Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 2480a-AL

STAFF APPRAISAL REPORT

MEAT INDUSTRY (ONAB) PROJEC

ALGERIA

June 11, 1979

Europe, Middle East and North AfricaProjects Department

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

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CURRENCY EQUIVALENTS(as of March 1978)

US$1.00 = 4 Algerian Dinars (DA)

DA 1.00 US$0.25

WEIGHTS AND MEASURES

Metric System British/US Systems

1 kilogram (kg) = 2.2 pounds

1 metric ton (t) = 2,205 pounds

1 millimeter (mm) = 0.04 inch

1 meter (m) = 3.28 feet

1 kilometer (km) = 0.62 mile

1 hectare (ha) = 2.47 acres

1 square kilometer (km2) = 0.386 square mile

1 liter (1) = 0.264 gallon

1 cubic meter (m3) = 35.28 cubic feet

1 million cubic meters (Mm3) = 810.7 acre feet

1 liter per second (1/sec) = 0.04 cubic feet per second

1 Newton/square millimeter (N/mm2) = 145.16 pounds force/square inch (lbf/in2 )

DEMOCRATIC & POPULAR REPUBLIC OF ALGERIA

Fiscal Year

January 1 - December 31

FOR OFFICIAL USE ONLY

ABBREVIATIONS AND ACRONYMS

BAD Algerian Development Bank

BNA National Bank of Algeria

BNEDER Bureau for the Study of Rural Development

CAPCS Commune Level Agricultural Service Centers

DARAW Agricultural Directorate at the Wilaya

MARA Ministry of Agriculture and of the Agrarian Revolution

SEP State Secretariat for Planning

SNC National Accounting Corporation

Directorates under MARA

DEP Directorate of Studies and Planning

IDGC Development Institute for Cereals and Pulses

IDEO Development Institute for Sheep

ONAB Office for Animal Feed

CET Fattening and Transit Center of ONAB

SONATMAG National Cold Storage Company

SONIPEC National Tanning Company

I This document has a restricted distribution and may be used by recipients only in the performanceof their officiai duties. lis contents may not otherwisc be disclosed without World Bank authorization.

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MEAT INDUSTRY TERMS AND CONVERSIONS

Offtake percent Number of animals killed in each year expressedas a percent of the total number of animals.

Killing out percent Bone-in carcass weight expressed as a percentof liveweight.

Bone-in carcass weight Weight of carcass meat after removal of inedibleoffal and edible offal and hide or skin, butbefore deboning.

Boneless meat Meat after deboning. In this report only appliedfor beef and assumed that one kg bone-in carcassis equivalent to 0.73 kg boneless meat.

Red meat In this report, beef and mutton only (goats,camels, etc. excluded).

White meat In this report poultry only (fish excluded).

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ALGERIA

APPRAISAL OF MEAT INDUSTRY (ONAB) PROJECT

TABLE OF CONTENTS

Page No.

I. THE AGRICULTURAL SECTOR .............................. 1

A. Sector Strategy and Performance .... ............. 1B. Main Sector Issues .............................. 5C. Bank Role ....................................... 6

II. THE LIVESTOCK AND MEAT SUBSECTOR ..................... 7

A. Livestock Production ............................ 7B. Livestock Slaughter and Distribution .... ........ 10C. National Office for Livestock Feed (ONAB) ....... 14

III. THE PROJECT ....... ................ ................... 20

A. Project Objectives .............................. 20B. Project Description ............................. 21C. Status of Engineering .26D. Implementation Schedule ......................... 26E. Cost Estimates .................................. 28F. Financing ....................................... 28G. Procurement, Disbursement, Accounts and Audit ... 30H. Environment and Health .......................... 32

IV. ORGANIZATION AND MANAGEMENT .......................... 32

V. PROJECT PRODUCTION, MARKETING AND FINANCIAL ANALYSIS . 36

A. Project Physical Output ......................... 36B. Future National Supply and Demand for Meat ...... 41C. Prices ........ .................................. 42D. Financial Analysis .............................. 44E. Manpower Considerations ......................... 45

VI. BENEFITS AND JUSTIFICATION ... ........................ 45

A. Production Benefits ............................. 45B. Meat Complex Benefits ........................... 47C. Economic Rate of Return ......................... 49

VII. RECOMMENDATIONS AND LOAN CONDITIONS ......... ......... 52

This report is based on the findings of a Bank mission which visited Algeriain December 1978 comprising Messrs. E. Quicke, J. Cerych, L. de Merode (Bank),and A. Estrade and E. Yates (Consultants). Ms. M. Varkie assisted in theProject analysis.

LIST OF TABLES IN MAIN TEXT Page No.

Table No.

2.1 National Cattle Numbers and Beef Production ............ 92.2 National Sheep Numbers and Local Mutton Production ..... 102.3 National Consumption of Red Meat .... ...................2.4 Red Meat Supply in Algiers .............................2.5 Algeria - Liveweight Prices ............................ 132.6 ONAB Meat Purchase and Sales Prices, 1978 .... .......... 142.7 ONAB's Sales of Red Meat ............................... 162.8 ONAB - Key Financial Indicators ........................ 182.9 ONAB - Income and Expenditure .......................... 193.1 Project Cost Estimates ................................. 293.2 Project Financing ...................................... 305.1 Algiers Meat Complex Output ............................ 395.2 Oran and Annaba Meat Complexes ......................... 405.3 Incremental Output from Algiers, Oran and Annaba

Meat Complexes ....................................... 415.4 Projected National Supply and Demand .... ............... 425.5 Projected Sales Prices for ONAB Meat .... ............... 436.1 Project Sensitivity Analysis ........................... 51

LIST OF FIGURES IN MAIN TEXT

3.1 Implementation Schedule ................................ 27

ANNEXES

1. Table 1 - Main Technical CharacteristicsSheep Purchase, Transit and Fattening ........ 54

Table 2 - Main Technical CharacteristicsAlgiers Meat Complex ......................... 55

Table 3 - Main Technical CharacteristicsOran and Annaba Meat Complexes .... ........... 56

Table 4 - Project Costs ................................ 57Table 5 - Schedule of Disbursements .................... 59Table 6 - Proposed Allocation of Loan Proceeds ......... 60

2. Selected Document and Data Available in the ProjectFile ................................................. 61

MAP

IBRD 14304

I. THE AGRICULTURAL SECTOR

A. Sector Strategy and Performance

Background

1.01 Agriculture is constrained in Algeria by difficult climatic andgeological conditions, and about 80% of the total land area is unproductive.Generally, the richest agricultural areas are located in a narrow band in thenorth, where annual rainfall (500-1,000 mm) permits growing fruits, vegetables,industrial crops, and high yield wheat varieties, and where the ainount offallow land is lowest. Areas in the 300-500 mm rainfall zone located betweenthe Northern zone and the desert, depend on a rotation of cereals and fallow.Further south in the Steppe the population is almost entirely dependent onsheep and goat production. Overall, forest and alfa grass (Stipa tenacissima)cover about 4% of the land area, pastureland used for grazing of livestockabout 13%, and cultivable land about 3%. Of the roughly 8 million ha ofcultivable land, 5 million ha were utilized in 1976, and the balance leftfallow. The cropping pattern included 43% winter cereals (wheat, barley, rye),41% fallow, 5% fruit trees, 4% forage crops, 3% vineyards, 2% vegetables,1% pulses and the balance under industrial and other crops.

1.02 In 1977, despite its relatively narrow resource base, agricultureemployed about 43% of Algeria's total active population of 4 million and 60%of Algeria's 17.3 million people lived in rural areas. However, the rapidgrowth of the industrial, hydrocarbon and urban services sectors, along withthe emphasis given by Government to industry, and improvement in housing andsocial services in urban areas, has contributed to high migration from ruralto urban areas. During the past ten years population growth averaged 3.2%p.a., with growth of urban population equal to 5.1% p.a., and that of ruralpopulation 2.0% p.a.

1.03 Government efforts to increase employment opportunities in non-agricultural sectors were relatively successful, with 359,000 jobs createdduring 1974-1976 or an employment growth rate of 6.8% p.a. Unemployment innon-agricultural sectors fell from 17% of the work force in 1973 to 10% in1976. In agriculture, employment creation was considerably slower. The num-ber of permanent jobs rose by 43,000 from 1973 to 1976 at a growth rate of1.6% p.a., while seasonal employment increased by about 0.3% during the sameperiod. Agricultural underemployment is high, with estimates ranging from 25%in the self-managed sector (para 1.05), to 60% of the total agricultural workforce. Despite this, there is evidence of localized shortages of manpowerduring parts of the year when agricultural activity peaks. In addition, ithas been the younger and better workers who have left the agricultural sector.

Sector Objectives and Investment Strategy

1.04 At the time of independence, Algeria was a predominantly agrariansociety with a very limited industrial base. The basis of independentAlgeria's economic policy has been the promotion of rapid industrializationcombined with increasing the country's economic independence. Structural

reforms were undertaken to reduce the dependence of the economy on foreigninterests and on trade with France, the principal of which was the applica-tion of central planning to the economy. In parallel, efforts were made todevelop education and training to meet the manpower needs of the strategy.The goal in agriculture, in addition to structural reform, was to shift fromthe export orientation developed during the colonial period to meeting domes-tic food requirements. However by assigning paramount importance to achievingthe structural reforms such as establishing self-managed farms, "Offices" andthe cooperatives of the agrarian revolution, which are discussed in the follow-ing paragraphs, insufficient emphasis was given to agricultural investment,incentives and productivity.

1.05 The Self-Managed Farms. Just before independence, about 20,000properties on 2.4 million ha were owned by Europeans. There were 630,000Algerian properties covering about 7 million ha (including pastureland).Average property size was 124 ha and Il ha respectively. European-owned farmswere found on the better land with the highest rainfall, mostly within anarrow strip in Northern Algeria. Employment on European farms, both seasonaland permanent, totalled about 250,000. These farms used modern farmingtechniques, considerable machinery and modern inputs. Production was directedmainly to the export market, with vineyards and orchards most important. Landowned by Algerians was generally of lower quality, and unevenly distributed.Property was fragmented and traditional farming techniques were predominant.Production was directed towards local consumption. Beginning before indepen-dence in 1962, the European landowners left the country, and management oftheir farms was taken over by the farm workers. Their land was nationalizedin 1963 and right to use it in perpetuity was given to the workers groupedinto large worker "self-managed" farms. The European properties were in mostcases consolidated so that about 2,000 "self-managed" farms were created onabout 2.1 million ha of cultivable land. About 180,000 permanent workers arepresently employed on these farms. A manager was appointed by Government toeach self-managed farm in order to provide technical assistance and to imple-ment Government instructions. The self-managed farms continue to use produc-tion techniques similar to those employed by the previous European landowners.The self-managed farms are only partly autonomous, implementing the investmentand operating plans provided them by Government. These plans are derived froma centralized planning process previously emanating from the Central Govern-ment, but recently decentralized considerably to the Provincial level.

1.06 Marketing and Credit. A major structural change begun in the 1960'swas the creation of Government owned marketing and input supply "Offices",each specializing in a product or group of products. The marketing and inputsupply "Offices" have required several years to organize, and in many caseshave not provided adequate service. Another structural change involved theconsolidation of the local assets of the European dominated banking systeminto the Government owned "Banque Nationale d'Algerie" (BNA) Banque Algeriennede Developpement (BAD) and other nationalized banks. However, credit allocatedto agriculture was reduced to low levels, contributing to the lack of replace-ment of equipment in agriculture during the 1960's. Agricultural marketingand input supply centers ("Cooperatives Agricoles Polyvalentes Communales deServices", or CAPCS) were established during the 1970's and managed by staff

appointed by the Ministry of Agriculture. By 1977, CAPCS had been establishedin 654 of Algeria's 703 communes. The CAPCS sell inputs to farms and marketagricultural output; primarily fruit, vegetables, and fodder to the "Offices."The objective is to bring the marketing and input supply function close to thefarm.

1.07 Cooperatives of the Agrarian Revolution and Private Sector. Furtherstructural changes took place in the 1970's. The first was the "AgrarianRevolution" in which state and communal land, as well as land expropriatedfrom absentee landowners and from the largest private farmers was distributedto landless peasants. Most beneficiaries were organized into productioncooperatives. By 1978, about 7,000 cooperatives had been created allottingone million ha, including 120,000 ha of pastureland, to 100,000 beneficiaryfamilies. These Agrarian Revolution Cooperatives, together with 2,000 self-managed farms, form the socialist sector holding a total of about threemillion ha of cultivable land. The remaining private sector supports about700,000 families on 4.8 million ha of cultivable land. Private livestockowners and farmers also exploit approximately 31 million ha of arid pasture-land, primarily in the Steppe Region.

1.08 Agricultural Planning. During the 1960's agricultural planningwas weak, principally due to manpower shortages, but it became more organizedwith the beginning of the first Four Year Plan (1970-1973). There has nowbeen a partial decentralization of the planning process from the CentralGovernment to the Wilaya (Provincial) Government level, and the creation ofcrop and livestock specific "institutes" at the national level which undertakeagricultural development, including applied research, demonstration and exten-sion. For agriculture, decentralization has meant increased responsibilityfor planning by staff of the Ministry of Agriculture and Agrarian Revolutionin Provincial headquarters, assisted by the institutes. Goals for agricultureunder the Second Plan, which are likely to apply for the Third Plan, included:

(a) continuation of the shift out of food exports to foodself-sufficiency;

(b) diversification of crop production;

(c) improvement of rural revenue, rural infrastructure, anddevelopment of rural employment opportunities;

(d) improvement of agricultural marketing and input supply; and

(e) relative improvement of the condition of the poorest groupsin the rural sector.

The Third Plan is likely to continue to emphasize these goals and to putgreater emphasis on decentralization of planning and project execution and ondevelopment of the private agricultural sector which has been neglected(para 1.09).

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Agricultural Investment and Performance

1.09 Despite ambitious national goals for agriculture and the relativeimportance of the sector for the Algerian economy, agriculture has been allo-cated small and declining shares of investment budgets: 15% under the FirstPlan (1970-1973), and 11% under the Second Plan (1974-1977). Low priorityaccorded to agriculture for building materials, equipment, import licenses,and qualified personnel, as well as administrative delays in beginning proj-ects and allocating credit, caused the sector to use up an even lesser pro-portion of national investment funds: 10% under the First Plan, and 7% underthe Second Plan. Moreover, during this period of structural reform, invest-ment in agriculture was nearly exclusively directed towards the socialistsector. The private sector, with 62% of the land, received less than 5% ofcredits to agriculture between 1972 and 1975. Investments designed to satisfysocial objectives in agriculture were relatively successful, with the creationof Agrarian Revolution Cooperatives, rural schools, dispensaries, roads, andsocialist villages, and the creation of CAPCS. Among productive investments,shortfalls were most striking for irrigation schemes, where less than 50% oftargeted areas were developed. As a result it is hardly surprising that theperformance of the sector has been disappointing. Agriculture's share in GDPdeclined from 10% during the First Plan to 7% during the Second Plan, andagricultural production lagged behind the large strides taken by the hydro-carbon and industrial sectors.

1.10 The cropping pattern has changed significantly over time as exportoriented crops such as grapes and olives have been replaced with domesticallyconsumed foodstuffs. As production of most crops in Algeria is highly vari-able in response to variation in climatic conditions, it is difficult todiscern marked trends in yields. After rapid progress in soft wheat yieldsin the 1965-1973 period, due to an increased area of improved varieties,soft wheat yields reached a plateau, but there has been no long term improve-ment in durum wheat production, although yields increased somewhat in the1970-1976 period. Total grain production failed to keep pace with populationgrowth, necessitating increasingly large imports. Due to changes in the areaof crop, production of vegetables, pulses, some fruits (particularly cherries,pears, and peaches), industrial tomatoes, has increased over the 1970-1977period at an average rate equal to population growth. Production of severalindustrial crops has tended to stagnate or decline, particularly cotton,tobacco, and sugar beet, partly because of the deterioration of irrigationfacilities.

1.11 But food production failed to keep pace with demand due to higherconsumption levels brought about by improving standards of living. Foodimports increased rapidly over the 1970-1976 period, though with considerableannual variation. Despite very high growth in imnports of non-agriculturalgoods, the average proportion of foodstuff imports to total imports rosefrom 14% to 17% between the First and the Second Plans. At the same time,accentuating the deterioration in the agricultural balance of trade, exportsdeclined, as a result of lower production and of restrictions to the entry oftraditional exports of wine and vegetables in the Common Market. Thanks tothe increase in imports of foodstuffs, Algerians on average are provided withadequate intakes of calories and proteins, although deficiencies appear among

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the people living in urban areas and in the arid south. Unless substantialimprovement takes place in the sector, however, or population growth abates,the total food import bill is projected to increase by some 3.6% per annum inreal terms over the next ten years, representing an increasing claim over thecountry's foreign exchange earnings.

B. Main Sector Issues

Incentives and Investment

1.12 The structural reforms leading to the establishment of the socialistsector, and government supporting services have been largely completed. Thecentral issue now is how to make the sector more productive. The orientationtowards agricultural exports (chiefly wine) has been dropped, with few gainsin import substitution. If agricultural growth is to be accelerated, twobasic requirements must be met. First, adequate incentives must be created,and second, more resources (investment and human) must be devoted to the sec-tor, particularly to private farmers who own 62% of the cultivable land.

Farm Level

1.13 Socialist sector farms (including the self-managed farms and AgrarianRevolution Cooperatives) must be given greater autonomy in financial decisionsas well as greater responsibility for repayment of credit obligations in orderto increase their incentive to make efficient use of investments. Increasedproduction incentives must be provided to workers on socialist sector farms,including termination of the ceiling on profit distribution to laborers, anincrease in the percentage of profits distributed to socialist sector farmers,more favorable producer prices relative to costs. Consistency of farm levelactivity with Government plans could be assured through the more systematicuse of price policy. The present Government policy of increasing agriculturalprices relative to input prices should be continued in order to stimulateproduction, reduce urban/rural income disparities and promote technicalinnovation and the use of modern inputs by agriculture.

Supporting Services

1.14 Government Administration. Over-centralization of Government ser-vices still remains a serious problem, combined with a lack of coordinationbetween departments within MARA. They can best be resolved through (a)investment and program coordination in regionally integrated projects and(b) more decentralization of decision making from the Government administra-tion to the level of the enterprise, farm and commune. The major constrainton implementing these recommendations is the availability of qualified per-sonnel. Although Algeria has undertaken an important training effort, thescarcity of qualified staff would probably inhibit rapid decentralization atall levels. Within the Ministry of Agriculture (MARA), in addition to presenttraining efforts, greater incentives must be provided to qualified personnelto induce them to enter public service.

