully with other crops in the projectarea and, therefore, prospective participants would be less reluctant to jointhe project than in earlier years.

Procurement and Disbursements

viii. Contracts over US$50,000 would be subject to international compet-itive bidding in accordance with Bank guidelines. ICB would be used to pro-cure goods and services estimated to cost US$1.4 million: fertilizer andinsecticides, US$0.5 million; vehicles and equipment, US$0.9 million. Localmanufacturers would be given preference of 15% against bids quoted in CIFprices. High-yielding palm oil seeds estimated to cost US$0.5 million wouldbe supplied by IRHO, the only supplier of suitable material. Civil worksconsisting of land clearing and earth estate roads, estimated to cost US$2.7million, would be carried out by force account. SODEPALM has the equipment,and has demonstrated that it can conduct it both efficiently and less costlythan contractors. Of the remaining project costs, US$2.6 million would befor staff and labor services, US$0.3 million would be for materials toestablish plant nurseries, US$0.5 million would be for housing, and US$2.8million unallocated. Disbursement of Bank and CCCE loans would occur fromloan signature to the end of the 1978 calendar year. For administrativeconvenience, the Bank and CCCE would finance pari passu, at 35% each, againstthe estates component only. Disbursements would be against contracts, com-pletion certificates and other documents certified by SODEPALM.

ix. Primary benefits from the oil palm outgrower and estate plantingswould be the increased production of palm oil and kernels and resultant netannual incremental foreign exchange earnings amounting to about US$8.8 millionby 1987.

x. Based on expected world prices for these commodities, the returnsto the economy from the project investments are estimated to be about 23%.The rate of return for the estate component alone is estimated at 20%, and therate for the outgrower component at 35%. The project would also have substan-tial secondary benefits through providing employment for some 600 workers onthe oil palm estates, and creating some 265,000 mandays of work per year indeveloping outgrowers holdings. It would further the Government's programof agricultural diversification both directly, through the project output,and indirectly by generating resources with which to pursue other programs.

Recommendations

xi. The assurances and covenants of Loans IVC-611 and IVC-760 would becontinued substantially in the Third Oil Palm Loan. The project is suitablefor a Bank loan to SODEPALM/PALMIVOIRE for US$2.6 million repayable over10 years after five years of grace on principal payments.

IVORY COAST

THIRD OIL PALM PROJECT

I. INTRODUCTION

1.01 The Government of the Ivory Coast has asked the Bank to financepart of the costs of completing its ongoing oil palm and coconut developmentprogram that is being carried out East of the Sassandra River (Map). Theobjectives of the program are to increase output of coconut and oil palmproduce, to further diversify agricultural production in forest and fringesavannah areas, and to increase farmers' inc,xnes and the country's foreignexchange earnings.

1.02 The proposed loan of US$2.6 million would be the Bank's final contri-bution toward the ongoing program, which has been underway since the middle1960's under the responsibility of an association of companies, SODEPALM,PALMINDUSTRIE and PALMIVOIRE, joined together in a Participation (the Partici-pation). The Bank and the prospective cofinancer of the proposed project,France's Caisse Centrale de Cooperation Economique, and the Government believethat the completed program, which involves almost 100,000 ha of oil palm andcoconut and substantial processing and commercial operations, will requirethe undivided attention of the Participation management. For this reason,Government plans to assign responsibility for future development of oil palmsand coconuts (in the Southwest) to a different agency.

1.03 The project was prepared by the Participation. This report is basedon the findings of a Bank mission which visited the Ivory Coast in November/December 1973, composed of Messrs. Losson, Tillier and Winston.

1.04 The Bank has made seven loans for agricultural development in theIvory Coast: three totalling US$17.1 million in 1969 for oil palm and coconutdevelopment; a loan of US$7.5 million in 1970 for smallholder cocoa production;two oil palm and coconut loans of US$7 million in 1971; and a loan of US$8.4million for a rubber project in late 1973. All of the projects financed havebeen completed or are progressing satisfactorily (Annex 1).

II. BACKGROUND

A. General

2.01 The Ivory Coast has a land area of about 324,000 km , broadlydivided into two ecological zones. Tropical rain forest stretches across thecountry in a belt reaching about 200 km inland from the Atlantic Ocean, andfurther North the forest is replaced by savannah which covers the remainderof the country. Shifting cultivation has led to the displacement of forestsby savannah, particularly in the center of the country.

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2.02 Population is estimated at about 5.4 million, growing at about 3.3%annually (including 1% growth from immigration). Small scale agricultureprovides about 80% of employment and, according to estimates, jobs for some400,000 foreign workers, mainly from Upper Volta and Mali.

2.03 GDP amounts to about US$1.8 billion and exports to about US$0.5billion (both 1972 figures). Due to the rapid growth of industry and urbanservices, the share of agriculture (including forestry and fishing) in GDPdecreased from 36% in 1965 to only 27% in 1972. However, the agriculturalsector still accounts for 86% of all exports (CFAF 120.7 billion out ofCFAF 139.5 billion in 1972).

2.04 In 1970, 23% of the population lived in towns with more than5,000 inhabitants; by 1985, this figure is expected to reach 43%. There isalso migration within the rural areas, from the savannah to the forest zone.Population in cities is expected to grow at around 6%, that of the forestzone at about 4%, and that of the savannah to decline by about 1% per year.

2.05 Migration is due largely to the wide income disparity between sectorsand regions. In 1970, when overall per capita income was CFAF 81,200 (US$325),money incomes of rural inhabitants varied from CFAF 3,400 (US$14) in the North,to CFAF 17,000 (US$68) in the central rain forest, and CFAF 23,600 (US$94) inthe South around AbidJan.

2.06 The forest zone produces the greatest share of agricultural outputand 86% of agricultural exports, with timber, coffee and cocoa being the mostimportant. Since 1965, the government has undertaken a program of cropdiversification involving pineapples, bananas, coconut, oil palm and rubber(the last three with the assistance of Bank loans). But coffee and cocoaremain the most important crops for small scale agriculture, with almosthalf of all farm families involvel in their production. A second cocoa projectis under consideration by the Bank.

2.07 In contrast, the savannah region is dominated by subsistence crop-ping of maize, rice, cassava, sorghum, beans and peas. Livestock productionis generally limited to poultry and small ruminants, mainly goats; beefproduction is limited by prevalence of tse-tse fly. Until recently, effortsto improve savannah incomes have been limited to rice and cotton developmentprograms. A major program in cotton, rice and other food crops is now inpreparation with Bank assistance.

Development Strategy

2.08 Real growth in the economy has averaged about 7% per year over thepast decade. Government would like to maintain this high growth rate. Thuspolicy emphasis is on commodity output increases, as well as on diversification,and making exports competitive to protect them from adverse trends in worldprices. The economy is very dependent on foreign exchange, and as the countrydoes not possess commercially exploited mineral resources, there is no alter-native to export crops as a source of foreign exchange.

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2.09 Until recently, efforts to improve agricultural productivity havetaken the single crop approach ani have generally been successful. Thisapproach was helped by the countr-'s being virtually self-sufficient in foodexcept for livestock products. Urbanization is now changing the situationand the need for increasing food production is pressing. Government is plan-ning to tackle this problem and the related one of rural poverty in the food-producing Savannah zone through regional programs involving a package ofimprovements not only in agriculture but in the physical and social infrastruc-ture. Projects currently under preparation for Bank financing support theseobjectives.

B. Institutional Structure

2.10 Overall development planning is in the hands of the Planning Ministry,while detailed plans and programs for crop production, forestry and fresh waterfisheries are the responsibility of the Ministry of Agriculture. Execution ofthese programs is entrusted to a number of agencies, some of which are Statecompanies, such as Societe d'Assistance Technique pour la Modernisation Agricolede la Cote d'Ivoire (SATMACI) for coffee and cocoa development. Others areforeign companies under contract to the Government, such as Compagnie Francaisede Developpement des Textiles (CFDT) for cotton development.

2.11 The principal entity involved in the proposed project is Societepour le Developpement et 1'Exploitation du Palmier a Huile (SODEPALM), whichwas founded in 1963 to develop the oil palm and coconut industries. It iswholly owned by Government. It owns oil palm and coconut estates and is re-sponsible for providing credit and supervision to oil palm and coconut outgrow-ers. SODEPALM is part of a joint venture (the Participation) which additionallyinvolves PALMINDUSTRIE and PALMIVOIRE. PALMINDUSTRIE is owned 73% by Governmentand 27% by private interests, and owns the palm oil mills and ancillary installa-tions needed to process the production from SODEPALM estates and outgrowers.PALMIVOIRE is owned 40% by Government and 60% by the same private interestswith minority ownership in PALMINDUSTRIE, and manages the SODEPALM oil palmestates and PALMINDUSTRIE mills. PALMIVOIRE supplies all staff above estatemanager level. Its operating standards and performance are very good.PALMIVOIRE does not directly provide services to outgrowers since the out-grower program is outside the scope of the Participation, except in so faras the Participation processes outgrower palm produce on a cost basis; coconutdevelopment, both estates and outgrowers, is also outside the Participation.Consequently, SODEPALM has its own organization for outgrowers and coconutdevelopment. Profits or losses to the Participation are divided proportionatelyamong the three companies on the basis of their investments. PALMIVOIRE, whosefinancial contribution is minimal, is remunerated for its management serviceson a sliding scale based on financial results of the Participation as a whole.The institutional structure is described in detail in the "Appraisal of theSecond Oil Palm and Coconut Project" (PA-89a, June 1, 1971).

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2.12 Fonds d'Extension et de Renouvellement (FER). This fund was set upin conjunction with the Participation, at the request of the Fonds Europeen deDeveloppement (FED), initially to finance modern housing for oil palm estateworkers and to assist in financing development of outgrower oil palm produc-tion. Its revenues were to consist of (a) rent paid by SODEPALM on the estatehousing, and (b) transfers from SODEPALM of CFAF 0.80/kg of fresh fruit bunchesproduced on the oil palm estates, as a form of repayment of the CFAF 8.3 bil-lion grant Government received from FED to establish the first 32,000 ha ofSODEPALM estates. Because estate production has been in its initial stages,transfers to FER under the levy on production have been small (CFAF 422 mil-lion). Since FER was short of funds to carry out its housing program,SODEPALM prefinanced its estate housing program, costing CFAF 2 billion. In1973 and early 1974, FER borrowed money from Government sources and repaidSODEPALM. Subsequently, Government decided that SODEPALM should own its ownestate housing outright, and should pay over 15 years the CFAF 2 billionrecently received from FER. As transfers to the FER from the levy on estateproduction will increase rapidly in the years ahead, this fund is expected tobecome a significant source of funds and Government would draw upon it tohelp finance the outgrower development program (para 4.06) and to financeoil palm and coconut development in the Southwest.

2.13 Agricultural Production Price Stabilization Agency. The "Caisse deStabilisation et de Soutien des Prix des Productions Agricole" (CSSPPA) is re-sponsible for carrying out Government agricultural price support policies. Itsupports producer prices for cotton, cocoa and coffee growers in a conventionalmanner: paying producers a guaranteed minimum price which it fixes annually,selling the commodities on the world market, and absorbing profits or losseson its operations. For oil palm, CSSPPA does not guarantee minimum pricesto outgrowers or to SODEPAIM, nor does it market oil palm products. Ratherits function is limited to moderation of drastic changes in world prices overconsecutive years. SODEPALM/PALMIVOIRE controls its own export sales and re-ports export prices and volume to CSSPPA, which intervenes after the year'sresults are known, but only if the average export prices for palm products varymore than 10% in either direction from the year before. For instance, in theevent of a substantial increase in export price in one year relative to thepreceding year, SODEPALM would be called on to transfer revenue to CSSPPA onthe following basis: (a) none of the marginal revenue from the first 10% ofthe price increase; (b) half of the marginal revenue from the 10-15% tranche;and (c) four-fifths of the marginal revenue from any remaining price increaseabove 15%. A similar formula applies for the transfer of funds from CSSPPAto SODEPALM in the event of a price decrease. CSSPPA does not support coconutprices.

2.14 Agricultural Research. Agricultural research is undertaken by variousFrench organizations under technical assistance agreements with France, andresearch costs are shared by the two Governments. Oil palm and coconut researchis undertaken by the Institut de Recherches pour les Huiles et Oleagineux(IRHO). PALMIVOIRE has a department concerned with collection, processingand end product research. Some of the results of research are described inAnnex 4.

C. The Oil Palm and Coconut Sector

Oil Palm Development

2.15 In the early 1960s Government initiated an oil palm developmentprogram and established SODEPALM to carry it out. Financial help was obtainedfrom Fonds Europeen de Developpement (FED), Banque Europeenne d'Investissement(BEI), Caisse Centrale de Cooperation Economique (CCCE), and IBRD (Annex 1).Some 65,000 ha of oil palms have been planted under the programs, of a nationaltotal of 75,000 ha of improved oil palm; the balance was planted prior to theSODEPALM program by private entrepreneurs. 55,000 ha, of various ages, arenow in production and exports of palm oil are growing rapidly:

Palm Oil Production and Exports

1969 1970 1971 1972 1980 forecast------------------'000 tons-----------------

Production 36 52 69 100 200

Exports 2 13 28 55 110

2.16 Both in its oil palm and coconut programs, Government has favored asystem of nucleus industrial estates surrounded by outgrowers, who are smallfarmers plimting, as of now, an average of 4 ha each. Estates are consideredessential go the outgrower program through demonstrating the value of usingmodern cultural practices, providing the potential outgrower with confidencein the future of the crop, and supporting a range of services essential toefficient production and high yields. Under this concept, nine developmentdistricts have been established East of the Sassandra River, each based ona palm oil mill and containing a mixture of estate plantings and outgrowers.The network is complete basically but additional investments to develop thepotential of each district will be required until 1985 (Annex 3). Exceptfor the Bank and CCCE financing under the proposed project, all or most furtherfinance to complete the ongoing program probably would be self-generated bythe Participation.

Coconut Development

2.17 Coconut development has been carried out since 1969 simultaneouslywith the oil palm program, and with financial help from the same sources(para 2.15). SODEPALM is carrying out a 20,000 ha coconut program in linewith the schedule envisaged during the 1969 and 1971 appraisals. Projectplantings will be completed in 1976, and will substantially exhaust thecoconut potential of the zone east of the Sassandra River. In the beginning,difficulties were met in implementing the outgrower program; but these diffi-culties are now being overcome through providing more incentives to farmers.Establishment of the coconut estates is satisfactory. Unit investment costshave generally been in line with appraisal estimates. In the meantime,varietal research is making substantial progress and future yields should be

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higher than originally anticipated. Considering the highly favorable marketprospects for coconut, there is every reason to consider the coconut programa success. By 1985, the Ivory Coast will produce only about 60,000 tons ofcopra equivalent, a negligible percentage of world trade in coconut products.

2.18 CKoconut plantings will begin to mature in 1976 but a decision isawaited as to how production will be processed and marketed. As this is im-portant in respect of SODEPALM's financial position and ability to generatefunds, Government has been asked to submit to the Bank, within 12 monthsafter effectiveness of the loan proposed in this report, a plan to processand market coconut production. An assurance on this point has been secured.

Investments and Finance for Oil Palm and Coconut Development (Annex 3)

2.19 The Participation has invested CFAF 30.2 billion (US$120.8 million)in oil palm and coconut development, as of the end of 1972, as follows:

Investments CFAF (billions) US$ (millions)

Oil Palm Estates 15.123 60.5Oil Palm Outgrowers 3.937 15.8Coconut Estates and

Outgrowers 2.360 9.4Oil Palm Processing

Facilities 8.775 35.1

30.195 120.8

The total investment is about CFAF 2.5 billion more than was anticipated bythe Bank at tbr time of appraising the Second Oil Palm and Coconut Project in1971 (Loans ITC 759 and 760) because investments have included expenditureson social infrastructure and housing (CFAF 2 billion) and estate roads (CFAF560 million), which under the original financing arrangements were not intendedto be financed by SODEPALM. Also, SODEPALM purchased land clearing and roadequipment costing 3ome CFAF 1 billion, to enable it to undertake work at lowercost than previous contract arrangements, see para 3.07. Oil palm developmentcosts per hectare, however, are in line with the 1971 appraisal estimates.The cost for oil palm estates is CFAF 260,000/ha. For the outgrower program,the cost is CFAF 140,000/ha. Smallholders have received loans amounting toCFAF 2.1 billion, and grants from Government of CFAF 1.6 billion. SODEPALMnow supervises about 6,500 oil palm outgrowers.

