Document of The World Bank FOR OFFICIAL USE ONLY Report No: 73722-MD EMERGENCY PROJECT PAPER ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 6.5 MILLION (US$ 10 MILLION EQUIVALENT) TO THE REPUBLIC OF MOLDOVA FOR AN EMERGENCY AGRICULTURE SUPPORT PROJECT March 1, 2013 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective February 11, 2012) Currency Unit = Moldovan Leu MDL 1 = US$ 0.08295 US$ 1 = SDR 0.65354 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS Agency for Interventions and AIPA IT Information Technologies Payments in Agriculture Ministry of Agriculture and Food APC Adaptable Program Credit MAFI Industry Consolidated Agricultural CAPMU MDL Moldovan Leu Project Management Unit CPS Country Partnership Strategy PDO Project Development Objective DPO Development Policy Operation POM Project Operational Manual Procurement Risk Assessment EC European Commission PRAMS Management System Rural Investment and Services ECA Europe & Central Asia Region RISP Program Environmental Management EMF SIL Specific Investment Loan Framework Operational Risk Assessment EU European Union ORAF Framework Food and Agriculture FAO OPs Operating Procedures Organization FM Financial Management TORs Terms of Reference FSA Food Safety Agency TSs Technical Specifications United Nations Development GDP Gross Domestic Product UNDP Program International Development IDA WB World Bank Association IFR Interim Financial Reports Vice President: Philippe H. Le Houérou Country Director: Qimiao Fan Sector Director Laszlo Lovei Sector Manager: Dina Umali-Deininger Country Manager Abdoulaye Seck Task Team Leader: Anatol Gobjila REPUBLIC OF MOLDOVA Emergency Agriculture Support Project CONTENTS Page A. Introduction ......................................................................................................................... 7 B. Emergency Challenge: Country Context, Recovery Strategy and Rationale for Proposed Bank Emergency Project..................................................................................................... 7 C. Bank Response: The Project ............................................................................................. 11 D. Appraisal of Project Activities .......................................................................................... 16 E. Implementation Arrangements and Financing Plan.......................................................... 21 F. Project Cost and Financing ............................................................................................... 22 G. Project Risks and Mitigating Measures ............................................................................ 24 H. Terms and Conditions for Project Financing .................................................................... 25 Annex 1: Detailed Description of Project Components ................................................................ 26 Annex 2: Results Framework and Monitoring.............................................................................. 33 Annex 3: Summary of Estimated Project Costs............................................................................ 36 Annex 4: Operational Risk Assessment Framework (ORAF) ...................................................... 37 Annex 5: Financial Management and Disbursement Arrangements ............................................ 40 Annex 6: Procurement Arrangements ........................................................................................... 45 Annex 7: Implementation and Monitoring Arrangements ............................................................ 47 Annex 8: Project Preparation and Appraisal Team Members ...................................................... 49 Annex 9: Safeguards Policy Issues ............................................................................................... 50 Annex 10: Economic and Financial Analysis ............................................................................... 51 Annex 11: Documents in Project Files ......................................................................................... 57 Annex 12: Statement of Loans and Credits .................................................................................. 58 Annex 13: Country at a Glance ..................................................................................................... 59 Annex 14: Maps ............................................................................................................................ 61 Table 1. Exceptional 2012 Drought in Moldova ............................................................................ 9 Table 2. Impact of the 2012 Drought on Corn and Wheat.............................................................. 9 Table 3. Corn Cash Transfers by District ..................................................................................... 27 Table 4. Wheat Cash Transfer by District .................................................................................... 28 Table 5. Project Sensitivity Analysis ............................................................................................ 54 Table 6. Corn and Wheat Crop Budget ......................................................................................... 56 Figure 1. Moldova – Destocking Caused by the 2007 Drought ................................................... 10 Figure 2. Kernel Milk Line ........................................................................................................... 32 Figure 3. Moldova – Gross Production Value (constant 2004-06 million US$) .......................... 51 Figure 4. Moldova – Cereal and livestock as share of gross agricultural product, 2010-11 ........ 52 Figure 5. Moldova – Livestock (average number of live animals, 2010-11) ............................... 52 Figure 6. Moldova – Estimated Impact of the 2012 Drought on Livestock ................................. 55 REPUBLIC OF MOLDOVA EMERGENCY AGRICULTURE SUPPORT PROJECT PROJECT PAPER EUROPE AND CENTRAL ASIA ECSAR Date: February 28, 2013 Team Leader: Anatol Gobjila Country Director: Qimiao Fan Environmental category: C Sector Manager/Director: Dina Umali- Joint IFC: Deininger Project ID: P143202 Joint Level: Lending Instrument: Emergency Recovery Credit Project Financing Data [ ] Loan [X] Credit [ ] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 10.00 Proposed terms: Financing Plan (US$m) Source Local Foreign Total BORROWER/RECIPIENT 0.00 0.00 0.00 International Development Association 10.00 0.00 10.00 (IDA) Total: 10.00 0.00 10.00 Borrower: Republic of Moldova Moldova Responsible Agency: Ministry of Agriculture & Food Industry 162 Stefan cel Mare Street, Office 416 Moldova Tel: (373-22) 233-427 Fax: (373-22) 210-204 viorel.gutu@maia.gov.md, Estimated disbursements (Bank FY/US$m) FY 13 14 15 Annual 0.50 9.00 0.50 Cumulative 0.50 9.50 10.00 Project implementation period: Start March 19, 2013 End: September 1, 2014 Expected effectiveness date: April 15, 2013 Expected closing date: September 1, 2014 Does the project require any exceptions from Bank policies? [ ]Yes [X] No Have these been approved by Bank management? [ ]Yes [X] No Does the project include any critical risks rated “substantial� or “high�? [X]Yes [ ] No Project development objective Ref. PP C.15, Annex 2. The Project Development Objective (PDO) is to mitigate the negative effects of the 2012 drought by helping to restore corn and wheat production and prevent livestock destocking in the most affected districts. Project description Ref. PP C.17, PP C.23, PP C.24, Annex 1. The project would include the following three components: (i) Cash Transfers to Affected Farmers, (ii) Training and Awareness, and (iii) Project Management. Component 1: Cash Transfers to Affected Farmers (US9.0 million). This component would finance cash transfers to corn and wheat farmers in the most affected districts of the country to compensate a share of the losses that farmers suffered during the 2012 season. The cash transfers would be disbursed only after eligible famers will have planted these two crops so as to provide an incentive for planting. It is then expected that the increased production will contribute to mitigating the risk of animal destocking. Component 2: Training and Awareness (US$0.35). This component would publicly disseminate information on the cash transfer program in order to avoid elite capture and create sufficient incentives for affected farmers to plant crop and wheat. The component will also provide for the establishment of a redress grievance mechanism and training on animal feeding, and carry out a feasibility study on small-scale corn silage production. Component 3: Project Management (US$0.65). This component would support costs associated with project implementation, including operational and costs for fiduciary specialists, component coordination, and monitoring and evaluation (M&E) support to the Ministry of Agriculture and Food Industry, specifically, its Agency for Interventions and Payments in Agriculture and the Consolidated Agriculture Project Management Unit. Which safeguard policies are triggered, if any? Ref. PP D.36. As mentioned above, the project will: (a) provide cash transfer to farmers affected by the 2012 drought and reimburse them after they already planted crops, thus creating incentives to plant the 2013 crops. Such financial support will be provided only to farmers who would plant crops on existing non irrigated arable lands; and (b) support agricultural training and awareness activities. These activities are not expected to cause any significant environmental impact. The potential minor adverse environmental impacts associated with crops cultivations can be easily mitigated by complying with the best agricultural and environmental practices. Based on this, the project will not trigger any WB environmental safeguard policies and its environmental category is therefore C. Sector Board Sector Board: Agriculture and Rural Development Sectors / Climate Change Sector (Maximum 5 and total % must equal 100) Major Sector Sector % Adaptation Co- Mitigation Co- benefits % benefits % Agriculture, fishing, Crops 100 and forestry I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project. Themes Theme (Maximum 5 and total % must equal 100) Major Theme Theme % Rural development Rural markets 40 Rural development Other rural development 30 Social protection and risk management Social risk mitigation 30 A. Introduction 1. This Project Paper seeks the approval of the Executive Directors to provide an IDA Credit in an amount of SDR 6.5 million (US$10.0 million equivalent) to the Republic of Moldova for the Emergency Agriculture Support Project. 2. The proposed credit would help finance the costs associated with alleviating the emergency in the country’s agriculture sector caused by the 2012 drought. The drought caused extensive losses to the country’s field crops, i.e. wheat, sunflower, and particularly corn (for example 60 percent losses in corn production), leading to a shortage of animal feed. Without immediate support to affected farmers the livestock sub-sector will be under significant risk for destocking and loss of capital, with potential long-term negative consequences. The proposed project would help to reduce the risk of destocking by providing conditional cash transfers and technical assistance (awareness and training) to farmers in the most affected districts, so as to maintain their ability to plant spring crops, and particularly corn and wheat. Corn is an especially important crop because pastures are scarce in Moldova, and corn is the main animal feed, both in the form of grain and silage 1. Corn is also an important staple for Moldovans, as it used in the local diet for the traditional dish called “mamaliga�. 3. Partnership arrangements: No formal co-financing is envisaged under the project. However, the proposed project would complement efforts by the Government of Moldova to put together a support package of MDL162.0 million (approximately US$13.5 million) for providing incentives to farmers to plant winter wheat, corn, and to maintain household cattle. The Government’s drought-recovery measures have so far been supported by financing from the European Union (EU). No other international organization is providing short-term support to mitigate the effects of the drought. In December of 2012, the EU provided a budget support grant of € 3.15 million, and in January of 2013, the Ministry of Agriculture and Food Industry (MAFI) commenced execution of cash transfers to farmers as incentives for the winter wheat planting campaign and for provision of fodder. The incentives for winter wheat were only partially covered with proceeds from the EU grant, and the remaining needs will be covered by the proposed project. As the on-going EU funded operation is already under implementation, it provided important practical lessons which have been incorporated into the project design. The Government has been communicating that help was forthcoming, without mentioning the source of funding and without the exact amount of support. This has already created some incentives for farmers to invest in the after-drought crop season. B. Emergency Challenge: Country Context, Recovery Strategy and Rationale for Proposed Bank Emergency Project. 4. Country Context. Moldova is landlocked between Romania and Ukraine. Moldova’s rich soils and mild climate are ideal for farming and the country has the potential to become a major supplier of agricultural products. Indeed agriculture is one of the largest sectors of the Moldovan economy and accounted for 12 percent of GDP in 2010, or 20 percent including the agro-processing industry. Agriculture employs 28 percent of the active labor force. The prevailing share of agro-food exports stands at 45-50 percent of total exports. Despite the size and significance of the sector in the economy, rural areas exhibit highest poverty rates: while 1 Silage is fermented, high-moisture fodder that can be fed to ruminants such as cattle or sheep. 7 poverty in urban areas is around 10 percent, it triples to around 30 percent in rural areas. The poverty rate among farmers and agricultural workers is the highest, at 36 and 45 percent respectively. 5. The sector potential is threatened by climate change. Although the majority of the country’s territory is agricultural land (73 percent), and in particular arable land (54 percent of the country) with fertile chernozem 2 soils, only a small share is irrigated (13 percent of the arable land). Rain-fed pastures account for 14 percent of the agricultural land. Irrigation is difficult because of poor water quality (due to a high degree of mineralization) and the need for pumping, which makes irrigation expensive. As a consequence, the cost of irrigation often exceeds its potential benefits. This makes the sector dependent on natural precipitation, whose variability is expected to increase due to climate change (see Report No. AAA71 - 7E “Looking Beyond the Horizon - Adapting Agriculture to Climate Change in Four Europe and Central Asia Countries�, which covers also Moldova). 6. The nature of the emergency. The current emergency situation evolved in two stages. The first stage took place in 2011, August through November, when temperatures up to 2.5 degrees Centigrade higher than average, in combination with a significant precipitation deficit (up to 50 percent), affected 80 percent of the country. This resulted in soil conditions that prevented timely soil preparation since plows could not get through the dry hardened soil. Thus, planting of winter crops in 2011 was delayed by 1.5 months, and even then, only about 77 percent of the initially anticipated area was planted. The resulting crops were generally feeble. This was the first time in the history of meteorological observations when Moldova faced such climatic anomalies in the fall. 7. The second stage of the drought took place in April, June, and partially August 2012, when the country’s agriculture sector faced unprecedented hot weather and lack of precipitation. Again, these phenomena were widespread (80 percent of the country) and were classified by the country’s State Hydro-Meteorological Service as “catastrophic�. Average temperatures during the period of June 1-August 8, 2012, were 4.5 degrees Centigrade higher than normal, which again represents a phenomenon that was observed for the first time. The highest temperature on record – 42.4 degrees centigrade – was registered on August 7, 2012 in the Falesti township. Against this backdrop, precipitations were only at 20-60 percent of the average. River flows were significantly reduced, making irrigation unfeasible in large parts of the country, while also putting pressure on drinking water availability. Additionally, many pastures deteriorated to the extent that free-range grazing became infeasible. 8. The effect of such severe weather was felt particularly hard in the central and, above all, the southern part of Moldova. The fact that the drought was particularly acute in the months of April, June and August (Table 1) – when winter wheat and corn, the two main rain-fed crops, face critical phenological growth phases – has caused significant damage to such crops through water and temperature stress. 2 Chernozem is a very fertile black-colored soil containing a high percentage of humus. 