ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(82)605
Vol.1982/0191

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COMMISSION
OFTHE
EUROPEAN COMMUNITIES
Genera!SecretariatCOM(82)605 final
Brussels,28September1982
FOROFFICIAL USEONLY
ReferraltotheCouncilforadecisionofafinancingproposal
notapprovedbytheEDFCommittee (Article19(2)ofthe
InternalAgreementof1979onthefinancing andadminis­
trationofCommunityaid:80/1155/EEC)(MADAGASCAR )
ReferraltotheCouncilforadecisionofafinancingproposal
notapprovedbytheEDFCommittee (Article19(2)ofthe
InternalAgreementof1979onthefinancing andadminis­
trationofCommunityaid:80/1155/EEC)(SENEGAL)
(Commission communications totheCouncil)
C0M(82)605final

Referral -to -theCouncil for adecision ofafinancing
proposal not approved bythe EPF Committee
(Article 19(2 )oftheInternal Agreement of1979
onthe financing and administration ofCo""""" -*t.y
aid :80/1155 /EEC)(MADAGASCAR )
(ComadBsion Commnni cation totheCouncil )
On17Hovember 1981 theCommission submitted thefollowing project at
the162nd meeting oftheEDFCommittee :
MADAGASCAR (Fifth EDF-Grant :2100000ECU)
Supply ofpharmaceutical andmedical produots
Theproject wasnotapproved bytheCommittee ,andafter consultation
with theMalagasy authorities arevised version ,incorporating anew
section atthemodest cost of65000ECUandentitled Supply of
pharmaceutical and medical products and analysis ofindustrial sector
rehabilitation tobefinanced bya2165OOPECU grant from the
fifth EDF .wassubmitted totheCommittee atits165th meeting *
TheCommittee withheld approval from therevised project aswell *
Attherequest oftheMalagasy Government yandpursuant toArticle 113
oftheLom£ Convention andArticle 18oftheInternal Agreement ,which
provide that "intheabsence ofafavourable opinion "the
representatives oftheACPState concerned "shall •••beheard bythe
representatives oftheCommunity ",theCommission convened theadhoc
committee referred toinArticle 11oftheRules ofProcedure ofthe
EDFCommittee toallow theMalagasy authorities toexplain their
grounds forrequesting EDFfinancing fortheproject *
Madagascar 'sMinister forHealth attended themeeting oftheadhoc
committee *Heshowed howtheproject fitted inwith andbuttressed
theisland 'shealth policy ,which heoutlined *

Followingthemeeting,pursuant -toArticle113(4)oftheLom6Convention
andArticle18(4)oftheInternalAgreement,theprojectwassubmitted
totheESPCommitteeatits170thmeeting,on5arid6July1982,whenitwasonceagainturneddown*
Thismeansthat,underArticle19ortheInternalAgreement,asthe
Commissionisunabletotakeafinancingdecisionindependently ,it
mustrefertheproposaltotheCouncilforadecision,asrequested
bytheMalagasyauthoritiesunderArticle113(5)oftheConvention *
MaingroundsgivenbycertainMemberStates'delegations forwithholding
afavourable opinion
1*Itwouldhavebeenbettertoapplyforemergencyaid,asprovided
forbyArticle137oftheConvention *
2*Thistypeofoperationisinthenatureofbalanceofpayments
support,orevenbudgetarysubsidy,andisthereforenotin
conformitywiththepurposesoftheLom6Convention,inparticular
theprovisionsofArticle93*
3.Thesemeasuresshouldberecastaspartofacomprehensive
projectdesignedtohelptacklethestructuralproblemsofhealth
careinMadagascar *
4*Effortsshouldhavebeenmadetofindthefundselsewherethan
undertheIndicativeProgramme,forexampleintheformoffresh
StabextransferstoMadagascarfurthertothedecisionstakenin
LibrevilleinMay1982atthemeetingoftheACP-EECCouncilof
Ministers *
5*It'shouldbenotedthatnodelegationvoicedobjectionstothe
"analysisofindustrialseotorrehabilitation "componentaddedto
therevisedversionofthefinancingproposal*

