Report No. 1057a-YAR FILE COPYAppraisal of a Grain Storage andProcessing Project Yemen Arab Republic

May 6, 1976

Agricultural Credit and Agroindustries DivisionProject DepartmentEurope, Middle East and North Africa

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may nototherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

US$ 1 = Yemeni Rials (YRls) 4.5YR1 1 = US$ 0.2222 = Bukshas 4oYRls 1,000 = US$ 222.22YRls 1,000,000 = US$ 222,222.22

WEIGHTS AND MEASURES

1 kilogram (kg) = 2.20 pounds1 metric ton (m ton) = 1,000 kilograms1 metric ton (m ton) = 0.98 long ton1 centimeter (cm) = 0.39 inch1 meter (m) = 1.09 yard1 kilometer (km) = 0.62 mile1 hectare (ha) = 2.47 acres1 square meter (m2 ) = 10.76 square feet1 square kilometer(km2) = 0.384 square mile1 liter (1) = 0.264 gallon

ABBREVIATIONS

ACF - Agriculture Credit FundCB - Central BankCGC - Cotton General CompanyCPO - Central Planning OrganizationDWT - Deadweight tonLWL - Length on waterlineMCH - Maternity-Child HealthRCC - Reinforced Concrete ConstructionSURDEP - Southern Uplands Rural Development ProjectSURDU - Southern Uplands Rural Development UnitTDA - Tihama Development AuthorityTDP - Tihama Development ProjectWFP - World Food ProgrammeWHO - World Health OrganizationYACB - Yemen Agricultural Credit BankYAR - Yemen Arab RepublicYBRD - Yemen Bank for Reconstruction and DevelopmentYGGC - Yemen General Grain Corporation

FISCAL YEAR

July 1 - June 30

-UK UNFILAL uan VAJn>

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

TABLE OF CONTENTS

MAIN TEXT

Page No.

SUMMARY AND CONCLUSIONS ................................. i - ii

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

II. GRAIN PRODUCTION, CONSUMPTION, PROCESSING AND MARKETING.. 2

A. General ............................................ 2

B. Grain Production, Consumption and Imports ........... 3

C. Grain Storage ...................................... 6

D. Grain Processing ....... ...................... 7

E. Grain Marketing .................................... 7

F. Transportation ....... ........................ 8

III. FUTURE TRENDS ........................................... 9

A. Production, Consumption and Imports .... ............ 9

B. Grain Handling and Storage Requirements .... ........ 10

C. Bakeries ........................................... 10

IV. THE PROJECT ............................................. 11

A. Objectives and Summary Descriptions .............. .. 11

B. Detailed Features ...... ............................ 12

C. Construction Schedule ...... ..................... 6

D. Cost Estimates ....... .............................. 17

E. Financing .......................................... 19F. Procurement ........................................ 20

G. Disbursements ....... ............................... 21

H. Environmental Impact ........ .. ... ........... 21

This report is based on the findings of an appraisal mission to yAR in

October/November 1975, consisting of Messrs. Heidhues, Nickel (IDA),Ackels, Rahman (Consulants) and Gurney (WHO). Messrs. Crowley (USDA)and Cooke and Peters (Consultants) assisted in the preparation of the

nutrition component.

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

TABLE OF CONTENTS (Continued) Page No.

V. ORGANIZATION AND MANAGEMENT ............................. 21

A. YGGC Organization and Operation .... ................ 21B. Project Management ................................. 22C. Credit Arrangements ................................ 24D. Project Monitoring and YGGC Audit .... .............. 27E. Project Evaluation ................................. 27F. Retroactive Financing .............................. 28

VI. BENEFITS AND JUSTIFICATION .............................. 28

A. Financial Results .................................. 28B. Economic Benefits .................................. 28

VII. AGREEMENTS REACHED AND RECOMMENDATIONS .................. 31

ANNEXES

1. Grain Production, Consumption and Importation2. Grain Storage, Processing, Marketing and Transportation3. Regional Grain Balance4. Agricultural and Agroindusrial Credit5. Nutrition6. Summary Project Cost and Financial Results7. YGGC Guideline Organization and Operating Procedures,

YGGC Summary Tables and Organizational Chart8. Technical Assistance and Training Program9. 20,000 m ton Port Silo10. Regional Warehouses11. Bakeries12. Time Schedule of Implementation13. Estimated Schedule of IDA Disbursement14. ACF Project Cash Flow Statement15. General Terms of Reference for Engineering Consultants16. Terms of Reference for Grain Storage Study17. Terms of Reference for Nutrition18. Economic Rates of Return of Total Project and Components

Map IBRD 11979

SUMMARY AND CONCLUSIONS

i. This report appraises a project that aims to expand and improve thegrain importing, handling and storage capability of the Yemen Arab Republic(YAR), reduce grain storage losses and import costs, improve sanitary condi-tions of bread supply and alleviate malnutrition. The lack of efficient andadequate facilities in YAR has resulted in port congestion, excessive importcosts and high grain storage losses as well as insanitary bread supply. Under-nourishment and malnutrition are widespread in YAR. Fortified bread providedto schools, hospitals and the poor under public feeding programs would reachsome of the most needy segments of the population. The nutrition educationand planning program aims to enhance the awareness of the population concern-ing malnutrition and to assist the Government to develop a national nutritionprogram.

ii. The project would provide for (a) a 20,000 m ton (metric ton) modernport silo in YAR's principal port Hodeidah with ship unloading and baggingequipment of not less than 200 m ton per hour average operating rate; (b)six regional warehouses with a total capacity of 18,000 m ton; (c) twoGovernment-operated bakeries, located in Sana'a (10 m ton/day) and Taiz (10 mton/day) including small whole grain flour mills to serve them, to providebread for schools, hospitals and public feeding programs; (d) a bakery creditcomponent to provide loans to private sector bakers for a 3-m ton/day bakeryin Hodeidah, and 1-m ton/ day bakeries in the country's major cities, and formodernizing existing bakeries; (e) a study to provide a nationwide storageinvestment program based on a survey of existing grain storage capacity andquality and a projection of consumption and production trends by region; (f) anutrition component including bread fortification with vitamins and minerals,a nutrition education and a nutrition planning program. The project wouldalso include the employment of engineering consultants by the Government toassist in the design and construction supervision of the silos, warehouses andGovernment bakeries; technical assistance to operate initially the facilities;a training program for key management atd operational personnel of YGGC andthe Agricultural Credit Fund (ACF); and extension service to private bakeries.

iii. The YGGC would be set up under the Ministry of Supply as a semi-autonomous, Government-owned enterprise to implement and operate the silo,warehouses and two 10-m ton Government bakeries. The bakery credit componentwould be implemented by the Agricultural Credit Fund (ACF) in cooperationwith YGGC.

IV. The project would cost YRls 98.3 million (US$21.8 million) of which69% or YRls 68 million (US$15.1 million) would be foreign exchange. The IDAcredit would finance US$5.2 million or 24% of total project cost. The SaudiFund would contribute US$11 million or 50% of the project cost. The Govern-ment would provide about US$4.9 million and the remainder of US$0.7 millionwould be financed by subborrowers.

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v. The Government would be the borrower. It would channel both the IDAcredit and the Saudi Fund loan through ACF. ACF would onlend the proceeds toYGGC for the investments in the silo, warehouses and large bakery facilities,and to private bakers for the construction of new and rehabilitation and modern-ization of existing bakeries. The interest rate charged to the subborrowerswould be 9%.

vi. The silo facilities, costing US$9.6 million, and the 10-m tonbakeries, costing US$2.0 million, would be financed under parallel financingarrangements by the Saudi Fund and the Government and would be procured onthe basis of international competitive bidding according to Saudi Fund rules.The warehouses are simple structures, located in various parts of the country,and consist mostly of civil works. They, as well as the civil works for smallbakeries, would be most suitable for local contractors and would be procuredunder local bidding procedures which are satisfactory to IDA. All other itemswould be procured through existing commercial channels in accordance withlocal bidding procedures. Consultants would be employed according to IDAguidelines.

vii. The project would result in a substantial reduction of import costsand grain storage losses. Its economic rate of return is estimated at 32%.It would save over US$200 million in foreign exchange over the project'slifetime. About 65 full-time and 70 manyears part-time positions would becreated. With the establishment of the YGGC and the strengthening of ACF aswell as the training and technical assistance provided for in the project, amajor institution-building effort would be made. The project would make asubstantial contribution to better health through improvements in the foodsupply and nutrition habits; an estimated 176,000 consumers, of which about67,000 are welfare recipients or persons in schools and hospitals, wouldobtain higher quality bread. Finally, the project would lead to a reduceddemand for firewood and thus decrease damaging deforestation of the country.

viii. Having received adequate assurances on all important matters duringnegotiations, the project is suitable for an IDA credit of US$5.2 million tothe Government of YAR on standard IDA terms.

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

I. INTRODUCTION

1.01 The Government of the Yemen Arab Republic has requested the Inter-national Development Association (IDA) to help finance a grain storage andprocessing project to increase the efficiency of grain importing and handling,expand much needed grain storage space, reduce grain storage losses and im-prove both the quality of bread and the sanitary conditions of bread supply.At present, bulk grain imports are handled without modern ship unloadingfacilities and, as a consequence, substantial amounts of grain are lost dueto inefficient handling, theft, short weighing and rodent infestation. Thegrain is stored under unsanitary conditions which result in additional infes-tation and quantity losses of grain. With grain imports projected to risesignificantly over the next two decades, improvements in grain handling andstorage facilities have high priority. Bread is the population's main staple.Investments in the bakery sector will help to improve the sanitary conditionsof bread supply and, together with the proposed bread fortification, contri-bute to the improved health of YAR's population.

1.02 The total project cost is estimated at US$21.8 million (YRls 98.1million) of which IDA would finance US$5.2 million (YRls 23.4 million). Theproject would be implemented by the Yemen General Grain Corporation (YGGC)and the Agricultural Credit Fund (ACF). The YGGC would be set up under theMinistry of Supply as a semi-autonomous Government enterprise.

1.03 The proposed project would represent the third IDA credit for agri-culture and agroindustries in Yemen. The first was for the Tihama Develop-ment and the second for the Southern Uplands Rural Development project. ACF,which was established in connection with both these projects, will be thelending channel for the proposed IDA credit and Saudi Fund loan.

1.04 The need for additional modern grain storage and handling facilitiesand improvements in the bakery sector was identified by an FAO/IBRD CooperativeProgramme mission in March/April 1975 1/. The project was further prepared bya Bank mission with FAO/IBRD Cooperative Programme assistance in August 1975and appraised in October/NIovember 1975 by Messrs. Heidhues and Nickel (Bank)and Ackels and Rahman (Consultants) and Gurney (WHO). Messrs. Crowley (USDA)and Cooke and Peters (Consultants) assisted in the preparation of the nutri-tion component.

1/ An industrial flour mill, originally proposed to be part of tne project,did not prove to be economically viable, in view of continuing subsidized,low priced EEC flour exports to YAR and large milling capacities presentlybeing installed in nearby Mliddle Eastern countries.

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II. GRAIN PRODUCTION, CONSUMPTION, PROCESSING AND MARKETING

A. General 1/

2.01 YAR, with an area of 190,000 km2, has a total population of 6.5 mil-lion and a resident population of 5.2 million. A substantial number of Yemeniswork in neighboring countries. The population is growing at an estimated an-nual rate of 2.4% (7% in the urban and 2% in the rural areas) despite highmortality. Infant mortality is estimated at 160 per 1,000 live births whilelife expectancy is set at between 40 and 45 years. Infections, undernourish-ment and nutrition deficiencies are cited as major causes of mortality, espe-cially in infancy and early childhood.

2.02 Real GDP grew at an average of about 6' per annum during 1969-74.GDP growth, depending largely on agricultural production, fluctuates heavilyw[th weather conditions. Agriculture represents the major sector in the YAReconomy, accounting for approximately 70% of the country's GDP and employingover 80% of the resident population. During the last five years agriculturalproduction grew at an average 7% annually and cereal production at 13% reflect-ing high rainfall and good harvests in 1973 and 1974. Although agricultureremains essentially subsistence-based, it provides over 90% of relativelysmall national export earnings from such items as cotton, coffee, hides andskins. In 1974, cotton and cottonseed accounted for 60% and coffee for 10% oftotal merchandise export value. Food imports, nearly half of which werecereals, accounted for about 50% of the total import value.

2.03 The land area of Yemen totals approximately 20 million ha of which1.5 million ha are cultivated with an additional 2.0 million ha kept fallow,

to be brought into production given sufficient pre-planting rainfall. Mostof the cropped area is classified as rainfed, with only 230,000 ha (15%)being under some form of supplementary irrigation from wells, perennialsprings or periodic wadi floods. Climatic conditions vary widely, and micro-climatic differences are locally import'nt because of variable mountainoustopography. Rainfall is erratic, and annual variations influence crop pro-duction by affecting not only per hectare yields but also utilization ofrainfed and marginal cropland. Normally the major rains occur in July-September with minor rains occurring in March-May. On the basis of rainfall,altitude and crop-livestock pattern, five main agricultural zones can bedistinguished in the country: (a) The Coastal Belt of the Tihama; (b) theWestern Slopes; (c) the Central and Southern Uplands including most of the Taizand Ibb Provinces; (d) the Intermontane Plains; and (e) the Eastern Slopes.Available data on land use, agricultural production, prices and productionvalue are given in Annex 1, Table 1.

1/ For further discussion of YAR's economy see Current Economic Positionand Prospects of the Yemen Arab Republic, IBRD Report No. 840-YAR.

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2.04 Although to date no long-run development plan has been prepared forYemen, the following were cited in the first three-year program (1973/74-1975/76) as the Government's major objectives for the agricultural sector: (a) anannual increase in agricultural production of not less than 6%, and the devel-opment of the necessary agricultural storage, processing and marketing facil-ities; (b) achievement of self-sufficiency in the long run in the basic food-stuiffs with particular emphasis given to cereal crops, oils, vegetables andlivestock production; (c) improvement of the trade balance through the increaseof exports, especially cotton, hides and skins, fresh and canned fish, vege-tables and fresh fruits; (d) improvement of the dietary standard of the popu-lation; and (e) provision of credit and supporting extension, marketing andinput distributional infrastructure for agricultural producers, especially thesmaller farmers. While progress in establishing an agricultural credit systemand extension services is encouraging, the first three objectives appear to betoo optimistic. Particularly the target growth rate for agricultural productionas well as self-sufficiency in cereals are unrealistic targets for the fore-seeable future (see also paras. 2.07 and 3.01 to 3.04). The importance of theagricultural sector is certainly recognized; however, YAR's capacity to imple-ment successful programs is hampered by (1) inexperience in systematic program-ming, (2) lack of institutional infrastructure, and (3) a weak resource baseoffering limited opportunities for growth. The Government is quite appro-priately concentrating its efforts on overcoming institutional weaknesses andimproving the supply of all basic agricultural inputs (farm equipment, fertil-izers, seeds, extension service) in an attempt to modernize the sector andincrease productivity.

B. Grain Production, Consumption and Imports

2.05 Production: Total annual cereal production ranged between 1.1 and1.3 million m ton during the 1970/71 to 1973/74 period; it rose to 1.98 millionm ton in the high rainfall year 1974/75. Sorghum and millet, displaying highdrought resistance, represent the principal grain crops, accounting for anaverage of 75%-80% of total grain production. Barley, wheat and maize requiringhigher levels of moisture, cover the balance of cereal production. Productionlimitations have resulted in wide fluctuations in annual production and lowproductivity (Annex 1, paras 2.1-2.5).

2.06 Production Organization and Technology. Farming systems vary re-gionally according to climate, soil characteristics and water availability.Holdings range between 0.25 and 10.0 ha, varying in size with region and de-gree Qf non-rainfed culture; in areas where cultivation remains rainfed-basedand extensive in nature, holdings generally fall in the upper portion of therange. The great proportion of total cultivated land area remains under thecontrol of large individual farmers, or sheikhs, and, to a lesser extent,State and religious institutions, which generally lease part or all of their

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land under sharecropping arrangements. Under these arrangements the tenant isexpected to supply required family and bullock labor input and the landlordthe full cost of hired labor. Procedures for further cost and income divisionbetween landowners and tenants differ widely, depending upon the particularcrop cultivated as well as the availability and method of supplementary irri-gation. In most cases, material input costs, zakat 1/, and net production aredivided between the tenant and landowner in fixed proportion, with the ten-ant' s share raniging from 25% on well-irrigated to 50% on rainfed land. Thesearrangements, in most cases, appear equitable. Even though most annualtenure arrangements are verbally established, tenant evictions appear rare.Women and children actively participate in farm operations. Family laborremains the primary source of manpower in farm operations; it is supplementedby hired workers usually only in peak harvesting periods. The level of tech-nology is traditional and utilization of modern production inputs at presentnegligible. Utilization of chemical fertilizers, improved seed varieties, andpesticides is in the main circumscribed to those areas having guaranteed watersupplies either through high annual rainfall or supplementary irrigation facil-ities. Soil nutrient replenishment is essentially limited to the applicationof manures. Research and extension services are presently minimal, and thosethat have been initiated are in the formative stages.

2.07 Production Constraints. Water availability at planting time apppearsto be the governing parameter of hectarage planted to cereals, and water avail-ability during the growing season the principal determinant of per hectareyields. In the low rainfall years, 1970/71 to 1973/74, the area planted withcereal crops declined from 1.56 to 1.19 million ha; however, with increasedrainfall in 1974/75, cereal area rose to 2.25 million ha as marginal land wasbrought back into production, mainly for sorghum and millet cultivation. Con-siderable efforts to increase grain productivity are concentrated on the in-troduction of suitable high-yield varieties, particularly cross breeds ofexotic strains with local varieties more adapted to agroclimatic conditionsin YAR, and increased consurmption of chemical fertilizers and pesticides.However, serious constra?nts are likely to limit a major expansion of grainproduction: (a) vagaric3 in rainfall affect yields, hectarage planted andrisk levels associated with innovation adoption; (b) the limitations imposedon chemical fertilizer use to terrace cultures because of possible toxin build-up in inter-field irrigation drainage flows; (c) limited scope for hectarageexpansion especially in the high rainfall, highly productive Taiz and Ibb Gov-ernorates; (d) the substitution of cereal hectarages by more profitable cashcrops, .particularly with increasing tube well irrigation; and (e) the lack ofa cc¶mpetent country-wide extension service, adequate seed multiplication facil-ities and supportive transportation infrastructure (Annex 1, paras. 2.6-2.13).

Consumption. Total annual cereal consumption 2/ averaged 1.5 mil-lion n tLjn during 1969/71 to 1973/74 equivalent to a per capita consumption of292 kg per annum. The -Laple food group in the Yemeni diet is cereals with

W/ Tax .naounting to 10% of production.

2/ 'Includ3s direct huraan corls-lmption, agricultural and industrial uses andLosses.

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approximately 75% of average caloric and 72% of protein intake derived fromthe consumption of cereal-based food items. Per capita direct human cerealconsumption averages about 400 grams per day or 146 kg per annum. Wholegrainlocal flat bread is the principal basis of all meals and often representsthe sole food consumed at a meal. Direct human cereal consumption for mostincome groups is expected to increase with rising incomes.

2.09 Nutritional Status. Although there is little statistical dataavailable on the nutritional status of people in Yemen, the few studies andnutrition-related indices all point to malnutrition as a major problem.Protein-calorie malnutrition (PCM) is extremely widespread amongst preschoolchildren, 14% are severely malnourished while only about 10-20% exhibit normalgrowth. High mortality rates in Yemen also point to serious levels of malnu-trition. The average mortality rate among children below 15 years of age isreported to be 46%; about 76% of these children die before they reach twoyears of age. Infant mortality is 160 per 1,000 live births and 92 per 1,000for children 1-4 years. FAG food balance sheets of 1964-66, although now outof date, provide supporting evidence that food consumption has been hazar-dously low. According to FAO, food consumption in Yemen has provided anaverage daily intake of only 1,900 calories and 58 grams of protein (comparedwith 2029 calories and 55 grams of protein on average in Iran; and 2,541calories and 64 grams of protein in Brazil). In addition to the problem ofinadequate food consumption, surveys indicate that Yemeni people suffer fromwidespread deficiencies of certain vitamins and minerals. Vitamin A defi-ciency has been reported in a number of surveys and night blindness, result-ing from this deficiency, is common in Yemen. Vitamin C deficiency whichcauses scurvy among young children is also widespread. Rickets resulting fromvitamin D deficiency is prevalent throughout the country. In the Taiz region,rickets was found in 17% of the children 6 months to 4 years of age; in one.village 59% of the children 1-2 years of age had signs of rickets. Symptomsof niacin and riboflavin deficiencies were reported among school children andiron deficiencies resulting in anemia was reported in both pre-school andschool age children. Although it seems evident that the major nutritionproblem in Yemen is lack of food, particularly among infants and youngchildren, it is also clear that the population is suffering badly fromlack of many important vitamins and minerals.

2.10 Imports. Commercial imports of all cereals averaged approximately105,000 m ton annually over the 1969/70-1973/74 period or about 7% of totalcereal supply. Predominant cereal imports were wheat grain and wheat flourwith annual import quantities varying in response to shortfall in domesticsupply; determined by the domestic crop success. Cereal imports more thandoubled during the 1969/70-1973/74 period while the value of such commoditiesincreased more than four-fold reflecting major hikes in world grain prices.Baking' quality and blend palatability, as well as long established trade rela-tions seem to determine preference for the harder, more expensive white wheats,especially from Australia, and for low priced, soft winter wheat flour from EEC

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sources. Imports have on the average entered the YAR port of Hodeidah in thegrain-flour ratio of 2:1, paralleling reported mixing preferences of wholegrain and white flour utilized in home baked bread preparation. Data oncereal grants-in-aid are fragmentary and incomplete. Average quantitiesDeceived under aid programs have been estimated at 62,000 m ton per yearduring 1969/70-1973/74, representing about 4% of YAR's total cereal supply.Several multinational and bilateral organizations participate in assistanceto the YAR. The volume of these grants varies directly, but inversely, withdomestic crop success.

2.11 Prices. Farm prices for grain commodities in Yemen are relativelyhigh compared with international prices and fluctuate heavily. Contrary toimported cereals the Government exerts no effective price control over thedomestically produced grain (see also para. 2.17). The spread between actualfarm prices and eventual consumer prices for domestic grain is reportedlysizable as is the post-harvest price buildup throughout the year. Farm gateprices for sorghum ranged from a low of US$31/m ton to a high of US$460/m tonduring 1974/75. At the retail level, white sorghum prices were US$345/m tonbefore the harvest and were expected to bottom out eventually at US$173/m tonafter the harvest.

C. Grain Storage

2.12 YAR needs both additional adequate grain storage facilities andsignificant improvements in grain storage management and sanitary standards.In rural areas grain is usually stored in large petroleum drums for currentneeds and in sealed earthern pits, called "madfans," for long-term storage tocover future requirements and potential crop failures. Only in a few areas,where rainfall is low and the drainage system consisting of a layer of sandand crop stubble functions properly, is the madfan a satisfactory storagefacility; its low internal temperature inihibits insect reproduction and activ-ity and the anaerobic atmospheric environment discourages aerobic microfloraproliferation. Commercialized domestic grain, zakat collections and importedcereals are typically handled in bags and stored in flat warehouses or store-rooms. Zakat commodities often are also placed in madfans, especially atintermediate distribution points. Although major grain merchants as well asthe Government own some good, relatively new, warehouse space, most of thegrain storage is improperly managed and insanitary. Particularly Governmentowned grain, often stored in rented madfans and various small stores, sufferssignificant losses due to infestation, moisture and rodents. Based on spotchecks in YAR and experience in other countries losses have been estimated toaverage about 3% of grain stored. Data on the total capacity of satisfactoryspace are not available. Most of it is owned by private merchants and locatedin urban centers; the Government owns two new warehouses of a total capacityof 5,000 m ton in Sana'a. Outside Sana'a the lack of suitable storagespace has limited the Government's ability to collect zakat in kind an' s-tribute it during the year under its institutional and social feeding r -grams. Bakeries typically maintain some space for cereal storage but jsn

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often have improperly managed stocks and unhygienic facilities. As yet nomodern grain silo yet exists in Yemen.

D. Grain Processing

2.13 Milling. There is no modern flour mill in YAR. In the more geo-graphically remote areas, women manually stone grind the grain into whole grainflour. Many larger villages and most urban centers have commercial, power-driven, stone buhr mills for custom grinding for commercial bakeries as wellas nearby private consumers. Because grain is rarely cleaned before proces-sing, flour often contains significant quantities of ground foreign matter.Total milling capacity presently is adequate and expansion is expected toparallel demand.

2.14 Baking. Although most of the bread consumed in Yemen is homemade, alarge quantity, especially in urban areas, is prepared in commercial bakeries.Total bread consumption in YAR is estimated at about 2,000 m ton per day(flour basis) of which the existing commercial bakeries produce about 190 -200 m ton, or roughly 10%. The majority of these commercial units have adaily capacity of 0.5 - 1.0 m ton (flour basis) and are equipped with brickhearth ovens fired by diesel oil or wood. Private bakeries are increasinglyengaging in custom baking of homeprepared dough. The total number of commer-cial bakeries in the YAR is estimated at between 220 and 230. Army garrisonsin urban centers typically maintain large-scale bakeries to supply in additionto personnel rations, about 20 m ton bread for government-sponsored school andhospital feeding programs, as well as charity distribution programs. Prin-cipal problems encountered in the YAR bakery sector are (a) unsanitary con-ditions, (b) improperly maintained plants, (c) inadequate storage space forsupplies, and (d) inefficient stock and operational management. Homebaking,which has contributed to damaging deforestation, is declining because of thehigh cost of wood that is used as fuel, and the inconveniences and healthhazards of homebaking. Also, increasing urbanization supports the trendtowards consumption of bakery produced bread. However, switching to bakerybread has been held back by the bakeries' failure to supply bread of thehomemade type, which is the local flat or kudam bread based on a whole grainand white flour mixture.

E. Grain Marketing

2.15 Domestic Grain. About 85% of the domestic crop remains on the farmsfor subsistence, for animal feed and as seed and therefore fails to enter thecommercial market. Approximately 11% of the average crop moves interregionally(Annex 3). Merchants acquire the grain at the lowest prices they can negotiateat harvest time, and subsequently store and distribute stocks at constantly in-creasing prices during the post harvest season. A large quantity of the grainsupply, inclusive of imported volume, is sold in full bag lots directly mostlyto urban households at wholesale prices.

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2.16 Imported Grain. Five importers dominate the commercial market forimported cereals with the largest covering 50% to 60% of the market. Theselarger importers also serve as agents for smaller buyers who are primarilywholesalers. The large importers collect small purchase orders, combine itemsinto economical lots, negotiate prices with foreign suppliers and arrange ship-ping. The absence of centralized controls over the volume and seasonal distri-bution of imported cereals as well as the ease by which import licenses andforeign exchange purchase authorizations are obtained have resulted in largefluctuations in available supplies and considerable price volatility.

2.17 Government Activities in the Cereal Sector. The Ministry of Financecollects the zakat and customs duties on commercial cereal imports, predomi-nantly in kind, at a rate of 5%, and administers the distribution of grants-in-aid grain imports. Periodically, the Ministry of Supply issues and monitorsprice ceilings for imported wheat and flour, at the wholesale and retail levels.The price control system for imported wheat and flour is reasonably effective.The quasi-governmental Yemen Foreign Trade Company imports small volumes offood commodities duty-free and sells them in accordance with Ministry of Sup-ply price guidelines; it also handles the importing of grain under grants-in-aid credits. Cereal stocks accumulated by the Government from zakat and cus-toms duty collections and grants-in-aid, averaging 75,000-79,000 m ton perannum, are utilized in public feeding programs for army personnel, schoolchildren, hospital patients, certain public servants and charity recipients,or sold in the market.

F. Transportation

2.18 Internal Transportation. There are no railroads in Yemen and allinternal transportation is by motor vehicles where satisfactory roads exist,otherwise by animals. A triangular, largely hard-surfaced road networkconnects liodeidah, Taiz and Sana'a. About 460 long-haul vehicles of 10-15 mton capacity are available to transport grain from the port of Hodeidah whileanother 50 vehicles of 5-15 m ton capacity are based in Mokha primarily toservice the Taiz area. Present transportation capacity appears adequate andsupply is responsive to increases in demand. Freight rates are set by theMinistry of Economy.

2.19 Handling of Imports. The principal port in the country is Hodeidahhandling about 87% of YAR's total cargo and 86% of its dry bulk imports.Ilodeidah enjoys several comparative advantages as a port facility over twoother sites, Mokha and Salif: (a) Hodeidah is an established urban area com-plete with supportive infrastructure; (b) the port is conveniently situatedwith relatively satisfactory road links with the majority of other urbancenters, (c) Hodeidah does not encounter major silting problems experienced inMokha alid, with the completion of present dredging operations, should be ableto handle vessels of up to 20,000 DWT. Hodeidah presently has three functionalberths one of which is shallow draft. A contract has recently been concluded'7ith the USSR to construct a fourth berth, 165 m in length, to be completedin 1976.

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2.20 Present unloading operations are inefficient and time consuming.Manual unloading of grain within the ships' holds, emptying grain-filledslings on to the quay apron, and subsequently handbagging to about 50 kg"catch" weight, aggravate the inadequacy of present berth space and thusresult in further port congestion. Under present conditions, a 10,000 mton ship requires about ten days for unloading. In October, 1975, a ship'swaiting time averaged about four days, a situation expected to worsen giventhe resumption of normal traffic through the recently reopened Suez Canaland the corresponding increase in the number of visiting ships, generallyof smaller tonnage for short-medium hauls, from European ports.

III. FUTURE TRENDS

A. Production, Consumption and Imports

3.01 Production. The present total land area under cereals, rangingbetween 1.3 and 1.9 million ha depending upon rainfall, will at best remainunchanged (see Annex 1, paras 2.7 to 2.13). In view of production constraintsdiscussed in para 2.07 above grain production is expected to average an annualgrowth rate of 1.5% and to reach about 1.5 million m ton by 1980 and 1.7 mil-lion m ton by 1990 (Annex 1, Table 10).

3.02 Consumption. The most important factor affecting future demand forcereals in Yemen will be population growth. The population is at the presenttime growing at an estimated average rate of 2.4%, 7% in urban and 2% inrural areas, despite high mortality. The high mortality rate is likely todecline substantially over the next decade in response to health-sanitationrelated programs, with no corresponding reduction foreseen in the present highbirth rate. As a result the present population growth rate is expected to risegradually to 3% per annum by 1990 (Annex 1, paras 3.4 to 3.9).

3.03 Given present low per capita income levels, the income elasticityof demand for cereals is assumed at approximately 0.5, a coefficient in linewith estimates for economies at similar stages of development and displayingcomparable consumption patterns. Together with an expected real incomegrowth of 4% per annum up to 1980 and 5% thereafter, total grain consumptionhas been projected to increase to 1.8 million m ton by 1980 and 2.7 millionm ton by 1990 (Annex 1, paras 3.10-3.11 and Table 10).

3.04 Imports. Based on the projections presented above concerningcereal consumption/production, domestic supply shortfall for cereals in1976 is-estimated to increase from a total of 199,500 m ton or 12.6% of pro-jected cereal consumption to 347,300 m ton or 19% of consumption in 1980,and 1,031,800 m ton or 37% of consumption one decade later. Assuming thatcereals will be acquired from foreign sources in approximate conformitywith the 2:1 grain-flour ratio observed on average in the past, flour im-ports into Yemen are projected to total 66,500 m ton in 1976 and to rise toroughly 343,000 m ton by 1990 (Annex 1, Table 10).

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B. Grain Handling and Storage Requirements

3. 05 With the projected rise in grain imports, the problems of significantgrain losses due to inefficient handling and short weighing, high import costsstemming from demurrage charges and high freight rates, and finally in-portcongestion will be aggravated. A port silo and ship unloading facilities areneeded to increase grain handling efficiency. They are designed to reducethe ship turn-around time to about two days for the 10,000 m ton cargo shipsthat presently call on Hodeidah and to about three days for the 14,000 m tonships that are expected to call on HIodeidah once the port's depth has beendtedged to 14 m in 1976. A silo with a 20,000 m ton capacity would be suf-ficient for short-term transfer storage of import volumes expected up to1990.

3.06 The total amount of new inland grain storage required in the futureand its location can only be determined on the basis of a more comprehensivecountry-wide grain storage study taking into account existing storage capacityand quality, and a projection of production and consumption trends by region.Ilowever, obvious shortages in storage capacity have been determined and re-quire immediate correction. Private storage space in the urban centers hasproved of insufficient scale to handle large Government-acquired stocks or wasunavailable on a sufficiently long-term basis to accommodate these quantities.Faced with these storage difficulties, the Government has often in the pastresorted to inefficient maintenance of its stock in scattered facilities andto frequent shipments of supplies to satisfy short-term needs. To cover theGovernment's most urgent present and future needs up to 1980, six warehousesof a total capacity of 18,000 m ton are necessary: 5,000 m ton in Ibb; 5,000m ton in Hodeidah; 3,000 m ton in Sana'a; 2,000 m ton in Damar; 1,000 m tonin Saada; and 2,000 m ton in Hajja. This additional warehouse space isimmediately required to store about 12,000 m ton of Zakat, mostly collectedonce a year at harvest time and distributed evenly during the year, and about43,000 m ton of customs duties and grants-in-aid cereals received relativelyregularly during the year (Annex 2, para 6).

3.07 Grain Stabilization. For the near term the Government has noplans to intervene actively in the domestic grain market or to maintainbuffer supplies of cereal foods to help bridge shortfalls. Ilith increasinggrain demand and imports in the future, as well as rising use of modernfarm inputs, the need for Government intervention will become increasinglynecessary to avoid shortfalls, stabilize prices and encourage productivityof grain production. Should at some time in the future the Government decideto become more active in the grain market, the YGGC, to be established underthe project, could be readily expanded along with facilities to take over thisresponhsibility.

C. Bakeries

3.08 Government Feeding Programs. The volume of bread for Goverr tfeeding programs, which is largely produced in army bakeries, is expecced

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to increase to about 26 m ton per day by 1980 (Annex 2, Table 2). Since thebread is currently made under unsanitary conditions, rendering it at timesunsuitable for human consumption, modern bakeries are necessary to supplybread produced under hygienic conditions. The bread would be enrichedwith vitamins and minerals (para. 4.14).

3.09 Commercial Bakeries. To achieve the Government's objectives inthe bakery sector of reducing homebaking and improving sanitation, invest-ments are necessary to build new bakeries and to rehabilitate existing ones,together with technical assistance on maintenance, sanitation and bread bakingaccording to the public's preferences. New bakeries will be necessary tosupply bread for expected increased demand of more than 7% per annum as aresult of both reduced homebaking and population growth (Annex 2, Table 2).They would also serve as demonstration units for bakery extension agents intheir efforts to upgrade existing bakeries. At present there exists noinstitutional source of investment credit for bakery construction and rehabil-itation. Although the Yemen Bank for Reconstruction and Development (YBRD)does extend loans and advances of a short-term nature primarily for internaland foreign trade and for industrial activities of private as well as publicsector enterprises, the institution to date has not provided credit fundingfor small-scale bakery modernization as envisaged under the project. Bakersindicated a need for credit for rehabilitation and expansion investments andexpressed keen interest in borrowing medium- and long-term funds for suchpurposes.

IV. THE PROJECT

A. Objectives and Summary Description

4.01 The project forms the initial phase of a long-term program to expandand improve YAR's grain handling, storage and processing system. It aims to(a ) curb grain storage losses; (b) reduce handling and import costs; (c) im-prove the sanitary conditions of the supply of bread - the population's mainstaple food; and (d) alleviate malnutrition and upgrade nutrition standardsthrough bread fortification and nutrition education. Provision of better breadwould also reduce inefficient home baking and decrease damaging deforestation.In establishing a Yemen General Grain Corporation (YGGC) the project wouldalso create the institutional framework for a possibly more active role of theGovernment in grain marketing at some time in the future.

4.02 The project would include:

(a) a 20,000 m ton modern port silo in YAR's principal portHodeidah with ship unloading and bagging equipment;

(b) six regional warehouses with a total capacity of 18,000 m ton;

(c) two Government operated bakeries, including small whole grain flourmills to serve them, of a capacity of about 10 m ton/day each;

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(d) a bakery credit component to provide loans to private sector

bakers;

(e) a study to provide a nationwide storage investment program

based on a survey of existing grain storage capacity and

quality as well as on future production and consumption trends

by region;

(f) a nutrition component including bread fortification with vitaminsand minerals, nutrition promotion and nutrition planning.

The project would also provide for the employment of engineering consultants by

the Government to assist in the design and construction supervision of the

silo, warehouses and Government bakeries; technical assistance to operate

the facilities initially ; a training program for key management and operational

personnel of YGGG and ACF; and extension service to private bakeries.

4.03 The YGGC would be established under the Ministry of Supply as a semi-

autonomous, Government-owned enterprise to implement and operate the silo,

warehouses and two 10-m ton Government bakeries. The bakery credit component

would be implemented by the Agricultural Credit Fund (ACF) in cooperation with

YGGC. ACF would also be the lend,ig channel for all credits to YGGC.

B. Detailed Features

Hodeidah Port Silo

4.04 The silo would be a transfer port silo with a storage capacity of

20,000 m ton. Its capacity would be sufficient to handle the grain imports

expected in 1980 in ten turnovers per year. Because import volumes are

projected to rise rapidly, site selection and construction plans would take

into account the possibility of adding silo bins in the future without expen-

sive alterations of, and additions to, the head house and conveyor system. The

storage bins and head house would be constructed of poured reinforced concrete

by the slip-form method. Silo foundations would be pile-supported. The basicgrain handling systems would have a full rated handling capacity of 400 m ton

per hour and would produce not less than an average operating output of 200 m

ton per hour for rapid discharge of import shipments. Three elevators would

receive the grain, move it internally, and transport it to the packing system.

The elevators would be arranged so that any one of the three could be used for

any one of these transport functions. The silo would have cleaning, weighing

and bagging facilities, the latter with an average capacity of about 200 m ton

per hour. The grain would be discharged in bags for storage and distribution

within the country. A small warehouse would be able to hold 1000 m ton of

bagged grain. A 1000 m2 building would house offices, a maintenance shop,

storerooms for parts and supplies, a grain grading laboratory and employee

facilities.

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4.05 The site selected by the Government for the silo facilities is a 200m x 200 m parcel in the Hodeidah port 1/ located immediately adjacent and per-

pendicular to the site for berth No. 5. The site would allow for expansion of

the silo and construction of grain processing facilities should they be neededat a later stage. Berth No. 4 would be used for bulk grain unloading. It is

scheduled to be completed by the end of 1976 under a contract signed with the

USSR. One 5-m ton and one 10-m ton capacity crane already purchased by theHodeidah Port Authority, would be used to discharge bulk grain into the receiv-ing hoppers on the apron. The cranes will be equipped with clam shell grainbuckets which would be procured with the cranes. An underground and a crossconveyor system would transport the grain to the silo.

4.06 Berth No. 5 is tentatively planned for construction in 1982 and isexpected to become eventually the bulk grain receiving berth. In that case,only the conveyor system would have to be moved from berth No. 4 to No. 5.

Regional Warehouses

4.07 Six regional Government warehouses of a total capacity of 18,000 mton would be built to cover the most urgent storage needs: 5,000 m ton inHodeidah, 5,000 m ton in Ibb, 3,000 m ton in Sana'a, 2,000 m ton in Damar,2,000 m ton in Hajja and 1,000 m ton in Saada. In all places sufficient landis available; four sites have already been selected and all sites would beacquired within three months of the proposed credit's effectiveness. Siteacquisition would also be a condition of disbursement for warehouse construc-tion. Warehouse sites and design would allow for future expansion as well assound warehouse management including sanitation and fumigation. Space wouldbe provided on the basis of 0.6 m2 per m ton. The warehouses would have gradelevel concrete floors and the handling of the grain would be labor intensive.While the detailed design work would be done by the engineering consultants,the structure is expected to have concrete frame and floor, concrete-blockcurtain walls, prefabricated wood roof-support structure and metal roofing.

Bakeries

4.08 Two 10-m ton (flour basis) bakeries (in Sana'a and Taiz) would bebuilt to produce bread for the Government's feeding programs in schools andhospitals and for the poor. The bakeries would be owned and operated byYGGC; they would be modern, semi-autonomous conventional systems with multi-deck peel ovens allowing the baking of European-style, Kudam, and the localflat-type breads. They would be housed in new buildings and properly de-

signed to facilitate cleanliness and hygiene. A small whole grain flourmill-, equipped with grain cleaning machinery would be installed in each10-m ton bakery.

4.09 One 3-m ton and nine 1-m ton commercial bakeries would be financedunder the bakery credit to produce bread for the Government feeding programsand for retail sales. Production contracts for about 3 m tons of bread daily

1/ See preliminary silo layout Annex 9, Chart 1.

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in Hodeidah and for about 1 m ton in each of the cities of Ibb, Damar andSaada would be awarded to private bakeries on the basis of competitive bid-ding procedures according to guidelines and quality, nutrition and sanitarystandards established by YGGC. All project bakeries would be establishedunder the technical direction of YGGC's bakery extension agents and wouldserve as demonstration units for the improvement of existing bakeries. 'Theywould have simple equipment and be relatively labor-intensive.

4.10 A bakery rehabilitation fund of US$1 million (1975 prices), alsohandled by ACF, would provide loans to an estimated 50 bakers in all parts ofthe country for modernization and sanitation improvements of existing facilities.Eligible for financing would be items such as new ovens, mixers, oven heatingunits, fermentation cabinets, sanitary bread cabinets, utility installationsand building improvements. Upgrading and maintenance of the facilities inaccordance with acceptable sanitary standards would be conditions of the loan.Bakery extension agents would assist in planning improvements, formulating thetechnical aspects of the loan application, training personnel, and supervisingtechnical compliance with the agreements.

4.11 During negotiations, assurances were obtained on the project featuresas described in paras 4.03 through 4.10.

Technical Assistance and Training Program

4.12 YAR has only a limited availability of technical and specializedmanagement competence to implement and operate the proposed facilities. Theproject would provide for a major institution building effort both in estab-lishing YGGC and in expanding and strengthening ACF, the latter in coordina-tion with the proposed Livestock Credit and Processing project. It would pro-vide YGGC and ACF with adequate services of expatriate experts, part-timeconsultants and foreign and "in-house" training of local counterpart staff(see also para 5.07).

Storage Study

4.13 Qualified consultants would be appointed by YGGC to conduct a studyto provide a nationwide grain storage investment program. Assurances to thiseffect were obtained during negotiations. General terms of reference for theconsultants appear in Annex 16.

Nutrition Component

4.14 Bread Fortification. Through the introduction of a nutrition compo-nent, the project provides the opportunity to improve the nutritional statusof Government and commercial bread recipients. The nutrition components in-clude bread fortification, nutrition promotion as well as provision for nutri-tion research and planning studies. Bread fortification through Governmentfeeding programs would reach approximately 30,000 school children, 23,000members of the poorest urban families and 14,000 hospitalized persons. Inaddition, fortification in commercial retail bakeries, proposed as a pilotoperation, would supply fortified bread to another 68,000 consumers. Brc,-dfortification for Government feeding programs would initially use a prL,lix

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containing fifteen supplementary vitamins and minerals, 1/ costing 0.6 #/kgflour, at a total of $57,000 per annum for 9,500 m ton production. The com-position of the premix is based on FAO/World Food Program (X4FP) supplementsdesigned to meet generalized deficiencies in young children. For fortifica-tion in commercial retail bakeries a simpler vitamin-mineral premix costing0.1 l/kg flour at total cost of $5,000 annually would be utilized to meetdeficiencies in the older children and the adult population. These premixesare safe and effective, as has been demonstrated during almost 10 years ofworldwide use. 2/ Fortified bread provided for schools and charity programs aswell as through the commercial retail bakeries would reach the recipients overa long period. Although fortified bread for hospitalized persons, on theother hand, would be received by a transient group and thus not have a longlasting impact, such recipients would benefit from fortification during theirstay in hospital. Moreover, the doses of certain vitamins and mineralsincluded in the premix, notably vitamin A and iodine, would, within the bodyof the patient, rebuild depleted stocks and build up reserves to be drawn uponfor a longer period 3/.

4.15 Nutrition Promotion. Nutrition promotion will be directed to speci-fic target groups and supervised by a Nutrition Expert located within theBakery Division of YGGC. Initially trained and supported by internationallyrecruited consultants, the Nutrition Expert would have responsibilities fordeveloping nutrition promotion materials and designing and implementingpromotional programs, particularly for fortified bread to urban population.A total of US$180,000 has been allocated over four years for nutrition promo-tion as detailed in Annex 5, Table 2. During the last year of the projectimplementation period an evaluation of fortification and nutrition promotionwould be undertaken by a team that would be composed of an expatriate andlocal staff, selected by the Government and acceptable to IDA. The team would(1) consider the continuation or termination of the program; (2) if continua-tion were advised, suggest modifications; and (3) evaluate the effectivenessof fortification and nutrition promotion on the specified target groups, andconsider its possible extension to rural areas. A total of US$24,000 has beenallocated for this evaluation.

4.16 National Nutrition Planning. At present there is no national nutri-tion program in YAR. In line with the Government's stated objective of upgrad-ing the dietary standards of the population (see para 2.04), the projectwould assist the Government in developing a national nutrition plan. A total

1/ Upon completion of the nutritional status survey, discussed in para 4.16,adjustments in the premix, if necessary, would be made.

2/ The bakery extension agents would carefully supervise the utilization ofthe premix to ensure proper use.

3/ It should also be noted that the fortified bread is produced in a con-tinuous process which would render it technically difficult to separatebread for hospitals for specialized handling and, in view of the lowincremental costs for fortificant addition, financially not worthwhile.

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of US$180,000 would be provided for a nation-wide nutrition status survey and,on its basis, the formulation of a national nutrition plan. YGGC would beresponsible for implementing the nutrition survey and for developing thenutrition plan, in coordination with the Ministry of Health and the CentralPlanning Organization. Implementation responsibility for nutrition planningwould rest with the Ministry of Health. General terms of reference forthe nutrition survey and plan development were discussed during negotia-tions and are shown in Annex 17.

4.17 The total cost of the nutrition component to be borne by the Govern-ment would amount to US$660,000 (in 1975 prices) (For a detailed cost breakdownsee Annex 5, Table 2). YGGC's bakery division would be responsible for imple-menting it. Fortificants would be provided to the bakeries at no cost. Duringnegotiations, assurances were obtained that the nutrition component would beimplemented as described in paras 4.13 through 4.16 and that the Goverrmentwould provide the necessary funds for a continuation of the fortification andnutrition promotion program, if, on the basis of the evaluation study, theGovernment and IDA agree to a continuation.

Engineering Consultants

4.18 A qualified engineering consultant firm would be appointed to preparefunctional specifications for the silo structure and mechanical-electrical equip.ment layout as well as detailed designs for the warehouses and 10-m ton bakeriescivil structures and mechanical-electrical equipment. The firm would also pre-pare tender and contract documents and assist in bid evaluation. During the con-struction period it would provide on-site inspectors to ensure that civil worksconstruction and mechanical-electrical equipment installations conform tocontract specifications. Although there are Yemeni engineering consultantfirms that are qualified to perform parts of the above task, all would have tobe supplemented with foreign experts or alternatively an association with aforeign firm would have to be formed. Assurances were obtained during nego-tiations that the employment of engineering consultants acceptable to IDA andon terms and conditions satisfactory to IDA would be a condition of effective-ness of the proposed credit. The Government has already invited proposals onthe basis of the draft general terms of reference for the engineering consul-tants, presented in Annex 15. The evaluation of proposals is expected tobe completed by end May and the appointment of consultants is expected duringthe first half of June.

C. Construction Schedule

4.19 The project facilities would be constructed over a three and a halfyear period following a 12-month period for design, engineering and contractorselection as shown in Annex 12. Apart from the appointment of key projectstaff and engineering consultants , site acquisition would be a key milestonefor expeditious project implementation. Assurances were obtained duringnegotiations that land for the warehouses and 10-m ton bakeries be selected,with IDA's concurrence, within three months of the signing of the credit andacquired within three months of the credit's effectiveness.

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D. Cost Estimates

4.20 The total project cost is estimated at YRls 98.1 million (US$21.8

million) of which the foreign exchange component is 69%, or YRls 68.0 million

(US$15.1 million). The foreign exchange cost includes the cost of imported

equipment and materials, foreign personnel required for the construction

and installation of project facilities, foreign consultants, training abroad,

imported fortificants, and the foreign exchange component of materials used

in local construction works. Detailed cost estimates are presented in

Annexes 6, 9, 10 and 11, and are summarized as follows:

For. For. For.

Category Local Exch. Total Local Exch. Total Exch.

