Document of The World Bank Report No. 17312-KG STAFF APPRAISAL REPORT KYRGYZ REPUBLIC AGRICULTURAL SUPPORT SERVICES PROJECT April 3, 1998 Rural Development and Environment Europe and Central Asia Region CIIRRENCY EOUIVALENTS (January 1998) Currency Unit Som US$1 17.5 Som WEIGHTS AND MEASURES Metric System BORROWER'S FISCAL YEAR January I - December 31 ABBREVIATIONS AND ACRONYMS ACSPP - Agency for Chemical Supply and Plant Protection ALRF - Agricultural Land Redistribution Fund ASSP - Agricultural Support Services Project ATAS - Agricultural Training and Advisory Services CLAR - Center for Land and Agrarian Reform (oblast/rayon level) CNFA - Citizen's Network for Foreign Affairs CRI - Crop Research Institute (Agrarian Academy) FPRI - Forage and Pasture Research Institute (Agrarian Academy) GoKR - Government of the Kyrgyz Republic GTZ - Gesellschaft fur Technische Zusammenarbeit (German) IFAD - International Fund for Agricultural Development IPM - Integrated Pest Management KAFC - Kyrgyz Agricultural Finance Corporation KH-F - British Know How Fund KS - Kyrgyz Standard MAWR - Ministry of Agriculture and Water Resources MOFE - Ministry of Finance and Economy MIS - Agricultural Market Information System NLF - National Land Fund NMC - National Management Committee for MIS NSA - National Seed Association NPOZ - Industrial Association for Crop Research NSC - National Statistical Committee PIU - Project Implementation Unit PSC - Project Steering Committee RADC - Rural Advisory and Development Center RADS - Rural Advisory and Development Services RASC - Rural Advisory Steering Council RCLAR - Republican Center for Land and Agrarian Reform SDAP - State Department of Anti-Monopoly Policy SDP - Sheep Development Project SFCOP - Small Fanner Credit Outreach Program SIPQ - State Inspectorate of Plant Quarantine SALMLR - State Agency for Land Management and Land Resources TACIS - Technical Assistance to the Commonwealth of Independent States Vice President: Johannes F. Limn, ECAVP Country Director: Kiyoshi Kodera, ECCO8 Sector Director: Kevin Cleaver, ECSRE; Sector Leader: Joseph Goldberg, ECSRE Responsible Staff. Ramesh Deshpande, ECSPF (Team Leader) Peer Reviewers: Jitendra Srivastava, Severin Kodderitzsch, and Tjaart Schillhom-Van Veen (ECSRE) Appraisal Mvissions: The IDA post-appraisal mission (November 1997) included: R. Deshpande (Mission Leader), J. Srivastava (Principal Agriculturist), J. Cole and R.Selvaratnam (Consultants), and D. Djoldsheva (Operations Officer). The IDA appraisal mission (June 1991) included: J. Cole (Mission Leader) ), R. Deshpande (Principal Financial Operations Officer), F. Dauphin (Agronomist); B. Villerette (Agricultural Economist); P. Dickie (Seed Specialist); M. Childress (Land Tenure Specialist); R. Selvaratnam (Consultant); and Ms. S. Abdysheva (Operations Officer). The IFAD's post-formulation and appraisal missions coincided with IDA appraisal and post-appraisal missions. International Development Association FOR OFFICIAL USE ONLY IDA/ R98-44[SAR]/1 FROM: The Secretary April 21,1998 KYRGYZ REPUBLIC - Agricultural Support Services Project Staff Appraisal Report (Corrigendum) Attached are Tables 4,5 (pp. 1 & 2) and 6 of Annex C which were inadvertently omitted from the Staff Appraisal Report regarding a proposed credit to the Kyrgyz Republic for an Agricultural Support Services Project (IDA/R98&44[SARI distributed on April 16,1998). Distribution: Executive Directors and Alternates President Bank Group Senior Management Vice Presidents, Bank, IFC and MIGA Directors and Department Heads, Bank, IFC and MIGA This document has a restnrcted 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. t, Annex C Table 4 KYRGYZ REPUBLIC Agricultural Support Services Project Estimated Disbursement Profile (US$ million) Disbursements Profile % Bank Fiscal Year By Quarter Cumulative Agriculture Projects and Quarter (USS million) (US$ million) ASSP in ECA region 1999 1 0.5 0.5 3.3 4.5 2 0.5 1.0 6.7 6.0 3 0.5 1.5 10.0 10.0 4 0.5 2.0 13.3 14.0 2000 1 0.5 2.5 16.7 20.0 2 0.5 3.0 20.0 26.0 3 0.6 3.6 24.0 30.0 4 0.6 4.2 28.0 34.0 2001 1 0.7 4.9 32.7 38 2 0.7 5.6 37.3 42 3 0.8 6.4 42.7 48 4 0.8 7.2 48.0 54 2002 1 1.0 8.2 54.7 60 2 1.0 9.2 61.3 66 3 1.0 10.2 68.0 72 4 1.0 11.2 74.7 78 2003 1 1.0 12.2 81.3 82 2 1.0 13.2 88.0 86 3 0.5 13.7 91.3 90 4 0.5 14.2 94.7 94 2004 1 0.5 14.7 98.0 100 2 0.3 15.0 100.0 106 figures may differ slightly due to rounding. SDR amount is equivalent of US$14.98 million. I Annex C Table 5 Page 1 of 2 Proposed Supervision Plan and Schedule for the ASSP Project Approximate Activity Expected skill Requirement Staff Date of Input Weeksl (mo/yr.) June 98 Supervision Mission Task Manager 20 (Project Launch) Extension Specialist Agriculturist / Seed Specialist Financial Management / Disbursement Spec. Procurement Specialist Dec 98 Supervision Mission Task Manager 20 Extension Specialist Agriculturist / Seed Specialist Financial Management ! Disbursement Spec. May 99 Supervision Mission Task Manager 20 Extension Specialist Agriculturist / Seed Specialist Financial Management / Disbursement Spec. Procurement Specialist Dec 99 Supervision Mission Task Manager 20 Extension Specialist Agriculturist / Seed Specialist Financial Management / Disbursement Spec. (continued) Annex C Table 5 Page 2 of 2 Approximate Activity Expected skill Requirements Staff Date of Input Weeks June 2000 Supervision Mission Task Manager 20 Extension Specialist Agriculturist / Seed Specialist Financial Management / Disbursement Spec. Procurement Specialist Dec. 2000 Supervision Mission Task Manager 15 (Mid-term review) Extension Specialist Agriculturist / Seed Specialist Financial Management / Disbursement Spec. May 2001 Supervision Mission Task Manager 15 Extension Specialist Agriculturist / Seed Specialist Financial Management / Disbursement Spec. Procurement Specialist Dec. 2001 Supervision Mission Task Manager 15 Extension Specialist Agriculturist / Seed Specialist Financial Management ! Disbursement Spec. May 2002 Supervision Task Manager 15 Extension Specialist Agriculturist / Seed Specialist Financial Management / Disbursement Spec. Procurement Specialist Dec. 2002 Supervision Task Manager 20 (ICR Preparation) Extension Specialist Agriculturist / Seed Specialist Financial Management / Disbursement Spec. Includes desk work at headquarters in Washington Annex C Table 6 Kyrgyz Republic Agricultural Support Services Project Technical Assistance A List of TORs in the Implementation File Component TORs for A. Land and Agrarian Reform 1. Land and Agrarian Reform Specialist 2. Land Law Specialist 3. Monitoring and Evaluation Specialist 4. Land Auction and Leasing Specialist 5. Training Specialist 6. Public Information Specialist B. Rural Advisory and Development Services 1. Local RADC Managers, Farm Mang. Specialist 2. RADS General Manager (local) 3. Extension Specialist 4. Training Specialist 5. Farm Development Fund Specialist 6. Farm Group Development Fund Specialist C. Seed Industry Development 1. Seed Specialist 2. Plant Breeding Specialist 3. Seed Certification Specialist 4. Variety Testing Specialist D. Crop Protection and Plant Quarantine 1. Pesticide Specialist 2. IPM Expert 3. Legal Specialist E. Agriculture Market Information System 1. Market Information System Specialist 2. Market Analysts for National Statistical Committee (local support) 3 Market Analysts for Department of Anti-Monopoly 4. Specialists in Grades and Standards F. Project Implementation Unit 1. National Project Director 2. Project Implementation Advisor 3. Procurement Specialist (National) 4. Disbursement Specialist (National) I STAFF APPRAISAL REPORT KYRGYZ REPUBLIC AGRICULTURAL SUPPORT SERVICES PROJECT Contents 1. BACKGROUND ..............................................................,1I A. PROJEC'T' BACKGROUND .I B. AGRICULTURE SICTOR .I C. BANK GROUP SUPPORT FOR AGRICULTURE IN T-IE KYRGYz REPUBLIC .3 2. ISSUES IN AGRICULTURAL SUPPORT SERVICES .5 A. LAND AND AGRARIAN REFORM .5 B. RURAL ADVISORY SERVICES .9 C. SEED PRODUCTION .1 D. CROP PROTECTION .13................................................. ......3 E. AGRICULTURAL MARKET INFORMATION .14 3. THE PROJECT .15 A. PRO.ICT OBJECTIVES .15 B. StUMMARY DESCRIPTION .15 C. DETAIIED FEATURES .15 D. PROJECT COST ESTIMATES .24 E. PROJECT FINANCING .25 F. STATUS OF PROJECT PREIPARATION .26 4. PROJECT IMPLEMENTATION .28 A. PROJECT ORGANIZATION AND MANAGEMENT .28 B. PROCUREMEN'T ARRANGEMENTS .37 C. DISI3URSEMENTS .42 D. ACCOUNTS ANI) AUm'I .43 E. SUPI.RVISION AND MONI'I'ORING .44 F. COORDINATION WITI I OI lIE.R PROJEICTS .44 5. PROJECT BENEFITS AND RISKS .45 A. BENi.F.ITS .45 B. FINANCIAL, ANI) ECONOMIC ANALYSIS .46 C. PROJEC T SUSTAINABILITY3.l 50 D. POVERTY IMI'AC."I 53 E. ENVIRONMENIAI. IMIAC'T .53 F. PROJE.CT RISKS ANI) MITIGATION MEASURES .54 6. AGREEMENTS REACHED AND RECOMMENDATION .56 - ii - ANNEXES A - Project Design Summary B.- Detailed Project Costs Estimates C - Project Implementationi Plan D- Financial and Economic Analysis TABLES Table 1.1 Rural Population and Agricultural Lanid by Oblasts .......................................................2 Table 2.1 Progress in Land Reform ................................................................................5 Table 2.2 Farmer Groups in Donor-Assisted Pilot Projects .......................................................... 10 Table 3.1 Summary of Project Costs ............................................................................... 25 Table 3.2 Financing of Technical Assistance and Training .......................................................... 26 Table 3.3 Summary of Financing Plan ............................................................................... 27 Table 4.1 Project limplementing Agencies ................................................................................ 28 Table 4.2 Summary of Procurement Arrangements ...................................................................... 40 Table 4.3 Summary of Procurement Information .......................................................................... 41 Table 5.1 Summary of Yields and Gross Margins of Major Crops With Existing and Improved Technology ................................................................................. 47 Table 5.2 Farm Models - Area, Returns and Credit ...................................................................... 47 Table 5.3 Household Models ............................................................................... 48 Table 5.4 Sensitivity Analysis: Switching Values ......................................................................... 50 Table 5.5 Sensitivity Analysis: Changes in Project Cost and Benefits (Economic) .......... . .......... 50 Table 5.6 Incremental Income and Service Costs per Household (HH)............................ ....... 51 FIGURES Figure 1.1 -RADS: Conceptual Design ........................................................................ 18 Figure 1.2 -Project Organization and Management ................................... .................................... 29 Figure 1.3 -Organization of Rural Advisory and Development Service (RADS) . ........................ 32 Figure 1.4 -Organization of Rural Advisory and Development Centers (RADCs) . ...................... 33 MAP IBRD 28979 TECHNICAL ANNEXES IN IMPLEMENTATION FILE I. Land and Agrarian Reforn (Farn Restructuring Support) 2. Agricultural Advisory and Development Services 3. Seed Development 4. Regulatory Services in Plant Protection and Pesticide Use 5. Agricultural Techniology 6. Agricultural Market Information System 7. Financial and Economic Analysis 8. Project Cost Estimates (Detail Tables) 9. Technical Assistance and Training: Terms of Reference 10. Five-Year Procurement Plan -iii- KYRGYZ REPUBLIC AGRICULTURAL SUPPORT SERVICES PROJECT (ASSP) CREDIT AND PROJECT SUMMARY Borrower: The Kyrgyz Republic Implementing Agency: Ministry of Agriculture and Water Resources (MAWR) Beneficiaries: MAWR and its associate entities; State Agency for Land Management and Land Resources; Participating enterprises and farms. Project Objective: Improve incentive framework for, and productivity, profitability and sustainability of Kyrgyz agriculture by: implementing land and agrarian reforms; providing emerging private farmers with advisory and development services (including micro-credit); seed industry development; establishing legal framework, organizations and procedures for crop protection and plant quarantine; establishing agricultural marketing system; and capacity building in the Ministry of Agriculture and Water Resources (MAWR). Poverty: In the rural sector, the proportion of households in poverty is over 50 percent of the total. The project's focus on increasing agricultural productivity is critical to increase rural incomes and alleviate rural poverty. Amount: SDR 11.1 million (US$14.98 million equivalent). Terms: Standard IDA terms, with 35 years maturity, including 10 years grace. Commitment Fee: 0.50 percent on undisbursed credit balance, beginning 60 days after signing, less any waiver. Project Financing: Total project costs are estimated at US$30.2 million. IDA would finance about US$15 million, or 49.7 percent of the total project costs, and 74.9 percent of foreign exchange part of the total project costs. IFAD would co-finanice the project up to US$7.9 million or about 26.2 percent of the total project costs, to support the Rural Advisory and Development Services (RADS) component. Bilateral donors would contribute about US$2.1 million or 6.9 percent of the total project costs. IDA and IFAD-assisted SDP would provide US$1.8 million or 6 percent of the total project costs to finance rural advisory and development services to be taken over by the project. -iv- Governmenit would contribute US$2.2 million, or about 7.1 percent of the total project costs. Beneficiaries' contributioni would be about US$1.2 million or 4.1 percent of the total project costs. Fiancin2g Plan: Fintancinig Source Local Foreign Total % of total project costs IDA 3.0 12.0 15.0 49.7 IFAD 2.5 5.4 7.9 26.2 Sheep Development Project 1/ 1.1 0.7 1.8 6.0 Bilateral Donors 0.9 1.2 2.1 6.9 Governmeit 2.0 0.2 2.2 7.1 Beneficiaries 0.7 0.5 1.2 4.1 Total 10.2 20.0 30.2 100.0 Percent of Total 33.7 66.3 100.0 Note: Vigures may slightly vary due to rounding. 1 / Livestock advisory services financed by IFAD under the Sheep Development Project (SDP) will be merged with ASSP's rural advisory and development services (RADS) which will be co-financed by IFAD. Economic Rate of Return: 20 percent Staff Appraisal Report: 17312-KG Map: IBRD 28979 Project ID Number: KG-PE-40721 KYRGYZ REPUBLIC AGRICULTURAL SUPPORT SERVICES PROJECT STAFF APPRAISAL REPORT CHAPTER 1: PROJECT AND SECTOR BACKGROUND A. PROJECT BACKGROUND 1.1 Revitalization of agriculture is a central element of IDA's assistance program for the Kyrgyz Republic. Agriculture is the mainstay of the Kyrgyz economy accounting for about 47 percent of GDP, 49 percent of employment and 38 percent of total exports. The sector's sustained growth is fundamental to accelerate the country's overall growth and reduce poverty. After a downward spiral of declining output, productivity and incomes during 1991-96, the sector is beginning to recover with a projected positive growth. However, the sector remains far from becoming efficient and profitable. 1.2 Against this background, the proposed project is designed to improve productivity, profitability and sustainability of agriculture by accelerating the implementation of land and agrarian reforms; and by providing to farmers critical advisory services and market information, supplemented by farm demonstrationis, field trials, and adaptive research; increased availability of quality seed; and crop protection and plant quarantine technologies. The project would complement other IDA-assisted agricultural operations and enable private farmers to avail themselves of rural credit, and benefit from irrigation infrastructure improvements, which would be supported respectively by the Rural Finance Project (approved in June 1997) and the Irrigation Rehabilitation Project which is being processed in parallel to the proposed project. The project would improve the effectiveness of the Ministry of Agriculture and Water Resources (MAWR) as a service-provider to the sector and the administrator of new laws and regulations. The Government provides high priority to this project. B. AGRICULTURE SECTOR Physical and Economic Setting 1.3 Kyrgyz agriculture is diverse. Out of a total of 10 million hectares of agricultural land, there are 1.5 million hectares of arable land in lowlands under intensive production, and 8.5 million hectares of upland grasslands and pastures under extensive livestock grazing. The country broadly splits into two main "regions", the heavily populated and climatically warmer South consisting of two oblasts, Osh and Dzhalal- abad, separated by the Tien Shan mountains from the more sparsely populated North. In winter it is not possible to drive between the two regions. In the North, there are also differences with Chui having a disproportionate amount of the cultivable and irrigated land (Table 1.1). The country experiences a typical continental clinate for Central Asia in the lowlands with temperatures rising to 40°C in the summer and falling to -20°C in the winter. The mountains are snowbound over the winter but provide much of the summer grazing. Precipitation which is dispersed throughout the year, varies from 130 - 680 mm and potential water deficits range from 360 -1450 mm. However, surface water supplies, largely derived from snow-melt are about adequate to meet the deficit in almost one million hectares under irrigation command. The major crops grown are wheat, barley, maize, cotton, tobacco, CHAPTER 1: PROJECTAND SECTOR BACKGROUND 2 sugarbeet, sunflower, potato, vegetables, fruit and fodder crops, while the main livestock products are meat and wool. 1.4 Livestock production contributes over 40 percent of agricultural GDP. Historically, feed from natural grasslands and fodder crops grown on irrigated land was heavily supplemented with imported grains and numbers rose to unsustainiable levels. Since 1991, there has been a severe cut back in imported feed and livestock numbers hiave dropped shiarply - sheep from 10.5 million to about 3 millionl and cattle from 1.2 million to 0.9 million. Livestock production remains less profitable than crop production, largely because prices for most livestock products remain depressed. New feeding systems based on improved fodder are required. 1.5 The population is about 4.6 million of whom 800,000 live in the capital Bishkek. Some 3.8 million people live in the regions and depend on the agricultural sector for thieir livelihood. The population of the six oblasts (excluding Bishkek city), whichi is predominantly rurai, is broadly as follows: Table 1. 1 Rural Population and Agricultural Land By Oblasts Oblast Population Cultivated Land Irrigated Land (000 persons) (000 ha) (000 ha) Dzhalal-Abad 820 191 97 Issyk Kul 418 186 137 Naryn 262 178 11] Oshi 1 409 360 129 Talas 202 134 89 Chiui 746 447 273 Total 3 857 1 498 836 Poverty 1.6 While poverty existed when the country was part of the FSU, real declines in GDP from 1991 until 1996 have been accompanied by rising unemployment and increasing poverty. In 1993, slightly more thani 40 precut of the population were classified as poor. By 1996, at least half of the population had consumption levels below the poverty line. The severity and depth of poverty are greater in rural areas where paid employment has declined more sharply than in urban areas. The most vulierable group is rural women while anthropometric data highilight the increasing incidence of malnutrition among children. The overall demand for benefits under the social safety net system in the Kyrgyz Republic has increased to a point where it is putting intolerable pressure on the social and employinent fuLids. Increasinig rural incomes throughi productivity increases in agriculture, the project's core objective, is therefore critical to alleviate rural poverty and reduce the government's growing fiscal obligations toward social expenditures. Government Objectives and Strategy 1.7 Kyrgyz Republic has been in the forefront in Central Asia in pursuhig econoinic reforms. To promote agricultural recovery and adjustment, the Government, with Bank Group assistance, hias formulated a strategy which includes: (a) privatizing state-owned land, and state and collective farms; (b) removing price controls and trade restrictions; (c) creating competitive and private marketing chaninels, (d) rebuilding a rural credit system; and (e) redefining the role of the state. Since 1991, the Government has acted on a number of fronlts includinig demonopolizing and privatizing agro- CHAPTER 1: PROJECTAND SECTOR BACKGROUND 3 conglomerates, introducing land reform legislation, improving the incentive structure, and reorienting the functions of the Ministry of Agriculture and Food, whichi has recently been merged with the Ministry of Water Resources, to be able to efficiently serve the emerging market-oriented agriculture. 1.8 The governmenit launched land and agrarian reforn in 1991, and vigorously pursued it since 1994 with emphasis on1 privatizing state and collective farms and ensuring equitable distribution of land and property among their members and rural citizens. Although the Kyrgyz Constitution still prohibits private ownership of land, considerable progress has been made in distributing the land held in former collectives and state farms on1 a 99-year lease basis. Land use rights are tradable. In December 1997, the government submitted to Parliament a comprehenisive draft Land Code, and is expected to propose a constitutionial amendment instituting private ownership of land and a Civil Code with provisions on the right to owIn lanid. Rural Credit 1.9 The Government has also embarked on a reform of the financial sector and is putting in place a strategy for rural finance. The Kyrgyz financial system, like those in other FSU countries, is still in transitioni. A comprehensive financial sector reform, supported by an IDA-assisted Financial Sector Adjustnent Credit (FINSAC) is assisting in the creation of a policy and regulatory environment conducive to the sound growth of a competitive and efficient banking system. As part of this operation, the Agroprombank which was the main channel for provision of directed credit to agriculture in the FSU was liquidated in 1996. The demise of this institution has left the rural sector without an institutional lender, and indeed virtually no access to credit. In response to this void, the govemment has established a commercially oriented and operationally autonomous noni-banikinig credit agency, the Kyrgyz Agricultural Finhance Corporation (KAFC) and to begin the long-tern development of a community-based rural finance system. This program is being supported by the recently approved, IDA-assisted, Rural Finance Project. 1.10 The Rural Finance Project would: (a) in the short-term, through KAFC, establish an interim institutional arrangement for lending to the agricultural and agribusiness sectors; and (b) in the medium- to long-term, support a Small Farmer Credit Outreach Program (SFCOP) to provide the basis for developing community-based financial services for the rural population. The SFCOP will be implemented on a pilot basis to permit necessary flexibility to learn and eventually establish rural financial intermediaries (RFIs) based on cooperative principles. SFCOP would test specific mechaniisms for credit delivery to poor houselholds and develop self-help organizations to facilitate poor households' access to commercial credit and other financial services. C. BANK GROUP SUPPORT FOR AGRICULTURE IN THE KYRGYZ REPUBLIC 1.11 The Bank's Country Assistance Strategy (May 1998) supports interventions in four main areas: restoration of growth, particularly in the rural sector; poverty alleviation; institution building; and strengthening of public finances. Recovery in the agriculture sector is a critical element of IDA's assistance program for economic growth and poverty reduction. Within the CAS framework, IDA assistance strategy for the rural sector consists of both policy-based operations in support of structural reforms and investment lendinlg operations in support of sectoral development. Operations in support of structural reforms, with relevance to the agricultural sector, included: (i) the Privatization and Enterprise Sector Adjustment Credit (PESAC) whichi initiated liberalization of trade and price policies, and the improvement of the regulatory framework for private sector development; (ii) the Agricultural Privatization and Enterprise Adjustment Credit (APEAC) which has promoted the deepening of market and price liberalization in agriculture and development of competitive markets through CHAPTER 1: PROJECTAND SECTOR BACKGROUND 4 demonopolization, privatization, and private sector development; and (iii) tile Financial Sector Adjustment Credit (FINSAC) referred above (para. 1.9) to restructure banking and make it competitive. Tile Bank Group has also provided TA to assist in designing a Land Reform and Farm Restructuring Program. 1.12 In addition to the above policy-based operations and the Rural Finanice Project (paras. 1.9 and 1L.10), IDA's lendinig program in agriculture includes the following investment operations: (i) the Sheep Development Project (SDP) whiclh recently became effective, aims to privatize, and increase profitability and export-orielltatioll of the sheep industry; (ii) the proposed Irrigation Rehabilitationi Project to restore original capacity of the irrigation and drainage system, and to establish an effective institutionial capacity to manage irrigation water efficiently and on a sustainable basis; and (iii) the proposed Agricultural Support Services Project (ASSP) to provide post-privatization support services to the growing private farming sector. Other donors, including TACIS aiid the Asian Development Bank (ADB), are providing techniical assistance to MAWR for its reorganization and capacity building. 1.13 Co-financing: IFAD Assistance Strategy. The International Fund for Agricultural Development (IFAD) would co-finance the Rural Advisory and Development Services component of the proposed project. IFAD's particular role is to ensure that in agricultural restructuring and development funded by the iiiterllatiollal community, small farmers and rural people who are below the poverty line are taken into account. Given the limited resources at its disposal, IFAD's strategy is one of involving the formation of strategic alliances, joining with the goveriiment and major financing agencies interested in nationial sector interventions, and seeking to ensure that suchl interventions are adequately responsive to the requirements of the rural poor. Pursuant to this strategy, IFAD is currently co-financing the IDA- assisted Sheep Development Project (SDP) which focuses on raising incomes of sheep producers who constitute the poorest segment of the rural population. The SDP is designed to introduce institutional reforms including the formation of grassroots level slheep farmers' organisations and provide them withl advisory services. Under the proposed project (ASSP), IFAD will co-finance agricultural advisory services for crops and livestock, the latter by integrating sheep advisory services being financed under SDP; and a pilot Iine of credit for small-holders with related teclinical assistance, complementillg the on- ,going IDA-assisted Rural Finance Project. 