World Bank Document - Cocoa Research Institute of Ghar-CSIR - Council for Scientific and Industrial Research ... GGADP - Ghana German Agricultural Development Project

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The World Bank

FOR OFFICIAL USE ONLY

CA. 7g / O

Report No. 6645-GH

STAFF APPRAISAL REPORT

GHANA

AGRICULTURAL SERVICES REHABILITATION PROJECT

April 22, 1987

Western Africa Projects DepartmentAgriculture Division B

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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GHANA

AGRICULTURAL SERVICM.S REHABILITATION PROJECT

CURRENCY EQUIVALENTS

Currency Unit = Cedi (#)e151 = US$1.00 1/

WEIGHTS AND MEASURES

1 metric ton = 2205 pounds (lb)1 hectare (ha) = 2.47 acres (ac)1 kilometer (km) = 0.62 mile (mi)I meter (m) = 3.28 feet (ft)

1/ A dual exchange rate system was established on September 19, 1986 whena foreign exchange auction was instituted for specified transactions.A 090 = 1 US$ rate applies to the first window (cocoa and residual oilexports, petroleum and essential drugs imports, and central governmentdebt service contracted before January 1, 1986); the rate on thesecond window is established at the weekly auction. The marginal rateat the auction was 0151=US$1.00 in the week ending November 28, 1986.The rates for the First and Second Windows have been merged onFebruary 20, 1987.

FOR OFFICIL USF. ONLY

ABBREVIATIONS

AfDB - African Development BankAHPD - Animal Health and Production Department of MOAARDAC - Agricultural Research Development and Advisory CommitteeAPCC - Agricultural Policy Coordination CommitteeCFDT - Compagnie Francaise pour le Developpement des Fibres

Textiles (French Company for Textile Development)CIDA - Canadian International Development AgencyCIDU - Crops Inputs Development UnitCOCOBOD - Ghana Cocoa Marketing BoardCRI - Crops Research InstituteCRIG - Cocoa Research Institute of Ghar-CSIR - Council for Scientific and Industrial ResearchERP - Economic Recovery ProgramERPS - Economic Research and Planning ServicesFASCOM - Farmers' Service CompaniesGCC - Ghana Cotton CompanyGFDC - Ghana Food Distribution CorporationGGADP - Ghana German Agricultural Development ProjectGIDA - Ghana Irrigation Development AuthorityGOG - Government of GhanaGOPDC - Ghana Oil Palm Development CorporationGSC - Ghana Seed CompanyGTZ - Deutsche Gesellschaft fuer Technische Zusammenarbeit (German

Agency for Technical Cooperation)KFW - Kreditanstalt fur Wiederaufbau (Credit Agency for

Reconstruction)MFEP - Ministry of Finance and Economic PlanningMIST - M'Iinistry of Industry, Science and TechnologyMOA - Ministry of AgricultureMTD - Mechanization and Transport Department of MOANORRIP - Northern Region Rural Integrated ProgramPNDC - Provisional National Defence CouncilPPMED - Policy, Planning, Monitoring and Evaluation DepartmentSOE - State Owned EnterpriseURADEP - Upper Region Agricultural Development ProjectVORADEP - Volta Region Agricultural Development Project

Fiscal Year

January 1 - December 31

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

GHANA

AGRICTLTURAL SERVICES REHABILITATION PROJECT

Table of Contents

Page No.

DOCUNFNTS CONTAINED IN PROJECT FILE iii

CREDIT AND PROJECT SUMMARY iv

I. INTRODUCTION 1

II. THE AGRICULTURE SECTOR 1

A. Recent Performance in Agriculture 1Background 1Policy Environment 2Output Performance 2

B. Potential for Constraints to Development 2Potential 2Constraints 3

C. Key Public Sector Agricultural Institutions 4Demarcation between Cocoa and Non-Cocoa 4Parallel and Other Institutions 4The Economic Research and Plazining Services 4The Delivery of Fertilizer and Tractor Hire Services 5The Delivery of Extension and Research Services 5The Delivery of Veterinary and Irrigation Services 6Agricultural SOEs 6

D. Government's Objectives, Strategy and Action Program 6Objectives 6Strategy 7The Government's Action Program 7

E. The IDA's Role 8

III, THE PROJECT 9

A. Project Origin, Rationale and Objectives 9Project Origin 9Project Rationale 9Project Objectives 10

This report is based on the findings of an appraisal missionconsisting of Messrs. J. Cole and S. Singh and Ms. I. Tsakok (Bank)which visited Ghana November/December 1986. Ms. K. Sesay-Bah providedthe secretarial support and figures were checked by Ms. C. DuCran.

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B. Project Description 10Summary Description 10PPMED 10Studies 12Agricultural Research 12Agricultural Extension 13Irrigation Services 14Veterinary Services 14Privatization of Fertilizer Operations 15Privatization of Tractor Hire Services 16Agricultural SOE Reform Program 16

C. Project Costs and Financing 18

D. Project Implementation 18Project Management and Technical Assistance 18

E. Procurement 20Amounts and Methods of Procurement 20

F. Disbursement 21Summary Disbursement Schedule 22Project and Special Accounts 23

G. AuditIng and Reporting 23

H. Financial Impact and Project Sustairnability 23

I. Benefits and Risks 24

IV. AGREEMENTS REACHED 24

ANNEXES

Annex 1 Key Statistics of the Agriculture SectorAnnex 2-1 Agriculture Sector ConstraintsAnnex 2-2 Key Agricultural InstitutionsAnnex 2-3 Government Agricultural Goals and PoliciesAnnex 2-4 Government Statement of Agricultural PolicyAnnex 3-1 Ministry of Agriculture and Policy Planning, Monitoring

and Evaluation Division: Reorganization and TrainingAnnex 3-2 StudiesAnnex 3-3 Agricultural ResearchAnnex 3-4 Agricultural ExtensionAnnex 3-5 Irrigation DevelopmentAnnex 3-6 Veterinary Services DepartmentAnnex 3-7 Privatization of Fertilizer OperationsAnnex 3-8 Privatization of Tractor Hire ServicesAnnex 3-9 Agricultural SOE Reform Program

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Annex 3-10 Table 1 - Project Cost SummaryTable 2 - Project Cost by Components and YearsTable 3 - Project Cost by Categories and Years

Annex 3-11 Project Financial PlanAnnex 3-12 Project Coordination UnitAnnex 3-13 Project Implementation ScheduleAnnex 3-14 Procurement ProceduresAnnex 3-15 Table 1 - Estimated Schedule of Disbursements

Disbursement ChartAnnex 3-16 Special Project AccountAnnex 3-17 Auditing and Reporting

MA?

IBRD No. 15116R3: Rainfall and Ecological Zones

Documents Available in Project File

A. Background

1. Ghana - Agricultural Sector Review; World Bank Report No. 5366-GH,August 6, 1985.

B. Project Preparation

1. Restructuring the Ministry of Agriculture in support ofDecentralization by C.L. Phocas. UNDP/FAO/Government of GhanaProject GHA/85/005/A/01/12.

2. Agricultural Sector Rehabilitation Credit -Identification/Preparation mission report, FAO/World Bank CPNovember 15, 1985.

3. Ghana: Fertilizer privatization Study submitted to the Ministryof Agriculture, Accra, Ghana. International Fertilizer DevelopmentCenter.

C. Working Papers

1. MOA's Policy, Planning, Monitoring and Evaluation Directcrate -UNDP Project Document

2. Studies - Terms of Reference3. Privatization of MOA's Fertilizer Operations4. Privatization of MOA's Tractor Hire Services5. Agricultural Extension6. Agricultural Research7. Irrigation8. Veterinary Services, Cost Recovery & Privatization9. Agricultural Pricing and Trade Policy Framework10. Import Program & Cedi Liquiditv11. Project Costs

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GHANA


Credit and Project Summary

Borrower: The Republic of Ghana

Implementing Agency: Ministry of Agriculture

Credit Amount: SDR 13.3 million (US$17.0 million equivalent)

Terms; Standard

Cofinanciers: UNDP (US$1.5 million); parallel financing foragricultural inputs by AfDB (US$25.0 million) andKFW (US$8.5 million).

Project Description: The objectives are to: (i) strengthen MOA's insti-tutional capacity to formulate and implement agricultural policies andprograms and (ii) rationalize and improve efficiency in the delivery ofpublic sector services to agriculture. The project would help prepare andimplement action plans and investment programs to strengthen agriculturalsupport services in the fields of research, extension, input supply,veterinary, irrigation and credit.

The project includes: (a) the reorganization and strengthening of MOA'swork in policy formulation, planning, monitoring and evaluation; (b) thepreparation of a national master plan for research and funding of researchon cotton and rice (irrigated and valley bottom); (c) the reorganization ofMOA's agricultural extension services in 3 regions on a pilot basis, as aforerunner to a national extension oroject, related training and logisticalsupport to the maize-cowpea program assisted by the Canadian InternationalDevelopment Agency (CIDA); (d) the strengthening of the Ghana IrrigationDeve1.opment Authority through a twinning arrangement, the introduction ofimproved agronomic practices on existing schemes and Investment in sixsmall scale pilot irrigation schemes; (e) logistical support for veterinaryservices; and (f) studies of the agricultural credit system and of foodsecurity. The project includes a program for improving sector managementwith respect to the privatization of MOA's fertilizer handling operationsand of its tractor hire services, divestiture of selected agriculturalState Owned Enterprises (SOEs), regular review of the investment programand improved cost recovery from veterinary and irrigation services.

Support from the project is in the form of one or several of the following:technical assistance, staff training, logistical support and operatingfunds; for MOA's planning division, for agricultural research and forextension, veterinary and irrigation support services. It also providesfor consultancy assistance for the reform of agricultural SOEs.

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Estimated Project Costs:

Local Foreign Total---- US$ Million … --

1. PPMED 0.2 2.0 2.22. Agricultural Research 0.4 2.6 3.03. Agricultural Extension 0.7 1.5 2.24. Irrigation Services 1.0 4.2 5.25. Veterinary Services 0.4 1.2 1.66. SOE Reform 0.2 1.4 1.67. CIDU 0.1 0.3 0.48. PCU 0.5 0.7 1.29. Refinancing of Project

Preparation Advance 0.1 0.4 0.5

Base Costs 3.6 14.3 17.9Contingencies 0.6 1.3 1.9

4.2 15.6 19.8

Parallel Financing:10. Vaccines and Drugs (KFW) - 8.5 8.511. Fertilizers & Chemicals (AfDB) - 25.0 25.0

Total Project Costs 4.2 49.1 53.3

Proposed Financing Plan

IDA 2.9 14.1 17.0Government 1.3 - 1.3UNDP - 1.5 1.5KFW (parallel) - 8.5 8.5AfDB (parallel) - 25.0 25.0

Total 4.2 49.1 53.3

Estimated IDA Disbursements:

FY88 FY89 FY90 FY91 FY92 FY93

Annual 1.5 1.1 5.7 4.6 3.2 0.9Cumulative 1.5 2.6 8.3 12.9 16.1 17.0

Project Benefits: The immediate benefits would be in training anddeveloping staff expertise to (i) formulate policy; (ii) plan, prepare and

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evaluate projects; (iii) develop medium-term investment programs forresearch and extension; and (iv) manage irrigation investments. The longerterm expected benefit is effective public support for agricultural develop-ment through (1) improved capacity to formulate and direct policies andinvestment programs; (2) effective utilization and coordination of donoraid; (3) impro'-ad access of farmers to basic public services. In addition,the studies and pilot schemes would lay the basis for future investmentprograms in agriculture. Public sector management reforms (iraciudingprivatization of fertilizer operations) linked to parallel financing ofagricultural inputs by Kreditanstalt fur Wiederaufbau (KFW) and AfricanDevelopment Bank (AfDB) would contribute to increased crop and livestockproduction.

Project Risks: There are institutional risks of two kinds. The first riskis of delays in the program to improve public sector management. Thesecond is that the Policy, Planning, Monitoring and Evaluation Department(PPMED) will not be able to retain the competent higher level staff whomthe project has trained a3nd who will be required to carry through theprogram.

Economic Rate of Return: Not applicable.

Staff Appraisal Report: 6645-GH

Map: IBRD No. 15116R2

GHANA


I. INTRODUCTION

1.01 The Government of Ghana launched a major economic reform programin April 1983. In response, the World Bank approved a series of shortterm credits to provide critically needed imports and immediate rehabilit-ation needs for key sect-rs (cocoa, timber, mining, roads and transport).In addition, the Bank stepped up economic and aector work which resulted inan agreement on a program to tackle medium term adjustment issues. Theprogram is supported by a Structural Adjustment Loan. As part of thissector work, the Bank undertook an Agriculture Sector Review whichidentified the main elements of a strategy to promote agriculturaldevelopment. The short term emphasis of this strategy is on improvingfarmer incentives and availability of inputs to exploit existing capacityand on rehabilitating road infrastructure and transport. The medium termemphasis is on strengthening the capacity of public sector institutions toplan and coordinate programs within the sector, to suppozt research andextension services, and to make the required investments for expandedagricultural production.

1.02 The proposed Agricultural Services Rehabilitation Project (ASRP)was identified as a priority recommendation in the medium term strategyoutlined by the sector review. It recommended strengthening nationalinstitutions in contrast to the approach adopted by donors in theseventies, where support was channelled through regional directorates ofthe MOA and separate project implementation units in area developmentprojects.

II. THE AGRICULTURAL SECTOR

A. Recent Performance in Agriculture

2.01 Background. Agriculture is the backbone of thi! Ghanaian economy.It absorbs nearly 60 percent of total labor force; contributes about 53percent of GDP and supplies up to 77 percent of total merchandise exports.Despite its importance, from Independence through the early 1980's thesector did not receive the policy and institutional support it needs forsustained development.

2.02 The main features of agriculture in Ghana are: it is primarilyrainfed, most producers are smallholders and productivity is generally low.Agricultural production is particularly risky and the task of reachingmyriads of small farmers with improved techniques is of central importanceto agriculture's development. Cultivable land is relatively plentiful:only 30 percent of the 10 million hectare of cultivable land is actuallycultivated. Only .07 percent cf total cultivable land is irrigated,although the Government accorded high priority to irrigation in the last

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decade. Most farmers practice shifting cultivation as land is abundant,and mixed cropping is the common response to reducing the risks of rainfedagriculture. However, there are more densely populated areas in the northand the south, where permanent cultivation has to be adopted and wheremaintenance of soil fertility is of particular concern. Over the longerterm, the pressure on land will intensify as Ghana's population growthrate is estimated at 3 percent per annum.

2.03 Ghana's ecology makes possible a rich arrav of produce. Thereare two main ecological zones, the forest and the Savannah. The forestzone which occupies one third of the country, produces the major food andcash crops, namely maize, tubers, cocoa and oil palm. The northernsavannah zone which occupies most of the remaining two thirds of thecountry produces the other basic food crops: sorghum, millet, rice,cowpea, and potentially imjportant cash crops, cotton, totacco, groundnuts.Cattle is important in the north as a source of draught power and of meat.In the rest of Ghana, backyard poultry, sheep and goats are common, and arean important source of protein. Modern livestock rearing systems ( poultryand pigs) are important only around major urban areas.

2.04 Policy Environment. Exchange rate, tariff, trade and macroeconomic policy throughout the seventies discriminated against agriculture.The salient features were a severely overvalued exchange rate, heavytaxation of cash crops, especially of cocoa, with farmers receiving roughly30 percent of world prices and a highly protected manufacturing sector. Atthe sectoral level, institutional support for formulating policies,directing public investments, delivering services and inputs remained weak.Numerous state owned enterprises were created while the transport systemdeteriorated through neglect.

2.05 Output Performance. Under these adverse circumstances, outputof both food and cash crops steadily declined, at a rate of roughly 0.3percent per annum between 1970-1980. With rising population, real percapita income decreased by 30 percent during this decade. Cocoa productionfell from above 400,000 tons in 1970 to less than 160,000 tons by 1983.Export earnings fell sharply, forcing a drastic cutback in imports.Agriculture's decline contributed to the deterioration of the GDP by 0.5percent per annum in the seventies. Droughts and bush fire3 of 1982-1983had disastrous consequences on an already weakened agriculture.Subsequently, under the combined impact of normal weather and improvedincentives gererated by the Economic Recovery Program (ERP), outputimproved significantly in 1984. Growth is estimated at roughly 10 percentin 1984, at I percent in 1985 and 5 percent in 1986. Thus after a decade ofnegative growth, recent growth is positive.

B. Potential for and Constraints to Development

2.06 Potential. Ghana has a strong comparative advantage in a varietyof annual and tree crops. The agronomic potential exists to nearly doubleyields on most crops. Improved technical packages exist for maize, cowpeaand rice (rainfed and irrigated). If rainfall is adequate, use offertilizers on local varieties can lead to a 20-30 percent yield increase;if fertilizer-responsive varieties are used, a 100 percent increase isachievable. There are improved planting materials for cassava and sweetpotatoes, and improved cultural practices for yais. There are no improvedmaterials for sorghum and mil3et, but fertilizer recommendations for loca'Lvarieties are available, although they need to be updated. For theindustrial tree crops, cocoa, coffee, rubber, oilpalm, there is access toimproved materials and techniques in Ghana. Output and yields on cottonand tobacco were much higher in the early seventies. For seed cotton,there is improved technology from neighbouring countries; e.g. averageyields in the Ivory Coast reach 1200 kg. per hectare, twice the level inGhana. At present, crop technology is not a constraint to higherproductivity (Annex 2-4 on Extension).

2.07 Constraints. To realise the substantial potential that exists,constraints on several fronts must be surmounted. Of primary importance,is the necessity of sustained producer incentives. Producer incentives, asmeasured by effective protection coefficients for selected cash crops,namely cocoa, cotton, tobacco have improved but remain low. For othercrops whose prices are determined by markets rather than the Government orcartels, poor roads and communication systems raise the risks of marketingand inhibit production as well. These risks are increased by weatherfluctuations inevitable in rainfed agriculture (see Annex 3-5 onIrrigation). Sharp price instability is a problem for producers and forthe Government which views it a threat to its food security goal, which isto ensure adequate supplies of maize, at stable prices in good times andbad (see Annex 2-3 Agricultural Goals and Policies).

2.08 Positive incentives are necessary but not sufficient to realizeGhana's agricultural potential. In addition, producers need effectivesupport in the delivery of extension, backed by adaptive research andavailability of inputs. Unfortunately, the delivery of most services isweak and availability of inputs constrained by foreign exchange shortages.Adaptive research and extension, which suffer from a chronic and severeshortage of funds and of competent staff, need to be revitalised (seepara 2.15). Adequate supplies of improved maize and rice seeds from theGhana Seed Company have been a problem. Timely delivery of fertilizer andother inputs for cocoa suffer from the institutional weaknesses of MOA andCocobod (see para 2.13). For irrigated areas, GIDA has been unable toextend effectively improved techniques for rice cultivation.

2.09 These constraints originated in a policy of discriminationagainst agriculture, partly to c.olect tax revenues and partly to protectmanufacturing. In addition, ist policy favored extensive and directgovernment intervention, in production and input supply. The first gave

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rise to nineteen non-performing agricultural state owned enterprises, withminimal payoff in terms of agricultural development. The second hasresulted in ineffective systems for delivering fertilizer and seeds. Theoverall hostile environment for agriculture coupled with an over-expansionof the public sector weakened MOA 's capacity to formulate and implementpolicies to benefit agriculture.

C. Key Public Sector Agricultural Institutions

2.10 Demarcation between Cocoa and Non-Cocoa. Institutionalresponsibility for agriculture is divided between cocoa and non-cocoa.Cocobod is responsible for cocoa and MOA is responsible for all othercrops. Their areas of intervention are broadly but not entirely similar.Common areas are: (i) the formulation and implementation of sectorpolicies, (ii) extension and delivery of inputs and; (iii) production andmarketing. Important differences are in the areas of research andmarketing. Cocoa research is under the Cocobod, but agriculture relatedresearch is not under MOA (see para 2.15). Cocobod has monopoly in domesticand external marketing of cocoa while MOA supervises the operations ofnineteen agricultural SOEs whose operations are an insignificant part oftotal agricultural production and marketing (see para 2.17). Annex 3-1contains a chart of the structure of the MOA. The institutional demarca-tion of agriculture into cocoa and non-cocoa gives rise to problems ofpolicy coordination between these two major sub-sectors.

2.11 Parallel and Other Institutions. Other than MOA and Cocobod,there are a number of area based extension and research institutions, somesupported by donors. All are nominally under MOA but are practicallylargely autonomous. Extension services throughout the two ecological zonesare supported by one or several of the following: Canada, Germany, EEC,IFAD and IDA. Extension is also provided by other MOA parastatals, (theGrains Development Board, Bast Fiber Development Board and the GhanaCotton Company); and private companies, (the Pioneer Tobacco Company andInternational Tobacco Company Ltd). Basic research on soils, crops,animals, aquatic biology, oil palm and food are undertaken by six researchinstitutes which are grouped under the CSIR and report to the MIST. Theuniversities at Legon and Kumasi and a variety of parastatals undertakeadaptive research (see Annex 3-4 on Research). Annexes 3-1 to 3-9 containmore detailed discussion of main agricultural institutions.

2.12 The Economic Research and Planning Services. MOA'sresponsibility for economic analysis, policy formulation and planning islocated with the Economic Research and Planning Services (ERPS) (seeorganization chart in Annex 3-1. ERPS would be renamed Policy PlanningMonitoring and Evaluation. However, as in the case of other Governmentinstitutions, the severe shortage of funds and professional staff hasundermined MOA's ability in this critical area. At the same time, lowerlevel staff Is excessive. For MOA as a whole, only 25 percent of univer-sity level posts are filled. At headquarters, the situation is worse:only one percent of all the posts established for technical staff, which

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includes not only university graduates, but also diploma holders andcertificate holder graduates, are filled. This situation of severe short-age is also true of the ERPS. Due to this constraint, its work program hasbeen limited to the processing of the 1984/85 census and the collection ofprice data from urban and rurs. markets. No analysis of the data collectedhas been undertaken and there is no effective ongoing planning(see Annex 3-1).

2.13 The Delivery of Fertilizer and Tractor Hire Services. The GOG isthe sole importer, distributor and retailer of fertilizers in Ghana. Thereis no local production. The MOA takes delivery of the fertilizer at Temaport and distributes it to its warehouses, regional stores, zonal storesand farm service centers from which it either redistributes or makes directretail sales. In 2 of the 10 Regions, Government-controlled FASCOMs haveassumed MOA's role. The Government has not been able to manage timelydelivery of fertilizer owing to poor assessment of demand, delays inprocurement, slow discharge at port, poor road communications, unsuitableand inadequate storage facilities and deficient management. Inappropriatetypes are frequently imported. Fertilizer is sold at a uniform nationalprice incorporating a subsidy of 40 percent prior to the adoption of thetwo-tier foreign exchange system and 66 percent under the current two-tiersystem, costing the Government roughly $5 million a year.

2.14 In addition, since 1966 the MOA has provided subsidized servicesfor land clearing, levelling, field preparation, ploughing, harrowing andcombine harvesting. A combination of factors, which include unsuitableequipment, inadequate funding, bureaucratic procedures, poor staff motiva-tion and consequent low staff morale, have resulted in an ineffectiveservice which collects only about 10 percent of its costs. Privately-ownedfarm mechanization equipment in operating condition outnumbers MOA equip-ment in the ratio of 10:1.

2.15 The Delivery of Extension and Research Services. Extensionservices are undertaken by several departments within the MOA and by otherinstitutions in parallel to the MOA (see Annex 3-4 on Extension). Exceptwhere there is donor assistance, services are without vehicles or operatingfunds and are ineffective. Donor assisted projects (CIDA maize and cowpeaprogram, Ghana German ADP in the Northern Region, and IDA/IFAD Volta RegionADP) are testing new institutional approaches and structures to elimina!:ethe duplication and provide more effective services. Instead of parallelservices, VORADEP adopts an integrated approach and the Training and VisitSystem. In this approach, the extension agent deals not only with cropsbut with livestock as well if the latter is part of the farming system.The extension agent is backed by subject matter specialists for individualfarming activities. In research as in extension, external funding has beennecessary for supporting meaningful programs. Technical ass-i'tance isbeing provided through grants from CIDA and GTZ to the Ghaaa GrainsDevelopment Project (maize and cowpea) and to the Nyankpala AgriculturalExperiment Station (farming systems and crop improvement) respectively.Again, as in extension, there is the need to avoid duplication among the

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numerous institutes, identify priorities and develop better linkages amongresearch programs. Finally, linkages between ext;nsion and research havenot provided the feedback essential for improving the quality of bothservices (see Annex 3-3 on research).

2.16 The Delivery of Veterinary and Irrigation Services. Veterinaryand irrigation services are an important component of MOA's extension work.The main role of MOA's AHPD is to help prevent the spread of contagiousdiseases and protect livestock against parasites. Ghana is under theconstant threat of rinderpest from cattle moving south from neighboringcountries. These services were one sf the more effective in West Africabut their effectiveness has declined due to budgetary constraints(see Annex 3-6 on Animal Health and Production Departmen;). Support isexpected in the near future from the EEC for rinderpest control. As far asirrigation is concerned, strengthening of irrigation services would enableGhana reap the benefits of its substantial investments in irrigation: over$200 million (in 1985 prices) in the last decade. Costs are estimatedbetween $10,000 and $50,000 per hectare, well above the economic thresholdlevel of viability (approximately $3,000). Currently, GIDA's management isweak, costs of operation and maintenance high (about $350 in 1985 prices,per irrigated hectare versus a norm of roughly $200) and cost recovery low(20 percent), extension to improve farmers' skills in irrigation managementineffective (see Annex 3-5 on Irrigation Development).