----- YRls'000 --- …-- ------Us$2ooo-- - %

YGGC InvestmentsSilo 6,066 22,518 28,584 1,348 5,004 6,352 79

Warehouses 4,977 4,892 9,869 1,106 1,087 2,193 50

10-m ton Bakeries 2,025 4,811 6,836 450 1,069 1,519 70

Subtotal 13,068 32,221 45,289 2,904 7,160 10,064 71

Bakery CreditNew Bakeries 2,529 3,326 5,855 562 739 1,301 57

Rehabilitation Fund 612 4,536 5,148 136 1,008 1,144 88

Subtotal 3,141 7,862 11,003 698 1,747 2,445 71

Nutrition Component 297 2,673 2,970 66 594 660 90

Storage Survey - 932 932 - 207 207 100

Technical Assistance 459 3,155 3,614 102 701 803 87

ACF & Bakery Credit

Base Project Cost 16,965 46,843 63,808 3,770 10,409 14,179 73

Contingency AllowancesPhysical (7.1%) 1,139 3,384 4,523 253 752 1,005 75

Price (43.8%) /1 12,119 17,816 29,935 2,693 3,959 6,652 60

Total Project Cost 30,223 68,043 98,266 6,716 15,120 21,836 69

/L For calculating price contingencies on local components an expected

inflation rate of 20% per annum was used. For imported equipment and

civil works, the following annual inflation rates have been employed:

Year Equipment Civil Works

1976 9 131977-79 8 121980-81 7 10

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4.21 Cost estimates are based on end 1975 prices. A physical contingencyof 10% is allowed on the silo investments to cover the cost of unexpected soilconditions and piling requirements as well as alternative designs for themechanical-electrical layouts. A 5% physical contingency allowance is includedfor the other project components. An average price contingency of 43.8% oftotal project cost including physical contingencies has been allowed for ex-pected price inflation.

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E. Financing

4.22 The financing plan for the project is shown below:

Amount Amount % of % of % ofComponent of in in Component's Component's Project'sthe Project YRIs '000 US$ '000 For. Ex. Total Cost Total Cost

IDAEngineeringConsultants 2,520 560 100 75 --

TechnicalAssistance 10,350 2,300 100 91 __

Warehouses 2,970 660 58 25 __

Half of Sub-loans to Bakers 6,075 1,350 60 40 --

Nutrition 1,485 330 40 36 --

Total IDA 23,400 5,200 34 /1 -- 24

Saudi FundSilo 43,200 9,600 100 100 --

10 m ton Bakeries 6,300 1,400 100 69 --

Total Saudi Fund 49,500 11,000 -- 50

GovernmentEngineeringConsultants 855 190 0 25

Technical Assistance 1,080 240 0 9Warehouses 8,708 1,935 42 75

Half of Subloansto Bakers 6,075 1,350 40 40

Nutrition 2,610 580 60 64

10 m ton Bakeries 2,812 625 0 31

Total Government 22,140 4,920 -- 23

Investors'Contribution 3 060 680 0 20 3

Grand Total 91,800 21,800 -- _ 100

/1 34% of the total foreign exchange component of the project.

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The Il)A credit would be made to the (overnment on standard IDA terms. TheSaudi Fund loan would be extended to the Government on terms similar to thoseof IDA; it would finance the silo and the foreign exchange cost of the 10 m-ton bakeries under parallel financing arrangements. The IDA credit wouldfinance the foreign exchange cost of engineering consultants and of technicalassistance as well as part of the cost of the warehouses, bakery credit andnutrition component, as shown above. The Government would finance the remainderof the warehouse component as well as the local cost of the 10 m-ton bakeries,of engineering consultants and technical assistance and 40% of the smallbakery investments. It would also finance any cost overruns that may occur.Agreement was reached during negotiations on these arrangements. The con-clusion of a loan agreement between the Government and the Saudi Fund forUS$11 million would be a condition of effectiveness of the proposed IDAcredit.

F. Procurement

4.23 Silo and 10-i ton Bakeries. The silo (US$9.6 million) and two 10-mton bakeries (US$2.0 million)would be procured by YGGC, assisted by theengineering consultants, under international competitive biddiing according toSaudi Fund rules. The silo facilities would be procured under a turnkeycontract since the civil works structures need to be closely integrated withthe mechanical-electrical equipment.

4.24 Small Equipment. Purchases of equipment items or groups of itemsunder the bakery credit component would be made in small lots over the four-year period of the project. They are expected to total about US$900,000.They would be procured by the investors under ACF's supervision on the basisof local competitive bidding procedures which are satisfactory to IDA. Asummary of bids or quotations, an analysis report and a brief justification ofthe contract award would be sent to IDA at the time the award is made. Minor"off the shelf" items costing less than US$20,000 would be procured by theinvestors also under ACF's supervision directly through existing commercialchannels. The total of such direct procurement would be about US$600,000.Foreign suppliers of goods and materials are well represented in YAR, neces-sary service facilities are available, there are no important quotas or otherimport restrictions, competition is keen and prices are competitive.

4.25 Civil Works. The regional warehouses I/ (US$2.6 million) are simplestructures and consist mainly of civil works. They as well as civil works forthe bakeries are dispersed throughout the country. riey would be constructedover a period of three to four years and thus be unsuitable for bunching.Therefore, contracts would be too small to be suitable for international com-petitive bidding. YGGC and the bakers, under IDA's and ACF's supervisionrespectively, would procure them under local bidding procedures, which aresatisfactory to IDA. Minor construction related services costing less thanUS$20,000 would be contracted directly with qualified firms.

1/ The average cost of a regional warehouse is US$390,000 (in 1975 prices).

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4.26 General. Procurement of consultant services required for the projectwould be made according to IDA guidelines. There are no preferential tariffagreements between YAR and other member countries that would affect evaluationof bids, and there are no domestic manufacturers of silo mechanical-electricalequipment. Additionally, Yemeni civil works contractors have not had experiencein large-scale slipform works. During negotiations, assurances were obtainedthat the procurement procedures contained in paras 4.24 to 4.26 would befollowed.

G. Disbursements

4.27 The IDA credit would be disbursed over 5 years. An estimated dis-bursement schedule is given in Annex 13. Disbursements would be made against100% of foreign exchange expenditures for engineering consultants and technicalassistance, or 75% of local expenditures for engineering consultants and 90% oflocal expenditures for technical assistance (representing the foreign exchangecomponent) as well as 50% of small bakery subloans and 30% of the costs of thewarehouse and the nutrition component. Disbursement requests would be sup-ported by full documentation, except for ACF subloans to private bakers forwhich IDA would disburse against certificates of expenditures. Supportingdocuments and contracts would be retained by ACF and would be available forreview by IDA during supervision. Retroactive financing from February 1, 1976up to an amount of US$160,000 is recommended. Assurances to this effect wereobtained during negotiations.

H. Environmental Impact

4.28 The project would have a favorable environmental impact by improvingsanitation, reducing air pollution caused by home baking and decreasing de-forestation (see also para 6.06).

V. ORGANIZATION AND MANAGEMENT

A. YGGC Organization and Operation

5.01 There exists no institution in YAR with the capability to implementand subsequently operate the project facilities. Therefore, a general graincorporation, the YGGC, would be established under the Ministry of Supply forthis purpose. The YGGC would be a semi-autonomous Government-owned enterpriseto be run on a sound commercial basis. YGGC's draft charter was discussedduring negotiations and the Government's approval of YGGC's charter satisfac-tory to IDA would be a condition of making the proposed credit effective. TheGovernment has already, on IDA's suggestion, appointed YGGC's Manager andCo-Manager (see para 5.07).

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_02 YGGC's responsibilities under the project would be:

(a) to implement the silo, warehouse and 10-m ton bakerycomponents and subsequently to operate and maintain them;

(b) to organize and manage the technical assistance program forprivate bakers and to assist ACF in implementing the bakerycredit component;

(c) to initiate and supervise the grain storage study;

(d) to implement and control the nutrition component.

After the project's implementation period all existing Government-owned grainstorage and processing facilities except those operated by the army would betransferred to YGGC for operation and management. Assurances to this effectwere obtained during negotiations.

5.03 In accordance with YGGC's responsibilities its legal powers wouldinclude:

(a) the acquisition of-land for its facilities;

(b) contractual arrangements with firms or agencies for theemployment of experts and consultants, for executing works,and for supplying equipment, materials and services; and

(c) the purchase and sale of cereals and cereal products onbehalf of the Government. For these transactions the Gov-ernment would provide YGGC with the necessary funds and otherresources; it would also reimburse YGGC for any loss that mayresult from such sales or purchases.

Assurances on these matters were obtained during negotiations.

B. Project Management

5.04 Organization. YGGC would have a board consisting of the Minister ofSupply as Chairman, a representative of the Central Planning Office and theMinistry of Finance, the General Manager of ACF, the Director of the HodeidahPort Authority and the Project Manager and Co-manager of YGGC. The boardwould decide on all policy issues, major invstments and operational mattersand approve key personnel decisions, as well as approve the annual balance

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sheet. 1/ The Project Manager would have the overall operational responsi-bility for project implementation and management. Three operational divisions,a silo, warehouse and bakery division, would be in charge of the individualproject components, and an accounts and audit division would handle the ac-counting and financial control function. YGGC's organization chart is givenip Annex 7. The Project Manager in cooperation with the Division Managers wouldformulate operating, accounting and auditing procedures for approval by YGGC'sboard. YGGC's Head Office and the divisional offices would be located inSana'a except the silo division, which would be housed in the silo complexin Hodeidah. Assurances were obtained during negotiations on these mat-ters and that YGGC's charter and organization would be changed only with IDA'sconcurrence.

5.05 Operating Policies. YGGC would operate on a commercially sound basis.It would provide bulk grain unloading, storage and baking services for privatemerchants and the Government at service fees that would cover its operatingcosts, depreciation and financial expenses and allow YGGC a reasonable returnon its equity (Annex 7, Tables 1-3). The silo would handle all bulk grainimported through the port of Hodeidah; a Government decree to this effectwould be passed by December 1979, the estimated completion date of the silo.The initial service charge to be paid by the importer of grain would be YRls36 per m ton (US$8 per m ton) (Annex 9, Table 5). The warehouses would storefor the Government the grain that is collected in kind as tax (zakat) andcustoms duties, as well as grants-in-aid. They would also rent out availablespace to private merchants, particularly when major import shipments arrive.The service charge to be paid by the Government or renting private merchantswould be a minimum of YRls 1.1 (U$0.24) per 50 kg bag per month stored (Annex10, Table 5). The 10-m ton bakeries would bake bread for the Government-sponsored feeding programs and deliver it to the appropriate institutions.The Government-owned grain or flour would be delivered by the warehousedivision to the bakeries. The bakeries would receive a service charge to bepaid by the Government of a minimum of YRls 0.10 (US$0.022) per 150 gram loaf(flour basis), (Annex 11, Table 5). All service charges (of the silo, ware-house and bakeries) would be adjusted annually in accordance with cost changesthat may occur over the lifetime of the project. Assurances on the governmentdecree concerning bulk grain import handling and the principle governingoperating policies and service charges as described above were obtainedduring negotiations.

5.06 Private bakeries supplying bread for Government-sponsored feedingprograms would operate on a similar basis. The Government-owned grain or flourwould be delivered to the bakeries which would bake the bread and deliver itto the proper institutions. The bakeries would charge a fee covering operat-ing costs, depreciation, financial charges and a reasonable return on equity.The fee for the 3-m ton bakery would be a minimum of YRls 0.104 (US$0.023) and

1/ A more detailed delineation of Board and 14anagement responsibilitiesis given in Annex 7.

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for the 1-m ton bakeries YRls 0.160 (US$0.035). The charge would be adjusted

annually in accordance with increased costs. Assurances on the principledetermining the service charge were obtained during negotiations. -

5.07 Technical Assistance and Training. A major risk for the successfulimplementation of the project presents the lack of experienced and competentstaff in YAR. To overcome this constraint comprehensive technical assistance

and training programs have been incorporated in the project. YGGC would bestaffed with five senior expatriate experts, for periods ranging from three tofive years - project manager, silo superintendent, bakery superintendent,bakery extension agent and accountant/controller. All of the expertswould have local counterparts (see Organization Chart, Annex 7, Chart 1, andAnnex 8, Table 1). These experts would be responsible both for project im-plementation and for training of their counterparts; the counterparts would

increasingly take over management responsibilities during the implementationof the project. The experience under the Southern Uplands project indicates

that such experts and local counterparts are available. Moreover, progress inthe recruitment of key project personnel is encouraging. The project managerand his local counterpart, the project co-manager have already been appointed,and the selection process for the other expert positions and local staff isunder way. Additional experts would be appointed as part-time consultants forthe grain storage study and nutrition survey. Further details on expatriateand local staff requirements are given in Annex 7, Figure 1, Annex 8 and Annex4, Table 3. Local counterpart staff who are expected to take over operationaland managerial responsibilities during the project's implementation periodwould be given comprehensive training before they assumed their positions.

The training would include specialized foreign training for key personnel,equipment suppliers' instruction and "in house" training. Additional detailson the technical assistance and training program are given in Annex 8. Assur-ances were obtained during negotiations that expatriate experts acceptable toIDA and on terms and conditions satisfactory to IDA, and local staff asdescribed above would be appointed within fourteen months of the credit'ssignature date. Assurances were also obtained that a training program satis-factory to IDA would be formulated within sixteen months of the credit'ssignature and implemented by December 1979.

C. Credit Arrangements

5.08 ACF Organization. ACF, which was established under the Tihama De-velopment Project, would be the lending channel for all credits extended underthe project. ACF would appoint a senior industrial credit and an accountant/financial control officer, both internationally recruited experts, in its headoffice and open two new offices, one branch office in Sana'a and one fieldoffice-in Hodeidah, and expand its Taiz/Ibb offices. The branch office inSana'a would be located within the head office facility. Local counterpartswould be assigned to the expatriate experts; the new and expanded officeswould be appropriately staffed with local personnel. The branch manager inSana'a would be responsible for organizing the Sana'a branch office while the

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Hodeidah field office would fall under the responsibility of the Wadi Zabidfield manager. The head office would handle the financing of YGGC's invest-ments and the branch and field offices would implement the bakery creditoperations under the project with the head office's guidance and supervisionand under close cooperation with YGGC.

5.09 Credit Arrangements. ACF would channel the Government's equitycontribution to YGGC and provide medium and long-term loans to YGGC for itsinvestments and to private bakers for the construction of new bakeries andrehabilitation of existing bakeries. ACF sub-loans and Government equitywould each finance half of the investment costs of the silo, warehouses and10-m ton bakeries. The Government would lend to ACF an amount equivalent tothe loan financed portion of the project investments (US$11.7 million) out ofthe proceeds of the Saudi Fund loan and proposed IDA credit; the Governmentloan to ACF would be for 20 years inclusive of 6 years of grace. ACF wouldon-lend these funds and be the administrative channel for the Government con-tribution to YGGC equity of US$8.5 million (YRls 38.2 million). Technical as-sistance to ACF would be financed by a Government loan, to be repaid as shownin Annex 14. ACF would also be the administrative channel for a Governmentgrant of US$0.9 million (YRls 4.1 million) to YGGC for the nutrition component.ACF would charge no commission or fees on these equity and grant components.

5.10 Lending Procedures. For the silo, warehouses and 10-m ton bakeriesYGGC would update the appraisal and submit the sub-loan application to ACF.ACF would review the appraisal and evaluate particularly the financial vi-ability of the investment proposals. After its review, it would forward to IDAthe sub-loan application for the first two warehouses for its approval andalso the application for the silo and the 10-m ton bakeries for its review andcomments, with appropriate recommendations. The sub-loan applications for theremaining warehouses would be approved by ACF. The small bakers credit opera-tions would be carried out by ACF in close coordination with YGGC. YGGC'sbakery extension agents would assist bakers in preparing the project appraisaland in completing the loan applications and submit them to the bakery divisionof YGGC. After YGGC's technical and financial review, it would forward thesub-loan applications to the ACF with appropriate recommendations. ACF wouldevaluate the creditworthiness of the applicants and financial and economicviability of their proposals, and the availability of the investors' own con-tribution, which is at least 20% of the investment cost. ACF would forwardthe first three sub-loan applications for new bakeries to IDA for approval aswell as every fifth bakery improvement loan exceeding an amount of US$10,000or YRls 45,000. These arrangements would result in IDA reviewing eight to tensub-loan applications or 20% of the bakery credit component. All other sub-loan applications would be approved by ACF. When sub-loans are approved,ACF would inform YGGC and each applicant about the amount granted and theterms and conditions of the sub-loan. YGGC's extension agents would periodi-cally visit the loanee bakers to advise them on organizational and technicalaspects of bread baking, sanitary requirements and bread fortification andextend necessary assistance. These visits would be coordinated with thevisits of ACF's own staff to the project bakeries.

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5.11 Terms of ACF's Loans. For YGGC's investments the equity contributionwould be 50%. The minimum contribution of private bakers would be 20% of invest-ment cost. Maturities would not exceed the life of the assets financed. Maxi-mum repayment periods for the various types of sub-loans would be:

Investment Category Grace Repayment Total-----------years---------------

Silo 5 9 14Warehouses 4 10 1410-m ton Bakery 3 10 131-m ton Bakery 3 5 8Rehabilitation Credit 1 4 5

5.12 Interest Rates. Commercial interest rates in YAR range from 11% formedium and long-term investment credits to 13%-14% for short-term credits. Apreferential rate of 9.5% is charged by YBRD to the General Cotton Company,which onlends to farmers at no interest; the Cotton Company recovers its fi-nancial costs through marketing arrangements with farmers. Interest ratescurrently charged under the Tihama and Southern Uplands Rural Developmentproject are 8% for medium and long-term loans and 9% for short-term loans.ACF's onlending interest rate to YGGC and to private bakers would be 9.0% p.a.The Government's interest rate to ACF would be 4.0% p.a., giving ACF a spreadof 5.07%p.a. Given an estimated inflation rate in YAR of more than 25% in1974/75, the real interest rate would be negative with prevailing nominalrates. However, the YGGC would carry the foreign exchange risk, thus raisingYGGC's real cost of capital. The Government would assume the foreign exchangerisk for sub-loans to small bakers and for the technical assistance loan to ACF.

5.13 ACF's spread of 5.0% would be sufficient to cover its costs includingtechnical assistance, to make provisions for losses and to earn some profitwhich would be retained to build up ACF's equity. ACF's administrative costsconnected with the project average 2.8% of loans outstanding. Provisions forlosses assumed at 10% of small bakery loans and 2% of loans to YGGC would beequivalent to an average of about 0.7% of sub-loans outstanding during thelifetime of the project. A margin of 1.5% on its sub-loans outstanding hasbeen allowed to ACF to build up a reasonable equity. Although ACF's spreadappears to be on the high side in view of the size of some of the loans thatit will make, it is reasonable given the weak data base in Yemen, particularlyfor losses due to bad debts. 1/ ACF's projected cash flow for operationsunder the project shows an annual allocation to equit- averaging US$500,000(YRls 2.3 million) during 1976 to 1996 (Annex 14).

5.14 Security. According to ACF's present lending procedures, short-term loans up to YRls 5,000 are provided against guarantee of two persons.Short-term loans in excess of the above amount and all medium and long-termloans require land security. The sub-loans to YGGC as a Government enterprise

1/ A spread of 5% is also in line with that required by agricultural creditinstitutions in other less developed countries and, in fact , well belowthat required in a number of them.

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would be secured by a Government guarantee. Sub-loans to private bakers wouldrequire land and/or other property security. Land would be acceptable assecurity up to 80% and other property up to 60% of the current market value.

5.15 Supervision and Recovery of Loans. Loans would be supervised by ACFstaff who would periodically visit sub-borrowers' installations. Financialstatements would also be obtained from sub-borrowers semi-annually to keep awatch over their operations. ACF field staff would be responsible for timelycollection of loans from YGGC and private bakers.

5.16 ACF's Accounts and Audit. ACF would maintain separate accountsfor the project. ACF accounting has been handled by CB's accounting depart-ment, with accounts kept separately from CB's own accounts. As ACF's opera-tions would increase substantially under this and the proposed LivestockCredit and Processing project, it would be necessary for ACF to acquire thecapability to handle its own accounts. An accounting and financial controlexpert would be appointed not later than March 1977 for a period of four yearsto assist ACF in establishing and operating a modern accounting and financialcontrol system. Until ACF's accounting system becomes operational CB'saccounting department would continue to handle ACF's accounts. Under theproject, ACF accounts would also be audited by the Government's CentralOrganization for Audit and Control, which is acceptable to IDA. Audit reportsand financial statements would be submitted to IDA not later than six monthsafter the close of each fiscal year.

5.17 The items discussed in paras 5.08 through 5.16 above would be in-cluded in the Subsidiary Loan Agreement between the Government and ACF, whichwould require IDA's concurrence. The conclusion of the Subsidiary Loan Agree-ment would be a condition of the proposed credit's effectiveness.

D. Project Monitoring and YGGC Audit

5.18 YGGC would prepare quarterly progress reports, to be sent to IDAwithin three months of the close of each quarter. Assurances to this effectwere obtained during negotiations. YGGC would also establish and maintainseparate accounts for project expenditures. Its accounts would be auditedannually by the Government's Central Organization for Audit and Control, whichis responsible for auditing public and para-public entities. Assurances wereobtained during negotiations that YGGC's accounts would be satisfactorilyaudited and that YGGC's audited annual financial statements would be sent toIDA within six months of the close of each YAR fiscal year.

E. Project Evaluation

5.19 YGGC would be responsible for evaluating the benefits expected underthe project. In particular, the silo division would collect information onachieved average operating rates for bulk grain unloading, ship turn around

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time, ship charter rates, per m ton unloading costs, and grain losses in silooperations; the warehouse division would keep records of grain losses duringwarehouse storage and monthly farmgate prices of grains; the bakery divisionwould gather data on bread production and marketing, the use of fortificantsparticularly by private bakers, the development of home baking of bread inproject areas. This monthly information would be evaluated and an annualreport on the project benefits, similar in scope to the discussion in ChapterVI of this report would be prepared and sent to IDA within three months ofthe close of the YAR fiscal year. Assurances to this effect were obtainedduring negotiations.

F. Retroactive Financing

5.20 To start the project's implementation expeditiously and to avoiddelays, the Government has already appointed the project manager and intendsto appoint engineering consultants and possibly other expatriate experts priorto the expected effectiveness date of the proposed credit. Therefore, retroac-tive financing for these expenditures is recommended up to an amount ofUS$160,000.

VI. BENEFITS AND JUSTIFICATION

A. Financial Results

6.01 The YGGC would operate on a commercially sound basis. The fees to becharged for the services would provide YGGC with a financial rate of returnof 23% on its investments. They would be sufficient to cover operatingexpenses, taxes, maintenance, depreciation, and debt service. A projectedcash flow for YGGC (Annex 7, Table 1 and 2) shows that YGGC's operations wouldproduce an average annual net income (after taxes and depreciation) of YRls 10million (US$2.3 million), sufficient to repay its subloans in 14 years. TheYGGC would have a sound financial structure. The debt equity ratio woulddecrease from 1:1 in 1976 to 1:24 in 1987. The debt service coverage wouldincrease from 1.5 in 1981 to 5.1 in 1989 (Annex 7, Table 2). The financialrates of return for individual components are: 25% for the silo, 17% for thewarehouses and 18% for the bakeries (Annex 9, Table 2; Annex 10, Table 2;Annex 11, Table 2). The financial rate of return for private new bakerieswould be about 26% (Annex 11, Table 7).

B. Economic Benefits

6.02 Economic Rates of Return. The YAR economy is expected to realize atleast a 32% rate of return from total project investments inclusive of physicalcontingencies (Annex 18, Table 1). The individual components may be considered

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as independent and, thus, would warrant the calculation of separate rates ofreturn. The silo component costing US$7.0 million 1/ generated the highestrate of the individual components with 41%; the warehouse and bakery compo-nents costing US$2.5 and US$4.6 million 1/, respectively, registered rates of17% and 20% respectively. These rates of return do not take into accountthe following non-quantified benefits: (i) savings due to reduced shippingfreight rates for general cargo as a result of decreased port congestion;(ii) the contribution of sanitary grain storage and bread production tobetter health; (iii) environmental benefits due to decreased deforestation.The rates of return exclude the nutrition component costing US$0.7 million 1/and the technical assistance to ACF costing US$0.4 million 1/, for which nomeaningful rates of return could be estimated because of the predominance ofnon-quantifiable effects. Grain savings were valuated at the end 1975 CIFHodeidah wheat price of $228 per m ton. All inputs were assessed at end1975 prices excluding taxes and subsidies. No special shadow pricing forlabor was conducted because of no apparent unemployment problems within theYemen labor pool, a condition attributable to the substantial syphoning ofexcess labor into relatively high paying jobs in nearby countries, particu-larly Saudi Arabia. Sensitivity tests were conducted to assess the stabilityof the respective rates of return to variation in project cost and benefitstreams. They appeared relatively insensitive. With an increase in invest-ment costs by 10%, the total project economic rate of return fell to 30% (silo38%; warehouses 15%; bakeries 19%). A 10% hike in operating costs resulted ina total project rate of return decline to 31% (silo 39%; warehouse 14%;bakeries 16%). A decrease in the value of derived benefits by 10% yielded adrop in the total project rate of return to 29% (silo 38%; warehouses 14%;bakeries 16%). When economic benefits were permitted to slip by one year, theeconomic rate of return for the total project declined to 27% while those forthe silo, warehouse, and bakery fell to 33%, 14%, and 17% respectively.

6.03 Foreign Exchange Savings. One of the major benefits of the projectis the reduction of grain volume losses throughout the storage system achievedby replacement of inefficient grain handling techniques at the port dock, pro-vision of sound warehouse space, and complementary management. In addition,faster grain unloading through the port silo facility would lead to fastership turn-around time and reduction in associated demurrage charges by aboutUS$4,000 per day for an 8,000 m ton vessel. Taking into account the foreignexchange savings from grain loss prevention, lower demurrage bills, as well asthe costs of the direct and indirect import components of project investmentsover the 30-year project period, net savings in foreign exchange of aboutUS$200 million would be realized. In addition secondary foreign exchangesavings would be achieved for all other users of the Hodeidah port as totaldenmrrage charges and charter rates begin to reflect more efficient graindischarge from vessels.

1/ At 1975 prices.

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6.04 Cost Reduction in Grain Handling. Mechanization of ship unloading,besides relieving port congestion, is expected to yield a reduction of variabledischarge costs from US$3.76 to US$0.25 per m ton.

6.05 Nutrition. Although the benefits are not quantifiable, the projectwould make a substantial contribution to better health through improvementsfn sanitary standards of bread supply and fortification. School attendanceand alertness of students are expected to increase as well as productivity ofother recipients of fortified bread. The nutrition promotion and planningprogram would alert the public as well as policy-makers of the importanceof nutrition, provide information about health and nutrition and the avail-ability of fortified bread, and assist the Government in designing a nationalnutrition-health program.

6.06 Employment and Training. Although the transfer silo would provelabor-displacing, an estimated net total of 65 full-time and 70 manyearspart-time positions would be created for the life of the project, the majorportion being generated in labor-intensive loading and unloading procedures inthe regional warehouses. The silo system would relieve port congestion,thereby facilitating increased port handling and rapid absorption of labor re-leased from manual grain unloading operations. Project-related administrativeposts would be created within YGGC and ACF. Scholarships, expatriate technicalassistance and training would prove important in alleviating present shortagesof technically trained manpower.

6.07 Reduction in Deforestation. Significant environmental damage hasoccurred in Yemen from cutting trees around cities as well as in rural areasto generate supplies of firewood primarily for home bread-baking activities.Incremental output from the 6 1-m ton commercial bakeries would permit approxi-mately 2,885 families to reduce firewood purchases totalling about US$500,000per annum for bread baking alone. In addition, an estimated 25 bakeries makingfacility renovations under the credit fund would invest in oven conversionfrom wood to diesel fueling. Such a conversion is estimated to result in anannual net fuel cost saving of about US$100,000, and thereby further abategrowing demand for firewood.

6.08 Institution Building. With the establishment of the YGGC, theGovernment would not only establish necessary infrastructure to effectivelyhandle present and future grain storage and processing requirements, but wouldalso create an institution through which it could eventually assume a moreactive role in the grain market. ACF would receive a significant infusion ofcapital resources that could eventually be allocated to other developmentprog.rams upon repayment of project-related loans and sub-loans. Additionally,ACF would experience sizable expansion of manpower and field offices under theproject. Lastly, the grain storage study would provide useful informationby which future facility requirements could more reasonably be assessed.

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6.09 Distribution of Benefits. Since the facilities to be installedunder the project would be located in cities and towns, benefits derived wouldaccrue primarily to urban dwellers. Since grain is the staple food in Yemen,a major part of society could potentially benefit from reduction of grainlosses, reflected in greater supplies and/or lower product prices. An esti-mated 67,000 persons in schools, hospitals, and welfare distributions wouldconsume bread prepared in new Government facilities and commercial bakeriesunder government contract; and in addition, approximately 109,000 privateconsumers would obtain improved bread from new or renovated retail outletsfunded under the project. Benefits from the nutrition component would accrueto not only those urban residents having access to retail bakeries producingfortified bread, but also the rural population receiving useful informationrelated to health and nutrition.

VII. AGREEMENTS REACHED AND RECOMMENDATIONS

7.01 During negotiations, agreement was reached on the following prin-cipal issues:

The Government would:

(a) establish YGGC, staff it appropriately and transfer to itthe responsibilities and legal powers that are necessaryto implement the project as described in paras 4.03 through4.10;

(b) employ experts, with qualifications and on terms satisfactoryto IDA, who would assist YGGC and ACF in implementing theproject, and design and implement a training program forlocal staff satisfactory to IDA;

(c) continue the bread fortification and nutrition promotionprogram, if, subsequent to an evaluation study the Governmentand IDA agree to do so; and

(d) ensure that the recommendations concerning ACF's expansion,credit arrangements, lending procedures, lending terms andinterest rates, security, supervision and recovery of sub-loansand auditing be followed as described in paras 5.08 through 5.16.

7.02 The conclusion of a loan agreement between the Government and theSaudi Fund for an amount of US$11 million (para 4.22), the conclusion of theSubsidiary Loan Agreement between the Government and ACF (para 5.17), and theGovernment's approval of YGGC's charter satisfactory to IDA (para 5.01) wouldbe conditions for making the proposed credit effective.

7.03 With the indicated agreements and fulfillment of the above condi-tions, the project is suitable for a credit of US$5.2 million, equivalent, onstandard IDA terms. The Borrower would be the Government of YAR.

ANNEX IPage 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Grain Production, Consumption, and Importation

I. Introduction

The Resource Base and Nature of Farming

1.1 Agriculture represents the major sector within the Yemen ArabRepublic economy, accounting for approximately 70 percent of the country'sGDP and employing 80-90 percent of the resident Yemeni population (see Table1). Although the agricultural sector is predominantly subsistence-based,it provides over 90 percent of national export earnings from such commoditiesas cotton, coffee, cotton seeds, hides and skins.

1.2 The land area in Yemen totals approximately 20 million ha, of whichonly about 2 million ha are classified cultivable. At the present time 1.5million ha are actually cultivated with 2.0 million ha kept fallow to bebrought into production given sufficient rainfall. Most of the cropped areais rainfed with only 230,000 ha being under some form of supplementary irriga-tion system. In addition, there are 14 million ha of rocky, desertic, andrangeland areas, 1.6 million ha of bush cover, and about 2.6 million ha ofwasteland. (See Tables 2 and 3).

1.3 Climatic conditions vary widely, and micro-climatic differences arelocally important because of variable mountainous topography. Patterns ofrainfall and temperature are to a large extent determined by the relief.Rainfall is erratic, and annual variations profoundly influence crop produc-tion by affecting not only per hectare yields but also utilization of rainfedas well as marginal cropland. Normally the major rains occur in July, August,and September with minor rains in March, April, and May. Reportedly, 1/ aforty-year climatic cycle is in existence, containing 20 years of high rain-fall followed by 20 years of relatively sparse precipitation. The 1974-75season has been pegged as the start of the former. Surface water resourcesare not abundant, and the extent of underground supplies remains an unknownfactor. Preliminary results from test borings have pointed to the possibilityof considerable underground water resources in the Tihama plain as well as in

1/ Citations are made of data collected by an Italian aeronautics consult-ant team which noted annual rainfall in Sana'a of 300 mm in 1973 versus600 mm in 1953.

ANNEX 1Page .2

the wadi areas of the Highland Plains. A decline in the water table has beenobserved within the last several years with replenishment of aquifers possibleonly with significant levels of precipitation. Winds likewise are an importantconstraint to agricultural production, particularly in the Tihama and theIntermontane Plain Regions. Soil characteristics vary widely, from excellentto poor, with salinity and alkalinity occurring in certain areas.

1.4 The principal cereal crops are sorghum, millet, barley, and wheatwith approximately 80-85 percent of crop acreage allocated to these produc-tion activities. Wide variations in climate, topography, and soils howeverpermit the cultivation of a considerable range of crops including coffee,tobacco, cotton, pulses, grapes, deciduous fruits, citrus, bananas, oilseeds,potatoes, maize, alfalfa and qat (Cata edulis). (See Table 4). Livestockassumes an important role in Yemeni agriculture by being the main source offarm work power, contributing to foreign exchange earnings through exportsof hides and skins, and providing meat and milk for domestic consumption.Forestry in the accepted sense of the word does not exist; however, moderate-ly large areas are covered by woody vegetation (shrubs) providing fuel andminor construction material, and accomplishing some soil and water conserva-tion. Deforestation over the last several decades has become a serious prob-lem because of large consumptive demand for home cooking requirements, espe-cially of family bread, with no compensatory program to replace diminishingstands.

1.5 Yemeni farmers are considered industrious, and the elaborate terrac-ing in the Highland and Midland regions remains as substantiation of this ob-servation. Participation by women and children in agricultural activities isconsiderable especially in weeding, harvesting, threshing, and herding activ-ities, and was even observed in plowing operations. In many cases women areleft to tend to agricultural matters during the lengthy periods of absenceof spouses engaged in non-agricultural employment in YAR urban centers orin other nearby Middle Eastern States. Family labor remains the main sourceof manpower in farm operations to be supplemented by hired workers usuallyonly in peak harvesting periods.

1.6 Farming systems vary regionally according to climate, soil charac-teristics, and water availability. The level of technology adopted remainsessentially traditional in nature with utilization of modern production in-puts such as chemical fertilizers, improved varieties, and pesticides atpresent negligible. Utilization of these modern inputs is in the maincircumscribed to those areas having guaranteed water supplies either throughhigh annual rainfall or supplementary irrigation systems. Soil nutrient re-plenishment and supplementation remains in most cases limited to manure applica-tion which in part accounts for the maintenance of relatively high fertilitylevels in terraced areas over many centuries of continuous cultivation. Re-search r?nd extension services are presently minimal except for the limitedefforts financed with foreign assistance.

ANNEX IPage- 3

Agro-Ecological Zones

1.7 The country can be divided into five major agricultural areas accord-ing to their resource bases, agricultural outputs, and development potential-ities:

(a) The Tihama (total land area--20,000 km2) consists of two aridand.semi-arid belts, the coastal plain and the foothills, andextends from the southern border to the Saudi Arabian borderin the north and approximately 30-60 km inland from the RedSea. The main towns are Hodeidah (the principal harbor),Zabid, Beit-el-Fakeeh, Mokha, Al-Marawi'ah and Salif. Theclimate is hot and humid with annual rainfall varying be-tween 50 mm and 300 mm. Rainfed and irrigated farming arepracticed in this zone. Sorghum, millet, sesame, maize, anddates are produced almost entirely for subsistence, and cotton,tobacco, vegetables and fruits as cash crops. The total cul-tivated area, both rainfed an- irrigated, varies from year toyear, depending on rainfall and surface water availability.Rough estimates have been made that currently up to 600,000ha could be planted under marginally rainfed conditions,70,000 ha under spate irrigation, and 25,000 ha under sup-plemental irrigation from ground and perennial water sources.Livestock production is important especially for a large por-tion of the Tihama agricultural population. Eight major wadis(intermittent streams) cross the Tihama. In these areas thereis deemed a significant potentiality for surface and groundwaterdevelopment where soils are favorable. The Tihama thus remainsthe major area for further land development in Yemen, with 200,000ha currently estimated as potentially irrigable with further devel-opment of underground water resources.

(b) The Western Slopes (total land area--35,000 km2) includes thethe area between the Tihama and the Midlands and Highlands. Al-though population estimates remain less than reliable, the upperreaches are known to be densely populated. Climatic conditions,primarily rainfall and temperature, vary with the altitude. Allthe cultivable land on the slopes is terraced, and irrigationoccurs in gorges along the wadi banks. The main crops aresorghum, millet, coffee, alfalfa, bananas and papayas. Thelivestock population is not known, but there is considerableevidence of over-grazing. There is virtually no scope forexpansion of agricultural land in this region; however pro-duction might be boosted by utilization of pesticides and improvedcrop varieties, as well as increased labor-management input inland preparation, seeding, weeding, and optional crop rotationplanning.

ANNEX 1Page 4

(c) The Midlands (total land area -- 20,000 km2) extends prac-tically from the southern border to the town of Qadah andcovers Taiz Governorate and adjacent areas. It is the secondmost populous area of the country (about 900,000 people), andalso the second largest in agricultural output. Altitudes varyfrom 800 m. to 2,000 m. above sea level, with annual rainfallranging between 450 mm and 500 mm. Climate, soils, and waterresources are suitable for production of cereals, pulses,potatoes, fruits, vegetables, fodder and coffee, but as in theWestern Slopes zone, there exists minimal potentiality in theMidlands to stimulate higher agricultural production throughfurther cultivable land extension. There does exist, however,some scope for reforestation, a project presently being in-vestigated by UNDP.

(d) The Highlands (total land area--35,000 km2) can be dividedecologically into two sub-areas, the Central Highlands and theIntermontane Plains. The differentiation between these twoareas is primarily with reference to climate and topography,and therefore agricultural production.

(i) The Central Highlands comprise most of the Ibb Governo-rate, with a population of approximately 800,000. Alti-tudes vary from 1,500 m to 2,000 m. Annual rainfall iswithin the 600-800 mm range, and soils are consideredrelatively fertile. Supplementary water resources areat present mostly restricted to limited groundwater andsprings; there are however a few wadis where surfaceirrigation is practiced on a small scale. Most of thecultivable area is terraced. Main crops in the regionare sorghum, wheat and barley, and of lesser coverage,millet, alfalfa, maize, potatoas, pulses, and some fruitsand vegetables.

(ii) The Intermontane Plains extend from Yerim to the northernborder and encompass the governorates of Radaa, Sana'a andSaada. The urban population is concentrated in Yerim, Damar,Sana'a and Saada; the rural areas are sparsely populated.This region is characterized by a series of flat plains sur-rounded by mountains, or closed watershed basins. Altitudesvary from 2,000 to 3,000 m and rainfall, averaging 200 mm to500 mm, is erratic. Temperatures and humidity are usuallylow. Groundwater resources are present but costly to tap,thereby restricting the scope for extensive small-scale ir-rigation from wells and springs. Most of the soils are con-sidered marginal or poor, and the area is devoid of much na-tural vegetation. The major crops grown are sorgum, wheat,barley, millet, qat, grapes, fruits, and vegetables. Livestockactivities, mainly sheep and goats, are an important source ofincome.

ANNEX 1Page 5

(e) The Eastern Slopes (total land area--80,000 km2) are the largestzone in size but poorest in agricultural resources. The slopescover the areas between the Intermontane Plains and the SaudiArabian border to the east. Climatic conditions are not favor-able for agricultural production since annual temperatures arehigh and rainfall is only about 100 mm to 200 mm. Soils generally

are poor; however, there are a few valleys where irrigated agricul-ture is practiced predominantly on a subsistence basis. Despiteexisting remnants of thousand-year-old irrigation schemes, thepossibilities for significant agricultural development in this

region seem extremely limited.

Land Tenure System

1.8 The land tenure system in YAR remains very tradition-based and com-plex. The great proportion of total cultivated land area remains under thecontrol of large individual owners who generally lease part of their land out

under sharecropping arrangements. The State and religious institutions direct-ly own three and 15 percent of the cultivable land respectively which isusually farmed by tenants. Procedures for cost and income division betweenlandowners and tenants differ widely and appear a function of the particularcrop cultivated as well as the availability and method of supplementaryirrigation. In general, the tenant receives between 1/4-1/3 of productionfrom irrigated land, and 1/3-1/2 of that from rainfed hectarage. Althoughholdings usually range between 0.25 and 10.0 ha, size seems to vary withregion and degree of non-rainfed culture; in areas where cultivation remainsrainfed-based and extensive in nature such as in the Tihama Highlands and onthe Eastern Slopes, holdings generally fall in the upper portion of the range.If cultivation of owned hectarage remains beyond the managerial and operationalscope of available family labor, the excessive land is usually leased under

sharecropping arrangements. Even though most annual tenure contracts areverbally established, officials report few cases of termination of thesepacts.

Taxation of Agricultural Production

1.9 Agricultural production is subject to a 10% tax (zakat) based onthe gross value of output. Livestock activities are generally assessed pro-portionately to the number of animals owned, and crop production on well-irrigated land is taxed at a reduced rate of 5.0%. Although the zakat mightbe collected in either kind or cash, an increasing quantity has been obtainedin the latter over the last five years reflecting a preference of local de-

velopment boards to obtain financial revenue from central authorities in cashform. Farmers' attitudes toward cash vs. kind payment appear mixed. Thosewith limited personally-owned storage facilities and/or who are unsure aboutprices for any marketable surpluses seem to prefer kind payment. Those havingdifficult access to Ministry of Finance zakat depository points and/or who

might need personal family stock replenishment, opt for cash payment. The

effectiveness of zakat collection is a function of the dependability andadministrative efficiency of local and regional Ministry of Finance repre-sentatives charged with its collection and management. At the village level

ANNEX 1Page 6

the local amin, a government representative and resident of the communityfully familiar with each farmer's productive performance, each year eval-uates the respective farmer's livestock and/or crop, assesses the amountof tax, and oversees movement of kind portion to designated depositoriesand collection of alternative tax in cash. Concerning the latter, a com-mittee established by the local governor determines the unit price atwhich the commodity is valued for tax purposes. Some officials report thatfarmers have been known to circumvent the zakat through payment in kind withan inferior product, either by buying cheaper quality grain on the local mar-ket to pay the tax or by substituting old, perhaps contaminated grain fromowned stores for the newly harvested taxed portion.

Taxation of Cereal Imports

1.10 Taxation on international trade, especially that on imported commod-ities, represents the major source of government revenues for Yemen, composingapproximately 55% of the annual current total. Over the three-year period,1971/72-1973/74, current revenues increased from 151.3 to 274.0 million YRlswhile taxes on international trade and transactions rose from 77.0 to 154.3million YRls. Of this latter category, import duties and taxes accounted foralmost the total amount in each year.

1.11 All imported food items are subject to a 5% custom duty levied onCIF value, but unlike other commodities are exempted from two additional taxes,a 5% defense tax and a 2% statistics tax. The Government has preferred in thepast to collect the customs duty on incoming grain and flour in the form ofkind payment rather than cash in order that it might utilize these cerealsto feed army personnel as well as to support established school, hospital,and charity feeding programs. At the port, the Ministry of Finance assessesthe import duties and takes possession of payments. The Ministry thereuponstores the acquired cereals in nearby warehouse facilities, and dispersesthem to regional centers in accordance with demand requirements. At theurban level the same facilities are utilized for storage of customs dutykind payments as for agricultural zakat commodities.

Agricultural Credit

1.12 A general agricultural credit institution has been started onlyrecently in Yemen. Early attempts to establish such an institutional networkfailed, principally from lack of capital and trained manpower. Agriculturalcredit from institutional sources has in previous years been limited to short-term funding for cotton production by the General Cotton Corporation (GCC).The GCC, financed by the Yemen bank for Reconstruction and Development, pro-vides interest-free loans to cotton producers for seed, fertilizer, andtool acquisition against the security of their cotton crops.

1.13 In connection with the Tihama Development Project, the Government in1973 authorized the creation of a small credit banking unit, the AgriculturalCredit Fund, under a subsidiary arrangement with the Central Bank. The ACF,nresenLly maintaining offices in Sana'a, Wadi Mawr and Wadi Zabid, acts as the

ANNEX 1Page 7

sole dispensing agent for the credit component of the Tihama Development Proj-ect scheduled to cover investments in machinery and tubewell units, short-termproduction loans, as well as credit to agribusiness firms for the installationof processing and marketing facilities. Similarly, ACF has been chosen thecredit channel for the Southern Uplands Rural Development Project providing

short-term loans for material inputs (mostly fertilizers), and medium- andlong-term loans for investment in on-farm development, and on a limited scale,for creation of nurseries and orchards, coffee culture expansion, and construc-tion of packaging and handling facilities. ACF, presently in a formative phase,has dispersed a few short-term loans mainly for the purchase of oil for irri-gation pumps and some medium-term loans for on-farm well sinking and tractoracquisition, all totalling YRls 410,380 as of October, 1975.

1.14 In 1975 the Command Council passed a law establishing a wholly state-owned Yemen Agricultural Credit Bank (YACB) and has allocated YRls 100 millionand certain resources in kind for the Bank. YACB is expected to start itslending operations from the second half of 1976. The establishment of the Bankwould not, however, restrict the operation of ACF which, according to a Cabinetdecision, would continue to be the lending agency for IDA projects until adecision is made, in consultation with IDA, to merge ACF with YACB toward thelong-term goal of maintaining an effective, nationwide agricultural creditinstitution.

1.15 The extent to which the inflow of remittances from family membersemployed in urban centers or abroad acts as a dampening agent on the demandfor agricultural credit remains an unknown and unexamined factor. However,at present those farmers requiring credit must generally rely on privatesources for funding. Since most farmers are relatively poor, it is quiteprobable that many depend on credit from relatives, neighbors, merchants, orlandowners. Although the terms of loans dispensed by private parties remainessentially unknown, interest rates are thought to vary considerably accordingto the source of the credit and to be mitigated to some extent by religio-cultural stigma attached to usury.

Development Planning

1.16 To date no long-run development strategy has been formulated forYemen. In 1973/74 a first attempt at development planning was made with therelease of a three-year development program that stressed (1) increasing na-tional income at an annual rate of at least 6%, (2) a substantial rise in theliving standard of the population, and (3) expansion of social services to allareas of the country. Significant emphasis was given to agricultural develop-ment reflected by the allocation to the agricultural sector of YRls 138.1 mil-lion, 15% of the total YRls 935.6 million budgeted for the three-year program.As originally proposed, 19% was to be financed from Government sources, 6%from local, private savings, and 75% from foreign aid.

1.17 The following are cited as basic aims in the YAR agricultural devel-opment strategy:

ANNEX 1Page 8

(a) A net increase in real agricultural income of not less than6% in order to achieve a resource surplus, subsequently tofinance development activities in other sectors;

(b) Achievement of self-sufficiency in the basic foodstuffs with,particular emphasis given to cereal crops, oils, vegetablesand livestock production;

(c) Rectification of the trade balance through the increase andimprovement of products for export, especially cotton, coffee,hides and skins, fresh and canned fish, vegetables and freshfruits;

(d) Improvement of the dietary standard of the population;

(e) Provision of credit and supporting extension, marketing, andinput distributional infrastructure for agricultural producers,especially the smaller farmers.

1.18 While the Government recognizes the importance of the agriculturalsector in the economy, it has not yet been able to generate a clearly estab-lished implementational scheme to translate aims into well-defined actionprograms and detailed investment projects. Many of these difficulties seem tostem from: (a) the lack of systematic long-term programming; (b) the lack ofinfrastructural instruments through which effective proposals could be trans-formed into action; (c) newly created governmental institutions to a largeextent dependent upon foreign technical assistance and capital; and perhapsmost importantly, (d) a narrow resource base placing serious constraints upongrowth possibilities (see paras. 2.07-2.14). During this formative period theGovernment appears to be emphasizing: (a) development of the Tihama as a long-term grain and cash crop production center, (b) the Midlands and Highlands de-velopment as a short-term cereal expansion program, (c) establishment of na-tional agricultural research, extension and credit institutions to stimulatecrop production for domestic as well as export markets, and (d) increasedfocus on livestock production activities such as poultry, dairy, sheep, andbeef feedlot enterprises.

