World Bank Documentdocuments.worldbank.org/curated/en/518691468313233224/pdf/mul… · to a relatively small number of estates producing sisal, tea, coffee, sugar, wheat and rice.

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 3634-TA

TANZANIA

SAO HILL FORESTRY PROJECT - PHASE II

March 18, 1982

Eastern Africa Projects DepartmentSouthern Agriculture Division

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

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CURRENCY EQUIVALENTS

Currency Unit = Tanzania Shilling (Tsh)US$ 1.00 = Tsh. 8.25

Tsh 1.00 = US$ 0.12

WEIGHTS AND MEASURES

1 meter (m) 3 3.3 feet

1 cubic meter (m ) 35.3 cubic feetI hectare (ha) = 2.47 acres

1 Kilometer (Km) 2 = 0.62 miles1 square Kilometer (Km ) = 0.39 square miles1 Kilogram (Kg) = 2.2 lb

1 Metric ton (ton) = 1000 Kg = 2,204 lb

ABBREVIATIONS

AFO Assistant Forest OfficerAPMFP = Assistant Project Manager(Finance and Planning)APMO Assistant Project Manager (Operations)c.i.f. Cost, insurance, freightFA = Forest AssistantFAO/CP = Food and Agriculture Organization/Cooperative ProgramFAO/TCP Food and Agriculture Organization/Technical Cooperation ProgramFO = Forest Officer

GOT = Government of TanzaniaGDP Gross Domestic Product4 I = Mean Annual Incrementm (r) = cubic meter roundwood

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FOR OFFICIAL USE ONLY

TABLE OF CONTENTS

Page No.

I. BACKGROUND ............................................... 1

A. Project Background ......... . . ...................... ................. 1B. The Agricultural Sector .................................. 1C. Previous Bank Group Assistance ........................... 3

II. THE FORESTRY SUB-SECTOR .... .............. ..................... 3

A. Resources ......... ................................... 3B. Institutions ........................... ................. 4C. Production and Marketing ............ .. ................. 9D. Forestry Policy ........ . ..... ......................... ....... . 6E. Bank Group Assistance . ............................ ...... 8F. Review of Sao Hill Forestry Project I ... ................. 8

III. THE PROJECT . . . .. 8II.THPRJC ...................................................

A. Project Rationale and Design ..... ........................ 10B. The Project Area ..... ... ....................................... 11C. General Description ...................................... 12D. Detailed Features ........................................ 13E. Project Costs ............................................. 19

-F. Financing ......................... 20

IV. PROJECT IMPLENENTATION ... 21

A. Organization and Management . 21B. Procurement .. 22C. Disbursements .......... 23D. Accounts, Audit and Reporting .24E. Environmental Impact .. 24

V. PRODUCTION, MARKETS AND PRICES ...... .. 25

A. Production .. 25B. Markets ... .27

C. Prices .... 29

VI BENEFITS AND JUSTIFICATION . . .31

A. General ......... .......... 31B. Financial Returns..... - - .. 31C. Economic Returns - ... ....... 32

VII. ASSURANCES TO BE OBTAINED AND RECONMENDATIONS ..... 35

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

Table of Contents (Continued)

ANNEXES:

Supporting Tables and Charts:

ANNEX 1: Table T-l.l : Summary of Project CostsTable T-l.2 : Development of Existing PlantationsTable T-1.3 : Development of New PlantationsTable T-1.4 : Cost of Replanting Clearfelled Pine AreasTable T-l.5 : Nursery Operating CostsTable T.1.6 : Fire Protection CostsTable T-1.7 : Plantation Roads and Tracks -Construction and

Maintenance CostsTable T-l.8 : Capital Cost of Buildings and Structures.Table T-l.9 : Vehicles, Tractors, Machinery and Equipment -

Capital CostsTable T-l.lO: Project Administration - Local Staff Salaries

and WagesTable T-l.ll: Headquarters General Services CostsTable T-1.12: Project Administration - Vehicle Operating CostsTable T-l.13: Technical AssistanceTable T-l.14: Staff Study ToursTable T-l.15: Retroactive Financing

ANNEX 2: Table T-2.1 : Pine per Hectare Models:Financial and EconomicTable T-2.2 : Eucalyptus per Hectare Models: Financial and

EconomicTable T-2.3:: Phase II Afforestation Program: Financial and

Economic Rates of ReturnTable T-2.4 : Overall Afforestation Program: Financial Rate

of ReturnTable T-2.5: Overall Afforestation Program: Economic Rate

of ReturnTable T-2.6 : Government Project Cash FlowsTable T-2.7(a): Price Structure of Standing LogsTable T-2.7(b): Price Structure of Standing PulpwoodTable T-2.8 : Import Parity Price of WoodTable T-2.9 : Export Parity Price of Sawlogs

ANNEX 3: Table T-3.1 : Estimated Schedule of DisbursementsTable T-3.2 : Physical Work Schedule (Key Indicators)

ANNEX 4: Table T-4.1 : Average Recorded and Estimated Production andApparent Consumption of Sawlogs in Tanzania.

Table T-4.2 : National Supply and Demand for Sawlogs, 1980-2010.Table T-4.3 : Production and Price Trends for Sawn Timber in

Tanzania, 1977-81.Table T-4.4 : General Pattern of Sawnwood Consumption in Tanzania.

ANNEX 5: Table T-5.1 : Assessment of Labor Availability.

Charts and Maps:

Chart C-1: Project OrganizationChart C-2: Project Implementation Schedule

Map No. IBRD 15896

Selected Documents Available in Project File

Project Preparation ReportWorking Papers

I. BACKGROUND

A. Project Background

1.01 In March 1981, the Government of Tanzania (GOT) requested theInternational Development Association (IDA) to consider financing the secondphase of a long-term industrial afforestation program to meet the futuredomestic demand for sawntimber, paper and wood products. A first phaseproject, costing US$8.1 million, was financed with a Bank loan of US$ 7.0million (Loan 1307-TA) in 1976 and implemented in SAO Hill which is one ofthe most promising industrial forest development areas in Tanzania. Theimplementation of this first phase project has generally been successful andabout 18,000 ha of new plantations have been established, 500 ha have beenreplanted and 11,30C ha of old plantations have been maintained. The firstphase project will be completed in December, 1981.

1.02 Assistance to the GOT in the preparation of the second phase wasprovided by the Food and Agricultural Organization/Cooperative Program(FAO/CP) in October/November 1980. IDA provided guidance during preparation.This report is based on the findings of an IDA appraisal mission comprisingMessrs A. Sidhu, B.K. Zegge, S. Sengamalay(IDA)and M. Grut (FAO/CP), whichvisited Tanzania in April/May 1981

B. The Agricultural Sector

1.03 Agriculture dominates the Tanzanian economy, accounting for 50%of GDP and more than 80% of export earnings. About 90% of Tanzania's popula-tion of 17 million lives in rural areas, with approximately 2.25 million farmfamilies grouped together in 8,000 villages. Smallholder farmers contributeabout 75% of Tanzania's agricultural export earnings and more than 80% of thevalue of marketed cereal production. Their main food crops are maize, cassavaand millet. Cash crops produced by smallholders include coffee, tea, cashews,pyrethrum, cloves, cotton and tobacco. Large-scale farming is confinedto a relatively small number of estates producing sisal, tea, coffee, sugar,wheat and rice. Livestock continues to play a relatively minor role in thecash economy as much of it is reared for subsistence purposes. With asignificant proportion of the cultivable area still unutilized and a suitablerange of agro-climatic conditions for producing a variety of crops, thelong-term agricultural potential is considered to be good. Tanzania'sagricultural export structure is somewhat more diversified than that of mostother African countries and seven commodities (coffee, cotton, cloves,sisal,cashew nuts, tea and tobacco) account for more than two-thirds of total exportearnings. Within agriculture, the forestry sub-sector plays an important rolein providing fuelwood, not only for domestic consumption but also for theproduction of tobacco and tea. To the extent that these forestry resourcesare being rapidly depleted in tobacco and tea growing areas, their inadequatesupply is acting as a constraint on the sustenance and expansion of existinglevels of production of these crops.

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1.04 The long-term performance of Tanzania's agricultural sectorhas been disappointing and the trend growth rate has hardly kept pace withpopulation growth. According to official statistics, agricultural valueadded in constant prices grew at 4.9% per annum during 1970-1979, with sub-sistence agriculture growing by 7.1% per annum and monetary agriculture byonly 2.1% per annum. 1/ The total export volume of the seven major crops(para 1.03) in 1980 was 28% lower than in 1966 and 34% lower than in 1973.As a result of better relative producer prices, marketed food production hasfared better than export crop production during the last half of the 1970s,but is still below the highest levels achieved in the major foodgrainsearlier in the 1970s.

1.05 There are several reasons for this disappointing level of overallproductivity in agriculture. The major ones are: inadequate producer priceincentives, insufficient allocation of foreign exchange to meet basic importneeds of the agricultural sector including that of the supporting infrastruc--ture in processing and transport, shortages of basic inputs and spares,the generally inefficient operations of public crop authorities, inadequateagricultural extension and research services, the villagization program inthe mid-1970s which moved many farmers away from their established farms andthe droughts of 1973/74 and 1974/75.

1.06 Other factors which inhibit improved performance of the agriculturalsector in the country include socio-political constraints, food securityobjectives and the complexity of the decision-making process. The socio-political constraints are largely a product of frequent and, sometimes,experimental institutional changes such as villagization, decentralizationof Government and the establishment of numerous parastatals. These havehad destabilizing and, in some cases, disruptive effects on basic agricul-tural services and hence on production, at least in the short-term. On theother hand, their anticipated desirable long-term effects (e.g. improvedextension through higher literacy and concentration of rural population)have yet to take hold. Similarly a firm commitment to long-term socio-political goals, such as equitable growth in rural incomes, continues toprevent the adoption of otherwise attractive solutions to current productionand distribution problems in the agricultural sector and other sectors of theeconomy. Food security objectives, vigorously pursued by the GOT since thedisastrous drought of 1974/75, have made it almost impossible for the Govern-ment to shift the balance of relative producer prices away from foodgrainstowards export crops. This limits Tanzania's capacity to maximize itsforeign exchange earnings. Prompt Government response to domestic factorsinhibiting agricultural performance has been often constrained by the complex-ity of the decision-making process within Government. This is furthercomplicated by the lack of a coherent long-term strategy for agriculture andthe general shortage of qualified and experienced staff in key ministriesand agencies.

1/ The Bank notes that the basis for the subsistence agriculture estimatesis unrealiable and the trend may be somewhat exaggerated.

1.07 In the agricultural sector, a development program needs to beformulated which would (a) improve agricultural productivity at the farmlevel, (b) reverse the decline in the production of both food and exportcrops, and (c) improve the efficiency of agricultural parastatals and agro-processing industries. The issues involved in the formulation and imple-mentation of such a program are currently being partly addressed by theExport Rehabilitation Program (Credit No. 1133-TA) approved in April, 1981and by the Government's Program for Economic Survival launched in July,1981.

1.08 The decline in agricultural production, transport bottlenecks andexternal shocks (the break-up of the East African Community in 1977, the warwith Uganda in 1978/79, oil price increases and world-wide stagflation during1970s and a general decline in prices of agricultural commodities) have allcontributed to a severe economic and financial crisis in the country whichis characterized by an alarming deterioration in the balance of payments,budgetary deficits (shortages of recurrent expenditures), shortages ofessential commodities including spares and petroleum products and grossunderutilization of capital and labor stocks.

C. Previous Bank Group Assistance

1.09 Since its joining the Bank Group in 1963, Tanzania has received 49IDA credits and 19 Bank loans amounting to US$976.3 million. Tanzania hasalso been a beneficiary of 10 loans totalling US$244.8 million which wereextended for the development of the common services and the East AfricanDevelopment Bank operated regionally by Tanzania, Kenya and Uganda throughthe East African Community. In support of Tanzania's overall developmentstrategy, Bank Group lending operations have assisted a wide range ofactivities. Agriculture and related activities have received 30% of the BankGroup's direct lending to Tanzania. The lending program in agriculture hasfeatured three main types of projects. A series of regional rural developmentprojects geared to agricultural production and the development of regionalinfrastructure. A second group consists of projects that are designed toimprove general support services for the agricultural sector (e.g. credit,storage and marketing etc). A third group of projects is centered on specificcrops or subsectors (e.g. tea, pyrethrum, dairy, fisheries and forestry).

II. THE FORESTRY SUB-SECTOR

A. Resources

2.01 About 45% of Tanzania's land area (about 40 million hectares)is generally classified as forest land. Nearly 33% of the forest land isprotected forest reserves, while the other 67% is natural woodlands on publicland which are nearly all unprotected and are disappearing fast in areas with

high population pressure. Except for 60,000 ha of softwood plantations andabout 900,000 ha of closed indigenous forests, most of the forests are"miombo" woodland, dominated by the Brachystegia/ Isoberlinia association.These are made up of slow growing and scattered trees which yield limitedquantities of commercial timber. Due to low stocking of merchantable timberper hectare and difficult accessibility only 22% of the 900,000 ha of closedindigenous forests is estimated to be commercially exploitable. About 50% ofthe 60,000 ha are under softwood forest reserve plantations, of which 50% isin the Sao Hill area and the rest is scattered throughout the country. About12% of the area under indigenous forest reserves is gazetted as protectedcatchment forests. The indigenous forests supply most of the fuelwood andtimber for the population and these are obtained free of charge for domesticuse from forests on public land or by licence from forest reserves.

B. Institutions

2.02 The Forest Division, Tanzania Wood Industries Corporation (TWICO),and the Southern Paper Mills Company (SPMC), are the three main institutionsdirectly involved in forestry and forestry products.

Forest Division

2.03 The Forest Division within the Ministry of Natural Resources andTourism has overall responsibility for forest development, protection andconservation. All forest reserve plantations are owned by the State throughthe Forest Division and the implementation of all national forest projects,including the Sao Hill Forestry Project, is the responsibility of the Division.Management of indigenous forest resources on non-gazetted public land isthe responsibility of Regional Development Directorates (under the PrimeMinister's Office) through the Regional Natural Resources Officer, who hasresponsibility for all technical matters concerning forestry and othernatural resources at the regional level. Technical and development mattersrelating to forestry and other natural resources at district level arehandled by a District Natural Resources Officer, who is responsible to theDistrict Development Director.

2.04 The Forest Division is headed by the Director of Forests and hasfour sections. The Management and Development Section is responsible for thedesign and implementation of national forestry projects. Project managers ofsuch national projects are responsible to the Head of the Management andDevelopment Section. However, the Project Manager of the Sao Hill ForestryProject, because of the size and overall importance of the Project, reportsdirectly to the Director of Forests. The Survey and Inventory Section isresponsible for all survey, mapping and inventory work of the Forest DivisiLon.The Manpower and Training Section is responsible for personnel administrati.on,education and training. Formal non-professional training is done at theOlmotonyi Forestry Training Institute which offers a two-year certificatecourse for candidates with Form four (Forest Assistants), and two-year

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diploma course for candidates with Form six, or a one-year course for thetwo-year certificate holders (Assistant Forest Officers). The Forest Indus-tries Training Institute (FITI) at Moshi offers short courses (up to sixmonths) to workers in the Forest Division and the Tanzania Wood IndustriesCorporation (TWICO) in logging, sawmilling and woodproduct making. Thereare plans to extend FITI's courses to tool maintenance, pitsawying and woodpreservation. In addition, there are two ILO-supported Workers' TrainingCenters at Sao Hill and Pongai. The University of Dar-es-Salaam's Faculty ofAgriculture, Forestry and Veterinary Science at Morogoro offers a three-yearprogram leading to a Bachelor degree and higher degrees in forestry.

2.05 Forestry research is formally done by the Research Section of theForestry Division and has two units dealing with silviculture and woodutilization based at Lushoto and Moshi respectively. A Forestry ResearchInstitute is curently under formation and it is intended to be an autonomousbody with a board of directors and seven centers specializing in forestmanagement (Lushoto), timber and forest engineering (Moshi), low-land affores-tation (Kibaha), plantation silviculture (Sao Hill), miombo woodland (Tabora),arid zone forestry (Dodoma) and southern zone silviculture and management(Rondo).

2.06 In 1980 there were 54 professional forest officers (graduates)in the Forest Division (for 118 established posts). In addition there were14 professional foresters on the staff of the Faculty of Forestry of theUniversity of Dar es Salaam, five in the regions, four in other agencies, andsix in TWICO. Including the 1980 graduating class of forestry students, thetotal professional forestry strength of Tanzania was 93. This is a largernumber than in any other East African country. In the same year there were250 technicians - Assistant Forest Officers (Diploma level) and ForestAssistants (certificate level) - for 374 established posts.

Tanzania Wood Industries Corporation (TWICO)

2.07 TWICO, a holding parastatal responsible for public participation inthe country's sawmilling and wood-based industries, owns a number of sawmillsand panel mills in the country. The individual mills are operated andmanaged as autonomous subsidiaries. TWICO also owns the Tanzania TimberMarketing Company (Tantimber) which is responsible for the marketing of sawntimber produced by TWICO-mills. Tantimber has monopoly on the import andexport business for timber.

Southern Paper Mills Company (SPMC)

2.08 SPMC is a subsidiary of the National Development Corporation (NDC)and has been formed to operate and manage the Mufindi pulpmill (which ispartly financed by the World Bank Group - Ln/Cr No. 1650/875-TA). Althoughthe implementation of the pulpmill project has had serious start-up problems,its construction has started and production is estimated to start in 1984-85.The pulpmill will have an installed capacity of 60,000 tons of pulp perannum.

C. Production and Marketing

2.09 No reliable data for the production or consumption of wood existsin Tanzania. However, wood production comes mainly from 27 million hectaresof natural woodlands, and about 90% of it is used for fuelwood and poles.The bulk of fuelwood consumption is for domestic purposes. Wood for indus-trial use accounts for only 10% of total wood production. The analysis inthis report deals only with the demand for and supply of wood for suchindustrial purposes.

2.10 According to official s5atistics on log removals, the country'ssupply of logs averaged 195,000 m (r) during 1978-1980, made up of 63%hardwoods and 37% softwoods. However, an analysis of production trends forlogs is difficult since only part of the actual production is recorded. Inorder to avoid payment of stumpage fees, some pitsawyers often do not declaretheir output from logs. A study by FA0 in 1974 concluded that actual produc-tion was two-and-one-half times greater than recorded production but thisestimate would appear to be high, particularly for softwood whose cutting ismore effectively controlled by the Forest Department than that of hardwoods.A more realistic assumption would be that recorded production representsabout 50% of actual production of softwoods and 40% of hardwoSds, so thataverage log production in 1978-80 was in fact about 451,000 m (r) (Annex 4,Table T-4 1). This is consistent with the estimated average demand for480,000 m (r) during 1978-80, a period in which shortages of local sawntimber and wood-based panels were frequently experienced.

2.11 Tanzania's industrial forestry sub-sector has a limited range ofproducts which include sawn timber, plywood, fibreboard, particleboard,poles and fuelwood. Sawmilling dominates the sub-sector's production andconsists of about 100 operating sawmills most of which are privately owned.They are typically very small and operate with obsolete equipment. Theirefficiency and recovery rates are very low. The share of pitsawyers is about74% of total recorded production of hardwoods but is only 27% of softioods.Total production in the sawmilling industry was estimated at 190,000 m in1980, of which TWICO accounted for less than one-third. There are twoplywood mills with a combined rated capacity of 12,600 tons per annum, afibreboard factory with a capacity of 39,000 tons per year, and a particleboardmill with a rated capacity of 9,000 m per annum. All the plywood, fibreboardand particleboard mills are owned and operated by TWICO. A pulp and papermill with a capacity of 60,000 tons per year is estimated to start productionin 1984. Both the sawmills and the board mills have been operating wellbelow their rated capacities in recent years, largely as a result of usingobsolete and worn-out equipment coupled with shortages of spare parts, bottle-necks in logging operations and ineffective management. This has led tosupply falling below domestic demand for these products. The supply of paperand paper products, which relies heavily on imports, has been severely con-strained by shortages of foreign exchange.