-3-
The Coæiaission's oase
1.Using emergency aidunder Article 137 "tocope with -thepresent
situati onwould effectively have been togive theMalagasy
authorities extra funds (i»a<not -taken from thecountry 'sIndicative
Programme )toremedy administratis ashortcomings •More tothepoint t
emergency aidisdesigned todeal with unforeseeable cyclical
contingencies ,which isno .,?festisinvolved here .
2.Themedical supply operation isofsinessentially humanitarian
nature# Obviously itdoes have anindirect effect onthe "balance
ofpayments andthebudget -as,clearly ,isthecase with all
EDF-financed projects .
There isnothing intheLom6Convention toforbid this sort of
operation .Article 93ispermissive ,instancing fields towhich
projects andprogrammes wmy•••inter alia"apply ;this wording
reflects thedesire oftheAGPandCommunity negotiators toframe
aprovision which would beinterpreted andapplied flexibly .
Article 153(2 )onback-^ip aidalso applies tothepresent
circumstances •
Atallevents ,this project indisputably promotes Madagascar *s
economic social development ,inaccordance with Article 91of
the Conventions
3.AstherepresentativsofMadagascar explained atlength atthe
meeting oftheadhoccommittee on5«faly ,this project forms part
ofathoroughly consistent andordered health policy .The
counterpart funds inMalagasy francs derived from thesale of
pharmaceuticals andmedical products supplied under theproject
would gotowards thefinancing ofaprogramme fortheoverhaul of
thehealth service ,topayfortherenovation ofrural health
centres ,training andrefresher courses forhealth service staff ,
andmeasures tosupport laboratories preparing pharmaceuticals and
medical supplies andunits making solutes forhospitals .
There will beaspecial condition tothis effect inthefinancing
agreement .
4.There arenogrounds forusing thenewStabex allocation to
finance such aproject .Inanycase ,theextra money has'yettobe
divided upamong ACPrecipients .
* *
*

Inordertoassesstherealwortaofthi<3r/?ojec»itisnecessaryto
seeitinitspoliticaland.economiccontext.Sincetheendof1981
theGovernmentofMadagascarhasmariet"effortstoimprove
ktacountry'seconondosituationwithth*sb«lpofaidfromtheIMP,
thei'iXlU^frnceaj-dotherexternalsources(followingaconference
heldinPd._^inJunetocoordinateaidtoMadagascar).Madagascar
iscurrentlyu,,.nsvereexternalj.,ittentdifficulties whiohare
theresults
(a)ofdomesticfactors-a,is.ji"-expansionary economicpolicy
coupledwithaoiSBiveiaveetmentsdoingnothingforshort-
ormedium-term productionaadsaddlingthecountrywithhuge
debts;pooradministration ofstate–runenterprises ;
inadequatepriceincentive«toproducersoffoodcropsand
exportcoEJiodities;
(b)externalfactors–asteepdeclineinthetermsoftrade,
largelybecauseofthefallinworldcoffeepricesandsoaring
oilprices;afallinworlddemandforMalagasymineral
commodities ;thehighlevelofinterestratesoninternational
capitalnaarkets;naturaldisasterswhichhaverecentlycaused
seriousdamagetoagricultural infrastructure .
Financingthisproject^-ouldfitinwiththeoverallplansetin
motiontoensureageneralrecoveryofMadagascar'seconomyand,
politically,constituteaKifc*a.ofwillingness ontheptirtofthe
Communitytojoinforceswiththeotherdunorswhoareprepared
toprovideconcertedfinancialBupport.Themainpurposeofthe
Communityaidwouldbetohelprelievethe'shortageofdrugs
duringthistimeofeconomiccrisis,aaditisnotfoundedon
econoiaicandpoliticalgroundsalone;itisabovealla
huEsariitarian act.
Finally,tiieCommissioabelievest1at*hisprojectisindeeda
necefcaai-yanddesirableCommunitycontribution toMadagascar's
economicandsoojaldevelopmentwithinthemeaningoftheLom6
!onv«ntion.ItwouldaVsodrawtheCouncil'sattentiontothe
>ctthatarefusalwillij&evit&Dly beseedbyoarAGPpartners
aseriousevasionofihaprovisi>ii£ioftheContention andthe
•?ritofT0'.v6»

-5-
Accordingly ,under Article 19(2 )oftheInternal Agreement onthe
financing andadministration ofCommunity aidandattherequest of
theMalagasy authorities ,theCommission hereby refers theannexed
financing proposal totheCouncil andproposes that ittake the
following decision :
"THECOUNCIL ,
Having regard toArticle 19(2 )oftheInternal Agreement onthe
financing andadministration ofCommunity aid' ,
Having regard totheproposal from theCommission ,
Considering thegrounds setoutinthefinancing proposal an!in
theCommission Communication totheCouncil ,
Whereas theEuropean Development Fund Committee didnotdeliver a
favourable opinion atitsmeeting on5 6July 1982 ,
DECIDES :
theproject described below ishereby approved :
Registration Ho Title Financing authorized
asagrant under the
fifth EDF
MA/507/81 Supply ofpharmaceutical and
medical products andanalysis of
industrial seotor rehabilitation2I65000ECU
commitment authorizations foratotal sumof2165000ECUarehereby
accorded ;
theChief Authorizing Officer oftheEuropean Development Fund is
hereby instructed tomake anyadaptation arrangements andcommitment
decisions that prove necessary toensure thesmooth execution ofthe
approved project under thebest economic andtechnical conditions ,"
OJL347,22.12.1980 ,