1.14 Bank Group's Experience. With the Slieep Development Project, wlich is the Bank Group's first inlvestmenet project in the sector, followed by the recently approved Rural Finance Project wlicih is just getting underway, the Bank Group has little project implementation experience in Kyrgyz agriculture. However, it is clear that inadequate implementation capacity is a serious issue and that effective project implementation requires reliance on foreign technical assistance. At the same time, considerable care must be taken to build local ownershlip. Elsewllere, investments in land and agrarian reforms have sIlowI to hiave improved producer incentives, and those in agricultural advisory services and seed industry development to hiave ligll payoffs, if implemented under a coinducive policy environiment and participatory approach. Initiatives in the area of crop protection and plant quarantine detect, monitor and address threats to plant, animal and humani healtll, tlhereby significantly contributing to the protection of the environment. Similarly, the Bank Group's experience from elsewilere in the world inldicates that the existence of a market information system can be critical to the development of competitive markets for agricultural inputs and outputs. Also, tIle Bank Group's limited experience in FSU and Eastern European countries indicates that project implementation problems require investments in institution building with emplhasis on hluman development. CHAPTER 2: ISSUES IN AGRICULTURAL SUPPORT SERVICES A. LAND AND AGRARIAN REFORM 2.1 Legal Framework. Since 1991, land reforn and farn restructurilng have been the cornierstonie of the governmeit's economic reform program, with a focus on creating an effective market environment in the rural sector, improving farm profitability, and providing equal opportunities for developmenit of all types of farm enterprises. Durinig 1991-93, the government established a legal framework to introduce the concepts of an "individual farm", a "peasant farm", and other types of farn organizationis SLIch as agricultural production cooperatives, associations of peasant farms, joint-stock companies, and small enterprises. UIntil early 1993, these types of fanns gained in number and land area. As the stagnationi and even reversal of the reform process became evident by about the end of 1993, the government introduced, in 1994, a Presidential Decree to reinforce the implementationi of the land and agrarian reforn program. This decree has become a center-piece of the prevailing legal framework for agricultural land and noni-lanid property distribution and farn restructuring. 2.2 Progress witht Land and Agrarian Reform. The 1994 Presidential Decree required all state and collective farms to issue shares of their land to farm residents, and non-lanld assets to farm employees for purposes of reorganization into smaller units. The decree provided the beneficiaries of land reform, the right to choose the kind of fann unit they want to establish or participate in, within the limits of minimum and maximum farm sizes set by the law. While the maximum limits on farm sizes were subsequently eliminated, the minimum limits on farm sizes were reduced to one ha for individual farms and five ha for associations of peasant farms. 2.3 There has been a substantial progress in thefirst stage of land reform, namely, the distribution of rights to use land from the former state and collective farms to individual farm households, with MAWR- recognized shares distributed for approximately 75 percent of 986,000 ha subject to distribution. This was done by issuing either of State Acts guaranteeing 99-year user rights (with few restrictions) or Certificates of Right to Use a Land Share. As in the case of land shares, the distribution of non-land assets ("property"), especially livestock, has proceeded almost as rapidly, with property share distribution completed on 387 of the 518 former state and collective farms. The backlog in the issue of land and non-land shares is mainly in Chui oblast. Table 2.1. Progress of Land Reform (as of January 1, 1997) Category Area (000 ha) % Commnents Land distributed by shares 766 471 51 Owned by about 800 000 families Land not distributed 219 995 15 184 000 ha in Chui oblast Land Redistribution fund 353 438 24 Available for leasing Seed and breeding farms 158,613 11 Continuing as state farms Total 1 498 517 100 2.4 The land and agrarian reform program provided members of the former state and collective farms the following four options in farm reorganization: (a) divide into individual and peasant farms; (b) divide into individual and peasant farms with voluntary reconsolidation into associations and cooperatives; (c) reorganize whole or part of the farms into joint stock companies; or (d) declare bankruptcy, with property CHAPTER2: ISSUESINAGRICULTURALSUPPORT SERVICES 6 sold by auction to other producers. However, contrary to the govermienit's expectation that most of the forner state and collective farms would dismanitle and restructure by the end of 1996, approximately 45 percent of the irrigated land area, or about 430,000 ha. still remains unider m-anagement structures essentially unchianged from those of the commanld economliy era, withi thieir chiaracteristic inefficienlcies. 2.5 Agricultural Land Retlistribution Fund (ALRF). An additional feature of tile Kvrgyz Republic's land and agrarian reforn program was the creatioii of a large reserve of land whichi formerly belonged to state and collective farms, whichi has been placed by law uiider the control of local goverinmenits. Initially, about 50 percent of total irrigated arable land, in most cases the best land, was transferred to a National Land Fund whichi was designated for the creation of peasant farms with "traditional Kyrgyz ways of farming". The land reserve has since been reduced to 25 percent and the National Land Fund hias been replaced by the Agricultural Land Redistribution Fund (ALRF). By currenit policy, the governmeit expects to auctionl about 50 percent of this land, with the remaininig 50 percent rented in shiort-term leases. Interim auction and leasing procedures, issued in September 1997, however, remain largely ulitested. 2.6 New Plhase in Land and Agrarian Reform. Land and agrarian reform in the Kyrgyz Republic must, therefore, launcil a new phase of consolilation and completion in whichi emphasis needs to be given to the areas in whichi land and non-land assets have either not beeii distributed, or distributed but not c*onsistenit with official guidelines. Attentioni must also be focused on the creation anid managemenlt of new e*nterprises from land anid non-land properties that still remain under the soviet-style collective maniagemenit. As the government is in the process of introduciing an immovable property registration system and a revised Land Code, the new phase of consolidation of land and agrarian reform is critical to establish the foundation for a secure, well-functioniing market in land leases and other assets in rural areas. To achieve this objective, a number of issues and constrainits, as noted below, must be systematically addressed: (a) Legal and Policy Aspects. While the legal framework for land anid agrarian reform, over time, has become more coherent, the following aspects are impeding the progress of land and agrarian reform: first, legal mandates for the agencies charged witlh land arid agrarian reform, including MAWR's Republican and Oblast level Centers for Land arid Agrarian Reform (RCLAR/CLARs); the recently established State Agency for Land Management and Land Resources (SALMLR); the oblast and rayon administrations, arid village governments tend to overlap arid need to be adequately defined, particularly at the grassroots level. The lack of clarity in the functionis of the above agencies have contributed to fragmented, arid sometimes contradictory approaches to land arid agrarian reform; secontd, while temporary regulations for the auction of land held in reserve have recently been issued, the basic policy objectives of the auction program remain to The government has since asked the MAWR Council headed by the Minister to address inter-agency coordination issues in the context of government orders Nos. 490 of October 1996 (for RCLAR); 3 1 0 of July 1996 (for SALMLR); and 187 of April 1996 (for local governments). Further work is needed to clarify responsibilities of individual agencies under these orders and other laws on land and agrarian reform. CHAPTER 2: ISSUES INAGRICULTURAL SUPPORTSERVICES 7 be defined. If the objective of the auction program is to make more land available to younlger or land-poor farmers (equity objectives), these goals should be explicitly incorporated into auction procedures; thiirdl, there is a need to provide fuller definition of rights and obligatiolis of new types of farms and service providers; fourth, legal rights conferred by land certificates for use of a land share, particularly with respect to inileritanice procedures, require formal clarifications; and the multiplicity of formats used for land certificates may complicate authenticationi and registration of land rights; fifth, criteria whicih can be used by local governmeit authorities for forfeiture of land use righits need legal clarification; sixtih, as land leases expire, their desirability for use as collateral diminishes. The question of how to make long-term use-rights function effectively as collateral must be addressed; and filnally, there is a need to reexamine the desirability of minimum size limits from the standpoint of enforcement and land market efficiency. (b) Institutional Coordination. The current informal coordination among RCLAR and CLARs, and SALMLR is weak and contributinig to fragmented implementation of the land and agrarian reform program. Besides, RCLAR, CLARs and SALMLR lack adequately- trained staff in sufficient numbers and equipment to carry out their responsibilities effectively. The government should draw up revised institutional mandates and a unified strategy for RCLAR and SALMLR; provide necessary training to their staff to effectively carry out land and agrarian reform policies; and support rural inhabitants in a variety of farm restructuring tasks. (c) Distribution of Land Shares. About 25 percent of land shares (for some 220,000 ha.) remain to be officially distributed. The backlog is mainly in Chui oblast where land shares have not been issued for some 185,000 ha, or about 77 percent of the total land earmarked for distribution but not yet distributed (220,000 ha). Further, about 90 percent of land certificates issued to holders of land shares are "temporary" rather than "permanent" and do not necessarily contain a sketch map identifying the location of household parcels. In Chui oblast, the shares issued are not recognized by the MAWR, as the share certificates do not conform to what the government has now adopted as an official standard; moreover, the certificates have been issued in the names of individuals rather than in the names of households. Land share distribution in Chui oblast is, therefore, a major unfinished issue, which will need to be dealt with through a coordinated effort of RCLAR/CLARs and SALMLR, taking a proactive role in issuance of share certificates for an estimated 90,000 families. Some 90,000 additional land shares in existence outside Chui do not correspond to a spatially defined parcel of land. These parcels need to be surveyed and sketched on CHAPTER 2: ISSUES INAGRICULTURAL SUPPORTSFRVICES 8 maps, giveni tilat it is now the government's policy that cach land slhare shiould be spatially located. 2 (d) Distribution of Property Shares Property shiares lhave not vet beeen issued by some 131 state and collective farms (out of 518 ). Of these 131 farms. 90 are located in CIhLui oblast. Valuation of propelty and shiare distribution in ClLii oblast, tlherefore. is a key unfinished issue. Elsewhiere in the couLntry, particularly in Oslh oblast. whdere many small larms hiave emerged, the manlagemenit of redistributed property lias become the central issue. Many individual farmers hiave ownerslip slhares in machiniery and infrastructure wlicih are runi by -service centers" wlhose maniagemenit is in the hanids of village government and/or the previous farm management committees, sometimes due to indivisibility of properties involved but more ofteii to provide the latter witlh an incomiie. The lack of transparent. equitable, and efficient manageinent practices for thlese assets is inhibitiiw( access to machiniery services for a substantial numilber of farms aiid contributing to decapitalization of the sector. Outstandinig fann debt, principally to the forner Agroprombanik and the governmenit, hias further complicated property shiare division, and is creating a disincenitive to formation of new farms. Pragmatic and conciliatory collection procedures and case-by- case debt restructuring linked to new leniding, may substanitially reduce this disincentive. (e) Farm Management and Reorganization. In some areas, especially in Chui oblast, thle pre-reforn management structures control up to 80 percent of irrigated land. Difficult macro-economic conditionis have played a large role in discouraging furtlher evolution in farn organizationi. But an equally discouraging role has been played in some areas, by managers and administrators reluctant to lose advantages offered to tlhem by thle status quo. Wlhile economic and sectoral reforms are beginninig to address constrainits to farm reorganization, public information about the legal framework, support for thie establislhment of true cooperatives and associations, and pro-active policy of advocacy and advisory services for restructuring enterprises must address the second set of constrainits. Thle newly forined farn enterprises face severe constrainits to becoming economically viable entities due to the lack of post-privatization services. Many are transitionial farn units whichi might undergo further changes, suclh as consolidation, division, and liquidation. Critical to the survival of these new private farns is access to: (i) credit to purcilase needed inputs; (ii) mechanizationi services and irrigation water; (iii) competitive product markets (including the recovery of agro-processing); (iv) techinical and farm management advisory services; and (v) productivity-enlhanicing technologies. 2.7 The government provides hiiglh priority to the establishment of a land registration system. 3 A draft law on the State Registration of Laand alid Immovable Property Riglhts wliclh provides for a uniform 2 The certificate for the right to use the land has only one official form introduced by the Government Resolution No. 632 of August 22, 1994, which has been used by all oblasts except Chui. The Chui oblast has introduced a different form for this certificate by a local government resolution No. 7/P-2/16 which, according to MAWR and SALMLR must be canceled and new certificates issued in the standard form. Chui certificates, unlike the certificates issued in other oblasts, are not accompanied by plot sketches. Pending the passing of a law on the State Registration of Land and Immovable Property Rights, the government has issued a Resolution No. 172 dated April 2, 1997 to facilitate registration of rights to use land. The SALMLR has been designated as the implementing agency. According to SALMLR, some 450,000 certificates must be issued and unless it is institutionally strengthened, it would take several years CHAPTER 2: ISSUES INAGRICULTURAL SUPPORTSERVICES 9 registration system covering all land (both rural and urbani) Uinder a single authlority has been submitted to Parliament. The governmiienet has also designated the Ministry oflJustice as the agenicy responsible for the registration system. A pilot registrationi project finaniced by USAID has been completed in two rayons and a follow-up project may be included in the IDA lending program for f1Y99. Accelerated and legally consistenit completioni of the distributioll ol land and property sliares is critical to ensure that transactionis and new boundaries created out of land reformi and farmi rCstrLucturinig are properly documented and monitored, througlh rural committees and rayoni level adminiistrationis and eventually by the Ministry of Justice. The proposed strengtlhenlinig of RCLAR/CLARs and SALMLR is fulidamenital to this process. B. RURAL ADVISORY SERVICES 2.8 Clhanges in Iniformiationi Needs. Under the forner system, the previous Ministry of Agriculture and Food (MAF) planied production in the agricultural sector on the basis of Governmenit targets, issuing instructions directly to the state and collective farms. The Agricultural Directorate of MAF provided techinical support to large scale farms throughi oblast and rayon level staff, in the form of directives concerning production quotas and use of new cultivators, fertilizers and other inputs. Many of these staff have joined new farms and those remainin1g with local departments of agriculture now deal primarily with regulatory matters. 2.9 Field surveys slhow that new farm owners created by the processes of land reform, either have no kinowledge of farming or, should they have worked in collectivized agriculture before, have much specialized knowledge in one or two activities under large scale agricultural production. Neither group has any experience of total farn management in a market economy nor of technical farm activities, apart from their previous specialization. The need for an advisory service is clear and urgent if land reforn is not to falter, and agricultural production is not to remain low with serious consequences for the economy as a whole as well as for the incidence of poverty. 2.10 Donor-assisted Advisory Services Projects. Since 1992, pilot projects funded by TACIS, Swiss Aid (provided through Helvetas and Caritas) and GTZ (Germany) have been launched to test out the provision of farm advisory services to emerging private farms. TACIS has operated two pilot projects: one of these has financed Agri-Business Centers (ABC) in three locations - Kara-Balta (Chui Oblast), Naryn and Djalal-Abad and the other set up Agricultural Training and Advisory Services (ATAS) in the Issyk-Kul and Talas oblasts, and a central unit in MAWR, Bishkek. These two pilot projects closed in December 1997. TACIS has also supported a pilot Farm Management Survey. Although there are no experienced farn management advisors within the country, the various pilot projects have shiowin that correctly selected and trained nationals, provided with up-to-date and accurate information, can very rapidly start to play a role in the support of the new land owners and managers. These pilot projects have tested different models of advisory services, as follows: the Swiss model supported the bottom-up approach based on the formation of groups which provide small farmers and poor people with democratic and financial power. The main emphasis has been on credit and farmer institution building, the latter bringing other benefits in its wake; * the German model is based on the special environment of Osh Oblast which already has strong Farmers Associations (FAs) established. The approach of this model has been to provide to complete this process and effectively service its obligations concerning the registration of rights to use land under the above government resolution. CHAPTER 2: ISSUES INAGRICULTURAL SUPPORTSERVICES 10 technical and legal advice at oblast level, as there is considered to be less need for rayon level staff because of the existence of strong FAs; * the ECU-TACIS ABC model is based on providing credit, building farmers' organizations and agro-technical advice withi specialist staff based in a large town rather than at rayon level; * the ECU-ATAS model is committed to the concept of general advisors at rayon level supported by subject-matter specialists at oblast level and a central office to provide a stream of information on inarketing and prices, land reform, credit as well as technical advice. 2.11 The Swiss-funded project run by Helvetas has been operating in two rayons in Naryn, while Caritas has a pilot activity in Djalal-Abad. Swiss aid is expected to continiue to support these operations for the next 5-10 years and any intervenitionis by the proposed project would be of a complementary nature. GTZ started a 5-year pilot program in July 1996, with the objective of developing structures and institutiolIs for farmers, ethniic groups and women in four rayons of Osh oblast. These pilot projects have demonstrated that farmers need general advisors at rayon level, capable either of advising directly on a range of topics (finanice, tax, techinology etc.) or know how, and where to get the informationi. Broadly, where farmers have a good techinical grounding, they seek Agri-business skills including fann management, financial planninig, cooperative managemenit and marketing. On the technilcal side, farmer skills are particularly weak in soil conservationi, irrigation management, animal husbandry and farm mechanizationi. The majority of farmers seek advice that is impartial and free of political interference. Table 2.2: Farmer Groups in Donor-Assisted Pilot Projects Oblast Pilot Project Farmer Groups Members (Farms) Talas ATAS 35 1643 CNFA 1 62 Naryn ABC/Helvetas 16 2470 Helvetas 44 1287 Djalalabad Caritas 118 2917 Osh GTZ 12 2917 CNFA 3 159 Issak-Kul ATAS 65 2724 PIAFDP 5 154 CNFA 1 234 Chui ABC 4 235 Total 304 14798* * Average farmer members per group: 49. CNFA: US-based Citizens Netwiork for Foreign Affairs. 2.12 Sustainability of Present Advisory Services. While there are altogether about 70 advisory staff working under the three donor-assisted projects (Swiss, German and EU-TACIS) in some 16 rayons, the sustainability of these services is in doubt. To date, pilot advisory services have been financed entirely by donor funds. While the services so developed are unsustainable as such, farmers have come to depend on them for sound advice and a fair counsel in the face of resistance of local administrations and rural committees (which previously managed the state or collective farms) with whom they are frequently in dispute on matters of land and property distribution. MAWR considers that quasi-independence of the advisory services should be maintained, while the local departments of agriculture should continue to be responsible primarily for regulatory matters. The proposed ASSP project would support this approacih withi the objective of putting advisory services on a sustainable basis and improving donor coordination, without, however, (a) losing the key elements of individual initiatives; and (b) by developing necessary linkages withi farm demonstrations, field trials, adaptive research and the agricultural research system. CHAPTER 2: ISSUES INAGRICULTURAL SUPPORTSERVICES 11 2.13 Agricultural Research System. The agricultural researcih system wlich was hardly sustainable before 1991 has ilow virtually collapsed. Designed for a different era whien much of the research was managed and funded from Moscow for the benefit of collective and state farms, salaries have dwindled and are paid irregularly, many staff have left and laboratories are closed. Conscious of the need to reform the system, the govemment is implementing an initial reorganizationi of the services. The core institutes for agricultural research comprising the Agricultural Traininig Institute (University) and five MAWR institutes have been brought together as an Agrarian Academy created by Presidential Decree of April 1, 1996. In terms of research, early indicationis are that the Agrarian Academy would focus on basic and applied science while MAWR would provide techniology support to farmiers. MAWR remains responsible for finanlcinig and coordinationi of activities of the experimental stations, training and extensioni, seed growing, livestock breeding and other farms of the Academy. Total scientific staff is about 375. While the core responsibility for agricultural research is with the Agrarian Academy and five associate institutes, the Academy of Sciences also contributes, as do the units of regional universities such as in OsI and Djalal- Abad which have recently established their departments of agriculture. 2.14 In addition to the core budgetary funds, fundinig for agricultural researcih is made available on1 a competitive basis by the Scientific Council oni Research in Agriculture operating under the Commission on Science and New Technology (CSNT). The Council puts out tenders for selected themes, but an amount of only 5 million Soms (US$350,000) was allocated in 1996 for this activity, whichi hardly cover salaries of the staff involved. 2.15 Farmers' Teclhnology needs: Importance of on-farm demonstrations, feled trials and adaptive Researchl. Technologies needed for small-scale farming in a market economy are different from those that were developed for large-scale farms of several thousand hectares with little reference to costs and benefits of production. Location-specific recommendations are required for optimum cropping patterns in different agro-ecological regions including: less intensive use of chemical inputs, better use of irrigation water and introduction of smaller scale machiniery. On-farm demonstrations, field trials and adaptive research programs should focus oln farmers' needs and be conducted partly on-farm and with farmer participation, while research results need to be subjected to economic analysis. Links with regional and international research institutes need to be established to introduce planting material and technologies that might be adaptable to Kyrgyz conditions. The proposed project would take the first step in developing on-farm trials and demonstrations to promote a sustainable improvement in productivity. 2.16 Rural Credit. Farmers' lack of access to credit for purchase of major inputs such as seed, fertilizers and chemicals, spare parts, animal feed and general support services continues to be the major constraint to realization of benefits of rural advisory services, exacerbated by falling incomes in the rural sector. To address this constraint, while the development of a broader rural financial market is underway (paras. 1.9-1.10), under the proposed project, the IFAD will provide a loan of US$1.5 million to the Government to make an equity contribution to KAFC for provision of micro-credit targeted at small farmers. This will essentially be a poverty targeting feature of the project. Additionally, the IFAD loan to tile Government, up to US$300,000 equivalent, would finance technical assistance for development of innovative micro-credit mechanisms suited to local conditions. C. SEED PRODUCTION 2.17 Background. Until recently, the country supported an active seed industry, exporting seed to much of the FSU. Today, much of this has collapsed because breeding and primary seed production are under-funded and increasingly ill-equipped and seed quality controls are weak. Farmers do not have information about new seeds and demand is constrained because of the lack of markets and credit in the CHAPTER 2: ISSUES INAGRICULTURAL SUPPORTSERVICES 12 agricultural sector. Seed used by farmies in most ex-collective or private farms is Luntreated. locally- saved seed, wlicil is genetically highly variable, contaminiiated withi seed-borne discases. weeds, and generally poor in terms of germinationi and vigor. TIhle quality of seed in the lpip3eline, from Breeder seed to Elite seed is also very variable. As a result, most farmers hiave no access to qualitv seed, whille seed producers hiave difficulty in selling good seeds at an adequate price. f'urthermore. the capacity of the seed industry to produce a steady flow of marketable varieties needs to be increased, as thils is crLucial to the development of an efficient and competitive agricultuire. 2.18 Institutions. Plant breeding is essentially conducted at two researcil ilnstitutes. botih under tihe Agrarian Academy. The Crop Research Institute (CRI) is responsible for the developmenit of all major crops, except fodder crops. CR1 is part of the "Industrial Association for Crop Researcil" (NPOZ) which links tihe researcih institute withi a network of experimental stations and productionI farmis. There are seven experimental stations under NPOZ, all of whiichi to some degree are involved in varietal improvemenit or in primary seed multiplicationi. In tile formier system, some five farms sLipplied Elite Seed (produced from Super Elite seed received from two specialized NPOZ farmis) to close to seventy specialized farms in the state sector whiichi are responsible for the productioll of comimlercial seed. The Forage and Pasture Research Institute (FPRI) conducts research on natLiral pastures anid cultivated forages. FPRI is also part of an 'industrial association' under wlichi operate four experimental stations. Recently, tile farn responsible for production of Elite and Super Elite forage crop seed hias been broughlt back tinder the FPRI. 2.19 Regulatory functionis regarding seeds involve official variety testing, carried out by the State Commission on Variety Selection, and seed inspectioni by the Republican Seed Inspectorate and a network of seed laboratories at oblast and rayon level. These various services are nom-niially Linder MAWR as the oblast and rayon-level seed laboratories are dependenit on local governmenits wlicih funid themr. 