2.20 The sources of funds, as of the end of 1972, are summarized below:

Equity Self-Generated Funds Grants Loan Disbursements Total…_------------------…CFAF million-------------------…----

Oil Palm Estates 300 2,658 10,592 1,640 15,190SODEPALM/PALMIVOIRE 150 774 2,169 3,287 6,380PALMINDUSTRIE 2,800 722 - 4,965 8,487

3,250 4,154 12,761 9,892 30,057

Percentage 10.8 13.8 42.5 32.9 100

Self-generated funds include profits, reserves and depreciation allowances.Grants include a Government contribution of CFAF 3,780 million and FED grantsto Government of CFAF 8,363 million. Disbursements from the five IBRD lo&nsaccount for CFAF 3.2 billion (US$12.8 million), or 10.6% of the total financ-ing of Participation investments.

2.21 Financial results are discussed in Chapter 7. Despite productioncosts that are 20% higher than anticipated, the financial results for theParticipation and for outgrowers have been better than expected due largelyto higher than anticipated prices for palm products.

III. THE PROJECT

A. General

3.01 The project is the final stage of an ongoing investment programaimed at the optimal exploitation of the oil palm growing potential of areasEast of the Sassandra River (Map). The project consists of oil palm plantingcoupled with the necessary support activities to bring the plantings tomaturity.

The project comprises:

(a) plantings of 5,000 ha of hiigh yield potential oil palm byoutgrowers assisted by SODEPALM's technical and supervised creditservices, to bring the total area of outgrower oil palmsto 30,000 ha; and

(b) plantings or replantings of 5,520 ha of high yield potentialoil palm, out of which 400 ha would be new hybrid lines,on SODEPALM estates.

The project would be carried out from 1974 to 1979.

B. The Planting Program

Outgrowers

3.02 The 5,000 ha of outgrower plantings would be divided among allnine of the palm oil mill districts, and phased equally over the five years,1975-1979 (Annex 4, Table 1). In general, the plantings would be as closeas possible to the mill sites. An estimated 1,300 farm families would beinvolved, including 600-800 newcomers to the program.

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Estates

3.03 1,600 ha would be planted on Ehania estate; the planting wouldincrease the area of this estate from 10,410 ha to 12,010 ha. This expansionis based on the availability of an unutilized parcel of land in SODEPALM'sEhania estate holding, which enjoys the best conditions for oil palm in IvoryCoast. The plantings would be in conjunction with an expansion of processingcapacity in Ehania district financed by PALMINDUSTRIE. About 400 ha of IRHO'snew hybrid, E. Melanococca x E. Guineensis, would be planted in 1975 as partof the 1,600 ha planting program. The characteristics of this hybrid aredescribed in Annex 4.

3.04 3,000 ha would be planted on Okrouyo estate, a new estate to thewest of Abidjan. This estate is within the collection perimeter of theexisting Soubre mill-estate complex. The plantings have high priority toprovide a larger throughput for the Soubre oil mill, which would otherwisehave wasted capacity.

3.05 920 ha would be replanted on the Dabou estate, which was originallyplanted in the 1950's with early experimental varieties that are now over-aged and obsolete.

3.06 The schedule of plantings would be as follows:

Planting Program(hectares)

1974 1975 1976 1977 1978 1979 Total

Oil Palm Estates

Ehania 1,100 500 - - - - 1,600Okrouyo - 1,500 1,500 - - - 3,000Dabou - 920 - - - - 920Oil Palm Outgrowers - 1,000 1,000 1,000 1,000 1,000 5,000

Total 1,100 3,920 2,500 1,000 1,000 1,000 10,520

C. Estate Development

3.07 Development and Maintenance. Land for estate plantings would becleared mechanically by SODEPALM, as has been the case in the past. Whilemechanical clearing is more expensive than hand clearing, the Ivory Coast isunable, because of the rapid pace of development in the rural sector, tomobilize in a timely fashion the necessarily large numbers of skilled menneeded to hand-clear the heavy vegetation. Initially clearing was done bycontractors, but since 1970 SODEPALM has cleared land with its own equipmentat about 50% of the contract price.

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3.08 Seedlings are raised by SODEPALM in its own nurseries, from seedsupplied by IRHO. SODEPALM also produces its own cover crop seed.

3.09 SODEPALM would ensure that all project plantings would be maintaineduntil the end of the third year after their planting. The maintenance require-ments are small but important: principal components are maintenance of thecover crop, including circle weeding for each plant; replacement of deadplants; and fertilizer applications and pest control.

3.10 Replanting the Dabou estate - 920 ha - would involve felling theold palms, planting and maintenance, and controlling existing weed infestation.The procedures involved in replanting are described in Annex 4. To meet theplanting schedule, the first phase of land preparation was started in 1973.

3.11 Estate Tenure. Ehania estate is owned by SODEPALM. The land onwhich the Okrouyo estate is located is classified forest land owned by Govern-ment. Dabou estate is Government property, and was put under SODEPALM manage-ment in 1972. Transfer of ownership of both properties to SODEPALM was inprocess at the time of appraisal, and no difficulties are expected. Duringnegotiations, the Bank received assurances that all facilities and title toor rights in respect of land required for the carrying out and operating theproject would be provided to SODEPALM within one year of loan effectiveness.

D. Outgrower lield Development

3.12 There has been no shortage of applicants for participation in theoil palm outgrower scheme, and no shortage of good candidates is expected.All plantings would be on land for which the farmer has the right of usufruct.Lo,cations and choice of planters would be strictly controlled by SODEPALMprocedures (para 4.04-4.05).

3.13 Oil palm holdings would be cleared by their owners. Seedlings,cover crop seed, fertilizer, and cash for hiring labor would be supplied tothe outgrower by SODEPALM. Development and maintenance methods employedby outgrowers and SODEPALM control and supervision procedures have provedsuccessful and no changes are contemplated.

IV. ORGANIZATION AND MANAGEMENT

A. General

4.01 The Bank was involved in the discussions that led to the creationof the Participation and its constituent companies, and approved the corres-ponding legal statutes. The Bank also approved the Participation's managementorganization, with the provisos that a policy of "Ivorization" would be pursued

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by SODEPALM/PALIIVOIRE, and that appointments to the key posts of GeneralManager and Assistant General Manager of SODEPALM/PALMIVOIRE and the CreditManager of SODEPALM would be made only following agreement with the Bank. Achange in top management took place on January 1, 1974, when an Ivorian citizenwas appointed as Director General to replace the former expatriate incumbent.He and his new Deputy, also an Ivor:tan, have held senior positions in SODEPALM;both men are qualified to fill their new posts. SODEPALM/PALMIVOIRE intendsto retain the services of seven high level expatriate staff members. Conse-quently all key managerial positions continue to be filled with qualified andexperienced persons.

Estates Management

4.02 SODEPALM estates are managed by PALMIVOIRE from headquarters inAbidjan. Development of plantings at the existing Ehania and Dabou estateswould be supervised by the present estate management, and for Okrouyo super-vision would be provided by the Soubre distrtct staff. These arrangementsare satisfactory.

Management of Outgrower Oil Palm Development

4.03 A Division of SODEPALM is responsible for oil palm outgrowers (para2.11). Within this Division and at field level, area chiefs supervise outgroweractivity in nine principal areas, each covering a zone of about 20 km radiusfrom each mill. Below the area level, group chiefs appointed by SODEPALMsupervise plantings made individually by farmers who are grouped on a villagebasis to facilitate supervision and the supply of technical and marketingservices. For each group, a SODEPALM employee coordinates and records thecollection of fresh fruit bunches to be delivered to the area's mill. Abouthalf of project plantings probably would be made by farmers who have alreadyplanted palms under the SODEPALM program. Because of this factor, and alsobecause more than half of outgrower palms are now in production and thusrequire less supervision, carrying out the outgrower component would requireno increase in headquarters or area field staff. The performance of theSODEPALM outgrower program has been satisfactory and no organizational ormanagement problems are envisaged.

B. Outgrower Selection, Size of Holdings and Credit Arrangements

4.04 Participation in the outgrower scheme would continue to be conditionalon the farmer's agreement to follow, throughout the development period, thetechnical advice provided by SODEPALM. Such an obligation has been containedin the agreements that are signed between SODEPALM and outgrowers and whichhave been approved by the Bank.

4.n5 The local SODEPALM agent inspects each applicant's farm, checkshis standing in the community and ability as a farmer, and makes a recommenda-tion to headquarters. Existing selection arrangements would apply. Under

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these, outgrower participants are limited to a maximum of 10 ha of oil palm.The farmer's planting site must be within 200 m of a road passable by ffbcollection vehicles; and new outgrower planting sites would be in zones whereadditional plantings could be handled by the existing supervision and ffbcollection services.

4.06 As under the ongoing program, outgrowers would receive both credits,now interest free, and grants from SODEPALM (details in Annex 5). About CFAF80,000/ha (US$320/ha) would be credit: CFAF 60,000 would be for fieldestablishment, specifically seedlings, fertilizer, and cash for land clearingand maintenance of plantings, and CFAF 20,000 for fertilizer supply fromyear 4 to year 7. This credit would be repayable in 9 years after a seven-year grace period. Outgrowers would contract to sell all theit produce toSODEPALM, which would deduct payments due from the sales price. About CFAF16,700/ha (US$67/ha) would be a grant, comprising the cover crop, wirenetting, and labor costs related to supply of seedlings. This is much lowerthan the CFAF 63,800 and CFAF 48,300 per hectare provided as grants, respectively,under the first and second projects. A reduction in individual grant is nowpossible because the experience with ongoing programs is demonstrating thatwell planted and maintained oil palm can compete successfully with other cropsin the project area and therefore prospective participants would be lessreluctant to join the project than in earlier years. FER would continue toreimburse SODEPALM for the grant element.

4.07 rhe system of financing oil palm out3rowers 1/ development in theIvory Coas: through nominally interest-free loans and grants cannot be judgedby the standards of a conventional credit system. The system is not intendedto replace or compete with a conventional system and is simply a financingmethod chosen by Government to attain the dual objectives of: (a) providingadequate incentive to farmers to diversify into oil palm, and (b) assuringGovernment a satisfactory return on its own investment in the outgrowersprogram and which has proved to be very successful. Recent studies show thatin conventional credit programs high interest rates have to be charged, upto 25% and 30% in some cases, if the lending institution is to receive areasonable return on the money lent to farmers after due allowance foradministration and technical service charges and reserves against bad debts.A scheme charging high interest rates would not have been condusive toencouraging farmers to invest in a crop that was essentially new to them,such as oil palm, and consequently of unproved merit. Under the SODEPALMscheme, outgrowers must sell their produce to SODEPALM. The difference betweenthe forecast export price and the price paid to producers accrues to SODEPALM,not to the outgr6wers, and the guiding principle in fixing the producer priceis consistency with a minimum financial return to Government of 7% on its oilpalm outgrower investment. On the basis of the average price paid for out-growers ffb (CFAF 8/kg including bonuses) and the current world market priceforecast, the return to Government from this investment is estimated at 12%;

1/ A conventional credit system has been used for coconut outgrowers sincethe inception of the coconut program.

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and even if the producer price to outgrowers were increased by 50%, the re-turn to Government would remain above the target return of 7%. Under themarket conditions prevailing during the early years of outgrowers development(1969-71), it had been felt necessary to charge a 2% interest rate on loans tooutgrowers to secure the desired return to Government. With a greatly im-proved mar;et outlook, SODEPALM suspended the interest charge in 1971, as itwas not neesded to insure a satisfactory return to Government. As the SODEPALMscheme is achieving highly satisfactory results and is not, because of thevery specialized nature of the oil palm program, establishing undesirableprecedents, it is not considered necessary to make any change in the creditarrangements for oil palm outgrowers.

C. Processing and Marketing

4.08 PALMINDUSTRIE would have sufficient capacity to process all ffbproduction with its nine existing oil mill centers and some additionalcapacity scheduled to be constructed at Ehania. PAIMINDUSTRIE would providethe transport services to collect outgrower and estate fresh fruit bunches(ffb).

4.09 Palm oil and kernels produced by the PALMINDUSTRIE mills would bemarketed by PALMIVOIRE, both directly and through contracts concluded withthe Belgian commodity trading company SOGESCOL as broker. These arrangementsare in force and are satisfactory.

V. COST ESTIMATES AND FINANCING

A. Cost Estimates

5.01 Project costs during the six-year period 1974 through 1979 areestimated at CFAF 2.7 billion (US$10.8 million), of which the foreign exchangecomponent is about CFAF 1.3 billion (US$5.1 million) or 47%. Detailed costestimates are in Annex 6, and are summarized in the attached table (next page).

5.02 Government has indicated its intention to continue to exempt allimports needed for the project from import duties during the developmentperiod, and confirmation of this has been obtained. Such exemption wouldnegate all preferences enjoyed by foreign companies in the Ivory Coast market.Cost estimates are based on February 1974 prices, and reflect the ample ex-perience gained from the national oil palm program. Cost estimates includeindirect taxes amounting to about US$1 million, and contain the followingcontingencies:

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SUMMAY OF PROJECT COST ESTIMATES

CFAE ('000) US$ ('000) ForeignLocal Foreign Total Local Foreign Total Exohange

I. Oil Palm Estates Development

Estate Management 117,556 101,672 219,228 470 407 877 46

Fixed AssetsHousing 41,340 96s460 137s800 165 386 551 70Vehicles and Equipment 21,526 78s345 99,871 86 313 399 78Land clearing 186,440 428,960 615,,400 746 1,716 2,462 70Field Development 423,048 174,602 597,650 2.693 698 2.391 29 -

Subtotal 789s910 88o0,39 1,669s949 3,160 3,520 6,680 53

II. Oatgrawers Develomt

Field Development 192,487 63,763 256,250 770 255 1,025 25Cash advances 82,000 -- 82 000 328 -- 328

Subtotal 274,487 63s763 338,250 1,098 255 1,353 19

Grand Subtotal 1,064,397 943,802 2,008,199 4.258 3.775 8,033 47

Physical Contingencies 10% 98,240 94s380 192,620 393 378 771 49Price Contingencies 275,412 236,500 511,912 1,102 946 2,048 46

Total Contingencies 373,652 330,880 704,532 1,.495 1,324 2,819 47

TOTAL PROJECT COST 1,438,049 IA274s682 2,712,731 5,753 5,099 10,852 47

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(a) pnys_a contingencies totalling about 10Z of projectcost are included for oil palm outgrowers and the estates; and

(b) price contingencies compounded as follows: for civil works,construction, and mechanical land clearance, 18Z in 1974,15? in 1975, 12X in 1976 and thereafter; and for all remainingcosts, 14% in 1974, 11Z in 1975, and 7.5? thereafter.

Total contingencies calculated on the foregoing basis amount to 26? of totalproject costs or 35% of base line cost estimates.

B. Proposed Financing

5.03 Government has asked France's Caisse Centrale (CcCE) and the Bankto cofinance part of project costs. It is envisaged that together the Bankand CCCE would-finance roughly the equivalent of the project's foreignexchange costs. This would entail a Bank loan totalling US$2.6 million, equiv-alent to 24% of total project costs and about 50% of estimated foreign exchangecosts.

5.04 The loan would be to SODEPALM/PALMIVOIRE, and would be disbursedduring the five-year period 1974-78. The term of the loan would be 15 years,with a five-year grace period for principal payments. CCCE has agreed in prin-ciple to lend an identical amount to SODEPALM/PALMIVOIRE, to be disbursed overthe same period as the IBRD loan. Tentatively, the CCCE loans would bearinterest at 5.5% and would be for the same term and grace period as on theproposed Bank loan. The balance of project costs not covered by IBRD and CCCEloans would be financed by SODEPALM from self-generated funds.

5.05 The financing plan for the proposed project is summarized below:

Financing Plan

Estates Outgrowers TotalUS$000 X US$ '000 x US$ '000 %

IBRD 2,600 29 - 2,600 24OCCE 2,600 29 - 2,600 24

Government:

SODEPALM 3,710 42 1,940 100 5,650 52

Total 8,910 100 1,940 100 10,850 100

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C. Procurement and Disbursement

5.06 All contracts of over US$50,000 would be subject to internationalcompetitive bidding in accordance with Bank guidelines. These would involveprocurement of goods and services estimated to cost US$1.4 million: fertilizerand insecticides, US$0.5 million; vehicles and equipment, US$0.9 million.Local manufacturers would be allowed a preference of up to 15% against bidsbased on CIF prices. High yielding palm oil seed estimated to cost US$0.5million would be supplied by IRHO, the only supplier of suitable material.Civil works consisting of land clearing and earth estate roads, estimated tocost US$2.7 million, would be carried out by force account. SODEPALM has theequipment needed for this work and has demonstrated that it can conduct itboth more efficiently and less costly than can contractors; costs have averaged50% less (para 3.07). Of remaining project costs, US$2.6 million would befor staff and labor, US$0.3 million would be for materials to establish plantnurseries, US$0.5 million would be for housing, and US$2.8 million would beunallocated. Disbursement of Bank and CCCE loans would occur from loansignature to the end of calendar 1978. For administrative convenience, theBank and CCCE would disburse pari passu, at 35% each, against the estatescomponent only. Disbursements (Annex 7) would be against contracts, completioncertificates and other documents certified by SODEPALM.

