Document of The World Bank FOR OFFICIAL USE ONLY Report No: 49392-JM PROJECT APPRAISAL DOCUMENT ON A PROPOSED L O A N I THE AMOUNT OF US$15 M I L L I O N N TO JAMAICA FOR A RURAL ECONOMIC DEVELOPMENT INITIATIVE PROJECT July 3 1,2009 Sustainable Development Department Caribbean Country Management Unit Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective July 15,2009) Currency Unit = Jamaican Dollar J$88 = US$1 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AccPac JSIF's accounting software package CBC Community Based Contracting CFAA Country Financial Accountability Assessment CPAR Country Procurement Assessment Report DA Designated Account ED0 Enterprise Development Officer EJASP Emergency Recovery Loan EMF Environmental Management Framework EO Environmental Officer ERL Easter Jamaica Agricultural Support Project EU European Union EUBSP European Union Banana Support Program FA0 Food and Agriculture Organization FPU Finance and Procurement Unit GDP Gross Domestic Product GNI Gross National Income GOJ Government o f Jamaica IBRD The International Bank for Reconstruction and Development ICBSP Inner Cities Basic Services for the Poor Project IFRs InterimUnaudited Financial Reports IICA Inter-American Institute for Cooperation on Agriculture JAS Jamaica Agricultural Society JLP Jamaica Labor Party JSIF Jamaica Social Investment Fund M&E Monitoring and Evaluation MIS Management Information System MOA&F Ministry o f Agriculture and Fisheries MOF&PS Ministry of Finance and the Public Service MOT Ministry o f Tourism MOU Memorandum o f Understanding MTF Medium Term Socio-economic Policy Framework NCDP National Community Development Project NGO Non Governmental Organization FOR OFFICIAL USE ONLY NPV Net Present Value OM Operational Manual PARE ProtectedArea and Rural Enterprise Project PDO Project Development Objective PEFA Public Expenditure Financial Accountability PMT Project Management Team RADA Rural Agricultural Development Authority REACT Rural Enterprise Agriculture and Community Tourism Project RED1 Rural Economic Development Initiative REEC Rural Economic Evaluation Committee SA Social Assessment SBD Standard Bidding Documents TA Technical Assistance TOR Terms o f Reference TPDCo Tourism Product Development Company USAID United States Agency for International Development Vice President: Pamela Cox Country Director: Yvonne Tsikata Sector Director: Laura Tuck Sector Manager: Ethel Sennhauser Task Team Leaders: Ellen Hamilton andYurie Tanimichi Hoberg This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not be otherwise disclosed without W o r l d Bank authorization. JAMAICA Rural Economic Development Initiative Project CONTENTS . I STRATEGIC CONTEXT AND RATIONALE .................................................. 1 A . Country and sector issues ........................................................................................ 1 B. Rationale for Bank involvement .............................................................................. 3 C. Higher level objectives to which the project contributes ........................................ 4 . I1 . PROJECT DESCRIPTION .................................................................................. 4 A . Lending instrument .................................................................................................. 4 B. Project development objective and key indicators .................................................. 5 C . Project components .................................................................................................. 5 D. Lessons learned and reflected in the project design ................................................ 7 E. Alternatives considered and reasons for rejection .................................................. -8 I11 . IMPLEMENTATION ........................................................................................... 9 A . Partnership arrangements (if applicable) ................................................................. 9 B. Institutional and implementation arrangements ..................................................... -9 C . Monitoring and evaluation o f outcomeshesults .................................................... 12 D. Sustainability ......................................................................................................... 13 E. Critical risks and possible controversial aspects ................................................... 13 F. Loadcredit conditions and covenants ................................................................... 15 IV . APPRAISAL SUMMARY .................................................................................. 16 A . Economic and financial analyses.......................................................................... -16 B. Technical ............................................................................................................... 16 C . Fiduciary ................................................................................................................ 17 D. Social ..................................................................................................................... 17 E. Environment .......................................................................................................... 18 F. Safeguard policies.. ................................................................................................. 19 G. Policy Exceptions and Readiness ............................................ ..'............................ 19 Annex 1: Country and Sector o r Program Background .............................................. 20 Annex 2: M a j o r Related Projects Financed by the Bank and/or other Agencies ......24 Annex 3: Results Framework and Monitoring ............................................................. 26 Annex 4: Detailed Project Description .......................................................................... 33 Annex 5: Project Costs .................................................................................................... 44 Annex 6: Implementation Arrangements...................................................................... 45 Annex 7: Financial Management and Disbursement Arrangements ............. 50 Annex 8: Procurement Arrangements........................................................................... 59 Annex 9: Economic and Financial Analysis .................................................................. 64 Annex 10: Safeguard Policy Issues................................................................................. 71 Annex 11: Project Preparation and Supervision.......................................................... 78 Annex 12: Documents in the Project File ...................................................................... 80 Annex 13: Statement of Loans and Credits................................................................... 81 Annex 14: Country at a Glance...................................................................................... 82 Annex 15: Map IBRD #37080 ......................................................................................... 84 JAMAICA RURAL ECONOMIC DEVELOPMENT INITIATIVE PROJECT APPRAISAL DOCUMENT L A T I N AMERICA AND CARIBBEAN LCSAR Date: July 3 1,2009 Team Leader: Ellen HamiltodYurie Tanimichi Hoberg Country Director: Yvonne M. Tsikata Sectors: General agriculture, fishing and Sector ManagedDirector: Ethel forestry sector (50%); Other industry (50%) Sennhauser/Laura Tuck Themes: Rural markets (50%); Rural non- farm income generation (so%j Project ID: P 105 122 Environmental category: Partial Assessment Lending Instrument: Specific Investment Loan [XI Loan [ 3 Credit [ ]Grant [ ]Guarantee [ ]Other: For Loans/Credits/Others: Total Bank financing (US$m.): 15.00 Proposed terms: USD denominated commitment-linked, IBRD Flexible Loan with a variable spread, payable in 30 years, including a 5.5-year grace period with level repayment o f principal with all conversion options and the Front End Fee and the premia for interest rate caps and collars capitalized. International Bank for Reconstruction and 15.00 0.00 15.00 Development Total: 17.50 0.00 17.50 Responsible Agency: Jamaica Social Investment Fund 1C- 1F Pawsey Road Jamaica Tel: 876-929-1620 jsif@isif.org / www.isif.org Estimated disbursements (Bank FY/US$m) FY [ 2010 I 2011 I 2012 I2013 I 2014 I 2015 2016 1 1 2017 1 4nnual 0.61 2.00 3.55 4.18 3.07 1.32 0.26 0.01 Zumulative 0.61 2.61 6.16 10.34 13.41 14.73 14.99 15.00 Expected effectiveness date: January 3 1, 2010 Expected closing date: July 3 1, 20 16 Does the project depart from the CAS in content or other significant respects? [ ]Yes [XINO Ref: PAD I.C. Does the project require any exceptions from Bank policies? Ref: PAD IKG. [ ]Yes [XINO Have these been approved by Bank management? ]Yes [ IN0 I s approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated "substantial" or "high"? [ ]Yes [XINO Ref: PAD III. E. Does the project meet the Regional criteria for readiness for implementation? [XIYes [ ] N o ReJ: PAD IKG. Project development objective Re$ PAD II.C., TechnicalAnnex 3 The Project Development Objective (PDO) o f the proposed RED1project i s to improve market access for micro and small-scale rural agricultural producers and tourism product and service providers. Project description [one-sentence summary o each component] Ref: PAD ILD., Technical f Annex 4 The project consists o f three components: Component 1. Rural Subprojects in Agriculture and Rural Tourism (Total US$ 14.22 million; IBRD US$12.22 million). This component will finance two types o f rural subprojects. Type A subprojects will support revenue generating activities in agriculture and tourism. Type B subprojects will support provision o f critical infrastructure, marketing and management in the agriculture and tourism sectors. Component 2. National Technical Assistance and Capacity Building (Total US$ 1.25 million; IBRD US$ 1.25 million). The main objective o f this component is to strengthen relevant national organizations to enhance their capacity to continue assisting the rural enterprises and other project partners and ensure the sustainability o f the rural enterprises. Hence, the component will finance technical assistance (TA) and capacity building for key organizations and agencies that deliver support services in agriculture and rural tourism at the local level. Component 3. Project Management (Total Cost US$2.03 million; IBRD US$ 1.53 million). This component will finance project management, technical expertise (tourism and agricultural specialists, monitoring and evaluation) staff training, the annual audit, vehicles, office equipment and other operating costs. This component will also ensure that effective fiduciary arrangements are in place during implementation. Which safeguard policies are triggered, if any? Re$ PAD IV.l?, TechnicalAnnex 10 O f the Bank's safeguard policies, the Environmental Assessment (OP 4.0 l), Natural Habitats (OP 4.04), Forests (OP 4.36) and Pest Management (OP 4.09) are triggered. The project design incorporates the necessary mitigation measures for the adverse impacts associated with the potential agricultural and rural tourism-based sub-projects through appropriate environmental screening procedures and related mitigation plans for submitted proposals. Significant, non-standard conditions, if any, for: Ref: PAD III. F. Board presentation: NIA Loadcredit effectiveness: Signing o f the Subsidiary Agreement between MOF&PS and JSIF. Adoption o f the Operational Manual by the Board o f Directors o f JSIF (scheduled for September 23,2009 board meeting). I. STRATEGIC CONTEXT AND RATIONALE A. COUNTRY AND SECTOR ISSUES 1. Jamaica i s a highly indebted middle income country with a population o f approximately 2.7 million and a per capita Gross National Income (GNI) `of US$4,491 (2007). Jamaica's economic performance i s severely constrained by i t s high level o f debt. The economy's key strengths include political stability, abundant natural resources, and i t s proximity to i t s largest trading partners. However, the high level o f debt to Gross Domestic Product (GDP) and the resulting cost o f debt service constrain the social spending and investment required for higher growth and poverty reduction. 2. Although poverty rates in Jamaica have declined overall over the past two decades, rural poverty has remained stubbornly high. The national incidence o f poverty has fallen from 30.4 percent in 1989 to 9.9 percent in 2007. Poverty declined sharply in the Kingston metropolitan area, falling from 14.3 percent to 6.2 percent over the same period. This compares with a more modest decline in poverty in rural areas from 22 percent to 15.3 percent. 3. If Jamaica is to achieve "Developed World" status, as i s the goal o f the Government's Vision 2030 plan, then development o f rural areas needs to at least keep pace with development in urban areas. The aim o f the proposed investment is to stimulate rural economic growth and in the process increase the country's overall competitiveness. 4. The tourism and agriculture sectors hold the most significant potential for rural growth and development both because o f their importance to the economy overall and their potential reach into rural areas. Service sectors, o f which tourism i s a significant component, account for about 75 percent o f GDP. The agricultural sector, while only accounting for 4.8 percent o f GDP, represents an important source o f income for the rural population, and accounts for 18.4 percent o f total employment. 5. There are also a number o f linkages and synergies between the tourism and agricultural sectors that can be exploited through this Project, including agro-tourism development in selected rural areas and enhancing the ability o f small-scale agricultural producers to supply the tourism industry. 6. Agriculture: The agricultural sector, while only accounting for 4.8 percent o f GDP, represents an important source o f income for the rural population, and accounts for 18.4 percent o f total employment. The traditional export crops, such as sugar, bananas, coffee, and citrus, which dominated export earnings in the`past, have declined b y 28 percent over the past decade. Meanwhile, the value o f non-traditional food crop exports has been increasing. Jamaica i s a major net food importer, and was among the most impacted countries during the food price crisis o f 2008. Food import comprises over 14 percent o f total imports, mainly for import o f cereals, dairy and meat. 7. The challenges faced by Jamaican agriculture are highly influenced by the effects o f globalization on food markets that have occurred since the late 1980s. Agricultural input and ' Source: Planning Institute o f Jamaica (PIOJ), Economic Planning and Research Department. 1 output marketing has been generally liberalized, and prices tend to be determined by market forces. The removal o f preferential arrangements with the European Union (EU) for banana and sugar exports in the near future w i l l have a significant impact on income from agricultural exports and w i l l require the Government o f Jamaica (GOJ) to support the changes toward a higher value added agriculture. 8. Jamaica's large-scale agricultural sector, based on the export o f sugar and bananas, i s becoming increasingly less important, i.e. mature and very slow growing, if not declining. On the other hand, the small-scale agricultural sector exhibits significant potential for growth, particularly in the domestic market displacing high cost imports and needs to be strengthened through technology transfer and infrastructure improvements to become more competitive. Small farmers, in particular, tend to be at a comparative disadvantage in accessing higher value markets for crop, livestock and fishery products because o f a lack o f market information, inefficient production practices and outdated technologies, lack o f production o f value added products, lack o f economies o f scale for storage and packing, and high logistics costs. Preliminary studies have shown small farmers specifically need to address seasonal variations in the crop supply due to high rainfall in the fourth quarter, which results in reduced crop production. 9. Rural Tourism: Neither the Jamaican business community nor the GOJ have fully exploited opportunities for industry growth presented by the significant changes taking place in the global travel market i.e., the slowing growth o f the Sun, Sand and Sea market - Jamaica's primary business, conducted almost exclusively in densely developed tourism hubs on the coast - and the accelerating growth o f tourism focused on nature, culture, and adventure, for which Jamaica has tremendous potential, primarily in rural areas in the interior o f the country. 10. While the beach resort market remains one o f the largest segments o f the global leisure travel industry, growth slowed to 2 to 3 percent per year in the Caribbean, in the decade before the most recent economic downturn2 On the other hand, tourism focused on nature, culture and unique, customized travel experiences has been growing, by most estimates, at a rate o f 15-20 percent er year, and i s being less significantly impacted by the current downturn in travel demand. P 11. Over the past 10 years, stopover arrivals to Jamaica have risen modestly (approximately 3.9 percent per year), and total tourism expenditures have increased by approximately 3.15 percent per year. Stopover arrivals and expenditures did decline modestly during the fourth quarter o f 2008, likely as result o f the global financial crisis and recessions in North America and Western Europe, Jamaica's two primary source markets. 12. The beach resort market has for a long time been the main focus o f Jamaican tourism. However, in response to changes in the global tourism marketplace, attempts are being made b y GOJ and the private sector to provide a more diversified visitor experience through new product offerings targeted to more diverse groups o f visitors. Although the potential i s increasingly Caribbean Overnight Tourist arrivals data, Caribbean Tourism Organization (CTO) Data source: CTO data, World Travel and Tourism Council, Travel Industry Association o f America, and the recent UNWTO study "Impact o f the Global Economic Crisis on Local Tourism Destinations." 2 recognized, activities such as nature, adventure and culture-oriented tourism, which could play a significant role in rural tourism, have not been adequately promoted and developed. 13. The most important market failures, o f rural tourism development relate to scale and knowhow. Resort tourism development in Jamaica requires relatively large investments, has been undertaken by the largest Jamaican and foreign investors, mainly in accommodations, and is concentrated in traditional resort areas (e.g. Montego Bay, Negril, and Ocho Rios). Those investments have been supported in most cases by large scale infrastructure-related investments by the GOJ. By contrast, successful nature and culture-oriented tourism development require relatively small investments by a fairly large number o f small players dispersed over a fairly wide area, with GOJ providing supporting services and infrastructure much less intensively. 14. Investment in tourism product development has increased in terms o f the diversity o f sizes, types, and service offerings. Still, within the accommodation sub-sector, a large portion of the investment and the market i s taken up by the large-scale, all-inclusive properties. The corresponding growth in mega hotel structures has largely been driven by consumer demand and other market dynamics. Small rural tourism enterprises face several challenges, including: the capacity to respond to changing market dynamics, access to affordable capital and financing, human resource constraints, capacity, limited access to business development services and limited technological management and organizational capacity, among other issues. 15. Given the scale and cost o f investments involved in these traditional areas o f tourism development, as well as, the limited number o f GOJ programs targeting small rural enterprises, many small tourism enterprises in rural communities are effectively excluded from fully participating in the economic benefits that can be provided by this sector. Creating mechanisms to enable small rural operators to access investment opportunities within the tourism sector is a primary objective o f this project. B. RATIONALE FOR BANKINVOLVEMENT 16. The Bank i s well positioned to assist the GOJ in rural income generation. Building on the successful experiences o f past projects, the GOJ has requested that the Bank support a project which would support rural economic development and income generation by enabling farmers to better access markets and by encouraging rural tourism development. The project would also complement the on-going Inner Cities Basic Services Project (ICBSP), which builds on the National Community Development Project's (NCDP) experience focusing on poor urban areas. 17. The Bank also has considerable experience, both in Latin America and globally, in supporting projects to enhance rural incomes, especially targeted at the small farmer and tourism 1 sectors such as the Colombia Productive Partnerships Support Project Iand 1 , Bolivia Rural Alliances Project, Peru Sierra Rural Development Project, Ecuador Poverty Reduction and Local Rural Development, Vietnam Agriculture Competitiveness Project, and the Ethiopia Tourism Development Project. 3 c. HIGHER LEVEL OBJECTIVES TO WHICH THE PROJECT CONTRIBUTES 18. The Project i s consistent with needs identified in Jamaica's Poverty Assessment and the goals set out in the Country Assistance Strategy (April 2005, Report No. 31830-JM), and the Bank's aim o f reducing poverty, improving income equality and overall quality o f l i f e in rural areas by increasing rural incomes. The World Bank Group's Jamaica's Country Partnership Strategy for FY10-13 (currently under discussion and expected to be approved by the end of 2009) is aligned with the Government's Medium Term Socio-Economic Policy Framework (MTF) and is based on three mutually reinforcing pillars: (i) accelerating inclusive economic growth; (ii) improving human development and opportunity; and (iii) crime prevention and reduction. The strategy also emphasizes the two cross-cutting themes o f governance and environmental sustainability. 19. The Project will support the goal o f increasing rural incomes and generating new employment opportunities in rural areas. This goal supports the prosperous economy and sustainable environmental development goals o f Jamaica's Vision 2030 plan, part o f which states the need for a "Competitive Diversified Value-Added Agricultural Production" and "Strong Marketing Systems for Domestic and Export Markets," and includes the need for long term rural development and rural environmental sustainability. The MTF, which sets out the development goals o f Vision 2030 to be accomplished over the medium term, includes the fostering o f Micro Small and Medium Enterprises as a supporting outcome to achieving the developmental goals o f Vision 2030. This should be achieved by creating conditions by which Jamaican productive enterprises can generate improved levels o f wealth. 20. The Project's goal also supports the 2002 Sustainable Tourism Master Plan for Jamaica which highlights the importance o f moving to a more inclusive growth strategy that will support small locally-based market entrants and will draw the country's natural, historic and cultural assets. Environmental sustainability i s a core principle given the importance o f natural assets and the tourism strategy also points to the importance o f reinforcing linkages with local agricultural suppliers as part o f the more inclusive strategy for growth. 11. PROJECT DESCRIPTION A. LENDING INSTRUMENT 21, S The lending instrument i s a U dollar commitment-linked IBRD Flexible loan with a variable spread with a final maturity o f 30 years, including 5.5 years o f grace, with level repayment o f principal with all conversion options and the Front End Fee and the premia for interest rate caps and collars capitalized. 4 B. PROJECT DEVELOPMENT OBJECTIVE AND KEY INDICATORS 22. The Project Development Objective (PDO) o f the Project is to improve market access4 for micro and small-scale rural agricultural producers and tourism product and service providers. The Project's outcome indicators are: Number o f participating rural enterprises that realize an increase in turnover (sales). Number o f participating rural enterprises functioning as registered business entities one year after final disbursement 0 Number o f direct jobs created in rural communities receiving project assistance Percentage o f critical infrastructure projects that achieve their expected results for improvement in the value chain c. PROJECT COMPONENTS 23. Component 1. Rural Subprojects in Agriculture and Rural Tourism (Total US$14.22 million; IBRD US$12.22 million'). This component will finance two types o f rural subprojects. Type A subprojects will support revenue generating activities in agriculture and tourism. Type B subprojects will support provision o f critical infrastructure, marketing and management in the agriculture and tourism sectors. It i s estimated that the project would finance approximately 75 Type A and 40 Type B subprojects over the course o f i t s implementation. The project i s expected to directly and indirectly benefit an estimated 22,000 rural residents through revenue-generating sub-projects and from critical market-oriented infrastructure, marketing and management. The inclusion o f young people and women will be encouraged. 