2.17 Agricultural SOEs. i±nally, a major area of MOA responsibilityis its supervision of agricultural SOEs. There are eighteen agriculturalSOEs, most of them minor in terms of their demands on the budget (althoughSOEs as a whole are a burden on the Government) or their role in implement-ing Government's agricultural policy. According to a diagnostic survey ofall SOEs, undertaken in 1985, SOEs incurred large operating losses,accummulated arrears on their payments of taxes and loan repayments,exhibited low productivity, and were illiquid. Of agriculture's eighteenthree however are significant and of direct policy interest to the proposedproject: (1) the GFDC which is in charge of implementing Government's foodsecurity policy, (see para 3.09 on Food Security Study); (2) the Ghana SeedCompany in charge of supplying quality seeds to farmers (see para 3.24 onthe SOE reform program); and (3) the Ghana Cotton Company in charge ofrevitalizing cotton in the north (see para 3.11).

D. Government's Objectives, Strategy and Action Program.

2.18 Objectives. The Government's short to medium term objectives foragriculture are set out in the Statement of Agriculture Policy (see Annex2-4). The major objectives are : (i) to rehabilitate the economy throughefficient production and marketing of commodities in which Ghana hascomparative advantage; (ii) to increase agriculture's net contribution tothe balance of trade through higher export earnings and reduced commodityimports; (iii) to redefine and improve public sector management; and (iv)to achieve an appropriate level of food security in a cost effectivemanner. Over the longer term, the Government seeks to diversify the

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production base as a means of reducing Ghana's vulnerability to cocoa pricefluctuations.

2.19 Strategy. The Government's current strategy reverses thepriorities of past policy in three important respects. First, the emphasisis shifting away from heavy taxation of cash crops to improved productionincentives for domestic import substitutes and exports. Second,quantitative controls and import allocation through licensing are beingreplaced by more market oriented mechanisms. Third, direct stateintervention in price setting, production and input delivery will besubstantially reduced in favor of more private sector involvement andmarket orientation. In addition, the Government wants to decentralizebudgetary and decision processes in public institutions.

2.20 The Government's Action Program. The program for agricultureencompasses short term measures for improving prices and liberalizingmarkets and medium term measures for strengthening public sectormanagement. Specifically, in the short term, it focusses on (i) anincreased share to farmers of world prices for cocoa, cotton, tobacco; (ii)a gradual elimination of subsidies on fertilizer as the MOA withdraws fromits monopoly on import and distribution; (iii) privatization of tractorbire services which are now also handled by MO*.; and (iv) improvement indelivery and cost recovery for veterinary and irrigation services.

2.21 For the medium term, the program makes a start on strengtheningthe capacity of the MOA to formulate and coordinate agricultural policywithin a decentralized structure. While Government accepts the principleof minimum direct price intervention in the pricing of industrial cropswhere monopolies or cartels exist (cotton, tobacco, palm oil), it wants MOAto improve its analytical capacity to assess the validity and efficiencyimplications of private sector proposals and to monitor their effects. GOGsets the prices of cocoa, coffee and sheanuts. It announces minimumproducer prices for maize and paddy rice but does not enforce them in theTarket place. These apply only to the purchases of the Ghana FoodDistribution Corporation. Mandatory consumer price controls are retainedon only eight "essential" commodities, imported rice and sugar being theonly agricultural ones. More generally, GOG does not set any food cropprices. At present, minimum prices of cotton, tobacco, palm oil arenegotiated between processors and farmers' representatives on the basis ofcost of production considerations. MOA's role is to balance processors'and farmers' interests and ensure that the final official price is in linewith GOG's overall policy. This arrangement serves the interests of allparties involved: for processors, they want GOG to take responsibility forthe final price; for farmers, they use MOA as a check against processors;and for GOG, it retains the option of actively intervening in thenegotiation. GOG wants to keep this present arrangement. In the deliveryof services where there is a valid role for the public sector, theobjective is to reorganize and focus limited resources on priorities.Thus, for extension and research, the program must identify priorities anddevelop appropriate institutions which can make effective use of Governmentand donor support. In irrigation, there is an agreed action program

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between the Government and IDA, so the broad task is to further develop andimplement components of the program. Finally, the MOA must providesustained support to make progress on the rationalization of agriculturalSOEs.

E. IDA's Role

2.22 The focus in IDA's approach is improving incentives,strengthening institutions and rehabilitating infrastructure. This focuswhich has evolved over the years, is based on lessons derived from earlierexperience (betwenn 1969-1980) and the recommendations of more recentanalyses. In close consultation with the IMF, IDA has designed theEconomic Recovery Program (ERP), which the Government launched in April1983. IDA's role has been to help Government rehabilitate productiveassets, lay the basis for sustained growth, mobilise and coordinate donoraid in support of a market and export oriented recovery strategy.

2.23 Between 1969 and 1980 Bank Group commitments to agriculturetotalled US$105.5 million for projects covering tree crops (cocoa ard oil-)alm), fisheries, sugar, livestock and integrated rural development. Themain lessons learned are: (i) the need to ensure positive price incentivesto producers through an active d:alogue with the Government; (ii) the highrisk to successful project implementation in view of MOA's limited institu-tional capacity to undertake planning and monitoring. This limitation atthe center could not be successfully overcome by strengthening managementin integrated area development projects. The more recent analyses of theeconomy in general and of agriculture in particular highlighted, amongother things, the following as major causes or consequences of agri-culture's economic decline: (i) low producer incentives for major indus-trial crops in which Ghana has comparative advantage; (ii) weak analyticaland management capability throughout the civil service and the SOEs afteryears of politiral instability, over-expansion of public intervention,unattractivte -y scales and insufficient operating funds; and (iii) wide-spread and severe deterioration of productive assets and of public infra-structure.

2.24 In its current operations, IDA's emphasis is on creating a macropolicy and institutional environment supportive of production in whichGhana has comparative advantage and on complementing its macro initiativeswith sectoral interventions. Specifically, a high priority area is thereduction of price distortions and excessive controls which encouraged rentseeking activities. Thus, major initiatives at the macro level are theliberalization of the foreign exchange regime; the reform of the tradetaxation and tariff system; the development of an export diversificationstrategy, increases in the annual prices for cocoa and other industrialcrops; and gradual elimination of comprehensive price and quantitativecontrols on all but eight "essential commodities". To manage thisfundamental reform process, it is absolutely essential to rebuild publicsector management and reallocate scarce public funds. In this respect,major initiatives are on improving the staff structure of the civil serviceand incentives for senior level staff; demarcating areas for public and

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private spheres of action; rationalizing the SOE sector, improving thefinancial performance and accountability of SOEs with a valid public roleto play; and restructuring public expenditure. In agriculture, animportant long term institutional objective is the integration of cocoainto general agriculture policy.2.25 In support of the Economic Recovery Program, the Bank hasfinanced two Import Reconstruction Credits and an Export RehabilitationCredit. It is developing a Structural Adjustment Loan, a StructuralAdjustment Institutional Support Credit, and a Public Enterprise Project.These macro level operations are complemented by sector level operations:the Industrial Sector Adjustment Credit; rehabilitation projects in publicinfrastructure (roads, power, ports) and the health and education sectors;and the proposed Agriculture Services Rehabilitation Project.

III. THE PROJECT

A. Project Origin, Rationale and Objectives

3.01 Project Origin. The project was proposed in the Bank'sAgricultural Sector Review 1/ the main conclusions of which were acceptedby Government in February 1985. The review recommended .a sustainedimprovement in producer incentives, input availability an,. roadrehabilitation as major short term actions and the strenghtening of keyfunctions of the MOA as the major thrust of a medium term strategy. AJ4cint Bank/FAO Cooperative Program mission agreed on the project outlinewith Government in April 1985 and the FAO Cooperative Program prepared anidentification report in November 1985 2/.

3.02 Project Rationale. The proposed project is an integral componentof the Bank7-s portfolio of current operations in support of theGovernment's Economic Recovery Program (para 2.24). It extends theinstitutional reforms inititated at the macro level down to the sectorallevel. It translates the institutional objectives of the ERP and thereforeof the SAL, into a concrete program of reform for key agriculturalinstitutions. Institutionally, the Structural Adjustment Loan contains (i)a review of the public expenditure program (1986-1988) to develop anexpenditure structure supportive of the ERP; (ii) a phased reform forpriority SOEs whose corporate plans must be reviewed and approved by theGovernment; (iii) a timetable for staff redeployment throughout the civil

1/ Ghana Agricultural Sector Review, Report No. 5366-GH, West AfricaRegion, August 6, 1985.

2/ Ghana Agricultural Sector Rehabilitation Credit,Identification/Preparation Mission Report 80/85 FAO/CP-GHA.16;November 15, 19P,5.

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service and improvement of the terms of service for senior staff; (iv) askill mobilization scheme to attract and retain competent senior staff toimplement the ERP. This project enables MOA to support item (ii) andparticipate in the other major exercises as part of its institutionalstrengthening. The Structural Adjustment Institutional Support Creditsupports items (iii) and (iv) and the Public Enterprise Project, item (ii).

3.03 There are additional considerations. First, the design of theproject responds to the Government's action program for both the short andthe medium terms (paras 2.20, 2.21). Second, it enables the MOA implementthe Government's policy of decentralization, at an early stage in Ghana'seconomic recovery. Third, based on earlier experience, MOA must be able tointroduce sustainable policy initiatives and take control of the investmentprogram which has become donor driven, before undertaking an extensiveinvestment in new projects.

3.04 Project Objectives. The basic objective of the project is toinitiate a self sustaining process of rehabilitation so that MOA can givemo-e effective support to agriculture. Specifically, it has twointerrelated objectives: to strengthen the institutional framework for theformulation and implementation of agricultural policies and programs; toimprove the delivery of public sector services to agriculture.

B. Project Description

3.05 Summary Description. The ability to develop policies and monitorimplementation is central to improved use of resources. This is the basicpremise of the project. Specifically, the project would supportGovernment's action program (para 2.21) to improve public sector managementand would fund investments to: (a) develop MOA's capacity for policyformulation, planning, monitoring and evaluation in the sector; (b)strengthen research, extension, irrigation and veterinary support services;(c) privatize fertilizer and tractor hire services; and (d) reformagricultural SOEs. The project provides for technical assistance, stafftraining, logistical support and operating funds. The proposed projectfocusses on institutional support with parallel financing for selectedimports from AfDB and KFW ,

3.06 Policy Formulation, Planning, Monitoring and Evaluation. Theproject would support reorganizing and strengthening of the Policy,Planning, Monitoring and Evaluation Department (PPMED) of the MOA. Thereorganization of the MOA is underway at the national level and strength-ening of PPMED is a key part of this broader reform. This broader re-organization includes: (a) st.engthening central planning capacity (atpresent, cocoa is not included); (b) merging a number of separate extensionservices; (c) decentralizing field operations; (d) disengaging MOA fromfertilizer handling operatiorns and tractor services; and (e) providing forbetter coordination between the various sector agencies. Agreement inprinciple has been reached among the Government, the UNDP, and IDA on the

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main components of MOA's reorganized structure. Assurances were obtainedat negotiations that the Government would consult with IDA prior to makingany material change in the agreed structure and organization of theMinistrv of Agriculture.

3.07 ln its Statement of Agricultural Policy, the Governmentrecognizes the need for better inter-institutional coordination of policyaffecting agriculture. Thus, as part of the reorganization of MOA, anAgricultural Policy Coordination Committee (APCC) is to be established (seeAnnex 2-4). Membership will include MOA, the Ministries of Local Govern-ment, Finance and Economic Planning, Industry Science and Technology, Tradeand Tourism, Transport and Communications, Roads and Highways, Lands andNatural Resources, COCOBOD and the Bank of Ghana. The Committee will bechaired by the MFEP with MOA acting as the secretariat. Assurances wereobtained at negotiations that the Committee will be set up by December 31,1987, will meet at least once a year, that its composition is acceptable toIDA, and that priority areas in its work program for the project years beacceptable to IDA. Suggested priority areas are: pricing of selectedindustrial crops and of imported agricultural inputs; selection of annualfeeder road rehabilitation program, extension for cocoa and non-cocoaactivities, work program of parastatals in agriculture (e.g. rubber andcotton), linkages between extension and research.

3.08 The PPMED will be reorganized from the existing ERPS. Thestrengthening of PPMED would enable it to: (a) develop sustainablepolicies, monitor their impact and take the lead in developing a sectorinvestment program including directing donor support; (b) review prioritiesin MOA's annual public expenditure budget (c) improve project preparationand monitor implementation; (d) review the impact of tariff changes whichwill be set following the Trade Taxation and Tariff review scheduled for1987; and (e) monitor pricing of industrial crops to assess relativeincentives and comparative advantage, following a methodology to be agreedwith the Bank (on methodology, see Annex 3-1, on GOG's current role in croppricing, see para 2.21). At negotiations, assurances were obtained thatMOA w4 11 review on an annual basis with IDA its annual public expenditurebudget and will follow the agreed methodology in reviewing with the Bankselected industrial crop prices ' cotton, tobacco, palm oil) oa an annualbasis. PPMED will be supported by a UNDP technical assistance project withIDA providing funds for studies under a cost sharing arrangement. Theproject would fund technical assistance (three advisors plus short termconsultancies totalling 22 man months), refurbishing of offices, vehicles,equipment and operating costs. At negotiations, assurances were obtainedthat (i) technical assistance staff to be appointed to the PPMED shouldhave qualifications, experience and terms and conditions of employmentacceptable to Government and IDA; and (ii) that by December 31, 1987, MOAand IDA are to agree on interim and long term staffing levels for PPMED. TheUNDP project in support of PPMED should be signed and TA staff selected is acondition of effectiveness.

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3.09 Studies which would be managed by the PPMED would cover: (a)review of Agricultural Research (para 3.10) 16 man months, (b) AgriculturalExtension (para 3.13) 8 man months, (c) Agricultural Credit (Annex 3-2) 21man months; and (d) Food Security (Annex 3-2) 21 man months. Draft Termsof Reference have been prepared (Working Paper 2). These studies wouldhelp lay the basis for action programs in major areas now affectinginstitutional support to agriculture. The Agricultural Credit study is tobe coordinated with a financial sector review planned for 1987. The FoodSecurity study is to help the Government develop a cost effective approachto ensuring a desired level of food security, given its concern with sharpprice instability following the drought years of 1982-83 and its currentplans to invest further in food storage (see Annex 2-3 on AgriculturalGoals and Policies). The first phase of the Food Security study is anassessment of the technical and financial aspects of the operations of theGFDC and is expected to be complete by August 1987. In the context of theSAL negotiations, February 23 to March 2, 1987, the GOG has indicated thatit will discuss the implications of the review and to incorporate actionsagreed upon with IDA in its 1988 budget. Agreement was obtained atnegotiations that (i) the Food Security study will be completed by December31, 1989 and an agreed program of action developed by June 30, 1990; and(ii) that prior to engaging any consultants, terms of reference for theiremployment would be reviewed and agreed with IDA; and (iii) they would havequalifications and experience acceptable to IDA.

3.10 Agricultural Research. The project would provide for (a) areview of agricultural research services ard preparation of a nationalmaster plan (Annex 3-3) and (b) funding of research on cotton and rice(irrigated and valley bottom). The review and preparation of a master planwas recommended as a top priority following the West Africa AgriculturalResearch Review carried out by the Bank. The review and the long term planshould identify priorities for the next 15-20 years; suggest an appropriateinstitutional framework for coordinating research and improving links withextension; and quantify manpower and budgetary needs of the system. In sodoing, it would help the GOG mobilise coordinated support from donors, thusproviding research with what it needs most: adequate funding, a clearstructure of priorities, and suitable institutional channels. The GOGagrees with the need for the study. Terms of reference (Annex 3-3) havebeen agreed with Government and assurances were obtained at negotiations that(i) the review would be carried out by June 30, 1988 and conclusionsdiscussed with IDA and interested donors.

3.11 Despite the budgetary and institutional problems of research,progress can be made in the medium term, in two priority crops for whichthere is institutional capacity to undertake the research. Cotton is one.CFDT is conducting a feasibility study for relaunching cotton production inthe north, where it is an important cash crop. Research on cotton wouldfurther the revitalization of cotton. Rice is the other. The proposedproject is assisting the institutional strengthening of GIDA asrecommended by the Irrigation Sector Review (see Annex 3-5). The researchon rice is part of an agreed strategy with GIDA to make better use of waterresources and existing irrigation schemes (see Annex 3-3). The project

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would provide for cotton iesearch at the Crops Research Institute'sNyankpala Station (Northern Region) and research on irrigated rice at theUniversity of Ghana's, Kpong Station (Eastern Region). Technicalassistance, vehicles and field equipment, renovation of laboratoryfacilities and operating costs would be funded.

3.12 Government has established the Agricultural Research Developmentand Advisory Committee (ARDAC), which includes directors of researchinstitutes, MOA departments and development agencies. The membership willpromote linkage between research and extension at the national and fieldlevels. However, in view of prevailing budget constraints, there is theneed to ensure that financial support be assured for the functioning of theCommittee. Assurances were obtained at negotiations that this committeewould continue to be supported and that ARDAC's comments are required priorto the finalization uf the work programs of the six institutes under theCSIR, which are engaged in agricul,ure related research.

3.13 Agricultural Extension. The project would continue therestructuring and strengthening of agricultural extension services that hascommenced under the Volta Region Agricultural Development Project (Credit1009-GH) and other Bank and non-Bank financed operations, and will parallela similar operation for the cocoa extension service under the CocoaRehabilitation Project. The proposed project will support a pilot programof extension strengthening in three Regions. Work in the first pilotRegion (in 1987) will be supported by a Project Preparation Facility.Priority under the pilot program will go to organizing an effectivefield-based extension service closely linked to agricultural supportservices (especially research) and supported by regular in-service trainingfor all staff. The program is a pilot in the sense that it will be a majorinput into the design of a possible national agricultural extensionproject. Particularly to this end, the project would fund (para 3.09) astudy of early progress under the pilot program and more generally of theorganization, objectives and experience of agricultural extension andrelated training in Ghana: By negotiations, assurances were obtained thatthis study be completed by December 31, 1988. (The research review to becompleted by June 30, 1988, should also contribute to the formulation ofthe proposed national extension project.) The pilot program implementationschedule is in Annex 3-4.

3.14 The pilot program of extealsion strengthening would support (i)short-term consultancy assistance for reorganizing non-cocoa andnon-plantation crop agricultural extension services within MOA and foridentifying extension staff training needs; (ii) training, vehicle andequipment and incremental operational costs of staff of the restructuredextension service in pilot Regions; and (iii) logistical support to themaize and cowpea demonstration activities of the Ghana Grains DevelopmentProject in Regions where the pilot program is implemented. Funds are alsoincluded under "extension" in the project to continue support of extensionactivities in Vo]ta Region upon the closure of Credit 1009-GH, and forrelated research and monitoring and evaluation activities in that Region.

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3.15 Irrigation Services. The project would assist GIDA in shiftingthe focus of its strategy away from construction of capital intensiveschemes to optimizing returns from existing schemes. New investments wouldbe limited to small scale and supplemental valley bottom schemes, Theredirection from capital intensive schemes which have dominated investmentsin the last decade was agreed in principle with GOG following theIrrigation Sector Review carried out by IDA and GIDA in 1985. The agreedprogram includes the following actions to be undertaken by GOG: (i)reviewing its irrigation strategy to strike the appropriate balance withthe development of rainfed cropping and prepare a National Plan fcrUtilization of Water Resources by December 31, 1990; (ii) giving priorityto small scale and supplemental valley bottom schemes; (iii) paying greaterattention to irrigation agronomy, optimizing returns from existing schemesand launching a program of research and developrment for irrigated crops; (iv)strengthening GIDA through a twinning arrangement with a comparable insti-tution in a another country. At negotiations, agreements were reached on(i) a policy statement incorporating these elements of the action program,(ii) submission to IDA by July 31, 1987 a plan of action for improved costrecovery from irrigation schemes, to be achieved over a three year periodand including staff reductions; and (iii) implementation of the costrecovery plan agreed to by GOG and IDA. A shortlist of possibleauthorities for twinning has been agreed with IDA. As a condition ofdisbursement for t!he GIDA component, the twinning contract must be signed.

3.16 The project would provide funds to support the twinningarrangement (including staff training), improved irrigation agronomy andthe development of six small scale pilot irrigation schemes to test thefeasibility of pump and low cost gravity schemes. The areas for the pilotprojects have been identified and the PPF provides funds for undertakingsurveys of these areas. Assurances were obtained at negotiations thatpilot projects will be prepared by GIDA according to agreed criteria andapproval by IDA would be needed for release of IDA funds, for theseschemes.

3.17 Veterinary Services. The project would provide logisticalsupport (vehicles, operating costs and storage facilities) for the AHPD toenable them to make good use of the improved supply of vaccines and drugsexpected from parallel funding by KFW, expected to be US$8.5 million. Asystem for recovering cost of materials is already operating and in twoRegions revolving funds have been set up for retention of revenues.Adequate cost recovery will generate the funds necessary for the MOA tosustain and improve the effectiveness of its services in preventingcontagious diseases and protecting livestock against parasites. By pricingservices at market rates, it will over time encourage private sectorparticipation (see Annex 3-6). Assurances were obtained at negotiationsthat Government would: (a) set up revolving funds on a national basis foruse of revenues by AHPD according to procedures and audit arrangements tobe agreed with rDA, (b) develop arrangements for the revolving funds, and(c) set prices for services to recover costs of drugs from 1988 and drugsplus operating costs excluding staff salaries but including travel

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allowances and equipment maintenance from 1989. The GOG has already set uparranigements for the revolving funds.

3.18 Privatization of Fertilizer Operations. The project wouldassist GOG transfer the importation and distribution of fertilizers to theprivate sector in order to improve the efficikncy of supply. During theproject period, AfDB will provide US$20.0 million 3/ to fund fertilizerimports, during a three year period. Privatization would be phased overfour years as time is needed to rebuild the distribution networks andinfrastructure and to phase out the subsidy (see para 3.19). The phasingwould be as follows. Government would be responsible for procuring anddistributing fertilizer during the transition period. In the first year,the Project would introduce private retailing of fertilizers in the Voltaand Brong Ahafo Regions where traders would be encouraged to buy fromdesignated distribution stores at a discount (representing the retailmargin computed by the MOA in conjunction with the Prices and IncomesBoard) to the uniform national price and they would be free to sell it attheir own prices. Using the experience of the first year, the privateretailing system would be extended countrywide in the second year. In thethird year, MOA would sell its fertilizers only to wholesalers/dealers fromits central stores at Tema, Swedru, Kukurantumi and Tamale and panterritorial pricing would cease to operate. The internal marketing anddistzibution systdm for fertilizer would then be, substantially, in thehands of the private sector and in the fourth year, direct imports by theprivate sector for an MOA-approved list of fertilizers would be permitted.There will be annual reviews to confirm the continued appropriateness ofthe proposed pri^vatization time-table.

3.19 The fertilizer subsidy woulK. - phased out in tandem with theprivatization of fertilizer operations. The subsidy level has been reducedfrom 66 percent in 1986 to 42 percent in 1987 and would be reduced to 30percent in the first -dar of the project (1988), 15 percent in the secondyear (1989) and eliminated altogether in the third year. 4/ This periodis acceptable to GOG. It will also facilitate the adjustment of the mainusers who are a minority, namely the larger farmers cultivating maize andrice (see Working Paper 9). The majority, the smallholders who practiceshifting cultivation will not be affected (see Annex 2-1). The main shortterm impact may be a fall in marketed surplus as larger farmers are themain contributors to the surplus. The longer term impact will be a moreefficient delivery and use of fertilizers. Since fertilizer use is still

3/ This is out of a total anticipated funding of US$25 million forfertilizers, chemicals and hand tools.

4/ The reference price for determining the extent of subsidy reduction isthe C.I.F. contiact price plus wholesale and retail margins asdetermIned by the Prices and Incomes Board. The 1987 MOA sellingprice recovers only the CIF Tema cost.

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at an early stage of adoption in Ghana, its proper pricing now will beparticularly valuable in developing efficient use. Assurances wereobtained at negotiations on the phasing out of the fertilizer subsidy andthe privatization of fertilizer operations according to the followingtime-table, unless MOA and IDA agree on adjustments to the time-tablefollowing the annual reviewE: to 30 percent for the 1988 crop year byJanuary 31, 1988; to 15 per cent for the 1989 crop year by January 31,1989; to make a public announcement on its privatization program byDecember 31, 1988; and to complete elimination of subsidy for the 1990 cropyear by December 31, 1989.

3.20 An internationally-recruited person who has had extensiveexperience in private sector fertilizer marketing would be in charge of theprivatization program and he would heed the Crops Inputs Development Unit(CIDU) in the Crop Services Department of MOA. The types of fertilizers tobe imported would be approved by a Fertilizer Extension Advisory Committeein the MOA (see Working Paper 3). The appointment of the Head of CIDU totake charge would be a condition of effectiveness. The PPF provides fundsfor initiating and completing the search for the Head of CIDU.

3.21 Privatization of Tractor Hire Services. MOA intends to phaseout its tractor hire services in order to encourage private sector interestin delivering these services. Wheeled tractor services would be terminatedby the end of 1987 and the combine harvester services by February 1989.Land clearing services would be terminated by June 1991. This length oftime is considered necessary for a build-up in pr4vate sector supplies toservice both construction and agricultural needs and to enable the GOG tocomDlete the disposal of equipment and the redeployment of affected staffstarLing September 1988 through to December 1991 (see Annex 3-9).Assurances were obtained at negotiations that (a) the wheeled tractor beterminated by the end of 1987 and the combine harvester services byFebruary 1989; and (b) land clearing service charge would be raised to fullcost recovery level by January 1988 and the services terminated by June1991.