D. Accounts and Audit (Annex 2)

5.07 SODEPALM, with PALMIVOIRE assistance, would continue to maintainaccounts for both the oil palm outgrower program and estates. As a result ofconsultations with the bank, SODEPALM has made improvements on the followingpoints concerning accounting and auditing:

Accounting System. SODEPALM's accounting system was deficient(Annex 2), and a satisfactory review along lines agreed withthe Bank has been completed.

External Audit. The former external audit of SODEPALM/PALMIVOIREfPALMINDUSTRIE proved inadequate because Ivorianlaw is less exacting in this respect than internationalauditing standards. Satisfactory arrangements for auditingunder international auditing practices have recently beenmade.

Internal Audit. To overcome the lack of an internal audit,SODEPALM/PALMIVOIRE established this function under satisfactoryconditions. This would insure a better reliability of costand financial data issued by SODEPALM/PALMIVOIRE.

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VI. YIELDS, OUTPUT, MARKETS AND PRICES

A. Yields and Output

6.01 Oil palm outgrowers are estimated to obtain an average yield of 13tons ffb/ha (21% oil and 4.3% kernel contents) when their oil palm plantingsare mature, nine years after planting. Actual results from existing oil palmoutgrowers confirm the validity of this estimate. Estates are expected toobtain a range of yields depending upon their differing potentials (Annex 4),specifically these are: Ehania, 16 tons/ha; Okrouyo, 14 tons/ha; Dabou, 12tons/ha, with oil yields of about 21.5Z and kernel yields of 4.3%.

6.02 Oil palms planted under the project would come into productionafter four years and reach full production in the ninth year. Consequently,project plantings would reach full production in 1984, from which time theirproduction would average 30,800 tons of oil and 6,300 tons of kernels annuallyor less than 1% of the anticipated world trade in these commodities at thattime (Annex 8).

B. Markets and Pricep

6.03 Market prospects are good. About 55X of the palm oil and allkernels produced by project plantings would be exported, and the remaining45% would be absorbed by the growing domestic market. Total world productionof palm oil is estimated to be expanding at about 12% annually, and productionby 1980 is expected to reach about 4.2 million tons and exports 2.7 milliontons. Of the total, the Ivory Coast would export about 110,000 tons or 4.5%.On the basis of the supply and demand outlook, the Bank's commodity analystsexpect palm oil prices to range from US$425/ton, the current price, to US$695/ton cif Europe in 1985. A price equivalent to US$327/ton cif Europe, inconstant 1974 prices, has been assumed for project purposes (Annex 8).

6.04 The principal product of palm kernels is palm kernel oil, whichhas similar chemical characteristics to coconut oil; on the basis of thetrend in coconut prices, palm kernel prices in current terms are expectedto range from US$350/ton, the present level, to US$460/ton cif Europe by1935. A price of US$218/ton, in constant 1974 prices, has been assumedfor project purposes. The price projections for both oil palm productscompare favorably with the outlook under the previous projects.

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VII. FINANCIAL BENEFITS AND OUTLOOK

Financial Results

7.01 Whilst production from the first project has been generally in linewith appraisal estimates, the financial results of the Participation havebeen better than expected because of higher than expected palm oil prices,which averaged over US$215/ton in 1972 and US$400/ton in 1973, compared withthe projected figure of US$160/ton, and which have more than offset cost in-creases. The financial results of the smallholder program have been in linewith estimates. The operating results for 1972, before debt service, maybe summarized as follows:

SmallholderSODEPALM Participation Program

CFAF million

Appraisal estimates 4 142 (138)

Effect of increased: - sellingprices 847 761 86

- costs (695) (588) (107)

Actual results 156 315 (159)

7.02 SODEPALM's working capital was severely depleted by the end of 1972,when Bank overdrafts amounted to CPAP 1.6 billion, due to investments outsidethe scope of the original program (para 2.19). By the end of 1973, however,increased revenues and additional long term borrowing from PER had reducedthe overdraft to an estimated CFAF 900 million.

7.03 The estimated cash flows for the period 1973-1988 for SODEPALM andPALMINDUSTRIE are at Annex 2, Table 8; they are based on the latest (April 9)price forecasts for palm oil. For SODEPALM they show the following mainflows of funds up to the end of disbursements, in 1978, under the proposedproject:

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Oil PalmOutgrowers

Oil Palm Estates Program -

Ongoing Proposed Ongoing & CoconutTotal Program Project Proposed Program

… -CFAY Billion -------- …

Retained earnings /1 21.6 18.5 - 2.0 1.1Loans /2 8.1 2.9 1.3 0.8 3.1

Inflow 29.7 21.4 1,3 2.8 4.2

Investments 11.0 2,7 2.2 1.3 4.8Debt service /3 8.3 5.4 0.2 0.9 1.8Income tax 6.1 5.2 - 0.9 -

Outflow 25.4 13.3 2.4 3.1 6.6

Surplus (Deficit) 4.3 8.1 (1.1) (0.3) (2.4)

/1 After payments of CFAF 3.5 billion to CSSPPA,72- Including proposed IBRD Loan of CFAP 0.75 billion equivalent.73 Including repayment of CFAF 1.4 billion to FER in respect of estate

housing.

Project Benefits - The Participation

7.04 The main benefits to the Participation would accrue from the outputof the estate plantings (Annex 10), from small reductions in estate and proces-sing overheads and costs due to economies in scale resulting from projectactions. The benefits would be allocated to SODEPALM, PALMINDUSTRIE andPALMIVOIRE in proportion to their investments. Surpluses would begin toaccumulate in 1979 and by 1985, at full development, would amount after debtservice to an estimated CPA? 380 million (US$1.5 million), or 20% of theParticipation's total earnings. At that time, net earnings would be allocated60% to SODEPALM, 39% to PALMINDUSTRIE and 1% to PALMIVOIRE.

7.05 SODEPALM would also benefit directly from the services it providesthe additional smallholders (Annex 5). At full development in 1985, incrementaliurpluses from this source would amount to CFAP 184 million (US$0.7 million),or 45% of the total surpluses accruing to SOEPALM's outgrower servicedivision (Annex 10, Table 2). In other words, due to economies of scale inservicing additional outgrowers with the same staff, the 5,000 ha of projectplantings will produce almost as much surplus as the previous 25,00b ha ofoutgrower plantings.

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Project Benefits - Oil Palm Outgrowers

7.06 For outgrowers, average returns from the ongoing projects areabout CFAF 860/manday employed after all costs including debt service, ascompared with estimates made at appraisal of the second project in 1971 ofCFAF 612. Expected benefits for outgrowers ander the project have beenestimated from models prepared from the experience of previous projects.Under current practice SODEPALM pays outgrowers a fixed basic price ofCFAF 4/kg ffb, augmented by a bonus system that enabled growers to attain,in 1973, an average price of CFAF 6/kg ffb. The expected 1974 average priceto outgrowers is CFAF 8/kg ffb; financial projections (para 4.07) show thatthis price is consistent with adequate return to Government. Production onan outgrower's holding would begin in the fourth year after planting, when39 working days would be required to maintain and harvest one hectare of oilpalms and when the return per manday would be CFAF 86 (USd0.34). This wouldincrease and reach a maximum of CFAF 2,000 after debt service by year 9 andCFAF 2,200 (US$8.8) when debt service is completed in year 16. The return tolabor employed is satisfactory compared with the official agricultural wageof CFAF 315/day (including fringe benefits) and with the return from cocoacultivation, another principal crop in the oil palm zone, of about CFAF940 (US$3.75) per manday from traditional plantings and CFAF 1,200 fromimproved plantings. Few outgrowers cultivate only oil palm, as most combineoil palms with coffee and food crops. Indications are that the averageoutgrower holding will be about 4 ha and plantings of this size would generatea t:otal annual income after debt service of approximately CFAF 480,000(US$1,920) as from year 16 after full repayment of debt. The returns areconsidered satisfactory from the viewpoints of inducing farmers to participatein the outgrower program, and of improving their standards of living.

VIII, ECONOMIC BENEFITS AND JUSTIFICATION

8.01 Primary benefits from the oil palm outgrower and estate plantingswould be the increased production of palm oil and kernels and resultant netannual incremental foreign exchange earnings amounting to about US$8.8 millionby 1987.

8.02 Based on expected world prices for these commodities, the returnsto the ecoriomy from the project investments are estimated to be about 23%.In calculating this overall rate, all labor used in the project, for small-holder as well as estate development, has been costed at the average officialrate of CFAF 315/manday including fringe benefits. The rate of return forthe estate component is estimated at 20%, and the rate for the outgrowercomponent at 35%. The difference between the two rates is greater than itwas under the previous project; the reason is that outgrower developmentunder the new project would utilize infrastructure and services already in-stalled during earlier projects. The resultilLg higher rate of return onoutgrower development might suggest that this co"ponent of the project shouldbe expanded. However, the proposed pace of development is based on SODEPALM's

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judgment as to how fast additional outgrower plantings could be integratedinto the program. Under Loan IVC-613, it was envisaged that 12,000 ha wouldbe developed by smallholders over a four year period but the developmentperiod subsequently had to be extended by two years. The proposed programis in keeping with that experience. Details of the calculation are givenat Annex 12, which includes an analysis of the sensitivity of the rates ofreturn to changes in costs and benefits. As is often the case with slowlymaturing investments, the rates of return for all project components arerelatively insensitive to changes in the value of output/ha, itself a functionof both yields and prices:

Returns (a)Output/ha 90% 110%

Outgrowers 32% 36%

Estates 17% 23%

8.03 The project would have substantial secondary benefits throughproviding employment for some 600 workers on the oil palm estates, and creat-ing some 265,000 mandays of work per year in developing outgrowers' holdings.The project would further the Government's program of agricultural diversi-fication both directly, through the project output, and indirectly by generat-ing the resources with which to pursue other programs.

IX. RECOMME9NDATIONS

9.01 The assurances and covenants of Loans IVC-611, IVC-613 and IVC-760would be continued, insofar as they are applicable, in the Third Oil PalmLoan. In addition, assurances have been obtained on the following points:

(a) Government would submit to the Bank, within 12 monthsafter loan effectiveness, a plan to process and marketcoconut production (para 2.18); and

(b) facilities and title to or rights in respect of landrequired for the carrying out and operation of theproject would be provided to SODEPALM within one yearof loan effectiveness (para 3.11).

9.02 Subject to the above conditions, the project is suitable for a Bankloan to SODEPALM/PALMIVOIRE for US$2.6 million repayable over 10 years afterfive years of grace on principal payments.

ANNEX 1Page 1

IVORY COAST

THIRD OIL PALM PROJECT

Progress of Agricultural Projects Financed by Bank Loans

A. Loan 611-IVC - Palmivoire US$3.3 Million Equivalent (June 13, 1969)

1. The project consists of establishing and bringing into production4,000 ha of oil palms at Ehania estate and to bring the estate to 10,000 haof oil palms. The loan became effective on December 30, 1969. Planting wascompleted in 1972 and plantation maintenance is satisfactory. Planting costswere slightly lower than estimated at the time of appraisal.

B. Loan 612-IVC - Palmindustrie US$4.8 Million Equivalent (June 13, 1969)

2. The project comprises the construction of a palm oil mill to servicethe 10,000 ha Ehania estate and some outgrowers. The loan became effectiveon December 30, 1969. The mill was constructed with an initial capacity of40 tons/hour ffb, in two processing lines, and these are functioning satis-factorily at full capacity. Costs were within appraisal estimates. Anaddition of a 20-ton/hr processing line was provided for in the project, butPalmindustrie has requested the Bank to approve a change in plans involvingtwo satellite mills of 20 tons/hr each with expanded central mill service,instead of the addition. The proposal is sound and therefore the projectdescription will be changed to delete the third processing line, and theremaining funds ($700,000) will be devoted to help finance the proposedsatellite-central mill complex.

C. Loan 613-IVC - Sodepalm US$9.0 Million Equivalent (June 13, 1969)

3. The project consists of the establishment and bringing into produc-tion of 12,000 ha of outgrower oil palms, the establishment and maintenanceuntil 1974 of 3,500 ha of estate coconuts and 3,000 ha of outgrower coconuts,the provision of credit and supervisory services for oil palm and coconutoutgrowers and the necessary infrastructure associated with the 3,500 ha ofestate coconuts. The loan became effective on December 30, 1969. Projectcoconut estate plantings were due to be completed in 1971. Due to shortageof planting material (because of disease), the Bank agreed to extend theplanting period to 1972. All estate plantings have now been completed. Atthe request of the Borrower, the Bank also agreed to the extension of the oilpalm outgrower program planting period, initially scheduled to be completedin 1970, to 1972 to permit more rigorous selection of outgrowers.

4. The above three loans are the first Bank operations in support ofthe oil palm sector in the Ivory Coast. After a relatively slow start dis-bursements of the Bank have accelereated and are now well within appraisal

ANNEX 1Page 2

estimates. On the other hand, physical progress has been very good. Althoughproduction of the oil palms under the project is just beginning, all indica-tions are that yields in the estates and of outgrowers will be in line withappraisal estimates. The number of outgrowers participating in the projectis also in line with appraisal estimates.

D. Loan 686-IVC - Cocoa Project US$7.5 Million Equivalent (June 5, 1970)

5. The project originally consisted of the planting of 18,800 ha ofcocoa and the rehabilitation of about 38,000 ha of existing cocoa plantationsand became effective in November 1970. The project was amended in July 1973to reduce the rehabilitation ccmponent to 15,500 ha. This revised programhas been completed. Approximately 10,000 ha had been established under thenew planting program by the end of 1973; plantings of 7,800 ha are expectedin 1974 and 1,000 ha in 1975, completing the program one year later thanexpected at appraisal. Disbursements have been delayed by a delay in signingannual operating conventions, between Government and SATMACI, but with theprocessing of outstanding commitments disbursements are expected to reachUS$3 million in early 1974, or about 25% below appraisal estimates. TheBank's share of project costs have been reduced by the reduction of rehabilita-tion and fertilizer programs (evidence has accumulated that, with increasedprices, payoff from fertilizer use on new plantations is not adequate).

E. Loans 759-IVC and 760-IVC - Sodepalm and Palmindustrie US$7.0 MillionEquivalent (June 22, 1971)

6. The project consists of (a) planting 4,500 ha outgrower oil palms,(b) 4,500 ha of outgrower coconut palms, (c) 8,000 ha of coconut palms onGovernment-owned estates, and (d) construction of a palm oil mill. The loansbecame effective on November 15, 1972. The oil mill was commissioned inJuly 1972, and is operating satisfactorily. The planting programs are pro-ceeding satisfactorily and on schedule.

F. Loan 938-IVC-SOCATCI Rubber Estate US$8.4 Million Equivalent(October 23, 1973)

7. This loan was signed in October 1973, but the deadline formeeting conditions of effectiveness was postponed from November 30, 1973,the original date, to April 30, 1974. The purpose of the loan is to finance,pari passu with CCCE and FED, the planting of 13,500 ha of modern rubberestates and the establishment of auxiliary services under the management of".EtablissementsMichelin", a French tire manufacturer.

ANNEX 2Page 1

IVORY COAST

THIRD OIL PALM PROJECT

SODEPALM Accounts and Financing

Accounting

1. Accounting procedures were changed in 1969 to fit with the newlegal structure of the participation, and, in 1972, to meet legal require-ments when Ivory Coast adopted a national accounting chart.

2. These requirements, added to a fast development of the group'sactivities, caused the accounting procedures to be in a state of transitionfor too long a time. As a result, the accounting system has not met therequirements. While SODEPALM has been mostly interested in obtaining reliableproduction costs quickly, it has neglected to produce detailed investmentcosts. This situation is now improving and SODEPALM has reconciled mostof its accounts with physical inventories; this work is expected to be com-pleted in 1974.

3. SODEPALM has reviewed its accounting procedures and is training itsIvorian accounting staff as recommended by the Bank. The Bank has been keptinformed of the progress of this review which is expected to enable SODEPALMto improve and simplify its accounting procedures.

Auditing

4. Two auditors are appointed by the Minister of Economic Affairs andFinance (actually, only one is from the Government Audit Department; theother is from a private firm of auditors, Societe Fiduciaire France-Afrique).Accounts remain provisional until approved by the Minister and submittedto the General Assembly together with an annual report. This must be withinthree months of the end of each fiscal year.

5. This auditing has not been satisfactory under present arrangementsbecause the Ivorian law is less exacting in this respect than internationalauditing standards. The important internal audit function has been lacking.SODEPALM/PALMIVoIRE has made satisfactory arrangements in both of thesematters.

Balance Sheets and Long-Term Forecasts

6. Tables 1 and 2 summarize balance sheets for SODEPALM and PALMINDUSTRIE.

7. Tables 3 to 8 summarize the long-term financing plan. They showthat oil palm activities will generate abundant surpluses on the basis ofcurrent estimates. Nevertheless, from these surpluses SODEPALM will have tofinance about CFAF 3.1 billion of deficits for the coconut sector, insteadof CFAF 1.5 billion as anticipated at appraisal.

