Page 1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB2135 Project Name AF: Emergency Horticulture and Livestock Project (HLP) Region SOUTH ASIA Sector General agriculture/fisheries/forestry (50%) Agricultural marketing & trade (25%) Agro-industry (25%) Project ID P098256 Borrower(s) Islamic Republic of Afghanistan Implementing Agency Ministry of Agriculture, Animal Husbandry and Food Environment Category [ ] A [ X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared February 4, 2006 Estimated Date of Appraisal Authorization March 19, 2006 Estimated Date of Board Approval May 18, 2006 1. Key development issues and rationale for Bank involvement Agriculture is central to the Afghan economy: 1 the sector contributes an estimated 53% to the GDP and agriculture provides employment for 67% of the labor force. Nearly 80% of the Afghan population lives in rural areas which also harbor the highest incidence of poverty. Agricultural performance is therefore pivotal for overall economic growth and poverty reduction and offers the only significant prospect for raising farmer incomes, contributing to food security, providing rural employment and reducing the vulnerability of resource poor rural people. Development of the agriculture sector is a central pillar of the Government’s strategy for economic growth and poverty reduction. However, Afghanistan’s agriculture has suffered badly from nearly a quarter century of prolonged conflict and unrest. The main drivers of agricultural growth and rural poverty reduction – roads and irrigation, technology, information and education, and markets – have all deteriorated due to social conflict, lack of maintenance for infrastructure and collapse of technical information and market systems. This situation has been exacerbated by frequent droughts. Between 1979 and 2005 agricultural production grew at 0.85% per annum, compared to 1.1% per annum in the pre- conflict period of 1964 -1978. To enable faster overall economic growth and also to significantly reduce rural poverty, agriculture needs to grow at a minimum rate of 5% per annum over the next decade. The Poppy Economy . In 2004 and 2005 , Afghanistan supplied an estimated 87% of the global market for opiates. In conditions of lawlessness and impoverishment, and starting from a tiny base 1 Agriculture GDP includes livestock, forestry and fisheries but excludes the opium poppy economy; figures are for 2003 (SAF, 2004). If the poppy economy is included the share of agriculture in drug inclusive GDP is 70%. Labor force figures relate to 2001 (FAO, Compendium of Food and Agricultural Indicators, 2003). Page 2 in the late 1970s, poppy production peaked in 1999 and has continued apart from a brief respite under a ban imposed by the Taliban regime in 2000. Poppy production resumed after the regime collapsed and it is now the leading economic activity, accounting for about one third of GDP. Although concentrated in three regions; poppies are cultivated in all parts of the country and reached a peak in 2004 with an estimated 131,000 hectares (6.6% of the irrigated land). This production involved some 356,000 farmers (35% of all farmers). The crop therefore provides a substantial part of the welfare of rural households in the main production areas, where the majority are resource poor. It is estimated that the opium industry involves 4 million people or 17% of the total population and indirectly supports 870,000 jobs in the rural non-farm economy. Breaking this economy will depend on finding alternative sources of income for producers and the traders involved. However, there are few non-farm opportunities through which licit economic growth can be supported and therefore alternatives must be found in crop and livestock production and agricultural processing and marketing. Comparing the net margins of $11,600/ha for poppies and $180/ha for wheat demonstrates the futility of offering field crops as competition. Given the country’s landlocked position, Afghan agriculture can only compete with low volume/high-value products and horticulture and livestock offer the best opportunities. The improved security and relations between Afghanistan and the rest of the world since 2002 has opened up opportunities in producing, processing and marketing horticulture and livestock products. 2. Government Strategy for the Agriculture Sector The Agricultural Sector Development Strategy (Master Plan) 2 emphasizes that the Government of Afghanistan considers revitalizing production and enhancing productivity of the sector as the cornerstone for rural development and economic growth strategies; however, this objective faces a number of development constraints. First, prior to the war (1977), horticulture (fresh and dried fruits) represented 41% of Afghanistan’s export earnings 3 ). Although the sector was neglected during the subsequent twenty- five years, survey data shows that cultivated areas increased in response to demand from population growth and increased local and regional demand, including the Soviet republics. Development of the global horticultural industry has been exceptional since 1977. However, Afghanistan has not benefited from recent innovations in selection, technical or marketing and its horticulture is uncompetitive. Yet, the perennial horticulture sector offers a great potential both for growth in the agriculture sector and for enhancing rural incomes: (i) Afghanistan is a land locked country and its comparative advantage lie in the value/weight ratio of its perennial horticulture products; (ii) there is a growing demand from the Indian sub-continent - where there is limited scope for producing temperate fruits crops; (iii) the genetic potential of Afghan fruits is unique, 2 Jointly prepared by MAAHF departments in collaboration with donor agencies and submitted to the Cabinet in November 2005. The Plan has been approved by the Cabinet’s Economic Commission and is pending Cabinet clearance. 