8 Table 1. Exceptional 2012 Drought in Moldova Change in monthly Change in monthly Crop precipitation temperatures Month phenological compared to the 2000- compared to the 2000- phase 2011 average 2011 average April 2012 -60% +26% Corn: germination Wheat: heading June 2012 -70% +14% Corn: flowering Wheat: ripening August 2012 -54% +7% Corn: ripening 9. Impact on agriculture. As a result of the drought, the total production of corn and wheat in the country dropped by 61 and 29 percent respectively compared to the average of the previous three years (2009-11). The value of the losses for corn and wheat alone has been estimated at around US$78 million, which is 9.5 percent of agricultural GDP 3 (Table 2). While the north of the country was not significantly affected, production of rain-fed crops in some districts in the south was strongly affected. Some areas of winter wheat were not even harvested (because harvesting cost was higher than the value of product), and corn yields dropped by 80 to 86 percent in the six most affected districts of the country. Corn yields dropped by more than 50 percent in 24 out of the 34 districts of the country. Table 2. Impact of the 2012 Drought on Corn and Wheat Number of districts Estimated Production with more than Crop Losses (US$ Losses 50% production million) losses 4 Corn 61% 24 62 Wheat 29% 7 16 TOTAL 78 10. Animal Destocking. Most farmers in Moldova rely on locally produced animal feed. If farmers do not have enough resources for a good planting campaign in 2013, they may not have enough feed for their animals and may be forced to slaughter them at rates higher than usual, causing an erosion of productive capital which will take years to recover. As a consequence of the reduced availability of animal feed, it is reported that animal destocking is happening in the winter between 2012 and 2013 (winter is the season when supply of animal fodder is most challenging). The lessons of experience show that the negative impacts of the 2007 drought on livestock were severe, particularly among grain fed animals such as pigs and chickens (Figure 1). After the 2007 drought, it took 3-4 years to recover to pre-drought trends (Annex 10: Economic and Financial Analysis). It should be noted, however, that the 2007 drought was even more acute than the one of 2012. In 2007, corn production dropped by 70 percent (15 percent worse than in 2012) and wheat production dropped by 44 percent (53 percent worse than in 2012). 3 According to the World Development Indicators, the 2011 agricultural GDP of Moldova was US$826 million. 4 Out of a total of 34 districts in the whole country. 9 Figure 1. Moldova – Destocking Caused by the 2007 Drought 11. Potential Economic and Social Impact. If no emergency measures are taken, there is the risk that the consequences of the drought may be further amplified: (a) Poverty Impact. The reduction in agricultural incomes as a result of the drought could push many vulnerable rural households into poverty. Rural poverty rates in Moldova remain high at 30.4 percent (2010) and poverty rates among farmers and agricultural workers are the highest, with 36 and 45 percent respectively and which together constitute 40 percent of Moldova’s poor. This can be compared with 10.4 percent poverty rates in urban areas (2010). (b) Food Security. The production shortfall and loss of income due to the drought could also contribute to greater household food insecurity among many poor rural households. In addition, Moldova is usually self-sufficient in terms of wheat and corn production. However, the drastic reduction in production caused by the 2012 drought may cause increased wheat imports. This may lead to a difficult situation if the 2013 production will also be scarce. Indeed, recent experience has shown that traditional suppliers are not always reliable since the risk of export bans in supplying countries could create serious food security challenges; (c) Farm Investments. The capacity of farmers to invest, including for innovation in climate adaptation measures which are key to reduce the impact of future climate change, may be curtailed; and (d) Social Impact. Most large farms in Moldova – where the majority of open-field crops such as wheat and corn are cultivated – lease their land from small land owners. Small land-owners share the production risks with large farms as the lease is usually paid in kind and varies significantly from year to year according to crop production. Small land owners who lease their land to larger farms are often elderly and poor. Therefore the potential social impact is significant. 10 12. The Government response is two-fold: (a) Short term. With EU financial assistance, the Government has been financing the purchase of fodder to reduce the risk of animal destocking. In January of 2013, with EU budget support, the Government also started to compensate farmers for winter wheat; and (b) Medium/long term. The Government has been working with various donors and international organizations, including but not limited to the World Bank, on climate adaptation interventions such as: • Support for the development of an agricultural/crop insurance system. For a set of reasons, including the high level of risk, however, the system is still poorly developed; • Seed improvements to increase the adoption of drought resistant varieties and the development of new varieties, with support of FAO; • For open field crops, the Government is developing the adoption of land management technologies such as conservation agriculture, which may help mitigate the negative impact of droughts and other extreme climatic events (IFAD and World Bank funded Agricultural Competitiveness Project); • Increased capacity of weather forecasting and early warning systems, including with World Bank support; • The Millennium Development Corporation has been supporting the rehabilitation of existing large-scale irrigation schemes; USAID has been supporting the development of small-scale irrigation. The World Bank may need to increase its attention to this area in the future; • Adapting the cropping pattern to a changing climate, such as drought resistance varieties, introduction of drought resistance species such as sorghum, and expansion of permanent crops and orchards to increase resilience to drier climatic conditions; and • Land consolidation, as a way to increase efficiency of resource use and farm resilience. 13. The proposed project would mitigate the risk that the effects of the 2012 drought will be amplified in 2013. To do this, the project would provide cash to farmers in the most affected districts for the 2012 winter wheat campaign and the 2013 spring campaign of corn. It is envisaged that the project will provide cash transfers to those farmers who suffered significant losses in 2012, and who have invested for wheat and will invest for corn in new crops in the 2013 planting campaign. C. Bank Response: The Project Brief description of Bank’s strategy of emergency support 14. The proposed emergency support is fully consistent with the Bank’s overall partnership strategy for Moldova. The 2009-2012 Country Partnership Strategy, had the “Stability in a World of Economic Shocks� and “Climate Change and Eco-Disasters� as main themes. The project also complements the following two projects which are currently under implementation: (i) the Disaster and Climate Risk Management Project, approved on August 5, 2010, and (ii) the 11 Moldova Agriculture Competitiveness Project, approved on May 1, 2012. The Disaster and Climate Risk Management Project aims to strengthen the country’s ability to forecast, prepare for, and respond to severe weather and natural disasters. The Moldova Agriculture Competitiveness Project aims to enhance the competitiveness of the country agro-food sector by, among others, mainstreaming agro-environmental and sustainable land management practices. Such practices are an essential element to help farmers adapt to a changing climate and for the sector to become more resilient to climatic variations. Project Development Objectives 15. The Project Development Objective (PDO) is to mitigate the negative effects of the 2012 drought by helping restore corn and wheat production and prevent livestock destocking in the most affected districts. 16. The project will support the Government’s priorities to address the emergency situation, reduce the risk of escalation, and facilitate recovery from the drought. To achieve the above objective, the project will contribute cash and technical assistance (awareness and training) to the farmers in the districts that have been mostly affected by the 2012 drought so as to maintain investments to plant corn and wheat. Corn plays a key role as animal fodder and its scarcity may lead to animal destocking. The short-term emergency objective of the proposed project complements longer-term objectives of existing operations that are supporting adaptation to climate change in agriculture and disaster preparedness. Summary of Project Components 17. The project would include the following three components: (i) Cash Transfers to Affected Farmers, (ii) Training and Awareness, and (iii) Project Management. 18. Component 1: Cash Transfers to Affected Farmers (US$9.0 million). This component would have the following two objectives: (i) to compensate a share of the losses that farmers suffered during the 2012 season, and (ii) to provide an incentive for planting winter wheat and corn during the 2013 campaign so as to prevent the risk of animal destocking. To achieve these objectives, the component would distribute cash to targeted farmers based on the following criteria: (i) farmers from the most affected districts, i.e. the districts where losses of the specific crop were higher than 35 percent, would receive cash payments according to the average loss of the district; (ii) farmers in those districts would be compensated ex-post on the basis of the area that they actually planted in autumn of 2012 for wheat, and for the area that they actually planted in 2013 for corn 5; (iii) eligible beneficiaries should plant a minimum area of 1.0 ha for wheat, and 0.5 ha for corn 6, and (iv) eligible beneficiaries should be registered farmers with formal access to arable land, either in the form of ownership or formal lease. The 35 percent limit was agreed with the Government in order to avoid the use of scarce public resources in areas where the drought impact has been moderate, and can thus be considered as a normal annual fluctuation. 5 The two eligibility criteria are independent of each other. 6 The two eligibility criteria are independent of each other. 12 19. The above criteria were established to balance fairness (higher compensation for higher loses) and implementation simplicity. As a consequence, farmers would not be compensated on the basis of their actual losses, due to the complex procedure of assessing individual losses, but on the basis of the average losses at district level. In order to create an incentive to plant the 2013 crops, farmers will be reimbursed ex-post, i.e. after they already planted their crops. 20. As a result of the application of the above criteria, US$7.4 million will be used to compensate for corn losses, while US$1.6 million will be used to compensate for wheat losses (compared to estimated losses of US$62 and US$16 million respectively). In total, 31 districts will be compensated for corn losses, while 15 districts will be compensated for wheat losses. For corn, an estimated total area of 322,000 ha will be compensated with amounts ranging from US$14 to US$34 per ha depending on the level of corn losses at district level. For wheat, a total area of 136,000 ha will be compensated with amounts ranging from US$9 to US$15 per ha depending on the level of wheat losses at district level. It is expected that cash transfers will be distributed among at least 22,000 farmers cultivating either wheat, corn, or both. The distribution by district is shown in Table 3 and Table 4 (pages 26-27). Using the methodology outlined above, a farmer in the most affected district of Ungheni who planted 10 ha of corn last year and who is planting the same area in 2013 would receive a cash transfer of US$340 (US$34 per ha x 10 ha). For the same area of wheat, a farmer in the less affected district of Hincesti would receive a cash transfer of US$90 (US$9 per ha x 10 ha). But a farmer in the district of Drochia, where the damage has been less than 35%, would not receive any cash transfer 7. 21. The decision to compensate with cash rather than with inputs is based on the following considerations: (i) in the past there were negative experiences in procuring seeds which proved to be of poor quality or not suitable to the specific local conditions, or were incorrectly used; (ii) cash transfers allow faster implementation by avoiding the need to procure inputs, and (iii) cash transfers maximize individual choice and ownership while minimizing market distortions. They maintain beneficiaries’ dignity and empower them, while providing a cash injection into communities to help remonetize and revive the local economy 8, and (iv) cash transfers allow for a development of existing supply chains by letting beneficiaries purchase their inputs from their existing suppliers (see below). 22. An analysis of input availability has been carried out. Moldova is self-sufficient in term of winter wheat seeds. However, it will need to import around 35 percent of corn seeds, or around 875 tons. There is a developed private system to import and distribute seeds which have been certified through a national system. They also regularly import fertilizers, mostly from Ukraine and the Russian Federation, and it is not expected that supplying these inputs will pose a challenge in the 2013 campaign. 23. Component 2: Training and Awareness (US$350,000). This component has two objectives: (i) public dissemination of information in the eligible districts about the cash transfer program. This has the objective of generating awareness to avoid elite capture and allow for the mechanism to create sufficient incentives for affected farmers to plant even if they receive the 7 The numbers for winter wheat are firm and represent actual area planted in 2012. The numbers for corn are estimated on the basis of the area planted in 2012. Exact area payments for corn will be determined when data on area planted is consolidated in MAFI in 2013. 8 CASH TRANSFER PROGRAMS IN EMERGENCY SITUATIONS: A GOOD PRACTICE AND GUIDANCE NOTE Operations Policy and Country Services, June 3, 2008. 13 cash transfer ex-post, and (ii) to improve knowledge about animal feeding. The component would finance the following three activities: • Awareness campaign and grievance mechanism. This activity would finance the services of an identified consulting company with unique experience to inform all potential beneficiaries of the availability of the cash transfers, the eligibility criteria, and the application procedures, as well as the grievance mechanism established to ensure accountability. The information campaign will be targeted to all potential beneficiaries in eligible districts and will use various media such as national and/or local TV channels, national and local radio stations, newspapers, representative websites, and news agencies. In addition, one national seminar and a series of regional and local information seminars will be held in every eligible district and in every municipality. The list of promotion materials to be prepared will contain radio and TV clips to be broadcasted on national and regional radio and TV channels, advertorials for the printed media, posters and flyers, press releases, information to be posted in existing websites (ACSA, AIPA, MAFI) and internet banners. The consultant will propose internet solutions for presenting the project content which would utilize existing web pages. The publicly accessible website information will contain detailed information about the project eligibility criteria and the list of beneficiaries with amount received to improve transparency. The awareness campaign will be developed by the consultant based on the results of existing socio- economic research. The information on the grievance mechanism attached to the cash transfers program will be an integral part of the information materials’ content and it will disseminate specific contact points, names of local grievance operators, channels, and period for presenting a request for clarification and/or complaint. • Training on animal feeding. Farmers’ knowledge in terms of improved animal feeding is limited. Therefore training on feeding practices, livestock dietary requirements and nutritional value/quality of various kinds of feeds would help farmers maximize the benefit which can be obtained from available feeds; and • Feasibility study on the potential to introduce small-scale corn silage. Corn silage can be a drought adaptation approach which could allow producing animal feed even in dry years such as 2007 or 2012. A simple technique called “crop yield visual assessment� would guide the decision about shifting corn production from grain to silage. In the Moldovan climatic conditions, this decision should be made in June. At that time, if corn is starting to suffer significantly from drought, grain yields may be reduced to the point that they may not even be harvested because the harvesting cost will outweigh the grain value. In that case, farmers can produce corn silage rather than grain. However, if the decision to produce silage rather than grain is taken too late, corn will have become too dry to produce silage. So having the appropriate knowledge about these techniques and the timing of their application can help mitigating the impact of droughts. Though silage production was used during the soviet period in large farms, there is no knowledge about small scale silage production. This component will finance the preparation of a feasibility study for corn silage production and would include adaptive research to test the economic, social, and environmental feasibility to produce small scale corn silage in Moldova 9. 9 Silage production presents an environmental risk: if excessively humid corn is used to prepare silage, it can produce a toxic “silage liquor�. Thus the feasibility study will assess this risk and mitigations measures. Note that the adaptive research will use 50 Kg plastic bags and will not require any civil works. 