FILE CJ P CIRCULATtNG COPYTO BE RETURNED TO REPORTS DESR

DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION

Not For Public Use

Report No. P-1388-TA

REPORT AND RECOMMENDATION

OF THE

PRESIDENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED DEVELOPMENT CREDIT

TO THE

UNITED REPUBLIC OF TANZANIA

FOR A

NATIONAL SITES AND SERVICES PROJECT

May 14, 1974

This report was prepared for official use only by the Bank Group. It may not be published,quoted or cited without Bank Group authorization. The Bank Group does not acceptresponsibility for the accuracy or completeness of the report.

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GCURRECY BQUIVAIf1

Currency Unit: Tanzanian Shillings (TSh)

1 Tanzanian Shilling (TShl.O) = US$0.141 U.S. Dollar (Us$1.00) - TSh7.14

WEIGHTS AND lUURSIES

1 meter (m) = 3.29 feet (ft)1 square meter (m2) - 10.76 square feet (sq ft)1 kilometer (km) = 0.62 miles (mi)1 hectare (ha) = 2.47 acres1 liter (1) = 0.246 US gallons (gal)

ABEREVIATIONS/ACRONYM

Ardhi - Ministry of Lands, Housing and Urban DevelopmentCOWIconsult - Danish consortium of consulting engineersNBC - National Housing CorporationRIDO - Regional Land Development OfficeTHB - Tanzanian Housing BankNHBRU - National Housing and Building Research Unit

GOVERNMENT OF TANZANIA

FISCAL TEAR

July 1 to June 30

REPORT AID R1CONMDATION OF THE PRESIITTO THE EIUTrIVE DIRECTRS

ON A PROPOSED DEVEIDPKEN CREDITTO THE UNITED REPUBLIC OF TAIZANIA

FOR A NATIONAL SITES AID SEICES PROJECT

1. I submit the following report and recommendation on a proposeddevelopment credit to the United Republic of Tanzania for the equivalentof US$8.5 million on standard IDA terms to help finance a National Sitesand Services Project. Some $2.0 million of the credit would be relentto the Tanzanian Housing Bank (THB) for 25 years, including a five-year grace period, with interest at three percent per annum. THEB wouldonlend these funds to cooperative housing societies and individuals ashouse construction loans at six percent per annum for up to 20 yearswith a one-year grace period.

PART I - THE ECONOMIS

General

2. The last full Economic Report on Tanzania (AE-26) was distributedto the Executive Directors on May 22 and June 22, 1972. This was fol-lowed by an Economic Updating Report (30-TA) which was distributed onDecember 11, 1972 and which was especially prepared for the East AfricanConsultative Group meeting on Tanzania of January 1973. An agriculturerural development sector mission visited Tansania during September/October 1973; its report is expected to be issued about the middle of1974. Daring 1974 we shall vndertake a missidon to study the industrialand mining sectors.

3. Tanzania celebrated ita first decade of independence in December1971. In the past 31 years gross national product increased in realterms by some 65 percent to the present level of about $1.5 billion.During the same period, life expectancy at birth increased from 35 to413 years, infant mortality declined from 250 to 160 per thousand livebirths, maternal mortality declined from 4.7 to 2.7 per thousand de-liveries, and the primary school enrollment rate increased from about28 to 37 percent of the relevant age group. While this sauple of economicand social indicators shows that significant progress has been made,it also gives some idea of the magnitude and difficulty of the develop-ment task facing the country. For example, while GNP grew at 4.7 percentper annum in real terms during these years, these gains were to a largeextent offset by the growth of population, with the result that percapita income increased at only 2.4 percent per anum. Tanzania isone of the 25 least developed countries.

4. Tanzania has a one-party system which is embodied in the con-stitution. The party, the Tanganyika Africa National Union (TANU),is a well organized mass party and is actively engaged at the grassroots in the promotion of popular involvement In the national developmenteffort, and within the party democratic principles are belng strictly

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adhered to. in econoiic policy making, the long-termn objective ofsocial equality prevails over econonic interests of miinority groups;scme progress towards reducing inequality of income distribution withinthe category of employed workers has been made, but large gaps continueto exist between urban and rural standards of living.

Economic Performance and Resource Mobilization

5, Tanzania's economic performance in recent years has beencharacterized by high marginal savings, relatively low returns oninvestment, and rapid institutional change. The growth of production,however, has been modest in most sectors, especially in agriculture.The cornbination of moderate production growth rates and a very ambitiousin'xest.rent progra-n has led to severe pressure on resources. This pressurehas heen partly alleviated by steadily increasing external capital inflowsand, until recently, by an improvement in the country's terms of trade.Although favorable current world market prices for several of Tanzania'sprinclpal exports and the growing contribution for local project costs byforeimn donors, have helpe(d to build up external reserves equivalent toabout three months' imports, the recent rise in oil prices has drasticallychanged the situation. It is estimated that the foreign exchange costof the oil price increase is in the region of $58 mnillion per year. Thiscomfpares with a net resource transfer from the World Bank Group of about$15 raillion per annun and a total net capital inflow of around $60miilicn per annum. The scope for cutting back on domestic oil consumptionwithout reducing production is extremely limited. Tne combined effect ofthe oil price rise, the expected large food import requirements, partiallydue to the drought in the north of the country, for the current year andother relative price changes is expected to cause a US$.30 - US$40 milliondron in reserves during 19i4. Although the problem ap,pears tolerable forthe next year or two, special measures will have to be taken to rectify thesituation during this period. A task force jointly manned by the Govern-nent and the Ban3k is currently assessing the short, medium and long-runeffects of the oil price increases with a view to fornulating policyrecommurendations. Possible alternati-ves include the development of domnesticenergv resources, including coal and hydroelectric power, and placing afurther emphasis on industries which produce exports or substitute forimports.

6. In terms of foreign aid disburselments, the People's Republic ofChina was Tanzania's principal donor, until the recent completion ofthe Tanzanian portion of the Tan-Zam railway. In terms of outstandingloans and credits, however, the Bank Group is the largest creditorto Tanzania followed Dy Sweden, norway and the Soviet Thicn. Includin-a notional one-third share of the debt of the East African CommunityCoriporations, the IBRD is presently carrying 14 percent of Tanzania'soutstanding ex-ternal debt and IDA 16 percent; the IBRD share is expected

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to rise to about 20 percent in the next five years, and the IDA share toremain about the same. The share of debt service payments to the Bank isat present about 10 percent of total debt service payments; the correspond-ing share for IDA is about 2 percent. These two figures are projected torise to about 20 percent and 3 percent, respectively, by 1980. Mostcapital aid to Tanzania is made available on very favorable financialterms, although about 50 percent of the total is tied to procurement inthe donor country. Supplier credits have been kept to the minimum. Inaddition to seeking as favorable a blend as possible and the minimum oftying, the Government has attempted to secure donors' agreement tosimplify the procedures associated with the use of committed aid. Forexmaple, Swedish assistance is now given within the terms of a frameagreement, which allows the Government to set its own priorities in theuse of SIDA funds and allows considerable flexibility in the switching ofsuch finance between the various projects and programs. The overall debtservice ratio has declined in recent years owing to buoyant export ear-ings; it is currently about 5 to 6 percent and is expected to remainbelow 10 percent at least until 1985. In view of this low debt serviceratio, there is scope for a modest amount of lending to Tanzania onconventional terms, particularly if such lending is for export prolnotingor import substituting activities.

