Document of

The World Bank

FOR OFFICIAL USE ONLY FILE COPY

Report No. P-2720-BEN

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT

TO THE

PEOPLE'S REPUBLIC OF BENIN

FOR AN INDUSTRIAL DEVELOPMENT PROJECT

March 3, 1980

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

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENT

Currency Unit: CFA Franc (CFAF)US$1 = CFAF 210

CFAF 1 million = US$4,762

The CFA Franc is pegged to the French Franc at the fixed rate of CFAF 1 =

FFO.02 and floats vis-a-vis the US dollar.

ABBREVIATIONS

BBD Banque Beninoise pour le DeveloppementBCB Banque Commerciale du BeninBCEAO Banque Centrale des Etats de l'Afrique de l'OuestCCI Chambre de Commerce et d'Industrie du BeninCNCA Caisse Nationale de Credit AgricoleCNE Caisse Nationale d'EpargneCNPA Centre National de Promotion ArtisanaleCPPE Centre de Perfectionnement du Personnel d'EntrepriseIBETEX Industrie Beninoise des TextilesIDA Association Internationale pour le DeveloppementILO International Labor OrganizationOPEC Organization of Petroleum Exporting CountriesSONACOTRAP Societe Nationale de ConstructionSONAGIM Societe Nationale de Gestion ImmobiliereUNDP United Nations Development ProgramUNIDO United Nations Industrial Development Agency

FISCAL YEAR

Government: January 1 - December 31BBD: October 1 - September 30

FOR OFFICIAL USE ONLYBENIN

INDUSTRIAL DEVELOPMENT PROJECT

Project Summary

Borrower: People's Republic of Benin

Beneficiary: Banque Beninoise pour le Developpement (BBD)

Amount: US$10.0 million

Terms: Standard IDA Terms

Relending Terms: US$8.6 million from the proceeds of the Credit would berelent to BBD at 8.0 percent per anntum for eighteenyears including five years of grace, to be repaid accord-ing to a fixed amortization schedule. The balance(US$1.4 million) would be made available as a grant bythe Government to BBD to finance technical assistanceand studies.

ProjectDescription: The Project's objectives are to make available to Banque

Beninoise pour le Developpement (BBD) needed termresources for financing small and medium-scale investmentsin the industrial sector and through the provision oftechnical assistance to help build up BBD's capacity toidentify, promote and assist industrial projects. Theproject would also offer an opportunity to advise theGovernment and the Beneficiary on industrial and financialsector issues and policies.

Estimated Costs: The project cost is estimated at US$13.6 million includingUS$1.3 million in taxes. Foreign exchange costs would beabout US$9.1 million or 74 percent of net of taxes cost.A summary cost table follows:

Prolect cost net-of-taxes

A. Industrial Investments US$ ThousandLocal Foreign Total

1. Small-scale and labor intensiveinvestments 722 1,878 2,600

2. Medium-scale investments 2,308 6,000 8,308

3. Technical Assistance 200 1,200 1,400

Total 3,230 9,078 12,308

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

- ii -

Following is a table indicating the financing plan for the various projectcomponents:

Prolect Financing Plan

US$ ThousandA. Industrial Investments IDA BBD Entrepreneurs Total

Small-scale and labor-intensiveinvestments 2,600 288 2,888

Medium-scale investments 6,000 3,231 9,231

Total Investments 8,600 3,519 12,119

B. Technical Assistance 1,400 50 5 1,455

TOTAL 10,000 50 3,524 13,574

US$ ThousandEstimated Disbursements FY81 FY82 FY83 FY84 FY85

Annual 650 2,269 2,853 3,168 1,060

Cumulative 650 2,919 5,772 8,940 10,000

Appraisal Report No. 2719-BEN dated February 26, 1980

INTERNATIONAL DEVELOPMENT ASSOCIATIONREPORT AND RECODMENDATION OF THE PRESIDENT

TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDITTO THE PEOPLE'S REPUBLIC OF BENIN

FOR AN INDUSTRIAL DEVELOPMENT PROJECT

1. I submit the following report and recommendation on a proposeddevelopment credit to the People's Republic of Benin for the equivalent ofUS$10.0 million on standard IDA terms to help finance an industrial develop-ment project. US$8.6 million out of the proceeds of the Credit would berelent to Banque Beninoise pour le Developpement for 18 years including 5years of grace, with interest at 8 percent per annum.

Part I - The Economy

2. The latest economic report on Benin (Report No. 2079-BEN, issuedin May 1979) was the result of a basic economic mission which visited thecountry in fall 1977. The paragraphs below are based on this report, butinclude updated information.

Introduction

3. Following independence in 1960, there were numerous changes inGovernment emanating from the rivalry between the three kingdoms which hadtraditionally formed the country. No single leader was able to maintain adominant role until the revolution in 1972 which brought to power themilitary Government of President Kerekou.

4. The new regime took immediate steps to replace the foreigndomination of the modern sector and strengthen the Government's involvementin the agricultural sector. These measures initially disrupted the economysince there was an inadequate number of trained Beninese to replace thedeparting expatriates. However, the Government also pursued conservativefinancial policies which resulted in budgetary surpluses and the maintenanceof the debt service ratio at less than five percent.

5. Benin has now enjoyed a comparatively long period of politicalstability under which a blend of pragmatic nationalism and socialist philoso-phy has emerged. Following the adoption of a new constitution LieutenantColonel M. Kerekou was recently confirmed President of the Republic for a3-year term by a newly-elected National Assembly. Mtr. Kerekou has in turnappointed a civilian dominated government.

6. The nation is poised for a period of moderate growth propelled bymajor investments in the industrial sector. But Benin's near-term prospectsshould be assessed with caution because they are dependent on a few keyfactors: strength of the Nigeria and Niger markets, success of key industrialprojects and, continuation of a prudent budgetary policy.

-2-

Recent Economic Developments

7. With a population of 3.2 million people and a GNP per capita of$230 per annum, Benin remains one of the least developed countries asdefined by the U.N. Over the 1972-78 period, the country enjoyed an averagereal GDP growth rate of 4% and a sound public finance position. Exports arelittle diversified (mainly oil palm products, cotton, and cocoa), and a largeresource gap (25% of GDP over 1972-78) has been recorded. Foreign reserveshave remained at about one month's imports; a decline in late 1978 has subse-quently been reversed.

8. The Agricultural sector, which generates income for about 60percent of the population and which generated 37 percent of the GDP in1978, has not substantially increased its output over the past decade.Foodcrops have at best followed the growth of population. Cotton productionpeaked in 1972 at 50,000 tons but has since fallen to around 15,000-20,000tons. Palm oil production continued to increase in the mid-1970s, butoutput has been reduced following a severe drought in 1976. Institutionalchanges, insufficient price incentives, lack of financial resources andthe absence of technical assistance are the main reasons for this unsatisfac-tory performance. Since 1974 the Government has experimented with a numberof organizational and policy approaches to the sector's problems, butconflicts between agencies, a desire for centralized control, and a neglectof extension services have seriously eroded the efficiency of the sector.

9. The industrial sector is still undeveloped due to a lack ofskilled manpower, smallness of the local market and institutional con-straints. It employs less than 2 percent of the labor force, contributes 12percent to GDP (1978) and consists mostly of agricultural processing andimport-substitution activities. The sector achieved an 11 percent annualgrowth rate during 1972-76, but slowed down to 4.0 percent during 1977-78because of a fall-off in demand from the Nigerian market. Currently, Benin isbeginning to exploit its natural resources through several major industrialprojects, for example, the Onigbolo cement factory (limestone), the Save sugarplant and the Seme offshore oil field.

10. The tertiary sector (mainly transport and commerce) constitutesthe second most important activity of the economy, accounting for 41percent of GDP (1978) and employing almost 40 percent of the labor force.The port of Cotonou has traditionally provided access to the sea forlandlocked Niger and the western part of Nigeria. The volume of transittrade through Cotonou Port was insignificant as late as 1974, but roseto 330,000 tons in 1977. This transit trade, however, declined in 1978due to Nigerian import restrictions.

11. There has been a significant improvement in the central Government'scurrent financial situation over the last decade. The chronic currentbudget deficits of the 1960's, financed by French Treasury transfers, wereeliminated during the first half of the seventies. During 1976-78 thebudget registered current surpluses averaging a high 23 percent of current

- 3 -

revenues. The Government has controlled the growth of current expenditures,

which did not increase in real terms during the 1972-1977 period. The

1976-1977 surplus was due to the sudden rise of tax revenues resulting from

the growing transit trade to Nigeria and also, to a lesser extent, to the

development of Beninese industrial activities. Some levelling off or decline

in public revenues related to the Nigeria trade, combined wi- expected

heavy demands on the Treasury for investment projects, will probably tighten

the budget picture in coming years.

12. Prices have also been kept under control and the overall rate

of inflation (on an implicit GDP deflator basis) has declined from 11 percent

in 1976 to 8.5 percent in 1977 and 5 percent in 1978.1/ Thus, inflation

in Benin continues to be considerably lower than in neighboring countries,

owing to the commercial sector's vitality and the Government's policies of

wage restraint and limited spending. Should import prices continue to rise

and domestic food shortages occur again, inflation might however be expected

to pick up slightly to 6-7 percent in 1980. The increased economic activity

induced by the implementation of new investments is likely to maintain this

trend in the following years and inflation is forecasted at 8-9 percent for

1981 and 1982.

13. The Government is committed to broad-based socio-economic policies,

but a key concern hitherto has been to keep wages and salaries low because

of limited public revenues. In real terms, both public and private sector

salaries have declined. Cash incomes of the farmers may have increased

slightly; the losses resulting from the drop in cotton production probably

having been made up by increased exports of maize to Nigeria. Thus, in

Benin, the gap between urban and rural income has not increased in recent

years. Education is one of the Government's top priorities. It is in the

process of implementing reforms aimed at both adjusting the education system

to the needs of the country, and reducing the high cost of formal education

which absorbs 40 percent of the Government's recurrent budget. Health faci-

lities are still poor, and the social indicators for Benin (literacy, life

expectancy, etc.) remain well below the average for low income developing

countries.