24. Type A: Small-scale Revenue Generating Activities Subproiects. These investments would co-finance approximately 75 demand-driven and competitively selected subprojects implemented by rural agricultural and tourism enterprises (Le., cooperatives, friendly or benevolent societies). Subprojects would be prioritized and evaluated on criteria such as preference for lower income groups, pre-identified markets for the proposed products and services, and a clear local impact (See Annex 4 for additional criteria). Subprojects grant amount are not expected to exceed US$50,000 (excluding technical assistance (TA) and capacity building elements) and beneficiaries will contribute at least 20 percent o f the total subproject cost (in cash and/or in kind). Grants must be spent in accordance with an agreed business plan and can be used for works, goods, services and/or operating costs. 25. Type B: Critical Small-scale Infrastructure, Management and Marketing Subproiects. These investments would co-finance approximately 40 demand-driven and competitively- selected investments in critical small-scale infrastructure, management and marketing support services that cannot realistically be made by the private sector on a for-profit basis, but are critical for successfully reaching project objectives. To qualify for this type o f grant applicants will be required to demonstrate that there is a viable, marketable product or service in their community that will be supported or enhanced. Parish councils, legally registered community organizations and industry associations would be eligible to apply for Type B subprojects. "Market access" improvements refer to all steps along the value chain from production to market. These amounts include the Front End Fee o f the IBRD loan. 5 Beneficiaries will provide a minimum of 20 percent co-financing in cash and/or in kind. Subproject grant amounts are not expected to exceed US$200,000. 26. Critical small-scale inpastructure subprojects: These investments would increase the efficiency and competitiveness o f agricultural value chains and, on the tourism side provide basic services needed or required by visitors and tour operators `to visit rural communities. Examples in the agricultural sector include investments that will enhance produce sanitary conditions, extend the shelf life o f fish, meat and produce, and promote the development o f higher value- added products, including investments in cold storage, vegetable warehouses, packing facilities, processing equipment, and environmental and waste management. Examples in the tourism sector include the construction o f public bathrooms, collection and out-of-view disposal o f solid wastes, construction o f simple crafts markets, equipment for satellite-based internet access, landscaping, trail development, signage, and rehabilitation o f or safety enhancements to public attractions (e.g., hiking trails, waterfalls, and mineral baths). 27. Management subprojects: Investments in management improvements that would enhance market access for agricultural and rural tourism product and service providers. Examples in the agricultural sector include improving the management o f physical markets, management of collection and publication o f market price information, environmental management, management o f market revenue and expenditures (collection techniques, trader registration and spending for market upgrading), efficient management o f market traffic and trade flows, and the organization o f study tours for physical market managers to regional well-run markets. Examples in the tourism sector include subprojects that assist associations/communities to better manage the tourism product, environmental management, and business management. 28. Marketing subprojects: Investments in marketing services that would enhance market access for agricultural and rural tourism product and service providers. Investments in marketing services would be supported where there is a detailed marketing strategy and plan for financial sustainability. Examples in the agricultural sector include development o f virtual markets (website), organization o f workshops bringing representatives o f the hospitality sector and supermarkets together with JSIF sponsored farmer organizations to review product quality and availability, reliability, volume, new products, the implementation o f campaigns to promote "region o f origin product quality", and the promotion o f improved technology or methods such as the use o f stackable crates in fruit and vegetable trade. Examples o f tourism marketing services include the development o f rural tourism "brands," websites, marketing strategies, and online reservations systems (which could be also implemented on a region basis, e.g., Blue Mountains, or island wide), press and tour operator familiarization tours to rural areas, establishment o f marketing and sales kiosks in tourism hubs, production and distribution o f brochures, DVDs and other collateral materials, participation at or even organization o f a trade show (if organized for Jamaica's rural tourism industry as a whole), internet marketing, and travel trade networking (sales calls, workshops, and performances and exhibitions in tourism hubs). 29. Component 2. National Technical Assistance and Capacity Building (Total US1.25 million; IBRD US$1.25 million), The main objective o f this component i s to strengthen relevant national organizations to enhance their capacity to continue assisting the rural 6 enterprises and other Project partners and ensure the sustainability o f the rural enterprises. Hence, the component will finance TA and capacity building for key organizations and agencies that deliver support services in agriculture and rural tourism at the local level. JSIF will invite TA and capacity building proposals from organizations such as Rural Agricultural Development Authority (RADA), Tourism Product Development Company (TPDCo), Jamaica Agricultural Society (JAS), Chambers o f Commerce, etc. JSIF will evaluate the proposals based on their potential contribution to the achievement o f the PDO and their contribution to the operation and sustainability of rural subprojects (Type A and B) financed under the Project. JSIF will finance and procure the agreed servicedactivities. An estimated 20,000 rural residents will benefit indirectly from the training and capacity building provided to beneficiary organization staff under this component. 30. Component 3. Project Management (Total US$2.03 million; IBRD US$1.53 million). To implement the Project, JSIF will put into place a small technical Project Management Team (PMT), funded by this component, while JSIF core staff will implement procurement and financial management. This component will finance project management, technical expertise (tourism and agricultural specialists, monitoring and evaluation), staff training, the annual audit, vehicles, office equipment and other operating costs. This component will also ensure that effective fiduciary arrangements are in place during implementation. The outputs o f this component are the efficient and effective Project implementation and monitoring. D. LESSONS LEARNED AND REFLECTED IN THE PROJECT DESIGN 31. Project design and implementation lessons relevant to this Project are drawn from Jamaica-specific projects, agricultural linkage development projects, tourism dedicated projects and private sector development projects with tourism and agriculture components. 32. Related World Bank-funded projects that influenced the design o f the Project include Colombia Productive Partnerships Support Project (200 1) and Second Rural Productive Partnership Project (2007), Peru Sierra Rural Development Project (2008), Bolivia Rural Alliances Project (2005), Vietnam Agriculture Competitiveness Project (2008), Ethiopia Sustainable Tourism Development Project (2009) and the recently closed Jamaica National Community Development Project (NCDP). In addition, the design o f the Project also takes into account lessons learned from operations supported by other donors, including USAID's Protected Area and Rural Enterprise Project (PARE), USAID's Rural Enterprise, Agricultural and Community Tourism Project (REACT), the European Union (EU)'s Eastern Jamaica Agricultural Support Project (EJASP) and the EU's Banana Support Program (EUBSP). Lessons learned include : a) Addressing market failures through matching grants (in addition to improving the policy environment and investment climate) helps small enterprises manage transaction costs and the risks associated with developing value chains, technological adaptation and organizational innovation, as in the case o f farmers investing in farmer organizations and agribusinesses in developing value chains, and also in the case o f small tourism enterprises entering the market. 7 b) The importance o f a competitive technical selection and approval process based o n publicized criteria and strict adherence to the "rules o f the game" for projects that finance subprojects through grants. c) Project support for advisory services to help partnerships prepare quality business and investment plans i s crucial for the success and sustainability o f the subprojects. d) The development o f a local consulting and .services industry that can offer ongoing support to both farmer organizations and enterprises. e) Small enterprise groups were more likely to succeed when they consisted o f entities that share the same economic level and interests and are established as formal organizations. 0 The importance o f fostering improved relations between the public and private sector as the private sector does not trust the public sector and i s reluctant to engage with small holders because o f the risks and high transaction costs involved. g) The importance o f mobilizing credit from financial institutions, since this can be difficult at the beginning. 33. For community and rural tourism development in particular, lessons learned from a review o f prior related projects, community-based tourism initiatives impact studies, and from peer reviewers' comments include: The travel trade, e.g. tour operators, ground operators, hotel operators should be engaged in the assessment process since they are the best and most reliable source o f market intelligence and important partners in selling the products and services developed. If a proposed subproject has no apparent market support, it should not receive project funding no matter how deserving the community or project might be. Any project funded product development should be for those with reasonable market access. If tourists cannot be brought into a community in a reasonably efficient way, n o matter how attractive the product, the odds o f success i s greatly diminished. The private sector and private (risk) capital should be engaged in the design and development process, both as a way to ground truth development proposals and educate communities in a market-based approach to tourism development and sensitize them to markets. Professional management and marketing services, or, at a minimum, extensive training, mentoring and marketing support should be provided. ALTERNATIVES CONSIDERED AND REASONS FOR REJECTION One alternative considered was doing a straight continuation o f the NCDP, which would have been more o f a pure social infrastructure project. Given the success o f the original N C D P project in improving social capital across Jamaica, the GOJ decided that it wanted to build on that success with a more market driven approach that would have a greater impact on rural income generation. 35. A second alternative would have been to aim at strengthening credit markets by improving access to credivlending for small businesses. As access to credit is only one constraint faced by small entrepreneurs, it was decided that it would be better to use 8 competitively allocated matching grants, which demonstrate positive results in addressing market failures limiting small entrepreneurs from entering and competing in high value markets. Lessons learned from other projects show that matching grants, as proposed in this Project, are relatively straightforward to administer and entail little `crowding-out' o f commercial financial services. 111. IMPLEMENTATION A. PARTNERSHIP ARRANGEMENTS (IF APPLICABLE) 36. Project preparation has been partially financed through a PHRD grant from the Government o f Japan (TF 90322) with additional financing provided by the European Union AAACP Program Trust Fund (TF 91439). 37. Public funds to finance the Project will be provided by the GOJ (through the IBRD loan and a budgetary contribution) and private funds from agriculture or tourism enterprises in cash or partially in kind are part o f the total partnership investment package. This counterpart financing i s important to ensure that selected rural groups have sufficient resources for working capital, and that there i s a high level o f commitment and buy-in o f the part o f grant recipients. B. INSTITUTIONAL AND IMPLEMENTATION ARRANGEMENTS 38. Project Oversight. The Borrower for the Project i s Jamaica, represented by the Ministry o f Finance and the Public Service (MOF&PS). MOF&PS w i l l delegate day-to-day Project implementation to the Jamaica Social Investment Fund (JSIF). The implementation o f the Project i s expected to be six years. 39. Inter-Ministerial Project Steering Committee. This committee w i l l be responsible for ensuring that the Project i s in line with national development priorities. The chairing o f the Committee w i l l be rotated between Ministry o f Agriculture and Fisheries (MOA&F) and Ministry o f Tourism (MOT). The Steering Committee w i l l include representatives o f other related agencies (i.e., Office o f the Prime Minister, Planning Institute o f Jamaica (PIOJ), Rural Agricultural Development Authority (RADA), Tourism Product Development Company (TPDCo), JSIF, and MOF&PS). The Committee w i l l meet at least quarterly during the first year o f implementation and at least semi-annually thereafter to review the Project's work plan, budget and implementation. The TORS for the Steering Committee will be included in the Operational Manual (OM). The Steering Committee w i l l have two sub-committees (one for tourism and one for agriculture) to provide technical guidance as required. 40. Implementing Agency. JSIF w i l l establish internally a Project Management Team (PMT) that w i l l be responsible for overall implementation and will coordinate all the actors involved in the Project's execution. JSIF w i l l be responsible for financial management, procurement and compliance with safeguards. Additionally, the PMT w i l l be responsible for key aspects o f the subproject cycle including: promotion, communication, selection, preparation, implementation, 9 local stakeholder coordination, monitoring and evaluation, capacity building and subproject implementation supervision. These activities will either be contracted or undertaken directly b y the PMT. The P M T will also coordinate with relevant national institutions on component implementation. 4 1. Rural Economic Evaluation Committees (REEC). These committees (one for agriculture and one for tourism) will be in charge o f reviewing and recommending the viable subprojects. JSIF will chair the Committees, which will be comprised o f five representatives o f the public and private sector. The three private sector representatives on each committee will be drawn from the private micro-finance sector, commercial banks and private businesses. JSIF and either MOA&F or RADA (for the agricultural REEC) or JSIF and either M O T or TPDCo (for the tourism REEC) will comprise the government representation on the REECs. 42. The Ministry o Agriculture and Fisheries (MOA&F) and RADA. The MOA&F will be a f lead partner to JSIF and will through i t s executing agency, RADA, provide field extension services for the agricultural subprojects in collaboration with the Enterprise Development Officers (EDOs) hired by the PMT. 43. The Ministry o Tourism (MOT) and TPDCo. The M O T will be a lead partner with JSIF f and will through i t s agency, TPDCo, conduct the initial product development assessment for proposed rural tourism subprojects to determine marketability and the required aspects f o r product development to meet standard requirements. 44. Rural Enterprises. Rural enterprises refer to groups o f people with common economic interests (Le., farmers, fishermen, agro-processors, tour guides, craft makers, etc.) who have formed a legally recognized organization (Le., a Cooperative, Friendly or Benevolent society) to carry out business activities. Rural enterprises will be eligible for subproject financing. 45. Governance and Project Transparency: In order to ensure good governance and transparency, JSIF posts all project operational manuals on i t s website. The RED1 OM will be posted and will include the details on eligibility, priority and selection criteria for subprojects. Applicants whose proposals are not selected will receive their applications back with comments and scores. Subproject funding and cost information will also be available on the JSIF website. The website lists JSIF's phone number and has a feedback form that the public can use to send in comments or questions. The Bank's anti-corruption guidelines will apply to the Project as w e l l as to the subprojects financed under this Project. In addition, the project will hold periodic activities, including workshops, with stakeholders. 46. Subproject Cycle. All subprojects will be selected through a competitive process. T h e initial objective will be to open up the process to as many subprojects as possible to help ensure that the rural enterprises with the most drive and determination, and the ideas with the most significant market potential and potential to catalyze rural development, have an opportunity to compete for grants. 0 Promotion. Following a promotion and dissemination campaign in targeted Parishes and regions, applicants will present proposals for Type A and Type B subprojects to JSIF following standard formats included in the OM. 10 Eligibility Screening. JSIF will pre-screen proposals to verify that all required documentation has been included and that the application complies with the eligibility conditions (including a fiduciaryhinancial assessment in the case that they will handle funds), which will be specified in the OM. Prioritization. JSIF will rank eligible proposals based on pre-established weighted priority criteria such as poverty-level o f community, level o f co- financing, local impact, jobs to be created, and size o f the group. Mandatory criteria and weights to be used for all subprojects will be specified in the OM, and any supplementary criteria will be included in the invitation. The highest ranked proposals (that also meet a minimum score) will move to the preparation stage. All other proposals will be returned to the applicants with scores and reviewers' comments. Subproject preparation. JSIF will assist applicants in preparing a detailed business plan (for Type A subprojects) or implementation plan (for Type B subprojects) showing that the subproject is technically and financially feasible, potential beneficiary groups satisfy the institutional requirements as described in the OM, and that the subproject can be implemented within the proposed budget and timelines. The plan will also include the results o f the environmental screening and environmental mitigation plan (as applicable), the agreed training and procurement plan, evidence o f legal entity status (where applicable), cash flow (Type A subprojects only), and Operation and Maintenance plan (Type B . subprojects only). Subproject selection. Once the subproject i s prepared and considered to be feasible b y PMT, it will be submitted to the REEC for evaluation and recommendation for financing or rejection. Selected proposals will be confirmed by the JSIF Board o f Directors. Subproject implementation. Successful applicants will implement subprojects with TA and support from JSIF and in accordance with the agreed businesshmplementation plan. JSIF and the recipients will sign a subproject agreement or contract specifying JSIF's contributions to the implementation o f the subproject as well as the duties and responsibilities o f both parties. The agreement will clearly specify the disbursement installments and conditions as well as the ownership o f the assets purchased under the agreement. Beneficiaries who will implement their subprojects will be required to open a special bank account to receive and manage subproject funds prior to selection. Procurement will be done by the beneficiary groups if and when all o f the following conditions are met: (a) works to be financed cost no more than 10 million Jamaican dollars (about US$l10,000); (b) beneficiaries are legally registered as a cooperative, friendly or benevolent society (or are associated with a legally registered community organization); and (c) beneficiaries (or associated community organizations, if applicable) have met the fiduciary capacity requirements specified in the OM. 0 Monitoring and Evaluation. The P M T will monitor each subproject through subproject documentation, reporting and field visits. 11 c. MONITORING EVALUATION OF OUTCOMES/RESULTS AND 47. JSIF will be responsible for Monitoring and Evaluation (M&E). An overall M&E system has been prepared and will be incorporated into JSIF's Management Information System (MIS), which will form the basis for tracking key implementation progress indicators. The M&E system i s based on the Results Framework presented in Annex 3. Particular attention has been paid to establishing realistic and useful indicators that can be regularly collected and maintained in the MIS. 48. The JSIF M&E unit is responsible for implementingthe Project's M&E framework. T h e JSIF M&E unit is presently staffed by an M&E Coordinator and two M&E Officers. At present, the M&E unit is involved in limited routine monitoring o f ongoing project activities and outputs. A full time M&E officer will be recruited for the REDI. She will be responsible for (i) maintaining the overall M&E framework including implementation procedures, tools, data flow chart and budget; (ii)strengthening the monitoring system to ensure sound output, process a n d outcome monitoring; (iii) validating data by random sampling recording and aggregating process; and (iv) promoting and encouraging the demand for M&E. 49. The M&E unit will maintain the M&E Module o f the Management Information Systems (MIS), producing reliable information in a timely manner. The system uses the Electronic Fund Manager platform. This database includes the basic physical and financial records, the details of inputs and services provided to the beneficiaries or clients (for example, funding and training) and data obtained from surveys and other recording mechanisms designed specifically to collect information from the subprojects. 50. The P M T will monitor each subproject through subproject documentation, reporting and field visits. The subproject preparation studies will provide baseline information o f the proposed business, objectives and measurable monitoring indicators. The business plan functions as t h e implementation plan. The EDOs will prepare bi-monthly reports on the implementation of subprojects, indicating the milestones achieved (according to plan) and the difficulties encountered. Where possible, the reports will also provide the degree o f achievement of t h e measurable targets. The report will also contain red flags requiring attention from the PMT. 51. At the central JSIF level, the data contained in the field reports will be reviewed by P M T specialists and entered into JSIF's central monitoring database. The P M T will issue reports every six month on the overall status o f the subprojects for review by JSIF management and t h e World Bank. These reports will provide inputs for the JSIF and World Bank monitoring system (Implementation Status Reports). The first report will cover the period between effectiveness and the first June or December following that date, JSIF will monitor the implementation of contractual agreements including procurement and financial management through the Rural Enterprise Consultant and P M T officers. 