3 “Fresh and dried fruits and nuts account for 78% of the value of Afghan horticultural exports and 41% of the value of all exports. Dried fruit represent 18% of total exports compared to 12% for fresh fruit and 11% for nuts”, World Bank, “ Horticultural Subsector Survey. Afghanistan. Volume I ”, Agricultural Credit and Agro-industries Division, Report No 1324-AF, May 1977, p. 28 Page 3 (iv) perennial horticulture offers higher returns than alternative licit agricultural products; and (v) perennial horticulture creates a demand for goods and services in the non-farm rural economy. Second, traditionally, livestock have been an integral part of most farming systems of the country. Range pasture, which covers some 45% of the total land area, has traditionally supported a large livestock population. Pastoralist livestock populations declined due to the pressures of war which disrupted the nomads’ traditional trekking routes and successive droughts between 1998 and 2001. This especially reduced the availability of sheep for fattening, the mainstay of meat supplies to urban centers. It also adversely affected the nutritional inputs of the rural people and increased the vulnerability of the rural population, particularly pastoralists. With reduction in hostilities and the return of favorable rains sheep and goat populations have been recovering since 2002. It is particularly timely; therefore, to support the recovery and growth of livestock production. Poor nutrition remains a serious constraint: supplies of animal feed are inadequate and many ruminants are reduced to straw diet for the winter. Feed shortages are exacerbated by degradation and misappropriation of rangelands, inadequate production and storage of winter forage and lack of concentrate feeds and mineral supplements. Poor livestock nutrition directly contributes to increased incidence of diseases and low fertility, even when vaccines and other animal heath interventions are available. Addressing these issues is therefore indispensable for achieving the Government’s development goals. Third, the war has resulted in a serious erosion of government institutions, their infrastructure and facilities, and staff capacities and skills. This has prevented the government from providing an effective technical assistance to the agriculture sector in general and to the horticulture and livestock sub sectors in particular. The available staff lacks modern training and has been prevented from acquiring information on state-of-the-art technologies and extension practices for improved production and productivity of the sector. While the private sector can potentially play a lead role in providing technical and financial assistance as well as marketing support for trade, productivity and income enhancement in agriculture, their potential has not been harnessed to date. Enhancing the state capacity to create an enabling environment and facilitating the private sector to provide support to horticulture and livestock production are therefore vital for the future growth of these two sub sectors. Rationale for Bank Involvement To address these issues, in March 2005, the Ministry of Agriculture, Animal Husbandry and Food (MAAHF) urgently requested World Bank assistance for developing a strategy for jump starting agricultural production. A Bank mission visited Afghanistan in March 2005 and prepared a draft strategy that was used as the basis for the government’s presentation on agricultural development at the Afghanistan Development Forum in April 2005. The strategy was further refined following extensive consultations with other donors in May 2005 and the formulation of The Agricultural Sector Development Strategy (Master Plan). The Plan identifies three key areas as priorities for investment: (i) increasing productivity from existing irrigated wheat areas, (ii) supporting the production and marketing of high value horticultural crops by revitalizing orchards and putting in place a framework for improving quality management and marketing channels, and (iii) developing a series of measures to address animal health and production, improve rangeland management, and ensure adequate fodder availability. Page 4 The proposed Emergency Horticulture and Livestock Project (HLP) is consistent with the Government’s “Interim Afghanistan National Development Strategy and Future Challenges”, which defines Government’s five year development strategy (2006-2011), and that has been submitted to London Conference held during January-February 2006. The project is also consistent with the Bank’s Transitional Support Strategy (March 2003). It will make specific contributions through: (i) stimulating increased and more efficient production from perennial horticulture crops and livestock; (ii) demonstrating improved technical approaches for these sub-sectors; (iii) initiating improvement in genetic quality of livestock and perennial crops; and (iv) strengthening