The 1978-80 Development Plan

14. A Three-Year Plan (1978-80) was issued in October 1977, setting out

the Government's economic goals. Its stated objectives are to raise the

general standard of living, to achieve independent national direction of

economic policies, and to promote broad participation in the conception and

implementation of economic and social changes. Investment allocation proposed

in the Plan favors large-scale projects. The major items are: a 40,000-ton

sugar project at Save (US$210 million); a 500,000-ton cement plant at Onigbolo

(US$159 million); the Seme offshore oil production project (US$120 million),

estimated to yield about 20 million barrels and the Cotonou Port extension

(US$50 million), financed by IDA and seven other agencies. These projects

together account for some 45 percent of the investment foreseen in the Plan.

The sugar and cement projects are joint ventures with the Nigerian Government,

1/ IMF staff estimates.

- 4 -

with Nigerian marketing and financing guarantees. Work on Cotonou Port isunderway. The production of sugar, cement and oil should commence around1983.

15. Based upon an analysis of the major projects and Benin's financingpossibilities, Bank staff estimate that only 70 percent of the plannedUS$1.1 billion investment will materialize, and will be disbursed over fiveyears rather than three. The Government's review of implementation of thefirst year of the Plan (1978) revealed that only 36 percent of the projectedvolume of investment materialized. Furthermore, the deepseated problemsfacing the rural sector are not really addressed in the Plan. The low rateof investment in agriculture is partly due to the lack of viable projects,which in turn is related to institutional problems, the absence of effec-tive extension services, and poor marketing arrangements for export crops.However, the several large projects in the Plan will push the overallpublic investment rate to 19 percent of GDP on average over the 1978-83period, compared with 10 percent over 1972-77.

Prospects

16. The medium-term outlook for economic growth in Benin is moderatelyoptimistic. Real GDP growth during 1979-85 is expected to average 5-6 percentper annum. The downside risks to Benin's economy are the reliance on Nigeriandemand which has been weak over the past year, and the negative impact ofproblems which may arise in implementing the large projects. The benefitsfrom these projects are, in turn, dependent upon price agreements (specificallywith Nigeria in the case of cement and sugar). Benin's growth prospects will,moreover, depend on effective pricing and marketing policies in the ruralsector. In the long-term, Benin's growth potential will be limited by a poorresource base to perhaps 4 percent per year, and even the achievement of thisrate will depend on the ability of Government to channel resources and orientprograms (in social and economic infrastructure, training, marketing, etc.) tothe development of food and cash crops.

17. Benin's public finance and balance of payments situation mayfluctuate more over the next five years than has been the case in thepreceding half-decade. In the mid-1970s, conservative public policies ledto budget surpluses and a stable trend in foreign reserves. This partlyreflected, however, the lack of sizable new initiatives in public investment.The situation is now changed with the implementation of the Three-Year Planwhich places heavy demands on the Treasury for counterpart funding, andsteps up the pace of capital and intermediate goods imports matched byforeign financial inflows. The balance of payments will undergo fluctuationsbetween now and 1985 under the impact of the major projects. Since thelarge projects underway will heavily influence the trade balance and publicfinances, their successful implementation is essential for Benin's mediumterm outlook.

18. Benin's total external debt (including undisbursed), which untilthe end of 1978 had remained relatively low, amounting to US$260 millionwith a debt service equivalent to 5-6 percent of the country's exports, isexpected to rise substantially as investments increase and borrowingconditions harden. The debt service ratio is projected to reach 22-27percent of --ports in the mid-80s. This ratio is high, but up to 80percent of the debt service is accounted for by the large projects, two ofwhich are guaranteed by Nigeria. Nevertheless, this points up Benin'svulnerability. Were any of the major projects to encounter seriousproblems (cost overruns, inefficient management, or unprofitable pricingagreements with Nigeria) then the debt burden could quickly become unmanage-able. The low level of Benin's traditional exports (only 19 percent of GDPin 1972-77) does not permit much flexibility in this respect.

19. In view of the country's low per capita income, the growing needfor external funding of priority projects in an expanding economy, andBenin's narrow export base, it will be necessary to increase the volume offoreign financing on concessionary terms. Benin is expected to be able tofinance no more than 10-15 percent of its overall public investment program.Thus foreign donors should continue to provide a large share of totalproject costs, including the financing of local costs.

PART II - BANK GROUP OPERATIONS IN BENIN

20. To date the Bank Group has extended nine credits to Benin, plustwo supplementary credits totalling US$67.8 million. Three of the creditswere for agriculture (19 percent of total lending), four for highway con-struction and maintenance (59 percent), and one for the extension of portfacilities. The ninth operation was an education project focussing ontraining of rural youth. Annex II contains a summary statement of BankGroup operations in Benin as of December 31, 1979, as well as notes on theexecution of ongoing projects.

21. IDA's first operation in Benin was the Hinvi AgriculturalDevelopment Project (1969), which provided for oil palm plantings and foodcrop development and the construction of an oil palm mill. The project wassuccessfully completed in 1974. The second agricultural credit was theZou-Borgou Cotton Project (1972). This operation, co-financed by FAC, wasaimed at expanding cotton and fooderop production in the Zou and Borgouprovinces. Due to organizational upheavals, managerial problems andfrequent policy revisions in the agricultural sector during its implementa-tion, the project failed to achieve its main objective, resulting in asevere decline of Benin's cotton program. The Performance Audit Report forthe Zou-Borgou project (Sec M78-353) was issued in April 1978 and that forthe Hinvi Agricultural Development Project (Sec M78-451) in May 1978. Thethird project, Technical Assistance (1977), is scheduled for completion inJune 1980. Its objectives are to reverse the Zou-Bourgou Project setbacks, tostrengthen the country's agricultural institutions and to prepare follow-uprural development projects. The first of these, in the Borgou Region, is duefor appraisal in mid-1980.

- 6 -

22. The Bank Group's involvement in the transport sector in Beninbegan in 1969, when the Bank acted as Executing Agency for a UNDP "LandTransport Study". This study led to the financing of a four-year (1970-1974) Highway Maintenance Project. Under the first project, the Governmentdepartment then responsible for maintenance was reorganized and a trainingprogram was carried out (Completion Report N. Sec. M77-758 of October 25,1977). The Second Highway Project, co-financed by USAID, comprised princi-pally the reconstruction of 320 km of the Parakou-Malanville road, Benin'smost important north-south trunk road which links Cotonou to the Nigerborder, and the continuation of the road maintenance program. This projectwas completed in June 1977 with the help of a supplementary credit of US$9million due to severe cost overruns. The Third Highway Project, approvedin November 1977, provides for the rehabilitation of a 107 km section ofthe southern part of the north-south axis (between Godomey and Bohicon) andthe expansion of the maintenance program, including the elimination of thebacklog in resurfacing bituminous and laterite roads. In addition, a FeederRoads Project, which provides for the construction and maintenance of about1,270 km of feeder roads and for the preparation of a long-term feeder roaddevelopment program in support of agriculture, was approved in FY77. A firstPort project was approved in FY78. Its major objective is to raise the cargocapacity of the port of Cotonou from 720,000 tons per year to about 1,100,000tons by providing about 660 m of additional berth capacity together withadditional storage facilities. The project includes technical assistance toimprove the efficiency of port operations, cargo handling and the operationsof the Cotonou-Parakou railway.

23. The First Education Project, which was approved in FY 74, providesfor the improvement of rural youth training programs and the construction andequipment of a skills upgrading center in Cotonou. The project includes apre-investment study for a follow-up training/education project currentlyunder preparation.

24. The emphasis in future IDA operations in Benin will shift fromtransportation to agriculture and rural development. Two rural developmentprojects are envisaged for FY81 and FY83. The lending program will alsoprobably include support for the development of the SEME oilfield andurban development in Cotonou.

PART III - THE INDUSTRIAL SECTOR AND FINANCIAL INSTITUTIONS

The Industrial Sector

25. Benin's industrial sector is still embryonic, contributing onlyabout 12 percent of GDP and employing about 2 percent of the labor force.Fueled by exports to Nigeria (an estimated three-fourths of Benin's indus-trial output find their way into Nigeria), industrial growth has beenrapid: between 1971 and 1976 value added increased 26 percent a year inreal terms, turnover 21 percent and investment 35 percent. Modern industryaccounted for most of this growth: the traditional artisan sector onlya small percentage.

- 7 -

26. Modern industry comprises about 75 firms, of which 63 are located

in Cotonou, Porto Novo and Parakou. These firms are mostly involved in

agricultural processing, manufacturing and construction. Eight firms (all

nationalized) account for three-fourths of total sales. They are primarily

producers of cement, textiles, oil processing and beverage industries.

Most of the remaining firms are small and privately owned. `ley include

food processing, beverages, vehicle assembly, mechanical worKshops, bakeries,

furniture making, paint, perfume and other consumer goods. An interestingcooperative (COBEMAG) producing agricultural implements -animal drawn carts

and ploughs- has been operating in Parakou since 1976. It is wholly owned

by its 150 workers.

27. Vegetable oil processing accounted for about one-fourth of

industrial output during 1972-76. But the palm crop was severely affectedby insufficient rainfall in recent years and marketed palm oil production

declined sharply from 38,500 tons in 1975/76 to 9,400 tons in 1978/79.Palm fruit and palm kernels production dropped by about 50 percent during

the same period.

28. Manufacturing has traditionally been oriented towards import-

substitution. It includes a shoe factory, a modern brewery, a flour mill

and clinker grinding plants. There are, however, some export orientedindustries such as the integrated textile plant in Parakou (IBETEX). This

is a joint venture (48 percent state ownership) with European firms with

the capacity to produce about 3,200 tons a year of made-up articles and

garments.

29. Small-scale enterprises, though common in the commercial field

in Benin, are not well-developed in manufacturing. Only eight firmscurrently benefit from the Investment Code provisions for "small-scale"Beninese entrepreneurs, according to a 1977 industrial survey. The

artisan population is quite large. A limited 1979 survey by the Ministry

of Industry identifies some 10,000 master-artisans. As elsewhere in

Africa, tailoring, metal working and woodworking are the most important

crafts (23, 16 and 13 percent respectively).

30. Benin's transit role to Niger and Nigeria has led to a rapid

growth of the road transport industry which carries 70% of all freightand 90% of all domestic passenger traffic. Although Government nationalized

the two main transport agents, and created a national Truckirg Company

(Trans-Benin) as well as regional transport companies, 350 small operators(with less than four trucks each) still handle the bulk of the traffic.

