Page 1 INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Report No.: AC793 Date ISDS Prepared/Updated: April 16, 2004 I. BASIC INFORMATION A. Basic Project Data Country: Nepal Project ID: P087140 Project Name: Agricultural Commercialization and Trade Task Team Leader: Daniel M. Sellen Estimated Appraisal Date: February 15, 2005 Estimated Board Date: July 28, 2005 Managing Unit: SASRD Lending Instrument: Specific Investment Loan Sector: General agriculture, fishing and forestry sector (80%); Agricultural extension and research (20%) Theme: Trade facilitation and market access (P);Rural markets (S) Safeguard Policies Specialists in the task team: Loan/Credit amount ($m.): IDA: 30 Other financing amounts by source: ($m) B. Project Objectives [from section 3 of PCN] The objective of the proposed Project is to promote commercialization of the agriculture sector and prepare for Nepal’s entrance into the World Trade Organization . This will be achieved through (i) strengthening institutions and systems for export quality control and certification; (ii) promote investment in local public goods and access to income-generating assets; and (iii) supporting, through adaptive research, extension, and agri-business development, a broad based move towards commercial crop and livestock production. Performance in achieving the development objective can be measured through volumes of trade that pass through certified systems, and growth in value and volume of key high value commodities. C. Project Description [from section 4 of PCN] Component 1. Quality Control The output of this component is a system for testing and certification of agricultural commodities to meet obligations of WTO membership. Controls, inspection, and approval procedures need to be established to account for different sanitary and phyto-sanitary standards imposed by the major importers. A rapid and substantial program of investment in physical and institutional Page 2 infrastructure, including laboratories and testing stations, as well as in human resource development is required if the country is to meet the WTO preparedness conditions by January 1, 2007. Aside from hardware and capacity-building, farmers will need to understand and be able to comply with standards. A related component activity could be certification of organic produce, to capitalize on the fact that much of production in Nepal is de facto consistent with organic standards, given that use of pesticides and chemical fertilizer is so low. This component would be implemented by the MoAC and will finance: • Construction of testing stations and laboratories • Training and staffing • Grading and standards development • Creation of regulatory and enforcement authorities • Organic certification and brand development • Policy evaluation and reform Component 2. Investment in Commercialization The output of this component will address collective investment needs with respect to local public infrastructure and income-generating assets that contribute to production of high-value commodities and commercialization of the sector. This component is a matching grant fund with two windows. The first will support investment in critical local public goods which will be owned and managed by district/village authorities, consistent with local development priorities and requiring a cash contribution. The decisions of what to finance and the management of that investment will be left to the stakeholders themselves, thus departing from traditional supply- driven and prescriptive approaches of the past. This will help ensure that investment is responsive to the needs of stakeholders is locally oriented, and likely to be maintained in future. The second window will be open to associations of farmers, fisherfolk, processors, traders, and community associations involved along the supply chain for high-value, tradable commodities. These commodities may include citrus, fish, meat, dairy products, spices, tea, coffee, and vegetables, based on production and market analyses. Attempts will be made to promote organic produce, which capitalizes on Nepal’s traditional practices with low use of chemical fertilizers and pesticides, and on Nepal’s potential appeal for consumers. Activities considered may be risky and innovative but with potentially high and replicable payoffs. As such, these investments would not normally be financed by the commercial banking system. Producer groups will be expected to contribute a percentage of the investment value in cash and/or kind to demonstrate commitment. Coordination of this component would be through the Project Management Unit, but implementation would take place through districts (for local public goods) and producer groups (for income-generating activities). This component may finance a set of activities including, but not limited to: • Market places, collection centres • Facilities for storage, processing, drying • Market access (small roads, bridges, transport, etc.) • Water resource management (tube wells, small-scale canals, water harvesting structures) • Crop production (cash crops, improved seed varieties, IPM, etc.) • Medicinal plants, non-timber forest products Page 3 • Livestock production (fodder and pasture development, processing, aquaculture, etc.) Component 