14 24. Component 3: Project Management (US$650,000). This component would support costs associated with project implementation incurred by MAFI’s Agency for Interventions and Payments in Agriculture (AIPA). Such costs would include incremental operational costs and incremental capacity development costs i.e. costs for fiduciary specialists, component coordination, and monitoring and evaluation. This component would also cover the costs associated with fiduciary and project management support provided by an existing project management unit – the Consolidated Agriculture Project Management Unit (CAPMU) 10, also within MAFI. Eligibility for Processing under OP/BP 8.0 25. The proposed project is fully consistent with OP 8.00 because it addresses major adverse economic and/or social impacts resulting from an actual natural crisis and it focuses on the Bank’s core development and economic competencies and is in line with its mandate. The project has been prepared in coordination with other development partners (such as the EU and FAO), and with appropriate oversight arrangements, including fiduciary oversight, to ensure appropriate scope, design, speed, and monitoring and supervision of the emergency operation in place. Consistency with Country Strategy 26. The proposed emergency support is fully consistent with the World Bank-IFC 2009-2012 Country Partnership Strategy (CPS) for Moldova. The CPS focuses on three pillars: (i) improving economic competitiveness; (ii) minimizing social and environmental risks, building human capital, and promoting social inclusion; and (iii) improving public sector governance. “Stability in a World of Economic Shocks� and “Climate Change and Eco- Disasters� are two important themes in the CPS and they will probably remain important also in the new CPS currently under preparation. Expected Outcomes 27. The proposed project has the objective of mitigating the negative effects of the 2012 drought by helping to restore the corn and wheat production and preventing livestock destocking in the most affected districts. This will be achieved by providing a cash compensation and training to affected farmers as an incentive to plant new crops to accelerate recovery from the drought and to reduce the risk of escalation of losses. Restored production will increase farmers’ capacity to feed their animals and thus reduce the risk of destocking. 28. The expected outcomes of the project are: Outcome Indicator Recover at least 80% of the pre-drought corn Percentage change over the 2009-11 average and wheat production national production of corn and wheat 10 CAPMU was established in 1999 through Government Decision 878 and has more than ten years of experience in providing fiduciary support in the implementation of Bank-financed projects in the rural sector in Moldova. 15 Prevent livestock destocking Percentage change over the 2009-11 average number of pigs, chicken, and cattle Benefit a significant share of affected farmers Number of direct beneficiaries, disaggregated by gender Some important risks affect the potential that the project will achieve the above outcomes. In particular weather and/or animal diseases do affect rain-fed crop production and livestock destocking respectively. However there is not much that a short-term emergency project can do to mitigate such risks. Other interventions, including two World Bank funded projects, are addressing the longer term sustainability risks, as explained under paragraph 12(b) at page 11. 29. The expected outputs of the project are: Output Indicator Recover at least 80% of the pre-drought area Area planted with corn in 2013 in 31 selected planted with corn and wheat districts in plots larger than 0.5 ha Area planted with wheat in 2013 in 15 selected districts in plots larger than 1 ha Avoid elite capture Share of small farmers of the total project beneficiaries (percentage) Compensate a share of damage caused by the Amount of cash transfers 2012 drought Increase farmers’ knowledge on animal Number of days of training provided feeding capacity Increase farmers’ awareness of the project Number of awareness workshops and broadcasting events Gender balance Share of female participants in the awareness workshops Test feasibility of small scale silage Completion of the small-scale corn silage feasibility study D. Appraisal of Project Activities 30. Economic/Financial analysis. A project economic and financial analysis has been carried out. The analysis compared the total cost of the project with the benefits expected from corn and wheat production increases. The analysis assumed that such increased production will generate two benefits: (i) increased availability of food for human (10 percent of corn and 50 percent of wheat); and (ii) the remaining 90 percent of corn and 50 percent of wheat would be consumed as fodder by animals, thus contributing to reduce the incidence of destocking (i.e. number of animals which would be slaughtered in addition to regular trends due to lack of feed, Figure 6). The benefits for the livestock sector are expected to be multifold: (i) better fed animals would produce more meat, milk, or eggs; (ii) farm gate prices would be less depressed because fewer producers will be forced to slaughter their animals all at the same time; and (iii) the need to import expensive feed would be avoided. 16 31. The assumptions on destocking were based on the 2007 drought, since that drought was comparable to the one in 2012. The following ratios were used to convert the impact on destocking of the 2007 drought into estimated to follow the 2012 drought: corn yield losses: 70 percent in 2007 and 61 percent in 2012; wheat yield losses: 44 percent in 2007 and 29 percent in 2012. 32. The resulting Internal Rate of Return (IRR) is 30% and the Net Present value (NPV) is US$940,981 (see Annex 10: Economic and Financial Analysis). 33. Procurement. Since Component 1 of the proposed project will only finance cash transfers to affected farmers, procurement of goods, non-consulting and consulting services will be made as part of Components 2 and 3, which make up around 10 percent of the total project cost. For these activities, the World Bank Procurement and Consultants Guidelines (January, 2011) will apply. 34. An assessment of the capacity of MAFI as Implementing Agency, and CAPMU as Fiduciary Agent, to implement procurement activities was carried out in December, 2012. The evaluation was conducted using the web-based Procurement Risk Assessment Management System and is available in the project files. The Bank team assessed the risks that may negatively affect the ability of each agency to carry out procurement processes. Given the experience of both agencies in implementing Bank-funded operations, including emergency operations, the overall risk for procurement is “Low�. 35. Despite the emergency nature of the proposed project, special procurement arrangements are not foreseen. It was agreed to use the same procurement arrangement as in the ongoing Moldova Agriculture Competitiveness Project, where MAFI is responsible for overall project implementation and CAPMU for carrying out procurement activities. As noted earlier, CAPMU has more than 10 years of experience in implementing Bank-funded operations and currently employs a full-time Senior Procurement Officer and a full-time Procurement Specialist, both with substantial experience in conducting procurement of different nature, size and complexity. 36. Component 1: Cash Transfers to Affected Farmers. It is planned that AIPA will transfer the compensations directly to the accounts indicated by each farmer in his/her application for compensation. However, payments to farmers without bank accounts will be made through Posta Moldovei using its network of branches and rural post offices based on payment orders authorized by AIPA. Posta Moldovei is a state-owned enterprise. The Bank agreed to single- source Posta Moldovei in accordance with paragraph 1.13 (c) of the Consultant Guidelines whereby government-owned enterprises may be eligible to be awarded contracts under Bank- funded projects if they provide services of unique and exceptional nature, including situations when there are no suitable private sector alternatives. 37. Component 2: Training and Awareness. This component will include a single-source contract to ACSA for awareness of the cash transfer program, training and the implementation of a grievance mechanism. ACSA is a well-established NGO with a nation-wide network and strong local capacity to provide advisory and training services. Their physical infrastructure comprises offices and equipment in all 34 districts of Moldova. Single-sourcing of ACSA for the awareness campaign and training presents a clear advantage over a competitive selection since it will lead to the same result. In addition, the emergency nature of the project makes timing 17 extremely important. Affected farmers need to be aware of the details on the availability of project funding so that they will have an incentive to plant corn in April, 2013. 38. Financial Management (FM) and disbursement arrangements. The execution of cash transfers to affected farmers will be performed by AIPA. The agency will conduct additional pre- payment compliance verification and post-payment checks on applications submitted by affected farmers. The existing business processes in AIPA were positively assessed by the Bank team during the preparation of Moldova Agriculture Competitiveness Project negotiated in March, 2012. At that time, the fiduciary assessment focused on reviewing the “four-eye� approach 11, which AIPA usually applies towards scrutinizing subsidy applications. From the FM and disbursement standpoint, the “four eye� approach is similar to the scheme to finance grants to farmers affected by the 2012 drought. The Bank assessed AIPA’s internal control system as adequate and reliable with clear separation of duties and responsibilities over subsidy cycle. To administer effectively the cash transfers, AIPA would handle a separate designated account opened for this purpose in the state treasury system. 39. The overall project fiduciary responsibilities, including financial management, will be managed by the CAPMU which has a vast experience in the implementation of donor-financed projects and is staffed with qualified personnel. CAPMU’s expertise has been regularly assessed by various donors (the latest FM review done by the Bank in April, 2012). CAPMU’s activities are subject to annual audits by independent eligible audit firms since its establishment. The financial management arrangements set up within CAPMU have always been proved satisfactory, having in place an efficient internal control system and advocacy for diligent compliance with legal provisions envisaged for the projects they manage. 40. Given the emergency nature of the proposed project and the fact that the Moldova Agriculture Competitiveness Project is jointly administered by CAPMU and AIPA, the existing approach on financial reporting would be maintained. This would avoid any unnecessary adaptation to new conditions and ensure efficiency in the project administration. Thus, within thirty days after the end of each reporting quarter, AIPA will prepare and submit to CAPMU the reports on the funds spent under Component 1, i.e. reports on the actual amounts of cash transfers provided to farmers. In its turn, CAPMU will consolidate this financial information into project financial statements and submit them to the Bank within forty-five days after the end of each quarter. The format of the consolidated interim financial reports has been agreed. The consolidated Interim Financial Reports will also serve as basis for disbursement of project funds. To meet the Bank’s audit requirements, the consolidated project financial reports will be audited on an annual basis by an independent eligible audit firm. Within these arrangements, CAPMU would be accountable for ensuring timely execution of the project’s financial audits - drafting of the TORs, selection of the auditor, provision of the required assistance to the auditor, and submission of the audit report to the Bank. The scope of the project audit would include, in addition to its standard procedures, an assessment of the adequacy and accuracy of execution of cash transfers to farmers and AIPA’s performance in executing these. 11 The four-eyes approach is applied to check whether a given subsidy application is eligible for financing and it passes through a scrutiny done by four departments that review the application from different perspectives before it is finally authorized for payment. 18 41. In addition to project financial audits, interim checks on compliance with statutory requirements on cash distribution to affected farmers (operational review) will be performed by an independent consulting company selected on competitive basis. 42. The cash transfers will be executed directly by AIPA to farmers who hold bank accounts. For those beneficiaries that do not, AIPA will enter into a service agreement with Posta Moldovei (the national Post Office), a state-owned enterprise. Posta Moldovei will execute payments to farmers based on the lists provided by AIPA via its vast network of branches and rural post offices spread throughout the country. The agreement will state the detailed mechanism of cash execution and reporting obligations, and the fee to be charged by Posta Moldovei (it is estimated that it would not exceed 0.8 – 1 percent of total amount executed). 43. The choice of Posta Moldovei is justified by the fact that it is the only existing structure with a network of retail offices available in every locality in the country. Posta Moldovei has been distributing retirement benefits to elderly population in the entire country for decades, a process which has some similarities with the distribution cash to affected farmers. It is the closer to and trusted by more citizens than any other financial institution, especially in rural areas. The alternative of using local government authorities (mayor’s offices) for this purpose, presents much stronger fiduciary risks due to political nature of these offices, and impediments in withdrawing petty cash from the treasury accounts (prohibited by the current legislation). In addition, many rural mayors’ offices lack for technological resources for effective reporting on cash distribution. On the other hand, an assessment carried out by the Bank team determined that Posta Moldovei has sufficient capacity and resources, including technological ones, to be involved in the distribution of cash transfers. The assessment focused on reviewing the arrangements related to internal controls, reporting between local offices and headquarters, internal audit, technological resources, security of local post offices established within the organization. Several field visits were conducted to observe the working conditions and staff qualification at local post offices in rural areas. The assessment concluded that the FM minimum requirements are met and the Bank may rely on business processes existing within Posta Moldovei for the project needs. Posta Moldovei is, therefore, assessed as a more suitable option. 44. Before executing the cash transfers, AIPA should gather satisfactory evidence of eligibility of farmers included in the lists, and particularly their inclusion in the lists approved by a Ministerial Committee (see Annex 7 for a description of the implementation mechanisms). AIPA should apply rigorous review of documentary evidence and monitor the execution of the cash transfers to ensure efficiency and compliance with procedures. The execution of cash transfers will also be monitored on a sample basis by the World Bank team. 45. To increase the prospects for successful implementation, the project would support necessary capacity building and training in AIPA, including technological enhancements to the business processes which would facilitate the benefit’s distribution in transparent, effective and efficient manner. 46. Assessment of capacity and relevance as operator of the awareness campaign and training. The Rural Development Agency (ACSA) is a well-established nation-wide NGO network with an impressive local presence in 350 Municipalities, which more the than one third of the municipalities in Moldova along with strong local capacity to provide advisory and training services. The network operates an impressive monitoring system that allows tracking 19 down any activity to the level of primary beneficiary and easy access to information. ACSA has strong administrative and financial capacity proven by the numerous international audits. Their physical infrastructure comprises offices and equipment in all 34 districts of Moldova. The agency is well-known as a trustworthy source of information to both local farmers and local authorities and as such is well positioned to run an awareness campaign. At the same time the recognized transparency of operations and administrative capacity coupled with long-term experience of cooperation with MAFI and international donors working in Moldova allows it to play the role of the trusted and independent intermediary to operate the grievance mechanism. The government agencies involved in project implementation do not have the capacity nor the culture to attend to grievances. Government local offices cannot provide easy and equitable access to complaints at local level since they may not be perceived as independent by the rural population. On the contrary, ACSA has a long history of good performance which allowed them to maintain good relationships even with changing governments. As indicated earlier the justification for single-sourcing is very strong. The project team will work with MAFI to identify sources of funding to begin the awareness campaign even before project effectiveness, to be later reimbursed through retroactive financing. 