31. Benin's construction industry has a turnover of CFAF 6.5 billion

in 1976 up from CFAF 2 billion in 1970-75. Foreign contractors handle

most civil works but building construction remains in the hands of local

firms whose capacity is constrained by the lack of equipment and capital.To lessen foreign domination on the sub-sector, Government established

two public companies, Societe Nationale de Construction et des TravauxPublics (SONACOTRAP) in 1976, and Societe Nationale de Gestion Immobiliere

(SONAGIM) in 1978.

- 8-

Industrial Promotion and Training

32. No institution is specifically equipped to promote industry:"Bureau Central des Projets", a planning ministry agency in charge ofindustrial assistance focuses mostly on large-scale, government sponsoredprojects included in the Plan. The "Direction de l'Industrie" within the"Ministere de l'Industrie et de l'Artisanat" has only a regulatory andstatistical function. The "Centre de Perfectionnement du Personnel desEntreprises" (CPPE) provides low level clerical and vocational training.The "Centre de Formation Administrative et de Perfectionnement" (CEFAP)trains Government and public sector employees. The only institutionscatering to the needs of entrepreneurs and managers of small or medium-scaleenterprises are the Chamber of Commerce (CCI) and Banque Beninoise pour leDeveloppement (BBD). CCI has successfully organized several trainingsessions for its members and managers of public enterprises. It alsoplans to organize its industrial extension service with the advice ofUNIDO. BBD's "Direction des Etudes et de la Promotion" is the most activepromotional agency, but it lacks engineering and managerial expertise.

33. Although the Government has been officially encouraging theformation of artisan cooperatives, no concrete measures have been takenand channels to deliver assistance to artisans have yet to be established.

Prospects and Issues in Benin's Industrial Sector

34. Industrial Policy. The industrialization of Benin is consideredessential to its development and the Three-Year Plan foresees an industrialgrowth rate much higher than that for the whole economy. Government hasassigned three objectives to industry: (i) satisfy the immediate needs ofthe population, (ii) produce agricultural inputs and (iii) process agricul-tural products. To affirm public leadership over the sector, the State hastaken over eight major firms which account for three-fourths of industrialsector sales, mostly in the cement, textile, oil processing and beverageindustries. The state has been encouraging cooperatives for small-scaleenterprises, but it keeps a pragmatic and positive attitude towards privateenterprises in an effort to direct the strong business community from commerceto industry. The liberal investment code of 1972 is still effective andprovides substantial incentives to enterprises investing more than CFAF 25million, including exemption from import duties on equipment and machinery,reduction of up to 75 percent in import taxes on raw materials, exemptionfrom the domestic turnover tax, etc. Incentives are granted on a case bycase basis following a review of each project's merits and requirements.A special system (Regime D) benefits small Beninese entrepreneurs investingat least CFAF 10 million and employing more than 10 employees; these pay noduties on imported equipment and raw materials. In addition they areexonerated from the turnover tax for five years. The investment code is notlikely to be amended until the Second Development Plan is adopted (1981);improvements then to be sought include the abolition of export taxes, theelimination of the minimum investment requirement of CFAF 10 million, and thelisting of all industrial activities reserved to private intiative. Atnegotiations, the Beninese delegation indicated that BBD would keep IDAinformed of any proposed changes.

- 9 -

35. Despite a recent slackening in demand due to a fall-off indemand from the Nigerian market, Benin's industrial sector is expected tocontinue in the next five years the fast growth rate it enjoyed during the1972-76 period. This growth would primarily result from the large industrialand transport projects identified in para 13 above. Benin's favorablelocation on. everal transit routes, its proximity to the large Nigerianmarket, its low wage structure, the Government's positive attitude towardsprivate enterprises and a liberal investment code provide substantialincentives to help broaden the base of Benin's industrial development.

36. Although prospects have improved in recent years, obstacles toa better performance of the industrial sector remain substantial. First,artisanal and industrial enterprises suffer from various operationalconstraints such as low capacity utilization, irregular supply of equipmentand raw materials, lack of technically competent personnel and poormanagerial practices. Second, Benin offers a rather narrow market and alarge share of Benin's industrial growth in recent years can be attributedto formal and informal exports into Nigeria. Certain risks are inevitablein this dependence on a single external market. Third, although Government'sattitude towards industrial entrepreneurship is essentially pragmatic, itssocialist philosophy inevitably deters private investment. Finally, verylittle technical or financial assistance is currently available to artisansand entrepreneurs.

Financial Institutions

37. Besides the Central Bank (BCEAO) the banking system comprisesthree state-owned, highly specialized banks. "Banque Commerciale du Benin"(BCB), specialized in commercial banking operations, resulted from themerger of three previously French-owned commercial banks. With 15 branches,80 percent of total loans and 75 percent of total deposits, it is Benin'sbiggest bank. "Caisse Nationale de Credit Agricole" (CNCA) was establishedby the Government in 1976 as the apex organization for regional and localagricultural savings and loan institution. "Banque Beninoise pour leDeveloppement" (BBD) is the country's main term-lending institution.

Credit Policies and Interest Rates

38. As a member of the West African Monetary Union (UMOA), Benin sharesa common currency (CFAF), Central Bank (BCEAO) and credit and monetarypolicies with Ivory Coast, Niger, Senegal, Togo and Upper Volta. Under itsoperating guidelines, BCEAO controls money supply and credit expansion byproviding liquidity to the banking system. Since 1976, the Central Bank hasalso decided to apply a formalized sectoral credit policy directing fundstowards priority sectors, which has yet to be fully implemented. Finally,to improve the use of liquid funds within each country and the Union, BCEAOoperates a money market for daily operations between the commercial banksand the Central Bank. Benin has so far practiced a policy of low interestrates. Thus, preferential loans (Government, housing, crop financing andsmall-scale entreprises) command an average interest rate of 7 percent whereasBCEAO authorizes a maximum of 8.5 percent, based on a preferential discount

- 10 -

rate of 5.5 percent. Other loans command an average interest rate of 9.5percent whereas BCEAO authorizes a maximum of 13 percent, based on a normaldiscount rate of 8 percent. Under the proposed project, BBD has agreed toincrease its lending rate to small- and medium-scale enterprises to 8.5 per-cent and 11 percent respectively. As of June 1978, credit outstanding in theeconomy amounted to 43 billion CFAF (US$205 million) of which more thanthree-fourths was short-term.

39. The banking system is almost exclusively dependent upon CentralBank refinancing which is subject to an overall country ceiling. Withinthis limit, the Government is entitled to borrow 20 percent of the precedingyear's tax revenues and the balance is available for the banking system.Each bank can claim Central Bank refinancing for up to 35 percent of itslending operations. At present, loans by the banking system to the economyare covered by Central Bank refinancing (79 percent), Government surpluses(12 percent) and public or private deposits (5 percent). As the countryis now embarking on a substantial development program led by the publicsector, Government surpluses and parastatal deposits will in part bewithdrawn to finance new investments and purchases of equipment abroad.Furthermore the Government might be compelled to draw on the CentralBank up to its statutory limit, thus curtailing the amount of refinancingavailable to the banks. To compensate for smaller deposits and tighterrediscounting, the banks must search for alternative sources of finance.The proposed line of credit for small and medium-size industrial projectswill provide BBD with the alternative resources it needs to fulfill itsdevelopmental role.

Banque Beninoise pour le Developpement

40. A government-owned institution with a share capital of CFAF 1billion (US$4.8 million), BBD became Benin's specialized term-financingbank for all economic and social development projects in 1975. It grantsmedium- and long-term loans, occasionally with equity participation, toall sectors of the economy whether public or private. BBD has had animpressive rate of growth and stands out as a well managed and profitableinstitution. Its 113 member staff is organized into five departmentsresponsible for project promotion and supervision, credit applications,accounting and finance, administration, and legal matters.

Policies and Procedures

41. BBD's By-Laws define its policies and operating guidelines. Equityparticipations are limited to 25 percent of a company's share capital andtheir sum cannot exceed BBD's unimpaired capital and reserves. BBD's exposurein each project is limited to 90 percent of total project cost for SMEs, 65percent for industrial enterprises and 50 percent for other projects.There is however no limit placed on individual loans in relation to BBD'sequity. At negotiations, BBD agreed to amend its By-Laws to include anexposure limit in relation to its own equity, acceptable to the Association aswell as a maximum debt/equity ratio of 5:1 (Project Agreement, Section 2.07).BBD's interest rates now range from 6.5 to 8.0 percent for indigenous SSEs,from 9.0 to 11 percent for other industries and from 9.5 to 12 percent for

- 11 -

trade and services. BBD's procedures are generally efficient. Appraisalscover most aspects of project evaluation and, following the Bank's identifi-cation mission of November 1978, now include economic rate of returncalculations and monitoring of employment creation. Supervision of problemprojects is good but it should be generalized to all projects. Loan col-lection procedures are well established and efficient. BBD accounts arecurrently reviewed by a "commissaire aux comptes" whose investigations,consistent with the practice in the region, are only superficial. Althoughcompetent, the "commissaire aux comptes" is not familiar with the long formaudit as required by IDA. Consequently audits under this project would becarried out by a firm of auditors acceptable to IDA (Project Agreement,Section 3.02).

42. BBD has in the past, carried the foreign exchange risk on someforeign borrowings. So far, its exposure has been minimal since half ofthe CFAF two billion borrowed is denominated in French Francs (which hasa fixed parity vis-a-vis the CFAF) and the other half in US$ (which hasdepreciated vis-a-vis the CFAF) and with a large spread (6 to 8 percent).Nevertheless, BBD confirmed during negotiations its willingness to set aside,each year, an amount equal to 2 percent of the outstanding on these borrowingsas a provision for exchange risk on past borrowings. In addition BBD hasagreed not to carry the foreign exchange risk on its future borrowings.Dispositions satisfactory to IDA will be taken by BBD before December 31,1980. (Project Agreement, Section 3.06).

