Document of The World Bank FOR OFFICIAL USE ONLY Report No: 68506-AZ PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$30 MILLION TO THE REPUBLIC OF AZERBAIJAN FOR THE SECOND RURAL INVESTMENT PROJECT June 13, 2012 Sustainable Development Department South Caucasus Country Unit Europe and Central Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective March 26, 2012) Currency Unit = Azerbaijani New Manat AZN 0.79 = US$1 US$ 1.27 = AZN 1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AzRIP Azerbaijan Rural Investment Project AzRIP-AF Azerbaijan Rural Investment Project Additional Financing AZN Azerbaijani New Manat CDD Community Driven Development CIG Common Interest Group CIS Commonwealth of Independent States CPS Country Partnership Strategy ECA Europe and Central Asia Region of the World Bank EMF Environmental Management Framework EMPF Environmental Management Plan Framework ExComm Local Executive Committee FAO Food and Agriculture Organization FM Financial Management GDP Gross Domestic Product IDP Internally Displaced Person IFR Interim Financial Report IBRD International Bank for Reconstruction and Development IGA Income Generation Activities LSMS Livings Standards Measurement Survey M&E Monitoring and Evaluation MIS Management Information Systems MP Micro-project OM Operational Manual PAT Project Assistance Team PDO Project Development Objective PM&E Participatory Performance Monitoring and Evaluation PMU Project Management Unit RGAC Regional Grant Approval Committee ROO Regional Operations Office SAAC State Agency for Agricultural Credits SFDI Social Fund for the Development of IDPs PRA Participatory Rural Appraisal WG Working Group Regional Vice President: Philippe Le Houerou Country Director: Asad Alam Sector Director: Laszlo Lovei Sector Manager: Elisabeth Huybens Task Team Leader: Daniel Owen Table of Contents I. Strategic Context ............................................................................................................ 1 A. Country Context ............................................................................................................... 1 B. Sectoral and Institutional Context.................................................................................... 1 C. Higher Level Objectives to which the Project Contributes ............................................. 3 II. Project Development Objectives ................................................................................... 4 A. Project Components ......................................................................................................... 5 B. Project Financing ............................................................................................................. 6 C. Lessons Learned and Reflected in the Project Design ..................................................... 7 III. Implementation .............................................................................................................. 9 A. Institutional and Implementation Arrangements ............................................................. 9 B. Results Monitoring and Evaluation ............................................................................... 10 C. Sustainability.................................................................................................................. 11 IV. Key Risks and Mitigation Measures .......................................................................... 11 A. Economic and Financial Analysis .................................................................................. 11 B. Technical ........................................................................................................................ 12 C. Financial Management ................................................................................................... 13 D. Procurement ................................................................................................................... 13 E. Social (including safeguards) ......................................................................................... 13 F. Environment (including safeguards) .............................................................................. 15 Annex 1: Results Framework and Monitoring ...................................................................... 17 Annex 2: Detailed Project Description ................................................................................. 20 Annex 3: Implementation Arrangements ............................................................................. 30 Annex 4: Operational Risk Assessment Framework (ORAF) ............................................. 46 Annex 5: Implementation Support Plan ................................................................................ 50 MAP: IBRD 38276 . PAD DATA SHEET Azerbaijan Second Rural Investment Project (P122944) PROJECT APPRAISAL DOCUMENT . EUROPE AND CENTRAL ASIA ECSS4 . Basic Information Date: 13-Jun-2012 Sectors: Other social services (40%), Microfinance (15%), Water supply (15%), Rural and Inter- Urban Roads and Highways (15%), Transmission and Distribution of Electricity (15%) Country Director: Asad Alam Themes: Rural services and infrastructure (33%), Sector Elisabeth Participation and civic engagement (25%), Manager/Director: Huybens/Laszlo Lovei Rural non-farm income generation (25%), Decentralization (17%) Project ID: P122944 EA B - Partial Assessment Category: Lending Specific Investment Instrument: Loan Team Leader(s): Daniel Owen Joint IFC: No . Borrower: Republic of Azerbaijan Responsible Agency: State Agency for Agricultural Credits (SAAC) Contact: Mr. Subhan Asgerov Title: Director Telephone 994-12-934693 Email: subhan@azrip.org No.: . Project Implementation Start 01-Sep-2012 End 30-Mar-2017 Period: Date: Date: Expected Effectiveness 01-Sep-2012 Date: Expected Closing Date: 30-Sep-2017 . Project Financing Data(US$M) [X] Loan [ ] Grant [ ] Other [ ] Credit [ ] Guarantee i Proposed term: The IBRD flexible Loan with a variable spread has a final maturity of 17 years including a grace period of 4 years. For Loans/Credits/Others Total Project Cost (US$M): 53.60 Total Bank Financing 30.00 (US$M): . Financing Source Amount(US$M) Borrower 20.00 International Bank for Reconstruction and 30.00 Development LOCAL BENEFICIARIES 3.60 Total 53.60 . Expected Disbursements (in USD Million) Fiscal 2013 2014 2015 2016 2017 2018 0000 0000 0000 Year Annual 4.07 6.54 7.02 6.92 4.42 1.03 0.00 0.00 0.00 Cumulati 4.07 10.61 17.63 24.55 28.97 30.00 0.00 0.00 0.00 ve . Project Development Objective(s) The Project Development Objective is to improve access to and use of community-driven rural infrastructure and expand economic activities for rural households. This would be achieved through: (i) the provision of grants to finance eligible demand-driven micro-projects in rural infrastructure; (ii) the provision of training and consultants‟ services to support micro-project development by enhancing the capacity of engaged local stakeholders in all aspects of micro-project program development; (iii) building opportunities for rural employment and livelihood support services through the provision of training and consultants‟ services to carry out pilot livelihood support services in six communities; and, (iv) supporting project management capacity at the Project Management Unit and its Regional Operations Offices for the purposes of effective management, implementation and monitoring and evaluation of Project activities. . Components Component Name Cost (USD Millions) Rural Community Infrastructure 18.90 Technical Assistance for Rural Infrastructure 4.73 Project Management and Results Monitoring 6.37 . Compliance Policy Does the project depart from the CAS in content or in other significant Yes [ ] No [ X ] respects? . ii Does the project require any waivers of Bank policies? Yes [ ] No [ X ] Have these been approved by Bank management? Yes [ ] No [ ] Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ] Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] . Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 X Natural Habitats OP/BP 4.04 X Forests OP/BP 4.36 X Pest Management OP 4.09 X Physical Cultural Resources OP/BP 4.11 X Indigenous Peoples OP/BP 4.10 X Involuntary Resettlement OP/BP 4.12 X Safety of Dams OP/BP 4.37 X Projects on International Waterways OP/BP 7.50 X Projects in Disputed Areas OP/BP 7.60 X . Legal Covenants Name Recurrent Due Date Frequency Schedule 2, Section I. A. Institutional X Arrangements Description of Covenant 1. The Borrower shall carry out the Project in accordance with the Operational Manual 2. The Borrower shall maintain the PMU and ensure it is adequately staffed with qualifications in accordance with procedures necessary for the carrying out of the project. 3. The Borrower shall ensure the Working Group shall be maintained with broad stakeholder representation satisfactory to the Bank. Name Recurrent Due Date Frequency Schedule 2, Section I. C. Micro-projects X Description of Covenant 1. The Borrower shall make Grants to Beneficiaries in accordance with eligibility criteria and procedures acceptable to the Bank. 2. The Borrower shall make each Grant under a Grant Agreement with the respective Beneficiary on terms and conditions approved by the Bank. Name Recurrent Due Date Frequency Schedule 2. Section I. D. Safeguards X Description of Covenant The Borrower shall ensure that the Project is carried out by the Project Implementing Entity in accordance with the provisions of the EMF and/or EMP(s). . iii Conditions Name Type Description of Condition Team Composition Bank Staff Name Title Specialization Unit Myrtle Laura Diachok Operations Officer Monitoring and SDV Evaluation Joseph Paul Formoso Senior Finance Officer Disbursement CTRLA Ahmet Gokce Consultant Procurement ECSO2 Daniel Owen Senior Social Task Team Leader ECSS4 Development Specialist Hiwote Tadesse Senior Program Operations ECSSD Assistant Deepal Fernando Senior Procurement Procurement ECSO2 Specialist Rufiz Vakhid Chirag- Senior Operations Institutional ECSS1 Zade Officer Arrangements Ghada Youness Senior Counsel Legal LEGEM Gulana Enar Hajiyeva Environmental Specialist Environment ECSS3 Yagut Iltifat Ertenlice Procurement Assistant Procurement ECCAZ Norpulat Daniyarov Sr Financial Financial Management ECSO3 Management Specialist Martin Henry Lenihan Senior Social Social Safeguards LCSSO Development Specialist Sabina Vagif Majidova Team Assistant Logistics ECCAZ Tural Jamalov Financial Management Financial Management ECSO3 Specialist Non Bank Staff Name Title Office Phone City Peter Reid Consultant, Livelihood Lyme Regis Specialist Yoshiko Ishihara Consultant Rome . Locations Country First Location Planned Actual Comments Administrative iv Division Azerbaijan Beylaqan Rayonu Beylagan Rayon X Azerbaijan Yardimli Rayonu Yardymli Rayon X Azerbaijan Salyan Rayonu Salyan Rayon X Azerbaijan Sabirabad Rayonu Sabirabad Rayon X Azerbaijan Saatli Rayonu Saatly Rayon X Azerbaijan Bilasuvar Rayonu Bilasuvar Rayon X Azerbaijan Neftcala Rayonu Neftchala Rayon X Azerbaijan Masalli Rayonu Masally Rayon X Azerbaijan Lerik Rayonu Lerik Rayon X Azerbaijan Lankaran Rayonu Lankaran Rayon X Azerbaijan Imisli Rayonu Imishli Rayon X Azerbaijan Calilabad Rayonu Jalilabad Rayon X Azerbaijan Astara Rayonu Astara Rayon X Azerbaijan Agcabadi Rayonu Aghjabadi Rayon X Azerbaijan Tartar Rayonu Tartar Rayon X Azerbaijan Zardab Rayonu Zardab Rayon X Azerbaijan Zaqatala Rayonu Zaqatala Rayon X Azerbaijan Yevlax Rayonu Yevlakh Rayon X Azerbaijan Oguz Rayonu Oghuz Rayon X Azerbaijan Ucar Rayonu Ujar Rayon X Azerbaijan Tovuz Rayonu Tovuz Rayon X Azerbaijan Samaxi Rayonu Shamakhi Rayon X Azerbaijan Saki Rayonu Shaki Rayon X Azerbaijan Samkir Rayonu Shamkir Rayon X Azerbaijan Kurdamir Rayonu Kurdamir Rayon X Azerbaijan Qabala Rayonu Qabala Rayon X Azerbaijan Qusar Rayonu Qusar Rayon X Azerbaijan Quba Rayonu Quba Rayon X Azerbaijan Xacmaz Rayonu Khachmaz Rayon X Azerbaijan Qazax Rayonu Qazakh Rayon X Azerbaijan Goranboy Rayonu Goranboy Rayon X Azerbaijan Qax Rayonu Qakh Rayon X v Azerbaijan Ismayilli Rayonu Ismayilli Rayon X Azerbaijan Goycay Rayonu Goychay Rayon X Azerbaijan Daskasan Rayonu Dashkasan Rayon X Azerbaijan Balakan Rayonu Balakan Rayon X Azerbaijan Barda Rayonu Barda Rayon X Azerbaijan Abseron Rayonu Absheron Rayon X Azerbaijan Agsu Rayonu Aghsu Rayon X Azerbaijan Agdas Rayonu Aghdash Rayon X Azerbaijan Gadabay Rayonu Gadabay Rayon X Azerbaijan Agstafa Rayonu Aghstafa Rayon X Azerbaijan Qobustan Rayonu Gobustan Rayon X Azerbaijan Samux Rayonu Samukh Rayon X Azerbaijan Siyazan Rayonu Siazan Rayon X Azerbaijan Xizi Rayonu Khizi Rayon X Azerbaijan Haciqabul Rayonu Hajigabul Rayon X . vi I. Strategic Context A. Country Context 1. Over the past decade, Azerbaijan has experienced many of the same challenges as other Commonwealth of Independent States (CIS) transition economies including deterioration in infrastructure and service provision and increasing inequality. Infrastructure attrition in Azerbaijan has been particularly acute in rural areas and the poor quality of public infrastructure, exacerbated by a weak public expenditure framework, has been one of the factors impeding development since the mid-1990s. Roughly 45% of the main and regional roads are in poor condition, hindering social and economic development and limiting growth prospects in rural areas of the country. The Government places high priority on infrastructure provision, including power supply and gasification, irrigation investments and major highways crucial for the development of Azerbaijan as a transport corridor, internal connectivity and the development of regions within the country. 2. Since independence, oil and gas discoveries have given Azerbaijan new means for combating poverty and developing a diversified and sustainable middle-income economy. Driven by the oil boom, per capita income rose from a post-independence low of just US$470 in 1995 to $4,820 in 2009. The economy has continued to grow in recent years, recording an average annual GDP growth rate of 24% in 2005-2008, with 12% growth in the non-oil sectors. 3. Strong growth and rising government social spending have reduced poverty markedly, from 49% in 2001 to 16% in 2008 and to 7.6% in 2011, according to official estimates. This decline has been largely driven by high growth rates averaging more than 20% over the period. Higher minimum wage rates over the last decade are likely to have contributed to poverty reduction. Minimum wages were last increased by 10% in January 2012 to the equivalent of US$118 a month. Social transfers, including a well targeted social assistance program, have also contributed to declining poverty. Data suggests that while rural and urban poverty rates have fallen sharply, much of the poverty is rural. 4. Azerbaijan‟s development challenge is to maintain momentum by strengthening the non- oil economy, improving competitiveness and by building skills and strengthening its institutions. Azerbaijan faces an important challenge in improving governance and fighting corruption and new challenges are emerging in economic prospects. The rapid growth derived from oil and gas revenues is likely to plateau over the coming decade and decline thereafter. While Azerbaijan has weathered the global economic crisis relatively well, the crisis has underlined the need for a diversified economy, market-based policies and improved social services. B. Sectoral and Institutional Context 5. Deficiencies in basic infrastructure (roads, water, and energy) in rural areas serve as an obstacle to poverty reduction by discouraging people and businesses from residing in or investing in rural space. Despite the tripling of government investment in basic infrastructure since 2006, there are still important gaps in terms of access and quality of public services between urban and rural areas. While over 90% of households in Baku have access to piped 1 water, the same is true for less than 33% of households in rural areas and in many parts of the country outside Baku people receive as little as three hours supply per day. Similarly, rural communities suffer from unreliable supplies of gas and electricity, a problem that becomes especially acute in remote mountainous areas where access may be completely lacking. Furthermore, the 2009 Country Economic Memorandum states that domestic vehicular traffic has increased 10% per year since 2003, leading to increasing pressure on local road networks and negative impacts on rural economic development. According to the 2008 Living Standards Measurement Survey (LSMS), improved access to, and the quality of public utilities will not only improve household livelihoods and living conditions but also the operating environment for rural enterprises such as food processing and light manufacturing. 6. While rural poverty reduction depends on increasing incomes from agriculture and the diversification and growth of the non-farm rural economy, there are significant constraints facing the development of both sectors. Currently, employment in rural areas does not guarantee a route out of poverty; the working poor account for 60% of the rural poor compared to 50% for the whole country and 35.6% in urban areas. This is due to the poorly paid and seasonal nature of employment in rural areas (median monthly earnings AZN 75 versus AZN 120 in urban areas), the lack of non-farm rural enterprises and the numerous constraints farmers face in maximizing income earned from agriculture. A key constraint is the weakness in infrastructure provision such as rural roads, irrigation and drainage systems. Irrigation is particularly problematic, with at least 50% of all irrigated land damaged due to the effects of salinity resulting from degraded irrigation and drainage systems. Similarly, farm profitability and off-farm employment is constrained by undeveloped value chains with farmers typically producing for their own consumption or sale in informal markets at very low prices. This is compounded by the absence of market infrastructure such as storage, packaging and processing facilities. Despite these constraints, agri-food is a key sector for the country‟s development, being the second largest exporter after oil and gas and employing close to 40% of the total workforce in full-time or seasonal employment. There are significant opportunities for generating off-farm employment at the upper end of the agricultural value chain which is currently underdeveloped. 7. There are important disparities between urban and rural areas in terms of access to health services and education attainment. Physical remoteness to health care has been cited in the 2008 LSMS as an explanation for lower utilization by the poor. Over two thirds of women in the poorest quintile surveyed by the LSMS reported distance from a health facility as representing a barrier to access, versus 14% in the richest quintile. Similarly, health service utilization for both out-patient and in-patient services is higher in Baku and other urban areas than for rural areas. For education, in rural areas, post-secondary education attainment rates are below 11% compared to 40% in Baku. In general, rural areas have lower access to both pre- school and post-secondary education, while the quality of the learning experience at primary and secondary levels is affected by the poor condition of school facilities. 8. Institutional capacity at the local-self government level to address these urban-rural disparities is growing and in need of support. Key institutions at the local level in Azerbaijan include Municipalities and Local Executive Committees. Local Executive Committees (ExComms) represent the various agencies and line Ministries of Central Government and are 2 primarily focused on regulatory functions and the development needs of larger settlements. While elected Municipal Councils were established by law in 1995, they are still relatively new institutions with limited responsibility (for roads, parks, cemeteries and some aspects of social care) and financial capacity to support the provision of critical rural infrastructure. The Second Rural Investment Project in Azerbaijan (AzRIP-2) is well placed to support the developing decentralization agenda through mobilizing local communities to work closely with both ExComm authorities and municipalities in the development of infrastructure in underserviced rural communities. 