The World Bank Moldova Agriculture Competitiveness Project (P118518) REPORT NO.: RES48920 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF MOLDOVA AGRICULTURE COMPETITIVENESS PROJECT APPROVED ON MAY 1, 2012 TO MINISTRY OF FINANCE AGRICULTURE AND FOOD EUROPE AND CENTRAL ASIA Regional Vice President: Anna M. Bjerde Country Director: Arup Banerji Regional Director: Steven N. Schonberger Practice Manager/Manager: Frauke Jungbluth Task Team Leader(s): Anatol Gobjila The World Bank Moldova Agriculture Competitiveness Project (P118518) I. BASIC DATA Product Information Project ID Financing Instrument P118518 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 01-May-2012 31-Dec-2024 Organizations Borrower Responsible Agency Ministry of Finance Ministry of Agriculture and Food Industry Project Development Objective (PDO) Original PDO The Project Development Objective is to enhance the competitiveness of the agro-food sector by supporting the modernization of the food safety management system, facilitating market access for farmers, and mainstreaming agro- environmental and sustainable land management practices. Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-67490 30-Jul-2020 01-Oct-2020 25-Jan-2021 31-Dec-2024 15.00 .24 15.65 IDA-58580 07-Jul-2016 08-Jul-2016 20-Dec-2016 30-Jun-2022 10.00 9.13 .86 IDA-56390 19-May-2015 21-May-2015 07-Jul-2015 30-Nov-2020 12.00 12.11 0 IDA-50950 01-May-2012 28-May-2012 20-Sep-2012 31-May-2019 17.99 16.39 0 TF-14946 15-Nov-2013 15-Nov-2013 15-Nov-2013 30-Jun-2016 2.11 2.26 0 The World Bank Moldova Agriculture Competitiveness Project (P118518) TF-12145 28-May-2012 28-May-2012 20-Sep-2012 31-May-2019 4.44 4.44 0 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No II. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES The project has successfully implemented a wide range of activities which laid the foundations for enhancing the technical functionality of the country’s Food Safety Agency (FSA) and its key divisions, improving the marketability and market integration of horticultural producers through productive partnerships, and promoting sustainable land management (SLM) and good agricultural practices. Additional activities, providing compensatory grants to fruit producers affected by the Russian trade ban in 2014, have also been implemented successfully. Major milestones have been achieved across all areas of the project’s interventions, as attested by achievement and over-achievement of all PDO indicators and all but one intermediate outcome indicators on food safety, enhancing market access, and SLM activities. Project performance is currently rated Satisfactory for both progress towards achieving the PDO for implementation progress (IP), and Satisfactory for overall project management. The project has continuously made sustained progress across all components towards achieving its PDO. Major results milestones have been achieved on food safety, enhancing market access, and SLM activities justifying the satisfactory rating. After the project’s closing date extension and restructuring in May 2019, political developments leading to succession of three Governments in 2019 have led to delays in the formalization of government commitment to the activities previously agreed as part of the above- mentioned restructuring. This resulted in delays in planned procurement activities and launch of agreed additional investments resulting in a downgrade of the project’s IP rating to Moderately Satisfactory IP rating. However, in 2020 and 2021, the project’s implementation pace has been solid enough to have the rating upgraded to Satisfactory, including in relation to the implementation of the activities of the more recent third AF. The project was consistently rated Moderately Satisfactory or better both for IP and PDO throughout implementation. While the Government of Moldova (GoM) has generally provided constructive and timely support in sustaining the project’s progress, the project faced some slowdowns in its implementation pace. In several instances, governance, and more specifically political factors contributed to delays in implementation, a deceleration of disbursements and less attention to the project’s thematic focus. Major contributing factors included the lengthy public sector reform implemented in 2017-2018, frequent changes in the leadership of the FSA (a major beneficiary/partner), the political fallout from the parliamentary elections in 2019, and the political crisis engendered by the resignation of the Government of Moldova in late 2020. Fortunately, the stabilization of the political situation following presidential elections in November 2020 and parliamentary elections in July 2021, have created an optimal operational space for an efficient and effective implementation of the project’s activities. The project’s financial management (FM), procurement and safeguards arrangements remain satisfactory. The project is compliant with financial reporting and auditing requirements, and there are no overdue audits or any other outstanding FM issues. The remaining procurement packages and activities are on track to be completed in line with the project’s current implementation timeline. The project’s safeguards arrangements are compliant with WB The World Bank Moldova Agriculture Competitiveness Project (P118518) requirements and remain satisfactory and fit for purpose. Regarding the citizen engagement arrangements, the project has a grievance redress mechanism (GRM), which