COMMISSION
OFTHEEUROPEAN COMMUNITIES
EILiNCINGPROPOSAL
5thEDF
!Titleoftheproject
I
>
!
ìSupplyofpharmaceutical andmedical
productsandanalysisoftheindu­
strialsectorrehabilitation
ïTypeofproject
ι
»Socialinvestment
(Art.93-LoméIIConvention )
;
jRecipientState
i
IDemocraticRepublicofMadagascar
Authoritysubmittingtheproject NationalAuthorisingOfficer
letterof8.10.1981
Registration N°oftheproject MA/307/81
;
'Sectorialclassification inthe
accountingPlan60
jcommitmentproposedasagrantECU2165000
Exchangerate:ECU1.00:FMG310,2

2
I.PROJECT SUMMARY
Thepurposeofthisprojectistosupplypharmaceutical andmedical
productsandanalysetheindustrialsectorrehabilitation inMadagascar
(NationalIndicative Programme5thEDF).
TheNationalAuthorities ofMadagascar haverequested anurgent
Communityintervention foranamountofabout4.8MECUto:
supporttheHealthServicesbyprovidingpharmaceutical and
medicalproducts (2.1MECU)
contributetotheindustrial sectorrehabilitation bypurchaseof
sparepartsandrawmaterialsinordertoensurecontinuityof
operationforfiveindustrialenterprises considered aspriority
(2.7MECU).
Thetotalcostoftheprojectisestimatedat2165000ECU.
Takingitsnatureintoaccount,itisproposedtofinanceitasa
grantonthe5thEDF.
Medicineswillbeprocuredbyinternational tender.
Theexpertisecontractwillbeestablished inaccordancewithLome
procedures .

3
II.BASICDATA
TheGovernmentofMadagascar,confrontedwithfinancialdifficul­
ties,hasundertakenstepstoimprovethefinancialsituationandis
negotiating withtheInternational MonetaryFundtothisend.
Amongstmeasuresalreadytakenisaprogrammetolimitimports.
2.1.Socialfield
Atsociallevel,andespeciallyinthehealthfield,theresultisan
acuteshortageofdrugsandbasicproductsnecessarytoensurenormal
healthcarefacilities.Thissituationisfurtheraggravatedonthe
onehandbyneedsin1981fornewhealtfifacilities (especiallyin
ruralareas)andontheotherhandbyvariousepidemicsmainly
affectingmostvulnerablegroups(children,mothers,theaged).Thus
itisproposedtogiveaCommunityAidforsupplyofpharmaceutical
andmedicalproductstobefinancedbythe5thFund.
2.2.Industnalfield
Theimportlimitsleadstotheslowingdownoffactoryactivitiesin
theindustrialfieldandtotheimpossibility ofmeetingthenormal
demandformanufactured productsofthepopulation,particularly for
adairy,asugarfactory,twotectilemillsandapapermill.
Anexpertiseisproposedinordertocarryoutadiagnosisofthe
industrialsectorsituationandtodefinethemeanstobeimplemented
tocontributetotherehabilitation pftheindustrialsector,in
particular byoptimalutilization oflocalresources.(oneexpertfor
eachindustrialsectorandonecoordinator duringonemonthi.e.
5experts-months ).Thisexpertisewillallow,inthecaseofpositive
conclusions,thepreparation ofaprojectsatisfyingtheusualcriteria
foranEDFintervention .
III.COMMUNITY CONTRIBUTION
3.1.Pharmaceutical andmedicalproducts
Suppliesconsistmainlyofthefollowingproducts:specialmilkand
dieteticproductsforchildren,medicalfabrics,variousdisposable
products(syringes,needles,etc.)sulphaseries,antibiotics,etc.
Destinations ofsuppliesandestimatedcostsareasfollows:
ECU
Directiondespharmaciesetlaboratoires Antananarivo 285000
Pharmaciescentralesd'approvisionnement à
-Fianarantsoa 300000
-DiegoSuarez 300000
-Majunga 165000
-Antananarivo '40000
-Tulear 280000
-Tamatave >280000
Subtotal 1750000
Contingencies (20%) 350000
Totalsupplies 2100000