52. At the end o f the subproject disbursement cycle, JSIF and grant recipients will carry o u t a final evaluation o f the subproject design and implementation to document lessons learned for future subprojects. In addition, an external independent mid-term review and final review will be conducted for the entire scope o f the Project to determine progress towards development 12 goals, and impact, likelihood o f sustainability o f results, and recommendations for follow up activities, respectively. D. SUSTAINABILITY 53. Sustainability o f the impact o f the Project will be ensured by a triple-bottom-line (financial, environmental, and social) assessment in the technical evaluation o f the subprojects eligible for program support. Special attention will be paid to ensure that subprojects to receive Project financing respond directly to a clearly identified market demand. The REEC will be comprised o f majority private sector actors who clearly understand and judge the financial viability o f the proposed subprojects. 54. In terms o f environmental sustainability o f the subprojects, for tourism subprojects, other sustainability measures could potentially include, both as a means o f ensuring sustainability and for marketing purposes, the pursuit o f certification o f enterprises created or enhanced through a variety o f programs, including Green Globe and Blue Flag, or development o f a Jamaica quality and sustainability ratings system. 55. In terms o f the institutional sustainability o f the Project, Component 2 i s designed to increase the technical capacity o f national institutions so that they may offer improved T A to fbture rural business enterprises in their incipient stage, The continuation o f the grant mechanism itself after the l i f e o f the Project i s not an expected indicator o f achieved sustainability. 56. The Project's support o f the participatory process at every level (government institutions, private sector, communities and beneficiaries) should also enhance sustainability by ensuring strong ownership by all stakeholders. Component 2 i s intended to strengthen the national organizations to enhance their capacity to continue assisting the rural enterprises and other Project partners and ensure the sustainability o f the rural enterprises. E. CRITICAL RISKS AND POSSIBLE CONTROVERSIAL ASPECTS Description of Risk Mitigation Measure Rating of Residual Risk Weak commercial linkages in the A clear and well-defined focus on markets M agriculture and tourism value chains that and market linkages as part o f subproject could inhibit market access reduce the evaluation, enterprise level TA, and odds o f successful rural enterprise institutional capacity building. development Frequent changes in tariffs and otherJSIF will coordinate closely with MOA&F M protection mechanisms applied to to ensure adequate advance warning. This agricultural imports. has been specified in the project memorandum of Understanding (MOU) with MOA&F. The complexity and interdisciplinary JSIF will set up an Inter-Ministerial Project M 13 nature o f creating a supportive Steering Committee, including high level institutional framework,' and government officials from all relevant Government related support services required for entities, which would promote intra- successful rural enterprise development. governmental coordination and ensure consistencv with Government Dolicies. The Project fails to attract and/or select Rural groups contacted during Project M high quality proposals for competitive preparation have demonstrated a high level grants. o f interest in the Project, and have been provided with significant opportunities to provide inputs into Project design. As a result the Project has been widely publicized. Subprojects will be selected through a competitive process by board with significant private sector representation. Selected proposals will be required to develop a detailed business plan that includes sustainability at the economic, social, and environmental levels. The implementing agency has limited JSIF has established a high level Inter- M technical expertise in supporting Ministerial Project Steering Committee productive activities and small which includes the relevant government enterprises. players. They also set up two technical working groups which included government and donor technical specialists and JSIF will make extensive use o f private sector expertise in delivering TA and building up i t s internal capacity to promote rural enterprise development. Also, technical specialists in agriculture and tourism will be contracted to work as part of the PMT. The lack o f connectivity between JSIF's JSIF i s in the process o f addressing this L MIS (Fund Manager) and JSIF's problem. In the interim, data on subprojects accounting software package (AccPac) i s are being entered in the accounting system a cause for continuing concern. manually. A full fiduciary (FM and procurement) assessment was carried out during preparation. National procurement procedures are The entity responsible for procurement M complex and cumbersome and could compliance & regulatory and monitoring, potentially delay Project implementation within the government has indicated that (it takes five months or more from bid national procurement thresholds will be opening to the endorsement o f contracts reviewed during this fiscal year to address through the national approval system). current bottlenecks. JSIF has a heavy work load with ongoing procurement activities that could be a JSIF recruited new staff who received source o f potential delays. additional training to handle different procurement activities. ~~ Consultations may not be carried out with A communication and outreach strategy L sufficient participation of rural aimed at attracting high quality proposals i s 14 stakeholders (communities and small already being implemented and has yielded entrepreneurs). significant results to date. Capacity building programs for the PMT will also be implemented, addressing operational mechanisms for participation during Project design and implementation. Politicization of the Project could result in Establishment o f the REEC that will select M Project funds being awarded to subprojects based on transparent procedures beneficiaries for political reasons, not and eligibility criteria. technical merit. Incentives for civil society participation will be provided through supporting technical training and capacity building. Overall Risk Rating u M I [H=High, S=Substantial; M=Moderate; L=Low.] F. LOAN~REDIT CONDITIONS AND COVENANTS Board Presentation There are no conditions of Board presentation Effectiveness Signing o f the Subsidiary Agreement between MOF&PS and JSIF. Adoption o f the Operational Manual by the Board of Directors o f JSIF (scheduled for September 23,2009 board meeting). Covenants e Within one month o f the Effectiveness date, JSIF shall ensure that the Agriculture Specialist, and Tourism Specialist have been appointed, and that the M&E specialist will be appointed within four months o f effectiveness. e The Borrower will establish and maintain the Inter-Ministerial Project Steering Committee under TORSacceptable to the Bank. e The JSIF will maintain the PMT within JSIF 0 The BorrowedJSIF will carry out the Project in compliance with the OM. 0 The Borrower/JSIF will complete a mid-term review report to be made available before the mid-term evaluation mission, in accordance with a TOR acceptable to the Bank. 0 The Borrower/JSIF will establish the REEC with composition acceptable to the Bank prior to subproject selection. e The JSIF will develop business and implementation plan templates acceptable to the Bank prior to subproject selection. 0 The JSIF will select and contract subproject formulators within three months o f the date o f effectiveness. e JSIF will adopt a Project communications strategy by November 30,2009. e The Borrower/JSIF will sign MOUs with MOA&F/RADA and with MOT/TPDCo describing their roles in project implementation. 15 JSIF will provide training in environmental management, including application o f the EMF. JSIF will maintain a MIS. JSIF will conduct an annual audit o f sample subprojects to learn lessons from t h e application o f the EMF, The Borrower/JSIF will prepare a Completion Report at the end o f the project. Retroactive funding. 57. Retroactive funding o f an amount up to US$ 3 million (20 percent o f the Loan amount) has been agreed in order to allow Project activities (such as promotion) to begin after August 1, 2009. IV. APPRAISAL SUMMARY A. ECONOMICAND FINANCIAL ANALYSES 58. The hnding o f subprojects, business opportunities and supporting services and infrastructure (Component 1) are the main component o f the project, comprising approximately 80 percent o f total project funds. These subprojects will be identified through a demand driven process during project implementation. Thus a precise detailed ex ante analysis o f projects that will be funded i s not possible and it is difficult to conclude definitively on the viability o f either o f the two types o f projects (potentially differentiated more by their ownership than b y their activity) in the two sectors (agriculture and tourism) being targeted in the project. 59. The financial and economic analysis based on seven representative samples o f similar ventures in Jamaica indicates that all o f the subprojects evaluated are viable. The financial internal rates o f return range from 19 to 58 percent. This increases for the economic analysis from 23 to 65 percent. Aggregate returns to the project amount to 33 and 39 percent respectively for the financial and economic returns across all o f the models. The N e t Present Value (NPV) per enterprise on average, without other project costs, i s US$48,000 using financial prices and US$55,000 using economic prices. When direct subproject additional costs (related preparation, consulting services/TA) i s also taken into account, the N P V per subproject reduces to US$28,000 and US$35,000 respectively, and the aggregate rate o f return also lowers to 12 percent (financial) and 14 percent (economical). These lower rates o f return when including associated support services reflect the very high cost environment o f Jamaica for quality technical service providers necessary to carry out these activities. Annex 9 provides the detailed results o f the financial and economic returns. B. TECHNICAL 60. The technical quality o f the subproject proposals will be ensured by (i) assisting applicants during the preparation o f business plans (Type A subprojects) or implementation plans (Type B subprojects) and requiring that business plans be financially, environmentally and socially sustainable before being considered for selection; (ii) including training and TA needs as 16 part o f the business or implementation plans; (iii)providing for independent evaluation with private sector representatives having the leading role in final subproject selection; and (iv) having in place a M&E system that will allow feedback into future rounds o f subproject applications. C. FIDUCIARY 61. The key fiduciary implementing agency o f the Project will be the Jamaica Social Investment Fund (JSIF). JSIF has a long and successful experience in implementing W o r l d Bank-financed projects, o f which two are currently active. JSIF would manage the Project through a Project Management Team (PMT). In order to accommodate the RED1 project, specific actions were taken to further enhance the financial management arrangements at JSIF: The actions related to the full staffing o f the PMT; revision o f i t s OM to include the financial appraisal and supervision o f rural economic development subprojects; and financial reports o n subprojects. I t was also agreed that the subproject agreement signed between JSIF and project beneficiaries responsible for implementing their respective subprojects would require beneficiaries to provide full financial information to the external auditor if so requested. Finally, Government agencies involved in the Project would be required to have adequate budget resources to implement the Project. 62. The Bank's assessment o f the capacity o f JSIF to implement procurement actions for the subprojects i s based on JSIF's satisfactory performance to date in implementing ongoing Bank projects. While the procurement team within JSIF is well-equipped to execute procurement according to World Bank Procurement Guidelines, the overall public procurement system in Jamaica needs some improvements. D. SOCIAL 63. Key findings and inputs to the Project design include the needs assessment reports and sectoral studies carried out by JSIF, which provided: (i) characterization o f rural communities; (ii) mapping o f local public and social organizations to be supported by the Project, which will enable the Project to support small scale producers and organizations, and (iii) suggestions for how to engage local producers and mitigate any social impacts. Consultations were carried out in workshops in January 2009 in three parishes. These consultations have involved representatives o f parishes, N o n Governmental Organizations (NGOs), farmers, women, private actors related to relevant agricultural and tourism initiatives and public and social sub-national entities that provide services in these sectors (see Annex 10 for a summary o f the results o f the studies consultations). As gender inclusion and economic empowerment are important for Project success, ensuring that both men and women will be able to access, participate and benefit from the Project i s crucial. A gender consultant will identify measures that would support women's economic empowerment within the Project. 64. The Project i s expected to positively impact beneficiaries by increasing income a m o n g rural residents. The objectives o f the Project from the social perspective are the following: 0 Promote Social Inclusion through expected increased access to opportunities for l o c a l employment alternatives; (i) benefit rural tourism and farming through capacity building; (ii)offer an alternative to ruralhrban migration, a contributing factor to urban violence. 17 Promote effective uarticipation of civil societv organizations in local government. This w i l l support the civil society engagement through T A to community organizations, as needed, to strengthen their internal organization, including financial management a n d their capacity to communicate demand and develop proposals on agriculture and community based tourism. Gender equity through providing capacity-building activities to target vulnerable groups such as women. The Project would also seek to enhance women's participation in decision making. E. ENVIRONMENT 65. This i s a category B project. The Project aims to enhance market-based opportunities for income generation and local economic development in the agricultural and rural tourism sectors in an effort to reduce poverty. The Project w i l l support the establishment and growth o f small rural-based agricultural and tourism enterprises which are located in (and/or owned by) people from poor rural areas. The primary focus of the Project w i l l be on groups o f producers/ small enterprises as experience has shown that these types o f groups are more likely to have the potential, skills and incentives to develop a successful small enterprise. 66. JSIF already had in place environmental guidelines and an Environmental Management Framework (EMF) to mitigate the negative environmental impacts of different types of subprojects which were being used to monitor subprojects under other Bank supported projects. The EMF covered environmental impacts and mitigation plans for different infrastructure project typologies such as roads; infirmaries and health centers; sanitary facilities (latrines and community showers); drainage; water projects; and agro-processing facilities. With the use of project preparation funds, a consulting firm proposed revisions to the current EMF to accommodate new types o f agricultural and rural tourism subprojects. Environmental mitigation plans have been prepared to spell out activities that w i l l need to be undertaken to address a n y potential environmental. The revised EMF was adopted by JSIF on July 21,2009. 67. N o major adverse environmental impacts are envisaged as a result o f the Project. Some of the potential negative environmental impacts associated with tourism subprojects include trail disturbance; natural resource loss from tampering o f flora/ fauna; desensitization o f existing natural fauna from human presence; possible damage to seafloor from divers/ snorkelers; improper sewage and solid waste disposal etc. Similarly, potential negative environmental impacts associated with agricultural subprojects include water pollution (groundwater contamination from seepage o f animal waste; feedlot, pesticide and fertilizer runoffs etc.); solid waste pollution (improper disposal o f agro-processing wastes etc.) etc. Environmental mitigation plans for these potential environmental impacts have been incorporated into the revised EMF. 68. In addition, the EMF includes: 1) a negative list o f investments (subprojects that would be classified as Category A under the World Bank's Environmental Assessment Operational Policy 4.01) which w i l l not be financed under the Project; 2) a provision that subprojects that w i l l result in the significant conversion or degradation o f natural habitats w i l l be evaluated to ensure compliance with Operational Policy 4.04 on Natural Habitats; 3) that in the event that any o f the subprojects procure pesticides or result in increased use o f pesticides, an appropriate Pesticide Management Plan, as required by OP 4.09 on Pest Management, which would include 18 non-chemical measures for pest management and guidelines for proper selection, application, storage, handling, transport, and disposal o f pesticides, will be developed. Additionally, subprojects that involve involuntary resettlement will not be eligible for financing under t h e Project. F. SAFEGUARD POLICIES 69. Among the Bank's safeguard policies, the Environmental Assessment (OP 4.01), Natural Habitats (OP 4.04), Forests (OP4.06) and Pest Management (OP 4.09) are triggered. The Project design incorporates the necessary mitigation measures for the adverse impacts associated with the potential agricultural and rural tourism-based subprojects through appropriate environmental screening procedures and related mitigation plans for submitted proposals. Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OPBP 4.0 1) [XI [I Natural Habitats (OP/BP 4.04) [XI [I Pest Management (OP 4.09) [XI 11 Physical Cultural Resources (OP/BP 4.1 1) [I [XI Involuntary Resettlement (OP/BP 4.12) [I [XI Indigenous Peoples (OP/BP 4.10) [I [XI Forests (OP/BP 4.36) [XI [I Safety o f Dams (OP/BP 4.37) [I [XI Projects in Disputed Areas (OP/BP 7.60)* [I [XI Projects on International Waterways (OP/BP 7.50) [I [XI G. POLICY EXCEPTIONS D READINESS AN 70. N o policy exceptions are required. 71. 'In terms o f readiness, JSIF has confirmed that the Project Manager responsible for preparation w i l l continue as the Project Manager, at least for the first 6 months o f implementation. TORS for other key staff are included in the draft OM, the final draft o f which was submitted to the Bank on July 15, 2009. The O M i s expected to be formally adopted at the next JSIF board meeting on September 23, 2009. The O M also includes eligibility and prioritization criteria, documentation required for the application process and description of the full M&E arrangements. JSIF already has procurement and financial management staff in place and has a well established MIS. The promotion process will begin immediately following negotiations in order to permit prioritization o f the first group o f subprojects to be completed by effectiveness. * By supporting theproposedproject, the Bank does not intend to prejudice thejnal determination o the parties'claims on the f disputed areas 19 Annex 1: Country and Sector o r Program Background JAMAICA: Rural Economic Development Initiative Project Country Context 1. Jamaica i s a highly indebted middle income country with a population o f approximately 2.7 million and a per capita GNI o f US$4,491 (2007).6 Jamaica's economic performance i s severely constrained by i t s high level o f debt. The economy's key strengths include political stability, abundant natural resources, and i t s proximity to its largest trading partners. However, the high level o f debt to GDP and the resulting cost o f debt service constrain the social spending and investment required for higher growth and poverty reduction. 2. The Jamaica Labor Party (JLP) won the 2007 general election. The new administration, under the leadership o f Prime Minister Bruce Golding, has embarked on an ambitious reform program aimed at achieving higher economic growth, combating crime and violence, and reducing poverty. Corruption i s a growing problem in Jamaica, In July 2008, public opinion polls, for the first time, listed corruption (21%) as the second most serious problem facing the country behind crime and violence (57%). The reform program recognizes that the country's n economic and fiscal trajectory i s not sustainable and i s taking actions to bring fiscal balances a d debt levels under control. These priorities have become even more pertinent in the context o f the current global financial crisis and economic slowdown. The government i s preparing a comprehensive 25 year development plan, Vision 2030, to address the many long-term challenges that Jamaica faces as well as a Medium-Term Socio-Economic Framework to achieve near-term goals. Vision 2030 i s currently being reviewed island-wide through consultations before being finalized by Parliament. 3. Since 1991, poverty levels have declined steadily, from 44.6 percent to 18.7 percent in 2005. The decline in the percentage o f Jamaicans with consumption levels below the national poverty line i s due in large part to increases in remittances, a sharp reduction in general inflation, and a decline in the relative price o f food. Although poverty rates in Jamaica have declined overall, rural poverty has remained stubbornly high during the 1990s and early 2000s. Poverty in rural areas i s two to three times higher than found in the Kingston Metropolitan Area ( M A ) and at least one-third higher than found in the other urban areas. 4. If Jamaica i s to achieve "Developed World" status, as i s the goal o f i t s Vision 2030 plan, then development o f rural areas needs to at least keep pace with development in urban areas. T h e aim o f the proposed investment i s to stimulate rural economic growth and in the process increase the country's overall competitiveness. Crime and violence problems and perceptions o f c r i m e and violence negatively affect Jamaica's image and i t s economy. Jamaica's homicide rate i s among the highest in the world. In 2008, for example, six out o f every 1,000 persons w e r e Source: PIOJ Economic Planning and Research Department. 20 murdered. The cost o f interpersonal violence in 2006 was estimated to be about US$600 million' or 5 percent o f GDP. 5. Poverty remains relatively high in rural areas, but has fallen substantially since the government began monitoring living conditions in 1988. The incidence o f poverty has fallen from 30.4 percent in 1989 to 9.9 percent in 2007. Poverty declined sharply in the Kingston metropolitan area, falling from 14.3 percent to 6.2 percent over the same period. This compares with a decline in poverty in rural areas from 22 percent to 15.3 percent. Sector Background 6. The majority o f Jamaicans who were classified as poor in 2006 resided in rural communities; this i s as a result o f the limited employment and/or income generating options within most o f these communities. In addition, about 3 5 percent o f potential workers remain outside the labor force. The tourism and agriculture sectors hold the most significant potential for rural growth ,and development both because o f their importance to the economy overall and their potential reach into rural areas. Service sectors, o f which tourism i s a significant component, account for about 75 percent o f GDP. The agricultural sector, while only accounting for 4.8 percent o f GDP, represents an important source o f income for the rural population, and accounts for 18.4 percent o f total employment. 7. Agriculture: The traditional export crops, such as sugar, bananas, coffee, and citrus, which dominated export earnings in the past, have declined by 28 percent over the past decade. Meanwhile, the value o f non-traditional food crop exports has been increasing. Jamaica i s a major net food importer, and was among the most impacted countries during the food price crisis o f 2008. Food import comprises over 14 percent o f total imports, mainly for import o f cereals, dairy and meat. 8. The challenges faced by Jamaican agriculture are highly influenced by the effects o f globalization on food markets that have occurred since the late 1980s. Agricultural input and output marketing has been generally liberalized, and prices tend to be determined by market forces. The removal o f preferential arrangements with the European Union (EU) for banana a n d sugar exports in the near future will have a significant impact on income from agricultural exports and w i l l require the GOJ to support the changes toward a higher value added agriculture. 