3.22 Agricultural SOE Reform Program. The project would assist theMOA carry out a substantial portion of the agricultural SOE reform program.The entire program is set out in Annex 3-9. The program would beimplemented in three steps, consistent with MOA's management capacity.First, agreement was obtained at negotiations from GOG on thecatu¢orization of the SOEs according to actions to be taken. Second, MOAwill in the first three years of the project either complete or makesubstantial progress in implementing the reform program for SOEs for whichthere are on-going activities or for which decisions have already beenagreed upon. Third, MOA will in the last three years of the project,initiate and set in motion appropriate actions for the reform of remainingSOEs.

3.23 The initial categorization resulted from the findings of the taskforce which conducted the diagnostic survey of the SOE sector in 1985.This initial categorization was then discussed with the MOA. In the

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agreed categorization, one is to be liquidated, one sold off, sevenconverted into joint ventures, five divested under the recently appraisedPublic Enterprise project, two (GFDC and a subsidiary company) retained asparastatals but subject to an action plan arising out of the Food SecurityStudy, and one to be reviewed as part of the reorganization of agriculturalextension (see Annex 3-9 for exact listing of the 17 SOEs; the eighteenthSOE is GIDA discussed in para 3.15). Agreement on this proposed categorizationwas obtained during negotiations. The MOA and IDA will jointly assess thefinancial and technical soundness of GFDC's current operations as part of abroader study to develop a cost effective approach to ensuring foodsecurity. The GOG has recently completed the construction of 17,000 tonsilo capacity and is planning on a further expansion of 150,000 ton. Theimmediate question is whether this planned expansion is a cost effectiveway of improving Ghana's prospects for ensuring food security. Thisquestion will be dealt with in the first phase of the Food Security study,which is expected to be completed by August 1987 (see para 3.09 onStudies). A more fundamental question is what should the relative roles ofpublic and private sector be in major areas such as storage and trade, withpotential to significantly reduce food insecurity. Decision on the GFDC andits subsidiary company is deferred until the completion of the FoodSecurity Study and an action plan agreed upon (see para 3.09, Annexes 2-4,3-2 and 3-9).

3.24 In the first three years of the project, MOA is to continueongoing activities and implement reform where decisions have already beenagreed upon. These are: (i) proceed with converting GOPDC into a joint-venture; (ii) revitalize the Ghana Seed Company in cooperation with USAIDso that GSC will be able to ensure an adequate supply of quality seeds;(iii) review the role of the Ghana Cotton Company joint-venture and producean action plan on the reorganization of the cotton growing and ginningoperations; (iv) prepare a plan for the conversion of FASCOM UR and FASCOMVR to joint ventures; and (v) facilitate the conduct of studies forrationalizing 5 SOEs which are being handled under the Bank's forthcomingPublic Enterprise Project (see para 3.02). By the third and fourth yearsof the project, MOA would conduct a set of studies and implementrecommended actions for the Grains Development Board, Irrigation CompanyUR, Ejura Farms, Crown Rice Mill and Pomadze Poultry.

3.25 The project would fund (i) an internationally recruitedprofessional to manage and facilitate the conduct of studies forrationalizing the SOEs, and (ii) the actions and the studies listed above(including subsequent actions identified by these studies) for which MOA isresponsible. At present, a task force is undertaking the SOE work programin the MOA. Given the complexity of the tasks, it is important toformalize this arrangement. A unit in MOA would coordinate the SOE reformprogram (see Annex 3-9). The establishment of the unit and the appointmentof its key staff will be conditions of effectiveness.

3.26 The categorization of the SOEs was agreed to at negotiations andassurances obtained that MOA would undertake the work program of actions

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and studies within the agreed timetable and that with effect from 1988budget year, no subventions would be provided to any of the organizationsthat are listed for liquidation or selling off.

C. Project Costs and Financing

3.27 Total project costs over the five-year project period areestimated at US$53.3 million 4/ of which US$49.1 million or about 92percent would be foreign costs. Without taxes and duties, total costswould be US$52.8 million. Base costs are estimated using prices obtainedduring appraisal and updated to levels expected to prevail in March 1987.Project costs include (a) physical contingencies equal to 10 percent ofbase costs for buildings and civil works and 5 percent for all other itemsexcept personal emoluments and travel allowances; and (b) pricecontingencies compounded annually at the following annual rates: all localcosts including salaries for 1987: 18 percent; for 1988: 15 percent; for1989: 10 percent; for 1990: 8 percent and for 1991: 8 percent; foreigncosts for 1987: 3.1 percent; for 1988, 1989 and 1990: 1.3 percent and for1991: 3.5 percent. Total contingencies are equivalent to 10 percent ofbase costs or 9 percent of total project costs. Project costs which aresummarized in Annex 3-10 and detailed in Working Paper 11, are incremental,covering those investments and operational costs over and above the presentexpenditures by the GOG for similar items.

3.28 The proposed IDA Credit of US$17 million represents 32 percent oftotal project costs and would cover 35 percent of foreign exchange cost and69 r,ercent of lo"al costs. The project cost of US$53.3 million providesfor US$1.5 million (3 percent) being provided by UNDP, US$1.3 million(2 percent) by GOG. US$8.5 million (16 percent) by KFW and US$25 million(47 percent) by AfDB.

D. Project Implementation

3.29 The MOA would be responsible for ensuring that the project wouldbe carried out in accordance with the credit agreements. A ProjectCoordination Unit (PCU) located in MOA and reporting to the Secretary ofAgriculture will be responsible for coordinating project implementation,finance, procurement and monitoring, (see Annex 3-12). The establishmentof the PCU would be a condition of credit effectiveness. The actualimplementation of the different componente of the project will beundertaken by the PPMED, the CIDU, the Mechanization and TransportDepartment (MTD), the AHPD, 6 Regional Administrations of the MOA, the GIDAand the Crops Research Institute (CRI).

3.30 Project Management and Technical Assistance. The PCU will beheaded by a Project Coordinator (PC) whose appointment would be a condition

4/ Includes a Project Preparation Facility of US$0.5 million.

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of Board presentation, and he will be assisted by a Project Officer (PO)who would be appointed no later than 3 months after credit effectiveness.The PCU assisted by the PO would communicate d!.rectly with all heads ofimplementing units on matters of annual work prierams, budgets, projectaccounts, credit disbursements and progress repn,rting. All heads ofimplementing units would submit to the PCU, for approval by MOA and for IDAinformation, the annual budget relevant to the project together with theannual work program at least 3 months prior to the start of each fiscalyear. Assurances to this effect were obtained at negotiations.

3.31 The project would finance 52 man-years of internationallyrecruited personnel to support the different components of the project:one persor each for PCU, CIDU and SOE Reform Program totalling 13man-years; 3 for Research for 9 man-years; 7 for Irrigation Development for21 man-years; and 4 for UNDP technical assistance for 9 man-years. Inaddition there will be consultancies totalling 97 man-months.

3.32 Project monitoring and evaluation would be the responsibility ofPCU and of PPMED which would assist in designing a management informationsystem. The evaluation section of PPMED would provide annual reviews ofthe fertilizer privatization program,a mid-term evaluation of the impact ofthe project's agricultural extension initiatives, the farm mechanizationdivestiture program, the irrigation development program, and the cotton andirrigation research programs in addition to preparing the ProjectCompletion Report. At negotiations, agreement was obtained on PPMED'sresponsibility with respect to evaluation.

3.33 The project would be implemented over 5 years starting December1987 with completion expected by December 1992. All staff selection andappointment, international and local would be completed by September 1988.About. 50 percent of the credit would have been disbursed by end-PY3 andimplementation could be expected to be completed on time as the project ismainly composed of studies and technical assistance.

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E. Procurement

3.34 Procurement arrangements are summarized as follows:

Amounts and Methods of Procurement 5/(US$ Million)

Procurement Component ICB LCB Others Total

1. Civil Works - 1.5 - 1.5

(1.3) (1.3)

2. Vehicles, plant, equipment, 1.8 1.3 0.4 3.5materials and spare parts (1.8) (1.3) (0.3) (3.4)

3. Consultants' services, 10.1 10.1studies and training (8.6) (8.6)

4. Operating costs 4.2 4.2(3.2) (3.2)

5. Project PreparationAdvance 0.5 0.5

(0.5) (0.5)

1.8 2.8 15.2 19.8(1.8) (2.6) (12.6) (17.0)

3.35 Assurances were obtained at negotiations that all goods andservices financed under the credit would be procured in accordance withBank guidelines. Goods contracts valued at US$200,000 or more for plant,vehicles, construction materials and equipment would be procured throughinternational competitive bidding (ICB), and a margin of preference appliedto 15 percent of CIF bid price or actual customs duties, whichever is less,would be allowed for domestic manufacturers. Purchases would be groupedinto packages of at least US$200,000 whenever possible. Contracts valuedat less than US$200,000 but more than US$ 20,000 would be procured throughlocal competitive bidding under procedures acceptable to the Bank. LCBprocedures used by GOG have been reviewed, and found acceptable. Theservices of the Ghana Supply Commission would be used for procurement onlyof items which have a long lead time for delivery. All other procurementwould be organized by the Project Officer (PO) in PCU who would have had

5/ Contingencies are included in the amounts shown. Amounts withinparentheses indicate IDA portion.

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experience in Bank procurement procedures. The PO will coordinate with allimplementing units so that all procurement activities are carried out in atimely manner and in accordance with Bank's procedures. The P0 would whenconvenient or necessary utilize the services of private proeurement agentsfor imported items (Annex 3-14).

3.36 Contracts of less than US$20,000 would be procured through directcompetitive shopping based on at least three quotations. Items would bebulked to permit optimum use of competitive bidding. Contracts for workssuch as buildings and small irrigation structures because of scatteredsites would be procured through LCB procedures satisfactory to the Bank,but would provide international contractors in Ghana an opportunity toparticipate. Contracts for goods and works for small scale publicirrigation schemes would only be let upon these schemes having beenprepared in accordance with agreed criteria and approval obtained from IDA(para 3.16). Procurement under ICB and LCB procedures would totalUS$4.6 million. US$15.2 million would be procured through other procedureswhich are as follows: (a) force account and local shopping for operatingcosts costing US$4.2 million; (b) employing internationally recruitedstaff, consultants and training services in accordance with Bank guidelinescosting US$10.1 million; (c) local shopping of equipment and vehiclescosting US$0.4 million. Assurances were obtained at negotiations that allbidding packages over US$200,000 would be subject to the prior review ofIDA. This would result in a coverage of about 45 percent of the value ofsuch works.

F. Disbursement

3.37 The Bank loan of US$17 million would be disbursed over six yearsbeginning first semester of IDA FY88 through FY93. The disbursementschedule (see Annex 3-15), is similar to the historical disbursementsprofile for Bank-wide agriculture sector adjustment loans (6 years). Theproject belongs to this category rather than the investment categorybecause of its high technical assistance component.

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Summary Disbursement Schedule(US$ Million)

Amount of Loan % of Expenditure toCategory Allocated be Financed

1. Civil works 100% of foreign(a) Irrigation 1.1 expenditure and 85%(b) Other items 0.2 of local expenditures

2. Vehicles, plant, equipment, 100% of foreignmaterials and spare parts expenditure and 90%

(a) Irrigation 0.6 of local expenditures(b) Other items 2.5

3. Consultants' services, 100%studies and training

(a) Irrigation 3.0(b) Other items 4.7

4. Operating costs excluding 80%local salaries

(a) Irrigation 0.5(b) Other items 2.5

5. Project Preparation Advance 0.5 100%

6. Unallocated 1.4

17.0

3.38 Reimbursement for civil works contracts less than US$50,000,other contracts of less than US$20,000 equivalent, local training programsapproved by the Bank, and operating and general service costs would be madeon the basis of statements of expenditures. Assurances were obtained atnegotiations that all supporting documents for statements of expenditureswould be held by the project units in readily available form and madeavailable upon request for inspection by the Bank. Whenever possible,withdrawal applications would be aggreg.ted it1 amounts of US$200,000 ormore prior to submission to the Bank for reimbursement out of the loanproceeds. All IDA reimbursements would be made to the Special ProjectAccount if appropriate or the other Project bank accounts (para 3.41). APPF of US$0.5 million has been made available to finance projectpreparation work for fertilizer privatization, agriculture extension andirrigation development.

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3.39 Project and Special Accounts. The project would establish aProject Account (Account No. 1) with a local commercial bank. This accountwould receive the GOG contribution. GOG would deposit in the ProjectAccount 50 million cedis which represents the estimated operating costs forthe first three months of the project, as a condition of crediteffectiveness. GOG assurance was obtained at negotiations that it wouldpromptly pay its contribution as a grant to the project, as would be statedin the approved annual budget. In addition, a Special Project Account(Account No. 2) would be established by the Project for its projectcomponents into which the Bank would make an initial deposit of US$1.0million to be used to prefinance goods and services reimbursable under theloan. The Special Project Account would be operated under terms andconditions acceptable to the Bank and its replenishment would beconditional on GOG's release of its quarterly contribution laot later than30 days prior to the start of the quarter. Assurances to this effect wereobtained at negotiations. The account would be managed by the ProjectCoordination Unit (PCU), and should any disbursement made from this accountbe found to be ineligible for financing, GOG would deposit the corres-ponding amount into the account prior to submission of any further re-plenishment applications. Special accounts procedures are given inAnnex 3-16.

G. Auditing and Reporting

3.40 Agreement was obtained at negotiations that GOG accounts relatedto the project (including separate accounts for amounts withdrawn on thebasis of statements of expenditures, and the Special Project Account) wouldbe audited annually by independent auditors acceptable to the Bank. Theauditor's report and statement of accounts would be submitted to the Bankwithin six months of the end of the GOG fiscal year. It would also beagreed that PCU (on behalf of GOG) would submit: (a) quarterly progressreports to the Bank (see Annex 3-12); and (b) within six months of theproject's closing date, a final report on implementation and projectachievements. Details of reporting requirements are in Annex 3-17.

H. Financial Impact and Project Sustainability

3.41 The projeet would generate US$0.5 million in government taxrevenue during the project period. Financial cost to the GOG during theproject period would consist of its share of project costs of US$1.2million. The relatively small incremental costs are expected to be withinGOG's financing capacity. No incremental project costs would have to besustained by GOG in the post project period as no incremental staff wouldbe needed after the project period and the project itself is expected tolead into nationwide projects for agriculture extension and agricultureresearch. Besides it would contribute to staff reduction in GIDA,liquidation and divestiture of several agricultural SOEs.

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I. Benefits and Risks

3.42 The main expected benefit is stronger public sector aupport forthe rehabilitation and longer term development of agriculture,. The keyareas at the present time are: (i) formulating policies to promote amarket oriented and efficient development in agriculture; (ii) developingan investment program which can effectively utilise scarce domesticdevelopment resources and foreign aid; (iii) revitalizing the delivery ofbasi public services -- veterinary, irrigation, extension and research.These services have the potential of promoting the structural transforma-tion of Ghanaian agriculture. For these benefits to farmers and theeconomy as a whole to materialize, a necessary condition is the strength-ening of MOA's capacity to undertake the analytical and managerial tasksinvolved. Therefore the immediate benefits are in the training anddevelopment of staff expertise and the shedding off of production,marketing and distribution activities that can be nore efficiently under-taken by the private sector. These benefits justify IDA's taking the risksdiscussed below.

3.43 There are risks at both the macro and the project specificlevels. Ghana's economy is in flux and political uncertainties withrespect to the fundamental redirection of the economy persist. Theseuncertainties may undermine the strong, stable and sustained commitmentfrom many parts of Government which institutional reform requires. Sincethe project is essentially a sectoral extension of the public sector reformprogram initiated at the macro level, delays in the latter could adverselyaffect progress of project timetable. There is a severe shortage ofcompetent and committed higher level staff, and even in the absence ofthese macro level uncertainties, the PPMED may not be able to retain thestaff the project has trained and which the program requires.

3.44 The project level risks are mitigated by the consensus that hasbeen achieved among senior officials in the MOA and MFEP on the directionof the restructuring and staff strengthening. There is also a broaderconsensus between GOG and the Bank on measures to improve the supply ofcompetent senior staff to the civil service. These measures are beingincluded in the SAL and supportive sectoral projects. Duringimplementation, close Bank supervision will be required in the developmentof a detailed work program for PPMED.

IV. AGREEMENTS REACHED

4.01 During negotiations, assurances were obtained from Government onthe following points:

MOA and PPMED

(i) MOA would review its public expenditure budget on an annualbasis with IDA and in monitoring industrial crop prices

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(tobacco, cotton, palm oil) MOA would use a methodologyagreed with IDA and would review industrial crop pricesannually with IDA (para 3.08);

(ii) Government would consult with IDA prior to making anymaterial change in the agreed structure and organization ofthe Ministry of Agriculture (para 3.06);

(iii) Technical assistance staff to be appointed to the Policy,Planning, Monitoring and Evaluation Department should havequalifications, experience and terms and conditions ofemployment acceptable to Government and IDA (para 3.08);

(iv) Interim and long term staffing levels for PPMED would beagreed with IDA by December 31, 1987 (para 3.08);

(v) Government would set up and maintain the Agricultural PolicyCoordination Committee by December 31, 1987 (para 3.07) andmaintain the Agricultural Research Development and AdvisoryCommittee (para 3.12) and ensure that (a) composition ofboth committees are acceptable to IDA (para 3.07), (b)priorities for work program for APCC during the project yearsare agreed with IDA (para 3.07); (c) ARDAC's comments arerequired prior to the finalization of the work program ofthe six research institutes reporting through the CSIR to MIST(para 3.12);

(vi) PPMED would provide annual reviews of the fertilizerprivatization program; mid term evaluation of the impact ofthe project's agricultural extension initiatives, the farmmechanization divestiture program, the cotton and irrigationresearch programs in addition to preparing the ProjectCompletion Report (para 3.32);

PCU

(vii) The Project Officer to be appointed no later than threemonths after credit effectiveness (para 3.30);

(viii) The annual budget and work program relevant to the projectshould be submitted by all implementing units to MOA and IDAat least three months prior to each fiscal year (para 3.30);

(ix) All goods, works and services financed under the creditwould be provided in accordance to Bank guidelines and allbidding packages for goods and services at or overUS$200,000 would be subject to the prior review of IDA(paras 3.35, 3.36);

(x) All supporting documents for statements of expenditures

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would be held by project units in readily available form andmade available upon request for IDA inspection (para 3.38);

(xi) The Special Project Account would be operated under termsand conditions acceptable to IDA and its replenishment wouldbe conditional to GOG's release of its deposit of itsquarterly allocation to the Project Account no later than 30days prior to the start of the quarter (para 3.39);

(xii) GOG accounts related to the project including separateaccounts for amounts withdrawn on the basis of Statements ofExpenditures and the Special Project Account would beaudited annually by independent auditors acceptable to IDA(para 3.40);

(xiii) COG would submit quarterly progress reports to IDA andwithin six months of project closing date submit a finalreport on implementation and project achievements (para3.40);

STUDIES

(xiv) The Agricultural Research Study and master plan would beprepared and reviewed with IDA and other donors by June 30,1988 (para 3.10);

(xv) MOA would carry out the Food Security Study according toterms of reference acceptable to IDA, complete the Study byDecember 31, 1989 and develop a program of action to beagreed with IDA by June 30, 1990 (para 3.09);

(xvi) The Agricultural Extension Study to be completed by December31, 1988 (para 3.13);

GIDA

(xvii) GIDA would prepare by July 31, 1987 an action program forimproved cost recovery acceptable to Government and IDA; inaddition GIDA would implement the agreed action program(para 3.15);

(xviii) Signing of the twinning contract is a condition ofdisbursement of IDA funds for the irrigation component (para3.15);

(xix) Small scale pilot projects for project funding would beidentified according to agreed criteria and would besubmitted for IDA approval and contracts for such projectswould only be let subsequent to such approval; (para 3.16);

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(xx) GIDA would prepare a National Water Plan according to termsof reference acceptable to IDA and review the final planwith Government and IDA by December 31, 1990 (para 3.15);

DELIVERY OF SERVICES AND INPUTS

(xxi) Government would (a) set prices for veterinary services torecover cost of drugs from 1988 and drugs plus operatingcosts excluding staff salaries but including travel allow-ances and equipment maintenance from 1989 and (b) completearrangements for the revolving funds (para 3.17);

(xxii) Government would reduce the fertilizer subsidy to 30 percentof the retail price for the 1988 crop year by January 31,1988, to 15 percent of the retail price for the 1989 cropyear by January 31, 1989 and eliminate the subsidy for the1990 crop year by December 31, 1989 (para 3.19);

(xxiii) MOA's fertilizer operations would be privatized according tothe following schedule: 1988 - test private retailing intwo regions, 1989 - MOA to sell only at main distributionstores, 1990 - MOA to sell at four depots, 1991 - MOArelinquishes import and distribution role (para 3.18);

(xxiv) MOA's tractor hire services would be discontinued asfollows: wheeled tractor services by December 31, 1987;combine harvester services by February 28, 1989 and landclearing services by June 30, 1991 (para 3.21);

SOE REFORM PROGRAM

(xxv) Government would carry out a reform program of theAgricultural State Owned Enterprises according to thefollowing schedule: in the first three years of project, tocontinue ongoing activities and implement reform wheredecisions have already been taken, (para 3.24); in the thirdand fourth years, to conduct studies and implementrecommended actions for selected list as specified in para3.24.

(xxvi) With effect from the 1988 budget year, no subventions wouldbe provided to any of the SOEs that are listed forliquidation or selling off (para 3.26).

4.02 Conditions of credit effectiveness agreed upon are:

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(i) UNDP project in support of PPMED signed and TA staffselected (para 3.08);

(ii) The appointment of the head of CIDU to be completed (para3.20).

(iii) MOA to establish a unit to handle agricultural SOE reformprogram and have its key staff in place (para 3.25);

(iv) The Project Coordination Unit established (para 3.29);

(v) The Government of Ghana having deposited in the projectaccount 50 million cedis which is the estimated operatingcost of the project for the first three months (para 3.39).

4.03 On the basis of the above assurances and conditions, the Projectwould be suitable for an IDA credit of US$17.0 million.

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Annex 1Page 1 of 4

GHANA

Key Features of the Agriculture Sector

1) Population Units

Total population million 13.00 1983it 13.95 1/ mid - 1985

Population growth 3.1 2/ 1973-83Rural as % of total % 61.9 3/ 1983

AverageUnits 1975-76 1984-85 1986

2) Economic Overview 4/

GNP Per Capita in 1985 5/ $ 390.00 n/a

Agriculture GDP/Head ofRural Population $ 368.95 n/a

Agriculture GDP as % ofTotal (in constant 1975prices) 6/ % 48.5 45.0 n/a

1/ Population Growth Policies in Sub-Saharan Africa, World Bank PolicyStudy, July 1986, Table S-1, page 68. Quarterly Digest of Statistics,March 1986 has different estimates 1983: 11.99, 1985: 12.62. SeeWorld Bank Report No. 6635 GH, March 30, 1987.

2/ Population Growth Policies in Sub-Saharan Africa, World Bank PolicyStudy, July 1986, Table 19, page 88.

3/ Data from World Bank Commodity Division, 1984.

4/ Ghana Towards Structural Adjustment, Vol. II, Statistical Annex, WorldBank, Report No. 5854-GH, October 7, 1985. Table 2.02, page 8.

5/ Atlas Methodology.

6/ Report No. 6635-GH, op.cit Table 2.02.

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Annex 1Page 2 of 4

AverageUnits 1974-76 1984-85 1986

Agriculture GDP as % of 7/ % 48.5 52.0 n/aTotal (in current prices)

3) Land Use 8/

Land Area million ha 23.08 23.08Forest " " 9.01 8.05Perennial Crops " " 1.07 1.07Annual Crops " " 1.05 1.12of whicharea under irrigation thousand ha 7.0 7.0

4) Outputs 9/

Maize thousand tons 372 485 495Rice " 71 78 80Millet " 140 130 140Guinea Corn it 167 181 190Cassava it 2,608 3,570 3,040Yam i 711 642 660Per Capita pounds 176.4 140.9 141Cereal Production

5) Inputs 10/

Fertilizer (Imports) metric tons 26,231 34,175 20,100Pesticides n/a n/a n/aTractors units 3,183 3,700 n/a

7/ Report No. 6635-GH, op.cit. Table 2.03.

8/ FAO 1985 Production Yearbook, Vol. 39, page 48.

9/ Report No. 5854-GH, op. cit. Table No. 7.06. For 1986 data,Report No. 6635-GH, op.cit.

10/ Ghana, Fertilizer Privatization Study, International FertilizerDevelopment Centre. July 1986, page 15.

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Annex 1Page 3 of 4

AverageUnits 1974-76 1984-85 1986

5) Trade

Total Exports of goods 11/ $m 772 12/ 599 13/ 773 14/of which

Agricultural Products % 75.7 70 73of which

Cocoa Products 58 95 92Logs & Timber 13.5 5 8

7) Imports 15/

Total of Goods $m 824 703.5 780of which

Agricultural Products % 11.6 n/a n/aFood Imports % oftotal % 9.03 n/a n/a

Agric. Inputs as % of %total 2.53 n/a n/a

11/ FAO 1985 Production Yearbook, Table 117, page 297.


13/ Report No. 6635-GH, op.cit. Annex D, page 1.

