Documentof The World Bank FOR OFFICIAL USE ONLY Report No: T7671-AF TECHNICAL ANNEX ONA PROPOSEDGRANT INTHE AMOUNT OF SDR 14 MILLION(US$20 MILLION EQUIVALENT) TO THE ISLAMIC REPUBLIC OF AFGHANISTAN FORAN EMERGENCY HORTICULTUREAND LIVESTOCK PROJECT May 1,2006 Agriculture and RuralDevelopment Sector Unit South Asia Region This document has a restricteddistribution and may be usedby recipientsonly in the performance o f their official duties. Its contents may not otherwise be disclosedwithout World Bank Group authorization FOR OFFICIAI, USE ON1,Y CURRENCY EQUIVALENT (exchange rate is Kabul based open market buyingrate) Effective as o f April 18, 2006 Currency Unit= Afghani (AFN) US$1 = 49.7 AFN GOVERNMENT FISCAL YEAR March 21-March 20 ABBREVIATIONS AND ACRONYMS AHDP Animal Health Development Project I-ANDs Interim Afghanistan National Development Strategy ARTF Afghanistan Reconstruction Trust Fund ICRR Independent Commission for Restructuring and Reform AVA Afghanistan Veterinary Association IDA International Development Association CBAHWs Community-based Animal Health I M S T Implementation Management Support Team Workers CDC Community Development Council I P M Integrated Pest Management D C A Dutch Committee for Afghanistan MA1 Ministryo fAgriculture and Irrigation DfID UK Department for International M I S F A Microfinance Investment Support Facility in Development Afghanistan E C European Commission FP Facilitating Partners EIRP Emergency Irrigation Rehabilitation NDDB National Dairy Development Board Project ESSF Environmental and Social Safeguards NEEP National Emergency Employment Program Framework FA0 Food and Agriculture Organization NSP National Solidarity Program GDLPD General Department for Livestock PFA Poultry Farmers Associations Protection and Development GOA Government o f Afghanistan PRR Priority Reform and Restructuring Program PPD Policy and Planning Department H D C A Horticultural Development Council o f P Y Project Year Afghanistan H L P Horticulture and Livestock Project R A M P Rebuilding Agriculture Markets Program (USAID) HSC Horticulture Steering Corqmittee UNDP United Nations Development Program VFUs Veterinary Field Units Vice President: Praful C. Pate1 Country Director: Alastair J. McKechnie Sector Director: Constance Bernard Sector Manager: Gajanand Pathmanathan Task Team Leader: Norman Bentley Piccioni ISLAMIC REPUBLIC OF AFGHANISTAN EMERGENCY HORTICULTURE AND LIVESTOCK PROJECT TECHNICAL ANNEX Table of Contents Page A. BACKGROUND AND STRATEGY 5 1. Project Rationale 5 2. Government Strategy for the Agriculture Sector 6 B. IDA RESPONSEAND STRATEGY 7 1. Interim Strategy Framework 7 2. Lessons from Experience in Afghanistan and Similar Countries 7 3. Rationalefor Bank Involvement 11 C. DETAILED PROJECTDESCRIPTION 11 1. Project Objectives 11 2. Project Components 12 3. Project Description 12 D. INSTITUTIONAL ARRANGEMENTS AND PROJECTIMPLEMENTATION 23 1. InstitutionalArrangements 23 2. Budget andCofinancing 27 3. ProcurementArrangements 28 4. FinancialManagement, Disbursement andAudit Arrangements 29 E. FINANCIALAND ECONOMICJUSTIFICATION 30 1, Project Benefits 30 2. Project Risks 31 3. Alternatives Considered 33 4. Project Sustainability 34 F. ENVIRONMENTAL AND SOCIAL SAFEGUARDS 35 1. Environmental and Social Inipacts and Safeguards 35 2. LandMine RiskManagement 36 G. APPENDICES 37 Appendix 1: Results FrameworkandMonitoring 37 Appendix 2: HorticulturalDevelopment Council of Afghanistan 44 Appendix3: Project ImplementationPlan 55 Appendix 4: Summary of Project Cost 69 0 Appendix 5: FinancialandEconomic Analysis 71 Appendix 6: Procurement Arrangements 80 FOROFFICIAL USE ONLY This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. Appendix 7: FinancialManagementand DisbursementArrangements 90 Appendix 8: Environment and Social SafeguardFramework 98 Appendix 9: Monitoringand EvaluationArrangements 116 Appendix 10: Project Organization andImplementationArrangements 120 Appendix 11:' Treatingthe OpiumProblem: Summary o f Analysis and 128 Recommendations H. MAP: IBRDNo. 34547,34548 131 4 A. BACKGROUNDAND STRATEGY 1. ProjectRationale Agriculture i s central to the Afghan economy.' The sector contributes to more than half o f GDP (53 percent) and provides employment for two-thirds (67 percent) o f the labor force. Nearly four out of five Afghans live in rural areas, which also harbor the highest incidence o f poverty. Agricultural performance i s thus pivotal to overall economic growth and poverty reduction, and offers the only significant prospect for raising farmer incomes. It contributes to food security, provides rural employment, and reduces the vulnerability o f resource-poor rural people. Accordingly, development o f the agriculture sector i s a central pillar o f the government's strategy for economic growth and poverty reduction. However, Afghanistan's agriculture has suffered badly from nearly a quarter century o f prolonged conflict and unrest. The main drivers o f agricultural growth and rural poverty reduction-roads and irrigation, technology, information and education, and markets-have all deteriorated because o f social conflict, lack of maintenance for infrastructure, and collapse o f technical information and market systems. This situation has been exacerbated by frequent droughts. Between 1979 and 2004, agricultural production grew at 0.85 percent per year, compared to 1.1percent per year inthe pre-conflict period of 1964-78. To enable faster overall economic growth and also to reduce rural poverty significantly, agriculture needs to grow at a minimumrate o f 5 percent per year over the next decade. The Poppy Economy In conditions of lawlessness and impoverishment, opium has become Afghanistan's leading economic activity and a main source o f livelihood for many rural people. In 2004 and 2005, Afghanistan supplied the overwhelming share (an estimated 87 percent) o f the global market for opiates. Starting from a tiny base in the late 1970s, poppy production peaked in 1999 and has continued at high levels, apart from a brief respite under a ban imposed by the Taliban regime in 2000. Poppy production resumed after the regime collapsed and i s now the leading economic activity, accounting for about one-third o f GDP. Although concentrated in three regions, poppies are cultivated in all parts o f the country. Production peaked in 2004, with 6.6 percent o f the irrigated land (an estimated 131,000 hectares percent). This production involved more than one- third of all farmers (35 percent, or some 356,000 farmers). Inthe absence of comparable sources of income, poppy production provides a substantial part o f the welfare o f rural households inthe main production areas, where the majority o f the populace are resource-poor. The opium industryinvolves nearly one in five people (an estimated 4 million people, 17 percent of the total population) and indirectly supports 870,000 jobs in the rural nonfarm economy. Breaking this illicit economy will depend on finding alternative sources o f income for producers and the traders involved. However, there are few non-farm opportunities through which licit economic growth can be supported. Therefore, alternatives must be found in crop and livestock production and agricultural processing and marketing. The futility o f proposing field crops as competition i s apparent when comparing the net margins for poppies, ranging from $1,600 to $2,30O/ha (with an average farm gate price o f $102/kg in 2005) and $180/ha for wheat. By focusing on high-value horticulture and livestock products and emphasizing small-scale farmers, the Horticulture and Agriculture GDP includes livestock,forestry, and fisheries, but excludesthe opiumpoppyeconomy.Figures are for 2003. Ifthe poppyeconomy is included, the share of agriculture in the drug-inclusive GDP i s muchhigher: 70 percent: Labor force figures above are for 2001. 5 Livestock Project (HLP) will make a positive contribution to the government's counter-narcotics policy. The improved security and relations between Afghanistan and the rest o f the world since 2002 have opened up opportunities in producing, processing, and marketing horticulture and livestock products. 2. GovernmentStrategy for the AgricultureSector The role o f agriculture as the central pillar for rural development i s explicitly recognized in the Interim Afghanistan National Development Strategy (I-ANDs). A five-year strategic framework and benchmarks for the agricultural sector are contained inthe "Afghan Compact," presented at the London Conference in February 2006. The framework calls for: (i) establishment o f the necessary institutional, regulatory, and incentive framework to increase agriculture production and productivity; (ii)creation o f an enabling environment for legal agriculture and agriculture-based industries; (iii) a 30 percent increase o f public investment in agriculture; and (iv) particular consideration to perennial horticulture, animal health, and food security. To achieve these goals, the Ministryo fAgriculture and Irrigation (MAI)prepared an Agriculture Sector Development Strategy (Master Plan).' The plan has been adopted by the government as the cornerstone for achieving the five-year benchmark targets for the agriculture sector and for ensuring sustainable economic growth and improved livelihoods in rural areas. However, there are three main constraints to achieving these benchmarks. First, before the onset of war (1977), horticulture (fresh and dried fruits) represented a substantial portion (41 percent) o f Afghanistan's export earning^.^ Although the sector was neglected during the next 25 years, cultivated areas increased in response to demand from population growth and increased local and regional demand, including the Soviet republics, according to survey data. Development of the global horticultural industry has been exceptional since 1977. However, Afghanistan has not benefited from recent innovations in selection, technological innovations, or marketing and its horticulture i s now uncompetitive. Nonetheless, the perennial horticulture sector offers great potential both for growth in the agriculture sector and for enhancing rural incomes for several reasons: (i) Afghanistan i s a land- locked country and its comparative advantage lies in the valuelweight ratio o f its perennial horticulture products; (ii) there i s a growing demand from the Indian subcontinent, where the scope for producing temperate fruits crops i s limited; (iii) the genetic potential o f Afghan fruits i s unique; (it.)perennialhorticulture offers higher returns than alternative, licit agriculturalproducts; and (v) perennial horticulture creates a demand for goods and services inthe non-farm rural economy. Second, livestock have traditionally been an integral part o f most o f the country's farming systems. Range pasture, which covers nearly half (45 percent) o f the total land area, has traditionally supported a large livestock population. Pastoralist livestock populations declined by more than half (50 percent) due to the pressures o f war whichdisrupted the nomads' traditional trekking routes and because o f successive droughts between 1998 and 2001. Inevitably, this reducedthe availability of sheep for fattening, the mainstay o f meat supplies to urban centers. It also adversely affected the nutritional inputs and increased the vulnerability o f the rural population, particularly pastoralists. 'Jointly prepared by Ministry o f Agriculture and Irrigation (MAI) incollaboration with donor agencies and approved by the Cabinet o f Ministers inDecember 2005. "Fresh and dried fruits and nuts account for 78 percent o f the value o f Afghan horticultural exports and 41% o f the value o f all exports. Dried fruit represent 18% o f total exports comparedto 12% for fresh fruit and 11% for nuts" (World Bank, 1977, "Horticultural Subsector Survey. Afghanistan. Volume I," Agricultural Credit and Agro-industries Division, Report No 1324-AF, Washington, DC, p. 28). 6 With reduction inhostilities and the returnof favorable rains, sheep and goat populations have been recovering since 2002. Thus it is particularly timely to support the recovery and growth o f livestock production. Poor nutrition in livestock directly contributes to increased incidence o f animal diseases and low fertility, even when vaccines and other animal heath interventions are available. Addressing these issues i s 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 subsectors in particular. The available staff lacks modem training and has been prevented from acquiring information on state-of-the-art technologies and extension practices for improved production and productivity o f the sector. While the private sector can potentially play a lead role in providing technical and financial assistance and marketing support to enhance trade, productivity, and income in agriculture, its 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 vital for the future growth o f these two subsectors. To address these issues, in early 2005, MA1urgently requested World Bank assistance to jumpstart agricultural production. A Bank mission visited Afghanistan in March 2005 and prepared a three- year strategy, which was reflected in the Agriculture Master Plan. The strategy identified three key areas as priorities for investment: (i) increasing productivity from existing irrigated wheat areas; (ii) supporting the production and marketing o f high-value horticultural crops by revitalizing orchards and putting in place a framework for improving quality management and marketing channels; and (iii)developingaseries ofmeasuresto addressanimalhealthandproduction, improverangeland management, and ensure adequate fodder availability. The HLP i s the Bank's response to support these priorities and to increase synergies with ongoing and related donor programs in the country. B. IDA RESPONSEAND STRATEGY 1.InterimStrategyNoteFramework The HLP is consistent with both the government's I-ANDs and the Bank's Agriculture Strategy Document (March 2005). It also aims to put into action the horticulture and livestock chapters of the Agriculture Master Plan, in coordination with other donors. It will make specific contributions by: (i) stimulating increased and more efficient production from perennial horticulture crops and livestock; (ii)demonstrating improved technical approaches for these subsectors; (iii)initiating improvements in genetic quality o f livestock and perennial crops; and (iv) strengthening human resources inMA1(see appendix 1, Results Framework and Monitoring). 2. Lessonsfrom ExperienceinAfghanistan and Similar Countries The design for HLP i s based on proven techniques and traditional practices in horticulture and livestock production, achievements by development projects inthe prewar period o f the 1970s, and results from technical operations supported by various aid agencies since the mid-1990s. In addition, the design has drawn on Bank-supported projects in other countries that have similar ecological conditions for perennial horticulture and livestock. 7 PerennialHorticulture Perennial horticulture has always been important to Afghanistan. Many tree crop species originated inthis part ofthe world. Perennial tree crops have consistently beenmore profitable than other licit agricultural products. Exports o f fresh and dried fruit and nuts have been the major source o f revenue to the Afghan economy for centuries. In the 1970s, the World Bank and other donors financed institutional and production projects aimed at strengthening the horticulture sector. However, with the onset o f protracted hostilities, Afghanistan failed to benefit from improvements in production and processing achieved in other parts of the world. Instead, many orchards were destroyed, while others deteriorated. Inthe rnid-l990s, the Foodand Agriculture Organization (FAO) initiateda horticulture programas part o f the PEACE Initiative. It focused on food security and emphasized apple production by establishing small nucleus nurseries. However, it lacked conceptual work on orchard systems and crop budget analysis. Over the years, FA0 has also provided support for integrated pest management (IPM) on crops. The proposed approach for the horticultural production activities under HLP i s based on research and development work carried out in the 1970s and resumed in 2002. A pilot project extending over 200 hectares was launched in Jalalabad in 2004-05 by two NGOs (CNFA and IFHope), with the aim o f encouraging farmers to invest in 1 hectare per farm o f perennial orchard and adopt modem production techniques. This pilot identified several keys to success in promoting new orchards: 0 The quality o f fruit tree seedlings i s critical for convincing farmers to forgo production o f staple crops and create an orchard on part o f their land. 0 Farmers taking the risk to plant orchards require specialist technical assistance for preparation and implementation. Cover cropping with alfalfa helps compensate for reduced income while orchards are establishing. Alfalfa also provides a source o f nitrogen, helps counter pests, prevents erosion, and increases supplies o f livestock fodder. The IFHope model i s limited by the fact that it i s based on orchard systems and research from Pakistan. While this i s relevant to some parts o f Afghanistan, other regions differ significantly. For potential developments in the west and north, for example, it i s more appropriate to draw on experience from Iran and other countries with agro-ecological conditions similar to Afghanistan, Developments in China, the Indian subcontinent, and Turkey since the 1970s have involved major investments in production, processing, and marketing technologies, resulting in state-of-the-art perennial fruit industries. With its strong traditions and reputation, Afghanistan will be able to meet the challenge o f finding market outlets for increased horticultural production. Livestock Livestock and agriculture have considerable traditional, social, and economic importance in Afghanistan. Moreover, the country has uneven climatic conditions. World Bank experience with livestock development in such situations demonstrates the need for a balance between extensive and mixed farming production systems. This helps ensure the best use o f scarce and variable feed resources and promote optimum livestock productivity relative to the comparative advantages o f the country. Evaluation o f Bank-financed projects also demonstrates that farmers will adopt production 8 growth and marketing initiatives when a secure production environment exists, including a favorable regulatory framework and effective and accessible veterinary services and technical advice. InAfghanistan, several lessons are apparent from the last 40 years. Inthe 1970s, the country was self-sufficient in meat and milk and enjoyed significant exports o f animal fiber and high-value processed products (carpets and skins garments). By contrast, today, imports o f frozen chicken, eggs, and dairy products are growing rapidly; average meat consumption i s less than 10 kg per capita per year. Added to this, the exodus o f people because o f the war created a vacuum that permitted a large part of the added value o f traditional animal products processing and products to be captured by neighboring countries. There i s therefore an urgent need to increase protein production to help redress poor diets and eliminate imports. The survival o f traditional nomadic livestock production systems depends on natural pastures inthe hills during spring and summer and the capacity o f traditional lowland reserve lands duringwinter. Decades o f civil unrest have affected Afghan pastoralists more than other livestock owners. Not only have the numbers o f flocks fallen by half, but flocks have been excluded from rangelands by new cultivators and have become increasingly vulnerable to contagious diseases. As a result, natural pastures-particularly highlyproductive summer pastures-are being poorly managed. The incidence o f environmental degradation through the encroachment o f seasonal agricultural activities has accelerated in the last five years. There i s urgent need to promote dialogue between local communities and national authorities. Inparticular, it i s necessary to explore ways for communities to agree on fair regulations on livestock movement and access to natural pastures in the context o f concerted pasture management plans, including exclusion o f cultivators from agreed access areas. Animal Health Services Government veterinary services that were available to Afghan livestock owners before 1979 were decimated by the conflicts that followed. Starting in the late 1980s, various donor funded NGOs and international agencies-led by FA0 and the United Nations Development Program (UNDP)- tried to provide a minimum o f veterinary services (as emergency operations) by training community-based veterinary paraprofessionals and establishing Veterinary Field Units (VFUs). In the 1990s, various aid agencies provided clinical veterinary services in the private sector as a support operation for district-based VFU. However, these efforts were not sufficiently widespread to prevent a decline inoverall animal health and fertility. Since 2001, donor-funded NGOs have shifted the emphasis from the relief mode to the development o f a sustainable national network o f privatized VFUs that provide regular veterinary care on a fee-for-service basis. The aim i s that VFUs should operate as independent private sector operators for livestock owners, as well as contracting some government regulatory oversight. Some 500 VFUs have been created with the assistance o f various aid agencies. Inaddition, there are 120 government veterinary clinics that are poorly operating and need to evolve into private sector operations in accordance with government policy on privatization. Collectively, the VFUs and clinics will provide a strong basis for a national network o f private clinic service delivery to livestock owners. The NGOs involved with VFUs have started to coordinate their operations. Notably, a start has been made to reduce the level o f subsidies for salaries and vaccines, thereby addressing the main reason for lack o f sustainability for VFUs in the past. Actions under HLP will further consolidate VFU and help them become profitable and more sustainable. A technical assistance project supported by the European Commission (EC) is studying the financial implications for the VFUs, including eventual complete privatization o f the associated 9 veterinary services. An Animal Health Development Project (AHDP) funded by EC will be initiated in2006 with the objective o f strengthening public sector veterinary services through policy formulation, updated regulation, planning, and increased capacity for laboratory diagnostics and disease control. Complementing these activities, H L P aims to revise and strengthen the regulatory framework, facilitate the transfer o f MA1 veterinary clinics to private operation, and further strengthen cooperation o f the publidprivate sectors in veterinary medicine through provision o f contracts for sanitary mandates by MA1to private practitioners. The continued expansion o f VFUs into an autonomous network i s uncertain, as EC contracts with two leading NGOs will end in 2007. However, it i s hoped that funding from the U.S. Agency for International Development (USAID) for these development will be renewed in 2006 to create a national network. At the same time, it i s important to ensure continued technical support while subsidies are being phased out. This will enable the NGOs concerned to hand over technical support and the supply and supervision o f the VFUs to a permanent Afghan professional association operating under a legal mandate. The Afghanistan Veterinary Association (AVA) was established inthe 1990s with FA0 assistance. After overcoming initial organizational challenges, the AVA i s developing into a successful service association that assures delivery o f most o f the VFU network's medicine and equipment supplies. It i s also an active partner in the veterinary field unit development project that has been funded by USAID through the Rebuilding Agriculture Markets Program (RAMP) and led by the Dutch Committee for Afghanistan (DCA). At present, AVA directly manages 115 VFUs in 14 provinces in Southern and Eastern Afghanistan. The RAMP project has supported the strengthening of AVA through institutional reforms and reorganization. By extending the ongoing reorganization and capacity building under HLP, the AVA will become a sound professional organization, able to coordinate effectively between its members and the government veterinary services. This will provide a framework for developingpublic-private partnership inveterinary service delivery. Animal Husbandrv Services Incontrast to animalhealth, farmers havehadlittle support for improvinganimal productionsince the 1970s. Pilot projects for poultry and dairy development were initiated in 2000 and are being implemented by FA0 with bilateral funding. These projects have generated substantial improvements in livelihood and nutrition, particularly in the poorest communities and for women, thus stimulating strong interest among the rural populations. Expanding such activities would help address social and production objectives and curb import substitution. In addition, there i s scope for fostering other types o f livestock production, especially sheep fattening, animal fiber, and pastoral livestock production. Improving animal production will require modem and well-trained technical support services. However, because o f decades o f neglect, the operations o f the General Department for Livestock Protection and Development (GDLPD) are weak and disorganized. Personnel lack relevant knowledge, appropriate training, and necessary facilities. Reorganization of MA1services has been delayed, pending the implementation o f the public sector Priority Reform and Restructuring (PRR) initiative, which i s supported by the Bank and other major donors. Developing the capacities o f animal production and marketing services will be central to any reorganization o f the Ministry,but no aid agency has committed to provide technical support. Lessons Reflected in the Project Design Four main lessons have been reflected inthe design o f the HLP: 10 Public regulatory capacity, support capacity, and technical advisory capacity are essential to create an enabling environment for the development o f private initiatives in horticulture, animal health, and production. A coordinated technical assistance and training program facilitate early start up of development operations and increases the capacity o f Afghans in both the public and private sectors. Direct involvement and ownership o f the concerned rural communities in the organization and management o f production and marketing operations are essential for ensuring ownership and sustainability. High-quality technical support services to farmers and traders help ensure expected outcomes and long-term sustainability. In the short-term, this will most likely involve contracting specialist private sector organizations and NGOs. 3. Rationalefor IDA Involvement There are four main reasons why the Bank should be strongly supportive at this stage. First, the government gives high priority to World Bank involvement in the agricultural sector-as reflected in its request for assistance in preparing the strategy document in March 2005 and subsequent discussions about the Agriculture Master Plan. Second, it i s widely recognized that increased productivity and growth in the (non-opium) agricultural sector will be an important component o f the strategy for reducing the opium economy-although action on several other fronts, including interdiction, will also be needed. Third, the Bank, together with other aid agencies (DFID, ADB, USAID) i s already supporting projects in irrigation (the Emergency Irrigation Rehabilitator Project, E m ) and rural development (including the National Solidarity Program, NSP; the National Emergency Employment Program, NEEP; and the Microfinance Investment Support Facility in Afghanistan, MISFA). The HLP will complement these operations and maximize the development effectiveness o f investments in rural development by enhancing agricultural production and productivity and improving agricultural technologies and markets. These interventions will also enhance the prospects for sustainability o f the ongoing operations. Fourth, because o f its strong in- country presence and development leadership in several other sectors, the Bank i s well positioned to encourage donor collaboration in rural development, thereby helping to accelerate agricultural development. C. DETAILED PROJECTDESCRIPTION 1.ProjectObjectives The project aims to stimulate marketable output o f perennial horticulture and livestock in focus areas by: (i) improving the incentives framework for private investments; and (ii) strengthening institutional capacity inagriculture. The project is designed as the first stage in a program that will unfold over the coming decade to support the horticulture and livestock subsectors nationwide. The program has been designed in collaboration with other donors under the umbrella o f the MA1Master Plan, with the expectation o f obtaining additional financing and adopting common approaches and procedures for implementation. At project maturity (4 to 7 years after initiaiion), it is expected that improvements inthe production capacity of the horticultural and livestock sectors will be well established (interms o f quantity and 11 quality), that market channels for Afghan produces will have been improved, and that aggregate export volumes will have begun increasing. Women farmers will particularly benefit from project activities through the major role that they play in horticulture and livestock production. The project will have a positive impact on broad-based economic growth in focus rural areas by increasing the demand for output from the rural non-farm sector and from multipliers in farmers' expenditure. On the institution front, project support for the restructuring o f MA1will help develop the basis for a strong policy, regulatory, and support framework for the agriculture sector. Overall, these benefits will contribute to the Bank's goals to reduce rural poverty and to implement the alternative livelihoods program. They will also provide a key element o f a counter-narcotics strategy by fostering an alternative to poppies and by stimulating rural incomes through support to small-scale farmers and through expansion o f the rural non-farm sector. 2. Project Components Project financing will provide for three components to: (i) increase productivity and marketable output o f perennial horticulture; (ii) increase productivity and improve output o f livestock; and (iii) strengthen the associated MA1departments, implement the project, monitor progress, and evaluate impact. 3. ProjectDescription Component 1:IncreasingMarketableOutputof PerennialHorticulture(US$23.7million) This component will provide civil works, goods, services, and grants to: (i)rehabilitate existing orchards and establish perennial tree crop cultivations; (ii) establish a Horticulture Development Council o f Afghanistan (HDCA) and develop MA1 capacity for policy planning and supporting horticulture producers; and (iii) support pilot activities in private sector export clusters for green raisins and pomegranates. Expenditures will be directed at developing a modem horticulture production capacity, including technical and degree training for specialists working in the subsector; specifying sanitary regulations for fruit crop production; supporting varietal selection of perennial tree crops and establishing state-of-the-art tree nurseries for distributing seedlings to qualifying farmers; and providing extension support for rehabilitating orchards and developing new orchards. Technical assistance would support these activities. The horticulture investments under the project are estimated to have incremental impact within 7 years, depending on species (1 to 2 years for nurseries; 2 to 3 years for existing orchards; and 4 to 7 years for new orchards). 