Document of The World Bank FOROFFICIAL USE ONLY ReportNo: 26799-TP PROJECT APPRAISAL DOCUMENT ONA PROPOSEDTRUST FUNDFOREASTTIMOR GRANT INTHEAMOUNT OFUS$3.0 MILLION TO THE DEMOCRATIC REPUBLIC OF TIMOR-LESTE FORA THIRD AGRICULTURE REHABILITATION PROJECT OCTOBER7,2004 RuralDevelopment and NaturalResources Sector Unit EastAsia and PacificRegion This documenthas a restricteddistributionand may be usedby recipientsonly inthe performanceo ftheir official duties. Its contentsmaynot otherwisebe disclosedwithout World Bank authorization CURRENCY EQUIVALENTS (Exchange RateEffective as June 2003) CurrencyUnit = US Dollar Local Currency = USD 1 1USD = lEUR lEUR = 1USD FISCAL YEAR July 1 - June 30 ABBREVIATIONSAND ACRONYMS Aldeia Sub-village(Hamlet) ACIAR Australian Centre for InternationalAgriculturalResearch ARP Agriculture RehabilitationProgram ARP I11 ThirdAgriculture RehabilitationProject ARP I1 SecondAgriculture RehabilitationProject ARP I (First) Agriculture RehabilitationProject AusAID AustralianAgency for InternationalDevelopment ASC Agriculture Services Centres CARITAS Catholic Relief,Developmentand Social ServiceOrganization CAS Country AssistanceStrategy CEP CommunityEmpowermentProject CFET ConsolidatedFundfor East Timor CFO ChiefFinancialOfficer CGIAR ConsultativeGroupof InternationalAgricultureResearch CIDA CanadianInternationalDevelopmentAgency CPP Community ParticipationProcedures CQS SelectionBasedon Consultants' Qualifications DAC DistrictAgriculture Coordinator DAO DistrictAgriculture Offices DFO DistrictFinanceOfficer DIO DistrictIrrigationOfficers DOE DivisionofEnvironment EC EuropeanCommission ENS0 ElNifio SouthernOscillation EOP End-of-Project ERR Economic Rate o fReturn ETADEP EmaMatanDalanbaProgresu (PeopleLeadingTowards Progress) eEUR Euro Euro FA FinancialAdvisor FA0 Foodand Agriculture Organization(of the UnitedNations) FAT FundasaunAmizade de Timor (Timor Friendship Foundation) FMR FinancialMonitoringReport FY FiscalYear GDP Gross DomesticProduct GTZ DeutscheGesellschaftfur Technische Zusammenarbeit (German Society for Technical Cooperation) Ha Hectares IAPSO Inter-AgencyProcurementServiceso f the UnitedNations IBRD InternationalBank for ReconstructionandDevelopment ICB InternationalCompetitive Bidding ICT Informationand CommunicationTechnology IDA InternationalDevelopmentAssociation FOROFFICIAL, USEONLY IT InformationTechnology IRR InternalRateofReturn JICA JapanInternationalCooperationAgency LCS LeastCost Selection MAFF Ministryo fAgriculture, ForestryandFisheries MDE MinistryofDevelopmentandEnvironment M&E Monitoringand Evaluation MOA Memorandumof Agreement NDP NationalDevelopmentPlan NGO NongovernmentalOrganizations NCB NationalCompetitive Bidding NPV NetPresentValue NRM NaturalResourcesManagement OALGD OfficeofAdministration and Local GovernmentandDevelopment OIE Office Internationaledes Epizooties OP OperationalPolicy OXFAM Oxford FamineRelief PMU ProjectManagement Unit PPPS Planning, Policyand ProgramServices (of MAFF) PSW Procurementof SmallWorks ROC Returnof Capital SA Social Appraisal SBD StandardBiddingDocuments SCDO Sub-DistrictCommunityDevelopmentOfficers SDO Sub-DistrictDevelopmentOfficer SEAFMD SoutheastAsia Foot andMouthDisease SIL Specific InvestmentLoan SMEC Snowy MountainsEngineeringCooperation SOE Statement o fExpenses SSB Single-SideBand(radio) sss Single Source Selection suco Vi1lage TFET Trust Fundfor EastTimor TOR Terms of Reference US$ UnitedStatesDollar USAID United States Agency for InternationalDevelopment USD United States Dollar UNDP UnitedNations DevelopmentProgramme UNOPS UnitedNationOffice of Project Services UNTAET UnitedNations TransitionalAdministrationinEastTimor VLW Village Livestock Workers WFP WorldFoodProgramme WUA Water Users' Association YAYASANHAK RightsFoundation Vice President: Jemal-ud-din Kassum,EAPVP Country Director: Xian Zhu, EACNF Sector Director: Mark D.Wilson, EASRD Sector Manager: HoonaeKim, EASRD Task Team Leader: Sofia Bettencourt, EASRD This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. TIMOR-LESTE THIRD AGRICULTURE REHABILITATIONPROJECT CONTENTS Page A. Strategic Contextand Rationale 1 1. Country and Sector Issues 1 2. Rationale for Bank Involvement 1 3. Higher Level Objectives to which the Project Contributes 1 B. ProjectDescriptionSummary 1. Project Instrument 2. Project Development Objective and Key Indicators 3. Project Components 4. LessonsLearnedand Reflectedinthe Project Design 5. Alternatives Considered and Reasons for Rejection C. Implementation 1. Partnership Arrangements 2. Institutional and ImplementationArrangements 3. Monitoringand Evaluation of OutcomesResults 4. Sustainability 5. Critical Risks and Possible Controversial Aspects 6. Grant Conditions and Covenants D. AppraisalSummary 1, Economic and FinancialAnalyses 10 2. Technical 11 3. Fiduciary 12 4. Social 12 5, Environmental 13 6. Safeguard Policies 14 7. Readinessand Compliance 15 TechnicalAnnexes Technical Annex 1: Country and Sector Background 16 Technical Annex 2: Major RelatedProjects Financed by the Bank and Other Agencies 25 TechnicalAnnex 3: Results Framework and Monitoring 26 Technical Annex 4: Detailed Project Description 35 Technical Annex 5: Project Costs 51 Technical Annex 6: Implementation Arrangements 54 Technical Annex 7: FinancialManagement and DisbursementArrangements 65 Technical Annex 8: Procurement 74 Technical Annex 9: Economic and Financial Analysis 84 Technical Annex 10: Safeguard Policy Issues 95 Technical Annex 11: Social Analysis 122 Page Technical Annex 12: EnvironmentalAnalysis 130 Technical Annex 13: Technical Evaluation 140 Technical Annex 14: Project Preparation and Supervision 154 Technical Annex 15: Documents inthe Project File 157 Technical Annex 16: Statement of Loans and Credits 158 Technical Annex 17: Country at a Glance 160 Map IBRDno. 30626R1 TIMOR-LESTE THIRD AGRICULTURE REHABILITATIONPROJECT ProjectAppraisalDocument East Asia and Pacific Region EASRD Date: October 7, 2004 Team Leader: Sofia U.Bettencourt Country Director: Xian Zhu Sector@): Generalagriculture, fishing and forestry (30%); Sector Director: Mark D. Wilson Irrigation and drainage(30%), General information and Sector Manager: HoonaeKim communication(15%), Animal production (20%), Project ID: PO79320 Agriculture marketing and trade (5%) Lending Instrument: Specific InvestmentLoan (SIL) Theme@): Water resourcemanagement (P), Other rural development (P), Participation and civil engagement (S) Environmental Screening Category: B Safeguard Screening Category: S2 Project Financing Data [ ]Loan [ ]Credit [ X I Grant [ ] Guarantee [ ]Other: Source Local Foreign Total DEMOCRATIC REPUBLIC OF TIMOR-LESTE 1.5 -- 1.5 EUROPEAN COMMISSION (Administered by IDA) 2.6 4.3 6.9' SPECIAL FINANCING(TFET) 1.4 1.6 3.0 Total: 5.5 5.9 11.4 FY 04 05 06 07 Annual 0.0 2.3 3.2 1.4 Cumulative 0.0 2.3 5.5 6.9 FY 04 05 06 07 Annual 0.9 1.5 0.5 0.1 ________~ 0.9 2.4 2.9 3.0 ~ Cumulative Does the projectdepart from the CAS in content or other significant aspects? 0 Yes N o (See Section A.3) Does the project require any exceptionsfrom Bankpolicies (See Section D.6) Yes 0 No Exception to notification requirements under International Waterways policy (OP 7.50) Havethese beenapproved by Bankmanagement? Approved September 17,2003 Yes 0 No I s approval of any policyexceptionsought from the Board? 0 Yes N o Does the projectincludeany criticalrisks rated"substantial" or "high" ? Yes o No (See Section C.5) Does the project meet the Regional criteriafor readinessfor implementation Yes o No (See Section D.7) Policy Triggered EnvironmentalAssessment (OP 4.01, BP 4.01, GP 4.01) Yes NaturalHabitats (OP 4.04, BP 4.04, GP 4.04) Yes Forests (OP 4.36, GP 4.36) Yes Pest Management(OP 4.09) Yes International Waters (OP 7.50) Yes Involuntary Resettlement(OP/BP 4.12) Yes A. Strategic Context and Rationale 1. Country and Sector Issues: (see Annex I) Timor-Leste faces the double challenge of cementingits new politicaland socio-economic structure while meetingthe risingexpectations of its people. Nearly40 percentof the populationremainspoor, and some 50-70 percent o f the rural households suffer from chronic food insecurity.These problems are partially natural - caused by periodic droughts and floods - and partially institutional; a legacy of the disempowerment and dependency that prevailed during the Indonesian administration. Despite rehabilitationof much of the infrastructuredestroyed in 1999, employment in rural areas remains scarce (especially for the youth), markets are under-developed, and prices have fallen for major agriculture commodities such as rice and coffee. This places considerable pressure on the new Ministry of Agriculture, Forestry and Fisheries (MAFF) which currently operates with a staff of 180 and an annual budgetofjust US$1.8million. MAFF's goals are closely aligned with those o f the 2002-07 National Development Plan (NDP): to reduce poverty in all sectors and regions, and to promote equitable and sustainable growth. In order to halve poverty within 25 years, Timor-Leste will need to achieve agricultural growth rates close to 6 percent a year, promote broad-based participation in economic opportunities, and reduce population growth. To address these challenges and encourage further national stability, MAFF prioritized all its programs in 2003 according to the "Road Mapfor Implementation of NDP Programs". The Road Map assigned highest priority to policy development; natural resources legislation and strategies; support to rural communities; information services; and coordination with donors and nongovernmental organizations (NGOs). The Third Agriculture Rehabilitation Project (ARP 111) was designed in accordance with these prioritiesas well as lessons learnedfrom previous ARP implementationphases. I 2. Rationalefor BankInvolvement: (see Annex I) This project is the third phase of the Agriculture Rehabilitation Program in Timor-Leste (ARP), a US$17.8million grant from the multi-donor Trust Fundfor East Timor (TFET) executed by MAFF and supervised by the InternationalDevelopment Association (IDA). ARP has been the major program of donor assistance to MAFF since 2000, starting with the then-Division o f Agriculture Affairs. By emphasizing flexibility and periodic adjustments based on lessons learned, ARP helped MAFF adjust to 1 the challenges posed by the reconstruction phase (ARP I), transition phase (ARP 11) and now the sustainabilityphaseof post-conflictrecovery (ARP 111). Since early 2001, donors such as AusAID, UNDPAJNOPs, FAO, Portugal, Japan, GTZ, CIDA and USAID initiated programs in rural development, specializing by district and/or topic, and operating generally within a programmatic framework discussed annually during Joint Donor Missions. Total donor disbursements to ruraldevelopment in FY04 are estimated at US$14million. This providedneeded supplementto MAFF's limitedbudget (US$1.8millioninFY04),but also stretches its capacity andraised the need for further donor coordination. By pooling European Commission (EC) and TFET resources under the ARP program umbrella, the project will further help build staff capacity, coordinate donor assistance, and institutionalizekey priority programs withinthe Ministry. 3. HigherLevel Objectivesto Which the ProjectContributes(see Annex 3) Timor-Leste's agriculture goals are (a) to attain food security and improve self-suflciency; and (b) to generate rural employment and increase income, through farming system diversification and agro- industrial development. The project will contribute to these goals by strengthening MAFF's main programs of assistance to ruralcommunities, while deliveringessentialservices inthe areas of agriculture information,animalhealth, andagri-business support.Together with other donor-fundedprojects,ARP Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 1 I11will also help MAFFdevelop key agricultural and naturalresources policies neededto clarify the roles o f the government, rural communities and civil society inthe sustainable management o f the sector. Although no Country Assistance Strategy exists yet for Timor-Leste, the project is consistent with the 2000 Transitional Support Strategy (IDA/R2000-193), which recommended a short-term focus on social safety nets, agricultural recovery, and local ownership at all levels. It also follows closely the conclusions o f the 2002 Joint Donors Agriculture Mission, which recommended strengthening community-based organizations and farmers' associations, further integrating MAFF services and policies, improving coordination, and promoting environmentalsustainability and natural resources management. B. Project Description Summary 1. ProjectInstrument The project will follow a Specific Investment Loan (SIL) instrument, disbursed as a grant. This instrument was selected because the current IDA-managed Transitional Support Program, which provides budgetary support to the Government, contributes relatively little to the agriculture sector (MAFF received less than 2.5 percent o f the total public expenditures - US$74 million in FY04). At the same time, a sectoral investment instrument would have duplicated the role o f the Transitional Support Program, and it would not have sufficiently targeted the MAFFprograms which ARP supports. 2. ProjectDevelopmentObjective and Key Indicators (see Annex 3) The first Agriculture Rehabilitation Project (ARP I;2000-02; US$6.8 million from TFET) focused primarily on the rapid restoration o f agriculture assets, irrigation infrastructure and restoration o f vaccination services. The Second Agriculture Rehabilitation Project (ARP 11; 2002-2004; US$8.0 million from TFET) continued irrigation rehabilitation, but also piloted a program o f assistance to upland and coastal farmers, and expanded services to farmers in information dissemination, animal health and farmers associations. It also supported policy studies and capacity building for MAFF staff. The proposed Third Agriculture Rehabilitation Project aims to strengthen the capacity of the Ministry of Agriculture, Forestry and Fisheries and its key development partners to assist rural communities in increasing their production and income in a sustainable way. The project was designed as ARP's consolidation phase, with an emphasis on sustainability o f activities, impact of achievements, and quality o f outputs. The estimated total costs are US$11.4 million equivalent, including 6,854,530 (US$6.9 million equivalent) from the EC, US$3.0 million from TFET, and US$1.5 million from the Government o f Timor-Leste. Key project outcomes will be measured through the following major impact indicators: All major project activities integrated into MAFF programs and funded by the Governmentby the end o f the project. Average rice yields inrehabilitated irrigated areas increasing from 1.5 to 2.0 metric tons per hectare per crop by the endo fthe project (EOP). Cropping intensityin Caraulun scheme at 160% by 2008. 70 percent o ffarmer beneficiaries satisfied with the services received. The sustainability and integration o f project activities into MAFF will be assessed through the FY08 budget allocation. MAFF is conductinga crop yield survey which will serve as a baseline to determine the impact o f rehabilitated irrigation schemes. MAFF will also design a farmer servicing survey to measure farmers' satisfaction for services provided. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 2 3. ProjectComponents (see Annexes 4 and 5) The project will include four major components: Participatory Development and Natural ResourcesManagement (US$1.3 million) Irrigation Rehabilitationand Management (US$3.5 million) o Services to Farmers (US$4.2 million) o ProgramManagement (US$2.4 million) The first component will be funded fully by TFET. The remaining components will be co-financed by EC and TFET (see Annex 5, and Tables B and C, Annex 7). Component I - Participatory Development and Natural Resources Management, will support MAFF's main assistance program to uplandand coastalcommunities.It will promote improved self-reliance and natural resources management to strengthen communities' resilience and make them less vulnerable to external shocks (such as periodic droughts and chronic food insecurity),It targets an estimated 50 villages inseven districts' - Dili, Lautem, Liquiqa, Manufahi, Covalima, Baucau, and Oecussi, or approximately 10,000 rural households (8 percent of Timor-Leste's rural families). About 30 percent of direct beneficiaries will be women. The project will finance small group grants, services, training for farmer groups, MAFFstaff, facilitators, and partner NGOs, workshops and cross visits, vehicles, office equipment, and incremental operating costs in support o fthe following activities: 0 Continuing technical and facilitation support to 30 pilot villages initiated duringARP 11; 0 Expansionto about 20 new villages, includingprovision of grants to small groups of farmers. Component 2 - Irrigation Rehabilitation and Management, will support MAFF's main assistance program to farmers inlowlandirrigated areas, based on procedures developed duringARP Iand 11.The component will target about 4,000 rural families inall 13 districts. About 20 percent of members of Water User Associations (WUAs) are expected to be women. The project will finance civil works, construction supervision, services, training, cross visits, farming inputs, office equipment, vehicles, and incremental operating costs insupport o f 0 Community rehabilitationof small irrigation schemes and rural access roads; 0 Rehabilitation o f the Caraulun irrigation scheme inManufahi district; 0 Support to Water User Associations (WUAs) and capacity buildingfor MAFF staff; Survey and mappingof selected irrigation schemes. Component 3 - Services to Farmers, will help institutionalize three basic MAFF services to farmers: Information, Animal Health, and Agri-Business support. Sub-component 3,l. Information to Farmers, will increase MAFF's capacity to provide information tc farmers (targeting most o f the 450,000 people with radio access), and foster two-way communicationwit1 rural areas. The project will fund technical assistance, information materials and programs, equipment small works, training and cross visits, translation services, and incrementaloperating costs in support o f 0 Information programming, including face-to-face communication and mass media; 0 Support to MAFF's Liaison Secretariat with the Consultative Group o f International Agricultural Research(CGIAR) and other internationalcenters of expertise; 0 Pilot community-based information networks at the district level; 0 Rehabilitationof a network o f automated agro-meteorologicalstations and rain gauges. UNDP/UNOPs,AusAID andPortugalare implementingsimilar programs inthe remainingsix districts. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 3 hb-Component 3.2. SustainableAnimal Health Services, will target the estimated 567,000 rural people living inhouseholds which own livestock, a major determinant o frural incomes. The project will finance technical assistance, vaccines and veterinary supplies, equipment, vaccination campaigns, vehicles, training and cross visits, and incremental operating costs for: 0 National vaccination campaigns 0 Replacement o f cold chain equipment; 0 Training and regulatory support to a network o f private Village Livestock Workers (VLWs); 0 Capacity building for livestock staff. Sub-component 3.3. Support to Agri-businesses, will strengthen MAFF's advisory services to rural producer organizations, as well as help promote key niche markets targeting some 1,200-1,500 grain seed growers (mostly rice and maize), and about 210 farming families involved in niche market commodities (such as candlenut and coconut oil production). The project will finance technical assistance, small works, agriculture and office equipment, farm inputs, training, and incremental operating costs for: 0 Support to seed producers; 0 Support to priority niche market commodities; 0 Strengthening o f agri-business support services inMAFF. Component 4 -Program Management, will help MAFF to manage the project, continue to develop key national policies, and strengthen the Ministry's managerial and technical capacity. Sub-component 4.1, Policy and Strategy Development, will fund high-level advisors and consultative workshops to help MAFF develop priority sectoral and institutional policies and strategies. These are expected to include an exit strategy for the ARP program (see Annex 1). Sub-component 4.2. Project Management and Capacity Building, will provide technical assistance, office, computer equipment and furnishings, workshops, training, study tours, and incremental operating costs insupport o f the following activities: 0 Priority equipment and furnishings for District, Regional, and Central Agricultural Offices; 0 Priority management and technical training for MAFFstaff; and 0 Project management support, including auditing o f project accounts. Though the project is complex, the activities are for the most part a consolidation o f previous ARP phases, for which there is already experience inMAFF.Continuation o f support isjustified giventhe long lead-time neededto institutionalize programs within an emerging institution. 4. Lessons Learned and Reflected in the Project Design (see Annex I) ARP I11is based on key lessons from ARP Iand I1and from the reconstruction period (2000-01): o The needforflexibility andperiodic evaluations. Ina fluid, post-conflict environment, there is a need to adopt a phased, flexible approach to implementation, with periodic evaluations to document lessons o f experience and adjust the program to emerging conditions. A `Farmer First' approach. Since the needs o f rural households are diversified and not focused on any single sub-sector, service delivery must respond to their multiple needs in a timely and effective manner. This `farmer first' approach emphasizes inter-sectoral, demand-based assistance, and further strengthening o f farmers' groups and community-based organizations. As an example, rehabilitation o f larger irrigation schemes under ARP Iand I1proved insufficient to raise yields without parallel WUA and extension support to farmers. Balanced investments between irrigated and upland areas. While ARP Ifocused primarily on irrigated areas, subsequent assessments stressed the need to also assist upland areas and promote food security through farm system diversification and strengthened self-reliance. Timor-LesteThirdAgriculture Rehabilitation Project -ProjectAppraisal Document,October 7, 2004 4 Direct grant assistance to communities. During the rehabilitation phase (2000-0l),MAFF faced major difficulties distributing a small number o f valuable inputs to a large number o f needy farmers. By contrast, community irrigation, which relied on contracts with farmers' groups, was well received and helped foster local ownership. The 2001 Donors' Mission recommended a shift from input provision to direct grant assistance to rural communities. Ensuring sustainability. Many donor-funded projects duringthe rehabilitation phase paid highwages for rural labor. While this may have been necessary to help create cash-earning opportunities in rural areas, it also promoted further dependence on external assistance. Lessons learned point to a need to promote further community self-reliance, and not pay for activities that communities are expected to maintain or support on their own once the project ceases. Policy and strategy support. ARP I1has proved the value o f reservinga pool o f funds for MAFF to contract high-level policy advisors. However, the scope o f advisory services needs to remain flexible to meet evolving needs. Monitoring droughts andfloods. The chronic effects o f droughts and floods on food security makes it important for MAFF to collect reliable agro-meteorological data and strengthen its contacts with international monitoring systems, as well as promote `no regrets' adaptation2 practices amongst vulnerable communities. Capacity building. Lessons from ARP Iand I1 indicate that foreign advisors may be needed for longer periods than originally envisaged, particularly in specialized fields such as project management, procurement and financial management. In addition, capacity transfer cannot be ensuredby single training events, as staff turnover is high. Sectoral and farmer training are also best left to MAFF divisions to closely integrate with their operational programs. 5. Alternatives Considered and Reasons for Rejection The following alternatives were considered and rejected by the project: MAFF - such as provision o f inputsto farmers - was rejected in favor o f shifting responsibilities to Government vs. communities ' implementation. Direct implementation o f many project activities by farmers' groups and private operators (such as VLWs). MAFF capacity - in both number o f staff and training -will remain limited in the near term. A community-based approach, on the other hand, will help farmers participate more actively in matching project assistance to their specific needs. Continuedfocus on irrigated areas. A continued focus on irrigated areas, as initiated under ARP I, was rejected due to emerging evidence that upland areas tend to be the poorest and most vulnerable. Hence, the project continues to support the Participatory Development and Natural Resources Management piloted under ARP I1for upland and coastal areas. Investment on low-cost, high maintenance solutions. communications and agro-meteorological units - such as posters and manual data collection - were L o w investment cost options for considered and rejected due to the needto involve a large number o f staff and difficulty o f access to remote areas. Instead, the project will invest in suitable mass media technology (radio and e-mail) and automated systems to minimize the recurrent costs to MAFF. Capacity building through long-term training. The project considered the option o f providing degree training to enhance long-term MAFF capacity. However, this was rejected in favor o f short-term training due to the project duration, current staff limitations, and the needto establish solid criteria to ensure the return o f trained staff to the civil service. -`No regrets' adaptationare measures- such as watershed management that decrease local vulnerability against climatic - events, and which are beneficial regardless o f the exact impact o f the event inthat location. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 5 New activities vs. consolidation. Consideration was given to supporting new activities, such as research. However,this was rejectedinfavor of consolidationof activitiesalready startedunder ARP 11, to help build upon lessons of experience and ensure sustainability. The only new activities - irrigation survey, support to agri-businesses, pilot community information, and agro-meteorology network - build upon previous components supported under ARP I1(Irrigation, Agriculture Service Centers, and Informationto Farmers). Giventhat privateretailersare becomingactive in rural areas, investmentinnew Agriculture Service Centerswas no longer considerednecessary. C. Implementation 1. PartnershipArrangements (See Annex 6) The project will be co-financedby the EuropeanCommissionandTFET and supervisedby IDA. The EC has negotiated an Administration Agreement with the World Bank under the Trust Fund and Co- financing Framework Agreement between the Commission and the World Bank, signed on November 8, 2001 and revised on March 17, 2003. IDA will then negotiate separate Grant Agreements for the TFET andEC grants with Timor-Leste. The project will promote several partnerships: MAFF will involve NGOs in implementation of Participatory Development and Natural Resources Management component, and establish an Advisory Committee with interested donors and NGOs to share lessons of experience. An IrrigationNetworkwill be also promoted to share experiences in irrigation.Under Information to Farmers, MAFF will further strengthen partnerships with internationalresearch organizations and re-activatean InformationForum; underSupport toAgri-Business, MAFF is expectedto partner with ACIAWSeeds for Life for provisiono f certified seeds, and with GTZ for support to coconut and candlenut oil production. A Policy Advisory Group and Livestock Network are also expected to be established with interested partners. A project indicator has beendevelopedto monitorthe progressofthese partnerships(see Annex 3). 2. Institutionaland ImplementationArrangements (see Annexes 6, 7 and 8) MAFF will be the executing agency. Project components are already being implemented by different MAFF Divisions, thus reducingthe number of activitieseach Division is responsible for. The only new activities considered (see above) will be contracted out or, in the case of agri-business support, implementedby trainedMAFF staffand advisors. To further institutionalizethe program, the Project Management Unit formed under ARP Iand I1will be absorbed into the MAFF structure. The Project Director (currently the Permanent Secretary of MAFF) will be responsible for project management and coordination, supported by a Project Management Advisor, and Financialand Procurement Advisors assistingthe MAFF's Budget and ProcurementUnits. The MAFF Management Team (comprising all Director Generals and Directors) will continue to be responsiblefor policy andmanagerialdecisions. Project activities will be implemented at 3 levels: at the village level, by the villagehub-village (suco/aldeia) andfarmers' groups; at the district level by district agriculturalstaff andtheir partners (e.g. NGOs and facilitators); and at the central level by the MAFF divisions responsible for each program (see Annex 6). MAFF has recruited 180 national and district staff, and plans to increase its staff to 261 in 2004-05. Many have received training under various donor-funded projects. However, their capacity needs to be further strengthened, particularly in technical, managerial and facilitation skills. To supplement their capacity, international advisors will be contracted in specialized areas, and evaluated periodically with emphasis on their effectiveness in capacity transfer. Annex 6 includes a capacity analysis matching projectrequirementswith the availablestaff, and identifyingareas for future strengthening. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 6 The financial management, fund flow, procurement and reporting will follow Government and IDA procedures already tested and establishedduringARP Iand 11, with further refinementsto reflect lessons of experience (see Annexes 7 and 8). MAFF has recruitedfull-time financial and procurement staff, and will appointa monitoringandevaluation specialist prior to projecteffectiveness. 3. Monitoring and Evaluation of Outcomesmesults (seeAnnex 3) The MAFF Divisions implementing project components will prepare Quarterly Project Monitoring Reports, using simple monitoring forms and field data checklists updated from ARP 11. MAFF's Monitoringand Evaluationofficer, assistedby the ProjectManagementAdvisor, will integratethe reports into 6-monthlyProgressReports as an inputto supervisionmissions. During ARP Iand 11, MAFF Divisionshave developed some capacity for field monitoringthe technical aspects of the program. However, this needs further strengthening duringARP I11to shift attentionfrom physicaloutputs to quality and impact monitoring.The project will also seek to institutionalizequarterly program reviews, to enableMAFFto assess past effectiveness andplanthe next quarter of activities. Most project indicators are baseline-independent and will be monitored quarterly. For impact indicators requiringa baseline, MAFF will carry out a benchmark study prior to the start of the field activities, and commission an independent impact study at the end to determine project outcomes. MAFF will also organize a project launch, mid-term review and participatory impact evaluation workshops, involving nationalanddistrictagriculturestaff, NGOs, donors and communityrepresentatives. 4. Sustainability (See also Section D.1 and Annexes I and 9) MAFF designed the project based on its past ARP experience and its emerging priorities. The Ministry earmarkedUS$1.5millionin counterpart fundingto the project (about 29% o f its annual budget) as a sign of its continuingcommitment and integrationof ARP activitiesin its core programs.Recurrentcosts were realisticallyestimatedand agreedwith MAFF management(Annex 9). The project was designed with a focus on sustainability. Grant funding for national vaccination campaigns, communityirrigationandroads, and incrementaloperating costs will be progressivelyphased out: EC/TFETwill fundthem at a decliningrate of 75%, 50% and 25%, duringyears 1to 3 of the project, with the Government funding the remaining expenditures. Component 1, though initially reliant on contractedfacilitators,will carry out a review at mid-termto evaluatethe options to progressivelydevolve responsibilitiesto field staff, partner NGOs and regional government staff under the new governance structure. Relianceon externaltechnical assistance is also expectedto decline as the pilot projects mature and technical manuals are prepared. The budget for the component is consistent with a planned post- projectexpansionof 10-13villages a year (1per district). Component 2 places a strong emphasis on WUAs to help ensure future operation and maintenance (O&M). Rehabilitation of the major irrigation scheme will only proceed after a network of WUAs is ,established.The O&M burdento the Government is beingincorporated intoforwardbudget estimates. Component 3 was designed to meet MAFF's severe extension constraints. By training a network of privateVLWs to provide simple animalhealthservices to farmers for a fee, MAFF will help address its critical staff shortages. By establishing partnerships with CGIAR centers and investingin radio and e- mail communication, MAFF hopes to access global specialized advice on a least-cost basis. Fully automatedagro-meteorologicalequipmentwas selectedto minimizeoperatingcosts. Sub-component 4.1 (Policy and Strategy Development) will help MAFF formulate a long-termsectoral strategy and exit strategy for the ARP program (see Annex 1). Reliance on foreign advisors remains a risk to sustainability, but the project will invest heavily on capacity building and on-the-job training of countemart staff. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 7 5. CriticalRisks and PossibleControversialAspects As a project operating in a fluid post-conflict environment, ARP I11entails substantial risks but also potentially high benefits. To address these risks, the project will follow a programmatic, flexible implementation, with an intensive supervision schedule and a 11 % contingency rate on expenditures. This will facilitate periodic evaluations and adjustments to emerging risks. There are no major controversial aspects associated with the project. Most activities are a consolidation o f those started under ARP 1-11.However, two activities merit close monitoring: Rehabilitation of Caraulun Irrigation Scheme. At 1,030 hectares (ha), Caraulun is the second largest irrigation scheme in Timor-Leste. Even though the rehabilitation works are technically simple and the project will re-establish pre-existing infrastructure and WUAs, many farmers have since left the area due to the damage to the scheme. About 291 ha o f land have unclear land ownership status: 64 ha were used by Indonesian transmigrants which have now left the area; 165 ha were used by the church for a now discontinued youth program; and 62 ha were government land currently used by local farmers. The project will address this issue by carrying out a detailed survey o f farmer plots, and requiring customary land use agreements as part o f re-establishing the WUAs prior to the commencement o f the rehabilitation works. Any tertiary canals proposed by communities will follow the mechanisms for voluntary land donation applicable to the rehabilitation o f community irrigation and roads, specified in the land Policy Guidelines for ARP 111. In the unlikely event that the Government would need to acquire land to rehabilitate the scheme, the provisions for compensation under the Guidelines would apply (Annex 10). Village Livestock Workers. The private VLWs network started during ARP I1is still new to Timor- Leste. Possible controversial aspects include farmers' ability to pay for VLW's services, and MAFF's capacity to adequately oversee the quality o f the services. The project has considered this by ensuring that the VLW program is introduced gradually, and as a complement (rather than a replacement) o f essential vaccination campaigns, which would continue to be funded by the Government. MAFF will also help establish a National VLW Association to ensure adequate certification and service quality monitoring. Risks Risk Mitigation Measures Risk Rating w/ Mitigation Toproject development objective: Oc&rr&ce of maior naturaldisasters (e.g. Information services, agro-meteorology and major droughts, floods or pest infestations) strengthening of self-reliance will contribute to risk S o f unusual scale or severity managementand proactive adaptationat the farm level. Farmers lack the right macro-economic and Project will encourage farm system diversification to S social incentives to increase their decrease vulnerability to market shocks, and strengthen production following project assistance self-reliance amongst farmers groups. To component results Farmers do not change their current Project will strengthen WUAs prior to proceeding with S practicesfollowing irrigationrehabilitation Caraulun rehabilitation. Community irrigation schemes remain fully viable under current yields and practices MAFF staff lacksthe capacity to ensurethat Project will provide communications expert to train local S agricultural information is conveyed in a counterparts, and develop a feedback mechanism to timely manner, accurately, and effectively improve information effectiveness Rice seed producers may not be able to Project will help train and certify seed growers to help M produce good quality seed and/or oil mills ensure quality; feasibility study for oil mills will be may becomeunprofitable carried out prior to investment Trained counterpartsfail to apply new skills All training will comply with a Training Plan approved effectively or move on to other positions by the Minister. Foreign advisors will be evaluated by Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 8 6. Grant Conditionsand Covenants For TFET Grant: Condition of Effectiveness: Appointment of MAFF staff for procurement, financial managementand nonitoringand evaluation, and advisors for projectmanagement,procurementandfinancialmanagement. 4rticZe 11: The Recipient shall make no withdrawals from the TFET Grant Account for expenditures financed, or to be financed, by the EC Grant. Remedies of Trustee: The Grant will be suspended, cancelled or terminated ifthe EC Trust Fund Grant 4greement does not become effective by March 1, 2005, unless IDA establishes that this is not due to failureby the Recipientto performits obligations, or alternative fundingis found For EC Grant: Conditionof Disbursement: Disbursement of Civil Works for rehabilitationof Caraulunshall be subject to (a) a MinisterialOrder definingthe responsibility of Government and communities in irrigationO&M xt Caraulun; (b) completion of a detailed topographic survey, design and bill of quantities; (c) WUA :stablishment and signed agreementon landuse; and (d) assignment of staff for constructionsupervision, ;atisfactory to IDA. The agreedactionplanto comply with these requirementsis includedin Attachment A, Annex 13. Withdrawal of Grant Proceeds: The Recipient shall make no withdrawals from the EC Grant Account for expenditures financed, or to be financed, by the TFET Grant. lmplementation CovenantsVor TFET Grant and EC Grant Components): In carryingout Component 1 and Rehabilitationof Community Irrigation and Roads, the Recipient will apply the OperationalManuals for these components, and shall not amend its provisionswithout IDA'Sprior agreement. The Recipient will adopt and apply the Policy Guidelines for the Negotiations over the Use and Development of Landfor ARP 111, ensure that landfor Component 1 and Community Irrigationand Roads Rehabilitationis voluntarily providedby landowners, and take measures to avoid or minimize the acquisition of land or assets. Where this is unavoidable for the rehabilitationof major irrigation schemes, it shall ensure that any displaced personswill be providedwith compensationin accordance with the Guidelines. In carrying out Component 2, the Recipient shall follow appropriate environmental procedures acceptableto IDA, includingcarryingout preliminaryscreeningand implementingany environmenta' mitigationmeasuresthat may be required. If the proposed community-based irrigation scheme is located on international waterways, thc Recipient will, in consultation with IDA, select schemes that involve only minor additions 01 alterations to existing schemes, will not adversely change the quality or quantity o f water flows to other riparianstate, or be adversely affected by other riparianpossible water use. The Recipientwill also comply with the provisions of any international agreements that may govern the waters of a selected community irrigationscheme. In carrying out support to agri-business under Component 3.3, the Recipient will ensure that any provision of pesticides will follow IDA'SOperationalPolicy 4.09, and that appropriate training is providedto farmers onthe safe useof pesticides. Training under the project will be carried out in accordance with a training program acceptable to IDA. Trainingevaluationprocedureswill be adoptedby June 30,2004. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 9 D. Appraisal Summary 1. Economic and FinancialAnalyses (seeAnnex 9) Economic Analysis The project's total economic rate of return (ERR) is estimated conservatively at 17.7% with a net present value (NPV) at 12% of US$2.32 million. The economic analysis is a combination o f cost benefit and cost effectiveness. Each component was assessed independently. The estimates were then combined to produce an overall rate of return. Potentialsocial and environmental benefits, as well as benefits resulting from strengthening MAFF's capacity to implement future projects, were not included inthe analysis. Participatory Development Natural Resource Management. The computations were based on the expected Small Group Grants (US$200,000), and theoretical analyses o f similar projects in Timor-Leste, where ERRSrange from negative to in excess o f 100%. An average ERR o f 15% was assumed. In practice, some projects (e.g. vegetable gardens) may deliver highbenefits immediately, while others (e.g. agro-forestry) may take much longer. Irrigation Rehabilitation and Management. Community irrigation schemes involve the rehabilitation of schemes that have fallen into disuse. Based on experience from ARP 1-11, limited investment will be required to bring previously irrigated land back into production for potentially large returns. The combined ERR for community irrigation and roads i s estimated at about 47%. This assumes (conservatively) an average yield o f 1.8 MT/ha/crop, a single crop, and a price o f US$130/MT o f paddy rice. Rehabilitation o f the Caraulun irrigation scheme will potentially benefit an area o f 1,030 ha. The economic analysis for this scheme estimates an ERR o f 20% for an investment o f US$1.6 million (about US$932/ha). The current yields are about 1.9 M T h a with a single crop. The with-project benefits assume two crops a year (160% cropping intensity) with yields increasingto 2.5 MT/ha for the first crop, and 2.0 M T h a for the second crop after five years. A price o f US$130/MT o f paddy was assumed. Information to Farmers. The benefits o f information through mass media cannot be easily measured due to the lack o f baseline data. Usinga cost-effectiveness analysis (based on an alternative o f more extension officers for face-to-face communication) the estimated ERR is 17% for mass media and 22% for community-based information services. Animal Health Services. Provided MAFF can sustain funding for vaccination campaigns or farmers are prepared to pay for future vaccination, the ERR o f vaccinating pigs, chickens or cattle/buffalo against common diseases could reach 234% because the main capital outlay (cold chain upgrading) is relatively small compared to the benefits. Agri-Business Support. The specific benefits o f seed multiplication and niche market processing will be evaluated through a planned feasibility study. ARF' I and I1gave significant assistance to agriculture associations, and while they have yet to break even, they have only been trading for a year and furthei technical advice to these and other farmers' organizations is consideredjustified. Program Management. The benefits for this component were not assessed, though they could be substantial through new policies andtraining. The costs were included inthe overall ERR. Sensitivity Analysis. The overall ERR is robust to changes in most project assumptions. The ERR sensitivity is highest for changes inrice prices, as well as prices of vaccinated pigs. World rice prices arc currently at low levels and are projectedto increase by about 10% over the next decade. A 20% increast in rice prices above the base price would increase the overall ERR to 20.5%, while a 20% decline in rice prices would result in an ERR o f 14.6%. A 20% decline in the price o f pigs would reduce the ERR to 14.6%. Iffarmers inCaraulun failed to increasetheir yield above 1.9 MT/ha or plant a second crop, the project ERR would be reduced to 15.6% (the ERR for Caraulun would fall to 8.1%). Similarly, if community information services failed, the ERR would decline to 16.3%. Timor-LesteThirdAgriculture Rehabilitation Project -ProjectAppraisalDocument, October 7, 2004 10 Financial Analysis. The financial rate o f return for the project is the same as the ERR (17.7 %) as existing tariffs on agriculture products have little effect on prices o f domestically produced commodities. The estimated recurrent cost associated with the ARP program are about US$737,000 a year, excluding staff costs (see Annex 9). This is equivalent to 26% o f MAFF's forward budget estimates for FY07. Given the high degree o f integration o f ARP I11with MAFF's programs, this is considered sustainable. The major recurrent costs are the annual vaccination campaigns (US$310,000 a year), and O&M for the 16,500 ha o f irrigated land served by schemes which will have been rehabilitated under ARP 1-111by 2007 (US$234,000 a year). 2. Technical (see Annex 13) The Participatory Development and NRM Component relies on a `farmer first' approach, based on well :ested principles o f collaborative natural resources management, community-driven development, and `no :egrets' adaptation. It i s also consistent with the Government's focus on strengthening local governance. The approach relies on direct grants to farmer groups to carry out their own proposals. The revised ?ositive list o f potential activities (see Annex 4) offers technically simple options - such as forage production, higher yielding staple crops, and simple agro-forestry - designed to promote community resilience to food insecurity, droughts and floods. It also introduces NRM principles which take into sccount farmers' economic needs. The community rehabilitation o f small-scale irrigation schemes and access roads will follow the zstablished technical standards developed during ARP Iand 11. The investment costs - US$160/ha for Community irrigation schemes and US$3,200 per km for access roads - compare favorably with similar schemes in the region. The importance o f these works for food security was shown in 2003, when they helped boost the rice harvest by 12% at the same time as the yield o f other staple crops (maize and cassava) declined due to drought. Amongst the four major-damaged irrigation schemes in Timor-Leste, the repair o f Caraulun proved the most viable (Annex 13). The proposed rehabilitation (US$598/ha for headworks and US$335/ha for canals) involves a free intake with flume, enabling the scheme to work as originally designed and thus minimizing the risk o f failure. Works in Caraulun will only proceed after WUAs are established. To help ensure O&M, the project will also invest on strengthening existing WUAs and on organizing one WUA per district amongst community schemes with highest demonstration value. Information to Farmers will build upon past ARP lessons, experience from other developing countries, and the urgent need to strengthen two-way communication between MAFF, district staff, and farmers in remote areas. The project will promote face-to-face contact with farmers and mass media (particularly radio) which have proven the most efficient communication methods in the past. The CGIAR Liaison Secretariat at MAFF will develop a rapid response system for most frequently asked questions, and help MAFF liaise with international centers of excellence ina cost-effective manner. Inaddition, ARP I11will pilot e-mail communication with district centers opened to local agricultural stakeholders, based on the successful experience o f the People FirstNetwork inremote areas o f the Solomon Islands. the most common diseases - Hemorrhagic Septicemia amongst cattle and buffaloes, hog cholera amongst MAFF will continue to support the vaccination campaigns started duringARP I,to prevent outbreaks of pigs, and Newcastle disease amongst chickens. The Government's decision to continue to provide free vaccination over the short-term is based on the inability o f very poor households to pay for vaccines, which could place the livestock population at risk. The Village Livestock Workers program started under ARP I1-based on the successful Cambodianmodel o f village para-veterinarians - will be expanded under ARP I11to help address the severe shortage of trained veterinarians in Timor-Leste. At full implementation, the program will train 265 VLWs (two per three villages), covering all 498 villages in Timor-Leste. To ensure regulatory control, the project will provide refresher training bi-annually, help establish a National Association to certify VLWs, and help them procure veterinary supplies inbulk. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 11 The project will also help strengthen agri-business support services in MAFF to meet the increasing demand from farmers' associations for technical advice and regulatory support. It will support two promisingniche markets: (a) certifiedseed production;and (b) small-scaleprocessing (expectedto focus on candlenut and coconut oil). Farmers in rice producing areas are constrained by the availability of partners - will help key farmers test new varieties suitable to Timor-Leste, and help establish a Seed certified seed, which is now obtained primarily from Surabaya (Indonesia). MAFF - through key Growers' Association. Based on the results of a feasibility analysis conducted by GTZ and IDA'S ongoing niche market study, the project will also help farmers develop priority niche markets, e.g. by providingsmall oil mills and helpinglink processorsof candlenut and coconut oil with retail outlets. The oil mills will be providedto an establishedfarmer association or directly to farmer groups with a lease-to- buy option. 3. Fiduciary (see Annex 7 and 8) The financial management system and procedures are satisfactory and adequate for the project implementation. MAFF's Finance and Budget Support Services will be responsible for financial management. Accounting, internal controls and audits will build upon ARP Iand ARP I1procedures which have beenprogressivelystrengthenedover the last 3 years. MAFF's Finance and Budget Support Services maintain an adequate accounting system to record project resources and expenditures. The annual financial statements for ARP Iand I1have been unqualified,with no significant irregularitiesor fiduciary accountability issues. Previous weaknesses - primarily on responsiveness of the accounting systemto Freebalance (the accounting software adoptedby the Government), lack of adequate fixed asset register, budget procedures to track expenditures against funds, delays in submission of quarterly Financial Monitoring Reports, and inadequate capacity transfer to Timorese counterparts - are being addressed.The FinancialAdvisor is expectedto be appointed on a full-timebasis as of February 2004. The project will follow standard Bank procurement procedures. The procurement risk is highbecause of continuing weaknesses in Timor-Leste's counterpart procurement capacity. This risk will be partially mitigatedby the appointment o f an internationalprocurement advisor on a full-time basis for at least 24- months(a conditionfor effectiveness). While the advisor will be responsiblefor processingprocurement, hidher performance will be measuredby success in capacity transfer. At present, MAFF has recruiteda local procurement officer and a trainedprocurement consultant. The adequacy of these arrangements will be carefully monitoredduringimplementation. The EC and TFET GrantAgreements will include, as an Annex to the Procurement Schedule, mandatoryprovisionsfor nationalcompetitivebidding. I 4. Social (see Annex II) With the expected issuance of an Autonomy Law at the end of 2003, Timor-Leste is in the process of establishing its system of localgovernance from the districtsto the village (sum) level. This presents an opportunity for MAFF to institutionalizecommunity-drivenapproaches in agriculture,throughthe direct grant approachused incomponent 1 (for upland and coastalareas), andthe communitycontracts usedfor small irrigation and road rehabilitation (for lowland areas). A potential risk in component 1 is the communities' capacity to absorb and manage small grants efficiently and sustainably. Based on ARP I1 experience, the project has reduced significantly the size of the grants and adopted tighter guidelines to ensure community in-kindcontributionsof free labor, land, and local materials. ARP I11 reflects the combined experience of MAFF, as well as partner NGOs, farmers, and private service providers. MAFF incorporatedthis feedback duringthe ARP I1Mid-TermReview, the evaluation of ARP I,a May 2003 stakeholder meetingto discuss component 1, and an ARP I11stakeholder workshop inAugust 2003. An extensive social appraisalwas also carriedout inMarch 2003. Thesereviews Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 12 identified, among other issues, the need for further technicalback-up to the pilot communities, and for greater participationandpartnershipswith civil society. Inresponse,the projectwill strengthenpost-grant technical assistance to community projects, involve NGOs in facilitation and external evaluations, and strengthen partnerships with other donors and NGOs in the areas of agriculturepolicy, NRM, irrigation, livestock, information, and agri-business. The VLW program will also respond to farmers' needs for further animalhealthservices. Beneficiary targeting remains unchanged from ARP 11, focusing primarily on poor upland and coastal communities as well as lowland irrigated areas. Vaccination, VLWs, information, and agri-business support will be national in scope. Decisions over the use of grants in component 1 will be made collectively, with no benefitexpected to accrue to particular individuals(in the ARP I1pilots, the grants benefitedon average 65 % of the village population). Women's participationhas been strengthenedby increasingthe numberoftargetedwomen's group beneficiaries andwomen facilitators,trainingwomento vaccinate chickens, and increasing the number o f female VLWs. Vaccinators will recordthe levels and reasons for farmer non-participationin vaccinationthrough a newly introducedvoucher system, so the program can be adjustedprogressively to achieve greater coverage. DuringARP 11, questions were raisedabout community user rights over natural resources -reforestation activities in particular. Whilst no specific conflicts were reported - all activities are carried out in land which was voluntarily providedby their recognizedowners -ARP I11is expectedto fund a study (under Component 4.1) to inform how natural resources management policies should address community user rights andtraditionaltenure inthe future. Social monitoring will be particularly important in component 1, and will be part of the regular monitoring carried out by project facilitators and district staff. Emerging issues should be discussed during monthly facilitator meetings and remedial action taken. Villages which breach financial management procedures, show a concentration of beneficiaries, or poor achievement o f development targets will be identified,providedwith remedialsupport, and excluded from the program if they fail to respond. Village leadership will be crucial in identifyingnegative social impact, providing guidance to facilitators in its resolution, and ultimately, deciding and applying sanctions (particularly in relationto traditional laws governing NRM). Importantly, selection of villages will include consideration of the strength o ftraditionalleadership. The project will also contract out external evaluations to determine the desirability and optimalpace of expansionto new villages. I 5. Environmental (see Annex 12) Duringpre-appraisal,IDA conducteda field reviewto assess how environmentalsafeguards were applied to ARP I1 activities. ARP I1 also funded a major feasibility study in Caraulun, including an environmental and social analysis, which was reviewed by IDA at pre-appraisal. The environmental review confirmedthe absence of major environmentalimpacts under past ARP projectsand was usedto adjust the environmental mitigation measures already adopted under the program, in order to improve their applicability (see Annex 12and SectionD.5). Basedonthis review, ARP I11is not expectedto have significant, complex, or irreversibleadverse environmentalimpacts. Both component 1 and 2 are expectedto help reduce community vulnerabilityto environmentalchanges (floods and droughts). For component 1, simple best practices criteria (Annex 12, Table 1) will be followedand monitoredfor each smallvillage grant, as specifiedinthe OperationalManual andmaterials for community facilitators. Some of the NRMactivities may include rehabilitating denuded communal areas within the villages, to ensure the quality and quantity of water supply for domestic and agriculture use, andthis is expectedto result in positiveenvironmentalbenefits. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 13 All irrigation and access roads rehabilitation will be carried out in pre-existing schemes, and no works will be supported inside critical or important natural habitats or protected areas. As part o f the Operational Manual for community irrigation and roads, MAFF will monitor compliance with simple environmental best practices and, if required, organize simple training in environmental best practices to communities involved in the works. The rehabilitation o f the Caraulun scheme will follow an environmental management plan, which includes mitigation measures and monitoring. These measures will be included inthe terms o f reference o fthe supervisory engineer. MAFF will be responsible for supervising the environmental mitigation measures and social safeguards. The Division o f Environment (DOE)will be consulted as required to advise on the effectiveness o f mitigation measures and propose alternatives. The bi-annual progress reports will include a section on environmental and social issues, a copy o f which will be provided to DOE. 6. Safeguard Policies (see Annex 10) Policy Triggered EnvironmentalAssessment (OP 4.01, BP 4.01, GP 4.01) Yes Natural Habitats(OP 4.04, BP 4.04, GP 4.04) Yes Forests(OP 4.36, GP 4.36) Yes Pest Management(OP 4.09) Yes Cultural Property (OPN 11.03, beingrevisedas OP 4.11) No Involuntary Resettlement(OPBP 4.12) Yes IndigenousPeoples(OD 4.20, being revisedas OP 4.10) N o Safety of Dams(OP 4.37, BP 4.37) N o Projects in InternationalWaters (OP 7.50, BP 7.50, GP 7.50) Yes Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60) N o The project's Safeguard Screening Category is S2. Some safeguard policies are triggered, but effects are limited intheir impact and are technically and institutionally manageable. The project's Environmental Screening Category is B (see Annex 10 and 12). Aside from OP 4.01 (Environmental Assessment), the project triggers the following safeguard policies: (a) Natural Habitats; (b) Forests; (c) Pest Management; (d) Involuntary Resettlement; and (e) International Waterways. Natural Habitats: All community based irrigation and farm-to-market access roads proposed for rehabilitation under the project will be located outside protected areas (one o f the criteria used in their selection). Component 1, however, may be carried out in and around natural habitat areas. The negative list excludes any activity which may impact adversely on important or critical natural habitats, including those at altitudes above 2000 meters, inmangrove areas, wetlands or coral reefs. Forests: Component 1 will include community-based forest management activities, such as reforestation o f community-owned forest land, and sustainable utilization o f non-timber forest products in natural forests within village boundaries (e.g. bamboo or honey). It will not involve harvesting timber from natural forests. Pest Management: This policy may be triggered in limited occasions. Under the Irrigation Rehabilitation component, and Agri-business support to seed producers, farmers may use limited amounts o f pesticides to control pests or diseases. In case pesticides need to be provided by the project in support o f these activities, MAFF will exclude all Class Itoxic pesticides and Class I1moderately hazardous pesticides (see Tables 2, Annex 12). MAFF will also provide training on Integrated Pest Management principles and safe dimosal methods. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 14 Involuntary Resettlement: N o involuntary resettlement or land acquisition which results in loss o f income is expected to take place as a result o f project activities. However, as small amounts o f community landmay be requiredfor community-based and owned activitiesunder Component 1and 2.1 (Community Irrigation and Roads) the Policy Guidelines for the Negotiations over the Use and Development of Land for ARP I11have been adopted to ensure that voluntary land donations are not made under duress, andthat appropriatecompensationis providedfrom within the community(Annex 10, Attachment 1). In the rehabilitation of the Caraulun scheme (sub-component 2.2) there is a remote possibility that small areas of land around the existing intake and canals may be acquired by the Government. Should this be needed, the Guidelinesprovidefor state compensation. Incase communities in Caraulun decide to establishtertiary canals under community irrigationcontracts, the same process as for Sub-component2.1 wouldapply.Agro-meteorologicalstations will be located ingovernmentland. International Waterways: Some community irrigation schemes proposed for rehabilitation may be located in the six internationalwaterways which Timor-Leste shares with Indonesia (see Annex 10). Given that the rehabilitation works will not involve any major additions or alterations of existing schemes, and that no impacts are foreseen on the quantity or quality of water to/from Indonesian riparians, an exceptionto the requirement to inform Indonesian riparianswas granted on September 17, 2003. During implementation, any proposed community schemes that may potentially fall under the policy will be reviewedin consultationwith IDA to ensure that they qualify for the exception. The need for notificationwill be reconsidered ifrequiredunder futuretreatieswith Indonesia. The social appraisaland final EnvironmentalAnalysis have beenprovidedto the Infoshop,and disclosed in-country.In addition, MAFF has confirmed disclosure of the Policy Guidelines for the Negotiations over the Use and Development of Landfor ARP I11 inDili andthe 13 district centers. Other assessments -includingtheFeasibilityStudyforMajorDamagedIrrigationSchemes-areavailableatMAFF'soffice in Dili. Past ARP supervision reports are summarized in the publicly available TFET Report to the Trustee. MAFF will ensure adequate public disclosure of project activities, and availability of relevant documents inpubliclyaccessible locations. 7. Readiness and Compliance The project is ready for implementation,and complies with all applicable Bank policies. MAFF has completeda ProjectImplementationPlanwhich is satisfactory to IDA.Key fiduciary and implementation arrangementsare inplace.Project staffandkey consultants have or are inthe process of beingmobilized, and sufficient counterpart budget is available to support FY04 activities. Crop yield baseline data for irrigation schemes are being collected and will be completed prior to the start of the works. Bidding documents will follow procedures andtemplates already established under ARP 11, which are satisfactory to IDA. Operational Manuals for Component 1, Community Irrigation and Roads, and Procurement Manual, satisfactory to IDA, have been completed and adopted by MAFF, meeting the conditions for projectnegotiations. An Administration Agreement between IDA and the European Commission has been signed for financingprojectcomponents supportedunderthe EC grant. Timor-Leste ThirdAgriculture Rehabilitation Project Project Appraisal Document, October 7, 2004 - 15 Technical Annex 1: Country and Sector Background TIMOR-LESTE: Third Anriculture Rehabilitation Proiect Timor-Leste- the world's newest nation (Population925,000 in 2004) - faces the double challenge of and cementingits new politicaland socio-economicstructures while meetingthe risingexpectations of its people. During the Indonesian administration period, agriculture and its support industries employed about 75 percent of the workforce, contributedto 26 percent of the Gross Domestic Product (GDP) and accounted for 90 percent o f the foreign exchange. Exports included coffee, some sandalwood and live cattle. Government subsidies on fertilizers, fuel and rice helped low-lying rice producingareas, but little was done to assist the uplands where the majority of the ruralpoor live. The overstaffedand underpaid government service contributedto disempowerment and dependence of rural communities, with a heavy bias towards centralizedandtop-downplanning.Traditionalmechanismsof natural resource management andself-reliance, suchas tara bandu,were activelydiscouraged. In the violence that followed the August 30, 1999 referendum, over 75 percent of the population was displaced, andnearly 70 percent of the physicalinfrastructurewas destroyed.Livestock (up to 29 percent of the buffaloesand 38 percent of the pigs), tools, andfarm machinery were destroyed, andfood and seed stocks were looted. Delayed maintenance resulted in damage to much of the 19 large and 346 small irrigationschemes in Timor-Leste,and the lack of road maintenance made it very difficult for farmers to move agriculture products to markets. As a consequence, the agriculturalcontributionto Gross Domestic Product (GDP) fell by 49 percent in 1999 relative to the previous year, with food crops, livestock and fisheries registering the most important losses. While upland farmers remained the poorest, lowland farmers suffered significantlosses in assets. The United Nations Transitional Administration and, after independence, the new Timor-Leste Government curtailed assistance to agriculture support services significantly. This was partially a strategic choice (to invest most public expenditures on healthand education) as well as a fiscal necessity, given the expected size of domestic revenues. From a staff of 6,000 and an annual budget of about US$1.9million equivalent during Indonesian times, the Ministry of Agriculture, Forestry and Fisheries (MAFF) now operates with a staff of 180 (expected to increase to 261 in FY04/05) and a budget of US$1.8million. This operational budget is expectedto levelat aroundUS$2.0-2.5 million ayear over the short term. Pendingfurther revenues from oil and gas, MAFF will needto rely on partnerships with the privatesector, NGOs, ruralcommunities, andbilateraldonors operating at the districtlevelfor agriculture service delivery. Lessons from other developingcountries indicatethat such an approach will, over the long-term,be more effectivethan a heavy relianceon government subsidies and disempowerment of rural communities that characterizedthe Indonesianrule. Some of the problems Timorese farmers face are chronic in nature. Geologically a very young island, Timor has a system of meandering rivers and frequent landslides that make it difficult to carry out traditional watershed management or sustain fixed irrigation structures. The island is also prone to periodic droughts and floods associated with El Nifio Southern Oscillation (ENSO). These natural phenomena, accentuatedby a loss intraditions of adaptation and self-reliance, contributeto chronic food insecurity. Accordingto the 2001 village (suco) survey, about 70-80 percent of the sucos report having insufficient food during the traditionalfamine months (December and January), a period which follows the end of the rice harvest and precedes the maize harvest (Figure 1). As many as 30 percent o f the households experience food shortages for up to 4 months a year. They cope with it by decreasingthe amount o f consumed food, switchingto less desirable foods, and to a lesser extent by borrowingfunds and sellinglivestock. Major diet deficienciesappear to be primarily inprotein, fats andvitamins. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 16 Figure 1. Proportion of Sucos ReportingInsufficient Food Relative to Rice and Maize Harvesting Season 100 90 80 70 60 50 40 30 20 10 0 0% of sucos reportinginsufficentfood Source: EastTimor TransitionalAdministration et al. (2001) "The 2001 Survey of Sucos: Initial Analysis and Implicationsfor PovertyReduction". Timor-Leste. The Agriculture Rehabilitation Program (ARP) started in 2000 as a US$17.8 million contribution from the multi-donor Trust Fund for East Timor (TFET), managed by the International Development Association of the World Bank. ARP phases were designed to respond to the evolving needs of the post- conflict situation: o Rehabilitation: ARP I. o Transition: ARP I1 o Sustainability: ARP I11 The Rehabilitation Phase and ARP I The Rehabilitation Phase (2000-01) was characterized by a focus on restoration of assets and rapid rehabilitation of services, infrastructure and supplies to help farmers jump-start agricultural production. The first Joint Donors' Mission (November 1999) identified the following priority areas for agriculture rehabilitation: (a) support to vulnerable groups (including victims of violence and those who lost their productive assets); (b) restoration of basic agricultural infrastructure, including irrigation systems and access roads; (c) restoration o f livestock; and (d) provision of agricultural services. ARP Iwas designed to respond to these priorities. The project (2000-2002; US$6.8millionfrom TFET) financed the following: Priority Productive Asset Restoration - restoration of annual national vaccination campaigns for buffaloes, cattle, pigs and chickens, distribution of cattle and buffaloes to 2,552 farm families, and chickens to 14,134 families, and agriculture tools to 20,658 farm families. Irrigation and Rural Infrastructure - rehabilitation of 1,090 ha o f land served by light-to- medium damaged irrigation schemes and 7,742 ha served by community schemes (equivalent to 37 % of the irrigated area inneed of rehabilitation) and 109 kmo f farm-to-market access roads. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 17 o Pilot Agriculture Service Centers - establishment o f 3 pilot agriculture service centers in Bobonaro (specializing in rice), Aileu (coffee and maize), and Viqueque (candlenut and copra), distribution of 1,000 radios to communities in 4 districts, and design o f soil analysis laboratory. o Project Management Unit Strengthening-training o fabout 90 MAFFstaffand district officers. A joint evaluation by IDA and the Government in June 2002 rated the project outcome as Satisfactory. Major achievements included the restoration o f vaccination programs, and improvements in farmers' livestock and irrigation assets. Overall, the project created an estimated 120,000 person-days o f labor at a time o f scarce cash opportunities for rural families, and helped place irrigated areas back into production. On the other hand, the chicken distribution was unsatisfactory due to highmortality, the pilot agriculture service centers were still at their early stages o f implementation, and institutional development was viewed as marginal due to continued reliance on foreign and local consultants. The rehabilitation phase and ARP Iyielded the following key lessons: Flexibility and Periodic Evaluations. The rehabilitation phase demonstrated the value o f a phased, flexible approach to program implementation, with time to study lessons o f experience and adjust the program to emerging conditions. Balanced Investments between Irrigated and Upland areas. While ARP Iwas designedto focus primarily on irrigated areas, subsequent joint donors missions reiterated the need to also focus on upland areas and target the most vulnerable sucos to promote further food security through farm system diversification and self-reliance. Direct Grant Assistance to Communities. During the rehabilitation phase, the Government experienced major difficulties distributinga small number o f valuable inputs to a large number o f needy farmers. By contrast, the community irrigation schemes - relying on direct contracts with local communities to undertake the works - were well received and fostered local ownership. The Joint Donors Agriculture Mission o f November 2001 recommended a shift from input provision to direct grant assistance to rural communities. Ensuring Sustainability. Many donor funded projects during the emergency phase paid high wages for rural labor and provided imported inputs and food. While this may have provided a much needed cash infusion into rural communities, it also promoted further community dependence. Lessons learned point to a need to promote community self-reliance, and not pay for activities that communities are expected to maintainthemselves once the projects cease. The need to strengthen Water Users Associations in irrigated areas was also emphasized. StressingInter-sectoral, Demand-basedAssistance. Joint donors agriculture missions repeatedly stressed the need for better integration o f rural development efforts, both within MAFF, as well as with donors and civil society. Establishment of Legislative and Regulatory Frameworks. There was an urgent need to develop legislative and regulatory frameworks suitable to the conditions of Timor-Leste. These lessons were taken closely into account inthe design o f ARP 11. The Transition Phase and ARP I1 During the Transition Phase (2001-2002), donors focused on helping to establish essential agricultural and natural resources policies and regulations, and to smooth the transition from a heavily subsidized sector to one with limited government funding. ARP I1 (2002-2004, US$S.O million from TFET) responded to the above needs through substantial design adjustments in its components: Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 18 Pilot Participatory Development and Natural Resources Management - This new component, implemented by MAFF's Forestry and Fisheries Divisions, aimed to strengthen the resilience o f upland and coastal communities to external shocks. It provided small grants and facilitated assistance to farmers' groups. The component focused first on 14 pilot villages in 7 districts, to be expanded to 30 villages after an evaluation o f lessons learned. AusAID, UNDP/UNOPs and the Portuguese Government startedsimilar community-based programs inthe other 6 districts. Rapid Infrastructure Rehabilitation - This component targeted the rehabilitation o f 7 light-to- medium damaged schemes, 2,100 ha o f irrigated land covered by community schemes, 100 km o f access roads, and establishment o f Water Users Associations in all larger schemes. Services to Farmers - This new component included: (a) support to agriculture information programs and establishment o f a CGIAR3Liaison Secretariat at MAFF; (b) continued support to vaccination campaigns, and establishment o f a program o f private Village Livestock Workers; and (c) continuedsupport to farmers' associations, through the Agriculture Service Centers. Program Management - This component included (a) strategy and policy support to MAFF; and (b) capacity building and support to the Project Management Unit (PMU). ARP I1has been under implementation for 2 years, and has remained satisfactory. The mid-termreview (January 2003) confirmed the continued validity o f the project design. While the project met or exceeded most o f its mid-term output indicators, further efforts were needed on strengthening its impact, quality and sustainability. Key lessons learned include: The Need to Strengthen Assistance to Farmers. The mid-term review stressed the need to strengthen the organization and training o f farmers' groups, and sending inter-sectoral teams to the field. It recommended a stronger selection and training o f facilitators incomponent 1, as well as an emphasis on technical backstopping. For component 2 (Irrigation) the review recommended improved assistance in crop production and strengthening o f Water Users Association to enable farmers to increase crop yields following irrigation rehabilitation. Monitoring ENS0 Events. In2002-03, production o f maize and other food crops declined due to a prolonged drought. This was partially offset by a 12 percent increase in rice production as a result o f irrigation rehabilitation. Given the recurrence o f ENS0 events, the mid-term review recommended that MAFF strengthen its monitoring o f drought and floods through its Agriculture and Geographical Information System and Information units, and liaise closely with the National Disaster Management Office on the need for targeted food distribution. Institutionalize Information to Farmers. The specialization o f MAFF Divisions made the operation o f the inter-sectoral information team particularly challenging. MAFF addressed this by placing the Information Team and the CGIAR Secretariat directly under the Director of Research and Extension Center. Continued feedback from farmers about the timeliness and appropriateness o f the information material stressed the need for further communication training amongst the team. Cold Chain Improvementfor Vaccination Program. The mid-termreview identified the need to replace old cold boxes and invest in generator or solar-powered refrigerators at the district level to preserve the quality o f vaccines, and to replace motorcycles damaged during previous vaccination seasons. Expansion of Marketing Network. The three pilot agriculture service centers are now active, but there is further need for training management committees, and expanding marketing networks with farmer members as well as between the centers to buildeconomies o f scale. _ _ _ _ _ _ ~ ~ ConsultativeGroup on InternationalAgricultureResearch, now called FutureHarvest. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 19 Policy and Strategy Support. ARP I1has proventhe value o f having a pool o f funds for policy and strategy support. However, the scope of advisory services needs to remain flexible to meet evolvingneeds. Moreover, any policy studies needto be extensively discussedwith stakeholders priorto their formaladoption. Capacity Building. ARP Iand I1providedseveral key lessons on capacity transfer: first, foreign advisors may be neededfor longer periods than originally envisaged, particularly in specialized fields and key areas such as project management, procurement and financial management. Second, capacity transfer cannot be ensuredby training only a few staff, as they can easily move effectively making it attractive for them to join the public service - many former consultants on to other posts. Third, MAFF management wisely loweredthe fees for national consultants, engaged under ARP Ihave now been hired by MAFF. Finally, centralizing training under MAFF's trainingunit hasnot beeneffective inthe past-sectoral and farmer trainingare best left to MAFF Divisionsto manageand closely integrate with their operational programs. The Sustainability Phase and the Road Map The SustainabilityPhase(2002-now) focusedon long-termsustainable agricultureand ruraldevelopment, income generation and natural resourcesmanagement.Assistance duringthis phasewas to be targeted at participatoryprogramsto encourage community self-reliance, provide options for diversifiedcash income sources, and enhance traditional institutional arrangements for natural resources management4 These principles were adopted in the design of ARP I1and 111, although ARP I1also focused on transitional phasesupport (primarilythroughrapidinfrastructurerehabilitationandthe agricultureservice centers). The August/September 2002 Joint Donors Agriculture Mission agreed with MAFF on a policy of sew- reliance for the agriculture sector, based on the principles that Timorese farmers should gain the economic meansto be food secure - either by growingtheir own food or by beingable to purchase it. A key to strengthening self-reliance and improving rural incomes was the further integration of MAFF's sub-sectors and promotiono f a diversified, demand-drivenapproach. Developinglinkages with partners working with community groups (e.g. NGOs) was to contributeto this goal, as was improvedskills and effective communication betweenproducer groups andMAFF. Amongst the overarching recommendationof the missionwas to adopt a `farmers first' approach. Since the needs of rural households are diversified and not focused on any single sub-sector, service delivery must respondto these multiple needs in a timely and effective manner. This approach emphasizedthe role of key farmers in extension, collaboration between MAFF and other government agencies, and further strengthening of community-based organizations and farmer groups. A proper enabling environment with key policies in place was also seen as critical for environmental sustainability and naturalresources management, with an emphasis on co-management approaches with local communities andtraditionalleaders. Theserecommendations were taken closelyinto account inthe formulationofthe RoadMap (see below) andthe designofARP 111. The NationalDevelopment Plan and Road Map In2002, Timor-Lesteadoptedits first 5-yearNationalDevelopmentPlan, with two major goals: P Reductionof povertyinall sectors andregions; and Promotionof economic growththat is equitable and sustainable, improvingthe health, education andwell-beingo feveryone inTimor-Leste. The three phases o fagriculturesector assistance to Timor-Leste were identified inthe Joint DonorsAgriculture Mission Report o f March-April 2001. Timor-LesteThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 20 MAFF's major goals of attaining food security, improving self-sufficiency, and generating rural employment are intrinsically linked with the National Development Plan. The riots o f December 4, 2002 highlighted the fragility o f the social fabric in Timor-Leste, and the urgency o f meeting immediate expectations for greater economic growth and employment, particularly among the youth. As a result, the Government adopted in January 2003 a Stability Program which emphasized strengthened governance and legal systems, job creation, a stronger focus on agriculture as a pillar for food security, and enhanced access to markets and distribution. Also emphasized was trade development through cooperatives. In February-March 2003, all Government Ministries were asked to help develop the Road Map, a framework for the implementation o f the National Development Plan. MAFF ranked all of its programs inaccordance with the following criteriaand weights: Table 1. Criteria used by MAFF to Rank its Programs Criteria Weights Relevanceto National Development Plan Goals of Poverty Alleviation and Economic Growth 15% Relevanceto Stability ProgramPriorities 20% Community Demand 10% Sustainability 15% Contribution to Inter-Sectoral Linkages 10% CounterpartFinancing Commitments towards Donor Programs 10% Basic Functions of the Ministry 20% Total Weights 100% Source: Ministry o f Agriculture, Forestryand Fisheries(2003). National Prioritization and SequencingSubmission, February 17. The Third Agriculture Rehabilitation Project (ARP 111) With this background in mind, MAFF designed ARP I11as the consolidation phase o f the Agriculture Rehabilitation Program, following the key themes o f sustainability o f activities, impact o f achievements, and quality o f outputs. The project follows closely the priorities o f the Road Map and National Development Plan, as well as lessons learned from ARP Iand 11. It aims to strengthenthe capacity o f the Ministry to assist rural communities inincreasing agriculture productionand income in a sustainable way -which are intrinsic to the sectoral and national objectives defined inthe National Development Plan. All ARP I11activities - with exception o f project management - are integrated into MAFF Road Map programs, and most rate relatively highly in MAFF's prioritization and sequencing (see Table 2, below). Activities which are identified as being o f medium priority - such as village livestock workers, and agro- meteorologicalservices - are expected to become increasingly important over the long-term. all levels - from MAFF staff, to NGO partners, to farmers-beneficiaries - was therefore stressed. To InARP 111, special attention was givento Timor-Leste's low capacity and budget. Capacity building at address MAFF's acute staff shortage, community-based project planning and implementation were reinforced based on the principles o f self-reliance and sustainability. The project also placed further emphasis on strengthening partnerships with alternative service providers (private village livestock workers, NGOs, and mass media for information dissemination), and on establishing networks with interested partners working in agriculture policy, natural resources management, irrigation, information, agri-business and livestock. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 21 Table 2. RatingofARP I11ActivitiesAgainst MAFFPriority Programs ARP IIIActivity MAFF Program NDP Stability Community Overall Goals Program Demand Rating I.ParticipatoryDevelopment and Supportto Communitiesfor Fisheries, High High High High (83%) Natural Resources Managemen1 Forestry & WatershedManagement, Livestock. FoodProduction 2. Irrigation Rehab. and Devel. 2.1. CommunityIrrigation andRoads Supportto communitieson community High Medium High High (89%) irrigation and roads 2.2. Major Irrigation Schemes Rehabilitationandmaintenanceof High Medium High Medium (62%) major schemes 2.3 Institutional Capacity Building Water Users Associations High High High High(87%) 2.4. SurveyandMapping Water Users Associations High High High High (87%) 3. Services to Farmers 3.I.Information to Farmers 3.1.1. InformationProgramming Information High Medium High High(89%) 3.1.2. CGIAR Secretariat Information High Medium High High(89%) 3.1.3. Community-based Information High Medium High High(89%) Information Services 3.1.4Agro-Meteorology ALGIS andAgroclimatology Low Low Medium Medium (54%) 3.2.Animal Health Services 3.2.1, Vaccinationcampaigns Vaccination High Low Medium Medium (72%) 3.2.2. Cold chainimprovement Vaccination High Low Medium Medium (72%) 3.2.3. Village Livestock Workers Village Livestock Workers and High Medium High Medium (56%) services for animaltreatment 3.2.4. Capacity Building Capacity building for Ministry staff NR NR NR NR 3.3. Support to Agri-Business Supportto farmers' associations High Medium High Medium(62%) 4. Program Management 4.1, Policy and StrategyDevelop. Policy development andlinks with High High High High (97%) other Ministries 4.2. ProjectManagement NR NR NR NR Source: Ministry of Agriculture, Forestryand Fisheries (2003). National Prioritization and SequencingSubmission, February 17. Ratingswere converted as follows: High (>75%); Medium (50-70%);Low (40%). NR-Not rated. The first component - Participatory Development and Natural Resources Management - will support MAFF's mainprogramo f assistanceto communities inuplandand coastal areas. It will helpstrengthen their self-reliance and make them less vulnerable to external shocks (such as droughts and floods and fluctuations in external markets) through improved natural resources management. The component builds upon well tested principles of community-based management, `no regrets' adaptation, and communitydevelopment assistance inthe Asia-Pacificregion. By institutionalizingthis approachwithin MAFF, it is hoped that ARP I11will help create an institutional shift towards integratedand demand- basedassistance to farmers, andpromote further partnershipswith NGOsand local governance structures. The component will build upon lessons of experience from pilots initiated under ARP 11: MAFF has strengthened the selection and training o f facilitators, and increased technical backstopping o f small farmer groups. An experienced, full-time community development specialist was mobilizedto strengthen community organization and facilitator training. MAFF will also form an inter-sectoralNRM team Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 22 composed o fstaff from other divisionssuch as livestockandcrop productionto helpbackstopcommunity activitiesinthese areas. The second component -Irrigation Rehabilitation and Management - will support MAFF's program of assistance to communities in low-land irrigable areas. Similarly to component 1, it will rely on small contracts with community groups and strengthening o f farmers' groups to maximize impact and sustainability. The project will continue to assist Water Users Associations (WAS)in larger irrigation schemes, but support will be expanded to include advice on crop production and diversification, in accordance with lessons learnedfrom ARP 11.A crop productionstaff has beenassignedto the Irrigation Division on a full-time basis to meet this need. MAFF will also help organize WUAs in community schemes selected in accordance with their demonstration value to surrounding areas. The community irrigationandroadprogram-now in its 3rdyear -will be gradually transferredto Government financing. The third component - Services to Farmers - will support three basic MAFF services (Information, Animal HealthAssistance, and Agri-Businesssupport), while promotingpartnershipswith privatesector, NGO and community associations to help ensure sustainability. The Information to Farmers sub- component will continue to strengthen MAFF's delivery of information programs through mass media (e.g. radio) and simple materials, while establishing networks with internationalcenters of agriculture research(CGIAR). At the same time, it will strengthenthe flow of informationto farmers by promoting electronic networks at the district and community radio levels. This is based on successful pilots introduced in similar remote areas of the Pacific Islands to improve services to farmers. Particular attention will be paid to strengthening information timeliness and appropriateness, two weaknesses identifiedinprior ARP I1reviews. The Sustainable Animal Health Services sub-componentwill continue support for vaccinationcampaigns -to be funded by the Government on an increasingscale -while strengtheningthe coldchain and transportationof vaccines by investing in solar-powered refrigerators and replacement motorcycles (in accordance with ARP I1lessons at the mid-termreview).It will also expandthe trainingof privateVillage LivestockWorkers initiatedunder ARP I1to cover all villages inTimor-Leste. The Support to Agri-Business sub-component will institutionalize agri-business support services within MAFF, to help support farmers associations and cooperatives. It will also seek to promote further domestic productionof grain seeds (particularly rice and maize), and promote marketing networks in priorityniche marketcommodities (such as coconut andcandlenut oil). The fourth component - Program Management - will provide overall capacity building assistance to MAFF and help manage the project. The Policy and Strategy sub-component will support MAFF's new Policy, Planningand Program Services (formerly the Policy and PlanningUnit), ratedhighest in priority inthe Road Map, and allow MAFF to contract high caliber advisors without nationalityrestrictions. It will provide MAFF with key advisory services to help MAFF formulate a long-termsector strategy, as well as priority agricultureand natural resourcespolicies and legislation.Building upon the lessons from ARP 11,the range of policy studies has beenleft flexible to meet evolvingpolicyneeds. The Project Management and Capacity Building sub-component will carry out overall project management,while supportingMAFF's core procurement, financialand monitoringunits. Inrecognition of the integration o f ARP activities within MAFF's programs, the Project Management Unit will be abolished. Instead, the project will continue to be managed by the Permanent Secretary of MAFF, and MAFF Directors responsible for the various components. In accordance with past lessons, all training relatedto specific projectactivities has beendecentralizedto the respective MAFF Divisions. A training evaluation processwill be introducedin2004. Many ARP I11activities are a consolidationof activities started under ARP Iand ARP 11. Hence, while the scope might be excessive in a new project, sufficient lessons, experience and staff capacity exist to Timor-Leste ThirdAgriculture Rehabilitation Project -ProjectAppraisal Document, October 7, 2004 23 implement it within MAFF's programs. Moreover, the fact that project activities are clearly divided amongst established divisions within MAFF will help facilitate implementation, effectively limiting the number o f activitiesthat eachdivisionis responsible for. Mechanismshavebeenbuilt into projectdesign to ensure effectivecoordinationof projectmanagement. An Exit Strategy for the Agriculture Rehabilitation Program SinceARP I11will be the last agriculture projectfunded by TFET, extensive discussions were heldduring appraisal to assess how the project could help MAFF formulate a long-term strategy for the sector and prepare an exit strategy for the ARP program. MAFF is inthe process of preparing its Sectoral Strategy, with assistance from the GermanGovernment, USAID, AusAID, FAO, JICA, Oxfam, and EC/TFET (through ARP 111). In addition to a summary sectoral strategy (includingMAFF's vision, key sector indicators,and programs)the strategy is expected to include a public expenditure analysis, basic sector statistics, and a review of field experience. The strategy is expected to be finalized by June 30, 2004, serving as a useful input to strengthen donor coordination in the sector. It was agreed that ARP I11would support (under the Policy and Strategy Development sub-component) the follow-upefforts of PPPS to develop andconsolidate this strategy. With the appointment of its first agriculturaleconomist to headPPPS, MAFF is also keento collect basic economic data on key crops. This is being proposed as a study under USAID and JICA financing, servingas a first step for MAFF to develop its future data analysis capabilitiesand potentiallydeveloping an agriculturalcensus. The exit strategy for ARP involves both preparation of post-program sector investments, as well as ensuring sustainability of field activities. ARP sustainabilitywithin MAFF is not a concern at this stage, giventhat programactivitiesare already well integratedwithin the Ministry's structure(see Annex 6). The strategy and policy studies funded by ARP I11will be reviewedperiodically to ensure a sound exit strategy for the post-ARPperiod. One option is that they would help support the preparationof relevant background studies for a Global EnvironmentalFacility operation. Thus, the fisheries and land studies currently proposed by MAFF could be adjusted to cover marine biodiversity or land degradation assessments neededto prepare a follow-up operation inthese areas. They could also be oriented towards future priority investments supportedby other donors. MAFF started using quarterly review workshops as a way to periodicallyreview and adjust ARP. These review workshops - complementedby the partnership fora promoted by ARP I11- will help MAFF gain lessons of experience and adjust project activitiesto help maximizetheir field impact and sustainability. Of particular importance will be a mid-termreview o f options to decrease reliance on hired facilitators, andalignthe programwith the emergingregionalgovernance structure. MAFF designedARP I11basedon a close assessment of lessons learnedduringthe post-conflictperiod. At the same time, Timor-Lesteremains a nation intransition, and this calls for a flexible, programmatic approach that can continue to be periodically evaluated and adapted. While the project design includes estimatedtargets, these will be examinedduringregularsupervisionmissions and adjustedbasedon need. Contingencies of about 11.4 percent have been built into the project costs to permit such adjustments. Projectactivitieswill continue to be plannedbasedon base costs, with projectcontingencies(reserved for unexpectedcost increases, change inactivity scope, or approvedchange in cost items) subject to approval by the ProjectDirectorandMAFF Management Team. Timor-Leste ThirdAgrtculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 24 Technical Annex 2: Major Related Projects Financed by the Bank and Other Agencies TIMOR-LESTE: Third Agriculture Rehabilitation Proiect Latest Supervision Sector Issue ProjectlArea of (PSR) Ratings Concentration (Bank-financed projects only) Implementation Development Bank-financed Progress (IP) Objective (DO) First Agriculture RehabilitationProject PriorityAsset Replacement,Animal Health, Irrigation,AgricultureService S S Centers, Capacity Building Second Agriculture RehabilitationProject Pilot ParticipatoryNatural Resources Management, Irrigation,Information, S S Animal Health,Agriculture Service Centers, Policy and Strategy,Capacity Building _ _ _ _ _ _ ~ Other development agencies 4DB Water Policy TechnicalAssistance Water policy and management W A R Seeds of Life Project Introduction of high quality seeds 4usAID East Timor Rural DevelopmentProject Rapid impact and rural development projects in Bobonaro,Aileu, Viqueque 4usAID Fisheries ManagementCapacity Building Fisheries legislation and coastal Brazil Transfer of Coffee GrowingTechniques Coffee CARITAS/AustraliaVarious Projects Food security, incomegeneration, reforestation ClDA Various Projects Community-based NRM, livelihoods,water supply, aquaculture,food security EC Timor Leste Rural DevelopmentProgramme' Rural development FA0 Various Projects Capacity building, agro-economy,rice, soil analysis, post harvest and storage Germany BMZlDW Rural Development in BaucauViqueque JlCA Various Projects Reforestation, Irrigation,Agriculture Policy NewZealand Policy Advice (Agriculture Economics and Water Policy) PortugalVarious Projects Horticulture, coffee, reforestation,aquaculture in Ermera and Aileu Oxfam Various Projects Rural Community Development,Training, Research (Oecussi, Liquica, Manatuto) UNDPlUNOPS AinarolManatuto and Oecussi CommunityActivation Program USAlD Various Projects Economic recovery, agro-industries,coffee World Vision Food Security '-Includes AW I11andUNDPLJNOPS OecussiCommunity ActivationProgram Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 25 Technical Annex 3: Results Frameworkand Monitoring TIMOR-LESTE: Third Agriculture RehabilitationProject A. Results Framewl Objectively Verifiable Indicators Sources of Critical ntervention Logic Verification Assumptions herall Goal (MAFF): Sector Indicators: Sector/ country reports: .To attain food security and 3 50% increase in average kilo-calories intake 2001 and 2005 Timor-Leste improve self-sufficiency by rural households during scarcity months iousehold Poverty Surveys (Nov-Feb) by 2008 3 At least 5 % increase peryear in agriculture 2entral Statistics gross domestic product 3 At least 2.5 % increase peryear in 2entral Statistics ?, To generate rural employrr employment in agriculture and related agro- and to increase income, thro industries 'arming systems diversificatic 3 At least 3% improvement peryear inthe 2entral and Trade Statistics and agro-industrial developm agriculture trade balance ?reject Development ImpactlOutcome Indicators6: (from Objective to 3bjective (Purpose): All major project activities that are adopted ;overnment FY07/08 budget Goal) by MAFF fully funded by CFET at EOP. To strengthen the capacity c # of products resulting from small group No major natural Ministry of Agriculture, Fore activities that is (a) consumed; and (b) sold; disasters occur (e.g. and Fisheries and its Component 1 impact % of small groups still active by EOP. evaluation reports major droughts, floods development partners to as: Average rice yields in rehabilitated irrigated or pest infestations) of rural communities in increaa MAFF crop yield monitoring unusual scale or their production and income areas increasingfrom 1.5 to 2.0 tonslhalyear at EOP6. reports severity sustainable way. Cropping intensity in Caraulun increasing to Farmers have the righ' 160% and in community irrigation schemes macro-economic and increasing to 100 by 2008. social incentives to 65% of farmer respondents claiming Information exit reports increase their increased knowledge of agriculture as a production following result of information provided project assistance 15% increase in production of farm animals; Livestock team monitoring (e.g. favorable Monetized income obtained by VLWs for reports markets) private services (in $) Amount produced and sold by RPOs assisted by MAFF's Agro-Business Unit. At least 70% of farmer-beneficiaries satisfied with the services received from Agri-business unit monitoring MAFF and its partners by EOP. reports Farmers' satisfaction survey at EOP. Impact indicators per component will be field tested during the benchmark survey. Project indicators may be officially revised during supervision in agreementwith IDA. Endof project. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 26 3esults for each Result Indicators per Component: sources of ?om Outputs to Zomponent: By End-of-Project rlerification )bjective) Zomponent 1: Component 1: 2 30 pilot and 20 new upland and coastalvillages rlo. of community armers groups are able or Jarticipatory fully assisted; at least 50% of community xoposals approved and fillingto sustain alternatives levelopment and proposals involving women mplemented romoted by the project Uatural Resources 2 At least 200 community groups assisted by iuarterly project Wanagement EOP; 30% are women's groups ionitoring reports 0 At least 3,000farmers directly trained in iuarterly project agriculture and NRM activities ionitoring reports Component 2: Component 2: Vater legislation is adopted to rrigation Rehabilitation 3,000 ha. of irrigated area rehabilitated by 3uarterly project .larify government and nnd Management communities nonitoring reports and ,ommunity roles in O&M. :ethnical audit report 150 km. of existing farm-to-market roads iufficient farming labor is rehabilitated by communities ivailable to farm the whole cheme. 1,030 ha. of major-damaged irrigation scheme 3uarterly project rehabilitated nonitoring reports and tice prices do not decline urther 14 new Water Users Associations (WUAs) site visits established (including a network of WUAs in :armers are willing to change major-damaged scheme), and 10 existing Quarterly project heir current practices (to WUAs provided with advisory services and monitoring reports and ncrease yield andlor plant further training (including women) WUA reports iecond crops) following rrigation rehabilitation :armers are willing to maintain he rehabilitated canals and nanage water resources in imes of scarcity. Component 3: Sub-component 3.1 -armers use information xovided effectively. Services to Farmers 0 About 40 pre-tested information materials Quarterly project providedto communities through different monitoring reports 3.1. Information to media MAFF staff apply training Farmers 0 At least 10cross-visits between CGIAR CGIAR scientists reports received and convey agricultura scientists and MAFF to provide advisory and MAFF staff reports information in a timely, accurate services and information support. effective manner 0 At least 3 regional centers connected Quarterly project electronically and functional up to EOP monitoring reports Telecommunication system 0 At least 10meteorologicalstations20 rain Quarterly project sufficiently developed to permit gauges and 4 hydro-stations established and monitoring reports and district connections. field visits ........................... functional by EOP "............................................................... 3.2. Sustainable Animal Sub-component 3.2: Farmers continue to recognize Health Services 0 At least 80% of adult cattle, buffaloes and pigs Quarterly project the benefits of vaccination and vaccinated on a timely manner monitoring reports bring their livestock to 0 265 Village Livestock Workers trained (includinf vaccination corrals. women), and 70% actively providing services to Farmers are satisfied and willing villages to start paying for treatments 0 NationalVLW Associationestablishedand VLW Association provided by VLWs. organizationally functional up to EOP reports Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 21 tesults for each Result Indicators per Component: Sources of from Outputs to Objective Component: By End-of-Project Verification 1.3. Agri-Business Sub-component 3.3: seed producers are willing to Services 3 Seed Growers' Association organized and Association registration xoduce good quality seed functional up to EOP 0 30 ha. of seed farm established Quarterly project 0 12 village processing facilities established and monitoring reports and 31millsbecome profitable unde functional by EOP field visits :urrent market conditions 0 MAFF agri-business unit established and MAFF organization set- operational by EOP UD 2omponent 4: Sub-component 4.1: Jrogram Management 0 Four agriculture policy studiesladvisory services Advisors' reports and Government adopts the policies 1.1. Policy and completed, discussed with key stakeholders, policy study reports promptly issues implementatior Strategy Develop. and accepted by MAFF guidelines, and monitors ................................................................................................................................................................................................... ............................................................................................. ................................................................................................................ compliance. 1.2. Project 0 Advisory support to project management, Advisors' contracts Trained counterparts remain in Management and finance, and procurement provided their positions and are able to Capacity Building 0 100person-days oftraining providedto MAFF Training reports apply their skills effectively. staff and partners (including women) Counterpart budget sufficient tc ensure project sustainability 3eneral -Social and Environmental Indicators Partnership 0 At least 2 consultative meetingdyear heldby Zonsultative meeting Arrangements key partnership group where more than 60% of ninutes and quarterly key stakeholders attend: xoject monitoring ------ Policy Advisory Group sports Natural Res. Management Adv. Committee Irrigation Network Information Forum Livestock Network ............................................................................................................................................................................................... Consultative Group on Agri-Business Environmental 0 Levelof compliancewith environmental Quarterly project Mitigation mitigation measures': at least 90% of all monitoring reports and community-based activities supported in field verification components 1 and 2: - Do not require mitigation plan - Fully comply with mitigation plan: or - Partially comply with mitigation plan (and are ........................................................................................................................................................ eiving training to improve mitigation) Land Policy 0 No. of community projects requiring land Quarterly project Guidelines 0 No. of grievances recorded and resolved (for monitoring reports and components 1 and 2) field verification ' This is an aggregate indicator for compliance with environmental mitigation measures for all community sub-projects. The mitigation measures are identified for each type of community sub-project (see OperationalManuals for Component 1 and 2.1). The indicator aims for 90 percent achievement in the number of community sub-projects that either do not require mitigation measures, fully comply with them, or partially comply with them but are receivingtraining to improve mitigation. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 28 Activities per Component: Inputs: costs: Component 1: Participatory 5 pm NRM Advisor and 12 pm Community Dev. Specialist Development and NRM 14 Facilitators and 4 NGOs contracted $395,000 (TFET) Training of staff, facilitators, NGOs $18,000 (CFET) 1.I Support to pilot villages 54 Farmer trainingltechnical back-up sessions Jilot villages evaluation Incremental operating costs (per diem and travel) for 35 staff ................................................................................................................................... z...com.pu!er..u.?i!s ................................................................................................................................................................................................ ......................................................................................................... 1.2 Expansion to new villages 12 pm NRM Advisor and 12 pm Community Dev. Specialist $770,000 (TFET) 27 Facilitators and 6 NGOs contracted $133,000 (CFET) Training of staff, facilitators, NGOs 30 Farmer trainingltechnical back-up sessions Small Group Grants to 20 villages ,ncrementaloperating costs for 43 staff Component 2: Irrigation :ontracts with about 24 community irrigation schemes $579,000 (EC) Rehabilitation and Management :ontracts with about 25 community-based access roads $480,000 (CFET) 2.1. Community Irrigation and 'echnical audit of irrigation schemes icremental operating costs (per diem and travel) ................................................................................................................................... Roads Rehabilitation .......................................................................................... .............................. 2.2 Major Irrigation Rehabilitation Large civil works contrac $1,875,000 (EC) Engineering supervision contract 18 pm irrigation advisor !.n.creme?!a!..oeera!.in.~..co~!s......................................... ....................................... 2.2 Capacity Building and WUA Training of ca. 24 WUAs $259,000 (TFET) support 4 Training courses for District Irrigation Officers $64,000 (EC) Technical training for 15 irrigation staff 12 pm WUA Advisor and 6 pm Irrigation Advisor 4 Local WUA Consultants (108 pm) 2 motorcycles, 2 field vehicles, 2 computers .................................................................................................................................. !!?!em en!a! ...opera!i.?l..co ........................................................................................................... 2.3 Survey and Mapping Topographic Surveying $190,000 (TFET) Incremental operating costs $ 44.000 (CFET) Component 3. Services to Farmer 12 pm InternationalCommunication Expert 3 national radio and communication consultants and NGO contracts Sub-component 3.1. Information Digital video and small voice recording equipment $67,000 (TFET) Farmers Information programs and materials through media and radio $279,000 (EC) Training of MAFF staff and partners in communications and radio $84,000 (CFET) ................................................................................................................................ 3.1.1 Information Programming ....................................................... Incremental op ................................................................................................................................................. 3.1.2 CGIAR Liaison Secretariat CGIAR Liaison nded by UNDPIEC) $266,000 (EC) 24 pm local CGIAR Officer 11 pm of CGIAR expert visits Training in e-knowledge Cross-visits by MAFF staff to CGIAR Information materials from CGIAR centers Translation of CGIAR materials Incremental operational costs .......................................................................................................................... ........................................................ ......................................................................................................... 3.1.3 Community-based Informatic Single side band radio receivers for 13 districts and Dili $395,000 (EC) Network Computers, HF transceiver, and generators for 3 pilot information Inits, expanding to 13 if successful at mid-term Small works (burglar-proofing rooms) Training of district staff and community radio stations 5 pm Information Technology Specialist, 18 pm IT assistants Incremental operating costs Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 29 3.1.4 Agro-Meteorological N' 2 pm hydrolagro-meteorological expert $341,000 (EC) ICB contract for supply and installation of about 12 agro- meteorological stations, 20 rain gauges, and 4 hydrological stations Training for operators Incremental operating costs \nnual vaccination campaigns for buffaloeslcattle, pigs, chicken $286,000 (TFET) Animal Health Services laccines and specialized medicines $314,000 (EC) !6 field motorcycles, 1 4-wd vehicle $500,000 (CFET) ............................................................................................................... 3.2.1 Vaccination Campaigr e?!a!...e.~era!.i.ns.cos!~...~~on.i!orin.~~ ............................................................................................................. 3.2.2 Cold Chain lmproveme idge-freezers, solar panels, and associated equipment and $356,000 (EC) es.kies!!l-ler?los..for..l.3..d.is!ric!s..and..4ls.ub-dis!ricts..~for.vaccine~~ .... .................. 