The World Bank Cambodia Agricultural Sector Diversification Project (P163264) REPORT NO.: RES45569 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF CAMBODIA AGRICULTURAL SECTOR DIVERSIFICATION PROJECT APPROVED ON JANUARY 31, 2019 TO THE KINGDOM OF CAMBODIA AGRICULTURE AND FOOD EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Mariam J. Sherman Regional Director: Benoit Bosquet Practice Manager/Manager: Dina Umali-Deininger Task Team Leader(s): Mudita Chamroeun, Sandra Broka The World Bank Cambodia Agricultural Sector Diversification Project (P163264) ABBREVIATIONS AND ACRONYMS CASDP Cambodia Agricultural Sector Diversification Project CERC Contingent Emergency Response Component DA Designated Account EAP Emergency Action Plan ESMF Environmental and Social Management Framework IPPF Indigenous People Planning Framework MAFF Ministry of Agriculture, Forestry and Fisheries MEF Ministry of Economy and Finance MoWRAM Ministry of Water Resources and Meteorology POM Project Operation Manual RGC Royal Government of Cambodia RPF Resettlement Policies Framework The World Bank Cambodia Agricultural Sector Diversification Project (P163264) BASIC DATA Product Information Project ID Financing Instrument P163264 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 31-Jan-2019 31-Jan-2025 Organizations Borrower Responsible Agency Ministry of Agriculture, Forestry and Fisheries (MAFF),Ministry of Economy and Finance (MEF),Ministry Kingdom of Cambodia of Rural Development (MRD),Ministry of Water Resources and Meteorology (MoWRAM) Project Development Objective (PDO) Original PDO The proposed Project Development Objectives are to facilitate the development of diversified agriculture value chains in selected geographical areas in Cambodia, and to provide immediate and effective response in case of an eligible crisis or emergency. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-63660 31-Jan-2019 03-Apr-2019 05-Jun-2019 31-Jan-2025 91.67 11.00 82.84 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Cambodia Agricultural Sector Diversification Project (P163264) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. The Restructuring Paper seeks the approval for a Level Two restructuring of the Cambodia Agricultural Sector Diversification Project (CASDP) involving: (i) an amendment of the Results Framework; (ii) a reallocation of a portion of the Credit from Category (2) to Category (3) of the withdrawal table in Section III. A of Schedule 2 to the Financing Agreement, thereby providing US$10.2 million equivalent to the Contingent Emergency Response Component (CERC) to fund COVID-19 responses activities; and (iii) the revision of the disbursement arrangements from fixed Designated Account (DA) ceiling to variable Designated Account ceiling for the Ministry of Agriculture, Forestry and Fisheries (MAFF) and the Ministry of Water Resources and Meteorology (MoWRAM) to respond to the funding needs for CERC implementation. This is the first project restructuring of the CASDP. 2. Project Summary. The project development objective of the Cambodia Agricultural Sector Diversification Project (CASDP) is to facilitate the development of diversified agriculture value chains in selected geographical areas in Cambodia, and to provide immediate and effective response in case of an eligible crisis or emergency. The project has five components: (a) Enabling Agriculture Diversification, to provide institutional, technical, and financing support for the development of diversified and competitive agricultural value chains, through which Producer Organizations (POs) and their members have access to rewarding domestic and international markets, and Small and Medium Agribusiness (SMAs) such as aggregators, processors, input suppliers, distributors, and wholesalers have access to better quality raw materials and meet the quality standards required in products markets; (b) Supporting Public Infrastructure to fund provision of demand-driven, improved infrastructure such as rural roads and higher-order irrigation infrastructure for which private sector services are not available or accessible; (c) Improving Agriculture Information Systems and Quality Control Management to finance activities to strengthen data analysis capacities, and implementation and enforcement of regulatory delivery systems within the public sector; (d) Project Management, Coordination, and Monitoring and Evaluation to fund overall project management activities including hired staff and technical assistants to assist the MAFF in managing project implementation in coordination with the technical Working Group on Agriculture and Water (TWG- AW) and with other relevant projects, monitoring and evaluation (M&E), and capacity building of the MAFF and other key stakeholders; and (e) Contingent Emergency Response, was designed to allow for rapid reallocation of the Credit proceeds in the event of a disaster or crisis that has, or is likely to imminently cause, a major adverse economic and/or social impact. This component may be triggered when the Government of Cambodia (RGC) declares an emergency, and provides a statement of fact justifying the request for the activation of the use of emergency funding. 