9. Aside from the decentralization agenda, AzRIP-2 further reinforces a range of other Government strategies and programs. AzRIP-2 complements specific strategies such as the Regional Development Program covering 2009-2012 which is focused on strengthening the productive potential of the regions in non-oil sectors (such as agriculture and tourism) and improving living conditions to ease the pressure on migration to Baku. AzRIP-2 is similarly aligned with Government action programs in other sectors such as infrastructure (prioritizing power supply, roads and social infrastructure), and the state program for agriculture covering 2008-2015 which prioritizes the rehabilitation of irrigation networks and the development of food processing enterprises. The Operational Manual (OM) specifies that micro-projects which do not confirm to national legislation and regional development programs will not be supported by AzRIP-2. 10. In terms of rationale for Bank engagement, AzRIP-2 not only builds on the successful implementation of the original project, but also the experience with Community Driven Development operations elsewhere in the region and globally. Beyond Azerbaijan, the World Bank has supported a range of successful Local and Community Driven Development (CDD) activities across Europe and Central Asia (ECA) that finance improved service delivery, infrastructure provision and income generation in countries as diverse as Croatia, the Kyrgyz Republic, Poland and Russia. These projects respond to the infrastructure and service deficits that arose during the transition era following the privatization of collective farms and local industries previously responsible for social infrastructure and service provision. They also respond to a need to support alternative, more participatory and transparent forms of local governance. These projects build on global best practice by the Bank to support participatory decision making, local capacity building, and community control of resources through CDD. Over the last decade, the Bank has increasingly used CDD projects across a range of countries to address critical infrastructure needs and the current global CDD portfolio amounts to approximately US$2 billion of Bank investments per year. According to the 2008 World Development Report on Agriculture for Development, CDD can also contribute to the agriculture for development agenda by first focusing on the provision of basic services and public goods and then by supporting income generating activities once basic needs have been met. C. Higher Level Objectives to which the Project Contributes 11. The Country Partnership Strategy (CPS) for Azerbaijan for 2011-2014 is focused on achieving results in two key pillars: (i) building a competitive non-oil sector; and (ii) strengthening human and social services; with a cross-cutting filter for improving governance and institution-building across all activities. The importance of improved access to rural 3 infrastructure through cost-effective approaches that support rural communities‟ demand-driven infrastructure investment priorities is emphasized in the CPS. Rural infrastructure projects have a high impact on employment generation. Rehabilitation of small scale irrigation works increases productivity significantly and school rehabilitation leads to increases in school enrollment. The CPS identifies the primary vehicle for achieving these outcomes as the Azerbaijan Second Rural Investment Project. 12. The Government‟s current development program is laid out in its strategy document “State Program on Poverty Reduction and Sustainable Development 2006-15�. The broad development goals include: maintaining macroeconomic stability; creating enabling conditions to improve income-generating opportunities; improving the quality and access to basic health and education services; improving infrastructure; and strengthening the social protection system to better protect vulnerable groups. The project is also in line with the objectives of the state programs on regional development, poverty reduction and food security. II. Project Development Objectives A. PDO 13. The Project Development Objective is to improve access to and use of community-driven rural infrastructure and expand economic activities for rural households. This would be achieved through: (i) the provision of grants to finance eligible demand-driven micro-projects in rural infrastructure; (ii) the provision of training and consultants‟ services to support micro-project development by enhancing the capacity of engaged local stakeholders in all aspects of micro- project program development; (iii) building opportunities for rural employment and livelihood support services through the provision of training and consultants‟ services to carry out pilot livelihood support services in six communities; and, (iv) supporting project management capacity at the Project Management Unit and its Regional Operations Offices for the purposes of effective management, implementation and monitoring and evaluation of Project activities. B. Project Beneficiaries 14. Under Component A - Rural Community Infrastructure, beneficiaries will include individuals in rural communities in the 11 currently un-serviced rayons (Shabran, Siyazan, Xizi, Abseron in the North, and Agcabadi, Beylaqan, Masalli, Uardimli, Lerik, Astara and Lankaran Rayons in the Mugan-Salyan Zone) who will benefit from mobilization and access to improved infrastructure. Other beneficiaries will include households and individuals from well-performing micro-projects in the 45 existing rayons served under the original Azerbaijan Rural Investment Project (AzRIP) and the Azerbaijan Rural Investment Project Additional Financing (AzRIP-AF), who will benefit from second generation community infrastructure and livelihood support services.1 These rayons comprise: Aghsu, Balakan, Gabala, Gakh, Gobustan, Guba, Gusar, Ismayilli, Khachmaz, Oghuz, Shaki, Shamakhi, Zakatala in the North; Aghstafa, Barda, Dashkasan, Gadabay, Goranboy, Khanlar, Qazakh, Samukh, Shamkir, Tartar and Tovuz in the 1 AzRIP became effective on January 18, 2005. The total project costs were US$21.10, of which US$15 million was financed from a Bank loan. On March 27, 2008, additional financing of US$15 million was approved to support the expansion of activities under AzRIP. The closing date for AzRIP was March 31, 2012. 4 North West; Aghdash, Goychay, Hajigabul, Kurdamir, Ujar, Yevlakh and Zardab in Lower Shirvan; Bilasuvar, Imishli, Jalilabad, Neftchala, Saatly, Sabirabad and Salyan in Mughan Salyan, and; Babek, Julfa, Kengerli, Ordubad, Sadarak, Shahbuz and Sherur in Nakhchivan. Micro-projects in Nakhchivan are to be fully financed by Government funds. Other zones are eligible for World Bank financed micro-projects. Individual, household and community-level beneficiaries will be measured, tracked and monitored (incorporating social and gender data disaggregation) using baseline surveys and follow-up impact evaluation. It is expected that in total 600 eligible communities in 56 rayons will be serviced under AzRIP-2 and an estimated 1,500,000 community members are expected to benefit from infrastructure investments. Under Component B – Technical Assistance for Rural Infrastructure, beneficiaries are projected to total 130,000 under participatory rural appraisal engagement; 9,000 in training and 10,000 beneficiaries in Community Network activities including workshops, cross visits and Community Investment Conferences. Livelihood pilots are expected to benefit approximately 1,200 people. Women‟s empowerment through incubating leadership and participation in decision-making has been a prominent feature of AzRIP‟s results narrative and a strong gender focus will continue under AzRIP-2. C. PDO Level Results Indicators 15. Achievement of the Development Objective will be assessed through the increase in access to and use of rural infrastructure; the change in access to markets and basic social services through improved rural infrastructure; and improved economic opportunities for rural households. The outcome and intermediate indicators are specified in Annex 1. II. Project Description A. Project Components 16. The project is a Specific Investment Loan (SIL) with a total investment cost estimated at US$53.60 million, of which US$30 million will be financed by the World Bank Loan. The Project will scale up AzRIP both geographically into currently un-serviced rayons and vertically through the inclusion of pilot livelihood support services and second generation institutional support in current AzRIP active project areas. The Project has three components. 17. Component A - Rural Community Infrastructure. This component will finance demand-driven micro-projects in rural infrastructure. Micro-projects eligible for finance through Project proceeds would increase access to, and quality of local economic and social infrastructure, such as roads, rural water supply, irrigation, schools, clinics and markets. Costs to be supported from the project include identification, design, construction, rehabilitation, and initial operation and maintenance of the micro-projects. Potential investments include basic economic (e.g., rehabilitation of secondary roads, potable water systems, irrigation infrastructure, electricity transformers) and social (e.g., school and clinic rehabilitation and construction) infrastructure, based on priority needs identified by communities. The Project will target rural communities (greater than 1,000 and less than 10,000 people with smaller communities open to clustering with neighboring communities to achieve scale) in regions that meet established selection criteria and have a higher relative incidence of poverty. The average size of micro- projects will be US$70,000, while projects over US$85,000 will require prior review. Current 5 micro-project cycle procedures will be maintained in the new Project, including local governance arrangements involving local authorities and sectoral line ministry representation in project screening and approval and public and private sector linkages for key operation and maintenance medium-term projections. Three categories of micro-project grants will be supported under Component A: (i) micro-projects in previously un-serviced rayons which meet eligibility criteria set out in the OM; (ii) second generation micro-projects in active AzRIP communities with high performance ratings from previous micro-project implementation and which meet eligibility criteria set out in the OM, and; (iii) micro-projects submitted by Common Interest Groups supported under the pilot scheme in Component B which meet eligibility criteria as established in the OM. 18. Component B - Technical Assistance for Rural Infrastructure. The objective of this component is to enhance the capacity of engaged local stakeholders, including community groups, local authorities, Regional Grant Approval Committees, Project Assistance Teams and staff in the Regional Operations Offices in micro-project program development and to provide technical assistance for pilot livelihood support initiatives. Stakeholder capabilities in functions of contracting, procurement, financial management, and participatory monitoring and evaluation will be strengthened. Livelihood support services will be piloted in six communities selected among communities that successfully implemented economic infrastructure projects under AzRIP and meet eligibility criteria described in the OM. Livelihood support services will include mobilization and organization of common interest groups (CIGs), identification of income generation activities (IGAs), preparation of business plan proposals, legalizing CIG status, and training CIG members in business management. CIGs that are well organized and performing in accordance with standards set out in the OM and equipped with quality business plans may submit their proposal as a micro-project under Component A, Category (iii). 19. Component C - Project Management and Results Monitoring. This component will finance the administrative and operational project implementation and management costs, including overheads of Project Management Unit (PMU) professional staff, as well as PMU and four Regional Operations Offices (ROOs) and their associated support staff, project outreach, and support to Regional Grant Approval Committees (RGACs). AzRIP-2 will continue the current practice of regular and rigorous project monitoring and evaluation using mixed quantitative and qualitative methods and results based, gender disaggregated indicators implemented on multiple levels – project, rayon and community. AzRIP-2 will also maintain the intensive effort of physical verification of works and technical aspects of sub-project implementation. B. Project Financing 20. The Lending Instrument for the project is a SIL of US$30 million for a period of 5 years from 2012 to 2017. The Loan will be a single currency (US dollar denominated), variable spread loan, with a maturity of 17 years inclusive of 4 years of grace, a front end fee of 0.25%, with repayments linked to commitment. 21. Total project financing requirements are estimated at US$53.60 million, inclusive of price and physical contingencies, taxes, interest, and the front-end fee. The Government of Azerbaijan will finance US$20 million towards total project costs, including 100% of costs of 6 micro-projects for Nakhchivan. The World Bank Loan of US$30 million will finance Components A, B and C. Information on costs and financing sources is provided in Table 1. Table 1. Project Costs by Component and Use of Financing Project Components Project Cost IBRD % (in millions) Financing Financing 1. Component A: Rural Community Infrastructure 41.64 18.90 63 2. Component B: Technical Assistance for Rural infrastructure 4.75 4.73 16 3. Component C: Project Management and Results Monitoring 7.21 6.37 21 Front-End Fees 0.075 Total Project Costs 53.60 30.00 C. Lessons Learned and Reflected in the Project Design 22. The proposed project is a repeater project, building on the current AzRIP design and institutional and implementation mechanisms with day-to-day management under the aegis of the existing PMU, which will be strengthened with additional core and technical staff as needed. The repeater project is founded on a similar yet enhanced PDO, project design and institutional arrangements as the existing project. 23. AzRIP, under implementation since 2005, has garnered widespread recognition for its strong results record and positive impact. The high quality operation has successfully achieved its development objectives and has been acknowledged for delivering tangible results on the ground and improving people‟s lives. The cumulative record of AzRIP is one of significant improvement of rural communities‟ access to infrastructure services, improved mobility and increased farmers' incomes. Beneficiary surveys have indicated that travel times to schools and markets have been reduced by 47% and 26% respectively as a result of the rehabilitation of rural roads. Livelihoods have improved significantly. The rehabilitation of irrigation systems, reaching over 700,000 people, has increased average productivity by roughly 30% and added more than $1 million to the value of production in project areas while primary school enrollment has increased by 25% subsequent to school rehabilitation. Moreover, in villages where roads have been rehabilitated under the project, 78% of farm products are now brought to markets in nearby towns by farmers themselves (as opposed to 18% in non-project areas). In project areas, farmers can now sell their produce at their farms at 20% higher prices, while prices for the same products in non-project areas have decreased. A keen emphasis on sustainable infrastructure, maintenance contracts and accountability has helped ensure that over 90% of infrastructure rehabilitated is operational. The income of over 600,000 farmers has increased and 150,000 rural poor now have access to safe water. Women‟s empowerment has been a prominent feature of AzRIP‟s implementation results narrative and a gender focus will continue under AzRIP-2 to support women‟s participation and empowerment and dedicated gender tracking and monitoring of project implementation and impacts. 7 24. The AzRIP-2 approach to local development pays particular attention to issues of sustainability and maintenance. Participating communities prepare maintenance plans and cost- share for maintenance of assets in conjunction with municipalities and service providers. Financial and institutional sustainability has been strengthened through mobilization by municipalities and line ministries of over US$800,000 for the operation and maintenance of rehabilitated infrastructure. 25. A Social Assessment carried out as part of preparation of AzRIP-2 reaffirmed the appropriateness of design choices and presented a series of recommendations which have been integrated in the revised OM for the project. These relate to additional advocacy and promotion work in new rayons with larger concentrations of internally displaced people; review of settlement size eligibility criteria for national minority group areas with smaller settlement sizes; and intensified efforts to foster women's leadership. 26. Impact evaluation findings from the first phase of AzRIP demonstrate a significant economic boost as a result of project interventions and improvements in financial security resulting from asset value and service enhancements and increases in on-farm and off-farm income. A Cost-Benefit analysis of AzRIP micro-projects carried out in 2010 recorded very high net present values and monetary appraisals of anticipated revenues from micro-projects at 85 times the value of initial investments. Participating communities from the first phase of AzRIP have expressed strong demand for AzRIP to stimulate livelihood and income generating opportunities and AzRIP-2 is incorporating this sequential evolution in project design. Experience from CDD practice globally attests to the viability of this model and phased evolution of a CDD program from an initial focus on welfare and public goods to second generation public plus private goods and a productive investment focus. 27. Building on lessons learned under AzRIP, rayons that have demonstrated successful results from AzRIP micro-project implementation will be eligible to request further support for complementary rural infrastructure investments under a second generation window in Component A. Evidence suggests that several engagements in one community are more likely to have an impact on poverty reduction. These second generation micro-projects will also step up efforts to crowd in private sector participation and thereby leverage additional capital, as well as new ideas and skills in support of local development initiatives. An incremental approach is to be incorporated within AzRIP's community engagement strategy to introduce support for productive infrastructure and livelihoods support services. Diagnostic work on livelihoods to be undertaken during the first year of Project implementation will determine the appropriate support services for income generation and livelihood strengthening in the pilot communities. The selected pilots would be targeted at a restricted number of communities that successfully implemented economic infrastructure projects under the original project and would be conditional on feasibility assessments. Probable areas of support would be business development services, local organizational capacity strengthening, market and institutional linkages and value addition initiatives. 28. Over the longer-term, the expected transformative impact of AzRIP-2 is twofold: (i) to facilitate the translation of enhanced social capital into financial capital and economic well- being; and (ii) to secure gains achieved in solidarity and social cohesion at the local level and 8 extend these pathways into improved governance and accountability between citizens and the State. The intensive investment in social capital in AzRIP-2 is manifested by the design emphasis on social and gender inclusion, social mobilization, collective decision-making, establishment of local governance groups and networks (community networks, cross-visits between communities and regional and national community investment knowledge sharing and networking) and broad mandates on transparency, information access and communications. The expected outcomes from such social capital investment include improved local governance, a sustained demand side stimulus for inclusive economic growth and continued attention to targeting to the most vulnerable and a focus on social inclusion. 