9. Jamaica's large-scale agricultural sector, based on the export o f sugar and bananas, i s becoming increasingly less important, i.e. mature and very slow growing, if not declining. On the other hand, the small-scale agricultural sector exhibits significant potential for growth, particularly in the domestic market displacing high cost imports and needs to be strengthened through technology transfer and infrastructure improvements to become more competitive. Small farmers, in particular, tend to be at a comparative disadvantage in accessing higher value markets for crop, livestock and fishery products because o f a lack o f market information, inefficient production practices and outdated technologies, lack o f production o f value added products, lack o f economies o f scale for storage and packing, and high logistics costs. Preliminary studies have 7 E. Ward and A. Grant: "Estimating the economic costs o f injuries due to inter-personal violence in Jamaica" in Manual for Estimating the Economic Costs o Injuries Due to Interpersonal and Self-Directed Violence. Geneva: f World Health Organization. 21 shown small farmers specifically need to address seasonal variations in the crop supply due to high rainfall in the fourth quarter, which results in reduced crop production. 10. Rural Tourism: Neither the Jamaican business community nor the GOJ have fully exploited opportunities for industry growth presented by the significant changes taking place in the global travel market i.e., the slowing growth o f the Sun, Sand and Sea market - Jamaica's primary business, conducted almost exclusively in densely developed tourism hubs on the coast - and the accelerating growth o f tourism focused on nature, culture, and adventure, for which Jamaica has tremendous potential, primarily in rural areas in the interior o f the country. 11. While the beach resort market remains one o f the largest segments o f the global leisure travel industry, growth slowed to 2 to 3 percent per year in the Caribbean, in the decade before the most recent economic downturn. O n the other hand, tourism focused on nature, culture and unique, customized travel experiences has been growing, by most estimates, at a rate o f 15-20 percent per year, and i s being less significantly impacted by the current downturn in travel demand. 12. Over the past 10 years, stopover arrivals to Jamaica have risen modestly (approximately 3.9 percent per year), and total tourism expenditures have increased by approximately 3.15 percent per year. Stopover arrivals and expenditures did decline modestly during the fourth quarter o f 2008, likely as result o f the global financial crisis and recessions in North America a n d Western Europe, Jamaica's two primary source markets. 13. The beach resort market has for a long time been the main focus o f Jamaican tourism. However, in response to changes in the global tourism marketplace, attempts are being made by GOJ and the private sector to provide a more diversified visitor experience through new product offerings targeted to more diverse groups o f visitors. Although the potential is increasingly recognized, activities such as nature, adventure and culture-oriented tourism, which could play a significant role in rural tourism, have not been adequately promoted and developed. 14. The most important market failures o f rural tourism development relate to scale a n d knowhow. Resort tourism development in Jamaica requires relatively large investments, has been undertaken by the largest Jamaican and foreign investors, mainly in accommodations, a n d i s concentrated in traditional resort areas (e.g. Montego Bay, Negril, and Ocho Rios). Those investments have been supported in most cases b y large scale infrastructure-related investments by the GOJ. B y contrast, successful nature and culture-oriented tourism development require relatively small `investments by a fairly large number o f small players dispersed over a f a i r l y wide area, with GOJ providing supporting services and infrastructure much less intensively. 15. Investment in tourism product development has increased in terms o f the diversity o f sizes, types, and service offerings. Still, within the accommodation sub-sector, a large portion of the investment and the market i s taken up by the large-scale, all-inclusive properties. The corresponding growth in mega hotel structures has largely been driven by consumer demand and other market dynamics. Small rural tourism enterprises face several challenges, including: the capacity to respond to changing market dynamics, access to affordable capital and financing, human resource constraints, capacity, limited access to business development services and limited technological management and organizational capacity, among other issues. 22 16. Given the scale and cost o f investments involved in these traditional areas o f tourism development, as well as the limited number o f GOJ programs targeting small rural enterprises, many small tourism enterprises in rural communities are effectively excluded from fully participating in the economic benefits that can be provided by this sector. Creating mechanisms to enable small rural operators to access investment opportunities within the tourism sector i s a primary objective o f this project. 17. Jamaica's tourism sector offers a significant opportunity for small and medium enterprise development and income generation in rural areas. There are also a number o f linkages that c a n be developed between the tourism sector, small-scale agricultural production and processing. Jamaica's small farmers have other potential market opportunities as well, including sales to wholesale produce buyers and supermarkets, and the ability to become more efficient a n d competitive through advances in technology and knowledge base. 23 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies JAMAICA: Rural Economic Development Initiative Project Sector Issue Bank Financed Projects Latest Supervision (ISR) Ratings Progress Objective (IP) (PDO) Access to Jamaica National Community Development da S (ICR Infrastructure Project (NCDP) (P076837) Rating) Jamaica Hurricane Dean Emergency Recovery S s - Loan (ERL) (P109575) Jamaica Inner City Basic Services for the Poor MS MS Project (ICBSP) (P091299) Productive Colombia Productive Partnerships Support da S Partnerships Project (PO41642) {agriculture) Colombia Second Rural Productive S S Partnership Project (P 104567) I Vietnam Agriculture Competitiveness Project I da da (P108885) Bolivia Rural Alliances Project (PO8305 1) S S Ecuador Poverty Reduction and Local Rural da S (ICR Development (PROLOCAL) Rating) Honduras Rural Competitiveness Project MU S (P10 1209) Panama Rural Productivity (PRORURAL) S S Project (PO649 18) Brazil State-level Rural Poverty Reduction S,S,HS S,S, HS Projects (P104752, P052256, P093787) Mexico Sustainable Rural Development S S (P 106261) Rural Tourism Ethiopia Tourism Development (PO98 132) Board Approval June 5, 2009 Colombian National Protected Areas S S Conservation Trust Fund Project (PO9 1932) Peru Vilcanota Valley Rehabilitation and MS MS Management Project (P082625) 24 Projects supported by other International Development Partners (agriculture and rural tourism) LenderDonor Project European Union Eastern Jamaica Agricultural Support Project (EJASP) (EU) Banana Support Program (EUBSP) USAID Protected Area and Rural Entemrise (PARE) Rural Enterprise, Agricultural and Community Tourism Project (REACT) . IADB Agriculture Marketing Project 25 Annex 3: Results Framework and Monitoring JAMAICA: Rural Economic DevelopmentInitiative Project Results Framework PDO Outcome Indicators Use of Project Outcome Information To improve market access for 0 Number o f participating rural These indicators will micro and small-scale rural enterprises that realize an help assess the extent agricultural producers and increase in turnover (sales). to which the activities tourism product and service Number o f participating rural o f the project result in providers. enterprises functioning as improved market- registered business entities one based opportunities year after final disbursement. and local economic Number o f direct jobs created in development in the rural communities receiving agricultural and project assistance. tourism sectors. 0 Percent o f critical infrastructure subprojects that achieve their expected results for .improvement in the value chain. Intermediate Outcomes Intermediate Outcome Use of Project Indicators Outcome Information Component 1: Rural Number o f rural enterprises that Assess the enterprises are established or have been selected competitively implementation enhanced through public and have started (or enhanced) progress o f Type A support provided on the basis o f their operations subprojects. transparent and competitive procedures Percent o f rural enterprise Ensure that participants who are underrepresented 0 youth (e 30 years old) groups are included 0 women in the funded subprojects. Component 1: Key Number o f beneficiaries Assess the infrastructure, marketing and (individuals or groups) benefiting implementation management bottlenecks in the from improved infrastructure and progress o f Type B value chains are addressed management subprojects Number o f beneficiaries This is indicative o f (individuals or groups) benefiting the coverage from improved marketing systems achieved b y Type B subproject. Number o f beneficiaries 26 (individuals or groups) benefiting from improved management systems Component 1: Increased Number o f rural enterprises Determine if the number o f rural enterprises that integrating environmental and agriculture and promote environmental and social good practices into their tourism subprojects social sustainability. business operations are environmentally and socially Percent o f participating rural sustainable enterprises integrating a business continuity plan for during and after a disaster. Component 2: National Number o f participating Assess the institutions are better able to institutions' staff trained in implementation provide rural business support technology and provision o f rural progress o f services business services Component 2 Number o f participating rural This is indicative o f enterprises using the services o f the coverage and the national institutions before and accessibility o f after the Project intervention. National Institutions' services Component 3: Project Percent o f subprojects that are Assess the implemented on schedule and processed and implemented in effectiveness o f the professionally monitored. accordance with the time frame Project by estimates in the O M determining the number o f Procurement and FM duties are subprojects executed in accordance with implemented on national and World Bank schedule and how guidelines. professionally they are monitored. JSIF project MIS i s producing indicator reports within 6 months after start o f Proiect. 27 0 \o m m 2 Iz 0 m 2 r- 0 m (c, m 2 rg CI I 0 2 m 0 0 m d cu 0 0 m 0 0 m 3 -4 w 3 3 3 36 E: 3 9 rl n 9 3 3 0 m d * 2 vl 3 0 0 3 3 3 3 3 n 0 0 Arrangements for results monitoring. 1. Project implementation will be guided b y a Results Framework. JSIF will be responsible for Monitoring and Evaluation (M&E). An overall M&E system has been prepared and will b e incorporated into JSIF's Management Information System (MIS), which will form the basis for tracking key implementation progress indicators. The M&E system will be based on the Results Framework presented in Annex 3. Particular attention is being paid to establishing realistic and useful indicators that can be regularly collected and maintained in the MIS. 2. The JSIF M&E unit i s responsible for implementing the Project's M&E framework. T h e JSIF M&E unit i s presently staffed by an M&E Coordinator and two M&E Officers. At present, the M&E unit is involved in limited routine monitoring o f Project activities and outputs. A full time M&E officer will be recruited for the REDI. S h e will be responsible for (i)maintaining the overall M&E framework including implementation procedures, tools, data flow chart and budget; (ii)strengthening the monitoring system to ensure sound output, process and outcome monitoring; (iii)validating data by random sampling recording and aggregating process; and (iv) promoting and encouraging the demand for M&E. 3. The M&E unit will maintain the Management Information Systems (MIS), producing reliable information in a timely manner. The system uses the Electronic Fund Manager platform. This database includes the basic physical and financial records, the details o f inputs and services provided to the beneficiaries or clients (for example, funding and training) and data obtained from surveys and other recording mechanisms designed specifically to collect information from the subprojects. 4. The P M T will monitor each subproject through subproject documentation, reporting and field visits. The subproject preparation studies will provide baseline information o f the proposed business, objectives and measurable monitoring indicators. The business plan functions as the implementation plan. The EDOs will prepare bi-monthly reports on the implementation o f subprojects, indicating the milestones achieved (according to plan) and the difficulties encountered. Where possible, the reports will also provide the degree o f achievement o f the measurable targets. The report will also contain red flags requiring attention from the PMT. 5. At the central JSIF level, the data contained in the field reports will be reviewed by PMT specialists and entered into JSIF's central monitoring database. The P M T will issue reports every six month on the overall status o f the subprojects for review by JSIF management and the World Bank. These reports will provide inputs for the JSIF and World Bank monitoring system (Implementation Status Reports). The first report will cover the period between effectiveness and the first June or December following that date. JSIF will monitor the implementation o f contractual agreements including procurement and financial management through the Rural Enterprise Consultant and P M T officers. 6. Mid-term review. The REDI Project Manager/M&E unit will coordinate with an outside consultant to execute an external independent Mid-Term Evaluation at the end o f the second year o f implementation. The Mid-Term Evaluation will determine progress being made towards the achievement o f outcomes and allow the project manager to adjust Project activities 31 and improve implementation in case the expected outcomes are not being achieved. The evaluation will focus on the effectiveness, efficiency and timeliness o f Project implementation. Findings o f this evaluation will inform the implementation during the final half o f the Project's term. 7. Final Evaluation. A similar evaluation will take place towards the end o f the final year o f funding. This final external independent evaluation will focus on the same issues as the mid- term evaluation, as well as it will examine impact and sustainability o f results and provide recommendations for follow up activities. The Final Evaluation will be an input into preparation o f the Borrower's Completion report. 32 Annex 4: Detailed Project Description JAMAICA: Rural Economic Development Initiative Project 1. Project Development Objective. The PDO o f the Project i s to improve market access' for micro and small-scale rural agricultural producers and tourism product and service providers. 2. The PDO will be reached by linking the rural enterprises' o f agricultural producers and tourism product and service providers to markets through: (i) providing financial and technical support to small scale agricultural and rural tourism enterprises; (ii) improving agricultural and rural tourism marketing; (iii) assisting in the development o f critical market-oriented small-scale infrastructure, marketing and management; (iv) increasing access to technical innovation and business support services; (v) enhancing financial management o f rural enterprises to increase their access to financial services; (vi) providing technical and environmental skills development including disaster mitigation and recovery training; and (vii) building up the capacity o f national organizations, such as RADA and TPDCo, that can help to sustain and later initiate similar rural enterprises. 3. Project Area: The Project will have national coverage over the l i f e o f the Project. However, in order to maximize development impact, the Project will not focus simultaneously on the entire country. For agriculture, the initial area o f focus will be on the western eight parishes (Clarendon, Manchester, St. Elizabeth, Westmoreland, Hanover, St. James, Trelawny and St. Ann). Tourism subproject locations will be driven largely by their proximity to the major tourism markets. 4. Project Beneficiaries: The Project will directly and indirectly benefit an estimated 22,000 micro and small-scale'o rural producers and tourism product and service providers who will benefit from revenue-generating subprojects and from critical market-oriented infrastructure, marketing and management. The Project will encourage the inclusion o f young people and women and an estimated 15 percent o f all direct beneficiaries will be youth (under 30 years old) and 30 percent will be women. An additional 20,000 rural residents will benefit indirectly from the training and capacity building provided to RADA and TPDCo staff. "Market access" improvements refer to all steps on the value chain from production to market. "Rural enterprises" refers to groups of people with common economic interests (i.e., farmers, fishermen, agro- processors, tour guides, craft makers etc.), who have formed a legally recognized organization to carry out business activities. lo"Micro and small-scale" businesses are those with an asset base (excluding land and buildings) not exceeding the equivalent o f US$ 10,000 (for micro) to US$ 100,000 (for small-scale) and an annual turnover of less than t h e equivalent of US$ 125,000. 33 Project Components Component 1 - Rural Subprojects (Total US$ 14.22 million; IBRD US$ 12.22 million") 5. Under Component 1, two types o f rural subprojects w i l l be implemented: Type A: Small-scale revenue generating activities by rural enterprises in agriculture and rural tourism. Type B: Provision o f critical small-scale infrastructure, marketing and management. 6. Co-financing: All subprojects that are implemented under Component 1 will be co- financed on a matching grant basis. The beneficiaries will be required to contribute at least 20 percent o f the total subproject costs (in cash and/or in kind12) associated with preparation, implementation and monitoring o f the subprojects: Type A Subprojects Small-scale Revenue GeneratingActivities 7. Agricultural Subprojects: Type A agricultural subprojects are revenue-generating activities linking groups o f small producers (rural enterprises) to markets such as the hospitality sector, supermarkets, agro-processors, and other buyers. These subprojects will help producers and processors to better respond to market demand through on-farm investments and innovations, (e.g. greenhouses, breeding stock improvement, introduction o f new crops and varieties, unseasonal production methods, small group marketing infrastructure, e.g. storage sheds, f h s i cleaningklleting facilities and equipment e.g. packing equipment). The subprojects w i l l also contain an important element o f TA and capacity building in production, marketing and business management. 8. Rural Tourism Subprojects: Type A rural tourism subprojects are revenue generating activities o f rural enterprises providing tourism products and services. A typical subproject in this category would be the development or enhancement o f tourism products and services focused on history, culture and nature that can be sold in major tourism hubs. These subprojects will create new enterprises or enhance the competitiveness and viability o f existing ones. Examples of such competitiveness enhancement include: assistance with business planning and defining target markets; evaluating market access constraints; identifying key intermediaries and market outlets, building relationships with them and engaging them in the design process; product or service design and procurement; providing training for tour guide and other visitor services; basic business skills, including bookkeeping, operations management and marketing; research of existing and potential markets; and conducting visitor opinion and satisfaction surveys. " These amounts include the Front End Fee o f the IBRD loan. I2 The methodology o f valuation o f in-kind contribution will be included in the OM. 34 9. Legal Status o f Type A beneficiaries: Provisionally selected rural enterprises will be required to register as Cooperatives, Benevolent Societies or Friendly Societies before final recommendation o f funding by the REEC. Alternatively, enterprises may collaborate with or be sponsored by a legally registered community organization, provided they are able to demonstrate how the subproject will benefit that community. In other words, the aim o f the subproject selection process i s not to promote a specific type o f organizational structure; i t i s to identify and support those subprojects that have the most significant potential to deliver broad-based economic benefits to rural communities. 10. Grant Amount for Type A subprojects: The maximum subproject grant will be specified in the OM. Initially it is expected not to exceed US$50,000 (excluding TA and capacity building elements). The beneficiaries would contribute at least 20 percent o f the total subproject cost (in cash andor in kind). Grants must be spent in accordance with an agreed business plan and can be used for works, goods, services andor operating costs. Land acquisition a n d debt repayment are not eligible for financing. 11. Expected number o f Type A subprojects: Considering previous Jamaica experience, the Project i s expected to support some 75 sustainable Type A subprojects in the course o f i t s implementation. 12. Development Focus: In both agriculture and rural tourism sectors, JSIF would attempt to link the sectoral subprojects together, be i t geographically or along a particular value chain. There are potentially substantial synergies in linking subprojects, for instance in the resolution of production and marketing problems in one particular geographical area e.g. storage and transport to marketshesolution o f plant disease or sanitary issues and in dealing with transactions costs such as too high dispersion o f sales points. Type B subprojects-Critical Small-Scale Infrastructure, Management and Marketing Subprojects. 13. Type B subprojects are investments in critical small-scale infrastructure, management and marketing support services that cannot realistically be made b y the private sector o n a for- profit basis but are critical for successfully reaching Project objectives. To qualify for this type o f grant, applicants will be required to demonstrate that there i s a viable, marketable product or service in their community that will be supported or enhanced. 14. Critical Small-scale Infrastructure. Type B subprojects will include critical small- scale infrastructure that help increase the efficiency and competitiveness o f agricultural value chains and, on the tourism side, provides basic services needed or required by visitors and tour operators to visit rural communities. Examples in the agricultural sector include investments that enhance produce sanitary conditions, extend the shelf l i f e o f fish, meat and produce, and promote the development o f higher value-added products, including investments in cold storage, vegetable warehouses, packing facilities, processing equipment, and environmental a n d waste management. Examples in the tourism sector include the construction o f public bathrooms, collection and out-of-view disposal o f solid wastes, construction o f simple crafts markets, 35 equipment for satellite-based internet access, landscaping, trail development, signage, and rehabilitation o f or safety enhancements to public attractions (e.g., hiking trails, waterfalls, and mineral baths). 15. Management. Type B subprojects will include investments in management improvements to enhance market access for agricultural and rural tourism product and service providers. Management improvements should be seen as a subcomponent o f Type B projects such as the improvement o f the information system and management o f a Parish market; o r the marketing and management o f a rural tourism circuit; although such management could also b e a self standing Type B. 16. Examples in the agricultural sector include subprojects improving the management of physical markets: management o f collection and publication o f market price information; environmental management; management o f market revenue and expenditures (collection techniques, trader registration and spending for market upgrading); efficient management of market traffic and trade flows; and the organization o f study tours for physical market managers to regional well-run markets. Examples in tourism sector include subprojects that w i l l assist associations / communities to better manage the tourism product: environmental management and business management, etc. 17. Marketing Services. Type B subprojects will also include investment in marketing services to enhance market access for agricultural and rural tourism product and service providers, which i s equally critical for both the agricultural and tourism sectors. Marketing services investments will only be made where there is a well defined strategy for sustainability beyond the life o f the subproject. Applicants for these grants will be required to provide a detailed marketing strategy and plan for financial sustainability (potentially including dues, commissions, and other methods for generating the revenues required to support ongoing operations, and demonstrate by-in from Project participantsheneficiaries). 