II. Domestic Grain Production

2.1 Water availability at planting time appears to be the governingparameter of hectarage planted to cereals, and water availability during thegrowing season the principal determinant of per hectare yields. Total cerealproduction in Yemen (see Table 4) ranged between 1.1 and 1.3 million tonsduring the 1970-71 to 1973-74 period; however due to highly favorable climaticconditions, production during the 1974-75 crop year rose to approximately1,975 million tons. In the low rainfall years, 1970-71 to 1973-74, the areaplanted with cereal crops actually declined from 1.56 to 1.19 million ha; how-ever with increased rainfall in 1974-75, cereal area rose to 2.245 mill on

ANNEX 1Page 9

ha as marginal land was brought back into production mainly for sorghum and

millet cultivation. Sorghum and millet, displaying higher drought resistance

than other cereals, represent the principal grain crops in YAR agriculture,

accounting for an average of 75-80% of total grain production.

2.2 However, due to rainfall scarcities, the sorghum-millet area was

reduced over the 1970-71 to 1973-74 period by 28.5% to be increased the fol-

lowing season from 0.88 to 1.95 million ha. Reflecting the boost in marginal

land utilization, production tonnage of millet and sorghum in 1974-75 more than

doubled over that of the preceeding year. Barley, wheat, and maize, requiring

higher levels of moisture, cover the balance of cereal hectarage. Wheat, in-

creasingly in demand, is cultivated mainly in the lbb Governorate where rain-

fall levels remain relatively high. Wheat area rose from 30,000 ha in 1970-71

to 70,000 ha in 1973-74, and production correspondingly increased from 33,000

to 71,000 m tons over the four-year period. Maize likewise experienced in-

creased popularity among farmers, especially with the release of better per-

forming varieties, and boosts in hectarage as well as tonnage during the

drought period reflected this interest. Barley, grown in the Highlands region,

displayed a 36.4% increase in area over the period from 0.14 to 0.19 millionha.

2.3 Considerable effort is presently being exerted to increase grain

production within YAR toward the long-term goal of achieving self-sufficiencyin cereal commodities. Variety trials have been carried out over the last

several years at research stations throughout the country in an attempt to

introduce suitable high-yielding varieties from foreign sources and to crossthese exotic strains with local varieties more adapted to the agroclimaticconditions in YAR. Efforts have similarly been made to boost yields through

the importation, demonstration, and distribution of chemical fertilizers aswell as pesticides. Progress to date has not been insignificant. Someexamples.

(1) On the Federal Republic of Germany Shoub Farm outside of Sana'a,fourteen varieties of wheat, including MEXIPAK strains, demon-strated a 73 percent averge increase yield over local varietieswith fertilizer applications remaining uniform.

(2) In UNDP fertilizer trials in the Ibb area, sorghum grown underrainfed conditions with 60 kg N applied per ha, displayeda 29.8 percent increase in yield over the unfertilized controlplots.

(3) Substitution of high-yielding Tihama maize varieties for the

local strain in Wadi Zabid is proposed to increase productionfrom one to three tons per ha given the simultaneous adoptionof complementary material inputs and modern crop management

practices.

(4) The introduction of triticale is being considered because of

(a) its resistance to drought and cold conditions, (b) thedesirable joint production of grain and fodder, (c) the facilitywith which it fits into multiple cropping patterns, and (d) its

ANNEX 1Page .10

potential generation of cash inflows throughout the year for

the grower. Its adaptability to heterogenous agroclimatic condi-

tions appears a potentially significant asset; however, consumeracceptance of its taste and brownish color remains an unknownfactor at the present time.

(5) The USAID-sponsored Sorghum-Millet Improvement Program is con-centrating on increasing yields for these important grain crops.Operating an experimental farm outside of Sana'a, specialistsare in the short-term investigating exotic varieties for suit-ability in Yemeni agroclimatic conditions, and in the long-termare stressing (1) cross-breeding selected foreign strains withthe better local cereal varieties, (2) improved seed production,and (3) farmer training programs. Approximately 6,000 varietiesof sorghum and millet have been tested to date on the Sana'astation, and by the end of the year, four or five superiorvarieties are scheduled for release for cultivation within theSana'a Governorate.

2.4 Ministry of Agriculture sources maintain that sizable areas ofmarginal land (mostly in the Tihama) can be brought into cereal production inthe future. According to their projections, hectarage of sorghum, millet,and barley can be increased from its present level of 1.5 million to 2 millionha, given sufficient rainfall. Similarly, through the installation of supple-mentary irrigation systems, wells and pumpsets, cereal production could be in-creased through more intensive crop rotational patterns. The number of newwells sunk, especially in Wadi areas, with the help of various bilateral assist-ance teams has increased considerably over the last several years. The numberof imported pumpsets for agricultural use has reflected this trend; accordingto CPO statistics, the number of pumpset units imported increased from 1,482in 1970 to 3,421 during the first nine months of 1974.

2.5 Plant breeders suggest that production on rainfed areas, comprisingthe major portion of cultivable land in YAR, might similarly be augmentedthrough the following measures:

(1) Selection of cereal varieties optimally adapted to local agro-climatic conditions, and improvement of these strains (a) tominimize susceptibility to rusts, diseases, and pest attackand (b) to increase inherent per hectare yield performance asmuch as possible.

(2) Boosting the plant population density by reducing the dis-tances between rows and/or by increasing the population with--n rows. With present cultivative patterns, densities cangenerally be raised with no necessary varietal adjustment;however should additional varieties be deemed desirable, geno-types must be carefully selected to efficiently utilize re-stricted per plant access to light, water, and nutrients.

ANNEX 1Page 11

(3) Adjustment of the date of sowing within each production area tooptimally utilize available rain water during the normal growingseason as well as during the post-precipitation period.

(4) Application of high fertilizer levels to highly responsive,improved varieties suitable for cultivation in YAR.

(5) Reduction in plant-weed competition through the usage ofherbicides, increased efforts at hand weeding, adequate cropmanagement, and appropriate crop rotations.

(6) Timely and appropriate application of pesticides and fungicidesto curb infestation.

2.6 Not only do numerous potential stimulants exist for increasedgrain productivity within YAR, but serious constraints are also present.The major constraint to increased production is the availability of water.-Elaborate production activities involving the utilization of high-yieldingvarieties, fertilizer, and rotational pa,terns are dependent upon adequatewater to insure a satisfactory return to high-cost investments and risks.In this regard, research in Yemen has shown that foreign high-yieldingvarieties of wheat are superior to local strains only with supplementaryirrigation; in test trials, local varieties outperformed the exotic strainsunder rainfed culture. Of the 50,000 ha of wheat grown during the 1975-76season, only 5,000 ha were cultivated under rainfed conditions. Farmersreport serious problems of crop burning attributable to chemical fertilizerapplicaton in years of low precipitation. Such adverse results often renderthe farmer less receptive to future risk assumption associated with fertilizerutilization and might in turn influence his receptivity to adoption of otherpotentially yield-boosting measures being advocated. Within the highlyterraced regions even in the fertile, relatively high rainfall Ibb-TaizSouthern Upland areas, fertilizer usage may in fact have a deleterious impactupon yield as runoff flows from field to field, carrying with it chemicalnutrients that can build to toxic levels.

2.7 Possibilities for future expansion of grain tonnage through util-ization of new hectarage seem limited at best and strictly a function ofwater resource availability. Marginal land, mostly in the Tihama, is pres-ently brought into production for sorghum and millet cultures only if pre-planting rainfall proves adequate. The withdrawal of 350,000 ha fromsorghum and millet production over the 1970/71-1973/74 period reflects thesens.itrvity of area cultivated to rainfall prospects. Even in the relativelyproductive, high rainfall areas of Taiz and Ibb, few opportunities of hec-tarage expansion exist, as witnessed by the intricate system of terracingcovering all usable space.

2.8 In Wadi regions where there seems some potentiality for cultivationunder well irrigation, the high investment cost of well construction as wellas significant operational costs make it necessary for the farmer to switch

ANNEX 1Page 12

to high cash crops such as vegetables, fruit, oilseeds, and maize from the

traditional sorghums. Wadi areas in the highlands have experienced a drop

in the water table over recent years necessitating further expensive deepening

of wells and higher pumping costs. In the Tihama, a similar water table de-

cline was observed over the past three years, to be reversed only recently with

aquifer replenishment through satisfactory rains. In the Tihama, where

brightest prospects seem to lie for sizable untapped underground water re-

source discoveries, the high cost of well irrigation, as observed in the Wadi

Zabid region, necessitates cultivation of high value crops instead of grain

to obtain a satisfatory rate of return on the costly investment and opera-

tions.

2.9 Grain crops are considered by the Yemeni farmer to be necessary for

subsistence--to supply his family's consumptive needs throughout the year,

to ensure adequate fodder for livestock, and through on-farm storage to pro-

vide some insurance during poor rainfall seasons. The mission estimates that

only about 10 percent of the country's total cereal production finds its way

into the interregional commercial market, with the great bulk utilized by

the farmer for the above functions. It is therefore plausible that if in-

novations in cereal production technology do in fact permit considerable

increases in per hectare yields, the farmer would derive his subsistence

from a smaller hectarage than previously and thereupon substitute cash crops

such as vegetables, fruits, oilseeds and qat (in the highland areas) for

cereal cultures. Incentives to diversify will likewise be strengthened by

high demand for livestock products and by technological improvements and

services availability for these activities. Increasing communication links

through better roads and transportation services could open markets for

perishable commodities which remain presently inaccessible. Ministry of

Agriculture sources note the profitability of such substitution: they esti-

mate that net income per hectare from commercial sales of cereals, fruit, and

qat is 1-2,000; 5,000; and 10,000 YRls respectively. Farmers in several high-

land wadi areas north of Sana'a (Dhar, Al Gara'a, and Dala'a) have already

made the transition to specialization in qat production and rely on market

purchases for domestic cereal needs. In the Ibb-Taiz region, terraced land

with supplementary irrigation was deemed suitable for cash crop alternatives

such as qat, fruit, grapes, onions, potatoes, and other vegetables; non-

irrigated terraced areas could be planted with coffee or qat in lieu of cereals.

Qat, in addition to its profitability, is adaptable to a wide range of highland

climatic environments--coldness, dryness, or wetness--and can be harvested

year-round starting one year after planting. In many cases where farmers have

access to well irrigation facilities, alfalfa is planted not only to provide

fodder for owned animals but also to act as an important year-round cash

generator. Farmers questioned expressed interest in allocating land to crop

alternatives such as vegetables and qat for family requirements and market

sales if at some future date family cereal needs could be met from reduced

plantings with better varieties and improved management.

ANNEX 1Page 13

2.10 Because of high costs of well irrigation, farmers will probably beforced to make crop substitutions. An economic analysis of the various cropactivity alternatives for the respective spate, well, and mixed irrigationareas in Wadi Zabid confirms this assertion. Based on the per hectare netIncome estimates for each crop, a comparison was made of the utilization ofland resources under present cropping patterns and those projected upon thecompletion of the Wadi Zabid agricultural development project. This summaryis presented in Table 5. Although total hectarage under the irrigationscheme would increase by 14.34 percent from 22,800 to 26,070 ha through therehabilitation of the diversion structures, further expansion of spate irriga-tion area, and installation of additional well facilities, the total area devotedto cereals would decline by 11.12 percent from 17,400 ha under present alloca-tion to 15,465 ha, even though maize, deemed profitable on well and mixed(spate and well) irrigated land, would increase from 1,500 to 3,650 ha. Be-cause of high construction and operating costs of well facilities as well asincreased utilization of certified seed, fertilizers, and insecticides, mil-lets and sorghum, displaying low potential profitability, would be relegatedto spate irrigated and rainfed land, while maize, vegetables, and oilseeds(sesame, sunflower, and groundnut) would be recommended for mixed and strictlywell irrigated land. The following is a summary of the budgeted averages foreach crop alternative costs and net returns examined in the Wadi Zabid study:

Cotton Sorghum Millet Maize Oilseed Vegetables

Production Cost andTaxes/ha (YRls)

Present 831.7 543.1 504.8 725.7 465.9 2,499.4Future with Project 1,917.4 907.7 839.9 1,671.5 1,360.6 4,705.0

Net Income/ha (YRls)Present 268.3 556.9 245.2 474.3 534.1 6,500.6Future with Project 282.6 842.3 460.1 1,328.5 1,039.4 11,295.0

2.11 Although extension officials warn that the budgets for the variouscereal alternatives were based on production costs and yields from oldervarieties, the span between net income from vegetable cultivation and thosefor other activities would probably remain quite substantial, even with in-creased yields from grain crops. Caveats should be raised, however, that(1) wbhile net income per hectare for vegetable cultivation is estimated

to remain high, production cost outlays for material inputs, especiallychemical fertilizers, and production taxes will also be substantial, neces-sitating expense and risk assumption above traditional agricultural patternlevels; (2) credit and extension services will be important factors under fullproject implementation for farmers not only engaged in vegetable cultures butfor the other mentioned crop alternatives as well; and (3) the envisioned sub-stitution of vegetable activities for less profitable ones might be constrainedby inaccessibility to large urban markets and/or the lack of rural processingindustries to absorb increased production and to maintain stable prices.

ANNEX 1Page 14

Although net return estimates for cotton appear low, thereby making it arelatively poor competitor for land resources, the crop remains the princi-pal cash crop in the region at the present time. Given its importance inforeign exchange generation through export earnings, the Government might inthe future deem it advantageous to support the cotton price to stimulate pro-ducton thereby increasing competition with cereals for available land espe-cially in spate-irrigated areas.

2.12 Adoption of improved cereal varieties as well as improved agronomictechniques will be dependent upon the establishment of a broad, competentextension network as well as adequate seed multiplication facilities--twoimportant ingredients noticeably absent in YAR at the present time. Rapidorganization of these necessary facilities in the short term will be hinderedby financial and trained manpower limitations as well as the lack of support-ive road and transportation infrastructure.

2.13 Programs to stimulate the incorporation of innovations such asfertilizer, high yielding varieties, pesticide use, or mechanical equipment,into agricultural productive patterns could be hampered in some cases by thelengthy absence of male authority figures from the farm family. As mentionedabove, women are often left at home to tend to general agricultural choreswhile men work in urban areas or neighboring Middle Eastern states. Thewomen more or less assume a holding pattern around the status quo and, be-cause of traditional role assignments, cannot make major decisions such asfarm technique adjustments. Since the husband or other male-family member mayvisit the family infrequently, perhaps once each year, communication betweenextension agent and family decision-maker would be difficult and attitudinalchange concerning decision-making authority even more so. On the other hand,if such decisions to adopt innovations were made, remittances from family mem-bers working abroad or in urban centers could act as an important source ofcapital to finance input acquisition.

Future Cereal Production Prospects

2.14 While per hectare yields for cereal crops will no doubt increasedue to better varieties, improved management, and modern input utilizationespecially in high rainfall and irrigated areas, on the national level it canoptimistically be projected that cereal production growth will probably belimited to only a per annum rate of 1.5 percent. Cereal production growthwill Ie constrained by rainfall, the limited adoption of the high )ieldingvariety p;ackage because of high costs and associated risks especially inrainfed -,-egions, the geographical strictures placed on future expansion ofcultivated hectarage, the incentives to substitute cash crops for sub-sisterto-oriented cereal activities given higher yields, and the economicuecessity to do so on well-irrigated land. Projections for domestic cerealprodui Lon 1976 to 1990, based on these assumptions, atmf presented in Tahle 12.

ANNEX 1Page 15

III. Cereal Consumption

3.1 The staple food group in the Yemeni diet is cereals with approxi-mately 75 percent of average caloric and 72 percent of protein intake de-rived from the consumption of cereal-based food items according to FAO FoodBalance Sheets for Yemen, 1964-66 (see Table 6). The same source, based onproduction and population data, reported per capita cereal consumption aver-aged 414.1 g per day during the same period. In an independent 1972 village-level study, Bornstein 1/ discovered daily direct per capita cereal consump-tion averaging 400 g. The principal form in which cereals are consumed iswholegrain native flat breads, with cereal-based porridges, gruels, andpuddings also being eaten. Bread however is the principal basis of all mealsand may represent the sole food consumed at a meal.

3.2 As discussed above, because of the subsistence nature of grain pro-duction within the country, only a small percentage of total production isbelieved to move into commercial channels. In rural areas grain is stored byfarmers in large petroleum drums for current needs and in underground "madfans"for long-term storage to cover future requirements and potential crop failures.Sorghum and millet represent the major ingredients for cereal-based foods inrural areas, supplemented by barley, maize, and wheat in areas where these aregrown. Urban residents (numbering approximately 350,530 persons or 6.69 percentof the YAR population living within the country according to the 1975 Housingand Population Census Preliminary Results) essentially rely on wheat and whiteflour imports as well as small quantities of domestically produced grain flow-ing into cities for cereal consumption needs.

3.3 Although wholegrain bread made from sorghum, millet, and other avail-able cereals seem preferred in rural areas, urban consumption patterns seem tovary from region to region. In Midland and Highland urban centers such as Taiz,Ibb, Damar, and Sana'a flat breads are made at home in wood-fired tannur-typeovens from dough based on wholegrain flour often mixed with imported whiteflour to improve taste and texture. Commercial bakeries supply European-type,white flour loaves (roti) for those not having access to home baking facilitiesand those having emigrated from Aden where roti breads seem preferred. It wasobserved in several cases that wholegrain dough would at times be prepared inhomes and then brought to commercial operations for the final baking process inan effoQt to reduce time spent in cooking activities, to reduce fuel costs, andto limit exposure to smoke filled kitchens.

1/ A. Bornstein, Food and Society in Yemen Arab Republic, ESN:MISC/74/14,FAO, Rome, 1974.

ANNEX 1Page 16

Population Growth

3.4 The most important factor affecting future demand for cereals inTemen will be population growth. According to the 1975 nationwide census,the resident population totalled 5.2 million of which only 0.35 million, or6.7 percent, were located in governorate capitals. The most densely populatedareas are in the rainfed highlands, particularly the Ibb/Taiz region where densi-ties are probably twice the national average of about 30 persons per square km.An estimated 1.2 million persons were living outside the country most of whomwere males of working age holding employment in nearby Gulf States, particular-ly Saudi Arabia.

3.5 The population is at the present time growing at an estimated aver-age rate of 2.4 percent, seven percent in the urban and two percent in ruralareas. Although population details are preliminary and fragmentary at best,both the birth and death rates are considered relatively high. Infant mor-tality is estimated at approximately 160 per 1000 live births while that forchildren between one and four years of age is probably above 92 per 1000 -two figures significantly above those recorded in North America and Europe.Life expectancy is set at between 45 and 50 years. Although birth rate es-timates are inconclusive, they are no doubt maintained at a high level as acompensatory factor.

3.6 Infections and energy-protein deficiencies are cited as major causesof mortality, especially in infancy and early childhood periods. Gastro-eneritis, marasmus, tuberculosis, and other infectious diseases are majorcauses of death among children admitted to hospitals, and it is suspected thatthe incidence of death from these diseases, often untreated and unreported,remains very high.

3.7 From discussions with demographers, public health officials, andforeign assistance teams working in the health field, it is felt that thereis a high probability that the high mortality rate will experience a sub-stantial decline over the next decade with no corresponding reduction fore-seen in the present high birth rate. Much of the movement to curb mortalitywill probably come rather quickly from potentially high payoff programs to(1) vaccinate against infectious diseases, (2) clean up municipal water sup-plies and install modern sewerage systems, (3) provide safer water suppliesin rural areas, (4) begin educative programs in schools and through radiobroadcasts covering topics of nutrition, hygiene, and disease prevention,(5) increase medical services in rural areas as well as urban centers, (6)expand veterinary services to limit pests and diseases in the animal popula-tion, some of which are potentially transmittable through the eventually con-sumed product, (7) improve road and transportation systems in order to limitfood commodity spoilage and contamination, and (8) upgrade animal slaughter-ing facilities as well as the handling, and marketing of meat products. Manyof the above programs are presently in the pipeline for national, bilateral.,

ANNEX 1Page 17

or international organizational funding. Remittances secured from family mem-bers employed in neighboring countries as well as internal urban centers couldlikewise provide resources for dietary improvements both in quantity andquality thereby curtailing caloric-protein inadequacies and susceptibilityto infectious diseases.

3.8 During this period little corresponding suppression of the highbirth rate is predicted because of (1) religious-cultural prohibitionsplaced on the adoption of birth control measures; (2) the "investment good"status given to additional children in agriculturally-oriented families;(3) the time lag generally required for passage from a high mortality, highrisk to low mortality, low risk mentality inducing family size adjustments.Additionally, although a rather large bloc of married males are separated fromfamilies by employment in cities or outside the country in nearby countries,studies of migratory patterns have demonstrated that birth rates are gener-ally unaffected by such absences if annual visiting periods are scheduled--as is the general case in YAR.

3.9 In conclusion, it is felt that the population growth rate in Yemen,presently estimated at 2.4 percent per annum, will soon begin to rise giventhe establishment of mortality-depressing social amenities. For grain con-sumption projection purposes, it has been assumed that the population willcontinue to grow at 2.4 percent, 1976-1978; thereafter the rate is estimatedto increase to 3.0 percent by 1990 and stabilize at that rate thereafter forthe balance of the 30-year planning horizon. The resident population esti-mates for 1976-1990 are presented in Table 12.

Income Effect

3.10 There is insufficient dependable data available with which to cal-culate the income elasticity of demand for cereal products in YAR. However,given the relatively low per capita income level in Yemen, cereal commoditiesare certainly still considered normal goods by most consumers there. Althoughestimation from Yemeni data was deemed infeasible, utilization of elasticitycoefficient estimates from similar grain-based developing economies has beendeemed a practical alternative for consumption demand projections for cerealsin YAR. Mellor 1/ (1968) estimated the income elasticity of demand forcereals in India and Pakistan as 0.5 percent. An earlier series of surveysdisclosed elasticity estimates for cereals of 0.44 percent in rural Pakistan 2/,0.32 and 0.62 percent for urban and rural India 3/ respectively, and 0.48 per-

1/ John W. Mellor, Developing Rural India: Plan and Practice, CornellUniversity Press, Ithaca, 1968, p. 25.

2/ The Pakistan Development Review, Vol. III, No. 2, 1963.

3/ Deri\.ed from t1,e 4fn-mily budget data collecte(d in the 10th Round ofNatiu!nic1 SampI 'iirvey2i955-56.

ANNEX 1Page 18

cent for Ceylon. A 1955 food expenditure survey in Egypt placed the incomeelasticity of demand for bread and cereals at 0.59 percent. For futukercereal consumption estimation for YAR, a 0.5 percent elasticity has been as-sumed for the 1976-1990 period falling thereafter to 0.2 percent to the endof the project time frame.

3.11 There are no projections regarding the rate of growth for the agri-cultural or non-agricultural sectors or resultant GDP of Yemen. In order toestimate the income effect on grain consumption, the following growth rateshave been assumed: (1) during the period 1976-1980, cereal production wouldincrease at 1.5 percent per annum, total agriculture at 3 percent, and industryand trade at 6 percent, resulting in an annual GDP growth rate of 4 percent;(2) in a second phase of the project period, 1981-2005, cereal production aswell as total agriculture would continue to grow at the same rates as in theearlier five-year period, but industry and trade would (a) grow at a higherrate of 8 percent, and (b) represent a greater portion of total GDP, therebyyielding a 5 percent rate of growth. Future human cereal consumption (base:146 kg per capita per annum @ 400 g per diem) has been calculated in accordancewith the assumptions presented above and has been included in an estimatedtotal disappearance quantity (base: 292 kg per annum @ 800 per diem) compris-ing human consumption, seed, losses, and grain utilized as feedgrains, pre-sented in Table 10 (see below). Based on these assumptions, the projectionsyield a per capita disappearance quantity of 307.2 kg in 1980 and 352.3 kg(per annum) one decade later, of which the direct human consumption componentwould amount to 442 g and 565 g per diem in 1980 and 1990 respectively. Thesedisappearance projections for Yemen remain significantly below approximate1975 estimates for more developed countries where large quantities of grainare first funnelled into livestock production activities, e.g. 415.4 kg in theU.K., 478.7 kg in France, and 394.2 kg in the Federal Republic of Germany. 1/

IV. Grain Imports

4.1 Commercial imports of all cereals averaged approximately 105,000 mtons annually over the 1969/70-1973/74 period. Predominant cereal imports werewheat grain and wheat flour with annual import quantities varying widely inresponse to domestic shortfalls. Table 7 displays the recorded commercialimport volume and value of cereals and cereal products in addition to thevalue-of total food imports over the 1969/70-1973/74 period. The data demon-stfate the significant increase in cereal acquisition from abroad duringdrought years; cereal imports more than doubled over the five-year periodwhile the value of such commodities increased more than four-fold reflectingthe major hikes in world grain prices.. Even though total food imports rose

1/ F. Uhlmann, "(.ofteideerzviigung und-verbrauch im Jahre 1%85 in leterweiterten EWe', Ararwlirtschaft, Vol. 7, July, 1973, p. 2O1.

ANNEX 1Page 19

in current value terms by more than 400 percent, cereals and cereal productsover the same five years continued to represent between 40 to 50 percent ofthe total. Flour and wheat tonnage dominated the total cereal category withan average of 87 percent of total cereal and cereal product imports.

4.2 Documentation of Yemeni wheat and flour commercial imports by sourceis fragmentary and often conflicting. Table 8 presents one record of flourimports expressed in wheat equivalents. Most of the flour obtained by Yemenfrom the world market is at commercial rates. While the EEC countries, es-pecially France, Belgium, Germany, and the Netherlands, have remained thedominant suppliers of commercially purchased flour, Canada and the U.S.have also provided flour as grants-in-aid or on concessional terms. Dataconcerning sources of Yemeni wheat grain imports are much less reliable;Table 9 presents some information concerning 1973 wheat and flour importsand to a lesser extent, those for 1974. Preference at present seems tobe for the harder, more expensive, white wheats, especially from Australia.

4.3 A common thread running throughout the data is that since 1969 flouron the average is delivered CIF Hodeidah at lower prices than those for wheat.The reason imported flour has been less costly than imported wheat has beendue to the quality of the flour purchased, and its sources. As a general rulewheat flour purchased has been a straight grade, 10.5-11 percent protein (drybasis), and 12.5-13 percent moisture product made from EEC (predominantlyFrench) soft winter wheats. Such wheats are usually the lowest priced millingwheats from any volume source. Although the EEC is expected to remain animporter of wheat, largely stronger wheats needed to maintain desirable bakingquality, the effect of such imports in most years is to make a large quantityof domestic soft wheats available for export, mainly in the form of flour.Secondly, the issuance of restitution payments to flour exporters (when theworld prices of wheat lies below the EEC lowest market price) as well as thegeographical proximity enjoyed by EEC suppliers, especially with the resumptionof trade through the Suez Canal, complement the quality-based price advantageof EEC flour over wheat of better or similar quality obtained from more distantsources.

Grants-in-Aid

4.4 Data on grants-in-aid are fragmentary and incomplete. It is felthowever, that grants-in-aid represent a minor, but importIiln, portion of theYAR cereal supply. The mission estimates that the average in recent years hasbeen 62,000 m tons per annum, representing about four percent of the total sup-ply. Although the estimate appears to be reasonable, it may be somewhat low.Wheat and wheat flour represent the principal commodities received underaid pr^ograms. Several multi-national organizations and many bilateraldonors engaged in food relief participate in assistance to YAR, with thevolume of grants provided varying directly with domestic crop success.

ANNEX 1Page 20

V. Conclusions Concerning Projected Grain Supply and Demand

5.1 Taking into account domestic production, commercial imports, andgrants-in-aid, as discussed above, average total cereal supply amounted to1,528,516 m tons per year during the 1970-1975 period, equivalent to a percapita consumption quantity of 292 kg per annum (a figure considered consis-tent with those recorded in other grain-based developing economies). Withdomestic cereal production projected to 1990 at a rate of increase of 1.5percent and consumption quantities estimates based on the above assumptionsconcerning per capita consumption, population growth, GDP growth, and incomeelasticity of demand for cereals, an ever-widening gap is expected to developbetween demand for cereal commodities and domestically generated supplies.(See Table 16). Specifically, while domestic shortfalls for cereals in 1976are estimated to total 199,500 m tons or 12.6 percent of projected cerealdisappearance, this quantity is expected to swell to 347,300 m tons or 19.1percent of disappearance in 1980, and 1,031,800 m tons or 37.71 percent oftotal demand one decade later.

5.2 The form these shortages will assume, either as grain or as flour,remains an important factor on which only present import patterns and currentconsumption trends might shed some light. Firstly, over the five-year period,1969/70-1973/74, the flour cereal grain ratio has varied widely and with theexception of 1969/70, has tended to become larger during drought periods,perhaps reflecting the relatively lower price of flour over imported wheatmentioned above; however when grants-in-aid are added to commercial cerealimports, the data reveal that YAR is presently importing an average annualamount of grain in the magnitude of 100,000 m tons and average annual flourquantities of approximately 53,000 m tons, yielding an average flour/grainratio of roughly 1:2. Secondly, during the period January-May 1975, a totalof 62,034 m tons of wheat and flour were imported through commercial channels,21,634 m tons or 34.9 percent of which were of flour. Thirdly, the principalimporter of cereals into YAR, handling over 50 percent of total tonnage,reported receiving flour and wheat tonnage in approximately the same ratio,1:2. Fourthly, many urban consumers prefer homebaked bread prepared froma mixture of one part importerd white flour and two parts whole wheat flour;such blends apparently result in textural as well as taste improvementsin the final products. Thus, for projection purposes, it has been assumedthat cereals will be acquired from foreign sources in approximate conformitywith the 1:2 flour-grain ratio encountered in the above stated cases. Onthis basis, flour imports into Yemen are projected to total 66,500 m tons in1976-, a quantity to rise to roughly 343,900 m tons by 1990.

VI. Implications of Projected Cereal Imports on the YARBalance of Payments Situation

6.1 The YAR balance of trade has displayed ever increasing deficitsover the 1,-t several years, totalling US$146 million in 1973 versus only

ANNEX 1Page 21

$66 million two years earlier (see Table 11). The trade deficit for 1974

(July/June) continued the upward trend to $219 million, an increase of 50

percent over the previus year. Food and manufactured consumer items repre-

sented the major imports, with the former comprising an average of 50 percent

of the total. (As shown in Table 7, cereals and cereal products amounted to

an average of 45 percent of the food import component). Value of total ex-

ports remained dominated by cotton, coffee, and hides and skins, yielding a

total rather meager in comparison with that for imports. Between 1970 and

1974, exports stagnated between US$6 and 12 million thereby covering only an

average of 7 percent of total commodity imports.

6.2 Workers' remittances, the major single source of foreign exchange

earnings for Yemen, and to a lesser extent cash and commodity grants from

foreign sources, have reasonably limited current account balance deficits to

tolerable levels amounting to only $15 million in 1973 and $1 million the fol-

lowing year. Workers' remittances more than doubled over the 1970-1973 period

from $45 to 108 million (current prices) and rose to $159 million in FY1974.

Official project and commodity loans in addition to private capital inflows

increased substantially over the period and in each year proved sufficiently

large to generate an overall surplus in the balance of payments.

6.3 Cereal import requirements are projected to rise significantly over

the next thirty years from 199,500 m tons in 1976 to 1,924,200 m tons in

2000, a factor that has serious potential implications for the YAR trade

balance and resulting balance of payments situation. Although the total cost

for these estimated cereal imports could be somewhat assuaged by foreign

aid donations and concessionary sales arrangements, the total expense of com-

mercially obtained tonnages of such magnitudes would no doubt be staggering

and probably be well beyond the ability of YAR to cover through foreign ex-

change generated from export commodities. Employing the currently (1975)

quoted CIF Hodeidah price of US$228/m tons for hard Australian white wheat for

valuaLion of future import requirements, 1/ the cost of 1980 cereal imports

is projected to total US$79 million, an amount rising to $235 million by 1990

and expected to hit $439 million by 2000.

6.4 Present earnings from exports, principally cotton, coffee, hides

and skins appear minuscule in comparison with these future import amounts (see

Table 12), and prospects for future growth of the present three major export

items are not encouraging. Although cottonseed and raw cotton exports, re-

presIitLing Yemen's most important export items, more than quadrupled in value

terms from 1971 to 1974, possibilities for future expansion are limited be-

cause: (1) termite-infestation is a major threat, and (2) cotton cannot com-

pete with high value crops on well-irrigated land given current input and farm

1/ The US$228 wheat price employed here aligns well with the IBRD/IDA 1980

price forecast of US$220 for Canadian hard red spring wheats, FOB

Thunder Bay quoted in Commodities and Export Projections Division,

IBRD Development Policy Staff, Price Forecasts for Major Primar

Commodities, Report No. 814, July, 1975, Annex 1, p. 8.

ANNEX IPage-22

commodity prices and per ha yields. Coffee, hides and skins likewise, fail to

offer significant prospects of large scale export based on past export per-

formance. Tonnage of hides and skins exported stabilized at approximately

1,800 m tons per year and coffee export volumes have declined markedly, reflect-

ing the agronomic substitutability of highly profitable qat for coffee. Pos-

sibilities for increased production and exportation of light manufactured

items such as cotton cloth to nearby markets seem favorable, but earnings from

such exports could probably only minimally cover required cereal imports.

6.5 As mentioned above, remittances from workers employed in Saudi

Arabia and other nearby states represent the major source of foreign exchange

earnings for Yemen. According to the recent housing and population census

(February, 1975), an estimated 1,234,000 Yemeni were living outside the

country at the time of the enumeration, the great bulk of whom were working

age males. The prospects for continued emigration for work purposes and

derived remittances remain unclear. Yemeni workers doubtless provide cri-

tically needed manpower in sparsely populated countries experiencing rapid

economic expansion attributable to petroleum revenues, and such countries

will doubtless continue to supply ready markets for this labor pool, at least

in the short-term. However job creation is chiefly a function of high growth

within nearby states and could therefore be seriously affected by an economic

slowdown and/or expansion of the domestic labor supply over the long-term,

creating competition for available jobs. The possibility of xenophobic back-

lashes to large inflows of foreigners into these neighboring countries, espe-

cially if their labor becomes competitive rather than complementary, should not

be ruled out.

6.6 It would appear therefore that Yemen could become increasingly de-

pendent upon external assistance, probably from neighboring Middle Eastern

countries, to finance required cereal purchases. Yemen is presently highly

dependent upon foreign aid for development as well as for current budgetary

obligations. External financing represented 54 percent of 1973/74 government

spending compared with an average of 46 percent over the 1969/70-197Z/73

period. The grant component, primarily the result of Saudi Arabian aid sup-

port, rose from 24.3 percent of current government expenditures in 1971/72 to

33.7 percent in 1973/74; in current values such grants increased from YRls 55.4

million (US$12.3 million) in 1971/72 to YRls 109.2 million (US$24.3 million)

two years later, a jump of 97 percent. Portions of needed cereal requirements

could be filled by acquisition of flour, possibly on grant or concessionalbases.derivable from huge flour milling units pj-esently being installed in

nearby Gulf States (Saudi Arabia, Kuwait, Abu DIlabi) with capacities deemed

considerably in excess of present or future domestic requirements. However the

limit tQ which such donors would be willing to go to cover future cereal importdemand for YAR remains unknown and as such underscores the criticality of theprojected food shortages, and likewise their so([at, economic, and political

ramifications.

s4ay, 1976

ANNEX 1Table 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Economic Activity by Sector

Year1969 1970 1971 1972 1973

------ YRls millions-----------------

Agriculture 1,592.0 1,710.0 2,054.0 2,245.2 2,276.0

Industry 51.1 67.0 85.6 100.5 129.0

Construction 65.6 74.2 86.4 112.5 145.0

Trade 286.5 307.3 349.2 505.9 589.0

Government 54.7 67.4 90.9 171.6 256.0

Transport & Communication 51.0 54.4 69.7 81.1 87.0

Finance 8.1 18.4 20.0 29.9 49.0

Housing 81.2 86.7 98.3 102.5 112.0

Services 24.4 31.1 40.9 51.6 62.0

TOTAL 2,214.6 2,416.5 2,895.0 3,400.8 3,705.0

Source: The National Accounts of YAR, 1969-1973

ANNEX 1APPRAISAL OF Table 2

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Agricultural Land Use by Governorate, 1974-75

(ha'000Q

Governorate Total Cultivated Marginal Forest and OtherArea Area Area 1/ Shrubs

Sana'a 8,000 400 600 100 6,900

Hodeidah 3,500 235 500 450 2,315

Taiz 1,200 250 100 500 350

Ibb 1,300 300 50 400 550

Hajja 1,700 130 250 50 1,270

Saada 1,800 60 200 - 1,540

Damar 1,000 100 200 100 600

Beida 1,500 40 100 - 1,360

Total 20,000 1,515 2,000 1,600 14,885

1/ Land cultivated in high rainfall years.

Source: YAR Central Planning Organization Statistics Department,Statistical Yearbook, 1974-75, Sana'a 1975, p.55

ANNEX 1Table 3

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Cultivated Land by Source of IrrigatiQn, 1974-75

(ha'OOO)

Source of Irr-i-gation.Governorate Cultivated land Rainfed Flood Perennial Wells

Sana'a 400 375 - 20 5

Hodeidah 235 105 100 5 25

Taiz 250 221 10 18 1

Tbb 300 279 - 20 1

Hajja 130 115 10 5 -

S-ada 60 60 - -

Damar 100 92 - 5 3

3pida 40 38 - - 2

Total 1,515 1,285 120 73 37

Source: YAR Central Planning Organization Statistics DepartmentStatistics Yearbook, 1974-75, Sana'a, 1975, p.54

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Major Crops 1/ by Area V/ and Tonnage 3/

1969-70 /4 1970-71 1971-72 1972-73 1973-74 1974-75Area Tonnage Area Tonnage Area Tonnage Area Tonnage Area Tonnage Area Tonnage

Barley 145 160 140 154 143 178 143 164 191 230 170 220Sorghum & Millet 1,200 680 1,230 984 1,100 1,020 1,100 900 880 720 1,950 1,570Wheat 35 NA 30 33 50 54 50 50 70 71 65 78Maize 4 9 16 32 50 80 50 80 52 84 60 107

Total Cereals 1,384 849/5 1,416 1,203 1,343 1,332 1,343 1,194 1,193 1,105 2,245 12975

Fruits NA NA NA NA NA NA 10 60 10 60 12 60Potatoes 4 20 6 55 5 58 6 64 6 64 6 78Vegetables 8 50 10 100 15 137 16 150 16 150 18 168Pulses 50 50 50 60 60 60 60 56 65 64 71 84Coffee 5 4 6 4 6 5 8 5 8 5 8 5Dates NA NA NA NA NA NA 1 5 1 NA 1 5Grapes 4 NA NA NA NA NA 8 35 8 31 8 40Cotton 5 2 10 10 15 15 20 18 20 20 28 26Tobacco 4 2 4 3 4 5 4 5 4 5 4 5Sesame NA NA NA NA NA WA 8 4 8 4 9 5

Source: YAR Central Planning Organization Statistics Department, Statistical Yearbook, 1974-75, Sana'a, 57-6G

/1 No data on qat production available/2 In thousand hectares X D

/3 In thousand m tons M/4 Based on July/June crop year (DX

- _ * f ; ;- r r, L r . 4

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Estimated Cropping Pattern in Wadi Zabid at Present and After Full Project Implementation

(ha'000)

Cotton Sorghum Millet Maize Oilseed Vegetables TotalPresent:Spate 2,000 8,600 3,900 1,200 700 100 16,500Well and Spate - 600 600 - - 100 1,300Well 2,200 1,200 1,000 300 100 200 5,000

Total 4,200 10,400 5,500 1,500 800 400 22,800

Percent 18.4 45.6 24.1 6.6 3.5 1.8 100.0

After Full Development:Spate 4,000 9,450 2,365 1,500 705 - 18,020Well and Spate 500 - - 650 400 - 1,550Well 2,500 - - 1,500 1,000 1,500 6,500

Total 7,000 9,450 2,365 3,650 2,105 1,500 26,070

Percent 26.8 36.2 9.1 14.0 8.1 5.8 100.0

Source: A. H. Shehata and A. K. El-Rafie, Economic Analysis of the Existing and Potential CroppingPatterns in Wadi Zabid, Tihaita Development Authority, Wadi Zabid, March 1975.

b >

ANNEX 1Table 6

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Supplies of Certain Foods Available for Consumption, their Calorieand Protein Content, and percentage Contribution to Total Calories

and Proteins

Year 1964-66 average per capita consumption (FAO Food Balance Sheets 1964-66)

Grams per Calories Percent of Proteins Percent ofFood Group day per day calories per day proteins

Cereals 414.1 1,419 75% 41.2 72%

Vegetables & fruits 78.8 103 5% 1.2 2%

Roots, pulses &seeds 49.0 87 5% 5.0 9%

Sugar Products 15.3 60 3% - -

Animal Products 170.7 155 7% 10.1 17%

Fats & Oils 11.3 85 5% -

Total 739.2 1,909 100% 57.5 100%

Source: A. Bornstein, Food and Society in Yemen Arab Republic, ESN: MISC/74/4,FAO, Rome, 1974. p.2 2.

APPRAISAL OF

GA. `AiŽ STORAGE AND PROCESSING PROJEj&

YEMEN AirAB REPUBLIC

Commercial Grain Imports /1

Year1969/70 1970/71 1971/72 1972/73 1973/74 1969/70 1970/71 1971/72 1972/73 1973/74…-----------m tons------------------- -----------------YRls'000 /2 --------------

Cereal and cerealproducts:

Wheat (C1) 22,997 40,677 53,036 74,241 67,302 14,368 18,984 28,976 41,996 64,050Rice (C2) 4,606 5,767 5,199 6,017 2,723 3,171 2,604 4,027 6,316 6,112Other Cereals(C3) 589 31 671 6,837 36,184 179 25 400 2,871 23,131Flour (F) 38,486 14,828 21,133 37,090 75,145 15,460 16,658 10,002 20,251 56,232Cereal preparations 980 751 1,367 3,269 21954 1,247 2,784 1,608 2,879 4,825

Total 67,658 62,054 81,406 127,454 184,308 34,425 41,055 45,013 74,313 154,350

Total Food Imports 84,814 83,169 90,722 176,331 364,328

Cereal and CerealProducts aspercent of total 40.59 49.36 49.62 42.14 42.37Wheat and Flour as apercent of cerealtotal 90.87 89.45 91.11 87.35 77.29 86.65 86.82 86.59 83.76 77.93Flour-Cereal Grainratio /3 136.51 31.91 35.88 42.59 70.75

Source: Central Bank of Yemen, Annual Report, 1973-74, p. 1 2 2

/l Partially estimated/2 In current YRls, CIF Hodeidah/3 Where ratio in year t = Ft 4, it

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Commercial Sales to and Special Transactions with Yemen Arab Republic

Flour in Wheat Equivalent - July/June year (m tons)

Year1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 1973/74

From:E.E.C. Commercial 16,301 4,695 69,444 44,910 83,835 87,792 88,973

Special - - 1,085 10,000 - - -Total 16,301 4,695 70,529 54,910 83,835 87,792 88,973

U.S.A. Commercial - - 0 - - - - -Special 194 1,123 91 - 34Total - - 194 1,123 91 - 34

Canada Commercial - - - - - - -Special 4,246 - 11,075 4,254 4,989 4,497 6,765Total 4,246 - 11,075 4,254 4,989 4,497 6,765

Australia Commercial - 3,535 - - - - 819

Special - - - - - - -

Total - 3,535 - - - -819

Other Commercial - 8 _ 13 - - _Special - 267 - 15,377 - - -

Total _ 275 - 15,390 - - -

All Commercial 16,301 8,238 69,444 44,923 83,835 87,792 89,792Special 4,246 267 12,354 30,754 5,080 4,497 6,799 a MTotal 20,547 8,505 81,798 75,677 88,915 92,289 96,591 (D X

Source: International Wheat Council, Record of Operations under the I.W.A.

ANNEX 1Table 9

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Wheat and Flour Commercial Imports

Year1973 1974cost/m ton cost/m ton

CIF CIFVolume Hodeidah Volume Hodeidah

(m tons) (YRls) (m tons) (YRls)

Total Wheat 71,216 650 NA NATotal Flour 75,859 650 NA NA

Selected Volume Sources

Iraq - Wheat 15,231 500 NA NAArgentina - Wheat 26,912 700 NA NAAustralia - Wheat 12,214 660 NA NABelgium - Wheat 1,085 700 NA NACanada - Wheat 5,627 640 NA NAUSA - Wheat 4,500 900 NA NAW. Germany - Flour 8,125 640 3,159 970France - Flour 18,020 660 12,.260 81L.Belgium - Flour 21,791 690 12,392 1,150Netherlands - Flour 15,400 660 7,594 1,000

Base Data Source: Central Bank of Yemen, Foreign Trade Statistics

ANNEX 1Table 10

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Projected Grain Supply and Demand

Domestic Grain Shortfall inProduction 1/ - Domestic1.5% Rate of Cereat Con- Cereal GrainIncrease Resident sumption 3,4/ Production Imports

(1,000 m tons) Population 2/ (1,000 m tons) (1,000 m tons) (1,000 m tons)

(1) (2) (3) (4)=(3)-(l) (5)

1976 1,382.2 5,363,602 1,581.7 199.5 132.91977 1,403.0 5,492,329 1,636.2 233.2 155.31978 1,424.0 5,624,145 1,692.3 268.3 178.71979 1,445.4 5,761,936 1,751.6 306.2 203.91980 1,467.0 5,905,985 1,814.3 347.3 231.31981 1,489.0 6,056,587 1,884.8 395.8 263.91982 1,511.4 6,214,059 1,959.9 448.5 298.71983 1,534.0 6,378,731 2,038.6 504.6 336.11984 1,557.1 6,550,957 2,121.8 564.7 376.11985 1,580.4 6,731,108 2,210.5 630.1 419.61986 1,604.1 6,919,579 2,303.5 699.4 465.81987 1,628.2 7,113,327 2,401.4 773.2 515.01988 1,652.6 7,319,614 2,506.2 853.6 568.51989 1,677.4 7,535,542 2,617.1 939.7 625.81990 1,702.6 7,761,609 2,734.4 1,031.8 687.2

l/ Base of Production Estimates: 1970/71-74/75 Cereal Production Mean: 1,361.8.Source: YAR Statistical Yearbook 1974/75, CPO

'| February 1975, Resident Population: 5,237,893. Source: YAR Housing PopulationCensus, February 1975. Assumptions: 1976-78 Population growth rate 2.4%thereafterrate increases linearly to 3.0% in 1990.

:3/ 1970-75 average per capita consumption: 800g/day based on 1,528,516 m tonsestimated average consumption (1970-75) inclusive of seeds, animal feeding,losses and direct human consumption. Source: YAR Statistical Yearbook,1974/75; Central Bank Annual Report 1973/74; mission estimates.Estimated direct human consumption: 400 g/day/capita.Source: A. Bornstein, Food and Society in Yemen Arab Republic, ESN:MISC/74/4,FAO, Rome 1974.Income Elasticity of demand utilized: 0.5 (1976-1990); thereafter 0.2.Mission estimate, based on data from: John Mellor,. Developing Rural India:Plan and Practice, Cornell University Press, Ithaca, 1968, p.25.

4/ Assumption: 1976-1980, cereal production growth 1.5%, total agriculturalgrowth 3.0%, industry and trade 6%; 1981-2005, cereal production growth:1.5%, total agricultural growth 3.0%, industry and trade 8%. Result:real GDP growth: 1976-80, 4.6%, 1981-2005, 5%.

ANNEX 1Table 1'

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Summary Balance of Payments

(US$ millions)

Year1970 1971 1972 1973 1974

Exports 6 6 7 9 12Imports -89 -72 -103 -155 -231Trade deficit -83 -66 -96 -146 -219Services and workersremittances (net) 45 47 81 108 159

Grants 18 6 19 23 61Current balance -20 -13 4 -15 -1Official Project andCommodity LoansPrivate Capital Inflows 30 30 23 32 64

Increase in reserves 10 17 27 17 63

Source: LBRD, Current Economic Position and Prospects of the Yemen ArabRepublic, January 9, 1976

ANNEX 1Table 12

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Composition of Recorded Exports

(In millions of current YRls)

Year1969 1970 1971 1972 1973 1974

Coffee 7.8 8.1 4.6 5.3 6.0 5.9

Qat 2.1 4.3 2.8 1.0 0.7 -

Cotton 0.4 - 8.0 7.2 17.8 36.8

Hides and skins 4.0 1.2 2.0 3.3 5.5 3.9

Rock salt 1.4 1.5 2.4 0.6 - -

Others 2.3 0.7 1.8 2.7 6.0 14.2

Total 18.0 15.8 21.6 20.1 36.0 60.8

Source: Central Bank Of Yemen

March 1976

ANNEX 2Page 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Grain Storage, Processing, Marketing and Transportation

A. Grain Storage

1. The principal storage space in rural areas, where most of thedomestic crop is consumed, is an earthen pit dug under the home, called a"madfan". If good drainage keeps water from collecting in the pit, it canbe a satisfactory storage system. Low underground temperatures inhibit in-sect reproduction and activity. The gas products of grain respiration mayresult in an anaerobic atmosphere, in a properly sealed dry underground pit,in which aerobic microflora does not proliferate.