29. The proposed operation is hence aligned with the CPS‟s cross-cutting filter on 'improving governance and institution building‟. In particular, the articulation within the AzRIP sub-project cycle of roles and responsibilities at the rayon level and its attendant municipal governance support can be broadly understood as supporting decentralization efforts in Azerbaijan. III. Implementation A. Institutional and Implementation Arrangements 30. The proposed project builds on the ongoing AzRIP design and its institutional and implementation mechanisms which proved to be successful in terms of achieving results on the ground. The project will be under the general management of the State Agency for Agricultural Credits (SAAC), which is the Ministry of Agriculture‟s agency for overseeing international rural development projects. Day-to-day management of the project will be delegated to the Project Management Unit (PMU) constituted within SAAC. The PMU has successfully implemented the on-going AzRIP. It reports to the Director of SAAC and would have direct responsibility for management, administration and coordination of the proposed project. The PMU has developed the necessary experience and competence to manage all core functions including program management, regional coordination, community mobilization and facilitation, capacity building, training, procurement, financial management and monitoring and evaluation (including environmental monitoring). This would facilitate a smooth transition from the current to the new project. Annex 3 provides a chart of the proposed project organization. The project implementation arrangements are described in detail in the OM. The OM for AzRIP-2 is based on the manual utilized for guiding operations under the previous project and updated and revised accordingly. The PMU comprises core staff, including the Director, Deputy Director, Engineers and Community Development, Procurement, Financial Management, M&E and MIS Specialists. As required, the project could also finance additional core and technical staff to provide specialized inputs that are not currently available in the project structures and also to ensure that all project activities are carried out effectively. In particular, the implementation of livelihood activities will require a full-time Coordinator in the PMU. It is also proposed to add a Legal Specialist to the core PMU team and to enhance its communications competencies. The PMU has acquired solid experience in procurement and has established a reliable and effective accounting and internal control systems under AzRIP. The PMU will continue to use these arrangements for the financial management of AzRIP-2. The PMU is planning to retain existing accounting software and accounting staff. 9 31. The project institutional arrangements at the national level also include the project Working Group (WG) established by SAAC to review the OM on a quarterly basis and adopt revisions, as required. The WG includes representatives of the Ministries of Economic Development and Agriculture, the Parliamentary Commission on decentralization, Regional Grant Approval Committees and civil society. 32. At the regional level, the PMU will be supported by the Regional Operations Offices (ROOs) which are the PMU representatives in the project zones to support and monitor the community project portfolio. The existing ROOs would continue to operate as under the previous AzRIP projects. The ROOs have been operating as umbrella offices, incorporating Project Assistance Teams (PATs), Technical Design Companies and Regional Grant Approval Committees (RGACs) in one location, under the coordination of a Program Specialist functioning as an extension of the PMU. This has worked well, and the same approach will be adopted for AzRIP-2. The PATs are currently functioning as the Service Providers for providing community mobilization, training and consultancy services for communities. The RGACs will continue to review the project proposals for approval, while the Technical Design Companies will help to develop local capacity for infrastructure development and maintenance. B. Results Monitoring and Evaluation 33. The implementing agency of AzRIP has a good system in place for monitoring and evaluation, including an intensive effort of physical verification of works and technical aspects of sub-project implementation, which is conducted at several levels (project, rayon and community). Reports from the field are generated regularly to produce monthly, quarterly and annual progress reports. Several improvements will be made in AzRIP-2, including: (i) sharpening of existing indicators and generation of new indicators with which to track progress and measure impact, in particular to assess women‟s participation and empowerment, economic changes and social capital impacts; (ii) improved monitoring and reporting on the complaints and grievance redress mechanisms which were built into AzRIP; and (iii) using MIS information more effectively for internal and external communications. 34. Impact Evaluation and Special Studies. A rigorous impact evaluation with quantitative and qualitative components will be conducted for AzRIP-2. Specifically, the project plans to conduct impact evaluation baseline, mid-point and end line field surveys. As part of the monitoring and evaluation framework, the project will also undertake several thematic evaluations and studies including the effects of the sub-projects on technical quality, women‟s participation and empowerment, economic changes and social capital impacts. 35. Regular monitoring and reporting, including maintaining the MIS, will be carried out by the PMU, who would also undertake the special studies with the assistance of contracted consultant services. The impact evaluation and more complex special studies will be supported by the Bank‟s Development Impact Monitoring and Evaluation (DIME) team. 10 C. Sustainability 36. This project will continue to use the AzRIP model which has demonstrated sustainability by using an integrated approach to infrastructure development which combines sound economic analysis in the selection of micro-projects, solid engineering design with support from Technical Design Companies and attention to social dynamics and environmental sustainability. Operations and maintenance plans prepared by communities will allow them to identify potential funding gaps and develop financing mechanisms and strategies for long-term maintenance requirements. IV. Key Risks and Mitigation Measures 37. Since the proposed project builds on the ongoing AzRIP design and its institutional and implementation mechanisms, the overall risk is anticipated to be Low. Potential risks are summarized in the Operational Risk Assessment Framework (Annex 4). The proposed Project has been strongly endorsed by the Cabinet of Ministers and the Prime Minister‟s Office and the Project will coordinate closely with relevant central and local line ministries and agencies. Project implementation risks are expected to be Low as existing PMU staff are experienced and strongly committed to the project, and appropriate mitigation measures are in place, including increased monitoring and evaluation at several levels, to ensure transparency and accountability within the project. V. Appraisal Summary A. Economic and Financial Analysis 38. For the original project, an ex-post cost benefit analysis was conducted for 18 of the 340 micro-projects implemented between 2005 and 2009. This exercise was completed by an independent consultant, who selected an equal number of projects from each of the three target regions, as well as an equal number of water (potable and irrigation), health, and roads projects. The findings of the cost-benefit analysis demonstrated a positive economic return from the micro-project investments. Ex-Post Cost Benefit Analysis of a Sample of 18 Micro-Projects Project Project Net Present Number of Project type Cost Benefit Budget Value beneficiaries Stream Stream Average for four water projects 39,979 143,096 103,117 31,171 1,444 Average for two irrigation 54,631 11,776,892 11,722,261 34,154 1,200 projects Average for six health post 442,719 120,334 80,582 38,281 2,645 projects Average for six roads projects 36,313 1,190,578 1,154,264 30,796 1,626 11 39. In addition to the above analysis, the beneficiary assessment for the original project also demonstrated important socio-economic benefits. Where AzRIP rehabilitated rural roads, the travel time to school and markets was reduced by 47% and 26% respectively. Moreover, 78% of farm products are now brought to markets by farmers themselves, eliminating costly intermediaries. This represents a significant achievement compared to non-beneficiary villages in the same region where only 18% of farm produce are brought to market by the farmers themselves. The value of agricultural production increased by more than US$1 million where irrigation systems were rehabilitated and primary school enrollment increased by 25% after rehabilitation of school buildings. 40. As a repeater project, supporting similar types of sub-projects, it is expected that AzRIP- 2 will yield similar positive economic returns and socio-economic benefits. However, given the expected large number of micro-projects, a full cost-benefit analysis will not be carried out for each micro-project. However, economic criteria and basic economic analytical tools will be used to appraise micro-projects both at the community level (who will assess the financial costs of the project and the degree to which it benefits the majority of community members), along with the RGAC who will score each proposal based on a number of economic criteria. The specific economic criteria to be used are outlined in the OM. 41. The livelihoods pilots will also be designed and implemented on the basis of economic feasibility analysis to be undertaken during the first year of AzRIP-2 implementation, prior to launching the livelihood initiatives. B. Technical 42. Project investments will be based on appropriate technology for the infrastructure needs of local communities, the majority of which have already been tested and validated under the original project. Over the course of AzRIP implementation, the technical quality of the completed infrastructure works has improved significantly. In the last year of the project, the World Bank Task Team Engineer and engineers working for the independent evaluation consultants deemed construction and engineering works completed in a sample of micro-projects to be satisfactory. The preparation of each community micro-project is supported by a Technical Design Company hired by the PMU for each operational zone who ensures technical norms and standards are adhered to. The Technical Design Companies are responsible for helping with the preliminary designs of each project, comparing technical and costing feasibility of alternative designs, preparing technical documentation packages, environmental standards, as well as the preparation of implementation monitoring and sustainability plans. Each community must also designate a Community Engineer to collaborate with the Technical Design Company and Project Assistance Team Engineers. Furthermore, a maintenance plan designed to ensure the sustainability of the micro-project after its construction must be presented by the community before the project is approved. For AzRIP-2, these practices will be scaled up to new project areas and the OM will address in detail technical norms and standards for project preparation, implementation, as well as operation and maintenance. Also, regular internal and external technical audits will be undertaken to ensure construction meets the required technical standards. 12 C. Financial Management 43. The financial management (FM) arrangements have been assessed as satisfactory under AzRIP and will be continued under AzRIP-2. The PMU will be responsible for FM arrangements. The most recent FM supervision (December, 2011) indicates that the Accounting and Internal Control system of the PMU is reliable and effective. Under AzRIP, the PMU have submitted timely Interim Unaudited Financial Reports (IFRs) and project audit reports, the quality of which have been assessed as satisfactory to the Bank. FM staffing arrangements of the PMU were also assessed as adequate. The PMU will continue to use these arrangements for the proposed project. The Bank and management of the PMU will work together to ensure that the current PMU staff and systems for the proposed project needs are retained. Currently, the PMU fully complies with the audit requirements of the ongoing project. As is the case with AzRIP, independent auditors will audit project financial statements under terms of reference acceptable to the Bank and in accordance with International Standards on Auditing (ISA). The PMU will submit quarterly IFRs covering the period of one quarter, format and content of which have been agreed with the PMU. D. Procurement 44. A procurement assessment carried out during the pre-appraisal of AzRIP-2 in April 2011 found three potential risks: (i) the procurement environment may be affected by the problems related to governance and corruption; (ii) probable attempts of administrative intervention in procurement and selection under the AzRIP-financed sub-projects; and (iii) as the project embraces community participation procurement, the pilot livelihood initiatives may face procurement risks due to lack of capacity at that level. 45. The assessment concluded that due to their previous involvement in AzRIP, PMU staff are familiar with Bank procurement procedures and have acquired the adequate experience and capacity to carry out procurement activities related to the proposed Project. Risk mitigation measures were discussed with PMU during project appraisal. The Procurement Plan will be updated at least annually (or as required) to reflect project implementation needs. Procurement under Component A - Rural Community Infrastructure will be will be carried out by the communities under the guidance of the ROOs. E. Social (including safeguards) 46. The primary stakeholders driving this project are the communities themselves, who will be actively supported in identifying, selecting, planning, implementing and maintaining infrastructure micro-projects. Communities targeted for assistance will be those suffering serious infrastructure deficits and will be identified using socio-economic infrastructure indicators provided by rayon authorities. This ensures that the most disadvantaged communities in terms of infrastructure access are targeted for mobilization. Under the original project, about 30 communities whose primary inhabitants were national ethnic minorities benefited from micro-projects and this number is expected to expand under AzRIP-2 as the project moves into new rayons in the east of the country where ethnic minorities such as the Lezgins account for a larger proportion of the population. A number of these rayons also border conflict-affected areas. 13 47. Social development principles such as participation, transparency, gender and social inclusion and local ownership underpin the micro-project selection, preparation and implementation process. 48. Aside from communities, other key stakeholders include Rayon ExComm authorities (local representatives of central government) and the relatively new municipalities. ExComm authorities play a key role at critical junctures in the micro-project process including the selection of project communities, the decision to mobilize, securing the relevant permits, and the handover of specific community projects for operation and maintenance to the relevant line agencies and ministries. Rayon ExComm representatives also participate in the RGACs. Currently, municipalities have limited responsibility for rural roads, parks, and cemeteries, as well as limited financial resources. AzRIP-2 will complement the national decentralization agenda through engaging municipal officials as community project group members, targeting training and capacity building measures at municipal officials, and transferring rural roads to municipalities for operation and maintenance purposes. Furthermore, there is strong involvement of private sector stakeholders in the form of contractors for the construction of civil works, as well as Technical Design Companies who support communities in project design and supervision. 49. Positive social impacts of the Project will include reduced travel time to access markets and social services resulting in improved incomes, as well as enhanced human capital, increased agricultural productivity, job creation during micro-project construction and increased availability of power and potable water to households. Alongside these tangible benefits, it is also expected that communities will benefit from increased levels of social capital, with community members, especially women, becoming more engaged in decision making that affects their lives, along with increasing trust, transparency and information sharing among community members. This will largely be the result of the strong emphasis placed on consensus building, broad based participation and community ownership during the community project process. 50. Compared to the social benefits, Project social risks are relatively minor and mitigation measures are already in place from the original project. Potential risks include elite capture and gender bias in sub-project selection, the exclusion of IDPs and ethnic minorities from decision making processes and project benefits, and potential resettlement impacts of micro-projects. In order to assess these risks, a Social Assessment was conducted in March 2011. This analysis found that the risk of elite capture was minimal, as AzRIP successfully introduced informed participation of the beneficiaries and transparent decision-making at the community level. The approach created a strong sense of community ownership of the infrastructure project during its identification and planning, as well as for operations and maintenance. 51. In terms of gender, women actively participated in the process and were well represented in the community level project committees („Community Group‟). AzRIP-2 will continue to promote these key principles while paying closer attention to new challenges related to the inclusion of Internally Displaced Persons ( IDPs) and ethnic minorities, such as intensifying mobilization and participation of IDPs in the two new rayons (Agdzhebedi and Beilagan) where 14 their presence is significant; better coordination with the Social Fund for the Development of IDPs Project (SFDI); and more emphasis on female leadership. AzRIP-2 will attempt to capture social outcomes rigorously through a set of social capital indicators. 52. AzRIP-2 does not trigger OP 4.10 (Indigenous Peoples), but the Social Assessment carried out as part of project preparation examined some aspects of one major national minority group (the Talysh) in the southern rayons, which will be included in the newly expanded coverage areas of AzRIP-2. The study found that the Talysh are integrated in wider society. Interactions with Government institutions (rayon ExComm and municipality) are well established and communications in the national Azeri language are not a constraint. Key village institutions are not different from those in other areas and, with prevailing practices of broad leadership structures and public meetings, are unlikely to provide an obstacle to AzRIP-2‟s approach of inclusive participation and transparent decision-making. Like other areas, women holding public offices, such as teachers and health workers, actively participate in public meetings and are listened to. The project does not trigger OP 4.12 (Involuntary Resettlement) as it will not finance activities that will require land acquisition or the displacement of livelihoods or residences. These potential impacts will be screened out using provisions in the EMP checklist. F. Environment (including safeguards) 53. The project does not raise any significant adverse environmental concerns. Experience derived from the original AzRIP indicates that positive environmental impacts resulted from the implementation of micro-projects such as improved irrigation, water supply and sewerage systems. The potentially adverse environmental impacts of AzRIP-2 are mainly associated with civil works during micro-projects‟ implementation, and include, inter alia, dust, noise, soil and water pollution, generation of waste materials, waste disposal (including medical waste), and damage to soil by excavation works. 