New Halfa Irrigation Rehabilitation Project - Sudan - Public ...

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Folder Title: New Haifa Irrigation Rehabilitation Project - Sudan - Credit 1022 - P002578- Correspondence - Volume 5

Folder ID: 811909

Project ID: P002578

Dates: 10/17/1979-12/27/1979

Fonds: Records of the Africa Regional Vice Presidency

ISAD Reference Code: WB IBRD/IDA AFR

Digitized: 3/5/2020

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THE WORLD BANKWashington, D.C.

© International Bank for Reconstruction and Development / International Development Association orThe World Bank1818 H Street NWWashington DC 20433Telephone: 202-473-1000Internet: www.worldbank.org

ML-T -i-MSUDAN - Credit 1022 SU

Vol. V

I NWOMMIMMOM

Arais 811909-41r- R1993-069 Other#:185 Box # 33952B

New Halfa Irrigation Rehabilitation Project - Sudan - Credit 1022 - P002571- Correspondence - Volume 5

R~flIRETRN TO gob 4

Dr'~ IFIEDIno

3II WBG Archives

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FORM NO. 635

-7) CLOSE- OUT SHEET

This file is closed as of ec iv

For further correspondence, please see . v'C

RECORDS MANAGEMENT SECTION

&4009 WORKL5ANK Distribution sj

Mr. Walton

61416 I FADRM I -fy v Mr. Burmester

'9 AEC 27 23

IFAD/>D52

FORK J. BALL

RE NEW HALFA PRJLECT STOP FATEFUL N COFY OF REVISED STAFF

SPR A I AL EPR T AV I DVISL UN NEW PROJECT cChEDULE 1TOP VERY

I MPORTANT F0 R IF1AD PRAMM I NG FOR MARC H BOAR 1 ToP R GARD

MANR I I FAD ROME)

COL IFAD/JJ2

I K

61160HN IFADRM I..•••

TELEX DECEMBER 26, 1979

215 74226

INTBAFRAD,

KHARTOUM, SUDAN

FOR FARAG PLEASE PASS FOLLOWING TO GASIM OSMAN, MOI UNDER

SECRETARY QUOTE RE NEW HALFA INSPECTION AND MAINTENANCE

PROGRAM OF KHASHM EL GIRBA DAM. WE RECEIVED WITH THANKS

DOCUMENT ON THE DAM INSPECTION AND MAINTENANCE PROGRAM GIVEN

TO OUR BLUE NILE MISSION IN KHARTOUM. AS SPECIFIED IN THE

DOCUMENT THAT DAM MAINTENANCE IS BEING CARRIED OUT BY SOGREAH

AS COVERED BY THE MAINTENANCE AGREEMENT BETWEEN MOI AND

SOGREAH, WE WOULD APPRECIATE YOUR SENDING US A COPY OF THE

AGREEMENT. SECONDLY, WE WOULD LIKE TO RECEIVE FROM SOGREAH

THEIR DETAILED PROCEDURES IN CARRYING OUT ANNUAL DAM

INSPECTION AND MAINTENANCE PROGRAM. WE BELIEVE THIS ADDITIONAL

INFORMATION SHOULD FULFILL THE REQUIREMENT FOR DAM SAFETY

REGULATION AS CALLED FOR IN THE CONDITIONS OF EFFECTIVENESS

FOR NEW HALFA PROJECT. WE WOULD BE GRATEFUL FOR YOUR

INSTRUCTION TO SOGREAH TO SEND US REQUIRED INFORMATION AS SOON

AS POSSIBLE UNQUOTE REGARDS, WALTON.

SUDAN - New Halfa Irri. Rehab.Project CPradithavanij:ch

Cleared with and cc: Mr. J. BaLL, Mr. du C.H. WaLton, Chief, EAPNAMee (o/r)

Eastern Africa Projects

In

c -,

TELEX DECEMBER 21, 1979

73512

BOOK OF TWO

(1) IFAD (2) INTBAFRAD

ROME, ITALY KHARTOUM, SUDAN

FOR OLOWUDE FOR FARAG

970TELEX NO. 614160, 614162 TELEX NO. 215

TELEX 12/21/79

61416Oe 614162 735 12

RE. NEW HALFA IRRIGATION REHABILITATION PROJECT.

TODAY I SENT THE FOLLOWING TO AFDF IN ABIDJAN QUOTE FOR G.

DOSSOU/JOHN. RE NEW HALFA CNHAPC) IRRIGATION REHABILITATION

PROJECT AND OURTEL OF DECEMBER 14, 1979. FIGURES E XPRESSED

BELOW ARE IN CURRENT TERMS UNLESS OTHERWISE STATED *ND EXCHANGE

RATE IS ONE POUND SUDANESE TO TWO UNITED STATES DOLLARS. ALPHA

TOTAL PROJECT COST IS ESTIMATED AT UNITED STATES DO4LARS 128.7

MILLION OVER FIVE YEARS. FOREIGN EXCHANGE COMPONENT IS UNITED

STATES DOLLARS 55.2 MILLION. TOTAL PROJECT COST IS MADE UP OF

DIRECT INVESTMENTS UNITED STATES DOLLARS 59.9 MILLI9N AND

INITIAL CASH REQUIREMENT OF NHAPC OF UNITED STATES OOLLARS

68.8 MILLION. HOWEVER, INITIAL CASH REQUIREMENT IS BEING

SUBJECT TO INTERNAL REVIEW AND MAY BE AMENDED SLIGHtLY.

BETA REFERENCE AFDF CONTRIBUTION. PLEASE REFER TO STAFF

APPRAISAL REPORT NEW HALFA IRRIGATION REHABILITATION PROJECT

IMPLEMENTATION VOLUME OF JULY 16, 1979, ANNEX 8, TABLE 1.

PROPOSEI AFDF FINANCE FOR YEARS 1 TO 5: AAA ALL (300) 70 HP

/c

CABL CU

Page 2

TRACTORS, BBB ALL (250) THREE-QUARTER DISC PLOWS, CtC ALL (296)

RIDGERS, DDD ALL (130) GROUNDNUT PLANTERS, EEE ALL t130)

RIDGER PLANTERS WITH FERTILIZER BOXES, FFF ALL (65) GROUND

LIFTERS, GGG INITIAL TRACTOR SPARES OF CONSTANT US DOLLARS

244 THOUSAND IN YEAR ONE AND HHH PRO RATA SHARE OF GENERAL

SPARES CONSTANT US DOLLARS OF YEAR TWO 166.8 THOUSAND, YEAR

THREE 594.4 THOUSAND, YEAR FOUR 591.8 THOUSAND AND YEAR FIVE

594.4 THOUSAND. ADD III PHYSICAL CONTINGENCIES OF 10 PERCENT

AND JJJ PRICE CONTINGENCIES BASED ON ANNUAL INFLATION RATES OF

NINE PERCENT FOR YEAR ONE, EIGHT PERCENT FOR YEAR TWO, AND

SEVEN PERCENT FOR EACH YEAR OF YEARS THREE THROUGH FIVE. RESULT

IS KKK TOTAL AFDF CONTRIBUTION NET OF LOCAL DUTIES AND TAXES

OF UNITED STATES DOLLARS 10.0 MILLION, WITH A FOREIGN EXCHANGE

COMPONENT OF UNITED STATES DOLLARS 8.7 MILLION AND LOCAL

CURRENCY COMPONENT NET OF DUTIES AND TAXES OF UNITED STATES

DOLLARS 1.3 MILLION. THIS LOCAL COST COMPONENT WOULD REPRESENT

LESS THAN TWO PERCENT OF TOTAL PROJECT LOCAL COSTS AND 13

PERCENT OF YOUR TOTAL PROPOSED PACKAGE. THIS LATTER FIGURE IS

SOMEWHAT HIGHER THAN WE HAD PREVIOUSLY DISCUSSED. HOWEVER,

IN VIEW OF THE HIGH OVERALL LOCAL COST COMPONENT OF THE PROJECT

Ic

;~:~ ~V 1& 4fl-

Page 3

AND THE URGENT NEED FOR SUDAN TO PROCEED WITH THIS MPORTANT

PROJECT IN THE CURRENT DIFFICULT ECONOMIC CIRCUMSTANCES,

WE HOPE YOU MIGHT CONSIDER THIS SLIGHTLY HIGHER CONT RIBUTION

TO LOCAL COSTS. UNQUOTE REGARDS, BLINKHORN.

SUDAN New Halfa Irrigation Project CS th stL

cLeared in Substance with & cc ornMr. Walton, EAP

cc: Messrs. BaLL, EAP, Smith, EAe EA2DBDu Mee, EAP(o/r), Ms Koch. EA2DBPettyetti, CTRO, Wiratungqf CTR

x

x

-x

RPTELEXD DECE1 BER-,21, 179EXPRESSE O A N CH 7 3 S

AFRICAN, 1EVELOPMENT BANK

ABIDJAN, IVORY -COAST

fOR G.-DOSSOGUIJOHN. RE NEW HALFA (NHAPC) IRRIGATION

REHABILITATION PROJECT AND OURTEL OF DECEMBER 14, 1979. FIGURES

EXPRESSED BELOW ARE IN CURRENT TERMS UNLESS OTHERWISE STATED

AND EXCHANGE RATE IS ONE POUND SUDANESE TO TWO UNITED STATES

DOLLARS. ALPHA TOTAL PROJECT COST IS ESTIMATED AT UNITED

STATES DOLLARS 128.7 MILLION OVER FIVE YEARS. FOREIGN EXCHANGE

COMPONENT IS UNITED STATES DOLLARS 55.2 MILLION. TOTAL PROJECT

COST IS MADE UP OF DIRECT INVESTMENTS UNITED STATES DOLLARS 59 9

MILLION AND INITIAL CASH REQUIREMENT OF NHAPC OF UNITED STATES

DOLLARS 68.8 MILLION. HOWEVER, INITIAL CASH REQUIREMENT IS

BEING SUBJECT TO INTERNAL REVIEW AND MAY BE AMENDED SLIGHTLY.

BETA REFERENCE AFDF CONTRIBUTION. PLEASE REFER TO STAFF

APPRAISAL REPORT NEW HALFA IRRIGATION REHABILITATION PROJECT

IMPLEMENTATION VOLUME OF JULY 16, 1979, ANNEX 8, TABLE 1.

PROPOSE AFDF FINANCE FOR YEARS 1 TO 5: AAA ALL (300) 70 HP

TRACTORS, BBB ALL (250)THREE-QUARTER DISC PLOWS, CCC ALL

(296) RIDGERS, DDD ALL (130) GROUNDNUT PLANTERS, EEE ALL

(130) RIDGER PLANTERS WITH FERTILIZER BOXES, FFF ALL (65)

)

'C

C.

j

Page 2

GROUND LIFTERS, GGG INITIAL TRACTOR SPARES OF CONSTANT US DOLLARS

244 THOUSAND IN YEAR ONE AND HHH PRO RATA SHARE OF GENERAL

SPARES CONSTANT US DOLLARS OF YEAR TWO 166.8 THOUSAND, YEAR

THREE 594.4 THOUSAND, YEAR FOUR 591.8 THOUSAND AND YEAR FIVE

594.4 THOUSAND. ADD III PHYSICAL CONTINGENCIES OF 10 PERCENT

AND JJJ PRICE CONTINGENCIES BASED ON ANNUAL INFLATION RATES OF

NINE PERCENT FOR YEAR ONE, EIGHT PERCENT FOR YEAR TWO, AND SEVEN

PERCENT FOR EACH YEAR OF YEARS THREE THROUGH FIVE. RESULT IS

KKK TOTAL AFDF CONTRIBUTION NET OF LOCAL DUTIES AND TAXES

OF UNITED STATES DOLLARS 10.0 MILLION, WITH A FOREIGN EXCHANGE

COMPONENT OF UNITED STATES DOLLARS 8.7 MILLION AND LOCAL

CURRENCY COMPONENT NET OF DUTIES AND TAXES OF UNITED STATES

DOLLARS 1.3 MILLION. THIS LOCAL COST COMPONENT WOULD REPRESENT

LESS THAN TWO PERCENT OF TOTAL PROJECT LOCAL COSTS AND 13

PERCENT OF YOUR TOTAL PROPOSED PACKAGE. THIS LATTER FIGURE IS

SOMEWHAT HIGHER THAN WE HAD PREVIOUSLY DISCUSSED. HOWEVER,

IN VIEW OF THE HIGH OVERALL LOCAL COST COMPONENT OF THE PROJECT

AND THE URGENT NEED FOR SUDAN TO PROCEED WITH THIS IMPORTANT

PROJECT IN THE CURRENT DIFFICULT ECONOMIC CIRCUMSTANCES,

ILx

Page 3

WE HOPE YOU MIGHT CONSIDER THIS SLIGHTLY HIGHER CONTRIBUTION

TO LOCAL COSTS. REGARDS, BLINKHORI,

SUDAN - New Halfa Irrigation Project CSmith:JKoch

Cleared in substance with & cc: Thomas AmAlinMr. WaLton, EAP

cc: Messrs. BaLL, EAP, Smith, EAP EA2DBDu Mee, EAP(o/r), Ms. Koch, EA2DBPettretti, CTR, Wiratunga, CTR

s

Mr. A. Raizen, PAS, E1028 December 21, 1979

C. Smith, EAPNA, A1000

Paras 3.01; 3.33, Table 7, 3.35 of SAR on New Halfa

1. Attached is the Revised SAR on New Halfa.

2. References in the above paragraphs and the Table are to'initial cash deficit.' We do not propose to maintain this wordingin later versions (assuming, of course, we maintain the-presentapproach). It is only used here so that there is no mistake as tothe nature of the item.

3. The deficit is broken down in para 3.33 and any laterversions would presumably set these components out separately elsewherein the SAR.

4. I have spoken to Mr. Mould under the mistaken impression thathe would be reviewing appraisal reports after January 1, 1980. He setme straight on this but did mention he would be willing -to attend ourmeeting next Wednesday if you felt it desirable.

CSmith:ch

MOM

DISTRIBUTION

TO WORLD BAN

FOR . WALTON MR.WALTONMR&.BURMESTER

REURTEX 946 DTD. DEC. 17, 1979 REGARDING NEW HALFA PROJECT++

THE CONSULTANTS WILL SUBMIT A DRAFT REPORT ON SUPPORT MEASURES FOR PH

ASE ONE

PHASE ONE REHABILITATION IN JUNE 1980++ A DRAFT REPORT ON LONG

TERM SOLUTION IS EXPECTED IN SEPTEMBER 1980++ THE CONSULTANTS

SUGGESTED FOUR EXTRA MAN MONTHS FOR THE FARMERS UNION STUDY

IN CONNECTION WITH THE COOPERATIVE MOVEMENT EXPOSED IN YOUR

PREVIOUS TELEXES++ LOCAL INSTITUTIONS CONTACTED SHOWED NO

POSITIVE RESPONSE TO CONDUCT THE SAID STUDY++THE CONSENT OF

SUDAN SOCIALIST UNION WAS SOLICITED FOR THE CONSULTANT TO DO

THE STUDY++

THE WORKING PART AGREED PROVISIONALLY WITH THE CONSULTANT TO

CARRY OUT THE SAID STUDY AGAINST THE COST OF THE PT

PROVI PRIOR CONSENT++ CONSEQUENTLY THE TOR FOR THE

FARMERS UNION STUDY WILL BE CLEARED AND READY FOR YOUR

APPROVAL++

I. HABBANI

DIRECTOR

PROJECT PREPARATION UNIT(PPU)

THRO EIMAR KM TEX 32

0

S(Tix Nr.> RECENEID Distribution sj

From: Ahidjan Mr. Burmester

1179 DEC Mr pj :. Walton

I DC COM UN Ph i 3v1sUN

- I T YUCALE 14 C R S

HALFA IIG TI ILITATI ROJECT STO OULD LIKE TO CONFIRM

ILLI S TO FINANCE UP 0 US DOLLAR UIVALENT OF 10 ILLION

FO URSICLUD T OF LOCAL COSTS OF UP T PERCT

ST TO F I' DETAILS IREVI OST TI ATES

A LIS POSSEI BLE STOP I -ST

JOHNDEC 1"979

AFDEV+STER

50F AN

COL. -

19/12 T 17.35

33 DVC C

FI ++

TELEX December 17. 19797 5574

Page 1 of 2

INTBAFRAD

KHARTOUM, SUDAN

FOR FARAG PLEASE PASS TO DR. HABANI, DIRECTOR PPU QUOTE RE NEW

HALFA PHASE II STUDIES. FURTHER TO DISCUSSIONS BETWEEN MR.

HARRIS AND THE WORKING PARTY ON NOVEMBER 18, 1979, WE WISH TO

CONFIRM THE FOLLOWING AGREEMENTS: AAA THERE WILL BE NO INCREASE

IN THE DOLLAR CONTRACT AMOUNT. BBB REPORTS FOR THE PHASE II

STUDIES WILL BE DIVIDED INTO TWO PARTS: WORK FROM NOVEMBER 18,

1979 ONWARD WILL BE EXCLUSIVELY ON PART ONE (ITEMS DIRECTLY

RELATED TO THE SUCCESSFUL COMPLETION OF PHASE I REHABILITATION)

UNTIL THE REPORT IS ACCEPTED BY GOVERNMENT AND IDA. ANY ADJUST-

MENT TO THE SCOPE OF WORK WOULD COME AT THE EXPENSE OF PART TWO

(LONG TERM ITEMS RELATED TO FULL WATER SUPPLY); CCC THE CON-

SULTANT WILL BE ASKED TO SPECIFY DATES FOR THE SUBMISSION OF

THE TWO PARTS SEPARATELY. IT IS EXPECTED THAT BOTH PARTS WILL

BE SUBMITTED TO AND ACCEPTED BY GOVERNMENT AND IDA BEFORE

OCTOBER 31, 1980, AND THAT PART ONE WILL BE SUBMITTED MUCH

EARLIER. DDD THE ABOVE POINTS WERE TO BE AGREED BETWEEN PPU

AND THE CONSULTANT THROUGH AN EXCHANGE OF LETTERS, WITH

7: g)rUI\JL~ Z~2u

V.

TELEX December 17, 19797 5574 Page 2 of 2

COPIES TO IDA. WE LOOK FORWARD TO RECEIVING THESE IN DUE COURSE.

REGARDS WALTON UNQUOTE. REGARDS WALTON.

Sudan: New Halfa Irrig. Rehab. Rfia ris:el

Cleared with and cc: Mr. Blinkhorn C.H.WaLton, Chief, EAPNAcc: Messrs. Ball, Pradithavanij


1"A L L

CAL u

'I.

TELEX DECEMBER 14, 197920 4 73512

AFRICAN DEVELOPMENT BANK

ABIDJAN,. IVORY COAST

FOR G. DOSSOU RE SUDAN NEW HALFA IRRIGATION REHABILITATION

PROJECT AND URTEL OF DECEMBER 12, 1979. ALPHA REVISED PROJECT

COSTS ARE BEING REVIEWED INTERNALLY, AND REVISED ESTIMATES

WILL BE TELEXED TO YOU BY DECEMBER 21, 1979 INCLUDING

SUGGESTED REVISED LIST FOR AFDF FINANCING INCLUDING FOREIGN

AND LOCAL COSTS. BETA SINCE FOREIGN EXCHANGE FINANCING GAP

NOW FULLY COVERED, PLEASE ADVISE WILLINGNESS TO FINANCE UP TO

US DOLLARS TEN MILLION EQUIVALENT FOR YOUR COMPONENT INCLUDING

A PORTION OF LOCAL COSTS OF UP TO 12 PERCENT. REGARDS,

BLINKHORN, INDEVAS

Sudan - New Hatfa- JAKoch/ td

cc & cleared with: Mr. Walton Thomas A -cc: Messrs. Harris, Ball, Smith,

Ms. Koch EA2DO

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CDV0-0

CD

WORLD BANK / INTERNATIONAL FINANCE CORPORATION

OFFICE MEMORANDUMTO: Mr. C.H. Walton, Chief, EAPNA DATE: December 13, 1979

FROM: R.L.'. Harris, Deputy Chief, EAPNA

SUBJECT: Mission to Sudan - November 1-21, 1979Back-to-Office Report -

1. In accordance with terms of reference dated October 30, 1979, Ivisited Sudan from November 3 to 21, 1979. During the mission, myactivities were as follows:

Agricultural Projects Supervision

2. From November 3 to 17, 1979, I took part in the supervisionmission for the Agricultural Research, .Savannah Development and LivestockMarketing Projects. In addition to participating in discussions inKhartoum, I visited the Agricultural Research Corporation (ARC) head-quarters in Wad Medani, Livestock and Meat Marketing Corporation (LMMC)facilities in El Obeid, and the ARC research station in Kadugli. Themission's findings are presented in the Back-to-Office Report fromMessrs. Goetz and Marples dated December 6, 1979.

Blue Nile Appraisal

3. Beginning on November 17, 1979, I joined the appraisal missionfor the Blue Nile Pump Schemes Project for initial meetings with Mr.Farag (IBRD Resident Representative in Sudan) and the Ministry of Irriga-tion. Since at that time the appraisal was just getting started and Iwas trying to resolve several issues related to other projects outsidemy original terms of reference (paras. 5-10), my participation in themission was limited.

Discussions with RMEA

4. On November 20, 1979, I attempted to proceed to Nairobi foroperational discussions with RMEA. However, due to a succession ofairline delays and cancellations, it was impossible for me to get toNairobi before November 23. Since I wanted to overlap with you inWashington before your departure on mission November 26, and sinceone-half day's work in Nairobi would have been of questionable value,I decided to return directly to Washington without going to Nairobi,arriving the evening of November 22.

New Halfa Irrigation Rehabilitation Project

5. Cost Recovery. In response to your telex of November 11, andafter discussion with Messrs. Blinkhorn and Farag and a further exchangeof telexes, I prepared an aide memoire on the subject (Appendix 1),based on your telex of November 11. Mr. Farag agreed to pass this onto the Minister of Agriculture with a covering letter stating that itwas a working paper intended to convey our ideas on cost recovery andto solicit Government reactions. This approach would not preempt anyfurther changes in documents after internal review of the appraisal re-port and its consideration by the Loan Committee. The aide memoire was

Mr. C.H. Walton - 2 - December 13, 1979

also intended to serve as the basis for discussions between you and theMinister in December.

6. Phase II Studies. On November 12, Mr. Blinkhorn and I met withDr. Habani, Director, Project Preparation Unit (PPU), Ministry of NationalPlanning (MONP), to discuss the terms of reference for the New HalfaPhase II studies. We emphasized the position stated in your telex ofOctober 26 to Dr. Wahab that "we are unable to justify any recommendationto our management that requests the use of funds for any Phase II studycomponents that are not directly related to the successful implementationof the Phase I rehabilitation." As explained in my telex of November 12,Dr. Habani responded that the Government, particularly the Ministry ofIrrigation, would be reluctant to delete the longer term elements relatedto full water supply, that the consultant had tentatively agreed to carryout all work within the original time limits and contract cost, and thatthe contract could not be reduced in any case. We suggested that, as apossible compromise, the studies could be divided into two parts, withthe first part covering items needed to implement the Phase I rehabilita-tion and the second part covering the longer term items. The second partwould be carried out only after the first had been completed to the satis-faction of the Government and IDA. I subsequently requested advice fromheadquarters by telex as to whether such a compromise would be acceptable,in preparation for further discussions with the working party for thestudies scheduled for November 18.

7. Unfortunately, your telex of November 16 which reiterated IDA'sinitial position, did not reach the Bank's office in Khartoum until afterI met with the working party on November 18. Therefore, in the absenceof any guidance to the contrary, the discussions followed generally alongthe lines of the compromise suggested earlier. However, I feel that theoutcome, as follows, was satisfactory:

(a) It was agreed that there would be no increase in the existingdollar contract amount. I later confirmed IDA's position onthis point in a letter to Dr. Habani (Appendix 2).

(b) Reports for the Phase II studies would be divided into twoparts, and work from that date onward would be exclusivelyon part one (items directly related to the successfulcompletion of Phase I) until the report was accepted bythe Government and IDA. Any adjustment of work would comeat the expense of part two (long term items).

(c) It is expected that both parts will be submitted andaccepted by the Government and IDA before October 31, 1980,and that part one will be submitted much earlier. The PPUhas asked the consultant (AHT) to specify dates for sub-mission of the two parts separately.

(d) Points (a), (b) and (c) were to be confirmed by an exchangeof letters between PPU and AHT with copies to IDA. Dr.Habani promised to give me a copy of PPU's request toART, but this was not available by the time I leftKhartoum. We should follow up by telex to find outwhere this stands.

-3-

There did not appear to be much scope for reopening the question of how touse the contract amount remaining after part one is completed, since ART'sfield work already undertaken since the beginning of October involved con-siderable overlap between items related to rehabilitation and longer termdevelopments.

Agricultural Services Project

8. As requested by you and Mr. Rice, on November 12 Mr. Blinkhorn andI discussed the future course of the project with Dr. Fatih el Tigani, MONP,and Mr. Ismail Amara, Assistant Managing Director of the Agricultural Bankof Sudan (ABS). We informed them that appraisal was scheduled for mid-January with Mr. Gafsi the probable mission leader; that realistic estimatessuggested a Board date of January 1981 and effectiveness in May 1981; thatthe latest IDA lending program included only US$15 million for the projectand nothing for MFC IV, not the roughly US$40 million envisioned in thepreparation report; and that final project size and scope and the possibilityof co-financing could be determined only after appraisal. We suggestedthat you and Mr. Gafsi might want to discuss the project further with themin December.

9. We also discussed the financing of Mr. Victor Burke's contractfrom January through September 1980, and agreed that it would be preferableto use the Project Preparation Facility to be reimbursed from the proceedsof the Agricultural Services Project, rather than funds from MFC II. Ilater discussed this proposal with Mr. Burke on his return to Khartoumfrom leave. He was agreeable and, after discussing the matter further withDr. Tigani and Mr. Amara, gave me a letter for RMEA containing an outlineof his terms of reference. Mr. Dewar subsequently replied that prepara-tion of the PPF request was a Government responsibility, not RMEA's, andthat RMEA should not become involved. In view of the close timing, weshould follow up by telex to ABS through Mr. Farag to see where the matternow stands.

Mechanized Farming Project III

10. I met briefly with Mr. Brian Shaw from P.A. International to dis-cuss the Mechanized Farming Corporation's (MFC) financial position andthe completion of P.A. International's contract. Mr. Shaw expressedguarded optimism regarding the future role of MFC (reduced concentrationof resources on State Farms) based on recent discussions he had had withMr. Elias, Director General of MFC, and the State Minister for Agriculture.However, he was still uncertain as to how to proceed with financial pro-jections for MFC due to the uncertainty surrounding its future role. Weagreed that he should work together with Mr. Elias to formulate a jointproposal for completing the P.A. contract and discuss this with you inDecember. You have subsequently indicated that Mr. Shaw did not get intouch with you during your mission. This matter should be pursued duringthe next supervision mission for MFC III, tentatively scheduled forFebruary 1980.

RLPH:cas

cc: Messrs. Gue, Adler, Gulhati, Hendry, Maubouche, Maane, McGibbon,North, Farag, Dewar, Burmester, Ball, Gafsi, Kuffner,Shivakumar, C. Smith, Rajagopalan (8), Yudelman,Wiratunga, Petretti, Mwine, Chittleburgh, Vogel, E.A. Files

Appendix 1

A I D E -M E M O I R E

Submitted to the Minister of Agriculture, Govermient of

Sudan, concerning the proposed cost recovery mechanism

for the


Khartoum, November 19th, 1979

NEW HALPA IRRIGATION REHABILITATION PROJECT

Proposed Cost Recovery Mechanism

1. The following note presents details of the cost recovery mechanismproposed for New Halfa, based .on the joint account for cotton with growerincentives, and with a new charge system levied on other crops similar to thatintuoduced for the Gezira gcheme. This cost recovery mechanism would be sub-ject to change depending on the findings of the proposed program credit studyon cost recovery. Accordingly, the proposal attempts to minimize changes tothe existing mechanism. It is based on the following fide principles:

(a) the joint account should apply exclusively to cotton, and should -not include any direct or indirect costs of producing non-cottoncrops;

(b) charges for non-cotton crops should remover the full cost ofproducing each;

(c) the joint account for cotton should be retained with a minimumof modification;

(d) no additional charges should be imposed on non-cotton cropsuntil the benefits of rehabilitation are clearly discernible totenants and

(e) the New Halfa joint account should give growers an increasedincentive to grow cotton, in a manner similar to the progressiveproduction incentive scheme introduced at Gezira.

The Joint Account System

2. The joint account for cotton is made up of three accounts. The firstis the general joint account, the second is an individual joint account andthe third is an individual tenant's cotton account. Additional individualtenant crop accounts are already maintained for groundnut and wheat. Theseare kept separately from each other, and also from the three accounts thatmake up the joint account for cotton. The introduction of a rainfed foddercrop into the cropping pattern would require an additional individual tenant'sfodder crop account.

Overhead Costs of Production

3. Currently, all overhead costs of production are charged against NAPC'sshare of the general joint account surplus. The overheads concerned arebasically the cost of operating the field department and include all adminis-trative costs of NHAPC. Most of these overheads relate to all crops, and aproportion of them should be allocated to non-cotton crops. It is proposed todo this by devising an equitable allocation of these costs between cotton,groundnut, wheat and fodder. The costs allocated to each non-cotton cropwould then be divided by the total number of tenants growing that crop andthe result would be debited to the non-cotton crop account of each tenant grow-Ing that crop. The proportion allocated to cotton would be left as a chargeagainst NHAPC's share of the general joint account surplus.

-2-

4. However, while this procedure would allocate overheads between cot-ton and non-cotton crops, without a further adjustment, it would benefitNHAPC at the expense of the tenant. This is because NHAPC would still re-ceive the same share of the general joint account surplus. It is thereforeproposed that whatever proportion of overhead costs is allocated to the non-cotton crops should also be debited against NHAPC's share of the generaljoint account surplus and simultaneously credited to the tenant's share ofthe general joint account surplus. When the tenant's hhare of the generaljoint account surplus plus the reallocated overhead is then divided by thetotal number of kantars of seed cotton produced by tenants, a higher tenant'sprice per kantar of seed cotton will result, 'offsetting the reduced net re-turns to other crops. This would provide an effective incentive for tenantsto grow cotton, in line with the progressive production incentive scheme atGezira.

Costs of Supplying Irrigation Water

5. Irrigation charges should be introduced to cover the full cost tothe Government of supplying water. At present the costs incurred by theMinistry of Irrigation in supplying water to New Halfa are not met by NHAPC.We estimate that these costs could amount to LSd 300,000 per year. To thisamount should be added whatever NBAPC bow spends on irrigation and any pro-ject costs attributable to improving irrigation. Any capital costs shouldbe amortized over 15 years at an appropriate interest rate to express themin terms of an equivalent annual cost. The total annualized cost would bedivided by the product of the number of irrigations supplied to each cropand the number of hawashas of that crop grown, for all crops. The resultwould be the average cost of irrigating one hawasha once. This average costmultiplied by the number of irrigations received by each crop would be thewater charge per hawasha for that crop in that year.

Other Costs

6. All crops benefit to varying degrees from the cost of project securityarrangements, publicity, land leveling, deep plowing, rodent control and thecash advances to hand-pull heavy weed infestations. These costs should alsobe allocated between all crops. Each non-cotton crop allocation would thenbe divided by the total number of tenants growing that crop, and the resultwould be debited to the non-cotton crop account of each tenant growing thatcrop. For each of these cost items, the proportion allocated to cotton wouldbe left in its present position within the joint account. Project security,publicity and rodent control costs for cotton would stay as a debit to thegeneral joint account. Land leveling, deep plowing and cash advances to hand-pull heavy weed infestations would stay as a debit to the individual jointaccount.

7. The total amount allocated to non-cotton crops in this manner wouldbe added to the tenant's share of the general joint account surplus. Thisprocedure would have the same effect as that proposed for the reallocation ofoverheads (para. 4) and would be necessary to avoid penalisg'the tenant andbenefitting NHAPC. It would also help increase the tenant's incentive togrow cotton by increasing the price paid to tenants per kantar of seed cotton.

-3-

Interest

8. Given the foregoing adjustments, an equitable allocation of NHAPC'sinterest commitments between all crops reduces to an arithmatic exerciseonce the interest rates between NHAPC and its sources of finance, and bet-ween NHAPC and the tenants, have been determined.

Phasing of Water Charges

9. Additional costs to the end user of water would arise as a result ofrecognizing MDI's input in supplying water, and the need to recover projectcosts. Both would be phased according to projected increases in tenant in-comes.

Distribution of the General Joint Account Surplus

10. Once the size of the general joint account surplus is determined, itmust be allocated appropriately. Based on the most recent figures availablefrom HEEPC, we proppse to use the following distribution of the general jointaccount surplus: 5% for the cost of social services; 2% for local goveumenttaxes; 45.5% for NHAPC; 47.5% for tenants. We will further assume thet 2%of the tenants' share is retained in the tenants' reserve fund.

Appendix 2

Our ref: RLPH/yjs November 19, 1979

Mr. Ibrahim Omer Habani,Director, Project Preparation Unit,Ministry of National Planning,Khartoum.

Dear Mr. Habani,

Subject: New Halfa Phase II Studies

Further to our discussion during the meeting of the Working Partyon November 18, 1979, I have just been advised by telex from Washingtonthat IDA cannot agree to any increase an the existing dollar contractamount.

Yours Sincerely,

R.L.P. HarrisDeputy Chief, Northern Agr. Div.Projects DepartmentEastern Africa Regional Office,IBRD.

cc: DTr;FaragDr. Sattar

248423 WORLDBANK sd

Distribution;

INTBAFRADMr., Burmester

WASHINGTON

BB8936 - SUBJECT : SUDAN NEW HALFA IRRIGATION REHABILITATION PROJECT

FOR THE ATTENTION OF MESSRS BLINCHORN/AJOEt 1MVJEFFREY BALL STOP

THE PROJECT IS SCHEDULED FOR XERXEHX ADF BOARD JANUARY 1980 THERE-

FORE REPORT HAS TO BE COMPLETED BY DECEMBER 1979 END AT THE LATEST

STOP MEANWHILE WE ARE AWAITING DETAILED REVISED COSTS FROM YOU IN

ORDER TO FINALISE OUR REPORT STOP WE WOULD BE GRATEFUL THEREFORE

IF YOU WILL INDICATE HOW SOON THIS WILL BE AVAILABLE STOP REGARDS

G. DOSSOU

AFDEV

COL. BB8936 -

12/12/79 AT 10.35

AFDEV A ABIDJANO

248423 WORLDBANK

FIN ++

sd

Mr. Walton

Mr. Burmester

INTBAFRAD KHARTOUM

DECEMBER 9, 1979

INTBAFRAD WASHINGTON D C

FOR HARRIS

. RE SUDAN NEW HALFA, URTEL DEC-EMBER 4TH TO KUFFNER. ACCORDING TO DR.

SATTAR OF PLANNING MINISTRY, DEFENCE TAX APPLIES TO VIRTUALLY ALL

IMPORTS, INCLUDING THOSE YOU MENTION. IT IS CALCULATED ON CIF PRICE

BEFORE IMPOSITION OF OTHER LOCAL DUTIES AND TAXES. YOU MAY ALSO BE

INTERESTED TO KNOW THAT FOR THE PURPOSE OF DEFENCE TAX, THE CIF

PRICE IS ALWAYS DETERMINED ON THE BASIS OF THE 50 P EQUALS ONE DOLLAR

EXCHANGE RATE, EVEN IF THE ITEM IN QUESTION IS IMPORTED AT THE 80 P

ri A I.. c

REGARDS,

LISTER

TELEX DECEMBER 11, 1979886658 7-4922

PEAT, MARWICK, MITCHELL AND PARTNERS

LONDON, ENGLAND

FOR M. COLLETT - RE SUDAN EXCHANGE RATES.

JEFF BALL AND COLIN SMITH ARE WORKING UP NEW HALFA PROJECT

AND WILL TELEPHONE YOU 0900 HOURS WASHINGTON EQUAL 1500 HOURS

LONDON WEDNESDAY 12 DECEMBER STOP ALL BANK AND IMF WASHINGTON

DATA SUGGESTS WE SHOULD BE USING THE OFFICIAL EXCHANGE RATE

OF UNITED STATES DOLLARS TWO TO SUDANESE POUNDS ONE FOR ALL

FOREIGN EXCHANGE INPUT COSTS AND OUTPUT RECEIPTS STOP REGARDS,

WALTON.

SUDAN: New HaLfa Irrig. Rehab. Project JWBaLL:mLd

C.H. WaLt , Chief, EAPNA

East Africa Projects

x

- -1 -2 + :

x ....

9

AGRAR- UNDHYDROTECHNIK

GMBHBeratende ingenieure

AGRAR- UND HYDROTECHNIK GMBH POSTFACH 60 4300 ESSEN 1

Mr.C. WaltonWorldbank

Telefon: (0201) 2016-1

East Afri can Division Durchwahl-Nr. 2016-

1818 H. Street N.W. Telegramm: AGRARTECH ESSEN

Washington, D.C. 2o433 Telex: 857557 aht d

U.S.A.

Ihr Zeichen Ihr Schreiben vom Unser Zeichen Huyssenallee 66-68, 4300 Essen 1

Ve/Hi 10th December 1979

Ref.: New Halfa, Phase II

Dear Mr. Walton,

Herewith we have the pleasure to send you a copy of theInception Report and a copy of the letter we wrote toMr. Habbani of the P.P.U. Khartoum upon his request.

We would be very much obliged of you could inform us aboutthe final support measures for the New Halfa Scheme and ifyou could send us a copy of the final documents.

S'n 'r ly your -

H Ve hoeven

Encl.:1 copy Inception Report.1 copy Letter to P.P.U.

Gesellschafter der Deutsche Projeki Union GmbH, Koin Bankverbindungen: SWIFT-Adresse:Trinkaus & Burkhardt, Essen, Kto. 30/1013/019, BLZ 36030000 TUBD DE DD 360

Geschsftsfbhrer: Johannes Mohrmann, Dr. Bernhard Frhr. von Falkenhausen Deutsche Bank AG, Essen, Kto. 100/5339, BLZ 360 700 50 DEUT DE DE 360Sitz der Gesellschaft: Essen Commerzbank AG, Essen, Kto. 15 252, BLZ 36040039 COBA DE DD 360Eingetragen im Handelsregister des Amtsgerichts Essen, Abt. B Nr. 2099 Dresdner Bank AG, Essen, Kto. 4072510, BLZ 36080080 DRES DE FF 360

I.

WORLD BANK INTERNATIONAL FINANCE C ) ORATION

OFFICE MEMORANDUMTO: Files DATE: December 7, 1979

FROM: Janet A. Koch, Young Professional, DB

SUBJECT: SUDAN - Annual Coordination Meeting with rican Development Bank

1. A meeting took place on December 4, 1979 with Mr. John and twoother representatives from the African Development Bank (Fund); otherspresent included Mr. Tolley, Mr. Burmester, and myself.

2. The meeting began with a general discussion of the overallfinancial/economic situation of Sudan, most notably the total debt burdenand arrears situation. The Bank and AfDB share similar problems in Sudan.AfDB should have stopped disbursing and even suspended operations in Sudanbecause of Government arrears on service payments. However, AfDB prefers apersuasive rather than coercive approach to resolving such problems.

3. Next we discussed the new philosophy and direction of IDA's lendingin Sudan -- investing heavily in rehabilitation projects, especiallyagricultural rehabilitation, with no new rural development projects for awhile. AfDB commented that they assumed this is why the Government talkedthem into considering rehabilitation projects. As for specific projects (seeNovember 29 memo to Burmester from Koch for details of projects to be covered):

(a) New Haifa Irrigation Rehabilitation (FY80): We discussed thefinancing situation. The foreign exchange needs of US$65.4 million arebasically met with US$40 million currently allocated from IDA, US$15 millionfrom IFAD, and up to US$10 million from AfDF; they felt they could make acase for US$10 million with no problem. Local costs are a different matter,still to be worked out at negotiations. The introduction of a fourth co-financier was discussed (EDF was specifically mentioned), but the generalconcensus seemed to be that if IDA would not finance local costs, no one would.Some brief discussion followed on the impact of the IMF ceiling on projectdevelopment and implementation in Sudan, and that maybe this would help thecase for IDA and others doing local cost financing. AfDB is anxious to getthe project to their Board in the first quarter of 1980, preferably to theJanuary meeting (&rd week), and hence need the revised cost figures as soonas possible. The revised yellow cover appraisal report was promised by theend of Decembbr/early January at the latest.

(b) Other Irrigation Sector Projects (FY81): The Governmentspecifically requested AfDB's participation in the White Nile project at thesame time as New Halfa. However, there is no longer a financing gap on thisproject. After our suggestion of the Blue Nile as an alternative, they saidthey would take note of it and check back with the Government.

Files - 2 - 12/7/79

(c) Water Supply Projects (FY81): AfDB are still interestedin El Obeid and Kosti, but they want to be brought in at the execution stage,leaving the financing of design to the Bank or other agencies. They might beinterested in putting up to US$10 million into El Obeid. Again they seemedanxious to move ahead on this, having heard that the feasibility studies wereto be done by the end of the year. As for their work in water supply outsideKhartoum they are dealing only with Port Sudan and may cancel the loan due toimplementation problems.

4. As for their other activities in Sudan, AfDB is seriously consideringa seed multiplication project for 1980. This is an FAO identified project, ona nationwide scale. AfDF might provide US$10 million for the agriculturalportion, and AfDB US$13 million for factory related aspects.

cc: Messrs. Gud, Tolley, Hornstein, Bah, Burmester, Blinkhorn, Hansen, Farag

JKoch:slw/mjb

0

CD-0

0

CD


OFFICE MEMORANDUMTO: Mr. Sven Burmester, Division Chief, EA2DB DATE: December 4, 1979

FROM: Thomas A. B1 rn, Sr. Loan Officer, EA2DB

SUBJECT: SUDAN - Bac1 to-Office Report

1.. In accordance with terms of reference dated October 12, 1979,I visited Sudan from November 6 to 16, 1979. On the way to KhartoumI stopped in Paris to discuss with various consultants the tenderingand procurement arrangements for the proposed Agricultural RehabilitationProgram (ref. Attachment). On my return to headquarters, I stopped inLondon to discuss general operational matters (particularly theSavannah Development Project) with the Overseas Development Administration(ODA).

