World Bank Document€¦ · TANZANIA -M1ANZA TEXTILE PROJECT (LOAN 1128-TA) I. INTRODUCTION 1.01 Tanzania's textile industry which was virtually non-existent prior to 1965, grew rapidly

Document of

The World Bank

FOR OFFICIAL USE ONLY

Repuwt No. 5187

PROJECT COMPLETION REPORT

TANZANIA - MWANZA TEXTILE PROJECT(LOAN 1128-TA)

June 29, 1984

Industry Department

This docume_t has a resicted distnlbution ad may be used by recpients oly in the perfomnee ofI eir official duti Its conte_t may n otherwise be disriosed withot World Bank autberizaton.

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PRINCIPAL ABBREVIATIONS AND ACRONYMS USED

Government = Government of Tanzania

KFAED = Kuwait Fund for Arab Economic DevelopmentKILTEX = Kilimanjaro Taxtile Corporation

mm = million me...ersMTP = Mwanza Textile Project (the Project, or Mill No. 2)MW = MegawattsMwatex = M -anza Textiles Limited

NDC = National Development CorporationNESP = National Economic Survival Program

PIU = Project Implementation Unit

SUNGURATEX = Tanganyika Dyeing and Weaving Mills Ltd.

Tanesco = Tanzania Electric Supply CompanyTEXCO = National Textile CorporationTNT = Thousand Metric Tons

COUNTRY EXCHANGE RATES

Appraisal Year - US$1 = TSh 7.1Investment Period - US$1 = TSh 7.1-9.4Completion Year - US$1 = TSh 9.4

FOR OMCUIL USE ONLY


TANZANIA - NWANZA TEXTILE PROJECT(LOAN 1128-TA)

Page No.

Preface ........... .................................... iBasic Data Sheet ...................................... ii

Highlights ............................................ iii

I. INTRODUCTION ........................................... 1

II. PROJECT BACKGROUND ......................... 2A. Project Preparation, APpraisal, Approval and

Loan Effectiveness ..................... ............ 2B. Project Description and Objectives................. 3

III. PROJECT IMPLEMENTATION AND MANAGEMENT . . . 3A. Achievement of Project Objectives .. 3B. Project Scope .. 4C. Project Management .. 4D. Training ........................................... 5E. Use and Performance of Engineering Contractors and

Consultants .. 5F. Implementation Schedule .. 6G. Procurement and Performance of Suppliers ........... 6H. Environmental Aspects .. 7I. Costs, Disbursements and Financing . . 7

IV. OPERATING PERFORMANCE .... 9A. Production ......................................... 9B. Market Development ................ . 11

V. FINANCIAL PERFORMANCE .... 12A. Incremental Financial Rate of Return . . ............. 12B. Financial Results .................................. 12C. Financial Prospects . . ..................... 13

VI. ECONOMIC PERFORMANCE .... 14A. Economic Rate of Return . . . 14B. Foreign Exchange Savings and Earnings . . ............ 14

i document has a restricted distribution and may be used by rccipients only in the performancotheir ofircial duies. Its cmntents may not otherwise be disclosed without World Bank autborzatiori

Table of Contents (Cont'd.)

Page No.

VII. INSTITUTIONAL PERFORMANCE ..... ....................... 14

VIII. BANIK PERFORMANCE .... 14A. Overall Performance and Relationship with Borrower.... 15B. Performance in Project Preparation, Formulation and

Implementation ...................................................... 16

IX. CONCLUSIONS ............................................... 17A. Overall Assessment .................................... 17B. Lessons for the Borrower and the Bank for Similar

Projects .............................................. . ..... 17

ANNWEXES

1 Implementation Schedule2 Employment3 Sources of procurement4 Project Capital Cost - Plan and Actual5 Project Disbursement Schedule (Cumulative)6 Production and Revenue Losses due to Shortages of Power, Fuel and Water7 Capacity Utilization and Technical Efficiency8 Investment Costs - Mill No. 2 (the Project)9 Incremental Financial Benefit - Mill No. 2

10 Financial Rate of Return Calculations11 Hwatex Historical Balance Sheets12 Mwatex Historical Income Statement13 Shadow Price Calculations14 Economic Revenue and Operating Cost Calculations15 Economic Rate of Return Calculations16 Excerpts from the Loan Agreement17 Comments from the Kuwait Fund for Arab Economic Development



PREFACE

Loan 1128-TA for the Mwanza Textile Project, in the amount ofUS$15.0 million, was signed in June 1975 and was closed in December 1981,US$0.5 million was cancelled. The project was cofinanced by the KuwaitFund in the amount of KD4.5 million, of which KD1.6 million was notutilized.

The main objective of the Loan was to finance the expansion of anexisting integrated textile plant (Mwatex) in the cotton growing region ofMwanza, to satisfy the increasing domestic demand for woven cotton fabricsic Tanzania.

The Project Completion Report has been prepared by the IndustryDepartment, based on a mission to Tanzania in November 1982. Commentsreceived from the Co-financier are reproduced as Annex 17. No commentswere received from the Borrower.

This project has not been audited by the Operations EvaluationDepartment.

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BASIC DATA SHEETAmounts (in US$M)

LOAN POSITION

As of 3/31/84Original Disbursed Cancelled Repaid Outstanding

Loan 1128-TA 15.0 14.47 - 1.63 12.84

CUMULATIVE LOAN DISBURSEMENT

1975 1976 1977 1978 1979 1980 1981 1932

Ci) Planned 0.2 8.1 14.0 15.0 15.0 15.0 15.0 15.0(ii) Actual 0.2 2.5 9.2 11.5 12.6 13.1 14.2 14.5(iii) (ii) as Z of (i) 100 31 66 77 84 87 95 97

OTHER PROJECT DATA

Original Actual orLoan Date Re-estimated

Board Approval 06/75 06/03/75Loan/Credit Agreement 06/75 06/19/75Effectiveness 09/75 10106/75Loan/Credit Closing 07/01/79 12/31/81Borrower United Republic of TanzanizExecuting Agency Mwatex/TEXCOFiscal Year of Borrower 07/01-06/30

MISSION DATA

No. of No. of Date ofMonth, Year Weeks Persons Manweeks Report

Preappraisal 08-09/74 2 2 4 09/06/74Appraisal 11/74 2 3 6 03/21/75Supervision I 09/75 1 1 1 09/11/75Supervision II 08/76 1 2 2 08/06/76Supervision III 08/77 1 2 2 08/12/77Supervision IV 05/78 1 1 1 05/18/78Supervision V 10/78 1 2 2 10/15/78Supervision VI 05/79 1 2 2 06/01/79Supervision VII 11/80 1 1 1 01/13/81Completion 11/82 1 2 2 06/20/83

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HIGHLIGHTS

The project consisted of a major expansion of a Government-ownedtextile mill in Mwanza in Western Tanzania. It was based on the Governmenttextile sector plan developed in 1973 which had as a major goal thecountry's becoming self-sufficient in woven cotton fabrics based on thecountry's cotton resources.

The project was completed seven months behind schedule with acost underrun of 20X compared to appraisal estimates. Most of the delaywas caused by inability to transport materials efficiently from Kenya dueto the border being closed. Successful project implementation was largelydue to the efficient project management provided by the Engineering Companyand the Technical Advisor as well as cooperation and coordination providedby the Texco and Mwatex personnel (paras. 3.07-3.10, 3.14).

The project met its main objective, increased textile outputunder efficient conditions, and availability of trained staff. However,shortly after successful commissioning, the mill suffered from shortages ofpower, water and fuel due to the generally depressed economic situation inthe country and to a major technical problem in the power plant thatsupplies electricity to Mwatex. Production deteriorated during 1979-1982and from November 1982 until mid-1983, the mill was closed due to lack ofpower. Production was resumed in mid-1983 (paras. 4.01-4.04).

The project's viability is difficult to assess given the lowoutput due to factors outside the mill's control. The FRR and ERR arecalculated at 9.2% and 8.9% compared to appraisal estimates of 24.2% and16.1%, respectively. The lower figures are a result of the low outputduring the 1979-1983 period and the expectation that the mill will only beable to achieve a two-shift operation instead of the forecast three shiftsat appraisal due to a shortage of foreign currency required to purchasedyestuffs, chemicals and spare parts. At the time of project preparation,appraisal and approval, neither the Bank nor, for that matter, otherdonors, anticipated the severe difficulties which would face Tanzania'seconomy in the late 1970s and 1980s, and the foreign exchange problemswhich caused drastic shortages of fuel, power and imported input materials(paras. 5.01-5.04, 6.01-6.03).

The most important lessons learned from the experience in thisproject were: (a) given adequate financial and human resources a projectcan be implemented within the appraised time schedule and capital costs,but subsequently it cannot be efficiently operated unless maintenance ofinfrastructure and foreign exchange required to cover the costs of importedinputs can be assured; (b) any project with no prospects for exportearnings or dependable allocation of foreign currency and structurallyrequiring a significant amount of imported inputs for indefinite periods oftime is highly vulnerable to foreign exchange constraints, and the risksassociated wlth potential deterioration of the country's economy shouldhave been taken into consideration at the time of appraisal (although thisis obviously difficult to predict); and (c) the need to provide training ona long-term basis to provide trained local staff for operations withoutexternal assistance (para. 7.02).


TANZANIA - M1ANZA TEXTILE PROJECT(LOAN 1128-TA)

I. INTRODUCTION

1.01 Tanzania's textile industry which was virtually non-existent priorto 1965, grew rapidly during the subsequent ten years, and by 1975 accountedfor about 25% of employment, 13% of value added and 11% of output in themanufacturing sector as a whole. By 1974, Tanzania produced about 76 millionmeters (mm) of woven fabrics accounting for about 67Z of domestic consumption(89% of cotton fabric consumption).