1.1Rehabilitation and Expansiono f Perennial Tree Crop Cultivation (US$20.7 million) This subcomponent aims to increase production and productivity of tree crops through four activities: (i)defining orchard systems and fruit crop production programs (see explanation below); (ii)helpingfarmers rehabilitate existing orchards through training and extension support on modem technologies and IPM; (iii)selecting the best pathogen-free fruit tree varieties for nursery production; and (iv) helping farmers establish new orchards. The first phase project will focus on parts o f selected districts in Parwan, Kapisa, Kabul, Logar, Baghlan, Jawzjan, Samangan, Sari Pul or Balkh Provinces. Women farmers play an important role inproduction o f high value products, especially intensive livestock rearing. If the security situation permits and funds are available, the project will expand to Southern Region, especially Hilmand and Kandahar inPY3. To maximize impact under a comprehensive rural development strategy, the detailed planning for this subcomponent will coordinate with areas o f focus and investments of other projects supported by the World Bank and other donors (notably EC, DFID and ADB). Inparticular, project actions 12 will benefit from the synergies o f developments under the NSP, EIRP, MISFA, and NEEP. This subcomponent supports four inter-related activities. i. Studiesonorchardsystemandfruit cropproductionprograms. Asabasisfordevelopinga modem and competitive horticulture industry, project actions will help establish fruit crop production programs based on international experiences from leading countries in the region and adapted to conditions inAfghanistan. Many existing orchards and vineyards are run down and are not geared to intensive and competitive production. Defining the best orchard systems for each fruit commodity i s critical for creating a competitive perennial horticulture industryin Afghanistan. Project funding will provide for conducting research on orchard management systems by international and Afghan horticulturists and for developing extension material inDari and Pashtu. Fundingwill also be provided to prepare an atlas o f landcover (Landcover Atlas) which i s required for area-based planning and project monitoring. ii.Rehabilitating existing orchards that were abandoned or destroyed during decades of conflict. Project financing will enable facilitating partners (FPs) to work with MA1 provincial offices and develop training and extension support to help farmers adopt best practices in fruit and nut production and post-harvest treatment. Best practices will include applying integrated pest management (PM) and improved orchards management techniques (to increase the quantity and quality o f harvested fruit) and soil analysis (to define optimum fertilizer applications). Community Development Councils (CDCs) and other community organizations will be instrumental in informing farmers' groups and fostering interest in potential beneficiaries. This subcomponent will start in Project Year (PY) 1, with the target o f rehabilitating 12,000 ha and achieving 10 percent yield increase and significant improvement in quality. The 12,000 ha o f rehabilitated orchards (8,000 ha grapes, 3,500 ha almonds, and 500 ha pomegranate) are estimated to generate annual gross income equivalent to $6.1 million and create some 200,000 additional man-days o f employment annually for horticultural production. iii.Establishingfruit treenurseries.ThefewperennialtreenurseriesoperatinginAfghanistan are generally producing poor quality seedlings. Quantities are insufficient for developing a modem, intensive perennial horticulture. Working with the MA1 Research Department, project financing will fund investigations to identify superior varieties o f fruit trees, mainly from Afghanistan but also from other countries with similar ecological conditions. Selected local germplasm will be treated through thermo-therapy in laboratories and multiplied to produce certified, virus-free fruit tree seedlings. This will be a precursor to contracting with private farmers to establish seven, state-of-the-art commercial tree nurseries covering about 70 ha and producing over 5 million seedlings during the course of the project and 7 mother stock nurseries in collaboration with the EC-supported horticulture project. Project funding will also be provided to create demonstration orchards with suitable farmers inthe vicinity o f each nursery. iv. Establishing new orchards. Seedlings from newly established nurseries in a package with fertilizer, legume seeds, and other inputs will be supplied to selected farmers, with the target o f creating 5,000 ha o f new orchards, starting in PY2. Under longer-term program support, it i s anticipated that production on newly established orchards will reach 10,000 ha per year from PY5. On this basis, the program would stimulate the establishment o f 70,000 ha o f orchards within 10 years, thereby fulfilling the target set in the Master Plan. Project financing will also fund 200 extension agents in the three regions. They will be trained to organize farmer field schools to help beneficiaries establish orchards and develop optimum 13 management techniques. Grants for inputs for new orchards will be provided to farmers on a sliding scale based onjevibs (1jevib -0.2ha), so as to ensure inclusion o f small-scale farmers. Beneficiaries will contribute with land, labor, and a percentage o f the costs. Where necessary, microcredit through MISFA or other facilities will be mobilized by community organizations (outside the project). The 5,000 ha o f new orchards to be established under the project will generate an estimated annual gross income equivalent to U S 2 2 million at full production: 5 to 10 years after planting, depending on the fruithut species. In addition to increased output, the new orchards will create some 685,000 man-days o f employment for rural communities. This represents nearly 340,000 more man-days than wheat production from the same area. Intercropping orchards with legumes such as alfalfa will be encouraged, both for improving soil quality and as a source o f winter fodder or cash income, This will provide an estimated 50,000 tons o f additional fodder annually, 1.2 Horticulture DeveloDment Council o f Afghanistan (HDCA) (US$1.7 million) This subcomponent aims at developing a modem and competitive horticulture industryand helping establish the HDCA, with mixed private and public governance. The Council will: (i) support MA1 by advising on the preparation o f legislation and national policies; and (ii) support services provide to private sector growers, traders, and processors. Starting with grapes and almonds, support services will expand to cover other varieties o f nuts and fruit, vegetables, flowers, and medicinal plants, as H D C A develops. Initially the Council will be established as a publicly funded organization. Over five years, it will be transformed into an autonomous private members' organization. A detailed proposal for setting up HDCA has been prepared (appendix 2), discussions on the roles o f the Council have been initiated, and a workshop was held in March 2006 with representatives o f all potential stakeholders to review and adopt the founding principles. Project funding will provide for qualified personnel, vehicles, equipment, and operating costs to enable H D C A to undertake the following tasks: i. DeveloptheCouncilasasoundinstitutionthatcanpromotethehorticulturesectorby: Researching and debating horticulture-related issues and proposing policy actions to the government Developing specific activities and services to support horticultural producers, such as training, demonstrations, overseas visits, advice, information, and technology transfer Developing specific activities and services to support associations o f horticultural processors, traders, and other buyers, such as marketing research, training, advice, information, visits, trade missions, and exhibitions Improving and developing linkages between horticultural growers, buyers, and government Encouraginginvestments and financing for the horticultural sector Encouraging programs and providing incentives for promoting and increasing national and export horticultural produce sales. A proposed structure for the Board o f Directors o f the Council has been drafted in appendix 2. A specialist FP with proven experience in running similar organizations and projects will be contracted to work with MA1in establishing H D C A and ensuring that its policy analysis activities and support services to member growers and traders are initiated and operated effectively and in 14 line with its articles o f incorporation and bylaws. The Board will operate as a Steering Committee for the horticulture production subcomponent. The Council will employ a Chief Executive Officer (CEO), who will be responsible for liaising with the Board, managing day-to-day activities o f the Council, and coordinating the agro-technical, marketing, training, information, and business development support activities to growers, traders, and processors. He/she will also be responsible for coordinating implementation o f the horticultural production activities o f HLP. Recruitment o f the CEO will be the responsibility o f the FP, following a limitedtender procedure. Final contracting for the CEO will be subject to approval o f the Council Board. ii.Capacitybuildingbystrengtheningsupportservicesforhorticulturalgrowers,traders,and processors, including the following: Developing technical messages for dissemination to producers, traders, and processors on improving production, post-harvest practices, and marketing Supporting the preparation, collection, and dissemination o f information about technologies, suppliers, markets, buyers, and the like Organizing, encouraging, and coordinating training, demonstrations, and study visits for growers, traders, and processors Facilitating trade missions and the attendance o f grower association representatives and market operators at food, agriculture and related exhibitions, conferences, and workshops Training in the preparation o f farm business plans and credit/grant applications and specific agronomic and post harvest practices Conducting and analyzing markets research Fostering strong linkages among horticultural inputs suppliers, traders, processors, and other buyers to reduce imports and promote exports Encouraging industry certification, quality improvements, and added value activity in horticultural production, As the functions of HDCA evolve, members will pay annual fees. The Council will obtain additional revenues from fees charged for provision o f specialist services. Within seven years, this income i s expected to be sufficient to cover the Council's operating costs and to enable it to become a credible and sustainable authority. Initially, the FP inputs will be intensive. However, from PY2, the FP will emphasize the transfer o f its responsibilities to the Boardpresident or CEO so that, within three years, the Board is able to carry out its responsibilities efficiently, with minimal external technical support. A Business Development Division (BDD) will be created within the H D C A to ensure sustainability o f the Council's activities, deal with membership recruitment issues, advise on planning and financing for new activities, and broaden its base o f activities and income, The BDDwill also: (i) manage and monitor HLP funds for horticulture development in accordance with procedures to be established by the Implementation Management Support Team (IMST) (see discussion below); and (ii) be responsible for managing a grant facility to be provided under HLP, and for fostering links with credit organizations to support proposals for upgrading production, improving post-harvest and marketing technologies, and stimulating local initiatives. 15 1.3 Pilot Activities on the Green Raisin and Pomegranate Export Clusters (US$1.3 million: IFC, USS0.9 million; IDA, US$0.4million) The Afghanistan green raisin and pomegranate export cluster is a group o f producers, private enterprises, and public institutions operating in the Afghan dried fruits and nuts industry. Planned to start in PY3, this subcomponent will be linked to IFC's Private Enterprise Partnership (PEP- MENA). The security situation permitting, it will focus interventions on improving production, processing, and marketing o f Shindokhani green raisins and pomegranate in Kandahar province. These products attract the highest value in export markets. To exploit these comparative advantages however, production, quality, processing, and marketing need to be improved significantly. To this end, project financing will provide for technical assistance, studies, and works for constructing simple drying facilities. A three-tiered approach will be used. i. Improveproductivity of grapes andpomegranates through technology transfer: Project actions will help farmers improve raisin processing through more efficient drying techniques adopted from lead producing countries (Iran and China) and fruit treatment and handling of pomegranates. ii.Developverticallinkagesbetweenfarmers andtraders:Projectactionswillsupporttraders in establishing or strengthening linkages with producers to improve efficiency and continuous quality control throughout the supply chain, and to ensure the sustainability o f new practices. As a result, penetration to key export markets, particularly in Asia, will improve. iii.Improveexportearningsfor shindukhani raisinsandpomegranate: Improvedproduction and quality o f grapes will enable traders to obtain better access to export markets, especially in the Asian subcontinent. Through HDCA, traders will benefit from market research, trade fairs, branding, and modern trading technologies. Based on lessons from these pilot operations, post-harvest developments would be expanded under the 10-year horticulture and livestock program. Staffingfor the HorticultureProductionSubcomponent A specialist organizational FP will be contracted to work with MA1 in establishing HDCA. Specialist horticultural production FPs will be contracted to work with the MA1strategic research center in each region and in liaison with provincial MA1 offices to ensure that horticultural production activities are implemented in a timely way and in accordance with agreed implementation manuals. The FPs will support MAI field operations and provide the following internationally recruited specialists: (i) an experienced regional coordinator; (ii)horticulturist who a will focus on one or two commodities and the nurseries; and (iii) junior IPM officer. These a specialists will be recruited on the basis of precise, results-oriented terms o f reference. The FPs will work alongside the following national staff to carry out field operations: (i)two qualified and experienced regional horticulture coordinators; and (ii) two regional IPM coordinators. The pilot activities in the green raisin and pomegranate clusters will require the FP to bring on board a specialist international horticulturist and two national horticulturists to coordinate technical activities on Shindukhani raisin and pomegranate, and two national development officers. The recruitment o f all specialists would be closely coordinatedwith similar activities supported by other aid agencies. The Minister o f MA1has been requested to assign a qualified senior officer as counterpart to the horticulture specialist responsible for implementing this subcomponent. This counterpart will be 16 assigned to support the creation o f HDCA and to oversee the production subcomponent. Regional FPs will work with the MA1 strategic research centers, the private nurseries, and the IPM coordinator to: (i)coordinate the selection o f mother stocks o f lead Afghan varieties to be multiplied in the nurseries; (ii)select and contract private investors to establish nurseries; (iii) provide technical assistance and quality control to private nurseries; (iv) train extension staff in orchard establishment and management, and integrated pest management, as supported by a specialized organization such as FAO; and (v) coordinate extension activities. These teams will work initially through qualifying extension agents from existing MA1 staff and, if necessary, additional agents recruitedby the FP for the duration o f the project. ExpectedResultsof the HorticultureComponent The following results are expected: 0 Best orchard management practices inlead fruit producing countries will be appraised, a fruit crop productionprogramwill be adapted and designed, and at least 40 superior indigenous varieties with commercial interest will be selected. 0 Legislation related to IPMand h i t tree seedlings production will be improved. 0 Some 12,000 hectares o f orchards will be rehabilitated; IPMand orchard management extension work will be completed. 0 At least seven 10-hectare perennial tree crop nurseries will be established andcapable of producing at least 5 million highquality seedlings 0 A system for establishing state-of-the-art orchards will be operating on 5,000 hectares. 0 The quality and productivity o f green raisin (110 drying facilities) and pomegranate production (100 producers) will be improved. Export earnings inthe green raisin and pomegranate clusters will increase. 0 A Horticultural Development Council of Afghanistanwill be established and will provide services to associations o f growers, trader, and processors, with strong indication o f fundraising capacity to ensure financial sustainability within seven years. 0 Policy papers will be prepared and advice will be given to enable MA1 to propose improvednational policies for horticultural development. 0 Research, training, and information will be provided and linkages and trade among horticultural growers, traders and processors will be improved. 0 Intelligence o f market opportunities will improve and horticultural growers, traders, processors and government personnel will be better informed through an efficient system o f information collection and dissemination. 0 A mechanism for disbursing grants to support the establishment o f orchards and for a pilot operation in post-harvest handling o f green raisin under HLP will be operating effectively. 0 Measurable improvements in horticultural product quality and supply reliability will be achieved and imports o f horticultural products will be reduced. 17 ComDonent 2: Increasing Output and Productivity of Livestock (US%20.2million) This component aims to help Afghan livestock owners to increase their access to and use of public and private goods and services related to livestock to ensure the marketing o f more and safer livestock and livestock products, and to improve the populace's diet through better nutrition. Project financing will provide for civil works, goods, services, and grants to strengthen institutions in livestock-related services in areas not already covered by other projects. This includes: supporting the reorganization o f the GDLPD; promoting livestock production and marketing initiatives to encourage import substitution and stimulate exports o f animal products; working with pastoral communities to study means for improving rangelands management; and establishing a public/private partnership in veterinary medicine to ensure a stronger regulatory government role and better profitability and sustainability o f privatized field veterinary services. 2.1 Reinforcement of the Animal Husbandry Deuartment (US $3.7 million) This subcomponent aims to strengthen the capacity o f GDLPD to supervise and regulate animal husbandry services 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 dairy, lamb fattening, poultry, and animal fiber production; and (iv) initiating preservation and selection of superior types of indigenous breeds o f cattle, sheep, and goats. Project funds would reinforce the capabilities o f GDLPD to contribute to rapid productivity improvement and preservation of the country's basic resources through: Trainingprograms at MA1headquarters and provincial offices to prepare professionals in the reorganized GDLPD to fulfill their job specifications, develop extension messages, and coordinate an extension service focused on responding to farmers needs Provision of equipment to improve working conditions and mobility of extensionpersonnel, including vehicles, office equipment, hardware, and software equipment Limited infrastructure rehabilitation and upgrading of ofices and provincial research stations Constitution of pure breed herds o f indigenous cattle; preservation, selection and cross breeding research with indigenous sheep and goats: (i)on government farms, with financing for 300 cattle and 500 sheep and goats, selected from superior Afghan stock and suitable breeds from other countries in the region; and (ii) with herds and flocks o f selected livestock owners, with financing for initial extension services and identification Provision of technical assistance, including in-depth surveys to assess: (i)the existing animal and breed resources; (ii) potentials for dairy production and dairy products; and the (iii)the scope for providingtraininginother fields, suchas artificial insemination, fish farming, bee keeping, and poultry farming Support to nomadic and agro-pastoral communities. Project financing will fund efforts to: (i)create apasturemanagementcommitteeto definepoliciesforrangemanagementand evolving agreements between the users' communities (this will involve the Animal Husbandry, Land Use, and Natural Resources Management Departments); (ii) assess the status o f natural pasture productivity and management and establish a monitoring system for quality and quantity and intercommunity management of rangelands using landcover data; and (iii) develop pilots to install VFUs along transhumance routes and train paravets (selected by their communities) inlocations that also have sedentary livestock populations. 18 Pastoral communities will also benefit from other activities to be developed under HLP, including those to better harvest, handle, and market cashmere fiber, and improve and fodder production and feed manufacturing. 2.2 Livestock Production and Marketing Initiatives (US$11.1 million) This subcomponent aims to develop livestock production and marketing initiatives for improving domestic food supplies and promoting traditional exports. Women farmers will be particularly involved. Actions will include: i. A dairy development initiativeconsistingofestablishingadairyprocessingunitand250 milk collection centers with district milk producers associations and provincial unions along the lines o f the successful Amul system in India.4 A rapid assessment o f potential sites for dairy development has been completed. Project financing will be provided for the following: 0 Contracting an FP to complete a feasibility study and planning for organizing milk procurement at remunerative prices through economically viable farmers' associations, and training o f village representatives 0 Fostering the development o f voluntary farmers associations covering 300 villages and providing services for farmers, including genetic improvement through natural service and artificial insemination, adapted health services, the construction o f a feed plant and sale o f balanced cattle feed, and extension services to promote optimum cattle management and encourage and promote quality fodder and pasture development 0 Installing refrigerated tanks and quality control equipment and establishing processing facilities in five provinces in Central Region for value added products 0 Developing a basic transportation and storage network to facilitate regional and seasonal balancing o f milk supply and demand 0 Fostering markets for milk products through a network o f outlets to realize better value-added and competitiveness; and 0 Examining the feasibility o f establishing a National Dairy Development Board (NDDB)to contribute to policymaking andregulation ofthe dairy industry. This subcomponent would be organized by a specialist FP, working with the provincial MA1office. It would be centered on developing farmers' associations, supported by a knowledgeable and responsive extension service and NDDB. ii.An initiative to develop a semi-intensive, village-basedpoultry industry for groups of women farmers, through training, supply o f initial stock, and technical support for production and related services. Project financing will be provided for the following: 0 Recruiting and training specialist poultry advisors for ten provinces to develop extension messages and foster women extension agents responsive to farmers' needs A successful systeminvolving organizing dairy cooperatives at the village level, including: the physical and institutional infrastructure for milkprocurement, processing, marketing and production enhancement services at the union level, and established dairies inIndia's major metropolitancenters. 19 Training women village team leaders inimproved poultry raising practices Promoting the development o f poultry producer groups (PPG) for women in and poultry farmers associations (PFA) in25 districts Helping the Kabul Poultry Association establish a commercial mother stock flock and hatchery inKabul Helping develop a commercial feed processing center (with grinder and mixing plant) in each o f the three provinces involved with the subcomponent Providing technical assistance for design o f poultry sheds, hatcheries, and feed plants; and for preparing investment plans Training o f trainers in production o f day-old chicks, poultry rearing, and adapted feed productiontechnology Providing a package o f extension support and input services for the farmers groups, including equipment, day-old chicks, balanced poultry feed, and adapted health services. iii.Supportfor increasing returnsfrom cashmerefiber,throughatechnicalspecialistand equipment to the Department for Animal Husbandry (DAH) for improving collection, cleaning, and marketing o f cashmere fiber and for developing links between fiber producers, wholesalers, processors, and buyers o f finished products. Project financing will beprovided for the following: Contracting a FP specialist to work with provincial offices in surveying potential for production o f raw materials, product quality, and marketing channels Organizing research between international and national specialists to determine the main product quality factors and to design extension messages Training herder communities in collecting and cleaning techniques for best quality cashmere fiber to obtain better returns and provide opportunities for further local processing, such as hand spinning Organizing annual workshops on raw and finished products between producers; and fostering traders and foreign buyers and national fairs. There i s strong consumer demand for poultry and dairy products. Production i s predominantly small scale and surpluses from domestic consumption are sold in local markets. This provides an important source o f cash for small-scale farm families. Some farmers sell to traders for transport to urban centers. Imports o f these products are organized by traders generally linked with neighboring countries. Other Potential Subcomponents Sheep fattening activities will be an important and financially attractive part o f the longer-term horticulture and livestock program but will not be financed under HLP. This i s the case for two reasons. First, such activities require a credit facility, which cannot be provided under HLP. Second, they relate more precisely to pastoralist development. Consideration will be given to the possibility o f supporting a comprehensive, free-standing project for pastoral communities when socio-economic studies under an Institutional Development Fund (IDF) assistance are complete (Grant # TF0.54983 to National Land Commission for Building Capacity to Address Land-Related Conflicts and Vulnerability in Afghanistan). Once sustainable procedures for animal production 20 have been established, the project would initiate a sheep fattening subcomponent to provide training for groups o f women and men farmers and technical support for production and related services. 2.3 Animal Health Services (USS5.4 million) This subcomponent aims to promote public-private partnership for the delivery of veterinary services by: (i)specifying policies and regulations for the conduct o f private veterinary practice and the role of paraprofessionals, as well as for importing, distributing, and administering veterinary medicines and vaccines; (ii) creating a system o f sanitary mandate and delegating implementation o f some disease control functions to private veterinarians; (iii) supporting the transfer o f the 120 MA1 veterinary clinics to private sector operation; and (iv) developing the capacity o f the Afghanistan Veterinary Association (AVA) to strengthen the veterinary profession, particularly with regard to members working in the VFU system. The latter will include developing four regional AVA offices and training centers. The subcomponent will thus help reduce the dependency o f VFUs on NGOs and donors and will help finance the restructuring and reinforcement o f 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. Project financing will be provided for the following: Developing official policies on the definitions, roles, and responsibilities o f different categories o f animal health care providers, including professionals and paraprofessionals Training activities to enhance the technical capacity o f Afghan veterinarians for providing services inthe public and private sectors Harmonizing the privatized VFU clinical services system, including the privatization o f government clinics supported and supervised by AVA Establishing sanitary mandates through MA1 Veterinary Department contracts with professional veterinarians or certified private paravets (with AVA to negotiate terms o f contracts) Providing vaccines, disease surveillance equipment, and supplies necessary for conducting contracted sanitary mandates. Staffing for the Livestock Component The Minister MA1has been requested to assign a qualified senior officer as counterpart to the Livestock Specialist responsible for implementing this subcomponent. For the development of animal health services, drafting o f revised legislation and mandates will be the responsibility of the Veterinary Department, supported by international specialists. The Dutch Committee for Afghanistan (DCA) will be employed to help coordinate operations o f VFUs under AVA's unified system. For the animal production subcomponents, developments would be focused on newly reorganized AHD personnel at MA1headquarters and provincial offices through strategic research centers in Central and Northern Regions. Proven FPs will be employed primarily to train qualifying women extension workers. Initial selection will be made from MA1staff at provincial and district offices. Trained extension workers will foster the development o f farmers groups and support the development and demonstration o f modem productiontechniques with participating farmers. Expected Results of the Livestock Component At project completion, the livestock component is expectedto have obtained the following results: 21 A strong and effective publidprivate sector partnership will be established for the delivery o f animal health services; a restructured AVA will be capable o f ensuring sustainable operation and coordination o f veterinary service providers through a national network o f self-sufficient VFUs; and an agreement between the government and AVA will enable VFU staffto carry out sanitary mandates for government on a contractual basis. Legislation specifying the responsibilities o f the MA1 Veterinary Department and the restructured AVA will have beenpresented to parliament for approval. A reorganized DAHwill provide training, adapted extension messages, and demonstrations in all provinces, procedures for monitoring trends in livestock productivity will improve, and assistance will be offered for production and marketing initiatives and investments The nucleus for improving quality o fruminant breeding stock will have been established. Dairy producers-organized at the village, district and provincial levels-will be capable o f managing the collection, processing, and marketing o f milk and dairy products, and providing cattle feed and other inputsto livestock owners. Poultry production-coordinated at the village level-will be improved through modem, small-scale poultry production enterprises run especially by women farmers and/or producers associations Pilot operations will be underway with modern harvesting techniques and improved quality o f cashmere fiber, with producers better integrated with processors and receivinghigher returns Ways to improve rangelands management and the livelihood o f the pastoral populationwill have been demonstrated. Component 3: CapacityBuilding, Implementation,andMonitoringandEvaluationSupport (US$6.0 million) This component will provide goods, services, and incremental operating costs for developing human and physical capacity in policy formulation, programming development, financial management and procurement, supervising and monitoring, and evaluating impact. This will enable MA1to ensure efficient implementation o f the HLP and other projects. 3.1 Institution Strengthening This subcomponent aims to strengthen MAI's central administrative capacity through two activities: (i)Humanresourcesdevelopment. TheMinistryisundergoingafundamentalreorganization aimed at creating a simplified, modem, and forward-thinking institution capable o f providing effective leadership in planning, regulating, and supporting the commercial agriculture sector. This i s a massive challenge. HLP will provide financing for intensive training and management support to strengthen the Policy and Planning Department (PPD), which i s responsible for the development budget, and for helping the newly reorganized Technical Production and Animal Health Departments provide modem, demand-based support services for farming communities. (ii)Office rehabilitation. Significant progress has been made in restoring the MA1 headquarters buildingsinKabul, totally destroyed duringthe war. Project financing will be 22 provided to rehabilitate, furnish, and equip offices necessary to implement the project's planning, administration, and monitoring activities effectively. 3.2 Project Management (i)Projectmanagementavvangements.Thissubcomponentwillprovideandsupporttechnical assistance for project and program implementation. Financing will be provided for recruiting: (i)a highly qualified lead Facilitating Partner and forming an Implementation Management Support Team (IMST), working as part o f the Policy and Planning Department and housed at MA1 Headquarters; and (ii)proven specialists (NGOs or international organizations) as FPs to coordinate implementation o f technical field operations through two strategic research centers in Central and Northern Regions and in collaboration with MA1provincial offices. Project financing will include equipment and vehicles necessary to carry out this work. (ii)Monitoring and evaluation. The IMST will strengthen the existing capacity o f the Monitoring and Evaluation Section o f PPD by establishing a Management Information System (MIS). Activities under the MIS will include: (i) financial monitoring o f project procurement, disbursement, budget and contract management; and (ii)technical and economic monitoring to measure the impact o f project developments on the basis o f agreed indicators related to measurable project objectives (appendix 1). Such indicators will be included in quarterly progress reports o f the implementing institutions responsible for the different components and will be the basis for deciding upon adjustments to the subcomponents. D. INSTITUTIONAL ARRANGEMENTS AND PROJECTIMPLEMENTATION 1. InstitutionalArrangements The H L P will be executed by MAI, with the support o f FPs. As a result o f more than two decades o f conflict, exodus o f trained personnel, neglected training institutions, low pay, and lack o f exposure to modem technologies, the government's institutional capacity i s generally very weak. Under the Priority Reform and Restructuring Program (PRR) process, MA1has been requested to propose a simplified structure for the Ministry to the Independent Commission for Restructuring and Reform (ICRR). In early 2005, MAI's leadership initiated a review o f alternative approaches for reforming the Ministry. In response, a proposal was submitted to the Commission for a structure comprising six departments (Policy and Planning, Administration, Agricultural Production and Extension, Quality Control, Natural Resources, and Food Security). This process has reduced the number o f departments from thirteen to six. Detailedjob descriptions have been prepared for the highest positions (ranks 1 to 3, on a 1to 10 scale) and generic descriptions for posts at grades ranks 4 to 10. With the objective o f attracting qualified people from the largest possible pool, the PRR process ensures that most senior posts (grades 1to 3) are widely advertised. It is expected that this process will be accompanied by an action plan for rationalizing staff numbers, with the aim ofhalving the number o fMA1staff and assigning the most competent people to specific jobs within the departments, on the basis o f a competitive recruitment process. However, these steps have been held in abeyance because o f confusion over hiring o f several hundred additional staff for the Ministry, as well as the submission o f a second organizational proposal (August 2005). Personnel recruitment has therefore been limited to competitive recruitment o f higher level posts (grades 1 to 3). MA1 department heads have been selected, 23 together with some provincial directors. A detailed exercise i s underway to define the operations o f GDLPD. The MA1operations are currently supported by some 30 international advisers, mostly assigned by bilateral and multilateral institutions with the responsibility for managing development projects (FAO, USAID/RAMP, DFID and EC) or as policy advisors. In addition, the Minister's cabinet includes some 15 to 20 Afghan advisers, many o f whom are returnees who have contemporary work experience from other countries. Decision about the Ministry's structure and staffing are critical to the proposed institutional strengthening under HLP. Personnel from the technical departments have been directly involved in identifying and preparing the project proposals. Overall Implementation The Implementation Management Support Team (IMST) i s planned as the vehicle through which MA1can most effectively manage, coordinate, and supervise both the Horticulture and Livestock Project (HLP) and horticulture and livestock developments supported by other aid agencies. The IMST will be part o f the MA1Policy and Planning Department (PPD), which i s responsible for planning and managing the development budget. To develop strong planning and administrative capacity within MAI, responsibility for the IMST will be outsourced to a lead Facilitating Partner (FP) with a proven record in implementing developments similar to HLP. This i s considered to be the swiftest means o f building professional capacity in MA1departments and ensuring efficient project implementation. The General Director PPD will be the Director o f H L P and the IMST will be headed by a Project Manager, who will be responsible to the Director General PPD for overall project implementation. The IMST will be part o f the General Directorate PPD and a Deputy General Director will be appointed to work alongside the Project Manager to ensure competent organization and supervision o f program developments after H L P i s completed. The IMST will consist of a small team o f professional specialists (planning, accounting, procurement, monitoring, and training) that will have the following responsibilities: 0 Coordinating the preparation o f annual work programs and budgets for project activities 0 Overseeing all aspects of project implementation, including coordinating the planning and supervision o f the two technical components and personnel training 0 Providing regular progress reports and monitor the impact o f project activities 0 Ensuring sound financial monitoring, procurement, disbursement, and contract management. These specialist personnel will work alongside and strengthen the capacities o f trained Afghan personnel. In addition, two highly experienced Horticulture and Livestock Specialists will be assigned to IMST to help coordinating the respective Project components. Implementation o f Technical Components Facilitating Partners with knowledge o f the country and with a proven experience inthe respective areas will work with MA1personnel to implement the horticulture and livestock components. The FPs will consist o f Afghan and internationalNGOs, internationalinstitutions, or firms. They will be recruited by MA1to be responsible for delivering technical and human resources development in the project areas. Depending on capacity and distances involved, individual FPs could be contracted to undertake these activities inmore than one location. 