Agricdltural Rehabilitation Program

2. I hand delivered Mr. Gue's letter of November 1, 1979 on the

Agricultural Rehabilitation Program to the Minister of National Planningand gave copies to the Minister of Agriculture, the new Minister of 'State for Finance, Osman Al Nazir, and to Dr. Abdel Wahab. The latterthree all indicated that they personally would like to attend negotiations.Since the Minister of Irrigation was not available (he reportedly was notcoming to the office because of a dispute with senior staff over aproposed reorganization plan for the ministry), I left a copy of theletter with Mr. Farag for subsequent delivery.

3. The Sudanese are clearly very keen to have prompt approval ofthe IDA and EEC Special Action Fund Credits for this program. Theyappreciate the need to maintain momentum with respect to the overalleconomic stabilization effort; in the aftermath of the Paris Clubdiscussionsand the recently successful negotiation of an additionalUS$100 million loan from Saudi Arabia (above and beyond the US$300 millionequivalent concluded earlier, from which all but US$88 million has beendisbursed), the program lending operation is regarded as another criticalstep in the process. Indeed, the Minister of National Planning reiteratedhis request, sent earlier via telex, that the Bank Group consider a secondprogram lending operation for the industrial sector, possibly in collaborationwith Saudi Arabia. I restated the position set forth in Mr. Wapenhans' telexof October 29; namely, that while it would be difficult for us to considersuch a lending operation before the Agricultural Rehabilitation Program hadreached fruition, we would be prepared to assist to the extent possible inproviding documentation on the sector. I also said that it might bepossible to field a reconnaissance mission early in 1980 if the Governmentso desired.

4. Assuming that Sudan manages to stay on track with the Fund (andalso remits Bank Group service payments in time), we should be preparedto move ahead quickly with final processing of the rehabilitation program.

It presents us with an exceptional opportunity for agreeing mutually with

Mr. Burmester - 2 - December 4, 1979

the Sudanese on a range of actions -- macro economic and sectoral -- thatcould have significant impact on the overall development effort. If weare to make maximn iuse of this leverage, however, I feel that it isimportant to be particularly sensitive to the following point, amongothers: That in trying to "sell" the various proposals associated withthe program, we engage not only old friends such as the Minister ofAgriculture and Dr. Abdel Wahab, who generally see eye to eye with us,but also the new team in the Ministry of Finance which, since theappointment of Minister Suleiman, has emerged as a mueh more powerfullocus of decision iraking in Sudan. This will be particularly importanton politically difficult matters such as land and water charges and re-organization in the Ministry of Irrigation.

Technical Assistance Project (US$4.0 million Credit (614) of April, 1976):

5. I reviewed progress on this project; a separate supervisionreport is being.prepared. In sum, the Project Preparation Unit in theMinistry of National Planning, which was established under the project,has managed to meet one of the major objectives of the project (co-financedby the Kuwait Fund): Preparing a pipeline of priority projects in key- sectors.However, the PPU has many shortcomings: (a) A serious deficiency in main-taining a proper accounting and record keeping system (e.g. updated informationon commitments and disbursements from the IDA and Kuwait Fund accounts, aswell as on local costs, is simply not available); (b) Failure of the workingparty system (apart from a few exceptions) to live up to the original aimof developing a good network of project preparation capabilities in keyministries; Cc) Inadequate training program for Sudanese staff. I relayedthese points in a brief note to Dr. Abdel Wahab and promised to elaborateon them in the supervision report.

6. Mr. Farag and I discussed with Dr. Abdel Wahab the future of thePPU in the context of the proposed Technical Assistance II project (currentlyshown as a FY82 standby with US$5 million allocated). It was agreed thatthe emphasis in the next project should be on project implementation ratherthan preparation. The precise design and scope of Technical Assistance IIwill have to be discussed thoroughly in the months immediately ahead sinceappraisal will have to be scheduled no later than September/October, 1980in order to meet the current timetable. I feel that we should regard thenext project as a convenient vehicle for providing those kinds of supportactivities and servic-es that are now sorely lacking in overall projectexecution in Sudan -- e.g. financial control, tendering and procurement,accounting systems and accountancy training, monitoring and evaluation.Funds- from the first Technical Assistance project are now fully committed butdisbursements will continue into 1980; thus the current closing date(December 31, 1979) should be extended for one year.

urmester - 3 - December 4, 1979

Savannah Development Project (Credit 718-SU)

7. Messrs. Mwine, Harris, Goetz and myself participated in the donorsmeeting to finalize arrangements for the amended project. Representativesof the Government, ODA and Abu Dhabi fund'attended but not the Saudi Fund.Mr. Goetz passed through Riyadh on his return to headquarters to brief theSaudi Fund on the outcome of the meeting.

8. The draft amended Credit Agreement between the Government and IDA,incorporating a revised project description and appropriate covenant changes,was agreed and confirmed by letter from Dr. Abdel Wahab. However, the ODArepresentative objected to certain features of the draft Memorandum ofUnderstanding, which was intended to be signed by all four external donors.Specifically, ODA felt that the detailed financing plan (Annex 1) showingspecific contributions of each donor agency should be eliminated since theU.K. Government had not given final approval to the amount shown as ODA'scontribution -- US$9.2 million equivalent. We noted that a Memorandumof Understanding would be important to all parties concerned, especially tohelp avoid any misunderstandings that might ecur infuture supervision ofthe project._ We also pointed out that IDA's particibation i- significantlyimended project would have to be approved by the 3ard of ive Directors-and that it would be very difficult to go to the B' j ai - ssurances onthe total financing plan.

Since--the problemcould not be reo :r T agreed todiscuss it in London upon return to"Washington a met with Peter Freeman,-Sudan desk officer at ODA. The basic difficulty apparently stems from adifference of view between the ODA and U.K. Treasury on the overall Britishaid allocation and the priorities that should be established'within thatallocation. ODA's predecessor organization -- the Overseas DevelopmentMinistry -- had agreed earlier this year to participate in the consolidatedSavannah project and to more than double its financial contribution to atotal of about US$9.2 million equivalent. Indeed, consultants had beenretained and almost US$2 million has been committed to an advance buildingprogram. However, in the aftermath of the British election, the U.K.government began to review its overall aid program and to date ODA stilldoes not have final approval from the Treasury to be able to commit thelarger amount to the consolidated Savannah project.

10. This, of course, creates a problem for us in going to the Board.I suggested to Mr. Freeman that ODA should at least be prepared to confirmboth to IDA and the Government, that'it agreed in principle to provide the

.required financing under the consolidated project. He said it would bedifficult for ODA to go that far at this time and suggested instead alternatelanguage to the effect that "all other donors (Saudi Fund, Abu Dhabi, ODA)have agreed to provide required financing." I said it would be very difficultfor us to proceed to the Board with that kind of general statement butpromised nonetheless to raise it with regional management.

Mr. Burmester - 4 - December 4, 1979

11. As I see the situation now, we have at least three options:(a) To wait until the ODA and Treasury sort things out (which may takeanother few months) in the hope that the full amount of U.K. financingwill then be made available; in the meantime, we can disburse under theexisting credit for those project activities that will remain in theconsolidated project; (b) To follow option (a) and if the full amount ofU.K. financing is not made available, to cut the project sometime nextyear; (c) To cancel our participation in the project now on the grounds ofuncertainty about the U.K.'s role and the overall financing plan. I wouldrecommend a combination of (a) and (b) above. On country grounds, I feelthat option (c) would simply be too damaging to our operations in Sudan,given the importance that the Government attaches to the Savannah projectand the resources (manpower, institutional, financial) that it has alreadycommitted to the endeavor.

Miscellaneous

12. Mr. Mwine and I met with representatives of the Attorney General'soffice to discuss ways of resolving problems of protracted delays inGovernment ratification of Bank Group legal agreements. Mr. Mwine cameprepared to discuss special enabling legislation,along the lines adoptedin other developing nations, that would give special ratification authorityto the president and thus avoid prolonged scheduling and debate in thePeople's Assembly; he is preparing a separate report on our meetings.Unfortunately, the new Attorney General, Dr. Hassan El Turabi, was out ofthe country at the time. The problem in Sudan may be further complicatedsince Dr. El Turabi is known to be a strict legal constructionist, committedto Islamic law, and is said to believe that the president cannot be givenprovisional authority to ratify legal agreements such-as those emanatingfrom Bank Group lending operations. The legal staff in the Attorney General's

chambers seem to favor a more pragmatic approach but so far hav not beenable to make much headway with Dr. El Turabi.

13. Mr. Harris and I held several discussions with officials on variousaspects of the proposed New Halfa rehabilitation project. We conveyed theAssociation's concerns about the need to establish the New Halfa AgriculturalProduction Corporation on a sound legal footing and also expressed reservationsabout the scope of future studies to be undertaken on New Halfa by Germanconsultants, financed under the.Technical Assistance Credit. I discussedthe problem of local cost financing for the project with the IMF residentrepresentative, Mr. Nashishibbi. The appraisal team had proposed that upto about 25 million Sudanese pounds be provided in the form of a loan overfive years from the Bank of Sudan. Mr. Nashishibbi said he did not thinkthat this Wuld contravene the ceiling on net domestic asset creationestablished under the Extended Fund Facility. Subsequently, however, theFund's mid-term review mission concluded that the ceiling had already beenexceeded b9 a significant amount. This matter will have to be discussedagain with the Fund prior to negotiations.

-ATTACHMENT

SUDAN

Proposed Agricultural Rehabilitation Program

Procurement Coordination

Discussions on tendering and procurement arrangements were heldin Paris on Monday, November 5 with representatives of the following firms:

British Crown Agents: Messrs. H.A. Rans, K. Simpson

Italconsult: Mr. Antonio Ciampa

Horgan-Lynch (Dublin): Mr. M. Horgan

Societe Generale deSurveillance S.A. (Swiss): Mr. M. Touche

SODETEG (Societe D'Etudes Techniqueset D'Enterprises Generales)(French): Messrs. J. Bertrand,

M. Jellatchitch, J. JallasSATEC (Le Societe d'Aide Technique etDe Cooperation): Mme. M. Nowak

r. Burmester - 5 - December 4, 1979

14. A representative of the French embassy in Khartoum,Mr. B. Chaignon, informed me that a French petroleum firm, Total CFP,had just signed a three year exploration contract with the Governmentto investigate natural gas deposits in a 6,000 square kilometer areabeneath the Red Sea near Port Sudan. The French Government has alsojust concluded negotiations on a new aid protocal for Sudan for 1980involving a total commitment of about 150 million francs. Details ofthe program will be forwarded to us in due course.

Attachment

cc: Messrs. Gue, EA2Adler, EAPNorth, RMEAWalton, EAPNAHarris, EAPNAHermans, IRDMwine, LEGWiratunga, CTRFarag, EAFSUMaane, EA2Shivakumar, EAPNAHansen, EA2DB

Ms. Koch, EA2DB

TABlinkhorn/ld

TELEX DECEMBER 3, 1979 PAGE 1 OF 2 PAGES215 74919

INTBAFRAD,

KHARTOUM, SUDAN

903FOR FARAG NUMBER ONE FOR KUFFNER. RE SUDAN NEW HALFA

IRRIGATION REHABILITATION PROJECT. AS YOU ARE PROBABLY

AWARE SUDANESE TAX CHANGES IN SEPTEMBER RESULTED IN REMOVAL

OF 5 PER CENT DEVELOPMENT TAX ON IMPORTS SO THAT IMPORTS

ARE NOW SUBJECT TO 5 PER CENT DEFENCE TAX. THESE CHANGES

HAVE AN EFFECT ON GOVERNMENT CASH FLOW FOR NEW HALFA PROJECT.

HOWEVER, THE EXACT NATURE OF THESE CHANGES WAS NOT CLEAR

DURING THE TIME OF THE MISSION AND WE HAVE BEEN UNABLE TO

DETERMINE IN WASHINGTON THE CATEGORIES OF IMPORTS TO WHICH

THE DEFENCE TAX APPLIES. THEREFORE COULD SOMEONE ON YOUR

TEAM PLEASE FIND OUT (ALPHA) WHETHER OR NOT DEFENCE TAX

APPLIES TO ITEMS SET OUT IN NEW HALFA IMPLEMENTATION VOLUME

DATED JULY 16, 1979, ANNEX 8, TABLES 1 TO 18 NAMELY:

(AAA) TRACTORS AND AGRICULTURAL MACHINERY AND SPARES,

(BBB) BUILDING MATERIALS, (CCC) MECHANICAL WORKSHOP

FITTINGS, (DDD) FUEL STORAGE EQUIPMENT AND VEHICLES,

(EEE) WEIGHBRIDGES, (FFF) ROAD MAINTENANCE EQUIPMENT

TELEX DECEMBER 3, 1979 PAGE 2 OF 2 PAGES

215 74919

AND SPARES, (GGG) CANAL MAINTENANCE EQUIPMENT AND SPARES,

(HHH) ROAD BUILDING MATERIALS INCLUDING BRIDGES, (III)

MOTOR VEHICLES AND SPARES, (JJJ) PUMP TURBINE AND

GENERATOR PARTS FOR DAM, (KKK) TELECOMMUNICATIONS EQUIPMENT

AND SPARES, (LLL) GINNERY DELINTER EQUIPMENT, AND (MMM)

HEALTH BUILDINGS AND EQUIPMENT, AND (BETA) IF TAX IS

IMPOSED ON CIF PRICE BEFORE IMPOSITION OF OTHER LOCAL DUTIES

AND TAXES. WE SUGGEST INFORMATION COULD BEST BE OBTAINED

FROM DR. TIGANI AT THE MINISTRY OF PLANNING. WE WOULD

APPRECIATE A TELEX REPLY AT YOUR EARLIEST CONVENIENCE.

REGARDS, HARRIS.

SUDAN - New HaLfa Irri. Rehab.Project -CSmith:ch

% Actino Chief, EAPAcc: Messrs. Ball and du Mee (o/r)

Eastern Africa ec s

AGRAR- UNDHYDROTECHNIK

GMBHBeratende Ingenieure

AGRAR- UND HYDROTECHNIK GMBH POSTFACH 60 4300 ESSEN

Telefon: (0201) 2016-1

Durchwahl-Nr. 2016-

Telegranm: AGRARTECHNIK ESSEN

Telex: 857557 aht d

ihr Zeichen Ihr Schreiben vom Unser Zeichen 4300 Essen, Huyssenallee 66-68

November 29th 1979

Mr. 1.0. H bb niDirector Project Prep r tion UnitMinistry of N tioni. Plinningm r t

Kh rtoum.

De r Sirs,

With reference to your letter MN"PPU/a/4-1 from 19 November 1979 we re ple sedto inform you th t your request to produce report on support me sures for Ph seI implement tion nd a report on long term me sures c n be met. However s thestudy items for both me'sures re c-rried out simult neously (see revised b sicprogr;mme October 1979) the field work for both reports c innot be subdivided.The only possibility to present the Phse I support me sures head of the longterm measures is given in the splitting up of the office work time from pril 1980onw rds. This will low for present tion of the Ph se I support measures dr ftreport in Jun- 1980 nd the long te-m measures dr ft report in September 1980.

In the interm report to be presented in December 1979 bro d outline of thecontents of both reports is given.

Sincerely yours

H. /erhoevencc: Mr. R. Harris

Deputy ChiefNorthern griculture DivisionProject Dep.E stern fric n Division'orld Bank

W shingtonU.S. .

Gesellschafter der Deutsche Projekt Union GmbH, K6|n Bankverbindungen: Trinkaus & Burkhardt, Essen, Kto. 30/1013/019, BLZ 36030000Deutsche Bank AG, Essen, Kto. 100/5339, BLZ 36070050

Geschaftsfihrer: Johannes Mohrmann, Dr. Bernhard Frhr. von Falkenhausen Commerzbank AG, Essen. Kto. 15252, BLZ 36040039Sitz der Gesellschaft: Essen - Eingetragen im Handelsregister des Amtsgerichts Essen, Abt. B Nr. 2099

OFF!CE MEMORANDUM C. ca 0oTO Mr. C.H. Walton Chief, EAPNA DATE November 26, 1979

FROM J.B. Hendry, Asst. Director, EAPDR

SUBJECT* Mission Terms of Reference

1. During your visit to Sudan, December 1-7, you should join theRahad Review Mission and assist it in formulating proposals for thefuture of this project and any related aspects which may, after subsequentreview with the Program department, be discussed with Government duringnegotiations for the proposed Program Credit, scheduled to begin onDecember 10. You should also have discussions with the Minister forAgriculture on institutional matters relating to projects currently underappraisal and to the future of the Mechanized Farming Corporation. Iftime permits, you should also try to ascertain the Minister's reactionto staff proposals for a revised cost recovery system (including landand water charges) for the New Halfa project.

2. On route to Khartoum, you should have discussions in the UKwith ODA on operational matters, in particular its participation inthe Southern Sudan Agriculture Project and with Sir M. McDonalds tolearn of their proposals for the reorganization of the irrigation sub-sector in the Sudan.

CHWicas

£leared with and cc: Mr. Blinkhorn

cc: Messrs. Gue, Adler, North, Farag, Dewar, Harris, Rajagopalan (5),Yudelman, Wiratunga, Petretti, Mwine, Chittleburgh,-Vogel, E.A. Files (4)

TELEX NOVEMBER 26, 1979

215 749119

INTBAFRAD

KHARTOUM, SUDAN

FOR FARAG. REFERENCE OUR TELEX 841 TO FARAG OF NOVEMBER 10,

1979 AND SUBSEQUENT RESPONSE DELIVERED BY BLINKHORN. COULD

FARAG PLEASE THANK MR. M.E. ABBASHER, FINANCIAL MANAGER, PAPC

FOR CO-OPERATION AND OBTAIN SOONEST FROM HIM BREAKDOWN OF

MISCELLANEOUS RECEIPTS POUNDS SUDANESE 228,026 SHOWN IN

PROFIT AND LOSS ACCOUNT OF NHAPC FOR FISCAL YEAR ENDED

JUNE 30, 1978. APPRECIATE TELEX REPLY SOONEST.

REGARDS, WALTON.

SUDAN - New Halfa Irrigation Project CSmith:ch

cc: Mr. Ball and du Mee (o/r) C.H. Walton, Chief, EAPNAt\


n

h.

t

TIELEX NOVEMBER 19, 1979215 7282

INTBAFRAD

KHARTOUM, SUDAN

FOR FARAG. REF. YOUR 515 REGARDING NEW HALFA COST RECOVERY.

AGREE TO PROPOSED APPROACH BUT GRATEFUL IF YOU WOULD EMPHASIZE

TO MINISTER THAT PURPOSE OF AIDE MEMOIRE IS MAINLY TO CONVEY

STAFF PROPOSALS WHICH ARE NOW BEING INCORPORATED INTO APPRAISAL

REPORT AND TO ELABORATE ON GENERAL FRAMEWORK AS EXPLAINED IN

GUE'S RECENT TELEX. ALSO NOTE THAT PROPOSALS CAN BE DISCUSSED

AT GREATER LENGTH DURING NEGOTIATIONS FOR AGRICULTURAL

REHABILITATION CREDIT WHICH WE WOULD HOPE MINISTER MAY BE ABLE

TO ATTEND. REGARDS, BURMESTER

SUDAN - New Halfa Rehabilitation Project TABlinkhorn:m

cc: Mr. Gue, EA2 (o/r) Sven-- m eter

Clearea 4n substance with and cc:Mr. Walton, EAP EA2DB

4-

20 e 5 5

3 4

Sulitted to the tMiSter of gricutrrnt of

Sudan, concerning the Propsed r-ost r--coverys .echanism

for thel

Neu, illfa Trriga!tion Rehabilitation projet

Khartour ovember 1 th, 1979

Proosed Cost Recovery echanisr

", ite followil note presents detailc of the cost recovery' mcchanisr

propose for Jew lialf bed on the joint account for cotton 'itlh growver

in1ntives, and with a ew charge system levied on other crops similer to that

introduced for the Gezira scheme. This cost rcovery mechanisv Iolc sub-

ject to change depending on the findings of the proposed rogra" credit study

on cost recovery. Accordingly, the pronosal attempts to minie changes to

the existing mechanismu. It is based on the following fide princip'ls:

(a) the joint account should aoly eclusiy to cotton, and should

not include ary direct or indirect costs o nrucing non-cottonc rop s

( ) ires for non -cotton crops should remover t1h full, cost ofproducing e'ch

(,c) the joint aceount for cotton should b. ret½-' with ' aminimuur

of modif!eation;

( v -'itloril ciar-s should Ie imposed on non-cotton crop s

mntil t)e "-fit s of rehabillittior e clearly di'sceroible to

Lenunts and

(e) the few nIfe joinlt 7cocunt should give rowers an increand

incentive to grow cotton, in a manncr sfril'r to the pro rendvc

production incentive scheme introduced at Cezira.

The Joint Account SVsten

2. T4e Joint account for cotton is made up of th ree accounts. The first

is the neral joint account, the second is . individual joint account and

the third is an ind1ividlual tenant cotton account. Editional individual

tenant crop accounts are already aintained for grouindnt and wheat. 'These

are kept seprat-ely Fro; each othier, and also f ro. th three accounts that

make up the j Cint accou. for cotton. Tie introduction of a rainfed foder

crp into the croppi atern would require an additional individual tenant'sfodder crop account.

OverheadCosts off rd let oP

SCurrently, all overhead costs of produ ct-ion are charged asainst W APC' s

share of the general loint account surplus. The overheads conc rned are

bsically the cost of operating the field departoent and include all adminis-

tratlve costs of pAPC. Most of these over'eas relate to all crops, and a

prop-ortion of the- should -e allocated to non-cotton crops. It is prop'osed to

do this by devising an eaultale allocation of these costs between cotton,

groundnut, wheat and fodder. The costs allocated to each non-cotton cropwould te beI' divided by the total 1ner of tenants growingz that crop and

the result would be debited to the non-cotton cram account of each tenant g-row-

ing that crop. The proportion allocated to cotton would be left as a charge

aganst hAPC's sh are of the general oint account surplus.

4. !.owever, while this procedure would allocate overheads between cot-ton and non-cotton crops, without a further adjustment it would lenefit

J'C at the expense of the tenant. This is because 1TApC would still re-ceive the same share of the general joint account surplus. It is thereforeproposed that whatever proportion of overhead costs is allocated to the non-cotton crops should also be delited a-ant ' AC' shre of the reneraljoint account surplus and simultaneously credi ted to tie tenant's share ofthe general joint account surplus. Uhen the tenant's hhare of the generaljoint account surplus pius the reallocated overhead is the'n divided by thetotal numbrer of kantars of seed cotton produced by tenants, a higher tenaut's,rice per kantar of seed cotton will result, offsetting the reduced net re-turns to other crops. This would provide an effective incentive for tenantsto grow cotton, in line with the progressivc production incentive scheme atCezira.

Costsof Sulinc Trri.nation _Wter

5. Irrig-ation charges should be introduced to cover the full cost tothe Governmert of suplying water. At present the costs incurred by theM'nistry of Trrigation in sunplying water to ew halfa arc not met by NTAPC.

Wc estimate that these costs could amiount to LSd 300,000 per year. To thisamount should be added whatever 11APe now spends or irrig'ation and any pro-ject costs attributable to improvin;:. irrigation. Any capital costs shouldbe amortized over 15 years at an apnropriate interest rate to express thenin term~s of an eqjuivalent annual cost. The total annualized cost would bedivided by the product of the miber of irrigations supplied to each cropand the nurier of hoaashas of thnt crop grown, for all crops. The resultwould be the average cost of irrigating one hawasha once. This averag- costmultiplied by the numb er of irrigations received by cach' crop would be thewater ch'arge per hawasha for that crop in that year.

Other Costs

6. All crops h enefit to varyin derrees fron the cost of project securityarrangements. publicity, land lev ralin < nlowing. rodent control and thecash advances to hrandpull heavy we infes1.tios. Tese costs s'hould alsobe allocated betwueen all crops. a e on-cotton crep allecatiort would thenbe divided by the total nurber of tenants groving that crop. and the resultwould 'e debited to the non-cotton crop account of each ternat growing thatcro. or each of these cost Iter s. the proportion allocated to cotton would1-e left in its present positior within the joint account. Project security,

ublicity and rodent control costr For cwtton would ntay as a debit to the-aneral joi-nt acrount . and levelint , deer lowing and cash advances to aarpull heavy wx d infetations would ctay -. a dbit to the individuel jointaccount,

7. The total ainount allocaited to non-otton crops in this manver would

be added to the tenant's share of tC ieneral joint account surplus. Thisprocedure would have the same effect is that nroposed for the reallocation ofoverheads (para. 4) and would be necessary to avoid penalizing the tenant andbenefitting NpAPC. It would also help icrease the tenant's incentive to

'row cotton by iuereacnr te orce pid to tenants per kantar of seed cotton.

Tnterpst

Civen tl foreo(ing adjustments an equitble allocation of 1cIAPC'sFinterest cormitents beteen all crops rcduces to r arith'atic exerciseonce the interest rates betwnen NHAPC and its sources of finance, and bet-7een IHAPC ( and the tenants, av boee deter ined

Phasing of '?ter Chares

S Aditional co-ts to the erd user of unter vould arise as a result cfrecognizing >01 s im ut In ru-plvirn tvter, and the need to recover projectcosts. Both would :e q1 sod :ccor i J. to nrojected increases in tenant in-COmes.

Distribution of theG Joint Accvunt Surolus

-TOce the size of the general joint account surplus is detemnd itrus t be allocated nprropriately. Based on the -ost recent 4igures availablefrom rP, we proppe to use the followin' distributior of the general jointaccount surplus: 5% for the cost of social services 2 for local goveunment

ta est5.5 for NHAPC: 47.5 for tenants. e w 42ill. Further assume that 27of the tenants' share is retaineo in the tenants' reserve fund.

Our ref: RLPl/yjs November 19, 1979

Mr. Ibrahim Omer Habani,Director, Project Preparation Unit,

Ministry of National Planning,Khartoum.

Dear Mr. Habani,

Subject: New Halfa Phase II Studies

Furt 4r to our discussion during the meeting of the Working Partyon November 8, 1979, I have just been advised by telex from Washingtonthat IDA cannot agree to any increase in the existing dollar contractamount.

Yours dincerely,

R.L.P. HarrisDeputy Chief, Northern Agr. Div.Projects DepartmentEastern Africa Regional Office,IBRD.

cc: Dri-larag

Dr. Sattar

INTBAFRAD KHARTOUMDistributton: fca

NOVEMBER 19, 1979 Dr Walton-fc

INTBAFRAD WASHINGTON D C N4r, Burmester

Mr.-R. Harris' Office

FOUR FOR WALTON (L LcJE3

Su - %e esmAAA AGRICULTURAL SERVICES PROJECT. HAVE DISCUSSED SITUATH WT

BURKE WHO PROMISED TO GIVE ME DRAFT TOR FOR PERIOD JANUARY -

SEPTEMBER 1980 THIS AFTERNOON, AFTER DISCUSSION WITH ABS.

FORMAL GOVERNMENT REQUEST WOULD THEN BE PROCESSED THROUGH

MONP. PROPOSE TO DISCUSS TOR WITH RICE IN NAIROBI AND SUGGEST

HE FOLLOW UP WITH ABS AND POSSIBLY DISCU'SS WITH GAFSI IN

DECEMBER.

BBB NEW HALFA. PRIMO SAFETY REGULATIONS - KASHM EL GIRBA-DAM.

HAVE DISCUSSED WITH GASSIM OSMAN TOGETHER WITH BLUE NILE

MISSION. OSMAN SAID HE WOULD ARRANGE FOR MOI DAM SECTION TO

PROVIDE REQUESTED INFORMATION TO MISSION BEFORE DEPARTURE.

SECONDO PHASE II STUDY. UNFORTUNATELY URTEL FOUR OF

NOVEMBER 16 NOT RECEIVED KHARTOUM UNTIL AFTER MY MEETING WITH

WORKING PARTY NOVEMBER 18. THEREFORE DISCUSSIONS FOLLOWED

GENERALLY ALONG LINES PROPOSED MYTEL TWO PARA BBB TERTIO.

HOWEVER, THE OUTCOME SATISFIES MOST OF POSITION STATED

URTEL FOUR AS FOLLOWS: (ALPHA) IT WAS AGREED THAT THERE WOULD

BE NO INCREASE IN EXISTING DOLLAR CONTRACT AMOUNT. (BETA)

REPORTS FOR PHASE II STUDY WOULD BE DIVIDED INTO TWO PARTS

AND STARTING NOW ALL WORK WOULD BE ON PART ONE (STUDY COMPO-

NENTS DIRECTLY RELATED TO SUCCESSFUL COMPLETION OF PHASE I)

UNTIL ACCEPTED BY GOS AND IDA. ANY ADJUSTMENT OF WORK WOULD

COME AT THE EXPENSE OF PART TWO (LONG TERM ITEMS).

(GAMMA) IT IS EXPECTED THAT BOTH PARTS PHASE II STUDIES WILL

U BA

BE SUBMITTE.D AND ACCEPTED BY GOS AND IDA ON OR BEFORE OCTOBER

31, 1980 AND THAT PART ONE WOULD BE READY MUCH EARLIER.

PPU HAS ASKED AHT TO SPECIFY DATES FOR TWO PARTS SEPARATELY.

(DELTA) THERE DOES NOT APPEAR TO BE MUCH SCOPE FOR COMPLETELY

-Ltr1NG QUESIruN Of HOW TO USE CONTRACT A, U. E 1AINING

AFTER PART ONE IS COMPLETED SINCE AHT FIELD WORK ALREADY

UNDERTAKEN SINCE BEGINNING OCTOBER REGRETTABLY INVOLVES/CONSIDERABLE OVERLAP BETWEEN PHASE I REHABILITATION AND LONGER

TERM ITEMS. (EPSILON) POINTS ALPHA THROUGH GAMMA ABOVE

ARE TO BE CONFIRMED BY EXCHANGE OR LETTERS BETWEEN PPU AND

ÀHT WITH COPIES TO IDA.

TERTIO. COST RECOVERY. REURTEL TWO OF NOVEMBER 13 AND

BLINKHORN'S REPLY OF NOVEMBER 14. HAVE DISCUSSED MATTER WITH

FARAG SINCE RETURN FROM KADUGLI NOVEMBER 17. EYE PREPARED

AN AIDE MEMOIRE ON THE SUBJECT BASED ON URTEL OF NOVEMBER 11

AND LEFT IT WITH FARAG TO GIVE TO MINISTER OF AGRICULLUGESVB

AND LEFT IT WITH FARAG TO GIVE TO MINISTER OF AGRICULTURE WITH

A COVERING LETTER STATING THAT THIS IS A WORKING PAPER

INTENDED TO CONVEY OUR IDEAS ON THE SUBJECT AND TO SOLICIT

THEIR REACTIONS AT THIS STAGE. THEREFORE, THIS WILL NOT

PREEMPT ANY FURTHER CHANGES IN DOCUMENTS AFTER INTERNAL REVIEW

OF THE APPRAISAL REPORT AND ITS CONSIDERATION BY THE LOAN

COMMITTEE. ON THIS BASIS YOU COULD DISCUSS THE PROPOSAL

WITH THE MINISTER IN DECEMBER, AND IT, COULD BE FURTHER

DISCUSSED IN WASHINGTON WITH PROGRAM AND PROJECT STAFF DURING

NEGOTIATIONS FOR THE PROGRAM CREDIT.

CCC REUR MEETING WITH MINISTER OF AGRICULTURE FARAG WILL ADVISE

MINISTER OF MATTERS YOU WISH TO DISCUSS AND WILL FIX DATE.

DDD EYE AM SCHEDULED TO DEPART KHARTOUM FOR NAIROBI VIA SUDAN

AIRWAYS FLIGHT 320 NOVEMBER 20.

REGARDS,

HARRIS

INTBAFRAD KM.

66145 iC LD ANK

Distribution; fcaINTBAFRAD KHARTOUM Pr0*. rfte"jk4Mr unse

EP 19 1 9 ~A~ Mr, Burinester-19, 1979 ',entr F- Mr Walton

IN AFR WASHINGTO D C Cable Office

515 F BLINKON/BURMESTER

REFERENCE I'-'" ~

TRUST THAT THE OUTLINED PROPOSAL IS AGRE ABLE TO YOU. AS

TOIORROW IS A HOLIDAY HERE, THE AIl IRE PLU THE COVERI G

LETTE ILL DELI. WDNESDAY. WUL. o e i FUL FOR

A ADVISE F Y NEW LOP TS THIS To INCLUDE

THE- IN Y COVERING LETTER..

REGARDS,

F A U1 z

JORDAN LIE1ENTHALNERCISSIANTZ i- S-

EJA HADJITARKHANI

~ ~rdIss

TELEX November 16, 19797 5571

INTBAFRAD

KHIARTOUM .. ... SUDAN

FOUR FOR HARRIS. NEW HALFA PHASE II STUDIES. FOR REASONS GIVEN

!IN OUR TELEXES OF SEPTEMBER 6 TO EL FATIH SIDDIG AND OCTOBER 26

TO DR. WAHAB, OUR POSITION REMAINS UNCHANGED. NAMELY, WE STILL

IFEEL UNABLE TO JUSTIFY ANY RECOMMENDATION TO OUR MANAGEMENT

THAT REQUESTS THE USE OF FUNDS FOR ANY PHASE II STUDY COMPONENT4

THAT ARE NOT DIRECTLY RELATED TO THE SUCCESSFUL IMPLEMENTATION

OF PHASE I STOP WE WERE THEREFORE SURPRISED TO HEAR THAT THE

CONSULTANTS CAN NOW COMPLETE THE 78 MAN MONTHS OF WORK SPECIFIEO

IN QUOTE SCOPE OF WORK - TIME SCHEDULE OF OPERATIONS AND EXPERT

ASSIGNMENT SCHEDULE OCTOBER 1979 UNQUOTE FOR THE SAME DOLLAR

COST AS THE 71 MAN MONTHS SPECIFIED IN THE PREVIOUS REVISED

BASIC PROGRAM STOP. AFTER CAREFUL RECONSIDERATION OUR POSITION

HAS THEREFORE TO BE (AAA) WE CANNOT AGREE TO ANY INCREASE IN

THE EXISTING DOLLAR CONTRACT AMOUNT. (BBB) THE EXISTING CONTRACT

AMOUNT SHOULD BE APPLIED TO STUDY COMPONENTS DIRECTLY RELATED

TO THE SUCCESSFUL IMPLEMENTATION OF PHASE I. (CCC) WE EXPECT

ALL PHASE II STUDIES AS DEFINED IN (BBB) ABOVE TO BE SUBMITTED

TELEX November 16, 19797 5571 Page 2

AND ACCEPTED BY GOS AND IDA ON OR BEFORE OCTOBER 31, 1980.

(DDD) IN THE EVENT THAT THE EXISTING CONTRACT AMOUNT IS NOT

FULLY UTILIZED WE WOULD EXPECT TO BE CONSULTED BEFORE THE

BALANCE CONCERNED CAN BE DISBURSED. REGARDS WALTON.

Sudan: New HaLfa JBaLL:eL

cc: Mr. Burmester C.H.Walton, Chief, EAPNA

Eastern Africa Projects,

Distribution sj

P $Mr. Burmeater

7 . -C1nter F1046 Mr.WaltonINTBAFRAD KHARTOUM

NOVEMBER 14, 1979 &3ewL3-INTBAFRAD WASHINGTON D C

FOR BURMESTER, WALTON REF. WALTON'S NUMBER TWO FOR HARRIS

REGARDING NEW HALFA COST RECOVERY STOP HARRIS IS TRAVELLING

IN WEST BUT EYE PERSONALLY STAND BEHIND OUR JOINT POSITION

AS SET FORTH IN HARRIS' CABLt.

AAA APPRAISAL REPORT SHOULD BE PREPARED ALONG LINES OF GENERAL

UPRINCIPLES DISCUSSED WITH MINISTER AGRICULTURE DURING

POST APPRAISAL AND AS SUBSEQUENTLY CONFIRMED BY GOVERNMENT

IN RESPONSE TO GUE TELEX.

BBB DETAILS SHOULD ALSO BE FORMULATED ALONG LINES SET FORTH

IN WALTON'S LENGTHY TELEX.

CCC AFOREMENTIONED SHOULD REPRESENT POSITION FOR REGIONAL

MANAGEMENT AND LOAN COMMITTEE REVIEW BEFORE NEGOTIATIONS.

DDD IF AFTER NEGOTIATIONS FURTHER ADJUSTMENTS ARE REQUIRED

THIS WILL HAVE TO BE DON.E BEFORE BOARD PRESENTATION.

EEE IN CIRCUMSTANCES HERE VERY DIFFICULT TO PRE-NEGOTIATE

COMPLEX COST RECOVERY ISSUE ALONE AND MORE APPROPRIATE

TO DISCUSS ENTIRE MATTER IN WASHINGTON DURING PROGRAM

CREDIT AND NEW HALFA NEGOTIATIONS. N 14BURaMErE|@

REGARDS, JORDAN IEBENTHAL

BLINKHORN NERCISSIANTS.SiNB-BLINKHORN HADJITAREANI

FILE

-7~

distribution:

INTBAFRAD KHARTOUM Mr Walton

NOVEMBER 12, 1979 Mr Burmeester

INTBAFRAD WASHINGTON D C CASLE S EC 0 N

TWO FOR WALTON/BURMESTER -

NEW HALFA

AAA GENERATOR AT KASHM EL GIRBA DAM. BLINKHORN WILL DISCUSS WITH

PEWC ON TUESDAY NOVEMBER 13 AND ADVISE OUTCOME.

BBB PROJECT PREPARATION FACILITY. UNO FINANCIAL CONSULTANTS,.

GOVERNMENT WILL DISCUSS TERMS AND CONDITIONS OF CONTRACT WITH

PA INTERNATIONAL ON WEDNESDAY NOVEMBER 14 AND WILL COMMUNW

3

975:9.3 59 2-'08,859, . SECUNDO PROCUREMENT SPECIALISTS.

EL TIGANI PLANS TO CONTACT THREE FIRMS OUT OF. LIST SUPPLIED

AND REQUEST PROPOSALS IMMEDIATELY. GOVERNMENT WILL CONTACT

WASHINGTON IN DUE COURSE. TERTIO PHASE II STUDIES. BLINKHORN

AND EYE HAVE DISCUSSED POINTS RAISED IN BALL MEMO OF OCTOBER

31 WITH HABANI PPU AND EMPHASIZED POSITION STATED IN URTEL

TO WAHAB OF OCTOBER 26. HABANI'S RESPONSE WAS THAT GOVERNMENT,

PARTICULARLY MOT, WOULD BE RELUCTANT TO DELETE LONGER TERM

ELEMENTS, THAT CONSULTANT HAD TENTATIVELY AGREED TO CARRY OUT

ALL WORK LISTED IN QUOTE TIME SCHEDULE OF OPERATIONS AND

EXPECTED ASSIGNMENT SCHEDULE, OCTOBER 1979 UNQUOTE

WITHIN ORIGINAL TIME LIMITS AND CONTRACT C.OST, AND THAT

CONTRACT COST WOULD NOT BE REDUCED IN ANY CASE. WE SUGGESTED

POSSIBLE COMPROMISE .TO DIVIDE PHASE II STUDIES INTO SUB-

PHASES IIA AND IIB WOH

PHASES IIA AND IIB WITH IIA COVERING ITEMS NEEDED TO IMPLEMENT

PHASE I REHABILITATION AND IIS COVERING LONGER TERM ITErS,.

WHICH IDA NOW SUGGFSTS TO DELETE. CONTRACT COULD THEN BE

AMENDED TO STIPULATE THAT IIB WOULD BE CARRIED OUT ONLY AFTER

IIA HAD BEEN COMPLETED TO THE SATISFACTION OF GOVERNMENT AND

IDA. FAT7AG ENDORSES THISAPPMA£4. PLEASE ADVISE BY TELEX

IF SUCH A COMPROMISE WOULD BE ACCEPTABLE TO IDA, AS BACKGROUND

FOR FURTHER DISCUSSIONS WITH PHASE II WORKING PARTY SCHEDULED

FOR NOVEMBER 18.

CCC SAFETY REGULATIONS - KASHM EL GIRBA DAM. MEETING SCHEDULED

NOVEMBER 17 TO DISCUSS WITH MOI AND REPEAT REQUEST

CONTAINED IN URTEL OF JUNE 25.

DDD NHAPC LEGAL RECONSTITUTION. HAVE DISCUSSED KOCH/BALL

COMMENTS WITH GOVERNMENT OFFICIALS WHO HAVE AGREED TO TAKE

UP MATTER WITH ATTORNEY GENEGAQ'S

UP MATTER WITH ATTORNEY GENERAL'S OFFICE. THERE WAS-

NO DISAGREEMENT BUT DETAILS WILL HAVE TO BE WORKED OUT AT

NEGOTIATIONS.

EEE NHAPC FINANCIAL ACCOUNTS. KEY ACCOUNTS OF WALTON TELEX

AND KOCH LETTER GIVEN TO BALLAL WHO PROMISED TO CONSULT.

WITH FINANCIAL CONTROLLER AND REPORT BACK TO BLINKHORN

BEFORE HIS DEPARTURE.

REGARDS,

HARRIS

INTBAFRAD KM,

K B D

KAUNTBAFRAD KM.

TELEX -November 13, 1979

- .. No Es 7 5571

ST ART -

1 HERE TO INTBAFRAD

CITY/COUNTRY KHARTOUM, SUDAN

MESSAGE NO _ 5_27

4 TWO FOR HARRIS. THANKS YOUR NUMBER ONE.

5 AAA. AGRICULTURAL SERVICES PROJECT. AFTER DISCUSSION WITH DEWAR

6 AGREE THAT BURKE'S SERVICES JANUARY THROUGH SEPTEMBER 1980 BE

7 FINANCED UNDER PPF. IT WOULD BE HELPFUL IF FORMAL GOVERNMENT

8 REQUEST INCLUDING BURKE'S TOR BE FINALIZED BEFORE YOUR DEPARTURE

9 \S MY TIME WILL BE HEAVILY COMMITTED DURING BRIEF STAY.