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1.15 Research and Extension. Algeria should confine its agriculturalresearch program to relevant and urgent production oriented questions andinsist on proper coordination between crop and livestock institutes. Tocomplement research activities Government should establish an agriculturalextension service, which should be systematically planned, implemented andsupervised. The service should assist all farmers including those in theprivate sector. A Bank Technical Assistance Loan is assisti'ng Governmentin the formulation of extension methods and system in the Sidi Bel AbbesRegion.

1.16 Marketing and Credit. The major marketing issues involve the needto give the private sector access to modern inputs and commodity marketingstructures, and to reduce scarcities of farm inputs and of agriculturalcommodities. Solutions involve expansion of the role and the facilities ofthe commune level input supply and marketing cooperatives (CAPCS), increasedinvestment priority given to industries producing agricultural equipment andinputs, reorganization of the marketing "Offices" and input supply interme-diaries along market oriented as opposed to administrative lines and increasedflexibility provided to input supply intermediaries in importing inputs orequipment when shortfalls occur in domestic production. The allocation ofagricultural credit should be decentralized to bank outlets at the communelevel. Moreover greater use should be made of contractual relationshipsbetween farm units and public enterprises or cooperatives. Contracts couldfacilitate the provision of credit and inputs to private farmers, with creditrepaid out of sales contracted with the CAPCS.

Irrigation

1.17 Irrigation potential is relatively untapped in Algeria, and mostirrigation structures which exist require rehabilitation. The largest devel-opment shortfalls compared to Algeria's Development Plan have occurred inthe irrigation subsector. The administration responsible for water resourcedevelopment including irrigation has been reorganized and improvement inquality and quantity of irrigation projects can be expected. The emphasisin the irrigation subsector should be the rehabilitation of existing largeperimeters, and development or modernization of small scale irrigationschemes. The potential for irrigated forage production, to overcome themajor constraint to livestock development which is inadequate feed, shouldbe exploited. National irrigation development requires a National WaterMaster Plan, formulation of a new National Water Code, and reform of thestructure of water charges.

C. Bank Role

Sector Analysis

1.18 The Bank has recently prepared a sector report which is presentlyunder discussion in draft form with the Government. The report is based onmissions carried out in late 1977 and in early 1978, with the collaboration of

the Bureau National d'Etudes pour le Developpement Rural (BNEDER) in Algeria.The views expressed in the report have already found wide agreement amongpolicy-makers in the sector. The report is complemented by a UNDP-financedstudy, for which the Bank is executing agency, the aim of which is to set upsimulation models for the sector in order to assist Government in decisionmaking, and to establish a sector-wide monitoring system.

Project Pipeline

1.19 The Bank sector missions, described above, also identified a numberof agricultural projects for possible Bank financing, of which one is thepresent Project. It has been proposed for early financing, since its success-ful implementation is not dependent on policy changes. The Project will beimplemented by the Office National des Aliments du Betail (ONAB) (paras 2.17-2.34), one of the main "Offices" under MARA. The Project will address severalof the issues raised in this chapter, coordination of crop and livestockactivities (para 1.15), strengthening of marketing through the CAPCS (para1.16), increased livestock production (para 1.11) and reorganization of thefinancial practices of the "Offices" (para 1.06).

1.20 A regional development project, which addresses directly the mainissues mentioned in this chapter, is under preparation for the Sidi Bel AbbesRegion. Project preparation is nearly complete but its finalization willawait acceptance by the Government of many of the recommendations of theBank's Sector Report. Other projects in the pipeline include irrigationrehabilitation in the Lower Cheliff Valley (proposed for FY80) and projectsin fisheries, rural roads and forestry.

II. THE LIVESTOCK AND MEAT SUBSECTOR

A. Livestock Production

Zones of Production

2.01 Livestock is distributed through the three principal climaticregions of Algeria. Apart from dairy cattle which are concentrated near tothe main urban areas, the lowest livestock numbers are to be found in thelittoral plain in the north, where with an annual rainfall of 500-1,000 mm,conditions are more suitable for fruit and vegetable cultivation than forlivestock.

2.02 The greatest potential for livestock production lies in the HighPlateau and on the southern slopes of the Atlas mountains where rainfallis between 300-500 mm. This area is primarily devoted to winter cerealgrowing, mainly on large self-managed farms. It is referred to as the cerealzone of the High Plateau in this report. The predominant rotation is wheat-fallow-wheat. In 1976 some 3.4 million ha or 41% of the cultivable land wasunder fallow, which provides some grazing for a sedentary sheep population,

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and in the spring and summer also for transhumant sheep that move north fromthe arid south. The sheep also graze the steep land which in the past has notbeen cultivated. However with the spread of powerful tractors, cultivationsare now taking place in the dry summer, enabling a larger area to be preparedfor planting in the short autumn planting season. Moreover the steep land,which used to be available for grazing, is becoming increasingly plowed up andplanted to cereals. Soils in this zone are alkaline, thin and friable, andsteeply sloping land is liable to erode when it is left bare. A growingreluctance on the part of the self-managed cereal farms is the risk of damagefrom sheep grazing their growing cereal crops; this is another factor contri-buting to reducing the sheep fodder available from stubble and fallow in thiszone. The sheep are not the only losers in this situation. The loss oforganic matter which the sheep used to contribute to the soil is resulting ina loss of fertility and reduced moisture retention capacity of the soil, andtherefore lower cereal yields.

2.03 To the south lies the Steppe, which is a continuation of the HighPlateau and falls gently from the Atlas foothills out into the Sahara Desert.Vegetation is typically semi-arid or arid desert low scrub, grazed by nomadicsheep flocks. Average rainfall is less than 250 mm. Recently the wetternorthern fringes (300 mm) of the Steppe and the shallow valleys where moisturecollects, which have traditionally been reserved for dry season grazing, havebeen plowed for cereal production. But cereal crops can seldom be harvestedand wind erosion destroys the land for future cropping or pasture, deprivingthe sheep of much of its food supply. For generations the majority of Algeria'ssheep flock has migrated from the low rainfall arid Steppe in the early springto the moister plateau, returning to the Steppe in the autumn to spend thewinter. As a result of increased cereal cultivation over the last generation,summer grazing in the High Plateau has been discouraged and a greater propor-tion of the flock has remained throughout the year on the Steppe. The Steppehas become heavily overgrazed, with a result that the quality of the pastureis deteriorating, and carrying capacity is now becoming reduced. Visualevidence supports the view that a cycle of degradation is underway.

Cattle Numbers and Production

2.04 Most of the cattle in Algeria are to be found in the wetter littoralplain and the hills of Northeast Algeria. They are owned almost entirely bysmall private farmers with relatively few head each. They are small, latematuring animals used for both meat and milk. There is a steady increase inthe number of supply and marketing cooperatives helping to increase production.Imported Friesian and Holstein cows (some 20,000 head in Algeria) have becomeimportant on the self-managed farms and specialized dairy production is foundnear large cities. Male progeny from these herds are fattened for beef pro-duction as is indicated by the heavier carcass weights recorded for animalsslaughtered during the past two years (Table 2.1).

2.05 Statistics for the national cattle herd vary considerably, evenamong different government bodies, and it has not been possible to satis-factorily reconcile the estimates of meat production with the herd statistics.

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The apparent percentage offtakes, shown in Table 2.1, would appear to be unrea-sonably high indicating that the national herd is probably underestimated, orless likely that meat consumption is overestimated (para 2.09). Assuming a 44%weaning rate, 16% culling of mature males and females, a 4% adult mortality, amore plausible offtake of 23% is obtained, which would indicate a nationalcattle herd in 1978 of about 1.5 million. Cattle numbers increased over theperiod 1970/72-1976/78 by about 3.2% annually and meat production over thesame period by 4.5%. However the rate of production increase has fallenrecently to about 3%.

Table 2.1: National Cattle Numbers And Beef Production /a

Total Number Average Totalin National Total Percent Carcass Carcass

Year Herd Slaughter Offtake Weight Meat('000) ('000) (%) (kg) ('000 tons)

1970 895 259 29 128 33.01971 922 322 35 117 37.71972 890 362 41 118 41.91973 872 388 44 113 43.91974 910 451 50 106 47.71975 1,002 401 40 116 46.61976 1,015 417 41 115 48.01977 1,130 350 31 142 49.81978 1,199 345 29 145 50.0

/a Source: MARA/DPA who assume that 40% of total slaughter is unofficial.

2.06 It would appear that cattle numbers and meat production are bothincreasing at least as fast as national population, and that MARA is alreadyencouraging active programs among cooperatives and self-managed farms. Nospecial production measures are therefore contemplated in the proposed MeatIndustry Project.

Sheep Numbers and Production

2.07 The three main breeds of sheep are the Ouled Djelal, the Rhumbi, andthe Hamra. Although they are all well suited to the hard conditions in whichthey live, the Ouled Djelal appears to respond best to improved nutrition interms of liveweight gain and fecundity. As already noted the national sheepflock is still in large measure transhumant, spending winter in the Steppe andspring and summer in the cereal zone of the High Plateau (para 2.02-2.03).Typical flocks of about 200 consist of about 60% mature females of which athird are old unproductive ewes. Lambing takes place between October andJanuary with a weaning percent L/ of about 85% of the productive ewe numbers

1/ Number of lambs surviving to weaning age as a percent of the number ofewes.

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(60% of all ewes). The weaning percent is directly related to the conditionof the ewes at the time of mating, and as mating occurs between May andAugust, when the flocks are normally on the High Plateau, the food suppliesin this zone directly affect the lambing percent. Lamb mortality is high,usually about 20%, and is largely dependent on the food suppiy during winter,when the flocks are on the Steppe.

Table 2.2: National Sheep Numbers And Local Mutton Production

Total Number Average Totalin National Total Percent Carcass Carcass

Year Flock Slaughter Offtake Weight Meat('000) ('000) (%) (kg) ('000 tons)

1970 7,786 3,535 45 13.8 491971 8,364 3,183 38 13.4 431972 8,825 3,172 36 14.1 451973 8,445 3,599 43 13.2 471974 8,687 3,008 35 12.6 381975 9,773 2,525 26 12.8 321976 9,337 2,525 27 12.8 291977 10,299 3,517 34 14.8 521978 11,052 3,494 32 14.0 49

2.08 As with cattle, statistics concerning the national sheep flock varygreatly depending on the source. MARA's Animal Production Department esti-mates presented in Table 2.2 assume that 50% of the total slaughter isunrecorded. There is no doubt that mutton production has stagnated, and thestatistics for an individual abattoir (para 2.09) provide further support.It seems probable that the main cause has been the reduction of locally grownfood supplies. Although the statistics show a regular increase in flocknumbers, it is likely that total flock numbers were underestimated in thepast, as nomadic flock owners are always reluctant to reveal their totalnumbers. The apparent offtake percent in Table 2.2 appears to be unreasonablyhigh, particularly in the period 1970-73. Assuming 60% weaning overall and7% mature deaths, a 26% offtake would be expected, suggesting a national flockof around 13 million sheep at present.

B. Livestock Slaughter and Distribution

Domestic Meat Consumption

2.09 Animals are slaughtered in municipal abattoirs in urban areas, invillage slaughterhouses, and elsewhere in the country. Most families alsokill a sheep for the Muslim Aid-el-Adha feast. Statistics are only availablefor the municipal abattoirs and from these total meat consumption has beenestimated. On this basis domestic red meat (beef and mutton) supply includingedible offal amounted to about 116,000 tons in 1978 as shown in Table 2.3.

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Goats, horses, donkeys and camels are also sources of red meat but are ignoredin this report which principally concerns urban meat supply, although goatmeat is undoubtedly important in the rural areas, as is camel meat in SouthernAlgeria.

Table 2.3: National Consumption of Red Meat

Beef & Total Per CapitaMutton Red Meat National Consumption

Year Beef /a Mutton /b Imports Supply Population Red Meat-----('000 tons carcass equivalent) ----- (million) (kg/head)

1972 48.2 53.6 - 101.8 14.7 6.91973 50.5 56.8 - 107.3 15.2 7.11974 54.9 45.4 - 100.3 15.8 6.31975 53.6 38.7 0.1 92.4 16.3 5.71976 55.2 35.3 3.6 94.1 16.8 5.61977 57.3 62.5 12.9 132.7 17.3 7.71978 57.5 58.7 12.6 128.8 17.8 7.2

/a Includes 15% edible offal - liver, heart, etc./b Includes 20% edible offal.

2.10 For the larger urban areas more reliable data exists. Thus forAlgiers it is estimated that per capita consumption was about 8.8 kg in 1978,and 11.4 kg in Oran. Slaughter in the Algiers municipal abattoirs and percapita consumption of red meat has fallen since 1972 (Table 2.4), although thetotal urban meat supply has not fallen much due to imports.

Table 2.4: Red Meat Supply in Algiers

Municipal laSlaughter/ Net /b Population Per Capita

Year Beef Mutton Imports Total of Wilaya Consumption--- ('000 tons carcass equivalent)-- (million) (kg/head)

1973 9.5 9.5 - 19.0 1.64 11.61974 11.1 8.3 - 19.4 1.72 11.31975 11.1 7.8 - 18.9 1.79 10.61976 9.4 6.9 3.2 19.5 1.88 10.31977 4.6 6.3 11.5 22.4 1.96 11.41978 3.3 4.8 9.9 18.0 2.06 8.8

/a Includes edible offal and allowance for unrecorded slaughter after 1974,due to avoidance of municipal slaughter tax (US$34/cow).

/b Net imports into Algiers after deducting estimated regional distribution.

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2.11 With increasing shortages of red meat, Government has made a majorand successful effort to increase poultry meat production (para 2.19) from44,000 tons in 1972 to 72,000 tons in 1978. As a result per capita consump-tion of white meat (poultry) has increased from 3.0 kg in 1972 to 4.0 kg in1978, and consumption of red and white meat together has increased modestly.

Marketing and Distribution

2.12 Well over 95% of the cattle and sheep marketed in Algeria passthrough a well developed system of private dealers. In principle there aretwo main types of operators, "maquignons", who deal in live animals, and"chevillards", who buy live animals, slaughter them, and sell the meat toretail butchers, but in practice many of the activities may be carried outby the same persons. Most traders are small scale and many are part-timeoperators. Many chevillards also have their own retail butcher shops. Asa consequence of the large degree of overlap between the different stages ofmarketing, it is difficult to establish the margins at any particular point.However, the overall margins between sales of live animals in the marketsin the producing areas and the final retail price of meat are surprisinglysmall (paras 2.14-2.15) and there is good reason to believe that the live-stock and meat marketing system works efficiently, except before major feastssuch as Aid-el-Adha, when prices rise steeply. At present, ONAB purchasesanimals mainly from the socialist sector. Marketing and distribution by ONABis discussed in paras 2.20-2.24.

Imports

2.13 Although Algeria imported small quantities of prime quality beefbefore independence, no further meat imports were permitted until 1975.Imports increased in 1976 but rapidly reached a ceiling in 1977 when a totalof nearly 13,000 tons of fresh and frozen meat were imported (Table 2.3).Without proper handling facilities it would be difficult to increase importsfurther. In principal ONAB is also the only meat importer. However due tothe present lack of facilities Galeries Algeriennes, a Government owneddepartment store, also imports fresh beef and mutton for sale in its stores.ONAB imports both fresh meat by air and frozen meat by sea. Since meat isregarded as an essential import, the Ministry of Commerce would increaseONAB's annual import allocation as soon as it is able to handle an increasedquantity. At present ONAB rents two cold store chambers from SONATMAG, thenationalized cold store chain at El Harrach, for Algiers, but the rooms areneither cold enough for frozen meat (-4 0C instead of -18 C) nor are theydesigned for bulk handling. Two chambers (560 m2) are also available at Oran,but there are no cold stores at Annaba. Most imports are sold locally althoughsome are dispatched directly to the petroleum complexes in Southern Algeria.

Prices

2.14 Domestic supply of beef and mutton together has barely increased asrapidly as has population, with the result that domestic supply per capita hasnot increased. At the same time with rapidly rising disposable incomes

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(1972-76, 5.5%/year) the demand for red meat has also increased. The resulthas been a rapid increase in liveweight prices as shown in Table 2.5, whichalso shows poultry prices. These prices conceal large seasonal fluctuations.

Table 2.5: Algeria - Liveweight Prices(DA/kg in constant 1978 Dinars)

Year Beef Mutton Poultry

1973 7.1 8.2 7.41974 7.8 8.8 7.21975 9.1 9.7 7.31976 11.0 11.3 8.01977 11.0 12.0 8.41978 11.0 12.0 8.4

2.15 ONAB purchases live animals on the domestic market, rather than meat,so the effective purchase price of meat has been obtained by taking liveweightprices and converting to carcass equivalent (allowing for condemned carcasses).During 1978 the average price paid by ONAB for beef was DA20.40/kg carcassequivalent, similar to the observed wholesale price in the municipal abat-toirs. Mutton purchase prices were higher averaging DA25.70/kg for carcasses,although prices rose up to 50% higher during Ramadan and just before the feastof Aid-el-Adha. ONAB sells meat to the institutional market and to privateconsumers at rates which are about DA3/kg less than prices for equivalent meatsold by private retail butchers. Average purchase and sales prices during1978 are shown in Table 2.6. Sales prices for individual cuts were of coursehigher and lower than those shown in the table, with beef fillet for exampleselling for DA32/kg and boiling beef for DA20/kg. These prices indicate boththe extremely high level of domestic meat prices and the surprisingly slimmarketing margins for both ONAB and the private sector. The cost of slaughterand municipal abattoir tax is met from the value of offal sales (DA400/cowand DA55/sheep). Hides and skins are sold to the National Tanning Company(SONIPEC) at official prices of DAl.90/kg for hides and DA13/sheep skin.ONAB's purchase and sales prices for imported fresh and frozen meat are alsoshown in Table 2.6. More than half the cost of imported meat is made up ofduties and taxes.

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Table 2.6: ONAB Meat Purchase and Sales Prices, 1978

DA/kg US$/kgPurchase Sales Purchase Sales

Mutton

Fresh local bone-in carcasses 25.70 30.00 6.43 7.50Frozen imported bone-in carcasses 14.97 23.00 3.75 5.75

Beef

Fresh local bone-in carcasses 20.40 - 5.10 -Frozen imported bone-in carcasses 17.72 - 4.43 -Fresh boneless /a - 27.80 - 6.95

Frozen imported boneless 14.54 23.80 3.64 5.95

/a Conversion 1 kg bone-in carcass = 0.73 kg boneless beef.