18. Examples in the agricultural sector include development o f virtual markets (websites), where a marketing organization can bring together buyers and sellers and coordinate fulfillment; workshops where buyers and sellers c q discuss, on a regular basis, production quality, reliability, volume, new products, and other challenges and opportunities; and organization and coordination of sales calls to hotels, supermarkets, etc., that integrate the production o f several rural producers. Examples o f the tourism marketing services include: the development o f rural tourism "brands," websites, marketing strategies, and online reservations systems (which could be also implemented on a regional basis, e.g., Blue Mountains, or island wide); press and tour operator familiarization tours to rural areas; establishment o f marketing and sales kiosks in tourism hubs; production and distribution o f brochures, DVDs and other collateral materials; participation at or even organization o f a trade show (if organized for Jamaica's rural tourism industry as a whole); internet marketing; and travel trade networking (sales calls, workshops, and performances and exhibitions in tourism hubs). 19. Partners. Partners in Type B Subprojects include parish councils, legally registered community organizations and industry associations, and combinations thereof. For example, all 36 of the rural tourism enterprises and town councils in the Blue Mountains region could form and register as a Blue Mountains Tourism Association and apply for a marketing grant. Alternatively, an agro-processors association could also apply for a Type B investment. 20. Grant Amount. The grant amount of a Type B subproject i s not expected to exceed US$200,000. The financial contribution of the partners towards the total cost o f the subproject would be a minimum o f 20 percent (cash and/or in kind). 21. Legal Status o f Type B Beneficiaries. Organizations that w i l l implement small-scale subprojects w i l l be required to register as Cooperatives, Benevolent Societies or Friendly Societies before final recommendation for funding by the REEC. However, for larger more complex subprojects which JSIF will implement its procurement on their behalf, groups m u s t be organized although not necessarily registered. Alternatively, enterprises may collaborate with, or be sponsored by, a legally registered community organization, provided that they are able to demonstrate how the subproject w i l l benefit that community. In other words, the aim of the subproject selection process i s not to promote a specific type o f organizational structure; it i s to identify and support those subprojects that have the most significant potential to deliver broad- based economic benefits to rural communities. 22. Expected number o f Agriculture and Tourism Type B subprojects: I t i s estimated that the Project would finance approximately 40 Type B subprojects over the course of its implementation. Subproject Cycle. 23. The selection o f all Component 1 subprojects, whether Type A or B, w i l l be made through a competitive process. The objective, at least in the early rounds o f the grant competition, w i l l be to open up the process to as many projects as possible, to help ensure that the rural enterprises with the most drive and determination, and the ideas with the most significant market potential and potential to catalyze rural development, have an opportunity to compete for grants. JSIF w i l l invite proposals from existing and prospective rural enterprises, parish councils, and local non-governmental and community organizations, rank them for co-financing based on published criteria. JSIF w i l l first pre-screen subproject proposals for completeness and compliance with eligibility criteria. Next, JSIF w i l l rank eligible proposals based on earlier- published priority criteria. The highest ranked proposals w i l l be prepared (business plan, viability, environmental sustainability, etc.). Then the REEC w i l l recommend or reject prepared subprojects. Finally the JSIF Board o f Directors w i l l confirm the selected proposals. Promotion 24. JSIF w i l l organize an information campaign in targeted parishes and regions. The campaign w i l l be directed to intended beneficiaries and will explain the objectives o f the Project, provide information on how and where to submit applications, the selection criteria, procedures and other operational issues. JSIF w i l l produce promotional leaflets and publish the guidelines, criteria, and the application form on the JSIF website. Proposals will be accepted on an ongoing 37 basis. Additionally, JSIF will periodically issue Calls for Proposals, which will outline the standard eligibility and priority criteria as well as any additional criteria related to that Call. Eligibility and Priority Screening 25. Eligibility Screening: JSIF will first pre-screen proposals and verify that all of the necessary documentation has been provided and the application complies with eligibility conditions (including terms o f invitation, willingness to co-finance, minimum number of members in applicant group, and legal right to use land if land is required for the subproject). Eligibility conditions will be minimal to allow for a more competitive selection process. All eligibility conditions will be specified in the O M and will be explained during the promotion campaign. 26. Prioritization. Second, JSIF will rank eligible proposals based on pre-established weighted priority criteria such as market potential, financial feasibility, financial capacity of applicants, potential social impacts (jobs created, poverty status o f community), environmental impacts, legal status o f applicant and organizational capacity to implement and monitor project. The Project O M will specify mandatory criteria and weights to be used for all agricultural and rural tourism subprojects. JSIF will announce and publish those criteria. Additionally, JSIF may also include supplementary criteria in support o f general government policy objectives, such as a special invitation for proposals with innovations adding higher value to local produce or for proposals from young farmers or from women. These will be published before each invitation. The highest ranked proposals (that also meet a minimum score) will move to the preparation stage. JSIF will return all other proposals to the applicants, with scores and any reviewer comments, so that they potentially can be resubmitted in future invitations. Subproject preparation 27. The highest ranked proposals that obtain the minimum prioritization score will then go through the subproject preparation stage. JSIF will determine the depth o f subproject preparation depending on the size and complexity o f the subproject for preparation which will be contracted to subproject formulators. Subproject formulators are individual consultants or organizations such as the Jamaica Business Development Center or Business Investment Centre in the MOA&F hired by JSIF to assist applicants in the preparation o f business and implementation p l a n s for subprojects. Plans will be prepared through a participatory process with applicants. 28. At a minimum for each subproject JSIF will assist applicants in preparing a detailed business plan (for Type A) or implementation plan (for Type B) that includes: 0 , Evidence that the subproject i s technically and financially feasible 0 Evidence that potential beneficiary groups satisfy the institutional requirements as described in JSIF's Community-Based-Contracting Assessment Tool. 0 Evidence that the subproject can be implemented with the proposed budget and timeline 38 The results o f the environmental screening and the environmental mitigation plan (as applicable) The agreed training plan 0 The agreed procurement plan and procurement methods to be used 0 Evidence o f legal entity status (where applicable) 0 The results o f the financial/fiduciary capacity assessment (for beneficiary- implemented subprojects) Cash flow (Type A projects only) 0 Operation and Maintenance plan (Type B projects only) 29. To facilitate the contracting o f the subproject formulators, JSIF will annually advertise for subproject formulators and qualified respondents will be included in a pool from which short lists can be drawn. Subproject Selection 30. Once the subproject i s prepared and considered to be feasible by the PMT, it will be submitted to the REEC for evaluation and recommendatiodrejection. Selected proposals will be confirmed by the JSIF Board o f Directors. Subproject Implementation 31. Successful applicants will implement subprojects with TA and support from JSIF and in accordance with the agreed to business/implementation plan. JSIF will try to establish links amongst the subprojects for synergy reasons. Subprojects will be assigned to EDOs who will be responsible for working with the beneficiary group' to implement subprojects in accordance with the developed business / implementation plan. 32. Before starting the subproject, JSIF will organize a Subproject Information M e e t i n g to remind all actors o f their commitments and agreements under the business plan (contributions, procurement methods, flow o f funds). The O M specifies the details o f this proposed meeting. 33. JSIF and the grant recipients will then sign a subproject agreement or contract. This agreement will specify JSIF's contributions to the implementation o f the subproject as w e l l as the duties and responsibilities o f both parties. The agreement will clearly specify the disbursement installments and conditions as well as the ownership o f the assets purchased under the agreement. For Type A and some Type B subprojects when grant recipients will implement their subprojects they are required to open a special bank account (see Annex 7 ) to receive and manage subproject funds prior to selection. Procurement will be done b y the beneficiary groups if and when a l l of the following conditions are met: (a) works to be financed cost no more than 10 million Jamaican dollars (about US$110,000); (b) beneficiaries are legally registered as a cooperative, friendly or benevolent society (or are associated with a legally registered community organization); and (c) beneficiaries (or associated legally community organizations, if applicable) have m e t the fiduciary capacity requirements specified in the O M (see Annex 8). 39 The Project will finance: The costs related to the grants for subproject investment and operational costs to enable the rural enterprises to adjust to market conditions; Specific TA and training to help the enterprises and partner organizations to implement their business or implementation plans; and The costs o f EDOs who will accompany the rural enterprises and partner organizations with procurement and financial management and monitor subproject implementation on behalf o f JSIF. The total financial package to implement the subproject will be composed of: The contribution o f the rural enterprises or partners; The grant; and Eventual contributions from the other partners in the value chain or (micro) credit. The TA and capacity-building component of the grants will be provided from several sources. RADA (Ministry o f Agriculture and Fisheries) will provide extension services to the agricultural rural enterprises and TPDCo (Ministry o f Tourism) will provide assistance to the rural tourism enterprises. JSIF will liaise or contract with specialized training institutes or consulting firms to provide the capacity building in business and organization management to those rural enterprises or partners that have included such capacity building in their business or implementation plans. Where very specific training i s required, JSIF will contract specialized consultants (local or international) to provide such expertise. 37. All subprojects are estimated to be able to spend the grant funds within a period of 8 to 12 months. At the end o f grant disbursement period, the grant recipients will prepare a final financial consolidation o f the use o f the funds. A random sample o f subprojects w i l l be included in the annual audit o f project funds carried out by an external auditor under terms and conditions satisfactory to the World Bank. 40 Figure 1. RED1 Subproiect Cycle 1. Promotions, ongoing applic tions/calls for proposals 2. Registration & Eligibility screening - Receipt of proposals - Registration o f Proposals - Screening against eligibility criteria - . . - . . - ..- ., - , . - . , - . .- ..- , , - ! Incomplete and i 3. Project Application i inappropriate applications i No Yes Review : will be rejected and 4 - complete scoring and ! returned I meet Eligibility Criteria? prioritization against ! ! mioritv criteria 4. Project Appraisal & Preparation - Business and Social Appraisal will be completed on highest ranking proposals - Business & Implementationplan designed ! Proposals that are not i accepted will be returned : with comments so that the I group may re-apply if i returned to applicants with , 5. Project Approval I desired : comments so that they may : N~ - REEC evaluates and recommends !Ireapply if desired !4 - projects for approval Recommended projects are confirmed ! I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . i through the JSIF Management & Board Approval process ~~ _ _ _ _ ~ ~ ~~ 6. Project Implementation - JSIF determines whether Community Based Contracting (CBC) or JSIF procurement and/or implementation - Subproject Information meeting - Contracts for procurement o f goods, works and services or Financing agreement completed for CBC - Implementation o f all aspects o f subproject over ,8 - 12 months * 7. Monitoring and Evaluation 41 Component 2: National Technical Assistance and Capacity Building (Total US$1.25 million: IBRD US$ 1.25 million) 38. The main objective o f this component i s to strengthen the national organizations to enhance their capacity to continue assisting the rural enterprises and other Project partners and ensure the sustainability o f the rural enterprises. Hence, the component will finance T A and capacity building for organizations and agencies that deliver support services in agriculture and rural tourism at the local level. 39. JSIF will invite TA and capacity building proposals from organizations, e.g. Chambers of Commerce, local government, RADA, TPDCo, JAS and institutions related to agriculture and rural tourism. JSIF will evaluate the proposals based on their potential contribution to the achievement o f Project objectives and to the operation and sustainability o f rural subprojects (Type A and B) financed under the Project. 40. Examples o f TA and capacity-building programs in the agricultural sector that c o u l d be financed under this component include: Consulting services to identify training needs and provide training for RADA staff to be able to support this Project and provide ongoing TA to grant recipients after subproject completion; 0 Training in participation methodologies and updating o f the community development handbooks (developed under NCDP); Training in agricultural marketing, identification o f bottlenecks in the value chain, post-harvesting technologies, sustainable farming (including organic farming, etc.) Expos, sponsorships for outside broadcast, publications; and Studies to improve the efficiency o f important value chains. 41. Examples o f TA and capacity-building programs in the rural tourism sector that could be financed under this component include: Assistance to the M O T to develop a national policy for Rural Tourism, including hiring a consultant to lead the process; hosting consultations across the island to discuss challenges to and opportunities for rural tourism development, conducting baseline research, host workshops to define needed policy reforms; Development o f a marketing platform (e.g., rural tourism association development, branding, and marketing) for rural tourism products; Training for TPDCo staff, focused on rural tourism and niche market tourism development, including culture and nature-oriented tourism product development; Trade shows, exhibitions, familiarization tours, press trips, advertising, webpage development, search engine optimization and online marketing, online reservations systems, publications, etc. 42 Development o f rural tourism training aides (handbooks, newsletters, "how to" websites) to be used and distributed by TPDCo Officers to rural communities and enterprises; Cross-cutting studies to develop and enhance rural tourism opportunities, for example by investigating barriers to entry for rural tourism product and service providers. 42, Selection o f proposals: JSIF will evaluate TA and capacity building proposals and include the selected program in a yearly capacity-building plan to be agreed upon with the World Bank. 43. Financing of Component 2: The agreed training and capacity building programs will be formalized in M O U between the beneficiary and JSIF. The TA and capacity building program itself will be provided by third party service providers, i.e. there will be no flow o f funds to the beneficiary institutions as JSIF will procure and contract for the services. The Project will finance the program costs, which are expected to include: consulting fees, training materials and other training costs such as trainer fees, travel, training room rentals, and trainee room and board and may include minor amounts o f goods. The Project will not finance salaries or benefits for public sector staff, only incremental public sector costs. 44. Monitoring and Evaluation: Each TA and capacity building program w i l l be monitored and evaluated. Each program will have objectives and measurable targets that will be monitored by the grant recipient and the PMT. The results will be entered into the JSIF central monitoring database and submitted in bi-annual reports. Component 3: Project Management (Total US$2.03 million: IBRD USS1.53 million) 45. To implement the Project, JSIF will put into place a small technical P M T w h i l e the existing JSIF core staff will implement procurement and financial management. This component will finance project management, technical expertise (tourism and agricultural specialists, monitoring and evaluation), staff training, the annual audit, vehicles, office equipment a n d other operating costs. I t will also ensure that effective fiduciary arrangements are in place during implementation. The outputs o f this component are the efficient and effective implementation and monitoring. 43 Annex 5: Project Costs JAMAICA: Rural Economic Development Initiative Project Components IBRD Component 1: Rural Subprojects in Agriculture & Tourism Type A - Small scale revenue generating enterprises Type B - Critical public infrastructure, management and 12.18 - I 2.00* I 14.18 marketing Component 2: National Technical Assistance and Capacity Building 1.25 1.25 Component 3: Project Management 1.53 0.50 2.03 Front-end Fee 0.04 0.04 Premium for Interest Rate Caps and Interest Rate Collars 0.00 0.00 Total Project Costs 15.00 0.50 2.00 US$17.50 million *in cash andor in kind 44 Annex 6: Implementation Arrangements JAMAICA: Rural Economic Development Initiative Project 1. The Jamaica Social Investment Fund (JSIF) will implement the Project on behalf of the GOJ. An Inter-Ministerial Project Steering Committee will provide Project oversight. There will also be active collaboration with the main government agencies responsible for Agriculture and Tourism, including the Ministry o f Agriculture and Fisheries (MOA&F), Ministry o f Tourism (MOT), Rural Agricultural Development Agency (RADA) and Tourism Product Development Company (TPDCo). 2. Implementing Agency. JSIF was incorporated in 1996 as a component o f the GOJ's National Poverty Eradication Programme. The Fund falls under the auspices o f the Office of the Prime Minister and implements small-scale community development projects primarily funded by International Funding Agencies and the GOJ in rural and urban areas. JSIF has integrated a holistic development approach in implementing these projects integrating infrastructure development, human and social capacity building and environmental stewardship. The Bank i s also piloting the Use o f Country Systems with the Jamaica Social Investment Fund (JSIF), which adopted policies equivalent to the Bank's environmental and involuntary resettlement safeguards. The diagnostic work and institutional strengthening measures undertaken with JSIF were pivotal in i t becoming the only public entity in the Caribbean to receive an I S 0 14001 certification for environmental management systems in January 2009. This demonstrates that environmental processes are consistent with international standards, and have been fully mainstreamed into JSIF's operations. 3. To date the JSIF has implemented a total o f 831 community based projects. Of this total, 393 were funded by loans from the World Bank. In the implementation o f these projects JSIF collaborated with various government agencies, communities, non-government organizations and the private sector to ensure success. This collaboration has also allowed for greater sustainability especially in the maintenance o f projects as each project group receives maintenance training. 4. Based on this successful history o f successfully implementing projects utilizing creative development strategies, fostering collaborative supportive partnerships with communities, government and non-government agencies, as well as its strong procurement and fiduciary management capacity, GOJ has selected JSIF to be the implementing agency for the Project. 5. JSIF will establish internally a Project Management Team (PMT) that will be responsible for overall implementation and will coordinate all the actors involved in the Project's execution. JSIF will be responsible for financial management, procurement and compliance with safeguards. Additionally, the P M T will be responsible for key aspects o f the subproject cycle including; promotion, communication, selection, preparation, procurement for subprojects in certain cases, local stakeholder coordination, monitoring and evaluation, capacity building and subproject implementation supervision. These activities can either be contracted or undertaken directly by 45 PMT. The P M T will also coordinate with relevant national institutions for the implementation of the Project. 6. The P M T will be housed in JSIF and will consist o f the following key technical staff: Project Manager, Tourism Specialist, Agriculture Specialist, and Monitoring and Evaluation Specialist (see Figure 3 at the end o f this Annex). The TORs for the P M T staff are included in the OM. P M T will utilize in-house JSIF Social and Technical Officers (such as environment) as needed. For most activities, the P M T will contract consultants, local organizations and/or institutions to carry out the fieldwork. The key functions o f the P M T will be to perform the following tasks: Oversee the management o f the project, including the planning, organization, implementation and monitoring and evaluation o f project related activities Undertake public education campaigns related to the various project components. Facilitate mobilization and capacity building o f communities Prepare TORs, guide, monitor and authorise payment to supervision and implementation consultants Facilitate Project Information Meetings and Final Completion Meetings at the start and end o f implementation o f the project in the community Evaluate the performance o f all contracted persons involved in the project Make follow up visits to assess the use, maintenance and operations o f the facility/service established through the project Work closely with communities/groups selected for project implementation to Establish formal arrangements with partner agencies involved in project implementation Initiate and monitor the relevant procurement processes Prepare overall project progress reports Manage and supervise all contract Conduct field based supervision o f the project in cooperation with the implementing groups, and related partner agencies Oversee and coordinate the activities o f the Rural Enterprises Evaluation Committee . Coordinate the project with other interventions which are similar and within project areas Inter-Ministerial Project Steering Committee. This committee will be responsible for ensuring that the Project i s in line with national development priorities. The chairing of the Committee will be rotated between MOA&F and MOT. The Steering Committee will include representatives o f other related agencies (Le., Office o f the Prime Minister, Planning Institute of Jamaica (PIOJ), Rural Agricultural Development Authority (RADA), Tourism Product Development Company (TPDCo), JSIF, and MOF&PS). The Committee will meet at least quarterly during the first year o f implementation and at least semi-annually thereafter to review the Project's work plan, budget and implementation. The TORs for the Steering Committee will 46 be included in the Operational Manual (OM), The Steering Committee will have two sub- committees (one for tourism and one for agriculture) to provide technical guidance as required. 