10 BB. NEW HALFA COST RECOVERY. WE APPRECIATE YOUR POSITION. YOU

11 1OWEVER WILL ALSO APPRECIATE OUR RELUCTANCE TO GET INVOLVED IN

12 =XTENSIVE RECALCULATION WITHOUT SOME GENERAL AGREEMENT FROM

13 3OVERNMENT. THE PRECISE QUANTITATIVE IMPLICATIONS OF THE PRO-

14 DOSALS CANNOT BE STATED UNTIL THEY ARE-CALCULATED BUT QUALITA-

15 IVELY THERE ARE THREE IMPLICATIONS. FIRST IN A STATIC SITUATION

THERE IS NO CHANGE IN FARMER DEDUCTIONS, MERELY A SHIFT OF SOME

17 IOSTS FROM COTTON TO OTHER CROPS. SECOND, THERE WOULD BE NO

18 :HANGE IN INCOME OF NHAPC, PROVIDING CHARGES PLACED ON CROPS

19 THER THAN COTTON WERE COLLECTED. THIRD, ALTHOUGH WE HAVE NO

20 END kLTERNATIVE OTHER THAN TO ASSUME THE PROPOSED SYSTEM OF COSTOF

21 TEXT c

........

7i

TELEX . November 13, 1979osas F- 7 5571

iPage 2

RECOVERY THROUGHOUT THE LIFE OF THE PROJECT, IN PRACTICE, THE

T ODIFICATIONS PROPOSED WILL BE SUBJECLTO-THE OUTCOME OF THE

ROGRAM CREDIT STUDY, CONSEQUENTLY, THE GOVERNMENT IS NOT COM-

ITTING ITSELF FOR MORE THAN A RELATIVELY SHORT PERIOD. MORE-

)VER, THE PROPOSAL IN PRINCIPLE CONFORMS TO THE REQUIREMENTS

PECIFIED BY THE MINISTER. WE THEREFORE BELIEVE THAT GOVERNMENT

HOULD HAVE THE OPPORTUNITY TO ABSORB THE PROPOSALS AS SOON AS

)OSSIBLE. WE LEAVE THE AUDIENCE TO YOU BUT ANY DECISION HAS

LEARLY GOT TO CARRY SUFFICIENT GOVERNMENT WEIGHT AND COMMITMENT

10 0 BE MEANINGFUL. IT WOULD BE REGRETTABLE AND I BELIEVE UNNECES-

11 ARY FOR A DECISION TO BE DEFERRED UNTIL MY ARRIVAL BUT IF THIS

12 *S UNAVOIDABLE WE AND GOVERNMENT MUST FACE THE RISK OF FURTHER

13 ELAYS SHOULD THERE BE SUBSEQUENT CHANGES. GRATEFUL THEREFORE

14 F YOU COULD DELIVER TELEX TO MINISTER OF AGRICULTURE AT LEAST

15 ND HOPEFULLY DISCUSS WITH HIM.

CC. AS PREVIOUSLY INDICATED, EYE AM NOW SCHEDULED TO ARRIVE

17 KHARTOUM AT 2145 HRS. BY SR 296 ON DECEMBER ONE

18 AND NOW PLAN TO LEAVE ON FRIDAY 7 FOR WASHINGTON IN VIEW OF

19 4GRICULTURE MINISTER'S PARTICIPATION IN PROGRAM CREDIT NEGOTIA-

20 END IONS. PLEASE LET ME KNOW SOONEST IF THERE IS ANY INDICATIONOF

AHE ATMNi

1, C) VV A Df QS AMFFI

.. LU UANK UU I LIUV .IJ Ivit -F- ' rIi un, I-. -, p./. RT -i ASF Rr- IN5TRUCTIONS TX? '

TELEX November 13, 1979

Telex No. Or - Lxt 7 5571 Page 3

0

START1 HERE TOTHAT PROGRAM CREDIT DISCUSSIONS HAVE TO BE POSTPONED. MY TOP

CITY/COUNTRY ISSION PRIORITY IS RAHAD AND TANGENTALLY THE BLUE NILE APPRAISAL

MESSAGE NO ISSION. AFTER THAT IS A DISCUSSION WITH THE MINISTER FOR AGRI-

4 CULTURE TO COVER ALPHA COST RECOVERY IF NECESSARY, BETA REOR-

5 3ANIZATION OF PARASTATALS PARTICULARLY AS IT AFFECTS NEW HALFA,

6 AHITE NILE AND BLUE NILE, GAMMA FUTURE OF MFC,DELTA STAFFING

7 AND PLANNING OF JOINT BANK/SUDAN STUDY ON COST RECOVERY, EPSILON

b :_XECUTION OF OTHER RELEVANT PROGRAM CREDIT COVENANTS. WOULD YOU

9 3LEASE INFORM HIM AND FIX DATE. EYE WILL BE ACCOMPANIED BY

10 AFSI ON 5TH AND 6TH.

1l »DD YOUR RECOMMENDATION ON AIR CHARTER IS UNDER ACTIVE CONSI-

12 DERATION HERE AND WE WILL RESPOND LATER. REGARDS WALTON.

13

14

15

17

18

19

20 ENDOF

21 TEXT

udan:Rahad,New Hatfa,Blue Nite,White Nile' CHWaLton:eL

teared with and cc: Messrs.Ball,C.Smith C.H.Walton, Chief,c: Mr. Burmester IL

Eastern Africa ProjectsN

AJ Distribution

Mr.Walton

INTPAFRAD KHARTOUM d' Mr. Burmester

NOVEMBER 12, 1979 Mr. R. Harris' ofc.


ONE FOR WALTON

AAA AGRICULTURAL SERVICES PROJECT. BLINKHORN AND EYE DISCUSSED

PROJECT WITH FATIH EL TIGANI AND ISMAIL AMARA AND INFORMED

THEM AAA APPRAISAL SCHEDULED FOR JANUARY WITH GAFSI PROBABLE

MISSION LEADER, BBB REALISTIC ESTIMATES OF PROCESSING TIME

SUGGEST BOARD DATE JANUARY 1981 AND EFFECTIVENESS MAY 1981,

CCC APPROVED FY81 LENDING PROGRAM INCLUDES ONLY US DOLLARS

15 MILLION IDA FOR ASP AND EXCLUDES MFC IV, DDD FINAL PROJECT

SIZE AND SCOPE AND POSSIBILITY OF CO-FINANCING CAN BE

DETERMINED ONLY AFTER APPRAISAL, EEE YOU AND GAFSI WOULD

DISCUSS FURTHER IN EARLY DECEMBER. RE BURKE CONTRACT AND

RICE TELEX 117 FOR FARAG WE AGREED WITH TIGANIAND AMARA

THAT FOR EXPENSES AFTER JANUARY 1, 1980 IT WOULD BE PREFERABLE

TO USE PPF RATHER THAN FC II PROCEEDS. WE EXPLAINED THAT

ACCESS TO PPF IS NOT DEPENDENT ON APPRAISAL AND ADVISED MONP

TO SUDVITHUTNF

REPEATING

ACCESS TO PPF IS NOT DEPENDENT ON APPRAISAL AND ADVISED MONP

TO SUBMIT STANDARD REQUEST AS SOON AS POSSIBLE STIPULATING

AMOUNT, PURPOSE BASED ON BURKE'S TOR AND OTHER SUPPORT NEEDED

FOR PROJECT STARTUP, AND PROPOSED REPAYMENT DATE BASED ON

EXPECTED EFFECTIVENESS. BURKE EXPECTE KHARIOUM NOVEMBER14

AND EYE PLAN TO SPEAK WITH HIM PRIOR TO DEPARTURE FOR NAIROBI

NOVEMBER_0., EYE HAVE TELEXED ABOVE TO RICE AND SUGGESTED

THAT WE DISCUSS FURTHER AT THAT TIME, PARTICULARY BURKE'S

TOR WHICH COULD BE CONVFYED TO ABS FOR DISCUSSION WITH YOU

AND GAFSI IN EARLY DECEMBER AND SUBMITTED TO WASHINGTON AS

PART OF PPF REQUEST.

BBB NEW HALFA COST RECOVERY. BLINKHORN AND EYE HAVE DISCUSSED

URTEL OF NOVEMRER 11 AND AGREE THAT DELIVERING DETAILED

PROPOSALS IN PRESENT FORM TO MINISTERS OF AGRICULTURE AND

IRRIGATION AND DR WAHAB UOULD BE PREMATURE. BLINKHORN FEELSO

V

PROPOSALS IN PRESENT FORM TO MINISTERS OF AGRICULTURE AND

IRRIGATION AND DR WAHAB WOULD BE PREMATURE. BLINKHORN FEELS

THAT MOST APPROPRIATE AUDIENCE WOULD BE Na'*T ' A''"

RE Al ONE AND THAT IT IdilILn RE MCDE EFFECTIVE IF YOU TOOK

UP THE figlER WITH HIM PERSONALLY ON AN INFORMAL BASIS DURING

MISSIDRN NEXT MONTtH,/lNSUCH A WAY THAT POLICY IMPLICATIONS i'

D ETA ILED~P5fRPOS AREjI0EOBVIOUS. FOR EXAMPLE, IT IS NOT

POSSIBLE FROM URTEL TO DETERMINE PROBABLE IMPACT OF PROPOSALS

ON GOVT OR NHAPC FINANCIAL POSITION, TENANT INCOME, NET

RETURNS FROM VARIOUS CROPS AND INCENTIVE EFFECTS, ETC.. WE FEEL

THAT ARGUMENTS IN FAVOUR Of MODIFIED JOINT ACCOUNT WOULD BE

EASIER TO UNDERSTAND AND MORE CONVINCING IF COUCHED AO 0.

REPEATING

THAT ARGUMENTS IN FAVOUR OF MODIFIED JOINT ACCOUNT WOULD BE

EASIER TO UNDERSTAND AND MORE CONVINCING IF COUCHED AT THAT

LEVEL FIRST, AFTER WHICH DETAILS COULD BE AGREED. MINISTER OF

AGRICULTURE HAS EXPRESSED DESIRE TO ATTEND NEGOTIATIONS

WASHINGTON FOR PROGRAMTHIS MATTER COULD

BE PURSUED FURTHER. IN ANY EVENT, MINISTER OF IRRIGATION IS

UNAVAILABLE AND OR WAHAB HAS JUST LEFT FOR KUWAIT FOR A WEEK.

FOR NOW WE SUGGEST THAT PROCESSING OF APPRAISAL REPORT

PROCEED ALONG LINES ALREADY STARTED, AND THAT PDI TCY

SIMPLICATIONS _9E.CS ECVR RPSASB NLZED AND HIGH-

LIGHTED IN ADVANCE OF OUR 0IION. IF YOU AGREE WE SHALL

ADVISE MINISTER OF AGRICULT11RF ACCORDINGLY

CCC AIR CHARTER. THERE WAS ANOTHER CRASH LAST WEEK DURING

EMERGENCY LANDING AT KADUGLI OF AIR TAXI DC 3 CARGO FLIGHT.

PILOT AND CO-PILOT ESCAPED WITH MINOR INJURIES BUT PLANEN

Y VC

REPEATING

PILOT AND CO-PILOT ESCAPED WITH MINOR INJURIES BUT PLANE

BURNED. EYE HAVE DISCUSSED AIR CHARTER SITUATION WITH

FARAG AND OTHER AGENCIES IN KHARTOUM AND RECOMMEND THAT WE

PROHIBIT DIVISION STAFF FROM FLYING EXISTING.CALOCAJ..LR

CHARTER IN SUDAN UNTIL THERE IS EVIDENCE OF SAFE OPERAILI.R.

EYE ALSO SUGGEST THIS BE DISCUSSED AT DEPARTMENT LEVEL.

REGARDS,

HARRIS

T E L E X

WASHINGTON D.C. NOVEMBER 10 979INTAFWAKARTOUM SUDAN

845

FOR FARAG - RE SUDAN NEW HAIFA IRRIGATION REHABILITATION PROJECT.PLEASE CONVEY TO DR. TIGANI QUOTE FOR DR, TIGANI, FIRST, REFERENCEYOUR REQUEST TO T. MARTIN IN JULY 1979 FOR BANK ASSISTANCE TO FINDA PBOCNREMENT SPECIALIST FOR NEW HALFA. SINCE THE PPF HAS NOW BEENAPPROVED IT IS URGENT THAT THIS POSITION BE FILLED. THE QUICKESTACCEPTABLE WAY WOULD BE FOR GOS TO APPROACH ONE OR TWO INDIVIDUALFIRMS FOR PROPOSALS. SHOULD YOU OPT TO DO THIS YOU SHOULD TELEXUS THE NAMES OR NAME OF THE FIRMS APPROACHED. HOWEVER, SHOULD YOUOPT TO APPROACH SEVERAL FIRMS FOR PROPOSALS WE HEREWITH LIST SIXPOSSIBILITIES:AAA THE CROWN AGENTS FOR OVERSEAS GOVERNMENTS

AND ADMINISTRATIONS4 MILLBANK, LONDON SW1P 3JDTELEPHONE: 01-222-7730, CABLE: CROWN LONDON SWLTELEX: 916205

BBB SIR M. MACDONALD AND PARTNERS, LTD,CONSULTING ENGINEERSDEMETER HOUSE, STATION ROADCAMBRIDGE CB 1 2RSENGLANDTELEPHONE: 0223 66455, TELEX: 817260, CABLE: SCREETON, CAMBRIDGE

CCC TIPPETTS-ABBETT-MCCARTHY-STRATTON (T )THE TAMS BUILDING655 THIRD AVENUENEW YORK, NEW YORK 10017TELEPHONE: (212) 867-1777, CABLE: TAMSENG NEW YORK,TELEX: ITT - 422188. RCA - 223055. WU - 125674

DDD NORCONSULT A.S.P.O. BOX 91322 HOVIKNORWYTELEPHONE: 02/53 0000, OR 02/54 5330. TELEX: 18815 NORCO N

EEE BUREAU CENTRAL D'ETUDES POUR LES EQUIPEMENTS D'OUTRE-MER15 SQUARE MAX HUMANS75741 PARIS CEDEX 15FRANCETELEPHONE: 566.93.39. TELEX: 250618 F= CABLE: BUCENETOWN-PARIS

FFF CONSULTORIA TECHNICARUA EDUARDO GUINLE, 48RIO DE JANEIRO, BRAZILTELEPHONE: 266-2822. CABLE: RIO DE JANEIRO GB ZC-02TELEX: END. TELEGRAFICO +TRANSCONRIO+

PLEASE NOTE HOWEVER THAT SUCH A LIST IS PROVIDED BY THE BANK ON ANEXCEPTIONAL BASIS ONLY. IT IS A SUGGESTED LIST AND IS NOT IN ANYWAY EXCLUSIVE. YOU MAY DELETE OR ADD TO THIS LIST AS YOU WISH BUTYOUR FINAL LIST SHOULD BE TELEXED BACK FOR CONCURRENCE. INFORMATIONON OUR FILES SUGGEST THAT FIRMS LISTED COULD PROVIDE A SPECIALISTCAPABLE OF UNDERTAKING THE ASSIGNMENT. IT DOES NOT REPRESENT BANKENDORSEMENT OF ANY OF THE LISTED CONSULTANTS AND THE BANK IN NO WAYACCEPTS RESPONSIBILITY FOR THE QUALITY OF THEIR WORK. REGARDINGINVITATIONS OF PROPOSALS AND SUBSEQUENT STEPS IN THE SELECTIONPROCESS, THE BANK RECOMMENDS THAT BORROWERS FOLLOW PROCEDURES ASDESCRIBED IN SECTION B OF -THE GUIDELINES ON QUOTE USES OF CONSULTANTSBY THE WORLD BANK AND ITS BORROWERS UNQUOTE. SECOND, PLEASE ADVICEPROGRESS IN RECRUITMENT OF THE FINANCIAL CONSULTA UNQUT E.

REGARDS, WALTON

F C*R

TELEX NOVEMBER 9, 1979215 1-4922

INTBAFRAD

_KBARTOUMA SUMAN-

FOR FARAG - RE SUDAN NEW HALFA IRRIGATION REHABILITATION PROJECT.

PLEASE CONVEY TO DR. TIGANI QUOTE FOR DR. TIGANI, FIRST, REFERENCE

YOUR REQUEST TO T. MARTIN IN JULY 1979 FOR BANK ASSISTANCE TO FIND

A PROCUREMENT SPECIALIST FOR NEW HALFA. SINCE THE P F HAS NOW BEEN

APPROVED IT IS URGENT THAT THIS POSITION BE FILLED. THE QUICKEST

ACCEPTABLE WAY WOULD BE FOR GOS TO APPROACH ONE OR TWO INDIVIDUAL

FIRMS FOR PROPOSALS. SHOULD YOU OPT TO DO THIS YOU SHOULD TELEX

US THE NAMES OR NAME OF THE FIRMS APPROACHED. HOWEVER, SHOULD YOU

OPT TO APPROACH SEVERAL FIRMS FOR PROPOSALS WE HEREWITH LIST SIX

POSSIBILITIES:

AAA THE CROWN AGENTS FOR OVERSEAS GOVERNMENTS

AND ADMINISTRATIONS

4 MILLBANK, LONDON SW1P 3JD

TELEPHONE: 01-222-7730, CABLE: CROWN LOND0N SW1

TELEX: 916205

BBB SIR M. MACDONALD AND PARTNERS, LTD.

CONSULTING ENGINEERS

/C

SUDAN-New Halfa Irrig. Rehab. JWBaLL:mLd

Cleared with and cc: Messrs. CHWaLt on, CbiA f EAPNADickerson, WaLton East Africa Projects

cc: Mr. Blinkhorn

CA:< :

TELEX NOVEMBER 9, 1979 EPAGE 2]

215 7-4922

DEME-TER HOUS ESTATION JROAD

-CAiB2xLGE- CR I 2-RS.

TELEPHONE: 0223 66455, TELEX: 817260, CABLE: SCREETON, CAMBRIDGE

CCC TIPPETTS-ABBETT-MCCARTHY-STRATTON (TAMS)

THE TAMS BUILDING

655 THIRD AVENUE

NEW YORK, NEW YORK 10017

TELEPHONE: (212) 867-1777, CABLE: TAMSENG NEW YORK,

TELEX: ITT - 422188; RCA - 223055; WU - 125674

DDD NORCONSULT A.S.

P. 0. BOX 9

1322 H0VIK

NORWAY

TELEPHONE: 02/53 0000, OR 02/54 5330; TELEX: 18815 NORCO N

EEE BUREAU CENTRAL D'ETUDES POUR LES EQUIPEMENTS D'4UTRE-MER

15 SQUARE MAX HUMANS

75741 PARIS CEDEX 15

FRANCE

TELEPHONE: 566.93.39; TELEX: 250618 F; CABLE BUCENETOUM-PARIS

c

SLIAN: New Hatfa Irrig. Rehab. JWBaLL:mLdProj-

C. H. Watn, _Chief.. EAPNACleared with and cc: Messrs. C H. W

Dickerson, WaLton East AFrica Projectscc: Mr. Blinkhorn

to- S': ?p~a "CISL~y -

TELEX NOVERSER 9, 1979215 7-4922 EPAGE 33

FFF CONSULTORIA TECHNIA

RUA EDUARDO GUINLE, -4a

RIO DE JANEIRO, BRAZIL

TELEPHONE: 266-2822; CABLE: RIO DE JANEIRO GB ZC-02

TELEX: END. TELEGRAFICO "TRANSCONRIO"

PLEASE NOTE HOWEVER THAT SUCH A LIST IS PROVIDED BY THE BANK ON AN

EXCEPTIONAL BASIS ONLY. IT IS A SUGGESTED LIST AND IS NOT IN ANY

WAY EXCLUSIVE. YOU MAY DELETE OR ADD TO THIS LIST AS YOU WISH BUT

YOUR FINAL LIST SHOULD BE TELEXED BACK FOR CONCURRENCE. INFORMATION

ON OUR FILES SUGGEST THAT FIRMS LISTED COULD PROVIDE A SPECIALIST

CAPABLE OF UNDERTAKING THE ASSIGNMENT. IT DOES NOT REPRESENT BANK

ENDORSEMENT OF ANY OF THE LISTED CONSULTANTS AND THE BANK IN NO WAY

ACCEPTS RESPONSIBILITY FOR THE QUALITY OF THEIR WORK. REGARDING

INVITATIONS OF PROPOSALS AND SUBSEQUENT STEPS IN THE SELECTION

PROCESS, THE BANK RECOMMENDS THAT BORROWERS FOLLOW PROCEDURES AS

DESCRIBED IN SECTION B OF THE GUIDELINES ON QUOTE USES OF CONSULTANTS

BY THE WORLD BANK AND ITS BORROWERS UNQUOTE. SECOND PLEASE ADVICE

PROGRESS IN RECRUITMENT OF THE FINANCIAL CONSULTANTS UNQUOTE.

REGARDS, WALTON

SUDAN:New Halfa Irrig. Rehab. Proji JWBa-LI:jnd

C. H. WaLton hief APNACLeared with and cc: Messrs.

Dickerson, Walton East Africa Praje tscc: Mr. Blinkhorn

kit


215 1-4-922

INTBAFRAD

KHARTOUM, SUDAN

FOR FARAG PLEASE PASS FOLLOWING TO HARRIS AND BLINKH ORN. FURTHER TO

BLINKHORN'S TELEX OF NOVEMBER 7 TO WALTON/BURMESTER, COULD BLINKHORN

AND HARRIS PLEASE STUDY THE FOLLOWING IN DETAIL, AND IF THEY HAVE

ANY QUERIES TELEPHONE WASHINGTON FOR CLARIFICATION BEFORE ATTEMPTING

TO DELIVER, EXPLAIN AND SELL PART TWO TO DR. WAHAB, THE MINISTER OF

AGRICULTURE, AND THE MINISTER OF IRRIGATION. BALLtS HOME PHONE

NUMBER IS (703) 860-5831. HE WILL BE HOME MOST OF THE WEEKEND. PART

ONE IS BACKGROUND FOR YOUR INFORMATION ONLY.

PART ONE: (ONE) THE PRESENT NEW HALFA COST RECOVERY MECHANISM IN-

VOLVES A GENERAL JOINT ACCOUNT, AN INDIVIDUAL JOINT ACCOUNT, AN

INDIVIDUAL TENANT'S COTTON ACCOUNT, (KNOWN COLLECTIVELY AS THE JOINT

ACCOUNT FOR COTTON) AN INDIVIDUAL TENANT'S GROUNDNUT ACCOUNT, AND

AN INDIVIDUAL TENANT'S WHEAT ACCOUNT. ALL COTTON RECEIPTS ARE

CREDITED TO THE GENERAL JOINT ACCOUNT. DEBITS TO THE GENERAL JOINT

ACCOUNT ARE BASICALLY RELATED TO THE COLLECTION, PROCESSING, TRANS-

PORT, INSURANCE, AND STORAGE OF COTTON PLUS SEED SUPPLIES, THE CASH

ADVANCES PAID FOR PICKING, PROJECT SECURITY ARRANGEMENTS, RODENT

/c

SUDAN:New Halfa Irrig. Rehab.Pro.C~mitd JIBal:mld

C. H. Walton, Chief, EAPNACleared with and Copied: Mr.

Walton East Africa Projectscc: Messrs. Blinkhorn,Harris A

CAL-

TELEX November 9, 1979215 7-4922

CONTROL, AND PUBLICITY. INTEREST ICURED BY NHAPC IN FINANCING ITS

OPERATIONS IS AL_0 DEITED- TO THIS ACCOUNT. OF THESE DEBITS ALCLBUT

THE PROJECT SECURITY ARRANGEMENTS, PUBLICITY, RODENT CONTROL AND

INTEREST CAN BE RELATIVELY EASILY SANITIZED TO REFLE T COSTS THAT

ARE EXCLUSIVELY ATTRIBUTABLE TO COTTON. THE SURPLUS ON THE GENERAL

JOINT ACCOUNT IS CALCULATED AT THE END OF EACH CROPPING SEASON. THIS

IS THEN DISTRIBUTED AS FOLLOWS: FIVE PERCENT GOES Tp MEET THE COST

OF SOCIAL SERVICES, TWO PERCENT GOES TO LOCAL TAXES, FORTY-FIVE AND

ONE HALF PERCENT GOES TO NHAPC, AND FORTY-SEVEN AND ONE HALF PERCENT

GOES TO THE TENANTS. TWO PERCENT OF THE TENANT'S FOTY-SEVEN AND

ONE HALF PERCENT SHARE IS THEN RETAINED UNDER THE HEADING TENANT'S

RESERVE FUND. NOTE WE HAVE BEEN GIVEN SEVERAL DIFFERENT SETS OF

DISTRIBUTION PERCENTAGES. ALL INVOLVE THE SAME HEADINGS. THE ABOVE

SET IS THE MOST RECENT AND WE INTEND TO USE IT. (TWO) DEBITS TO

THE INDIVIDUAL JOINT ACCOUNT COMPRISE ALL MACHINERY SERVICES SUPPLIED

BY NHAPC FOR THE PRODUCTION OF COTTON. THESE SERVICES INCLUDE ANY

PROVIDED BY CONTRACT THROUGH COOPERATIVES. HOWEVER, THERE ARE TWO

WHICH ARE SUPPOSED TO BE CARRIED OUT ONCE EVERY THRE YEARS WHICH

ALSO BENEFIT THE NON-COTTON CROPS. THESE ARE DEEP PLOWING AND LAND

LEVELING. ALSO DEBITED TO THIS ACCOUNT IS THE COST OF AERIAL SPRAY-

/c

SUDAN-New Halfa Irrig.Rehab.Proj. CSmith/J Ball:mld

C. H. Walton, Chief EAPNACleared with and cc: Mr. Walton

cc: Messrs. Blinkhorn East Africa Prat-IsHarris

2 Fs


-PAG E 3_

ING. THE COST OF FERTILIZER IS ALSO DEBITED TO THIS ACCOUNT. A CASH

ADVANCE OF SUDANESE PjQRDS 17.50 IS PALD, TO PULL AND BURN THE HARVES-

TED COTTON BUSHES THE _SWEEP THE CLEARED COTTON FIELD. ANOTHER OF

SUDANESE POUNDS 8.50 IS PAID TO HAND PULL HEAVY WEED INFESTATIONS.

BOTH ARE DEBITED TO THE INDIVIDUAL JOINT ACCOUNT. TE LATTER BENE-

FITS ALL CROPS. WITH THE EXCEPTION OF LAND LEVELING DEEP PLOWING

AND THE CASH ADVANCED TO HAND PULL HEAVY WEED INFESTATIONS ALL OTHER

DEBITS TO THIS ACCOUNT CAN BE RELATIVELY EASILY SANITIZED TO REFLECT

COSTS THAT ARE EXCLUSIVELY ATTRIBUTABLE TO COTTON. THERE ARE NO

CREDITS TO THE INDIVIDUAL JOINT ACCOUNT. IT IS CLOSED AT THE END OF

EACH CROPPING SEASON BY TRANSFERRING FIFTY PERCENT OF THE BALANCE

TO NHAPC AND FIFTY PERCENT TO THE INDIVIDUAL TENANT'S COTTON ACCOUNTS.

THE FIFTY PERCENT TRANSFERRED TO THE TENANTS IS SUPPOSED TO BE DIS-

TRIBUTED ACCORDING TO THE SERVICES, MATERIALS AND CASH ADVANCES EACH

TENANT RECEIVED DURING THAT CROPPING SEASON. WE HAVE REASON TO

BELIEVE THE ACCOUNTING SYSTEM IS NOT UP TO DOING THIS PROPERLY.

DETAILS TO THE INDIVIDUAL TENANT'S COTTON ACCOUNTS COOPRISE THAT

TENANT'S SHARE O THE INDIVIDUAL JOINT ACCOUNT, A PER HAWASHA CHARGE

FOR TERTIARY CANAL MAINTENANCE, AND ALL OTHER CASH ADVANCES PAID TO

THAT TENANT BY NHAPC. (THREE) DEBITS TO AN INDIVIDPAL TENANT'S

/c

SUDAN:New Halfa Irrig. Rehab. Proi CSmith/ LtBall:m

CLeared with and cc: Mr. WaLton C H. Walton Chief, EAPNA

cc: Messrs. BLinkhorbEast Africa ProjectsHarris

Is

C L1

TELEX NQVEMBER 9, 1979215 7-4922 PAGE 4

GROUNDNUT ACCOUNT AND AN INDIVIDUAL TENANT'S WHEAT ACCOUNT ARE DIR-

E-TL1Y RELATED TO THE 14ACHINERY SERVICES, MATERIAL INPUTS AND, IN THE

CASE OF GROUNDNUTS, THE CASH ADVANCES SUPPLIED OR PAID TO THAT TENANT

FOR THAT CROP. THERE ARE NO CASH ADVANCES PAID FOR WHEAT. BOTH

CROPS ARE DEBITED WITH THE SAME PER HAWASHA CHARGE FOR TERTIARY CANAL

MAINTENANCE AS COTTON. (FOUR) TO SANITIZE THE ABOVE DESCRIPTION OF

THE JOINT ACCOUNT SO THAT IT RELATES EXCLUSIVELY TO COTTON IS NOT

DIFFICULT. THE ONLY ITEMS THAT NEED ATTENTION IN THE GENERAL JOINT

ACCOUNT ARE THE COST OF PROJECT SECURITY ARRANGEMENT4, PUBLICITY,

RODENT CONTROL AND INTEREST. IN THE INDIVIDUAL JOINI ACCOUNT THE

ONLY ITEMS THAT NEED ATTENTION ARE LAND LEVELING, DEEP PLOWING, AND

THE CASH ADVANCED TO HAND PULL HEAVY WEED INFESTATIONS. IF THESE

ITEMS ARE EQUITABLY ADJUSTED BETWEEN THE CROPS THIS ONLY LEAVES IN

QUESTION THE PER HAWASHA CHARGE FOR IRRIGATION. THI CHARGE SHOULD

BE BASED ON THE TOTAL COST OF SUPPLYING WATER. IT SHOULD THEN BE

ALLOCATED BETWEEN CROPS ACCORDING TO USE. WE PRESENT DETAILS IN PART

TWO AS TO HOW WE INTEND TO DO THIS. HOWEVER, NOTE THAT AT PRESENT

NHAPC MAKES NO PAYMENT TO THE MINISTRY OF IRRIGATION FOR THE COST OF

OPERATING AND MAINTAINING THE DAM AND THE MAJOR SUPPLY CANALS.

EXTRAPOLATING FROM ALL AVAILABLE SOURCES SUGGESTS THIS COULD BE

/c

SUDAN-New Halfa Irrig.Rehab.Proj. CS th/ tLL:mld

C. H. WaLt on_, Chief EAPNACleared with and cc: Mr. Walton

cc: Messrs. Blinkhorn East Africa Proj-ectsHarris

rr~ MPV


PAGE 5

COSTING ABOUT THREE HUNDRED THOUSAND SUDANESE POUNDS PER YEAR. THERE

IS A STUDY INCLUDED IN THE PROJECT TO CHECK THIS. UTIL THE RESULTS

ARE AVAILABLE WE WILL USE OUR OWN ESTIMATE. TO MAKE SURE ALL CROPS

BEAR THEIR ESTIMATED FULL COSTS OF PRODUCTION A MAJO AREA OF ADJUST-

MENT NEEDED RESTS IN THE PRESENT ALLOCATION OF NHAPC OVERHEADS. THE

MAIN COMPONENTS OF THESE OVERHEADS ARE THE COST OF OPERATING NHAPC'S

FIELD DEPARTMENT AND ALL NHAPC'S ADMINISTRATIVE COSTS. WE ALSO

BELIEVE THESE OVERHEADS INCLUDE ANY ROAD MAINTENANCE NNAPC HAS BEEN

ABLE TO CARRY OUT. (FIVE) MOST OF THESE OVERHEADS BENEFIT ALL

CROPS. AT PRESENT, THE OVERHEADS ARE A CHARGE AGAINST NHAPC'S SHARE

OF THE GENERAL JOINT ACCOUNT SURPLUS. THAT IS NHAPC'S SHARE OF THE

COTTON SURPLUS CARRIES THE ENTIRE COST. ALSO THE FIVE PERCENT OF

THE GENERAL JOINT ACCOUNT SURPLUS FOR SOCIAL SERVICES IS BORNE

ENTIRELY BY COTTON BUT BENEFITS ALL TENANTS AND SHOULD BE SHARED BY

ALL CROPS. DETAILS OF HOW WE INTEND TO CORRECT THESE ANOMALIES ARE

PRESENTED IN PART TWO. (SIX) PART TWO READS QUOTE FURTHER TO

ANDRE GUE'S TELEX DATED OCTOBER 25 DETAILS OF THE COST RECOVERY

MECHANISM PROPOSED FOR NEW HALFA ARE PRESENTED BELOW. THESE WILL

BE SUBJECT TO CHANGE DEPENDING ON THE FINDINGS OF THE PROPOSED

PROGRAM CREDIT STUDY. ACCORDINGLY WE HAVE ATTEMPTED TO MINIMIZE

/c

SUDAN-New Halfa Irrig. Rehab. Proj.Cs ith b4WBall:mld

C. H. Walton, Chief, EAPNACleared with and cc: Mr. Walton

East Africa Projectscc: Messrs. Harris,

Btinkhorn

*

4 ~ ' '


PAGE 6

CHANGES TO THE EXISTING MECHANISM. AT THE SAME TIME WE HAVE DIFFI-

ILLTY II RE.C4MMENDIN tlAAl AMY RETENLTION OF THE JOINT ACCOUNT FOR

C_0TTON UNLESS IT CAN BE CLEARLY DEMONSTRATED THAT THE JOINT ACCOUNT

APPLIES EXCLUSIVELY TO COTTON. THAT IS, THE JOINT ACCOUNT SHOULD

NOT INCLUDE ANY DIRECT OR INDIRECT COSTS OF PRODUCING THE NON-COTTON

CROPS NAMELY GROUNDNUT, WHEAT, AND THE RAINFED FODDER CROP WHICH

REPLACES RAINFED SORGHUM. (BBB) ANY MECHANISM THAT FAILS TO CHARGE

EACH OF THE NON-COTTON CROPS WITH THE ESTIMATED FULL COST OF PRO-

DUCING EACH. SIMULTANEOUSLY, WE HAVE HAD TO TAKE INTO ACCOUNT THE

MINISTER OF AGRICULTURE'S POSITION AS STATED IN PARA 4, PART (A)

OF THE MINUTES OF MEETING HELD ON TUESDAY 25 SEPTEMB R. COPIES OF

WHICH ARE AVAILABLE FROM FARAG AND WERE SUPPLIED TO OR. TIGANI AND

MOA BY POST APPRAISAL MISSION. IN ESSENCE THE MOA'S POSITION EM-

BRACED THREE CONDITIONS. FIRST, (CCC) THE JOINT ACCOUNT FOR COTTON

HAD TO BE RETAINED WITH A MINIMUM OF MODIFICATION. N THIS RESPECT

WE HAVE DEFINED MINIMUM RELATIVE TO (AAA) AND (BBB) ABOVE. SECOND,

(DDD) NO ADDITIONAL CHARGES SHOULD BE IMPOSED ON NON-COTTON CROPS

UNTIL THE BENEFITS OF REHABILITATION ARE CLEARLY DISCERNIBLE TO

TENANTS. IN THIS RESPECT MOA AGREED THAT THE BASIS ON WHICH IDA'S

FARM SERVICE CHARGES WERE CALCULATED IN THE DRAFT YELLOW STAFF

Tc_

SUDAN-New Halfa Irrig. Rehab. Proj.C 1th/tj Ball:mld

Cleared with and cc: Mr. Walton C. H. WaltOno Chief, EAPNAcc: Messrs. Blinkhorn, Harris

East Africa Projects

-?~ K

TE L EX NOVEMBE R 9, 1979215 7-4922

PAGE 7

AP_RAlSAL REPORT AND IDA'S PRQPOSED TIMING OF IMPOSI ION WOULD BE

ACCEPTABLE PR0AIED THEY WERE REVISED TQ APPLY TO GROUNDNUT, WHEAT

AND PRESUMABLY THE FODDER CROPS ONLY. THE MOA'S THIRD CONDITION WAS

(EEE) THE NEED TO INTRODUCE INTO THE NEW HALFA JOINT ACCOUNT THE

PROGRESSIVE PRODUCTION INCENTIVE SCHEME THE MOA PROPOSES TO INTRODUCE1

INTO GEZIRA. (SEVEN) GIVEN THE CONSTRAINTS IMPOSEO BY (AAA)

THROUGH (EEE) ABOVE WE NOW PROPOSE THE FOLLOWING. THE JOINT ACCOUNT

FOR COTTON IS MADE UP OF THREE ACCOUNTS. FIRST THE GENERAL JOINT

ACCOUNT. SECOND AN INDIVIDUAL JOINT ACCOUNT AND THI D AN INDIVIDUAL

TENANT'S COTTON ACCOUNT. ADDITIONAL INDIVIDUAL TENANT CROP ACCOUNTS

ARE ALREADY MAINTAINED FOR GROUNDNUT AND WHEAT. THE E ARE KEPT

SEPARATELY FROM EACH OTHER AND THE THREE ACCOUNTS THAT MAKE UP THE

JOINT ACCOUNT FOR COTTON. THE INTRODUCTION OF A RAINFED FODDER

CROP INTO THE CROPPING PATTERN WILL REQUIRE AN ADDITIONAL INDIVIDUAL

TENANT'S FODDER CROP ACCOUNT. (EIGHT) CURRENTLY, ALL OVERHEAD

COSTS OF PRODUCTION ARE CHARGED AGAINST NHAPC'S SHARE OF THE GENERAL

JOINT ACCOUNT SURPLUS. THE OVERHEADS CONCERNED ARE BASICALLY THE

COST OF OPERATING THE FIELD DEPARTMENT AND INCLUDE ALL ADMINISTRATIVE

COSTS OF NHAPC. MOST OF THESE OVERHEADS RELATE TO ALL CROPS. THE

ONLY REVENUES CREDITED TO THE GENERAL JOINT ACCOUNT ARE DERIVED FROM

/c

New Hatfa Irrigation Rehab-8 pg-geeetCS ith/JilBall:mld

C. H. Walton, Chief, EAPNACLeared with and cc: Mr. WaLton

cc: Messrs. BLinkhofn East Africa ProjectsHarris

LA

rs vu:~


PAGE 8

COTTON. IN ORDER TO MEET (GBBW ABOVfE IT WILL BE NECiSSARY TO ALLOt

CATE A PROPORTION OF THESE 01ERHEA..DS T.THE NON-COTT6N CROPS. IT IS

PROPOSED TO DO THIS BY DEVISING AN EQUITABLE ALLOCAT ON OF THESE

COSTS BETWEEN COTTON, GROUNDNUT, WHEAT AND FODDER. OACH NON-COTTON

CROP ALLOCATION WOULD THEN BE DIVIDED BY THE TOTAL NUMBER OF TENANTS

GROWING THAT CROP. THE RESULT WOULD BE DEBITED TO TIAT INDIVIDUAL

TENANT'S NON-COTTON CROP ACCOUNT. THE PROPORTION ALLOCATED TO COTTON

WOULD BE LEFT AS A CHARGE AGAINST NHAPC'S SMARE OF T4iE GENERAL JOINT

ACCOUNT SURPLUS. (NINE) HOWEVER, WHILST THIS PROCEDURE SATISFIES

(BBB) IT BENEFITS NHAPC AT THE EXPENSE OF THE TENANT. THIS IS BE-

CAUSE NHAPC IS STILL RECEIVING THE SAME SHARE OF WHATEVER GENERAL

JOINT ACCOUNT SURPLUS APPEARS. IT IS THEREFORE PROPOSED THAT WHAT-

EVER REALLOCATION OF OVERHEAD COSTS IS DEBITED TO THE NON-COTTON

CROPS SHOULD ALSO BE DEBITED AGAINST NHAPC'S SHARE OF THE GENERAL

JOINT ACCOUNT SURPLUS AND SIMULTANEOUSLY CREDITED TO HE TENANT'S

PHARE OF THE GENERAL JOINT ACCOUNT SURPLUS. WHEN THE TENANT'S SHARE

OF THE GENERAL JOINT ACCOUNT SURPLUS PLUS THE REALLOCATED OVERHEAD IS

THEN DIVIDED BY THE TOTAL NUMBER OF KANTARS OF SEED COTTON PRODUCED

OY TENANTS A HIGHER TENANT'S PRICE PER KANTAR OF SEED COTTON WILL

AESULT. THIS WILL PROVIDE AN EFFECTIVE INCENTIVE FOR TENANTS TO GROW

SUDAN-New Halfa Irrig.Rehab.Proj. C _ith/B__llmld

C. H. Walton, Chief EAPNA

Cleared with and cc: Mr. WaltonE. A. Projects

cc: Messrs. Blinkhorn,Harri

I -4

4I

TELEX NOVEMBEL 9, 1979215 7-4922

PAGE 9

COTTON THUS SATISFYING (EEE). (TEN) -TO FULLY SATISFY (AAA) AND

(BBB) WILL REQUIRE ADDITIONAL. ADJUSTIMENTS. FIRST IRRIGATION CHARGES

DO NOT AT PRESENT COVER THE FULL COST TO GOS OF SUPPLYING WATER.

COSTS INCURRED BY MOI ARE NOT MET BY NHAPC. WE SUGGEST THESE COSTS

COULD AMOUNT TO THREE HUNDRED THOUSAND SUDANESE POUNDS PER YEAR.

