The World Bank Food Security and Agriculture Productivity Project (P155513) REPORT NO.: RES60620 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF FOOD SECURITY AND AGRICULTURE PRODUCTIVITY PROJECT APPROVED ON APRIL 27, 2017 TO TO THE KINGDOM OF BHUTAN AGRICULTURE AND FOOD SOUTH ASIA Regional Vice President: Martin Raiser Country Director: Abdoulaye Seck Regional Director: Dina Umali-Deininger Practice Manager/Manager: Gayatri Acharya Task Team Leader(s): Sheu Salau The World Bank Food Security and Agriculture Productivity Project (P155513) ABBREVIATIONS AND ACRONYMS CSA Climate Smart Agriculture FSAPP Food Security and Agriculture Productivity Project GAFSP Global Agriculture and Food Security Program IRIs Intermediate Results Indicators ISM Implementation Support Mission IUFRs Interim Unaudited Financial Reports RGoB Royal Government of Bhutan The World Bank Food Security and Agriculture Productivity Project (P155513) BASIC DATA Product Information Project ID Financing Instrument P155513 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 27-Apr-2017 30-Dec-2024 Organizations Borrower Responsible Agency Ministry of Finance, Department of Public Accounts Project Development Objective (PDO) Original PDO The Project Development Objective (PDO) is to increase agricultural productivity and enhance access to markets for farmers in selected gewogs in south-west Bhutan. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-B6044 15-Jul-2021 07-Aug-2021 07-Aug-2021 30-Dec-2024 4.64 3.96 .68 TF-A4224 27-Apr-2017 18-May-2017 08-Aug-2017 30-Dec-2024 8.00 7.73 .27 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Food Security and Agriculture Productivity Project (P155513) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Performance Summary 1. The Food Security and Agricultural Productivity Project (FSAPP) was approved on April 27, 2017. The Financing Agreement was signed on May 18, 2017, and the Project became effective on August 8, 2017, with a closing date of December 30, 2024. It is fully financed by a grant of US$8.0 million from the Global Agriculture and Food Security Program (GAFSP) Trust Fund, along with a Royal Government of Bhutan (RGoB) contribution of US$1.12 million and beneficiary contributions of US$0.24 million. An Additional Financing (AF) of US$ 4.64 million was approved on July 21, 2021. 2. The Project Development Objective (PDO) is to increase agricultural productivity and enhance access to markets for farmers in selected gewogs in southwest Bhutan. To achieve these objectives, the FSAPP strengthens the capacity of farmer and producer groups to adopt technologies that boost productivity, and access to markets. The higher-level objectives of FSAPP are to reduce rural poverty, food insecurity, and malnutrition, while increasing resilience to climate change and improving access to local and export markets. The objectives of FSAPP continue to be relevant and in line with the priorities of the Royal Government of Bhutan. 3. The recent Implementation Support Mission (ISM) conducted by the World Bank between October 9 and 24, 2023, has verified a marked enhancement in the execution of project activities. With a total allocation of US$12.6 million from the TF0A4224 and TF0B6044 funds, the disbursement to the Designated Account as of March 2024 was $11.69 million, representing 92.45% of the total commitment. Consequently, the FSAPP has achieved considerable strides towards its Project Development Objective (PDO), with notable successes in increasing agricultural productivity and improving market access for farmers. The project has reached 92% of its intended beneficiaries, of which 44% are women, and is well-positioned to surpass this figure prior to its completion. Additionally, the project has garnered a high level of satisfaction among beneficiaries regarding the services rendered. 4. The Progress towards Achievement of PDO, Implementation Progress, Financial Management, and Procurement are rated “Moderately Satisfactory”. Environmental and social safeguards are rated “Satisfactory”. 5. Component 1: ‘Strengthening Farmer and Producer Groups’ supports the institutional capacity, knowledge, and awareness of farmers and farmer groups. The project has established farmer groups, improved their capacity, and created processes to formalize eligible groups, with a total of 9,182 members. The current focus is on improving the marketing skills of these groups. Additionally, the project has made progress in enhancing nutrition, surpassing the target for the number of individuals who have received improved nutrition services and products. The World Bank Food Security and Agriculture Productivity Project (P155513) 6. Component 2: ‘Enhancing Farmer Productivity’ delivers irrigation systems, technical and institutional capacity building, equipment, and goods, of human-wildlife-conflict management tools to eligible beneficiaries. The FSAPP has surpassed its area-based targets for irrigation and micro-irrigation and has provided support to 2,011 water users with new and improved irrigation services. In addition, the project carried out various capacity- building activities such as training on climate-smart agriculture (CSA) technologies and techniques, climate-smart irrigation technology, intercropping, high-yielding rice varieties, soil nutrient management, pest and disease management, vegetable nurseries, and mushroom production. Furthermore, the FSAPP offers a variety of inputs and equipment (including women-friendly mini-tillers, prefabricated polyhouses, electric fencing, bio-digesters, and power sprayers) to eligible beneficiaries under cost-sharing arrangements. 