REPUBLIC OF MOLDOVA Agriculture Competitiveness Project and Agriculture Governance, Growth and Resilience Investment Project Implementation Support Mission February 24 through March 14, 2025 Aide Memoire I. INTRODUCTION 1. A World Bank team1 carried out an implementation support mission for the above referenced projects during the period of February 24 – March 14, 2025. The World Bank task-team would like to express its gratitude and appreciation to the representatives of the Government of Moldova (GOM) for a fruitful and open collaboration. 2. The Aide-Memoire summarizes the conclusions and recommendations derived from discussions held with representatives of the Ministry of Agriculture and Food Industry (MAFI), the Consolidated Agriculture Project Management Unit (CAPMU), and other pertinent and beneficiary institutions. The final version of the Aide Memoire was endorsed by the World Bank management. The Moldova Agriculture Competitiveness Project (MACP) II. PROJECT DATA AND RATINGS Table 1: Key Project Data Project Data USD (millions) Project Amount US$ 64.63 million Total Disbursement US$ 52.75 million Disbursement in FY 24% Closing Date December 31, 2025 III. IMPLEMENTATION PROGRESS AND KEY FINDINGS 3. Major results’ milestones have been achieved on food safety, enhancing market access and sustainable land management activities. As such, the project continues to be rated Satisfactory for its prospects of achieving the Project Development Objective (PDO). 4. Following the 12-month extension of the closing date to December 31, 2025, prior implementation impediments related to bureaucratic complexities and domestic political economy have largely been eliminated and the implementation progress (IP) of the remaining activities has been solid. Therefore, the IP rating can be upgraded to Satisfactory. 1The team was comprised of Anatol Gobjila (Task Team Leader, Senior Agriculture Economist), Mahwash Wasiq (Senior Water Resources Management Specialist), Dmytro Donets (Senior Procurement Specialist), Oxana Druta (Senior Financial Management Specialist), Adrian Laurentiu Mihailescu (Senior Environment Specialist), Aki Tsuda (Senior Social Development Specialist), Anastasia Zakharova (Social Development Consultant) and Tamara Ursu (Program Assistant). Official Use Only 5. The project’s procurement arrangements are compliant with the World Bank procedures and policies. The project also remains compliant with financial reporting and auditing requirements and there are no overdue audits or any other outstanding financial management issues. The project’s safeguards performance remains rated as Satisfactory. Key Implementation Issues Component 1: Enhancing food safety management. 6. Animal By-Products Management System. Under Component 1, the project has made significant progress in implementing activities aimed at establishing a modern Animal By-Products (ABP) management system2. This includes the launch and a sustained pace of the construction phase for the ABP facility. In addition, deliveries of highly specialized, made-to-order, equipment from the Netherlands and Turkey have commenced and are expected to be completed by the end of April 2025. The ABP facility is on pace to be completed by the end of October 2025, whereupon the testing phase will be launched. 7. The operationalization of the ABP facility is scheduled for early 2026, falling beyond the closing date of the project. It was agreed that continued support to the country’s ABP management efforts could be included in the on-going Agriculture Governance, Growth and Resilience Investment (AGGRI) Project. Component 3: Enhancing land productivity through sustainable land management3. 8. Under Financial Support for Piloting Sustainable Land Management (SLM), to date, there were five calls for matching grant applications. There was a total of 127 applications, which yielded 88 grant awards. The beneficiaries have invested in SLM machinery, including no-till combines, seeders, mowers, plows, sprayers and shredders, as well as irrigation equipment and water collection basins. The cumulative value of the grants amounted to approximately US$780,000, with an average grant value of around US$8,855. The agricultural land area cultivated by grant beneficiaries covers 15,756 hectares. Twenty two percent of the beneficiaries are businesses owned by women. A sixth call concluded on December 31, 2024, resulting in 46 additional applications, with a total value of US$395,000, for which reviews and evaluations are currently under way and expected to be concluded by mid-April 2025. 9. Under Support for the Rehabilitation of Shelterbelts, CAPMU, the National Institute for Forestry Research and forestry enterprises under the State Forestry Agency, in close collaboration with local public authorities, have been implementing shelterbelt rehabilitation and re-afforestation on an area of 672.2 hectares. At the time of the mission, works have been completed on some 412 hectares. With nine months left before project closing, works on the remaining 260 hectares are on track to be completed. Furthermore, approximately 300 additional hectares were identified to be potentially covered under the project, for which planning and contracting will commence shortly. Proposed Future Actions 10. Notwithstanding commendable implementation progress and results in 2024, the GEF-funded activities will not be achieved at the originally intended scale. Since the start, implementation progress was marred by several factors, such as: repercussions from Russia's invasion of Ukraine, impacting investment decisions by farmers and hindering the project's ability to increase the delivery of post-investment SLM grants; lingering effects of severe 2 Funded by the project’s 3rd Additional Financing approved on May 1, 2021. 