Slaughter Conditions

2.16 The municipal abattoirs in Algeria have mostly outiived their usefullives. They are of the fixed-station type, i.e. all operations from the actualslaughter to the dressing of the carcasses are done in the same position, withsheep suspended from a hook and cattle suspended by a winch. This type ofinstallation was intended to allow butchers to do their own slaughtering, butit is now outdated and provides no assurance of hygiene. Two small modernabattoirs using lines have been constructed at El Asnam and Sidi Bel Abbes buteven these do not meet EEC standards as concerns hygiene. Municipal abattoirscome under the overall control of the municipalities who collect slaughtertax, but the Ministry of Hydraulics is responsible for their construction. Anational plan has been prepared for constructing new abattoirs but progressin its implementation is slow. The meat hygiene standards established beforeindependence have been revoked, since it was not possible to apply them dueto the poor physical state of the abattoirs, and the lack of a trained meatinspection service. Government has a national plan to improve municipalabattoirs which is being implemented by the Ministry of Hydraulics.

C. National Office for Livestock Feed (ONAB)

2.17 The National Office for Livestock Feed (ONAB) 1/ was created byOrdinance No. 69-19 in April 1969. It is a legally and financially inde-pendent public agency ("Office") under the tutelage of the Ministry of Agri-culture (MARA). ONAB's original role according to the Ordinance was indus-trial production of animal feed for livestock and poultry. In order to beable to fulfill its role ONAB was required to purchase locally and externally

i/ Office National des Aliments du Betail (ONAB).

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the needed raw materials, proceed with investment in production facilities,and establish a security stock of animal feed. The following year, as aresult of red meat and poultry scarcity, ONAB's role was extended (July 1970)by a decision of MARA so as to include also industrial poultry production,marketing livestock from the socialist sector, and production and imports ofred meat.

Animal Feed

2.18 Originally, ONAB inherited a few formerly private feed mills whichhad been nationalized since independence. New plants were opened, old plantsexpanded, and at the end of 1978, ONAB found itself operating 16 mills distri-buted widely throughout Algeria. ONAB controls about 98% of the nationalmarket, producing about 40 varieties of feed for poultry, cattle and sheep,as well as a vitamin/mineral concentrate. ONAB has developed animal feedproduction by over 20% annually from 27,000 tons in 1970 to 218,000 tons in1978. Some 70% of the total production is poultry feed for sale and forONAB's own poultry operations (para 2.19). Raw materials for feed productionare mostly imported, but locally produced inputs are also used, such as bran,oil-seed cake and abattoir by-products. ONAB plans to increase annual produc-tion of animal feed to 700,000 tons by 1985, with the construction of 5 newmills, at an estimated cost of DA152 million.

Poultry Production

2.19 In the early seventies, when a serious meat deficiency started todevelop in Algeria major investments were made in industrial poultry produc-tion as being the cheapest and fastest way to increase supply of animalprotein to the population; hence the rapid development of ONAB's activity inthis line. ONAB now runs the whole range of activities related to poultryproduction, including supplying poultry farmers with hatching eggs for broilerand layer production, layers, chicks, aviculture equipment and, as seen above,poultry feed. ONAB operates 9 units for poultry production with capacities asfollows: broiler eggs (18 million/year); day old chicks (16 million/year);broilers and poultry slaughter houses (13,500 tons/year); and eggs forconsumption (100 million/year). In spite of this, ONAB still imports some 250million eggs valued at DA50 million annually, and sales of eggs amount to 25%of ONAB's total sales. Several poultry production units are under constructionas part of a large expansion plan.

ONAB's Red Meat Operations

2.20 The role of ONAB in the red meat subsector is:

(a) to provide a market for animals which are produced by thesocialist sector;

(b) to supply meat to the collective consumers (hospital,s`,> schools,some Governmental agencies and institutions); and '-

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(c) to regulate by its intervention the red meat market as a buyerwhen supply exceeds demand (in case of drought), or as supplierof domestic and imported meat when supply is scarce.

2.21 ONAB's cattle and sheep operations can conveniently be divided intotwo parts, (a) live animals, and (b) meat slaughter and distribution. Ori-ginally ONAB's intervention in the meat market was limited to distribution oflivestock purchased from the socialist and private sectors. It soon becameobvious that without adequate cold storage capacity and/or yards for feeding(feed lots), where cattle and sheep could be maintained alive, ONAB could inno way regulate the fluctuations in supply and in prices. Accordingly ONABstarted to establish fattening and transit feed lats (Centres d'engraissementet de transit - C.E.T.) of which presently 13 are in operation, 6 for sheepand 7 for beef, which handle about 50,000 head of sheep and 7,000 cattle peryear.

2.22 ONAB's meat marketing activity has grown rapidly with sales increas-ing from 1,750 tons in 1974 to a nearly 8,600 tons in 1977 and an estimated12,100 tons in 1978, as shown in Table 2.7. ONAB's red meat sales now accountfor 10% of the national total. In Algiers alone ONAB's sales (estimated at9,700 tons in 1978) have risen to about 40% of the total for the city. InOran and Annaba, ONAB's operations have only started recently reaching 800tons at Oran and 900 at Annaba. However the dependence on imported meat whichaccounts for three quarters of total sales is marked.

Table 2.7: ONAB's Sales of Red Meat('000 tons product) /a

1974 1975 1976 1977 1978

Local fresh mutton 0.5 0.6 0.5 0.8 0.8Local fresh beef 1.3 1.4 1.9 0.8 2.1Imported fresh beef - - 2.2 4.5 2.8Imported frozen mutton - - - 1.1 2.3Imported frozen beef - - - 1.4 4.1

Total 1.8 2.0 4.6 8.6 12. 1

/a Excludes offal.

2.23 Almost all ONAB's meat operations are currently carried out inAlgiers, Oran and Annaba where facilities are rented in the municipal abat-toirs. There are small facilities at Sidi Bel Abbes and Setif. In Algiers,ONAB slaughters in a reserved bay of the municipal abattoir with a team of 15ONAB slaughtermen. A refrigerated chamber is available to store about 150carcasses. Frozen meat is stored at El Harrach (para 2.13). ONAB has alsoestablished a small meat cutting plant handling about six tons per week toprovide cut and rolled meat for the institutional market, and a delicatessenunit producing 6-8 tons per week is also in operation. At Oran part of themunicipal abattoir is reserved for ONAB, but there are no refrigeration

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facilities. Frozen meat is stored in rented facilities. At Annaba conditionsare least satisfactory for ONAB. Slaughtering is in the antiquated abattoirwhich has no refrigeration equipment and there is no cold store for frozenmeat.

2.24 ONAB's sales are mainly directed to the collective buyers (60% ofbeef and 80% of mutton) but meat is also sold to Government stores, Souk ElFellahs (35% and 15% respectively) and to a few private butcher shops and twoONAB pilot retail shops (5% in both cases).

ONAB's Present Organization and Management

2.25 ONAB is managed by a General Director, and an Assistant DirectorGeneral reporting to MARA and operates under close supervision from theMinistry. No Board of Directors has been nominated as provided for in theOrdinance of April 1969 (para 2.17). ONAB's organization evolved somewhathaphazardly, as the "Office" developed in many directions under the pressureof circumstances, and assumed functions unforeseen at the time of its creation.Headquarters are in Algiers and regional directorates operate from Algiers,Annaba and Oran. A new organization is being introduced progressively sincemid-1978 in which three new departments are created for Animal Feed, Avicul-ture and Marketing. The new Department of Marketing will be responsible forthe red meat sector and for distribution of imported eggs and poultry. It isnot yet clear what responsibility, if any, will be left to the regionaldirectorates (Directions Regionales de Production). Since the new organiza-tion is not yet entirely operational, judgement on the new structure is notpossible based on results, and its success will largely depend on the qualityand dedication of ONAB's professional staff.

2.26 ONAB's most serious problem is the lack of trained and qualifiedpersonnel, a problem which has confronted Algeria since independence. As inother "Offices", ONAB salary scales are lower than in industry, althoughhigher than in the Adcrinistration. Nevertheless, in the past four years,ONAB has been able to expand its labor force from a total of 1,046 personswith only 19 professionals in 1974 to 2,450 persons and 120 professionalsin 1978. In addition to the permanent labor force ONAB employs as many as1,800 seasonal workers. Consolidated sales per staff have increased in everyyear except 1977 where exceptional labor force increase took place.

ONAB's Financial Situation

2.27 In common with other "Offices" the efficiency of ONAB's operationsis severely hindered by rigid financial procedures. All policy and investmentdecisions must be approved by MARA, as well as the operational budget. Allfinancial transactions are made obligatorily through the Banque Nationaled'Algerie (BNA) and are tightly controlled under rigid procedures. Theproduction units have to transfer current income to the Head Office incomeaccount. The expenses of the units are covered by a monthly transfer fromHead Office to the Unit's current expense account, the amount of which conformsstrictly to a pre-established budget, which requires a lengthy procedure tomodify. Moreover, investments can be made only if they have been provided for

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in the annual budget revision of the National Four Year Development Plan,agreed by ONAB, MARA and the Ministry of Finance. Consequently, unexpectedinvestments, such as replacement of broken machinery or simple ommissions,cannot be made resulting in long production stoppages or delays in completionof project construction. The result, which is characteristic of the central-ized socialist policies followed by Algeria, is a highly inflexible decision-making structure often interfering with efficient management.

2.28 ONAB's financial position is marked by a very smail equity as com-pared to total long-term resources and by an equally small net working capital.ONAB's consolidated balance sheets for the years 1973 to 1977 (shown in theProject File) reflect its rapid growth. The total assets increased six foldduring the period. Borrowing from government banks, marginal in 1973, reachedDA352 million in 1977 but the equity and the net working capital changedlittle. The salient data of ONAB's consolidated balance sheets are thefollowing:

Table 2.8: ONAB - Key Financial Indicators

1973 1974 1975 1976 1977--------------DA million------------

Total assets/liabilities 102 217 316 454 679Equity 21 21 22 29 34Medium- and long-term borrowing 21 112 180 213 275Current assets 79 99 122 223 380Net working capital 18 15 9 12 10Debt equity ratio 50:50 84:16 89:11 88:12 89:11

2.29 At the end of 1977 the medium- and long-term debts stood at DA275million of which DA232 million were due to BNA (Banque Nationale d'Algerie),DA30 million to BAD (Banque Algerienne de Developpement) and DA6 millionwas a supplier loan. The conditions of the BNA medium-term loans are generallya 7 year term with a grace period of 2 years and an interest rate of 5.5%.BAD loans have a term of 12 years with again a 2 year grace period and aninterest rate of 5.5%. The interest rates have been reviewed recently andincreased to 7.5% for new lending.

2.30 ONAB's debt/equity ratio clearly demonstrates the Government'spolicy of limiting the financial autonomy of ONAB. From a situation ofequilibrium in 1973 when ONAB's equity stood at egality with long- andmedium-term borrowing, new investments were financed quasi exclusively byborrowed funds without practically any increase in equity. The heavy relianceon bank financing is not healthy.

2.31 The presentation of ONAB's accounts does not permit a meaningfulanalysis of operations (see Consolidated Income Statement in the ProjectFile). The salient data of ONAB's income, expenditure and profit over thethree years ending December 31, 1977 were the following:

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Table 2.9: ONAB - Income And Expenditures

1975 1976 1977-----DA million-----

Sales 217 379 577Other income 21 42 67Current expenditure 227 398 546Net operational income il 23 98Non-operational income 4 41 37Non-operational expenditure 9 58 116Profit before tax 6 6 19Profit tax 4 10 17Net Profit 2 (4) 2

2.32 The substantial increase in sales in the years 1975, 1976 and 1977was mostly due to the increase in ONAB's commercial (as opposed to industrial)activity. Although no analysis exists separating the two activities at thelevel of sales, available data on ONAB's imports of eggs and red meat indicatethat in 1976 about 25% and in 1977 32% of sales were imported goods whichwere not processed or otherwise conditioned by ONAB. The high profit marginon these goods explains also the significant improvement of the operationalsurplus and gross margin in 1976 and especially in 1977.

2.33 The company profit tax rate in Algeria is 60% and ONAB is subject tothe tax as any other company or "Office". In fact, however, the effective rateis substantially higher because the Government refused to consider - from thetaxation point of view - ONAB as one unit which could offset losses in someproduction units against profits in others and ONAB had to pay the 60% taxon profits of each unit making profit without a compensation with units makinglosses. The resulting overall tax rate was therefore 66% in 1975, 166% in 1976with, as result a net loss, and it was 89% in 1977.

Conclusion

2.34 ONAB's very rapid expansion in many directions has not been matchedwith commensurate efforts in organization. Reorganization in mid-1978 hasnot yet addressed basic shortcomings such as absence of cost control in theproduction centers, or comprehensive long-term financial planning. There isalso a lack of systematic description of functional responsibilities. Amongother things the Project would address itself to greater financial autonomyfor ONAB, better financial structure and improved debt:equity ratio, and moreefficient organization (paras. 3.17 and 4.10).

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III. THE PROJECT

A. Project Objectives

3.01 Increase in the Supply of Beef and Mutton. The main objective ofthe Project is to increase the supply of beef and, more important, mutton inAlgeria, by increasing both imports and domestic suppplies, as well as increas-ing storage for imported meat. Two main actions are envisaged to increasedomestic production:

(i) removing young lambs and old cull ewes from the aridSteppe, and

(ii) fattening this flock in the cereal zone of the HighPlateau.

3.02 Reduction in Seasonal Price Fluctuations. The principal meanswhereby ONAB can assist in dampening seasonal price fluctuations will bethrough controlled release of imports onto the market during periods ofshortage on the domestic market. Expanded cold storage capacity and frozenand chilled distribution channels will be required to achieve this objective.

3.03 Supply of Meat to the Institutional Market and Private Retail.The increasing needs of the large institutional market including factories,schools, hospitals etc. necessitates the construction of abattoirs,meat cutting and meat distribution plants in the main urban centers. Asa first phase three centers are proposed at Algiers, Oran and Annaba.

3.04 Establishment of a Modern Hygienic Meat Industry. There is anurgent need to improve meat hygiene in Algeria, and the project will provideONAB with the means to establish a modern meat industry in Algeria. The meatcomplexes, including the slaughterhouses, will be designed and constructedto EEC standards, not with intention of exporting to the EEC, but to provideAlgeria with a clearly defined set of standards suitable for application ina modern industrialized society.

3.05 These objectives are complementary. In the medium and longer termAlgeria must obviously make full use of a large potential fodder resourcein the cereal zone of the High Plateau for livestock fattening, and theProject is designed so that ONAB can act both directly, and as a catalyst, inmobilizing these resources as rapidly as possible. However in the short-term,large increases in domestic beef and mutton production are not physicallypossible and imports will have to increase to supply a rapidly growing nationaldemand for meat. Enlarged cold storage capacity is therefore essential tosatisfy the first objective of increasing meat supply, but it will also beutilized to contribute towards the second objective of reducing seasonalprice fluctuations. The third objective of supplying the institutional marketis also directly linked with the other two, since few retail butchers orprivate households have refrigerators or freezers which are required for the

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distribution of frozen meat. Imports of frozen meat, the cheapest and mostreliable form of meat imports would therefore have to be distributed principallythrough institutional markets where refrigeration and the necessary sanitarycontrols exist.

B. Project Description

Main Features

3.06 The Project will comprise three main components:

(i) sheep purchase, transit and fattening:

(a) establishment of 12 buying centers on the northernboundary of the arid Steppe;

(b) purchase of 30 trucks to transport 100,000 young lambs andcull ewes from the Steppe to the cereal zone of the HighPlateau;

(c) establishment of 60,000 ha medic pasture (Medicagospp) on self-managed farms; and

(d) construction of sheep handling yards on 120 self-managed farms.

(ii) establishment of three integrated meat complexes at AlgiersOran and Annaba:

Meat Complex at Algiers

(a) construction of a multi-species abattoir with twoparallel lines for cattle and sheep with a capacityof 16 head/hour for cattle and 100 head/hour forsheep (7,200 tons/year);

(b) meat cutting plant with a capacity of 28 carcasses/hour and associated chilled storage (7,850 tons bone-in carcasses/year);

(c) meat products plant to produce 1,500 tons/year;

(d) 3,700 m2 storage for imported frozen meat;

(e) trucks and vans for the distribution of meat and meatproducts;

(f) by-products plant for production of bone-meal,hides and skins; and

(g) incremental working capital.

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Oran and Annaba Meat Complexes

(a) multi-species abattoir with lines for 8 cattle/hourand 40 sheep/hour (2,900 tons/year);

(b) meat cutting plant (2,440 tons bone-in carcasses/year);

(c) meat products plant (750 tons/year);

(d) 1,400 m2 cold storage for imported frozen meat;

(e) trucks and vans for the distribution of meat and meatproducts;

(f) by-products plant; and

(g) incremental working capital.

(iii) technical assistance and training.

Detailed Features

3.07 Sheep Purchases, Transit and Fattening. Although the potentialexists for the annual purchase of some half a million lamb and cull ewes fromthe arid Steppe ONAB will only attempt to purchase some 100,000 additionalhead of sheep under the Project. Several programs have been started and areongoing to introduce medic pasture, and to fatten cattle and sheep on theself-managed farms and cooperatives in the cereal zone of the High Plateauwith varying degrees of success. Due to institutional constraints (Develop-ment Institute for Cereals and Pulses works only with crops, and DevelopmentInstitute for Sheep works only with livestock) it has been difficult to co-ordinate research on medics with commercial livestock production (para. 1.15).However, the Government of Algeria has expended considerable effort since 1973to introduce a rotation of wheat followed by annual medicago spp based pasturewhich, because of a high proportion of hard seeds, can regenerate after wheatwithout reseeding. As a semi prostrate legume it provides a high qualityfodder, production against erosion and increases soil nitrogen. Althoughproblems of weed control and adaption to colder areas still remain, some 8,000ha of medic pasture have been established in Algeria and about 50,000 ha inTunisia. Research into weed control and selection of cultivars adapted toaltitude greater than 600 meters is progressing satisfactorily and shouldprovide results in time for application to the areas where these factors are aconstraint to optimum development. ONAB as a semi-autonomous "Office" is ina unique position to break through these constraints, but it is consideredthat a three man technical assistance team with experience of sheep and medicpasture farming is required to assist ONAB in making the advance from researchtrials to commercial exploitation. Taking into account some resistance by theself-managed farms to adopting new farm practices such a team could reasonablyestablish some 60,000 ha of medics on 120 farms over three years.

