The World Bank Integrated Dairy Productivity Improvement Project (P155412) REPORT NO.: RES31458 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF INTEGRATED DAIRY PRODUCTIVITY IMPROVEMENT PROJECT APPROVED ON NOVEMBER 29, 2016 TO KYRGYZ REPUBLIC AGRICULTURE EUROPE AND CENTRAL ASIA Regional Vice President: Cyril E Muller Country Director: Lilia Burunciuc Senior Global Practice Director: Juergen Voegele Practice Manager/Manager: Julian A. Lampietti Task Team Leader: David Tuchschneider, Artavazd Hakobyan The World Bank Integrated Dairy Productivity Improvement Project (P155412) ABBREVIATIONS AND ACRONYMS ABCC Agribusiness Competitiveness Center CLMU Credit Line Management Unit DBG Dairy Borrowing Groups GF Joint Stock Company “Guarantee Fund” of the Kyrgyz Republic GoK Government of the Kyrgyz Republic IDPIP Integrated Dairy Productivity Improvement Project IP Implementation Progress KDSDP Kyrgyz Dairy Sector Development Program M&E Monitoring and Evaluation PDO Project Development Objective RF Results Framework 2 The World Bank Integrated Dairy Productivity Improvement Project (P155412) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P155412 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 29-Nov-2016 31-Dec-2020 Organizations Borrower Responsible Agency Ministry of Finance,Ministry of Agriculture, Food Industry Kyrgyz Republic and Melioration Project Development Objective (PDO) Original PDO The Development Objective of the Project is to enhance dairy animal productivity and milk quality on beneficiary farms. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-59180 29-Nov-2016 10-Aug-2017 10-Apr-2018 31-Dec-2020 2.75 .20 2.57 IDA-D1470 29-Nov-2016 10-Aug-2017 10-Apr-2018 31-Dec-2020 2.25 .31 2.05 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No 3 The World Bank Integrated Dairy Productivity Improvement Project (P155412) Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING Project status 1. This Restructuring Paper seeks approval to restructure the Integrated Dairy Productivity Improvement Project (IDPIP). The proposed restructuring encompasses refocusing of project activities, reallocation of funds between components, a minor adjustment of the institutional and implementation arrangements and simplification of the Results Framework. 4 The World Bank Integrated Dairy Productivity Improvement Project (P155412) 2. The project was approved on November 29, 2016 and became effective on April 10, 2018. Implementation progress (IP) is currently rated Moderately Unsatisfactory mainly due to the implementation delay resulting from the seventeen-month lag in effectiveness. The Project is now in full implementation. Disbursements have reached ten percent and are expected to pick up rapidly since the key implementation contract for Component 3 is under execution and the key contract for Component 2 is close to being awarded. 3. The Project Development Objective (PDO) is to enhance dairy animal productivity and milk quality on beneficiary farms. The project is implemented in the Issyk Kul region of the Kyrgyz Republic. It is closely coordinated with the IFC-funded Kyrgyz Dairy Sector Development Program (KDSDP), initiated in 2015 to help the country capitalize on export market opportunities. KDSDP focuses on value chain development and IDPIP on smallholder on- farm improvements and linkages to processors. IDPIP is expected to achieve its objectives through the following components: (a) Component 1 - Strengthening Public and Private Services in the Dairy Sector, which aims to enhance the quality of essential public services for small dairy farmers to benefit from participating in the dairy value-chain; (b) Component 2 - On-farm Productivity Enhancement, which envisages a large-scale training and capacity building program for small dairy farmers with the objective of delivering the basic knowledge and skillset for improved dairy cattle productivity and milk quality; (c) Component 3 – Farm-level Investments, which establishes a Revolving Fund to facilitate access to finance for small farmers to purchase inputs and small equipment, and technical assistance and capacity building to enable beneficiaries to access existing financing schemes; and (d) Component 4 - Project Management, which covers the costs associated with management, monitoring and evaluation, and results assessment. Rationale for restructuring 4. Restructuring arises from requests from the Government of the Kyrgyz Republic (GoK) to: (i) simplify design and streamline implementation given the shortened implementation period; (ii) adjust the institutional arrangements for managing the Revolving Fund in Component 3; and (iii) increase the allocation of resources for Sub- financings under the Revolving Fund. 5. The proposed changes will not have any impact on the safeguards category nor policies triggered under the Project but will entail amendments to the IDA Financing Agreement. II. DESCRIPTION OF PROPOSED CHANGES 6. Scope. This restructuring is focused on simplifying the project design, rebalancing the allocation of funds to increase the number of direct beneficiaries of the Revolving Fund, and the inclusion of the Open Joint Stock Company “Guarantee Fund” (GF) of the Kyrgyz Republic in the arrangements to support management of the Revolving Fund. It does not propose any changes in the Project Development Objective (PDO) but it replaces a custom PDO indicator with a core indicator and reduces the target number of beneficiaries. Intermediate Outcome Indicators are reduced and adjusted to sharpen the focus on outcomes and to facilitate Monitoring and Evaluation (M&E). 