2.12 Tanzania has been a net importer of most wood panels and of sawnsoftwood, although it has occasionally exported sawn hardwoods. Much of theproduction in the sawn timber and wood-based panel industry described in para2.11 is geared to meet domestic consumption. Log exports are banned. Thepresent marketing system of wood and wood products consists of direct salesfrom non-TWICO mills to consumers, while sawn timber production from TWICO-mills is marketed by Tantimber. Production from board mills is distributed bythe mills themselves. The industry is protected by import duties ranging from30% on sawnwood, plywood and particleboard to 40% on fibreboard.

2.13 Domestic prices of sawn timber vary according to species and sizesbecause of the characteristics of the timber and their yield in sawmilling.Pine timber has been priced slightly below or close to ordinary hardwood.In recent years the shortage of sawn timber has resulted in an average annualincrease of 7% in real prices for high quality hardwoods and 4.5% for utilitytimber (Annex 4, Table T-4.3). Since haulage capacity is limited, and hasbecome worse in recent years, transport costs have had major influence on thesupply and consumption pattern of manufactured wood products. Manufacturersand distributors of wood-based panels usually use a national freight costsystem which sets freight charges on the basis of volume instead of haulagedistance. This system discourages transporters from catering for markets farbeyond a reasonable trucking distance. This had led to shortages of panelsin distant areas of the country. On the other hand, this system has not beenapplied to sawn timber, so that appropriate freight charges are reflected inhigher prices for sawn-timber in those areas which are far away from asawmill.

2.14 The forestry sub-sector and its related industries are estimatedto account for about 4% of the GDP, of which forest industries contributeslightly over 1%. Exports of forestry products are negligible. However,official data on the production and value of forestry products do not ade-quately reflect the important role played by indigenous forest resource inproviding fuelwood, building poles, timber and minor forest products to meetthe rural population's basic needs and for processing of tobacco and tea. Onmountains and slopes, forests provide catchment to control water flow andprotect soils.

2.15 Similarly, the contribution of the forestry sub-sector to Governmentrevenue is small, largely because about 90% of the total consumption offorestry products in form of fuelwood and poles is obtained free of charge andthe royalties levied on wood for commercial purposes, although they have beenincreased in recent years, are still low. In 1979/80, revenue obtained fromforestry products accounted for less than 0.2% of total Government recurrentrevenue. During 1976/77-1979/80 Government recurrent expenditure in theforestry sub-sector has varied between 0.2% and 0.3% of total Governmentrecurrent expenditures.

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D. Forestry Policy

2.16 The Government's forestry policy aims at (a) acquiring enoughland for afforestation to achieve an ecological balance and to meet futureneeds for forest produce of all kinds; (b) introducing management of forestryresources on public lands and villages and intensifying management in gazettedforest reserves in order to remedy the decline of indigenous forests and toreforest those areas which have been depleted of fast growing species; and(c) promoting a viable forestry subsector through appropriate research,extension and pricing of forest products. The major challenges facing theGovernment within the forestry sub-sector include the need to design along-term afforestation program to provide adequate supply of fuelwood (asthe major source of energy) to the rural and urban poor who cannot affordalternative sources of energy; to improve productivity and efficiency in thesawmilling and wood-based industries, both of which are currently operatingfar below their respective capacities; and the need to promote a viableforestry development program which would ensure maximum contribution of theforestry subsector to the national economy in the medium and long-term. TheGOT is attempting to meet these challenges through programs assisted by theWorld Bank, FAO, and bilateral agencies (para. 2.18).

E. Bank Group Assistance

2.17 The Sao Hill Forestry Project (Loan No. 1307-TA), approved in 1976,is the only project financed by the Bank Group to assist the implementationof the Government's long-term program which is aimed at developing forestresources to meet the country's requirements for timber and wood products(for review of Project, see 'F' below). The Bank Group has also financed twoRural Integrated Development Projects in Tabora and Mwanza-Shinyanga whichhave forestry components aimed at establishing forestry woodlots by villagersand district authorities to meet the demand for fuelwood and poles in theseareas. The implementation of these components is still at an early stage.

2.18 GOT is also receiving both financial and technical assistance(on bilateral basis) from the governments of Sweden, Norway and Finland inthe wood processing industry. With this assistance, an investment programhas been formulated which is made up of short-term (mainly rehabilitation ofexisting capacities), medium-term (principally geared to expansions andmodernization in existing mills) and long-term investments (consisting ofexpanded production capacities outside existing mills). Expansions in SaoHill are planned in both the medium and long term.

F. Review of Sao Hill Forestry Project I

2.19 The first phase of Sao Hill Project was approved in July 1976and became effective on December 10, 1976 and is scheduled for completion in

December 1981. No Completion Report on the project is yet available, but theproject's implementation was reviewed during appraisal of Phase II. PhaseI provided for the planting and maintenance of about 16,000 ha, and themaintenance of some 11,000 ha of existing plantations; the construction ofabout 164 km of primary and secondary forest roads, 393 km of tracks andmaintenance of 2,400 km of forest roads; construction of 214 staff houses ofvarious grades and 20 administrative and social buildings; research, trainingand studies. Provision was also made for the employment of two internation-ally recruited specialists (forest silviculturist/economist,and mechanicalengineer) and the employment of local technical, clerical and supportingstaff. On the basis of the review, the implementation of the first phase isjudged to have been successful with respect to the project-s afforestationprogram in which the appraisal targets in nursery production, land prepara-tion, planting and replanting have been significantly exceeded. As a resultabout 18,000 ha of plantations are expected to be established by the comple-tion of the Phase I. Performance was below appraisal targets in weeding,construction of firebreaks, roads and staff housing largely due to delays inprocurement of machinery and equipment, lack of spares, cement, and poormaintenance of vehicles and machinery. The water study and the road engineer-ing study for the pulpmill were carried out, although the latter was subse-quently financed from non-Project proceeds. The Project's afforestationprogram was reasonably staffed by local professionals and technicians, exceptfor the post of financial controller which was not filled with appropriatepersonnel. The post of mechanical engineer was not filled at all due to anapparent lack of suitable candidates. As a result, the Project supportservices (workshop and finances) were not effective and the Project sufferedfrom lack of internal controls and poor maintenance of Project vehicles andequipment. The research trials were carried out satisfactorily and a systemof fire protection has been established in the Project. Funds for studytours under Phase I were not fully utilized, largely due to Project-s in-ability to release staff. The Project is expected to be implemented withinthe appraisal cost estimates of US$8.1 million.

2.20 Although the Project Completion Report has yet to be prepared,some conclusions can be drawn from the implementation of the first phase.A reasonably good project implementation capacity, comprising qualified andexperienced staff and capital stock, has been established at Sao Hill.However, there is need to consolidate and fully utilize this capacity by(a) strengthening and streamlining project organization to ensure betterimplementation of targets, (b) strengthening project financial management,cost accounting and internal control procedures, (c) improving silviculturalpractices, (d) strengthening the operation of the mechanical workshop and itsspare parts supply system, (e) continuing the long-term research programundertaken in Phase I as well as widening its scope to cover aspects ofagro-forestry, and (f) improving the existing fire protection system afterreassessing its needs and scope. The second phase Project has therefore beendesigned to take account of the lessons from Phase I.

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III. THE PROJECT

A. Project Rationale and Design

3.01 In recent years, the supply of sawn timber and other wood productshas generally been inadequate to meet domestic demand and this has resulted inconsiderable increases in real prices for timber (paras 2.13). The shortageof sawn timber has been largely a consequence of structural problems I/ in theeconomy as a whole and in the sawmilling industry in particular, as well asof high costs of exploiting the natural forests, some of which are inacces-sible. The structural problems in the wood processing industry are beingaddressed through the Nordic assistance program (para 2.18). Demand/supplyforecasts indicate that there would be further significant deficits in theaggregate supply of sawlogs and hence of sawn timber after the year 2005,unless new plantings are initiated during the next five years (paras 5.09-5.10). According to inventory data of 1980, the existing plantations ofabout 30,000 ha in Sao Hill if properly managed would be sufficient to supplyindefinitely the Sao Hill Sawmill with sawlogs and the proposed Pulp andPaper Mill at Mufindi with pulpwood at their respective initial capacities.Therefore the proposed expansion in plantations under the Project would beneeded to meet the projected deficits in the overall national demand forsawlogs.

3.02 According to official estimates, increased supply of wood fromnatural forests could not be sustained beyond the early 1990s if not supple-mented with softwood plantations. Fast growing softwood plantations would bethe best alternative for increasing sawn timber supply to cover the estimaltedsupply deficits. However, the establishment of new softwood plantations orthe expansion of existing ones is generally constrained by the availabilityof ecologically suitable land. Sao Hill is one of the few areas in thecountry with sufficient land and a proven technological package for softwoodplantations (paras 3.04-3.08). Low requirement for land preparation, andgood communication links with the rest of the country, make Sao Hill one ofthe lowest cost production areas for softwood in the country.

3.03 The present and medium-term economic prospects in Tanzania (paras1.06-1.08) require that the Project be designed to minimize possible adverseeffects from such an environment. Three key factors have influenced thedesign of this Project. Firstly, there is the problem of inadequate Govern-ment finance as manifest in current and projected budgetary deficits, parti-cularly the general shortage of recurrent expenditure in the public sector.Particular attention has, therefore, been given to keeping the Project'sincremental recurrent costs to a minimum. Secondly, is the problem of pro--jected slow improvement in the country's balance of payments situation

1/ These include the small size of sawmills and numerous pitsawyers operat-ing with obsolete equipment, shortage of spare parts, inadequate loggLngand transport capacity and shortage of skilled manpower.

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leading to persistent shortages of imported spare parts and petroleum products;this necessitated minimizing the incremental foreign exchange burden resultingfrom the Project by, as far as possible, limiting the Project requirement fornew vehicles, machinery and equipment to replacement of existing stocks,financing all foreign exchange costs, including expenditure on fuel andspare parts requirements throughout Project implementation, having strictercontrol on vehicle procurement, improved maintenance and reducing vehicleoperations by almost 20% per annum. Thirdly, there is a need to consolidateand strengthen the project implementation capacity established at Sao Hilland to exercise restraint on the scale of new investments. As a result theproposals contained in the Preparation Report were considerably scaled down totake these considerations into account.

B. The Project Area

3.04 The project is situated in Sao Hill within Mufindi District inIringa Region. It is about 40 km south of Iringa, the Regional headquarters(Map No. IBRD 15896). The Tanzania - Zambia (Tanzam) highway traverses thehigh-elevation portion of the Project area, and the Tanzania-Zambia RailwayAuthority (TAZARA) railway the lower-elevation portion of the Project area. Agood gravel road connecting Mafinga(formerly John-s Corner) and Mufindi passesthrough the older and some of the new plantation blocks. The existing andproposed plantation areas on and below the Mufindi escarpment are at presentconnected by a lengthy road of about 65 km. The escarpment road proposedunder the Pulpmill project to link the pulpmill with the Tanzam highway wouldshorten the distance to 40 km. Apart from the rapidly growing township ofMafinga, there are 10 wards containing 20 villages with about 30,000 householdsor a total population of almost 140,000 all around the Project area. The malepopulation, which is the main source of labor for the Project, is estimated at75,000, of which about 50% is estimated to be the workforce. Each village hasan area of 3,000 - 4,000 ha, which is considered to be more than enough foragricultural and other domestic needs (including afforestation for fuelwoodproduction). The tea estates in the area also have enough land holdings forboth tea growing and to meet their firewood requirements. The area allocatedto the Project is approximately 94,300 ha of which 66,300 ha have been surveyed.About 64,000 ha are considered suitable for tree planting, of which 30,000 ha.have been planted to date.

3.05 The Project area is part of a massif, with an elevation of 1,500 mor above, extending from the Livingstone Mountains (near Lake Nyasa) north-eastwards through Njombe to and beyond Iringa. Most of the area covered byplantations and the proposed high-elevation extension areas in the northeast,lie above 1,800 m (see map). The topography of this area is mainly undulatingand rivers and streams often rise in broad, flat marshes. In the east, thetopography is generally steeper with ridges falling off gradually at first butlater quite steeply into sharp valleys. Except on steep escarpment slopes orwhere soil depth is a limiting factor, topography by itself is not a seriousconstraint to tree growing, though it may impose limitations on harvestingand extraction. However, eucalypts are more demanding than pine with regard

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to land preparation, and experience at Sao Hill has shown that they requirecomplete ploughing before planting. Hence where land is too steep, rocky orotherwise unsuitable for ploughing, eucalyptus would not be planted. TheKigogo and Mufindi East Escarpment reserves, which have been recently acquiredby the Forest Division, contain land suitable for eucalypts and would be wellsituated in relation to the pulpmill once the proposed escarpment road hasbeen constructed.

3.06 The soils in the Project area have been formed in situ and there-fore reflect certain characteristics of the parent materials which are mainlygneisses and granites. The granite soils are deep, relatively uniform, sandyclay loams, often compacted in the top 20-30 cm where unweathered quartzpebbles are frequently the dominant physical component. Such soils are crumbstructured, well drained and infiltrated by grass roots down to about 30 cm;their fertility is low and they are moderately acidic. Active erosion ishardly apparent, although extensive gully erosion has occurred in the past inthe eastern sector of the upper elevation extension area, largely due to humansettlement. Mechanical land preparation is often hindered by small termitemounds which occur in unusual profusion in some areas and with moderatefrequency nearly everywhere else.

3.07 The climate is greatly influenced by altitude and topography.Rainfall ranges between 812 mm and 2,009 mm; the area in the south facingthe escarpment has the highest rainfall, while rainfall decreases north-eastwards away from the escarpment. Rainfall is seasonal and is heaviestin November - January and March - April with a short dry spell in between ofapproximately two weeks in the first half of February and a long dry spell inMay - November. The highest wind velocities occur during May - November.

3.08 Most of the Project area is covered with short grasses among whichLoudetia simplex is often dominant above the escarpment and Hyparrhenia belowit. Couch and associated grasses characterize areas which have been farmed inthe past and require more intensive land preparation and weeding than theformer areas. In certain parts of the Project area scattered trees or shrubsoccur. The light vegetation cover which characterizes much of the Projectarea permits light land preparation, mainly strip ploughing, except in areasintended for eucalypts which require thorough land preparation.

C. General Description

3.09 The proposed Project would be the second phase of the Sao HillForestry Project. It would provide for the further development of forestplantations established under Phase I and planting and establishment of newplantations, as well as for the development of infrastructure and forestservices within the Project area. It would be carried out by the ForestDivision of the Ministry of Natural Resources and Tourism over five years andwould consist of the following:

(a) Further development of about 18,000 ha of Phase I forestplantations for production of sawlogs and pulpwood;

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(b) Establishment and development of about 10,000 ha of newforest plantations for production of sawlogs and pulpwood;

(c) Construction of about 160 km of forestsecondary roads,725 km of tracks, and upgrading some 120 km of secondaryforest-roads to primary forest roads; and the maintenance ofexisting and new roads and tracks;

(d) Construction of 58 staff houses and other buildings andstructures and the maintenance of existing and new housesand buildings;

(e) Strengthening of the mechanical engineering services,financial and management information systems of the Projectand the provision of short study tours for selected Projectstaff

(f) Short-term consultancies and studies to review theProject's fire protection system; the die-back problem ofpine trees in Sao Hill; stumpage rates and pricing offorestry products in the country; and existing and plannedprograms for national village afforestation.

D. Detailed Features

Afforestation

(a) Further Development of Existing Plantations

3.10 The Project would provide for further development of about 18,000 haof Phase I forest plantations in Sao Hill over a five-year period. Theseforest plantations consist of 16,000 ha of pine (principally P.patula) andabout 2,000 ha of eucalypts. The development of these plantations consists ofpruning, marking for thinning, measuring logs (scaling), replanting clearfelledareas, and fire protection - all of which are necessary for the full develop-ment of these existing forestry resources.

3.11 Pruning would be restricted to pines only, as eucalypts would onlybe grown for pulpwood. Pines would be pruned at the average ages of 5,6 and 8years. In the first pruning all trees would be pruned, while the second andthird prunings would be limited to the best trees. Approximately 34,340 ha ofPhase I plantations would be pruned, some on a repeat basis, during theperiod of Project implementation with a total labor requirement of approxi-mately 12,000 man-months.

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3.12 Marking for Thinnings would involve identifying and marking thetrees which would be harvested. The eucalypts would be managed on a coppicesystem, with clearfelling every 8-10 years and would therefore not requirethinnings other than early reduction of the number of coppice shoots. Thinningof pine would be at 14/15 and 18/20 years and clearfelling at 25 years, butProject management would have the discretion of postponing thinnings somewhatif desired - e.g. for reasons of market availability. Approximately 264 ha ofPhase I plantations would be involved in the thinning program during theProject period.

3.13 Timber Scaling determines the volume of felled timber and forms thebasis for charging stumpage fees. The requirements of the Sao Hill sawmill andthe pulpmill would determine the amount of wood 3to be felled each year. Theformer's intake of logs would be about 45,000 m per annum while the total 3wood intake of the pNlpmill (logs + sawmill waste) would rise from 57,000 min 1984 to 226,400 m in 1987 according to the proposed operating schedule forthe pulpmill. Since the pulpmill would obtain part of its raw materials fromother sources (wattle logs and sawmill waste), the round woos requirement iromthe existing forest plantations would increase from 45,000 m to 251,000 mper annum during the Project period.

3.14 Clearfelling and Replanting would be restricted to compartmentswhich are 25 years or older. In order to obtain the wood requirements of thesawmill and pulpmill, about 150 ha/year would be clearfelled in addition towood from thinnings. Unless more land suitable for eucalyptus can be found inthe low elevation area than is at present available, the clearfelled pineareas would be replanted with eucalypts, which would be in short supply whenthe pulpmill starts operating, especially if it will need fuelwood as well aspulpwood, which has been suggested as a possibility. The oldest pine stands,which are the ones first in line for clearfelling, are on sites ecologicallysuited to eucalyptus, and situated in that part of Division I (map) which isnearest to the pulpmill.

(b) Establishment and Development of New Plantations

3.15 The Project would provide for development of 10,000 ha of newplantations over a period of five years i.e. 2000 ha per year. The newplantation program would include surveying part of the new areas, establish-ment of nurseries, land preparation, planting, fertilization, weeding andresearch.

3.16 Surveying. Most of the 10,000 ha to be afforested under thesecond phase would be land which has already been surveyed. However, someof the area within the low-elevation portion and which would be suitable foreucalypts would need both topographical and soil surveying before detailedplanning can be done.

3.17 Land Preparation. Since much of the Project area is generallycovered by grass, land clearing involves manual breaking down of smallanthills before ploughing or ripping is done. Strip ploughing would continueto be the normal method of land preparation for pine, while land which cannot

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be ploughed would be pitted or ripped and pitted. However, land earmarkedfor eucalypts would require complete ploughing, except in case of replantingclearfelled pine areas with eucalypts. In order to obtain the desired shatter-ing effect, ripping would be done in the dry season when the soil is hard.For this purpose the Project would provide for a 140 hp crawler tractor. Inorder to ensure satisfactory tree growth, pits would be 30 cm in diameter by30 cm deep within a 1 m cleared patch.

3.18 Nurseries. Seed of P. patula and E. saligna and E. grandis would beobtained locally. Seed for other species would be locally procured or imported.The polythene tube method would continue to be used in the production ofseedlings but the earth ball method, which has been introduced, would befurther improved in order to avoid the Project's dependence on polythene tubeswhose supply is subject to foreign exchange availability. Seedlings would beplanted at an average density of 1370 per hectare. About 4 million seedlingswould be produced annually for new plantings of 2,000 ha/annum and for replant-ing 150 ha/annum. Small temporary nurseries near planting sites would beestablished (instead of large and permanent nurseries) in order to minimizethe need for transporting seedlings over long distances.

3.19 Planting and Weeding. Planting would be done by hand during theearly part of the rainy season which extends from November - April and thiswould permit replacement of dead plants to be done within the same season.P. patula which has done best in the high elevation areas at Sao Hill wouldcontinue to be the major species at that elevation while P. caribaea andpossibly P. kesiya would be planted in the lower-elevation area. However, inorder to avoid the risk associated with monoculture, some compartments in thehigher elevation area would be planted with P. taeda and P. elliottii. Ongood ploughable land, particularly within short distances from the pulpmill,E. grandis and saligna would be planted. Fertilizer (NPK) would be appliedonly to eucalypts because of its significant response. The cost of applyingborate, whose deficiency is suspected to cause the dieback of occasional treesin Sao Hill, has been provided for in the Project and would be incurredfollowing the recommendations of a tree physiologist and a silviculturist whowill visit Sao Hill under FAO/TCP funding in 1981. P. patula and, especially,eucalypts are sensitive to weed competition. Except for eucalyptus areas,where weeding would be both mechanical and manual, weeding in all other areaswould be by hand.