3. Background. The CASDP is funded through an IDA Credit of SDR 65.50 million (US$91.67 million equivalent), approved on January 31, 2019. The Financing Agreement became effective on June 5, 2019. The overall project implementation progress has been rated moderately satisfactory. While the first year’s implementation of the project has experienced delays, key project staffing needs, including consultants, are now in place. It is expected, following findings of the last Implementation Support Mission, that a scaled-up level of activity implementation will be reached by mid-2021. The restructuring of the project is requested following an activation of the CERC approved by the World Bank, on October 9, 2020. 4. Implementation Status. The overall progress both for achievement of the Project Development Objectives (PDO) and Implementation Progress (IP) is rated Moderately Satisfactory (MS). The government’s teams successfully held the launch workshop for the CERC on January 12, 2021, which featured active participations from relevant stakeholders. However, the implementation of the main project has been delayed amidst the COVID-19 environment. The delay pertains notably to the hiring of the Technical Service Providers (TSPs) who provide critical technical assistance and facilitation The World Bank Cambodia Agricultural Sector Diversification Project (P163264) roles to producer organizations and Small and Medium Agribusinesses (SMAs). This has resulted in a significant delay in preparation of diversification business proposals (BPr) and diversification business plans (BPl) by producer organizations and SMAs. Since the project’s infrastructure activities such as road and water infrastructure improvement activities are linked to the specific geographical sites where BPr and BPl will be implemented, their execution has been delayed as well. It is expected that project’s implementation status will markedly improve during this calendar year, triggered by the expected approval and financing of the first batch of Business Plans submitted by project’s target beneficiaries (producer organizations and SMAs) by mid-2021. 5. Project Disbursement. Disbursements totaled US$11.00 million (12.1 percent) as of February 22, 2021. It is expected that project expenditures would reach US$20 million by mid-2021, to the extent that projected expenditures of about US$9 million provided in the 2021 Annual Work Plan and Budget (AWPB) for the first semester of 2021 materialize. Therefore, cumulative disbursements by 30 June 2021 would reach around US$20 million, sensibly above the projected expenditures of US$13.27 set forth in the Project Appraisal Document (PAD) by 30 June 2021. B. Rationale for Restructuring 6. On March 11, 2020, the World Health Organization (WHO) declared the novel coronavirus (COVID-19) outbreak a global pandemic. In Cambodia, a rapid assessment carried out by FAO, the MAFF and the CARD, suggests that amid the pandemic, more than 100,000 Cambodian migrants returned to Cambodia by mid-July 2, 2020 and that more returning migrants were expected. At the same time, 200 garment and footwear factories have filed for operational suspension since early 2020, affecting about 200,000 workers. In June 2020, the CASDP project conducted field observations in the 13 provinces and municipalities covered by the project. These showed that the following categories of people have been impacted by the COVID-19 pandemic: 1,353 laid-off workers including 743 females; 26,919 migrant workers including 11,313 females; and, 307,824 people classified as IDPoor 1 and of IDPoor 2 including 116,837 females. 7. To respond to the immediate needs arising from the impact of COVID-19 on food security, nutrition and local economic development, the RGC requested the World Bank to trigger the activation of the Contingency Emergency Response Component (CERC) of the CASDP. Activities to be funded under the CERC will focus on the promotion of short cycle agricultural production for the purposes of ensuring access to food by the targeted rural households as well as to generate marketable surpluses to restore household incomes. The CERC will finance: (i) the provision of agricultural inputs and agrotechnical advice to promote production of high value crops and livestock products with high nutrition content, including vegetables, poultry, and aquaculture; (ii) rehabilitation/cleaning of agriculture tube wells and ponds to ensure adequate access to water for beneficiary households who receive the agricultural inputs. The selection criteria for the beneficiary households include: holding IDPoor status (IDPoor 1 and 2); ability to meet home consumption needs and to supply local markets with marketable surpluses; financial sustainability of production activities; activities not requiring much land; and availability of relevant agricultural support services to farmers, from pubic and/or private providers. 