INTEGRATED SAFEGUARDS DATA SHEET APPRAISAL STAGE Report No.: ISDSA4903 Public Disclosure Copy Date ISDS Prepared/Updated: 18-Jun-2013 Date ISDS Approved/Disclosed: 05-Dec-2012, 29-Jan-2013, 18-Jun-2013 I. BASIC INFORMATION 1. Basic Project Data Country: Azerbaijan Project ID: P122812 Project Name: AGRICULTURAL COMPETITIVENESS IMPROVEMENT PROJECT (P122812) Task Team Rufiz Vakhid Chirag-Zade Leader: Estimated 24-Apr-2013 Estimated 21-Oct-2013 Appraisal Date: Board Date: Managing Unit: ECSAR Lending Specific Investment Loan Instrument: Sector(s): Agro-industry, marketing, and trade (60%), General agriculture, fishing and forestry sector (20%), Agricultural extension and resear ch (20%) Theme(s): Rural markets (30%), Rural non-farm income generation (30%), Other social protection and risk management (20%), Rural services and i nfrastructure (20%) Is this project processed under OP 8.50 (Emergency Recovery) or OP No 8.00 (Rapid Response to Crises and Emergencies)? Public Disclosure Copy Financing (In USD Million) Total Project Cost: 53.25 Total Bank Financing: 34.50 Total Cofinancing: Financing Gap: 0.00 Financing Source Amount Borrower 18.75 International Bank for Reconstruction and Development 34.50 Total 53.25 Environmental F - Financial Intermediary Assessment Category: Is this a No Repeater project? 2. Project Development Objective(s) The Project Development Objective is to facilitate the access of agricultural producers to markets by strengthening sanitary and phytosantiary services, enhancing selected value chains and providing financial services to agribusiness enterprises. Page 1 of 8 3. Project Description The project components and activities are: Public Disclosure Copy Component A: Support for Sanitary and Phytosanitary Services. This component aims to strengthen the efficiency and effectiveness of sanitary and phytosanitary services in order to reduce existing obstacles to agricultural and food trade. Activities under Component A will be grouped into three subcomponents: (i) Food Safety Capacity Building; (ii) Upgrading plant health and phytosanitary system (iii) Animal health and veterinary services. The project would support: (i) comprehensive capacity building and training program on food safety through provision of TA, training and equipment; (ii) strengthening pest diagnostic capacity and enhancing pest risk analysis of SPCS through provision of equipment for laboratories, targeted TA and training; (iii) privatization of the State Veterinary Service (SVS) field staff; and (iv) further strengthening the disease surveillance and preparedness functions of the SVS. Component B: Agribusiness value chain development The component aims to increase the competitiveness of selected supply chains by raising productivity and quality of output and by facilitating commercial relationships between stakeholders along each supply chain. The component will help agro enterprises, farmers and others to actively engage in the development of commodity value chains by partially financing demand-driven investment proposals. The component would also support activities for improving seed varieties and quality of seeds entering the market. The activities will be structured into two sub-components: (i) Investment and advisory support for agribusiness value chain development, and (ii) Seed sector development. Component C: Financial Services to Agribusinesses The objective is to enhance access to financial services for agribusinesses operating in Azerbaijan’s agrifood sector, in particular towards enhanced competitiveness of the agribusiness sector, achievement of food product quality and safety standards, new products development, and Public Disclosure Copy establishment of market linkages. Specifically, the component will include the following activities: (i) credit line through commercial banks and leasing institutions; (ii) capacity building of Participating Financial Institutions (PFIs); and (iii) feasibility study on agricultural insurance and capcaity building of the local insurance sector. Component D: Project Management This component will finance the administrative and operational project implementation and management costs (FM, procurement, safeguards compliance, M&E), including overheads of Project Management Unit (PMU) professional staff as well as support staff. The Project is managed by the Project Management Unit (PMU) established within the State Agency for Agricultural Credits (SAAC) under the first phase of Agricultural Development and Credit Program APL (ADCP), which continued under ADCP 2. The SAAC is the Ministry of Agriculture’s agency for overseeing international agricultural development projects. The PMU functions include among others, implementation of project activities, financial management, procurement, project monitoring and evaluation. 