Vehicles and Equipment

3.20 Vehicles and equipment to be provided under the Project would include12 motor cycles (4 additional and 8 replacements) for middle-level stafftransportation; 5 four-wheel drive vehicles (all replacements) for generaland staff transportation; 1 crawler and 1 ripper (both replacements); 3wheel-tractors (94HP) and 2 wheel-tractors (78HP) - both replacements -; 5harrows and 5 ploughs (both replacements); 3 additional trailers for generaltransportation; 5 seven-ton trucks (2 additional and 4 replacements), 1ten-ton truck (replacement) for general transportation; 20 bicycles for ForestAssistants (all additional); 9 additional water storage tanks and 6 additionalwater pumps for nursery work.

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3.21 In order to avert the problem of recent shortages in spares neededfor efficient use of vehicles and equipment, the Project would finance theprovision of initial spares for new and replacement vehicles, machinery andequipment for workshop and general plantation operations and for fire protec-tion activities and the purchase of spare parts inventory throughout theProject period and the purchase of 2 light pick-ups for supplies transporta-tion, 2 four-wheel-drive vehicles for work study activities and workshoptransport needs.

Fire Protection

3.22 Fire protection of forest plantations is important because ofthe real threat of fire, given the pronounced dry season and the concentrationof inflammable species in the Project area. A fire protection system hasalready been built in the Project which includes firebreaks, fire towers, firecontrol centers, mobile fire investigation units, fire patrols and fireextension work. In addition, the Project would provide for the purchase of 3four-wheel drive vehicles, construction of 5 new fire-towers and additionalfirebreaks in new areas and the purchase of fire-fighting equipment to bedetermined by a fire protection consultant whose employment would be financedby FAO's Technical Cooperation Program in 1981. A total provision of Tsh 1.25million (US 151,515) has been included for the purchase of the fire protectionequipment. Assurances were obtained that disbursement against these fundswould be made after the Consultant has drawn up detailed proposals satisfactoryto both GOT and IDA.

Research

3.23 The long-term research trials program would be continued and fundstotalling TSh 945,500 would be provided as follows: staff salaries - Tsh373,000 (Table T-l-10), 4 wheel-drive vehicle - TSh. 147,500 (Table T-l.9),hand tools and implements - TSh. 25,000 (Table T-1.2); fertilizers, etc. -TSh. 200,000 (Table T-1.3); labor - TSh. 200,000 (Table T-1.3). The followingspecific investigations would be carried out under the Project: Species andprovenance trials. Pinus elliottii has performed surprisingly poorly in thehigh elevation area. Further provenances would be tried. Improved strain ofP. taeda would also be tried in the same area. For the low elevation area anattempt would be made to find a less heavily branched variety of P. kesiya, aswell as the best provenances of P. caribaea and P. oocarpa. Improved varietiesof Eucalyptus grandis would be tried at both high and low elevations.

Nutritional studies. At present NPK fertilizer is given to eucalyptus atplanting. The possibility of excluding N would be investigated. Similarlythe effect of zinc and boron applications on the growth of both pines andeucalyptus would be assessed. Provision for laboratory services has beenincluded (Table T-1.13) for soil and foliar analysis.

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Agro-forestry. The effect on costs and growth rates of growing maize andother agricultural crops between trees during the first few years would beinvestigated. Especially in the case of the new eucalyptus plantations, wherethe land would be completely ploughed, it would not be difficult for theProject to cultivate the land between the trees or to induce farmers to do so,and this would minimize weeding costs. The possibility of grazing under theolder stands would be investigated, especially in the case of stands ofnarrow-crowned species like P. elliottii in which there is a considerableamount of grass growth. This would reduce fire hazard.

Nurseries. Soil tests, germination tests, perfection of the earthball tech-nique, and the correct fertilizer mix and irrigation schedule would be subjectsfor further investigation.

Weeding is a very labor demanding and, therefore, expensive operation.Research would be carried out to determine areas and conditions where weedingcould be either omitted altogether, or reduced in intensity. Alternativemethods of weed control would be tested.

Civil Works

(a) Road Construction and Maintenance

3.24 About 120 km of-secondary roads within the Project area would beupgraded to all weather primary roads capable of serving all purposes includinglog transport. The construction and maintenance of other logging roads wouldbe the responsibility of the log consumers. Also about 160 km of secondaryroads (all-weather roads for personnel access) and 725 km of tracks would beconstructed during Project implementation. All roads would be constructedusing designs adopted in Phase I and which are satisfactory. 1/ The Projectwould also provide funds for the maintenance of new and existing forest roadsand tracks. In order to facilitate the implementation of the road constructionand maintenance program, funds would be provided for the purchase of 1 con-struction grader - 140 HP (incremental), 2 tow graders (incremental), and 1tipper-truck (replacement).

(b) Buildings and Housing

3.25 About 58 houses for senior and junior staff would be constructed andprovision would be made for maintenance of existing and new buildings. Afield office to serve as headquarter for the plantation division in the lowerelevation area would also be constructed under the Project.

1/ Road density: high elevation - 15 m/ha.(secondary roads) low elevation - 18 m/ha.Road standards: primary roads - 8 m wide.

secondary roads - 7 m wide.tracks - 4 m wide.

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Technical Assistance

(a) Long-term Specialists

3.26 The mechanical engineering services would be strengthened by theemployment of an internationally recruited Workshop Manager, with practicalexperience in the organization, management and operation of a workshop forrepair and maintenance of vehicles and agricultural machinery and equipment,for five years. In order to strengthen the Project's financial management,planning and cost accounting systems, the Project would finance (i) theemployment of an internationally recruited Assistant Project Manager (Financeand Planning) for three years and who would be a person with appropriatefinancial and personnel management and planning experience and qualifi-cation; and (ii) the employment of an internationally recruited Work StudySpecialist, for a period of three years, to assist in developing improved,cost effective silvicultural practices and field operations and train localcounterparts. Assurances were obtained during negotiations that GOT wouldassign personnel with appropriate experience and qualifications as localcounterparts to the Assistant Project Manager, Workshop Manager and Work StudySpecialist.

(b) Short-term Consultants

3.27 The Project would also finance short-term consultancies as follows:(i) an internationally recruited Forest Fire Protection Specialist (for twoman-months) to assist Project management to review and draw up an implementa-tion plan of the recommendations made by the FAO/TCP fire protection specialist(para 3.23); (ii) a three-man-month consultancy in support of Government'sproposal to carry out a comprehensive study that would form a basis forappropriate and rational stumpage rates and pricing of forestry products inthe country; (iii) a Tree Physiologist (one man-month to accompany a supervi-sion mission to review the implementation and effectiveness of the recommenda-tions made by the FAO/TCP silviculturist/physiologist team on the diebackproblem in the existing Sao Hill plantations; and (iv) two internationallyrecruited Village Afforestation Specialists for three man-months each whowould assist GOT to review existing programs and studies and to formulate aNational Village Afforestation Program; the specialists would be a Sociologistand a Forestry Specialist.

3.28 Assurances were obtained during negotiations that the selection,qualifications, experience and terms and conditions of employment of thespecialists (para 3.27) and short-term consultants (para 3.28) would besatisfactory to IDA and be in accordance with IDA guidelines; that the work-study specialist would be appointed by December 31, 1982 and the appointmentof the Assistant Project Manager (Finance and Planning) and the WorkshopManager would be a condition of Project effectiveness.

(c) Training

3.29 The Project would also provide for short study tours for selectedProject staff to visit similar projects in neighboring countries to broadentheir experience.

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E. Project Costs

3.30 Total Project costs are estimated at Tsh 123.6 million (US$15.0million) of which Tsh 50.7 million (US$6.2 million) or 41% represents foreignexchange costs. The Project costs do not include any local taxes and dutiessince virtually all items would be exempt from import duties and the localtaxes are negligible. Details and phasing of the project costs are presentedin Annex 1, Tables T-l.l through T-1.15 and are summarized below:

Foreign BaseLocal Foreign Total Local Foreign Total Exchange Cost------TSh. '000------ ------US$'000 - ------

Afforestation

Development of ExistingPlantations 7,518 160 7,678 911 19 930 2 9Replanting clearfelled areas 1,752 319 2,071 213 39 252 15 2Development of New Plantations 11,223 5,969 17,192 1,360 724 2,084 35 19Nursery Operations 4,280 2,100 6,380 519 254 773 33 7Fire Protection 4,412 856 5,268 535 104 639 16 6

Sub-total 29,185 9,404 38,589 3,538 1,140 4,678 24 43

Civil Works

Roads - construction/maintenance 1,561 2,459 4,020 189 298 487 61 4Buildings & Structures 4,378 1,876 6,254 531 227 758 30 7

Sub-total 5,939 4,335 10,274 720 525 1,245 42 11

Vehicles, Machinery & Equipment 1,113 11,222 12,335 135 1,360 1,495 91 14

Project Administration

Staff Salaries and Wages 11,135 -- 11,135 1,350 -- 1,350 - 12HQ - General Services Cost 1,634 1,072 2,706 198 130 328 40 3Vehicles Operating Cost 1,548 6,310 7,858 187 765 952 80 9

Sub-total 14,317 7,382 21,699 1,735 895 2,630 34 24

Technical Assistance & Training

Technical Assistance -- 6,271 6,271 -- 760 760 100 7Staff Study Tours -- 247 247 -- 30 30 100 1

Sub-total _ 6,518 6,518 -- 790 790 100 8

Total Base Cost 50,554 38,449 89,415 6,128 4,710 10,838 43 100

Contingencies - Physical 3,896 3,187 7,083 472 386 858 45 8- Price 18,460 8,687 27,147 2,237 1,053 3,290 32 31

TOTAL PROJECT COST 72,910 50,735 123,645 8,837 6,150 14,987 41 139

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3.31 Project costs were estimated at prices as of December 1981. Aphysical contingency of 10% was included on all Project costs except staffsalaries, technical assistance and study tours. Price contingencies werecalculated on a cumulative basis: for local costs the rates were 14% for1982, 13% for 1983, and 12% thereafter, while for foreign exchange costs therates were 8.5% for 1982, 7.5% for 1983 and after. Price contingencies total31% of Project baseline costs.

3.32 Provision has been made for financing retroactively Project expendi-ture between January 1st and credit signing date. Such expenditure is esti-mated at Tsh 6.6 million (US$800,000) (Annex 1, Table T-1.15).

3.33 Project costs provide for a total of 132 man-months of long-termconsultancies (para 3.27) at an estimated total cost of TSh. 5.5 million(US$666,666). This includes cost of salaries, fees, travel and subsistence.The average cost per man-month is TSh. 41,666 (US$5050). Provision is alsomade for a total of 12 man-months of short-term consultancies (para 3.28) atan estimated total cost of TSh. 594,000 (US$72,000). The average cost perman-month is TSh. 49,500 (US$6,000). The Project would also provide for theexpenditure on salaries and wages of existing and incremental local staff ofabout Tsh 11.1 million (US$1.3 million) including contingencies. IDA disburse-ment against these local salary and wages expenditures would be on a declLningbasis (para 4.06e).

F. Financing

3.34 The Project costs would be financed as follows:

Tsh US$(million) (million) %

IDA 99.0 12.0 80GOT 24.6 3.0 20

Total 123.6 15.0 100

3.35 The proposed credit equivalent to US$12.0 million to GOT would beon standard IDA terms. The credit would finance 80% of total Project costs,including 100% of foreign exchange costs (US$6.2 million) and 66% of localcosts (US$5.8 million). GOT would finance the remaining US$3.n million.

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IV. PROJECT IMPLEMENTATION

A. Organization and Management

4.01 The Forest Division of the Ministry of Natural Resources andTourism would be responsible for the implementation of the Project. Projectactivities would be carried out by the Project Manager who would be directlyresponsible to the Director of Forests. Assurances were obtained duringnegotiations that the position of Project Manager would be kept filled at alltimes with a person whose qualifications and experience are satisfactory toIDA.

4.02 The Project organization would be as shown in Chart C-1, and theanticipated scheduling of implementation of the various components is shown inChart C-2. The Project Manager would be assisted by two Assistant ProjectManagers, one responsible for plantation operations and the other for financeand planning. The Assistant Project Manager (Operations) (APMO) would beresponsible for forest plantation management, survey and work plan, all civilworks, research and trial activities under the Project. The forest plantationswould be divided into three Divisions. Three Divisional Plantation Officers(DPO), each responsible for a Division consisting of a number of plantationblocks, would assist the APMO in the implementation of the afforestAtion andfire protection programs of the Project. In each Division, Forest Officers(FO) and Assistant Forest Officers (AFO), who would be in charge of afforesta-tion and fire protection activities at plantation or section level, would beresponsible to the DPO. The FO and AFO would be responsible for implementingagreed activity targets in their respective sections or units and they wouldbe assisted by Forest Assistants (FA) who would supervise the physical implemen-tation of such activities. Six additional FA's would be posted to the Project.Assurances were obtained during negotiations that GOT would appoint andassign six FA's with appropriate experience to the Project by December 31,1982. The APMO were obtained by a Civil Engineer in implementing the civilworks program under the Project. A reasonably good capacity, in terms ofstaff and equipment, exists at the Project to implement the civil worksprogram. A Senior Forest Officer in charge of research activities in theProject would assist the APMO. A Forest Officer responsible to the APMO,would be in charge of the Survey and Work Plan Section. This section wouldutilize the recent forestry inventory data to prepare a five-year Working(Management) Plan with detailed prescriptions on a compartment basis forpruning, thinning, clearfelling, replanting and other operations. Assuranceswere obtained during negotiations that such a Working Plan would be preparedby July 31, 1983 and that Project management would implement the Plan thereafter,taking into account IDA's comments and that subsequent plantation inventorieswould be undertaken and work plans prepared every five years.

4.03 The Assistant Project Manager (Finance and Planning) (APMFP)would assist the Project Manager in all matters relating to support servicesconsisting of finance, accounts, administration, work study and costing,and the workshop. Since it has not been possible for the Project to recruitlocally such a person in the past, the APMFP would be internationally-recruited

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(para 3.26). The APMFP would be assisted by a Senior Accountant who would bein charge of the Accounts and Finance Section. Procurement and suppliesmatters would be the responsibility of two procurement and supplies officers,one at the Project head office and another stationed in Dar-es-Salaam, whowould report to the APMFP, through the Senior Accountant. This would facilitateexpeditious procurement and clearing of imported goods for the Project, aproblem which beset the first phase of the Project. The AdministrationSection would be headed by an Office Supervisor who would assist the APMFP inmatters relating to personnel administration and staff welfare. In order toset up an effective costing system for the Project, a Work Study and CostingSection would be established and headed by an internationally-recruited WorkStudy Officer (para 3.26). A Forest Officer, Assistant Forest Officer and alocal Cost Accountant would assist the Work Study Officer. An internationally-recruited Workshop Manager (para 3.26) would assist the APMFP in settingup and supervising a mechanical workshop for servicing and repairing allProject vehicles, machinery and equipment.

B. Procurement

4.04 Procurement under the Project would be in accordance with Bank/IDA guidelines. Specifically:

(a) orders for vehicles, tractors, machinery and equipment andinitial spare parts (US$1.7 million - including price con-tingencies) would be bulked as far as practicable. Orders ofUS$100,000 and above would be procured through internationalcompetitive bidding (ICB) from suppliers who maintain oragree to maintain in Tanzania adequate after sales serviceand inventory of spare parts;

(b) orders for vehicles, tractors, machinery and equipmentbelow US$100,000 would be procured in accordance withexisting local competitive bidding (LCB) procedures whichare satisfactory. These orders would not, however, exceedUS$300,000 in aggregate;

(c) civil works (US$1.2 million) would be undertaken in accord-ance with Government standards and designs which are accept-able to IDA. As these works would be small (individualitems would not exceed $100,000) and at geographicallydispersed locations, they would not attract ICB and LCB andsince the Forest Division has the capacity to implement such aprogram with reasonable efficiency, construction wouldbe by force account;

(d) the selection and employment of consultants (US$0.7 million)would be in accordance with Bank/IDA guidelines.

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4.05 Draft tender documents for all contracts expected to cost inexcess of US$150,000 would be submitted to IDA for approval before bidinvitations are issued. Bid evaluations and recommendations for awardwould be submitted to IDA for comments before contracts are awarded. Inthe evaluation of ICB bids for purchase of vehicles, tractors, machineryand equipment, domestic manufacturers would be allowed a preference of 15% orthe existing rate of duty, whichever is lower. Assurances were obtainedduring negotiations that the procurement procedures outlined above would befollowed.

C. Disbursements

4.06 Funds from the Credit Account would be disbursed on the followingbasis:

(a) 100% of foreign and 75% of local cost for vehicles,machinery, equipment and spare parts (US$1.7 million);

(b) 75% of total cost of construction of housing, buildingsand structures and construction and maintenance of roadsand tracks (US$1.3 million);

(c) 100% of total cost of technical assistance and staff studytours (US$0.9 million);

(d) 100% of foreign cost and 75% of local costs of afforestation,(US$5.5 million);

(e) salaries and wages of local Project staff with disbursementsat 75% up to US$0.4 million; 60% up to an aggregate ofUS$0.6 million; and 40% up to a total of US$0.8 million;

(f) 100% of foreign cost and 75% of local costs of headquartergeneral services and vehicle operation (US$1.3 million);

(g) An unallocated amount of US$0.5 million representing physicalcontingencies on items (a) to (d) and (f), and transferableto them as required.

4.07 All disbursements would be fully documented except for expendituresby force account under (b), and local expenditures under (d), (e), and (f)which would be on the basis of Statement of Expenditure signed by the ProjectManager and the Ministry of Finance. However, supporting documents inrespect of Statement of Expenditure would be retained by the project forinspection by IDA supervision mission.

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4.08 A schedule showing the estimated pattern of credit disbursementis at Annex 3, Table T-3.1. This schedule is based on the historical dis-bursement profile of the Phase One Project which was faster but consideredmore appropriate than the available regional or country-wide profiles.

D. Accounts, Audit and Reporting

4.09 An improved system for financial management and planning, internalcontrols and cost accounting would be implemented. The provision for strengthen-ing the finance and planning section in the Project organization wouldassist in meeting this requirement (para 3.26). Separate records relating toall expenditures under the credit, would be kept in accordance with acceptableaccounting practices, and reflecting the complete operations and financialposition of the project. All accounts relating to the Project, includingStatement of Expenditures, would continue to be audited annually by theGovernment Auditor General whose services have been satisfactory to the Bankunder Phase I. The audited accounts together with the auditor-s report wouldbe submitted to IDA within six months of the end of each financial year.Detailed annual and quarterly reports covering the physical implementation ofthe Project and the funds received and expended, together with the expenditurebudget for the ensuing quarter, would be-prepared and submitted by the ForestDivision to the Ministry of Natural Resources and Tourism and to IDA. Findingsof the research program (para 3.23) would also be included in the ProjectAnnual Report. In addition, appropriate records with regard to the followingwould be maintained on a continuous basis: (a) actual total and unit costscovering various afforestation activities, viz: plantation eatablishment andmaintenance, replanting, land preparation, weeding, pruning, production ofseedlings etc.; (b) historical statistical data relating to the operatingcosts of the different types of vehicles, tractors, machinery and equipment;and (c) unit costs of construction relating to staff houses, buildings andstructures. Within six months of the completion of disbursements, GOT wouldprepare and submit to IDA a Completion Report. Assurances were obtainedat negotiations that the accounting, auditing and reporting procedureswould be followed.

E. Environnmental Impact

4.10 The forest plantations within the Project area would continue toprovide protection to minor catchment areas and the maintenance of soil coveron vulnerable sites within the Project area. By providing softwood to meetthe national demand, the Project would reduce pressure on the environmentallyimportant indigenous forests. The Project would have no particular adverseeffects on the environment.