24 For horticulture developments, the existing Horticulture Steering Committee (HSC) will be the basis for establishing the Horticultural Development Council o f Afghanistan (HDCA). A horticulture organization specialist FP, working alongside HSC, will have dual responsibility: for organizing the formation o f the Council and for coordinating technical developments in the field. Within three years, the HSC will become the permanent Secretariat of HDCA. Livestock developments will be organized through farmers' groups in liaison with MA1provincial agricultural offices. The existing Livestock Steering Committee (LSC) will provide a forum for agreeing activities between MA1and other donors and for exchanging ideas on developments. Implementation o f field production o f the horticulture subcomponents o f HLP will be responsibility o f separate FPs working through designated MA1 strategic regional research centers (SRC) in Central and Northern Region. The FPs will involve a team o f technical and organizational specialists working alongside Afghan counterparts. They will organize their work through the SRCs and in liaison with provincial MA1 offices. These teams will work with community authorities (Community Development Councils, Shuras, and farmers groups/cooperatives) to recruit and train farmers. AVA will be contracted as FP supported by a specialist FP to implement the animal health component. Similar specialist organizations will be contracted as FPs to work with GDLPD in planning, coordinating and supervisingthe livestock production subcomponents. The primary roles o fFPs will be to: Identify locations for project operations in the designated provinces and select farmers groups as the vehicle for implementingthe project Collaborate with local communities (CDCs, where they exist) in their project area to develop and transfer information on project activities to farming communities and to identify suitable beneficiaries for project activities Prepare detailed annual work programs for their assigned tasks, in collaboration with farmers groups and MA1provincial offices Ensure the recruitment, training, and supervision o f men and women technical field staff in their project area Organize training for farmers and livestock owners and provide technical assistance to communities during implementation Contract with selected farmers to develop fruit tree nurseries in accordance with precise technical and quality mandates Coordinate the supply and distribution o f crop and livestock production inputs to participating farmers Maintain records o f physical and financial activities and conduct monitoring and reporting The following outputs are expected from the FPs: The plannedtargets for horticulture and livestock components will be achieved A set o f manuals for implementing horticulture and livestock sub components will be developed A cadre o f competent technical operators will be created in the project areas. The human resources o f MA1staff assigned to the project will be strengthened-particularly women technical field staff, which will be critical for achieving project objectives 25 Performance-based Contracting The contract with the lead FP and technical FPs will be based on monitorable outputs and, where required, renewable annually. The MA1 will hold the lead FP accountable for timely planning, contracting o f FP support, coordinating the preparation o f annual work programs and budgets, ensuringtraining programs for counterpart personnel, and monitoring the impact o f agreed project activities. The FPs will follow implementation approaches that they consider the most suitable for helping individual farmers, groups o f farmers, and livestock owners achieve the planned technical and financial objectives. The H L P will hold the FPs accountable for performance against output targets. Linkages with Other World Bank-financed Proiects The design o f HLP draws on the technical and organizational experiences o f similar developments in Afghanistan. Foremost is the National Solidarity Program (NSP), through which some 10,000 village-based Community Development Councils (CDCs) have been created. CDCs act as the fulcrum for mobilizing communities and for planning and organizing rural infrastructure developments. They each have a bank account and the officials receive training. To date, about half the rural population of Afghanistan benefits from CDC development activities. NSP activities are planned to reach all rural areas inAfghanistan by 2008. Where feasible, HLP operations will be focused on locations where CDCs exist, thereby benefiting from their organization to inform, mobilize, and assist in training potential men and women beneficiaries. Similarly, to the extent possible, planning for horticulture activities under HLP will coincide with developments under the Emergency Irrigation Rehabilitation Project (EIRE') and the National Emergency Employment Program (NEEP), so as to benefit from rehabilitated irrigation schemes and rural roads. The Microfinance Investment Support Facility in Afghanistan (MISFA) i s expected to be an important option for providing farmers with small loans to provide their in-cash contribution to investments. For institution building, the project will draw on the experience o f PRR. Project assistance for pastoralist communities will depend on Institutional Development Fund(IDF) support for the Land Commission for exploring means for reconciling access rights and joint utilization o f communal pastures. Project support for green raisin production would link with entrepreneur developments being supported by IFC. The National Steering Committee (see below) represented by the anchor ministries o f these ongoing Bank programs (Ministry o f Agriculture, Animal Husbandry and Forestry, MAI; Ministry o f Rural Rehabilitation and Development (MRRD),Ministry of Energy and Water (MEW), and Ministryof Finance, MOF) will play a lead role to ensure strong coordination and synergy among the Bank projects. There i s no provision for farmer credit in HLP; however, where farmers request such assistance, CDCs and other community authorities will be encouraged to make direct links with MISFA and other micro credit agencies. Collaboration with Development Activities o f Other Aid Agencies The proposed HLP production activities draw on experience gained from similar technical developments in recent years by other multilateral and bilateral donors in Afghanistan, and on the Agriculture Master Plan, to which several donors have contributed. At the same time, the planned developments will mesh with continuing and new projects in the horticulture and livestock sectors agreed by other donors, especially EC, USAID, ADB and DfD. A Livestock Steering Committee has been effectively fostering collaboration between different development activities since 2004 26 under the chairmanship of GDLPD. The Committee is an informal group involving associated technical departments and representatives o f various projects and interested donors. Project Governance It is proposed that the Minister MAAF arrange for the inter-ministry Steering Committee that has been established to advise on the National Solidarity Program (NSP) to be extended to act in a similar capacity for overall program policy formulation and direction for the Horticulture and Livestock Project. The Steering Committee will approve annual work programs and budgets and assess monitoring and evaluation reports from project implementation, as well as help ensure swift resolution to problems encountered during implementation. The Steering Committee will include representatives from MAI, MRRD, MIWRE, and MOF, as well as donors and UN agencies. The Steering Committee will meet at least twice a year to: 0 Review and endorse project-related policy and contractual issues 0 Approve the Project Operational Manual 0 Approve annual work programs and budgets 0 Review the implications from project monitoring and impact analyses 0 Reconcile problems that mightarise during project implementation 0 Develop consensus among the concerned ministrieson plans and strategies requiredto maximize the development effectiveness o f all ongoing programs in the sector. 2. Budget and Cofinancing The project design emphasizes the priorities identified in the five-year Master Plan, where the horticulture sector alone i s estimated to require US$455 million o f investment funds (33 percent of the total US$1,384 million). These funds would be targeted to the seven most profitable fruit and nut tree crops that have the greatest immediate export potential. Following horticulture and wheat production, the Master Plan's third priority i s livestock, with a program investment o f US$101 million (7 percent o f the total). In recognizing the inherent difficulties in increasing livestock productivity, the Plan identifies the high potential for import substitution and export development. Total financing requirement (including c0ntingencies)for the three-year implementation o f HLP i s estimated at around US$49.9 million, with the following allocations: Horticulture development US$23.7 million Livestock developments US$20.2 million Capacity building (MAI) US$6.0 million The total includes an estimated requirement o f US$10 million for technical assistance personnel (facilitating partners) and short-term studies. This level o f expenditure i s justified for the following reasons: (i) i s the first comprehensive development to be implemented by MAI, HLP where transformation into a modem, demand-driven administration is still at a formative stage; (ii) buildingintheMinistry,bothatheadquartersandinthefield,isacentralpillarofthe capacity Agriculture Master Plan; and (iii) i s the swiftest and most efficient means o f developing a this modern ministry of agriculture. All technical assistance personnel would work with MA1 personnel to achieve these objectives. Detailed terms o f reference have been developed for each post and all technical assistance personnel will be recruited by MA1 under performance-based contracts. 27 Detailed summaries o f these costs are shown in Appendix 4. O f the total financing, the initial IDA grant will fundUS$20 million and the total cost estimate for the first project year isUS$13.1 million. It i s agreed that the Japanese Social Development Fund (JSDF) will provide US$10 million toward project costs and it i s proposed to request US$18.8 million from the IDA- administered Afghanistan Reconstruction Trust Fund (ARTF). The latter was created to finance key recurrent expenditures (salaries, capital expenditures, operations, and maintenance o f key government institutions) and for urgent investments and reconstruction activities planned in the country's economic recovery program. The ARTF can either finance free-standing projects or cofinance IDA or other donor-funded projects. Other interested aid agencies, notably DFID and CIDA, have expressed interest in supporting HLP either through bilateral arrangements or ARTF. The latter includes procedures to permit donors to express preferences for a priority program or project included in the government multi-year development budget, and for which the government has requestedARTF funding. There i s strong endorsement o f the project concept from other donors interested in supporting rural development in Afghanistan. For example, both the ADB and the EC are initiating or preparing proposals to support the horticulture sector. EC will also be providing support for veterinary services. It i s likely that USAID will continue to support livestock developments, under a new RAMP agreement in mid-2006. All o f these activities are at a formative stage and implementation o f H L P will be organized in close collaboration with the EC, USAID and ADB activities. It i s anticipated that the new productivity focus will attract additional funds for the project. 3. Procurement Arrangements Procurement Guidelines Procurement for H L P will be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRDLoans and IDA Credits" (dated May 2004); "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" (dated May 2004); and the provisions stipulated in the Development Grant Agreement. The Bank's Standard Bidding Documents, Requests for Proposals, and Forms o f Consultant Contract will be used. In case o f conflicticontradiction between the Bank's procurement procedures and any national rules and regulations, the Bank's procurement procedures will take precedence. The expenditure under different categories i s expected to be as follows: Goods: US$20.2 million Works: US$3.2 million Services US$26.5 million Total US$49.9 million Procurement Responsibility The IMST will be responsible for procurement under the project through MA1 Policy and Planning Department and with assistance from the Government's Central Procurement Consultant. The procurement procedures and procurement plan reflect the public procurement environment o f the country. 28 Procurement Methods For each contract to be financed by the proposed grant, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and timeframe are described in appendix 6 and the Procurement Plan (Appendix 6) The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. A General Procurement Notice will be published in UNDBIDgMarket indicating the major packages to be procured under the project. The ADB is proposing to invest in developments associated with actions proposed under HLP, focused on post-harvest horticulture activities and institution building. It i s agreed in principle that when the detailed proposals for the ADB developments are decided, joint procurement arrangements could be formulated. To simplify procurement procedures, the possibility for adopting similar procurement or cofinancing arrangements for HLP will be investigated with other interested aid agencies (EC, DFID, CIDA, and JICA). 4. Financial Management, Disbursementand Audit Arrangements A PFM performance rating system has been recently developed for Afghanistan by the Public Expenditure and Financial Accountability (PEFA) multi-agency partnership program, which includes the World Bank, IMF, EC, and other agencies. Afghanistan's ratings against the PFM performance indicators portray a public sector where financial resources are, by and large, being used for their intended purposes as authorized by a budget that i s processedwith transparency and has contributedto aggregate fiscal discipline. Financial management and audit functions for HLP will be undertaken through the agents contracted under the Public Administration Capacity Building project. This i s the primary instrument for continuing to strengthen the fiduciary measures put in place for ensuring transparency and accountability o f funds provided by the Bank and other donors. Under these contracts, two advisers-Financial Management and Audit-are responsible for working with the government and line ministries to carry out these core functions. The Financial Management Agent (FMA) i s responsible for helping the MOF maintain the accounts for all public expenditures, including IDA-financed projects and for building capacity within the government offices for these functions. Quarterly Financial Monitoring Reports will be prepared by M A Y S accounting unit. Consolidated project reports will be prepared, reviewed, and approved by the MOF, supported by the FMA. A Designated Account (DA), with an initial deposit of U S 1 0 million, will be opened at Da Afghanistan Bank (DAB, Central Bank) or in a local commercial bank in the name o f the project on terms and conditions satisfactory to IDA. The DA will be maintained by the MOF. Withdrawal applications for replenishment will be submitted monthly. Specialist financial management and procurement technical assistance will be contracted as part o f IMST to work with PPD personnel to strengthen existing capacity. Financialmanagement arrangements for HLP are detailed in appendix 7. FundsFlow Management o f funds for HLP will follow existing procedures. As with all public expenditure, all payments under the project will be routed through MOF. The FM Agent will assist the M O F in executing and recording project payments. Inkeeping with current practices for other projects in 29 Afghanistan, the DA will be operated by the Special Disbursement Unit (SDU) in the Treasury Department MOF. Requests for payments from DA funds will be made to the SDU by the relevant implementing entities. In addition to payments from DA funds, the implementing entities can also request the SDU to make direct payments to consultants or consulting firms, and special commitments for contracts covered by letters o f credit. Such requests will follow World Bank procedures. All withdrawal applications to IDA, including replenishment, reimbursement, and direct payment applications, will be prepared and submitted by MOF. Accounting and Reporting Financial management specialists5 (FMS) o f the Implementation Management Support Team o f the Policy and Planning Department will supervise preparation o f supporting documents for expenditures, payment orders (Form M16), approval, and submission o f the same to the Treasury Department MOF. The Department, in turn, will issue a check payable to the cash trustee by DABafter verification o f supporting documents and approvals on the form. The FMS will develop a FinancialManagement Manual outlining guidelines for project activities, and establish a project financial management system in accordance with standard Afghan government policies and procedures. This will include use o f the Chart o f Accounts developed by the FMA to record project expenditures. Project accounts will be consolidated centrally in MOF, through the SDU and supported by the FMA. Consolidated Project Financial Statements will be prepared for all sources and uses o fproject expenditures. DisbursementMethod Disbursements from the IDA grant will be transaction-based, with replenishment, reimbursement, direct payment, and payments under Special Commitments including full documentation or against statements o f expenditures, as appropriate. Retroactive Financing Provision has been made to reimburse the Government o f Afghanistan (GOA) for payments it makes for project expenditures, up to US$0.5 million, between April 5, 2006 and the time o f grant signing. Audit ofProiect Funds The Auditor General, supported by the Audit Agent, i s responsible for auditing the accounts o f all IDA-financed projects. Annual audited project financial statements will be submitted within six months o f the close o f GOA'S fiscal year. E. FINANCIAL AND ECONOMICJUSTIFICATION 1.ProjectBenefits Preliminary analyses have been made o f the likely project impact (Appendix 5). These are based on representative farm models for beneficiaries o f each subcomponent. At project maturity (PY 5 Before effectiveness MA1will nominatehecruit a civil servant or consultant to act as the counterpart for the FMSprovided by the lead Facilitating Partner (FP). Both counterpart and lead FP financial management specialists will be on the ImplementationManagement Support Team. 30 to 7), the incremental annual output from horticulture i s estimated to reach about 32,000 tons for both grapes and pomegranates, and 4,000 tons for almonds. Incremental milk production for sale/processing i s expected to reach 16,000 tons/year and incremental poultry production will reach to 100 million o f eggs and 1,754 tons o f meat at project maturity (PY5). Animal health activities under HLP would have a significant additional impact on increased production; however, no effort has beenmade to project these values. The financial analyses indicate that, at project maturity, income for participating farmers' will increase by between 6 and 140 percent over the without project situation. For horticulture, incremental income ranges between 6 and 13 percent for rehabilitated orchards, between 115 and 140 percent for new grape production, between 12 and 17 percent for new almond groves, and between 15 and 20 percent for pomegranates. Incremental income for poultry and dairy production would be 20 and 16 percent, respectively. The economic impact i s measured for the project as a whole and for individual components by subtracting project costs from the estimated benefits. This includes the cost o f grants, extension and other services and the capacity buildingand administration costs. The cost o f incentives and services for beneficiary farmers that fail to complete the proposed changes (assumed at 15 percent) are also taken into account. Most tradable input and product economic prices are assumed to be equivalent to their market prices (except for labor where a shadow price o f 0.7 has been applied to reflect the highunderemployment inrural Afghanistan). All prices are assumed to remain constant inreal terms throughout the life o f the project. On this basis, the economic rate o f return (ERR) on total project investments over 20 years i s estimated at 40.2 percent and, assuming a 12 percent discount rate for the expected costs and benefits, the net present value would reach US$104.7 million. Excluding the costs o f the capacity building component, the ERRS of the production components would be 32.7 percent for horticulture, 49.9 percent for dairy, and 81 percent for the poultry subcomponents. The investment in institution buildingwill have lasting impact by helping to develop both MAI's planning capacity and organize modem technical support systems for horticulture and livestock production. In addition, by supporting the creation o f HDCA, the project will help develop an effective means for promoting horticultural production and marketing for all stakeholders. The animal health component will help formalize the creation o f a sustainable independent national veterinary service. The project seems to be strong enough to support the adverse independent occurrence o f the major risks identified, including delays in implementation, cost escalation, and lower than expected impact (see appendix 5). As a result of the sensitivity analysis it was estimated that the expected ERR of the project i s 24 percent, and that the probability o f obtaining a higher ERR than 24 percent would be 0.60. 2. Project Risks The project design incorporates the lessons learned from ongoing IDA-supported projects in Afghanistan, particularly with regard to project implementation, procurement arrangements, and financial management arrangements. At the same time, the design o f the components reflects experiences from similar technical developments supported by other aid agencies. Nonetheless, there are risks because o f the uncertain socioeconomic and administrative situation in Afghanistan. 31 Mitigation Measures Drawing from experience with other projects, the implementation deteriorates inrural areas arrangements will rely on well-qualified FPs already working in Afghanistan. Ifa deteriorating security situation prevents planned merations. these mav be transferred to other districts inthe Drovince. Possible resistance by Project document and implementation plan prioritize actions to strengthen government to Facilitatinl MA1personnel. By directly linkingwith qualifiedpersonnel inMA1 + Partners technical departments and the provinces concerned, the FPs will help accelerate and institutionalize humanresource development. Political interference in tnstitutional design o f the HDCA and strong private sector participation in day-to-day operations o f the management o f the Council. Delays in effecting Continue to work incollaboration with PRR and with a coordinated donor reorganization o f group. MA1departments Weak capacity of HLP will be the first significant project inMAI. Project funds will MA1technical and financ provide for strengthening the MA1PlanningDepartment andhiring departments skilled personnel to form an Implementation Management Support Team. Possible confusion with Close collaboration with associated aid agencies throughout project other aid agencies having preparation: (i) ADB is proposingto invest inhorticulture, with a focus similar projects on post-harvest developments; and (ii) horticulture and livestock activities proposed under EC financing are complementary and close collaboration will prevent duplication. ADB is amenable tojoint procurement. Similarly, no confusion i s likely with livestock developments by USAID. Avian flu was diagnosed inAfghanistan inMarch2006. As poultry financed under HLP would be housed, risks o f contaminationby wild birds,and direct contact with humans would be minimal. The Bank, in collaborationwith FAO, i s now appraising a project for countering the effects o f avian flu. Actions for developingthe sanitary mandate under HLP would be directly relevant for this. Production components are designed to demonstrate approaches for developments affected by increasing productivity o f horticulture and livestock and are based on lack o f credit partial grants. Where necessary, CDCs or other community authorities will liaise with MISFA and other microfinance organizations to help accelerate uptake. Lack o f coordination The same Steering Committee coordinatingmost o f these IDA-financed between complementary projects will be playing an important role inapproving annual plans and program (NSP, NEEP, approving the operational manuals. MISFA, EIW) could prevent the HLP from realizing its potential The in-cash For new orchards, a sliding scale contribution or similar mechanism contributions of proportional to the area cultivated will guarantee the highest subsidies to beneficiaries to smaller farmers. Beneficiaries will contribute to the cost o f poultry investments could packages. Ifrequired, field FPs will mobilize microcredit facilities to exclude poor farmers assist beneficiaries, in collaborationwith CDCs or other community authorities. The government, with support from donor agencies, i s implementingan business thrives ina anti-narcotic strategy and alternative livelihood action plan. The strategy may include using priority subprograms such as NSP as part o f a package 32 Risk Mitigation Measures setting, and there are o f incentives to eradicate poppy. Experience inusingcommunity grounds for concern that development initiatives as incentives to wean farmers from poppy those who profit from cultivation demonstrate that coordinated efforts-combining attractive this business mighttry development programs and effective enforcement o f a ban on poppy to undermine the cultivation-an play a positive role inpromoting alternative livelihoods government's State for these farmers. buildingefforts The grants may be The project will work with CDCs (NSP), traditional shuras and farmers' either misused by groups/cooperatives to inform communities, plan horticulture production recipient farmers or activities, and design grant packages. Grants will only be inkindand each captured by the village farmer group will decide the form grant packages. Community elites and other consultative and participatory arrangements will be usedto disseminate influential elements extension and technology support, monitor the use and implementationo f grant packages. This will improve the transparency and accountability in the use o f grant funds and mitigate the risk o f misuse. Establishment o f tree The project team will closely monitor the temporary negative effects that crops may affect substitutingannual with tree crops may cause on the farmers' cash flow. income generation Ifnecessary, the tree establishment packagewill includeimproved capacity for smallest varieties seeds o f annual crops to increase output to compensate for the farmers duringthe first reduced amount o f land dedicated to annual crops. Inpoppy producing 3-5 years because o f the areas, special attention will be given to coordinate with other employment reduced amount o f land generating programs. dedicate to annual crops. Inpoppy producing areas this may also reduce the demand for temporary labor. Implementation inHigh-riskAreas The extent to which the project will be able to assist farmers throughout the country i s critically dependent on the security situation. Security remains problematic in some provinces because o f the limited extent o f government authority. Aid agencies can face threats from crime, inter- warlord rivalries, and opponents to the government (primarily from Taliban and the Hizb-e- Islami). The security situation in the country i s expected to ease in the coming years, but risks remain, particularly inthe South. Preliminary operations o f H L P have therefore been designed to avoid areas o f persistent risk. 3. Alternatives Considered Approach and Scale The project i s the first extensive effort since the 1970s to directly expand and modernize agricultural production in Afghanistan. Two alternatives were considered in preparing the project: (i)concentrating on increasing production o f field crops; and (ii)designing more ambitious subcomponents. The first option was rejected because the Emergency Irrigation Rehabilitation Project (EIRP) i s focused on increasing output o f staple crops. Moreover, the 33 horticulture and livestock subsectors offer the greatest scope for promoting economic development, raising levels o f rural incomes, stimulating exports, and countering poppy production, as stated in the Agriculture Master Plan. The second option was rejected because in the view o f the project team, an emergency project focusing on profitable approaches for small- scale operators will provide an effective demonstration and foster demand that can be addressed through an expanding program. This was deemed the best use o f limited grant funding. In addition, development on a larger scale would be possible only in the context o f viable rural credit operations. These do not exist. Use o f Credit Schemes Limited access to financial capital is a major constraint to investingin agriculture in Afghanistan. After careful analysis, the possibility o f establishing credit facilities was dropped in favor o f simple grants schemes. While establishing credit schemes might improve sustainability, the design o f such schemes would require a long period o f gradual institutional building and specialized expertise that i s beyond the scope o fthe project. A Component Addressing Pastoral Nomads During preparation, a component directed at pastoral nomads was considered. However, the complexity o f the social implications, the holistic and integrated approach that such intervention would warrant and the cross-institutional responsibilities that its implementation would entail suggested that a stand-alone operation should be considered for tackling this major challenge. ImplementationArrangements This is the first large-scale development project to be undertaken by MAI. Direct implementation o f the project by the Ministry staff was rejected on the evidence from NSP, where the positive experience with the Ministry of Rural Reconstruction and Development demonstrates the importance o f distinguishing the core function o f the Ministry from program delivery. Implementation will therefore be assigned to Facilitating Partners with temporary functions, including responsibility for building institutional capacity within MAL For the same reasons, the possibility o f establishing a Project Implementation Unit was discounted in favor of an Implementation Support Management Team as an integral part o f the MA1 structure, working alongside Ministry staff. 4. Project Sustainability The project design includes features that are critical for ensuring sustainability o f the investments. The project will support capacity building that will enable MA1to play an effective role inpolicy, planning, and regulatory functions o f the sector as well as providing necessary support to help farmers resolve technical problems and develop modern production systems. Project actions will be instrumental in establishing such a framework, as well as for demonstrating procedures for developing modern production systems that can be expanded into a program to address the priorities o f the Agriculture Master Plan and to attract funding from other aid agencies. As a sustainability measure, the basis for the organizing both horticulture and livestock operations will be orientedto private sector initiatives, including: 0 Supporting moves for transferring animal health services to private sector operations under a professional AVA 34 0 Supporting the creation o f HDCA, with the target o f becoming an independent body servingthe needs o f fee-paying members within 10years 0 Encouragingthe development o f perennial tree crop nurseries inthe private sector 0 Fostering voluntary farmers associations for producing and marketing horticulture and animal products. In addition, the project will use CDCs and traditional shuras through a consultative and participatory mechanism to plan, implement, and monitor project activities. The involvement o f community in the project and the sliding scale contribution mechanism will enhance the prospects o f sustainability o f the project investments. F. ENVIRONMENTALAND SOCIAL SAFEGUARDS 1.EnvironmentalandSocialImpactsandSafeguards The Environment and Social Safeguards Framework (appendix 8) will be followed through the project's arrangements for implementation, monitoring, and capacity building. In terms o f social impacts, the project falls in the B category o f the Framework's Guidelines for Land and Asset Acquisition, Entitlements, and Compensation. It has an environmental rating o f B. Environmental Impacts Project activities are not expected to have any significant negative environmental or social impacts. On the contrary, developments proposed for perennial tree crops are likely to have a positive impact by promoting nursery development that will lead to an increase in orchard areas. The promotion of perennial horticulture might increase the use o f chemical insecticides and fertilizers in the project areas and possibly trigger OP/BP 4.09. However, the strict IPMmeasure to be installed under the project, including hiring IPM specialists, developing crop-specific IPM plans, training farmers in the application o f IPM planning, and monitoring the I P M activities in project areas, will mitigate this risk. Risko f erosion innew orchard areas will be mitigatedby seeding alfalfa cover crop at the same time that fruit tree seedlings are planted. Land Acquisition No land acquisition i s anticipated under the project. In the current socio-political context in the rural areas, involuntary land acquisition based on the State's eminent domain i s unlikely for the kind of small-scale activities that will be undertaken under the project, for two reasons. If any minor areas o f land would be needed for a project (for example, for construction o f veterinary offices), such land could be obtained only through private voluntary donations, compensation paid by the community (that is, transactions between willing buyers and willing sellers)--or, more likely, from available government land. Private voluntary donations and community purchases would be documented as required by the Framework. For government land, documentation would be needed that the land i s free o f encroachments, squatters, or other constraints, and has been transferred to the project by the authorities. Ethnic Minority Groups The design for the project reflects a strategy that will ensure that ethnic minority groups are included as beneficiaries, and that their concerns are addressed in compliance with the requirements o f OD 4.20 on Indigenous Peoples. There are three key elements o f this strategy: (i) horticulture 35 and intensive livestock production activities will be open to all farmers in the project area; (ii) the pilot activities with pastoralists are specifically designed to demonstrate approaches and legislative changes that would benefit kuchi and sedentary communities living in the same areas; and (iii) independent monitoring by civil society (NGOs and the press) will provide another mechanism to identify cases where ethnic minority groups would have been bypassed or marginalized by project operations. Cultural Propertv Chance finds during implementation of subprojects involving civil works will be reported to the provincial or district governors, who then will inform the Archaeological Committee, Compliance with the safeguard provisions and the negative list will be ensured through an environmental, social, and mine risk screening procedure (checklists) requiredfor grants eligibility, and by internal input, process, and output monitoring, independent external monitoring by consultants, and by Bank supervision missions. Consultation and Disclosure The Environmental and Social Safeguards Framework will be disclosed by the government through inDari and Pashto, as well as Englishthrough apublication andthe government's Web site. It will also be made available at the World Bank's Infoshop. The following information on the project will be posted on the government's Web site: summaries o f quarterly HLP implementation progress reports, summaries o f annual project financial statements and audit reports, and summaries o f findings from monitoring and supervision teams (after a reasonable period allowed for internal review). 