4. Project location and salient physical characteristics relevant to the safeguard analysis (if known) The project coverage is country-wide. The activities under Component A and B would cover, inter Page 2 of 8 alia, the network of plant, seed quality and veterinary laboratories, including teaching laboratory in Ganja Agricultural University. The demand-driven activities to be supported under Component B and C will be implemented across the rural areas of Azerbaijan. Public Disclosure Copy 5. Environmental and Social Safeguards Specialists Daniel P. Owen (ECSSO) Gulana Enar Hajiyeva (ECSEN) 6. Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment OP/ Yes Component A and B will support upgrade of BP 4.01 plant and veterinary and seed quality laboratories, which environmental compliance might require strengthening. TA to be delivered under Components B and C may have environmental implications (for example, lead to increased use of pesticides). Component B and C will support diverse agricultural activities to be financed by the project grant program and the credit line , and might cause direct environmental impacts of various type and significance. The project is classified as FI because Component C (provision of agricultural credits through designated banks) is the largest component. The environmental issues to be dealt with, will include collection and disposal of animal waste and waste water, construction related issues (in case of small scale construction of rural facilities), impacts related to agro-processing and minor construction, and Public Disclosure Copy impacts related to environmental management practices in laboratories to be upgraded under the project. These impacts are anticipated to be temporary, reversible and can be avoided, minimized or duly mitigated if managed appropriately. In order to address the potential environmental impacts and identify relevant mitigation measures, an Environmental Management Plan (EMP) has been prepared and duly disclosed. The EMP envisages site-specific EMPs to be prepared by grant and credit applicants for sub-projects, and, thus, describes the procedures and institutional responsibilities and arrangements to be followed for the preparation, review and approval of those specific EMPs. Natural Habitats OP/BP 4.04 No Page 3 of 8 Forests OP/BP 4.36 No No activities which may potentially impact forests will be allowed under the project. Public Disclosure Copy Pest Management OP 4.09 Yes This policy is triggered because, while not financing directly the purchase of pesticides, the project may lead to the increased use of pesticides. This will be mitigated through the capacity building (trainings), extension services, and specific measures provided in the framework document and site-specific EMPs to be prepared in accordance with the project 'umbrella' EMP , to ensure that sustainable agricultural practices are introduced by credit beneficiaries. The Pest Management Plan and Recommendations for the Development of the National IPM Program have been prepared, with a dual purpose to (i) indicate how safe pesticide handling and integrated pest management practices will be promoted under the project, and (ii) suggest strategic approach for promoting integrated pest management in the country. The project related recommendations of the PMP are duly incorporated into the project EMP and the project design. Physical Cultural Resources OP/ No BP 4.11 Indigenous Peoples OP/BP 4.10 No Public Disclosure Copy Involuntary Resettlement OP/BP No The project activities will not require any 4.12 resettlement and will not be implemented in the locations which will require change of land use or ownership Safety of Dams OP/BP 4.37 No Projects on International Yes The project support for development of value Waterways OP/BP 7.50 chain would include inter alia investments for the improvement of on-farm infrastructure, such as small irrigation systems. Such activities, if any, are likely to be developed inter alia on the transboundary rivers Samur, Kura and Araz, flowing into the Caspian Sea and considered international waterways for the purposes for the Word Bank Operational Policy on Projects on International Waters (OP 7.50). The proposed project, however, is not expected to have any significant impacts on the quantity or quality of water flowing through these rivers or into the Page 4 of 8 Caspian Sea. It is expected that sub-projects would not produce a noticeable change for the abstraction volumes of the systems and would not Public Disclosure Copy have an adverse change to the quality or quantity of river flows as the works would not change the nature of the original systems. The irrigation infrastructure improvements will not result in significant increases in either withdrawals from or discharges to the international waterways. Therefore, the project is not expected to have any adverse effects on the water flows or the rights of the other riparian states on the international waterways, thus on November 19, 2012 the RVP approved the exception to the notification requirement