IVORY COAST AT lX 2Table I

THIRD OIL PALM PROJnCT

(CPA? Willio-)

A. ASST81967 198 1969 1970 1971 1972

(a) Tiad Assets (Not)

Pteltainawy 5eUsos . - 115.8 453.6 659.7 230.1Vehicles includirm agriultlre.qa84snt 189.0 288.8 345.1 1,895.2 1,264.7 1.446.5

1natalIatione 142.0 200.7 232.8 440.5 577.5 720.9Oil sills 165.0 C08.6 2,095.8 - 1,979.9 5,852.2b.ci1ding and brldgs 457.0 953.0 5G7.3 1,665.4 887.1 3,676.6 2.353.3 5,142.6 2.783.9 7,265.7 3,642.2 11,891.9

Aericulturel De VlOmDnt

Estates: Oil Pdsn 4,098.0 4,763.0 6,312.7 8,815.6 9,405.5 9,390.7Cocenut 56.0 4,154.0 242,1 5,005.1 195.6 6,508.3 949.9 9,765.5 1.211.2 10,616.7 1,752.9 11,143.6

Ou.tposwar 809.0 809.0 - 1,116.1 _ 877.9 1,264.3 1,264.3 - 2,303.1 - 3,778.8Usell"cated - 426.0 - 838.8 _ 732.0 - - . - _

Total Fhed Assgts 6,342.0 8,623.4 11,794.8 16,172.4 20,185.5 - 26,814.3

(b) Current Asets

Av ilable 547.0 - 659.6 - 3,214.9 - 3,330.6 - 4,120.1 - 3,746.0 -Lo:ei curre.t 1ahlilities (518.0) 29.0 (474.5) 185.1 (1,560.2 1,654.7 (1,995.3) 1,335.3 (3,479.5) 640.8 (5,467.1) (1,721.1)

(c) Loes 81.2 - 138.1 _ 138.1 - 232.7 655.1

TOTAL ASSE 6,371.0 - 8,891.7 - 13,587.S _ 17,645.8 _ 21,05930 25,748.3

8. IlIAILlT785

(a) Sharshuldors Pwuda

Share capital 200.0 - 400.0 - 1,712.5 - 2,950.0 - 2,950.0 - 3.250.0Raers.. 278.0 - 2- - 824.6 - 1.074.9 - 772.5

Ttal - 478.0 - 400.0 - 1,712.5 - 3,774.6 _ 4,024,9 - 4,022.5

(b) Grents

SU _ 1,148.0 - 1,253.5 _ 2,027.4 2,390.5 2,390.5 2,900.8 2,900.8 - -3,440.5

IBRD _- - - 499.4 - 1,654.9 - 3,205.0Others - 4,745. _ 7,238.2 - 9,847.7 10,981.3 11,480.7 12.478.4 14,133.3 15.080.2 18.285.2

TOTA.L LTAILITIZS 6 8,371.0 _ 8,891.7 _ 13,587.6 _ 17,645.8 - 21,059.0 - 25,748.2

March 14, 1974

ASiRM 2IVORY COAST Teble 2

THIRD OIL PALM PROJECT

PAUlENDUSTRIE

Audited Balance Sheet; On Deceber 31(CFA Milon)

1969 1970 1971 1972

ASSETS

(a) Fixed Assets

Preliminary expenses 115.8 453.0 649.7 182.0Oil mills and ancillaries 163.8 2,735.0 3,670.6 5,529.4Buildings - - 555.8Vehicles - 64.7 165.1 429.8Other equipment - 26.1 23.9 147.3Infrastructure - 57.4 177.2 272.2Spare ports 1,631.8 _ 2,883.2 _ 4,036.8 203.7 7,138.2

Work in Progress 463.9 4.0 345.5

(b) Inventories - - - - - - -

(c) Current AssetsAvailable 964.5 - 2,230.8 - 1,794.8 - 717.0 -

Legs:Liabilities 347.0 617.5 582.5 1,648.3 343.6 1,451.2 412.9 304.1

(d) Losses - 12.8 - 14.0 - 18.3 - 395.8

2.841.8 5.002.5 6,156.0 8.365.6

LIABILITIES

Shareholder Fund

Share capital 1,291.0 - 2,500.0 - 2,500.0 _ 2,800.0 -Reserves - 1,291.0 - 2,500.0 29.9 2,529.9 8.3 2,808.3

Loans

Long term 367.2 - 830,7 - 2,123.2 - 4,611.9Medium term 219.1 - 318.1 - 225.0 - 228.4 -Draving rights 964.5 1.550.8 1.353.7 2,502.5 1,277.9 3,626.1 717.0 5,557.3

2.841.8 5.002.5 6.156.0 8,365.6

March 14, 1974

9

ITU C00kM

THIRD OCIL PaX 2JS3

80O2MIX on1 ?AIX 39CAM

1972 1973 1k 9W6 1,2L m si 1.51 151 INk

(a) Inn

=S 520h - a~1 7 - - - - - - - - --CL - 205 45 - - - - - -

ca:s 1 000 baEk 42 87ID400 oco mm . 167 148 ;6_

- 152 97 - - - - - - - - -PU~~ ~~~ - 1.1.03 600 - - - - - - - - -

S*b_totzl _ 2, mo 890 44 -

IND - - 91.2 201.3 173.6 91.1 57.9 26.9-OCCc - - 91.2 2C4.3 173.6 91.1 57.9 26.9 - -

Totl 2. 2.mo.0 1.078.4 4L52.6 347.2 182.2 115.8 93.8

(b) *lt _ Pnrd

Do d at1o (a) 720.0 806.o 885.0 886.0 6 o.0 869.0 816.0 856 W.0 840.0 810.0 784.0 775.03b) - - - - - - 19.0 53.0 78.0 79.0 81.0 83.0 86.0

Aflocated p2n fta ft. th.ptn latoo n 313.0 1.686.0 3.080 2.866 2.857 2.$74 2.320 2.3c8 2.422 2,599 2.732 2.76?

Total Self-gert.d food. 1.033 2,490 3.965 3.752 3.763 3.458 3.219 3.231 3.31 3.492 3.599 3.626

Total S _ 3.043 3.568.4 i.1U7.6 h.099.2 3.9S4.2 3.s7.8 3.272.8 3.231 3.3.1 3.90 .I89.0 3.626.0

c_ital memditk

de.e1.~a cost Co tin katet- R NnwaLaL- 1,341.0 520.0 211.0 101.0 121.0 131.0 2c.0 116.0 102.0 82.0 84.0 75.0

-- po.d Pro3.ot 1 72.6 .78.7 232.9 12.9 S3.4 31.9 12.5 12.9 12.5 12.5 12.5

&kb-total 1.491.9 1. 92.6 686.7 333.9 231.5 224.4 236.9 128.5 114.5 94.5 96.5 87.5

DetIEe caiCl C91 _nt

31 _ _ 31.7 64.7 65.9 67.3 68.7 70.0 71.4 72.9 74.3 75.8 77.4CAA- 25.3 26.8 28.4 30.1 31.9 33.8 35.8 38.0 - -CCCZ 1.. OD lb- 28 .0 28 .0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0IDD 4000 Ha -b 34 .6 35 3. 38.3 10.8 413.3 4.5.8 419.6 52.0 55.8 57.6PR _ 39.9 - . - - - - * - - -

.- ned Pfo3eot

I - - D - *- 6.2 39.5 53 1 57 0 61 1 65 6COCZ 5 0.2 93 59.9 58.9 62.2 65.6

Other Cbre

MU %baidy' - 303.0 303.0 -. -. * -- FE Loan Reppmt 43.0 1. 31.6 D 131.0 134.0 3.o 134.. 13.0 134.0 134.0 131.0 131.0FM. ledeo.. CPAI 0.80 per klo - 210.0 . 28.0 331.0 359.0 376.0 383.0 386.0 388.0 388.0 388.0 388.0

kab-total 292.9 685.7 878.6 621.5 655.0 677.6 786.6 801.s 817.3 830.2 804.9 816.2

Pinacinjl Cha..

B1 _ 17.8 17.9 17.1 15.7 14.4 13.1 11.7 10.3 8.8 7.4 5.9 4.4CA _ 6.0 15.0 15.0 13.5 11.9 10.2 8.4 6.5 4.4 2.3 -CCC 124.9 17.2 17.4 16.3 15.1 13.9 12.7 11.7 10.5 9.3 8.1 6.9ioD 37.0 40.8 99.1 52.8 50.4 47.9 43.3 42.4 39.4 36.1 32.7 29.0Jlt-t. In - 65.o 32.5 16.3 16.3 16.3 16.3 16.3 16.3 16.3 16.3 16.3 16.3

Proooa.d Pro tet

IMED - _ 7.8 17.3 29.9 38.4 43.1 46.7 43.4 39.8 35.9 31.8 27.3CCCG _ _ 2.5 10.6 21 28.3 32.4 35.4 32.6 29.7 26.7 23.4 20

PU - 31.0.0 139.0 128.0 19.0 12.0 117 106.0 95.0 85.0 72.0 63.0 93.0 4 2.0N2.aell_ obarsg. - 35.0 29.0 16.0 16.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0

Skb-tota 289.7 302.7 303.8 309.5 301.8 292.9 279.5 258.2 230.9 207.0 181.2 155.9

W-kl.f Ceoial - 5 590.0 900.0 500.0 - - - - - - - -

o. ?a 4.6 - 10.5 622.5 1,249.1 1,150.4 1,149.8 1,026.5 918.2 922.4 986 1,076.4 1,147.9 1,175Coaxthgeooi.e (3 _ 131.1 52,0 01.1 10.1 11.9 13.1 20.5 11.6 10.2 8.2 8.1. 7.931) _ 15.1 109.2 170.9 112.7 41.2 62.5 25.3 1.3 1.3 1.3 1.3 1.3

ToW klicaut - 2,7864.2 3,364.7 3,810.2 2,538.1 2,421.2 2,297.0 2,267.0 2,123.5 2,160.2 2,217.6 2,240.2 2,243.4

SMw (789.6) 2au8.8 203.7 607.4 1.S61.1 1.S34 1.276.8 1.00A.8 1.107.5 1.180.8 1.272.4 1.138.8 1.382.6

(a) Otgoing prop=

(b) 2rqd 09oj t

IVORY COAST

THIRD OIL PAIX( PROJECT T

SODKPAIL - OILPAIM OUlROWS

BSTTIHUD CASH now

V7 1974 1975 1976 1977 1978 Fil) O 98 1982 1S3 98 1985INFL

146 15 5BNDA 8 111 43 12 6IB.D 14 235 36 34BsIE 28 34 14 11

b) R ep!Vwtsb a) 95 25 6 67 86 103 121 138 148 5 152 359

FU a) 9 25 47 68 87 105 122 139 150 132 106 814b) 3 9 1,5 21

a) Reem %Icales a) 1.354 3,100 3,220 3,518 3,848 3,928 3,933 4,025 4.155 4.207 4,226 4,208 4,634

b) 61 127 245 409 585 748 956DOprociation 36 16 6 39 0 hO 3 3 3

Total OO J,A 1A4 3,705 UZ02 4X0 4,9 4,713 4.956 1, 231 4293

Iovestmenta a) 348 287 160 117 76 38 30 24 18 12 5b) 53.8 62.4 68.7 76.7 76.7 23 14.3 12.8

Renewals 4 15 7 8 10 2 16 16 16 20 17 21 17

Loans R nitsWZFM 38.6 72.6 72.6 72.6 72.6 72.6 72.6 72.6 72.6 72.6 34 34BNDA 6.3 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5IBRD 39.6 42.1 48.5 46.6 61.1 66.6 70.2 73.5 80.7 85.9 92.3

* 25.2 37 132 25

Oper itlo Ia) 465 455 195 549 603 643 661 672 673 673 671 676 676b) 3 6 12 19 27 33 38

Proceasing a) 385 454 521 605 682 759 816 849 881 894 874 872 811b) 8 16 30 50 70 85 97

Financial charges 67 80 95 104 110 112 105 97 89 81 73 51 56Stabilization Fund 550

Purchase of Fruits 409 1,453 1,767 1,894 2,153 ,1114 2,080 2,231 2.366 tA,2 2,582 2,657 3,394

Contingencies 121 124 134 14 152 161 161 165 168 166 169 169

Incom Tax 8 108 113 77 58 77 57 85 114 148 185 145

Total 1,703.2 3, 498.6 3,575 3,726.1 4,051.1 4,116.4 4,179.9 4,303.7 415o4.6 4,4.4 4,798.8 41.84.4 5,571.8

(89.2) 50.4 (171) (21.1) (23.1) 23.6 62.1 131.3 208.4 271.6 356.2 424.6 321.2

/ Ongoing Program

P. Project

ANNEX 2

Table 5

rVORY COAST

THuID 01 PALM PROJECT

SODZPALHU, COCONTE SECTCR

Estimated Cash Flows(ClAP Million)

1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

INPLOWS

Loans

CCCE 45 46 38 17 - - - - - - -rBRD Loan 613 159 286 _ -18RD Loan 759 190 293 347 s8BNDA 255 350 336 197 - - - - - - - -BSIE 75 150 157 21 - - - - - - - - -

Farmr's Reoavmeot - - 2 14 41 80 117 148 161 168 168 168

Proceeds of Sales 3 33 117 299 571 929 1,292 1,801 2,415 2,793 3,018 3,143 3,269

Depreciation 1/ 81 91 103 116 146 150 172 203 225 222 221 215 212

Total inflows 808 1,249 1,098 740 731 1,120 1,544 2,121 2,788 3,176 3,407 3,526 3,649

OUT'FLOWSInvestmentField Investmext Coat 857 1,100 789 496 397 291 132 33 4 - - - -

Equipment and housing 146 68 87 17 25 39 41 55 50 30 10 1 3Renewals 13 42 34 17 16 5 50 65 26 38 53 74 111

Production CostDirect Cost 5 31 100 200 354 540 742 923 1,005 1,033 1,042 1,040 1,036Purchase of nuts from

outgrowers - - - 4 34 102 202 317 428 489 519 519 519

Debt Service

Interest 134 178 220 237 234 227 211 198 184 169 154 138 122Capital Repyment - 13 91 99 166 230 237 244 253 261 270 279 229

Income tax and FNI 95 307 439 523 578 627Contingencies 94 115 91 61 64 73 79 87 86 88 88 88 88

Total Outflow 1,249 1,547 1,412 1,131 1,290 1,507 1,694 2,017 2,343 2,547 2,659 2,717 2,735Surplus (Deficit) (441) 259 (314) (391) (559) (387) (150) 104 445 629 748 809 914

1/ Included in production costs.

T7lkD OIL ?AX NOJICT

1973 1974 U19 1976 19fl 1978 197S 19S0 1981 1982 1983 198M4 19S

N.t Oprotina I..lt (214) 56S 1,572 161? 1.581 1.l2 12'7 1.30 1,36k 1.31k 1,50? 1.5°0 28,SSO.pr-.ttion 751 *82.1 992.8 1.113.4 1.231.1 1.276.7 1.353 1.361.6 1.407.4 1.419.S 1.330.5 1.3.43.2 1.235.6

Tot;7 S1f-C.-.trat.d F..ad. 5 i.,546 2,?30.h 2,812.1 2, 60.7 2.590 2,666.6 .7M1. 2,U3J 2,857.5 2.S23.? 3,2S.6

70ns. Dfiab...r_tCMA 414 39 --5. CCCE 95 - _ _ _ _ _ _ _ _ - _ _B11 463 _ _ _ _ _ _ _ _ _ _ _B9A 153 69 - - - - - - - - -IDRD L-. 612 193 261 42 - - - - - - - - -IW0 Lo-n 759 153 55 -

t1.477 1,2 _ _ . . _ _ _ .