54. Environmental Assessment. These potential negative environmental impacts trigger the Operational Policy OP 4.01. The impacts are minor and can be prevented or minimized through appropriate preventive actions and mitigation measures. Therefore, the project is classified as Environmental Category „B‟, requiring a partial environmental assessment. Since micro-projects are not pre-identified and will be determined in the course of project implementation by applicant communities through intensive participatory processes, an Environmental Management Framework (EMF) will be applied which will establish screening mechanisms and govern the process of development and implementation of specific mitigation plans. The EMF for the original AzRIP has been updated by the Borrower to address impacts from the newly proposed activities to strengthen rural livelihoods and to reflect the expanded geographical coverage. The updated EMF has been discussed with stakeholders and has been publicly disclosed by the Borrower on April 15, 2011. 55. Capacity for the EMF implementation has been built under the original project through a series of training regularly provided to the PMU, its Regional Offices and potential beneficiary communities. The PMU Environmental Specialist is responsible for training delivery, assisting the Regional Offices and applicant communities throughout the micro-project cycle and closely 15 supervising implementation of specific preventive and mitigation measures by project beneficiaries. The same good practice will continue under AzRIP-2. G. Other Safeguards Policies triggered 56. Projects on International Waterways. As was the case with AzRIP, AzRIP-2 will support activities on rehabilitation or construction of irrigation and drainage systems, water supply improvement and wastewater treatment. Such activities are likely to be developed inter alia on rivers flowing into the Caspian Sea and trans-boundary rivers, which are international waterways for the purposes of the World Bank Operational Policy on Projects on International Waterways (OP 7.50). It is expected (and also based on the experience under the original project) that proposed micro-projects would not produce a noticeable change for the abstraction volumes of the systems and would not have an adverse change to the quality or quantity of river flows, while the works would not change the nature of the original systems. With OP 7.50 being triggered, riparian states have been notified accordingly. 16 Annex 1: Results Framework and Monitoring . Country: Azerbaijan Project Name: Second Rural Investment Project (P122944) . Results Framework . Project Development Objectives . PDO Statement To improve access to and use of community-driven rural infrastructure and expand economic activities for rural households. . Project Development Objective Indicators Cumulative Target Values Data Source/ Responsibility for Indicator Name Core Unit of Measure Baseline YR1 YR2 YR3 YR4 End Target Frequency Methodology Data Collection Percentage increase in 3 times during Randomized access to and use of rural Percentage 0.00 0.00 15.00 20.00 project (baseline, DIME, Contracted firm impact evaluation infrastructure mid-term, final) Percentage of households 3 times during that are satisfied with the Randomized Percentage 10.00 40.00 64.00 project (baseline, DIME, Contracted firm quality of basic rural impact evaluation mid-term, final) infrastructure Percentage reduction in 3 times during travel time to market, Randomized Percentage 0.00 30.00 48.00 project (baseline, DIME, Contracted firm hospital, school, safe impact evaluation mid-term, final) water source Percentage change in 3 times during Randomized income from household Percentage 0.00 16.00 23.00 project (baseline, DIME, Contracted firm impact evaluation economic activity mid-term, final) . Intermediate Results Indicators Cumulative Target Values Data Source/ Responsibility for Indicator Name Core Unit of Measure Baseline YR1 YR2 YR3 YR4 End Target Frequency Methodology Data Collection 3 times during Number of micro- Randomized Number 79.00 79.00 215.00 368.00 521.00 600.00 project (baseline, DIME, Contracted firm projects impact evaluation mid-term, final) Quarterly and Direct project Number 197500.00 197500.00 537500.00 920000.00 1300000.00 1500000.00 annual project Project MIS PMU/ROOs beneficiaries reports 17 Quarterly and Female beneficiaries Percentage annual project Project MIS PMU/ROOS reports Participants in Quarterly and consultation activities Number 700.00 700.00 2000.00 3500.00 4800.00 5600.00 annual project Project MIS PMU/ROOS during project reports implementation (number) Intended beneficiaries 3 times during that are aware of project Randomized Number 0.00 13000.00 35000.00 61000.00 86000.00 100000.00 project (baseline, DIME, Contracted firm information and project impact evaluation mid-term, final) supported investments Number of Women in Quarterly and Community Project Number 0.00 160.00 400.00 700.00 1000.00 1200.00 annual project Project MIS PMU/ROOs Committees reports Percentage of subprojects where necessary Six-month and 1 Micro-project maintenance operations Percentage 0.00 0.00 0.00 0.00 0.00 70.00 year after MP PMU/ROOs evaluations are taking place with completion community engagement Grievances registered Quarterly and related to delivery of Percentage 0.00 0.00 60.00 60.00 70.00 80.00 annual project Project MIS PMU/ROOs project benefits addressed reports (%) Change in community Randomized members who feel they 3 times during impact evaluation have some influence in Percentage 0.00 0.00 0.00 30.00 30.00 40.00 project (baseline, and qualitative Contracted firm community decision- mid-term, final) studies and focus making processes groups (male/female) Randomized Change in degree of 3 times during impact evaluation people‟s trust in Percentage 0.00 0.00 10.00 20.00 40.00 60.00 project (baseline, and qualitative Contracted firm community groups mid-term, final) studies and focus groups Randomized Change in people‟s 3 times during impact evaluation willingness to contribute Percentage 0.00 0.00 15.00 30.00 50.00 60.00 project (baseline, and qualitative Contracted firm to community project mid-term, final) studies and focus costs groups No. of trainees in capacity building activities by kind of activity Quarterly and (male/female/youth/ Number 0.00 1100.00 5500.00 10000.00 14500.00 19000.00 annual project Project MIS PMU minorities/IDPs/municipa reports l/ExComm) Community training; Cross visits; Seminars; Conferences No. of villages which Measured 6 and 12 Regional Number 0.00 0.00 30.00 60.00 90.00 120.00 PMU hold community-wide months after evaluations 18 meetings organized by project completion Community Group to discuss public matters after project completion (measured at 6 and 12 months after completion of sub-project) No. of communities with new projects implemented with Measured 6 and 12 Regional internal resources Number 0.00 0.00 50.00 110.00 260.00 420.00 months after PMU evaluations, (including activities with project completion municipality and ExComm) No. of communities with Measured 6 and 12 Regional projects implemented Number 0.00 0.00 30.00 60.00 90.00 120.00 months after PMU evaluations with external resources project completion . 19 Annex 2: Detailed Project Description Azerbaijan: Second Rural Investment Project (P122944) 1. Objective: The Project Development Objective is to improve access to and use of community-driven rural infrastructure and expand economic activities for rural households. This would be achieved through: (i) the provision of grants to finance eligible demand-driven micro- projects in rural infrastructure; (ii) the provision of training and consultants‟ services to support micro-project development by enhancing the capacity of engaged local stakeholders in all aspects of micro-project program development; (iii) building opportunities for rural employment and livelihood support services through the provision of training and consultants‟ services to carry out pilot livelihood support services in six communities; and, (iv) supporting project management capacity at the Project Management Unit (PMU) and its Regional Operations Offices (ROOs) for the purposes of effective management, implementation and monitoring and evaluation of Project activities. 2. This repeater project is a Specific Investment Loan (SIL) with a total investment cost estimated at US$53.6 million, of which US$30 million will be financed by IBRD. The Project will scale up AzRIP both geographically into currently un-serviced rayons and vertically through the inclusion of pilot livelihood support services and second generation institutional support in current AzRIP active project areas. 3. The Project has three components: Component A - Rural Community Infrastructure -US$41.64 million 4. Two categories of micro-project grants will be supported under Component A: (i) micro- projects in previously un-serviced rayons which meet eligibility criteria set out in the Operational Manual (OM); (ii) second generation micro-projects in active AzRIP communities with high performance ratings from previous micro-project implementation and which meet eligibility criteria set out in the OM, and; (iii) micro-projects submitted by Common Interest Groups supported under the pilot scheme in Component B which meet eligibility criteria as established in the OM. 5. The current AzRIP provides investments in demand-driven micro-projects to eligible communities in five regions (Mughan-Salyan, Lower Shirvan, Nakhchivan, North and North West). This component will extend coverage and provide funding for demand-driven micro- projects in rural infrastructure in eleven new rayons in the North and in the Mugan-Salyan zones. The average size of the micro projects will be US$70,000, while micro-projects valued at over US$85,000 will require prior review by the Working Group. Micro-project expenses eligible for financing from the project include identification, design, construction and rehabilitation of the investment. Potential investments, based on priority needs identified by communities include, inter alia, rehabilitation or construction of:  Potable water systems  Irrigation infrastructure  Sewerage and drainage systems  Secondary roads and small bridges 20  Small-scale local electricity distribution  Primary schools and kindergartens  Health centers  Community centers  Parks  Market places 6. Costs: This component will support costs related to the identification, design, construction, rehabilitation, and initial operation and maintenance of the investment. Beneficiaries are required to share the cost of the investment and to ensure the availability of funds for O&M after the grant funding has been completed. Micro-projects require a minimum community contribution of 10% of the investment cost, of which at least 2% must be in cash. 7. Eligibility: The project targets newly eligible rural communities and communities in existing project coverage areas in 56 rayons across the country (11 new rayons and 45 rayons served under AzRIP). These comprise the North zone rayons of Aghsu, Balakan, Gabala, Gakh, Gobustan, Guba, Gusar, Ismayilli, Khachmaz, Oghuz, Shaki, Shamakhi, Zakatala and new rayons of Absheron, Khizi, Shabran and Siyezen and; North West zone rayons of Aghstafa, Barda, Dashkasan, Gadabay, Goranboy, Khanlar, Qazakh, Samukh, Shamkir, Tartar and Tovuz; Lower Shirvan zone rayons of Aghdash, Goychay, Hajigabul, Kurdamir, Ujar, Yevlakh and Zardab and Yevlakh; Mughan Salyan zone rayons of Bilasuvar, Imishli, Jalilabad, Neftchala, Saatly, Sabirabad and Salyan and new rayons of Aghjebedi, Astara, Beylagan, Lenkaran, Lerik, Masalli and Yardimli; Nakhchivan zone rayons of Babek, Julfa, Kengerli, Ordubad, Sadarak, Shahbuz and Sherur. Micro-projects in Nakhchivan are to be fully financed by Government funds. Other zones are eligible for IBRD financed micro-projects. 8. These rayons will benefit from mobilization and access to improved infrastructure. Households and individuals from well-performing micro-projects in the 45 existing rayons served under AzRIP will benefit from second generation community infrastructure and livelihood support services. 9. The size of the communities should be greater than 1,000 and less than 10,000 people, but smaller communities can cluster with neighboring communities to achieve scale, in regions that meet established selection criteria and have a higher relative incidence of poverty. A total of 600 micro-projects are expected to be implemented in communities meeting eligibility criteria. 10. Current micro-project cycle procedures as detailed in the AzRIP OM will be maintained in the new Project. Grants to project beneficiaries shall be delivered in accordance with eligibility criteria and procedures acceptable to the Bank and shall include the following: (a) the Grant(s) shall be denominated in Manat; (b) grants for financing micro-projects under Component A shall be made available to: (i) municipalities; community-based organizations registered as legal entities, which consist of representatives of rural communities with populations of more than 1,000 and less than 10,000 (including clusters of smaller communities that add up to 1,000), eligible under the OM; and any other associations and organizations as the Government and the Bank may agree. 21 11. ROOs shall launch a promotion and outreach campaign, issue requests for micro-project proposals and assist in the preparation of micro-project proposals. Investments will be identified by beneficiaries, prioritized through local participatory planning processes, and appraised according to technical, financial, social, economic, institutional and environmental criteria set out in the OM. Micro-project committees formed as part of community mobilization, as defined in the OM, shall submit proposals of micro-projects to ROOs on behalf of their respective community. ROOs shall appraise and evaluate micro-project proposals based on the following: (i) impact on the community; (ii) institutional capacity to implement the service intended by the Micro-project; (iii) financial viability; and (iv) technical and environmental safety. Any micro- projects involving land expropriation shall not be eligible for consideration. ROOs shall register the results and forward the summary evaluation of proposals to the respective Regional Grant Approval Committee (RGAC) for their approval or rejection. Any members of the RGACs who may have a potential conflict of interest in a particular proposal shall recuse themselves from making a decision on that particular proposal. 12. The amount of individual grants shall be based upon the estimated cost of goods, works services and operating costs that will be required for the Micro-project, and shall not exceed 90% of the overall costs of Micro-projects. The Government shall take necessary actions, satisfactory to the Bank, to ensure that, where proposals approved by the RGACs call for implementation of micro-projects by community-based organizations that are not already registered as legal entities, the charters of such organizations shall be registered in accordance with the laws of the Government in a timely manner. The Government shall provide each Grant under a Grant Agreement with the respective beneficiary community on terms and conditions approved by the Bank, which shall include the following: (a) The Beneficiary shall ensure that the grant funds are used exclusively for the purposes specified for the Micro-project approved by the RGAC. (b) The Beneficiary shall provide no less than 10% of the total cost of the Micro- project, in cash or in-kind. (c) The Government shall obtain rights adequate to protect its interests and those of the Bank, including the right to: (i) suspend or terminate the right of the Beneficiary to use the proceeds of the Grant, or obtain a refund of all or any part of the amount of the Grant then withdrawn, upon the Beneficiary‟s failure to perform any of its obligations under the Grant Agreement; and (ii) require each Beneficiary to: (a) carry out its Micro- project with due diligence and efficiency and in accordance with sound technical, economic, financial, managerial, environmental and social standards and practices satisfactory to the Bank, including in accordance with the provisions of the Anti- Corruption Guidelines applicable to recipients of loan proceeds other than the Government; (b) provide, promptly as needed, the resources required for the purpose; (c) procure the goods, works and services to be financed out of the Grant in accordance with the provisions of this Agreement; (d) maintain policies and procedures adequate to enable it to monitor and evaluate in accordance with indicators acceptable to the Bank, the progress of the Micro-project and the achievement of its objectives; (e) (1) maintain a financial management system and prepare financial statements in accordance with consistently applied accounting standards acceptable to the Bank, both in a manner adequate to reflect the operations, resources and expenditures related to the micro- 22 project; and (2) at the Bank‟s or the Government‟s request, have such financial statements audited by independent auditors acceptable to the Bank, in accordance with consistently applied auditing standards acceptable to the Bank, and promptly furnish the statements as so audited to the Government and the Bank; (f) enable the Government and the Bank to inspect the micro-project, its operation and any relevant records and documents; and (g) prepare and furnish to the Government and the Bank all such information as the Government or the Bank shall reasonably request relating to the foregoing. 13. The Government shall exercise its rights under each Grant Agreement in such manner as to protect the interests of the Government and the Bank and to accomplish the purposes of the Loan. Except as the Bank shall otherwise agree, the Government shall not assign, amend, abrogate or waive any Grant Agreement or any of its provisions. 14. A village may not implement more than one project at a time, but since numerous municipalities comprise two or three villages, it is not excluded that more than one project can be implemented in one municipality. Eligible proposals have to be endorsed by at least 50% of community members 16 years or older with adequate representation as specified in the OM. The proposals have to include information on appraisal criteria such as presence or efforts to create community groups, participation in training programs, ability or willingness to collect taxes and a statement confirming the communities‟ investment share. The OM explains the detailed eligibility and appraisal criteria. 15. AzRIP-2 support for second generation projects for community infrastructure and Common Interest Group proposals will be based on eligibility criteria and performance ratings in accordance with project and CIG evaluation standards set out in the OM. 16. Procurement. Procurement by grantees will be conducted based on the September 2003 “Manual for Conducting Very Small-Value Procurement under World Bank/IDA Small Grants, Loans and Credits.� Training on compliance with the procurement procedures will be provided as part of the capacity building and technical assistance for proposal preparation. Eligible expenditures include works, goods and services for micro-projects. 17. Reporting. The micro-project recipient will be required to complete regular reporting as described in the cooperation agreement. The reports serve three main purposes: (i) regular progress monitoring; (ii) performance monitoring; and (iii) payment requests based on progress and performance. 18. Beneficiary community contribution. Ten percent of micro-project costs will be provided through community contributions in cash or in-kind. The minimum cash contribution shall be 2%. The in-kind portion of the Community Contribution can be work (unskilled labor), services, material and equipment. Members of the Community Group and the Municipal Council can not be paid for their work. Their work can be considered as in-kind community contribution when calculating the budget for the Community Project. The in-kind contribution is estimated by the PAT team at design in consultation with the Community Group. The Technical Design Company calculates up to a maximum of 8% of the micro-project budget for the 23 technical package accompanying the Project proposal. Community in-kind contributions are verified at ROO site visits and documented in the Monitoring Reports submitted to the PMU to trigger release of the CP tranches. 