7. Components and Cost. Changes are proposed for all components, as described in this section and in Table 1. 5 The World Bank Integrated Dairy Productivity Improvement Project (P155412) (a) Strengthening Public and Private Services in the Dairy Sector. Component 1 will be refocused on strengthening service delivery systems to support small farmers’ achievement of market quality standards for milk and creation and consolidation of farmer linkages with selected dairy processor companies. To achieve this, the sub-components will be modified as follows: (i) Sub-component 1A will be renamed “Quality Platform for the Milk Value Chain”. The focus will move from establishing a general platform for public-private sector dialogue to: designing and implementing a digital platform for milk collection and the provision of equipment for milk collection, cooling, quality testing, and data entry in milk collection points. The equipment will be provided to milk collection point operators including milk-processing companies, independent operators or farmer groups, under terms and conditions which will be described in detail in the Project Operational Manual including, inter alia, selection and eligibility criteria for beneficiaries, the types of eligible goods, the beneficiary’s obligation to adopt and use the digital milk quality platform, as well as the recipient’s compliance with sanitary requirements. Up to 130 collection points would be expected to join the platform. (i) Sub-Component 1B will be renamed “Support to the Regional Centers for Veterinary Diagnostics”. It was originally envisaged that the project would support the government’s initiative of cattle identification and registration, but this activity will be excluded since it has already been financed by GoK. Funding will be directed instead to: upgrading veterinary control and surveillance capacity, by providing resources for two newly built regional laboratories in the selected Project area. The laboratories are located in Karakol and Balykchi and provide support to sanitation control measures. Funding for this activity will encompass: (i) equipment; (ii) start-up consumables; and (iii) technical and managerial assistance for capacity building. (ii) Sub-Component 1C, Procurement of high quality semen straws to ensure early breeding improvement in the Project area, will include the means to deliver the service to beneficiaries. (iii) Sub-component 1D, Establishment of up to three veterinary check points, will be eliminated as investment in physical infrastructure for veterinary check-points is deemed premature to achieve disease-free status. (b) On-farm Productivity Enhancement. Component 2 envisages a large-scale training and capacity building program for small dairy farmers with the objective of delivering the basic knowledge and skillset for improved dairy cattle productivity and milk quality. While this continues to be an important and relevant project activity, this restructuring will reduce the component’s (and the Project’s) target from 12,000 to 6,000 households in order to re-allocate funds to the Revolving Fund in Component 3. The component will include (i) a contract with a local Consulting and Training Company that will develop and carry out the training, and (ii) procurement of goods and works for demonstration farms and trainees. The component will focus on the following specific outputs: (i) training delivered for 240 farmer groups (farmer field schools), and (ii) farmer technical assistance in marketing to help farmer groups establish linkages with dairy processors. Each training program will include 7 technical modules and marketing support and will be delivered over a period of 8 months. (c) Farm-level Investments. Component 3 will be expanded to include a larger number of Sub-financing recipients, raising the target from 1,500 to 2,000 beneficiaries. In addition, the ceiling amount per beneficiary will be raised from US$ 1,000 to US$ 1,200. 6 The World Bank Integrated Dairy Productivity Improvement Project (P155412) (d) Project Management. Component 4 will reinforce its focus on: (i) increasing the project’s footprint in Issyk Kul; (ii) incorporating on-line, real-time systems for monitoring and evaluation; and (iii) linking the M&E systems to the milk processors’ dairy procurement system. Table 1. Summary of component changes Component/sub-component Original US$ Proposed US$ Change US$ 1. Strengthening public and private services in the dairy 1,650,000 1,140,000 - 510,000 sector 1a. Improving Public-Private Dialogue (renamed as Quality 50,000 390,000 340,000 Platform for the Milk Value Chain) 1b. Animal Identification and Registration (renamed as 1,100,000 550,000 -550,000 Support to the Regional Centers for Veterinary Diagnostics) 1c. Procurement of high-quality semen straws 200,000 200,000 Same 1d. Veterinary check points 300,000 0 -300,000 2. On-farm productivity enhancement 1,480,000 