3 The Global Environment Facility (GEF) Additional Financing was approved on November 13th, 2021, and became effective on August 18, 2022. Official Use Only droughts that have affected the agriculture and forestry sectors in three out of the past four years; escalating domestic inflation, elevating input costs and challenging the project's capacity to achieve its intended targets (considering that costs were estimated in 2019); and overextended capacity of the country's forestry institutions which are concurrently involved in numerous initiatives and programs. Even though the GEF resources are likely to be fully exhausted before closing, certain adjustments in targets and indicators were agreed to better reflect the implementation reality on the ground. A minor project restructuring to process these adjustments will be launched once all evaluations under the latest SLM grants call are finished. Project Management 11. CAPMU has continued to provide support and cross-component coordination in a timely and efficient manner. Inter-agency coordination and guidance of the project’s activities are still burdensome to the overall ABP facility effort but progressing well due to CAPMU’s pro-activity. However, cases of unjustified delays in processing payments and delays in project progress reporting represent reasons for a downgrade in the rating to Moderately Satisfactory. Several of the issues have been eliminated following discussions and interventions from the World Bank team, and should there be no relapses, the rating will be upgraded to Satisfactory at the next review. 12. Financial Management (FM). The review of the financial management arrangements at CAPMU and the country’s Paying Agency concluded that the FM system established for the project continues to comply with World Bank requirements. Both agencies are in line with financial reporting and auditing requirements (with the existing financial management systems providing a complete audit trail). The project budget for FY2025 has been approved, but the allocations provided by the Ministry of Finance are insufficient to cover all emerging needs this calendar year. Therefore, CAPMU and AIPA will request additional allocations during a mid-year budget adjustment exercise. CAPMU has initiated an inventory of the project assets but has not completed it. The inventory lists have not been signed by the members of the Inventory Committee. Since CAPMU purchased goods for a multitude of stakeholders, the Bank recommends that it obtains confirmations from all that the goods received are properly accounted for in their ledgers. 13. Notwithstanding the above relatively positive dynamic, the project financial management arrangements rating is downgraded to Moderately Satisfactory. Deficiencies in the staffing of CAPMU in relation to the FM function that have lingered through 2024 and that have only been eliminated during the mission, following repeated discussions and interventions from the World Bank, justify the downgrade. These deficiencies have caused several delays in processing payments specifically under MACP activities and cannot be disregarded. Most of the issues have been addressed, except for the transfer of signature rights, and should there not be relapses, the rating will be upgraded to Satisfactory at the next review. 14. Procurement. As part of the visit, the procurement team carried out its regular review of procurement arrangements and compliance. The project has continued to make sustained progress and procurement arrangements remain compliant with the World Bank procedures and policies. CAPMU continues to demonstrate good performance and maintain strong fiduciary capacities. The quality of procurement documents continues to be satisfactory. Most of the activities are subject to post-review and limited guidance is requested from the World Bank on those. The largest contract for design, supply and install of the ABP facility has been signed. The Contractor has already completed the design, which was formally approved by the authorities, and commenced construction of the facility after permits and authorizations were issued. It is expected that the ABP facility will be completed by October 2025. The mission concluded that CAPMU’s procurement performance is rated Satisfactory and the project procurement risk as Low. 15. Safeguards. The World Bank team has highlighted the delay in delivering the annual project progress report for 2024, which should include a section on environmental and social safeguards, that is forward-looking and Official Use Only including actions planned for the first