9. Rural Economic Evaluation Committees (REEC). These committees (one for agriculture and one for tourism) will be in charge o f reviewing and recommending the viable subprojects. JSIF will chair the Committees, which will be comprised o f five representatives of the public and private sector. The three private sector representatives on each committee will be drawn from the private micro-finance sector, commercial banks and private businesses. JSIF and either MOA&F or RADA (for the agricultural REEC) or JSIF and either M O T or TPDCo (for the tourism REEC) will comprise the government representation on the REECs. 10. Ministry o f Agriculture and Fisheries and FUDA: M O A & F will be a lead partner to JSIF and will through i t s executing agency, RADA, provide field extension services f o r the agricultural subprojects in collaboration with the EDOs. 11. Ministry o f Tourism and TPDCo: MOT will be a lead partner to JSIF and will through i t s agency, TPDCo, conduct the initial product development assessment for proposed rural tourism projects to determine marketability and the required aspects for product development to meet standard requirements. 12. Rural Enterprises. Rural enterprises refer to groups o f people with common economic interests (i.e., farmers, fishermen, agro-processors, tour guides, craft makers, etc.) who have formed a legally recognized organization (i.e., a Cooperative, Friendly or Benevolent society) to carry out business activities. Rural enterprises will be eligible for subproject financing. 13. Governance and Project Transparency: In order to ensure good governance and transparency, JSIF posts operational manuals for all o f i t s projects on i t s website. The RED1 O M will be posed and will include all details on eligibility, priority and selection criteria for ' subprojects. Applicants whose proposals are not selected will receive their applications back with comments and scores. Subproject funding and cost information will also be available o n t h e JSIF website. The website lists JSIF's phone number and has a feedback form that the public can use to send in comments or questions. In addition, the project will hold periodic activities, including , workshops, with stakeholders. 47 , Figure 2. Project Organizational Chart ..................................... ........... ....... .................... ..... ............... ............. Inter-ministerial Project Steering .............. Committee (Policy decisions & Monitoring) ........... ............. .................. .............. ............. 4,, ............................. JSIF I PMT (manages overall project implementation & monitors partnerships) I ..... (Experts, not JSIF staff, Training Building approval/reiection) Rural Enterprises 48 I c m c c .- v) ln 2 v .- e a .. cc) Annex 7: Financial Management and Disbursement Arrangements JAMAICA: Rural Economic Development Initiative Project Country Issues 1. The Country Financial Accountability Assessment (CFAA), Country Procurement Assessment Report (CPAR) and the Public Expenditure and Financial Accountability (PEFA) provide a good overview o f the public financial management system in Jamaica. K e y recommendations o f these analytical works are (i) strengthening the link between policy, planning and budget allocation b y moving toward a Medium Term Expenditures Framework and costing the Corporate Plans; (ii) improving the quality and timeliness o f financial reporting; (iii)improving cash predictability by defining a transparent mechanism for warrant releases that maintain budget consistency with Government priorities; and (iv) strengthening the capacity o f the Internal Audit Directorate and increasing the financial independence o f the Auditor General's office. The country i s implementing the CFAA and the PEFA recommendations with the support o f the IDB and the European Union. In addition, the Bank is preparing an Institutional Development Fund proposal in the area o f budget execution and internal and external controls. Risk Assessment and Mitigation Measures 2. Appendix 2 shows a risk assessment and mitigation matrix. The preliminary overall assessment is Substantial given the issues at the country level and the complexity o f the Project. The implementation o f the mitigation measures i s expected to reduce the overall assessment to Moderate. In addition to the country issues described above, the financial management assessment provide greater detail on the current and proposed actions to achieve these improvements. Financial Management Arrangements 3. Implementing Entity. The overall responsibility for the Project's financial management will l i e with the JSIF. JSIF i s an autonomous Government-sponsored institution primarily designed to channel resources to small-scale community-based projects. JSIF was established in 1995 as part o f Jamaica's National Poverty Eradication Program. The Project's financial management will be handled by JSIF's Finance and Procurement Unit (FPU). JSIF's FPU i s currently considered to be adequately staffed. It i s headed b y Finance and Administration Manager, and also includes a Financial Analyst, Financial Accountant, Financial Officer and Accounting Clerk. All staff has sufficient background and experience for their duties. The financial staff i s considered capable o f absorbing the duties o f the Project to the degree that it i s implemented in a manner similar to current JSIF operations. The subprojects will be prepared with the help o f EDOs who will prepare bi-monthly reports on their implementation, indicating the milestones achieved (according to plan) and the difficulties encountered. 50 4. Accounting System. For the purpose o f the Project, JSIF will essentially use its existing financial management systems and procedures which will be adapted as necessary to reflect the specific characteristics o f the Project such as the support o f income generating subprojects. The already existing accounting software (AccPac) can cope with several projects at a time. It w i l l be customized to include a separate `entity' to separately monitor the accounts o f and reports on the RED1 Project. AccPac i s fully functioning. The software has a multi-currency feature, but this i s limited in that i t only allows for the translation o f balances, which i s sufficient for asset and liability accounts, but for sources or uses o f funds, the average or weighted average exchange rates must be manually calculated. In order to facilitate the preparation o f the financial reports, it will be necessary to change the structure o f the chart o f accounts. Currently, the chart o f accounts i s based on the source o f funding and not necessarily on the project or program being funded. As a result, preparing financial reports by project requires for GOJ- financed expenditures to be manually assigned to individual expenditures. . 5. Financial Management Procedures. The updated JSIF OM, approved by the JSIF Board on February 22, 2006, contains the key financial procedures that cover the needs o f the Project, including for the community subprojects (same comment as before). Further improvements, including on budgeting, reporting and internal control procedures have been made with the implementation o f successive World Bank-financed projects. Additional modifications would be made to the financial management procedures to accommodate the unique features o f REDI's income generating subprojects. Details have been included in the OM. 6. Reporting and Monitoring. The JSIF will prepare Interim Unaudited Financial Reports (IFRs), in conformity with the content and format that have been agreed. The IFRs would include: a) reports o f instructions and payment details from the Designated Account (DA) held in the Central Bank or some other commercial bank satisfactory to the Bank; b) disbursement by Project components; c) report o f appraisals, approval, commitments and disbursements o f subprojects; d) summary statement o f subprojects, partners' contributions and cost sharing transfers, including summary reconciliation o f advances pending documentation; e) cumulative investment statement (with actual and budgeted figures) and cash balances; and f ) notes to the financial statements. The information from AccPac, along with that contained in the JSIF MIS, will be used not only to generate IFRs, but more generally, to provide better information for JSIF managers and other stakeholders o f the Project. 7. IFRs will be sent to the Bank quarterly within 45 days after the end o f each such period. The IFR's will be used for both monitoring and disbursement purposes. The IFRs will serve as a basis for the annual audited financial statements. These financial statements will also include project management's assertion that loan funds were used in accordance with the intended purposes as specified in the Loan Agreement. The annual financial statements, once audited, will be submitted to the Bank not later than four months after the end o f each fiscal year. The P M T will issue reports every six month on the overall status o f the subprojects for review by JSIF management and the World Bank. These reports will provide inputs for the JSIF and World Bank monitoring system 51 (Implementation Status Reports). JSIF will monitor the implementation o f contractual agreements including procurement and financial management through the EDOs and P M T officers. 8. The supporting documentation o f the financial statements will be maintained by JSIF (and the Commercial Bank) and made easily accessible to Bank supervision missions and to the external auditors. All financial reports will be made public, including through posting in the web pages o f the JSIF. 9. Flow o f Funds: The Bank would disburse the proceeds o f the loan into a DA in U dollars in the name o f the Project, held b y the National Treasury in the Central Bank S of Jamaica or a commercial bank satisfactory to the Bank. The designated account will be segregated. All subprojects that are implementedunder Component 1 will be co-financed on a matching grant basis. The subproject sponsors will be required to contribute 20 percent o f the total subproject costs (in cash or in kind) associated with preparation, implementation and monitoring o f the subprojects. JSIF will request the National Treasury to convert the deposits made in the DA into Jamaican Dollars and to transfer them to the commercial banks where Type A subproject accounts will be opened in the name of each subproject sponsor. Type B subprojects implemented by communities will also be required to open subproject accounts as for Type A subprojects. Funds for the remaining Type B subprojects (JSIF Implemented) and for Components 2 and 3 o f the Project would be managed through a process similar to that used for the ongoing Bank- financed projects. The partner will finance and JSIF will finance their agreed share o f subproject costs. The arrangements for the flow o f funds including counterpart founding have been included in the OM. All funds would be first budgeted via the Government's normal budget processes, with counterpart funds made available on a quarterly basis via the Government's warrant system. A flow chart o f the flow o f funds i s attached as Appendix 3. 10. Commercial Banks. Funds under Type A subprojects under Component 1 o f the Project and Type B subprojects implemented by communities will be disbursed through transfer to subprojects accounts held in selected commercial banks by subproject sponsors. The commercial banks will be selected to ensure that it i s easily accessible to subproject sponsors and partners. Based on the cash flow needs, JISF will transfer the funds to subproject sponsors' accounts in installments. JSIF will normally deposit no more than 40 percent o f its agreed contribution as the initial advance into the subproject account. JSIF would deposit the remaining 60 percent o f i t s contribution in several installments after the group has justified the expenditure o f 70 percent o f all the funds previously advanced to the beneficiary at that time. The commercial banks will process the payments directly to the subproject sponsor's suppliers and will provide documentary evidence o f the full amount at the end o f the disbursement cycle. The detailed procedure has been included in the OM. 11. Internal Audit. JSIF has a position o f internal auditor which reports directly to the JSIF Board o f Directors. An assistant internal auditor has recently been hired. In addition to the internal audit, JSIF has a Finance and Audit Committee that functions and meets monthly. 52 12. External Audit. Due to its legal status, JSIF must have i t s financial statements regularly audited. This is done every year b y a private sector auditor appointed by the JSIF Board. In addition to the statutory audit o f JSIF financial statements, the auditor also issues a consolidated audit report on all the projects being implemented by JSIF with a separate opinion on the financial statements o f each project. The quality o f the audit report is satisfactory. The main qualification in the audit opinion has been related to the cost o f the Beneficiaries/Sponsors contributions in subproject activities which has only been partially accounted for in these financial statements. This i s a recurrent problem that i s being addressed as part o f the M I S and the operations manual revision. The current auditors were appointed for a one-year contract renewal. These auditors are acceptable to the Bank, as they have produced well-organizedy informative audit reports and management letters in previous years. The TOR largely reflects the requirements o f the Bank and i s still appropriate, given the characteristics o f the Project. JSIF will be required to submit no later than four months after the end o f its fiscal year its statutory audit report and the consolidated report o f all the projects implemented, including this Project. Disbursement Arrangements 13. The following table summarizes, by component the agreement on the amount o f the Loan, the use o f funds, and when the Bank will recognize expenditures, for the activities to be financed with loan funds. Componenthubcomponent Responsible Description(use) Recognition o f Expenditures 1. Rural Economic Development JSIF Identification, Preparation, Subprojects (Total US$ 14.22 Subproject Appraisal and Approval of Upon provision o f million; IBRD US$ 12.22 Sponsors Subprojects goods, facilities and million)* services Implementation of Subprojects 2. National Capacity Building TA to subproject sponsors and Upon payment to (Total US$ 1.25 million; RADA service providers, studies, contractors, suppliers, IBRD US$ 1.25 million) JAS training and capacity building consultants, and travel MOT and per diem to TPDCo TA to producer organizations trainees under the TA and to regional institutional subcomponent players who help promoting and establishing partnerships and the monitoring of the development o f the partnerships. 3. Project Management and Goods, consultants, training, Upon payments to Coordination (Total US$2.03 JSIF audits and operating costs. consultants, JSIF staff million; IBRD US$1.53 million) and suppliers of goods and services *These amounts includes the Fror end Fee of the BRD loan. 14. The subproject resources will be documented ex-post through reconciliation reports prepared by the sponsors with the assistance o f the EDOs as part o f the installment deposits that in a simple format should attest to the adequate use o f grant funds against the criteria and requirements o f the subproject agreements. These reports 53 will be subject to the JSIF's supervision and to the external audit. Should instances of ineligibility be brought up by these reports or by Bank supervision, the concerned amounts will be returned by the JSIF to the D A or directly to the Bank. 15. The table below shows the categories o f eligible expenditures that may be financed out o f the proceeds o f the Loan, the allocation o f the amounts o f the Loan to each category, and the percentage o f expenditures to be financed for eligible expenditures in each category Category Amount o f the Loan Percentage of Allocated Expenditures to be (expressed in USD) financed (1) Goods, works, TraininglWorkshops, consultants' services and Operating Costs for Part 1 o f the Project. (2) Goods, TraininglWorkshops and consultants' services for Part 2 o f the Proiect. (3) Goods, 1,530,000 100% TraininglWorkshops, consultants' services, and Operating Costs for Part 3 o f the Project. (4) Front-end Fee 37,500 Amount payable pursuant to Section 2.03 o f this Agreement in accordance with Section 2.07 (b) o f the General Conditions (5) Premium for Interest Rate 0 Amount payable pursuant Caps and Interest Rate to Section 2.07 (c) o f this Collars Agreement TOTAL AMOUNT I 15.000.000 16. Disbursement Mechanisms and Documentation. The Project will have access S to funds advanced by the Bank to a DA in U dollars for processing disbursements for eligible expenditures under Project activities. The DA will be segregated. Funds deposited into the DA as advances will follow the Bank's disbursement operating policies and procedures established in the Disbursement Letter. An initial advance equal to the Ceiling Amount, o f US$2 million i s proposed to be deposited in the DA upon loan effectiveness on the basis o f a withdrawal application only. Direct Payment and Reimbursements will also be the other available disbursement methods. The Minimum Application size will be US$400,000 equivalent. 54 17. Withdrawal applications for subsequent advances into the DA will be submitted on a quarterly basis and will be fully supported by appropriate supporting documentation in the form o f Interim Unaudited Financial Reports (IFR's). The formats o f the IFRs will follow the format o f the existing reporting to the extent possible. In agreement between the Bank and the JSIF, the specific reports required for disbursement purposes (indicated below) can be adjusted during project implementation: 8 IFR 1-A: Statement o f Sources and Uses o f Funds (quarterly, project-to-date) including forecast for next 6 months 8 IFR 1-B: Statement o f Uses by Project component (quarterly, project-to-date) showing budgeted amounts versus actual expenditures, (i-e., documented expenditures), including a variance analysis. 5 IFR 1-C: DA Reconciliation Statement 8 IFR 1-D: Project Disbursements Schedule (quarterly report indicating disbursements by Category, % o f financing, paid from the DA etc) 18. In addition the report o f appraisals, approval, commitments and disbursements o f subprojects; and summary statement o f subprojects, partners' contributions and cost sharing transfers, including the summary reconciliation o f advances pending documentation should also be provided for informational purposes. 19. The IFRs would state the expenditure figures by quarter, and accumulated for the project. The description and format o f the IFRs will be attached to the Disbursement Letter and will be included in the OM. JSIF will be responsible for preparing and submitting withdrawal applications to the Bank. All supporting documentation o f withdrawal applications should be retained at a central location (and at the commercial banks) and be available for review by the Bank supervision missions and independent auditors. Retroactive Expenditure 20. Retroactive funding o f an amount up to US$3 million has been agreed in order to allow critical start-up Project activities (such as promotion) to begin after August 1,2009. Loan Conditions and Summary o f Annual Audits Requirements 21. The main loan conditions are the following: (i) Standard financial management provisions; (ii) transmission within four months o f the end o f Jamaica's fiscal year, Le. by the end o f September each year, annual audit reports in the table in paragraph 19, (iii) transmission o f the IFR together with the disbursement requests not later than 45 days after the end o f each quarter. Supervision Plan 22. Given JSIF's past experience and performance as well as the clean audits that have resulted in the past, the financial management supervision will focus on: (i) the review o f the quarterly IFRs which will help monitor financial performance o f the Project 55 the (ii) financial management arrangements and financial reporting on the subprojects; (iii) performance o f the commercial banks, FM staff would undertake two supervision the missions a year during the first year o f implementation and at least one supervision mission a year thereafter. The overall financial management system o f JSIF would be monitored on an on-going basis, within the context of this and other projects, to ensure it continues to be satisfactory. 56 Appendix 1: Financial Management Action Plan The actions included in the Financial Management Action Plan have been successfully implemented prior to negotiations. Appendix 2. Risk Assessment and Mitigation Matrix Risk Assessment Risk Mitigation Measures Residual Risk H I S I M I L The Bank has developed an M Institutional Development Fund proposal to contribute to the implementation o f the CFAAKPAR action plan. This grant will complement the actions undertaken by other donors. It will focus on the areas identified in text above. The JSIF's organizational structure will L be strengthened through the hiring of additional staff; its O M will be updated to include new procedures to accommodate the unique features of the RED1project and the chart of accounts will be amended. Project Level. Control Risk X ki Project Implementation will entail a number o f entities Specific measures have been included in the action plan in A endix 1 to miti ate the risks. I Budget. X Subproject sponsors will be carefully L chosen to ensure minimize the emergence of budget shortfalls. Accounting. X Implementationof the action plan in L Appendix 1 will help reduce the risks. Internal Controls. X Implementationo f the action plan in M Appendix 1 will help reduce the risks. Funds Flow. X Flow o f funds arrangements will be M agreed upon prior to loan's approval. Financial Reporting. X Format and contents o f the reports (IFRs) will be agreed upon during L negotiations. Auditing. X An auditor will be recruited for the Overall Control Risk I 1x1 I I I L 57 Appendix 3 - Flow o f Funds Flow Chart Flow of Funds Bank Loan - Sub- Project Commercial Sponsors Bank 1 4- v - Sub- Commercial r T b uI l Project Bank DA JSlF Project b A c c o u n t I Commerc Sub- Project -' Sponsors I1 Goods, Works and Services Goods, works and services for for JSIF-implemented Component 1 Beneficiary-implemented Subprojects; Component 1 Subprojects Goods and Services for components 2 and 3. 58 Annex 8: Procurement Arrangements JAMAICA: Rural Economic Development Initiative Project A. General 1. Procurement for the Project would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004, Revised October 2006; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004 revised October, 2006, and the provisions stipulated in the Legal Agreement, The various items under different expenditure categories are described in general below. For each contract to be financed by the Loan the different procurement methods or consultant selection methods, the need for pre- qualification, estimated costs, prior review requirements, and timeframe are agreed between the Borrower and the Bank 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. 2. Procurement of Works: Works procured under this Project, are expected to consist exclusively o f small-scale collective infrastructure that improves post-harvest processing and market access such as collection, sorting and packing centers and storage facilities, such as fencing, roofing, watering systems, and others carried out by community based organizations and small rural-based agricultural and tourism enterprises which are located in poor rural areas for subprojects under Component 1. These works would be procured following the Community Participation procedures described in the Operational Manual (OM) and the subproject Agreements. N o works are expected to be procured under Components 2 and 3 o f the Project. This procurement would be carried out using Standard Bidding Documents (SBD) agreed with the Bank. 3. Procurement o f Goods: Goods procured under this Project w i l l include: computers, software, and office equipment. For all International Competitive Bidding (ICB), the Bank's SBD w i l l be used; for National Competitive Bidding (NCB), National SBDs satisfactory to the Bank w i l i be used. 4. Selection o f Consultants: Consultant services will include T A (TA) package intended to build government capacity in the agriculture and tourism sectors. Specially, the Project w i l l support capacity building activities with agencies such as Rural Agricultural Development Authority (RADA), Jamaica Agricultural Society (JAS), Ministry o f Tourism (MOT), and the Tourism Product Development Country (TPDCo). 