47. Safeguards. As mentioned above, the project will: (a) provide cash transfer to farmers affected by 2012 drought and reimburse them after they already planted crops, thus creating incentives to plant the 2013 crops. Such financial support will be provided only to farmers who would plant crops on existing non irrigated arable lands; and (b) support agricultural training and awareness activities. These activities are not expected to cause any significant environmental impact. The potential minor adverse environmental impacts associated with crops cultivations can be easily mitigated by complying with the best agricultural and environmental practices. Based on this, the project will not trigger any WB environmental safeguard policies and its environmental category is therefore C. 48. Poverty implications. The agricultural sector in Moldova is associated with households in chronic poverty and high vulnerability to fall-back into poverty. In 2010, over three quarters of the extreme poor in Moldova had a household head working in the agricultural sector (and half of those in high vulnerability to move back into poverty). A dynamic picture of recent years (2008-2010) shows that Moldova presented a remarkably low mobility level, with 96 percent of their households remaining in their same relative position in the period. However, approximately two thirds of the chronically poor 12 households worked in agriculture. Further, of those who fell into poverty, approximately 60 percent worked in agriculture, compared to 40 percent of those households into the service sector 13. The recent weather shocks affected the regions of Moldova where the poor are more likely to be directly involved in agricultural production. The central and southern regions of Moldova were the most affected by the 2012 drought, and are also the regions in which the less well-off (bottom three deciles) are 2 to 5 times more likely to be directly using their land for agricultural production. The poor in rural parts of Moldova are significantly more likely to be involved in activities that can be directly or indirectly affected by corn production, in particular in the southern region. According to the latest available household budget survey, 61 percent and 80 percent of the agricultural activity of those in the bottom 3 deciles, in the Central and Southern regions, respectively, are related to livestock (meat, cheese 12 The term chronically poor in this context refers to those households that remained in poverty between 2008 and 2010. 13 Source: Maria Davalos and Moritz Meyer (forthcoming) "Economic Mobility in Moldova: Patterns and Determinants of Movements Out of Poverty and into the Middle Class". ECA PREM 20 and milk, and other related products). This result seems to suggest that these groups could be particularly vulnerable to the risk of animal destocking which are likely to occur if famers do not have access to locally produced animal feed. The poverty analysis highlights the project’s relevance and its targeting approach. 49. Gender. The project is not specifically targeted at gender and does not envision specific quota for women beneficiaries form cash transfer program. Such quotas are particularly difficult to set as there is no gender disaggregated data on farmers and land owners in Moldova. However it is expected that increase in the livestock will result in increased income generation opportunities in particular for rural women as they are normally engaged in animal care, production and sales of dairy products in local markets. Attention to gender equity in the project will be paid through the following means: (i) gender-disaggregated data on project beneficiaries, as well as on those having grievances will be collected; (ii) awareness activities and grievance mechanism envisaged under the project will use communication and outreach channels that ensure equal access of women clients: the information posters will be located in the places often attended by women such as church and local shop, female leaders that are influential in the community will be invited to participate in the village level information meetings; (iii) timing and methods of delivering the training and consulting services will be made flexible to accommodate women clients that can afford less time to spend outside of their households due to their care functions. 50. The proposed project does not involve any exception to Bank policies. E. Implementation Arrangements and Financing Plan 51. Institutional and Implementation Arrangements. The Project will be implemented by the Ministry of Agriculture and Food Industry (MAFI). MAFI has extensive experience in successfully implementing World Bank projects (such as the on-going Agricultural Competitiveness project, the Rural Investment Service Program ACP (RISP I and RISP II), and the Avian Influenza project). An existing inter-ministerial Steering Committee, established in accordance with Government Decision 878 dated September 9, 1999 (as revised to include the relevant up-dates for this project), will perform overall supervisory and coordination functions for the project. Currently, the Steering Committee has representatives of MAFI, MOE, MOF, and the State Chancellery. The decision will be adjusted to include representatives of farmer organizations. As mentioned above, under Component 1, the project’s cash transfer scheme will rely on AIPA 14 for disbursements, delivery of cash payments to beneficiaries, financial management and monitoring of the cash transfer program. The implementation of the second component will rely on ACSA’s institutional network to play a pivotal role in the project’s proposed awareness and training activities, as well as its grievance mechanism. For fiduciary support to the implementation of other project activities across all three components, an existing project management unit - CAPMU 15 will be in charge of supporting financial management and procurement activities. Last but not least, in addition to the institutions above, the project will rely heavily on local and rayon-level authorities which will play an important role in increasing awareness about the project’s cash transfer program, amassing initial information about planted 14 AIPA is institutionally subordinated to MAFI, and is modeled after payment agencies present in EU countries. It has received significant institutional and human capacity strengthening support under the RSIP II Project. 15 CAPMU was established in 1999 through Government Decision 878 and has more than ten years of experience in providing fiduciary support in the implementation of Bank-financed projects in the rural sector in Moldova. 21 areas and eligible beneficiaries and compiling formatted lists, and transmittal of this information for further processing to AIPA. 52. The implementation arrangements for Component 1 will rely on the principles set forth in the Government Decision 766 of October 15, 2012 (as amended by Government Decisions 820 and 978 of November 6, 2012 and December 22, 2012 respectively), which establishes the operating framework for the cash payment scheme funded with EU budget support for winter wheat. A detailed description is provided in Annex 7. The implementation arrangements for Component 2 will rely on the sourcing of all activities to ACSA for the implementation of a national awareness campaign, the establishment of a grievance mechanism, and the propagation of a training program for improved animal feed practices. The implementation arrangements for Component 3 will rely on the collaboration between AIPA and CAPMU to ensure timely implementation and fiduciary compliance with Bank rules and procedures. 53. The project will be implemented based on a Project Operational Manual which will be cleared by the project’s Steering Committee and adopted by MAFI. The POM would include, inter alia: (i) the project’s overall operating, fiduciary and decision-making procedures, including the application of the grievance mechanism; and (ii) results monitoring arrangements. Only the Steering Committee will have the authority to amend the two documents above, provided such amendments are acceptable to the World Bank. The adoption of the POM by the Recipient constitutes a condition of effectiveness. F. Project Cost and Financing 54. The project would be entirely financed with IDA resources. Project costs and financing plan are presented in the table below: IDA Project % IDA Financing Project Components cost Financing (US$ (US$ million) million) 1. Cash Transfers to Affected 9.00 9.00 100 Farmers 2. Awareness and Training 0.35 0.35 100 3. Project Management 0.65 0.65 100 Total Baseline Costs 10.00 10.00 100 Physical contingencies 0.00 0.00 Price contingencies 0.00 0.00 Total Project Costs 10.00 10.00 Interest During Implementation Front-End Fees Total Financing Required 10.00 10.00 22 55. The proposed project comes to alleviate the consequences of an emergency. Timely and efficient implementation of the cash transfer scheme is critical to the effort of mitigating the consequences of the drought on animal destocking. In order to achieve the PDO, project implementation must be based on a foundation of rigorous implementation support efforts covering analytical, technical and fiduciary aspects. In addition, implementation support would have a strong focus on the implementation of mitigation measures for key risks identified in the Operational Risk Assessment Framework (ORAF). The activities supported by the project would require timely availability of a corresponding skill mix on the task team, with a particularly strong focus on fiduciary matters (primarily financial management), social aspects (primarily inclusiveness and grievances), and technical knowledge in the area of improved animal feeding practices. In addition the team’s technical specialists should support the Implementing Agencies in ensuring adjustments in the current monitoring and evaluation systems at AIPA and ACSA, to include algorithms that will best capture projects results, as well as in ensuring proper collection and maintenance of data. Finally, some of the proposed activities, primarily of capacity building character, will require availability of team expertise in information technologies and communications. 56. The project’s operational complexity will require a very proactive approach by the Bank team in assisting the Government with the drafting of TORs for the awareness and training activities, the grievance mechanism, as well as other technical assignments. Implementation Support Plan 57. The levels and typology of analytical, technical, fiduciary, safeguard support for the implementation of the proposed project are detailed below. Focus of Implementation Support Time Focus Skills Needed Resource Partner Role Estimate First twelve • Robustness of General US$150,000 • Bank team to months implementation agriculture and provide general arrangements rural implementation reflected in the development support to the POM expertise. Project on • Preparation of Social and technical first-line communication implementation, procurement expertise M&E and packages and Financial fiduciary aspects initiation of Management • MAFI, AIPA and procurement Procurement CAPMU to initiate • Financial ICT preparation of Management TORs and TSs for arrangements, first-line with a particular procurement emphasis on packages, and APIA’s role in subsequently implementing initiate the Component 1 procurement • Robustness of process. 23 M&E systems for Components 1 and 2 12-18 months • Project General US$75,000 • Bank team to Implementation agriculture and provide general • Financial rural implementation Management development, support to the • M&E Financial Project on Management technical implementation, M&E and fiduciary aspects • MAFI, AIPA and CAPMU to continue procurement implementation activities Skill Mix Skills Needed Number of Staff Weeks Number of Trips Agriculture 30 3 Social Aspects 10 3 Financial 20 0 Management Procurement 20 3 Information 5 0 Technology 58. The project’s proposed closing date is September 1, 2014. G. Project Risks and Mitigating Measures 59. A risk of the proposed project is that of cash may be distributed to ineligible farmers or may not reach eligible farmers. These represent two types of targeting errors: inclusion and exclusion errors. To mitigate for this risk, the project will be extensively monitored through regular ex-post reviews by an independent consulting firm. Two levels of approvals at local mayor’s office and at ministerial level in addition to interim checks performed by the AIPA are aimed to reduce the risk of misconduct, as well. The engagement of Posta Moldovei as a third party aims at ensuring more efficient and transparent process in distribution of cash to the farmers with no accounts. 60. According to the Corruption Perceptions Index issued by the Transparency International, Moldova has gained 36 points out of 100 in 2012, ranking the country on 94th position out of 176 countries. Comparing to 2011, Moldova’s status has improved significantly and it has climbed 18 positions in ranking. Although the Moldovan population perceives corruption as a major impediment in economic, social and democratic development of the country and the volume of 24 unofficial payments remains at high level, there is a positive tendency which shows that the tolerance towards corruption is declining among citizens. This imposes exalted requirements vis- à-vis all branches of the state on being more transparent and accountable. 61. Two measures are built into the project to mitigate the above risk: (i) a grievance mechanism would be developed so that perceived irregularities can be reported and investigated; and (ii) the awareness campaign is expected to increase transparency and thus reduce the risk of targeting errors. H. Terms and Conditions for Project Financing 62. Project financing is an Emergency Recovery Credit provided to the country on blend IDA terms. 25 Annex 1: Detailed Description of Project Components MOLDOVA: Emergency Agriculture Support Project 1. The project would include the following three components: (i) Cash Transfers to Affected Farmers, (ii) Training and Awareness, and (iii) Project Management. 2. Component 1: Cash Transfers to Affected Farmers (US$9.0 million). This component would have the following two objectives: (i) to compensate a share of the losses that farmers suffered during the 2012 season, and (ii) to provide an incentive for planting winter wheat and corn during the 2013 campaign so as to prevent the risk of animal destocking. To achieve these objectives, the component would distribute cash to targeted farmers. The targeting would be based on the following criteria: (i) farmers from the most affected districts, i.e. the districts where losses were higher than 35 percent, would receive cash payments according to the average losses of the district; (ii) farmers in those districts would be compensated ex-post on the basis of the area that they actually planted in autumn of 2012 for wheat, and for the area that they actually planted in 2013 for corn 16; (iii) eligible beneficiaries should plant a minimum area of 1.0 ha for wheat, and 0.5 ha for corn 17, and (iv) eligible beneficiaries should be registered farmers with formal access to arable land, either in the form of ownership or formal lease. The 35 percent limit was agreed with the Government in order to avoid the use of scarce public resources in areas where the drought impact has been moderate, and can thus be considered as a normal annual fluctuation. 3. The above criteria were established to balance fairness (higher compensation for higher loses) and implementation simplicity. As a consequence, farmers would not be compensated on the basis of their actual losses, due to the complex procedure of assessing individual losses, but on the basis of the average losses at district level. In order to create an incentive to plant the 2013 crops, farmers will be reimbursed ex-post, i.e. after they already planted their crops. 4. As a result of the application of the above criteria, US$7.4 million will be used to compensate for corn losses, while US$1.6 million will be used to compensate for wheat losses (compared to estimated losses of US$62 and US$16 million respectively). In total, 31 districts will be compensated for corn losses, while 15 districts will be compensated for wheat losses. For corn, an estimated total area of 322,000 ha will be compensated with amounts ranging from US$14 to US$34 per ha depending on the level of corn losses at district level. For wheat, a total area of 136,000 ha will be compensated with amounts ranging from US$9 to US$15 per ha depending on the level of wheat losses at district level. It is expected that cash transfers will be distributed among at least 22,000 farmers cultivating either wheat, corn, or both. The distribution by district is shown in Table 3 and Table 4 (pages 26-27). Using the methodology outlined above, a farmer in the most affected district of Ungheni who planted 5 ha of corn last year and who is planting the same area in 2013 would receive a cash transfer of US$340 (US$34 per ha x 10 ha). For the same area of wheat, a farmer in the less affected district of Hincesti would receive a cash transfer of US$90 (US$9 per ha x 10 ha). But a farmer in the district of Drochia, where the damage has been less than 35%, would not receive any cash transfer 18. 16 The two eligibility criteria are independent of each other. 17 The two eligibility criteria are independent of each other. 18 The numbers for winter wheat are firm and represent actual area planted in 2012. The numbers for corn are estimated on the basis of the area planted in 2012. Exact area payments for corn will be determined when data on area planted is consolidated in MAFI in 2013. 