semester of 2025. The World Bank team noted that CAPMU stakeholder engagement activities have focused on information campaigns about the ABP management system. establishing a project website and a central grievance redress mechanism (GRM). There have been no project specific consultations during the second semester of 2024. CAPMU indicated they have made efforts to maintain the Social Impact Monitoring Committee (SIMC) previously established, but the affected community has lacked interest at this time. CAPMU continues to maintain its ABP engagement at mayoralty level and the World Bank team advised that enquiries (e.g. regarding the construction progress) received at the Criuleni mayoralty, should be tracked in the project’s grievance log. It was agreed that renewed efforts to re-stablish the SIMC would be made as the facility approaches commissioning. At this time, no new grievances regarding the project have been received, and no communications have been received from the previous complainant (although there still are legal proceedings in place in one remaining case brought about by the complainant). 16. During a field visit to the ABP facility construction site, there were several good practices observed, including appropriate use of protective equipment and provision of facilities for drinking water, sanitation, and rest for the workers. The World Bank team highlighted the following observations from the site visit that are to be addressed: (i) general housekeeping could be improved at the site; (ii) first aid kits could be stocked with additional items to treat common injuries such as cuts, scrapes, and burns (ex. gauze, bandages, burn dressing and antiseptics); (iii) fully finalize the site fencing; (iv) add fire extinguishers for each housing/resting container; and (v) affix the site sign board with GRM contact information. IV. PROJECT DATA AND RATINGS The Moldova Agriculture Governance, Growth and Resilience Investment (AGGRI) Project Table 2: Key Project Data Project Data USD (millions) Project Amount US$ 55.00 million Total Disbursement US$ 5.81 million Disbursement in FY 11% Closing Date December 31, 2029 V. IMPLEMENTATION PROGRESS AND KEY FINDINGS 17. The GOM has provided timely and effective support to the implementation of the project activities. Major results milestones have already been achieved on sector governance aspects, catalyzing growth in the underperforming livestock sector and enhancing climate resilience through increased access to irrigation services. As such, the project continues to be rated Satisfactory for both its prospects of achieving the PDO and implementation progress. 18. The project’s procurement arrangements are compliant with the World Bank procedures and policies. The project also remains compliant with financial reporting and auditing requirements and there are no overdue audits or any other outstanding financial management issues. The project’s safeguards performance, despite a Substantive risk rating, remains rated as Satisfactory. Official Use Only Key Implementation Issues Component 1: Enhancing Sector Governance and Agriculture Knowledge Management. 19. Since its effectiveness on October 2, 2023, the AGGRI project achieved several milestones that boosted the country’s essential systems for sector governance and service delivery. These included enhanced laboratory diagnostic capabilities for residues, the establishment of a competent cadre of state veterinaries, and the establishment of veterinary excellence centers. A common theme of all activities implemented under the component is that they focused on investments in enhanced (and in some cases unique) technical capacity of beneficiary institutions, and less on providing technical assistance to enhance policy and program formulation and institutional alignment to European Union requirements (as envisaged originally). The two main reasons for this are: (i) length and complexity of elaborating terms of reference (TORs) and technical specifications for certain transformative institutional reforms, such as the case of the Paying Agency and the Agricultural and Rural Advisory Center; and (ii) availability of alternative financing for technical assistance (from grant sources). In the latter case, the National Food Safety Agency – ANSA, has benefited from significant grant funding from the Government of Czechia for the financing of a phytosanitary registry; and from similarly significant grant funding from UNIDO for a large range of ANSA-specific institutional improvements (including method accreditation and ISO management certification). 