Tanzania's high rate of investment during the last five yearshas not been reflected in high growth in production -- at least notas yet -- partly because there was a heavy bias towards social andeconomic infrastructure with long gestation periods. A substantialproportion of total investment has been undertaken to provide a viablealternative outlet to the sea to neighboring landlocked Zambia afterSouthern Rhodesia's Unilateral Declaration of Independence of 1965.Economic and political ties between Zambia and Tanzania are growingstronger every year. As a consequence of the lower than expected growthrate, the Government has decided to shift its investment emphasisto more productive quick yielding investments, particularly thosewhich generate increased export earnings. The effects of these newpolicies can already be seen in the rural sector and in the BankGroup's own lending program.

8. The budgetary position which has been adversely affected bysluggish economic growth in recent years coupled with high levelsof development and recurrent expenditure, remains extremely tight.The Government does not have many remaining possibilities to increaserevenues. In view of the already high marginal savings rate, the scopefor additional taxation is very limited. Even with a decline inthe rate of investment, with the escalation of fuel prices, Tanzaniawill still require a continued capital inflow in excess of the foreignexchange component of high priority projects it it is to achieveits development targets; financing of local expenditures will thereforebe justified.

9. Financial discipline in the regions, Central Government Ministries,and many state corporations remains a problem, probably becausescarce accounting and auditing skills are now even more thinly spread.There is a general serious shortage of many professional skills. The

situation has been aggravated by the departure of many Asians and theGovernment's reluctance to recruit abroad. However, this reluctanceis now dimi-nishing as part oi an effort to accelerate project pre-paration and implementation.

'O. President Tlyerere recently announced that following a reviewz,ihe C-overnment has decided to move the capital of' Tanzania fromDar es Salaam to Dodoma. By moving the capital city to the centeror the country and so closer to the bulk of the rural population,it is the exDectation that the Government wrill becoimie more responsiveto the needs of the rural sector. The Government presently plansto make the move over a ten year period. No accurate estimates ofthe total costs involved are yet available but in view of the scarcity

oi investment resources in Tanzania, it is likely that the transferof the capital will take much longer than planned; in addition, the

nuiber of Governiment orT'ices moved may be fewer than is presentlyenvisaged.

11. The administrative structure and many of the functions ofGovernment were decentralized to the regions in July 1972. Thiswas done to make the Government more responsive to the needs of ruraldevelopment. It is still far too early to assess the success or

otlherwise of this decentralization. As expected, problems ofcoordination between the center and the regions have occurred, and

the transfer of high ranking officials from Dar es Salaam to the

ru3-al areas has had its inevitable, but one hopes only short-term,

eff'ect on the smooth functioning of Central Govermment. Some dis-

location in project irmlementation has also been experienced. In

some regions the new Government structure is already showing itspotential to be more responsive and relevant to the needs of the

rural sector. Several rural develonment programs are now beingprepared in the regions and Bank Group) finance is being sought forsome ol them. It has become apparent that the severe shortage of

regional technical expertise will inhibit the ability of' the newdecentralized authorities to plan and execute rural projects; progressin regional development will, therefore, inevitably be patchy, re-flcting the local availability of the required expertise. WJays inwhrich the Bain Group and other donors might assist in alleviatingthese constraints are currently being explored with the Government.

Expropriations

12. In April 1971 legislation (The Acquisition of Buildings Act)

was enacted empowering the President on behalf of the state to acquire

any rental or commerial property the constriuction cost of which was

over 100,000 Tanzanian Shillings ($lh,000). About 3,000 propertieswere acquired under the Act. About 560 claims, including less than10 percent on behalf of foreign owners, were lodged in respect of the

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actual acquisition itselr or on the amount of compensation. Theseclaims, including the foreign cases, have either been settled or arein the process of being settled in accordance with the provision ofthe Act. The Government has recently expropriated about 50 large-scale farms in the Moshi-Arusha area of northern Tanzania. The Govern-ment is presently making an assessment of the value of these propertiesand negotiations on compensation are expected to commence soon.

PART II - BANK GROUP OPERATIONS IN TANZANIA

13. Tanzania joined the Bank, IDA and IFC in 1962. Beginning withan IDA credit for education in 1963, it has so far received 15 creditsand three Bank loans amounting to $172.1 million. In addition, Tanzaniahas been a beneficiary of nine loans, totaling $229.8 million whichhave been extended for the development of common services operated ona regional basis by Tanzania, Kenya and Uganda through their associationwith the East African Conmunity. The only IFC investments in Tanzaniato date, totaling $4.4 million, were made in the Kilombero Sugar Companyin 1960 and 1964. In 1969, IFC and other investors sold their interestin the Company to the Goverment. Annex II contains summary statementsof Bank loans and IDA credits in Tanzania and the East African Com-munity Organizations as of March 31, 1974 and notes on tne execution ofongoing projects.

14. Our lendirg program, reflecting the emphasis the Tanzanian Govern-ment attaches to agricultural development is increasingly focusing ondirectly productive activities in the rural sector. Up to the endof FY72, 10 out of 14 loans and credits had been made for infrastructure.All but one of the loans to the East African Community Organizations,of which Tanzania is a beneficiary and co-guarantor, had been extendedfor improvements in transportation and comunications. However, theapproval by the Executive Directors Of the Flue-Cured Tobacco Project(Credit No. 217 TA) in October 1970 opened a new phase in our lendingfor such directly productive activities. The Smallholder Tea DevelopmentProject (Credit No. 287 TA) was approved in March 1972. A Second Live-stock Project (Credit No. 382 TA) was approved early in April 1973.The Geita Cotton Project (Credit No. 454 TA) approved in January 1974constitutes the beginning of a major effort to expand cotton production.A project to expand cashew nut production and processing and a proposedrural development project were appraised in October 1973. A sugar projectwas also appraised in December 1973. Preparations of a proposed dairyproject and a second rural development project are under way.

15. Our Regional Mission in Eastern Africa was involved in the prepa-ration of six of the above projects. Our capacity to provide such as-sistance has proved to be particularly valuable in a country where projectpreparation capacity is, and for ane time will be, limited. Tanzania

is developing an institutional structure, stressing greater regionaliza-

tion and development of ujamz.a villages, designed to promote and respond

to development initiatives. These institutions are still in their

formative stages, and related organizational and staffing difficulties

have sometimes resulted in the project delays referred to in Annex II.

In recent months Bank Group staff have held intensive discussions with

the Government on ways in which these implementation bottlenecks can

be alleviated. As part of' this exercise, a procurement and disburse-

ment workshop was organized in Dar es Salaam in late August 1973 for

the relevant Tanzanian staff engaged on Bank Group projects. In addition,

the Government has recently instituted a high level monthly review for

all externally aided projects. As a result of these efforts, it is

expected that project implementation should now improve.

16. Tanzania's education and training programs are expected to solve

the manpower problem in the longer run, but meanwhile there will continue

to be a need for technical assistance in planning and implementation

if the difficulties in executing projects are to be overcome. We are

exploring with the Government how assistance of this kind can be strength-

ened and best fitted to Tanzania. Through participation in their

projects we have supported Tanzania's new development institutions at

an early stage. Our supervision ol the projects has resulted in bringing

to light, earlier than might have happened otherwise, that some of these

institutions are facing significant diff'iculty in executing all the

projects they have undertaken. Because of our involvement we have

been able to help the Government in its consideration of how to overcome

this problem whose solution is fundamental to rapid development.

17. The proposed urban sites and services project would be the Bank

Group's first lending to Tanzania for urban development. The Credit

for the Tanzania Investment Bank (Credit No. 460 TA) approved in Feb-

ruary 1974 was the Bank Group's first lending in the industrial sector

in Tanzania. A proposed pro5ect for textile development is presently

under preparation. Other projects outside the agricultural sector which

are expected to be ready for consideration in the near future include

a proposed highway maintenance project and a proposed supplementary

loan to complete the Kidatu Hydroelectric Project (Loan No. 715 TA).