2. Land Mine Risk Management No project activities will be implementedwithout appropriate mine risk management, based on the procedures defined inthe Environmental and Social Safeguard Framework (appendix 8). 36 G. APPENDICES APPENDIX 1- ResultsFrameworkand Monitoring ISLAMIC REPUBLIC OF AFGHANISTAN EMERGENCY HORTICULTURE AND LIVESTOCK PROJECT TECHNICAL ANNEX 1. ResultsFramework ProjectDevelopment OutcomeIndicators Use of Outcome Information Objective Agricultural producers 20% increase inquantities o f InPY3, extend orchard improve their productivity and outputs from perennial tree developments to other stimulate marketable outputs crops, and higher quality, provinces in accordance with ' of perennial horticulture and resulting 30% improvement in nationalprogram. livestock in focus areas by producer prices. improving the incentives framework for private By PY3, 120 Government InPY1, sanitary mandate in investmentsand strengthening clinics transferred to private place for mitigating possible institutional capacity in sector operation; and disease Avian Flu epidemic and, in agriculture. control established through PY3, national animal and sanitary mandates and zoonotic disease control collaboration o f government campaigns operational. and private sector. Model dairy processing unit InPY3,prepare plans for established, involving 19,500 expanding dairy and poultry farmers and incremental production activities in line 40,0001tiday by PY3.Poultry with national development production expanded by program. 25,000 units with incremental 100,000 eggs and 1,500 tons meat annually - by PY3, IntermediateResults ResultsIndicators Use of Results Monitoring Horticulture Component Horticulture Component Horticulture Component Enhance productivity and marketable output from tree :rops. 2) Orchard Rehabilitation Best orchard management By PY2, collection o f superior PY1, analyze and rectify cause 9ractices in lead fruit fruit tree varieties complete o f any delay in developing ?reducing countries are and two germ plasm banks germ plasm banks.. ippraised and fruit crop established (Northern and xoduction program designed. Central Regions) & producing screened seedlings. 37 Rehabilitation o f targeted By PY 3, 12,000 ha Iftarget is fully met inPY2, 12,000 ha o f orchards. rehabilitated with I P M and plan expansion to other improved orchard provinces. Any shortfall to be management methods fully analyzed with intended adopted. beneficiaries. b) Fruit Tree Nurseries Selection o f superior By PY2,40 superior varieties Each year, any shortfall in indigenous and foreign with potential selected by planned selection and varieties with commercial research centers and provided multiplication to be analyzed potential (at least 40 varieties) to selected nurseries for and rectified. multiplication. Perennial tree crop nurseries By PY3, at least 5 million Iftarget is fully metinPY2, are established (at least 7 @ quality seedlings produced in plan expansion to other 10 ha) and capable o f private nurseries and provided provinces. Any shortfall to be producing targeted high to farmers. analyzed with contracted quality seedlings. producers. e) OrchardEstablishment System for establishing new By PY3,5,000 ha o fnewly Iftarget metinPY3, extend orchards is operating (5,000 established orchards fully information and training ha) realized. campaigns to new areas; if not, analyze reasons with intended beneficiaries. d) Green Raisin and Pomegranate Clusters Quality and productivity of By PY3, 110 improved drying Iftarget met inPY3, extend green raisin and pomegranate sheds for raisins are complete information and training production is improved. and 100 pomegranate campaigns to new areas; if producers are selling on export not, analyze reasons with market. intended beneficiaries. Livestock Component Livestock Component Livestock Component Enable livestock owners to increase their use of public and private good and services, raise nutritional standards and ensure the marketing o f more and safer livestock and livestock products. a) Improve veterinary Comprehensive animal health Analyze and rectify any delay legislation and strengthen and legislation presentedto inlegislating for modernizing coordinate public and private parliament; operation o f all veterinary services, in animal health services VFUs unified and coordinated consolidating publiciprivate nationwide. by AVA; government and veterinary services, or private sector collaborating for developing and authorizing national disease control sanitary mandates. through sanitary mandates. 38 b) Establishdairy processing By PY2, one commercial Prepare plans for replicating plant for small-scale processing unit successfully anit; or analyze reasons and producers. established; 250 collection rectify any shortfall. centers operating by PY3. By end PY3, 25,000 semi- c) Establish semi-intensive intensive poultry units being [nPY3, prepare plans for poultry units for women operated profitably by women replicating successful units;or farmers. farmers. analyze reasons and rectify any shortfall. CapacityBuilding Capacity Building Capacity Building Component Component Component Developing capacity in policy formulation, financial management and procurement, supervising, and monitoring and evaluating of developments. a) Strengthened capacity o f (i)ByPY2,4trainedAfghans (i)Annually monitor status o f Planning Department to enable operating financial financial management and MA1to ensure efficient management and procurement procurement for project implementation o f HLP and procedures efficiently. operations and aim to transfer other projects. to Finance and Administration Department inPY3. Rectify any delay by more intensive training. (ii)ByPY2,proceduresfor (ii)EachPY,review monitoring and evaluating effectiveness o f impact impact o f agriculture analysis and simplify and developments producing pro- revise procedures to counter active results. any shortfall. b) Sustainable Horticulture Development plan to be Development Council o f InPY3,50% o fHDCA constantly monitoredto rectify Afghanistan (HDCA) revenues provided through shortfall in establishing a established and providing services renderedto members viable business oriented services to fee-paying and other users. Council. members. 39 0 c '- . hl E E s s 3 s 5 5 10 hl 3 d g g 5 s W W 0 vr g g s m m m w N w c3 zx e -6 x & @ s 2 0 m m b d i- VI v) a M e 3x 8 3xe 3x x x 3 3 5 &5b & 5b g g g g 5 0 0 0 ~ 3 A 3 g 10 g5 g g 00 L3 s g g 0 L3 d d d n cd s h 0 Y VI APPENDIX 2 - HorticultureDevelopment Council Of Afghanistan (HDCA) ISLAMIC REPUBLIC OF AFGHANISTAN EMERGENCY HORTICULTUREAND LIVESTOCKPROJECT TECHNICAL ANNEX Background The Horticulture Development Council o f Afghanistan i s (to be) registered, before the Horticulture and Livestock Project (HLP) i s launched, as a not-for-profit organization under the Law of Social and Political Organizations o f Afghanistan. The aim o f the Council being to "help in strengthening the horticultural sector of Afghanistan through assisting in the development or appropriate legislation and national policies as well as encouraging and providing supportive services to private sector growers, traders and processors".6 Horticultural sectors include nuts, grapes, fruit, vegetables, flowers, and medicinal plants. Council members will include associations of farmers, traders and food processors that are registered as legal entities under the Laws o f Afghanistan, as well as representatives from o f the Ministry o f Agriculture, the Ministry o f Trade and Commerce and any other organizations that have a particular interest in further strengthening the horticultural sector in Afghanistan and that may later be accepted for membership by the unanimous agreement o f all elected Council Board members. No individual growers or traders are entitled to become members. Members will elect a Board to direct the activities o f the Council. This Board will link with the Horticultural Steering Group o f the Ministry o f Agriculture, Animal Health and Food (MAT) as well as Council grower, trader and processor member associations. Support will be provided through the H L P to help in establishing the Council as a sound institution promoting the horticulture sector by: - Researching and debating issues in relation to horticulture in Afghanistan and proposing practical policy actions for and alongside national and regional Government - Developing specific activities and services that will support horticultural growers, such as training, demonstrations, visits, advice, information and technology transfer - Developing specific activities and services that will support horticultural grower associations, traders, processors and other buyers, such as marketing research, training, advice, -- information, visits, trade missions and exhibitions Improving and developing linkages between horticultural growers, buyers and Government Encouraginginvestments and other finance inthe Afghan horticultural sector - Encouragingprograms for increasing national and export horticultural produce sales As the functions o f HDCA evolve, it is intended that members will pay membership fees and other income will be obtained from charges for specific specialist services. Within five years, income i s expected to be sufficient to cover the operating costs o f the Council and to enable it to become a credible and sustainable authority. Articles of Incorporation of the HDCA 44 Management Structure The Council will employ a Chief Executive Officer (CEO) with responsibility for liaising with the Board, managing day-to-day activities o f the Council and coordinating the agro-technical, marketing, training, information, technology and business development support activities to growers, traders and processors. Recruitment o f the CEO will be the responsibility o f a facilitating partner (FP) with proven experience in running similar organizations and projects, following an open tender procedure. Final recruitment will be dependant on the approval o f the Council Board. The CEO will also be responsible for supporting the implementationo f definedcomponents o f the HLP. The Board of the Council will also operate as a Steering Committee for the horticulture component o f H L P and the FP will work with Board members to ensure that they understand the functions and roles of H D C A inthis respect. The FP will consist o f a team o f specialists, including a Grower Support Coordinator, a Markets Support Coordinator, a Business Development Coordinator, a Sector Investments/Grants Coordinator. Including these personnel and administrative support staff, translators and drivers a total of 10 full-time Afghan staff would be employed for the entire project period and their costs would be covered through the HLP. The FP will ensure that all staff have clear job descriptions specifying responsibilities and expected output targets and that they are trained effectively to carry out their expected tasks. A Business Development Division (BDD) will be created within the HDCA to help inensuring the sustainability o f the Council's activities and to deal with membership issues, new activity planning and financing and to broaden or maintain its base o f activities, income and membership. The BDD will be responsible for managing and monitoring HLP funds in accordance with procedures to be established by IMPT. The BDD will also be responsible for developing a grant scheme to be supported by HLP and making links with credit organizations to help upgrade production, improve post-harvest and marketingtechnologies and stimulate further local initiatives inhorticulture. The Council will also develop a number o f specific grower, trader and horticultural processor and government support activities, including organizing meetings, training and study tours, providing links for technical advice and information, market research, trade missions and exhibitions. Some o f these activities will financed through HLP. A proposed structure for the Board, and an outline of the proposedactivity units i s shown inthe chart below. The FP will ensure that, within three years, the Board i s able to carry out its responsibilities effectively with minimal external technical support. Initially FP inputs will be intensive but, from PY2, responsibilities will be gradually transferred to the Board, President, or CEO. 45 HorticultureDevelopmentCouncilof Afghanistan Steering Group Farmer, Trader and Processor Associations Horticulture Policy and Government Issues I I I I I I Facilitating Partner(s) Chief ExecutiveOfficer I Technical Support and Training Grower Support Markets Support BusinessDevelopment Farmbusiness plans Markets research Sector investments, grants Training Y Market information Y and finance Technical advice r) Training Membership development Demonstrations Advice Project proposal and Study visits Trade missions preparation Information Exhibitions Donor/client linkages Linkages Linkages Reports and planning 46 Strengthening the Capacity of the Council The HLP will support capacity buildingo f the Boardto carry out its responsibilities. The Council objectives and responsibilities are defined in the articles o f association and bylaws. The FP will provide support to the Board to ensure that it i s managed in accordance with the articles and byelaws and, inparticular to: Help identify key policy issues for debate, decision and action and inpreparing meetings plans and agendas Ensure that a Board meetings schedule is prepared and that meetings are organised and conducted professionally, decisions recorded and agreed actions implemented Prepare an administrative system for the effective operation o f the Council Present the Council administration manual to all members o f the Council Board and ensuring that all members are able to understandand interpret its contents Help establish task forces/commodity groups (as required) to deal with specific products or defined policy issues (such as customs regulations, regional trade issues, export licences, and certification) Assist indeterminingbudgets and preparing plans for developing Council activities Help in ensuring that members are kept informed o f all Council decisions and actions and remain committed to the development of the Council at bothnational and local level The FP will need to provide support to the founding Board, President, and CEO in relation to organising and conducting the first Annual General Meeting and formal elections to the Council, which are due within six months after formation o f the Council (according to the Articles o f Incorporation). The FP will work with the Board to ensure that it understands its functions and roles, particularly by: 0 Presenting and explaining the Council's role and responsibilities as the HSC 0 Working closely with Board, Government and IDA personnel to ensure that proper administrative procedures are followed and documented StrengtheningGrower and Market Support Activities The HDCA also aims to help strengthen Afghan capacity to provide appropriate support services for horticultural growers, traders and processors. The FP will help the Council to: 0 Prepare a detailed database o f current service providers (individual and Institutional, public and private) and their capabilities for providing specific extension services to horticultural growers e Conduct detailed surveys o f key training needs and prepare detailed training plans for public and private extension service providers and for clearly defined technical issues, specific target groups and regions 0 Train, inform and advise both public and private extension service providers in appropriate production, post-harvest and marketing practices - including the preparation o f farm business, trader and processor plans and credit/grant applications - based on the results o f a detailed training needs survey e Strengthen linkages between the H D C A and vocational training providers in horticulture to improve the quality o f training and material provision on existing courses, or to introduce new courses that could eventually will lead to a certification program for horticultural growers, with a particular emphasis on younger growers and women 47 0 Plan, organize and coordinate demonstrations and study visits for horticultural growers, traders and processors, based on the assessment o f key training needs 0 Conduct marketing research and analyze specific markets, with particular attention given to export market opportunities and focused research into defined markets (such as India or the Middle East) and products (such as dried raisins) 0 Plan, organize and support trade missions and facilitate the attendance o f horticulture grower association representatives and market operators at regional and international food, agriculture and other relevant trade exhibitions, conferences, and workshops 0 Prepare, collect and disseminate relevant information on technologies, suppliers, markets and buyers relevant to horticulture 0 Develop appropriate dissemination messages for growers, traders, processors, and government on how to improve production, post harvest practices and marketing Encourage and strengthen linkages between horticultural input suppliers, traders, processors and other buyers and so further encourage import substitution and increased exports o f horticultural products 0 Encourage further certification, quality improvements, standardization and added value activity inhorticultural production It i s not intended that the Council, at least during its formative years, develop a full time extension staff; rather, the Council may issue service provider contracts for specifically defined activities to trained and qualified individuals and organizations. However where suitable or sufficient local technical skills do not presently exist, the H D C A will help to train specialists as necessary and with the financial support o f the HLP. Where specialist skills are already available, local service providers will be contracted to help to strengthen local capacities, but where there i s no current capacity, international specialists will be contracted through the FP to train and/or mentor local specialists/coordinators. Each year the FP, alongside the CEO, will present a work plan for each activity and based on widespread consultation with H D C A members and association agencies and review o f relevant data. This activity plan will present targets, numbers and outcomes. Each year the CEO will present the plan to the Board of the Council for final approval. Budgets will be available through the HLP to support each o f the activities defined above. However, the FP will also be expected to develop joint funding programs with other donors, private sector, and trade associations and particularly inrelation to demonstrations, trade missions, promotions and exhibitions. BusinessDevelopment To help ensure the sustainability o f the activities o f the Council, a Business Development Division will deal with membership recruitment issues, new activity planning, and financing to broaden or maintain its base of activities, income, and membership. The responsibilities o f this division will be to: 0 Help strengthen the membership base and maintain details o f current members, including key government representatives, farmers associations and traders/processor organizations 0 Develop a financial record keeping, budgeting and reporting system for the H D C A 0 Prepare information and promotional materials on the Council, its objectives and activities 0 Present the capability o f the HCDA to provide for organization and delivery o f training, technical advice and infomation to horticultural development programs operating across Afghanistan, including: the WB supported program for orchard development as well as 48 the IFC supportedproject inKandahar; the EUsupported Orchard Development Program (due to begin in March 2006); and the proposedRAMP 2 extension (due to begin in June 2006) 0 Develop and present new horticultural project proposals for presentation to donors, private sector and other support agencies and liaise closely with donors, private sector investors and government to encourage greater activity and investment into the sector 0 Assist the CEO, the Board and the FP in the preparation, monitoring and presentation o f plans, budgets, financial and other reports An important function o f the Council will be to encourage greater investment into the sector by private and public investors and donors. The Council will establish within the Business Development Division a capacity to manage World Bank grant funds that are to be provided as part of the orchard development program and disburse and monitor these funds according to procedures deigned as part o f the orchard development program. In addition, the Council will assist in developing new grant and credit programs to help in upgrading production, post-harvest and marketing technologies and in stimulating local initiatives. Specifically, the FP will be responsible for developing the capacity o f H D C A to: 1, Prepare an efficient administrative process and system for receiving and disbursingfunds as requiredfor the grant component o f the HLP orchard development program 2. Monitor disbursement o f funds and in accordance with guidelines to be provided by the Implementation Management Support Team andprepare progress reports as required 3 . Prepare proposals for MA1and donors for extending grant activities o f the longer-term Program, to enable investments into production, post-harvest and processing technologies and, if requested, prepare proposals, cost estimates and agreements for providing defined technical/training/advisory /information support. 4. Work closely with other credit and grant providers in order to encourage greater involvement and investment inthe sector INFORMATION TO BE INCLUDED INTHE BYLAWS Purpose and Powers The purpose o f the Council i s to help strengthen the horticultural sector o f Afghanistan through assisting in the development o f appropriate legislation and national policies as well as by encouraging and providing supportive services to private sector growers, traders, and processors. The powers it may exercise are set forth inthe articles o f association. Structure The Horticultural Development Council o f Afghanistan will consist o f farmer, trader, and food processor associations and Ministry representatives. The membership shall elect a Board o f Directors to direct the activities o f the Council and to ensure that it operates in accordance with these bylaws. The Board o f Directors will subsequently elect a Chairman and Vice Chairman to work with the Chief Executive Officer o f the Council and to ensure proper day to day management within the plans, programs and budgets approved by the Board. 49 Membership Membership o f the Council will consist o f farmers, traders and food processor associations that are registered as legal entities under the Laws o f Afghanistan, as well as representatives from o f the Ministry of Agriculture, the Ministry o f Trade and Commerce, and any other organizations that have an interest in strengthening the horticultural sector in Afghanistan and that may be later accepted for membership by the unanimous agreement o f all elected Council Board members. N o individual growers or traders will be entitledto become members. The rights, duties, and privileges o f each full member shall be equal to those o f any other member. No member shall acquire any interest that will entitle it to a greater voice, vote, authority or interest inthe Council than any other member. Conditions, contributions and dues to be paid by members or other forms o f associate membership may be fixed and establishedby the Council Board. The annual meeting o f the members of the Council shall be held eachyear, at a time and place to be set by the Board o f Directors. At least 10 days before such a meeting, the Chief Executive Officer shall sendnotice o f the time and place o f the annual meeting to each member. Boardof Directorsof HDCA Farmer, trader and processor representative members that wish to become members o f the Board will present themselves for election at the Annual General Meeting and be elected through vote. The number o f Board members o f the Council shall not be less than 10 and not more than 20. The exact number o f Board members will be proposed by the Board itself and approved by the membership at the annual meeting. A Board member is elected for a period o f one year and can stand for reelection each year. Government officials will be nominated by the relevant member Ministries or their nominated representatives and shall not exceed a maximum o f 4 members. Both grower and trader/processor representatives shall be included on the Board and with members from either party at no time exceeding half (50 percent) o f total Boardmembership. Immediately following the Annual General Meeting o f members, the Council o f the Board will meet to elect the President, Vice President and any other officials designated by the Board. The Board may hold regular and scheduled meetings as they shall determine but these shall not be fewer than four meetings each year. Notice o f meetings shall be given as determined by the Board. Special meetings o f the Board may be called at any time by the President o f the Board or in hidher absence by the Vice President or at the request of four Board members. Notice of special meetings o f the Board shall be sent at least five days prior to the day o f the meeting. More than 50 percent attendance at Board meetings will constitute a quorum. An additional vote of the majority o f Board members that are present at any meeting will be required to take actions and unless this requires votes as may be set out inthese bylaws. Board members shall not receive any compensation for their services. However legitimate expenses may be presented by any member for advance approval by the Board. A member rendering a specific and defined service to the Council may be compensated if agreed by all members o f the Board. 50 The Council Board i s able, at any time, to second nonvoting "associate" members, as required. Nonvoting members shall serve in an advisory capacity. They may be appointed only on the agreement o f agreement o f all Board members. The Chief Executive Officer may be invited to join Board meetings as a nonvoting member on the agreement o f all Board members. Board members may attend alongside their designated (nonvoting) adviser ifthey so wish. Mode and Manner of ConductingBusiness The Board will exercise the general powers o f the Council and manage and control its affairs. The Board may make rules, but these should not be inconsistent with the laws o f Afghanistan or with these bylaws. The Board shall provide direction to the Chief Executive Officer and other employees inthe management and affairs o f the Council. All conveyances, mortgages, contracts and other instruments necessary to be executed under the seal o f the Council shall be executed by the President or Vice President but only executed only following the authorization o f the Council Board. Roles and Responsibilitiesof Officers The President shall be the presiding officer at all meetings o f the Board. The Vice President shall discharge these duties inhidher absence. The President shall, under the direction and control o f the Board, exercise general supervision and management o f affairs, the business and property o f the Council and shall perform such duties that the Board shall prescribe, consistent with the bylaws and the laws o f Afghanistan and within the scope o fthe Articles o f Incorporation. It shall be the duty of the President to attend all meetings o f the Board and Annual General Meeting or special meetings o f members and to ensure that a full record o f meetings minutes, decisions and actions i s maintained. The foregoing duties may be delegated infull or inpart. The President will be custodian o f all records, books and papers o f the Council and shall present to the Board any report or statement of Council affairs that shall be required by the Board. Upon retiring from office heishe will turnover to their successor forthwith all records, books and papers o f the Council. The President shall be custodian o f the seal o f the Council and shall affix the same to all documents requiringit. It shall be the duty o fthe President to keep andreceive all monies of the Council and disburse the same by order as shall be authorized by the Board o f Directors and not otherwise. The President shall keep a correct account o f all monies received and paid out. Whenever requiredby the Board, the President shall make to them a full and true account o f the business o f the office and with all appropriate receipts. The President shall keep the funds and money o f the Council in such a depository as the Board shall direct. All funds o f the Council shall be deposited therein and shall only be disbursed on signature o f the President and or by such other person or persons as may be authorized by the Board o f Directors. 51 Inthe absence ofthe PresidenttheBoardofDirectors maydelegate allor partofhidherdutiesto the Vice President and during the performance o f such duties will have the powers o f the President. The Board o f Directors may appoint Committees from its number to whom it may delegate any o f the powers or authority o f the Board in the management o f the business and affairs o f the Council. Such Committees shall be subject to the general direction and control o f the Board and shall act only in intervals between the meetings o f the Board. The time, place and method o f holding meetings o f the said Committee and the number necessary to constitute a quorum shall be determined by the said Committee. Finance Each member shall pay for each year such charges as may be fixed by the Board o f Directors and approved by at least 60 percent o f members o f the Council at the Annual General Meeting. Not less than 20 days before the Annual General Meeting, the Board o f Directors shall adopt a budget and a basis for contribution by respective members and as may be necessary to meet the expenses o f the Council. Immediately following approval at the Annual General Meeting notice will be given to each member o f the Council of the budget and the proposed basis for contributions for the following year. Each member shall have the right to resign from the Council within 10 days after the Annual General Meeting. A resigning member shall not be liable for any sums for the following year but shall be liable to pay all contributions for the year during which he/she was a member. All sums shall be payable according to the date and process determined by the Board. The Board o f Directors may provide for the development o f a surplus fund.This fund will bekept separate fkom the general funds o f the Council and shall be drawn out only on the order o f the Board o f the Council for defined activities. All withdrawals against the fund shall be signed by the President or by such other person or persons as authorized by the Board. Any surplus inthe general funds that is in excess o f the sums necessary for operating expenses at the end o f any year shall by the order o f the Board o f the Council be put into the surplus fund. In case o f distribution o f surplus or dissolution o f the Council each member shall receive its proportionate share o f the distribution based upon the total sum they shall have paid in contributions thereto, but not to exceed the total amount o f contributions made. Inthe case o f any excess after repayments to members this shall be contributed to a not-for-profit agency whose resources may be used only for the promotion o f the horticultural sector. Terminationof Membership Membership may be terminated either by voluntary resignation or through expulsion by a Board decision and the following procedures set out inthese bylaws. Any member may withdraw from membership at any time and by submittingtheir resignation in writing. He/she shall not be liable for any contributions for the month after the month during which heishe may resign. Incase payments have beenmade inadvance, refunds shall be made for any period after the end o f the month duringwhich he/she resigns. If any member of the Council fails to pay contributions or dues at the time when they shall become payable or shall fail to comply with these bylaws or with any rule or regulation 52 established by the Board o f Directors or shall engage in activities or conduct itself in a manner detrimental to the objectives o f the Council then upon a vote (as described below) heishe shall be expelled from membership and all o f hidher interest in the Council and its property shall be forfeited and terminated and the said member shall not have any right to claim against the Council for any monies paid or to any o f the property or assets o f the Council Before any member i s expelled, written charges shall be presentedto the Board o f the Council and setting forth details o f how the member has failed to comply with the byelaws or regulations. A time and place shall be appointed by the Board for the hearingof such charges and notice, with a copy o f the charges submitted to the accused member. At a time fixed the said member will be permitted to appear in front o f the Board and file an answer to the charges made. A full and fair hearing shall be conducted. Two-thirds o f the members o f the Board of the Council shall be necessary to constitute a quorum at the hearing. No member shall be expelled except upon the vote o f two-thirds of the entire membership o f the Board. Votes may be cast in person or by proxy. Termination o f membership either by resignation or expulsion shall inno manner restrict or affect any legal remedy or right or action against the said member. Access to CouncilRecordsandInformation All members shallhave access at all reasonable times to the records andproceedings ofthe Board o f the Council. All information obtained or prepared by the Council in relation to production, post harvest technologies, marketing or any other area o f specific interest to members shall be available to all members through access at the main Council offices and through a system o f communications designed by the management of the Council. Nonmembers will be entitled only to access Council information or services where specifically approved by a Board decision or specifically contractedby Council clients. Amendment of Bylaws These bylaws may be amended, repealed, or others added at any meeting o f the Board o f the Council called for that purpose and will require a two-thirds agreement o f the Board o f the Council and the approval o f two-thirds o f the full membership o f the Council. Definitions Membership - All organizations that have paid fees into the Council each year and in line with the bylaws o f the Council Board of Directors - Elected each year by the full membership at the Annual General Meeting and charged with directing the activities o f the Council in line with the Articles o f Incorporation, bylaws and within the laws o f Afghanistan President - Elected by majority vote by the Board o f the Council to provide leadership to the Board and to carry out responsibility in line with these bylaws and to oversee management o f the Council 53 Vice-President - Electedby majority vote by the Board of the Council to provided support to the President and to deputies inhidher absence Chief Executive OfJicer - A paid employee o f the Council responsible for carrying out the day-to- day activities under the direction of the Council and also responsible for submitting plans and budgets for approvalof the Council 54 1 c f T r rT- 1 c r r c U m n e m 8 'C 9 e0 n-.