1.02 After the Arusha Declaration (February 1967), the Government adopteda policy of controlling and directing all major industrial activities,including textile manufacturing, through parastatal organizations. The majortextile companies were incorporated into and operated as subsidiaries of theNational Development Corporation (NDC). In January l974, all four largeintegrated textile companies, as well as the manufactmring of garments andJute bags, were transferred from NDC to a new parastatal company, the NationalTextile Corporation (TEXCO). TEXCO was organized as a holding companycontrolling the majority of shares and exercising complete responsibility foroverall management and production of its subsidiary companies, and planningand expansion of the sector.

1.03 Cotton, the major raw material of Tanzania's textile mills, isproduced locally. Of an annual production ranging from 45 to 70 thousandmetric tons (TNT), in 1974, less than 20% was consumed locally by the textilemills. The rest was exported, constituting Tanzania's second most valuablecrop and export earner. In 1973, the Government developed a long-termindustrial strategy aiming at a gradual restructuring of the economy bylinking the pattern of production more closely to domestic resourceavailability and local demand. Within the framework of this policy, expansionof the textile sector was given high priority by the Government. Theobjective of the planned expansion was to enable Tanzania to becomeself-sufficient in woven cotton fabrics and achieve a small exportable surplusby 1980. The plan included elimination of production bottlenecks and minorexpansion of Friendship, Kiltex and Sunguratex plants, and doubling of thecapacity of Mwatex textile mill in Mwanza.

1.04 Early in 1974, the Government of Tanzania requested Bank financingto cover part of the foreign exchange expenditures for a project to expand theannual production of Mwatex by 20 mm to 43 mm per year. The project wasappraised in September 1974 and approved by the Board in June 1975. The costof the project was estimated at TSh 314 million (US$44.3 million equivalent).The financing of the foreign component included a US$15 million loan fromIBRD and a US$15 million loan provided, on the basis of the Bank's appraisalof the project, by Kuwait Fund for Arab Economic Development (KFAED). Localfinancing was made available in the form of equity by TEXCO. The MwanzaTextile Project (MTP) was the Bank's first industrial investment in Tanzania.At the time, the only other Involvement of the Bank Group was a US$17.5million IDA Credit approved in January 1971 to help finance a cottoncultivation development project in Geita District of the Mwanza region.

1.05 MTP (Mill No. 2) was completed in October 1978, i.e. with a minimaldelay of about seven months, at lower cost than the appraisal estimates andachieved higher capacity utilization within the first three months ofoperation than forecasted. At that time, TEXCO requested, and on the basis ofa detailed action program submitted by Mwatex, the Bank agreed that the unusedbalance of the Bank loan (US$2.2 million) should be used for proviston ofspare parts and rehabilitation of the weaving and processing equipment in theoriginal Mwatex plant (Mill No. 1). A similar arrangement was made regardingthe unused portion of the KFAED loan regarding spinning equipment and at thetime of the closing of the Bank loan (12/31/81) an additional US$1.7 millionof the Bank funds and US$0.7 million of KFAED funds was spent forrehabilitation of the Mill No. 1. Also, TEXCO contributed TSh 4.7 million(US$ 0.5 million equivalent) for repairs of roofs and floors in Mill No. 1.

1.06 In 1979 and subsequent years, Mwatex experienced severe operationalproblems due to shortages of fuel, power and water in the Mwanza region.Shortages of fuel and power in Tanzania have been wide-spread in recent yearsdue to the critical foreign exchange situation. In the case of Mwatex, thesituation has been exacerbated because of the plant's location at the end of a600-mile long single track railway from Dar-es-Salaam, and repeated failuresof the newly erected, Nyakato power station nearby (Mwatex's source ofelectricity) due to technical problems (para.4.02).

1.07 In addition to MTP, TEXCO has invested in five other textileprojects, four of which are still under construction. Currently, the sector,due to acute shortages of fuel, power and spare parts, is operating at about40% of the installed capacity and the future prospects of the sector dependheavily on the success of the recently formulated National Economic SurvivalProgram (NESP) and the Structural Adjustment Program for 1983/85.

II. PROJECT BACKGROUND

A. Project Preparation, Appraisal, Approval and Loan Effectiveness

2.01 The expansion of the Mwatex plant in Mwanza was part of theGovernment's policy to enable Tanzania to become self-sufficient in wovencotton fabrics. At the time the project was identified (April 1974), Mwatexwas one of the best textile mills in the country with satisfactory operatingperformance and relatively high product quality. TEXCO, the parastatalorganization fully owned by the Government and responsible for the textilesector, submitted to the Bank a well-prepared feasibility study carried out bya leading Pakistani textile manufacturing company. The MTP was preappraisedin August 1974 and appraised in November 1974 (Appraisal Report No. 743-TAdated May 5, 1975).

2.02 At the time of appraisal of MTP, there were two major issues ofconcern to the Bank. The first related to the Government's plans to proceedwith construction of a new textile plant at Musoma, construction of which wasscheduled to be concurrent with the expansion of Mwatex. The Bank's positionwas that before embarking on another major project in its textile industry,Tanzania should undertake a special market and marketing study to establishthe long-range market potential for its cotton fabrics. The Bank was alsoanxious to impress upon the Government that, because of resource constraints

and shortage of trained technical personnel, Tanzania would be well advised todevelop the textile industry at a more realistic pace. The second, related toTEXCO's intentions to award the project engineering contract forimplementation of the MTP to a Pakistani firm despite the fact that thecompany had never executed or operated a project outside its own country. Thefirst issue was resolved as the Government agreed to carry out a study of thepossibilities of marketing textiles manufactured in Tanzania in othercountries and applying the conclusions of such a study to any major futureexpansion of the textile industry. On the second issue, the Bank agreed tothe appointment of the Pakistani firm as the Engineering Company responsiblefor the implementation of the project, provided that, in addition, TEXCO wouldemploy an experienced textile consulting company to act as a Technical Advisorto provide specialized assistance and supervise the implementation of theproject on behalf of the sponsors. TEXCO agreed to this approach. The loanwas subsequently approved by the Bank's Executive Directors on June 3, 1975and became effective October 6, 1975.

B. Project Description and Objectives

2.03 The project consisted of the expansion of an existing integratedtextile plant (Mill No. 1) at Mwatex in the cotton growing region of Mwanza,about 600 miles north-west of Dar-es-Salaam. The project (Mill No. 2) wasbuilt adjacent to Mill No. 1 on land already owned by Mwatex. The projectadded 27,648 spindles and 578 looms to the existing facilities, as well asrelated bleaching, mercerising, dyeing and printing equipment. Civil worksconsisted of construction of about 23,000 m of covered floor space, additionof two 1.5 NW transformers and two extra boilers, each with capacity togenerate 6 tons per hour of steam. The main objective of the project was toincrease the annual spinning capacity from 3,360 to 6,540 tons of yarn andweaving and finishing capacity from 23 to 43 million meters to provideadditional 20 million meters of woven cotton fabrics for the domestic market.The project's objectives also included improved capacity utilization and atraining program designed to train a sufficient number of qualified staff ofMwatex in textile technology and implementation of a study of thepossibilities of marketing textiles manufactured in Tanzania in othercountries (para. 2.02).

III. PROJECT INPLEMENTATION AND MANAGEMENT

A. Achievement of Project Objectives

3.01 The civil works were finished in May 1978, and MTP was mechanicallycompleted in October 1978 and commissioned in December 1978, about nine monthsbehind schedule (Annex 1). The delay was mostly due to the problem oftransportation of building materials, specifically steel structures, acrossthe Tanzania-Kenya border which was closed, due to political reasons, inFebruary 1977. As stated above, a key objective of the project was to improveoverall capacity utilization. Early in 1974 prior to project appraisal, afour-shift (168 hours/week) operation was introduced in all TEXCO textilemills, including Mwatex, and capacity of the new facilities was calculatedaccordingly. However, the four-shift operation was abolished after two yearsdue to the reluctance of the labor force to work on Sundays as well asnegligible production gains, and in 1977 all mills converted to a six-day (144

hours) week. Consequently, the new mill at full capacity could produce 2,726tons of yarn and 17.1 million meters of fabric. In the first three months ofoperations (January-March 1979), the yarn and fabric production from Mill No.2 amounted to 594 tons and 3.7 mm. On this basis, the overall capacityutilization in the first three months of operation was about 87%, i.e abovethe appraisal estimates. But subsequently in 1979-81, due to shortages offuel, power and water, the capacity utilization deteriorated to about 50-60%.At the same time, the technical efficiency of the mill, whenever it wasoperating, was satisfactory and only in one department (weaving) slightlybelow the appraised estimates.

3.02 Another objective of the project-carrying out of a trainingprogram--has been implemented and altogether about 130 mechanics, supervisorsand technologists have been successfully trained locally, and 14 outside thecountry. Finally, studies of the textile market and the feasibility of thecotton-polyester plant were completed in June 1977 and resulted inidentification and eventually financing by the Bank of the next textileproject in Tanzania (Morogoro Textile Project - SAR 1893a-TA).

B. Project Scope

3.03 There were no significant deviations from the appraised scope of theproject. However, because of an underrun in the cost of the project, aboutUS$2.9 million was used for the rehabilitation of the equipment and buildingsin Mill No. 1. The rehabilitation of the equipment and supply of spare partsfor Mill No. 1 was technically and economically justified and agreed to by theBank.