7. Component 3: ‘Enhancing Access to Markets’ supports post-harvest and market infrastructure development and market linkages. Most of the infrastructure work for the centralized packaging houses and integrated cold storage is either completed or nearing completion. The FSAPP is currently equipping the facilities and seeking partners to operate and manage them. The project has successfully supported beneficiaries and farmer groups with market infrastructure and information, and has also facilitated market linkage activities, including organizing two buyer-seller meetings which resulted in the signing of 43 off-take agreements. Additionally, the project conducted market promotion activities through trade fairs in Bangladesh and Singapore. 8. The project complies with all legal covenants and no fiduciary and ESF issue has been flagged. The project submitted acceptable interim unaudited financial reports (IUFRs) and audits on time and regularly. There are no outstanding audits. Overall, management and implementation of environment and social safeguards continues to be rated as Satisfactory. Rationale for Restructuring 7. The proposed restructuring seeks the Country Director's approval for a Level 2 restructuring of the Project, to adjust the end-of-project targets for three intermediate results indicators (IRIs) as detailed in Table 1. This second restructuring is in response to the formal request dated January 18, 2024, from the Department of Micro- Fiscal and Development Finance within the Ministry of Finance. The rationale for this restructuring is to revise the overly ambitious end-of-project targets initially established for the three IRIs in the Results Framework. These targets, deemed unattainable, were pinpointed during the Implementation Support Mission in May 2023, and were acknowledged as a key action item in the subsequent Aide Memoire. 8. The overall design, Project Development Objective (PDO), components/sub-components, institutional, implementation, fiduciary, and environmental and social safeguards arrangements, and environmental and social safeguards category remain unchanged. II. DESCRIPTION OF PROPOSED CHANGES Main Changes 8. Changes to the Result Framework: The targets for IRI 1.2, 1.3, and 2.3 will be revised, and the definition of IRI 3.1 and 3.6 will be made more explicit. These changes are summarized in Table 1. The World Bank Food Security and Agriculture Productivity Project (P155513) 9. The description of the proposed changes are as follows: 10. Intermediate Indicator 1.2: The original target of 11,938 households for IRI 1.2, 'Number of farmers who are members of an association including producer groups, cooperatives,' is being revised to 5,890 households. Initially, the target for this indicator was set as the total of the project beneficiary households (11,938 households) in the 5 project Dzongkhags/Gewogs (29 Gewogs), meaning the project aimed to cover every beneficiary household under farmer group formation. However, it is unrealistic to assume that all the project beneficiary households would become members of farmer groups. Therefore, the revised measurement of this indicator is calculated as the product of the targeted number of farmer groups supported by the project (IRI1.1) and the average number of members within farmer groups. Based on the data from the Department of Agricultural Marketing and Cooperatives (which shows that, there are 695 farmer groups in Bhutan with a total of 12,975 members), an average member size of 19 is assumed for farmer groups. The restructuring proposes to revise the target for IRI 1.2 to 5,890 households (310 * 19). 11. Intermediate Indicator 1.3: The targets for sub-indicator 1.3.1 will be swapped with those of 1.3.2 without affecting the overall target of 6,000 individuals for IRI 1.3, with 34% being female. These sub-indicators were added during the MTR, but their targets need to be adjusted based on ground realities. In Bhutan, limitations exist in expanding extension services, so BBC nutrition counseling is offered to a larger beneficiary pool, while nutrition extension is offered to a subset of beneficiaries only. As a result, the target for IRI 1.3.1, 'Number of people who received nutrition counseling/education,' will be doubled from the initial goal of 2,000 individuals to 4,000 individuals. Conversely, the target for IRI 1.3.2, 'Number of people receiving extension support for nutrition- relevant techniques,' will be reduced from 4,000 individuals to 2,000 individuals. 