Operations

43. The structure of BBD's US$56.6 million portfolio (CFAF 11.9 billionin 1977/78), of which three-fourths are for several large equipment loans andone-fourth for a multitude of small social loans, is a reflection of thetransition BBD has undergone since 1975, from a multipurpose bank to a devel-opment bank. With equipment lending now accounting for two-thirds of its US$30million yearly approvals, BBD's operations are geared towards developmentlending. BBD's portfolio affected by arrears represents almost 43 percent ofits total portfolio. However most of these are technical arrears on state-owned or guaranteed loans often due to start-up delays in project implementa-tion which do not affect the ability of clients to repay. Accordingly, BBD'sestimate of doubtful loans (12 percent of its portfolio) and the levelof provisions for these (about 5 percent of its portfolio) are consideredadequate. Nevertheless, BBD's monitoring of arrears could be improved and aplan to reduce arrears to an acceptable level would be submitted to theAssociation for its approval not later than October 1, 1981 (Project Agreement,Section 2.11).

Financial Performance

44. BBD has grown rapidly and its assets have tripled over a fouryear period to reach US$68.6 million as of September 1978. With outstandingcommitments and approvals of some US$33 million, BBD's resource position showsa term resource gap of about US$20 million. In securing more term resources,BBD is trying to decrease its dependence on BCEAO by locating alternativesources of term finance. It has already succeeded in mobilizing new deposits

- 12 -

of approximately US$7.1 million, and has US$4.5 million available fromexisting lines of credit (Caisse Centrale de Cooperation Economique, USAID,African Development Bank and Algerian Development Bank)l/. In addition BBDobtained recently a US$4.5 million loan from the OPEC Special Fund. Thisloan would be administered by IDA in conjunction with the proposed Credit.Moreover BBD agreed to increase its capital not later than December 31, 1980by at least US$2.4 million (Development Credit Agreement Section 3.02).BBD's earnings before taxes have risen steadily from US$300,000 in 1975 toUS$700,000 in 1978. Administrative expenses have been maintained at areasonable level and their share of average total assets has declinedfrom 2 to 1.2 percent in 1978.

Prospects and Issues

45. BBD's strategy for the future is not only to continue its currentrole as the main source of term financing for all clients, public and private,outside the agricultural sector, but also to intensify its promotional,appraisal and supervisory services for small and medium-scale industries. BBDcurrently has a pipeline of projects amounting to CFAF 7 billion or US$33million for the next three years. Projects under consideration includebakeries, ice-making, packaging, textile, food processing, charcoal making,transport, metal working, etc. BBD's pipeline, lending program and pastperformance show that its financing of small and medium industrial projectscould easily reach US$15 million over the next four years if its projectpreparation capability is rapidly upgraded.

46. BBD's Departement des Etudes et de la Promotion (DEP), which isin charge of promoting and assisting SME's, is clearly understaffed; it needsthe services of an experienced industrial engineer with managerial experienceto assist in identifying, promoting and supervising SHE investment projects.To fulfill its promotional role vis-a-vis local entrepreneurs, DEP - inliaison with the Chamber of Commerce and Industry -- would also requireexpertise in preparing and implementing training and promotion programs. Dueto the unavailability of local personnel experienced in these fields, outsidetechnical assistance would be provided under the project. In addition, BBDhas been encountering some difficulties keeping its accounts up to date andoptimizing its liquidity management. A review by a firm of experiencedexternal consultants of the financial department's functions and procedureswould be carried out under the project.

47. Financial forecasts show that BBD resource requirements until 1984would reach an estimated CFAF 12.8 billion (US$61 million) until 1984. Thiswould be met by an increase in capital, deposits, central bank rediscountand lines of credit. BBD's projected financial ratios show that its financialposition would remain sound throughout the period; the term-debt/equity ratiowould remain below 5:1 and the total debt/equity ratio would stay around 8:1.Profitability would remain stable relative to net worth because the forecastedincrease in average interest rate from 8.2 percent in 1978 to 9.5 percent in1981, would be gradually matched by the increase in administrative and financialexpenses.

1/ In 1978 BBD's average cost of funds stood at 4 percent of total assets.

- 13 -

PART IV - THE PROJECT

Project History

48. Following an official request by the Minister of Plan, an iden-tification mission visited Benin in November 1978. It concluded that therewas a need in Benin for alternative sources of long-term foreign exchangeresources to finance productive investments in the industrial sector, andthat, subject to improvements in its financial management and promotionalrole, BBD could become an adequate channel of Bank Group assistance. Theproject was appraised in the field from April 8 to 20, 1979. Negotiationswere held from January 16 to 18, 1980. The Beninese delegation was led byMr. Baba Moussa, Director General of BBD. The Staff Appraisal Report No.2719-BEN is being circulated separately to the Executive Directors. Annex IIIof this report provides supplementary project data.

49. The main thrust of the proposed IDA credit would be to providean alternative source of term financing, to build up BBD's capacity toidentify, promote and assist industrial projects and to advise the Governmenton industrial and financial sector issues (export strategy, employmentcreation, artisans role, investment code). Specifically the project seeks tobring the Government to focus not only on large-scale projects, but also onsmall manufacturing and artisan industries. To achieve these objectives, theproject would be supported by a line of credit to BBD for the financing ofindustrial projects and a technical assistance program to strengthen theinstitution. An advance of US$320,000 under the Project Preparation Facilitywas granted in December 1979 to ensure an early start of the technicalassistance and for the preparation of ad hoc feasibility and engineeringstudies.

Project Costs and Financing

50. The project will cost US$12.3 million net of taxes, of which US$9.1million is foreign exchange. Taxes are estimated at US$1.3 million. Theproposed IDA credit of US$10 million would therefore represent 81 percent oftotal project cost net of taxes. It would finance 100 percent of totalforeign expenditures. In addition, it would finance US$0.9 million of localexpenditures (7 percent of total project cost) under the small-scale andtechnical assistance components.

51. US$8.6 million from the IDA credit proceeds would be onlent to BBDas a line of credit to finance economically and financially sound investmentsin the following areas:

Small-Scale and Labor Intensive Investments

(i) At least US$2.6 million of the line of credit (30 percent)would benefit small-scale investments defined as projects

- 14 -

costing less than US$238,000 (CFAF 50 million). BBD would beauthorized to finance 90 percent of the investment cost (CFAF45 million or US$214,000) of such projects; IDA would finance100 percent of BBD's loans. BBD would be expected to financeabout 25 to 30 investments in the typical areas of wood andmetal working, food processing, road transport, fisheries,tailoring, repair and maintenance activities. Artisanalenterprises would also be eligible for financing under thiscomponent. Moreover, as an incentive for employment generationin medium-scale industry, any industrial project creatingemployment at a cost per job of US$10,000 or less would beeligible for a loan at conditions similar to those for small-scale enterprises (Development Credit Agreement, Section 2.03).

Medium-Scale Investments

(ii) Up to US$6.0 million of the line of credit would benefitmedium-scale investments defined as projects costing betweenUS$238,000 and $2.4 million (CFAF 50 to 500 million). BBDwould be expected to finance up to 65 percent of the investmentcost of such projects representing their estimated averageforeign expenditures (CFAF 325 million or about US$1.5 million).IDA would finance 100 percent of such BBD's subloans. Underthis component, BBD would finance 10 to 15 projects in a widerange of activities such as manufacturing of agricultural toolsand implements, vehicle assembly, small hotel projects, produc-tion of consumer goods, construction companies (DevelopmentCredit Agreement Section 2.03).

Terms and Conditions of Sub-Loans

52. The line of credit would be onlent by the Government to BBD at 8percent for eighteen years including five years of grace. BBD would becharged a commitment fee of 0.75 percent and repayment would be on a fixedamortization schedule of equal, semi-annual payments of principal and interest(Development Credit Agreement, Schedule 2); a fixed amortization schedule isjustified to provide BBD with increased resources through roll-over of fundsand to ease the administrative burden of frequent schedule readjustments.

53. The terms of sub-loans would vary according to the type of project.Maturities would range from 2 to 15 years. Averages are expected to beabout five years for small-scale investments and eight years for medium-scale investments. The grace period on principal repayment could reach upto five years but would seldom exceed three years. The interest rate tomedium-scale sub-borrowers would be 11 percent per annum. This rate repre-sents a 1.5 percent increase above BBD's average rate. It would yield apositive return given the low current inflation rate (para. 12) and would giveBBD an adequate spread of 3 percent to cover its overheads. Sub-borrowerswould also be charged a commitment fee (0.75 percent of the undisbursedbalance). The interest rate charged on small-scale and labor-intensive

- 15 -

sub-projects would be 8.5 percent per annum, in line with BCEAO's preferentialrate (Development Credit Agreement, Schedule 2). To ensure BBD an adequateand consistent spread, the Government has agreed to compensate BBD for theinterest lost on its lending on small-scale and labor-intensive projects(Development Credit Agreement, Schedule 2 paragraph 1 (e)).

54. BBD would calculate the investment cost per job and the internalfinancial rate of return and the economic rate of return of all its sub-projects. All subprojects financed under the line of credit would have,normally, a minimum economic rate of return of 10 percent, encourage employ-ment creation, and give due consideration to the use of appropriate technology.The foreign exchange risk would be borne by the Government (DevelopmentCredit Agreement, Schedule 2, paragraph 1(d)). A free-limit of US$150,000for individual subloans and an aggregate free-limit of US$2 million would beestablished. However, the first three sub-projects below the free-limitwould be reviewed by IDA. BBD would also limit its long-term borrowings tonot more than five times its paid-in share capital and unimpaired reserves(Project Agreement, Section 3.05).

Technical Assistance Program

55. Technical Assistance is an important aspect of this project andUS$1.4 million of the proceeds of the Credit would be earmarked forthis component. The program's objective is firstly to help improve BBD'sfinancial management and strengthen its project identification, promotionand supervision capabilities, and secondly to assist BBD and the Direction del'Artisanat in the Ministry of Industry in the formulation of an artisanpromotion policy and the preparation of a practical cost-effective artisanproject component.

56. Assistance to BBD would include 18 man-months of consultantservices to help organize BBD's data processing capability and improvefinancial reporting and management, 3 man-years of an industrial engineerservices to help BBD's "Departement des Etudes et de Promotion" in theidentification, promotion and supervision of industrial investments. Anallocation of US$130,000 from the proceeds of the credit would be madefor the preparation of engineering and feasibility studies for projectsprometed by BBD and US$115,000 to finance the cost of in-house training andfellowships for BBD's staff. BBD would in addition carry out, jointly withthe Chamber of Commerce, training programs for SME entrepreneurs. The creditwould provide for 2 man-years of the services of a training and extensionexpert to organize BBD's in-house extension service and carry out studies. Anallocation of US$145,000 would be made to finance the cost of training ses-sions.