26 Table 3. Corn Cash Transfers by District R Regi District 2012 Corn 2012 Corn Losses Corn Cash Transfer a on Area, ha Corn Million Million Million US$/ha Lei/ha n (> 0,5 ha) Yield Lei USD US$/ k Change district 1 C Ungheni 13,625 -86% -41 -3.4 0.41 34 410 2 S Basarabeasca 1,999 -84% -6 -0.5 0.06 33 402 3 S Leova 10,122 -83% -30 -2.4 0.30 33 397 4 S Causeni 22,452 -82% -64 -5.3 0.65 32 390 5 N Falesti 14,547 -81% -41 -3.4 0.42 32 388 6 C Telenesti 12,593 -80% -35 -2.9 0.36 31 382 7 S Cimislia 11,515 -79% -32 -2.6 0.32 31 378 8 C Dubasari 333 -77% -1 -0.1 0.01 30 366 9 C Orhei 12,255 -76% -33 -2.7 0.33 30 362 10 S UTA 15,065 -73% -38 -3.2 0.39 29 348 Gagauzia 11 C Straseni 6,705 -73% -17 -1.4 0.17 28 348 12 S Cantemir 11,948 -73% -30 -2.5 0.31 28 347 13 C Ialoveni 5,996 -71% -15 -1.2 0.15 28 340 14 C Nisporeni 9,827 -71% -24 -2.0 0.25 28 338 15 C Rezina 7,940 -71% -20 -1.6 0.20 28 336 16 C mun.Chisinau 6,467 -70% -16 -1.3 0.16 27 335 17 S Stefan-Voda 16,101 -69% -39 -3.2 0.39 27 327 18 S Cahul 15,507 -68% -37 -3.0 0.37 27 326 19 C Calarasi 8,584 -65% -19 -1.6 0.20 25 309 20 N Glodeni 6,870 -64% -15 -1.3 0.16 25 307 21 C Anenii-Noi 4,775 -64% -11 -0.9 0.11 25 303 22 C Criuleni 12,581 -58% -26 -2.1 0.26 23 277 23 C Soldanesti 8,006 -53% -15 -1.2 0.15 21 252 24 S Taraclia 10,126 -52% -18 -1.5 0.18 20 247 25 N Ocnita 3,824 -48% -6 -0.5 0.06 19 229 26 N Floresti 17,001 -48% -28 -2.3 0.29 19 228 27 N Riscani 6,135 -45% -10 -0.8 0.10 18 214 28 C Hincesti 19,469 -43% -29 -2.4 0.29 17 205 29 N Singerei 11,104 -42% -16 -1.3 0.16 16 199 30 N Soroca 12,770 -41% -18 -1.5 0.18 16 194 31 N Donduseni 5,885 -36% -7 -0.6 0.07 14 170 32 N Drochia 9,162 -30% -9 -0.8 0 0 0 33 N Briceni 5,014 -26% -5 -0.4 0 0 0 34 N Edinet 13,695 -5% -3 -0.2 0 0 0 TOTAL 350,000 -61% -756 -62.0 7.4 Project corn area (ha) 322,129 27 Table 4. Wheat Cash Transfer by District R Re District 2012 2012 Wheat Losses Wheat Cash Transfer a gio Wheat Wheat Million Million Million US$/ha Lei/ha n n Area Yield Lei USD US$/ k Planted Change district (ha) 1 S Basarabeasca 4,383 -60% -7 -0.5 0.07 15 186 2 S Cimislia 15,317 -59% -23 -1.9 0.23 15 181 3 S Causeni 17,516 -54% -24 -1.9 0.24 14 165 4 C Ungheni 8,341 -53% -11 -0.9 0.11 13 163 5 S Leova 7,349 -51% -9 -0.8 0.09 13 157 6 C mun.Chisinau 1,215 -51% -2 -0.1 0.02 13 156 7 S Cahul 14,922 -49% -18 -1.5 0.18 12 150 8 C Straseni 899 -46% -1 -0.1 0.01 11 140 9 C Criuleni 7,200 -44% -8 -0.6 0.08 11 135 10 C Dubasari 3,684 -43% -4 -0.3 0.04 11 132 11 C Nisporeni 742 -39% -1 -0.1 0.01 10 118 12 S UTA 30,126 -36% -27 -2.2 0.27 9 111 Gagauzia 13 C Telenesti 7,676 -36% -7 -0.6 0.07 9 111 14 S Cantemir 7,194 -36% -6 -0.5 0.06 9 110 15 C Hincesti 9,305 -35% -8 -0.7 0.08 9 108 16 C Anenii-Noi 6,417 -33% -5 -0.4 0 0 0 17 S Taraclia 9,378 -31% -7 -0.6 0 0 0 18 C Rezina 9,200 -30% -7 -0.6 0 0 0 19 C Ialoveni 2,493 -29% -2 -0.1 0 0 0 20 S Stefan-Voda 17,563 -28% -12 -1.0 0 0 0 21 N Falesti 14,512 -27% -10 -0.8 0 0 0 22 N Glodeni 8,315 -22% -5 -0.4 0 0 0 23 C Orhei 12,226 -21% -6 -0.5 0 0 0 24 N Edinet 9,584 -20% -5 -0.4 0 0 0 25 N Drochia 20,131 -19% -10 -0.8 0 0 0 26 C Calarasi 451 -14% 0 0.0 0 0 0 27 N Soroca 12,554 -13% -4 -0.3 0 0 0 28 N Ocnita 4,957 -7% -1 -0.1 0 0 0 29 N Floresti 16,210 -7% -3 -0.2 0 0 0 30 N Riscani 12,772 -7% -2 -0.2 0 0 0 31 N Singerei 10,881 -6% -2 -0.1 0 0 0 32 N Donduseni 7,769 1% 0 0.0 0 0 0 33 N Briceni 5,855 7% 1 0.1 0 0 0 34 C Soldanesti 7,958 12% 2 0.2 0 0 0 TOTAL 325,095 -29% -233 -19.1 1.6 Project wheat area (ha) 135,869 28 5. The decision of compensating with cash rather than with inputs is based on the following considerations: (i) in the past there were negative experiences in procuring seeds which proved to be of poor quality or not suitable to the specific local conditions, or were incorrectly used; (ii) cash transfers allow faster implementation by avoiding the need to procure inputs, and (iii) cash transfers maximize individual choice and ownership while minimizing market distortions. They maintain beneficiaries’ dignity and empower them, while providing a cash injection into communities to help remonetize and revive the local economy 19. 6. An analysis of input availability has been carried out. Moldova is self-sufficient in term of winter wheat seeds. However, it will need to import around 35 percent of corn seeds, or around 875 tons. There is a developed private system to import and distribute seeds which have been certified through a national system. They also regularly import fertilizers, mostly from Ukraine and the Russian Federation, and it is not expected that supplying these inputs will pose a challenge in the 2013 campaign. 7. Component 2: Training and Awareness (US$350,000). This component has two objectives: (i) public dissemination of information on the cash transfer program in the eligible districts. This has the objective of generating awareness to avoid elite capture and allow for the mechanism to create sufficient incentives for affected farmers to plant even if they receive the cash transfer ex-post, and (ii) to improve knowledge about animal feeding. The component would finance the following three activities: 8. Awareness campaign. This activity would finance the services of an identified consulting company with suitable experience to inform all potential beneficiaries of the availability of the cash transfers, the eligibility criteria, and the application procedures, as well as the grievance mechanism established to ensure accountability. The information campaign will be targeted to all potential beneficiaries in eligible districts and will use various media such as national and/or local TV channels, national and local radio stations, newspapers, representative websites, and news agencies. In addition, one national seminar and a series of regional and local information seminars will be held in every eligible district and in every municipality. The list of promotion materials to be prepared will contain radio and TV clips to be broadcasted on national and regional radio and TV channels, advertorials for the printed media, posters and flyers, press releases, information to be posted in existing websites (ACSA, AIPA, MAFI) and internet banners. The consultant will propose internet solutions for presenting the project content which would utilize existing web pages. The publicly accessible website information will contain detailed information about the project eligibility criteria and the list of beneficiaries with amount received to improve transparency. The awareness campaign will be developed by the consultant based on the results of existing socio-economic research. The information on the grievance mechanism attached to the cash transfers program will be an integral part of the information materials’ content and it will disseminate specific contact points, names of local grievance operators, channels, and period for presenting a request for clarification and/or complaint. 9. The main purpose of the awareness campaign is to ensure that potential beneficiaries are aware of the following: (i) purpose of the cash transfer program; (ii) eligibility criteria for applying; (iii) necessary documents to support application; (iv) expected amount of 19 CASH TRANSFER PROGRAMS IN EMERGENCY SITUATIONS: A GOOD PRACTICE AND GUIDANCE NOTE Operations Policy and Country Services, June 3, 2008. 29 reimbursement per hectare; (v) deadline and place for submission of the application; and (vi) availability of a grievance mechanism. 10. In rural areas of Moldova the word of mouth and community media are important and trusted sources of information. In addition to conventional media, the awareness campaign envisages the following approaches: (i) media coverage through 1 week of prime time announcements on a TV channel with national coverage, 1 dedicated thematic block in a Sunday popular TV program watched by farmers, 10 days of radio announcements and 2 printed announcements in the most relevant printed editions popular in rural areas will be supported; (ii) at least 2,500 full color posters of A3 size will be published and disseminated in every municipality of the eligible districts. The contents of the posters will be based on the operation manual for cash transfers program. The design of the poster will contain a white box where the telephone number of the local consultant to attend to the grievance (covering the cluster of municipalities) will be placed. Contents and design shall be cleared by the World Bank prior to publication; (iii) at least 10,000 color leaflets of A4 size will be published and distributed during information events and through local authorities; (iv) one national awareness seminar of at least one day for about 100 people including regional representatives of the organization assigned to disseminate the information, representatives of the local authorities, representatives of the national stakeholders, and the media; (iv) one day national workshop to explain in detail all issues to be covered by the local information campaign back to back with the national seminar; (v) a series of regional seminars at the district level for about 50 people each being representatives of every municipality in the districts; (vi) information meetings at the level of every municipality in the eligible districts accompanied by distribution of information materials will be conducted within a week time after rayon level seminars; (vi) development of a website within the Ministry of Agriculture with all available information and forms. Banners with links will be put at least in the three most popular agricultural websites. 11. The Grievance mechanism. Social accountability will be strengthened by putting in place a grievance mechanism that is easy to be reached by local farmers in the eligible districts during the project’s implementation. Information about the methods of inquiring and filing complaints will be disseminated together with the information on cash transfers within the framework of the awareness campaign. Such an approach will ensure that whoever gets the information about the cash transfers program becomes also aware of the grievance mechanism. During a period of one month from the deadline for submission of cash grant applications, the operators of the grievance mechanism (ACSA consultants) will be available for complaints on any targeting and/or calculation issues. The telephone of the local consultant (covering a cluster of municipalities) will be written on all information materials distributed. Claimants can initiate a contact by calling the consultant to figure out whether they have any formal grounds for filing a complaint, and whether it is worth spending time and resources to travel to the consultant’s office. If the claimant does not meet eligibility criteria (e.g., failed to meet a deadline for submission of application), the consultant will advise accordingly. However, the complaint will still be registered. In more complex cases the consultant will advise the claimant to come and fill in an easy standard complaint form. 12. Completed complaint forms will be passed to AIPA’s territorial offices for review and recording on a monthly basis. Primary control will be ensured at district level in two ways (i) by checking the relevance of advice given to claimants randomly selected from the list of those advised not to file a complaint and (ii) by reviewing formal eligibility for cash transfers as per 30 the information in completed complaint forms. The register of reviewed complaints with the original documents will be further passed to the central office of the grievance mechanism operator to be reviewed, classified and presented to the Project steering committee for review and decision making. In this way, the neutrality of the grievance mechanism operator and transparency of complaints review will be ensured. The claimant will be informed on the decision taken on his/her complaint by the local consultant through whom the claim was submitted and through the list of satisfied claims on the website of the project. The data on complaints will be disaggregated by rayon, by size of the land plot and by gender. The analysis of complains will serve as quasi clients’ satisfaction survey. The basic demographic information will allow monitoring whether all categories of clients are served equally, or whether there are districts that were more affected than others. 13. Training on animal feeding. Farmers’ knowledge in terms of improved animal feeding is limited. To address this shortcoming, training on feeding practices, livestock dietary requirements and nutritional value/quality of various kinds of feeds will be provided. 14. Feasibility study on the potential to introduce small-scale corn silage. Corn silage can be a drought adaptation approach which could allow producing animal feed even in dry years such as 2007 or 2012. A simple technique called “crop yield visual assessment� would guide the decision about shifting corn production from grain to silage. In the Moldovan climatic conditions, this decision should be made in June. At that time, if corn is starting to suffer significantly from drought, grain yields may be reduced to the point that they may not even be harvested because the harvesting cost will outweigh the grain value. In that case, farmers can produce corn silage rather than grain. However, if the decision to produce silage rather than grain is taken too late, corn will have become too dry to produce silage. So having the appropriate knowledge about these techniques and the timing of their application can help mitigating the impact of droughts. Though silage production was used during the soviet period in large farms, there is no knowledge about small scale silage production. This component will finance the preparation of a feasibility study for corn silage production and would include adaptive research to test the economic, social, and environmental feasibility to produce small scale corn silage in Moldova 20. 15. In Moldova there is a tradition of corn silage production, but only on a large scale. However, this technology could be applicable also to small-scale farmers and can significantly increase the capacity to feed animals compared to corn grain. Corn silage is a fermented, high- moisture fodder that can be fed to ruminants such as cattle or sheep. Silage utilizes the whole stalk of a corn plant rather than its grain only. Thus productivity per hectare increases significantly. While one hectare of corn can produce at best 4-5 tons, silage production is 10-15 tons or even more. Silage production also requires a shorter period of time: while corn for grain requires 4-6 months to be cultivated, corn for silage only needs 2.5-3.5 months. This allows farmers the flexibility to adapt to incipient drought. In the Moldovan context, around June farmers can monitor corn growth potential with a simple approach called “crop yield visual assessment�. If corn is starting to suffer from drought in June, grain yields will suffer significantly. In that case, farmers are much better off producing silage rather than grain (silage has a two year storage capacity). However, if the decision to produce silage rather than grain is 20 Silage production presents an environmental risk: if excessively humid corn is used to prepare silage, it can produce a toxic “silage liquor�. Thus the feasibility study will assess this risk and mitigations measures. Note that the small-scale corn silage pilots will use 50 Kg plastic bags and will not require any civil works. 31 taken too late, the plant will became too dry to produce silage. So having the appropriate knowledge about these techniques and the timing of their application is an important factor with significant implications on the capacity to feed animals. 16. This training will also cover environmental concerns: if excessively humid corn is used to prepare silage, it can produce a toxic “silage liquor�. Thus the training will produce a special guidebook and a training module to clearly explain that the correct level humidity of corn is essential to produce quality silage and avoid the risk of “silage liquor 21�. To obtain a good fermentation, dry matter of corn should be above 27-30% but less than 35-37%. If dry matter is too high, fermentation will not happen, while if dry matter is too low, the resulting Figure 2. Kernel Milk Line1 silage will have less nutritional value and be less palatable for animals. Thus farmers have an interest not to use raw materials with excessive moisture content to avoid loss of nutrients and to obtain more palatable feed. This also addresses the risk of producing toxic silage liquor. 17. There is an easy approach to estimate the suitable dry matter content of corn: it is enough to observe the stage of maturity of the grain. Corn for silage should be harvested when the milk line has descended 1/3 to 1/2 of the way from kernel crown to the base (Figure 2). Thanks to this easy approach, the risk of silage liquor production from corn is very low. This method does not work well in some very new hybrid corn, called high stay-green. The feasibility study will assess the use of such hybrids in Moldova to check whether the above simple method can be relied upon. 18. Component 3: Project Management (US$650,000). This component would support costs associated with project implementation incurred by MAFI’s Agency for Interventions and Payments in Agriculture (AIPA). Such costs would include incremental operational costs and incremental capacity development costs i.e. costs for fiduciary specialists, component coordination, and monitoring and evaluation. This component would also cover the costs associated with fiduciary and project management support provided by an existing project management unit – the Consolidated Agriculture Project Management Unit (CAPMU) 22, also within MAFI. 21 To note that the project will not finance any investments on silage production, including no investments for demonstrations. It will just finance training. 22 CAPMU was established in 1999 through Government Decision 878 and has more than ten years of experience in providing fiduciary support in the implementation of Bank-financed projects in the rural sector in Moldova. 