C. Project Management

3.04 For the purpose of the project implementation, TEXCO formed a smallProject Implementation Unit (PIU) composed of three officials with abackground and some experience in civil works, textiles and finance. TEXCOentered into a contractual arrangement with the Pakistani firm (para. 2.02) toact as the Engineering Company to implement the project, including design andengineering, procurement, construction, erection, start-up and initialoperations, and personnel training. In addition, TEXCO retained anexperienced textile consulting firm from Switzerland as Technical Advisor.The main responsibility of the Technical Advisor was to assist the TEXCO PIUand management of Mwatex in supervising the work of the Engineering Company,specifically developing the plant and machinery design, procurement ofequipment, construction activities, training of management personnel andcommissioning of the new mill. The decision to use a Technical Advisorappears to have been a right one, as the personnel of the PIU was not fullyadequate to manage all project implementation activities by themselves.Eventually the local staff involved were assigned to other tasks, so theimplementation of the project was supervised by the staff of the TechnicalAdvisor reporting directly to the Managing Director of TEXCO. The lessonlearned from this experience is not a new one. By using enough qualifiedexpatriate assistance, a project has been implemented in a relatively timelyfashion and within the approved budget, but its contribution to institutionbuilding, i.e assisting the country in developing capability to plan andimplement new projects has been limited, mostly because of a shortage ofqualified personnel.

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D. Training

3.05 The most recent data (9/30/82) indicated that the staff of mwatexwas 3,624, up from 2,400 at the time of the project ldentification In 1974,below the high of 4,186 in 1978, and very close to the appraisal projection of3,600 (Annex 2). In order to cope with its expanded activities, TEXCO hasdeveloped, in cooperation with the Engineering Company and the TechnicalAdvisor, a detailed job-related training program for the operators,supervisory personnel and management which was accepted by the Bank inSeptember 1976. The program included on-the-job training for additionallyrecruited operators as well as specialized training for mechanics, foremen andsupervisors. Also, selected high school graduates were sent to PakistanCollege of Textile Technology in Lyalpur, Pakistan for a specially designec3-month training program. In addition, seven suitable candidates were sent totextile colleges in UK and FRG.

3.06 The on-the-job training program of the operating personnel over athree-year period (1977-79) covered 1,043 people. About 40 mechanics, 25foremen and 75 supervisors were trained by the staff of the textile machineryequipment procured for the project. Also, 14 staff members were trained InPakistan and seven obtained Higher Diplomas in Textile Technology fromcolleges in UK and FRG. The total cost of training amounted to TSh 3 million,plus US$0.3 million in foreign exchange. The program can be considered asonly partly successful as it has not produced enough highly qualified weaversas reflected in somewhat lower than appraised technical efficiency of theweaving mill, and occasionally, low capacity utilization due to shortage ofweavers. An important lesson for any future textile project is that theproblem of training a sufficient number of highly skilled weavers, in view ofthe critical importance of their performance on the efficiency, capacityutilization of the plant and quality of the product, has to receive specialconsideration in formulation of the training program.

E. Use and Performance of Engineering Contractors and Consultants

3.07 The cooperation between TEXCO, the Engineering Company and theTechnical Advisor, and the management of Mwatex was quite successful asindicated by the underrun in costs and a relatively short delay in thecompletion of the project. The supervision missions also reported that themanagement of TEXCO expressed satisfaction with the progress of the work andthe performance of the consultants' personnel, and recognized that the Bank'sinsistence that both an Engineering Company and a Technical Advisor had to beused during project implementation was essentially correct.

3.08 The performance of the Engineering Company was satisfactory as itwas able to call on the manpower and experience of its operating companies inPakistan. Their main strength was a good experience in textile technology andcivil engineering, and they were able to maintain good relations with localcontractors, local labor and Mwatex and TEXCO management. However, theirknowledge of foreign equipment was limited to the types used in Pakistan andassistance of the Technical Advisor with their international experience wasmost useful in procurement activities. In addition to supervising andassisting the Engineering Company, the Technical Advisor was most helpful indealing with Government authorities regarding the problems of transportation

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of material from Dar-es-Salaam to Mwanza, the power and water authorities,keeping of records and report writing. Essentially, in view of the relativeweakness of the TEXCO team, the Technical Advisor also acted as the managementagent and coordinated all aspects of the implementation. They have performedtheir work well and were awarded a contract (Part C of the project) for amarketing study and feasibility study of the cotton-polyester plant. Thetotal cost of the engineering and technical assistance to the project (notincluding the studies) amounted to US$1.3 million, the same as projected inthe appraisal estimates, and included about 1,200 man-weeks on the site.

3.09 As stipulated in Article 2(d) of the Project Agreement in August1978, Mwatex entered into contractual arrangements for technical management ofthe expanded plant. The firm that was the Engineering C.ompany was alsoselected for this assignment. The original three-year contract was extendeduntil August 1983. The management team consists of 12 expatriates (about 4Xof the total number of personnel listed as administration and management) butincluding such key positions as Plant Manager, Technical Manager, FinancialManager and Department Heads. Within the limitations imposed by the shortagesof power, water and fuel, the management team has been considered both byTEXCO and Bank missions to be doing an excellent job under very difficultcircumstances. This has been particularly important because the performanceof Kill No. I in the period 1976-1978 deteriorated very badly, due to adrastic reduction of the number of expatriate technicians and administrativepersonnel, imposed by the personnel localization policies of the Government.

F. Implementation Schedule

3.10 The mechanical completion of MTP was seven months behind theappraisal schedule and the commissioning nine months behind schedule (Annex1). Most of the delay was due to the political situation as theTanzania-Kenya border, o-er which most of the construction (steel structure)material had to be transported, was closed in February 1977. Consequently,civil construction work was completed only in March 1978, about thirteenmonths behind schedule. Also, some problems were experienced with customsclearance of equipment in the port and the office of the Bank Representativein Dar-es-Salaam was most helpful in resolving the misunderstanding regardingthe Government's waiving of custom duties on equipment for the Bank financedproject. There was little problem with procurement and ocean freight but thelocal transportation from Dar-es-Salaam to Mwanza along single track railwayprovided some difficulties which resulted in a large amount of additional workin frequent changing of the erection schedules, but due to close cooperationbetween the Engineering Company and machinery suppliers, no additional delaystook place. As a matter of fact, the interval between the completion of thecivil works and mechanical completion was cut to five months as compared withseven months projected during appraisal. The commercial production started inDecember 1978, and in the first sixty days of 1979, the production of the newmill reached the completion requirement as stipulated in Article I(e) of theLoan Agreement.

G. Procurement and Performance of Suppliers

3.11 Procurement of equipment and services was carried out in accordancewith World Bank guidelines. Except for a few items that were proprietaryequipment, about 95% of the contract was awarded through international

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competitive bidding (ICB) procedures_ All specifications, tender documentsand instructions to the bidders were prepared by the Engineering Company,reviewed by the Technical Advisor on behalf of TEXCO, and approved by theBank. Altogether, about 900 companies applied for prequalification and about300 were prequalified in 35 categories. This included about 50 companiesprequalified in six categories to supply spinning equipment financed by KFAEDwhich had adopted identical procurement procedures. Although the contractswere awarded to companies in 12 countries, the top three (Japan, FRG andSwitzerland) received 60% of the orders (Annex 3). As far as the civil workswere concerned, two contracts were awarded through competitive bidding tolocal companies-one for site preparation and another for excavation, concreteand erection of the buildings. The steel structure was awarded through ICB toa Yenyan company.

3.12 Evaluation of the bids, award of the contracts and supply ofequipment proceeded smoothly, and by the end of 1977 practically all machineryand equipment was delivered to the site. There were few problems witherection, performance tests and commissioning of the machinery and equipment.Only in one cate,ory (high speed cards) did the equipment procured by KFAEDfail to reach the expected level of performance, and a few additional unitshad to be purchased as KFAED and TEXCO were not inclined to press claimsagainst the supplier. During the whole procurement procedure, the Bankreceived only one complaint from a bidder on one package who claimed that thecontract was unjustly awarded to a higher-priced competitor. A subsequentinvestigation indicated that the offer of this bidder was unresponsive and thecomplaint was withdrawn.

H. Environmental Aspects

3.13 As there are no Tanzanian standards for pollution control, theproject was designed to meet international standards for gaseous and liquidemissions. The new steam boilers were equipped with automatic regulatingdevices to ensure maximum combustion so as to control the discharge of carbonmonoxide in the fuel gases. Similar modifications have been made in theexisting boilers. The cards in the new mill were equipped with floor wLsteexhaust filters and air filters have been installed in the spinning andweaving sheds to reduce the level of dust in the working areas. Additionalsettling tanks were installed to treat effluent from the convertingoperations, so the possibility of the waste being discharged into LakeVictoria has been eliminated.

I. Costs, Disbursements and Financing

3.14 The cost of the project was US$6.1 million below the appraisalestimates (Annex 4). A summary comparison of the actual capital costs withthe appraisal estimates is presented below:

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Mwatex - Summary of Project Costs(in US$ million)

Appraisal Estimates Actual Cost VarianceLocal Foreign Total Local Foreign Total

Engineering &Consulting 0.3 1.0 1.3 0.3 1.0 1.3 Nil

Plant & Machinery 4.3 23.8 28.1 - 17.3 17.3 (10.4)Civil Works 4.5 1.9 6.4 7.7 4.0 11.7 5.3Study & Training 0.1 0.3 0.4 - 0.4 0.4 -Working Capital 4.6 - 4.6 4.8 - 4.8 0.2Interest During

Construction 0.5 3.0 3.5 - 2.7 2.7 (0.2)Total Financing

Required 14.3 30.0 44.3 12.8 25.4 38.2 (6.1)

Actually, the cost of the project as appraised was US$35.3 million, butsubsequently US$2.9 million was used for rehabilitation of Mill No. 1. Thefigures indicate that two significant differences between the appraisalestimates and the actual costs related to equipment and civil works. In thecase of equipment, neither physical nor price contingencies were utilized,which accounted for most of the savings. There were three major reasons forlower than expected prices. One was the use of ICB procedures. For example,prices for similar equipment procured for a textile plant in a neighboringcountry in the same period, but procured on a negotiated basis, averaged30-40% higher. The second is that in the general inflationary environment ofthe 1975-76 period, the years following the major increase in energy costs,the textile industry and its suppliers experienced acute economic difficultiesresulting in a surplus capacity, lack of orders and low prices. On the otherhand, the cost of the civil works exceeded the appraisal estimates, includingcontingencies, by 83%, mostly due to higher than expezted increases in theprice of building materials and delays in construction due to the closing ofthe Tanzania-Kenya border. The third reason is the strong performance andcooperation of the Engineering Company and the Technical Advisor.