57. Finally, 10 man-months of consultant services would be provided toadvise BBD and the Ministry of Industry's Direction de l'Artisanat on policiesrelated to artisans and to help prepare an artisan project component proposalfor a possible follow-up industrial development project. IDA would approve

- 16 -

the qualifications, terms and conditions of employment of advisors andshort-term consultants financed under the project (Project Agreement, Section2.06). Provision has been made to finance five man-years of advisors and 28man-months of short-term consultancies estimated at an average foreignexchange cost of US$8,750 per man-month, plus US$1,600 (net of taxes) perman-month for local expenditures and subsistence.

Monitoring

58. BBD would submit to IDA semi-annual operational and financialreports, annual reports and audited financial statements. In addition,BBD would furnish information on staff training, and its coordinationwith other project-related organizations (Direction de l'Artisanat andthe Chamber of Commerce).

Procurement and Disbursement59. BBD is expected to follow usual DFC procurement procedures.Disbursement would be made on the following basis:

(1) line of credit: 100 percent of BBD's subloans;

(2) technical assistance, consulting services, and trainingexpenses: 100 percent of expenditures.

Disbursements under all categories would be fully documented.

Benefits

60. Benefits are expected to accrue to the Beninese economy in theform of productive investments, employment creation and institutionbuilding. The project would result in the implementation of about 45financially and economically viable subprojects, representing an investmentof about US$12.0 million in industry. The line of credit is expected tocontribute to the creation of about 900 jobs at an average cost per jobof US$7,100 for SSE/labor-intensive investments and US$19,500 for medium-scale investments. The institutional improvements in BBD would increaseBBD's overall efficiency and the quality of its investments. By makingcredit and technical assistance available, the project would provide thefirst organized attempt in Benin to upgrade the skills of local artisansand entrepreneurs.

Risks

61. The small size of the Beninese economy, the uncertaintiessurrounding the Nigerian market, the centralized management of theeconomy and the lack of skilled labor are factors which could prevent sub-project investments from materializing as quickly as expected, resultingin slower disbursements. To balance this the positive factors are thecoming into force of the trade provisions under the ECOWAS Agreement, theexpectation that the Nigerian market will continue to absorb Benineseproducts, that state enterprises will undertake substantial investments

- 17 -

and that the Government will maintain its pragmatic attitude towardssmall and medium-scale private investments. The lack of BBD expertisein designing and implementing investment proposals would be addressedby the early provision of a substantial technical assistance package.The project being centered around an efficient and dynamic intermediaryshould ther-''re be implemented smoothly.

PART V. LEGAL INSTRUMENTS AND AUTHORITY

62. The draft Development Credit Agreement between the People's Republicof Benin and the Association and the Recommendation of the Committee providedfor in Article V, Section 1 (d) of the Articles of Agreement of the Associa-tion are being distributed to the Executive Directors separately.

63. Special conditions of the project are listed in Section III of AnnexIII. Special conditions of effectiveness included in the Development CreditAgreement would be the execution of a Financing Agreement between the Govern-ment and BBD and the amendment of BBD's "Reglement Interieur" to establish anexposure limit and a maximum debt/equity ratio acceptable to the Association.

64. I am satisfied that the proposed Credit would comply with theArticles of Agreement of the Association.

PART VI - RECOMMENDATION

65. I recommend that the Executive Directors approve the proposedCredit.

Robert S. McNamaraPresident

AttachmentsWashington, D.C.March 3, 1980

ANNEX I- I 8 - I

3aXy - SOCIAL rNDrCATORS DATA SHUT

3y 8REFERC1E CaROLPS (ADJUSTED AIRAGESLAJI AJIA (THOUSAND 50. E.) - NOzS. rc!SAfT IT-5 % L)

-OTAL 12.6 SA SAME mT EIC'ERAC;L C=LTU4L 33.9 ID5T 2tCEYT OEOGRAP9IC INCOM LNCODH

1960 /b 1970 lb !STIMAlE /b RE10ON /c GROUP /d GROUP I.

GNP PER CAPITA (USS) 90.0 130.0 230.0 306.1 209.6 467.5

11110! COK5t_TiON' ER CAPITA(KILOGRAMS o COAL EQUIVALENT) 39.0 42.0 49.0 80.6 83.9 262.1

POFULA-Iolf s.' VITAL STATIST5CSOPULATION MID-TEAR (MILLIONS) 2.1 2.6 3.2ULAN POPULATION (PE1CDEN OF TOTAL) 9.8 16.3 23.2 17.1 16.2 Z4.6

POPAT5N PRnJECT50NSPOPULATION DiN riA 2000 (MILLIONS) 6.0STATIOlNARY POPULATION (MILLIONS) 15.0YEAI STATIONARY POPLATION IS RE4DE 2160.0

POPULATION DENSITYnR SQ. IX. 19.0 23.0 28.0 18.4 49.4 45.3PER SQ. M:. ACRICULILRA LAND 62.0 77.0 94.0 50.8 252.0 149.0

POPUIATION AGE SIRCTUllZ (PERLCENT)0-14 IRS. 44.2 44.9 46.0 44.1 * 43.1 45.2

15-64 TRS. 53.2 52.6 52.0 52.9 53.2 51.965 "RS. AND ABOVE 2.6 2.5 2.0 2.8 3.0 2.J

POPUATION GROWTH RAT5 (P2RCtNT)TOTAL 2.2 2.6 2.9 2.7 2.4 2.7R,3AY .. 7.9 10.6 5.7 4.6 4.3

CRUIDE UIRTH gATE (PER THOUSAND) 51.0 49.0 49.0 46.3 42.4 39.4CRUDE DEAIR RArE (PER THOUSAND) 27.0 22.0 19.0 17.2 15.9 11.7GROSS UPRODUCTION RATZE 3.3 3.3 3.3 3.1 2.9 2.7FAmILY PLANNLSC

ACCEPORS ALNUAL (TROUSANOS) .. .. ..USERS (PtRGIYT OF MARID WOM) .. .. .. .. 12.2 13.2

FOOD AM NUTRITIONNDEIX OF FOOD PRODUCTION

PER CAPITA (1969-71-100) 92.9 101.0 9.0 94.3 98.2- 99.6

PER CAPITA SUPPLY oFCALORIES (PERCm4T OF

RIQUIRZXEYTS) 96.0 97.0 87.0 89.5 93.3 94.7PROTEINS (GRAMS P!R DAY) 54.0 55.0 56.0 55.8 52.1 54.3

Or ¶IC1c ANIMAL AND PULSE 14.1 1S.0/f 13.0 17.9 13.6 17.4

CElLD (AGES 1-4) '8i3TALITY RATE 41.0 32.0 27.0 22.3 18.5 11.4

KEALTNLIFE EXPECTANCY AT SIRTd (lIARS) 37.0 42.0 46.0 47.0 49.3 54.7INFANT MORTALITY RAT£ (PERThOUSAND) 206.0 .. .. .. 105.4 68.1

ACCESS -O SAP! WATER (PERCENT OFPOPULATION)

TOTAL .. .. 20.0 20.3 26.3 34.4URAN .. .. 42.0 53.9 58.5 57.9RURAL .. .. 16.0 10.1 15.S 21.2

ACCESS TO ECCR1TA DISPOSAL (PERCENTOF POPULATION)

TOTAL .. 14.0 .. 22.5 16.0 40.8CUAN .. 83.0 .. 62.5 65.1 71.3RUL .. 1.0 .. 13.9 3.3 27.7

POPLAT5ION P1R PHYSICIAN 47000.0 28920.0 34380.0 17424.7 11396.4 6799.4POPULATICN PER NURSINC P'RSON .. 2910.0 3100.0 2506.6 5552.4 1522.1POPULATION PER BOSPITAL SED

TOTAL 710.0 870.0 780.0 502.3 1417.1 726.5URJAM .. 360.0 290.0 201.4 197.3 272.7RURAL .. 1620.0 1300.0 1403.6 2445.9 1404.4

ADMISS10NS PE.R EOSPITAL SED .. 30.2 17.7 23.4 24.8 27.5

EOCS INCAVERAGE SIZ' OF ROUSEROLD

TOTAL. .. .. .. 4.9 5.3 5.4U1RAN .. .. .. 4.9 4.9 5.1RURAL .. .. .. 5.5 5.4 5.5

AVERAGE NUMSER OF PERSONS PER ROOMTOTAL .. .. ..L'RSA. .. .. ......3URAL .. .. ..

ACCESS TO ELECTRICITY (PERCENTOF DWELLINGS)

TOTAL .. .. .. .. 22.5 28.1URBN .. .. .. .. 17.8 45.1tLRAL .. .. .. .. .. 9.9

_ 19 _ ANNEX I

SENIN - SOCIAL INDtCATORS DATA SHZET

SVIIN UPTIVICE aOL?5 " -,!T`i,) NV§SL;-MOST 9.EOENT,ST:xxrz

tt SkME N3 7ltMaT llCINT GFOGRAPhlC LNCOtLE INCOME

1960 /b 1970 /b ZSTIXATE /b 9C:NOS 'c C7LOiP /d GROUP /I

EOUCATIONAX ST1 ENsRO.LL..T EATIOS

7I11sn lft TOTAL 26.0 40.0 53.0 59.0 63.3 82.7RAU 38.0 56.0 73.0 64.2 79.1 87.3MT%%Z 15.0 25.0 3Mo 44.2 48.4 75.8

SUCONDAAY: TOTAL 2.0 5.0 10.0 9.0 16.7 21.4MALE 2.0 8.0 14.0 12.0 22.1 33.3?LMAIL 1.0 3.0 5.0 4.4 10.2 15.5

VOCATIONAL ENROL. (C oT SECOIDUAY) 13.0 4.1 2.1 7.0 5.6 9.3

rj?TL-STEAC1hR IATIOItM-t 41.0 4.0 4S.0 42.2 41.0 34.19IC0tfOAIY 23.0 26.0 31.0 22.9 21.7 23.4