8. Following the CERC activation, this project restructuring is being undertaken to: (a) Revise the Results Framework (RF) to add nine CERC intermediate indicators; (b) Reallocate a portion of the Credit from Category (2) to Category (3) of the withdrawal table in Section III. A of Schedule 2 to the Financing Agreement; and (c) Revise disbursement arrangements from fixed DA ceiling to variable DA ceiling for MAFF and MoWRAM to respond to the funding needs for CERC implementation. The World Bank Cambodia Agricultural Sector Diversification Project (P163264) II. DESCRIPTION OF PROPOSED CHANGES 9. The Proposed changes to the CASDP implementation arrangements include: (a) Results Framework. The following CERC’s indicators have been added to the overall CASDP’s Results Framework and reflected in the updated POM Table 1. Changes in the Result Framework CERC Indicators added to the Result Framework Baseline End Target Number of beneficiary households who received net houses, horticulture inputs, and TA 0 3,900 Number of beneficiary households who received horticulture inputs (seedlings, fertilizers, net, 0 6,240 TA) Number of beneficiary households received chicken/duck pen poultry inputs (chick/duck, 0 3,640 vaccines, feeds, net, medicines, disinfectant, TA) Number of beneficiary households raising catfish and frogs 0 2,700 Quantity two cycles of chicken/duck produced (ton) 0 500 Quantity of vegetable produced per year (ton) 0 4,680 Quantity of catfish and frogs produced two cycles of plastic pond (ton) 0 900 Number of ponds rehabilitated for beneficiary households 0 100 Number of tube wells for beneficiary households 0 910 Total number of beneficiaries including at least 40 percent females (HH) 16,480 (b) Emergency Action Plan (EAP). The EAP lists short term interventions to support the COVID-19 recovery in agriculture. The development objective of the CERC is to enhance the resilience of targeted vulnerable rural populations through improved food security, livelihood improvement, and employment. Based on the results of the rapid assessment of COVID-19 outbreak on agriculture and food security in Cambodia, the proposed production activities of the CERC focus on short cycle productions covering horticulture, poultry, and aquaculture. The EAP will provide production inputs (seeds, poultry and fishes) and relevant agricultural support services, as a means to enhance food security and financial sustainability of targeted and vulnerable households. The details of activities to be financed under the CERC are included in the EAP. (c) Institutional Arrangements. The implementation arrangements of the CERC follow the existing structure of the CASDP project which includes a Steering Committee, and National and Provincial entities. The Ministry of Agriculture, Forestry and Fisheries (MAFF) is the Executing Agency (MAFF/EA) with overall responsibility for the achievement of the CERC’s objectives. CERC’s activities will be implemented by technical entities at national and provincial levels. These include: (i) MAFF, for agriculture-related activities; and, (ii) the Ministry of Water Resources and Meteorology (MoWRAM), for tube and ponds rehabilitation activities. Procurement, Financial management and disbursement, Monitoring & evaluation and Environmental and social safeguard compliance will be carried out by MAFF and MoWRAM, for their respective activities. (d) Financial Management. The CASDP’s overall FM performance is satisfactory. Adequate FM staff and contracted FM Consultants and accounting system are in place. As of 4 March 2021, there are no overdue audit reports and Interim unaudited Financial Reports (IFRs). The disbursement and financial management under the CERC will follow guidelines in the approved CERC manual as well as FM policies and procedures in POM. MAFF and MoWRAM are responsible for ensuring that the financial management and disbursement The World Bank Cambodia Agricultural Sector Diversification Project (P163264) policies and procedures governing the project are applied to the management of the financial resources mobilized through the CERC in support of the identified emergency activities. (e) DA and External Auditing. The existing DA of the CERC’s implementation agencies are used to receive funds allocated for Emergency Expenditures (as defined in the Financing Agreement) under Disbursement Category (3). The financial reporting and auditing of the CERC will follow the arrangement of the CASDP project. The funding advance for CERC’s activities is based on the project’s needs and subject to the World Bank’s approval. The documentation of expenditures will be on the basis of the Statement of Expenditures on a quarterly