human resources in MAAHF. The proposed project operationalizes the key elements of the above strategy, keeping in mind ongoing programs/projects supported by the Bank and other donors/agencies. There are a number of good reasons why the Bank should be strongly supportive at this stage. First, the government is extremely desirous of World Bank involvement in the agricultural sector and this is reflected in the assistance that was sought to prepare the strategy document in March 2005, and also in discussions before and since. Second, it is widely recognized that increased productivity and growth in the (non-opium) agricultural sector will be an important component of the strategy to reduce the size of the opium economy (although action on several other fronts including interdiction will also be needed). Third, the Bank is already supporting projects in irrigation (EIRP) and rural development (e.g., NSP, NEEP, MISFA) and the proposed operation and these ongoing operations are mutually complementary and will maximize the collective development effectiveness of the investments by enhancing access to improved agricultural technologies, credit, and markets. These measures would also enhance the sustainability prospects of the ongoing operations. Fourth, because of its strong in-country presence and development leadership in several other sectors, the Bank is well positioned to coordinate donor efforts in rural development, with agriculture being the engine for rural growth. 2. Proposed objective To enhance productivity and stimulate perennial horticulture and livestock marketable output in focus areas by improving the incentives framework for private investments and strengthening institutional capacity in agriculture. The Project is designed as the first stage in a program that will unfold over the coming decade to support the horticulture and livestock sub-sectors nationwide. The program has been designed in collaboration with other donors, with the expectation of obtaining additional financing and adopting common approaches to implementation. 3. Preliminary project description Component 1 : Increasing marketable perennial horticulture output (US$25.2 million) – comprising works, goods, services and grants for: (i) stimulating increased output and quality from existing orchards through improved production techniques and IPM; (ii) expanding output by helping farmers to establish new orchards through matching grants; (iii) establishing a Horticulture Development Council of Afghanistan (HDCA) and developing MAAHF capacity for policy planning and supporting horticulture producers; and (iv) supporting pilot activities on the private sector green raisin and pomegranate export clusters. Expenditures will include developing a Page 5 modern horticulture production capacity including technical and degree training for specialists working in the sub-sector, specifying sanitary regulations for fruit crop production, varietal selection of perennial tree crops and establishing state of the art tree nurseries for distribution to qualifying farmers, extension support for rehabilitating orchards and developing new orchards. Specialist technical assistance would support these activities. It is anticipated that the horticulture investments under the project will have incremental impact within seven years (1 to 2 years from nurseries, 2 to 3 years for existing orchards and 4 to 7 years for new orchards - depending on species). 1.1 Rehabilitation and Expansion of Perennial Tree Crop Cultivation – Under this sub- component facilitating partners hired by HLP will provide technical assistance for four activities: (i) defining orchard systems and fruit crop production programs; (ii) helping farmers to rehabilitate existing orchards through training and extension support on modern technologies, management and IPM; (iii) selecting the best, pathogen free fruit varieties for nursery production; and (iv) helping farmers to establish new orchards through matching grants. Activities will initially focus on two regions: North and Central with offices in Mazar-e-Sharif, and Kabul, respectively. Under the development program for Tree crops, these activities will extend to other regions and other crops. In this context, it is intended (security permitting) to extend operations in PY3 to Kandahar in the Southern Region. In order to maximize impact under a comprehensive rural development strategy, the detailed planning for this sub-component will – wherever possible - coordinate with areas of focus and investments of other projects supported by the World Bank and other donors. In particular, these developments would benefit from the synergies of developments under the NSP, NEEP and EIRP. 1.2 Establishing a Horticulture Development Council of Afghanistan (HDCA) – As basis for developing a modern and competitive horticulture industry, project financing will help to establish a Horticulture Development Council of Afghanistan (HDCA) with mixed private and public governance. Initially the Council will be established as a publicly funded organization that, over seven to ten years, will be transfo rmed into an autonomous private members’ organization consisting of commodity marketing entities. Discussions on the roles of the Council have been initiated and will be defined through a detailed study and agreed by a consultative process between all stakeholders. Funding under the project will include qualified personnel, vehicles, equipment and operating costs to enable HDCA its tasks that will be defined in the Technical Annex. 