-m C f 1 -bo E .C( > 0 > E .I vr W m e, 0 E &E 8 a 4B 9 .* 4-4 3 -r i ' i E 1 fc. 4 c w E r 'I 3 r s 0 vl W A T1 t : s g t U I!& I I l l C 8 - .C c a c C 2 *E eE .I .C 5 a - V t n _t_ t I t I- t APPENDIX 4 - Summary of ProjectCosts ISLAMIC REPUBLIC OF AFGHANISTAN EMERGENCYHORTICULTURE AND LIVESTOCK PROJECT TECHNICAL ANNEX Table 1 TotalProjectCosts by Component and Year - 06107 07108- 08/09 Total A Marketable Horticulture Output 1. Rehabilitation and Expansion of Perennial Tree Crop Cultivation 3,470 6,881 10,391 20,742 2. Horticulture Development Council of Afghanistan 619 575 493 1,687 3. Pilot Activities on Export Clusters 439 805 - 1,244 Sub-Total Marketable Horticulture Output 4,529 8,260 10,884 23,673 B Livestock Output and Productivity 1. Animal Husbandry Department 1,294 1,544 846 3,684 2. Marketing Initiatives (i) Dairy Initiative 649 4,190 (ii) Village Poultry Industry Initiative 1,795 1,630 (iii) Cashmere Fiber Support 120 210 Subtotal Marketing Initiatives 2,564 6,030 3. Animal Health Services 2,316 2,074 Sub-Total Livestock Output and Productivity 6,173 9,648 C Capacity Building 2,403 1,788 Total Project Costs 13305 19,695 69 APPENDIX 5 -Financialand EconomicAnalysis ISLAMIC REPUBLIC OF AFGHANISTAN EMERGENCY HORTICULTURE AND LIVESTOCK PROJECT TECHNICAL ANNEX Background The Government o f Afghanistan (GOA) proposed that the Horticulture and Livestock Project (HLP) would have an investment cost o f US49.9 million and would be implemented between 2006 and 2009. Expected project targets include: (i) creating 5,000 hectares o f new orchards; (ii) rehabilitating 12,000 hectares o f old orchards; (iii) helping dairy producers, organized in village associations and district and provincial level cooperatives, purchase concentrate feed and other inputs, and supply milk to a processing plant to be established under the project; and (iv) expanding and improving poultry production - coordinated through farmers groups - through modem, small-scale, semi-intensive enterprises, runespecially by women farmers. Small-scale farmers are expected to be the main beneficiaries o f the project's production components, and as women farmers play a dominant role in orchard management and small-scale intensive livestock production, they will benefit at least as much as men. While the proposed modem production innovations have not yet been adopted in Afghanistan, there i s extensive experience in neighboring countries such as Iran and Pakistan, under similar ago-ecological conditions as those prevailing inthe proposed project areas. Methodology The financial analysis aims to determine the current attractiveness for the target group to engage inthe proposed farm investments and/or improvements. The economic analysis is aimed at testing the viability o f the project from the country's economy as a whole, including the costs o f the required incentives. Using FARMOD software, cost and benefits were estimated under two scenarios: (i) without the HLP situation, which corresponds to the maintenance o f the existing smallholders production systems; and (ii)the with HLP situation, in which the project components would allow for the rehabilitation and expansion o f orchard activities, and the improvement o f the existing livestock activities (milk and poultry). FinancialAnalysis Detailed financial analyses were undertaken on representative beneficiaries' farms from the Central and Northern Regions. Crop budgets were considered on the basis o f the cultivation o f one hectare for the following field and fruit crops: wheat, barley, alfalfa, poppy, grapes, almond, and pomegranate. Budgets for milk and poultry production activities are regarded separately from crops, although these products are sometimes part o f comprehensive mixed farming systems in the project areas. There are no price distortions in the project commodities, and actual farm-gate prices were used in calculating production costs. In general, the availability o f labor is not a major constraint to agncultural development in the project area, except in limited peak demand periods duringharvesting o f poppy in certain areas. The availability o f family labor largely meets the field requirement. 71 Crop Budgets Due to time and security constraints, the appraisal mission could not prepare detailed crop budgets in all project areas. However, it could prepare crop budget analysis for existing production systems based on field observations in 2003 and 2004 under another World Bank project (National Solidarity Project). The proposed new fruit orchards were modeled on modem production practices which do not exist in Afghanistan, and data were therefore based on detailed interviews with farmers in eleven similar production areas in Iran. The horticulture component includes provision for implementing the extension work. Farm-gate prices are conservative and on average 10-15 percent lower than current prices inAfghanistan. FarmModels The most recent estimate o f land distribution i s the FA0 survey o f 5,000 farms over 30 provinces conducted in 2003. Farm size by agro-ecological zone for the project areas i s summarized in tables 1 and 2. Table 1: Farm Size Distributionin the Easter Mountains inthe Central Region ~ Total Rain- Distribution TOTAL 245,571 220,431 25,139 100 Below 0.50 H a 23,538 22,939 599 10 0.50-0.99 H a 26,954 25,158 1,796 11 Farm 1.00-1.99 H a 54,141 52,195 1,945 24 size in 2.00-4.99 H a 84,174 79,834 4,340 36 hectares 5.00-9.99 H a 28,582 28,233 349 13 10.0-19.9 H a 2,494 1,995 499 1 20.0-49.9 H a 22,346 6,734 15,612 3 50+ H a 3,343 3,343 0 2 Table 2: Farm Size Distribution in the Turkistan Plain inthe North Region Below 0.50 H a 1,384 1,384 0 0 0.50-0.99 H a 1,983 1,846 138 0 1.00-1.99 H a 9,058 8,049 1,009 2 2.00-4.99 H a 55,610 43,114 12,495 8 5.00-9.99 H a 115,197 80,806 34,391 16 10.0-19.9 H a 218,002 128,426 89,576 25 20.0-49.9 H a 224,134 140,244 83,890 27 164,410 109,156 55,254 21 72 Two basic farm models have been developed for each o f the two first regions of intervention (Central and Northern) as representative o f typical target beneficiary farmers. Central Region Typical farmers would be introducing minor changes intheir production systems, including 1 or 2 jeribs (0.2 or 0.4 hectares) of new orchard, rehabilitating old trees, and developing new or intensifying their existing milk or poultry production activities. Farmers' land i s usually divided in intensively irrigated land that is cultivated every year, and intermittently irrigated land that is cultivated occasionally. The small farm model (Model A) i s based on 2 hectares cultivated intermittently every other year due to limited water availability, and 1 hectare cultivated every year. Inthis model farmers cultivate therefore an average of 2 hectares o f land every year. They include: 1.2 ha o f wheat, 0.4 ha o f grapes, 0.2 ha with alfalfa and 0.2 with other crops. The larger farm model (Model B) represents families cultivating an average 5 hectares, out o f which: 3 hectares are on a three-year rotation due to limited water availability, while 2 hectares are intensively cultivated every year. Hence, every year these farmers would cultivate a total o f 3 hectares o f land, including: 2.2 hectare with wheat and 0.6 hectares with alfalfa, vegetables, beans, corn and other minor crops. These farmers typically have 0.2 ha o f grapes and, inthe with- project scenario, will either incorporate 0.4 ha o f new vineyard (intercropped with alfalfa) and reduce wheat cultivation, or improve their dairy or poultry production activities through the project's livestock component. Northern Region The small farm model (Model C) for the Northern Region represents a household with an average 5.8 hectares o f land, o f which: 4.8 hectares are on a five year rotation (due to limited water availability) and 1 hectare i s intensively cultivated every year. Every year, these farmers would cultivate 1.8 hectares o f land, including: 1 hectare o f wheat, 0.2 hectares o f barley, 0.2 hectares o f poppy and 0.2 hectares with alfalfa, vegetables and other minor crops. Through the horticulture component participating farmers would incorporate 0.2 hectares o f new almond trees (intercropped with alfalfa) and reduce wheat and some poppy cultivation once almond orchards start producing. As in the Central Region model adopting the livestock component, beneficiaries would only improve the milk or poultry production. The larger farm model (Model D) represents families who farm an average o f 10 hectares o f land, o f which 8 hectares are on a five year rotation system (due to limited water availability) and 2 hectares are intensively cultivated every year. These farmers cultivate about 3.6 hectares annually, including: 2.2 hectares o f wheat, 0.4 hectares o f barley, 0.4 hectares o f poppy and 0.2 hectares o f alfalfa, vegetables and other minor crops. They also cultivate 0.2 hectares o f almond and, with the project, would incorporate 0.4 hectares of new almond orchards (intercropped with alfalfa) and reduce wheat and possibly some poppy cultivation once orchards start producing. Under this model livestock production would be restrictedto improving existing activities, The anticipated incrementalyields resulting from project activities havebeen phased over three to four cropping years. The anticipated yields and income per ha are summarized inthe Table 3. 73 Table 3. Yields and Income after Labor Costs Incomeafter labor Yields (MT/ha) costs (US$/ha) Present WithHLP Present With HLP CentralRegion New grapes orchards 25 (year 5) 5,069 Grapes orchard rehabilitation 8.5 9.35 902 1,313 Wheat 3.06 3.06 476 476 Alfalfa 20 30 669 1,020 Milk(Itslyear) 500 1,000 -10 30 Poultry (eggs & meta) 125 IO 5,225 I 86 -16 260 NorthernRegion New almond orchards 2.1 (year 7) 3,468 Old almond orchard rehabilitation 1.4 1.54 1,791 2,235 Wheat 2.14 2.14 312 3 12 Barley 2.15 2.15 274 274 Alfalfa 20 30 469 720 POPPY 35 35 3,974 3,974 Milk(Its I cow I year) 500 1,000 -10 30 Poultry (eggs I meta) 125 IO 5,225 186 -16 260 DairyProductionImprovements. Provision o f inputs, technical services, and milk collection in about 300 villages (50 collection centers) and for 20,000 farm families i s expected to lead to better nutrition, genetic upgrading, and improved hygiene and health for cattle. A typical family cow currently produces 800 liters per lactation and has a calving rate of 75 percent, equivalent to average milk production o f 500 ltlyear. The with-project situation would improve yields to 7001t per year in Year 2 and lOOOlt in Year 3 as a result o f improved feeding and hygiene. Increasing milk's yield to 1,500 literslyear in Year 10 i s possible as a result o f using cross-bred animals; however, this has not been assumed in the project benefits. The with-project situation i s also expected to produce a 10 percent increase innumbers of animals in Year 2 and 25 percent in Year 3 for farmers starting in PY1, and an increase o f participating farmers o f 10 percent inYear 2 and 30 percent inYear 3. Some 25 percent o f milk production i s assumed to be consumed on farm. With the dairy processing unit to be established under the project involving milk collection centers, district milk producers associations and provincial unions along the lines o f the successful Amul system in India, expected farm-gate prices for milk would increase from US$O.lO to US$0.26/lt (a 260 percent increase). The expected increased milkproduction as result o f the dairy sub-component .is shown intable 4 below: Price o f poppy varied from US$50 to US8350 per kilo. For the budget presentedinthis assessment, a price o f US$150 was used. By focusing on high value horticulture and livestock products as grapes and emphasizing small-scale farmers, the Horticulture and Livestock Project (HLP) will make a positive contribution to the Government's counter-narcotics strategy. 74 Table4. EstimatedAggregateResultsfromthe Dairy Improvements MilkProduction ProjectYear (Nocows andValue ofProduction) 1 2 3 No o f cows 15,000 18,250 24,375 Yearly productionper cow 600 700 800 Quantity milk collectedper year (MT) 6,750 9,581 14,625 Daily collection (liters) 18,500 26,250 40,000 Value paid to farmers ($'OOO) 20,250 28,743 43,875 Added value ($0.3/liter o fmilk) 8,493 23,625 PoultryProductionImprovements The project would distribute 120,000 six-to-eight week-old pullets (104,000 hens and 16,000 males, 15 birds per family unit) to 8,000 small farmers in each o f the three project implementation years. These units would be housed and managed more intensively than the traditional backyard poultry (typically 6 per family). Egg production would start at the sixth month and the cycle would continue for about 18 months, with output from the semi-intensive hens peaking at 180 eggs per heniyear. In addition, mortality would be reduced because o f project vaccinations, thus production from traditional birds would produce an additional 50 eggdyear. Slaughtering and replacement o f hems i s assumed at 24 months o f age (90 percent o f birds surviving), with culled birds being sold or consumed on farm. The expected incremental production o f the 24,000 families to be reached by this subcomponent would have an aggregate value o f more thanUS$5 million equivalent per year. On-farmFinancialResults The estimated incremental impact from HLP on individual farmers compares the detailed financial analysis o f the existing farm budgets and the expected values o f increased productivity obtained from project interventions. Considering the four basic farm models (A and B for the Central Region and C and D for the Northern Region), the estimates o f incremental farm income (before family labor) are based on farms that: (i)establish new orchards; or (ii)rehabilitate existing orchards; or (iii)improve dairy production; or (iv) provide 16 pullets for increasing poultry production (eggs and meat). Farm models take into account agricultural and possible off- farm income, on-farm consumption o f eggs and meat, on-farm use o f manure, fodder crops, and the hiringo f labor to meet seasonal peaks for family labor. Off-FarmProjectSupport Activities. Under the project support to the dairy development initiative, a dairy processing and feed mixing units, and about thirty milk collection centers with refrigeratedtanks to be managed by farmers' associations will allow for the processing and marketing o f dairy products, adding value and improving results to the activity. Farmers' FamilyIncome. Beneficiaries' income would increase at project maturity between 6 percent and 140 percent over the present situation. The extent o f increased income depends on the type and size o f farm, on the relative importance o f the improved activity on the production system, and on the crop/activity 75 type involved. New grape vines would generate between 115 percent and 140percent incremental family income, almonds groves between 12 percent and 17 percent; and pomegranates between 15 percent and 20 percent. Rehabilitationo f existing grape and almond old groves would produce increased household income o f 13 percent and 6 percent respectively. Incremental livestock production would be 16 percent to 24 percent in the case o f poultry and dairy production respectively. The proposed interventions should be attractive to the beneficiaries o f both project areas, as table 4 below indicates. Indeed, some farmers could obtain even higher results. For purposes of this analysis, calculations were considered independently for each project sub-component, as if farmers could only benefit from either rehabilitation o f old orchards, or installation o f new ones, or improvement o f dairy production, or o f poultry expansion. Inreality, some farmers could well incorporate two or more of the production systems supported by HLP, thus their results could be even higher. Table 5. Farmers'FamilyIncomeIncreasesper Project Subcomponent Farm Present With YOIncrease Size Situation Horticulture Dairy Poultry (ha) (inUS$ / household) ModelA (small) Central Region Model A.l New grapes (0.2 ha) 3 1,657 3,977 140 Model A.2 Rehabilitating grapes 3 2,216 2,509 13 Model A.3 Livestock -milk 3 1,506 1,750 16 Model A.4 Livestock -poulty 3 1,635 2,027 24 ModelB (medium) CentralRegion Model B.l New grapes (0.4 ha) 5 2,888 6,214 115 Model B.2 New pomegranates (.4) 5 2,688 4,015 49 Model C (small) NorthernRegion Model C.1New almonds (0.2 ha) 5.8 2,25 1 2,591 15 Model (2.2 Rehabilitating almonds 5.8 2,683 2,848 6 ModelD (medium) NorthernRegion Model D.l New almonds (0.4 ha) 10 4,240 5,082 20 Model D.2 New pomegranate (0.4) 10 4,240 4,721 11 However, given the level o f poverty in rural Afghanistan and the average size o f families (nine members), the expected increase in family income, while significant, would not be sufficient to pull farmers out of poverty. Only households represented by Models B, by increasing grapes orchards by about 0.4 hectares, would reach a family income of about US$2 per capita per day, the acceptedpoverty threshold. 76 EconomicAnalysis The aggregation o f farm budgets provide the basis for the estimation o f the economic benefits o f the HLP: this aggregation includes incremental physical quantities and economic values o f inputs used and production at the farm level for the about 40,000 beneficiaries o f the horticultural component and a similar amount o f the livestock component. The aggregate result shows whether the project would be desirable for the economy. Most tradable input and product economic prices were assumed to be equivalent to their market prices (a shadow price o f 0.7 was applied for labor costs given the high underemployment levels in rural Afghanistan). All prices are assumed to remain constant inreal terms throughout the life o f the project. Proiect Benefits Project benefits are estimated by aggregating on-farm net income increases. Table 5 below shows the implementation pace assumed for the evaluation. It shows farmers entering into the project extension coverage and adopting the proposed improvements, either planting or rehabilitating orchards (40,000 farmers), or improving milk or poultry production activities (37,400). These numbers are excluding about 15 percent of the beneficiaries that would fail in adopting the proposed modifications intheir production systems. Table 6. Implementationpace. With Project Number ofFarmsParticipating 1 2 3 ModelA (small) CentralRegion Model A.1New grapes (0.2 ha) - 383 1,063 Model A.2 Rehabilitating grapes 2,869 8,819 16,469 Model A.3 Livestock - milk 4,250 10,625 17,000 Model A.4 Livestock -poulty 6,800 13,600 20,400 ModelB (medium) CentralRegion Model B.1New grapes (0.4 ha) 383 1,063 Model B.2 New pomegranates (-4) -- 680 1,754 ModelC (small) NorthernRegion Model C.1 New almonds (0.2 ha) - 850 2,975 Model C.2 Rehabilitating almonds 1,700 5,950 11,900 ModelD(medium)NorthernRegion Model D.1New almonds (0.4 ha) - 850 2,975 Model D.2 New pomegranate (0.4) - 680 1,754 Totalfarms participating 15,619 42,820 77,353 Proiect Costs Total project costs were deducted from the expected flow o f benefits to get the final net flows for the project and each component, including all "incentive" costs, the extension and other services and the HLP capacity building and administration costs. The cost o f incentives and services for those farmers failing to adopt the proposed changes are also considered. Incremental Production Increased production from horticulture i s estimated to reach about 32,000MT o f grapes and similar amount of pomegranates, and 4,000 MT o f almonds at project maturity (PY5 to PY7). 77 These incremental supplies could be easily absorbed domestically, but it i s expected that the limited levels o f current exports to neighboring countries will be expanded. During project implementation, markets for these products would be analyzed and exports organized by the Horticulture Development Council of Afghanistan to be created under the HLP. Milkproduction is expected to grow from about 8,500 to 17,000 MT/year, out of which between 13,000 and 16,000 MT would be processed by the dairy plant financed by the project, and whose products would be marketed for internal consumption, thus reducing imports. Incremental poultry production would reach 107 million o f eggs and 1,754 MT o f meat at project maturity (PY5). These levels are also expected to be easily absorbed by domestic markets, thereby reducing imports. Animal health activities under HLP would have a significant additional impact on increased production; however, no effort has beenmade to project these values. EconomicRateof Return(ERR) ERR on the HLP investments over 20 years is estimated at 40.2 percent. Assuming a 12 percent discount rate for the expected costs and benefits, the Net Present Value (NPV) would reach to US$104.7 million. Considering the main components separately (excluding the capacity building component), the ERR would be 32.7 percent for horticulture, 81 percent for the dairy subcomponent, and 49.9 percent for the poultry subcomponent. Table 7. Project EconomicResults % US$ million Horticulture component 32.7 47.3 Dairy subcomponent 49.9 19.6 Poultry subcomponent 81.0 42.7 Implementation support team - 4.9 TotalHLP 40.2 104.7 Major Risks and SensitivityAnalysis. The most significant risks related to the project are: (i)delays because o f the poor institutional capacity on the implementing agency or political interference which could affect technical, procurement andor disbursements activities; (ii) escalation o f project and agricultural production costs; and (iii) lower than expected levels of farmer's adoption o f the new technologies, resulting inareducedproduction impact. These risks, individually or combined, can affect the ERR.Inthe case of the individual effects, the results and estimated probability o f occurrence are shown in table 7 below: 78 Table 8. Sensitivity Analysis Event ERR Probability YO (event) 1.Time incompleting project improvements 40.2 60% 25.8 40% 2. Project Costs ....3 years 5 years As price levels are today 40.2 65% Prices increase by 50% 21.8 35% 3. Farmers acceptance of new technologies and/or technologies performance .. Impact results as expected 40.2 70% Production improvements are attained only 7.8 30% 50% Expected Economic Rate of Return The project seems to be strong enough to support the adverse independent occurrence o f the mentioned risks. When combining the three uncertainty factors (implementation delays, cost escalation, and lower than expected impact) weighted by their probability o f occurrence, the effects are estimated in different situations, resulting in eight different probabilities and corresponding ERRS.UsingICRISK'' software, it was estimated that the expected ERR of the project i s 24oercent, and that the probability o f obtaining a higher ERR than 24 percent would be 0.60. loICRISK i s a predetermined spreadsheet for estimating the probability of an expected rate o f return of investment projects developed by the FA0 Investment Center, 1995. 79 APPENDIX 6 -ProcurementArrangements ISLAMIC REPUBLIC OF AFGHANISTAN EMERGENCY HORTICULTUREAND LIVESTOCKPROJECT TECHNICAL ANNEX A. General Procurement for the proposed project will be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated M a y 2004, and the provisions stipulated in the Development Grant Agreement. The Bank's Standard Bidding Documents, Requests for Proposals and Forms o f Consultant Contract will be used. Incase o f conflicticontradiction between the Bank's procurement procedures and any national rules and regulations, the Bank's procurement procedures will take precedence. The general descriptions o f various items under different expenditure category are described below. For each contract to be financed by the proposed grant, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank project team in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. A General Procurement Notice has been submitted for publishingin UNDPiDgMarket in April 2006, indicating the major packages to be procured under the project. Considering the nature o f the item, RCC posts shall be procuredthrough N C B procedure. ProcurementResponsibility:The Ministryo f Agriculture and Irrigation (MAI) will be responsible for procurement under the project. At present, the procurement capacity within the Ministry i s weak and therefore the procurement risk i s rated high. In order to mitigate the risk, An Implementation Management Support Team (IMST), composed o f qualified national and international staff, will be created under the project, with substantial support from a consulting firm. In view o f the number o f packages and the magnitude o f procurement, the IMST will include at least two capable International Procurement Specialists familiar with the procurement under World Bank financed projects, with adequate support staff. The recipient will also arrange to provide necessary orientation training and guidance on World Bank procurementprocedures to the staff o f IMST and the Ministry.The IMST will also receive necessary assistance and guidance from Afghanistan Reconstruction and Development Services Procurement Unit (ARDS), which i s the Central Procurement Consultant to the Government o f Afghanistan. Procurement of Goods: Goods procured under this project will include various types o f specialized equipment, dairy processing plant, posts and wires, tree seedlings, plants, fertilizers, vaccines, vehicles, furniture, office equipment such as computers and accessories, photocopiers, and fax machines. The procurement will be done using Bank's Standard Bidding Documents (SBD). The estimated cost o f such expenditure i s expected to be about US$20.1 million. The goods shall be procured by following the international competitive bidding(ICB), national competitive bidding (NCB), shopping, and Direct Contracting procedures. Procurement of Works: Works procured under this project will include rehabilitation o f several buildings, construction o f offices, training centers, dairy processingunit, and feed processing units,The procurementwill be done using the Bank's SBDs. The estimated cost o f such expenditure i s expected to be about US$3.2 million. The works shall be procured by following the ICB, NCB, Shopping and Direct Contracting procedures. 80 Selection of Consultants: There shall be several major technical assistance (TA) packages: (i)12 separate packages to provide TA in Project Management and Implementation, (ii) TA for cashmere fiber development, (iii) TA for satellite imagery and analysis, and (iv) TA intraining and development. Inaddition there will be around 20 assignments for individual consultants. The estimated cost of such consultancies i s expected to be about US$lO.O million for personnel and $5.1 million for training, Short lists o f consultants for services estimated to cost less than $50,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 of the Consultant Guidelines. For services exceeding US$200,000 or more Quality and Cost Based Selection (QCBS), Quality Based Selection (QBS) or Single Source Selection (SSS) shall be used as appropriate, For services estimated to cost less than US$200,000 QCBS, SBCQS, Least Cost Selection (LCS), Fixed Budget Selection (FBS), and SSS shall be used. There will be several long term large value contracts for individual consultants selected following Section V. The lead Facilitating Partner will be contracted through QBS procedures. Single Source Selection o f consultants, both individuals and firms, shall be allowed. However, before starting the process for SSS, where the estimated cost exceeds US$50,000, complete justification shall be furnished to the Bank for each individual case for prior approval. Selection o f training institutes, government research institutions, universities, specialized international organizations, and NGOs for carrying out capacity building programs, special studies, and research programs may be awarded following QBS, CQS or SSS methods with prior clearance o f the Bank. The estimated cost o f consultancy services i s expected to be about US$lO.O million. Others:There will be a staff development program for the staff engaged inthe Horticulture and Livestock sector duringthe project implementation. The training will be provided mainly on the job by availing the staff to work with Facilitating Partners contracted both to IMST and project field operations. Inaddition, staff will be provided training by periodic exposure to Internationalworkshops and technical visits abroad. B. Assessmentof the Agency's Capacity to ImdementProcurement: A preliminary assessment o f procurement capacity within the Ministry was made by the Appraisal Team through discussions with the concerned official in mid-January 2006 and it was found that the procurement capacity within the Ministry i s weak. As the MA1 personnel concerned are not conversant with World Bank procedures, the Ministry will be unable to handle the specialized nature o f large procurement under the project without assistance. Therefore, the following mitigation measures have been agreed: 0 Appointment o f Implementing Management Support Team (IMST) having competent procurement personnel 0 Assistance and guidance from A R D S 0 Arranging periodic training o f staff The overall procurement riskwith above measures i s considered Medium. C. ProcurementPlan The recipient has developed an Initial Procurement Plan for project implementation which provides the basis for the procurement methods. This plan i s available (attachment 1). The Procurement Plan was updated during Appraisal o f the Project, and it will be updated annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. Draft bidding documents, agreed NCB documents, and a draft procurement manuals have been prepared by the recipient and submitted to the Bank for review inApril 2006. 81 D. FrequencyofProcurementSupervision In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment o f the Implementing Agency suggests at least two supervision missions per year to visit the field to carry outpost review o f procurement actions. E. ProposedProcurementArrangements: The proposed packages to be procured, their estimated costs and proposed methods o f procurement have been given in the Procurement Plan. The thresholds for procurement methods and prior review are given inthe following Table: Table 1.Thresholdsfor ProcurementMethodsandPrior review - s1. Expenditure Contract-Value Procurement Contract subject to Prior No. - Category Threshold (US$) Method Review 1. Goods Contracts of value hternational All Contracts more than Zompetitive US$300,000 Bidding equivalent National Firsttwo contracts. Contracts o f Value Competitive more than Bidding us$100,000 equivalent and less than US$300,000 Shopping All contracts subject to post equivalent review. Contracts of value less than US$lOO,OOO Shopping All contracts equivalent. Contracts for specialized equipment, tree seedlings, fertilizers etc. o f value more Direct All contracts subject to post than US$50,000 Contracting review. Contracts of value less than US$ 5,000 equivalent 2. Works Contracts o f Value National First two contracts and all ~ more than US$ Competitive contracts more than US$ 50,000 equivalent Bidding 300,000 equivalent. Contracts of value Shopping All contracts subject to post US$50,000 review. equivalent or less - 82 - s1. Expenditure Contract-Value Procurement Contract subject to Prior No. - Category Threshold(US$) Method Review 3. Consulting (a) Firms Services Contracts more than Quality Based All contracts us$200,000 Selection (QBS), equivalent Single Source Selection (SSS) QBS, SBCQ, All contracts of SSS. Contracts between Fixed Budget In case of other methods of US$50,000 and US$ Selection (FBS), selection, T.O.R. and 200,000 equivalent Least cost shortlist to be prior Selection (LCS) reviewed. and SSS Contracts less than sss All contracts subject to post US$50,000 review. equivalent (b) Individual: As per Section V All contracts Contracts more than of the Consultants US$50,000 Guidelines equivalent sss T.0.Rto beprior reviewed Contracts less than US$50,000 equivalent 83 W O W Q Q W W 0 3 0 0 0 0 0 6 Y 3 c.' m B M M t- -t-6 6 Y m IE E 61 6 zl z W z 0 0 b B 0 .-a z .3 za 2a Ba 4 m v) 0 0 :- 0 0 0 0 En z b Q\ Q o\ -3 .r( e, m + s m c) h J v1 e, >I - . P c 3 7.r 9 e, t 4 a l a 2 m 2 iP 0 0 0- 10 x c h - 9 3 a 0 % 0 Z a" z 5 sv) .. _. - r. r. 0 0 0 0 br. r.b r. 3 3 t- c 0 0 cc 0 D a, 9e, @ 4 4 c m e u a L z __ 2 C 0 C 0 C 5 - 8m m % * E J I c-. 9 0 0 3 3 3 5 5 f? - - h i 23 3 _. 4-4 u? $ z 0 m Z z0 $ t-\ D U Q Q 0 3 0 e C 0 c* M 01 Y m 23 8 e Y m -2 8 a r9 0 3 z m W C m Z 8 W C m W C m 0 3 C 0 0 0 3 8 8 C 0 0 C 0* C 8 10 10 0 m F J C 3 7 2 d 00 00 $ $ $ in in in - 0 0 b b r- $ Q) C 5 - h h h 5 M 0 APPENDIX 7 -FinancialManagement and DisbursementArrangements ISLAMIC REPUBLIC OF AFGHANISTAN EMERGENCY HORTICULTUREAND LIVESTOCKPROJECT TECHNICAL ANNEX Status of FinancialManagementinAfghanistan The World Bank has gained substantial experience and understanding o f the financial management environment inAfghanistan through the large number o f projects under implementation over the past four years. The primary instrument to enhance the established fiduciary measures and ensure increased transparency and accountability for the funding provided by the Bank and other donors i s the Public Administration Capacity Buildingproject (PACB). A Public FinancialManagement (PFM) performance rating system using28 high-level indicators that was developed by the Public Expenditure and Financial Accountability (PEFA) multi-agency partnership program was applied in Afghanistan in June 2005. PEFA i s comprised o f the World Bank, IMF, EC, and several other international agencies. The system i s structured around six core dimensions o f PFM performance: i)budget credibility, ii)comprehensiveness and transparency, iii) policy-based budgeting, iv) predictability and control in budget execution, v) accounting, recording, and reporting, and vi) external scrutiny and audit. Afghanistan's ratings against the PFM indicators generally portray a public sector where financial resources are, by and large, being used for their intended purposes. This has been accomplished with very high levels o f support from international firms; this assistance will continue to be needed over the medium term if these ratings are to be maintained. There i s also much room for improvement across the PFMareas. In spite o f undeniable gains made in reconstruction since the end o f 2001, the challenges facing Afghanistan remain immense; not least because o f the tenuous security situation and continued prevalence o f a large illegal and illicit economy. The policy framework benchmarks have not yet been fully costed so various priorities are fundedthrough the annual budgeting process. The rising costs of the security sector constitute the major constraint on attainment o f fiscal sustainability. With regard to executive oversight, the national assembly will play an increasingly active role. All in all, the new national strategy has created highexpectations o f the executive which could prove to be quite difficult to meet. The public sector, in spite o f considerable efforts to reform its core functions, remains extremely weak outside o f Kabul. The lack o f qualified staff in the civil service and the absence o f qualified counterparts in the government after 30 years or war and conflicts i s a binding constraint. Delays in reforming the pay structure and grading o f civil servants have severely crippled the public administration o f the country. Domestic revenues lag behind expenditures by a factor o f ten to one. Large-scale corruption could emerge to undermine the government's efforts to enhance aid flows through national accounts. Capacities to track expenditures and monitor expenditure outcomes have improved, but they need rapid and substantial strengthening if progress toward the attainment o f national development targets i s to be monitored. Currently, 75% o f external revenues bypass government appropriation systems. To help support critical centralized public sector administration functions, the World Bank i s financing a Financial Management Advisor to assist the Ministry o f Finance, an Audit Advisor to assist the Control and Audit Office, and a Procurement Advisor to assist in Procurement-related activities. Also an Internal Audit function i s being developed within the Ministry o f Finance with World Bank financing. USAID and earlier the Indian Aid Assistance Program are also financing a team o f consultants and advisors to assist the D a Afghanistan Bank in local as well as foreign 90 currency operations. The activities carried out under the existing Public Administration projects have helped the Government to ensure that appropriate fiduciary standards are maintained for public expenditures, including those supported by the Bank and the donor community. Progress has been slower than expected in shifting from operations support provided by the three Advisors to capacity development and knowledge transfer to the civil servants. Given that, i s expected that the Advisors will continue to be required for the medium term. Challenges still remain in attaining the agreed upon fiduciary standards and also to further enhance them. And to make matters more complex, the regulatory environment in Afghanistan has advanced significantly in the past three years. Unfortunately, even mastery o f basic skills in the early environment does not fully qualify the civil servants to work effectively inthe new emergingenvironment. The activities carried out under the Public Administration capacity Building Project (PACBP) have helped the government ensure that appropriate fiduciary standards are maintained, as well as continuing to ensure that standards are further enhanced and that capacity i s developed in government to maintain these standards. The systems that are currently in place for externally-aided projects will be used for all financial management matters o f the Horticulture and Livestock Project (HLP). Risk Assessment and Mitigation Table 1 identifies the key risks that the project may face and indicates how these risks are to be addressed. Table 1:FinancialManagement RiskinAfghanistan (Riskrating's=high risk;S=substantialrisk;M=modest risk;L-low risk) Risk RiskRating Risk Mitigation Measures InternalRisk ResidualRisk Country Inherent M Source - PFM study M Risk Project financial S Minimize use o f special account, M management risk maximize direct payments to consultants; all procurement through procurement advisor. Oversight by Special Disbursement Unit (SDU) with the support o f FMAto ensure timely reconciliation o f cash advances under the project. Field-based components still retain some FMrisk Perceived corruption H Government commitment, S internal controls, new internal audit, and external scrutiny will help reduce corruption Overall inherent risk S S ControlRisk 1.Weak H Will be supported by a highly S implementing Entity aualified lead Facilitating Partner 91 Risk RiskRating Risk Mitigation Measures to be responsible for the IMSTto lead activities undertaken by other ImplementationPartners for M&Eand financialmanagement. Counterpart local staff within PPD to be assigned responsibilities for financial management. Pending this arrangement, an international FM consultant working with MAX will undertake financial management activities. 