3.15 Allowing for one year delay, disbursement of the loan followed thepattern of the appraisal estimates (Annex 5) quite closely. The portion ofthe Bank loan related to the project (US$12.8 million) was disbursed by theend of 1979. Subsequent disbursements in the 1980-81 period were inconnection with the cost of rehabilitation of Mill No. 1. The lastdisbursement was made on 02/01/82, one month after the loan was closed on12/31/81, and the balance of US$0.5 million was cancelled in October 1982.

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3.16 Financing for the project was provided from the following sources:

Mwatex - Summary of Project Financing(in US$ million)

Appraisal EstimateSource Total Actual

Debt Equity TotalTEXCO 14.3 - 12.8 12.8IBRD 15.0 14.5 - 14.5KFAED 15.0 10.9 - 10.9

Total 44.3 25.4 12.8 38.2

The actual amounts are lower than appraisal estimates due to the underrun inproject costs.

IV. OPERATING PERFORMANCE

A. Production

4.01 The operating performance of Mwatex and MTP has been closely linkedto the problems of shortages of power, fuel and water. Originally, Mwatexstarted operations in 1968, and, in 1970, achieved production of 12.3 mm whichwas gradually increased to 22.6 mm in 1974 and 22.7 mm in 1975, at which timeMi-1 No. I was operating at maximum capacity on 4 shifts (50 weeks per year,168 hours per week). Dmring the period of project implementation, productionof Mill No. 1 declined to 19.1 mm in 1976, and about 16 mm in 1977 and 1978.While the problems at the time appeared mainly to be due to lack of spareparts, poor maintenance, low productivity and a lack of qualified personnell/(in 1977 and 1978, respectively), there was also a loss of about 0.3 mm and2.0 mm of fabric production due to shortages of water, fuel and power.Problems with power supply were also mentioned in the Staff Appraisal Report.At the time of appraisal, the Tanzanian Electric Supply Company (Tanesco) wasoperating six 1.5 MW units at Nyakato (Mwanza), but had under construction anadditional four diesel generators expected to be ready in 1976. This wasprojected to increase the supply of power from 7.5 to 22.5 MW, adequate tomeet Mwatex's increased needs (from 5 to 10 MW), together with those of otherconsumers in the area. Supply of electric power sufficient to ensure theefficient operation of the Hwatex integrated textile plant was also made aCovenant of the Loan Agreement (Section 4.03), with the Borrower.

4.02 The expansion of Nyakato power plant was completed in 1978, butsupply of power did not improve because of the worsening fuel supplysituation. In the years 1979-81, power was cut repeatedly, and 9.8 mm totalof potential Mwatex production was lost. Also, 6.0 mm of production was lostdue to water shortage as the municipal pumping station was incapacitated dueto the lack of power and spare parts. In addition, 7.4 mm of production waslost due to direct shortage of fuel to operate Mwantex's boilers for steamgeneration. Details of down time and resulting losses of production andrevenues are presented in Annex 6.

1/ The number of expatriates was drastically reduced at the end of 1974 whenthe contract with the textile consulting firm managing the plant wasterminated.

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4.03 The Bank missions which visited the Mwanza project in 1979, 1980 and1981 reported alarming deterioration of the operating performance of Mwatexdue to shortages of power, fuel and water, and the most unsatisfactory stateof affairs was being highlighted in the Project Progress Reports. Severalletters were sent by the Mwatex management to TEXCO pointing out the loss ofproduction and heavy financial losses in 1979, 1980 and 1981. Similar letterswere sent to TEXCO from the Bank and copies to the Principal Secretaries inthe Ministries of Industry and Finance, but in view of the wide-spreadshortages of fuel and power in the country, no remedial actions were taken bythe Government, and it has become apparent that it may not be realistic toexpect the Government to be able to honor its commitments to the Bankregarding supply of power to Mwanza until there is a general improvement inthe economic situation of the country. Actually, the problems of Nyakatopower plant have not been limited to the shortage of fuel. The lastsupervision mission (November 1982) learned that from the time the plant wascommissioned in 1978, the generators had been repeatedly stopped foradjustments to eliminate vibration, and prolonged stoppages were necessary torealign the crankshafts. Finally, in 1962, the problem was traced to faultyfoundations and the plant was closed for major rehabilitation, includingrebuilding of the foundations and regrinding of the crankshafts. The work wasexpected to be completed in stages during 1983, which would allow Mwatex tooperate one shift beginning in March, two shifts in June and reinstate fullproduction in November 1983. (This schedule may be optimistic due not only topower problems, but also to other problems such as lack of foreign exchangefor procurement of spare parts and dyestuffs). In the meantime, output of theold Nyakato plant is down to 5 MW which is barely sufficient to satisfy thedomestic needs of the consumers in the area. It is to be noted, however,that the existence of the technical problems at Nyakato were not communicatedby Tanesco to Mwatex or TEXCO until late 1982, and during the entire period,all concerned were under the impression that power interruptions were entirelydue to shortage of fuel.

4.04 In the first three months of operation of the MTP (January-March1979), the project achieved 86.5% capacity utilization. Subsequently, due toshortages of power, water and fuel, the production deteriorated and for all of1979, the project operated at 64.3% capacity utilization. In 1980 and 1981,the capacity utilization was further reduced to about 50%. In 1982, Mwatexwas non-operational most of the time and finally production was completelydiscontinued on October 14, 1982, following the closing of Nyakato for majorrepairs (para. 4.03). It is important to point out, however, that during theoperational period of the MTP (Iill No. 2) the technical efficiency in theweaving mill was gradually improving, and in the spinning mill it remainedclose to 90% throughout 1979-1982, i.e. at the level exceeding the appraisalestimates which is considered excellent for developing countries. Also, whilecapacity utilization of Mill No. 1 has been deteriorating, the technicalefficiency, as a result of the supply of spare parts and new management in the1979-1982 period, had improved. A summary of Mwatex's operating performanceis presented below, and details of capacity utilization and technicalefficiency are shown in Annex 7:

Mwatex - Production of Woven Fabrics(in million meters)

1974 1975 1976 1977 1978 1979 1980 1981 1982

Mill No. 1 22.6 22.7 19.1 15.9 1-2.2 9.4 7.2 8.9 2.1Hill No. 2 - - - - 3.9a/ 11.0 8.2 8.4 2.4Total 22.6 22.7 19.1 15.9 16.1 20.4 15.4 17.8 4.5

a/ Trial runs.

B. Market Development

4.05 Consumption of textile fabrics in Tanzania has shown a slower growththan expected at the time of the project appraisal. The Bank appraisalmissions projected that the local production would reach 122 mm in 1982 andthat the consumption would increase from 7.9 to 8.7 square meters per capita.Actually, while the capacity increased to about 144 mm2/, with thedeteriorating economic situation of the country and ensuing shortages ofenergy and input materials, the production of textiles decreased steadily fromthe 73 mm produced in 1975, and in 1982 only 58 mm were produced. Also, dueto foreign exchange restrictions, imports of textile products were drasticallyreduced and, in 1982, the fabric equivalent of the imports was about 24 mm.Apparent consumption was about 4.5 mm of cloth, about 5 square meters percapita, one of the lowest levels in the world.

4.06 To increase revenue and reduce consumption, the Governmentdrastically increased the prices of textile fabrics and imposed high salestaxes amounting to over 100% of the value ex-factory. For example, a linearmeter (116 cm wide) of printed fabric (Kitange) which at the time of appraisalsold for TSh 7.0, currently sells at TSh 32.5, including TSh 17.3 of the salestax; while during the same time the average industrial wage increased fromabout TSh 3.0 to TSh 4.3 per hour. At the same time, the Government made aneffort to develop foreign markets, but with the exception of a barter dealwith Mozambique in 1979 and 1980, the exports to nearby countries amounted to500-600 tons, worth about US$3 million. The details of production, export andimports are presented below:

Tanzania - Apparent Supply of Textiles(in million meters)

1975 1976 1977 1978 1979 1980 1981 1982

Imports a/ 199 226 287 362 304 324 191 199Exports a/ 19 26 10 14 104 138 30 22Balance a/ (180) (200) (279) (348) (200) (196) (161) (177)Volume Equivalent 34 32 44 60 32 32 26 25Production 73 66 63 72 73 67 62 58Apparent Supply 107 98 107 132 105 99 88 83Population (million) 14.8 15.8 15.6 15.0 16.5 17.0 17.4 18.0Meters/Capita 7.2 6.2 6.9 8.8 6.4 5.8 5.1 4.6

a/ TSh million at current prices

2/ The Government's projections were 186 mm.

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4.07 Textile consumption generally is a direct function of GDP and theabove figure of decreasing per capita consumption reflects, in part, thedifficult economic conditions now prevailing in the country. Even when theimmediate utility problems of Mwatex are solved (para. 4.03), it is difficultto forecast a rapid return to full output at Mwatex or a dramatic increase inthe overall textile sector's output until economic recovery is underway inTanzania.