Although no projects are planned in the near future for the common services

organizations of the East African Community, the Bank, through its super-

vision missions of ongoing operations, is discussing further assistance

for telecommunications, industry and port development. Additional

loans to the East African Railways Corporation, however, will have to

await resolution of the financial and operational problems being en-

countered by that Corporation. The main operational problems consist

ol an inadequate tariff structure, inefficient use of rolling stock,

and differences between the Partner States about how the railways

should be managed. The Partner States are very much alive to these

problems and have arranged to engage consultants to recommend solutions.

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PART III - HOUSING AND URBAN DEVEIOPMENT IN TANZANIA

General Background

18. Tanzania has a population oI about 14 million with an urban pop-ulation of 900,000 or about 6.5 percent of the total. The populationgrowth rate in the urban areas is more than two-and-a-half times thenational rate of about 2.5 percent per annum. Nearly three-quartersof the urban increase is the result of ru.ral urban migration. TheGovernment's national development strategy emphasizes increased agricul-tural production and the improvement of rural services and amenities,with the hope that this migration will be checked. Tanzania's urbanpolicy seeks to promote new urban growth centers outside Dar es Salaam,which currently has 55 percent of the total urban population, by itsemphasis on regional development and its policy to locate industry in10 urban growth centers outside Dar es Salaam. So far, the Governmenthas not been very successful in implementing this policy, due in partto the lead time required to reverse trends based on economic andhistorical forces.

19. While the ten regional centers grew at an average annual rate of6.5 percent during 1957-67, Dar es Salaam grew at a rate of 8 percent,reaching 11 percent between 1965-67. If these growth rates continue,Tanzania's urban population will double every 11 years and Dar asSalaam will double every 9 years, reaching one million people by 1983.Urban growth, particularly in Dar as Salaam, has far out-paced theconstruction of low-cost housing and related infrastructure. As aresult, squatter settlements with little or no basic infrastructureand community facilities are mushrooming. In 1969 over 40 percent ofthe housing containing an estimated 65 percent of Dar es Salaam'spopulation was located in squatter areas. Upcountry centers havesimilar problems. Mwanaa, Tanzania's third largest town (estimatedpopulation 55,800) is growing at an average annual rate of 6 percent.Located on Lake Victoria, it is the major regional manufacturing andtrade center, as well as a principal port and rail terminus. Due toa shortage of inexpensive housing and surveyed plots, squatting hasproliferated. Mbeya, strategically located on the Tan-Zam Highwayand Railway, has grown in recent years at an average annual rate of7 percent to its current level of 21,000. As in Mwanza, most of thepopulation has been forced to provide its own shelter in poorlyserviced squatter areas.

20. A direct result of these high rates of urbanization has been thecreation of a severe nationwide housing shortage. The Second Five-YearPlan estimates that 20,000 units p.a.(including 13,700 low-cost units)in urban areas are required throughout the country. The country-widewaiting list for National Housing Corporation units is over 24,000,nearly 19,000 of which are for houses in Dar es Salaam. Another waitinglist for surveyed plots in Dar es Salaam, dating back to 1967, consistsof about 18,000 applications. There is probably some overlap between tkhs8lists and some applicants undoubtedly have died, returned to the ruralareas, or are no longer interested or able to secure a plot. Never-theless, these lists indicate a substantial unfulfilled dmand.

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National Sites and Services Program

21. Recognizing that its current housing programs were not meeting the

needs of the low-income segments of the urban population, the Government

adopted a new housing strategy based on the sites and services approach.This approach, an extension of the ujamnaa movement to the urban areas,

is seen as the key to the provision of low-cost housing and as a solution

to the squatter problem. In 1973, the Itinistry of Lands, Housing and

Urban Development (known by its Swahili abbreviation of Ardhi),prepared a four-vear sites and services program for ten regional centers

to provide 12,500 plots an1nually with basic infrastructure and communitv

facilities. The proposed project is the first step in the implementationof the GovernmentAs program, with project sites in Dar es Salaam and the

two regional centers of Mwanza and mbeya.

22. Hecognizing the importance of self-help contribution to alleviate

the housing shortage, squatter settlements will be upgraded where

spontaneously organized. efforts have resulted in well-constructed housing

and viable neighborhoods. This is an important departure from previous

policies of squatter demolition and resettlement which the Governmentfound too costly and socially disruptive. Under the proposed project

three such settlements will be upgraded. Basic infrastructure and

community facilities will be provided and sturdy housing will be con-served and improved, resulting in a significant cost saving. An addi-

tional benefit will be the preservation of viable communities which ofter.

serve to integrate the rural migrant into the urban community.

Tanzania Housing Bank

23. To meet the credit requirements of low-income households for con-

struction loans, the Tanzania Housing Bank (THB) was established in

1973 replacing the Permanent Housing Finance Company of Tanzania (PHFCT),a cormmercial institution ;jointly owned by the Goverinent and the Common-we,alth Development Corporation (U.K.). The main purpose of 'nB is tomobilize domestic savings and foreign funds for financing low-incomehousing for individuals and cooperative groups. THB provides technical

and financial assistance lor sites and services projects, ujamaavillages, and other owner--occupied housing schemes. Mbreover, it

promotes the use of local building materials, encourages the construction

of housing types best suited to local conditions, and fosters the

minimizing of building costs.

2L4. THB- is a corpora.te body wi- more than 50 percent of its share

capital owned by the Government. It is governed by a Board of Directors,

consisting of 8 to 12 members appointed by the .nister of Financewith the Chairman appointed by the President. One of the Directorsis the Principal Secretary of Ardhi, thus ensuring coordination ofpo';icy and programs between Ardhi and THB. THB is currently receiving

techni.cal. assistance from SIDA ancl NORAD and has inherited well-trainedand qualified adminvistrative and operational staff from PHFCT. Additional

staff are being recruited and trained, placing THB in a sound positionto undertake it's enlarged objectives.

25. THB offers two major types of loans: (i) housing loans at 6percent per annum interest for up to 20 years to meet needs of low-income groups and (ii) loans at 9 percent per annum interest for upto 10-20 years for individuals or institutional borrowers who wishto invest in expensive housing or commercial buildings. Loans areprovided for the construction of low-income housing by participantsin sites and services projects throughout the country. Lendingprocedures, particularly suited for individuals and cooperative groupsin such projects, have been prepared. All loan applications must beaccompanied by a long-term Right-of-Occupancy, issued by the regionaladministrations, and all loans must be secured by a first mortgage.THB must satisfy itself that the borrower has the ability to makerepayments without undue hardship, and that adequate provisions forthe enforcement of the repayment exist. In addition, THB ensuresthat the proceeds oX any loan are used solely for the purpose forwhich it was granted.

PART IV - THE PROJECT

General

26. An appraisal report entitled "Tanzania - National Sites and ServicesProject" dated May 14, 1974, is being circulated separately. A Creditand Project Summary is provided as Annex III to this report.

27. A mission from the Transportation and Urban Projects Departmentidentified the project in February 1973, and it was appraised in thefield in August/September 1973. Negotiations for the proposed creditwere held in Washington, D. C. in April 1974. The Tanzania delegationwas headed by Mr. B. A. Sikilo, Principal Secretary, Ardhi.

Objectives

28. The proposed project is an initial step in implementing the Govern-ment't nation-wide low-cost housing program, with project sites in Dares Salaam and the two regional centers of Aaansa and Mbeya. Althoughit will not satisfy the total demand for serviced and improved plots,the funds, technical assistance and training support provided under theproject will enable the Government to strengthen its institutionalcapacity to plan and implement an expanded program in the future. Theprovision of surveoyed plots, basic infrastructure, commnmity facilities,and access to credit for construction will pormit low-income householdsin planned areas and squatter settloments to constract houses and improvetheir living conditions on a elf-help basis and at acceptable per plotcosts.