basis. (f) Revised Withdrawal of the Proceeds of the Financing. Category The Original Reallocation Revised Amount Percentage of Expenditures to Allocation (expressed in SDR) of the Financing be Financed (expressed in SDR) Allocated (inclusive of Taxes) (expressed in SDR) (1) Goods, works, non-consulting 35,744,000 0 35,744,000 For works, 100% of the services, consulting services, Financing’s agreed share of the Training and Operating Costs cost specified in the AWPB and under other parts of the Project 100% for other expenditures (2) Matching Grants and Sub- 29,756,000 (7,200,000) 22,556,000 100% of amount disbursed loans under Part 1.2 (i) and (ii) of the Project (3) Emergency Expenditures 0 7,200,000 7,200,000 100% under Part 5 of the Project TOTAL AMOUNT 65,500,000 0 65,500,000 (g) Safeguards. All activities financed through the CERC are subject to World Bank’s safeguards policies. The CERC follows the existing Environmental and Social Management Framework (ESMF), the Resettlement Policies Framework (RPF) and the Indigenous People Planning Framework (IPPF) for the CASDP project. An addendum to the CASDP’s ESMF was prepared by MAFF and cleared by the World Bank’s Regional Safeguards Advisor and disclosed in the MAFF’s website on October 9, 2020. The ESMF Addendum provides guidance on the required due diligence steps to be undertaken by the implementing agency during the implementation of CERC activities in line with the World Bank, the Ministry of Health (MOH) and the WHO guidelines for managing risks of COVID-19. The addendum includes a checklist of environmental and social impacts, requirement measures, eligibility for benefits, indigenous peoples’ identification, preparation of safeguards instruments, reporting and monitoring. Land acquisition leading to involuntary resettlement and/or restrictions of access to resources and livelihoods is not anticipated. Any grievances and disputes related to the implementation of the CERC can be submitted through the existing GRM for the CASDP. The safeguards reporting and monitoring as well as incidents/accidents reporting for CERC activities will follow the same mechanism defined in the CASDP’s ESMF, RPF and IPPF. (h) Monitoring and Evaluation. The monitoring of results indicators and report on the overall progress will be carried out as part of the CASDP ISM, and will be reflected in the AM and ISR. Monitoring and evaluation of CERC activities will be done by the MAFF, deploying their local field office staff in the communities. The MAFF The World Bank Cambodia Agricultural Sector Diversification Project (P163264) staff will be present when the beneficiaries receive the inputs, materials and/or completed works, to ensure acceptable quality. The MAFF’s local offices will provide to the MAFF HQ information on the implementation progress in the field. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ The World Bank Cambodia Agricultural Sector Diversification Project (P163264) IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Component 1: Enabling Component 1: Enabling 48.72 Revised 38.52 Agriculture Diversification Agriculture Diversification Component 2: Supporting Public Component 2: Supporting 29.33 No Change 29.33 Infrastructure Public Infrastructure Component 3: Improving Component 3: Improving Agriculture Information Agriculture Information Systems 13.83 No Change 13.83 Systems and Quality Control and Quality Control Management Management Component 4: Project Component 4: Project Management, Coordination, 9.79 No Change Management, Coordination, 9.79 Monitoring & Evaluation Monitoring & Evaluation Component 5: Contingent Component 5: Contingent 0.00 Revised 10.20 Emergency Response Emergency Response TOTAL 101.67 101.67 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-63660-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: GDS,WORKS,NON-CS,CS,TR*OC 35,744,000.00 1,543,137.24 35,744,000.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: MATCHING GR&SUB-LOANS PT 1.2(i)(ii) 22,556,000.00 0.00 22,556,000.00 100.00 100.00 The World Bank Cambodia Agricultural Sector Diversification Project (P163264) iLap Category Sequence No: 3 Current Expenditure Category: EMERGENCY EXPENDITURES PT. 5 7,200,000.00 0.00 7,200,000.00 100.00 100.00 Total 65,500,000.00 1,543,137.24 65,500,000.00 . The World Bank Cambodia Agricultural Sector Diversification Project (P163264) . Results framework COUNTRY: Cambodia Cambodia Agricultural Sector Diversification Project Project Development Objectives(s) The proposed Project Development Objectives are to facilitate the development of diversified agriculture value chains in selected geographical areas in Cambodia, and to provide immediate and effective response in case of an eligible crisis or emergency. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 Increased revenues/profitability and diversified agriculture production Increase in the value of gross sales at 0.00 5.00 15.00 30.00 benefitting farms (Percentage) Increase in the value of gross sales at benefitting female owned farms 0.00 5.00 15.00 30.00 (Percentage) Increased in the volume of gross sale of 0.00 5.00 15.00 30.00 benefitting farms (Percentage) Increased in the volume of gross sales of benefitting female owned farms 0.00 5.00 15.00 30.00 (Percentage) Increase in the value of gross sales of 0.00 5.00 15.00 30.00 benefitting agribusinesses (Percentage) Increase in the volume and value of gross sales of benefiting female 0.00 5.00 15.00 30.00 owned agribusinesses (Percentage) Share of non-rice production area of 0.00 20.00 45.00 65.00 participating farmers (Percentage) The World Bank Cambodia Agricultural Sector Diversification Project (P163264) PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 Component 1: Enabling Agriculture Diversification Number of diversification proposals submitted and 0.00 50.00 100.00 150.00 150.00 150.00 evaluated (Number) Number of business plans under implementation 0.00 20.00 70.00 120.00 200.00 200.00 (Number) Number of nutrition sensitive business plans 0.00 4.00 10.00 15.00 20.00 20.00 under implementation (Number) Beneficiaries reached with financial services (CRI, 0.00 3,000.00 5,000.00 9,000.00 13,000.00 17,000.00 Number) Number of SMAs with a line 0.00 5.00 10.00 20.00 30.00 40.00 of credit. (Number) Number of female-owned SMAs with a line of credit. 0.00 2.00 4.00 8.00 12.00 16.00 (Number) Percentage of previously unbanked adults reached 0.00 5.00 10.00 20.00 40.00 60.00 with transaction accounts - female. (Percentage) The World Bank Cambodia Agricultural Sector Diversification Project (P163264) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 Beneficiaries that feel project investments reflected their 0.00 60.00 65.00 70.00 75.00 75.00 needs (Percentage) Component 2: Supporting Public Infrastructure Area provided with new/improved irrigation or 0.00 2,000.00 4,000.00 6,000.00 10,000.00 12,000.00 drainage services (CRI, Hectare(Ha)) Area provided with improved irrigation or 0.00 2,000.00 4,000.00 5,000.00 8,000.00 10,000.00 drainage services (CRI, Hectare(Ha)) Area provided with new irrigation or drainage 0.00 0.00 0.00 1,000.00 2,000.00 2,000.00 services (CRI, Hectare(Ha)) Roads rehablitated (CRI, 0.00 0.00 50.00 100.00 200.00 250.00 Kilometers) Roads rehabilitated - rural 0.00 0.00 50.00 100.00 200.00 250.00 (CRI, Kilometers) Component 3: Improving Agriculture Information Systems and Quality Control Management Number of users of agriculture 0.00 2,000.00 5,000.00 8,000.00 10,000.00 10,000.00 information system (Number) Users satisfied with information quality 0.00 30.00 40.00 50.00 60.00 65.00 (Percentage) Number of producers and 0.00 500.00 1,500.00 2,500.00 3,000.00 3,000.00 processers trained in GAP The World Bank Cambodia Agricultural Sector Diversification Project (P163264) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 implementation rules (Number) Producers and processers trained in GAP implementation rules - 0.00 30.00 40.00 40.00 40.00 40.00 Female (percentage) (Percentage) Number of quality controls confirmed GAP compliance 0.00 50.00 100.00 120.00 150.00 150.00 (Number) Component 4: Project Management, Coordination, and Monitoring & Evaluation Percentage of complaints solved by the Grievance 0.00 20.00 80.00 90.00 90.00 90.00 Redress Mechanism of the project (Percentage) Component 5: Contingent Emergency Response Component (Action: This Component is New) Number of beneficiary households received net 0.00 0.00 0.00 0.00 0.00 3,900.00 houses, horticulture inputs and TA (Number) Action: This indicator is New Number of beneficiary households received 0.00 0.00 0.00 0.00 0.00 6,240.00 horticulture inputs (Number) Action: This indicator is New Number of beneficiary 0.00 0.00 0.00 0.00 0.00 3,640.00 households received The World Bank Cambodia Agricultural Sector Diversification Project (P163264) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 chicken/duck pen poultry inputs (Number) Action: This indicator is New Number of beneficiary households raising catfish and 0.00 0.00 0.00 0.00 0.00 2,700.00 frogs (Number) Action: This indicator is New Quantity two cycles of chicken/duck produced (ton) 0.00 0.00 0.00 0.00 0.00 500.00 (Tones/year) Action: This indicator is New Quantity of vegetable produced per year (ton) 0.00 0.00 0.00 0.00 0.00 4,680.00 (Tones/year) Action: This indicator is New Quantity of catfish and frogs produced two cycles of plastic 0.00 0.00 0.00 0.00 0.00 900.00 pond (ton) (Tones/year) Action: This indicator is New Number of ponds rehabilitated for beneficiary households 0.00 0.00 0.00 0.00 0.00 100.00 (Number) Action: This indicator is New Number of tube wells for beneficiary households 0.00 0.00 0.00 0.00 0.00 910.00 (Number) The World Bank Cambodia Agricultural Sector Diversification Project (P163264) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 Action: This indicator is New IO Table SPACE