20. To this end, the World Bank team and MAFI have discussed and agreed on the need for the cancellation of certain activities and reallocation of funds to existing or new activities under Component 1. As mentioned earlier, one such new activity relates to the need for continued support to the country’s ABP management system. Funding and time available under MACP will not be sufficient to cover all needs for the launch and final operationalization of the facility (including the management model) and ancillary systems (refrigerated trucks, warehouses, etc.). The World Bank is looking forward to receiving a final request on the range of changes to initiate the restructuring of the component. Any such restructuring will include an update of AGGRI project’s environmental and safeguards framework (ESF) documents, and an emphasis on continued stakeholder engagement at both national and community levels. Component 2: Fostering Growth in Underperforming Sub-Sectors 21. The World Bank team took note of the positive dynamic in the implementation of the component’s activities aimed at enhancing market-oriented value chains for the growth, competitiveness and diversification of the country’s agriculture sectors. The main vector in the first full year of implementation focused on the country’s flailing livestock sector. Several calls for proposals were launched in 2024 and early 2025 to incentivize scaled investments in the dairy sector, initially to produce bovine milk, and subsequently ovine and caprine milk. The first call for bovine dairy production yielded 31 applications for a total amount of US$21 million (ended on May 17, 2024). After several rounds of reviews 15 applicants received awards for a total of approximately US$10.5 million. A second call for ovine/caprine dairy production yielded seven applications worth US$0.52 million (ended August 2, 2024), but only one was deemed eligible and was sent for final evaluation (award still pending). A third call for bovine dairy products is under way with a deadline for April 4, 2025. 22. While the implementation of the component has progressed well, with investments already being realized in the field, the World Bank team reiterated its position, that this component is not exclusive to the country’s languishing livestock sector (primary production) and funding under it should be made available to livestock processors and producers in the vegetable and niche horticulture sub-sectors. The leadership of MAFI has assured Official Use Only the World Bank team that calls for other types of production/processing are being envisaged and will be launched in 2025. Component 3: Strengthening Resilience through Irrigation Services 23. This component supports the rehabilitation of three Central Irrigation Schemes (CIS), in the Tudora, Tetcani, and Etulia communities, and a moderate package of support for institutional capacity building in MAFI’s Land Improvement Agency and the Water Users Associations (WUA). The project has been making commendable strides towards expanding the availability of irrigation services to interested farmers (see Annex 2 for further details). At the time of the mission, a major milestone contract was signed for the rehabilitation works of the Tudora CIS (on the Nistru River). This has followed months of intensive work on the finalization of the technical designs, drafting of complex technical specification, social and environmental planning, launch of the procurement activity, and ultimately evaluation, award, and signing of the contract. There is a lot of excitement about the immediate commencement of the works in Tudora, as well as in adjacent communities. 24. The completion of the procurement cycle for the Tudora CIS has revealed cost savings that are sufficient for the rehabilitation of one more CIS. This is the case for the Tetcani CIS (on the Prut River), for which funds were only allocated originally for finalizing feasibility work and technical designs. This is a legacy Millenium Challenge Account CIS for which a feasibility design existed at time of appraisal of this project (similarly to Tudora), and an update was carried out in 2024. The local WUA has initiated the technical design process for the scheme, which is now in the final stages of preparation. A potential tender launch for the rehabilitation of the CIS in May 2025 and contract award in September/October 2025 is a very feasible timeline. However, to proceed with the financing of this activity, a restructuring of the project must take place to include specific wording for the financing of rehabilitation works in the project and legal documents. It was agreed with MAFI that a request for this will be received by mid-April 2025. Additionally, there is agreement with CAPMU that the detailed design/TORs for Tetcani CIS would be shared with the World Bank for review, regardless of contracts amount and whether it is subject to prior review. The detailed design and TORs for the construction contract under Tetcani scheme would be submitted to the Bank by April 15, 2025. 