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Project Description

29. The proposed project will be executed over a three-year period(1974-77) and will consist of the following:

(i) Mew Sites: about 10,600 newly serviced plots located asfollows: 7,450 plots on three site8 in Dar es Salaam (Sinza, Kijitonyamaand Mikocheni); about 2,300 plots in Mwanza (Nyakato), and about 870new plots in Plbeya (Mwanjelwa).

(ii) Squatter InMrovements: improvements to basic infrastructurefacilities and additional services in two existing squatter settleamentsof Dar as Salaam (Manzese A and B) and the Hwanjelwa settlement inMbeya. These improvements will affect about 8,800 dwellings.

(iii) Community Facilities and Ecguipaent: ccnstruction of elevencommunity education centers, one health center, seven dipensaries andeleven markets on the seven project sites. Purchase of coss pit eaptiersand refuse collection trucks and equipment.

(iv) Construction Loans: assistance to THB in financing constructionand house improvement loans for low inc ce households on the project sites.Loans will be extended by THB for purchase of cement, galvanied ironroofing and other building materials.

(v) Training and Monitoring: a training program for technicalstaff of Ardhi and expansion of the physical facilities for the townplanning program of the Ardhi Institute (a training school of theMinistry), as well as monitoring of the project by the Economic ResearchBureau of the University oZ Dar es Salaam.

(vi) Nutrition: a pilot project to improve the nutritionalawareness of households in the sites and services areas, and

(v) Consultants' Services: consultants for the design anddetailed engineering of basic infrastructure and community, facilities,preparation of a follow-up site and services project and overaUl projectsapervision.

Project Sites

30. The seven proposed sites were selected after a careful evaluationin accordance with three basic criteria: (i) availability of land,suitably sized and situated which could be developed economically forlow-income housing; (ii) suitable Boil and ground water conditions toenable natural drainage of the area and (iii) location relative to jobopportunitiss, transportation facilities, and off-site infrastructure

such as access roads, water, power and sewerage mains. For squattersettlement areas, an additional selection criterion was the existenceof well-constructed housing and viable neighborhoods.

31. In Dar es Salaam, the five oites selected are located on theprincipal roads to the city center and are near the rapidly developingUbungo indastrial area. With the completion of the port access roadin 1977, the sites will also be within a short commuting distance ofthe existing major industrial area along Pugu road. In Mwanza, thesite is located on the principal east-west route served by the publictransport system and near the Nyakato industrial area. In Mbeya, thesite is adjacent to the city center and in close proximity to the Tan-Zam highway and railway.

Project Costs

32. Total project costs are estimated at $16.7 million, includingland acquisition costs of about $634,000 which will be borne in fullby the Government. The foreign exchange component of $3.9 million(23 percent of total cost) is rolatively small due to the labor intensive-ness of the project and the econoy of design standards. The proposedIDA credit of $8.5 million would finance the total estimated foreignexchange component as well as $4.6 million equivalent of local cost,and would amount to about 50 percent of the total project cost. IDAwill finance 65 percent of the costs of the infrastructure, ccmmunityfacilities, and the expansion of the Ardhi Institute, 75 percent ofconsultant services, the full cost of equipment, and $2.0 million forthe construction loan funds for the THB. The breakdown of projectcost is given in Annex III.

Project Standards

(a) Individual Plots

33. The basic design unit is the ten-house cell for both new andsquatter improvement areas. The plot layouts and preliminary engineeringon four sites, i.e. two new (Sinsa and Kijitonyama) and two squattersettlements (Manzese A and B), give a typical plot size of 288 m 2. Thisis lage in comparison to previous Bank/IDA financed projects (Senegal150 m , Nicaragua nO m2 and Jamaica 94 m2 ), but is appropriate in theTanzanian context given the need to accommodate a traditional Swahilihouse, the most prevalent type of low-cost house, which in constructedof local materials and consists of four-six rooms separated by a corridor.Such houses often lodge several families with provision for an outdoorcooking area, a garden (shamba), and a pit latrine or aqua privy (septictank). Under present Government procedures a long-term Right-af-Occupancy

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is required to undertake permanent construction and on the issuance ofthis right the national building codes apply. These codes were framedfor high-income group housing and require a minimum investment of aboutTSh 15,000 in the construction of a house. In the project area, however,an improved Swahili house of cament, clay block walls, concretefloor and galvanized iron roof is estimated to cost TSh 7,000 for afour-room and TSh 9,000 for a six-room house. The Government has, there-fore, agreed in Section 3.06(ii) of the Devel-opment Credit Agreement towaive application of the building codes for low-income housing in theproject areas. In their stead, Government has under consideration thepreparation of house designs and building standards which will be usedon an interim basis for project housing. The Government has furtheragreed in Section 3.06 (iii)of the Development Credit Agreement to revisethe building codes and, after review by the Association, to incorporatethe new standards into a revised code by December 31, 1976.

(b) Infrastructure and Community Facilities

3L4 . The design standard§ for the basic intrastructure are such thatthe per plot costs can be afforded by households at the lower end ofthe household income scale. Each site will be provided with a networkof collector, primary, secondary and pedestrian roads; collector roadswiLl be macadam-surfaced for bus traffice. Except at the Mikocheni site

in Dar es Salaasm where, due to a high water table, individual house waterconnections are essential, water kiosks (stand pipes) will be provided.for every 50 plots at a distance of 150 m. The power distribution systemwill provide for streetlighting on the main roads and electricity forthe community facilities,. Provision will be made, however, for futureimprovement to roads, drainage, and the installation of individual houseconnections for water ancd electricity.

Organization and Execution

35. The executing agency for the project will be Ardhi which will haveoverall responsibility for the project. Within Ardhi, a special Sitesand Services Section has been established for the detailed planning,engineering and construction supervision of the project and for coordin-ation with other concerned ministries in designing the community facil-ities and with THB in providing construction loans. The Section willalso set up local site offices on each of the sites to provide technicalassistance to the individual plot occupants in self-help constructionand related matters. The Sites and Services Section is presently under-staffed and the Government has agreed in Section 3.08 of the DevelopmentCredit Agreement to adequately staff the Section and fill all vacanciesat the professional levels in the Section by June 30, 1975.

36. With the decentralization of governmaental functions, some Of tholocal project administration functions, such as advertising and pro-cessing of plot applications, issuing of Rights-of-Occupancy, andcollection of ground rents and fees, are performed by the RegionalaLand Development Offices (RLDO). The RLDO also have responsibility foradvising and assisting in the formation of housing cooperatives andwill perform the essential function of coordinating the activity ofother regional offices dealing with matters such as education, health,water supply, and electric power. RIDOs in the three regions includedin the project are adequatily staffed.

Training

37. Technically trained manpower, a constraint in most sectors inTansania, also presents a problem in the Government institixtionsi dealingwith this sector. Currently, Ardhi is relying heavily on expatriateassistance provided by the UNDP and bilateral-aid agencies. Under theproject, it is proposed to assist in developing training facilities toreduce dependence on external assistance. Funds w1 be provided forthe expansion of the physical facilities of the Ardhi Institute, locatedat the University of Dar es Salaam. The Institute, which provides sub-professional training in aLrveying, land management, valuation and townplanning, currently has only 26 trainees in town planning. With fundsprovided under the project, the Institute's facilities will be expandedto accanmodate 60 town planning students. In addition, Ardhi will beresponsible for an in-house, two-year training program for 12 civil/sanitary technicians. Funds have been provided in the project forconsultants to carry out this training, as well as for training equipmentand materials.