2. Funds flow M Follows flow establishedin M previous projects 3. Budgeting S Head o f DevelopmentBudget M will be responsible for coordinating the PPD function for HLP with the support o fFMS- IMST _ _ _ _ ~ 4. Accounting S Will follow international S policies and standards with support from procedures FMA. Project accounting procedures will be detailed inthe s FMManual to be approvedby the Bank 5. Lack o f internal H Newly-formed internal audit hl audit department will review project internal control systems using a risk-based approach 6. External audit S Will be audited by CAO with support from Audit Advisor 7. Reporting and S Strengthening the SDU i s a monitoring priority under the new FMA contract, to provide information that will comply with agreed format o f financial reuorts. Overall control risk S Detection risk L AccountingiRecordingioversight by SDU -MOF o f all advancesiM-16 supported by Financial Management Advisor. S engths and Weaknesses of the Financial Management Operations Strengths. The main strength i s the government's commitment to accountability and transparency in its operations, which provides assurance to the Bank and other donors that the measures in place to 92 ensure appropriate utilization o f funds will not be circumvented. The government support for PACB strengthens the financial management function in Treasury operations, the public procurement function, the internal audit function inthe public sector and the external audit functions o f the Auditor General. Weaknesses. The main weakness in this project - in common with projects in other ministries - is the inability to attract suitably qualified and experienced counterpart staff. This project is the first management responsibility o f a foreign grant for MAI, and the Policy and Planning Department staff have no experience in dealing effectively with donor agencies. To address this weakness, MA1staff involved at multiple levels, within and outside Policy and Planning Department, will be involved in financial management o f the project working alongside the FP. ImplementingEntity The MA1 will be responsible for implementing HLP and has recently initiated reforms o f its administrative and financial functions. The Head o f Development Budget will work closely with the Financial Management Specialist (FMS) o f the lead FP to carry out day-to-day financial management operations o f the project, preparation o f M-16 forms (payment orders), and overall contract and project management. Staffing To ensure comprehensive management o f HLP finances, the lead Facilitating Partner o f IMST will hire a Financial Management Specialist to perform key project functions and to help develop capabilities o f the MA1 Administrative Department, including training staff at the national and provincial levels. Pending this recruitment, an international financial management consultant working with USAID-RAMP for MA1has been assigned to provide support for financial management o f HLP. This FMS of the Facilitating Partner and the local counterpart FMS will both be members o f the IMST. Other Facilitating Partners at the regional level will also have financial management staff as core team members. Over the course o f the project as needed, additional FM staff will be engaged and trained. Budgeting Because limited capacity exists within MA1to manage the external budget, the FMS will be chartered to strengthen the financial management capacity o f MAI. Additionally, other FPs at the regional level will have financial management staff as core team members. The FMS will be responsible for ensuring that project expenditures expended in a fiscal year are captured in the Governmental Development budget o f that fiscal year. The MA1must get an approval from the presidential office and the parliament to be attached to D1 forms at the time o f requesting yearly allotments for contracts under development project to avoid delays when payments are processed. FundsFlow The standard mechanism o f flow o f funds in Afghanistan will be followed in this project. Project funds will be deposited in the Designated Account (DA) to be opened and maintained at the Da Afghanistan Bank (DaB) or in a local commercial bank, if approved. The DA, in keeping with current practices for other projects in Afghanistan, will be operated by the Special Disbursement Unit (SDU) in the Treasury Department o f MoF. Requests for payments out o f the DA will be made to the SDU by the implementing entity when needed. 93 In addition to payments out of DA funds, the implementing entities could also request the SDU to make direct payments to consultants or consulting firms, and special commitments for contracts covered by letters o f credit will follow the World Bank procedures. All project payments are expected to be made to either international firms or local firms that have bank accounts in DaB, a local commercial bank, or an overseas bank. All payments will be made either through bank transfers into the account o f such firms or by check. T o provide in-kind grants under the horticultural component, IMST will enter into contracts with private nurseries to provide a package o f fertilizers, plants, and other supplies directly to farmers. To acquire the package from nurseries, farmers will use vouchers along with their own contributions. The vouchers will be allocated to specific farmers based on each community's decision (through Community Development Councils whenever possible). The exact implementation and control mechanisms o f the grant schemes will be established by the Facilitating Partner in each instance to meet the sub-project's development and control objectives. As control mechanisms, these procedures will be fully documented and cash transfers will not take place throughFPs inprovinces. Retroactive financing of up to U S 0 . 5 million i s envisaged for the goods and services related to start- up activities between April 5, 2006 and the time o f grant signing. The retroactive finance can be claimed only after the grant becomes effective. Accounting Policies and Procedures The SDU will maintain a proper accounting system o f all expenditures incurred along with all the supporting documents to enable IDA to verify these expenditures. The Financial Management Specialist and the government counterparts will: i)supervise preparation o f supporting documents for expenditures, ii)prepare payment orders (Form M16), iii)obtain approval for M-16s by the Minister or Deputy Minister depending on the payment amount, and iv) submit them to the Treasury Department in M o F for verification and payment. The FM Advisor in the MoF/SDU will use the government's computerizedaccounting system, AFMIS for reporting, financial statements, and audits. Currently, all records o f payments by MA1 are filed manually. However, the FMS will establish a simple tracking and reporting system in PPD. The FMS and the government counterpart will train existing MA1 staff to record project expenditures in spreadsheets to maintain accurate and timely financial data for the project. The FMS will develop a Financial Management Manual outlining guidelines for project financial management that i s subject to review and approval by the Bank. The manual will include roles and responsibilities o f all FM staff, documentation and approval procedures for funds transfers in each of the subprograms, project reporting requirements, and quality assurance measures to help ensure that adequate internal controls and procedures are in place and are being followed. The lead Facilitating Partner will establish project financial management inaccordance with standard Afghan government policies and procedures, including use o f the government Chart o f Accounts to record project expenditures. The use o f these procedures will enable adequate recording and reporting of project expenditures. Overall project accounts will be maintained centrally in SDU, which will be ultimately responsible for accounting for all expenditures and receipts in the Government's accounting system. Reconciliation of project expenditure with M o F records will be carried out by the Administration and Finance Department along with the Policy and Planning Department. This will be supported by the Financial Management Specialist who will ensure that monthly and yearly reconciliation for project expenditures are carried out by MA1with Treasury-MoF. Consolidated project accounts will be maintained centrally in M o F through the SDU in the Treasury. Consolidated project financial statements will be prepared for all sources and uses o fproject funds. 94 Internal Audit The project financial management systems will be subject to review by the newly-established Internal Audit Directorate o f the MoF, according to programs to be determined by the Director o f Internal Audit. A risk-based approach will be applied to the internal audit work program to better focus the efforts on areas o f maximum impact or perceived internal control weaknesses. ExternalAudit The accounts o f HLP will be audited by the Auditor General, with the support o f the Audit Advisor, following terms o f reference satisfactory to IDA. The audit o f the project accounts will include an assessment o f the: (a) adequacy o f the accounting and internal control systems; (b) ability to maintain adequate documentation for transactions; and (c) eligibility o f incurred expenditures for IDA financing. The audited annual project financial statements will be submitted to IDA within six months of the close o f fiscal year. All agencies involved in implementation and holding records o f expenditures would need to retain these records as per the IDA retentionpolicy. The following audit reports will be monitored inthe Audit Reports Compliance System (ARCS): ResponsibleAgency Audit ~ I Auditors i Date I MOF, supported by SOE, Project Accounts and Auditor General September 22 Special Disbursement Special Account Unit Reportingand Monitoring Interim unaudited Financial Reports will be used for project monitoring and supervision. Based on the FM arrangements o f this project, these reports will be prepared by the FMS with the help of local counterpart in PPD based on records kept on spreadsheets or database. Quarterly Financial Reports will be produced showing: (i)sources and uses of funds by disbursement category and project component; (ii)physical progress; and (iii)status o f procurement activities. The Civil Services Commission will forward the relevant details to the Development Budget and External Relation (DBER) unit for consolidation, if any, with a copy to IDA within 45 days o f the end of the quarter. The government and IDA have agreed on a pro forma format for all Bank projects. Annual project accounts will be consolidated centrally in M o F by the Treasury Department supported by FMA, and consolidated project financial statements will be prepared for all sources and uses o f project funds. Table 1 shows the allocation o f IDA proceeds and Table 2 the expected cofinancing. A single category for "goods, works, consultants's services, training and operating costs" i s defined in the financing agreement to facilitate preparation o f disbursement applications and record-keeping. Project funds will be disbursed over 42 months. The closing date of the project will be December 31, 2009, with a final disbursement deadline four months after the closing date (grace period). Duringthis additional 4-month period, project-related expenditures incurredprior to the closing date are eligible for disbursement. Disbursements procedures set out in the Bank's "Disbursement Handbook for World Bank Borrowers" (October 2005) are applicable to this project. 95 Table 1: IDA Financingby Category of Expenditure(US$ million) Amount of the Financing Expenditure Category Grant Allocations Percentage (1) Goods, works, consultants' services, training and 20.0 100 % Operating Costs" Total 20.0 - Table 2: EstimatedCofinancing(US$ million) IDA ARTF JSDF Beneficiaries Total 20.0 18.9 10.0 1.o 49.9 Summary Reports. Summary reports in the form o f Statements of Expenditure will be used for expenditures on contracts above US$200,000. Designated Account. A single designated account will be opened at DAB or in a local commercial bank in U S dollars for a maximum amount o f US$3 million, representing 3 months o f estimated expenditures. The SDU inMOF will manage payments from and new advancesireplenishmentsto this account. Cash advances may be taken from the Designated Account, and held and managed by MAI. This agency's controls, holding, accounting, and preparation o f Statement s o f Expenses (SOEs) have been satisfactorily assessed. New cash advances will only be made when all other prior cash advances have beenjustifiedthrough submission o f SOEs to the SDU. The designated account will be replenished on a quarterly basis. DirectPayments. Third-party payments (direct) will be permitted for amounts exceeding 25 percent of the advance inthe Designated Account. All such payments require supporting documentation. Preparation of Withdrawal Applications. The SDU will review withdrawal applications for quality and conformity to Treasury procedures, and then obtain signature. Selected MAVIMST finance staff will be registered as users o f the World Bank Web-based Client Connection system, and take an active hand in managing the flow o f disbursements. Action Plan Action ResponsibleAgent TargetDate Nominateh-ecruit a civil servant from MA1or MAVIARCSC Before effectiveness. consultant to act as the local counterpart for the assigned FMS. The counterpart FMS will also be on the IMST. Operating Costs means the Project-related incremental expenses incurred on account o f Project implementation support and management including the rental of office space; the operation, maintenance, rental and insurance of vehicles; fuel; communications supplies and charges; advertisements; books and periodicals; office administration and maintenance costs; bank transaction charges; utility charges; domestic travel and per diem but excluding salaries o f officials and staff of the Recipient's civil service. 96 Action ResponsibleAgent TargetDate Develop an FMManual FMS-IMSTIMAI Before disbursements . FinancialManagement Covenants Audited financial statements will be submitted within six months from the end o f each fiscal year. The audit report will cover the project financial statements, the project special account, . and SOEs inaccordance with terms o f reference to be agreed with the Bank. Financial monitoring reports will be submitted on a quarterly basis 9 Local counterpart FMS inMA1will be designated for IMSTmembership. SupervisionPlan During project implementation, the Bank will supervise the project's financial management arrangements. The team will: (i) review the project's quarterly financial monitoring reports as well as the project's annual audited financial statements and auditor's management letter; (ii) review the project's financial management and disbursement arrangements (including a review o f a sample of SOEs and movements on the Designated Account) to ensure compliance with the Bank`s minimum requirements, and iii)monitor compliance with the FMManual and legal covenants, Conclusion The FM arrangements, including the systems, processes, procedures, internal controls, and staffing are adequate to support this project - subject to implementation of the items listed inthe action plan, 97 APPENDIX 8 -Environmentand Social SafeguardsFramework ISLAMIC REPUBLIC OF AFGHANISTAN EMERGENCY HORTICULTURE AND LIVESTOCKPROJECT TECHNICAL ANNEX A. Background Afghanistan i s a rugged, land-locked, mountainous country (more than half o f its area o f nearly 65 million ha i s 2000m above sea level) with an estimated population o f around 25 million. Afghanistan i s among the poorest countries in the world and agriculture i s central to the Afghan economy with the sector contributing an estimated 53 percent to the GDP and providing employment for 67 percent o f the labor force. Nearly 80 percent o f the Afghan population lives in rural areas which also harbor the highest incidence o f 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 o f resource poor rural people. B. Purpose of the Environmentaland Social SafeguardsFramework(ESSF) It is acknowledged that currently social and environmental management in Afghanistan is facing critical capacity constraints. Keeping in view the existing environmental management capacity, as well as the flexibility required as not all investments are known at the time o f project appraisal, a framework approach i s adopted. The ESSF has been developed specifically for the proposed operations to ensure due diligence, to avoid causing harm or exacerbating social tensions, and to ensure consistent treatment o f social and environmental issues by the Government o f Afghanistan, addressing the following issues. Consistent with existing national legislation, the objective o f the Framework i s to help ensure that activities under the project will: 0 Protect human health; 0 Prevent or compensate any loss o f livelihood; 0 Prevent environmental degradation as a result o f either individual subprojects or their cumulative effects; 0 Minimize impacts on cultural property; 0 Enhance positive environmental and social outcomes; and 0 Ensure compliance with World Bank Safeguards policies. C. GeneralPrinciples Recognizing the emergency nature o f the proposed operation, and the related need for providing assistance, the Environmental and Social Safeguards Framework (ESSF) provides general policies, guidelines, codes o f practice and procedures to be integrated into the implementation o f the proposed operation for providing assistance, while at the same time ensuring due diligence in managing potential environmental and social risks. This Framework i s based on the following principles: 0 The proposed operation will comprise several sub-projects, the detailed designs o f which may not be known at appraisal. To ensure the effective application of the World Bank's safeguard 98 policies, the Framework provides guidance on the approach to be taken during implementation for the selection and design o f sub-projects, and the planning o f mitigation measures; 0 All proposed sub-projects will be screened to ensure that the environmental and social risks can be adequately addressed through the application o f standardized guidelines; 0 The proposed operation will finance feasibility or pre-feasibility studies for subsequent investments, which will include environmental and social impact assessments, as required by World Bank safeguard policies; 0 Project design and sub-project selection will aim to maintain regional balance, and equity between genders, and ethnic and religious groups, considering variations in population density, and security considerations. Employment opportunities within the projects will be available on an equal basis to all, on the basis o f professional competence, irrespective o f gender, or ethnic or religious group. In all projects which require consultations with local communities or beneficiaries, consultations will be conducted to elicit the views o f both the male and the female population; and 0 Consultation and disclosure requirements will be simplified to meet the special needs o f this project. Prior to approval by the World Bank Board, this Environmental and Social Safeguards Framework will be disclosed in Afghanistan inDari and Pashto, and inthe World Bank Infoshop. D. ProjectObjectives To stimulate perennial horticulture and livestock marketable output in focus areas by improving the incentives framework for private investments and strengthening institutional capacity in agriculture. Specific objectives include: 0 Improvements in the production capacity o f the horticultural and livestock sectors and improvement o f market channels for Afghan produces 0 Involvement o f women farmers who will particularly benefit from project activities through the major role that they play inhorticulture and livestockproduction 0 At a higher level, the project will have a positive impact on broad-based economic growth in focus rural areas by increasing the demand for rural non-farm sector output and from multiplierson farmers' expenditure 0 On the institution front, project support for the restructuring o f MA1will help to develop the basis for a strong policy, regulatory and support.organization for the agriculture sector 0 Overall, these benefits will contribute to the Bank's rural poverty reduction goals as well as providing a key element o f a counter narcotics strategy by fostering an alternative to poppies and, at the same time, stimulating rural incomes through expanding the rural non-farm sector which encompasses the bulk o f the poor. E.ProjectDescription Project comprises three components: 1) Increasing marketable perennial horticulture output (US$23.7 million)comprising works, goods, services and grants for: (i) rehabilitating existing orchards and establishing perennial tree crop cultivations through TA and grants; (ii) establishing a Horticulture 99 Development Council o f Afghanistan (HDCA) and developing MA1capacity for policy planning and supporting horticulture producers; and (iii) supporting pilot activities on the private sector green raisin and pomegranate export clusters; 2) Increasing Livestock Output and Productivity (US $20.2 million) comprising works, goods, services and grants for strengthening institutions inlivestock-related services in areas not already covered by other projects. This includes: supporting the reorganizing the General Directorate for Livestock Protection and Development (GDLPD); promoting livestock production and marketing initiatives in order to permit import substitution and stimulate exports o f animal products; studies with pastoral communities to improve rangelands management; and establishing a publiciprivate partnership in veterinary medicine to ensure a stronger regulatory government role and better profitability and sustainability o f privatized field veterinary services; 3) Capacity Building, Implementation and Monitoring & Evaluation Support (US$6.0 million) comprising goods, services and incremental operating costs for developing human and physical capacity in policy formulation, programming development, financial management and procurement, supervising and monitoring and evaluating impact. This will enable MA1 to ensure efficient implementationo f the HLP and other projects. F.PotentialImpact ofVarious Components Activities under the project should not entail significant and negative environmental and social impacts, provided they are designed and implementedwith due consideration o f environmental and social issues. The project falls in the B category for environmental and social issues. The present framework i s then adopted as a mean o f ensuring due diligence inmanaging potential environmental and social risks inthe different sub-projects. OP/BP 4.01 Environmental Assessment (triggered). The HLP aims at harnessing orchard and livestock productivity increase in selected priority areas with the goal o f creating new opportunity for farmers and building on-the-ground capacity for the delivery o f efficient services to the farmers. The interventions proposed essentially relate to the rehabilitation o f existing orchards and that have been partly neglected or destroyed by the war and encouraging livestock production by small-scale farmers. Hence, developments proposed for perennial tree crops are likely to have a positive impact through promoting nursery development that will lead to increased orchard areas. However small-scale impacts may arise inadvertently, in the unlikely event that the selection, planning, and implementation o f the sub-project interventions and demonstration sites are inadequate. Although, specific sub-project interventions are not known at this point o f time (but will be known when locations for sub-projects are selected), attention in the selection o f sub-projects should focus on the following potential threats: (1) use o f pesticide and insecticides that may cause harm to natural resources and human health; (2) unsustainable grazing causing land degradation (increased erosion); (3) possible effluents from the diary units; (4) limited construction activities. OP 4.09 Pest Management (triggered). The productivity increase component of the HLP depends partly on the ability to adequately control pest populations. This triggers OP4.09 on Pest Management and sound application o f an integrated pest management plan i s required. Pest management should be seen as a way o f improving the sustainability o f horticulture practices, by adopting appropriate cultural practices (such as the planting o f alfalfa cover crop and efficient on-farm water management), biological control (involving the use o f natural pest enemies) and, when necessary, chemical control (involving the use o fpesticides). OP 4.37 Safety of Dams (not triggered). The project does involve the construction o f new dams and does not depend upon existingdams. 100 OPBP 4.36 Forests (not triggered). The HLP focuses on the rehabilitation of existing orchards. Operations are expected to take place in privately owned land and are not expected to impact on the health and quality o f forests, or on their management, protection or utilizationregimes. OP 4.04 Natural Habitats (not triggered). No significant conversion or degradation o f natural habitats i s expected under the HLP. On the contrary, the project i s likely to produce positive impacts on landscapes. As a consequence o f more than twenty years o f conflict, agricultural land has been impacted directly by war operations and indirectly by environmentally damaging subsistence practices. The project i s expected to identify horticultural products that are appropriate to specific regions and rehabilitate the agricultural landscapes. OP 7.50 Projects on InternationalWaterways (not triggered). OP 7.50 does not apply to the project, given the localized nature of the project and the fact that the project essentially involves rehabilitation o f existingorchards and livestock farms. It does not involve works and activities that would exceed the original scheme, change its nature, or alter and expand its scope and extend to make it appear a new or different scheme. The team believes that given the nature o f the works envisaged under the proposed project: (a) the project will not adversely affect the quality or quantity o f water flows to the other riparians; and (b) it will not be adversely affected by other riparians' water use. OP 4.12 Involuntary Resettlement (not triggered). No involuntary resettlement or landacquisition is anticipated under the project. Inthe current socio-political context in the rural areas, involuntary land acquisition based on the state's eminent domain i s unlikely for the kind o f small-scale activities that will be undertaken under the project for two reasons. If any minor areas o f land would be needed for a project (e.g. construction o f veterinary clinics, field office and so forth), such land could only be obtained through either private voluntary donations, compensation paid by the community (i.e. transaction between willing buyer-willing seller), or, more likely, from available government land. Private voluntary donations and community purchases would be documented as required by the Framework, and for government land, documentation would be needed that the land i s free o f encroachments, squatters or other encumbrances, and has been transferred to the project by the authorities. OPBP 4.10 Indigenous Peoples (not triggered). There are no communities inAfghanistan which can be defined as `indigenous peoples'. But the design for the project defines a strategy, which will ensure that ethnicireligious minority groups are included as beneficiaries, and that their concerns are addressed in compliance with the requirements of OD 4.20 on Indigenous Peoples. The key elements of this strategy are: (i) horticulture and intensive livestock production activities will be open to all farmers in the project area; (ii)the pilot activities with pastoralists are specifically designedto demonstrate approaches and legislative changes that would benefit nomadic and sedentary communities living inthe same areas; and (iii) independent monitoring by civil society (NGOs and the press) will provide another mechanism to identify cases where ethnic minority groups would have been bypassed or marginalized by project operations. Exclusion based on gender is also addressed in the project design through specific efforts to reach women as producers both within horticulture and livestock component. OPN 11.03 Cultural Property (not triggered). The proposed operations are unlikely to pose a risk of damaging cultural property. Section K includes a list o f negative o f attributes, which would make a sub- project ineligible for support, including any activity that would significantly damage non-replicable cultural property. Chance finds during implementation o f sub-projects involving civil works will be reported to the provincial or district governors, who then will inform the Archaeological Committee as per the Chance FindProcedures listed in Section M. 101 The following table identifies potential impacts and solutions adopted in the design o f the project. Moreover, a list of sub-projects ineligible for support under the HLP i s provided in Section K. Table: Potential impact and solutionsadopted in the design of theHLP Project Component Potential impact iolution adopted in the design of theproject ir in this ESSF 1. Increasing Application o f fertilizers P M i s an integralpart o f the program. An marketable perennial ntemationally hired PMofficer will work horticulture output ilongside two regional IPMcoordinators in 'armers' training on PM. 1.1.Rehabilitationand Sub-projects that require pesticides that fall expansion of fruit crop nWHO classes IA,IBor I1are ineligible production programs 'see Section K) Forest or natural habitat The project will take place inexisting degradation igricultural land. Moreover, the tree planting :omponent will actually improve the natural .andscape o f the country. Land acquisition Yo land acquisition i s anticipated. Incase o f land acquisition the guidelines inSection L should be followed. Increase inwater use for No new irrigation scheme or expansion o f irrigation scheme i s foreseen (new orchards will be established inexisting agricultural land). Sub-projects requiringnew or expanded irrigation schemes are ineligible as per the list in Section K. 2. Increasing livestock Erosion due to Before livestock are purchased, grazing output and unsustainable grazing requirements for the new and projectedherd productivity should be estimated, and legal access to sufficient sustainable grazing ensured (code 2.2. Livestock o f practice for the mitigation o f potential production and environmental impacts in Section N). marketing initiatives Localized temporary Construction activities limited road impacts from rehabilitation should follow the relevant construction work for the elements o f the codes o f practice for the installation o f Veterinary mitigation o f potential environmental FieldUnits, cattle feed impacts, presentedin Section N. plant, provincial diary processing facilities, storage network and development o f basic tranmortation. Pollution from diary N o major pollution i s expected. development Pollution from semi- No major pollution i s expected. intensive village poultry industrydevelopment intake 102 G.Safeguards Screening The selection, design, contracting, monitoring and evaluation o f subprojects will be consistent with the following guidelines: 0 A negative list o f characteristics that would make a proposed subproject ineligible for support (Section K) 0 Guidelines for land and asset acquisition, entitlements and compensation (Section L) 0 Procedures for the protection o f cultural property, including the chance discovery o f archaeological artifacts, and unrecorded graveyards and burial sites (Section M). 0 Relevant elements o f the codes of practice for the mitigation of potential environmental impacts (Section N). 