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3.08 The Project will establish 12 sheep buying centers (Annex 1, Table1) by enlarging 10 existing Cooperative Agriculture Service Centers (CAPCS) inthe semi-arid areas and using two existing ONAB transit centers (CETs). TheCAPCS, which are currently used to supply sheep flocks with feed, fodder anddrugs, etc. will become ONAB buying points for weaned lambs and cull ewesfrom nomadic sheep flocks in the semi-desert areas. They will be enlargedthrough the construction of sheep handling yards, provision of trucks forsheep transportation and the necessary staff. During the early spring buyingseason each buying center would handle about 8,350 sheep over a period of onemonth. The sheep will be transported from the buying centers to selectedself-managed farms participating in the Project as soon as possible afterpurchase. During the rest of the year the vehicles and the staff will beused by ONAB for transporting animal feed.

3.09 ONAB will select some 120 self-managed or other farms in the cerealzone of the High Plateau over a three year period. Participating farms willeach grow 500 ha of medic pasture to be used for sheep grazing of which 250 hawould be in production each year. Self-managed farm average about 1,000 haand have approximately 340 ha in fallow land each year (MARA statistics) sothat the medic pasture will occupy 73% of the fallow land. Stocking rateof 5 sheep per ha is assumed, permitting 1,250 sheep per farm over a fourmonth fattening period. As a working hypothesis it has been assumed thattwo-thirds of the sheep to be fattened on the medics (a total of 100,000sheep) will be provided by ONAB and will remain the property of ONAB. Theywill be fattened on the self-managed farms on a contract basis. The remaining50,000 sheep to be fattened on the medics will belong to the self-managedfarms themselves.

3.10 ONAB will provide technical assistance for planting the medicpastures. The existing farm machinery will wherever possible be used forestablishing the pastures. In this way a total of 60,000 ha of medic pastureswill be established. Sheep handling yards would also be constructed on theself-managed farms by ONAB. The sheep belonging to ONAB will graze the medicpastures for a period of approximately 120 days from the beginning of Februaryuntil the end of May. The period coincides with the correct grazing periodfor medic before seed setting takes place. Sheep belonging to the participat-ing self-managed farms will either be sold to ONAB at that time or retained tograze the medic stubbles after the seed has set from July 15 to October 15,which will allow a total grazing period for the medics of 210 days. Medicpastures may be expected to regenerate four or five times after wheat over 8or 10 years before reseeding becomes necessary.

3.11 Algiers Meat Complex. The complex will include a multi-speciesabattoir with two parallel lines and a capacity of 16 head/hour for cattleand 100 head/hour for sheep. EEC hygiene and health requirements will beadopted which inter-alia require cutting of carcasses in the suspended posi-tion, separation of clean and dirtied areas, and forward flow without anyback tracking or crossing, as well as the need for adequate refrigeration.Initially a single slaughter team will operate a six hour shift killingeither cattle or sheep on a sequential basis, with an estimated annualthroughput of 5,760 cattle and 38,800 sheep (3,150 tons). The abattoir hasbeen designed so that both lines can operate concurrently, and when domesticsupply increases, a second slaughter team will be added to double annual

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throughput to 6,200 tons/year. The abattoir design includes chilled carccassstorage for 109 tons. The major part of the abattoir investment is in refrig-erated facilities which will be required whether local or fresh importedmeat is being utilized. As domestic slaughter increases the proportion ofimported meat will decline. Thus, the abattoir will be efficiently utilizedfrom the beginning.

3.12 The meat-cutting plant wil] replace ONAB's totally inadequatefacilities at El Harrach, and will permit ONAB to supply its institutionaland retail customers with boned and rolled meat. An estimated 7,850 tons ofbone-in meat will be required annually to supply the plant of which threequarters will initially have to be imported. Boneless cut meat will bevacuum packed in heat shrinkable and clipped Cryovac packs. Bone-in cutswill be packed in Multivac packs. Price-weighed and labelled meat willbe stored in picking and dispatch chillers included in the meat complex.

3.13 Cold storage chambers (3,700 m2) for 3,600 pallets of frozen meatwill be included in the meat complex. Assuming 50% beef and 50% muttonsome 2,500 tons of meat could be stored at any one time which will permitan annual throughput of 10,000 tons with four rotations. Defrosting chamberswill be included so that imported frozen mutton may be defrosted before saleto the institutional and private retail market. A small blast freezer willbe included in the complex for freezing carcasses held back for veterinaryinspection, but it is not intended to freeze and store large volumes ofdomestically produced meat. Trucks and vans for the distribution of meatare included in the Project. Incremental working capital will be principallyrequired to finance frozen meat imports.

3.14 A meat products (charcuterie) plant to produce 6 tons of sausages,pate and cured meats daily (1,500 tons/year) will be included to make useof carcass trimmings, heads, offal etc. and culled hens from ONAB's poultryoperations. A small by-products plant to manufacture blood and bone meal,edible fats, tallow and a separate plant for preparing hides and skins willalso be included. The technical characteristics and throughputs of theAlgiers complex are summarized in Annex 1, Table 2.

3.15 Meat Complexes at Oran and Annaba. Integrated meat complexes willbe constructed at Oran and Annaba, which will be similar but smaller than theone at Algiers. The abattoirs will also have two parallel lines: one forcattle (8 head/hour) and one for sheep (40 head/hour). Initially these willoperate sequentially with one team operating either the cattle or the sheepline and operating a single six hour shift. The meat cutting plant will alsobe smaller than at Algiers and will require 2,420 tons bone-in carcasses ofwhich 1,440 tons will be imported. A total. of 700 tons frozen meat will bestored on 900 pallets in the cold store, allowing an annual throughput of2,800 tons with 4 rotations. Defrosting chambers for 840 tons mutton/yearwill be constructed. The meat products plants to be built at Oran and Annabawill be one half the size of the one at Algiers. It will utilize some importedfrozen meat as well as trimmings to produce a minimum viable output of 3 tonsdaily. By-products and hides and skins will also be produced in the meatcomplex. The technical characteristics of the Oran and Annaba meat complexesare summarized in Annex 1, Table 3.

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Location of Meat Complexes

3.16 Locations have not been finalized for the meat complexes, althoughGovernment has been given site specifications to enable suitable sites to beselected. Due to the critical importance of correct location to the technicalviability of the Project, it was agreed during negotiations that acquisition ofsite locations acceptable to the Bank for the Algiers, Oran and Annabacomplexes will be a condition of effectiveness. The main criteria to besatisfied are: location, access, water, drainage, electricity, and groundconditions. A 7 ha level site within 35 km of the center of Algiers isrequired (5.5 ha for Oran and Annaba). A reliable supply of 10 1/sec (2 1/secfor Oran and Annaba) of wholesome potable water with no coliform bacteria in100 ml is also needed. If a mains water supply is to be utilized a minimumpressure of 0.104 N/mm2 for 16 out of 24 hours/day is required. Otherwisewater will be supplied from a deep tubewell which must be suitable for treat-ment to required quality standards. Hydrological survey evidence will beneeded to substantiate the required abstraction rates of 10 1/sec at Algiersand 2.0 1/sec at Oran and Annaba. Drainage requirements to prevent pollutionare given in para 3.28. Electricity supply will be 3 phase high voltagecurrent providing 2 MW at Algiers, 1 MW at Oran and Annaba.

3.17 Technical Assistance. The Project will finance four sets oftechnical assistance activities totalling about 636 months of expertise:

(a) consulting engineering services for preparation of tenderdocuments, evaluation of bids and during construction ofthe meat complexes to be employed as a condition of loaneffectiveness and to start work before December 1, 1979(288 man-months);

(b) in-service training for the meat complexes to commence6 months prior to completion of their construction (180man-months);

(c) sheep and medic pasture development teams to start workby January 1, 1980 (108 man-months); and

(d) finance and cost accounting support for ONAB to startbefore April 1, 1980 (60 man-months).

Supervision of construction of the meat complexes is discussed in para 3.18.In-service training for the meat complexes will include a five-man team forthree years (1981-83) comprising a production manager, refrigeration engineer,veterinary officer to teach meat inspection, a food technologist for themeat products plant and a marketing manager. The team will be based inAlgiers but have particular responsibility for initial operations in Oranduring 1982 and at Annaba during 1983. Technical support for sheep purchaseand medic establishment will be provided by a three-man team comprising ateam leader, a sheep specialist and a legume pasture specialist. The fourthset of technical assistance activities will include assistance in improvingONAB's financial planning and procedures, and help in the establishment of

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cost accounting. Technical assistance costs have been estimated at US$6,100/man-month for (a) above, and at US$8,300/ man-month for (b), (c) and (d) aboveinclusive of local costs, an average of US$7,300/man-month overall.

C. Status of Engineering

3.18 Detailed technical specifications and preliminary cost estimateshave been prepared for the meat complex at Algiers, and for the complexes atOran and Annaba, by consultants financed through a Bank executed UNDP proi-ect. 1/ Site specifications to enable Government to select suitable sites havealso been prepared and given to Government (para 3.16). Considerable thoughtand discussion has gone into the capacities and throughputs of the complex andthe Bank has been fully consulted regarding the technical specifications thathave been prepared. Since construction would be by turn-key contract, thetechnical specifications published in the tender documents may be lessdetailed than those prepared to encourage innovation and to provide thefreedom for tenderers to use their own equipment sizes where the technicalrequirements of the Project would not be jeopardized. No more than sixman-months will be required to complete tender documents comprising contractdetails, and the less detailed specifications described above. Funding forthis work is available under the ongoing Bank executed UNDP Project. Afurther two man-months will be required for evaluation of tender documents.The tender documents will have to include clearly spelt out penalty clauses.Eight man-months of consultant time remains unutilized in the ongoing Bankexecuted UNDP Project, which is sufficient for finalization of tender docu-ments and evaluation of bids. Engineering supervision will be required forthe duration of the construction period, for which costs have been includedin the Project. Assurances were obtained at negotiations that consultants,acceptable to the Bank, will be employed to assist in the preparation oftender documents, the evaluation of tenders and to supervise construction ofthe three meat complexes, and that their employment will be a condition ofeffectiveness of the loan.

D. Implementation Schedule

3.19 The Project will be implemented over a five year period, frommid-1979 through October 1983 (Figure 3.1). Detailed specifications forthe meat complexes were completed in May 1979 and tender documents will becompleted and issued in July 1979. After receipt of bids and award of con-tract, construction of the Algiers meat complex will begin in January 1980 andbe completed in October 1981. Construction of the Oran complex will begin inJanuary 1981 with completion estimated in June 1982. The Annaba complex willbegin a year later, January 1982, and be completed in June 1983. Construction

1/ UNDP ALG 77/030 Technical Assistance to ONAB.

ALGERIAMEAT INDUSTRY (ONAB) PROJECT

Implementation Schedule

Year 1979 1980 1981 1982 1983

Quarter 1 2 3 4 1 2 3 4 1 2-3 4 1 2 3 4 1 2 3 4

Meat Complexes _Algiers _ _ - a _ a I * _Oran -F Z om a m m mAnniaba --In-Service Training l IIXIaI mon

Sheep Purchase Transit & Fattening NONA8 Fattening Yards - - - _Vehicle Purchase _ _Sheep/Pasture Team II hW | h" lU |h I |h I li *il 1 ii

Other Technical AssistanceFinance/Cost Accounting al ; hhhlI X 000 I l I

Preparation of designs and tender documents.MeVO d. Bidding and award of contracts.- - m Construction.

S u*1*II Technical Assistance.

March 1979 World Bank - 20315

90

'-1.e

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of the sheep buying centers will begin in 1980, and a start will be made toestablish medic pastures. The planned 60,000 ha of medics will be planted bymid-1982, and should be in full production by early 1983.

E. Cost Estimates

3.20 The total project cost is estimated at DA420.7 million (US$105.2million) including physical and price contingencies. Cost estimates forcivil works and equipment are based on unit rates obtained in contractsin Algeria and North Africa during 1978. Physical contingencies includedin project estimates are 10% for both civil works and equipment. For allcivil works, price contingencies have been compounded at annual rates of10% for 1979 through 1983, taking into account increases in internationalprices and the rather higher rates of inflation in Algeria. For equipmenta lower rate of price increases would have been used, but due to thespecialized nature of most of the equipment to be installed and the rapidincrease in prices of livestock agro-industry equipment a rate of 10% hasalso been adopted. The estimated foreign exchange component of the Projectis estimated at DA169.3 million (US$42.3 million), including contingenciesof DA50.2 million (US$12.5 million). The foreign exchange estimate assumesthat a foreign contractor will win a turn-key contract for all three meatcomplexes but that most of the civil works will be subcontracted to localAlgerian firms. DA20.0 million (US$5.0 million) of the DA251.4 million(US$62.9 million) local costs represents duties and taxes. Details ofthe cost estimates are given in Annex 1, Table 4, and are summarized inTable 3.1.

F. Financing

3.21 The proposed Bank loan of US$42 million will be made to ONAB therebyencouraging and supporting Government policy of autonomy and delegationof responsibility to State enterprises. The loan will finance the whole ofthe foreign exchange cost of the Project. Local currency expenditures will befinanced partly by loans from BNA and BAD, and partly by a Government budgetaryappropriation. Government will bear the foreign exchange risk. The financingplan will be as shown in Table 3.2.

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Table 3.1 - Project Cost Estimates

Item Local Foreign Total Local Foreign Total % Foreign-----(DA million) ------ -----(US$ million)----- Exchange

Meat Complexes

a. AlgiersEquipment 11.4 25.8 37.2 2.8 6.5 9.3 70Vehicles 1.8 3.0 4.8 .5 .7 1.2 62Civil works 35.2 18.9 54.1 8.8 4.7 13.5 35

Subtotal 48.4 47.7 96.1 12.1 11.9 24.0 50

b. OranEquipment 5.6 13.0 18.6 1.4 3.3 4.7 70Vehicles .5 .8 1.3 .1 .2 .3 62Civil works 17.9 9.7 27.6 4.5 2.4 6.9 35

Subtotal 24.0 23.5 47.5 6.0 5.9 11.9 49

c. AnnabaSubtotal 24.0 23.5 47.5 6.0 5.9 11.9 49

Total Meat Complexes 96.4 94.7 191.1 24.1 23.7 47.8 50

Sheep Purchase, Transit and FatteningVehicles for buying centers 1.4 2.6 4.0 .3 .7 1.0 62Handling yards .8 .5 1.3 .2 .1 .3 35Establishment medic pasture 12.1 6.4 18.5 3.1 1.6 4.7 35

Subtotal 14.3 9.5 23.8 3.6 2.4 6.0 40

Technical AssistanceSupervision of construction 1.4 5.6 7.0 .3 1.4 1.7 80Training for meat complexes 1.2 4.8 6.0 .3 1.2 1.5 80Sheep/pasture team .7 2.9 3.6 .2 .7 .9 80Finance and cost accounting .4 1.6 2.0 .1 .4 .5 80

Subtotal 3.7 14.9 18.6 .9 3.7 4.6 80

Incremental Working Capital 60.7 - 60.7 15.2 - 15.2 -

ContingenciesPhysical 11.1 10.4 21.5 2.8 2.6 5.4 48Price 65.2 39.8 105.0 16.3 9.9 26.2 38

Subtotal 76.3 50.2 126.5 19.1 12.5 31.6 40

Total Project Cost 251.4 169.3 420.7 62.9 42.3 105.2 40

April 1979

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Table 3.2: Project Financing

DA Million US$ Million Percentage

World Bank Loan 168.0 42.0 40Government--Equity 49.7 12.4 12

BNA loan 113.6 22.4 27BAD loan 89.4 28.4 21

Total 420.7 105.2 100

3.22 The Bank loan would cover 40% of the total Project Cost. The termof the proposed loan would be 17 years including 4 years of grace based onProject projected sources and use of funds. The Government contributionwould be provided on standard terms determined by current legislation whichprovides for Government grants for site preparation and services, and fortraining (US$12.4 million). Short term loans would be available from BNAand (US$22.4 million) and long term loans from BAD (US$28.4 million) for thebalance at prevailing conditions, currently 7.5% interest. Assurances tothis effect and that ONAB will maintain an appropriate financial structurewere obtained during negotiations.

G. Procurement, Disbursement, Accounts and Audit

Procurement

3.23 Contracts, amounting to a total of US$70.3 million, includingphysical and price contingencies will be tendered for under internationalcompetitive bidding according to the Bank's guidelines:

(a) construction of civil works and furnishing of equipmentfor the meat complexes at Algiers, Oran and Annaba. Thiswill either be tendered as one single contract or threecontracts for Algiers, Oran and Annaba separately (US$66.2million);

(b) purchase of vehicle fleet for meat distribution (US$2.7million); and

(c) purchase of sheep transport vehicles (US$1.4 million).

Construction of the three meat complexes would be on a turn-key basis to ensurethat the specialized buildings and equipment are compatible and interface pro-perly. An advantage of turn-key construction is that one contractor onlytakes responsibility for the construction and operation of each complex. Otheradvantages of turn-key contracts for construction of the meat complexes are thepossibility of obtaining the benefits of recent developments in design, and

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savings in costs through use of fully compatible equipment. It is antici-pated that the turn-key contractor would in fact subcontract the civil worksto a local Algerian firm (para 3.20). The duration of construction has beenphased over 4.5 years (Figure 3.1) to encourage medium sized as well as thelargest international contractors, and to permit time for training ONAB staff.Strict penalty clauses concerning delays in construction, would be incorporatedin contract details included in the tender documents.

3.24 Construction of sheep handling yards for ONAB's use at the purchas-ing centers, and on the participating self-managed farms would amount toUS$460,000 and would be let in small contracts after local competitive bidding.All technical assistance provided under the Project will be under terms andconditions acceptable to the Bank. Assurances to this effect, and that allcivil works and equipment will be procured in accordance with Bank guidelinesfor procurement dated March 1977, were obtained during negotiations.

Disbursement

3.25 The proposed Bank loan of US$42 million will be disbursed over fiveyears, 1979-1983. The loan will finance:

(a) 50% of the cost of the turn-key contract for constructing thethree meat complexes.