32 Annex 2: Results Framework and Monitoring MOLDOVA – Emergency Agriculture Support Project . Project Development Objective . The Project Development Objective (PDO) is to mitigate the negative effects of the 2012 drought by helping restore corn and wheat production and prevent livestock destocking in the most affected districts. . Target Values Indicator Name Core Unit of Measure Baseline YR1 End Target Frequency Methodology Data Collection Percentage change over the 2009-11 Percentage -39% -20% -20% Annual MAFI MAFI average national production of wheat Percentage change over the 2009-11 Percentage -61% -20% -20% Annual MAFI MAFI average national production of corn Percentage change over the 2009-11 Pigs - 34%, Pigs -31%, Pigs -31%, average number of pigs, chicken, and Percentage chickens - 19%, chicken -17% chicken -17% Annual MAFI MAFI animal registry cattle cattle -18% cattle -16% cattle -16% 22,000 out of Direct project beneficiaries (number), of X Number/percentage 0 na which at least Annual MAFI MAFI/AIPA which female (percentage) 15% female . Intermediate Results Indicators Target Values Indicator Name Core Unit of Measure Baseline YR1 End Target Frequency Methodology Data Collection 300,000 ha in Area planted with corn in 2013 in 31 31 districts selected districts in plots larger than 0.5 Percentage change 80 percent 80 percent Annual MAFI MAFI/AIPA (2009-11 ha average) 110,000 ha in Area planted with wheat in 2013 in 15 15 districts selected districts in plots larger than 1 Percentage change 80 percent 80 percent Annual MAFI MAFI/AIPA (2009-11 ha average) Share of small farmers of the total Percentage 0 70% 70% Annual MAFI MAFI/AIPA 33 project beneficiaries Amount (US$ based Amount of cash transfers 0 US$9 million US$9 million Semi-annual MAFI MAFI?AIPA on local currency) 830 (one at central level, Number of awareness workshops Number 0 31 in districts, 830 Semi-annual MAFI Project monitoring system/ACSA plus 798 at local level). Grievance mechanism established and Text 0 1 1 Semi-annual MAFI/ Project Monitoring System/ACSA working Days of training provided Number 0 35 35 Semi-annual MAFI/ Project Monitoring System/ACSA Number of broadcasting events Number 0 120 120 Semi-annual MAFI Project Monitoring System/ACSA Completion of the small scale corn Text 0 0 1 Annual MAFI Project Monitoring System/ACSA silage feasibility study 34 Annex 2: Results Framework and Monitoring Moldova – Agriculture Competitiveness Project (P118518) . . Project Development Objective Indicators Indicator Name Description (indicator definition etc.) The 2012 drought had the biggest impact on corn. The objective is to restore 80% of pre-drought level of Percentage change over the 2009-11 average national production of production of the most affected farmers to avoid the risk of destocking. Crop production will depend again wheat on weather during 2013. The second most affected crop in 2012 was wheat. The objective is to restore 80% pre-drought level of Percentage change over the 2009-11 average national production of production of the most affected farmers to avoid the risk of not having sufficient seeds for planting, animal corn destocking, and insufficient food for human consumption. Crop production will depend again on weather during 2013. Percentage change over the 2009-11 average number of pigs, chicken, The experience of the 2007 drought showed severe destocking of pigs, chickens, and to a lesser extent and cattle cattle. Targets where extrapolated from the 2007 experience (see economic analysis). Number of direct project beneficiaries, of which female The number of beneficiaries reached is an indicator that project will reach a large number of farmers, and not benefit only few larger farmers. Intermediate Results Indicators Indicator Name Description (indicator definition etc.) Arresting reduction of area planted with corn is the main project output. This indicator will compare the Area planted with corn in 2013 in 31 selected districts area planted by farmers larger than 1 ha in 2013 with the average for 2009-2011. Arresting reduction of area planted with wheat. This indicator will compare the area planted by farmers Area planted with wheat in 2013 in 15 selected districts larger than 1 ha in 2013 with the average for 2009-2011. Share of small farmers of the total project beneficiaries Kay indicator to track eventual elite capture. Amount of cash transfers A straightforward indicator on the implementation of the largest component Important input to achieve a change in farmers’ behavior (increased area planted with the objective of Number of awareness workshops collecting cash transfers). Grievance mechanism established and working Key mechanism to mitigate the risk of elite capture. Number of days of training provided A straightforward indicator on the implementation of training activities. Number of broadcasting events Important input for the awareness campaign. Completion of the small scale corn silage feasibility study Partial indicator. Results of the study, if positive, will need to be disseminated. 35 Annex 3: Summary of Estimated Project Costs MOLDOVA: Emergency Agriculture Support Project Project IDA % IDA cost Financing Financi US$ US$ ng Project Components million million 1. Cash Transfers to 9.00 9.00 100 Affected Farmers 2. Awareness and Training 0.35 0.35 100 3. Project Management 0.65 0.65 100 Total Baseline Costs 10.00 10.00 Physical contingencies 0.00 0.00 Price contingencies 0.00 0.00 Total Project Costs 10.00 10.00 Interest During Implementation Front-End Fees Total Financing Required 10.00 10.00 36 Annex 4: Operational Risk Assessment Framework (ORAF) MOLDOVA: Emergency Agriculture Support Project 1. Project Stakeholder Risks 1.1 Stakeholder Risk Rating Low Description: Risk Management: Political consideration could dominate the The project's targeting mechanism eliminates is based objective criteria which reduces the risk of political rationale for distribution of emergency funds influence in the process of distribution of cash to farmers. Additionally, the awareness campaign and the to areas/farmers that are not the most affected project's grievance mechanism bring further transparency and mitigation of this risk. by the 2012 drought. Resp: Both Stage: Both Recurrent: Due Frequency: Quarterly Status: In Progress Date: 2. Implementing Agency (IA) Risks (including Fiduciary Risks) 2.1 Capacity Rating Substantial Description: Risk Management: The need to disburse significant amounts of The project's Financial Management arrangements were designed to significantly reduce this type of risk funds in a short period of time may lead to along the entire cash transfer scheme. The use of the country's National Post Office and not the local delays and/or fund mismanagement. administration for delivery of cash is one such example, where risks of delays and mismanagement were significantly reduced. Additional measures include building of incremental capacity with AIPA to comply with financial management needs and carry out necessary monitoring and controls. Resp: Both Stage: Both Recurrent: Due Frequency: Quarterly Status: In Progress Date: 2.2 Governance Rating Substantial Description: Risk Management: The main counterparts to the project may Constant engagement with all stakeholders, including operational staff of MAFI such as Department and change as a result of political instability, Division Heads which are non-political appointees in project preparation and implementation. weakening project ownership and Resp: Both Stage: Both Recurrent: Due Frequency: Monthly Status: In Progress complicating communication with MAFI on Date: project implementation issues. 3. Project Risks 37 3.1 Design Rating Moderate Description: Risk Management: Higher than currently estimated demand for The project is designed based on OP8.0 which allows for speedier processing and retroactive financing. the project's cash transfers for corn could Resp: Both Stage: Both Recurrent: Due Frequency: Quarterly Status: In Progress result in the need to recalculate area (hectare) Date: payments thus causing delays in delivering much needed support to farmers. 3.2 Social and Environmental Rating Moderate Description: Risk Management: A massive awareness and training campaign is envisaged under the project to ensure inclusiveness for all Elite capture and other targeting errors. The potentially eligible beneficiaries. project environmental impacts are expected to be minor and associated with the crops Resp: Client Stage: Imple Recurrent: Due 01-Jul-2013 Frequency: Status: Not Yet Due cultivation. menta Date: tion Risk Management: Development of a grievance mechanism (through a trusted institution at the local level) that is communicated during the awareness campaign. Resp: Client Stage: Imple Recurrent: Due 01-Jul-2013 Frequency: Status: Not Yet Due menta Date: tion 3.3 Program and Donor Rating Description: Risk Management: Resp: Stage: Recurrent: Due Frequency: Status: Date: 3.4 Delivery Monitoring and Rating Moderate Sustainability Description: Risk Management: Testing the feasibility of a new corn drought management approach, i.e. increasing the use of corn 38 More dry weather in 2013-215 may again Resp: Client Stage: Prepa Recurrent: Due 30-Dec-2013 Frequency: Status: Not Yet Due reduce productivity of winter and spring crops ration Date: and delay recovery in the animal sub-sector. Risk Management: Animal diseases could negatively affect animal stocks and productivity. Climate adaptation in agriculture and managing animal health are a broad and long term agenda which is addressed under other projects such as the Disaster and Climate Risk Management Project and the Moldova Agricultural Competitiveness Project. Resp: Client Stage: Both Recurrent: Due Frequency: Monthly Status: In Progress Date: 4. Overall Risk Implementation Risk Rating: Substantial 39 Annex 5: Financial Management and Disbursement Arrangements MOLDOVA: Emergency Agriculture Support Project 1. The Consolidated Agricultural Project Management Unit (CAPMU) will be responsible for project management, including overall fiduciary responsibilities for the project. The Agency for Interventions and Payments in Agriculture (AIPA) will be responsible for the financial management of the execution of cash transfers to the affected farmers based on the lists approved by the Ministerial Committee. Existing financial arrangements and business processes in these two agencies have been positively assessed in terms of their reliability and trustworthiness. 2. CAPMU is subordinated to the Ministry of Agriculture and Food Industry. It is responsible for project management of externally funded projects, and is one of the country’s most experienced units assisting with the implementation of investments projects funded from external resources. Their performance on financial management side has always been assessed as satisfactory. The latest review was done in April 2012. 3. AIPA is a division of MAFI, and it is responsible for providing public financial support to farmers who invest in agricultural projects, monitoring fund distribution and evaluating the resulting impact. It is been modeled after similar payment agencies in the EU, and its establishment was supported through technical assistance provided by different donors, including the World Bank. Currently, AIPA has demonstrated capacity to serve up to 10 thousand beneficiaries annually and is about to start implementation of sub-project grant schemes under the Agricultural Competitiveness project. The AIPA’s business processes are straightforward, well-managed, with various checks and controls at every tier of verification chain. The functions are clearly divided between the agency’s departments (the so-called “four-eye approach�), and site inspections are conducted at each stage of application, as well as in the post-payment stage. The cash distribution component will rely extensively on AIPA’s existing controls framework, i.e. documentary and field controls, additional scrutiny, and post-payment inspections. AIPA’s inspection reports are very detailed and comprehensively document the findings and conclusions of the inspection exercise. AIPA has managed to fully automate its business processes and it is using an integrated information system. The system users have different levels of access depending on their job responsibilities. The interface is user friendly, and any application can be easily tracked through the system. The system is easily adjustable, if needed, to accommodate new requirements or criteria. The system is integrated with AIPA’s accounting software to allow better interoperability and data export and import. It is connected to other relevant governmental authorities (tax, registration, cadaster, etc.), that facilitates the review and verification process. 4. Given the emergency nature of the proposed project and the fact that the Agriculture Competitiveness Project financed by the World Bank is jointly administered by CAPMU and AIPA, the existing approach on financial reporting will be maintained. This would avoid any unnecessary adaptation to new conditions and ensure efficiency in the administration of both projects. 5. Both CAPMU and AIPA will open separate accounts through the treasury system, with access to funds under the components for which they are responsible for. In terms of financial reporting, AIPA will be responsible for reporting on the utilization of funds under Component 1 - Cash Transfers to Affected Farmers, while CAPMU will be responsible for reporting on the utilization of funds under the other two components (Training & Awareness, and Project 40 Management). AIPA will furnish its quarterly financial statements to CAPMU, reporting the actual amounts spent for cash transfers. The latter will consolidate the overall project financial information, including information from AIPA, into Interim Financial Reports (IFRs). The consolidated IFRs will be subject to annual external audits. From an accounting perspective, the consolidated IFRs will be prepared on a cash basis and would include: sources and uses of funds by category, by components and by financing source, if more than two, cumulatively and for the reporting period, together with variance analysis; the statement of the designated account, notes to financial statements, and the account reconciliation statements. The consolidated IFRs would show a clear breakdown of the project funds and expenditures pertaining to each agency (CAPMU and AIPA). AIPA will ensure the timely submission of its financial reports to CAPMU, i.e. within thirty days after the end of each calendar quarter, while CAPMU will ensure the consolidated quarterly reports are timely submitted to the World Bank, i.e. no later than 45 days after the end of each calendar quarter. For disbursement purposes, the IFRs will additionally include: cash forecasts for the next three months totally and separately for each agency, by project categories in the currency of the designated account; a summary statement of expenditures by categories and in the currency of the designated account; a Designated Account Reconciliation statement for each agency; and a copy of the bank statements. 6. CAPMU and AIPA current staff will manage all FM project-related activities in terms of their fiduciary responsibility for the components they directly relate to. The CAPMU staff consists of two people: financial management specialist and accountant. The FM specialist possesses necessary expertise and qualifications, joined the Unit in 2010 from the Court of Accounts where she worked as an auditor. She also holds international diploma in public accounting, and benefited of training on FM and disbursements in Bank-financed projects (last one taken in April 2012). 7. AIPA’s accounting division is staffed with 5 accountants, including chief-accountant. There is segregation of duties within the division, although each accountant is required to know the entire spectrum of duties specific to the job to allow smooth replacement if needed. The chief-accountant is rather experienced in both private and public sectors, has a very good knowledge of the public sector accounting, and applies IT solutions in accounting work to make it more efficient and transparent. The AIPA chief-accountant and one of her staff took training on FM and disbursement in the Bank-financed operations in April 2012. The project will support incremental costs related to additional FM consultants, if determined to be necessary during implementation. 8. The project budget and procurement activities agreed during the project preparation will serve for producing project annual budgets. The project budget will form the basis for allocating funds to project activities and for requesting funds for payments via the Treasury. AIPA will develop the budget for the cash transfer scheme they are responsible for, and then send it to CAPMU, which will consolidate the project budget information for reporting purposes. The execution of annual budgets will be monitored through interim reporting. 9. CAPMU keeps accounting records in automated software 1C, which allow for easy audit trail, and generates financial reports in accordance with statutory and donors’ requirements. The system backup is regularly done for safeguard purposes. 10. A Project Operational Manual will be elaborated, by adjusting the recently developed one for the Moldova Agriculture Competitiveness project. The latter covers all financial management and administrative procedures, including accounting and record-keeping, flow of funds, and 41 reporting procedures. The manual reflects the internal structure relevant to the project, administrative arrangements, internal control procedures, including procedures for authorization of expenditures, maintenance of records, safeguarding of assets, segregation of duties to avoid conflict of interest, regular reconciliation of bank account statements, Bank signing mandate and withdrawal applications signing mandate, regular reporting to ensure close monitoring of project activities, and complaints resolution mechanism. The adoption of the POM by the Recipient is listed as a condition of effectiveness. 