0 The requirement that confirmation i s received through the Regional Mine Action center that areas to be accessed duringproject activities have been demined (Section 0) H.Responsibilitiesfor Safeguard ScreeningandMitigation Sound design will if not eliminate, at least diminish to the extent possible, most o f the potential adverse impacts of project activities. The overall responsibility o f project implementation rests with the Ministry o f Agriculture and Animal Husbandry and Food (MAI). The MA1will act through an Implementation and Management Support Team (IMST) which will be headed by a Manager who will be responsible fro the minister MA1for overall Project Implementation. An independent Monitoring and Evaluation unit with, inter alia, environmental and social specialists' inputs have been proposed within the MAI. One of the M&E specialists under HLP will also be assigned as Safeguards Focal Officer and will be responsible for overseeing the implementation o f the Environmental and Social Safeguards Framework. Safeguard monitoring capacity will be gradually transferred to relevant MA1 staff to ensure continuity in safeguard application after project completion. Duringthe operation stage, the M&E Unit will carry out the monitoring o f the operations also. It will confirm (from anecdotal evidence and, if required, laboratory testing) that the water quality in the project area i s not adversely impacted due to agrochemicals, soil conditions are conducive for growth o f crops normally grown in the region, and pathogens and vectors are under control. In case o f incidence o f water related or water-transmitted disease, it will co-ordinate with the local health department to ensure that the situation be brought under control in the shortest possible time. Mitigation measures acceptable to the Bank are expected to be included inthe Operational Manual, I.CapacityBuilding As part o f the social and environmental capacity buildingthat will be provided for implementation o f IDA-financed operations inAfghanistan, the Safeguards Focal Officer and relevant staff o f MA1and implementing agencies/Consultants will receive training in the application o f the Safeguard Framework. It i s proposed to prepare specific materials, hold a workshop, and arrange site visits to other countries in the region on similar projects in progress to provide hands-on training to the Ministry and implementing agency staff. Specialist training modules may be considered after an acceptable level o f base knowledge has been established. Duringsupervision o f the project, the World Bank will assess the implementation o f the Framework, and if required, will recommend additional strengthening. 103 J. Consultation and Disclosure This Environmental and Social Safeguards Framework was developed on the basis o f an overall Framework for World Bank-funded reconstruction operations which was prepared in consultation with the principal NGOs and development partners participating in reconstruction activities in Afghanistan. Prior to approval o f the project by the World Bank Board, it will be disclosed by the Government of Afghanistan in both Dari and Pashto, as well as English, and it will also be made available at the World Bank's Infoshop. It i s worth noting that Government o f Afghanistan intends to make all project documentation publicly available through the Afghan Information Management System (AIMS). K.NegativeListof Sub-project Attributes Sub-projects with any o f the attributes listed below will be ineligible for support under the proposed Emergency Rebuilding o f capacity and productivity inHorticulture and Livestock Project. Attributes of IneligibleSubprojects GENERAL CHARACTERISTICS Involves the significant conversion or degradation of critical natural habitats. Including, but not limited to, any activity within: 0 Ab-i-Estada Waterfowl Sanctuary; 0 Ajar Valley (Proposed) Wildlife Reserve; 0 Dashte-Nawar Waterfowl Sanctuary; 0 Pamir-Buzurg (Proposed) Wildlife Sanctuary; 0 Bande Amir National Park; 0 Kole Hashmat Khan(Proposed) Waterfowl Sanctuary. Will significantly damage non-replicable cultural property, including but not limited to any activities that affect the following sites: 0 monuments o f Herat (including the Friday Mosque, ceramic tile workshop, Musallah complex, Fifth Minaret, Gawhar Shah mausoleum, mausoleum o f Ali Sher Navaii, and the Shah Zadehah mausoleum complex); 0 monuments o f Bamiyan Valley (including Fuladi, Kakrak, Shar-I Ghulghular and Shahr-i Zuhak); 0 archaeological site o f Ai Khanum; 0 site and monuments o f Ghazni; 0 minaret o f Jam; 0 mosque o f Haji PiyadaMu Gunbad, Balkhprovince; 0 stupa and monastery o f Guldarra; 0 site and monuments o f Lashkar-i Bazar, Bost; 0 archaeological site o f Surkh Kotal. Requires pesticides that fall inWHO classes IA, IB, or 11. Requires involuntary acquisition of land, or the resettlement or compensation o f more than 200 people. Affects waters inriparian neighbors. r Roads New roads. Widening of primary road. Irrigation New irrigation scheme or expansion o f scheme requiring increased water intake. 104 Attributes of Ineligible Subprojects Newtubewell for irrigation. Income GeneratingActivities Activities involvingthe use ofunsustainablyharvestedtimber or fuelwood. Activities involving the use of hazardous substances. L.Guidelinesfor LandandAssetAcquisition,EntitlementsandCompensation I. Objectives Land acquisition and involuntary resettlement i s not anticipated under this proposed emergency project, No land or asset acquisition may take place outside o f these guidelines. A format for Land Acquisition Assessment i s attached as Section L(i). These guidelines provide principles and instructions to compensate affected persons to ensure that all such persons negatively affected, regardless o f their land tenurekenancy status, will be assisted to improve, or at least to restore, their living standards, income earning or production capacity to pre- project levels. 11. Eligibility Project Affected People (PAPs) are identified as persons whose livelihood i s directly or indirectly affected by the project. PAPs deemed eligible for compensation are: 1. those that have formal legal rights to land, water resources or structureshuildings, including recognized customary and traditional rights; 2. those who do not have such formal legal rights but have a claim to usufi-uct right rooted in customary law; and 3. those whose claim to land and water resources or building/structures do not fall within (1) and (2) above, are eligible to assistance to restore their livelihood Acquisitionof ProductiveAssets and Compensation PAPs are eligible for replacement costs for lost assets as described below: 1. Voluntary contributions. In accordance with traditional practices, individuals may elect to voluntarily contribute land or assets and/or relocate temporarily or permanently from their land without compensation. 2. Contributions against compensation. A contributor/asset loser considered "affected" will be eligible for compensation fi-om the local community or alternatively from the Government. A PAP shall lodge hidher claim for compensation to the local community representativesishura head and it shall be verified by the facilitating agency. The claim shall be lodged within 2 weeks o f completion o f the consultations with the concerned community, and before project implementation begins. Voluntary contribution, or contribution against compensation, should be documented. The documentation should specify that the land i s free o f any squatters, encroachers or other claims. A format i s attached in Section L(i), which includes a Schedule to be followed to assess any compensation claimed and the agreement reached. 105 111. CompensationPrinciples The project implementing agencies shall ensure that any of the following means of compensation are provided ina timely manner to affected persons: 1, Project affected persons losing access to a portion of their land or other productive assets with the remaining assets being economically viable are entitled to compensation at replacement cost for that portion o f land or assets lost to them. Compensation for the lost assets will be according to following principles: a. replacement land with an equally productive plot, cash or other equivalent productive assets; b. materials and assistance to fully replace solid structures that will be demolished; C. replacement o f damaged or lost crops and trees, at market value; d. other acceptable in-kindcompensation; and e. incaseofcash compensation, the deliveryofcompensation shouldbemade inpublic, i.e. at the community meeting. 2. Project affected persons losing access to a portion of their land or other economic assets rendering the remainder economically non-viable, will have the options o f compensation for the entire asset by provision o f alternative land, cash or equivalent productive asset, according to the principles in (1) a-d above. IV. ConsultationProcess The implementing agencies will ensure that all occupants of land and owners o f assets located in a proposed sub-project area are consulted. There will be gender-separate community meetings for each affected village to inform the local population about their rights to compensation and options available in accordance with these Guidelines. The Minutes o f the community meetings shall reflect the discussions held, agreements reached, and include details o f the agreement, based on the format provided in Section L(ii). The implementing agency shall provide a copy o f the Minutes to affected persons and confirm in discussions with each o f them their requests and preferences for compensation, agreements reached, and any eventual complaint. Copies will be recorded in the posted project documentation and be available for inspection duringsupervision. Complaints and Grievances All complaints should first be negotiated to reach an agreement at the local community/village level. Ifthisfails, complaintsandgrievancesabouttheseGuidelines,implementationoftheagreements recorded in the Community Meeting hinutes or any alleged irregularity in carrying out the project can also be addressed by the affected persons or their representative at the municipal or district level. Ifthis also fails, the complaint maybe submittedto the relevantimplementingagency for a decision. Verification The Community Meeting Minutes, including agreements o f compensation and evidence of compensation having been made shall be provided to the Municipalityidistrict, to the supervising engineers, who will maintain a record hereof, and to auditors and socio-economic monitors when they undertake reviews and post-project assessment. This process shall be specified in all relevant project documents, including details o f the relevant authority for complaints at municipal/district or implementing agency level. 106 L(i).LandAcquisition Assessment Data Sheet (To be used to record information on all land to be acquired) 1. Quantities o f landstructuresiotherassets required: 1. Date to be acquired: 2. Sketch o f project landplot, identifying: Location and Category of Current uses Users Multiple Methodof area of each land (private/ claimants/users acquisition** individual communal/ Yes/No piece of government landhtructure etc) and involved: Owner(s)* (a) (b) (c) * Provide documentary proof, where available. ** DonatiodAcquisition -against CompensationiPurchase. This should be determined following consultations with PAPS Incase of Multiple customary claimantsiusers, specify for eachindividual piece oflandinvolved: 0 Number o f Customary claimants: 0 Number o f Squatters: 0 Number o f Encroacher: 0 Number of Owners: 0 Number o f Tenants: 0 Others (specify): Number: 4.. Transfer o f title: 0 Ensure these landsistructuresiother assets free o f claims or encumbrances. 0 Written proofmust be obtained (notarized or witnessed statements) o f the voluntary donation, or acceptance o f the prices paid, from those affected, together with proof o f title being vested inthe community, or guarantee o fpublic access,bythe title-holder. 5. Describe grievance mechanisms available: L(ii)Format to Document ContributionofAssets The following agreement has been made on............................ day o f............................. between.,............................................. resident o f ........................................... .(the Owner) and ...................................................... .(the Recipient). 1. That the Owner holds the transferable right o f ............................................ .jerib o f landstructureiasset in.................................................................................... 107 2. That the Owner testifies that the landstructure i s free o f squatters or encroachers and not subject to other claims. 3. That the Owner hereby grants to the Recipient this asset for the construction and development o f ................................ for the benefit o f the villagers and the public at large. (Either, in case of donation:) 4. That the Owner will not claim any compensation against the grant o fthis asset. (Or, in case of compensation:) 4. That the Owner will receive compensation against the grant of this asset as per the attached Schedule. 5, That the Recipient agrees to accept this grant o f asset for the purposes mentioned. 6. That the Recipient shall construct and develop the........................ and take all possible precautions to avoid damage to adjacent landstructureiother assets. 7. That both the parties agree that the.......................... .so constructeddeveloped shall be public premises. 8. That the provisions o f this agreement will come into force from the date o f signing of this deed. Signature of the Owner Signature o f the Recipient: Witnesses: 1. 2. (Signature, name and address) (Attestation by District/Province Judge, Date) Scheduleof Compensationof Asset Requisition Summaryof Unitsto be Compensated Agreed Compensation affectedunit/item a. Urbadagricultural land Cjerib): b.Houses/structuresto be demolished (unitdjerib): c. Type o f structure to be demolished (e.g. mud, 108 brick, etc.) Not Applicable. d. Trees or crops affected (unitsijerib): e. Water sources affected: Signature o f PAP signifying hidher agreement: Signatures o f local community representatives, shura head: Include record o f any complaints raised by affected persons: Map attached (showing affected areas and replacement areas): (Attestation by DistrictiProvince Judge, Date) M.Protectionof CulturalProperty Physical culture includes monuments, structures, works o f art, or sites o f "outstanding universal value" from the historical, aesthetic, scientific, ethnological, or anthropological point o f view, including unrecorded graveyards and burial sites. Within this broader definition, cultural property i s defined as sites and structures having archaeological, paleontological, historical, architectural, or religious significance, and natural sites with cultural values. The proposed emergency reconstruction operations are unlikely to pose a risk o f damaging cultural property, as the sub-projects will largely consist of small investments incommunity infrastructure and income generating activities, reconstruction o f existing structures, and minor urban public works. Further, the negative list o f attributes, which would make a subproject ineligible for support (Section K), includes any activity that would significantly damage non-replicable cultural property. Nevertheless, the following procedures for identification, protection from theft, and treatment o f chance finds shouldbe followed and included in standardbid documents. ChanceFindProcedures Chance find procedures are defined in the law on Maintenance of Historical and Cultural Monuments (Official Gazette, December 21, 1980), specifying the authorities and responsibilities of cultural heritage agencies if sites or materials are discovered in the course o f project implementation. This law establishes that all moveable and immovable historical and cultural artifacts are state property, and further: 1. The responsibility for preservation, maintenance and assessment o f historical and cultural monuments rests with the Archaeological Committee under the Ministry o f Information and Culture, which has representation at provincial level. 109 2. Whenever chance finds o f cultural or historical artifacts (moveable and immovable) are made the Archaeological Committee should be informed. Should the continuation o f work endanger the historical and cultural artifacts, the project work should be suspended until a solution i s found for the preservation o f these artifacts. 3 . Ifamoveableorimmovablehistoricalorculturalartifactisfoundinthecountrysideofa province, the provincial governor (wali) or district-in-charge (woluswal) should be informed within two weeks, and they should inform the Archaeological Committee. In case the immovable historical or cultural artifact i s found in a city, the provincial branch o f the Department o f Maintenance o f Historical Values o f the Ministry o f Information and Culture should be informed within two weeks (art. 18). If the find i s made within the center, the Archaeological Committee must be informed directly within one week (art. 25). 4. Failure to report a chance find within the stipulated time limit will be punished with a fine or imprisonment for a period o f one week or up to one month (art. 72). 5. Ifsomeone intentionallydamages ahistoricalor culturalartifact, the culprit shallpay compensation in accordance with the value o f the artifact plus be imprisoned for a period o f one month to ten years depending on the gravity o f the crime (art. 71). Incase of a chance find of moveableor immovablehistorical or cultural artifact, the implementing agency i s responsible for securing the artifact from theft, pilferage and damage until the responsibility has been taken over by the relevant authorities as specified above. These procedures must be referred to as standard provisions in construction contracts, when applicable. During project supervision, the Site Engineer shall monitor that the above regulations relating to the treatment o f any chance find encountered are observed. Relevant findings will be recorded in World Bank Project Supervision Reports (PSRs), and Implementation Completion Reports (ICRs) will assess the overall effectiveness o f the project's cultural resources mitigation, management, and capacity building activities, as appropriate. N.CodesofPracticefor PreventionandMitigation ofEnvironmental Impacts PotentialImpacts Prevention and Mitigation Measures 0 Plan disposal o f spoil material from cleaned canals to ensure it will not wash back into the system, and i s not deposited on fields without the owners' permission. 0 Re-grading and rehabilitation o f borrow areas or pits. Water-logging and salinization: 0 Incorporation o f adequate drainage to prevent water- lomine and salinization. Over-exploitation o f aquifers: 0 Analysis o f the sustainability o f groundwater yield, if increased abstraction i s proposed. Injury, death or loss of productive 0 See section on dams, below. resources caused by dam failure: 110 PotentialImpacts I Preventionand MitigationMeasures Housing and PublicBuildings e Rehabilitation of dwellings or public buildings. Deforestation caused by: e Replace timber beams with concrete where structurally e unsustainable use o f timber. possible. e wood-firing o f bricks. e Ensurefired bricks are not wood-fired. e Where technically and economically feasible, substitute fired bricks with alternatives, such as sun-dried mud bricks, compressed earth bricks, or rammed earth construction. Injuryand death from earthquake: e Apply low-cost aseismic structural designs. Disease caused by inadequate e Ensure designs include adequate sanitary latrines and provision of water and sanitation: access to safe water. Injury from machinery: e Ensure that safe practices for the use o f new machinery are understood and adopted. [ I Unsustainable grazing: Before livestock are purchased, grazing requirements for the new and projected herd should be estimated, and legal access to sufficient sustainable m-azing ensured. 0.Procedures for MineRiskManagementinWorldBank-FundedProjectsinAfghanistan Background: The following procedures are designed to respond to the risks caused by the presence o f mines in Afghanistan, inthe context of: e Community rehabilitation / construction works to be identified and implemented by the communities themselves (for small projects of up to $100,000 each); e Small and medium-size works to be identifiedby local authorities and implementedby local contractors (for projects upto $5m each); e Works to be implemented directly by Government departments/agencies, without use o f contractors; e Large works to be implementedby contractors (for projects above $5m); General comment applying to all following procedures: All risk assessment and clearance tasks shall be implemented in coordination with the Mine Action Center for Afghanistan (MACA). These procedures may need to be amended inthe future depending on evolving circumstances. Procedurefor Community-ManagedWorks Applicability: This procedure applies to community rehabilitation / construction works to be identified and implemented by the communities themselves (for small projects o f up to $100,000 each). 111 Overall approach: The communities should be responsible for making sure that the projects they propose are not in mine-contaminated areas, or have been cleared by M A C A (or a mine action organization accredited by MACA). Rationale: Communities are best placed to know about mined areas in their vicinity, and have a strong incentive to report them accurately as they will carry out the works themselves. Procedure: 1, Communities are required to submit a reply to a questionnaire regarding the suspected presence o f mines in the area where Bank-funded community-managed projects will be implemented. This questionnaire should be formally endorsed by the Mine Action Programfor Afghanistan (MAPA). It will be a mandatory attachment to the project submission by the communities and should be signed by community representatives and the external project facilitator. External project facilitators will receive training from MAPA. Financing agreements with the communities should make clear that communities are solely liable incase o f a mine-related accident. 2. If the community certifies that there i s no known mine contamination in the area, the ministry responsible for the selection o f projects should check with M A C A whether any different observation i s reportedon MACA's data base. 0 IfMACA's information is the same, the project can go ahead for selection. The community takes the full responsibility for the assessment, and external organizations cannot be made liable incase o f an accident. 0 IfMACA's informationis different, the project shouldnot go ahead for selection as long as MACA's and community's statements have not been reconciled. 3, Ifthe community suspects mine contamination inthe area, 0 If the community has included an assessment / clearance task in the project agreed to be implemented by M A C A (or by a mine action organization accredited by MACA), the project can go ahead for selection. 0 Ifthe community has not included an assessment / clearance task inthe project, the project should not go ahead for selection as long as this has not been corrected. Mine clearance tasks must be implemented by M A C A or by a mine action organization accredited by MACA. Communities will be penalized (subsequent funding by World-Bank funded projects shall be reduced or cancelled) if they elect to clear mines on their own. Procedure for Small and Medium-size Works Contracted Out Applicability: This procedure applies to small- and medium-size works to be identified by local authorities and implementedby local contractors (for projects up to $5m each). Overall approach: M A C A (or a mine action organization accredited by MACA) should provide detailed information on the mine-related risks (either based on previously done and updated general survey or on a new general survey) before projects are considered for selection. Only project sites 112 assessed to have a nil-to-low risk would be eligible for selection, unless they have been demined by MACA or by a mine action organization accreditedby MACA. Rationale: Neither local authorities nor local contractors have the capacity to assess the mine-related risks in a systematic way, while they may have incentives to underestimate them. Procedure: 1. Prior to puttingup a project for selection, a general survey should be carried out by MACA (or a mine action organization accredited by MACA) to assess mine-related risks in the area o f the project (this should include checking information available inthe MACA data base). 2. IfMACA provides information suggesting a nil-to-low risk in the proposed project area, the project can go ahead for selection. 3. The contract betweenthe responsible ministry and the contractor will include a clause stating that in case o f an accident, legal liability would be fully and solely borne by the contractor. 4. IfMACAassessesapotentiallyhighriskinthearea(whetherduetothepresenceofmines or uncertainty), 0 If the project includes an assessment / clearance task agreed to be implemented by MACA (or by a mine action organization accredited by MACA), it can go ahead for selection based on agreed funding modalities (clearance may be funded either under a contract with a Bank-funded project or under existing donor agreements with the mine action organization); 0 Ifthe project does not include an assessment/ clearance task, it shouldnot go ahead for selection as long as this has not been corrected. Procedure for Works to be implemented directly by Government DepartmentdAgencies, without use o f contractors Applicability: This procedure applies to works to be implemented directly by Government departmentdagencies, without use o f contractors. Overall approach: MACA (or a mine action organization accredited by MACA) should provide detailed information on the mine-related risks (either based on previously done and updated general survey or on a new general survey) before works or installation o f goods/materials are carried out in any given area. Work would only be allowed to proceed in areas assessed to have a nil-to-low risk, unless they have been demined by a mine action organization accredited by MACA . Rationale: Government departments and agencies responsible for providing services currently do not have the capacity to assess the mine-relatedrisks in a systematic way, and currently follow a process o f consulting with MACA prior to carrying out activities. Procedure: 1. Prior to carrying out work, the Government department/agency will consult with MACA to assess mine-related risks in the area (this should include checking information available in the MACA 113 data base). If not already done, a general survey should be carried out by M A C A (or by a mine action organization accredited by MACA) to assess mine-related risks inthe area. 2. If M A C A provides detailed information on mine-related risks which suggest a nil-to-low risk in the proposed area, the work can proceed. The Government would be solely liable in case o f a mine-related accident. 3. IfinformationprovidedbyMACAcannotsupporttheassessmentofanil-to-lowriskinthe proposed area (whether due to the presence of mines or uncertainty), works should not go ahead before M A C A (or a mine action organization accredited by MACA) carries out the necessary further assessment andor clearance for risks to be downgraded to nil-to-low, based on agreed funding modalities (clearance may be funded either under a contract with a Bank-funded project or under existing donor agreements with the mine action organization). Procedure for Large Works Using Contractors Applicability: This procedure applies to large works to be implemented by large contractors (projects above $5m). Overall approach: The main contractor should be responsible for dealing with mine-related risks, in coordination with the UNMine Action Center. Procedure: 1. As part o f the preparation of the bidding documents, a general survey should be carried out by MACA (or a mine action organization accredited by MACA) on all the areas where contractors may have to work (broadly defined). This survey should provide detailed information on mine- related risks in the various areas allowing for an un-ambiguous identification o f areas that have a nil-to-low risk o f mine/UXO contamination and areas where the risk i s either higher or unknown. The survey should be financed out o fthe preparation costs o f the biddingdocuments. 2. All survey information should be communicated to the bidders (with sufficient legal caveats so that it does not entail any liability), as information for the planning o f their activities (e.g., location o f campsites, access roads to quarries). 3. Depending on the nature and location o f the project and on the available risk assessment, two different options can be used. Option 1 Mine-clearance activities are part of the general contract - a. Based on the general survey results, a specific budget provision for mine action during construction i s set aside as a separate provisional sum in the tender documents for the general contract. b. As a separately identified item in their bid, the bidders include a provision for a further detailed mine assessment and clearance during constmction. c. On the instruction o f the Supervision Engineer and drawing on the specific provisional sum for mine action inthe contract, the contractor uses one o f several nominated sub-contractors (or a 114 mine action organization accredited by MACA) to be rapidly available on call, to carry out assessment prior to initiation o f physical works in potentially contaminated areas, and to conduct clearance tasks as he finds may be needed. The Contractor may also hire an international specialist to assist him in preparing and supervisingthese tasks. The Contractor i s free to choose which o f the accredited sub-contractors to use, and he i s fully responsible for the quality o f the works and i s solely liable incase of accident after an area has been demined. d. To avoid an "over-use'' o f the budget provision, the Contractor i s required to inform the Supervision Engineer in writing (with a clear justification o f the works to be carried out) well in advance o f mobilizing the mine-clearing team. The Supervision Engineer has the capacity to object to such works. Option 2 - Mine-clearance activities are carried out under a separate contract a. Specific, separately-awarded contracts are issued for further surveying andlor clearing o f areas with a not-nil-to-low risk (under the supervision o f the Engineer)by specialized contractors (or a mine action organization accredited by MACA). The definition o f the areas to be further surveyed / cleared should be limited to those areas where any contractor would have to work, and should not include areas such as camp sites and quarrieslmaterial sites which are to be identified by the Contractor duringand after bidding o f the works. As a result of these further surveys and possibly clearance works, mine-related risk in the entire contract area i s downgraded to nil-to- low. b. The contract with the general Contractor specifies the extent o fthe portion of the construction site o f which the Contractor i s to be given possession from time to time, clearly indicating restrictions o f access to areas where the mine risk i s not nil-to-low. It also indicates the target dates at which these areas will be accessible. Followingreceipt o f the notice to commence works from the Engineer, the Contractor can start work in all other areas. c. The general Contractor i s invited to include in its bid an amount for mine-security, to cover any additional survey I clearance he may feel necessary to undertake the works. 4. In case o f an accident, a Board o f Inquiry i s assembled by M A C A to investigate on the causes o f the accident and determine liabilities. Large penalties should be applied on the Contractor if the Board determines that the accident resulted from a breach o f safety rules. 5. All parties involved in this process are required to closely coordinate with M A C A and to provide the Government, local communities, MACA, as well as any interested party the full available information on mine-related risks that may reasonably be required (e.g., maps o f identified minefields, assessments for specific areas). 115 APPENDIX 9 -MonitoringandEvaluationArrangements ISLAMIC REPUBLICOF AFGHANISTAN EMERGENCY HORTICULTURE AND LIVESTOCK PROJECT TECHNICAL ANNEX Main Objectives. The monitoring and evaluation (M&E) system for the Horticulture and Livestock Project (HLP) i s intended to provide information to the various stakeholders on project implementation performance, process, outputs, and outcomes. The main purpose o f the monitoring system i s to provide timely feedback to the Ministry o f Agriculture and Irrigation (MAI), IDA, and other aid agencies on the progress o f the project developments so that lessons can be learned on a real time basis and corrective actions initiatedwhere necessary. The M&E system has four components: (i)implementation monitoring - physical and financial; (ii)process monitoring, involving the Implementation Management Support Team (IMST), Facilitating Partners (FPs), and MA1 departments; (iii) post-implementation monitoring, including sustainability monitoring o f completed sub-projects and audits; and (iv) outcome evaluation to assess impacts on livelihoods by yield measurements and income assessments. A management information system (MIS) will ensure that information flow takes place smoothly at all levels, and that data are electronically processed from individual project through provincial MA1offices. Indices for M&E activities would be based on the data included inthe Results Matrix and Results Monitoring for the Project (Appendix 1). Organization for Monitoring and Evaluation will be the responsibility of the Monitoring and Evaluation Department (MED) o f the Policy and Planning Department (PPD) o f MAL The M&E Specialist recruited as part o f the lead Facilitating Partner (FP) in the Implementation Management Support Team (IMST) will be responsible for working with colleagues in MED to develop systems that will ensure production o f practicable, timely and accurate information on the impact o f HLP and other agricultural development projects. Physical GeograDhic Monitoring. The Landcover mapping to be financed under the HLP will provide the following information on the national status o f agriculture and irrigation sectors and will provide a basis for measuring achievements under HLP and, inparticular: 0 Detailed mapping o f agricultural land from, involving highresolution satellite imagery (SPOT 5 - 2 meters) and trend analysis (1972/1993/2000/2006). 0 Detailed mapping o f rangeland classes and characterization o f vegetation dynamics focusing on rangeland classes over a 4-5 years timeframe and including: trend analysis o f rangeland encroachment (1993/2000/2006) with rainfed cultivation inwinter and summer pastureland and total dry matter estimates innatural pastures for rearing livestock. 0 Baseline data on cultivated areas in designated project areas and similar adjacent non-project (control) areas, including trend analysis (1993/2000/2006) for: orchards, vineyards, field crops, vegetable gardens, and pistachio forest areas. The control areas would be double difference monitored withlwithout treatments provided to direct beneficiaries. 0 Output and outcome impact analysis o f key indices relating to horticulture and livestock production sub-components. 116 0 Records o f trends in numbers o f livestock prophylactic treatments, incidence o f endemic diseases, and numbers o f animals treated at VFUs. ImplementationMonitoring Project developments will be monitored in all operating locations, with farmers' associations providing the basic unit for data and FPs organizing collection and collation. Physical information to be monitored will relate to key production-oriented targets agreed inannual work programs and other outputs (such as training). Financial information will provide details o f expenditures relative to the work program budget. 0 At field level: Farmers groups will be requested to provide quarterly summaries o f production activities, as well as their organization and the usefulness o f services provided under HLP. The FPs will produce quarterly reports specifying the input, output, and outcome achievements o f project beneficiaries (farmers groups, traders, etc.), including details o f any problems encountered and remedial actions taken. These data will be submitted in a comprehensive progress report to MED. Monitored data for aggregated reporting for the provincial level will be entered into a standardized MIS. The flow o f monitoring information and findings deriving from this information can be depicted as follows: 0 At the province level: Facilitating Partners (or MAI, where there i s more than one FP in the province) will input data from reports (including comments) to the MIS and generate simple, province reports, by district and farmers' group. 