Terms and Financial Conditions

38. The Government has agreed in Section 3.07 of the Development CreditAgreezent to a set of criteria to select applicants for plots in theproject sites. These criteria should enable Ardhi to select familieswith genuine housing needs and steady employment and income. It isestimated that per plot charges for beneficiaries, excluding house con-struction loans, will range fron TSh 12.7 per month in squatter upgradingareas to TSh 37.8 per month for a new plot. These charges consist of astatutory ground rent of about TSh 37.0 per year per plot, collectedby the Treasury, for the use of land, and 'chargeable ground rent," rangingfrom TSh 9.6 per month for squatter areas to TSh 34.7 for a new plot,which is designed to recover, over 25 years at 9 percent per annum, 75percent oX the on-site cost of the infrastructure provided; the rmaini25 percent relates to comimnity facilities. In addition, constructionloans made by THB are estimated to range between TSb 4,o00 and TSh 10,000,with a typical loan of TSh 5,000 amortized at 6 peroont over 20 years.

- 14 -

It is thtefore estimated that the total Monthl p t for w it

covering all costs (plot charges and repayment of construction loan)

will range from TSh 50.8 to Tsh 88.6 per mnth. Households mat alo

meet the frot-end costs8, whichae an important expression of the

household's cmaitamnt to the project. These coatB include a down

payment amounting to 10 percent of the assignable cost of the infrastructre

provided and several anall foos. On the as tic that families spend

15 percent ox? their income n housing, the di monthl4 household

incme required to afford a new plot ranges from TSh 340 to TSh 590 per

month. However, households with lower incomes, about TSh 200 per month,

will also be able to afford a plot, either by taking a smllor ccnsracUion

loan or through renting of rooms to others. In Dar es Salam, with 16

percent of households earaing less than TSh 200 per month and 14 percent

more than T S 750 per month, it is expected that the project Will reach

well down on the household income scale and cover an intermediary range

on the acale including about 70 percent of the total income distribution.

39. The Government will relend to THB, from the proceeds of the proposed

credit, $2.0 million (TSh 14 million) for construction loans. TIB will

repay this loan to the Government over 25 years, including 5 years grace,

at 3 percent per annum interest. It is estimated that a total of TOi 45

million will be required to provide credit for all new censtruction and

improvements on the proposed projoet sites. Taking IDA funds and

contributions expected from bi-lateral sources (IDA) into account,

THB will need an additional TMh 16.8 million. The Goveronmnt has

agreed in Section 3.01(b) of the Development Credit Agreement to provide

sufficient funds for the THB to meet the demand for low-oo t construction

loans in accordance with the project's construction schedule.

Procurement and Disburtsent

40. Contracts for civil works will be let after international competi-

tive bidding in accordance with Bank/IDA procurement procedures. Because

of the scattered locationa and staggered time schedules, the civil works

will be divided into a number of small contracts, ranging between $300,000 --

$1.5 million. In order to interest small and apecialized contractorsand promote competition, it is proposed to combine the various works into

three or four groups and to tender each group separately. As the construc-

tion work will be labor intensive, involving simple equipmnat ad techniques,

it will be well within the capabilities of local contractors. In evaluating

bids, local civil works contractors will be allowed a 7-½ percent preference

over bids of foreign contractors. Due to the aise, nature and location of

the project it is unlikely that foreign firma based outside Dar es salaam

would be interested in bidding for construction works. However, there are

a number of established contractors in the Esnt African countries. In

accordanoe with Bank/IDA procedures, tenders till be advertised in the East

- 15 -

African countries, and embassies in Dar es Salaam will be notified.Prequalification of contracting finrs will be required. Contracts forequlpment an vehicles will be awarded in accordanc with the Governent'sumal procurement procedurs in view of the fact that only an estimatedUS$150,000 would be involved in the purchase of these items which consistmainly of six serrice vehicles and sundry equipment for the Cc3nityEducation Centers. In addition, theae items will be required at differentstages of project implementation and hence their procurement will also haveto be staggered. Local manufacturers would be allowed a preferentialmargin of 15 percent or the existing rate of import duties, whicheveris less, over the c.i.f. price of competing imports.

41. A schedule of estimated disbursements is included in Annex III.To begin project construction as soon as possible, the Government hasengaged consultants for the detailed engineering of the infrastructure.The terms of reference of the consultants were agreed to by ID& andwork began in January 1974. It is recommended that retroactive finncingup to an amount of $200,000 be included in the credit.

lecmomic Justification

42. The main Justification for the project is that it would help alle-viate a severe shortage of low-cost housing in Dar as Salaam and thetwo upcountry towns and put such housing within the financial reach ofthe low-income urban dwellers. The sites and services and squatterimprovement approach would provide lower cost housing than previouspublic housing programs. As there is a large element of self-helpconstruction, they would also serve as a model for a long-teon nationalsites and services program. The technical assistance component wouldstrengthen the Government's inatitutional capacity to plan and implementnational sites and services programs.

43. In order to permit an easily quantifiable and conservative evaluation,the benefits have been measured in terms of the estimated market valuesfor the dwelling units to be constructed. The economic life of theproject has been assumed at 25 years, which corresponds to the usefulphysical life of the basic infrastructure and community facilities andan improved Swahili house.On this basis, the internal economic rate ofreturn for the various sites ranges froa 10.4 to 14.5 percent, with thehigher rato for the squatter improvement sites.

Special Features of the Project

44. Some special features of the project ares provision of the l1Coumnity Edacation Centers for the sites developed; the inclusion ofa pilot nutrition project; and the provision of fbuds for amnitoringthe projoct. Commmnty Education Centers in the rural areas havebeen financed earlier under the Fourth Bducation Project (371-TA) and

- 16 -

the Geita Cotton Project (454--TA) to serve as primary schools and provide

basic facilities for instructing adults in crafts, agriculture, work-

oriented literacy, home science, health care and to generally complement

other rural development activities. In the proposed project these

objectives will also be served with an urban orientation. The

pilot nutrition project will be carried out by the Tanzanian Food and

Nutrition Center, which has been established with SIDA assistance. Its

purpose will be to encourage changes in food habits, based on nutritional

considerations and to develop capabilities to prepare and disseminate

appropriate nutritional information. Provision has also been made in

the project for undertaking sample surveys by the Economic Research

Bureau of the University of Dar es Salaam to monitor and assess whether

the project objectives are being met. This will provide a feedback of

information during the project's implementation, allowing for flexibility

in administration and enabling the collection of data for the preparation

of future sites and services projects in Tanzania.

PART V - L]EAL INSTRUMENTS AND AUTHORITY

45. The draft Development CrediL Agreement between the United Republic

of Tanzania and the Association, the draft Project Agreement between

the Association and the Tanzania Housing Bank, the Report of the Com-

mittee provided for in Article V, Section l(d) of the Articles of Agree-

ment, and the text of a resolution approving the proposed credit are

being distributed to the Eaecutive Directors separately.

46. I am satisfied that the proposed credit would comply with the

Articles of Agreement of the Association.

PART VI - RECOMMENDATION

47. I recommend that the Executive Directors approve the proposed

credit.

Robert S. McNamaraPresident

Attachments

Washington, D.C.