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V. PRODUCTION, MARKETS AND PRICES

A. Production

Yields

5.01 The 1980 inventory of Sao Hill plantations indicated that oldstands of P. patula had a mean annual increment (MAI) of 20 m /ha (underbark). It is likely that actual yields from pines are much lower than thisfigure because the utilizable volume is much lower and older stands aregenerally better than average within the Project area and other conifers areslower growers than P. patula in Sao Hill. Thus t e overall average yieldfrom pine could realistically be estimated at 15 m /ha per year. On this basisthe expected distribution of average yield over the rotation and differentproducts are as follows:

Age: Thin to Yields m /haYears (stems/ha) Pulpwood 1/ Sawlogs 2/ Total

10 800 40 -- 4014/15 500 30 30 6018/20 300 25 50 7525 50 150 200

Total --- 145 230 375

1/ Logs below 25 cm diameter.2/ Logs above 25 cm diameter.

5.02 Eucalyptus plantations at Sao Hill are still too young to givea reliable estimate of MAI, but on the basis of non-Project plantationsin the area and of research exyerimental plots, the average yield foreucalyptus is estimated at 18 m /ha/year, provided the standard practicedeveloped by the Project is followed. Eucalyptus would be clear-felledevery 8 years and then they would be left to regenerate from coppice. 3Thus the average yield at the age of clearfelling would be 8 x 18 = 144 m /ha.The eucalyptus plantation life cycle would be 32 years, including one seedlingcrop and three coppice rotations of 8 years each.

Output

5.03 On the basis of an MAI of 15 m /ha for pine and 18 m /ha foreucalyptus and the assumed plantation cycle for each species, the proposedplantations under the Project consisting of 8,000 ha of pine, and 2,000 ha ofeucalyptus, and 760 ha of replanting of clearfelled pine with eucalyptus,production would be as summarized below:

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---------- 000-- m3 ------------------Pine Plantations Eucalyptus Plantations

Crop Pulpwood Sawlogs Pulpwood Sawlogs

Seedling Crop --- --- 397 ---lst Coppice or thinning 320 --- 397 ---2nd Coppice or thinning 240 240 397 ---3rd Coppice or thinning 200 400 397 ---Final Crop 400 1,200 ---

Total Production 1,160 1,840 1,588

5.04 Since the existing pine plantations at Sao Hill are adequateto meet the requirements of both the sawmill and pulpmill at their presentlyplanned capacities, the pine pruning program in existing plantations and allthe pine sawlogs production under the second phase would require expansion inthe sawmill. Under its medium and long-term development program, TWICO plansto expand the Sao Hill sawmill by adding another production line in the late1980's and to establish another sawmill to meet the expected growth in domesticdemand for sawn timber in the 1990s. Similarly, there is a possibilitythat the pulpmill might increase its capacity to satisfy the growing domesticdemand for paper and paper products and improve its profitability throughan increased scale of operation.

5.05 Eucalyptus would be exclusively used as pulpwood, while pine wouldconstitute a raw material for both the sawmill and pulpwood. Pine logs below25 cm diameter would go to the pulpmill while bigger logs would be for thesawmill. Except for eucalyptus and possibly for some stunted pine stands,integrated harvesting of pine plantations would be practiced throughout theProject area. This would mean that each compartment of pine would yield bothsawlogs and pulpwood and separate working circles would not be set aside foreach product.

5.06 At present the Sao Hill sawmill is the only consumer of wood fromthe Project area and it manages its own harvesting and logging on the basis ofworking circles. However, both GOT and Project management recognize theneed for rational management and harvesting of the Project's forest resourceson an integrated basis, particularly once the pulpmill becomes operational.For this purpose GOT commissioned a study by consultants in 1980 which hasidentified a number of possible institutional arrangements for managing andharvesting the Project's output on an integrated basis. Although GOT has notyet made any decision, it is expected that a rational decision would be madein line with the sound advice it is receiving from the consultants. Duringnegotiations assurances were obtained that GOT would consult IDA beforeany institutional arrangement for integrated management and harvesting of theforest resources in Sao Hill is decided upon and that GOT would have estab-lished such institutional arrangement before June 30, 1983.

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B. Markets

5.07 The major consumers of the Project's output of round logs wouldbe the existing Sao Hill sawmill and the Pulp and Paper Mill currently beingconstructed at Mufindi. Their respeciive installed capacities, in termi ofannual log intakes, would be 45,000 m (r) for the sawmill and 283,000 m (r)for the pulpmill. The sawmill has been operating since 1976 and reached itsrated capacity (single shift) in 1981. It is considered to be the mostefficient mill of all TWICO sawmills and has been operated profitably. Thepulpmill is scheduled for commissioning in 1984 and is expected to reach itsfull rated capacity in 1989. Prospects for its expansion beyond its initialcapacity would be contingent upon future growth in markets for its productsand its financial performance. On the other hand, TWICO plans to expand itssawmilling capacity in Sao Hill in the late 1980's and early 1990½s to caterfor the expected growth in domestic demand for sawn timber and to utilize theplanned increase in softwood production in Sao Hill area.

Sawn Timber

5.08 The demand for sawn timber is derived from such end-uses as furnitureand joinery, which together account for about two-thirds of the consumption(Annex 4, Table T-4.4). Other end-uses for sawnwood in Tanzania are roofstructure, internal partitions, concrete formwork, vehicle bodies, boats,wooden cases and pallets. Consumption of sawn timber is almost evenly dividedbetween softwoods, fine hardwoods and utility hardwoods (Annex 4, TableT-4.4); and the ultimate application of the various species is basicallydetermined by the end-use properties. Fine hardwoods (e.g. mahogany, mvule,etc.) are used mostly for furniture, joinery, panelling and other decorativepurposes. Muhuhu and panga-panga are used for parquet flooring and are mostlyexported. At present, a large proportion of fine hardwoods is still beingused for utility purposes, as other species are not always available. Utilityhardwoods (e.g. Mutundu, mtambara, etc) are used for light consruction work,joinery, sleepers, bridges, vehicles, etc; where natural appearance is not soimportant. Softwoods are particularly suitable for general building work(roof structures, doors, windows, door frames and ceilings) and internaljoinery. They are also used for shuttering, boxes and other packaging pur-poses. The pattern of sawn timber consumption in the country is given inAnnex 4, Table T-4.4. The projections of demand for sawn timber in Annex 4,Table T-4.2 assume that this consumption pattern would be maintained and thatthere would be no substitution for wood by non-woodbased products in the majorend-uses.

5.09 The supply/demand data for Tanzania indicate that demand for sawlogsexceeded supply by about 29,000 m (r) during 1978-80 and this is consistentwith the shortages of sawn timber experienced during this period and consequentincreases (in real terms) in timber prices. In addition, the shortage ofsawlogs was exacerbated by structural bottlenecks in the sawmilling industry,including inadequate logging capacity. Detailed projections of supply anddemand for sawlogs are presented in Annex 4, Table T-4.3. These projections

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incorporate the assumptions contained in the latest Country Economic Memoraindumrelating to population growth and per capita income growth as specified on thetable. They are also based on the assumption that the income elasticity ofdemand is 1, a statistic estimated by FAO in 1971 but which cannot be reviseddue to lack of more recent and reliable data. Since consumption of sawntimber and panels has been affected by recent structural (e.g. nationalizationof large sawnmills in 1976) and operational constraints (lack of spare parts,inadequate operating expenditure, etc), and general economic problems in thecountry in the late 1970's, average demani for 1978-80 was normalized to reflectthe sawlog consumption level of 380,000 m in 1973 which was free of thesedistortions. On the basis of3this, total demand for sawlogs is projec5ed toincrease from about 480,000 m (r) during 1978-80 to about 1,904,000 m (r) inyear 2010, or an average annual increase of 4.7%. On the other hand, esti-mates of the potential supply of sa'logs (both softwoods and hardwsods)indicate an increase from 451,000 m Sr) in 1978-80 to 1,572,000 m (r)in year 2005, of which only 400,000 m (r) would be hardwoods. After theyear 2005 supply of sawlogs is estimated to decline to only 940,000 m in year2010 as a result of clear-fellings of softwood plantations established in theearly 1980's. Much of the expected increase in demand for timber would be metfrom expansions in softwood-plantations, which would have to grow at a cumula-tive rate of about 1.4% p.a.

5.10 Thus the present and projected suppiy/demand situation revealsthat the appare3t general deficit of 29,000 m (r) in 1978-80 would rise toabout 964,000 m (r) by year 2010, implying that shortages of timber in thecountry would increasingly become acute unless substantial imports wereenvisaged or the area under softwood plantations were significantly increasedin the late 1980's. While the former would be constrained by the balance ofpayments situation, the latter would be contingent upon the availability ofsuitable land in ecologically suitable areas and by the country's economic andfinancial prospects in the short and medium-term. In order to eliminate theprojected supply deficits, expansions in the supply of softwoods would have tobe at a rate of about 5% per annum between 1985 and 1995.

5.11 On the basis of the supply/demand estimates, it is very unlikelythat Tanzania would have some surplus timber (except high quality hardwoods)for export. However, in the very unlikely event that the domestic marketcould not absorb the production from the Project, exports could be directed tothe growing markets in the Middle East and countries like Somalia and Ethiopia.The potential for exports to these markets would depend on Tanzania's abilityto produce adequate quality of sawn timber at competitive prices. The pruningand thinning regimes proposed for Sao Hill would result in high qualitysawlogs, while the relatively low cost of producing sawlogs in Sao Hill wouldsignificantly contribute to the price competitiveness of the Project timber.A comparison between the Project's theoretical stumpage rates for pine andexport parity prices of standing timber indicate that the Project-s timberwould be highly competitive in international markets (Appendix 2, TableT-2.9).

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Paper and Paperboards

5.12 The domestic demand for paper and paperboards, according to latestand most conservative estimates 1/, was about 50,000 tons in 1980 and isprojected to reach 130,000 tons in year 2000. 2/ Current domestic productionis negligible and the bulk of the domestic demand is met by imports which inrecent years have been drastically affected by shortage of foreign exchange.The Mufindi Pulp and Paper Mill would have a processing capacity of 60,000 TPAat full capacity and this would be absorbed entirely by the domestic market.

Panel Products

5.13 Panel products consist of plywood, particle board and fibreboard andtheir future demand would be influenced by a number of factors, includingeconomic development, population growth, availability of supplies, trends inprimary end-use industries (i.e. building, furniture, joinery, and packaging)and the rate of urbanization. The consumption of panels in 1973 was used asthe base level for demand projections. Their close substitutability permittedthe calculation of the total demand, after which its roundwood equivalent wascalculated and added to the total forecasts for sawn timber. The domesticdemand for wood panel products is expected to remain quite strong. Demandfor plywood, particle board and 3fibreboard would rise3 in terms of roundwoodequivalent, from about 35,000 m in 1980 to 197,000 m in year 2000, represent-ing a 9% annual growth rate. Much of this growth would be accounted for bythe construction industry and the backlog of unsatisfied demand at the moment.The demand for plywood and particle board would grow faster than that of otherpanels, largely because of their versatile end-use. However, the supply ofpanels would depend on installed capacity and its utilization. The supply oflogs for the panel products industry is included in tha figures for supply ofsawlogs (para 5.09).

C. Prices

5.14 Permits are required for cutting of wood in forest reserves andprotected catchment areas and in forest resources on public lands for commer-cial purpose and fees are charged. Stumpage fees vary with species andthe recently revised 3/ fees for softwood average Tsh 90/m . However, since

1/ Jaakko Poyry, Wood Industries Development Program in Tanzania-Long-TermDevelopment Plan, 1979.

2/ The Muf-ndi Pulp and Paper Appraisal mission estimate is 162,300 tons inyear 2000.

3 33/ Stumpage fees were revised from an average of Tsh 49/m , to Tsh 90/m

with effect from July 1, 1981.

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the cost of production in most of the existing plantations is not known, GOTis not certain whether the revised stumpage fees appropriately reflect thefull cost of production. GOT therefore intends to commission a study underthe Project (para 3.27) which would review and determine the cost of productionin existing plantations with a view to setting up appropriate stumpage rates.Since stumpage rates would play a critical role in the profitability of theconsumers of softwood in the country, the proposed review would also assessthe impact of increased stumpage rates on the major users of wood. Theprincipal objectives of the study would be to ensure (i) financial viabilityat all levels of the industry is attainable, (ii) future stumpage ratesreflect variations in production costs as well as transport costs, and (iii)adjustments in price levels are fully reflected at all levels of the industry.Assurances were obtained during negotiations that (i) GOT would complete thestudy on stumpage rates before June 30, 1983; (ii) GOT would take promptmeasures as agreed with the Association based on the findings of the study;(iii) the selection, experience, qualifications and terms and conditions ofemployment of the consultants be in accordance to Bank/IDA guidelines. It isunderstood that after the findings and recommendations of the stumpage studyhave become available, GOT and IDA would consult annually on the generalpricing policy affecting the forestry sub-sector having regard to economicconsiderations and the impact a price increase would have on the majorusers of industrial wood.

5.15 The existing price structure for sawlogs and pulpwood for Sao Hillplantations are presented in Annex 2, Tables T-2.7(a) and T-2.7(b) andindicate that industry profit margins (largely covering marketing agencies)are substantial, ranging from 17% of wholesale price for sawn timber to10% of ex-mill sales price for pulp. These margins are largely due to thelow stumpage rates currently being charged.

5.16 Based on the Project's production targets and using a discountingrate of 12% (assumed to equal the opportunity cost of capital in Tanzania),the average stumpage prices for both pine and eucalyptus which would ensurefull recovery of the costs of production by the time these resources areharvested would be as follows (Annex 2, Tables 2.1 and 2.2).:

Pine sawlogs Tsh 157.20 (US$19.05) per m3Pine pulpwood Tsh 55.00 (US$ 6.67) per m3Eucalyptus Tsh 55.65 (US$ 6.75) per m

These figures indicate that present stumpage rates for Sao Hill wood are toolow and that there is need to revise them upward. As indicated (para 5.15)such full cost recovery could be achieved by reducing profit margins tomarketing agencies without jeopardizing the industry as a whole. At present,the high profit margins upstream are due to a failure by the stumpage ratepolicy to fully reflect the cost of producing wood in plantations in Sao Hill.An assumption underlying this methodology of calculating stumpage rates isthat producers of sawlogs and pulpwood (i.e. the Project) would adopt marginalcost pricing policy. This means, wood as an asset would be valued at its

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its replacement cost rather than at its historical cost of production. Thiswould suggest that the stumpage rate study under the Project (para 3.27) wouldhave to take marginal cost pricing for both sawlogs and pulpwood as itsstarting point.

VI. BENEFITS AND JUSTIFICATION

A. General

6.01 The principal benefit from the Project would be the production ofwood to meet the increasing domestic demand for sawn timber, panels and paperand paper products. Supply and demand projections for these products indicatethat there would be considerable domestic supply deficits in the near futureand that these would increasingly become significant in the long-run. Con-sequently, all Project's output of sawlogs and pulpwood would be geared toimport substitution, and the Project-s output has therefore been valued at itsimport parity prices. Since the forest resource in the Project area would bemanaged on an integrated basis (para 5.05), no separate calculations forpulpwood and sawlog plantations were made.

6.02 Both financial and economic returns have been calculated for aperiod of 36 years on the basis of (a) incremental investments for Phase IIcoasisting of 10,760 ha of new plantations and replantings and (b) the overallprogram which consists of investments for further development of the 18,000 haof plantations established under Phase I plus the incremental investmentsunder Phase II. The latter evaluation is necessary because Phase II is a merecontinuation of the long-term afforestation program. The incremental evaluationexcludes all costs and benefits incurred under and prior to Phase I and thesubsequent development costs associated with Phase I plantations. However,costs and benefits of replanting under Phase II have been included in theincremental evaluation of the Project. Both the incremental and overallProject analyses assume that the investments in the pulp and paper mill andsawmill would not be sunk costs and this is reflected in the financial andeconomic values of both the sawlogs and pulpwood.

B. Financial Returns

6.03 Financial returns have been calculated for both Phase II incre-mental investments and the afforestation program in Sao Hill. The calculationsfor both are based on individual hectare models for pine and 3eucalyptus whichassume 1381 prices. The assumed stumpage rates are Tsh 90/m for pine sawlogs,Tsh 32/m for both pine and eucalyptus pulpwood. These are the prevailingstumpage rates and valid country-wide. On the basis of these assumptions, thefinancial rates of return are 7% for Phase II incremental investments and 5%for the overall afforestation program in Sao Hill. The relatively highfinancial rate of return on Phase II incremental investments indicates that

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projects which aim at utilizing stocks of capital and labor are likely to befinancially sound.

Sensitivity Tests

6.04 Sensitivity tests of the financial returns were made to considerthe change ii wood prices to reflect the estimated stumpage fees ofTsh 157.20/m (r) for sawlogs and Tsh 55.65/m (r) for pulpwood (para 5.16).The results were as follows:

At AtCurrent Stumpage Estimated Cost

Rates Stumpage RatesPhase TwoIncremenalInvestments 7.3 12.6

Overall Project 4.6 8.0

6.05 It is evident from the above analysis that the prevailing stumpagerates would result in low returns to public investments in the establishmentof forestry plantations.

C. Economic Returns

6.06 iiie bpecific assumptions used in the calculation of economicrates of return are as follows:

(a) the cost of unskilled labor was valued at 70% of the officialwage rate to reflect the increasing employment opportunitiesin the Project area (as a result of the planned establishmentof the pulpmill at Mufindi and the pyrethrum processing plantat Mafinga in addition to tea and farming).

(b) local costs were converted to border prices by the use of astandard conversion factor of 0.55 which reflects the shadowexchange rate of the shilling (Tsh 15 = US$1.0);

(c) c.i.f. Dar - es - Salaam prices were used to value Project-simported inputs;

(d) although much of the land earmarked for the Project iscurrently not used (zero opportunity cost), a nominal valueof Tsh 50/ha has been included to reflect its future opportunitycost, given the long-term nature of the Project;

(e) 70% of capital costs for new vehicles, machinery, equipmentand spare parts was allocated to Phase II plantations and30% to Phase I plantations; while 60% of capital costs for

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administration, housing and building and fire protectionwere apportioned to Phase I and the rest 40% to Phase II;

(f) Project's3output was valued at imporS parity prices ofTsh 423/m for sawlogs and Tsh 159/m for pulpwood; theseprices were assumed constant throughout the Project period(Annex 2, Table T-2.8).

6.07 On the basis of the above assumptions the internal economic rateof return for Phase II incremental investments was estimated at 30% (Annex 2,Table T-2.3), while that for the overall afforestation program was 35% (Annex 2,Table T-2.5). These estimates do not include the benefits of reducing deple-tion of indigenous forests and other non-quantifiable, environmental benefitswhich the Project would have.

Sensitivity Analysis

6.08 Assuming an opportunity cost of capital of 12% per annum, about509% increase in costs, or almost 84% reduction in wood yields would berequired to render the afforestation program under Phase II unacceptable;while a 561% increase in costs or a 85% decline in yields would lead to arejection of the overall afforestation program in Sao Hill. Both Phase IIand the overall program would therefore be least sensitive to cost increasesor yield reductions. Delayed implementation of the Project by two yearswould reduce the internal economic rate of return to about 25%.

Project Risks

6.09 The major risk relates to the operations of the pulpmill. Sincethe pulpmill would constitute the major consumer of the Project's output, itsfailure to start-up on schedule or operate at full capacity would lead toconsiderable waste of forestry resources produced from early thinnings. Itwould, therefore, reduce the Project's benefits and it would also lead todistortions in the thinning regimes recommended under the Project and thiswould have some, though not serious, effects on the quality of sawlogs produced.Without the pulpmill demand, the economic rate of return of Phase II and theoverall afforestation program would be reduced to 25% and 29% respectively;and these would still be acceptable.

6.10 Another risk .for the Project would be, in view of the currenteconomic crisis in the country, the failure or delay by TWICO (which isdependent on Government funding for its major investments) to implement theplanned expansion in sawmilling facilities to absorb the sawlog output fromPhase II to meet projected growth in domestic demand for sawn timber. However,given the projected acute shortages of sawn timber in the country and thebleak prospects for timber imports as a result of foreign exchange constraint,TWICO and GOT have formulated, with Scandinavian technical assistance,a sound long-term investment program in the country's wood processing industrywhich includes expansion of sawnilling capacity in Sao Hill in the late 1980'sand early 1990's. As is the case for similar projects in Tanzania today,another risk is the problem of diesel fuel supply to the Project which

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has been recently reduced by nearly 50%. Further reduction of diesel supplieswould paralyze the Project-s afforestation and roads programs. However, sincethe Project gets its diesel supplies direct from an oil company and hasadequate storage capacity, it is better equipped to cope with the fluctuationsin the national supply of diesel fuel. The Project has been designed, as farpossible, to minimize the use of diesel fuel by establishing nurseries near toplanting sites (para 3.18); limiting the Project requirement for new vehiclesand equipment largely to replacement of existing stocks (para 3.20); andreducing vehicle use by almost 20% p.a. (para 3.03).