(b) 65% of the cost of locally procured vehicles and equipmentand/or 100% of the c.i.f. cost of imported vehicles andequipment;

(c) 35% of the total cost of medic pasture establishment and con-struction of handling yards; and

(d) 100% of the foreign exchange cost of consultant services.

Disbursements will be made against supporting documents such as confirmedcopies of contracts, receipted invoices and certified progress reports in thecase of civil works and technical assistance.

3.26 Any savings in Project costs will be cancelled. Estimated schedulesof expenditures, disbursements, and the proposed allocation of the proceeds ofthe loan are presented in Annex 1, Tables 4, 5 and 6.

Accounts and Audit

3.27 Separate accounts will be kept for the Project. Presently ONAB'saccounts are not audited but only verified by a controller appointed by theGovernment. Under the Project, ONAB's accounts will be audited by the SocieteNationale de Comptabilite (SNC), an independent governmental accounting andauditing agency which is now receiving technical assistance by Peat & Marwickunder the SNMC Expansion Project (Loan 1185AL-76). Assurances that ONAB will

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keep separate accounts and have them audited by SNC, which is satisfactory tothe Bank, and that the auditors' annual report will be sent to the Bank withinsix months of the end of each fiscal year were obtained during negotiations.

H. Environment and Health

Environment

3.28 The three meat complexes will be sited to ensure that there is noadverse environmental impact. They will not be located adjacent to housing,and will have good hard-surface access roads to avoid undue traffic conges-tion. Effluent disposal systems will be installed. If effluent is dis-charged into a main sewer it will have a capacity of 25 1/sec for Algiers,and 6 1/sec for Oran and Annaba, and the effluent will have less than: 1.207g/l. Biological oxygen demand (B.O.D.); 1.503 g/l total suspended solids(T.S.S.) and 0.647 g/l oils and grease. If a main sewer is not available, anadditional 0.75 ha of land for treatment facilities will be provided so thattreated effluent could be discharged to either (a) an uncontaminated water-course having minimum flows throughout the year of 200 1/sec at Algiers and50 i/sec at Oran and Annaba; or (b) an additional area of open land suitablefor sub-surface irrigation of which the suitability will be determined bystandard percolation test; or (c) additional adjacent arable land capable ofutilizing water for crop irrigation purposes. If a main sewer is not avail-able then the effluent will have less than 0.023 g/l B.O.D.; 0.027 g/l literT.S.S. and 0.009 g/l oils and grease. Government assurances were obtainedduring negotiations that the procurement specifications for effluent disposalalready prepared by the consultants will be included in the tender documentsto ensure that there will be no adverse environmental effect from the effluentof the meat complexes.

Health

3.29 The meat complexes will not be located downwind of industrial plantemitting air borne pollutants - dust, soot, toxic fumes, etc. to preventcontamination. The plants will be built and operated to EEC standards forhygiene, except as appropriately modified by agreement between the Bank andONAB. Assurances to this effect were obtained during negotiations.

IV. ORGANIZATION AND MANAGEMENT

4.01 The Project will be implemented by the Office Nationale des Ali-ments du Betail (ONAB) (paras 2.17-2.34). The new ONAB organization whichis now being put into effect introduces a new Department of Marketing whichis responsible for the red meat sector and will be responsible for Projectoperations. As discussed in paras. 2.17-2.26 ONAB has grown dramatically duringthe past five years and its record to date provides good assurance for thefuture. In particular the meat slaughter and distribution operations havegrown under the most difficult conditions and there are existing teams ofcompetent personnel in Algiers, Oran and Annaba to provide the nuclei stafffor the Project's operations.

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Sheep Fattening

4.02 Sheep purchase, transit and fattening will be under the responsibil-ity of the Red Meat Production Division (Department Viande) of the MarketingDepartment. In order to promote a rapid increase of sheep fattening on medicpastures by self-managed farms, assurances were obtained during negotiationsthat ONAB will strengthen the organization and staffing within its Red MeatProduction Division, and that a three-man technical assistance team willbe employed for three years, comprising a team leader, a sheep productionspecialist and an agronomist with experience in medic pastures. 1/ ONAB'scurrent livestock buyers who would take on the responsibility for purchasingthe additional 100,000 head sheep planned for the Project. ONAB staff at eachbuying center would consist of a veterinary technician, four drivers and aclerk. The Red Meat Production Division would be responsible for executingthe sheep purchases and for their transportation from the buying centers toparticipating self-managed farms, and subsequently to the abattoirs.

4.03 A major new function of the division would be to popularize commer-cial sheep fattening among the self-managed farms in the cereal zone of theHigh Plateau. To this end the Division would draw up and sign agreements withthe participating self-managed farms relating to medic pasture establishment,sheep grazing conditions and renumeration to the members of the farms forsheep grazing. (A draft agreement is given in the Project File.) The key tothe success of this part of the project, and in fact the key to a rapid devel-opment of livestock in Algeria, would be the incentives given to the members ofthe self-managed farms. If the contract grazing fee is merely absorbed upinto the general farm income, there would be no incentive for the workers onthe farm to become involved with the extra work associated with looking aftersheep. Assurances were therefore obtained from MARA at negotiations that con-tracts between ONAB and participating farms would be acceptable to the Bankand would include adequate incentive to ensure satisfactory participation bythe self-managed farms.

4.04 The agronomist in the technical assistance team will be specificallyresponsible for coordinating his work with the local MARA officials andwith the Development Institute for Cereals and Pulses (IRGC) to ensure thatsuitable areas are selected and methods used to establish medic pastures.The livestock production specialist will be responsible for selecting andsupervising suitable CAPCS as buying centers for sheep purchases, assistingthe ONAB livestock buyers to ensure sufficient numbers are purchased andsupervising transportation to the farms.

Meat Complexes

4.05 Although the meat complexes will come under the control of theDirector of Marketing Department, each complex will be expected to operateas an independent profit making enterprise, which will be headed by a produc-tion manager. Consultants will be recruited to provide an in-service train-ing team responsible for establishing operations first in the Algiers complex

1/ Terms of Reference for this team are given in the Project File.

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and subsequently in the Oran and Annaba complexes. This team will be headedby a counterpart production manager who will be a right-hand-man to theAlgerian production managers. As noted (para 3.17) the team will be based inAlgiers and the Algerian teams who would operate the Oran and Annaba complexeswould be trained at the Algiers facility priar to moving to their own centers.

4.06 A second key position will be the director of marketing for eachcomplex. Re will have responsibility for organizing sales to the institu-tional market and to ONAB's retail outlets. He will have an experiencedadvisor to help him organize operations. This advisor will also work withMARA, the Ministries of Commerce and Planning so as to coordinate nationalmeat import objectives with ONAB's own operations. This may involve increas-ing the proportion of frozen meat distributed to the institutional market soas to release more fresh cut meat onto the retail market. In addition skilledmanagement will be required as the function of the meat complexes changesinitially from local supply in the three urban areas of Algiers, Oran andAnnaba, to an increasingly important regional distribution role. It has beenassumed that 60% of the imports of frozen meat will be removed from the coldstores in bulk on pallets for distribution to the main towns.

4.07 Other operations of the meat complexes will also require technicalassistance, in particular operating the refrigeration installations. Currentlynone of the frozen meat stores in Algeria operate at the required temperaturesand a considerable amount of training concerning their correct operation andmaintenance of the equipment will be needed. Funds are available under theongoing UNDP Project (para 3.18) for this type of training but a fulltimerefrigeration engineer will be required for 3 years. Expansion of the smallmeat products plant at Algiers will necessitate a considerable amount oftraining and an experienced food technologist will train the staff for theexpanded Project meat products operations. Due partly to the poor facilitiesthat exist for slaughter, and partly to lack of staff, meat inspection isrudimentary in Algeria. Meat inspection is the responsibility of the VeterinaryDepartment of the Ministry of Agriculture. Therefore although ONAB will beresponsible for recruiting and employing a veterinarian, he will work closelywith the Veterinary Department in training inspectors to work in the ONAB'smeat complexes. Assurances were obtained at negotiations that five persons toprovide technical assistance to the meat complexes will be recruited for threeyears.

4.08 When the new facilities come into operation, ONAB will give up itsexisting rented and obsolete facilities at the municipal abattoirs at Algiers,Oran and Annaba, which are not suited for further use. Staff will be trans-ferred to the new location. At Algiers total manpower will be 420 and thecomplexes at Oran and Annaba will each employ 165 people. Few additionaloperating staff will be required for the abattoirs due to the greater effi-ciency of the new facilities. Additional staff will be required for themeat cutting, meat products and by-products plants, and considerable expansionwill be required for meat distribution. At present the institutions collecttheir own meat from ONAB's rented facilities. Instead, ONAB will operate itsown transport fleet to avoid congestion and unrecorded disappearences of meat

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during dispatch operations. Orders will be made either a day in advance inwhich case a sealed prepacked order would be prepared, or purchasers could buydirectly from ONAB distribution vans (para 5.09).

Financial Management and Planning

4.09 The efficiency of ONAB's operations is severely hindered by rigidfinancial procedures (para 2.27). Accordingly, a US$0.5 million technicalassistance component to provide about 60 man-months of services, has beenincluded in the Project to study, make recommendations for and to assistin the implementation of improved financial procedures for ONAB. This assis-tance will also have general application for other offices which come underthe overall responsibility of MARA. The assistance will be provided bya financial management team, who in addition to reforming ONAB's financialprocedures, will establish and monitor cost accounting in the MarketingDepartment over a one year period. ONAB does not have any cost accounting atpresent though its introduction has been planned for several years and willstart on a pilot basis during 1979. Assurances were obtained during negotia-tions that a financial team acceptable to the Bank will be recruited.

Monitoring

4.10 In addition to cost accounting which will be strengthened as partof the Project, ONAB will keep full records of the sheep purchase, transitand fattening. These records will be supplemented with regular monthlyslaughter data collected from the main municipal abattoirs for sheep andcattle, so that the trends in domestic meat supply are monitored, togetherwith data of meat imports. The Marketing Department will also continue to beresponsible for monitoring retail prices in the private sector in Algiers,Oran and Annaba compared with elsewhere, and to use this information as abasis for management decisions concerning:

(a) total quantity and composition of fresh and frozen imports;

(b) quantities of fresh meat including defrosted mutton soldon the retail market (through the Souk-El-Fellah stores);

(c) the ratio of fresh to frozen meat sold to the institutionalmarket; and

(d) the relative availabilities and prices of poultry meatfor which information would be available from ONAB'sPoultry Department.

The Project's meat complexes will provide ONAB with an effective way todampen seasonal price fluctuations through controlled release of imports, andcontrol overall price increases, provided that the relevant indexes aremonitored and that the information is made available rapidly, and managementis responsive. Assurances were obtained at negotiations that the purchase,transit and fattening of sheep and the Meat Complexes would be fully monitored.

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Completion Report

4.11 Semi-annual reports on the progress of the Project will be preparedby ONAB and sent to the Bank throughout the disbursement period. Not laterthan six months after completion of the Project, ONAB will prepare and furnishto the Bank a report on the execution and initial operation of the Project,its cost, the benefits derived and to be derived from it, the performance ofONAB and the Bank of their respective obligations under the proposed loanagreement and the accomplishment of the purposes of the proposed loan.Assurances concerning semi-annual and completion reports were obtained atnegotiations.

V. PROJECT PRODUCTION, MARKETINGAND FINANCIAL ANALYSIS

A. Project Physical Output

Sheep Purchase, Transit and Fattening

5.01 Out of 100,000 lambs and cull ewes, weighing an average of 20 kgliveweight, purchased by ONAB annually through the purchase centers andfattened on the self-managed farms, some 98,000 (allowing for mortality)weighing 32 kg will be slaughtered in ONAB's abattoirs. It is estimated thata further 50,000 head of sheep belonging to members of the self-managed farmswill also gain about 12 kg liveweight through fattening on the medic pastures.Incremental production will amount to 6 kg carcass weight each, or 870 tonsannually. The main annual outputs of this component are given in Annex 1,Table 1.

5.02 A total of 60,000 ha of medics will be eutablished by 1983 ofwhich half (30,000 ha) will be producing medic pasture in any one year, andthe other half wheat. There will be a corsiderable output of nitrogen fromthe nitrogen fixing nodules in the medic roots and some 60 kg N per ha willbe available each year for the subsequent year's wheat crop, equivalent to3,900 tons urea annually for the 30,000 ha.

Algiers Meat Complex

5.03 Abattoir. The project output of 3,150 tons carcass weight (2,050tons beef and 1,100 tons mutton) is based on sequential killing by a singleslaughter team operating either the cattle line or the sheep line at any onetime. Analysis of the 1977 and 1978 slaughter statistics shows considerableseasonal variation in the proportions of cattle and sheep slaughtered, with apeak in sheep numbers in the summer months which is somewhat balanced by apeak in cattle numbers in the winter. Even so there is a marked irregularityin the total numbers of cattle and sheep slaughtered from month to month.The projected 1985 Project output represents a 60% increase over the 1978

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level of throughput. With one slaughter team killing cattle or sheep sequen-tially the abattoir could just handle (104% utilization) the largest monthlypeak recorded in March 1978. On the other hand considerable flexibility hasbeen built into the abattoir design, and with concurrent slaughter and twoshifts (a total of 4 slaughter teams) annual throughput could be increasedto 12,000 tons. The capacities and outputs of the abattoir and the othercomponents of the Algiers meat complex are given in Annex 1, Table 2.

Meat Cutting Plant

5.04 The specific role of the meat cutting plant is to debone carcassesof beef, and to cut and wrap the meat into individual portions. Muttoncarcasses, being smaller than beef carcasses, are not normally cut but will bewrapped in plastic before distribution. The plant will debone some 7,850 tonsof carcass beef for consumption by the institutional market and for directretail sale by ONAB. Raw material requirements of beef by 1985 would utilizethe whole of the projected throughput of beef from the abattoir and requireimports of a further 5,800 tons of fresh imported carcass beef. The projectedlevel of imports in 1985 is some 60% greater than actual fresh meat imports in1977 most of which arrived by air from Eastern Europe. ONAB can make good useof these fresh imported beef carcasses from Eastern Europe, which because oftheir small size do not have a ready market in Western Europe. As domesticmeat production increases after 1985, concurrent slaughter will commence witnboth lines in the abattoir operating at the same time, so that fresh meatimport requirements will fall. Output of the meat plant would be 5,750 tonsboneless beef. Chilled storage capacity is provided for 3 to 4 days ofcarcass imports, and 2 days of local carcasses.

Frozen Meat Imports

5.05 By 1985, 10,000 tons of imported frozen meat will be distributed byONAB annually through the Algiers meat complex, of which half will be frozenmutton carcasses and the other half frozen boneless beef. Frozen meat willbe distributed both locally in the Algiers metropolitan area and regionally.It is assumed that 6,000 tons would be for regional distribution in bulkdirect from the cold stores on pallets. The remaining 4,000 tons of frozenimports will be distributed in Algiers together with the fresh meat through

the dispatch department of the meat complex. An interesting feature of theProject is the inclusion of defrosting chambers, which will be used prin-cipally to defrost frozen imported mutton carcasses before sale, and willenable some of the low cost imported meat to be sold on the private retailmarket. In Algeria few retail butchers or private households have refrige-rators and freezers, and this presents a problem for the distribution offrozen meat on the private market, since it should be consumed soon afterdefrosting. Mutton carcasses will therefore be sold after defrosting as theywould by a European retail butcher. Frozen beef will be imported alreadyboned and boxed. It is less suitable for defrosting due to discoloration anddrip, and will be hand-sawed into individual order sizes and distributedmainly to the collectivities.

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Meat Products Plant

5.06 The plant will utilize about 1,000 tons annually of trimmingsavailable from the meat cutting plant after deboning local and importedcarcasses, 200 tons of edible offal from the abattoir (livers, etc.) and200 tons of poultry carcasses culled from ONAB's laying operations. Itwill produce about 1,400 tons annually (6 t/day) of meat products (sau-sages, pate, and cured meats). The plant has been designed with considerableflexibility and a maximum capacity of 12 t/day, so output could be doubled to2,800 tons annually if required by utilizing the lower value cuts of importedfresh or frozen meat. The actual mix of products on any one day will dependon the availability of different raw materials and on the demand for thedifferent products produced.

By-Products

5.07 A plant located in the meat complex will manufacture blood andmeat meal (840 t/year), bone meal (2,250 t/year) and will separate out ediblefats (360 t/year) from tallow. A separate building in the meat complex willbe used to salt and prepare hides (12,000) and skins (69,000) before sale tothe National Tanning Company (SONIPEC).

Meat Distribution and Marketing

5.08 The meat complex includes a dispatch department with about 100 tonschilled storage capacity. Daily and annual sales distributed in the Algiersmetropolitan area will amount to over 11,000 tons annually (50 t/day) as shownin Table 5.1, with a further 6,000 tons handled in bulk for regional distribu-tion.

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Table 5.1 - Algiers Meat Complex Output(in tons of product)

T/Day T/Year

Local Distribution

Fresh local mutton carcasses 4.6 1,100Fresh cut and boneless beef 24.0 5,750Less: used in meat products

manufacture 4.2 1,01019.8 4,740

Defrosted imported mutton carcasses 8.3 2,000Frozen imported boneless beef 8.3 2,000Meat products 6.0 1,440Fresh offal (sheep and cattle) 0.6 150

47.6 11,430

Regional Distribution

Frozen imported mutton carcasses 12.5 3,000Frozen imported boneless beef 12.5 3,000

25.0 6,000

Total 72.6 17,430

5.09 It is assumed that ONAB will itself deliver 80% of its sales in theAlgiers area with the remaining 20% sold from a retail store located in themeat complex compound. Distribution will be made by 50, one-ton capacitydelivery vans, 20 of which will be loaded at the meat complex for delivery tothose areas located nearby the complex. Five, six-ton refrigerated truckswill also load each morning at the complex and transport meat and meat pro-ducts to the districts where delivery is to be made. The other 30 vans willbe loaded from these trucks. The practice of loading the majority of thedelivery vans in the locality where the meat is to be distributed rather thanat the meat complex, is widely adopted by successful European meat distribut-ing operations. It is assumed that the proportion of meat sold to the insti-tutional market (schools, factories, etc.), and to the private consumersthrough the Souk-El-Fellah Government stores will remain the same as atpresent (70% institutional; 30% private consumers.) The 20% direct retailsales by ONAB already mentioned, will be made from a "Cash and Carry" store,located in the meat complex compound, but in a separate building from the mainmeat complex. Meat and meat products will be sold direct to the small collec-tivities and to the public, which will permit ONAB to continue to obtain firsthand information and understanding of day-to-day market conditions.