May 14, 1974

Annex IPage 1 of 3 pages

COUNTRY DATA - TANZANIA

ARiA POPULATION DENSITY

k, fkm2 i3iiZlton (mid-1971) 14 Per i,a147/p Par kn2of arable land

SOCIAL INDICATORS

Reference CountriesTanzania Niyaria U.K.

l960 1970 R7 . 197

ONP PER CAPITA US$ (ATLAS BASIS) 2 .. 100 150 120 2,210

DM3RAPHICCrude blrth rate (par thousand) 46 /a b 47 48 50 16

Crude death rate (per thousand) 25 21 16 24 11

Infant mortality rate (per thousand live births) 225 160-1

65/c . 150-175 19 d

Life expectancy at birth (years) 38 /a 43 49 37 72

Oross reproduction rate /2 * 3.2 3.3 3.3 1.3

Population growth rate a 2.2 2.7 3.3 2.5 0.6

Population growth rate - urban * 7 6 /e.f 5 0.5

Age etructure (percent)0-11, It, /a u 4L 47 L5 24

15-64 5(' a, 53 51 53 63

65 and -ver 2/b 3 2 2 13

Danendency ratio O.b7 l.l/ 1.2/h 1.2 0.8

tUrban, population as percent of total 4 6 /c 9 /d,f 23 78

Fnmily Planning: No. of acceptors cumulative (thous.) * * * *

No. of users (% of married women) - *- 2.2

E14PLOPiENTTotal labor force (thousands) .. 5,780 5,o60 /d h 24,050 25,240

Percetntage employed in agriculture .. 91 90 go 70 3Percentago unemployed . .. .. . 3.6

INCOHE DISTRIBUTIONPercent of national income received by highest 5% ..

Percent of national income received by highest 20% .. . .

Psrcent of national income received by lowest 20% .. ..

P3rcent of national tncome received by lowest 40% .. ..

DISTRIBUTIoN OF LAND OiA8lHIP% owned by top 10% or owners% owned by smallest TOc ot owners

HEALTH AND NUTRITIONT;-pu-.ati-o-n p-er -phy-s,ician 20,000 /o 21,510 /b 12,350 /d 24,030 /j: 860 /c

Population per nursing person *- 2 980 7. d 3,050 7d 2,530 79 290

Population per hospital bed 530 lu 780 730 7d 1,870 o 105 /d

Per capita calorie supply as % of requirements /5 65 /k 69 90 90 120

',r capita protein supply, total (grams per day7T:5 42 7Z 43 68 59 88

of which, animal and pulse 22 77 23 29 14 58

Death rate 1-4 yearsa /.. .. .. .. 0.9

EDUCATIONAdjusted /8 primary school enrollment ratio Z5 3i 60 /i 34 98 /d

Adjusted 7F secondary school enrollrmnt ratio 2 2 8 a ,j 4 58 7d

Yeers f 3 schooling provided, firat and ascond leel 13 13 13 14 13Vocatlonal enrollment as % of sec. school enrollment 22 6 2 10 /1 5 /c

Adult lit-racy rate % .. .. 30 /j .. 97 75

HOUSINtAverage No. of persons per room (urban) 0.8/o .. .. .. 0.6/n

Percent of occupied units without piped water .. 20 /m

Access to electricity (as % of total population) .. 3 .. 8

Percent of fural populatirn connected to electricity .. ..

CONSUKPTIONRadio receivrs per 1000 population 2 11 48 /d 23 324 /d

Passenger cars per 1000 population .. 2 /b d 9 1.2 215-

Electric power consumption (kwh p.c.) li /b 29 7E. 45 19 /d 4,291 /d

Newsprint consumption p.c. kg per year o.07Vo 0.1 0.4 0.1 28

Notes: Figures refer either to the latest Periods or to account of envirormntal taqsrAture, body weifb, aDdthe latest yeare. Latest periods refer in principle to distribution by age and m of national populatins.the years 1956-60 or 1966-7s; the latest yeara in prin- /6 Protein standards (rtairmente) for all countries as estab-

ciple to 1960 and 1970. Only significantly different liahed by tlSDA Zoomoic R search Service provide for a siniu

periods or years are footnoted separately. allowance of 60 grams of total protein per day, and 20 graQ of

/I The Per Capita GNP estimates for year other than 1960 animal and pulse protein, of whieh 10 grams obuld be animal

is at market prices, caloulated by the sauae conversion protein. These standards are smwhat lower than thoee of 75

t.ahnique as the 1972 lorld Bank Atlas. gram of total protein and 23 gram of a1iml protein as an

/2 Average number of daughtere per wanan or reproduictive average for the world, proposed by lAO in the Third Wbrld Jood

age. Survey.13 Population growth rates are br the decades eniing in /7 Sons studiea have suggested that crude death rates of children

1960 and 197. ages 1 through 4 say be used as a firat approximation index of

A Ratio of under 15 aod 65 and over age brackets to slnutrition.those in labor force bracket of ages 15 through

64. /B Percentage enrolled of corresporning population of school age

FAO reference standards represent physiological re- as defined for each country.

quiremente for normal activity and health, taking

/a i, '. b Tanganyika oily; i -. ': /1 1969; /e 19.2-69; /f Over 2,000 population; /g Ratio of

popolati, ,7under 15 and 65 aid over to tota labor force; Labor force in age bracket 15-59; /A Ratio of

po,ilatio- under 15 and 65 and over age brackets to those in 15-64 age bracket; 1968; Ak 19;T-63; A Data

c-nyr only 9 out of 12 states; /m Urban only; /n 1966 urban and rural; h7 1958, Zanibar only; /P bcludingfore.qts dan pastures.

R2 December 4, 1973

FEONOMIC BM PE DA6TA Page 7 of 3 PageslMensta in mdIlIa.6 of U.T. dofara)

Actual .'ro3ccted - 964- i~65 - 1967 - 1973 90 194 17i920 1971 192 1914 15 10,76 199-7 92 27

5-Year Average at 1997- 1969 fTiset& Exchange, hates Averwe Anru.1a Geswth Rat-s As F-ro-n of r1ytr-luct 217.1 1275.4 134127 1494.7 1562.0 1632.1 6.1 6.8 4.9 4.5 120 11i lotl~~nor Of Trade (a) -0.2 -10.8 -1I... -17.3 -21 -33.06A .5 .1 I io- ,.'r',,-ss.. Income ~~~~1213.9 126,,.1. 1322.3 4'7 7. 4 1536.9~ 1599.1 5. 6. .5 2 10 10 0

* p *> 344.6 395.1 389.2? 358.1 361.! 371.6 6.7 I1.0 4.61 2.6 30.27 - I * xnncapacitY) 3U3 a 31jQ6 3.jL 323.3 3-3-1.2 3-47 5 2. I .? 2. 28 5

h. bi~~~~~~~6.1 8!. 5 74.2 31.8 27.9 24.1 3. 6. 5.9

.ri ;' - prr±es 1822.6 1061.6 1038.9) 1189.9 [237.7 1292,3 5.6 9.6 14,8 1.2 64.3 -4 .0 421.6Estocks) 25.1-.2 282.6 306.1 323.3 3.1 7. 0 321.0 0.1 14.0 0.4 2.5 20,9 U 127 .3 3

'5<144 ~~~~~~~191.1 24.1 221.4 248.5 299.2 3045.8 1.4 6.5 2.2 3.9 IS5 273 .5V~~~~fl>O 68.0 ~~~ 206.8 228.0 2346. 6 298.3 30)5.9 3.1 9.0 3 .4 4.0 14.3 ~ 6.4 112.

* ,* ~~~~~~~~~~~~~Annual Data .t Corrert tines Av-ra th0lror Race- As cemen-t of o.ta]1966-72 1973-76

90. 2 112.0 97.3 97.6 97.1 107. 2 13.5 - 27. 3. 2.'96- "fcc c.fue5a 101.7 [31.- 134.0 173.7 192.4 212.5 14. 5 71.5 31,1 1- ' 1.6eroo mterials3 2720 35'.8 39.8 29.4 82.9 95.4 16.3 17.0 2.5 49 ' '2

SUt 22.03 (35.8) (39.8' 719.47 (07.9', (96.43 (16.3) 14.0 8,5 1 42 32r' 30fl 740.0 fl..~~~~~~~ 2L6 1fl~~~~j 2J" la"Q 1Q4j 1.0 3.8 3(.L.