11. As part of internal control procedures, CAPMU and AIPA would be required to: (a) close on a timely basis monthly project accounting books; (b) close on a timely basis yearly project accounting books; (c) check the accuracy of the IFRs inputs with the accounting records; (d) check the opening figures of the IFRs with the closing figures of the previous quarter; (e) check the IFRs figures for consistency between the various reports (Statement of Sources and Uses of Funds, Summary reports used as basis for withdrawals, Uses of Funds by Project Activities, Designated Account Statements, Physical Progress Reports, Procurement Reports and Contract Monitoring); (f) monthly Treasury and bank accounts statements reconciliation with project accounting records; (g) monthly WB disbursement records reconciliation with project accounting books, including SDR/USD reconciliation; (h) regular reconciliation of balances with Posta Moldovei and (i) inventory and fixed assets stock taking at least once per year and more often if needed, including periodical monitoring of assets purchased for beneficiaries on their existence and use. 12. As a fiduciary agent, CAPMU will be responsible for initiating selection of external auditor for conducting the annual audit of the project. The project financial audit would be performed on the standard Terms of Reference which would be agreed with the World Bank. The template of the audit ToRs have been provided to the implementing agencies and will be agreed during the negotiations. 13. The standard audit scope for this project will be extended and the auditors will be required to assess the adequacy and accuracy in cash transfers. The annual audited project financial statements together with the audit opinion and the Management letter would be submitted to the World Bank within six months after the end of the calendar year. 14. In accordance with "The World Bank Policy on Access to Information" dated July 1, 2010, which requires that the audited financial statements are made publically available, the project financial audit reports would be published within sixty days after submission of the audit report to the Bank on its external website. The reports would be published within the same period also on the Ministry of Agriculture and AIPA websites: www.maia.md and www.aipa.md. 15. In addition to project financial audits, regular operational reviews of the execution of cash transfers will be carried out by an independent consulting firm. These reviews will assess the efficiency and effectiveness of fund use, appropriateness of cash grant amounts and compliance of the affected farmers with the eligibility criteria. Their periodicity will be determined during the project implementation based on the frequency of cash transfers as approved by the World Bank. The consulting company in charge of the reviews will be competitively selected in accordance with Terms of Reference agreed in advance with the World Bank. 42 Disbursement 16. The project will have two disbursement categories: one for the project’s cash transfers and another – for financing of other project-related activities to be administered by CAPMU (Training & Awareness, and Project Management components). For disbursement purposes, CAPMU and AIPA will open two separate designated accounts in the State Treasury. The project will use a report based disbursement method. Each disbursement will be based on the project consolidated interim financial reports in the format agreed, and supported by two withdrawal applications prepared and sent separately by CAPMU and AIPA, in accordance with their cash forecast. The withdrawal application for the initial advance will be supported by the cash forecast report for the first six months of the project implementation. The withdrawal of further advances can be de-linked from the due date for submission of quarterly IFRs. This means that CAPMU and AIPA can request funds between the three months period. In such cases, the withdrawal application will be accompanied by the cash forecast, reconciliation of designated account and copies of bank statements. Advances will be disbursed provided that there are no overdue IFRs. The reconciliation (recovery process) of the expenditures will be carried out on quarterly basis in line with IFRs, therefore each IFR should be sent to the disbursement department together with the Withdrawal Application. The recovery withdrawal applications will be supported by full IFRs including in particular Summary Statement of Expenditures (part of IFRs) showing types of expenditures with applied disbursement percentage and expressed in the currency of the loan. Foreign currency amounts will be either paid directly to foreign suppliers or exchanged as needed in local currency, to cover eligible expenditures payments in local currency to suppliers, from the designated accounts into local currency transfer accounts also opened by the Treasury. The Ministry of Finance will give authorization to designated officials to withdraw funds from the loan account. The Designated accounts will be held in USD and the ceilings are established in the Disbursement Letter. Full documentation in support of project expenditures would be retained by CAPMU and AIPA staff for at least two years after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made. This information will be made available for review during supervision by the Bank staff and for annual audits, which will be required to specifically comment on the appropriateness of disbursements and the quality of the associated record-keeping. Disbursement of cash transfers 17. The Moldovan Government adopted through its Decision 766 of October 15, 2012 the procedures for how financial means (support from the EU) would be allocated to minimize the consequences of the drought. This regulation will be taken as a starting point in preparing the specific operating principles of the cash transfer scheme, to be included in the Project Operational Manual. A few modifications and additional measures to ensure effective and transparent funds distribution are still needed, and these are described in detail below. 18. The flow of funds to farmers will be executed through AIPA based on the lists provided by local authorities. In order to compile these lists, the local public administration will establish Special Commissions at the level of each community which would include the mayor, secretary, cadastral engineer, and the representative of the local farmer community. These commissions will collect and analyses the applications from the farmers. 19. One copy of the approved list of farmers will be consequently submitted to the territorial offices of AIPA, which would introduce necessary data into its system and would re-send those 43 lists for further scrutiny by the Ministerial Committee set up at MAFI. Between two verification levels of approved farmers, AIPA would apply pre-payment checks of information included in the farmer’s applications using its own available tools (electronic connection to Cadastral Register, fiscal data, etc.). In the case of payments for corn, the lists of eligible beneficiaries will be determined in April-May of 2013. To this end, disbursements and advances to the designated account for corn payments will only start when the lists of eligible beneficiaries has been approved by the Ministerial Committee in a manner satisfactory to the Bank. 20. Payments to the eligible beneficiaries will be made by AIPA only upon approval of lists of farmers by the respective Ministerial Committee. AIPA would execute payments directly to eligible farmers on their accounts, if available. 21. The Government’s regulation states the mechanism of payment execution for farmers who do not hold accounts to be through Posta Moldovei. This is the most cost-efficient and technically feasible option, as Posta Moldovei, which is operating on the market for almost 20 years, has large coverage in the country, especially in rural areas, and a large experience of distributing payments, including the retirement benefits to population from both urban and rural areas. This option would also avoid potential conflicts of interest, compared to a set up in which mayoralties would be involved in cash payments. An assessment carried out by the Bank team determined that Posta Moldovei has sufficient capacity and resources, including technological ones, to be involved in the distribution of cash transfers. The assessment focused on reviewing the arrangements related to internal controls, reporting between local offices and headquarters, internal audit, technological resources, security of local post offices established within the organization. Several field visits were conducted to observe the working conditions and staff qualification at local post offices in rural areas. The assessment concluded that the FM minimum requirements are met and the Bank may rely on business processes existing within Posta Moldovei for the project needs. 22. Thus, AIPA will enter into a contractual agreement with Posta Moldovei which would describe in detail the distribution and reporting requirements. CAPMU will assist AIPA in negotiating the contract provisions with Posta Moldovei. According to the initial estimations, the Post Office will charge around 0.8-1% of amount of funds executed through them as service charge. The signing and authorization of said agreement by AIPA and the Posta Moldovei constitute a condition of effectiveness. 23. Simultaneously, the execution of cash transfers will be monitored closely by the World Bank team alongside with annual audit and independent operational reviews / post- payment checks to be conducted by eligible consulting firm. AIPA will report on execution of cash transfers as part of interim IFRs. 44 Annex 6: Procurement Arrangements MOLDOVA: Emergency Agriculture Support Project 1. An assessment of the capacity of MAFI and CAPMU to implement procurement actions was carried out in December, 2012. The assessment reviewed the organizational structure for implementing the project and the interaction between the project staff responsible for procurement and the relevant units in the implementing agency. Both MAFI and CAPMU have extensive experience in implementing Bank-funded projects. CAPMU has more than 10 years of experience as a fiduciary agency. It is staffed with highly qualified professionals both in FM and procurement. Currently the agency employs a full-time Senior Procurement Officer and a full- time Procurement Specialist. Both specialists are regularly attending procurement training courses and workshops organized by the Bank in the region. 2. As part of the assessment, the overall project risk for procurement was rated “Low�. 3. Procurement Arrangements: Procurement for the project will be carried out in accordance with the World Bank “Guidelines: Procurement of Goods, Works, and Non- Consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrowers� published in January 2011 (Procurement Guidelines) and “Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits & Grants by World Bank Borrowers� published in January 2011 (Consultant Guidelines) and with the latest Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits. 4. The following activities are planned under each component: Component 1: Cash Transfers to Affected Farmers. Given that support will be provided to a large number of farmers (which can have as little as 1 ha for wheat and 0.5 ha for corn to be eligible for a payment), transfer of cash becomes an issue for those farmers that do not have a bank account. For those farmers that do have a bank account, it is planned that transfer the compensation directly to the accounts indicated by each farmer in his/her application for compensation. However, AIPA has no capacity to manage payments to farmers without accounts. The proposed solution is to make payments to such farmers through Posta Moldovei, using its network of branches and rural post offices based on payment orders authorized by AIPA. It is foreseen that only a relatively small portion of the amount allocated for this component will be administered by Posta Moldovei. The latter is a state-owned enterprise, created through the decision of the Ministry of Communications and Information of Moldova in January, 1993. Having considered the proposed suggestion to use the services of Posta Moldovei, the Bank agreed to Single-Source Selection in accordance with paragraph 1.13 (c) of the Consultant Guidelines whereby government-owned institutions may be eligible to be awarded contracts under Bank-funded projects if they provide services of unique and exceptional nature including because of the absence of a suitable private sector alternative, and their participation is critical to project implementation. Components 2 and 3: There is limited and only small to medium-value procurement involved in the implementation of the project. Component 2 will include a single-source contract to ACSA for awareness, training and a grievance mechanism, while Component 3 will cover other costs associated with project implementation, component coordination, monitoring and evaluation and 45 others. ACSA is a well-established nation-wide NGO network having local presence in more than one third of the municipalities in Moldova along with strong local capacity to provide advisory and training services. Their physical infrastructure comprises offices and equipment in all 34 districts of Moldova. The agency is well-known as a trustworthy source of information to both local farmers and local authorities and as such is well positioned to run an awareness campaign. Single-sourcing of ACSA for the awareness campaign and training presents a clear advantage over a competitive selection since it will lead to the selection of the same consulting firm. In addition, the emergency nature of the project makes timing extremely important. Affected farmers need to be aware of the details on the availability of project funding so that they will have an incentive to plant corn in April, 2013. Retroactive Financing: It is envisaged that the contract with ACSA under Component 2 will be subject to retroactive financing. 5. Procurement Plan: The Borrower developed a Procurement Plan which provides basis for the procurement methods. The plan will be agreed between the Borrower and the Bank at negotiations. Its final version will be available on Bank’s external website. The Procurement Plan will be updated on regular basis, as a minimum annually or as required, to reflect the actual project implementation needs. The Plan and all subsequent updates will be subject to Bank’s prior review. Once agreed, each version will be published as required by the Bank Guidelines. 6. Prior/Post Review: It is recommended that the procurement methods and prior review thresholds are set in accordance with the latest ECA Regional Thresholds which are available on the Bank’s external website. All Terms of References shall be subject to prior review. Routine procurement reviews and supervision will be conducted by the Procurement Specialist. In addition, one supervision visit is expected to take place every six months during which ex-post reviews will be conducted. Given the risk rating for procurement, the Bank recommends that at least 5 percent of the contracts subject to post-review are included in the review. Procurement documents will be kept readily available for Bank’s ex-post review during supervision missions or at any other point in time. A post-review report will be prepared, shared with the implementing agency and fiduciary agency and filed in the post-review system of the Bank. 46 Annex 7: Implementation and Monitoring Arrangements MOLDOVA: Emergency Agriculture Support Project 1. The Project will be implemented by the Ministry of Agriculture and Food Industry (MAFI). MAFI has extensive experience in successfully implementing World Bank projects (such as the on-going Agricultural Competitiveness project, the Rural Investment Service Program ACP (RISP I and RISP II), and the Avian Influenza project). An existing inter- ministerial Steering Committee, established in accordance with Government Decision 878 dated September 9, 1999 (as revised to include the relevant up-dates for this project), will perform overall supervisory and coordination functions for the project. Currently, the Steering Committee has representatives of MAFI, MOE, MOF, and the State Chancellery. The decision will be adjusted to include representatives of farmer organizations. In order to promote the development of country systems, the project’s cash delivery scheme will rely on AIPA 23 for disbursements, delivery of cash payments to beneficiaries, financial management and monitoring of the cash transfer program. For fiduciary support to the implementation of other project activities across all three components, an existing project management unit - CAPMU24, will be in charge of supporting financial management and procurement activities. The implementation of the second component will rely on the involvement of the country’s National Agency for Rural Development (ACSA). ACSA has been established in 2002 and has extensive experience in providing extension and advisory services to the country’s farmers. Its current network consists of more than 400 regional and local consultants, with technically well-equipped offices, that are able to play a pivotal role in the project’s proposes awareness and training activities, as well as its grievance mechanism. In addition to the institutions above, the project will rely heavily on local and rayon-level authorities which will play an important role in increasing awareness about the project’s cash transfer program, amassing initial information about planted areas and eligible beneficiaries and compiling formatted lists, and transmittal of this information for further processing to AIPA. 2. The implementation arrangements for Component 1, will rely on the principles set forth in the Government Decision 766 of October 15, 2012 (as amended by Government Decisions 820 and 978 of November 6, 2012 and December 22, 2012 respectively), which establishes the operating framework for the cash payment scheme funded with EU Budget support for winter wheat, and for which the project contributes additional funds. More specifically, local authorities will establish special commissions for receiving applications for cash transfers from farmers. These Special Commissions will have the following composition: the mayor of the locality (chairperson of the commission), the secretary of the local council (secretary of the commission), the cadaster engineer, and a delegate representative of the local farmer community. A Special Commission’s primary role will be to review a cash payment application and fill out a standardized form confirming the actuality of plantations. The form will be filled out on-site in the presence of the soliciting farmer, or an authorized representative. Finally, the Special Commission will consolidate information on individual applications and compile beneficiary lists. In case of declined applications, the solicitor will be informed in written, with an indication of the reasons, and a reference to the project’s grievance mechanism. 