2.20 Seed program. The governmeit lias placed highi priority on tile relhabilitation of the seed industry. With inputs from various donors, MAWR is working on a national strategy to clarify the role of the state and private sector withi an emphasis on the development of seed productioni anid distribution in the private sector. The government has also started to put in place an appropriate legal and regulatory framework (a public sector role) for establishing an enablinig environmenit for seed development. including freer access to international germplasm. A recently passed seed law provides a satisfactory framework withlin whiich the sector would operate, except that the seed law containis a requiremenit of compulsory certification of all varieties. This requirement, thiough primarily intenided to ensure that low quality seed does not enter the market and allow time for the development of genuine seed producers. in the long run, it (tlhe compulsory certification) could become a constrailit to the development of a market- based, private sector seed industry. The government agrees that this restriction should be lifted in due course, and is prepared to provide for appropriate safeguards in certification procedures that would be followed in the interim. During negotiations, an agreement was reached that the government would issue, by December 31, 1998, policy guidelines, satisfactory to IDA, to implement the conmpulsory seed certification requirements under the Seed Law; and by December 31, 2000, submit to the Parlicm?ent, a drafi amendment to the Seed Law, satisfactory to IDA, which would allow MA WR to offer seed certification on a voluntary basis. 2.21 The Government also intends to introduce a law on Plant Breeders' Protection Rights (PBPR) to create an enabling environment for private investmenits in plant breeding. FAO legal and technical specialists have reviewed the draft PBPR Law with the government anid made recommendations, and the govermment has also sought and incorporated the comments of UPOV (Interniationial Unioni for Protection CHAPTER 2: ISSUES INAGRICULTURAL SUPPORTSERVICES 13 of New Varieties of Plants) in thie draft law. Goverinimlenit lhas stated its inteintioni to becomne a member of the UPOV and the necessary finanicinig hias becei included unide- the project. Dutrin,g neg,oliations, an agreenent 11/as reLaCheLd i/hit tlie government wo uld subiniii to the ParlijamnentU (/raft law, satisf.afctor.y to IDA. ol tile Pr otection of p/ant brecders rsrigh/s. A ugigst 3/, 1998. 2.22 Tlhrougih an EU-assisted project, a credible mechianism for productionl and supply of quality commercial seed has been demonstrated USingl couniterpart funids generated from food aid. Amonig the seed farmiis associated withi this project. a number of farmis have already demonlstrated a poteintial to emerge as hiealthy private sector seed businesses. Hlowever, they still tace significant finanlcial, tecihnical and marketing problems, and need furthier sUpport beforc tiley can become fully sustainable. Also, there is need to move tihpstrealnf to secure thie production of good Elite seed for contract multiplication and to put in place necessary regulatory and quality controls, especially in the sphieres of breeding, and initial multiplicationi (the primary seed sector), wlicil the goveriinmenit sees as of strategic importanlce in tile prevailinig economic environmiienit. 2.23 The government has accepted that one step downward from breeding, i.e., Super Elite and Elite seed production, should be privatized. In support of this approach, the proposed project will assist the (Zovernmeit in progressively dismantling the state monopoly starting witlh Elite seeds, then Super Elite seeds, and encouraginig tile private sector to step in. The project-assisted public investments would only be at the apex of the seed industry, (germplasm acquisition; seed breeding; and regulatory services). Support for seed multiplication would be limited to finanicing of two publicly-owned Super Elite and Elite seed farms and to thiree private commercial seed producers (selected competitively) to provide a basis for trainiilng and demonstrationi of good practice. The project's emphiasis is on creating an incenitive framework to assist in developing techinical and managerial expertise in the private sector. At thlis time, the Kyrgyz seed sub-sector is not ready to permit a total shiift from public funding to private/client fundinig, ancd the proposed limited public sector intervenitioni is urgently needed to pave the way for future sustainable private sector investments. This is particularly so because the project support would relate mainlly to self-pollinating cereal and fodder crops, the seed production of whichi, due to its inherently low profitability, is of limited commercial interest to the private sector. D. CROP PROTECTION 2.24 Until 1995, crop protection was essentially in the domain of one company, tile Kyrgyz Selkhiozkimia (KSK), whiicih hiandled procurement, application and distribution of pesticides and other agro-chiemicals along withi its related regulatory functions of product registration, quality control and residue monitoring. With the privatization of KSK in 1996, these regulatory functionis were given to MAWR's Agency for (often called as Department of) Clhemical Supply and Plant Protection (ACSPP). ACSPP, an independent legal entity, is currently under-funded. There is no establishied registration system for pesticides while the import, sale and use of pesticides is currently uncontrolled. Although plant quarantine services were relatively well established using FSU procedures, these remain severely under-funded with major quarantine facilities being in need of reliabilitation. The capacity of plant quarantinie witihin tihe country, thierefore, needs to be strengtihenied: first, in the context of the reduced availability of fiscal resources; and second, to effectively respond to a significant increase in the demand for quarantine services as a result of the increase in the germplasm exchiange emanating from the on- going agrarian reform. 2.25 What is needed is to establishi a sound legislative framework and effective organizations and procedures for the Kyrgyz crop protection and plant quarantine services whicih will effectively assist in controllinig plant pests and diseases by: (a) detecting and monitorinig tlireats to plant healtih; (b) CHAPTER2: ISSUESINAGRICULTURALSUPPORTSERVICES 14 forecasting attacks and disseminating information; (c) deploying counter-measures, strategies and methods of protection (these include the use of pesticides in the context of integrated pest management, biological control agents and similar techniques, methods and substances). In this regard, the government has formulated a draft law for the control of pesticide use. E. AGRICULTURAL MARKET INFORMATION 2.26 Currenitly, the development of agricultural marketing is constrainied by several factors including the following: the structural remains of the old system whiich limit producers' access to free, competitive markets; interventionis by local autilorities in price setting for inputs and outputs; the lack of working capital resulting in delayed payments to sellers; limited price differentiation by product quality; the lack of legal protection to buyers and sellers in enforcement of contracts; inadequate infrastructure for storage and transportationi contributing to higih post-harvest losses; and the lack of access of producers, traders and consumers to market information. The proposed project will focus on strengthelling institutional arrangements for collection, processing and disseminationi of relevant market information for the benefit of producers, processors, traders, and policy-makers, playing the role of a catalyst in promoting a broad development of agricultural marketing. A pilot project to disseminate market informationi is currently underway in two oblasts, with support from the British Know How Fund. The proposed project would extend the pilot to the remaining four oblasts, thus extendinig market informationi nationi-wide, under an improved conceptual, legal and operational framework. CHAPTER 3: THE PROJECT A. PROJECT OBJECTIVES 3.1 The project objective is to improve the incenitive framework for, and productivity, profitability, and sustainability of Kyrgyz agriculture by meanis of: assisting the government in implementing land and agrarian reforms; providing emerging private farms with advisory and development services; developing the seed industry; establishinig a legal framework, organizationis and procedures for crop protection and plant quarantinie; establishinig an agricultural market informationi system; and enhancing institutional capacity of MAWR. B. SUMMARY DESCRIPTION 3.2. The project would comprise of the following main components: (i) Land and Agrarian Reform (Support to Farn Restructuring); (ii) Rural Advisory and Development Services; (iii) Seed Industry Development (for cereal and fodder crops); (iv) Crop Protection and Plant Quarantine; (v) Agricultural Market Information System; and (vi) Institutional Capacity Building of MAWR, including of the Project Implementation Unit (PIU), already established, to ensure timely implementation of the above components, consistent with sound financial, economic and technical standards. The project would use a judicious combination of public, private and voluntary initiatives to help raise rural household incomes, reduce poverty, and protect the environmenit. It would promote a participatory approach to technology adaptation and transfer. Increased farmer ownership and accountability of the agricultural knowledge system is a key element of the project design. The project will be implemented over a period of five years (1998-2003). Annex A summarizes the Project Design. C. DETAILED FEATURES (i) Land and Agrarian Reform (Support to Farm Restructuring) 3.3 The main objectives of this component are to: (i) complete distribution of land and non-land assets so that, by the end of the project period, there will be complete private use-rights or ownership of land and non-land assets designated for privatization, (ii) establish policies and procedures for land auctions; (iii) support capacity building in government agencies (RCLAR, CLARs and SALMLR), and of farming communities to support agricultural enterprise restructuring; and (iv) establish a legal and regulatory framework for land market development. 3.4 At the republican and oblast levels, the component will assist RCLAR, CLARs and SALMLR to develop policy, monitoring, outreach and support service capacities. At rayon, village and farmer levels, the strategy would be to overcome both physical and human resource constraints to substantive farm restructuring, through improvements in the legal framework, provision of agricultural enterprise management information, and physical demarcation and allocation of land and non-land assets. The British Know How Fund (KHF) would provide a grant up to US$800,000 during the first two years of the project and the major inputs of this technical assistance will be concentrated in strategy development for land reform nationwide, capacity building in MAWR's RCLAR and oblast level CLARs; and resolving problems across country in order to establish sustainable systems for managing and financing land and agrarian reform programs. CHAPTER 3: THE PROJECT 16 3.5 The land and agrarian reform componlenit will be nationial in scope. Tel RCLAR and SALMLR will initially commenlce the componenit implemilenitationi in Chui oblast, f'ollowed by the five other oblasts, during project years I and 2. comillelnsLirate with the progress in capacity huildin, in local institutiolIs whicIh will be the focus of technilcal assistanice proposed to be provided by the KI 1F. In Chui, the reforml process is the least complete of all the six oblasts. withi little of' its land distributioll recognized by the MAWR as valid, and 90 (out of a nationiwide total of 131 ) large state and collective farms still required to carry out distributioni of their noni-lanid assets. AltIlougIl the distributioll oft land and noni-lanid shares is relatively advanced in the remaining iive oblasts (Osh, Talas, Dzal-abad, Naryn and Issyk-Kul), there are major issues to be addressed in all i/hi six oblasts. including the orgaLization of new farmillng UllitS, forilializationi of land use-righllt certificates, resolution of outstanding debts. clarificationi of property righits; formiationl aiid adminlistiationi of equipmenit service entities: and auctioning/leasing of land held in ALRF. Durinlg negotiationis, at the Goverinimienlt request, IDA agreed to expand the scope of this componienit to include the cost of issuanice of land certificates in all oblasts (inistead of ihilitilig this activity to only Chui oblast as originally proposed). 3.6 The componenit will finanice techinical assistance, training, office equipment, vehicles, printinig of land certificates, and iicr-emenital operating expenditures for the following: (a) a review of unresolved legal aspects of land and agrarian reform and land market development; (b) institutionial strengtihenlilng of RCLAR in four areas (program coordinationi and implementationi; public information preparation and disseminationi; monitorinig and evaluation; and the maniagemenit of ALRF); (c) SALMLR's capacity building for physical demarcation of land boulidaries and issue of land certificates; and (d) institutionlal strengthieninig of oblast and rayon CLARs, village governimenits and farner groups to effectively carry out grassroots-level responsibilities. (ii) Rural Advisory and Development Services (RADS) 3).7 The objective of this component will be to assist newly created private farms (throughi the processes of land reform) to undertake profitable farming on a sustainable basis, by making available the knowledge they need, with regard to small-scale farming, accessing credit and input supply, and output marketiig. (Figure 1). As the project-assisted farm restructuring program proceeds, there are likely to emerge as many as 140,000 private farmers, many with very small holdings. To be able to effectively serve this large clientele, the RADS will establish a network of rural advisory and development centers (RADCs), one in each of the six oblasts (includinig the centers already established in all the six oblasts by donor-assisted pilot projects). The oblast RADCs will, in phiases, open some 44 rayon/village level offices, 4-10 per oblast, depending upon the oblasts' area and population. RADCs' rayon offices will have an average of 2-3 advisors each, totaling about 100 advisors. The RADCs will be supported by a Secretariat in Bishkek to provide coordinationi, monitoring and financial managemeit. 3.8 The RADCs' main functions will be to give advice to farmers, on a one to one or group basis, in appropriate techniques of farming, backed by location-specific technology development. Techniology development will concentrate on field trials and demonstrationls and these will be done on1 farmers' fields at the request of farmers, in conjunction with necessary adaptive research. This is expected to raise farner awareness and understandinlg of the basic principles of plant nutritioni and protection, as well as of soil and water management, including the importance of rotations, proper tillage and irrigation practices. This knowledge is generally lacking, as most of the new farn operators hiave no prior farming experience. Demonstrationis and on-farm experimentation would help translate these principles in practices that increase farm efficiency. This would be a long-term investment In sustainiable agriculture. RADCs will also assist farmers in preparing business plans in support of credit applications, anid in various forms of group development such as credit, water user, machiniery and marketing groups, CHAPTER 3: THE PROJECT 17 including associated training. These initiatives will enable farmers to organize themselves for obtai1ilig improved services, solving coImlilimlo problems. and improving productivity of farms thley cultivate. 3.9 In this regard, the RADS will use the experience gailned with on-goling pilot projects that are being implemented in the counltry by EU-TACIS (ABC and ATAS projects); the Swiss; GTZ and NGOs in agricultural extensioni and credit (para. 2.10) and integrate farmn advisory services currenitly being provided by the donors and the on-goling IDA/IFAD-assisted Sheep Developmelit Project (SDP). This will avoid the developmenit of parallel actions serving different productioin activities on the same farms. Major donors have agreed on the need for coordinationi, and the convergenice of various donor-assisted pilot projects into RADS is uliderway. This will, it is hoped, contrast with maniy extensioni services whiich go out to "deliver" techniical messages that are not necessarily demanded by farmers. As a condition of negotiations, the governmlent (MA WR) issued a formnal order (No. 2 of February 4, 1998) to merge livestock advisory services under the 'Sheep Development Project ('SDP) with A&STSP integrated rural advisory and development services (RADS2) and, at negotiations, informed IDA and IFAD (which wZould co-finance RADS) that this merger would be cairried out effectively, no later than September 30, 1998. 3.10 Target Group. RADCs operating at the oblast and rayon levels will serve a wide range of farming enterprises includinig individual farms, partnershiips, associations, and joint stock companies. The strategy would be to re-activate the farming sector as a whole, the collapse of whichi is one of the major causes of the present highi level of poverty in the rural sector. Experience with on-going pilots (para. 2.10) indicates that an advisory service will be most effective wheln it is dealing with innovative, early-adopter type farmers, and indeed it will, by demand, be pulled in that direction. In this context, IFAD, whichi will co-finance this componenit, would necessarily reconcile its institutional policy of providing advice and support for the poorest rural groups with the fact that if the advisory service must achieve the maximum effect at the lowest cost and effort, theni it is the lead farmers, who would influence others in their social groups, who would be the most rewarding to target. 3.11 However, the project will include deliberate measures to target the needs of the rural population below the poverty line (about 50 percent of rural houselholds), comprising mostly small holders with limited or no access to social services, social infrastructure, credit, and off-farn employment as follows: (a) stipulating eligibility criteria that will ensure that small holders get access to credit provided by the proposed IFAD-funded Farm Development Fund (FDF) (paras. 2.16 and 4.11-4.13); (b) introducing, from year 3 of the project, a voucher system (funded by IFAD loan) to enable small holders below the poverty line, to pay for advisory services -- by which the government will bear the cost of vouchers issued to and used by those who would most need its assistance; (c) introducing initiatives to overcome farm machinery problems faced by small holders; (d) targeting poorer farmers in field trials and demonstrations; and (e) training RADS advisors to address broader socio-economic issues, including issues faced by rural women. While RADS' institutionial goal will be to operate gradually on a self- financing basis, the cost of targeting the poor will be borne by the governmeit for many years. Kyrgyz Republic Figure 1.1 Agricultural Support Services Project Rural Advisory Development Service (RADS) Farmer Needs Farmers Farmer ____Farmer __ Oblast Representatives Steering National (i) Technical Representatives \ Councils Secretariat In Bishkek Crops tarmer Livestock V Represenitatives RADC at RADS Oblast Day-to-day Contact Training (ii) Business at Level Specialist Management Rayon - Day-to-day Level Farm Management Formal Requests for (iii) Financial . _ _ Specialists Research/information Information Contact Rayon Advisors (iv) Credit Fanmer with Advisors .Farmer day-to-day contact Group Developmen with Specialists Specialists (v) Mechanisation . A Commissioned Research (vi) Group Univemetie Agraian Ag. Universities Formation | j A 4 Local Academy Agrarian National Academy Level Day-to-day contact with Group Development SpeciallsVis FARMERS REQUESTS | NATIONAL REQUEST EVALUATION | PROCESS | LOCAL REQUEST EVALUATION I RESEARCH COMMISSIONED BY OBLAST STAGES RESEARCH COMMISSIONED BY SECRETARIAT co CHAPTER 3: THE PROJECT 19 3.12 The main items to be finaniced by RADS componienit will include relhabilitation of existing buildings for RADCs; laboratory and field equipment: vehicles; technical assistance and traininig; and incremental operating expenses (includinlg salaries of RADS staff). The project envisages that farmer beneficiaries will begin to pay, even if in small amouLnts, toward RADCs' service cost right from the start. This approach will have two advantages. First, farmers will demand value for money and advisors will liave to perform or they will not be able to clharge. Second, farmers will begin to recognize that advice hias monetary value. RADCs will make chiarges for: thle preparation of business plans; preparation of credit applications; techilical visits to farms and services such as soil analysis and fertilizer recommendationis. The initial charges will be low. The government will review the effectiveness of the proposed cost-recovery mechanlisms for the RADS during the project's mid-term review and introduce appropriate refinements (paras. 5.15-5.16). (iii) Seed Industry Development 3.13 The project would assist in establishinig a viable, self-sustaining, seed industry with emplhasis on1 commercialization, providing farmers with good quality seed of improved varieties. For this, the project would: (a) support the acquisition and development of plant varieties including the use of international finished germplasm for cereals and forage; (b) rehabilitate selected facilities for cereal and forage seed production, processing and storage; (c) demonstrate seed production on pilot farms to promote the development of a private commercial seed sector; (d) strengtheni first, MAWR's capacity to develop and implement seed policy and second, its regulatory services for variety testing, variety registration and seed certification; (e) establish a legal framework and procedures for the protection of plant breeders' rights; and (f) support publication and dissemination of official variety testing results and seed industry information. 3.14 Plant Variety Acquisition and Development. The project would provide support to the plant breeding departments of the Crop Research Institute (CRI) and the Fodder and Pasture Research Institute (FPRI) which are constituents of the Agrarian Academy and responsible for the acquisition, development and evaluation of new germplasm and its submission to the official variety testing system. Support in thie form of laboratory and field equipment, incremental salaries, and operating costs would be provided to CRI for variety development activities in wheat, barley and maize (and later for oil seeds and potatoes) at Djal (Chui oblast) and two other stations (Osh and Issyk-Kul), and to FPRI for alfalfa and sainfoin variety development at the FPRI center in Sokoluk rayon (Chui oblast) and one outstation. 3.15 The two breeding units' main functions under the project would be to: (a) acquire a wide range of (essentially finished) germplasm for cereals (wheat, barley, and maize) and forage crops (alfalfa and sainfoin), from appropriate sources including CGIAR Institutes and renowned universities, and select material suitable for Kyrgyz conditions; (b) test and screen such material for different ecological conditions and market requirements; (c) further improve/adapt such material to the extent needed to maintaini germplasm collections and release adequate quantities of breeder seed of preferred, existing and new varieties; and (d) ensure prompt release of preferred varieties. The breeding units would concentrate their efforts on the implementationi and evaluation of finislhed cereal varieties and forage germplasm, so as to accelerate the flow of new varieties for testing and reduce the costs involved. For cereal varieties, it is anticipated that most of this material should come from ICARDA (International Center for Agricultural Research in Dry Areas) and CIMMYT (International Maize and Wheat Improvement Center). ICARDA may also be able to assist in providing trial material of the forage species. It will also be the responsibilities of the CRI and FPRI to maintain new and existing varieties which have been officially released and to undertake rapid bulking up to the breeder seed generation. To make this CHAPTER 3: THE PROJECT 2 0 possible, the project would provide assistance to breeding units to adopt modern breeding technology by providing training and study tours for its teciical staff and participating seed growers. During negotiations, an assurance was obtained fron the government that: (ac) he CRI and FPRI wvould, hy March 31 of each year (or such other clale aigreed wilh IDA), submil lo IDA f/r its review, their (annzual seed breeding program77s; (b) inmniediately thereaffer, finalize said prrograms taiking in! o conws deruion IDA 's comnmenis thereon: and (c) ccarmy oul such p)rogramns ini accordance wvith their term.s. IDA credit withdrawals for CRI's and FPRI's seed breeding activities Would be made ulider programlis acceptable to IDA. 3.16 Multiplication of Super Elite and Elite Seed. For cereals (wheat, barley and maize), the main specialized producer of early generationi seed, i.e., Super Elite and Elite generatiolns, woLIld be the NPOZ farn at Djal. The FPRI seed farm (Sokoluk rayon) would hiandle multiplication of alfalfa and sainfoill varieties. In order to commercialize operations of the seed enterprises and ensure full cost recovery (by replacing existing budgetary funding of these farms), the governmenit would disburse IDA credit fLunids to NPOZ and FPRI farms, subject to cost recovery, on terms and conditionis acceptable to IDA (para. 4.17). These funds will finanice incremenital investmenits and working capital requiremenits. The farims w ill sell Super Elite and Elite seed to commercial seed production farms at a premium price for fuLthier multiplication and eventual sale to farmers. They may also undertake this multiplication themilselves to supplement income. The NPOZ and FPRI farms would repay project finanice from proceeds of seed sales. The farms would maintaini separate accounts for project-financed seed activities. The CRI and FPRI breeding units would owin new varieties of seed and allow NPOZ/Djal, or othier authorized farms, to produce and market Super Elite and Elite seed of new varieties. These NPOZ and Djal farms would pay a fixed percentage of the sale proceeds of Super Elite and Elite seed, as royalty to CRI and FPRI breeding units toward the cost of variety development. 3.17 Pilot Commercial Seed Production. To facilitate the start-up of commercial seed productioni in the private sector, the MAWR, in collaboration with the Agrarian Academy, would select on the basis of criteria acceptable to IDA (para. 4.16), thiree newly privatized seed farms - one in each of the main growing areas: Chui, Osh, and Issyk-Kul - whichi would be contracted by the Seed Unit in MAWR to serve as models for the development of the commercial seed sector. These pilot farms would serve as demonstration and training ground for other seed farm managers and techinicianis. and RADCs. At the same time, they would also increase the production of quality seeds and demonstrate the advantage of using such seeds, thus developing the market for good seeds. The MOFE would provide IDA credit funds to the three pilot farms subject to cost recovery, on terms and conditions acceptable to IDA (para. 4.17). The IDA credit would finance mainly the repair of essential buildings, purchase of seed cleaning and farm equipment, including for each farm, a combine and a seed drill. 3.18 Review of Seed Farms' Investment Proposals. MAWR's Seed Unit, in association witlh PIU, will be responsible to: (i) assess feasibility of subprojects proposed by super elite and elite seed farms (NPOZ farm at Djal and FPRI seed farm at Sokoluk) and the selected private commercial seed farms (paras. 3.16 and 3.17) and (ii) recommend to MOFE or its authorized representative (e.g. PIU), the amount of project finance that should be provided for eligible subprojects, taking into account IDA recommendations on the feasibility studies. It would also be the condition of MOFE's project finanice to CRI, FPRI and the farms engaged in the multiplication of Super Elite and Elite seed that the varieties produced by them would be made available to other registered Super Elite and Elite seed producers. with seed breeding units compensated adequately (using market-based prices), following the rules of the proposed Plant Breeders' Rights Law. A project finance contract indicating the obligations of each party would be signed by MAWR/MOFE and the farm management/s (para. 4. 