5. Short lists o f consultants for services estimated to cost less (than US$ 200,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines. 6. Operating Costs w i l l include in-house project management and administration, utilities and supplies, such as field trip costs, travel allowance for PMT, office supplies, 59 vehicle insurance and maintenance costs. These will be procured using procedures acceptable to the Bank and defined in the Project OM. 7. The procurement procedures and SBDs to be used for each procurement method, as well as model contracts for works and goods procured, are presented in the OM. B. Assessment of the agency's capacity to implement procurement 8. Procurement activities will be carried out under the responsibility and oversight o f JSIF, which i s already managing procurement under the Inner City Basic Services for the Poor and the Hurricane Dean Emergency Response projects, both financed by the Bank, as well as procurement for several other projects in Jamaica. The Bank's assessment o f the capacity o f JSIF to implement procurement actions for these projects i s based on JSIF's satisfactory performance to date in implementing these ongoing projects. While the procurement team within JSIF i s well-equipped to execute procurement according to Bank Guidelines, the overall public procurement system in Jamaica needs some improvements. 9. Procurement functional responsibilities under the national procurement system The Ministry o f Finance and the Public Service (MOF&PS) has overall responsibility for the public sector procurement system including direct responsibilities for informing sector procurement policy, monitoring the implementation o f those policies particularly with regard to public expenditures, and facilitating a proper understanding o f the governing documentation service-wide. The Contractor General, in accordance with the contractor general act, monitors and investigates the award o f contracts. 10. Procurement functional responsibilities are as follows: a. National Contracts Commission (NCC): responsible for: (a) promoting efficiency in the award process for government contracts; and (b) reviewing award recommendations by the procuring entities, for the procurement o f Goods, Services and Works with estimated values equal to or exceeding J$ 10 million. b. National Contracts Commission Sector Committee (NCCSC): responsible for reviewing the procuring entities' award recommendations for contracts. c. Procurement Committees: Each procuring entity i s required to establish a procurement committee consisting o f not less than four persons appropriate to the needs o f the entity. The Committee will comprise a Chairman, Senior Financial management Personnel, Secretary, and Procurement Officer (non voting member). d. National Contract Point (Ministry of Finance and the Public Service and planning): acts as the focal point for information and clarification o f public sector procurement. e. Accounting Officer: responsible for enforcing the procedures. 11. While having various checkpoints for procurement is a good thing, the down side is the delays encountered during contracts processing. Based on the cases reviewed, it appears that it would take from two weeks to six months for the national procurement 60 boards to endorse a contract award after bid evaluation. This is a serious issue as it causes delays to project implementation. 12. To assure an acceptable procurement processing under the Project, the following measures are proposed: a. Preparation and submission to the Bank o f a preliminary Procurement Plan to cover the first 18 months o f the Project, which was approved on July 24, 2009. b. Preparation o f an O M with a specific chapter on procurement, detailing all the procedures and channels o f responsibilities and flow o f documentation. The final O M was received on July 15,2009. 13. In addition to the above actions, procurement thresholds and methods have been set to mitigate the substantial procurement risk. C: Procurement Plan 14. The Borrower, at appraisal, developed a procurement plan for Project implementation which provides the basis for the procurement methods. This plan was agreed between the Borrower and the Bank's task team on July 24,2009 and is available at JSIF headquarters. I t will also be available in the Project's database and on the Bank's external website. The Procurement Plan will be updated in agreement with the Bank's task team annually or as required to reflect the actual Project implementation needs and improvements in institutional capacity. D. Frequency of Procurement Supervision 15. In addition to the prior reviews that will be carried out from Washington, the Procurement Capacity Assessment recommends that supervision missions should be conducted every six months. Post review o f procurement actions will be carried out once a year. E. Details o f the Procurement Arrangements Involving International Competition 1. Goods and Works (a) List o f contract packages to be procured following ICB and direct contracting: NA (b) I C B contracts estimated to cost above US$150,000 for Goods and US$ 1,500,000 for Works per contract and all direct contracting will be subject to prior review by the Bank. 61 2. Consulting Services (a) List o f consulting assignments with short-list o f international firms. NA (b) Consultancy services estimated to cost above US$lOO,OOO per contract and single source selection o f consultants (firms) w i l l be subject to prior review by the Bank. (c) Short lists composed entirely o f national consultants: Short lists o f consultants for services estimated to cost less than US$200,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions of paragraph 2.7 o f the Consultant Guidelines. F. Thresholds for Procurement Methods and Prior Review 16. Recommended thresholds for use o f the procurement methods specified in the legal agreement, and for Bank prior review o f procurement actions, are identified in the table below. Specific contracts which are subject to prior review are detailed in the Procurement Plan agreed at negotiations. Thresholds for Procurement Methods and Prior Review Expenditure Contract Value Procurement Contracts Subject to Category (Threshold) Method Prior Review US $ thousands 1. Works >1,500 ICB All 150- 1,500 NCB None 450 Shopping None 2. Goods >150 ICB All 25-150 NCB Non <25 Shopping , None 1 Regardless o f value Direct Contracting All 3. Works, Goods As defined in the Community None and Services under OM Participation detailed Subprojects in O M 62 -4.A Firms >loo QCBS,QBS ,FBS, All LCS 400 QCBS,QBS,FBS, None LCS and CQS Regardless o f Single Source All value -4.B Individuals Regardless o f Comparison o f 3 None value CVs in accordance with Chapter V of the Guidelines 63 Annex 9: Economic and Financial Analysis Jamaica: Rural Economic Development Initiative Project (REDI) Indicators ' Economic Analysis Financial Analysis (ERR) (FRR) Internal Rate o f Return - 39% 33% Subprojects Internal Rate o f Return - with direct additional costs 14% 12% Introduction 1. REDI will assist small farmers and tourism stakeholders to increase their productivity and income generation through financial and technical support. The project will help stakeholders to enter markets at points further along the value chain beyond the farm gate. I t will assist stakeholders to prepare business plans and train them in business skills to negotiate their way through some o f the current barriers stopping them from being active market participants. These increased financial, knowledge and managerial benefits will respond to demands from agriculture and tourism sector stakeholders. 2. The funding o f business opportunities and supporting services and infrastructure through subprojects (component 1) by the project will be identified through a demand driven process during project implementation. Thus a precise detailed ex ante analysis o f projects that will be funded i s not possible. Four agricultural models based on consultation with rural stakeholders and reflecting real experiences o f successful enterprises and market prospects, ongoing investments and business opportunities were constructed. This information collected was supplemented by price and cost data from the Ministry o f Agriculture and Fisheries and the Rural Agricultural Development Agency (RADA). Three tourism models, based on secondary information reflecting results and recommendations o f a national rural tourism project, were constructed and analyzed to evaluate tourism activities that will very likely be a part o f the tourism demand for project resources. Thus, the financial and economic analysis i s based on seven models that very much reflect typical demand that will arise during project implementation. Detailed criteria in the operations manual, emphasizing viability and sustainability, will be applied to guide the preparation and evaluation o f subprojects to be funded. 3. All components o f the project include a significant amount o f critical public and private institution capacity strengthening as well as direct stakeholder technical and managerial support. I t is very difficult to estimate the benefits o f these activities, especially when the services provided are directed at stakeholders that are not well established market participants. Many ex post economic analyses have shown the high rates o f return to investments in institutional strengthening and particularly to extension related activity linked to improved technologies. Component 2 o f the project strengthens the agricultural and tourism institutions that are central to technology transfer in the respective sectors in Jamaica. Estimated returns on agricultural extension activities 64 globally are high, on average 79 percent and for technology development and transfer returns average 53 percent for Latin America and the Caribbean (Alston et al., 1999). Thus, it can be expected that with effective selection o f subprojects and successful assistance to their preparation and implementation the returns to funds expended (30% of loan funds) will be high. Financial and Economic Analysis 4. As stated earlier, it i s known that investment in public goods such as extension services and marketing have exceptionally high returns o f investment. However, the economic and financial analysis will primarily focus on the main activity o f the project, the subproject financing (Component l), which comprises approximately 80 percent of total project costs. Thus, since the costs and benefits o f Component 2, which seek to improve the public support for rural enterprises, are not included in the analysis, the result o f the analysis i s expected to be an underestimate o f the overall financial and economic benefits o f the Project. 5. Through Component 1, the Project will provide funds through matching grants directly to stakeholders and to agricultural and tourism institutions that support the success and sustainability o f their activities. The amount o f loan funds allocated to grants for stakeholders are differentiated between Type A subprojects which are for revenue generating activities and Type B subprojects which are for small-scale critical infrastructure, marketing and management activities, that are relatively more community managed and oriented in their benefits. There i s expected to be slightly more demand for Type B activities as opposed to Type A activities. Criteria laid out in the operations manual seeks to ensure that each subproject type i s financially viable. 6. Table 1 provides a brief description o f the subprojects analyzed. They represent currently existing opportunities that need assistance for expansion and improvement. They include the provision o f productive goods such as small scale packaging and processing machinery, post harvest handling facilities or TA to small rural producers, small infrastructure projects which contributes to increased production, improved quality, expanding market opportunities and ultimately increasing the welfare o f small rural agricultural and tourism producers. ParishlLocation Activity/Opportunity I Description I Main Investment Manchester, Drying o f Herbs(Mint, Lemon I The goal i s for small farmers to Hermitage District Grass) supply adequately dried and Small Crop Dryer hygienic herbs to processors producing a variety o f teas for which a huge market currently exists both domestically and exports. St. Elizabeth, Balaclava Pre-processing pumpkins The goal i s enable farmers to cut pumpkins into two sizes - soup Machine for crop (squared) and rice (diced), for squaredshredder ; marketer that supplies restaurants Storage shed; pre packaged ready to cook Packing and vegetables. Cutting Room 65 This activity i s to enable farmers to white potatoes to different differentiate between grades o f market segments potatoes and sell in different market segments, especially in the higher priced fast food, restaurant Chill room; quality baking sized potato market grading and available packing room . The goal i s to address the of peppers - green and hot to - continuity o f supply through all Hargrove Tunnel covered/green house seasons (especially winter) and the Protective green reliability and quality o f products. houses Manchester, Alligator Manchester Parish Develoument (a) Boat Tours - Coast Byway Committee (PDC) i s serviAg as the Glass bottom boat, marketing company for tourism engine; attractions located along the Alligator Coast By-Way on the (b) Sanco Gully South Coast. Several different - Trails Toilet opportunities have been identified facilities, water as having potential. Three serve as tank, signage; subproject examples - (a) Glass bottom boat tours, (b) Walking (c) Hills Craft I Gully trails (c)Craft Centre Center- Parking area, vendor stalls; 7. I t i s important to reinforce that while for the purposes o f the financial and economic analysis it i s necessary to focus on some agricultural and tourism activities these models do not limit the type o f activity to be funded and clear criteria in the project document elaborates the requirements to qualify for project assistance. Thus, the flexibility during the implementation process, leaving the choices o f activity open, should not be undermined in any way by the fact that during project design some particular types o f activities were focused on to evaluate the viability o f the project. 8. For the seven representative subprojects analyzed, economic and financial indicators were estimated. The financial analysis is differentiated from the economic analysis by the deduction o f taxes (16.5 percent) on the investment expenditure, mainly goods and services for the agricultural examples and small scale infrastructure and equipment for the tourism sector. There are no other major direct input or output subsidies which affect these representative cases and tariffs were not taken into account, partly due to the volatile nature o f tariffs on some agricultural products. The estimated parameters include: incremental annual revenues, net benefitshncome, Net Present Value (NPV) o f benefit flows (at a 10% annual discount rate); and Internal Rate o f Return (IRR). A summary o f the levels o f investment and the estimates for the financial and economic analysis o f the sub projects are presented in Table 2. 66 Table 2: Sub- Project Results by Type Parish/Location Activity/ Financial Economic Opportunity Rate of Rate of at 10% at 10% Return Return $5 1,526.10 $54,678.75 $220,819.97 $239,913.28 $7,408.46 $8,862.55 $7,408.46 $19,306.13 $150,607.56 $152,558.57 $19,232.58 $23,576.13 $28.227.26 $28.979.18 9. The financial analysis shows that all the sub projects are viable with IRRs ranging from 19 to 58 percent. The agricultural activities have a greater competitive base than the tourism activities which are more dependent on negotiation o f markups agreed with the intermediary demander o f the services. In other words, the tourism activities are dependent on tour operators to bring tourists to the rural community offerings. The two subproject sectors vary considerably in their sensitivity to price changes, the rural tourism projects being very vulnerable to price changes, lacking financial viability with a 10 percent decrease in price margins. The agricultural subprojects are less vulnerable and o n average a 20 % decline in price would have to take place to result in their rate o f return falling to below 12 % causing them to become unprofitable. 10. The economic analysis reflects greater returns mainly because o f the removal of taxes o n goods and services. The estimates might be considered conservative as the case can be made for using a shadow wage rate given the high rural unemployment in Jamaica. However, analysis lowering costs would not increase the profitability estimates in a significant manner. 11. The aggregate analysis reflects financial returns o f 33 percent and financial returns'of 39 percent to all examined subprojects and indicates the capacity o f the project to also bear the other project costs. When direct costs for preparing the subprojects a dn providing direct TA to beneficiaries are added onto the costs) the financial and economic IRR are lowered to 12 percent and 14 percent respectively, reflecting both the importance that the project places on human and institutional capacity development, allocating a substantial amount to supporting the identification, evaluation, guidance a d n implementation o f subprojects. These low estimates also reflect the high cost 67 environment of Jamaica for quality technical service providers necessary to carry out these activities. The following tables show the financial and economical net income flows for each sub project, the aggregate flows and the returns with and without other project costs. 68 Annex 10: Safeguard Policy Issues JAMAICA: Rural Economic Development Initiative Project Social Context 1. During the 2000s rural poverty in Jamaica has remained high and i s characterized by factors such as higher numbers o f poor children. Rural populations in Jamaica, particularly youth, tend to be the most vulnerable to high unemployment rates. Despite the high incidence of poverty in rural areas the GOJ has been paying more attention to addressing poverty in urban areas. This Project seeks to focus on vulnerable rural populations, give them access to economic opportunities and the ability to improve their productivity and competitiveness. 2. The Project w i l l support the goal o f increasing rural incomes and generating n e w employment opportunities in rural areas, This objective coincides with the sustainable environmental development goals o f Jamaica's Vision 2030 plan, part o f which states the need for a "Competitive Diversified Value-Added Agricultural Production" and "Strong Marketing Systems for Domestic and Export Markets," and includes the need for long term rural development and rural environmental sustainability. 3. Public Consultation and Disclosure. For the Project design relevant data was provided in consultations with agricultural producers and tourism enterprises, NGOs, farmers, agricultural and tourism associations; other public and social sub-national entities; and private actors related to agriculture and tourism initiatives and services providers. The Project has also drawn from the lessons learned in the NCDP studies which include (i) supply and demand a analysis o f fresh agricultural industry which entailed a stakeholder consultation in three selected parishes, St. James, St. Elisabeth and St. Ann, with public institutions, agricultural extensions, JSIF's field staff and R A D A officers (ii) consultations carried out by a supply and demand study o f tourism in the areas where the Project would implement these activities. Building on studies carried at the design stage, the Project defined and addressed the type o f support prioritized b y the rural farmers. 4. A national workshop carried out in January 2009 by JSIF served to inform the Project design and to gather suggestions, and recommendations o f a number o f NGOs, community associations, agriculture and community based tourism and other private organizations. This consultation reconfirmed the lack o f market opportunities, the high cost o f inputs and lack of availability for disasters relief as the main constraints for poor farmers. Respondents also referred to the need for formal agricultural training and access to micro finance fund and T A for both tourism and farming. Some o f the key comments and suggestions for the Project were: (i) to collaborate and support local producers' organizations in the Project area; (ii) ensure t h e to participation o f the small rural enterprises in Project design and implementation, (iii) increase to productive investments and the capacity o f the public sector as well as that o f suppliers o f goods and services in rural areas. 5. Social. The social issues o f the Project have been documented in studies conducted during the preparation phase to ensure that i t leads to the achievement o f the defined objectives 71 without negative consequences among the beneficiaries. The studies carried out for the investment included the following for which mitigation plans will be developed: (i) characterization o f the rural population; (ii) identification o f potential barriers in accessing Project benefits; (iii)identification o f potential social risks. The assessment draws from: (i) consultations conducted primarily with poor rural farmers to prioritize their main constraints and opportunities; (2) consultations with representatives o f a range o f social and community organizations. 6. The Project will support competitively selected subprojects in agriculture and rural tourism through matching grants and TA. These grants will be targeted to registered groups o f lower income small-holders (for agricultural groups) or lower-income rural-based tourism product and service providers (for tourism groups). The Project will prioritize according to each Project's market potential, ability to generate income and create jobs, and i t s financial, social and environmental sustainability. The requirements to access the Project grants will be made public ensuring that potential users are informed. The Project will be national in coverage. 7. Agriculture. Evidence drawn from the poverty assessments show that a number o f rural communities that were producers o f domestic food crops two decades ago are now in living under the poverty line. Jamaica's rural areas accounted for 65 per cent and 67 percent o f persons in poverty in 2007 and 2008 respectively (Survey o f Living Conditions 2008). The decline o f crop production has been strongly linked to limited market access. The domestic food crop sub-sector is undoubtedly the largest and single most important economic base in rural Jamaica accounting for between 50 per cent and 70 per cent o f agriculture's contribution t o GDP annually. Small farmer participation in the sub-sector comprising 5 1 crops includes a wide range o f vegetables, legumes, tubers, cereals and condiments. 8. The findings o f a survey conducted for the design o f this Project confirm that nearly 65% o f the rural respondents obtain their income from farming13. This also confirmed that rural poverty i s steadily increasing the rate o f youth migration from rural to urban areas in search o f employment. Lack o f market opportunities and high cost o f inputs and availability for disaster relief were identified as the main constraints and core barriers for the development o f the small farming sector. Respondents also referred to the lack o f formal agricultural training and access to micro-finance. 9. Tourism. Rural tourism enterprises are relatively new in importance for Jamaica. Approximately half o f the rural tourism enterprises surveyed for this Project design consider themselves "community owned." All o f the businesses reported some form o f community involvement ranging from employment and purchase o f inputs to sharing profits. Community owned businesses include Friendly Societies and Cooperatives. Despite the presence o f rural tourism enterprises, farming continues to be the main economic activity in rural communities. IO. Jamaicans comprise the highest percentage o f visitors to rural tourism enterprises; this is followed by visitors from the United States, but the tourism enterprises still need to be improved in order to be competitive. The cruise ships arriving in Ocho Rios offer a prime opportunity for a marketing campaign. A carefully crafted marketing plan needs to include this l3The survey was carried out rural areas of St. Elizabeth, St. James and St Ann in 2009. 72 segment o f the market. According to data gathered nearly half o f the rural tourism enterprises surveyed indicated that they had not done any business related studiedassessments such as market studies, business plans, and/or feasibility studies. Approximately 58 percent o f surveyed rural tourism enterprises do not advertise and do not have an overall marketing programme. 