Employment Benefits

6.11 During Project implementation period (1982/83-1986/87) an annualtotal of nearly 450,000 mandays of unskilled labor would be required fornursery and field operations for establishing new plantations and maintenanceof existing plantations. Nearly 80% of the total labor requirement would befor the establishment of new plantations. The labor would come from villageswithin or neighboring the Project area and the townships of Mafinga andMufindi. No major problems in the labor supply are foreseen since villagersin Sao Hill area have generally demonstrated their desire to work for paid.jobs. Moreover, an analysis of the labor input in the Project area (Annex 5,Table T-5.1) indicates that the Project would not face labor supply problemsduring the critical months of planting (November-April). Surplus family laborwould be available to the Project throughout the year except in July and Augustwhen it is virtually fully utilized. The Project's current wage rate of Tsh 25per day for unskilled labor is about 15% above the wage paid by the competitors(tea estates, Southern Paper Mills, etc.) in the area. The Project would thusprovide a source of income, albeit temporary for the majority, to th- ruralpopulation in addition to their farm incomes. It would also provide permanentemployment for over 200 skilled persons. Equally important would be theProject's indirect impact on employment in related activities such as logging,transportation and wood processing.

Government Project Cash Flow

6.12 Assuming that the stumpage3rates charged foS sawlogs would beincreased from the existing Tsh 90/mi to Tsh 157.20/m , the Government'sincremental cash flow would be as presented in Annex 2, Table T-2.6. Duringthe first two years of Project implementation the negative net cash flowsamounting to Tsh 1.8 million would represent GOT's net contribution to Projectcosts. Without the Project Government contribution, largely in the form oflong-term recurrent commitments for further development of existing plantationsand debt servicing, would be substantial during the period 1982-87. Given thecurrent financial (budgetary) crisis in the country, it is doubtful whetherGOT would be able to meet such substantial amounts of recurrent expenditure.With the Project, Government Project cash flows would generally remain positivefrom the second year onwards due to (i) IDA contributions in the initial fiveyears of Project implementation and (ii) increased sales revenue from wood

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output of both Phase I and II after 1988. On the other hand, GovernmentProject cash flows would fluctuate from negative to positive every now andthen if Phase II were not implemented. The Project would thus, generatesubstantial cash surplus from net operating revenues of the Sao Hill plantations,and most of this cash would flow into the national Treasury. Since, however,these cash flows are based on stumpage rates which are about 75% above existingrates, the need to revise the latter upwards in order to generate cash surplusfor the national budget is obvious (para 5.14). Project revenues wouldadequately cover Bank Group debt servicing.

VII. ASSURANCES AND RECOMMENDATIONS

7.01 Assurances were obtained during negotiations that:

(a) the Government would assign personnel with appropriatequalifications and experience as local counterpart staff forthe internationally recruited Assistant Project Manager(Finance and Planning) Workshop Manager, and Work StudySpecialist (para 3.27);

(b) the Work-Study specialist would be appointed by December 31,1982; the selection, qualifications, experience and terms andconditions of employment of the internationally recruitedspecialists and consultants would be satisfactory to IDA andbe in accordance with Bank/IDA guidelines (para 3.29);

(c) the Govenrment would keep the position of Project Managerfilled at all times with a person whose qualifications andexperience are satisfactory to IDA (para 4.01);

(d) the Government would appoint and assign six Forest Assistantswith appropriate experience to the Project by December 31, 1982(para 4.02);

(e) a 5-year Working Plan for the Project based on the plantationinventory would be prepared by July 31, 1983, and thatProject management would implement such a Plan thereafterafter taking into account IDA's comments; that subsequentplantation inventories and work plans would be done everyfive years (para 4.02);

(f) project accounts would continue to be audited by the Govern-ment Auditor-General and that the accounting, auditing andreporting procedures including the preparation of a CompletionReport within six months of completion of disbursements,would be followed as outlined (para 4.09);

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(g) the Government would consult the Association before anyinstitutional arrangement for integrated management andharvesting of the forest resources in Sao Hill is decidedupon and such an institutional arrangement would have beenestablished before June 30, 1983 (para 5.06);

(h) the Government would complete a study on stumpage ratesbefore June 30, 1983; the terms of reference for the studywould be satisfactory to IDA; the Government would takeprompt measures as agreed with the Association based on thefindings of the study (para 5.14)

7.02 It would be a condition for disbursement against funds for thefire-fighting equipment that detailed proposals satisfactory to both theGovernment and the Association have been prepared by the FAO/TCP fire protec-tion specialist (para 3.22);

7.03 The recruitment and employment of the Assistant Project Manager(Finance and Planning) and the Workshop Manager would be a condition of Projecteffectiveness (para 3.28).

7.04 Subject to the above assurances and conditions, the Projectconstitutes a suitable basis for an IDA Credit of US$12.0 million.

TANZANIA ANNEX 1

SAO HILL FORESTRY PROJECT - PHASE II Table T - 1.1

SUMMARY OF PROJECT COSTS

--- (T.Sh. '000)---

Year 1 Year 2 Year 3 Year 4 Year 5 Total x of Total Foreign Exchange Foreign Exchange Local1982/83 1983/84 1984/85 1985/86 1986/87 Base Cost X Total Cost

Afforestation

Development of Existing Plantations 92.8 526.0 1,825.0 2,649.8 2,585.2 7,678.5 09 02 160.0 7,518.8Development of New Plantations 1/ 7,851.6 2,335.0 2,335.0 2,335.0 2,335.0 17,191.6 19 35 5,968.8 11,222.8Replanting clear-felled areas 489.3 410.4 390.4 390.4 390.4 2,070.9 02 15 318.7 1,752.2Nursery Operations 1,276.1 1,276.1 1,276.1 1,276.1 1,276.1 6,380.5 07 33 2,100.3 4,280.2Fire Protection 850.9 1,036.6 1,081.8 1,126.8 1,172.2 5,268.3 06 16 856.0 4,412.3

Subtotal 10,560.7 5,584.1 6,908.3 7,778.1 7,758.9 38,589.8 43 24 9,403.8 29,186.3

Civil Works

Roads - construction/maintenance 796.5 812.7 810.9 791.8 808.0 4,019.9 04 61 2,458.9 1,561.0Buildings and structures 1,761.9 1,880.1 956.8 956.8 698.3 6,253.9 07 30 1,876.1 4,377.8

Subtotal 2,558.4 2,692.8 1,767.7 1,748.6 1,506.3 10,273.8 11 42 4,335.0 5,938.8

Vehicles, Machinery and Equipment 7,335.8 4,916.8 82.8 - - 12,335.4 14 91 11,222.1 1,113.3 W

Project Administration

Staff Salaries and Wages 2,226.9 2,226.9 2,226.9 2,226.9 2,226.9 11,134.5 12 - - 11,134.5Headquarter - General Services Cost 612.3 528.6 546.1 455.0 564.0 2,706.0 03 40 1,071.8 1,634.2Vehicle Operating Cost 1,616.5 1,616.5 1,541.6 1,541.6 1,541.6 7,857.8 09 80 6,309.5 1,548.3

Subtotal 4,455.7 4,372.0 4,314.6 4,223.5 4,332.5 21,698.3 24 34 7,381.3 14,317.0

Technical Assistance and Training

Technical Assistance 2,170.5 1,485.0 1,560.0 561.0 495.0 6,271.5 07 100 6,271.5Staff Study Tours 49.5 49.5 49.5 49.5 49.5 247.5 01 100 247.5

Subtotal 2?2. 1,534.5 T,609.5 610.5 544.5 6,519.0 07 6,519.0

Total Base Cost 27,130.6 19,100.2 14,682.9 14,360.7 14,142.2 89,416.6 100 43 38,861.2 50,555.4

Contingencies - Physical 2,175.1 1,533.8 1,084.7 1,152.5 1,137.1 7,083.2 08 45 3,187.4 3,895.8- Price 2,810.9 3,877.6 4,742.5 6,917.2 8,798.9 27,147.1 31 32 8,687.1 18,460.0

Subtotal 4,986.0 5,411.4 5,827.2 8,069.7 9,936.0 34,230.3 39 35 11,874.5 22,355.8

Total Project Cost 32,116.6 24,511.6 20,510.1 22,430.4 24,078.2 123,646.9 139 41 50,735.7 72,911.2

1/ Including retroactive financing of T.Sh.5,516,600 covering expenditure between January 1, 1982 and Credit signing date.

TANZANIA ANNEX 1

SAO HILL FORESTRY PROJECT - PHASE II Table T - 1.2

DEVELOPMENT OF EXISTING PLANTATIONS - OPERATING COSTS

--- (T.Sh. '000)--

Year 1-1982/83 Year 2-1983/84 Year 3-1984/85 Year 4-1985/86 Year 5- 1986/87 Total Total Foreign Exchange LocalUnits Coat Units Cost Units Cost Units Cost Units Cost Units Coat Z Cost Cost(Ha) (Ha) (Ha) (Ha) (Ha)

Pruning (Labour)1st - 8 mandays/Ha 1/ 264 52.8 2,100 420.0 6,300 1,260.0 4,976 995.2 4,700 940.0 18,340 3,668.0 - - 3,668.02nd - 10 md/Ha - - 264 66.0 2,100 525.0 6,300 1,575.0 4,976 1,244.0 13,640 3,410.0 - - 3,410.03rd - 6 md/Ha - - - - - - 264 39.6 2,100 315.0 2,364 354.6 - - 354.6

Subtotal 64 52.8 2,364 486.0 8,400 1,785.0 11,540 2,609.8 11,776 2,499.0 34,344 7,432.6 T - 7,432.6

Marking for Thinnings (Labour)

Age 10 years - 2 md/Ha 264 13.2 264 13.2 13.2

Subtotal 264 13.2 264 T3.2 13.2

Coppice Reduction (Labour)

1977 Eucalyptus - 5 md/Ha - - - - _ _ - _ 200 25.0 200 25.0 - - 25.0 t

Measuring of Timber (000 m3

) - (000 a3) - -

Sales to Pulp mill - 20 md/1,000 m3

16 8.0 16 8.0 - _ 8.0

Hand Tools and Implements 2/ 40.0 40.0 40.0 40.0 40.0 200.0 80 160.0 40.0

Base Cost 92.8 526.0 1,825.0 2,649.8 2,585.2 7,678.8 02 160.0 7,518.8

Contingencies - Physical 9.3 52.6 182.5 265.0 258.5 767.9 02 16.0 751.9

102.1 578.6 2,007.5 2,914.8 2,843.7 8,446.7 02 176.0 8,270.7

- Price 13.0 163.1 882.7 1,786.5 2,290.4 5,135.7 01 45.1 5,090.6

Total Cost 115.1 741.7 2,890.2 4,701.3 5,134.1 13,582.4 01 221.1 13,361.3

1/ Cost per manday - T.Sh. 252/ Estimated at T.Sh. 40,000 per year.

- 39 -

TANZANI1AANg

SAO HlLL FORESTRY PROJECT - PHASE II Table T_ 1.3

DEVELOPMENT OF NEW PLANTATIONS 1/ - OPERATING COSTS

--- (T.Sh.'000)---

Unit Cost No, of Units Yeor 1 Year 2 Yeat 3 YeaT 4 YToo S Total Foreign Etoh.a.g LaolINPUTS Units (T.Sh) per yeor 1982/83 1983/84 1984/85 1985/86 1986/87 Cast 1 Cant Cant

('000) Cost Coat Toni Cant Cant

S-Y.~~~~~~~

Lobo-r mandoys 25 4.0 100.0 100.0 100.0 100.0 100.0 500.0 - - 500.0Materials - =i6n. T Sh - 10.0 10.0 10.0 10.0 10.0 10.0 50.0 85 42.5 7.5

Cronspona of Plants

Laboor sundays 25 2.0 50.0 50.0 50.0 50.0 50.0 250.0 - - 250.07 to tTrunk km 2.62 10.0 26.2 26.2 26.2 26.2 26.2 131.0 85 111.4 19.6Trayn t Sh - 18.0 18.0 18.0 18.0 18.0 L.0 90.0 80 72.0 18.0

Sitt Ponporation

Labour- Clrlarig and burn1i,g cadayn 25 4.0 100.0 100.0 100.0 100.0 100.0 500.0 - - 500.0- Breaking a_thills =andays 25 1.8 45.0 45.0 45.0 45.0 45.0 225.0 - - 225.0- --rraoSig nondayn 25 0.4 10.0 10.0 10.0 10.0 10.0 50.0 - - 50.0- Pitting tnodoyg 25 2.9 72.5 72.5 72.5 72.5 72.5 362.5 - - 362.5

-achines and I=pleen.ts

- Wheel Truct-r - 94 hp hra 83 3.9 323.7 323.7 323.7 323.7 323.7 1,618.5 77 1,246.3 372.2- Plough hrn 3 2.5 7.5 7.5 7.5 7.5 7.5 37.5 95 35.6 1.9- harrot hrn 4 1.4 5.6 5.6 5.6 5.6 5.6 28.0 95 26.6 1.4- Cr-cU-r Trooner/Ripper - 140 hp hkm 147 0.4 58.8 58.8 58.8 58.8 58.8 294.0 85 249.9 44.1

plonting

Labours- ckinkg =andays 25 1.3 32.5 32.5 32.5 32.5 32.5 162.5 - _ 162.5Pl-nting -ondays 25 12.4 310.0 310.0 310.0 310.0 310.0 1,550.0 - - 1,550.0F-rtili.tn Application =ondoys 25 2.0 50.0 50.0 50.0 50.0 50.0 250.0 - - 254.0

- Beating 07 mandayo 25 4.4 110.0 110.0 110.0 110.0 110.0 550.0 - - 550.0

'.-ateriala

- NP0 Ftrnilizer kg 3 80.0 240.0 240.0 240.0 240.0 240.0 1,200.0 85 1,020.0 100.0- b-tat kg 8 24.0 192.0 192.0 192.0 192.0 192.0 960.0 85 816.0 1.4.0

W-Sedi.g

Labour

- Year I ' odays 25 8.5 212.5 212.5 212.5 212.5 212.5 1,062.5 - - 1,062.5- Year 2 =andays 25 5.9 147.5 147.5 147.5 147.5 147.5 737.5 - - 737.5- Year 3 mondays 25 2.0 50.0 50.0 50.0 50.0 50.0 250.0 - - 250.0

oachiSee and I=pl-rents

- Wheel Tra-to-/gatr-o - 78 hp- YSar 1 hon 68 1.2 81.6 81.6 01.6 81.6 01.6 408.0 85 346.0 61.2- Tear 2 htn 68 1.2 81.6 81.6 81.6 81.6 81.6 408.0 85 346.8 61.2

Cant of Ens Plantation 2,330.0 2,535.0 2,335.0 2,335.0 2,335.0 11,675.0 37 4,313.0.,9361.1

Raretro tire Fi.nanoig 2/ 5,516.6 - - - - 5,516.6 30 1,654.9 3,061.7

Base Cost 7,851.6 2,335.0 2,335.0 2,335.0 2,335.0 17,191.6 35 5,968.8 11,222.8

Contingencien - Phyni-ol 692.2 233.5 233.5 233.5 233.5 1,626.2 35 596.8 1,029.4

8,543.8 2,568.5 2,568.5 2,568.5 2,568.5 18,817.03 35 6,565.6 12,252.2

- Prior 1,056.8 624.6 957.9 1,327.5 1,718.3 5,685.1 24 1,371.0 4,314.1

Total Cast 9,600.6 3,193.1 3,526.4 3,896.0 4,286.8 24,502.9 32 7,936.6 16,566.3

1/ [Na Plontattina at 2,000 Oa par yeoo. Totot 10,000 b,2/ Details of -ts tn hr f b.nanned rotroactiaely are giaen an Tablh T - 1.15.

TANZANIA ANNEX 1

SAO HILL FORESTRY PROj9CT - PHASE, I Tb.l T - 1.4

COST OF REPLANTING CLEARiFELLED PINE AREAS WITH E13XALYPTUS

--- (T.Sh. '000)---

U.ita -eded Cost/Unit Tear 1-1982/83 (160 ha) Yea-2 1983/84 (150 h.) Year 3-1984/85 (150 ha) Year 4-1985/86 (150 h.) Year 5-1986/87 (150 ha) Totals (760 h.) F-rign Exchange Localpe- ha TSh Foita Cost Un1ts Coat FaEtn Coast Units Cast (nit. Cast Oits Cat S Cast Coat

Tran..port of Plants

7 ton tr-c 5 kn 2.62 800 2.1 750 2.0 750 2.0 750 2.0 750 2.0 3,800 10.0 85 8.6 1.5Labr 1 ad 25.00 160 4.0 150 4.0 150 4.0 150 4.0 150 4.0 760 20.0 - - 20.0Tray7 OT.h - - 1.4 - 1.4 - 1.4 - 1.4 - 1.4 - 7.8 - - 7.0

Sit. Prpar-tion

Filing and b-rigtr-sh 20 ad 25.00 3,200 00.0 5,000 75.0 3,000 75.0 3,000 75.0 3,000 75.0 15.200 380.0 - - 380.0

PittIng 5 ad 25.00 800 20.0 750 19.0 750 19.0 750 19.0 750 19.0 3,800 96.0 - - 96.0

Plant ing

Staking 2 ad 25.00 320 8.0 300 7.0 300 7.0 300 7.0 300 7.0 1,520 36.0 - - 36.0Planting 6 ad 25.00 960 24.0 900 22.0 900 72.0 900 22.0 900 22.0 4.560 112.0 - - 112.0

Application of PattS-Olieec 5 od 25.00 000 20.0 750 19.0 750 19.0 750 19.0 750 19.0 3,800 96.0 - - 96.0

Repla-ong dead plants 3 ad 25.00 480 12.0 450 11.0 450 11.0 450 11.0 450 11.0 2,280 56.0 - - 56.0

NPKF PetElmer 200 kg 3.00 32,000 96.0 30,000 90.0 30.000 90.0 30.000 90.0 30.000 90.0 152.000 456.0 - - 456.0Borate 1/ 00 kg 9.00 9,600 76.9 9,000 72.0 9,000 72.0 9,000 72.0 9,000 72.0 45.600 364.8 85 310.1 54.7

Weeding

Year 1 0 ad 25.00 1, 280 32.0 1.200 30.0 1.200 30.0 1,200 30.0 1.200 30.0 6,080 152.0 - - 152.0Year 2 8 ad 25.00 4,240 106.0 2/ 1,280 32.0 1,200 30.0 1,200 30.0 1,200 30.0 9,120 22B.0 - -280

Tear 3 2 nd 25.00 300 7.0 3/ ~~~~~~ ~~1,060 26.0 320 0.0 300 9.0 300 8.0 2.280 57.0 - - 57.0

Bonn Cost 409.3 410.4 390.4 390.4 390.4 2.F070.9 15 318.7 T.752.2

CtlBaEn-PhysIcal 48.9 41.0 39.0 39.1 39.1 207.1 15 31.9 175.2

5~38.2 451.4 2Z'2T9, 4298.5 2,7-8.0 15 35-0.6 -1,-9 27-.

- fric 71.3 121.7 177.1 245.9 321.4 937.4 10 89.1 848.3

Total Coal 60-9.5 575-.1 606.5 675.4 7-50-.9 3.,215.4 1 3. ,7.

1/ Incladed In cane ongoIng trials indicate its pr.fitahility.2/l Of the 530 ha of tepl..ti.g pr-p-nd in- 1981/82.3/ Of the 1SO ha of replanting d..e in 1980/91.