THEREFORE THE TOTAL COSTS OF SUPPLYING IRRIGATION WATER WILL BE

MADE UP OF THIS THREE HUNDRED THOUSAND POUNDS PLUS WHATEVER NHAPC

EXPENDS ON IRRIGATION AND ANY PROJECT COSTS DISBURSOD ON THIS COM-

PONENT. ANY CAPITAL COMPONENTS INCLUDED IN THESE C STS WOULD BE

AMORTIZED OVER 15 YEARS AT AN APPROPRIATE INTEREST RATE TO DERIVE

AN ALL INCLUSIVE ANNUAL COST. THIS ANNUAL COST WOULD BE DIVIDED BY

THE PRODUCT OF THE TOTAL NUMBER OF IRRIGATIONS APPLIED TO EACH CROP

AND THE TOTAL NUMBER OF HAWASHAS OF THAT CROP GROWN THE ANSWER

WOULD BE THE AVERAGE COST OF IRRIGATING ONE HAWASHA ONCE. THIS AVERY

AGE COST MULTIPLIED BY THE NUMBER OF IRRIGATIONS RECEIVED BY EACH

CROP WOULD BE THE WATER CHARGE PER HAWASHA FOR THAT CROP IN THAT

YEAR. (ELEVEN) SECOND ALL CROPS BENEFIT TO VARYING DEGREES FROM

THE COST OF PROJECT SECURITY ARRANGEMENTS, PUBLICITY, ALAND LEVELING*

DEEP PLOWING, RODENT CONTROL, AND THE CASH ADVANCES TO HAND PULL

HEAVY WEED INFESTATIONS. WE THEREFORE PROPOSE TO DEVISE AN EQUITA-

Jc,

SUDAN-New Halfa Irrig. Rehab.Pro. CAqith)J _BaLL:mtd

C. H. Walton, Cjhef, EAPKA_Cleared with and cc: Mr. WaLton

East Africa& Proj aCtscc: Messrs. BLinkhorn,Harris

C/ -

TELEE NOVEMBER 9, 1979215 7-4922

BLE ALLOCATION FOR EACH OF THESE COSTS BETWEEN ALL CfROPS. EACH NON-

CGTTON CROP ALLOCATION WOULD THEN BE DIVIDED BY THE TOTAL NUMBER OF

TENANTS GROWING THAT CROP. THE RESULT WOULD THEN BE DEBITED TO

THAT INDIVIDUAL TENANT'S NON-COTTON CROP ACCOUNT. FOR EACH OF THESE

COSTS THE PROPORTION ALLOCATED TO COTTON WOULD BE LEFT IN ITS PRESENT

POSITION WITHIN THE JOINT ACCOUNT. THAT IS, PROJECT SECURITY,

PUBLICITY, AND RODENT CONTROL COSTS FOR COTTON WOULD STAY AS A DEBIT

TO THE GENERAL JOINT ACCOUNT. THE REST NAMELY LAND IEVELING, DEEP

PLOWING, AND THE CASH ADVANCES TO HAND PULL HEAVY WEED INFESTATIONS

WOULD STAY AS A DEBIT TO THE INDIVIDUAL JOINT ACCOUNT. (TWELVE)

THE TOTAL AMOUNT ALLOCATED TO NON-COTTON CROPS AS ABOVE WOULD BE

ADDED TO THE TENANT'S SHARE OF THE GENERAL JOINT ACCOUNT SURPLUS.

THIS PROCEDURE HAS THE SAME EFFECT AS THAT PROPOSED OR THE REALLO-

CATION OF OVERHEADS AND IS NECESSARY TO AVOID PENALIZING THE TENANT

AND BENEFITING NHAPC. IT WILL ALSO HELP INCREASE THE TENANT'S IN-

CENTIVE TO GROW COTTON BY INCREASING THE PRICE PAID TO TENANTS PER

KANTAR OF SEED COTTON. (THIRTEEN) THIRD GIVEN THE ABOVE ADJUST-

MENTS AN EQUITABLE ALLOCATION OF NHAPC'S INTEREST COMMITMENTS BE-

TWEEN ALL CROPS REDUCES TO AN ARITHMETIC EXERCISE ONOE THE INTEREST

RATES BETWEEN NHAPC AND ITS SOURCES OF FINANCE AND B TWEEN NHAPC AND

/c

SUDAN-New Halfa Irrig_ Rehab £4rmCmith/ SBaLL t

Cleared with and cc: Mr. Walton _C_. Watton. -CM-e-f, -EAPMA-

cc: Messrs. BLinkhorn, Harris East Afri-c-a Pr-ojects

*44~

cE TELEX NOVEMBER 90 1979215 7-4922

PAGE 11

THE TENANTS HAVE BEEN STRUCK. (FOURTEEN) WE BELIEVE THE ABOVE

APPROACH MEETS THE CONSTRAINTS IDENTIFD (AAA) THROUGH (EEE) AND CAN

BE RECOMMENDED AS AN ACCEPTABLE INTERIM COMPROMISE PENDING THE OUT-

COME OF THE PROGRAM CREDIT STUDY. IT RETAINS THE JOINT ACCOUNT, AND

WILL SIGNIFICANTLY INCREASE TENANT INCENTIVE TO GROW COTTON. ONE,

ADDITIONAL COST TO THE END USER OF WATER ARISES AS A RESULT OF RE-

COGNIZING MOI'S INPUT IN SUPPLYING WATER. A SECOND SOURCE OF ADDI-

TIONAL COSTS ARISES FROM THE NEED TO RECOVER DISBURSED PROJECIT

COSTS. BUT BOTH WILL BE PHASED IN ACCORDING TO PROJ CTED INCREASES

IN TENANCY INCOMES. THE QUID PRO QUO, HOWEVER, LIES IN THE STRICT

REGISTRATION OF ALL TENANTS, A REVAMPED TENANCY AGREEMENT AND STRONG

SANCTIONS AGAINST ALL TENANTS WHO DEFAULT ON REPAYME NTS WITHOUT DUE

CAUSE. THE MECHANISM WE INTEND TO USE IS WRITTEN UP IN THE DRAFT

YELLOW STAFF APPRAISAL REPORT, PARAS 6.12 and 6.13. (FIFTEEN)

IN ORDER FOR THE REWORK TO PROCEED WE NEED AGREEMENT ON THE FOLLOW-

ING - ALPHA. THE GENERAL JOINT ACCOUNT SURPLUS WILL BE DISTRIBUTED

FIVE PERCENT COST OF SOCIAL SERVICES. TWO PER CENT LOCAL GOVERNMENT

TAXES. FORTY FIVE AND ONE HALF PER CENT NHAPC, FORTY SEVEN AND ONE

HALF PER CENT TENANTS. TWO PER CENT OF TENANTS SHARE RETAINED IN

TENANTS RESERVE FUND - REFERENCE PARACONE) - BETA. M CHANISM FOR

/c

SUDAN-New Halfa Irrig.Rehab.Proj. CJth/JWBall:mLd

ks&'A ,gnP No.Ag.Div.Cleared with and Cc: Mr. Walton

cc: Messrs.Blinkhorn East Africa ProjectsHarris

1: -~ ,~

(S

TELEX NOV EEE L9, 1979215 7-4922

PAE 12

REALLOCATING OVERHEADS IN PARAS (EIGHT) AND (NINE) AND SATISFIES

CONSTRAINT (EEE) IN PARA (S-IX) - GAMA., OUR PROPOSAL FOR RECOVERING

FULL COST OF SUPPLYING IRRIGATION WATER - REFERENCE PARA (TEN) -

DELTA. REALLOCATIONS SPECIFIED IN PARAS (ELEVEN) AND (TWELVE) -

EPSILON. AN EQUITABLE ALLOCATION OF NHAPC'S INTEREST COMMITMENTS -

ZETA. MECHANISM DESCRIBED IN DRAFT YELLOW STAFF APPRAISAL REPORT

PARAS 6.12 AND 6.13 REFERENCE PARA (FOURTEEN). UNQUOTE - END PART

TWO. (SIXTEEN) PLEASE MAKE CLEAR TO DR. WAHAB, MOA AND MOI THAT

WE HAVE ALREADY COMMENCED REWORKING THE STUDY ALONG THE ABOVE LINES.

UNLESS WE RECEIVE A TELEX TO THE CONTRARY ON OR BEFORE MONDAY,

NOVEMBER 19 WE WILL ASSUME THE DETAILS HEREIN PRESENT ARE ACCEPTABLE

TO GOS. REGARDS, WALTON.

SUDAN-New Halfa Irrig. Rehab. Proj 4Cdith/jd4Jill _:mLd

C. H. WaLton_ Chief, EA N xCLeared with and cc: Mr. Walton

East Africa Projectscc: Messrs. BLinkhorn

Har ris .....

:|: a

a

4.1.

-4

x

x:

x

. x.

x-

- 9


215 74918

INTBAFRAD,

KHARTOUM, SUDAN

TO FARAG FOR BLINKHORN. RE NHAPC FINANCIAL STATEMENTS

SEASON 1977/78. AAA PLEASE OBTAIN ANSWERS TO JANET KOCH'S

QUESTIONS CONTAINED IN MEMO UNDER COVERING LETTER DATED

NOVEMBER 1, 1979, ADDRESSED TO MR. MOHAMMED EL HASSAN,

FINANCIAL MANAGER, PAPC AND BBB PLEASE OBTAIN IN ADDITION

COPIES OF (1) TRIAL BALANCE OF ALL ACCOUNTS IN NHAPC

CENTRAL LEDGER AS AT END OF SEASON 1977/78 WITH WORKSHEETS

SHOWING HOW ACCOUNT BALANCES ARE COMBINED TO ARRIVE AT

FIGURES IN FINANCIAL STATEMENTS, (2) A BUDGET FOR THE

SEASON 1978/79, AND (3) TRIAL BALANCE FOR SEASON 1978/79

IF ANY. MANY THANKS. REGARDS, WALTON.

SUDAN - New Halfa Irri.Project CSmith:ch

C.H. Walton, Chief, EAPNA

cc: Mr. Ball and Ms. Koch East frica Projec

'*4NC6 NGTELEX

Distribution: fcaMr. Burinester -

•r. Walton

BL NidJR HFO ORA LF TA

AAA

R LI

T -

pe

L

2I

INTERNATIONAL DEVELOPMENT INTERNATIONAL BANK. FOR INTERNATIONAL FINANC L. ASSOCIATION RECONSTRUCTION AND DEVELOPMENT CORPORATION

OFFICE MEMORANDUMTO: Klaus Meyn - E A P DATE: November 5, 1979

FROM: Shawki M Farag - Resident Representative

SUBJECT: SUDAN - New Halfa Project

Pleaswl'id attached the minutes of the meeting of the post appraisalmission with the Minister of Agriculture on September 25th, 1979. Due tothe plane accident I did not attend that meeting and thus I have no com-ments on the minutes.

Attachment: Summary of the Minutes of the Joint MeetingFor Discussions on the Rehabilitation Project/Of New Halfa Agric. Corporation.

cc: Blinkhorn

Summary of the Min..tes of the Joint Meeting

For Discussions on the Rehabilitation Project

Of New Halfa Agric. Corporation.

The meeting was held on Tuesday 25th of Sep.1979 in the Officeof his s Excellency Prof. Abdalla Ahmed Abdali, Minister for Agric.,Food and Natural Resources and was attended by :

(1) Prof.Abdalla Ahamed Abdalla Minister for Agric., Foodand Natural Resources.

(2) Dr. Abdel Rahman Abdel Wahab Undersectretary for Min. ofNaticnbl Planning.

(3) Dr. El Fatih El Tigani Min. of National Planning

(4) J. Ball World Bank (Team Leader)

(5) Chamnan Pradithavanij "

(6) Janet A. Koch "

(7) S.A.Olowrde IFAD

(8) G.R.Nanthamnwe African Deve.Bank

(9) H.D. Akwrd " "(10) T.L. Edgar " "

(11) Ahmed Osman Balal PAPC, Ministry of Agric.,Food and Natural Resources.

(12) Ali Mohammed Ali Nureldin Planning Administration,Ministry of Agric.,Food andNatural Resources.

The purpose of the meeting was to discuss certain important issuescoverd by -hhe Staff Appraisal Report of the World Bank for therehabilitation Project of New Halfa Corporation. The representativesof the World Bank, International Fund for Agricultural Development( IFAD ) and African Development Bank , as the three main possibleco-financing agencies of the rehabilitation rprogramme, were keen toget the reaction of the Ministry of Agric. as well as other concernedbodies with regard to tho components of the World Bank Report of theNew Halfa rehabititaion.Specifically , the meeting reviewed anddiscussed the following issues :-

(1) Production ReLitionship and the Cost Recovery system

The Staff Appraisal Report suggested replacement of thepresent cotton Joint Account by a new system that comprises a directrepayment of the cost for the inputs and services rendered by theNew Halfa Corporation to the tenants for &ll crops, in addition tothe Farm-Service Charge designed to cover costs related to itemssuch as the administraion, irrigation services ...which were used tobe faced by the Coporation from its share of cotton revenue under thejoint Account system. The suggestion of the abandonment of theJoint Account,eventually, will mean the loss of the Corporation's Cshare of cotton revenue.

Prof. Abdalla explained his view with regard to this issueby first, describing both crop sharing and water charge systems asthe two commonly used arraggements. Then gave a brief detail of therecently evented system of the Gezira scheme - Gezira Modal. Thissystem is 1c.mplexone that incorporates an incentive component asits main feature besides retaining thE ..Joint Account for cotton,

2/.

-2-

and suggests a water-charge for crops other than cotton. He thenstated his desire for adoption of the Gezira Model in New Ialfaand emphasized the necessity for improving the yield levels of thevarious crops grown through the rehabilitation plan as realizationof higher yield levels is considered a crncial factor for the successof any adopted production relationship. In the lightof the presentpoor levels of productivity of all crops grown in New Halfa, andspeciklly wheat, he proposed a gradual application of t; e water -charge, first, for groundnuts and then in the f'.rm of a gradualprocess for wheat crop in coodiination with the expected productivityimprovement with the rehabilitition programme. The principles of thissuggestion was accepted by the World Bank Team.-

(2). Cropping pattern

The W.B. Team also inquired about the proposalof the gradual introduction of dura (sorghum) instead of wheat cropunder rainfed cultivation. Prof.Abdalla stated that the idea wouldbe unacceptable Mainly on technical grounds as reported by theAgricultural R-hsearch Corporation because dura is considered animportant host forc~ertain pests and diseases, such as stem-borer, thatdamage sugar-cane. Hence cultivatinn of dura on the vicinity of thesugar-estate would have serious implications in sugar-cane production.Therefore , he mentioned that the possibility of introducing otheralternative crops could be investigated, namely, introduction offodder crops to integrate livestock in the scheme or soyabean orany other summer crop.

Here the representative of IFAD expressed someprecautions about dropping the idea of introducing dura in thescheme since IFAD's policy is characterized by strong suppvrtfor food production expansion and helping low-income subsistent andtraditional producers. Prof. Abdalla assured the meeting that theexpected contribntion of IFAO in financing New Halfa rehabilitationis in line with the specific policies of IFAD for the followingreasons :-

(a) By helping to implement the rehabilitation IFAD cansatisfy itself by expansion of groundnuts and cotton-seed (food oils)and wheat , or by integration of livestock in the scheme .

(b) Whether IFAD supports tenants of mwNew Halfa schemeor the traditional small producers in the rainlands is the samething since presently there is no substantial income differentialsbetween the two groups.

(c) By aiding the Government to implement thisrehabilitation programme IFfD can facilitate and erkhance tetterSudan Government contribution in the transformation process of thetraditional and subsistence sub-sector by creating additional financialresources for the Government through improving the financial effinencyof the existing modern sub-sector schemes and hence initiate thecpaital formation needed for local participation in the trans6or-mation process. IFAD's representative accepted the genuity of thiscase but expressed his desire to report to the agency's board forfurlter discussions before finalizing its decision with regardto its participation in the rehabilitation plan.

.... 3/.

(3) The independent legal entity of New Halfa Corporation .:-

With regard to this subject the representatives werereferred to the eabinet decision which approved the formation ofan independent corporation for New Halfa scheme . And when theW.B.Team inquired about completing the legal and constitutionaldocumentation, they were told that the matter could be finishedin a short period and a copy of the new constitution could beprovided for them soon.

In this context, the W.B. Team Leader raised theproblem of the absentee tenants and the proper measures neededto tackle this problem. Prof.Abdalla expressed the clearposition of the Government and Ministry of Agriculture againstthis unaccepted phenomenon and stated the approval' for usecf.eviction prodedures against absentee tenants and defaulters.

Ali Mohammed Ali Nurel Din

Planning Administration

Ministry of Agric.,Food & N.R.

LBANK

ARNHEM, 2/11, ~1Distribution sj

Mr. Walton

Mr. Burmester

FOR WALTON AND BALL EAP,

RE: HALFA RAINFED REHAB PROJECT

RE URTELEX OCTOBER 25 AND URTEL OCTUObLR -A ON BASIS OF ONLY

200 MM RAINFALL IN N ORTHERN HALF OF SCHEME, EARLY 1979 PRICES,

ALL FIGURES PER 5 FEDDAf( HAWASHA. DISCPLOUGHING ENDS CLU Z-LY

SPACED COTTON IN FEBURARY OR WIDELY SPACED COTTON IN APRIL,

FIRST RAINS BRING UP FIRST FLUSH OF WEEDS CONTROLLED BY 1.25

TRACTOR-HOUR RIDGING DURING JULY TRACTOR SLACK FOLLOWL

BY 4 MANDAYS CR0-j-RIDGING AND AFTER 40 Ml ACCUMULATED RECENT

RAIN 2 MD SOWING OF 10 KILOS ABU-70 FODDER SORGHUM OR BULRUSH

MILLET SEED IN FURROWS PREI [RRING RISK OF INCIDENTAL WATERLOGGING

OVER NEAR. CONSTANT ThRkLAT OF DROUGHT 10 MANDAYS INTERROW WEEDING

DURING AUGUST MANPO WE R SLACK AND DURING EARLY OCTOBER 20 MANDAYS

9 ~~-CUTTING AND STACKING OF FORAGE 4TNNES DRY MATTER WORTH

POUNS 16 PER 200 MM RAIN GIVING NET RETURN OF POUND S

16 - 1.25 X POUND S 6 - 10 X POUND S 0.05 = POUND S 8 FOR 36

MANDAYS HIGHLIGHTING-TENANT DILEMMA TO SPEND LABOUR ON SUCH

_ESERT FORAGE CROP OR ON HIS IRRIGATED COTTON OR GROUNDNU TS,

CONSQUENTLY EYE ',UGGET FOLLOWING ALTERNATIVES: ONE FULL

200 MM IRRIGATION PLUS 40 KG N COSTING POUND S 12 MAY RAISE

YIELDS TO 10 TONNES WORTH POUND $ 40 MINUS POUND S 2n COSTS

OR A NET RETURN OF POUND S 20 FOOR 44 MANDAYS, ALThRNATIVELY

KG N PLUS 400 MM SUPPLEMENTARY IRRIGATION IN INTERVALS OF

UP TO ONE MONTH, IF AND WHEN COTTON AND GROUNDNUTS HAVE

ENOUGH SOIL MOISTURE AND TILL MID OCTOBER DAMGATES CLOSE,

USING A LATER MATURING SORGHUM REQUIRING 36 MANDAYS HARVESTING

IN DECEMBER MAY PRODUCE 16 TONNES DRY MATTE- WORTH POUND S 64

MINUS COSTS POUND S 32 OR A NET RETURN OF POUND S 32 FOR 52

MANDAYS, ALTERNATIVELY GRUlNG DOLICHOS LABLABJ ELLIT

SUDANESE FODDER LEGUME WITH SUPPLEMENTARY IRRIG TION

UIRING KILOS D POUND NO FERTILI

FOR HADIEST IN IN DECEMFD DDArUINA h17 f TONNFA DYAATTFR HAV WDTH

POUND S 72 MINUS COSTS POU 12 = PUDS FOR 60 ANYS,

FINAL ALTERNATIVE MIXED GRAIN SORGHUM DOLI O I I

MANDAY E UTTING EARLY OCTOBE MANDAYS F HTHER

HARVESTING IN DECEMBER PLUS 60 KG N RODUlI NG 1.4 T

SORGHUM GRAIN AND 15 TONNES DRY MATTER MIXED FOA WORTH

POUND S 70 + 75 = POUND S 145 MINUS COSTS POUND S30 =

POUND S 115 FOR 90 MANDAYS, I DO NOT RECOMMEND TO LEAVE OR

IRRIGATED F+LLOW FIELDS BECAUSE CWMBERSOME ANNUAL WEEDS

AS WELL AS PRESENTLY INVADING SUDAN GRASS AND COCKLE BUR

XANTHI UM SPP) WILL I ILA SE, THEIR FORAGE VALUE MORE OR LEESS

LU UA LS THE AFTERMATH OR STUB BLE OF FORAGE CROPS UNU

COMPARABLE WATER REGIMES, MAKING THEIR EFFECTS CLEARER,

COMMON PESTS OR DISEASES OF GRAIN uRGHUM AND SUGARCANE ARE LIMI TED TO ST

RIGA OR WITCHWEED

CONTROLLED IN SORGHUM BY ROTATION WITH COTTON, SESANIA CRETICA

STALK BORER IN SUGARCANE IS MADE HARMLLSa BY USING HEALTHY

$ED CANE AND STIMULATING TILLE*- MOREOVER INFESTED CANE

IS WORSE SOURCE OF FURTHER INFESTATION THAN SEASONAL SORGHUM

SORGHUM SMUT IS TOTALLY DIFFERENT FROM SUGARCANE SMUT AND

OMNIPFriENT. SUDAN GRASS IS FAR MORE I MPORTANT POTENTIAL SOURCE

OF MOSAIC VIRUS IN SUGARCANE THAN FO$J{I OR GRAIN SORGHUM

WHILE IDENTfY OF SORGHUM VIRUS AND SUGARCANE VIRIUS IS VERY

DOUBTFUL,

(GAU/KERKHOVEN

CORRECTIONS: READ LINE 3 FLUDAR IS FEDDAN

LINE 12 HARD-CUTTING IS HANDCUTTING

LINE 20 FOOR IS FOR

LINE IRRIGATED FOLLOW IS IRRIGATE FALLOW

LINE L ANIA IS SESAM4IA

LI 47 TILLENHY IS TILLERING

LINE 51 FORGAE IS FORAGE

LINE 52 IDENTTI E E E IDENTILY IS IDENTITY

LINE 1 UIRUS IS VIR

440WOR

EURO NL

The World Bank / 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. • Telephone: (202) 393-6360 • Cables: INTBAFRAD

November 1, 1979

Mr. Mohamed El HassanFinancial ManagerPublic Agricultural ProductionCorporation

Khartoum, Sudan

Re: NHAPC: Balance Sheet for Financial Year EndedJune 30, 1978

NHAPC: Profit and Loss Account, 1977/78PAPC/NHAPC: Joint ,Cotton Account, 1977/78 -

E:xpendituresPAPC/NHAPC: Tenants Individual Account,

1977/78 - Expenditures

Dear Mr. El Hassan:

Thank you very much for the updated statements of the New Halfaaccounts (noted above) which you gave me when I was in Sudan last October (Mr.Ahmed Osman Ballal had suggested I meet with you). These have been mostuseful and-have clarified many questions about the operation of the scheme, aswell as updating the basic information collected during the appraisal mission ayear ago.

After careft.lly reviewing these accounts and after variousdiscussions among those of us working on the proposed New Halfa RehabilitationD.oject here in Washington, I find we still have a few remaining questions.

Le basic questions pertain to the gross revenues and expenditures of the overallNew Halfa scheme in the past, and the financing of the corporation's/scheme'sdeficit in the past. In the three attachments to this letter, I have tried toraise specific questions with regard to the accounts you gave me, in order toclarify our remaining concerns. -

In looking back at these three attac ts, realize that manyquestions have been posed, and that you and your colleagues are naturally verybusy. Any assistance you or your assistants might be able to lend in answeringthe specific questions raised in Attachments I, II, and III would be very muchappreciated. The information is needed for the various documents we are preparing

Mr. Mohamed El Hassan -2- November 1, 1979

for the upcoming presentation of' the proposed New Halfa Rehabilitation

Project to the Loan Committee at the Bank.

Thank you for all of your assistance, both this time and last

October. I look forward to seeing you again when I am next in Sudan.

Sincerely,

Janet A. KochCountry Programs IIBEastern Africa Region

|AJ

1. NHAPC: Profit and Loss Account 1977/78 (Net)(Sdb, rounded to nearest 1,000)

A. Revenues 1/Corporation Share from Cotton Proceeds 646,000Receipts by: 2/

Agricultural Eng. Section 607,000Plant Protection Sectio - 12,000Horticultural Section - 10,000Agricultural Extension 6,000 2,208,000Ginning Factories 2/ 1,346,000

Miscellaneous receipts - 228,000

Losses 1977/78 1,130,000

TOTAL 3,984,000

l/ Is this the corporation's proceeds after deducting corporation's share of individualjoint account; that is, their share of cotton proceeds net of all expenses exceptoverhead expenses as reflected on expenditures side of account?Is it fair to work backward to get approximate cotton proceeds:

646,000 corp. proceeds from cotton+2,737,000 50% of indiv. joint account expenses3,383,000 corp. share of joint account

x26,766,000 net joint account

+3,088,000 joint account expenses9,854,000 gross proceeds from cotton

That is, is Sdb 9.854 million an accurate reflecti.on of cotton proceeds received in1977/78? If not,what were the proceeds?

2/ Where do these receipts come from -- are they income from services performed outside' scheme or profits on services performed inside the scheme? The main question is:

they receipts net of all expenses except overhead expenses as reflected onexpenditures side of account?

B. Expenditures WChapter I: Salaries agd Wages-V 1,906,000Chapter II: Services l 1,796,000Depreciation 282,000

Damaged Mexican Wheat --

TOTAL 3,984,000

1 What do these expenditures represent--are they basically just overhead items? That is,expenses which are not directly charged to the'joint account and individualjoint account expenses, and therefore, expenses which the corporation must recover fromtheir share of the cotton proceeds and other receipts?Is it possible to get a further breakdown of these expenditures?

I.' New Halfa Scheme: Profit and Loss Account 1977/78 (Gross)(Sdb, rounded to nearest 1,000)

A. Gross Revenues lGross Proce'eds from2 otton 9,854,000Receipts to NHAPC 2,208,000

Subtotal (NHAPC) 12,062,000

Gross Proceeds froGroundnuts ?Wheat ./Other Crops/Income 3/

Subtotal (tenants) ?

TOTAL 7

l/ As estimated in I. A V' above - if you have corrected figure, I'd appreciate it.2/ As shown in Profit and Loss Account 1977/78 of NHAPC in I. A above.3/ Are any figures available on the sales of these crops by the tenants, or of their other

sources of income?

Gross ExpendituresJoint Accounts 1/General Joint - Cotton 3,088,000Individual Joint - Cotton 5,478,000 8,566,000

NHAPC Administrative andand Field Dept. ./Salaries and Wages 1,906,000Services 1,796,000 3,702,000

Tenants Individual Accounts 3Total Tenants IndividualAccounts 4,497,000

Less: Tenants' Share (50%) ofIndividual Joint Account-Cotton (2,737,000) 1,760,000

TOTAL 14,028,000

1/ From PAPC/NHAPC Joint Cotton Account 1977/78 - Expenditures (obtained Oct. 1979).2/ From Profit and Loss Account 1977/78 of NHAPC in 1B above.3/ From PAPC/NHAPC Tenants-Individual Account 1977/78 (obtained Oct. 1979).

Is this account for cotton only, or does it also include advances and services forother crops as well? The only obvious "other" expense in the breakdown I have isGroundnut seeds Sdb37,458. If it includes advances and services for "other" crops,do you know how much they are? If it does not generally include "other" crops,are individual accounts kept for these, and could I get them? ,Are any figures available on additional expenses of the tenants for these"other" crops?

4/ Is this a fair representation of the gross expenses NHAPC had to bear in 1977/78?Are there others that have been left out -- expenses of irrigation are noticeablymissing, for example? Is there any double counting of expenses?

III. NHIAPC: Balance Sheet, June 30, 1978(Sdh, rounded to nearest 1,000)

A. Liabilities 1

Capital 4,868,000Reserve Funds

General 165,000Tenants 405,000 585,000

Social Services 14,000Accounts Payable

Profits (net) Due toTenants 2/ 6,345,000Sundry Creditors 3/ 7,890,000Headquarters and Other 21,240,000

Corporations (PAPC) 4/ 6,191,000Stores and Materials

Creditors 814,000

TOTAL 26,693,000

1/ Is this a correct interpretation of the balance sheet I was given in Oct. 1979?2j How long have these been due to tenants? When will they get paid, or are they used

to offset their debts iherever possible?3/ Who are some of these creditors? How old are these debts - 1, 3, greater than 3 years?4/ Is this a long-standing accumulated debt to PAPC (actually Bank of Sudan)?

B. Assets 1/Fixed Assets 3,411,000Less Depreciation (282,000)Net Fixed Assets 3,129,000

Accounts ReceivableSundry Debtors 2/ 7,145,000 18,441,000Tenants'Debts 3/ 11,297,000

Cash 136,000

Losses (NHAPC) 4/

Accumulated Losses 3,857,000 4,987,000Net Loss 1977/78 1,130,000

TOTAL 26,693,000

1/ Is this a correct interpretation of the balance sheet I was given in Oct. 1979?2/ Who are these debtors? How old are these debts - 1, 3, greater than 3 years?3/ How old these debts -- e.g., how much 1977/78, how much 3 years old, and how much

older?4/ How is this loss financed -- by PAPC (actually Bank of Sudan)? Potential deficit

is actually considerably larger than this due to uncollected, and perhapsuncollectable, debts of tentants.

OFFICE MEMORANDUMTO Messrs. Blinkhorn and Mwine DATE 11/1/79

FROM: Janet A. Ko h and J. jBall

SJ8JECT. SUDAN - Legal Aspects Associated with Establishing New Halfa Agricultural' .Production Corporation as a Separate Legal Entity

1. The establishment of the New Halfa Agricultural Production Corporation(NHAPC) as an autonomous entity is a pre-condition for negotiation of theproposed New Halfa Irrigation Rehabilitation Project. To date NHAPC has beenseparated from the Public Agricultural Production Corporation (PAPC), and PAPChas effectively been dissolved. Attachment (1) has been drafted by the Governmentof Sudan in a further effort to establish NHAPC as a separate legal entity.Attachment (2) is the existing agreement between the tenants and the corporation;certain redrafting of this agreement is clearly necessary.

2. In order that the overall project can get underway, and the approachto cost recovery outlined in attachment (4) can be implemented, some redraftingof Attachments (1) and (2), and making them consistent both with each other andwith the final Credit Agreement will be necessary. We thought it might beappropriate for you to review these documents at this time, and to take up thesematters plus any of your concerns and the points we raise below, with theMinistries of Agriculture and of National Planning and with the Attorney General,in vour fcrthccming mission ta Sazdan.

3. Some of our preliminary comments/thoughts,primarily on the draftEstablishment Decree (attachment 1), include:

(a) It should be ensured that the reconstituted NHAPC is free ofany debts of the old corporation (see-Chapter 2, Section 5(1), page 3).(b) Financing of the reconstituted NHAPC has yet to be finalized;it is expected that local funds might largely come from the Bank ofSudan in the form of a loan. In light of this, the proposed Boardof Directors of NHAPC (see Chapter 3, Section 8, pages 4,5) shouldhave, in addition to those suggested,'one representative from theBank of Sudan, one from the Ministry of National Planning, and maybeone from the Agricultural Bank of Sudan (the latter being asked toconsult with the reconstituted NHAPC on debt recovery and the use ofextended financing for tenants). Also, it is not clear that theKassala Province needs two representatives. Further, it is statedthat there will be twenty members, yet only eleven are listed, and

it is not clear who appoints some of these representatives.(c) The wording of Chapter 7, Section 22(2), page 13 should bewatched as it implies that all officers and employees appointedbefore the decree comes into force will remain in their same positionsthereafter, which may or may not be true given certain reorganizationof the corporation.

(d) The Government of Sudan and IDA have not yet resolved the issueof cost recovery; attachment (4) is an effort in this direction.Nevertheless, chapters 10 through 13 of attachment (1) specify thecost recovery mechanism to be used (also mentioned in phapter 5);

-2-

Attachments (2) and (3) present slight variations on the same basicmechanism. It seems this might better be specified in a redraftedAttachment (2) or in some sort of attachment to the EstablishmentDecree (e.g., via statute as proposed in Chapter 14, Section 50,pages 22, 23), thereby leaving the basic Establishment Decree moreflexible in this regard. Moreover, the system specified in basicallythat which is currently in force, not the modified Gezira System asproposed by the Minister of Agriculture (in our meeting with himin September and referred to in Attachment (3)). The details of the

cost recovery system need to be spelled out and agreed upon bythe Government of Sudan and IDA.(e) Certain other issues, like the cropping pattern, also needto be specified somewhere, although it's not exactly clearwhere. It is possibly more appropriate in a redrafted Attachment (2)or in an attacqhment to the basic Establishment Decree as suggested

in (d) above.

Attachments: J

C1) Draft "Establishment Decree: New.falfa Agricultural Corporation"(2) vExisting "Agreement on Allotmemts for Khashm Al Korbah Agricultural Project"(3) -"Production Relations" Statement by the Minister of Education (presumably

lan) New 2-. Âicultu- r.- -iect'., Te.Lex d ..ahab - Fa-L, -. Gu-

cc: Messrs. Burmester, Walton, Harris, Farag

JKoch:slw

TELEX OCTOBER 29,197974916

Page 1 of 2

INTBAFRAD

KHARTOUM, SUDAN

FOR FARAG. SUDAN NEW HALFA REHABILITATION PROJECT. PLEASE PASS

FOLLOWING TO DR. FATTIH EL TIGANI OF MINISTRY OF PLANNING AND

ABDUL FATTAH ABDUL KAREM OF PEWC. QUOTE RE INSTALLATION OF NEW

3 MW DIESEL GENERATOR AT KASHM EL GIRBA DAM. WE ARE QUITE

CONCERNED OVER THE DELAY IN COMPLETING INSTALLATION OF THE NEW

GENERATOR AS ITS COMPLETION IS CONSIDERED A CONDITION OF

NEGOTIATIONS FOR NEW HALFA PROJECT. LATEST INFORMATION RECEIVED

FROM PEWC BY OUR MISSION IN SUDAN RECENTLY INDICATED THAT

CERTAIN PARTS OF GENERATOR BROKE DURING TRANSPORTATION FROM

PORT OF SUDAN. PEWC IS NEGOTIATING WITH SUPPLIERS TO REPLACE

THESE PARTS, CONSEQUENTLY COMPLETION DATE IS PRESENTLY UNCERTAIN.

WE WOULD APPRECIATE YOUR EXPEDITIOUS ACTION ON THIS MATTER, AND

WOULD CONSIDER ANY ADVANCE FINANCING FOR THOSE PARTS IF

NECESSARY. BANK MISSION COMPRISING MESSRS. BLINKHORN AND HARRIS

WILL ARRIVE KHARTOUM ABOUT NOVEMBER 6 TO DISCUSS THE MATTER

WITH YOU IF FINANCIAL ASSISTANCE IS REQUIRED. IN THE MEANTIME

WE WOULD APPRECIATE RECEIVING YOUR REPLY TO LET US KNOW WHEN

c

O3 2N

C ABL

TELEX OCTOBER 29,197974226

Page 2 of 2

YOU EXPECT TD RAVE THE INSTALLATIQN COMPLETED. REGARDS,

WALTON, UNQUOTE-REGARDS, JWALTON

SUDAN:New HaLfa Rehab. Project Praditavanij.:jas

C.H. Walton, Chief, EAPNACleared with & cc: Mr. BLinkhorncc: Messrs. Harris, BaLL East Africa Projects

3C 3Ei"L TO

TELEX OCTOBER 26, 1979 {215 7-49 22

INTBAFR AD

KHKTOUA, -SUD"K

FOR FARAG RE SUDAN - NEW HALFA IRRIGATION REHABILITATION PROJECT.

PLEASE PASS ON FOLLOWING MESSAGE TO DR. WAHAB. QUOTE RE NEW HALFA

IRRIGATION PROJECT PHASE II STUDY. WE HAVE RECEIVED A COPY OF AGRAR

HYDROTECHNIC'S OCTOBER 1979 REVISED BASIC PROGRAM FOR THESE STUDIES

AND A TELEX FROM OMAR MAGOUB PPU DATED OCTOBER 23, 1P79. OUR COMMENT

/REPLY TO BOTH AS FOLLOWS. FIRST, WE ARE UNABLE TO JUSTIFY ANY

RECOMMENDATION TO OUR MANAGEMENT THAT REQUESTS THE U E OF FUNDS FOR

ANY PHASE II STUDY COMPONENTS THAT ARE NOT DIRECTLY RELATED TO THE

SUCCESSFUL IMPLEMENTATION OF THE PHASE I REHABILITATION. THIS MEANS

AAA THE WATER AVAILABLE FOR THE IRRIGATION OF WHEAT iS GOING TO DE-

CLINE. BBB THE MAIN SUPPLY CANAL FROM KASHM EL GIRB9 DAM TO THE

SCHEME WILL NOT BE ENLARGED AND IT WILL NOT BE POSSIBLE TO CONSIDER

A TWO CROP ROTATION COMPRISING ONLY COTTON AND GROUN NUT. CCC AS THE

AREA OF WHEAT DECLINES ALTERNATIVE NON-IRRIGATED RAIOFED CROPS MUST

BE FOUND. DDD AHT'S REVISED BASIC PROGRAM SHOULD BE DRASTICALLY CUT.

SPECIFIC DETAILS CAN BE DISCUSSED WITH BLINKHORN DURING HIS SUPER-

VISION OF THE TECHNICAL ASSISTANCE PROJECT BEGINING OOVEMBER 7.

/c

SUDAN-New Halfa Irrig. Rehab. JWBaLL:mLd _

Cleared with and cc: Messrs. CH4atton, Chief,_EAPA

Walton E. A. ProjectsBlinkhgrn

cc: Mr. Harris

4Q

CAEot

42

TELEX OCTDBER 26, 1979215 7-4922

Page 2

liC-OND, WE ARE JUNARLE TO JULSTIFY TO OUR MANAGEMENT ANY REQUEST FOR

ANY INCREASE IN FUNDS FOR THE PHASE lL STUDIES BUT BOLIEVE AHT COULD

.OKRPlEU ALL TRE PHA.Sll COMPONENTS THAT ARE DIRECT(Y RELATED TO THE

SUCCESSFUL IMPLEMENTATION OF PHASE I WITHIN THE ORIGINAL CONTRACT

COST. THIRD, RELATIVE TO OMAR MAGOUB'S TELEX AND SUBJECT TO THE

ABOVE WE HAVE NO OBJECTION TO SHORTENING THE DURATION OF PHASE II

FROM 13 MONTHS TO 11 MONTHS NOR PAYMENT OF 45 PERCENt OF THE TOTAL

PAYMENT IN THREE EQUAL INSTALLMENTS INSTEAD OF FIVE. HARRIS AND

BLINKHORN WILL BE IN KHARTOUM IN FIRST WEEK OF NOVEMOER AND WILLK

BE IN A POSITION TO DISCUSS ALL DETAILS RELATING TO JHE ABOVE. UN-

QUOTE. REGARDS, WALTON.

SUDAN- New Hialfa Irrig. Rehab. P-rxo EaJtt ld

Cleared with and cc: Messrs. -C1WaLton-,, vhiie- £-APNABLinkhorn E. A. ProjectsWaLton

cc: Mr. Harris

I13 OCT 27 1 6 19

CABLE SCT oN

WORLD BANK ' INTERNATIONAL FINANCE CORPORATION C _ J e 4

OFFICE MEMORANDUMTO Files DATE October 26, 1979

FROM: C.H. Walton, Chief, EAPNA

SUBJECT SUDAN - New Halfa Rehabilitation Project

Mr. Mansouri of IFAD phoned October 24 to find out wherewe stood. I explained and said that a February/March Boardpresentation was now likely.

He said three things:

(a) IFAD expects to overcome the difficulty presentedby the elimination of sorghum; this to be confirmedwithin the next week;

(b) IFAD prepared to increase contribution to US$15million;

(c) They now propose to present at their March Boardmeeting.

CHW:cas

cc: Messrs. Ball, Blinkhorn

TELEX OCTOBER 25 197975571

INTBAFRAD

KHARTOUM, SUDAN

FOR FARAG. PLEASE PASS FOLLOWING TO MINISTERS FOR AGRICULTURE

AND IRRIGATION AND DR. WAHAB. QUOTE NEW HALFA REHABILITATION

PROJECT. AFTER CONSIDERATION OF POST-APPRAISAL MISSIONS RE-

PORT, WE ARE PREPARED TO RECOMMEND TO OUR MANAGEMENT THAT

THE COST RECOVERY SYSTEM FOR THIS PROJECT BE BASED ON THE

JOINT ACCOUNT FOR COTTON WITH GROWER INCENTIVES AND WITH A

NEW CHARGE SYSTEM LEVIED ON OTHER CROPS VERY SIMILAR TO THAT

INTRODUCED FOR THE GEZIRA SCHEME. IN PROPOSING THIS ARRANGE-

MENT, WE CONSIDER THAT IT WOULD BE NECESSARY TO STRENGTHEN

THE COST RECOVERY STUDY PROPOSED UNDER THE PROGRAM CREDIT BY

MAKING IT A JOINT SUDAN/IDA ENDEAVOR AND FURTHERMORE, WE WOULD

BE SEEKING AGREEMENT UNDER THE NEW HALFA PROJECT, THAT IF A

DIFFERENT COST RECOVERY MECHANISM EMERGES FROM THE STUDY, IT

WOULD BE INTRODUCED IN NEW HALFA. WE ARE FURTHER PREPARED

TO RECOMMEND TO OUR MANAGEMENT THAT RAINFED FODDER CROPS

REPLACE RAINFED SORGHUM IN THE CROPPING PATTERN AND THAT THE

MODEST REDESIGN OF THE IRRIGATION SYSTEM ON ABOUT ONE THIRD

THE SCHEME AREA NOT BE IMPLEMENTED AT THIS STAGE. OUR AGRI-

DISPAT CHED

1979 OCT 31 AN 2: 48

CABLE SECTION

CULTURE DIVISION WILL BE SENDING YOU A FURTHER TELEX DETAILING

THE PROPOSED ARRANGEMENTS FOR COST RECOVERY IN THE HOPE THAT

THIS CAN BE AGREED WITHOUT OUR HAVING TO SEND A FURTHER MISSION

TO SUDAN. MEANWHILE WE WOULD APPRECIATE YOUR EARLY RESPONSE

TO THIS TELEX IN ORDER THAT PROJECT STAFF CAN BEGIN TO REVISE

THE APPRAISAL REPORT. REGARDS ANDRE GUE, ACTING VICE-PRESIDEN-

SUD New Halfa HWalton: (

Cleared with and cc: Messrs. Blinkhorn, Cne~ej, R72/!I Al1Ball, Waltoncc: Messrs. Wapenhans o/r, Hendry, Acting Vice President

Pradithavanij, Kuffner, Shivakumar, Harris

1979 OCT 31 A 2: 48

CABLE SEC flON

WORLD BANK INTERNATIONAL FINANCE CORPORATION

OFFICE MEMORANDUMMr. Sven Burmester, Chief, EA2DB DATE October 25, 1979

FROM: Janet A. Koch, YP, EA2DA41f

Back-to-Office Report on SudanSept. 19 - Oct. 11, 1979

1. In accordance with terms of reference dated September 17, 1979,I visited Sudan from September 21,to October 10, 1979 to participate inthe post-appraisal of the Nev Halfa Irrigation Rehabilitation Project, todiscuss with appropriate Government officials and others the costrecovery/agricultural production relation systems currently in use orproposed to be used in public irrigation schemes in the Sudan, and tovisit some of these schemes. I extended my visit by four days in order tocomplete terms of reference in view of the somewhat slow start to themission due to the light aircraft accident on Thursday, September 20involving Messrs. Martin and du Mee.