2. Commercialized domestic grain, domestic producers' tax known as'zakat", all imported grain, and all of the imported grain products (princi-pally wheat flour) are typically handled in bags and stored in flat ware-houses and store rooms. The zakat is often stored also in madfans. Thereare no modern silo facilities.

3. Major merchants and the Government own some excellent, relativelynew warehouse space. If well managed such space is adequate to house food-stuffs properly. Reliable data on the total capacity of such good space arenot available. Most of the space belongs to private merchants and is locatedin the cities. The Government owns two good warehouses of a total capacityof 5,000 m tons in Sana'a, including a recently completed warehouse. However,private rented storage space in the major urban centers has in the past provedof insufficient scale to handle large Government-acquired stocks or was un-available on a sufficiently long-term basis to accommodate zakat and customsduty volumes. As a consequence, the Government has often resorted to in-efficient holding of stocks in scattered, rural-based facilities and to fre-quent shipments of supplies to satisfy short-term needs in urban institutionprograms.

4. Almost all of the wholesale, retail, and bakery storage areasvisited were improperly managed and insanitary. Among the worst, and pro-bably not amenable to significant improvement, is the large Government bakerycompound in Sana'a, reported to be capable of storing 25,000 m tons of grain.Its mud buildings are reported to be relics from the Ottoman Empire invasionand may be as much as, or more than, 200 years old. Most of the Governmentstorage observed, primarily old mud (adobe block) buildings, could not berenovated economically to provide satisfactory storage.

ANNEX 2Page 2

5. Better data on YAR's existing grain storage space and grain flowsare urgently needed. There is no inventory of grain and grain product stor-age space in the YAR and no dependable data on its kind, its physical condi-tion, available rental space, and the flow of grain to and from it. A com-plete analysis of warehouse needs in the YAR cannot be made without such in-formation. The project would include a comprehensive .nation-wide survey ofgrain storage capacity, quality of existing space and future needs based uponflow rate analysis. The study would require about 27 man months and costab6ut US$200,000. Based upon the results of such a study a comprehansivewarehousing system can be formulated for a later project.

6. There are, however, obvious inadequacies in storage space whichwould be corrected through this project. The six warehouses proposed wouldcover the most urgent present and future needs up to 1980 and would need tobe complemented by additional storage space, the location and capacity ofwhich would be determined after completion of the storage survey. The -pro-posed five warehouses include:

(a) Ibb. There is no Government storage space in the city.. -Atpresent the Government stores its grain in rented madfans andsmall stores in various parts of the city, with significantquantity and quality loss. The Government collects about4,000 m tons of zakat and 11,000 m tons of customs duty andgrants-in-aid cereal commodities. It is proposed to construct5,000 m tons storage space.

(b) Hodeidah. There is an existing 5,000 m tons of space in two ware-houses. They are old and in poor condition, and losses due toinfestation and rodents are substantial. They would be amen-able to repair at an estimated cost of US$100,000. However,these houses are located in a prime commercial area. A zoningplan under implementation for the city of Hodeidah will removethem from consideration for continued use. The Government doesnot want to violate its zoning plan and renew warehouses in sucha prime area. A new 5,000 m tons capacity warehouse would replacethese two houses. The present annual tonnage estimated to behandled through that house for the Hodeidah area is 16,500 m tons.

(c) Sana'a. The Government owns about 5,000 m ton new warehousespace in the city. Grain is presently stored in the new ware-houses as well as the old Government bakery compound, in thelatter under significant losses due to infestation. To replacethe inadequate storage an additional 3,000 m ton new warehousespace is proposed to accommodate part of the Zakat (about 5,000m ton p.a.) and customs duties and grants-in-aid (about 18,000m ton p.a.) entering the city.

ANNEX 2Page 3

(d) Damar. The Government has no warehouse in Damar. The annual

volume of zakat, customs duty, and grants-in-aid cereal com-

modities in Damar city is estimated at about 9,500 m tons. The

amount of zakat collected per year amounts to about 2,000 m t9ns.As in Ibb the grain is presently stored in rented madfans and

small storage places with considerable loss to the Government.

A warehouse of 2,000 m tons capacity would be needed in Damar.

(e) Saada. The Government owns no warehouse in Saada. It is esti-mated that 3,200 m tons of zakat, customs duty and grants-in-aidenter the city annually for the Government accounts. The grain

is stored in rented small stalls and stores, urgently needed forcommercial purposes. It is proposed to build space for 1,000 m

tons.

(f) Hajja. There is no Government warehouse in Hajja. It is esti-

mated that 8,000 m tons of Government-owned cereal commodities,mostly customs duties and grants-in-aid, enter the city annuallyand that space for 2,000 m tons would be needed.

All warehouses would be multipurpose storage space, suitable also for storing

other food commodities and fertilizer.

7. As the zakat comes in at harvest time and, for practical purposes,

represents one annual turn-over, the annual ton-month occupancy rate is 58%

for the proposed houses. The warehouses proposed will also provide space for

increased amounts of customs duty, grants-in-aid, and possibly direct Govern-ment grain imports. In times of general storage space shortage, and with the

expected growth of storage needs, idle space in the Government facilities

could be rented to merchants at a fair rate of return.

B. Grain Processing

Flour Mills

8. There are no modern flour mills in the YAR 1/. In the more remoteareas women still grind the grain into whole grain flour by hand, typically in

a stone quern. Many large villages, most large towns, and all of the citieshave commercial, power-driven, stone buhr mills for custom grinding. Bakeries

and people located in reasonable distance of such mills take grain to them for

1/ A white flour mill originally proposed for inclusion in the project did

not prove to be economically viable in view of continuing subsidized

EEC flour exports to YAR and large expansions of flour milling capacity

under way in nearby Middle Eastern countries.

ANNEX 2Page 4

grinding. In 1973, the city of Sana'a had 12 such mills, Taiz 10, Hodeidah 6,

Ibb 4, Damar 3. The grain is not cleaned and all foreign matter is ground

into the whole grain flour. The miller, however, examines the grist for stone

and metal that would damage his buhr stones, and rejects lots containing such

matter. The custom charge for grinding averages about YRls 60 (US$13.67) per

m ton. An exact total count of such mills in YAR is not available, but total

milling capacity appears to be adequate, with new mills being installed each

year.

Bakeries

9. About 90% of the bread consumed in Yemen is prepared in the home.

This percentage is even higher in rural areas. Bread is baked in cone shaped

mud ovens called "tannurs" or "mawfans"; they are usually wood fired. This

bread is the flat, only slightly leavened, native type. In the towns and

cities, much bread is baked in commercial bakeries. Most of these bakeries

have a capacity of 0.5 to 1 m ton per shift, and operate one thousand shift,

with time out between meal hours. They also do increasingly custom baking of

doughs made in the home. Typically the commercial bakeries have brick hearth

ovens fired by wood or diesel oil. Although a few have motorized dough

mixers, most mixing is done by hand in troughs.

10. The total number of bakeries in YAR is estimated to be between 220

and 230. In the major cities 56 bakeries were counted: in Sana'a 11, Taiz

18, Hodeidah 22 and Ibb 5. In Sana'a the army operates a large bakery making

about 30 MT of bread daily; the bakery supplies bread for the army, hospitals,

schools and public feeding programs. Similarly, in Taiz, Hodeidah, Damar, Ibb

and Saada, army bakeries produce bread for the same purposes.

11. The Ministry of Supply theoretically controls bread prices through

the imposition of a price ceiling. The Ministry publishes the price lists and

enforces them through regular visits of inspectors, who check the bakeries in

the cities about once a week. Due to its severe penalty system, the price

control system is reasonably effective despite widespread illiteracy and com-

plete lack of scales. In the third quarter of 1975 bread prices in Sana'a

showed some variation between bakeries. White bread and native bread using

white flour appeared to be closely priced at the ceiling of about YRls 2.08

per kg (US$0.46 per kg). At the same time native bread using whole grain

sorghum flour was being offered at YRls 2.08 to 2.38 per kg (US$0.46 to 0.53

per kg).

12. The major problems in the bakery sector are insanitary conditions

due to poor facilities and improper management. All of the bakeries visited

were quite insanitary, including a modern, mechanical bakery only two months

old. The large Government bakery in Sana'a is particularly notorious for its

poor facilities and insanitary conditions. Lack of adequate storage space

leads to easy infestation of flour; flies cover ingredients and bread and,

often, lack of hot water supply prevents cleaning of troughs and equipment.

Food supplied under such insanitary conditions is recognized as a source of

ANNEX 2Page 5

endemic diseases widespread in YAR. The project would make a substantialcontribution to better health through significant improvements in bakeryfacilities and technical assistance.

C. Grain Marketing

Domestic Crops

13. The major portion of the domestic crop does not enter the commer-cial markets. Although no exact data are available concerning commercial-ization of the domestic cereal crops, Table 1 of Annex 3 indicates that about11 percent of the average crop of about 1.4 million m tons is probably com-mercialised interregionally. Certainly a large part of the non-farm popula-tion buys its supplies from local domestic production. Also farmers special-izing in cash crops buy cereals from the domestic supply. Grain is movedexclusively in bags from production to consumption areas.

14. The scheme below indicates the usual routes to the market fordomestic cereals:

MARKET CHANNEL FOR DOMESTIC CEREALS

SMALL MERCHANT, OR WHOLESALER GATHERS IN

FARMER GATHERER, BUYS AT TOWNS AND VILLAGES RETAILER CONSuMERTHE FARM AND TRANSPORTS

RETAILS LOCALLY BAKERl1W CaLk-SMERTO THE CONSUMER lll ll

World Bank-15525

ANNEX 2Page 6

15. Farm prices of cereals are high relative to international prices.S:zrghtim and wheat are reported to have been sold for over US$300 per m tons

equivalent in the four major producing areas. This is almost double the

market price for foreign grains CIF Hodeidah. The Government exerts no ef

fective price control and refrains from purchasing intervention. Selling

prices for domestic grain are restrained to a certain extent only by themarket prices for imported grain. Merchants buy the grain at the lowest

prices they can negotiate at harvest time, and store and distribute it overthe year at constantly increasing prices. The spread between actual farm

prices and consumer prices for domestic grain is often unreasonable, according

to undocumented reports. Monthly retail prices from March through December

t974 in Sana'a city averaged YRls 1.75 per kg 1/ which is equal to US$389 perrn tons. According to undocumented reports farmgate prices for sorghum ranged

from a low of US$31 per m ton to a high of $460 per MT during 1974/75; retailprices for Australian wheat in 1975 in Ibb were equal to US$356 per m ton be-

fore harvest and dropped to US$249 after harvest; white sorghum retail priceswere at US$345 per m ton before harvest, were dropping rapidly and were ex-

pected to bottom out when harvest was completed at about US$173 per m ton.

Commercially Imported Cereals

16. Some five large importers dominate the market for imported cereals,

with the largest accounting for perhaps 50 to 60% of the market. These largeimporters also serve as agents for the small importers, who are primarily

wholesale merchants. The large importers collect small purchase orders, com-bine them into economical lots, negotiate prices, and arrange shipping. Thesmaller importers thus are required only to open a letter of credit for pay-

ment, and take delivery at the port.

17. Commercial importation of cereal commodities averaged 105,000 MT an-nually during 1971-74. The volume varies markedly from year to year in re-

sponse to the size of the domestic crop. In practice, the commercial import

volume of grain is not controlled. A license to import and an authorizationto buy the foreign exchange necessary to do so is required but both are freely

given by the Central Bank. The lack of any import regulation for cereals has

led repeatedly to large fluctuations in available domestic supplies and er-ratic price changes. With increasing cereal imports expected in the future

the Government will need to become more active in the grain import sector.

1/ Central Planning Office, Statistical Yearbook of YAR, 1974-75.

ANNEX 2Page 7

18. The usual routes for imported cereals to the consumer are as follows:

MARKET CHANNEL FOR IMPORTED CEREAL

IMPORTERS' IMPORTERS'HODEIDAH REGIONAL BAKERWAREHOUSE WAREHOUSE

HODEIDAH COSUEPO RT 1 CO NSU ME R

"O.- WHOLESALER -40.W RETAILER

World Bank-1 5526

ANNEX 2Page 8

Government Activities in the Cereal Sector

19. Legislation provides broad authorization for the Ministry of Supplyto engage in food supply and food price stabilization activities. However,

it does not at present engage in such activities-with a formal, integrated

plan. Government intervention up to this time has taken two forms:

(a) Maximum price lists for each Governorate are issued by theMinistry of Supply periodically for imported staple food com-

modities, including wheat and flour. These lists show maximumprices for specific controlled commodities, available in each

Governorate, at wholesale and retail levels. The basis forcalculating the wholesale price.is the CIF price plus im-porters' costs plus typically 10% importers' margin. Whole-sale maximum prices are derived by adding the wholesaler'scosts to his purchase price and profit margin of 5%. Re-tailer's maximum prices are derived less specifically and tendto be based more on average costs and higher margin allowances.

For the imports of wheat and flour the Ministry of Supply esti-mated that 75% of the wholesale volume is sold in full bag lotsdirectly to the households and bakers at the wholesale price,which would leave only 25% of the volume to be sold at the higherretail prices. Margin allowances may be altered by the Ministryof Supply to provide incentives to either increase or depress

supplies of imported goods. Annex 2, Table 1 illustrates atypical cost and price build-up in the domestic market for im-ported Australian wheat at imported CIF prices prevailing in the

third quarter of 1975.

(b) The Yemen Foreign Trade Company (YFTC) is a quasi-governmentcorporation and owned 40% by the Government of YAR, 35% by the

Yemen Bank for Reconstruction and Development (YBRD), and 25%by the private sector. It has operated under the supervision of

the Ministry of Economy and the YBRD. Its principal activityhas been the importation of food commodities. It operates in

the three major cities - Hodeidah, Sana'a and Taiz. The Ministryof Supply instructs this company when to import and sell cereals.It imports food commodities duty-free and sells at the Ministry

of Supply's maximum wholesale prices. It also receives somecereals from the Government grants-in-aid credits, which it sells

for the account of the Government, retaining a commission. Overthe past seven years YFTC's cereal volume has averaged 13,000 mtons per year, or about 8% of the average annual imports of

167,000 m tons.

20. YFTC has experienced difficulties in recent years. It has not beenprofitable and has not successfully attained its intended stabilization goals.

Based upon interviews, its problems appear to stem largely from charter defici-

encies, organizational problems and inadequate capital.

ANNEX 2Page 9

21. Government acquires cereal commodities for its own account primarilyfrom three sources:

(a) Zakat - originally a religious tithe, is levied at 10% of theproduce. Total zakat collection would theoretically amount toabout 140,000 m tons of grain per year. Actual collection isless as part of the zakat is paid in cash. Also the collectionsystem is rather inefficient, particularly in inaccessible areas.There is no available record of what the Government actually re-ceives "in kind". The tax authorities estimated that as much as75% is actually paid in kind, but that large portions of thegrain received is immediately sold to merchants to meet the cashneeds of local Government bodies. WJhile no record of the volumeof grain retained in kind by the Government is available, the taxauthorities estimated that the amount would approximate 26,000 to30,000 m tons per year. Such a retention seems to agree reason-ably well with data rationalized from other fragmentary sources.The distribution of zakat taxes collected is: (i) 45% to theMinistry of Finance; (ii) 45% to the Local Development Associa-tions; 10% to the local sheikhs and amins.

(b) Customs Duties levied on commercial imports at a rate of 5%.These duties may be paid either in cash or in kind, althoughthe Government prefers to take these duties in kind, and gen-erally does so. No record of the exact quantities of cerealcommodities so acquired is available; however, it is reason-able to estimate that the average annual quantity approximates5,200 m tons.

(c) Grants-in-aid from multi-national and bilateral donor organiza-tions. The total of such grants is estimated to average 62,000m tons annually, with wide differences between years due to vary-ing needs, brought about by wide differences in annual domesticcrop production. It is estimated that about 18,000 m tons ofthis quantity are ear-marked for specific food-for-work programsand 44,000 m tons are direct grants to the Government.

The Government thus may have for its account 75,000 to 79,000 m tons of cerealcommodities in an average year. Its disposition of these quantities is notknown in detail. However, the principal uses are: (a) public feeding programs- armiy, schools, hospitals, certain public servants and charity to the poor;(b) sales for cash.

D. Transportation and Import Handling of Grain

22. All internal transportation-in YAR is carried out on roads by motortruck or animal. There are no rail roads. A triangular, largely hard surfaced

ANNEX 2Page 10

road network connects Hodeidah, Taiz and Sana'a, the major urban areas. Ship-pers and their agents report an adequate supply of trucking vehicles availableat all times. The General Office of Domestic Land Transportation states thatthere are somewhat more than 400 10-15 m tons capacity long-haul trucks.operta-irg out of their office in Hodeidah, plus 60 more operating out of anotheroffice serving Hajja. There would be no problem in supplying additionalvehicles as the demand for service rises.

23. Freight rates are set by the Ministry of Economy. Present ratesquoted to the principal cities from Hodeidah are:

YRls per m ton

Hodeidah - Sana'a 71Hodeidah - Taiz 71Hodeidah - Ibb 93Hodeidah - Saada 149

The Transport Association of Mokha has 40 members operating fifty 5-15 m tonscapacity vehicles. Present rates to their principal services areas are:

YRls per m ton

Mokha - Taiz 40Mokha - Ibb 70Mokha - Sana'a 110Mokha - Hodeidah 70

24. The principal port of YAR is Hodeidah. It handles about 87% oftotal cargo and about 86% of dry bulk imports. Of YAR's three ports handl-ing significant amounts of commercial cargo the Hodeidah port is, at present,best suited for future development: the site was chosen carefully in allow-ing for expansion; the geotechnical conditions are satisfactory; it is a suit-able distance from the city; and all infrastructure facilities are available.The main constraint to the port's future development may be its depth of 9.6m L.W.L.

25. Hodeidah port is operated by a semi-autonomous port authority corpo-ration, responsible directly to the Ministry of Public Works. All functionsat the port, except the collection of customs duties, are the responsibility.of the corporation.

26. The ship channel, port basin and berth drafts available at presentpermit ships with about 10,000 DWT to navigate and berth. Dredging, expectedto be completed in 1975, will increase the possible cargo weight of ships toabout 14,000 m tons. Longer term plans are to dredge further to depths thatwill permit 20,000 DWT vessels to berth. Greater depths may be practical, butadditional studies are necessary before a prediction of greater depths canbe made.

ANNEX 2Page 11

27. The port presently has berthing space for one 90m and two 160 mships along 410 m of wharf. The No. 1 berth of 90 m is shallow draft. TheNo. 2 and No. 3 berths handle most of the port's present cargo. A contracthas been signed with the USSR to construct a fourth berth, 165 m in length,to be completed in 1976. Three 5-m ton capacity rail cranes on the quay apronload and unload ships by sling and hook methods. Bulk grain is unloaded bylabor crews 4ithin the ship's holds, filling canvas or jute lined rope slings.These sling jads are dumped in piles on the quay apron. Labor crews fill newbags by the use of volume measure cans, usually to about 50 kg "catch" weight.The bagged grain is immediately trucked to the importer's warehouse. There isno grain warehouse space in the port area. Usually about 700 m tons per daywill be unloaded. Annex 9, Table 8 shows approximate average variable portcosts of US$3.76 m tons to the importer at present to handle bulk grain, ex-cluding any ship's demurrage or hidden charges he may be paying in chartercosts due to port turn around time.

28. While on the quay apron, the grain is subjected to losses due torain, rodent contamination and spillage. It is estimated that 0.5% of thegrain may be saved by eliminating these operations. The grain is not weighedat the port. Prior studies by consultants have shown that deliveries of bulkgrain to ports without receiving scales may be short weighted by up to 5%.Without weighing, the consignee does not know of his loss and cannot file ac-ceptable claims.

29. YAR has two other ports that handle commercial cargo in significantvolumes: Mokha and Salif. The port of Mokha receives a small quantity ofcereals. It is a lighter port and is subject to heavy silting. There is, atpresent, no assurance that Mokha port can be successfully developed in view ofits siltation problem. At best, its development would be a costly undertakingfor the small volume of cargo it would handle advantageously. Its only ap-parent advantage is its proximity to the Taiz/Ibb area for inland transporta-tion. The estimated difference in truck transportation costs in favor ofMokha over Hodeidah port to Taiz is YRls 53.6 (US$11.9)/m ton. 1/ It is about163 km further from Hodeidah to Taiz than from Mocha to Taiz - 269 km versus106. However, only about 7% of the present national shortfall of cereal pro-duction occurs in the Taiz/lbb Governorates. 2/

30. Salif is reported to be an excellent natural deepwater harbor--thebest of the three. It has been used in the past as a port for shipping salt.However, there is no infrastructure--no city, no utilities, no improved roads.

1/ Based on data presented in YAR Port Development Study, Preliminary Draftof Consultant Study, August 1975.

2/ According to the appraisal mission's estimates, 93% of the grain importswould be consumed in the areas other than the Taiz-Ibb Governorates.rhe mission considers the port study's estimate that 70% of agriculturalimports would be handled more efficiently through Hodeidah as too low forgrain imports.

ANNEX 2Page- 12

The costs of developing infrastructure at Salif will prevent development ofthe harbor as a major port in the foreseeable future. 1/

31. There is no doubt, and the analysis of the preliminary port studyconfirms this, that a port silo for YAR should be built at Hodeidah to handlethe 93% of the imported grain volume, for which Hodeidah has a cost advantage.Duplication of the receiving facilities for bulk grain at Mokha would resultin an investment cost in the magnitude of US$3.1 million without consideringthe cost of port development, dredging and storage bin space. At the presentvolume of about 7,000 m tons of grain advantageously handled through Mokha,the freight savings would amount to about US$55,000 p.a. 2/ This is not suf-ficient to justify the high investment costs. The only logical location forconstruction of silo capacity at the present time is tiodeidah Port. Consider-ation of Mokha port can be safely deferred until such a time as the Mokha portfuture is decided as a result of the port study, and the total demand for im-ported cereals has grown to the point where expansion in storage space, beyondthe 20,000 m tons proposed in the project, is needed. (Annex 9, Table 8 des-cribes the present cost differentials for bulk grain handling and transport toTaiz from Hodeidah vs. Mokha. At present the differential is YRls 14.22(US$3.16) per m ton in favor of Mokha. This differential would be even lowerif the more efficient port facilities proposed in llodeidah were taken intoaccount).

32. Hodeidah port's main problem is congestion. In October 1975 a ship'swaiting time averaged about four days. Bulk grain unloading with present fa-cilities is a major reason for the congestion. A 8,000 m ton ship requiresabout ten days for unloading bulk grain and, during this time, occupies one ofthe two available berths for large ships. For this reason, the Government isconsidering the restriction of the import of bulk grain and requiring allgrain to be imported in bags. This may add about US$30 - US$50 per m tons tothe CIF cost of imported wheat. Moreover, such regulation would severely re-strict the sources of grain supply as many export ports are not equipped forhandling bagged grain. The Hodeidah port congestion is expected to increase,once the international shipping traffic has adjusted to the reopening of theSuez Canal. 3/ The proposed silo and modern ship unloading facilities wouldreduce the turn-around time for bulk grain ships of 8,000 m tons from thepresent ten days to two days and thus help substantially in relieving portcongestion in Hodeidah.

1/ YAR Port Development Study, Preliminary Draft of Consultant Study,August 1975.

2/ Based on data presented in YAR Port Development Study, loc. cit.

3/ The increased number of ship arrivals in the third quarter of 1975seems already to indicate increased traffic for Hodeidah.

May, 1976

ANNEX 2

APPRAISAL OF Table 1

A GRAIN STORAGE AND PROCESSING PROJECT

YEE1,I kAAB REPUBLIC

Typical Cost and Price Build-up - Imported Wheat

Sector Cost toCosts Market Margins

…IXRls/m ton --InportersAustralian FAQ Wheat CIF Tiodeidah 1,026.0 1,026.0 -Landing Charge - Port Authority 5.5 5.5 -Customs Duty at 5% 51.3 51.3 -Fill Bags and Sew 6.o 6.o -Load Trucks 3.0 3.0 -Truck to Hodeidah Warehouse 7.0 7.0 -Labor Expense in Warehouse 6.0 6.0 -Warehouse Overhead Expense 2.0 2.0Office Overhead Expense 4.0 4.0 -Imorter's margin for Taxes and Profit 1/ 111.0 - 111,0

WholesalerWholesaler's Cost Inside Importer'sHodeidah Warehouse 1,222.0 - -

Loading Trucks 5.0 5.0 -

Transport to Sana'a or Taiz 71.0 71.0 -Unload Truck 2.5 2.5 -Rent 4.0 4.0 -

Wholesaler's Margin for Taxes and Profit 1/ 65.0 - 65.o

RetailerRetailer's Cost Inside Wholesaler's 1,369.5 - -

Warehouse 2/Loading Truck 5.0 5.0 -Truck to Retailer's Stall 10.0 10.0 -Unload Truck 2.5 2.5 -Rent 4.0 4.0 -

Margin for Taxes and Profit 359.0 - 359.0

Price to Consumer at 1.75 YRls/kg. 1,750.0 _ _Costs in Consumer Price 1,215.0 -Margi`ns in Consumer Plice 535.0Percent of Consumer Price 100.0 69.4 30.6

1/ Calculated at the allowable rates, as furnished by the Ministry of Supply2/ Consumers buy bag (50kg) lots at this price - YRls 63/50 kg

Typically wholesalers sell all customers - retailers, bakers and consumersat the same full bag price..

Source: 1ission calculations based upon interviews with merchants, andGYAR officials.

49EX

"able &

APPi{AISAit

A GRAIN STORAGE AND PROCESbiNG PROJECT

YEMEN ARAB REPUBLIC

Bread Demand and Production, 1975 and 1980

Government Welfare ProgramsDaily Bread Requirements Projected Requirements /2

1975 1980------ m tons (flour basis)…-----------------

Sana'a 8.o /1 10.0Hodeidah 2.3 /1 3.0Taiz 6.9 /1 9.7Ibb .8 1.0Damar .8 1.0Saada .7 3.9

Total 19.5 25.6

Private Bakeries Production and DemandProduction Demand /31975 1980 19i5

-------m ton (flour basis)…------

Sana a 17.8 25.0 35.0Hodeidah 13.2 18.5 26.0Taiz 11.8 16.6 23.2Ibb 4.5 6.3 8.9Damar 3.8 5.3 7.5Saada - 1.0 1.5HajJa 1.5 2.1 3.0

Total 52.6 YIV8 105.1

Source: Ministry of Supply Estimates

l Breakdown of Government Welfare Program Requirements

Sana'a Taiz Hodeidah---------- m ton------------

Distribution to Poor 1.7 1.7 .5Hospitals 1.4 1.3 .7Schools 4.9 3.9 1.1Subtotal 8.0 ___ 2.3

/2 Increase is mostly for expected expansion of school and hospital feedingprograms and, for Taiz and Hodeidah, for enlarged distribution to poor.

/3 Demand has been conservatively estimated to increase at 7% per annum. Thisis in line with the projected urban population growth rate.

May . 1976

ANNEX 3Page 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Regional Grain Balance

1. Although data do not exist concerning governorate-specific rates ofpopulation growth and of grain production increase, rough estimates concerningfuture regional balances could be generated with the utilization of: (1) pre-sent population and production information for each governorate as well as (2)the national growth projections discussed in Annex 1.

2. According to current disapearance and cereal production estimates,cereal shortages total approximately 313,800 m tons of which 145,000 m tons,or 46.2 percent, are alleviated through inter-governorate shipment of surplusquantities, leaving the remaining excess demand to be satisfied through im-ports. The Sana'a, Hodeidah, and Ibb Governorates represent the current sur-plus producers, with the composite category encompassing the Damar, Al Mahweet,Saada, Marib and Al Beida Governorates accounting for the largest deficit.Only approximately 10 percent of current domestic cereal production moved intothis intergovernorate stream with the major portion remaining at the locallevel to satisfy current consumption and storage needs at the farm level aswell as to meet intra-regional market demand.

3. Because of the rise in the population growth rate and relativelylimited expansion of cereal production foreseen in the future, gross shortagesare expected to increase to 425,000 m tons in 1980, 662,800 m tons in 1985 and1,033,000 m tons in 1990. Correspondingly, for the same reasons, the Sana'aGovernorate is expected to slip to net importer status by 1980, Ibb by 1985,and Hodeidah by 1990. In sum, regional surpluses area projected to satisfy adiminishing portion of excess demand, an amount falling from 46.2 percent in1975 to 18.4 percent in 1980, and to 4.9 percent in 1985. By 1990, all gov-ernorates will probably rely on foreign obtained supplies to satisfy cerealrequirements, an expected trend accounting for the marked rise in projectedcereal import demand.

May 1976

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YE;EN ARAB REPUBLIC

Approximate Cereal Grain Production and Cereal Utilisation bz Region

1975 1975 1975 1975 1980 1 1990Population j Domestic Total Shortage (-) Shortage (-) Shortage (_) Shortage (-)

Governorate Production 14 Consumption / or or or orSuplu(us (+j/ Surplus (*) Surplus (+) Surplus (+)

-- ---------- -- --- -- ------------ ------- m tons ---- ----------- -------- -------------------

Sanata 883,553 282,900 257,997.5 (+) 24,902.5 (-) 1,284.4 (-) 44,5 60.1 (-) 107,788.0Nodeidah 740,263 297,390 216,156.8 (+) 81,233.1 (+) 63,958.8 (+) 32,727.4 (-) 14,831.9

Taiz 954,391 227,010 278,682.2 (-) 51,672.2 (_) 86,030.9 (-) 139,317.8 (-) 214,662.0

Ibb 861,564 290,490 251,576.7 (+) 38,913.3 (+) 14,508.9 (-) 26,471.8 (_) 86,813.9Hajja 428,494 109,020 125,120.2 (-) 16,100.2 (_) 30,977.7 (-) 54,310.9 (_) 87,501.5

Other 1.369.628 153,870 399,931.4 (-) 246,061.4 I-) 308,654-5 (-) 399,438.1 (. 520,096.1

Total 5,237.893 1,360,680 1,529,464.8 (-) 168,784.9 ) 48,479.8 (-)631,371.3 (-_ _o3l,693.4

/ February 1975, Resident Population; 5,237,893; Source: YAR Housing Population Census, February 1975;Assumptions: 1976-1978 population growth rate 2.4%, thereafter rate increases linearly to 3.0% in 1990.Since reglon-specific rates are unknown, estimated national rate of growth employed for each governorate.

/ Base of Production Estimates: 1970/71-1974/75 Cereal Production Means 1,361.8; Source: YAR-Statistical Ycarbook 1974/75, CPO

3/ 1970-75 average per capita consumption: 292/kg/year based on 1,528,516 m tons estimated average consumption (1970-75) inclusiveof seedsx, animal feeding, losses, direct human consumption. Approximate average annual tonnage of Cereals available: (m tons)

Domestic Production - l,'36,800 (Basis Aver. 70/71 to 74/75 - Source; "Statistical Year Book" 1974-75 (CPO))

Commercial Imports - 104,716 (Basis Aver. 69/70 to 73/74 - Source: "Central Bsck - Annual Report" 1973/74)Grants in Aid _ 62.000 (Estima'e Based on Rationalization of Fragmentary Data)

Total 1,528,5161,58,56 mtomns29personns =292 kg/capita for all uses (Consistent with other, similar grain food economies)

Income Elasticity of demand utilized: 0.5 (1976-1990); thereafter 0.2. Mission estimate, based on data from: John Mellor, Developing Rural

India: Plan and Practice, Cornell University Press, Ithaca, 1968, p.25.

j/ Assumption: 1976-1980, cereal production growth 1.5%, total agricultural growth 3.0%, industry and trade 6%; 1981-2000, cereal production growth;1 __1 tal agricultur-al growth 3.01 1ndustur and trade 8% result: GDP growth: 1976-80, 4-.qo _ 281-2000, 5.0-

Since region-specific rates unknown, estimated national rates of growth abployed for each Governorate.

i/ Columns will not add to the totals shown due to rounding. Deviations are less than one percent.

May , 1976

ANNEX 4Page 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Agricultural and Agroindustrial Credit

A. Banking System

Background

1. The practice of modern banking in YAR dates back te i962 Wht,:- the

Yemen Bank for Reconstruction and Development (YBRD) was established by the

Government with a majority state shareholding. Besides performing tmmercial

banking functions, it implemented Government monetary and developmellv policies

until the formation of the Central Bank of Yemen (CB) in 1971. Five commer-

cial banks, four foreign and YBRD, now operate in Yemen. The foreign banks

are the Habib Bank, the British Bank of the Middle East, the United Bank and

the Arab Bank. There are no specialized institutions for financing of agri-

cultural and industrial sectors.

2. The Banking Law of 1972, administered by CB, regulates all banking

operations in YAR. It provides for licensing and supervision of banks, stip-

ulates capital, reserve and liquidity requirements, and prescribes acolunting

and auditing procedures.

The Central Bank of Yemen

3. The CB was established in September 1971 with an authorized capital

of YRls 10 million. IMF experts assisted the Government in its establishment

and helped in organizing its various departments. CB's main functions include

regulation of banking and credit in the country and acting as banker to theGovernment. Credit supply by banks is regulated through two major instruments,

statutory reserve requirements and rediscounting of credit papers. The re-

serve requirement is seasonally adjusted in line with demand for credit and

is generally reduced during the cotton financing season to allow larger flow

of credit. The CB also rediscounts commercial papers with a maturity not ax-

ceeding six months from the date of discount and is also authorized to reojis-count agricultural and industrial credit instruments with a mat0rity of not

more tham.9 months.

4. CB's management is vested in a Board of Directors c,u, li t ing ot aGovernor who acts as Chairman, a Deputy-Governor, a representative act. from

ANNEX 4Page 2

the Ministry of Finance and the Ministry of Economy, and three other di-rectors nominated by the Minister of Finance. Both the Governor and theDeputy-Governor are appointed by the President of the Republic for an initialperiod of four years and are eligible for reappointment. The Governor is theChief Executive Officer and is responsible for implementation of the policiesdetermined by the Board. The CB has six departments including a Banking Con-trol Department recently established to regulate and supervise the operationof banks. Its Head Office is in Sana'a and it has two branch offices, atHodeidah and Taiz.

5. CB periodically fixes interest rates on deposits and loans forguidance of banks. The current minimum rates fixed are 5% on savings and6%-9% on fixed deposits for 3 to 12 months. The minimum lending rates are11% on commercial loans and 14% on personal loans.

Yemen Bank for Reconstruction and Development

6. YBRD is the largest commercial bank in YAR. Its share capital isYRls 10 million of which 51% is held by the Government and the rest by thepublic. Nearly half of its resources are derived from deposits which amountedto YRls 156 million at the end of 1974. YBRD extends short-term loans and ad-vances mainly for internal and foreign trade and for industrial activities toprivate and public sector enterprises. It grants substantial credit facil-ities to the Cotton General Company every year for procurement and export ofcotton and also provides assistance for import of farm machinery, fertilizersand other agricultural inputs. A few loans are also granted to farmers forpurchase of farming equipment and for development of groundwater. Its loansand advances increased from YRls 52 million in 1969 to YRls 212 million in1974. In fulfillment of its developmental role, YBRD has contributed YRls 16million to the share capital of eleven public sector companies and is alsoinvolved in their management.

7. The Bank is managed by a board of eleven directors, six of whom,including the Chairman, are Government representatives. The remaining di-rectors are elected by the private shareholders. The Bank's Head Office andprincipal business office are in Sana'a and it has eleven branches andagencies throughout the country.

8. YBRD was selected in 1973 as the credit channel for the IndustrialEstate Project (Credit 465-YAR).

Foreign Banks

9. The four foreign banks handle about 30% of YAR's banking business.They finance the commercial sector, mainly foreign trade, and are permittedto accept deposits from the public. They have six branches in three majortowns - Sana'a, Hodeidah and Taiz.

ANNEX 4Page 3

B. Agricultural Credit

Background

10. At present institutional credit to agriculture in YAR is in gen-eral limited to cotton production. Farmers primarily depend on their ownresources, remittances from relatives from abroad (mainly Saudi Arabia) andother non-institutional sources such as friends and traders, for investmentin agriculture.

11. Prior to the establishment of the Agricultural Credit Fund (ACF),two attempts were made to establish a national institutional credit sourcefor the agricultural sector. A proposal was made in 1969 to set up an agri-cultural credit department within YBRD to provide production loans to farmers,but it failed to materialize due to lack of resources and trained manpower.In 1971 the National Parliament enacted a law creating an Agricultural Bank.This bank could not be established due, more or less, to similar reasons. In1975 the Command Council passed another law establishing a wholly state-ownedYemen Agricultural Credit Bank (YACB). The Government has earmarked a sum ofYRls 100 million, of which YRls 20 million are to be paid in during 1976, andcertain resources in kind for this bank. YACB is expected to start its lend-ing operations from the second half of 1976. The establishment of YACB how-ever would not restrict the operation of ACF which, according to a Cabinetdecision, would continue to be the lending agency for IDA projects until adecision is taken in consultation with IDA to merge ACF with YACB.

The Agricultural Credit Fund (ACF)

12. ACF was established in connection with the Tihama Development Proj-ect (TDP) to set up an Agricultural Credit Fund within the CB to finance theproject beneficiaries. The ACF has since been selected also as the financingchannel for the Southern Uplands Rural Development Project (SURDP) 1/. Underboth the projects, short-, medium- and long-term loans would be provided tofarmers for purchase of agricultural inputs and for capital investment.

13. Under the Tihama Development Project, ACF will be headed by a Manager(expatriate) who will recommend to the CB's Board of Directors policies to befollowed by the ACF and, upon their approval, would be responsible for theirimplementation. He would also formulate detailed procedures for ACF's opera-tions and would undertake training and supervision of local staff, both atheadquarters and at the field offices. The Manager was appointed February1975. The TDP area would be served by two offices, one at Wadi Zabid and

1/ Credit 545-YAR.

ANNEX 4Page 4

the other at Wadi Mawr. For the SURDP area, there would be two more officesat Taiz and Ibb. The offices in each project area would be under the chargeof an expatriate Field Manager who would be responsible to the Manager.

14. The first field office at Wadi Zabid was opened in April 1975 andlending operations have since started. Table 1 of this Annex shows ACF'sfinancial position as of October 31, 1975. Due to weak extension services,the size and scope of 1975 credit activities (through October) were stillmodest, but the growth trend is encouraging (see Table 2). Short-term loansmainly for purchase of oil for irrigation pumps and fertilizers, and medium-term loans for on-farm development and farm machinery aggregating to YRls410,000 have been disbursed so far. Satisfactory progress has been made inestablishing the operational procedures and systems. The expatriate CreditOfficer assigned to the lWadi Zabid Field Office has trained two Yemeni loanofficers in loan appraisal and other operational duties. However, ACF stillfaces problems of recruiting Yemeni counterparts and receiving inadequatesupport from the CB. The expatriate Manager in Sana'a is still without aqualified counterpart, and the CB's lack of interest is reflected in the as-signment of inadequately qualified and poorly motivated counterparts to headoffice positions. ACF also needs additional transport facilities (e.g. motorcycles) for loan enquiries as well as for periodic supervision and collectionof loans. Under the project ACF's resources would increase substantiallywhich would decrease ACF's dependence on the CB. Likewise it would also bestaffed and would receive additional technical assistance for properly carry-ing out its responsibilities under the project (See para 24 below).

Credit Arrangements under the Project

15. The ACF would be the lending channel for the proposed project. Itwould provide medium- and long-term sub-loans to the Yemen General Grain Cor-poration (YGGC) and to private bakeries.

16. Half of the investment costs of the silo, warehouses and 10-m tonbakeries would be financed by Government equity contribution and half by ACF'ssubloans to the YGGC. The Government would on-lend an amount equivalent tothe loan-financed portion of the project investments (US$11.7 million) out ofthe proceeds of the IDA credit and Saudi Fund loan to ACF at an interest rateof 4.0% per annum. ACF would receive a spread of 5.0% which would be suffi-cient to cover its costs, to make provisions for.losses and to allow ACF tobuild up a reasonable equity. ACF's administrative costs connected with theproject' average 2.8% of loans outstanding. Provisions for losses assumed at10% of small bakery loans and 2% of loans to YGGC would be equivalent to anaverage of about 0.7% of subloans outstanding during the lifetime of the proj-ect. To'allow ACF to build up a reasonable amount of equity would requireabout 1.5% of its sub-loans outstanding. In addition to its lending activi-ties, ACF would be the administrative channel for a Government contribution toYGGC equity of US$8.5 million (YRls 38.2 million), of which US$1.3 million(YRIs 5.9 million) would be provided under the proposed IDA credit. ACF wouldlikewise act as the administrative channel for a Government grant of US$0.9million (YRls 4.1 million) to YGGC for the nutritional component.

ANNEX 4Page 5

Lending Procedures

17. For the silo, warehouses and 10-m ton bakeries YGGC would updatethe appraisal and submit the sub-loan application to ACF. ACF would reviewthe appraisal and evaluate particularly the financial viability of the proj-ect proposal. After its review, it would forward to IDA the sub-loan appli-cation for the silo, 10-m ton bakeries and the first two warehouses for itsapproval, with appropriate recommendations. The subloan applications for theremaining warehouses would be approved by ACF. The small bakers credit opera-tions would be carried out in close coordination with YGGC which would advisebakers and encourage them to participate in the project and provide the neces-sary technical and administrative assistance to applying bakers. YGGC'sbakery extension agents would assist bakers in preparing an investment programand in completing the sub-loan applications and submit them to the bakerydivision of YGGC. After YGGC's technical and economic review, it would for-ward the sub-loan applications to the ACF with appropriate recommendations.ACF would evaluate the creditworthiness of the applicants, the financial andeconomic viability of their proposals, and the availability of the investors'own contributions, covering at least 20% of the investment cost. ACF wouldforward to IDA the first three sub-loan applications for new bakeries forprior approval as well as every fifth bakery improvement loan request exceed-ing an amount of US$10,000 or YRIs 45,000. All other sub-loan applicationswould be assessed directly by ACF. When sub-loans are approved, ACF wouldinform YGGC and each applicant about the amount granted as well as the termsand conditions of the sub-loan. YGGC's extension agents would periodicallyvisit the loanee bakers to advise them on organizational and technical as-pects of bread baking, sanitary requirements and bread fortification andwould extend necessary assistance. These visits would be coordinated withthe visits of ACF's own staff to the project bakeries.

Investment Categories

18. ACF would make sub-loans to YGGC for the construction of the silo,regional warehouses and two Government bakeries. ACF sub-loans to privatebakers would be for the construction of nine 1-m ton bakeries and one 3-m tonbakery and for bakery rehabilitation to an estimated 50 bakers. The loans fornew private bakeries would finance building construction, utilities, engineer-ing and bakery equipment, grain and flour cleaning facilities, as well assales shop facilities. The bakery improvement credits would finance buildingrehabilitation, installation of utilities, parts of bakery equipment and grainand flour cleaning facilities.

Terms of Sub-loans

19. Half of YGGC's investments wol.d be equity contribution. The mini-mum contribution of private bakers would be 20% of investment cost. Maturi-ties would not exceed the life of the assets financed. Maximum repaymentperiods for the various types of sub-loans would be:

ANNEX 4Page 6

Investment Category Grace Repayment Total-----------years-----------

Silo 5 9 14Warehouses 4 10 1410 m ton Bakery 3 10 131 m ton Bakery 3 5 8Rehabilitation Credit 1 4 5

Interest Rates

20. Commercial interest rates in YAR range from 11% for medium- andlong-term investment credits to 13%-14% for short-term credits. A preferen-tial rate of 9.5% is charged to the General Cotton Company. Interest ratescharged under the Tihama and Southern Uplands Rural Development project are8% for medium- and long-term loans and 9% for short-term loans. Interestrates charged under this project would be 9%, i.e. one percentage point higherthan in the Tihama and Southern Uplands projects. As discussed above (para16) the Government's interest rate to ACF would be 4.0% p.a., resulting in aspread of 5.0% p.a. to cover its costs, to make provisions for losses and toallow a reasonable increase of its equity capital. If ACF's onlending ratewere to change the Government's rate charged to ACF would be adjusted accord-ingly in order to maintain a 5.0% spread for ACF. Given an estimated infla-tion rate in YAR of more than 25% in 1974/75, the real interest rate would benegative with prevailing nominal rates. However, the YGGC would carry theforeign exchange risk, thus raising YGGC's real cost of capital. The Govern-ment would assume the foreign exchange risk for sub-loans to small bakers andfor the technical assistance loan to ACF.

Security

21. According to ACF's present lending procedures, short-term loans upto YRls 5,000 are provided against guarantee of two persons. Short-term loansin excess of the above amount and all medium- and long-term loans require landsecurity. The sub-loans to YGGC as a Government enterprise would be securedby a Government guarantee. Sub-loans to private bakers would require landand/or other property security. Land would be acceptable as security up to80% and other property up to 60% of the current market value.

Supervision and Recovery of Loans

22. Loans would be supervised by ACF staff who would periodically visitsub-borrowers' installations. Financial statements would also be obtainedfrom sub-borrowers semi-annually to keep a watch on their operations. ACFfield staff would be responsible for timely collection of loans from YGGCand private bakers.

ANNEX 4Page 7

ACF Organization and Staffing

23. The organizational expansion and additional staffing of ACF herediscussed, are based on the projected requirements of this project as well asthe proposed Livestock Credit and Processing Project. The two projects' wouldo6perate predominantly in the Sana'a, Hodeidah and Taiz areas. ACF's field of-fice at Taiz, proposed under the Southern Uplands Project, would become op-erational by the time this project matures for implementation. An expansionof the Taiz field office and addition of two new field offices, one at Sana'aand the other at Hodeidah, would be necessary to service the two projects.ACF's organization chart showing the required additions is attached as Chart1.

ACF Staffing

24. ACF is not at present equipped to undertake financing of agroindus-trial and livestock activities. A major institution building effort is re-quired to prepare ACF's Head Office, as well as the field offices, for theincreased volume and variety of lending operations. Table 3 of this Annexshows in detail the staffing and additional offices and equipment that wouldbe required under these two projects. In summary, the projects would providefor:

(a) Head Office, Sana'a. The extension of ACF's General Managerfor three additional years after the termination of his termunder the Tihama Development project. One industrial creditofficer and one livestock credit officer would establish lend-ing procedures for, and would supervise, agroindustrial andlivestock loans. One accountant/financial controller wouldset up ACF's accounting and financial control system. A farmmanagement extension officer would supervise the farm creditextension operations. All four additional staff would be in-ternationally recruited and work under the overall supervisionand guidance of ACF's Manager. Apart from their operationalresponsibilities, their main function would be the selectionand training of local counterparts. Each expatriate wouldhave a Yemeni counterpart. In addition, the ACF head officewould be staffed with a legal advisor. The Yemeni staff wouldincreasingly undertake operational and management responsibil-ities during the projects' implementation.

(b) Branch Office, Sana'a. To handle the increased lending opera-tions in the Sana'a area, a local branch office would be es-tablished. It would be staffed by a branch manager, an agri-cultural credit officer and an industrial credit officer aswell as five extension officers. All staff would be recruitedlocally and would work under the guidance and supervision ofACF's head office manager and staff.

ANNEX 4Page 8

(c) Field Office, Hodeidah. A field office would be established-in Hodeidah. It would be staffed with a senior credit officerand an extension officer, both locally recruited, and it wouldoperate under the supervision of the Wadi Zabid Field Manager(already appointed).

(d) Expansion Taiz/Ibb Office. ACF's Taiz/Ibb field office wouldreceive one additional credit officer and three extensionofficers, all Yemeni staff.

ACF's additional staff requirements would thus be four expatriate experts,and eight Yemeni credit officers, one Yemeni legal advisor and ten live-stock extension officers. The head office, branch and field offices would beprovided with the necessary general supporting staff, equipment, vehicles andother facilities. (For details see Table 3 of this Annex).

Training

25. Apart from on-the-job training to be conducted largely by the ex-patriate experts, the projects would provide for six two-year graduate coursesin banking and finance, with emphasis on agricultural and agroindustrial fi-nancing. They would also provide for five six-month courses with practicaltraining at agricultural credit institutions, preferably in Arabic speakingcountries. The Government has been asked to initiate the candidate recruit-ment process to expedite training and ACF staffing.

Resources of ACF

26. Funding of ACF for medium- and long-term credits under the TihamaDevelopment Project was originally to consist of: (a) US$0.665 million lentto ACF by the Government; and (b) US$2 million from the proceeds of the IDAcredit. The funds for short-term production credit were to be obtained byACF from the Government by special agreement, from loans, rediscount facili-ties, and other sources. The Government loan under (a) was to be made at aninterest rate of 4T per annum for 15 years, including five years of grace;the same conditions were to be applied for the on-lent proceeds of the IDAcredit. tio wever, it was agreed that if ACF should become an independentagricultural credit institution, the Government loan would be transformedinto equity.