23 AIPA is institutionally subordinated to MAFI, and is modeled after payment agencies present in EU countries. It has received significant institutional and human capacity strengthening support under the RSIP II Project. 24 CAPMU was established in 1999 through Government Decision 878 and has more than ten years of experience in providing fiduciary support in the implementation of Bank-financed projects in the rural sector in Moldova. 47 3. The consolidated lists will be processed in two originals, each signed by all members of a Special Commission. One original will be kept in the files of the locality, while the second one will be forwarded (including an electronic copy), to the territorial offices of AIPA for further processing and forwarding to MAFI. The MAFI will set up a Ministerial Commission (to include representatives from MAFI itself, AIPA and farmer organizations) which will be responsible for verifying and authorizing cash payments to farmers. 4. Upon receipt of authorization from the Ministerial Commission, on the basis of an official , AIPA will execute payments to farmers either directly to their bank accounts, or by personal delivery of cash by Posta Moldovei for farmers that do not have a bank account. For latter purposes, AIPA and Posta Moldovei will enter into a service agreement which will provide for a detailed framework of collaboration, payment terms for services rendered, and specific standards expected from Posta Moldovei. 5. The implementation arrangements for Component 2, will rely on the sourcing of ACSA for the implementation of a national awareness campaign, the establishment of a grievance mechanism, and the propagation of a training program for improved animal feed practices. The implementation arrangements for Component 3 will rely on the collaboration between AIPA and CAPMU to ensure timely implementation and fiduciary compliance with Bank rules and procedures. 6. The project will be implemented based on a Project Operational Manual which will be cleared by the project’s Steering Committee and adopted by MAFI. The POM would include, inter alia: (i) the project’s overall operating, fiduciary and decision-making procedures for all three components; (ii) a specific chapter on the operation of the cash payment scheme under Component 1, including operating procedures, institutional mandates, service standards, and grievance mechanism; and (ii) results monitoring arrangements. Only the Steering Committee will have the authority to amend the two documents above, provided such amendments are acceptable to the World Bank. 7. The project’s monitoring and evaluation activities would be focused on several types of data specific to activities under each component in accordance with the results framework described in Annex 2. The responsibility for monitoring and evaluating results/outcomes will rest with AIPA and ACSA, for Components 1 and 2 respectively. The two institutions possess the necessary technical means and system platform for collection, processing and maintenance of monitoring data, which will be adjusted with assistance from the Bank team, to account for the specific character of the cash transfer program in the case of AIPA, and for the grievance mechanism in the case of ACSA. For the cash-transfer program AIPA will perform field visits and post-acceptance checks to ensure that local authorities have correctly applied eligibility criteria to the compilation of beneficiary lists. AIPA will also carry out visual crop assessment on a needs basis. CAPMU will be in charge of supporting MAFI in the production of semi-annual consolidated results monitoring reports for review by the Bank. 48 Annex 8: Project Preparation and Appraisal Team Members MOLDOVA: Emergency Agriculture Support Project Name Title Unit Anatol Gobjila Sr. Operations Officer, TTL ECSAR Maurizio Guadagni Sr. Rural Dev. Specialist ECSAR Armen Mehrabyan Agricultural Consultant Asa Giertz Economist ECSAR Arcadie Capcelea Sr. Environmental Specialist ECSEN Klavdiya Maksymenko Social Development ECCSO Specialist Oxana Druta Financial Management ECSO3 Analyst Knut Leipold Senior Procurement ECSO2 Specialist Sophia Georgieva Consultant ECSSO Elena Corman Procurement Analyst ECSO2 Elena Segura Sr. Counsel LEGLE 49 Annex 9: Safeguards Policy Issues MOLDOVA: Emergency Agriculture Support Project 1. Project activities are not expected to cause any significant environmental and social impacts. The potential minor adverse environmental impacts associated with crops cultivations will be easily mitigated by complying with the best agricultural practices and technologies environmental requirements. Based on that the project not triggers any WB safeguard policies and its environmental category is C. For such project no further EA activities are required. 50 Annex 10: Economic and Financial Analysis MOLDOVA: Emergency Agriculture Support Project Summary 1. A project economic and financial analysis has been carried out. The analysis compared the total cost of the project with the benefits expected from corn and wheat production increases. The analysis assumed that such increased production will generate two benefits: (i) increased availability of food for human (10 percent of corn and 50 percent of wheat); and (ii) the remaining 90 percent of corn and 50 percent of wheat would be consumed as fodder by animals, thus contributing to reduce the incidence of destocking (i.e. number of animals which would be slaughtered in addition to regular trends due to lack of feed, Figure 6). The benefits for the livestock sector are expected to be multifold: (i) better fed animals would produce more meat, milk, or eggs; (ii) farm gate prices would be less depressed because fewer producers will be forced to slaughter their animals all at the same time; and (iii) the need to import expensive feed would be avoided. 2. The resulting Internal Rate of Return (IRR) is 30% and the Net Present value (NPV) is US$940,981. Sector Background 3. In value, Moldovan agricultural production has remained fairly steady over the past decade and even seen a slight increase. The main interruption in the trend was caused by the 2007 drought (Figure 3). Figure 3. Moldova – Gross Production Value (constant 2004-06 million US$) Source: FAO STAT, Jan 2013 4. Cereal and livestock combined constitute 57 percent of gross agricultural value (Figure 4. Moldova – Cereal and livestock as share of gross agricultural product, 2010-11). Although Moldova’s traditional cuisine includes the maize dish mamaliga, maize is primarily grown for fodder. While Moldova’s annual food consumption of wheat is around 350,000 tons, only about 51 half of domestic production is food wheat (due to quality) and some 45,000-67,000 tons of food wheat is imported annually. 25 Figure 4. Moldova – Cereal and livestock as share of gross agricultural product, 2010-11 Source: FAO STAT, Jan 2013 5. On the basis of the 2007 experience, the impact of the drought on the livestock sector was assumed to affect three sub-sectors: pigs, chicken, and cattle in order of reducing impact. The number of cattle in Moldova has seen a downward trend over the past decade, in part due to increased productivity per animal. Pigs, on the other hand, has seen a stable upwards trend in the past decade, but was significantly affected by the 2007 drought. The number of animals in the country is available in Figure 5 below. Although the number of sheep is high, they were not significantly affected during the 2007 drought (Figure 1) 6. A sub-sector that has seen a significant production increase over the past decade is chicken production, from some 17.4 million in 2005 to 34 million in 2011 26 (a 95 percent increase). Figure 5. Moldova – Livestock (average number of live animals, 2010-11) 25 UN Rapid Vulnerability Assessment (2012) 26 2010-11 average was 28 million chickens 52 Main Assumptions 7. The economic and financial analysis assumes that the project increased corn and wheat production will generate two benefits: (i) increased availability of food for human (10 percent of corn and 50 percent of wheat); and (ii) the remaining 90 percent of corn and 50 percent of wheat would be consumed as fodder by animals, thus contributing to reduce the incidence of destocking (i.e. number of animals which would be slaughtered in addition to regular trends due to lack of feed, Figure 6). The benefits for the livestock sector are expected to be multifold: (i) better fed animals would produce more meat, milk, or eggs; (ii) farm gate prices would be less depressed because fewer producers will be forced to slaughter their animals all at the same time; and (iii) the need to import expensive feed would be avoided. 8. The assumptions on destocking were based on the 2007 drought, since that drought was comparable to the one in 2012. The following ratios were used to convert the impact on destocking of the 2007 drought to estimate the impact of the 2012 drought: • Corn yield losses in 2012 were 13 percent less acute than in 2007 (corn production losses: 70 percent in 2007 and 61 percent in 2012); and • Wheat yield losses in 2012 were 34 percent less acute than in 2007 (44 percent losses in 2007 and 29 percent in 2012). 9. The impact of the 2007 drought had an effect that lasted for 3-4 years. The same destocking was applied to 2010-2011 average production data, after adjusting it for the different intensity according to the factors in the two bullets above. The impact of the 2007 drought, as well as the assumed impact of the 2012 drought, on cattle, pigs, and chicken stocks is compared with the trend for the past decade in Figure 6 below. Sensitivity Analysis 10. A sensitivity analysis has been carried out. It showed how results are sensitive to assumptions on expected benefits. Overall, the Project is expected to yield benefits for 4 years, with full impact during the first two years and declining impacts over year 3 and 4. If assumptions on benefits are reduced by 10 percent—Low Case Scenario—then the IRR drops from 30 percent to 4 percent. Similarly, if assumptions on benefits are increased by 10 percent— High Case Scenario—then the IRR increases to 67 percent (Table 5). Because of this, assumptions of benefits project targets have been kept as conservative, as graphically visible in Figure 6. 53 Table 5. Project Sensitivity Analysis Scenarios Baseline Low Case High Case IRR 30% 4% 67% NPV $940,981 -$318,732 $2,125,638 Human Consumption 3.0% 2.7% 3.3% of Wheat and Corn Cattle meat (ton) 5.0% 4.5% 5.5% Chicken meat (ton) 8.0% 7.2% 8.8% Cow milk, whole, 6.0% 5.4% 6.6% fresh (ton) Hen eggs, in shell 8.0% 7.2% 8.8% (ton) Pig meat (ton) 8.0% 7.2% 8.8% 54 Figure 6. Moldova – Estimated Impact of the 2012 Drought on Livestock With and Without Project (2001-2016 trend-lines extended to 2016) 2007 drought destocking Cattle 450,000 400,000 W/o project 350,000 With project 300,000 250,000 200,000 150,000 2007 drought destocking 100,000 2012 expected 50,000 destocking - 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Pigs 600,000 500,000 400,000 300,000 200,000 2007 drought 2012 expected 100,000 destocking destocking - 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Chicken ('000) 50,000 40,000 30,000 20,000 10,000 2007 drought 2012 expected destocking destocking - 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 55 Other assumptions 11. The discount rate has been set assumed at 10 percent. Due to limited price information, official farm gate prices (2010-2011 averages) from the National Bureau of Statistics have been used, adjusted for inflation. With the exchange rate of 0.08516 lei/US$, the following prices were used (US$ per ton): i. cattle meat: 1,503 ii. pig meat: 2,302 iii. chicken meat: 1,813 iv. fresh whole milk: 355 v. eggs: 1,358 12. Crop budgets have been calculated to estimate the impacts of the project on corn and wheat produced for human consumption. As mentioned above, approximately 10 percent of corn and 50 percent of wheat yields is used for human consumption. Table 6. Corn and Wheat Crop Budget Production Gross Net Project Net Revenue in Net Revenue in cost revenue Revenue Area project area project area, (Lei/Ha) (Lei/Ha) (Lei/Ha) (ha) (million Lei) (million USD) Corn 3,500 7,222 3,722 322,129 1,199 98 Wheat 2,500 3,747 1,247 113,854 142 12 56 Annex 11: Documents in Project Files MOLDOVA: Emergency Agriculture Support Project 1. Moldova CPS 2. Moldova Agriculture Competitiveness PAD 3. Moldova Agriculture Competitiveness POM 4. Government of Moldova Decision # 766 of October 15, 2012 5. Moldova Disaster and Climate Risk Management PAD 57 Annex 12: Statement of Loans and Credits MOLDOVA: Emergency Agriculture Support Project Operations Portfolio (IBRD/IDA and Grants) As Of Date 1/4/2013 Closed Projects 37 IBRD/IDA * Total Disbursed (Active) 137.77 of which has been repaid 0.00 Total Disbursed (Closed) 239.56 of which has been repaid 180.72 Total Disbursed (Active + Close 377.33 of which has been repaid 180.72 Total Undisbursed (Active) 74.65 Total Undisbursed (Closed) 7.50 Total Undisbursed (Active + Clo 82.15 Active Projects Difference Between Last PSR Expected and Actual Supervision Rating Original Amount in US$ Millions Disbursements a/ Development Implementatio Frm Project ID Project Name Fiscal Year IBRD IDA GRANT Cancel. Undisb. Orig. Objectives n Progress Rev'd P118518 AG COMP # # 2012 18 17.68 0.30 P127125 AGRICULTURE COMPETITIVENESS PROJ. (GEF) # # 2012 4.44 4.29 0.35 P115634 DISASTER & CLIMATE RISK MGT S MS 2011 10 7.44 2.72 P095250 HEALTH SERVICES AND SOCIAL ASSISTANCE MS S 2007 27.2 7.33 -3.27 -3.27 P089124 MD Competitiveness Enhancement S S 2006 33.8 2.06 -22.44 2.39 P121231 MOLDOVA eTRANSFORMATION S MS 2011 20 16.12 4.29 P107612 NATIONAL WATER SUPPLY & SANITATION MU MU 2008 14 3.89 4.60 1.60 P090340 QUAL EDUC IN RUR AREAS OF MD MU S 2006 11 0.78 -1.41 0.00 P079314 SIF 2 MS S 2004 45 0.00 -25.36 -0.89 P120913 Strengthen SSN - Results S S 2011 37 19.35 -2.16 Overall Result 216 4.44 78.93 -42.40 -0.17 IFC for Moldova Moldova Committed and Disbursed Outstanding Investment Portfolio As of 11/30/2012 (In USD Millions) Committed Disbursed Outstanding **Quasi Partici **Quasi Partici FY Approval Company Loan Equity Equity *GT/RM pant Loan Equity Equity *GT/RM pant 2008 Bostavan 0 0.87 0 0 0 0 0.87 0 0 0 2011 Chisinau 10 0 0 0 0 5 0 0 0 0 0 Energo continent 0 0 3 0 0 0 0 0 0 0 2011 Eximbank moldova 26 0 0 0 0 26 0 0 0 0 2012 Gc prim 3 0 7 0 0 3 0 7 0 0 2010 Maib 12.86 0 0 0 0 12.86 0 0 0 0 1999/00/01 Orange moldova 0 0 1.62 0 0 0 0 1.62 0 0 2009 Pc bank moldova 2.29 0 0 0 0 2.29 0 0 0 0 2013 Transoil 30 0 0 0 20 15 0 0 0 0 2010 Uf moldova 13.62 0 0 0 0 13.62 0 0 0 0 Total Portfolio: 97.77 0.87 11.62 0 20 77.77 0.87 8.62 0 0 * Denotes Guarantee and Risk Management Products. ** Quasi Equity includes both loan and equity types. 58 Annex 13: Country at a Glance MOLDOVA: Emergency Agriculture Support Project 59 60 IBRD 33448R 27°E 28°E 29°E 30°E Dnes tr To Vinnytsya UKRA INE To Chernivtsi Moghiliov- To Vinnytsya Ocnita Podolski Briceni MOLDOVA Donduseni B To Chernivtsi Edinet Soroca e Drochia s 48°N Camenca 48°N Rîscani s Floresti Nist ru a Costesti Soldanesti ˘ r Glodeni Balti Rîbnita Rezina Balatina a Pr Sîngerei ut To Voznesens'k r Falesti ˘ Telenesti 0 10 20 30 40 Kilometers a Chiperceni b Orhei 0 10 20 30 Miles RO MAN I A Sculeni Dubasari ˘ TRANSNISTRIA i To Pascani Mt. Balanesti Calarasi ˘˘ Criuleni (430 m) a Ungheni Straseni ˘ Grigoriopol Nisporeni ˘ Stauceni To Zhmerynka 47°N ˘ CHISINAU 47°N ˘ Lapusna Ialoveni Anenii Noi Tiraspol Hîncesti Bender Leuseni (Tighina) Slobozia ˘ Cainari Causeni ˘ To Odesa Plain Cimislia c ˘N Stefan-Voda ist To Birlad ea ru g Leova Bu This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Comrat Basarabeasca Group, any judgment on the legal status of any territory, or any To Birlad endorsement or acceptance of such boundaries. Cantemir 27°E ˘ ˘ GAGAUZIA Ceadîr- To Artsyz UKRA INE Lunga MO LDO VA 46°N 46°N Prut SELECTED CITIES AND TOWNS Cahul Taraclia AUTONOMOUS TERRITORIAL UNIT CAPITALS ˘ ˘ GAGAUZIA RAIONS OR MUNICIPALITIES CAPITALS* ˘ Vulcanesti NATIONAL CAPITAL RIVERS MAIN ROADS RAILROADS To Imayil B l ack AUTONOMOUS TERRITORIAL UNIT BOUNDARIES To Bucharest Sea and Constanta RAIONS OR MUNICIPALITIES BOUNDARIES INTERNATIONAL BOUNDARIES *Names of the raions or municipalities are identical to their capitals. 28°E 29°E 30°E MAY 2007 The original had problem with text extraction. pdftotext Unable to extract text.