V. FINANCIAL PERFORMANCE

A. Incremental Financial Rate of Return

5.01 In order to evaluate the success of MTP in terms of financial rateof return (FRR), the effects of 'external- factors, i.e. factors outside thecontrol of the project and plant management such as persistent shortages offuel, power and water, have to be separated from the usual project parameterssuch as delay in implementation, number of shifts worked or variations incapital costs. Also, to calculate FRR, assumptions have to be made when MTPwill be back in operation, and at what rate of capacity utilization.

5.02 Assuming a rapid resumption of power in 1983 and a full three-shiftoperation in 1984, FRR of the project would be 12.9% in constant terms. If,however, the "external" factors contributing to the shortage of fuel, powerand water were removed, FRR would have been 21.3%, compared with the appraisalestimate of 24.2%. Other factors such as lower number of shifts worked anddelay in commissioning had only a minor effect on reducing FRR and accountedfor 1.7 and 2.3% decrease, respectively, in FRR, while lower than anticipatedcapital costs increased FRR by 1.1%.

5.03 It appears, however, that operation of MTP beyond a two-shift levelis not likely until there is a significant economic recovery in the country.If the plant operates one shift for six months in 1983 and two shifts in 1984and afterwards, which is a most likely scenario, then FRR would be 9.2%. Onthe other hand, if, due to the general economic situation in the country, onlyone-shift operation can be sustained, FRR would be 3.3%.

5.04 The assumptions and calculations of the FRR are, as shown in Annexes8 through 10, based on the actual investment costs, the actual sales andproduction costs until 1982, and the projected sales and production costs from1983 and onward. Annual net sales and production costs attributable only toNTP were not provided by Mwatex. The incremental net sales and productioncosts to the project have been estimated by prorating MTP's share of Mwatexfabric production with consideration for better quality products and loweraverage production costs of the new mill. The project cost and benefitstreams are then adjusted to 1975 US dollars after incorporating changes inthe foreign exchange rate.

B. Financial Results

5.05 Detailed income statements and balance sheet statements of Mwatexare shown in Annexes 11 and 12, and summarized below:

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Mwatex - Selected Financial Data(in T Shillings million)

1975 1976 1977 1978 1979 1980 1981

Net Sales 17.7 115.0 105.2 104.1 176.9 140.8 189.9Income After Tax 7.2 4.2 (4.2) (6.7) (25.8) (38.9) (24.2)Depreciation 7.5 7.2 7.4 8.3 29.8 25.1 23.6Interest 3.5 1.4 0.4 0.5 16.6 19.3 17.2Cash Flow (before tax & int.) 18.2 12.8 3.6 2.1 20.6 5.5 16.6Current Assets 92.9 81.2 69.7 87.0 116.4 116.0 114.0Total Assets 143.2 158.6 274.7 353.7 375.6 351.8 336.5Current Liability 98.2 82.8 27.9 87.2 111.0 142.1 171.3Long-term Debt 11.9 20.5 136.7 154.1 163.1 159.4 137.7Equity 33.1 55.3 110.1 112.4 83.6 51.7 27.5Debt Service 18.9 16.8 8.4 2.6 17.3 41.8 40.3Ratios: -Current Ratio 0.9 1.0 2.5 1.0 1.0 0.8 0.7Debt/Equity Ratio 26/74 27/73 55/45 58/42 63/37 76/24 83/17Debt Service Coverage 1.0 0.8 0.4 0.8 1.2 0.1 0.4

5.06 The overall financial position of the company deteriorated from 1976due to: (i) replacement of highly qualified expatriates in key operationaland accounting positions with Tanzanian nationals, in some instances, oflimited professional experience; and (ii) shortage of fuel, power and waterin early years of operation of Mill No. 2 (the Project). The net profit fellfrom TSh 7.2 million in 1975 to a net loss of TSh 24.2 million in 1981. Thedebt/equity ratio decreased to 83/17 by 1981. Debt service coverage was below1.0 most of the period, forcing the company to finance debt service paymentswith short-term borrowings.

C. Financial Prospects

5.07 The company has not prepared financial projections, !n part, due toits present extreme difficulties. At present, TEXCO and ultimately theGovernment, is meeting the financial obligations of Mwatex. The company'sshort-term financial outlook is not good. However, the company's ability toservice its debt is expected to improve in the near future, as it re-startsits operations. Annual debt service requirements of the company are currentlyestimated to be about TSh 40 million (US$4.4 million equivalent). The companycan meet its minimum debt service requirements plus cash break-even if itachieves a capacity utilization of about 40% (one-shift with occasionalt-bo-shift operation), which is likely to be achieved during 1984, at theearliest. By 1984, the company should be able to service its foreign debts atthe present exchange rate, but a major devaluation, as well as the presenthigh debt structure may require a restructuring of the company's finances. Atthe time of the completion mission (Nlovember 1982) none of these possibilitieswas being addressed by Mwatex or TEXCO and the mission was not able to obtaina full analysis on the future of the company.

5.08 The financial problems are not limited to Hwatex but exist in thetextile sector as a whole, and the solution must be addressed by TEXCO. TheNovember 1982 mission advised TEXCO that it should assess its overall

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operations considering the potential overcapacity (if and when all plantscurrently under construction are completed), the severe shortage of foreignexchange (for spares and chemicals), the social problem of laying-off workers,and try to develop a cost minimization operating scheme that would extendthrough the present economic period. The program should consider whetherincreased exports of yarn or cloth (not dyed) is possible, to assist TEXCO andthe country in servicing at least part of its external debts. TEXCOundoubtedly would need significant levels of experienced consulting assistancein achieving this goal.

VI. ECONOMIC PERFORMANCE

A. Economic Rate of Return

6.01 The revised economic rate of return (ERR) for the project is 8.9%,compared to the appraisal estimate of 16.1%. The main reason for the lowerreturn is lower than forecasted capacity utilization in the early years ofoperation due to the shortage of fuel, power and water, while other factorssuch as a longer than expected implementation period and a lower productioncapacity due to abolition of four-shift operation have only a minor effect onERR. If the -external' factors contributing to the shortage of fuel, powerand water during 1979-1983 were removed, the ERR would have been14.2% compared with the appraisal estimate of 16.1%. The remaining deviationfrom the appraisal estimate results from a delay in commissioning of theproject and the abolishment of four-shift operation, whose adverse impact onthe ERR have been mitigated by the lower than estimated capital costs.

6.02 As with the FRR (para. 5.03), sensitivity tests on lower levels ofoperation were made. If the plant resumes operation on one shift-for sixmonths in 1983,3/ two shifts in 1984 and afterwards, the ERR would be 4.8%.

6.03 The calculations of ERR are shown in Annexes 13 through 15.Financial cost and benefit streams are adjusted using economic shadow prices.The calculations of shadow prices are as follows: for tradable goods,economic prices are border prices (f.o.b. price for cotton and c.i.f. pricesfor fabric) For electricity, the economic price of US$0.078 per KWh isassumed. For non-tradables, i.e. mostly salaries and wages, a shadow price of75% of the actual rate is assumed as in the Appraisal Report. Further,whenever applicable, transfer payments to the Government (custom duties andsales taxes) are excluded. Also, sensitivity tests on the effect ofproduction costs indicated that an increase of 10% in annual production costswould lower ERR by 2.1%.

B. Foreign Exchange Savings and Earnings

6.04 The foreign exchange savings and earnings in 1981, expressed inconstant 1981 dollars, is estimated at US$3.3 million. This figure would beincreased to US$4.0 million when full capacity operation is achieved.

VII. INSTITUTIONAL PERFORMANCE

7.01 At the project level, the institutional performance of Mwatex has tobe divided into three periods. The first was when Mill No. I was managed on a

3/ The plant reportedly resumed one-shift operation in May 1983.

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contract basis by an expatriate textile consulting company until early 1976.The second was when the company was operated by predominantly Tanzanianpersonnel until August 1978, and the third has been since August 1978 whenboth Mill No. 1 and 2 have been managed by an expatriate management team.During the first period, the mill achieved a high capacity utilization andtechnical efficiency, and 6% return on sales before taxes. During the secondperiod, the number of expatriates was reduced from 23 to 8 people who werehired on individual contracts and responsible to the Tanzanian management.During that time, supervision, maintenance and labor discipline deterioratedmarkedly, resulting in a drastic decrease in production, quality and profits.As stipulated in the Project Agreement, since the completion of the MTP,Mwatex has been operated by the Pakistani management team and, withinlimitations imposed by power, water and fuel shortages, the performance ofMwatex has been considered satisfactory. Therefore, if the performance of acompany is defined in terms of results achieved by a local management team,the rating of institutional performance of Mwatex would be quite low. On theother hand, all textile companies in Tanzania (except Friendship) are operatedby expatriate management, as the qualified local personnel required to fillthe key 15-20 technical, administrative and financial positions in the textilecompanies are not available locally. In this context, Mwatex compares wellwith other companies operated with expatriate management.

7.02 Also, the performance of TEXCO has been strongly affected byshortage of qualified personnel. At the time of appraisal, TEXCO employedtwenty five expatriates on a contractual basis. These expatriates were laterreleased and the Project Implementation Unit formed by TEXCO was not fullyeffective, so the supervision of the Engineering Company implementing theProject was carried out by the staff of the Technical Advisor, reportingdirectly to the Managing Director of TEXCO. More recently, TEXCO staff hasbeen strengthened by a UNIDO team whose personnel are filling top technical,operational, merketing and financial positions.