14/ Report No. 6635-GH, op.cit. Annex D, page 1.


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Annex 1Page 4 of 4

Units 1974-76 1984 1986

8) Government Expenditures 16/ Om 1,300.5 26,694.0 n/a

Total Capital Budget 17/ " 363.7 3,994.0 n/aof which

Agriculture andNon-Mineral Resources " 29.6 384.3 n/aTotal Recurrent Expenditures " 936.4 22,700.0 n/a

of whichAgricultural andNcn-Mineral Resources It 62.0 936.3 n/a

WAPABApril 1987

16/ Report No. 6635-GH, op.cit. Statistical Appendix, Tables 5.01, 5.03,5.05.

17/ Capital Budget referred to as total Development Expenditure does notinclude foreign funding.

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Annex 2-1Page 1 of 2

GHANA


AGRICULTURE SECTOR CONSTRAINTS

1. Ghana's agriculture which is dominated by smallholders, isprimarily rainfed, with low yields characteristic of traditionaltechniques. Population is increasing at a high rate of approximately 3%per annum, intensifying the pressure on land. Government's developmentgoal is to improve productivity, by promoting widespread adoption of moderntechniques and use of related inputs and by improving marketinginfrastructure. To achieve this goal, Government must address four broadsets of constraints.

2. First, are inadequate incentives. The situation is differentbetween industrial and food crops. The prices of industrial crops --cocoa, coffee, sheanuts, cotton, palm oil, tobacco and rubber, are setdirectly by Government or by monopolies and cartels, with Governmentapproval. Producers of some of these crops (cocoa, coffee, cotton andtobacco) continue to receive prices which are low compared to borderprices, although there has been a significant improvement in recent years.Palm oil and rubber production is hampered by technological rather thanincentive problems. The prices of basic food crops -- the major ones beingmaize, rice, sorghum, millet, tubers -- are market determined. Except fortubers, they are all tradeables but their prices are determined primarilyby localized gluts and scarcities, rather than the border prices ofcompeting imports because of the deteriorated state of domestic marketinginfrastructure and the severe foreign exchange constraint. As a result ofmarket segmentation, prices are volatile. For producers, the volatilityincreases the risks and costs of marketing, which in turn tend to inhibitincentives for production. For the Government, the volatility is viewed asundermining its food security objective which is to ensure adequate foodsupplies at stable prices (see Annex 3-5 on Irrigation Development).

3. Secotd, are the difficulties in input supplies. The import anddomestic sale of fertilizer and inputs to cocoa have been Governmentmonopolies. Their delivery have suffered from the institutional andfinancial weaknesses of the Government machinery, and the poor state ofroad transport. The right types and quantities of fertilizer are notimported, and fertilizer is not available on time. The import of otherinputs handled by commercial importers and enterprises (e.g. fisheries andlivestock) experienced the usual delays and inefficiencies of a cumbersomeimport licensing system. As of October 1986, Government has in theoryswitched over to automatic licensing. Thus licenses are no longer requiredto participate in the weekly auction which was introduced on September 19,1986. With the rapid devaluation of the cedi from the official 90 cedirate to a 150 cedi rate (early December), cedi liquidity of commercial

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importers and enterprises is becoming a serious constraint on access toimports.

4. Third, are the weaknesses of the policy making and implementinginstitutions serving agriculture. The Ministry of Agriculture (MOA) hasnot been able to adequately fulfill its role of identifying priorities forthe sector's development, formulating policies and programs, coordinatingthe activities of the many agencies operating in the sector, and deliveringessential support services to farmers. Extension services are poorlyorganized and lack mobility. Research also suffer fzom shortage of funds,is fragmented and results are not adequately translated into extensionmessages. Seed releases from the state owned Ghana Seed Company are oftenof low quality and overpriced.

5. Fourth, is the widespread deterioration of road and communicationsystems and the limited development of an effective rural credit system.Transport problems inhibit output marketing and timely delivery of inputs,thus raising the costs of intermediation and contributing to sharp pricevolatility. What is known about formal credit points to the high cost ofdelivering credit to rural areas, including low recovery rates and lack ofpublic confidence in the formal system which undermines the mobilization ofsavings. Effective demand for modern inputs suffers from farmers' limitedaccess to credit. Credit problems also contribute to price volatility.

6. In short, sustained agricultural growth has been constrained by adiscriminatory policy environment, inadequate systems for deliveringextension services, and farm inputs, and poor marketing infrastnrcture.

WAPABApril 1987

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GHANA


KEY AGRICULTURAL INSTITUTIONS

1. The main public sector agricultural institutions are responsiblefor (a) policy formulation and implementation, are involved in (b) thedelivery of services and inputs, and to more limited extent handle (c)production and/or marketing of selected industrial crops. They are all inthe process of being restructured so as to better support the EconomicRecovery Progravi. This annex describes the main features. More detailedfeatures are described in the Annexes 3-1 to 3-8 which follow.

2. The Ministry of Agriculture (MOA) is of primary importance to thesector since it is responsible for both items one and two above, and itsupervises the operations of numerous state owned enterprises (SOEs). Theonly area that does not fall under its jurisdiction is cocoa, which ishandled by the Cocoa Marketing Board (COCOBOD). MOA's operations arehighly centralized. The headquarters in Accra set policy directions,formulate programs and decide on the budgets for all the ten regionaloffices. As a result, regional offices have no autonomy. Despite thiscentralized structure, the management information system in Accra isvirtually non-existent. It is thus extremely difficult to effectivelymanage even the Accra operations of the six major departments: cropservices, veterinary, animal husbandry, fisheries, agricultural engineeringand Economic Research and Planning Service (ERPS). The ERPS is intended asthe analytical and policy formulation arm of the MOA, but it has not beenable to function effectively as such.

3. There are other institutional constraints, which are common toother parts of the civil service. The main ones are staffing andremuneration within a context of overall resource constraint. The skilland pay structure does not support the highly technical and analyticalfunctions MOA has to fulfill. There are too many lower level staff and notenough pay for higher level staff. Apparently, staff at all levels earn nomore than ten per cent of their total income from their MOA employment.Both staff effectiveness and morale suffer as a result.

4. MOA is responsible for delivering extension, fertilizers andmechanization services. In the Upper East, Upper West and Volta regions,Government owned Farmers' Services Companies (FASCOMs) handle fertilizersales, not MOA. The four technical departments provide their own extensionservices, in parallel with other commodity and area based extensionservices. There are three sets of issues with respect to extension. Oneis the internal organization and resources of MOA's services to improvetheir effectiveness. The second is their relationships with existingsystems so as to avoid duplication. The third is their linkages with

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adaptive research so as to improve the quality of extension messages. Onfertilizer, a faulty system of assessing demand and chronic budgetaryconstraints have undermined timely delivery. Mechanization services sufferfrom similar managerial and budgetary shortcomings. Both fertilizersupplies and mechanization services are subsidized, further constrainingbudget and delivery.

5. Research on crops, livestock and forestry is undertaken by sixinstitutes. Their work program and budgets are managed by the Council forScientific and Industrial Research which in turn reports to the Ministry ofIndustry and Technology (MIST). So although these institutes work onagriculture, they fall under the jurisdiction of industry. Like otherpublic institutions, their work suffer from lack of funding and adequatestaff skills.

6. COCOBOD is the other major policy making and marketinginstitution. It handles all cocoa matters, including the supervision ofthe Cocoa Research Institute of Ghana (CRIG). Its major subsidiaries arethe Produce Buying Company (PBC) which has monopoly over internal purchaseand the Cocoa Marketing Board (CMB) over external sales. Major issues arethe rationale for its marketing monopoly and the efficiency of itsoperations. These are being discussed in the context of the StructuralAdjustment (SAL).

7. The State Owned Enterprises (SOEs) form the third block of publicsector institutions in agriculture. They fall into three categories (a)direct production and marketing such as Food Production, State Farms andState Fishing; (b) delivery of inputs and services such as the Ghana SeedCompany and the FASCOMs in the Upper East, Upper West and Volta regions;(c) implementation of Government policy on irrigation -- IrrigationDevelopment Authority and on food security -- the Ghana Food DistributionCorporation. To a greater or lesser extent, they all face seriousfinancial and management problems. The operations of major SoEs, some ofwhich are agricultural, are being reviewed in the public sector managementcomponents of the SAL and by the Public Enterprise Project. There are twobasic issues, namely the rationale for Government involvement in productionand marketing activities which can be undertaken by the private sectorwithout any loss to society's interests (case of market failure or ofexternalities); and the cost effectiveness of their operations inactivities where Government has a legitimate role to play.

WAPABApril 1987

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GHANA


MINISTRY OF FINANCEAND ECONOMIC PLANNINGP.O. BOX M. 40ACCRA

March, 1987

Dear Mr. Conable:

Subject: Agricultural Goals and Policies

1. I am writing in connection with the proposed AgriculturalServices Rehabilitation Project to inform the International DevelopmentAssociation about the agricultural development goals being pursued and thepolicy reform actions which the Government has already taken or proposes totake to promote growth in Ghana's agricultural sector. The primaryobjective is to rehabilitate the sector by providing incentives forincreased production of crops and animal products for which Ghana has acomparative advantage.

2. As you know, this Government launched an Economic RecoveryProgramme (ERP) in 1983 to revive a deteriorating economy. We havecompleted the first phase of the ERP which has brought improvements in theeconomy and general living standards. In order to strengthen and buildfurther upon the successes of the first phase (1983-85) of the ERP theGovernment has formulated a second phase covering the next three-year(1986-88) period. The issues to be dealt with under the second phase ofthe ERP are similar to those addressed under the first phase, but with agreater emphasis on sectoral concerns so as to lay the basis for renewed,vigorous and efficient growth in the key sectors of agriculture, energy,industry, education and health. Against this background, the Government isasking the International Development Association to grant a credit tosupport the rehabilitation and the development of an efficient agriculturalsector.

3. The report presented by the Government to the Consultative Group,in November 1985, describes the main features of the second phase of theERP covering the period 1986-88. In this letter, I will describe in moredetail the Government's objectives and actions taken or planned in twomajor areas of policy reforms, critical to the rehabilitation of theagricultural sector: the trade regime and pricing policy; and the role ofthe public sector in agriculture.

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4. Trade Regime and Pricing Policy: One of the fundamentalobjectives of the ERP is to improve the competitiveness of tLe economy ingeneral and of agriculture in particular by appropriate trade and pricingpolicies. These policies have been described in detail in a more generalmacro-economic context in my letter of February 21, 1986, addressed to youin relation to the Industrial Sector Adjustment Credit financed by IDA.

5. Import Regime: The exchange rate is being devalued through theauction and import procedures are being liberalized. Over the longer term,this liberalization should improve the sca:e and efficiency of agriculturalproduction by expanding the availability and improving the timeliness ofInputs. Government also intends to improve coordination of food andcommodity imports so as to ensure that commercial and concessional importsdo not undermine domestic incentives for production and marketing.

6. Tariff Structure: Government's objective is to reduce dis-crimination against the sector and distortions within the sector, therebypromoting efficiency of resource use and reducing costs of administration.A Fiscal Review is being carried out in 1987 to recommend appropriatetariff levels for the entire economy, including agriculture.

7. Export Promotion: Incentives to export will benefit from higherexchange rates expected under the auction. Measures to promote exportswill include removal of legal and administrative impediments, astrengthening of the Export Promotion Council and improvements in creditfacilities. In addition, the World Bank is financing a study, beingcarried out in 1987, to develop a medium term strategy for exportdiversification.

8. Agricultural Pricing Policy: The Government has taken steps toimprove financial incentives to farmers by significantly increasing theprices of cocoa, sheanuts, coffee, tobacco and cotton. There has been apositive supply response from farmers and production of these crops isincreasing. For tobacco, cotton and palm oil, for which there are one or afew purchasing companies, Government wants to monitor private sectorproposals and develop its own price proposals. The Government proposes toadopt efficiency criteria rather than cost of production alone in itspricing work. The Ministry of Agriculture's Policy, Monitoring andEvaluation Department (PPMED) will be suitably staffed and upgraded underthe proposed ASRP, to provide the required analytical underpinnings. Forsheanuts and coffee, it is intended to set local prices at levels closelyreflecting world prices. For cocoa, it is the Government's intention toencourage production by increasing the prices paid to the producers tolevels approaching 60% of the estimated long-time world price by the1988/89 crop year.

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9. Public Sector Role in Agriculture: The reform and ratio-nalization of the public sector's role in agriculture will be carried outthrough a four-pronged program:

(a) Improving the Coordination of Institutions Involved in theSector. Government recognizes the need for setting up aninter-institutional agricultural policy coordinating committee toharmonize policies between the Ministry of Agriculture (MOA),COCOBOD and the Department of Forestry of the Ministry of Landsand Natural Resources. The PPMED in MOA will be strengthened andgiven the mandate of coordinating Government agriculturalpolicies and programs. An Agricultural Policy CoordinationCommittee comprising MOA, COCOBOD, Ministry of Finance andEconomic Planning, Ministry of Local Government, Ministry ofIndustry, Science and Technology, Ministry of Trade and Tourism,Ministry of Transport and Communications, Ministry of Roads andHighways, Ministry of Lands and Natural Resources, and Bank ofGhana will be set up by the end of 1987. To ensure that therequired coordination of agricultural research and extension, theAgricultural Research and Development Advisory Committee hasalready been set up. This Committee brings together the researchinstitutes, MOA and the development agencies.

(b) Rationalizing of Public Sector Role. Government is currentlyundertaking a thorough review of the state enterprise system inorder to carry out appropriate reform. This will includerehabilitation of some state-owned enterprises because of theirstrategic importance, in other cases, joint ventures anddivestiture. The overall strategy aims at limiting the directparticipation of the State in agriculture to critical areas inwhich there is no interest by private investors or some otherexceptional justification for direct public involvement.State-owned enterprises will be expected to operate withoutGovernment subventions as commercial entities and contributepositively to public savings. Critical areas for continuedGovernment involvement are agricultural research and extension.Two studies to be carried out in 1988-1990 will prepare researchand extension strategies to meet future needs.

(c) Efficiency Criteria for Public Investment. In addition to therationalization of the state owned enterprise sector, theremaining government investment in agriculture will receivegreater scrutiny than in the past based on efficiency criteria.Allocation of a higher percentage of national resources toagriculture will enable investments in longer term, institutionaldevelopment to begin during the period. To begin with, MOA willbe reorganized to meet the objectives outlined above, with astrengthening through the proposed ASRP of the PPMED, theextension services and the veterinary services.

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Adequate recurrent expenditure will be ensured in the budgetto operate and maintain projects or services which have beendeemed worthy of further support; particularly agriculturalresearch and extension. Cost recovery for services provided andrevolving funds will be introduced in irrigation schemes,veterinary services and for other inputs provided by MOA(seedlings, etc.). A study of the irrigation sub-sector has beencompleted and it has been agreed that any new investments inirrigation must be shown to generate satisfactory rates ofreturn.

(d) National Conservation Strategy. Ghana's ability to develop andmaintain a viable, productive and competitive agricultural sectordepends on its ability to maintain soil fertility and avoidenvironmental degradation. To this end, the Ministry has set upan Agro-Forestry Department to advise MOA on the conservation andimprovement of the country's agricultural resource base. Anational policy will be developed by 1988 in conjunction with theForestry Department of the Ministry of Lands and NaturalResources and the Environmental Protection Council.

10. Food Security: Government's policy has been to build and managestocks to support a minimum price to farmers and to increase food suppliesunder emergency situations. The Ghana Food Distribution Corporation is itsimplementing agency, but its operations are undermined by financialconstraints. It has recently completed the construction of 17,000 ton silocapacity and is planning on a further expansion to 150,000 ton. Beforeproceeding with this expansion, the Government with Bank assistance, willassess the technical and financial soundness of current operations. TheMOA and the World Bank with financial support from USAID are jointlyundertaking a study of Food Security to review the effectiveness of currentoperations and to develop cost effective options for ensuring a desiredlevel of food security. Based on the findings and recommendations of thestudy, the Government and the World Bank will agree on a program of action,which can be supported by interested donor governments.

11. Farm Credit: Government policy over the 1986-88 period involvesstrengthening the institutional capability of Rural Banks and thedevelopment of a manual for rural bank personnel. The Bank of Ghana willbe required to assume a wider range of responsibility in the field ofagricultural credit. We are also considering measures to promote savingsand facilitate local resource mobilization. Government policy ofmaintaining real positive interest rates will improve the mobilization ofrural savings and thus contribute to credit expansion.

12. Monitoring Policy Impact: A strengthened Policy, Monitoring andEvaluation Department will monitor changes in major prices along themarketing chain from border to farm. In the case of three industrialcrops: cotton, tobacco, and palm oil which are purchased by monopolies.

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or cartels, the PPMED will also develop its own price proposals based uponefficiency considerations. Finally, it will monitor farm level responsesand report to policy makers so as to facilitate flexible policy response.

Youirs faithfully,

PNDC Secretary for Finance andEconomic Planning(Dr. Kwesi Botchwey)

WAPABApril 1987

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GHANA


GOVERNMENT STATEMENT OF AGRICULTURAL POLICY

A. INTRODUCTION AND BACKGROUND

1. Agriculture, including forestry, has, in the past, accounted forabout 57% of Gross Domestic Product (GDP), close to 80% of merchandiseexports, and employed 55% of the labor force. About 70% of the population(8.5 million) live in rural areas. In every respect therefore, agricultureis the "prime-mover" of the Ghanaian economy; and it is in the agriculturalsector that the battle for long-term economic growth and development willbe won or lost.

2. The scope for efficient growth in agriculture is great sinceGhana is endowed with an immense agricultural resource base, a relativelylarge and potentially competitive industrial capacity, an abundant supplyof hydroelectric power (1070 megawatts) a relatively well developed humancapital base and a relatively small population (12.2 million in 1984).

3. The development of Ghana into a solid agricultural nation capableof feeding herself and exporting her surpluses has in the past suffered asa result of a general decline in Ghana's economy. Gross Domestic Product(GDP) declined by 0.5% per annum between 1970 and 1982. Real per capitaincome fell by 30%, import volumes fell by 65%, real export earningsdeclined by 52%, falling from 21% of GDP in 1970 to 4% in 1982. The con-sumer price index increased by 80% per annum between 1975 and 1982, and by122% in 1983. Population growth rate on the other hand averaged 2.6% perannum between 1970 and 1984. The population in 1984 was 12.2 million andper capita GNP was about US$320.

4. The general decline in the Ghanaian economy was caused amongother things, by inappropriate and uncoordinated economic policies, out-moded institutions and unworkable procedures. The inappropriate policiesinclude (a) the maintenance of a grossly overvalued exchange rate, (b)quantitative import restrictions which protected non-competitive systems ofindustrial and agricultural production, (c) excessive taxation of exportsresulting in reduced production and foreign exchange earnings, (d) main-tenance of low product prices through subsidies for the benefit of urbanconsumers resulting in a marked decrease in domestic production, and (e)the uncoordinated fashion in which research, extension and other institu-tions pursued their narrowly defined objectives.

5. The consequences of these unfavorable domestic policies havebeen, among other things, disincentives to crops for which Ghana has aclear comparative advantage and vice versa, resulting in a decrease in the

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production of several crops including tobacco, cocoa, cotton, rubber andoil palm. The resultant highly distorted incentive structure imposed highimplicit taxation on some crops with a clear comparative advantage (cocoa,rubber, cotton and tobacco) and high implicit subsidy to crops with clearcomparative disadvantage (mechanized rice and sugar-cane).

B. RECENT POLICY MEASURES

6. Given the continuing decline of the economy, it was necessary totake appropriate trade and exchange rate, monetary, fiscal as well asnon-price policy initiatives. The Government of the Provisional NationalDefense Council (PNDC) which took office at the end of 1981 announced aseries of fundamental economic reform measures in April 1983 and agreed toa short term stabilization program with the International Monetary Fund(IMF). The major measures under this first phase of the ERP have includedthe following:

- progressive exchange rate adjustments from 02.75 - US$1.00 inApril 1983 to 090.00 = US$1.00 in January 1987. The latestexchange rate of 0153 = US$1.00 (February 21, 1987) representsunified market;

- an increase in cocoa producer prices from 012,000 per ton inApril 1983 to 056,000 per ton for the 1985/86 mid-crop year and¢85,000 for 1986/87 a 112 percent increase in real terms since1983. An additional ¢500 per metric ton is to be paid if theproduction target for the 1987/88 season of 230,000 metric tonsis exceeded;

- the progressive reduction of price and distribution controlsreducing the list of goods subject to these controls from 23 in1984 to 8 in 1985;

- increased fiscal stringency including greatly reduced recourse byGovernment to the banking system;

- the preparation and implementation of rehabilitation programs forkey sectors including cocoa, gold, timber, mining and transport;

- increases in low public sector salaries by 40 percent in April1984, 80 percent in January 1985 and by a doubling of salarylevels on average in January 1987, with the objective ofproviding increased incentives in the civil service, particularlyfor the higher management levels, and

- the encouragement of private sector involvement in activitiespreviously controlled by Government and parastatals.

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- increasing interest rates to encourage saving and achieve apositive real rate of interest.

7. Recent figures show that the economy has begun to respond,despite a slow start due to severe drought in 1983. Real GDP increased by10.7 percent in 1984, helped by a more normal rainfall, after five succes-sive years of decline. A further increase of 5.1 percent in GDP wasrecorded in 1985 bringing the GDP to only 10 percent (in real terms) belowthe production peak which occurred in 1974. The consumer price index roseby 40 percent in 1984 and a further increase of only 10.4 percent occurredin 1985 despite heavy exchange rate adjustments. The balance of paymentsregistered a US$215 million current account deficit in 1984. This was 2.8percent of GDP, slightly lower than the deficit of US$230 million in 1983.Total debt service (including IMF) was about US$281 million in 1985, whichwas 45 percent of estimated export levels in that year, and it is estimatedto amount to US$391 in 1986.

8. Agricultural output grew at ten percent in 1984, accelerated bygood rainfall improved incentives and input supplies, and accounted forabout 51 percent of GDP. A further growth in agriculture of about onepercent was recorded in 1985.

9. In spite of the positive response to the policy reforms initiatedin 1983, the Government still faces a formidable task in maintaining themomentum of the recovery in view of the still poor state of the economic,social and administrative infrastructure and the depleted manpower base.A serious current constraint is the shortage of foreign exchange andliquidity at a time when inputs for the productive sectors, especiallyagriculture, are badly needed. There is also the urgent need to improveGhana's institutional capacity for policy formulation and analysis as wellas monitoring and evaluation of projects.

10. The purpose of this Statement of Agricultural Policy (1986-88) isto indicate the policies and strategies the Government of Ghana intends topursue over the 1986-88 period and the general direction beyond thatperiod, in order to consolidate the gains so far made to improve the policyenvironment which will provide the impetus for the future growth anddevelopment of the National Economy on a sustained basis.

C. OBJECTIVES AND STRATEGY

11. The principal objectives of agricultural policy during the secondphase of the Economic Recovery Program (ERP) are to:

(a) liberalize the mechanisms for determining domestic pricesand imports, thereby promoting more competitive markets and more efficientresource allocation;

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(b) reduce and where possible eliminate dependence on importedfood and industrial crops, fish and livestock products for which Ghana hasa comparative advantage;

(c) increase export earnings from crops and animal productsincluding cocoa and non-traditional exports;

(d) rationalize and improve the performance of public sectorexpenditure in agriculture;

(e) provide for sufficient research, incentive and investment toensure the implementation of a national conservation policy;

(f) through the attainment of the above objectives, an improve-ment in producers' incomes, with particular attention to the lower-incomeproducers.

12. Government's strategy for the rehabilitation and further develop-ment of the agricultural sector is based on considerations of competitive-ness, efficiency and equity. The Government's role in the sector will berationalized to provide a suitable environment for competitive markets todevelop and resources to be allocated more efficiently. It is Government'sintention that the process be phased in such a manner that producers canadjust gradually (over the 1986-88 period) to more competitive and effi-cient modes of production.

13. The short-term strategy (2-3 years), which was begun under thefirst phase ERP but requires additional follow-up and consolidation, is tocomplete the rehabilitation of the existing productive capacity in themajor crop (including cocoa) forestry, fish and livestock subsectors. Forthis, the principal short-term actions required are the provision ofadequate incentives and inputs to the agricultural sector. Direct incen-tives are required for export and industrial crops, and indirect incentivesfor increasing the production of all crops through the speedy rehabilita-tion of transportation services and infrastructure so as to reducemarketing costs and uncertainties. In addition, better coordination onfood imports must be carried out as recent importations (both food aid andcommercial) have depressed domestic prices (e.g., maize, fish). Increasedquantities of inputs, tools, spare parts, equipment, etc., have been madeavailable, but more needs to be done to increase resources for imports andto facilitate and liberalize inputs importation and distribution.

14. The medium-term strategy (4-6 years), would include four mainlines of action: (a) major institutional restructuring and investment topromote export/import substitution crops, particularly cocoa, rubber,forestry products, cotton and tobacco; (b) reorganization and/or strength-ening of support services-: input distribution, seed production, extension;assistance for prevention of post-harvest losses and improved storage insupport of food production (primarily maize, cassava, and sorghum/millet inthe northern savannah); (c) consolidation of irrigation development; and

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(d) rationalization of central and regional government support to thesector, particularly in planning and resource allocation. Sustainedagricultural growth in the medium- to long-term would require continuedprice incentives and additional measures to overcome existing constraints,particularly the weak research base and extension/research link andcontinued ineffectiveness in input distribution.

