Project assistance completion report : African economic policy reform program (AEPRP) and cereals export liberalization program

Report covers the period 1986-1990. CELT sought to achieve liberalization of the cereals market by encouraging the Government of Togo (GOT) to allow the private sector to export surplus produce. To this end an export licensing system was established by a presidential decree on November 25, 1986. By the end of the project, however, virtually no licenses had been issued to private traders for cereal exports. The reasons for this include poor production of cereals, the licensing bodies" distrust of statistics predicting exportable surpluses, and the view held by some political leaders that the CELT program constituted a threat to food self sufficiency. A second objective of the CELT program was the use of local currency counterpart funds to alleviate some of the constraints to efficient marketing of cereals. These funds were to be used to provide credit to cereal traders and producers to finance their activities, build storage facilities, and to improve roads to facilitate transportation of food crops to markets. Release of each of the two tranches of $3.5 million to the GOT was dependent upon fulfillment of specific conditions precedent (CP). Presidential decree (86-21) was issued to meet the CPs to the disbursement of the first tranche of funds. This decree liberalized and privatized food crop exports subject to the preservation of national food security. The funds were transferred to the GOT on February 7, 1987, one week after the decree became effective. Release of the second tranche of funds was delayed until November of 1989 when USAID was satisfied that the second set of CPs had been met. The second set of CPs were established to ensure that the liberalizations that were decreed, in fact took place. Very little of the local currency funds were used for their intended purposes. Most of the first tranche was lost in an embezzlement scandal involving CNCA, the financial intermediary where the funds were deposited. By the end of the project, only about 7% of the second tranche had been used. No credit was extended to traders and only 12 farmer groups received assistance in marketing and storing maize. None of the funds were used to improve road conditions. A third objective was to provide technical support to the Bureau of Agricultural Statistics Services (DESA). Specifically, the TA team improved the capacity of DESA to provide accurate forecasts of food production and consumption. The purchase of several computer systems, and training provided to key DESA employees enabled a crop price and production forecasting model to be developed and refined during the course of the project. Weekly crop price data was published in national newspapers beginning in March 1988. In addition, the DESA published a review of 1989-90 food crop statistics, and 1989 food crop prices. Lessons learned include the following: (1) sufficient dialogue with the host government should occur before programs are developed to ensure a unity of purpose and expected achievements; (2) before designing programs, a thorough socioeconomic analysis needs to be conducted in order to identify constraints to program success; (3) the imposition of a licensing system ultimately served to contradict the objective of reducing legal restrictions to export trade by creating another bureaucratic layer; (4) local currency funds should not be essential to program success. Requiring counterpart funds greatly diminished the value of balance of payments support. An addendum to the PACR states that, as of 12/92, the GOT was persisting in its policy to control every aspect of the economy that it could in order to sustain the high civil service employment rate and pay operating costs. In hindsight it is clear the GOT never really intended to fully comply with the project goal to allow the private sector to drive and be responsible for increased agricultural production. The government still maintains a monopoly on inputs and discourages "speculation," a term used by the GOT to refer to the private sector. TOGOGRAIN still functions and sells cereals for profit. It was recently involved in a trilateral food relief operation with France and Cape Verde despite the government"s insistence that the private sector was free to operate. France bought from TOGOGRAIN 4,000 tons of cereals which it in turn donated to Cape Verde for relief operations. France defended this procurement method saying that there were no businesses or established networks able to provide the required quantity. A major lesson learned is that only by attacking fundamental macroeconomic and social policies, i.e., fiscal reform, privatization, and budgetary responsibility, will agricultural projects and agricultural policy reform programs bear fruit. (Author abstract)