17). Seed producers wishinig to produce Super Elite and Elite seed would need to register with MAWR's seed unit using criteria to be CHAPTER 3: THE PROJECT 21 agreed with IDA. During negotiations, the government agreed to ensure that. (a) the seed production eniterprises, selected according to criteria acceptable to IDA, would submit to IDA for its review, by September 30 of each year, feasibility studies with reconmmendations (including those on cost recovery) for the production of seed to be financed under the Credit; (b) immediately thereafter, finalize said reconmmendations taking into consideration IDA's comments thereon; and (c) carry out such recommendations in accordance with their terms. 3.19 In coordinating seed production, the Seed Unit of MAWR would maintain close contacts with relevant Rural Advisory and Development Centers (RADCs). RADCs' mandate would include, at farmers' request: (a) variety testing at the centers and on farmers' fields; (b) provision of advice and technical support to farmers in the production of good quality farmer-saved seed; and (c) demonstration of early generations of public domain varieties. For the pilot private commercial farms (para. 3.17), the RADCs would represent a source of readily available technical expertise in agronomy, business management, and machinery operation. Tlhrough variety testing activities, RADCs would provide a meeting ground for researchers, farmers and seed growers to assess demand for new varieties. To facilitate these close contacts, financial assistance to pilot commercial seed farms would be granted, as much as feasible, in conjunctioni witlh local RADCs. 3.20 Official Variety Testing. The project would strengtlhen the capacity of MAWR's State Commission on Variety Testing to test new varieties by: (a) streamlining the service, maintaining only the minimum required number of locations (four for cereals, of which two responsible for maize), thus ensuring thlat scarce budgetary resources are used for those centers which remain active in their mandated tasks; (b) introducing modern experimental and data analysis procedures; (c) introducing tests for distinctiveniess, uniformity, stability (DUS), particularly to obtain detailed variety descriptions which will be required for plant variety protection; and (d) publishing and disseminating test results, particularly througlh the advisory service, so as to allow farmers to make inforned variety choices. Plot machinery would be provided at four main testing stations (Bishkek, OshI, Issyk-Kul and Talas), together with miscellanieous laboratory equipment for measuring quality attributes of new cereal and forage varieties. The project would also provide computer equipment, technical assistance, and training. 3.21 Seed Certification. The project would support the development of an effective seed testing and certificationi calpacity. Seed certification for commercial seed would be compulsory initially (following the provisions of the new seed law), but would be expected to move to a voluntary basis after the project's mid-term review, that is after about three years (para. 2.20). The project would provide for: (a) strengtheninlg the Republican Seed Inspectorate and developing its capacity to technlically support regional and local seed quality control laboratories; (b) relocating and equipping the central seed laboratory to a standard that will enable ISTA accreditation, and providing minimum supplementary laboratory equipment for six regional laboratories; and (c) providing training and technical assistance to facilitate the introductioni of efficient certification procedures. The Republican Seed Inspectorate and the Variety Testing Commission would be merged into one Variety and Seed Testing Organization operating under the oversight of a Deputy Minister for Crops. 3.22 Seed Unit. As part of the MAWR's proposed reorganization plans, MAWR's Seed Unit would be strengtlheined to develop and implement seed policies, maintain registry of plant variety rights, liaise with internationial seed organizations, and promote the development of a Kyrgyz National Seed Association (NSA). The project would provide office equipment, a vehicle and incremental operating costs of the Seed Unit. A seed specialist would be funded by the project to build capacity and provide technical assistance for implementation of the overall seed component. CHAPTER 3: THE PROJECT 22 3.23 The objective of the National Seed Association (NSA) would be to bring togetlher public and private sector agencies and private seed producers committed to tl-he development of quality seed. The NSA would provide a mechanismii for coordinatilig the flow of good quality seed from breeder to farmer and build the concept of quality seed whiichi has been seriously eroded in recent years. The NSA would be established in the first year of the project as a noni-goverinmental organization with a democratic structure, open to all parties interested in producilg and selling quality seed. During negotiations, an assurance was obtained that, by Decenmber 31, 1998, the Government will establish NSA with a charter and by-laws acceptable to IDA. (iv) Crop Protection and Plant Quarantine 3.24 Current Status. The shiift, during the transition, in the provision of farn inputs from the governmenit or parastatals to the private sector requires the governmtnent to reassess its role. This applies in particular witlh respect to the supply of agro-chemicals where there is still a major public sector interest, especially with respect to consumer protection, user safety and prevention of disease and insect resistance. As such the governmenit is drafting a new set of regulations but this process, and in particular the implementation of these regulations is limited by budgetary constraints followed by low salary of staff, poor managemenit, inadequate equipment, and the lack of modern technical expertise. Consequently, MAWR's regulatory services are working much below acceptable levels. There has been as yet no external fundinig for these services, except for an on-going review under a TACIS project. 3.25 The overall objective of the componient is, therefore, to assist the government to develop pest managemenit systems for the country that warranits user safety, public hiealth and environmental and agronomic sustainability. The project will not directly fhianlce the import or purchase of pesticides, but help develop a system of sustainable pest management, by (i) assisting the government to develop the framework and tools to ascertain the use and marketing of appropriate and safe pest control methods; and (ii) educating farmers in safe and sustainable pest preventioni and control. The government intends to introduce a new law on pesticides and pest control. A draft of this law was reviewed during appraisal by an FAO expert and the new version provides for increased relevance to current and future conditionis, and increased precision and clarity. The Kyrgyz authorities have indicated a general acceptance of the nlew draft and recognized the need to revise current rules for pesticide registration. At negotiations, it was agreed that by August 31, 1998, the government would submit to the Parliament a draft law, satisfactory to IDA, on pesticides and pest control, in the context qf an IPM approach. This would supplement the assistance given directly to farmers through the project-assisted RADCs, and complement the techilical assistance behig provided by the EU and ADB for MAWR's re-organization and redefinitioll of funlictiolls. 3.26 In line with the internationial understanding on pest managemenit, it is governmenit policy to encourage the use of integrated pest management (IPM). The government regards the proposed project as the first critical step in support of this policy. As a follow-up, the governmenit (MAWR) would introduce a systematic. phased effort to introduce diverse IPM approachies suchI as biological control, cultural practices, and the development and use of crop varieties that are resistaiit or tolerant to pests. ITle project-assisted RADS would be the vehicle that would be available to the government, to reach IPM messages to farmers and farmer groups. At negotiations, it was agreed that the government would issue by June 30, 1999. a Manual on Pesticide Management and Application, Crop Protection and Plant Quarantine acceptable to IDA, for use by RADCs, traders and farners, outlinin1g environmenitally sound practices that must be followed in the management of agricultural chemicals and pesticides including their distributioll, hanidlinlg and utilization. It was also agreed that the Government would ensure that RADCs advise farnmers andfarm?er groups on pesticide use only when such use is justified under an IPM CHAPTER 3: THE PROJECT 23 approach, and submit to IDA, by December 31 of each year, reports on compliance by RADCs with this obligation, and take into consideration IDA 's comments on these reports, including ways to improve comnpliance with this obligation.. 3.27 In the spheres of plant quarantine and crop protection, the project would assist in the following specific initiatives: a) Crop Protection. Support the development and implementation of a pesticide registration system and of regulations and procedures covering the safe distribution and use of pesticides, and monitoring of pesticides utilization and residue contents in the context of an IPM approach. The project will establish two laboratories to international standards, one in the north (Bishkek) and one in the south (Osh) to analyze pesticides, and re-equip each of the six (oblast-level) centers whose role will be to monitor the compliance with the new law. The project would finance critical facilities for the operations of the two laboratories and the six oblast-level centers, including vehicles; computers; communication equipment; technical assistance; staff training; and incremental operating costs. b) Plant Quarantine. The project would rehabilitate on a pilot basis quarantine facilities at two sites (Bishkek and Osh) to improve quarantine controls on imported plants and plant produce consignments, and finance: (i) vehicles, computers and office equipment; (ii) membership of the European Plant Protection Organization (EPPO); (iii) technical assistance (a legal specialist) to review quarantine regulations and procedures; and (iv) incremental operating expenses 3.28 MAWR's State Inspectorate for Plant Quarantine will update plans and cost estimates for rehabilitation of the (Bishkek and Osh) Plant Quarantine Centers, consistent with international (EPPO) standards for laboratory equipment and operation, and the requirements of the 1987 Montreal Protocol on Ozone Depleting Substances including amendments thereto, which would require the approval of IDA before these investments are made. Under the recently amended Montreal Protocol, the calculated levels of consumption and production of the controlled substances do not include the amounts used by a country for quarantine and pre-shipment applications. During negotiations, an understanding was reached that, by December 31, 1998, the government would submit to IDA, for its review, feasibility studies for the rehabilitation ofplant quarantine centers in Bishkek and Osh and, immediately thereafter, finalize saidfeasibility studies taking into consideration IDA 's comments thereon. 3.29 There is no justification for keeping an extensive network of stations and laboratories which would by force remain ill-equipped and understaffed. For plant quarantine, only about half the number of rayons should retain stations, and that new points of entry would be staffed primarily by re- deployment of local personnel. Besides the proposed rehabilitation of ACSPP's Bishkek and Osh centers, there are a number of rayon stations which cannot be maintained. At negotiations, an assurance was obtained ihat, by December 31, 1999, the government would submit to IDA for its review, a plan for the consolidation of existing quarantine laboratories and centers at the rayon level; and imnmediately thereafter, finalize said plan taking into consideration IDA 's comments thereon, and carry out such plan in accordance with its terms. (v) Agricultural Market Information 3.30 Market Information System (MIS). The project would provide equipment, technical assistance and training for the establishment of a nation-wide agricultural MIS building upon the pilot project which is currently underway in two oblasts, Talas and Issyk-Kul, with financing provided by the British Know How Fund (KHF). The KHF pilot, which was recently extended to December 1997 includes the CHAPTER 3: THE PROJECT 24 recruitment and traininig of the MIS staff for the four oblasts not covered by the existing pilot project; institutional strengthieninig of the State Department of Anti-Moniopoly Policy (SDAP) and the National Statistical Committee (NSC); and support to Kyrgyz Standard (KS) and Kyrgyz Agrotech project (KATP) for evaluation of grades and standards. 3.31 The MIS would collect, process, and disseminate agricultural market information for the benefit of producers, processors, traders and policy-makers. It would help increase the transparency of market transactions; transmit incenitives and opportunities to agricultural producers; improve producers' bargaining position; stimulate competition among traders; and expand processors' and consumers' choices in product selection. 3.32 Initially, the MIS's commodity and informationi coverage will be somewhat limited (farm gate, wholesale and retail prices for major agricultural commodities) whichi would be expanded, in phases, to include all major agricultural inputs, outputs, and processed products, and report on prices at various levels (farm gate, wholesale, retail, and buying and selling prices of agro-processors) and on production, market arrivals and volumes traded. 3.33 By about the end of Year I of the project, MIS would begin to provide information on international prices, initially starting with FSU. Also, MIS cannot be effective unless prices are related to commodity standards and grades, which makes the marketing system function in an orderly manner. The MIS work program and staff development includes a well-designed strategy to achieve these objectives. Specific proposals for project support would include: updating standards and grades for priority commodities, especially those intended for export to CIS and other countries; dissemination of informationi on standards and grades; preparing legal framework for enforcing the use of standards and grades in market transactions; and strengthening MIS to report market information with reference to standards and grades. (vi) Project Implementation Unit (PIU) 3.34 MAWR would establish a project implementation unit (PIU) to coordinate the overall project implementation (and taking account of the services already available from the PIU established uider IDA- assisted Sheep Development Project). The implementation of individual components/activities will be entrusted to respective MAWR departments, SALMLR, Agrarian Academy (CRI, FPRI); the seed farms; RADS' national secretariat and RADCs. The project would provide for finanlcinlg of PIU's management costs including the cost of a national project director; an expatriate project implementation advisor (for eighteeni monthis) and national procurement and financial management specialists. D. PROJECT COST ESTIMATES 3.35 Total project costs are estimated at US$30.2 million, of which 66 percent would be foreign exchange part of the costs. Project costs are net of taxes and duties whicih will be reimbursed by the government. Cost estimates are summarized in Table 3.1 and shiowin in more detail in Annex B. Physical contingencies have been included at 10 percent on civil works, equipment, vehicles and printing of land certificates. Price contingencies have been calculated on the basis of the annual projected inflation rates applied to local and foreign costs, including physical contingenicies. Price contiligenicies equal to about II percent of the base costs. CHAPTER 3: THE PROJECT 25 Table 3.1: Summary of Project Costs (SOM Million) (US$ Million) Foreign Foreign as % Total I % Base Component Local Foreign Total Local Foreign Total of Total Costs A. Land and Agrarian Reform 14.22 55.87 70.09 0.81 3.19 4.01 75 15 B. Advisory Services (RADS) Advisory and Development Services 34.80 25.46 60.26 1.99 1.45 3.44 42 14 TIIrai;iiing, Credit & Secretariat 23.04 60.24 83.28 1.32 3.44 4.76 72 19 Field Demonstration and Adaptive Research 9.07 13.29 22.36 0.52 0.76 1.28 59 5 Group Development 5.81 15.22 21.02 0.33 0.87 1.20 72 5 Subtotal 72.71 114.20 186.91 4.15 6.53 10.68 61 42 C. Seed Industry Development Crop Breeding (CRI Program) 3.78 24.59 28.37 0.22 1.41 1.62 87 6 Forage Breeding (FPRI Program) 1.87 5.85 7.71 0.11 0.33 0.44 76 2 Super E:lite and Elite Seed ProductioIn 2.17 16.40 18.57 0.12 0.94 1.06 88 4 CoInmmercial Seed Multiplication 3.54 24.70 28.25 0.20 1.41 1.61 87 6 Seed Unit in MAWR 1.80 7.54 9.33 0.10 0.43 0.53 81 2 Official Variety resting 6.20 27.75 33.95 0.35 1.59 1.94 82 8 Seed Certification 3.15 4.78 7.93 0.18 0.27 0.45 60 2 Subtotal 22.51 111.60 134.11 1.29 6.38 7.66 83 30 D. Crop Protection IPIlant Quarantine 5.65 5.32 10.97 0.32 0.30 0.63 49 3 Crop Protection 2.12 10.20 12.32 0.12 0.58 0.70 83 3 Subtotal 7.77 15.53 23.29 0.44 0.89 1.33 67 5 E. Agricultural Market Information System 10.79 15.69 26.49 0.62 0.90 1.51 59 6 Subtotal 10.79 15.69 26.49 0.62 0.90 1.51 59 6 F. Project Implementation Unit 6.84 6.69 13.53 0.39 0.38 0.77 49 3 Total BASE COSTS * 134.83 319.58 454.42 7.70 18.26 25.97 70 100 Physical Contingencies 4.53 17.05 21.58 0.26 0.97 1.23 79 5 Price Contingencies 38.42 13.40 51.82 2.20 0.77 2.96 26 11 Total PROJECT COST 177.78 350.04 527.82 10.16 20.00 30.16 66 116 * Excluding taxes and duties. Figures/total may slightly vary due to rounding. E. PROJECT FINANCING 3.36 An IDA credit of SDR 11.1 million (equivalent of US$14.98 millioni) will finance about 49.7 percent of total project costs and 74.9 percent of the foreign exchange part of the project costs. IFAD is expected to co-finanice RADS component up to a total of US$7.9 million, covering about 26.2 percent of total project cost. The remainder of the RADS cost would be financed by IFAD throughi the on-going Sheep Development Project (US$1.8 million), following the proposed integration of SDP's livestock advisory services with RADS. Bilateral donors (Swiss, GTZ and KHF) have reached understandings with the government to provide grants amounting to about US$2.1 million equivalent, of whichi US$1 million will finance technical assistance and the balance of US$1.1 million, vellicles and operating expenditures for CHAPTER 3: THE PROJECT 26 the on-going pilot projects. Project beneficiaries would contribute about US$1.2 million and the Government would finance the balance at US$2.2 million (plus taxes and duties, if any). The project would receive a total financing of US$3.88 million for techinical assistance and US$1.87 million for training as shlowni in the table 3.2 below. Table 3.2 Financing of Technical Assistance and Training (US$ million) Source of Financing Technical Training Total Assistance 1. Bilateral grants 1.00 - 1.00 2. IDA Credit 1.44 0.41 1.85 3. IFAD loan for the proposed ASSP 1.04 0.97 2.01 4. IFAD loan for SDP (livestock advisory services) 0.40 0.49 0.89 Total 3.88 1.87 5.75 3.37 Financing of the project costs would be in the amounts and proportions shown in Table 3.3. As a condition of IDA credit effectiveness, the government will open a Project Account in a commercial bank and nmake an initial deposit of an amount in Somn equivalent to US$25,000 into such account. At negotiations, the government agreed to maintain the Project Account during the execution of the project, and deposit semi-annually an amount of Son, acceptable to IDA, into such account, toward its budgetary contribution for the project. F. STATUS OF PROJECT PREPARATION 3.38 Initial preparation studies were undertaken by Euroconsult, Netherlanids, and the FAO Investmenit Ceniter working with the MAWR. Euroconsult carried out farm studies and worked on proposals for seed and post-privatization on-farm support. The FAO Investment Center reviewed and developed the adaptive research program. A joint IDA/IFAD mission visited the Kyrgyz Republic in October 1996 and reached a broad agreement with MAWR on the components to be included in the project. Subsequently, in February 1997, the MAWR asked IDA to include the Land and Agrarian Reform Component in the project which was prepared by an IDA appraisal mission in collaboration with MAWR and SALMLR during June-August 1997. The IDA post-appraisal and IFAD appraisal missions (November 1997) finalized the project design and implementation arrangements in consultation with the Government's relevant ministries and departments. The State Foreign Investment and Economic Aid Commission (Goskominvest) approved the project for IDA/IFAD financing in January 1998. 3.39 Substantial preparatory and pilot work done by the government, with assistance from donors, has significanitly reduced the risk of implementation delays usually attributed to project complexity. The involvement of RCLAR and SALMLR in defining the Land and Agrarian Reforn component and the technical assistance (up to US$0.8 million) which the British KHF has agreed, in principle, to support RCLAR and SALMLR, will facilitate an early start on implementationi of this componenit. As regards the Rural Advisory and Development Service (RADS), in each of the six oblasts, at least one advisory center has already been established: in Clhui, Naryn, Dzalal-Abad, Issk-Kul and Talas oblasts under the EU-TACIS program; in Naryn, Dzalal-Abad, and Osh oblasts under the Swiss program; and in OsIh oblast under the Dutch program. FAO has provided techinical assistance for preparation of the seed, crop protection and plant quarantine components including the review of the proposed legal framework, while the British KHF has funded the establishment of MIS in two oblasts, which has become operational. The CHAPTER 3: THE PROJECT 27 project implementation will benefit from the organizations established and experience gained from the above initiatives and the on-going implementation of the IDA-assisted Sheep Development Project. Table 3.3: Project Financing Plan Local Foreign Total % of total Financing Source _ project costs (US$ nillion equivalent) IDA 3.0 12.0 15.0 49.7 IFAD 2.5 5.4 7.9 26.2 SDP /a 1.1 0.7 1.8 6.0 SWISS 0.4 0.5 0.9 3.0 GTZ 0.3 0.1 0.4 1.4 KHF 0.2 0.6 0.8 2.5 Government 2.0 0.2 2.2 7.1 Beneficiaries 0.7 0.5 1.2 4.1 Total 10.2 20.0 30.2 100.0 Percent of Total 33.7 66.3 100.0 I * Figures/totals may differ slightly due to rounding. a/ The livestock advisory services component of the Sheep Development Project (SDP) will be merged with the ASSP's integrated rural advisory services (RADS) which will also be financed by IFAD. CHAPTER 4: PROJECT IMPLEMENTATION A. PROJECT ORGANIZATION AND MANAGEMENT Overall Project Management 4.1 The MAWR departments and other agencies that will be involved in the project implementation are shown in Table 4.1 below. Figure 1.2 shows the organizational and management arrangements for the project. The primary responsibility for project implementation will rest with the Minister of Agriculture and Water Resources, who will chair an inter-agency Project Steering Commnittee (PSC) which will be established to provide oversight and coordination, as well as approve annual work plans and budgets. The PSC members would include MAWR's Deputy Ministers responsible for individual components: MOFE representative; the President of the Agrarian Academy; and representatives of farmer and other non- governmental organizations working in the rural sector. Besides the Chairman, the PSC will have no more than five members. During negotiations, an agreement was reached that, by August 31, 1998, the Government will establish and, thereafter maintain until the completion of the project, the PSC' with composition and under terms of reference acceptable to IDA; and carry out the prolect through MA WR with participation of SALMLR; CRI, FPRI and selected seed farms; SIPQ and ACSPP; and NMC in respective components (Table 4.1). Table 4.1: Project Implementing Agencies by Component Component F Implementing Agency 1. Land and Agrarian Reform (Farm Restructuring Support) MAWR - Republican and Oblast Centers for Land and. Agrarian Reform. SALMLR - State Agency for Land Management and Land Resources. 2. (i) Rural Advisory and Development Services (RADS) RASC/RADS Foundation/RADCs. Rural Advisory Steering (ii) Small Farmer Credit (Farm Development Fund) Council (RASC); the RAIDS Foundation (registered as a farmer-dominated, autonomous, non-profit, foundation) with a national secretariat; Oblast Steering Councils and Rural Advisory Development Centers, with support from MAWR and the institutes of Agrarian Academy, agricultural universities and contract researchers. KAFC in collaboration with UNDP and RADCs 3. Seed Industry Development MAWR: Seed. Unit and Variety Development and Seed Testing Organization;- Agrarian Academy: Crop Research Institute (CRI) and Forage and Pasture Research Institute (FPRII) Super Elite/Elite Seed Farns (3); and Private Commercial Seed Farms (3);I 4. Crop Protection and Plant Quarantine MAWR: State Inspectorate of Plant Quarantine (SIPQ) and the Agency for Chemical Supply and Plant Protection I(ACSPP) 5. Agricultural Market Information System MAWR: NMC for MIS and the MIS Unit in MAWR 6. MAWR Capacity Building MAWR (PItJ._ 4.2 The Project Implementation Unit (PIU) in MAWR, already established, will be responsible for coordinating the project implementation. The PIU's main responsibilities will include: (a) oversight on project implementation including providing guidance to, and coordination among agencies involved in Figure 1.2 Kyrgyz Republic Agricultural Support Services Project Project Organization and Management .i3~~~~~~~jec : ~~~~~~~~~Minister Steering .............................. MAWR l Committee Project Deputy Minister/s ..... Director M R (PIU) MAWIIR l Project Components Rural Advisory and Land & Agrarian Reform Seed I dustry Crop Protection Agricultural arket Development Service (Farm Restructuring) Development & Plant Quarantine Information System(MIS) National RuralAdio. yRC.A.We..SALMLR [Agra Sn Steering Steering Council : Academy : Unit * Committee for :......... .......... .... .. CRI and FPRI MAWR | * MIS _ , , _ _ _ _ ' ',~~~~~~~~~~~~ ~~ Agency for,: MIS RADS Foundation Pilot Variety & Seed State Chemical Unit _ Seed Testing Inspectorate of Supply & Secretariat Farms Organizations Plant Protection Plant (SIPQ) ::Protection: (ACSPP) Rgpeseat coorftdb&I or Sutlolous agebic R_2 Lim A CHAPTER 4: PROJECT IMPLEMENTATION 30 the implementation of individual project components; (b) undertake procurement of goods and services; (c) accounting and financial management of project funds; (d) arrange audit of project accounts;(e) monitoring and evaluation of project performance including the preparation of progress reports; and (f) liaise with the national and local governments to ensure effective implementation of the project. The PIU will work under the direction of a national Project Director who has been recruited, using competitive selection procedures. The national project director will, however, be under study (on the job training) for the initial one year and will work in collaboration with an internationally recruited Project Implementation Advisor (PIA). The PIA will be contracted for about 18 months, will take full responsibility for all aspects of project implementation during the first year of the project, and during the following six months, assist PIU in an advisory capacity. As a condition of negotiations, the Government also finalized, in consultation with IDA, the Letter of Invitation (LOI) to international firms to submit bids for the PIU advisory assignment, including the terms of reference of this assignment. The Government will appoint a Project Implementation Advisor prior to the effectiveness of the IDA Credit. During negotiations, the government agreed that, throughout the execution of the project, it would maintain the PIU with sufficient number of qualified staff, adequate facilities and resources, satisfactory to IDA. It was also agreed that the Government will exercise its rights under the PlUAdvisory Agreement in a manner acceptable to IDA in order to accomplish the purposes of the Credit, and would not assign, abrogate, amend or waive the PIU Advisory Agreement without the concurrence of IDA. The execution of the PIU Advisory Agreement between the government and the PIU Advisor, satisfactory to IDA, will be a condition of IDA credit effectiveness. (i) Land and Agrarian Reform (Farm Restructuring Support) 4.3 Role ofRCLARICLAR and SALMLR. The implementation strategy for this component is to use existing governmental institutions at the republican (national), oblast and rayon levels, namely, the RCLAR, CLARs and SALMLR, which would be strengthened and supported by the project. No new organizations or bodies will be created. While the PIU will coordinate and oversee the component implementation, a Land Reform Specialist, a Legal Specialist, M & E Specialist, and a Land Auction and Leasing Specialist will be attached directly to RCLAR. A Legal Specialist, though attached to MAWR would coordinate with SALMLR, the Ministry of Justice, and the President's and Prime Minister's offices on issues concerning land and related legal reform issues. The Farm Management Specialist, working closely with existing TACIS-assisted farm survey activities in Chui oblast, will assist the local Agribusiness Center, in carrying out farm restructuring activities. Building on the earlier donor collaboration, MAWR will place a Training Specialist (preferably Russian speaking) in the Agrarian Academy, for designing and implementing training-of-trainers programs, including the preparation of training modules/materials. These core trainers will then train CLARs, village governments and farmer representatives in topics such as Land and Agrarian law and p:rocedures, the establishment of new enterprises, and monitoring of farm performance. On-the- job training will be provided by TA specialists to the national staff for local capacity building. 