ADULT LITERACY RATE (PERCENT) 8.0 *- 11.0/h 20.8 31.2 54.0

CONSU)IYONPASSENCER CARS PER TIIOISAND

POPULATION 1.0 4.0 5.3 4.0 2.8 9.3RADI0 RECEIVERS PEP TIOUSAND

POPULATION 13.0 32.0 47.0 46.3 27.2 76.9TV RECEIVERS PER THOUSAND

POPULATION .. .. .. 2.9 2.4 13.5NEWSPAPER ("DAILY CtNERALLTrEREST") CIXCU'LATION PERTHOUSAnD POPULATION 2.0 1.0 0.3 5.6 5.3 18.3CYIENA AI.NUAL ATTNDEANC_ PER CAPITA 0.2 0.4 .. 0.4 L.1 2.5

'ABOR FORCETOtAL LABOR FORCE (ThOUSANDS) 1100.0 1300.0 1645.0

F.tALE (PERCENT) '5.1 44.9 46.2 31.9 24.8 '9.2AGRICiLTURE (?ERCENT) 54.5 49.7 47.0 77.6 69.4 62.7INDUSTRY (P7ERCENT) 8.9 11.8 15.0 7.9 10.0 11.9

?ARTICILPATION RAT! (PERCENT)TOTAL 51.2 49.0 46.4 40.8 36.9 37.1iALE 57.1 54.9 51.0 53.9 52.4 48.8FENALE 45.5 43.3 42.1 25.6 18.0 20.4

ECONOMIC DEPENDENCY RATIO 0.9 1.0 1.1 1.2 1.2 1.4

:iCOtNE DlStRiBUTION--fRCET OF PRIVATE INCOMERECEIVED BY

nEGiHEST 5 PERCENT OF HOUSEHOLDS 31.6[ .. .. .. .. 15.2ECIGHEST 20 PERCENT OF HOUSEROLDS 51.77j .. .. .. .. 48.2LOWEST 20 PERCENT OF HOUSEHOLDS 5.57j .. .. .. .. 6.3LOWEST 40 PERCENT OF HOUSEHOLDS 15"85 .. .. .. .. 16.3

POVERTY -AIRCET GROUPSESTI-AtlaD ABSOLUTE POVERTY INCOMELEVEL (USS PER CAPITA)

URBAN .. .. .. 187.6 99.2 241.3RURAL .. .. 65.0 96.8 78.9 136.6

ESTIYATED RELATIVE POVERTY INCOMELEVEL (USS PEL CAPITA)

URBAN .. .. .. 138.4 91.9 179.7lIItAL .. .. 67.0 71.0 54.8 103.7

ESTIMATED POPULATION SELOIW ABSOLUTEPOVERTY INCOKE LE.VL (PERCENT)

DRAN .. .. .. 34.5 44.1 24.8RUIRL .. .. 50.0 48.7 53.9 37.5

Itoc availableNot applicable.

NOTES

/a The adjusted group averages for each indicator are poPulation-veighted geometric means, excluding the extremevalues of the indicator end the most populated country in each group. Coverage of countries aoag theindicacors depends on aveilability of data and is not uniform.

/b Unless otherwise motoud data for 1960 refer to an.y year betue.n 1959 and 1961; fir 1970, betw,en 1969and 1971; and for Most Recent EstimAte, between 1973 4nd 1977.

tc Africa South of Sa hara; Id Low Income (5280 or less per capitsa 1976); Le Lower Middle Income(5281-550 per capita 1976); 7f 1964-66; /. Population; /h 1973.

Most Recent Estimate of C0? per capita is for 1978.

August, 1979

- 20 - ANNEX I

DRINITION OF SWILLI INDICATORS L

Notes: Although the dta are draw from souce gnealy judged the ash authoritative and rlae,It ehuId also be noted that they my sot he inter-tio.. lly omparable becus o f the lookof otndordioed definition ad concpts used by dif formt coutrisa Is soil1etisg the data. The data ar, sontheleas,use ful to deocibe order o. f asgoitude, indicate tredc, end hsatsriae certain maJor difference beteeo vo-trie..

The adjusted group, avera.ges fo,r eah odicotoc -r popuAtin-eightsd geomtric mean, enoudig the eatre -alues of the indicator and the ant popaItedooutrI eac gRoup. se to lak ofdata, gr-paveroge of all indicators for Capital iurplu Oil Epoters and of indlators of Access no Water and Escreta

Dihepocl, Ocuolo, incom Distribution cnd Povety oroher conr gop are -polsstinRueighted geotrio mesa mulct secluion of the satrem value andthe at popultetd cutry hecvrg fcounties sag h Inicatr eed on itfl* llhy of da,tat n is, notunform"ction -t be e-rised

iretiga erae of use Indicator to another. These average ar astly uelasapoatnofspetCvusebsceaigthe valise of oiadiator at a tins sang the ocutry and referenc groups.

[AND ARSA (nioneadfs,q.ha.( AIest nrt ipai preto oaain toa.-na.ancol

Agrloulturnl- act reoco vetikate o agrcu turl re used taprail eceitags oft dirrspetive poiestisas. Zcreta disposal sa lo_ldeor eracetl fo oop, petree erie ad itcesgacen ortoth oletsaddipa,wth or sithout tretnet, of bian- rrtlie f717APlosA and-GVPprci. t- sante-eater by oste-borne system or the u- of Pit Privies and s-alo,

calulaed y cne oovraon ethd n Wold as Atas 197-76buss) qualified from a medcl school at uni-ernity level.1950, 1970, no-96-.t-i.-hd 1976 Al data7- . Papalation cNosn Per so - P opulationdiv~ided by outer of p-trailg mal

ETY0 C:1 Cli 0tTi rPE CAPITA - Anoun -o-uption of oo -erilal coersY and female graduate nre,Practical sue ad asistant nures(oa- nd git,ptroleu, otural gao and hyiro-, nulear and gEc-Pelto o ptlBd- total, urban ad rural - Popolatioo (total, urban,thermal electriciyp) io kitIogr- of col qivletper onpits; 1760, nod-rrl dicided byterrsetv obr of hsia esnalbeino7, d 1976 data, public and private genera and speialied hatPital and rehabilitation ceters.

1,70, ~~~~~~~~~~~~~~~~~~~~~~~~~HosPitals are steblisu-tst parmenetly etaffed by at least on plysicien.POPULATION AlD VITAl STATISTICS EntabIishnesto proidIog pri-cipa11y custodial car are not inclded. Rura

T Pla.it,E,fa (Ilhion) - A, of JulIy 1; 1960, 1970, and hospitals hoevr,madud health no medical -eters ect permenetly ot.ffed1977ddata.bY a phys ioa (ht by a medical -sistant, nurs, midwife, etc.) hiob offerUrban Pestio (pero-t of total) - Retic of urban to total population; ie-patient sdainad Provide a limited enoge of medical facibtiia..

difeen deiultioo of urba teat- sa ffect oop-rbility of data Admissions nor Hoseital Bed - Total nuber of adisosto or dinchargec fron19toutre;i60, 1970, nod 1975 dnta. hospitala dicided by the nuber of beds.

oplet ic rjvoti...ytnsslation nDao 00- Curet populution projections so bae on. dHOUSING

1975 total poplation by ag nd -tond their mortality and ferilt Avrae u of Householfd (persons-pe household)-total, urban and rural -ente.Prjetio praetrs ornotaity rates coprise of thoc A oueol onits fagopo niiul b hr.iigqotr olevels assui life r-p-ct-y at tirthi- ooeoig mitt -ntey s tbeir main meals A boaderor. logrsy or na not to i-cluded is tiePer capitt iccs -lee, and fel lfe oet-ny aiiiga oshl o statistclpupss

77.5ycnc. c pramter for fertility rnte .1e- bar thre - rvela Avrgenmbro pron e room - total, uban, and rura - io-rnge caberasumn dcln ho fertility accoding to incom isrl nod past of persons per roo i all urban, and rura occupied .conetional .delino,

family elnoing pro n e. ith costry is then assigned one of these repectively. D-seliegs ecede non-perm-et st_tures and un-cpiedpartc.cite -veinstions of ortality sod fertiiity trends for proJection Access be Electricity (p-eret of dwellings) - total, urban. ss, rura - Co-,,rpoevo v-tional1 dwelligs cub e1lectricty to livig quarters as pe,reotage of

stationnoy oPulatio." - it a ototionrY Puisslatio three is no grthtotal, urban, nod rura dwellings repectively.sioce the birth rate is equal to tho death rate, nod also the ageototur , renioontt.Ts ic ah ievd only after fertility riltes EDUCJATIONde-lie t the replscrnect level o ct ne reprodutio rate, ebs djsted Enrolmet Ontioscah g-n-ctioc of -oe replace it-elfe--tly. The stationar ypp- nPimar school - total, male nod femle-ir... total, male and female arnii--lationst en-ctimted on the bnuic of the Projec.ted charactertsti-s mea of al aest the primcy levl a peroentages of respective priarof theP pultion in tie pear 2000, nod the traeo decline of fertiiity cholag populations ; normlly IInudes childre aged 6-li year but

rate no replaccacot lvccl. a~~~~~~~~~~~~~~~~~~djusted for diffecest lengths o primaryeducation; for -- utri-o ithYaatatictar pouain svnhed - rhc year obey stationer poPulation uiesldctonuril t may nceed tUG pRcen.t since acn .poilsloe has teen reobd.ar lblo ,osov tie official achool age.PopultiosU. enit -coday scoo _ total1, male and f l.l - Computed as at,-y; -eocoso

Pee sq. kn. - Eid-yea polpcition per squar hilorter (1CC h-tare) ofeducation requireset least four year of oppr-vd primary inotructic;total are proid.s general cutiosa1, or teachr training 1antrntiono" for pupils

Per s.- ka. agiutua -ed Coptd ntcr o arcltrlladuully of 12 to 17 year of age; correpondenc oourse rga loly. eoldd