25. Finally, one area which requires further attention, relates to the implementation of Sub-component 3.2 – Strengthening the enabling environment for irrigation management. The current MAFI approach prioritizes the allocation of funds exclusively for the construction of irrigation systems. Given the importance of this sub- component to a better management and improved sustainability of the CISs, the World Bank team recommends that funding should be made for technical assistance to the National Agency for Land Improvements and the WUAs available to ensure that the newly established infrastructure is used sustainably and with proper government oversight. Proposed Future Actions 26. The World Bank team and MAFI have discussed and agreed on the need to restructure the project to reflect the evolving reality on the ground in relation to Components 1 and 3. The restructuring will include several additional and incremental activities for which a formal request from the Ministry of Finance will be required. Once received, the World Bank will initiate the formal steps for the restructuring and the necessary updates to the project and legal documents (including adjustments in the results framework). It was agreed that the request will be provided to the World Bank by May 1, 2025, and that to the extent possible all proposed changes will proceed in one restructuring. Official Use Only Project Management 27. For the most part, CAPMU’s fiduciary support and cross-component coordination continues to be timely and efficient. Inter-agency coordination and guidance of the project’s activities, especially under Component 3, are complex processes which progressed well to CAPMU’s proficiency and pro-activity. However, project management is downgraded to Moderately Satisfactory due to cases of laxed reporting on project progress, including on ESF compliance. These issues are being dealt with following discussions and interventions from the World Bank team, and should there be no relapses, the rating will be upgraded to Satisfactory at the next review. 20. Financial Management. The review of the financial management arrangements for AGGRI have produced the same conclusions as for MACP described in para 12. For similar reasons, the project financial management arrangements rating is downgraded to Moderately Satisfactory. 21. Procurement. As part of the visit, the procurement team carried out its regular review of procurement arrangements under the project. The mission concluded that CAPMU’s procurement performance continues to be rated Satisfactory while the procurement risk rating remains Moderate. CAPMU has sufficient staff with the right skill set and behaviors, and a satisfactory track record in carrying out procurement. A clear system of accountability with clearly defined responsibilities and delegation of authority on who controls procurement decisions is in place. The project has disbursed circa 22% and continues its implementation pace with major contract for works signed in March 2025 (rehabilitation of irrigation systems). Additionally, since CY 2023: 7 contracts for goods have been completed and several more for goods, works and consultant packages are expected to be launched in the next several months; 27 consultancy contracts are currently under implementation. 28. Safeguards. Overall environmental and social standards (ESS) performance is rated Satisfactory. At this stage, there still are not any major construction activities under the project. For the upcoming rehabilitation of the Tudora CIS, the World Bank team re-confirmed that the anticipated resettlement impacts are: (i) the easement to lay irrigation pipes in beneficiary’s own lands, and (ii) the temporary potential crop losses during construction. Most land leaseholders are agriculture companies (rather than individuals). Also, most landowners and leaseholders are direct beneficiaries of this project (through improved access to irrigation). Impacts on affected land plots are expected to be minor. The landowners will sign easement agreements as per national legislation. Most of the leaseholders have signed the agreement voluntarily and did not request compensation to potential impact, while some small number of farmers requested compensation if the loss occurs during construction. An agreement with CAMPU was reiterated that they will closely work with the contractor to avoid crop losses (avoid works during the planting and harvesting seasons) and provide compensation in case of loss. 29. The World Bank team was informed that CAPMU has already initiated all necessary preparatory ESS for the proposed rehabilitation of the Tetcani CIS. VI. NEXT STEPS AND AGREED ACTIONS 30. A summary of all essential agreed actions is contained in Table 3 below. A summary of the status of the agreements from the previous Aide Memoire is contained in Table 4 below. Table 3: Summary of Agreed Actions Actions Responsible Due Date 1 Restructuring request under the AGGRI Project on Ministry of May 1, 2025 ABP management system and the Tetcani CIS Finance, MAFI, CAPMU Official Use Only Actions Responsible Due Date 2 Restructuring request under MACP on adjustments MAFI, CAPMU May 1, 2025 to the Results Framework 3 Completing CAPMU authorized signature transfer MAFI, CAPMU April 11, 2025 4 Submission of the detailed design for the Tetcani CAPMU April 15, 2025 CIS to the World Bank Table 4: Status of Agreements from the previous AM Actions Responsible Due Date 1 Issuance of the urban development plan approval GOM, MAFI, Completed for the ABP facility. CAPMU 2 Complete the restructuring of the GEF Additional MAFI, CAPMU, Not due Financing. World Bank 3 Maintain a dialogue on the existing registered MAFI, CAPMU, Completed grievance until resolution World Bank 4 Complete the Grant Operations Manual for the MAFI, CAPMU, Completed AGGRI Project. 