19. Participatory Performance Monitoring and Evaluation (PM&E). AzRIP-2 monitoring and evaluation activities are facilitated and coordinated by the Monitoring and Evaluation and MIS Specialists at the central level and the M&E/MIS Specialist at the regional level. The objectives of the M&E activities are to: (i) provide AzRIP-2 staff and stakeholders with regular information on project implementation and outputs; (ii) identify bottlenecks and impediments in project implementation; (iii) ensure that all the activities under AzRIP-2 are implemented in compliance with the OM; (iv) determine to what extent the PMU achieves its goals and objectives, and how it affects the intended beneficiaries‟ social conditions and capacities; and (v) maintain acceptable performance standards for environmental and social impacts. Besides project level and local level project monitoring, AzRIP-2 relies on participatory monitoring and evaluation that engages local communities, as well as municipalities and other stakeholders in a collaborative approach. The main objective is to improve accountability, strengthen partnerships between all stakeholders, primarily between local governments and communities and interest groups, encourage inclusiveness and promote empowerment at the local level while accumulating lessons learned. Participatory M&E methods to be used include community workshops, Participatory Rural Appraisal, beneficiary assessment, self-assessment/evaluation methods, and community records and indicators. Component B - Technical Assistance for Rural Infrastructure – US$4.75 million 20. This component will fund technical support services for micro-project implementation and pilot livelihood support services. There are two sub-components, namely: (i) sub-component B1 on Supporting Micro-Project (MP) Development and (ii) sub-component B2 on Piloting Livelihood Support Services. 21. (i) The sub-component on Supporting MP Development will enhance the capacity of engaged local stakeholders including communities, local authorities, RGACs, Project Assistance Teams (PATs) and staff in the ROOs in all aspects of micro-project program development. Stakeholder capabilities in functions of contracting, procurement, financial management and participatory monitoring and evaluation will be strengthened. 22. The MP preparation, selection and implementation steps are described in detail in the OM. In summary, the MP cycle comprises the following seven main steps: 1) Outreach planning 2) Community mobilization and MP preparation 3) MP appraisal 4) MP approval 5) Signing of Cooperation Agreement and MP implementation 6) MP completion and handover 7) MP evaluation. 24 23. PATs and Technical Design Companies provide assistance to communities in identification and preparation of project proposals through community mobilization and follow- up activities. After appraisal by the ROO, the proposal is sent to the Regional Grant Approval Committee (RGAC) for approval. The RGAC comprises a mixture of government and civil society members identified and selected from stakeholders in the economic zone of operations of the ROO. The OM establishes procedures on how the RGACs deal with the MP approval process and MP proposals. Approved MPs enter into a cooperation agreement with the PMU which will become effective once the Beneficiary Investment Share has been deposited in the recipient‟s account. MPs below US$l5,000 can be implemented directly by the community and their legal entity will act as both implementing and executing agency. They will recruit workers, purchase equipment, materials and small-scale services (e.g. a plumber), and undertake procurement activities which will have been described in detailed procedures in the scope of work of the contract. MPs above US$15,000 are executed by outside contractors, who will be contracted by the legal implementing entity according to the competitive procurement procedures described in the scope of work of the contract. The ROO Procurement Officer will ensure that adequate procedures are included in the contract, train the implementing partners and supervise the procurement aspects of project implementation. 24. (ii) The sub-component on Piloting Livelihood Support Services was developed in response to demand from communities supported under the original project who had invested in economic infrastructure such as rural roads and irrigation systems. Community demand centered on the need to support income generating activities at the community level. Diagnostic work conducted by an International Livelihood Consultant recommended piloted livelihood support services in six communities that already successfully implemented AZRIP micro-projects focused on economic infrastructure such as road rehabilitation or irrigation schemes. Further community selection criteria recommended included having a mix of communities from Azerbaijan‟s agro-ecological zones (highlands, upland-rainfed, and lowlands), along with willingness and commitment to organize Common Interest Groups (CIGs) focused on income generation activities, and a willingness and capacity to engage in new activities and form new institutions. These factors will be assessed in advance of providing services by PAT‟s facilitators and PMU staff conducting follow-up field visits to communities that implemented economic infrastructure. Once selected, communities will be eligible for the following services: a. Mobilization and Organization of Common Interest Groups: Mobilization within communities will begin with a three or four day Participatory Rural Appraisal (PRA) process. While similar to the process used for mobilizing communities for infrastructure micro-projects, the aim of the PRA exercise will be to conduct a participatory diagnosis of the community‟s economic challenges. Adopting this approach will generate important information on existing and potential on-farm and off-farm income generating activities, and opportunities and constraints to realizing those opportunities. The PRA exercise will further determine whether or not a community is committed and capable of forming a Community Interest Group (CIG). CIGs will be selected among participants in the PRA process, but unlike Community Project Groups, will be composed of people with a common economic interest (e.g. dairy producers, handy-craft workers, beekeepers). A particular emphasis will be placed on supporting CIGs that include or are exclusively composed of women and youth. Following the PRA exercise, mobilization 25 teams will return to each community with one or two weeks to assess progress in group formation, to provide training on group dynamics, and to begin facilitating the process of identifying income generating activities. b. Identification of Income Generating Activities: Income generating activities will be identified based on the diagnostic work conducted during the PRA process and will respond to real needs identified by the community. Key principles underlying the selection of activities should include their potential to: (i) be people centered and participatory; (ii) be socially, environmentally and economically sustainable in the long term; (iii) partner with other private sector actors (e.g. agri-business processors, tourist operators) and donor initiatives (e.g. Oxfam, IFAD); and (iv) empower vulnerable community members such as youth and women. When identifying specific investments necessary for implementing the IGA, priority should be given to fixed assets (e.g. buildings and equipment), costing less than AZN 50,000, that are technically feasible and within the competence of the CIG to realize. Potential investments may relate to farm- based activities (e.g. agricultural machinery and equipment); off-farm activities (e.g. milk processing facilities); and non-farm activities (e.g. carpet making looms, honey production equipment). An economic feasibility analysis will be required for identified IGA proposals. c. Business Plan Preparation: Once activities have been identified, training and advisory services will be provided around the preparation of business plans. This support will include market analysis, procurement planning, financial analysis and planning, implementation planning and human resource and organization/management planning. d. Formalizing CIG Status: The PMU will also provide legal support to CIGs in formalizing their status as limited liability companies. Once registered, CIGs can open a bank account for depositing income generated by the CIG. e. Training and Technical Support: CIG members will also benefit from training and advisory support on implementing their selected IGA. Topics covered will include basic book-keeping, management principles, as well as technical topics relevant to the activity selected. 25. It is estimated that providing the whole range of livelihood support services will cost AZN 20,000 per community (10,000 for mobilization / organization services, and 10,000 for training and technical support). At the end of the mobilization and training process, CIGs may be eligible to submit their IGA business plan as a micro-project proposal that could be funded under Component A. The eligibility of the proposal will depend on an assessment made by the PMU according to criteria such as the: (i) regularity of CIG meetings; (ii) election of CIG office holders; (iii) maintenance of good records; (iv) technical and economic viability of the proposal – judged on the basis of the quality of the business plan; (v) environmental and social sustainability of the proposal; and (vi) relevance of the proposal to the PRA diagnosis. Only once these criteria have been met to the satisfaction of the PMU will a proposal be deemed eligible for funding. All micro-project proposals will have to contribute 20% to the overall cost of establishing the IGA, at least 10% of which must be cash. Further details on this sub- component will comprise a dedicated operational manual prepared for the livelihoods pilots prior to launch of the pilot program. 26 Component C - Project Management and Results Monitoring – US$7.21 million 26. This component will finance the administrative and operational project implementation and management costs, including overheads of Project Management Unit (PMU) professional staff as well as PMU and Regional Operations Office (ROO) support staff, project outreach and support to Regional Grant Approval Committees (RGACs). 27. Management responsibility for AzRIP-2 will come under the State Agency for Agricultural Credits (SAAC) within the Ministry of Agriculture. AzRIP-2 will be managed by the Project Management Unit (PMU) located in the SAAC office in Baku to provide overall coordination and four decentralized Regional Operations Offices (ROOs) in the selected project regions. Because the program is community demand-driven, decisions as to where, how and what investments will be made are not defined in advance. The project will be managed with an OM that will provide the PMU the authority and operational guidance needed to deliver and account for funding, provide for institutional capacity building, and supervise implementation of selected micro-project by recipients. The ROO staff will be guided by the procedures in the OM to work with eligible communities, to assist them in identifying and developing micro-project proposals and in seeking approval from the Regional Grant Approval Committees (RGACs). The ROOs will then prepare cooperation agreements with the grant recipients for implementing the MPs that have been approved by the RGACs. The recipients will implement their MPs under the supervision and with the institutional support of the ROOs. The ROOs will monitor and report on a step-by-step basis on the process and decisions made in the micro-project cycle and keep detailed records in the Management Information System (MIS). 28. Evaluations will also include qualitative and participatory evaluation analysis, which will allow ROOs, the PMU, the Government, the Bank and other donors to have regular updates of the progress of the program. The PMU and the ROOs will use the MIS and M&E results to continuously improve project management. 29. In addition, a randomized impact evaluation will be utilized in AzRIP-2. The impact evaluation will seek to provide answers to four sets of questions. First, it will analyze the impact of the project on poverty reduction. Second, it will assess whether the project improves access to and use of basic services, such as education, health, water, roads. Third, it will evaluate the impact of the project on communities‟ awareness and participation in community development. Fourth, it will evaluate the impact on social capital dimensions, such as groups and networks, trust and solidarity, collective action and cooperation, social cohesion and inclusion and information and communication. A special focus of the evaluation will be on gender issues and the methodology will include specific designs to disaggregate project results by gender. 27 Attachment 1 to Annex 2: Summary Description of Sub-Component on Piloting Livelihood Support Services 30. This subcomponent will serve to: a. Develop capacity of involved stakeholders (communities, groups and individuals) to identify, plan and implement income-generating micro-projects; b. Identify and test selected institutional models for community livelihood projects; c. Test the process of livelihood project planning and management with communities: through identification, design, implementation, analysis and evaluation; and d. Develop detailed operational guidelines for scaling up the livelihood pilots. Activities and Responsibility 31. Work under this sub-component will be captured in two main phases, Inception and Implementation. The main activities in the Inception Phase will be as follows: Inception Information outreach, selection of communities  Identify shortlist of possible communities  Visit local authorities and communities, information sharing, assess communities  Select final pilot candidates Diagnostic  Diagnostic research conducted by contracted researchers on the key constraints to income generation in selected communities  Diagnostic workshop to verify research findings and identify lessons learned Community mobilization  Mobilization workshops for the entire community  Participatory Rural Appraisal exercise to select micro-project  Establish Community Groups Training, IGA project planning  Training Community Groups in IGA methodology  Development of community IGA Proposals and Business Plans  Selection of IGA Projects by the Community Groups  Registration, Appraisal, Approval of the Community Group as a legal entity capable of implementing an IGA  Approval and signing Cooperation Agreement between the Community Group and the PMU. 32. The main activities in the Implementation Phase will be as follows: Procurement and Implementation  Procurement of inputs for realizing the IGA  Start implementation of projects Monitoring and evaluation 28  Quarterly review of progress, on-going project adjustment  Annual review and workshop  Project evaluation Completion, Handover and Evaluation  Completion and handover Implementation Arrangements 33. The PMU will lead in implementing the pilots, managing the workplan, supervising activities, facilitating partner relationships and monitoring progress of the projects. The PMU will also work closely with community groups and local government authorities throughout the pilot phase. AzRIP-2 PMU will need to recruit additional capacity to enable it to undertake additional tasks. This will include legal, agricultural, and business development expertise. 34. Communities will be selected according to criteria developed for the purpose. Those selected will be community groups or associations registered under the Municipality, and as such they are allowed to generate revenue. 35. A number of topics to investigate have been identified and these will be addressed during the Inception Phase through a mixture of quantitative and qualitative methods. National NGOs and service providers will be selected for this work based on competence, reputation and previous performance. It seems likely that a number of pilot initiatives will be related to agricultural markets, and will engage in value chains. Depending on the selected sub-sectors and commodities, private sector partners will be selected who are competent and are prepared to invest. Depending on the nature of the pilots, other partners will be selected to work with community groups, to support their work and help deliver positive outcomes. Criteria for selection of Communities 36. The process of selection of communities will be made using the following criteria. Levels of vulnerability  Levels of assets (physical, financial, natural)  Levels of income, income diversification Local agro-ecology  Altitude, relief/topography, kind of agriculture (main crops, livestock etc), irrigation Existing activities  Main farm, non-farm and off-farm activities undertaken by community Local employment  Opportunities for local employment Willingness to participate and contribute through savings  Communities must be willing to engage in new and challenging activities. 29 Annex 3: Implementation Arrangements Azerbaijan: Second Rural Investment Project (P122944) 1. Project institutional and implementation arrangements for: A. Project Administration Mechanisms Project Administration Mechanisms 2. The project will be under the general management of the State Agency for Agricultural Credits (SAAC). Responsibility for the day-to-day management and administration will be delegated to the Project Management Unit (PMU) which will be maintained within the structure of the SAAC. The PMU functions will include procurement, financial management and disbursement, ensuring project compliance with the Operational Manual (OM) and the World Bank safeguards, monitoring and evaluation, and reporting. The PMU has extensive experience with World Bank-financed operations, and the successful implementation of AzRIP is the basic justification for using the existing project implementation arrangements, including management structure, for AzRIP-2. The AzRIP-2 Organization Chart is shown on Page 32. The project institutional arrangements occur at the national and regional levels. Institutional arrangements at the national level include the Project Working Group and the PMU. 3. The PMU will maintain core staff, including the Director, Deputy Director, Engineers, procurement, financial management, environmental, M&E, MIS and community development staff, and quality control personnel. The PMU has developed the necessary experience and competence to manage core functions such as procurement and financial management, which would allow for a quick start of project implementation. The PMU Director is responsible for ensuring, on a daily basis, that the project is progressing according to plan and is responsible for ensuring that the PMU is fulfilling its tasks. The Deputy Director will be in charge of day-to-day operations of AzRIP-2, reporting to the Project Director. The M&E Specialist will be responsible for establishing a project-wide M&E system to track the progress of the project. The community development staff will be in charge of community mobilization and enhancement activities of the project. The Environmental Consultant will coordinate the environmental monitoring work and ensure that project activities are carried out in accordance with the EMP. The Senior Engineer will coordinate engineering aspects of the project and ensure that AzRIP-2 technical standards are followed in design and implementation of MPs. 4. SAAC maintains the Working Group which was established with the primary objective to review and adjust the policies and procedures outlined in the OM to effectively meet the project needs. The Working Group is also tasked to review community projects in excess of US$85,000. The Working Group consists of relevant representatives from the Ministry of Economic Development, Ministry of Agriculture, the Parliamentary Commission on decentralization and municipal development, chairpersons of RGAC and a member of civil society. 