12. Intermediate Indicator 2.3: The initial target for IRI 2.3 'Number of farmers who have adopted an improved agricultural technology promoted by the project in targeted project areas' will be reduced by 25.19 percent from 11,938 to 8,300 households. Like IRI 1.2, the original aim for this indicator was excessively high, targeting all 11,938 households in the five Dzongkhags of the project. However, technology adoption is a complex process influenced by behavior and economics, often requiring several years to be fully adopted. It is not feasible to expect every household benefiting from the project to adopt the FSAPP-promoted technologies. The rate at which technology is adopted also varies based on the nature of the technology itself and the users it is intended for. With these in mind, the restructuring seeks to make the measurement of this indicator clearer and to adjust the target by categorizing the number of adopters according to their prior familiarity with the technology or its novelty to them. i) The first category includes inputs and technologies that are already established and known by farmers, such as seeds, fertilizer, and green/polyhouses. The number of adopters of these technologies will be measured as the number of project beneficiaries that received the input or technology multiplied by the adoption rate as measured by the Annual Outcome Surveys organized by FSAPP. To revise the target, an adoption rate of 80% is assumed to account for near-perfect adoption of known technologies. Thus, it is expected that 80% of the 6,000 intended beneficiaries will adopt known technologies, resulting in a revised target of 4,800. The World Bank Food Security and Agriculture Productivity Project (P155513) ii) The second category consists of new and improved crop management practices that FSAPP promoted and demonstrated to farmers for the first time. The number of adopters of these technologies will be measured as the number of project beneficiaries supported by FSAPP promotion and demonstration activities multiplied by the adoption rates from such activities. The latter is measured through specific surveys conducted by the Agricultural Research and Development centers responsible for promoting these technologies. The adoption rate of new and improved practices or technologies is assumed to be 70%, based on global literature on agricultural technology adoption. Therefore, it is expected that 70% of the 5,000 intended beneficiaries will adopt these new technologies, resulting in a revised target of 3,500. iii) Adding the revised targets of 4,800 farmers for the first category of technologies and 3,500 farmers for the second category of technologies yields a revised target of 8,300 farmers for IRI 2.3. 13. Intermediate Indicators 3.1 and 3.6: The restructuring has clarified the definition of Intermediate Indicators 3.1 and 3.6. Previously, there was redundancy in reporting due to the introduction of IRI 3.6 with the additional financing for FSAPP in July 2022. Following the agreement at the ISM in May 2023, IRI 3.1 will be dedicated to tracking the number of beneficiary households from the project-supported market infrastructure, whereas IRI 3.6 will be responsible for the count of post-harvest facilities and market infrastructures that have been constructed or rehabilitated by the project. Table 1. Summary of results framework revisions to targets. Indicator Name 2017 2024 Base Revised line EOP Target 1.2 Number of farmers who are members of an association including producer groups, cooperatives etc. (disaggregated by gender) – GAFSP Core Indicator # 14 0 5,890 (Number) Number of Female members of an association including producer groups, 0 2,005 cooperatives etc (Number) 1.3 Number of people receiving improved nutrition services and products through the 0 6,000 project - GAFSP Core Indicator # 11 (new GAFSP indicators) (Number) 1.3.1 Number of people who received nutrition counseling/education 0 4,000 (Number) 1.3.2 Number of people receiving extension support for nutrition-relevant 0 2,000 techniques (Number) Number of Females beneficiaries receiving improved nutrition services and products through the project-GAFSP Core Indicator # 11 (new GAFSP 0 2,400 indicators) (Number) 2.3 Number of farmers who have adopted an improved agricultural technology 0 8,300 promoted by the project in targeted project areas (Number) Number of Female farmers who have adopted an improved agricultural 0 4,059 technology promoted by the project in targeted project areas (Number) 3.1 Number of beneficiaries households of project supported market infrastructure 0 59 (Number) 3.6 Number of post-harvest facilities constructed and or rehabilitated (Number) 0 32 The World Bank Food Security and Agriculture Productivity Project (P155513) III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ The World Bank Food Security and Agriculture Productivity Project (P155513) IV. DETAILED CHANGE(S) . The World Bank Food Security and Agriculture Productivity Project (P155513) . Results framework COUNTRY: Bhutan Food Security and Agriculture Productivity Project Project Development Objectives(s) The Project Development Objective (PDO) is to increase agricultural productivity and enhance access to markets for farmers in selected gewogs in south- west Bhutan. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline End Target Enhance productivity and marketable surplus Productivity of targeted crops increased by at least 25 percent in 0.00 25.00 project areas (Percentage) Increase in volume of produce marketed by at least 25 percent 0.00 25.00 (Percentage) Increase in value of produce marketed by at least 25 percent 0.00 25.00 (Percentage) Number of direct project beneficiaries (Number) 0.00 11,938.00 Female Beneficiaries (Percentage) 0.00 34.00 PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline End Target Strengthening farmers and producers groups The World Bank Food Security and Agriculture Productivity Project (P155513) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline End Target 1.1 Number of beneficiary groups receiving technical trainings 0.00 310.00 and other capacity building support (Number) 1.2 Number of farmers who are members of an association including producer groups, cooperatives etc. (disaggregated by 0.00 5,899.00 gender) – GAFSP Core Indicator # 14 (Number) Action: This indicator has been Revised Number of Female members of an association including 0.00 4,008.00 producer groups, cooperatives etc (Number) 1.3 Number of people receiving improved nutrition services and products through the project - GAFSP Core Indicator # 11 (new 0.00 6,000.00 GAFSP indicators) (Number) 1.3.1 Number of people who received nutrition 0.00 4,000.00 counseling/education (Number) Action: This indicator has been Revised 1.3.2 Number of people receiving extension support for 0.00 2,000.00 nutrition-relevant techniques (Number) Action: This indicator has been Revised Number of Females beneficiaries receiving improved nutrition services and products through the project-GAFSP Core 0.00 2,400.00 Indicator # 11 (new GAFSP indicators) (Number) Enhancing farmer productivity 2.1 Targeted crop area provided with irrigation – GAFSP CI # 6 0.00 2,244.00 (Number) Area covered by Flood Irrigation (Number) 0.00 1,914.00 Area covered by Micro Irrigation (Number) 0.00 330.00 The World Bank Food Security and Agriculture Productivity Project (P155513) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline End Target 2.2 Number of water users with new/improved irrigation services 0.00 2,767.00 – GAFSP Core Indicator # 8 (Number) New users with Flood Irrigation (Number) 0.00 744.00 New users with Micro Irrigation (Number) 0.00 2,023.00 2.3 Number of farmers who have adopted an improved agricultural technology promoted by the project in targeted 0.00 8,300.00 project areas (Number) Action: This indicator has been Revised Number of Female farmers who have adopted an improved agricultural technology promoted by the project in targeted 0.00 4,059.00 project areas (Number) 2.4 Total land area under cultivation for citrus and cardamom 0.00 6.00 increased by 6 percent (Percentage) Cardamom- cultivated area (Number) 1,140.00 1,208.00 Citrus- cultivated area (Number) 3,744.00 3,968.00 2.5 Number of beneficiaries reached, who have been helped to cope with impact of climate change; GAFSP Core Indicator # 1 0.00 1,500.00 (Number) Number of female beneficiaries reached, who have been 0.00 510.00 helped to cope with impact of climate change (Number) Enhancing access to markets 3.1 Number of beneficiaries of project supported market 0.00 59.00 infrastructure (Number) 3.2 Number of producer groups receiving market information 0.00 40.00 (Number) The World Bank Food Security and Agriculture Productivity Project (P155513) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline End Target 3.3 Number of farmer groups linked to schools (Number) 0.00 25.00 3.5 Proportion of beneficiaries with medium or high (>7) 50.00 70.00 Household Dietary Diversity Score (Percentage) 3.6 Number of post-harvest facilities constructed and or rehabilitated includes markets, agro-processing/storage/quality 0.00 32.00 control facilities (Number) Project Management 4.1 Learning notes or case studies published and disseminated 0.00 4.00 (Number) 4.2 Progress reports satisfactory (Text) reports prepared Accurate and timely reports 4.3 Procurement satisfactory (Text) reports prepared Contracts awarded and completed on schedule. 4.4 Percentage of beneficiaries satisfied with services provided 0.00 50.00 by the project. (Percentage) IO Table SPACE The World Bank Food Security and Agriculture Productivity Project (P155513)