2. The first five days or so in Khartoum were spent largely inmeetings relating to the post-appraisal of the New Halfa Project. Themembers of the World Bank mission met intensively with the co-financiers(International Fund for Agricultural Development (IFAD) and AfricanDevelopment Fund (ADF)) and with representatives from the Ministries ofNational Planning (MONP) and of Agriculture (MOA) and Public AgriculturalProduction Corp. (PAPC) (see Annex I for specific names). Discussionsfocused on project financing, proposed project components, croppingpattern, cost recovery (joint account v. farmer service charge v. othersystems), and timing. These issues were also discussed in a joint meetingwith the Minister of Agriculture and Dr. Abdel Wahab. The topic ofproject financing was to be further discussed with Dr. Wahab in a separatemeeting, but the meeting was cancelled due to his heavy work load beforeleaving for Belgrade and due to the unresolved issue of cost recovery.Mr. Ball and the ADF representatives later attempted to resolve the issue offinancing through meetings with the Ministry of Finance and Dr. El Tiganiof the MONP, as reported in Mr. Ball's Back-to-Office report, while I wasin the field. Other meetings were held with the Bank of Sudan (BOS)concerning the impact of the recent devaluation on project costs andwith the Ministry of Irrigation concerning the proposed canal rehabilitation.

3. In addition to Khartoum, I spent one and a half days in NewHalfa talking with representatives of the corporation, tenants union, andtenants, and generally visiting the scheme. The primary focus of discussionswas the cost recovery issue; Messrs. Ball and Pradithavanij also had

specific issues which I raised for them and have since conveyed the responses

to them.

4. To avoid repetition, only those items directly relevant to myterms of reference, namely financing and cost recovery, are discussed here,leaving the other topics to be covered in the Back-to-Office report of

Messrs. Ball and Pradithavanij. The topic of cost recovery is left to

the second part of this report, where the subject is dealt with more

broadly.

Mr. Burmester - 2 - October 25, 1979

Project Cost and Proposed Financing

5. The following represents my present understanding of the cost/financing situation0fr

(a) Proposed Project Cost (US$ million)

Foreign Exchange 65.4Local Currency 2/ 84.6

Total 150.0

(b) Proposed Project Financing (US$ million)Two options present themselves:

Option I Foreign LocalExchange Currency Total

IDA (proposed) 40.0 0 40.0IFAD 15.0 0 15.0ADF 9.5 0 9.5Project induced duties/taxes 0 12.8 12.8Development budget (MONP) 0 20.0 20.0Loan to NHAPC by BOS 3/ 0 51.8 51.8

Total 64.5 84.6 149.1gap 0.9 0 0.9

Option 2 Foreign LocalExchange Currency Total

IDA (proposed) 35.0 5.0 40.0IFAD 12.0 3.0 15.0ADF 9.5 0 9.5Project induced duties/taxes 0 12.8 12.8Development budget (MONP) 0 20.0 20.0Loan to NHAPC by BOS 3/ 0 43.8 43.8

Total 56.5 84.6 141.1gap 8.9 0 8.9

1/ The exact numbers are subject to some change in view of new price contingenciesand the cost recovery mechanism ultimately used.

2/ At the official rate of US$2 to ESd 1.

3/ With grace period of 4 years and repayment over 15 years at 9% interest,or with Ministry of Finance paying principal and interest due to BOSduring first 4 years.

Mx. Burmester - 3 - October 25, 1979

6. Under Option I, the foreign exchange gap of US$0.9million is negligible, and with relatively minor adjustments in projectscope, it should be resolvable. The highly questionable aspect of thisoption is the US$51.8 million loan to be made over a five-year period toNHAPC by the BOS. The amount specified is that needed to fulfill localcurrency costs, mainly for operational expenses. Whether or not it isavailable, and whether or not it is within the limits of the IMF imposedceiling on the BOS lending are subject to question. It should additionallybe noted that the figure of US$20.0 million from the Development Budgetwas provided by Dr. El Tigani of the MONP, as Dr. Wahab was in Belgrade.

7. Under Option 2- some external financing (by IDA and IFAD) would beused for local cost financing; this would mean a foreign exchange gap ofUS$8.9 million, if the present project scope is retained. It would appearthat either: (a) a fourth co-financier must be found for local and/orforeign funds; or (b) the project scope must be reduced, and local currencyand fore;Lgn exchange costs/financing adjusted to eliminate any gaps; or(c) IDA and/or other co-financiers should be asked to raise their contri-butions; or (d) a combination of the above. Even given this, the US$43.8million loan to NHAPC by the BOS is still questionable in terms ofavailability and IMF limits.

8. Finding a fourth co-financier for local funds, as well as perhapsfer some foreign exchange, was discussed. The Arab Fund, Saudi Fund, andKuwait Fund were mentioned, as well as German aid from KFW. Dr. El Tiganiwas going to check in these alternatives, but prospects do not look t66promising.

9. Discussions of reducing the project were also pursued, but nodefinite conclusions were reached. The general feeling seemed to be thatlittle pieces could be cut here and there but nothing major (although itshould be noted that a major portion of the irrigation rehabilitation wasdropped due to lack of agreement between the Bank and Minigtry ofIrrigation representatives on the specific rehabilitation). The deficitof NHAPC (some US$27.0 million in foreign exchange and the equivalentof some US$53.2 million in local currency costs) appears as a major,apparaatty irreduceable component of project costs.

10. Both IFAD and ADF seemed strongly committed to the proposedproject, but both also indicated that this was their highest possible level offinancing. IFAD's contribution originally, in fact, was some US$12 to 15million, although Dr. Olowude, the IFAD representative, agreed to submitthe final request at US$15 million. IFAD is interested in joint financingand ADF in parallel financing; the latter's portion would be equipment,including road and canal maintenance, electro-mechanical, telecommunications,and new tractors and agricultural equipment as well as part of the motorvehicle component.


Co-financier Constraints/Timetables

11. A change in the cropping pattern (sorghum was dropped from theproject for various technical and economic reasons) necessitates IFAD'sbringing the project before its review board again, but Dr. Olowude did notthink this would be a problem; potential difficulties from IFAD's viewpointwith the target population of the proposed project seemed to be satisfactorilyresolved in the course of our discussions. The ADF representatives weredoing their own "appraisal" in the course of their visit, and expected toprepare a report upon their return to Abidjan.

12. Both co-financiers were anxious to negotiate the project thisyear, before their board meetings (IFAD-December; ADF-November), as theysaw potential problems in trying to get it into their 1980 budgets, givenexpectations of its being in the 1979 budgets. In the case of IFAD, thisis its second loan to Sudan, and it appears that next year IFAD may adopta policy of no second loans to countries until all countries have receivedat least one. This creates very tight, if not impossible, time constraints(e.g., ADF to loan committee, with financing gap closed and issues resolved,by Oct. 26). Later discussions suggest that there may be some possibilityof delaying the Board presentations.

Pre-Negotiation Conditions

13. NHAPC, as well as all other corporations under PAPC, has beenseparated from PAPC. The various legal documents for reconstitutingit as an autonomous entity are being drawn up. Draft copies of these docu-ments for NHAPC were obtained(being sent to the Legal department for review).

14. Progress on the installation of the 3MW generator at the KhasmEl Girba Dam was checked at PEC while in New Halfa; it appears to beencountering some difficulties. A part (generator bearing) needed tocomplete the generator's installation has been ordered, but it may be fivemonths before delivery and an additional month before installation can becompleted. April 1980 is the target if all goes well.

Cost Recovery/Agricultural Production Relations

15. The remainder of the time in Khartoum and effectively all timein the field (2 days at Gezira, 1 at Rahad, and 1.5 at New Halfa) wasspent investigating the issue of cost recovery in public irrigation projectsin the Sudan. These meetings were conducted largely on my own with con-siderable advice and assistance from and discussions with Messrs. Shivakumar,Ball, and Farag of the Bank. Unfortunately, I missed discussing the subjectwith Mr. Karim Nashashibi, the IMF representative in Khartoum, as he was

out of town when I was there.

16. In Khartoum I met largely with Government officials (see Annex Ifor specific officials). Upon returning from the field to Khartoum, Ilearned that many studies had been done in this area, particularly inrelation to Gezira. Efforts were, therefore, largely directed toward findingout about these various studies, and meeting with some of the persons

involved in their execution. Many of the persons listed in Section 2D of


Annex I whom I was unable to meet were involved in such efforts. Much ofthe work is, unfortunately, in Arabic, and reports are difficult to accessin Sudan. I have thus brought back only one study, a 1976 review of agri-cultural production relations carried out by Dr. Osman Hakim, presentlywith the MOA (part of this is now being translated). A study of theSuki scheme, a land and water charges system, currently being done byMr. A. M. Abu Sinn, also of the MOA, has been promised (hopefully inEnglish). I also briefly visited the library at Shambat, the branch ofthe University of Khartoum in which the Department of Agriculture islocated; some potentially useful documents may exist there, generally olderones and student theses.

17. In the field, efforts were focused on discussions withrepresentatives of the respective corporations, tenants unions, and tenantsand visiting the various irrigation schemes (see Annex I for specificpersonnel). The primary objectives were to obtain a clearer understandingof the various cost recovery systems in use and/or proposed for use, theassociated procedures and their success/effectiveness under implementation,and the attitudes, concerns, and problems of these systems as perceived bythe various persons directly involved (tenant-.corporation). I joined theWhite Nile mission as far as Wad Medani, and then went to El Fau and NewHalfa while they went to Ed Dueim.

18. Specific comments and observations pertaining to the variouspublic irrigation schemes and cost recovery systems are kept very briefhere, as a background paper on the subject will be prepared shortly asnoted below.

Gezira

19. A Ministerial Decision in May 1979, based on a memorandumprepared in the MOA in the fall of 1978, set forth a system of incentiveson cotton in conjunction with the joint account and land and water chargeson groundnuts and wheat for Gezira. Resistance on the part of tenantsand their union this summer, when efforts were made to enact this decision,led to an impasse. Negotiations between the Minister of Agriculture andthe tenants union are still underway. The old system of the joint accountfor cotton and individual accounts for groundnuts and wheat remains ineffect. Agricultural advances are given for cotton, as are advances oncotton sales. Tenants debts are considerable, some hSd 18 million infrozen debts and another hSd 13 million in debts to be paid in installmentsover the next three years. Information on the current system at thecorporation and block level was collected.

New Halfa

20. In our discussions in Khartoum with the Minister of Agriculture,he indicated that a cost recovery system patterned after that proposed forGezira would probably be instituted in New Halfa. The current system, whichincludes a joint account, individual joint accounts, and individual accounts,is effectively somewhere between the traditional joint account and a system ofindividual accounts or land and water charges; the extra account (individualjoint account)allocates more of the individual's costs to the individual while


at the same time still sharing these costs with him. Nevertheless, theMinister is firmly against eliminating the joint account completely andimposing in its place land and water charges until higher yields havebeen achieved as a result of the rehabilitation (i.e., year 3 or 4 of theproject). He additionally wants the study of cost recovery systems inpublic irrigation schemes in Sudan, proposed under the AgriculturalRehabilitation Program Credit, to be carried out before instituting anymajor changes.

21. Discussions with the corporation and tenants union at NewHalfa reflected similar views. Interestingly enough, the tenants themselves,particularly the Nomads, seemed less strongly inclined. At the same time,they seemed to know very little about the current system, and even lessabout any proposed changes, other than that they had heard some changesin the accounting system might be coming about in the near future. Theyseemed reasonably flexible, although it is felt that the union is a ratherpowerful force behind them. Only a couple of Nubians and a rather largegroup (10-15) of Nomads were interviewed, the latter getting into parti-cularly active discussions among themselves when Mr. Zein El Abdeen MohdMahmoud of NHAPC explained the proposed Gezira system to them.

22. Delays in payment for cotton of 6 months to a year or more wasbrought up by the corporation as a particular problem, and agreed to bythe union and tenants. All liked the idea of immediate payment for cottonwhen it is delivered to the collection center, leaving the whole processingand marketing problem to the corporation in exchange for a necessarily lowerunit price for their cotton. Nuba mountains, a rainfed scheme where cottonis grown traditionally, practices this, but has recently encountered problemsin getting tenants to grow cotton because of the very low price it pays.On a larger scale this also creates a real cash flow problem for thecorporations.

Rahad

23. Rahad has a system of land and water charges on cotton andgroundnuts, but it is only in its third year of partial operation, and itssuccess has been limited. Original estimates showed a rate of hSd 2.85/feddan/irrigation; the Board reduced this to hSd 1.5/feddan/irrigation, whileactual costs in year 1 amounted to nearly hSd 6/feddan/irrigation(operation and maintenance costs alone/depreciation and interest on invest-ment not included). Even so, debts of tenants in year 1 amounted to hSd 1.7million. In year 2 the corporation tried to control the marketing ofgroundnuts as well as cotton in order to ensure greater recovery on landand water charges and agricultural advances. This failed to alleviate theproblem, however, as much of the crop was still sold privately. In year 3,therefore, no advances will be given for groundnuts, and land and watercharges are to be paid in cash or in kind, leaving the tenants free to


market their groundnuts privately if they wish. A major complaint of thetenants interviewed here is the very high costs of all services. It is notclear, unfortunately, how much, if at all, these costs might be reducedonce the full scheme is in operation.

24. A land and water charges system has been used fairly successfullyit seems since 1971-72 in Suki, a Blue Nile Pump scheme. Annual rates ofsome USd 100/hawasha (cotton and groundnuts) have been collected, althoughactual costs are now closer to BSd 300/hawasha. The corporation and tenantsunion together, without interference from the MOA, raised the rate ofBSd 130/hawasha this year. This is the system that is the subject of thestudy by Mr. A. M. Abu Sinn of the MOA.

White Nile and Blue Nile Pump Schemes

25. These schemes are rather similar to one another, and to that ofNew Halfa in terms of their cost recovery systems. Mr. Shivakumar and theWhite Nile mission are assembling the necessary information on the WhiteNile system and will be passing it along. Some limited information is alsoavailable through the consultants' reports/feasibility studies alreadydone.

Proposed Background Paper/Terms of Reference for Longer Term Study

26. The findings of this mission indicate that much work has alreadybeen done in the Sudan in the form of studies of their public irrigationschemes, particularly Gezira. Nevertheless, a better understanding of thevarious cost recovery system applied in these schemes and their overallstrengths/weaknesses and economic/social implications with respect to thetenants, corporation, and government as a whole is badly needed.

27. In view of this, I propose to prepare a brief background paperon the cost recovery systems currently in use. The specific topics mightinclude: (a) historical background and present situation of publicirrigation schemes in the Sudan; (b) cost recovery/agricultural productionrelations systems in use; (c) issues raised in their analysis -- financial,economic, social and political; and (d) scope of study needed and methodof approach. A draft terms of reference for the more complete study to beconducted under the proposed Agricultural Rehabilitation Program Creditwill be attached, as well as annexes describing the various systems(e.g., Gezira, Rahad, New Halfa, others as relevant) and their operations,the various procedures for labor and sales advances, and so forth. Timeand information available necessarily limit the scope and depth of thepaper. Any comments as to its proposed contents would be appreciated.


28. Even at this stage, it is clearly vital that the Sudaneseparticipate actively in this study, as well as outside consultants. Whileconsultants have the advantage of certain objectivity in such an undertaking,the Sudanese have the advantage of much greater familiarity with andsensitivity to the particulars of the problem and local concerns/constraints.

cc: Messrs. Wapenhans, Gue, Hendry, Walton, Ball, Shivakumar, Blinkhorn,Dewar (RMEA), Mwine, Wiratunga, Hansen and Farag (Res. Rep.)

JAKoch:lrg

ANNEX I

Persons Met/Contacted in Sudan During Mission, Sept. 21 - Oct. 10, 1979

1. New Halfa Rehabilitation Project Meetings/Contacts

A. Khartoum (Sept. 22 - 26)

IFAD (Rome): S. A. Olowude

ADF (Abidjan): G. R. NanthambweThomas L. EdgarDavid Akroyd

Ministry of National Planning: Dr. Abdel Wahab, Under SecretaryDr. El Fatih El Tigani

Ministry of Agriculture: Dr. Abdalla Ahmed Abdalla, MinisterAli Mohamad Ali Nur el Din

Public Agricultural Production Corp. (PAPC): Ahmed Osman Ballal

Bank of Sudan: Awad El Karim Mohamed, Manager, Exchange AdministrationBallal Khalif Osman, Manager, Foreign Exchange Division

UNDP/IBRD Planning Assistance Program

(Ministry of National Planning) Dr. Abdus Sattar, Agricultural AdvisorDr. B. A. Azhar, Fiscal Advisor

PA International (Khartoum): Brian Shaw

World Bank (Khartoum): Dr. Shawki Farag, Resident Representative

B. New Halfa (Oct. 3 - 4)

New Halfa Agricultural Production Corp. (NHAPC): Osman Idris, Managing DirectorAbbas, Deputy Manager

Saeed Ibrahim Salah, Financial Mgr.Muthasin, Chief, Engineering

DivisionF. Sulieman, Senior Mechanical

Engineer

Zein El Abdeen Mohd Mahmoud, Head,Technical Office

F. M. Haleem, Entomologist,Plant Protection Department

Block Inspectors - Nubian andNomad Villages

Tenants Union: Mohamed El Hassan, General Secretary

-2-

Tenants: Nubians and Nomads

Public Electricity & Water Corp. (PE & WC): Abdullah Mohammed Nur, Manager ofWater Supply

2. Cost Recovery Meetings/Contacts

A. Khartoum (Sept. 27, 29, Oct. 6 - 10)

Rahad Agricultural Corp.: Abdullah Hami El Gadi, Financial Manager

Economic and Social Research Council,National Council for Research : Dr. Ibrahim Abdel Galil, Director

Dr. Mohamed M. Abdel Salam

Ministry of Agriculture: Abdalla M. Abu Sinn, Managing Director of theMinister's Office

Osman Hakim, Director, Agriculture InvestmentPromotion Administration

PAPC: Mohamed El Hassan, Financial ManagerAbogisasa, Assistant Financial Manager

Mirghani Ahmed El RagGamal Abdul Latif, Agricultural Section

Sir M. MacDonald & Partners (Khartoum): R. G. Self

EEC (Ministry of Agriculture): Alphonse Gintzberger

IMF (Washington): Samir El Khouri

World Bank (Washingtonl: J. Shivakumar, EAP

B. Wad Medani (Gezira) (Sept. 30 - Oct. 1)

Gezira Board: A. M. Daboura, Deputy FinanciAl ManagerBlock Inspector

Ministry of Irrigation: Mohamed Saleb, Director General, Projects DepartmentGaafar MahgoubKamal Abdu

C. El Fau (Rahad) (Oct. 2)

Rahad Agricultural Corp.: Ahmed Talaab, Agricultural ManagerAbdul-Razig Mohammed Osman, Assistant Financial ManggerFadl El Saeed Masaad, Headquarters Inspector, Field Dept.Mahmoud Hassan Ahmed, Chief, Agricultural EngineeringKhadir Babikir, Block InspectorSiddig Abdulla, previous Head Accountant of Block

Tenants

-3-

D. Others Not Met Who Might be Helpful

Ministry of Irrigation in Khartoum: Kamal Ali, Director of Nile Waters

University of Khartoum at Shambat: Izz Eldin Mamoun, LibrarianDr. Farah Hassan Adam, Dept. of Rural

Economics, Faculty of Agriculture

University of Khartoum in Khartoum: Dr. Ali Ahmed Sulaiman, Dean of Faculty ofEconomics

Abdel Latif Imam, Dept. of Business Admin.Kamal Allim, Dept. of Business Admin.

University at Wad Medani: Ali Mohamed El Hassan, Dean of Faculty of Economics

Ministry of Agriculture: Dr. Muddathir Ali Ahmed, Director of Economics andStatistics

Mohamed Hashim Awad, formerly Chairman of committee under Ministry ofAgriculture to investigate agricultural production relations in Sudan,now with Sudan Socialist Union

Ministry of National Planning: Dr. Osman, Deputy Under Secretary of Budget

Ministry of Finance: Dr. Osama, Deputy Under Secretary of Supervision and ResearchAbdel Wahab (El Hashim?), Director of Revenue/Under Secretary

IMF (Khartoum): Karim Nashashibi, Resident Representative

,O


OFFICE MEMORANDUMTO: Mr. Sven Burmester, Chief, EA2DB DATE: October 25, 1979

FROM: Janet A. Koch, YP, EA2DBP1&.

SUBJECT: Back-to-Office Report on Sudan

Sept. 19 - Oct. 11, 1979

1. In accordance with terms of reference dated September 17, 1979,I visited Sudan from September 21 to October 10, 1979 to participate inthe post-appraisal of the New Halfa Irrigation Rehabilitation Project, todiscuss with appropriate Government officials and others the costrecovery/agricultural production relation systems currently in use orproposed to be used in public irrigation schemes in the Sudan, and tovisit some of these schemes. I extended my visit by four days in order tocomplete terms of reference in view of the somewhat slow start to themission due to the light aircraft accident on Thursday, September 20involving Messrs. Martin and du Mee.


2. The first five days or so in Khartoum were spent largely inmeetings relating to the post-appraisal of the New Halfa Project. Themembers of the World Bank mission met intensively with the co-financiers.(International Fund for Agricultural Development (IFAD) and AfricanDevelopment Fund (ADF))and with representatives from the Ministries ofNational Planning (MONP) and of Agriculture (MOA) and Public AgriculturalProduction Corp. (PAPC) (see Annex I for specific names). Discussionsfocused on project financing, proposed project components, croppingpattern, cost recovery (joint account v. farmer service charge v. othersystems), and tiring. These issues were also discussed in a joint meetingwith the Minister of Agriculture and Dr. Abdel Wahab. The topic ofproject financing was to be further discussed with Dr. Wahab in a separatemeeting, but the meeting was cancelled due to his heavy work load beforeleaving for Belgrade and due to the unresolved issue of cost recovery.Mr. Ball and the ADF representatives later attempted to resolve the issue offinancing through meetings with the Ministry of Finance and Dr. El Tiganiof the MONP, as reported in Mr. Ball's Back-to-Office report, while I wasin the field. Other meetings were held with the Bank of Sudan (BOS)concerning the impact of the recent devaluation on project costs andwith the Ministry of Irrigation concerning the proposed canal rehabilitation.

3. In addition to Khartoum, I spent one and a half days in NewHalfa talking with representatives of the corporation, tenants union, andtenants, and generally visiting the scheme. The primary focus of discussionswas the cost recovery issue; Messrs. Ball and Pradithavanij also hadspecific issues which I raised for them and have since conveyed the responsesto them.

4. To avoid repetition, only those items directly relevant to myterms of reference, namely financing and cost recovery, are discussed here,leaving the other topics to be covered in the Back-to-Office report ofMessrs. Ball and Pradithavanij. The topic of cost recovery is left tothe second part of this report, where the subject is dealt with morebroadly.


Project Cost and Proposed Financing

5. The following represents my present understanding of the cost/financing situationl.

(a) Proposed Project Cost (US$ million)

Foreign Exchange 65.4Local Currency 2/ 84.6

Total 150.0

(b) Proposed Project Financing (US$ million)Two options present themselves:

Option I Foreign LocalExchange Currency Total

IDA (proposed) 40.0 0 40.0IFAD 15.0 0 15.0ADF 9.5 0 9.5Projezt induced duties/taxes 0 12.8 12.8Develcpment budget (MONP) C 20.0 20.0Loan to NHAPC by BOS 3/ 0 51.8 51.8

Total 64.5 84.6 149.1gap 0.9 0 0.9

Option 2 Foreign LocalExchange -Currency Total

IDA (proposed) 35.0 5.0 40.0IFAD 12.0 3.0 15.0ADF 9.5 0 9.5Project induced duties/taxes 0 12.8 12.8Development budget (MONP) 0 20.0 20.0Loan to NHAPC by BOS 3/ 0 43.8 43.8

Total 56.5 84.6 141.1gap 8.9 0 8.9

1/ The exact numbers are subject to some change in view of new price contingenciesand the cost recovery mechanism ultimately used.

2/ At the official rate of US$2 to ISd 1.

3/ With grace period of 4 years and repayment over 15 years at 9% interest,or with Ministry of Finance paying principal and interest due to BOSduring first 4 years.


6. Under Option 1, the foreign exchange gap of US$0.9million is negligible, and with relatively minor adjustments in projectscope, it should be resolvable. The highly questionable aspect of thisoption is the US$51.8 million loan to be made over a five-year period toNHAPC by the BOS. The amount specified is that needed to fulfill localcurrency costs, mainly for operational expenses. Whether or not it isavailable, and whether or not it is within the limits of the IMF imposedceiling on the BOS lending are subject to question. It should additionallybe noted that the figure of US$20.0 million from the Development Budgetwas provided by Dr. El Tigani of the MONP, as Dr. Wahab was in Belgrade.

7. Under Opticn 2, some external financing (by IDA and IFAD) would be

used for local cost financing; this would mean a foreign exchange gap ofUS$8.9 million, if the present project scope is retained. It would appearthat either: (a) a fourth co-financier must be found for local and/orforeigg funds; or (b) the project scope must be reduced, and local currencyand foreign exchange costs/financing adjusted to eliminate any gaps; or(c) IDA and/or other co-financiers should be asked to raise their contri-butions; or (d) a combination of the above. Even given this, the US$43.8.million loan tu NHAPC by the BOS is still questionable in terms ofavailability and IMF limits.

8. Finding a fourth co-financier for local funds, as well as perhapsfor some foreign exchange, was discussed. The Arab Fund, Saudi Fund, andKuwait Fund were mentioned, as well as German aid from KFW. Dr. El Tiganiwas going to check in these alternatives, but prospects do not look toopromising.

9. Discussions of reducing the project were also pursued, but nodefinite conclusions were reached. The general feeling seemed to be thatlittle pieces could be cut here and there but nothing major (although itshould be noted that a major portion of the irrigation-rehabilitation was

dropped due to lack of agreement between the Bank and Ministryl ofIrrigation representatives on the specific rehabilitation). The deficitof NHAPC (some US$27.0 million in foreign exchange and the equivalentof some US$53.2 million in local currency costs) appears as a major,apparently irreduceable component of project costs.

10. Both IFAD and ADF seemed strongly committed to the proposedproject, but both also indicated that this was their highest possible level offinancing. IFAD's contribution originally, in fact, was some US$12 to 15million, although Dr. Olowude, the IFAD representative, agreed to submitthe final request at US$15 million. IFAD is interested in joint financingand ADF in parallel financing; the latter's portion would be equipment,including road and canal maintenance, electro-mechanical, telecommunications,and new tractors and agricultural equipment as well as part of the motorvehicle component.


Co-financier Constraints/Timetables

11. A change in the cropping pattern (sorghum was dropped from theproject for various technical and economic reasons) necessitates IFAD'sbringing the project before its review board again, but Dr. Olowude did notthink this would be a problem; potential difficulties from IFAD's viewpointwith the target population of the proposed project seemed to be satisfactorilyresolved in the course of our discussions. The ADF representatives weredoing their own "appraisal" in the course of their visit, and expected toprepare a report upon their return to Abidjan.

12. Both co-financiers were anxious to negotiate the project thisyear, before their board meetings (IFAD-December; ADF-November), as theysaw potential problems in trying to get it into their 1980 budgets, givenexpectations of its being in the 1979 budgets. In the case of IFAD, thisis its second loan to Sudan, and it appears that next year IFAD may adopta policf of no second loans to countries until all countries have receivedat least one. This creates very tight, if not impossible, time constraints(e.g., ADF to loan committee, with financing gap closed and issues resolved,by Oct. 26). Later discussions suggest that there may be some possibilityof delaying the Board presentations.

Pre-Negotiation Conditions

13. NHAPC, as well as all other corporations under PAPC, has beenseparated from PAPC. The various legal documents for reconstitutingit as an autonomous entity are being drawn up. Draft copies of these docu-ments for NHAPC were obtained(being sent to the Legal department for review).

14. Progress on the installation of the 3MW generator at the KhasmEl Girba Dam was checked at PEWC while in New Halfa; it appears to beencountering some difficulties. A part (generator bearing) needed tocomplete the generator's installation has been -ordered, but it may be fivemonths before delivery and an additional month before installation can becompleted. April 1980 is the target if all goes well.

Cost Recovery/Agricultural Production Relations

15. The remainder of the time in Khartoum and effectively all.timein the field (2 days at Gezira, 1 at Rahad, and 1.5 at New Halfa) wasspent investigating the issue of cost recovery in public irrigation projectsin the Sudan. These meetings were conducted largely on my own with con-siderable advice and assistance from and discussions with Messrs. Shivakumar,Ball, and Farag of the Bank. Unfortunately, I missed discussing the subjectwith Mr. Karim Nashashibi, the IMF representative in Khartoum, as he wasout of town when I was there.

16. In Khartoum I met largely with Government officials (see Annex Ifor specific officials). Upon returning from the field to Khartoum, Ilearned that many studies had been done in this area, particularly inrelation to Gezira. Efforts were, therefore, largely directed toward findingout about these various studies, and meeting with some of the persons

involved in their execution. Many of the persons listed in Section 2D of


Annex I whom I was unable to meet were involved in such efforts. Much ofthe work is, unfortunately, in Arabic, and reports are difficult to accessin Sudan. I have thus brought back only one study, a 1976 review of agri-cultural production relations carried out by Dr. Osman Hakim, presentlywith the MOA (part of this is now being translated). A study of theSuki scheme, a land and water charges system, currently being done byMr. A. M. Abu Sinn, also of the MOA, has been promised (hopefully inEnglish). I also briefly visited the library at Shambat, the branch ofthe University of Khartoum in which the Department of Agriculture islocated; some potentially useful documents may exist there, generally olderones and student theses.

17. In the field, efforts were focused on discussions withrepresentatives of the respective corporations, tenants unions, and tenantsand visiting the various irrigation schemes (see Annex I for specificpersonnel). The primary objectives were to obtain a clearer understandingof the various cost recovery systems in use and/or proposed for use, theassociated procedures and their success/effectiveness under implementation,and the attitudes, concerns, and problems of these systems as perceived bythe various persons directly involved (tenant-+ccrporation). I joined theWhite Nile missior. as far as Wad Medani, and then went to El Fau and NewHalfa while they went to Ed Dueim.

18. Specific comments and observations pertaining to the variouspublic irrigation schemes and cost recovery systems are kept very briefhere, as a background paper on the subject will be prepared shortly asnoted below.

Gezira

19. A Ministerial Decision in May 1979, based on a memorandumprepared in the MOA in the fall of 1978, set forth a system of incentiveson cotton in conjunction with the joint account and land and water chargeson groundnuts and wheat for Gezira. Resistance on the part of tenantsand their union this summer, when efforts were made to enact this decision,led to an impasse. Negotiations between the Minister of Agriculture andthe tenants union are still underway. The old system of the joint accountfor cotton and individual accounts for groundnuts and wheat remains ineffect. Agricultural advances are given for cotton, as are advances oncotton sales. Tenants debts are considerable., some tSd 18 million infrozen debts and another hSd 13 million in debts to be paid in installmentsover the next three years. Information on the current system at thecorporation and block level was collected.

New Halfa

20. In our discussions in Khartoum with the Minister of Agriculture,he indicated that a cost recovery system patterned after that proposed forGezira would probably be instituted in New Halfa. The current system, whichincludes a joint account, individual joint accounts, and individual accounts,is effectively somewhere between the traditional joint account and a system ofindividual accounts or land and water charges; the extra account (individualjoint account)allocates more of the individual's costs to the individual while


at the same time still sharing these costs with him. Nevertheless, theMinister is firmly against eliminating the joint account completely andimposing in its place land and water charges until higher yields havebeen achieved as a result of the rehabilitation (i.e., year 3 or 4 of theproject). He additionally wants the study of cost recovery systems inpublic irrigation schemes in Sudan, proposed under the AgriculturalRehabilitation Program Credit, to be carried out before instituting anymajor changes.

21. Discussions with the corporation and tenants union at NewHalfa reflected similar views. Interestingly enough, the tenants themselves,particularly the Nomads, seemed less strongly inclined. At the same time,they seemed to know very little about the current system, and - even lessabout any proposed changes, other than that they had heard some changesin the accounting system might be coming about in the near future. Theyseemed reasonably flexible, although it is felt that the union is a ratherpowerful force behind them. Only a couple of Nubians and a rather largegroup (10-15) of Nomads were interviewed, the latter getting into parti-cularly active discussions among themselves when Mr. Zein El Abdeen MohdMahmoud of NHAPC explained the proposed Gezira system to them.

22. Delays in payment for cotton of 6 months to a year or more wasbrought up by the corporation as a particular problem, and agreed to bythe union and tenants. All liked the idea of immediate payment for cottonwhen it is delivered to the collection center, leaving the whole processingand marketing problem to the corporation in exchange for a necessarily lowerunit price for their cotton. Nuba mountains, a rainfed scheme where cottonis grown traditionally, practices this, but has recently encountered problemsin getting tenants to grow cotton because of the very low price it pays.On a larger scale this also creates a real cash flow problem for thecorporations.

Rahad

23. Rahad has a system of land and water charges on cotton andgroundnuts, but it is only in its third year of partial operation, and itssuccess has been limited. Original estimates showed a rate of tSd 2.85/feddan/irrigation; the Board reduced this to hSd 1.5/feddan/irrigation, whileactual costs in year 1 amounted to nearly Sd 6/feddan/irrigation(operation and maintenance costs alone/depreciation and interest on invest-ment not included). Even so, debts of tenants in year 1 amounted to bSd 1.7million. In year 2 the corporation tried to control the marketing ofgroundnuts as well as cotton in order to ensure greater recovery on landand water charges and agricultural advances. This failed to alleviate theproblem, however, as much of the crop was still sold privately. In year 3,therefore, no advances will be given for groundnuts, and land and watercharges are to be paid in cash or in kind, leaving the tenants free to


market their groundnuts privately if they wish. A major complaint of thetenants interviewed here is the very high costs of all services. It.is notclear, unfortunately, how much, if at all, these costs might be reducedonce the full scheme is in operation.

24. A land and water charges system has been used fairly successfullyit seems since 1971-72 in Suki, a Blue Nile Pump scheme. Annual rates ofsome hSd 100/hawasha (cotton and groundnuts) have been collected, althoughactual costs are now closer to bSd 300/hawasha. The corporation and tenantsunion together, without interference from the MOA, raised the rate ofESd 130/hawasha this year. This is the system that is the subject of thestudy by Mr. A. M. Abu Sinn of the MOA.

White Nile and Blue Nile Pump Schemes

25. These schemes are rather similar to one another, and to that ofNew Halfa in terms of their cost recovery systems. Mr. Shivakumar and theWhite nile mission are assembling the necessary information on the WhiteNile system and will be passing it along. Some limited information is alsoavailable through the consultants' reports/feasibility studies alreadydone.

Proposed Background Paper/Terms of Reference for Longer Term Study

26. The findings of this mission indicate that much work has alreadybeen done in the Sudan in the form of studies of their public irrigationschemes, particularly Gezira. Nevertheless, a better understanding of theVarious cost recovery system applied in these schemes and their overallstrengths/weaknesses and economic/social implications with respect to thetenants, corporation, and government as a whole is badly needed.

27. In view of this, I propose to prepare a brief background paperon the cost recovery systems currently in use. The specific topics mightinclude: (a) historical background and present situation of publicirrigation schemes in the Sudan; (b) cost recovery/agricultural productionrelations systems in use; (c) issues raised in their analysis -- financial,economic, social and political; and (d) scope of study needed and methodof approach. A draft terms of reference for the more complete study to beconducted under the proposed Agricultural Rehabilitation Program Creditwill be attached, as well as annexes describing the various systems(e.g., Gezira, Rahad, New Halfa, others as relevant) and their operations,the various procedures for labor and sales advances, and so forth. Timeand information available necessarily limit the scope and depth of thepaper. Any comments as to its proposed contents would be appreciated.


28. Even at this stage, it is clearly vital that the Sudaneseparticipate actively in this study, as well as outside consultants. Whileconsultants have the advantage of certain objectivity in such an undertaking,the Sudanese have the advantage of much greater familiarity with andsensitivity to the particulars of the problem and local concerns/constraints.

cc: Messrs. Wapenhans, Cue, Hendry, Walton, Ball, Shivakumar, Blinkhorn,Dewar (RMEA), Mwine, Wiratunga, Hansen and Farag (Res. Rep.)

JAKoch:lrg

ANNEX I

Persons Met/Contacted in Sudan During Mission, Sept. 21 - Oct. 10, 1979

1. New Halfa Rehabilitation Project Meetings/Contacts

A. Khartoum (Sept. 22 - 26)

IFAD (Rome): S. A. Olowude

ADF (Abidjan): G. R. NanthambweThomas L. EdgarDavid Akroyd

Ministry of National Planning: Dr. Abdel Wahab, Under SecretaryDr. El Fatih El Tigani

Ministry of Agriculture: Dr. Abdalla Ahmed Abdalla, MinisterAli Mohamad Ali Nur el Din

Publie Agricultural Production Corp. (PAPC): Ahmed Osman Ballal

Bank. of Sudan: Awad El Karim Mohamed, Manager, Exchange AdministrationBallal Khalif Osman, Manager, Foreign Exchange Division

UNDP/IBRD Planning Assistance Program(Ministry of National Planning) Dr. Abdus Sattar, Agricultural Advisor

Dr. B. A. Azhar, Fiscal Advisor

PA International (Khartoum): Brian Shaw

World Bank (Khartoum): Dr. Shawki Farag, Resident Representative

B. New Halfa (Oct. 3 - 4)

New Halfa Agricultural Production Corp. (NHAPC): Osman Idris, Managing DirectorAbbas, Deputy Manager

Saeed Ibrahim Salah, Financial Mgr.

Muthasin, Chief, EngineeringDivision

F. Sulieman, Senior MechanicalEngineer

Zein El Abdeen Mohd Mahmoud, Head,Technical Office

F. M. Haleem, Entomologist,Plant Protection Department

Block Inspectors - Nubian andNomad Villages

Tenants Union: Mohamed El Hassan, General Secretary

-2-

Tenants: 1ubians and Nomads

Public Electricity & Water Corp. (PE & WC): Abdullah Mohammed Nur, Manager ofWater Supply

2. Cost Recovery Meetings/Contacts

A. Khartoum (Sept. 27, 29, Oct. 6 - 10)

Rahad Agricultural Corp.: Abdullah Hami El Gadi, Financial Manager

Economic and Social Research Council,National Council for Research Dr. Ibrahim Abdel Galil, Director

Dr. Mohamed M. Abdel Salam

Ministry of Agriculture: Abdalla M. Abu Sinn, Managing Director of theMinister's Office

Osman Hakim, Director, Agriculture InvestmentPromotion Administration

PAPC: Mohamed El Hassan, Financial ManagerAbogisasa, Assistant Financial Manager

Mirghani Ahmed El HagGamal Abdul Latif, Agricultural Section

Sir M. MacDonald & Partners (Khartoum): R. G. Self

EEC (Ministry of Agriculture): Alphonse Gintzberger

IMF (Washington): Samir El Khouri

World Bank (Washington): J. Shivakumar, EAP

B. Wad Medani (Gezira) (Sept. 30 - Oct. 1)

Gezira Board: A. M. Daboura, Deputy Financial ManagerBlock Inspector

Ministry of Irrigation: Mohamed Saleb, Director General, Projects DepartmentGaafar MahgoubKamal Abdu

C. El Fau (Rahad) (Oct. 2)

Rahad Agricultural Corp.: Ahmed Talaab, Agricultural ManagerAbdul-Razig Mohamed Osman, Assistant Financial ManagerFadl El Saeed Masaad, Headquarters Inspector, Field Dept.Mahmoud Hassan Ahmed, Chief, Agricultural EngineeringKhadir Babikir, Block InspectorSiddig Abdulla, previous Head Accountant of Block

Tenants

-3-

D. Others Not Met Who Might be Helpful

Ministry of Irrigation in Khartoum: Kamal Ali, Director of Nile Waters

University of Khartoum at Shambat: Izz Eldin Mamoun, LibrarianDr. Farah Hassan Adam, Dept. of Rural

Economics, Faculty of Agriculture

University of Khartoum in Khartoum: Dr. Ali Ahmed Sulaiman, Dean of Faculty ofEconomics

Abdel Latif Imam, Dept. of Business Admin.Kamal Allim, Dept. of Business Admin.