5. The PMU will be supported by four Regional Operations Offices (ROOs) acting as the project‟s representation at the regional level. The PMU will provide institutional support to the ROOs which will be responsible for daily project management and monitoring of the community 30 project portfolio. The ROO staff will be contracted by the PMU and include skills required to carry out appraisal, contracting, supervision and monitoring of community projects. These centers will maintain close liaison with local authorities, civil societies, private sectors, and communities. The ROOs will be focal points for project activities and fully equipped with computers, office equipment, and dedicated transport for field staff. The ROOs will also accommodate the Project Assistance Team (PAT), the Regional Grant Approval Committees (RGAC) and the Technical Design Companies. The ROOs will support and monitor the operations of PAT and facilitate the meetings of regional micro- project grant approval committee. The ROOs will also facilitate contacts of the technical design companies with participating communities and will be responsible for communications outreach at the rayon level. 6. Project Assistance Teams (PAT) will act as the Service Provider for AzRIP-2 zones and will be responsible for coordinating all aspects of community mobilization, training, advising on procurement and providing technical assistance to communities in the preparation of CP proposals. The main services of PAT include rapid community assessment and organizing cross fertilization visits and regional capacity building workshops. The PATs will also assist community participatory M&E groups in monitoring implementation of the micro-projects. All PAT staff are employed as full time local consultants by the PMU and coordinated by the Project Deputy Director and community development staff. PAT reports directly to the PMU. The PAT‟s work in the community is monitored by their respective ROOs, but they will operate under the supervision of the PMU. PAT will consist of a team leader, mobilizers, trainers, engineers, procurement officer and accountant. 7. The Regional Grant Approval Committees (RGACs) are located in the project target zones and review all community project proposals for approval. The RGACs include representatives from the rayon executive committees, municipalities, civil society and regional representatives of the MOA and MOED. The RGACs will also be housed within the ROOs, in order to facilitate communication. Finally, the PMU will recruit the technical design companies in each zone with the objective to provide technical assistance to communities in engineering aspects of micro-projects. The design companies would also assist the communities and the PMU in quality control and construction supervision. 31 AzRIP-2 ORGANIZATIONAL CHART 32 B. Financial Management, Disbursements and Procurement Financial Management (FM) 8. The financial management arrangements for the project are satisfactory. The PMU within SAAC will be responsible for FM arrangements. The PMU implemented AzRIP and its financial management arrangements have been assessed as satisfactory. The project was closed on March 31, 2012. The latest FM supervision indicates that Accounting and Internal Control System of the PMU is reliable and effective. Financial Management staffing arrangements of the PMU were also assessed as adequate. 9. The Inherent Risk, Control Risk, and Project Risk of the project are all rated as Moderate. Due to a gap between the closing of the previous project and the anticipated effectiveness of AzRIP-2, retroactive financing shall cover expenditures incurred and payments made for eligible expenditures in an amount not exceeding US$ 4.2 million prior to the date of signing of the Loan Agreement but on or after April 1, 2012. Therefore, the sustainability of the current staffing arrangements of the PMU is assessed as low risk. 10. Country systems: A number of studies carried out for Azerbaijan (PEFA Assessment, February 2008 and ROSC, September 2006) in the Public Financial Management (PFM) area identified set forth recommendations to strengthen public and corporate sector accounting, auditing, governance, and financial accountability frameworks. The Government has made efforts to strengthen public financial management by enacting a Budget System Law, modernizing Treasury operations and strengthening the capacity of the Chamber of Accounts. The Government continues to receive donor support to reinforce public financial management, particularly to improve budget preparation and allocation, introduce an internal audit function and increase overall accountability and transparency in financial reporting. Despite the lack of broad reliance on country systems in some areas of PFM, for Planning and Budgeting and Internal Controls in AzRIP-2, country systems will be used and accompany relevant procedures prescribed in the OM. 11. Budgeting and counterpart funding: The PMU will have overall responsibility to coordinate the budget preparation with all project beneficiaries. Budget figures will be entered into the accounting software and their execution will be monitored through the quarterly interim un-audited financial reports (IFRs). The PMU will ensure timely data inflows from project beneficiaries in the agreed format. The project budget will be split by quarterly expenditures, components and sources of finance. The draft project budget will need to be agreed with the relevant government organizations and project beneficiaries before sending it to the Bank. Government counterpart funding should be made available to government agencies in a timely manner. 12. Flow of Funds: The Bank funds under the Project will be disbursed through transaction- based disbursement methods that include: reimbursements with full documentation, reimbursements on the basis of Statements of Expenditures for small expenditures with defined 33 thresholds, payments against issued Special Commitments, direct payments to third parties, and payments through the Designated Account. Government co-financing funds will be disbursed through the Treasury system of the MOF. To facilitate the flow of funds for micro-projects not exceeding US$15,000 which do not require the selection of a subcontractor, AzRIP PMU shall facilitate opening of a local bank account at a commercial bank at the regional level by municipalities representing the interests of local communities. The initial grant transfer shall be made after approval of the Community Project and signing of the Cooperation Agreement. Subsequent transfers will be based on agreed milestones. For MPs above US$15,000 and executed by contractors, payments will be made directly to the subcontractor based on the community‟s request and submission of necessary documents for subsequent MP tranches. 13. Accounting: The PMU maintains its accounting records in 1C based accounting system. It has been agreed with the PMU that it would retain the existing accounting software. The software will have the capacity to generate IFRs of the project. 14. Internal controls: Existing Accounting and Internal Control systems of the PMU have been assessed as reliable and effective. To further strengthen the internal control environment of the project the Bank will hire an independent consultant to review at least 25% of civil works contracts for accuracy of design documentation and conduct physical verification of works. This would allow the Bank to ensure that funds are spent for intended purposes and eligible expenditures. In case of funds applied to ineligible expenditures, the implementing agency should return the portion of ineligible expenditures to the Bank. All financial management related documents will be signed first by the FMS and approved by the PMU Director. 15. Financial Reporting: The PMU has a history of submitting timely IFRs for AzRIP which were satisfactory to the Bank. The PMU will submit quarterly IFRs covering the period of one quarter, the format and content of which have been agreed with the PMU for AzRIP-2. 16. External Audit: Currently the PMU fully complies with the audit requirements of the existing project. As was the case with AzRIP, a financial audit of the project financial statements will be required: independent auditors will audit project financial statements under terms of reference acceptable to the Bank and in accordance with International Standards on Auditing (ISA). Project audit reports will need to be submitted to the Bank within six months of the end of each calendar year and at project closing. In accordance with "The World Bank (the Bank) Policy on Access to Information" dated July 1, 2010 the Bank requires that the borrower makes the audited financial statements publically available in a timely fashion and manner acceptable to the Bank. In addition, following the Bank‟s formal receipt of these financial statements from the borrower, the Bank makes them available to the public in accordance with this policy. Disbursements 17. The loan will be disbursed through transaction-based disbursement methods that include: reimbursements with full documentation, reimbursements on basis of Statements of Expenditures for small expenditures with defined thresholds, payments against Special Commitments, direct payments to third parties, and payments through the Designated Account. 34 18. Designated Accounts. To facilitate project implementation, a Designated Account will be opened in a commercial bank on terms and conditions acceptable to the Bank, for the IBRD loan. The Designated Account, which will be managed by the PMU, will be replenished on a quarterly basis, as needed. The total ceiling will be limited to US$2 million for the IBRD loan. The Designated Account will be audited annually in conjunction with the audit of the project financial statements. 19. Disbursements will be made on the basis of full documentation for: (i) contracts for goods costing more than the equivalent of US$200,000 each; (ii) contracts for works costing more than the equivalent of US$1 million each; and (iii) services under contracts of more than the equivalent of US$100,000 for each consulting firm and more than the equivalent of US$50,000 each for individual consultant. Disbursements below these thresholds and for expenditures against incremental operating costs and training would be made according to certified Statement of Expenditure (SOEs). For all expenditures financed under Statement of Expenditures (SOEs) full documentation in support of the SOEs will be retained in the PMU for at least two years after the project closing date. This information will be available for review by Bank missions during project supervision and by the projects auditors. SOEs will be audited in conjunction with the annual audit of the project. Further instructions on the size of the Minimum Application and on how funds will be withdrawn from this Loan will be provided in the Disbursement letter. 20. The withdrawal of proceeds from the IBRD loan will be made in accordance with the following schedule: Category Amount of the Loan Percentage of Allocated Expenditures to be (expressed in USD) financed (Net of VAT) (1) Goods, works, non-consulting 8,925,000 100% services, and consultants‟ services, Training, and Incremental Operating Costs for the Project (2) Grants 21,000,000 90% (3) Front-end Fee 75,000 Amount payable pursuant to Section 2.03 of this Agreement in accordance with Section 2.07 (b) of the General Conditions (4) Interest Rate Cap or Interest 0 Amount due pursuant to Rate Collar premium Section 2.07(c) of this Agreement TOTAL AMOUNT 30,000,000 35 21. Government Contribution. The Government‟s contribution of US$20 million to finance project expenditures will be disbursed from budget allocations through the Treasury system of the MoF, and managed by the PMU. Funds will be released to the project to finance project expenditures as expenditures are incurred, and the Project Account shall be replenished regularly to minimize delays in project implementation. 22. Beneficiary Contribution: The beneficiary contribution to finance project expenditures is US$3.6 million. 23. Retroactive financing. Withdrawals up to an aggregate amount not to exceed US$4.2 million equivalent may be made for payments made on or after April 1, 2012, for eligible expenditures. Procurement 24. Procurement for the Project will be carried out in accordance with the World Bank‟s “Guidelines: Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans and IDA Credits & Grants, January 2011� and the “Guidelines: Selection and Employment of Consultants under IBRD Loans & IDA Credits & Grants by World Bank Borrowers, January 2011;� and the provisions stipulated in the Legal Agreement. 25. Procurement Risk Assessment. A procurement assessment carried out during pre- appraisal AzRIP-2 in April 2011 found three potential risks: (i) the procurement environment may be affected by problems related to governance and corruption; (ii) probable attempts of administrative intervention in procurement and selection under the project funded sub-projects; and (iii) as the project involves community participation, including in the proposed livelihood pilots, addressing procurement issues at that level may create problems due to lack of capacity. As a result, the overall project risk for procurement is considered substantial. Risk mitigation measures have been discussed with the PMU and incorporated in project design. The procurement plan for the first 18 months of implementation was finalized during negotiations. It will be updated at least annually (or as required) to reflect project implementation needs. The procurement under the Rural Community Infrastructure Component will be undertaken by the community under the guidance of the Regional Operations Offices. 26. The general conclusion is that the core PMU has adequate experience to carry out procurement activities related to AzRIP-2. The staff is familiar with Bank procurement procedures and guidelines as they have been involved in, and gained substantial knowledge and experience during the implementation of AzRIP. The Project will finance various contracts for civil works with a wide geographic spread, technical services, consultancy contracts and several contracts for goods, as indicated in the Procurement Plan. 27. Procurement Plan and Procurement Arrangements. The PMU, has developed a Procurement Plan for project implementation which provides the basis for procurement methods. All contracts in the procurement plan shall be grouped in bid packages as much as possible to encourage better/wider competition. This plan was agreed between the Borrower and the Bank during negotiations. It will be available at the office of the PMU and on the 36 Bank's external website. The Procurement Plan shall be updated in agreement with the Bank annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. Contracts not subject to Bank‟s prior review will be post reviewed by the Bank‟s Procurement Specialist assigned to the project. Post review of contracts will be carried out once per year. Not less than 5 % of the contracts under Component A: Rural Community Infrastructure Component; and 20% of the contracts under Component B: Technical Assistance for Rural Infrastructure, and Component C: Project Management and Results Monitoring will be post reviewed by the Bank. 28. The following measures were agreed to mitigate the remaining risks and maintain the implementing team‟s capacity:  The procurement section of the OM will be prepared by the PMU which, among other things will elaborate on the roles and responsibilities in the management and coordination of the procurement process, preparation of terms of reference and technical specifications, evaluation, establishment and appointment of evaluation committees, conflict of interest mitigation measures, record keeping, contract management, a complaint handling mechanism, etc;  as needed, additional staff with experience in procurement will be hired to strengthen the capacity of the PMU for coordination and management of the procurement and management of the significant number of contracts;  the Bank‟s Procurement Specialist assigned to the project will provide the team with a full set of the most recent procurement documents, including but not limited to Procurement and Consultant Guidelines, standard and sample bidding documents, proposal, evaluation report documents, etc. 29. It was agreed that the PMU will maintain complete records under AzRIP-2 for each activity, to include complete procurement documentation for each contract, including bidding documents, RFPs, advertisements, bids received, bid evaluations, no objections, letters of acceptance, contract agreements, bid security, advance payment guarantee, performance security, photocopies of invoices and payments and related correspondence, etc. The PMU will also keep copies of the procurement files relating to the Rural Community Infrastructure Component. Contract award information will be promptly recorded and contract rosters maintained. Agreed reporting formats will be included in the OM. 30. Procurement of Goods, and Non-consultant technical services: Goods and non- consultant technical services estimated to cost US$300,000 equivalent and more will be procured through ICB. Goods, equipment and non-consultant technical services estimated to cost less than US$300,000 may be procured through NCB and less than US$ 100,000 through Shopping. Direct Contracting may be used with prior agreement with the Bank. 31. Procurement of Works: Works contracts estimated to cost US$3,000,000 equivalent or more will be procured through ICB. Works contracts estimated to cost less than US$3,000,000 may be procured though NCB and less than US$100,000 through Shopping. 37 32. Selection of Consultants: Consulting services under the project will be procured in accordance with the Bank‟s Consultant Guidelines mentioned above and by using the standard RFP and contract forms. Consultant‟s services would include Quality and Cost Based Selections (QCBS), Fixed Budget Selection (FBS), Consultant Qualifications (CQ), Least Cost Selection (LCS), Single Source Selection and Individual Consultants (IC). Consultancy contracts estimated to cost more than US$100,000 equivalent will be selected through QCBS. Individual Consultants would be selected in accordance with the provisions 5.1 to 5.6 of Section V of the Consultant Guidelines. This method will require comparison of at least three qualified candidates interested and available to undertake the assignment. For contracts with firms estimated to cost less than US$100,000 a shortlist may be based solely on national firms unless qualified international firms express interest in accordance with the provisions of paragraph 2.7 of the Consultants Guidelines. 33. Community Participation Procurement (CPP): Procurement of goods, works and services under the Rural Community Infrastructure component shall be carried out in compliance with the Community Participation Procedures method in accordance with paragraph 3.19 of the Procurement Guidelines. 34. Operating Costs: These expenditures would cover costs incurred for all components under the project, such as communications, utilities, office supplies and maintenance, fuel and vehicle operation and its maintenance, salaries of support staff, eligible social charges, etc., which would be financed by the project as per annual budget approved by the Bank and would be procured using administrative procedures of the Implementing Agency, which were reviewed and found acceptable to the Bank. Operating costs will not include salaries of civil servants. 