has proven to be an efficient mechanism for addressing beneficiary feedback in a fast and efficient manner. The mechanism has been operated since 2015 by the National Rural Development Agency and processed a large number of grievances under Component 5 (Compensatory Sales Support Grants). Finally, the project is compliant with all pertinent legal covenants. The project’s disbursement rate is 72 percent for all funding sources and 95.4 percent for all sources except the recent third AF, with the remaining funds projected to be disbursed before the closing date of June 30, 2022 for IDA financing #58580. Component 1: Enhancing Food Safety Management. The FSA is a relatively new institution (established in 2012) which has largely become functional due to the support of the project. Major civil works, such as the rehabilitation of the FSA building and the construction of five BIPs , have been successfully completed. The project has also completed the construction/reconstruction of two regional food safety laboratories which are now in the final stages of being equipped and staffed. The component has also been supporting technical and human capacity strengthening activities which resulted in the international accreditation of the national reference laboratory for products of animal origin and animal health. Development of management software for the FSA has also been completed, setting up the stage for marked improvements in management practices and transparency at the FSA. Additionally, the FSA continues to receive technical assistance support for legislative and regulatory improvements, capacity building activities, training and knowledge transfer. The third AF is providing funding for the establishment of essential infrastructure for the management of Animal By-Products (ABPs) unintended for human consumption, which is highly relevant for the country’s land degradation neutrality (LDN) agenda. A feasibility study on technical and operational options for the ABP facility is in the final stages of completion, to be followed shortly by planning and construction of the necessary infrastructure can begin. Component 2: Enhancing Market Access Potential. Progress in the implementation of this component has been highly satisfactory. After seven calls for proposals for matching investment grants from emerging productive partnerships, 47 producer groups have received matching investment grants in a total amount of more than US$13.0 million for a variety of post-harvesting infrastructure investments. Thirty-nine productive partnerships have been officially recognized as Producer Groups by the Ministry of Agriculture and Food Industry (MAFI) in conformity with the provisions of Law No. 312 on Producer Groups. At this time, the project’s complementary technical assistance to beneficiaries has shifted focus towards post-partnership creation support , including legal, finance and accounting, and market access aspects. Producer groups report increasing volumes of annual sales, an indicator of cohesiveness of the group, and demonstrated increasing export volumes. Component 3: Enhancing Land Productivity Through Sustainable Land Management. Implementation of this component has progressed well. All the activities related to the rehabilitation of forestry shelterbelts were implemented ahead of schedule and above and beyond the initial targets. Specifically, 2,200 hectares (ha) of shelterbelts have been rehabilitated, and the equipment which was procured for these purposes has been utilized efficiently by two mobile mechanized agro-forestry squads . The area protected by robust anti-erosion rehabilitated shelterbelts exceeded 64,000 ha. The component's SLM grant scheme has been implemented through seven calls for proposals that yielded 257 applications, 192 of which received grants in a total amount of US$2.4 million. The average share of the matching grant in the total SLM-related investment constituted 27 percent. At present, the total on-farm area benefitting from SLM practices supported by the project is 58,650 ha, which considerably exceeded the target value of 10,000 ha. The World Bank Moldova Agriculture Competitiveness Project (P118518) Component 4: Project Management. Support for project coordination and management has been constantly rated Satisfactory. Component 5: Compensatory Sales Support Grants. Overall, the component has been implemented in an expedient and efficient manner, as required by its nature of providing quick support to fruit growers affected by the Russian Federation export ban in 2014. About six thousand small-scale farmers cultivating apples, plums and table grapes applied and received compensatory grants in the total amount of US$7.0 million. The activities of the component staved off a likely collapse of the country’s fruit-growing sub-sector. III. DETAILED CHANGES REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Current Current Actuals + Proposed Disbursement % Ln/Cr/TF Expenditure Allocation Committed Allocation (Type Total) Category Current Proposed IDA-58580- G,W,non- 001 CS,CS(inc.AUD), 1,000,000.00 1,374,686.99 1,490,954.00 100.00 100.00 Currency: TR,OC,P B1,D XDR Matching Inv. Grants for Part 4,000,000.00 4,153,577.48 4,154,283.00 100.00 100.00 B.2 Matching Inv. Grants for Part 0.00 0.00 0.00 100.00 100.00 C.2 G,W,Non- CS,CS,TR,OC for 2,100,000.00 806,639.40 1,454,763.00 100.00 100.00 P A,C1,C3 Comp. Sales Sup. Grants for 0.00 0.00 0.00 100.00 100.00 Part E Total 7,100,000.00 6,334,903.87 7,100,000.00