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Output of Oran and Annaba Meat Complexes

5.10 The two meat complexes that will be built at Oran and Annaba will beidentical and will have similar components: abattoir, meat cutting plant,cold store, etc. as at Algiers but will have about one-third of the output.The capacities and throughput of the different components are shown in Annex 1,Table 3. Output of meat and meat products is shown in Table 5.2.

Table 5.2 - Oran and Annaba Meat Complexes(tons of product)

T/Day T/Year

Local Distribution

Fresh local mutton carcasses 1.9 450Fresh cut and boneless beef 7.4 1,780Less: used in meat products

manufacture 2.1 5005.3 1,280

Defrosted imported mutton carcasses 2.8 660Frozen imported boneless beef 2.8 660Meat products 3.0 720Fresh offal (sheep and cattle) 0.2 50

16.0 3,820

Regional Distribution

Frozen imported mutton carcasses 4.1 990Frozen imported boneless beef 4.1 990

8.2 1,980

Total 24.2 5,800

Incremental Output of Meat Complexes

5.11 Total output from the three Project meat complexes in 1985 iscompared in Table 5.3 with ONAB's output in 1978 from its existing rentedfacilities at Algiers, Oran and Annaba. Of the total 23,200 tons increase inoutput, some 19,150 tons (83%) would be incremental imports.

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Table 5.3: incremental Output from Algiers,Oran and Annaba Meat Complexes

(expressed in tons carcass equivalent)

1978 1985 Increment %

Local ProductionFresh beef 2,100 4,050 1,950 8Fresh mutton 800 2,000 1,200 5Offal etc. 500 1,450 900 4

Subtotal 3,400 7,450 4,050 17

ImportedFresh beef 2,800 8,680 5,880 26Fresh mutton 2,300 8,300 6,000 26Frozen beef (carcass equivalent) 4,100 11,370 7,270 31

Subtotal 9,200 28,350 19,150 83

Total 12,600 35,800 23,200 100

B. Future National Supply and Demand for Meat

Supply

5.12 Beef production is projected to increase by 3% annually, similarto the historic rate of increase. Domestic mutton production is projectedto increase by only 0.5% annually due to the lack of feed availability,although the impact of the Project's medic pasture component would begin to befelt by 1985. Total and per capita meat supply is shown in Table 5.4 whichshows that per capita supply of red meat would increase slightly from 7.2 kgin 1978 to 7.7 kg in 1985. However, without the Project, per capita red meatconsumption would fall to 6.6 kg. The Project would account for 57% (23,200tons) of the total projected increase in red meat supply of 40,800 tons inAlgeria between 1978 and 1985. Even so, ONAB would only represent 21% of thetotal supply. Increased domestic beef production and increased imports offresh meat by Galleries Algeriennes would account for most of the rest of theincrease in red meat supply. Poultry production is projected to increaserapidly mainly as a result of ONAB's increased broiler production, so that percapita consumption of red and white meat together would increase from 11.2 kgin 1978 to 13.7 kg in 1985.

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Table 5.4: Projected National Supply and Demand

1978 1985'000 Tons '000 TonsBone-in Bone-inCarcass kg/Head /a Carcass kg/Head /a

Domestic Beef Supply 57.5 3.2 70.7 3.2Domestic Mutton 58.7 3.3 61.7 2.8Imports of Beef and Mutton 12.6 0.7 37.2 1.7Total Red Meat Supply 128.8 7.2 169.6 7.7

Poultry Supply 72.0 4.0 129.9 6.0Total Red and White Meats 136.0 11.2 299.5 13.7

Total Demand 136.0 11.2 330.7 15.1

Balance (deficit) - - 31.2 1.4

/a Estimated population 1978, 17.8 million; 1985, 21.9 million.

Demand and Supply Gap

5.13 With increasing disposable incomes (4.4%/year) and an assumed 1.1income elasticity of demand for meat, demand per capita is projected toincrease to 15.1 kg by 1985. Total apparent demand would in consequence beabout 30,000 tons greater than available supply assuming constant relativeprices. lIt is possible that some of the 12,500 tons of existing ONAB storagespace could be used in an emergency. It is also likely that consumer priceswould rise (para 5.14) so that demand would not be far out of equilibrium fromsupply.

C. Prices

Meat Purchases

5.14 The extremely high prices of meat in Algeria have been mentioned(para 2.15). Present liveweight prices of DA12/kg (US$3/kg) for sheep andDAll/kg for cattle are expected to increase in constant terms to DA14/kg andDA12/kg respectively by 1985, due to the continuing tight supply conditionseven with the Project. The prices paid by ONAB for cattle purchased from theself-managed farms are expected to increase from DA9/kg to DA10.50/kg. If theProject meat complexes are not constructed, and red meat imports remain attheir present level then there is no doubt that prices would rise more thanestimated. Taking into account a 45% killing out percent for cattle and 48%for sheep and allowing for rejection of some diseased carcasses, purchaseprices in 1985 for local mutton carcasses would be DA29.95/kg (US$7.50/kg) andDA23.80/kg (US$5.95/kg) for beef carcasses.

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5.15 In projecting prices for imported meat it is estimated that c.i.f.prices would increase by 1985 by 35% in constant value terms above the averagelevel during the period 1976-78. The c.i.f. prices used in the financialanalysis are US$1,650/ton for frozen mutton carcasses, US$1,950/ton for frozenboneless beef and US$2,200/ton for fresh imported beef carcasses by 1985.

Meat Sales

5.16 ONAB's sales prices for red meat are projected to increase by 16.7%in constant terms during the period 1978-85. Prices for fresh mutton areexpected to increase from DA30/kg (para 2.15) to DA35/kg, and for fresh beeffrom DA27.80/kg to DA32.40/kg. For sales of frozen meat, separate salesprices have been adopted for local distribution and for regional distribution.For local distribution it has been assumed that ONAB would continue to sellfrozen meat at the same percentage discounts as at present. Offal, hides, andskins have been valued at their present prices.

5.17 At present "regional distribution" accounts for a small proportionof the total and ONAB charges one set of prices for all frozen meat sold.For frozen meat (but not for fresh meat) ONAB is in a position to set prices,since it is the only supplier of frozen meat in Algeria. However in thefuture, as Algeriaes total meat imports increase, the meat complexes atAlgiers, Oran and Annaba would increasingly become temporary cold stores intowhich shiploads of frozen meat are unloaded and stored before transport toother cities. ONAB's costs at the meat complex located at the seaports(Algiers, Oran or Annaba) would be only a part of total distribution costs.Therefore for the 60% of frozen imports distributed regionally it has beenassumed that meat complexes would sell on a cost-plus basis with a 10% mark-upon actual purchase costs (c.i.f. plus duty, taxes) to cover storage andhandling. The percentage mark-up could of course be increased or decreased,and in most cases it would merely be a book transfer (say from ONAB's Oranmeat complex to its Sidi Bel Abbes distribution unit). Meat sales prices aresummarized in Table 5.5.

Table 5.5: Projected Sales Prices for ONAB Meat(DA/kg Meat)

Local Regional WeightedSales (40%) Sales (60%) Average

Fresh mutton 35.00 - -

Fresh beef 32.40 - -Frozen mutton 26.80 18.37 21.75Frozen beef 27.80 20.13 23.20

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D. Financial Analysis

Sheep Purchase, Transit and Fattening

5.18 Both the self-managed farms and ONAB would have good financialreturns from the fattening enterprise. The annual operating cost to ONABof fattening their own 100,000 sheep on the self-managed farms are estimatedat DA386/ha, of which 43% represents the DA167/ha (DA50/head x 3.3 ONABsheep/ha) incentive bonus paid to the self-managed farms. This is equiv-alent to a cost of DA9.6/kg (12 kg/head) of liveweight gain, compared withthe market price of DA14/kg liveweight. The financial rate of return isestimated at 15% over 17 years, assuming that ONAB would reimburse the estab-lishment and operating costs of the medic pasture and pay to the farms anincentive bonus of DA50/head of ONAB sheep fattened. The fattening componentwould also be highly attractive to the self-managed farms, who in addition tothe payments received from ONAB would receive the profit from grazing theirown sheep. It is assumed that the only cost to the self-managed farms wouldbe provision of labor to shepherd the flock, although the precise arrangementsbetween ONAB and each farm would be agreed by contract (para 4.03).

Meat Complexes

5.19 The financial rate of return for the three meat complexes afterdeduction of income tax would be 11%. Returns for the individual complexeswould be similar. The rate of return is very sensitive to changes in meatpurchase costs, more than half of which is made up by import duties andtaxes. However, meat purchase prices are closely linked to sales prices andsince supply is so scarce ONAB would have considerable scope to adjust pricesand to retain a satisfactory operating margin. In particular, ONAB canincrease sales prices for frozen meat. Thus, the 40% of frozen meat soldlocally could be increased, since the price set by ONAB for frozen is con-siderably below the market price for fresh meat, and the sale price of the 60%for regional distribution would increase automatically since it has beenestimated on a cost plus basis (para 5.17). The Project is rather insensitiveto changes in investment costs, with the financial rate of return falling to8% if capital costs increase by 10%.

5.20 If income tax is excluded from the analysis, which would be reason-able since the tax liability would decrease if the net income decreases,then the basic financial rate of return would be 21%. In this case a 5%increase in meat purchase prices would reduce the financial rate of return to10% if not compensated for by adjustments in sales prices. Increases inother operating costs would not affect the rate of return much, and a 10%increase in other operating costs would only reduce the return from 21% to18%.

5.21 The overall rate of return for the Project would be 10%, whichis similar to the meat complexes, since the fattening operation is only asmall part of the total. The Project generates sufficient funds to repay the

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loans (para 3.22) and, the accumulated cash generated over a 17-year lifeassumed for the Project would amount to DA43 million (US$11 million).

E. Manpower Considerations

5.22 The total labor requirements for sheep purchase, transit and fat-tening, and for the three meat complexes would be an estimated 830 persons:20 managers, 470 skilled employees, and 340 unskilled workers. Some 400 newjobs will be created by the Project.

VI. BENEFITS AND JUSTIFICATION

A. Production Benefits

Introduction

6.01 The Project strategy, as distinct from ONAB's specific objectives,is simply to increase the supply of meat in Algeria in an economic manner.ONAB's objectives are complementary (para 2.20). It is clear from the discus-sion in Chapters II and V, that in the short run there is little scope forincreasing the domestic supply of red meat, although in the longer term thereis a large untapped potential for fattening livestock in the cereal zone ofthe High Plateau. The Project is therefore designed to increase the avail-ability of red meat for consumers through the enlargement of an effectiveprocessing and distribution channel, which in the short run would have todepend on imported meat. The main direct beneficiaries of the Project will bean estimated 4.5 million urban consumers in 1985 in Algiers, Oran and Annaba.Provision is included for the transition to make increasing use of domesticmeat production as it becomes available. Nevertheless, although most ofthe investment is in agroindustries, the Project's main long-term impact islikely to be in agricultural production through the integration of livestockand crop production. The Project will permit ONAB to play an importantrole in the establishment of a stratified livestock industry in Algeria,whereby the Steppe range lands will become a zone specialized for breeding andrearing of young lambs, and the higher rainfall cereal zone of the HighPlateau will become predominantly a fattening area for sheep and cattle.

Benefits from Purchase, Transit and Fattening of Sheep

6.02 The main impact of establishing purchase centers in the Steppe willbe a gradual reduction in grazing pressure on the range lands through removalof young lambs and cull ewes before the beginning of the dry season. Thepurchase centers will also provide a ready cash market for nomadic shepherds,and by locating them in the existing CAPCS, the cooperative and marketingfunctions of the CAPCS will be supported. If the Project is successful

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it will be possible subsequently to increase the annual purchases from theSteppe from 100,000 head per year to 500,000 head. This will reverse thespiral of overgrazing and degradation of the forage resources of the Stepperange lands and permit sheep production from the Steppe to be stabilized.No benefits have been quantified from the Steppe for use in the economicanalysis.

6.03 The benefits from the Project fattening operations arise from(a) the availability of a large underutilized land resource (3.4 millionha of fallow land annually) in the cereal zone of the High Plateau (para 2.02);and (b) the possibility of adding incremental weight to sheep that wouldotherwise have been slaughtered unfinished. Algeria can compete economi-cally in livestock production with other countries producing low cost live-stock from pasture. In economic terms the opportunity cost of replacingfallow by medic pasture is almost nothing (some rough grazing foregone),and once established (DA308/ha) the maintenance costs of medic (DA80/haonce every two years) are low. Furthermore due to the acute shortage ofpasture in Algeria, most animals are slaughtered without being finished(fattened). Therefore domestic meat production may be increased just byfattening sheep and cattle without any overhead breeding and rearing costs,and the whole of the weight gain (5 sheep/ha x 12 kg liveweight) is an eco-nomic gain, without having to deduct any rearing costs.

6.04 In addition to liveweight gains, the incorporation of medics intothe crop rotation provides some 60 kg nitrogen for the subsequent cerealcrop (para 5.02). There is also a beneficial effect from the sheep grazing,treading and manuring the land; the so called "sheep's golden hoof" wellutilized in European agriculture. The long-term improvement in soil fertilityand cereal yields in the cereal growing areas, resulting from establishingmedic pastures in the rotation will probably be as important as the additionallivestock weight gain. The build up of organic matter and the avoidance ofbare fallow land will also have a major impact on the prevention of soilerosion, particularly on sloping land. A further benefit of medics is that inperiods of severe drought sheep can find up to 400 kg/ha of high protein seedpods from the ground. However, the only benefits quantified in the economicanalysis are the liveweight gain, and the value of 60 kg nitrogen/ha.

Alternatives

6.05 The Government has for some time recognized the importance ofreducing grazing pressure on the Steppe, and of the potential liveweight gainsfrom fattening animals which are at present sold unfinished. One alternativehas been to fatten animals in feed-lots (CETs para 2.21) on a grain basedration. Given the present price structure feed-lot fattening is financiallyprofitable in Algeria, but it is not economic. Algeria is a net grain importer,so c.i.f. prices must be applied for imported grain. Bran and other feedby-products available locally can be better fed to poultry which have a foodconversion ratio (feed consumed:carcass weight gain) of about one-third toone-quarter that of cattle or sheep. At current and projected prices it ismore economic to import fresh and frozen red meat than to fatten cattle orsheep in feed lots on a concentrate rich feed ration.

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B. Meat Complex Benefits

Integration of the Meat Complex Components

6.06 The justification for each complex is similar, although they areentirely separate from each other being located several hundred kilometersapart at Oran in northwestern Algeria, Algiers (north-central region) andAnnaba (north-eastern region), and their respective zones of influence arequite separate. The benefits of the individual components are discussed inthe following paragraphs, but the basic justification of each complex is asan integrated system which makes it possible to rapidly increase the supply ofmeat and meat products in the main urban areas. For this reason an economicrate of return has been calculated for each complex (para 6.17) but notfor the individual components.

Meat Cutting Plant

6.07 The central component of the meat complex is the meat cuttingplant and the associated distribution system. It provides a clearing houseor assembly market where, under hygienic and refrigerated conditions, domesticand imported fresh and frozen meat can be packed for dispatch to institutionaland private consumer markets. Depending on daily and seasonal demand andsupply conditions ONAB's marketing manager would be able to utilize differentquantities of fresh meat from the abattoir, imported fresh meat, defrostedmutton, or frozen boneless beef. Fresh mutton, fresh beef and defrostedmutton would be sold both to the private consumers and to the collectivities,but frozen beef, which is mainly used for manufacturing (hamburgers etc.) indeveloped countries, would be sold mainly to the collectivities due to the lackof domestic refrigeration (para 5.05). The collectivities provide the logicalmarket for imported frozen meat since they have a large daily demand, can beeasily controlled by public health inspectors, and in some cases already haverefrigeration facilities.

6.08 Other benefits of cutting the meat at the meat complex rather thanat the factory or school canteen are reduced transport and distribution costs,more efficient meat cutting and full use of the trimmings and by-products.Wrapping and chilling the cut meat in plastic improves the hygienic conditionsof the meat and reduces the considerable health hazards attached to thepresent meat distribution system. On public health grounds a meat cuttingplant is therefore desirable. On grounds of convenience, consumers wouldprefer to buy cut and rolled meat at ONAB's retail outlets.

Cold Stores

6.09 Apart from fodder based fattening, imported frozen meat provides thecheapest source of additional meat from an economic standpoint. It would bethe principal means of maintaining per capita consumption of red meat over thenext 10 years. Each meat complex is located at major sea and air ports fromwhich meat may also be distributed to the main regional towns. To the extentpossible ONAB should distribute low cost frozen meat to the institutionalmarket in these towns as well as in Algiers, Oran and Annaba.

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Abattoir

6.10 In the future it is planned that fresh meat imports would decrease asdomestic production increases. The economic justification of each abattoir issimply that it provides a mechanism to introduce locally killed carcasses intothe system, since it would not be possible to use the unhygienic meat from theexisting unsatisfactory and obsolete abattoirs at Algiers, Oran or Annaba.The abattoir is designed so that it can initially operate efficiently with asmall output (one slaughter team killing either cattle or sheep sequentially).Throughput can be doubled simply by adding a second slaughter team to workconcurrently, but there will still be sufficient refrigeration capacity sincefresh carcass imports will be reduced as domestic supply increases.

6.11 Other benefits of the abattoirs would be as follows. The abattoirswill make a start in providing clean meat for the urban population. Algeriahas a rapidly expanding urban population who will require clean hygienic meatas in other developing industrial countries. It is hoped that the munici-palities would themselves build similar abattoirs, and that as a result ofthe Project, the EEC code of regulations agreed at negotiations for ONAB'smeat complexes (para. 3.29) would also be adopted and practiced for all newabattoirs.

Meat Products and By-Products Plants

6.12 The meat-products plant will make efficient use of trimmings andedible offal. It can also use frozen imported meat as a raw material.Meat products are particularly scarce in Algeria which as a Muslim countrycannot import products containing pork. By using old hens culled from ONAB'spoultry operations, the plant will produce products not otherwise availablein Algeria. The by-products plant will make use of abattoir waste and bonesfrom imported carcasses that would otherwise be wasted.