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- -E8 -

TANZANIA ANNEX I

SAO HILL FORESTRY PROJECT - PHASE II Tahbl T - 1.6

FIRE PROTECTION - OPERATING COSTS

-- (T.Sh. '000)--

Unit Cost Year 1- 1982/83 Year 2- 1983/84 Year 3- 1984/85 Year 4- 1985/86 Year 5- 1986/87 Total Total Foreign Exchange LocalInputs Units (T.Sh) Units Cost Units Cost Units Cost Units Cost Units Cost Units Cost z Cost Cost

Labour

Manning of Fire Towers 1/ mandays 25 6,120 153.0 7,140 178.5 8,160 204.0 9,180 229.5 10,200 255.0 40,800 1,020.0 - - 1,020.0Fire Investigation Units 2/ mandays 25 14,700 367.5 14,700 367.5 14,700 367.5 14,700 367.5 14,700 367.5 73,500 1,837.5 - - 1,837.5Manning Control Centres 37 mandays 25 2,430 60.8 2,430 60.7 2,430 60.8 2,430 60.7 2,430 60.8 12,150 303.8 - - 303.8Patrols 4/ mandays 25 5,400 135.0 5,850 146.3 6,300 157.5 6,750 168.7 7,200 180.0 31,500 787.5 - - 787.5Burning of Fire Breaks 5/ mandays 25 2,560 64.0 2,720 68.0 2,880 72.0 3,040 76.0 3,200 80.0 14,400 360.0 - - 360.0

Subtotal 31,210 780.3 32,840 821.0 34,470 861.8 36,100 902.4 37,730 943.3 172,350 4,308.8 - - 4,308.8

Equipment

Tractor (98 hp) & Tow Grader 6/ hours 98 720 70.6 765 75.0 810 79.4 855 83.8 900 88.2 4,050 397.0 81 321.6 75.4

Maintenance of Fire FightingEquipment 7/ - - - - - 140.6 - 140.6 - 140.6 - 140.7 - 562.5 95 534.4 28.1

Subtotal 70.6 215.6 220.0 224.4 228.9 959.5 89 856.0 103.5

Base Cost 850.9 1,036.6 1,081.8 1,126.8 1,172.2 5,268.3 16 856.0 4,412.3

Contingencies - Physical 85.1 103.6 108.2 112.7 117.2 526.8 16 85.6 441.2

936.0 1,140.2 1,190.0 1,239.5 1,289.4 5,795.1 16 941.6 4,853.5

- Price 127.6 302.6 486.8 703.9 958.1 2,579.0 11 270.9 2,308.1

Total Coot 1,063.6 --- 1,676.8 1,943.4 2,247.5 - 8,374.1 14 1,212.5 7161.6

1/ Fron the existing 5, the number of fire towers would increae by one each year. Mandays required perfire tower - (5 months x 30 days x 4 men) plus (7 months x 30 days x 2 men) = 1,020 mandays.

2/ Mandays for fire investigation - (5 months x 30 days x 70 mec) plus (7 months x 30 days x 20 men)

- 14,700 nd/year throughout the five years.3/ Mandays for fire control centres - (5 months x 30 days x 4 men) plus (7 months x 30 days x 1 man)

. 810 mandays per centre per year. There will be three such centres.4/ Mandays for patrols in Year I - 12 months x 30 days x 15 men - 5,400 ads. This increases by 450 macdays

per year fron Year 2 to Year 5.5/ Mandays for burning fire breaks in Year 1 - 32 Ha x 10 km per 1,000 ha x 8 md/km - 2,560 md.

This would increase in proportion to the 2,000 Ha added each year upto Year 5.6/ Tractor Usage - 6 hours per day x 20 days per month a 3 months = 720 hrs for Year 1. Tbhi would increase

in proportion to the burning of fire breaks.

7/ 45% of the capital cost is provided for spare parts. Another 15% included under capital cost to coverpurchase of initial stock of spareparts.

TANZANIA ANNEX I

SAO HILL FORESTRY PROJECT - PhASE II Table T - 1.7

PLANTATION ROADS AND TRACKS - CONSTRUCTION AND MAINTENANCE COSTS

--- (T.Sh.'000)--

Unit Year I - 1982/83 Year 2 - 1983/84 Year 3 - 1984/85 Year 4 - 1985/86 Year 5 - 1986/87 Total Foreign Exchange Local CostCost Units Cost Units Cost Units Cost Units Cost Units Cost Units Cost Z Cost

Construction

Upgrading to primary roads 3.7 24 km 88.8 24 km 88.8 24 km 88.8 24 km 88.8 24 km 88.8 120 km 444.0 80 355.2 88.8New Secondary Roads 1/ 2.5 32 km 80.0 32 km 80.0 32 km 80.0 32 km 80.0 32 km 80.0 160 km 400.0 80 320.0 80.0Tracks 2/ 0.9 145 km 130.5 145 km 130.5 145 km 130.5 145 km 130.5 145 km 130.5 725 km 652.5 80 522.0 130.5Culverts 3/ 8.1 35 nos 283.5 35 nos 283.5 35 nos 283.5 35 nos 283.5 35 nos 283.5 175 nos 1,417.5 50 708.8 708.7Bridges - upto 3 m span 4/ 17.6 4 km 70.4 4 km 70.4 3 km 52.8 3 km 52.8 3 km 52.8 17 km 299.2 50 149.6 149.6Bridges - over 3 m span 5/ 35.3 1 km 35.3 1 35.3 1 km 35.3 - _ - - 3 km 105.9 50 52.9 53.0

Subtotal - - 688.5 - 688.5 - 670.9 - 635.6 - 635.6 - 3,319.1 64 2,108.5 1,210.6

Maintenance 6/

Existing Roads and Tracks

Roads 0.6 140 km 84.0 140 km 84.0 140 km 84.0 140 km 84.0 140 km 84.0. 700 km 420.0 50 210.0 210.0Tracks 0.2 120 km 24.0 120 km 24.0 120 km 24.0 120 km 24.0 120 km 24.0 600 km 120.0 50 60.0 60.0

Phase II Roads and Tracks

Roads 0.6 - - 11 km 6.6 21 km 12.6 32 km 19.2 43 km 25.8 107 km 64.2 50 32.1 32.1Tracks 0.2 - - 48 km 9.6 97 km 19.4 145 km 29.0 193 km 38.6 483 km 96.6 50 48.3 48.3

Subtotal - 26*i 108.0 319 km 124.2 Tf7 k m 437 km 156.2 496 km 172.4 T1, 890km 7 0.8 0 50.4 350.47

Base Cost 796.5 812.7 810.9 791.8 808.0 4,019.9 61 2,458.9 1,561.0

Contingencies - Physical 79.6 81.3 81.1 79.2 80.8 402.0 61 245.9 156.1

876.1 894.0 892.0 871.0 888.8 4,421.9 61 2,704.8 1,717.1- Price 93.1 191.1 292.0 395.5 512.7 1,484.4 47 690.4 794.0

Total Cost 969.2 1,085.1 1,184.0 1,266.5 1,401.5 5,906.3 57 3,395.2 2,511.1

1/ 15 km/ha in highland area., 18 km/Ha in lowland area2/ 65 km of tracks along fire breaks (includes backlog from Phase I) and 80 km of plantation tracks (40 km/Ha)3/ 1 per km of upgraded road and I per 3 km of secondary roads4/ 17 such bridges over 5 years for the new secondary roads5/ 3 such bridges over 5 years for the new secondary roads6/ One third of roads and tracks will be maintained each year, beginning in the year after construction.

TANZANIA ANNEX I

SAO HILL FORESTRY PROJECT - PHASE II Table T - 1.8

CAPITAL COSTS OF BUILDINGS AND STRUCTURES

--- (T.Shi '00)---

Unit Year I - 1982/83 Year 2 - 1983/84 Year 3 - 1984/85 Year 4 - 1985/86 Year 5 - 1986/87 Total Foreign Exchange Local Cost

Cost Units Cost Units Cost Units Cost Units Cost Units Cost Units Cost 1 Cost

Residential Buildings 1/

Type A - Senior Officers 154.0 2 308.0 2 308.0 2 308.2 2 308.0 2 308.0 10 1,540.0 30 462.0 1,078.0

Type B - Middle Level Officers 112.0 1 112.0 1 112.0 - - - - - - 2 224.0 30 67.2 156.8

Type C - Junior Staff 67.3 6 403.8 5 336.5 5 336.5 5 336.5 5 336.5 26 1,749.8 30 524.9 1,224.9

Type D - Minor Grades 51.7 5 258.5 5 258.5 5 258.5 5 258.5 - - 20 1,034.0 30 310.2 723.8

Subtotal 14 1,082.3 T13 1,015.0 12 903. 12 903.0 7 644.5 SW 4573T.8 3 1,364.3 3,183.5

Other Buildings and Structures

Divisional Offices 99.1 1 99.1 - - - - - - _ _ 1 99.1 30 29.7 69.4

Nursery Sheds 53.8 1 53.8 2 107.6 - - - - - - 3 161.4 30 48.4 113.0

Fire Look-out Towers 53.8 1 53.8 1 53.8 1 53.8 1 53.8 1 53.8 5 269.0 30 80.7 188.3

Water Supply Systems 80.7 2 161.4 1 80.7 - - - - - - 3 242.1 30 72.6 169.5

Irrigation System - Nurseries 150.1 1 150.1 2 300.2 - - - - - - 3 450.3 30 135.1 315.2

Construction of Nursery Sites 161.4 1 161.4 2 322.8 - -- - 3 484.2 30 145.3 338.9

Subtotal T 679.6 T 1 8T T 5T. 18 1,706.1 519

Base Cost 1,761.9 1,880.1 956.8 956.8 698.3 - 6,253.9 30 1,876.1 4,377.8

Contingencies - Physical 176.1 188.0 95.7 95.7 69.8 - 625.3 30 187.6 437.7

1,938.0 2,068.1 1,052.5 1,052.5 768. - 6,879.2 30 2,063.7 4,815.5

- Price 239.3 519.9 405.5 562.7 533.6 - 2,261.0 30 678.3 1,582.7

Total Cost 2,177.3 2,588.0 1,458.0 1,615.2 1,301.7 - 9,140.2 30 2,742.0 6,398.2

1/ These are based on actual staff strength after considering existing staff houses.

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a a- a a- a a- a-a-a-a-a- a- a-c a-ca-a-a-a-a- I-Ina-a a a a a- a- a- a a- a-a-a-a- a- a-a-a-a-Ca-a- Oa-a-Ca- a- asa a-a a a- -a IC a- 'Ca-a-a-a Ia-a-a a- a- a- a- a- a-a-a-a-a a- a-a-a-a-a-a-a-a-a-a-a-a-a-a-a- a-

aa a-a a- Ha a a a- aas a-a a Caa as - - I a- a- a--I a Ic ca-a- Ia-Iaa-a-a-a-a-a- III a- a-a

a- C aa -C a-a- a-a- a- a- I a a- a- a- a-a-a-a-a-a-IC a-a-a-ca-a-a-a CIa-a' a-a- a-s a-I a-a- a-a- a- -$ a a- a- a- a- a-a-a-ca- a- a-a-a-a-na-a-a-a-a-a-a- a- Ca-Ca a a a- I a-a- a-a- a- a-I a- I a- a- a- a-a-I Ia- a-a-a-a-a-a-a-Ia-a-a-a-a-a-a-a-Ill a-a-a- aC a-a .j . . . .asa . a-a a a-a- a-a- a- a- a- a- a- a- - a-a- a- a- a-a- a- a-a-a- a-a-a-a-a-a-a-a- a- a-

Ca- C.

a a . a- HCa Ca- Ca a-Ca-C a- a- I II I I I I I II la-a-I II Ia- II C-a-I a-a-a-a-a-a- I I Ia-a-.- a- a-a-

55 a-a- aCaC Ca- a-C a- a- a- a-]

as aa a- a-a- a-a- a- a- a-I -, a- a- a a-a,a- a-a- a-a- a-�S a-as a a- a- a-a- a-a- I a- a-f a-I a- a-a-a-a-a- a-a-a- a- Ca- a-a-C Ca 5C . . 'I . -a- asa Ca- aC a- a-a- a-a- a- a- I I I I I Ia-a-I a-I a- a-a-la-a-a-a-ca-Il Ia-a-a- a- Ca- a-aa- a-C aa- - a-a- a-a- a- a- a-I a-I a- a-a-a-a-a-a- a-a- a-

a- a I . a-a- ba a-b a-a-a- a- a-

a- ag a-� aa-C Ca- C I I� I I a- I I II Sill II II I IIIIIIIIIIIIIIIII a-Ca- C� Ca aa-C a-. a a- a

a Ca- a-CC H Ca a-Ca- CC a- -I asIa� a-C -

a-a- a- a- I I c I I II hIll I, II I IIIIIIIIIIIIIIIII

a- a a a- C

a-2��Ca- C a-

C C C I II I I I I I I I 11111 II II II IIIlIlIlIIllIII I a-- Ca- CC .4

l.aa a Ca- C a- I IIIIIIlIIII I I I I II 11111 II II IIIIIIIIIIIIIIIII C CC5 C a-

I II I I I I I I I 11111 I Il I IIIIIIIIIIIIIIIII a-

a- a-I I Ill hIll I I I I I I I 11111 II II Ii IIIIIIIIIIIIIIII a-

I a- a- CI II a- a- a- a- a- II a-a-a-a-a- II Ia- II a-Ia-a- a-a-a-a-a-ca--a-a-a-a-c a-

a- a- a- a- a- - a- a-I a- a-.1 a- -

a-a-a-a-a- a- a- a- a- a- - -al a-a-a- a- a- at a- a- a a- a-t ca-a-a-a-ta-a-a-a- 0a- a-a- a-a- a-a-a- a- a- a- C. a-I a-a-at-a. a-a-C� -ca-a-a-a-a-a-a-a-a-a- a-a-a-a-a- aa- a-a- a-a- a- a- a- a- a- a- a- a

1

a-a- a- aa- a-a- a-a- a- a- a- a- a- a- Ca-a-a-a-a-a- a-a-a-a-a-a-a-a-a-a-a-a-a-a-a- a-

� � CC hC� C IC lb IC I� CIC'C'CIC CC a- a- a- a- a- a- a- a- a- a- a- a-

a- - a- a- a- a- a- - a- a- a- a-

cc a a- a- a- a a- a- a- ca-a-a-a- a- a-ca-ca-a-a-ca-a-a-a- a-a-a-ca-a- a- a- Ha' -a-a-a-a- a--a-a- a-a-a-a-a-a- a- a-a-a-a-a-ca-a-a-a- a C

a- a-

a- a- a- a- a- a- a- I a-a-a-a- a- a-a-a-a-a-a-a-a-a-a-a-a-ca-a-a-a-a- a- a- � a- a- a- a- a- a- I a-a-a-a-a- a-a-a- a-a-a-a- a-a- a-a-a-a-a-a-a-a-a-a- a-4

a-a-a-a-a-a-Ia-a-a- a- a- a-ia-a-a-a-a- a-a-a-a-a-a-a-a-ca-a-a-a-a-a- a-a-a-a- a-

- 46 -

TANZANI4A ANNEX 1

SAO HILL FORESTRY PROJECT - PHASE II Table T - 1.10

PROJErT ADMINISTRATION - LOCAL STAFF SALARIES AND WAXES 1/

-(T.Sh. 000)--

N.S. URit Cast Year I Year 2 Year 3 Year 4 YSar 5 Total2/ (per aeram) 1982/83 1983/84 1984/85 1985/86 1986/87 (100%

Lasal Cast)

Fr.jeot M..ag r (Chief Farcest OfiCer) I 50.8 50.8 50.8 50.8 50.8 50.8 254.0Aket. Prejert Ma.a. r (Sr. Frcest OffiEer) 1 48.6 48.6 48.6 48.6 48.6 48.6 243.0

Plartastia Ma.a.geeent

Diiisi..al Fla-tatita Offi or- 3 30.4 91.2 91.2 91.2 91.2 91.2 456.0

AfC fare tee ita

Aest. Farcst Officers 5 16.9 84.5 84.5 84.5 84.5 84.5 422.5FarteS Aseietaste 3/ 15 10.7 160.5 160.5 160.5 160.5 160.5 802.5Fartes Atterdeere 30 7.6 228.0 228.0 228.0 228.0 228.0 1,140.0Saco= - Iahbarr 60 7.2 432.0 432.0 432.0 432.0 432.0 2,160.0Dria rs and Operatsar 6 7.9 47.4 47.4 47.4 47.4 47.4 237.0

Sab-tatal 116 952.4 952.4 952.4 952.4 952.4 4,762.0

Fire P-rtectian

FPcrst Officer 1 30.4 30.4 30.4 30.4 30.4 30.4 152.0Asst. Ferret OMficer 1 16.9 16.9 16.9 16.9 16.9 16.9 64.5Farest Assistasts 3 10.7 32.1 32.1 32.1 32.1 32.1 160.5Farest Atteada-t 1 7.6 7.6 7.6 7.6 7.6 7.6 38.0Dcioae. 3 7.9 23.7 23.7 23.7 23.7 23.7 118.5

Sabt-aal 9 110.7 110.7 110.7 110.7 110.7 553.5

Research

S-ora Forest Officer 1 47.0 47.0 47.0 47.0 47.0 47.0 235.0AstisEatt Foreet Offi-er 1 16.9 16.9 16.9 16.9 16.9 16.9 84.5Forest Aeeissoat 1 10.7 10.7 10.7 10.7 10.7 10.7 53.5

Subtotal 3 74.6 74.6 74.6 74.6 74.6 373.0

CGivi Works

Cioil Isgineer 1 48.6 48.6 48.6 48.6 40.6 40.6 243.0C.ol Works Forceea 3/ 1 25.7 77.1 77.1 77.1 77.1 77.1 385.5Roildisg Arttiars 16 7.8 124.8 124.8 124.8 124.8 124.8 624.0Driosr r ad op-ratere 3 7.9 23.7 23.7 23.7 23.7 23.7 118.5

Sabtstal 23 274.2 274.2 274.2 274.2 274.2 1,371.0

AOoO...s aCd Fisass

Sr. A-coaata-t 1 24.7 24.7 24.7 24.7 24.7 24.7 123.5Aooa..taet 1 22.1 22.1 22.1 22.1 22.1 22.1 110.5Accouste A-sieta-ts 2 11.0 22.0 22.0 22.0 22.0 22.0 110.0Procure. nt/Suppliee Officers 3/ 2 28.2 56.4 56.4 56.4 56.4 56.4 282.0Acounota Clerks 4 7.6 30.4 30.4 30.4 30.4 30.4 152.0Stares Clarke 4 7.6 30.4 30.4 30.4 30.4 30.4 152.0Typirt 1 7.2 7.2 7.2 7.2 7.2 7.2 36.0DSio-re 2 7.9 15.8 15.8 15.8 15.8 15.8 79.0

Subtotal 17 209.0 209.0 209.0 209.0 209.0 1,045.0

Adsiaittcatioa

Office Sup roisar 1 29.1 29.1 29.1 29.1 29.1 29.1 145.5Rgistrty Clerk 1 7.6 7.0 7.6 7.6 7.6 7.6 38.0Typist 1 7.6 7.6 7.6 7.6 7.6 7.6 38.0REeeptianilt 1 7.6 7.6 7.6 7.6 7.6 38.0Rucal n diooI Aid 1 15.6 15.6 15.6 6 15 15.6 78.0N-rs /Midvif 1 7.2 7.2 7.2 7.2 7.2 7.2 36.0

2 7.9 15.8 15.8 15.8 15.8 15.8 79.0

Sabtatal 8 90.5 90.5 90.3 90.5 90.5 452.5

Work Stady and Casttie

Forces Ottioe 1 30.4 30.4 30.4 30.4 30.4 30.4 152.0Asst. Forert Officer 1 16.9 16.9 16.9 16.9 16.9 16.9 64.5Cost A-o-taa 3/ 1 24.7 24.7 24.7 24.7 24.7 24.7 123.5

Shbt-aI 3 72.0 72.0 72.0 72.0 72.0 360.0

Saroey and Work Pla

Forest Officers 2 30.4 60.8 60.8 60.0 60.0 60.0 304.0Acst. Forest 0f0icece 2 16.9 33.8 33.8 33.8 33.0 33.0 169.0For t Aaeistoane 2 20.7 21.4 21.4 21.4 21.4 21.4 107.0

Subttotl 6 116.0 116.0 116.0 116.0 116.0 580.0

Aeet. Warkehap Mata ec 3/ 1 48.6 48.6 48.6 48.6 40.6 48.6 243.0Forteas 1 23.7 25.7 25.7 25.7 25.7 25.7 128.5Meohatios 6 7.8 46.8 44.8 46.0 46.8 46.8 234.8Dri'v,rs2 7.9 13.i 15.8 15.8 15.8 15.8 79.0