VIII. BANK PERFORMANCE

A. Overall Performance and Relationship with Borrower

8.01 The Government of Tanzania requested Bank assistance for the textilesector in May 1974. Pursuant to this request, the subsector was included inthe Industrial and Mining Sector Survey carried out by the Bank in September1974. The Mwatex Project was appraised in November 1974, and Board Approvalwas granted in June 1975, 13 months after the formal request. In view ofconsiderably longer loan processing time for other projects, 13 monthsinterval for MTP from the date of the request to Board Approval shows that theBank made a special effort to respond quickly to the Borrower's needs. Theeffort is especially significant as MTP was the Bank's first industrialproject in Tanzania and also the first textile project ever undertaken by theIndustry Department.

8.02 In order to expedite the implementation of MTP, the Bank agreed touse the same engineering firm which prepared the feasibility study, butprudently insisted that the capability of Mwatex and TEXCO to supervise theimplementation of the project should be strengthened by retaining anexperienced international company of textile consultants as TechnicalAdvisor.

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8.03 The Bank's relationship with Mwatex and TEXCO throughout projectpreparation and implementation was excellent and was aided by TEXCO'sprovision of a team of local professionals (the PIU) who provided liaison withTEXCO and the Government in the initial and most critical stage of theproject.

B. Performance in Project Preparation, Formulation and Implementation

8.04 The Bank helped to prepare the project by carrying out the sectorsurvey, helping to establish priorities in the sector and identifying MTP asthe project with the best chance of providing the needed additional productionof textiles in the shortest possible time, and at relatively low cost. TheBank also made a valuable contribution to the success of the project bycorrecting some of the assumptions of the feasibility study regarding pricesand equipment capacity, labor productivity, technical efficiency, as well asin preparation of tender documents, machine specifications and reviewing ofthe bid evaluation procedures. The Bank also assisted TEXCO in preparation ofthe terms of reference for the contracts with the Engineering Company,Technical Advisor and Textile Consultants who implemented the study of exportmarketing prospects, as well as the contract for Technical Management of thecompany after MTP completion. Finally, the Bank exercised a carefulmonitoring of the project progress reports, mounted six supervision missionsduring the 42-month period of project implementation, and assisted Mwatex informulating a program of rehabilitating Mill No. 1, using the balance of IBRDand KFAED loans.

8.05 The Bank played an important and successful role in bringing inco-financing (para 1.04), to enable the project to proceed without delay andwith minimum use of the Government's foreign exchange reserves.

8.06 The Bank correctly identified training as a key element, and asubstantial training program was included. However, as indicated earlier, theamount of training should have been larger (para. 3.05).

8.07. On the debit side, the Bank failed to anticipate and made noattempts to ensure orderly localization of key personnel in TEXCO and Mwatexmanagement, which, in retrospect, had rather deleterious effects on Mwatex andthe entire textile sector.

8.08 At the sector level, the Bank had correctly raised the issue of theGovernment's plans regarding other expansions in the cotton textile sector(para. 2.02). After extensive discussions at all levels within the Bank onwhether it was appropriate or feasible to set limits on expansion, thecompromise language of Section 4.02 of the Loan Agreement was reachedrequiring the Borrower to carry out a study of export possibilities forTanzania's textiles, and applying the conclusions of the study to any majorexpansion of the textile manufacturing industry (Annex 16). Although theletter of the covenant was followed, the spirit was not. In the ensuing years,in addition to the Bank sponsored Morogoro Textile Project, designed tosatisfy Tanzania's need for polyester-cotton blends as recommended by thestudy, three other cotton text'le projects were undertaken by TEXCO with noapparent regard to the excess capacity being built. The Bank was not

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consulted and while it is not clear that a stronger position regarding sectorplanning and investment strategy was achievable in practical terms, at least aconsultation clause on overall planning and development could have resulted ina continuous dialogue with TEXCO regarding limitations of the countryresources and a realistic supply/demand balance of textile products.

IX. CONCLUSIONS

A. Overall Assessment

9.01 In the overall assessment of the project, a clear distinction has tobe made between the implementation and subsequent operation of the project,especially as the onset of severe shortages of fuel, power and water coincided(beginning of 1979) with the completion of the project. The Mwanza TextileProject could be considered one of the best Bank projects in Tanzania in termsof implementation. Very close attention was paid to time schedule and costcontrol. Civil works, machinery procurement and training programs have beencompleted with minimum delay and, overall, within the appraised cost. Theplant has a proven capability to produce cotton woven fabrics at low cost andrelatively high efficiency, and quality suitable for domestic and exportmarkets in neighboring countries. On the other hand, the plant still cannotbe effectively operated without assistance of an expatriate management team.As a matter of fact, the appraisal mission anticipated that the plant wouldrequire foreign assistance after completion and an appropriate covenant(para. 3.09) regarding technical management was made part of the ProjectAgreement. However, neither the Bank, or, for that matter, other donors,adequately anticipated the severe difficulties which would face Tanzania'seconomy in the late 1970s and early 1980s, or the foreign exchange problemswhich caused drastic shortages of fuel, power, spare parts and other inputmaterials which have been responsible for the subsequent operational problemsin Mwatex and the entire textile sector.

B. Lessons for the Borrower and the Bank for Similar Projects

9.02 Lessons learned from the experience in this project were: (a) givenenough financial and human resources a project can be implemented within theappraised time schedule and capital costs, but it cannot be effectivelyoperated unless maintenance of infrastructure and supply of vital inputs canbe assured; (b) as far as infrastructure is concerned, the technical problesof Nyakato power plant could be considered force majeure but at the same time,the fact that electricity supply to Mwatex was dependent on the operation of asingle power plant ratber than a multiplant grid was not taken intoconsideration in evaluation of major risks associated with the Project; (c)the risks associated with the condition of the water pumping station in Nwanzaand its dependence on the power supply were not recognized; {d) a majorreduction in the number of expatriates in Mwatex and TEXCO was not recognizedas a major risk; in retrospect, a correct strategy should have been toestablish and finance a major management training program and to localize thekey positions in the sector more gradually until such a program was completed;(e) not enough attention was given to labor training, in particular thedifficulties in training the adequate number of critically important weavingoperators; (f) at the time of appraisal, Mwatex and the sector were operating

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at 168 hours per week (four shifts/seven days per week), and it was assumed bythe appraisal mission that this would become the norm in the sector; thelesson here is that in Tanzania, as in many other developing countries, due tosocial pressures the operation of a seven-day working week is not likely to beachieved; and (g) the current deterioration of Tanzania's economic situationand, particularly, the drastic foreign exchange shortage, probably could nothave been predicted in 1975; however, the lesson here is that any project withno prospects for export earnings or assured allocation of foreign currency andrequiring a significant amount of imported inputs annually (dyes, chemicalsand spare parts), is highly vulnerable to foreign exchange constraints, andrisks associated with possible deterioration of the country's economy shouldhave been taken into consideration.

9.03 In summary, implementation of the project itself has been successfulmainly because Mwatex and TEXCO used expatriate help from established firmsand worked harmoniously with them. The Bank, in addition to financing, hasrendered valuable assistance in project identification, preparation andimplementation. Neither TEXCO, Mwatex nor the Bank placed enough emphasis onusing the presence of expatriates to train local management or to establish acomprehensive training program for technical, administrative and financialpersonnel. Also, the risks associated with the fragility of Tanzanianinfrastructure and the foreign exchange situation were not recognized.

Industry DepartmentJune 1983

TANZANIAMWANZA TEXTILE PROJECT

Completion ReportImplementation Schedule

~1-975 .976 1977 1978 1 979

MONTHS 0' 12 18 24 30 36 42 48 54

Deloi!ed EngineenngandDesign

ConstructionWVork ..... .. .... .........

Procurement (FOB) - -

Unbod:ng ond IrnoNl_Tiansporloion

Mochinery Erection ................

Trial Production

Commercial Production . _ _ _ _ _m_m_i........

I July 1. 1975

Key

- Approisol Estirntos

s a a e Actuol Vd Br*-24770


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ANNEX 2

TANZANIA - MW& TEXTLER PROJECT

PROJECT COI2=ETION REPORT

Employment(Number of People)

1974 1975 1976 1977 1978 1979 1980 1981

Operators:Spinning 641 647 693 708 1,232 1,021 820 766Weaving 961 972 984 1,030 1,689 1,669 1,793 1,746Processing 509 505 510 513 833 768 767 724

Services, Engineeringand Maintenance 72 74 87 99 147 156 197 314

Administration andManagement 225 245 263 218 255 228 299 356Expatriates 23 17 8 8 12 18 13 11

TOTAL 2,331 2,460 2,545 2,576 4,188 3,860 3,889 3,917

Cost of Labor and Management(Tsh Million)

Operators:Spinning )Weaving ) 17.6 19.8 20 1 21.4 25.1 33.6 33.8 40.9Processing)

Services, Engineeringand Maintenance - - - - - - -

Administration andManagement ) 2.4 2.9 3.8 3.5 3.2 4.0 4.4 5.4Expatriates )


- 21 -

ANNEX 3

TANZANIA -MWANZA TEXTILE PROJECT


Sources of Procurement

Country US$ Equivalent Z of Loan Amount(in Thousands)

Japan 4,729 31.6Fed. Rep. of Germany 3,190 21.4Switzerland 1,484 9.9France 1,243 8.3United Kingdom 824 5.5Netherlands 799 5-3United States 760 5.1Pakistan 686 4.6South Africa 466 3.1Belgium 215 1.4Denmark 57 0.4Tanzania 15 0.1

Subtotal 14,468 96.6Cancelled 532 3.4

Loan Total 15,000 100.0


TANZANIA - HWANZA TEXTILE PROJECT


Project Capital Cost - Plan and Actual

Appraisal Estimates Actual Cost,/

In Killion Shillings In Killion US Dollars In Million Shillinags In HU1lion US DollarsLocal Porelin Total Local Poreign'j Total Local Foreln atLt