Conclusion

6.13 From the foregoing it is clear that ONAB will use a mix of rawmaterials, and distribute to both institutional and private consumers. In sofar as the actual product mix is different from that assumed in the Projectcalculations the economic benefits of the Project would change. If ONAB usesits quasi-monopolistic position only to increase domestic livestock purchases,instead of increasing production through fattening, then the Project abattoirwill slaughter animals which would any way have been slaughtered and distri-buted by the comparatively efficient, though unhygienic, private sector. Inthis case the only benefit to the economy will be provision of clean meat,whereas the economic success of the Project really depends on how much addi-tional meat ONAB could produce, import and distribute into the economy.

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C. Economic Rate of Return

Project Economic Rate of Return

6.14 The Project would have an overall Economic Rate of Return (ERR)of about 50% over a 17 year life (1980-96). lncluding consumer gains (para.6.16) the ERR would be about 60%. The large proportion of the total invest-ment accounted for by the meat complexes has a major impact on the overallERR, so the sheep fattening and the meat complexes are therefore discussedseparately in the following section. However, certain assumptions are commonto both major Project components. It was intended to carry out a full shadowpricing analysis but in the case of Algeria the price distortions resultingfrom quantitative controls are so great as to make the analysis almost meaning-less. A shadow exchange rate has been estimated of DA4.80:US$1.00 which is20% higher than the financial exchange rate of DA4.00:US$1.00 used in theProject financial calculations. However it is quite possible that this ratemisestimates the opportunity cost of foreign exchange, so shadow rates whichare 20% lower, 20% and 67% higher than the shadow rate adopted have alsobeen used in the sensitivity analysis. The Project remains thoroughly viableirrespective of the exchange rate adopted.

Economic Return from Fattening

6.15 The small sheep fattening operation has a ERR of 22% over 17 yearsat the Shadow Exchange Rate (DA4.80:US$1.00) adopted. In estimating benefitsthe economic cost of the sheep (weighing 20 kg) is assumed to be nil, and thebenefit is the 12 kg of liveweight gain (6.0 kg of meat) less 2% mortalityduring fattening. The incremental mutton production has been valued at itsborder price US$3.50/kg (DA16.80/kg at the shadow exchange rate adopted)rather than the market price of DA35.00/kg. The value of 60 kg/ha nitrogen tothe subsequent wheat crop has been included in the calculation based on a 1985border price for urea of US$192/ton. The sensitivity of the fattening compo-nent to changes in the shadow exchange rate is shown in Table 6.1.

Economic Return from Meat Complex

6.16 Without the Project, imports could not increase and per capitaconsumption of red meat would fall. Total per capita consumption of meatwould only rise from 11.2 kg/head to 12.5 kg/head, compared with a potentialdemand of 15.1 kg/head (Table 5.4). Wholesale and retail market prices wouldrise steeply in constant value terms. The Project will permit per capita meatconsumption to rise to 13.7 kg, but there will still be an apparent supply gapin 1985 of about 30,000 tons. Mission calculations indicate that assuming anaggregate price elasticity of demand of 0.9, by 1985 prices are expected tohave increased in real terms by 31% without the Project but by only 16% withthe Project. The benefits of the Project comprise two parts:

(a) the gains to ONAB resulting from the lower purchase priceof imported meat compared to domestic meat; and

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(b) the consumer gains due to the difference in consumer meatprices without and with the Project referred to above.

6.17 In calculating benefits, border prices have been used for purchasesof incremental meat imports. Mutton purchased by the abattoirs from theProject fattening component would be incremental and has been valued at theborder price i.e. the same price is used for purchases by the abattoir, as isused for sales by the fattening unit (para 6.15). However, for fresh localbeef, where no incremental production is involved, the full market purchaseprice (DA33.60/kg meat) has been used since each animal purchased by ONABrepresents one animal lost to the private sector. In this case, use of theborder price US$1.95/kg (DA9.36) would overvalue ONAB's contribution andundervalue the cost to the economy of slaughtering domestic animals throughONAB's abattoirs. Given these assumptions the ERR of the meat complexes are50% for Algiers and 60% for Oran and Annaba, taking into account only thegains to ONAB. If the consumer gains are also taken into consideration theERRs are about 10% higher.

Sensitivity Analysis

6.18 The sensitivity of the Project to changes in shadow exchange rates,prices and investment costs is set out in Table 6.1 which shows that boththe fattening operation and meat complexes are sound investments under alllikely circumstances. Results in general indicate little sensitivity toincreases in costs. On the other hand the ERR is fairly sensitive to changesin total benefits.

Project Risk

6.19 The main risk involved in the Project concerns the proper selectionof a site for the meat complexes (para 3.16, 3.28-3.29). Specifically, it isvital that the sites for the three meat complexes are selected and inspectedby the Bank prior to effectiveness of the Project. As already mentioned,assurances to this effect were obtained during negotiations (paras. 3.16, 3.28and 3.29). Other risks affecting the meat complexes would be mainly concernedwith the competence of ONAB's management. Meat purchase and sales priceswould probably not be as critical as might be assumed from the sensitivityanalysis, since purchase and sales prices would be closely related. MoreoverONAB is in a monopoly position to influence prices of frozen imported meat(para 5.17).

6.20 For the livestock purchase, transit and fattening operation, thereare two main risks, first that shepherds on the Steppe would be unwillingto sell their lambs and cull ewes, and second that the self-managed farmswould be unwilling to contract fatten as envisaged in the Project. In bothcases it is vital that in negotiating contracts, which will be subject to Bankapproval (para. 4.03), sufficient financial incentive is given to the Steppicshepherds and to the members of the self-managed farms. The sheep component

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Table 6.1 - Project Sensitivity Analysis

Shadow Rate Financial 20% Above 67% AboveAdopted Rate Shadow Rate Shadow Rate

DA4.80:US$1.00 DA4.00:US$1.00 DA5.76:US$1.00 DA8.00:US$1.00

Base Case

Sheep FatteningComponent 22 10 33 51

Algiers MeatComplex 51 57 44 30

Oran Meat Complex 59 65 52 40Annaba MeatComplex 59 65 52 40

Overall Project 51 56 46 36Overall Projectwith ConsumerGains 62 67 56 46

Switching Values(at 10%) /a

a. FatteningTotal Sales -6 -13 -25Total Invest-

ments 90 180 340

b. Algiers MeatComplex

Total Sales -27 - 30 - 24 -15Total Costs 38 45 30 18

c. Total ProjectTotal Sales - 27 - 29 - 24 - 19

Total Costs 37 40 32 23

/a Percentage changes which reduce the net present value to zero at adiscount rate of 10%.

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offers enormous economic rewards if introduced on a national basis, and it isvital that the small ONAB pilot enterprise is made to work. To this end thefull cooperation of MARA will be essential.

VII. RECOMMENDATIONS AND LOAN CONDITIONS

7.01 During Negotiations assurances were obtained that:

(a) Consultants acceptable to the Bank will be employed to assist inthe preparation of tender documents, evaluation of tenders andto supervise construction of the meat complexes (para 3.18);

(b) all technical assistance provided under the Project will beunder terms and conditions acceptable to the Bank. All civilworks and equipment will be procured in accordance with Bankguidelines for procurement dated March 1977 (para 3.24);

(c) separate accounts will be kept for the Project, which willbe audited by SNC, an independent auditor acceptable to theBank. The auditor's annual report will be forwarded to theBank within six months of the end of each fiscal year (para3.27);

(d) the procurement specifications already prepared for effluentdisposal from the meat complexes will be included in thetender documents (para 3.28);

(e) the meat complexes will be constructed and operated accord-ing to EEC standards of hygiene except as appropriatelymodified by agreement between the Bank and ONAB (para 3.29);

(f) ONAB will strengthen the organization and staffing withinits Red Meat Production Division and that a three-manconsultant agricultural team, acceptable to the Bank, willbe appointed for three years to assist ONAB in developingsheep fattening on medic pastures (para 4.02);

(g) agreements between ONAB and participating self-managed farmsfor sheep fattening will be on terms and conditions satis-factory to the Bank, and will include adequate incentives toensure satisfactory participation by the self-managed farms(para. 4.03);

(h) consultants satisfactory to the Bank, will be recruited forthree years to provide a five person in-service training teamduring initial operations of the meat complexes (para 4.07);

- 53 -

(i) financial consultants acceptable to the Bank will be recruitedto improve ONAB's financial procedures, and to establish costaccounting (para 4.09);

(j) the activities concerning the purchase, transit and fatteningof sheep and of the meat complexes will be fully monitored(para 4.10); and

(k) semi-annual reports on the progress of the Project, and afinal report not later than six months after its completion,will be prepared and sent to the Bank (para 4.11).

7.02 Effectiveness of the Loan will be conditional on the acquisition ofsite locations acceptable to the Bank for the Algiers, Oran, and Annaba meatcomplexes (para 3.16), and on the employment of consultants (para 3.17).

7.03 Recommendation. With the above assurances and agreements, theProposed Project is suitable for a Bank loan of US$42 million to ONAB for aterm of 17 years including 4 years of grace.

ANlNEX 1Table t

A3,0180A

MUAT INDmSTIY (O10635 P20JECT

main Teichicel Ch-recacnisticn

Sh-ep Perch.en. Trgneit and FatentingAchat d'ovine, Tracsit et Engraisse=t

Totnl Nocher *1. ef locober nf T2ta1 Ne. cfof shcep it Nt cal Buying Sh-ep te be

Iditava Flock Cnctcrs Purch-ed(mhilions )

A. BuYing Centers A. Centres d'Achat

Saida 1.96 17.2 2 16,700/a Saide

Tintee .74 6.5 2 L6,700 - C6tt

DjeiEa 2.32 20.5 2 16,700'6 Djsltr

Mtsiie .79 6.9 2 16,700 MSite

Qum El 3e.aghi .41 3.6 1 8 350 Qse El 3-eee'si

7.cg-ha- .87 7.6 I 8,350 Laoeihat

Tebessa .55 4.8 1 8,350 cece

Biskre .50 4.4 I 8,350 BiOk-r

cu-ber

b. tddisienal mTenspcrtateon B. MteoenAs d teuIraseTpo Npeb-

Largn seiep transporters 20 Tra -spetcsr-gcande teillc 20

Spelt sheep trannpcttvt 10 - ptitue ntaill 10

4 nheel drive vehiccle 10 v'ehinets us ter-inc 10

Tecel bO lott i4O

1971 1979 1980 1981 1982 1983

C. Shtpe e i_ C. Ontetcervevn d'Ovies sur Medicego

i. Lad Freparetion i. reparteier. dcn tcrres

Lsn rcmentacnumb erpf Ocres (sincher) - - hQ 120 - - F'ermcs additioncelles (ccmbte)

Aca et land preperatien thectates) - - 15,000 30,000 15,000 - Stefncu t pnlpcrcc (4e)

ii. fflic Pasture Establishmene i1. lise e- plant taîstegen Medincag

Arca et cedis pasr-re nder preducion îhectco( - - - 15,000 30,050 30,0 toc-fttie de ocituegu e p-nd-utins (e)

est Ates ef hledic Ptstete (hestaes) - - - 15,000 45,000 6h,000/- Seniece seuctu pesuneins rediseon lues

Tet_l uur -rr ni tan eteith -rdis pasuec (sumbstl - - 60 120 12 0S Nome usuel de f-cees -eu pate-agcs eedtee 0e (nnhrex

fii. Shecp P he h 3 01140 iii. Aehals d'Ovins par ONAl bnomhrc)

09.1 cree fatetned en nedic peconre - - - 50,0Q0 10,000 10l,000 ovins d'ONAR engraissés se.c patvvcs cediuag.

Sheep ef SeLi-Oaeeîed Fecos fa ttened en ovins du s-ctr I ca sur

crdie pesître 25 .. ,000 50,000 50 000 pinsvdsg

Slntbtal sheep fattened en cedis p7sîe - - _ 75,000 150,000 155,000 Sn- 1 e engreiss aes

Othen ONA9 ?_ctha nes lo elf-Llagcd Faccs 50,000 Sô,OOO 55,OO 35,000 20,000 20,000 eutus achats d'O\AB auprecs e-p e- r si-lissu

lst

01 OkA3 P-urchases SO,OOO SO.ûOO 95.000 110,00 170,000 17OOo/- TotaL eniets d'ORAB

retsl Offtike f-v Netitonal FIock (piliin) 2.9 2.9 2.9 2.9 2.9 2.0 N.ecrb uutl deovine prelevns sec 1hrpt-e cetopal 'niIllios)

stsated Numcer Avaitahnb fer Cnnvre-led Olaughte- (millien) t.7 1.7 1.7 1.7 1.7 t.7 Esti atiu nrete dtspnubhi psun abtelcoencrol (cilibns(

OsAB S__encses en Fercetage et eCu_rolled Sla1 ghter (%) 2.9 2.9 3.2 6.5 10.0 10.0 Achats d'ONA8 en p-nrc.ntaov doehessegesncurcius

iu. ?nue aceu tredennine from Mndin Pteesarr(sues cetarcas velotetOSAI Shcep - . - 790 1,570 1,500

Shl p f Self-Macaged Fas _ _ 390 780 70

besai - - - i,180 2,350 2,350

.Lnsceacrata Meas Frodust_on frac Ondin Pas recel tre d in u c do stadv

tînce earcas eg7 astures I. iredcto press ?eftntaie (uudeld vinede dtàL'itrout

ONAB Shee - _ _ 290 590 590 des 0 100B

Sheep i se lf-vac-ged fea-s _ _ _ 150 290 290 0o-ns dec fermes du sreîceureuliais-e

Terat ~~~~ ~~~~ ~~~~~~~~~~~~~~~~~~~~~44 880 8-00ou

ta Once cter eeistcng ar ONAB feni ccutr. ta tececure einreos an neutre d engrsienONAB.

/b HaLi erce vln bI preduning mcdic (30,000 ha) end half ;h ta motOé de - aisupceunr Jreluis nedisPge (35,000 he) ce ta

hcatn i n ec - year. vlnoié prndeit de bré n -serue evdnne

/c Est-ter-d sleughbrr ef she-p in 1983 ic Pr-ejc a iasueirs le 127,000 1903 -t dn 127,0

(Al giers 40,000; Otan acd Acaibe 29,000 -ch) uith recining 33,500 0Algr 69,000, torun Acvins 29,050 hso. de trî

nceihtnterd et Sidi IcL Abtol and 33accinro. 5,000 u Stanu tidi tel Vobes c ii°uevtL

/d Assumed th-u 0AB sthp --ured a 20 kg l1- ight nd -Id e td Oeppnsu que StAB vs t s 22 kg pid us od

32 kg lur sivg il Ag li-gehat 6g 3keg ,elv te 6 s a 2d n.id q i, eueruoseuoneecs uovn do 2 kg pnid vir et teaiven

carneesuveight gait/head. i kg oid v12 es poid vif eqei.l-cè

April 1979

-55-ANNBX 1Table 2

ALGERIA

MEAT INLBJSTRY (ONAB) PROJECT

Main Teohbinal Charasctriostni

Algies Me-t CinplceUnites Inte...us Viande Algue

A-snd Tons Bn-BeIlHeed/ Headi eai!d/ laasso anasso- Tons Bonelana.. Tons Boneins _bHeur Day Year eaight nos Veau MeasanttY Meat/Day

A. Abattoir A. Abattoiri. Proient Throughput ,b i. Niveau d'utilisation PCo-it

Cattle 16 50iS 11,980 170 2,050 - - BovinsSheep 100 288'- 69,120 16 1.100 _ 4.6 Ovins

Tonta 3_150 Total

is. Plannnd Cocacis - ii. Capaoite pt- Cettle 16 96 23,040 170 3,900 - - BovinShiae 100 600 144,000 16 2.300 - - Ovin

Toal 6_200 Total

B. Ment Cutting PIent B. Atelier de den-upeLonal beaf cosssses 8 4i 11,980 170 2,050 1,300 6.3 Cornasses 1-1calsIposted bf carnases 220 120 29,000 200 S.800 4,250 17.7 Ca-e.oonu importons

Votai 28 168 7,850 5,750 Total

N. ni Rosatinon Tees Tees4 Ha Pallets sotngo p-er Y.To Mat/Yes/a Mast/Daylv 2 (sors)

C. F9ones Ment StIrane C. Stockage viandes -ongelé-sInpoteld muttoancasc 2,350 1,250 4.0 0,000 20.8 Careesses ovins inrpatTopstd b-1o-a beni tl25 1.250 4.0 ... 92Q26. Viande du hon de- sé

Vepornid 3,70l eS6 beeE 3 7 00 2,30 4.0 41.6'- Viles

Days f-oCapaity Dfn...ieting HCod/aey Tons/Seat Tons/DaB

(ni) _(carcases)D. Defr -Dter D. Danongelation

Mott-, 162 1,048 2 520 2,080 8.7 Viaude de contes

BNo. of5 RailsChillers Carcases Capacity Cavanitv

E. Chilled Sonrage Capacity itn) (as . Cnapaite do refrigerationi. Carcass Stora i. Entreposage carnasses

Sheep 3 600 9.6 2.1 OvinsLocal n-ttle 3 90 15.3 1.8 Soviet lonauxIspsted settle 14 420 84.0 3.5 Bovins impostes

Tro_l 20 108.9 Tonal narcasses

ii. MeaO9t. so '/! ii. Et.eposag.Muat nets 83 Decoupet de viandeMeat products 15 CharcuteriefUlals 2 AbatsTotal 100 4.3 Total

Toto/lD Te.../Ve-r

F. Miat Produ-ts Plant F. Atelier CharcuterieCnreone tri.n.. so 4.2 1,010 Dec-hsu de eneensoCeded, offal, etc. .9 210 Têeut abateIpent hens .9 220 Volaiile do rafona

Total 6.0 1_440 Total charcterie

I. By-Prod-nts Plant G. Ateliar de Sous--rodsitlBlond and nast cool 3.5 840 Sang et fanise de Ca-gEdible fats 1.5 360 Matières grasses conertiblîn3.ne Meal 9.4 2,250 Ferie d'es

No. pur Year

V . Hides ond lSkins :. Cuise et Peauxloden 11,980 FoOtsSkies 69,120 Pauxa

la Assumes 73 ks6 b-onts biri abtained fron 105 kga boe.-innsaoa. la Soppuso qu'on ebcinnt 73 kgi de viande dr.eusrr à pantin do 100 kli de can.ns.e

/S Assuonnstqunnnral killicg by slaughter tean operatîing e-ttl lise /b Suppose abattgaû tequentiol aven une équipe travaillant 527. du tops sus chaine52?. cf tine -nd sh.cp lise 40% cf tine, with ose si hbor shiFt/day, bovins nt 48s. nsr chai-eovio, par potis de 6 heures , 1 pste/jour, 20 jeurs/mois20 doys/sona, 12 ourthe/yens. 17 lairage Ces up te 24 house ntandin 8 12 pis/an. 8table de 17 enclos on le bétail resto jusqu'a 24 heors avont lksbarcuic.be/ose slanghter.