3.2.3 Village Livestock Work 18 pm VLW advisor $262,000 (TFET) 2 local VLW consultants (48 pm) $208,000 (EC) 85 VLW packs (wl basic medications) $73,000 (CFET) 156 meetings and training of 85 VLWs VLW association support ......................................................................................................................................................................................................................................................... Incremental operating costs 3.2.4 Capacity Building 1 computerlprinter unit $25,000 (TFET) Training of 14 MAFFlDistrict Livestock staff (210 person-days of in- $111,000 (EC) country training) Farmers training in forage development OIE membership and annual attendance at SEAFMD meetings ~~~ Sub-Component 3.3. Suppo 6 pm Seed Production Specialist $104,000 (TFET) Agri-Businesses 1seed machinery and equipment $ 6,000 (CFET) Training of farmers: 30-45 seed growers 3.3.1 Support to Seed produ Seed production inputs (registered seed) Training of 2 MAFF staff on seed production and certification Workshops for formation of a Seed Growers Association ............................................................................................................... .................................................................................................................................................................................................................... tal operating costs 3.3.1 Support to Priority Nicl 3 pm Oil Processing Specialist, 1 pm Oil Mill Specialist $304,000 (EC) Market Commodities 6 pm Agri-business consultant $6,000 (CFET) 6 small processing mills and 12 small mill sheds (small works) Training of farmers: 12 oil mill farmer-cooperators ................................................................................................................ ...................................................................................................................................................................................................................................................... Incremental operating costs 3.3.2 Support to Rural Prodi 1 computer set $179,000 (EC) Organization Training of rural producers organizations $15,000 (CFET) 9 pm Agri-business consultant 3 local consultants (72 pm total) Incremental operating costs Component 4. Program 12 pm Senior Agriculture PolicyAdvisor, 6 pm LegalAdvisor $118,000 (TFET) Management 4 priority policy studiesladvisory support $423,000 (EC) 4.1. Policy and Strategy Workshops ............................................................................................................ Development ..................................................................................................................................................................................................................................................... Incremental Operating Costs 4.2. Project Management Computer units and furnishings for 13 districVMAFF offices $1,190,000 (EC) MAFF Training (including priority short-term training abroad) $498,000 (TFET) Project Review Workshops $178,000 (CFET) 30 pm Project ManagementAdvisor; 24 pm Procurement Advisor; 24 pm Financial Management Advisor 3 pm Evaluation Experts and NGO Surveys (M&E) 18 pm local information technology Annual audits Incremental operating costs Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 30 c d 0 m 0, * 0 z d c1 d m c1 I 2 N ! I 2 UB U ti -vl rw 0 I: d 0 m 0 L D b z s .n zL3 b .n b D z s zE, b b c) D zE, zs Y 3 Q v) z" 2 Technical Annex 4: Detailed Project Description TIMOR-LESTE: Third Agriculture Rehabilitation Project A. Project Summary This Annex providesa description ofthe proposedThirdAgriculture RehabilitationProject (ARP 111). The project's objective (purpose) is to strengthen the capacity of the Ministry of Agriculture, Forestry and Fisheries (MAFF) and its development partners to assist rural communities to increase their agriculture production and income in a sustainable way. It consists of four major components: ParticipatoryDevelopmentandNaturalResourcesManagement (US$1.3 million) IrrigationRehabilitationandManagement(US$3.5 million) P Servicesto Farmers (US$4.2 million) P ProgramManagement (US$2.4 million) The estimated total costs of ARP I11 are US$11.4 million equivalent, including 5 percent price contingencies and 7 percent physical contingencies. About US$3.O million will be funded by TFET, 6.854 million by the European Commission (US6.9 million equivalent), and US$1.5 million by the Government of Timor-Leste. MAFF will be fully responsible for project implementationand funding execution, under the supervision of IDA.The projectdurationis estimatedto be 3.5 years, from January 2004 to June 2007. B. Project Oescription by Component Component 1. Participatory Oevelopment and Natural Resource Management (TFET: US$1.2million; CFET: US$O.I million) This component aims to increase community resilienceto chronic threats to food security, through the promotion of sustainable natural resources management (NRM) and mechanisms of self-reliance. It targets an estimated 50 upland and coastal villages in 7 districts - Baucau, Lautem, Covalima, Dili, Liquiqa, Manufahi and Oecussi - or approximately 10,000 rural households (8 percent of Timor-Leste's rural families). At least 30 percent of the direct beneficiariesare expectedto be women. Subject to a favorable independent review and IDA'Sagreement, additional districts could be considered during supervisionmissions. The component is a continuationof activitiespilotedduringARP 11. It will buildthe capacity of MAFF, contracted facilitators, NGOs and local government to facilitate and providetechnical support to upland and coastal communities. The target beneficiaries - SmallGroups o f farmers -will be assistedto identify their priorityneeds, managesmall group grants, and implementtheir approvedactivities. The projectwill includethe following activities: Support to ARP I1pilot villages o Expansionto new villages Component implementation will be guided by the Operational Manual for ARP Participatory Development and Natural Resources Management, which will be adjusted from time to time to take into consideration lessonslearned. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 35 Activity 1.I.Support to Pilot Villages (TFETGrant only) This activity will continue MAFF's support to the 30 pilot villagestargetedunder ARP 11. During 2002- 03, MAFF provided small group grants to 103 farmers groups in 14 pilot villages (2 per district) to support local activities such as village nurseries, reforestation, fish ponds, live fences, and vegetable gardens. The pilot villages will continue to require technicalsupport and capacity buildingduringARP 111, as many of the activitiesare seasonal, and some involve multiple crop or breeding cycles. ARP I11 will also provide continued managerial support to ensure equitable distribution of the post-harvest benefits,as well as technicaladvice on marketing. ARP I1will be extendedfor an additionalyear (to end- December2004) duringwhich activitieswill commenceinthe remaining16pilot villages. ARP I11will fund technical assistance, community facilitators, NGO involvement, training, workshops and study tours (for beneficiary farmers, MAFF staff, NGO partners and facilitators), computer equipment, minor inputs for demonstration plots, and incremental operating costs in support o f the following tasks: Continuedplanningand implementationo f SmallGroupActivities inthe 30 pilot villages; Follow-uptechnicalandmanagementtraining Technicalandmanagerialsupportto Village ImplementationTeams and Small Groups; Monitoringandevaluationofthe first pilots. Fundingfor SmallGroup Grants for the 30 pilot villages is budgetedseparately under A W 11. Activity 1.2. Expansion to New Villages (TFET Grunt only) This activity will expand participatory development and natural resources management assistance to about 20 new villages in the seven districts. Thus, the program will be expanded to cover about 50 villages-an average o f 7 per district. The decisionto expand to new villages will be made following a detailed participatoryevaluationof the first 30 pilots conductedby an external evaluator, which will be discussedat a nationalworkshop. At this stage, the number of Districts could also be re-considered. MAFF's NRM Management Team will prepare detailed terms of reference for this evaluation, which will include measurable indicators as benchmarks for success. These will take into account the activities' physicalprogress, the adequacy o f financial and management systems and their relatedtransparency, level of community participation,and (as far as possible) the technical soundness o f the activities. This will determine the optimal number o f new villages which can be supported before expanding. MAFF will then take into account lessons learnedandrecommendedadjustmentsto the OperationalManual. The projectwill fundtechnicalassistance, communityfacilitators,NGO involvement,training, workshops and study tours, field vehicles, small group grants, minor agriculture inputs for smalldemonstrationplots, and incrementaloperatingcosts in support ofthe followingtasks: Formationof aVillage SelectionTeam ineach District Village selection Trainingon participatoryruralappraisal Community organization Village datacollection andanalysis ParticipatoryNRMplanningandanalysisof key naturalresourceandagricultureproblems Activity Planpreparationby SmallGroups Small GroupActivity planevaluationand approvalby MAFF Provisiono f grantsto Small Groups (Small Group Grants); Timor-LesteThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 36 0 Technical and management training for Small Groups; 0 Implementation o f activities (by Small Groups) 0 Monitoring and evaluation Implementation Responsibilities. The component is integrated into MAFF's Forestry and Fisheries National Directorates - specifically the Divisions for Reforestation and Forest Rehabilitation, and Fisheries Resources and Marine Environment. They will establish an NRM Management Team responsible for overall management and decision-making, as well as for developing policies in support o f community-based natural resources management. Inrecognition o f the need to broaden the component's focus to include sustainable food crops and livestock management, MAFF will form an NRM Advisory Committee with representatives from other MAFF Divisions (including Crop Production and Livestock), other Government agencies, and selected NGOs and donors active in natural resource management. Experience in other NRMprojects will be shared through this forum at bi-annual meetings, and relevant members will be consulted on the technical aspects o f the activity plan approval. It is anticipated that responsibility for the management and monitoring o f community-based activities will be passed to the relevant MAFF divisions at project end to ensure they continue to receive the necessary support. MAFF will also continue to engage an NRM Advisor and a Community Development Specialist to improve participatory planning and provide training in community organization. At the District level, implementation will carried out by a District Implementation Team headed by the District Agricultural Coordinator. The district will also establish an NR7M Advisory Panel, consisting o f staff from the District Administration, and representatives o f NGOs and donors active in NRM. This panel will be responsible for selecting the pilot villages, and providing technical support and guidance. Given the present scarcity o f trained extension workers, MAFF will continue to rely on contracted facilitators to facilitate community activities. The facilitators (2 per district) will be selected following improved procedures developed under ARP 11. Although quality recruits will be sought, facilitators are likely to continue to need a high level o f support. MAFF will contract NGOs partners to supply and manage facilitation services, as well as provide technical back-up to the community groups. A target o f 50 percent women facilitators has been set under ARP 11, and its effectiveness will be monitored progressively. The facilitators will work as far as possible with the newly appointed Sub-District Development Officers and Forest guardianExtension officers, who will also be trained in participatory planning. At mid-term, the relative effectiveness o f using contracted facilitators, NGO partners, MAFF and District Administration staff as service providers will be assessed. Recommendations will then be made on a phase-out strategy for external facilitators aimed at maximizing the program's sustainability. Village Selection. The criteria for the selection o f new pilot villages by District teams will be as follows: Preference will be given to villages with degraded natural resources; o Preference will be given to a mixture o fthe relatively poorest upland and coastal villages; o The potential contributiono fsustainable management o fthe resource to the development ofthe overall area; The potential o fthe locationto serve as a pilot (accessibility); Strong local leadership; and o Willingnessto contribute voluntary labor, land and locally available materials. Small Group Selection Process. A balanced number o f men's, women's and mixed farmer groups (Small Groups) will be selected at the hamlet (aldeia) level, the most culturally and geographically appropriate level for farmer collaboration in Timor-Leste. Approximately 5-8 Small Groups per village (suco) will be selected, averaging 25-30 households each. Group formation may vary between villages, with some electing to maintain existing groups (in the limited cases where they exist) or to form new ones. The advantage o f forming new groups i s that the inclusion o f women and the poorest can be Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 31 promoted duringthe initial educationand informationcampaign whichwill establishprinciplesof gender participation and benefit sharing. The project will establish a minimum o f one women-only group per village to improve women's management and leadership skills. Village leaders (Village and Hamlet heads and traditional leaders) will be encouraged to become group members to ensure support for activities (a lesson learnt from ARP 11) but should not automaticallybecome group leaders unless elected by their members. Small Group membershipwill be loosely defined for the initial planning and activity identification, but then formalizedprior to activity implementation, where membershipmay be extended to householdsnot thus far involved.Each group will elect a leader, treasurer and/or secretary to promote transparency and accountability (see Annex 7). Previous ARP I1pilots benefited some 65 percent of the village population; hence elite capture o f benefits is unlikely. At the village (suco) level, a Village Implementation Team will be established to provide overall coordination and monitoring support. Members will be nominated from each Small Group to ensure representativeness, with a minimum of three womenper team. Small Group Activity PlanDevelopment and ApprovalProcess.The SmallGroup Activity plans will be geared towards solving problems o f resource management and vulnerability rather than overly focusingon income generation -with the exceptionof productsthat people can store for times of scarcity to strengthen food security. Project facilitators will raise environmental awareness, explain the project criteria(includingthe voluntary natureo f land, local materials and local laborcontributions)and facilitate data collection and participatory planning and proposal development at the Small Group level, using Participatory Rural Appraisal methods. This process is further detailed in the OperationalManual and trainingmanualfor communityfacilitators. Small Group Activity plans will include a justification for the proposed activities relative to their contributionto vulnerability reductionand improvedNRM;the inputsrequired; the communities in-kind contributions; the expected outcomes; implementation responsibilities; maintenance and monitoring plans; andmechanisms for distributingbenefits amongst group membersand ensuringsustainability. The approvalprocessfor SmallGroup Activity plans is describedinFigure1below: Figure1. Evaluationand Approval of SmallGroups' Activities Small Group Activity Plan Assessment by Village Implementation Team I I Small Group Activity Plan PreliminaryEvaluationand Verification by District ImplementationTeam, including Environmentaland Social Impact Mitigation Measures I .- Final Evaluation by ARP NRM Management ;m 1 1 Approval by ARP Project Director 1 1 I Signing of Small Group Agreement Timor-Leste ThirdAgriculture Rehabilitation Project- Project Appraisal Document, October 7, 2004 38 At each assessment stage, facilitators will assist the Small Groups in making any recommended improvements to their activity plans. The District implementationteams will play an important role in working with the communities and facilitators, and ensure that environmental and social mitigation measures are taken into account (includingverifyingthat any landusedby the Small Groups is provided voluntarily andagainst community-agreedcompensation). Table 1 shows the positive and negative list of activitiesthat will guide the preparation and approval of the SmallGroup Activity plans: Types of activities which theproject will support Types of activitieswhich theproject will not support 0 Tree seedling propagation, reforestation and 0 Activities requiringany involuntary land acquisition agroforestry 0 Salaries of any kind 0 Sandalwoodand fuel wood plantations 0 Works for govemment administration or religious purposes 0 Catchmentmanagementplanting 0 Inputs and materials available from within village 0 Managementof natural forests boundaries (this shouldbe part of in-kind contributions) 0 Mangrove rehabilitation Inputs that benefit a few individualsonly 0 Processing and marketing of non-timber forest 0 Payment for attendance at workshops/training products 0 Activities likely to have significant negative environmental 0 Fresh-waterfish ponds or social impact such as: aggressivehnvasive tree species 0 Processing and marketing of fish products propagation; establishment of mono-culture plantations; 0 Extensive mariculture (sea weeds, green mussel, purchase of chemical fertilizers, pesticides or fungicides; trepangetc) chainsaws, explosives, asbestos, poisons and other harmful 0 Community-based coastal resources management materialsor equipment 0 Increasing productivity of agronomic crops Military or paramilitary equipment 0 Fruittree orchardestablishment 0 Activities where funding is available from other sources, Vegetable production(especially new varieties) such as road/irrigation rehabilitation (funded under 0 Processing and marketing of agricultural products Comp.2) or income generating activities for which micro- credit is readily available 0 Community-based seedmultiplication and distribution 0 Activities which impact negatively on biodiversity 0 Rehabilitationhmproved management of coffee, candlenutor coconut plantations 0 Activities which disrupt or damage cultural property 0 Post harvest storage to reduce crop losses, and 0 Activities which violate Regulation No. 2000/19 on managementof crop residues ProtectedPlaces or are harmful to other important habitats 0 Forage grass and fodder legume cultivation such as high mountains (above 2000m), wetlands, 0 Multi-purpose living fences and animal sheds mangroveareas and coral reefs. 0 Water harvesting and storing (including handpump sets for uplandirrigation) 0 Activities which encourage adaptation to climatic variation (droughts and floods) Small Group Grants and Funds Disbursement. Eachvillage (suco) will be eligibleto receive grants of ~pto US$lO,OOO, though this ceiling will needto be carefully explained to discourage the SmallGroups from seekingto maximizetheir allocation throughoverly-ambitiousproposals. At least half of the grants jhould go to groups which include women (they could be mixed groups). The Small Group Agreements dlbesigneddirectlybetweentheProjectDirectorandtheSmallGrouprepresentatives.Theprojectwill not pay for local materials (seeds, soil and buildingmaterials), local labor or compensation for landuse - these will be part of the Small Groups' in-kind contributions,to promote greater ownership and planning at a manageable scale. Funds disbursement must take place at a time in the seasonal cycle when wet season planting can be effectively ensured. Once approved, funds will be transferred directly from the project's special account to the District Finance Offices for direct collection by the Village Implementationand Small Group Treasurers in accordance with the mechanisms specified in Annex 7. Each village will be requiredto submit their own plan for guaranteeingthe transparency and security of the funds before the activity plans would be approved, with adherence monitored by facilitators and MAFF. Funds will be provided in several installments (advance, intermediary and final payment) in accordance with the agreedtargets. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 39 Capacity Building. A major focus of Component 1 is to buildthe capacity of MAFF staff, facilitators, and NGOs to identify and respond to farmers' needs. The project will assist farmers' groups in identifyingproblems and potentialsolutions specific to their resource base, and developingthe technical and organizationalskills to address them. Where technical capacity exists within MAFF, the project will conduct Training of Trainers courses to help them transfer technical skills to facilitators, or directly to farmers. MAFF's ResearchandExtensionDivisionwill help develop the trainingmaterials. Where appropriate skills do not exist internally, MAFF will contract external trainers. A series of technical manuals will be developed for the most common types of projects proposed by communities (e.g. agro-forestry, nursery management, fish pond maintenance, vegetable gardens). The manuals will include, amongothers, impact indicatorsspecificto each activity-such as survivalrates for seedlings, or fish yield - and will be progressively updated based on lessons of experience in various geo-climatic areas. The bulk of farmer training should be delivered directly to farmers within their own village environment to avoid dilution of techniques and emphasize practical applications. Where promising environmentalconservation or rehabilitationmeasures are identifiedby members of the advisory panels but not included in the Small Groups Activity Plans, MAFF may introducethem to model farmers and fund them as demonstration activities under a separate budget to the Small Group Grants. The project will also organize study tours to enable new pilot communitiesto learn from successful sites. MAFF staff and facilitators will be encouragedto attend key seminars on the principles of community-basedNRM and `no regrets' adaptation. Where possible, invitationsto the various trainingevents will be extendedto partnerNGOsto act either as resource persons or participants as part o f overallcapacity buildingefforts. Component 2. Irrigation Rehabilitation and Management 1EC: 2.5 million: TFET: US$0.4million: CFET: US$0.5 million) This component will support MAFF's program of strengthening rural communities' food security and sustainable economic development in lowland, irrigated areas. The project will rehabilitate community based irrigation schemes serving 3,000 hectares of irrigable land, and 150 kilometers of rural access roads; rehabilitatethe major-damagedirrigationscheme in Manufahi(Caraulun) covering 1,030 hectares o f irrigableland; and strengthenor establishabout 24 Water User Associations (WUAs). All together, the component will target some 4,000 rural families, about 29 percent of the area in need of rehabilitation under small irrigationschemes, and 27 percent o f the area covered by damaged large irrigationschemes inTimor-Leste. Some 20 percent ofmembers of WUAs are expectedto be women. Component 2 will be implemented by the Irrigationand Water Management Division o f MAFF. It will includethe followingactivities: Community irrigationandroadsrehabilitation Major irrigationrehabilitation P Capacity buildingandWUA support Survey andmapping Activity 2.1. Community Irrigation and Roads Rehabilitation (EC Grant only) The activity will follow the successful model o f community contracts started under ARP Iand ARP 11, and now institutionalizedby MAFF. Since rehabilitation o f community schemes is expected to be required for several years, it would be gradually transferred to full government financing by project conclusion. The EC Grantwill support 75%, 50% and25% ofthe costs o fthe schemes inyears 1to 3 of the project, respectively, with the Government funding the corresponding balance. The project will finance small civil works contracts with communities, technical audits of the works, and incremental operating costs in supportofthis activity. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 40 Rehabilitation of Community-based Irrigation Schemes. This activity will continue the rehabilitation o f small-scale irrigation schemes under ARP Iand I1that has brought about 9,900 hectares back into irrigated rice production. ARP I11will target further rehabilitation o f 3,000 hectares where productivity is affected by structural failures inall 13 districts. Local communities will carry out the remedial works directly, following the model developed under ARP Iand 11, and in accordance with the Operation Manualfor Community Irrigation and Roads Rehabilitation(which will be updated from time to time to incorporate lessons o f experience). The project will sign a Memorandum o f Agreement for the identified works with community-designated entities, who will be responsible for ensuring that the works are completed satisfactorily. The irrigation schemes will be selected annually from the submissions made by the scheme representatives, after scrutiny at the District level, and technical review by MAFF Irrigation staff. To ensure that rehabilitationworks start inthe early part o f the dry season (May) the District Irrigation Officers will be encouraged to carry out early surveys o f community proposals and maintain a pipelineo f plannedprojects for follow-up seasons. To encourage ownership and sustainability, beneficiaries will be required to contribute part o f the total rehabilitation costs either in materials or labor, the amount contributed on each sub-project increasing gradually from 5% to 15% (or higher depending on experience). The overall procedures have been successfully tested by MAFF over three seasons o f works, and are considered adequate for ARP I11(see Annex 7). The project will also finance an independent technical audit o f community irrigation schemes to provide lessons o f experience to MAFF from which to further strengthenimplementationstrategies. Rehabilitation of Community-based Access Roads. This activity will target the rehabilitation of a further 150 kilometers of minor access roads requiredby communities to link agricultural project areas and irrigation schemes to national or district roads. Communities will rehabilitate the roads using the same procedures for community contracting, payment and technical supervision as for the small irrigation schemes. The technical audit will include access roads rehabilitated under the project. Activity 2.2. Major Irrigation Rehabilitation (EC Grant only) Based on the detailed feasibility study carried out under ARP 11, this activity will rehabilitate the Caraulun irrigation scheme in Manufahi District to provide controlled and equitable water supply to an estimated 1,030 hectares o f land. In addition to civil works, the project will finance technical assistance, engineering supervision services, and incremental operating costs. With project assistance in re- establishing WUAs and MAFF extension inputs, the project should help ensure that farmers achieve rice production levels o f 2.5 tons/hectare/crop by 2008 (from current levels o f 1.9 todhectare), and increase their cropping intensity by producing two crops per year. Due to the scope o f the works, MAFF will contract out the rehabilitation to a qualified contractor. The head works and irrigation area i s located in Betano village which has an estimated population o f 3,930 or 810 households. Before the scheme was damaged by floods in December 2001, it had about 600 hectares under cultivation, with two crops produced each year over an estimated 25% o f the area. About 14 Water Users Associations were active in the scheme before 2002. The civil works required for rehabilitation include the remodeling o f the head works with a new approach channel and gates, irrigation intake works and repairs to structures and canals inthe project area, including rehabilitation o fthe main, secondary and select tertiary canals and service roads within the Caraulun irrigation scheme. A detailed feasibility study, including social, economic, and environmental analysis, was completedunder ARP 11. A number o f preconditions must be fully satisfied before the works on Caraulun would be allowed to proceed (see Annex 13). These preconditions include (i) the issuance o f a Ministerial Order defining the responsibilities o f the Government and communities for operation and maintenance o f irrigation schemes; (ii) completion o f detailed topographic surveys, detailed designs, and bill o f quantities for Caraulun; (iii) Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 41 I re-establishment of local WUAs and agreement on land use; and (iv) adequate staff allocations from MAFF for construction supervision. Completion of these requirements would be necessary before the civil works couldproceedand is a conditionfor disbursement underthe EC Grant Agreement. A detailed actionplanfor these conditions is includedas an Attachment o fAnnex 13. At present, the rehabilitation plan only envisages work on the main canals. Once WUAs are re- established in Caraulun, iflocal farmers agree on the need for secondary or tertiary canals, they could carry out the works under separate community irrigation Memorandaof Agreement, usingthe processes adoptedunderthe Community IrrigationandRoadsRehabilitation. Activity 2.3. Capacity Building and Water User Associations' Support (EC and TFET) The project will establishone pilot WUA per district (for a total of 13 WUAs) in smallcommunity-based irrigationschemes. The W A Swould be selected from amongstthe schemes targeted under ARP 111, as well as those already rehabilitated under ARP 1-11, with a view of maximizing their success and demonstrationvalue to other communitiesinthe district. The projectwill also providefurther training and strengtheningto the 10 WUAs formed under ARP I1in rehabilitated light-to-medium damaged irrigation schemes, and increase extension support to crop production to stimulate improved productivity. Training will be provided in irrigation operation and maintenance as well as general agriculturalproduction,ifrequired. A smallallocationhas beenbudgeted for minor farm inputs (such as improvedseedvarieties) to helpthe WUAs optimizetheir yields. During the first year, the project will also support the establishment of a network o f WUAs in Carulun. Four WUA local consultants will be mobilized to this end, covering the East, West, Central and Caraulun regions. The project will finance vehicles, computer equipment, minor agricultureinputs, consultingservices, and training, workshops and study tours, and incrementaloperating costs in support of this activity. ARP I11 will continue in-country training of MAFF staff in irrigation, focusing on design, construction supervision, operation andmaintenance. Activity 2.4. Survey and Mapping (TFET Grant only) The project will contract a specialist survey firm to prepare detailed topographic surveys and mappingof up to 12,500 hectares of land, covering the Caraulun major irrigation scheme, as well as the light- to medium-damaged schemes rehabilitated under ARP Iand ARP I1 and selected community irrigation schemes. The surveys will complementthe detailed feasibility study of Carauluncompletedunder ARP 11 by enablingdetailed designs for the commandareas. It will includefeatures such as roads, canals, drains, bridges, tube wells, urbandevelopment areas, andthe location ofvillages. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 42 Component 3. Services to Farmers (EC: 2.7 million; TFET: US$0.8million: CFET: US$0.7 million) This component aims to strengthen and institutionalize MAFF's service delivery to farmers in three key areas: (a) information services; (b) animal health services; and (c) agri-business support. Sub-component 3.1. Information to Farmers (US1.4 million) This sub-component aims to increase MAFF's capacity at the central and local levels to deliver timely and relevant information to farmers, and foster two-way communication flows. In a country where 34 percent of the population is illiterate,8 face-to-face information delivery is the preferred option for communicating with farmers, followed closely by the use o f mass media such as the national public broadcaster and community radios. Latest estimates indicate that 60,000 radio sets have been distributed by various donors in Timor-Leste since 2000, covering some 450,000 people. Radio stations are concentrated in Dili, but there i s now one operational community radio station per district. Most o f them have a 30 kmradius transmitter, but their coverage varies depending on topography. Farmers have consistently identified access to appropriate and timely information as a major need, particularly in the present context where extension support is scarce. Better information also allows communities to participate in the planning and implementation o f activities affecting their livelihood, thereby increasing their sense o f ownership and the sustainability chances. The project will support the following activities: o Information Programming Strengthening o f the CGIAR Liaison Secretariat o Pilot Community-BasedInformation ServiceNetwork o Agro-Meteorological Services The sub-component will be implemented by the Research and Extension Center o f MAFF and will be managed by the inter-sector Information Team established under ARP 11. Activity 3.1.I. Information Programming (EC and TFETGrants) This activity will be a continuation o f the information programming activity supported under ARP 11, drawing on lessons from the previous project. The project will finance communication equipment, technical assistance, information programs and materials (including radio and television broadcasts), training and workshops for MAFF staff and local consultants, and incremental operating costs in support o f this activity. Key problems with past farmer information programs in Timor-Leste have included late delivery; non- responsiveness to farmer requests and feedback; irrelevant material; inappropriate communications channel; unclear printed material; lack o f basic communication skills among MAFF staff; and weak planning, implementation, and monitoring. The project will focus on strengthening these aspects. Prior to implementation, the MAFF Information Team will incorporate lessons learned into a new communications strategy, including an appropriate monitoring and evaluation mechanism. The team will also re-establish an Information Forum to share past experiences with other partners involved in information and communications programs (see Annex 6). The AsiaFoundation,National Surveyo f Voter Knowledge,2001. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 43 The project will support information campaigns that directly support other components and MAFF activities. Information campaigns will emphasize face-to-face, participatory communications in conjunction with paid community radio broadcasts, printed materials, television broadcasts, and mobile audio-visual van demonstrations. Traditional approaches o f information delivery (i.e., farmer field days, key farmers, village meetings, market days, Chefis do Suco, church groups, schools, and others), utilizing available resources will be explored. This activity also aims to develop partnerships with other donors, NGOs and groups that can assist with information dissemination and monitoring, effectively maximizing options for face-to-face contact with farmers and allowing for external monitoring o f activities. Activity 3.1.2 Support to CGIAR Liaison Secretariat (EC Grunt only) This activity, already started under ARP 11, will help MAFF's CGIAR Liaison Secretariat develop a rapid response system to provide agriculture staff -and farmers-with specific technical advice from CGIAR and other international centers o f expertise. In a country with isolated rural communities and limited Government resources, electronic links with these centers will become increasingly important. The project will develop an easy-to-access repository o f most frequently asked questions and suggested solutions for use by MAFF staff, NGOs and interested stakeholders. In addition to online access, the database will be stored in Compact Disk and sent to the pilot community-based information service network for further dissemination. The project will also finance cross visits between CGIAR experts and MAFF staff, training, translation o f relevant CGIAR materials into local language and continuous access to Internet. The CGIAR Liaison Secretariat will be assisted by an international advisor to be funded by UNDPEC. Cross-visits by MAFF staff to CGIAR or other centers o f expertise will adhere to a strict criteria which will include approval of the Minister; clear identification o f the activity as a high priority on the Road Map; short-term duration (Le., a 1-4 weeks); cost-efficiency; lack o f in-country opportunity; and an action plan to link the result o fthe cross-visits to practical recommendations and MAFF programs upon return. Activity 3.1.3 Pilot Community-Based Information Service Network (EC Grunt only, This new activity aims to facilitate the information flow to and from the districts through point-to-point communications usingaffordable technology. It will promote decentralization o f information services by building capacity at the district level, effectively locating the information and communication sources closer to farming communities. The technology is based on the well-documented and successful People FirstNetwork e-mail system inthe Solomon Islands: as well as case studies documenting the potentialo f community radio in rural areas and the increasing use o f internede-mail facilities by farmer groups. The project will finance radio, office, computer and communications equipment, small works, training, technical assistance and incrementaloperating costs insupport o f this activity. The project will first introduce pilot community-based information services at the three selected agriculture centers (likely to be the regional centers in Baucau, Same and Bobonaro). Each information service network office-comprising a secured room at or near the agriculture center -will be equipped with two desktop computers, software, e-mail facility, and peripherals. Due to the lack o fa reliable power - The People First Network (PFnet) of the Solomon Islands is an e-mail systemthat permits remote locationson islands across thousands of square kilometersin the Pacific Oceanto have access to Internete-mails usinga simple computer, short-wave radio, and solar power. For more information,visit http://www.peodefirst.net.sb. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 44 supply, the equipment will be powered by solar-power" and/or generators. Small works will likely be requiredto increase security o f the equipment in these offices. An assessment of equipment needs was completedat appraisaland is includedinMAFF's Project ImplementationPlanand detailed costtables. The office and e-mail will be available to district agriculture staff and community radio staff, NGOs, teachers, and farmers groups, on a regulateduse basis. The offices will be mannedby district agriculture staff, where IT capacity is expected to grow with training inputs. The projectwill finance the short-term inputs of an Information and Communication Technologies (ICT) Specialist who will help assess the most appropriate technology specifications and advise on a planfor cost recovery (based on payment for services rendered) once a criticalmass of users is reached.Trained MAFF staffwill monitorthe use o f e- mail and information dissemination activities. They will record the number and type of requests for agricultural information, develop profiles of e-mail users, and monitor the number of agriculture radio programs by community radios over time. The strategy will be to start with three pilot network offices, and then evaluate at mid-termreviewto determine whether an expansionis warranted, as well as how the services couldbe improved. To overcome severe communication problems between MAFF and district agricultureoffices, the project will also finance single-side band (SSB) radios connecting all 13 offices with Dili. These radios are designed primarily for long range voice communications (whilst short-wave radios can be efficient for data transmission but are not appropriate for rapid voice communication). The option of sharing radio networkswith the Ministry of Healthhas been ruledout, as this network of fixed and mobile radios will be restricted to health posts, district health managers and ambulances.and possibly the police on an emergencybasis. Activity 3.1.4. Agro-Meteorological Network (EC Grunt only) At present, Timor-Leste lacks the means to collect agro-hydro-meteorological data on such basic parameters as rainfall, temperature, humidity, evaporation, and stream water levels, which are key for monitoring areas vulnerable to droughts and floods. They are also necessary for planning agricultural programs: the design of irrigationsystems, for example, requires data on long-termrainfall patterns and intensities.Under the Portuguesetimes, Timor-Lestehad64 rainfalland 7 climatology stations, butthese fell out of use duringthe Indonesianoccupation. A feasibility analysis was conducted duringappraisalto determine the scope and potentiallyrecommendedlocationsofthis network(detailso fthe analysis can be found inMAFF's Project ImplementationPlan). The project will support the re-establishment o f a national network of fully automated agro- meteorologicalstations in the 8 major agro-ecologicalzones of Timor-Leste. This is expectedto include 12 meteorological stations and 20 automatic rain gauges to collect information such as rainfall, air temperature, evaporation, relative humidity, wind speed, barometric pressure, and soil temperature, and four hydrological stations in major rivers, measuring water levels and rainfall (and therefore capturing dataon highest discharges andbaseflows). A short-termtechnicaladvisor will work with the AgricultureLandUse and GIS Unit at MAFF (ALGIS) under the Research and Extension Center to assist in establishing the system and design simple data collection and interpretationprocedures. The stations units will be re-establishedwhere possible in pre- existingsites and in government land close to the District offices. For the meteorologicaland rain gauge stations, the project will need to construct a small fenced area (about 9 m2)to protect the units against vandalism. The project will finance small works, agro-meteorologicalequipment, consultant services, trainingfor MAFF staff, and incrementaloperating costs insupport ofthis activity. loThe use of solar-poweredcomputersis well documentedand developingcountries have beenusingit for rural schools, distance learning,communitycenters, andtele- or multimediacenters. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 45 Sub-component 3.2. Sustainable Animal Health Services (US$2.I million) This sub-component -a continuation ofARP Iand I1- aims to provide sustainable animal health services to the estimated 567,000 rural people living in households owning livestock. It will continue to support essential annual vaccination campaigns, targeting 80 percent o f the pig, cattle, and buffalo population, as well as some 500,000 chickens a year. It will also improve the cold chain network for vaccine storage, and continue support to the Village Livestock Workers (VLW) program initiated under ARP 11. MAFF's Livestock Division and District Livestock Officers will implement the activities. Both the vaccination and the VLW programs have been institutionalized within the Ministry. The project will include the following activities: o Vaccination Campaigns o ColdChain Improvement Village Livestock Workers Capacity Building Activity 3.2.1. Vaccination Campaigns (EC and TFET Grants) Project support for vaccination will continue under a three-year phasing-out formula (75% in the first year, 50% in the second year, and 25% in the third year), with progressive transfer o f campaign financing to MAFF. This will help ensure sustainability following project completion. The annual campaigns will vaccinate about 300,000 pigs against Swine Fever, and up to 180,000 cattle and buffalo against Hemorrhagic Septicemia and Brucellosis. They will also distributeNewcastle Disease chicken vaccine to 200,000 farming families. District Livestock Officers and VLWs will train lay vaccinators at the village level to administer this vaccine three times per year. The project could also help support vaccination against emerging new animal diseases that are judged to pose public health concerns. Communities will be encouraged to build small corrals to facilitate the vaccination campaigns. The project will finance vehicles, vaccines, the costs o f vaccination campaigns and monitoring, and incremental operating costs in support o f this activity. Activity 3.2.2. Cold Chain Improvement (EC Grant only) Inthe past, vaccine quality has beenunderminedby frequent power outages inthe districts, which operate the refrigeration (cold storage) network. The project will seek to maintain the quality o f veterinary vaccines by procuring solar-powered refrigerators for 37 sub-districts and 13 districts. Replacement o f cold boxes will also improve transport across mountainous terrain between sub-district cold storage and vaccination sites. Activity 3.2.3. Village Livestock Workers (EC and TFET Grants) This activity will continue to support the VLW Program, a privatized village livestock service modified from a similar program in Cambodia. ARP I1supported the training o f 200 Village Livestock Workers. Under ARP 111, an additional 65 VLW will be trained (of which 5 percent are expected to be women). Together, the 265 trained VLWs are expected to cover all districts at a rate o f 2 VLWs per three villages, providing simple treatment and advice at cost to livestock owners across the country. The project will finance veterinary equipment and medications, consulting services, training, workshops and cross visits, and incremental operating costs insupport o fthis activity. MAFF Livestock staff, assisted by an internationaladvisor and qualified NGOs, will provide starter kits, refresher training, and technical and monitoring support to the VLWs in the field. MAFF will also help establish a VLW Association to certify and support its members, procure replacement medications, and Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 46 handle disciplinary matters. The VLWs will operate on a privatizedfee-for-services basis, and may be contracted by MAFF to carry out vaccinations and other MAFF-directed programs. Monitoring and evaluation of the VLW program will be stressed throughout implementationto strengthen the program progressivelybasedon lessons learned. Activity 3.2.4 Capacity Building (EC and TFETGrants) The project will support capacity building for MAFF Livestock Division staff, District Livestock Officers, andtheir LivestockNetworkpartners. Identifiedareas for further in-countrytraining include:(i) epidemiology to support the VLW program, (ii)community-based forage and legume development to backstop upland villages; (iii)abattoir management; and (iv) annual membership to the Office Internationale des Epizooties (OIE) and attendance o f annual meetings o f OIE Southeast AsianFoot and Mouth Disease sub-commission (SEAFMD). The project will provide computer and office equipment, training, workshops andstudy tours, and incrementaloperating costs in support ofthis activity. Sub-component 3.3. Support to Agri-Businesses (US$0.6 million) This sub-component aims to strengthen and institutionalizeMAFF's agri-business advisory services, in support of rural producer organizations (a key priority under the Stability Program). The project will promote key niche markets by targeting about 1,200-1,500 seed growers and 210 farming families involvedin candlenut and coconut oil production,and continue to provide advisory services to emerging ruralproducer organizations. The sub-componentwill be implementedby the FoodCropsDivisionofMAFF. The projectwill support three key activities o Supportto SeedProducers Support to Candlenut andCoconut Processors Support to RuralProducerOrganizations Activity 3.3.1. Support to Seed Producers (TFET Grant only) InTimor-Leste,rice farmers do not use certifiedseeds; they store their ownseeds from previous harvests. Becauseofthe repeateduseofthe same variety, the seeds lackvigor resultingin low germinationand low resistance to disease. Procurement of imported certified seeds was attempted by A W I1 under the AgricultureService Centers, butthis was unsuccessfuldue to highprices and low germinationrates. The project will build upon existing partnerships with the ACIAR-funded Seeds for Life Project, GTZ, the Agriculture Service Center in Bobonaro and the InternationalRice Research Institute(IRRI) to help establisha SeedProducerAssociationin the mainrice growingareas o f Timor-Leste,and train about 30- 45 seed growers. MAFF will organize training, delivery of the initial registered seeds and minor agricultureinputsto the target farmers. Rice seed growers in Bobonaro district are expected to use local machinery. However, this may not be available in more remote rice growing areas such as Viqueque. In that case, the project would help procure a set of rice seed productionmachinery (thresher, grain cleaner, and dryer), to be providedto a suitable organized farmers' group with a lease-to-ownoption. This would be carefully considered to avoid setting a precedent that could compete with micro-credit schemes. Marketing of the seeds is expectedto be facilitatedthroughexistingoutlets (such as the AgricultureService Center inBobonaro). Timor-Leste ThirdAgriculture Rehabilitation Project -ProjectAppraisal Document, October 7, 2004 41 While the initial emphasiswill be on rice seeds, the scope of this component also allows MAFF to assist corn seed or other priority grain seed producers. Target seed producers will be selected amongst those with extensive experience, in consultationwith community leaders. MAFF will develop guidelines for the selection o f seed producers andtarget locations, as well as any productionagreements. The project will provide technical assistance, seed processing equipment and machinery, training of farmers and o f MAFF staff (to assist seed producers), and incremental operating costs in support of this activity. Activity 3.3.2. Support to Priority Niche Market Commodities (EC Grant only) A niche market study for Timor-Lesteis currently being carriedout with assistance fromthe World Bank. Inaddition, GTZ will be financinga feasibility study on candlenutandcoconut oil processing. Basedon the results of these studies, MAFF is expected to help promote the most promising niche market commodities by providingspecializedtechnicalassistance, training, and equipmentto key farmer groups. Experience with the Agriculture Service Centers in ARP Iand I1 points to the need to reach critical economies of scale inquantities traded, as well as controlquality. Two promisingniche markets in the districts of Viqueque and Lautemare coconut and candlenut oil. To encourage value-added production and help generate local employment in these remote districts, the project will help establishabout 6 small village type coconut oil mills and 6 candlenut oil mills, with an individual productioncapacity estimated at 16-48 liters of oil per day. This task will be carried out in partnership with GTZ, who is financing the initial feasibility study and could support future farmer training in Viqueque. The feasibility study will determine the economic viability and market outlet for the oil mills. Village mill operators will be trained on the oil processing, operation and maintenance. Dependingon the resultsofthe study, the smallmills will be providedeither to a large established farmer association, or directly to farmer operators with a lease to buy option, under clearly agreed terms. Short term specialists inoil millandoil processingwill assist MAFF inthis activity. The project will finance technical assistance, small works, agro-processing equipment, training of farmers, and incrementaloperating costs insupport ofthis activity. Activity 3.3.3. Support to Rural Producers' Organizations (EC Grant only) This activity will support the institutionalizationof agri-business support services within MAFF, to help strengthen rural producer organizations, and coordinate agri-business support. The activity will extend MAFF advisory andtrainingsupport beyondthe Agriculture Service Centers supportedunder ARP 1-11to marketing and farmer organizations supported by AusAID, CIDA, FAO, GTZ, JICA, OTI, and UNDPLJNOPS. To share lessons o f experience, MAFF will establish an Agri-Business Consultative Group with interestedpartners. Advisory and training support to Farmers Organizations will be based on demand, and will cover primarily the following areas: (i)association formation, operation, and management, (ii)business planningand feasibility preparation, (iii)market analysis, (iv) business operation and management, (v) financial management, reportingand auditing. The project will finance office and computer equipment, trainingandworkshops, technical assistance, and incrementaloperatingcosts insupport ofthis activity. To prevent potential conflicts of interest between its regulatory and operationalroles, the Agri-Business Support Services will focus primarily on advising non-governmental or private Rural Producer Organizations, and its role is expectedto becomeprogressivelyregulatoryinthe future. Timor-Leste ThirdAgriculture Rehabilitation Project -ProjectAppraisal Document, October 7, 2004 48 Project Component 4. Program Management (EC: 1.6million: TFET: US$0.6million: CFET: US$0.2million) This component will continue to assist MAFF in developing key organizational and sectoral policies, build further core skills amongst MAFF staff and their partners, and integrate ARP management fully within MAFF's organizationalstructure. The project will includethe following sub-components: Policy and Strategy Development; and ProjectManagementand Capacity Building. Sub-component 4.1. Policy and Strategy Development (US$0.5million, EC and TFET) Among the most highly sought ARP I1activities were its policy and strategy studies. ARP I11will extend this support to enable MAFF to develop priority organizational, agriculture, rural development and natural resources policies and strategies, under its new Policy, PlanningandProgram Servicesunit. The project will continue to provide the services of a Senior Agriculture Policy Advisor and Legal Advisor. In addition, it will support about four policy and strategy studies. To ensure flexibility and responsiveness to evolving needs, the subject of the studies will be confirmed further during implementation.At present, they are envisagedto include (a) support to MAFF's Long-Term Strategy; (b) a Community-Based Natural Resources Management study; (c) Livestock Industry Development; (d) Agriculture LandUse Policy; and (e) a Fisheries study. The studies will be prioritised based on MAFF management priorities, value added relative to other donor support, contribution to the ARP exit strategy (e.g. the extent to which they will help prepare a follow-up operation), and the willingness of the proponentDivisions to provide counterpartassistance. MAFF will contract out high calibre policy advisors to manage the studies. Policy development would require extensive consultations with stakeholders (agriculture donors, key government departments, NGOs, district governments, farmer groups, and the church, among others). It is expectedthat the MAFF will adopt the relevant policy recommendations and integratethese into its policies and regulations. The project will finance technical assistance, studies, surveys and workshops insupport of this activity. Sub-component 4.2. Project Management and Capacity Building (US1.9million, EC and TFETGrants) This sub-component will provide overall project management and coordination. It will also support capacity building of MAFF staff to increase their skills on relevant technical and management topics. Program management will be coordinated by the ARP Project Director who is currently the Permanent Secretary o f the Department of Agriculture and Livestock. The MAFF ManagementTeam, consisting of the National Directors ofthe three MAFF departments andthe Directors of Divisions involved inproject, will continue to provide overall policy and decision-making to facilitate project implementation. To ensure sustainability, the Project ManagementUnit establishedunder ARP Iand I1will be abolished, and the project will be absorbed into the existing structure of MAFF. Incremental operating costs will be progressivelyfinancedby MAFF at an increasingrate of 25% inyear 1to 75% inyear 3. EquipmentReplacement. The project will provide minor replacement of computer equipment, vehicles, and furnishings for District Agriculture Offices, Regional Offices and the central MAFF office. To Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 49 improve office equipment maintenance, the project will also hire a full time Information Technology Specialist. Management Training. MAFF staff continue to require skill improvements in key technical and management areas. A Training Plan has been completed for the project. In addition to farmers and technicaltrainingalready budgetedunder each component, the planidentifiesthe needfor furthertraining in procurement, financial management, monitoring and evaluation, and overall management. The Training Plan also includes provision for attendance by MAFF senior staff at priority international conferences or short-termcourses not available in-country. The status o f training will be assessedevery six months andtrainingcourseswill be continuedor revisedbasedon the results. Core Support for Project Management. The Project Director and MAFF Management Team will be assisted by a full time Project Management Advisor in day-to-day project operations, a Procurement Advisor and a Financial Management Advisor, who will work with their respective government counterparts under the Finance and Budget Support Services Unit of MAFF. MAFF's Monitoring and EvaluationOfficer (already trainedunder ARP 11) will be responsible for the monitoringand evaluation of project activities, assisted by short-term monitoring and evaluation specialists at key stages of the project(benchmark study, mid-termreview,and final evaluation). Insupport ofthis sub-component,the projectwill finance office andcomputerequipment andfurnishings, vehicles, workshops, training and study tours, technical assistance services, annual project audits, and incrementaloperating costs. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 50 Technical Annex 5: Project Costs TIMOR-LESTE: Third Agriculture Rehabilitation Project Local Foreign Total Project Cost By Component US $million US $million US $million 1.Participatory DevelopmentandNatural Resource Management 0.82 0.35 1.17 2, IrrigationRehabilitation and Management 1.76 1.28 3.04 3. Services to Farmers 3.1. Information to Farmers 0.48 0.78 1.26 3.2. SustainableAnimal Health Services 1.21 0.76 1.97 3.3. Support to Agri-Businesses 0.13 0.4 1 0.54 Sub-Total Services to Farmers 1.82 1.95 3.77 4. Program Management 4.1. Policy and Strategy Development 0.00 0.47 0.47 4.2. Project Management and Capacity Building 0.61 1.04 1.65 Sub-Total Program Management 0.61 1.51 2.12 Total Baseline Cost 5.00 5.09 Physical Contingencies 0.32 0.45 0.76 Price Contingencies 0.23 0.3 1 0.54 Total Project Costs' 5.54 5.85 11.39 Total Financing Required 5.54 5.85 11.39 Local Foreign Total Project Cost By Category US $million US $million US $million Goods 0.43 1.43 1.87 Works 1.88 0.85 2.73 Services 0.70 3.53 4.23 Training 0.93 0.03 0.96 Small Group Grants 0.24 0.24 Incremental Operating Costs 1.10 1.10 Incremental Staff Salaries (under CFET) 0.24 0.24 Total Project Costs' 5.52 5.85 11.37 Taxes and Duties 0.02 0.02 Total Financing Required 5.54 5.85 11.39 Identifiabletaxes and duties are US$25.000and the total project cost, net of taxes, is US$11.37million. Note: Numbersmay not add up due to rounding. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 5 1 COST TABLE SUMMARY Base Costs Without Contingencies(in US$ equivalent) - OMPONENTlSUBCOMPONENT/ACTIVITIES TOTAL tREAKDOWh Y FUNDSOUR EC OVERALL (TFET8 EC) TFET CFET PROJECTCOST IPARTICIPATORYDEVELOPMENTANDNRM 1.1 S4pport to P.lotVillages 354,600 354,600 18,000 372,600 1.2 Expansionto New Wlages 660,200 660,200 133,000 793,200 Sub total Component 1 1,014,800 1,014,800 151,000 1,165,800 2 IRRIGATIONREHABILITATIONAND MANAGEMENT 2.1 Commmty Irrigaton and Roads Renaolitation 500,000 500,000 480,000 980,000 2.2 Major IrrigationRehablitation 1,560,640 1,560,640 1,560,640 2.3 Capacity Buildingana WUA Sbppon 288,600 230,600 58,000 288,600 2.4 Survey and Mapping 165,000 165,000 44,300 209,300 Sub total Component2 2,514,240 395,600 2,118,640 524,300 3,038,540 3 SERVICESTO FARMERS 3.1 Informationto Farmers 3.1.1 InformationProgramming 304,535 60,060 244,474 84,000 388,534 3.1.2 S~pportto CGIAR Laison Secretarat 224,250 224,250 224,25C 3.1.3 P.lot Commmty-based Informat.onService Netwonc 346,692 346,692 346,692 3.1.4 Agrc-Meteoro,ogical Nehvork 299,684 299,684 299,6& Sub total 1,175,161 60,06C 1,115,100 84,000 1,259,16( 3.2 S-sta'nade Animal HealthServices 3.2.1 Vamnat.on Campa,gns 527,700 282,55C 245,150 500,100 1,027,80( 3.2.2 Cold Cnain Improvement 324,800 324,800 324,80( 3.2.3 Ullage Livestock WorKers 420,510 236,94C 183,570 72,600 493,11( 3.2.2 Capacry BLilding 121,70C 22,90C 98,800 121,70( Sub total 1,394,710 542,39C 852,320 572,700 1,967,41( 3.3 Supponto Agn-Business 3.3.1 S~pponto See0 Producers 92,35C 92,35( 6,OOC 98,35( 3.3.2 S~pponto Prionty N'cne Market Commoddes 267,40C 267,40C 6,OOC 273,40( 3.3.3 Supportto Rural ProducerOrganisations 155,OOC 155,OOC 15,OOC 170,00( Sub total 514,750 92,35( 422,400 27,OOC 541,75( Subtotal Component3 3,084,620 694,80( 2,389,820 683.70C 3,768,32( 4PROGRAMMANAGEMENT 4.1 Polcy and Strategy Development 470,OOC 105,00( 365,OOC 470,000 4.2 Pro;& Managementand Capacity Buildng 1,472,165 444,83! 1,O27,33C 178,2OC Sub total Component4 1,942,165 549,83! 1,392,33C 178,20( OTAL PROJECT 8,555,825 2,655,03! 5,900,79( 1,537,20( 10,093,025I Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 52 AGRICULTURE REHABILITATION PROJECT 111 COST TABLE SUMMARY -Total Costs with Contingencies (in US$ equivalent) TOTAL REAKDOWN E FUND SOURC TFET EC OVERALL (TFET & EC) W R ) CFET PROJECT COST 1 PARTICIPATORY DEVELOPMENT AND NRM 1.1 Support to Pilot Villages 394,624 394,624 18,000 412,624 I.2 ExpansiontoNewVillages 769,745 769,745 133,000 902,745 Sub total Component I 1,164,369 1,164,369 151,000 I,315,369 2 IRRIGATION REHABILITATION AND MANAGEMENT 2.1 Community Irrigation and Roads Rehabilitation 579,006 579,006 480,000 1,059,006 2.2 Major Irrigation Rehabilitation 1,875,359 1,875,359 1,875,359 2.3 Capacity Building and WUA Support 323,332 259,043 64,289 323,332 2.4 Survey and Mapping 190,064 190,064 44,300 234,364 Sub total Component 2 2,967,761 449,108 2,518,654 524,300 3,492,061 3 SERVICES TO FARMERS 3.1 Information to Farmers 3.1.1 Information Programming 345,695 66,620 279,075 84,000 429,695 3.1.2 Support to CGIAR Liaison Secretariat 265,516 265,516 265,516 3.1.3 Pilot Community-based Information Service Network 394,682 394,682 394,682 3.1.4 Agro-Meteorological Network 340,788 340,788 340,788 Subtotal 1,346,681 66,620 1,280,061 84,000 1,430,681 3.2 Sustainable Animal Health Services 3.2.1 Vaccination Campaigns 599,497 313,501 285,996 500,100 1,099,597 3.2.2 Cold Chain Improvement 355,802 355,802 355,802 3.2.3 Village Livestock Workers 469,385 261,478 207,909 72,600 541,987 3.2.2 Capacity Building 135,497 24,754 110,743 135,497 Sub total 1,560,182 599,733 960,451 572,700 2,132,883 3.3 Support to Agn-Business 3.3.1 Support to Seed Producers 104,162 104,165 6,OOC 110,16E 3.3.2 Support to Priority Niche Market Commodities 304,OlS 304,019 6,OOC 310,OlE 3.3.3 Support to Rural Producer Organisations 178,80( 178,800 15,OOC 193,8OC Sub total 586,98r 104,16! 482,819 27,OOC 613,984 Sub total Component 3 3,493,84( 770,511 2,723,331 683,70C 4,177,54f 4 PROGRAM MANAGEMENT 4.1 Policy and Strategy Development 541,552 11444: 423,107 541,552 4.2 Project Management and Capacity Building 1,687,00( 497,561 1,189,435 176,20C 1,865,20( Sub total Component 4 2,228,55: 616,OOC 1,612,546 178,ZOC 2,406,752 OTAL PROJECT 9.854.531 3,000,00( 1,537,20( 11.391.73( Timor-Leste Third Agriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 53 Technical Annex 6: Implementation Arrangements TIMOR-LESTE: Third Agriculture Rehabilitation Project The Ministry of Agriculture, Forestry and Fisheries (MAFF) will be the executing and implementation agency for the project. This is the thirdARP projectexecutedby MAFF and its predecessor,the Division of AgricultureAffairs. The projectwill therefore benefitfrom accumulatedimplementationexperience. ARP I11will be implemented at three levels: at the village level, by rural communities and farmers' groups; at the district level, by the District and RegionalAgricultural Offices and their partners such as nongovernmentalorganizations(NGOs) andprivatesuppliers (e.g.Village LivestockWorkers); and at the centrallevel, by MAFF Departmentsand Divisionsresponsible for the activities. Project implementation will be "embedded" into MAFF's organizationalstructure (see Figure 1). This was judged to be the most efficient arrangement to ensureownership andsustainabilityof projectactivities. Lessons learned from ARF' Iand I1point to a need to strengthen inter-sectoralcollaborationamongst MAFF Divisionsto ensure that services to rural communities are integrated and demand-driven. It also identifieda needto strengthencoordinationacross all levels -with other donors, NGOs and development partners, other governmentdepartments, and betweenDili-basedand district-basedagriculture staff.ARP I11 will seek to strengthen these aspects: it will organize formal inter-sectoral teams and periodic consultation meetings to strengthen links between MAFF divisions, as well as facilitate partnership groups with NGOs, academic institutions and donors working on specific topics - such as natural resource managementor agriculturalpolicy (see Section C). This should contributeto further sharing of lessons of experience amongst MAFF development partners. MAFF currently has 180staffat the national and district levels. It expectsto recruit an additional81 staff in 2004-05, bringing the total number to 261. Many staff have undergone short-termmanagement and technical training under past donor-funded projects. However, their capacity needs to be strengthened further to ensure sustainability. An initial capacity analysis was completed at appraisal, matching existingstaff and skillswith projectneeds, and assessingthe technicalassistance requirements(See Table 2). This analysis identifiedareas for further institutionalstrengthening and training. Giventhe needto strengthen coordinationamongst MAFF divisions, it is a matter of concern that the NationalDirectorate of Forestry, and the Divisions of Livestock and Irrigation have been temporarily moved to a different buildingfrom other MAFF Divisions, due to lack of space. This will needto be monitoredvery closely, with the objectiveof regroupingthe Ministry in an alternativebuildingas soon as possible. Another great challenge faced by MAFF is its ability to coordinate the vast donor program in agriculture and rural development, amounting to close to US$14million in FY04 - close to 8 times the level of its public expenditures (US$1.8 million). ARP I11 seeks to address this by working on MAFF's priority programs from within, effectively supplementing the Ministry's scarce budget. It will also help the Ministry develop a long-termstrategy where donor-fundedprogramswill be closely alignedwith sectoral priorities(see Annex 1). To enhanceMAFF's implementationcapacity, the project will continueto engage long-termtechnicaland management advisors in the areas of natural resources management, community-driven development, irrigation, communication, livestock, agri-business, project management, financial management, and procurement. Short-term technical experts will also be contracted for specialized areas. These technical assistance requirements are summarized in the capacity analysis (Table 2). MAFF will evaluate all internationaladvisors quarterly to determine their effectiveness at skill transfer to local counterparts. In addition, the project will seek to improve the English language skills of middle level management to strengthentheir ability to negotiate with donors, access critical global informationand communicate with internationalexperts. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 54 The project will continue to invest heavily on improving MAFF's capacity for project planning, implementation, and monitoring, as well as providing technical training according to needs. MAFF prepared a detailed Training Plan for each component as part of the Project ImplementationPlan. To improve the effectiveness o f training, MAFF will develop training evaluationprocedures and invest in refresher trainingwith immediateapplicationonthe ground. Inadditionto technicalassistanceandtraining, MAFF stafflimitationswill be addressedthrougha higher relianceon NGOs and private partners, such as VLWs and facilitators, as well as community groups to carry out natural resource management and irrigationand roads rehabilitation. The growing capacity o f these groups as partners are expectedto be assessedperiodicallyduringthe projectreviews. ARP I11is expectedto bejointly financed by the EuropeanCommission(EC) andthe Trust Fundfor East Timor (TFET). Similarly to TFET, EC funds would be managed by the International Development Agency (IDA) and executed by MAFF, although under separate Grant Agreements. Hence, project financial, procurement, and reporting will follow Government and IDA procedures. The financial management, procurement, and monitoringand evaluation systems establishedunder ARP IandI1will be further enhancedbasedonpast experience. A. Project Organization The project will be implementedat three major levels, as outlinedbelow. 1. Rural Communities ARP I11will continue to strengthenthe ARP I1strategy for participatorydevelopment. This will involve (i)SmallGroupGrantstouplandandcoastalcommunitiesunderComponent1; (ii)direct civilworks contracts with communities in lowland areas to rehabilitate irrigation schemes and access roads; (iii) extendingthe Village LivestockWorkers programto cover all villages inTimor-Leste; and(iv) supportto seed producers and priority niche market processors. Farmers groups and individuals (in the case of VLWs) will implement these activities, assisted by facilitators, partner NGOs and MAFF staff at the central and district levels.ARP I11will target existingfarmers groups or, if they do not exist, encourage their establishment accordingto the most appropriate socio-economic units: sub-village (aldeia) small farmers' groups are targeted under component 1, whilst Water Users Associations will be targeted under component 2. MAFF will engage civil society groups in the monitoring of project activities. The experience with community-basedactivities will be discussedwith other donors implementingsimilar programs, such as AusAID, GTZ, Portugal, UNOPs, Oxfam, CARITAS and CIDA. MAFF's Forestry Directorate is currentlyestablishing a networkto share lessonsof experience innatural resourcesmanagement. The capacity of community small groups to undertake natural resource management activities (under Component 1) varies substantiallyacross villages. In general, the mid-termreview of ARP I1concluded that technical support to community groups needed to be increased. ARP I11 has taken this recommendation on board: it will strengthen the technical training o f community groups, and prepare technicalmanuals for the most frequently selectedactivities. ARP Iand I1 demonstrated the ability of communities to act as contractors in rehabilitating small irrigationand access roads. The first technicalaudit -conducted inmid-2002- identifiedsome technical weaknesses andrecommendedthat MAFF revisitcommunity schemes periodically to assess those inneed of further assistance. As a result, MAFF providedextra support to about 15 percent of the schemes previouslyassisted. This processof revisitingtechnicallyweak communities will continue inARP 111. Timor-LesteThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 55 2. District and Sub-District Level MAFF's District Agricultural staff will provide technical backstopping and coordinate the implementation o f project activities at the community and district levels. There are presently an average o f six staff under the coordination o f a District Agricultural Coordinator, including a District Irrigation Officer, a District Livestock Officer, a District Crops Officer, a District Forestry Officer, and a District Fisheries Officer. However, MAFF plans to optimize the deployment o f field staff by creating three regional extension offices (in Baucau, Manufahi, and Bobonaro), though the precise staff assignation is still being discussed. District officers will be responsible for specific components, in close collaboration with MAFF central divisions. For example, Component 1 will be the joint responsibility o f Forestry and Fisheries Officers, with other staff assisting on an as-needed basis. Animal Health Services are the responsibility o f Livestock Officers, and Irrigation Rehabilitation the responsibility o f Irrigation Officers. The District Agricultural Coordinator will be responsible for ensuring integration o f activities in the district, as well as for monitoring and reporting. The District Agriculture Officers should coordinate closely with other partners active at the district level- NGO partners, church organizations, other donors, and Sub-District Development Officers (SDOs). The newly deployed SDOs, who are expected to work at the grassroots level, could facilitate the linkages between project beneficiaries and MAFF implementers, though their specific responsibilities need to be defined further when the new Autonomy Law comes into effect. 3. Central MAFF Departments and Divisions MAFF has three national Directorates headedby National Directors under a Permanent Secretary, as well as twelve technical divisions headed by Directors. The different components o f ARP I11 will be implemented by the Divisions that are responsible for the associated programs in MAFF (see Table 1). These same Divisions have implemented ARP I1 and their staff are already familiar with the implementation procedures. They will be assisted by technical advisors whose terms o f reference have been expanded to include specialist advice to MAFF management on their areas o f expertise (Le. not only confined to project activities). B. Project Implementation Arrangements In ARP Iand 11, a Project Management Unit (PMU) was established to manage project implementation. This will be dissolved in ARP I11 and project management will be fully integrated into MAFF's organizational structure. Overall coordination will remain the responsibility o f the Project Director, currently the Permanent Secretary o f MAFF. H e will be supported by an international Project Management Advisor. Based on the implementation experience in ARP 11, a Deputy Project Director may also be appointed to carry out day-to-day project management on behalf o f the Project Director. The Project Director will retain full signatory and supervisory authority over all MAFF units and staff involved inthe project. The ARP Management Team o f ARP 11, consisting o f MAFF National Directors and Division Directors, will continue to be responsible for overall implementation achievements and decision-making. MAFF's Finance Officers, trained under ARP 11, will handle the project's financial management with the support o f newly recruited financial staff and a full-time international Financial Advisor. Monitoring and evaluation (M&E) and quarterly reporting will be the responsibility o f MAFF's M&E Officer with support o f an Assistant M&EOfficer and the internationalProject Management Advisor. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 56 Table 1. Project ImplementationResponsibilities by MAFF Division ARP 111Componenr Responsible DepartmenvDivision Overall ProjectCoordinationandManagement ProjectDirector (Permanent Secretary of MAFF) MAFF ManagementTeam 1.ParticipatoryDevelopmentandNRM Reforestation andForestRehabilitationDivision (Directorate ofForestry) FisheriesResourcesandMarineEnvironmentManagementDivision (Directorate of Fisheries and Marine Resources) 2. Irrigation RehabilitationandManagement Irrigation and Water ManagementDivision (Direct. of Agriculture and Livestock) 3.1. Information to Farmers Researchand ExtensionCenter (Directorate of Agriculture and Livestock) 3.2. SustainableAnimal Health Services LivestockDivision (Directorate of Agriculture and Livestock) 3.3, Supportto Agri-Business FoodCropsDivision (Directorate ofAgriculture and Livestock) 4.1. Policy and Strategy Policy, PlanningandProgramService and MAFF ManagementTeam 4.2. ProjectManagementKapacityBuilding ProjectDirector andMAFF AdministrationUnits Procurementand FinancialManagement FinanceandBudgetSupport Services (MAFFAdministration Directorate) MAFF's Procurement and Tender Services Unit will continue to be assisted by an international procurement advisor, working together with a full-time Procurement Officer and a contracted Procurement Specialist. The suitability of these arrangements will be monitored closely during supervision- if found lacking, IDA will seek assurances from the CentralProcurement Office that they will seconda qualifiedprocurement officer to MAFF (see Annex 8) Activities formerlyunder the PMUwill now be institutionalizedwithinthe appropriateMAFF units: e Coordination and supervision of component implementation will be transferred to the MAFF ManagementTeam, underthe oversight ofthe ProjectDirector. e Monitoring of field activities will fall under the responsibility of the respective MAFF Divisions. MAFF's Monitoring and EvaluationOfficer (with assistance from the Project Management Advisor) will compilebi-annualprogressreports as inputsto IDA'SSupervisionMissions. e MAFF's Budget Services Unit will be responsible for managing disbursements and the project's Special Account, preparingwithdrawaland replenishment applications, carry out assets accounting, andcoordinate the preparation of annualproject audits. e The Procurement and Tender Services Unit will be responsible for preparation, advertisement, evaluation and awards o f project-related procurement, with assistance from the Logistics and Equipment Unit. e The InformationUnit of the Researchand ExtensionCenter will be responsiblefor ensuringeffective communication betweenthe project's stakeholders. L. fi Collaboration and Partnership Arrangements A key lesson from ARP Iand I1 is the need for MAFF Divisions to collaborate more closely in community-based activities such as Components 1 and 2, as well as in information dissemination. In addition, collaborationbetween MAFF and development partners at the national and district levels has remained informaluntil now. MAFF started to implement community-basedactivities, but it could gain further from lessons of experiences accumulated by internationalNGOs (such as ETADEP, Yayasan HAK, FAT), and other donor-funded development projects (such as GTZ, JICA, AusAID, ACIAR, Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 57 CIDA, FAO, UNDPLJNOPS, etc.). Most internationalNGOs, for example, already participate in a Sustainable LivelihoodForum, andMAFF has startedliaisingwith NGOs, particularlyinnaturalresource management activities. ARP I11will seek to further strengthen collaboration with these partners and formalize networks where lessons of experienceandinformationcouldbe shared. 1. MAFF Inter-Sectoral Teams Under ARP 111, the following inter-sectoralteamswill be strengthened: o NRMImplementationTeam (withassistancefrom stafffrom Crop ProductionandLivestock, in additionto ForestryandFisheries) Irrigation Team (with assistancefrom stafffrom CropProduction) o Information Team (with participation of staff from key Divisions involved in information programs) Training Team These teams will need to be formally designated with a team leader, clear terms of reference, work schedule, and stafftime allocation. Their effectivenesswill be monitoredduringprojectimplementation. 2. PartnershipGroups MAFF Divisionshave committedto formthe followingnetwork groups with interestedpartners: o A PolicyAdvisoryGroup,ledby MAFF's Policy,PlanningandProgramServices. NRMAdvisory Committee,ledby the ReforestationandForest RehabilitationDivisionandthe Divisionof FisheriesandMarineResources. An Irrigation Network,ledby the IrrigationDivision An InformationForum,ledby the ResearchandExtensionCenter o A LivestockNetwork,ledby the LivestockDivision An Agri-Business Consultative Group,ledby stafffrom the Crop ProductionDivision. These partnership groups will meet at least bi-annually to exchange information and lessons learned. Their levelo factivity will be monitoredunderthe project. 3. Collaborationwith International Research Organizations Under ARP I1 and the Seeds for Life Program, MAFF has established contacts with several CGIAR centers and specialized organizations. Several cross visits of CGIAR experts to Timor-Leste, and Timorese staff to the centers have taken place, andthis collaborationwill continue under ARP 111. Inthe Support to Agri-business sub-component,MAFF is also expectedto partner with IRRI, andACIAWSeeds for Life in obtainingrice foundationseeds. Inaddition, the LivestockDivision has proposedmembership for Timor-Leste in the Office Internationaledes Epizootics (OIE) and its regional Southeast Asian Foot andMouthDisease Sub-commission(SEAFMD). Ultimately,the project's sustainability will be measured by the degree to which activities are integrated into MAFF programs and delivered effectively to farmers. Special attention will therefore be paid to impact and quality aspects, using a programmatic approach that relies on learning-by-doing, periodic evaluations, and subsequent adjustments. Two key activities - vaccination and community irrigation - will be progressively transferred to MAFF financing as the project evolves. Other activities will be supported by increasing shares o f counterpart operational funds to help ensure effective institutionalization. Timor-LesteThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 58 r s 3 0 c.l c, Q) cd I cw 0 m W cd H H H B-4 c, a El Q) E ; I H .y 0 : .I P u3 kl 2E cw 0 .I m 3m 4cd Icd .I c, c, a .I c, m HEl .. c.l 5clc a P E; d f Q M a N Technical Annex 7: Financial Management and Disbursement Arrangements TIMOR-LESTE: Third Agriculture Rehabilitation Project A. Financial Management Assessment MAFF's Budget Services Unit will be responsible for the overall financial management of the project. This permanent MAFF Unit is a natural successor of the Project Management Unit (PMU) first established in 2000 for ARP Iimplementation. Accounting, internal controls and audit procedures for ARP I11will thus be a continuationof systems which have evolved and been progressively strengthened over the last three years. The financial management o f ARP projects has been supervised regularly in accordance with IDA procedures. Problems arising have been adequately identified and corrective actions followed up during supervision missionand documented inproject files. Procedures and controls of project expenditures are set out in a Manual of FinancialProcedures which is updated as required. These procedureshave also beenincorporatedinto the ProjectImplementationPlanfor ARP 111. The Budget ServicesUnit consists ofthree Timorese staff, assistedby a part-timeFinancialAdvisor. The Financial Advisor undertakes all the tasks o f a Chief Financial Officer of a project or an entity. In preparationfor ARP 111,the FinancialAdvisor will becomeavailablefulltime as ofmid-October2003. Past problems in financialmanagementhave included: (i)modificationsand improvements necessary to make accounting systems responsive to the requirements o f Freebalance (the accounting software adopted by the Government for uniform application); (ii)lack of an adequate register of fixed assets financedby ARP funds and periodic physicalverification of assets; (iii) modificationsnecessary inthe budget procedures to enable each project component manager to follow expenditures against the funds allocated for each component; (iv) inadequate follow up of financial management procedures at Agriculture Service Centers; (v) delays in conforming to IDA'S recent requirements for quarterly FinancialMonitoringReports(FMRs) and(vi) inadequateattentionto trainingof Timorese financial staff. Since the arrival o f FinancialAdvisor in February 2003, these issues are beingaddressed in a systematic manner. The conversion o f the FinancialAdvisor to full-time basis is expectedto further accelerate the process. Project funds will be utilizedeither by direct payments, or through a Special Account at a local Bank, which will be replenishedperiodically by IDA. MAFF will open and manage separate Special Accounts for the TFET andEC grants.Directpaymentswill generally be for larger paymentswhich exceed20 % of the authorized allocation for a Special Account. The Budget Services Unit will be responsible for managementof the SpecialAccount inaccordancewith IDA procedures and as indicatedunder SectionE below. All payments to suppliers of goods and services and beneficiaries will be effectedby the Budget Services Unit in accordance with established procedures, includingapprovals of expenditures by MAFF managersresponsible for the projectcomponents. The Budget Services Unit maintains an adequate accounting system to record project resources and expenditures. The system has now been designed to generate data required for inputting in the computerizedGovernment accountingsystem(Freebalance). Annual financial statements of ARP Iand I1have beenpreviously auditedby an internationalfirm (Ernst & Young, Darwin)with no significantirregularitiesor issues as regardsfiduciary accountabilityreported. The latest audit report for year ended June 2002 contains an unqualified(clean) audit opinion. Several recommendationsfor strengtheningo f internalproceduresare beingaddressed. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 65 FinancialMonitoring Reports (FMRs). The Finance Unit is now able to produce quarterly FMRs for ARP I1in accordance with IDA guidelines. Ifthe FMRs under ARP I11are considered acceptable (and providedother requirements for adequacy o f financialmanagementfor the projectare satisfied), IDA may allow an optionfor the Governmentto switchARP I11disbursementsonthe basisof quarterly FMRs. Based on the above and a specific assessment undertakenfor ARP 111,and taking into account the agreed corrective actions agreed, overall financial management systems and procedures are considered satisfactory and adequatefor implementation of theproject. 8. Financing Arrangements by Component The flow of funds andfinancingarrangements by componentare describedbriefly below. Component 1 Pilot Participatory Developmentand Natural Resources Management - The financial and accountingprocedures for this component will follow the process pilotedunder ARP I1 and the Operational Manual for ARP Participatory Development and Natural Resources Management. Payments under Small Group Grants for approved Small Group Activity plans will be in three installments: an advance o f up to 30 percent, an intermediary payment upon verification of progress of activities, and a final payment upon verification o f successful completion.Periodic monitoringwill take place to ensure compliancewith financial reportingrequirements.The flow of funds and accountabilities for processingthe SmallGroupAgreements is shown inFigure 1below. Component 2 -Irrigation Rehabilitation and Management Community-basedcontracts will use the established procedures developed under ARP 11. Memorandum ofAgreements (MOAs) will be signedbetweenthe Project Directorand a well-respectedrepresentative of the community undertakingthe works, selectedby the beneficiaries themselves (insome cases, this could include a member of the Church or NGOs, depending on communities' preference). The MOAs will be signed in the presence of community witnesses. The MOA will stipulate a mobilizationadvance of not more than 20 percent of the contract value. A 30 percent intermediarypayment will be done based on certification o f progress billings by MAFF irrigationconstructionsupervisions or, if sufficient capacity exists, the district irrigationofficer, reviewedby the Head o fthe IrrigationDivision and approved by the ProjectDirector.The final and full payment (50 percent) will only be made upon full completionof the works, certified, reviewed and approved in the same manner as the intermediary payment. The MOA accounts and weekly financial reports will be displayed publicly on a notice board at the community level. In addition, MAFF will undertake periodic technical audits of the community works. Upon the final payment o f the community contract, MAFF and the community will sign a Memorandum of Turn- Over which states that MAFF officially turns over, and the community correspondingly accepts, responsibilityfor the O&M of the rehabilitatedirrigationfacilities or access roads. These procedures are detailedinthe final Operation Manualfor Community Irrigation and Roads Rehabilitation. For larger irrigation works, payment will be in accordance with the terms stipulated in the contract. Followinga standardmobilizationpayment, periodicpayments will be based on certification of progress billings signed by Project Supervisors, e.g., the consulting firm engaged to supervise the works, and MAFF Irrigationstaff. The certification will be reviewedby the Director o f the IrrigationDivision, and approved by the Project Director. Such progress billing shall include, among others, a detailedphysical accomplishment report. The final payment shall be done upon 100 percent completiono f the works as certified, reviewed and approved in the same manner as the progress billings. All payments shall be subjected to 5 percent retention. The total amount retained shall be paid to the Contractor when the Defects Liability Period, which will be definedineach contract, has passedand all defects that havebeen notifiedto the Contractor have beencorrected. All other details specifyingpayment shall be stipulated in each specificcontract. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 66 Figure 1. ParticipatoryDevelopmentand NRM Component Fund Flow for SmallGroup Grants Copy o f the approvalnotice for the release o fthe Small Group Grants must be hrnished to Sub-District Coordinator, District Agriculture Coordinator, District Forestry and Fisheries Officers, Facilitators andNGO Partners(where applicable) Prior to the first release of the grant, each village must be required to develop and submit their own independent strategiesfor the transparencyo fthe releaseo fthe grant. In instances where the District FinanceOfficer finds it difficult District Finance Officer to collect the money inDili, the NRMManagementCommittee will mediateto speedup the flow ofthe fund i The Village Implementation Team Treasurer must be accompanied by the Leader of the Village Implementation Team and one other respected member o f the Small Group. The money must be turned over immediately to the Small GroupTreasurer as soon as it arrives inthe village. The receipt between District Finance Officer and Village Implementation Team must be noted by the District Forestry Officer and District Fisheries Officer and witnessed by Implementation Team Leader and accompanying member of small group. ~ ~~ The receipt between Village Implementation Team Treasurer and Small Group Treasurer must be notedby the Leader of the Village Implementation Team, Chefe do Suco and Chefe do Aldea and mustbe witnessed by at least2 TraditionalLeaders. As soon as the group receives the money, the group must conduct a meeting to announce the availability o f the money. w The Small Group Treasurer must coordinate closely with the Village ImplementationTeam Treasurer for the public posting of information related to the amount they received and the status of their expenses (in accordance with their agreed strategy) The SmallGroup Grantswill generallybe released in3 Small Group Treasurer ... installments: ........ 30% 2ndrelease ....... 50% 1"release 31d release......... 20% ofthe approvedgrantsfor each activity. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 67 Component 3 Servicesto Farmers - This component will fund informationto farmers, sustainable animal health services and agri-business support services. 3.1. Information to Farmers. Paymentsfor informationcampaigns, informationequipment, and CGIAR Liaison Secretariat's technical assistance will be inaccordance with terms specified in contracts. 3.2. Sustainable Animal Health Services. Payment to private vaccinators for the implementationof vaccination campaigns will follow the system institutedduring ARP 11. Each District Livestock Officer will complete a standard budget estimate, detailing requirements for fuel, transport, materials, and contracting of private vaccinators (usually 8-12 per district). A 20 percent advance for vaccination expenses will be paidto a Campaign Coordinator (usually the District LivestockOfficer) in the form of an `Imprest' for which he has to retire all documents. As the work progresses and accounts are retired, further payments will be made. Periodicpaymentsto vaccinators will be made based on the certification by the Coordinator,and confirmedby the Headof the LivestockUnit as to the quantityand quality of the work done. ARP I11 will also introduce also a new system of vouchers requiring the signature or thumbprintof animalowners for all vaccinated livestock. 3.3. Agri-business Services. MAFF will procure the equipment, farming inputs, services and small works required by this sub-component. Payment will be made upon submission o f invoices, purchase orders or contracts. During implementation, MAFF will explore the best way to provide a set of seed production machinery and village based oil mills to target beneficiary groups, avoiding potential inconsistencies with micro-credit schemes. Options include (a) providing it to an established farmers organization, such as the Agriculture Service Center or a church group; or (b) providing it directly to farmers' groups on a lease-to-buy option. Component 4 - ProgramManagement Payment for experts' services under the Program Management component will be in accordance with the terms of their contract, basedon the presentationof invoices for services rendered. The invoiceswill be authorizedfor payment by the Project Director prior to payment. Payments for goods will be rendered against purchaseorders or invoices. C. Action Plan for Financial Management As indicated, actions necessary for strengthening of financial management have been identifiedthrough periodic supervisions and annual audits. This process will continue during implementationof ARP 111. An important covenant included in the TFET and EC Grant Agreements is that any single project expenditure will only be charged to a single donor. In addition, MAFF will continue to use the same format for FMRs as adoptedunder ARP 11, which is satisfactory to IDA, with changesthat will be agreed with IDA. In particular (a) MAFF will include sufficient details in the FMR to identify separately the funds received from TFET and the EC, as well as their respective uses; and (b) the annual financial statements ofthe project-which includea statement onthe Sources andUses of Funds-will identify the sources anduses of funds separately for TFET andEC. The only other specific action necessary to ensure adequate Financial Management will be for the Financial Advisor to become available full time, for a minimum period of 24 person-months. The appraisalmissionhas receivedassurancesthat this will take place aroundFebruary 2004. 0. Audit Arrangements As for previous ARP projects, annual financial statements will be audited by independent auditors and under auditterms of reference acceptable to IDA. Inadditionto opinionon financial statementsthe audit Timor-LesteThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 68 will reporton the use of SpecialAccounts, reliabilityof Statement of Expenses used as the basis for IDA disbursements, and provide a management letter with recommendations on improvements in internal controls and procedures. The auditors will be requestedto ensure that their report conforms to IDA'S recently revised policies for project audits "Audit Policies and Practices for World Bank Financed Activities, July I,2003". Inaddition,the Terms of Referencefor audits will includea specific requirement to verify (a) that receipts and uses of TFET and EC funds are adequately reported; and (b) that no expenditure has been claimed from both sources of funds. Annual audit report will be due not later than six months after the end of eachfiscal year. E. Disbursements The proposedproject is expected to disburse over a period of 42 months from the date o f effectiveness (expected to be January 2004) to closure (June 30, 2007). Disbursementsmay continue for an additional four months past June 30, 2007 for expenditures covering goods, services or works delivered to the projectbeforethe closingdate o fthe Grant. 1. Special Account MAFF will establish separate Special Accounts for the TFET and EC grants, denominated in U S dollars under terms and conditionsacceptable to IDA. An initial deposit of US$500,000 for the TFET grant, and US$750,000 for the EC grant will be made to facilitate project implementation. This could be reviewed during project implementation if disbursements accelerated beyond current plans. Replenishment applications should be submitted by MAFF on a monthly basis, or when the balance of the Special Accounts reaches 20 percent of the initial deposit, whichever comes first. The Special Accounts will be auditedannually by independentauditors underterms of referenceacceptableto IDA. 2. Use of Statements of Expenditures Statementof expenditures (SOEs) will be usedfor: 0 Contracts for works costingless than US$lOO,OOO equivalent per contract (for EC grant only); 0 Contracts for goods costingless than US$lOO,OOO equivalent per contract (for EC andTFET); 0 Small Group Grants (for TFET grant only); 0 Incremental operating costs, such as reasonable expenditures incurred by MAFF under the project for travel costs and per diems for MAFF staff and partners; bank charges; communications and printing costs; consumables and supplies; internet links; information materials and radio and television broadcast fees; translation services; vehicle and office and field equipment operation and maintenance; and fees for contracted drivers (but excluding staff salaries and staff allowances) (for bothEC andTFET grants); 0 Training,workshops, and study tours (for bothEC andTFET grants); 0 Contracts with consultingfirms costing less than US$100,000 equivalentper contract (for both EC andTFET grants); and 0 Contracts with individualconsultants costing less than US$50,000 equivalentper contract (for bothEC andTFET grants). All other disbursements will be fully documented under standard prior review procedures, Documentation supporting SOE disbursements will be retained by the MAFF Budget Support Unit for a minimum o f one year after receiptby IDA o f the audit report for the year in which the last disbursement was made. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 69 3. DisbursementSchedule Table A below shows the summary allocationof grant proceeds. Giventhat several components are co- financed by TFET and EC, Tables B and C show the separation of disbursements amongst the grants by projectpart (as definedinthe Grant Agreements), or by cut-offdate of incurredexpenditures. Allocation of Grant proceeds (Table A) Table A: Summary Allocation of Grant Proceeds (see also Tables B and C and D) EC Grant TFETGrant Expenditure Category Amount Amount Financing Percentage Civil Works -- 100' (a) Part B.2 of the Project 1,290,000 (b) Other Parts 590,000 Goods (including local transportation) 1,040,000 520,O 00 100%/100%/90%2 Small Group Grants -_ 200,000 100% Consulting Services and Studies 2,120,000 1,340,000 100%/96%3 Training, Workshops, and Study Tours 460,790 410,000 100% Incremental Operating Costs 400,000 190,000 100%~ Unallocated 816,650 340,000 Total Grant to Government 6,717,440 3,000,000 IDA AdministrativeFee (2%) 137,090 3,000,000 Grand Total 6,854,530 Notes : -CommunityirrigationandroadswillbefinancedbytheGovemmentat25% duringthefirstyear, 50%duringsecondyear, and 75% duringthe third projectyear. However, different community schemeswill be financed separatelyby the EC and the Government. Hence, the EC-fundedschemes will be funded at 100%. -100%offoreignexpenditures,100%oflocalexpenditures(ex-factorycosts), and90% oflocalexpendituresforotheritems procuredlocally. -100%forindividuals,and96% forfirms. -100%uptotheamountsspecified. TheGovernmentwouldbefinancinganincreasingshareofincrementaloperatingcosts equivalentto 25% during FY04/05, 50% duringFY05/06, and 75% afterwards Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document,October 7, 2004 70 Table B. IndicativeDisbursementsby Project Component (for TFET Grant, in US%'OOO) DisbursementAccount (1) (2) (3) (41 (5) (6) Total Project Parts Goods Small Consultant Training, Incremental unallocated (as defined in GrantAgreement) Group Services Workshops Operating Grants and Studies Study Tours Costs A,. Participatory DevelopmentandNRM Continuation in Pilot Villages 67.0 0 169.6 74.0 44.0 354.6 Expansion to New Villages 40.0 200.0 289.2 131.0 - 660.2 p o t a ~Part A. 107.0 200.0 458.8 205.0 44.0 1,014.8 I B. Irrigation Rehabilitationand Management B.3(a) Vehicles, equipment, T.4, WUA training, inputs 42.0 - 162.6 26.0 - 230.6 B.4. Survey and Mapping 165.0 - - - - 165.0 total Part B 207.0 0 162.6 26.0 0 395.6 I C. Services to Farmers C.1. Information to Farmers C.l(a) Information Programmingup (first year) 0.75 - 8.2 6.2 44.9 60.1 ketal Part C.1 0.75 - 8.2 6.2 44.9 60.1 1 C.2.Animal Health Services C.2(a) Vaccination Campaigns (first year) 130.4 - 128.0 - 12.1 282.6 C.2(c) Village Livestock Workers (first year) 35.0 128.0 73.9 12.1 236.9 C.2(d) Capacity Building (first year) 4.7 -- - 18.2 0.1 22.9 k o t a ~Part c.2 170.1 - 256.0 92.1 24.2 542.4 (2.3,Support to Agri-Business C.3(a) Support to Seed Producers 17.4 - 60.0 15.0 0.1 92.4 ketalPart c.3 17.4 - 60.0 15.0 - 92.4 1 D. Program Management D.1. Policy and Strategy (first year) - - 105.0 - - 105.0 D.2. Project Management (first year) 15.0 - 284.6 62.0 83.2 444,8 potal Part D 15.0 0 389.6 62.0 83.2 550.3 I Contingencies 345.0 345.0 \TotalTFET Grant 517.2 200.0 1,335.2 406.3 196.4 345.0 3,000.0 1 Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 71 Table C. IndicativeDisbursementsby ProjectComponent(for EC Grant) in EUR'000 - Project Parts (1) (2) (3) (4) (5) (6) Total (as defined in Grant Agreement) Works Goods Consultant Training, Incremental Unallocated Servicesand Workshops, Operating Studies and Study costs Tours B. IrrigationRehabilitation and Management B.1. Community Irrigationand Works 480.0 5.O 15.0 - - 500.0 B.2. Major Irrigation Rehabilitation 1,287.9 - 272.8 - - 1,560.6 B.3(b). MAFF and DIO Training - - - 58.0 - 58.0 ITotal Part B 1,767.9 5.0 287.8 58.0 - 2,118.7 1 C. Servicesto Farmers C.1 Information to Farmers C.l(a) Information Programming (second year - 12.0 151.2 10.5 70.8 244.5 onwards) C.l(b) CGIAR Secretariat - - 94.0 34.3 96.0 224.3 C.l(c) Community-based InformationNetworks 24.7 227.4 55.4 7.0 32.2 346.7 C.l(d) Agro-Meteorological Network 28.0 235.9 20.0 1.8 14.0 299.7 ITotal Part C.1 52.7 475.3 320.6 53.5 213.0 1,115.1 1 C.2. Animal Health Services C.2.(a) Vaccination Campaigns (second year onwards) - 60.8 136.0 - 48.4 245.2 C.2 (b) Cold Storage Equipment - - - - - 324.8 324.8 C.2 (c) Village Livestock Workers (second year 23.8 67.0 92.8 - 183.6 onwards) C.2 (d) Capacity Building (secondyear onwards) - 2.4 - 96.4 - 98.8 1Total PartC.2 0 411.8 203.0 189.2 48.4 852.4 I C.3. Support to Agri-Business C.3 (b) Support Priority Niche Market Commodities 60.0 60.0 123.4 12.0 12.0 267.4 C.3(c) Support to Rural Producer Organizations - 3.O 111.6 20.0 20.4 155.0 ITotal Part C.3 60.0 63.0 235.0 32.0 32.4 422.4 I D. Program Management D.1.Policy and Strategy (secondyear onwards) - - 365.0 - - 365.0 D.2. Project Management (second year onwards) - 87.0 712.0 124.0 104.3 1,027.3 1Total Part D - 87.0 1,077.0 124.0 104.3 1,392.3 I Contingencies 953.7 953.1 O fwhich: Unallocated 816.65 2% IDA Administrative Fee 137.09 ITotalEC Grant 1,880.6 1,042.0 2,123.4 456.7 398.I 953.7 6,854.53 I Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 72 Table D. IndicativeAllocationof CounterpartBudget by Project Component (for CFET Funds) Project Parts (as dejned in Grant Agreement) Works Goods Operating Services Staff Costs Total costs A,. Participatory Developmentand NRM Continuationin Pilot Villages 40.0 18.0 58.0 Expansionto New Villages 93.0 93.0 ITotal Part A 0 0 40.0 0 111.0 151.0 I B. Irrigation Rehabilitation and Development B.l. CommunityIrrigationand Works 519.5 B.4. Survey and Mapping 5.0 C. Servicesto Farmers C.1. Information to Farmers C.l(a) Information Programming - - 60.0 - 24.0 84.0 ITotal Part C.1 0 0 60.0 0 24.0 84.0I C.2. Animal Health Services C.2.(a) VaccinationCampaigns - 121.5 103.5 240.0 35.1 500.1 C.2 (c) Village Livestock Workers - 37.5 - - 35.1 72.6 ITotal Part C.2 0 159.0 103.5 240.0 70.2 572.7 ] C.3. Support to Agri-Business C.3 (a) Supportto Seed Producers 6.0 C.3 (a) Supportto CandlenuUCoconutProcessors 6.0 C.3(b) Supportto RuralProducer Organizations 15.0 ITotal Part C 3 - - 27.0 - - 27.0I D.Program Management D.l.Policy and Strategy - - - - - 0 D.2.Project Management - - 178.2 - - 178.2 ITotal Part D - - 178.2 - - 178.2 I I TotalCFET 480.0 159.0 413.7 240.0 244.5 1,537.2 I Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 73 Technical Annex 8: Procurement TIMOR-LESTE: Third Agriculture Rehabilitation Project MAFF's Procurementand Tender Services Unit will be responsible for projectprocurement, MAFF has also implementedthe two previousARP projects inthe sector. The estimated project costs are US$11.4million equivalent, of which US$5.5 million will be local costs, and US$5.9 million foreign costs. IDA, as the Trustee for the Trust Fund for East Timor (TFET) will finance a grant of US$3.0 million. The European Commission will finance a grant of 6.8545 million (US$6.9 million equivalent), administered by IDA. The Government will finance the remainingUS$1.5 million: Of the portion funded by the TFETEC grant, an estimated US$2.25 million will be for civil works, US$1.73 million for goods, US$3.99 for services, and US$0.24 million for Small Group Grants. The remainingamount (US$1.65million) will be for trainingand incrementaloperatingcosts. The project implementationperiod is from January 2004 to June 2007 (for the TFET grant) and from September2004 to December2007 (for the EC grant). A. Summary of Procurement Methods Procurement of civil works and goods financed by IDA and the EC shall be on the basis of the "Guidelines: Procurement under IBRLI Loans and IDA Credits" dated January 1995, and revised in January and August 1996, September 1997, and January 1999. Selection of consultants shall be on the basis of the "Guidelines: Selection and Employment of Consultants by World Bank Borrowers", dated January 1997andrevised in September 1997, January 1999, andMay 2002. 1. Procurement Of Civil Works (US$2.73million, EC Grant and Government Financing;) (a) InternationalCompetitive Bidding(ICB): The project is expectedto includeonly one large civil works contract. Procurement o fthis contract shallbe carriedout throughICB procedures.MAFF has completeda detailed feasibilitystudy and designdocuments for the contract. (b) Procurement of Small Works (PSW): The project will finance a number of small works: refurbishing of existing office space and burglar proofing for community-based information units, protective fencing for ago-meteorologicalunits and rain gauges (under the Informationto Farmers sub-component), and village sheds for small oil processing mills (under the Agri-Business sub- component). These works are estimatedto cost less than US$10,000 each, up to an aggregate amount not exceeding US$150,000". Procurementof such small works shall be under lump-sum, fixed price contracts awarded on the basis o f quotations obtained from at least three qualified domestic contractors in response to written invitations. The invitationsfor quotation shall include a detailed description of the works including basic specifications, the required completion date, a form o f agreement acceptable to IDA, and relevant drawings where applicable. The award shall be made to the contractor offering the lowest price quotation for the work and who has experience and the resources to complete the contract successfully. Community ParticipationProcedures(CPP): Rehabilitationof smallirrigationschemes and farm- to-market access roads under the Irrigation Rehabilitation and Management Component will be carried out with the active participation of the communities. MAFF will sign a memorandum of agreement for the rehabilitation of the works with a well respected community-designated ~~ ~ "Table C indicates maximumaggregates by financier. Maximumaggregatesmay exceedthe estimated contractvalue. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 74 representative, selected by the community itself, and signed in the presence of witnesses. This community-based contractor will be responsible for the works. Payment will be made against satisfactory progress of works, as verifiedby constructionsupervisors and MAFF irrigationstaff(see Annex 7, Section B). These procedures have been well tested over the course of three seasons of works, and have shown to enhance community ownership and commitment to future maintenance. The schemes to be rehabilitatedwill be selected annually from submissions made by the scheme representatives, after scrutiny at the district level and technical review by MAFF. The cost of the schemes' rehabilitation-materials and labor - will be estimatedby MAFF basedon the scope of the works and guidelines developedover the course o f previous seasons.Communitieswill be requiredto contribute5-15% ofthe costs of rehabilitationin-kind(to be increasedprogressively). The maximum value of each scheme shallnot exceedUS$50,000, with a maximum aggregatevalue of US$750,000. The project includes provisions for a technical audit of the schemes at mid-term, to enable adjustments based on lessons from experience. The Government is expected to finance approximatelyhalfofthe community irrigationandroadschemes. II. Procurement of Goods (US$1.89million, EC, TFETGrants and Government Financind (a) InternationalCompetitive Bidding(ICB): ICB procedures shall be usedfor procurement of goods estimated to cost US$lOO,OOO or more per contract. Goods planned for procurement through ICB includeatopographic survey andmapping; procurement of community-basedinformationequipment; agro-meteorologicalequipment; refrigerators for the vaccination cold chain; and small oil mills for the agri-businesssub-component. The estimated cost of goods to be procuredthroughthis methodis US$l.l million. NationalCompetitiveBidding(NCB): Goods estimatedto cost morethan US$15,000 but less than US$lOO,OOO per contract up to an aggregate amount not exceeding US$250,000 (US$150,000 for TFET andUS$lOO,OOO for EC) may beprocuredthroughNCB. Shopping: Vaccines estimatedto cost less than US$50,000 per contract, up to an aggregate amount not to exceedUS$150,000 (US$75,000 for TFET andUS$75,000 for the EC grant), and other goods estimated to cost less than US$15,000 per contract, up to an aggregate amount not to exceed US$250,000 (US$190,000 for TFET and US$60,000 for EC) may be procuredthrough Shopping. If such goods are available inthe local market from reputedlocal suppliers, who provide such goods as a part o f their normal business, then they may be procured through national shopping. Otherwise, they shallbe procuredthroughinternationalshopping. Direct Contracting: Veterinary medicines and supplies which are of proprietary nature and obtainable from a single source, with IDA'Sprior agreement, be procureddirectly from the suppliers. Foundationgrain seeds which are of proprietary nature will be procured directly from the research institutes which originally bred the varieties, or their collaborating research institutes testing the variety. Direct contractingisjustified on an exceptional basis due to the needto ensurethe purity o f the foundation seeds introduced into Timor-Leste, and the fact that foundation seeds are not yet commerciallyavailable. The aggregate value o f goods purchasedthroughdirect contractingshall not exceedUS$SO,OOO (US$25,000 each for the EC andTFET grants). Procurementfrom IAPSO: Vehicles, computers and relatedequipment may be procuredthrough the Inter-AgencyProcurement Services of the UnitedNations (IAPSO). The aggregate value shall not exceedUS$200,000 (US$150,000 for TFET andUS$50,000 for the EC grants).12 l2While procurement o fvehiclesandequipment is expectedto bethrough IAPSO, the specifiedmaximumaggregatesallow for it to be procuredunder ICB,or throughNCB proceduresifavailable inthe local market at competitiveprices. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 15 111. Consultants SeWiCeS (US4.23 million, EC, TFET Grants and Government Financing) The main consultants' services will consist o f individual advisors, both international and local, who will assist MAFF with the implementation and monitoring o f the project. With regards to firms, the main contract will be for supervision o f the large irrigation works. In addition, MAFF will contract non- governmental organizations and training groups to assist with implementation, training, surveying and monitoring. Visits by experts from specialized institutions (e.g., Consultative Group on International Agriculture Research-CGIAR) will also be supported. Least-Cost Selection (LCS): For the supervision o f the large irrigations works, a qualified consultant firm shall be selected through LCS method under the EC grant. The assignment is o f routine nature and the estimated value o f the contract is small (less than US$lSO,OOO). In addition, project auditors will also be selected through LCS method. The estimated value o f consultants and auditors selected through LCS method will not exceed US$250,000 (US$50,000 for TFET and US$200,000 for EC). Selection Based on Consultants' Qualifications (CQS): Selection o f NGOs and training organizations for facilitation, training, surveying and monitoring and evaluation activities under the Participatory Development and Natural Resources Component, Support to WUAs, Information Services, Vaccination Campaigns, and Project Monitoring and Capacity Building sub-components may be through CQS. The estimated cost of each contract will not exceed US$50,000, with a maximum aggregate value o f US$300,000 (US$90,000 for TFET and US$210,000 for EC). Single-Source Selection (SSS): With prior concurrence from IDA, CGIAR Research Centers will be contracted on SSS basis to provide specialists in selected fields (e.g. rice seed production or pest management). Single-source selection is justified as these specialized research centers can provide leading specialists in their respective fields, and in some cases, charge only travel costs as part o f partnership arrangements with national governments. The aggregate value o f such contracts shall not exceed US$105,000 (under EC financing). In addition, where NGOs have established links with local communities in the fields of participatory planning and/or have unique advantages in monitoring and evaluation (because o f their knowledge o f field conditions), and where their past performance is considered to be satisfactory by MAFF, they may be selected on a single-source basis with IDA'Sprior concurrence. IDA'Sapproval could be given against an aggregate list o f selected NGOs with contract values and justification for their single source selection, and a pro-forma contract agreement. Such selection is justified as these NGOs will be continuing their established activities and, because o f their links with the communities, they will be providing services o f exceptional worth. This is expected to be required for facilitation and training in Component 1, information services, vaccination monitoring, and project monitoring. The maximum value o f each individual NGO contract shall not exceed US$50,000 and the aggregate amount shall not exceed us$110,000. Individual Consultants: International advisors as well as local consultants, including facilitators and vaccinators, will be appointed by MAFF to assist in project implementation. They should be selected through a comparison o f qualifications o f at least three qualified consultants among those who have expressed interest in the assignments or have been approached directly by MAFF. The total estimated cost o f the individual consultants to be selected through a competitive process is US$2,350,000. In addition, with appropriate justifications and afier concurrence by IDA, individual consultants may be selected on a sole-source basis in exceptional cases, such as (i) tasks that are a continuation o f previous work that the consultants have carried out and for which the consultants were selected competitively, (ii)assignments lasting less than six months; and (c) when the individual is the only consultant qualified for the assignment. The maximum aggregate value o f such consultants i s US$1,200,000 (US$500,000 under TFET and US$700,000 under EC). This takes into account potential extensions in contracts o f current MAFF advisors, as well as Timorese vaccinators and facilitators whose performance i s evaluated as satisfactory by MAFF management, Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 16 and in cases where such extension is deemed important for the continuation o f ARP activities. The minutes o f negotiations will include a clause specifying that for the hiring of individual consultants under sole sburce basis which are not subject to prior review, the unit rates will be based on prevalent rates established during ARP 11, or on any official guidelines, acceptable to IDA, adopted by the Government o f Timor-Leste in the future, with allowances for annual inflation as determined by the Timor-Leste National Statistics Directorate. Any additional rate increases will be subject to prior approval by IDA. IV.Small Group Grants (US$0.24million, TFETonly) Small Group Grants under the Participatory Development and Natural Resources Management Component will comprise o f a broad spectrum o f activities to be undertaken with the direct participation and in-kindcontribution o fthe beneficiary communities. The main purchases will consist o f construction materials for very small works, such as plant nurseries, woodlots, seed storage, fences, and water retention facilities, small equipment, materials and supplies not available locally (such as introduced seeds, fish fries), and payment for external specialized labor and technical support. Materials available locally within the villages, land, and local labor will be expected to be provided voluntarily by the communities. The grouping o f these purchases would not be feasible because they involve different operators and scattered beneficiaries invery remote areas. The maximum amount o f such grants for each village is US$lO,OOO. Selection criteria and the process for allocation, procurement and disbursement o f the small group grants shall be in accordance with an Operational Manual satisfactory to IDA. MAFF has prepared such a manual for ARP 11, but it has been revisedto incorporate lessons o f experience from the first pilot communities. The revised Manual was a condition for negotiations. Because o f the small size of the individual purchases and since a comparison o f prices may not be practical due to quality and distance considerations, procurement o f materials costing less than US$2,500 may be through direct contracting from local markets or suppliers. For all other items, a comparison o f three quotations shall be required. MAFF will assist the communities by compiling a list o f local suppliers and prevailing prices. Most community projects involve only minor earth works which communities carry voluntarily. In case skilled labor is required, communities will contract them directly on a daily rate or output basis, whichever is most prevalent locally. Disbursement o f the small group grants will be done in three installments based on the progress o f activities. MAFF shall carry out the monitoring o f the use o f the grants. B. Procurement Manual and Procurement Documents MAFF will prepare and submit to IDA for review a revised Procurement Plan and Procurement Manual prior to project negotiations. The Manual shall outline the agreed process for the procurement o f works, goods and consultants' services, and also include sample documents, where standard procurement documents are not available. Once cleared by IDA, MAFF shall follow the Procurement Manual and the Procurement Plan for all its procurement. The Procurement Plan should be adjusted periodically (at least every 12 months) with IDA'Sconcurrence to meet the evolving needs o fthe project. For the procurement o f works on the basis o f ICB, MAFF shall use the Standard Bidding Documents for Procurement of Works -Smaller Contracts,dated January 1995, revised June 2002 and March 2003. For the procurement o f goods on the basis o f ICB, MAFF shall use the Standard Bidding Documentsfor the Procurement of Goods, dated January 1995, revised on March 2000, January 2001, March 2002 and March 2003. MAFF shall also use the Standard Requestsfor Proposals - Selection of Consultants,dated July 1997, revised on April 1998, July 1999 and March 2000. While using these documents, MAFF shall ensure that the latest revisions to the above documents are incorporated. These revisions are available in the Bank's external website at www.worldbank.org. Even though the procurement o f the topographic survey is a goods ICB contract, given the nature o f the contract and on an exceptional basis, the bidding documents will be based on the standard biddingdocuments for small works. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 I1 For procurement on the basis of NCB, until new ProcurementRegulations are enacted (see below), the mandatory provisions outlined in the Attachment to this annex, shall be included as an Annex to the Procurement Schedule of the Grant Agreement. Oncethe new regulationis enacted, these provisionswill be reviewedand amendedas necessary. For Procurement o f Small Works and Community Procurement Procedures, Shopping, and Direct Contracting, sample documents shall be included in the Procurement Manual. In addition, the Bank's Guidance Procurement Note on Handling Procurement Under Shopping Method, datedJune 8,2000 shall be incorporatedinthe ProcurementManualandfollowed. For selection of ConsultingFirms, IDA's StandardRequestfor Proposals -Selection of Consultants (July 1997 edition) shall be used, after incorporatingthe latest revisions. For Individual Consultants, sample contracts(lump-sumandtime-based) shall be includedinthe ProcurementManual. In the preparation o f evaluation reports for procurement for ICB and NCB, MAFF shall use IDA's Standard Bid Evaluation Form -Procurement of Goods or Works, April 1996. Inthe case of consulting firms, MAFF shalluse IDA's SampleForm of Evaluation Report Selection of Consultants. For all other cases, simple sample forms for evaluationshall be usedand includedinthe Procurement Manual. C. Summary Capacity Assessment An assessment o f the procurement capacity o f MAFF was carried out in accordance with World Bank procedures (dated July 15, 2002). The assessment involved a review of the procurement policies and procedures adoptedby MAFF andtook into consideration the experience inthe implementationof ARP I and ARP 11, as well as the findings and recommendations o f the Timor-Leste: Country Procurement Assessment Report of June 2003. Legal Framework The primary instrument governingpublicprocurement inTimor-Lesteis Regulation 2000/10 on Public Procurement for Civil Administration in East Timor. This Regulation is to a large extent based on the Model Law of the United Nations Commission for International Trade Law. However, there are several provisions and approaches that diverge from the Model Law and the World Bank's Procurement Guidelines. They include: (a) restrictionto payments in US dollars; (b) greater emphasis on nationalsources of procurement; (c) exceptions to the use of open tendering; (d) publication of invitationsto bid or to apply for pre-qualificationin the Official Gazette, rather than in the national press; (e) expression of non-priceevaluationcriteriain non-monetary terms; and (0apparent compulsory extension of bid validity periods at the discretion of the procuring entity. Regulations 2000/10 also expressly provide that in the case of donor funded procurement; the procurement rules of the donors will prevail over the Regulations in the case o f any conflict. Accordingly, MAFF followed IDA's Procurementand Consultant's Guidelines for ARP IandARP 11. The Government is aware of IDA'S concerns and, with financing under the Administrative Services Capacity Building Project, has appointed a consultant to assist in the preparation of manuals relatedto procurement. The third draft of the new Procurement Regulations has been submitted to the Government and IDA for comments. The Government is also inthe process of appointingconsultants to assist inthe preparationo f manuals related to procurement. Since these manuals will not be available before the commencementofthe proposedproject,MAFF will haveto use its ownProcurementManual(see above). Procurement Thresholds: Regulation 2000/10 has very high levels of thresholds for shopping (US$200,000), small works (US$350,000), and ICB (above US$l.O million). In a country where the procurement risks are considered to be "high" (see below), the high thresholds for shopping and small works cannot bejustified. Further, the highthresholdfor ICB cannot bejustified consideringthe capacity of local contractors and the limited local manufacturing capacity. Accordingly, consistent with the Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 78 recommendations of the Country Procurement Assessment Report, lower thresholds will be applicable underthe proposedproject(see Table B). Procurement Capacity: MAFF has established a Procurement and Tender Services Unit (reportingto the Headof Administration) to assist in processingall procurement. However, it is inadequately staffed, with only one nationalregular staff with very limitedexperience in procurement, a nationalprocurement consultant with some experience gathered during the implementationof ARP Iand ARP 11, and a part- time internationalprocurement advisor. Lack of procurement capacity is one of the greatest challenges confronting Timor-Leste. This also extends to MAFF and there will be a continued need for MAFF to engage an internationalprocurement advisor on a full-timebasis for at least the first two years of project implementation. The advisor will assist in the processing of procurement, and will mentor and train national staff. Further, in addition to the one regular national staff assigned to the Procurement Unit, MAFF should consider recruiting another regular staff to enhance its capacity and avoid delays in processing of procurement. The appointment of the international procurement advisor shall be a condition o f effectiveness of the Grant. Procurement capacity will be monitored closely during implementation. One possibilitywould be for the Government's Central ProcurementDivisionto second an experiencedprocurementstaffto MAFF. Procurement Processing and Filing: In view of the limited national capacity available in the Procurement Unit, the burden of processing most of the procurement has been vested upon the internationalprocurementadvisor. As a result of the overload, there were often delays in processing and the Procurement Unit could not effectively monitor and supervise the performance of the suppliers and contractors. Filing of procurement documents under ARP I1has improvedand is now satisfactory. It is expectedthat procurement processingwill improve with staffgainingmore experience. Risk Assessment: Consistent with the findings of the Country Procurement Assessment Report, the assessment o f risks for the proposedProject is "high". This conclusion is based on the extremely weak procurementcapacity. Basedon past experience underARP IandARP 11, corruptionis not consideredto be an issue. Inorder to mitigatethe risk, as indicatedabove, appointment of an internationalprocurement advisor will be a condition for effectiveness of the Grant. The terms of reference o f the advisor will specifically include a provisionfor training and mentoringof nationalstaff, and hisher performance will bejudged by the success in capacity building. In addition, as an outcome of the Country Procurement Assessment Report, IDA and the Asian Development Bank are providing financing for training Government officials in procurement. MAFF staff will be able to avail itself of these training opportunities. 0. Prior Review Thresholds Table B indicates the prior review thresholds. Since MAFF has been involved in the implementationof ARP IandARP 11, where substantial procurementthroughshoppingand small works has taken place, prior reviewof such contracts is not considerednecessary.Accordingly, prior reviewwill be requiredfor: (i) all contracts for goods andworks that are estimated to cost US$lOO,OOO or more; (ii) all contracts for consultingfirms andNGOs, estimatedto cost US$lOO,OOO or morel3; (iii) all contracts for individualconsultants, estimatedto cost US$50,000 or more; (iv) all contracts for individual consultants selected through sole source procedures (excluding tasks below US$50,000 that are a continuation of previous work for which the consultants were selected competitively,suchas vaccinators, facilitators,and local consultants); l3This appliesto theECgrant only. UndertheTFETgrant, onlyasmallamountofprocurement(estimatedatUS$85,000) would be through firms. Prior review will apply to those selected on a single-source basis. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 79 (v) all contracts for goods awardedthrough direct contracting; and (vi) all contracts with consultingfirms, includingNGOs, awardedthroughsingle-sourceselection. The total value of contracts subject to prior review is estimatedto be US$6.06 million, or 63 percent of the value o fthe two grants. E. Post Review and Procurement Supervision Since procurement risks are consideredto be "high", duringthe initial stage of project implementation, IDA shall carry out ex-post reviews of 20 percent of the contracts that were not subject to prior review. With the concurrence o f the Regional Procurement Advisor, this percentage may be lowered if, during implementationofthe project,it is determinedthat the processingo f procurement is satisfactory andthere is a lower perceivedrisk. Procurementmethods(TableA) Table A: Project Costs by Procurement Arrangements (Total) (US$ million equivalent) ProcurementMethodl Expenditure Category ICB NCB Other2 N.B.F. Total Cost 1. Works 1.56 0.00 0.69 0.48 2.73 (I.56) (0.00) (0.69) (0.00) (2.25) 2. Goods 1.13 0.08 0.53 0.15 1.89 (I.13) (0.07) (0.53) (0.00) (I.73) 3. Services 0.00 0.00 3-99 0.24 4.23 (0.00) (0.00) (3.99) (0.00) (3.99) 4. Small Group Grants 0.00 0.00 0.24 0.00 0.24 (0.00) (0.00) (0.24) (0.00) (0.24) 5. Training, Workshops, Study Tours 0.00 0.00 0.96 0.00 0.96 (0.00) (0.00) (0.96) (0.00) (0.96) 6. Incremental Operating Costs 0.00 0.00 1-10 0.00 1.10 (0.00) (0.00) (0.69) (0.00) (0.69) 7. Incremental Staff Salaries 0.00 0.00 0.00 0.24 0.24 (0.00) (0.00) (0.00) (0.00) (0.00) Total 2.69 0.08 7.5 1 1.11 11.39 (2.69) ' (0.07) (7.10) (0.00) (9.85) I / Figures in parentheses are the amounts to be financed by the IDA and EC grants. All costs include contingencies. 21 Includes civil works and goods to be procuredthroughprocurementof small works, shopping, direct contracting, consultingservices, training, communityparticipationproceduresand incrementaloperating costs. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 80 Table A I : Consultant Selection Arrangements (US$ million equivalent) Selection Method Consultant Services Total Expenditure Categoly QCBS QBS SFB LCS CQS Other N.B.F. Cost1 A. Firms 0.20 0.07 0.21 0.47 (0.20) (0.07) (0.21) (0.47) B. Individuals 3.52 0.24 3.76 (3.52) (0.00) (3.52) Total 0.20 0.07 3.73 0.24 4.23 (0.20) (0.07) (3.73) (0.00) (3.99) 1\ Includingcontingencies Note: QCBS = Quality-and Cost-BasedSelection QBS = Quality-basedSelection SFB = Selectionunder a FixedBudget LCS = Least-Cost Selection CQS= SelectionBasedon Consultants' Qualifications Other = Selectionof individualconsultants(per SectionV of Consultants Guidelines), CommercialPractices,etc. N.B.F.=Not Bank-financed Figuresinparenthesesare the amountsto be financedby TFET and EC grants. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 81 Prior review thresholds (Table B) Table B: Thresholds for Procurement Methods and Prior Review Contract Value ContractsSubject to Amount Threshold Procurement Prior Review Subject to Expenditure Category (US$ thousands) Method (US$ thousands) Prior Review (US$thousands) 1. Works 110 Small Works None 150 CPP None - All Others ICB All 1.56 2. Goods All DC All 0.05 115' Shopping None - >15 1100 - NCB 2100 - 1150 IAPSO 1100 0.16 >loo ICB 2100 1.13 3. Consultant Services Firms 1 50 sss All 0.21 150 CQS None - 1150 LCS 2100 0.15 4. Consultant Services Individuals 2502 2.96 ' -Note: Vaccines threshold is US$50,000 -SolesourceindividualconsultantsarealsosubjecttopriorreviewexceptiftheirassignmentisacontinuationofARPI1for whichtheywere selected competitively, and the value of their contract does not exceedUS$50,000. Total value of contracts subject to prior review: 6.22 (63% of TFET/EC Grants) Overall Procurement Risk Assessment: High Frequencyof procurementsupervision missions proposed: One every six months (includes special procurement supervisionfor post reviewlaudits) Table C. Maximum Aggregates for EC and TFET Grants (in US$) Procurement Method EC Grant TFET Grant Total (EC and TFET) Works: ICB PSW 150,000 150,000 CPP 750,000 750,000 Goods: ICB NCB 100,000 150,000 250,000 Shopping 135,000 265,000 400,000 IAPSO 50,000 150,000 200,o 00 DC 25,000 25,000 50,000 Services: LCS 200,000 50,000 250,000 CQS 300,000 sss 210,000 90,000 150,000 65,000 215,000 IC Competitive IC ss 1,400,000 950,000 2,350,000 700,000 500,000 1,200,000 Note; Specificationof maximumaggregate totals is not required for ICB. Maximumaggregatesexceedestimatedcontract costs to allow for adjustmentsin cost itemsduringimplementation. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 82 Attachment A. Mandatory Provisions for National Competitive Bidding 1.Goods and works for which this Schedule allows procurement under paragraphs 3.3 and 3.4 of the Guidelines shall be procured in accordance with the provisions of Regulation 2000/10 on Public Procurement for Civil AdministrationinEastTimor, as adopted by the Democratic Republicof Timor- Leste (the Procurement Regulation). These provisions, in order to ensure economy, efficiency, transparency, and broad consistency with the provisions included in Section Iof the Guidelines (as requiredby paragraph3.3 ofthe Guidelines), shall be modifiedas set forth inthe followingparagraphs. Participation in Bidding 2.Government-owned enterprises in Timor-Leste shall be eligible for bidding only if they can establish that they are legally and financially autonomous, operate under commercial law, and are not a dependent agency o fthe Recipient. 3.Foreignbidders shall be eligible to participateinbiddingunder the same conditionsas local bidders. In particular, no domestic preference over foreign bidders shall be granted to local bidders in bid evaluation. Advertising; Timefor bidpreparation 4.Invitations to bid shall be advertised in at least one newspaper of national circulation, allowing a minimum of 30 days for the preparation and submission of bids, such 30 days to begin with the availability ofthe biddingdocumentsor the advertisement, whichever is later. StandardBidding Documents 5.Until national standardbiddingdocuments approvedby the Association are available, the Association's standardbiddingdocumentsshall be used. Classification of Suppliers or Contractors; Post-qualification 6.Bidding shall not be restricted to any particular class of suppliers or contractors, and non-classified suppliers or contractors shall also be eligibleto bid. Before contract award, the bidderhavingsubmitted the lowestevaluatedresponsivebidshall be subject to post-qualification. Evaluation criteria 7.Evaluationcriteria shall be clearly specified in bidding documents, and evaluationcriteria other than price shall be quantified in monetary terms. Only evaluationcriteria so specifiedshall be used in bid evaluation.Merit pointsshallnot be usedinbidevaluation. Extensionof the validity of bids 8.In exceptionalcircumstances, the procuringentity may, beforethe expirationof bidvalidity, request all bidders inwriting to extend the validity of their bids. In such a case, bidders shall not be requestednor permittedto amendthe priceor any other conditionof their bid.Bidders shallhavethe rightto refuseto grant such an extension without forfeiting their bid security, but bidders granting such an extension shallberequiredto providea correspondingextensiono ftheir bidsecurity. Nopost-bidding negotiations 9.There shall be no post-biddingnegotiations betweenthe procuring entity and the lowest or any other bidder. Inspection andAuditing 10. Each contract financed from the proceeds of a Grant shall providethat the suppliers and contractors shall permit the Association, at its request, to inspect their accounts and records relating to the performance o f the contract and to have said accounts and records audited by auditors appointed by the Association. Timor-Leste Third Agriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 83 Technical Annex 9: Economic and FinancialAnalysis TIMOR-LESTE: Third AgricultureRehabilitationProject The project's overall internal Economic Rate o f Return (ERR) is estimated at 17.7%, with a Net Present Value o f US$2.32 million. The project objective is to strengthenthe capacity o f MAFF and its development partners to assist rural communities in increasing their production and income in a sustainable way. Thus, while the economic analysis assessed the viability o f individual project activities, ideally project activities should be assessed based on how they help strengthen the institutional capacity o f MAFF and its partners (particularly in regardto the implementation o f future projects). As future projects have not been identified, an economic analysis o f these additional benefits could not be carried out. Furthermore, the economic analysis did not take into account potential environmental and social benefits, as relevant data were not available. Hence, the total benefits o f ARP I11are likely to exceed the benefits included in this economic analysis, and the project is expected to have a continuing impact on MAFF programs well beyond project completion. The economic analysis was based on the US dollar, the official currency inTimor-Leste. There are tariffs on several agricultural products. However, as the analysis below shows, there is little evidence to suggest that these tariffs have a significant effect on the prices o f domestically produced commodities covered in this economic analysis. Hence, no shadow prices were usedinthe economic analysis. The FinancialRate of return was considered to be similar to the Economic Rate o f Return. The economic analysis was first carried out on a component by component basis. This was based on both cost benefit analysis (for some components) as well as cost-effectiveness analysis (for components such as information which do not lend themselves to cost-benefit analysis). The ERR for the project as a whole was based on an aggregation o f the individual components' analysis. The duration o f the benefits was assumed to vary between 10 and 20 years, depending on the likely duration o f the technology and its resultingbenefit stream. A. Economic Analysis by Component Component 1 Participatory Development and Natural Resource Management - The main activities associated with this component are facilitation and support to upland and coastal farmer groups for the implementation o f their own Small Group Activities. One o f the criteria for assessing the viability o f Small Group Activities will be their economic viability. Many o f the potential benefits, however, may be difficult to measure (such as reduction in environmental degradation). Furthermore, the benefits will be site and activity specific, and as the activities have not yet been identified, precise potential benefits cannot be assessedat this time. The economic analysis took into account the potential ERR o f prototype village activities, akin to those that may be funded under this component. The Australia East Timor Rural Development Program has estimated internal rates o f return and returns on capital for similar village activities: vegetable development, new coffee plantings (starting with nurseries); and post harvest storage o f rice and coffee processing. In addition, the economic analysis took into account rates o f return for a hypothetical community fishpond activity, one o f the activities supported under ARP 11. The results are shown below: Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 84 Table 1. IndicativeRates of Returnfor UplandCommunityActivities Activity IRR or ROC Vegetable development 151% Coffee plantings -4.4% Post harveststorage 27% Coffee processing -250% Fishponds > 25% (dependingon size) Source: AusAID Rural Development Program, Timor-Leste The results suggest that significant rates o f return could be achieved on individual community activities but that prior analysis would be advisable before proceeding. Some o f the activities may only be viable if significant environmental benefits could also be achieved. As small village-based activities may be one o f the main opportunities to increase farmer income, it is important that MAFF staff be trained in advising farmers on activities likely to yield positive returns. Table 1 shows, for example, that many small coffee plantation activities may not be viable at this stage, though this could change with a strengthening o f world coffee prices or inareas with lower production costs. This approach does not take into account the benefits o f institutionalizing the process within MAFF. If costs associated with providing the technical assistance under this component were to be taken into account, the benefits would be underestimated. For the purposes of the economic analysis, and taking into account the type o f activities likely to be financed, it was assumed that the Small Village Grants included in this component (US$200,000) would achieve an ERR o f 15% over ten years. Actual benefits may be higher, especially as social and environmental benefits were not been taken into account. For some technologies - such as tree planting - a ten year benefit stream may be too short while for others - such as fish ponds - it may be excessively long. The duration o f the benefit stream takes into consideration an average o f the activities expected to be supported under the project. Duringimplementation, relevant baseline data should be collected to permit a more precise evaluation o f individual village activities, and subsequent adjustments in the positive list. This should include, among others, assessments o f storage losses for grain, current yields for vegetable crops, prices for main agricultural commodities, mortality (for fish ponds), and processing conversion rates. Indicative financial viability analyses o f most common village activities should then be included in the respective technical manuals. Component 2 - Irrigation Rehabilitationand Management The main activities under this component are community irrigation schemes and roads, one large irrigation scheme, institutional capacity building and surveys and mapping. Project benefits were only estimated for the rehabilitation o f irrigation and farm-to-market road schemes. CommunityIrrigation and Roads Rehabilitation. Based on experience gained under ARP Iand ARP 11,the average investment cost associated with community irrigation schemes is US$160 per hectare (ha). A total o f 3,000 hectares will be rehabilitated under ARP 111. These community schemes will be rehabilitating land that was previously irrigated but is not currently used because o f damaged infrastructure. The base case scenario is that the land to be irrigated will produce a single rice crop with similar yields as nearby land that is already irrigated (on average 1.8 tons per ha). The land to be irrigated is currently left fallow inthe wet season and may be used for grazing duringthe dry season. The costs associated with growing rice are 100 man hours o f labor per hectare at US$1 per hour with operation and maintenance costs o f US$20 per hectare. N o fertilizer is used. The rice price is assumed to Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 85 be US$O.l3/kg (paddy), US$O.Ol/kg above current prices (at Bobonaro). This takes into account the fact that international rice commodity prices are at an historic low and are projected to increase by about 10 percent inthe next few years. Timor-Leste currently has a tariff of 10% on imported rice. Table 2 below shows the estimated imported parity price if the tariff was fully effective in raising local rice prices. However, selective inquiries about local rice prices during appraisal suggest little variation in prices irrespectively o f the distance from Dili or from rice growing areas. Furthermore, local prices are approximately 10% below the estimated import parity prices. At current prices, therefore, the poor transportation infrastructure and limited marketing facilities cause rice prices to be determined predominantly by local supply and demand. Hence, the assumed rice price o f US$O. 13/kg o f paddy is representative of both economic as well as financial prices. Table 2. Comparison of Estimated Import Parity Price with Observed Market Prices of Rice (September 2003) ConversionFactors Price FOB Saigon/Bangkok (equivalent to 20% brokens - 16%discount on 5% brokens at US$2IO/MT) 176.40 InsuranceandFreight 7.45 ImportDuties(10%) 18.38 Labor 3.45 Haulage 6.85 Customs 0.45 Intereston Capital(15% for 15 days) 0.93 Sub-TotalDiliPort 213.91 Importer'smargin(15%) 32.08 TruckingCosts (Dilito Caraulun) 28.0 Wholesale Margin(10% onprice at Dili) 21.39 Unloadingand LoadingCharges 4.00 Potential Caraulun Wholesale Price 299.38 (US$O.299/kg) Selected Actual Market Prices: Unit as stated: Aileu (50 km from Dili): 50 kgbag importedrice 14.00 1 kg importedrice 0.30 Maubisse(100 km from Dili): 50 kgbag importedrice 14.00 1 kg importedrice 0.20 Same (150 km from Dili): 50 kgbag importedrice 14.00 1kg importedrice 0.25 Conversion to Paddy (at 60% milling recovery - US0.25 less wholesale margin) US$O.135/kg The costs o f rehabilitating farm-to-market roads have been included in the cost o f rehabilitating the irrigation schemes. In the base case scenario, the benefits for this rehabilitation are assumed to be equal to the cost o f maintenance. In the economic analysis in ARP 11, the incremental benefit was assumed to be 200 Rupiah/km based on the estimates made for similar roads in Indonesia. This approach would value the benefits o f the farm to market roads at the equivalent o f US$12/ha rehabilitated or US$4/ha 86 ~~~Timor-LesteThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 above the assumed operational and maintenance costs o f roads (5% o f investment cost per year). In this analysis, the benefits of roads were valued conservatively at the same level as operational and maintenance costs. Under these assumptions, the ERR per ha for community schemes (over 20 years) is 47%. This relatively high rate o f returnreflects the fact that the project is simply rehabilitating schemes for which development costs have already been incurred, and may therefore be regarded as sunk costs. Furthermore, the potential irrigable areas are not currently being cultivated due to the state o f disrepair o f the schemes. Hence, investment in community irrigation rehabilitation is highly economical. The life span o f community irrigation schemes was assumed to average 20 years. Asides from the 3,000 ha o f land that are expected to be irrigated through rehabilitation o f community irrigation schemes, there remains at least another 7,000 ha that require future rehabilitation by MAFF. If MAFF can fund the rehabilitation o f some 1,000 ha a year - as currently planned - it will have the institutional capacity to rehabilitate these schemes after the project ends. The benefits and costs associated with the rehabilitation o f 1,500 ha o f this land have been included in the sensitivity analysis (but not in the baseline scenario) as indicative o f some o f the capacity buildingbenefits o f ARP I11(see Table 3). Rehabilitation of Large Irrigation Schemes. The project is expected to rehabilitate only one large irrigation scheme, Caraulun, at a cost o f approximately US$1.6 million with contingencies. The potential irrigable area is 1,030 ha. The feasibility consulting firm hired under ARP I1carried out an independent cost-benefit analysis for this scheme inMay 2003 (see Annex 13 for further details). Based on assumptions that reflect current experience, the ERR is estimated at 20.3% over 20 years. The current yields are about 1.9 MT/ha with a single crop. The with-project benefits assume two crops per year, with yields increasing to 2.5 M T h a for the first crop, and 2.0 MT/ha for the second crop after 5 years. The analysis also assumed a cropping intensity (with project) o f 160%14, taking into account the experience with light-to-medium damaged irrigation schemes rehabilitated during ARP 11. As with community schemes, a price o f US$O.13/kg o f paddy was assumed. The sensitivity analysis indicates that iffarmers grewonlyonecroponthenewlyirrigatedareaandtherewasnoincreaseabovecurrentyields, the ERR would be 8.1%. However, the overall project would remain feasible with an ERR o f 15.6%. The sensitivity analysis also shows that ifno production increase was achieved inthe first two years after rehabilitation (as WUAs gained experience in utilizing the improved scheme) the ERR would remain viable at 13.9%. For the purposes o f project monitoring, MAFF should collect information on existing yields from a control site (nearby irrigated land), and then monitor the impact o f the rehabilitation on the area irrigated, yield, inputs used and prices. Sub-component 3.1 Information to Farmers - The primary activities associated with the information component are delivery o f information to farmers via various media and collection o f meteorological information. These activities are considered separately below. During the Indonesian Administration period, there were about 700 extension staff in Timor Leste, an average o f about 2 per village. This compares to a current average o f 5 technical agricultural staff per district, a reduction o f nearly 50 staff per district. Most villages lack easy access to agricultural information. ARP I11will use mass media and establish an e-mail information service network to raise the ~~ l4 This assumption was discussed extensively with irrigation staff during appraisal and is considered to be conservative based on the experience o f ARP I1schemes. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 87 capacity o f district staff and other development partners to give relevant advice to farmers, as well as convey farmers' requests for information and support. Delivery o f information has a number o f interconnected activities. The economic benefits o f these activities cannot easily be estimated due to a lack o f baseline data. Nevertheless, provision o f information to farmers is a primary function o f MAFF. A cost effectiveness approach to the delivery o f information is therefore an appropriate evaluation methodology. A ten year time horizon was assumed inthe economic analysis as future technology changes would likely render current interventions obsolete. There are at least two methods o f providing information to farmers: directly by word o f mouth, and electronically. Cost effectiveness may be assessedby estimating (i)the costs o f upgradingthe capacity o f existing field staff by providing them with access to information through computer networks; and (ii)the cost o f providing more information through various media. The investment and operational costs o f the proposed project activities can then be compared to the costs o f employing further extension staff for face-to-face communication. A sensitivity analysis was undertaken to determine what would needto be the number o f extension officers that could be `replaced' by an effective mass media information system. This analysis suggests that ifone radio program producedevery two weeks could replace the activities o f up to 20 extension workers at current salaries (about 1.5 officers per district), the estimated ERRfor mass media campaigns would be 17% over a ten-year period. In other words, the mass media campaign would be cost effective under the realistic assumption that each extension worker is only able to visit an average o f 5 farmers per day, whilst an effective radio program could reach an average o f 1,000 farmers each fortnight. On the other hand, if less than 500 farmers were positively influenced by mass media on a 15- day period, a mass media information campaign may not be a cost effective option. A key issue is thus the number o f farmers likely to be positively influenced by mass media campaigns. As 1,000 farmers i s a relatively small proportion o f farmers with access to radio (about 450,000 people), there seems a reasonable chance that an effective mass media campaign will potentially be a cost effective option. The costs o f the community based information services and links with the CGIAR network were compared with the costs o f extension officers providing a similar service to farmers. The cost effectiveness o f the information network might be evaluated by recording the network use by district extension staff on behalf o f farmers. The sensitivity analysis used a base case scenario where an extension staff member (without access to an information network) provides advice to an average o f 5 farmers per day. The increasedproductivity o f district staff inthe with-project situation may be measured by how many requests for information on agriculture problems they could make using the computer network. At present, district staff spend a lot o f time traveling to Dilito confer with MAFF on problems encountered in the field. If each o f the four district extension staff member (or, alternatively, local development partners) were to conduct on average 5 information searches per day (Le. a total o f 20 searches a day per district), then this number o f requests might be considered the equivalent o f each district officer achieving the workload o f two district officers who do not have access to the information network (i.e. the five searches represent the additional capacity o f a district officer to assist farmers). The rate o f substitution (i.e. the average number o f farmers assisted by district officers before and after the establishment o f the information network) provides the basis for determining the cost effectiveness o f the use o f computer networks for the provision o f information to farmers. Under the scenario o f 20 searches per district per day (and 5 farmers assisted per day per district officer without access to an information network), the estimated ERR for the information network is 22% over a ten year period. This estimate is highly sensitive to the baseline assumptions: if the average number o f searches were to be limited to 10 per district per day, the estimated ERR would be -4% over the ten year period. It is therefore appropriate to introduce the network on a pilot basis first, expanding nationwide only after an evaluation o f the effectiveness o f the first pilots (as currently proposed under the project). For the purposes o f evaluation, baseline information needs to be collected on current coverage and usage o f radio programs. Such a survey is expected to be undertaken later in 2003. The survey should include Timor-Leste ThirdAgriculture RehabilitationProject -Project Appraisal Document, October 7, 2004 88 appropriate questions to assess the usefulness o f the radio programs to farmers. As current use o f e-mail by district officers is very limited, impact evaluation could be assessed based on usage o f the network over the life o f ARP 111. The collection o f agro-meteorological information has additional benefits to those accruing to farmers. One important issue in any economic analysis is the quality o f the technology to be used. A feasibility study will be prepared evaluating alternative approaches. Implementation o f this sub-component and assessment o f the economic benefits will depend on the results o f this feasibility study. Only the costs o f the feasibility study have been includedinthe overall economic analysis. Sub-component 3.2 SustainableAnimal Health Services - The primary activities associated with this sub-component that lend themselves to an economic analysis are the vaccination campaigns for cattle, pigs and chickens. Ideally, the economic analysis should be based on actual mortality rate with and without vaccination. Livestock numbers, however, are not accurately recorded in Timor-Leste. The approach adopted was therefore to determine what parameters would be needed to generate a positive ERR. An assessment was then made as to whether these parameters are likely to underestimate the actual situation. A twenty year time frame was used in the economic analysis on the assumption that vaccination will remain the primary means o f protecting animals against disease inthe foreseeable future. For all animals - cattle, pigs and chickens, the ERR for vaccination is positive for a wide range o f reasonable assumptions. Based on experience in Indonesia, Hemorrhagic Septicaemia is endemic in cattle and the likelihood o f an outbreak i s 510% in any one year. The effectiveness o f the vaccine could be around 35%. For pigs, swine fever is endemic and the likelihood o f an outbreak could be at least 20% in any one year. The effectiveness o f the vaccine could be at least 50%. For chickens, the likelihood of Newcastle disease could be 35% and the effectiveness o f the vaccine could be at least 50%. This is a conservative estimate given that the effectiveness of the vaccine in challenge trials in Mozambique approached 100%. Key assumptions are associated with the value o f the animals that become infected. When infected, the animals are likely to be quickly killed and consumed. The economic cost is therefore the additional value that would have been added to the animal (e.g. in weight and breeding potential) before it is was eventually slaughtered or died. The economic analysis used conservative assumptions o f US$50 for cattle, US$30 for pigs, and US$1 for chickens. Imports o f live animals are subject to a 12% duty, while duties for meat are set at 6%. The impact o f these tariffs on prices o f animals and meat in local markets is uncertain. Generally, prices o f livestock products will reflect short-term supply and demand conditions at the local level, particularly when transportation is difficult and expensive. Thus tariffs are unlikely to have significant effects on local markets. Economic and financial prices are therefore assumed to be the same. Under these baseline assumptions, the resulting ERR is 234% over twenty years. For the purposes o f evaluation, it will not be possible to compare previous mortality from disease. The most appropriate assessment methodology will be to collect information on mortality through the new voucher system introduced by ARP 111. Village Livestock Workers will be required to collect information on the number o f animals in each household and the number vaccinated. The base case scenario assumes a mortality rate from disease after implementation o f the campaigns o f about 1% for cattle, 8% for pigs and 6% for chickens. The number of animals assumed to be vaccinated is 275,000 pigs, 200,000 cattle and 330,000 chickens. Timor-Leste ThirdAgriculture Rehabilitation Project -ProjectAppraisal Document, October 7, 2004 89 Sub-component 3.3 Agri-BusinessSupport - The primary activities include support to rural producer organizations; support to seed producers; and supportto priority niche market commodities. The benefits of establishing an Agri-Business Support Unit in MAFF were estimated based on the potential benefits of MAFF continuing to provide technical advice to Agriculture Service Centers established under ARP Iand I1 (one of the types of rural producer organizations that the unit would support). The three existing Agriculture Service Centers (in Bobonaro, Aileu and Viqueque) prepared business plans prior to their establishment. All three plans significantly overestimated the actual volume of activity duringtheir first year of operation. Significant funds were invested in the establishment of these centers. Furthermore, in the absence of well-developed markets and associated infrastructure, many farmers couldbe without the meansto dispose of surplus productionat reasonableprices inthe absenceof efficiently functioning centers. Support for rural producer organizations is therefore one strategy that needsto betrailedas a meansof raisingruralproductionandfarmer incomes. It is still too early to assess the long-term economic viability of the three pilot Agriculture Service Centers based on current performance. However, taking the initial investment as sunk costs, continued technical support to these type of organizations would have potentially high economic benefits. In the economic analysis, the foreign exchange costs associated with (indirectly) supporting producer organizations such as the ASCs (US$lSO,OOO) were assumedto have anERR of 20% over tenyears. A ten year time frame was assumed as developments in the market economy might lead to more efficient forms of marketing becoming available. The viability of the proposedoil mills will be assessedthrougha feasibility study beforeMAFF proceeds with this assistance. Currentinformationsuggeststhe economic viability of coconut/candlenutoil mills is very sensitive to assumptions about market prices andthe volume of nuts crushed. Highprices and high throughput generates very high ERRS. Given that this analysis has still to be carried out, the costs associatedwith the implementationo foil mills were not incorporated intothe economic analysis. Component 4 Program Management - N o direct benefits were estimated for this component, even though the policy studies and capacity buildingare likelyto generate long-standingbenefits. B. Overall Project Economic Returns The overallestimated ERR for the project is estimatedconservativelyat 17.7% with a Net Present Value (at 12%) of US$2.3 million(see Table 3). This was basedon a combinationof cost effectiveness analysis for some components (e.g. information) and cost benefit analysis for other components, as outlined in Section A above. The overall ERRwas estimatedtakinginto account all projectbaseline costs, except for the agro-meteorologicalequipment and oil mills for which more complete feasibility analyses are still pending. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 90 Table 3. Summary of Benefits and Costs for ARP I11 Baseline Scenario (US$'OOO) - Year Costs Benefits Net benefits NRM Irrigation Information L'stock Agribus Communi& Caraulun fl) f2) 1 2,844 696 -2,148 2 3,506 40 122 37 -2,707 3 3,299 40 306 55 119 722 37 -2,02 1 4 40 306 201 55 119 122 31 1,480 5 40 306 234 55 119 696 37 1,486 6 40 306 282 55 119 122 37 1,561 7 40 306 328 55 119 122 31 1,606 8 40 306 391 55 119 722 37 1,669 9 40 306 391 55 119 696 37 1,643 10 40 306 391 55 119 422 37 1,369 11 40 306 391 55 119 722 37 1,669 12 0 306 391 55 119 722 1,592 13 306 391 696 1,392 14 306 391 722 1,418 15 306 391 722 1,418 16 306 391 722 1,418 17 306 391 696 1,418 18 306 391 722 1,418 19 306 391 122 1,418 20 306 391 722 1,418 21 306 391 697 22 306 391 697 23 0 391 391 EIRR= 17.7% NPV = $2,332 C. Sensitivity Analysis Table 4 below shows the sensitivity analysis for the project for the most significant assumptions. The mainrisksthat would significantly lower the projectreturns include: 0 Caraulun farmers unable or unwilling to achieve increased yields andor planting of two crops. 0 MAFF unableto providefunds to cover recurrent costs associated with livestockvaccinationprogram andfarmers unwillingto pay for the coast ofvaccination. 0 Farmers unwilling to contribute to the maintenance of community irrigation schemes to ensure that they remainoperational. 0 Failure of the community based information services network to improve communication with farmers. These risks would need to be managed carefully during implementation. Nonetheless, the sensitivity analysis indicatesthat the projectis fairly robustto changes inthe basic assumptions. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 91 Table 4: SummarySensitivityAnalysis for ARP I11(US$'OOO) Variable ERR NPV RicePrice -20% 14.6% $1,014 +20% 20.5% $3,651 RiceYields -10% 16.1% $1,656 +lo% 19.2% $3,008 Additional 1,500 haof communityschemes rehabilitated 19.4% $3,146 Increaseinroadbenefits +50% 17.8% $2,404 No productionincreasein Caraulunfor the first two years 16.4% $1,850 No increaseinyields or secondcrop inCaraulun 15.6% $1,396 Only 60% croppingintensity achievedin Caraulun 14.3% $867 Caraulunrehabilitationdoes not proceed 17.5% $1,725 Value of vaccinatedpigs -20% 14.6% $1,103 No agri-businesssupport (or no net benefits) 17.2% $2,145 Projectcost increase (wkontingencies) +15% 14.5% $1,186 No community informationnetwork (or no netbenefits) 16.3% $1,799 No mass mediacampaigns(or no netbenefits) 17.0% $2,404 0. Fiscal Impact The estimatedrecurrent costs after ARP program completion (excluding salaries) are US$733,000 ayear, or about 26 percent of MAFF's forward estimatedbudget for FY06/07. These estimateswere extensively discussed with MAFF management and are consideredreasonable, given the high level of integration o f ARP I11with MAFF's current programs.The major recurrent costs will be annualvaccination campaigns (US$310,000 a year) and operation and maintenance costs for the 16,500 ha of irrigated land that will have been rehabilitated under ARP I, I1and I11by 2007. Detailed fiscal estimates by project component are summarizedbelow. 1. Participatory Development National Resource Management After completion ofARP, the following on-going activities would likely be implemented: Activity Unit Total Annual Costs US$ Grant per village $3,000 Number of villages 13 (one per district) $39,000 Facilitators 6 (on average 1per two villages) Cost of facilitators $190 per month (including travel) $13,680 Training/extension material) 5 training courses per village Cost oftraining $200 per course $13,000 I Total $65,680 Timdr-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 92 MAFFstaff expenses associatedwith this activity would include: Item Number Unit cost TotalAnnual Costs (US$) District Fishery and Forestry Offices 2 per district $150 per month $21,600 Transportation (district) 12 motorbikes $80 per month $1 1,520 Investment cost o f bikes 12 $300 per annum $3,600 Headoffice staff 3 $150 per month $5,400 2. Irrigation Rehabilitation and ManagementComponent Underthe various ARPs, it is expectedthat the following targets will have beenachieved: Type Target Investment cost Recurrent Annual Costs (US$) Community irrigation schemes 10,000 ha $1.6 million (Le. $160per ha) Light - medium irrigation schemes $80,000 @ $8 per ha 2,436 ha $2,256,000 $72,000 @ $30 per ha Roads 200 km $640,000 @ $3200 per km $32,000 @ 5% of investment cost Total $184,000 Ifthe Caraulunscheme goes ahead, there wouldbeanotherUS$50,000 per annumofrecurrent costs. In addition, there are the following staffing and transportation costs: Item Number Unit cost TotalAnnual Cost (US$) District Irrigation Officer 12 $150 per month $21,600 Transportation (district) 12 motorbikes $80 per month $11,520 Investment cost ofbikes 12 $300 per annum $3,600 Headoffice staff 5 $150 per month $9.000 3.1, Information Services Sub-component There are three sub-components o fthe information sub-component. Recurrent costs are: Item Composition Unit cost TotalAnnual Costs Informationprogramming Materials production- $200 per month $2,400 consumables etc. Radio person $300 per month $3,600 Communication assistant $300 per month $3,600 CGIAR Internet/translation/ $4,000 per month $48,000 supplies CGIAR Cross visits 1 @ $8,000; 1 @ $5,000 per year $13,000 CGIAR MAFF staff 1 @$l50 per month $1,800 Community network (3 stations) Operational costs $65 per month per station $2,340 Community network (3 stations) Computer operator $150 per month per station $5,400 Community network (3 stations) Consumables $2,000 per station per year $6,000 Community network (3 stations) Capital costs annualised $1,000 per year per district $3,000 Total $89,140 Inaddition, ifthe meteorological data collection sub-component proceeds, the costs could be US$14,000 per annum for consumables and US$3,120 per annum (including travel) for a fill time MAFF staff responsible for data collection. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 93 3.2. Sustainable Animal Health ServicesSub-component The costs o f the vaccination campaigns are: Item Number Unit cost TotalAnnual Costs (US$) CSF vaccine 350,000 11 cents $38,500 NDvaccine 1,500,000 1.5 cents $22,500 HSvaccine 200,000 10 cents $20,000 CSF fee 350,000 25 cents $90,000 HS fee 200,000 35 cents $70,000 Supervision and Refresher Training 52 per year $600 $31,200 Motor bikes (operating) 26 $80 per month $24,960 Motor bikes (capital) 26 $500 $13,000 Total $310,160 Inaddition, there are the following staffing andtravel costs: Item Number Unit cost TotalAnnual Costs MAFF salaries Per month $2,500 $30,700 MAFF operational costs Per month $1,000 $12,000 Total $42,700 Other Recurrent Expenditures ARP has provided at least US$79,000 incomputer equipment which will needto be replaced. Assuming an average life o f 3 years, the annual replacement costs are estimated at US$26,000. Total Recurrent Costs after Project Completion Based on the assumptions in the above tables, the total estimated fiscal impact o f ARP on MAFF is: Item cost MAFF staff Total KJS$) Participatory Development and NRM $65,680 $42,120 $107,800 (Forestry $71,867) (Fisheries $35,933) Irrigation - Caraulun $184,000 $45,720 $229,720 $50,000 $50,000 Information - Agro-Meteorology $89,140 $89,140 $14,000 $3,120 $17,120 Livestock $310,160 $42,700 $352,860 Computer Replacement $26,000 $20,000 Total without Caraulun and Agro-Meteorology $668,980 $130,540 $799,520 Grand Total (w/Carulun and Meteorology) $736,980 $133,660 $866,640 Thus, the estimated annual recurrent costs (minus salaries o fMAFFstaff), are US$737,000 a year, or about 26 percent o f MAFF's forward estimate for FY06-07: Item Forward Estimate ($ '000) Departmento f Agriculture, Forestry and Fisheries $2,798 Salaries and Wages $580 Goods and Services $1,218 Capital Expenditure $1,000 Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 94 Technical Annex I O : Safeguard Policy Issues TIMOR-LESTE: Third Agriculture Rehabilitation Project A. Introduction The project is classifiedas Safeguard Screening Category S2: some safeguard policies are triggered, but effects are limited intheir impact and are technically and institutionallymanageable. The project triggers the following safeguard policies: (a) Environmental Assessment; (b) Natural Habitats; (c) Forests; (d) Pest Management; (e) Involuntary Resettlement; and (0 International Waterways. Potential environmental impacts will be short-term, localized and readily prevented or mitigated by good engineering design and constructionpractices - as laid out on the prevention and mitigation measures adopted by the project - reinforced by adequate supervision in the field. In the unlikely event that landneeds to be acquiredby the Government, it would be located around an existing irrigationscheme, beminor innature, andwill notresultinpopulationrelocation. I.EnvironmentalAssessment ARP I11 is designed to be primarily a continuation and sustainability phase of ARP 11. The project activities are not expected to have any major significant, complex or irreversible adverse environmental impacts. No works will be undertaken that could affect protected or vulnerable natural habitats. The projecthastherefore beenclassifiedas EnvironmentalScreeningCategoryB (see Annex 12). 2. Natural Habitats This policy will apply to the project. All community-based irrigationand farm-to-market access roads will be located outside protected areas as defined in Regulation2000/19 on ProtectedAreas (one of the criteria used in their selection). However, Component 1 (Participatory Development and Natural Resources Management) may be carried out in and around natural habitat areas. The component is expected to strengthen natural habitat management by introducing improved methods of watershed management and replanting. The negative list for this component excludes any activity which may impactadversely on important/protectednaturalhabitats, includingat altitudes above 2000 meters, and in mangrove, wetlandor coral reefareas (unless for rehabilitationpurposes). 3. Forests This policy will apply to the project. Component 1 will include activities on community-based forest management, such as reforestationof community-ownedforest land, and sustainable utilizationof non- timber forest products in natural forests within village boundaries (e.g. bamboo or honey). It will not involveharvestingtimber innaturalforests. Communityforests established under the project will not be ready for harvest for 10-15 years. The OperationalManualfor this component will includeprovisionsthat requirereplantingo f future trees harvested in any community forestry areas supported under the project, and conservationplans for areas reforestedto reduce environmentaldegradation. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 95 4. Pest Management This policy may be triggered in limited occasions. Under the on-farm demonstrations of new crop varieties by Water User Associations in Component 2 (Irrigation Rehabilitation and Management) and support to certified seed producers in Sub-component3.3 (Support to Agri-Business) it is possible that the project may need to supply limited amounts of pesticides to control insects or pests. In addition, farmers in Component 1 may feel the need to use agro-chemicals to protect new varieties introduced under the small group grants (even though the grants themselves would not finance pesticides or fertilizers). In these cases, MAFF would ensure that all procurement of pesticides would comply with OperationalDirective4.09. All Class 1toxic pesticidesandClass I1moderatelytoxic pesticides wouldbe excluded (see Table 2, Annex 12). MAFF would further provide training to farmers on principles of integrated pest management to minimizethe use of chemical pesticides, and enhance their awareness on safe applicationandpesticide disposalmethodswhich discouragedhouseholduse. 5. Cultural Property This policy is not expected to apply to the project. All community-based Small Group Grants will be small in scale and will be decided by the communities themselves within their administrative village boundaries (thereby respecting any existing cultural property). The negative list for Component 1 specifically excludes the funding of activities which endanger cultural property. Rehabilitationof roads and irrigationwill be on pre-existingschemesonly. 6. Involuntary Resettlement No involuntaryresettlement or land acquisitionresultingin loss of income is expected to take place as a result of project activities, as demonstrated under ARP 11. However, as small amounts of community land may be required for community-based activities under Components 1 (Participatory Development and Natural Resources Management) and 2.1 (Community Irrigation and Roads Rehabilitation), the Policy Guidelines for the Negotiationsover the Use and Development of Land for ARP I11were adopted by the Council of Ministers on November 15, 2003 (see Attachment 1). Part Io f the Guidelines - incorporated into the OperationalManuals for the components - specifies the process for ensuring that there has been informed consent for land donations or community-fundedcompensation under voluntary community agreements. Inthe case of the Caraulun irrigationscheme under sub-component2.2 (Major IrrigationRehabilitation), there is a remote possibilitythat the Government may needto acquire land to complete the rehabilitation works as designed. Inthis case, the provisionsfor involuntary land acquisitionof the Policy Guidelines for the Negotiationsover the Use andDevelopmentof Landfor ARP I11(Part I1of the Guidelines), would apply. In case communities or Water User Associations in Caraulun decided to establishtertiary canals under community irrigationcontracts, they wouldfollow the same process as for sub-component2.1. Inthe Caraulun major irrigationscheme, the ownership of a small area of land(291 ha) remains unclear although no disputes have been reported (see Annexes 11 and 13). This involves land previously occupied by Indonesian transmigrants, the church (who used it for a now discontinued youth program) and the Government. As part of the pre-conditions to proceed with the scheme's rehabilitation, the projectwill requiretopographic mappingof all landplots, establishment of Water User Associations, and resolutionof land use issues accordingto traditionalmechanisms as well as the provisions of the Policy Guidelines for the Negotiationsover the Use andDevelopment of Landfor ARP 111. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 96 Re-establishment o f agro-meteorological stations would take place primarily in pre-existing sites. The equipment would require a small (about 9 m2)fence to protect it against vandalism. Where new sites are needed (e.g. for rain gauges) the replacement ago-meteorological equipment would be installed in government land. 7. Indigenous Peoples This policy would not apply to the project. Timor-Leste is made up of approximately 13 major ethnic groups and 33 main and sub-language groups. N o single ethnic group dominates, and none are better placed than others to capture project benefits. As such, there are no specific indigenous minority groups requiring special attention. Village units are made up o f homogeneous ethnic populations. Since the project is designed to operate largely within the administrative boundaries o f single villages (including on irrigation schemes) an Indigenous People's Development Plan would therefore not be required. Under Component 1 (Participatory Development and NRM), one o f the criteria for the selection o f target villages will be their level o f poverty, with preference given to the poorest communities. This will ensure that groups inthe most marginal areas are included. Although widely spoken, not all ethnic groups speak Tetum or Indonesian. As a consequence, MAFF will select facilitators and Village Livestock Workers based on their capacity to communicate in the language of pilot villages, and local interpreters will be used when required. National activities - such as vaccination campaigns - also rely on locally-employed vaccinators and information i s provided in local languages through the national community radio network. 8. Safety of Dams This policy would not apply to the project. N o dams will be constructed or rehabilitated under the project. 9. Projects in InternationalWaters The only major irrigation rehabilitation (Caraulun) is located in central Timor-Leste and does not involve internationalwater issues as defined inthe Operational Policy 7.50. Since the rehabilitation o f community irrigation schemes is national in scope, there is the possibility that several o f the schemes may be located in the six International Waterways shared with Indonesia. These are: 0 Malibaka River in Bobonaro District; 0 Talau River inBobonaro District; 0 Motabicco (Lotan) inBobonaro District; 0 Noel Besi River inOecussi District; 0 Kali Tono River inOecussi District; and 0 Tafara River inCovalima District. While it is not possible to identify up front the location o f all the community irrigation schemes (they will be proposed by communities for each season) MAFF will adopt the procedure followed under ARP I1to screen any proposed schemes near the border with Indonesia that may potentially involve international waters. MAFF would consult with IDA to ensure that they comply with the exception to the requirement to inform Indonesian riparians for cases where the works involve only minor additions or alterations to the ongoing schemes, which "(i) will not adversely change the quality or quantity of waterflows to the other riparians; and (ii) will not be adversely affected by the other riparians possible water use. In cases Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 97 where this cannot be ensured, the schemes would not be considered for rehabilitationunder the project. This exception was granted on September 17, 2003. While there are at present no agreed international waterway treaties, the need for notification will be reconsidered if required under any future treaties signedwith Indonesia. B. Application of Safeguard Policies Most o f the impacts and mitigationmeasures proposed that would apply to EnvironmentalAssessment, Pest Management andNaturalHabitats are describedin detail inAnnex 12. This section summarizesany additionalsafeguardrisks and mitigationmeasures involvingthe applicationof the Forestry, International Waterways, and Involuntary Resettlement policies, as well as the general approach to assess safeguard issues, consult with stakeholders, andmonitor compliancewith safeguardpolicies. 1. Completed Studies and Assessments The project carriedout the following studies andassessments: o A review of the environmental impacts and monitoring procedures in ARP 11. This review, carriedout duringpre-appraisal (June 4-18, 2003) involvedvisits to project sites infour districts, as well as discussions with MAFF and Division of Environment and a review o f project documents. The resultingrecommendationswere usedto adjust the environmentalsafeguards o f ARP I11and improve their applicability (see Annex 12). o A social appraisal of ARP I1and 111, carriedout in February 2003. This involvedfocus group discussions with upland, coastal and lowland villages, detailed case studies of larger irrigation schemes rehabilitatedunder ARP 11, and interviewswith key service providers. MAFF usedthe results ofthis assessmentto helpdesignARP I11(see Annex 11). An extensive environmental and social analysis of the Caraulun Irrigation scheme area was carried out in 2002-03 by SMEC under contract to MAFF (see Annex 12 and 13). The study included extensive field surveys in the Betano area of Manufahi where the scheme is situated. Recommendationswere taken into consideration inthe project design. o The existing ARP I1 Land Acquisition and Resettlement Policy Framework was assessed by MAFF and IDA'Sappraisal team, with advice from the World Bank Legal and Social Safeguard teams. A revised Policy Guidelines for the Negotiationsover the Use and Development o f Land for ARP I11was adopted for project implementationwhich better reflectsthe projectactivities. 2. Potential Safeguard Risks The project is not expected to have major significant, irreversible or adverse environmental impacts. Potential environmental impacts would be mitigated according to the measures outlined in Annex 12, Table 4. This section describes primarily other safeguard risks not covered under the Environmental AnalysisAnnex. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 98 Forestry ARP I1did not envisage application of the Forestry Policy. Followinga review of ARP I1community- basedforest activities, however, itwas agreedthat more attentionto forestrypolicy issues was neededdue to the number o freforestationandplantationactivities proposedby the target villages. The mainareas of concern are as follows: Status of communal land planted with project-supportedseedlings, including equity o f access within the village; 0 The intentiono findividualowners oftrees to harvestthem beyondthe life ofthe project. Although no disputes have yet been observed, ARP I1raised questions regardingthe tenure status of communal land plantedwith project-supported seedlings. Traditional mechanisms for allocationof land ownership anduser rightsvary fromvillage to village, providingdifferent degreeso fcertainty.Ingeneral, sub-villages (aldeias) are inhabited by extended families and land use is distributed within the village boundary. Openaccess to grazing andforest land is usually grantedto all village members.Insome areas, plantingof trees signifies ownership o f the land; in others, only the tree is owned by the individualwho plantedit. Traditionallaws governingthe harvestingof timber products and generally requirepermission from traditionalleaders. Target householdsunder Component 1are giventhe opportunityto participatein project-relatedactivities by formingsmallgroups to planandmanageactivitiesfundedby Small Group Grants. Whilst this process i s inclusiveof all households, internalvillage selection processes can limit the number of participants.In addition, some villages have large numbers of households which inhibits their total representation in projectplanningand inimplementationgroups at least inthe initial stages. This meansthat insome cases, only a proportion of the community may be making use of communal land to plant project-supported seedlings. Whilst this has not yet led to conflicts, when the fruits and/or trees are ready to harvest, disputes over ownership and distributioncould potentially arise. Consultationwith pilot village groups revealedthat this is not a major issue in the lifetime of individualparticipants,but as they do not "own" the land legally, they cannot bequeathtrees they planted to their children, as redistributionaccording to traditionallaw may occur after their death. Members of existing groups explained that representation of all households had not been achieved because some hadnot been interestedin participatinginitially, due to disinterest inthe types of activities proposed; suspicion that the fundingof activitieswould either not materializeor be appropriatedby a few inthe village; or becausethey were "too lazy" to contributeany labor (inthe words ofrespondents).Now that activities are under way however, non-group members inthe communityare seeingthe results of the seedlingproductionactivities,and some haveexpressedan interest inbecominginvolved. Another problem identified was that the primary focus o f forest rehabilitation activities is to replant on degraded land. However consultations revealed that communities are motivated more strongly by the future economic benefits o ftree plantingrather thantheir environmentalbenefits.Whilst some ofthe land being plantedis indeed degraded, participantson the whole intendto harvest the resultingtrees even in these areas. Ifcommunities are to participateinplantingtrees on a voluntary basis, it is essentialthat they benefit economicallyinthe use of project-relatedforest rehabilitationor plantation,while ensuringat the same time that the use is sustainable. This will require forward planningto include replantingof trees harvestedifthe integrityofthe forest cover is to be maintained. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 99 InternationalWaterways As the locations for community irrigation schemes are not yet defined, there is a risk that they may be situatedon riversthat share a commonborderwith IndonesiainOecussi, Bobonaro or CovalimaDistricts. The potentialrisksto Timor-Lestecommunity irrigationprojects are two-fold: Upstreamriparianscouldextract more water andthus reducethe flow available for downstreamuse. Since the generaltopography of the border is unsuitable for large storage dams and the area ofthe communityprojects is very small (less than 0.3 percent) ofthe catchment area, the risks of excessive upstreamextractionare low. Industrialdevelopment projects which may pollutethe water suppliesmay be locatedinthe future in upstreamareas. Giventhe difficulties of access andthe topography ofthe border areas, the potential riskofthis occurringis minimal. There is a potentialrisk for Indonesianriparians located below Timor-Leste irrigation schemes that they may receive reduced water supplies and that the water may be polluted. However, since the proposed community irrigation schemes are small in relation to the total catchment area, and the community projects would not be inthe same sub-catchment, the interactionlower inthe system would be minimal. For most waterways, Indonesianriparians also occupy a smallproportionof the catchment area (less than 20 percent inBobonaro)andare locatedupstreamfromripariansinTimor-Leste. Land Acquisition As stated above, the project is extremely unlikely to require involuntary resettlement. Risks associated with communityactivitiesunder Components 1 and 2.1 relate to the possibilitythat communitymembers may bring pressure to bear on individuals to donate their land. In this case, an effective consultation, verification and grievance process is required to ensure that affected people have recourse to appeal. Land use agreements will involve informed consent for the voluntary donation of land for use by the community, These procedures are included in the Policy Guidelines for the Negotiations over the Use and Development of Land for ARP I11(see Attachment). Inthe case o f the Caraulun irrigationscheme (sub-component 2.2), where a remote possibility exists that the Government may need to acquire small areas of land involuntarily to implement the rehabilitation works, provisions for involuntary land acquisitionhave beenincludedinthe Guidelines. 3. Proposed Measures to Address these Risks Forestry The forestry regulatory framework remains a combination of existing Indonesian Law and Regulations 2000/17 and 2000/19 o fthe UnitedNations TransitionalAdministration in East Timor (UNTAET). As a first step indevelopingNational policy and regulations, MAFF carriedout a policy study entitled"A New Forest for a New Country", in May 2002. This stressed the importance of developing a policy for community-basednaturalresources management, includingtenure and user right issues. MAFF proposes to carry out such a study under Component 4.2 of ARP 111. It is expected that this study will make recommendations for a new Community-BasedNatural Resources Management Policy in Timor-Leste, which in turn would guide the implementation o f community forestry and fisheries management activities. It is expected that key principles of IDA'SForestry safeguards policy would be incorporated intothis study. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 100 It is not envisaged that the project would become involved in actual decision-making relating to traditionalmethods o f determiningland use and access. The resultso fthe Natural ResourceManagement Policy Study would instead contribute to a clearer policy and legal framework. It is however proposed that the process of planning community-basedforestry activitiesbe strengthenedto incorporate stronger principleso fequity andsustainable managementprinciples.This will be done intwo key ways: For Small Groups in pilot villages that do not have complete household representation, group membership will be reassessedfollowing productionof the first batch o f seedlings througha public meeting mechanism. Any additional community members willing to participate as a result of the success of the initial seedlings will be offeredthe opportunitytojoin groups or establishnew ones as a means of accessing project support. This will provide them with seedlings to plant on their own and communal land, andreducethe potentialfor conflict over resource access anduse inlateryears. Where plantingis beingundertaken on degraded land (that was unstable andproneto landslide prior to planting), consideration should be givento banningfuture harvest usingagreed, traditionalclosure processes (tara bandu). Community plans for transplantingfrom nurseries to village land should ensure some or all of the degraded land is planted prior to planting on more stable land where sustainableharvestingcan take place.A planfor continuedreplantingon communityplantationareas should be included in the proposals. Communities will be encouraged to reinstate traditional ceremonies of tara bandu regulating the use of reforested areas or plantations. This system, previously bannedunder the Indonesianadministration, is presently beingrevivedinmany Timorese communities andshouldprovidea solidbasis for community-based naturalresource management. As a principle, rather than providing seedlings, the project is providing training in seed selection and propagation (from the many locally available seed types) to ensure that beneficiary groups have the technicalcapacity to continue replantingbeyondthe life ofthe projectusinglocallyprocuredmaterials. The project has prepared a `positive' and `negative' list which will govern the nature of activities supported under Small Group Grants (see Annex 4). The positive list includes nurseries to propagate mainly locally available tree seeds to be used for reforestation of degraded areas, increasing local fuelwood supply, introducing improved agroforestry techniques, community management of natural forests, mangrove rehabilitation, and catchment management. It also allows for the sustainable use of non-timber forest products (such as honey and medicinalplants). All o f these activities are guided by sound principles of sustainable forest practices. The negative list prohibits the approval of any activity with significantenvironmentalimpacts, especially inprotectedareas andcriticalor importanthabitats. InternationalWaterways IDA management has provided an exception to the notification requirement under the International Waterways policy, based on the fact that community irrigationworks will only involve rehabilitationof existing schemes, and therefore that the quantity of water abstracted will not change from the original design capacity. The community rehabilitation works are also not expected to affect the quality or quantityo fwater to Indonesianripariansor be affectedby their water use. LandAcquisition The Policy Guidelines for the Negotiations over the Use and Development o f Land for ARP I11(see Attachment) will guide the process related to the voluntary donation o f land, associated community compensation arrangements, verification, and grievance procedures. In the event of involuntary land acquisitionby the Government,the Guidelineswouldprovidefor state-fundedcompensation. Timor-LesteThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 101 4. Mechanisms and Capacityto Monitor Safeguards MAFF - in close collaboration with the Division o f Environment (DOE)- will be responsible for supervising the implementation of environmental management and monitoring procedures. Where required, MAFF may call on the DOEto assist in the identificationof protected area boundaries and critical or significant natural habitat areas. As the capacity o f both agencies to identify and monitor environmentalmitigationmeasuresis weak, trainingmay needto be provided. Projectfacilitators will be trained inthe applicationofthe Policy Guidelines for the Negotiationsover the Use and Development of Land for ARP 111. Coordinationwith the Division o f Lands and Property (Ministry of Justice) has been established, and their advice will be sought, as needed, during project implementation. Inparticular, district staff from Lands and Property will be involved in any grievances that may require district intervention.Monitoringforms have been includedinthe Guidelines, as well as inthe OperationalManuals (see Attachments). The project overall indicatorswill recordthe number of sub-projects requiringland, as well as any grievanceswhichmay occur (see Annex 3). For Components 1 and 2.1, the district implementationteams will be requiredto apply a checklist of possible negative environmentaland social impacts, includedinthe Operational Manuals. The mitigation measures recommended and agreed by the communities will be included in Community Agreements. Compliance with these will be monitoredby facilitators and by the district implementationteams. The project includes an overall environmental indicator measuringthe proportionof community sub-projects which (a) do not requiremitigationmeasures; (b) fully comply with the measures; or (c) partiallycomply with the measures. The target achievement is 90 percentby end-of-project(see Annex 3). For Component 1 activities involvingnurseries, project facilitators will ensure that community meetings are held following the first round o f seedling productionto re-visit group membership and encourage wider participation. New group memberswill only be accepted ifthey are willing to contributelabor and locally availablematerials. This will ensure greater equity of access to community forest land. Details of this processare specifiedinthe OperationalManual. The Small Groups Activity Plans will include agreements on which areas cannot be harvested (those planted in areas prone to erosion) and replantingfor areas intended for future harvest. Ultimately, any harvesting will not occur until some years after project end. Monitoring is therefore expected to be undertaken by the Forest Guardiardextensionofficers employed by MAFF (currently around 3 per district). They will be included in project training for facilitatingcommunity proposal development, and will be aware of the plans made by the pilot villages for management of project-supportedseedlings. Whilst it cannot be guaranteed that these staff will still be in placed when harvesting is planned, their current job description includes working with communities to manage their forest resources on a sustainablemanner andact on andreportincidences of mismanagement. Village leaders will also be encouragedto participateinlong-termmonitoring,inparticular, inmonitoring compliance with the agreements surrounding resource use management made through their traditional tara bandu system. The environmental mitigation plan for Caraulun will be included in the tender documents for the rehabilitationcontractors, as well as the Terms of Referencefor the consultants supervisingtheir works. The quarterlyprogressreports producedinternallyby MAFF, as well as the bi-annualreports submittedto IDA will include an assessment of the level of compliance with social and environmental safeguards. DOEand Lands will be provided a copy of this report and invited to provide advice on improving environmental compliance ifnecessary. Timor-Leste Third Agriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 102 Attachment: Timor-Leste Third Agricultural Rehabilitation Project (ARP 111) Policy Guidelines for the Negotiations over the Use and Development of Land for ARP 111 Background The Third Agriculture Rehabilitation Project aims to strengthen the capacity o f the Ministry of Agriculture, Forestry and Fisheries (MAFF)to assist rural communities in increasing their production and income in a sustainable way. The project was designed as a consolidation phase, with an emphasis on sustainability of activities, impact of achievements, and quality of outputs. The period of implementation i s January 1, 2004 - December 30,2007. The project contains the following Components: Component 1 - Participatory Development and Natural Resources Management, will support MAFF's main assistance program to upland and coastal communities. It will promote improved self- reliance and natural resources management to strengthen communities' resilience and make them less vulnerable to external shocks (such as periodic droughts and chronic food insecurity). It targets an estimated 50 villages in seven districts - Dili, Lautem, Liquiqa, Manufahi, Covalima, Baucau, and Oecussi. Component 2 - Irrigation Rehabilitation and Management, will support MAFF's main assistance program to farmers in lowland irrigated areas. The component will target about 4,000 rural families inall 13 districts. Activities include about 3,000 hectares of community rehabilitation of small irrigation schemes and 150 km of rural access roads, and the rehabilitation of the Caraulun irrigation scheme in Manufahi district. Component 3 - Services to Farmers, would help institutionalize three basic MAFF services to farmers: Information, Animal Health, and Agri-Business support. Sub-components are as follows: 0 Sub-component 3-1, Information to Farmers, will increase MAFF's capacity to provide information to farmers and enhance links with international agriculture research, pilot district information networks and establish an agro-meteorological network. 0 Sub-Component 3.2. Sustainable Animal Health Services, will target the estimated 567,000 rural people living in households which own livestock, providing vaccination and veterinary services and establishing a network ofVillage Livestock Workers. 0 Sub-component 3.3. Supportto Agri-businesses, will strengthen MAFF's advisory services to rural producer organizations and assist farmers in grain production, priority niche markets and candlenut and coconut oil production. 0 Component 4 - Program Management, will help MAFF to manage the project, continue to develop key nationalpolicies, and strengthen the Ministry's managerial and technical capacity. Giventhe nature of this project, which involves community based planning and implementation of small scale activities and rehabilitation of a large irrigation scheme (Caralaun), no adverse impacts are expected as a result o f land use. However, some Project components may require land. The present ARP I11 Policy Guidelines have been prepared to guide the preparation and implementation of project components requiring land, These Policy Guidelines are applicable for the implementation of ARP I11only and, by no means, shall it be considered national policy for all cases of land acquisition by the State. Its objective is to ensure that the use or acquisition of land for Project-related activities does not result in loss of Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 103 economic opportunity. It will be the goal of the Project to minimize any economic and physical displacement of people. These guidelines includeprovisionsfor: 1. Voluntary donationof land, or land providedagainst compensationpaidby community members, for Small Group Activities under Component 1(ParticipatoryDevelopment andNaturalResource Management) and community-owned irrigationschemes under Sub-component 2.1 (Community- basedIrrigationandRoadsRehabilitation);and 2. Involuntary acquisition of land for the rehabilitationof the major irrigation scheme under Sub- component2.2 (Rehabilitationofthe Caraulun irrigationscheme) These Policy Guidelinesare divided into two mainparts. Part Iincludes provisions for: (i) ensuringthat all participating communities under Project components 1 and 2.1 (option 1 above) are made aware of their rights relatingto the provisiono f land as voluntary donation or as communitybasedcompensation; (ii)verify that voluntary donations or community basedarrangementsfor compensationare indeed voluntary and appropriate; (iii)verify that the donor is the legitimate owneduser of the land/assets; (iv) verify that the donor is fully informedof the nature ofthe projectactivity andthe implicationsof donating the property;and(v) providean appropriate avenue for grievances. Part I1includes provisionsfor land acquisition against compensation paid by the Government of Timor- Leste shouldany landacquisitionby the Stateby requiredunderthe Projectcomponent2.2. Key Definitions Involuntarv Land Acquisition refers to the taking of land by government for public purpose against compensation where the landowner must surrender their land involuntarily and has only the right to negotiate and appeal the amount of compensation proposed. This includes land or assets for which the owner enjoys uncontestedcustomary rights. Land refers to agricultural and non-agriculturalland and any structures thereon whether temporary or permanent andwhich is requiredfor the Project. Voluntaw Land contribution refers to a process by which an individual or communal owner agrees to provide landor propertyfor project-relatedactivitieswithout compensation, or with community-provided compensation. Voluntary contribution is an act of informedconsent, made with the prior knowledge of other options available and their consequences, includingthe right not to donate nor transfer the land. It must be obtainedwithout undue coercionor duress. OrganizationalArrangements Overall responsibility for the implementationof these Policy Guidelines lie with MAFF. MAFF will ensure that the Policy Guidelinesare appropriately disseminated and that project staff have the required skills and receive appropriate training. The Unit is responsible for proper monitoring o f the Policy Guidelines and will incorporate necessary changes to the guidelines and procedures based on recommendationsfrom monitoringexercises andwith the World Bankprior agreement. Projectfacilitatorsand technicians will be trainedand taskedto ensure that requirements and procedures of the PolicyGuidelines will be followed as prescribed. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 104 PART I: Voluntary Donation of Land PART 1.A: Project Component 1.ParticipatoryDevelopmentand NaturalResourceManagement. Guiding Principle Where land is required for implementation of Participatory Development and Natural Resource Management activities, it must be provided voluntarily in accordance with the process specifiedbelow. No person will be involuntarily displaced by activities financed by Small Group Grants. Under no circumstance will the Government of Timor-Leste acquire land for the purpose of implementing activities funded by SmallGroup Grants, or be requiredto providecompensationto communitymembers for land utilized by the community for the purpose of Component 1 activities.The Small Group Grants can not be used for the purpose of providingcompensation in cash or in-kind.These principlesand the following process are embodiedinthe OperationalManualfor Component 1. Key Additional DeJnitions Communi@Facilitatorrefers to project-contractedfacilitators who have been contracted for the purpose of assisting SmallGroups to develop activitiesunder the Projectfor financingby a SmallGroup Grant. It may also include MAFF field staff and field staff of the District Administrationoffice following review at mid-term. SmallGroups refers to the groups basedat the hamlet level(typically along kinshiplines) formed to plan andmanageNaturalResourceManagementactivitiesusingSmall Group Grant support under Component 1. Village ImplementationTeam refers to a team made up of elected representatives o f the Small Groups with overallresponsibilityfor village-levelmanagementandmonitoringof SmallGroup Grants. 1.Securing of Landfor Small Group GrantActivities Landmay be secured for use by communitygroups through: a) Voluntary Land Contributionswithout Compensation: Individualsor community groups may elect to voluntarily contribute individual or communal land without compensation for use by the Small Groupsfor the SmallGroup activities; b) Voluntary Land Contributionswith Community-generatedCompensation: Where landowners or community groups require payment of compensation to provide land for use by the Small Group for Small Group activities, this compensation must be agreed between them and the Small Group members (Small Group Grant funds cannot be used to pay for compensation in cash or in-kind nor will compensationbe providedby the Government of Timor-Leste). 2. Consultation,I nformation Disclosure and Planning Process Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 105 The consultation, informationdisclosure andplanningprocessfor Voluntary LandContributionswith and without community-generatedcompensationwill be as follows: (a) At the initial broad-based community meetings conducted as part of the Educati,on and Information Campaign, the Community Facilitators will inform the participating villages about the principles relating to the voluntary nature of land donations, the option for contributions o f land with compensation resourced by the Small Group, the procedures of Part Iof the Policy Guidelines, and a brief description of the grievance procedures and mechanism. The fact that the Small Group Grants are not to be used to provide compensation, whether in cash or in-kind, will be emphasized. (b) As part of the proposal development process (defined in full in the OperationalManualfor Component l), Community Facilitatorsand members of the Village ImplementationTeam will facilitate a meeting with each Small Group to assist in the development of proposals. This will includedeterminingthe most appropriate location for the activity. The principlesof Part Io f the Policy Guidelines will be reiterated by the Community Facilitators prior to commencementof SmallGroup discussions relatingto the proposedactivity. (c) Proposed Small Group Activities, with the need for voluntary provision of land with or without compensation, will need to include the following information in the Activity Plan (proposal) which is submittedto the DistrictManagementTeam: 1. For any voluntary contributions of individual land, a consent form which includes the name of the land donorh, and details of the contribution (type, size, location, specified period of use etc. as appropriate). This should be signed (or thumb-printed) by the land donorh (includingthe male and female heads of the household involved), the Leader of the Small Group, the Chief of the Village and Chief of the Hamlet and the Leader of the CouncilofElders (or nominee). A sample consent form is includedas Attachment A. 2. For land contributionsagainst compensation, a consent form which includes the name o f the land donor/s, details of the contribution(type, size, location, specifiedperiod of use etc. as appropriate), and details o fthe agreed compensation arrangements. This shouldbe signed by the land donods (including the male and female household heads), a nominatedrepresentativeofthe group providingthe compensation, (e.g. the Leader ofthe Small Group), the Chief of the Village, Chief of the Hamlet and the Leader of the Councilo fElders (or nominee). A sample consent form is includedas Attachment B. 3. Where the land donated is communal land, these forms can be signed on behalf of the Small Group by the elected leader. (d) For SmallGroup Activitieswhere landis donatedor providedagainst compensation,the DistrictImplementationTeamwill, duringits appraisalof proposedactivities: (i) verify with the landdonorhthat the donation is indeedmade on a voluntarily basis, that the donods idare the legitimateownerhserof such lands, andthat the landdonods idare fully informedofthe natureo fthe activity andthe implicationsof donatingthe property;(ii)assess that the land donor does not suffer a substantial loss affectinghidher economic viability as a resultofthe arrangement. Where there is substantial loss the activity cannot be approved as proposed(the amount donated should usuallynot exceed 10% of his/her land or assets without an appropriate compensation); and (iii)assess that the compensationarrangements are appropriate. The compensationshouldbe roughlyequivalent to traditionalcompensation arrangements. Where demands are excessive, compensationinappropriateandthe landdonor Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 106 andthe communitycannot agree, the Community Facilitatorswill encourage alternative sites or arrangements.The activitywill not be approved for fundingby a SmallGroup Grant until suitable alternative sites are identifiedand landhas beenvoluntarily made available through the process describedabove. Ifno suitable landis made available throughthe VoluntaryLand Contributionprocessthe activitywouldnotbe further processed. (e) In all cases o f voluntary land contributions,the Recipientshall furnish copies o f all the duly signed consent forms to the Directorateof Land and Property of the Ministry of Justice, for reference andrecordspurposes. 3. Complaintsand Grievances The Community Facilitators will be responsible for ensuring that Small Group discussions during proposal development - in particular relating to voluntary donation o f land - are transparent and conducted in a fair manner. During proposal development, the following process for complaints and grievanceswill be reiteratedto communitiesandfollowed: (a) The District ImplementationTeam will invite and address any grievances duringthe verification and appraisal process. If a suitable solution is not found, the District Implementation Team cannot verify the consent forms and the proposalwill not be submitted for assessment. The issue will then go back to the community for discussion. The Small Groups and the Village Implementation Team may request the assistance of the Suco and Aldeia Leaders and any relevant traditionalleadersto mediate inthe compensationprocess.The mediationprocesswill be implementedaccording to traditional methods of mediatiodconflict resolution. The resolution will then be documentedon the relevant consent forms and verified following step 2.d above. If no resolution is forthcoming, the district office of the Directorate of Land and Property may be invited by the Recipient to assist in the mediation process. Until a resolutionis arrived at, the SmallGroup Activity planwill not be submittedfor approval. (b) At their discretion, the National Management Team may elect, as part of the overall proposal assessment process, to re-confirmany consent forms as requiredthrough a verification dialogue processas definedabove. (c) After a proposal has been completed and verified, the land donods as well as other members of the community may raise any concerns they may have with the District ImplementationTeam, National Management Team, Suco and Aldeia Leaders, relevant traditional leaders or other appropriate authoritieswithin 30 days after the verification meeting. The resolutionwill then be documented and the proposaland consent form changed, if needed, and verified by the District ImplementationTeam. Ifno resolutionis forthcoming,the activity planwill not be approved. 4, Monitoring Duringactivity implementation,monitoringwill be conducted by the CommunityFacilitators,the District Implementation Team and the National Management Team. This will be integrated into the overall monitoring of Small Group Grant activities. Facilitatorswill be principally responsible for identifying any adverse outcomes as a result of landdonation. Where disputes occur, either becauseinformedconsent has been withdrawn or compensation agreements have been reneged on, any further Small Group Grant disbursement to the affected Small Group activity will be postponed until such time as the dispute has been resolved.Ifnecessary, the SmallGroup can choose to relocate the activity which would requirethe re-negotiationof a consent form andverificationas outlinedabove. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 107 Indicatorswill include: -- the number o f Small Group Grant activities which have involvedlanddonation; the number o f SmallGroup Grant activities whichhave involvedprovisionof landagainst - the number of grievances recorded, includingthose successfully mediated, andthose unresolved. compensation; and Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 108 ATTACHMENT A: Sample consent form AGREEMENTTO APPROVETHE USEOF LAND FORTHE PURPOSE OFSMALLGROUP,SMALL GROUP GRANT ACTIVITY IMPLEMENTATION Date: INVe, male household head female household head, OR Small Group Leader Residentls of Sub-district suco ,Aldeia, declare that INVelthe group is voluntarily donating the use of (specify land, asseffs, location, size, type etc) For the purpose of: (specifyactivity) For the duration of: (specifycommencement date and duration) Of MylOur own free will, lNVe are waiving MylOur right to compensation of any kind for the sp cifi d duration of the activity. Signed: Male household head Female household head Leader of Small Group Suco Chief Aldeia Chief Leader of the Council of Elders (or designate) Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 109 ATTACHMENT B: Sample consent form AGREEMENT TO APPROVE THE USE OF LAND FOR THE PURPOSE OF SMALL GROUP SMALL GROUP GRANT ACTIVITY IMPLEMENTATIONFOR COMPENSATION Date: IiWe, male household head female household head, OR Small Group Leader Residenffsof Sub-district suco ,Aldeia, declare that IiWelthe group are consenting to the use of (speciw land, assets, location, type efc) For the purposeof: (specifyactivity) ~ ~~ For the duration of: (specifycommencementdate and duration) For the following agreed compensationarrangements (NB, use the back of form ifneeded): Signed: Male household head Female household head Leader of Small Group Suco Chief Aldeia Chief Leaderof the Councilof Elders (or designate) Timor-LesteThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 110 PART 1.B: ProjectComponent2.1 CommunityIrrigation and RoadsRehabilitation Guiding Principle Component 2 focuses on the rehabilitationof existingroads and irrigation works proposed and done by communities and is, therefore, not expected to involve land acquisitionor resettlement. The specific requirements for Community Schemes (under Activity 2.l),not requiring Involuntary LandAcauisition, are set out below. These principles and the following process are embodiedinthe OperationalManualfor Community-basedirrigationrehabilitation. Key AdditionalDefinitions Communitv Contractor refers to the nominated manager of the community contract for infrastructurerehabilitationandthe community liaisonpointwith MAFF. Water User Association(WUA) refers to a collectionof ricefarmers sharing a commonirrigation scheme who are responsible for the managementandminor maintenanceofthat scheme. 1.Securing of Land or OtherAssetsfor Community Contracts For rehabilitationof community irrigationand roads landmay be secured for use by community groups through: a) Voluntary Land Contributions without Compensation: Individuals or community groups may elect to voluntarily contribute individual or communal land or assets without compensation; b) Voluntary Land Contributions with Community-generated Compensation: Where individuals or community groups are not willing to donate land and require compensation for providing land, they will be eligible to be providedwith compensation in an amount and form agreed to and provided by the participating community or Water User Association. The communitycontract funds can notbe usedfor the purpose of providingcompensationwhether in cashor in-kind, nor will the Government of Timor-Lesteprovidecompensation. 2. Consultationand I nformation DisclosureProcess The consultation, informationdisclosure and planningprocess for Voluntary LandContributions with or without community-generatedcompensationfor communityactivitieswill be as follows: a) The principlesrelatingto the voluntary nature of landor propertydonations as a form of community contribution to the rehabilitationworks, as well as the option for contributions against community compensation will be disclosed by District Irrigation Officers. This will be done during the process of soliciting/preliminary checks of proposals (see Operation Manualfor Community Irrigationand Roads Rehabilitation).The fact that the infrastructure contract funds are not to be used to provide cash or in-kind compensation will be emphasized. b) Once the preliminary selection of schemes to be funded by the project has been conducted by the Central Irrigation Team, the District Irrigation Officers will facilitate a meeting with all potentially affected landholders to assist in the development of agreements Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 111 to maintainthe completed works (all beneficiaries) and, ifneeded, the preparation o f consent forms. The principles of these Policy Guidelines as they relate to Activity 2.1 will be reiterated by the District Irrigation Officer as a preface to discussing community contributions and location of the rehabilitation works. The District Irrigation Officer will assist infacilitatingdiscussions, butwill not make any decisions on behalfof the community. c) ProposedCommunity Schemes, with voluntary donations of land or provisionof landwith community-generated compensation, will need to include the following information in the proposal: 1. For voluntary contributionsof individualland or property, a consent form which includes the name of the land donorh, and details of the contribution (type, size, location, specifiedperiodofuse, etc. as appropriate to the type of donation). This shouldbe signed by the land donorh (includingthe male and female household heads), the Community Contractor(or communityrepresentative), and witnessedby the Chief o f the Village and Chief of the Hamlet and the Leader of the Council of Elders (or nominee). A sample consent form is includedas Attachment C. 2. For land or property contributions with community-generated compensation, a consent form which includes the name of the land donor/s, details of the contribution(type, size, location, etc. as appropriate to the type of donation) and details of the compensation arrangements agreed. This should be signed by the landdonods (includingthe male and female householdheads), a nominated representative of the community group providing the compensation, (e.g. the appointed Community Contractor), and witnessed by the Chief of the Village, Chief of the Hamlet and the Leader of the Council of Elders (or nominee). A sample consent form which canbe modifiedfor each individualrequirement is includedas Attachment D. d) For Community Schemes where land is donated or provided with community-generated compensation, the CentralIrrigationTeam will, during its appraisal of proposedactivities,as the case may be: (i)verify with the land donods that the donation is indeed made on a voluntarilybasis, that the landdonods is/are the legitimate ownerhser of such lands, andthat the donods idare fully informedof the nature of the works and the implicationsof donating the land; (ii)assess that the land donor does not suffer a substantial loss affecting hidher economic viability as a result of the arrangement. Where there is substantial loss the works cannot be approved as proposed (the amount donated should usually not exceed 10% of hidher land or assets without an appropriate compensation); and (iii)assess that the compensationarrangements are appropriate. The compensation should be roughly equivalent to traditional compensation arrangements. Where demands are excessive, compensation inappropriate and the community cannot agree, the Community Contractors will encourage alternative sites or arrangements. e) In all cases of voluntary land contributions, the Recipient shall furnish copies of all the duly signedconsent forms to the Directorateof Landand Property o f the Ministry of Justice, for referenceandrecords purposes. Timor-Leste Third Agriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 112 3. Complaintsand Grievances The District Irrigation Officers will be responsible for ensuring that discussions during the formulation of agreements relating to voluntary donation of land and community-generated compensation are transparent and conducted in a fair manner. Once proposals are submitted, includingthe relevant forms agreeingto consent for voluntary donation and/or compensation, the following processfor complaints and grievances is ineffect andreiteratedto communities: a) Any grievances should be invited and addressed during the verification and appraisal process. If a suitable solution is not found, the Central Irrigation Team cannot verify the consent forms and the proposalwill not be accepted for funding. The issue will then go back to the community for discussion. The village may ask the assistance of the Suco and Aldeia Leaders and any relevant traditional leaders to mediate in the compensation process. The mediationprocesswill be implementedaccordingto traditionalmethods o fmediatiodconflict resolution.The resolutionwill thenbe documentedonthe relevant consent forms andverified following step 2.d above.Ifno resolutionis forthcoming,the districtoffice o fthe Directorate of LandandProperty may be invitedby the Recipientto assist inthe mediationprocess.Until a resolutionis arrivedat, the work proposalwill notbe submitted for approval. b) After a proposal has been completed and verified, the land donorh as well as other members o f the community may raise any concerns they may have with the District Irrigation Officers, Suco and Aldeia Leaders, relevant traditional leaders or other appropriate authoritieswithin 30 days after the verification meeting. The resolutionwill then be documentedand the proposal and consent form changed, ifneeded, and verified by the Central IrrigationTeam. If no resolutionis forthcoming, the proposal will not be approved. 4. Monitoring Duringactivity implementation,monitoringwill be conductedby the CentralIrrigationTeam and the District IrrigationOfficers. This will be integrated into the overall monitoringof community rehabilitationworks. District IrrigationOfficerswill be principallyresponsiblefor identifyingany adverse outcomes as a result o f land donation. Where disputes occur, either because informed consent has been withdrawn or compensation agreements have been reneged on, any further disbursementwill be postponeduntilsuchtime as the dispute has beenresolved. Ifnecessary, the village can choose to re-negotiate a consent form and verification will be required as outlined above. Indicatorswill include: -- the number o communitycontracts which have involvedlanddonation; f the number o f community contracts which have involved provision of land against - the number compensation; and o f grievances recorded, including those successfully mediated, and those unresolved. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 113 ATTACHMENT C: Sample consent form AGREEMENT TO APPROVE THE USE OF LAND OR OTHER ASSETS FOR THE PURPOSE OF COMMUNITY CONTRACTS FOR INFRUSTRUCTURE REHABILITATION Date: INVe, male household head female household head, OR Community contractor Residenffs of Sub-district suco ,Aldeia, declare that INVelthe group is voluntarily donating the use of (specify land, assets, location, size, type etc) For the purpose of: (specify activity) For the duration of: (specify commencement date and duration) Of MylOur own free will, lMle are waiving MylOur right to compensation of any kind for the specified duration of the activity. Signed: Male household head Female household head Community Contractor Suco Chief Aldeia Chief Leader of the Councilof Elders (or designate) Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 114 ATTACHMENT D: Sample consent form AGREEMENT TO APPROVE THE USE OF LAND OR OTHER ASSETS FOR THE PURPOSE OF INFRUSTRUCTURE REHABILITATION FOR COMPENSATION Date: INVe, male household head female household head, OR Community Contractor Residentls of Sub-district suco ,Aldeia, declare that INVelthe group are consenting to the use of (specify land, assets, location, type etc) For the purpose of: (specify activity) For the duration of: (specify commencement date and duration) For the following agreed compensation arrangements (NB, use back of form ifneeded): Signed: Male household head Female household head Community Contract Suco Chief Aldeia Chief Leader of the Councilof Elders (or designate) Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 115 PART II: Involuntary Land Acquisition Land or other assets relating to the rehabilitation o f roads and existing head works, primary, secondary or tertiary canals and land or other assets relating to the expansion o f existing primary, secondary or tertiary canals, or the creation of new canals and other irrigation-related facilities if found to be required during field investigations, and which would require involunta,wland acquisition by the Government o f Timor- Leste, may be secured through the provisions o fthese Policy Guidelines. These provisions relate to Component 2.2 Rehabilitation o f the Caraulun Irrigation Scheme, and will be included in the tender documents for the supervision o f the Caraulun Rehabilitation Contract. They do not relate to Component 1 Participatory Development and Natural Resource Management, nor to Component 2.1 Community-Based Irrigation and Roads Rehabilitation. For tertiary canals under Component 2.2 that are proposed and implemented by communities the provisions in Part 1.B o f these Policy Guidelines apply as they will thus be provided for under a Community Contract arrangement. Key AdditionalDefinitions Compensation refers to payment incash or in kind o f the replacement cost o f the acquired land. Displaced Person refers to persons who are affected by the involuntary taking o f land resulting in (i) relocation or loss o f shelter; (ii)loss o f assets or access to assets; or (iii)loss o f income sources or means o f livelihood, whether or not the affected persons must move to another location. Replacement Cost refers to the principle o f valuation used to determine appropriate compensation for lost land or other assets. For agricultural land, it is the pre-project or pre-displacement, whichever is higher, market value o f land o f equal productive potential or use located in the vicinity o f the affected land, plus the cost o f preparing the land to levels similar to those o f the affected land, plus the cost o f any registration and transfer taxes. For houses and other structures, it is the market cost o f the materials to build replacement structure, plus the cost o f any registration and transfer taxes. In determining the replacement cost, depreciation o f the asset and the value o f salvage materials are not taken into account, nor is the value o f benefits to be derived from the project. Section 1. General Policy. The objective is to ensure that persons displaced either physically or economically by the Project maintain their livelihood. It shall be the goal o f the Recipient to minimize the physical and economic displacement o f persons as a result o f the implementation o f the project; provided, however, when the involuntary acquisition o f land is required, the Recipient shall utilize available land administered by the Recipient and which the community is not using. Only as a last resort shall the Recipient acquire land through involuntary acquisition following the below provisions. 1.1 There shall be no involuntary land acquisition o f land and other assets and resettlement o f people, unless absolutely necessary. In particular, acquisition o f sites o f spiritual or cultural significance shall be avoided. 1.2 If such involuntary land acquisition is absolutely necessary then it shall be minimized to the greatest extent possible. 1.3 Plans for involuntary acquisition o f land and other assets and provision o f rehabilitation measures will be carried out inconsultation with the Displaced Persons, to ensure minimal disturbance. 1.4 The Displaced Persons will participate throughout the various stages o f the planning and implementation o f the Resettlement Plans. For these purposes and prior to the preparation o f the Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 116 Resettlement Plans, the Displaced Persons, will be informed of the provisions of these Policy Guidelinesandtheir entitlementsat publicmeetingsheldby the Recipient. Section 2. Resettlement Instrument 2.1 A determinationshall be madeby the Recipientwhether there are any DisplacedPersons. 2.2 If there are noDisplacedPersons, the Recipientshallprovideawrittenstatementto this effectto the Trustee. 