Engineering b ConsultancyServices 2.0 7.1 9.1 0.3 1.0 1.3 2.8 9.4 12.2 0.3 1.0 1.3

Plant 6 Machinery 0.7 109.9 110.6 0.1 15.5 15.6 - 162.6 4/ 162.6 - 17.3 17.3Freight & Insurance 10.8 11.4 22.2 1.5 1.6 3.1 - - - _- -Erection 4.9 3.5 8.4 0.7 0.5 1.2 - - - - - -Civil Works 17.8 12.1 29.9 2.5 1.7 4.2 72.4 37.6 110.0 7.7 4.0 11.7Base Cost Estimate (BCE) Tr.Y T144 MY 58. 2-T 2504 7-32 ! : 284- IF." uW Y2 30.0

Contingencies& Physical(5Z of BCE) 1.8 7.1 8.9 0.3 1.0 1.3 Included In Above Cost Included In Above Cost

Price (34% of BCe plusphysiael contingency) 26.6 38.8 64.9 3.7 5.4 9.1 H It

Installed Cost 64.6 189.4 254.0 9.1 26.7 35.8 75.2 209.6 284.8 8s0 22.3 30.0Working Capital 32.4 - 32.4 4.6 - 4.6 45.1 - 45.1 4.8 - 4.8Study 6 Training 0.7 2.1 2.8 0.1 0.3 0.4 - 3.8 3.8 - 0.4 0.4Project Cost .77 191.5 289.2 21r 8 0 U 40.8 -3 Yrr.T NT.7 Tr. 8 YET 34.S

Interest During Construction 3.9 21.3 25.2 0.5 3.0 3.5 - 25.3 25.3 _ 2.7 2 7

Total Financing Required 101.6 221.8 314.4 14.3 30.0 44.3 120.3 238.7 3SB0 12.8 25.4 38.2

1/ Including Item C, Table 12/ At TSh 7.1/US$I At TSh 9.4/USs/ Including freight and insuranaee


- 23 -

ANNEX 5

TANZANIA - MWANZA TEXTILE PROJECT

PROJECT CONPLETION REPORT

Project Disbursement Schedule (Cumulative)(in US$ Million)

Year Appraisal Actual

KuwaitIBRD TEXCO1/ IBRD Fund Total

1975 0.2 1.2 0.2 - 1.4

1976 8.1 3.4 2.5 3.1 9.0

1977 14.0 9.4 9.2 6.8 25.4

19782/ 15.0 12.3 11.5 9.0 32.8

1979 - 12.7 12.6 9.0 34.3

1980 - 12.8 13.1 10.2 36.1

1981 - 12.8 14.2 10.9 37.9

19823/ - 12.8 14.5 10.9 38.2

i/ At TSh 9.4/US$2/ June 303/ Last disbursement was made on 2/01/82



PROJECT COHPLETION REPORT

Production and Revenue Losses due to Shortages of Power, Fuel and Water(1977-1981)

liour. Metersl/ Revenues2/1-977 1978 1979 1W90 1981 1977 1978 1979 1950 1981 1977 1978 1979 1980 1981

Power 107 641 783 815 662 0.3 1.0 3.6 3.4 2.8 3.1 11.6 43.9 49.4 49.5

Water - 67 583 605 282 - 0.2 2.3 2.5 1.2 - 2.2 34.0 36.7 21.4

Fuel - 284 510 343 896 - 0.8 2.3 1.4 3.7 - 9,2 29.8 20.8 67.9

Total 107 992 1,876 1,763 1,870 0.3 2.0 8.2 7.3 7.7 3.1 23.0 107.7 106.9 138.8

1/ Killion2/ TSh million


- 25 -

ANIEX 7



Capacity Utilization (Z)1/

1974 1975 1976 1977 1978 1979 1980 1981 1982

Spinning

Existing (Mill No. 1) 92.3 95.2 80.4 71.4 68.5 27.5 15.8 18.0 3.1Project (Mill No. 2) - - - - - 75.8 59.6 72.4 18.6

Weaving

Existing (Mill No. 1) 99.6 102.6 84.1 70.9 70.5 41.8 31.7 39.2 9.2Project (Mill No. 2) - - - - - 64.3 45.6 52.0 14.0

Technical Efficiency (x)

Spinning

Existing (Mlll No. 1) 85.0 n.a. n.a. n.a. n.a. 70.0 74.8 82.0 81.3Project (Mill No 2) - 89.0 88.4 88.6 88.8

Weaving

Existing (Mill No. 1) 80.0 n.a. n.a. n.a. n.a. 46.0 42.0 55.0 62.0Project (Mill No. 2) - - - - - 69.0 51.8 57.2 66.1

1/ As based on 3-shift (144 hours per week) operation, the capacities of Mwatexplants are as follows:

Mill No. 1 Hill No. 2 TotalSpinning (MT) 2,900 2,700 50600Weaving (mm) 19.5 17.1 36.6


- 26 -

ANNEX 8



Investment Costs - Mill No. 2 (the Project)

1975 1976 1977 1978 Total--- -- (in US$ Million) )-

A. Investment Costs:

- In Current US$ 1/ 1.4 7.3 15.3 2/ 8.2 3/ 32.2- In Constant 1975 US$ 1.4 7.2 13.9 6.3

B. Conversion Factors:

- Exchange Rate (TSh/US$) 7.41 8.38 8.27 7.69- US$ Deflator (1975 - 100) 100.0 101.8 110.2 130.1

1/ Project Disbursement Schedule (Annex 6) less estimated interest paymentsduring construction.

2/ Including working capital amounting to US$3.6 millon.3/ Including working capital amounting to US$1.2 million.


- 27 -

AME 9



Incremental Financial Benefit - Mill No. 2(in T Shillings million)

A.R. I/ 1979 1980 L981 1982 2/ 1983 2/ 1984-93 2/

Production (mm) 20.0 11.0 8.2 8.4 2.4 9.0 17.1

Net Sales 3/ 127.3 110.4 86.7 107.3 30.7 115.0 218.4

Direct Costs:3 /Cotton 21.8 25.5 17.4 20.2 5.8 21.7 41.2Cotton Yarn ( 6.7) (6.8 ) (6.8) (6.8) (6.8) (6.8) (6.8)Salaries and Wages 9.8 15.6 15.6 16.6 16.6 16.6 16.6Dyes and Chemicals 13.6 11.2 10.5 10.5 3.0 11.2 21.3Other Material 1.5 1.8 1.8 1.5 0.4 1.6 3.0Inventory Decreases - 2.3 (2.8) (2.1) (0.6) (2.3) (4.3)

40.0 49.6 35.7 39.9 18.4 42.0 71.0

Operating Expenses:3/Management Fee - 1.5 1.5 1.6 1.6 1.6 -Electricity, Water & Ias. 12.7 22.8 21.7 22.5 6.4 24.1 45.7

Total Production Costs 52.7 73.9 58.9 64.0 26.4 67.7 116.7

Exchange Rate (TSh/US$) 7.41 8.25 8.20 8.29

US$ Deflation (1975 = 100) 100 145.1 157.1 149.6

1/ Appraisal estimates at full capacity in 1975 T Shillings.2/ Present estimates at 1981 prices.3/ Prorated according to Mill No. 2's share of production in Mwatex. However, 15.7%

premium in average product price for its superior quality, as well as 23.1% loverunit labor costs (per meter of fabric), are allowed for Mill No. 2, as assumed inthe Appraisal Report.

Industry Department

- 28 -

ANNE 10

TANZANIk - MWANZA TEXTILE PROJECT


Financial Rate of Return Calculations

Appraisal Estimate Actual/Present EstimateInvestment Production Net Investment Production Net

Year Costs Costs Sales Costs Costs Sales

1975 0.8 - 1.4 - -1976 13.1 - 7.2 - -1977 14.7 - - 13.9 - -1978 1.8 5.3 9.6 6.3 - -1979 - 6.6 14.3 - 6.2 9.2

- 1980 - 7.2 17.0 - 4.6 6.71981 - 7.2 17.0 - 5.2 8.71982 - 7.2 17.0 - 2.1 2.51983 - 7.2 17.0 - 5.5 9.31984-93 - 7.2 17.0 - 9.4 17.6

Financial Rate of Return (before tax):Appraisal Estimate: 24.2%Present Estimate: 12.9%


- 29 -

ANNEX 11TANZANIA -MWANZA TEXTILE PROJECT


Mwatex Historical Balance Sheets(in T Shillings million)

1975 1976 1977 1978 1979 1980 1981

ASSETS

CURRENT ASSETS:CashReceivables 38.2 35.7 27.2 17.5 34.6 19.7 21.6Inventory 54.7 45.5 42.5 69.5 81.8 96.3 92.4Total Current Assets 92.9 81.2 69.7 i8i 11. 116.0 114.0

FIXED ASSETS:Gross Fixed Assets 96.2 124.2 266.0 337.2 358.0 359.7 370.1Accumulated Depreciation 45.9 53.4 61.0 70.5 98.2 123.9 147.6Net Fixed Assets 50.3 70.8 205.0 266.7 259.2 235.8 222.5

OTHER ASSETS - - - - - - -

TOTAL ASSETS 143.2 158.6 274.7 353.7 375.6 351.8 336.5

LIABILITIES

CURRENT LIABILITIES:Creditors 57.8 34.3 18.9 55.4 33.1 86.8 114.9Short-Term Borrowings 25.2 40.5 6.9 21.4 28.7 30.8 38.8Current Long-Term Debt 15.4 8.0 2.1 0.7 22.5 23.1 23.6Total Current Liabilities 98.2 82.8 27.9 87.2 111.0 142.1 171.3