4.4 As a condition of negotiations, the Government provided to IDA, a position paper on land and agrarian reform issues, reinforcing its commitment to implement various activities proposed by the project. Additionally, following the recent international agricultural conference held in Bishkek in December 1997, the government issued a resolution (No. 773 of December 1997) incorporating the recommendations of the conference on land and agrarian reform which are in accord with ASSP-supported activities, and inter alia focus on debt resolution for new enterprises; strengthening of the legal framework; and operational strategies to complete the issuance of land use right certificates and commence land auctions. The Draft Land Code (second version) and the Draft Law "On State Registration of Rights on Immovable Property are currently under discussion by the Parliament (paras. 2.6 and 2.7). CHAPTER 4: PROJECT IMPLEMENTATION 31 (ii) Rural Advisory and Development Service (RADS) 4.5 RADS. In order to ensure autonomy, professional competence and operational efficiency in delivering technical services and business advice to numerous farmers and farmer groups, the RADS has been established as a non-governmental, farmer-dominated and non-profit Foundation (paras. 2.10 and 2.11). This model is based on the concepts successfully used in the country for the EU-TACIS Agricultural Training and Advisory Service (ATAS). The RADS Foundation sponsors will include farmer representatives drawn from the six oblasts, the Government (MAWR and MOFE) and bilateral donors. By ensuring that farmer representatives remain in the majority, both as sponsors of the RADS Foundation, and as members of the national-level Rural Advisory Steering Council (RASC), the RADS is expected to remain fully oriented to farmer needs. At the same time, since the bulk of the RADS initial financing will be provided by the government (with IFAD co-financing), the ultimate control over channeling of the funds will unavoidably rest with the government. For this reason, the RADS will function as a semi-autonomous institution, until it becomes, over a period, a self-financing organization. Another important feature of the RADS will be that its management will remain decentralized as RADCs at the oblast and rayon levels will function as the main grassroots level resource management and operating units. 4.6 Rural Advisory Steering Council (RASC). The RASC will be the highest permanent management body for the RADS. RASC's Chairman would be appointed by the President and/or the Prime Minister and will have qualifications and experience acceptable to IDA and IFAD. The RASC Chairman would be the main link between the RADS and the rest of the project (including the government and the Agrarian Academy), as both the Minister of Agriculture and Water Resources and the President of the Agrarian Academy will be the members of RASC. Other members of the RASC will include the representatives of key government agencies, including the President's/Prime Minister's Offices; the Ministry of Finance and Economy (MOFE); farmer associations (one from each oblast); and donors. Finally, the charter of the RADS Foundation will provide for a flexible institutional structure, so that RADS could effectively respond to the changing economic and sectoral environment. The RASC will oversee the implementation of the component through approval of annual work plans and budget prepared by the Secretariat in collaboration with RADCs. Each RADC would prepare an annual work plan and budget using the format and schedule agreed with IDA, for approval by RASC, and review by IDA during project supervisions. 4.7 The RADS will have a national Secretariat in Bishkek which will be headed by a General Manager and will include technical specialists as well as support staff for personnel management, training, accounting and financial management. Two international advisers (extension and training) will be attached directly to the Secretariat. In addition, a media unit will be located in the Secretariat although its principal clients will be the RADCs. The Secretariat will be responsible for the component implementation, in liaison with the MAWR (line departments) on technical matters and MOFE on financial matters. The Secretariat, being autonomous, would have the authority to: (a) open and operate bank accounts; (b) select and hire staff for itself and RADCs, and (c) sub-contract activities to various agencies and NGOs. The Secretariat's responsibilities would include: policy development; RADC administration; financial management and control; advice to media unit; and monitoring of RADC performance. Kyrgyz Republic Figure 1.3 Rural Advisory and Development Services (RADS) and Micro Credit Organization and Management RADS Micro Credit Rural RADS __ Advisory Foundation KAFC Steering :---------- --_ - __ Council , Secretariat HQ (RASC) .. ,___ , ,, ~~~~~~~~~~~~~~~.... ........ Obasry-on ObasRDCs lOblastUrayon l '------- IKAFCoffices Oblast Steering ..I Council/s Rayon Farmers & ----- Centers .-Farmer Groups Farmers & Farmer Groups Represents coordinating and I or autonomous agencies Represents line agencies Kyrgyz Republic Figure 1.4 Agricultural Support Services Project Organizational Structure of Rural Advisory and Development Centers (RADCs) Agrarian Academy RADC Secretariat Other Research . Manger ...... .... . . . . Farm Management ______ __ Advisor (Subject Matt r Specialists) Mechar~lsation Agroomy Livestock Eco omics Women's Development Rayon Centers 24 Advisors Farmers and Farrers Groups -Rpresent coordinating and I or autonomous agencies Represent line agencies _~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(~ CHAPTER 4: PROJECTIMPLEMENTATION 34 4.8 Figure 1.3 shows RADCs' proposed structure. RADCs will be the main vehicles to deliver advisory and development services to farmers and farmer groups and will have the following main responsibilities: (a) prepare and implement technical programs in advisory services; (b) carry out on- farm demonstrations and field trials on farmers' fields at farmers' request; (c) commission local adaptive research contracts; (d) manage oblast and rayon level staff and maintain accounts; (e) liaise with local governments; and (g) disseminate information. RADC Managers will be responsible for the development of annual work plans for their respective oblasts, under the overall guidance of local Oblast Steering Councils (OSCs). The OSCs which will comprise of representatives of farmners, NGOs, and government agencies from within the oblast, will play the same pivotal role as the RASC will do at the national level, in terms of ensuring that RADS remains client-responsive. 4.9 In addition to the Manager, there will be five specialist staff and two administrative staff as well as a TA-financed advisor, either from the associate donors (Swiss, GTZ) or from local UN volunteers or equivalent. The group development adviser (financed by Swiss grant) will also work at RADC level, though based in Bishkek. RADCs' rayon offices will be staffed by two or three extension advisors capable of giving a broad range of advice to farmers. They will also advise farmers where to go for additional help, whether to the specialists in RADC oblast offices, to the rayon land reform offices, to KAFC or to research institutes, as necessary. There will be no need for a formal committee structure at the rayon level. 4.10 As a condition of negotiations, the government. (a) approved the Charter for the establishment of the RADS Foundation and registered this Foundation, as a legal entity, with the Ministry of Justice; (b) issued a friamework agreement in a format acceptable to IFAD, for the establishment of a small farmer credit program (Farm Development Fund in KAFC), duly signed by the KAFC, UNDP and the government; and (c) confirmed that the existing legal and administrative arrangements permit the establishment of: (c) farmer-dominated Steering Committees for the RADS; and farmer groups/associations which would be RADCs' target clientele. 4.11 Farm Development Fund (FDF). The government will establish a Farm Development Fund in KAFC with an equity contribution of US$1.5 million from the Loan provided by IFAD, under a subsidiary agreement to be signed by the Government and KAFC. KAFC will operate FDF in coordination with but outside the RADS, using its (KAFC's) institutional structure already in place. KAFC will give authority to its regional managers to approve subloans to small-holders initially up to about US$1,000. This is seen as a necessary institutional development for KAFC if it is to efficiently serve its institutional mandate to finance the agricultural sector. The small-farmer credit program will be implemented through a three-party agreement under which: (a) KAFC will provide financial services; (b) UNDP (with technical assistance of US$0.5 million to be provided outside the project) will develop credit-worthy groups; and (c) RADS/RADCs will provide technical services. 4.12 KAFC has prepared a lending operations Manual to provide practical guidance to the operating staff covering procedures for lending under the IDA-assisted Rural Finance Project's Small Farmers Credit Outreach Program (para. 1.10). In addition to the lending under SFCOP, KAFC would use the ASSP-assisted Farm Development Fund (FDF) to provide subloans mainly to poorer farmers on a group basis, who would not qualify for credit even under the liberal criteria proposed to be used by SFCOP. The FDF window will be mainly for banking with the poor, by providing non-collateralized credits using group dynamics and by developing a credit culture and discipline among farmers. This part of social intermediation is currently being supported by UNDP as part of its poverty alleviation project. Using the proposed UNDP grant of US$0.5 million, the KAFC will build partnerships with community-based CHAPTER 4: PROJECT IMPLEMENTATION 35 organizations for delivering credit to poorer farmers. As part of the project implementation, UNDP will hire an expatriate training - cum - group development expert to strengthen the processes of training and group formation and organize training programs exclusively for KAFC staff and guide in the appraisal of group loans, the documentationi processes and portfolio management. KAFC and UNDP will share information on1 their respective activities and prepare quarterly work programs for the FDF. They will associate RADC staff with these processes. 4.13 IDA has appraised KAFC in its role as the implementing agency for the Rural Finance Project (RFP) which is being regularly supervised. The terms and conditions for KAFC's subloans from the FDF to farmer groups and individual farmers will also be broadly similar to those for the SFCOP component under the RFP so that the interest rates charged by KAFC remain positive and the subloan maturities are consistent with the production cycle. KAFC may waive or modify collateral requirements. The executionr of the Subsidiary Agreement between the government and the KAFC would be a condition of effectiveness for the IFAD loan, and implicitly for IDA credit, as the effectiveness of the latter is conditional upon the IFAD loan becoming effective. (iii) Seed Development 4.14 MAWR's coordinating/regulatory role. MAWR's Seed Unit operating under the Deputy Minister for Crops, would be the administrative office for all matters relating to seeds within the Ministry. It would be responsible for promoting a policy and regulatory environment favorable for the development of a commercially viable and diversified seed sector in which private companies can play a significant role. Specifically, the Seed Unit would: (i) develop and implement seed policies, seed regulations and standards; (ii) approve the registration of varieties as recommended by the Variety and Seed Testing Organization; (iii) maintain the official registry of varieties protected by the grant of Plant Breeding Rights; (iv) license seed producing companies which satisfy minimum standards in terms of facilities and staff; and (v) liaise with international seed organizations concerned with seeds and varieties. The Seed Specialist will be based within the Seed Unit and will be expected to strengthen the institutional role of the Unit and advise on the above activities. 4.15 Seed regulatory services (including official variety testing and seed certification) would remain part of MAWR but would be reorganized to bring all technical work concerned with seed variety testing, seed quality control and certification, under one organization to ensure coordination and the efficient use of the existing facilities. The two existing services (Variety Testing and Seed Inspection) would be brought under one regulatory agency called Variety and Seed Testing Organization. 4.16 Selection Criteria for Pilot Seedfarms. The selection criteria for the three pilot commercial seed farms which were agreed with IDA during negotiations, include the following: (a) farms should be easily accessible and located in different agro-climatic (representative) regions; (b) farms should be private and/or have plans to complete the privatization process in a manner acceptable to the Government and IDA; (c) farms should have necessary managerial and technical staff, with appropriate qualifications and experience and a demonstrable track record of producing high quality commercial seed; (d) farms should provide adequate documentary evidence regarding the ownership of land and non- land assets held by them; the commercial viability of the improved seed production; ability to repay project finance for seed production; and the legal authority of the farms' representatives to sign project finance and cost recovery agreements with MOFE or its representative; (e) farms should qualify for selection through a competitive tendering process, acceptable to the government and IDA; and (f) the number of farms to be selected will be three unless otherwise agreed to by IDA at the request of the Government. CHAPTER 4: PROJECTIMPLEMENTATION 36 4.17 Financing of Seed Farms. Finanicinig of super elite and elite seed farms and the three private commercial seed farms will be processed by PIU in collaboration with MAWR's seed unit and the CRI/FPRI as relevant (paras. 3.16 and 3.17). The MOFE or its designated representative (e.g. PIU) will provide IDA Credit to eligible seed farms on the basis of project finance agreements to be signed by it (MOFE) and the beneficiary seed farms oni the following main terms and conditions: (a) the project finance will carry interest at rates that are positive in real terms (to be determined by MOFE annually at the end of each calendar year) and include (i) a fee of 3-5 percent payable to a financial institution, acceptable to IDA, which will act as MOFE's agent for account administration; and (ii) such additional spread as MOFE might prescribe, in consultation with IDA to cover the opportunity cost of capital to the government. The interest rate charged by MOFE will not generally exceed the prevailing interest rate/s cilarged by commercial banks for similar working capital and/or investment credit; (b) tile MOFE will require the seed farms to repay project finance for working capital within a period of two years, and for capital investments within a period of seven years, taking into account the subprojects' incremental income; projected cash flow; and the assessment of the seed farms' repaying capacity. MOFE may roll- over the working capital finance to seed farms, on similar terms and conditions; and (c) the MOFE will require the seed farms to provide collateral and guarantees consistent with local commercial practices. These terms and conditions were agreed with the government during negotiations. The MOFE will introduce such other terms and conditions as may be determined by IDA during project supervisions or the proposed mid-term review of the project (para. 4.42). KAFC has agreed to administer project finance accounts of the seed farms, as the agent for MOFE. 4.18 Commercialization of seed production. MAWR is phasing out its direct support for seed production and the majority of farms classified as seed producers are nlow in private hanids. Only some six state-owned farms remain under the Agrarian Academy and one under MAWR. The guidelines for seed certification, proposed to be issued by the government under a project covenant (para. 2.20) will ensure that seed production will be open for any seed farm that is able to meet necessary legal, financial and technical standards developed by the MAWR's Seed Unit in agreement with IDA. 4.19 Links wit/l RADCs. While the commercial seed sub-component would be coordinated by the MAWR's Seed Unit (with PIU support), close contacts would be maintained at the regional level with relevant RADCs (para. 3.19). (iv) Crop Protection and Plant Quarantine 4.20 The two sub-components, plant quarantine and crop protection, would be implemented by the concerned regulatory bodies under MAWR, namely the State Inspectorate for Plant Quarantine (SIPQ) and Agency for Chemical Supply and Plant Protection (ACSPP). The MAWR will bring the two agencies, SIPQ and ACSPP, under the administrative control of a Deputy Minister for Crops to ensure necessary technical coordination. The effectiveness of the present administrative set-up for the two services will be re-assessed during the mid-term review of the project. (v) Agricultural Market Information 4.21 MAWR will be the primary organization responsible for the establishment and conduct of MIS in collaboration with the State Department of Anti-Monopoly Policy (SDAP); the National Statistical Committee (NSC); Kyrgyz Standard (KS); and Kyrgyz Agrotech project (KATP), all operating at the national and regional levels, and the six participating oblasts. CHAPTER 4: PROJECTIMPLEMENTATION 37 4.22 The MIS's national unit at Bishkek is currently located in MAWR. The national unit would operate under the direction of a National Management Committee (NMC) which will comprise of senior staff from MAWR, NSC, SDAP, KS, and RADS. During negotiations, an agreement was reached that the Government will maintain NMC until the completion of the project with composition and terms of reference acceptable to IDA. MAWR is currently reviewing its organizational structure to introduce necessary changes to make itself more client-responsive. MAWR would inform IDA of any changes in MIS national unit's internal organization. For information collection, processing and dissemination, the MIS will have regional offices established in each of the six oblasts (two of which have already been established for the pilot project). To coordinate activities in the regions, Regional MIS Management Committees will be established comprising of oblast representatives (Agriculture Department of the Akimiat) and oblast level SDAP, KS, and ATAS (and its successor organizations, RADCs). 4.23 As a condition of negotiations, the government issued a resolution (No. 76 dated February 13, 1998) approving the establishment of the agricultural Market Information System (MIS). The government also established a NMC for MIS and required the agencies involved in the MIS implementation to sign a cooperation agreement outlining their mutual responsibilities. B. PROCUREMENT ARRANGEMENTS 4.24 Procurement Responsibilities. The PIU would be responsible for carrying out all procurement actions under the project. The PIU would include a procurement specialist, with responsibilities that will include: (i) training of PIU and regional staff on Bank Group procurement and disbursement procedures; (ii) developing monitoring procedures for procurement and disbursement; (iii) ensuring proper notification of bidding opportunities; (iv) preparing specific bid documents based on the current Bank Group Standard Bidding Documents for goods and works; (v) preparing requests for proposals (RFPs) and terms of reference for consultants; and (vi) assisting PIU in contract administration. In addition, IDA would monitor procurement activities, contract administration, and project record keeping during supervision missions and assist the Government (through PIU) to organize training for the national contractors in competitive bidding. 4.25 Procurement Procedures. The General Procurement Notice for the Project and a Special Procurement Notice for international recruitment of a Project Implementation Adviser for the PIU were published in the Development Business issue of February 15, 1998. Procurement of goods and works would follow the "Guidelines: Procurement under IBRD Loans and IDA Credits, January 1995 as revised in January and August 1996 and September 1997 (the Guidelines)". Recruitment of consultants would follow the "Guidelines: Selection and Employment of Consultants by World Bank Borrowers, published by the World Bank in January 1997 and revised in September 1997 (the Consultant Guidelines)". The Borrower will use the Bank's standard bidding documents for goods and works, including the Bank's Regional standardized NCB documents for works issued in 1995. For consulting assignments, the Borrower will use the Bank's standard form of contract. A Procurement Workshop will be held in Bishkek immediately after the project effectiveness, tentatively scheduled for June 1998. 4.26 Procurement Arrangements. Tables 4.2 and 4.3 summarize the procurement methods and prior and post-review procedures proposed under the project. Annex C, Table I provides a summary of the five-year procurement plan which was reviewed and agreed upon during negotiations. Details of the proposed arrangements are as follows: * Civil Works: The project consists of components which require construction and rehabilitation works mainly for office and laboratory buildings. Minor Works (MWs) CHAPTER 4: PROJECT IMPLEMENTATION 38 estimated to cost less thani US$100,000 per contract, and up to an aggregate amount of about US$300,000 may be procured under lump sum, fixed price contracts awarded on1 the basis of quotations from three qualified domestic contractors in response to a written invitation. The number of contracts under this category would be about 12. However, any work estimated to cost above US$100,000 and below US$200,000 up to an aggregate amount of US$400,000 will be procured through NCB usilng Europe and Central Asia (ECA) Region's Standard Bidding Documents. The NCB contracts are expected to number about three. All contracts estimated to cost above US$200,000 shall be procured through ICB in which case, the local contractors will be eligible for preference in accordance with Bank procurement guidelines. * Goods: Goods including laboratory and field equipment, office equipment, and vehicles, collated in different packages and estimated to cost more than US$200,000 up to an aggregate amount of US$6.6 million, would be procured using Internationial Competitive Bidding (ICB) procedures. The number of ICB subpackages would be in the range of 37 and would be consolidated into about 21 packages. The procurement of land certificates, estimated to cost about US$0.8 million, usinlg ICB procedures, will be througlh a multi-year single contract with a provision for price adjustment. For ICB contracts, local manufacturers, eligible for domestic preference in accordance with Bank Procurement Guidelines, would be granted a domestic preference in bid evaluation equivalent to 15 percent of the CIF price, or the amount of the custom duties and other import taxes, whichever is lower. Contracts for the supply of goods and equipment, estimated to cost less than US$200,000 up to an aggregate amount of US$2.2 million would be procured through International Shopping (IS) on the basis of quotations to be obtained from a minimum of three suppliers from at least two eligible countries. The number of IS subpackages would be about 55 which could be consolidated into an appropriate number of larger packages for purposes of achieving necessary efficiency in procurement including a potential ICB, especially for vehicles. Contracts for procurement of items costing less than US$50,000 would be awarded through national shopping (NS) on thie basis of three quotations obtained from three different eligible suppliers, depending upon the availability of such items in the Kyrgyz Republic. The number of NS contracts will be few (about seven) for an aggregate amount not to exceed US$124,000. * Consultant Services: Prior to the issuance to consultants of any requests for proposals, the government will submit to IDA a Plan for the selection of consultants for its review and approval. The procurement of consultant services will be undertaken in accordance with the selection plan approved by IDA. Consultant services amounting to US$1.4 million would be procured on the basis of Quality and Cost-Based Selection (QCBS), with individual contracts generally exceeding US$50,000. The number of QCBS contracts will be about 12. Contracts related to services for PIU, seed development and crop protection, estimated to cost not less than US$25,000 may be procured using Least Cost selection procedures, involving about six contracts for a total amount of US$133,000. During the project implementation, there will be some contracts, not exceeding US$25,000 per contract (totaling about US$151,000), which will be entered into with individual consultants selected from short-listed candidates acceptable to the IDA to carry out specific tasks such as the preparation of training materials, case studies, legal support, and translation services. A part of the consulting services for agricultural market information system and research services estimated to cost approximately about US$59,000 (about five contracts) will be contracted following the single source selection procedures. Suchi contracts will be generally for amounts less than US$25,000 each. CHAPTER 4: PROJECT IMPLEMENTATION 39 * Training. The cost of IDA training is estimated at about US$ 410,000. The training program and criteria for selection of trainers and trainees under IDA/IFAD-assisted programs would be agreed with the two institutions. Training financed by bilateral grants will be procured following donor procedures. * FDFSubloans. The beneficiaries of individual or group subloans issued by KAFC from the IFAD-funded Farm Development Fund (FDF) which are expected to range between US$100 to US$2,000 will use subloan funds for purchase of farm inputs, small equipment, spare parts, livestock breeding stock and agricultural produce. They will carry out the procurement using local commercial practices. KAFC being an implementing agency for the IDA-assisted Rural Finance Project is familiar with the Bank Group's procurement procedures. * Incremental operating expenses will include: (a) salaries of project staff over a period of five years (about US$3 million) to be recruited following competitive procedures including advertisements, interviews, etc; and (b) expenditures on maintenance of vehicles, rent, office consumables, expenses for field visits, etc (US$6 million), which would be procured following public procurement practices. 4.27 IDA Review: All ICB and NCB contracts would be subject to prior IDA review, as well as the first three contracts for minor works, one each from three different oblasts; and the first two contracts each for procurement of goods using international shopping (IS) and national shopping (NS) procedures. 