pursuant to paragraph 7(a) of OP 7.50 for this safeguard policy. Projects in Disputed Areas OP/BP No 7.60 II. Key Safeguard Policy Issues and Their Management A. Summary of Key Safeguard Issues 1. Describe any safeguard issues and impacts associated with the Restructured project. Identify and describe any potential large scale, significant and/or irreversible impacts: Veterinary, plant health and seed quality laboratories to be upgraded under Component A and B (renovation of lab facilities and provision of equipment) might not be environmentally compliant with good international practices, e.g. in terms of proper management of laboratory wastes. The upgrade and renovation will ensure the laboratories are provided with necessary infrastructure and Public Disclosure Copy equipment to improve environmental management practices. Also, training sessions will be delivered to the lab staff under the project to improve lab environmental management capacity and introduce international best practices. Components B and C will provide TA which might indirectly cause the increased use of pesticides and, thus, this potential impact has to be adequately addressed by raising awareness among farmers via various means and inter-media, including extension services currently existing in most of the rayons of Azerbaijan. Investment support (grants) will be provided under Component B for sub-projects focused on improvements in infrastructure and technology, modernization of post-harvest technologies, food safety upgrading and skills development. The largest component of the project is Component C which will provide agricultural credits via authorized agent banks (PFIs). The activities eligible for financing under Components B and C are not pre-determined and will be identified on market-led and demand- driven basis, however, the analysis of the activities applied for during the ADCP 1 and ADCP 2 allowed to identify several most typical potential sub-project types, which might be associated with such environmental issues as the need to handle animal and construction wastes and waste water, increased use of pesticides (though not financed by the project), impacts caused by various agro-processing activities (e.g. canning industry, dairy factories, fruit and pickle processing) and by establishing/supporting small-scale agricultural infrastructure (minor rehabilitation of existing small irrigation facilities, storage or cooling facilities, grading and sorting equipment), etc. No large scale and/or irreversible impacts are anticipated to result from the sub-projects’ implementation as all the activities potentially having high risks will be screened out. While not Page 5 of 8 being highly risky separately, the similar or related sub-projects, if implemented in the same area, may cause cumulative impacts such as water pollution, overgrazing and pasture depletion etc. In order to prevent the risk of adverse cumulative environmental effects, a brief environmental Public Disclosure Copy analysis will be made of the portfolio every year by the PMU environmental specialist, and specific recommendations will be provided to PFIs and the Value Chain Development Secretariat (VCDS) based on the results of the analysis 2. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: Overall, the long-term impacts of the project activities are expected to be positive as the project will support improved agricultural practices and will build the awareness of environmentally sustainable agriculture among farmers. 3. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts. N/A 4. Describe measures taken by the borrower to address safeguard policy issues. Provide an assessment of borrower capacity to plan and implement the measures described. The borrower has updated and revised the ADCP 2 EMP to accommodate environmental aspects of the ACIP. The revised EMP indicates potential impacts associated with TA to be delivered under the project, which may lead to increased use of pesticides, and those of sub-projects which have high probability to be applied for under Components B and C. For the purposes of Components B and C the EMP serves as a framework document identifying most likely activities and associated impacts, proposing mitigation measures, specifying the environmental management procedures for screening, evaluation, approval and implementation of sub-projects to be financed under the grant scheme and credit line, and indicating institutional responsibilities for enforcing environmental compliance. The EMP also considers cumulative impacts of both multiple activities under a single sub-project and of similar sub-projects implemented in the same area. The implementation mechanism ensuring project’s compliance with the EMP involves the PMU hiring Public Disclosure Copy a full time Environmental Specialist with the responsibilities to supervise the environmental performance of the project and provide training and advice