1.3 Pilot activities on the green raisin and pomegranate export clusters – The Afghanistan green raisin and pomegranate export cluster is a group of producers, private enterprises and public institutions operating in the Afghan dried fruits and nuts industry. Planned to start in PY3, this sub- component will be linked to IFC’s Private Enterprise Partnership (ref. PEP- MENA) and will focus interventions on improving production, processing and marketing of Shindokhani green raisins and pomegranate in Kandahar province. The Shindokhani raisin and pomegranates from Afghanistan capture the highest value in export markets. To exploit these comparative advantages however, the production, quality, processing and marketing of raisin and pomegranate production need to be improved significantly. Page 6 Component 2 : Increasing Livestock Output and Productivity (US$21.9 million) – Comprising works, goods, services and grants for: strengthening institutions in livestock-related services in areas not already covered by other projects. This includes: supporting the reorganizing the GDAH; promoting livestock production and marketing initiatives in order to permit import substitution and stimulate exports of animal products; studies with pastoral communities to improve rangelands management; and establishing a public/private partnership in veterinary medicine to ensure a stronger regulatory government role and better profitability and sustainability of privatized field veterinary services. 2.1 : Reinforcement of the Animal Husbandry Department –The capacity at national level of the GDAH to supervise and regulate animal husbandry services will be strengthened by: (i) developing adapted extension messages on animal nutrition, and animal husbandry; (ii) surveying and monitoring animal nutrition, forage and feed resources as well as national genetic resources; (iii) undertaking pilot operations for commercial farming and value-added product manufacture in the dairy, lamb fattening, poultry and animal fiber production; and (iv) initiating preservation and selection of superior types of indigenous cattle, sheep and goat breeds. Project funds would reinforce the capabilities of AHD to contribute to rapid productivity improvement and preservation of the country’s basic resources through: training programs, equipment to improve working conditions, limited infrastructure rehabilitation, Constitution of pure breed herds of indigenous cattle, technical assistance, including in-depth surveys and assessments. 2.2 : Livestock Production and Marketing Initiatives – This sub-component aims at: i) developing livestock production and marketing initiatives for improving domestic food supplies, eliminating imports of animals and animal products (milk and milk products, frozen chicken and live cattle and buffalo for slaughter) and promoting exports. This will be achieved by: (a) fostering dairy producers organizations and developing pilot milk collection and processing facilities; (b) fostering individual farmers or producers’ associations to improve modern poultry farming; and (c) supporting producers associations for the development of sheep fattening activities; and ii) revitalizing traditional exports earnings from high quality wool, camel hair, cashmere fiber and karakal skins, by supporting technologies for improving the harvesting, processing and marketing of these products for better value-added. Actions will include: a) A dairy development initiative consisting of establishing a dairy processing unit and thirty milk collection centers with district milk producers associations and provincial unions along the successful Indian Amul system model; (b) a semi-intensive village poultry industry development initiative providing training for groups of women farmers, supply of initial stock and technical support for production and related services; and c) Support for increasing returns from cashmere fiber, involving technical support to improve collection, cleaning and marketing of wool and fiber and for developing links between fiber producers, wholesalers, processors and buyers of finished products. 2.3 Animal Health Services – Project financing provide for promoting public-private partnership for the delivery of veterinary services through: (i) specifying policies and regulations for the conduct of private veterinary practice and the role of paraprofessionals, as well as for importing, distributing and administering veterinary medicines and vaccines; (ii) developing proposals for a government vaccine bank for responding to emergency situations for zoonotic or highly contagious livestock diseases; (iii) creating a system of sanitary mandate to delegate implementation of some disease control functions to private veterinarians; (iv) supporting the transfer of the 120 MAAHF Page 7 veterinary clinics to private sector operation; and (v) developing the capacity of the Afghanistan Vetenerary Association (AVA) to strengthen the veterinary profession, particularly with regards to members working in the VFU system. The latter will include developing seven regional veterinary offices and training centers. The sub-component will thus help to reduce the dependency of VFUs on NGOs and donors and will help finance the restructuring and reinforcement of AVA. Project action will also initiate a sanitary mandate