/c -nsuols-gnhurrenroiao tmes with 2 6caun nparoring i hAnse/day each, /c Sapposa abattage -n paral-lè 'a 2 équipea ope-ant chacune 6 haures/onc, 20 joues/cils,20 deye/-enrh, 12 months/year. 12 mois/an.

/d 20 tons/day fer final disoribution by ONAB, and 30 toss/dny fo bulk /d 20 sonnes/jour pour transpert et livraison par ONAB, et 30 tose.s/j-ur pour distributi.ntranshiptent on p1llert to SONATRACCH etc. -n rac son paletten à SONATRACH oet.

/r Additional chilled 6trragoecapaeity f-r Orde- Sele-tion and Dispatoh le Capacité additionnel.l do réfrigérctio peur Sroie Expedition, conprea.nt:Deparmntnt i,c1ndes: pinkiîg ehiller 1 day capacity; dispasct chill-r réfrigerateur -a-ooage cepani-t d'on jon-, réfrigérateur soptditin: sepacité dc0.67 cf ens day'n capacity: disrtibetiee chille- 0.33 nf ne- day's -ap-city. 0.67 jourt; refrig-tr-eur distribution: capacite de 0.33 jours.

>,rehb 1979

-56-ANN8X iTable 3

AIGRRIA

MEAT INDLSTRY (ONU) PRO0ECT

Main TechnisaI Chrct-enitiCs

Tran and An-aba Me.s CmplreresIJnicas Integree Viande Oran ee Annaba

Assncnd Tons ma- -laHand Head/ eald/ Carcas Carcans Tons- Bn. sas-/A Tons Bonrss-/ianc Dav Ysar a- W tigh r Taon - Meat/Year Meat/Dya

A. Abattoiri. Proieet Thrnoughpu A. Abotonir

Castsl 24/' 5,760 170 1,000 __ i. Nirean d'utiiisation projarShbep 40 120h/ 28,800 16 450 - 1.9insCoasa 1,450 Tttan

ii. PlaTnnd CataaisblCa-lc 8 48 11,520 170 2,000 _ _ ii. Canonise nrévun/'Sheep 40 24C 57,600 :6 900 - _ 3-ViasCTai~ _14 oDatas

t. vat Cuttion Pioctcanai CeeA ca4cases A 24 5,760 170 1,000 730 3.0 B atelier4densaaon:sparted Ceai cancanons 5 30 7 200 200 1.440 1 050 4C4 anans poaies

Total 0 _4 I2.I6 25440 42,780 7a4 Tsait

No. of Roaseions Tons TantStrage Palieta Strorage pas Teaon Meat/ean Oeoi/ia',(m

2) (tons)

C. Frozna`net ntoan C. Sacckan viandes canaslinnIcportrd sn:nscarcassns 790 410 4.2 1,650 6.0 Cia ipmPorted barrlrss bref 410 410 4.0 1 650 6h9 Vanea annsi sste

rasai 1,400 1,200 820 3n300 1=.O8/ie Tata)

Doys forCa scia' Capainy Defrosting Head/Dav Tons/Year .

(m ) (concassas)D. Defroster i. Incocgniatian

Mutt-o 65 420 2 210 840 3.5 -tnvdn d rtonro

Chillers Cancanons Capacity Capacit(one.) Onoan) (dots)

e. ChilId Strocag Ca.acta. O. Covaciar de retrisarotios

i. CotcnesaoraiSheep 2 160 2.1 1.3 Tns

tLocal cassis 2 32 5.0 1.3 Ovin aponersed cattin 5 OS 1900 3.3 3vinirperasTotal 9 26.1

il. M-a Soag/Mt et c-t 33 Déi..i. Carcesoon - idnde

0

Meat productt 6 Décoapen de atdeOffatlsdan Charcuesiri

tasai 40Total

Casa /oa Taons Year

P, veat Products Planat.AairbnsaiCencans Inisminge 2.i1 SOO F. Alrh cutari

lead, pffal esc. .4 110 Techet abo cSpena becs .s 010 VoiiTsad a seTane) 3.0 720 Coasa cabs nrin

G. Bv-Prad-cas Plnt3100d and -- at meal 2C0 480 G. Acclinr denann-nrsdciasEdiblo a noc.B 190 Sang ai farine de sangBn- Meal 3.2 770 -at0td-

Onnîv- d'as

Nl. p- YC r

Ijid-a a-d SkirsHidas 5,760 H. Coins at PeauxSki-s 28,800 Caim

la ,hnscans 73 kge bocalnss be-f cbtaiaed fr-n 100 kgh bans-iC cornons. /a Soppose qu'an obtient 73 kgC det iand d-ossée a partir dA 100 kga de carcasse.

/b Assum -sseqcan-ia1 killirg by llianOtec sean - peraci 0g caitle a-d see-p lins -/b SapprmanbattSag -eqcanteieiavaetcucquip cravas 50/. do snpe-r chain5O5 no cilo roch, with ave sic hbar s:ift/day, 20 days/mo.th, 12 nacclelynar. bairns nt 5 ans abhine ovics, par pastns de 6 havres, I posae/jour, 20 jannals,

la A- su cncurrntlslaughbar aith 2 6ars operating h hours/day each, 20 days/cccab, la îoppann abattage ra parnllèln à 2 equipes cperant choc.n. 6 heresn/jour, 20 jours/ sots,ID 1cacs/ycan. 12 nain/oc

6d i tans/day for fi-al dis-rib-tica by OA3 an-d 7es for bulk fransparracicc /d 5 cnss/our pan tcon.port e- livraison pan ONA3, ns 6 tonnea/jou pour disribu-Caan li SiI Bil AbD and fa-, Accaba tc C.n-sclai-a. tisn -ac non paerttes d'Oan t Sidi BeI Abben ns d'Acnabg à Constantite.

la Additiol chilled -s-rage fan capacity for Order -Selcion and DOspat;h Department / Copcia t dditricani11s dc ràOrioàani- 70c S-in tapediti.s, P-at:iccidra _ diApateh chiller 0.67 cf ave day's capacity; dis-ribnti-s chi11- 0.33 -o e riO-ta - -eageaa nei:aeatsc Oc 0.67 aS, rvfige-t ditinctbn-i-:

-d.' c. cpiy.p de 0.331979

Moral, 1970

-57-ANNDX 1~~~~57~~~~~~~~~~ ~~TaPît 4 Page I

ALGERITA

MEAT INDUSTRY 09lAb) PROJECT

Prolect Caste(USOSI 000>

Total 1980 1981 i982 1983Porrigo Tota Fl Poeg Total Poreign Totl Foreigo Total Poroige Tota

A. Moto Coseoltoot A. Un_eiotorroviondc

1. Alt erei I. Alg-ro. Equipment 6,461 9,294 3,231 4,647 3,230 4,647 a. Eqeiponoot

Phyctioa oonoigoo-y 646 930 323 465 323 465 Ala phyoiq-osTrioooootiogeoop 1,514 2.177 55 729 963 1 385 Abat fi..o.or

S,,b.toca 4,521 13/2 =,. . ,09tooto

b. Toti1Lot 750 1,200 - - 750 1,290 b. VohiroloPhyipoirl ooo tioîoty 73 120 - 75 122 Abat phytiqatoPrite tootitgtttp 224 358 _ 224 358 ALero floatro. ro

Sobtotal 1,04 9

1,678 - - 1,049 1.678 S000-tot3L

c a. Bouidtooo 4,737 13,534 2,369 6,767 2,368 6,767 o. tatiactoPhytital ooontlogroy 473 1,353 237 677 236 676 Al-a phptiqot-Prite oooticgeoop 1.109 3,171 404 1.154 705 2,017 Alea Oltootor

Sobtotal 6.31'3 la058 3,010 8.598 3.309 9.460 Sot-total

d. Total Algir- 8. Tota Algora. t _e 11,948 24,028 5,600 11,414 6,348 12,614 Cooe do bo-

PhysicaL .o.tieg-ttY 1,194 2,403 560 1,142 634 1,261 Al-a physiquctpricc- cotlrgetty 2 847 5,706 955 1,946 1,892 3.760 Abat

Total 5_989 32,137 7.1L5 L4_502 8O874 17.633 Total

I1. Orat 11. Oreea. Eqoipmeot 3,256 4,657 _ - 2,182 3,121 1,074 1,536 a. Eqoipe-r-t

Physical oootlogtoop 325 466 - - 218 312 107 154 Al-a po,ysiqorsProit _ootitg-toy 1,120 I,418 - - 650 745 470 673 Al-a faatorr

Sbt-oal 4. 701 6,541 - - ._2 4,178 :.651 233ot-totl

b. Tehitlot 200 320 - - - - 200 320 b. 407408)00

PhysiraL coticgency 20 32 - - _ _ 20 32 Abat phytiq-tsPoire -oetigoc 88 140 - - - - 88 _140 Alan tin .oti-r

Sobtnral 308 492 - - - 30 492 loto-ro

e. Ooilditgt 2,412 6,890 - - 1,616 4,616 796 2,274 c. îatooootoPhycitaL rontingency 241 689 - _ 161 462 80 227 Alea physiquasPoire tcntingecpy 831 2,371 - - 482 1.376 349 995 Alea- fi-a-ti-rt

Sbb-otal 3.484 9,950 _ 2,259 6,454 1,225 3,496 oo-total

dJ. Totcal lOaneac -t 5,868 11,867 - - 3,798 7,737 2,070 4,130 d. aT-al Sons

Physical 5onti8gcy 386 1,187 - - 379 774 207 413 coAt do b-stPric etontin8egtt 2,039 3,929 - - 1,133 2.121 907 1,808 Airs phyiq-o

Total 8_493 16,983 - - 10.632 3, 3 6. Tota:

III. Atoabo III. A-oaha1 . A qipeceet 3,336 4,657 - - - - 2,182 3,121 1,074 1,5336 a. Oqoipooot

Phpciea oo-tiog-ooy 325 466 2 18 312 107 134 Abatl phytiqacPrioe otioîeooy 1,589 2.274 - - 9 - 55 1,366 634 908 Alat litatoirt

Sobtotal 5,170 7,397 3,355- 4,9 1.813 29 Soatoa

b. Vehiolet 200 320 - - - - - 200 320 b. VPoirolosPhcsi-a .cntitg.e.y 20 32 - - _ _ - - 20 32 Abat phytiqos_Prire ootiogcy 118 189 - - _ _ - - 118 189 Alac_ fitat..ri_

sObtota1 338 541 - - _ _ - - 338 54i Soto-total

o. Boildings 2,412 6,890 - - - - 1,616 4,616 796 2,274 c. --Phytical yontingecy 241 689 - - - - 161 462 80 227 Altot phyt-q-otPri_ toittt y 1,177 3.364 - - - 707 2.021 470 _1_343 Alat tatolara

Sebtotal 3,830 10,943 - - - - 2,484 7,099 i 346 3,844 S-ot-toa

T. Total A-oaba d. Total Anohabcote otot 5~~~~~,868 11,867 - - - - 3,7908 7,737 2,370 4,130 Cû obs

Phyciral cottingency 586 1,187 - - _ 379 774 207 413 A.-o pc itPrice o-ti.gec.y 2,884 5.827 - - 1 _ 1,662 34387 1,222 2.440 Ala.- fi--ati-rr

Total 9_338 158881 - - - - .839 6.,8 3,499 Total

Total Mbct COtpl-oco 33 820 68.001 7.1L5 14,502 14.183 28,267 9,_02 18,249 3.499 6_983 TotaL Toitot -otrgrc.-s ia-da

MOr-h 1979

ALGERIA

MEAT INDUSTRY (ONABj PROJECT

Project Costs(US$'000)

Total 1980 1981 1982 1983Foreign Total Foreign Total Foreign Total Foreign Total Foreign Total

B. Slheep Purchase Transit B. Achat d'ovins. Transit

and Fattening et Engraissement

a. Vehicles for Buying Ceoters 638 1,020 319 510 319 510 a. Vehicules pour Centrea d'Achat

Physical contingency 64 102 32 51 32 51 Aleas physiquesPrice cootinge.cy 149 239 54 87 95 152 Aleas financiers

Sobtotal 851 1.361 405 648 446 713 Sous-total

b. Ilandling yards 114 325 25 72 36 103 53 150 b. Enclos

Physical costingency il 32 2 7 4 10 5 15 Aleas physiquesPrice contingency 38 109 4 12 il 31 23 66 Aleas financiers

Subtotal 163 466 31 91 51 144 81 231 Sous-total

c. Establish Medic Pasture c. Introduction medicago

on State Fars 1,620 4,628 405 1,157 810 2,314 405 1,157 dans domaines

Physical contingency 162 462 41 116 80 230 41 116 Aleas physiques

Prire contingescy 488 1_394 70 197 240 690 178 507 Aleas financiers

Subtotal 2,270 6.484 516 1.470 1.30 3 624 1.780 Sous-total

d. Total Sheep Purchase, d. Total Achats d'Ovins,

Transit and Fattening Transit et Engraissemtut

Base cost 2,372 5,973 749 1,739 1,165 2,927 458 1,307 Coût de base oe

Physical contingency 237 596 75 174 116 291 46 131 A5

eas physiquesPrice contingency 675 1,742 128 296 346 873 201 573 Aleas financiers

Total 3284 8.11 952 627 705 2.011 Total

C. Technical Assistance C. Assistance TechniqueSuper-ision of Construction 1,400 1,750 352 440 352 440 352 440 344 430 Supervision sonatruetias

I-service traising for Formation pour unite integréemeat complex 1,200 1,500 - - 400 500 400 500 400 500 viande

Medic/Sheep Tese 720 900 240 300 240 300 240 300 - - Equipe medicago/ovins

Fisaone and cost a..o.nti,,g 400 500 - - 400 500 - - - - Gesti fnnciere, comptabilité

Subtotal 3,720 4,650 592 740 1,392 1,740 992 1,240 744 930 Sous-total

Prire contingency 1.498 1,872 326 407 378 472 395 494 399 499 Aleas financiers

Total 5,218 6.522 918 1.147 1_770 2_212 1_387 1_734 1_143 1_429 Total

D,Incrresntal Working Capital D. joe,ds de Roule,ne,,t Additionnels

Estimated -ost - 15,176 - - - 2/4 - 6,553 - 8,319 Estimation de base

Pric contingency - 7,165 _ _ - 74 - 2,608 - 44 Alcs inanciers

Total _ - - - 348 _ 9,161 12832 Total

E. Total Project Cost E, Cout Total du ProietTotal Base Cost 29,776 /3,361 6,932 13,193 12,703 25,292 7,318 20,967 2,814 13,409 Total crots de baseTotal Physical Contingency 2,603 5,373 635 1,316 1,129 2,326 632 1,318 207 413 Total aleas physiquesTotal Price Contingency 9,943 26,241 1,409 2_649 3,748 7 300 3,165 8,870 1,621 7,422 Total aleas financiers

TOTAL 42322 105175 895 17,858 17,580 34,918 11_115 31,155 4,642 21_244 TOTAL

April 1979 a

-59-

ANNEX 1Table 5

ALGERIA

MEAT INDUSTRY (ONAB) PROJECT

Schedule of DisbursementsBareme de Deboursements

IBRD Fiscal Year Cumulative Disbursementand Quarter at End of Quarter

(US$ Million)

FYFY80September 30, 1979December 31, 1979 .1March 31, 1980 2.3June 30, 1980 4.5

FY81September 30, 1980 6.7December 31, 1980 9.0March 31, 1981 13.2June 30, 1981 17.6

FY82September 30, 1981 22.0December 31, 1981 26.2March 31, 1982 29.0June 30, 1982 31.8

FY8 3September 30, 1982 34.6December 31, 1982 37.4March 31, 1983 38.6June 30, 1983 39.8

FY84September 30, 1983 40.9December 31, 1983 42.0

March 1979

-60-

ANNEX 1Table 6

ALGERIA

MEAT INDUSTRY (ONAB) PROJECT

Proposed Allocation of Loan Proceeds

Repartition Propose du Montant du Pret(US$ million including price contingencies)

Category Project Cost ProposedTotal Foreign Loan

1. Meat Complex Construction

Equipment 23.9 16.8Civil works 35.4 12.4

59.3 29.2 29.6

2. Vehicles 3.7 2.3 2.3

3. Other Civil Works

Pasture establishment 5.8 2.1Handling yards .4 .1

6.2 2.2 2.2

4. Consultant's Services

Supervision of construction 2.5 2.0Training for meat complex 2.1 1.7Sheep/Pasture team 1.3 1.0Finance and Cost Accounting .7 .5

6.5 5.2 5.2

5. Unallocated 29.5 3.4 2.7

Total 105.2 42.3 42.0

March 1979

-61-

ANNEX 2

ALGERIA

MEAT INDUSTRY (ONAB) PROJECT

Selected Documents and Data Available in the Project File

A. Selected Reports and Studies on the Agricultural Sector in Algeria

Algeria - Agricultural Sector Survey. Analysis of IssuesTwo volumes. World Bank October 1978

B. Selected Reports and Studies Relating to the Project

Technical Specifications for the Proposed Complexes at Algiers,Oran and Annaba. Shirley M. Holt Associates/EASAMS April 1979.

Interim Evaluation Report Contract No. ALG 77/030. EASAMSNovember 1978

Medicago and the Wheat - Medicago Rotation in Algeria. D.A. Saunders.CIMMYT. July 1978

The Return of Medic. CIMMYT No. 3 1975

C. Selected Working Papers Prepared by Bank Staff and Consultants

Working Reports on Livestock Numbers, Slaughter Statistics, andMeat Complexes. Shirley M. Holt. September, 1978; January 15, 1979;January 30, 1979; February 7, 1979; February 15, 1979.

Proposals for a Fattening Programme Based on State Farms (SecteurAutogere) in the Cereal-Growing Areas of Algeria. C.T.R. Pritchard/Farmkey January 1979

Cattle and Sheep in Algeria, and Investment and Operating Budgetfor ONAB Sheep Purchase, Transit and Fattening. E. Yates January 1979

ONAB - Meat Complexes at Algiers, Oran and Annaba. A.R. Estrate/SEDES February 15, 1979

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