4
3.2.Industrialsectorexpertise
-fiveexpertsduringonemonth 50000
-contingencies 15000
Totalexpertise 65000
TOTAL 2165000
IV.IMPLEMENTATION
Thesesupplieswillbeprovidedbyinternational callfortender.The
expertisewillbeimplementedaccordingtoLomeConventionregulations .
V.SPECIALCONDITION
TheequivalentinMadagascarcurrencyresultingfromthesaleofthe
pharmaceutical andmedicalproductsprovidedunderthisprojectwill
betransferredtoaspecialaccountopenedattheBanqueCentralede
Madagascar.ThesemonieswillbeusedonlywithCommission'sagree­
menttofinancedevelopmentprojects,especiallytofinancelocal
costsofcertainEDFProjects.
VI.CONCLUSION ANDFINANCING PROPOSAL
theHavingregardto/opiniondeliveredbytheEuropeanDevelopment Fund
Committeeatits163rdmeetingonFebruary16,1982,andhavingregard
tothesupportingargumentssetoutinthefinancingproposal,itis
proposedthattheCommissiontakethefollowingdecision:
TheCommission hasdecided:
-toapprove,undertheconditionslaiddownintheproposalbefore
it,theprojectdescribedhereunder :
Registration n° Title Commitment
MA/507/81 Supplyofpharmaceutical
andmedicalproductsand
analysisoftheindustrial
sectorrehabilisation2165000ECU
asagrant
tograntcommitmentauthorisations foratotalsumof2165000ECU
asagrantfromthe5thEDF,and
toinstructtheChiefAuthorisingOfficeroftheEuropeanDevelop­
mentFundtomakeanyadaptationarrangements andcommitmentdeci­
sionsthatprovenecessarytoensurethesmoothexecutionofthe
approvedprojectunderthebesteconomicandtechnicalconditions.

Referral tothe Council for adecision
ofafinancing proposal not approved ,by
theEPF Committee (Article 19(2 )ofthe
Internal Agreement of1979 onthe
financing and administration ofCommunity
aid:8o/ll^/EEC)(SENEGAL )
(Commission communication tothe Council )
On18May ,22June and6July ofthis year theCommission submitted the
following project atthe168th ,169th and170th meetings respectively
ofthe EDF Committee .
SENEGAL (Fifth EDF-grant :1985000ECU)
Transfer tothefifth EDF ofexpenditure originally intended tobethe
Senegalese Government 'scontribution tothree projects financed bythe
fourth andfifth EDFs ,viz :
(i)further development ofstock-farming inthesavannah
forest area :
(ii)construction andfitting outoftheEcole Nationale des
Infirmiers etInfirmières d'Etat :
(iii)promotion ofcraft industries .
The project was not approved bythe Committee .
TheSenegalese authorities didnotasktobeheard bytheCommittee .
Under Article 19ofthe Internal Agreement ,the Commission cannot take
afinancing decision itself ,but moist refer theproposal tothe Council
foradecision ,astheSenegalese authorities have requested under
Article 113(5 ) "theLom6 Convention .
Main reasons given bycertain Member States' delegations forwithholding
approval
1.Itwould have been preferable tousecounterpart funds from food aid.
2.Consideration should have been given tothepossibility ofobtaining
finance from asource other than theindicative programme ,such as
theextra funds tobeallocated toSenegal under Stabex 1981 ,or
counterpart funds derived from those same resources .

3.Thistypeofoperationwasinthenatureofbudgetaid.,oreven
balanceofpaymentsaid,contrarytothepurposesofthe
LomSConvention,andcouldcreateaprecedent.
TheCommission *scase
1.Counterpart fundsderivedfromfoodaidhavealreadybeenallocated
intheirentiretyfor1981,andthe1982programmehasnotyetbeen
implemented.
2.TherearenogroundsforusingStabexallocationstofinancethis
typeofoperation;thatwouldbetomisapplyfundsintendedfora
differentpurpose,andwouldthereforebecontrarytothe
decisionstakenbytheACP-EECCouncilofMinistersatLibreville
inMay.
Itmustalsobeemphasizedthatno–onecanstipulateinadvance
whatuseSenegalistomakeoftheStabexfunds,andinanycase
theextramoneyhasyettobedividedupamongACPrecipients *
3.Thisisnotbudgetaidorbalanceofpaymentsaidintendedto
takeovercurrentgovernmentexpenditure ;theideaistouse
theindicative programmeofCommunityaidtofundthatpartof
theprojectwhichSenegalhadoriginallydecidedtoco–finance
outofitsinvestmentbudgetduringtheactualimplementation
period,butnotafterwards.Becauseofitsfinancialand
economicdifficulties ,itcannolongerdoso.
ThewholeprojectcouldhavebeenfinancedbytheEDFfromthe
outset.Thisisthereforenotanewdeparture,noristhere
anyriskthataprecedentwillbecreated.Thepointissimply
thatcertaincountries,Senegalbeingoneofthem,whichafew
yearsagowereabletoco–financepartofsomeprojects,are
nownolongerinapositiontodoso.
Thefinancingproposalisthereforeperfectlycompatiblewiththe
Lom6Convention,bothsubstantively andprocedurally.