D. ACTION PROGRAM

15. The agriculture sector's objectives and strategies describedabove will be pursued through the following major policy measures andspecific actions:

(a) improve incentives to agriculture by improvements to thegeneral economic environment including exchange rate adjustments, facili-tating and liberalizing the importation of inputs a,.1 rromoting exports;

(b) improve availability of agricultural inputs to rehabilitatethe sector and fully utilize existing productive capacity;

(c) develop the technologies necessary to intensify and diver-sify production to increase local food supply and expand exports through acoordinated research and extension program;

(d) rationalize and reform the public sector role in the agri-cultural sector to one of support, through a concerted program of improvedcoordination of institutions in the sector, limited direct public sectorparticipation in productive and marketing activities, improved investmentcriteria and rehabilitation of essential services provided by Government.

(e) develop a national conservation policy with particularreference to the forestry sub-sector and research into the maintenance ofsoil fertility under traditional and more advanced farming systems.

E. POLICY FRAMEWORK

(1) Trade and Export Promotion Policy

16. Liberalization of Imports of Agricultural Inputs. SinceSeptember 1986, the auction has been the official mechanism for importingall production inputs, including agriculture. Quantitative allocationthrough import licenses are no longer operative.

17. Coordination of Food and Commodity Imports. Government intendsto improve the coordination so as to ensure that commercial andconcessional imports do not undermine domestic incentives for productionand marketing. Since producers will be incurring increasing production

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costs with further devaluation, it is essential that output prices not beartificially depressed through poor timing of imports.

18. Phased Elimination of Quantitative Restrictions on CommodityImports. Government s objective is to promote efficiency of resource usein production and reduce costs of administration. As part of a study onFiscal Review scheduled for mid 1987, the appropriate level of effectiveprotection for agriculture using tariffs primarily will be recommended.

19. Export Promotion. A concerted export promotion program willattempt to diversify the production base and strengthen agriculture'sability to earn foreign exchange. Recent exchange rate adjustments andexport retention schemes have reinforced selective price adjustments toimprove earnings from exports. Further measures to consolidate and expandthese gains will be developed, so that agriculture's and the economy'svulnerability to a narrow export base can be reduced. An Export PromotionCouncil will be strengthened to review, coordinate and provide thenecessary incentives for exporting.

(2) Pricing Policy

20. Output Pricing. Considerable progress has been made inliberalizing price setting by Government, thereby improving incentives toproducers. However, a few crops including cocoa, which is of significantimportance to the economy, still have producer prices set by Government.Due to its position as the main source of foreign exchange, cocoa pricingwill remain in the hands of Government during the 86-88 period, but theproducer price will be increased annually to an indicative target of 55 to60 percent of the world market price. For cotton, tobacco and plantationpalm oil, monopolies or cartels purchase the outputs. Government intendsto monitor the prices proposed as well as develop its own price proposalsusing cost of production and border price considerations. The strengthenedMinistry of Agriculture's Policy, Monitoring and Evaluation Department(PPMED) will provide the analytic basis to develop these price proposalsand to monitor buyers' proposals, so as to ensure farmers are offeredremunerative prices based on expected border prices and competitivenesswith other crops.

21. Fertilizer Pricing and Privatization. The Government has decidedto phase out the substantial subsidy on fertilizer and to complete theprivatization process by 1990. The subsidy will be reduced by 42 percentby crop year 1987, 30 percent by 1988, 15 percent by 1989, and completelyeliminated by 1990. When a completely privatized system of importing,handling and distributing fertilizers is established, the companies willset prices and Ministry of Agriculture will only monitor them.

(3) Public Sector Role

22. The reform and rationalization of the public sector's role inagriculture will be carried out through a three-pronged program:

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(a) Improved Coordination of Institutions Involved in the Sector.Government recognizes the need for setting up an inter-institutional agricultural policy coordinating committee toharmonize policies between the Ministry of Agriculture (MOA),COCOBOD and the Department of Forestry of the Ministry of Landsand Natural Resources. PPMED in MOA which will act assecretariat to the coordinating committee, will be given themandate of coordinating Government agricultural policies andprograms. An Agricultural Policy Coordination Committeecomprising MOA, COCOBOD, Ministry of Finance and Economic Plan-ning, Ministry of Industry, Science and Technology, Ministry ofTrade and Tourism, Ministry of Transport and Communications,Ministry of Roads and Highways, Ministry of Lands and NaturalResources, Ministry of Local Government and Bank of Ghana will beset up by the end of 1987 to ensure the required coordination ofpolicy actions is carried out. Improved coordination ofagricultural research and extension has already been initiatedthrough the Agricultural Research and Development AdvisoryCommittee, which brings together the Research Institutions, MOAand the development agencies.

(b) Rationalization of Public Sector Role. Government is currentlyundertaking a thorough review of the state enterprise system inorder to carry out an appropriate reform. This will includerehabilitation of some state-owned enterprises because of theirstrategic importance, for others joint ventures and divestiture.The overall strategy aims at limiting the direct participation ofthe State in agriculture to critical areas in which there is agap in the availability of private investment or some otherexceptional justification for direct public involvement. State-owned enterprises will be expected to operate without Governmentsubventions as commercial entities and contribute positively topublic savings. Critical areas for continued Government involve-ment are agricultural research and extension. Two studies to becarried out in 1987-1988 will prepare research and extensionstrategies to meet future needs. Research needs of the countrywill be studied to direct efforts towards increasing productivityand promoting crop diversification for domestic use and export.Government will also continue to play a role in facilitatingmarketing and quality control by market information systems,produce inspection, weights and measures.

(c) Application of Efficiency Criteria to Investment: In addition tothe rationalization of the state owned enterprise sector, theremaining Government investment in agriculture will receivegreater scrutiny than in the past, based on efficiency criteria.Allocation of a higher percentage of national resources toagriculture will enable investments in long term, institutionaldevelopment to begin during the period. To begin with, MOA willbe reorganized to meet the objectives outlined above, with a

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strengthening through donor aid of the PPMED, the extensionservices and the veterinary services. Adequate recurrent expen-diture will be ensured in the budget to operate and maintainprojects or services which have been deemed worthy of furthersupport; particularly agricultural research and extension. Costrecovery for services provided and revolving funds will beintroduced in irrigation schemes, veterinary services and forother inputs provided by MOA (seedlings, etc.). A study of theirrigation sub-sector has been finalized and the Government andthe Bank have reached agreement on the main points of an actionprogram. In particular, it has been agreed that any new invest-ments in irrigation must be shown to generate satisfactory ratesof return.

(4) National Conservation Strategy.

23. Ghana's ability to develop and maintain a viable, productive andcompetitive agricultural sector depends on its ability to maintain soilfertility and avoid environmental degradation. To this end, the Ministryhas set up an Agro-Forestry Department to advise MOA on the conservationand improvement of the country's agricultural resource base. A nationalpolicy will be developed by 1987/88 in conjunction with the ForestryDepartment of the Ministry of Lands and Natural Resources, theEnvironmental Protection Council and the Ministry of Finance and EconomicPlanning.

(5) Food Security

24. Government's objective is to improve food security by developingcost effective means sustainable within Government's budgetary constraints.The Government is concerned about the sharp fluctuations in maize prices,causing hardships to farmers in times of surplus and to consumers in timesof scarcity. It thus intends to build food stocks in maize producing anddrought-prone areas and to improve village level storage capacity. Withexternal financing, GFDC is preparing the storage construction program.The recurrent cost implications of this construction program, subsequentstocking and its management are being fully monitored and must be cerefullyexamined, so as to develop ways of effectively managing the stocks uithoutstraining the Government's recurrent budget.

25. Of immediate importance is to assess and improve the technicaland financial soundness of GFDC's current operations. Over the mediumterm, we need to develop an affordable food security strategy by analyzingthe cost effectiveness of stockbuilding and other means of improving foodsecurity. With World Bank assistance the Government is launching a studyto analyze the cost effectiveness of a mix of instruments: (1) public andprivate stockbuilding at different levels, including recourse to emergencyfood procurement and imports; (2) external trade and (3) special reliefmeasures.

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(6) Farm Credit

26. Liquidity constraints have increased with successive devalua-tions. Government has taken steps to provide additional funds to the ruralcredit system, through its own funds and external aid. The Governmentregards the Rural Bank concept as the best means of extending credit tosmall farmers. Government policy over the 1986-88 period involvesstrengthening the institutional capability of Rural Banks through trainingprograms for directors and managers of Rural Banks and the development of amanual for rural bank personnel. The Bank of Ghana will be required toassume a wider range of responsibility in the field of agricultural credit.Specifically, the Bank of Ghana will be required to develop a more workableCredit Guarantee Scheme for banks involved in extending credit to smallfarmers and to improve the effectiveness of its supervisory activities overrural banks. These measures are designed to improve the loan recoveryperformance of the Rural Banks and other banks extending credit to smallfarmers and thus increase the amount of loanable funds. Measures topromote savings and facilitate local resource mobilization will also bepursued. The Government also recognizes that farmers' ability to repaytheir loans promptly, to a large extent depends on availability of readyand lucrative markets for their produce. In this regard, private sectorinitiatives will be encouraged to provide efficient marketing, storage anddistribution services, through tax and other incentives. Government policyof maintaining real positive interest rates will improve the mobilizationof rural savings and thus contribute to credit expansion.

Monitoring Policy Impact

27. The rapid and extensive changes being proposed in the policyenvironment are likely to have far-reaching and at times may have unin-tended consequences on production and marketing. A strengthened Policy,Monitoring and Evaluation Department will monitor changes in major pricesalong the marketing chain from border to farm. It will also monitorindustrial crop prices for cotton, tobacco and palm oil and farm levelresponses and report to policy makers so as to facilitate flexible policyresponse.

WAPABApril 1987

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GHANA


Ministry of Agriculture and Policy, Planning, Monitoring &Evaluation Department: Reorganization and Training

1. Overall Structure. MOA is implementing a reorganization of itsservices which was prepared with the assistance of UNDP/FAO and agreed withthe Bank; see chart 1, attached. The reorganization includes (a)strengthening of the central policy, planning, monitoring and evaluationcapacity; (b) a phased program of decentralization of field operations; (c)merging of a number of separate extension services; (d) the disengagementof MOA from fertilizer operations and tractor hire services; and (e)provision for better coordination between the various sector agencies.

2. Staff Restructuring and Redeployment. As a result of thereorganization, staff restructuring and redeployment will be required.Greater decentralization of responsibility and the start on strengtheningpolicy, planning and monitoring capacity at the center will requirequalified and experienced staff at the senior and middle level. Civilservice salaries have recently been raised and the differential betweensenior and junior levels widened. The salary differential between seniorand junior level staff was 2:1 pre-January 1986; post January 1986, it haswidened to 3.3:1 and the target is 7.5-8.0:1 by 1989. The staffretrenchment goal is 15,000 per year between 1986-1988. This target may berevised following the functional staff review scheduled for 1987. The SALcontains a skill mobilization scheme to improve the availability ofprofessional and managerial skills to support the Economic RecoveryProgram. This scheme consists of incentive proposals to attract bothprivate sector professionals to perform as short and long term consultantsto the Government and civil servants to serve on specific task forces. Thestaffing of the Ministry of Agriculture will necessarily be affected by theimproved salary differential, the retrenchment program and the skillmobilization scheme, all components of the Technical Assistance Credit.Within the ASRP, the functional staff review implicit in the restructuringof the PPMED and the twinning arrangement for GIDA will contribute tomeeting the SAL targets of the public sector management reforms. Anassessment of the staffing needs of PPMED should be completed by December31, 1987 and for GIDA by June 1988.

3. Policy Coordination. Government has decided to set up acommittee to improve coordination of policies and investment programs inthe sector, particularly between MOA and COCOBOD. The Agricultural PolicyCoordination Committee will include MOA, the Ministries of LocalGovernment, Finance and Economic Planning, Industry, Science andTechnology, Trade and Tourism, Transport and Communications, Roads andHighways, Lands and Natural Resources, the Cocoa Board and the Bank ofGhana. The GOG has agreed in principle to its establishment. Assurances

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will be obtained at negotiations that the Committee will be established byDecember 31, 1987 and its performance will be monitored to assess whethercoordination is improved. Coordination is required in the short term inthe following priority areas: road rehabilitation including feeder roads;price policy for industrial crops from farm to processing levels and foragricultural inputs; extension and research.

4. Policy, Planning, Monitoring and Evaluation Capacity.Strengthening of MOA's capacity to develop policies and monitorimplementation in the sector is central to efforts to strengthenagriculture's production and diversify its export base. The Policy,Planning, Monitoring and Evaluation Department (PPMED) of MOA will bestrengthened for this role. PPMED will be the current ERPS reorganized toconsist of four units: (i) Policy, Plan.aing and Analysis; (ii) ProjectPreparation and Appraisal; (iii) Monitoring, Evaluation and Budget; and(iv) Agricultural Statistics.

5. The policy, planning and analysis unit will among other things,monitor proposals from private sector processors on the pricing of cotton,tobacco and oil palm. In its price policy monitoring work, it will useborder prices as efficiency benchmarks, the specifics of this methodologyto be agreed with the Bank (see Attachment 1). PPMED will also keep underreview the impact of the tariff structure which will be reformed in 1988following the Trade Taxation and Tariff review scheduled for 1987. PPMED'scapacity in project preparation and appraisal will be developed to enableit to take the lead in developing its investment program and directingdonor support. Currently the ERPS is conducting Annual Production Surveys,processing the results of the 1984/85 census of agriculture and withtechnical assistance from UNDP/FAO, is developing a Crop Forecasting andEarly Warning System. No analysis, monitoring or evaluation areundertaken. Under the ASRP, a modest start will be made on monitoring andevaluation. The key information requirements are set out in Attachment 2.The agricultural statistics unit within the PPMED will be responsible forcollecting the information required.

6. Training Needs Assessment. PPMED will be supported by a UNDPtechnical assistance project, with IDA and UNDP jointly providing funds forstudies. The broad outline of its reorganization has been worked outfollowing which, a detailed work program and staffing needs will bedeveloped as the first task of the UNDP project scheduled for April 1987.This will include a detailed assessment of training needs. The assessmentwould be completed by December 1987 and a training program worked out andagreed with IDA by June 1988. The likely areas of technical assistance tobe financed is in Attachment 3.

Attachments 1, 2, 3.

WAPABApril 1987

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Annex 3-1£hart 1Page 3 of 9

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Annex 3-1Attachment 1Page 4 of 9

Methodology Using Border Prices as Efficiency Benchmarks

1. This note sets out the basic steps required for deriving borderprices which can serve as efficiency benchmarks. The purpose of thederivation is to enable policy makers assess the likely levels of pricesproducers would have faced in the absence of their domestic intervention inprice setting. These alternative prices represent the opportunity costs ofthese commodities to the economy: namely the value to the economy if thecommodity were exported or the cost to the economy if the coLmodity wereimported. Within the perfectly competitive model, resource allocation isefficient when market prices reflect opportunity costs. Therefore, borderprices which reflect opportunity costs will induce efficient resourceallocation. This is the theoretical basis for using border prices asefficiency benchmarks.

2. The main steps in the derivation are:

(a) Ascertain whether the commodity is an export or an importsubstitute. If an export, then the relevant price is the f.o.b.,if an import substitute, then it is the c.i.f.

(b) Determine the period relevant for the derivation. Should it bethe current, projected, or an average of past, current andprojected world prices?

(c) Determine the relevant (or a relevant range of) exchange rate(s).The exchange rate(s) that best reflect(s) the scarcity value offoreign exchange is (are) the relevant one(s). Given the weeklyfluctuations of exchange rates in Ghana, an average of theunified auction rates (unified windows one and two) and theparallel rates are indicative of the scarcity value of foreignexchange to the Ghanaian Economy.

(d) Determine at what stage in the chain from farm through processingto consumer level is relevant. The world price, converted by theexchange rate into the border price should be adjusted for thecosts or margins iicurred from a given stage to the border. Foran export, the margins from farm gate to export point aresubtracted from the border price, because the farwer would havehad to incur these costs to bring the commodity to the border.For an import substitute, the margins from the border to thewholesale level are added to the border price. The farmerhowever does not receive this c.i.f. - plus price, if additionalcosts are incurred to bring the commodity from farm to wholesalepoint. If these costs exist, then they are subtracted from thederived wholesale price to obtain the economic farm gate price,which is the appropriate adjusted border price.

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Annex 3-1Attah-ment 1Page 5 of 9

3. These adjusted border prices are irdicative of the pricesproducers would have received in the absence of direct price setting.These are the prices to be used as efficiency benchmarks.

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Information Requirements under theAgriculture Services Rehabilitation Project for Monitoring

Effects of the ongoing Economic Recovery Program

1. Area of Major Crops for Main and Minor Seasons, including Pure,Mixed-Predominant, and Mixed:Subsidiary Areas for each major crop.(Source:Crop Statistics Section - ERPS).

2. Production of Major Crops for Main and Minor Seasons(Source:Crop Statistics Section - ERPS).

3. Disposal of Major Food Crops for Subsistence and Sale(Source:Crop Statistics Section - ERPS).

4. Regional Food Balance (Production + Import + Food Aid - ExportsDemand) for Major Food Crops(Source:Crop Statistics Section - ERPS: FAO Early Warning System)

5. Prices of Major Crops (Monthly and Annual Averages) at Farm Gate,Retail and Wholesale, at Rural, Semi-Urban and Accra Markets)(Source: Farm Management and Market Intelligence Sections - ERPS).

6. Prices of Major Cropping Inputs (Monthly and Annual Averages) atFarm Gate, Retail and Wholesale at Rural, Semi-Urban, Urban andAccra Markets)(Source:Market Intelligence Section - ERPS).

7. Agricultural Input Usage = Amounts of Composite Fertilizer(15i15=15),TSP, Urea and others, Insecticides and Herbicides.

8. Use of Agricultural Inputs = Percentage of Farmers using each kindof inputs e.g., fertilizers, insecticides, and herbicides(Source:Farm Management Section - ERPS).

9. Use of Hired Labourers = Percentage of Farms using hired labourers,Amount (Mondays) used, and Average Wage rates.(Source:Farm Management Section - ERPS).

10. Farm Budgets of Major Farming Systems - Cash portion only,including non-paid labour input.(Source:Farm Management Section - ERPS).

11. Adoption of Modern AGricultural Practices = Recommended varieties,levels of inputs, cultivation practices and post-harvest technologies(Source:Extension Service - MOA).

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12. Percentage Distribution of Household Income/Expenditure and NetBalance, by Rural, Semi-Urban and Urban Enumeration Areas withreference to Poverty Line and possibly by Occupation Group(Source:Statistical Services Board - ERPS).

The responsibility for collating these items of information andfor preparing the progress reports rests with the Policy and PlanningSection in ERPS of the Ministry of Agriculture. Initially the reportsshould be submitted annually.

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Areas for Possible Technical Assistanceunder the UNDP/FAO Project

Inputs from UNDP

The following persons will be provided under a sub-contractarrangement with an international management consultancy firm specializingin Agriculture Planning. Short-term consultants would be either foreign ornational ?rofessionals, as appropriate.

(a) Long term personnel:

(i) A Section Planner (and Chief Technical Adviser) for 3-yearperiod to help establish and advise on all functions or thePolicy, Planning and Analysis unit at the centre, and theplanning aspect of the Region and District units.

(ii) A Programme Monitoring specialist for a 3-year 8 monthperiod to help establish and advise on all functions of theProgramme Monitoring and Evaluation unit at the centre andthe relevant aspects of the Region and District units.

(iii) A project preparation and appraisal specialist for an 18month period (12 months initially, and periodic visits overthe remaining project period during medium term and annualplan preparation periods) to help establish and advise onall functions of the project preparation and Budget unit atcentre, and the relevant aspects of the Region and Districtunits.

(iv) An Agriculture Statistics specialist for a 12 month periodb-eyond June 1987 (the end of the current GHA/84/003Agriculture Statistics project), to help establish andadvise on those aspects of the Statistics unit which are notcovered under the present project (i.e. livestock,fisheries, cocoa and forestry statistics, etc.) and theplanning information data base.

(b) Consultants

(i) A Planning Trainer Consultant, for a 12 months total ofperiod visits over the project period, to assist in thedesign of training programmes and training manuals for staffat all levels.

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Annex <-lAttachment 3Page 9 of 9

(ii) An Organization and Methods consultant for a 4 month periodat the beginning of the project to support the finalizationand initial implementation of the institutional arrangementsand to assist the other advisers in designing the technicalsystems, guidelines and procedures.

(iii) An information systems/data processing consultant for a 4month period to support the establishment of the planninginformation data base.

(iv) A consultant in budgeting for a 2 month period to assist indesigning and implementiuig new budgetary systems, guidelinesand procedures.

Source: Draft Project Document No. GHA/86/008: Strengthening AgriculturePlanning in support of the Government's Agriculture SectorRehabilitation Programme, November 29, 1986

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Annex 3-2

GHANA


Studies

1. The project is funding four studies, 2 on the delivery ofservices: extension and research and 2 en broader policy issues: foodsecurity and agricultural credit. The rationale for these studies is helplay the basis for future strategy in these critical areas of publicintervention. Detailed Terms of Reference for these studies are inWorking Paper 2.

2. The Extension and Research studies are institutionally oriented.Their main outputs are concrete proposals on priorities and what kinds oforganization and resources will be required to improve the effectiveness inthe delivery of these services. For the Extension study, the experience ofthe pilot projects will be evaluated to become a major input in thedevelopment of these institutional proposals. Important issues to beaddressed are (1) the integration of services at field levels; (2)budgetary and training requirements of an effective system; and (3)linkages with adaptive research. For the Research study, major issues willbe what priorities should be supported; how institutions should bereorganized to improve coordination and effectiveness; and implications forfunding.

3. Food Security Policy is highly controversial: The controversyis what constitutes a cost effective approach for a desired level of foodsecurity. The immediate concern is twofold: (i) What should be therespective roles of public storage, private commercial storage and expandedforeign trade in improving the level of food security? (ii) How shouldpublic storage be designed and managed to improve its effectiveness? TheAgricultural Credit study is envisaged as as follow-up on the financialsector review scheduled for early 1987. This macro level review willidentify key areas for institutional reform. It is envisaged that thisidentification should fLorm the basis of a financial sector structuraladjustment loan. It should also have implications for other areas to behandled at the sectoral level. Important issues that have been identifiedare the viability of formal rural financial institutions and the low levelof public confidence in them, the high cost of credit and low level ofsavings in thie formal network. Since this study is viewed as a follow-upto the macro review, the terms of reference at this point are necessarilybroad. The main output of this study are likely to be proposals of apolicy and/or institutional nature to address this concern. Thesimultaneous conduct of studies of two closely related. services, extensionand research, should benefit both efforts and help Ghana build up mutuallysupportive systems that can attract donor support.

WAPABApril 1987

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Ainex 3-3Page 1 of 4

GHANA


AGRICULTURAL RESEARCH

Introduction

1. Agricultural and related research is carried out by at least sixautonomovs institutions reporting to the Ministry for Industries, Scienceand Technology (MIST) through the Council for Scientific and IndustrialResearch (CSIR) and a few others reporting directly to Boards such as forCocoa and for Grains or to Ministry of Agriculture (MOA) such as RegionalDevelopment Projects, and the Ghana Seed Company, doing adaptive research.Some of these institutions once had excellent international reputation butin recent years they have steadily deteriorated and are now unable to givethe desired support to agriculture. Trained staff have left, equipmenthave not been properly maintained and many need replacement, and researchprograms have contracted.

2. Coordination of Research. There has been little national coordi-nation of research priorities and programs and links with extension ser-vices are practically non-existent at most levels. As a result, the impactof research on agricultural production is slight. The MOA, until recently,had little influence on the programs of the various research organizations.Since the several research institutions are autonomous, there is risk ofunnecessary duplication in effort and even conflicting extension messages.Efforts are now being made to achieve some measure of coordination betweenCSIR and other organizations with the MOA. A senior staff member has beenappointed each in the CSIR and the MOA with the specific responsibility forcoordination. Some cooperation exists between the universities and otherinstitutions in the conduct of specific research projects but it restsmainly on the personal initiatives of the research staff rather than on aformal position between the institutions for collaborative work.

3. Recent Performance. Agricultural research does not receive thepriority it deserves for a country whose mainstay is agriculture. Progressin crop research during the last 25 years has been very limited, with thepossible exception of cocoa. But even cocoa research has not kept up withthe previous traditions for high quality. During the decade 1958-68,research came to a virtual standstill because of government's lack ofinterest and insufficient financial support. Research in industrial cropshas thus made no progress in the last three decades while the efforts infood crops have not been adequate to make positive impact on food produc-tion. The research institutions and organizations are all short of funds.The number of experiments they can conduct is therefore limited and in somecases no work is carried out at all. Many of the more capable researchscientists have emigrated because of low salaries and difficult working

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conditions in Ghana, due primarily to shortage of funds which have alsomade it impossible to purchase laboratory equipment, chemicals and toprovide transport facilities.

4. Future Strategy. The main consideration is the strengthening ofGhana's capacity to attend to the research needs for agricultural develop-ment and growth. The strategy should take into account the short as wellas the medium to long term needs. The project would provide assistance forshort term strategy measures, some of which would pave the way for thelonger term strategy.

5. Short Term Strategy. This would include the following specificmeasures which would be supported by the project:

(a) Review of Agricultural Research. An in-depth review would beundertaken during 1987 of agricultural research in Ghana by ateam of local and foreign scientists of international repute whowould examine the programs and resources for agricultural re-search, the institutional framework, including staffing levelsand quality, the possibilities for rationalization and mergersbetween organizations, strengthening MOA's coordinating role overresearch and for improving links with extension services. Theteam would formulate measures and make recommendations forreorganizing national agricultural research institutions andorganizations to be able to address adequately the problems ofthe sector.