35. Other Special Procurement Arrangements: Retroactive Financing may be used for advance contracting in an amount not exceeding US$4.2 million from the proceeds of the Loan. C. Environmental and Social (including safeguards) 36. Environmental. The AzRIP-2 community projects, similar to AzRIP, will include rural roads, water supply, sewerage, electricity, small bridges, small irrigation systems, schools and kindergartens, health centers, community centers, etc. In addition, the menu of eligible activities will be expanded to accommodate livelihood support activities to be identified during implementation. The experience of AzRIP indicates positive environmental impacts resulting from the implementation of the micro-projects, such as reduction of erosion through proper road rehabilitation, improved wastewater treatment and improved water supply. There are also certain negative impacts which might occur during the implementation of micro-projects. Since micro-projects will be identified during the project implementation, the types and degree of associated impacts will be determined accordingly. Consequently, the mitigation measures will vary to address specific impacts, which can be summarized as follows:  Construction and general impacts: health and safety hazards for construction worker and the public; noise; dust; soil and water pollution from fuel and oil; generation of waste materials; surface run-off; excavation of materials and disposal of surplus soil; risks to environmentally sensitive areas; 38  Water supply impacts: over-exploitation of water resources; interruption of surface and underground drainage patterns; contamination of resources during construction works; damage to soil during excavation;  Rural and suburban roads rehabilitation impacts: noise, dust, vehicle and pedestrian safety, changes in drainage and traffic patterns;  Small bridges and footbridges construction impacts: changes to river regime and riverbanks; disturbance to aquatic habitat and water quality during construction;  Wastewater, drainage and sewerage construction impacts: smell, impacts on the river regime, pollution by the effluent;  Small-scale irrigation impacts: impacts on water resources; water logging of the soil; discharge of wastewater;  Minor buildings: generation and disposal of wastes during construction/rehabilitation, medical waste management during operation of medical facilities;  Livelihood support activities: the project will not provide financing for pesticides and for activities likely to lead to increased pesticide use. 37. The potential adverse environmental impacts are minor and can be addressed through appropriate mitigation measures. For the purpose of OP 4.01 “Environmental Assessment‟, the project has been assigned an environmental category „B‟. The Environmental Management Framework prepared for the original AzRIP addresses most of the impacts specified above and provides a framework mechanism for screening environmental impacts, developing mitigation plans and monitoring environmental progress. As in the case of AzRIP, environmental assessments will be carried out for specific micro-projects and/or project sites, and environmental advisory services will be provided, as appropriate. An updated Environmental Management Plan Framework was publicly disclosed in-country on April 15, 2011. 38. The Borrower‟s capacity to implement environmental safeguards has been developed through experience with AzRIP. The original project supported environmental awareness raising and capacity building activities both among the Regional Operations Offices and potential sub-project beneficiaries. The PMU Environmental Specialist performed highly satisfactorily and will continue close environmental monitoring of sub-projects, starting from early stages of sub-project development, and will provide training and guidance to the PMU, ROOs and community beneficiaries on project screening and appropriate mitigation measures. Environmental training to be delivered under AzRIP-2 will include specific community/sub- project guidance. 39. As was the case with AzRIP, AzRIP-2 will support activities around rehabilitation or construction of irrigation and drainage systems, water supply improvement and wastewater treatment. Such activities are likely to be developed inter alia on rivers flowing into the Caspian Sea and trans boundary rivers, which are international waterways for the purposes of the World Bank Operational Policy on Projects on International Waters (OP 7.50). With OP 7.50 being triggered, riparian states have been notified accordingly. 40. It is expected that micro-projects would not produce a noticeable change for the abstraction volumes of the systems and would not have an adverse change to the quality or quantity of river flows, while the works would not change the nature of the original systems. 39 The proposed project would not have any impact on the quality and quantity of the river flows in the riparian countries. There would also be no impact on the Caspian Sea, since there would not be a significant adverse change to the quality and quantity of water flowing to the Sea. Similarly, water use in the riparian countries would not affect the project. 41. Social: OP/BP 4.12 on Involuntary Resettlement is not triggered as micro-projects requiring land acquisition, or the displacement of people using land for livelihood or residential purposes will not be financed under the project. The micro-project environmental checklists within the environmental management framework have been updated by the client in order to include additional questions to screen for land acquisition and resettlement. 42. Other social risks (findings from the Social Assessment). A Social Assessment was carried out as part of the preparation of AzRIP-2. The exercise aimed at: assessing social of the communities in the new rayons that would have important implications for project approach and design; and examining measures to strengthen social outcomes of the project. A rapid social assessment targeted two types of new rayons: (1) the two rayons near conflict affected areas (Agdzhebedi and Beilagan); and (2) the southern rayons where one national minority group – the Talysh – has a significant presence. The Social Assessment addressed issues of inclusion of women and other vulnerable groups; and appropriate social capital indicators to incorporate in project monitoring and evaluation. The exercise comprised a desk review, focus group discussions and stakeholder workshops. Rayons near Conflict Affected Areas 43. Neither rayon directly borders with the occupied area, but Agdzhebedi‟s west and southwest boundaries border with partially-occupied rayons of Agdam, Khodzhaveno and Fizuli. Some of its villages are within 10 km from the border with the occupied territory. Beilagan shares some 30 kilometers of border with Fizuli. Since the 1994 cease fire, there have been no major military operations although sporadic shootings in areas near the border have been reported. Most people seem to believe that an imminent outbreak of any serious form of violence is unlikely. According to the latest census data, the total population of Agdzhebedi is about 123,000. Over 93,000 live in villages (kend)2. Beilagan‟s total population is about 87,000, and nearly 55,000 live in villages. Table 1: Village Population in Agdzhebedi and Beilagan (2010) Total village Of which Number of Rayon population IDPs villages Agdzhebedi 93,042 8,642 40 Beilagan 54,577 3,928 24 Source: Agdzhebedi and Beilagan Rayon Executive Committees. 2 The term „village‟ (kend) refers to an official administrative-territorial division which is rural and less developed. „Settlement‟ (gasaba) is another type of administrative-territorial division used for a more developed and often larger locality. This document follows these official designations, and uses the terms „village‟ and „settlement‟ separately. Under AzRIP-2, the settlements are not beneficiary communities. 40 44. Internally Displaced Persons (IDPs). The number of IDPs living in the villages of Agdzhebedi and Beilagan rayons is about 13,000 persons. In Beilagan, an additional 3,000 IDPs live in settlements. In Agdzhebedi, IDPs account for about 9% of the total village population and in Beilagan their share is about 7%. In Agdzhebedi, most of the villages are hosting IDP families. In Beilagan, all villages have IDP families, and in six of them IDPs account for more than 10%. In most cases, IDP families are living on their own, mostly in temporary housing in very poor conditions. Some families are still living in public buildings. People report of marriages between members of IDP and non-IDP families in the same village, but the identity of IDPs as those not originally from the community remains strong even after almost 20 years of their residence. Field discussions revealed that IDPs believe, or wish to believe, that the Government will give them new houses, and are awaiting the day when they will move out of their current residence. This is unlikely to happen given the Government‟s current low priority for IDPs living in rural communities regardless of their housing conditions. However, the native village population seems to avoid talking about the likelihood of their extended, if not permanent, residence in the villages in obvious consideration of the feelings of the IDPs. In general, the native residents of the villages are highly sympathetic of the IDPs, and seem to consider them as members of the same community. 45. Effects of the Conflict as Perceived by Community Members. Major effects of the conflict as identified by the community members include: restricted use of public buildings as a result of past and current occupation of IDPs; restricted use of farm land (some IDPs were allocated land near the border, but cannot use it due to security risks) and anxiety and psychological distress experienced by IDPs due to the painful memories of the past and future uncertainties. 46. The Social Fund for Development of Internally Displaced Persons of Azerbaijan (SFDI). SFDI has been operational since 1999. The World Bank has been financing some activities through its Internally Displaced Persons Economic Development Support Project (IDP-EDS). Micro-projects and micro-credit are the main activities financed by IDP-EDS. SFDI micro- projects are essentially public infrastructure works, similar to those which are eligible under AzRIP-2. Non-IDPs are also benefitting from the micro-projects. However, key features of SFDI operational modalities are different from those under AzRIP-2. One of the most important differences is the way infrastructure works are identified. While AzRIP-2 follows a rigorous community process with strong emphasis on participation and transparency, which includes mandatory, popular selection of the representative body („Community Group‟), SFDI mostly works with the municipality for identification, planning and implementation of the micro-projects. National Minority Groups 47. Legal Rights. The Constitution guarantees respect for human rights and freedoms regardless of ethnic origin, race, religion, languages or other distinctions. According to Article 25 of the Constitution, the State guarantees equality and respect of rights and freedoms for all persons regardless of race, nationality, religion, language, ethnic origin, conviction or other distinctions. Restriction of rights and freedoms of citizens based on racial, religious, ethnic 41 discrimination or of ethnic, political and social origin is strongly prohibited. Azerbaijan is a party to the Framework Convention for the Protection of National Minorities since 2000. 48. The Talysh. According to the 1999 census data, national minorities constitute about 9.4% of the total population in the country. The Talysh is the single most important minority in the south where five new rayons will be included in AzRIP-2. The same census data reports about 77,000 Talysh persons in total in the country and most of them are believed to live in the southern rayons. It is possible that the census figures are underreported. According to a study, the Talysh make up nearly 95% of the rural population in some rayons.3 The same study cites that the Talysh language belongs to a group of Iranian languages. Talysh speakers are also found in Iran. The Talysh in Azerbaijan are bilingual, and some also speak Russian. Proficiency of the Talysh in Azerbaijani is high except in remote and isolated communities. Gender does not feature as an important factor to differentiate their levels of proficiency in Azerbaijani. 49. Settlement Patterns and Main Livelihoods. The Talysh Mountains cover western parts of the region. Mountainous areas of the region, especially Lerik and Yardymly rayons, are characterized by a large number of small villages. While the Talysh are predominantly agrarian, differences in climatic, geographical and natural resource bases serve to differentiate main livelihoods of the residents of the region. The lowland Talysh cultivate such crops as rice and tea, but in the mountainous areas livestock is the most important livelihood. In the lowland along the Caspian coasts, the communities are engaged in fishing. The lowland area is more accessible and hence integration with a wider economy can be more advanced. Table 2: Population and Percentage of the Talysh in the Five Southern Rayons Total population Proportion of the Rayon (persons) Talysh (%) Lenkoran 189,929 13.6 Astara 84,319 6.8 Lerik 63,314 11.4 Masally 173,937 21.1 Yardymly About 48,000 n/a Source: Census 1999, The State Statistical Committee 50. Decision Making and Participation. Community-level decision making mechanisms are in principle the same as those in the Azeri communities, and would involve village-level public meetings and/or discussions among the leaders. The latter not only includes official leaders such as rayon ExComm and municipality representatives, but also Aksakhal members and other respected persons, including women who are holding public offices (teachers, doctors and other health workers). 3 John Clifton, Calvin Tiessen, Gabriela Deckinga and Laura Lucht, Sociolinguistic Situation of the Talysh in Azerbaijan, SIL International, 2005 (http://www.sil.org/SILESR/2005/silesr2005-009.pdf). 42 Inclusion of Women and Vulnerable Groups 51. Participation of Women. AzRIP-2 promotes the participation of women, and incorporates measures to achieve it, including an indicative target of women‟s representation in Community Group membership (set at 35%). Such measures, however, are not binding, and participation and inclusion of women and vulnerable groups is mostly left to the will of individual community members. Evidence suggests that actual participation of women in various project activities has been satisfactory. According to the results of a series of focus group discussions (FGDs) conducted in randomly selected 24 communities with completed Community Projects, 71% of women said they actively participated in the project 4. Women‟s representation in Community Group memberships is 31% which is slightly lower than the target, but nonetheless at a satisfactory level. This is a significant achievement in considering that selection was left to the popular votes without any separate quota for women. Discussions with Community Groups during field visits indicated that women are not only represented in the groups, but they are active members. Most villages have a good pool of female professionals in public offices (schools, hospitals, etc.), who are known to the residents and have the capacity and experience to fulfill public functions, from which female Community Group members are mostly drawn. Women account for about 28% of the total participants of community mobilization workshops at the project level. Achievement of this satisfactory level of participation without any binding measures is again encouraging, and seems to suggest a genuine interest of women in the project. 52. Most types of Community Projects provide gender neutral benefits, thus the selection process is not likely to involve gender-based competition. One important exception is, however, drinking water supply which would potentially attract a higher level of interest from women since fetching water is predominantly their role in rural Azerbaijan. AzRIP financed 66 potable water Community Projects during 2005-2008, which is nearly 20% of the total for the period, indicating that male dominance in Community Project selection is unlikely5. Table 3: Women’s Participation North North Nakhchivan Total West Community Women 31% 34% 27% 31% Groups Youth 6% 18% 4% 10% Mobilization Women 30% 31% 23% 28% Youth 26% 30% 13% 24% Source: PMU 4 AzRIP: Project Quarterly Status Report (July-September, 2010). 5 It is possible that more communities chose drinking water supply as the top priority, but the budgetary ceiling did not allow it to be implemented. 43 53. Inclusion of Vulnerable Groups. Assessment of participation of youth is only possible with the available data which covers the period 2009-2010. The youth‟s participation in community mobilization workshops and training is reasonably high at about 21% and 10%, respectively. For IDPs‟ participation, however, the data from the northwest zone which has a sizeable IDP presence indicates more efforts are needed. On average, IDPs accounted for 14% of the total population of the 19 communities where AzRIP was implemented, but less than 8% of the participants of the village meetings. There are several communities where the difference is quite significant, and in some communities with a high percentage of IDPs they are not represented in the Community Group. Social Capital Indicators 54. Following the World Bank‟s Social Capital Implementation Framework, potential indicators were identified according to the five operational dimensions: (i) groups and networks; (ii) trust and solidarity; (iii) collective action and cooperation; (iv) social cohesion and inclusion; and (v) information and communication. Consultations narrowed down the potential indicators, which include:  Number of Community Groups (CGs) which participated in cross visits  Number of projects and activities implemented with internal resources in cooperation with municipality  Number of reporting meetings voluntarily organized by CGs  % of households willing to contribute to public projects  % of functional CGs six months after project completion  % of households which attended mobilization  % increase of community wide meetings  % of women in CG membership Recommendations 55. Key recommendations of the Social Assessment are as follows:  Strengthen efforts to promote and ensure IDP participation and representation in Agdzhebedi and Beilagan, especially in communities where IDPs‟ presence is significant. Specific measures would include setting a percentage target for IDP participants in community mobilization and CG membership.  Improve coordination on support to community infrastructure between AzRIP-2 and SFDI in Agdzhebedi and Beilagan in order to maximize the benefits and avoid potential duplication of efforts.  Adjustment of minimum population requirement (1,000 persons except for Nakhchivan where it is 600) for eligible communities in some rayons (possibly Lerik and Yardymly) where a great majority of the villages have less than 1,000 persons and distance and poor accessibility makes clustering a challenge. 44  Preparation and implementation of a strategy to strengthen women‟s leadership within AzRIP-2‟s programming.  Training of project staff on diversified women‟s constraints and female leadership. Monitoring & Evaluation 56. The objectives of the monitoring and evaluation activities are to provide AzRIP-2 staff and stakeholders with regular information on project implementation and outputs; identify bottlenecks to project implementation; ensure that all activities under AzRIP-2 are implemented in compliance with project regulations; determine to what extent the PMU achieves its goals and objectives and how it affects the intended beneficiaries‟ social conditions and capacities; and maintain acceptable performance standards for environmental and social impacts. The project will continue to use the monitoring and evaluation procedures and existing MIS and other relevant tools that have been established under the current AzRIP project, tailoring and strengthening them as needed in order to better track and assess areas such as women‟s participation and empowerment, economic changes and social capital impacts. 57. Data sources will include an impact evaluation including a baseline survey to be conducted prior to project implementation; information from the MIS covering detailed tracking of individual micro-projects and overall project progress including capacity building activities at all levels, financial costs, etc. Periodic qualitative evaluations will be undertaken to measure and assess the project‟s physical achievements, project impacts, and beneficiary satisfaction. Additionally, after completion of the micro-project, community project evaluations will take place after 6 months, 1 year and 2 years to assess the impact and sustainability of the project. The costs of data collection and monitoring and evaluation will be covered under Component C of the project (Project Management and Results Monitoring). 