4.28 With respect to Consultant Services, prior IDA review would be required for all terms of reference, irrespective of the contract value. Contracts estimated to cost more than US$25,000 would be subject to IDA's prior review (the IDA would review the Request for Proposals, the terms of reference and short-lists). For each contract estimated to cost US$50,000 or more, after the technical proposal has been evaluated, the technical evaluation report would be submitted to the IDA for its review prior to the opening of the priced proposals. For contracts estimated to cost between US$25,000 and US$50,000, the IDA would be notified of the results of the technical evaluation prior to the opening of the financial proposals. For contracts with individual consultants costing US$25,000 or more, the qualifications, experience, terms of reference and terms of employment shall be furnished to IDA for its review and approval. All other contracts would be subject to ex-post review by IDA on a random basis. 4.29 An Agreement was reached during negotiations that all procurement actions under the project wouldfollow the procedures outlined above. 4.30 A Country Procurement Assessment Report (CPAR) is to be scheduled. The PIU would keep a record of all procurement actions and furnish to IDA quarterly reports thereon, which would include information as to: (a) revisions, if any, in cost estimates for individual contracts and the total project; (b) changes in the timing of procurement actions and completion dates; and (c) compliance with aggregate limits on specified methods of procurement. As a condition of negotiations, the government has prepared a procurement plan for the first year of the project. CHAPTER 4: PROJECTIMPLEMENTATION 40 Table 4.2: Summary of Proposed Procurement Arrangements (US$ million equivalent) Procurement Method Total Project ICB NCB Other /a NBF Cost 1. Civil Works 1.1 Rehabilitation of Laboratories/ 0.4 0.3 0.1 0.8 Office buildings (0.4) (0.3) lb (0.7) 2. Goods 2.1 Equipment 6.6 1.0 0.9 8.5 (6.6) (1.0) (7.6) 2.2 Vehicles 1.0 0.8 1.8 (1.0) (1.0) 2.3 Issuance of Land Certificates 0.8 0.8 (0.8) (0.8) 3. Farm Development (Credit) Fund 1.5 1.5 4. Consultancy Services and Training 4.1 Project Implementation Support 1.7 3.5 5.2 /c (Consultancy services) (1.7) (1.7) 4.2 Capacity Building 0.4 2.1 2.5/d (Training & study tours) (0.4) (0.4) 5. Incremental Operating Cost 5.1 Project Implementation Support /e 1.4 1.6 3.0 (0.4) (0.4) 5.2 Operating Expenses /f 3.7 2.3 6.0 (2.3) (2.3) Total 7.4 0.4 9.5 12.8 30.2 Total IDA (7.4) (0.4) (7.2) (15.0) Figures may slightly differ due to rounding Note: Figures in parenthesis represents amounts financed by the IDA credit. NBF= Non IDA Financed but includes IFAD and other donors. a. International Shopping (IS) will be for field equipment, laboratory equipment & vehicles. National Shopping will be for small procurement packages such as office equipment and vehicles. b. Some of the civil works contracts are likely to be for less than US$100,000 each, which would be procured as Minor Works. c. Co-financed by IDA(USS 1.4 million), IFAD (USSI.0 million), the Sheep Development Project (US$0.5 million) and Other Donors (US$1.0 million) d. Co-financed by IDA(US$0.4 million), IFAD (US$1.3 million), Sheep Development Project (US$0.5 million) and Other Donors (USS0.1 million) e. Represents salaries of non-governmental local staff contracted as per Bank guidelines (para 4.25), would be co-financed by IDA (US$0.4 million) IFAD (US$0.5 million), the Sheep Development Project (US$0.6 million), Other Donors (US$0.4 million), Beneficiaries (US$0.3 million) and the Government (US$0.6 million). f. Operating expenses include operations and maintenance of equipment and vehicles, rent, office consumables, expenses for field visits etc. Thes items would be procured following public procurement practices. Items would be co-financed by IDA (US$2.3 million), IFAD (US$1.0 million), the Sheep Development Project (US$0.1 million), other Donors (US$0.4 million), Beneficiaries (US$0.9 million) and the Government (US$1.4 million). Kyrgyz Republic Agricultural Support Services Project Table 4.3 Procurement Information' ProcurementofWorks Intemational National Intemational MinorWorks OtherMmethods Competitive Competitive Shopping Bidding Bidding (IS) (MW) (ICB) (NCB) __ _._>z 1. Procurement method thresholds >US$200,000 US$200,000 >US$50,000 but US$50,000 - >US$25,000 US$59,0002 40 percent). 5.8 Potential Changes in Cropping Patterns. Farm models presented above assume a cropping pattern comprising of predominantly low value crops. There will be mostly one crop per year though some farmers might take vegetables as a second crop on a small area. However, the share of the second crop in the total cropping pattern is expected to be very small. Taking a conservative approach to financial and economic analysis, the farm models, therefore, assume neither any increase in the cropping intensity nor any fallow lands. Potentially, however, in response to higher prices and improved marketing, the cropping pattern may undergo structural changes relative to the base case. Such changes would inevitably lead to increases in household/per ha incomes, and in the financial and economic returns to the project. To illustrate the impact of a potential change in the cropping pattern on the project's economic performance, a sensitivity analysis was undertaken assuming that the proportion of relatively high value crops such as maize, sugarbeet and cotton could go up by about 20 percent at the expense of wheat and barley. The ERR in this environment, assuming other variables remain constant, could be as high as high as 33 percent relative to 21 percent under the base case (para. 5.12). 5.9 Super Elite and Elite Seed Farms. Government project finance to NPOZ/Djal farm for production of super-elite and elite seed in cereals (wheat and maize) and FPRI forage farms (Alfalfa and Sainfoin) will be based on detailed techno-economic feasibility studies (paras. 3.16 and 3.18). Preliminary analysis of the these investments indicate financial rates of return ranging between 24 CHAPTER 5: BENEFITS AND RISKS 49 percent and 36 percent with economic rates of return ranging between 22 percent and 32 percent. At an interest rate of about 12 percent (in real terms on project finance expressed in US$), the maturity period will be about seven years for machinery and equipment finance, and two-three years for working capital finance. 5.10 Economic Rate of Return (ERR). A cost/benefit analysis has been undertaken by using economic values, and aggregating farm models and project costs at the national level. Economic prices have been calculated for major tradable products using prices and price projections available in November 1997 issue of the Bank's Business Quarterly (Annex D, Table 9). A conversion factor of 1 has been used for project costs as no distortions appear to affect the prices of items procured under the project. 5.11 Economic values are higher by 18 percent to about 50 percent compared with the financial prices. When introduced in crop budgets, the economic prices show positive results indicating that major crops supported by the project are economically justified. While aggregating costs and benefits at project level, two critical assumptions have been used: Attribution of Benefits Among Projects. In order to avoid double-counting of the benefits due to ASSP and the two other projects (Rural Finance and Irrigation Rehabilitation), approximately 40 percent of the previously mentioned benefits are attributed to the proposed project (ASSP); 40 percent to the Rural Finance Project; and 20 percent to the Irrigation Rehabilitation Project, based on a broad empirical assessment of the contributions expected to be made by various inputs to total productivity improvement on participating farms. The irrigation project will be contributing about 10 percent increase in yields (accounting for about 20 percent of the incremental benefit) as a result of improved water supply. The rest of the incremental benefit is estimated to result equally from the improved incentive framework and services provided by ASSP and increased credit facilities to farmers provided by the Rural Finance Project. 0 Teclnology Adoption Rate. It is estimated that there will be approximately 143,000 private farmers when farm restructuring is completed. A recent survey to assess the impact of the experience of TACIS households (ABC and ATAS) shows that "farmer coverage" rates are between 47 percent and 70 percent. This means that about 67,200 households could be served by the project. Among these, only a proportion would adopt recommended technologies and/or improved seeds released by the project. The adoption rate has been estimated at 50 percent so that the number of participating small-holders (households) would be about 33,600 or about 24 percent of the total: about 8 percent at the end of year 2 (I 1,200 farmers); 16 percent at the end of year 3(16 percent); and 24 percent at the end of year 4 (33,600). 5.12 Economic Rate of Return (ERR). The ERR for the project as a whole is estimated at 20 percent, corresponding to a Net Present Value of US$9.93 million(with a 12 percent discount rate), which is satisfactory given that the project's main emphasis is on the provision of services to farmers, including as many as 50 percent small holders. A sensitivity analysis has been undertaken using the following approaches: (i) farmer coverage rate of advisory services, and adoption rates for proposed technologies could be lower; (ii) farm benefits from project activities could be lower; and (iii) the cost of project activities could be higher than expected. The results are as follows: CHAPTER 5: BENEFITS AND RISKS 50 Table 5.4: Sensitivity Analysis Sensitivity Factor Base Assumption Switching Value Switching Value in % compared with base assumption Participating Rate (Coverage rate 24% 17% -28%% x adoption rate) Farm Benefits attributed to the US$ 187 per household US$ 131 per household - 27%% project I_ I Total Economic Project Costs US$ 26.3 million US$ 37.3 million + 42% Table 5.5 Sensitivity Analysis: Changes in Project Cost and Benefits (Economic) Benefits/Costs ERR Cost+ 10% Cost+20% Base Assumption 20% 18% 15% Benefits-10% 17% 16% 13% Benefits -20% 14% 12% 10% C. PROJECT SUSTAINABILITY 5.13 Sustainability. The project design has benefited from the experience with the on-going donor- assisted pilot projects in rural advisory services and market information, and a comprehensive evaluation of activities currently under way in the spheres of land reform; breeder, super elite and elite seed production; crop protection and plant quarantine. The analysis shows that the sustainability of the project-assisted activities and institutions could be substantially enhanced if their reliance on government funding could be progressively reduced, and private sector participation significantly increased. Accordingly, in the sphere of land and agrarian reform, no new organizations or bodies will be created: the strategy would be to strengthen the ability of existing government institutions and farmer groups to carry out grassroots level activities more efficiently. 5.14 The rural advisory and development services (RADS) component would use a participatory approach ensuring that farmers gradually become responsible for managing and financing the services they need. To facilitate this process, RADCs would function under autonomous, decentralized, management structures with participation of local farmers. The long-term sustainability of the advisory services would depend upon RADCs ensuring high professional standards, and assisting farmers to access credit from formal and informal sources. The sustainability of the seed component will be assured by involving critical stakeholders in both public and private sectors in the initial development of the sector with emphasis on progressively increasing the role of the private sector in seed breeding and primary seed multiplication leaving commercial seed production increasingly to the private sector. Under a similar approach, crop protection and plant quarantine activities would be sustainable by RADC training farmers and traders in safe handling and utilization of pesticides. CHAPTER 5: BENEFITSAND RISKS 51 5.15 Cost Recovery. Durinig the five-year project implemip enitation period, the finanicinig of the incremenital operating expenses of the project would be progressively borne by the govermenit and/or the project beneficiaries. At full development (PY6), anilual incremental operating costs would reach about US$1.53 millioni, of whiich 70 percent would be finaniced by the Governmeit (US$1.08 million) and the remaininig by beneficiaries. Table 5.6 below compares the cost per beneficiary with the expected anlilual incremenital increases at farm level as a result of the project intervelitiolns. 5.16 Cost Recovery Mechanisnms: These would vary by type of activity: * In the case of land and agrarian reforn componenit, the cost recovery would come mainly from fees thiat would be charged by the govermenlt on future land titling and registration activities whicil would be facilitated by the project. Additionally, the impact on the (lovernment budget of this componenit would progressively reduce as farner groups are trained to carry out on their own, farm restructuring activities precedent to issue of land certificates. * As for the rural advisory and development services (RADS), it is envisaged that beneficiaries will begin to pay for the services provided by the RADCs, even if in small amounts, right from the start, mainly for concrete products such as the preparation of business plans, preparation of credit applications, advisory visits Table 5.6: Incremental Income and Advisory Service to farms, soil analysis and Costs per Average Household (HH): 7 Ha fertilizer recommendatiolis. Som inUS$ During the project period, Annual total IncoTe per average [IH (7 ha) using 21.939 1253 RADCs are expected to new technology (with proaject) collect from the beneficiary Annual incremental income per average 1-11{ wvith 7.793 445 houselholds, a total amount project of about US$700,000, Annual operating cost of proposed advisory 370 22 equivalent to about 5 percent services per average HH adopting new of the total project cost. The technology Annual nct income per ha (with project) 2.999 171 rest of the operational cost Annual incremental income per ha (witlh project) 1(043 60 will be financed by the Annual operating cost of proposed advisory 55 3.14 project. In year 5, the servicesperha benleficiaries' contribution Annual farming cost per ha with improved would amount to about technology for an average HH 5,554 316 US$108,000 or 25 percent of the total salaries paid to RADS staff, and 15 percent of the total operational cost of the RADS estimated at about US$750,000 equivalent. * In Year 6, the number of households expected to hiave beneficial contact with RADS is estimated at about 33,600 (235,000 ha). The cost per average beneficiary houselhold (7 ha) works out to about US$22 or US$3.14 per ha, whicih would be about 0.7 per cent of the average househiold's incremenital income of US$445, and less thani I percent of per ha farminig cost withi new techinology, at US$3 16. Dependilng upOIn the size of the farm, the cost of RADS would range between US$8 for a small farm of say 2.5 ha to about US$150 for a farn with 50 ha, generally withiin the repaying ability of the beneficiary farms. In practice, hiowever, it may be difficult for RADS to levy differential fees, especially for services like training. Mechaniisms must, therefore, be developed to effect cost recovery with reference to specific products such as the preparation of business plans and credit applications and the size of farms served. It is expected that RADS, by the end of the project year 5, would be CHAPTER 5: BENEFITS AND RISKS 52 able to charge fees for all types of services, at least to larger farms, estimated at about 50 percent of the total number of expected beneficiary households (33,600), at rates equal to or above the average cost. This will enable RADS to at least partially cross-subsidize small holders, especially those below the poverty line. * If on empirical considerations, RADS must reach the poor (small holders) free of charge or by charging fees at low rates, clearly the government would have to finance part of the RADS costs. However, to reduce this fiscal burden on the government and to better target the use of public funds to the poor, apart from piloting beneficiary payments during the implementation of the project, the RADS would introduce two other sources of financing small holders: (a) a voucher system (initially funded by an IFAD loan of US$180,000) in support of targeting the poor (para. 3.1 1), and (b) KAFC contracting RADS advisors (on fee basis) for supervision of its loans to farmers and farmer groups. Potentially, the RADS should aim to promote competition in the provision of advisory services to farmers by paying local level advisors a basic salary, and then allowing them to keep, as an incentive, a percentage of the fees, in which case, local advisors would compete with each other for customers (e.g. across rayons/oblasts). The RADS would also explore if it must divest all its employees providing advisory services, and let them become independent contractors. In this approach, the resulting competition could help lower the cost of advisory services, so also the burden on the budget. RADS would then evolve itself into an association of agro- business centers rather than a monolithic NGO. * During the project's mid-term review, the government and the RADS Foundation in consultation with IDA, will review the effectiveness of various cost recovery mechanisms and develop plans for future financing of the RADS. The project's goal is to ensure that RADS remains a client-oriented, viable, and efficient (competitive) activity, and takes an aggressive stance on cost recovery, to become a fully self-financinig activity, with government funding limited only to the cost of RADS reaching the most needy groups and areas as may be justified by empirical considerations. * Seed Component. Cost recovery under the seed component would be based on the sale of patent rights and payment of royalties for new varieties. Breeding activities should begin to achieve partial cost recovery after a period of about five years through the release of new varieties. The seed production farms would recover costs through charging an adequate margin on the commercialization of Super Elite and Elite Seed, respectively 50 percent and 30 percent of their production costs. Cash flow projections of the NPOZ and FPRI farms demonstrate their financial sustainability (subject to a systematic effort toward elimination of prevailing inefficiencies in seed production). Project finance to pilot commerzial seed farms will be subject to full cost recovery. * The seed regulatory services are the responsibility of the State. Annual expenses have been estimated at US$74,000 for seed certification laboratories, US$115,000 for official variety testing laboratories and US$23,400 for the Seed Unit. A full cost recovery is envisaged in operating the seed certification laboratories which would charge the full cost of tests to seed growers at the current rate of about Som 80 per sample. The variety testing laboratories would recover initially 50 percent of their operating expenses by charging a realistic (market-based) fee of US$100 per variety to be tested, but the fee rate could be potentially increased commensurate with the increases in farm profitability. CHAPTER 5: BENEFITS AND RISKS 53 * The cost of regulatory services for crop protection and plant quarantine will be borne by the government; however, the stations and laboratories to be developed under the project would charge fees to gradually recover their operational costs over a period of five years. * Agricultural market information system, at full development, would be partially commercialized by producing customized reports which would be sold to producers and traders. (iii) ][mpact on Government Budget 5.17 During 1997, the total budget allocated to the agricultural sector was about Som 286 million (about US$16.3 million) including: Som 60 million for the MAWR and the entities under its responsibility; Som 38 million for the Agrarian Academy; Som 38 million from oblast budgets to the local administration; and Som 150 million for agricultural credit. The annual incremental operating costs of the proposed services at full development (PY6) have been evaluated in constant terms at US$2 million or Som 35 million of which the Government would have to finance about 80 percent, equivalent to US$1.6 million or Som 28 million (which could be reduced through concerted efforts toward cost recovery). This amount represents about 7 percent of the total budget support to agricultural sector. Additionally, during the project period (July 1998-June 2003), the government will bear the incremental recurrent cost of the services provided, up to a total of about US$2.1 million (Som 37 million), or 22 percent of the total, with the balance funded by the project. 5.18 The government will raise incremental resources for the project mainly by reducing the level of subsidies provided to the agricultural sector, and by reallocating the savings to the proposed project, within the threshold set by the recent budget. Under the recently approved IDA-assisted Rural Finance Project, the Government has agreed to reduce/phase out its budgetary allocations for agricultural credit according to the following maximum benchmarks and schedule: (i) 1997: Som 150 million; (ii) 1998: Som 50 million; (iii) 1999: Som 25 million; and (iv) 2000: Nil. These budgetary savings would be made available for other uses, including the proposed project. In order to assist MAWR and MOFE in budgeting counterpart funds over the next five years, detailed financial requirements per activity and per year have been reviewed and agreed with the government. D. POVERTY IMPACT 5.19 The project would target private and restructured farm-holdings in which the majority of the rural poor are founcl. The project would strengthen MAWR's institutional capacity to provide technical, and through RADS, farm management services to private farms which currently receive hardly any public support. Women provide most of the farm labor in the country. Their role is likely to increase with the emergence of the private family farm-holdings which will be based largely on family labor. The project's farm advisory services would cover women as farmers and create potential for direct additional employment for them. The project will address poverty by improving household incomes and food security. E. ENVIRONMENTAL IMPACT 5.20 The project is expected to have a positive impact on the environment and has been given a 'C' rating. The positive impact would be obtained essentially through activities supporting: (a) land and agrarian reform which are expected to lead to long-term investments in soil quality; (b) advisory services, ensuring that farmers make more efficient use of seeds, irrigation, fertilizers and crop protection chemicals; (c) adaptive research which would focus on improving soil and water management CHAPTER 5: BENEFITS AND RISKS 54 practices; and (d) crop protection and plant quarantine services in conjunction with an IPM approach. Other components, such as seed development, would also have a positive impact directly by reducing weed infestation and contamination with seed-borne diseases, and indirectly through the introduction of varieties with higher insect or disease resistance. 5.21 The proposed advisory services including field trials, demonstrationis and related adaptive research programs are specifically directed towards better management of natural resources. The soil management and conservation program would seek to reduce tillage and promote better water inlfiltration, whiich would limit soil erosion, reduce the need for irrigation, and curtail land preparation costs. The advisory services for crops whilch in the past tended to receive alarming levels of pesticides (such as vegetables) will raise awareness among farmers of the factors that influence pest development and introduce IPM methods for their control. Plant quarantine sub-component would reduce the risk of introducing new pests in the country and would put in place a system to regulate and control the supply of pesticides, as well as their distribution, handling and utilization. This would allow to ban particularly toxic chemicals, to control adulteration of pesticides (which invariably result in higher levels of application or hazardous self-experimentation of new products), and impose proper labeling. These activities would complement the work of advisory and adaptive research services and result in safer handling and lower utilization of crop chemicals. F. PROJECT RISKS AND MITIGATION MEASURES 5.22 The expected benefits can be achieved by participating farms only if the services provided by the project are combined with appropriate and timely supply of credit to finance additional inputs associated with the adoption of new technologies. This risk will be mitigated by the proposed IFAD line of credit for the Farm Development Fund in KAFC for small holder credit in conjunction with the IDA-assisted Rural Finance Project; the ADB-financed Credit Union Project; and the on-going GTZ-supported line of credit. S.23 The availability of budgetary resources to finance part of the incremental operating cost is another major risk. In order to limit this risk, the levels of these expenses would be kept low and the mechanism of cost recovery from beneficiaries would be introduced from the project start, though initially on a modest scale. However, the Government would still have to redirect part of the agriculture budget currently used for direct transfers to the provision of project-assisted services. During the project implementation, cost recovery would be carefully monitored as well as the availability of the government contribution. Any disruption in government financing would be identified early on in order to seek alternative sources of financing. 5.24 In the sphere of land and agrarian reform, there are four main types of risks: political risks; risks of failure of complementary reforms; risk of social dislocation; and climatic risks. A substantial redistribution of land and property faces a political risk as it might undermine the basis of political power of village and rayon administrations, leading to administrative "hold up" of some aspects of the land reform. This risk will be addressed by making information on far-m restructuring available directly to farmers and by supporting land share certification scheme which identifies specific parcels, thus weakening local administrations' ability to influence land allotments prejudicially. The complementary reforms, especially in rural finance, are currently under way. The project's focus on improving the incentive framework for agriculture is expected to reduce the risk of social dislocation. Climatic risks affecting agricultural performance could potentially preclude farm families from pursuing changes in the prevailing collective management, and establishing individual farms and farmer associations. The on- going social expenditure programs are expected to address this risk. CHAPTER 5: BENEFITSAND RISKS 55 5.25 Continued intervention by Government seeking to retain a direct role in agricultural production rather than shifting its mission to that of a service provider, remains a risk. This is particularly so in the case of the seed component, but could also toucih other components. The low implementation capacity especially related to services which are new for the country, such as advisory services and MIS, could delay project implementation and realization of benefits. The relatively high content of technical assistance, (about 15 percent of project cost), aimed at local capacity building is designed to mitigate these risks. CHAPTER 6: AGREEMENTS REACHED AND RECOMMENDATION 6.1 As conditions of negotiations, the Government completed the following actions: (i) Issued a formal order to merge livestock advisory services under the Sheep Development Project (SDP) with ASSP's integrated rural advisory and development services (RADS), and at negotiations, informed IDA and IFAD that this merger would be carried out effectively, no later than September 30, 1998 (para. 3.9); (ii) Finalized the Letter of Invitation (LOI) to international firms to submit bids for PIU advisory assignment, including terms of reference of this assignment (para. 4.2); (iii) Provided to IDA for review, a position paper on land and agrarian reform, reinforcing government commitment to implement various activities proposed by the project (para. 4.4); (iv) (a) Approved the Charter for the establishment of the Rural Advisory and Development Services Foundation and registered this Foundation, as a legal entity, with the Ministry of Justice; (b) issued a framework agreement for the establishment of a small farmer credit program (Farm Development Fund in KAFC), duly signed by KAFC, UNDP, and the Government; and (c) confirmed that existing legal and administrative arrangements permit the establishment of: farmer dominated Steering Committees for RADS, and farmer groups and associations which would be RADCs' target clientele (para. 4. 