(b) Supporting Resuscitation of Cotton Production. As part of themeasures for resuscitation of the cotton industry, CRI wouldresume research on cotton which was stopped since the early1970's.

(c) Initiate Program of Irrigation Research. CRI and SRI wouldembark on a program of research in irrigation management directedat efficiency of wacer use and of crop production.

(d) Provide Support for Valley Bottomland Development. CRI inconsultation with the Ghana Irrigation Development Authority(GIDA) will develop and test out simple low cost systems forcontrol of water in wet valley bottoms for cultivation of swamprice and other crops.

(e) Embark on Program of Farming Systems Research in Upper East andWest Regions. Building on the work started in the Upper Regionby lUTADEP and the British Overseas Development Administration(ODA), and the information already gathered, CRT and SRC, incollaboration with URADEP would undertake a program of farming

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systems research to arrive at results with possibilities forapplication within the next 3 years. The work would be centeredon catchments with small ponds or reservoirs and water supplysystems and the capabilities and needs of village communities.

(f) Establish a Coordination Framework for Agricultural Research.Following the recommendations of the Research Review, the neces-sary reorganization would be undertaken so as to involve MOA oran appropriate body, such as the recently established Agricul-tural Research, Development and Advisory Committee inestablishing research priorities, coordinating the research andestablishing appropriate linkages between adaptive research,extension and farmers.

(g) Tmprove Arrangements for Publlsning and Disseminating ResearchResults. The results of research during the last 10 to 15 yearsin Ghana are largely unknown because of the inability of theresearch institutions to publish the information for dissemina-tion in the country. The project will enable clearing of theprinting backlog of scientific and practical information for useby the farmers and support agencies, and will provide forcontinuation of the publications during the next 3 years. Itwill also enable the resumption of information exchange withother relevant agricultural research and publishing institutions.

6. The details of the short term research programs are being workedout by CRI in collaboration with SRI and GIDA and are expected to be readyin time for the implementation during 1987.

7. Medium to Long Term Strategy. The medium to long term strategywill follow the short term measures being financed by this project, andcould be subject for possible external assistance. They would include:

(a) strengthening of the reorganized research institutions, particu-larly those involved in research and adaptive trials on crops;

(b) breeding, screening and selecting high yielding varieties of foodand industrial crops suitable for the different ecological zones;

(c) intensifying trials on different combiLnations and levels of NPKelements for major food and industrial crops with the view toreducing costs and developing recommendations for the mosteconomical formulations, thereby enhancing fertilizer use and itsefficiency;

(d) developing programs for rapid soil fertility tests for the majorfood and industrial crops; and

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(e) embarking on a program of farming systems and mixed croppingresearch applicable to small farmers, and including use ofherbicides, no tillage and direct seeding vs. bullock ploughingand hoe cultivation, and soil moisture management.

8. Organization and Adminiatration of the Program. Prime responsi-bility for implementing the research program will be with CRI. The Minis-try of Agriculture will enter into a contractual arrangement with CSIR andCRI which will collaborate with and obtain specialized assistance fromlocal associated institutions in the conduct of the work. Specific compo-nents of the work program to be undert&ken by any of the collaboratinginstitution would require sub-contractual agreements especially with regardto scope of work, facilities, the timing, staffing, costs and payments,reviews, reporting, etc.

9. The program will be undertaken in two parts, namely: (1) theSouthern part based at the Irrigation Research Station at Kpong; and (2)the Northern part based at Nyankpala Agricultural Experiment Station. Eachpart will have a coordinator to assist the Director of CRI in coordinatingthe work of the collaborating institutions. The coordinators will reportdirectly to the Director CR1, based at Kwadaso near Kumasi but will haveother responsibilities. An Agricultural Research Development and AdvisoryCommittee (ARDAC), comprising directors or representatives of the ResearchInstitutes involved and the Ministries of Agriculture and Finance has beenestablished to provide general policy guidelines. It shall review the workprograms and progress, and make recommendations for meeting the objectives.Provision is made for recruitment of additional specialist staff, some ofwhom will be international. Most of the local staff to start the programare in post and others can be recruited without much difficulty.

10. Some of the laboratory and field facilities are in need ofrehabilitation or replacement and provision is made in the project for thisand for meeting some of the operating costs, particularly the foreigncomponents.

WAPABApril 1987

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GHANA


Agricultural Extension

Introduction

1. Extension Agencies. The Ministry of Agriculture (MOA) is theprincipal agency for agricultural extension which is executed by its CropServices Department (CSD). Several other agencies also undertake extensionwork. They include the Grains Development Board (GDB), the Cotton Develop-ment Board, which was recently converted into the Ghana Cotton Company(GCC), the Bast Fiber Development Board (BFDB), the Cocoa Board (COCOBOD),the tobacco producing companies - Pioneer Tobacco Company (PTC) and Inter-national Tobacco Ghana Ltd. (ITG), and the Ghana Irrigation DevelopmentAuthority (GIDA). A number of area development projects with outside aidand operating semi-autonomously under MOA provide direct support fcrextension services; these include the Bank/IFAD supported area agriculturaldevelopment project in the Volta Region (VORADEP) and the West Germansupported project in the Northern Region (GGADP). In addition the CIDAassisted Ghana Grains Development Project is developing improved technologyfor maize and cowpea and is promoting research/extension links.

2. Responsibilities of Extension Staff. Total numbers of MOA staffinvolved in extension are estimated at about 2500. Their responsibilitiesinclude management of procurement and distribution of inputs (improvedseeds and seedlings, farm tools and equipment, fertilizers and otherchemicals), collection of cash from sales, organizing Nuoboa (group) farmsfor joint activities under mechanization and "crop associations" for groupcredit from the Agricultural Development Bank (ADB), collection of rainfallrecords and crop prices, undertaking market surveys and establishing fielddemonstration plots. Recently the responsibilities for supplying non-fertilizer chemical inputs and tools have been handed to private traders,but MOA staff maintains close supervision over the distribution of thesechemicals and tools. Extension activities of CSD suffer from thisinvolvement in non-extension work and a lack of logistical support. Inaddition to CSD which carries out crop extension, other MOA departments -Veterinary, Animal Husbandry, Fatm Mechanization, Plant Quarantine,Fisheries and Home Extension - provide some extension services, Morale andmotivation of all extension staff are generally low because of the absenceof a clear and implementable mandate, low salaries, inadequatetransportation, absence of extension materials, little or no in-servicetraining and relevant technical literature, lack of useful technicalmessages for farmers, lack of linkages with research, an absence of formalwork programs or evaluation of activities, and involvement in non-extensionduties.

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3. Staff of other agencies provide crop specific advice and organizeinput delivery and, in some cases, play a role in crop marketing. Theseagencies such as BFDB and GCC operate in parallel to MOA staff and there islittle liaison between them. Extension support to cocoa farmers isprovided by COCOBOD's Cccoa Services Division. That extension service hadmore than 12,000 staff (including labor); it is being restructured into aforce of under 1000 in the first instance under the Cocoa RehabilitationProject; it deals only with cocoa and coffee. MOA has a reduced presencein the cocoa areas. Extension staff in agencies other than MOA and COCOBODtotal about 500.

4. Available Technology. The status of available technology for themajor crops is as follows:

(i) For the main tree crops, cocoa and oil palm, an acceptableimproved technology based on improved planting material andcultural practices is available. Cocoa hybrid plantingmaterial (which is CSSVD tolerant) is available from COCOBODseed gardens (capacity for planting 25,000 ha per year) andcapable of yielding about 600 kg/ha under smallholderconditions. Capsid control systems have been developed butfurther work is required to control blackpod, to developrecommendations for use of fertilizer on hybrids, and tocontinue bringing forward new hybrids. Uptake by farmers ofhybrids and CSSVD, capsid and blackpod control programsdepends primarily on cocoa prices. Improved oil palmplanting material is available from the Oil Palm ResearchCentre (OPRC), which is supported by IDA, and MOA nurseries,and is in strong demand. For rubber, the existing GhanaRubber Estates Ltd. plantation is suitable forrehabilitation and the main need is to change the processingsystem to produce for export. Traditional coconuts in thecoastal situation are attacked by Cape St. Paul wiltdisease; potentially tolerant planting materials are undertest.

(ii) Food Crops. For maize, the major cereal crop in Ghana,improved planting material and a package of practices (plantdensity, fertilizer, weeding) has been developed by theCIDA-assisted Grains and Legumes Development Project (phaseI 1978/84 and phase II to continue to 1988/89) which worksthrough CRI and GLDB. Improved composite varieties havebeen released and about 10 percent of the maize area isestimated to be under these improved practices. The projectcontinues to test and release new va:-ieties of maize andcowpeas (including IITA releases) and provide a link ofresearch with extension services. Demonstrations plots ofthe improved technology are laid by extension staff of GLDB,MOA and VORADEP. Hybrid maize varieties with a high yieldpotential are also under test and can be expected to be

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introduced gradually; an acceptable hybrid could form thebasis for revitalizing the Ghana Seed Company under privatesector management. Major factors affecting the uptake ofimproved maize packages are planting material with a signi-ficant improvement on traditional varieties, adequate cropprices and seed supplies. Improved planting material forthe major cereal crops in the northern savanna - millet andsorghum - is not available and requires continued develop-ment. However, some replacement of sorghum with maize onbetter soils with adequate rainfall can be expected toimprove total production in the north. For the major rootcrops, improved cassava planting material has been undertest by VORADEP and CRI and three varieties suitable forfood preparations used in southern Ghana have been releasedin 1986. Extension will have a major role in the demonstra-tion of this new material. For yam, improved plantingmaterial is not available, but the mini-set technique forseed yam multiplication (introduced under IITA supervision)is being tested and promoted under VORADEP. Improved sweetpotato planting has also been introduced from IITA and takenup by farmers.

For rice, improved varieties and practices have been deve-loped for irrigated conditions as well as for valley bottomconditions. However, with largescale mechanized developmentof valley bottom land, weed control has proved difficult andled to partial abandonment of the schemes. Rice and vege-tables are the main crops likely to yield a return on theexisting irrigation schemes. A policy of consolidation isproposed on the large formal schemes plus testing of small-scale developments.

(iii) Among industrial crops, an acceptable improved technologyfor tobacco is promoted by the two main tobacco companies,PTC and ITG. For cotton, improved technology developed inneighboring countries is available. The improved technologyof both these crops will require small farmers to changefrom mixed to pure cropping to reap full benefits, but thischange has proved acceptable where adequate prices, inputsand marketing support services are provided.

Reorganization and Strengthening of Agricultural Extension Services

5. There are a number of issues to be tackled in preparing a compre-hensive program for strengthening agricultural extension in Ghana,including:

(i) What should be the responsibilities of the extensionservice, particularly its coverage of crops? Should there

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be one agricultural extension service (covering all non-plantation crops, animal husbandry, farm fisheries, farmforestry, etc.), or should there be more than one service(for example, ona for cocoa, and one for other crops)?

(ii) What i; the most appropriate way to structure the extensionservice/s, and to coordinate between it/them and otheragriculturai support services, what is an appropriateextension system and strategy, and what staff and otherresources (existing and incremental) are required for thisover the medium- and long-terms?

(iii) How can appropriate resources and attention be given todeveloping effective two-way contacts between agriculturalextension and research?

(iv) How should on-going extension operations with externalassistance (e.g., VORADEP, NORRIP, Ghana Grains DevelopmentProject and GGADP), be assisted while a national extensionstrategy is being designed, and how can the experience ofthese on-going activities be incorpkrated into the design ofthis strategy?

6. MOA has already initiated efforts to rationalize and strengthenagricultural extension services. The recent reorganization of MOA with thecreation of a Department of Extension to bring together existing parallelextension activities within the Ministry and the moves towards a modestdecentralization of management should provide an improved structure withwhich to begin work. There is also a consensus within MOA on the need to:Mi) exclude extension staff from direct involvement in input supply orregulatory functions; (ii) operate one service covering all sub-sectors(i.e., including animal husbandry, farm forestry and farm fisheries, aswell as field crops, (but excluding cocoa) through one agent supported bySubject Matter Specialists; (iii) strengthen extension/research links; and,(iv) make a considerable investment in applied and adaptive farmer-relevantresearch.

7. Given the current consensus on the objectives and organization ofextension and the existence of other on-going projects at various stages ofdevelopment, a two phased, action-oriented approach to strengtheningextension services is proposed. During Phase 1, ASRP would support afield-based pilot program for strengthening food crop extension activitiesunder MOA, while COCOBOD's extension services would be supported under theCocoa Rehabilitation Project. The question of whether ultimately thereshould be one extension service in the cocoa areas is put aside whilealternative approaches are tested, Government commitment gauged, and appro-priate means of possible unification worked out. However, other overlapswith GCC, BFDB and GDC and other organizations involved in extension wouldbe addressed during Phase 1. Also during Phase 1, a study would be carriedout to provide a plan for the reorganization of extension services at the

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national level. Phase 2 would comprise a national level reorganization ofagricultural extension services supported by a proposed nationalagricultural extension project. The national extension project would takeinto account its design work with extension under a proposed cocoarehabilitation project that would be implemented simultaneously with thisproject (ASRP).

Project Actions

8. The Agricultural Services Rehabilitation Project would fund: (i)the testing in three regions on a pilot basis of the reorganization of MOAextension services including logistical support for MOA extension staffworking on the Grains Development Project in regions where extension staff,supervision, training and technical support are appropriate; (ii) continuedsupport to the VORADEP extension, research and monitoring and evaluationservices after the closure of the present IDA/IFAD project in December1987; and, (iii) a study of extension and training as preparation of apossible national extension project.

9. The schedule of (i) is at Appendix 1. The first pilot operationwill be initiated in the Ashanti Region and be funded under a ProjectPreparation Facility. The objective of this and subsequent pilot exercisesplanned in three regions is to provide a more precise definition of issuesand organizational alternatives in broader extension strengthening. Theon-hands experience of the pilot program should lead to practical ways toovercome specific problems in organization, research linkages andtechnology identification. The pilot program would build on the experienceobtained in implementing the T & V approach in VORADEP, the demonstrationapproach of the CIDA-assisted Grains Development Project and the work ofGGADP in the Northern Region. The pilot operation would include a reviewof the training programs and resources available at an agriculturaltraining institution. The ?ilot program would also provide for logisticalsupport to MOA staff working with the Grains Development Project inselected regions: this would be temporary assistance to enable MOA staffin those regions to operate more effectively prior to the national reorgan-ization of extension services.

10. Under (ii), key extension, adaptive research and monitoring andevaluation services developed in the Volta Region under Credit 1009-GHwould continue to receive outside support for a period of 3 years, whenGovernment could be expected to take full responsibility.

11. Draft terms of reference for the agricultural extension andtraining study are at Appendix 2.

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Annex 3-4Appendix 1Page 6 of 9

GHANA


AGRICULTURAL EXTENSION PILOT PROGRAM

Outline of Activities, December 1986-1989

Implem. FundAction Responsible Period Source

1' Area selection - Region to be pilot;number of districts and subdivisions,and extension staff in these GOG Dec.86 GOG

2. Consultant selection/appointment(i) Field extension specialist

(5 staff months) GOG Apr.87 PPF(ii) Extension training needs analyst

(3 staff months) GOG Apr.87 PPF

3. Equipment procurement for 1st regionalpilot exercise GOG Apr.87 PPF

4. Field extension assignment, first part Cons. May-Sept 87 PPF

5. Training needs assignment Cons. May-Sept 87 PPF

6. Study tour to Nigeria or Burkina Faso(10 Ghanaian staff) GOG Aug.87 PPF

7. Field extn. assignment, second part Feb.88(5 staff months) Cons, May.88 PPF

8. Commence 2nd regional pilot exercise GOG Apr.88 ASRP

9. Extension/training study Cons./GOG June-Dec.88 ASRP

10. Commence preparation of possible national GOG/agricultural extension project Cons? End.88 ASRP

11. Commence 3rd regional pilot exercise GOG Mar.89 ASRP

*These activities would pre-date Board presentation; they are left here as

they are integral part of a plan of action agreed by the MOA and the Bank.

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GHANA


Draft Terms of Reference for a Study of the Organization ofAgricultural Extension & Training in Ghana

1. Objectives

1. The main objectives would be to assess the organization, programsand resources of the agricultural extension services in Ghana with theemphasis on the potential for rationalization and creation of a unifiedstructure. The study would follow a pilot program of on-hands testing oforganizational alternatives and would lead to preparation of a master planfor rationalizing agricultural extension activities. It would be a basicinput into the preparation of a proposed national - gricultural extensionstudy.

2. The study report would contain detailed proposals for the re-organization and strengthening of the extension services, including organ-ization structure, staffing levels, training and technical assistancerequirements, job descriptions, vehicle and equipment needs, etc.

2. Scope of the Study

(a) Organizations to be Covered

- The MOA including all its technical departments.- VORADEP, URADEP, the GGADP and zonal projects promoted

by NORRIP.- The Cocoa Marketing Board.- The Grains Development Board.- The Ghana Cotton Company.- The Bast Fibre Development Board.- The Irrigation Development Authority.- Other organizations involved in extension.

(b) Organizational Analysis

- Organizational structures.- The functions other than extension services carried out

by extension officers.- The coordination of extension policy by the MOA.- Duplication and overlap between extension services and

potential for rationalization.

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- Links between extension services and research at alllevels.

- Training support for agricultural extension staff.- Operational planning, monitoring and control.- Evaluation of results.

(c) Programs

- Evaluation of present extension programs and theirsuitability for development needs and policies.

- The generation and availability of suitable researchresuilts.

- The availability of technology packages for the variousecological zones.

- Extension methods.- Staff training and training planning.

(d) Resources

- Financial.- Staff.- Farmer/extension ratios.- The availability of necessary skills and the needs for

recruitment, training and technical assistance.- The availability of necessary training facilities.- Conditions of service of extension officers and other

staff.- The availability of vehicles, other equipment and

promotional materials.- The role of existing extension demonstration stations.

3. Work Program

3. The study would require six months of work and would be initiatedin mid 1988 of the project by a senior agricultural extension expert withpossible assistance from a costing and budgeting expert. TU. individualwould be graduate agricultural scientist with at least ten years experiencein organizing and managing extension services in developing countries.

4. The consultant would report to the MOA through the Director ofthe PPMED. The report would be expected to review the options availablefor reorganizing the extension services and to develop a workable andeffective system which the country can afford.

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5. These terms of reference would be substantially revised byGovernment and the Bank in light of experience with the pilot program priorto the start of the study. Final Study Terms of Reference will be approvedby the Bank.

WAPABApril 1987

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GHANA


IRRIGATION DEVELOPMENT

Introduction

1. Rainfall reliability imposes moderate to high risks for success-ful crop production on more than 60 percent of the estimated 10 million haof cultivable land in Ghana. In the coastal Savannahs and in the northernhalf of the country, potential evapotranspiration exceeds precipitationduring 6 to 8 months of the year, and only short-term (3 to 5 months) cropscan be produced there. Even in the wet areas in the south, particularly inthe transition vegetation zones, rainfall is inadequate for optimum plantgrowth during 3-4 months of the year. Perhaps more serious is theunpredictable timing of the onset of the rains and its distribution toallow farmers to prepare adequately to take full advantage of a relativelyshort growing season in a large part of the country.

2. Limitations to Food Production. Seasonal rainfall deficiencyis generally recognized as one of the limitations to successful productionof food crops throughout Ghana. After the traumatic experiences of a fewyears ago when food production failed in Ghana and shortages of foreigncurrency did not allow imports, the Government strengthened its resolve toplace high priority on irrigation to improve the country's food security.

3. Irrigation in Ghana. Irrigation development is relatively new toGhana, starting only about fifteen years ago. During this period, theGovernment spent well over $200 million (in 1985 value) and succeeded indeveloping only a little over 5,000 ha of irrigated land. The eighteenschemes involved vary in size from a little over 100 ha to about 2,500 haand have a potential irrigable area of about 10,000 ha. They are locatedmainly in the southern region although three of the larger schemes are inthe northern and upper regions. Rice is the main crop produced underirrigation, using more than 80% of the developed area. The rest producesvegetables. When sugar was produced, some of the sugar cane was irrigated.

4. Promotion and Performance of Irrigation Development. The Minis-try of Agriculture (MOA) has been the main Government itnstitution respon-sible for promoting the development of irrigation and in 1975 itestablished the Ghana Irrigation Development Authority (GIDA) for thispurpose. In the last ten years the economic, social and political environ-ment has not allowed GIDA to function effectively. This is reflected inpoor perfcrmance of irrigaticn development and the maintenance andoperation of projects. Its staffing and organization need substantialstrengthening. In particular, measures should be taken to improve themorale of the professional staff to give better opportunities to utilize

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their skills, while the large number of under-utilized employees, many ofwhom are unskilled, should be trimmed to an effective size for operatingand maintaining the irrigation schemes more efficiently.

5. Irrigation Costs. A review of the irrigation subsector in late1985 by the Bank confirmed the high costs of developing irrigation, rangingfrom US$10,000 to over US$50,000 per ha. The operation and maintenance ofthe schemes were also inefficient and production levels from them werelower than desired and little or no better than well managed rainfedproduction. They were thus not the most appropriate for investment ofscarce financial resources.

6. Future Strategy. Until it is able to reduce costs significantly,Ghana will postpone major irrigation development and concentrate on im-proving the efficiency of those schemes already completed or requiring onlymoderate expenditures relative to the benefits to complete or rehabilitate.It will address the institutional weaknesses undermining efficientIrrigation and will take appropriate steps to correct them. These include(1) strengthen the capacity of GIDA to effectively undertake its mandate;(2) establish incentives for farmers to make full use of investments inirrigation; (3) ensure that necessary input supplies and services arereadily available; (4) train farmers in skills for sound irrigacionmanagement; (5) organize research to determine the most appropriatetechnologies for efficient water use and irrigated crops management; (6)improve the agronomic practices on rainfed agriculture, particularlytechniques in moisture conservation and semi-arid farming to increaseproduction from existing cultivations; (7) develop technologies for use ofwet valley bottom areas for swamp rice and supplemental irrigation of othercrops; (8) make better use of the potential for small-scale irrigationschemes in which farmers are involved directly ir. their development andoperation. These measures were the main ones identified by the subsectorreview to receive priority attention and have been accepted by Ghana foradoption in its future policies and programs.

7. Assistance in Irrigation. This project will assist the Govern-ment of Ghana to consolidate present irrigation schemes and prepare forbetter planning and implementing future ones. It will support:

(a) strengthening the capacity of GIDA to deal more effectively withplanning, designing, constructing, managing and maintainingirrigation schemes. Reducing 0 & M costs of projects andrecovering all 0 & M costs;

(b) improving the technology of irrigation farming by "on farm"testing of techniques proven elsewhere, and modified wherenecessary for application on existing schemes;

(c) establishing about 6 pilot small-scale simple irrigation schemesof about 50 ha average size and involving simple watercoursediversions or low head pumping. They would be constructed and

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managed by farming groups with GIDA giving technical advice inplanning and implementation. Expenditure for materials andequipment would be recovered from production of irrigated cropsover a reasonable period of time, e.g. 7 to 10 years;

(d) initiating a program of irrigation research which will attend tothe need for:

(i) a better understanding of crop water requirements and use,and efficient irrigation management systems;

(ii) formulating sound agronomic practices, taking into accountcrop varieties, land preparation, timing of planting,spacings, soil fertility and crop protection, water conser-vation measures, etc., to make the most effective andeconomical use of available water;

(iii) developing and testing systems for use of wet valley bottomlands which could incorporate supplemental or full irriga-tion for rice and other crops.

8. Organization and Administration of the Program. The MOA, as theimplementing agency, will organize the assistance to irrigation developmentin two parts. The first part concerns the strengthening of GIDA andassisting it in improving irrigation development through technology testingand transfer and establishment of small scale pilot schemes. The secondconcerns the research proposals which will be carried out by CRI and SRC inassociation with other research organizations under specific contractarrangement with MOA. This is discussed under proposals for AgriculturalResearch. The key element in the strengthening of GIDA is its twinningwith a well organized and successful irrigation authority working underconditions comparable eo those in Ghana and which has the capacity toextend its expertise and experience during the next five years. This willbe under contractual arrangements between Ghana and the TA institution.The T.A. will provide for seconding qtaff to work with the management andtechnical staff of GIDA and assigning GIDA staff for specific periods toprojects of the T.A. institution to work wiLh their staff on operationsrelevant to responsibilities in GIDA. The T A. institution in addition tostrengthening the organization of GIDA through the training process andrationalizing the staffing composition, will be involved with the testingand transfer of technology, particularly appropriate irrigation managementand associated agronomic practices, and the planring, organizing andestablishing pilot smallscale low cost irrigation schemes. They will workclosely on the pilot schemes with the farming groups who will be expectedto participate from the conceptual and planning stages right through totheir taking full responsibility for operation and management.

WAPABApril 1987

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GHANA


ANIMAL HEALTH AND PRODUCTION DEPARTMENT

1. Background

1. The Ghana Veterinary Services has a history of being one of themore effective services in West Africa. In spite of the constant threat ofdiseases especially rinderpest, from across her borders, Ghana has enjoyeda relatively stable sanitary situation since the end of the InternationalCampaign against Rinderpest (JP 15) in the middle sixties. For example,between 1978 and 1983 there was only one outbreak of rinderpest in Ghana,compared to 34 in Burkina Faso, 4 in Ivory Coast, 78 in Mali and 90 inNigeria. The laboratory support and health care delivery especially tocommercial poultry farms has contributed in no small measure to theviability of the livestock poultry industries.