1,140,000 -340,000 Training and TA of farmer field groups 700,000 Goods and works for demonstration farms and farmers 440,000 7 The World Bank Integrated Dairy Productivity Improvement Project (P155412) 3. Farm-level investments 1,270,000 2,120,000 850,000 3a. Revolving Fund 1,200,000 2,000,000 800,000 3b. TA & capacity building for access to finance 70,000 120,000 50,000 4. Project management 600,000 600,000 Same 8. Results Framework (RF). The proposed changes in the RF reflect the adjustments in the components, the changes in targets and the shorter effective implementation period. (a) One PDO indicator will be replaced to include a Core Indicator. “Dairy producers have adopted improved animal feeding, health, breeding and management practices” is replaced by “Farmers adopting improved agricultural technology”. (b) The reduction in the targeted number of direct beneficiaries from 12,000 farm households to 6,000 farm households will result mainly from the reallocation of funds from training activities in component 2 to the Revolving Fund in order to increase the number of Sub-financing recipients from 1,500 to 2,000. (c) The Implementation Progress (IP) indicator for Component 1 will be replaced to reflect the proposed change in focus. (d) Three IP indicators for Component 2 will be dropped either because they will be encompassed in other indicators or to simplify monitoring. (e) Minor revisions will be included for other indicators in either End Targets or yearly Targets. 9. Institutional Arrangements. The Agribusiness Competitiveness Center (ABCC) will remain in charge of overall project coordination and the execution of components 1 and 2. Component 3, Farm-level Investments, will continue to be implemented by the Credit Line Management Unit (CLMU). As part of the restructuring, CLMU will incorporate the support of the GF for Sub-financing approval and ensuring repayments. CLMU, with support of GF, will provide Sub-financings to Dairy Borrowing Groups (DBG) or DBG Members individually or through their respective DBG in accordance with eligibility criteria and procedures acceptable to the Association, and set forth in the Revolving Fund Operational Manual. 10. Reallocation between Disbursement Categories. In order to accommodate the increase in funding for Sub- financings under the Revolving Fund, funds will be re-allocated in IDA credit 59180 as follows: Category 1 will be reduced from SDR 1,140,000 to SDR 560,000; and Category 2 will be increased from SDR 860,000 to SDR 1,440,000. Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. 8 The World Bank Integrated Dairy Productivity Improvement Project (P155412) III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Institutional Arrangements ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) 9 The World Bank Integrated Dairy Productivity Improvement Project (P155412) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Component 1: Strengthening Component 1: Strengthening Public and Private Services in the 1.65 Revised Public and Private Services in 1.14 Dairy Sector the Dairy Sector Component 2: On-farm Component 2: On-farm 1.48 Revised 1.14 Productivity Enhancement Productivity Enhancement Component 3: Farm-level Component 3: Farm-level 1.27 Revised 2.12 Investments Investments Component 4: Project Component 4: Project 0.60 No Change 0.60 Management Management TOTAL 5.00 5.00 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-59180-001 | Currency: XDR iLap Category Sequence No: (1) Current Expenditure Category: G,W,Non-CS,CS,TR,IOC 1,140,000.00 0.00 560,000.00 100.00 100.00 iLap Category Sequence No: (2) Current Expenditure Category: SUB-FINANCING PART 3(a) 860,000.00 0.00 1,440,000.00 100.00 100.00 Total 2,000,000.00 0.00 2,000,000.00 IDA-D1470-001 | Currency: XDR iLap Category Sequence No: (1) Current Expenditure Category: G,W,Non-CS,CS,TR,IOC 1,700,000.00 116,574.89 1,700,000.00 100.00 100.00 10 The World Bank Integrated Dairy Productivity Improvement Project (P155412) Total 1,700,000.00 116,574.89 1,700,000.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2017 0.00 0.00 2018 500,000.04 29,935.98 2019 1,500,000.00 1,412,464.02 2020 2,000,000.04 2,100,000.00 2021 1,000,000.02 1,457,600.00 2022 0.00 0.00 2023 0.00 0.00 . 11 The World Bank Integrated Dairy Productivity Improvement Project (P155412) . Results framework COUNTRY: Kyrgyz Republic Integrated Dairy Productivity Improvement Project Project Development Objectives(s) The Development Objective of the Project is to enhance dairy animal productivity and milk quality on beneficiary farms. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 To enhance dairy animal productivity and milk quality on beneficiary farms Increase in the average lactation period milk yield per cow in the 0.00 0.00 5.00 10.00 10.00 beneficiary farms (baseline: 1,585 kg) (Percentage) Rationale: Action: This indicator has been Reduction in End Target from 15 to 10%; changes in yearly targets. End target reduced given time required to reflect farm innovations Revised Dairy producers have adopted improved animal feeding, health, 0.00 20.00 30.00 40.00 40.00 breeding, and management practices (Percentage) Rationale: Action: This indicator has been Replaced by a core indicator “Farmers adopting improved agricultural technology”. Marked for Deletion Increase in the percentage of milk 0.00 0.00 20.00 40.00 40.00 produced on the participating 12 The World Bank Integrated Dairy Productivity Improvement Project (P155412) RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 farms that meets or exceeds processor quality requirements (Percentage) Rationale: Action: This indicator has been Revised description for clarity. Yearly targets changed to reflect implementation delays. Revised Direct project beneficiaries 0.00 0.00 3,000.00 6,000.00 6,000.00 (Number) Rationale: Action: This indicator has been Reduction in End Target from 12,000 to 6,000 and changes in yearly targets. End target reduced given the re-allocation of resources to the Revolving Revised Fund. Female beneficiaries 0.00 0.00 30.00 45.00 45.00 (Percentage) Rationale: Action: This indicator has been Reduction in End Target from 60 to 45% and changes in yearly targets . End target reduced to better reflect gender composition of beneficiaries. Revised Direct Youth (18 to 29 years old) 0.00 0.00 7.00 10.00 10.00 beneficiaries (Percentage) Rationale: Action: This indicator has been Change in yearly targets to reflect implementation delays. End target remains. Revised Farmers adopting improved agricultural technology (CRI, 0.00 0.00 1,200.00 3,600.00 3,600.00 Number) 13 The World Bank Integrated Dairy Productivity Improvement Project (P155412) RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 Rationale: Action: This indicator is New Replaces PDO Indicator "Dairy Producers have adopted improved animal feeding, health, breeding, and management practices". Farmers adopting improved agricultural technology - Female 0.00 0.00 900.00 2,700.00 2,700.00 (CRI, Number) Rationale: Action: This indicator is New Indicator measures female participation. PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 Component 1: Strengthening Public and Private Services in the Dairy Sector (Action: This Component has been Revised) The milk procurement platform is No No Yes Yes Yes established (Yes/No) Rationale: Action: This indicator has been Indicator description adjusted from " The operational PPD platform is created at the regional Administration" to reflect change in component focus. Revised Number of service points of MDVs 0.00 0.00 20.00 30.00 30.00 created (Number) Action: This indicator has been Rationale: Marked for Deletion Lack of relevance in implementation period. 14 The World Bank Integrated Dairy Productivity Improvement Project (P155412) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 Component 2: On-farm Productivity Enhancement (Action: This Component has been Revised) Increase in the average milk output per household in the beneficiary 0.00 0.00 5.00 10.00 10.00 farms (Percentage) Rationale: Action: This indicator has been Change in the baseline value from 2627 to 2140 kg per year per household due to improved information. Revised Clients who have adopted an improved agr. technology 0.00 1,200.00 2,700.00 4,800.00 4,800.00 promoted by the project (CRI, Number) Rationale: Action: This indicator has been Encompassed in PDO indicator. Marked for Deletion Clients who adopted an improved agr. technology 0.00 600.00 1,485.00 2,880.00 2,880.00 promoted by project – female (Number) Action: This indicator has been Marked for Deletion Number of women farmers trained in improved animal husbandry 0.00 3,000.00 4,950.00 7,200.00 7,200.00 practices (Number) 15 The World Bank Integrated Dairy Productivity Improvement Project (P155412) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 Rationale: Action: This indicator has been Encompassed in PDO indicator. Marked for Deletion Beneficiary dairy producers who have adopted improved animal feeding, and/or health, and/or 0.00 0.00 30.00 40.00 40.00 breeding, and/or management practices (Percentage) Rationale: Action: This indicator is New Originally a PDO indicator, adjusted and moved to Intermediate Results to measure outputs. Component 3: Farm-level Investments (Action: This Component has been Revised) Number of beneficiaries who received sub-financing from the 0.00 200.00 1,300.00 2,000.00 2,000.00 Revolving Fund (Number) Repayment of sub-financing 0.00 0.00 85.00 95.00 95.00 (Percentage) Component 4: Project Management (Action: This Component has been Revised) Percentage of male beneficiaries satisfied with project activities 0.00 0.00 60.00 80.00 80.00 (Percentage) Rationale: Action: This indicator has been Lower yearly and end targets reflect reduced implementation period. Revised 16 The World Bank Integrated Dairy Productivity Improvement Project (P155412) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 Percentage of female beneficiaries satisfied with project activities 0.00 0.00 60.00 80.00 80.00 (Percentage) Rationale: Action: This indicator has been Lower yearly and end targets reflect reduced implementation period. Revised Grievances registered related to delivery of project benefits that are 0.00 100.00 100.00 100.00 100.00 actually addressed (%) (Percentage) Grievances related to delivery of project benefits that are 0.00 0.00 0.00 0.00 0.00 addressed-(number) (Number) Rationale: Action: This indicator has been Sub-indicator was not in original PAD and in AM. Marked for Deletion IO Table SPACE 17