University at Wad Medani: Ali Mohamed El Hassan, Dean of Faculty of Economics

Ministry of Agriculture: Dr. Muddathir Ali Ahmed, Director of Economics andStatistics

Mohamed Hashim Awad, formerly Chairman of committee under Ministry ofAgriculture to investigate agricultural production relations in Sudan,now with Sudan Socialist Union

Ministry of National Planning: Dr. Osman, Deputy Under Secretary of Budget

Ministry of Finance: Dr. Osama, Deputy Under Secretary of Supervision and ResearchAbdel Wahab (El Hashim?), Director of Revenue/Under Secretary

IMF (Khartoum): Karim Nashashibi, Resident Representative

From ;Khartoum

Distribution sj

XuK. Burmester

Cw~w F 1049Mr. WaltonTAX 23/10/1979

FROM EIMAR KM TEX 324

FOR PROJECT PREPARATION UNIT

TO WORLD BAN TEX 64145 25 M

-------------- S

REF: NEW HALFA IRRIGATION REHABILITATION PROJECT N

THE WORKING PART AND THE CONSULTANT HAVE PROVISIONALLY AGREED

TO:

AAA SHORTEN THE DURATION OF PHASE II FROM THIRTEEN MONTHS

TO ELEVEN MONTHS AGAINST THE SAME COST++

BBB THE FOURTYFIVE PERCENT OF THE TOTAL PAYMENT SHOULD BE PAID

IN THREE EQUAL INSTALLMENTS INSTEAD OF FIVE++

YOUR APPROVAL IS APPRECIATED+++ REGARDS+++

OMAR MAHGOUB, PPUO

64145

EIMAR KM.

TILLLX OCTOIEe 1

1::T %.F."A

FOR FArAG. PLEAC PASS FCLLC.$I.GG TO tl:I'TERS FOR AGICtLTURE

A:D IIQ.'IATI. NDA D. U!UA3. QUOTL .tE liAPLFA AL!AICILITATIc:

PROJECT. AFTER CO.SID £ATIOl OF I'OST-APPRAISAL~;ISSIv;S RE-

PvoRT, UE A! P".PAICD TO REC:::E:!' TO OUR rmAGU;U:T T:AT

TilE COST RECOVLRY SYSTE., FCR ThIS PROJECT CE &AScD ON TIPE

JOiiT ACCOUNiT FOR COTTO:N WITH GROVER INCE:TIVES AND UITIl A

NI ClARGE SYSTE1i LEVIE[ O OTHER CROPS VERY SI"MLAR TO THAT

I3TRODUCID FOR ThE CEIIRA SCUE::E. IA PROPOS IG THIS AlPANGE-

- ,EJT, VE CO .SIDER TNAT IT UOULD 'E NErCESSARY TO STRESTHErl

TICE COST Ii.COVERY ST'rDY PrOPOSD U:.DER THE PRORAlf CRECIT DY

IAIIG IT A JOINT S'JDAN/IDA ENDEAVOR AN,) FURTHE-.ORE, W: U"ULD

SE SEEKI:;G AGR~EEf1f UIDER Til INEW HALFA PROJECT, TEAT IF A

01FFEROE:T COST RECOVERY MECH..iIS:1 EMRGES FRO:! TE STUDY, IT

WOULD M INTRODUCED IN NEV HALTA., WE ARE FURTI,1R PREPARED

TO RECO;'. II: TO OUR rAMAGENENT THAT RAIMFED FODDER CROPS

REPLACE FrAI:;rFD SCMRilu 1N THE CroPPIr;G PATTETl AND THAT T'E

f1ODEST D.SIG.A oF TI'E OF IlRIATII:l SYS 0:1 ACOLrT O:CE ThlIfD

THE SC11E.!E A.rA fOT CE INPLE'INTED AT THIS STA-Z. OUP AGRI-

/'

; -.

cCLTUE DIVI'IC..ILL S'.I'. YCU A FLF:TYER TELLX ZETAILI.G .

TIZ; P:,ZCPCLD Ar2A*:.L TS FC.' CCST RFCOVE7 Y IJ TI;E OPE TL:AT

THIS CiA 1. A E .ITS;OUT Ct 1AVI'7- TO SM!) A F12T!'. NI.I-'

TO 302 ; .a..,:UL: GE '.TULD P.tPPEC.CII.TE YC.' CA.LY s:tCEI'C:

TO ThIS TELEX Ia CRZER THAT P.'OJECT STAFF CAa G7cGI TO iEVISK

TilE APPRAISAL REPORT. RESARDS A CUE, ACTI.li VICE-P"ESI'ET

SUD - New Hlatfa CIllatton:cas

Cteared with and cc: ?'cssrs. Utir.khorn,H-ris, An-r Cue, E/PSaLL, I:aLtoncc: Messrs. Wapenhans o/r, flendry, Acting Vice President

TELEX OCTOBER 25, 197945097-EURO 7-4922

PAGE 1

HOL L A ND-. THE NETI-RLAN D S

FOR KERKHOVEN RE - NEW HALFA IRRIGATION REHAB PROJECT. URTEL CONVER-

SATION OF OCTOBER 23 COULD YOU PLEASE SUPPLY CHRONOLOGICAL LIST OF

OPERATIONS REQUIRED TO INCORPORATE A RAINFED FODDER CROP IN THE NEW

HALFA CROPPING PATTERN TO REPLACE RAINFED SORGHUM. BRIEFLY DESCRIBE

EACH OPERATION, THE LIKELY TENANT COST OF EACH PHYSICAL INPUT, THE

NUMBER OF MANDAYS LABOR REQUIRED, THE NUMBER OF KILOS OF SALEABLE

FORAGE ANTICIPATED PER UNIT AREA AND YOUR ESTIMATE OF THE HARVESTED

IN FIELD PRICE. NOTE THAT ONE HAWASHA OF GROUNDNUT YIELDING A TOTAL

OF 125 SACKS OF 45 KG UNWASHED NUT IN SHELL WAS REPORTED BY ONE

TENANT TO PRODUCE 12.5 SUDANESE POUNDS WORTH OF HAND THRESHED OR 20

SUDANESE POUNDS OF MACHINE THRESHED STRAW. THE RAINFED SORGHUM WAS

ONLY GOING TO INVOLVE ONE MACHINE OPERATION NAMELY A DISC HARROWING

OR RIDGING. ALL OTHER SORGHUM OPERATIONS WERE TO BE CARRIED OUT BY

HAND USING A TOTAL OF 30 MANDAYS OF LABOR PER HAWASHA. THERE IS NO

WATER AVAILABLE FOR IRRIGATION OF THE SORGHUM AND THERE WILL BE NONE

FOR FODDER CROPS. SORGHUM YIELDS OF 0.4 TON PER FEDDAN WERE BUDGETED

USING NO FERTILIZER AND NO PESTICIDES. IN PREPARING YOUR FODDER CROP

SUDAN-New Halfa Irrig. Rehab. Proj.JWBaLl:mld

Cleared with and cc: Messrs. C}lWaLton, C1ief EAPNABlinkhornWalton APro ects

1919 OCT 25 PN 0 tRECORD3 AND

COMMUNIC ATiON3

TELEX OCTOBER 25, 197945097 ZTEUR -492 2

ATJL -P-LEAS-E NOTf- THAT AAA -E- -W OULD PRET E R TO U S E NO F E R TILIZE R AND

40 PESTICIDES SS& THERE _ 0- -SCO-PE TOR ANY ADDITIONAL MA CHINERY

INPUTS CCCTHERE IS SCOPE -TO USE MORE LABOR BUT PREFERABLY NOT FROM

MID-OCTOBER TO END NOVEMBER AND NOT MUCH MORE THAN THE 10 MANDAYS

PER HAWASHA THAT WAS BUDGETED FOR SORGHUM THRESHING IN DECEMBER.

DDD GROUNDNUT WILL FOLLOW THE FODDER CROP AND THE HAWASHAS MUST BE

FREE FOR GROUNDNUT LAND PREPARATION FROM LATE MARCH ONWARD. PLEASE

EEE SPECIFY THE TYPE(S) OF FODDER CROPS YOU HAVE IN MIND. FFF

INCLUDE SOME NON-SORGHUM VARIETIES. GGG INDICATE LIKELY SOURCE(S)

OF SUPPLY. HHH LIKELY LANDED COST TO NHAPC. III LIKELY COST OF SEED

TO TENANT. HOWEVER SINCE THIS WHOLE QUESTION OF AN APPROPRIATE SUB-

STITUTE FOR WHEAT WILL BE STUDIED IN DETAIL EITHER BY THE TECHNICAL

ASSISTANCE TO BE INCLUDED IN THE PROPOSED PROJECT AND/OR IN THE NEW

HALFA PHASE TWO STUDIES WE ONLY SEEK TECHNICALLY VALID ORDERS OF

MAGNITUDE AT THIS STAGE. APPRECIATE TELEXED REPLY. THE COST OF

YOUR SERVICES, TELEX, ETC CAN BE ADDED TO YOUR BLUE NILE CONSULTANCY.

REGARDS, WALTON

SU-DAN-Ne w- _Halfa_ IfPi g. R ehab.- _ProQj_ WB a LLmt

Cleared with and cc: Messrs. £CHW-aiton, -Chief APNA

WaLton E. A. ProjectsBlinkhorn

979 OCT 25 PI

RECORDS A

TELEX OCTOBER 24, 1979215 -7351?L

INTBAFRAD

KHARTOUM, SUDAN

FOR FARAG PLEASE CONVEY TO DR. EL TIGANI OF THE MINISTRY OF

NATIONAL PLANNING QUOTE HAVE YOU HAD A CHANCE TO PURSUE

FURTHER THE POSSIBILITIES OF THE ARAB AND GERMAN AID

SOURCES WE DISCUSSED EARLY THIS MONTH FOR THE FINANCING OF

NEW HALFA STOP INFORMATION AS TO ANY PROGRESS WOULD BE

APPRECIATED AS SOON AS POSSIBLE STOP IT IS NEEDED FOR

ASSEMBLING THE VARIOUS DOCUMENTS FOR PRESENTATION OF THE

PROJECT TO THE LOAN COMMITTEE PRESENTLY SCHEDULED FOR LATE

DECEMBER EARLY JANUARY STOP PLEASE LET US KNOW IF WE CAN BE

OF ANY ASSISTANCE IN THESE MATTERS REGARDS KOCH UNQUOTE

REGARDS KOCH

Sudan-New HaLfa J toch/4

cc: Messrs. Burmester (o/r), Walton Thomh('rBaLL, Blinkhorn V

EA2DB

6125

WORLD BANK / INTERNATIONAL FINANCE CORPORATIONMr. Gue. I have not rdeaLt with this! WAW

11/5Mr. Burmester

Please see my comments. Mr. WW did not havetime to look into it.

1. Very difficult must be last resort.

2. LWC should be phased in as project benefitsmateriaLize (as agreed earlier) takinginto account results of -study - But

need agreement now on timing.

3. Should request a detailed plan of actionto rescue sector for mid-term review.

4. Same

Should also be prepared for mid-termreview.

WORLD ANK / INTERNATIONAL FINANCE fORPO ATION1A

" WOFFICE MEMORANDUMTO: Mr. Andre R. Gue, Acting RVP, EAI DATE: October 22, 1979

FROM: Thomas A. Blinkhorn, Seno Loan Officer, EA2DB 00c

SUBJECT: SUDAN - Irrigation Subsector

1. I refer to Mr. Walton's memorandum of October 17, 1979, toMr. Hendry in which he raised several issues regarding the Rahad project,the proposed New Halfa project, the proposed Program Credit and associatedmatters in the irrigation subsector. As Mr. Walton noted in paragraph 12of his memorandum, I reviewed the note in draft and am in general agree-ment with the substance of the proposals. My specific reactions to thevarious points raised are as follows:

(a) New Halfa Local Cost Financing (para. 3): Because ofthe severe deterioration that has developed in the NewHalfa scheme, the appraisal and post-appraisal missionshave confirmed that substantial local cost financingwill be required to rescue the scheme. During my forth-coming mission to Sudan, I will attempt to ascertainfrom the Fund representative and officials of theGovernment and Central Bank whether, under existingcredit ceilings, a loan of up to 26 million Sudanesepounds over five years can be provided by the CentralBank to New Halfa to meet local financing requirements.If not, then the only other course of action would beto consider a formula under which Government would beasked to contribute somewhat more to the project andthe external agencies--IDA, IFAD and African Develop-ment Fund--would be asked to do some local costfinancing. In light of the decision at the last SudanCPP meeting regarding local cost financing, it may bedifficult to get management's agreement to this course.However, given the changed circumstances since the CPPreview, and the fact that the project is a non-starterwithout substantial local cost financing, it shouldnot be impossible to make a persuasive case.

(b) New Halfa Cost Recovery (para. 4): In light of theexperience in the Gezira, and given the fact that weare about to embark on a major study of cost recoverysystems, and their impact, in irrigated agricultureas part of the Program Credit, I would agree that in

LJ C OV the New Halfa case we settle for (i) continuation ofthe joint account for cotton; (ii) introduction of anew land and water (or service charge) system forother crops (groundnuts and wheat). However, the New

Mr. Andre R. Gue - 2 - October 22, 1979

Halfa conditionality should be tailored in a fashion toallow introduction of a full land and water charge system,or some adaptation thereof, in the aftermath of thespecial study. Proposed covenants under the Program(Agriculture Rehabilitation) Credit already are formulatedin this fashion.

(c) Irrigation Subsector Generally (para. 8): The analysisof the logistical and managerial problems in the sub-

A sector is quite accurate. However, I would not wish tohold up submission of the Agricultural Rehabilitationdocuments to the Loan Committee (currently envisionedfor mid-November) simply to engage in a rather non-specific discussion about a possible commission of somesort.

'(d) Rahad (para. 9): Mr. Stevenin's back to office report isindeed troublesome. However, I would prefer to await theconclusions of the proposed review mission before makingfinal judgements. In any event, there should be no dif-ficulty in including Rahad as one of the elements to beexamined in the mid-term review before disbursing thesecond tranche of the Program Credit (June, 1980).

(e) Additional Covenants for Program (Agricultural Rehabili-tation) Credit: Generally I agree with the proposals forcommercial accounting in two public corporations of theMinistry of Irrigation and for the outline of long termpriority investment in the irrigation subsector. However,I feel we must be ca-eful not to overload the conditionalityand make the Program Credit a "catch all" for Governmentactions that should more appropriately be carried out ina different context. You may recall that this was onecriticism levelled at the proposed project at the DecisionMeeting stage--that we were including too many macroeconomic conditions. There could be a danger now ofincluding too many sectoral conditions. However, we willweigh these matters more carefully as we prepare for theLoan Committee.

cc: Messrs. Hendry, EAP, Walton, EAP, Burmester, EA2DB (o/r),Nercissiantz, EA2DB, Hansen, EA2DB, Farag, EAFSU

Mrs. Koch, EA2DB

TAB:mm

iaioOctatnr 'Su bs'cto

refer to Mr. alton's oancor 17, 197-,r ndry in~ whichhe raid~ several issues regarding the Phad pronj cnt,

maters .in the irrigation~ subsecctor. As r. Waltonot i~ pa ~ragraph~ 12of Ms" xeor'adu- I reiviewed- ~ th ote in rft an a in~ genral- ageO't with thei subtance o the prcoposa ls' x sei fic reactions to the'

(a e ,alfa Local Cost na wcing (parc. ): Becas ofthe .evere deterition that havs l nevlp in th New

have- confir ta ubtantial loc hal cost flinncingi be reqired to res'cuethe m. Durinrgu m'y forth-

comng isi to' Su~an I ill att'mt to~ ascertain'from theP Fund reresetaiv and o-~fficeil of the-

criIt ceilings, a loan of up to 26 nill1ion' Sudanese'pounds over five years can he pirovided, by thwe CetraliiZank to New !alfa to mee-t loca-l fian cin reqcuirai, nt.

If not, ten the~ only oter cours~e of action -Woul beto corsider a fo-riula undier which Governmenut 'ould bea-skedi to contribute somadit more to the projsect an

imeit 'und-iouild be ase to do s~ome local1 costfinancing. In light of the dectision at th lasnt fGudan-PP eting-- re'ard~in local cost fina n It vv ay b

difficult to or "ii-t. ,u t cnt's areeent to this ' course.Hoowvr, riven th chango-ed circu;stanes~ since thle CPP

reiw and4 the~ fact tha-t theproject is a on 'tarterwithout substantial local co'st finanicin it should~ 14

"r V - i- to d o pKriuasive case.

(b) Zew alf Cost Rcovery (para. ') In light of teexpeiec in hre GA-ira, and glven tv fac that we-

a Are bout to e'barw on a -ar study of cost rIcoverysyvstems, and theIr ict in irrigaoted agricul tureais prt of the P-ro-'ram Credit, I1 iouild agire that tn

th e Galfa cse e settle for (I) co.tinuation ofte joiint account for cotton (Ii) ntroduction of a

newv land and water (or ervicehorge) :ystem for-A r ecro (- - w li '.n 'i- t), i'ever, te

OFFICIAL FILE COPY

r. And~re S. e CupOctober 22, 1972

Halfa conitionality sholbe tailored in a fashion toallo introduction of a full 1ad and water charge system,or some aint tin thereof, in the afterm'ath of thespecial study. Proposed covenants under the Program(Agriculture ebilitation) rdit already are formulatein this fashion.

(c) irtyition 2se or Generally (ar ): The analysisof the logist2cal and mana"er 0arol 1 e in the sub-sector is qMite accurate. However, I would not wish tohold up submission of the Agricultural Rehablitationdociments to the Loan Comttee (curre tly envisionedfor mid-november) simply to engage in a rather non-specific discussion abot a ossIble conmisaon of somesort.

(d) ahad (para. 9); Mr. Stevenin's back to office report isinreed troublesome. However, I would prefer to awiit theconclsions of the proposed review mission before naklngfinal judgements. In any event, there should be no dif-ficulty in inCluding Rahad as one of th elements to heexamined in the id-term review before dUisbursing thesecond tranoe of the Progra Credit (June, 1290)

(e) Additinal Lgven ts for Program (Agricultural Rehabil1-tatiot) Credit Generally I agre-e witi t pro -os. Jfor

commercial accounting in two public corporations of thministry of Irrigation and for the outline of long termpriority investment in the irrigation ubsector. However,I feel we must be careful not to overload the conditionalityand make the Progran Credit a catch all for Governmentactions that should more appropriately be carried out ina 'ifferent context. You may recall that this was onecriticism levelle at the roposed project at the Decisioneting stage -chat w were includinp too many macro

economic conditions, There could be a danger now ofincluding too nay sectoral conditions. However we willweih these matters wore carefully as we prepare for theLoan Com ittee,

cc: Messrs. endry, 7AP, Walton, EAP, Burmester, AX2DB (o/r),ercisiantz, MAD2D, Hansen, EA2D, ParaG, LAFSU

rs. Koch e 2DB

TAB AEm

OFFICIAL FILE COPY

Mr. J r M. Duarte, cun- ting Divis on October 22, 1979

0. M. R. Wiratuinga, Diabwueents iiion

" - IDA Ce&'t POMGAdvwr~i s for 5.0 etion of the New Halfa Irrigntion

The Cntroll-'s Mportent has asnised IDA Credit No. POZ0-SU tothe ab: - rv c r , ', as -provd for. an w-ount e!izltto US$ 530, on OctAi 15, 1979 undr the Project Preparation 1nellity.

/tt ~cd are copf of the lttier dated June 28, 1979 from the. -. m - rnt of ,:4-1 re tis the advance and Mr. Gue's letter of approval

ed 1 15, 1979.

For this Project the date for purposes of Section 7 of the Fintncialr Tirma c 1i-ble to ! mancen for Project Preparation published on

1ecceter 1, 1976 is June 1980.

Attnchments

File: POEO-SU/PPF

cc: Mesars. 2iinthorn/LA2

Farag/"cc. Rep, SuzdanPetretti/iI

1irg Vog.1/CTRSPU,Ma liae.a

DB01 & DB02 iaod.

fl¶RWiraturngc /thn

DT, ,

1

IRe

VT

AA

1-- --

GM1~ij~aungath*

ORLBANK 1nc

#I tHT D (tx. no,)

Distribution:

II U

D e TILATED Mr. Walton

YO RmN1 1 A 1 1 0

IF T Y TO CHY.

TT: C . LTOf J LL H.P

T.o.R. LI T TO Y y I.

Y J. LL 1, TOM4R CT

Repetitten reuesated t' Cable Offtce; or ttAa apaegerecetve4 gatble4,

WORLBANK


OFFICE MEMORANDUMTO See Distribution Below DATE: October 18, 1979

FROM: Janet EA2DB

SUBJECT: Revised Schedule In New Halfa Irrigation Rehabilitation Project

1. By agreement with the Projects Department, in light of the recent returnand findings of the post-appraisal mission, the following is proposed as therevised schedule for the New Halfa Irrigation Rehabilitation Project:

Revised Yellow Cover/Draft Green Cover November 16, 1979Distribution of Draft Green Cover/Draft President's Report

Division Chiefs (Burmester, Walton) December 10, 1979Program and Project Directors (Gue, Adler) December 17, 1979Office of Regional Vice President (Wapenhans) December 26, 1979

Distribution of Documents to Loan Committee January 4, 1980Negotiations - Start January 16, 1980Presentation to Board February/March

Distribution: Messrs. BurmesterWaltonBlinkhornTolleyMwineWiratungaFarag

Ms. KronfliMs. Hadjitarkhani

JK:dtn

rjee litiut ion Jelow Otle

-. evised Scedl In Ie (alfarIroie c7~~ r(-, 0 iPo

esotenabiitaton Po ee

y aree n ith th Prjectsi Departmendt i lit of the recen t euran ir~ i s of L' e post '~appraisal Imiiu theC folloing ~ is pro;osed astha~ f rri t ioi edr iloation Pr ect

YellIoi Cve/ r L ree i over 6v T 19;istribujtio of )Iraft renover/Draft tPresident . ~or