to relevant PIU staff, PFIs, VCDS and potential grant and credit applicants. Borrower's capacity has been built and considerably improved during the two previous ADCPs. The series of training sessions have been delivered to PMU, participating PFIs, credit applicants and other stakeholders. The environmental management capacity of the project will be further improved by continuing this good practice under the ACIP, with special focus on newly authorized PFIs. The Recommendations for the Development of the National IPM Program and Pest Management Plan have been prepared. The IPM Recommendations have been submitted to the Ministry of Agriculture (MoA) for further consideration. Recommendations of the PMP have been incorporated into the project design. In particular, the project would support an extensive training program based on needs of research institutes and farmers and support biological control program and pesticide residue management of Plant Protection Institute. 5. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. The key stakeholders of the project are the Ministries of Agriculture, Environment, Economic Development, farmers and local entrepreneurs involved in agri-business as well as local executive, agricultural and environmental authorities. The updated EMP has been disclosed and discussed at the public consultation meetings which took place in several locations of the project area during February 2012, with records of the meetings attached to the EMP as an annex. The key Page 6 of 8 stakeholders participated in the consultation meetings, and their feedback was duly addressed. The IPM Recommendations and PMP were broadly discussed with the stakeholders in March-April 2012. Both EMP and PMP have been placed on MoA web-site for public access. Public Disclosure Copy B. Disclosure Requirements Environmental Assessment/Audit/Management Plan/Other Date of receipt by the Bank 19-Nov-2012 Date of submission to InfoShop 20-Nov-2012 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors "In country" Disclosure Azerbaijan 26-Jan-2012 Comments: The dusclosure took place in January-February 2012. The revised final EMP was re- disclosed in November 2012 Pest Management Plan Was the document disclosed prior to appraisal? Yes Date of receipt by the Bank 30-Aug-2012 Date of submission to InfoShop 31-Aug-2012 "In country" Disclosure Azerbaijan 26-Jan-2012 Comments: If the project triggers the Pest Management and/or Physical Cultural Resources policies, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/ Audit/or EMP. If in-country disclosure of any of the above documents is not expected, please explain why: Public Disclosure Copy C. Compliance Monitoring Indicators at the Corporate Level OP/BP/GP 4.01 - Environment Assessment Does the project require a stand-alone EA (including EMP) Yes [ ] No [ ] NA [ ] report? If yes, then did the Regional Environment Unit or Sector Yes [ ] No [ ] NA [ ] Manager (SM) review and approve the EA report? Are the cost and the accountabilities for the EMP incorporated Yes [ ] No [ ] NA [ ] in the credit/loan? OP 4.09 - Pest Management Does the EA adequately address the pest management issues? Yes [ ] No [ ] NA [ ] Is a separate PMP required? Yes [ ] No [ ] NA [ ] If yes, has the PMP been reviewed and approved by a Yes [ ] No [ ] NA [ ] safeguards specialist or SM? Are PMP requirements included in project design?If yes, does the project team include a Pest Management Specialist? OP 7.50 - Projects on International Waterways Page 7 of 8 Have the other riparians been notified of the project? Yes [ ] No [ ] NA [ ] If the project falls under one of the exceptions to the Yes [ ] No [ ] NA [ ] Public Disclosure Copy notification requirement, has this been cleared with the Legal Department, and the memo to the RVP prepared and sent? Has the RVP approved such an exception? Yes [ ] No [ ] NA [ ] The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the Yes [ ] No [ ] NA [ ] World Bank's Infoshop? Have relevant documents been disclosed in-country in a public Yes [ ] No [ ] NA [ ] place in a form and language that are understandable and accessible to project-affected groups and local NGOs? All Safeguard Policies Have satisfactory calendar, budget and clear institutional Yes [ ] No [ ] NA [ ] responsibilities been prepared for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included Yes [ ] No [ ] NA [ ] in the project cost? Does the Monitoring and Evaluation system of the project Yes [ ] No [ ] NA [ ] include the monitoring of safeguard impacts and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed Yes [ ] No [ ] NA [ ] with the borrower and the same been adequately reflected in the project legal documents? III. APPROVALS Public Disclosure Copy Task Team Leader: Rufiz Vakhid Chirag-Zade Approved By Regional Safeguards Name: Agnes I. Kiss (RSA) Date: 18-Jun-2013 Advisor: Sector Manager: Name: Dina Umali-Deininger (SM) Date: 18-Jun-2013 Page 8 of 8