Tot.l 2.089 1,970.1 2.606., 2,730A 2,812,1 2,690.7 2890.0 2.666.6 2.771.4 2,813.8 2,857.5 2g23.2 5.2%0.6

DidInd. 43 45 - - - -Pr.1lo0i..y p .-- I- -5

I M,,.r..nt. (1) 1.473.1 514.6 544.2 697 675.5 78.7 32.1 22.6 16.3 6.9 -(2) 17C 550 59 - 4 11.9 21 39.4 45 40.6 40.2 36.5 62

8R.-. (1) 90.6 97.8 146.5 337.1 402.1 563.5 687.5 619.9 895.4 413.9 680.2 796.4 796.4(2) _ -_ - _ _ _ - - 4.3 13.3 17.4

1,776.7 1.212.2 749.7 1.034.1 1.0S1.6 654.1 740.6 681.9 956.7 461.4 724.7 S46.2 875.8

Rn P,tCAA 125 203.7 199.1 201.0 203.0 224.0 130.1 43 45.6 48.4 51.3 .CCCI - 30 s 50 50 3o so so 50 s0o3 30 30-t2 56.8 156.7 167.6 179.4 191.8 205.2 219.6 234.5 251.2 268.9 297.6 307.8

8ND8 - 17.8 35.6 35.6 35.6 35.6 35.6 35.6 35.6 35.6 35.6 35.6

I= L 61.2 - 51.4 55.5 59.7 62 68 70.8 76,5 81.9 87.5 S3.o 98.3B980 Lo-n 739 - - 8.8 18.8 20 22.5 23.8 23 27.5 28,8 31.3 33.8 36.3

125 260.5 183.8 528.5 547.7 536.4 512.7 444.0 499.5 495.9 524.6 500.0 52B.2

Cootilg.n.ia. (3) _ 161.2 80.2 103.1 109,2 65.4 74.1 68.2 9537 46.1 72.5 84.6 115.3

soltotal 1I901.7 1.633.9 1,313.7 1,66,0 1,737..5 1,305.9 1,17,4 1,194.1 1.521.9 1,003.4 1,321.8 1,430.8 1,519.3

I-o T-o - 3 525 653 696 636 557 587 67J 627 678 711 997

1,901.7 1,676.9 1.838.7 2,32.0 2,A33.5 3,91a. 9 i,88h.1, l,781 2,3.35.9 1,630. 1,9.8 2,U1UJ 2W,.3

Net Surplo (D fiit) 137.3 293.r 768.1 1,3.3 37M.6 i 8.8 705.6 885.5 635.5 1.231k 8K7.? 78. a8.3

(I) Ongoing Pro'r.e.(2) Sh.ni. 0.9.001-0 *nd transport equlpeot relted to 01 P.lo frojeot(3) 107 on nr.=r=nt nd r.n.l cot.

M-oth 15. 1974

IVORY COmST

THIRD OIL PA91I PROJECT

ASSOCIA?ION EN PARTICIPATION

UPd,tod E,timates of Profit And Lo-, k-co.-ta

im uzk ~~~~~m ~~~ni im 3.9 9 MO6 ma an 1U ik

I Bic Data

11i bar1t ) 3k,426 37,269 38,636 40,003 40,993 40,003 40,923 40,923 40,923 40,923 40,923 40,923 40,923P#o3ot p) - - - 1,100 3.100 4,600 4,600 4,600 4,600 4,600 4,600 4,600

*)NUMUMM 339 4114.2 43.2 518.1 545.9 560.6 573 576.7 579.6 581 582.3 583.3 583.3b) ~~~~~~~~~~~~~~~~~~3.3 10.7 20.9 33.3 bS.3 56.6 60.6 67.6 67.6

802.2 1M.2 160.9 189.5 215.4 238.7 255.1. 269.1 277.6 281 261 281 281~~13ha1iw, 100.2 132.2 160.9 ~~~~~~~~9.5 3.3 10.7 20~~~~.9 33.3 1.2 26.6 60.6 67.6 567.6

NLTSU ;n-3 4,2.7 -517 51.8 53.6 55.o 51.3 52.2 53.1 54 .54.1 51 q

M s 589.1 685.8 759.4 818.2 665 905.3 S41.1 973.8 1.. 82 1.8s9s 15037.1 1.U.3

h£ S99.1 123.5 1.4.2 161.1 173.3 182 187.7 191.8 194.5 195.8 196.1 196.3 196.3-- - - 06 2 14.9 8. 13 17.9 22.5 25.2 26.9

5pma i e19.8 2h.8 28.8 32.3 34.86 36.5 37.6 38-.4 38.9 39.2 39 .3 39J4 39.14

-*- - - o0.. 0.4 1 1.7 2.6 3.6 4.5 5 5.4

n --So a ---------------- N-------------------------------------- -------- ,------- -- -- -----

frooSalog Ch.w tob23.ho1w. (a) 385 45 521 605 682 759 816 849 881 894 872 872 84

(b) - - 5 6 6 7 8 16 30 49 69 85 97GoO88wao1A 39 1.5 52 61 68 76 83 86 91 914 91. 96 91.asa frm ht" ai6

Private seor (a) 4,s950 10,717 10,67 10,571 10,697 10,123 S,605 9,402 9,464 9,501 9,522 9,537 10,515(b) _ _ _ _ 50 156 331 535 770 969 1.128 1.17 1.309

Total Iwans" 5.374 2.216 U1.220 U..237 11.4n 11, .11 10.843 10.888 U1.236 11.537 2.685 U1.777 12.856'

hptoat1la Goot 5;) 1,627 1.766 1.809 1,870 1,873 1,878 1,884 1,874 1,866 1,861 1,863 1,865 1,866(b) - - - - 6 42 92 125 127 133 131 133 134

?woo..iog costs (a) 1,212 1,32 1,436 1,553 1,612 1,1 1,7142 1,753 1,714 1,794 1,775 1,775 1,775(b) 4 - - 6 - - 4 6 3 6 101 137 6 189 201

TOW q hpa ito_ 2,839 3,09. 3,245 3,423 3,495 3,651 3,761 3,821 3,868 3,925 3,941 3,962 3,976

d 5EI" b-sn (a) 73 836 8a9 953 962 946 932 932 926 894 870 861 862(b) - - -_ * 19 53 78 79 81 83 84 84

al I1s (a) 592 693 7714 n 970 1,Om 1,069 1,081 1, 114 1,219 1,077 1,076 1,072(b) * - - . - 10 30 43 66 91 107 107 107

Ibrobeba of Ffrits fromPr.itt. sotr 337 487 684 659 656 631 580 563 582 592 592 592 652

Total 4,481 5,10o 5,602 5,906 6,103 6,238 6,425 6,518 6,635 6,702 6,670 6,682 6,753

Coatings Los 1(8 284 309 325 342 350 365 376 382 387 393 394 396 398

Total coat 4,765 5j1s 5,927 6,218 6,453 6,603 6,8m 6,900 7,022 7,095 7,064 7,078 7,15

etbiUsation rnad 2- A -2.s40 -- -4I~fl~53 c293 4,9S9 5,Q514 4,511 14,0,2 3,98e L4,2 214 4,12 4,e21 4,v99 -,705

313 1, 66 3,080 2,866 2,857 2 574 2, 320 8 ,306 422 2 599 2 732 2,767 3,297PAr9=Sn= 2s 1,019 2004 1,919 1,960 1,741 1 537 1'493 1,600 1,630 1 682 1,71 2,166

rA1~IV0II n91 152 209 20c4 207 196 185 187 192 203 207 213 242

*) onIg Pr_ogra incl d4ag Dabo replanting.b) Projeots -sal., oCkzo sad astr.?.

TIID 02 AlM OJ2CT

i mo SD U Dmm ms 1

I.

QL1~~~~~~~~~~~~~~~~~~~~~~~~~y r *@l

oego±ag (789.6) 424.ry3 713.5 3 873.2y3 1,610.3 1,561.8 1,358.8 1,081.0 1,13.2 1,7.S 1,068.5 1,076.5 1,078.5 1,300popeed prject y/ - 166.9) ( 9.8) (285.8_ (.2) (27.8) (82.0) (7t.2) t.7) 122.9 200.9 282. 3 378.7

tb-total t 798.6) JA 203.7 60. 1,56.1 1,53k 1,276.8 1,005.8 1,107.5 1,180.8 1,272.1 1,358. 1,382.5 1,678.7

Gowse o (230) (89.2) o5.4 (1l3.5) 62.7 7)1.2 138.2 60.7 153.7 221 237.7 282.6 2SVS9 l77.1propoed pojeet _ _ - (67.:) (81.8) (97.3) tU.6) (l22.8) (22.4) tl2.6) 33.S 73.6 127.7 11.1

3lb-total (230) (89.2) 5o4 hin.o) (21.1) (23.1) 23.6 (62.1) 131.3 208.4 2n.6 356.2 lt2k.6 321.2

Cooovxt (e*tates and e )omorm)

cwoXi proo (483) t,41.) (298) (31) (391) (559) (387) (50) 1d..0 W&5 629 718 809 914

eli.X auctivities

ceoi pwroi (1,502.6) 105.5 165.9 15. 1 282 0 1,077.0 1,110.0 S1.7 1,396.9 1,723.9 1,935.2 2,107.1 2,1. 2,391.1pr,od prjet 3/ - - (509.8) (33. 3) tl32 tl25,1) (196.6) (198 6) (U4 1) 11n 1 17R 431. 522.8

Tetal (.0.6) (273.)) L43.9) 122.4 1,149.0 951.9 913.4 793.7 1.342.8 1.834.2 2.173.0 2.463.o 2.616.2 2.9t3.9

Divide duo to vew t M A 22.8 458.1 1.21.8 421.6 383.6 336.7 1.M.5 566.1 688.2 769.5 87.5.8 928.5

I . PAXJINUITU

cooing Propos () 185.3 293.2 768.1 I.21 378.6 AM8.8 705.6 88 6.5 635.J 1.183.h 857.7 .4 81.8.3

Ince taz is deduted frm cas flown = 1 1 provielor of OU 500 .111Um is dedmated from cub tie to rWal h morkirtcapital co1etaIr ested at the md of 192.

issome ethat IM and 0003 eld each fiims d2% of the project oeat.Z 30S eprofit aftr txm aid em1or le res_,

dom Table S

SOWAIN

THIRD OIl PAIN PROJIIT

F-S.F. ANTICIPATRl CASH FLCWS

1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985_________ (CFAY Million) ---------------

SOJRCE OF FUNDS

C58 i,Loo 600 - - - - - - - - - - -

SOD5FAIM STAiTES

Lou. rpqejot 94 251 281 270 260 249 237 227 216 204 195 184 174Royalties from SOIXPM 210 235 289 331 359 376 383 386 388 388 388 388 388Hei.doreaeent, sbort-ternadvate - 303 303 - - - - - - - - - -

SODLPAIM

(Fia.oed by F/DBSISE)Loa. Repainnts 22 30 36 40 4i 42 39 34 24 15 5 4 2Reixbure.t outrowwe

defIcit. 25.2 37 132 25 - - _ _ - _ - _ _Social Pand Rapoy t (31-8) 75.5 123.3 -

Totel 1,719.4 1,531.5 1,164.3 666 660 66? 659 647 628 607 588 576 564

ALLOCATION OF FUNDS

Loan to Sodepalt 1,400 6O - - - - - - - - - - -

CAA Loan Repayment 18 54 148 292 348 348 348 348 348 348 348 104 -Repamnt to SODEPIAN

for outgrower _ 9 25 47 68 92 105 122 139 153 141 121 105Ad.d.ietratien oet 15 15 5 5 5 5 5 5 5 5 5 5 5

Reesarcb 61 29 7 6 - - - - -

Total 1,494 707 185 350 421 445 458 475 492 506 494 230 110

Sorplue.. 225.4 824.5 979.3 316 239 222 201 172 136 101 94 346 454

Ctoul.tive Sorploaco 98.4 922.9 1.902.2 2,218.2 2,456.2 2,679.2 2,800.2 3,052.2 3,188.2 3,289.2 3,383.2 3,729.2 4,183.2

IVClY COAST

THI1 OIL PALK 1ROJZCT

IU1M? AND FIRACIND

(zt crl=,ea)

I. The Plautim Proir-

A. Planting.To be Completed

biating Under OAping Propoaod12V31V73 Progr Project Total

------_lic-t--- ------

SODPALKt

sbtatea 40,923 - 5,520 46,443ontgro2 23.7142 2l300 5.000 .L2

Total Sodepals 64,665 2,300 10,520 77,485

Private Holdjst

Out of ZoosPlantings 1,400 - - 1,400

Private Estates J.723 _ _ 8.723

Total 74.788 2.300 10.520 87.608

B. Firneci

Oil Pal lEstatee s7C'AF *quivelut

a) Ogoing Loan.

CCC0 1st Project 420,000,000B3I 899,600,000IERD lot Project 802,000,000CAA (Roads) 250,00O,000PUR (Housing) 2.000.000.000

h4.371600.000 17.490.000

b) Grants

FMO / 8,206,000,000BSIZ 1.570.000.000

9,776.000.000 39.100.000

c) Proposed ProJect

IBRD 645,Ooo,oo°cCC: 645,000,000Self-geerated

funds 52% 870.000,0002,16o,oooo, 8.640.000

Total Oil Paln Etatea 16,307,600,0D0 65.230.000

Oil PaIm Outgrowers

a) Oneoing Loan.

CCCE 386,400,000CCC1 let Project 510,000,000IIED lot Project 149,600,ODDBNDA 2nd Project 188,000,000IBD 2nd Project 1.120.000.000

2.354,000,000 S26.000b) Granta

BSIZ 1,900,000,000 1.900.0000000 7.600.00D

c) Proposed ProJect

Self-generated funds 485.ooo,oo 485.oDo.000 1.940.000

Total Oil Pala Outgrover 14,739,000.000 18,956.000

Total Oil PanK 2ia(aE Qa60,0 D o4 aK^

A Re ?qable to FER

IVORY COAST

THIRD OIL PALM PROJECT

3I. Oil Hills

A. Growth of Planting and Processing Facility by Distriot

Estates ------ --- Outgrre.rs --- i- lling CapacityM.l MIlls Mding Project Existing Project Total 13 1985

--- ------------H---- - - or--- f-- -- *ur

Ehania l04ilO 1,600 1,726 1,750 15,846 40 90

Teuanguie 3,281 - 41,242 500 8,023 40 40

Eleka 2,681 - 2,196 675 5,552 20 40

Az4uededeu 2,t835 - 41,960 575 8,370 40 40

Dabmu Tiogba 5,516 920 (R) 5,875 375 12,686 40 40

Irebo 3,653 - 2,773 125 6,551 20 40

Deub. 4,,373 - 1,863 500 6,726 20 40

Seubre 4,632 3,0C0 892 125 8,649 20 40

Bole 3,o542 - 115 375 5,432 20 20

TOTAL 40.923 5,520 26,042 5$Q 77,485 260 390

Other Facilities:

Terminal Storages: One at VRIDI One at SAN PEIRO(Abidjan Habeur) harbour

Abidjan: werkshop and stores.

B. Financing

Sources CFAF US$

Eloka-Teamanguie CAA/FED ls,O7,00O000 14,312,000

Ebania IRD 1s,200,000,000 4s800,000

Boubo AnguededeuIr*bo Seubre Beol BEI/CCCE 3,176,000000 12s,7041000

Dabou IBRD/CCCE 1,067,000,0000 4,268,000

Anguededem 2nd Line CAA 400,000,000 1,600o000

Equity Capital 2,800,000,000 I1,200,000

9,721,000,000 38.884.000

ANNEX 4Page 1

IVORY COAST

THIRD OIL PALM PROJECT

Technical Features

Planting Program

1. The combined estate and outgrower planting targets are given inTable 1.

Planting Material

2. The Institut de Recherche pour les Huiles et Oleagineux (IRHO), aFrench plant research institution, has its main oil palm research stationat La Me in the Ivory Coast, and maintains two experimental plantations in theproject area. Most of the project plantings will be seedlings of E. Guineensisdura x pisifera, which is the same basic species used in both previous Bankprojects. However, the yield potential has been greatly improved since thefirst project, througi the yearly selection of lines. Oil palm seeds areprovided by IRHO under contract, and the existing plantations are capable ofproviding seed to plant over 12,000 ha per year. IRHO also provides technicalsupervision of the SODEPALM nurseries, where seedlings are raised under shadein prepared plastic bags. It should be noted that the varieties replanted atDabou Estate in the savannah would be chosen by IRHO for resistance tofusarium. IRHO has been selecting and improving such varieties since 1965.Fusarium disease is, in fact, fairly common in replantations of palm on palm.In view of the results obtained by IRHO on its own replantings, the varietiesnow used should not cause undue risk.

3. Of the 1,600 ha scheduled under the project for Ehania estate, 400 hawould be the first commercial plantation of a new hybrid variety, a crossbetween the African palm, Elaeis Guineenis and the Anerican palm, ElaeisNlelanococca. The new hybrid has been under development by IRHO since themid-1960's, and test plantings have been observed to maturity. The resultsare promising enough for IRHO to launch a variety trials program. The Ehaniaplantings would be in support of this program.

4. E. Melanococca became of interest to IRHO because of severalcharacteristics:

(a) its oil is rich in unsaturated fatty acids - a trait desirablefor human consumption that is a deficient quality of theAfrican palm. Its oil is also fluid;

(b) it has demonstrated resistance to two American diseases,Polesis Root Rot and Heart Rot. Outside of its nativehabitat, it has also shown resistance tofusarium inAfrica and to ganoderma in the Far East;

ANlNEX 4Page 2

(c) its vertical growth is slower than the African palm, atrait that allows easier exploitation over a longerperiod than E. Guineensis; and

(d) it crosses easily with E. Guineensis to form hybrids.