PPopuato Ag Itut -(pret) - Childre (0-14 yau) wokn-ag Vocational enrollt (perost of se-dort) - Vocation..l iantituti-asi-code(1-0yas,ndrtiy N tred (65 years sod ovr) no peretae of mid-year teehi-al J idustrial, or ohrporm ho prt neednl rnpopuatin;h76oriP0, od 977dat,hdparmens o seondry ndttuttns.npalation orossi _On_ (ertat tota - Annual ercth rates of tubal aId- Punil-sher rtbi -_primar. an secodary - Total students ar11ed in

yerppltion for 199-h, i5-7', -n 1970-77. primary and aeodary levels divided by nubers of teachers in throrrossltion Irc-th Rate (I-roet -buio- Annuael grot rae of urban pondinghein

populations for 1950 -'S, 950-7, ned 19(70-75. AMutt literacy rate (percet) - Mberate adults (able to rea and write)aCrude Birth PeePrthousad) - docual l:c births pee thousad of id-apercentage of total ,adut population aged 11 years andov

Crude st us(e oad -Anahotsprthousand of mid-year filhi5Pfhpouain'9b0o17, o i 1977 data. Pssngrur (per thousad ppolation) -Psegrcscopiemtr orUroapepr.duntlo aekeaenme f daughtero ca ciii bear seating less than eight pore.one; encldes abalances, h-eare nmltr

in her norma -rprdontic period if chv eeivcopr-eet age- ve.hiclesspecific fertility mire; usualIly fin-yea averges ending is i960, RaIo Ri-cber (::r thIan Iuto) - All types of receivr fr radi.1970, nod 1975. ~~~~~~~~~~~~~~~~~~~~~ ~~~~~broadcasts to geealpbicprthuad of poputintic;enudsnic d

Fe-ily Plning A-.Acptors. Annua (thousande) - A-nuI outer of reier in-outries and is year ahe. registration of radio sets sacitaccPtors of tirth-otr-1 devices under unpiors of national family effect; data for r.eet years may not he coparble amus m-t coutriesplanning program abolished licening.

Family Plannin " sr prcent of ariedhcme)- Percetage of maried TV,Receiver (pcr thouan copulation) -TV reerenfr broadcat to gen-erlwoe f child-bearingrae(7h yeas b on birth-c rolc devices pulcpetosnIpplto;ecue -icaed TV r-cicers in o-ami-itoal imrrid con Is it n age group, and is year behe registratiun of TV sets en ieffect.

P001 All NlYftiTIIM Cens~~~~~~~~~~~~~~~~~~~-pape Ciroulattunl (per .thousnd _nultinn) - ih-m bth avrage nrsltoFOOD AND _____T___ of "daily genra ineret oropapr defi-ed as a periodical publicationUndes of Food Produtioc pee Capita (1,769-711..i0 - token of per onpita deveted primaily to r-crding gee..ral sewn ti is onidered to he "daily"

snslproductio of allfoo co_ditie- Prdutocecldes sed and if it appears at leant fou times sweet.feed and is -t caldar year basic..Coadities cre-r pria-y goods Cicem As-iua Attendance per Capita per tea - Based -s the somber of tipketa(e .g.egarone tosted of suar" bbbar dible nod cotain s-trient sold daring the year, including admission to drive-in ci-n and bilie(e.. cffe sd tea are-oolded').iARggrcgnte prod-otio of each -tumrye uis

Per' on pits nsply ofcaore T-(Percent of reurerta) - Compted from l,hR F0RCRenra euialn o vt oo nplis valal i cunrype apta ToalLb r oc thousands) - fo-ui-ally active person, i-oludiog asne

perday holale uppiescop"ris dmsic prdutmoc, imprts lens focsad nmlyed but ocludiag hocseics, students, etc. -*f.ititi..enports, nod oh"gr it stock. Net supplies en de animal feed, seeds, is vaious osuetries arc act coparble.quatIties used ic food pr-cce oin n losses in Ldictribunica. tequtre - remale_ertent) - Pan els hao forc as percetags of tnta1 lehor furce.

ntsam etimated by FA0Onndonpipsoloica areds for normal rost lbr force- in farin, fnr-try, huting andacticity. sd health coniderig -nirut.1ta temperture, body seights, fihnga pretageof total labo Cons

ag sod se dIntri btion o f population, and .1llsing 10 p-eret for 47tpgfljgfee) -Labrforc is minig, -ont-utios, e-sfaturig andnas ten1 ho-shil d le-ci. eletricity, eatec and gas as parcetags of total labor force.

Pep ocit. suppy o rti (gam er d,sy) - Protein -cte-t of Per Participation Rate (percen)-_tota mle ndf - artioipatin orcapita ccisupl offo Nerdy et supply of fond is defined asativity rat..es re optda nt ae n female labor fn- as Per-shove euieet for all c-trics eatbilished by USDA proide for a -etags of total, male ad femal popastlati of all ages respeotivly;slain as1-ce of 60 gr- of total protein per day and 20 gram of t1960, 197, and 1975 data. These.are [ILe participation rata reflectinganimal ad pular pecteit, of shih 10.grS; houldfit 1ania protein, age- o struttue f thepopulation, and long tine trend. A few estimates

Teses-dards ar loser than those of 75 -gasftotal pruten and are fru asntsi.- snsres.25 gram of anma protein as an average for the colk, proposed by fAOt S ..nmi ~cpw4enen Ratio - Ratin of Ppopatim under 15 snd 65 and ove r toit the Third Ioid rod Survey tbe labor frc is age group of 15-64 years.Percapta rob supply from animal and puls - Protris supply of foodderve frmaiassdplesiMraprdy~5 DISTRCBTDI

Child (ages -)atlt.ae(e hosd muldah a thusnd Proatg of Privt ncmkbohi ss ndbn) - eceired by riohestin ge rop 16 ear, t cildenin this age groop; for ant keel- 5 proat, richest 20 p-ret, poorest 20 peret. tpoeth enn

oping c-otrie- data derived fro lif tataf housholds.HEALTR POVERTY TARITl GiOOP

Life Slpetnpanit eas-Aerg ober of year of life - Etimated Absolute Poverty Income Level (*secaia ubnad ual-1raiin at hth; iPId,1 , and 1977. data. Abs.tiut povert boum lee is tbt tenseve hl wVhic IniaIaf-at artality Rate (per thousad)_A-IAoa deaths of infants under on. nutritiomally adequate duet plus essetial se-fund reqiremets is cot

year of age par thousadlvebirths. affordable.Acesto Oafe eater (Peroest. of acasltios2j ttl ura,so Jua - Estiated RelativeP- eyIn Level .(u pe oita) - ara and sei;r -

ssir of prple (ttal, urban, and l siheaonIe access to Rura relative povry no ee_s n-tid tavr. par capita=af eterpnoppl (macIduke treted surf- nowters or mtreabed hut pernom1 Iscon of the .- astry. urban leve Is derive fro the rura leve

u-otmat-ted enter .. ch as that from protected boreholes, springs, ith adjustment far higher ... b of livig in urbanonand sanitar mls) as perc-tages of their reprtice poplati-ns. T estimtdPnsainbo Aslt se noeLee rts)-nt nanuban are a public foutain ur st.Adpob located sot are thanrrl-Preto ouain(rbn rrl len bouspo'

2it meters from a hous may he coniderd as being within raonbleacces of that hous. Is rualara reasonble amm.s mould iplythat the h-.-rif. or -eer-o the household do not have to spend a -oic s-d Sanial Rain Dtisiadisproportiona.te part of the day in fetching the fmaily, s nt- needs icosoni Analysts a ProjectIon hapartas

Aagsss 1919

ANNEX I- 21 -

Page 4

ECONOMIC INDICATORS

GROSS NATIONAL PRODUCT IN 1978 ANNUAL RATE OF GROWTH (%, current prices)

US$ Mln. 7 of GDP 1974-1978

GNP at Market Prices 745.1 104.2 13.0GDP at Market Prices 715.1 100.0 12.3Gross Domestic Investment 128.3 17.9 11.2Gross Domestic Saving -36.3 -5.0Current Account Balance -105.5 -14.7 -80.0Exports of Goods, NFS 115.0 16.1 50.0Imports of Goods, NFS 288.5 40.3 60.0

OUTPUT, LABOR FORCE ANDPRODUCTIVITY IN 1978

Value Added Labor Force V.A. Per WorkerUS$Mln. % M-. % US$ ah

Agriculture 266.5 40.9 0.890 57.7 299.0 70.8Industry, Construction& Public Works 85.5 13.1 0.034 2.2 2,514.7 595.7

Government 66.4 10.2 0.068 4.4 976.4 231.3Commerce and Transport 215.7 33.1 0.550 35.7 392.2 92.8Other Services 17.2 2.7 .. .. . ..

GDP at Factor Cost 651.3 100.0 1.542 100.0 422.3 100.0

GOVERNMENT FINANCECentral Government

(CFAF Bln.) % of GDP1978 1978 1972-75

Current Receipts 26.9 16.6 14.9Current Expenditures 22.3 13.8 14.0Current Surplus 4.6 2.8 0.9Capital Expenditures 19.0 11.7 9.2External Debt Disbursements (gross) 8.5 5.2 3.6

MONEY, CREDIT AND PRICES

1972 1973 1974 1975 1976 1977 1978(Billion CFAF Outstanding End Period)

Money and Quasi Money 13.89 14.79 18.45 31.86 30.63 33.32 39.01Bank Credit to Public Sector -0.51 -1.16 -2.42 -2.95 -2.30 -6.22 -4.92Bank Credit to Private Sector 10.41 12.73 16.45 32.60 32.10 37.60 45.10

(Percentages or Index Numbers)

Money and Quasi Money as% of GDP .. *- 17.1 28.2 23.5 23.8 24.1

General Price Index (1974 = 100) 88.4 89.6 100.0 114.7 124.1 136.3 145.6Annual Percentage Changes in:

General Price Index .. 1.4 11.6 14.7 8.1 9.8 6.8Bank Credit to Public Sector 37.8 -127.5 -108.6 -21.9 22.0 -170.4 20.9Bank Credit to Private Sector 22.0 22.3 29.2 97.3 -1.1 17.1 19.9

Note: All conversions to dollars in this table are at the exchange rates noted on the following page.

.. not available.