3. Producer Organization and Support Services The output of this component is an enabling environment for commercialization comprising (a) social mobilization for market-oriented producer groups; (b) support for technology development and dissemination, as well as marketing information and trade promotion networks; and (c) facilitation of financing (particularly for working capital) and risk management associated with a shift away from subsistence production. Implementation of this component would be through the relevant departments (agriculture, livestock, irrigation) in the Ministries of Agriculture and Water Resources, National Agriculture Research Centre, other research institutions, and in partnership with existing rural finance institutions. This component will cover: • Social mobilization (i.e. assistance in the formation and operation of a group approach to production, processing, and marketing of high value commodities) • Selective and applied agricultural research (e.g. improved seeds, agronomic practices, soil and water management, integrated pest management, packaging, processing, storage) • Selective knowledge dissemination and technical advice (i.e. to ensure that research generated reaches and is adopted by beneficiaries) • Agri-business development (e.g. policy advocacy, and providing entrepreneurs with advice, technical assistance, establishing strategic partnerships, and facilitating access to financial packages through appropriate financial intermediaries) Component 4. Project Management: The output of this component is a management unit capable of operating on schedule, within budget, and focused on results. It will be carried out by qualified professionals, recruited competitively, with private sector experience in farmer organization, high value crop and livestock production, and agricultural marketing. International TA should be considered given the emphasis on global trade and marketing. Monitoring and evaluation will be a critical role of the management team, and will include assessments of the economic and financial viability of investment under component 2 and of environmental assessment of sub-projects. D. Project location (if known) Location is not known at this time, other than the likelihood of excluding the Eastern Region, which is the focus of a similar ADB project. During preparation, the team will discuss with Government the high potential areas for project activities, which will likely include areas in the Hills and Terai zones. E. Borrower’s Institutional Capacity for Safeguard Policies [from PCN] This is not exactly known at this time but the Borrower has experience with many IDA-financed projects, and in particular the Ministries of Water Resources and Agriculture have been involved in recent projects involving (respectively) irrigation and agricultural research & extension. Page 4 II. SAFEGUARD POLICIES THAT MIGHT APPLY Applicable? Safeguard Policy If Applicable, How Might It Apply? [Y] Environmental Assessment ( OP / BP 4.01) Several possible environnmental implications (roads, irrigation) will require EA. [N] Natural Habitats ( OP / BP 4.04) Project will not work in protected areas. [Y] Pest Management ( OP 4.09 ) Project will not directly finance but may induce increased use of pesticides. [TBD] Involuntary Resettlement ( OP / BP 4.12) Some structures may involve land acquisition. [TBD] Indigenous Peoples ( OD 4.20 ) Not known at this time whether indigenous groups would be involved. [TBD] Forests ( OP / BP 4.36) Project may promote marketing of non-timber forest products. [N] Safety of Dams ( OP / BP 4.37) The project will not construct or rehabilitate dams larger than 10 meters in height. [N] Cultural Property (draft OP 4.11 - OPN 11.03 ) Project activities will not involve cultural property. [N] Projects in Disputed Areas ( OP / BP / GP 7.60) * No disputed areas will be involved. [TBD] Projects on International Waterways ( OP / BP / GP 7.50) Irrigation activities, while small-scale, may trigger this safeguard. Environmental Assessment Category: [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) If TBD, explain determinants of classification and give steps that will be taken to determine that EA category (mandatory): III. SAFEGUARD PREPARATION PLAN A. Target date for the Quality Enhancement Review (QER), at which time the PAD-stage ISDS would be prepared. October 2004 B. Time frame for launching and completing the safeguard-related studies that may be needed. The specific studies and their timing 1 should be specified in the PAD-stage ISDS. * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 5 The PHRD application specifies environmental and social safeguard work. This could begin during the summer and be completed by October-November. IV. APPROVALS Signed and submitted by: Task Team Leader: Daniel M. Sellen April 23, 2004 Approved by: Regional Safeguards Coordinator: Eric Brusberg Date Comments Sector Manager: Adolfo Brizzi Date Comments 1 Reminder: The Bank's Disclosure Policy requires that safeguard-related documents be disclosed before appraisal (i) at the InfoShop and (ii) in-country, at publicly accessible locations and in a form and language that are accessible to potentially af fected persons.