27. The initial resources as described in para. 26 above were comple-mented under the Southern Uplands Rural Development Project (SURDP) by (a)US$1,5c0,000 (YRls 6,750,000) from the proceeds of the credit for financingof meditum- and long-term loans. The former amount will be a governmentalgrant in case ACF becomes an independent institution. The latter amount willbe passed on by Government to ACF as a loan at an interest of 1% per annum fora term of 15 years including five years of grace. A 3% interest rate differen-tial will be credited by ACF to a special reserve fund account to cover excep-tional losses of ACF due to catastrophic drought conditions in the Southerntiplands region.

AN1iEX 4Žage 9

2.. The resourusc. naqpiined farr fItmneihg, AUW`s. I'aans; jnmposed; under theGtPain S{Arnage ancli Prmeassihg- pnoA,iaat waulkd asount tio U-S-O&.55 rxiil,lhiom (YRls3* .21 mialion)' for- tihe YLG imv estrt,, USM_77 mi lliUanr. (, S H.21 nilion) f orpriAtit bak&riy. i!nestments and: USRIW53 miilaliubni (YR1Iis5 Z.25" Aii11iPon)).. The Gov-ernmfrnt: wauld make. thesa fiindid avaidiAaldlb, as- al lioan-a ttim AP' att anm intrarest rateofi 4:.DY p.a.. The loan, would be for 2OMyear i-clkidihg 6 yaar.s. of, grace. ACFwould receiv.e a spread! of 5.flY, on the funds onklQntt tm) suiTrmoer. ACF'snotA in t.enrstt canned afittor. dedbet inn of. Qns-sts and! pnovAisi-bnas_ fEor- losses wouldbe' aIihsattci ta- iittEeqSiry capit`al:.. The praijaetted' cash. fillom, fir- A'IF opera-taDrns und- r.he hGaihn Starag- andl Ptrs-sih&g EBtje£t: (Ana. 14')) sihaws an aver-a,g aniatl' allbe-attibn- tx) equiity of about USOOL5) rmildlicn! during- 11U9 through19f(i.

Anountn auth Nwldtt

Z9&. ACP anoountThgl has boen. hand-ledi by' GB`s; accountitig- daartnent, withAGE: ac-anuntn- kaltL sepanatnaW ffroa GR"sQ aw. Ab, AN"s- awo at would in-crease sub-attantlidlly. undbr- tthuis-, aa- w-11i. as- ttte[ pTaedi Gliti. edit andPtreesaitlg- prrjiactt 3 , iitt woul&i hel, necessary, fintr A{h ttho huial up. and- h-andle itsoWvri aoccaunttsci. MA accauntdin&. and' fTHnaneii antil mUexqntt walAk h appointednote lDhtLan than- m1197,' ffton a- pe:rttd: of' fhrun- yaansrs tW) assiia ACE. ih establish-iiig, and' oRerrattihW al modtarn aecounttihg- andl fi-anciiaill contrncill satwairr. UntilAMUas accountihg; syaicsm . beonmes; operatdianaL GBI a. atmounttih- dkpantrciant wouldcuatribue tvm handib: AUE's- aao_ount:si. Utidbn- ttoh pc4dptr,, PG'R aanntis-z would also

Uia audjitrtai by- tbhe Gtbver-nme -nti'4 Ginttnal Obgarniiiztattib flm.- AVdAftt andi G(ntrol which4i9; acetabie' tor IA. AMP Midit nat ntis andi farnniEaii atatmaets- wouLd! be submittuadi tim IDN\ nntt llatar, tliani sib. mvnthsm afEbanr tit} ciloss off -aff ffUisca-I year.

I-lay 197ff

ANNEX liTable 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Agricultural Credit FundFinancial Position as of October 31, 1975

Amount AmountIRis '000 YRis '000

Liabilities Assets

Government Loan 1,041 Cash in banks 1,65o

Kuwait Fund Loan 872 Loans to farmers 410

Government Contribution Administrative and Capital(budget) 250 Expenses 119

Interest and ServiceCharges 16

Total: 2,179 Total:

Source: Agricultural Credit Fund

ANNEX 4APPRAISAL OF Table 2

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Agricultural Credit FundLoan Approvals and Disbursements /

May - October 1975

Loan Approvals

Month Number of Total PurposeBorrowers Amount Machinery On-Farm Dev. Seasonal

……---- YR--------------------May, 1975 6 120,050 72,000 32,000 16,O50June, 1975 34 151,650 - 21,000 130,650July, 1975 16 76,640 - 15,600 61,,040August, 1975 2 8,000 - - 8,000September, 1975 4 20,000 - 5,000 15,000October, 1975 36 136,095

Total 8 512,43 200 366835

Ioan Disbursements

Month Total PurposeDisbursed Machinery On-Farm Dev. Seasonal

……--------------- --------… M s -…-____- ___-_______May, 1975 16,550 - 8,000 8,550June, 1975 126,105 48,000 13,250 64,855July, 1975 53,495 - 24,850 28,645August, 1975 86,565 - 18,500 68,065September, 1975 31,240 - 4,250 26,990October, 1975 96.425 - 3,5oo 92,925

Total 410,380 48,000 72,350 290.030

/1 All under the Tihama Development Project.

May , 1976

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Agricultural Credit Fund

Frnject Related C ett

YEAR

I11 2 1 1 a 6Unit F-rnign Foreign Foreign Frign Foreign F-reign Foreign Foreign

Stondino Unit Cost Exchange T tat Exchange Total Exchange T,tal Exchange Total Exchange Tote Exehetge Total L cal E=cheege Ttgtat ExchAng%e

A. InvestceIHead Office - ot

Vehiles- 4 hee drire Project onit 44 40 44 4o 44 -- -- -_ -- -- _- -- -- 8 80 88 90-lervice Car Project sait 23 4i 46 __ __ -- -- -- -- -- -- -- -- 5 41 46 90

Furniture and lOffice Equipment Project aet 30 27 30 -- -- -- -- -- -- -- -- -- - 3 27 30 90Bracoh Offior - Smnaa

Vehicles - 4 vheel drive Project unit 44 40 44 -_ -- -- -- -_ -- -- _- -- -- 4 40 44 90- Mot-rcyles Pro.ect unit 3 -- -- 16 18 -- -- -_ __ __ __ __ __ 2 16 18 90

Furniture and Office Equipment Project Bet 24 22 24 -_ __ -- __ __ __ __ __ __ __ 2 22 24 90.Field Office - Noleidsh

Vehicle Project -itt 23 21 23 -2 __ __ -_ __ __ __ __ __ _ 21 23 90Motorcycle Project nit ' 2 1 3 90Furniture ond .ffice Equipment Project art iS 14 15 __ __ -- __ __ __ __ __ __ __ 1 14 15 90

Branch Office Toiz/IbbVehicles - Mot.orcycle- Project unit 3 __ 11 12 -- -- -- -- -- -- -- -- 1 11 12 90Furniture and 'ffice EqoipeBnt Project net 5 4 5 4-- -- = _ 5 90

Subtotal 811 23 Ci 77 - 30 27

B. Recurrent FErPensesStaff - Fanutriatelead I fiTs

leveral Ma-uger Project M. Year 270 -- -- - -- 203 270 203 270 203 270 203 270 268 812 10BO 75Liceatock Credit nfficer Project M. Year 250 188 250 i88 250 188 250 188 250 -- -- -- -- 248 752 1000 75Industrial Credit Officer Pro ject M. Year 250 188 250 188 250 188 250 188 250 __ __ __ __ 248 752 1000 75Far M ..aageentExtension Officer Project M. Yeor 250 -- -- 188 250 188 250 188 250 188 250 __ _ 248 752 1000 75 -

Accountant - Fi-nacciIcomtr-11er Proj-ct M. Year 290 188 290 188 250 188 250 188 250 188 250 -- -- 310 910 1250 75

Staffing - LocalHtead Office

ivoent-ok Credit 0fficer ACF M. Year 21 __ 24 -o 24 -- 24 -- 2h -- __ 24 144 -- 144 --

Industrial Credit Officr ACF M. Yeor 24 __ 24 __ 24 __ 24 2_ 24 __ 24 -- 24 1f __ 144 -_Far M-tgre.ent E.t-csi-r Officer ArF M. Year oh _- _- __ 24 __ 24 __ 24 __ 24 -_ 24 1b2 -- 120 __A-coont-a1 Fin,,-iag C AtF Mller iC F M . Year 24 - _ 24 2 4 24 24 -2 24 _ _ 24 144 144Legal ffioer ACF M. Year 24 _ _ 24 _ 2 2 - 24 24 _ _ 24 i4_4 144 _ .__Reourda 'alck ACF IM. Year 10 _ _ 10 _ _ 10 _ _ 10 _ _ 10 _ _ 10 6o -- 6o _Jeneral Clerk ACF M. Year 10 10 1 0 10 0 10 0 10 0 10 0 10 60 -- 60 __

e-recac T-piat ACF M. Year 6 __ 6 I 12 -- 12 -- 12 -- 12 __ 12 66 -- 66 --Driver ACF M. Year 6 _ 18 -h 24 __ 24 __ 24 138 __ 138 __Mes-eng-r ACF M. Year 4 -- 4 -- 8 __ 8 -_ 8 __ 8 __ 8 44 -- 44 -_P-er ie I -al ACF p. dsy 40 YRs. 1-- 16 -- 16 -- 16 i6 -- 16 -- 16 96 -- 96 -_

- F-ei an Project p. duv 70 YRla. 25 25 25 25 32 32 32 32 32 32 32 32 -- 178 178 100bit at al 5 935 777 1225 877 1502 987 1502 U3T 1002 235 502 48I

/ 111-nv 100 dava/tctOn credit and ecteneton officers and couternQrts, 50 tayn/axcun soc uciact and cotunterpart aed legal .fficer

Tablte sh-ws Usts for bllth the LTVEST0 Ct CREDIT AND PROCESSINB sAd IRAIs Slt)RAYE ANP PFRCESSICi PPJgE1'TS

lurch, 1976

LGA 115 - TORAGE lIA YROCRII8 PROJECT

A 1: yy::, 18, 90 9C 2 9. 95w 5

ACSg-k ACT M ROes 20 1. -- C, - CA- Ci, -1. I-2. -- C 6h. -- 111. -Cndn yTIoe ACY Ynes Cl - 6 - 6 6 -6 6 -- 3 -6 26 -26 -

OTTCATS/3 ~~~~ ~~ACT yz Isp isY.. 3-- 6 -- 36 -- 3 - 36 -- 6 181. - 181 -

rihid OPTIC. - OoOsCFidSYi lB 1.IgnensinnlTtnner ICC ACenT 08 -- GA -- 16 --~~~~~~1 18 -18 -- i -- i 108 -- 18 -

Cen AC YR O - 10 I- C - 50 - o- 10 10 60 - 60

3eTYeisesii36ien OCT~ 6tYsp 6 - 6 6 -6 -- 6- 6 6 36 -- 36 -

lusod ICY ITem C --~~A M.Y C -- 4-i - . 21. - 21. -neYAEELI I~~ ~ ~~~~CY Pos 4oOR. -- -- C 6-C--- 6 31. 3-96 -

660C- enCM A 5

FdsnerseIiTiTTRnCY ~ACF nOes 10 - - - ii - 5.- , - - 5. 20 -20 -C= I0fnrIY lien 1 - 1 - 8- 3 - 0- 10 -- nI 108 6-10

ClerA AC? OCear 10 -- ii -- 1~ ~ ~~~ ~~ ~ ~~~~~ ~~~~~~~~~0 10240 -1 -- 1 6v -- 60 -

~~iTj1I1Ies ~~~~~ACF -- - - 1 - n - 1 15 5 - 15 - 1 90 -- 90 OTlnelitpneeIC - - -- 1 - i- 03 -- 50- 10 -- 10 60 -- 0

16f0-n1s - ICY - - Cl -- 3 130 - 0- 30 3n On -71 001 MsIh eilnn#1.IC -- - - 1C - I 1.1 -- 1.- 11 63 -- 63 -

Replaneseni flhonoceS ICYF - - 3 33 1.3 18 1. 4. 43 48A 43 4.8 1.3 18 28 A1.5 0 90

teE ACY Iooo- 30 - 3 - 3-- 3 -- 3--0-- 0 jO- sn -

nohlliseeICY -- -- -- 12 - 1P -12 -- 12 68R2IA- 68 -

nAnls.ne IYAll-- 6 - 6 -- 6 -- 6 -6 35 -- 35 -5tPhOR0IC=- - -ll S7 -- o -3 -- 23 -- 23 - 2 132 -132 -

Yield- Ilodeidal ICC Cootnes -- 16 -- ~~ ~ ~~ ~ ~~~ ~ ~ ~~ ~~~~~16 -- 16 -- 16 -C6 - 56 96 -- 96

F iRid ee fh C 4- i-16 - 3- - -5- 29 - 29 -i ~.0 - - - C - - 3 - -3 -- 3 17 -- 17

Ofi-ftlo .R9B .e AO --- -- 8 - 8 -- 0- 1.8 4860 -

AenR-tsI/1 IY Oa, - - C 12 -- 12 -- 12 -- 12 -1I 2 2 -P.R

0/ ICY' -- 66 - 8 m- 0 -- A--3 16 4-16 -

li-IY --. - -5 -- S -26 - . -

051111e La ACY - - - - - 3 - -7- 5- S -

C.TYssn Ceesne.

M.. Offi.. oit' q p o' O - 9 3 60 CO o 0 3o 90 560Dlp g 1- --- ---- 030 1 5

6-RAnh Tispe? -iP ns, t3 In1 5 -

B- ffiO- LI80e' os' 3 - -- 0 0 0 60 6o 60 30 -- A 1 IR010 998 __ 33~~~~~j8 1.50 455 .5 38 510 - 3 16 0

09

IISP ET-ling L8 5noA 013 50 Do.5 -

sosiCot 3788 52159 TSS 588f 83 Z__ I23 115 33 12-73 O5E 88 190 5

D. rjetCTS- - 1195 152 7. 05 153 1981 0t7 1966 I,,(. 1978 247~ 937 P"8 682889

ACV Cos ' 623 1.5 906 15 956 Is 955 1.5 955 1. 906 I1.N,6 5.0. -

Dires -Poen- 553 735 857 1108 11os 1281 I107 11.00 1o6o 178 IoOt 060 .5 26 -Yst,pornloi - PYojeit -- -- ~~~~ ~~~~ ~~223 267 133 a67 116 219 11. 160 8 -- -- -- I5 011. %,

F. 30551 -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~2 5

F. et-POR' - - 8 6 197 266 183 26 197 263 --97 --6- 2fl. -20' 105 DsiOnll- Psj ni- - 23 23 13 i7 15 1P is 18- -- -- la.P 612 Nec -

ToA r 21 _ _-t"33- ---- - 00 18 81-p Esrept is yesr 1 seenese 150 dsysfspsue TOY Rn-As,sO Rsosger snd KOleAe

5tT Rosers ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 166k ~ I M

AeT1 wlsefes9,0 2(somTo oCos,Te Y eie .

'el Tn . e2ne O'3:'eCPTIe0160478 .e, i,eTncol plo im -~~~~~~.qAeier1lleelndPSttYOe TYltr T q,

1etotrin,

OpeedOPlOITeoOeI555 Y.iieeoonO 5dn-sIR0rd 0

Y16Y,soYT -ICnne-n -neS - -lnI0

sod, 3 RYoo I5RT2On.1 nil,OsTTn 1,AOl se.Iiig oIn

-hsP, 1976

APPRAISAL OFA GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLICOrganization of Agricultural Credit Fund (ACF)

GOVERNOR

CENTRAL BANK

GEN ERALMANAGERACF

FIELD MANAGER .FIELD MANAGER

TIHAMA SOUTHERN UPLANDS

FILFEDOFC IL FIEFIELD OFFICE FIELD OFFICE FIELD OFFICE

WADI ZABID WADI MAWR HODEIDAH TAIZ BSAAA /

/ New offices to be established under the project. World Bank-15544

S m

ANNEX 5Page 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Nutrition

A. Introduction

Nutritional Status

1. Although there are little statistical data about the nutritionalstatus of the people of Yemen, the few available studies and nutrition-relatedindices all point to malnutrition as a major public health problem. 1/ In-adequate or improperly balanced food consumption is a major contributor topoor nutrition, and it, together with poor hygiene, has led to severe re-tardation of growth and to high levels of morbidity and mortality throughoutYemen.

2. According to a recent review by Bornstein 2/, protein-calorie mal-nutrition (PCM) is extremely widespread among preschool children. Surveysindicate that up to 14% of the preschool children are severely malnourishedwhile only about 10-20% exhibit normal growth. A 1972 study of Yemeni schoolchildren indicates that most are malnourished or underweight. About 65% ofthe boys and 50% of the girls were found to be only 70-89% of the Cairo meanweight, and 17% were below 70% of the Cairo standard. High mortality rates inYemen also point to serious levels of malnutrition. The average mortalityrate among children below 15 years of age is reported to be 46%; about 76% ofthese children die before two years of age. 3/ Infant mortality is 160 per1,000 live births and about 92 per 1,000 for children 1-4 years.

1/ This was confirmed in the appraisal mission's discussions with healthofficials and hospital staff members interviewed in YAR.

2/ Bornstein, A., Food and Society in Yemen Arab Republic, ESN:'IIS/74/4FAO, Rome, 1974.

3/ Bornstein, A., p. 43.

AN4NEX 5Page 2

3. FAO food balance sheets 1/, although now out of date, provide sup-porting evidence that food consumption has been hazardously low. Accordingto the FAO study, food consumption in Yemen has provided an average daily in-take of only 1,900 calories and 58 grams of protein (compared with 2,029calories and 55 grams in Iran; and 2,541 calories and 64 grams of protein inBrazil). The food balance sheets also show that the vast majority of foodintake is made up of cereals; 75% of the calories and 72% of the proteinconsumed by Yemenis are derived from sorghun, barley, wheat and other cerealgrains. Other cereal-dependent countries with similarly low food consump-tion rates are known to have widespread malnutrition among low income seg-ments. Accordingly, low income segments of the population in Yemen mightalso be expected to lack adequate food and be affected seriously by mal-nutrition.

4. In addition to the problem of inadequate food consumption, sur-veys indicate that Yemeni people suffer from widespread deficiencies ofcertain vitamins and minerals. Bornstein notes that vitamin A deficiencyhas been reported in a number of surveys and that night blindness result-ing from the deficiency is common in Yemen. Vitamin C deficiency whichcauses scurvy among children is also reported as widespread. Rickets, re-sulting from vitamin D deficiency, is prevalent throughout the country. Inthe Taiz region, rickets was found in 17% of the children 6 months to 4 yearsof age; in one village 59% of the children 1-2 years of age displayed signs ofrickets. Symptoms of niacin and riboflavin deficiencies were reported amongschool children, and iron deficiencies resulting in anemia was reported inboth pre-school and school age children.

5. Although it seems evident that the major problem in Yemen is caloricinadequacy and protein deficiency, the latter particularly among infants andchildren, in part stemming from inequitable distribution of basic familyfood supplies attributable to conventional taboos attached to child feedingpatterns, it also appears clear that the population is suffering badly fromlack of many important vitamins and minerals.

B. Bread Fortification

General

6. The Grain Storage and Processing Project provides financial andtechnical assistance for the erection of twelve new bread bakeries to pro-duce and-distribute up to a total of 32 m tons of bread per day or 11,700m tons per year (flour basis) to needy recipients in six to eight urban cen-ters. The new bakeries include: (i) two 10-m ton per day bakeries (Sana'aTaiz), one 3-rm ton bakery (Hodeidah) and three 1-m ton bakeries (Damar,Ibb, Sana'a) to provide bread for Government-sponsored feeding programs in

1/ FAO Food Balance Sheets, 1964-66, Rome.

ANNEX 5Page 3

schools, hospitals, and charity distribution; and (ii) six 1-m ton commer-cial bakeries for private purchases. Apart from commercial bakeries' pres-ent production of European-type breads, bread made in these bakeries will alsoinclude traditional Yemeni flat bread made from cereal flours, salt, water andyeast. The cereal flour will consist mostly of whole grain meals from sorghum,millet, and other local grains ground in mills at the bakeries and mixed witha small portion of imported wheat flour. The bread from these new bakeries isconsumed by all income groups and is expected to reach a total of over 80,000recipients. Those units.supplying bread for Government purposes will feedapproximately 30,000 school children 1/, 23,000 members of the poorest urbanfamilies 1/, and 14,000 hospitalized persons and other beneficiaries of theprogram 1/. In addition, the project would provide a loan fund to helpmodernize about fifty existing commercial bakeries of 0.5-1.0 m ton per daycapacity 2/. Thus, the project encompasses bakeries providing nearly 10,000 mton per year (flour basis) to needy persons through Government programs and upto 10,000 m ton per annum destined for commercial sales to the general public.Fortification of bread produced in both government and private bakeries withvitamins and minerals could contribute to the reduction of these nutritionaldeficiencies among all consumers of bread produced by bakeries benefittingfrom the project, or about 135,000 persons.

Bread for Government Feeding Programs

7. Since bread made in Government bakeries is to be produced largelyfrom local grains milled at the bakeries and since the other bread ingredients(salt and yeast) are probably not suitable carriers for fortificants 3/, thepreferred method of fortification is expected to be addition of a vitamin-mineral premix directly to the bread dough at the bakeries. This is a stand-ard method of fortifying bread in the West where premixed and pre-weightvitamin mineral wafers or packets are dissolved in water and added to bread

1/ Number of beneficiaries quoted is low because these are based solely onpartially estimated data obtained from Government bakery facilities inSana'a, Hodeidah and Taiz, and therefore do not take into account quanti-ties for feeding programs obtained under contract arrangements withcommercial bakeries. Information concerning the volume of bread pre-pared under the latter was not available, and therefore its sector-specific distribution could not be ascertained.

2/ Presently, commercial bakeries largely produce European-style loaves mademostly from imported wheat flour. Commercial bakeries benefitting fromthe credit would also produce traditional-type breads.

3/ Although salt is sometimes used as a carrier of vitamins and minerals,fortification of local salt in Yemen would probably not be feasiblethroughi a small project element of this type.

ANNEX 5Page 4

dough during the normal mixing procedure. A similar procedure could be easilyadapted to use in the new Yemeni bakeries. (The costs of vitamin-mineralmixes used in the following sections are based on premixed and pre-weighedunits, packaged in water-soluble films, so that all fortificants can be'addedin a single element to the water used to make up bread doughs with no need forspecial weighings by the baker.)

8. The studies reported above indicate that there are widespread defi-ciencies of many vitamins and minerals in Yemen. Since no rigorous nutritionalstatus survey has been conducted in YAR that would yield detailed informationconcerning the nature, severity and geographical distribution of specific nutri-tional deficiencies, it would be appropriate initially to fortify the breadused to feed the poor, school children and other needy segments of the popula-tion with a standard combination of vitamins and minerals. In other cases offood fortification strategies, it is common practice when comprehensive dataare non-existent, to employ a standard premix of minerals and vitamins to covera broad range of potential and probable deficiencies. Such generalized dosagesat levels herein suggested pose no health hazard to the ultimate consumer, aswidespread utilization in the past can attest.

9. Certain nutritionally designed food supplements furnished by the FAO/World Food Program (WFP), such as corn-soy-milk and wheat-soy-blend, contain15 added vitamins and minerals. These foods are intended primarily for use bycereal consuming populations and have been demonstrated to be safe and effec-tive during almost 10 years of worldwide distribution. Such premixes havedemonstrated satisfactory storage capabilities for up to one year as well asresistance to serious quality deterioration during final product preparation,and in fact are required to do so by the U.S. Government for usage in allfoods distributed under Title II of PL 480. Thus, it seems reasonable toinitially base the vitamin-mineral mix for Yemeni bread on the proportionsof nutrients added to WFP foods and to add the vitamins and minerals to Yemenibread in amounts such that persons receiving their total food supply throughthe bread would receive essentially 100% of their daily vitamin-mineralrequirements. Upon completion of the nutritional status survey discussedbelow in para. 29, necessary adjustments in the utilized mix would be made.Table 1 lists the vitamins and minerals proposed for use in Yemeni bread basedon WFP supplements.

10. The cost to fortify Yemeni bread with this mixture would be about

0.6 f per kg of flour 1/. On an annual basis, costs for fortification wouldbe $57,000 to add the 15 supplementary vitamins and minerals to the 9,500 mton of flour used in all the bakeries producing bread for Government purposes.

1/ For purposes of estimating fortification costs this commonly usedpremix has been employed. If as a result of the nutrition statussurvey (paras 26-29 of this Annex) the premix were changed thecosts of fortification could change accordingly.

ANNEX 5Page 5

Bread for Retail Sales

11. The bakeries participating in the project would produce both Europeanand traditional type breads from whole grain and imported wheat flour. There-fore two alternative methods of fortification can be considered. One possibil-ity is fortification of the wheat flour at the mill where it is produced. Thesecond alternative is fortification of the bread at the bakery using the samemethod proposed above for fortification in Government bakeries.

12. Fortification at the mill presents the fewest technical and controlproblems in that any modern flour mill can be inexpensively-equipped to addvitamins and minerals to its products. 1/ Also, fortification in mills canbe effectively administered and controlled to assure that the fortificants arealways present in the correct amounts. However, there is no industrial flourmill in Yemen. Arranging for imports of specially fortified wheat flour in theinternational market may lead to excessive "special order" costs and be prohi-bitively expensive. Further inquiry by the Government into the feasibility andrelative costs of this method of fortification would be required. It is, how-ever, proposed in the project that fortification be attempted as a pilot schemein the six new 1-m commercial retail bakeries and 50% of the units rehabilitatedfrom the loan fund in addition to the Government facilities. Although it isrecognized that problems could arise in developing and enforcing reliable con-trol procedures for the estimated 31 geographically dispersed credit recipients,extension agents proposed under the project to assist these small commercialoperations in technical as well as hygienic details would also provide instruc-tion concerning the proper utilization of the fortificant premixes and wouldparticipate in the execution of control measures adopted.

13. The costs of fortification of commercial bread can be reduced if onlythe most noteworthy nutritional deficiencies are dealt with by fortifying withvitamins A and D, niacin, thiamine, riboflavin and iron. The amounts of thesevitamins and minerals required per kg of flour specifically to furnish 100%of the adult requirements 2/ are: 5,000 IU vitamin A, 150 IU vitamin D, 1.5mg thiamine, 25 mg niacin, 2.5 mg riboflavin and 30 mg iron. The cost offortifying commercial Yemen bread with this mixture would be 0.1 1 per kg offlour. Fortification of up to 5,000 m ton per year might be carried out todemonstrate feasibility at a vitamin-mineral premix cost of $5,000.

Effectiveness, Control and Costs

14. The clear evidence of vitamin and mineral deficiencies in Yemen indi-cates that fortification of foods for needy groups is an appropriate publichealth measure, as has been demonstrated in other countries under clinical con-ditions. Enriched bread provided for schools and charity programs as well as

1/ The capital cost to equip a modern mill for fortification should be nomore than about US$5,000.

2/ Recommended intakes of nutrients are based on those listed in 11andbook onHuman Nutritional Requirements, FAO, Rome, 1974, when listed therein.When not listed, recommended intakes were based on those suggested inRecommended Dietary Allowances, TIAS, Washington, 1974.

ANNEX 5Page 6

through the coimmercial retail outlets would reach target groups which arerelatively stable for a long term. Although the hospital patients receivingthe fortified bread would comprise a transient group, such recepients wouldbenefit from enrichment during their stay in the hospital. Similarly, thedoses of certain vitamins and minerals in the premix, notably vitamin A andIodine would facilitate replenishment of depleted stocks and establishment ofreserves to be drawn upon for a longer period. At the same time however itwould be difficult, if not impossible, to show the beneficial effects of breadfortification through field studies of nutritional change because: (a) thefood recipients, particularly the hospitalized recipients, are likely tochange with time so that prolonged longitudinal studies would be impossible;(b) many uncontrolled factors contribute to nutritional status thus making itdifficult to separate, without elaborate and costly multivariate analysis, theeffect of fortification from the effect of uncontrolled factors; and (c)fortification with vitamins and minerals, although helpful, is not a totallysufficient nutrition intervention, independent of progress in complementaryprograms to improve general health conditions, e.g. vaccination against com-municable diseases; purification of water supplies, installation of modernsewage systems; educational health-oriented programs in schools and throughmass media; measures to limit food spoilage and contamination in transport andsales; improvement in veterinary services, slaughtering facilities, meat hand-ling activities; and general upgrading of health care services. Therefore, iffortification were considered independently, the modest investment in theproposed program for Yemen probably would not justify the high costs of carry-ing out a nutritional effectiveness study.

15. In order to establish procedures to ensure that the correct amountsand kinds of fortifications are used and that bakers consistently follow theprocedures, the bakery extension agents would develop the necessary proceduresfor procurement of vitamin-mineral mixes, for adding the mixes to the breaddough, and also for monitoring their use by the bakers. As a part of themonitoring system, frequent chemical tests of the bread would be made to ensurethat proper addition of vitamins and minerals has taken place.

16. The vitamin-mineral premixes proposed for the project would be im-ported by the Yemen General Grain Corporation and all costs of fortificationand technical assistance related to fortification of Yemeni bread would beborne by the project and financed out of the Government grant contribution.The project would provide funding for the fortification of all bread inGovernment feeding programs with a comprehensive vitamin-mineral premix (ascited in paras. 10 and 11) at an estimated cost of 0.09 0 per loaf (150 gflour). In addition, the alternative premix would be supplied under theproject,"at no cost to the private baker, for fortification of bread in thesix new 1-m ton commercial bakeries and 50% (approximately 25) of the commer-cial units securing credit for facility modernizaton under the credit component

A1NEX 5Page 7

of the project. The total cost of the fortificants would amount to aboutUS$186,000 (Table 2 of this Annex), or about US$2.63 (YRls 12) per recipientof fortified btead from Government bakeries and US$0.24 (YRls 1.1) per recipi-ent of commercial fortified bread over the implementation period of theproject.

17. At the end of the project an evaluation of the technical and adminis-trative effectiveness of fortification in YAR would be undertaken by a teamselected by the Government and acceptable to IDA. Based on the assessment ofthe operational efficiency of the program, the team would: (1) recommend thecontinuation or termination of the program; and (2) if continuation were ad-vised, suggest possible adjustments in program, and recommend, upon analysis ofviable options, the most desirable procedure whereby the fortification programcould thereafter be continued.

C. Nutritional Promotion

18. Bread fortification will be most effective when accompanied by a nu-trition promotion program with the following objectives: (i) to emphasize thehigher nutritive value of traditional bread from bakeries participating in thetechnical assistance program; (ii) to educate people that commercially-baked,fortified traditional breads are of higher nutritional quality than home-bakedbread; (iii) to provide a focus for nutrition promotion within schools andhospitals and to the poorest urban families; (iv) to stress that reduced home-baking will decrease damaging deforestation.

19. The target groups can be categorized (i) 30,000 school children whoare direct beneficiaries of the program and through them, their families; (ii)23,000 members of the poorest urban families together with 14,000 hospitalizedpersons; (iii) a wider urban population in towns where the bakeries are situated.It has been estimated that 67,000 people are potential customers within theseurban areas.

20. Nutrition promotion in schools is of great importance in introducingsound health and nutrition principles to children. Hone economics and nutri-tion components are being introduced in the Yemeni school curricula beginningin the fourth primary grade. However, only a small minority of school-age child-ren go beyond the fourth grade. To introduce the school population to princi-ples of nutrition, the promotion component would include discussion seminars,printed material and displays at an earlier stage in the educative program.Some addlitional curricula development would be necessary to reinforce theprinciples at different stages in the educational process.

21. For the poorest groups and those hospitalized due to the effects ofmalnutrition a more basic strategy is needed. Nutrition promotion throughprinted material, displays and discussions will be designed to emphasize thepositive aspects of Yemini food habits and modify those food habits which are

AINEX 5Page 8

nutritionally negative. A positive aspect of Yemeni dietary patterns is theirreliance on cereals as the basic staple food. Compared to root and tuber-eating populations, the Yemenis are favored in having a higher intake of pro-te.ins and minerals from whole grain cereal foods which partly compensate fortheir low consumption of animal products. The recent tendency, especiallyin urban areas, to replace whole grain bread with modern bread made of highlymilled wheat flour, and cereal porridge by polished rice, represents a nutri-tional loss. It is of great importance to encourage traditional ways of usingcereals in their unrefined form.

22. Promotion is necessary for the larger urban target group. Communi-cation channels already exist in the towns, such as the Maternity Child Health(MCH) clinics, literacy classes for men and women, Women's Associations(Sana'a and Taiz), and other Government and privately organized activities.Programs on consumer education and family budgeting would include a componenton the advantages of fortified bread and the effects of mineral and vitamindeficiency. Traditional marketing methods appropriate to the culture such asradio, posters, placards for stores, logos that communicate to the non-literatepopulation, promotional and educative packaging would be used. These tech-niques, used less extensively than in western society, have been used alreadyto introduce new food habits to large sectors of the Yemeni population.Attention would also be given to educating the bakers participating in theprogram and in providing them with educational materials. Participation inthe promotion program would be a condition of receipt of projectsuppliednutrients.

23. Supervision of nutrition promotion would be the responsibility ofthe Nutrition Expert who would be located within the bakery division of YGGC.He would be responsible for all target groups and for developing promotionalmaterial for packaging and advertising. A budget of $20,000 per year has beenallocated to cover salaries, auxiliary staff, transport costs and generalexpenses. An amount of $5,000 p.a. has been allocated to schools and institu-tions for the development and production of educational materials. Moreextensive communication channels are necessary to reach the commercial market;$10,000 has been allocated to coincide with the initial marketing of fortifiedbread and $5,000 p.a. for continued promotion (Table 2 of this Annex). Adver-tising whould emphasize nutritional advantages and create public awareness ofthe importance of adequate nutrition. Ten person weeks, estimated to cost$20,000 have been allocated in the first year for promotional purposes and forthe development of operational objectives. Five person weeks per year, at anestimated cost of $10,000 p.a. have been allocated for continuing promotionand evaluation.

ANNEX 5Page 9

D. Nutrition Planning

24. At present there is no national nutrition program in YAR. It is theGovernment's objective, as stated in the three-year development program 1973/74-1975/76, to upgrade the dietary standards of the population. The project pro-vides a suitable opportunity to assist the Government in developing a nationalnutrition plan toward the achievement of this goal.

25. Under optimal conditions, nutrition interventions such as those pro-posed by this project should be determined within the context of an understand-ing of national nutrition needs and, if possible, a national nutrition plan.At this stage, due to lack of information and analysis, tne nature of thebroader nutrition problem is not entirely clear. Nor has a systematic examina-tion been made of alternative ways of alleviating it. Accordingly, provisionis made in this project for the funding of a nutrition study to cost about$180,000. The study would include: (a) a survey of nutrition status; (b) ananalysis of the causes of malnutrition in YAR; (c) identification and compari-son of alternative interventions; and (d) preparation of a nutrition plan,including suggested options for the Government to consider in dealing with theproblem.

26. The nutrition status survey will include a detailed study of thenutrient deficiencies of a representative sample of the YAR population. Thesample would include members of the target group to be reached by the breadproduced in facilities financed by the project. In this way, the fortificantmix could later be tailored to meet the specific deficiencies of the bread re-cipients. The survey will also examine food consumption patterns, family budg-et expenditures and available information on agricultural, economic, health andother policies and practices which affect the nutritional status.

27. Analysis will be made of the determinants of malnutrition in YAR.Although attention will be given to the most proximate causes of malnutritionfrom a medical point of view (e.g. insufficient nutrient intake, poor utiliza-tion of nutrients from the food ingested, and the heightened nutritional needscaused by nutrition-related illnesses), primary attention will be directed tothose socioeconomic factors directly influencing diet and food utilizationthat can possibly be changed to improve nutritional status. Here analysiswould be made of distribution shortcomings, price relationships, food waste,and errors of consumer behavior (the study will not examine inadequacy of na-tional resources and the entire constellation of macro-economic causes thatconstitute underdevelopment).

28. Possible intervention programs would be formulated and analyzed andpreliminary cost effectiveness studies conducted. From this, a proposed na-tional nutrition plan would be developed, suggesting to the Governnent alter-native ways of addressing nutritonal needs of the society.

ANNEX 5Page 10

29. The nutrition status survey would be undertaken by a Government medi-cal team supported by 12 man-months of foreign consultants during the firstyear of the project. Costs in the survey will include: travel, training oflocal counterparts to conduct interviews, equipment etc. The remainder ofthe planning work will be completed during the second year of the projectthrough 3 man-months of technical assistance provided by foreign experts,working with YGGC and officials from the Ministry of Public Health. TheMinistry of Public Health would make arrangements satisfactory to IDA forestablishing the national nutrition plan, including agreement on terms ofreference for the consultants and an agreed-upon methodology for the nutri-tion status survey. The Government would provide IDA with copies of the finalreport of the study, and thereafter review the recommendations with IDA.

May, 1976

APPRAISAL OFANNEXE 5

A GRAIN STORAGE AND PROCESSING PROJECT Table

YEWENT RkB REOUPLIC

Amour;tS of Vitam;ins and Minerals Droposed for Use in Yemeni Flour

Amrrant Added per Kg-/FlourNutrient Governmeent Bakeries Commercial Bak;eries

Vitamin A 500 IU 5,000 IUVitamin C 130 rrpVitamin D 670 IU /1 150 I /2Vitamin E 25 IUThiamine (B 1 ) 0.9 mg 1.3 lagNiacin 17 mg 25 r.ngRiboflhvin (B 2 ) r.1 mg 2.5 mgFolacin 0.7 mgPyridoxine (B 6 ) 0.6 rmgCyanocobalarnine (B12 ) 0.013 mgPantothenic Acid 9 mgCalciumn 800 mg

Zinc 3 mgIron ,O mg O mgIodine 0.15 mg

/1 Amount provides 63% of recomnended daily intake for a 1-3 year old child, ifflour provides total food energy.

/2 Equivalent to 125% of recommended daily intake of adult male, if flour providestotal food energy.

APPRAISAL OF ANNEX 5Table ?

A GRAIN STORAGE AND PROCESSING PROJECT-

YEMEN ARAB REPUBLIC

Estimated Costs of Nutrition Component

Project Activity 1 2 Y a Total

Bread FortificationBakeries supplying Govt.

Feeding ProgramsControl - 5,000 5,000 5,000 15,000Technical Assistance 10,000 5,000 5,000 10,000 30,000Fortificants - 57,000 57,000 57,000 171,000

Commercial BakeriesAdm,inistration & Control - 5,000 5,000 5,000 15,000Technical Assistance 10,000 5,000 5)000 10,000 3(,000Fortificants - 5,000 5,000 5,'00 15,000

Sub-Total 20,000 82,000 82,000 92,000 27G?7QO

Nutrition Promotion

Personnel & Ooerating Costs 20,000 20,000 20,000 20,000 80,000Educational & PromotionalMaterialsSchools - 5,000 5,000 5,000 15,000Hospitals, etc. - 5,000- 5,000 5,000 15,000Urban Population - 10,000 5,000 5,000 20,000

Technical Assistance& Training 20,000 10,000 10,000 10,000 50,000

Sub-Total 40,000 500ooo 45,000 46,000 180,0OC

Project Evaluation 24,000 24,000National Nutrition Surveyand NutritionPlanning 45 000 45,000 45,000 45,000 180,000

Total Cost (,6o,00Physical Contingency 12,000

Grand Total 672,000

May 1976

ANNEX 6Page 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Summary Project Cost and Financial Results

1. The projected investment, income and cash flow statements for thesilo, warehouses, 10-m ton bakeries and 1-m ton bakeries are shown in detailin Annexes 7, 9, 10 and 11. The financial rates of return including those forsensitivity tests are summarized below:

Investment Operating RevenuesBase Costs + 10% Costs + 10% - 10%

YGGC 23.8 22.3 22.7 20.8Silo 27.1 25.6 26.4 24.7Warehouses 16.8 15.2 15.8 14.110-m ton Bakeries 18.3 16.6 14.9 12.81-m ton Bakeries 26.1 23.9 17.1 14.3

All prices and technical coefficients used are based on information receivedat the time of appraisal (November 1975). A physical contingency of 10% forthe silo and 5% for the other components has been included. All rate ofreturn calculations are based on projections in real terms. Particular assump-tions made for each component are listed in the footnotes of the respectivetables.

2. All income statements have been projected at constant 1975 prices.No changes in relative prices are foreseen. To reflect adequately the entities'future cash position, all cash flow projections should theoretically be made innominal terms. In the projected cash flow statements in Annexes 7,9, 10 and 11the investment costs have been inflated using the following inflation rates(in % per annum):

Imported Component LocalCivil Works Equipment Component

1976 13 9 201977 12 8 201978 12 8 201979 12 8 201980-81 10 7 20

Accordingly the projected financing requirements and debt service would reflectexpected actual amounts. The revenues and operating expenses, however, havebeen projected in constant prices. This is justified as YGGC's activities are

ANNEX 6Page 2

service operations that generate revenues out of service charges. IWheneveroperating costs increase, YGGC would also raise the service charge by the sameamount, leaving the margin unchanged. For private bakeries producing breadunder contract for the Government, the same principle applies. Private bakeriesproducing for the market sell the bread at Government controlled prices. TheGovernment fixes and adjusts the prices according to operating costs. There-fore, the same principle applies.

May, 1976

ANNEX 6APPRAISAL OF Table 1

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Total Project Cost in Constant and Current Prices

Local For.Ex Total Local For.Ex Total…YRls' 000…Us$ 000 -------

20,000 m ton siloCost at 1975 prices /1 6,057 21,038 27,095 1,346 4,675 6,021Price Contingency 7,083 9,180 16,263 1,574 2,040 3,614

Subtotal 13,140 30,218 43,358 2,920 6,715 9,635Six Warehouses, 18,000 m tonCost at 1975 prices /1 5,103 4,144 9,247 1,134 921 2,055Price Contingency 1,463 968 2,431 325 215 540

Subtotal 6,566 5,112 11,678 1,459 1,136 2,595Two 10-m ton Bakeries (incl.mills)Cost at 1975 prices /1 1,813 4,707 6,520 403 1,046 1,449Price Contingency 1,197 1,413 2,610 266 314 580

Subtotal 3,010 6,120 9,130 669 1,360 2,029Bakery CreditCost at 1975 prices i1 3,325 7,952 11,277 739 1,767 2,506Price Contingency 1,814 2,110 3,924 403 469 872

Subtotal 5,139 10,062 15,201 1,142 2,236 3,378Technical Assistance to YGGC /2Cost at 1975 prices 324 6,098 6,422 72 1,355 1,427Price Contingency 162 2,362 2,524 36 525 561

Subtotal 486 8,460 8,946 108 1,880 1,988Technical Assistance to ACFCost at 1975 prices 450 1,404 1,854 100 312 412Price Contingency 167 454 621 37 101 138

Subtotal 617 1,858 2,475 137 413 550Engineering ConsultantsCost at 1975 Prices 729 2,160 2,889 162 480 642Price Contingency 126 360 486 28 80 108

Subtotal 855 2,520 3,375 190 560 750Nutrition ComponentCost at 1975 prices 301 2,723 3,024 67 605 672Price Contingency 108 967 1,075 24 215 239

Subtotal 409 3,690 4,099 91 820 911

Total Project CostAt 1975 prices 18,102 50,226 68,328 4,023 11,161 15,184Price Contingency 12,120 17,814 29,934 2,693 3,959 6,652

Grand Total 30,222 68,040 98,262 6,716 15,120 21,836

/lExcludes costs of engineering consultants and technical assistance

/2Includes cost of warehouse study of US$217,000 at 1975 prices and US$250,000in current prices.

May , 1976

ANNEX 7Page 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Yemen General Grain Corporation (YGGC)

Guideline Organization and Operating Procedures

A. Organization and Operating Procedures

1. There is no institution in YAR with the capability to implement andsubsequently operate the project facilities. A general grain corporation, theYGGC, would be established under the Ministry of Supply for this purpose. TheYGGC would be a semi-autonomous Government-owned enterprise to be run on asound commercial basis. The Government's equity in YGGC would amount to 50%of YGGC's investment costs. YGGC would be established in 1976.

2. YGGC's responsibilities would be:

(a) to implement the silo, warehouse and 10-m ton bakery componentsand subsequently to operate and maintain them;

(b) to assist ACF in implementing the bakery credit component andto organize and manage the technical assistance program forprivate bakers;

(c) to initiate and supervise the grain storage survey;

(d) to implement and control the bread fortification and nutri-tion promotion program, and to initiate and supervise thenutrition survey as well as the study to develop a nationalnutrition program.

After the project's implementation period all existing Government-owned grainstorage and processing facilities except those operated by the army would betransferred to YGGC for operation and management.

3. In accordance with YGGC's responsibilities its legal powers wouldinclude:

(a) the acquisition of land for its facilities;

(b) contractual arrangements with firms or agencies for execut-ing works and supplying equipment, materials and services,and for employing experts and consultants;

ANNEX 7Page 2

(c) the purchase and sale of cereals and cereal products on be-half of the Government. For these transactions the Govern-ment would provide YGGC with the necessary funds and otherresources; it would also reimburse YGGC for any loss thatmay result from such sales or purchases.

B. YGGC Management

4. YGGC would have a board consisting of the Minister of Supply as Chair-man, representatives of the Central Planning Office and the Ministry of Finance,the General Manager of ACF, the Director of the Hodeidah Port Authority andthe Project Manager and Co-manager of YGGC. The Board would decide on allpolicy issues, major investments and operational matters, and approve keypersonnel decisions as well as the annual balance sheet. The Project Managerwould have the overall operational responsibility for project implementationand management. Three operational divisions--a silo, warehouse and bakerydivision--would be in charge of the individual project components, and anaccounts and audit division would handle the accounting and financial controlfunctions. YGGC's organization chart is given in Chart 1 of this Annex. TheProject Manager in cooperation with the Division Managers would formulateoperating, accounting and auditing procedures for approval by YGGC's board.YGGC's Head Office and the divisional offices would be located in Sana'a ex-cept the silo division, which would be housed in the silo complex in Hodeidah.

5. In view of the lack of experienced staff in YAR, YGGC would, forperiods ranging from three to five years, be staffed with five senior inter-nationally recruited experts, project manager, silo superintendent, bakery-superintendent, bakery extension agent and accountant/controller. All of theexperts would have local counterparts (see Organization Chart). These expertswould be responsible both for project implementation and for training oftheir counterparts, who would take over management responsibilities duringthe experts' assignments. The project manager has already been appointedand the selection process for the other expert positions and local staff isunder way. Additional experts would be appointed as part-time consultantsfor the grain storage and nutrition surveys. Further details on expatriateand local staff requirements are given in Chart 1 of this Annex, and Annex8, Table 1.

C. Procedures

6. YGGC would operate on a commercially sound basis. It would providebulk grain unloading, storage and baking services against service charges thatwould cover its operating costs, depreciation and financial expenses and allowYGGC a reasonable return on its equity (this Annex, Tables 1-3). The silowould handle all bulk grain imported throagh the port of Hodeidah. The servicecharge to be paid by the importer of grain would be a minimum of YRls 36 per

ANNEX 7Page 3

m ton (US$8 per m ton) (Annex 9, Table 5). The warehouses would store-for theGovernment the grain that is collected in kind as zakat and customs duties, aswell as grants-in-aid. They would also rent out available space to privatemerchants. The service charge to be paid by the Government or renting privatemerchants would be a minimum of YRls 1.1 (US$0.24) per 50 kg bag per monthstored (Annex 10, Table 5). The 10-m ton bakeries would bake bread for theGovernment-sponsored feeding programs and deliver it to the appropriateinstitutions. The Government-owned grain would be delivered by the warehousedivision to the bakeries. The bakeries would receive a service charge to bepaid by the Government of a minimum of YRls 0.10 (US$0.022) per 150 g loaf(flour basis), (Annex 11, Table 5). All service charges (of the silo, ware-houses and bakeries) would be adjusted annually in accordance with costincreases that may occur over the lifetime of the project.

7. Detailed Board procedures would be drafted and approved by YGGC'sBoard. The procedures would include the following:

(a) the Project Manager would act as the convenor of the Boardand he would initiate the meetings in consultation and withthe approval of the Chairman;

(b) a decision of the Board could be obtained by circulating work-ing papers. Decisions taken in a Board meeting or by circula-tion could be acted upon before the minutes are confirmed for-mally in the next meeting;,

(c) the Board would delegate adequate financial and administrativeauthority to the Project Manager and the divisional heads sothat meetings of the Board would be necessary only formajor policy and essential operational issues;

(d) the Board would approve all key appointments such as con-sultants, all expatriate personnel, and all senior Yemenipersonnel. Authority for appointments to junior posts wouldbe delegated to the Project Manager and the divisional headsas appropriate;

(e) all major tenders for construction, supplies and serviceswould be subject to the approval of the Board. However, rela-tively minor supplies and services would be the responsibilityof the Project Manager and the division heads.