- 22 -

ANUZ; IPage 5

TRADE. PAYMENrS AND CAPITAL FLOWS

BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1974-1977. RECORDED)

1975 1976 1977 1978- US $ Million °h

(US $ Million) Cotton 9.6 29.8

Exports of Goods, NFS 116.3 118.8 115.0 115.0 Cocoa Beans 3.2 9.9Imports of Goods, NFS 235.5 241.0 253.5 288.6 Palm Products 4.7 14.6

Resource Gap (deficit=-) -119.2 -122.2 -138.5 -173.6 All Other Commodities 14.7 45.7TOTAL 32.2 100.0

Interest Payments (net) -1.3 0.0 -0.4 -0.9Workers' Remittances 14.9 16.1 20.3 30.9Other Factor Payments (net) 0.0 0.0 0.0 0.0Net Transfers 31.8 34.0 19.0 38.1Balance on Current Accounts -73.8 _72.1 -99.6 -105.5

EXTERNAL DEBT, December 31, 1978

Direct Foreign Investment 1.9 2.4 2.4 2.9Net MLT Borrowing 7.9 27.1 23.3 29.5 US $ MillionCapital Grants 20.6 25.9 37.8 33.2Other Capital (net) -0.8 14.8 16.6 23.4 Public Debt (Disbursed), Incl. Guaranteed 145.5Other Items n.e.i. 23.6 8.0 20.1 28.5 Non-Guaranteed Private DebtUse of Reserves (increase -) -20.6 -6.1 -0.6 -12.0 Total Outstanding and Disbursed

Net Reserves (end year)l/ 14.6 18.3 17.8 7.3

3/Petroleum Imports as 2 DEBT SERVICE RATIO FOR 197r

of Total Imports 6.1 5.6 4.9

Public Debt (Disbursed) Incl. Guaranteed 6.4Non-Guaranteed Private DebtTotal Outstanding and Disbursed

EXCHANGE RATES (CFAF per US $)

Year Period Average End of Period

1972 252 256 IBRD/IDA LENDING, December 31, 19791973 223 2301974 241 222 IBRD IDA1975 214 224 (US $ Million)

1976 239 248.51977 246 235 Outstanding and Disbursed 39.801978 226 209 Undisbursed 36.04

Outstanding Including Undisbursed 75.84

I/ Net foreign assets of Central Bank.

2/ Estimated.

3/ Preliminary estimate of ratio of debt service toexports of goods and services.

not available.

WA2DA

FeDruary 26, 1960

- 23 - ANNEX IIpage 1 of 3

THE STATUS OF BANK GROUP OPERATIONS IN BENIN

A. STATEMENT OF IDA CREDITS(as of December 31, 1979)

CreditNumber Year Borrower Purpose Amount 1/ Undisbursed

(US$ million)

Three Credits fully disbursed 14.80

415-BEN 1973 Benin Roads 20.80 2/ 4.23

583-BEN 1975 Benin Rural Educationand Training 4.00 2.87

716-BEN 1977 Benin Technical Assistance 1.70 0.91

717-BEN 1977 Benin Feeder Roads 5.50 2.93

746-BEN 1977 Benin Third Highway 10.00 7.70

826-BEN 1978 Benin Cotonou Port 11.00 17.41

TOTAL 67.80 36.04

of which has been repaid 1.14

TOTAL now outstanding 66.66

TOTAL now held by IDA 66.66

TOTAL undisbursed 36.04

1/ Prior to Exchange Adjustment.

2/ Including a Supplementary Credit of $9 million made in 1976.

- 24 - ANNEX II

Page 2 of 3

B. Projects in Execution

Credit No. 415: Second Highway Project; US$11.8 million creditof July 3, 1973; Closing Date: December 31, 1979. Due to inflation andcurrency realignments, project cost estimates increased to US$23.3million or 77 percent above the original cost estimates. The Associationprovided a supplementarty credit of US$9.0 million on March 10, 1976.Physical execution of the project has been completed. About US$3.9million is expected to remain undisbursed under the Credit. The Govern-ment has requested that these funds be used to upgrade a bridge whichconstitute a major bottleneck on the alignment of the Parakou Malanvilleroad which has been upgraded under the Project, or alternatively to helpcomplete the feeder road program begun under Credit 717, BEN. Creditfunds would be exhausted by September 1980, leaving about 300 km stillunimproved.

Credit No. 583: Rural Education and Training project; US$4.0million credit of September 5, 1975: Closing Date: June 30, 1981. Thiscredit provides for (i) construction and supply of training materialsfor a Skills Upgrading Center in Cotonou; (ii) construction, equipmentand technical assistance to improve the ongoing rural youth trainingprogram; and (iii) preparation of a second education project. Theconstruction of the National Support Center (CNAC) and of a Regional SupportCenter for the rural training component of the project have been completed.The two remaining regional centers are still under construction. Personnelhave been appointed to the CNAC. Equipment has been selected and issuedto the youth clubs. Training for extension staff and group leaders hasbegun. Construction of the Skills Upgrading Center (CPPE) is nearingcompletion. Overall project execution is about 18 months behind schedule.

Credit No. 716: Technical Assistance Project; US$1.7 millioncredit of May 30, 1977; Closing Date: June 30, 1980. This project isdesigned to prepare the way for a rural development project. The projectwhich was to be carried out over a two-year period is nearing completion.It provided for technical assistance to SONAGRI, the project executingagency, in financial management and project preparation and evaluation,procurement of trucks and staff vehicles, consultant services for thepreparation of investment proposals and for cotton and food crops adaptiveresearch. Project preparation which started rather slowly is now proceedingsatisfactorily. The technical assistance program has been extended toJune 1980.

Credit No. 717: Feeder Roads Project; US$5.5 million Credit ofMay 30, 1977; Closing Date: September 30, 1981. This project consists ofa three-year program for the improvement and subsequent maintenance of about1,270 km of feeder roads, the purchase of highway maintenance equipment andspare parts, and technical assistance to the Ministry of Equipment. Project

- 25 -ANNEX IIPage 3 of 3

start-up was delayed for about 18 months because of delays in equipmentdelivery. Credit funds are expected to be exhausted by September 1980 leavingabout 300 km of project roads still unimproved.

C lit No. 746: Third Highway Project US$10 million Credit ofNovember 18, 1977; Closing Date: December 31, 1980. This project isdesigned to facilitate access to the Port of Cotonou by providing for therehabilitation of a 107 km section of the country's main north-south highway;it also aims at expanding the highway maintenance program begun under the twoprevious highway projects, including the elimination of the backlog ofbituminous and laterite roads resurfacing. Project start-up was delayedbecause of administrative problems which stem from frequent reshuffling ofpersonnel at the head of the service and an appalling lack of support staff.However, there are signs of improvement. One bitumen and one gravel brigadehave been constituted and have begun work. The training program has beencarried out satisfactorily. It is proposed to extend the program by training15 additional technicians.

Credit No. 926: Cotonou Port Project; US$11.0 million creditof October 6, 1978, Closing date: March 31, 1982. This project provides forthe extension of the existing general cargo port facilities, involvingdredging of a new basin, construction of 610 m of berths, with transit sheds,hardstandings, roadway, and railway services; the construction of a newcut-off breakwater and entrance channel dredging; technical assistance forall port operations including railway and a study of coastal erosion problems.Eight co-financiers including IDA had originally agreed to participate in theproject and to provide about US$44.0 million of external financing. A US$3.0million EEC Special Action Credit was approved on November 9, 1979 to closethe financing gap created by the withdrawal of one of the cofinanciers.Civil works are proceeding satisfactorily.

- 26 - ANNEX IIIpage 1 of 1

INDUSTRIAL DEVELOPMENT PROJECT

SUPPLEMENTARY PROJECT DATA SHEET

Section I: Timetable of key events

(a) Identification Mission November 1978(b) Appraisal Mission April 1979(c) Negotiations January 1980(d) Planned Date of Effectiveness September 1980

Section II: Special Project Implementation Actions by IDA

An advance of US$320,000 under the Project PreparationFacility was granted in December, 1979 to ensure an earlystart of the technical assistance and for the preparationof ad-hoc feasibility and engineering studies.

Section III: Special Conditions

The Government shall (a) increase BBD's capital in1980-81 by at least CFAF 500 million (para.4 4 of thisreport); (b) bear the foreign exchange risk (para. 54);and (c) compensate BBD for the interest lost on itslending on samll-scale and labor-intensive projects(para. 53).

BBD shall:

(a) Set aside every year 2 percent of the outstandingpast borrowings as a provision for exchange risk onthese borrowings. In addition BBD shall not carrythe foreign exchange risk on its future borrowings(para. 42);

(b) Not later than October 1, 1981 prepare and furnishto the Association for approval a plan for thereduction of arrears on BBD's portfolio (para. 43);

(c) Limit its long-term borrowings to not more than5 times its paid-in share capital and unimpairedreserves (para. 54).

Special conditions of effectiveness would be that:

(a) The Financing Agreement has been executed on behalfof the Borrower and BBD, respectively;

(b) BBD shall have amended its By-Laws to include interalia an exposure limit in relation to its own equityacceptable to the Association, as well as a maximumdebt/equity ratio (paras. 41 and 63).

IBRD 13627-2- ' N I k 3'G E R \ MAY 1978

-12° 12'-

' MALANVJ I o|

E R 4

SI6; **, N / /S \

t > Bollo r J/ f X S / \ -)/11/ KAt'~~~~~~~DI

, Dorrorl / ji «Kro~o i Gogornou -B.-

N GUIETA

)~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~7I - TouLounroumO J .}/

NATIINGCU Uode /'.BoirO,re ± oo .rgr o,it - BemberOkeJ

| Be /oungou _ _B

To Lirom(or KJ= OUGOU / B (omloM iee

N,

! X of A ~~~~~~PARAKOU

9' Boe oeeo

Io i K - bo t9

I K~~~~~~~Kb

PEPESREPUBLIC OF BENIN

ADMINISTRATION

A F R I C A" * ' BOiCt Oigo R.C,

ll~~~~~ ENgo-INOABOm -l -te -. 1ioa A,o,nrioAO oh0

., ~ ( ± CC3 Copecity A rport

ti,oir,, 00r flrOinPin4Yb riOPit. or 0* per eriC3

A l B.rr On i

X~~~ L¢owru FO O AMIISRAIOer,rreare,|,o,, y

0re * ! h~P

.emite~ - ,r Ke/ r .Poinor BOroO.r1es

< 9 j 6 \ / Ko$$s n / 0 j Paved Roads~~~~~~~~~~~~~~3