2.3 Ifthere are DisplacedPersons, aResettlementPlan, or anAbbreviatedResettlementPlan, willbe prepared by the Recipientin accordance with the Provisionsof these Policy Guidelines and the WorldBank policy on InvoluntaryResettlement,OPBP 4.12. Section 3. EntitlementsPolicy The calculation of compensation payable to DisplacedPersons shall be based on principles of sustainable development and ensure, in accordance with these Policy Guidelines, the maintenanceof the physicaland economic livelihoodof DisplacedPersons. For purposes of determiningpossible eligibility to compensation, the project activities will be announcedto potentially DisplacedPersons and a census will be conducted. The date ofthe censuswill be the cut-off-datefor eligibility. Section 4. Supervision, Monitoring and Evaluation 4.1 Implementationof the Resettlement Plan, or AbbreviatedResettlement Plan as the case may be, shall be subject to monitoringand evaluationby MAFF, with the assistance of the Directorateof LandandProperty as appropriate, for the purpose ofverifyingthat: 4.1.1 The informationrequiredinthe ResettlementPlanhas beensatisfactorilyprovided. 4.1.2 The Provision of compensation, resettlement and other rehabilitation entitlement has been carried out in accordance with the provisions of these Policy Guidelines and the respective ResettlementPlan. 4.1.3 The funds for implementing these Policy Guidelines have been provided in the necessary amountsand ina timely mannerandhave beenusedin accordance with the ResettlementPlan as designedandapproved. 4.1.4 Informationrelevant to the resolutionof grievancesand complaints inaccordancewith Section 5 o f these PolicyGuidelines has beenprovidedto DisplacedPersons. 4.2 At the requestofthe Trustee, one or more independent agenciesacceptable to the Trustee shallbe retained from time to time by MAFF, in accordance with terms of reference approved by the Trustee, to monitor andevaluate the implementationo fthe ResettlementPlans. 4.3 Any further implementationreports shall be furnishedby MAFFto the Trustee uponits request. Timor-Leste ThirdAgriculture Rehabilitation Project - Project Appraisal Document, October 7, 2004 117 Section 5. Complaintsand Grievances 5.1 MAFF shall appoint a Grievance Officer who shall receive complaints and grievances related to any aspect o f the application o f these Policy Guidelines. The Grievance Officer shall be the Head o f the MAFF Division o f Forestry, or a person designated by MAFF as the Grievance Officer. 5.2 MAFF shall inform the Displaced Persons o fthe rightto bringcomplaints, the process for making a complaint, the identity o fthe Grievance Officer and how to contact them. 5.3 The Grievance Officer shall receive grievances inthe first instance. A report o f any complaints or grievances received and any action taken to address that grievance shall be forwarded by the Grievance Officer to MAFF. 5.4 Displaced Persons shall have standing to enforce any aspect o f these Policy Guidelines that is to their benefit in relevant dispute resolution mechanism or a competent court. The Recipient accepts the payment o f all administrative and legal costs for complaints or grievance upheld by such court. Section 6. Acknowledgements 6.1 These Policy Guidelines do not replace any rights that Displaced Persons have under the laws applicable in Timor-Leste or other requirements under the laws that must be observed in the implementation o fthe Project. 6.2 Final verification o f rights in land and buildings in Timor-Leste may not be presently possible by the Recipient and compensation may be based on an assessment o f likely rights. Section 7. InstitutionalArrangements 7.1 It is recognized that the Directorate of Land Property is the government office legally responsible for land and property issues in Timor-Leste. As such, it shall have formal participation in all involuntary land acquisition processes for the Project, in coordination with the Ministry o f Agriculture, Forestry and Fisheries. 7.2 All decisions related to involuntary land acquisition for this Project shall bejointly approved by the Ministryo fJustice andthe Ministryo fAgriculture, Forestry and Fisheries. 7.3 Any funds requiredfor compensation inthis regard shall be the responsibility o f the Ministry o f Agriculture, Forestry and Fisheries, unless otherwise agreed. Timor-Leste Third Agriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 118 PROCEDURES FORTHE IMPLEMENTATION OF THE LANDPOLICY GUIDELINES, PART I1 The procedures set forth below shall be utilized by the Recipient inthe implementationo fthese Policy Guidelines,o f which these procedures are an integralpart. 1. ResettlementInstrument.Ifthere are DisplacedPersons, an Abbreviated Resettlement Plan will be prepared by MAFF in accordance with the provisions o f these Policy Guidelines, and will consist o f the following: 1.1.2 The numbers, names and addresses o f DisplacedPersons; 1.1.3 The loss suffered by each person and / or household as determined on the basis o f the following criteria: 1.1.3.1 The number, type, and area o f the houses and structures lost. 1.1.3.2 The number and type o f any other fixed assets lost. 1.1.3.3 The number and area o f the all the residential land lost 1.1.3.4 The number, category and area o f agricultural or grazing land lost. 1.1.3.5 The quantity and types o f crops and trees lost. 1.1.3.6 A description o f and value o f lost business. 1.1.3.7 Identification o f sites o f spiritual and cultural significance and a description o f that significance (if appropriate; if not, a statement o f the reason why this is not appropriate). 1.1.4 Detailed compensation, rehabilitation and relocation arrangements for each Displaced Person as determined in accordance with the entitlement policy in Section 3 above, including : 1.1.4.1 Any cash amounts payable. 1.1.4.2 The location, area, value, and description o f any replacement land. 1.1.4.3 Evidence o f the informed agreement by the Displaced Person. 1.1.4.4 In the case o f partial loss, a percentage figure for the portion o f total productive assets lost. 1.1.5 The intended sources o f funding for the various Abbreviated Resettlement Plan activities, including compensation and rehabilitation measures will be clearly specified incost tables. 1.1.6 A detailed implementationschedule inaccordance with Section 3 below. 1.1.7 In the case that the total number o f Displaced Persons affected by the Project exceeds 200, a full Resettlement Plan will be prepared, including a detailed socio- economic survey o f all Displaced Persons describing their age, sex, ethnicity, education, occupation, sources o f income, and total household income shall be prepared by MAFF (see World Bank Policy on Involuntary Resettlement, OP/BP 4.12 for further guidance). 2. Entitlements. The calculation o f compensation payable to Displaced Persons shall be based on the following principles, including with respect to: 2. Land or premises wholly affected: Timor-LesteThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 119 2.1 Houses, structures and fixed assets, cash compensation shall be at full replacement cost o f the structures, without deduction for depreciation. Any salvage materials remaining become the property o f the Recipient after the full payment and may be disposed in any manner it deems appropriate in accordance with existing government rules and regulations. 2.2 Residential, agricultural or grazing land, including premises, a choice shall be given to Displaced Persons o freplacement land or cash, where: 2.2.1 Replacement land shall be acceptable to the Displaced Person and shall take into account size, productive capacity, financial value, be located as close as possible to the landthat was lost and be otherwise satisfactory to the DisplacedPerson. 2.2.2 Cash compensation shall be at full replacement cost, without deduction for depreciation. Any salvage materials remaining become the property o f the Recipient after the full payment and may be disposed in any manner it deems appropriate in accordance with existing government rules and regulations. 2.2.3 Crops and trees: Cash compensation shall be given for standing crops, fruit, industrial tress and productive trees at replacement cost. 2.2.4 Sites o f spiritual or cultural significance: the Recipient shall negotiate appropriate compensation to Displaced Persons for interference with or destruction o f such sites. 3. Land or premises partially affected: 3.1 Ifthe portion ofthe landto be lost represents 20% or less ofthe total productive area of the landholding, and the remaining land is still a viable economic holding, a choice on the form o f compensation must be given to the Displaced Person between replacement land (of equal productive value and acceptable to the Displaced Person) and cash compensation for the lost land, at full replacement cost . 3.2 Ifmorethan 20% ofthe productive area ofaparceloflandis acquired andthe remaining holding is not viable, then, with the consent o f the Displaced Person, the entire landholding shall be acquired. A choice on the form o f compensation shall be given to the Displaced Person between replacement land (of equal productive value and acceptable to the Displaced Person) and cash compensation at full replacement cost as described inthe section 3.1 above concerning land wholly affected. 4. Land or premises temporarily taken (or unable to be used due to works under the Project) shall be compensated for: 4.1 Loss o f income, including the cost o f alternative premises. 4.2 Damage to productive assets, standing crops, infrastructure and shall include the cost o f soil and habitat restoration. 5. Other entitlements: Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 120 5.1 Allowances sufficient to cover the cost of transfer and subsistence until the Displaced Personsare reestablishedintheir new location. 5.2 Such other financial and physicalresources for resettlement and rehabilitation available as may bereasonablyrequiredby the DisplacedPersons. Section3. ImplementationSchedule The following timeframes shall apply unless otherwise agreed between the Trustee and the Recipient;provided,however, no such agreementto waive the timeframes shalladversely affectthe rights or interests of DisplacedPersons underthese PolicyGuidelines: 3.1 The inventory shall be completed at least four months prior to the commencement of work. 3.2 The AbbreviatedResettlementPlanshall be submittedto the Trustee for its approval. 3.3 Compensation,resettlement andrehabilitationactivitieswill only commenceafter the Trustee has acceptedthe AbbreviatedResettlementPlan. 3.4 The compensation, resettlementandrehabilitationactivities, ifany, will be completed at least one monthprior to the commencemento f work. 3.5 The provisiono f such further information as requiredby the Trustee in Section 3.4 shallbe subjectto suchtimeframes as may be specifiedby the Trustee. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 121 Technical Annex 11: Social Analysis TIMOR-LESTE:Third Agriculture Rehabilitation Proiect A. Introduction A Social Appraisal was carried out inFebruary 2003 immediatelyfollowingthe mid-termreviewof ARP 11. During the mid-termreview, recommendationswere made basedon a self-evaluationof the quality of impact o f activities on the farming community. These recommendations will be implemented between February -December 2003, and continue in ARP 111. Projectimplementers andIDA will needto review the outcomes at the conclusion of ARP I1 (December 2004) in order to further adjust AFV I11 implementation. The main theme of the Social Appraisal was to examine how best MAFF could identify and meet the needsof farmingcommunities, while at the same time contributingto a cultureof empowerment in which farmers articulate realistic demands for external assistance. The methodology included a number o f qualitative tools, such as: (a) focus group discussions with sample groups from a mixture of upland, coastal and lowlandvillages from the north and south (269 men and 125 women); (b) development o f detailedcase studies o f lightto mediumdamagedirrigationschemesrehabilitatedunder ARP Iand 11; and (c) interviewswith key service providers. This Annex summarizesthe resultsofthe Social Appraisal. A complete reportcan be found inthe project files (see Annex 15). B. Key Findings Component 1. Participatory Developmentand Natural Resource Management Group Formationand Funds Disbursement ARP I1required project activities to be implemented with the active involvement of the Conselho do Sucos (village councils) established under the Community Empowerment Project (CEP), includingsub- project agreements with the Project Management Unit. Supervision missions during ARP I1notednon- compliance with this requirement in planning, management and disbursement of funds, and the Social Appraisalexploredthe issue further to determine suitable solutions. Non-pilot communities with no experience of managingexternalassistance (except for CEP) were wary of the involvementof the Conselho do Suco as a possible organizationto planand implement agricultural activities. This seemed to largely be attributed to the fact that they are perceived to be integrally connected to CEP and do not yet have a broader role in the community. Instead, non-pilot groups identifiedthe Chefe do Suco (village chief) and the Chefe de Aldeia (sub-village chief) as the key points o f contact for planningnew activities, and the most trusted mechanism for receivingand administering grant funds. They also mentioned the Conselho dos Katuas (Traditional leaders' council) as being important to decision-making. Normally very active in making decisions surrounding land tenure, traditional law and naturalresource management ceremonies, they tend not to concern themselves with `development' or moderngovernance issues, and are more appropriate inan advisory role. With regardto relyingon existinggroups to plan and implement the activities, a robust tradition of collective action in formally established, non-clan based `farmers' groups appears to be largely absent from Timorese Timor-Leste ThirdAgriculture RehabilitationProject -Project Appraisal Document, October 7, 2004 122 farming communities.This is perhaps a reflectionof low input farming and the relativelyrecent entry of many village communities into the money economy. Where groups did or do exist, they tend to be dependent on external support to providethem with a reasonto identify as a group. This is supportedby the fact that the majority of the non-pilot sucos thought that developing a new group to discuss and implementa hypotheticalnew agricultural development and manage subsequent funding would be most appropriate. Where ImplementationTeams (i.e. "new" groups) had been established in pilot sucos, the communities were largely content with their performance and nominatedthem as the most effective methodto channel funds and new agriculturalactivities. The results of the Social Appraisal therefore supports the current ARP I1 approach to flexibility in establishing new suco-based groups for activity planning and implementation. This includes assessing requirements for groupings on a suco by suco basis, incorporating strong, traditional leadership support where it is found to exist, while assisting new community groups to increase self-reliance through increased democratic decision-making and funds management.These principleshave been incorporated into the ARP I11design, which no longer mandates the inclusionof the Conselhodo Suco ina formalrolebut reliesdirectly on the ImplementationTeams. The identificationo f new groups andtheir members should be done in close collaborationwith the Chefe do Suco, Chefe de Aldeia andTraditionalLeaders.What will be importantis that all interestedcommunity membersare providedwith quality informationabout the scope of the potentialactivities, and are able to nominate themselves if they are keen to participate. Suco government and traditional leaders should be encouraged to motivate the poorest to become active members to minimize elite capture, rather than nominate the most progressive/active farmers only (as may have been the case in ARF' 11). The establishment of equal quotas of men's, women's and mixed groups is includedin the design of ARP I11 as a mechanismto help ensurewomen are givenmaximumchancesto participate. The difficulty of sustaining purpose-specificgroups will be common to any institution in which the component is located, i.e. they may only be sustained for as long as the activity is funded. ARP I11will encourage groups to develop mechanisms for maximizing distribution of benefits arising from grant activities to the entire suco population. The Operation Manual will include a process to extend the opportunity to participateto beneficiaries who may not have been interested or been invited to join in initially, especially in the larger villages. This will be especially important for ensuring equity o f access for activitiesinvolvingthe use of communallandsuchas reforestation/plantation activities. The Office of Administrationand Local Government and Development (OALGD) is currently leadinga process to determine appropriate structures and institutions for local governance from suco to District level. MAFF, in its important role on the Technicaland PoliticalCommittees (duringthe draftingof the Autonomy Law) should consider the need for suco level representation to assist in implementationof their broader programs. If a substantial change to village level administration occurs within the life of ARP 111, the new suco structure will needto be studied by MAFF to determine whether the component 1 activities would be better planned and implementedthroughthese structures, rather than throughproject- specific Implementation Teams. MAFF would then assists in overall capacity building of the newly emerging suco structures by administeringsmall group grants throughthem. This would likely require a changeto the OperationalManual andpossiblyan amendmentto the GrantAgreement. With regard to financial disbursement and transparency, communities appear to embrace the idea of the rightto information, while the holders of money are equally keento avoidsuspicion of misappropriation. Whilst some form of public display (such as messageboards) is likely to remainappropriate, it will only serve its intendedfunction if communities are assisted indevelopingmore user-friendlyformats. What is preferable is that regular community meetings are held at which this information is presented orally for Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 123 discussion and comment to all interestedparties. In the interests of promotingself reliance, communities should be encouraged to develop their own plans for ensuring transparency, following an agreed set of principles as part o f their proposal. These should be endorsed by group members as a prerequisite to receivingfunding. Revised funding disbursement mechanisms which no longer rely on the Conselho do Suco Treasurer have beenincorporatedintothe ARP I11design (see Annex 7). Options for Providing Effective Service Delivery The most keenly felt loss in agricultural support since independence is the services of the agriculture extension officers. Their most important contributionsto farmers were the introductionof new varieties and the establishment of demonstration plots to introduce new technologies. There is a feeling that `modern' farming practices are the answer to productionproblems, as well as inputs such as improved seed, fertiliser andpesticides. However, farmers feel decreasedaccess to these inputs, as well as less face- to-face delivery. One o f the key challenges for ARP 111is to supplement MAFF's limited capacity to providethese services ina sustainable manner. In the absence of effective and broad-based extension services, trained facilitators employed by the project are one of the most viable ways to assist in bridgingthe gap between communities and District Agricultural staff. It is extremely critical, however, that facilitators receive appropriate training and support. Attempts to train MAFF staff in participatory planning methodologies have largely been unsuccessful as they see their role as technical specialists and do not have the time for extended participatory planning. A desirable outcome from implementationof ARP I11would be to have either MAFF or the local government hire the facilitatorsto create a permanent interfacebetweencommunities and technical staff. Budgetary constraints, however, will likely prevent the hiring of additionalstaff for some time. The project considered the alternative of using the Sub-District Community Development Officers (SCDOs) who will be recruitedby OALGD by August 2003 at a rate of 1per sub-district.Their intended role is to stimulate development at the suco level. As the vast majority will be based in rural areas, their role in facilitating agricultural planning could be maximized by MAFF. However it was considered premature to divest greater responsibilityto them under ARP I11as their status and role requires further clarification under the Autonomy Law, and the needs of the pilot villages at this point may mean they neglectnon-pilotvillages intheir sub-districts. Another alternativeis to train the newly recruitedForest GuardiansBxtensionOfficers to gradually take over the role of facilitators. The major drawback with this approach is that their terms of reference largely relate to community forestry activities, includingpolicing, and do not extend to other NRMissues. They could not therefore be expectedto facilitate and integrated NRh4 planningapproach and provide follow up support in all areas. However under ARP 111, both the SCDOs and the Forest GuardianExtension Officers will be trained alongside the project facilitators, and will be included as far as possible in the facilitator teams to ensure the principles of community-based planning are extended into their core developmentactivitiesbeyondthe life ofthe project. Many local NGOs are now being supported by internationalNGOs such as Oxfam and Catholic Relief Services, and organizations such as CARITAS are actively tryingto establishstable, localNGOsthrough an intensive process of capacity building. The extent to which effective NGOs are represented at the District level should be assessed by MAFF and contracts for facilitation services considered on a per- district basis (as an alternative to hiring facilitators), with district agriculture staff providing technical inputs as required.ARP I11has made provisionsfor the involvementof up to 10NGO contracts. The form of the NGO contracts will need to be carefully negotiated to ensure that MAFF is satisfied with the intended outcome, and that the NGOs are able to provide services to an agreed level of quality. NGOs Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 124 would be encouraged to seek funding from other sources to maintain their relationship with the pilot communitiesandcontinueprovidingsupport inpartnershipwith MAFF beyondthe life ofthe project. Underthe remainder of ARP I1and 111, facilitator trainingneedsto be improvedto develop an effective, participatory planning methodology. This should take into account the broader farmers' priorities in ensuring food security and self-reliance (such as livestockmanagement, improvedcroppingpractice, and integratedpest management) rather than an exclusive focus on forestry and fisheries management. The activities selected by communities should be based firmly on their priority problems, rather than on activities recommended by the facilitators.ARP I11has acknowledged the need to include other MAFF divisions in Component 1 through the establishment of an NRM Advisory Committee. Through their involvement in the component, it is hoped that sectoral staff can further absorb NRM and participatory planningprinciplesand integrate them into their sectoral programs, Component 2. Irrigation Rehabilitation and Management Communityand Light-to-MediumDamagedIrrigation Schemes ARP I1supervisionmissions indicatedthat farmers in areas where some of the more complex irrigation schemes had been rehabilitatedwere not yet usingthem optimally - e.g. not planting a dry season crop, The Social Appraisal highlighted that each irrigation scheme rehabilitated has a set of conditions, traditions and socio-politicalissues peculiar to the way it functions. The reasons given for sub-optimal utilization were complex and were often contradictory and confusing - particularly as farmers were largelybeingaskedto estimatetheir future plantingplans in an uncertainenvironment. An examination of pre-I999rice growingpatterns was revealinginboththe extent to which rice growingwas subsidized and supported, andthe unevenadoption of inputs such as fertiliser andpesticides.Baedubu, one of the largest and most complex irrigation schemes, was kept operational by the Indonesian administration free of charge (de-siltingthe primarycanal every year) while Bilimauhadassistance from an NGO andthe local sub-districthead to excavate the intake each year. Neither of the two schemes in Viqueque or Maliana used fertilizer, and actively rejected it, believing their soil was sufficiently fertile (perhaps because the majority is croppedonly once ayear). By contrast, the three Oecussischemeswere largelyresponsiblefor their own maintenance and were using fertilizer and pesticide on a regular basis. Marketing patterns varied as well. In Viqueque, all surplus produced was sold to the Farmer's Cooperative; in Oecussi, it was sold in the market at Kefamenanu (West Timor); in Bobonaro, it appeared to be mostly used for householdconsumption,with some surplus soldto family members inMaliana. Plantinga secondcrop on the same landwas not widespread, butwas most common inOecussi. The respective levels of dependency appear to be reflectedinthe post-conflictproductionpatterns, where the three Oecussi schemes seem to have recovered quickest to pre-1999 production levels (at least in terms of number of hectares planted), with planting experiencingminimal disruption. Those with major government and NGO support on the other hand came to an almost complete standstill and were much slower to overcome productionproblems (whetherthis is coincidentallyan effect ofthe extent ofthe level of damagethey suffered is not known).The advent o f the drought leadingup to the 2002/2003 wet season further complicatedthe emerginguse pattern.This may meanthe 2003 dry seasonplantingwill haveto be delayed until August, and the implications of the late wet season planting will need to be closely monitoredbeforeconclusionsare drawnregardingoptimaluse. Water availability aside, farmers raised many other factors that compound their difficulties. They include: threat of flooding which causes damage to intakes, (and the course of the river shifting away from the intake); lack of water; longstandingwater divisions accordingto tradition; unsuitabilityof some areas for planting in both seasons; unsatisfactorysystems of water distribution; lack of or high cost of tractors; lack of buffalo or buffalo unable to work in the dry season; lack of or poor quality rice seed; unavailability of other inputs and credit; market uncertainty; difficulty in coordinating the community Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 125 when only a few plant in the dry season, and a tradition of plantingcorn and subsistencetendencies. The interactiono f price, assuredmarkets, rice as a preferredstaple, the capacity to adequately store surplus for long periods, the reversion to corn as a reliable staple post-1999, and the uncertainty surrounding the operationand maintenance of their irrigationschemes is complex. It will take some time before a balance i s struckbetweenperceivedbenefits of increasingproductivityandreturnson labor. Despite the myriad problems facing rice growers, Water User Association (WUA) board members interviewedduringthe Social Appraisalseemedcommittedto the idea of WUAs as an appropriate vehicle for management of their water resources. All were well aware of the burdenof self reliance that hadbeen placed uponthem and the enormity of the responsibility.They felt it was too early to comment on their capacity as they had not hada chance to test their WUAs duringa plantingseason. Close monitoringwill be requiredto ensure the WUAs are appropriate for the task ofmanagingtheir water resourcesequitably. This may include strengthening the supporting role of the Chefe do Suco or Sub-district Head if the authority of the WUAs is not sufficient to organize voluntary operation and maintenance works and ensure compliance with distributionquotas. The ARP I11design includes establishment of more WUAs and continued capacity buildingto assist them in undertakingtheir tasks. In recognition o f the need to increase extension services to farmers to improve cultivation practices, provision for on-farm demonstrations has also beenmade. Women were under-representedas members of WUAs, and while their importance to the productiono f rice is acknowledged by men, the tradition of men representing the household in irrigation matters is strong. Women are consideredto be equally representediftheir husbandsare members, eventhough they may never attendmeetings or participateindecision-makingdiscussions. WUAs should be encouragedto progressivelyincludemore interestedwomen as membersto maximizeorganizationalcapacity and skills within the Associations. As women were not specifically invited to attend initial WUA meetings, a subsequent roundof meetingsto ascertain their desired levelof involvementshould be conducted as part of ongoingsupportto WUAs. The Large CaraulunIrrigation Scheme All o f the issues relating to the light-to-medium damaged schemes also relate to the larger Caraulun scheme. However, the sociological study completed as part of the Feasibility Study (December 2002) indicateda higher levelo f communitymanagementprior to 1999.Indeed, 14W A Sare reportedto have been organized at the commencement o fthe scheme in 1995/6with a membership o f approximately 450 male and I50 female members. These were functioning until the scheme sustainedmajor damage during the 2001 floods, and a relatively high level of cooperation was reported, with groups organized for each tertiary block and the implementationof agricultural extension activities. Two local field coordinators paid by the Indonesian Administration provided considerable support. This support will need to be replicatedby MAFF until the groups are functioning again. The WUA consultants employedunder ARP I11should be sufficient for this task initially, but MAFF will needto make arrangements for longer-term support to the WUAs. The recent efforts of the Chefe do Suco to mobilize farmers in October 2002 to clean the canals in preparation for a pump promised by MAFF indicate a willingness of the WUA membersto re-starttheir rice production. The feasibility study identified as a potential concern three unresolved land ownership issues. These involve: 64 hectares used by transmigrants who have apparently left the area; 165 hectares used by the church for a youth program, which is now no longer functioning; and 62 hectares of government land which is currentlybeingusedby local farmers. While no disputes havethus far beenreported, andthere is apparently a surplus of irrigatedlandcomparedto the amount of families with potentialownership rights, this will need to be resolved in order for the scheme to be used optimally. With no formal land titling process in place for the foreseeable future, the reallocation responsibility will rest with Traditional Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 126 Leaders, the Suco andAldeia Heads, and the Posto Administrator according to traditionallandallocation practices. This process should be prompted by the detailed topographic and mappingsurvey which the project will support prior to the start of the works, identifying individualplots and their "owners". The projectwill also requirethat WUAs be establishedand land distributionresolvedbefore any rehabilitation works proceed. By default, the land reallocation process must be completed before this begins, as all WUA members must have a defined and recognized relationshipto their plot. A similar situation has occurred on some of the light-to-mediumdamaged schemes (Bilimau in particular) and been resolved without conflict, and as such is consideredto pose a low riskto the project. Component 3. Services to Farmers Sub-component3.1 Informationto Farmers The Social Appraisal confirmed farmers expressed desire to learn about `new' and `modern' farming methods. The challenge for MAFF is to develop quality information as a pre-requisite for effective dissemination. The overwhelmingly preferred method of delivery is through direct, practical demonstration, which enhances the adoptionof new varieties andtechniques for largely illiterate farmingpopulations. While it is acknowledge that MAFF faces problems with a shortage of human resources to support this face-to- face delivery of technical training, direct extension as a means of effective communicationshould not be left behindin the rushto develop alternative, less labor intensivesolutions which rely on radio and print media. ARP I11includes demonstration activities under Components 1 and 2, and MAFF's Information Section will actively assist in the development of materials and media to facilitate face-to-face delivery. More traditional methods of informationdissemination will also be utilized. These will include farmer field days which capitalizeon pre-arrangedactivities(such as vaccinationcampaigns). To assist MAFF in delivering appropriate informationto farmers, the project will also establish a pilot community-based information service network. This would rely on simple e-mail communication, and would be open (on a regulated basis) to District Staff, local NGOs, community radio staff, service providers and teachers keen to access information from MAFF and internationalcenters of expertise to disseminate through their current programs. The extent to whichthis informationactuallyreaches farmers will need to be closely monitored to ensure this approach represents the most effective means of increasing farmer access to information. Undoubtedly, e-mail access will greatly assist the speedy responseto implementationdifficultiesand should, at the very least, improveservice delivery. Sub Component 3.2 Animal Health Services Vaccinationcampaigns Farmer expectations that their animals will not get sick if they are vaccinated are largely being met through the current vaccination campaigns. Where animals were reported to have died following vaccinations, farmers reportedthat it was becausethey were sick already, and they seemedto understand that vaccinations will not cure sick animals. All sucos interviewed stated that they would continue to vaccinate their animals, and that they expected to increase the coverage rate duringthe next campaign- especially for free-ranging animals. Chickens were largely reported as not being vaccinated. This is because training for women vaccinators had not yet taken place. ARP 111includes provision for this trainingand vaccines for this importantsource o fhouseholdincomeandprotein. The main reasons given as to why not all animals may be vaccinated were related to lack of clear information or a meeting prior to the campaigns, and more importantly, the difficulty associated with Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 127 gatheringthe (free-ranging)animals from the hills. Subsequent campaigns should focus on targetingfree- ranging herds as farmers become more accustomed to the annual event. This may require notifying the sucos at least one month in advance to enable the community to organize holdingpens and conduct a coordinatedanimal drive. ARP I11includes an informationcampaign which will pay attentionto timely delivery regardingvaccination events. The vaccinator's Terms of Reference also include exit reports on the number of animals not vaccinated and the reasons given by the owners. This information should be usedto improveMAFF's vaccinationcoverage. A majority o f groups interviewed indicatedthat vaccination was a service they would be prepared to consider paying a nominal amount for, in order to continue receiving the perceived benefits. This, however, has not been widely tested. With the progressive shift in vaccination funding to the Government, the concept of a fee for service should be gradually tested to ensurethat MAFF can sustain this importantservice. However it may be premature to do this under ARP I11as the cash economy is still developinginruralareas andcashshortages may prohibit payment evenwhen the demandis high. Village LivestockWorkers Ingeneral, farmers are somewhat fatalistic about animalillness, believingthat once sick, it is better to kill andeat the animalrather thanattemptto save it with their limitedknowledge andresources. Priorto 1999, veterinary assistance was not widespread. The difficulties people are experiencing in converting their animals to cash is a possible disincentiveto treat them, although the needto have significant numbers o f animals for ceremonial obligations is quite strong, and may provide some motivation to invest in treatment. It is against this backgroundthat the Village LivestockWorkers (VLW) programwas designed for ARP I1andwill continue inARP 111. Although the first batch of VLWs has been selected, trained and equipped under ARP 11, this only occurred inmid 2003. As such, it is difficult to judge how well they will be acceptedand utilizedby the farming community. Duringthe Social Appraisal, the VLW program was not yet well known. Once the program was explained to the groups, the majority indicatedthat they would likely call a VLW to treat a sick animal. However, this woulddependonthe cost andtheir abilityto pay at the time. All o fthe groups were supportive of the idea of a VLW - the closer to the suco the better, and all but one thought it an appropriate role for a woman. Better information dissemination to publicize the program will be addressed in ARP 111, including during the vaccination campaigns where paid vaccinators will provide informationto suco with a VLW trained and operating in their sub-district.The tendency to select paid vaccinators to be trained as VLWs will need to be closely monitoredto see if the combination o f free service provision(vaccinations) with a paidservice (all other treatments) acts as a disincentiveto service utilization. The perceptionthat the VLWs are government employees paid regular wages will need to countered ifthey are expected to thrive as private service providers.In addition, the dependenceon paid vaccinators may be limiting the opportunity for women to take up these positions. Recruitmentunder ARP I11shouldtake bothofthese issues into account. Sub-component 3.3 Agri-BusinessServices The need for marketing services is a priority which continues to be expressed by farmers producing surplus rice and cash crops in particular. Whilst the Agriculture Service Centers (ASCs) supportedunder ARP Iand I1 are well targeted to meet this need, during the Social Appraisal the level o f farmer awareness of the ASCs appearedto be low. Farmers who hadnot heard of the ASCs (or hadnot had any dealings with them) had difficulty in conceptualizingwhat sort o f servicesthey might be able to provide. In Viqueque, as discussions were with rice farmers, they were interested in their ASC expanding to provide rice-relatedinputs.Pesticide was specifically mentioned, as this usedto be providedby a farmer cooperativeat the sub-district levelandwas no longer availablefor purchase. Oecussifarmers by contrast Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 128 hadheardo fthe ASCs andwere keenfor the MalianaASC to establishtradinglinksto purchasetheir rice and providesubsidized or guaranteedquality fertilizer inexchange for a portionof the harvest (ifthe rice cannot be sold). Further discussions with farmers need to take place to determine other needs that the Agri-BusinessUnit couldaccommodateby diversifyingservicesno longer available to farmers. Conclusion Recognizing that Timor-Leste is an emerging country with local government structures and service delivery mechanisms still in their development, the Social Appraisal for ARP I1recommended that an assessment o f social appropriateness become an integral, continuous part of the program. The idea is to make certain that the assumptionsconcerningthe services providedand its impacts were actually correct, and suggest changes if they were not. The Social Appraisal for ARP I11supports this recommendation. Supervisionmissions should continue to providethe vehicle for strategic shifts in approaches to respond to evolvingneeds. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 129 Technical Annex 12: Environmental Analysis TIMOR-LESTE: Third Agriculture Rehabilitation Project A. Introduction ARP I11was designed primarily as a continuationand consolidationphase of ARP 11. Therefore no new activitiesthat couldhave potentialenvironmental impactsare anticipated. The project will finance four major components: Participatory Development and Natural Resources Management, IrrigationRehabilitationandManagement, Services to Farmers, andProgramManagement. Project components with potential for environmental impacts are mainly found in the Participatory Development and NRM and Irrigation components. As such, these components form the focus o f the environmental analysis. Other activities - information to farmers, re-establishment o f an agro- meteorological network, sustainable animal health services, agri-business support, policy development andtraining-are not expectedto have significantenvironmental impacts. Duringpre-appraisal, IDA reviewedlessons learned with environmentalprocedures adopted duringARP I1 to determine the degree of impact and assist MAFF in revising the procedures according to past experience. This environmentalreview took place on June 4-18, 2003, and involved field visits to the districts of Lautem, Manufahi, Bobonaro, and Baucau. Discussions were also heldwith MAFF staff and officials fromthe Division of Environment. This Annex outlines the environmentalsafeguards of the overall project, based on lessons of experience fromARP 11. The Annex will also serve as a guidelineto ensure that the relevant OperationalPolicies are followed shouldany negativeenvironmentalimpacts occur. The environmental review concluded that the project would not entail any major sign@cant, complex or irreversible environmental impacts. N o works would be undertaken that could affect protected or vulnerable ecosystems. The projecthastherefore beenclassifiedas EnvironmentalCategory B. The project is expectedto result in environmental benefits from improvednaturalresourcesmanagement. MAFFwill follow the environmentalmitigationmeasuresrecommendedinthis analysis andmonitortheir compliance by includingthem into operational manuals for the respectivecomponents and inthe terms of reference of engineeringsupervisionconsultants (for the major irrigationworks inCaraulun). B. Institutional Context Timor-Leste's environmentalreview procedures were formulated recently and are generally consistent with the World Bank and European Commission criteria. These procedureswill form the framework for the project's approach to environmentalmanagement. Even though ARP I11activities are expected to have no major adverse effects, MAFF will institutescreeningandreviewingproceduresto ensure that any emergingproblems are discussedandcorrectedina timely manner. There have been recent improvements in the institutional framework of the Division of Environment (Ministry of Development and Environment). A new environmentalregulationsimilar to the Indonesian Environmental Management Act No. 23/1997 has been drafted and is expected to be approved by the Secretary of State for Development and Environment at the end of 2003. Several Indonesian and UNTAET laws and regulations are still applicable, includingRegulation on Analysis of Environmental Impacts No 27 of 1999; Regulation Concerning the Control of Water Pollution No 20 of 1990; and Timor-LesteThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 130 Regulation on Protected Places No. 2000/19. UNTAET drafted an interimRegulation on the Importation and Use of Agriculture Chemicals in East Timor which is in line with the Food and Agriculture Organization International Code of Conduct on Distribution and Use o f Pesticides, the Stockholm Convention on Persistent Organic Pollutants, and the Rotterdam Conventionon Prior InformedConsent Procedures for Certain Hazardous Chemicals and Pesticides in International Trade. However, this regulation has not yet been officially adopted. With the exception of the UN Conventionto Combat Desertification, which Timor-Leste accessed on August 20, 2003, the country is not yet a party to internationaltreaties. Discussions are well underway for Timor-Lestetojoin the BiodiversityConvention andthe RamsarConventionon Wetlands. InARP 11, MAFF undertookthe initial environmental screeningofvillage projects (under Component 1) and irrigation schemes. The screening criteria were derived from those followed by the Community Empowerment Project and originally from Indonesian environmentalscreening criteria, adapted to the environmentalcontext of Timor-Leste. Improvedcriteriahave been includedinthe Operational Manuals for the two components. MAFF will collaborateclosely with the Division of Environment in supervising the implementationof environmental management and monitoringprocedures. Training will be provided in identificationand minimization o f potential environmental impacts for project-relatedactivities. In addition, MAFF will provide the Division of Environment with copies of its quarterly and biannual progress reports, which will include a summary of any environmental issues encountered, the status of the environmental indicatorindex adoptedfor the project,andany proposedmitigationmeasures(see Annexes 3 and 10). C. Environmental Aspects Component 1:Participatory Development and Natural Resources Management This componentwas designedas a continuationof a similar componentunder ARP 11.The environmental analysis focused on the revised positive list of village activities, as well as actual activities under implementation in ARP I1 pilot villages. The review concluded that due to their small scale, the environmentalimpactofvillage projects inthe short-termis not expectedto be significant. Activities promoted under this component are expected in generalto have positiveenvironmentaleffects. They include: (a) reforestation and rehabilitation of denuded communal areas within participating villages; (b) rehabilitationof selected catchment areas, thus enhancing the quality and quantity of water supply for domestic and agricultural use; (c) community management of natural forest areas; (d) mangrove rehabilitation, potentially improving productivity of fisheries resources; (e) community management of coastal fisheries and marine resources; (f) community nurseries to propagate fruit and forest tree species; (g) agro-forestryactivities to promote alternative systems to shifting cultivation; and (h) soil and water conservation structures in individual farms. By encouraging better natural resources management, the component should also help decrease local vulnerability to climatic events such as droughts and floods. The mainenvironmentalissue envisagedduringproject implementation(based on the experience of ARP 11) is the disposal of large numbers of polybags (plastic bags used for seedlings). The recommended environmental mitigation measure is proper disposal of the polybags by farmers. MAFF should also encourage farmers to reuse the polybags or use local recyclable materials like bamboo tubes. In the facilitator training sessions, MAFF will incorporate training on the reuse of polybags, and more importantly,the use of locallyavailablebiodegradablesubstitutes. Timor-LesteThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 131 Small freshwater fishponds in upland areas require minor excavation works by communities. Observations in the field indicate that this generally takes place in land with little alternative use. However, MAFF should ensure that the ponds are constructed at minimumdistances from waterways and that farmers use only local feeds (e.g. corn scraps). Aquaculture proposals involving mangrove conversion(e.g. shrimp) or relying on wild broodstock (e.g. grouper mariculture) would not be supported. ARP I1adopted an environmentaland social check-list to screen potential proposals. This form has been adjusted and simplified so that district staff and facilitators can use it as a practical environmental management guideline (or more likely as a best practice), The table below summarizes the recommended mitigation measures, which have been incorporated into the Operational Manual for Component 1. Table 1: Best Practices for EnvironmentalManagementfor the ParticipatoryDevelopmentand NaturalResourcesManagementComponent Activities Recommended Actions Processing - Shouldbe carried out by small-scale landholders, and local communities under community forest management Include non-timber forest products Harvest inareas outside critical forests or related critical natural habitats Prepare a replanting planto maintain the ecological functions and biological diversity of the area. Forest restorationand Take actionsto improve biodiversity and ecosystemfunctions plantation development Establishplantations innon-forest lands that do not contain critical natural habitats Avoid conversions or degradation o f natural habitats- avoid siting of plantations adjacentto upstreamor critical natural habitats Avoid planting on steep slopes as it will encourage erosion Ensure cooperationbetweenMAFF and local NGOs (ifapplicable) in forest restoration and plantation development Seedlingsproduction Reuse polybags (including silos) Confine disposalof polybagsto a limited area . Explore alternative, biodegradablesubstitutesto polybags. Encouragefarmers to adopta schedule for silo maintenance(including cleaningthe silos to avoid insect breeding) Select plant varietiesheedsthat require lowest agro-chemical inputs to achieve highyields Iffarmersusefertilizers andpesticides,encouragetheirsafe and sustainable use (in accordance with World Bank Operational Procedureson Pest Management) Select plant varieties with minimal level of pest and disease vulnerability Aquaculture Use locally available materialsfor fish feeds. Locate fishponds away or at a substantialdistance from waterways Drain ponds after harvestto avoid vector-borne diseases (e.g. malaria) Encourageonly extensive, sustainableaquaculturemethods (e.g. carp in upland areas, seaweedmariculture incoastal areas); reject proposals for brackish water aquaculture that promote mangrove conversion (e.g. shrimp), or dependence on natural broodstock (e.g. grouper). Avoid areas where there is ahigh density of aquacultureoperations that could reducethe water quality used in other operationsand thus increase the risk of disease. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 132 Although Component 1 will not finance pesticides and fertilizers, it is possible that farmers may adopt new farming practices that may require them. Ifthis occurs, the application of these agrochemicals would follow the World Bank's Operational Policy 4.09, which excludes all Class Itoxic pesticides (see list in Table 2). MAFF would also not support any Class I1moderately hazardous pesticides under the project. As an additional mitigation measure, MAFF staffwould provide training for these farmers inthe selection and safe use of appropriate agrochemicals. Component 2: Irrigation Rehabilitationand Management Community Irrigationand Roads Rehabilitation Timor-Leste has 346 small irrigation schemes with a design area covering 41,092 ha and a functional area covering 21,000. Virtually all needed rehabilitation following the 1999 violence. To date, ARP Iand I1 have rehabilitated 9,892 ha or 49 percent of the area in need of rehabilitation. Under ARP 111, an additional 3,000 ha of irrigable land would be rehabilitated in all 13 districts. The schemes are scattered throughout the country and are therefore not expected to have any significant cumulative or regional impacts. Table 2: World Health Organization List of Extremely Hazardous, Highly Hazardous and Moderately Hazardous Pesticides(Classes Iand 11) ClassI (Extremelyand Highly Hazardous Pesticides) Extremely HazardousPesticides Class Highly Hazardous Pesticides Highly Hazardous Pesticides I (a) Class I (b) Class I (b) Cont'd Aldicarb (ISO) Acrolein (C) Isoxathion(ISO) Brodifacoum(ISO) Allyl alcohol(C) Leadarsenate(C) Bromadiolone(ISO) Azinphos-ethyl(ISO) Mecarbam(ISO) Bromethalin(ISO) Azinphos-methyl(ISO) Mercuricoxide (ISO) Calciumcynide (C) Blasticidin-S Methamidophos(ISO) Captafol(ISO) Butocarboxim(ISO) Methadathion(ISO) Chlorethoxyfos(ISO) Butoxycarboxim(ISO) Methiocarb(ISO) Chlormephos(ISO) Cadusafos (ISO) Methomyl (ISO) Chlorophacinone (ISO) Calciumarsenate (C) Monocrotophos(ISO) Difenacoum(ISO) Carbofuran(ISO) Nicotine (ISO) Difethialone(ISO) Chlorfenvinphos(ISO) Omethoate(ISO) Diphacinone(ISO) 3-Chloro-I, 2-propanediol(C) Oxamyl (ISO) Disulfoton (ISO) Coumaphos (ISO) Oxydemeton-methyl(ISO) EPN Coumatetralyl(ISO) Paris green(C) Ethoprophos(ISO) Zeta-cypermethrin(ISO) Penthachlorophenol(ISO) Flocoumafen Demeton-S-methyl(ISO) Pindone (ISO) Fonofos(ISO) Dichlorvos(ISO) Pirimiphos-ethyl(ISO) Hexachlorobenzene(ISO) Dicrotophos(ISO) Propaphos Mercuricchloride (ISO) Dinoterb(ISO) Propetamphos(ISO) Mevinphos(ISO) DNOC (ISO) Sodiumarsenite (C) Parathion(ISO) Edifenphos (ISO) Sodiumcyanide (C) Parathion-methyl(ISO) Ethiofencarb(ISO) Strychnine(C) Phenylmercuryacetate (ISO) Famphur Tefluthrin Phorate(ISO) Fenamiphos(ISO) Thallium sulfate (C) Phosphamidon Flucythrinate(ISO) Thiofanox (ISO) Sodium fluoroacetate (C) Fluoroacetamide(C) Thiometon(ISO) Sulfotep (ISO) Formetanate(ISO) Triazophos(ISO) Tebupirimfos (ISO) Furathiocarb Vamidothion (ISO) Terbufos (ISO) Heptenophos(ISO) Warfarin (ISO) Isazofos(ISO) Zinc Phosphide(C) Isofenphos(ISO) Timor-LesteThirdAgriculture Rehabilitation Project -Project Appraisal Document,October 7, 2004 133 Table 2: World HealthOrganizationList of ExtremelyHazardous,HighlyHazardousand ModeratelyHazardousPesticides(ClassesIand 11) (Cont'd) ClassII (Moderately Hazardous Pesticides) Alanycarb [ISO] Endosulfan [ISO] Pebulate [ISO] Anilofos [ISO] Endothal -sodium [(ISO)] Pemethrin [ISO] Azaconazole EPTC [ISO] Phenthoate [ISO] Azocyclotin [ISO] Esfenvalerate[ISO] Phosalone [ISO] Bendiocarb [ISO] Ethion [ISO] Phosmet [ISO] Benafuracarb [ISO] Etrimfos [ISO] Phoxim [ISO] Bensulide[ISO] Fenazaquin[ISO] Piperophos[ISO] Bifenthrin Fenitrothion [ISO] Pirimicarb [ISO] Bilanafos [ISO] Fenobucarb Prallethrin [ISO] Bioallethrin [C] Fenpropidin[NO] Profenofos [ISO] Bromoxynil [ISO] Fenpropathrin [ISO] Propiconazole [ISO] Bromuconazole Fenthion [ISO] Propoxur [ISO] Bronopol Fentin acetate [(ISO)] Prosulfocarb [ISO] Butamifos [ISO] Fentin hydroxide [(ISO)] Prothiofos [ISO] Butylamine [ISO] Fenvalerate[ISO] Pyraclofos [ISO] Carbaryl [ISO] Fipronil Pyrazophos[ISO] Carbosulfan [ISO] Fluxofenim [ISO] Pyrethrins [C] Cartap [ISO] Formothion [ISO] Pyroquilon [ISO] Chloralose [C] Fuberidazole [ISO] Quinalphos [ISO] Chlordane [ISO] Gamma-HCH [ISO] Quizalofop-p-tefuryl [ISO] Chlorfenapyr [ISO] Guazatine Rotenone[C] Chlorphonium chloride [ISO] Haloxyfop Sodium fluoride [ISO] Chlorpyrifos [ISO] HCH [ISO] Sodium hexafluorosilicate [ISO] Clomazone [ISO] Heptachlor [ISO] Spiroxamine [ISO] Copper sulfate [C] Imazalil [ISO] Sulprofos [ISO] Cuprous oxide [C] Imidacloprid [ISO] TCA [ISO] (acid) Cyanazine [ISO] Iminoctadine [ISO] Terbumeton [ISO] Cyanophos [ISO] Ioxynil [ISO] Tetraconazole [ISO] Cyfluthrin [ISO] Ioxynil octanoate [(ISO)] Thiacloprid Beta-cyfluthrin [ISO] Isoprocarb [ISO] Thiobencarb [ISO] Cyhalothrin [ISO] Lambda-cyhalothrin Thiocyclam [ISO] Cypermethrin [NO] Mercurous chloride [C] Thiodicarb [ISO] Alpha- cypermethrin [ISO] Metaldehyde [ISO] Triazamate [ISO] Cyphenothrin [(IR)-isomers] [ISO] Metam-sodium [(ISO)] Trichlorfon [ISO] 2,4 -D [ISO] Methacrifos [ISO] Tricyclazole [ISO] DDT [ISO] Methasulfocarb [ISO] Tridemorph [ISO] Deltamethrin [ISO] Methyl isothiocyanate [ISO] Vemolate [ISO] Diazinon [ISO] Metolcarb [ISO] Xylylcarb Difenzoquat[ISO] Metribuzin [ISO] Dimethoate [ISO] Molinate [ISO] Dinobuton [ISO] Nabam [ISO] Diquat [ISO] Naled [IS01 Paraquat [ISOI None of these works will have significant, complex or irreversibleadverse environmentaleffects, since they will be carriedout only in pre-existingschemes. The activity will therefore not endanger protectedor vulnerable areas or habitats. Potentialimpacts should be short-term, localized and readily prevented or mitigatedby good engineering design and constructionpractices, reinforcedby adequate supervision by MAFF staffoftarget communities. An estimatedtotal of 150 km o f agricultureaccess roads (unpaved) will be rehabilitatedand maintained through community participation. This activity is not expected to produce significant negative environmentalimpacts as it involvesthe rehabilitationof existingunpavedroads, without any lengthening Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 134 or enlargement o f alignment. Local communities will undertake the work using hand tools and local materials. Based on ARP Iand 11, the roads will be scattered through the 13 districts, and are not expectedto haveany significantcumulative or regionalimpacts. The main anticipatedimpacts of road rehabilitationwill be soil erosion and possible land slides in hilly areas. During the design and constructionphases, MAFF will adopt the following mitigation measures: (a) encourage communities to plant bush grass or buildretainingwalls in slopes and suitable places along the road side to prevent soil erosion; (b) on sections with high filing and deep cutting, encourage communities to cover slopes with stone pitchingand plant steep slopes with grass; (c) in sections along the river, encourage communities to properly dispose of earth and stone to avoid blocking rivers, adversely impacting water quality; and (d) encourage construction of drains and culverts to provide adequatedrainage. After rehabilitation, MAFF should encourage communities to maintain road surfaces, drains and shoulders by periodically clearing drains to ensure water flow. Regular maintenance would help reduce environmentalimpactscausedby continuingdeteriorationofroadconditions. Environmental mitigation measures for community irrigation and roads rehabilitation have been incorporated into Operational Guidelines, andwill be monitoredunder the project(see Annexes 3, 10). Rehabilitationof Major Irrigation Schemes The only major irrigationscheme proposedfor rehabilitationis Carulun, inthe district of Manufahi. This scheme serves a potentialirrigablearea of 1,030 ha. Rehabilitation o f Caraulun is unlikely to create any major adverse environmental impacts. No new construction/structureof significantsize would be built.The major rehabilitationwork is the construction of a new free intake at the existing intake site, but with an invert level 1.7 meters below the river bed. A new channel would be constructed through the existing masonry sedimentation basin and canal. The existingcanals will also be rehabilitated. Operationo f the irrigationscheme is not expectedto result in significantnegative environmentalimpacts as it would bring back water into previously irrigated areas. Since irrigationwater is generally diverted from river flows duringand immediatelyafter the rainy season, the rehabilitationofthe scheme would not affect ground water supply but may reduce slightly the amount of runoff water that goes to the sea. No salinationnor water loggingare expected. During ARP 11, MAFF commissioned a comprehensive feasibility study for major-damaged irrigation schemes which includedan environmentalanalysis (see SMEC 2003. Feasibility Study Report of Seical Up, Maliana I,Uatolari and Carulun Irrigation Schemes, Annex 6). The study indicatedonly relatively minor potential impacts. There are no protected areas or cultural sites within the scheme area. Negative impacts couldpotentiallycome from: (a) erosion andscouring o f river banks; (b) indiscriminatedumping o f excavated sediment deposits and other materials from the canals, drains, and structures during constructionand maintenance; and (c) environmentaldamage caused by contractors during construction activities. The recommended mitigationmeasuresto address these potential impacts include: (a) gravel managementto maintainthe river course during low and medium flows; (b) community-based catchment managementto reducethe loss o fvegetation on the slopes; (c) managemento f constructionworks during constructionincludingdisposalof sewage, disposal of spoil from canal desilting,and appropriate location of constructioncamp; (d) protectionof flora and fauna; and (e) addressinghealth issues such as potential for increasedmosquitobreeding grounds intemporary ponds. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 135 The identified list of potential environmental impacts from rehabilitationof major damaged schemes is includedinTable 3 below, along with the recommendedmitigationmeasures shouldthese occur. MAFF will ensure that these measures are incorporatedinto the scope of works for the contractors as well as the terms o f reference for the engineeringsupervisors. Relevantmitigationmeasureswill also be integrated in WUA and stafftrainingmaterials. Rehabilitationo f Carulunis expectedto also havepositiveenvironmentalimpactsthrough: (a) cleaning of the main canals, drains and removal of deposited debris and other unwanted materials; (b) repair and improvement o f canals and drainage channel banks; (c) removal of areas of stagnant and standing water through cleaningo f drainage canals and drainage systems; and (d) improvement of water managementby providing better access to control structures and to gates, improvement of outlets to farms and the re- establishment of Water User Associations. Component 3: Services to Farmers This component is not expected to have any significant environmental impacts. The project would support better informationto farmers which should help encourage sustainable agriculture and natural resourcemanagementpractices. The projectwould also support the restablishmentof a networkof agro- meteorologicalunits and rain gauges. The automatic units would be installedin pre-existingsites. The rain gauges may requirethe constructionof minor fences (about 9 m2)to protectthem against vandalism, but this should not entailany major environmental impact.The agro-meteorologicalnetworkwould be an important source o f informationto help MAFF and other government agencies identify vulnerable areas to droughts and floods andconsequently develop appropriatepolicyresponses. The Support to Agri-Business component is expected tcI support the establishment of small village coconut and candlenut oil mills and grain seed producers (mostly rice and maize). The proposed feasibility study for coconut and candlenut oil processing will include recommendations on the proper disposalof organic waste and any mitigationmeasuresrequired. Extension support to seed producers is likely to entail distribution (by MAFF) of small quantities of pesticides and fertilizers. If so, the procedures described for Component 1 (includingcompliance with OperationalDirective4.09 on Pest Management) would apply. The Sustainable Animal HealthServices sub-component would focus on vaccinationand animal healthand is not expectedto have any significant environmentalimpacts. Vaccinationsyringes are re-usedextensivelyand their disposal is not expected to be problematic. Component 4: Program Management This component would not have any significant adverse impacts on the environment. One of the policy studies proposed by MAFF would cover community-based NRM which is expected to improve the overallpolicy frameworkfor environmentalmanagement inforest and coastalareas of Timor-Leste. Conclusion The overall potential environmental impacts o f the project and remedies proposed are summarized in Table 4 below. Activities under Component 1 are small in nature and would generally improve environmentalconditions. Component 2 only includes rehabilitationof existing irrigationschemes and roads-the quantity of water extracted would not change significantly from the original design capacity. Any shortages in water for irrigationare more likely to be relatedto shifting river courses from braided rivers rather than reductions in supply or project-relatedimpacts. No significant regional or cumulative impacts of project activities are expected, since Component 1 operates in 50 villages spread over seven districts, and Component2 inall 13 districts of Timor-Leste. Timor-Leste Third Agriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 136 I I l l I I I I I l l I I I I I I $ $ 4 .- -g&e -0 P I .- -bz a 8 U 3 4 f0 M se .-2. '58 2E 5 .-.-c) w I I I I I l l I l l UP I I l l I l l k P L P Ir, .e P h b 3 I I l l cI I l l I Table 4: Summary of ProjectPotentialEnvironmentalImpactsand Remedies Project Component Potential Environmental Impact Project Remedial Action Participatory Development Impact is not significant due to Community proposals will be screened against criteria to and Natural Resources small-scale nature of activities. evaluate their environmental soundness. Management Best practices for environmental management will be included inthe OperationalManual. Any indirect application of fertilizer and pesticides will be in accordance to World Bank OperationalPolicy 4.09. Rehabilitationof existing irrigation schemes: - Community scale Impacts are local andtemporary. Community rehabilitation activities will be screened for environmental impact, and environmental mitigation measures will be monitored, as specified in the Operational Guidelines. No irrigation activities will be supported insideprotectedareas. - Recommended environmental mitigation measures will be Caraulun Scheme Summary description of potential impacts and mitigation measures incorporated into construction tender documents and terms of for major damaged irrigation reference for construction supervision schemes shown on table 3 Applicable mitigation measures will be incorporated into training materials for Water User Associations and MAFF Rehabilitation of farm-to- Rehabilitation would be MAFF will provide advice on environmental best practices to marketaccessroads. undertakenonly on existing roads local communities involved in road rehabilitation and will and would not enlarge or lengthen monitor environmental mitigation measures. them. No road rehabilitation activities will be supported inside Impacts would be local and protected areas. temporary. All project components Ensure adequate public disclosure MAFF will ensure adequate public disclosure of Project of key project documents. activities, and availability of relevant documents (including the Project Environmental Analysis) in publicly accessible locations. PAD including environmental analysis and the Integrated Safeguard Data Sheet will be available at the World BankPublic InformationCenter in WashingtonDC andDili. ~Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 139 Technical Annex 13: Technical Evaluation TIMOR-LESTE: Third Agriculture Rehabilitation Proiect This Annex summarizesthe technicalassessmentof projectcomponents. Component 1: Pilot Participatory Development and Natural Resource Management This component buildson the introductionof a more integratedapproachto naturalresource management (NRM) to increase sustainable productivity and decrease vulnerability in target upland and coastal villages. This is a shift from MAFF's current subsector-based approach to providing assistance. A national levelAdvisory Committee will lead the effort to achieve better integrationo f community-based activities. The focus on devolving responsibility for natural resource management (NRM) to the communities, and attempting to address user right security through a concurrent policy study, is consistent with provenfarmer-first approaches in other developing countries. The strengthenedpositive list o f activities offers technically simple, proven alternatives which continue to be adapted for implementation in Timorese villages. These include improved forage production, planting of higher yielding staples, andthe promotiono f traditionalmechanismsto planandrespondto climatic fluctuations includingdroughts andfloods. In order to demonstrate the effectiveness of an integrated village-based program, provision of direct grants to farmers' groups is appropriate to enable sufficient experimentation with options. Community capacity and experience in planning, financing, implementing and monitoring their own development activities is still limited in Timor-Leste. However, the provision of direct grants to communities in countries around the world has demonstratedthe potentialof this mechanism to promote demand-driven development,It is also consistent withthe Government's objectiveof strengtheninglocal governance. Component 2: Irrigation Rehabilitation and Management The approach followed by the project to concentrate on rehabilitating existing irrigation schemes is considered appropriate. Further rehabilitationof irrigation schemes will reduce the risks to food scarcity causedby droughts, as indicatedby the recent FAO/WFPreport15whichreporteda 12percent increase in rice harvest in 2003 at the same time as the yield of other food crops dropped (largely due to irrigation rehabilitation). Community-based rehabilitation of small-scale irrigation schemes and farm-to-market access roads startedunder ARP Iand I1will be continued under the project.Ineconomic terms, rehabilitationof these schemes is highly viable (see Annex 9). They have also shownto have generatedconsiderable benefits to communities in terms of creatinglocal employment as well as contributingto an increase in production. To strengthen farmers' capacity and improve operation and maintenance, one pilot Water User Association(WUA) will be organizedineach district. The 10 WUAs formed on the light-to-medium damaged irrigation schemes under ARP I1 will be strengthenedfurther to ensure active participationof men and women farmers inthe managementof their irrigationschemes. The technical advice and further training provided by MAFF staff will improve the efficiency of the WUAs, particularly ifstaffcould learnto work in inter-sectoralteams (Irrigation, Crops, Livestock and Research and ExtensionDivisions)to respondto farmers' needs for an integratedfarming systems approach. IsFAOIWFP.2003. Special Report. FAONFP Crop and Food Supply Assessment Mission to Timor-Leste. June. Food and Agriculture Organization of the UnitedNations and World Food Programme. Dili, Timor-Leste. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 140 The topographic survey and mapping activities will provide detailed and accurate plans of completed irrigationschemes and are expectedto facilitate their utilization and effective operations by WUAs. The training providedwill also improve the capacity of MAFF staffto carry out future irrigation design and construction-relatedactivities. TechnicalJustificationfor Rehabilitationof Caraulun ARP I1carried out a feasibility study for major-damaged irrigation schemes. One economicallyviable scheme (Caraulun) will berehabilitatedto its originaldesign capacity to enable farmers to planttwo crops per year. The contract for constructionwill be awarded competitively. A qualifiedengineering firm will supervise the works. Based on the lessons of ARP I1where farmers were slow to take advantage of the larger rehabilitatedschemes, a number of pre-conditionswill be requiredprior to the start of the works. These are outlinedinthe Attachment to this Annex. The feasibility study considered various alternatives for rehabilitating Caraulun's headworks, including reconstruction o f the original fixed weir, free intakes either constructed annually or as a permanent structure, andpumping. All these techniques couldbe usedto ensure deliveryof water to the projectareas for irrigation.However,boththe weir reconstructionas well as pumpingwere rejected on the following grounds: 0 The estimated cost of constructiono f the fixed weir was excessively high, based on an assessment of the poor foundationconditionswhich consisted of gravels and large cobbles, and the potentialscour depth(up to 5.5 metres). The economic analysis indicatedthe weir optionwas uneconomic. 0 Pumping the water required for the project would require high annual operation and maintenance costs, which could not be funded by the WUAs, making the project unsustainable since it would require annual Government interventions. The selected option was a free intake to supply irrigation water only to the left bank area, with water diverteddirectly from the river. This option is technically and economicallyfeasible and relatively easy to operate andmaintain.Although the Caraulunriver is wide and braided, with itswidthvaryingfrom 150 to 500 meters upstream from the weir site, there are a number of low flow channels which run along the left bank, and the assessment is that flow concentrations will continue along the left side of the river, supplyingwater into the free inlet structure. Constructinga new intake structure with a lower invert level located at the upstream edge of the existing weir apron would allow flow to enter the flume, while minimizingdebris and sediment inflow. The feasibility study modeled and evaluated the existingcanal system. Generally no major changes are necessary for the irrigation system to deliver water supplies to 1,030 hectares. The rehabilitationworks include mostly de-silting and repairs to the existing structures, with two new siphons on the Caraulun secondary canal. The engineering works proposed for the rehabilitation of the Caraulun Scheme appear appropriate, technically feasible and sustainable, with operation and general maintenance by the WUAs possible. Some long-termcommitment is requiredof the Government for major maintenance works which will be required on the intake structure. More details of the technical assessment o f and preconditionsfor this activity are providedinthe Attachment to this Annex. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 141 Component 3 : Services to Farmers Information to Farmers This sub-component builds upon lessons from ARP Iand 11, experience from other developingcountries, andthe expressedneedofTimorese farmers to foster effectivetwo-way communicationflows. Access to appropriate andtimely informationhas consistently beenidentifiedby farmers as a major need, particularly in the present context where extension support is scarce. A participatory approach to informationdelivery through face-to-face contact with farmers will increase their knowledge and skills. This will be coupled with the use of mass media-particularly national and local radio broadcasts-to maximize information dissemination through agriculture programs, generate demand for services, and raise awareness. To ensure sustainability,capacity and resources will be strengthenedat the local level. Training on basic communications and informationwill increase the ability to better identify needs and issues, and choose appropriate communication methods and materials. Further, the functions o f the CGIAR Liaison Secretariat at MAFF, established under ARP 11, will be streamlined to develop a rapid response system to timely address farmer's immediate needs, and enhance the institutionalknowledge base. A point-to-point e-mail communications network-successfully implemented in the Solomon Islandsthroughthe PeopleFirstNetwork(PFnet)-using solar-poweredcomputers andradio connectivity is expected to expand MAFF's dissemination efforts by making e-mail accessible to other development partnersworkingwith farmers (e.g. NGOs). The component also targets the re-establishment o f a network of agro-meteorologicalstations to enable MAFF to collect and processbasic informationon rainfall, temperature, humidity, and evaporation. This informationis becoming increasingly important to allow policy makers and potentialdonors to identify highly vulnerableareas proneto droughts andfloods, andthereby permita better targetingof assistance. The comprehensive approach proposed for information services will seek to optimize information on demand. It is also consistent with MAFF's prioritization and sequencing exercise that identified informationas one ofthe highest programpriorities. Sustainable Animal Health Services MAFF will continue to support the vaccinationcampaignsthat commenced inARP I,to ensure no major outbreaks o f animal diseases. The 2002 Poverty Survey had indicatedthat nine in ten ruraldwellers live inhouseholds that own animals. The inabilityof very poor householdsto pay for vaccines may put other livestock at risk by reducingcoverage. The government has therefore decidedto continue vaccinationas a public service in the short-term.To ensure financial sustainability, it was agreed that the vaccination program will be carried out on a 3-year phasing out formula of external assistance, with EC/TFET financing75%, 50% and 25% o fthe campaigncosts, andCFETfundingthe remainder. The Village Livestock Workers (VLWs) Programbuilds on the successful Cambodian model of village para-vets,aimed at traininga privatizedcadre of animalhealthworkers to serve ruralcommunities. About 265 VLWs will be trained on basic animal health and livestock production topics to enable them to provide advice to farmers for a fee. MAFF could also contract out VLWs for its annual vaccination campaigns. Eventually, there would be one VLW per two villages, covering all 498 villages in 13 districts. This is consideredan appropriate approachto provideminor veterinaryservices giventhe severe shortages of trained veterinarians and MAFF livestock staff. To ensure quality control, MAFF will Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 142 provide refresher training courses to VLWs every six months, and help establish a VLW Associationto facilitatefurther training,certify its membersandfacilitatethe procurementofveterinarysupplies inbulk. Supportto Agri-business ARP Iand I1 established three farmer-owned Agriculture Service Centers (ASCs), to facilitate the marketingof agriculture products and sales o f critical inputs (e.g. seeds and fertilizer). Althoughthere is no further needfor ARP I11to invest in additionalASCs, MAFF will create, throughthe project,an Agro- Business Support Unit to continue to provide advisory services and training to rural producer organizations. Inaddition,MAFF will target the development o f two promisingniche markets: certified rice production in the main rice producing areas (Viqueque, Bobonaro and Baucau); and promotion o f coconut andcandlenut oil processingat the village level. Availability of certified seed continues to be a major constraint to increasing rice production in the country. The projectproposesto assist some 30-40 rice seedgrowers, help them establish a SeedGrowers Association and assist them in initial marketing and quality control. This activity will be linkedto on- going initiatives such as the ACIAR-funded Seeds for Life Project, and emerging partnerships with the InternationalRiceResearchInstituteinthe Philippines. The establishment o f about 12 small scale village-type oil mills in the production areas is expected to generate value added products and employment in the villages. A feasibility study to be carriedout by GTZ will providethe economic context andbasisfor implementationofthis activity. Component 4: Program Management The project will continue to support priority policy and organizational studies, through high-level advisors to MAFF. The scope of the studies and advisory services will be left flexible to meet evolving needs. This sub-componentwill be closely linkedto MAFF's new Policy and PlanningUnit, and enable MAFFto helpconnect its new policieswith those o fother agencies involvedinregionaldevelopment. Timor-Leste Third Agriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 143 Attachment: Technical Evaluation and Pre-Conditions for the Rehabilitation of Caraulun Irrigation Scheme A. Technical Evaluation 1. Location and Background The Caraulun Irrigation Scheme is located in the District of Manufahi, about 20 km south of the district capital, Same. The scheme is designed to use the water from the Caraulun River, a wide, braided river discharging into the Timor Sea at Betano. The construction of the Caraulun Project commenced in 1991, and the civil works were substantially completed in 1996.The scheme consisted of a fixed weir across the approximately 90 meter wide river, with intakes designed on both the left and right banks. However, only the canal distribution system on the left bank was completed. This consists of a 2,200 meter long masonry paved main canal, and two secondary canals which branch off to the left and right o f the system at a regulating structure. 2. Economic Feasibility The feasibility study carried out under ARP I1showed the following comparative costs of rehabilitating the four major damagedirrigationschemes inTimor-Leste: Table 1. Comparative Costsfor Major Damaged Irrigation Schemes + Rehabilitation Costs per ha (USSj Irrigation Scheme Headworks Canals Total Area Headworks Canals Total Caraulun 615,512 344,800 960,312 1,030 598 335 932 Seical Up 1,152,958 330,788 1,483,746 510 2,26 1 649 2,909 Maliana I 677,922 266,829 944,75 1 500 1,356 534 1,890 Uatolari 563,281 632,322 1,195,603 660 853 958 1,812 Source: SMEC 2003. Feasibility Study Report of Seical Up, Maliana I,Uatolari and Carulun Irrigation Schemes Note: Area used in comparison is area proposed for first rice crop. Although the total area planned to be planted for the first rice crop on Caraulun is more than 50% greater than any of the alternative schemes, and is double the proposed area in Seical Up and Maliana, the total rehabilitation costs for Caraulun is only approximately 50% of the cost of the next least costly project, Uatolari. The considerable difference in the costs of rehabilitation is reflected in the Economic Rates of Return (ERRs) estimated for each of the schemes. Using a conservative approach based on the observed development progress on the Light-to-Medium Damaged schemes rehabilitated under ARP Iand ARP 11, the ERRsfor the four schemes includedinthe SMEC Study were as shown inTable 2 below. Timor-LesteThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 144 Table 2. ERR for Rehabilitation of Major Damaged Irrigation Schemes Name of Scheme ERR 1 Caraulun 20.3% 2 Seical Up 1.16% 3 Maliana I 12.6% 4 Uatolari 5.21% Source: SMEC 2003. Feasibility Study Report of Seical Up, Maliana I,Uatolari and Carulun Irrigation Schemes. The estimatedERR for this study (22.9%) has beenreducedto conform with the project assumptions of 160% cropping intensity. The economic analysis indicatesthat only Caraulunand Maliana 1 are economicallyviable. However due to budget limitations, the rehabilitation of only one of these schemes was possibleunder ARP 111.Clearly, the rehabilitation ofCaraulunrepresentedthe best option. 3. Economic Analysis The base case scenario for the economic evaluationfor the Caraulun Project was based on the following assumptions: 0 First rice (wet season paddy) crop was assumed to yield 2.0 tonsha after rehabilitation, increasingto 2.5 tons/ha. after 5 years; 0 Second rice (dry seasonpaddy) was assumedafter rehabilitation to yield 2.0 tonsha. after 5 years 0 Incremental operating and maintenance costs are assumed at US$30/hectare per year, plus US$10,000/year for the headworks, with the cost building up at 10/50/100percent over a three year period. These assumptions are conservative, but perhaps realistic based on the actual progress made on the completed light-to-medium schemes to date. However, even with these assumptions the ERR for the Caraulun scheme is 22.9%. The reasons for the high ERRare relatedto the low costs per ha of rehabilitating the scheme: 0 The Caraulun scheme will cover 1,030 ha, which is much higher than the other three systems included inthe feasibility study. The cost for rehabilitating the headworks per hectare is therefore reduced. 0 The design for the new Caraulunheadworks is muchless expensive than for other schemes, since the modifications to the existing scheme do not requirea long ungatedfree intake flume which is necessary onthe Seical Up and Uatolari schemes. The costs for rehabilitating the canal network are also considerably lower than for the other three schemes 4. Water Resources The feasibility study carried out an assessment of the stream flow in the Caraulun River, as well as an estimate of the crop water requirementsfor the full development of 1,030 ha. based on a three crop cycle which may eventually be achieved. The land preparation and cropping pattern assumed for the analysis was: 0 First paddy crop land preparationinDecember 0 Secondpaddy crop land preparation inApril 0 Other crops cultivated inAugust Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 145 Table 3. SeasonalAnalysis of Water Flow Availability in CaraulunRiver Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Crop Requirements m3/sec 0.85 0.75 0.58 1.99 0.85 1.55 1.23 0.85 1.08 1.04 0.73 2.21 Availability 1:5 yrD m3/sec 4.3 10.0 12.7 16.5 14.1 9.5 5.9 3.9 2.7 1.7 1.3 2.7 Min m3/sec 0.9 1.1 2.1 3.2 8.2 5.7 3.7 2.5 1.9 1.3 1.0 1.3 The maximum water requirements are associated with land preparation and the first month o f the first paddy crop in NovembedDecember when effective rainfall becomes insignificant in November and the available water drops substantially. It is apparent that in most years there will be sufficient water for the full irrigation o fthe 1,030 ha. At present there are no significant upstream extraction on the Caraulun River which could affect the scheme. However, for the longer term sustainability of the system legal allocations and long term rightsto these limited available water resources will become essential and should be addressed. 5. Major Works The major civil works included inthe proposed civil works contract for the rehabilitation o fthe Caraulun Irrigation Project are: 0 Construction o f new intake works on the CaraulunRiver, including a flume intake; 0 Rehabilitation o f the canal network The proposed rehabilitation works include the construction o f a free intake. The free intake is proposed with a lower invert level near the existing intake, and the design includes the lowering o f the primary canal to the second drop structure. The free gated intake will include a gate and a debris and rock barrier, located in the existing training walls, 15 meters upstream from the existing intake. The water will be conveyed to the existing canal system in a flume through the existing sedimentation basin. The civil works and equipment proposed as part o f the rehabilitation o f the headworks includes the following: 0 Demolition o f part o fthe existing weir, intake and sluice; 0 Constructiono f a 240 meter long open flume through the existing sedimentation basin; 0 Construction o f a new flume and intake structure 0 Installation o f new gates for the flume and canal intakes. For the canal distribution system, the rehabilitation works include the repairs and modifications to the 2.25 km long Caraulun main canal, the 0.7 km long Leoai secondary canal, the 5.4 km long Raifusa secondary canal and the 1.83 km long Caraulun secondary canal. The rehabilitation works include the desilting o f the canals, and provision o f some inverted siphons for cross drainage flow. The need, ifany, for additional works at the tertiary level will be assessed after the detailed topographical surveys are completed. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 146 6. Social Conditions The total populationof ManufahiDistrictwas recordedas 38,617 inthe 2001 Suco Survey. The project is locatedwithin the administrativeboundariesof Betanovillage, which has a total populationof more than 3,900 divided into 810 households. Before the Caraulun Scheme was damaged, 600 ha were under cultivation by about 600 families. Approximately 20% of the households were female headed, and the average land holding was 1.0 hectare. Duringthe Indonesian Administration, about 80% of the land in Betano Village was owned by individuals, with a further 19.75% owned by the community, and the remaining0.25% owned by the Government. The landtenure situationon the irrigatedland indicatedthat 75% were owner-cultivator,20% were tenant cultivator,and the remaining5% were share tenants. There is an unresolved issue regarding the re-allocationof about 300 hectares of land, which was previously allocated for a transmigrationprogram, a churchyouthprogram, and designated `government' land under the Indonesian Administration. This will progressively be re-allocatedaccording to traditional law, and the detailed surveyto identify landparcelsunder ARP I11will likely provideimpetus for this process. 7. Water User Associations The sociological study completed as part of the feasibility study indicated a higher level of community management prior to 1999than in most light-to-mediumdamaged irrigationschemes. Indeed, 14 WUAs were reportedat the commencement of the scheme in 1995/6 with a membership o f approximately 450 male and 150 female members. These were functioninguntil the scheme sustainedmajor damage during the 2001 floods. The WUAs were reportedto have a relatively high level of cooperation, with groups organized for each tertiary block and the implementationof agricultural extension activities. This was partially due to the support of two field coordinators paidby the Indonesian Administration. MAFF will needto replicatea similar levelof support untilthe groups are fully functioningagain. The recent efforts of the Chefe do Suco to mobilise farmers in October 2002 to clean the canals in preparationfor a pump promised by MAFF indicate a willingness of the WUA members to re-start their rice production. However in light of lessons learnt from the light-to-medium damaged schemes under ARP 11, it was considered prudentto establish a number of pre-conditionsto reconfirmboththe commitment of farmers as well as the Government to ensure that the use of the scheme is maximizedfollowing its rehabilitation. These pre-conditionsare summarizedbelow. B. Preconditions Prior to Proceeding with Tender Process 1. Summary Although the economic analysis carried out for the feasibility study indicates that under the most conservative assumptions the investment for the rehabilitationof the Caraulun IrrigationProject is fully justified, there are still a number of activities requiredwhich needto be completedbefore the contract for the rehabilitationworks can be awarded.Broadly,these fall intotwo categories: Actions Requiredat Government Level: 0 Regulation on Water User Associations and Responsibilities o f the Government and Communities for IrrigationMaintenance Actions requiredby MAFF: 0 DetailedTopographic Surveys 0 Completiono fDetailedDesigns andBills of Quantities for Caraulun Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 147 0 Formationof Water User Associations andAgreement on LandUse 0 Staff Allocations from MAFF for ConstructionSupervision Full completion of all these requirements will be necessary before the invitation to bid is issued by MAAF. A detailed activity plan has been agreed which indicates measurable outputs to evaluate the progress made towards achieving pre-funding requirements. Progress will be monitored during supervision missions. The activity plan envisages that all required activities will be completed by mid- October 2004. This will allow sufficient time for the bidding process for the rehabilitation works to commence inthe dry seasonofApril 2005. 2. Actions Required at Government Level The development of irrigationwithin East Timor requires a clear legal framework to ensure that projects developed on presently available water resources are not detrimentally affected by future development strategies based on the same resources. Although there may be adequate water available for most purposes during the wet season when the rivers are flowing, the situation is significantly more critical duringthe dry season, when irrigationdevelopment is basedon much lower riverbaseflows. Ideally, a Water Law would be enacted following discussion and review (among all the various Government Departments) of a Water Strategy and Policy Paper. The Water Law should cover at least the following aspects: 0 Water extraction rights, including riparian rights and release of base flows for environmental purposes; 0 Priorities for allocation of water extraction from rivers, including allocations for agricultural, ruralandurbanuses; 0 Definitiono fthe rightsandresponsibilitiesfor various Government Ministriesinvolvedinthe use and development of water resources; 0 Allocation of available water resourcesfor future development within the catchment areas, so that these areas have some reservations for development; and 0 Formationof WUAs with the rights and responsibilities for the management o f water resources within their projectareas. It is recognized, however, that drafting and enactment o f a Water Law is beyond MAFF's control and may not realisticallybe accomplished duringthe life ofthe project. At a minimum, MAFF should draft and facilitate the enactment o f a MinisterialOrder approved by the CouncilofMinistersspecifyingthe following: 0 Clear delineation of responsibilities between the Government and communities and Water User Associations for the rehabilitation, operation and maintenance of irrigation schemes. 0 A firm Government commitment to give the Caraulun Irrigation Scheme first priority on available water resources in the Caraulun River, andto restrict any upstreamwater development projects which may prejudice the availability of water for the Caraulun Irrigation Scheme, particularlyinperiodswhenthere is limitedriver flow. 0 A Water User Association regulation, which may be part o f a more general Law relatedto the legal status of small business, also issued as a Ministerial Order and approved by the Council of Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 148 Ministers, conferring official status and recognition to the formation o f the Caraulun WUA and its Turnout Service Area Groups. The regulation should specify: - Minimumnumbers andtitles o fOffice Bearers; - Procedures for the election o f Office Bearers; - ConstitutionoftheAssociations; - Internal and External Audit o f Association Accounts; - Authority o fthe Association to control and manage water distribution; - Authority for the Association to assess and collect fees for water charges; - Authority for the Association to use funds for expenses related to operation and maintenance; - Authority for the Association to penalize or fine members for various activities including damage to the system, failure to carry out allocated maintenance or other duties, and illegal extraction o f extra water from the system; - Limited authority to resolve land disputes, and allocate unused land within the project areas; - Ifagreedby members ofthe Association, to extendthe activities ofthe associationto the bulk purchase o f crop inputs such as seeds, fertilizers, pesticides etc; and - If agreed by members of the association, to extend the activities of the association to bulk selling o f produce, and other activities including finance and loans. Untilmore general Laws are established within East Timor, the development o f irrigation projects which require effective WUAs to operate and manage the systems will be problematic. Although some WUAs have been established on the light-to-medium damaged projects which were rehabilitated under AI" I and ARP 11, these associations have to rely on the good will o f the members in order to operate the systems, and the WUAs have no procedures for obtain funds for their activities. Before the Ministerial Orders can be issued, detailed discussions and agreements are necessary to establish the responsibilities related to operation and maintenance which will be assigned to the WUAs, and the source o f the funds necessary to carry out these tasks. Generally it would be expected that the Government would provide the total maintenance costs in the first year (or two) o f the project, and this would then decrease over a fixed period to some percentage (perhaps 30%). The Government would then be required to provide this final amount each year for operation and maintenance, and this amount should be includedinthe annual MAFFbudget. The actual procedure for usingthese funds should also be clearly defined. The funds could be used by MAFF for direct maintenance costs under their supervision. Alternatively, the funds allocated by the Government for operation and maintenance could be passed directly into a bank account held by the WUA, and the WUA would make all arrangements for project maintenance. Annual auditing o fthe accounts would be necessary to ensure transparency inthe allocation o f these funds. MAFF may need to have a representative on the WUA to provide some technical support inmaking decisions onthe use of available funds. 3. Actions Required by MAFF SMEC has prepared the detailed Feasibility Study for the Caraulun Project, and as part o f the Study SMEC has prepared detailed designs, specifications and tender documents for the project to proceed to the next phase. However, before MAFF can proceed with the tendering and eventual construction process there are a number o f activities which must be completed, as a pre-condition for disbursement under the civil works category o f the EC grant. These requirements are detailed below: Timor-Leste ThirdAgriculture RehabilitationProject -Project Appraisal Document, October 7, 2004 149 a. Detailed Topographic Surveys. In order to prepare detailed designs at the field level, as well as for the efficient and equitable operation of irrigation systems, there is an urgent need for MAFF to obtain detailed topographic surveys of the area. These should include contour intervals at perhaps 0.25-meter intervals drawn on the basis of spot height data collected by a total station (or similar system), at sufficiently close intervals so that the contours developed are reasonably accurate and reflect the true situation on the ground. The topographical surveys should result in the preparationof maps showing details o f individualland holdings and field boundaries, as well as the positionso f roads, canals, rivers, drains and any other natural features. Any infrastructureincludinghouses, farm buildings etc should also be included.This detailedtopographicalmap will be requiredfor the preparation and finalizationof the design for the irrigation canal network as well as in the reallocation of any unallocatedland and the formation of the WUAs. MAFF will contract out this topographic survey in the first year of project implementation. b. Completion of the Detailed Designs and Bills of Quantities for Caraulun. After the detailed topographicalsurvey is complete, MAFF (with assistance from the IrrigationAdvisor) should reviewthe design documents completedby SMEC andprepare a more detaileddesignto ensure that equitable water supplies can be suppliedto all participatinghouseholds. Since the present irrigationsystem adopted is a cascadingprocess, with water flowing from field to field and each farmer relyingon the releasesof water from the upper fields, this review should ensure that water will be able to reach the extremities of the project area without problems. If necessary, some additional secondary or tertiary canals could be proposed, but this would require agreement amongst WUA members that small amounts of land from surrounding farmers would be providedvoluntarily for their construction,necessitatingsignedagreements similar to those used in ARP I1 for the location o f WUA offices. The Policy Guidelines for the Negotiationsover the Use andDevelopmentof Landfor ARP I11(see Annex 10) shouldbe appliedto any landacquisitionrequiredfor the rehabilitationof Caraulun. SMEC's design documents for Caraulun show a river flowing through part of the system. The design review should consider the procedure for takingwater across or around this river, and the possibleuse of the incisedriver to drainthe area. When the designreview is completed, MAFF should revise the Bill of Quantities to includeany additionalworks identifiedinthe detailedfinal designfor the project. c. Formation of Water User Associations and Agreement on Land Use. As soon as the detailed topographical survey is complete, the process of re-establishingWater User Associations on Caraulun should commence. It is anticipatedthat there will be a networkof WUAs with branchesestablishedat the secondary and perhaps tertiary canal levels, each branch with the responsibility for managing water allocationssupplied at one or more outlets fromthe proposedsecondary canals. These branches will each providea representativeto the mainWUA. MAFF's WUA Advisor will determine the optimal number o f WUA groups to be established on Caraulun, anddefine the activitiesneededto create effectiveand sustainableWUAs for the project. The process of establishing WUAs on Caraulun may be difficult and time consuming if adequate resourcesare not allocated by MAFF.When the irrigationsystem failed, farmers generally abandonedthe Caraulun Project area and returnedto rainfedareas inthe hills where there is generally adequate rainfall for a single rice crop. For dry season rice crop, some farmers are developingcultivatedareas elsewhere along the rivers where diversions are possible. This highlightsthe importance of establishing the WUAs to determinethe number o ffarmers who will returnto andutilizethe scheme once it is rehabilitated. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 150 The WUA establishment process needs to include signed agreements from all stakeholders involved regardingthe 291 ha that remain unresolved (see Annex 11). These include land used by Indonesian transmigrants who may have left the area (64 ha); land owned by the church and previously used for a youth program (165 ha); and government land (62 ha). Traditional and formal leaders, the WUAs, the church and the Government should agree in writing and voluntarily on the use of this land, using traditionallandallocationprocedures. Establishment o f the WUAs (including the election of office bearers, training, registration, and preparationof an operationalandmaintenancemanual for day-to-day management) andwrittenresolution of the unresolved land area will be required prior to MAFF proceeding with the tendering and rehabilitationof Carulun. IDA will monitor closely the progress towards this requirement duringproject supervisionmissions. d. Staff Allocation from MAFF for Construction Supervision. The rehabilitationworks will be carried out by a qualified company selected under InternationalCompetitive Bidding.MAFF will also contract out a qualified engineering supervision consultant to oversee the constructionprocess, monitor progress, ensure compliance with the environmental management plan, and ensure quality control of the works in accordance with the original specifications. To limit the costs of the supervising services and to ensure that MAFF Irrigation staff gain experience in supervision of major irrigation works, MAFF should allocate some of its own staff for the supervision o f Caraulun. During the constructionperiod, from the mobilizationof the contractor until the issue of the Completion Certificate, MAFF shall providethree qualified staff to work directly under the Site Engineer nominated by the supervising Consultant. The counterpart staff assigned for supervision should not be changed during the construction period and should be involved in the preparation of the Operation and Maintenance manual for the WUAs to ensure close ownership over the scheme. Allocation of three qualifiedstaff on a full-time basisto the schemewould be a pre-conditionfor tendering. Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 151 El a I 5E a *3 0 .I 0 El c) c) d a .I z P ed L (El 20 .I c) 8 Y a E eE 8ea M El .I P c) Q) eh zEldEl 0 .I 4 CI, 3 a2 h kM a a I tII - .-m I c0 Technical Annex 14: Project Preparation and Supervision Project Schedule Planned Actual Time taken to prepare the project (months) 4.5 First Bank mission (identification) May27, 2003 June 3,2003 Appraisal mission departure August 15,2003 September 1, 2003 Negotiations (TFET Grant) September 9, 2003 December 5, 2003 IPlanned Date of Effectiveness January 15,2004 January 25,2004 Prepared by: Ministry of Agriculture, Forestry and Fisheries, Timor-Leste Preparation assistance: Bank staff who worked on the p >jectincluded: Name Specialty WorldBank Staff: Sofia Bettencourt Sr. Natural Resource Economist, Task Team Leader Dely P. Gapasin (Consultant) Sr. Agriculturalist, PIP Preparation Coordination Loty Salazar Information Specialist Helen Moriarty (Consultant) Social/NRM Specialist Brian Brandenburg (Consultant) Livestock Specialist Edio da Costa Institutional Specialist and Project Officer Michael Dalton (Consultant) Project Economist Chris Davey (Consultant) Irrigation Specialist Abdul Haji (Consultant) Financial Management Specialist Nurul Alam Sr. Procurement Specialist Lisa Lui Project Lawyer and Sr. Counsel Vivianti Rambe (Consultant) Environmental Specialist SvendJensby Sr. Sociologist Hilarion Bruneau Sr. Finance Officer (Disbursements) Cecilia Belita Program Assistant Cynthia Dharmajaya Program Assistant Donna Marie Quartley-Parker Program Assistant Joeann Buhagiar Office Assistant Ronald lsaacson Project Advisor/Deputy Chief of Mission Carlos Escudero Chief Counsel Karin I. Nordlander Lead Counsel Glenn Morgan Environmental Analysis and Safeguards Reviewer Lars Lundt Safeguards Committee Chairman Hilary Kiell Sr. Procurement Specialist Denis Robitaille Regional Procurement Advisor Hoonae Kim Sector Manager Shawki Barghouti Peer Reviewer Marie-Helen Collion Peer Reviewer Eija Pehu Peer Reviewer Salah Dargouth Peer Reviewer Wayne Gum External Peer Reviewer (Oxfam) Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 154 European Commission Partners: Guglielmo Colombo Head of Office, European Commission, Dili Stefan Agne Administrator, EuropeAid Cooperation Office, European Commission Juan Planas First Counsellor, European Commission, Jakarta Bart Smet European Commission, Jakarta Rowena Cabigon Assistant to Head of Office, European Commission, Dili Joerg Hartmann (Consultant) Head of Mission, EC Project Identification, Timor-Leste Adam Sendall (Consultant) European Commission, EC Project Identification Timor-Leste Bill Bradfield (Consultant) European Commission, EC Project Identification, Timor-Leste Counterpartswho worked on the project included: Name Specialty/Unit/Organization A. East Timorese H. E. Eng. Estanislau Aleixo da Silva Minister for Agriculture, Forestry and Fisheries H. E. Francisco de SA Benevides Vice Minister for Agriculture, Forestry and Fisheries H. E. Aicha Bassarewan Vice Minister for Planning and Finance Cesar Jose da Cruz Permanent Secretary of Agriculture/Director of PMU (ARP II) Mario Ribeiro Nunes National Director of Forestry, Forestry Department, MAFF Narciso de Carvalho Director of Fisheries Resources and Marine Environment, MAFF Domingos Gusmeo Director of Livestock, MAFF Florindo Barreto Director of Irrigation, MAFF LourenGo Borges Fontes Director for Research and Extension Center, MAFF Deolindo da Silva Director for Crop Production, MAFF Maria Odete de Ceu Guterres Director of Administration, MAFF Fernando dos Santos Monitoring and Evaluation Officer and Livestock Officer, MAFF Arcanjo da Silva Director of Policy, Planning and Program Services Ervina Pinto Soares Finance Officer, MAFF Maria Virgina P. Belo Finance Officer, MAFF Edmundo da Costa Procurement Officer, MAFF Boaventura Freitas Procurement Consultant, MAFF Egas Brites da Silva Training Coordinator, MAFF Luis Godinho Director, Reforestation and Forest Rehabilitation, MAFF Acacio da Costa District Fisheries Officer LourenGo Amaral Fisheries Officer, MAFF Higinio Barros Forestry Utilization Officer Gil Rangel da Cruz Director for Soil Conservation, Crop Production Division, MAFF Guilhermo Piedade Boavida ASC Consultant, MAFF LourenGo dos Reis Director for Aquaculture, MAFF Cipriana So'ares Administrative Assistant hone Goncalves Vice Minister's Secretary, MAFF Natalia Benevides Administrative Assistant, MAFF Francisco Amaro Administrative Assistant, MAFF Mr. Gasteo de Sousa Acting Director, Planning and External Assistance, Ministry of Planning and Finance Mr. Jose Luis Lopes da Cruz Finance Officer and Focal Point for External Cooperation, Ministry of Foreign Affairs and Cooperation Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 155 Counterpartswho worked on the project included: Name Specialty/Unit/Organization A. ForeignAdvisors lsmael D. Tabije (Consultant) PMU Advisor, MAFF Stephen Dunn (Consultant) Livestock Advisor, MAFF David Hill (Consultant) ProcurementAdvisor, MAFF Kong K. Mu (Consultant) FinanceAdvisor, MAFF Erwin Nacuray (Consultant) NRM Advisor, MAFF James Oduk (Consultant) Irrigation Advisor, MAFF Felimar Torrizo (Consultant) Agriculture Service Centres Management Advisor, MAFF Genaro San Valentin (Consultant) CGIAR Liaison Secretariat Advisor/Crops Production Advisor, MAFF Leonard0 Gonzales (Consultant) Sr. Agriculture Policy Advisor, MAFF Remegio Alquitran (Consultant) Community Development Specialist, MAFF Arno Haegens (Consultant) Communications Specialist, MAFF Bayani Ofrecio (Consultant) WUA Specialist, MAFF Jose GonCalves Investment Advisor, Ministry of Development and Environment Joao Nataf Legal Advisor, Ministry of Planning and Finance Project Processing Budget and Schedule Project Budget (US$OOO) Planned Actual (At Activity Initiation Stage) From Preparation to Appraisal Bank BudgeVTFET 250.0 212.3 Others (CTF) 20.0 22.0 From Appraisal to RVP Approval Bank BudgeVTFET 150.0 228.8 Others Total 400.0 463.1 Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 156 Technical Annex 15: Documents in the Project File TIMOR-LESTE: East Timor Third Agriculture Rehabilitation Project A. Project Implementation Plan (By Ministry of Agriculture, Forestryand Fisheries) Analysis of Timor Lorosa'e Household Survey for Ministry of Agriculture, Forestry and Fisheries, March 2002. Annual Action Plans and Quarterly Review Matrixes for FY2003-04, March 7,2003. Timor-Leste Third Agriculture RehabilitationProject (ARP 111)Policy Guidelines for the Negotiations over the Use and Development of Land for ARP 111,November 15,2003. Environmental Analysis for ARP 111. October 16,2003. Feasibility Study Report of Seical Up, Maliana I,Uatolari Iand Caraulun Irrigation Schemes, SMEC International PTY LTD, 6 Volumes, December 10,2002. National Prioritization and Sequencing, February 17, 2003. Operational Manual for ARP Participatory Development and Natural Resources Management, November 2003. Operation Manual for Community Irrigation and RoadRehabilitation, November 2003. Procurement Manual for ARP 111, December 2003. Project Implementation Plan of the ThirdAgriculture Rehabilitation Project, November 8,2003. The RoadMap (for the implementationofthe National DevelopmentPrograms), Republica Democratica de Timor-Leste, Dili, April 15,2003. B. Bank Staff Assessments AgricultureRehabilitation Project, Implementation CompletionReport, The World Bank, March25, 2003-06-12. Second Agriculture Rehabilitation Project, Project Appraisal Document, The World Bank, September 28, 2001. Social Appraisal Report for the ThirdAgriculture RehabilitationProject, The World Bank, March 2003. Mid-TermReviewo fthe SecondAgriculture RehabilitationProject, The World Bank, January 2003, Tihor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 157 Technical Annex 16: Statement of Loans and Credits TIMOR-LESTE: Third Agriculture Rehabilitation Project _ '7-0Cl-21)O _ i I_ - - Difference _ _ _ betvmenexpeded - OriginalAmount__USSMillions in and actual PrqectLE - FY _Purp_ose_ - .lB!o_ - IDA- __ S disbursemend F - Cancel- Undisb- Orig I FrmRev'd POSZlQO TransilmSup+&grsm II 000 000 000 OM 417 000 000 P m 6 6 2 3 3 Tm"LmlsPekdarm (EASEGI 000 000 026 OM 000 024 000 Po&PdZ x 0 3 TPSemrrl Timct-Leste PelmleumProled 000 000 128 OM 151 000 000 PO75342 x O 2 TP THIRD COMhlUNITYEMPOWERMENT6 LOCA 000 000 1 so om 01Q 120 000 poi3911 2332 SewntlngrtculwreRehabilnBnonPrq DO0 000 BOO 003 200 7 8 0 000 POT354 2a32 TP-Small Enlerprirer Prole1I1 000 000 750 om 591 750 ooo P O W 7 mz TPCUND~V~~EWTAL SCHOOLOVPLITY PROJEC 000 000 1390 003 936 000 000 PO72556 231 TP.SECCIND COblh!UNllY EblPOWERMEtUPAOJ 000 000 R 5 0 OM 2 01 850 000 POR461 XI31 TP-Bcnmic lnstllulwnsforCapacity6' 000 000 050 Om 002 050 000 PO72846 x O 1 TPQND HEALTHSECTOR REH4B 000 000 1260 OM 760 014 000 PO7G2Dd xO0 TPHesllhSsctorRahab 6 Mv Prop3 oao 000 1270 om 144 1270 000 Total om 000 m72 OW 3620 ?856 000 Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 158 I R'Approval Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 159 Technical Annex 17: Country at a Glance TIMOR-LESTE: Third Agriculture Rehabilitation Project East POVERTY and SOCIAL Timor- Asia & LOW- Lbsh Pacific income 2002 Population midyear /rniY/mnsl 0.75 i.aa 2.495 Life expectancy GNI per capita lAtkrs method. US57 460 ,250 430 GNI (Alhsmethod. US$brlonsl 0.35 1,740 1.072 Average annualpwwm. 149642 Population (%I -2.2 1.o 1.9 Labcr forcrr l%J 1.2 2.3 3NI G W x r primary Most recentestimata(latestwar available. 1996-02) =pita enrollment Poverty ('& ofpWU$th below ~~ORiorrplPcVeI@l/iXI Ulban ppulabcn (% of tctalprrpldaf#nl E 3a 30 Lifeexpctancy at birth (Leafs) 69 59 Infant matality @w1 OWhw ~I~UTS) 85 33 81 Child malnutntlon (%dch!EdrenMar 5) 15 Amass to imarovedwater sourca Access to an imprwed water source (X c8PoPuf~bonl 76 76 Illiteracvl%O~P@U$AUI ape 13 37 G m s pnman enrollment (16 afschoo/-a(lep o w l / o n l 106 95 Male 105 103 Female 106 a7 KEY ECONOMICRATIOSand LONG-TERMTRENDS 1982 1992 ma1 2002 GDP (US.$brlbmsJ 0.39 0.39 G m domesticinvfstmentK;DP 25.0 Exportsof goods and ssrficfsiGDP Trade G m s domesticsavingsGDP 47.0 G m s national savlngslGDP 31.5 Current amunt balancefGDP -1.5 , ..---- Interest pavmentsfGDP 1 Domestic savings Investment Total debVGDP Total debtservicetexports Premnt value of debEDP Pressnt value of debtlexporb I Indebtedness 1982-92 199242 2001 2002 200246 laverme annualmwiW GDP 18.2 -0.5 GDP p r capita 15.7 STRUCTURE of tire ECONOMY (% ofGdPI Agnculture 25.4 143 I lndustn .... 17.5 hlanufactunnq 2.5 Servicss .. 57.1 PrNateconsumpbon Generalgovernment wnsumption .. . lmpats ofgoods and serwces 1982-92 $992-02 2001 2002 (rrversgeannu31mwW Aanculture -2.3 Industrj 9.5 Manufactunng 6.9 Services Prwateconsumpbon Genera gowrnment wnsumption G m s domesticInvestment Impcrts of goods and smew * The dmcnck &ow fwr key indicatas in the m n u y (in bdd) mmpsedwrth db inoomeqmup s q e Ifdsta sre rntrrirg the dmmd wlll ba incomplete Timor-Leste ThirdAgriculture Rehabilitation Project - Project Appraisal Document, October 7, 2004 160 PRICES andGOVERNMENT FINANCE 1982 1992 2001 2002 Domestrc prices f% LJlsnsej h s u r n e r prices 0.0 -2.0 Implicit GDPdeflator 2.5 0.2 Government finenc~ [% d GDP. inchides current svantsl Current rewnue 7.0 E! Current budgetbalanca a.5 Overallsurplus/deficl -5.2 TRADE 1982 1992 2007 2002 (US$ mi&" 11 Total eworts Ifobl 4 2m Coffee 3 n a 2m Manufactures im Totalimports@if) 237 I im Food Fuel and enemv 60 Capitalqoods Exportpricaindex /7095=ICyI) Import pica index (fQG=lCnl Terms uftrade (I995=fDaJ BALANCE of PAYMENTS 1982 1992 2001 2002 , - _ - __-I (US$mr8mns) currant account balanceto GDP (a) EXDO&of qoodsand SBWICBS `XI I m r m b dqoods and services 16 Resourcebalance 303 Ii o Neti n c " 4 Net current transfers 293 6 Current acmunt balance -6 0 , 96 9T 02 Financingtams (net) Changes in net reserms Memo: Resermsincludinqadd (US$mnrlionsl Omversion rate (DEC. locolUSU 1.o 1.o EXTERNAL DEBT m d RESOURCE FLOWS 1982 1992 2001 2002 (US$ millionsl Totaldebtcutstandinq3nd disbursed IBRD IDA Total debt service IBRD IDA Canposition of net resouwe flow Offiual grants Offiaalcreditors Pnvata creditors Foreiqn dired investment R3rtfOIiO eguw World Bank pogram Cornmltments Disbursements Pnnapal repavments Net flows Interestpwments Net transfers Timor-Leste ThirdAgriculture Rehabilitation Project -Project Appraisal Document, October 7, 2004 161