2. Within the last ten years however, like the rest of Governmentservices, the effectiveness of the veterinary services has decreased, duein large measure to the general economic decline, ineffective use of themany professional and technical staff and budgetary constraints. Whilecontrol of epizootics is still adequate, the service is unable to carry onteffective preventive treatment, particularly in the non-commercial sector,resulting in foregone production in the order of 170 tons of eggs, and3,820 tons poultry, goat, sheep and cattle meat. In 1986 terms this isequivalent to approximately ¢1,323 million or US$14.7 million and quitepossibly enough to eliminate meat imports and meet rising local demand.This is not to mention the loss in output in manhours as farmers engagethemselves in fruitless attempts to overcome diseases which could have beenprevented if the veterinary services had the necessary tools and logisticsupport to provide satisfactory prophylactic coverage.

2. The Policy Reform ane Rehabilitation Program

3. The deterioration of Veterinary Services was part of a generalerosion of Government services due to the economic decline during the 1970to 1982 period (see Agricultural Sector Review, Report No. 5366-GH, August6, 1985, for greater details). Since 1983, the Veterinary ServicesDepartment (VSD) has modified its policies and mode of operation as part ofthe Economic Recovery Program in an effort to increase its effectiveness.Its proposed action plans (Working Paper 8, Annex 3 - 1986-88 Action Plansand Strategies for VSD Services) require both a reform of its policies anda rehabilitation of its services and funding for capital items (equipmentand :ehicles), their subsequent operation and maintenance costs, veterinarydrugs and field allowances for staff. To resolve these problems, VSD hasundertaken a three-pronged policy reform and rehabilitation programconsisting of: (i) privatizing selected services, (ii) rehabilitating VSD

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with external aid, and (iii) instituting cost recovery practices andestablishing a revolving fund within the Department with the proceeds tocover its recurrent expenditures.

4. Privatizing Selected Services. One reason for inappropriatestaffing (many lower level, fewer middle level staff) of the Department isdue to the policy commonly practiced throughout the Ministries of acceptingall graduates of related disciplines, i.e. VSD is obliged to hire all vetgraduates. VSD is now changing this policy so that it will no longer beobliged to hire all vet graduates and would instead hire them as needed.It would concurrently promote private veterinary practice particularly inthe commercial livestock sectors where a vet can "make a living". There isstill a long way to go before there is sufficient remunerative work for asizeable number of veterinarians to go private. However, a growing numberof technical staff (animal health assistants, etc.) are being hired bycommercial poultry and pig operations. For the time being, epidemiologicalcontrol and animal health in the traditional village context cannotgenerate sufficient funds for a vet to cover his costs and make an adequateincome.

5. Concurrent with encouraging private vets, VSD is now allowingcompanies to procure, distribute and sell a selected list of drugs andchemicals. Retail prices are determined with the concurrence of the Priceand Income Board. The list of items includes all drugs and chemirals whichdo not require special handling (live vaccines requiring refrigeration),btologicals and poisonous drugs, or drugs which through improper use(underdosing, breakdown of cold chain) could result in the built up ofresistant strains or delivery of non-viable drugs. The list of items beinghandled privately includes: antihelminths, coccidiostats, disinfectants,feed additives including vitamins and minerals, water soluble powders andmixes, dressings, and acaricides. VSD will hand'le the biologicals (livevirus/vaccines), trypanocides, poisonous drugs and anasthetics andtranquilizers.

6. Rehabilitating Veterinary Services. Assistance has beenrequested from both the World Bank and the EEC to re-equip the Department.Assistance was provided by IDA to the Veterinary Departments in tworegional projects--URADEP and VORADEP where cost recovery and revolvingfunds were introduced. In addition, in 1984, emergency aid (US$300,000)was provided by the World Bank to assist in the Rinderpest EradicationCampaign. As a considerable risk exists that the disease could be broughtin the country again by migrating herds, continued assistance is required.It is expected that the EEC will provide about US$2.2 mn to Ghana for therinderpest campaign as part of the regional program for Africa. This willinclude vaccines, equipment and vehicles. To supplement this aid, IDAwould provide support for the balance of equipment and vehicles required byVSD for its rehabilitation estimated at about US$2.5 mn under the ASRP. Inaddition, KWF will provide funds for the import of drugs & vaccines.

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7. Increased Cost Recovery. Within the ERP framework, VSD wasrequested by Government at the end of 1985 to introduce a cost recoveryprogram for services provided. VSD's proposal was approved andimplementation began April 1, 1986. There have been some implementationproblems as the Ministry of Agriculture did not precede the program with apress release announcing the new charges. This is being rectified and themedium term objective is to recover costs in the following order ofpriority:

(a) costs of vaccines, drugs, medicaments used for treatment includesCIF cost, and transport, storage and distribution costs;

(b) (a) + operating and maintenance costs of lab and field chemicals,spare parts, equipment and vehicles (excludes transport, storageand distribution in (a));

(c) (a) + (b) + replacement cost of capital items directly associatedwith the provision of services - refrigerators, vehicles,equipment. Does not include such overheads as buildings,administration, etc. May or may not include vehicles replacementcosts, particularly at the beginning;

(d) (a) + (b) + (c) + field allowances of staff-travel and per diems;

8. It is anticipated cost recovery would be at level (d) as perabove by end of 1989. Remaining overheads such as buildings are notincluded in the recovery proposal as these are regarded as an investmentmade by Government which will reap benefits to the economy in excess ofindividual benefits received by each livestock producer, and thus theproducer should not have to pay for (directly). With items (a)-(d)covered, VSD will be able to operate without the interruptions of servicesso often occasioned by delays in budgetary procedures and actual allocationof funding to the Department, usually below its requirements.

9. Under ASRP, funds will be provided to hire a firm of independentauditors to: (i) review the fee collecting system and accounts, and produceannual dudits with suggestions for improvements where necessary; and (ii)point out inefficiencies in the system which are increasing costs, andrecommend cost cutting where necessary. The auditors' work will have asits objective ensuring the cost-effectiveness of the VSD.IDA would annually review with VSD its cont recovery program to ensure itsmeeting its three-year target based on the auditors' report. This auditwould also cover the Vet Departments under URADEP and VORADEP, which havebegun cost recovery programs and revolving funds several years ago, toensure consistency across the country. Terms of reference for theaudit/management team are at Working Paper 8, Annex 12.

WIAPABApril 1987

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GHANA


Privatization of Fertilizer Operations

1. The Government of Ghana through its Miristry of Agriculture isvirtually the sole importer, distributor and retailer of fertilizers inGhana. There is no local production. The Government intends to privatizethe fertilizer delivery system in order to reduce budgetary burden andimprove efficiency of delivery. A study on fertilizer distributionprivatization has as its main recommendations the following:

(i) that the process of privatization be phased over 5 years;(ii) that the price subsidy be eliminated in step with

privatization; and(iii) that uniform pricing be replaced by a free market system.

2. The study report also emphasizes the need to strengthen MOA'sCrop Production Services Department to facilitate privatization andrationalization of fertilizer policy. The GOG accepts these mainrecommendations and the Project proposes to assist GOG in transferring itsfertilizer procurement and distribution.

3. A phased process of privatization would allow the development ofa wider retail network, a phased reduction of the subsidy and smoothtransition to free-market pricing. In essence it means privatizing theretail level first, followed by the wholesale level and finally theimportation. This means that MOA will continue to be involved in theinternal distribution and importation at the first stage. It would bepurely an importer during the second stage and it would give up this roleat the third stage.

4. In the first year (1988) the Project would introduce privateretailing of fertilizers in the Volta and Brong Ahafo Regions. In the VoltaRegion fertilizers are currently distributed through a Farmers ServicesCompany (FASCOM) which is essentially government-owned and was set up inconjunction with IDA Project Credit No. 1009-GH. Distribution in the BrongAhafo Region on the other hand is with the MOA extension service. FASCOMand MOA would withdraw from retailing and instead sell to private retailersfrom designated stores. The selling price at these stores will be at adiscount to the national uniform retail price to reflect a retailingmargin. The retailers would be free to set their own retail price in thetwo regions. Farmer groups and cooperatives would receive the same termsas private retailers. The experience in developing a private retailingnetwork in the two regions in the first year would be used to develop anational private retail network.

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5. In the second year (1989) private retailing will be extended toall the administrative regions. There would be a uniform DistributionPoint Price which retailers would pay and use as the basis for establishingtheir own retail prices. In areas where it is not possible for theMOA/FASCOM to withdraw from retail sales, for reasons of lack of retailers,cooperatives or farmer groups, the retail price would provide for retailermargins based on the experience in Volta and Brong Ahafo Regions.

6. In the third year (1990) the MOA will hand over the internaldistribution functions to the private sector by limiting sales towholesalers/distributors from central warehouses at Tema, Swedru,Kukurantumi and Tamale. The price at each warehouse will reflect the costat each location. Wholesalers/distributors will fix their own prices tothe retailers who in turn will set their own retail prices. As theexisting general distribution system for goods continues to functionadequately up to the main towns which are distribution centers, it isconsidered that one year should be adequate to install a fertilizerwholesaler network instead of two years as indicated in the study.

7. In the fourth year (1991) MOA will relinquish its importationrole. In July 1990 it will make a public announcement that the privatesector would be permitted to import fertilizers that appear on a MOA -approved list which would be published. The announcement would indicate anestimate of existing stocks and anticipated stock as at end of 1990. Withthis the transfer of fertilizer procurement and distribution to the privatesector would have been completed.

8. The price subsidy on fertilizer would be phased out in 3 years.It is estimated that the 1987 subsidy would be 42% on the principle thatthe cif cost would be fully recovered. In 1988 the subsidy would bereduced to 30% and in 1989 it would be reduced to 10%. In 1990 it would beeliminated altogether. Thus by the time the whole fertilizer deliverysystem is privatized in 1991 there would be no price subsidy and a freemarket system would operate.

9. To facilitate a smooth transition to full privatization withinfour years the MOA would require the services of a person who has had atleast 10 years' experience in the marketing of agricultural inputs in acommercial concern. He or she would head MO.:'s Crops Inputs DevelopmentUnit (CIDU) for a minimum period of 3 years. A senior MOA official with atleast 10 years' experience in extension and input distribution will be thecounterpart of the internationally-recruited head of CIDU. CIDU would alsohave a sales agronomist, with a minimum of 5 years' experience in sellingagricultural inputs in the private sector, to assist in the planning andimplementation of the privatization process. CIDU would set up amonitoring system based on monthly reports from extension officers to keeptrack of retailer development and sales. CIDU would be responsible forestimating demand and arranging for procurement, importation and internaldistribution prior to such activities being privatized. A FertilizerExtension Advisory Committee will be set up in MOA to assist CIDU in

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determining the types of fertilizers that are to be promoted and imported.It would help in the development of fertilizer recommendations for variouscrops and conditions.

10. To recap fertilizer privatization will be completed over 4 yearswith price subsidies being eliminated in 3 years and a free market pricingsystem installed in that process. MOA's CIDU will oversee and promote theprocess of privatization. A series of actions will be required to completethe process and these are as follows:

Schedule of Actions by MOA to FacilitatePrivatization of Fertilizer Delivery

Action Completed by

1. Appointment of key personnel to CIDU June 30, 1987

2. Begin preparation of implementation planfor private retailing in 1988 in Voltaand Brong Ahafo Regions July 30, 1987

3. Invite bids for 1988 supply August 31, 1987

4. Evaluate bids November 30, 1987Award bids December 31, 1987

5. Announce 1988 prices with price subsidynot to exceed 30% January 31, 1988

6. Launch private retailing program inVolta and Brong Ahafo Regions January 31, 1988

7. Import and distribute fertilizers March 31, 1988

8. Invite bids for 1989 supply August 31, 1988

9. Analyze performance and problems ofprivate retailing in 2 pilot regions September 30, 1988

10. Finalize plans for launching privateretailing in other regions and makepublic announcement on privatizationprogram December 31, 1988

11. Award bids for 1989 supply December 31, 1988

12. Announce 1989 Distribution PointPrice with subsidy not to exceed 13% January 31, 1989

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Action Completed by

13. Launch private retailing in all regions January 31, 1989

14. Import and distribute to allDistribution Points March 31, 1989

15. Invite bids for 1990 supply July 31, 1989

16. Complete plans for privatewholesaling in 1990 September 30, 1989

17. Award bids for 1990 supply November 30, 1989

18. Launch private wholesaling December 31, 1989

29. Announce ex-central warehouse prices December 31, 1989

20. Announce approved list of fertilizersthat private sector may import.Also publish estimated stocks atMay 31, 1990 and anticipated stocksat December 31, 1990 July 31, 1990

WAPABApril 1987

- 84 -

Annex 3-8Page l of 3

GHANA

AGRICULTURE SECTOR REHABILITATION PROJECT

Discontinuation of MOA's Tractor Hire Services

1. The Mechanization Division of the Mechanization and TransportDepartment (MTD) of the MOA has, since 1966, provided services to farmersfor land clearing, levelling, field preparation, ploughing, harrowing andcombine harvesting. These services have not only been loss-making (becauseof low hire charges), but are also plagued with problems of inefficientoperations and inadequate funding. It has been proposed that theMechanization Division of the MTD of MOA be revitalized through additionalcapital injection and be operated as a private limited company withgovernment as well as private sector (both foreign and local)participation. It is difficult to see any justification for continuingMOA's mechanization services and it is even more difficult to justify thatthese be taken over by a govetnment-led company particularly as the privatesector, in spite of foreign exchange difficulties, plays a dominant role infarm mechanization services.

2. In 1985 the MTD of MOA was allowed to spend only 50% of itsbudgeted expenditure of 40 million cedis of which approximately 1/3 goes ontractor hire activities. In return for this expenditure, the revenuecollected was only 1.5 million cedis. This indicates the extent to whichthe government is actually subsidizing its mechanization services asopposed to the nominal subsidy contained in its rather low rates forequipment hire. The official rate for ploughing is 1,200 cedis per hectarewhilst the private sector is charging around 2,000 cedis/ha. 1/

3. MOA's tractor hire services are in reality a relatively smallproportion of the total mechanization services available in both the publicand private sectors. For example, in the Northern Region MTD has only 10operating tractors out of an estimated total working tractor fleet of about900. Similarly, it had only four serviceable combine harvesters out of atotal fleet of about 35 in working condition. This situation is repeatedin other regions. There at least six private sector firms which undertakeland clearing and/or combine harvesting operations on contract. Theownership of wheeled tractors and cultivation machinery is well spread outand includes private companies, farmers, cooperatives and state farminginstitutions such as the Grains Development Board and the CottonDevelopment Board.

1/ Although official equipment hire charges are controlled by thegovernment at MTD rates, private contractors are able to circumventthe regulation and obtain higher fees.

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4. Consequently, the abolition of MOA's tractor hire services isunlikely to have any serious adverse effects on agricultural production.MTD staff, however, feel that a rather abrupt withdrawal of land clearingservices could slow down expansion of agriculture. The upsurge in demandfor similar equipment in construction activity has placed agriculture at adisadvantage at a time when demand is greater than supply. This, however,is likely to adjust itself with better foreign exchange availability. Itis, therefore, appropriate that plans be made to discontinue the services.Since wheeled tractor services are readily available from the privatesector and MTD itself has hardly any worthwhile operation in this category,these should be the first to be dispensed with. The withdrawal of landclearing services could be delayed in order to allow for a betterdemand-supply balance in equipment availability. Nevertheless, noadditional land clearing equipment should be supplied to MTD and a periodof four years to slut down the service wouid seem reasonable. In addition,land clearing service charges would be raised to a level of full costrecovery. All other services including the combine harvester serviceshould be closed down as soon as possible. The major obstacle todiscontinuation of the services is expected to be staff redeployment. Itis estimated that of the current 1,200 staff of the MTD, about 500 wouldbecome redundant if only the land clearing services were retained and allother mechanization ser'zices withdrawn. 2/ A list of actions to be takenby MOA to achieve the objective of disengaging from tractor hire servicesare as follows:

List of Actions Required of MOAin Conjunction with the Discontinuation

of Tractor Hire Services

Action To Be Completed By

1. Discontinue wheeled tractor service Dec. 31, 1987

2. Establish list of wheeled tractors andassociated equipment that is to be disposedof as a result of Action 1 above Dec. 31, 1987

3. Establish list of staff that has to beredeployed as a result of Action 1 above Dec. 31, 1987

4. Announce new land clearing service chargesbased on full cost recovery. Jan. 31, 1988

2/ The majority of the remaining staff would be servicing thetransportation division, which is separate from the mechanizationservices.

- 86 -


Action To Be Completed By

5. Establish means of disposal of wheeled tractorsand associated equipment on an "as-is,where-is" basis, i.e., either by tendersor by aucLion Mar. 31, 1988

6. Complete disposal of wheeled tractors andassociated equipment Sep. 30, 1988

7. Obtain agreement of relevant government unitson service termination dates for staff to beredeployed on basis of Action 3 above Sep. 30, 1988

8. Establish list of combine harvesters andassociated equipment Dec. 31, 1988

9. Discontinue combine harvester service Feb. 28, 1989

10. Establish list of staff to be redeployed asa consequence of Action 9 above Apr. 30, 1989

11. Complete disposal of combine harvestersand associated equipment JuxLe 30, 1989

12. Obtain agreement of relevant government unitson service termination dates for staff to beredeployed on basis of Action 10 above Sep. 30, 1989

13. Establish list of land clearing equipment Dec. 31, 1990

14. Establish list of staff to be redeployed ondiscontinuation of land clearing services June 30, 1991

15. Discontinue land clearing services June 30, 1991

16. Complete disposal of land clearing equipment Dec. 31, 1991

17. Obtain agreement of relevant government unitson service termination dates for staff tobe redeployed on basis of Action 15 above Dec. 31, 1991

WAPABApril 1987

- 87 -


GHANA


Agricultural SOE Reform Program

1. There are 18 agricultural SOEs that come under the purview of theMOA. The complete list of SOEs with the various actions to be taken by theProject under the SOE reform program is set out below:

SOE Action to be taken under the Project

A. Proposed for Joinat-venture:

1. Pomadze Poultry Enterprises hOA to engage consultants by PY4 toLtd. prepare action plan for

implementation by PY5.

2. Ghana Oil Palm Development Restructuring into a privateCorporation (GOPDC) company already under way and

expected to be completed before PY3.

3. Ghana Seed Company MOA task force to determinerestructuring and to be completed byPY3.

4. Ejura Farms Ltd. MOA to engage consultants in PY3 toprepare action plans forimplementation by PY5.

5. Ghana Cotton Company Joint venture between government andsix private companies already formedand studies are being undertaken toprepare an action plan with regardto the role of the company inagriculture extension, productionand ginning. The action plan is tobe implemented before end of PY3.

6. FASCOM (U.R.) See FASCOM (V.R.).

7. FASCOM (V.R.) Studies to determine futurecorporate and ownership structureare under way and would be used asthe basis for developing an actionprogram for both FASCOMs forimplementation by PY3.

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B. Proposed for Selling Off:

A. Crown Rice Mill MOA to engage consultants by PY4 toprepare action plan for fullimplementation by PY5.

C. Proposed for Liquidation:

9. Irrigation Company (Upper MOA to engage consultants to prepareEast Region) Ltd. action plan in PY3 for full

implementation by PY5.

D. No Change in Status:

10. Ghana Irrigation Development Twinning arrangements andAuthority technology transfer consultancies to

be undertaken by PY3 to improvemanagement and operations includingcost recove,ry.

11. Ghana Food Distribution Action to depend on Food SecurityCorporation and Ghana Milled Study expected to be completed byRice Production Company PY2.Ltd. 1/

12. Grains Development Board MOA to engage consultants by PY3 toprepare reform plan for fullimplementation by PY5. Reform planshould be an integral part of theoverall reorganization of extensionbeing developed under the Project.

Agricultural SOEs to be Reformed Under theForthcoming Public Enterprise Project


13. State Farm Corporation (SFC) MOA will coordinate withconsultants of PE Project andsupervise action plan to beimplemented by PY3.

1/ A subsidiary of GFDC.

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SOE Action :o be taken under the Project

14. State Fishing Corporation Action plan to be implementcd byDecember 31, 1987. 2/

15. Ghana Food Production MOA to coordinate with PE ProjectCorporation consultants and supervise acLion

plan to be implemented by PY3.

16. Kwahu Dairy Farms Same as for Ghana Food ProductionCorporation.

17. Bast Fibre Development Board Same as for Ghana Food ProductionCorporation.

2. MOA would establish a unit to coordinate the various SOE reformactions that need to be taken under the Project. An internationally-recruited professional (IRP) with sufficient experience to determine thelogistical and irtellectual needs of a divestiture program would head theunit. The IRP would maintain liaison with consultants appointed under theProject and under the Public Enterprise Project and prepare quarterlystatus reports on studies and action plans for review by the PNDCSecretary. The IRP will coordinate with all SOEs in the reform program toensure compliance with time tables and government decisions. The IRP wouldbe appointed w'thin six months of credit effectiveness.

WAPABApril 1987

2/ Covenant under the SAL.

GHANA


Project Cost Summary

(Cedis '000) (US$ '000) % ForeignLocal Foreign Total Local Foreign Total Exchange

A. Policy, Monitoring andEvaluation 30,853.1 328,271.9 359,125.0 187.0 1,989.5 2,176.5 91

B. Agricultural Research- Research Review 10,107.1 46,221.9 56,328.9 61.3 280.1 341.4 82- Cotton 17,865.2 117,316.1 135,181.2 108.3 711.0 819.3 87- Irrigation 29,312.9 203,915.6 233,228.5 177.7 1,235.9 1,413.5 87- Valley Bottom Dept. 17,274.4 62,665.0 79,939.4 104.7 379.8 484.5 78Sub-total 74,559.6 430,118.6 504,678.0 452.0 2,606.8 3,058.7 84

C. Agricultural Extension- Pilot Programs 57,100.8 164,763.9 221,864.8 346.0 998.6 1,344.6 74- Volta Region 53,375.1 129,060.6 182,435.7 323.5 782.2 1,105.7 71Sub-total 110,475.9 293,824.5 404,300.5 669.5 1,780.8 2,450.3 71

D. Irrigation- Development Authority 85,163.0 574,882.9 660,045.9 516.1 3,484.1 4,000.3 87- Pilot Schemes 85,224.9 119,324.5 204,549.4 516.5 723.2 1,239.7 58Sub-total 170,387.9 694,207.4 864,595.3 1,032.6 6,207.3 5,240.0 79

E. V7eterinary Services Dept. 60,303.8 204,294.0 264,597.8 365.5 1,238.1 1,603.6 77F. State Owned EnterprisesReform 28,119.9 242,200.3 270,320.2 170.4 1,467.9 1,638.3 90 t oG. Crops Inputs

lr bDevelopment Unit 15,772.1 76,309.8 92,081.8 95.6 462.5 558.1 83 M F- H. Project Coordination Unit 87,587.4 108,452.0 196,039.4 530.8 657.3 1,188.1 550

(Cedis '000) (US$ '000) % ForeignLocal Foreign Total Local Foreign Total Excbange

===== =S*=z== ===== ===== =*===__ _____ ____ ............ ___~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

TOTAL BASELINE COSTS 578,059.6 2,377,678.6 2,955,738.3 3,503.4 14,410.2 17,913.6 80

Physical Contingencies 24,375.7 121,021.8 145,397.5 147.7 733.5 881.2 83Price Contingencies 172,665.5 362,324.7 534,990.2 459.9 511.5 971.4 53

Sub-Total 775,100.8 2,861,025.2 3,636,126.0 4,111.0 15,655.1 19,766.1 79

PARELLEL FTNANCING

I. Vaccines and Drugs (KFW) - 1,283.5 1,283.5 - 8.5 8.5 100J. Fertilizers, Chemicals,

etc. (AfDB) - 3,775.0 3,775.0 - 25.0 25.0 100

TOTAL PROJECT C03T 775,100.8 2,866,083.7 3,641,184.5 4,111.0 15,688.6 19,799.6 80=e=====5=========== === ==…==-=====_ ======= ==

WAPABApril 1987

tD

0 x0

GHANA


ProJect Cost by Components and Years(Excluding Parallel Financing)

Total Including Contingencies Total Including Contingencies(Cedis '000) (US$ '000)

87/88 88/89 89190 O'0191 91/92 Total 87/88 88/89 89/90 90/91 91/92 Total-~ ~ ~ - . = - _ = c= _ n =_ =

A. Policy, Monitoring and

Pvaluation 157,163.8 131,602.8 103,5I6.8 42,546.1 - 434,829.4 969.7 731.0 505.8 193.3 - 2,381.7

B. Agricultural Research- Research Review 41,888.7 10,389.0 11,669.5 - - 63,947.2 258.4 57.0 56.3 - - 371.7- Cotton 73,094.3 42,575.9 43,185.S - - 158,856.0 451.0 211.0 230.7 - - 892.6- Irrigation 120,727.2 73,128.9 82,367.6 - - 275,923.8 744.9 401.0 396.2 - - 1,542.0- Valley Bottom Devpt. 50.811.4 21,638.7 lq,967 I - - 92,417.3 313.5 97.6 117.2 - - 528.3

Sub-total 286,521.6 147,732.f 155,89(1.0 - - 591,144.3 1,767.8 800.4 766.6 - - 3,334.6

C. Agricultural Extension- GCDP Support 65,213.6 20,418.4 23,084.7 - - 108,716.7 402.4 110.6 112.8 - - 625.8- Pilot Program 49,690.4 48,111.4 56,816.6 - - 154,618.3 306.6 260.6 277.6 - - 844.8- Volta Region 80,010.1 70,503.2 69,393.8 - - 219,907.1 493.7 382.0 339.0 - - 1,214.7