10); (v) Established criteria for selection of private pilot commercial seed farms, and terms and conditions of project finance to seed farms (paras. 4.16 and 4.17); (vi) Issued a government resolution (No. 76 dated February 13, 1998) approving the establishment of an agricultural Market Information System (MIS); established a National Management Committee (NMC) for MIS; and required agencies involved in the MIS implementation to sign a cooperation agreement outlining their mutual responsibilities (para. 4.23); (vii) Prepared a Procurement Plan for the first year of the project (para. 4.30); and (viii) Prepared a draft Manual on Financial Management and Accounting for the project, which will be revised by May 31, 1998, taking into consideration IDA's recommendations (para. 4.39). 6.2 During negotiations, agreements were reached on the following: (a) Seed Industry Development: (i) Government to issue, by December 31, 1998, policy guidelines, satisfactory to IDA, to implement the compulsory seed certification requirements under the Seed Law (para. 2.20); (ii) Government to submit, by December 31, 2000, to the Parliament, a draft amendment to the Seed Law, satisfactory to IDA, which would allow MAWR to offer seed certification on a voluntary basis (para. 2.20); CHAPTER 6: AGREEMENTS REACHED AND RECOMMENDATION 57 (iii) Government to submit, by August 31, 1998, to the Parliament a draft law, satisfactory to IDA, on the protection of plant breeders' rights (para. 2.21); (iv) Government to ensure that CRI and FPRI submit to IDA, by March 31 of each year (or such other date agreed with IDA) for its review, their annual seed breeding programs; immediately thereafter, finalize said programs taking into consideration IDA's comments thereon; and carry out such programs in accordance with their terms (para. 3.15); (v) Government to ensure that: seed production enterprises, selected according to criteria acceptable to IDA, submit to IDA for its review, by September 30 of each year, feasibility studies with recommendations (including those on cost recovery) for the production of seed to be financed under the Credit; immediately thereafter, finalize said recommendations taking into consideration IDA's comments thereon; and carry out such recommendations in accordance with their terms (paras. 3.18, 4.16 and 4.17); (vi) Government to establish a National Seed Association (NSA) by December 31, 1998 with a charter and by-laws acceptable to IDA (para 3.23); (b) Crop Protection and Plant Quarantine:, (i) Government to: (a) submit to the Parliament, by August 31, 1998, a draft law satisfactory to IDA on pesticides and pest control in the context of an IPM approach (para. 3.25); (b) issue, by June 30, 1999, a Manual on Pesticide Management and Application, Crop Protection and Plant Quarantine, acceptable to IDA (para. 3.26); and (c) ensure that RADCs advise farmers and farmer groups on pesticide use only when such use is justified under an IPM approach; submit to IDA, by December 31 of each year, reports on RADCs' compliance with this obligation; and take into consideration IDA's comments on these reports, including ways to improve RADCs' compliance with this obligation (para. 3.26); (ii) Government to submit to IDA, by December 31, 1998, feasibility studies for rehabilitation of plant quarantine centers in Bishkek and Osh and, immediately thereafter finalize said feasibility studies taking into consideration IDA's comments thereon (para. 3.28); (iii) Government to submit to IDA, for its review, by December 31, 1999, a plan for the consolidation of the existing rayon-level quarantine laboratories and centers; and, immediately thereafter, finalize said plan taking into account IDA's comments thereon; and carry out such plan in accordance with its terms (para. 3.29); (c) Project Implementation: (i) Government to maintain the Project Account during the execution of the project; and deposit, semi-annually, an amount of Som, acceptable to IDA, into such account toward its budgetary contribution for the project (para. 3.37); (ii) Government to establish by August 31, 1998 and, thereafter, maintain until the completion of the project, with composition and terms of reference acceptable to IDA, the Project Steering Committee (PSC), and assign to it the responsibility to provide oversight and coordination for project implementation and approve annual work plans and budgets; (para. 4. 1); CHAPTER 6: AGREEMENTS REACHED AND RECOMMENDATION 58 (iii) Government to carry out the project through MAWR with participation of SALMLR; CRI, FPRI and selected seed farms; SIPQ and ACSPP; and NMC in respective components (para. 4. 1); (iv) Government to maintain, throughout the execution of the project, the PIU with sufficient number of qualified staff, adequate facilities and resources, satisfactory to IDA; exercise its rights under the PIU Advisory Agreement, in a manner acceptable to IDA, to accomplish the purposes of the project; and not to abrogate, amend, or waive the PIU Advisory Agreement, without the concurrence of IDA (para. 4.2); (v) Government to maintain the National Management Committee (NMC) for MIS until the completion of the Project, with composition and terms of reference acceptable to IDA (para. 4.22); (vi) Government to establish and maintain policies and procedures for monitoring and evaluation of project activities on an on-going basis and in accordance with indicators satisfactory to IDA; and carry out, by December 2000, a mid-term review of the project on terms of reference acceptable to IDA (para. 4.42); (d) Financial Management. (i) Government to maintain a financial management system including records and accounts, and prepare financial statements in a format acceptable to IDA, adequate to reflect the operations, resources and expenditures related to the carrying out of the project, and consistent with International Accounting Standards (para. 4.39); and ensue that annual accounts for the project, including SOEs and Special Account (SA) for each fiscal year, are audited in accordance with International Standards on Auditing by an independent auditor, acceptable to IDA (para. 4.40); Conditions of Effectiveness 6.3 It was agreed during negotiations that the following will be the conditions of effectiveness of IDA Credit in addition to those in the general conditions: (i) Government to open a Project Account in a commercial bank and make an initial deposit of an amount in Som equivalent of US$25, 000 into such account (para. 3. 37); (ii) Execution of the PIU Advisory Agreement with the PIU Advisor, satisfactory to IDA (para. 4.2); (iii) Government to appoint an independent auditor acceptable to IDA (para. 4.40); and (iv) Government to fullfill all conditions precedent to the effectiveness of the IFAD Loan other than those related to the effectiveness of the IDA Credit. Recommendation 6.4 I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association and reconmmend that the Executive Directors approve it. Annex A KYRGYZ REPUBLIC Agricultural Support Services Project Project Design Summary .. . ..*...*..*..*.........*.... .. . .. ~ o V lftt ~ t * oi. ( M.............t~ o CAS-related goal: Facilitate agricultural recovery to Measurable improvement in economic National statistics on: overall economic Continued macro-economic stability; increase the sector's contribution to growth; agricultural productivity, growth; agricultural growth; agricultural overall economic growth; increase rural profitability and sustainability; increases GDP per capita; agricultural production Political support for: processes of land incomes; and alleviate rural poverty. in rural incomes; reduction in poverty and productivity (annual); agricultural reform; farm restructuring; farmer access and related social expenditures. incomes, by farm size and per capita; to support services; phasing out of rural population in poverty and absolute remaining government interventions and poverty; and trends in social promoting competitive marketing. expenditures. Consolidate structural reforms; and Farm Management Surveys covering a sample of crops and non-crop activities, farms and enterprises; Strengthen institutional capacity. Rural household income and expenditure surveys; Bank Group and other donors' economic reports and sector studies. Improve incentive framework for and Physical outcomes in terms of land and Concurrent monitoring of key activities Macro-economic conditions sufficient to productivity, profitability and property shares distributed; number of including PIU progress reports; stimulate increased agricultural sustainability of Kyrgyz agriculture. This farms restructured and new farms production. will be done by means of assisting the created; farm management changes in IDA/IFAD supervision reports; government in: terms greater use of private (as against collective) management structures; IDA/IFAD mid-term review; The project's M and E system would provide location and institution-specific baseline and targeted values for each activity including the land and agrariani reform program; the seed industry development; and advisory, crop protection and market infonmation services. The physical outcomes of the indicators, as relevant, will be defined on the basis of the annual work program for the project implementation as approved by the Project Steering Committee. The first year's expected physical outcomes will be defined at the commencement of the project, i.e, by May 31, 1998. cyi tD RADC surveys of farm and crop budgets; (a) implementing land and agrarian Improvements in farm productivity, reforms; profitability, (viability), and sustainability of private farming; (b) providing emerging private farms Improvements in farmers' access to Prepare Implementation Completion with advisory and development services inputs including credit, quality seeds, Report (ICR) jointly with IDA/IFAD. and training (in conjunction with farm advisory and adaptive research services; trials, farm demonstrations and adaptive crop protection; and market information. research); (c) developing seed industry; (d) establishing legal bases, organizations and procedures for plant protection and quarantine services; (e) establishing agricultural market information system; and (f) capacity building in MAWR. (i) Complete implementation of (i) Amount (ha) of farm and range land Existing baseline data on land and non- Four main types of risks: government program in distribution of distributed; land assets and farm restructuring (i) political risk; (ii) r isk of failure of land and non-land assets; managed by RCLAR, CLARs and complementary reforms; (iii) risk of (ii) Number of permanent land shares and SALMLR, supplemented by farm survey social dislocation; and (iv) climatic r isks. (ii) Establish policies and procedures for certificates distributed and registered; data available in MAWR Economics Project design focuses on minimiziig land auctions; Directorate; adverse impact of these risks as follows: (iii) Capacity building in government (iii) Number of former state and Concurrent monitoring of land reform -- Political r isk addressed by making agencies (RCLAR, CLARs and collective farms with land and non-land program by RCLAR, CLARs and information on farm r estructuring SALMLR) and farming communities to property shares distributed; SALMLR to systematize available available directly to farmers; and support agriculture enterprise baseline data and collect new data; supporting land share certification restructuring; and (iv) Number and type of farm units scheme which identifies specific parcels, created in each rayon and oblast; Field surveys to assess range and quality thus weakening local administrations' 0 Narrat-ive.St eS lary - . : ................. . Key Perforinace Inidicators Monitoring.. ' p :..M9nitorin gid Sp t .:'.'~~~.' -.: . - ,,',-' ".......:''.. . . :: ': : . '.: .......... .' '''-' :'''' :'........... :' _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ( e a n s f V e ific d~ ii . & I. .: ( M a n s f se ific ti o n of services provided by CLARs and ability to influenice land allotments (iv) Establishmilenit of a legal framilewor-k SALMLR: prejudicially: for land market development. (v) Number of goverinimlenit land auctionis -- Complementary reforms under way comnpleted (aniual data) with total land Narrative repor-ts on progress and through IDA-assisted Rural Finance (ha) involved; ranige of lease tenures; and problems in agrarian reform by regions Project assisted by IDA and other donors; no. of farmers leasing lands; and for the country as a whole. ADB project in Credit Unions and bilateral donors' credit programs; PIU to provide quarterly/semi-annual progress reports; (vi) Gross margins on crops by farm type -- Results of farm reorganization which and farm size tbr represenitative rayoois IDA supervisionis; have occurred to date have not tended to and oblasts: exacerbate social dislocation and poverty. A mid-term review to assess progress in The project objective of improving (vii) Number of machinlery service component implementation and its incentive framework for agriculture providers established at rayon and oblast impact; and introduce mid-term directly addresses this risk: level: cor r ections. (viii) Number of agricultural enterprises seeking and receiving production and investment credit; -- Climatic risks in agriculture could (ix) Number of transactions in private potentially preclude changes in farm (distributed) lands: leases, subleases, and management. This risk addressed by mortgages; and total land area (ha.) improving agricultural productivity and involved (more indicators to be added); incomes supplemented by on-going social and expenditure programs. (x) Number of transactions in non-land properties: sales/purchases; leases and sub-leases and mortgages. Compon.nt 2;Rural .Advisory OW : ::: .... ..... ,JMotent Servce (Th c po,,nen t,,, .:. .:.-' ,wi, be ,Ofif d , y , ..,, , . :.. .f. i.fto ::..: . Assist newly created farms through the Key performance indicators would relate Two main types of risks: (i) RADCs' processes of land reform to establish to: sustainability; (ii) government profitable farming and increase rural commitment to economic reform: incomes. Toward this objective. .__ __ (Means of ~~~~~~ . ...... *.. .. (e.s f..r.i.ton Nui~~~~~~~~~~~~. ... . iary Key Per c e I hidXcali: V i' ur io (i) Establish Rural Advisory and (i) Adoption Rate and Participationi: (i) Conculr-elnt monitorilng of physical (i) Sustainability: For long-term Development Centers (RADCs) at oblast Number of villages and houselholds progr-ess and qualitative assessment sustainability of a farmer-driven advisory and rayoni levels; directly receivinig project advice; throughi RADS progress reports, and service: (a) RADCs must assure high adoption rate of each techinique; number PIU/IDA/IFAD supervision reports; professional standards; and (b) RADCs of groups formed and supported by the must remain fully oriented to provide project: numilber of farm trials and (ii) PIU to conduct annual impact advice that is impartial and free from demonstiations completed; and number of evaluation of those actually participated political biases; encourage farmers to farmers visitinig demonistiationl plots and in farmer associations; which services provide contributions to the cost of trials: number of farmers/groups assisted under the component would be actually advisory services, and ensure with business plans: number- of adaptive beneficial to farmers; and to what extent participatory character of the service rescarchi contiacts signed, contracts did non-participanits benefit indirectly througlh on-farm trials, demonstrationis, completed. topics covered. results (information diffusion effect); and training; and (c) assist farmers to disseminated; access formal and informal credit; (ii) Establish a Secretariat in Bishkek to (ii) Impact at farm level and (iii) Mid-tern review of the project by (ii) Government commitment provide coordiniationi and rmoniitorin1g for attractivenless of techniiques: number of IDA/IFAD backed by a survey of strengthened throughi: (a) on-goinig RAI)Cs and to oversee financial techniiques considered by farmers as beneficiaries privatization of land and non-land assets management and control: worthiwhile; assessment of yields and and productivity improvements in incomile increases on sample houselholds (iv) MAWR (PIU) to prepare agriculture; (b) improved farmer access adopting advice: implementation completion report (ICR). to credit; reducing dependelice of RADCs on governmient budget; (c) on-goirig (iii) Access to Credit: Number of systemic and institutional reforms in business plans prepared with MAWR functions and (d) use of a RADS/UNDP support; and subloans judicious blend of public, private and disbursed by KAFC thiouglh Farm voluntary sector initiatives to imnprove Developmenit Fund; Progress in farm productivity: implementinig pilot activities in miciro- ftiance in selected areas; (iii) RADCs to assist and traini farmers (iv) Cost Recovery. Amount of recovery in (a) techiology adaptation including fr-om farmers of RADS runniinig costs and training in the use of improved otlher souices of income including media production practices, in conjunction with sales, and fees tor preparationi of credit a program of field trials and field applications; demonstrations onl farmers' fields at farmers' requests; (b) preparation of (v) Poverty Taigetinig. Classification ot business plans in support of credit advisory visits, credit and trainiing applications; and (c) work on1 farimler according to poverty status. group development for obtainiig N.. ... ....... '., . ', t' , ,.. . .M . ..t improved services and solving common problems, e.g.. in small-scale machinery operation and water use: (iv) Establish a Farm Development Fund ($1.5 million) at KAFC and Carry out pilot activities in micro-credit ($0.3 million). * ' *p¢ ~ L S e~ 4 0 e v e1W... ........-...._.. Establish a viable, self-sustaining, seed industry with emphasis on private sector participation by: (i) Acquisition. development and (i) Quantity and sources of wheat, Crop Research Institute (CRI) and Fodder No significant risks from using new evaluation of new germplasm and its barley, maize, alfalfa and sainfoin and Pasture Research Institute (FPRI) varieties. However, the project design submission to official variety testing germplasm meeting specific breeding records and PIU progress reports. IDA would minimize following risks: system; objectives acquired for testing; supervision missions. (ii) Number of selection nurseries Government continuing its dominant role established for each crop at agreed in seed production. number of sites; (iii) Number of collection nurseries (a) Project introduces phased established; privatization of seed breeding and primary seed multiplication. (iv) Number of varieties meeting specific (b) Super elite and elite seed farms and characteristics in multiplication nurseries; pilot commercial seed farms will be and provided technical assistance to eliminate current inefficiencies and introduce (v) Release of superior varieties to modern technical and management official variety testing system. practices in seed production; (ii) Rehabilitation of cereal and fodder (i) Area sown to wheat, barley, maize, NPOZ/Djal farm and Forage Institute Credit: seed (Super Elite and Elite) production, alfalfa and sainfoin for Super Elite and Seed Farm records. PIU progress reports The risk of the slow development of processing, storage and distribution Elite seed production -- targets by year; and IDA supervision missions farmers' access to credit concurrently facilities; and addressed by other development projects including IDA-assisted Rural Finance CO~ . .9 i tSS : - . : . K r 5: ;~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. .. . . . . . Project, and ADB-assisted Credit Unions project. (ii) Quantities for Super Elite and Elite Farm record; PIU progress reports and seed produced and released to registered IDA supervision mission. Elite and Commercial seed producers. (iii) Demonstration of best practice (i) Three farms to be selected for 1999 commercial seed production on thiee spring crop season according to criteria pilot private seed farms to encourage agreed with IDA, by June 1998; setting up of private seed houses; (ii) Loans issued and equipment procured by January 1999; (iii) Quantity of elite seed purchased for multiplication; (iv) Quantity of certified commercial seed sold; and (v) Financially viable seed business established. (iv) Strengthen MAWR's regulatory (i) Complete rehabilitation of facilities, VSTO annual reports, PltJ progress services for variety and seed testing: including relocation of the central seed .reports and IDA supervisioni missions. ceritification laboratory is merged with Variety and Seed Testing organization (VSTO); (ii) Number of variety trials conducted at four sites by crop; (iii) Regular reports published on results of trials; and (iv) Seed certification system established. (v) Establish a lcgal framework and (i) PBR law submitted to Parliament by procedures for the protection of plant August 31, 1998; breeders rights and ensure satisfactory implementation of Seed Law regulations governing compulsory certification; (ii) Regulations on implementation of VSTO repor-ts and PIU progress reports. seed law regulations issued by August 31, 1998: and (iii) Compulsory seed certification regulations to be reviewed by mid-2000. (vi) Publication and dissemination of (i) Publications issued at intervals to be PIU progress reports official variety testing results and seed agreed. industry informationi. 4-t op hot et j~ W d . n. ... ,,.., .......d .................. . ..... ..... ........ ..... ....... ..... .. . ......_ 6omp' rnt 4^ Crop Protection and Plant .*...**.* .*... Qaarwttine: . . .. .. .~~~~~~~~~~~~_A: .. .... (i) Establish a legal framework for the (i) Draft law on pesticide use to be PIU progress reports and IDA Two types of risks need to be addressed: regulation of pesticide use and put in submitted to Parliament by August 31, supervision missions. place regulatory structures: 1998; (ii) Committee responsible for (a) Likely delays in implementation due implementing pesticide registration to insufficient understanding of the need established and operating by August 31, to reform and take collaborative actions 1998. with other agencies and services; (ii) Implement pesticide registration (i) Bishkek and Osh laboratories of PIU progress reports and IDA (b) Stringent regulations might result in system and apply regulations for safe Agency for Chemical Supply and Plant supervision missions. stifling private initiatives in procurement distribution and use of pesticides, and Protection (ACSPP) refurbished and and distribution of agrochemicals, as well monitor performance at regional level; operating, and six oblast-level offices as the provision of related services. equipped to monitor implementation of pesticide regulations; (ii) Oblast quarterly monitoring reports Risk (a) would be addressed by provision provided; of technical support including training, inter-ministerial group work associating national and foreign specialists; and study tours abroad. (iii) Manual on introduction of IPM Risk (b) will be addressed by prior produced by June 30, 1999, and review of laws and regulations by distributed to RADS centers soon international experts and IDA. CJi ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. . . . . . . . . . . . . . . . . ;; . . ;.;;; thereafter; and (iv) Sustainability of services assured with plan for consolidation of rayon offices agreed by December 31, 1999, scale of charges of services set by mid- term review in December 31, 2000, with fees collected retained by agency. iii) Relocate and rehabilitate key plant (i) Bishkek center relocated and PIU progress report. quarantine centers and improve refurbished and Osh center rehabilitated procedures; and by December 31, 1999; and (ii) Report in improved procedures. (iv) Support membership of European (i) Republic becomes a member of Plant Protection Organization. EPPO, and benefiting from exchange of information and training of staff. s.<..rset....-:. -; ..-;-~~~~~~~~~~~~~~~~~~~~~~~.........-;.- .; .... .... .......... MIS coverage to be extended nationwide Effectiveness of inter-agency PlU's progress reports and IDA/IFAD The main risk is the prevailinig low (6 ohlasts) from 2 oblasts currently coordination (in terms of policy direction; supervision reports. implementation capacity which the covered by a pilot project. problem solving and monitoring project would address through provisioli performance) through a National of training to local staff and ensuring Management Committee (NMC) effective inter-agency coordination comprising of representatives of MAWR, NSC, SDAP, KS, and RADS (SAR, paras. 4.21 - 4.23) MIS to collect, process, and disseminate Range, depth and quality of market Mid-term review of the progress in relevant market information for the information coverage and dissemination: component implementationa; assess benefit of agricultural producers, including number and types of arrangemenits and impact. processors, traders and policy-makers, commodities (inputs and outputs); prices (farm gate, wholesale and retail); use of stanardseand grades (by commodity); type of information covered --local, national, international; specialized commodity/market reports prepared; (Frequency and media used for C NarrtiveSiinMat e ef'nac lnd60rs M:: . . :ii:.'. t6eJhg.aiid SuperviWoqN1ni:rng d Sprv'o ''.'''.'''a"'.... ....-'I..' y'--;t'- ............ .... l, 't'','.",........ ........ :~ M ii~ : e, informiiationi dissemiiiationi. MIS to iicrease tranisparenicy of market Extent of use of standards and grades in Field surveys by MIS regionial offices, transactionis: transimiit incenitives and market infor-mationi for priority jointly withi RADCs. opportunities to agricultural producers: commodities. and dissemination of improve producers' bargaining position: iniformationi on standards and grades to stimulate competition among traders: and public. expand processors' and consumers choices in pr-oduct selectioni. 