Subtota1 10 136.9 136.9 136.9 136.9 136.9 684.5

Saee Toes 200 2,226.9 2,226.9 2,226.9 2,226.9 2,226.8 11,434.5

Tota1 Coat 2,226.9 2,226.9 2,226.8 2,226.9 2,226.9 11.t34.5

/ Salaries of sh thr repatriate staff (all -acemental) are included aeder id chnhicl assistance.2/ The pre5ect staff sabliehmear es ta r_ a I.onsetaot thraoaha-e th prajecs period.7/ The fallowig ar inoreeata1 staff far Phae TI:

F- ct Assieso.se 6

Praocers nt Offic-r 1

Cast Aoce-tast lAlst. Warkehap Mlaeag-r ICivil Works For=ese 3

TANZANIA ANNEX I

SAO HILL FORESTRY PROJECT - PHASE II Table T_- 1.11

HEADQUARTERS - GENERAL SERVICES COST

--- (T.Sh.'000)---

Year 1 Year 2 Year 3 Year 4 Year 5 Total Cost Foreign Exchange Local Cost1982/83 1983/84 1984/85 1985/86 1986/87 % Cost

Office Supplies 100.0 100.0 100.0 100.0 100.0 500.0 50 250.0 250.0

Generator Operating Cost 60.0 60.0 60.0 60.0 60.0 300.0 90 270.0 30.0

Staff Subsistence and LeaveTravel Allowances 100.0 100.0 100.0 100.0 100.0 500.0 - - 500.0

Workshop Tools and Equipment 100.0 100.0 - - - 200.0 90 180.0 20.0

Protective Clothing & Uniforms 100.0 - 100.0 - 100.0 300.0 50 150.0 150.0

Buildings Maintenance 102.3 118.6 136.1 145.0 154.0 656.0 30 196.8 459.2

Station Upkeep 50.0 50.0 50.0 50.0 50.0 250.0 10 25.0 225.0

Base Cost 612.3 528.6 546.1 455.0 564.0 2,706.0 40 1,071.8 1,634.2Contingencies - Physical 61.2 52.9 54.6 45.5 56.4 270.6 40 107.2 163.4673.5 581.5 600.7 500.5 620.4 2,976.6 40 1,179.0 1,797.6

- Price 77.4 136.1 223.9 262.8 415.9 1,116.1 75 836.7 279.4

Total Cost 750.9 717.6 824.6 763.3 1,036.3 4,092.7 49 2,015.7 2,077.0

TANZANIA

SAO HILL FORESTRY PROJECT - PHASE II Table T - 1.12

PROJECT ADMINISTRATION - VEHICLE OPERATING COSTS

--- (T.Sh.'000)--

Vehicle Type Unit Year 1 - 1982/83 Year 2 - 1983/84 Year 3 - 1984/85 Year 4 - 1985/86 Year 5 - 1986/87 Total Foreign Exchange LocalCost Units Cost Units Cost Units Cost Units Cost Units Cost Cost I Cost Cost

Existing Fleet 1/

Minibus - 28 seater 54.9 1 54.9 1 54.9 1 54.9 1 54.9 1 54.9 274.5 85 233.3 41.24-Wheel Drive - Hard Top 56.4 1 56.4 - - - - ' - - - 56.4 77 43.4 13.04-Wheel Drive - Station Wagon 57.4 1 57.4 - - - - - - - - 57.4 77 44.2 13.24-Wheel Drive - LWB - Pick-Up 55.9 3 167.7 - - - - - - - - 167.7 77 129.1 38.6Light Pick-Up 33.1 - - - - - - - - - - - 77 - -

Saloon Car 33.4 1 33.4 1 33.4 - - - - - - 66.8 77 51.4 15.4Trucks - 7 tons, Flat Bed 62.9 2 125.8 - - - - - - - - 125.8 85 106.9 18.9Trucks - 7 tons, Tipper 74.9 2 149.8 1 74.9 - - - _ _ - 224.7 85 191.0 33.7Trucks - 10 tons, Flat Bed 84.7 2 169.4 - - - - - - - - 169.4 85 144.0 25.4Tractor (78 HP) 3/ 96.0 1 96.0 1 96.0 1 96.0 1 96.0 1 96;O 480.0 77 369.6 110.4Trailer (5 tons) 3/ 4.6 1 4.6 - - - - - - - - 4.6 85 3.9 0.7Motor Cycles 4.2 8 33.6 - - - - - - - - 33.6 77 25.9 7.7

Subtotal 949.0 259.2 150.9 150.9 150.9 1,660.9 81 1,342.7 318.20.

New Purchases 2/

4-Wheel Drive - Hard Top 56.4 1 56.4 2 112.8 2 112.8 2 112.8 2 112.8 507.6 77 390.9 116.74-Wheel Drive - Station Wagon 57.4 - - 1 57.4 1 57.4 1 57.4 1 57.4 229.6 77 176.8 52.84-Wheel Drive - LWB - Pick-Up 55.9 6 335.4 9 503.1 9 503.1 9 503.1 9 503.1 2,347.8 77 1,807.8 540.0Light Pick-Ups 33.1 2 66.2 2 66.2 2 66.2 2 66.2 2 66.2 331.0 77 254.9 76.1Saloon Car 33.4 - - - - 1 33.4 1 33.4 1 33.4 100.2 77 77.2 23.0Trucks - 7 ton - Flat Bed 62.9 3 188.7 5 314.5 5 314.5 5 314.5 5 314.5 1,446.7 85 1,229.7 217.0Trucks - 7 ton - Tipper 74.9 - - 1 74.9 1 74.9 1 74.9 1 74.9 299.6 85 254.7 44.9Trucks - 10 ton - Flat Bed 84.7 - - 2 169.4 2 169.4 2 169.4 2 169.4 677.6 85 576.0 101.6Tractor (78 hp) 3/ 96.0 - - - - - - - - - - - 77 - -Trailer (5 ton) 3/ 4.6 - - 1 4.6 1 4.6 1 4.6 1 4.6 18.4 85 15.6 2.8Bicycles 0.2 20 4.0 20 4.0 20 4.0 20 4.0 20 4.0 20.0 77 15.0 5.0Motor Cycles 4.2 4 16.8 12 50.4 12 50.4 12 50.4 12 50.4 218.4 77 168.2 50.2

Subtotal 667.5 1,357.3 1,390.7 1,390.7 1,390.7 6,196.9 80 4,966.8 1,230.1

Base Cost 1,616.5 1,616.5 1,541.6 1,541.6 1,541.6 7,857.8' 80 6,309.5 1,548.3Contingencies - Physical 161.6 161.6 154.2 154.2 154.2 785.8 80 630.9 154.9

- Price 170.3 338.1 493.8 679.8 854.9 2,536.9 69 1,760.7 776.2

Total Cost 1,948.4 2,116.2 2,189.6 2,375.6 2,550.7 11,180.5 78 8,701.1 2,479.4

1/ Purchased under Phase I and used in Phase II2/ Replacements and additions in Phase II3/ One Tractor/Trailer to work on general transport on a full time basis.

Operating Cost of all other Tractors/Trailers included under afforestation.

- 49 -

TANZANIA ANNEX I

SAO HILL FORESTRY PROJECT - PHASE II

TECHNICAL ASSISTANCE Table T - 1.13

(T.Sh.'000)-----

Unit Cost(l) Year 1 Year 2 Year 3 Year 4 Year 5 Total Cost1982/83 1983/84 1984/85 1985/86 1986/87 (100% foreign)

A. Long Term

1. Financial Controller 495.0 495.0 495.0 495.0 - - 1,485.0

2. Mechanical Workshop Manager 495.0 495.0 495.0 495.0 495.0 495.0 2,475.0

3. Work Study Officer 495.0 495.0 495.0 495.0 - - 1,485.0

Subtotal , 1,485.0 1,485.0 1,485.0 495.0 495.0 5,445.0

B. Short Term (Consultancy Service/Study)

1. Fire Protection - 2 m.m. -- Review 49.5 49.5 - - 49.5 - 99.0

-- Report 16.5 16.5 - - 16.5 - 33.0

2. Stumpage Rates3 man months - Review 49.5 148.5 - - - - 148.5

- Report 16.5 16.5 - - - - 16.5

3. National Village AfforestationProgram (6 m.m.) -- Review 49.5 297.0 - - - - 297.0

= Report 16.5 16.5 - - - - 16.5

4. Tree Physiology - Dieback,Disease (I m.m.) - Review & Report 66.0 66.0 - - - - 66.0

5. Laboratory Services 75.0 - 75.0 - 150.0

Subtotal 685.5 - 75.0 66.0 - 826.6

Base Cost 2,170.5 1,485.0 1,560.0 561.0 495.0 6,271.5

Contingencies - Physical - - - - - -

Price 90.5 146.5 252.2 194.7 211.8 895.7

Total Cost 2,261.0 1,631.5 1,812.2 755.7 706.8 7,167.2

1/ Annual cost of an expatriate employee is estimated at $60,000- at T.Sh. 8.25/$1 = T.Sh. 495,000

Cost of hiring consultants is estimated at $6,000 per man aonth

- at T.Sh. 8.25/$l = T.Sh. 49,500Cost of Consultant's Reports estimated at $2,000 - T.Sh. 16,500.

TANZANIA ANNEX 1

SAO HILL FORESTRY PROJECT - PHASE II Table T - 1.14

STAFF STUDY TOURS

---(T.Sh.'000)---

Unit Cost 1/ Year 1 Year 2 Year 3 Year 4 Year 5 Total Cost1982/83 1983/84 1984/85 1985/86 1986/87 (10OX Foreign)

Two staff members - on visits toforestry projects abroad - (1 month each) 24.75 49.5 49.5 49.5 49.5 49.5 247.5

____ 'nBase Cost 49.5 49.5 49.5 49.5 49.5 247.5 °

,Contingencies - Physical - - - - - -- Price 4.2 8.2 12.5 17.2 21.2 63.3

Total Cost 53.7 57.7 62.0 66.7 70.7 310.8

1/ Cost of Passage estimated - $1,000Subsistence - 30 days at $60/day - $1,800Clothing etc, allowance - $ 200Total cost per person/month $3,000Converted at T.Sh.8.25/$1 - T.Sh 24,750

ANNEX ,

- 51 -Table T - 1.15

TANZANIA

SAO Hill Forestry Project - Phase II

Retroactive Financing(T.Sh. '000)

(1) Planting of Existing Seedlings: F.E.%

800 Ha - New Planting - Ecalyptus (Transport, Planting & Weeding) 1,505.0 37

530 Ha - Replanting 457.0 37

3780 Ha - Beating Up 195.0 37

Sub-Total = 2,157.0 37

(2) Preparation for Year 1 - 1982/83:

Nursery Costs 569.0 33

Land Preparation 45.0 37

Sub-Total = 614.0 33

(3) Plantation Development Cost:

Weeding (1980/81 Planted Area) 583.0 02

Pruning, Marking for Thinnings & Timber Measuring 39.0 02

Fire Protection 453.0 16

Road Maintenance 50.0 50

Research and Trial Plots 18.0 37

Sub-Total 1,143.0 10

(4) Project Administration:

Existing Local Staff Salaries & Wages 930.0 --

Motor Vehicles Operating Cost 622.6 80

HQ - General Services Cost 50.0 40

Sub-Total = 1,602.6 32

(5) Base Cost 5.516.6 30

(6) Contingencies - Physical (10% of 5,516.8 less 930.0) 458.7 30

- Price (1,654.9 @ .0850%) + (3,210.6 @ .14%) + 10% 649.2 24

1,107.9 26

(7) Total Cost 6,624.5 29

TANZANIA Annex 2

SAO HILL FORESTRY PROJECT - PHASE II Table T - 2.1

PINE PER HECTARE MODELS

--- (TSh/Ha)--

Financial Economic

Year Establishment Maintenance Total Benefits Establishment Maintenance Total BenefitsCosts Costs Costs Costs Costs Costs

1 3,373 170 3,440 3,338 122 3,460

2 61 170 231 49 122 1713 25 170 195 20 122 1424 170 170 122 122 1

5 200 170 370 161 122 283 >

6 328 170 498 262 122 3847 170 170 122 122

8 150 170 320 120 122 2429 170 170 122 12210 70 170 240 2,200 56 122 178 7,95911 78 170 248 62 122 18412 170 170 122 12213 170 170 64 122 18614 80 170 250 6,366 122 122 17,67515 170 170 122 12216 78 170 248 62 122 18617 170 170 122 12218 88 170 258 9,235 70 122 192 26,09419 170 170 122 12220 170 170 122 12221 78 170 248 62 122 18422 170 170 122 12223 170 170 122 12224 170 170 122 12225 100 170 270 26,330 80 122 202 73,312

- 53 -

Annex 2

Table T - 2. 2

TANZANIA

SAO HILL FORESTRY PROJECT - PHASE II

EUCALYPTUS PER HEC TARE MODEL

--- t(TShlHa)--

Financial Economic

Year Establishment Maintenance Total Benefits Establishment Maintenance Total BenefitsCosts Costs Costs Costs Costs Costs

1 4,927 167 5,094 3,942 120 4,0622 329 170 499 263 122 2853 25 170 195 20 122 1424 170 170 122 1225 170 170 122 1226 78 170 248 62 122 1847 197 170 367 158 122 2808 170 170 8,014 122 122 28,6209 170 170 122 122

10 170 170 122 12211 78 170 248 62 122 18412 170 170 122 12213 170 170 122 12214 170 170 122 12215 170 170 122 12216 275 170 445 8,014 220 122 342 28,62017 170 170 122 12218 170 170 122 12219 170 170 122 12220 170 170 122 12221 78 170 248 20 122 14222 170 170 122 12223 170 170 122 12224 197 170 367 8,014 158 122 280 28,62025 78 170 248 20 122 14226 170 170 122 12727 170 170 122 12228 170 170 122 12229 170 170 122 12230 78 170 248 20 122 14231 170 170 122 12232 170 170 8,014 122 122 28,620

- 54 -

Annex 2

Table T 2.3

TANZANIA

SAO HILL FORESTRY PROJECT - PHASE II

PHASE II AFFORESTATION PROGRAM: FINANCIAL AND ECONOMIC RATES OF RETURN

--- (TShs.'000)---

Financial Economic

Year Incremental Incremental Net Incremental Incremental Incremental Net Incremental

Costs Benefits Benefits Costs Benefits Benefits

1 7,054 (7,054) 5,625 (5,625)2 7,111 (7,111) 5,617 (5,617)3 7,150 (7,150) 5,648 (5,648)4 7,184 (7,184) 5,675 (5,675)5 7,250 (7,250) 5,727 (5,727)6 2,530 (2,530) 2,000 (2,000)7 1,780 (1,780) 1,406 (1,406)8 1,390 4,888 3,498 1,098 16,028 14,9309 1,320 4,407 3,087 1,043 15,741 14,698

10 452 7,927 7,475 357 22,461 22,10411 340 7,927 7,587 269 28,450 28,18112 340 7,927 7,587 269 33,000 32,73113 340 11,066 10,726 370 42,540 42,17014 468 13,706 13,238 269 29,820 29,55115 340 10,186 9,846 455 45,848 4r.,3316 575 14,674 14,099 269 45,561 45,29217 340 14,674 14,334 380 87,311 86,93118 481 29,369 28,888 269 57,491 57,22219 341 7,886 7,545 269 57,491 57,222

-_ 20 340 7,886 7,546 269 41,750 41,48121 465 3,479 3,014 269 41,750 41,48122 340 3,479 3,139 142 7,950 7,80823 340 - (340) 419 0 (419)24 205 4,488 4,283 54 116,678 116,62425 531 12,580 12,049 54 133,041 132,98726 68 12,580 12,512 54 133,041 132,98727 68 12,580 12,512 54 133,041 132,98728 68 12,580 12,512 54 133,041 132,98729 68 8,173 8,105 54 117,300 117,24630 68 - (68) 54 0 (54)31 68 - (68) 54 0 (54)32 68 4,488 4,420 54 16,028 15,97433 68 4,407 4,339 54 16,028 15,97434 68 4,407 4,339 54 16,028 15,97435 68 4,407 4,339 54 16,028 15,97436 99 4,407 4,308 78 16,028 15,950

IRR - 12.6% EIRR 30.2

- 55 -

TANZANIA Annex 2

SAO HILL FORESTRY PROJECT - PHASE II Table T - 2.4

OVERALL AFFORESTATION PROGRAM: FINANCIAL RATE OF RETURN

--- (TShs.'OOO)--

Costs Benefits

Year Phase I Costs Phase II Costs Total Costs Phase I Benefits Phase II Benefits Total Benefits

1 48,333 7,054 55,3872 6,426 7,111 i3,5373 5,238 7,150 12,3884 4,572 7,184 11,7555 2,430 7,250 9,680 537 5376 1,908 2,530 4,438 976 9767 1,908 1,780 3,688 14,196 14,1968 1,908 1,390 3,298 11,592 4,888 16,4809 1,908 1,320 3,228 12,394 4,407 16,80110 2,430 452 2,882 731 7,927 8,65811 1,908 340 2,248 10,647 7,927 18,57412 2,430 340 2,770 8,696 7,927 16,62313 1,908 340 2,240 9,328 11,066 20,39414 2,430 468 2,898 609 13,706 14,31515 1,908 340 2,248 8,873 10,186 19,05916 1,908 575 2,483 7,243 14,674 21,91717 2,430 340 2,770 7,493 14,674 22,16718 1,908 481 2,389 - 29,369 29,36919 1,908 341 2,771 - 7,886 7,88620 1,908 340 2,770 670 7,886 8,556*21 2,480 465 2,945 1,219 3,479 7,69822 15 340 355 17,745 3,479 21,22423 15 340 460 14,498 - 14,49224 255 205 546 14,992 4,488 19,48025 15 531 83 1,385 12,580 12,58026 15 68 83 1,385 12,580 12,58027 15 68 83 1,385 12,580 12,58028 15 68 83 1,385 12,580 12,580

s1 68 83 1,385 8,17 8,17330 15 68 83 1,385 - -31 25 CR 93 1,385 - -32 68 68 1,385 4,488 4,48833 68 68 1,385 4,407 4,40734 68 68 1,385 4,407 4,40735 68 68 1,385 4,407 4,40736 99 99 1,385 4,407 4,407

IRR = 8.02%

- 56 -

TANZANIA Annex 2

SAO HILL FORESTRY PROJECT - PHASE II Table T - 2.5

OVERALL AFFORESTATION- PROGRAM: ECONOMIC RATE OF RETURN

--- (TShs.'OO0)----

Costs Benefits

Year Phase I Costs Phase II Costs Total Costs Phase I Benefits Phase II Benefits Total Benefits

1 43,492 5,625 49,117 0 0 02 5,783 5,618 11,401 0 0 03 5,164 5,649 10,793 0 0 04 4,115 5,675 9,790 1,940 0 1,9405 2,187 5,727 7,914 3,525 0 3,5256 2,187 2,000 4,187 51,283 0 51,2837 2,187 1,406 3,595 41,875 16,028 57,9038 2,187 1,098 3,285 47,865 15,741 63,6069 2,187 1,043 3,230 8,259 22,461 30,720

10 2,187 357 2,544 120,341 28,450 148,79111 2,187 269 2,456 94,918 28,450 123,36812 2,187 269 2,456 108,016 33,000 141,01613 2,187 370 2,557 11,583 42,540 54,12314 2,187 269 2,456 169,270 29,820 199,09015 2,187 455 2,642 137,640 45,848 183,48816 2,187 269 2,456 142,348 45,561 187,90917 2,187 380 2,567 0 87.311 87,31118 2,187 269 2,456 0 57.491 57,49119 2,187 269 2,456 17,885 57,491 75,37620 2,187 269 2,456 32,545 41,750 74,29521 2,187 269 2,456 473,506 41,750 515,25622 2,187 142 2,329 386,804 7,950 394,75423 2,187 419 2,606 887,498 0 887,49824 2,187 54 2241 3, 68 116,678 120,40125 14 54 68 3,723 133,041 136,76426 14 54 68 3,723 133,041 136,76427 230 54 284 3,723 133,041 136,76428 14 54 68 3,723 133,041 136,76429 14 54 68 3,723 117,300 121,02330 14 54 68 3,723 0 3,72331 14 54 68 3,723 0 3,72332 14 54 68 0 16,028 16,02833 14 54 68 0 16,028 16,02834 14 54 68 0 16,028 16,02835 14 54 68 0 16,028 16,02836 14 78 92 0 16,028 16,028