0 At Ministry Headquarters level: The Monitoring and Evaluation Specialist form the lead FP will help the MED team to input data to the main MIS system, organize data analysis, and produce comparative province and district reports. ProcessMonitoring Process indicators are based on the measurable outputs agreed inthe annual work program o f each FP and included intheir corresponding quarterly progress report. In addition, MAL'IMST will separately conduct, on a sample basis, a bi-annual process monitoring exercise. This will involve the hiringo f an external agency to spend significant time in the field to monitor key processes at the farmer group level, inter-group and province comparisons, and suggest remedial action where required. Post-implementationMonitoring: The purpose i s primarily to determine whether farmers groups are operating as predicted inthe annual work programs and achieving the predicted results. Post-implementationmonitoring will be carried out through random sample monitoring by PPD Monitoring Department at harvest time. OutcomeEvaluation. To assess whether the HLP i s meeting its objectives, key performance indicators have beendeveloped (Appendix 1). Achievements against these will be evaluated on a bi-annual basis by an external evaluation consultant. Inaddition, regular supervision, and a mid-term review will be conducted by IDA. At the end o f the project period, IDA will produce an Implementation Completion Report, which focuses on evaluating whether the project objectives and targets for keyperformance indicators have beenmet. 117 Dissemination o f Information: The FP's quarterly progress reports derived from implementation monitoring will cover the district(s) in which each FP i s operating and information from district and provincial reports will be aggregated at the national level by MA1 Monitoring and Statistics Departments (see reporting below). At the national level, quarterly progress reports for the project as a whole will be shared with key stakeholders, including the Minister MAI, the Project Steering Committee, FPs, and donor agencies. These reports will be used by the Director PPD to ensure that lessons from ongoing projects are reflectedinthe design o fnew developments. Institutional arrangements for M&E: The M&E system will be managed by MA1 Monitoring & Evaluation Department at the provincial and national levels with inputs from FPs. While it is expected that the MED staff at the provincial level will regularly visit farmers associations, it i s important that senior personnel from IMST and the HLP Steering Committee should also go to the field periodically, to obtain first-hand knowledge of project activities. IMST will also hold meetings and workshops with FPs (at least quarterly) to share the results o f monitoring and receive feedback and decide how to improve project operations. The monitoring system and the HLP Operational Manual will thus be periodically updated and improved, making both live instruments for improving project performance. At the same time, these lessons will be reflected in subsequent annual work programs. 118 t APPENDIX 10-ProjectOrganizationand Implementation Arrangements ISLAMIC REPUBLIC OF AFGHANISTAN EMERGENCY HORTICULTURE AND LIVESTOCK PROJECT TECHNICAL ANNEX Present Situation Since 2002, considerable progress has been made in restoring and re-equipping buildings and employing a cadre o f qualified Afghan returnees with extensive experience from working in other countries. Operations o f MAI are currently supported by some thirty international advisers, mostly funded from bi/multilateral institutions, who are policy and technical advisors to MAIdepartments or to development projects (FAO, USAIDIRAMP, and EC). At the same time, under the umbrella o f Government's Priority Reform and Restructuring (PRR) program, the structure for a modem agricultural ministry is being debated and a systematic process adopted for personnel selection. Similarly, a start has been made inre-establishing the University o f Kabul and other universities. Nonetheless, the Ministry has a major staffing dilemma, with an older group - that was active in 1970s and is now approaching retirement - and recent graduates - who lack practical experience. The Ministry has initiated a broad based training program to further address this need. Between these groups there is a dearth o f qualified or experienced personnel. Added to this, severe fiscal budget constraints means that poor salary levels provide no incentive to staff at all levels. Lacking any capability in modem agricultural technological and management skills, farmers regard the existing agriculture support personnel as having little to offer for improving crop and livestock productivity, and resolving agricultural problems. A voluntary redundancy scheme and staff selection would enable MAT to provide incentives to qualifying staff. While the developments that have been achieved are fragile, they could provide a sound basis for a modem, demand-driven agriculture ministry. The challenge will not be solved by reverting to the procedures o f the 1970s. To realize the potentials for regaining traditional markets andbetter assuring food security, i t is essential to develop modem technologies and management practices. However, in the absence o f a coordinated development program, the dearth o f Afghans with practical field experience o f modem agricultural production will continue for the foreseeable future. The staffing dilemma can best be countered byjudicious contracting o f qualified technical assistance personnel to work with qualifying staff and disseminate contemporary information to farming communities. However, this must be inline with precise terms o freference and results related conditions. At the same time, there are encouraging examples at field level where various pilot projects with NGO support are successfully selecting, training, and involving field personnel in extension operations. However, their impact i s only sustainable when working with MAIpersonnel and when continued finding i s assured. The approach taken by the initiators o f these operations is to announce that they are intending to start operations in a specific location and, following evaluation and selection; extensionists are trained and assigned to development activities. These examples demonstrate that - with support from qualified and committed technical assistance - it i s possible initiate effective extension operations. I t is essential that the Ministry's reorganization process be accompanied by an action plan for rationalizing staff numbers. Under the PRR program, the management of MAI is requiredto reduce by half the Ministry's staff numbers. It is hoped that this will happen early in 2006, on the basis of a competitive and transparent selection process, thereby enabling the most competent people to be retrained and assigned to specific jobs within the departments and provinces. I t will also mean that the scarce budget resources available for MA1salaries can be allocated so as to provide better income and incentive for the selected personnel. However, the rationalization process is being held in 120 abeyance due to confusion over hiring o f several hundredadditional staff for the Ministry as well as the submission o f a second organizational proposal (August 2005). Formal personnel recruitment under PRR has therefore been limited to competitive selection o f higher level posts (grades 1 to 3) and MAIdepartment heads have been selected together with some provincial directors. Clearly, urgent decision over the Ministry's structure and staffing will be critical for successful institutional strengthening under HLP. Personnel from the technical departments were directly involved in identifying and preparing the project proposals and discussions on the organization continued during appraisal. A t the same time, the evolutionary process described above is fragile, because o f the Government's extremely limited recurrent budget situation that primarily depends on the international community. Project Organization Basic Principles o f Proiect Operation Project implementation will be founded on developing the technical and managerial skills o f Afghan people, with the aim of establishing a strong basis for sustainable development. However, this will not be achieved by reinstating personnel that were employed by the Ministry o f Agriculture in 1970s; existing personnel will be evaluated to assess their competence for fulfilling project posts. In the first instance, production developments will be organized through strategic regional research centers (North: Deh Dadi and Central: Qurgaha) and in liaison with MAI provincial offices concerned. This will help to mitigate possible delays from relying on the large number o f districts in the provinces to be touched by HLP. The personnel needs o f each sub-component o f HLP have been defined on the basis of teams that include management, organization support and field staff. Recruitment will be based on precise terms o f reference and the selection procedures for all posts. Competent personnel that hlfillthese will be assigned for project implementation and provided with training, facilities, and subsistence allowances. Project financing will not provide for `top-up' salary payments, but field allowances will be payable for project-related operations. Selected personnel would be able to gain a higher salary by resigning from MA1for a specified period during project implementation under special arrangements with MOF. In order to counter the inherent weakness in MA1staff, both at headquarters and inthe field, and to address the HLP's emergency objective, FPs will be recruited to work with existing MAIpersonnel to support project implementation. Preference will be given to qualifying individuals and organizations that have recent experience o f organizing rural development in Afghanistan to lead the teams. Where existing MAI personnel in any location do not fblfill the specifications, FPs in conjunction with the directors of the designated strategic research centers will recruit younger, proactive Afghans who can comprehend the opportunities of modern, demand-driven agriculture strategies based on farmers' needs and recognizing the role o f women producers. These people will be contracted for specified periods during H L P implementation. An important responsibility o f FPs working in each sub-sector will be to develop training materials and an information system for project staff. In addition to ensuring the swiftest possible implementation of sound technical developments, FP teams will fulfill the following key project objective by: 1. Contracting ineach designated strategic research center a lead regional FP to work as the regional team leader and the Head o f the Center will serve as deputy team leader; 2. Providing specialist advice on agricultural technologies and management systems and on-the-job training by working with qualifying personnel inline positions inMAIdepartments involved with project implementation; 121 3. Working with Project personnel to organize demonstrations for potential beneficiaries and extension and management support for guiding the development o f sub-components; 4. Developing MAI's policy analysis capacity by working with personnel o f the MAI Policy and Planning Department (PPD); and 5. Developing procedures for monitoring the achievements of sub-components and analyzing reasons for any shortfall. Proiect Management The H L P will be executed by MA1 and the project activities will be integrated with the Ministry departments and field operations. An Implementation Management Support Team (IMST) will be established as the vehicle through which MAIcan most effectively manage, coordinate and supervise H L P and could provide the framework through which MA1will manage horticulture and livestock developments supported by other aid agencies. The IMST will be part o f Policy and Planning Department (PPD), which is responsible for managing the development budget. In order to develop strong planning, administration, and management capacity in MAI as swiftly as possible, responsibility for the I M S T will be outsourced to a lead FP with a proven record in implementing similar developments to HLP. The IMST will be headed by a Manager (head o f the lead FP) who will be responsible to the General Director o f PPD for overall Project implementation. In addition, the Minister MAI has been requested to appoint an experienced agriculturalist as Deputy General Director to work with the Manager to ensure competent organization and supervision o f program developments after completion o f HLP. The IMST will consist o f a small team o f professional specialists (planning, accounting, procurement, monitoring and training) that will work alongside and strengthen the capacities o f trained Afghan personnel working in PPD, as well as a horticulture and a livestock specialist to be responsible for coordinating the respective project activities. Implementation of Technical Components Project developments will be organized through voluntary farmers' associations in agreed project areas, Horticulture production activities will initially be restricted to Central and Northern Regions and, if security permits, will be extended to Southern Region in PY2. Animal health developments will operate in five regions, consolidating past developments, the pilot dairy unit will serve parts of five provinces in Central Region and poultry production will operate in parts o f eight provinces, extending past developments. Horticulture Developments a) Horticulture Development Council o f Afghanistan (HDCA). For horticulture developments, the existing Horticulture Steering Committee (HSC) will be the basis for establishing a HDCA. A horticulture organization specialist FP, working alongside HSC, will have dual responsibility for organizing the formation o f the Council and coordinating technical developments inthe field through the strategic research stations at Deh Dadi in Balkh (Northern Region) and Kabul (Central Region), for which implementationwill be responsibility o f separate FPs. Within three years, the HSC will become the permanent Secretariat o f the Council. The FPs contracted to coordinate field production o f the horticulture sub-components will involve a team o f technical and organizational specialists that will work through the strategic research centers and in liaison with provincial MAI offices. These teams will work with farmers associations in collaboration with community authorities (CDCs, Shuras, etc.) who will be responsible for informing farmers about the project, encouraging women and men farmers to attend training, and verifying the 122 location and extent o f beneficiaries' land holding. Field extension teams for each sub-component will be formed first by testing existing MAI personnel in each location and, if there are insufficient number that fulfill the terms o f reference, additional staff will be recruited from the locality. b) Perennial Tree Crop Production. Trained farmers that agree to rehabilitate their existing orchards will receive a simple package involving small tools and integrated pest management. Those that agree to develop new orchards will receive packages o f inputs that will be grant aided on a sliding scale.I2 The package for grape orchards will also include provisions for trellises. Beneficiaries' contribution will include provision o f their land and other inputs, such as water, manure, tools, labor, and the cost of any mechanization. In addition, farmers will be required to contribute 5 to 10 percent in cash towards the total cost (level to be decided by the FPs and reflected inthe Operational Manual). The precise arrangement for allocating grants will bejointly decided for each farmers group involved by the community authority and FP concerned. These measures will help to ensure the commitment of beneficiaries and access for all types o f farmers. If required, communities would inform farmers about channels through which beneficiaries can obtain micro credit (e.g. MISFA, which is supported by IDA). Animal Production To a large extent, the animal production sub-components will follow the procedures o f existing operations that are being duplicated: a) For animal health, the Afghanistan Veterinary Association (AVA) will be contracted as the FP, working in team with the Dutch Committee for Afghanistan (DCA) and will continue to support the development of professional veterinarians through veterinary field units (VFUs), including training and the use o f equipment and vaccines. Short-term specialists will be contracted to advise on drafting legislation. b) Animal husbandry developments will involve recruiting specialists to work with MAI personnel. They will be contracted to help adapt procedures in a range o f modern livestock production techniques to the needs of Afghan conditions and farmers' preferences (natural pastures, animal fibers, artificial insemination, fish and bee keeping) - all as a basis for expansion under the longer-term horticulture and livestock program. c) Dairy processing developments will involve a specialist FP to help develop procedures for developing milk collection centers with farmers' associations to serve a central processing unit. The FP will also assist with developing facilities for processing animal feed. This sub-component will be based on proven systems in India and elsewhere and is expected to expand to a nationwide network under the longer-term. A short-term specialist FP will be hired to develop proposals for a coordinating dairy development organization for Afghanistan. d) The poultry production sub-component will involve experienced FPs to extend the existing successful experience working with mostly women farmers to develop small-scale, semi-intensive egg and meat production units. The primary roles o f FPs will be to: 0 In collaboration with MAIprovincial offices, prepare detailed annual work programs for their assigned tasks; 0 Collaborate with community authorities (e.g. CDCs where they exist) in their project area to develop and transfer information on project activities to farming communities and to identify suitable beneficiaries for project activities; l 2For example, the first jerib [0.25ha] could be free to all qualifying farmers. For 1 - 2jeribs farmers could pay 25% of total cost.For 2 - 5 jeribs, they could pay 40%, for 5 - 10jeribs, 60% payment, for 10- 25 jeribs, 80% payment, andbeyond 25 jeribs, the full cost. 123 0 Ensure the recruitment, training and supervision o f men and women technical field staff intheir project area; 0 Organize training for farmers and livestock owners and provide technical assistance to communities during implementation; 0 Contract with selected farmers to develop fruit tree nurseries in accordance with precise technical and quality mandates; 0 Coordinate the supply and distribution o f crop and livestock production inputs to participating farmers; and 0 Maintain records o f physical and financial activities and conduct monitoring and reporting. The expected outputs o f the Facilitating Partners are: 0 The planned targets for horticulture and livestock components will be achieved; 0 Development o f a set o f manuals for implementing horticulture and livestock sub- components; 0 Creation o f a cadre o f competent technical operators in the project areas, including strengthening human resources o f MAI staff assigned to the project. This will especially include women technical field staff that will be critical for achieving project objectives. ResultsBasedContracts Contracts with the lead FP and technical FPs will be based on monitorable outputs and, where required, renewable annually. The MAIwill hold the lead FP accountable for the timely planning, contracting o f FP support, for coordinating the preparation o f annual work programs and budgets, for ensuring training programs for counterpart personnel and monitoring the impact o f agreed project activities. The FPs would follow implementation approaches that they consider the most suitable for assisting individual farmers, groups o f farmers, and livestock owners to achieve the planned technical and financial objectives. The H L P will hold the FPs accountable for performance against output targets. Summary of TechnicalAssistance In~olvement'~ I CapacitvDevelopmentComponent Management ImplementationSupport Team Project Manager 36 months Financial ManagementiAccountingSpecialists (2+1+1 years) 48 months Procurement Specialists (2+1+1 years) 48 months Monitoring and Evaluation Specialist 36 months 11. PerennialCrops Component HorticultureDevelopmentTeams (FP) Horticulture Production Specialist 36 months HDCA: Horticulture Council Specialist 28 months HDCA: Production Support Specialist (periodically) 12 months HDCA: Market Support Specialist (periodically) 12 months l3 DirectorandProjectManagerwillreviewpreciseneedsfortechnicalassistancepersonneltoberecruitedunderHLPinthe Project context of any similar horticulture and livestock activities in other projects recently started or about to commence with support from other aid agencies, especially EC, USAID, ADB. Depending on the completeness of any other such operations, the Project Director and Project Manager might propose to IDA to cancel or change the terms o f reference for specified posts. 124 HDCA: Policy Specialist 2 months HDCA: Grants Development Specialist 3 months Commodity Specialists (tree crops & nurseries x 6) 90 months Regional Specialists (2) 72 months Crop Protection Specialists (4) 123 months Processing Specialists (6) 42 months I11 LivestockComponent LivestockDevelopmentTeams Livestock Production Specialist 36 months Animal Resources and Production Specialist 16months Natural Pastures Assessment Specialist 10 months Dairy Production and Processing Specialists 6 months Animal FibersSpecialist 19 months Livestock Production Specialists (genetics AI,fish, bees, poultry, dairy) 30 months Farmers Organizations Specialist (2) 18 months Dairy/Feed Technologists 34 months Poultry Specialist 18 months Veterinary Organization Specialist 12 months Legislation & Policy Specialist 18 months Summary of Technical Assistance Costs US$million I.CapacityBuilding IMST 4.3 11. HorticultureDevelopments Horticulture Production 3.1 Horticulture Processing 0.4 H D C A 0.7 111. Livestock Developments Animal Husbandry 0.4 Dairy Development 0.4 Poultry Development 0.2 Animal Fibers 0.2 Animal Health 0.3 Total 10.0 125 1 I r ... I APPENDIX 11-Treatingthe OpiumProblem: Summaryof AnalysisAnd Recommendations ISLAMIC REPUBLIC OF AFGHANISTAN EMERGENCYHORTICULTURE AND LIVESTOCKPROJECT TECHNICAL ANNEX Counter narcoticsstrategy Given the scale and nature o f the opium problem in Afghanistan it i s recognised that the illicit drugs issue cannot be dealt with in isolation from the wider state building and development process. No single project or program can address the myriad motivations and factors that influence opium poppy cultivation. The elimination o f opium production will be dependent on the achievement o f broader development goals, including establishing the institutions required for formal governance and promoting civil society, strengthening social protection mechanisms, as well as encouraging licit on- farm, off-farm and non-farm income opportunities. HLP and counter-narcotics The H L P objectives will contribute to strengthening and diversifying legal rural livelihoods (National Priority Two o f the Afghan National Drug Control Strategy (2005)) by facilitating the move from opium poppy cultivation to the production o f licit crops. The primary beneficiaries o f the HLP horticulture component are better off farmers with irrigated land, although smaller farmers are expected to participate more strongly in the orchard rehabilitation sub-component. Most project investments are proposed in areas close to Kabul where opium i s not currently produced, but one major opium producing province - Balkh - is included. Thus the component as designed is likely to have relatively weak impacts in reducing opium production directly. Indirect impacts could however be stronger, with employment for permanent and casual labour created by both rehabilitation o f orchards and by expansion, and also by the proposed alfalfa inter-crop. Where tree crops substitute for opium poppy, which i s assumed in the change model implicit in the farm models, there could be potentially negative repercussions, as share cropping opportunities, labour requirements and wage rates will diminish. There will be reduced access to land for poorer farmers and the landless and less labour opportunities. Thus, there is a potential for the land poor and landless to lose out from the loss o f opium poppy in terms o f access to land, to on and o f f farm income and to credit. This could possibly prompt relocation o f cultivation to neighbouring areas to cultivate opiumpoppy. The livestock component would have more direct and immediate positive impacts on the opium economy. The dairv component, slated to be implemented in the Kabul area, would have little or no impact on the opium economy, but effects could be considerable if and when the component is replicated in peri-urban areas located close to poppy production. The poultry sub-component could have potential impacts on the opium economy as it would benefit principally households in resource- poor, densely populated areas, and the component could also help rural-urban migrants. The cashmere fiber sub-component could have impacts on the poorest households, improving returns to livestock and artisanal family labour. The veterinarv sub-component would have diffuse but positive impacts, as it will address the production systems o f poorer households, for whom livestock is a coping strategy. Women are expected to be the major beneficiaries o f the livestock component as a whole, and their voice will be important in moving household livelihood strategies towards licit production choices. Improvingthe contributionof HLP to the nationalcounter-narcoticeffort Guidelinesfor the implementation Select otium areas where possible: H L P could implement activities where possible in opium producing or vulnerable areas (all components, particularly the livestock components). The & 128 component could be quickly replicated within the Program in other peri-urban areas more sensitive to opium (for example, Jalalabad, Mazar, Qandahar...). The poultry component could be started up in: Balkh, Chemtal, and Dihadi districts in Balkh province, Panjwai and Arghandab districts in Qandahar province and Rodat, Kama, Surkhrud and Chapahar districts in Nangarhar. The cashmere fiber subcomponent could target areas o f particular poverty where labor for opium may originate, such as the Spinghar piedmont inNangarhar. Give prioritv to the uovertv reducing components: as the principal target groups for opium-reducing actions are the poorer farmers and landless, more emphasis could be given to components addressing the production systems o f the poor. The livestock components are the most appropriate here (dairy, poultry, cashmere, and veterinary). Given the risk o f migration o f poorer farmers and labourers in search o f opium sharecropping andjob opportunities elsewhere, there i s a logic to giving priority to implementing these components in Balkh and any other opium producing area where the horticulture component is implemented, so that the poorer farmers and labourers faced with diminished access to the means o f production and to jobs will have some "stay-in-place alternatives". Ways to increase interventions specifically targeted at the land poor and landless should be considered - links with labour intensive agro processing, vocational training, or improving access to agricultural inputs for the rural poor so they can obtain a better sharecropping agreement. Clearly, much o f this lies outside the present scope o f HLP: therefore, efforts should also be made to provide further economic alternatives locally through partnerships and synergies with other programs (see next two recommendations). Form a partnership with MISFA for more rapid scaling up: HLP development models are based on careful implementation o f technical models and considerable use o f grant financing to start activities. A partnership with financing agencies, particularly with MISFA, could help scale up activities in dairy, poultry, and cashmere fiber quickly. A constraint for micro-finance institutions is that they are not equipped to conduct skills training for farmers: a partnership between HLP and MISFA could create complementarity, with HLP providing the technical input and MISFA institutions driving the financial appraisal and credit. This approach would help scale up the components that address the poorer farmers, more vulnerable to the opium economy, more quickly. Improve synergies by networking, coordination and ioint programming and by linkinginto the extent possible with CDCs: HLP will join a number o f other National Priority Programs in providing services to farmers that are "vertical" intheir delivery mechanism. Development impact - and hence the counter-narcotic impact - will be considerably enhanced if these programs can be: (a) more demand driven; and (b) more coordinated in their response. The model developed in the project document is well conceived: involvement o f the CDCs at the base, and coordination between National Programs at a higher level. H L P needs to be linkedto other programmes inthe area particularly those targeting poorer farmers by extending the provision o f credit, agricultural services, and vocational training. The specific potential for developing inter-linkages with these programmes in each HLP area though CDC's and at higher levels (CDC clusters, District, Province) will need to be identified. Inareas where opium poppy is being cultivated and the proposed sub project is being implemented in isolation from other sectoral interventions, follow up action with relevant line ministries and district and provincial development councils is recommended. It is recommended that it be an explicit objective and activity in the TORSo f the IMST to identify the scope for these synergies and to work on developing the mechanisms for operationalizing them. Within the World Bank, there could be an explicit mandate to work up these synergies at every level. Monitoring and evaluation to: (1) track movement from licit to illicit livelihoods; and (2) create incentives bv setting indicators: monitoring and evaluation i s included in project design, but needs to be expanded to track movement from licit to illicit livelihoods, informing both project management and the national counter-narcotics program. An Opium Poppy Impact Assessment i s recommended, with an analysis o f (i) extent o f opium poppy cultivation in the area inwhich the project is being the implemented, (ii) different socio-economic groups involved in opium poppy cultivation in the the area, (iii)how these groups will benefit and lose from HLP, and (iv) what their likely responses will 129 be. In addition, the monitoring and evaluation system should create incentives for MA1and for the I M S T and the FPs by setting indicators. Guidelinesfor a broader "program approach" Operationalize the program approach: H L P is intended as the first step in MAI's long-term program for horticulture and livestock development, so good ideas on modifications that would enhance the counter-narcotic impact but cannot be incorporated in the H L P could be included in the wider program, and could be picked up relatively quickly e.g. by DfID financing. MAI's Policy and Planning Department will need support to manage a program framework and seek cofinancing, and this support should be an explicit objective and activity in the TORSo f the IMST. A program document could be prepared independent o f the project documents, as a basis for seeking co- financing and for tracking progress towards the targets o f the 2005 Agriculture Master Plan. Bringforwardsupport to annual vegetables for earlier financing: annual vegetable production systems do "mimic" the attractions o f the opium economy closely, particularly for smaller and poorer farmers and labourers, providing: (i) access to inputs and credit for a profitable ready cash market; (ii) the possibility o f access to land through share cropping; (iii) access to risk management instruments through contracts, forward purchases, agro-industrial supply; and (iv) remunerative labor opportunities. Several pilot projects have tested out models o f market-driven support (USAID ALP, RAMP, PAL). The proposed support through the H D C A to the development of the annual vegetable business could be brought forward for early financing and implementation, possibly by other donors under the broader program. Linkages to credit through MISFA would be key to rapid scaling up. Develop and include a livestock fattening component for early scaling up: sheep fattening is a typical enterprise o f poorer farmers, and as such an activity that could present a real livelihood alternative choice. There i s currently a tendency for areas o f poppy concentration to have limited livestock: there i s a cycle o f less wheat straw due to high levels o f poppy cultivation, resulting in the need to purchase straw in some years when cropping patterns are high poppyllow wheat - which makes livestock too expensive to keep. In these areas, a livestock fattening program could help to shift the balance o f returns, particularly ifbreedingand fattening credit can increase, using livestock as a guarantee and if credit on opium continues to dry up as at present. This could prompt some shift to fodder crops and livestock, and reductions in poppy. Sheep fattening thus plays a key role in diversification, reducing the risk and increasing the return from the licit economy. A combination o f technical advice, veterinary services and credit is required. Propose components of the HLP program for CNTF financing at the 2006 London Conference, a total o f $80 million was pledged to the CNTF by a range o f donors. Although CNTF has yet to approve any projects, its criteria give priority to projects in opium producing or vulnerable areas, and to projects which support the "mainstreaming" o f counter narcotics objectives within institutions and .programs. HLP, as a national priority program from a leading line ministry and meeting the eligibility criteria, could well be a candidate for CNTF financing. There are several advantages to seeking CNTF financing for the program: (1) it can provide extra resources for a program that i s under-funded and which could prove very costly when it i s scaled up; (2) CNTF provides consolidated cofinancing, so that MAI would not have to deal with multiple donors; (3) CNTF is under national budget management, so that public budget management concerns would be allayed; (4) H L P gives a signal practical and concrete example o f "mainstreaming", and if i t were "cofinanced" by CNTF it could be a flagship which would have both demonstration effect for the world at large and institutional development impacts for mainstreaming capacity and practice in both MAI and MCN; and (5) financing a major national program like H L P would help build CNTF and its procedures and help CNTF to focus on mainstream programs with broad impact rather than on the kindofmyriadmicro-projects considered up to now. 130 60°E 65°E 70°E 75°E AmuDarya UZBEKISTAN Murghob TAJIKISTAN TAJIKISTAN AFGHANISTAN TURKMENISTAN Faisabad JAWZJAN¯ Pyandzh BALKH KUNDUZ ¯ Kunduz¯ Taloqan ¯ ¯ Pamir Sheberghan ¯ Mazar-e ¯ ¯ Sharif ¯ TAKHAR BADAKHSHAN Saripul Samangan ¯ Baghlan¯ Meymaneh SAMANGAN ¯ BA GH LAN ¯ FARYA¯B ¯ ¯ ¯ 35°N B ADGH¯IS ¯ SARIPUL Morghab PARWAN ¯ NURISTAN ¯ D¯arya-yeQ¯onduz Mahmud-e Raqi ¸ ¯ ¯ ¯ ¯ ¯ KAPISA ¯ ¯ ¯ Nuristan ¯ ¯ 35°N Qal`eh-ye Now Bamyan Charikar ¯ ¯ ¯ Asadabad ¯ ¯ BAMYAN ¯ ¯ LAGHMAN KUNAR Chaghcharan ¯ KABUL ¯ Mehtarlam ¯ Herat ¯ KABUL ¯ PAKISTAN Harirud ¯ ¯ WARDAK¯ Meydan Jalalabad ¯ ¯ ¯ H E R AT ¯ Shahr NANGARHAR ¯ GHOR LOGAR Pol-e `Alam INDIA PAKTIKA ISLAMIC Helmand GHAZN¯I Ghazni¯ Gardiz ¯ KOWST Indus REPUBLIC URU¯ZGAN Kowst ¯ Sharan OF IRAN Farah FA R AH ¯ Tarin Kowt ¯ Harut ¯ ¯ PAKT¯IKA ¯ Farah ¯ AFGHANISTAN ZABUL ¯ Qalat ¯ EMERGENCY HORTICULTURE ¯ Khash Tarnak ¯ AND LIVESTOCK PROJECT Lashkar Gah ¯ Hamun-e Kandahar ¯ ¯Saberi¯¯ Arghandab LIVESTOCK COMPONENT ¯ LIVESTOCK COMPONENT COVERAGE: Zaranj HILMAND N¯I M R O Z ¯ KANDAHAR ¯ DAIRY 0 50 100 150 Kilometers POULTRY Helmand PROVINCE CAPITALS 30°N Gowd-e 0 50 100 Miles NATIONAL CAPITAL FEBRUAR Zereh 30°N IBRD This map was produced by the Map Design Unit of The World Bank. PROVINCE BOUNDARIES The boundaries, colors, denominations and any other information Y2006 shown on this map do not imply, on the part of The World Bank INTERNATIONAL BOUNDARIES 34548 60°E PAKISTAN Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 65°E 70°E