Thesubstantive argument :Buch expenditure could have been financed from
theoutset aspart oftheprojects inquestion ,notonly under
Articles 139(2 )and 152oftheConvention ,butalso under Article 93(3),
which makes explicit reference tothis type ofexpenditure .
There isnogeneral requirement that recipient countries oranythird
party contribute tocosts ;co-financing under Article 96etseer ,ofthe
Convention ispurely optional .
Theprocedural argument :there isnoprocedural rule against taking a
supplementary financing decision should achange intheinitial circumstances
make itnecessary ;onthecontrary ,itisfrequently done .
This financing proposal fits inwith theSenegal Government 'soverall
economic andfinancial recovery plan drawn upafter ameeting ofaid
donors held inParis from 19to21October last year ,inwhich the
Commission took part .
Finally ,theCommission believes that this project isanecessary and
desirable Community contribution toSenegal 'seconomic andsocial
development ,within themeaning oftheLome Convention .Inaddition ,
itwould draw theCouncil 'sattention tothefact that ourACPpartners
will inevitably regard anegative decision asaserious undermining of
theprovisions oftheConvention andthespirit ofLome andasamove by
theCommunity tobreak ranks with theother donors whoinParis last year
expressed their willingness tosupport Senegal 'seoonomic andfinancial
recovery .
Accordingly ,pursuant toArticle 19(2 )oftheInternal Agreement onthe
financing andadministration ofCommunity aidand attherequest ofthe
Senegalese authorities ,theCommission hereby refers theannexed financing
proposal totheCouncil andproposes that -ittake thefollowing decision :
"THECOUNCIL ,
Having regard toArtiole 19(2 )oftheInternal Agreement onthefinancing
andadministration ofCommunity aid "!,
Having regard totheproposal from theCommission ,
Considering thegrounds setoutinthefinancing proposal andinthe
Commission Communication totheCouncil ,
10JNoL347,22.12.1980

-3-
Thesubstantive argument!suchexpenditure couldhavebeenfinancedfrom
theoutsetaspartoftheprojectsinquestion,notonlyunder
Articles139(2)and152oftheConvention,"butalsounderArticle93(3),
whichmakesexplicitreferencetothistypeofexpenditure.
Thereis*<.ogeneralrequirementthatrecipientcountriesoranythird
partycontributetocosts;co-financing underArticle96etseq.ofthe
Conventionispurelyoptional.
Theproceduralargument:thereisnoproceduralruleagainsttakinga
supplementary financingdecisionshouldachangeintheinitialcircumstances
makeitnecessary ;onthecontrary,itisfrequentlydone.
ThisfinancingproposalfitsinwiththeSenegalGovernment'soverall
economicandfinancialrecoveryplandrawnupafterameetingofaid
donorsheldinParisfrom19to21Octoberlastyear,inwhichthe
Commissiontookpart.
Finally,theCommissionbelievesthatthisprojectisanecessaryand
desirableCommunitycontribution toSenegal'seconomicandsocial
development ,withinthemeaningoftheLomeConvention.Inaddition,
itwoulddrawtheCouncil'sattentiontothefactthatourACPpartners
willinevitablyregardanegativedecisionasaseriousundermining of
theprovisionsoftheConventionandthespiritofLomeandasamoveby
theCommunitytobreakrankswiththeotherdonorswhoinParislastyear
expressedtheirwillingnesstosupportSenegal'seoonomicandfinancial
recovery.
Accordingly ,pursuanttoArticle19(2)oftheInternalAgreementonthe
financingandadministration ofCommunityaidandattherequestofthe
Senegaleseauthorities,theCommissionherebyreferstheannexedfinancing
proposaltotheCouncilandproposesthat-ittakethefollowingdecision:
"THECOUNCIL,
HavingregardtoArtiole19(2)oftheInternalAgreementonthefinancing
andadministration ofCommunityaid^,
HavingregardtotheproposalfromtheCommission,
Consideringthegroundssetoutinthefinancingproposalandinthe
CommissionCommunication totheCouncil,
10JNoL347,22.12.1980

-4-
WhereastheEuropeanDevelopment Fund.Committeedidnotdelivera
favourableopinionatitsmeetingon5and6July1982,
DECIDES:--'1.'
theprojectdescribedbelowisherebyapproved
Registration No Title Financingauthorized
asagrant
SE/519/82 Transfertothefifth
EDPofexpenditure
originallyintendedto
betheSenegalese
Government's contribution
tothreeprojects
financedbythefourth
andfifthEDFs1985000ECU
commitmentauthorizations foratotalsumof19°5000ECUarehereby
accorded;
theChiefAuthorizingOfficeroftheEuropeanDevelopment Fundishereby
instructedtomakeanyadaptationarrangements andcommitmentdecisions
thatprovenecessarytoensurethesmoothexecutionoftheapproved ,
projectunderthebesteoonomicandtechnicalconditions."