58. AzRIP-2 monitoring and evaluation activities will be conducted at three levels – central, regional, and community. At the central level, the work will be facilitated and coordinated by the M&E and MIS Specialists, with periodic supervision and monitoring done by the World Bank and the Working Group through receipt and review of quarterly and special reports provided by the PMU, as well as independent auditor reports. At the regional level, Community Development/ Monitoring Officers will monitor project-level micro-projects, using the performance indicators developed by the PMU for each type of infrastructure investment. The ROO will also hire technical experts to monitor the technical quality of infrastructure works to ensure compliance with technical standards established for the works. ROO staff will also visit project sites at random for spot-monitoring. In addition, Community Groups will engage in regular participatory monitoring and evaluation activities during project implementation. Data collected at the regional and community levels will be entered by Regional MIS Officers into the database for transmission to the PMU. 45 Annex 4: Operational Risk Assessment Framework (ORAF) Azerbaijan: Second Rural Investment Project (P122944) . Project Stakeholder Risks Stakeholder Risk Rating Low Description: Risk Management: The Ministry of Economic Development may have concerns about the institutional The project is being developed in close collaboration with the Ministry of Agriculture and the Ministry of Economic Development and placement and context of the project, which they have expressed in the form of concerns enhanced communication mechanisms will be put in place to ensure that project implementation performance and results are broadly on sustainability and efficiency issues in AzRIP. disseminated. Additionally, indicators to measure sustainability will be developed for AzRIP-2 and shared proactively with MoED. Resp: Both Stage: Both Due Date: Status: Completed Beneficiary capacity in new rayons to prepare and implement sub-projects may be weak. Risk Management: Controversy around selection of additional project regions and beneficiary communities. As with AzRIP, efforts will be focused on stimulating community mobilization and strengthening community capacity to implement sub-projects. Resp: Client Stage: Both Due Date: Status: In Progress Risk Management: As with AzRIP, clear and transparent selection criteria to be used in selecting new regions and beneficiary communities, along with active public information and dissemination campaigns. Resp: Client Stage: Both Due Date: Status: Completed Implementing Agency (IA) Risks (including Fiduciary Risks) Capacity Rating Low Description: Risk Management: Gap between the closing of AzRIP 1 and effectiveness of AzRIP-2AzRIP-2 may result in Retroactive financing is in place to fill the gap. loss of experienced PMU staff. Resp: Both Stage: Preparation Due Date: Status: Governance Rating Low Description: Risk Management: Lack of support from the Ministry of Economic Development could influence the The project has received strong endorsement from the Cabinet of Ministers and the Prime Minister's office, and the task team will Ministry of Agriculture's views on the design and scope of the project. continue to work closely with the Ministry of Economic Development during project preparation to ensure their ongoing support. Resp: Bank Stage: Preparation Due Date: Status: Completed Significant turnover and/or political appointments at top management levels of MoA, resulting in lack of competent management and failure to provide strong leadership, good Risk Management: governance and transparent decision making. The Bank will need to continue emphasizing the importance of a well governed agriculture sector to the national economy in the course Community concerns and priorities are not sufficiently taken into account. of our country dialogue. It will continue work with Government to build support and consensus for governance reforms. Resp: Bank Stage: Both Due Date: Status: In Progress Risk Management: The project will enhance the role of communities in design and implementation, and ensure that adequate grievance redress mechanisms 46 exist. Resp: Both Stage: Both Due Date: Status: In Progress Risk Management: The project will continue to use the transparent procedures established under AzRIP 1 with regard to the decision making process, which limit opportunities for interference. Resp: Client Stage: Implementation Due Date: Status: In Progress Risk Management: Regular on-site supervision of civil works construction will be conducted together with procurement and FM reviews. Oversight of rehabilitation works will be strengthened by increased participation of communities in tender award and construction supervision. Resp: Client Stage: Implementation Due Date: Status: Not Yet Due Risk Management: Properly established internal controls within PMU that ensure several levels of approval by procurement and FM of invoices. Reconciling of expenditures to the pre-approved procurement plan. Audits of project expenditures. PMU will have annual technical / procurement audits to be carried out by independent consultants. Resp: Client Stage: Implementation Due Date: Status: In Progress Project Risks Design Rating Low Description: Risk Management: Growing project complexity resulting from new component on strengthening household Design of new livelihoods component will be based on comprehensive diagnosis and analytics on sustainable livelihoods and livelihoods, and scaling up of the number of regions the project will cover. institutional arrangements and will draw on lessons learned from livelihoods support in CDD operations globally. Resp: Client Stage: Implementation Due Date: Status: Not Yet Due Non-transparent selection of participating grantees Risk Management: Monitor implementation for consistency with guidelines to ensure that clear and transparent criteria are used for beneficiary selection and project screening and approval. Resp: Client Stage: Implementation Due Date: Status: Not Yet Due Social and Environmental Rating Low Description: Risk Management: Proximity of two new rayons (Agcabadi and Beylaqan) to conflict-affected areas. If conflict occurs along the borders of these two rayons, the Bank and Project team will assess the continued feasibility of activities in these areas, or may recommend community mobilization or sub-projects designed to build community resilience to conflict. Risk that sub-projects benefit a small number of people and exclude women and Resp: Both Stage: Implementation Due Date: Status: Not Yet Due marginalized groups. Risk Management: There is no risk related to involuntary resettlement or land acquisition. Potential land acquisition will be screened through questions in the EMF checklist as per AzRIP 1. Regarding, inclusion of women and marginalized groups, the project will have a continued emphasis on inclusion of all relevant social groups and robust grievance redress mechanisms. Beneficiary communities may fail to follow environmental requirements during sub- Resp: Both Stage: Both Due Date: Status: In Progress project implementation due to insufficient capacity or lack of understanding. Risk Management: 47 AzRIP 1 supported environmental awareness raising and capacity building activities among both the Regional Offices and potential sub- project beneficiaries. AzRIP-2 will continue the same good practice. The project EMP and OM contain clear procedures to be implemented for each sub-project. Resp: Client Stage: Both Due Date: Status: Not Yet Due Risk Management: The Environmental Specialist will continue close environmental monitoring of sub-projects and will provide support and guidance to community beneficiaries. Resp: Client Stage: Both Due Date: Status: In Progress Program and Donor Rating Low Description: Risk Management: No dependence on other donors. Resp: Stage: Due Date: Status: Delivery Monitoring and Sustainability Rating Low Description: Risk Management: Weak technical quality of small-scale infrastructure. Enhancement of PMU capacity to handle livelihoods component, and continued emphasis on capacity building and accountability, local responsibility and empowerment, partnerships and sustainability. Inadequate O&M arrangements, leading to lack of sustainability of small scale Resp: Client Stage: Both Due Date: Status: In Progress infrastructure. Risk Management: Inability of communities to collect the required funds for recurring O&M costs for rehabilitated infrastructure. Ongoing capacity building of Design Company and Engineers at the community and regional levels. Resp: Client Stage: Both Due Date: Status: In Progress Livelihood activities unable to be sustained after project completion. Risk Management: Continued support for developing adequate standardized maintenance contracts and ongoing M&E, including capital improvement plans and longer-term maintenance schedules. Resp: Client Stage: Both Due Date: Status: In Progress Risk Management: The project will further strengthen capacity of participating communities to take over the responsibility for O&M of rehabilitated infrastructure. Resp: Client Stage: Both Due Date: Status: In Progress Other (Optional) Rating Description: Risk Management: Resp: Stage: Due Date: Status: Other (Optional) Rating Description: Risk Management: 48 Resp: Stage: Due Date: Status: Overall Risk Preparation Risk Rating: Low Implementation Risk Rating: Low Comments: 49 Annex 5: Implementation Support Plan Azerbaijan: Second Rural Investment Project (P122944) I. Strategy and Approach to the Implementation Support 1. The strategy and approach for the Implementation Support Plan (ISP) is built on the following key aspects. 2. Capacity building activities and micro-project cycle implementation under all components will be implemented by AzRIP-2 staff working at the PMU and in the regions, supported by Individual Consultants under contract. The PMU will be supported by three existing Regional Operations Offices (ROOs) and one new ROO acting as the project‟s representation at the regional level. The PMU will provide institutional support to the ROOs which will be responsible for daily project management and monitoring of the community project portfolio. The ROO staff will be contracted by the PMU and include skills required to carry out appraisal, contracting, supervision and monitoring of community projects. The ROOs will also accommodate the Project Assistance Team, the Regional Grant Approval Committees and the Technical Design Companies. The ROOs will support and monitor the operations of PATs and facilitate the meetings of the regional micro-project grant approval committees. The ROOs will also facilitate contacts of the technical design companies with participating communities. The institutional capacity building activities and studies will be undertaken through individual and firm contracts. The PATs serve as service providers for AzRIP-2 zones and will be responsible for coordinating all aspects of community mobilization, training, advising on procurement and providing technical assistance to communities in the preparation of micro-project proposals. The Regional Grant Approval Committees are located in the project target zones and review all community project proposals for approval. The RGACs includes representatives from the rayon executive committees, municipalities, civil society and regional representatives of the Ministry of Agriculture and Ministry of Economic Development. The PMU will recruit the technical design companies in each zone with the objective to provide technical assistance to communities in engineering aspects of micro-projects. The design companies would also assist the communities and the PMU in quality control and construction supervision. The Bank team will provide overall implementation support to this structure of project work flow. 3. The PMU has sound experience in fiduciary aspects and fiduciary arrangements have not been significantly altered for this repeater project. The Bank‟s Task Team will monitor FM arrangements and compliance. 4. The PMU has adequate capacity for procurement, and adequate thresholds for post – and prior-review have been established. Subsequent to a Procurement Post Review carried out under AzRIP, procurement oversight in the PMU will be strengthened and management of MP contracting will be subject to rigorous scrutiny. The Bank procurement supervision will remain a high priority during project implementation. 5. The Bank‟s Task Team will focus on strengthening the M&E capacity and providing assistance to the PMU M&E Specialist in a high standard M&E and impact evaluation. Survey methodologies are subject to the Task Team‟s review. 50 II. Implementation Support Plan 6. The Bank's supervision team will include a Washington-based Task Team Leader and country-based fiduciary, procurement and safeguards staff. 7. Technical support for Component A: The Bank's Task Team will include a Participation and Institutional Specialist to provide supervision support for the micro-projects component in similar vein to implementation support provided during the course of the initial AzRIP project. The technical specialists will provide support for the capacity building/TA program and the workflow for micro-projects and provide technical advice on the implementation of activities under this component. The Bank's Task Team will include a Civil Engineer to review the adequacy of the design, construction, operation and maintenance schedules, planning and actual works. The specialist will perform site supervision, audits and spot-checks of construction and completed works. This input will require on average one mission per year through the life of the project. 8. Technical support for Component B: The Bank‟s Task Team will include general CDD technical expertise and specialized expertise in capacity building and social accountability to enhance delivery and impact under this component by ensuring the necessary quality of capacity enhancement inputs and training at multiple levels for the PMU, regional teams, ExComms, communities and other stakeholders. A second focus for support is that of livelihood/income- generating activities and the Bank‟s Task Team will include a Sustainable Livelihoods Specialist to assist the PMU with the design and implementation of livelihood pilots and associated market and assessment studies. This input will be required for approximately 2 missions a year in the first 2 years of the project, and 1 mission in project years 3-5. 9. Technical support for Component C. The Bank‟s Task Team will include a Monitoring and Evaluation specialist team from the Development Impact Evaluation Group (DIME). This team will provide ongoing technical support for M&E and impact evaluation design and implementation including baseline and periodic evaluation throughout the life of the project. 10. Financial Management Supervision: The Bank's Financial Management Specialist based in Baku will conduct one FM supervision every year throughout the life of the project. FM supervision will cover, in addition to standard FM areas, detailed review of civil works contracts and funds flow between PMU and regional offices of the project. 11. Procurement supervision: The Bank‟s Procurement Specialists based in Baku will be members of the project team throughout the project. During project implementation, designated Procurement Specialists will join the regular Bank implementation support missions. The frequency of procurement supervision is expected to be twice per year. In addition to the prior review supervision to be carried out by the Bank team, procurement post reviews are to be carried out on at least 10% of the contracts subject to post review. As a minimum, one post review report which will include physical inspection of sample contracts including those subject to prior review will be prepared each year and not less than 10% of the contracts will be physically inspected. 51 12. Environmental Safeguards supervision. The Bank‟s Environmental Specialist based in Baku will be a member of the project team throughout the project. Besides supervision of compliance with environmental safeguards, the specialist will provide assistance and support in conjunction with the PMU‟s Environmental Specialist on environmental issues arising during the implementation of Component A. 13. Social Safeguards supervision: The Bank's Task Team will include a Social Development Specialist who will provide support to the PMU on social development issues, in particular in the area of assessments and social analysis relating to social impacts and social sustainability. III. Implementation Main Focus 14. Table 1 presents the main focus of implementation support over the life of the project. Table 1: Implementation Support Time Focus Skills Needed Resource Partner Role Estimate First twelve M&E – IE baselines Participation and US$ 135,000 /yr months Institutional Institutional Specialist; development capacity Civil Engineer; building, TORs, Social Safeguards, training, Procurement, livelihoods capacity Environmental development, Safeguards, and assessments and M&E Specialist procurement prior reviews 12-48 months Implementation Participation and US$ 110,000/yr review of MPs; Institutional Livelihoods pilots Specialist; initiation; Civil Engineer; M&E mid-term Social Safeguards, Procurement, Environmental Safeguards, and M&E Specialist > 48 months Policy dialogue with Participation and US$ 110,000/yr government Institutional Pilot results and Specialist; dissemination Civil Engineer; IE end line Social Safeguards, Procurement, Environmental Safeguards, and M&E Specialist 52 Skills Mix Required Skills Needed Number of Number of Comments Staff Weeks Trips Task Team Leader 50 10 Social Development Specialist 18 7 Institutional Specialist 12 2 Civil Engineer 10 Field based M&E Specialist 12 4 Procurement Specialist 12 Field based Financial Management Specialist 12 Field based Environmental Specialist 10 Field based Livelihoods Specialist 12 4 Partners Name Institution/Country Role To Be Determined FAO/CP Institutional and Technical Supervision Support 53 IBRD 38276 To Tbilisi To Kayakent 45° 46° 47° 48° 49° 50° 51° G E O R G I A RUSSIAN AZ E R B AI J AN SECOND RURAL INVESTMENT PROJECT y ha Balakan h c k F E D E R AT I O N e Kat BALAKAN Zaqatala ZAQATALA XACMAZ To Tbilisi Sa m ur AzRIP2 EXPANDED PROJECT AREAS R iver QUSAR Xacmaz QAX Qusar Qax AzRIP1 PROJECT AREAS Quba DAVACHI Iori AGSTAFA MOTORWAYS SAKI QUBA Davachi QAZAX Saki RAILROADS Qazax Agstafa Siyazan 41° OGUZ DISTRICT CAPITALS TOVUZ Shamkur Reservoir Oguz SIYAZAN CAPITAL OF AUTONOMOUS REPUBLIC 41° Tovuz Mi Qabala ng ech Xizi Kura SAMUX evi NATIONAL CAPITAL SAMKIR rR ese QABALA DISTRICT BOUNDARIES r vo ISMAYILLI Samkir ir Ch y Nabiagaly Ismayilli iki INTERNATIONAL BOUNDARIES SAMAXI XIZI cha To Dilizhan l c ir ha mk YEVLAX AGDAS y Ganja Goycay Samaxi ha S Yevlax Agdas GOYCAY QOBUSTAN Goranboy Agsu Khyrdalan Gadabay Xanlar GORANBOY Maraza GADABAY AGSU XANLAR Daskasan Ucar Barda UCAR BAKU DASKASAN ABSERON BAKI Tartar Kurdemir Lake Sevan BARDA TARTAR ZARDAB KURDEMIR Zardab HACIQABUL Kura Riv er Gazi-Mammad 40° Kalbacar AM AGCABADI ARMENIA KALBACAR AG D Agcabadi Sabirabad 40° SABIRABAD Agdam IMISLI To Yerevan Xocali Imisli Saatli Caspian XOCALI SAATLI BEYLAQAN SALYAN LACIN Susa Xocavand Sea D Beylaqan N Sadarak A Lacin SUSA V A Sarur Fuzuli Salyan C r ve BAHRAMTAPE O FUZULI BILASUVAR Ri HEADWORKS X SARUR z Ara a SAHBUZ Ar Bilasuvar Kura z Neftcala Sahbuz QUBADLI NEFTCALA Cabrayil Qubadli CABRAYIL Kara BABEK CALILABAD Calilabad KAZAKHSTAN su River NAKHCHIVAN UKRAINE CULFA Araz Reservoir Babek Zangilan 0 10 20 30 40 50 N RUSSIAN FEDERATION A N Masalli 39° IL ORDUBAD MASALLI KILOMETERS R A G 39° Culfa N ZA Ordubad A LI Yardimli This map was produced by the Black Sea IM K RD Map Design Unit of The World Bank. Caspian N YA Lerik A The boundaries, colors, GEORGIA L Sea Len Lankaran denominations and any other TURKMENISTAN kar information shown on this map do not To Jolfa LERIK an AR imply, on the part of The World Bank AZERBAIJAN M Baku Group, any judgment on the legal EN IA status of any territory, or any ISLAMIC REPUBLIC OF IRAN ASTARA endorsement or acceptance of such boundaries. TURKEY Astara 45° 46° 47° 48° To Rasht 50° SYRIAN ARAB REP. IRAQ ISLAMIC REP. OF IRAN DECEMBER 2010