11. Tourism enterprises were surveyed and identified key industry problems, which included obtaining working capital and becoming licensed to be a formal part o f the Jamaican tourism industry. Other problems faced include, among others, a lack o f access to energy and the lack o f upgraded sanitation and potable water provision. Many aspects o f marketing and capacity building w i l l be involved in improving services and products to enable rural tourism t o develop into an alternative source o f income and potentially slow the migration from rural communities. As the industry develops however, it may become necessary to develop standards to regulate different aspects o f the industry. 12. The Project i s expected to have positive impacts on rural residents by providing income generating opportunities. The objectives o f the Project from the social perspective are t h e following: (A) Promote Social Inclusion through expected increased access to opportunities for local employment alternatives; (i) benefit rural tourism and farming through capacity building; (ii) offer an alternative to rurahrban migration (a contributing factor to urban violence). fB) Promote effective participation of civil society orpanizations locally: Civil society w i l l engage through TA, as needed, to strengthen their internal organization, including financial management and their capacity to communicate demand and development proposals on agriculture and community based tourism. (C) Gender equity through capacity-building with activities that target vulnerable groups such as women and youth. In the rural economic and productive fields women and youth are among the most vulnerable. The Project would support the inclusion o f women in the processes o f economic decision making. In doing so, the participation o f women's productive organizations and training programs focused on developing subprojects proposals and preparing business plans by women w i l l be supported. Moreover, the participation rate o f both women and youth will be monitored separately. 13. Stakeholder Groups. A large segment o f the Project's beneficiary population belongs to productive small-farmer organizations, and groups related to agriculture and tourism activities. Currently these organizations have limited involvement with local development investment. The Project will promote and establish mechanisms for their participation. The development o f rural tourism and agriculture i s a central part o f the government's rural development strategy, the Project w i l l support participatory processes to identify potential products and will select interventions that create jobs and raise rural income. EnvironmentalIssues 14. The Project i s not expected to have any large-scale, significant and/or irreversible environmental impacts as Project activities w i l l focus on increasing agricultural competitiveness in small and medium farms, rural tourism development, and strengthened linkages between agriculture and markets in general. The Project design also specifically incorporates ecological and environmental sustainability concerns into the eligibility criteria for selecting subprojects, 73 such as the use o f integrated pest management, organic farming practices, and renewable energy. All measures are aimed at increasing the competitiveness o f agricultural produce and improving food safety which will have positive human health and environmental impacts. As such, the Project i s assigned an Environmental Category B.14 The environmental screening for the REDI subprojects will be building on JSIF's existing Environmental Management Framework (EMF) prepared for the ICBSP project and approved by JSIF's Board in 2006. 15. Review o f JSIF's EMF: Recent supervision missions for other Bank projects in Jamaica reviewed experience with the implementation o f the EMF to identify possible problems encountered, highlight lessons learned, and assess institutional capacity. Findings from these reviews are highlighted below: The institutionalization o f JSIF's Environmental Management Framework (EMF) has continued to improve, with environmental management procedures on track to being fully developed and incorporated into ongoing JSIF operations. Supervision o f selected subproject sites during the mission showed that the EMF procedures and mitigation plans are also being implemented well in practice. Appraisal reports for these subprojects included an analysis o f potential environmental impacts, and the relevant mitigation plans. The automation o f processes helps keep the Environmental Officer (E0)'s workload manageable; with additional subprojects under the proposed REDI Project, staffing may be revisited. Regular training o f Technical Officers continues to strengthen their capacity to implement and monitor environmental management actions. Customized environmental management plans (EMPs) are being appended to contracts and bid documents to ensure conformance. JSIF has recently achieved I S 0 14001 certification, becoming one o f the first such institution in the Caribbean to receive this recognition. The new certification requires all JSIF staff to be trained in environmental procedures; as well as regular audits o f JSIF's EMS. 16. The Project includes two new types o f subprojects (agricultural and tourism) which were not part o f the original EMF. For this reason, a consulting firm was hired to (i) review the existing framework to ensure that the procedures are appropriate for the new subproject types and (ii)verify the utility and effectiveness o f the existing procedures, making modifications as necessary. Draft environmental mitigation plans have now been prepared to address potential minor negative environmental impacts that may arise from RED1 subprojects. These have been included in the revised EMF adopted on July 2 1,2009. 17. Among the Bank's safeguard policies, the Environmental Assessment (OP 4.0 1), Natural Habitats (OP 4.04), Forests (OP 4.36) and Pest Management (OP 4.09) are triggered. l4I t should also be,noted that JSIF has been I S 0 14001 Certified as o f January 2009. 74 The Project design incorporates the necessary mitigation measures for the adverse impacts associated with the potential agricultural and rural tourism-based subprojects through the development o f appropriate environmental screening procedures and related mitigation plans f o r submitted proposals. 18. Environmental Assessment (OP/BP 4.01): The Project will support multiple small subprojects; as such the size and nature o f these subprojects are not expected to have significant negative environmental impacts. Potential environmental issues may arise from the use/management o f chemicals and pesticides in agricultural production; from the mismanagement and improper disposal o f agricultural and tourism wastes; from construction and operations o f small-scale market infrastructure as well as tourism facilities/ infrastructure; and relating to increased encroachment risks to natural habitats. Further details o f specific environmental impacts are elaborated further below. 19. Environmental screening procedures and an Environmental Management Framework (EMF) had already been developed within JSIF under a previous Bank project (ICBSP), a n d will be applied to these subprojects. As mentioned earlier, the existing EMF was revised to include screening for environmental impacts from new types o f subprojects (tourism and agricultural) as well as to include appropriate environmental mitigation plans. Additionally, a s the subprojects will not involve involuntary settlement or indigenous peoples, OP 4.10 and OP 4.12 safeguard policies are not triggered for this Project. The Project will ensure compliance with the Bank safeguard policies for small-scale infrastructure investments through t h e incorporation o f specific guidelines in the OM. 20. Natural Habitats (OP/BP 4.04): The subprojects financed under this Project are not expected to have significant impacts on critical natural habitats. However, this policy has been triggered as a precaution. Environmental screening procedures have already been developed within JSIF, and during preparation, the EMF was reviewed to ensure it screens subprojects for impacts on natural habitats, with appropriate environmental management plans. 21 * Forests (OP/BP 4.36): The subprojects financed under RED1 will not result in significant conversion o f degradation o f critical forest areas. However, this policy has been triggered as a precaution, as there may be possible subprojects supporting small-scale forest restoration activities (such as afforestation). Any such activities will be minor and positive in nature from a forest perspective. Until there i s a more defined program in this area, a sector- wide analysis o f policy and institutional issues is not warranted. The revised EMF includes guidance on assessing the potential for improved biodiversity and ecosystem functions. 22. Pest Management (OP 4.09): This Bank policy has been triggered as agricultural subprojects may directly or indirectly contribute to the increased use o f pesticides because o f t h e intensification o f the production o f certain crops. The revised EMF includes specific provisions regarding the prohibition o f certain types o f pesticides (those on the World Health Organization's Hazardous Pesticides List) and guidelines for the selection, application, storage, handling, transport, and disposal o f pesticides. The selection criteria for subprojects will also encourage the use o f sustainable farming practices to promote the application o f Integrated Pest Management, organic farming practices and renewable energy. 75 23 I There are other Bank's safeguard policies that have not been triggered b y the Project. Physical Cultural Resources (OP 4.11). This Bank policy i s not triggered because the Project will not affect sites with archeological, paleontological, historical, religious, or unique natural values in the Project area. However, appropriate clauses will be included in all construction contracts regarding the procedures to be followed in the event o f chance find o f culturally significant artifacts or sites. Safety of Dam (OP 4.37). This Bank policy i s not triggered because the Project w i l l not involve construction or rehabilitation o f existing dams nor rely on the performance o f an existing or proposed dam. International Waterways (OP 7.50). This Bank policy i s not triggered because there are no known Project components involving international waterways as defined under the policy. Disputed Areas (OP 7.60). This Bank policy is not triggered because there are no known Project components involving disputed areas as defined under the policy. Involuntary Resettlement (OP 4.12). The project does not trigger OP/BP 4.12 because it does not involve the taking o f land or other assets and requires no physical relocation o f populations. The subproject eligibility criteria and safeguard screening process would not consider any proposal that could involve such impacts, as stated by the eligibility criteria, included in the OM. Indigenous Peoples (OP/BP 4.10). The project does not trigger OP/BP 4.10.This Bank policy i s not triggered because there i s no population in Jamaica that identifies as indigenous. Environmentalimpacts and mitigating measures to be addressed under the project 24. The potential environmental impacts and mitigation measures to be addressed under the Project are described below. All o f these mitigation measures have been incorporated into the design o f this Project. This section i s an outline o f JSIF's adapted Environmental Management Framework and related mitigation plans. The E M F has been finalized a n d approved b y the Board o f Directors o f JSIF on July 21,2009. Agricultural subprojects 25. Potential impacts. These subprojects may include some small-scale collective infrastructure that improves post-harvest processing and market access such as collection, sorting and packing centers and storage facilities, such as fencing, roofing, watering systems, and others. These infrastructural works would be constructed by farmers and are not expected t o result in significant negative environmental impact, Other potential negative environmental impacts associated with agricultural subprojects include water pollution (groundwater contamination from seepage o f animal waste; feedlot and fertilizer runoffs etc.); solid waste pollution (improper disposal o f agro-processing wastes etc.) etc. 76 26. Mitigation measures: Environmental mitigation plans to address the potential environmental impacts from agricultural subprojects have been put together by a consulting firm hired during Project preparation, and incorporated into JSIF's revised Environmental Management Framework. These include measures such as (i) proper waste and wastewater management to prevent contamination o f surface and groundwater; (ii) proper disposal systems for livestock waste; (iii) conservation measures, and good agricultural practices to prevent soil runoffs and address land degradation and soil erosion; and (iv) appropriate soil contouring, proper terracing and Integrated Pest Management practices for cultivation o f orchard and cash crops, and herbs. These mitigation plans -which are elaborated in greater detail in the revised EMF document -will also be incorporated into the project's Operations Manual. Rural tourism subprojects 27. Potential impacts. These subprojects include grant assistance for tourism infrastructure (such as signage, trails, public use facilities etc.), as well as enterprise development (such as restaurants, camp sites, lodges, vehicles etc.). Roadwork is to be excluded. These small-scale infrastructural works are not expected to result in significant negative environmental impact. Some o f the potential negative environmental impacts associated with tourism subprojects include trail disturbance; natural resource loss from tampering o f flora/ fauna; desensitization of existing natural fauna from human presence; possible damage to seafloor from divers/ snorkelers; improper sewage and solid waste disposal etc. 28. Mitigation measures: Environmental mitigation plans to address the potential environmental impacts from rural tourism subprojects have been put together by a consulting firm hired during Project preparation, and incorporated into JSIF's revised Environmental Management Framework. These include measures to (i) demarcate trails and use appropriate signage to protect natural habitats; (ii) appropriately design snorkel and dive tours (and equipment) to minimize that human damage to existing ecosystems; (iii)limitations on dredging, and dock construction to protect the seafloor; and (iv) the sustainable harvesting of natural resources used for making arts, crafts and other novelty items. These mitigation plans - which are elaborated in greater detail in the revised EMF document -will also be incorporated into the project's OM. 77 Annex 11: Project Preparation and Supervision JAMAICA: Rural Economic Development Initiative Project Planned Actual PCN review 9118/2008 09118/2009 Initial PID to PIC 12/03/2008 Initial ISDS to PIC 12/03/2008 Appraisal 05/04/2009 06122/2009 Negotiations 06/2 212009 07/24/2009 Board approval 09/03/2009 Planned date o f effectiveness 0 1/3 1/20 10 Planned date o f mid-term review 01/3 1/2012 Planned closing date 07/3 1/20 16 Key institutions responsible for preparation o f the Project: Jamaica Social Investment Fund 2ndFloor, IC- 1F Pawsey Road Kingston 5, Jamaica Planning Institute o f Jamaica 16 Oxford Road Kingston 5 Jamaica, West I es ndi Bank staff and consultants who worked on the Project included: Name Title Unit Ellen Hamilton Co-TTL, Sr. Urban Specialist LCSUW Yurie Tanimichi Hoberg Co-TTL, Sr. Agricultural Economist LCSAR Daniele Giovannucci Market & Agro-enterprise Specialist Consultant Jim Phillips Tourism Specialist Consultant Jessica Wurwarg JPA, Urban Planner LCSUW Deep Ford Agricultural Economist FAO-CP Yao Wottor Procurement Specialist LCOPR Emmanuel Njomo Financial Management Specialist LCSFM Pilar Gonzalez Sr. Counsel LEGLA Viviana Maya Counsel LEGLA Nancy Agwu Senior Finance Officer LOADM Miguel-Santiago Oliveira Finance Officer CTFRC Anjali Acharya Sr. Environmental Specialist LCSEN Pilar Larreamendy Sr. Social Development Economist LCSSO Ming Zhang Lead Urban Economist LCSUW Jean Claude Balcet Agriculture Economist Consultant Shaun Mann Tourism Specialist Consultant Paul Siege1 Agriculture Economist Consultant 78 Patricia Acevedo Program Assistant LCSUW Severin Kodderitzsch Peer Reviewer EASVS Marianne Grosclaude Peer Reviewer EASE Patrick Labaste Peer Reviewer AFTAR Hannah Messerli Peer Reviewer AFTFP Bank funds expended to date on Project preparation: 1. Bank resources: US$326,528 2. Trust finds*: US$244,5 17 3. Total: US$571,045 (Project preparation was supported with Trust funds from two sources. PHRD (TF 90322) for a total amount o f $500,000 and European Union A A A C P Program Trust Fund (TF 91439) for a total amount o f $50,000.) Estimated Approval and Supervision costs: Remaining costs to approval: US$30,000 Estimated annual supervision cost: US$80,000 79 Annex 12: Documents in the Project File JAMAICA: Rural Economic Development Initiative Project The following key documents can be found in the Project file: 1. JSIF Environmental Framework. 2. OECS Backward Linkages in Tourism Study. (October 2008) 3. Caribbean Trade Report (April 2008) 4. Agri-tourism Workshop Report (July 2008) 5. Feasibility Study for a Grameen Bank Model in Jamaica; FA0 TCFP Report (December 2008) 6. Small Farmers Productive Alliances Pilot Report (January 2009) 7. JSIF Escallion Supply Chain Analysis (January 2009) 8. JSIF Carrots Supply Chain Report (January 2009) 9. JSIF Operational Design Inception Report (January 2009) 10. Final Literature Review on the Supply Chain Analysis (January 2009) 11. JSIF Hotel (Wet Market) Report (January 2009) 12. Sustainable Tourism Master Plan (2002) 13. Vision 2030 80 Annex 13: Statement o f Loans and Credits JAMAICA: Rural Economic Development Initiative Project Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose lBRD IDA SF GEF Cancel. Undisb. Orig Frm Rev'd PO95673 2008 J Early Childhood Develop Proj -- SWAP M 15.00 0.00 0.00 0.00 0.00 15.00 0.00 0.00 PI05024 2008 J Social Protection M 40.00 0.00 0.00 0.00 0.00 40.00 0.67 0.00 PI06622 2008 JM Second HIV/AIDS Project 10.00 0.00 0.00 0.00 0.00 10.00 0.00 0.00 P109575 2008 JM Hurricane Dean ERL 10.00 0.00 0.00 0.00 0.00 8.48 1.17 0.00 PO91299 2006 JM Inner City Basic Services Project 29.30 0.00 0.00 0.00 0.00 25.95 6.08 0.00 PO71589 2003 JM- Reform o f Secondary Ed. (ROSE 11) 39.80 0.00 0.00 0.00 27.30 2.07 29.37 1.41 PO67774 2002 JM- Social Safety Net Project 40.00 0.00 0.00 0.00 0.00 1.81 1.81 0.00 Total: 184.10 0.00 0.00 0.00 27.30 103.31 39.10 1.41 JAMAICA STATEMENT OF IFC's Held and Disbursed Portfolio In Millions o f U S Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2003 JPS Co. , 0.00 0.00 45.00 0.00 0.00 0.00 45.00 0.00 2005 Jamaica Energ... 20.00 0.00 8.00 50.00 20.00 0.00 8.00 50.00 2002 MBJA Limited 19.60 0.00 0.00 24.04 19.60 0.00 0.00 24.04 2006 MBJA Limited 2 1.20 0.00 0.00 20.00 3.89 0.00 0.00 3.25 2005 NCBJ 30.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total portfolio: 90.80 0.00 53.00 94.04 43.49 0.00 53.00 77.29 Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic 2006 JEP B Loan Swap 0.00 0.00 0.00 0.00 Total pending commitment: 0.00 0.00 0.00 0.00 81 Annex 14: Country at a Glance JAMAICA: Rural Economic Development Initiative Project Latin Upper. POVERTY and SOCIAL Amerlca mlddle- 3evelopmntdlanonb Jamaica 6 Carib. income '1007 Population, midyear (millions) 2.7 563 823 Life expectancy GNI per capita (Atlas method, US$) 3,70 5,540 6,987 GNI (Atlas method, US$ billions) 9.9 3,118 5,750 r Average annual growth, 2001-07 Population (%) 0.5 13 0.7 21 13 GNI Gross Labor force (%) 4.1 per primary M o a t recent estimate (latest year available, 2001-071 capita nrollment Poverty (% 0 f population below nationalpo verty line) Urbanpopulation (%of tofalpopulation) 53 78 15 Life eqectancy at birth (years) hfant mortality(per ?,000live births) 71 26 73 22 71 22 1 Child malnutrition (%of children under5) 3 5 Access to improved water source Access to animproved water sourca(%ofpopulation) 93 91 95 Literacy(% o f population age 59 90 93 in Jamaica Gross primaryenrollment (%of school-age population) 95 18 - I_. Male 95 QO tp Upper-mo'dle-inwm g m p Female 95 16 09 KEY ECONOMIC RATIOS and LONG-TERM TRENDS I- 1987 1997 2006 ' 2007 EconomlcratioZ GDP (US$ billions) 3.3 7.5 0 0 0.7 Gross capital forrnation/GDP 20.6 29.2 33 2 30.5 Trade 1 Exports of goods and ServicesIGDP 46.6 39.1 45 8 49.0 Gross domestic savings1GDP 210 6.4 160 12.2 1 Gross national SavingsIGDP 15.6 23.0 26 2 217 i Current account balancelGDP -10 -4.4 -0 9 -9.1 hterest paynentsIGDP 6.3 2.1 47 i I Total debtlGDP 144.7 50.4 79 0 Total debt serviceleqorts 42.0 R.4 PO I Present value of debt1GDP 80 8 Present value of debtleqofls P9 2 Indebtedness j 1987-97 1997-07 2006 ' 2007 2007-11 I (average annuelgmwlh) I GDP 3.7 15 2.1 2.0 3.1 -Jamaica 1 GDP per capita 2.9 0.9 16 17 19 - Upper-m'ddlw'nmme m P g i Exports of goods and services I STRUCTURE o f the ECONOMY r 1987 1997 2006 ' 2007 i Growth of capitd and GDP (Oh) j (%of GDP) Agriculture .. 7.9 5.9 6.4 hdustry .. 33.1 32.8 34.0 Manufacturing .. 14.9 P.7 P.4 Services .. 59.0 613 59.6 Household final consumption eqenditure 65.2 68.4 66.3 70.3 02 03 04 05 OB 07 Generalgov't final consumption eqenditure n.0 15.2 7.7 R.5 -0CF -WP 1 hports of goods and services 46.3 519 63.0 67.3 1987-97 1997-07 zoo6 zoo7 (average annualgmwlh) Agriculture 3.3 -18 15.9 -2.0 hdustry 14 12 -0.9 4.0 M anufacturing 4.3 -0.5 -2.4 -2.0 Services 3.5 17 3.1 15 Household final consumption eqenditure Generalgov't final consumption eqenditure Gross capital formation hports of goods and services Note 2007 dataare preliminaryestlmates This tablewas producedfrom the Development Economlcs LDB database 'The dlamonds showtourkeylndlcators Inthe country(1n b0ld)comparedwlth its income-group average ll dataare mlsslng, thediamondwll be!ncompFte I - . --. - 82 PRICES and GOVERNMENT FINANCE ' 1987 1997 2006' 2007 Inflation (%) D o m e s t i c prices (%change) 2o t Consumer prices 6.7 9.7 8.6 6.5 15 Implicit GDP deflator rn.8 m.5 6.7 8.6 10 Government finance 5 ( % o f GDP, includes current grants) o l I Current revenue 27.1 24.5 30.4 30.5 02 03 04 05 06 07 Current budget balance 4.5 -1.6 -2.4 0.1 ----.- GDP deflator -0-CPI Overall surplusldeficit -0.3 -6.4 :5.0 -3.1 TRADE ' ' I 1987 1997 2006 2007 Exportandimportlevels ( U S mill.) (US$ millions) Totalexports (fob) 829 1,700 1984 2,118 6,000 I Alumina 224 652 1,041 Bauxite 113 73 113 Manufactures lj7 320 165 I70 Total imports (cif) 1237 3,322 4,868 5,218 Food 95 258 Fuel and energy , Capitalgoods Export price index(2000=W0) Import price index (2000=WO) Terms of trade (2000=WO) 237 347 4 11 660 735 1P3 01 02 OExporir 03 04 Olmporir 05 06 07 I B A L A N C E of PAYMENTS ' 1987 1997 2006 ' 2007 Current account bdance to GDP(%) (US$ millions) Exports of goods and services 1696 3,399 4,847 5,260 Imports of goods and services 2505 4,064 6.981 7,224 Resource balance 192 -665 -2,135 -1,964 Net income -397 -292 -681 -808 Net current transfers I72 625 1727 1734 Current account balance -34 -332 -1089 -978 Financing items (net) 247 81 139 1m5 Changes in net reserves -213 252 -230 -P7 Memo: Reserves including gold (US$ millions) 680 .. 2,445 Conversion rate (DEC, loca//US$) 5.5 35.4 65.7 68.0 E X T E R N A L D E B T a n d R E S O U R C E FLOWS (US$ millions) ' 1987 1997 2006 ' 2007 Composition of 2006 debt (US$ mill.) Total debt outstanding and disbursed 4,756 3,770 7,994 IBRD 735 431 387 360 IDA 0 0 0 0 I G. 1,173 A:387 Total debt service 750 628 825 IBRD 98 a6 65 71 IDA 0 0 0 0 Composition of net resource flows Official grants 71 41 91 W Official creditors rn8 -248 -#3 Private creditors -2 38 907 Foreign direct investment (net inflows) 53 203 882 Portfolio equity(net inflows) 0 0 0 F. 4,790 W r l d Bank program Commitments P2 0 29 0 E - Bilateral A - IBRD Disbursements 64 26 1B 19 B IDA. . D Other multilateral F - Private Principal repayments 42 72 43 48 C - IMF G Short-term ~ Net flows 23 -46 -25 -29 Interest payments 56 34 22 22 Net transfers -34 -80 -47 -5 1 Note:This tablewas producedfrom the Development Economics LDB database. 9/24/08 Annex 15: Map JAMAICA: Rural Economic Development Initiative Project 84 77°W JAMAICA 19°N 19°N RURAL ECONOMIC DEVELOPMENT INITIATIVE PROJECT PARISHES MAIN CITIES AND TOWNS PARISH CAPITALS Caribbean Sea JAMAICA NATIONAL CAPITAL MAIN ROADS RAILROADS PARISH BOUNDARIES Monteg o Falmouth Ba y Montego Bay Discovery Bay Lucea St. Anns Bay SAINT Gr Ocho Rios Oracabessa HANOVER eat Montpelier Port Maria JAMES T R E L AW N Y SAINT ANN SAINT Negril Moneague MARY Annotto Bay WESTMORELAND Savanna Port Antonio La Mar Christiana Frankfield Blu ef ield Linstead Ba y k Bog Walk SAINT PORTLAND lac Chapelton SAINT ANDREW B Mandeville CLARENDON C AT H E R I N E Halfway Tree 18°N Black River SAINT 18°N ELIZABETH MANCHESTER May Pen Spanish KINGSTON SAINT Town THOMAS Minho Port Esquivel Port Morant Alligator Pond Rocky KINGSTON Point Lionel Town Po rt l a nd Bight 0 5 10 15 20 25 Kilometers 0 5 10 15 20 Miles Caribbean Sea IBRD 37080 This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information JULY 2009 shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 78°W