COMMISSION
OPTHE
EUROPEAN COMMUNITIES
––– For officiai use only
Nopart ofthis document
may "bereproduced
FINANCING PROPOS AL
Fifth EDP
TITLE OPPROJECT Transfer tothe fifth EDP ofexpenditure
originally intended tobetheSenegalese
Government's contribution tothree projects
financed bythe fourth andfifth EDFs
TYPE OPPROJECT Economic andsocial development projects
RECIPIENT STATE Republic ofSenegal
■AUTHORITY SUBMITTING THE
PROJECTTheMinister forthePlan and Cooperation
REGISTRATION NUMBER OP
THE PROJECTSE/519/82
SECTORAL CLASSIFICATION IN
THE ACCOUNTING PLAN4100 .035.45 .30/4200.035.45· 31
4iOO.O6l.45.39 /5iOO.6l.45.OO2
4200.Ol8.45.34
jCOMMITMENT PROPOSED AS1985000ECU
Indicative exchange rates 1ECU=CFAF 300.

I.SUMMARYOPTHEPROJECT
UnderthisprojectthefifthEDFIndicativeProgrammeofCommunityaid
fortheRepublicofSenegalistobeusedtoprovidefundstocover
expenditure onfourthandfifthEDFprojectswhichwasoriginally -
intendedto"becovered "bytheSenegalese Government'slocal
contribution .TheSenegalese Governmentisnowunabletomeetthis
expenditureinthelightofitseconomicandfinancialsituation.
»
Thiscontribution ,whichamountstoCFAF595million(19^5000ECU),
concernsthreeimportantsectors:developmentofstock-farming ,
traininginthehealthsectorandthepromotionofcraftindustries.
Thisprojecttiesinwiththeeconomicandfinancialrecoveryplan,
whichcannotbeimplemented withoutthesupportofthemaindonors.
Itisproposedthatthefinanceforthisprojectshouldtaketheform *
ofafifthEDFgrant.

II.BACKGROUND ANDPURPOSEOPTHEPROJECT
1.Ec£n£mic_situation ofJienegal
InDecember1979"theSenegaleseGovernmentadoptedaneconomicandfinancial
recoveryplancomprisingmeasuresaimedatstabilizingpublioexpenditure ,
revivingtheexporteconomyandtighteningupmanagementintheagricultural
sector.
However,asaresultoftwoverypooragriculturalyears(1979/80and
1980/81)therewasahugeincreaseinriceimportsandveryfewexportsof
groundnutproducts.Duringthesameperiodtheworld–wideriseininterest
ratesmeantincreasedpaymentsoncommercialloansandabiggerbalance
ofpaymentsdeficit.
InDecember1981arrearshadreachedanalarminglevel.Thebalanceof
paymentsdeficitincreasedfromCFAF22000millionin1980toCFAF50800million
inI98I.Inspiteofthecompensation arrangements madebytheIMPandthe
prospectofastand-byofCFAP20600millionfromthesameorganization ,the
situation wasstillcriticalandledtheGovernment totaketwodecisions :
(i)toobtainrescheduling ofitsexternaldebt;
(ii)tosubmittheSixthEconomicandSocialDevelopmentPlanto
itstraditional donors.
2.MeetinginParisfrom_19_t£21_0£t£ber_128l
%
Havingobtainedrescheduling oftheexternaldebtatthemeetingofthe
ParisClubfrom11to^l3October1981,theSenegaleseauthoritiessaidatthemeetingofdonorsthattheoverallimbalanceinpublicfinancefor
198l/82couldbereducedfromCFAP82500milliontoCFAF21000million.
TheSixthEconomicandSocialDevelopment Planconvincedthedonorsthatthe
Governmentwasmakinganefforttofixrealisticobjectives (publicand
privateinvestmentnotexceedingl&foofGDP),giveabsolutepriorityto
directlyproductiveinvestment(agriculture,fisheries,energyandindustry)
andsetupstricterproceduresforselectingprojectsandtypesoffinancing.
Theparticipants were:theIBRD,Germany,theADB,theBADEA,Belgium,
theIslamicDevelopment Bank,theBOAD,Brazil,Canada,theEuropeanCommission,
theEIB,theCEAO,theUnitedStates,France,theKuwaitFund,theSaudiFund,
the1MB1,theIraqFund,Japan,UNIDO,theUnitedKingdom,Switzerland and
theSahelClub.