5. Spontaneous stands of E. Melanococca in Central and South Americaexhibited a short stem of 3-4 m, a floral biology similar to the African oilpalm, and fresh fruit bunches (ffb) that bore orange-red or yellow fruit ofwlhich a high proportion was parthenocarpic (nonfertilized). Only the duravariety has been identified. To collect promising sire strains for hybridiza-tion with E. Guineensis, IHRO prospected the known stands of E. Melanococcain Colombia, Brazil, Surinam, Panama and Costa Rica.

6. Hybrid plantings began in 1968. Various lines of E. Melanococcawere tried with various origins of E. Guineensis pisifera under observationfor five years, i.e., into the productive phase. These plantings generallyshow:

(a) Trecocity, as compared to E. Guineensis

(b) excellent crown development

(c) slower vertical growth of the stem.

7. Comparative results in terms of ffb characteristics, against theproduction variety E. Guineensis (tenera), indicate the hybrid E. Melanococca(dura) X E. Guineensis (pisifera) produces a slightly inferior quantity offruit per bunch, and its oil extraction rate is also slightly inferior. Buta high proportion of nonfertilized fruit increases the quantity of the oilproduced. The hybrid contains a greater amount of nonsaturated fatty acids.The hybrid palm oil is also entirely fluid at normal temperatures whichovercomes a serious deficiency of the African palm oil, which contains alarge proportion of concrete oil. The African oil thus has to be heatedfor transport, and for table use the concrete oils have to be separated andextracted. The quality of the new hybrid palm oil is very near to olive oil.At the present state of knowledge, it appears the hybrid would yield lessoil (about 17% extraction rate to date versus the 21% or more presently beingachieved in the Ivory Coast) but which would bring higher prices due toquality factors.

8. The hybrid tree also promises greater resistance to various diseases,and slower growth of stem which would lengthen the exploitation period.

9. To determine the magnitude of future industrial plantings with thisnew planting material, further tests are necessary. IRHO has embarked on avariety trials program that will pursue the results of combining other strainsof E. Melanococca, the selection of particular hybrid lines, backcrosses,etc. In the meantime, it is also important to begin small scale tests ofthe best available seed material under commercial plantation conditions.

ANNEX 4Page 3

Rationale of the Estate Plantings

10. Dabou. The Dabou Savanniah Plantation (PSD) covers an area of1,950 ha belonging to the Republic of the Ivory Coast, and since July 1972has been under the management of SODEPALM. Ownership is being transferredto SODEPALM.

11. This plantation was virtually the first industrial oil palm venturein the Ivory Coast. The first lots were planted in 1952 by the AgriculturalServices, and during the years to 1964 the total area was extended to 1,950 ha.Subsequently, between 1965 and 1968, SODEPALM planted a supplementary 1,416 haon its periphery, giving a total of 3,366 ha of industrial plantations. (Inaddition there are more than 4,500 ha of village plantations in the area).

12. Almost all of the Dabou savannah area is now exploited. Landsuitable for planting is uncommon (IRHO plantations and the SAPH rubberplantation are also in the area). Most of the post-1958 plantations areunder the higher yielding seedlings. However, there are previous plantationscovering 920 ha that are under traditional varieties (Dura x Dura and Dura xTenera) which yield no more than an average of 6 tons/ffb/ha (4 to 7 tonsaccording to lot). The extraction rate is 12% for oil and 5% for kernels.

13. In June 1973, the new Savannah Dabou oil mill, owned by PALMINDUSTRIEand financed under the second project, began operations in the area. Sincethe new mill would be able to handle the higher production made possible byreplanting with new seedlings, the proposed project component has beenassigned high priority.

14. Okrouyo. Within the framework of the general study carried out byIRHO in 1967-68 on the "Possibilities of Oil Palm Development in the IvoryCoast", the Soubre-Gueyo region appeared particularly interesting and wasstudied in detail.

15. These studies led to choosing a 4,595 ha perimeter for development,17 km notheeast of the Soubre oil mill. The decision to proceed is based onthe existence of excess capacity at the Soubre mill. This mill has a theor-etical capacity of 132,000 tons (40 tons ffb/hour), but is now supplied byonly 72,000 tons, i.e. 55% of its theoretical capacity. This small supplycauses a milling cost that is about 60% above the average cost of otherSODEPALM mills.

16. The proposed project would finance plantings of 1,500 ha in 1975and 1,500 ha in 1976. The expected output would supply the mill at Soubrewith an additional 42,000 tons of ffb, increasing supply to 86% of theoreticalcapacity.

17. The cost of setting up the Okrouyo unit, in a granitic zone, willbe higher than for plantings on tertiary sands. Collection will also behigher because of the necessity of transporting the ffb over 17 km to themill at Soubre. But the availability of the otherwise underutilized capacityat the Soubre mill justifies the high priority given to these plantings.

ANNEX 4Page 4

18. Ehania. The Ehania district, in the eastern sector near Ghanaborder, is one of the most favored sites for oil palm identified in theoriginal reconnaisance surveys. It therefore benefitted from detailedtopographic and soil surveys which resulted in the exclusion of all unsuit-able land. TJnder the first Bank project, the estate was expanded by 4,000 hato a total of about 10,400 ha, which was considered the completion of the es-tat:e unit as planned. (Outgrower plantings in the district were raised underthe second project from approximately 1,700 ha to 2,200 ha, thus making atotal of some 12,600 ha in the district).

19. However, within the perimeter granted by the Republic of the IvoryCoast to SODEPALM for Ehania palm plantations, there remains 1,600 ha ofavailable land on the northeast boundary of the existing block. The avail-ability of this land in the highest yielding district influenced the decisionto build additional processing capacity, and to build a satellite mill in con-junction with the estate plantings. The proposed project would finance plant-ings of 1,100 ha in 1974 and 500 ha in 1975.

Production Data

20. <'elds. For the project estates, Ehmnia area has excellent tertiarysandy soil<, a good rainfall pattern, and is expected to be capable of pro-ducing 18 tons/ha; but a more conservative 16 tons/ha has been used in projec-tions. The advance over the first appraisal estimate is striking: five yearsago, capability was estimated at 16 tons/ha, and 15 tons/ha was used as aconservative base. The Dabou estate is in a savannah area which, for techni-cal reasons, supports much lower yields than exforest land. The capabilityis judged to be 13 tons/ha, with 12 tons/ha being used for projections.Okrouyo is in an area of medium productive granite soil, with average goodrainfall, and might be capable of producing 15 tons/ha; 14 tons/ha has beenused in the projections.

21. The yields above generally indicate the range of possible yieldswith new plantings in the oil palm region. Older plantings are producingat much lower levels, of course. There is no agronomic reason why an out-grower should not achieve estate yield levels - in fact some in the Ehaniadistrict are matching the high estate yield. But outgrowers are able to havea much wider range of yields (many of the farmers also tend crops such ascoffee and food). Since SODEPALM has recently tightened its selection stand-ards, and its supervising program is now well tested, the project outgrowersshould give a good performance. However, a conservative average of 12 tons/hahas been used in projections. Projected yield levels are detailed in Table 2.

22. It should be mentioned that a substantial number of smallholdersare outside SODEPALM's "statistical net". Of the 25,000 ha of outgrower oilpalm, many of the older plantings are near urban areas, such as Abidjan, andsuch farmers naturally prefer the higher prices that fresh fruit brings onthe private market. It is estimated that, overall, SODEPALM now receivesabout 80% of total smallholder production, but this percentage should increaseas the proportion of plantings in outlying districts increases (there are noprivate sales from Ehania smallholders, for instance).

ANNEX 4Page 5

23. Fertilizer. Foliar analys sa, to establish yearly nutrient standardsby growing area, is provided by IRHO, as part of its technical service, fromits central laboratory in Paris. SODEPALM effects dosage control on a blockbasis. There has been no significant change in the fertilizer regime. Potashis the most important element in the mixed formula; on some estates, someadditional boron has proved beneficial. Consumption of fertilizer underSODEPALM's program reached 8,069 tons in 1973 (including coconuts).

24. Processing Quality. The nine existing mills are probably the mostmodern in the world, and incorporate improvements developed by the researchservice. Palm oil with the high technical standard of 2.5% acidity or lessis produced, against the general market allowance of 5%. The high qualityof the product is related to the efficiency of collection and processing.As a result, premium prices are commanded: say 106-107, assuming a marketincex of 100. Each factory has a local control laboratory, and there is acentral laboratory at Abidjan Terminal. The technical services have a tangiblerecord of achievement, and research programs under way should lead to furtherprogress in processing efficiency, product quality, and end product use.

25. Pest Control. Advice is provided by IRHO. A minor threat to oilpalm is a beetle (oryctes) which is visible in various stages of development.Current method of control is to pay children a bounty. The beetle is a machmore serious threat to coconut than to oil palm, because it multiplies inthe softer woods left by land clearance along the littoral, but not in thehardwoods left in forest areas.

26. Cover Crop and Maintenance. Pueraria has been used as a covercrop from the beginning, and provides satisfactory control of vegetativeregrowth and of Oryetes multiplication. Maintenance is a hand operationfor the young trees, then coupled with chemical spraying when the trees reachadulthood; the objective during the establishment period is to provide eachtree with a noncompetitive growing area.

27. Spacing. The recommended regime remains the same. Rows are stag-gered to give a triangular spacing of 9 m between trees - 143 trees/ha.

The Special Problems at Dabou Estate

28. The Estate replantings at Dabou Savannah Plantation would involvea special regime development by IRHO, which since 1967 has been systematicallyreplanting its Mopoyem plantation in the same area (some 360 ha had been re-planted by the end of 1973). The method used, related to the mechanized landpreparation practices followed for all Savannah plantations, is now clearlydefined. The special problem is to get rid of the imperata. It consistsbasically of:

(a) one furrow 40 cm deep by means of a disc plow (1.20 m wide),covering the entire interlines;

ANNEX 4Page 6

(b) one deep cross harrowing, with a cover crop 2.80 m wide.The ground is left for 10 to 15 days between the twoharrows, allowing the isperata to grow again. The regrowthiL then torn out during the second harrowing;

(c) 10 to 12 shallow harrowing. (at maziusm) at 10 to 15-dayintervals to kill the imperata. When there are no moresigns of imperata, Pueraria (cover crop) is sown at thesame time as the final harrowing;

(d) the palm trees are then uprooted in lines with caterpillarequipment 'and formed into windrows; and

(a) once the cover crop has completely grown over the palmtrunks, new planting can commence. The windrow must becovered to prevent any danger from Oryctes infection.It takes about eight montbh for the covering process tobe completed.

29. Assuming that planting were to start in May 1975, the trew wouldhave to be felled in October 1974. Taking into account the time intervalbetween the various preparatory operations, the first plowing was carriedout during the third quarter of 1973.

ANNA 4Table I

IVORY COAST

THIRD OIL PALM PROJECT

Project's Oil Palm nanting Pro(1974-1979)Hectares

I. OIL PALM ESTATES 174 197 1976 1977 1978 1979 Total

Ehania 1,100 500 1, 600

Okrouyo 1,500 1,500 3,000

Dabou -20 9 20

Subtotal 1,100 2,920 1,500 5,520

II. OIL PALM OUTGROWERS

Abobo Region- Blngerville 90 90 90 90 90 450- Alepe 90 90 90 90 90 450- Attinguid 50 50 50 50 50 250- Anyama 20 20 20 20 20 100

Aboisso- Toumanguie 50 50 50 50 50 250- Adiake 50 50 50 50 50 250- Ehanis 350 350 350 350 350 1,750

Dabou- Dabou 25 25 25 25 25 125- Ousrou 25 25 25 25 25 125- Yassan 25 25 25 25 25 125- Irobo 25 25 25 25 25 125

Divo- Boubo 100 100 100 100 100 500- Bolo 75 75 75 75 75 375- Soubr4 25 25 25 25 25 125-

Subtotal 1,000 1,000 1,000 1,000 1,000 5,000

TOTAL 1,100 3,920 2,500 1,000 1,000 1,000 10,520wuu SUEE ........ mE.. ..... ..... u.u. UUUU U.."..........-...

Annex )s

IVORY COAST

THIRD OIL PALM PROJECT

Prejeoted Yields ,/

A. Estates

Tear afterPlanting Obr et* Dabeu

N. Ta/ha ffb

4 7.0 14.O 3.0g9.0 6.o 5.0

6 12.5 9.0 8.07 35.0 12.0 9.08 16.0 14.0 11.09 Oward 16.0 i4.0 12.0

B. Ontgrers

M. TunnA/a ffb

Toar after Ehania OtherPlan"g Disict Digtricts

4 6.0 3.55 7.5 5.06 10.5 7.57 12.5 10.08 Onward 13.5 12.0

Weighted Average: 12. 8

1/ Estate and eutgr_eir plantings have differing yieldpetentials in acoerdaneo ith lecal sel and o3imatio cnditiusa

ANNEX 5Page 1

IVORY COAST

THIRD OIL PALM PROJECT

CREDIT ARRANGEMENTS

Oil Palm Outgrowers

The Credit Component

1. The following table shows the cost and the proposed distributionof credit and grants over the four-year period required to bring outgroveroil palm into production:

Development Cost

Year 0 Year 1 Year 2 Year 3 Total Year 4-7-~~~ - CFAP75 a-

I. Grant Assistance

Cover Crop 1,800 1,800Wirenetting 4,900 4,900Fertilizers 1,360 1,360Transport 4,140 160 100 140 4,550Labor 3,500 60 40 50 3,650Equipment 450 __._,

Total Grant 16,150 220 140 200 16,710

1I. Credit in Kind

Seedlings 26,600 1,300 27,900Fertilizers 4,100 3,200 4,800 12,100 20,000

III. Cash Credit 11.000 3,000 3,000 3,000 20,000 -

Total Credit 37.600 8,400 6,200 7,800 60,000 20§005TotaCot5,750 ,62 6 76,71 2 0,

Total Cost 53,750 8,620 6,340 8,000 76,710 20,000

ANEX 5Page 2

Credit Grant

Repayment Schadule Farmers PER

Years 7 5,000 3,0008 10,000 6,0009 10,000 7,71010-14 50,000 -15 5,000 -

Total 80,000 16,710

2. Total development cost is estimated at CFAF 76,710/ha as comparedto CFAF 117,220 and CPAF 102,050 for the two previous projects (Loan 613 and760 IVC). This saving results from an economy of scale, since the proposedproject does not require any expansion of the existing infrastructure andsupervision staff.

3. Outgrowers would clear the land, supply necessary tools at anestimated cost of CFAF 150/ha/year as from year 0, and supply labor forunkeep and harvest.

4. During the operating period, SODEPALM would supply fertilizers atan average rate of CFAF 5,000/ha/year, depending upon the result of foliaranalysis, and would organize and maintain collection service. The fertilizercredit would begin in year 4, and extend through year 7, in line with thecurrent technical recommendation. Cash credit would remain at CFAF 20,000/haand credit in kind would increase from CFAF 33,750/ha to CFAF 40,000/ha.

5. The Ponds d'Extension et de Renouvellesent (PER) would reimburseSODEPALM CFAF 16,710/ha, which is the difference between the total cost ofestablishing 1 ha (ClAF 76,710) and the amount repaid by farmers (CPFA 60,000).FER's payment under the first project was CFAF 63,800/ha and CPA? 48,300under the second.

6. Farmers would now repay CFAF 80,000 from year 7 to year 15 inteadof CFAF 78,000 from year 7 to year 17. As a whole, the total subsidy perhectare is now reduced to CFAF 16,710 instead of CPAW 39,220 for the firstproject and CPAF 35,000 for the second one.

Allocation of Proceeds

7. Up to 1972, farmers received a guaranteed net price of CFAF 4/kiloof fresh fruit bunch (ffb) delivered to the district oil mill regardless ofthe actual price received by SODEPALM for oil palm products. Early in 1973,SODEPALM implemented a bonus system with two objectives: to give a priceincentive to outgrowers who delivered more fruits than expected to the oilmills; and to allow outgrowers to participate in the revenues accruing toSODEPALM. This bonus system avoided a flat increase of the fixed price of

ANNEX 5Page 3

CFAF 4/kg of ffb. Also, SODEPALM expected that outgrowers production would beincreased by 102 above current estimates over the next five yars.

8. The following table shows the estimated annual average allocationof the value of one kilo of ffb, as of 19810, using the IBRD Porecast of palmproduce prices:

Palm produce content (per bunch) (kg) (CFAF)

Oil content 0.215 14.07Kernel 0.043 1.71

Gross revenue 15.72Export taxes 0.67

Net revenue to SODEPAIL 15.05

ODEPALM Costs

Supervision 1 .49Collection 1.32Processing and transport 3 46Financial charges 0. 37

*60.64Net available 8.41

AlIlocation to OutArovers

Guaranteed price 4 .00Bonus: (15.05 - 10.65) /1 x 45% 4.00

Total 8.00Surplus kept by SODEPALH 0.41

/1 Revenue less reference price established by SODEPALM.