ANNEX 7Page 4

D. Responsibilities and Operating Procedures

Silo Division

8. The silo division would have the following responsibilities:

(a) During the construction phase it would create the operatingorganization by setting up the office, recruiting personneland training it;

(b) it would be responsible for the complete management and opera-tion of the silo including all its financial and grain accounts;

(c) it would coordinate and cooperate with private importers, PortAuthority and other agencies to discharge bulk grain ships ex-peditiously and deliver the grain to its owners in bagged or

-bulk form and be responsible for its safety and accountabilityin its passage through the silo.

9. Operating Procedures

(a) During the initial years of operation, the silo is expectedto handle mostly private imports of bulk grain. Irrespectiveof the ownership of the grain, however, the Port Authoritywould place all bulk grain vessels along berth No. 4 for dis-charge through the silo. The owner of the cargo having com-pleted port formalities would get authorization from the portauthority in writing to commence discharge of the vessel andsimultaneously the Port Authority would assign two cranes withclam shell buckets for the discharge of the bulk grain. Theowner of the cargo would also arrange stevedoring in the holdswhich are being worked;

(b) The owner of the cargo would be encouraged to have a representa-tive present at the weighing scale in the silo head house towitness the weighing operation throughout the period of dis-charge. After the ship is fully discharged, the owner wouldbe given the weighed-in figures for his record;

(c) The owner, having paid the unloading and bagging charges plusany storage charges which may be levied, would receive a de-livery order from the silo's office. On presentation of thedelivery order at the bagging center the bagged grain wouldbe received by the owner or his authorized representative.Transportation from the silo would be arranged by the owner ofthe grain;

ANNEX 7Page 5

(d) The Customs Authority at present retains 5% of the grainimported by the private importers. The silo authoritieswould retain the quantity of grain specified by the cus-toms out of the privately-owned grain received from thevessel and would deliver it according to the instructionsof the Ministry of Finance, which controls Customs;

(e) The weigh-in scale would print the weighing-in, and theweigh master would arrange the printed figures of eachdraft to show into which bin the grain had been discharged.Similar procedures would be followed for weighing-out of abin. Bin cards would be filled out to show the incomingand outgoing weights of grain for each storage bin;

(f) For the bagging operation, grain would be transferred tobagging bins in lots from the main storage bins throughthe weigh-out scale and the quantities delivered in baggedform would be checked with the weights of the grain sup-plied to the bagging bin. All bagging systems would havecounters to record the number of bags packed, and in thecentral panel there would be a duplicate counter to recordthe same figures as at the bagging operation center;

(g) The owner of the grain may be allowed free storage of grain inthe silo during the first 48 hours from the commencement of dis-charge of the ship. After this period he must arrange to takedelivery at the rate of 1,500 m ton per day. The number of daysrequired in excess of this rate would be charged on an ascend-ing scale on the whole shipment. This system of storage chargeis designed to free storage space in the silo for subsequentgrain arrival. Appropriate rates of charge may be worked out onthe basis of conditions prevailing in 1979 when the silo is ex-pected to go into operation, but for an indication of the orderof magnitude, it might be 10 Bukshas per m ton for the first twodays default and 15 Bukshas per day for the next two days and 20Bukshas for the next two days, and so on with the charge per m tonincreasing by 5 Bukshas for each additional two days of storage;

(h) Invoices for all grain deliveries, whether the owner be a pri-vate trader or any Government agency, should be sent with fulldetails within three days of such dispatches. These invoicesshould be prepared in four copies, and might be made out in dif-ferent colors for convenience. Two copies of the invoice wouldgo to the consignee, of which he would return one copy aftercertifying receipt of the goods, the third copy would be sentto the controllers office, the fourth copy would be retainedby the consignor. In addition to these formal invoices there

ANNEX 7Page 6

would be transport invoices which would be issued at the timeof loading any transport with grain. These invoices would bein triplicate, one copy would be handed out at the Guard post,the second would be retained by the dispatcher of the silowho is loading the truck, and the third copy is to be carriedby the truck driver.

Warehouse Division

10. Responsibilities. The Warehouse Division will have to coordinateclosely and cooperate with the Ministry of Finance, the Bakeries Division andthe Silo Division for its operation. The warehouses operated under this divi- -sion during the initial years of the project would store and handle grain suchas zakat, customs duties and grants-in-aid grain on behalf of the Government. 1/They may also store other goods such as flour, and rent available space toprivate merchants.

11. The division would supervise the operation of each of its warehouses,i.e. those built by YGGC itself and the existing Government warehouses whichwill be transferred to YGGC. The division would ensure that modern managementpractices are followed in the operation of the warehouses including maintenanceof proper sanitary standards. It would also take adequate measures for regularmaintenance of the structures and other ancillary facilities. During the con-struction phase of the project, this division would recruit personnel for thewarehouses operation and train them. It would also be responsible for expedit-ing the construction work in general and in setting up office procedures andaccounting systems in collaboration with the Controller's Office.

12. Operating Procedures. The warehouse in principle would provide astorage service for the owners of the commodities in stores. All receiptsinto the warehouses and deliveries from them would therefore be on the instruc-tions of the owners. The warehouse man would be required to keep complete anddetailed accounts of the commodities received and delivered with full informa-tion of quantities, type, dates, containers, consignors, consignees and anyother information which might be relevant.

13. All commodities received should be stored separately in stacks keep-ing three feet aisles between the stacks. All stacks of grain or flourshould have cards showing the number of bags, quantity, date of receipt andthe name of the consignor. This is required to identify the arrivals inchronological order, so that deliveries can be made on first in - first outbasis.

1/ Should YGGC at a later stage take over responsibility for procurementand marketing of grain, a much more comprehensive inventory control systemwould become necessary for storage and movement of grain in the entiresilo-warehouse system.

ANNEX 7Page 7

14. During receipt of any consignment, weighment must be made for theconsignment usually on a sample basis, unless full weighment is specificallyrequired for a particular lot. The weigh-in figures should be recorded ina register or tally book for record. Sinilar procedures should be followedfor deliveries made out of the warehouse. In case of short receipts of anyconsignment in comparison to the stated quantities in the invoice, the caseshould be reported immediately to the consignor as well as to the warehousemanager. In cases of serious shortages it would be advisable to have areliable witness to observe the weigh-in operation.

15. If consignments of grain or flour received show evidence of infesta-tion or evidence of deterioration in quality, this would be reported immediatelyto the consignor as well as to the warehouse manager.

Bakeries Division

16. The Bakery Division would:

(a) implement the construction of the two 10-m ton bakeries as wellas manage and operate them;

(b) implement in cooperation with ACF the bakery credit componentand organize and manage the technical assistance program forprivate bakers;

(c) implement and control the bread fortification and nutrition pro-motion program, initiate and supervise the nutrition statussurvey as well as the study to develop a national nutrition pro-gram;

(d) be responsible for recruitment of bakery staff and its training;

(e) in operating the 10-m ton bakeries, the division would coordi-nate with the Government agencies concerned as well as theWarehouse and Silo Divisions of YGGC the provision of grainand flour and the delivery of bread to schools, hospitals andother feeding programs.

17. It would set up detailed accounting procedures for the bakeries incollaboration with the Accounts Division of YGGC and would exercise all ad-mini-strative and financial authorities delegated to it.

18. Operating Procedures. Each of the two bakeries would be equippedwith simall whole-grain flour mills. The bakery in Sana'a is expected to beconstructed adjacent to the new Government warehouse now under construction.The bakery in Taiz will have storage facilities for about ten days' consump-tion requirements. At both the bakeries records would be kept for all receipt

ANNEX 7Page 8

of grain and flour and other supplies made to the bakeries. The records ofthe bakeries would show quantities of grain and flour received and of theproducts made. Similarly records would be kept of all deliveries made toGovernment agencies or for other purposes.

Accounts/Financial Control Division

19. The Accounts/Financial Control Division would be responsible forkeeping all accounts of YGGC and its divisions. It would handle all paymentsand collect all service and other charges. Each division would have a smallimprest account for minor daily expenditures. This account would be adjustedand replenished monthly.

May, 1976

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Yemen General Grain CorporationConso1ida't9d I,come Statement Projections

Year1976 1977 1978 1 9 9 1981 1982 1983 - 19 r 1986 1987 1988 1989 1990 1991 1992-2005---------------- --------------------- _ _------- _------------------U 000__------ _ _------ __------- ___-- - - -- ---__ _ _ _ _ _-- _________________--

RevenuesSilo - - 1,850 2,111 2,390 2,689 3,009 3,357 3,726 4,120 4,548 5,006 5,498 5,887 9,592Warehouses - - 318 636 636 636 636 636 636 636 636 636 636 636 636 636 636Government Bakeries - _ 537 1,074 1,074 1,074 1,074 1,074 1,074 1,074 1 074 1 074 1 074 1 074 1 074 1 074 1 074

Subtotal - - 855 1,710 3,560 3,821 4 4,399 4,71 5,067 5,436 6

operating ExpensesSio - -E _ 395 412 430 450 471 493 517 543 570 600 632 658 898Warehouses - - 99 198 198 198 198 198 198 198 198 198 198 198 198 198 198Government Bakeries - 298 6 596 596 596 596 596 596 5 59659 5

Subtdtal - _ 397 794 26 12 1,244 1 1,265 1,287 1,311 1,337 1,364 ,34 1 2

DepreciationSilo _ _ _ _ 594 594 594 594 594 594 594 594 594 594 594 594 594Warehouses - - 24 48 48 48 48 48 48 48 48 48 48 48 48 48 48Government Bakeries - - 65 130 130 130 130 130 130 130 130 130 130 130 130 130

Subtotal - _772 77 772 772 772 772 772 772 772 772 772 772 772

Net Income before Taxes _ _ 369 738 1 1,843 2,104 2,383 2,682 3,008 3,353 3,721 4,122 4,550 5,010 5,373 8,838TaxesSilo _- - 215 276 342 411 486 568 654 746 846 953 1,068 1,159 2,045Warehouses - - 48 96 96 96 96 96 96 96 96 96 96 96 96 96 96Government Bakeries - _ 44 23 88 88 88 88 88 88 88 88 88 88 88 88 88

Subtotal - - 92 l4 3T9 7 v 5 77) 752 8 936 1,030 1,I7 1,252 1,343 2,229

Net Income after Taxes _ _ 277 554 1,200 1,383 178 1,88 2,012 2,256 2,515 2113,09 2 3 3,758 4,030 6,609

Net Income after Taxes _3,5plus Ospreclation - - ~~~~~366 732 1,972 2,155 2,350 2,560 2,784 3,2 3,287 3,563 3,864 14,185 1,3 ,0 ,8

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAL REPUBLIC

Yemen General Grain CorporationConsolidated Cash Flow Projections

Year1976 1977 1978 1979 1980 1981 1982 1 1985 1986 1987 1988 1989 1990 1991 1992-2005

--- --- --- -- --- --- -- --- --- --- -- --- --- -- --- --- -- UST O --0 - ------- - - - - - - - - - - - -- - - - - - - - - - - - ----- ---- -Cash InflowRevenue - - 855 1,710 3,560 3,821 4,100 4,399 4,719 5,067 5,436 5,830 6,258 6,716 7,208 7,597 11,302Long-term Loan 399 1,583 4,336 1,765 415 - - - - -Government EquityContribution 400 1,583 4,336 1,765 414 - - - -Interest duringConstruction 18 107 374 646 746 - - -_Subtotal - -37 5 3,821 4100 4,39 4,719 5,o07 5,13 25 6,716 7,208 11,302

Cash OutflowOperating Expenses - - 397 794 1,189 1,206 1,224 1,244 1,265 1,287 1,311 1,337 1,364 1,394 1,426 1,452 1,692Investments /1 799 3,166 8,672 3,530 829 87 - - 87 - - 87 - - 3,155 29 29Taxes - - 92 184 399 460 526 595 670 752 838 930 1,030 1,137 1,252 1,343 2,229Debt Service

Interest 18 107 374 646 746 765 696 620 539 452 356 261 148 25 - - -Principal - _ - _ _ 770 840 895 976 1,063 1 059 1,254 1,367 1 274 -_ - -Subtotal 817 3,273 92535 5,154 3,13 3,28 5 3,354 3,5373 3,5 3909 2 35083 3 2,824 3,950

Cash Flow _ - ~ _ 732 1,972 _ 815 1,045 1,182 1,513 1.872 1,961 2,349 3,886 1375 4,773 7,352

Cash Flow for FinancialRate of Return (710) (2,498) (5,537) (1,265) 1,669 2,263 2,560 2,784 2,941 3,287 3,563 3,777 4,185 4,530 1,647 5,056 7,777Depreciation (Annual) - - 89 178 772 533 772 772 685 772 772 685 -772 772 - 743 743Legal Reserve(Annual) - - 42 83 180 - 58 268 302 338 377 419 464 512 714 405 991Retained Earnings

(Annual) - - 235 471 1,020 - - 5 195 403 723 857 1,113 2,602 661 3,425 5,618Depreciation Fund

(Cumulative) - - 89 267 1,039 1,572 2,344 3,116 3,801 4,573 5,345 6,030 6,802 7,574 5,191 5,934 -Legal Res.(Cumulative) - - 42 125 305 305 363 631 933 1,271 1,648 2,067 2,531 3,043 3,757 4,362 _Retained Earnings (Cum)- - 235 706 1,726 1,726 1,726 1,731 1,926 2,329 3,052 3,909 5,022 7,624 8,285 11,710 -

Debt/Equity L2 49:51 48:52 47:53 44:56 38:62 35:65 33:67 29:71 24:76 19:81 12:88 5:95 - - - - -Debt Service CoverageL3 - - - - - 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 - - -

Projected Financial Rate of Return

Financial Rate of Return : 23.4%Sensitivity TestInvestment Cost +10% : 21.8%Operating Expenses +10% : 22.2%Revenues -10% : 20.5%

1 Includes technical assistance for bakery credit/ Long-term debt outstanding, excluding short-term portion of long-term debt, over equity/3 Net income after taxes plus depreciation plus interest over debt service. D

ANNEX 7Table 3

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Yemen General Grain CorporationInvestments by Year

Year Grand Total197 6 977 17 99 Total For.Ex________-____-----USyi '0-00- -- - --------- )

20,000 m ton SiloCost at 1975 Prices 11 275 320 4,785 1,403 204 6,987 5,505 (79)Price Contingency 50 113 2.345 1,231 234 3,973 2.73 (§2)

Subtotal E; W~~~~~ 7.130 2,634 3M 10.960- 7087 (72:)Sub total 32JJ 2.6

6 Warehouses, 18,000 m tonsTotal CapacityCost at 1975 Prices /1 373 2,037 47 38 25 2,520 1,359 (54)Price Contingency 528 25 20 62 293

Subtotal 40 5 72 z .6

2 Govt. Bakeries,1O m tons per day eachCost at 1975 prices /j 62 141 1,071 310 11 1,595 1,122 (70)Price Contingency 6 2 399 8 7 637 332 (52)

Subtotal 1.40 P _ 2,232

Total including PriceContingency > 3,166 8.672 3,200 > 16.335 10,984 ( D

/1 Includes Technical Assistance, Incremental Working Capital and PhysicalContingencies

ANNEX 7Table 4

APPRAISAL OF

A GRAIN STORAGE AND PROCESSDIG PROJECT

YEMEN ARAB REPUBLIC

Yemen General Grain Corporation - Corporate OfficeAnnual Expense Estimate

Unit Cost Amount-US$-

1 General Manager at YRIs 3,000/month 8,0001 Secretary-Typist " 800 '1 2,1331 Controller 2l 2,000 it 5,3331 Accountant - Accounts Payable " " 1,000 " 2,6671 Accountant - Receivables " " 1,000 " 2,6671 Accountant - Inventory n n 1,000 " 2,6671 Accountant - Financial " " 1,000 't 2,6674 Accounting Clerks " " 800 ' each 8,5331 Secretary - Typist " " 500 " 1,3331 Telephone Operator " 500 1,3v331 Guard n 400 ' 1, 0671 Office Boy t' " 300 't 8001 Janitor ' " 300 " 800

Rent - 260 m2 at YRls 9o/m2 5,200Operating Supplies and Misc. Expense 35,000

Total 80,200

Allocation to Project Components

Silo at 50% 40,100Warehouses at 21.5% 17,243Bakeries at 28.5% 22,857

May ., 1976

APPRAISAL OFA GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLICOrganizational Chart of

Yemen General Grain Corporation

Minister of Supply - ChairmanRepresentative of Ministry of FinanceRepresentative of Central Planning OrganizationRepresentative of the Port AuthorityGeneral Manager of ACFProject ManagerProject Co-Manager

I~~~~~~~~~~~~~~~~~~~~~~

Project Manager - 1 (Exp)Project CoManager 1 (Local)

Bakery Division l lSilo Division Warehouse Division Manager - 1 (Exp) Accounts & Audit DivisionSilo Superintendent - 1 (Exp) Manager - 1 (Local) Co-Manager-1 (Locali Controller- 1 (Lop lSilo Co-Superintendent -1 (Local) Nutrition Expert Co-Controller 1 (Local)

Sana'a TiGovt. Bakery Govt. Bakery

Bakery Superintendent -1(LclBakey Speritenent- I (Local) Extension Agent - 1 )Exp)Bakery Superintendent- (oaiBkrSuentdn-1 (Local)Extension Ag. - 1 (Local) Extension Agent - 1 (Local)

Warehouses

Saada j j Hia lbb Damnar F Hosia1SnaaExisting

World Bank-154 m

World Bank-15524

ANNEX 8Page 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Technical Assistance and Training Program

Technical Assistance

1. There is an acute shortage of qualified and experienced personnelin YAR to implement and manage the project. During the implementation andearly operating stage of the project adequate technical assistance would be

provided. A total of six expatriates would be hired, five of them for threeto five years and the infestation control expert for about six months. In

addition, part-time consultants would be hired for engineering and construc-tion supervision as well as for implementing the nutrition component and thestorage survey. The main tasks of the expatriate experts would be to imple-ment and manage the project and to train Yemeni national counterparts so that

they can take over managerial and operational responsibilities once the ex-patriate experts leave. The estimates of salaries and other costs are basedon market prices of persons who possess outstanding capabilities in their re-spective fields. Table 1 of this Annex shows the time period over which the

experts would be required, as well as the costs associated with technicalassistance.

2. ACF would appoint under this project a senior industrial creditexpert and an accounting/financial control expert and would conduct a train-ing program for local staff described in detail in Annex 4.

Terms of Reference for the Expatriate Staff

3. The following are the major responsibilities of the expatriate staffand their required qualifications:

4. The Project Manager

Responsibilities: He is the executive manager of YGGC. He willcarry the overall responsibility for project implementation and operation.He will also act as the convenor of meetings for decision of the Board, withthe consent of the Chairman. His main responsibilities in the project imple-mentation stage will be:

(a) to initiate and follow through all actions necessary to em-ploy consultants and other expatriate personnel required forproject implementation and operation;

ANNEX 8Page 2

(b) to initiate and follow through all actions to select andappoint key Yemeni personnel and arrange their training;

(c) to coordinate and supervise the work of consultants, adviseand assist YGGC on bidding documents, tender evaluationsand contract awards, and administration of contracts;

(d) to assist the Government in its negotiation with IDA andalso be responsible for all communications with IDA withregard to project implementation, within the framework ofYGGC's policy;

(e) to assist and advise the Government in case of disputeswith contractors and suppliers;

(f) to train his counterpart in all.aspects of his work;

(g) to assist the Government in establishing the organizationprocedures for the project components; -

(h) to supervise the operation of all the project components,the evaluation, and system monitoring, as well as to designa reporting system for management; and

(i) to send the required reports on the project's progress,performance evaluation and financial situation tc IDA.

Qualification: University degree in engineering; 15 years or moreprofessional experience, a substantial part of which should have been acquiredin the field of grain storage and processing projects in developing countries;experience as Project Manager of a fairly large grain storage or processing.project.

5. The Bakery Division Manager

Responsibilities:

(a) As the manager of the Bakery Division of the Corporationhe has the overall supervision responsibility of the two10 m ton bakeries in Sana'a and Taiz;

(b) He would train his counterpart bakery manager and the localextension agent located in Sana'a, as well as the localbakery superintendent in Sana'a, and, in addition, wouldsupervise their foreign training;

(c) He would generally assist the Project Manager and YGGCduring the construction phase of the bakeries;

ANNEX 8Page 3

(d) He would carry out experimentation and trials in bakingof local varieties of bread and establishment of bakingsystems compatible with the consumer preferences;

(e) He would set up accounting procedures and books of accountsfor the bakers in collaboration with the Controller;

(f) He would assist the Bakery Extension Agent in Taiz in the

organization and operation of the bakery extension servicein Sana'a;

(g) He would assist and advise the ACF in the operation of thebakery loan fund;

(h) He would initiate and supervise the implementation of the

nutrition component.

Qualifications:

A university degree in cereal science, bakery science or engineering;

professional experience of at least five years, part of which must have been

acquired in bakery projects. He should possess management and training ex-perience in bakery operations as well as in bread fortification and nutrition

promotion.

6. Silo Superintendent

Responsibilities:

(a) The Silo Superintendent would be in charge of the Silo Division

and would supervise all work relating to its operation. Duringconstruction his main responsihLLities would be to set up theoffice, and, in coordination with the Project Manager, appoint

and train operatives and supervisors. He would also train hiscounterpart;

(b) Organize a detailed grain accounting system as it relates tothe receipt, storage and delivery of grain and would enforceits implementation in full assistance to the Controller;

(c) Introduce a system of continuous inspection and preventativemaintenance as well as a lubrication schedule;

(d) Organize fire drills and accident emergency training, and en-force fire safety rules;

(e) Organize a spare-parts inventory and ordering system;

ANNEX 8Page 4

(f) exercise financial authority in purchasing supplies andservices to the extent it is delegated to him by the Cor-poration.

Qualifications:

A university degree in mechanical or agricultural engineering withat least five years professional experience, a substantial part of whichshould have h)een acquired in the operation and management of a silo in a lessdeveloped - Xon ry. lie must have experience in training others. In the absence

a degr,-, a technical high school diploma would be required with at leastion years experience in the operation and management of a grain silo as a super-~itendent or manager.

7. The l;arehouse Manager

Responsibilities:

(a) The Warehouses Manager would supervise and coordinate theoperation of the warehouses of YGGC, to be located atSana'a, Hodeidah, Ibb, Damar, Hajja and Saada, and exist-ing Government-owned warehouses which may be taken overby YGGC:

(b) he would assist YGGC in all matters in connection with,and during the construction of, the warehouses;

(c) he would help in establishing the warehouse division officeand in recruiting and training local staff in operation andmanagement of the warehouse system;

(d) he would collaborate with the infestation control expert aswell as set up a preventative infestation control system inthe warehouses;

(e) he would establish accounting procedures and books of ac-counts for the warehouse operatives in collaboration withthe Controller of Accounts.

8. Controller, Accounts and Audit Division

Responsibilities:

(a) As the Chief Financial Controller of YGGC he would adviseand assist in all matters of financial transactions andaccounting procedures;

(b) He would be responsible for setting up detailed accounting,auditing and budgeting procedures for the YGGC's Head Officeoperations as well as its divisions;

ANNEX 8Page 5

(c) He would train his counterpart in all aspects of accounts,audit and budget of YGGC:

(d) He would operate commercial bank accounts on behalf ofYGGC and approve all requests for payments;

(e) He would prepare annual detailed manufacturing accounts,loss and profit accounts as applicable and the balancesheets for all the project components and for the cor-poration for approval of the board;

(f) He would prepare project accounts and disbursement schedulesfor timely submission to IDA during project implementationphase.

Qualifications

University degree in accountancy or qualification as chartered ac-countant with accounting and administrative experience of at least five yearsin a big organization. Experience in establishing accounting systems and set-ting up procedures would be desirable.

9. Bakery Extension Agent

Responsibilities:

To organize and operate a bakery extension system in YAR which wouldassist private bakers in applying for loans from the bakery loan fund of ACFas well as to provide training and advice in bakery operation, sanitation andbread fortification. 1/ The bakery extension agent would also supervise andtrain local staff of YGGC's 10-m ton bakery to be established at Taiz and thelocal extension agent for Taiz, Ibb and Damar areas located at Taiz.

Qualifications:

Senior trade school certificate in Bakery Science with at least fiveyears experience in operation and management of modern bakeries.

10. Infestation Control Expert (Sanitarian)

Responsibility:

This would be an assignment for six months. The main responsibili-ties would be to carry out a survey of the degree and nature of infestationthat takes place in grain and flour in storage in Yemen both in Governmentfacilities as well as in the major privately-owned warehouses and to recom-mend and establish a system of preventative infestation control for YGGC's

1/ A more detailed description of the functions of the bakery extensionprogram is given in Annex 4, para 17.

ANNEX 8Page 6

warehouses and silo. He would also train warehousemen and the silo staffon control measures and techniques.

Qualifications:

A degree in entomology and wide experience in the field of infesta-tion of stored grain and its control. A possible source for obtaining thisservice would be through the Ministry of Overseas Development and the TropicalProducts Institute, United Kingdom.

Training Program of YGGC 1/

11. A total of eight Yemeni nationals would receive training abroad.The project would provide four scholarships in cereal, bakery, milling andgrain storage science. The costs of overseas training and the period overwhich they would be incurred is shown in Table 1 of this Annex. In addition,there would be on-the-job training of counterparts and other staff in silo,warehouse, and bakery operation and management by expatriates. The costs oftheir training are included in the project.

12. The qualifications of the Yemeni counterparts, the duration and lo-cation of training would be as follows: qualifications are shown under part(a) and duration, location and training responsibility under (b).

13. Project Co-Manager - I

(a) Bachelor's or preferably master's degree in engineering oreconomics with at least five years administrative experience.

(b) Training abroad would be for 6 months with the grain boardsof, preferably, Arabic speaking countries. Training shouldcommence in the middle of 1976 so that by early 1977 he canparticipate in the implementation of the project from itsinception.

14. Silo Superintendent - I

(a) University degree in mechanical or agricultural engineering.Some professional experience preferable.

(b) Training abroad would be for six months with the grain boardsof, preferably, Arabic speaking countries, commencing fromearly 1977.

1/ The training program for ACF staff is discussed in Annex 4.

ANNEX 8Page 7

15. Bakery Manager - l

(a) University degree in science or engineering, preferably withsome professional experience.

(b) Training abroad would be for six months at a technical school.Management training would be provided locally by the expatriatemanager. Training should commence in early 1977.

16. Bakery Superintendents - 2

(a) High school diploma in science or graduate of technical highschool.

(b) Theoretical and practical training abroad for six months ata technical school and :n bakeries.

17. Bakery Extension Agents - 2

(a) High School Diploma.

(b) Training should commence by mid 1976 for a period of sixmonths in bakeries in the Middle East. The extension agentsshould be available in YAR after training in early 1977 tohelp in the operation of the bakery loan fund. Trainingmay be arranged through the Grain Boards of the Middle East.

18. Warehouse Manager - 1

(a) University degree in general economics, agricultural economicsor science with some managerial experience.

(b) Training abroad for one year out of which six months shouldbe spent with Grain Boards in, preferably, Arabic speak-ina countries; in the temaining period courses in businessadministration should be taken. Training should commencein early 1977.

19. Scholarships - 4

(a) Four scholarships are provided for in the field of cerealchemistry (two) and in bakery science (two). These are fouryear courses leading to a degree. The graduates would beneeded in YAk is experts in their respective fields. TheMlinistry of Supply and the YGGC would need qualified nationalsin their expanded operations in the years ahead. The basicqualifications would be a high school diploma and good academicrecord. Knowledge of English would be an advantage.

ANNEX 8Page 8

(b) At least one university is known to provide those courses ofstudy with a full degree program, Kansas State University.Four students would be selected in 1976 and arrangements madewith such a university for admission.

May, 1976

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PxOJECT

YEWN ARAB IKPUBLIC

Technical A1aistano. and Training Costs

Year1 2 3 4 5 Or_t _otal

Total For. . To a Per.sx TNtal For. c. Total For. Ex. Total For.Ex. Total For.Ex.- -- --- --------------- 1JS3$ OO ------- ----

Grain Corporation - Expatriates1 Project Manager - General Manager 30 30 60 60 60 60 60 60 60 60 270 2701 Silo Superintendent - - - - 50 50 50 50 50 50 150 1501 Bakery Manager - - 50 50 50 50 50 50 - - 150 1501 Bakery Extension Agent - - 40 40 40 40 40 40 - - 120 1201 Controller - - 50 50 50 50 50 50 50 50 200 2001 Sanitarian (6 months) - - - - - - 25 25 - - 25 25

Grain Corporation - Foreign TrainingI General Manager (6montis) 14 10 - - - - - - - - 14 101 Silo Superintendent (6 months) - - 13 10 - - - - - - 13 101 Bakery Manager (6 months) - - 15 12 - - _ - - - 15 122 Bakery Superintendents (6months) - - 28 24 - - - _- - 28 242 Bakery Extension Agents (6months) 28 94 - - - - - - - 28 241 Warehouse Manager - - 26 20 - - - - - - 26 204 Scholarships - Kansas State Univ. 22 22 22 22 22 22 22 22 _ - 88 88

Subtotal 1L 94 C6 304 288 272 272 297 297 160 160 1.127 1,103

Agricultural Credit Fud /21 LIdustrial Oredit Offer - - 55 41 55 41 55 40 55 44 220 1661 Accountant/inancial ControUera - - 28 21 28 21 28 20 28 23 112 85Foreign Trdniag ACF Staff - - 8 8 13 12 14 9 7 7 42 36Equipent and Material _ _ 27 23 - _0 1 1 38 _5

Subtotal - - 118 93 96 74 107 69 91 75 412 312

Natrition 1 _ 52 1 221 199 132 119 167 672 615

Engineering Consultants 295 254 127 84 84 52 84 52 - _ 590 442

Total 389 340 701 602 673 597 620 537 418 385 2.801 2.462

A Allocation of Orain CorporationMapatriates and Foreign Trainigto Coponents

Silo 28 26 74 71 111 111 116 116 105 105 434 429Warehouses 11 10 52 46 26 26 36 36 24 24 149 i42 ~3Bakeries 55 50 179 172 136 136 146 146 31 31 547 535 '

2 For details see Annxa 4 , Table 3.a Cost shared with proposed Livestock Credit and Processing Project

Two-year diploaa courses overseas for 2 Credit Officer. and 3 Branch Managers, and 6 ronth coarees overseasfor General Manager and Accountant/nnancial Controller (Oost shard with proposed Ivestock Credit and Processing Project).

May, 1976

ANNEX 9Page 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

20,000-m ton Port Silo

A. Projected Income Statement

B. Projected Cash Flow Statement

C. Projected Financial Rate of Return

D. Investment Costs and Disbursements by Years

E. Annual Operating Expense Estimate

F. Service Charge Calculation

G. Charges to Expense - Construction Years

H. Savings in Hodeidah Variable Port Costs Due to Silo Construction

I. Comparative Present Bulk Grain Ship Discharge Costs andFreight to Taiz - Hodeidah vs. Mokha Ports

May, 1976

APPRAISAL OF

A GRAIN STORAGE AND PRDCESSING PROJECT

NEN ARAB RZPUBLIC

20,000 m ton Poit SiloA. Projected Income Statement

Year1-4 5 6 7 8 _ 9 10 11 12 9 14 17

- ----------- -- - --- ------ 0--------------- - ---- Revenue

Service Charge i- 1.850 2.111 2.9 .... 3-o02.3_3.Z 3. 2 . . 1;9 4 548 5.006 5,498 5.887 9.592Subtotal - 1,850 2,111 2,390 2,689 3,009 3,357 3,726 4,120 4,548 5,006 5,498 5,887 c1,592

Operating EpensesVariable Expenses /t - 120 137 155 175 196 218 242 268 295 325 357 383 623Fixed Etpenses , 275 275 7 7 27 27 275 7 27 275W 275

Subtotal - 395 412 430 450 471 493 517 543 570 600 632 658 898

Depreciation 13_ 594 594 594 594 54 94 9 594 594 594 5-9-4 54 59Total - 989 1,006 1,024 1,044 1,065 1,087 1,111 1,137 1,164 1,194 1,226 1,252 1,492

Net Income before Taxes - 861 1,105 1,366 1,645 1,944 2,270 2,615 2,983 3,384 3,812 4,272 4,635 8,100Taxes -_ _ 276 342 411 486 568 654 746 846 953 1.068 1.159 2.045

Not Income after Taxes - 646 829 1,024 1,234 1,458 1,702 1,961 2,237 2,538 2,859 3,204 3,476 6,055

YAno Items Net Income afterTaxes, inol. Depreciation - 1,240 1,423 1,618 1,828 2,052 2,296 2,555 2,831 3,132 3,453 3,798 4,070 6,649

/I Service charge of US$8 per m ton or YRls 36 per m ton. For details see Annex 9, Table 5.For details see Annex 9, Table 4For details see Amnex 9 , Table 5Income tax rate for annual net inecme of YMl8 37,5oo anm more is 25%

iig9 \

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YENEN ARAB REPUBLIC

20 000 m ton Port SiloB. ProJ7ctd Cash Flow Statement /

Year1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17-30

--------- ~~~~~~~~~~~~~~U 00-----------------------_----- ,U$_00--------_____ _______________

Cash InflowRevenue - - - - 1,850 2,111 2,390 2,689 3,009 3,357 3,726 4,120 4,548 5,006 5,498 5,887 9,592Long-Term Loan /2 162 216 3,565 1,317 219 - - - - - - - -_ 5Equity Contribution r 163 217 3,565 1,317 219 - - - - - - - - -Interest During Construction /3 7 24 194 414 - _ _ _ - - - -_ _ _

Subtotal 332 457 -_ 3,O4H 7 2 ? X I,00 , S 4 1 2Cash Outflow 7 73 30 Z E ZE 268 309 3 q 72 10 454 .6 jka9s

Operating Expenses - - - - 395 412 430 450 471 493 517 543 570 600 632 658 898Investments 325 433 7,130 2,634 438 15 - - 15 - - 15 - 2,503 - 15Taxes - - - - 215 _276 342 411 486 568 654 746 846 953 1,d68 1,159 2,045Debt Service

Interest 4 7 24 194 414 483 493 457 417 373 326 274 218 156. 89 - - -Principal - - - - - 407 443 483 527 574 626 682 744 993 - - -

Subtotal m 457 7,324 3,048 1,531 1,763 1,72 1,6 172 1 I 2,071 2,20 2,316 2635 3 1,817

Cash Flow - - - 757 8 718 928 1 1,376 1.655 1.916 2.232 297 4,070 6 +Cash Flow for Financial Rate ofReturn / (275) (320) (4,785) (1,403) 1,036 1,408 1,618 1,828 2,037 2,296 2,555 2,816 3,132 3,453 1,295 4,070 6,644Depreciation Fund (Annual) - - - - 594 408 594 594 579 594 594 579 594 594 - 594 5,9 -Contribution to LegalReserves /6 (Annual) - - - - 55 100 124 185 219 255 294 336 411 429 481 521 g20

Retained Earnings - - - - 66 - - 149 339 547 767 1,001 1,227 1,348 814 2,955 5,135

Depreciation Fund (Cumulative) - - - - 594 1,002 1;596 2,190 2,769 3,363 3,957 4,536 5,130 5,724 5,724 6,318Legal Reserves (Cumulative) - - - _ 55 155 179 364 583 838 1,132 1,468 1,879 2,308 2,789 3,310 -Retained Earnings (Cumulative) - - - - 66 - - 215 554 1,101 1,868 2,869 4,o96 5,444 6,258 9,213 -

C. Projected Financial Rate of Return

Financial Rate of Return : 25,2%

Sensitivity TestsInvestment Costs +10% 23.8%Operating Expenses +10% :-4.5%Revenues -10% 22.8%

1 Investment costs and financing in current prices. Revenues and operating expenses in constant 1975 prices. For a discussion see Annex 6 , page 12 50% of investment costs.

Interest rate at 11% p.a.5 In constant 1975 prices

15% of net income after taxes and depreciation, if available -

APPRAISAL OF

A GRAIN STORA3E AND PROCESSING PROJECT

Yhwii ARLAB REPUBLIC

20.000 on ton Port Silo

D. IAvestment Costs and Diabursmnts by Years

Year2 3 4 o Grand Total

'lotaL Fcr.7c. Lotal -o.nc -ol -or.Exc. Totalotal For.E__xc. Total For.Exc.

Detail &gineerin & Superision 22 193Pc. oaLV ' oa 714o114 71 141 7ota4 )jL-or1444 32------------------------------------- US$1ooO - ----- _------__--------- -- _________________-

Detail Engineering & Supervision 222 193 74 44 74 44 74 44 -- 444 325

Job Mobilization & Site Devel. - - ill 100 - - - - - - 111 100

Rec.Hoppers,Conveyor & Elev. - - - - 339 339 168 51 - - 507 390

Storage Structure - _ 1,231 940 - - - 1,231 940

Head Eouse, Equipped - - - - 1,011 903 325 107 - - 1,336 -I,010

Bin Top Gallery, EQuipped - - - - 164 -147 70 8 - - 2 34 155

Auto Scale Packing Equip. - - - - 158 158 - - - - 158 158Power Sub-station an, Disbtris. - - - - 930 930 464 385 - - 1,394 1,315

Water and Sewage - - - - 33 25 - - - - 33 25

60(m2 warehouse - - - - 93 46 - - - - 93 46

Office, Laboratory & Shop -1000m2 - - - - 176 o6 - _- - 176 96

1 Utility Truck, 1 Passenger Auto - - 15 15 - _ _ _ _ _ 15 15

Technical AssistarLce & Training 23 26 74 71 111 111 116 116 105 105 434 429Working Capital - 45 days

receivable - - - - - - - - 80 - 80 -

Expeases during Construction - - 17 - 30 _ 59 - - - 106 -

Total - 1975 Prices 250 215 291 230 4,350 3,73Y 1,276 711 185 105 6,352 5,004Physical Contingency at 10>6 25 22 29 23 435 374 127 71 19 11 635 501

Total Incl. Physical Contingency 275 24-1 320 253 4,785 4,1-13 i,403 732 204 116 6,987 5,505

Price Contingency /3 50 42 74 2,345 1 740 131 4 _234_S I_39_

Total Intl. Price Contingency 327 E 7 .634 10.960 Z 6

(D xLI For the foreign exchange component international inflation rates according to

the Bank's guidelines have been employed. An inflation rate of 20% p.a. hasbeen applied to the local component.

ANNEX9Table4

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

20,000 m ton Port SiloE. Annua" . Oeratijn Emens isate

Basist 1975 Voiwime 100,900 m ton

Unit No.of Rate AmountVariable Expense Units YRls TJf

Port Crane Charge (For ship's Account) Crane hrs. 1,009 59.37 13,312Berth Fees (For Ship's Account) Meter hrs. 83,664 0.16 2,975Stevedoring (For Shipts Account) Man hours 3,072 1.73 3,103

Sub-T(etal for Shipts Aecount 19,390Expense per m ton

Packing and Sewing (For Silo Account) Man hours 11,211 2.31 5,755Longshore Labor (For Silo AccounIt) Man hours 33,633 1.73 12,930Electric Power (For Silo Account) kWh 252,250 o.6 31 613

Sub-Total for Silo AccountExpense per m ton U3$0.52

Grand Total Variable Expense 71,708

Variable Expense per m ton US$0.71

Fixed Expense - Administrative & Financial1/2 Corporate Of-fice Expense (see Annex 7, Table 4) )ho, Ioo1 Silo Superintendent at YRls 2,000/month 5,333- Shift Supervisors " " 1,500/month 12,0001 Laboratory Technician " U 1,000/ ,nnth 2,667I Office Manager-Accountant i ,500/7ontlt 4,000

rAccu Onting Cerks 8" O0/month 4,2671 Secretary-Typist " U 500/monch 1,3331 Stores Clerk " I 500/mTont 1,3'3?6 Guards " " 400/month encn v,h000ffice Supplies & Miso.Office Expense 8,222Insurance on Plant - 1A x U ,S$ ,305,000 63,050Omsurance on 20,000 m ton Inventory - 1% x US$4,560,000 45,600

Fixed Expense - Operating? Dock Conveyor Operators at YTls 500,'month ea h 4,3003 Scale Men " 600/,month " 4,23003 Cleaner Men " " 600/month " 4,300

73 Gallery Men " 6 600/month " 4, uOO3 Bin Discharge Men " i 600/month " 4i,3001 Bag Man " 600o/month " 1,600

Maintenance1 Electrician at 'Mis 1,500/month 4,u0CI Millwright-Machinist i' 1 ,500/Aonth I 4 0001 Sheetmetal Welder " U 1,500/month L6,00-? 3 'dft Maintenance Ae4n 8" 00/month C,ach 6,400Materials, Supplies and Outside Services 37,071

Total Fixed ExDense 275,376

kAJINEX 9.taEle 5

hi&iAiSAL OF

A Gtkl N TO.itGE AJj PiOCESSIiN"G PROJECT

YEi .LiA iA- &1PUBLIC

20,000 m ton Port SiloF. Service Charge Calculation L

USsSilo Variable i-xYpense ,;,,UO m ton at US$ 0.52 137,22

Silo Fixed Exoense 275,376

I4iiipment Depreciation - US$ '5,919,000 at 3 1/3 6 p.a. 493,O0O

Civil Works Depreciation - j3$P 5,041,000 at 2A p.a. 101,000

Interest on lnvT rstment(Opportunity Cost) - US$6,977,000 at 11% 767,470

Debt RP-Tpayment - 50% E-uity - 50% Loan, 11i yr.term 317.1 36

Total 2,091,210

Service Charge Per m ton = US$ 2,091,210 = uS$ 7.92 or US $ 8.oo YRls 3.6.0263,900 m ton

L Based on Volume Year 6 - 2nd Full Operating Year - 263,900 m toD-

ANNITX 9Cable 6

APPRA SAL OF

A GRAIN STORAGE ANJ PROCESSING PROJECT

YE1MEN ARAB REPUBLIC

20,000 m ton Port SiloG. Charges to ExPense - Construction Years

Year2 3 4

Corporate Office1/2 General Manager at us$8,000 4,000 4,000 4,0001/2 Secretary Typist at US$2,133 1,067 1,067 1,0671/2 Controller at US$5,333 2,667 2,667 2,6671/2 Accountant-Construction 1,3324 1,334 1,334

Accounts Payable at US$2,6671/2 Accounting Clerk at US$2,133 - 1,067 1,0671/2 Guard at us$1,067 534 534 5341/2 Operating Supplies and Misc.Expense 44,000 5,000 5,0oo

Hodeidah Silo Expense1 Silo Superintendent at US$5,333 - 5,333 5,3333 Shift Supervisors at US$4,000 each - - 12,0001 Office Manager-Accountant at US$4,000 - 4,000 4,0001 Secretary-Typist at US$1,333 - 1,333 1,3331 Guard at US$1,067 - 1,067 1,06722 Employees (In Plant Training) at

US$44,000 (3 months) - - 11,000Operating Supplies and Misc. Expense 3,000 3,000 9,000

Total 16 602 Li 402 59,402

ANNEX 9

Table 7

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

200O0o m ton Port Silo

H. Savins in Hodeidah Variable Port CostsDae to Silo Construction

YRls/m ton

Ship Discharge Labor Cost - Bulk Grain 6.Op

Filling and Sewing Bags - Bulk Grain 6.00

Anchorage Dues - 2 days at -Rls 0.05/m ton 0.10

Present Average Crane Charge -yitl 59-37/Crane hrs x 2 cranes 24 hrs 4.22

67 m tons

Berth Fee - 166M x 216h x YRIsO.16 0.713000 m ton

Total 17.03

3 US$ 3.78

Rate Source: "Hodeidah Port Tariff", 21 June 1975, The HodeidahPort General Corporation (The Port Authority)

Labor Costs Source: Interviews: (a) Importers, (b) Stevedoringagents, (c) Port Labor Office.

ANNEX 9

APPRAISAL OF Table8

A GRAIN STORAGE AND PROCESSING PROJECT

YEME ARAB REPUBLIC

20,000 i tons Port SiloI . ComDarative Presenz Bulk Grain Ship

Discharge Cost and Freight to Taiz -Hodeidah vs. Mokha Ports

YRl,I'm tons---Hodeidah Mokha

Loading Slings - On ship 6.00 6.ooBagging and Sewing 6.00 7.50Loading Barge - 4.ooUnload Barge and/or Load Trucks 3.00 3.00Barge and Tow Lighter Charge - 20.00Anchorage Charge 0.10 0.50Crane Charge 4.22 -Berth Fee 0.71 -MerchantsI Landing Fee .o 2.00Pilotage 0.24 -Mooring and Unmooring 0.03 -Canal Dues 0.05 -Tug Fees (Mooring and Unmooring) 0.09 0Navigation Dues 0.05 -Net Registered Ton Dues 0.23 -

Total Port Costs - Loaded on Trucks 26.22 43.00

Truck Freight Rate to Taiz 71.00 40.00

.=

Com.parative Port and Inland Freight 97.22 83.00Costs

Premium Ccst for Shipments to Taiz via Xodeidah = LRls 1L.22 = US$3.16/rm ton

Sources: (a) "Houeidah Port Tariff", 21 J,une, 1975, The HodeidahFort General Corporation;

(b) Mission calculations are based upon intarviews withimporters, stevedoririg abents,V the port authorities,the port labor officers, and the domestic landtransportation officials.

May , 1976

APPRAISAL OFA GRAIN STORAGE AND PROCESSING PROJECT

YEMAN ARAB REPUBLIC

20,000 MT Port Silo in HodeidahProposed Preliminary Layout

BERTH IV BERTH V165 m t16m* IEEm~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

APRON APRONCRANE APlN CRANE APO

UNDERGROUND

CONVEYORF

-V CROSS CONVEYOR

\ \ ~~~~~~HOPPERS''_ HEADHOUSE

OPEN STORAGE UPPER CONVEYORGALLERY

_ 2 t v t l o OFFICE~~~~~~~~~~~~~~ FLOUR MILL

E~~~~~~~CL STOAG 44m tE

I mSPACE FOfl ~ ~ ~ ~ ~ ~ SPCEFO

FUUR EXPAUSUOE

OF 0 LOUIMLL

COD S EROAD TO HODEIA

AREA

ANNEX 10Page 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Model: Regional Warehouse (3,000 m ton Capacity)

A. Projected Income Statement

B. Projected Cash Flow Statement

C. Projected Financial Rate of Return

D. Investment Costs

E. Annual Operating Expense

All Regional Warehouses

F. Service Charge Calculation

G. Incremental Working Capital

H. Investment Costs and Disbursements by Year

I. Annual Operating Expenses

May, 1976

ANNEX 10Table 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Model: Regional Warehouse (3,000 m ton Capacity)A. Projected Income Statement

Year1-2 _-30

---US$ 0ooo--

RevenueService Charge /1 1 06

Subtotal -

Operating ExpensesVariable Expenses /2 12Fixed Expenses / 2 22

Sabtotal - 2

Depreciation g - 8Total - 4

Net Income before Taxes - 64Taxes A - 16

Net Income after Taxes _

Memo Item: Net Income afterTaxge incl. Depreciation - 56

L Service charge of US$4.89 (YRls 22.0) per 'm ton or US$ 0.24(YRls 1.10) per 50 kg bag per month of storage. Fordetails see Annex lO. Table 5

For details see Annex 10, Table 475 For details see Annex 10, Table 5

Income tax rate for annual net income of This 37,500 and more is 25%

APPRAISAL OF

A GRAIN STORAGE AND P5CSSI PR=CT

IXENI ARAB RIPUBjC

Model: Regional Warehouis e}3,99 u ton capacity)B. ProJected Gash Flow Slat.eAtt(

Year1 2 3 4 5 6 7 13 9 10 11 12 13 14L 15 1-6-30

Cash Inflow 10- -Realueniie - - 106 106 106 iO6 iO6 i06 iO6 ¶06 106 iO6 io6 106 o6 io6Long TerA Ioan~ 32 238 5 8 - - - - - - - - - - - -

Equity Contribution 32 23 6 8 - - - - - - - - - - -

rnter'eat Duzring Construction A 1 14 -

Subtotal 1Cash Outflow

Operati.ng E2enses - - 34 34 34 34 34 34 34 34 34 34 4 34 3. 3Investments, 64 476 11 16 - - - - - - - - - - - -Taicea - - 5 5 5 5 5 5 5 5 5 5 5 5 5 5Debt Service

Interesat 1 14 25 26 26 24 22 20 18 15 13 10 7 3 - -Princlpa.l - - - J f25 27 2 32 + 34 - -

Subtotal 95 4 -4 7r t

Cash Flow 42 41 22 22 22 22 22 2? 22 22 22 30 6? ?