-3-
Thefollowing isthebreakdown ofthefinancial requirements ofthe
Senegalese authorities ,which were confirmed ,"bytheIMPandIBRD experts :
(i)financed required for1981/82 "bytheNational Budget forEquipment
andtherelated special accounts oftheTreasury ,about
CFAF 21000million (70million ECU);
(ii)requirements connected with forecast expenditure for1982/83»
about CFAP 23000million (77million ECU);
(iii)additional financing (particularly cost overruns )required t'o
achieve theobjectives oftheI98I-85 Plan ,which also amounts to
about CFAF 23000million (77million ECU).These financial
requirements mainly concern investment inagriculture (52$),
health andsocial infrastructure (30$)andtransport (14$)•
3.Obiectives ofthe _project
Inview oftheefforts made bytheGovernment ofSenegal ,theproviders of
funds whoattended theParis meeting agreed togrant Senegal aidtohelp it
overcome its current economic difficulties .
The Community wasapproached onthis matter .
Inline with this request ,thepurpose ofthis project isforthe
Senegalese contribution tothree current fourth andfifth EDFprojects
tobetaken over byCommunity aid .
4.The£roject within_t he_Indic ativeProgramme
Attherequest oftheSenegalese Government ,theCommunity istotake
over theSenegalese contribution tothree development projects ,which sire
nowtobecovered bythefifth EDF Indicative Programme asfollows :
(i)"Further development ofstock-farming inthesavannah forest area"
CFAF 210million (700000ECU)fortherural sector -31«9$ ofthe
Indicative Programme ;
(ii)"Construction andfitting-out oftheENUE "
CFAF 270million (900000ECU)forthepublic health sector ,an
increase from 6.7$ to8,1% ,Theshare ofthesanitation and
urban transport sector hastherefore been reduced andisnow
only 12.2$ oftheIndicative Programme instead of14»2$ .

-4-
(iii)"Promotionofcraftindustries' *
CFAF115million(385000ECU)onthetradepromotionofsmall
andmedium-sizedcraftindustries,i.e.3*5$ofthe
Indicative Programme.
ThereserveprovidedforintheIndicative Programmehasalready
beentransferredtotheregionalprojectrunbythe
OrganizationfortheDevelopmentoftheSenegalRiver(OMVS).
III.PROJECTDESCRIPTION
TheSenegalesecontribution tothethreeeconomicandsocialdevelopment
projectsinhandistobetakenoverasfollows:
1.FurtherdevelojDmjmtof_stock-farmi n^_inthe_savannah_f ior£st-area
Thefinancingagreementforthisprojectwassignedon28MarchI98O.It
makesprovisionforagrantof14^3000ECUandaloanonspecialterms
of1500000ECU.
Theprojectinvolvesthecontinuation ,intensification andextensionofthe
animalhusbandryschemesunderthepilotprojectentitled"Development of
stock-farming inthesavannahforestarea–initialphase".
Theoperationsincludethesetting-upoftheinfrastructure andsupplyof
equipmentfortheproductionof1166tofbovinemeatand672t
(liveweight)ofmuttonforthefourthyear.
TheprojectismanagedbytheSoci€t6deD^veloppement del'Elevage
danslaZoneSylvo–Pastorale(SODESP–Companyforthedevelopmentof
stock-farming inthesavannahforestarea)withexpatriatetechnical
assistance.
Satisfactory progresshasbeenmade.
Fortheyear198l/82,thesecondyear,extensionserviceswereprovidedfor
5000farmersand13000cattle(themaximumnumberofcattleprovidedfor
inthefinancingagreementwas20000inyearfour).Extensionservices
wereprovidedfor4000sheep(outofamaximumof20000).
UnderthespecialconditionsofthefinancingagreementtheGovernmentof
Senegalundertooktomakeacontribution totheprojectofCFAF200million
(688000ECU),intendedmainlyfortheremunerationoftheSenegalese
managerialstaffandsocialsecuritycosts.
However,theincreaseinlocalcostswasgreaterthanexpectedandthe
estimatefor198l/82providesforalocalcontribution o£CFAF210-million
(700000ECU),tobebrokendownasfollows:

165 000 ECU Subsidies forthepurchase ofgroundnut
oil cake .
40000ECU Purchase ofvarious equipment .
495000ECU Salaries ,transport costs ofextension workers ,
protection ofpastureland andmaintenance
ofbuildings ,andcosts ofslaughtering cattle .
Itisthis sumof^0000ECUwhich istobetaken overbytheCommunity .
2.Public_Health Training ^J'Construct ion_and_fittine-out ofthe
Ecole Rationale _de_sInfirmiers_et_Infirmi èread,Ètat~(ENIffi)""in Dakar
ThenewENIIE ,which isstill under construction ,will beable toadmit
300students ,ofwhich 240areresident ,thusdoubling thecapacity ofthe
existing facilities temporarily housed inoldandill-suited premises .
Thenewschool isdesigned totrain agreater number ofnurses tocopewith
thecountry 1sgrowing needs andatthesame time toimprove thestandard of
teaching byproviding suitable premises andequipment .
Theproject (covering 6532m)includes theconstruction andfitting-out of
theclassrooms ,offices andgeneral services block ,accommodation for
resident students andthree staff houses .
Theconstruction work isunderway andthetenders forequipment have been
examined .
«
Theproject wastobefinanced byCommunity aidtothetune of3345million ECU
(1350million ECUfromthefourth EDPand1995000EOTfromthefifth EDF)
andbyanadditional CFAF270million (6.9million ECU)fromSenegal asits '
contribution totheconstruction work .AstheSenegalese budget cannolonger
meet this contribution ,itisproposed that theCommunity provide the
900000ECU .
3*Promotion £f_craft industries
Thepurpose ofthis project istoestablish ,equip andprovide with
extension services four regional workshops with aview topromoting
Senegalese craft industries injoinery andcarpentry ,sheet-metal working ,
painting andgeneral engineering activities .Theregions selected are
Dakar ,Thifes ,Diourbel andSaint –Louis .
TheEDFcontribution (aloan onspecial terms of951000EOT)covered
improvements andextensions tothepremises ,thesupply ofequipment and
funding onadecreasing scale ofthesalaries ofthetechnical supervisors
inthe four centres .

TheSenegalesenationalbudgetwastocoverthesalariesoftheproject
leader,theheadsofthefourcentresandtheextensionworkers(in
increasingamounts,inadditiontoandtheninsteadoftheEDF*sfunding
onadecreasingscale),thesalariesofauxiliarystaff,themaintenance
andoperationofequipment,vehicles,officesandworkshops(forthe
entiredurationoftheproject,i.e.threeyears),totalling
385438ECU.
Thefinancingagreementwassignedon31October1980andtheloancontract
on10November1980.Attheendof1981twooffices(Diourbeland.Thifes)
werealreadyinoperationthankstoEDFinvestment.Thelackof
Senegalesefundshassloweddowntheactivitiesofthesetwocentresand
delayedtheopeningoftheothertwo.Itisthereforeamatterofurgency
forthislaokoflocalfinancetobemadegood,and,tothisend,itis
proposedthatthecontributionoriginallyplannedforSenegal(385000ECU)
shouldbetakenoverbytheCommunity.
IV.MEMSOFIMPLEMENTATION
Themeansofimplementation axethesameasthosesetoutinthe
financingagreementsofthethreeprojectsinquestion.
V.TYPEOFFINANCING
ThefinancingforthisprojectwilltaketheformofafifthEDFgrantfor
atotalof1985000ECU,brokendownasfollows:
-afurther700000EOJfortheproject"Furtherdevelopmentofstock-farming
inthesavannahforestarea";
-afurther900000ECUfortheproject"Construction andfitting-outofthe
ENIIE"j
-afurther385000ECUfortheproject"Promotionofcraftindustries".
VI.CONCLUSION ANDFINANCING PROPOSAL
HavingregardtotheOpiniondeliveredbytheEuropeanDevelopmentFundCommittee
atits168thmeetingof18May1982andhavingregardtothesupportingarguments
setoutabove,itisproposedthattheCommissiontakethefollowingdecision:
l'heCommission hasdecided:
–toapproveunder"theconditionslaiddownintheproposalbeforeitjthe
projectdescribedhereunder:

Registration NoTitleoftheprojectFinancingauthorized
asagrant
SE/519/82TransfertothefifthEDFof
expenditureoriginallyintended
to"betheSenegalese Government *s
contribution tothreeprojects
financedbythefourthandfifth
EDFs.1983000ECU
»
–tograntcommitmentauthorizations foratotalsumof1983000ECU
fromtheresourcesofthefifthEDF:
-toinstructtheChiefAuthorizingOfficeroftheEuropeanDevelopment Fund
tomakeanyadaptationarrangements andcommitmentdecisionsthatprove
necessarytoensurethesmoothexecutionoftheapprovedprojectunderthe
besteconomicandtechnicalconditions *