9. The surplus kept by SODEPALM ensures that Government will receivean adequate return from its investments in the oil palm sector. Anotherjustification for not allocating this surplus to outgrovers is that SODEPALIneeds to build up a reasonable reserve fund to guarantee a minimlum price tooutgrowers, since the Stabilization Fund does not guarantee any minimum priceto farmers.

ANHIX 6Tabl. I

IYORY COAST

TI O1. PALH PROJICT

rYanOr OOST ISTIHASZ5

PROJECT OIL FALH ZSTAITu

1973 1974 1975 1976 1977 1978 1979 TOTAL SN.

CFAF' 00081WxIA OIL PALM LSTATE

a) ltat. t aunsat

Staff 6,1k38 11,118 10,168 6,628 6,248 1,833 42,133 40 16,973Trwoport 1,2I0 1,077 1,877 1,877 1,877 587 9,385 70 6,570Hisellanuoas 1,936 1,936 1,936 1.936 1,936 605 10,285 50 5,142

b) Pixud Asts

Hoosuig and baildirgs 13,590 23,355 36,945 70 25,861V.hicl.. 10,000 6,800 500 17,300 80 13,840Eqo9iprt 5,460 5,460 70 3,j48

F) Peld DS..lop_t

Land Cl.ar,lg 45,700 100,000 145,700 70 101,990Road. 5,000 35,000 40,000 70 28,0007i.ld Labsr 6,545 22,99S 16,415 12,180 13,650 4,375 76,160Transport 1,185 5,693 4,399 2,593 2,1412 754 17,036 70 11,9125Seeds 8,085 5,903 2,002 450 16:,10Plasti. Bag. ,513 8,885 3,100 16,528 70 11,569Insecti.ide.,ftrtilizere 1,814 6,326 5, 1,930 5,026 1,580 25,520 70 17,864Land Suruy 1,100 500 1,600 50 800Eqoipsnt 1,222 852 389 478 627 210 3.778 70 2.6L5

Subtotal 75,194 186,154 32,149 20,631 21,715 6,919 342.762 1741793

Total Ehaoia 98,448 239,900 52,930 31,572 31,776 9,944 464,570 247,127

0OtO0M ESTATE

a) Estab. H Maoago.t

Staff 151,Ol 21,357 19,459 13,068 12,308 5,774 86,977 40 34,791Transport 2,055 4,110 4,110 4,110 4,110 2,055 20,550 70 14,385Niscellacoos 1,997 3,993 3,993 3,993 3,993 1,997 19,966 50 9,983

b) PiLd Assets

Hoosing ald Buildings 26,530 45,575 2,400 74,505 70 52,153Vehicles 19,000 11,800 7,200 500 500 500 39,500 80 31,600Zquip-nt nd Tools 7,100 3,660 560 11,320 70 7,924c) Pid1d Ltorlopmot

Land Clsariog 111,400 133,700 44,500 229,600 70 202,720Roads 50,100 60,500 20,100 131,0003 70 91,700Field L bor 8,924 38,325 39,900 23 100 26,250 13,650 150,144Tr-nport' 1,616 9,698 11,310 5,822 5,187 2,591 36,227 70 25,350Seed. 11,025 14,062 1,387 1,350 30,824Flatic Bats 6,195 15,495 9,300 30,990 70 21,693Inw cticidao/F.rtilizers 2,176 9,976 12,060 9,210 9,390 4,740 47,852 33,496Land Srrey 3,750 3,750 7,500 50 3,750Kquipe,ot 1,665 2,070 751 810 1,125 630 7.081 70 4_596

Roototal 197,451 287,576 142,308 40,322 41,952 21,614 731,223 383,313

Total Okruyo 269,144 378,071 180,030 61,993 62,863 31,940 984,041 534,149

DABOU 07L PALM ESTATE

a) E,tots Ilanaganeot

J Staff 5,06 5,046 5.046 5.046 20,184 40 8,074Tranoport 1,288 1,208 1,288 1,288 5,152 70 3.606Mlc llolanooa 1,071 1,074 1,071 1.074 4.296 50 2.148Subtotal 7,400 7,100 7,40t 7,4w 2 13,828

b) PiFod Assets

Housolg 12,305 12,290 1,755 26,350 70 18,445V.hioles 16,891 9,400 26,291 80 21,0333qdip-nt od Tool- 70Subtotal 29,190 21,690 1,755 52,641 39,478

c) Field DeSlop,nt

Field Labor 4,185 17,710 19,320 7,406 6,440 8,695 63,756Tr-nport 18,370 8,639 3,367 1,465 1,193 1,193 34,227 70 23,959S. 5d 6,762 1,863 1,288 460 10,313Flastlo Hugo 3,800 5,701 9,504 70 6,653Insecticid./F.Arilloore 368 3,356 4,968 3,312 2,944 2,908 17,856 70 12,500Zquipmnt 322 1,638 294 405 304 386 3,349 70 2.344

S0btot0l 23,245 41,905 35,516 13,876 11,341 13,182 139,065 15.456

T7t.l Dabou 52,441 63,595 44,679 21,281 18,749 20,590 221,338 98,762

TOTAL PROJECT 150,889 572,639 475,680 232,886 112,518 93,397 31,910 1,669,949 52.6 880,038

Phyoioal Contiog.nioso 15.089 57.26h 47 s6a 23289 11.2S2 9.340 3.l94 166.996 88 008Subtotal 161,970 629,903 523,210 256,175 123,770 1023 73 3P8i_0 Oootiprooe. 511.80 121,270 89,359 300907 3 1339 2055

TOTAL 165.978 681,983 646,523 345,534 174,677 153,873 57,272 2,227,700 1,173,605

IOYM COAST

7MIlD OIL ?AIM PIOJICT M

Cost KatmtatesTotal

Total D l_t Cost1973 lIAi 1977 1978 1979 1975-1979 1980 1981 1982 1975/19C2

Planting Progra Re 1.000 1,000 1,000 1,000

Cove? cp 1,80DI800 100 1,00 1,800 1.800 9,000 - - - 9,000Virenettiag 4,900 4.900 4,900 4,900 4,900 24,500 - - . 24,300lertiltlurs 1,560 1,360 1,360 1,360 1,360 6.800 _ _ 6,800Tr_om,ort 4,140 4,300 4,400 4,550 4,550 21,940 410 250 150 22,750

Labor 3,500 3,560 3,600 3,650 3,650 17,960 130 90 50 18.250Zqui_mat 450 450 450 450 450 2,298 - 2,250

II. CEDIT Di t7ID

Oil Palm aedli1 26,600 27,900 27,900 27,900 27,900 138,200 1,300 - - 139,500Pertilxtere 4,100 7,300 12,100 12,100 35,600 12,100 8,000 4,800 60,500

Sub-total 42,730 48,370 51,710 56,710 56,710 256.250 13,96O 8,340 5,000 283,550

Physical Coetiagceta 4.275 4.837 5.171 5.671 5.671 25.625 1.39 834 500 2.3355

47,025 53,207 56,U81 62,381 U2,381 281.875 15,336 9,174 5,500 311,905

Price Coati Laos 9,499 16,643 23,395 32,263 39,306 121,106 - -

56,324 69,050 80,276 94,644 101,687 402,981

Ill. C41 CUIDIT 11,000 14,000 17,000 20,000 20,000 82,000 9,000 6,000 3,000 100,000

Total Project Cost 67.356 83.850 97.276 114.644 121.687 484.981 24.356 15.174 8.500

"earch 19, 1974

Annex 7

IVORY COAST

THIRD OILPALM PROJECT

Estimated Schedule of Disbursements

IBRD Fiscal Year Ckmulative Disbursements atand Quarter end of Quarter

(US$ '000)

1974/1975September 30, 1974 -December 31, 1974 365March 31, 1975 590June 30, 1975 810

1975/1976September 30, 1975 1,000December 31, 1975 1,190March 31, 1976 1,325June 30, 1976 1, ;I65

1976/1977September 30, 1976 1,685December 31, 1976 1,930March 31, 1977 1,975June 30, 1977 2,035

1977/1978September 30, 1977 2,160December 31, 1977 2,280March 31, 1978 2,340June 30, 1978 2,1410

1978/1979September 30, 1978 2, 460December 31, 1978 2,500March 31, 1979 2,550June 30, 1979 2,600

ANNEX 8Page 1

IVORY COAST

THIRD OIL PALM PROJECT

Market and Price Outlook for Palm Oil 1/

1. The world supply of palm oil increased very rapidly in recent yearsfollowing a long period of slow growth. From 1950-52 to 1967-69 world pro-duction rose at an annual average rate of 1.2%, while from 1967-69 the annualgrowth rate has averaged more than 12%. World exports of palm oil, whichalso practically stagnated throughout the 1950's and early 1960's, began toincrease at a 15% rate after 1967-69. By 1972 the share of palm oil inexport:s of all fats and oils had nearly reached the level of the early 1950's.

2. World production of palm oil is expected to increase rapidly asnew plantings of high-yielding varieties reach maturity. Oil palm projectsfinanced by the Bank Group will contribute 15-16% to the total increase inproduction during the decade from 1970 to 1980. Although the share of theoutput consumed domestically in producing developing countries will decline,total consumption of palm oil is expected to grow more rapidly in the 1970'sthan in the 1960's.

3. The demand for palm oil is largely influenced by the demand for alloils and fats and for vegetable oils as a group. Total estimated consumptionof fats and oils expanded steadify at a trend rate of 2.9% from 1960 to 1970,but both the geographic and the product composition of demand changed duringthis period. Consumption in developed and developing countries rose at atrend rate of 3.2%, while the trend rate of growth reached only 1.8% incentrally planned economies. Developed countries, which represent the mainexport market for fats and oils produced in LDC's, accounted for half of thetotal world consumption in 1970. Demand for palm oil increased most rapidlyin Oceania, Japan and South Africa combined (7.0% per annum), followed byWestern Europe (3.0%) and the United States and Canada (2.6%). Among thedeveloping regions, Latin America had the greatest rate of growth in consump-tion (4.3%) followed by Africa and Asia.

4. The past decade saw a significant change away from animal fatsand oils towards vegetable oils. Consumption of animal fats and marine oilsincreased at a rate far below that for vegetable oils. Within the vegetableoils, the composition of demand changed in response to availabilities andto a number of economic and noneconomic factors affecting the use of oils.

5. The shift of demand away from animal fats and oils and to vegetableoils is expected to continue. This will strenghthen the markets for vegetableoils as a group. Increasing interchangeability among these oils will tend toreduce price differences in the long run. In the short run, however, prices

1/ Prepared by the IBRD's Economic Analysis and Projections Department.

ANNEX 8Page 2

stili reflec, relative availabi'lities of individual oils. According toBar. staff project;ions, wori-d demand for all fats and oils at 1972 pricesvill rise to 56 million tors in 1980. This is 31.5% more than in 1970(42.6 million tons) and represents a somewhat slower rate of increase thanin the preceding decade (33.1%'). World consumption of vegetable oils in,980 is expected to reach about 39 million tons (69.5% of the total), anincrease of 41% over )970.

6. During the past decade world production of animal fats and marineo-.s has increased more slowly compared to the output of vegetable oils.Within the group of vegetable oilsj, soybean oil, palm oil, rapeseed oil andsuaflowerseed oil showed steepest increases. On the basis of past productiontreuds, world supply of all fats and oils combined in 1980 is expected to beroughly in balance with world demand at the level of 56 million tons oil orfat equivalent. This in turn implies that increased supplies of fats andoils will be absorbed in the market without any persistent downward pressureon the prices of these commodities as a group.

7. On the basis of present e£timates of future output of the differentcommodities involved, it seems cleat that palm oil will account for a largerincrease in world demand for vegetable oils than in the 1960-1970 decade.Total demand for palm oil is expected to reach 4,130 thousand tons in 1980compared with 2,078 thousand tons in 1971. Slightly more than half of thisquantity will be absorbed by developed countries, compared to 42% in 1971and 35% in 1967. Total output of ,alm oil is projected to reach between4,080 and 4,230 thousand metric tons (depending on alternative productionforecasts for Malaysia). Exports will range between 2,560 and 2,710 thousandmetric tons. This corresponds to about 64% of the total production comparedto 46% in 1971 and 49% in the period 1967-69. Malaysia will dominate exports,followed by Indonesia; the Ivory Coast and Zaire will be the only importantexporters in West Africa. The share of LDC's in total consumption will fallfrom 57% in 1971 to 48% in 1980, but the share of intra-LDC trade in totalexports will increase from 10 to 18% (low output assumption).

8. The following factors will affect the future price of palm oil.World consumption of palm oil is projected at 4,130 thousand metric tons in1980; 1,520 metric tons will be consumed domestically in producing countries.This leaves a total import requirement of 2,610 thousand metric tons, of which14% would come from nonproducing developing countries, and 4% from Nigeria,which will become a net Importer of palm oil in the amount of 100,000 metrictons. Output is projected to reach between 4,080 and 4,230 thousand metrictons, depending on developments in Malaysia. The 150,000 ton supplement inthe higher projection for Malaysia is expected to find its way into exports,giving alternative world export figures of 2,560 to 2,710 thousand tons. Theprojected difference between import demand and export supply is small and allthe more so given the expected overall balance between demand and supply ofall fats and oils and of vegetable oils. The price for palm oil is projectedat US$300 in 1980 and US$327 in 1985 per metric ton (in 1974 constant dollars).This price forecast assumes that general inflationary tendencies will not be

ANEX 8Page 3

reflected in the future price for palm oil and, as a result, the purchasingpo er of palm oil exports is likely to be reduced by a corresponding amount,particularly if export prices of developed countries do follow the expectedgeueral Inflationary trend. If the relatively high rate of inflation (7.3%for the period 1974-80) is taken into consideration in the price projection,the price for palm oil will amount to about US$477 per metric ton in 1980and US$695 in 1985 (current terms).

9. Table 1 contains monthly prices for palm oil (Malayan, bulk 5%cif European ports) for the period from 1967 to 1973. These figures illustratethe dramatic increase in palm oil prices in more recent years. From 1967 to1973 annual average prices climbed at a rate of 10.9% - well above the aver-age rate of inflation in develop"d countries.

NirOr COAST

T=M OIL PALM PROJECT ANNEX E

Table 1

Table 1: PRICES FOR PALM OILs MLLAYAN BULK. 5% CIF EUROPEAN PORTS

(Unit: US$/Metric ton)

AnnualYear Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. Average

1967 200.8 197.6 191.3 191.3 191.9 196.6 196.1 196.1 192.0 190.4 187.2 1.3 193.6

1968 184.2 185.4 188.5 189.3 186.2 172.2 - - - 135.8 135.8 - 172.2

1969 - - 179.5 170.1 166.3 165.3 161.8 171.5 181.0 203.9 - 5.1 183.8

197Q 255.3 256.3 259.0 267.5 278.7 276.0 266.3 242.4 175.7 249.9 269.9 1.6 255.7

1971 278.4 283.0 280.7 273.9 248.0 242.9 268.7 284.8 273.9 254.0 247.9 286.2 264.4

1972 224.2 185.3 214.2 226.7 227.6 203.6 214.1 220.5 222.7 219.0 218.8 213.7 215.9

1973 213.9 264.1 278.7 290.7 328.2 372.8 455.9 532.0 - 437.7 420.7 - 359.5

I 3

I.- oc

Ivcur COAST ANNEX 8

BIRD OIL PJAI PROJECT Table 2

T&BLE 2: WORMD PROWCTION. poiRTS AND OOMNUPTION. ACTU4 4ND PROJECTED

(t000 Metric Tons)

Production zpworts1980 -980

Countries and Areas 1971 ProJece.d 12-1 PAated

Malaysi, / 588 1,970-2j12S 57? ),,910-2,060Indonesia 225 475 1 90 375.Nigeria 500 575 20 -100Zaire 200 235 112 75Other Countries in Afrioa 410 685 68 205 2/World 2,008 4,080-4,235 965 2,5.65-?,T15

Consumption\1980

1971 Proj2ected

Developed countries 878 2,100Centrally planned econcaies 6 50Developing countriesz 1,194 1,980of w2ich (a) non-producing 90 36

(b) producing 1,104 1,620World 2,9078 4,9130

Note: Prie of MHlasia paln oil CIF Europe (in US> Oollars pr wetric ton).

19801973 ~~~~~~~Pro1iectX

41L 31P&3

Share of palm oil in wor-ld output of all rats and Qils

19.80

4z.88% 7.32%

2/ Alternative output forecasts depending on realisgtioz of produation plAns.