Depreciation (annual) - - 8 a 8 8 8 8 8 a 8 8 8 8 8 8Legal Reserve (annua) - - 7 7 7 7 7 7 7 7 7 7 7 7 7 7Retained arninga (aznu-l) 27 26 7 7 7 7 7 7 7 7 7 15 52 52

Cash Flow for Pinamial Rate ofReturn (49) (325) 49 45 67 6? 67 67 67 67 6? 67 67 67 6? 67&

C. Projected Financial R.te of Return

Financial Rat, of Return : 16.8%

S"aaitivity TeatInvestment Costa + 10% i 15.2%Cterating Costs lo1% 15.8%

Dvees 10: D141%

ZI Investment costs and fin-aning in current prioea. Revenues and opramting expenaea in constant 197 prioca.Ifor a disausdon see Annex 6 , page 1..1

/2 Service charge of US$J..9 (Ms. 22.0) per -A ton or US3$ 0.24 (YR2Ls 1.10) per 50 kg 'bag per month.3-50% of investment coatsTo be financed by Governmet contribution 0Plua residual value of US$156,000 in year .30.

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

ZEMEN ARAB ;REPUBLIC

Model; Regional Wr se (0,000 m ton Capacity)D. Investmnt Costs

Year ......2 3Grand Th-ta2l

Totl 1r 'o Total lcFZ2---- ---- --------- us$ -- -------- - ------------------

Land ( 6 5a x 1lOrn, at YRls24/m 2 ) 38 -- - - - - 38 -

Eagineering 7 6 7 6 - - - - 14 12Building (1800m2 at Rlas 700m2) - - 280 141 - - - - 280 ia1Electzic Power, Service & Distr. - - 2 1 - - - - 2 1Water & Sewage - _ 4 3 - - - - 4 3Offieo - - 2 2 - - - - 2 2

' abtotal 5 1 -;7Techn} a Assistance and Training g 9 5 10o 10 10 7Increruental Working Capital L - _ 4 - 3 _ _ 7

Total 7T ___ 8 163 7 T 10 10 372 ,3

Physical Contingency (5%) 2 1 1 8 _ - 1 1 18 10Total Incl.Physical Contingency 7 - 3 9 7 -7 11 1

Price Contingency 2 15 2 51 60 4 2 5 1 69Total Inc. Price Contingency 11 __9 11 _6 4 1 2 22

1 Icr details see Annex 10, Table 6.__ based on Bank projected inflation rates for the foreign exchange component and a 20% p.a. inflation rate

for the domestic component.

>un(DX

H Io

ANNEX 10APPR. ISAL OF Table 4

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Model: Regional Warehouse (3,000 m ton Capacity)E. Annual Operating Expense

* - AmountVariable Expense Unit Volume Cost per unit (YRis) US$

Truck Unloading mton 9,000 3 6,000Truck Loading m ton 9,000 3 6,000

Total(Variable Expense per 4m ton US$1.33)

Fixed ExpenseShare Corporate Office (3.6% of total cost) 2,874Share Warehouse Manager (at YRls 2000 p.m., Corporate Office) 889Share 1 Accountant (at YRls 1000 p.m., Corporate Office) 445Share 1 Secretary/Typist (at YRls 500 p.m., Corporate Office) 222Share Corporate Office Rent (75m2 at YRls 90/rm<) 250Share Miscellaneous Operating Supplies and Expenses 1,603

Warehouse Manager (at YRls 880 p.u. L ) 2, 347Warehouse Accounting Clerk(at YRis 680 p.m.) 1,813Warehouse Shipping Clerk (at MRls 680 p.m.) 1,813Amua2L yuuigat0on Cost (35 days at !Ril 10 per day) 78Operating Supplies and Miscelaneous Expenses 2,000Insurance Plant (us$392,400 at 1%) 3,924Insurance Average Inventory (US$399,500 at 1%) 3 995

Total

/j Monthly salary would range between YR1s 800-1000/month depending uponwarehouse sise

APPRAISAL OF ANNEX 10Table 5

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Rezional WarehousesF. Service Charge Calculation L

US$1000Variable Expense (54,000 m tons at US$1.33) 72.0Fixed Expense 125.0Depreciation:

Civil Works- US$2,343,OOO at 2% (Current Prices) 47.0Equipment - US$11,113 at 8 1/3 % (Current Prices) 1.0

Interest on Investment (Opportunity Cost)US$2,520,000 at 11% 277.0

Debt Repayment /3 114.0

Total Annual Service Charge (All Warehouses) 636.0

Total Annual Service Charge (3000 m ton Wareiouse) 106.0Service Charge per m ton per month /2 h4.89 (YRI P?.P.

/1 Based on total volume handled in Year 3 by all regional warehouses,estimated at 54,000 m ton

2 In -and out handlixrg costs per m ton US$1.33 (YRis 6.0) Fixod storagestorage cost per month US $3.56 (YR1s 16,0), based on Zakat,collection once a year and grants-in-aid and import duties beingcollected uniformly during the year.

/3 Based on 50% of investment cost being loan financed at 11% p.a.interest and for all year term.

ANNEX 1OTable 6

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

All Regional WarehousesG. Incremental Working Capital

Year 2US$

2 1/2 % Corporate Office Allocation 5,849

1 Accountant - Construction PPyables 2,667

Rent in Corporate Office, i,500

Misc. Supplies and Operating Expense(Corporate Office) 3,000

' Regional Managers - 6 months 5,867

Misc. Supplies and Operating Expense(Warehouse) 2,000

Total 20,883

APPRAISLU OF

A GRUIN STORGE AID PROCESSING PROJECT

H. All Regial Warhouses Invost,nt Costsand Diibureemnta by Year

1 2 5 Grand TotalTotal Fo rjx Total x Total For.Es total- For.l Total For.Ex Totl For.Ex

198 - ~~- --- ---- - -- - -198 --Land 37,O5Om2 at IELs 24/K2 L, 198 - 198 6Engineering 43 37 43 32 86 69Buildings, 10,800.2 at yELs 700/32 2 - - 1,680 846 1 _ _ _ 1,680 846Electric Power Service & D2istribution - - 11 7 - 11 7Water and Sewerage - - 20 14 - - - _ _ _ 20 14Office Equipment - - 9 9 _ _ _ _ _ _ 9 9Technical Assistance and Training 11 10 52 46. 26 26 36 36 24 24 149 142WorkIng Capital - - 21 - 19 - - - - - 40 -Warehousing Study - 27 mamonths 0 10 1 14 - 20 2

Total at 1975 Prices 1205% Physical Contingency 18 8 97 53 2 1 2 2 1 20 6

Total including Physical Contingency 1. z :z z

Price Contingency 11 25 20 20 17 17 623 293Total including Price Contingency _402 6 2 .; 2

1 Ibb - 65m x 2 llOC; Hodeidah - 65T x llOm; Sana'a - 265m x lOmn; Da'r - 65m x llO; Sada 65m x l20m; Haija 65m x llOmj2 Ibb - 3000m2; Hodeidah - 3000m; Sana'a - 1800 m; Damar - 1200m; Sada - 600m; Hajja - 1200m

- 0 H

APPRAISAL OF ANNEX 10Table 8

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

All Regional WarehousesI. Annual Operating Expenses

AmountVariable Expense Units Volume Cost per unit (YRls) x

Truck Unloading Ei ton 54,000 3 3 '°°°Truck Loading m ton 54,0oo 3 6 ooo

Total

(Variable Expense per m ton = US$1.33)

Fixed Expense21 1/2 % Corporate Office Allocation 17,2431 Warehouse Manager at YEls 2,000/m (Corporate Office) 5,3331 Accountant-Operations Control YRls 1,000/m (Corporate Office) 2,6671 Secretary-Typist YRls 500/m (Corporate Office) 1,333Warehouse Manager's Area - Corporate Office Rent 72mi at YRls 90/m2 1,500Warehouse Manager's Misc. Operating Supplies and Expenses 7,688

3 Regional Warehouse Managers at YRls 1.,000/m 8,0003 Regional Warehouse Managers at YRls 800/m 6,003 Regional Warehouse Accounting Clerks at YRIls 8 00/m 6,4003 Regional Warehouse Accpunting Clerks at IRls 600/m 4,8003 Warehousemen-Shipping dlerks at IRls 800/x 6,4003 Warehousemen-Shipping Clerks at YRls 6 00/m 4,800Annual Day Labor for Fumigation, etc., warehouses

389Operating Supplies and Misc. Expense - Warehouses 5,000Insurance - Plant - US$2,354,113 at 1% 23,,541Insurance - Average Inventory - US$2,397,000 at 1% 23,970

Total 1"25,464

May , 1976

ANNEX 11Page 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Model: Ten-m ton Bakery

A. Projected Income Statement

B. Projected Cash Flow Statement

C.' Projected Financial Rate of Return

D. Investment Costs

E. Estimated Operating Expense

Model: One-m ton Bakery

A. Projected Income Statement

B. Projected Cash Flow Statement

C. Projected Financial Rate of Return

D. Investment Costs

E. Annual Prouduction Cost

Bakery Division

Investment Costs and Disbursements by YearCorporate Office Annual Operating Expense EstimateIncremental Working Capital

One-m ton Bakery Serving Government Feeding Program

Annual Operating ExpenseService Charge Calculation

Three-m ton Bakery Serving Government Feeding Program

Annual Operating ExpenseService Charge Calculation

May , 1976

ANNEX 11APPRAISAL OF Table 1

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Model: 10 m ton BakerYA. Projected Income Statement

Year

--- US$ tooo--

RevenueService Charge / - 537

Subtotal - 37

Operating ExpensesVariable Expenses 2 - 248Fixed Expenses /2 - 50

Subtotal - 29_

Depreciation i3 _ 65Total -

Net Income before Taxes - 174Taxes A - 44

Net Income after Taxes - _30

Memo Item: Net Income afterTaxes including Depreciation - 195

L1 Service charge of US$0.0221 (YRls 0.0995) per loaf of bread. Fordetails see Annex 11 Table 5.

-^/2 For details see Annexli Table 4.75 For details see Annex M1 Table 5.T Income tax rate for annual net income of YRls 37,500 and more is 25%.

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

TEMEN AR* REPUBLIC

Model; 10 m ton BakeryB. Prore`t.d Ch Fow Statement L

Year1 2 1 i 6L 8 I II- a .12t

___________-- -- - USs$000

Coah InlowRevenue - - 537 537 537 537 537 537 537 537 537 537 537 537 537 537Long Term Loan / 95 525 10 - - - - - - - - - - - - -Equity Contribution,& 95 525 10 - - - - - - - - - - - - -Interest during

construction A 4 -Subtotal 194 1___ 2 7 3 7 ± = 3 3 m =

Cash OutflowOperating Expenses - - 298 298 298 298 298 298 298 298 698 298 298 298 298 298Investments 190 1,050 20 - - 36 - - 36 - - 36 - - 326 12Taxes - - 44 44 44 44 44 44 44 44 44 44 44 44 44 44Debt Service

Interest 4& 32& 56 57 53 49 44 39 34 28 21 14 6 - - -Principal - 43 47 5 56 61 66 72 79 86 67 - - -

Subtotal _ 1.082 418 442 442 478 442 442 W 3 w 44 47 t 0 M 3Cash Flow _ _ 95 59 95 5 95 95 *n m E( ) v

Depreciation Fund(Annual)- - 65 65 65 29 65 65 29 65 65 29 65 65 (131) 53Contrib. to Reserves( ") - - 61 30 30 30 30 30 30 30 30 30 57 130 - 130

Cash Flow for FinancialRate of Return /5 (161) (811) 181 195 195 159 195 195 159 195 195 159 195 195 (131) 183

C. Projected Financial Rate of Return

Financial Rate of Return : 18.3%Sensitivity Tests

Investment Costs + 10% : 16.6%Operating Costs + 10% 14-9%Revenues - 10% 12.8%

/I Investment Costs in current prices, operating expenses ancilavenues in constant 1975 prices.For a discussion seeAnnex 6 page 1 .

/2 Long-term loan equal to 50% of Investment Cost/. Equity contribution equal to 50% of Investment Cost 3

To be financed by Government ContributionExpressed in constant 1975 prices

(D

rM P -

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN lRAB REPUBLIC

Model: 10 m ton BakeryD. Investment Costs

Year Grand Total1 23

Total 1 For.Ex Total For.Ex Total For.Ex Total For.Ex-- - - ----------- - ---------

… -…~________US$t 000-…

Land - 2000m2 at YRls 25 11 - - - _ - 11 _Eigineering 20 16 10 8 - - 30 24Mobilization & Site Development 30 27 - - - - 30 27Building (Q5OOm2 at YRls 700) - - 233 114 - - 233 114Equipment installed - - 240 187 - - 240 187Power Distribution System - - 60 56 - - 60 56Water and Sewerage - - 10 8 - 10 8Office, shop, Employee Room, etc. - - 20 20 - - 20 203 Delivery Trucks, 1 Auto 6 6 0 3 6 6

Subtotal 67 79 63 e23 -670 472

Technical Assistance & Training 1 81 77 124 124 13 13 218 214Incremental Working Capital __45-_ 4 - - - 50 -

Total 13 12 772 13 13 93 M

Physical Contingency (5%) 8 6 39 27 1 1 48 _4Total inc. Physical Contingency 171 32 611 z -9E

Price Contingency 34 25 07 6 6 6 _347 200Total inc. Price Contingency 19 _ 1.1,1 743 20 20 __

/1 For details see Annex 8 Table 1T2 For details see Annex n Table 12: Based on Bank projected inflation rates for the foreign exchange component and 20% p.a. inflation

for dc=estic component. 3

AINNEX' 11

APPRlAISAL OF Table 4

A GHAIT STORAGE A.D PROCESSING PIOJECT

ZMNA-RAB REPUBLIC

10 m ton BakeryE. Estimated Operating Expense

US$Variable E:xpense3 Warehouse men - 365 days x 8 hrs x Yias 1.73/hr 3,3681 Miller " it " " " " " 2.31/hr 1,4993 Mixer men it it It it Vt It 2.31/hr 4,4/073 Bakers " It i Vt " It 5.78/hr 11,2513 Rack men It it i f, it t 2.31/hr 4,4971 Janitor it It I it it n IV 1.73//nr 1,123- Truck Drivers it if , , i I? t 3.47/hr 6,755Truck Expenses at US$ 16.60/day each (3) 13,200Fuel - Diesel Oil - 190,092 liters at Ylas 0.5 6/liter 23,6563lectric power - 262,300 ZWhs at YRls o.6/krn 35,040Salt and Yeast at YRls 170 x 3650 m tons flour 137,889

Total Variable Expense 2L7,775(!V ariable &xpense per m ton flour equivalent at

US$ 67.88

Fixed Elxoense - Administrative and Financial1 Bakery Superintendent at Y.Rls 2000/month 5,3331 Office Ilanager-Accountant at YRls 1500/month 4,0001 Accounting, Clerk at ''LRls 800/month 2,1331 Secretary-Typist at Y.Rls 500/month 1,333Insurance - Plant US$622,125 at 1% 6,22l

- Inventory US$136,300 at 1% 1, 368Operating Supplies and iMiscellaneous 3,000Corporate Office Allocation & 11,9141

Fixed Ex-Dense - I.aintenance1 Maintenance man at YPls 1000/month 2,667Materials aLnd Outside Services -12 000

Total g15ixed ;bxense

A See Annex 11, Table 12

AEX 11

APPRAISAL OF Table 5

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB RbP1JBLIC

10 m-ton- BakeryF. Service Charge Calculation

Projected Volume - 66,667 - 186 gram (150 gram flour base) loaves "Kudam"bread daily; serving schools, hospitals, the poor, andspecific GYAR employees.

Assumption - Government will supply whole grain ant/or wheat flour tothe bakery door at no charge to the bakery. Storage andhandling charges by the Warehouse Division will be billeddirectly to the Government.

US$Variable Expense 1/

3,650 m tons of flour equivalent at US$ 67.88 247,775

Fixed Expense 1/A InIstrative, Financial and Maintenance 49,969Depreciationt Civil Works - US$4h5,oo0 at 2% 8,900

Equipment - Us$674,000 at 8 1/3 % 56,167Interest on Investment (Opportunity Cost)

US$1,119,000 at 11% 123,090Principal Repayment - 50% Equity - 50% Loan - 11 year term 50,864

Total Fixed Expense 288 990

Service Charge per loaf = US$536,765 US$0.0221 = YRls 0.1066,667 x 365

Service Charge per m ton of flour equivalent = US$ 147.34

1/ Detailed in Annex 11, Table 4

ANNEX 11Table 6

APPRISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Model: One m ton BakeryA. Projected Income Statement

Year1-2 3Z5--US$'O k

Revenue / _ 233.2Subtotal _ 233.2

Operating ExpensesVariable Expenses 157.3Fixed Expenses /2 9.7

Subtotal - 167.0

Depreciation /3 - 6.2Total - 173.2

Net Income before Taxes - 60.0Taxes &- 15.0

Net Income After Taxes - 45.0

Net Income After Taxes, includingDepreciation 51.2

/ 1 503.7 m ton bread at YRis 1 per 480 grams (YRls 2.08 per kg)2 For details see Annex 1n Table 9

E Civil Works (US$67, 000 at current prices) with 50 years lifetime;equipment (US$58,000 at current prices) with 12 years lifetime

/4 Income tax rate of 25%

APPRAISAL OF

A GRAIN STORAGE AND P1OCESSING PFOJECT

9MEN ARAB RlV LIC

Modell Ons m ton BakeryB. Projected Cash tLow Statement Li

Year

1 2 3 4 5 6 7 a 9 10 11 12 13 14 15

Cash Inflow - ---------- --- - ----- ---------- -----U- ---s$ - -- _----_ -__________

Revenue - - 233.z 233.2 233.2 233.2 233.2 233.2 233.2 233.2 233.2 233.2 233.2 233.2 233.2

Iog-Trer Loan /2 67.6 74.1 - - - - - - - - - X - - -

Equity Contributon n 16.9 18.5 - - . _ _ _ _ _ _ _ _ _

Interest duringConstrLiction A 3.0 9.4 - - - --- - -- ----

Subtotal 102.0 2.2 2 233.2 33 233 332 .2 233.2

Cash OutflowOperating Expenses _ - 167.0 167.0 167.0 167.0 167.0 167.0 167.0 167.0 167.0 167.0 167.0 167.0 167.0

Investments 84.5 92.6 - - - 8.0 - - 8.0 - - 8.0 - - -

Taxes - - 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0

Debt ServiceInterest 3.0 9.4 ,2.8 12.8 10.4 7.9 5.2 2.2 - - - - - -

Principal _ - _ 25.6 28,0 30.5 33.2 24.4 - _ _ _ _

Subtotal i 7 102.0 220. 220.4 220.. 190.0 182.0 190.0 16. 12

Cash Flow - - 3. 12 12.8 42-1 82.8 _.2 51.2 51.2 2 51.2 51.2 51.2

Depreciation Fund (Annual) _ _ 6.2 6.2 6.2 4.8 6.2 6.2 6.2 6.2 6.2 6.2 6.2 6.2 6.2

Contribution to Reserves(Anmual)- - 32.2 6.6 6.6 - 6.6 6.6 37.0 45.0 45.0 37.0 45.0 45.0 45.0

Cash Flow for Financial Rateof Return (71.9) (71.6) 151.2 151.2 151.2 143.2 151.2 151.2 143.8 151.2 151.2 143.2 151.2 151.2 151.2

C. Projected Financial Rate of Return

Financial Rate 'of Return : 26.1%

Sensitivity TestInvestment Costs + 10% : 23.9%Operating Costs + 10% 17.1%Revenues - 10% 14.3%

/I Investment costs in current prices, operating expenses and revenues in constant 1975 prices. For a discussion of details see

Annex 6 page 1. s

Long Term loan equal to 80% of Investment Cost q H

7 Equity contribution equal to 20% of Investment CostTo be financed out of investor's own funds

ANNEX 11Table 8

APPRAISAL OF

A GRAIN STORAGE AND PRDCESSING PROJECT

YEMEN ARAB REPUBLIC

Model: One m ton BakeryD. Investment Costs

Year1 2 Grand Total

Total For.Ex Total For.Ex TRW For.Ex- - - -- - ----

Clvil WorksLand (250m2 at YRls 80m2) 20.0 - - - 20.0 -Engineering y4.1 3.0 4 _ 4.1 3.0Building (250m2 at YR1s800m2) 44.4 21.8 - - 44.4 21.8

Equipment - - 29.8 23.2 29.8 23.2Power - - 2.0 1.9 2.0 1.9.Water & Sewerage - - 2.0 1.6 2.0 1.6Office, Retail Shop, etc. - - 3.4 3.4 3.4 3.41 Utility Truck - - 8.0 8.0 8.0 8.0

Subtotal 62793 1

Incremental Working Capital _ - 230 - 23.0 -

Total 68.5 24.8 68.2 38.1 136.7 62.9

Physical Contingency 5% 3.4 1.2 3.4 1.9 6.8 3.1

Total includingPhysical Contingency 71.9 26.0 O. 66.o= = -~~L= =6 o

ANNEX 11Table 9

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Model: One-m ton BakeryE. Annual Production Cost

Us$

Variable Ingredient Costs365 m tons of Grain and Flour at YRls 68/50 kg bag 110,31112.17 m tons yeast at YRls 5/kg 13,52212.17 m tons Sugar at YRls 3.6/kg 9,7366.08 m tons Salt at YRls 0.14/kg 1898.52 m tons Shortening at YRls 2.25/kg 4,26o

Sub-Total 138,018

Variable ExpenseCustom Milling Whole Grain (2/3 x 365 m tons = 243 1/3 m

tons at YRls 60/m tons 3,2442 Bakers at YRls 14/day each - 365 days 2,2712 Mixers at YRls 14/day each - 365 days 2,2712 Laborers at YRls 10/day each - 365 days 1,6221 Truck Driver at YRls 13/day - 312 days 970Fuel - DieseiOil - 26,070 liters at YRls 0.56/liter 3,244Electricity - 32,850 kWh at YRls o.6/kWh 4,380Truck Expense - 10,000 km at YRls 0.56/km 1,244

Sub-Total 19,246

Total Variable Expense 157,264

Fixed Expense1 Owner-Manager at YRls 1,000/month 2,6672 Retail Clerks at YRls 500/month each 2,667Insurance - Plant (Inflated) US$164,000 at 1% 1,640

Inventory (Inflated) us$46,ooo at 1% 460Operating Supplies, Maintenance and Misc. 2,000Property and Truck Tax 278

Total Fixed Expense 9,712

APPRAISAL OF

A GRAIN STORAGZ AND PROCaSSING PROJECT

ThIUI ARB RIIPUBLI,C

Investment Cot r t by Year

Year- 1 ~ - 2 4 Grand Tot

Total For.Ex. To T_. .or-E o77jt ji, f-.

Two 10. m ton Bakeries2 Parcels Land - 4000m2 at Rla 25 22 - - - 22Engineering 30 24 10 8 10 8 10 - 60 48Mobilization and Site Development - _ 60 54 _- - - 60 54Buildings - 3000 m2 at YPs 700 - - - - 4 6 6 228 4 _ _ _ 466 228Equipment, installed _ _ _ - 320 320 160 54 - - 480 374Power Distribution Systems - - - - 120 112 - _ - - 120 112Water and Sewerage - - - - 20 16 _ - - - 20 16Office, Shop, Employee Roan Equipment - - -4 40 - - - - 40 406 Delivery Trucks, 2 Antos 2 12 - _ 60 60 - - 2

Subtotal M2 122 82 7 23 -_ _ * 340 la

Bakery Loan FundOne 3 m ton Bakery 11 3 165 134 22 8 - - _ _ 198 145Nine 1 m ton Bakeries - - 341 189 341 189 341 189 _ _ 1,023 567Modernization Investment Credit - =- f 3 334 1.000 1.000

Subtotal 11 3 f j 696 r 2 -2,221 1.712

Technical Assistance & Training 55 50 179 172 136 136 146 146 31 .31 547 535Incremental Working Capital - Expense during

Implementation - - 35 - 66 - 84 - -_85Incremental Working Capital - 60 Days supply

of flour 27_ 9 27 9 _P 21Total 116 77 Ti~~~~~~~~~ 911i 1, 901i 1,399 1,1 31 731Contingency -.f- - 3.360~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~WT~T1,735% Physical Contingency 6 56 5 70 8 0 2 2 21 162

Total including Physical Contingency -Z 4 1.220 1. 1220 30Price Contingency 10 7 1 79ll

Total including Price Contingency _2 66 2 i 1 l * 892 1 9

ANNEX 11Table 11

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Corporate Office - Bakery DivisionAimugl 229r!ti Expense Estimate

Allocation of Corporate Expense from Table 4, Annex 7 22,8571 Bakery Division Manager at YRls 2,000/month 5,3332 Bakery Extension Agents at YRls 1,000/month each 5,3331 Bakery Div. Secretary- T ist at YRls 500/month 1,333Bakery Division Rent - 80m' at YRls 90/r 2 1,600Bakery Division Operating Supplies & Misc. Expense 182600

Total 55.o56

Allocations to Activities:

2 Corporate LoanBakeries Fund

US$ US$

Corporate Expense 15,727 7,130Division Manager 2,667 2,666Extension Agents - 5,333Secretary 333 1,000Rent 400 1,200Operating Supplies and Miscellaneous Expense 4,700 13,900

Total 23,827 31229

ANNEX 11Table 12

APPRAISAL OF

A GRAIN STORAGJ AID PROCESSING PROJELCT

YEMEN AAB REPUBLIC

Bakery DivisionIncremental Workinig Capital

Ye ar2 U3 . 1

Corp. Loan Corp. Loan Corp. LoanBak. Fund Bak. Fund Bak. Fund

Corporate Office23.5% General Manager at US$8,000 1,569 711 1,569 711 1,569 71128.5% Secretary-Typist at US$2,133 418 190 418 190 418 19028.5g Controller at US$5,333 1,046 474 1,046 474 1,046 47428.5% Accountant at US$2,667 523 237 523 237 523 237283.5% Accounting Clerk at US$2,133 - - 418 190 418 19028.5% Guard at uS$1,067 209 95 209 95 209 9528.5% Operating aupplies & lisc. Exp. 2,588 1,174 2,930 1,352 2,980 1,3521 Bakery Div. Manager at US$5,333 - - 2,667 2,667 2,667 2,6672 Bakery Extension Agents at

US$2,667 each - 5,333 - 5,333 - 5,3331 Bakery Div. Secretary at US$1,333 - - 333 1,000 333 1,0003 Drivers for expatriates at

US.1,333 each 928 2,113 923 2,118 928 2,118Div. Oper. Supplies & Misc. Expense 2,400 15,100 2,400 15,100 2,400 15,100

Co:porate Bakeries (2)2 Bakery Supts. at US$5,333 - - 10,666 - lo,666 -

2 Office Mgr.-Accountants at US$4000 - - 8,000 - 8,000 -2 Secretary-Typists at US$1,333 - - 2,660 - 2,666 -

34 Employees (In Plant Training) 3 nths - - - - 17,267 -

Ope-. Supplies & Misc. Expense _ - 2,000 - 2,000 -

Total 9,681 25,432 36,817 29,467 54,090 29,1467

AiNNE I 1Table 193

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

1-idtonBakery Serving Government Feeding Program

Annual Operating Expense

US$Variable Expense L

Salt and Yeast at YRls 170 x 36 5m toa Flour 13,789Custom Milling Whole Grain (2/3 x 365 MT - 243 1/3 MT)

at YRls 60tm ton 3,2442 Bakers at YRMs 14/day each - 365 days 2,2712 Mixers at YRls 14/day each - 365 days 2,2712 Laborers at YEls 10/day each - 365 days 1,6221 Truck Driver at YRls 14/day - 365 days 1,136Fuel - Diesel oil - 26,070 liters at YRls 0.56/liter 3,244Electricity - 32,850 kWh at YRls 0.6/kWh 4,380Truck Eppense - 10,000 km at YRis 0.56/km 1,244

Total Variable Expense 33,201

Fixed Expense1 Owner-Manager at YRls 1,000/month 2,6671 Accounting Clerk at YRls 500/month 1,333Insurance - Plant (at Current Prices) US$164,000 at 1% 1,640Insurance - Inventory(at Current Prices)US$10,053 at 1% 100Operating Supplies, Maintenance and Misc. 2,000Property and Truck Tax 278

Total Fixed Expense 8.oi8

Total Operating Expense 41.219

/1 Assumptions: Grain and flour will be furnished to the bakery fromYGGC's stocks at no charge for the commodities. Production will bethe present kudam loaf, basis 150 grams flour per loaf.

ANNEX 11Table 14

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

One m ton Bakery Serving Government Feeding ProgramService Charge Calculation

Projected Volume: 6,667 - 186 gram (150 gram flour base) loaves kudam breaddaily; serving schools, hospitals, the poor and specificcivil servants.

Assumptions: The Government will supply whole grain and/or flour to thebakery from YGGC's local inventory at no charge to the bakery.Storage and handling charges by YGGC Warehouse Division willbe billed directly to Government.

-US$Variable Exvense365 m tonsflour equivalent 33,201

Fixed ExpenseFixed Operating Expense 8,018Depreciation: Civil Works, US$67,000 at 2% 1,340

Equipment, US$58,000 at 8 1/3% 4,833Interest on Investment (Opportunity Cost), US$213,608 at 11% 23,497Principal Repaymet - Eligible Capital US$178,870 at 80% - 10yrs. 14 310

Total Fixed eapese

Service Charge Per Loaf 85.192 US$0.035 -YEs 0.16

Service Charge per m ton US$85199 US$233.42 - YRls 1,050of flour equivalent >365

ANNEX ll1Table 15

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

3-.m ton Bakery Serving Government Feeding Program

Annual Operating Expense

US$

Variable Expense /1Salt and Yeast at YRls 170 x 109 m tons 41,367Custom Milling Whole Grain (2/3 x 1095 - 730 m t gn) gt YRIs 9,7332 Bakers at YRls 14/day each - 365 days 0/m tons 2,2712 Mixers at YRls 14/day each - 365 days 2,2712 Laborers at YRls 10/day each - 365 days 1,6221 Truck Driver at YRls 14/day - 365 days 1,136Fuel - Diesel Oil - 78,210 liters at YRls 0.56/liter 9,732Electricity - 78,840 kWh at YRls 0.6/kWh 10,512Truck Expense - 10,000 km at YRls 0.9/km 2 000

Total Variable Expense ______

Fixed Expense1 Owner-Manager at YRls 1,500/month 4,0001 Accounting Clerk at YRls 500/month 1,333Insurance - Plant (At current Prices) US$255,000 at 1% 2,550

Insurance - Inventory (At current Prices)US$30,159 at 1% 302Operating Supplies, Maintenance and Miscellaneous 5,000Property and Vehicle Tax 885

Total Fixed Expense 14,070

Total Operating Expense 94,714

/1 Assumptions: Grain and flour will be furnished to the bakery from YGGC'sstocks at no charge for the commodities. Production will be thepresent kudam loaf, basis 150 grams flour per loaf.

ANNEX 1 1Table 16

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

3 m ton Bakery Serving Government Feeding Program

Service Charge Calculation

Projected Volume: 20,000 - i86 gram (150 gram flour base) loaves kudambread daily; serving schools, hospitals, the poor andspecific civil servants.

Assumptions: The Government will supply whole-grain and/or flour to thebakery from YGGCts local inventory at no charge to thebakery. Storage and handling charges by the YGGCWarehouse Division will be billed directly to the Government.

Variable Operating Expense

Fixed ExpenseFixed Operating Expense 14,070Depreciation: Civil Works (Current Prices)

US$114,000 at 2% 2,280Equipment (Current Prices)

US$132,000 at 8 1/3 % 11,s000Interest on Investment (Opportunity Cost)

US$333,522 at 11% 36,687Principal Repayment - Eligible Capital US$292,175 at

80% - 10 years 23.374Total Fixed Expense 87,411

Service Charge per loaf - 168,05520,OOO x 365 = US$3.023 - YRls 0.1036

Service Charge per m ton of flour - -- US$153.47 - IRls 691equivalent 1,095

May, 1976

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Time Schedule of Implementation

4------1976 ------------- 1977_-----------44 ------------ 1978-----______> C … ----------- =-71979--…--------…--------------1980…-------------II .III . IV .I . II . III . IV . I . II . III . IV . I . II . III . IV . I .= .II.I

Consulting Appoin- Prepare ReceiveServices tment document- tenders, -------------------------- Supervision ------------------------ Completion Certificates

33mos ation of evaluationbidding & 5 MiOEAdvertise-ment-5mos n.

Award Detailed Engineering ConstructionSilo of Mobilization Guarantee Period 12 mos

Construction Cont- 18 snsContract ract

2ans

Award Silo of Manufacture and Shipping - 16 mosn Installation - Start Guarantee Period - 12 .mosn

Equipment Cont-| 9 moB Up

Contract ract 2 nos

10-MT AwardBakery of Mobilisation and Construction _ Guarantee Period - 12 msO

Construction Cont- 15 mos s

Contract ract2mos

10-MT AwardBakery of Manufacture and Shipping Installation Trials Guarantee Period - 12 mos

Equ4pment Cont- 13 mos 6 mos 2 Mos,

Contract ract2 msan

AwardjWarehouses of Mobilisation and Construction - 17 mos Guarantee Period - 12 mos

Contract Cont-ract2 mos

Bakery Credit Loans to private bakers for kuilding, haabil.itating existing bakeries (3 years)

Field Work (12 msO) ReportWarehouse Survey I Writing

I (6mos)

Nutrition Component Bread Fortification, Nutrition Education and Studies (4 years)

Maay, 1976

ANNEX 13

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Estimated Schedule of IDA Disbursement

US$ million

Bank Fiscal Year Disbursements Cumulative Disbursement Outstanding Balanceand Quarter during Quarter at end of Quarter at end of Quarter

1977I .06 .06 5.14II .10 .16 5.04III .10 .26 4.94IV .20 .46 4.74

1978I .40 .86 4.34II .60 1.46 3.74III .76 2.22 2.98IV .40 2.62 2.58

1979I .40 3.02 2.18II .40 3.42 1.78III .37 3.79 1.41IV .30 4.09 1.11

1980I .29 4.38 .82II .35 4.73 .47III .35 5.08 .12IV .03 5.11 .09

1981I .03 5.14 .06II .03 5.17 .03III .03 5.20

May, 1976

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN APAB REPUBLIC

ACF Project Cash Flow Statement

Year

]7 16 21 1980 197 1 2 192 3 1962 a§ j 1 987 1988 2 19 19 90 1991 2 199 1994 2 -11992-------------------------------------------------_ - -------------- - US O 00 ---- ------- ---- ----------------------

Sources of FundsLoan from Government /1 409 2,459 5,156 2,690 486 - - - - - -

Contribution from Governmentto YGGC Equity 400 1,583 4,336 1,765 414 - - - - - - - - - - _ _ _

ACF Technical Assistance Loan - 157 129 143 121 - - - - - -Grant from Government for

Nutrition Component - 179 286 188 258 - - - - - - - -Tnterest Tncomne 12

ntfrom YGGC 18 107 373 640 723 735 679 620 548 471 387 292 187 71

- from Private Bakers 40 117 194 234 222 200 164 124 79 38 11 - - _ _ _ -_ _

Repayment of Loans /3- by YoGG - - - - _ 622 690 766 850 944 1,047 1,163 1,291 794 - _ - _ - _ _

-by Private Bakers - - - - 122 251 400 445 4 465 292 127 - -

Total Sources 827 5 10.397 3 I 1,995 1959 T2674 1,59 ,

Use of FurdosLoan Disbursement A_ to YGGC (Silo, Warehouses

Gov't Bakeries) 399 1,Bj3 4,336 1,800 486- to Private takers (80% of

Investment Cost) 10 876 820 890 -Equity to YGGC 400 1,583 4,336 1,7r65 414 - - - - - - - - - _ - - _ - - _

ACF Technical Assistance - 157 129 143 121

Grant for Nutrition Comp, - 179 286 188 258

Interest Payment to Gov't L4 8 66 218 371 425 431 448 448 424 398 372 344 315 286 255 222 189 154 u8 80 41

Interest Payment to Gov'tfor Technical Assistance4 - 3 9 15 19 22 - - - - - - - - - - - - - - -

Loan Repayment to Gov't -- - - - - 612 636 663 688 716 745 774 806 838 871 907 942 980 1,022

Teahniesl Assistance Loan,aelayment to Gov't -550 - - - - - - - -

Administrative EFpensesa/ 8 62 106 106 io6 106 106 1o6 85 85 64 64 42 42 21 - - - -

Write Off for bad debts - - - - 12 37 54 60 66 66 49 36 26 _ 16

Total Uses E 92 4509 10,240 5,2=7 1,841 1a i6 2 1,22 1,211 1 212 17 1:1Z6 79399 1 082 1 1 ,OtI o 100 1 2

Annual Surplus (Deficit) 2 16 157 342 517 684 1,361 769 805 747 591 433 350 (253)(1,082)(1,060)(1,o6o)(1,06l)(l,060)(1,060)(1,062)Income on CumulativeSurplus (9) - - 2 i4 48 9 69 306 404 513 612 720 824 0 9 1 ) 98 i) 919 950 940

Net Cash Flow 2 -1v 159 5 565 783153 1075 1,209 1,260 120 1,5 4 5 8p (11 (1)(122)

Cumu,lative Net Cash Flow 2 13 177 533 1,098, 1 , 3 9 5,695 6.955 , 9311 10, 511,12 11,071 10.93 10,98 10,816 10, 10 io$3

Amounts to 50% investment costs of YGGC investments and 80% of private bakers' investments

2 ,% per annum on amount oatstandi.g7, Baied on YG3C cash flow and private bakery modelIT 4% per annum on amoImt outstanding. ACF's spread of 5% covers: 2.8% administrative costs, 0.6% risk allowance and 1.6% equity build up

Ir. ]4 equal annuities after uiy jesrs' grasst i:'r detailo see Annex 4, Table 4

May, 1976

ANNEX 15Page 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

General Terms of Reference for Engineering Consultants

A. General Scope of Work

The Government of the Yemen Arab Republic will invite proposals forgervices from qualified consulting firms for preparation of tender documentsinvolving: (a) preliminary design and functional specifications for the con-*truction of a silo on turn key basis, and (b) tender documents involvingdetailed design and technical specifications for the construction of sixwarehouses and two 10-m ton bakeries. Supervision requirements during con-struction would, be to monitor the turn key construction of the silo and toprovide full supervision for the construction of the warehouses and the bak-eries. Details of the services required are provided in Section B, entitledGeneral Duties of the Consultants.

Services for the Silo Construction on Turn Key Basis

2. The project, to be administered under a Government-owned, semi-autonomous enterprise, called the Yemen General Grain Corporation, consistsof a 20,000 m ton modern port silo in YAR's principal port, Hodeidah, with aship unloading facility of 400 m tons/hour rated capacity and not less than200 m tons/hour average operating capacity and an operational bagging capa-city of not less than 200 m tons per hour.

3. The silo would be sited behind the apron of the future berth No. 5of the port. It is expected that the construction of berth No. 4 would becompleted by the end of 1976 or early 1977 and the proposed silo would haveits ship unloading conveyor located on berth No. 4. Bulk grain will be dis-charged with clam shell buckets attached to two general type portal cranes,one of I^Q m ton and the other of 5 m ton lifting capacities. Cranes withclam shell buckets will be provided on completion of berth No. 4. Hopperswould receive the grain and feed it to the collecting conveyor which wouldrun underground along the apron of berth No. 4. A cross conveyor woulddeliver the grain into the head house of the silo. The silo would serveprimarily as a terminal transfer facility. The bins and headhouse would beconstructed of RCC in slipform. The number of bins vis-a-vis the diameter ofindividual bins should be decided on the basis of economy in construction aswell as handling and storage requirements. Each ship usually arrives with asingle grade of wheat. The silo would have an office, laboratory, perimeterfencing, guard posts, water supply,. sewerage and electricity.

ANNEX 15Page 2

Detailed Engineering Services for Warehouses and Bakeries

4. Warehouses: Six regional flat warehouses with a total bagged grainstorage capacity of 18,000 m tons would be constructed in Hodeidah (5,000 m.

tons), Ibb (5,000 m tons), Damar (2,000 m tons), Saada (1,000 m tons), Sana'a(3,000 m tons) and Hajja (2,000 m tons). These would be general-purpose typeflat floor warehouses expected to have concrete frame and floor, concreteblock curtain walls and either prefabricated wood or steel roof structure.The general design should allow fumigation to be carried out. The use oflocal materials should be encouraged. Warehouses at each location would havewater supply, electricity and a small office with toilet facilities.

5. Bakeries: The Government bakeries would have a total capacity ofabout 20 m ton flour per day, and be located in Sana'a and Taiz. The two 10m ton per day bakeries, one at Sana'a and one at Taiz, will have small whole-grain grinding mills attached to them in addition to storage space for atleast three days' requirement of grain and flour.

6. The bakeries would essentially have batch type operations and wouldbe equipped with mechanical dough mixers, proving cabinets, batch-type ovensand other necessary equipment for easy handling and movement of stock inprocess. It is intended to bake both European-type loaves as well as localvarieties requiring different mixes, fermentation and baking procedures.

7. Each bakery would have a small office. Utilities such as sewerage,water supply and electricity would be provided.

8. The foregoing descriptions of the project components are indicativeof the general requirements. Fuller details for design are to be agreed uponin consultation with the Government of the YAR.

B. General Duties of the Consultants

Tender Documentation and Evaluation Phase

9. Services required for the Silo

(a) Obtain field information on topography of the site, sub-soilconditions, availability and location of utilities and com-munication facilities, and determine their requirements forthe silo.

(b) Prepare site plan showing location and orientation of silo inrelation to its surroundings, indicating location of conveyorsfor ship unloading, the head house, bagging center, truck move-ment yard, perimeter fencing, guard posts, office, cafeteria,electrical substations and motor control centers for approvalby YGGC.

ANNEX 15Page 3

(c) Prepare a grain flow diagram and describe functional requirementsfor civil, mechanical, electrical and other works.

(d) Prepare functional specifications for civil, mechanical andelectrical materials, equipment and works (detailed design bycontractor would be subject to approval of consultants).

(e) Prepare general specifications for civil, mechanical andelectrical materials, equipment and work.

(f) Prepare list of workshop machinery, laboratory equipment,spare parts, to be supplied under the contract, and theirgeneral specifications.

(g) Prepare tender documents, including forms for tender, bidbond, performance bond and other guarantees.

(h) Prepare contractors qualifications questionnaire.

(i) Prepare all of the above documents in draft form, andsubmit them to the Government of YAR for review and, onapproval, print sufficient copies for issue to the intend-ing bidders.

(j) Advertise the invitation to international tender, in accord-ance with IDA guidelines.

(k) On receipt of the tenders, analyze, evaluate and make recom-mendation to YGGC for award in accordance with IDA guidelines.

(1) Advise and assist YGGC in all legal and technical issues in con-nection with the tenders.

10. Warehouses and Bakery Construction

(a) Obtain field information concerning topography of site, sub-soil conditions, availability and locations of utilities andcommunication facilities and determine the requirements ofthese for the warehouse and bakery units.

(b) Prepare site plans showing location and orientation of theseunits on their respective sites indicating the location of ancil-liary facilities, approach roads, electricity and sewerage systems.

(c) Prepare plan, elevation, and sectional drawings and details ofstructural design, electrical and sewerage systems.

(d) Prepare technical specifications for all civil, electrical andsanitary works for the units.

ANNEX 15Page 4

(e) Prepare line drawings of machinery layout for bakeries includingthose for the whole-wheat flour mills.

(f) Prepare technical specifications and a list of all bakery equip-ment, including requirements for the whole-wheat flour mills.

(g) Prepare list of spare parts for all equipment.

(h) Prepare questionnaire for contractors' qualifications.

(i) Prepare tender documents, including forms for tender, bidbond, performance bond, and other guarantees.

(j) Prepare general conditions and special conditions of contract.

(k) Prepare draft copy of the foregoing documents and submit themto the Government of YAR for approval and, upon approval, printthem for issue to the intending bidders.

(1) Advertise invitation to tender for the civil works for thewarehouses and the bakeries in the Yemen and for the supplyand installation of the bakery equipment according to IDAguidelines.

(m) Upon receipt of the tenders analyze, evaluate and recommend awardfor the Government of YAR in accordance with IDA guidelines.

(n) Advise and assist the Government of YAP, on all legal and tech-nical issueg in connection with the tenders.

Construction Supervision Phase

11. Silo

(a) Check and approve contractor's design of civil work structuresand mechanical equipment layout and installation drawings.

(b) Provide engineering inspectors to check construction standardsand adherence to agreed design and specifications.

(c) Check and approve contractor's periodical progress paymentclaims.

(d) Check trial runs and prepare itemized list of deficienciesfor rectification of any deficiencies, and issue completioncertificate upon completion of the works.

(e) Check operation and performance during guarantee period.

ANNEX 15Page 5

(f) Advise and assist the Government in adjusting any extraclaim from the contractor should any variation to the worksbecome necessary.

12. Warehouse and Bakeries

(a) Provide expatriate and local inspectors for supervision ofthe construction, quality of materials, supplies and construc-tion standards.

(b) Guide and assist the Yemeni contractors in following throughthe construction schedule.

(c) Check and approve contractors progress and final payments (thecontracts would be on lump sum basis and not on unit price basis).

(d) Deal with any extra claim from the contractor and issue variationorder when necessary in consultation with the Government.

(e) Issue completion certificate.

(f) Provide 'as built' drawings.

13. Bakery Equipment

(a) Provide inspection from time to time for quality and quantityof equipment supplied and installed.

(b) Inspect trial runs.

(c) Check and approve payment of contractors bills. (It is ex-pected that the bulk of the payment would be through letterof credit against shipment and the remaining payment to bemade after installation.)

(d) Advise and assist the Government in any matter of claims orvariation to the contract.

May 1976'

ANNEX 16Page 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Draft Terms of Reference - Warehouse Study

I. Objectives and Existing Conditions

1.01 The Government of the Yemen Arab Republic, represented by itsMinister of Supply, invites qualified contractors to bid for a contract tosupply services and materials required to produce a grain storage study,covering the investment needs for a cereal grain and cereal product storagesystem in YAR as specified below.

Objectives

1.02 The study should present an investment program for the necessaryphysical grain storage facilities, including transportation, to be locatedand designed on the basis of an integrated transport and storage program.Taking into account comparative production advantages and projected produc-tion and demand by region, the capacity and quality of existing facilities,costs and benefits of alternative storage systems, foreign exchange scarcityand management and administrative constraints in YAR, the proposed facilitiesshould be capable of being integrated with the present storage and processingfacilities, to provide a complete storage system that would minimize trans-port, handling, storage, and marketing costs as well as storage losses dueto insects, rodents and climate conditions.

1.03 The study will:

(a) analyze comparative advantage of grain production by regionin YAR and project production of and demand for grain byregion up to 1990;

(b) carry out an economic and financial analysis of alternativestorage systems and determine the optimal system, includingin particular, location, number and size of transport andstorage facilities;

(c) prepare feasibility studies for the proposed physical invest-ments. The feasibility studies would include cost estimatesand technical, economic and financial analysis in sufficientdetail to enable the appraisal of the proposed project forfinancing by IDA.

ANNEX 16Page 2

1.04 The draft final report is to be completed within five months ofinception and the final report within two months of receipt of written com-ments from the Government and IDA.

7.

Existing Conditions

1.05 Few reliable data are available with respect to cereal production,cereal imports and grants, commercial movements, end uses, and the Governmentvolume participation. Much of the data needed does not exist in any collectedform. The study will have to collect data from original sources, locatedthroughout the country, in order to verify published data and produce data notpresently collected.

1.06 There are no collected data available with respect to grain storagespace nationally; its capacity, its condition, its ownership, its multipleuses, or its adequacy. Such data have to be collected at the source through-out the nation.

1.07 Most original source data and most of the interrogation of personswho may contribute to source data, will be in the Arabic language. Interpre-tation and translation of Arabic into English will be a requisite to satis-factory completion of the contract.

II. Specific Tasks

The tasks for the consultants are as follows:

2.01 To outline and recommend the adoption of a complete storage and dis-tribution system, including organizational structure, accounting systems andpersonnel requirements, to assure the efficient operation of the proposedfacilities. This includes recommending the type, kind and location of stor-age, handling and transport facilities required for the foreseeable future (upto 1990). The capacity and location of additional storage facilities of alltypes (terminal silos, subterminal silos, gathering/distribution silos or flatstorage units) should be determined through the application of appropriatesystem analysis techniques (linear programming, inventory models, etc.) to in-sure that the new facilities, integrated with the existing facilities, willprovide a complete system with minimized capital, operating and transportcosts. The analysis should contain the feasibility of installing bulk handl-ing capability at all levels of storage and a program for conversion to bulktransport of foodgrains.