system for contracting certain Government veterinary activities to private veterinarians, thereby reinforcing their revenue base and increasing their profitability. This will be achieved through: (a) developing official policies on the definitions, roles and responsibilities of different categories of animal health care providers including professionals and paraprofessionals; (b) organizing community based animal health workers (CBAHW) training starting in PY2; (c) fostering supervision and/or employment of trained veterinary technicians and CBAHWs by professional veterinarians; (d) delivering sanitary mandates to professional veterinarians or certified CBAHWs and contracting the AVA to manage the delegation of public activities to sanitary mandate holders (including participatory epidemiosurveillance, samples collection and legal vaccinations); and (e) providing a stock of approved vaccines as a strategic bank in the Directorate of Veterinary Services for emergency and strategic vaccinations. Component 3 : Capacity Building, Implementation and Monitoring & Evaluation Support (US$6.1 million) – This will consist of two parts- (i) Institution Strengthening and (ii) project management support. 3.1 Institutional Strengthening : The institution strengthening is sub-divided into two sub- components: (i) human resources development (HRD); and (ii) office rehabilitation, improvement and refurbishment and provision of office and field equipment. Human Resources Development. HRD is crucial to start to reverse the effect of twenty-five years of neglected development and training and the lack of contemporary information for professional staff of MAAHF. The Ministry is undergoing a fundamental reorganization aimed at creating a simplified, modern and forward thinking institution capable of providing effective leadership in planning, regulating and supporting the commercial agriculture sector. This is a massive challenge for which HLP will provide financing for intensive training and management support to strengthen key headquarters departments responsible for Planning and Administration (Development Budget) and for helping the newly reorganized technical production and animal health departments to provide modern demand-based support services for farming communities. Office rehabilitation : Significant progress has been made in restoring the MAAHF headquarters buildings in Kabul - that were totally destroyed during the war. Project financing will be provided to rehabilitate, furnish and equip offices necessary for effective implementation of the project’s planning, administration and monitoring activities. 3.2 Project Management This sub-component will support and provide technical assistance for project and program implementation. Financing will be provided for recruiting: (i) a highly qualified lead Implementing Partner to be responsible for the Implementation Management Support Team (IMST) that will be part of the MAAHF Planning Department; and (ii) proven specialists (NGOs Page 8 or international organizations) as IPs to coordinate implementation of technical field operations. Financing will include equipment and vehicles necessary for carrying out this work. Possible Project Components Indicative Cost US$m – Increasing marketable perennial horticulture output 14.0 Increasing livestock population and productivity 20.0 Capacity Building, Implementation and M&E support 10.0 TOTAL 44.0 4. Safeguard policies that might apply Applicable? Safeguard Policy If Applicable, How Might It Apply? [Yes] Environmental Assessment ( OP / BP 4.01 ) Project activities are not expected to have any significant environmental effects. On the contrary, development proposed for perennial tree crops are likely to have a positive impact through nursery development that will lead to increased orchard areas. However, some small scale construction activities may cause limited, localized and temporary negative environmental impacts. An Environmental Management Plan with environmental checklists will be developed and used to mitigate those potential negative impacts and to enhance positive impacts. [Yes] Pest Management (OP/BP 4.09) The promotion of the production of perennial horticulture might increase the use of chemical insecticides and fertilizers in the project areas. However, the project includes provisions for hiring of IPM specialists, developing crop specific IPM plans, training of farmers on the application of IPM plan, and monitoring the IPM activities in project areas. The IPM strategy will be applied in a manner that minimizes risks to the environment, human health, and beneficial non- target organisms. [No] Natural Habitats ( OP / BP 4.04) . [No] Involuntary Resettlement ( OP / BP 4.12) [No ] Indigenous Peoples ( OP 4.10 ) . [No] Forests ( OP / BP 4.36) [No] Safety of Dams ( OP / BP 4.37) [No] Cultural Property (draft OP 4.11 - OPN 11.03 ) [No ] Projects on International Waterways ( OP / BP / GP 7.50) Page 9 5. Tentative financing Source: ($m.) BORROWER 0.0 IDA 24.0 ARTF 20.0 Total 44.0 6. Contact points: Contact : Norman B. Piccioni (Task Team Leader) Lead Rural Development Specialist World Bank, Kabul, Afghanistan Tel: +93(0)70276002 (mobile) Bank Link Line extension: 5232-424 Email: npiccioni@worldbank.org Nihal Fernando (Team Member) Senior Rural Development Specialist World Bank, Kabul, Afghanistan Tel: +93(0)70 166206 (mobile) Bank Link Line extension: 5232-429 Email: nfernando@worldbank.org