2 Ivory Coast, Dahomey and Cameroon only.

3/ 1R974 .s tt 4ulrs.

ntr oQn

- kL &W llLCoa detr - Ia.Paed Ia lS75

Year I 0 1 2 3 4 5 6 7 * 9A 1S i.2

Mellon tea 3t 6,s 5 8.S 10 10 10 10usxu 5 7 10 11, 16 16 16 36

Ca" medYame U.,oO 3,000 3,000 3,OO - _ _Wa1 value of pdeto - - 24o0o 36 ,o0 52,oo0 68,ooo 80,000 100,000 1C0,000 100,000Ia_m -a- f wadeu -, 40,000 56o000 o 0 o o 12,000 128,000 160,000 160,000 160,000

b le 150 ISO 5° 0 0 150 ISO 150 15o 150 iso 5o 150 o50frlw'leeW - - - 5,000 5,000 5,000 5,000

De ervice (80,000) - f- - - - o o0. lO. oo S.o TeO 150 150 150 150 150 ISO 150 150 5,150 35,150 15,150 10,150 S,1S0

minion (150) 10,850 2,850 2,850 2 850 23,850 5,85o 51,850 62,850 64.850 81,S:o 89,850 S 4,850JIIA (lSo) 10,850 2,850 2,850 2,850 39,850 55,850 79,850 106,850 112,850 1k&,850 1,9,850 ,5h85o

MaL 80 4fs 51 30 25 39 h2 45 50 50 50 50 50Fl-awl - - - 42 45 50 56 56 56 56 56

l.86 56 S fl 6 853 1,1352 1,257 1 297 1,697 1,797 1, 97AMMUM a~~~~~~I 5 95 31) 91, ,2, 1,597 1, 900 2,015 2,586 2,675 2,765

_j Mea. 2,250 k at 16 T pw

.j/ Cobesa-Isi at 10 9 pr ha

iv ee I 1ZJ 9 p .ba.

010

IVM! COAST

TRD OIL Pax moJEr

OIL PAINM SATIS

P9oiet Cash now

la 19t MM 197 1S7 1 g 920 UK6 156 16 I& IO-adAPWT -------------- - *------ ------------

I . RS

I2D - 91,200 206 300 173,600 91,100 57 900 26,900 - _ _ _ . _

CWI 91,200 204,300 173,600 91,100 57,900 26,900

P,ocaad of Sal"

P l -a44 ,449 L39,363 296,183 179,3S0 68S9,87 867,142 1,007,114 1,059,962 1,167,666

Kernel - - - 5.372 16.386 36.506 55.845 80 264 lOL 726 1204961 127.458 121.635

Sub-total . - - - 49,821 155,749 330,689 535,235 769,751 969,168 1,128,075 1,187,420 1,309,3a.

TOTAL sVUilS 182,400 408,60 301,200 232,021 271,549 384s489 535,235 769,751 969,168 1,128,075 1,187,1420 1,309,301

I1. W

Ptoiact Coat

a-au" 269,144 378,071 180,030 61,993 62,863 31,940 - - - - - -

948,48 239,900 52,930 31,572 31,776 9,944 - _ - - - - -

wa 9552, 63.59 44,67S 21.284 18.749 20.590 - - - - - -

Sub-total 150.889 572.639 475.680 232.886 112.518 93.397 31,940 _ _ _ _ _

Dat±o Coat aud Renmovl

Oaouyo - - _ -_ 15,867 98,464 173,312 137,392 174,033 181,114 188,500 179,550!ida - - - - 16,722 78,501 7,266 99,837 84,304 87,166 89,495 93,179 82,230

n_bou, - - - - - 16.738 33.807 277311 31.6363 34.296 34,272 35.445 36.041

Sub-total - - - - 16,722 llL,106 203.537 300.460 253.330 295.495 304.881 317,124 297.821

Total cot 150,8389 572,639 475,680 232,886 129,240 204,503 2351477 300,460 253,330 295,495 304,881 317,124 297,82128211c0L Contingoncis 15,089 57,264 47,568 23,289 12,924 20,450 aSW 30,046 25,333 29,549 30,488 31,712 29,782PFt-ce Contigencoes - SL.990 123.275 89,359 So,S07 53.136 22.138 - - -

Sub-total 165.9ne 681.893 666523 345.534 193,071 278,089 261,63 330g506 278.663 325.044 335,369 348,836 327,603

Debt Service

IBRD Loan - 7,800 17,300 29,900 38,400 43,100 92,900 92,900 92,900 92,900 92,900 92,900 92,900CCCIS Loen - 2.S00 10.600 21.000 28.300 32.400 85.600 85.600 85.600 85.600 85.600 85.600 85.600

Sub-tot.L - 10.300 27.900 50,900 66.700 75,500 178.500 178,500 178,500 178,500 178.500 178,500 178,500

TAL oaTPLnows 165.978 692.193 674.423 396.1.3 259.771 353,589 45S,665 509.006 457.163 503.544 513.869 527,336 506,103

m1e Sarpl,us (Dficit) (165,978) (509,793) (265,823) (4P,231.) (27,750) (82,040) (75,170) 26,229 312,588 1.65,624 611,206 66o,084 803,198

Incm Tax and NationalInvestmnt Fud - 57,928 189,715 261,686 331,877 356,078 424,457

got Surplus (Deficit) (165.978) (509,793) (265.823) (4S,23.4) (27,750) 82.d.o0) (75MAN) (31.699) 122.873 203.938 282.329 304,006 378.741

IVORY COAST

THIRD OIL PAI' PROJECT

PROJECT CASE FLOWS

OILPAOT OUTGROWERSCFAF '000

1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 198

7/onvard

RESOURCES

Proceeds of Sales

Palm Oil - - - - 54,884 113,907 219,478 366,298 522,019 669,968 855,239 933,967 961,3814Kernels - - - - 6,397 13,286 25,587 42,668 62,999 78,037 100,426 109,795 112,919

Reimbursement to SODEPALX

Outgrowers - - - - - - - 5,000 15,000 25,000 35,000 45,000 50,000FFR - - - - - - - 3,000 9,000 15,000 21,000 27,000 30,000

Total - - - - 61,281 127,193 245,065 416,966 609,018 788,005 1011,665 1,115,762 1,154,303

APPLICATION OF FUNDS

Development Costs 53,750 62,370 68,710 76,710 76,710 22,960 14,340 8,000 - - - - -Collection Equipment - - - - 9,100 15,300 21,500 18,400 21,500 6,200 10,550 6,200 3,100CreditF't±lis.r - - - - 3,000 6,000 9,000 12,000 12,000 9,000 6,000 3,000 3,000Purchase of Fruits - - - - 37,791 78,214 145,580 234,794 334,484 409,805 584,366 629,635 647,660Collection and ProcessingCosts - - - - 11,138 22,789 42,219 68,385 96,388 118,076 134,669 145,101 149,256

Contingencies (a) 13,774 21,480 28,566 37,934 44,977 1,396 834 500 - - - - -Contingencies (b) - - - - 1,414 2,879 5,122 7,639 10,839 12,707 14,067 114,810 15,226

Total 67,524 83,850 97,276 114,644 184,130 1I49,538 238,595 349,718 475,211 555,788 749,652 798,746 818,242

Surplus (Deficit) (67,524) (83,8o50) (97,276) (114,644) (122,849) (22,345) 6,470 67,248 133,807 232,217 262,013 317,016 336,061

Income Tax and NationalInvestment Fund - - - - _ - 19,040 33,862 60,213 1014,498 117,906 142,657 151,227

Net Surplus (Deficit) (67,524) (83,850) (97,276) (114,644) (122,849) (22,345) (12,570) 33,386 73,594 127,719 144,107 174,359 184,834

(a) Daring development period

(b) During operation period

CD0

TM3 amL PAIN Foau! maz3ni -our

1973 17 1975 12_ 1977 _ 1980 1981 1982 1984 1965

308A1M gad YU Catr1 na so P2'e.at Cost

Oil Pr Oatgrouww _ 2 67.85 83.9 97.3 11O.6 127.8 22.3 - 3 9 15 21il Pa tate. 166 509.8 265 89.2 27.8 2.0 .1 31.7- -

Total 166 509.8 333.3 173.1 124.1 196.6 201.9 54.0 - 3 9 15 21

. add" ad otbw tans on sjeot Mt

OWI Pau letata 16.6 69.8 62.7 32.1 17.7 26.1 27.3 33.1 33.4 32.5 33.5 34.9 32.8Oil Pal Octgroer - - 6.8 8.4 9.8 11.7 16.7 15.1 20.2 29.9 39.0 56.2 51.7

Total 16.6 69.8 69.5 40.5 26.5 37.8 44.0 48.2 53.6 62.4 72.5 91.1 84.5

Snort Daties

P Oil _ _ _ _ 5.4 14.7 25.4 39.1 53.4 66.7 74.5 79.1_oral O _ _ .8 2.0 3.6 5.5 7.4 9.5 10.6 3.1.2

Isooms Tax

Oil Palm Ntates - _ - - 57.9 1.89.7 261.7 331.9 356.1 424.5Oil Pa Oitgrowr s _ _ _ _ _ - 19 33.8 60.2 104.5 117.9 142.6

Oil Pal ntate _ _ _ _ - - - - 122.9 203.9 282.3 30-.0 378.7Oi P1al Otlgrojw _ _ _ 334_ 73.6 127.7 144.1

Total 16.6 69.8 69.5 40.5 26.5 44.0 60.7 154.1 444.6 682.4 941.0 1,081.9 1,264.7

3urpla (Daficit) (149.4) (440.o) (263.8) (132,6) (97.6) (152.6) (141.2) 100.1 444.6 679.4 932.0 1.066.9 1,243.7

V After debt r tpamnt

ANNEX 12Page 1

IVORY COAST

THIRD OIL PALM PROJECT

Economic Rate of Return Calculation

Assumptions

1. Life of the Project and Phaslng. The life of the project has beenassumed to be 25 years, which corresponds to the expected economic life ofoil palm trees planted under the project. The phasing of the project isshown in Annex 4.

2. Yields. Expected yields of estate plantations and outgrowers arein Annex 4. These yields reflect the experience in Ivory Coast with similarestate plantations and outgrovers.

3. Prices. Output prices are the ex-harbor expected prices of palmoil and kernels expressed in 1974 constant prices. These prices are basedon the projections to 1985 of the IBRD's Economic Analysis and ProjectionsDepartment which are discussed in detail in Annex 8. The detail of the conver-sion from CIT projected prices into ex-harbor is in Table 1.

4. Costs. Costs take into consideration on-farm development costand additional investment in processing and transport facilities as well asrecurrent expenditures related to processing and transporting of projectoutput over the life of the project. Input prices have been updated tothe level of the first quarter of 1974, with due allowance for cost increasesfor transport, insecticides and fertilizers. Identifiable taxes have beendeducted from costs. Labor has been costed at the minimum legal wage of CFA 315per day (including fringe benefits).

5. Foreign Exchange. The value of exported project output and im-ported inputs has been converted into local currency at the ongoing rate ofexchange of US$1 - CPA 250.

Rates of Return

6. On the basis of the foregoing assumptions, estimated rates ofreturn are:

Oil palm estate 20%Oil palm outgrower 35%Project 23%

Detailed calculations are shown in Table 2.

ANNEX 12Page 2

Sensitivity Analysis

7. The rate of return to outgrowers and estate plantations has beentested under several assumptions as shown below:

Outgrowers Estate

Cost + 10% 33 17+ 20% 30 16

Benefits - 10% 32 17-20% 29 15

Cost + 10/Ave Benefits - 10 30 15Cost + 20/Ave Benefits - 20 24 11

Ar

IVRY 0CDUT

THIRD OIL PALK PROJECT

MROJWPU PAIN OIL AID KOM NI PIIU 137)t =Wm?

1974 1975 1976 1977 1978 1979 1980/84 1985/A. OIL PALM

Price Forecastm in 1974 Contant Terms

Oil Palm s 8$ 448 385 358 345 327 308 300 327ClAP 112,000 96,250 B9,500 86,250 81,750 77,000 75,000 81,750

Variable Costa in . of CIF Value

Insurance 1.252Brokerage 0.557.

1.80% 2,e20 1,730 1,610 1,550 1,470 1,390 1,350 1,470

Fixed Costa per Ton

Freight 7,200Transit 200Loading 100Unloading 700

8,200 8.200 8.200 8,200 8.200 8.200 8.200 8.200 8.2.00

Total Cost 10.220 9.930 9,810 9.750 9,670 9.590 9.550 9.670

FOS price 101.780 86.320 79,690 76,500 72.080 67.410 65.450 72.080

T-xesCustoms duty 27./42 1/ 2,040 1,730 1,590 1,530 2,880 2,700 2,620 2,880Other taxes 140 140 140 140 140 140 140 140

1.930 1.870 1,730 1.670 3.020 2.840 2.760 3.020

Net Ex-Harbor Price 99.600 84,450 77,960 74.830 69.060 64.570 62.690 69.060

D. ZERNeL

Price in 1974 Constant Terms

US$ 299 257 239 230 218 205 200 218CFAF 74,750 '64,250 59,750 57,500 54,500 31,250 50,000 54,500

Variable Cost in % of CIF Price

Insurance 1.25%Brokerage 0 55%

1.80% 1,350 1,160 1,080 1,040 980 920 900 980

Fixed Cost per tn

Freight 7,400Transit 1,100Unloading 800

9,300 9.300 9.300 9.300 9.300 9.300 9.300 9.300 9.300

Tatal Cost 10,650 10.460 10.380 10.340 10.280 10.220 10.200 10.280

FOS Price 64.100 53.790 49.370 47.160 44.220 41.030 39.800 44.220

Taxes

customs duty 4t/8% 2/ 2,560 2,150 1.970 1,890 3,540 3,280 3,180 3,540Other taxes 120 120 120 120 120 120 120 120

2.680 2.270 2.090 2.010 3.660 3.400 3.300 3.660

Net Ex-Harbor Price 61.420 51.520 47.280 45.150 40,560 37.630 36.500 40.560

1/ Two percent up to 1977 and 4% thereafter.

2/ Four percent up to 1977 and 87 thereafter.

IVORY COAST

THIRD OIL PALM PROJECT

ECONOMIC RATE OF RETURNX

1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

I. OIL PALM ESTATES - CFAF million ---------a)BENEF ITS

Proceeds of Sales

Palm Oil - - - - 15

-b L45,5 309.2 500.5 719.8 905.6 1,051.5 1,106.6 1,218.7Kernels - - - - 5.6 17.9 37.6 60o.9 87.5 110.9 131.9 139.0 15 4.4Sab-total - - - - 51.0 163.4 346.8 561.4 807.3 1,a16.5 1,183.4 1,245.6 1,373.1

b)COSTS

Project Cost 141.6 534.4 439.7 210.5 95.4 81.7 27.9 - - - - -

Oil mills-allocatedinvestment coast &transport costs - - - 340.1 333.5' 40.9 24.2 29.0 29.0 22.4 16.7 11.2 3.1Production cost - - - - 15.8 101.9 183.5 274.5 226.1 251.5 283.1 279.7 269.9

Total 141.6 534.4 439.7 550.6 444.7 224.5 235.6 303.5 255.1 273.9 299.8 290.9 273.0

Surplus (Deficit) (141.6) (534.4) (439.7) (550.6) (393.7) (61.6) lf1.2 257.9 552.2 742.6 883.6 954.7 1,100.1

II. OIL PALM OUTCROWERSBENEFITS

Proceeds of Sales

Palm oil - - - - 57.3 118.9 229.1 382.4 564.6 699,.' 892.6Kernel - - - - - - 7-0 114.5 27.9 46.5 68.? 85.1 109.5

Total - - - - - - 64.3 133-4 Z57.0 426.9 633.3 784.6 1,002.1

COSTS

Project cost - 20.0 30.8 57.2 61.8 67.3 67.3 16.5 10.1 5.4 - -

Oil palm mills &transport costs - - - - - 40.9 24.2 29.0 29.0 22.4 16.8 11.3 3.1Production cost - - - - - - 10.5 21.4 39.7 64.3 90.6 111.0 141.6Farm labor and tools - 14.0 21.9 30.8 36.1 47.6 38.0 32.9 31.9 35.6 40.1 42.0 44.2Fertilizer from year 4 - - - - - - 2.6 5.1 7.6 10.1 12.6 12.5 10.0

Total - 34.0 52.7 88.0 97.9 155.8 142.6 104.9 118.3 137.8 160.1 176.8 198.9

Surplus (Deficit) - (34.0) (52.7) (88.0) (97.9) (155.8) (78.3) 28.5 338.7 291.1 1473.2 67.8 803.2

Rate of Return: Project - 23%Estate - 20%Outg.osera - 35%

- t.

.-!M A LI U P UP E R VOLTA!IVORY COAST

PLANTATIONS UNDER THE THIRD OIL PALM PROJECTz (i *A KR7 .,,,, j /9 IVORY COAST SODEPALM OIL PALM

:_*1Z Main roads SODEPALM MAIN ROADS

0 LI A LA ~~~~~~0~0 0.RailwaysSEODR RAS

Major airfi'ids PLANTATIONS UNDER THE THIRD OIL PALM PROJECT- SECONDARY ROADS

o>/ } ........... -'rAN \ .°i): J Cercle adsioistrative EXISTING OR IN COURSE OF ESTABLISHMENT

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