IERR - 34.5

TANZANIA Ann"e 2

SAO HILL FORESTRY PROJECT - PHASE II Table T - 2.6

GOVERNMENT PROJECT CASH FLOW 1/

--- (T.Shs. 000)---

Cash Inflow Cash Outflow

GOT Physical Bank Group Phase I 2/ Phase I12/ Total Project Costs Banl; Group Debt Servicing Total Surplus DeficitYear Credit Revenue Revenue "Cash Inflow" Phase I Phase II Phase I Phase II "Cash Outflow" With Phase II Without Phase II

1982/83 15,675 15,675 11,633 3,430 1,278 118 16,459 (784) (12,911)1983/84 19,800 19,800 6,420 12,771 1,403 266 20,860 (1,060) (7,823)1984/85 18,150 18,150 3,575 11,174 1,526 403 16,678 1,472 (5,101)1985/86 17,325 17,325 3,482 11,076 1,650 533 16,741 584 (5,132)1986/87 18,975 537 19,512 3,482 10,913 1,815 675 16,885 2,627 (4,760)1987188 9,075 976 10,051 3,482 2,530 1,939 743 8,694 1,363 (4,445)1988/89 14,196 14,196 1,908 1,780 2,145 743 6,576 7,620 10,1431989/90 11,592 4,888 16,480 1,908 1,390 2,351 743 6,395 10,085 7,3331990/91 12,394 4,407 16,801 1,908 1,320 2,434 743 5,405 11,395 8,0521991/92 731 7,927 8,658 2,430 452 2,681 743- 6,306 2,352 (4,380)1992/93 10,647 7,927 18,574 1,908 340 2,888 743 5,879 12,795 5,8511993/94 8,696 7,927 16,623 2,430 340 3,053 743 6,566 10,057 3,2131994/95 9,328 11,066 20,394 1,908 340 3,176 743 6,167 14,227 4,2441995/96 609 13,706 14,315 2,430 468 3,300 743 6,941 7,374 (5,121)1996/97 8,873 10,186 19,059 1,908 340 3,630 743 6,621 12,438 3,3351997/98 7,243 14,674 21,917 1,908 575 3,918 743 7,144 14,773 1,4171998/99 7,493 14,674 22,167 2,430 340 4,290 743 7,803 14,364 773

1999/2000 - 29,369 29,369 1,908 481 4,700 743 7,832 21,537 (6,608)2000/01 - 7,886 7,886 1,908 341 5,074 743 8,066 (180) (6,982)2001/02 670 2,886 8,556 1,908 340 5,569 743 8,560 (4) (6,807)2002/03 1,219 3,479 7,698 2,480 465 3,094 4,043 10,082 (2,384) (4,355)2003/04 17,745 3,479 21,224 - 340 - 4,043 4,383 16,841 17,7452004/05 14,498 - 14,492 - 340 - 4,043 4,383 '10,109 14,4982005/06 14,992 4,488 19,480 - 205 - 4,043 4,248 15,232 14,9922006/07 1,385 12,580 12,580 - 531 - 4,043 4,574 8,006 1,315

1/ In 1981 Prices2/ Revenue is based on theoretical stumpage rates of TSh. 157.20/m

3of sawlogsi and

TSh. 55/m3of pulpwood, whereas current stumpage rates are 75% less than these prices.

- 58-

Annex 2Table T-2.7(a)

TANZANIA

SAO HILL FORESTRY PROJECT PHASE II

Price Structure of Standing Sawlogs

(TSh/m 3 )

Existing Price Estimated Price

Tantimber Wholesale Price 2,495 2,495less:

-- industry profit margins 417 283-- transport to markets 280 280-- conversion costs 1/ 1,109 1,109-- logging and transport 509 509

Value of Sawlogs before Conversion 180 314

Conversion Rate 2 2

Value of Standing Sawlogs 90 157

1/ Include conversion costs and profitmargins for sawmills.

November 1981

- 59 -

Annex 2Table T-2.7(b)

TANZANIASAO HILL FORESTRY PROJECT PHASE II

Price Structure of Standing Pulpwood

(TSh/tonne)

Existing Price Estimated Price

Ex-Mill Sales Value 1/ 5,420 5,420less:

-- industry profit margins 540 425-- conversion costs 2/ 3,880 3,880-- logging and transport 840 840

Value of Pulpwood before Conversion 160 275

Conversion Rate 5 5

Value of Standing Pulpwood, per m3 32 55

1/ Based on Dar landed composite price of US$ 672 forScandinavian paper products in May 1981 less transportcosts of TSh 120/ton to Mufindi.

2/ Includes conversion costs, depreciation and amortizationand profit margins for the pulpmill.

November 1981

ANNEX 2Table T-2.8

- 60 -

TANZANIA

SAO HILL FORESTRY PROJECT PHASE II

Import Parity Price for Wood

Pulpwood Sawlogs(Tsh/ton-ne.) (Tshs/mJ)

Landed composite price at Dar 5,540 1/ 1,535 2/Transport to markets 120 4/ 280Processing and logging costs 4,720 5/ 890Distribution and transport costs 145 6/ 80 3/Price of standing wood before conversion 795 845Conversion coefficient 3 0.20 ,5QPrice of standing wood after conversion per m 159 423

1/ Based on actual landed composite cost at Dar of US$672 for Scandinavianpaper products in May 1981. 3 3

2/ Based on Chile f.o.b. price of US$130/mi plus freight charges of US$56/mi3/ Dodoma is assumed the center of consumption for timber and will be trans-

ported by rail from Mufindi.4/ Pulp consumption centers are limited to Dar, Arusha and Tanga.5/ Mill manufacturing costs for new mills of 300,000 mt/year were US$375/ton

or Tsh 3,094/ton in Sweden, US$350/ton or Tsh 2,888/ton in Southern US,British Columbia and Brazil in 1978.

6/ Distribution and transport costs as well as margins for paper and paperproducts.

September 15, 1981

- 61 -ANNEX 2Table T-2.9

TANZANIA

SAO HILL FORESTRY PROJECT PHASE II

Export Parity Value of Standing Sawlogs(Tsh/m3)

Price f.o.b., Dar-es-Salaam 1/ 1,450Transport Costs to Dar 80Processing and Logging Costs 890Price of Sawlogs before Conversion 480Conversion Coefficient 0.5QPrice of Standing Sawlogs after

Conversion 2/ 240

1/ Based on Tantimber export prices for premium qualitysoft timber in March 1981.

2/ Estimated export parity price for Kenya sawlogs is aboutKsh 171/m3 with shadow-pricing of foreign exchange (Kenya Forestry IIAppraisal Report, August 19l81).

62 - Annex 3Table T-3.1

TANZANIA

SAO HILL FORESTRY PROJECT PHASE II

Estimated Schedule of Disbursements

(US$ '000)

IDA FY and Quarter Quarterly Disbursement Cumulative Disbursement

FY 1982 QlQ2Q3Q4 1/ 550 550

FY 1983 Ql 360 910Q2 360 1,270Q3 360 1,630Q4 690 2,320

FY 1984 Ql 690 3,010Q2 690 3,700Q3 690 4,390Q4 600 4,990

FY 1985 Q1 600 5,590Q2 600 6,190Q3 600 7,790Q4 600 7,390

FY 1986 Ql 600 7,990Q2 600 8,590Q3 600 9,190Q4 600 9,790

FY 1987 Ql 450 10,240Q2 450 10,690Q3 450 11,140Q4 450 11,590

FY 1988 Ql 450 12,000Q2Q3Q4

1/ Quarter in which credit is expected to become effective and the disbursementshown is for retroactive financing.

September 22, 1981

- 63 - Annex 3Table T-3.2

TANZANIA

SAO HILL FORESTRY PROJECT - PHASE II

Physical Work Schedule

Year 1 Year 2 Year 3 Year 4 Year 5Unit Total

1982/83 1983/84 1984/85 1985/86 1986/87

A. AFFORESTATION

Seedling Production Millions 3.9 3.9 3.9 3.9 3.9 19.5Site preparation Ha 2000 2000 2000 2000 2000 10000Planting Ha 2000 2000 2000 2000 2000 10000Replanting Ha 160 150 150 150 150 760Weeding Ha 6840 6840 6460 6450 6450 33040Pruning Ha 264 2364 8400 11540 11776 34344Firebreak construc-tion Km 20 20 20 20 20 100

Firebreak maintena-nce Km 300 320 340 360 380 1700

B. FOREST ROADS

Upgrading of secon-dary roads Km 24 24 24 24 24 120

New secondary roads Km 32 32 32 32 32 160New tracks Km 145 145 145 145 145 725Road and trackmaintenance Km 260 319 378 437 496 1890

C. BUILDINGS/STRUCTURES

Staff Houses Units 14 13 12 12 7 58Divisional Offices Units 1 - - - - 1Nurseries Units 1 2 - - - 3Fire look-out towers Units 1 1 1 1 1 5Water Supply System Units 2 1 - - - 3

D. CONSULTANCY/STUDIES

Fire Protection Manmonths 1 - - 1 - 2Stumpage Rates .Review Manmonths 3 - - - - 3Village Afforesta- Ition Manmonths 6 - - - - 6

Tree Physiology Manmonths 1 - - - - 1

Annex 4Table T-4.1

TANZANIA

SAO HILL FORESTRY PROJECT PHASE II

Average Recorded and Estimated Production and Apparent Consumption of Sawlogs in Tanzania, 1978-80

('000 m3 (r) )

Recorded Bank 1/- FAO 2/

A. PRODUCTION

Softwoods 73.0 146.0 182.5Hardwoods 122.0 305.0 305.0

Total Production 195.0 451.0 487.5

B. NET EXPORTS

Softwoods 2.0 2.0 2.0Hardwoods 4.0 4.0 4.0

Total Exports 6.0 6.0 6.0

C. APPARENT CONSUMPTION

Softwoods 71.0 144.0 180.5Hardwoods 118.0 301.0 301.0

Total Consumption 189.0 445.0 481.5

.o=

lt Bank Mission Estimates based on multipliers of 2.0 for softwoods and 2.5 for hardwoods.21 Bank Mission Estimates based on a multiplier of 2.5 for both softwoodls and hardwoods as estimated

by FAO in 1974.Source: Forest Department and Mission estimates

Table T-4.2

- 65 -

TANZANIA

SAO HILL FORESTRY PROJECT PHASE II

National Supply and Demand for Sawlogs - , 1980-2010

('000 m3 (r) )

1978-80 1985 1990 1995 2000 2005 201C

2/'National Supply: -

Softwoods: 3/Sao Hill Ph. I & II - - - 7 70 80 819 240Other Sources 146 300 300 454 573 353 300

Hardwoods 305 400 400 400 400 400 400

Total Supply 451 700 707 924 1,053 1,572 940

National Demand 480 604 760 955 1,203 1,514 1,904

National Deficit(Surplus) 29 (96) 53 31 150 (58) 964

1/ Includes sawlogs and logs for panel production.2/ Includes Sao Hill Forestry I and II output.3/ Maximum production of 1,050,000 m3 would be reached in

Year 2003 and production after Year 2005 would be fromPhase II plantations only.

4/ Based on following assumptions:

(a) 1978-80 average demand is 480,000 m3

(b) population growth is 3.4% p.a.;(c) per capita income increase is 1.3% (in real terms) p.a.;(d) elasticity of demand for sawlogs is 1%; and(e) rate of substitution for sawn timber by non-woodbased

products is zero.

October 2, 1981

ANNEX 4- 66 - Table T-4.3

TANZANIA

SAO HILL FORESTRY PROJECT PHASE II

Production and Prices Trendsfor Sawn Timber in Tanzania, 1977-8]i/

Quality Hardwoods 2/ Utility Timber 3/Sawn Timber 3 Nominal Real Price 5U Nominal Real Price 5j

Year Production (000 m ) Price Price

--------------------- Tshs|m3

1977 167 1,350 1,212 1,217 1,093

1978 177 2,022 1,620 1,460 1,169

1979 153 2,363 1,675 1,837 1,302

1980 260 2,633 1,654 2,130 1,339

1981 200 3/ 3,105 1,695 2,495 1,362

Average AnnualGrowth Rate - 18.1 7.0 15.4 4.5

I/ Wholesale official prices by Tantimber; the actual retail prices are probably muchhigher than these.

2/ Average Tantimber price for camphor and mainga sawnr timber.

3/ Average Tantimber price for cypress/pine and podo sawn timber.3

4/ January-Apri' 1981 production estimated at 70,000 m

5/ Based on Banks estimated inflation rates of 11.4% in 1977, 12.0% in 1978, 13.1% in1979, 13.0% in 1980 and 15.0% in 1981 (Tanzania Economic Memorandum of April, 1981).

August 25, 1981

- 67 - ANNEX 4Table T-4.4

TANZANIA

SAO HILL FORESTRY PROJECT PHASE II

General Pattern of Sawnwood Consumption in Tanzania I/

(Percent)

-------------Species Group-----------------------

------------ Hardwoods-----------End - Use Softwood Utility Fine Total

Furniture 28 27 55 36Joinery 32 37 31 34Building 32 26 11 24Others 8 10 3 6

Total 100 100 100 100

1/ Estimates for the early 1970ts

Source: Jaakko Poyry, Wood Industries Development Program in Tanzania:Annex on Domestic and Export Market Prospects for MechanicalWood Products, 1979

- 68 -

TANZANIAAnnex 5

SAO HILL FORESTRY PROJECT PHASE II Table T-5.1

Assessment of Labor Availability(Mandays)

Jan. Feb. Mar. Apr. Hay June July Aug. Sept. Oct. N<ry. Dec.

A. Farming Activities 1/

Maize(1.28 ha) 10.2 9.0 5.1 3.8 12.8 19.2 32.0 37.0 20.5 20.0 20.5 16.6Peas (0.19 ha) -- 0.6 1.3 4.4 8.8 1.9 -- 0.6 0.6 1.3Other (0.47 ha) 2/ 7.5 7.5 7.5 6.6 6.6 5.6 7.5 8.5- 6.6 7.5 6.6 5.6

Total Labor Input 17.5 17.1 13.9 14.8 28.2 26.7 39.5 46.1 27.7 29.3 27.1 22.2

Labor availability 31 45 45 45 45 45 45 45 45 45 45 45 45

Residual Labor A/ 27.5 27.9 31.1 30.2 16.8 18.3 5.5 (1.1) 17.3 15.7 17.9 22.8Available Residual Labor in 5/

Sao Hill area(000)- 825 837 933 906 504 549 165 (33) 519 471 537 684B. Forestry Acvitities:

Planting (1.0 ha) 6/ 50 50 50 --- --- --- --- --- --- --- 50 50Weeding (1.0 ha) --- -- -- - 25 25 25 25 25 25 --- --Beating up (1.0 ha) --- 25 25 25 --- --- --- --- --- --- --- ---Site preparation 7/ --- --- --- --- 50 50 50 50 50 50 --- ---

Total Labor Input 50 75 75 25 75 75 75 75 75 75 50 50

Project labor requirement(000 m-d) 8/ 20 33 33 1 44 44 44 44 44 44 20 20

Project labor requirementas % of available residual

labor 2.4 3.9 3.5 0.0 8.7 8.0 26.7 133.3 8.5 9.3 3.7 2.9

1/ Based on Working Paper C-6, Table 5 for Ubena Zone for the Tanzania Pyrethrum Project,(SAR dated March 20, 1980).2/ Assumed to comprise 20% sunflower, 40% beans and 40% irish and sweet potatoes.3/ On the basis of 24 m-days from the husband, 24x0.7 m-days from the wife, plis 4 m-days x 0.5 from each of children of

working age.4/ Residual labor available for non-farm employment.5/ There are 30.000 households in the 20 villages in the Project area.6/ Includes staking and planting for pine, and less for eucalyptus (16 m-days/ha).7/ Principally involving clearing and burning and breaking anthills.8/ Based on 400 ha/month for planting; 250 ha/month for weeding; 40 ha/month for beating up; 333 ha/month for site

preparation. Labor requirement for nursery work would be provided by permanent employees.

TANZANIASOA HILL FORESTRY PORJECT -PHASE 11

PROJECT ORGANIZATION CHART

M kinistty of Natural Resourms_0

D irector of Forest$

|Project Maneger(Chief Forest Officer)

Asst Project Manaqr As.t Project ManagerOperations) IFinance and Planningi

_. ~ ~ ~ ~ ~ZZ IZZLReearch Pla,tation Manatl-rent Civil Works Survey and Work Plan Accounts and Finanre Administration Work Study and Costing Work Shop

(Research Office t (Civil Engineer) (Forest orlicer) (Sr. Accountant) (Office Supervisor) IWork Study Officer) (Work Shop Manager)

Assistant Research Divisional Plantation Civil Works Foremen 3 Forest Officer 1 Accountant I Registry Clerk 1 Forest Officer 1 Assistant WorkshopOfficer 1 Offirls -- . II. III Artisans 16 Assistant Forest Accounts Assistants 2 -rypist I Assistant Forest Maniager IForest Assistant 1 Forest Officers 3 Drivers/Operators 3 Officers 2 Procurementl Receptionist 1 Officer 1 Foreman IForest Assistants 2 Supplies Officer 2 Medical Aide 1 Cost Accountant 1 Mechanics 6- - Accounts Clerks 4 Num I Drivers 2~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~_Acons lrs use1-Drvr23 -~ ~~~~~ Stores Clerks 4 Dtivers 2 4

Typist 1 Drivers 2

Fire P-otection Afforestation

Forest Officer 1 Assistant ForestAssistant Forest Officers 5Officer 1 Forest Assistants 15

Forest Assistants 3 Forest Attendants 30Forest Attendant 1 Hrsdmen (Laborerni 60Drivers 3 Drivers/Operators 6

World Bank--23256

TANZANIASAO HILL FORESTRY PROJECT - PHASE 11

IMPLEMENTATION SCHEDULE

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

1981/82 1982/83 1983/84 1984/85 1985/86 1986/87

Q 0 Q2 Q3 Q4 Q1 Q2 Q3 04 01 02 03 04 01 Q2 Q3 04 01102 Q3 Q4 Q1 Q2 Q3 Q4

1. Consultancy and Studies:

Fire Protection ... ....

Stumpage Rates Review .. .......

Village Afforestation ... ... ....

Forest Pathology ....

2. Project (Phase 11) Effectiveness _

3. Employment of Expatriates/Counterparts:

Financial Controller - . _ - -_ _ _- -

Workshop Manager .1 _

Work Study Officer

4. Civil Works Program:

Roads and Tracks - - - - -_ _ _ _ _

Staff Houses - - -= - -_ = -- __ _ -

Divisional Office

Nurseries and Water Supply - _ - _ -

Fire Towers - - - - - - - - - - - - - - --

5. Procurement of Vehicles and Equpment | | - - - - - - - -

6. Afforestation Program:

Establishment - New Plantations | ----- --- - --- - - -

Maintenance - Existing Plantations - - - _ _ -_ _ -_ _ - -_ _ - --

Replanting - - - _ - - - - _ - - - -

Nursery Operations - - -_ _ _

Fire Protection | | . | _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

7, Research and Trials - - -_ _ _ _ _

8. Staff Study Tours/Training ........... ... .................. ....... ... ..

Planning and Preparing Project Period-_ Implementing

....... Implement as and when required World Bank-23255

I

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~IIRD ISE06

3 <__FIH1OFA>r, no..... . vX. d/ ...... ,, eF e ER -

DIV I~~~~~~~~~~~~DI /

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P.[, ,, AAIcI

k r y 1 ,, \~~~~~~~~~~C .9 7. 6,,, A\ InWiR/r '

N.,,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~P

. g < * E O q K 0 N G O 5SAOIHILWFORESTRY,PROJEC

---5P I - P--nt, io~ ' _ '

; X , ,l, *, - ' T ,/-L'AA LB ,.__ -,

h -,~ ~ ~ ~ ~ ~~~~~~~~~~~~~~T N .AK A- S

A ~ ~ ~ ~ va Psas U' i_ Plantation -Ar eas er i r

. k t>F l , P >SASS A. 1 BoGo E_j, Xfwlnca