5 Provide budget space for the AGGRI project for GOM, MAFI Completed 2024. Official Use Only Annex 1: List of officials met by the World Bank team. Mr. Ludmila Catlabuga, Minister of Agriculture and Food Industry Mr. Sergiu Gherciu, General State Secretary, MAFI Mr. Iurie Scripnic, State Secretary, MAFI Ms. Alexandra Sian, State Secretary, MAFI Mr. Vasile Sarban, State Secretary, MAFI Ms. Ina Butucel, Deputy State Secretary, MAFI Ms. Daniela Manole, Head of Minister’s Office, MAFI Mr. Ion Talmaci, Director, Forestry Research Institute, Ms. Daria Vedutenco, Senior Expert, Forestry Research Institute, Mr. Dumitru Galupa, Consultant, Forestry Research Institute, Mr. Liviu Gumovschi, Director, CAPMU Mr. Eugen Voinitchi, MACP Component 1 Coordinator, CAPMU Mr. Corneliu Bordeianu, Procurement Specialist, CAPMU Mr. Veaceslav Shokin, Senior Management Consultant, CAPMU Mr. Igor Belibov, Financial Management Specialist/AGGRI Component 2 Coordinator, CAPMU Mr. Pavel Trofin, AGGRI Component 3 Coordinator Mr. Maxim Pocaznoi, Consultant, CAPMU Ms. Marina Stasiev, MACP Component 3 Coordinator, CAPMU Ms. Victoria Sargu, ESF Coordinator, CAPMU Ms. Tatiana Ilescu, Environmental Specialist, CAPMU Official Use Only Annex 2: Component 3: Strengthening Resilience through Irrigation Services 1. This component supports the rehabilitation of three pre-identified CIS in the Tudora, Tetcani and Etulia communities, and moderate institutional capacity building of the recently established National Agency for Land Improvements. 2. The implementing agency has successfully proceeded to procure the construction supervision consultancy and the associated works contracts for the Tudora CIS scheme. Given the initial uncertainty with regards to market prices, and whether the allocated budget was sufficient to procure all three schemes, only the Tudora CIS was marked for full rehabilitation in the loan agreement, while the other two schemes were limited to the preparation of feasibility and technical documentation. Only after it was established that savings would result from the Tudora CIS tender was the solution proposed to implement an additional system using the current loan proceeds. 3. The construction supervision Contract was awarded to the Joint Venture of HYDROPLAN Ingenieur- Gesellschaft GmbH, Germany (Lead Member) and Apcan Proiect LLC, Moldova (JV Member) on 07.02.2025. The contract amount is ML USD 430,200 equivalent of USD XXX. In addition, the works contract was awarded to the Joint Venture: Cakir Yapi Sanayi ve Ticaret A.Ș., Turkey (Leading Member) and Polimer Gaz Conducte SRL, Moldova (JV Member). The contract was signed on March 4, 2025 and the contractor mobilization and commencement of works has commenced in the second half of March 2025. The contract amount is 157,567,267 million Moldovan Leu, equivalent to US$8,423,714. The duration of the contract is 2 years/730 days. 4. Under this scheme, there is another contract for electricity supply to the pumping station which was split from the works contract for an estimative amount of 7,000.000 Moldovan Leu, equivalent to US$ 311,856 using the NCB method. It was agreed that procurement for this contract should be expedited as there will be some level of coordination required between the two construction contracts. The mission suggested that efforts should be made not to split contracts under any future schemes. Given the size and nature of works under these schemes, the ideal contracting method should have been a turnkey design and build. However, the government policy of requiring the detailed design to be financed by the beneficiaries to assure ownership, does not allow for a turnkey design and build contract, therefore two contracts one for works and another supervision is necessary. The mission also suggested that CAPMU consolidates the number of construction/supervision/consultancy contracts whenever possible to lessen the burden of contract management and speed up procurement. 5. Given the costs for implementation of the Tudora CIS, the remaining funds will be sufficient to implement the rehabilitation of the Tetcani CIS scheme. The local WUA has initiated the process of detailed design for the scheme, which will be ready by mid-April 2025, with a potentially anticipated tender launch in May 2025 and a contract award in September/October 2025. The cost estimate for implementation of the full rehabilitation of the third CIS (Etulia) is around US$ 20 million and can be done only with additional finance under the project. Given the time remaining under the project, the mission suggested that discussions on a potential additional financing must commence soon and follow the well-established process of. 6. Given the importance of agriculture sector in Moldova’s economy both as a share of GDP and employment, and the persistent of recent drought in Moldova, the need for irrigation and or supplemental irrigation is now a necessity and there is a demand for irrigation. In the absence of an existing strategy for tackling irrigation needs, the World Bank team suggested to MAFI to make use of grant funding from the EU develop a strategy for irrigated agriculture including prioritization of schemes to help the sector. That would constitute the base for prioritizing future investment in the sector. Official Use Only Official Use Only