Sub-total 194,914.1 139,033.0 149,295.1 - - 483,242.i 1,202.7 753.2 729.4 - - 2,685.3

D. Irrigation

- Development Authority 262,649.1 268,167.3 268,156.7 - - 798,973.1 1,620.5 1,452.8 1,310.2 - - 4,383.5- Pilot Schemes 27,577.0 118,877.5 132,582.3 - _ 279,036.8 170.1 644.0 647.8 - - 1,461.9

Sub-total 290,226.1 387,044.8 400,739.0 - - 1,078,009.9 1,790.6 2,096.8 1,958.0 - - 5,845.4

E. Veterinary Services Dept. 106,004.1 101,214.3 114,437.5 - - 321,655.9 654.0 548.3 559.1 - - 1,761.5 c t, 0F. State Owned Enterprises ( x

Reform 111,365.3 36,761.1 74,804.6 81,501.4 37,321.1 341,753.6 687.1 199.2 365.5 370.2 160.8 1,782.' 0 rG. Crops Inputs -

Derelopment Unit 36,618.0 32,225.6 35,524.4 4,346.0 4,693.6 113,407.6 225.9 17 1. 173.6 19.7 20.2 614.0 O

H. Project Coordination

Unit 48,810.2 47,822.5 53,716.8 58,525.8 63,207.8 272,083.1 301.2 25v.1 262.4 265.9 272.3 1,360.8

TOTAL PROJECT COSTS 1,231,623.2 1,023,436.6 1,088,924.2 18t.,919.2 105,222.5 3,636,125.9 7,599.0 5,544.6 5,320.4 849.1 453.3 19,766.0

WAPABApril 1987

6WMAGRICULTURAL SERVICES REHABILITATION PROJECT

SUWIART CCOUNTS COST SUNWARY(Excluding Parallel Financing)

(CEDIS '000) (US$ '000)

Z Total 2 TotalI Foreign Base Z Foreign Base

Local Foreign Total Exchange Costs Local Foreign Total Exchange Costs

I. INVESTHENT COSTS

A. BUILDINGS AND CIVIL VORKS 86,650.9 125,257.9 211,908.8 59 7 525.2 759.1 1,284.3 59 7B. VEHICLES AND EQUIPHENT 70982.5 510,732.4 518,714.9 98 18 48.4 3,095.3 3,143.7 98 18C. .URNITURE AND OFFICE EGUIPhENT 4,231.5 11,151,2 15,382.7 72 1 25.6 67.6 93.2 72 1D. CAPITAL INJECTION - 82,500.0 82,500.0 100 3 - 500.0 500.0 100 3

Total INMESThENT COSTS 98,864.9 729,641,5 828,506.4 88 28 599,2 4,422.1 5,021.3 88 28Phvsical Contingencies 9,275.8 38,620.0 47,895.8 81 2 56.2 234.1 290.3 81Price Contingencies 26,836.3 59,709.7 86,546.1 69 3 75.6 118.8 194.4 61 1

Tutal INCLUDING CONTINGENCIES 134,977.1 827,971.2 962,948.2 86 33 731.0 4.774.9 5,505.9 87 31 1

II. RECURRENT COSTS

A. PERSONAL ENOLUHENTS 21,602.0 - 21,602,0 - 1 130.9 - 130.9 - IB, TRAVFLLIN6 ALLOUANCE 155,595.0 - 155,595.0 - 5 943.0 - 943.0 - 5C, VEHICLES AND EOUIPHENT OPERATION 63.26&,6 265,585.7 328,852.4 81 11 383.4 1,609.6 1,993,0 81 11D, OFFICE AND GENERAL OPERATION 28,788*6 66,426.2 95t214.7 70 3 i.5 402.6 577.1 70 3E. TRAINING 14,208.0 54,255,5 68,463.5 79 2 86.1 328.8 414.9 79 2F. STUDIES AND TECHNICAL ASSISTANCE 184,434.5 1,261.769.8 .,446,204.3 87 49 1.117,8 7,647.1 8764.9 87 496. IRRIGATIQN PILOT SCHEME OPERATION AND NAINTENANCE 11.300,0 - 11,300.0 - 0 68.5 - 68.5 - 0Total RECURRENT COSTS 479,194.7 1,648,037.2 2,127,231.9 77 72 2,904.2 9988.1 12,892.3 77 72Physical Contingencies 15,099,9 82,401.9 97,501.7 85 3 91.5 499.4 590.9 85 3 tOnPrice Contingencies 145,829.2 302s615,0 448,444.2 67 15 384.3 392.' 777.0 51 4 r r-jTTotal INCLUDING CONTINGENCIES 640,123.8 2,033,054.0 2,673,177*8 76 90 3,380.1 10,880.2 14,260.2 76 80 w 1

Total BASELINE COSTS 578,059.6 2W377,678,6 2W,55,738.3 80 100 3,503.4 14P410.2 17t913.6 80 100Phwsical Contingencies 24,375.7 1219021.8 145,397.5 83 5 147.7 733.5 881.2 83 5Price Contingencies 172,665.5 362,324.7 53499"0.2 68 18 459.9 511.5 971.4 53 . S

Total PROJECT COSTS 775,100.8 2,8614025,2 3W636,126.0 79 123 4W11,0 15,655.1 19766.1 79 110=-_ -- = = -== === = -_=

- 94 -

Annex 3-11

GHANA


Project Financial Plan(Million US$)

Project Year IDA UNDP GOG Total

1 0.5 0.6 0.2 1.32 2.3 0.4 0.4 3.13 5.9 0.3 0.5 6.74 5.0 0.2 0.1 5.35 3.4 - - 3.46 0.9 - - 0.9

Total 18.0 1.5 1.2 20.7

% 87 7 6 100

WAPABApril 196;

- 95 -


GHANA

AGRICULTURE SERVICES REHABILITATION PROJECT

Project Coordination Unit (PCU)

1. The main functions of the PCU would be the following:

(a) Maintain close liaison with all the MOA Units, theIrrigation Development Authority and the Crops ResearchTnstitute which are responsible for the implementation ofdifferent components of the Project, with the objective ofensuring that implementation is in accordance with both thespirit and the letter of the Credit and Project Agreementswith IDA and its SAR;

(b) Coordinate the preparation of the annual work plans andbudgets of the relevant implementing units including the PCUfor submission to IDA not later than November 30 of thepreceding year and maintain a record of all agreed workplans and hudgets;

(c)- Organize the procurement of IDA-funded goods and servicesand the appointment of IDA-funded consultants and ensurethat these are acquired consistent with the "Guidelines forProcurement Under IBRD Loans and IDA Credits" and"Guidelines for the Use of Consultants by World BankBorrowers and by World Bank as Executing Agency";

(d) Maintain project accounts according to accepted accountingprinciples and practice and produce an annual statement ofaccounts which is to be audited by external auditors andsubmitted to IDA not later than June 30 of the followingyear;

(e) In the event the PCU or any of the implementing units arebeing confronted with problems that cannot be resolved, thePCU would take the initiative to raise such prublems at anappropriate level and keep IDA informed of progress andresults achieved.

(f) Monitor the progress of implementation of the variouscomponents of the Project and submit to IDA, not later than45 days after the end of each quarter, reports which,amongst others, would provide the following:

(i) progress achieved during the quarter as measuredagainst targets giving reasons for delays, explaining

- 96 -


problems encountered and measures taken to overcomeproblems;

(ii) actual disbursements received from IDA as at end of aquarter; applications pendinig; and estimateddisbursements for the coming 4 quarters and annuallythereafter;

(iii) actual expenditure to end of a quarter including GOGcontribution compared with budget with explanations onshortfalls and/or overspending; and

(iv) list of incremental and non-incremental staff engagedin the implementatioTi of each component of the Projectindicating changes cver previous quarter and anyplanned changes forthcoming.

Project Coordinator

2. The PCU would be headed by a Project Coordinator (PC) who wouldbe responsible for its operations as listed above. The PC would beresponsible directly to PNDC Secretary for Agriculture and shall keep thelatter informed of all problems and progress related to the Project throughregular briefings and/or reports. In carrying out these functions the PCwould be assisted by a Project Officer (PO) who would be specificallyresponsible for organizing the procurement, reporting, disbursement andaccounting aspects. The actual maintenance of accounting records andpreparation of quarterly and annual accounts would be undertaken by a firmof accountants who would be engaged for an annual fee.

3. The PC would be a senior government official from the Ministry ofAgriculture who is capable of establishing a harmonious and effectiveworking relationship with the different implementing units and provide theleadership and initiative to help them overcome managerial, administrativeand budgeting constraints. The PC must have the confidence and trust ofhis superiors.

Project Officer

4. The PO who would be the support officer to the PC would beselected on the basis of the following criteria:

(a) a university degree or equivalent professionalqualification;

(b) a minimum of 5 years experience in a supervisory capacitywith exposure to both operational and administrative aspectsand a basic knowledge of accounts;

- 97 -


(c) familiarity with IDA/World Bank procurement and disbursementprocedures;

(d) ability to work independently and represent the PC atmeetings and discussions related to the Project; and

(d) willingness to travel within Ghana regularly to ascertainactual status of lmplement4tion of project components andprovide on-the-spot advice on procurement and disbursementprocedures.

Accountants

5. The firm of accountants who would be responsible for maintainingthe accounting records and preparing the financial and accounting reportswould be selected in accordance to IDA/World Bank guidelines and would befully responsible for this aspect of the Project. They would report to thePO and keep the PO informed of progress in maintaining and preparingaccounts and reports, and any problems and delays in their work. The POwould provide an assessment of the firm's performance in the accountssection of the quarterly report.

Recruitment

6. The PC would be appointed by the MOA prior to the proposedProject being presented to the IDA Board in order to take over theresponsibility for coordinating actions by the various implementing unitson matters which are preconditions to effectiveness. The PO would beappointed to take office no later than 3 months from date of effectiveness.The accounting firm would be appointed no later than 3 months from date ofeffectiveness with the initial contract being for three accounting yearsand being renewable by mutual agreement thereafter.

- 98 -


QUALIFICATIONS AND JOB DESCRIPTION

PROJECT COORDINATOR

QUALIFICATIONS:

(1) A senior official of the Ministry of Agriculture with at least 10years' service in agricultural development/administration.

(2) Have proven leadership abilities as reflected in performance ofcurrent and/or previous jobs.

(3) Possesses qualities that would enable the development of aharmonious and effective working relationship.

(4) Has the confidence and trust of his superiors and colleagues.

JOB:

(1) Responsible for the overall operations of the ProjectCoordination Unit and reporting to the PNDC Secretary fortgriculture.

'2) Ensuring that the Project and its components are implemented inaccordance with the spirit and the letter of the Ciedit Agreementand the Staff Appraisal Report (SAR).

(3) Supervise the coordination work necessary for the preparation ofthe annual work plans and budgets of the implementing units toproduce a consolidated annual project work plan and budget to besubmitted to IDA by November 30 of preceding year.

(4) Supervise the procurement of the IDA-funded goods and servicesand the appointment of IDA-funded consultants and ensure thatIDA/IBRD Guidelines are complied with and the work is carried outexpeditiously.

(5) Ensure that the Project Officer regularly supervises the work ofthe firm responsible for maintaining the accounting records andthat the firm produces the quarterly and annual accounts onschedule. To supervise the selection of external auditors andensure that their work is in accordance with IDA/IBRD guidelinesand meets the scheduled completion dates.

(6) To visit and discuss with implementing units, including visits toproject sites, to ascertain general progress and problems.

- 99 -


(7) To take the initiative to raise problems at in appropriate levelwhen implementing units are not capable of resolving the problemat their level.

(8) Monitor the progress of imp'ementation and supervise thepreparation of quarterly progress reports to be submitted to IDAnot later than 45 days after the end of each quarter.

(9) Be responsible for the budget and expenditure of the PCU.

(10) Supervise the work of the PO and delegate to the PO whenevernecessary responsibility to act on the PC's behalf.

- 100 -


QUALIFICATIONS AND JOB DESCRIPTION

PROJECT OFFICER

QUALIFICATIONS:

(1) A university degree or equivalent professional qualification.

(2) A minimum of 5 years experience in a supervisory capacity withexposure to both operational and administrative aspects.

(3) A basic knowledge of accounts.

(4) Familiarity with World Bank procurement and disbursementprocedures.

(5) Ability to work independently.

(6) Willingness to travel within Ghana to regularly ascertain actualstatus of project implementation and provide on-the-spot adviceon procurement and disbursement procedures.

JOB:

(1) To prepare an annual procurement schedule on the basis ofsubmissions from implementing units, to be ready by November 30of preceding year.

(2) To organize the preparation of bid documents and ensure that theymeet World Bank requirements, ensure World Bank prior approval isobtained on bid documents for International Competitive Bidding.

(3) To organize the evaluation of bids and the approval to purchase,organize the preparation and signing of procurement andconsultancy contracts, and keep track ofsupplier/contractor/consultant performance.

(4) Visit project implementation units to ascertain actual progressand problems and provide on-the-spot advice on procurement anddisbursement procedure.

(5) Organize applications for disbursements of IDA funds and keep anup-to-date record of disbursements.

(6) Liaise with all implementation units on the preparation of annualwork plans and b. :gets and prepare consolidated work plan andannual budget for the Project including the PCU.

- 101 -


(7) Compile the Project Quarterly Report for submission to World Bankwithin 45 days of the end of the quarter.

(8) Supervise the work of the firm of accountants engaged to maintainaccounting records and preparing quarterly and annual statements,organize the timely appointment of auditors and review progressof audit in relation to agreed completion dates.

(9) Prepare the budget for the PCU and keep track of itsexpenditures.

(10) Represent the PC at meetings, discussions, etc., which he maynot be able to attend and carry out any other responribilities hemight delegate.

WAPABApril 1987

- 102 -

Annex 3-13GHANA

AGRICULTURAL SERVICES REHABILITATION PROJECTProject Implementation Schedule

Project Year Pre-Project 2 3 4 5 6IBRD FY FY87 FY88 I FY89 FY90 FY91 FY92 FY93

1986187 1987 88 1988 89 1989190 199091 1991;92 199293

Quarter 1 2 3 4 1 2 3 4 1| 2 1 3 | 4 _1| 2 3 4 4 |2T3|4 11 21 3 1 4

I IBRD

11 Negotiations

1 2 Board Presentation

1 3 Effectiveness

1 4 Completion Date

1 5 Closirng Date

2 Project Implementation

2 1 Staff Appointment |

Project Coordn Officer O j

Project Officer

Accounting Firm

AIDU Head 0)

2 2 Budget ana Work Program01 0 0 0

Submitted to Bank O

2 3 Reports

Quorterly 0 a i O * o l 0 O 0 1 0

Completion

2 4 Procurement

Vehicles and equipment _ m _

Buildings and civil works

2 5 Consultancies

FNED

Agricultural Extension

SOE Reform

Reseorch

-ec 31 i9?2 0

- 103 -


GHAN}


Procurement Procedures

1. According to the Ghana Supply Commission Act, 1960, "The mainfunction of the Commission shall be to procure for the Government allsupplies and stores the cost of which falls to be met out of public fundsand, except with the permissiJn of the Minister, no such supplies or storesshall be purchased by the Government from any other person." Subsequent tothe establishment of the Ghana Supply Commission (GSC) the Ghana NationalProcurement Agency (GNPA) was created to mainly handle imports ofcommodities. Only the activities of the GSC are relevant to this Project.

2. Over the years there has been a reldctance to use GSC servicesand shift to direct purchases or use other procurement agents to satisfyspecific donor requirements. According to laid-down procedures except forconstruction projects and very large contracts which go to the CentralTender Board in the Ministry of Finance and Economic Planning and thosedetermined by donor requirements, all other non-commodity imports are to bemade through GSC. In practice this is not so. Ministries/departmentsprefer to place orders directly with local distributors or agents ofimported goods. The reasons advanced are that it ensures follow-up servicein the case of equipment and it also avoids the problem of obtainingseparate local cost funding and approval for payment of port clearing,handling, customs duties and internal transport. Those who use GSCservices have had problems of goods being held at the port for an extendedperiod of time until GSC has obtained the funds for local costs from theclient. At a time when there is high uncertainty on fund availability thepreference to deal directly with local suppliers is expected.

3. Ministries/departments select local suppliers either on the basisof the lowest evaluated bidder from a minimum of 3 quotations, or for beingthe only supplier of a particular brand or item that has been determined bya technical unit to be the most relevant to the need in question. GSCprocedure is to receive a request together with assurance of funds from aMinistry/department and call for bids either from a list of registeredsuppliers or through open tender on the basis of the estimated value of thetender. Although GSC is required to call for open bids if the valueexceeds 17,000 pounds sterling ($24,000) but does not strictly follow thisrequirement and does it according to the requirements of each exercLe. Inrespect of open tenders there is a public opening of bids. Upon receivingbids GSC evaluates and passes on the evaluation to the client forconsideration. Upon receiving the client's agreement, GSC places theorders. When the goods arrive at the port the client is required toprovide the necessary funds for port clearing, handling, customs duties andlocal transport upon the payment of which the goods are taken out of the

- 104 -


port and delivered to the final destination. The billing of the 2 percentse-vice charge is done upon completion of delivery.

4. It is assessed that GSC is unlikely to be the preferred channelof procurement because of, firstly, the uncertainty of the supply of localfunds and, secondly, its perceived inability to cope with speedyprocurement. The Project itself requires that items be procured in thequickest possible manner within the Bank's Guidelines which require adegree of planning and skills that are not needed in normal governmentoperations. The reluctance of government organizations to use GSC suggeststhat it would not be able to provide the desired level of service exceptperhaps where there is a long lead time. It would, therefore, be necessarythat the Project recruit a person who is familiar with Bank procedures andis able to plan and schedule procurement actions well in advance ofrequirement. This person who would be the Project Officer in the PCU wouldhave to organize the preparation of bid documents, the calling of bids, theevaluaLion and award of the bids, and the preparation and signing ofcontracts. The transitory nature of the Project itself would not justifythe establishment of a full-scale procurement unit to carry out the totalprocurement exercise. Consequently, the preparation of bid documents,calling of bids, evaluation and prepat"tion of contracts would be carriedout by a procurement agent for a fee to be negotiated. The choice then isbetween GSC or a private procurement agent. All items that need theservices of a procurement agent and have only a short lead time would beprocured through an experienced private procurement agent equipped withgood external communications and access to suppliers. Items that have along lead time would be offered to GSC for procurement after Project staffare satisfied that GSC wcjld be able to perform as required.

6. All procurement would be in accordance with Bank Guidelines.Purchase contracts of a value exceeding $200,000 would be arranged throughinternational competitive bidding (ICB) procedures. Purchase contracts ofvalues exceeding $20,000 and up to $200,000 would be arranged through localcompetitive bidding procedures. International and local shopping based onat least three price quotations would apply to all other purchases, exceptproprietary items or items costing less than $1,000 which may be procuredthrough direct negotiation with a supplier. It is not anticipated that allprocurement will be organized by PCU staff. Local shopping and directpurchase would be the responsibility of the heads of the implementing unitsbut they would be required to keep proper documentation of each process andthe evaluation of bids.

WAPABApril 1987

- 105 -

Annex 3-15Table 1Page 1 of 2

GHANA


Estimated Schedule of Disbursements 1/(US$ mn)

IBRD Fiscal Year Cumulative Cum. Disbursement Cum % of Investmentand Semester Disbursement Disbursement as % of Credit Disbursement Profile 2/

FY88 1st Semester 1.2 1.2 7.0 102nd " 0.3 1.5 8.8 29

?Y89 Ist Semester 0.3 1.8 10.6 472nd " 0.8 2.6 15.3 60

FY90 1st Semester 3.1 5.7 33.5 702nd " 2.6 8.3 48.8 78

FY91 1st Semester 2.1 10.4 61.2 832nd " 2.5 12.9 75.9 87

FY92 1st Semester 1.6 14.5 85.3 892nd " 1.6 16.1 94.7 91

FY93 1st Semester 0.3 16.4 96.5 932nd " 0.6 17.0 100.0

1/ Loan effectiveness and closing date assumed to be December 1, 1987 and June 30, 1993respectively.

2/ For agricultural sector adjustment loans for all regions as per PPD office memo ofOctober 3, 1985.

WAPABApril 1987

GHANAAGRICULTURAL SERVICES REHABIUTATION PROJECT

DISBURSEMENT CHART100'

90

80

70 7

360 / wt aeo fetvns

~~50~~ / sue sDcebr1 97

0~~~~~~~~~~~~~~~~~~~~~~~~

Z 40

Cumulative Disbursement30 (with date of effectiveness

assumed as December 1, 1987)

20 /_istorical disbursement profilfor Agricultural SectorAdJustment Loans for all

10 ~~~~~~~~~~~~~regions 'FY 76-8510 t°3

0-onth 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 oC

Mlonth 12 3 6 9 12 3 6 9 12 3 6 12 3 6 9 12 3 6 9 12 3 6 9 1287 J8 - ~ 89 9i )

- 107 -

Annex ',-16

GHANA


Special Project Account

1. The Special Project Account (Account No. 2) would be establishedby the Project with a commercial baiek. IBRD would make an initial depositof $1 million to be used to prefinance goods and services which arereimbursable under the Credit. The account would be replenished throughdisbursement applications which would be supported by (a) a statement oftransactions of the Special Project Account certified by the commercialbank where the account is held; (b) a certificate signed by the ProjectCoordinator or the Project Officer jointly with a Senior Accountantappointed by the accounting firm acceptable to the Bank confirming that thegoods and services have been supplied as contracted; (c) reconciliation ofwithdrawals and deposits with statements of permitted expenditures and IBRDdisbursements certified by the Project Officer and the Senior Accouatant;and (d) statement disclosing the quarterly contributions made by GOG andcredited to the Project Account. Additionally, replenishment will becon'itional to GOG remaining current with its contributions. In aninstance where a disbursement made from the Account is not acceptable tothe Bank, GOG would be required to refund the corresponding amount of thedisbursement into the Account.

WAPABApril 1987

- 108 -

Annex 3-17

GHANA

AGRICULTURE SERVICES REHABILITATION PROJECT

Auditing and Reporting

1. PCU and Project Implementing Units would keep financial recordsIn accordance with sound accounting practices to reflect their operationsand financial positions, and would have the accounts including the specialaccount and statement of expenditure audited annually by a firm ofindependent external auditors acceptable to the Bank. The audited accountsand the auditor's report, including a statement as to whether or not Bankfunds had been used for their intended purpose, would be submitted to theBank within six months of the eiid of the fiscal year.

2. PCU and Project Implementing Units would prepare annual budgetsand work programs based on appraisal estimates, amended where necessary toreflect changes in costs and project development policies. At the time theannual work programs and budgets are prepared, PCU would also prepare aprocurement program for the coming year, giving items and quantitiesrequired, sources of funds, timing and procurement methods (whether ICB orother). This program would be submitted along with the annual budget toMOA for approval, and to the Bank for information. The PCU would preparequarterly cash flow statements, which would be submitted to MOA and theBank, and would operate on the basis of these statements. On the basis ofthe approved budgets and procurement program, the Government of Ghana wouldmake budgetary allocations and thereafter would release the necessary fundsquarterly in advance.

3. PCU would submit quarterly reports to MOA and the Bank showingactual and budgeted expenditures, statements of progress achieved andobjectives for the forthcoming quarter by each project component. The4uarterly reports would contain summaries of expenditures and use of fundsto date. After completion of the project, PCU would prepare a projectcompletion report analyzing the implementation of the project and itsimpact in relation to its objectives, and would submit them to the Bankwithin six months of the closing date.

WAPABApril 1987

IBRD 15116R3

BURKINA FASOG H A N A

UPPER 0Bolgotongo RAINFALL AND.,U P P E R W E ST T EAST ECOLOGICAL ZONES

REGION HIGH FORES T ZONEREGION ' Equotoriul Roin Forest

I) OWO () s } oNosio \ F 5Moist Semi- dcciduousNoi Forest

,W0j f , i \ ' SAVANNAH ZONE17 ~~Guineo Savannah

Woodlond

-1_ 9 _ t / \ \ ; < : Sudon SovannahWoodland

\* ~ )R Coastal Thicket andN R ERN GrasslondTamole

a ,- /. i } ' Mongroves

Roinfoll (mm)

rf ¢Dongo -. _Region BoundariesInternational

4 ,J , \._, -'-Boundaries

2~~~~~COTE < Sologa z N.

D'IVOIRE *\Mm

OAtebubu

0~~~~~~~~

/ BRONG.- AHAFO REGION\ TOGO

Suvnyoni -7-.

ASHANA S H A N T I- 7 ,,,

Kunaosi

i / ~~~~~~~~~~R E G I O N -' 't

V N~~~~~~~~~~~~~~~ EE S T E R N ,\r s

< '8 / REGION ,2 ,E 0 14DV

'JV E S T EJ ERTERN

9, ~ ~ ~ ~ Axm\ \-. / RE,O { iooolo 7 ° 8KofoIdMtE Ar

C E N TRAF 1AALINIRREGiON 3, ~~~~~~~~~~~ '~~~X~~~ACCRA 6~fl.,URKINA' ,,,~~~~ -REGION ~~~~~~~~~(FASO'~

-.. COTE /18~~~~~~~~f' ~NIGERIA

'~~ ~ 30 40 50MiIES ~ ~ D'IVOIRE , ~ 'Axim' \1 0Tkra 20 40 60 80 KiIMAETER$

FEBRUARY 1987