ivision Chiefs (normster Wato ioecembe-r~ ~r 10 1979Oro ram au k rject Directors (G. adlr) Deebe 17 1979

~~~-~ CtO kO~- f >-ofac of oeinl\c rsd

is secerero ool

cri

Laruar 7

- linkhorn

Ms. Hadjitarkhani

OFFICIAL FILE COPY


OFFICE MEMORANDUMTO: Mr. J.B. Hendry, Assistant Director, EAPDR DATE: October 17, 1979

FROM: C.H. Walton, Chief, EAPNA

SUBJECT: SUDAN - New Halfa Irrigation Rehabilitation Project; Rahad andProposed Agriculture Rehabilitation Credit

1. Please find attached a copy of Mr.- Ball's BTO and minutes ofmeetings on the New Halfa post-appraisal mission. Following Mr. Martin'sdeath, Mr. Ball and Mr. Pradithavanij were able to advance a number ofoutstanding matters on this project though it is unfortunate that Dr.Wahab's absence from Khartoum at the-latter stage of the mission maymean that we do not have the Sudan Government's definitive positionon some issues.

2. We now have to take some important decisions if this projectis to proceed. You will note from Mr. Ball's BTO that the Governmentproposes to eliminate sorghum from the cropping pattern and that amodest redesign of the irrigation system on about 100,000 fd. be ex-cluded at this stage. While we have our concerns about Government'smotives in each case, we are prepared to accept these proposals.

3. The availability of adequate local cost financing provides acontinuing uncertainty (see para. 3 of Annex I to BTO which suggeststhat the gap may be LSd. 26 million over five years on the presentcost structure). We understand that IMF staff are now examiningwhether the required amount of local financing can be accommodatedwithin agreed credit ceilings under the EFF and we look forward totheir findings. If the judgment is that this cannot be accommodateddomestically, our only viable option will be to increase externalfinancing and help finance local costs from the IDA credit and requestthe co-financiers (IFAD and ADF) also to pick up a share of local costs.

4. However, perhaps the most critical issue concerns cost recovery.It is the mission's judgment that Government will not accept the pro-posed farm service charge (land and water charge) which, followingextensive post-appraisal discussions is now a central feature of theyellow cover report. The Minister for Agriculture in part bases hisopposition to the farm service charge on the tentative IDA/Governmentagreement that a study of cost recovery schemes would be carried outas a condition of the Agriculture Rehabilitation (Program) credit.He is also undoubtedly being influenced by the recent tenant's strikeon Gezira in response to the Government's announcement of a modifiedjoint account system. In fact in view of this tenant action, themission is not convinced that the Minister could follow through onan assurance to switch to a farm service charge even if he wanted to.

5. I have on a previous occasion expressed this division's un-certainty about the relative merits of various cost recovery systemsin the Sudan. This uncertainty has been based on a real sense ofour inadequacy in measuring the costs, benefits and risks of different

Mr. J.B. Hendry - 2 - October 17, 1979

approaches and in particular, the behavioral responses that can be eK-pected in what is clearly a very political arena. Our problems havebeen in part based on the fact that cotton is the only crop marketedthrough official channels and thus, that the switch to a service chargecould result in lower cost recovery than through the joint account(leading to a significant risk of a financing gap for projects such asNew Halfa). To some extent the bias against cotton has been rectifiedby other recent Government reforms, thus weakening one of our formerarguments against the joint account.

6. In brief, we think we should be prepared to go along (initiallyat least) with a cost recovery system based on that which is intendedto apply at Gezira, i.e. joint account plus incentives on cotton anda charge on other crops. At the same time, we must I believe do moreto ensure that the proposed Program Credit study on cost recoverymechanisms comes up promptly with a reliable and workable system andto achieve this we feel that IDA would have to participate actively.Such a system would be introduced under the New Halfa project duringthe course of implementation. Proposed covenants under both the ProgramCredit and New Halfa project would need revision to meet these objectives.

7. The above, if acceptable, would represent considerable concessionsto Government but ones which we believe are reasonable. At the sametime we have as a division considered whether there are additionalactions which could be taken to improve the effectiveness of projectimplementation in agriculture (particularly the irrigation sub-sector)in the context of the now strong sectoral objectives of the ProgramCredit.

8. Generally we conclude that the effective operation and maintenanceof the irrigation sub-sector in the Sudan is dependent on a highlyefficient system of logistical support, management and technical direc-tion which is currently not present in the country and is unlikely tobe so in the foreseeable future. While this conclusion obviously hasserious implications for the future of the economy, we are unable toformulate any proposals which are likely to be effective and acceptableto Government - for example a ministerial committee or a joint Sudan/IDAcommission to overview the rehabilitation of the irrigation sub-sector,a large program of technical assistance, etc.* However, we do believethat the challenge is a critical one and deserves wider discussion beforethe Program Credit papers are submitted to the Loan Committee.

9. Regardless of whether we can formulate some 'grand design'measures, we are seriously concerned about the future of Rahad, which,on present trends, could become another candidate for rehabilitationin a very short time. Mr. Stevenin's supervision mission BTO is attached.Essentially there are two problems. First, the Government agencies arenot acting upon a number of project objectives, e.g. introduction oflong furrow, cost recovery, civil works design checks, etc. Second,as things stand, there are unlikely to be the financial and technicalresources to sustain the Project at a viable level after completion,maybe before. Accordingly, we propose to send to Sudan as soon aspossible, a small but highly qualified review mission, the purpose ofwhich would be to devise an agreed program to completion and specify

Mr. J.B. Hendry - 3 - October 17, 1979

the fundamental conditions under which the project can be expected to besustained thereafter. We further propose that Sudanese acceptance ofan agreed Rahad plan be one of the elements of the mid-term review underthe Program Credit. One of the most disappointing features of ourrelationships with the Sudan is the continuing obstinacy of the Ministryof Irrigation (in particular) to discuss the Rahad issues. If any pro-gress is to be made, there has to be some straight talking and I hopethat the above proposals will be presented to the Sudan by senior manage-ment in the context of the Program Credit. We must move quickly onthis as we need to write soon as a follow up to the last supervisionmission.

10. On more detailed points, we additionally propose that under theterms of the Program Credit, the Ministry of Irrigation be required tointroduce commercial accounting into its two public corporations andthat Government prepare and discuss with the Association the outlinesof long term priority investments in the irrigation sub-sector. Neitherwill be welcomed by the Sudanese but both are important.

11. May we please have some early decisions on the above? We arein sight of obtaining short-term financial expertise (in place of Mr.du Mee) and if we can have an internal answer to the New Halfa costrecovery issue by the end of next week, it should be possible to getdocuments to the Loan Committee by mid-December; an extensive reworkingof the figures is necessary, but before we can do this, we need to havean exchange of telexes with Government on precise proposals for cost-recovery. For reasons mentioned above, we also require an early answeron the Rahad proposals.

12. The above has been seen and discussed with Mr. Blinkhorn who isaway for the rest of this week. He is in agreement with the substanceof the proposals.

CHW:cas

Cleared with and cc: Messrs. Harris, Stevenin, Ballcc: Messrs. Wapenhans, Adler, Maubouche, Maane,

Gue, Burmester, Blinkhorn, Shivakumar,Rajagopalan, Yudelman, Chittleburgh,Wiratunga, Mwine, E.A. Files

CC10

O~O), O

WORLD BANK / INTERNATIONAL FINANC i ION

OFFICE MEMORANDUMTO: Mr. C.H. Walton, Chief, EAPNA October 17, 1979

FROM: J.W. 1, C. Pradithavanij, EAPNA

SUBJECT SUDAN - New ialfa Irrigation Rehabilitation Project- Back-to-Office Renort

Background

1. In accordance with terms of reference dated 7 September 1979,Messrs. Martin, du Mee, Pradithavan ij and Ball (3IA) were to assert3lin Sudan to rry out the above mission from Sunday, September 23through Wednesday, September 26. But, due to the death of Mr. Martinand se rious injury to Mr. du Mee in a light aircraft accident onThursday, 20 SeptLuber1 the mission never assembled.

2. However, in a telex dated Monday, September 24, Messrs. Balland Pradithavanij were asked to pursue the mission's terms of referenceto the extent possible. To this end Mr. Ball extended his stay untilThursday, October 4 and a revised work program was formulated toaccommodate the participation of the co-financiers, represented byDr. Oluwude (IFAD) from September 23 through 26, and Messrs. G.R.Nanthambwe, T.L. Edgar, and D. Akroyd (ALF) from September 24 throughOctober 3. Ms. J. Koch, (IDA, Programs Pivision EA2DB), operatingunder separate terms of reference, also participated in the mission.

3. Key mission findings are summarized in an Aide Memoire (Annex I)and Minutes of Meeting with Minister of Agriculture (Annex II). Boththe Minister and Dr. Wahab were present at the meeting summarized inAnnex II ana the contents of Annex II have been cleared by the Ministeras an accurate record of that meeting. However, it is important tonote that neithor the Minister (who was unable to extricate himselffrom negotiat ions with the Gezira Tenant's Union) nor Dr. Wahab (Belgrale)were able to attend the wrap-up meeting in which the Aide Memoire which wasdiscussed and agreed to by Dr. Fatih El Tigani.

4. The mission was unable to definitively resolve two key issues(cost-recovery and financing gap). However, sufficient progress wasmade on these to identity the decisions which will have to be taken ifthis project is to proceed. Although it was possible to establishrelatively firm agree-nt on all other issues and mattcrz that had tobe discussed, some of these could be influenced by whatever is finallyresolved with regard to cost recovery and the financing gap.

Resolved Issues

5. Cropn;g Pattr-n. IDA agrcd to abandon the propoil to includerainfed sorgliu on L1d that could not be utilized for irrigated wheatproduction. Goverwont's arguments were threefold: first, sorghur: is

Mr. C. H1 . Walton -2- October 17, 1979

a host for diseases of sugar (there is a 41,000 fd Sugar Estate within thecommand area); second, it would be difficult to prevent "accidental" irri-gation of a rainfed crop within the command area - particularly when therainfed crop is a staple of the nomad tenants; third, Government stronglybelieves additional water wi 11 be available from the proposed Upper AtbaraDam within a decade, thus reducing the need to find an alternative for irri-gated wheat.

6. Although the mission was not convinced that these arguments alonewere sufficient for IDA to share Government's conclusion, it was agreed toabandon the rainfed sorghum because: first, it was obvious any attempt tonegotiate an alternative would take several months; second, an objective solu-tion would require additional stud -s; (Such studies have now been includedin the already commissioned New Halfa Phase II studies and results will beavailable towards the end of 1980); third, the removal of rainfed sorghumwould not change Project costs and whilst reducing the economic rate of returnis not expected to jeopardize the economic viability of the proposed project;and fourth, although the decision means IFAD must now resubmit the projectto its Board, it will now do so on the basis of a US$15 million contribution(whereas before there was a possibility that it would only be US$12 million)as a joint co-financier with IDA.

7. However, one area of concern for IDA did emerge from these discussiorsand that is the implication that the successful introduction of rainfed sorghuminto the cropping pattern could make it difficult to re-iitroduce wheat if andwhen additional stored water could be made available, - or, restated from IDA'spoint of view, in the absence of additional stored water, the successful intro-duction of rainfed sorghum could reduce tenant pressure to utilize more land(and water) for wheat production at the expense of cotton and groundnut.

8. Canal Irprvement. The Ministry of Irrigation would not accept IDA'sproposal to redesign the irrigation system on about 100,000 fd despite thefacts that: MOI were unable to fault IDA's design; MOI's alternative was2 to 4 times more expensive (before including the additional cost that Mr.Pradithavanij demonstrated it would be necessary to include in MOI's alterna-tive to correct a technological/arithmetic error in their costings); andMOI's was aware of the financing gap faced by the project. Since agreementwas reached that the tenant's involved would accept a continuance of nightirrigation (this point was briefly field checked by the ADF mission and Ms.Koch during their separate visits to New Halfa) it was mutually agreed todelete this component. The obstinacy of the MOI on this issue was disappoint-ing.

9. Water Management Specialist. It was mutually agreed that thisposition would now be filled by an expatriate and not an MOI secondee. MOI'sprevious willingness to provide this specialist was rapidly withdrawn whenthey realized the position would report exclusively to the Managing Directorof the reconstituted NHAPC.

Mr. C. H. Walton -3- October 17, 1979

10. NHAPC - Reconstitution. The draft "Establishment Decree, New Halfa

Agricultural Corporation" supplied to IDA, ADF and IFAD will require careful

study to ensure it is compatible with the final Development Credit Agreement.

For example, in its present form it specifies (amongst other things) the cost

recovery mechanism to be adopted thus pre-empting the proposed Program Credit

Study and fails to detail what if any action can be taken to ensure debt re-

payment (short of passively providing an open ended extended financing facility

to all tenants who are unable to meet their commitments to the reconstituted

Corporation). It was agreed with Dr. Tigani that the central importance of

this document to the project would require that its mutual acceptance by GOSand all co-financiers would have to be a condition of credit effectiveness.

And, the co-financiers specifically requested that the reconstituted NHAPC

would have to be a functioning entity as at the time of credit effectiveness

with all key positions (including Board Members) filled with personnel whose

qualifications and responsibilities either to and/or within NHAPC (1979)were acceptable to IDA.

11. Credit Program: as per Aide Memoire (Annex I para. 5).

12. Exchange Rate: as per Aide Memoire (Annex I para. 8).

Unresolved Issues

13. Financing Gap. (Refer to Aide Memoire, Annex II, para. 3). Thisissue is intricately linked with whatever cost-recovery mechanism is finally adopted.However, although retention of the Joint Account for cotton.will minimize thedemand for local currency this advantage will take time to materialize, willlag realized physical increases in cotton output by about 2 years, and do littleto avert the heavy demand for funds in the first two or three years followingcredit effectiveness.

14. The various alternatives of bridging the local cost financing gap(currently estimated at bSd 26 million over five years) have been referred to the

Programs Division who have undertaken to pursue the possibilities of accomnodat-

ing this demand within existing or agreed credit zeilings under the EFF. Missionattempts to interview the Governor of the Bank of Sudan (absent in Belgrade) orhis Deputy (London) were unsuccessful. A meeting with one of the five DeputyUnder Secretaries, Ministry of Finance (Abdel Ali Abdalla Makki) produced noassurances.

15. In addition, the Bank's "Revised Guidelines on Expected Price Increases(Price Contingencies)" dated September 24, 1979 will increase the demand forforeign exchange and preliminary calculations suggest this will produce a foreignexchange gap unless an additional co-financier can be found.

16. Apart from requesting Government to proceed to contact as many additional

co-financiers as possible and to inform IDA of any positive expressions ofinterest so obtained no other means of resolving this financing gap issue was

identified.

17. However, in the mission's judgement, serious consideration should be

given to the possibility of IDA raising its contribution to about US$ 45 million.This, together with a US$ 15 million IFAD and a US$ 9.6 million ADF contributionshould close the foreign exchange gap, and may leave a small surplus which themission suggests could be applied to alleviating a little of the pressure forlocal cost financing.

Mr. C. H. Walton - 4 - October 17, 1979

18. Cost Recovery Mechanism. The Minister was adamant that he would notattempt to implenift any mijor changes to the present cost-recovery mechanismon New Halfa until the tenants had realized higher yields. His reasoning isoutlined in Annex II para. 2. The limits of what the mission was authorizedto accept and the Minister's definition of "major changes" are summarizedin Annex II para. 4.

19. However, in the mission's judgement, the Minister's attitude andassurances regarding his ability to implement even minor changes must beweighed against the fact that despite several months of negotiation with theGezira tenants, he has as yet not been able to implement any changes to theGezira cost recovery mechanism. In fact, even though the cost-recovery packagehe is attempting to introduce can be shown to financially benefit the tenant,his efforts to date have led to tenant strikes that have flowed beyond Gezirato New Halfa. On New Halfa these strikes have reduced 1979/80 estimates ofcotton output from already prepared land by 80%. On Gezira, the local pressreported (Wednesday October 3) that the Minister has undertaken to providefree land preparation for wheat - which is estimated to involve 500,000 fdin 1979/80. Such a concession appears overly generous since it was notreportedly tied to any quid pro quo from the tenants, and followed on theearlier removal of all fiscal policies that recovered costs from cotton output.For these reasons, the mission suggests any attempt to implement any change tothe present New Halfa cost-recovery mechanism at this point in time couldbe thwart with danger with the cost of whatever the Minister has to concede towin tenant acceptance possibly exceeding the ben-efits.

20. Conseqututly, the mission recommends that should IDA choose toproceed with the proposed project it should seriously consider accepting theexisting cost recovery mechanism unchanged!/ with an assurance that the Govern-ment subsequently implement a possibly revised mechanism to be determined inaccordance with the findings of the sector wide study to be included in theproposed Program Credit. However, such an assurance would need to specify:

(1) The date on which such a study would need to be presented toIDA;

(ii) The date on which a mutually acceptable project specific costrecovery mechanism for New Halfa (and action program for informingtenants) would have to be mutually agreed by IDA and GOS;

(iii) The date on which the new cost recovery mechanism would have tobe fully operational.

Note: It is the mission's judgement that such a study could produce gneralprinciples to be applied throughout the sector and project specific detailsfor New Halfa within one year. That, a further two to three years may berequired to "sell" this to the tenants. Hence, if the proposed Program Creditand New Halfa Rehabilitation project were to become effective in the first halfof 1980 it would be 3 or 4 years before the new cost recovery mechanism couldbe fully operational by which time there would be ample tangible evidence ofeffective rehabilitation on New Halfa including near full production and in-creased yields. If this were the case consideration might be given to setting anadditional date at which substantial and irrevocable tenant acceptance must beobtained and made a condition of continuing disbursement.

1/ Or at the most seek to hold the Minister to the position negotiated inAnex II para. 4.

Ad A A a . 3 : r1! LIrT~nog Ianj cr

id& o0r- on r7 p, L igrh I!:ion

r ing with Hlistry of National TlP t tr-i

Wdo -y coe 3rd,1979

Prerent: . FAtih E1 Tini MNP. Sat r P- UD/1 0

,. s. UNPL ea aMr. G.R. tl1 AfDBMr. Thor s L. r.'-r AfDBMr. Drd /hoyd AfDBMr. J.W. Ball IDA

Pints covof h

1. Mrra ThL r.. tSOl 3 : L3tcd ra iute.: of 1eetL,11i8 1.XCel vey, linr er of is e uture ,~i rua Ti' t ay 25 xji .~.

1979 at 11:00 a.m.

2. e cover; nfn ; i jtiati culmi aa stat dIt'cy, 7 ntar of A ru ture, rtcu

Tucsday tcb , 1979 at t

3. C u -. Tt : ):nueebe fin rewlyc~ r u tilJ - . GYt l tr Uy e

oludo~ tothe cce-recovery . fcrm , Mct dio: rroc..: -don the 1 I of a V,,: Proj f orign c0 e of .0iljlior. for local currency 42. Aion

(a) kam~ehngereqiresnt ppraluaelyUS$66.0 ulinIdtetified oures (US$I~lonIDA : 30 40IFAD :12 a1ADF : 9. 9

Sul-L&: 51 (4Cap 14.4 1.4

(b) 1 -c cy r1- l _!.4

(1) rojet iduce ers an taes (EP)6.410.0

Loan to UPC (197)rm akof Sudain(BO): ithgra ydd o 4 aro an

repay t. over 1 a at 9 utierest

ANNEX IPage2

-2-

(ii) As for (i) but with 10F paying principal and interestdue to BOS during f rct 4 y rs.

(iii) As for (i) but reducing BOS loan by finding a fourthco-financi r.

(iv) As for (ii) but reducing BOS loan by finding a Tourthco-financier.

OS is re triCd tundr Fi, o ceilin, red to Do -Ltic. M endLure also L-r ic:ed by an ITF celli but the room

for eomodatn, a BOS loan to NAC versus an 1 Ceneral ,-lenditure0a i tion the 1 rits of k tural r. : -t ons"much r:aterr ( rtonal Co unication: K. a Iibi, IHF, re dentRepresentative)

(c) rendin, further discussion with IFAD the intention is for IDA andIFAD to jointly finance the foreign - require7--nt of theProject not parallel financed by ADF.

(d) ADF have indicated their wish to parallel finance:(i) all rcad mking equipment;(ii) all c:nnal maintenance equipment;(iii) all electro-mchanical guip ent;(iv) all tclecomaunications equtrent;(v) all new tractors and naVieultural e uIpment;(vi) and part of the motor vehicle compenent.

(e) It was mutually n reed that the MNP otid:(i) proceed to contact as many potential co-finanri-rs as posr161e

(including the variousi Arab Iunds, er in and other sources ofbilateral aid) to estabi h hich, if any, may be inter tod incontributing prefon ;ocnnu t cur.my to this Project, and

(ii) to imform IDA of any p itive expq .ulons of intereat so obtained.

4. NWiC - ?econit tion: cpis of draft lcrillaA io were rupiliaJto IDA, and IFAD. he NNP and co-fin l , a .r that this d anentis a key I ,.-l instra ont and c d not be falized u .il the cost reco-very and ft ming i- i had ben resolve and incor o e d into thedocument in a manner that is Tundily- acceptbl to 0 and IDA. Even so,as at credit effectiveness the e rtituted I'TAPC woni have to be afunctionin entity with key positions ill th per -1 khose rian-sibilitien within N C and qualwieatiow wre acc p beato IDA.

5/ Cr t re r :: u was ced that all internatt.1 aid would bechanneller c, c1-- 1 Clern to t COS then on-lent to APC (1979) atan interet rate to decidd; nthat r (1979) ould then o Iaedto co-opr .Lves and nt in or r1 ) at cin cInal rates ofinterest C, :nsurate witu thoi used for 1hnn to co .toratives, theprivate sector, forn'ra and tens roedr in Duta .

ANNEX TPage 3

-3-

6. Card1 I-,rve~~nt Crnonret: It was utum11y .reed beteen MOIand IT- . the tr or: L in Lu(de an i' iA ti on la velopcut Co!1pon;nt

to convert the area that is corrently r rced with a continuonna irri-tion to a I ht-eture ,tem tiu be -cI : '. The en -tin

ir- - ;lfr- e ut res inhis area n ad be n v bilit: .: as a

cot-.u iritto7. Eter ma geent 2ciai t:It asrtoi13y :.; E~d hchtocn M01

and IDA I'at i uc o this .-t; t - ldbe recrulted to fill the posit and that his quali'ications and termsof rfe c,<' (adjubt d to DeCort' ti the reIl of the IrigationDcvelopn t. pos: L) v0uld be I Lab DA.

8. Excl-ore Rate: It was aeed that the GOS vould be asked to assurethe co-firoraciers that all Project rer-ta <penditures and receipts

would be effected at the Offikal c.r Rate.

cc: Dr. Fatih El T11:iii 1-MP

cc: His Excellency, the Minister of Agriculture

cc: Ma Janet Koch

cc: E/I13, Washinng a - Attention J.W. Ball

ANNEX IIPage 1

M I N U T E S O F 11 E E T IN G-

With His Ec llency,

Minister of Agriculture

Yiartoum, Tuesday 25th September 1979,

At 11.00 am

Pre I :1 y, the 7 !,it of -. ulture COS, MOA

Dr. Wahab COS, MOP

lOS, PAPC

Dr. ratih El ligani GOS, MOP

Ali Mohamed Ali Nur el-Din GOS, MOP

J.W. BAll IDA

C. Pradithavanij IDA

Ms. J. Koch IDA

Dr. Olowide IFAD

G.R. 1a.thambre AfDB

Thomas L. Edgar AfDB

David Akroyd AfDB

Subject: New Ulfa Rehabilitation IT -tion Project

- Post / praisal I ncIon

Major Issues:

(1) Crn; yii pattern - need to remove un us.

(2) Cost recovery mechnnism in uding IDA's propoi,4.

(3) Fn nc gap.

(4) Cama ipruvr at proQs .

ANNEX II

Ptbe 2

Croptr tu tr:

1. T-propon I to inchdc r~ iied nor -Aan in the cropning p.ete.rn hadto be ~r iter~ it is -t for d ri of . a

r'andnte to to Wod fr the and ser e is a 1tapl 66 thepoor thi Z.c the 1Y Ti tica Luitation Projetwould to be r tt t 's . for rnal. AltI on:h t0 -nut, C, C,1Y~

3Uar & r ', about of iscurr_,'ty iuzed usin- traditioral uethods by some of the pcoorest of Sudan's

<Co pt T&covery:2. proposal to abolish the Joint Account and introduce a Farm Ser-

viccrcdIt fectiveness was vimromly dicumed, His Ycellny Tthe Mi n-t y's posi . First *:.:retrtion of any uch cL! 2: xo:-

-pend on rmicfv vfhlds i'e 3 as a rcut e r'habili ation.Second, in the tran!tion pri (boen credit effectiveesa and the real-ization of hf•her y 1) the raction itionsMp :Itretcd should rainas fleXible as possiE to ayot cr-ceptin effative co unicatiel withtenants. Third, it a the initer 's u3derstr. n that GOS & IDA had careed(during the recent ni-icUtural imorta pro rxr cr it v1riml) that coatrecovery is a sector .diue. Tourth, m r 1re tln to the Irc entcost recovery arrar. Cate on Alfa veuld prept COS's ability t acton the f u1i n of the scetor stuiy to carried out under the pslrcredit.t' llfth, at this Voint in time the lIi try is as tble to accept onrerit the proposition to abardo the o:int 'ront.

3. IDA ni, it roted fliAo a potts and emlai that: theprogran . had no been n! ti!ted r irai i vold have to rierto Bsie A

1T for a cci7 on . a all i uent

discussio muld hae to sje to rena, ticu of Joint Account issuon a rnituly accepto 1; basis.

4. In order the diP ' to coti - all diMcussion toland and carr (L0) on e azo nt i rhitI- , son it q uit clLr th L:iVe 7C IT~ f'7 irsp . IDA

v to 's th htfa

J1st. rr Proj coste t rtirt i the life theject with c -l -tjri - the diaburr t and - it wason this ,n that trc Cx;-e t ) ei 's :-: t staff

/grai1 m t lca . T L r the to in-

troduce t m erefv - ion the s were 1 1dir rnd l J c t es..;. urtLr a _ en 17 it e-vincd mis" J. IDA's

S.met criter ir' . 1::otiUcrtu cub H v in stry c a t nrthe l :dr lch ' 's to be G.A.;1;itad 's piyrz~ tmlwrof I o inm provIa ' -y were revcd to ;.,ly to se aiu end :seat only

and subjec to:

(a) On the of n f y

(I) 1, OL.un of t : - for o n and(ii) i1iv uti a Jo1t A count

of the 1prr pr 1 c schene

ANNEX IIPage 3

-2-

rocently introduced in Gezira

(b) On the part of IDA(i) wntiefacN y r,, o lInI of the

Joint ?ceru L cim, and(ii) cle: < sy ce of effcrti-ve cto to

info~ to -- t of ''s iiisc en toirFSC onl I g nt at

tand of te to tsoes da

5. In this :: ct the iiter claimd that the tenaats were aleadyinformed via st tr vs he had a to th Sudar * i h W cti, rii'ntand . to ete nco and forthe iis to inoivi - tenat. at. N -;l.

6. Discussion failed to reveal a rctical colution to cotton contin-uing to bear the : everza o o f r udut ad vvbhe at for all tenantwhiose net rctuu frm cctton ±iled to Iedt ir total d x to rfor grounut whent. Altujh this is an i7-.' 1 consd nce ofNMPCornly controllin the tr~nrketi of cotton the ot was r d that it inthe cont--',t of the propesd rebahili r on it was not visale for TAPC toatte *pt to enter the nrket of non-cotton co-o ration. The Yiniteragreed that the thd of FSC p ft T tec the D ft Staff : aReport (in ked ag it is to the reation of an up Lad tenants rister, ud

a ti htly contr< c delit rr -c ry r- :m in . the provision of anertende.d fr.ianc ft cility for cr-1-t 1 tr te-t ecupld with stoporder.i on traue t and 1:t and -tati in eviction for per:is entpayr tent defnult) ray provide a soluti11 but time did not allow the d 1o,-to prrLcd to a final conclusion.

7. Isau on on the firein was dcf d, to be t n up withthe Itijotry of Lional mir and try of Tinace.

CanJl roe e vrr8. ncu sic ca the e, i fnr- eut pro ra 1 was d-£ iaed to betaken up with the istzy of igatien.

St

October 15, 1979

Dr. Abdel P.=n Abdel W'habUnder , 7taryMinistry of -'tl-nal PlanniugP. 0. Box 2092Khartoum. Sudan

Dear Dr. Abdal Wahab:

I wish to acknowledge receipt of your letter dated June 28, 1979by which your Government requested an advance from the InternationalDevelopment Association for final project preparAtion and start-up activitiesoutlined in that letter.

This letter will confirm that IDA accepts your Government's requestand hereby grants to your Government an advance in an amount not exceedingUS$530,000 for the purposes and on the terms and conditions set forth in theattached letter and the Financial Provisions Applicable to~Advances for ProjectPreparation publishied by IDA on December 1, 1976, a copy of which is alsoattached hereto. The approved advance is US$140,000 less than the totalrequested in your letter; the difference represents local costs which we proposeto exclude until the Bank Group decides whether to finance local costs for theproject. This decision will be made after the return of the Bank's post-appraisal mission.

The advance of US$530, 000 will czarry a service charge at the rate of0.75 percent per annum as provided in Section 6 of said 1Ancil Provisions.For the purpose of Section 7 of said Provisions w. would propose that the date ofJune 30, 1980 be used; this should provide ample time for completion of all requiredpreparation work.

Since the advance would cover not only the procurement of services butalso that of spare parts, paragraph 4 of your letter of June 28, 1979 should beunderstood to mean as well that any procurement of goods and works would be madein a manner satisfactory to IDA.

It is understood that the grant of this advance does not constitute orImply any commitment on the part of IDA or the International Bank for Reconstructionand Development to assist in the financing of the project for the preparation ofwhich the advance is granted.

OFFICIAL FILE COPY

Dr. Abdel Rahman Abdel Wahab - 2 - October 12, 1979

We note that withdrawal applications will be signed on behalf ofthe Governnent by Mirghani Mohamed Ahmed, Uinistry of Nlational Planning, orany person designated in writing by him. Authenticated specimen of signaturesof the persons so designated should, of course, be provided with the applications.

As proposed by you, your letter of June 28, 1979, and this letterconstitutes a binding agreement between your Governmient and IDA, effective asfrom the date of this letter.

Sincerely yours,

rAndre R. Cue

DirectorCountry Programs Department

Eastern Africa Region

Attachments

TABlinkhorn/ld

and cleared withcel Messrs. Walton, EAP, Blinkhorn, EA2DB, Hine, LEG, Wiratunga, CTR, Lethem,PAS

OFFICIAL FILE COPY

lbs III [.%I &.. 4~~' &:, 3tO ,4J1. 1 54

Ministry of Natinal Panning

UNDER SECRE'ARY'S OrrxcJ

r.o. iNox 2092 KIIARTOLM

TELEX 3A.1 1,

-- .*. .-R : . .. ... - -.. .

Hr Andre Cue, •Z

Eastern Africa - Country Prograts P'pt. II, >11 >' JInternational Development A!sociation, £ -1818 H1 ST. NW,Washington DC 20433.

Dear 'Sirs,

Attention: Country Prvtgran Departre-nt,.. astern Africa RegionSub-ect: Advan:co for "reratje. cFn f e ala Irritation

RehaI'iitrion l*i'rotc.

1. The Goverr.-ent of the Democratic Republic of the Sudan herebyrequests fror the T nternation1l Develop-mnt Association (IDA) an a1dvancein an amount not exceeding USS750,000 to finance cortz-in expendituresrequired to con'plere the preparation of rhe New Halfa Irrigation Tlchabili-tation Project. The initia! preparation of this project was covered underthe Technical Assistance proj'et (IPA Credit No. 614-SU). The renaining.funds under the Technical AssisLance project are not sufficient to comiletethis preparation.

2. The activities and goods required to complete the preparationof the project and maintoin agricultural production in Ncw I!alfa IrrigationScheme until the proposed project becomes effective, are:

US

' (a) Financial Consultancy -m.45 an months with operating costs 153,0NIO

(b) Iternationally recruited Procurement_At .- i - Specialist operating costsfor about

c-a-year 80qOO

(c) Spare parts to rehabilitate ex4.sting

Agricultural and canal maintena-nce machineryand motor vehicles , 440,000

Total Cost:- 670,000

-2-

These investments would allow the New.H1alfa Agricultural Production Corpora-tion (1lAPC) to reorganize its accounting procedures', assist with the pre-paration of the financing a-rrangcments within the reconstructed NilAPC andprepare procurement documents, initiate improved water manngement proceduresand purchase spare parts. for existing agricultural and canal maintenancemachinery and vehicles.

3. Consultants acceptable to IDA would be employed by the Governmenton terms and conditions satisfactory to IDA for (a) above. IDA would beasked to a.sist the Government in finding the specialist staff reqluiredunder (b). Draft terms of reference for (a) and (b) are enclosed. Under(c), procurement would be limited to a list of spares, prepared by NHAPCfrom the original suppliers of the equipment; in this case, direct paymentto the supplitrs would be the method of disbursement favoured by theGovernment.

4. The Government will carry out the project preparation activitiesoutlined above with due diligence and efficiency, will promptly furnish toIDA all such information covering such activities and the use of the pro-ceeds of the advance as IDA shall reasonably request and shall from time totime exchange views with IDA's representatives on-the progress and resultsof such activities.

5. The Government hereby accepts the Financial Provisions Applicableto Advances for Project Preparation published by the World Bank and IDA on

December 1, 1976, a copy of which we have received, and unconditionallyundertake to withdraw, use and repay (with service charge) the requestedadvance, if granted, in accordance with such previsions.

6. The Government proposes that, for purposes of Section 7 of the saidprovisions, the date of June 30, 1980 be agreed upon between us. No with-

drawals of the advance will be maide after the said date.

7.- Withdrawal applicatioiis for the advance, if granted, will besigned on behalf of the Government by Mirghani Mohatmed Ahmed, Ministry .of National Planning, or any person designated in writing by him. Authen-ticated specimen signatures of the persons so designated will be providedwith the first application.

8. The Government understands and accepts that, in accordance with

the said Provisions, the advance, if granted, will carry a service charge,on the amounts of the advance withdrawn and outstanding, at the rate thatwill be specified by IDA in its acceptance of this request.

9. The Government understands and accepts that the granting by IDAof the advance reested vould not constitute or imply any commitment on

tjio part of IDA or the World Bank to assist in the financing of the projectfor the preparation of which the advance is requested.

10. The Government represents that it is authoeizd to rcquesto

accept, withdraw and repay the advance in accordance with the foregoind

and proposes that, upon acceptance by IDA of this request, this letter and

the reply of IDA, including the Provisions rferred to intparagraph 5,

will constitute a binding agree:ent between the Government of the Democ-

ratic Republic of the Sudan and IDA.

Yours very ttuly,

Abdel Rahman Abdel Vahab

Under SecretaryMinistry of National Planning

Enclosures: 1. Terms of Reference - Financial Consultant.

2. Terms of Reference - Procurement Specialist.

No. 2.15 Anwx It• ~Alfewa

Issued: No cii r 1976Page of 2 lagc%

Operational Manual StatementThe World* Bar.!

Form Ne.. 1170 WORLD HANK(12-76)

FINANCAL I-ROVISIONS APPLICAltLETO ADVANCES FOR PCILCT NIEPARATION

dated Dcccnsber 1, 1976

1. In these Provisions, the term "World Bank" means (i) the intcrnational Bank for Re`conruttionand Devilopme-nt in the case of advances granted by it or (ii) the International Developmcnt Asuciaion, inthe case of advances granted by it.

-2. Advances for project preparation& pantcd by the %oldd Bank at (te request of a member ei t a.nr(the Governmentj shll be withdrxn by the Gvermmem only t% meet evpndimies reuiled therefor as cdbetween the Covernnent and the Wodd Bank, upon submissioin by the Govcrnenerit of a writtn te.In the fnrm specie: by thw Wo:ld flank, signed by an auwrvzed represcntaLwe of the Gmemmeiut .ndaccomparied by vii-t.nv, satis.ctory to the Watlw- Iim, of tihc-expnuture incurred or to be incuaed.

3. The amounts of the advance shall be witir awn in U.S. dollars; at the requcst of the Govenmnt.however, the World mjak may, on behldf of the Govermnent, purchase with the t..S. dotas so witlhdlawa ;Iyother currency requiaed to meet an cxjenditure to be financed by the advance. WiLltdwas shall he m:ad lsyon account of cxFnitturcs for services up id from. or goods produced in, member countries of the WetildBank or Switzerland.

4. Payment of the amounts so withdrawn or puirchased shall be made only in or on the ode r tleGovernment.

S. The World IBank may, by notixc to- the Gocernment, suspend at any time further withdraw .s ofthe advance ir any fund% theretofore withdrawn have not been used for the purpose agred between the ,aa.V 'm *

and lie World Itnk or if the papamion actvities are notecarried out in accordaice with the sttanvltwdair rnethtI arecd betwen the Goverimeu and the World Bank.

6,- -Ai Ja aonuls of the advance so wicitdawn and not repaid shall carry interest or a service chuargeat-Ife raie specciied t lTrWrldl ank ar the tie the advnce is grauted.

7. The amount of the advance withdrwn, together widlh interest or srvice charge accrued thcrecn,salbe repaid by "the Government ti lte Worldl Bank as follows:

A. if by.the date agreed upon for this purwose by the Government and the World .mk at thetime the advanice is rranted, a loan shall have been ranted by the itertal Bank tirRemiwtructio'ni and Di:vea;llomm. or a devclopmtent credit shall lave been ramted by tileIntel national Dew,%pmen Awwutron forl thle pullpose of anisting inl thle finanemyll: tof thle

pnject for tile plequrtin w ht w llth tite aiujnce wa.s ptatted tilr Jn posIlttill of such Itprotecti.then the hill 34amunt oif the Jdiice wittidrawin and aultstatdull sl.ll be reuid tat the Wtoildlbank, with interest air wvie Cluite accrued thieieani, by mieans al a withdrawal ofi the pro-ceas of ssch hunl oir delpmeinaIailat caedst in actdudamne with the prowiswits of such aircmewnt.

as dauan as such ar muent sill t uve becmate clcclive.

( ~ ~~~~ikM aaavaama saa rw Ae aw e r of atie afeuf r ir. awSatM a.,nlna ae ian neen a nurr iabOttreare iaf di e n~. ni raav

a bu~~& aat Se al 4ia a!» sor eata~j It awL na.aA laa~ Uet er aade a~w een eh y e1eeea Jo e msg u. ft rnaty g..r be pSaaakeL gessens aa atderuA. h tie.. OW aM. b., o.# 11 C

F .

NM. 2.15 Anusex isAttaciuslent 2Inned: Niember 1976'age 2 of 2 inges '

OperationI Manual Statement

B. If by the date referred to in prataph A abve no such lo.in or devclopment credit sh.ll havebeen -ranted, or if the .grceent p' - fur such loan or developnent credit shall have lcentenninated without hbcumouag cffct c, then:

(a) If the amount of the advance v.ithdrawn shall not exceed U.S.SSO000, such anountshall be repaid by the Government to t1h World Blank, toetienr with aferued interestor service chare liercun to the date of repayment, on such date i the World lbikshall specifiy in a notice to llc GovenrnCnt; such date shall in no event be earlier than60 days following the datc of dispatch of such noi.cc:

(b) If thei amount of the advance withdrawn shall exceed U.S.550,000, the aggregate of suchamount and of the -interest or service charge accrued thercon to the dae rceferred toin paragraph A above shall bc paid by the Governmnt to tlIc Word Bank. to!ictherwith interest or service charre at the ame rate on such aggreate outst:mding from timeto time, in ten approximately equal se-mi-ammioAl instalhne.nts Of principald and interestor service charge, in the amounts and on the daics specified by the WVorld aln! inl anotice to the Governrment; the first installment date shall in no event be earlier than60 days following the date of dispatch of such riotice.

T 8. All pyrue-nts to the World Bank shall be madec in US. do'ltr at such plces and with such depositoriesas. the World llan~k shll specify.

-SM.

IT agwr a s e r er e I r e. un..ie ii 0the Werlh nw r ,M1aeunplea a smr of qr w JJen onkt 8111o 14 0 j twit &V tw•• I Net Nth d 16 N mj J4 a %I ' Ie Of, P I "t a i lh I'M e N k Joae n 4 Ar P4u14,nho, 4 td, Ve e-tr

41011&A Me U U

.11 ;i L.-

Ta OCTOBER 11, 1979

____ ___ ___ ___ __ ___ 12 10

START f.1 HERE TO INTBAfRAD

CITY/COUNTRY KHARTOUM, SUDAN

MESSAGE NO 74 FOR FARAG. PLEASE PASS TO SHIVAKUMAR REUR TELEX OCTOBER 11.

5 AAA PLEASED TO NOTE ,ENCOURAGING NEWS ON PROJECT SCOPE, DESIGN

6 AND RESOLUTION OF MAJOR ISSUES. BBB AGREE YOUR DECISION NOT

Aft TO PRESS PRODUCTION RELATIONS ISSUE. IN VIEW OF SECTOR-

8 WIDE IMPORTANCE, WE WILL DISCUSS IN WASHINGTON WITH REGARD

9 TO NEW HALFA AND PROGRAM CREDIT AS WELL AS WHILE NILE. CCC

10 POUCHING GEZIRA BRIEFS TO FARAG AND ARRANGING BECK RESERVA-

11 TION PER YOUR REQUEST. REGARDS WALTON

12

13

14

17

is

19

20 ENDOF

21 TEXT

SUD - White NiLe, NewHalia, Program Cred R arris:cas

cc: Messrs. Blinkhorn, BaLL, Kuffner C.H. WaLton, Chief /akk-lMs. Watsom

E l4 --w ErA

Distributi si

Mr. Walton

Mr. Burmaster

I A DG KHARTOUM Mr. Shivakumaris ofc.

OCTOBER 11, 1979


FOR WALTON EAPNA

AAA THANKS FOR MESSAGE ON BECK. SORRY WE OVERLOOKED

PUBLIC HOLIDAY.

BR MISSION PROCEEDING BY ROAD FRIDAY 12TH TO KOSTI FOP ONE

WEEK FIELD VISITS. PLAN WRAP-UP MEETINGS ON 22ND.6SUBJECT

TO MINISTER'S AVAILABILITY. WILL TELEX FLIGH-T SCHEDULE-S

ON MONDAY 22ND.

C CC ""JrT' rCr A~ DFS~!r1M M'I4~1 CLEARER AMIDl ACCF'?TAqLF Tf 'Jos.

IT COMPRISES OF PROJECT WIDE SHORT TERM REHABILITATION WITH

START ON A FEW SUB-PROJECTS ON A FEW GROUPS WHERE CROPPING

AREA AND CHOICE DECISIONS ARE CLEAR, SOILS SUITABLE, EARL-Y

PUMPING POSSIBLE FROM SUITABLE SITES, rItMCIAL TIA0ILITY

nPOrotre !°OfnT AND ELECTRIFICATION FEASIBLE. WE. HfA.VE

LOCATED SUCH GROUPS BUT ASSURANCE ON ELECTRICITY

AVAILABILITY BEING CHECKED CLOSELY IN VIEW OF PA-ST

EXPERIENCE WITH PEWC. DESPITE UNCERTAINTY REGARDING FUTURTE

AF C rPORnfAT TSMC AUCCIUNT Nm ABAITTION A PAPC CQP CH.TCF

ISSUES IN CERTAIN POCKETS, DATA COLLECTION PROBLEMS,

RELIABILITY OF PEWC TARGET DATES AND FUTURE PRODUCTION

RELATIONSHIPS AGAINST THE BACKDROP OF THE NEW HALFA IMPASSE,

ENCOURAGING RESPONSES FROM GOS MAKE US HOPEFUL THAT AT LEAST

SOME OF THESE ISSUES WILL B EYE WOULD WEVER

APPRECIATE GUIDANCE ON PRODUCTION RELATIONS ISSUE IN CASE MY

TENTATIVE DECISION NOT TO PRESS IT NOQBUT LEAVE IT TO LATER

STAGE IS NOT ACCEPTABLE TO YOU.

DD FARAG WOULD APPRECIATE IF TE COPIES OF ESAI IlIS- 4EIv A

BRIEF COULD BE POUCHED TO HIM FOR DISTRIBUTION TO, GOS.

F' rECK WILL RE IN WASHINGTON RD NVE MBER THRO.UGH 16T4i.

GEORGETOWN DUTCH INN RESERVATIO S MAY KINDLY BE iMODIFLEF

ACCORDINGLY.

R ARDS,

SHIVAKUMAR

INTBAFRAD KM.

1197688WORLDBANKO F000

TELEX October 2, 197972820

INTBAFRAD

KHARTOUM

FOR KOCH REF. YUR TELEX SEPTEMBER 29 CONCERNING LOGISTICAL

DIFFICULTIES STOP AGREE TO YOUR PROPOSAL FOR A FEW ADDITIONAL

DAYS IN KHARTOUM STOP GRATEFUL IF YOU COULD TELEX EXACT

DATE OF DEPARTURE AND EXPECTED ARRIVAL WASHINGTON

REGARDS BURMESTER.

SUDAN - New Halfa Irrig, Project TAB Li nkhorn:sLw

Sven Bur .er, Chief, CPIIB

LAN-CPl

QABLI, SECTION4

INCOMING TELEX

RECEIVED

-. Ceio F.1043

197S SEP 29 PM 1:30CABLE SECTION

DIST: MR. BURVESTER

F00

KOCH eieN~BEL BUONO

I II

AMKMl"

/ aGd Mo*zJIaANI~4 14-. L

/pf~

TELEX September 28, 197972820

INTBAFRAD

KHART0LtMr -SUDAN-

FOR FARAG REF GOVERNMENT REQUEST FOR PPF ADVANCE FOR START UP

ACTIVITIES FOR NEW HALFA PROJECT STOP GRATEFUL IF YOU COULD

INFORM MINISTRIES OF PLANNING AND AGRICULTURE AS WELL AS

MEMBERS OF BANK MISSION THAT MANAGEMENT HAS APPROVED PPF

ADVANCE HOWEVER AMOUNT APPROVED IS ONLY US DOLLARS 530,000

AND NOT 670,000 AS REQUESTED STOP MANAGEMENT DECIDED THAT

LOCAL CURRENCY COSTS OF US DOLLARS 140,000 WHICH WERE

INCLUDED IN THE LARGER TOTAL SHOULD BE EXCLUDED UNTIL A

DECISION IS TAKEN AFTER RETURN OF POST APPRAISAL MISSION

WHETHER TO FINANCE LOCAL COSTS FOR THE PROJECT STOP LETTER

FOLLOWS REGARDS BLINKHORN

Sudan -New4 tlk Project __ TABtinkhorn/L

cc: Messrs. Burmester, Walton, Mwine, Thomas A.Wiratunga

TjAiPDB

DISPATCH 3

ECT-N PH 826CABLE SECTION

September 28, 1979,

Director Africa DivisionProject Danareuent 'epartrentIntcernatioal Fund for

10)?, Via el Serafico,01l42 Ror~a, Italy

S AX Haifa arbIR Ia ilitation Pro iceThank you for your letter of Septerber 12 1979

Tnk t97 ant ya si asb aressionof I A1e continued I-ntarest In co-financini tile proe,,ct wit', the Bank.As yOu know. tie post-appraispl 2iission has been af. 117e b tlte tr acaccident last week involvinm Messrs. Marin, du Jee ilkias, but t eremainin nissi .c nembers are continuing to operate ia tbue tio!, thwe anticipate beinr able to process t -redit -- ,ra,

We t ye couiveyed IFA s observations ana Crents on the YellowCover Staff Appraisal Report to the Lision, au expect that they willbe abl to answer th, qukstious you .. v. raised to IFAD's satisfaction,On th e subJect of erirf., patterns, 1N~uAPC ha3 iniforved the missionthat it will UOloe be possible to includec sorfdua in the Proiect,due to probler of plant pathology and os le avers effects or,sugarcane outsiue the pro we trust tare teproject will contiute to satisfy IUFI..D's v lnate to rupport foot proue-tio in view of t. project's beneficial impact on the output orgr 'ianuut, W- seat aa.Cottonseed,

p e ilt b sendin' copies of the revised draft Staff Appraisal Re-port anp Leal Dopurins, a soon a tnese are prepare after tPe returnof ter post-apnrai Ad s We look forward to continued closecoo eratin with UtFAi on i'j Ll. project.

Sincerely yours,

R.L.P. FarrisDeruty Division Ci I

orthern Apricultur" DiviAionEast Africa Prcbects Denartment

Cleared with and cc: Mr. Blinkhorncc: Messrs. Wlalton o/r, Ball

RLPh: cas

a ii. wa, oor F4 004,

INTBAFRAD KHARTOUM

SEPTEMBER 27, 1979

INTBAFRAD WASHINGTON D C EIn A LIEBENTHAL_0ERCI5fANZZ B IUONO-- JiN' .OR AMUKOERGEDJITARKHANI

FOR BURMESTER/BLINKHORN

EXPECT TO BE AWAY FROM KHARTOUM TO NEW HALFA, RAHAD, GEZIRA BY