LONG-TERM DEBT:IBRD - 12.1 79.2 86.3 100.3 103.6 105.3Kuwait Fund - 5.4 56.4 67.3 84.4 78.9 56.0Other Loans 27.3 11.0 3.2 1.2 0.9 - -

Sub Total 27.3 28.5 138.8 154.8 185.6 182.5 161.3Less Current Long-Term Debt 15.4 8.0 2.1 0.7 22.5 23.1 23.6

Total Long-Term Debt 11.9 20.5 136.7 154.1 163.1 159.4 137.7

EQUITYShare Capital 29.0 47.0 106.0 115.0 115.0 119.0 120.0Retained Earnings 4.1 8.3 4.1 ( 2.6) (28.4) (67.3) (92.5)Total Equity 33.1 55.3 110.1 112.4 83.6 51.7

TOTAL LIABILITIES AND EQUITY 143.0 158.6 274.7 353.7 375.6 351.8 336.5

Debt Service Coverage (Times) 0.9 1.0 2.5 1.0 1.0 0.8 0.7Debt/Equity Ratio 26/74 27/73 55/45 58/42 63/37 76/24 83/17Current Ratio 0.9:1 1:1 2.5:1 1:1 1:1 0.8:1 0.7:1


- 30 -

ANNEX 12



Hvatex Historical Income Statement(in T Shillings million)

1975 1976 1977 1978 1979 1980 1981

Production:CapacityL/ 22.7 22.7 19.5 19.5 36.6 36.6 36.6Capacity Utilization (Z) 105.4 84.1 81.5 82.6 55.7 42.1 47.0Fabric (NLM)1/ 23.4 19.1 15.9 16.1 20.4 15.4 17.2Yarn (TMT)2/ 3.2 2.7 2.4 1.3 3.0 2.2 2.6Net Sales 117.7 115.0 105.2 104.1 176.9 140.8 189.9

Direct Costs:cotton 26.4 28.0 30.0 34.8 47.2 32.7 41.4Cotton Yarn 8.5 3.8 1.9 6.8 - - -Salaries and Wages 22.7 23.9 24.9 28.3 37.6 38.2 46.3Dyes and Chemicals 16.7 14.8 14.0 15.0 20.7 19.8 21.4Other Materials 2.5 3.0 2.7 3.1 3.4 3.3 3.0Inventory - Adjustment3/ (3.0) (0.2) - (16.1) 4.3 (5.3) (4.3)Subtotal 73.8 73.3 73.5 71.9 113.2 88.7 107.8

Gross Profit 43.9 41.7 31.7 32.2 67.7 52.1 82.1

Operating Expenses:Management Fees - - - 1.2 3.0 3.0 3.2Other Expenses (Income) 20.9 23.4 24.6 26.5 42.3 40.7 61.8Interest on Short-Term Debt 1.9 3.3 2.7 1.9 1.6 2.4 2.3Subtotal 22.8 26.7 27.3 29.6 46.7 46.1 67.3

Operating Profit 21.1 15.0 4.4 3.6 21.0 6.1 14.3

Depreciation 7.5 7.2 7.4 8.3 29.8 25.1 23.6Interest on Long-Term Loan 3.5 1.4 0.4 0.5 16.6 19.3 17.2Other Financial Charges 2.9 2.2 0.8 0.5 0.4 0.6 0.2Subtotal 13.9 10.8 (8.6) (9.3) (46.8) 45.0 40.0

Income Before Tax 7.2 4.2 (4.2) (6.7) (25.8) (38.9) (24.2)

Taxes - -

Net Income (Loss) 7.2 4.2 (4.2) (6.7) (25.8) (38.9) (25.2)

1/ Million Linear Meters21/ Thousand Metric Tons3/ Variation in inventories plus work in progress

Industry Department

June 1983

- 31 -

ANNEX 13

TANZANIA - MNANZA TEXTILE PROJECT

PROJECT COIIPLETION REPORT

Shadow Price Calculations(in 1981 TSh)

Financial Price 1/ Economic Price Shadow Price(TSh) (TSh) (Percent)

I. Average Product Price(per meter)2!: 12.8 10.8 3/ 84.4

_I. Unit Cost (per meter):- Cotton 2.4 2.8 3/- Salaries & Wages 1.0 0.75 4/- Dyes & Chemicals 1.2 1.0 Y/

Direct Cost Subtotal 4.6 4.55- Operating Expenses 2.7 2.7

Total Production Costs 7.3 7.25 99.0

I/ Based on actual 1981 financial statements of Mwatex2/ Average price for the product mix of Mwatex3/ Border prices using shadow exchange rate of TSh 12.0 to US$1. For cotton,

FOB price of US$0.72 per pound is used. For fabric, c.i.f. price of US$0.90per meter is used.

4/ Same shadow pricing (75Z) as in the Appraisal Report (AR).5/ Excluding payments of custom duties (20%).


- 32 -

ANNEX 14



-Economic Revenue and Operating Cost Calculations

Actual Projected1979 1980 1981 1982 1983 1984-93

A. Production(million meters) 12.2 9.2 9.6 2.4 9.0 17.1

B. H Fnancial Revenue andCosts: -(In Constant 1975 US$ Million)--- Net Sales 9.2 6.7 8.7 2.5 9.3 17.6- Production Costs 1/ 6.2 4.6 5.2 2.1 5.5 9.4

C. Economic Revenue andcosts:2/- Net Sales 7.8 5.7 7.3 2.1 7.8 14.9- Production Costs 1/ 6.2 4.6 5.2 2.1 5.5 9.3

1/ Direct costs plus operating expenses.2/ Using shadow prices calculatd in Annex 14.

Industry DepartmentJune-'1983

- 33 -

ANNEX 15

TANZANIA - XWANZA TEXTILE PROJECT


Economic Rate of Return Calculations(in Constant 1975 US$ Millon)

Appraisal Estimate Actual/Present EstimateInvestment Production Net Investment Production Net

Year Costs Costs Sales Costs 1/ Costs Sales

1975 1.2 - - 1.4 - -1976 16.6 - - 7.2 - -1977 18.5 - - 13.5 - -1978 2.2 5.7 8.8 6.2 - -1979 - 7.8 13.2 - 6.2 7.81980 - 9.0 17.8 - 4.6 5.71981 - 9.0 17.8 - 5.2 7.31982 - 9.0 17.8 - 2.1 2.11983 - 9.0 17.8 - 5.5 7.81984-93 - 9.0 17.0 - 9.3 14.9

Economic Rate of Return:Appraisal Estimate: 16.1%Present Estimate: 8.2%

1/ Adjusted to exclude the payments of custom duties on imported dyes andchemicals, which are estimated to be about US$0.4 and US$0-1 million in 1977and 1978, respectively, in current dollars.


- 34 -

ANNEX 16

TANZANIA K-WANZA T.EXTILE PROJECT


Excerpts from the Loan Agreement

Section 4.02

The Borrower shall carry out the study included in Part Cof the Project. The conclusions of the study will beapplied to any major expansion of the textile manufacturinginduLtry .

Schedule 2

Part C

The carrying out of a study of the possibilities ofmarketing textiles manufactured in Tanzania in othercountries including the study of the feasibility ofconstructing in Tanzania a textile plant for the productionof polyester-cotton blended materials."


-35- AleN= 17

COENTS nRox. THE COFnNCIER

ZCZC DTST7203 .IWS0656DISTRFF: T5P HCOEDDIRJ

J1450656 ZJRSB2 IN 26/05:53 01lT 26/06:400AL_SUNDIJK

REF: KF/SFN/R/058/i 96026. ;.t 994

FROM: KIUWAJT FiND FOiR ARAB FCONOMIC DEVELOPMENTS KUWAITTO : MR. SHIV S. KAPtJR WORL.D BAN-K - WASHINGTON Df1.

U. S. A.

SUBJECT : PROJECT COMPIF TION REPORT (IN TAtN.ZANIA - M4;;NZATEXTILE PROJECT.

WE THANK Ynu FnR YOUR LFTTER JATED 5TH AlRIL 198A. AND FOR THEEXCELLENT DRAFT PROJECT CoMPl ErTXON RFPOr DATED 20TH JU.NfE 1983. THEKUWAIT FLINn HAS NCOT SIJPERVISEJD THE PROsJECT AND C!.ANOT TIERRFr!ORh.FUSEFULLY COMMENT (IN THE SAID REPORTh HOWEVER WE WOO. 1Ut. LIKE T) BRrtJGTO YOUR ATTFNTION THE ?Cl l WINS:

A) THE KUWAIT FUND LOAN TO THE PROJECT ;JYOJNT1N( Ti) KD 41.5 MILLIONHAS ONLY BEEN PARTIALLY WITHDRAWN AfND TH;.f rAPPIROXIXMATELY lCD 1'5 9MIL-LION REMAINS tJNDISBURSFD.

B) THFRF IS YET NO ASRE:MFNT DEl WEEN THt KUWAIT FUND ANED BORQOHElt-R (iNTHE UTILIZATION OF r:iE umDIsBsRED PoR rIoN (IF T:IE LOAN. THEBORROFWR HAS CHANGED HIS MINDI A NUMBER OF TINES ABJT HOtl )CS' tl'UTIl.IZE THE SAD13 FUJNDS AND H.AS LATELY MADE SCONE NEW PROPUShA'..S TOTHIS ENIt WHtCH ARE BEING CONSIDEREsi.

BESIT REGARD-Si,

BADIER Al -HIIMATIHIDEPUrY B (RECTOR-GENERALCOPERATTONS AND FINANCE)

Al-SUNDUK

=05261115 MAY 21984UNNN

World Bank Document€¦ · TANZANIA -M1ANZA TEXTILE PROJECT (LOAN 1128-TA) I. INTRODUCTION 1.01 Tanzania's textile industry which was virtually non-existent prior to 1965, grew rapidly

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