O'er 3, Imports Crlf) 318.4 381.5 2933. 3 31e.3 503.4 8 10. 2 6.7 2.8 1531. 0 120 3 3..01

- .. ..rerli,r to ='5. fuels) 133.1 183.1 198.5 7.24.7 327.1 332.9 9.6 2.-6 72.4 72.4 73.2

'lie ptcyctsi 143~~fS24 151. 4'27 '59 30.4 34.4 J1.2-12.6 2".4 >9on> .. nnss- 1 I ~~~~ ~ ~~~~~~~40.3 53.7 53. 66.'ll5 712.9 ____ 1.3Ex1: ports (lo.b) 296.5 742.9 7,90.0 407.9 4 1 7.3 '.32.8 377.4 100.0 .120.5 .11 '

1'. ..~s~f5*. '-,'d- Tn-lne Averag 1967- 49 .

1.6 102.0 112.6 171.2 170.1 131,013 1- dee- 29.9 103.4 129.9 187.9 109.2 196.5

- Ma sS -- 1. 98.9 86.7 227 89.9 8'.90 17'..: 1~~~~22.0 132.0 .33.3 10.3.0 '49.6

W.'! 71 fBY SECTOR Annual Datot. -t196 Pr,ices ard I4sehge Rates Av,erage AnsaS Growth Rates As Percent Of Total1964-69 1965-70 1866-71 t987-72

-ni--I.,>'. 446.5 112.7~~4 .2 1.2 3.3 Z4.4 1.-4 2. 40.0 38.1 30.5Ii .is kac1n~~~~~ 179.2 138.0 202.7 9.7 6.3 7.2 5.0 46.0 77.9 14.5

______ 491.1 522.2 351.7 2~~ ~ ~~~~ ~~~~ ~~~~ ~~~~~~~~~~~~.1 7.4 2.0 61.1 9j_0 44.9 45.1110.8 1162,7 1225.3 5.7 4.3 1.7 4.5 5. 100. 4 (. [00.0

I'll 110471-S Annio~~~~~~l Ot. it Cons rco1967-72 As Percent of 0 1?

Firo lroe 44 235.6 240.3 304.3 14.0 19.2 ( 23.0ot '.apedst'irrs 23~~~84 792 306.6 15 3. 1 3 9.

'tol9etoy 'air7.2 11.9 -0.3 -5. 0.6 405 5 0,41',' Snc'or ~~~38.0 57.8 7 5. 0 2. . .

,A Isseat 1s7.G 233.0 2'33.0 21.0 13.3 13.4 11.5

'el-N) 5P504'j 07FfDEAfAtS Ac,t-alA. olCn 'otEXed. 971 3973

3 21~i.1 12.5

2-. s]2rices JlIon" 3- 30.5 27.3

3... ~~~~~16.9 2~3.2

3't'1f42122 1P;i965- 1970- 1973-o,.'31o4'-2 'nix --ya overge

4data) 1970 1975 1976

3.3 4 3 4.3tlostinito 1~~ ~ ~~~~.1 1,0 0.6

P-..'-50Tht45.4 S-singa Rate 0.2 0. 0.2l's! iv's 2 arOngsRate 0,2 0.25 0.25

''~~~~"M.'F 435) ~~~~~~~~Tota later- Force au Added pe~r Worker (iin Coreu nsrs% lKi) a Ullos f To tal in 0I.8.lbllars PeretoAvae

1971 19zi. 97 17

4.i, ', tie. ~~~~~~~~~~~5.3 91 68 430.1 2 1590 69411.4 2 2170 9081

ol~~~~~l ~~~~.ns2 ~~~~5.6 100, 229 130

i1L2.71<r)3731r - 31 On~ni orneglIgIble

"-27 orslotl- -.less than half thesmallst unit rshown-rge

I' ec -esparta, nal,esslfied doisotic esct.sd djuastiests for tier, value, sod eeae

o o. Ir, ^ a osr p o P w d !1x 3 c ; s a @ <X ; - 9w wt w

' °lnl ~~~~ < ~~~4 8 ' f =0 3 e~~A A e^- :a-'

' 1- ^° -: eL e o n e e TIsIe oP o mo l

41 e o nr I

s lo Cf o kat,,' r>;s rr1; ~rvotbt 7 4 E

o oo|o| e ~~~ ' r' ' t ° p ° r o r e o t t 2 ot, fl U c e~~A.

_ * 4 _ ° _ 4 R > ~~~ R ¢ He

ANNEX IIPage 1i-of 6

A. STATEMENT OF BANI LOANS AND IDA CREDITS TO TANZANIAMARCH 31, 1974

(US$ million)Amount less cancellations

No. Year Borrower Purpose Bank IDA Undisbursed

One loan and six credits fully disbursed 5.2 43.0

586 TA 1969 Tanzania Roads 7.0 2.6

149 TA 1969 Tanzania Education 5.0 2.1

217 TA 1970 Tanzania Tobacco 9.0 7.7

715 TA 1970 TANESCO Power 30.0 3.6

232 TA 1971 Tanzania Education 3.3 3.3

265 TA 1972 Tanzania Roads 6.5 6.3

287 TA 1972 Tanzania SmallholderTea 10.8 9.3

371 TA 1973 Tanzania Education 10.3 10.3

382 TA 1973 Tanzania Livestock 18.5 18.5

454 TA 1974 Tanzania Cotton 17.5 17.5

460 TA 1974 Tanzania TanzaniaInvestment Bank 6.0 6.o

Total 42.2 129.9 87.2of which has been repaid 0.6 0.1

Total now outstanding 41.6 129.8

Amount sold: .1of which has been repaid .1

Total now held by Bank and IDA 1/ 41. 6 129.8

Total undisbursed 6.2 81.0 87.2N=== ===== =em

1/Net of exchange adjustments.

ANNEX IIPage 2 of 6

B. SUMMARY STATEMENT OF EANK LOANS FOR COMMON SERVICES GUARANTEEDBY KENYA, TANZAAflA AND UGANDA AS AT MARCH 31, 1974

(US$ million)Amount less cancellations

No. Year Borrower Purpose BMnk Undisbursed

Three loans fully disbursed 75.0

638 EA 1969 EAHC Harbors 35.0 11.2

674 EA 1970 EARC Railways 42.4 21.5

675 EA 1970 EAPTC Telecomnmications 10.4 0.7

843 EA 1972 EADB Development Finance 8.0 8.o

865 EA 1972 EAHC Harbors 26.5 22.8

914 EA 1973 BAPTC Telecommunications 32.5 29.1

Total 229.8 93.3of which has been repaid 25.4

Total now outstanding 20b.4

Amount sold: 24.4of which has been repaid 2J.4 1.0

Total now held by Bank 1/ 203.4

Total undisbursed 93.3

1/ Net of exchange adjustments.

ANNEX IIPage 3 of 6

C. PROJECTS IN EXECUTION!"(As of March 31, 1974)

There are currently 11 projects under execution.

AGRICULTURAL SECTOR

Credit No. 217 TA - Tobacco Project: $9.0 Million Credit of October9, 1970; Closing Date - September 30, 1976

Although this Project continues to experience difficulties, itsprospects appear to be improving. Farmer recruitment has improvednow that more farmers can cultivate tobacco on an individual as wellas a collective basis; however, there is still a shortfall of therevised planting targets. The village water supply situation whichhas caused severe recruitment problems in the past has greatly improved.The financial managemant of the Project remains weak and arrangementsare being made to recruit a suitably qualified and experienced financialcontroller for the Tobacco Authority.