CAR, FRIDAY SEPTEMBER 28TH THROUGH TUESDAY OCTOBER 2ND. WRAP-

UP MEETINGS ON NEW HALFA TENTATIVELY SCHEDULED WEDNESDAY OCTOBER

3RD WILL LIKELY DELAY RETURN TO WASHINGTON BY A FEW DAYS TO

COMPLETE TOR. WILL FIRM UP SCHEDULE NEXT WEEK.

REGARDS,

KOCH

INTBAFRAD KM.


OFFICE MEMORANDUMTO Files DATE September 26, 1979

FO. Ilaus Meyn, Acting Chief, EAPNA

SUBJECT: SUDAN: New Halfa Irrigation Project

Telephone Call by Mr. Ball

1. Mr. Ball rang from Khartoum this morning to report about the progress ofhis mission and to give details about his further mission schedule.

2. During discussions with the Minister of Agriculture, Dr. Abdullah,the cost recovery issue has not been resolved. IDA's position is tointroduce farm service charges from the year of disbursement to coverProject costs and interest up to year 20 and that cotton, groundnut andwheat must be included. The Minister is of the opinion that:

(a) introduction of this new formula is premature because it would preemptGovernment to act on the findings of the sector wide study on landand water charges envisaged under the Program (Agricultural Services)Credit the Minister wants a sector-wide solution; and

(b) the joint account system should be retained and amended by the "ProgressiveProduction Incentive Scheme"as recently introduced into the Gezira,the inclusion of groundnut and wheat in the cost recovery schemewould be acceptable.

3. Mr. Ball will visit the Project area Friday - Sunday and assess whetherfarmers are aware that land and water charges would be levied, not onlyon cotton but also on groundnuts and wheat.

4. For plant pathological reasons dura (sorghum) had to be taken outof the crop rotation because it would threaten the sugar plantation in thescheme; and this may affect IFAD's attitude towards co-financing the Project.

5. Mr. Ball will extend his stay in Sudan until Thursday, October 6,arriving in Washington on Friday, October 5.

cc: Messrs. Blinkhorn, Hendry, Harris, Walton (o/r)

KMeyn:ab

TELEX September 26,_19797 5574

INTBAFRAD

KHARTOUM, SUDAN

FOR FARAG PLEASE PASS TO BALL. RE YOUR PHONE CONVERSATION

NEW HALFA WITH MEYN. AAA WE WILL BE UNABLE BEFORE END OF MISSION

TO RESOLVE ISSUES OF FARM SERVICE CHARGES. PLEASE OBTAIN FOR

ANALYSIS AND DISCUSSION ON YOUR RETURN GOVERNMENT'S PRECISE

POSITION ON (i) FARM SERVICE CHARGES VERSUS PROGRESSIVE PRO-

DUCTION INCENTIVE SCHEME; (ii) MODALITIES TO INCLUDE GROUNDNUT

AND WHEAT CHARGES; (iii) TIMING OF INTRODUCTION OF CHARGES.

BBB PLEASE CLARIFY WITH IFAD REP POSITION ON SORGHUM IN LIGHT

OF FACT THAT GROUNDNUT, WHEAT AND COTTON SEED PRODUCTION UNDER

PROJECT MIGHT ALSO MEET CRITERIA FOR IFAD'S MANDATE FOR FOOD

PRODUCTION. CCC FINAL BANK POSITION ON ISSUES RAISED POSSIBLE

ONLY AFTER RETURN OF MISSION AND PRESENTATION OF RECOMMENDATION

TO LOAN COMMITTEE. DDD MEYN HAS INFORMED YOUR WIFE OF YOUR

NEW FLIGHT SCHEDULE. REGARDS HARRIS.

SUDAN-New Halfa

cc: Messrs. Walton (o/r), Blinkhorn, Meyn ting Chie EAPNA


..........

x .. -::::

-:- x .-

- x

.. x as :-

6:

.- t

x

4 --

:W.5-

TELEX SEPTEMBER 24, 1979

7-5574

INTBAFRAD

KHARTOUM, SUDAN

FOR FARAG, PLEASE COPY TO BALL AND SHIVAKUMAR. AAA WE

AGREE WITH YOUR SUGGESTION THAT BALL PROCEED WITH POST-

APPRAISAL OF NEW HALFA IRRIGATION AND APPRECIATE BALL'S

WILLINGNESS TO LEAD MISSION IN ORDER TO ACCOMPLISH ITS

TARGETS. WE LEAVE IT TO BALL'S DISCRETION TO EXTEND HIS

STAY IN SUDAN FOR A FEW DAYS UP TO ONE WEEK AS HE FEELS

NECESSARY. GRATEFUL FOR HIS RETURN FLIGHT SCHEDULE FOR

NOTIFICATION OF WIFE. BBB PROGRAMS WOULD WISH MS. KOCH

TO CONTINUE UNDER OBJECTIVES GIVEN IN EXISTING TOR. CCC

BECAUSE OF LOCAL REQUIREMENTS IN WASHINGTON LISTER IS NOT NOW

COMING TO SUDAN AND WILL NEITHER BE AVAILABLE FOR NEW

IALFA NOR FOR WHITE NILE. WE REQUEST SHIVAKUMAR TO MAKE

APPROPRIATE ARRANGEMENTS TO COVER LISTER'S TASK BY OTHER

MISSION STAFF. REGARDS, MEYN

SUDAN: New Halfa Project KMeyn b

Klaus e n , EAPNAcc: Messrs. Hendry, Walton (o/r),

Harris, Burmester, Blinkhorn Eastern Africa Projects Department

4p .-

9

.-- 4 ..

.r-

2.

.. C

19768 RLDB sd

L

Distributio

Mr. Waltonl k ,)

R KMr. Burmester

INTB rAFRAD KHARTOIUM

SEPTMBE 24T, 1979

FAD WASINGTON D.C.

436 FOR EY/ ÙM T EP

AAA SUBJF T hALF

DI - THE CLNT LOSS OF MARTIN AND WILKS AiD NON-

/1 1G F iF, 1 . IS G Eh T ~A J EF FBALL

P S F I PROJE

BBB - IS SUJC HIT NLE.

cc --A

TH REPRT N THE HITE L HS N T REAHD KAR M 0FRMRN A THU THE- APPASLMSINWIHI

EXPECTED T'OMR WILL. HAVE TO START THIR WORITK WIT

EXTENIVE IFIN ON~ S THE FAO PREPARATION REPORT. THERE

FOEMISO COUL ALS PROVIDE ASSISANC TO NEW

CCC - LAS ADVIS YOU AGR MENT PARTICULARLY AS L N

KOCH MAPAVE TO STAY LONGER I TO OMPET ASSGNM T

FAG

Distribution sj

Mr. H

Ms. Burmester

Su NJ.

r. rujest ter, VPt1 7

111i A. Wapnhs, PEAN

SA R - New Haifa Irrigation Rehabilitatiua Project;

Governmnt ruest fo a Project Priration Facil'it

veraet of the Sudan has requested an advance of

Z:,O frec the Project Preparation Facility to finance certain expenditures

r ire to continue start-up activities during preparation of the New afa

rrigation Renabilitition Projec, T i is memorandu is to rceuest your approval

of the advance.

baCk gr ound

2. fhe c- iwalta Schene, which extends to about '-J'OAJJ fedzans

inh a et irrigble area of about 400,000 feddans, was constructed by

zn te mi-19%'s with funds received from igypt in compensation for

;u, foded by the Aswan high dan. it is locate4 on the Atbra river,. in

asjaia province and grows rincipaly redus staple cotton, roununuts

and wheat. In January 1976, tue Ninister of riculture raqueste naun

assistnce to help iake the acheim more productive. the requesthd

apparently been triggered by exceptionally low cotton yelds in 1975/76,

but initial discussions suggested that the difficulties encountered by the

schene were of a more fundauental character. Subsequently, bank staff

iscussed te broad issues. The Sudmese Government and the Asociation

greed uat a project would be requiree and that the project preparation Siould

by a firm of coronitants e ployed by tue Ministry of Planning an

inaucea uder the Technical Assistance Credit (No. 614-S). in December

1977, Agrar-und hydrotechnik (Geran1y) were selected by the Covernment to

lre),.re a ,'easibility StudJy. e consultants suoritted draft proposals to

the Governu'nt in May 1978, and these were reviewed subsequently by the

Banr and a ain at a joint Covernment/Bank meeting in btartou in Auhust 1978.

The feasibility study was completed in ;overber 197u and tue aroject was

appraised in November/Decenfber 1978. A post-appraisal mussiu. for Suan as

just left.

The Prroject Objectives and its costs_

3. The proposed project objectives are consistent with the goals

of the Governments' Inree Year Public Investwent Prograi and the approved

country stragegy: namely, to help rehabilitikaeexisting agricultural schems.

In particular, the project would provide agricultural machinery, spare p art

and replacenents vehicles and workshops; buildings, roads and fuel suppiles.

canal aintenance and irrigation development, electro-rnechanical equipnent,

ontrotl: rura -. ar Hus'1 colubi i. p~aaoiin, m L Cu ical1 asit- e

iotal groPnc uout Incb ~im pr ject ma'e .eu fm tL ats is tentativeyesiu o; a outalo vlnt wt oeacMo copoen

o at ->li on.al1 A credit of S 30 nillion is curr tiy shown in tht

1ouiu~. coy . or aL 1> I he lternr.ti oaa Iu tn'for gricultu a

Ovlou t (1 ) ta. Mrien evao net non ( T), ar' o:>ctsd

tprovide usle i ::illion . . Li r aactivut::. Lrve : . p ofUS1 rAtlion.

Aivities to be financedi from the FIF

I reiueted tohlp fluauee iriport at art-ap activiti.

inavc to r , y cc a e l. t reset ca a of A-rirult u-m

Pro uctiou corporatio ( ~A. ) de is res ponsible or t e tw aunn of &E

senhemu ent erform; its unmtion effecively recause of a v 1i y &f 'nor

cori~a Toes. will be n st witi in to course: ot project L~i -uetation

wever, or nor e seius proble- - 1 c of certain Wricutt ra1 spr arrtant tioe ac of areliable accountim systes --- nee to be nnde i ldciate Ly,

iorder to ;rovi'e fir.r rou tion for rot i~ti tton. )n ct ltter

~ro li- the.re is au (a) to ei a coultait' tr over~ ni tiv presentccou tiE au in. mme repo L-tt rocehures t oe of t tbloc 1evel,

ai t a tr, nor op unt rirv (b) to hj½ prepae ta rur e wto)cULts me ~to ocure t. goods requires to corete *aa rearation of th

cet~ od aitaa agricultural proauction in the sey 'alf iri nation 2cor..

fr are arts tuese are urgenatly required for existin: equiL ot (1t7

cicattara. tractors. 3 crawler tenetors, i teners :mO a otor sa dors) that

5. P~roceeds of the PPF would be used as follows:

(a-) Fiancial consultancy (13ru an moth with o er~itia costs)

and internationally recruited Procurement sio list US$230,000

(for abou t ayear)(b ) Spare parts to rehabilitate existing ag.ricultura 44 1.

an canal mainteacTotal Tot$

Local costs,. esi: ated at approximately USS140,000f are in clu te ai the PPF

6. accordance with the normal temis ad conditions of a n

: ran vi unr t. a tai pro~ose ace ($670,0) oulde fully reai

c og reit rr eat L rar ci ropose LA credit for thi projec as it

ece f rectiv, curretly tehet tat the oredit could 1 cme asfe

by arch 31, 1980. In the event that thie creditr for ti projet is notgrante byo Ju 1980a, the outstanding amounts of tVe avance willb

Ad in installnts over a eriod no t exced five yers er after.

/- W rooe tlt the e n of lett rs givi et to theadvance shul be signe.d on behalf of the Sudan Governmen byirg ed Ahed, Minitry of ftona Plning

cc and ceared with: iesrs. 1. Marti (A), Ball (EA), !a e (nP)U L C) Petretti (TR)

cc: ess am(CPSvP), Yudema (AR) Lethe (PS, ndry ( CP) ue (A2Burmste (EA), linhorn(EA), olley (AV) aa

4 ~ BON

..I .........

.....ISE

.. ........ .....

..... ...

/t

y7

Date received; September 25, 1979 Date: September 25. 979

PROJECT PREPARATION FACILITY (PPF)

Request Evaluation

Country: SUDAN GNP per capita (1978): $ 320

Sector/Project: Agriculture: New alfa Rehabilitation Project

Type of case: B. Start-up expenditures for (a) improving accounting and management

procedures (15 n-r); (b) preparing procurement documents (12 m-a-); and (c) urgently

needed spare parts to rehabilitate existing agricultural and canal maintenance equip-1/ment'- (See para(s) 4 and 5 of request.)

PPF Advance Requested: $ 670,000

79% for foreign expenditures (local currency cost: $140,000)

Within the limit of -

(b) $1.0 million

Estimated cost of consultants per man/month: $ 8,500

Project: tv=e-==pre appraised -o. in November/December 1978

Appears sound based on"Yellow Cover Appraisal Report of July 16, 1979.

A post-appraisal mission is in the field.

Scheduled for Board presentation: January 1980

Date for refinancing: June 30, 1980 is acceptable

Availability of timely alternative sources of financing: UNDP and other sources of

D funds unavailable.

(see para(s) of request).

Other comments: 1/ The Letter of Agreement between Government and the -Bank should

specify that any procurement of goods and works should be in a manner satisfactory

to, TDA.__

2/ To be excluded from advance until Bank decides whether to finance

1-cal costs for the project, presently linited to foreign exchange cost financing.

3/ Essentially to improve existing systems of land and water charges

and cost recovery

Recommendation: Request meets the requirements of OMS 2.15 for an IDA advance of

$530,000 with June 30, 1980 as the date for refinancing. The Bank's L tter Agree-

mnnt should include the above-mentioned provision relating to procu mt.

enG van der Ta

cc: Messrs. Blinkborn, Petretti, Ms. Flores for Warren C. BaumVice President

FrancisLethem:mm Projects Staff


OFFICE MEMORANDUMTO: Mr. Ernest Ste , VPO DATE: September 19, 1979

FROM: Willi A. Wapenh\4, RVP, EAN

SUBJECT: SUDAN - New Halfa Irrigation Rehabilitation Project;Government's request for a Project Preparation Facility

1. The Government of the Sudan has requested an advance ofUS$670,000 from the Project Preparation Facility to finance certain expendituresrequired to continue start-up activities during preparation of the New HalfaIrrigation Rehabilitation Project. This memorandum is to request your approvalof the advance.

Background

2. The New Halfa Scheme, which extends to about 500,000 feddanswith a net irrigable area of about 400,000 feddans, was constructed bySudan in the mid-1960's with funds received from Egypt in compensation forland flooded by the Aswan High dam. It is located on the Atbara river, inKassala province and grows principally medium staple cotton, groundnutsand wheat. In January 1976, the Minister of Agriculture requested Bankassistance to help make the scheme more productive. The request hadapparently been triggered by exceptionally low cotton yields in 1975/76,but initial discussions suggested that the difficulties encountered by thescheme were of a more fundamental character. Subsequently, Bank staffdiscussed the broad issues. The Sudanese Government and the Associationagreed that a project would be required and that the project preparation shouldbe done by a firm of consultants employed by the Ministry of Planning andfinanced under the Technical Assistance Credit (No. 614-SU). In December1977, Agrar-und Hydrotechnik (Germany) were selected by the Government toprepare a feasibility study. The consultants submitted draft proposals tothe Government in May 1978, and these were reviewed subsequently by theBank and again at a joint Government/Bank meeting in Khartoum in August 1978.The feasibility study was completed in November 1978 and the project wasappraised in November/December 1978. A post-appraisal mission has just leftfor Sudan.

The Project Objectives and its costs

3. The proposed project objectives are consistent with the goalsof the Government's Three Year Public Investment Program and the approvedcountry strategy: namely, to help rehabilitate existing agricultural schemes.In particular, the project would provide agricultural machinery, spare partsand replacements; vehicles and workshops; buildings, roads and fuel supplies;canal maintenance and irrigation development, electro-mechanical equipment,

-2-

telecommunications and delinter plant; a health component involving diseasecontrol and rural water supplies; training, planning and technical assistance.Total project cost including project management and farm inputs, is tentativelyestimated at about US$150 million equivalent with a foreign exchange componentof about US$66 million. A credit of US$30 million is currently shown in thelending program for FY 1980. The International Fund for AgriculturalDevelopment (IFAD), and the African Development Fund (AFDF), are expectedto provide US$15 million and US$8 million respectively, leaving a gap ofUS$13 million in foreign exchange financing.

Activities to be financed from the PPF

4. The PPF is requested to help finance important start-up activitiesin advance of project approval. At present, the New Halfa AgriculturalProduction Corporation (NHAPC), which is responsible for the management of thescheme, cannot perform its function effectively because of a variety of short-comings. These will be dealt with in the course of project implementation;however, some more serious problems -- a lack of certain agricultural spare partsand the absence of a reliable accounting system -- need to be handled immediately,in order to provide a firmer foundation for project initiation. On the latterproblem, there is a need (a) to engage consultants to overhaul the presentaccounting and management reporting procedures at head office, at bloc level,in the stores, workshops and ginnery; (b) to help prepare the procurementdocuments and to procure the goods required to complete the preparation of theproject and maintain agricultural production in the New Halfa Irrigation Scheme.As for spare parts, these are urgently required for existing equipment (187agricultural tractors, 3 crawler tractors, 3 ditchers and 2 motor graders) thatwill otherwise be rendered useless. These spare parts represent less than10% of the funds to be provided during the five year project implementation period

5. Proceeds of the PPF would be used as follows:

(a) Financial consultancy (15 man months with US$ 230,000operating costs) and internationally recruitedProcurement Specialist (for about a year)

(b) Spare parts to rehabilitate existing 440,000agricultural and canal maintenance

Total Cost: $ 670,000

Local costs, estimated at approximately US$140,000 which is about 2% of thetotal external demand for local currency in the project cost are included in the PPF.

6. In accordance with the normal terms and conditions of advancesgranted under the PPF, the proposed advance ($670,000) would be fully repaidthrough reimbursement under the proposed IDA credit for this project as itbecomes effective. We currently expect that the credit could become effective

-3-

by March 31, 1980. In the event that the credit for this project is notgranted by June 30, 1980, the outstanding amounts of the advance will berepaid in installments over a period not to exceed five years thereafter.

7. We propose that the exchange of letters giving effect to theadvance should be signed on behalf of the Sudan Government byMirghani Mohamed Ahmed, Ministry of National Planning.

cc and cleared with: Messrs. T. Martin (EAP), Ball (EAP), du Mee (EAP),Mwine (LEG), Petretti (CTR), Lethem (PAS)

cc: Messrs. Baum (CPSVP), Yudleman (AGR), Farag (KHART), Hendry (EAP), Gue (EA2),Burmester (EA2), Blinkhorn (EA2), Tolley (EANVP)

SBerger/TABlinkhorn:slw

Janet Koch, Young Profe September 17, 1979

Sven Burnester, Division Chief.LZW

SUDAN~ - Terms of Refrence

1. On Setember 19, 1979 you shouj procee.d to Sudan to join thepost-appraisal uission for the New Halfa Irrigat ion Rehabilitation projectheaded by ;r. T. Mrtin. You vill participate in discussions both inKhartonu and in New Halfa. You &hould concentrate particularly on costrecovery aspects of the project, especially the proposed farmer servicechar e system and assess the likely econoric and social implications oft proposdl on Cenants and te ew halfa scherme generally. In additionyo sould cocentrate on project cost and financin asects with a viewto dterining quite clearly the reoired rovernnent financial contributionto th ;roject, as nov designed. Cofinancinh reuireLents should also beexa~'ied, along with the likely contributions and processing schedules oft international Fund for .7ricultural Developn t (IFAD) and the Africanhevelopment 1'und .

2. You should discuss with appropriate Covernment officials thevarious land and water charge systems currentlv in use or proposed to bense in t 1e p tlic irriation schemes - Gezira, Rabad, Blue and White Nile

ugq schenes. if time pernits, you should plan to visit one or ,ore ofthese schees. T roughout your stay you should liaise closely with

r. Fara and sek his Iidance on approsriate officials to contact aboutthe lan and water charge systens.

. pon your return to heariquarters on cto er , you should Preparei uack to office repor t ou tlining vour main findin's . Su semuently, yous ould prepare a more coemlete report on the land and -trr chtarfe system inthe public .- riculture scheues. You should also help prinare necessarydocuracetatieo- Decision :carandor~, Presict's Report, etc. -- for pre-ettin of tihe Jew !iaafq roject to th to: Co tte, in advance of

neotiations.

cc. an cleared Iin substance with: Mr. T. rtn

cc: Messrs, Meyn, EAPNA

hiansen, EA2DS~

Dewar, RMEA

Mrs. Berg~er, E A2DB

Thlinkhorn/l&9i

INTERNATIONAL FUND FOR AGRICULTURAL DEVELOPMENT

J0LIF 6/4 Sudan - New Halfa 12 September 1979

Dear Mr. Walton,

Sudan - New Halfa Irrigation Rehabilitation Project

I thank you for the copy of the "Yellow Cover" appraisal report on

the above project. The report has been carefully reviewed by-tfie Fund

and the project has been found to satisfy the Fund's lending policies

and criteria. Consequently, IFAD management has decided to consider co-

financing the project with the Bank, subject to successful resolutions

of the attached issues during post-appraisal mission and negotiations.

In further cooperation with the Bank, an IFAD staff member will be

released to participate fully in the post-appraisal mission as scheduled.

Best regards.

V B. Mansuri

Director Africa Division

Project Management Department

Mr. C.H. WaltonChief, EAPNAWorld Bank

1a18, H Street, N.W.Washington, D.C. 20433

U.S.A

107, Via del Serafico, 00142 Roma, Italy U Cables IFAD ROME, Telex 614160/2 IFAD, Tel. 54591

R E C 1, V E D

1979 SEP 2l PM 3: 40

INCOMING HAIL UNIT

New HalFa Irrigation REnaoilidation Project - Yellow Cover Report

IFAD Observations and Comments

arget Group

Taret Groups finnts and migrani labourers) are in line withthE IFAD policy requirements. However, morE n-formation on thE prozesrc

AW0:~t, ant enEr sHansac molvngrec ceo s ~cc

> jusmify IFAD assistance.

2. Cropping Pattern

The inclusion of sorghum in the proposed cropping programme isinteresting to IFAD and an assurance that sorghum would be promoted asproposed will be required for IF/ participation.

The crop areas shown in table 2 of the report showed that area

cropped fell by 42 percent over a period of 6 years. The only reason

for the fall was given as inability of NHAPC to supply required services.

This appears to be a sound reason but one still feels that it may not

tell the whole story. For example, initially 1973/74, if the NHAPC can

supply the services required to cultivate 276 000 feddans and if tenants

have been paying the economic cost of services one would expect the

maintenance of the same level of services. It therefore appears to us

that the remote cause of tenants' inability to pay charges possibly

because of poor returns from farm output is more important than the

resultant inability of NHAPC to supply services and therefore should beaddressed in the rehabilitation project. The 42 percent shrink in project

size may be a good indication of defaulters kicked out of project. Other

questions that occur to one and which need a look into are:

(a) as a result of some tenants leaving their tenancy, has the

farm size changed ? If so, what is now the pattern of holdings ?

(b) Are there better employment opportunities in the project area

which have attracted the tenants from farming ?

(c) Are the tenants contented with subsistence farming while relying

on outside jobs for income ?

(d) Was the original scheme too large for effective management by

NHAPC ?

Looking at the rate of fall in cropped wheat area in table 2 and

comparing it with proposed wheat cultivation in table 5, it appears that

the arrangements to raise cropped wheat area to 70 000 feddans within 3

years may be too optimistic. It is agreed that the proposal is both

technically and economically sound but its practical feasibility is

suspect.

3. Farmers' Repayment System

There are many good reasons that can be advanced for changing frompresent Joint Account System to the Farm Service Charge as proposed inthe report. Howevcr, there is need for a close'r look at the FSE arrange-ment if it is not to result in a hiner default rate. The arrangerent istoo loose at present; tnerc i s ne to T si a way for NHAPC to exercisesome control on recovery. For xampc, NHAFC uhile net atding mrketingarragement to its already over-loaded schedule, can be expected to havenecessary links with marketing/processing agencies and merchants in theproject area for project cost recovery. The practicability of evictionof tenants may be in doubt bearing in mind that many of the tenants were

resetted there and may not have alternative location to move to. In

essence, what may happen is that NHAPC will not supply services to de-faulters, which already appears to be the present practice.

The regressive nature of the FSC system is of much concern to IFAD

since the Fund is more concerned about the plight of the poorest farmers.Will it not be possible to have a graduated FSC for groups of farmersinstead of one fixed charge for tenants ? Such an arrangement may encourage

some tenants and may result in better cost recovery.

On page 8 of the report, para 2.21, it was stated that if JointAccount System is abandoned, prices paid to tenants for seed cotton would

rise from £Sd 82 to £Sd 198/mton. The mechanism for such a rise is not clear.

It may be necessary to give a brief statement on how the increase would be

achieved.

4. Credit

The proposal to review the credit arrangement vis-a-vis the role of

ABS is noted and in line with IFAD observation in this regard. You may

also wish to rectify the inconsistency of the statement on pages 30, para

4.26, and 34, para 6.01 to the effect that tenants would pay 9 percent p.a,

on seasonal credits and other statements in the report that interest on

seasonal credit would be 7 percent, e.g, page 38 (a).

S. Project Costs

With regard to your statement on page 2 of the memorandum attached to

the report, how will the procedure to project cost estimate affect financing

arrangement ?

6. Research Sub-Station

A research sub-station of 1 000 fd operated under the existingscheme was not mentioned in the appraisal report. IFAD will be interestedin finding how this station would he handled in the proposed project.

7. Project Production

Annex 1, rabiE 6, shcvei that incremental production would beconstant as from year 5, whilE the cropping programme, tasle of text,<hows that crop mix :uad coFtinu> cnning nt-tl jaa 2. T-r. may be

Snee-d to rEconcilE taoie 5, text, Annex 1, tanle E and Annex 1, taez 12.

8. Income Disparity

Table 10 shows that tenant incomes would vary from £Sd 312 to£Sd 2 551 years 5-10, and from £Sd 381 to £Sd 2 463 years 10-20. Iftenant farm-size is equal and services supplied by NHAPC are standardized,there may be a need to give some explanation on the high income disparity.If tenancy sizes are different, there may be a need to give the distribution

of farm sizes and incomes.

¶1. Sunk Costs

Page 36, para 6.03 d. The written-down value of "sunk costs" plus

vehicles is estimated at £Sd 12.3 million. Does this represent the true

value of the assets ? If not, this may lead to a situation where the

proposed project is paying for the services already enjoyed by the existingproject.

10. Training of Local Staff

Recruitment and training of local personnel middle and senior shouldbe given high priority and proper description in the report. The jobdescription of the internationally-recruited personnel should clearly includeon-the-job training of local personnel.

11. Management Cost

The management cost of the project was estimated at US$ 30.644 million

which is about 24 percent of the total project cost. The Fund is concernedabout the high ratio of management cost and would want a justification forsuch a high management cost.

12. Strenghtening of Farmers Organizations

The findings of the appraisal mission on the infeasibility of usingFarmers Co-operatives for project management at present are appreciated by

the Fund. However, there does not appear tc be enough evidence in the appraisalreport to show that efforts will be intensified in the proposed project todevelop Farmers Organizations capable of handling some aspects of the projectin the future. The development of such organization may hele in reducing themanagement cost of the priject in thL future.

13. Reconstitution of #F

The reconstitution of NHAPC as proposed in the appraisal report hasthe support of the Fund as this is crucial to the success of the project.

14. Monitoring and Evaluation

The monitoring and evaluation arrangement has not fully satisfied

the Fund's requirement particularly with respect to the socio-economic impact

of the project. Usually, the Fund requires that such evaluations are carried

out by an independent national organization. It will be appreciated if this

will be looked into during the Post-Appraisal Mission.

Those listed below September 10, 1979

P.R. du "ee NAP A

SUDAN - New I alfa Irrigation Rehabilitation ProjectRevised Cash Flow Projections

1. My memo of 8/21 proposed certain changes, but the twoalternative Covernment Cash flow projections and the NHAPC cash flowprojections annexed did not quite reflect the changes.

2. Now that the changes hcve, subject to the forthcomingpost appraisal discussions, been agreed, I have recast the E!APC andGovernment (one only) cash flow projections to reflect the chances.These 2 statements are annexed to this memo.

3. Please note that:

(a) Project cost is as in Annex 4 to my memo of 8/21, i.e.Deficit of NHAPC is included in Project cost, thereforeAnnex 4A is redundant.

(b) Contributions to project cost are as per Annex 5, i.e.in addition to taxes and duties Government willcontribute LSd 7.5 million p.a. from year 1 in localcurrency, and the aid agencies will contribute LSd 40million, including LSd 7.3 million in local currency.

(c) Government will service the agencies' loans andcredits and will transfer them to liAPC as equity,but will receive a dividend from NHAPC of LSd 1million in year 6 and LSd 6 million p.a. fromyear 7.

Distribution: M essrs, BurmesterBlinkhorn

Ms. BergerMessrs. Walton (o/r)

MartinBallFaragDr. Wahab

Encls.

PRduMee: ch

ND HALFA IRRIATION RETLABILITATION FROJICT

INIAPC (1979) Sussmary Cash Flow in Curent Wd '000

Year I Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year Y year I year f Year 11 yeM 12

INFLOW

Refund of Advances, Fare Inputs & Machinery 17,738 17.848 17,558 17,468Services -- -. 7,287 10.160 14,480 16,73 17,919 17,829

Recovery of Ginning darge and Fare ServiceCharge - 2,320 3,987 9,276 13,917 15,520 19.336 19,336 19,336 19,336 19.336 19,336

Interest Charged to Fa rme rs 1,305 1,834 2,605 3,000 3,200 3200 3200 3,200 3200 3200

sub-Total -- 2,320 12,579 21,270 31.002 35.2,51 40,455 40,365 40,274 40,184 40.094 40,004

OU1TFLOW

Operating Expenses 12,056 16,459 21,942 25.602 27,921 30,661 30,717 30,814 30,835 30.835 30.835 30,835

Provision for Bad Debts 50 800 ,300900 2,200 2500 2500 2_500 2.500 , 2l.-

Sub-Total 12,056 16,509 22,742 26,902 29,821 32,861 33,217 33,314 33,335 33,335 33,335

Noc Cash Flow Before Financing, etc., (12,056) (14,289) (10,163) (5,632) 1,181 2,390 7,238 7.051 6,939 6,8649 6.759 6,669

Deficit Financed by COS end Other Donors J/ 12,056 14,289 10.163 5,632 - -- 6,00 6 D0 6,Dividend Available for GOB ---- 1.000 .--

Surplus -- •• • 11.,390 -l238 1r051 939 849

1/ Excluding Project Expenditure (below the line) which will be entirely borrowed.T/ Escalated at 50/50 Foreign Exchange/Local Cost Price contingency rates a. used for

Project costs, i.e. Years 1-5 - 13.5%. 26.25%, 38.55%, 507 and 60.6% respectively(subsaquent years at Year 5 rate).

Year I Year 2 Year 3 Year 4

1/ Financing of Deftict - COS (taxes) 8 840 1,950 1,400 1,200COS (Devt.budget) 5,196 2,803 4,685 3,230IDA & Others (IC) 2,107 4,230 1,009 --IDA & O0ter (FK) 3 913 5.306 3 069 1202

12.056 14.289 10.163 5 632

Total Contribution from Developmnnt Budget 7,500 7,500 7,500 5,336less ,Local Component of Direct Inveatment 2,0 2. 2,815 2,106

2.803j1 4.685 .2 0

1RduaBa

9/6/79

NEW HAI.PA IRRICATION R1AILZTA7TOM FROJECT1

GoveTment Cash Flow - Ar Related to TOAr(w ith 6 without Protect

C.urrent 1,0d *000

ttiod Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Tear 7 Year 8 Year 9 Year 10 Year It Yeae Z 12 yearonwards Total

A. WIfOUT PROJECT

InflouExport Development Tax on Crops (b) 915 978 1.048 1,111 1,180 1,180 1,180 ..1,180 1,180 1.180 1,180 1.180 13.492Import Taxes., etc. (c) 123 130 138 138 138 138 138 138 3 138.1,5,9

Sub-Total 1,022 1,093 1,171 1,241 1,318 1,318 1.318 1,318 1,318 1,318 1,318 1,318 15.071

uPr-ing Loss of 3HAPC (s) 3,064 3.409 3,471 4.050 4,336 4.336 4,336 4,336 4.336 4.336 4,336 , 4,336 48,682

(Deficit) (2.042) (2.316) (2,300) (2,809) (3,018) (3,018) (3,018) '(3,018) (3.018) (3,018) (3,018) (3,018) (33.611)

a. WITH PROJECT

InflowExport Development Tax on Crops (b) 915 1,148 2,273 3,099 3,530 S,742 3,742 3.742 3.742 3,742 3,742 3,742 37,159Import Taxes on Direct Investment (r) 840 1.714 1,027 769 633 Sol 560 648 641 616 565 511 9,121import Taxes on Incremental Input. Lic() 2 160 400 400 450 450 450 450 450 450 40 450 4,562Dividend fro. leIAPC 66_ 0010000 6.000 6000 6000 60 6

Sub-Total 1.737 3.022 3,700 4,268 4.615 5,693 10.752 10,840 10.833 10,808 10,777 10,777 87,842

Outflow- Contribution to Project (taxee) 840 1,900 1,400 1.200 1,060 . . -- 6,400

(development budget) 7,500 7,500 7,500 5.336 681 --. ---- 28,517- Debt Service (d) __j 2211 266 30 _.1303D D 00 69" _694 3.835

Sub-Total 8,375 9,521 9,121 6,802 2,041 300 300 300 300 300 698 694 38,752

Deficit First 4 Years (6,618) (6,499) (3,421) (2,534) •- . -- • (21,072)

surplus -- •• -- - 2,574 5,393 10.452 10.540 10,533 10,508 10,079 10,083 70.163

C. DtIFERENCE in Goverranent Cash kieov-ith Project W/e Without Project (-) 4,576 (-) 4,183 (-) 3,121 + 275 + 5,592 + 8,411 + 13,470 + 13.358 + 13,551 + 13.526 + 13.097 + 13,101 + 62,702

Notes: 1/ Taxes on incremental inpute onlyA/ 1, IFAD, ADF, all mo IDA ctamdurd terme

method of mesalation (escalated to year 5, then at year 5 rate)) Project escalation rates 50/50 FX/LC (13.52,2625%,3.5%,50%,60.4%)

(b) Appropriate commodtty inflation rate. (6% p.4.)(c) Project FX escalation rate (7% up to year 3. then 6%)(d) Interest on and repaysants of already escalated principal sume; no further

escalation required.

PRduee9/6/79

TELEX September 7, 19797 5402

INTBAFRAD

KHARTOUM, SUDAN

FOR QUENNELL. DURING FORTHCOMING POST APPRAISAL MISSION OF NEW

HALFA PROJECT SCHEDULED SEPT. 23 THROUGH 26, AT LEAST THREE

MISSION MEMBERS PLUS PROBABLY ONE REPRESENTATIVE EACH FROM

ADB AND IFAD PLUS SAY TWO GOVERNMENT OFFICIALS - TOTAL SEVEN

PEOPLE - WOULD LIKE TO VISIT THE NEW HALFA SCHEME BY AIR FOR

DISCUSSIONS WITH SCHEME OFFICIALS AND FARMERS' REPRESENTATIVES

COULD YOU PLEASE MAKE FIRM BOOKING, PREFERABLY WITH UN AIRCRAF

OR IF UNAVAILABLE, WITH AIR TAXI OR OTHER AIR CHARTER COMPANY,

FOR EARLY DEPARTURE RETURNING LATEST ON SAME DAY. PREFERRED

DATES WOULD BE SEPT. 24 OR 25. PLEASE AGREE THE DATE WITH DR.

EL TIGANI, MIN. PLAN., AND REQUEST HIM TO ARRANGE MEETINGS AT

NEW HALFA. REGARDS MARTIN.

Sudan- New HaLfa Irrig.Rehab. TLMartimel

cc: Messrs. Farag (HQ), du Mee T.LJartin, Sr. Agric., £APNA


/4

TELEX September 5, 19797 5574

-OOK OF TWO TELEXES

U) INTBAFRAD

9357ABIDJAN, IVORY COAST

t) TELEX 4024, 717 498

AFDEV BANK, ABIDJAN, IVORY COAST 37/7 AFOR I.C.B. JOHN 3 l

Telex September 5, 19797 5573

Page 2

FOR ELLINGER RMWA COPIED MR. JOHN ADF. RE SUDAN NEW HALFA IRRI-

GATION PROJECT. GRATEFUL YOU MAKE AVAILABLE YOUR COPY OF YELLOW

COVER APPRAISAL REPORT TO MR. JOHN, ADF FOR REVIEW. FURTHER

COPIES HAVE BEEN AIRMAILED TO MR. JOHN DIRECTLY ON AUGUST 15

AND TODAY. REGARDS MEYN.

Sudan: New Halfa Irrigation Rehab.Proj. KMey6e

pc: Messrs. Blinkhorn, Martin K.Mey ctin Chief, EAPNA



OFFICE MEMORANDUMTO:Messrs. T.L.Martin, J. Ball, P.R.du Mee and DATE September 7, 1979

C. PradithavanijFROM:- Meyn, Acting Chief, EAPNA

SUBJECT:SUDAN - New Halfa Irrigation Rehabilitation Project -- Post Appraisal Mission

- Terms of Reference

1. During the period of September 23 through 26, you will hold dis-cussions with officials of the Sudan Government and the New Halfa Agricul-tural Production Corporation (NHAPC), and representatives of the New HalfaIrrigation Scheme tenants on the rehabilitation project proposal. You shouldkeep Mr. Burmester, who will also be in Khartoum, and Dr. Farag fully in-formed of the progress of the discussions. Mrs. Koch of the Programs DivisionEA2DB will join the mission in the field under separate terms of reference.

2. You may be accompanied by representatives from the African Develop-

ment Bank and the International Fund for Agricultural Development who shouldbe given every opportunity to participate fully in the discussions.

3. In addition to general discussions, to ensure that the projectproposal is fully understood, you will pay particular attention to thefollowing matters to which the Ministry of National Planning was alertedin our letter dated August 10, 1979:

(a) NHAPC Reconstitution and Financial Structure

Review the draft legislation and financing proposals which

the Public Agricultural Production Corporation (PAPC) are

scheduled to have prepared.

(b) Credit Program. Discuss the terms and conditions of lending,

credit administration and ABS's proposed involvement.

(c) Cost Recovery. Since NHAPC's financial viability and theproject's impact on Government's cash flow are critically depen-dent upon the design and successful operation of the proposed

Farm Account and Farm Service Charge, the matter must be dis-

cussed fully with the Ministry of National Planning, NHAPCand farmers' representatives with the main objective of se-

curing the latters' co-operation.

(d) Canal Improvement. Finalize with the Ministry of Irrigation

the strategy to be adopted and agree the arrangements and time

schedule for designing and implementing the component.

(e) Implementation Schedule. Assist NHAPC to prepare an outline

critical path analysis of the project's key activities.

-2-

4. The mission will also:

(a) check the arrangements for implementing the PPF and try toobtain the assurance requested in Mr. Burmester's telex No.324to the Ministry of National Planning regarding the implementationof the canal improvement program;

(b) review with the Ministries of Finance and National Planningthe proposed project's financial requirement, particularly localcost requirements, and, if possible, prepare a tentative financingplan.

5. Upon your return to Washington on or about September 27, you willsubmit a Back-to-Office Report and prepare a green cover staff appraisalreport.

Cleared with and cc: Mr. Blinkhorn

cc: Messrs. Adler, Director, EAPGulhati, Chief Economist, EANWalton, Chief, EAPNA (o/r)Eccles, Chief, EAPSA

Ms. Marshall, Chief, EAPCANorth, Director, RMEAFarag, Res. Rep.Dewar, Chief, Agric., RMEAHendry, Asst. Director, EAPGue, Director, Programs EANBurmester, Chief, EA2DB (2)

Ms. Koch, EA2DBRajagopalan, PAS (3)Yudelman, CPS (3)Chittleburgh, EDCDisbursement Off. Wiratunga, CTRMwine, LEGAwunyo, LEGE.A.FilesN.A.Files

TLMart n:el

TELEX SEPTEMBER 6, 1979

Page 1 of6

IN T AFRAD

KHARTDU&F, SUZAKN

TO FARAG FOR EL FATIH ALI SIDDIG - PROJECT PREPARATION UNIT, KHARTOUM

WE HAVE REVIEWED YOUR PROPOSED BASIS FOR THE NEW HAL A PHASE II

STUDY. OUR SUGGESTIONS ARE HEAVILY INFLUENCED BY: (FIRST) THE FACT

THAT UNTIL SUCH TIME AS THE DECLINING AVAILABILITY OF WATER FOR

IRRIGATION IS RESOLVED THERE IS NO POINT IN THE PHASi II STUDY FORMU-

LATING RECOMMENDATIONS WHICH IGNORE THIS CONSTRAINT (SECOND) THERE

ARE SEVERAL QUERIES WHICH THE PHASE I APPRAISAL HAS LEFT UNRESOLVED.

SOME OF THESE NEED MORE DATA ON WHICH TO BASE RECOMMENDATIONS THAT

WOULD REINFORCE THE REHABILITATION ENVISAGED IN PHAS I (THIRD) THERE

ARE SEVERAL AREAS IN WHICH THE PHASE II STUDY CAN AS$IST IMPLEMENTA-

TION OF THE PHASE I REHABILITATION. ACCORDINGLY, WE BELIEVE THERE

IS A STRONG CASE FOR A PHASE II STUDY BUT SUGGEST SEVERAL ADJUSTMENTS

TO ITS PROPOSED BASIS. AS THIS WOULD REPRESENT A REPUCTION IN THE

OVERALL DEMAND FOR CONSULTANT MAN DAYS, WE SUGGEST THAT THE WORK

COULD BE COMPLETED WITHIN THE ORIGINAL CONTRACT COST!. USING YOUR

LISTING OF ITEMS OUR SPECIFIC SUGGESTIONS ARE: AAA bELETE 1.1, 2.3,

3.1, 3.3, 5.2, 7.1, 8.2, 9.1. AS TRANSMITTED DETAILS OF 2.1 AND 2.2

44

SUDAN - New Halfa Irri ,Rehab_. Pr.JW~IaLJ d

Cleared with and cc: Mr. Walton KMeyn, AcLt if, EAPRAMr. Burmester

cc: Messrs. Blinkhorn "- A. ProjectsduMeeP ~~ ba-a - M'art tin

s

94

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TELEX SEPTEMBER 6, 1979215 7-4922

Page 2 of 6.

WERE MISSING FROM OUR COPY AND THE MEANING OF 6.9 WAS NOT CLEAR.

HOWEVER, THE REMAINDER OF THE ITEMS APPEAR TO PRESENT A COMPREHENSIVE

COVER AND WE SUGGEST 2.1, 2.2 AND 6.9 COULD ALSO BE PELETED. USE

PHASE I APPRAISAL ASSUMPTIONS AND DATA IN LIEU OF 7.J. BBB WE

SUGGEST 3.2, 5.4, 7.3 AND 8.1 BE AMALGAMATED INTO A $INGLE COMPONENT

CALLED COOPERATIVES WHICH SHOULD (FIRST) DETAIL FOR EACH EXISTING

COOPERATIVE ITS PRESENT OWNERSHIP AND CONTROL, ASSET$, LIABILITIES,

FINANCIAL AND LEGAL STATUS, ROLE, CAPACITY, ORGANIZATION AND MANAGE-

MENT, HOW IT WAS INITIATED, PAST AND PRESENT PERFORMANCE, MAJOR CON-

STRAINTS, AND THAT COOPERATIVE'S OWN CONCEPTION OF ITS FUTURE. (SEC-

OND) GOS, TENANT'S UNION AND NHAPC'S CONCEPTION OF COOPERATIVES

FUTURE ROLE. (THIRD) ANALYSE THESE DATA, DEFINE OBJ CTIVES FOR

FUTURE COOPERATIVE SECTOR AND FORMULATE A PROGRAM FOR PHASE II SPECI-

FYING HOW MANY COOPERATIVES WOULD BE REQUIRED, WHEN THEY WOULD BE

REQUIRED, HOW THEY MIGHT BE INITIATED, HOW THEY SHOU(D BE LEGALLY AND

FINANCIALLY STRUCTURED, ORGANIZED, MANAGED AND AUDITD. DEFINE CO-

OPERATIVES RELATIONSHIP, IF ANY WITH NHAPC, TENANT'S UNION AND PRI-

VATE SECTOR. DETERMINE WHAT INFRASTRUCTURES AND FACILITIES ARE RE-

QUIRED AND WHERE THEY SHOULD BE LOCATED. DETERMINE IF THERE IS A

NEED FOR THE QUALITY OF GOODS AND SERVICES SUPPLIED OY COOPERATIVES

SUDAN - New Halfa Irrig. Rehab. Pr. JWBaLL:mld

Cleared with and cc: NxxkinkhaxoKMeyn, ActMessrs. Walton, Burmester

cc: Messrs. Blinkhorn, duMee, E. A. ProjectsPradi thavani j, Martin

. 4

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TELEX SEPTEMBER 6, 1979215 7-4922

Page 3 of 6

TQ BE ft0AMED BY NHAPC. DETERMINE IF SOME COOPERATIVES SHOULD

ENTER G01KOUNDl1,I, S"RG]JUM_.ARKETING. (FOURTH) COMPLETE THIS COMPO-

ItENT WITH A CONSOLIDAT.ED FINANCIAL ANALYSIS AS WELL AS A DETAILED

FINANCIAL AND PHYSICAL ANALYSIS OF THE IMPACT SUCH AN EXPANDED CO-

OPERATIVE SECTOR WOULD HAVE ON NHAPC. CCC SPECIFY THAT 4.1 IDENTI-

FY HOW BEST LIVESTOCK CAN BE USED TO COMPLEMENT THE CROPPING ACTI-

VITIES INCLUDING (FIRST) A DETAILED EXAMINATION OF WITHIN SCHEME

GRAZING (SECOND) A CUT AND CARRY ZERO LIVESTOCK GRAZING WITHIN

SCHEME OPERATION, WHICH SHOULD INCLUDE THE FEASIBILITY OF USING ANY

LOCALLY AVAILABLE SUGAR BY-PRODUCTS, (THIRD) A MIXTURE OF THE TWO

(FOURTH) THEN FOR EACH OF (ONE), (TWO), AND (THREE) ABOVE SPECIFY IN

WHAT MONTHS OF THE YEAR AND ON OR FROM WHAT CROPS THE GRAZED OR CUT

FORAGE WOULD COME AND HOW MANY LIVESTOCK UNITS EACH FORM OF UTILI-

ZATION COULD SUPPORT. (FIFTH) A DETAILED STATEMENTIOF HOW WHATEVER

IS RECOMMENDED SHOULD BE CONTROLLED AND POLICED (SI4TH) TENANT

ATTITUDES TO RECOMMENDED OPERATION, (SEVENTH) THE F ASIBILITY OF

LEVYING A CHARGE AND ISSUING A PERMIT FOR ANY WITHIN SCHEME GRAZING

(EIGHTH) THE NEED FOR 24 HOUR HERDING FOR ANY WITHIN SCHEME GRAZING.

(NINTH) PREPARE 4.2 (VETERINARY) AND 4.3 (STOCK WAT RING) PROGRAMS

GEARED TO EACH APPROACH (TENTH) PREPARE A FINANCIAL AND ECONOMIC

_S.JDAN -New_ taLf~a Irrig%. Rehab. Pr.JWBatym d 4Cleared with and cc: Mr. BurmesteEMeyn A f, EAPNA

Mr. Waltoncc: Messrs. Blinkhorn

duMee, PradithavanijJmav t 1Thn-

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&

TELEX SEPTEMBER 6, t979

215 7-4922

RALYSJS F TH -E £-MC0PONENT -PLUS- S.ONE M!.0MEL S S H 0 W IN G T E F IN A N C I A L

C4ST-4D--AN-E-N-Ef-IT_ ACCRUIN TO TH4 -F_ EST 0 C K 0 W N E R A ND H E N C E H I S

ASILITY T-0- -P.AYl ED& UT -ANA-CARRY FORAGE AND/OR FOR A PERMIT TO GRAZE

ANIMALS WITHIN THE SCHEME. DDD RETAIN 5.1 BUT DELETE 5.2 AND 7.4

THEN REPLACE 5.2 WITH A STUDY OF HALFAWYEEN, NOMAD AND MIGRANT LABOR

HOUSEHOLDS TO ESTABLISH THE NUMBER OF PERSONS PER TYPICAL HOUSEHOLD

jBY AGE AND SEX, HOUSEHOLD INCOME BY SOURCE IN CASH AND KIND, HOUSE-

HOLD LIVING COSTS BY NATURE IN CASH AND KIND, HOUSEH LD ASSETS, LIA-

BILITIES, NUTRITION, HEALTH, USE OF CREDIT AND EFFEC IVE INTEREST

RATES, DIVISION OF LABOR WITHIN HOUSEHOLDS AND THE ROLE AND EXTENT

TO WHICH HOUSEHOLD MEMBERS INCLUDING WOMEN AND CHILDREN ENTER WORK-

FORCE. IDENTIFY MAJOR DETERMINANTS OF THIS ROLE OF LABOR FOR EACH

TYPE OF HOUSEHOLD. QUANTIFY CURRENT AND LIKELY FUTUOE LABOR SUPPLY

FROM EACH HOUSEHOLD AND USE THIS WITH THE RESULTS OF 5.1 TO ASSESS

LIKELY SUPPLY OF LABOR FOR PROJECT AS A WHOLE. EEE RETAIN 5.3

BUT ADD QUOTE AND RAINFED SORGHUM WITHIN SCHEME IN LIEU OF WHEAT

UNQUOTE. FFF RESTRICT 6.5, 6.6 AND 6.7 TO PLANNING AND SITING OF

STAFF HOUSING, STORES AND WATER SUPPLIES ALREADY INCLUDED IN PHASE I

READING FOR STORES QUOTE ALL BUILDINGS AND STORES INgLUDED IN PHASE I

UNQUOTE. GGG RETAIN 6.1 THROUGH 6.4. RETAIN 6.8. DERIVE FINAL

New Halfa Irrig.Rehab.Proj. JWB$1L: ld

CLeared with and cc: Mr. Burmester KMeyn, A hief, EAPNAMr. WaLton

cc: Messrs. Blinkhorn, duMee, E. A. Projects.Pradithavanij, Martin

- -::: !!:P

x

x:- -x:- ..

TELEX SEPTEMRER 6, t979215 7-4922

Page 5 of 6

RECOMMENDATIOS. FQR RQAD SYlTi4. lNCLUDlNG ANY NEW BRIDGES BY COMPAR-

IWG-0S O , E lNLUDINfiL EAC.W AG-AJMT TA-S ANSPORT AND C0 MUNICATION COSTS

SAVED. ONLY INCLUDE INCREASED CROP OUTPUT FOR THOSE AREAS IN THE

SCHEME, IF ANY, WHICH ARE CURRENTLY PHYSICALLY INACCOSSIBLE IN THE

ABSENCE OF A BETTER ROAD OR A BRIDGE. IDENTIFY THE MONTHS IN WHICH

THESE AREAS WOULD BE INACCESSIBLE AND THE ROAD SEGMENTS AND/OR

BRIDGE(S) INVOLVED, THE SIZE OF THE CROP AREA AFFECTOD AND THE YIELD

REDUCTIONS EXPERIENCED BUT DO NOT INCLUDE ANY BENEFIt ARISING FROM

YIELD EXPECTATIONS GREATER THAN THOSE ASSUMED IN THE PHASE I APPRAI-

SAL. PREPARE AN IMPLEMENTATION PRIORITY LIST OF ROAD SEGMENTS AND

BRIDGES. HHH RETAIN AS IS 1.2, 1.3 AND 7.2. III RETAIN 9.2 AND

9.3 AND- TREAT ALL PHASE I APPRAISAL COSTS AS SUNK INPUTS. JJJ SUG-

GEST AN ADDITIONAL COMPONENT BE INCLUDED TO BE TITLED TENANT'S UNION

TO (FIRST) STUDY EXISTING ORGANIZATION AND MANAGEMEN, DOCUMENT ITS

ASSETS, LIABILITIES, FINANCIAL AND LEGAL STATUS, IDENTIFY ITS OWNER-

SHIP AND CONTROLLING MECHANISM, ASSESS EXTENT TO WHICH IT REPRESENTS

ALL TENANTS, LIST ITS PRESENT FUNCTIONS AND ITS EXIS ING CAPACITY TO

FULFILL THESE. DOCUMENT PAST AND PRESENT PERFORMANCE, LIST MAJOR

CONSTRAINTS AND RECORD TENANT'S UNION'S OWN CONCEPTION OF ITS FUTURE

ROLE (SECOND) DOCUMENT GOS, NHAPC AND COOPERATIVES CONCEPTION OF

SUDAN - New Halfa Irrig. Rehab. Pr. JWBar 2 : d

Cleared with and cc: Mr. Walton KMey I ef, EAPNAMr. Burmester

cc: Messrs. Blinkhorn EA. ProjectsduMee, Pradithavanij

t

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TELEX SEPTEMBER 6, 1979215 7-4922 Page 6 of 6

TENANT'S UNION FUTUBE B-OLE LTWtRDI) ASSESS ABILITY OF TENANTS UNION

TO OBBY -0- BEaALF -fM TEANTS- AND 4A-ER AND PROCESS THE DATA NECESS-

ARY TO DO TUS JA AN IFORMED MANNER. (FOURTH) IDENTUFY ANY AREAS

IN WHICH ADDITIONAL RESOURCES COULD BE RATIONALLY US D BY THE

TENANT'S UNION TO THE MUTUAL BENEFIT OF TENANTS, THE TENANT'S UNION

AND THE SCHEME AS A WHOLE. (FIFTH) ESTIMATE THE FINANCIAL COST OF

ANY SUCH RESOURCES AND SUGGEST HOW BEST THESE MIGHT OE PROVIDED OR

RAISED. REGARDS, WALTON

SUDAN -New Halfa Irrig.Rehab.Proj JW l :mLd

Cleared with and cc: Mr. Walten KMey'n, At g Chief, EAPNAMr. Burmester Mr.

E. A. Projectscc: Messrs. Blinkhorn, duMee

Pradithavanij, Martin

- . . . a :.-. .-A: e -:em a m m : = - - -

September 5, 1979

By R~ ist redxpress irn~ail

M'r. T B. C. JohnDeputy Director, ProjectsAfrican Development BankP.O.Box 1387Abij an, Tvory Coast

Dear Mr. John,

ian -!(w alfa Irrigation Rehabilitation Project

I am sorry you have not yet rceived the two copies of theN -Halfa Project draft appraisal report sent you by 4r. Blinkhorn on August15thi. Herewith two miore copies.

I look forward to your agency's participation in our mission to dis-cuss the project with Governrmnt and the New Halfa Corporation. However, yousnould note that these discussions and a possible visit to the project areafor discussions with farmers' representatives are scheduled for September 23through 26, not from September 17 as indicated in Mr. Blinkhorn's letter.

Best wishes,

Sincerely yours,

T. L. MartinSenior AgriculturalistEastern Africa Projects

Attachments Northern Agriculture2 :ain Reports2 Implementation Reports

cc: Messrs. Meyn, Blinkhorn, Farag

TLM: e 1

OFFICIAL FILE COPY