2.02 When proposing the construction of storage and handling facilities,to perform the following in order to enable a consulting engineering firm toprepare detailed construction plans and specifications for awarding construc-tion contracts on a competitive basis:

ANNEX 16Page 3

(a) determine the types of storage and handling facilities tobe developed;

(b) prepare definitive plans for each facility prototype, coveringequipment, flow diagrams, layout and preliminary design plans(these should be sufficiently comprehensive to establish de-tailed design and construction criteria); and

(c) select the types of materials for structures (e.g., concrete,steel) and the kind and capacity of equipment needed.

2.03 To make realistic estimates (divided into foreign exchange and localcurrency) of total capital costs, based on current labor, building and equip-ment costs; and to determine the operation and maintenance cost of each facil-ity, based on personnel required for efficient operation and furnish a de-tailed time schedule (quarterly basis) for executing the recommended program.

2.04 To describe and evaluate existing storage facilities including thoseunder construction or in the planning stage, with the view to recommending me-chanical, structural and operational changes, and their relevant cost esti-mates. The evaluation should include an assessment of average grain lossesunder present conditions and their causes.

2.05 To review all available reports and provide the necessary additionaldata and analysis in tabular form where appropriate on the following:

(a) historical production of each grain by region;

(b) production projections for each grain by region (up to 1990),and factors responsible for production increases, with anevaluation of their direct influence;

(c) time of the year and amount of grain harvested;

(d) present and projected uses (by human consumption and otheruses) made of cereal crops grown, by type of cereal, cerealcommodities and by area, separately for urban and rural areas.Consumption projections should spell out basic assumptions,such as population growth, migration pattern and income andprice elasticities;

(e) the commercialization of the domestic cereals crops by commodityand by area. These data shall include types of merchants in-volved, where the commodities reach the consumers, and typicalprice data from the farm gate to the consumer;

(f) present and projected future zakat tax collection by the Gov-ernment from cereal grains (up to 1990), including:

ANNEX 16Page 4

(i) how much is collected in cash,(ii) how much is collected in kind,(iii) how are the receipts used,(iv) where are the receipts stored,(v) where are the receipts used;

(g) present and projected volume of cereal grains and grain inter-mediates commercially imported into the YAR (up to 1990), in-cluding:

(i) the volume imported, by kind,(ii) the source of imports and prices,

(iii) the importer,(iv) the phasing of imports over the year,(v) where it is stored and used,(vi) who uses it,(vii) how it is used.

(h) present and projected quantities of cereal grains and intermediategrain products acquired by the Government resulting from the col-lection of customs duties (up to 1990), including:

(i) volume of commodities acquired, by kind,(ii) where the receipts are used,(iii) how the commodities are used.

(i) present and projected quantities of cereal grains and intermediategrain products acquired by the Government as Grants-in-Aid (upto 1990), including:

(i) volume of commodities, by kind.(ii) where the receipts are stored.

(iii) how the commodities are used.

(j) existing storage space available for cereal grains and cerealintermediates, throughout the YAR, including:

(i) Breakdown by ownership, i.e.:

a. Governmentb. Merchantsc. Processorsd. Investor Rentals

(ii) Breakdown by storage capacity, by location, condition forsound storage of foodstuffs, and by type of structure,

(iii) Assessment of rental space availabilty by area, and itsrental price,

ANNEX 16Page 5

(iv) Assessment of storage space quality:

a. suitable for the storage of foodstuffs,b. amenable to improvement to suitable,c. unsuitable, should be replaced.

(k) existing and planned transport capacities, transport costsbetween major production and consumption areas and improve-ments needed; and

(1) projected net food balance for each production zone and thenation as a whole, for 1980, 1985 and 1990.

2.06 To present a summary chart oL the flow pattern of the Government'scereal commodities.

2.07 To present a summary chart of and detailed data on recommended ad-ditions to the Government's storage capacity resulting from the study. Thiswill include (a) determining the size, type, kind and location of individualgrain storage and handling facilities recommended; and (b) describing theanalysis model used to define the food grain storage system which would mini-mize capital, operating and transport costs.

2.08 To review existing legislation or decrees governing the power andresponsibilities of the responsible Government agencies as well as the privatesector in grain storage.

2.09 To review the following areas and prepare recommendations to be im-plemented under the project:

(a) infestation control at all levels of storage;

(b) grain grading systems and standards to allow the comminglingof grains;

(c) optimal inventory control, including import scheduling anddomestic movement scheduling.

2.10 To propose organization and operating procedures of the recommendedsystem;'

(a) A review and analysis of the present organization and operation;

(b) Recommendations for the proper overall organizational structurefocusing on assigning major areas of responsibilities includingan automated inventory control system to the Yemen General GrainCorporation to carry out the assigned functions. Degrees ofpolicy definition and decision-making to be prescribed for eachlevel of the organization;

ANNEX 16Page 6

(c) The feasibility of an automated information system for the neworganization including:

(i) the required report (output) outlines, indicating fre-quency and purpose;

(ii) the inventory control personnel requirements in numberand qualifications;

(iii) the basic flow charts of the proposed information processing;

(iv) the capability of present and future communication facili-ties in YAR to provide a centralized system in Sana'a link-ing together all silos, major warehouses and provincialcapitals;

(v) the general hardware system, indicating the type and locationof equipment;

(vi) a schedule in months for the development and implementativnof the program; and

(vii) the total systems costs - for installation and operation;

(d) The recommended systems':

(i) personnel requirements and classification;

(ii) training program and cost of training program;

(iii) operating costs of recommended system, including workingcapital requirements and individual cost items (electricity,labor, insurance, etc.);

(e) Breakdown analysis for each prototype installation, with allrelevant costs and revenues; and

(f) Estimates of expected average savings in costs of handling andstoring each ton of grain as a result of the recommended con-struction program.

2.11 To assess the benefits to the Nation:

(a) Internal (economic) rates of return on investments

(i) for each stage;(ii) for each prototype installation;

(b) Types of primary economic benefits and their quantification

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(i) decreased losses from insects and rodents; moisture andother climatic conditions; inadequate handling, trans-port and losses from inadequate storage;

(ii) other primary benefits;

(c) Improved diets as a result of developing a long-range plan forinventory management of grains;

(d) Contribution to gross domestic product (GDP);

(e) Contribution to employment;

(f) Contribution to balance of payments;

(g) Number of farmers benefitting from the system, by farm size grouping;

(h) Number of consumer families benefitting from the system, by incomeclass.

2.12 To prepare a detailed report encompassing the above required data andany other relevant information acquired as a result of the work.

(a) 10 copies of a preliminary report shall be presented to theGovernment in the English language;

(b) Within thirty (30) days after receipt of written comments fromthe Government and IDA the contractor shall present 40 copiesof a final correctd report to the Government in the Englishlanguage.

2.13 To prepare throughout the course of the study for the Government amonthly progress report in sufficient detail to assess the study's progress.

2.14 At all times in pursuance of the defined work, the contractor shallbe required to relate the work, and the results of the work, to the attainmentof the stated objectives. It shall be his general duty to provide definitivedata, from which the Government can confidently proceed with construction andoperating plans to manage its cereal inventories, and at a later date, expandits intervention in cereals marketing to include an effective price and sup-ply stabilization program. If, at any time in the course of the work, it be-comes apparent to the contractor that additional work is required to attainthe goals intended, or that the scope of work required cannot be reasonablycompleted it shall be his duty to immediately convey such information to theGovernment.

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III. Consultant Staff Required for Preparation of Study

3.01 It is estimated that approximately 20 man-months would be requiredto complete the study outlined above. The draft study is desired within fivemonths of the beginning of the task and the complete final report two monthsafter receipt of written comments from the Government and IDA.

3.02 Preparation of the study will require the following expertise:

(a) Agricultural Economist, trained and experience in:

(i) analysis and organization of a grain storage awld distri-bution system in a country of small, private farmers;

(ii) analysis and projection of grain production and consumption;

(iii) economic evaluation of benefits of improved food grainstorage and distribution systems.

(b) Distribution Systems Analyst, trained and experienced in designinginventory control systems and applying operations research tech-niques such as linear programming to large systems storing anddistributing grain or similar commodities, for the purpose ofoptimally determining the size and location of additional facil-ities.

(c) Grain Storage Engineer and Operations Manager, an individual withexperience in engineering, including design, drafting and costestimating, and in managing grain storage and handling facilities.Experienced also in training programs and maintenance systems aswell as in estimating grain storage losses due to insects, rodentsand climatic conditions.

(d) Transportation Economist/Engineer, technical and economicexpertise in transportation to perform the analysis of theeconomic distribution of food grains by road transport.

3.03 The entire group of experts would not be employed full time through-out the course of the study, but only engaged for the time required to fulfillthe specific tasks relating to their specialty. However, it is envisaged thatthe agricultural economist would be engaged full time, as he would serve asthe director of the study. -

May 1976

ANNEX 17Page 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Draft Terms of Reference - Nutrition Study

I. Objectives

1.01 The Government of the Yemen Arab Republic (YAR) invites qualifiedconsultants to bid for a contract to supply services and materials required toproduce a nutrition study that will include (a) a survey of nutrition status;(b) an analysis of the causes of malnutrition in the YAR; (c) ideutificationand comparison of alternative interventions; and (d) preparation of a nationalnutrition plan, including suggested options for the Government to consider indealing with the problem.

1.02 The nutrition status survey will include a detailed study of thenutrient deficiencies of a representative sample of the YAR population. Thesample would include members of the target group to be reached by the breadproduced and fortified in facilities financed by the project, to determine theoptimal fortificant mix tailored to meet the specific deficiencies of thebread recipients. The survey will also examine food consumption patterns,family budget expenditures and available information on agricultural, econo-mic, health and other policies and practices which affect the nutritionalstatus. Based on the data collected by the survey an analysis will be made ofthe determinants of malnutrition in YAR, focussing on those socio-economicfactors that can be changed to improve the nutritional status. Alternativeintervention programs will be analysed and a national nutrition plan will beproposed to the Government of YAR.

II. Specific Tasks

2.01 Survey of Project's Target Group. The target groups for breaddistribution will be about 30,000 school children, 14,000 hospital patientsand 23,000 persons from very poor families. The survey will be divided intothree parts:

(a) School Children

(i) The sample selected will be of random clusters, stratifiedto include all ages attending school, all differing-socio-economic levels and covering the main ecological areas of

ANNEX 17Page 2

Yemen. About 1,500 children should provide a representativesample, but numbers should be adjusted so as to provide 95%confidence in the statistical results.

(2) If there is seasonal variation in food intake, which is like-ly in the highlands where there is only one rain-fed crop peryear, a repeat survey to determine the effect of seasonalvariation should be carried out.

(3) The anthropometric data to be gathered would include: age,weight, height and arm circumference.

(4) If it should be feasible to take blood samples, biochemicaldeterminations of hemoglobin, serum albumin and a sub-sample of serum Vitamin A should be taken.

(5) Data on clinical signs of Vitamin A, C and D deficiencieswould be noted, together with any concurrent diseases, in-cluding parasites, if possible.

(6) Sociological data on father and mother, address, siblingsand parents occupation and education.

(b) Hospital Patients

Data collection will be confined to study of the records, kept atthe hospitals. Details required would include:

(1) Specific mortality rates from malnutrition, diarrhoea andinfectious diseases by age and sex.

(2) Infant mortality rate.

(3) Mortality rate for children 12-60 months of age.

(4) Mortality rate of cases admitted suffering from protein/calorie malnutrition.

(5) Morbidity rates for cases diagnosed primarily as mal-nutrition and its nature, and if possible, cases in whichmalnutrition was a contributing factor.

(6) Details of the diets of hospitals would be analyzed anddietary education, if any.

(c) Members of the poorest families

The Government has not yet determined how the families would be se-lected, nor how long each would continue to be provided with fortified bread.

ANNEX 17Page 3

Depending on selection and duration, a sampling frame should be devised tocover the beneficiaries. The survey data should be confined to the vulnerablegroups - children under three years, pregnant and lactating women. The datacollected should include:

(1) Number, ages and sex of family group; occupation of head offamily and others wotking; whether urban, peri-urban orrural; foods grown; foods purchased; cooking facilities;source of water; domestic animals and milk supply.

(2) Details of breast feeding; when started; duration and rea-sons for any variation; age at which supplements introduced;types of supplement and methods of preparation; methods offeeding supplement; prohibition during lactation; manner inwhich breast feeding is stopped; types of food providedafter weaning; any prohibition regarding foods provided.

(3) Anthropometric data should include: age, weight, height orlength, arm, chest and head circumferences. If possible,a blood sample should be taken for haemoglobin and serumalbumin. Clinical examination for deficiency of VitaminA, C and D. tor preghant and lactating women data shouldbe obtained if possible, on weight gain during pregnancy;the weight for hight ratio, the history of previous preg-nancies and of previous babies; haemoglobin and serumalbumen; and clinical signs of any other relevant problems.

2.02 National Food and Nutrition Survey. Prior to data collection areview of all available studies and other information (from primary andsecondary sources) will be made; in particular the activities of WHO, UNDP,FAO and other multilateral as well as bilateral agencies in the nutrition/health sector will be reviewed. All information will be classified by geo-graphical regions and urban and rural communities. DTata to be collected willinclude:

(1) Data relating to food production inputs: total area ofland, arable and irrigative areas, area currently underproduction, area for grazing, land ownership and govern-ment policies relating to land and its use. Prices andquantities of purchased inputs (fertilizer, chemicals,etc.), labour utilised, labour productivity and wages,capital investment; agricultural machinery, water sup-plies; credit availability, interet rates and maturities;government policies regarding agriculture, food programsand budgetary expenditure.

(.2) Data relating to food output: yield per ha, total quan-tities produced, nutrient c'ontent of each crop and total

ANNEX 17Page 4

quantity of nutrients. Numbers and types of animals, pro-duction of livestock including eggs and milk, total quantityof nutrients supplied, input of feed. Total fishing catchby species, quantity of nutrients. Losses due to vermin,pilferage, infestation and spoilage. Exports and importsby product; wholesale prices and costs, price fluctuationsand return to farmers.

(3) Data relating to food processing and distribution: thenumer, size and type of food processing plants, the quan-tity of processed food produced, the nutrient value per unitand the potential capacity of the plants; cost of produc-tion, number of items produced, distance from markets andmeans of distribution. Communication facilities, roads,camel trails and donkey tracks; estimated transport costs;number, location and capacity of storage facilities andtheir utiliztion costs. Numbers of retailers and whole-salers, prices of food products, profit margins if avail-able, variety of foods and marketing methods. Details ofany food distribution programs by government, internationalor voluntary agencies, the population reached, the fooddelivered and, if possible, evaluated results of the program.

(4) Demographic information: details of population by age andsex; the population distribution, urban, rural, nomadic andmigratory; vital statistics of births, deaths, growth rate,infant mortality, 1-4 mortality, fertility rate and lifeexpectation. .

(5) Data on consumption and expenditures: stratified by region,income, age, occupation and family size. Degree of monetizedincome. Expenditure other than on food. Food habits, pat-terns and beliefs; food preferences within categories andbetween categories; variety and quantity of food consumed;seasonal variations annually and over a period of years;proneness to natural disasters.

(6) Data on health: type, extent and, if known, effectivenessof services available through government or private programs;traditional medicine as well as modern practice; nutritionalstatus and nutrition problems, their incidence, severity, andlocality, who affected and how to be reached; immunizationprogram; causes of morbidity and mortality; housing, sanita-tion, clean water, personal and environmental hygiene; taboosaffecting nutrition, such as protection of children from sun(rickets).

(7) Information on related current activities: likely communityreaction, governmental machinery for coordination and imple-mentation, available trained manpower and training require-ments, scientific and institutional support and an assessment

ANNEX 17Page 5

of the Government's priorities in the nutrition sector andavailability of resources for a national food and nutritionprogram.

2.03 Nutrition Plan Development. Based on the data collected, analysiswill be made of the determinants of malnutrition in YAR. Although attentionwill be given to the most proximate causes of malnutrition from a medicalpoint of view (e.g. insufficient nutrient intake, poor utilization of nutri-ents from the food ingested, and the heightened nutritional needs caused bynutrition-related illnesses), primary attention will be directd to thosesocioeconomic factors directly influencing diet and food utiliztion that canpossibly be changed to improve nutritional status. Here analysis will be madeof distribution shortcomings, price relationships, food waste, and errors ofconsumer behaviour (the study will not examine inadequacy of national re-sources and the entire constellation of macro-economic causes that constituteunderdevelopment).

2.04 Possible intervention programs will be formulated and analyzed andpreliminary cost effectiveness studies conducted. From this, a proposednational nutrition plan would be developed, suggesting to the Governmentalternative ways of addressing nutritional needs of the society, includingcost estimatvs for the proposed alternatives.

III. Manpower Required

3.01 Time. An estimated 15 man-months of expert consultant services willbe required to complete the study outliied above. The design of the surveyshould be accomplished in one man-month to be followed by the survey. Whilethe survey itself should cover one full year to take into account seasonalvariability, the total consultant services needed (including design of thesurvey), wil'l be six man-months, of which a nutrition survey expert should beavailable for four man-months and a socio-economic analyst for two man-months.The experts will be made available during the course of the survey for ade-quate periods of time. The Government of YAR will provide adequate counter-part support from YAR. The analysis of the survey data and development of thenational nutrition plan will require an estimated nine man-months of a teamof two, one of whom would be a nutrition planner (6 man-months) and the othera food'inarketing expert (3 man-months).

3.02 Qualifications and Experience of Experts. The nutritional surveyexpert whould have experience-in designing and conducting nutritional statussurveys in developing countries. He should have a basic degree in nutritionand/or clinical medicine or statistics. He shoud be familiar with the use ofstatistical survey techniques in relation to nutritional status studies.

The socio-economic analyst should have experience in food habit andnutritional surveys. A preferred choice would be a person who has had a strongstatistical background and participated in the conduct of surveys in othersimilarly situated developing countries.

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The nutrition planner would: (a) be an economist/agricultural econ-omist, or general planner with experience in food and nutrition management andplanning; (b) be familiar with theory and practice of planning, and (c) shouldhave the perception to relate to nutrition in the broader context of develop-ment and vice-versa.

The food technologist/marketing expert will have wide experience intechniques of marketing and processing and be familiar with food processing andfood habits of the Middle East area. He should be acquainted with techniquesof economic analysis of food and nutrition problems.

ANNEX 18Page 1

APPRAISAL OF

A GRAIN STORAGE AND PROCESSING PROJECT

YEMEN ARAB REPUBLIC

Economic Rates of Return of the Total Project and Components

1. The economic rates of return for the total project as well as foreach respective component were calculated on the basis of quantifiable econ-omic costs and benefits generated. Results derived from this analysis areconsidered conservative since many of the benefits attributable to the proj-ect involving uniform bag weighing during grain discharge from the silo,im-proved sanitary conditions in bakery facilities, a more nutritious breadproduct available to government feeding program beneficiaries as well asprivate consumers, and improvement in nutritional status given bread-bakingquality control, fortification and nutrition promotion were deemed non-quantifiable and therefore were excluded from the calculations. Because ofthe nonmeasurable nature of nutritional benefits, these, as well as the as-sociated costs of the fortification and nutrition promotion component, havebeen omitted from the economic rates of return determination.

2. The economic rates of return are based on the following assumptions:

(a) Grain price

Grain has been valuated at the end 1975 CIF Hodeidah wheat price ofUS$228/m tons 1/ with adjustments for handling and transportation where ap-plicable. Grain losses averted because of provision of suitable storagefacilities were assessed at this opportunity cost.

(b) Input prices

(i) Imported investment items have been valuated at CIF Hodeidah pri-ces. Other inputs have been priced in conformity with prices prevailing atthe end of 1975. The price of diesel fuel was adjusted for taxes.

1/ The US $228 wheat price employed here is in line with the IBRD/IDA 1980price forecast for Canadian hard red spring wheats, FOB Thunder Bayquoted in Commodities and Export Projections Division, IBRD DevelopmentPolicy Staff, Price Forecasts for Major Primary Commodities, ReportNo. 814, July 1975, Annex 1, p. 8.

ANNEX 18Page 2

(ii) Labor was not specifically shadow priced for the calculations sinceunemployment is not a serious problem in Yemen. Although available data arenot wholly dependable, information from the YAR preliminary census resultsand from WHO provides a rough indicator of the limited size of the domesticlabor pool, WHO has estimated that 53.1% of the resident population comprisesthose within the 15-65 age group, or the "working age" sector. Since menaccount for the major portion of the work force especially in urban centers,a group supplemented by female participation only in rural areas in agri-cultural activities, extrapolation from census data reveals a domesticworking age male population of only about 500,000:

Total estimated population 6,471,893Male population (50%) 3,235,946Male population in "working age"

group (53.1%) 1,718,187Yemenis outside the country 1/ 1,234,000Resident "working age" males 484,287

Although boys often hold employment before entry into the formal"working age" category, the figure above appears strikingly low and indicativeof lack of domestic manpower surpluses. Availability of higher paying employ-ment in nearby countries, especially Saudi Arabia, has induced a male manpowerdrainage from Yemen currently estimated at 1.2 million. Additionally, urbanpopulations reflect significant sex ratio imbalances as males have migratedinternally seeking better jobs off the farm.

(c) Exchange rate

The prevailing exchange rate of YRls 1.00 = US$0.22 has been em-ployed in the economic analysis. It is the rate at which commodities areexchanged. Currencies are easily convertible within Yemen in conformity withthis rate.

3. The following benefits are attributable to the components of theproject:

(a) The 20,000 m ton Port Silo

(1) Analysis of ship demurrage rates and available charter,dataseem te indicate an average charge of US$0.50 per m ton per day for port timeat lodeidah. With the installation of the transfer silo facility an estimated

1/ Census officials reported that only a very small percentage of thoseoutside the country were women and that most represented men employedin nearby Middle Eastern states, especially Saudi Arabia.

ANNEX 18Page 3

savings of eight days of US$4,000 per day for an 8,000 m ton vessel in-shipturn-around time, would be achieved. Secondary benefits to grain importersand all other users of the Hodeidah port could also be realized as total

demurrage bills and charter rates begin to reflect generally quicker turnaround time attributable to the elimination of system bottlenecks throughfaster, more efficient grain discharge from vessels, but these were notincluded.

(2) An estimated 2.5% of grain imports could be saved with elimina-

tion of rodent damage, rain, unrecovered spillage, and short weighing occurr-

ing in present unloading procedures.

(3) Mechanization of the ship discharge in order to save ship turn

around time, and thereby relieve port congestion, is expected to also reduce

variable ship discharge costs from US$3.76 to US$0.25 per m ton.

(4) Bagging operations are presently performed manually on thequay by volume measure with no total per bag weight assessment made. Nominallythe bags weigh 50 kg when filled, but deviation does occur to as low as 45 kg.Automatic scale bagging in the silo facility would ensure a higher degree of

uniformity to the consumer who purchases the bag on a 50 kg basis.

(b) Regional Warehouses (18,000 m ton Capacity)

(1) The primary purpose of improved warehouse space is to avoidlosses in both grain quantity and quality. However, at the same time, deter-

mination of a uniform loss percentage savings attributable to this provisionis not possible. Storage and handling losses are functions of a variableset of factors which can result in losses of from zero to 100%. With provi-sion of dry facilities secure from exposure and theft, losses due to pestdepredation and microflora are functions of time, grain condition, initialpest population, climatic conditions, efficiency of management, and other

factors. Time tends to be the principal determinant of losses; in any stor-age facility, under conditions conducive to predator multiplication, losseswill increase at high geometric rates with the passage of time.

In two somewhat similar grain-based economies in which data andinfrastructure were somewhat superior for storage to those in Yemen, studieshave shown that the maximum losses that could be demonstrated from each annualsupply"were 3.5% from all causes; time of exposure remained the principal con-trol factor in these analyses. However, at the same time, detailed studies in

the USSR and the US have estimated average, seemingly irreducible losses(mostly dust and moisture) of -0.5% when wheat was stored with optimal management.

ANNEX 18Page 4

Therefore on the basis of these two parameters it appears technical-ly feasible to save about 3% of tonnage stored in the regional warehouse fa-cilities, given significantly improved managerial input proposed in the proj-ect.

(2) Although no detailed data were available concerning rentalcosts incurred by the Government for customs duty tax, zakat, and grants-in-aid storage, quotations from private merchants revealed that rental ratesvaried signiticantly with demand for space, location, and structure quality.Employing a load factor of 73%, as projected for the new government facili-ties, an estimated rental cost savings of US$228,000 per annum (US$1.63/m ton/month) would be achieved through the substitution of government facilitiesfor rented space.

(c) New Government Bakeries and Bakery Loan Fund

(1) The bakeries in YAR are generally quite insanitary and aretherefore believed to be a source of contaminated food not only for commer-cial sales, but also for government distribution to hospitals, schools, andthe poor. Bread from bakeries constructed under the project would be preparedin conformity with strict quality controls and hygenic guidelines establishedby the YGGC nranagement to ensure a contamination-free product. Facilitiesbuilt or modernized undet the loan fund would receive technical assistancefrom YGGC bakery extension agents who would instruct credit recipients abouthygenic proceiures and vould inspect these operations to ensure compliance.It is intended that the project should make a substantial contribution to betterhealth through improvements in the food supply.

(2) An incremental quantity of 3,022.2 m ton of bread per annumwould be generated with the construction of the six new 1-m ton commercial bake-ries. Although the bread has been valuated for economic rate of return deter-mination at end 1975 market price of $0.46/kg, it would in fact represent aproduct superior to that presently available in commercial bakeries. Thebread from the six new facilities will be prepared under hygienic conditions,would be fortified with a comprehensive vitamin-mineral premix to mitigatenutritional deficiencies of consumers, and would contain a moisture contentmore in conformity with more ideal levels than the 50% content presentlyobserved. Consumers would therefore receive more-grain for their money andwould in addition purchase a cleaner, nutritionally improved product.

(3) The Government is increasingly interested in curbing theserious deforestation problem in YAR. Areas around urban centers once sup-porting significant stands of trees and secondary vegetation have over time,become denuded by increased cuttings to satisfy demand for wood-fuel, pri-marily utilized in home food preparations. Regions distant from cities havesimilarly in recent years experienced the same trend as trees and scrub arecut for use in rural areas and also for transport to urban centers for market-ing. Serious ecological damage has resulted from depletion of ground coversand subseque-nt water and wind erosion.

ANNEX 18Page 5

An estimated 80% of wood utilized in cooking activities in the Yemeni

home is funneled into bread-baking activities. Significant quantities of wood

are required to achieve high temperatures in tannur-type ovens for rapid baking

of Jocal breads. Since an estimated 90% of all households prepare this dietary

staple, there exists considerable incentive to induce substitution of commer-

cially baked bread in diesel-fueled ovens for home preparation with woodfiredtannurs. Many households, attempting in part to circumvent rapidly rising

prices of firewood (an estimated YRls 8.00 or US$1.78 is required to pre-

pare an average family's food supply for three days) have increasingly re-

sorted to dough manufacture at home and subsequent baking in commercial enter-

prises.

Provision of additional baking capacity of 6 m ton per day (flour

basis) would permit approximately 2,885 urban families to substitute com-

mercially baked bread for home-baked products. Such an adjustment would

thereupon result in an estimated annual savings of US$499,000 in firewood

costs and correspondingly yield reduced demand pressure on limited wood sup-

plies.

(4) Within the bakery credit component, a rehabilitation fundwould be established to renovate and modernize existing bakery units. One of

the major items covered under this fund would be the conversion of existing

wood-fired ovens to cheaper, more efficient, diesel-fueled ovens. An owner of

a 0.75-m ton bakery making this system alteration would thereby derive an esti-

mated US$35.00 saving per day in net fuel cost. If half of the estimated 50

bakeries expected to benefit from rehabilitation funding under the project

were to make this oven conversion a net fuel savings would be so derived

amounting to US$107,000 per year (taxes excluded from diesel costs). Demand

for firewood would in the process be abated.

(d) Nutrition - Health Promotion

The fortification component of the project is a direct attempt to

conveniently and inexpensively upgrade the nutritional status of beneficiaries

of Government-sponsored feeding programs as well as private consumers pur-

chasing bread from newly constructed or renovated bakery facilities. Avitamin-mineral premix, specially formulated to counterbalance presentdietary nutrient deficiencies would be added to the bread dough before the

baking process. When complemented by other programs to improve health and

'sanitfry'conditi6ns'in Yemen,- fortification would be an important vehicle to-

combat present high levels of malnutrition and resulting high mortality rates,

particularly among children. All new facilities, as well as half of existingbakeries rehabilitated under the project, would be supplied with the pres-

cribed premix. An estimated 135,000 persons would benefit from consumptionof the fortified bread: 67,000 through Government programs and the remainder

through commercial channels.

ANNEX 18Page 6

Benefits derived from the nutrition promotion component of the proj-ect would be heightened awareness among the public and policy-makers concerningtopics of health and nutrition, provision of information to consumers throughpublicity channels about the advantages of the fortified bread and the locationat which it would be available for retail purchase, and assistance to the Gov-ernment in preliminary design of a national nutrition program.

(e) Storage Study

The national survey of the quantity and quality of existing grainstorage space in YAR included in the project would provide useful informationby which future needs could more reasonably be assessed.

(f) Yemen General Grain Corporation (YGGC)

With the establishment of the YGGC, the Government would not onlycreate necessary infrastructure to effectively handle present and future grainstorage and processing needs, but would also set up an institution throughwhich it could eventually assume a more active role in the grain market, e.g.price controls on locally produced grain, regulation of import volume andscheduling, direct purchases on the domestic and/ or international markets tostabilize prices, regulation of interregional grain flows.

(g) Agricultural Credit Fund (ACF)

With the selection of ACF as the lending channel for all creditsextended under the project, the institution would receive a significant in-crease in capital resources, an amount that could eventually be allocatedin other development programs upon repayment of project-related loans and sub-loans. In addition, ACF would experience sizable expansion of manpower andfield offices under the project.

(h) Training of Administrative and Technical Expertise

Expatriate technical and administrative personnel would be securedduring the project implementation period to not only ensure the effectivefunctioning of the YGGC and its respective divisions, but also to train localcounterparts in such activities as project management, silo and modern bakeryoperations, accounting and auditing procedures, and effective extension pro-grammhng: Such on-site instruction in addition to project scholarships,could prove important in alleviating existing shortages of technically trainedmanpower in Yemen.

(i) Foreign Exchange Earnings

One of the major benefits of the project would be the eliminationof volume losses throughout the storage system through the elimination ofinefficient grain handling techniques on the quay apron, construction of

ANNEX 18Page 7

sound warehouse space, and provision of adequate stock management in thestructures erected under the project. Taking into account the foreign ex-change savings from grain loss prevention, reduced demurrage charges fromfaster ship turn-around time, and the costs of the direct and indirect importcomporieuts of project investments and operating costs over the 30-year timeframe of the project, net savings in foreign exchange are estimated to amountto about US$200 million.

(j) Impact of the Project on Employment

An estimated total of 65 full-time jobs and 70 manyears in part-time positions would be created for the life of the project. The major por-tion of this demand for labor would be generated for loading and unloadingoperations within the warehouse component. Bakery facilities built and re-modeled would similarly employ labor-intensive technology. The silo system,however, would be relatively capital-intensive, and therefore its installationwould result in displacement of a large labor pool employed in present manualgrain unloading and bagging operations. The elimination of these jobs wasnot included as an economic cost in the rate of return calculation because itwas felt that those displaced workers could readily be absorbed at zero costin increased port activity stemming from the elimination of bottlenecks andslow ship turn-around times made possible by the more efficient silo facility.Lastly, project related administrative posts would have to be filled withinYGGC and ACF.

Distribution of Project Benefits

4. Since the structures to be built under the project would be lo-cated in urban areas, benefits derived from the project would predominant-ly accrue to urban residents. Since grain is the staple food in Yemen, allsegments of society could potentially benefit from elimination of lossesthrough more efficient handling of grain in the silo complex potentiallyreflected in increased supplies and/or lower product prices. Curbing oflosses in warehouse storage would directly benefit the poorer segment ofsociety since a major portion of commodities stored in such facilities arefunneled into government feeding programs for school children, hospitalpatients, and charity recipients. Bread from the new Government bakeriesand private bakeries on contract for Government programs would be more hygi-enic, nutritious, and better prepared. An estimated 67,000 persons wouldbeneft ftrom consumption of this superior product in such programs and in turnrepresent a target group most in need of nutritional status upgrading. Inaddition , an estimated 60 m tons of bread per day reaching approximately109,000 private consumers would- be prepared in retail commercial operationsbuilt or renovated under the project credit fund and therefore subject toquality control assistance and inspection by YGGC extension agents. Addition-al baking capacity will permit approximately 2,885 urban families to cut ex-pensive firewood purchases. Benefits from the nutrition promotion componentcould reach not only a large numbers of urban residents having direct access to

ANNEX 18Page 8

improved bread supplies, but also to rural dwellers, through mass communica-tion information dissemination (e.g., radio broadcasts) concerning nutritionand general health-related topics. Lastly, society in toto would benefit frommiigation of demand for firewood and of related ecological damage.

Impact of Additional Bakery Capacity on Bread Prices

5. It is unlikely that a pecuniary external diseconomy in the form oflower bread prices received by existing bakeries will result from the instal-lation of incremental 6 m ton bakety capacity under the project. The addi-tional tonnage is small relative to total existing capacity. Secondly, thenew facilities will be constructed in various urban centers so that thespecific intra-city impact of each unit would be minimal. Thirdly, the breadprepared in the six new 1-m tons commercial bakeries is expected to facilitatesubstitution of commercial bread purchase for home-baking and would therebyleave existing markets of present facilities undisturbed. Fourthly, Yemen isexpected to undergo increased urbanization (present urban growth rate: 7%);it is therefore likely that demand for bread in cities will expand at approxi-mately 9% reflecting both population growth as well as an income effect. Thisrate of increase in demand could actually prove higher given future boosts inwood prices.

Economic Rates of Return

6. Based on the assumptions enumerated above, the economic rates ofreturn were calculated for the total project as well as for the respectivecomponents (see Table 1). Benefits deemed quantifiable were included in thedetermination of rates; those considered nonquantifiable, either because ofa lack of information or because of their nonmeasurable nature, were excluded.The rates generated In the analysis are therefore considered conservativeestimates.

7. Economic Rates of Return. The YAR economy is expected to realizeat least a 32% rate of return from total project investments inclusive ofphysical contingencies (Annex 18, Table 1). The individual components may beconsidered independent and thus would warrant the calculation of separaterates of return. The silo component costing US$7.0 million 1/ generated thehighest rate of the individual components with 41%; the warehouse and bakerycomponents costing US$2.5 and US$4.6 million, respectively, registered ratesof 17% and 20% respectively. These rates of return do not take into accountthe following non-quantified benefits: (i) savings due to reduced shippingfreight rates for general cargo as a result of decreased port congestion;(ii) the contribution of sanitary grain storage and bread production tobetter health; (iii) environmental benefits due to decreased deforestation.The rates of return exclude the nutrition component costing US$0.7 millionand the technical assistance to ACF costing US$0.4 million, for which no

1/ At 1975 prices.

ANNEX 18Page 9

meaningful rates of return could be estimated because of the predominance ofnon-quantifiable effects. Grain savings were valuated at the end 1975 CIFHodeidah wheat price of $228 per m ton. All inputs were assessed at end1975 prices excluding taxes and subsidies. No special shadow pricing forlabor was conducted because of no apparent unemployment problems within theYemen labor pool, a condition attributable to the substantial syphoning ofexcess labor into relatively high paying jobs in nearby countries, particu-larly Saudi Arabia. Sensitivity tests were conducted to assess the stabilityof the respective rates of return to variation in project cost and benefitstreams. They appeared relatively insensitive. With an increase in invest-ment costs by 10%, the total project economic rate of return fell to 30% (silo38%; warehouses 15%; bakeries 19%). A 10% hike in operating costs resulted ina total project rate of return decline to 31% (silo 39%; warehouse 14%;bakeries 16%). A decrease in the value of derived benefits by 10% yielded adrop in the total project rate of return to 29% (silo 38%; warehouses 14%;bakeries 16%). When economic benefits were permitted to slip by one year, theeconomic rate of return for the total project declined to 27% while those forthe silo, warehouse, and bakery fell to 33%, 14%, and 17% respectively.

8. In conclusion, the total project and each component appear economi-cally viable, and their viabilities rather insensitive to limited declines inbenefits, increases in costs, and slippages in benefits.

May, 1976

40011181 OFA GRUAIN STORAGE AND MROCESSING f6REC1

OttN AR" tREPUNLIC

toO-oil Rat of ReItor

1I 3 4 5 6 7 0 9 00 Il 612 13 14 i5 26 17 18 19 20 21 22 23 26 25 26 27 28 70 30O-Proje-t B.aft.ItOlIn Clatan

-Nb19liw Sa-iOs LI - - 925 1,056 1,195 1,344 1,504 1,678 1,843 2,060 2,274 2,503 2,749 2,944 3,145 5,360 3,5N0 3,810 4.052 4,304 4,566 4,839 5,126 5,42 5 5, 736 6,058 6,395 6.748Loss Navigs to Grain dur to

_or effiolert

l-aNOtt /2 - ,329 1,502 1.702 1,915 2,144 2,392 2.665 2,935 3,240 3.5o7 3.917 4,195 4,4032 4,701 5,102 5.430 5,775 6,123 6,496 6,884 7,590 7,716 ,1539 8,618 9,296 9,99Variabl Part Ret.dllR

Ra_t5 g00U$ 3.75a tot - 70 99J1 1.123 13264 1.414 1.57N 1_751 1 336 2.138 2.353 2.594 2 .767 2.957 3.158 3.366 3,5R2 3.809 4.046 4.2933 4.54 4818 5.093 5391. 5695 .j,011 6 343Rita Sub.totl1 31148 3.547 4.822 4.223 5.847 5.648 6.269 6_931 1.652 R.42s 9.250 93226 10, ±11..330 12.040 12.822 13.636 14.473 15.354 16.272 17,236 18-240 193286 208.371 72102 22 690

Warh-as CasaasttRLoe -aiega Vt Grin (3%(3~- 205 460 460 410 410 410 410 410 410 410 462 410 410 410 410 410 410 410 410 4t 410 410 41 0 410 410 410 I 410 410

Rant Rasttga - - ~~~~ ~~~~ ~~~129 250 258 250 258 2S 58 258 258 258 25825 258 258 258 258 258 25R 258 558 lN 25 0 258 258 258 258 258 258 25825Residual Vale.-I---- ---..-- - . - 936

Worahus Sultutal.1 334 668 668 668 668 668 668 668 _668 6-68 668 668 668 66R 668 bIN 66R 666 668 668 668 668 668 _RN 68 668 668 68 1,684

6 Nw- 1-r tO tt7 3

- - 463 927 1,390 1,390 1,390 1,390 1,390 1,390 1,390 1,390 1,390 1,390 1,390 1,390 1,390 1.390 1,390 1,390 1,390 1,390 6,9 430 030 150 158 130 130 130Road Rated frt. Subsitltti-nftou Ito RokiuR /4 - - 166 333 499 499 499 489 499 499 499 499 499 499 499 499 4~99 499 499 499 499 499 499 499 499 499 499 499 499 499Net Fual S-cta It Ot.uCot--tia /5 36 71 107 10L 07 107 107 10 2 1027OR? 107 107 107 107 107 107 10 7 107 107 107 107 107 107 107 107 107 602 107

Bakery Saboo-l - - 605 1.331 1.996 1.996 1,996 1 996 1, 896 1 996 0.996 1 996 6.996 0.996 1.996 .1.996 1.996 1.996 1.996 1.996 1,996 1.996 1.996 1,996 1,996 1,996 1,996 1,996 1,886 1,996

PuJr-t B a..tft Total - - 999 1.999 5,0708 6.211 4,684 7.3187 7 726 8.312 8.933 9,595 10.316 11,087 1 _.314 13.378 13,24B 13.969 14.212 15,486 16.300 17,137 18,018 18.936 19.900 207904 21950 2 3,035 24 166 26 2_90

Pro3e- Cuat

Stlo 244 259 4,663 1,3276 98 15 15 - 15 2,503 - - 15 - - 15 . 15 - - 15 --Rorobaues 361 1,982 20 -… - - - - - - .- --Balkrti.s 66 1,032 1,153 1,0627 152 1 52 . - 152 - 740 - - 15 12 - - 5 152 --

1- -st.ut Subtotl 671 3.2_53 6. 536 2,343 88 167 - - 162-7 167 3.478- 167 - - 167 - - 167 - - 167 -- -

Voolablo Cost.lilo. /7 - - - - 120 137 155 073 1,90 2718 242 261 296 325 357 383 409 437 465 495 527 56 534 629 666 705 746 78 856 177W-rh-tej. . - 36 72 72 2 72 7 72 7 2 72 72 72 72 72 72 72 72 72 72 72 72 72 72 72 7 72 72 72 72 72Bolksrla3 -9 311 623 934 934 934 934 934 954 _3 _14 -14 934 934 934 934 934.23 934 934 -. 3 .. 34...-.34 934 934 93 934 94 ~934 934 934

VarIable Coa tubt-i1 37 695 1.12610143 7.61 Li!! 1,202 1.224 1,248 1.274 1,002 1.331 6.563 1.319 1.341 1.443 1.471 1.501 15373 1.56$ 1.600 1,435 1.672 12.71 . 723 1.7L2 1 830 1.883Fitad Coat

Sil - - 275 235 235 275 275 275 275 273 771 275 270 275 275 273 775 275 2 75 275 275 2 75' 273 275' 273 275 2735 275W.rsb-t.ee 123 125 120 125 123 125 125 123 125 125 123 125 173 125 125 123 125 125 125 l.S 17 5 1 125 52 125 125 123 125B.k.ti.. ~~~~~~19 39 SR 59 50 5 58 S 58 58 _568 50 50 SR SR 38 SR SR SR 50 58 50 58 58 SR S 8 38

Noted Coat Sub-totl I"-14 164 450 458 438 459 450 458 458 430 458 4-50 418 -45t 436 458 458 450 4_~58 458 458 458 458 451 48 458 438 4~58

061

o 31 81 122 17 116…- - - - - - - - -Rorhoo-o 12 55 27 36 25… -- - - - -- -- -Bok-i-o 58 180 143 653 53 … …………

Ada. 4 T-h. Subtotal 101 326 292 319 174-- . - - - -. .. -

P-oja- Coat Total 772 )_327 7.319 ...3,.5 10 846 1. 768 1.833 17697 1.827 1.682 1_706 0.8999 176 0719 '6,299 0 847 0.873 2,769 1_929 1.959 2,158 23024 2,038 2,260 2,130 7,_4 6 9 2_ _ 2. 252 2,295 2.341Rat tBofita: Tota Prolso (772) (3,5775 56,320) (0,521) 3, 932 4,443 5,065 3,540 5,0899 6,630 7, 22 7 0,696 0,556 9,290 6,615 10,~7 23 11,375 11,901 12,783 13,077 14,142 15,113 15,969 16,676 07,770 08,735 19, 573 20,7R3 21,871 23,849

tot Seorfta - Stlu Co.u7

oao 52755 (320) 14,785) 0,403 2,515 3,100 3,590 4,073 4,376 5,155 9,752 6,373 7,091 7,023 6,005 9,248 9,900 10,570 11,308 12,052 12,019 13,638 14,485 15,355 16,290 07,260 11,250 19,308 20,396 21,539Na tBNsnelt: WaO-h..aCuapooo 1375(20375 026 433 466 471 471 471 471 471 471 471 470 471 470 471 4 71 471 420 571 471 471 470 470 471 4 71 470 471 471 1,41?7

Nat Ra Blt: lkaty Cottyt-o 0312455(1,220)) 01,661) 55515 971 852 1,004 1,004 832 1,004 1,004 29 1.004 1,004 052 1,004 1,004 652 1,004 1,004 8352 1,004 1,004 0 52 1,004 1,004 852 0,004 1,004 1,004

E-oooic Ran- of R-tor ond S-ioul lot An-1ouis

Ba.. Io---eo Coat, -5107. AdiltaleadToblo totos 0% qrrrfl ot oO1 Ptio ert n-00 j4 0 8 0

j9

tlaYt

V-tt OtoOtt 31.7 29.8 31.5 30.9 20.7 27-6SOlo Copto 40.76 38.4 40. 40. 3. 32.W-rhoua ot

7000 16. 0551. 59 14.3 14.1'

oBroy" Coapotoo 20. 3 09.5 20.1 10015.7 14.0

Ao-raa Bulk Goult, Ctr 1b633/ '8,04 I tone; RSitug of 8 das toe arud ties P.r 6hip, tO rflnt 46 Bt$u,GWO.e-In.0 etRd at 0.W

Sntrt of op .. tiot: 2 1- tot bekerisa it 1978, 2 ian 2979, sad 27i t go 1 .B0loi.: 7.7-sab_r it _tona fdull0t .400 kg/day/o58nbt. -- I eaRto 2.56 log datly etttpis f asetle ba, -erge-sird family o-t of 3-d.y a-pply If -od: YRIR 0.00 (791.785: 82% -f oood p,trb-nd -td to breed -atftet-is h- YROt 6.4/3 duye for bred btkiag 6 a- 1t.tt wsOsade for pretssales

Result: u779499,ooo etord etch y-t tro- **b.tit,tia to dteeS-fRtd - 1.,toteotly beltd btost Con -od lat.Oto, Row-bold brad.40 Inle 0.73 1tjt OONt.. oldbaSk. rots 8o 1 dieald 2tI1207/116t. (s,nalois teas).

2OSNttnod.tt, Odbtkaey, onese7¶/YMt-e.rl C Noodydl furl -te -ttig. dbo asbbtau f distal ro ooo..do YOSs 22.4/dly for n 0.75-rSt- btRe.y.AasuaPt-ot: Otl of btktr

tes --ord by rabablittti_n f-dt to Itet11ti -lst-fi-a vn.a 29 ~int. ot a-eeR 0.75 a t-m 55ps-Y.

rsl:0407,002 aa-uu net fo-I aoitI./6 ONtio rNl-tOstn:

30% of qup..teet -Inet-at -tet for 2 lisa ton bake-is o 5% of qRutwe.t Ilu-seb.et -ottaf 9.n to -td 9 54. te b)aeri- tine 100% of 1975% ohiolt coat.) equlpeetl-ot=t -tNotsofr 3 a 000 -ad 9 lot tun -tre 75% of total i-tortat -teo.MY,17

)totil -tbtolN not -$1.52,COM 0 W48,00C/tt-ko, 06$40,0/tots..8 ,17(7 t-ieble Costa of 0010.5/ ,nnbandied,

t3 sro80505 17: i.tn5 t*')1.ttO 1979: lo-ato 3OtO 92-aton 18:-.ROe

IBR D-11979613 fi>, : sg f @ 44 16 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~FEEPRUARY 1976

- xilAsx;> IRAN ,/>JaSl YEM EN ARAB REPU BLIC

'UN tAL'i'/ i--1- .. \ SAUDI ARABIA GRAIN STORAGE AND PROCESSING PROJECT4 99 AUDs AREEIC -^ 3= L OLOCATI ON

AI Warehouses

rX %- No\ on, .S A , i >.t | rS Government Bokeriessu-AW( f- ; * -; * /) 9 j/ .r '- - 2 Small Bakeries

j $le_.~ N -, sw ................. / Paved Roadso ( S ErHlOPIA t F -< P - - Pav,ed Roads Under Construction

Liv - ____________ ~~~~~~~~~~~~~~Other Roads

-4on , ;Ax iS v 0 ( i I; D g A H 20 Cities, Towns and Villages

.I - \ E n -. i1\ c :_ : t \/ t Wadis

oO-400 Contours in Meters4' International AirportsfavAm .- \Provincial Boundaries

o f ' - ' \ I< -.- bIntern-atonal Boundaries

0 20 40 60 80 100

. 20 40 60

MILES

I b,l RondoS MrnibI

17~~~~~~~~~~~~~.

09 PEI0 00 0 0A taAI \8°0D.>*zfEID

PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN

U-,~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~A

P_H 1. A. 'I. X / H. 9

Xff'3'~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~s \oaL,,, tva,,i, \i COO:-0 ,o 4

A~ ~ ~ ~ ~ ~~~~~~~~~~~~~~POL' DEORAI REUBI OFDba YEMENX :

E T H I O P I A .~~ ~~~~~~~~~~~~~~~ U/ S F Of XA DtUf

/F. T. A. 1.' - '

/e 41i e 0 r , e . 0b