Credit No. 287 TA - Smallholder Tea Project: $10.8 Million Credit ofMarch 3, 1972; Closing Date - December 31, 1976

This Project has experienced a number of delays. Although problemsrelating to farmer recruitment have eased as the Government's col-lectivization policy has become more flexible, the Project has experienceda number of implementation difficulties reflecting shortcomings inProject management. The Government and the Tea Authority are nowconsidering ways of strengthening management to assist theAuthority in solving those difficulties.

1/ These notes are designed to inform the Executive Directorsregarding the progress of projects in execution, and in particularto report any problems which are being encountered, and the actionsbeing taken to remedy them. They should be read in this sense,and with the understanding that they do not purport to presenta balanced evaluation of strengths and weaknesses in projectexecution.

ANNEX IIPage 4 of 6

Credit No. 382 TA - Second Livestock Doevelopuent Project: $18.5 MillionCredit of May 23, 1973; Closing Date - December 31, 197°

The Credit was declared effective on September 28, 1973. TheGovernment is recruiting the necessary staff to implement this Project.Plans for the first phase of procurement are presently being finalized.

Credit No. 454 TA - Geita Cotton Project: $17.5 Million Credit ofJanuary 17, 1974; Closing Date - December 31, 1982

This credit was declared effective on April 5, 1974. The Govern-ment and Cotton Authority are proceeding with recruitment.

POVER SECTOR

Loan No. 715 TA - Kidatu Rydroelectric Project: $30.0 Million Loanof December 1h, 1970; Closing Date - June 30, 1976

This Project has encountered major cost overruns. The latestcost estimates exceed the original (US $59.0 million) by about one-

half. The two main factors responlsible for the overruns were (i)the unexpectedly high cost escalations inside and outside Tanzaniasince appraisal in April 1970 and (ii) the unexpected bad rock cond-

itions encountered during escalation of the underground facilitieswhich make up the major part of the main civil engineering works.

CIDA of Canada has provided Can$13.0 million to cover a large portionof the overruns. Discussions are currently- taking place between theBank, the Government and SIDA with a view to covering the residual(about $ 9 .5 million). A supplementary loan would be necessary to ensurethe completion of the Project as originally scheduled3 such a proposal idshortly expected to be submitted to the Executive Directors for their

consideration. In spite ol' these cost overruns, Lhe Project still remainsthe most attractive alternative to othar possible development includingthermal, in the power sector.

INDUSTRIAL SECTOR

Credit No. 460-TA - Tanzania Investment Bank Project: $6.0 Million Creditof Februaxy 13, 1974; Closing_Date - June 30, 1978

This Credit was declared effective on April 18, 1974.

ANNEX IIPage 5 of 6

TRANSPCRTATION SECTOR

Loan No. 586-TA - Second Highway Project: $7.0 Million Loan ofFebruary 24, 1969; Original Closing Date - December 31, 1972:Revised Closing Date - June 30, 1974

Construction work on this Project has been completed, but out-standing claims by contractors are substantial. The Government and thecontractors have been negotiating these various claims for some time;these negotiations are still continuing.

Credit No. 265-TA - Third Highway Project: $6.5 Million Credit ofAugust 6, 1971; Closing Date - December 31, 1974

After long delays by Government in completing tenderarrangements, an award of contract for the improvement of theMtwara-Masasi Road has been made. However, owing to the increasein world prices for civil works since the appraisal in 1970, the bidprice for improving this Road is now more than double the appraisalestimate. Work by two betterment units on the improvement of about475 km. of agricultural feeder roads in the Geita district and Mararegion has commenced. Consultants for the preinvestment studiesto be funded under the Project have been selected and contracts arebeing negotiated.

EDUCATION SECTOR

Credit No. 14 9-TA - Second Education Project: $5.0 Million Creditof May 29, 1969; Closing Date - December 31, 1975

Progress has improved recently. All civil works contractshave now been awarded and although it is not expected that lost timecan be made up, all elements of the project should be completed in goodorder within a 24 month extension of the Closing Date.

Credit No. 232-TA - Third Education Project: $3.3 Million Creditof February 5, 1971; Closing Date - June 30, 1975

BidB for the construction of all 13 project institutionswere received in May 1973 resulting in the contract award for fourinstitutions but due to high quotations and poor response, theremaining nine were retendered. Although the new tenders were stillhigher than anticipated, all civil works contracts have now beenawarded. Although the lost time cannot be made up, project progresshas now improved.

ANNEX IIPage 6 of 6

Credit No. 371-TA - Fourth Biucation Project: $10.3 Million Creditof April 13, 1973; Closing Date - June 30, 1978

The Credit was declared effective July 2, 1973. TheProject Coordinator has been appointed and after some delays,technical assistance specialists to assist in Project implementation,provided by the Danish International Development Agency, havebeen recruited and are now arriving in Dar es Salaam.

ANNEX IIIPage 1 of 2 pages

TANZANIA

Credit and ProJect Summary

Borrower: United hepublic of Tanzania.

Amount: US$8.5 million equivalent.

Beneficiary: Part of the proceeds of the credit would be relent tothe Tanzania Housing Bank (THB).

Terms: Standard IDA terms.

ProjectDescription: National Sites and Services ProJect. The project con-

sists of about 10,600 newly serviced plots and improve-ment to existing squatter settlements affecting about8,800 dwellings and related infrastructure and communityfacilities including community education centers, dispen-saries and markets; construction loans for purchase ofbuilding materials; a pilot nutrition project; expansionof training facilities at the Ardhi Institute and trainingprogram for Ardhi technical staff; consultants servicesfor design and detailed engineering, overall1 project -_supervision and preparation of a follow-up project; andmonitoring and evaluation of the project.

Cost ofProject: US$'000

Component Local Foreign Total

A. Land Acquisition 634 - 634B. Infrastructure 2,364 1,682 4,046C. Community Facilities 1,098 472 1,570D. Technical Assistance 433 792 1,225E. Equipment/vehicles - 150 150F. Tanzanian Housing

Bank 6,303 - 6,303G. Contingencies 1.980 829 2.827

Total Project Cost 12,812 3,945 16,757

FinancingPlan: The financing plan is expected to be as follows:

Component IDA Government TotalUS$'ooo % us$'ooo0 us%oioo

Land Acquisition - 0 634 100 634Infrastructure and

Community Facilities 3,650 65 1,966 35 5,616Technical Assistance 919 75 306 25 1,225Equipment/Vehicles 150 100 - 0 150TB - Construction

loans 1,961 31 4,342 69 62303Contingencies 1.839 65 990 3T 2,829

Total 8,519 51 8,238 49 16,757

ANNEX IIIPage 2 of 2 pages

Relendinrs The following are the proposed relending terms:

Government to Tanzania 3% 25 years relendingHousing Bank (THB) 5-year grace

THB to cooperative buildingsocieties or individualsfor low-cost housing onproject sites 6% 20 years

EstimatedDisbursements: Fiscal Year

(US$ millions)

171974 1976 1216 1978

0.5 2.9 4.0 0.3 0.8

ProcurementArrangements: International competitive bidding for civil works, local

civil works contractors will be allowed a 7½ percentpreference. Contracts for equipment and vehicles willbe awarded in accordance with the Government's usualprocurement procedures as amount involved is $150,000and items are required at different stages of projectimplement-ation.

Rate ofReturn: 10.4-peroent (new sitas), to 14.5 percent (squatter

improv.iont).

AppraisalReDort: Report No. 337-TA dated May 14, 1974.

Haps: Maps of the proposed project areas are attached.

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