68 ANNEX B KYRGYZ REPUBLIC AGRICULTURAL SUPPORT SERVICES PROJECT DETAILED PROJECT COST ESTIMATES LIST OF TABLES Table 1. Project Cost Summary by Components Table 2. Project Cost by Expenditure Accounts Table 3 Project Cost by Financing Agencies Table 4. Project Costs by Expenditure Accounts and Financing Agencies Table I Kyrgyz Republic Agricultural Support Services Project Project Cost Summary by Components Foreign Component (SON Million) (USS Million) s percent as percent Local Foreign Total Local Foreign Total of Total of Base Costs A. Land and Agrarian Reform 14.22 55.87 70.09 0.81 3.19 4.01 80 15 B. Rural Advisory & Development Services(RADS) Advisory and Development Services 34.80 25.46 60.26 1.99 1.45 3.44 42 13 Training, Credit & Secretariat 23.04 60.24 83.28 1.32 3.44 4.76 72 18 Field Demonstrations and Adaptive Research 9.07 13.29 22.36 0.52 0.76 1.28 59 5 Group Development 5.81 15.22 21.02 0.33 0.87 1.20 72 5 Subtotal Rural Advisory & Development Services(RADS) 72.71 114.20 186.91 4.15 6.53 10.68 61 41 C. Seed Industry Development Crop Breeding Institute (CRI) 3.78 24.59 28.37 0.22 1.41 1.62 87 6 Forage Breeding Institute (FPRI) 1.87 5.85 7.71 0.11 0.33 0.44 76 2 Super Elite and Elite Seed Production 2.17 16.40 18.57 0.12 0.94 1.06 88 4 Commerdal Seed Multiplication 3.54 24.70 28.25 0.20 1.41 1.61 87 6 Seed Unit in MAWR 1.80 7.54 9.33 0.10 0.43 0.53 81 2 Offidal Variety Testing 6.20 27.75 33.95 0.35 1.59 1.94 82 7 Seed Certification 3.15 4.78 7.93 0.18 0.27 0.45 60 2 Subtotal Seed Industry Development 22.51 111.60 134.11 1.29 6.38 7.66 83 30 D. Crop Protecton Plant Quarantine 5.65 5.32 10.97 0.32 0.30 0.63 49 2 Plant Protection 2.12 10.20 12.32 0.12 0.58 0.70 83 3 Subtotal Crop Protection 7.77 15.53 23.29 0.44 0.89 1.33 67 5 E. Agriculture Market Information Market Information System 10.79 15.69 26.49 0.62 0.90 1.51 59 6 Subtotal Agriculture Market lnformaton 10.79 15.69 26.49 0.62 0.90 1.51 59 6 F. Project Implementation Unit 6.84 6.69 13.53 0.39 0.38 0.77 49 3 Total BASELINE COST 134.83 319.58 454.42 7.70 18.26 25.97 70 100 Physical Contingencies 4.53 17.05 21.58 0.26 0.97 1.23 79 5 Price Contingencies 3842 1340 51.82 2.20 0.77 2.96 26 11 Total PROJECT COST 177.78 350.04 527.82 10.16 20.00 3016 66 116 Table 2 Kyrgyz Republic Agricultural Support Services Project Project Cost Summary by Expenditure Accounts Foreign Component (SON Millon) (USS Million) s percent s percent Local Foreign Total Local Foreign Total of Total of Bas Costs 1. Investnent Cost A. CMI Works 9.59 2.40 11.99 0.55 0.14 0.69 20 3 B. Equipment Laboratory Equipment - 10.07 10.07 - 0.58 0.58 100 2 Field Equipment - 79.63 79.63 - 4.55 4.55 100 18 Offic Equipront 7.94 44.90 52.85 0.45 2.57 3.02 85 12 Subtotal Equipmnt 7.94 134.60 142.54 0.45 7.69 8.15 94 31 C. Vehicles - 27.20 27.20 - 1.55 1.55 100 6 D. Contacted Services 10.22 6.32 16.54 0.58 0.36 0.95 38 4 E. Technical Assistance Intemational Costs - 60.90 60.90 - 3.48 3.48 100 13 Local Support Expenses 5.41 - 5.41 0.31 - 0.31 - 1 SubtotaleTchnical Assisance 5.41 60.90 66.31 0.31 3.48 3.79 92 15 F. Training Oversea Training - 12.53 12.53 - 0.72 0.72 100 3 Local Training 17.53 - 17.53 1.00 - 1.00 - 4 Subtotal Training 17.53 12.53 30.06 1.00 0.72 1.72 42 7 G. Fafn Development (Credit) Fund 31.50 31.50 - 1.80 1.80 100 7 Total Investment Costs 50.70 275.44 326.13 2.90 15.74 18.64 84 72 11. Recurrent Costs A. Operating Expenses 44.14 44.14 88.29 2.52 2.52 5.05 50 19 B. Incremental Salaries 39.99 - 39.99 2.29 - 2.29 - 9 Total Recurrent Costs 84.14 44.14 128.28 4.81 2.52 7.33 34 28 Total BASELINE COSTS 134.83 319.58 454.42 7.70 18.26 25.97 70 100 Physical Contingencies 4.53 17.05 21.58 0.26 0.97 1.23 79 5 Price Contingencies 38.42 13.40 51.82 2.20 0.77 2.96 26 11 Total PROJECT COSTS 177.78 350.04 527.82 10.16 20.00 30.16 66 116 0 Table 3 Kyrgyz Republic Project Costs by Components and by Financing Agencies Components by FinancIars (Us$ Million) Sheep Developmnt Local IDA IFAD Project BENEFICIARIES GOVERNMENT SWISS GTZ KHF Total For. (Excl. Amount % Amnount % Amount % Amount % Anount % Amount % Amount % Amount % Amount % Exch. Taxes) A. Land and Agraan Reform 3.41 727 - - - 0.06 1.2 0.47 9.9 - - - - 0.76 16.2 4.69 15.6 3.61 1.08 B. Rural Advtsory a Developnent Services(RADS) Advisory and Development Services 1.54 36.7 0.73 17.4 0.47 11.2 0.49 11.6 0.53 12.7 0.43 10.3 - - 4.19 13.9 1.58 2.61 Trainig, Credi6&Serretariat - 3.98 74.9 1.06 19.9 0.14 2.6 0.14 2.6 - - - - - 5.31 176 3.57 1.75 Field Demonstrations and Adaptive Research - - 1.41 92.3 - 0.06 3.8 0.06 3.8 - - - - 1.53 5.1 0.84 0.69 Group Devebpment - . 0.99 71.8 - - 0.02 1.3 0.37 26.9 - - - 1.37 4.6 0.92 0.46 Subtotal - - 7.92 63.8 1.79 14.4 0.67 5.4 0.70 5.7 0.90 7.3 0.43 3.5 - 12.41 41.1 6.90 5.50 C. Seed Indusbry Development Crop Breeding InsttAte (CRI) 1.78 95.1 - - - * 0.09 4.9 0.00 - - - - - - 1.87 6.2 1.58 0.29 Forage Breeding lnstitute(FPRI) 0.47 90.9 - - - - 0.05 9.1 .0.00 - - - - - - - 0.51 1.7 0.37 0.14 Super Elte and Elte Seed Production 1.20 100.0 - - - - - 0.00 - - 1.20 4.0 1.06 0.15 Commercial Seed Mutiplication 1.84 100.0 - - - - * 0.00 - - - - - - 1.84 6.1 1.60 0.24 SeedUnftinMAWR 0.53 91.3 - - - - 0.05 8.7 - - - - - 0.59 19 0.45 0.13 Otriial VarietyTesting 1.83 81.9 - - - 0.19 8.3 0.22 9.8 - - - - - 2.24 7.4 1.77 0.47 Seed Certificatlon 0.43 83.5 0.09 16.5 0.00 - 0.52 1.7 0.29 0.23 Subtotal 8.10 92.3 - 0.41 4.7 0.27 3.1 - - - 8.78 291 7.12 1.65 D. Crop Protection Plant Quarantine 0.58 76.7 - - - - - 0.18 23.3 - - - - - 0.76 2.5 0.34 0.42 Plant Protection 0.74 90.0 - - - - 0.08 10.0 - - - - - * 0.82 2.7 0.66 0.16 Subtotal 1.32 83.6 - - - - - 0.26 16.4 - - 1.58 52 1 00 0.59 E. Agriculture Market Information Market Information System 1.22 68.8 - - - - 0.11 6.2 0.44 25.0 - - - - - - 1.77 5.9 0.96 0.80 F. Projec Implementation Uni 0.94 100.0 1.79- - 0.00 - 2 7 0 3 - 1 0.94 3.1 0.40 0.63 TotelProject Cost 14.98 49.7 7.92 26.2 1.79 5.9 1.25 4.1 2.14 7.1 090 3,0 0.43 1.4 0.76 25 30.16 100.0 20.00 10.16 Table 4 Kyrgyz Republic Agricultural Support Services Project Project Cost by Expenditure Accounts and by Financing Agencies (Including contingencies) (USS Million) Sheep Development Local IDA IFAD Project BENEFICIARIES GOVERNMENT SWISS GTZ KHF Total For. (Excl. Amount % Amount % Amount % Amount % Amount % Amount % Amount % Amount % Amount % Exch. Taxes) I. Investment Costs A. Civil Works 0.77 91.6 0.07 8.4 - - - - 0.00 - - - - - - 0.84 2.8 0.15 0.69 B. Equipment Laboratory Equipment 0.63 94.9 0.03 5.1 - - - - - - - - - 0,66 2.2 0.66 - Field Equipment 4.84 93.4 0.34 6.6 - - - - - - - - - - 5.19 17.2 5.19 - Ofrice Equipment 2.87 80.9 0.47 13,2 0.02 0.5 - - 0.12 3.5 0.05 1.3 0.02 0.6 - - 3.55 11.8 2.95 0.59 Subtotal 8.34 88.8 0.84 9.0 0.02 0.2 - - 0.12 1.3 0.05 0.5 0.02 0.2 - 9.39 31.1 8.80 0.59 C. Vehicles 0.99 56.3 0.63 35.6 0.04 2.0 - - 0.07 4.0 0.04 2.0 - 1.76 5.8 1.76 D. Contracted Servtces 0.28 22.5 0.96 77.5 - - - 0.00 - - - - - 1.24 4.1 0.43 O.81 E. Technical Assistance IntemationalCosts 1.30 36.2 0.90 25.1 0.47 13.0 - - 0.37 10.3 - 0.55 15.4 3.60 11.9 3.80 LocalSupportExpenses 0.14 37.4 0.14 38.1 0.01 3.5 - - 0.08 21.0 037 1.2 - 0.37 Subtotal 1.44 38.3 1.04 26.3 0.48 12.1 - - - - 0.37 9.3 - 0.63 159 3 97 13.1 3.60 0.37 F. Training OverseaTraining 0.31 41.4 0.33 43.4 0.11 15.3 - - - 0.75 2.5 0.75 - LocalTraining 0.10 7.2 0.71 51.2 0.44 32.2 - - - - - - - 0.13 9.3 1.38 4.6 - 1.38 Training 0.41 19.3 1.03 48.5 0.56 26.2 - - - - - - - 0.13 61 213 7.1 0.75 1.38 G. Farm Development (Credit) Fund - - 1.80 100.0 - - - - - - - - - _ 1.80 6.0 1.80 - Total Investment Cost 12.23 57.9 6.38 30.2 1 09 52 0.12 0.6 0.49 2.3 0.06 0.3 0.76 36 2113 70.1 17.30 3.8' II. Recurrent Cost A. Operating Expenses 2.30 38.2 1.03 17.1 0.04 0.7 0.85 14.2 1.43 23.7 0.20 3.3 0.17 2.8 - 6.02 20.0 2.71 3.32 B. Incremental Salaries 0.45 14.9 0.50 16.8 0.65 21.6 0.39 13.1 0.59 19.6 0.22 7.2 0.20 6.8 - - 3.01 10.0 - 3.01 Total RecurrentCost 2.75 30.4 1.54 17.0 0.69 7.7 1.25 13.8 2.01 22.3 0.42 4.6 0.37 41 - - 903 29.9 2.71 6.32 Total by Financing Agency 14.98 49.7 7.92 26.2 1.79 5.9 1.25 4.1 2.14 7.1 0.90 3.0 0.43 1.4 0.76 2 5 3016 100.0 20.00 10 16 -.1 73 Annex C KYRGYZ REPUBLIC Agricultural Support Services Project Project Implementaiton Plan A. Implementation Plan 1. Chart 1 presents key elements of the project's implementation plan. B. Procurement Plan 2. Indicative procurement plan for the five-year project plan is presented in Table 1. The procurement plan for Project Year I will be reviewed with IDA during negotiations. C. Disbursements 3. Disbursement percentages for IDA financing; estimated disbursement schedule, estimated disbursment profile and flow of funds are provided in Tables 2, 3, 4 and figure 1 respectively. D. Supervision Plan 4. Table 5 presents the supervision plan. The IDA and IFAD will coordinate supervision activities to avoid duplication and reduce supervision costs. E. Technical Assistance and Training 5. Activity-wise details for technical assistance and training have been included in Annex 9 of the Implementation File. A list of TORs is provided in Table 6. Agricultural Support Services Project Annex C Draft Implementation Plan Chart 1 1998 1999 2000 2001 2002 1 2003 ID Task Name Duration Start Finish Q4Q1| Q2 Q30401|020304|Q|Q2|03|040Q1 Q21030401|Q2|0304|Q1|Q2 Q3 Q4 1. PROJECT IMPLEMENTATION 316.2w 1/1198 12131103 2 Appoint procurement specialist 67d 1/6/98 3/31/98 3 Recruit local staff 1296d 2/1/98 12/31/02 4 Prepare procurement plan for Project Year 1 13.4w 1/6/98 3/31/98 5 Prepare Proj.. work plan, budget, monitoring, procurement, reporting & supv. 1320d 1/1/98 12/31/02 6 Tender contract and appoint a Project Implementabon Adviser 27.2w 1/1/98 6/30/98 7 Establish financial management system for PIU & project agencies 27.2w 1/1/98 6/30/98 Establish & maintain project accounts 145.2w 4/1/98 12/31/00 9 Prepare Mid-term Project Implementation Report for IDA review 13.2w 10/2/00 12/31/00 . 10 Prepare Implementation Completion Report 26.4w 7/1/03 12/31/03 1 2. LAND AND AGRARIAN REFORM COMPONENT 285w 211/98 6/30103 . | - 12 (a) Preparaton AcUvIties 259.2w 211198 12131/02 13 Recruit LAR advisor & field legal speciaist 26.6w 4/1/98 -9/30/98 . 14 Canry out legal review 40.2w 4/1/98 12t31/98 15 Procure RCLAR equipment 17.8w 6/1/98 9/30/98 16 Recruit M&E specialist 13.2w 6/1/98 8/28/98 17 Establish M&E 30.8w 9/1/98 3131199 Employ public informaton specialist 30.8w 9/1/98 3/31/99 1S 9Prepare public information materals 30.8w 9/1/98 3/31/99 - 20 Recruit aucion specialist 13.4w 7/1/98 9/30/98* 21 Prepare land auction procedural manual 13.6w 10/1/98 12/31/98 22 LAR Training of Local ALRF Aucbon Commissions 154.4w 2/1/98 12/31/00 23 Procurement of Land Certificates, complete ICB, sign contract 13.6w 6/1/98 9/1/98 24 Procure Land Certificates 223.4W 10/1/98 12V31/02_ 25 io) Support for Rayon CLAR's 123.2w 6/1/98 9/30/00 __ 26 Contracd with Ag. Academy for Trng. of Trainers, Drafted & Signed 9w 6/1/98 -7/31/98.__ Agricultural Support Services Project Annex C Draft Implementation Plan Chart 1 1998 999 2000 2001 2002 2003 ID Task Name Duration Start Finish Q401|QQ21031041Qi4Q2l3Q401Q2Q2031 1102|Q30Q4|1QQ2103|Q4|Q1|02|03104 27 Recruit training specalist Ow 6/11/98 7131198 28 Train core trainers 13.4w 9/1/98 11/30/98 29 Training of CLAR and Village Govemment staff 109.8w 9/1/98 9/30/00 30 Procure CLAR Equipment (for Chui oblast) 1 8w 711/98 10131198 31 (c) Farn Restructuring Support Services 262.6w 7/1/98 6/30/03 _ 32 Prepare Farm Restru. Service (FRS) contract with Kara-Balta 4.4w 9/1/98 9/30/98 33 Prepare FRS training materials 27w 711/98 12/31/98 _ 34 Conduct FRS farmer training seminars 218.8w 11/1/98 12/31/02 35 Procure survey equipment for land share mapping (6 oblasts) 105.4w 7/1/98 6/30/00 36 Hire Incremental staff for land share mapping 52.8w 7/1/98 6/30/99 37 Update and Issue Land Certificates 253.8w 8/31/98 6/30/03 38 3. RURAL ADVISORY & DEVELOPMENT SERVICES (RADS) 289.8w 1/1/98 6/30/03 _ 39 (a) Central Level 237.6w 1/1/98 61.0;02 _ -_ 40 Est. RADS Found., RASC & RASC sec. by a charter approv. by govt & spon. 4.2w 1/6/98 1/31/98 41 Appoint RASC chairman and GM for RASC secretariat 66d 4/1/98 6/30/98 42 Recruit staff for RADS 330d 4/1/98 6/30/99 - 43 Technical Advisor 1188d 1/1/98 6/30/02 44 Merge SDP's advisory service with RADS 26.8w 3/31/98 9/30/98 45 (b) Regional level (6 oblasts) 257w 2/15/98 12/31/02 _ _ _ __. _ I , .~~~~~~~'V ' 46 Appoint RADC managers 73w 2/15/98 6/30/99 47 Recruit RADC staff 66w 4/1/98 6/30/99 48 Recruit rayon staff 79.2w 4/1/98 9/30/99 49 Establish rayon level RADC committees 74.8w 5/1/98 9/30/99 50 Establish regional steering committees ( RSC) 18w 6/1/98 10/1/98 , 51 Rehabilitate office buildings 52.8w 7/1/98 6/30/99 _ 52 Start inital training (staff and farmers) 79.4w 7/1/98 12/931/99 .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~U Agricultural Support Services Project Annex C Draft Implementation Plan Chart 1 1998 1999 2000 2001 2002 2003 ID Task Name __ _ Duration Start Finish Q4 Q 2|030Q4Q1 IQ2. 3|Q4 Q1 Q2|03|Q4|01|203|Q4 01|203Q401 Q2030Q 53 Procure equipment 79.4w 7/1/98 12131/99 54 Group training, feld trials &demonstration 236.8w 7/1/98- 12/31/02 w 55 (c) Adaptive Research 275.3w 4/11/98 6/30/03 _ 56 At RADC's - 275.8w 4/1/98 6130/03 - 57 Review existing facilites 26.6w 4/1/98 9/30/98 58 Prepare yearl program and budget 17.8w 6/1/98 9/30/98 59 Rehabilitate farm buildings 79.4w 7/1/98 12/31/99 - 60 Procure farm/lab equipment 26.4w 5/3/99 11/1/99 61 Implement trials 253.6w 9/1/98 6/30/03 62 C-o nt-raCt-e _ Resea rc_h 262.6w 7/1/98 6130/03 - 63 Prepare 3 prionty programs 27w 7/1/98 12/31/98 _ 64 Appoint program leaders 52 8w 7/1/98 6/30/99 65 Prepare/evaluater.bids = 184.4 7/1/98 12131/01 66 Implement program 253.6w 9/1/98 6/30/03 67 (d) Farm Development Fund (managed by KAFC) 287.6w 1/15/98 6/30/03 68 Signature of Framework Agreement 11.8w 1/15/98 3/31/98 69 Prepare supplementary Guidelines and Approach 18w 7/1/98 10/31/98 70 Annual Work Plan and Budget 4.6w 7/1/98 7/31/98 71 Establish KAFC regional Offices (3) 52.8w 7/1/98 6/30/99 72 Organize UNDP Farmer Groups, prepare subloans applications 118w 7/15/98 10/9/00 _ 73 Group Loan - appraisal and disbursements 262.6w 7/1/98 6/30/03 _ 74 (e) Implement Pilot Credit Activities(through RADS Foundation) 262.6w 7/1/98 6/30/03 _ 75 4. SEED COMPONENT [ 318.8w 1Z115197 12/31/03 __ ______ _ _.___ ._ .......... .. ............................... _ .._._ 31.w , 1 2 31/0.3. 76 CRI and FPRI - Variety Acquisition and Development 316.2w 11/98 12/31/03 77 Procure critical equipment (under PPF) 20w 1/1/98 5/12/98 78 Prepare for IDA review annual seed breeding program 191 .2w 7/1/98 2/15/02 _ i Agricultural Support Services Project Annex C Draft Implementation Plan Chart 1 1_ _ _ _ | 1998 I 1999 2000 2001 1 2002 1 2003 ID _ Task Name ____ _ Duration Start Finish Q40Q1 Q2341 Q2 Q3|Q4 Q1 Q2304 |Q 02 |Q3Q4 Q1 Q20Q30Q40Q1 Q2 0Q3Q4 79 1 st year seed breeding program 6w 7/1/98 8/10/98 80 2nd year seed breeding program 6w 1/4/99 2/12/99 81 3rd year seed breeding program 6w 1/3/00 2/11/00 82 4th year seed breeding program 6w 1/1/01 2/9/01 83 5th year seed breeding program 6w 1/7/02 2/15/02 84 Prepare plan and specifications for the first year procurement 4.8w 1/16/98 2/15/98 85 Obtain germplasm from International Institutes 210.4w 7/1/98 6/30/02 _ 86 Select topics /areas for first year program 13.4w 7/1/98 9/30/98 87 Technical assistance and staff training 289w 7/1/98 12/31/03 88 Prepare and approve training program 52.8w 7/1/98 6/30/99 89 Initial training/information visits to outside centers (under PPF) 37.6w 7/16/98 3/31/99 90 Staff training 289w 7/1/98 12/31/03 . _ 91 Technical assistance for ureeding programs 184.4w 7/1/98 12/31/01 - _ 92 Rehabilitation of buildings 79.4w 711/98 12131199 93 Bishkek stes 27w 7/1/98 12/31/98 94 Outstations 66w 10/1/98 12/31/99 95 Procurement of equipment 79.4w 7/1/98 12131/99 96 Bishkek sites 27w 7/1/98 12/31/98 97 Outstations 66w 10/1/98 12/31/99 98 Multiplication of Super Elite and Elite Seed 236.8w 7/1/98 12/31/02 99 Prepare sub project feasibility studies 52.8w 7/1/98 6/30/99 100 Approve subloans 52.6w 9/1/98 8/31/99 101 Repair existing equipment 52.8w 7/1/98 6/30/99 102 Prepare specifications for new equipment 27w 7/1/98 12/31/98 103 Procure equipment 21.6w 2/1/99 6/30/99 - 104 Prepare building rehabilitation plans 18w 7/1/98 10/31/98 Agricultural Support Services Project Annex C Draft Implementation Plan Chart 1 1998 1 999 2000 2001 2002 2003 ID Task Name Duration Start Finish Q4 I92|Q31Q4IQ1 IQ2LQ3|Q4IQ1 Q21031Q4 IQI1Q2|Q3|4 Q1|Q2|Q3|Q4Q1| Q2|Q3|Q4 105 Tender building rehabilitation contract 18w 9/1/98 12/31/98 106 Rehabilitate Buildings 61.4w 11/1/98 12/31/99 - 107 Production of Super Elite and Elite seed 227.8w 9/1/98 12/31/02 I I 108 Pilot Commercial Seed Production 282.8w 2/15/98 6130103 _ i iI i n _ 109 Agree selection criteria with IDA 2.6W 2/15/98 3/1/98 I I 110 Select pilot seed farms (3) 13.4w 5/1/98 7/31/98 111 Approve subloans, prepare contracts and loan arrangements 52.8w 7/1/98 6/30/99 . - 112 Procure equipment 39.4w 10/1/98 6/30/99 I 113 Production of commercial seed 222.8w 4/1/99 6/30/03 114 Performance monitoring 222.8w 4/1/99 6/30/03 | 115 Training workshop and study tour 4.4w 7/15/99 8/13/99 116 Variety and Seed Testing Organization 216.8vW 312198 4i12102 u _ 117 Tec. Asst. for draviing up building & lab. rehab.. plans (unider ppf) 13.2w 4/1/98 6/30198 j 118 Procure emergency equipment needs (under ppf) 13.2w 4/1/98 6/30/98 119 Prepare procurement proposals for Rehab plans 17.8w 4/1/98 7/31/98 120 Relocate Bishkek seed testing laboratory 26.2w 9/1/98 2/26/99 . 121 Rehabilitation of other buildings 22w 3/1/99 7/30/99 , _ 122 Procure equipment (variety testing and seed certification) 114.2w 4/1/98 5/31/00 _ 123 Training and technical assistance 216.8w 3/2/98 4/12/02 _ __ .. _ . . 124 Appoint variety testing specialist 66w 71/98 9/30/99 - 125 Seed certification specialist 66w 7/1/98 9/30/99 - 126 Study tours 66w 711198 9/30/99 - 127 CRI & FPRI annual Seed breeding programs 216.8w 3/2/98 4/1V02 l0 133 Local training 70.4w 6/1/98 9/30/99 - 134 Seed Unit in MAWR 214.2w 12/15/97 12/31/01 135 Prepare, clear and issue LOI for recruitment of Seed spec..(under PP 7.8w 12/15/97 2/2/98 .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. Agricultural Support Services Project Annex C Draft Implementation Plan Chart 1 1998 | 1999 2000 2001 | 2002 2003 ID Task Name Duration Start Finish Q4|Q1 |Q2|Q3|Q4Q1| Q2|Q3|Q4|Ql Q2|Q3|Q4Q1| Q2|Q3|Q4Q1| Q2|Q3|Q4Q1| Q2|Q3|Q4 136 Select technical experts following response to LOI 9w 3/1/98 4/30/98 * 137 Establish National Seed Association 27w 7/1/98 12/31/98 138 Appoint Seed Specialist and counterpart 184.4w 7/1/98 12/31/01 I 139 Appoint sub-group of Proj.. St. Comm. to oversee Impi.. of Seed comr 4w 1/1/98 1/27/98 I 140 Adopt policy guidelines for seed certification 26.8w 7/1/98 12/30/98 . 141 Submit Law on Plant Breeders Rights to Parliament 9w 7/1/98 8/31/98 142 Procure equipment and vehicle 27w 7/1/98 12/31/98 143 Implement Training program 171.2w 9/30198 12/31/01 . 144 6. Crop Protection and Plant Quarantine 271.4w 5/1/98 6/30/03 145 (a) Crop protection 271.4w 6/1198 6/30/03 146 Submit draft law on pesticides and pest control to Parliament 13.4w 7/1/98 9/30/98 147 Introduce pesticide registration system 70.4w 9/1/98 12/31/99 148 Techmncal assistance with laboratory plans and specification (PPF) 17.8w 5/1/98 8/31/98 149 Rehabilitate Bishkek and Osh laboratories 66w 10/1/98 12/31/99 150 Procure equipment for Bishkek and Osh 66w 10/1/98 12/31/99 151 Procure equipment for 6 oblast centers 66w 10/1/98 12/31/99 152 Plan for consolidation of rayon centers 6.8w 3/1/99 4/1999 153 Prepare crop protection and plant quarantine manual 52.8w 7/1/98 6/30/99 154 RADCs to advise farmers on use of pesticide in IPM context 262.6w 7/1/98 6/30/03 . 155 Training and technical assistance 235.6w 1/1/99 6/30/03 156 Technical assistance 25.8w 1/1/99 6/30/99 I 157 Staff training 235.6w 1/1/99 6/30/03 158 (b) Plant quarantine 88.2w 5/1/98 12/31/99 159 Visit to EPPO (under PPF) 18w 7/1/98 10/31/98 160 Technical assistance with laboratory plans and specification 4.4w 5/1/98 5/31/98 161 Rehabilitate quarantine centers at Bishkek and Osh 79.4w 7/1/98 12/31/99 _ . , ___ _-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~' Agricultural Support Services Project Annex C Draft Implementation Plan Chart 1 1 1998 1 1999 2000 2001 200 2003 ID Task Name Duration Start Finish Q40Q1 0Q20Q30Q41 Q Q2Q Q401 Q30Q43 Q101Q2|Q30Q4|Q1 02Q3|Q4|1 TQ2|3|Q4 162 Procure equipment 79.4w 7/1/98 12/31/99 163 6. Agricultural Market Information 75.4w 1/31)98 6/30/99 164 Establish MIS by a decree 4.8w 1/31198 2/28/98 I. 165 Establish Advisory Groups 27w 7/1/98 12/31/98 166 Fommalise MAWR unit, complete staffing, establish work program 27w 7/1/98 12131198 167 stablish sub-units in oblasts 27w 7/1/98 12/31/98 168 Extend MIS to other 4 oblasts S2.8w 7/1/98 6/30/99 co CD Kyrgyz Republic - Agricultural Support Services Project Annex C Procurement Plan Table I 1 2 3 4 5 6. Estimated Schedule * See details in Project Implementation Schedule (Annex 10) Component Type No. of Estimated cost Procurement Pre- Document Invitation to Contract Contract subpackages (IJS!) method qualification preparation bid Award/ Completion Signing Land and Agrarian Reform Office Equipment G 4 1,456,809 ICB NA 5/98 Spread over Project Years 1998-2001 Vehicles G 15 660,321 IS NA 5/98 Spread over Project Years 1998-2001 Issuance of Land Certificates G 1 750,000 ICB NA 7/98 Spread over Project Years 1998-2002 Total 2,867,130 Seed Development Rehabilitation ofBuildings CW 1 105,425 NCB NA 5/98-6/98 7/98-8/98 | 9/98-10/98 | 11/98-12/98 Rehabilitation of Buildings CW 1O 368,294 MW NA 5/98 Spread over Project Years untill year 2000 Lab Eqpt., Field Eqpt.,Office Equipment G 16 4,820,758 ICB NA 5/98 Spread over Project Years untill year 2000 Lab Eqpt., Field Eqpt.,Office Equipment G 21 505,086 IS NA 5/9S Spread over Project Years untill year 1999 Vehicles G 1 12,129 IS NA 5/98 Spread over Project Years untill year 2001 Consultant Services for CRI, FPRI, Seed CF 5 621,445 QCBS NA 5/98 Spread over Project Years untill year 2001 Unit in MAWR, Official Variety Testing & Seed Certification Division Consultant Services for CRI, FPRI, Seed CF 2 63,390 LC NA 5/98 Spread over Project Years untill year 2001 Unit in MAWR, Official Variety Testing & Seed Certification Dih i,n __on Consultant Services for CRI, FPRI, Seed CF 5 69,724 IND NA 5/98 Spread over Project Years untill year 2001 Unit in MAWR, Official Variety Testing & Seed Certification Division Training TR 8 238,498 NA Total _ 6,804,749 Crop Protection __. Rehabilitation of Buildings CW 2 246,700 NCB NA 5/98 Spread over Project Years 1998-1999 Rehabilitation of Buildings CW 2 49,340 MW NA 5/98 Spread over Project Years 1998-1999 Lab Eqpt., Field Eqpt.,Office Equipment G 10 546,384 IS NA 6/98 Spread over Project Years 1999-2000 Lab Eqpt., Field Eqpt.,Office Equipment CG 2 22,588 NS NA 6/98 Spread over Project Years 1999-2000 Vehicles G 1 35,640 NS NA 5/98-6/98 7/98-8/98 9/98-10/98 11/98-12/98 Vehicles G 1 73,278 IS NA 5/98-6/98 7/98-8/98 9/98-10/98 11/98-t2/98 Consultant Services for Plant Quarantine CF 6 87,334 IND NA 6/98 7/98-8/98 9/98-10/98 11/98-12/98 & Plant Protection Training TR 2 63,390 NA Total -__ . 1,124,654 _ Agriculture Market Information Office Equipment G 4 324,685 IS NA 5/98 Spread over Project Years until year 2001 Office Equipment C 1 20,417 NS NA 5/98-6/98 7/98-8/98 9/98-10/98 11/98-12/98 Vehicles G 3 62,370 IS NA 5/98 Spread over Project Years until year 2001 Consultant Services for CF 4 262,605 QCBS NA 5/98 Spread over Project Years until year 2001 KAMIS,NSC,SDAM & KYSTKYAG Tech. Project. Consultant Services for CF 4 19,552 SS NA 5/98 Spread over Project Years until year 2001 KAMIS,NSC,SDAM & KYSTKYAGRO co Tech. Project. . Training TR 3 109,029 NA Total - 798,657 _ Kyrgyz Republic - Agricultural Support Services Project Procurement Plan 1 2 3 4 5 6. Estimated Schedule Component Type No. of Estimated cost Procurement Pre- Document Invitation to Contract Contract slicesitenis/ method qualification preparation bid Award/ Completion subpackages Signing Project Implementationt Unit Office Equipment G 2 27,076 NS NA 5/98-6/98 7/98-8/98 9/98-10/98 11/98-12/98 Vehicles G 1 17,820 NS NA 5/98-6/98 7/98-898 9/98-10/98 11/98-12/98 Consultant Services Implementation CF 1 277,207 QCBS NA 5/98 Spread over Project Years 1998-1999 Adviser, Consultant Services Impact CF 2 208,960 QCBS NA 5/98 Spread over Project Years 1998-1999 Evaluation & for Mid-term review Contracted services Monitoring and CF 1 69,597 LC NA 5/98 Spread over Project Year until year 2002 Evaluation Contracted services local Support CF I 39,411 SS NA 5/98 Spread over Project Year until year 2002 Total _ 640,071 Operating Cost Land and Agrarian Reform l Incrc:-r ,rt':iI Salaries 34.072 1 NA Opera:his Expenses 508,159 NA Total 542,231 Seed Development Incremental Salaries 86,648 NA Operating Expenses 1,204,080 NA Total 1,290,728 Crop Protection Incremental Salaries 27,698 NA Operating Expenses 173,923 NA Total 201,621 Agriculture Market Information Incremental Salaries 93,765 NA Operating Expenses 324,654 NA Total 418,419 Project Imptementation Unit Incremental Salaries 206,876 NA Operating Expenses 88,278 NA Total 295,154 NA Total Procurement For IDA , 14,980,000 Figures may slightly differ due to rounding CW - Civil Works; costing less than USS100,000 each, are classified as minor works, but these cosld be consolidated to be procured as NCBs. Possibilities of consolidation are indicated by an asterisk.('). Similarly National Shopping contracts could also be consolidated for purposes of procurement through Intemational Shopping G -Goods CF - Consulting Firms SS - Single Source r TR - Training LC - Least Cost ICB - International Competitive Bidding Operating Expenses - inclades vehicle maintenance, office consumables, chemicals. fertilizers etc. NCB- National Competitive Bidding PY - Project Year QCBS - Quality Cost Based Selection IND - Individual IS - Intemational Shopping CF - Consulting Firms 83 Annex C Table 2 Kyrgyz Republic Agricultural Support Services Project IDA Disbursements (US$ million) % of expenditures Amount to be financed Civil Works 0.60 100% foreign expenditures and 90% of local expenditures Goods 8.25 100% of foreign expenditures; 100% of local expenditures (ex-factory cost); and 80% of local expenditures for other items procured locally Consultants' 1.80 100% Services and Training Operating Costs 2.36 100% until June 30, 1999; 85% until June 30, 2000; 65% until June 30, 2001; 45% until June 30, 2002; and 20% thereafter. Refunding of 0.50 Project Preparation Advance Unallocated 1.47 TOTAL 14.98 84 Annex C Table 3 KYRGYZ REPUBLIC Agricultural Support Services Project Estimated Disbursement Schedule (US$ million) IDA Fiscal Year Disbursements Cumulative Disbursements and Quarter by Quarter by end of Quarter 1999 1st Quarter 0.5 0.5 2nd Quarter 0.5 1.0 3rd Quarter 0.5 1.5 4th Quarter 0.5 2.0 2000 1st Quarter 0.5 2.5 2nd Quarter 0.5 3.0 3rd Quarter 0.6 3.6 4th Quarter 0.6 4.2 2001 1st Quarter 0.7 4.9 2nd Quarter 0.7 5.6 3rd Quarter 0.8 6.4 4th Quarter 0.8 7.2 2002 ist Quarter 1.0 8.2 2nd Quarter 1.0 9.2 3rd Quarter 1.0 10.2 4th Quarter 1.0 11.2 2003 1st Quarter 1.0 12.2 2nd Quarter 1.0 13.2 3rd Quarter 0.5 13.7 4th Quarter 0.5 14.2 2004 1st Quarter 0.5 14.7 2nd Quarter 0.3 15.0 Figures may slightly differ due to rounding. SDR amount is equivalent of US$14.98 million. Annex C Kyrgyz Republic Figure 1 Agricultural Support Services Project Flow of Funds /1 I IDA | IFAD Credit Loan [ Ministry of Finance & Economy l | Ministry of Finance & Economyl Ak F PIU Financial (MAWR) Institution (Agency) Grant Equity . . vv ._ ._ ._ __ - RADS Kyrgyz Agricultural V Project Implementing Seed FarmsKyrgyz Agricultural Agencies |Foundation Finance Corporation A A Oblast level KAFC RADCs Oblast/Rayon Offices Rayon Farmers & Centes Farmer Groups /1 Govemment budgetary contribution will be channeled through a Project Account (SAR, para 3.37). Bilateral donors will disburse grants following their respective procedures. 01 R* Represents cost recovery andlor subloan repayments.-s 86 Annex D Kyrgyz Republic Agricultural Support Services Project Financial and Economic Analysis List of Tables 1. Yields of Main Crops (1989-1996) 2. Areas of Main Crops and Changes in Cropping Pattern, 1989-96 3. Financial Crop Budgets for Selected Crops (Wheat, Barley and Maize) 4. Financial Crop Budgets for Selected Crops (Sugarbeet, Lucerne, Cotton) 5. Farm Model 1: Individual Household in Kara Balta (Financial) 6. Farm Model 2: Peasant Farm in Kara Balta (Financial) 7. Farm Model 3: Individual Household in Osh (Financial) 8. Farm Model 4: Family Farm in Osh (Financial) 9. Economic Prices for Main Inputs and Outputs 10. Economic Crop Budgets for Selected Crops (Wheat, Barley and Maize) 11. Economic Crop Budgets for Selected Crops (Sugarbeet, Lucerne, Cotton) 12. Farm Model 1: Individual Household in Kara Balta (Economic) 13. Farm Model 2: Peasant Farm in Kara Balta (Economic) 14. Farm Model 3: Individual Household in Osh (Economic) 15. Farm Model 4: Family Farm in Osh (Economic) 16. Economic Analysis: Base Scenario and Switching Value (1): Reduced Farm Household Participating Rate 17. Economic Analysis: Switching Values 2 and 3: Reduced Benefits and Higher Project Cost 87 Annex D Table I Yields of Main Crops (1989 - 1996) (tons/ha) Average Average Change 1989 1990 1991 1989-1991 1992 1993 1994 1995 1996 1994-1996 1989-1996 Wheat 3.1 2.64 2.24 2.66 2.73 2.62 1.7 1.83 2.3 1.9 -27% Barley 2.27 2.37 2.06 2.23 2.36 2.16 1.5 1.3 1.7 1.5 -33% Grain Maize 6.81 6.18 5.85 6.28 5.13 4.52 3.53 3.74 4.0 3.8 -40% Potato 13.4 13.6 13.7 13.57 12.4 10.8 9 9.9 11.4 10.1 -25% Sugar-beet 16.9 16.9 15.6 16.47 21.3 18.8 11.6 12.3 13.3 12.4 -25% Cotton 2.75 2.73 2.45 2.64 2.44 2.42 2.02 2.2 2.3 2.2 -18% Tobacco 2.53 2.16 2.12 2.27 2.08 2.19 1.92 2.1 2.1 2.0 -11% Vegetables 21.5 19.6 18 19.70 15.4 14 11.5 10.3 11.2 11.0 -44% Source: National Statistics Comittee, Kyrgyzstan () Over 5 years for sugar-beet Yield Trends from 1989 to 1996 (base 0 in 1989) 30% 20%- 1 1992 993 \ 1994 1995 1G96 l4\Wheat |-1V \, - ------ ---------------- \ \|Barley -fr-Gtain Maize -* Potato -20% - --------------------- X ~~~~~~~~~~~-* Sugar-beet -e-Cotton 4-Tobacco 430% - ---------------------,- vegetables -60% 88 Annex D Table 2 Areas of Main Crops (1989 - 1996) (thousand hectares) Change 1989 1990 1991 1992 1993 1994 1995 1996 1989-1996 Wheat 196.8 193.6 193.6 248.4 338.3 333.1 363.9 451.5 129% Barley 250.3 266.4 290.1 263.5 235.5 206.7 150.7 108.4 -57% Grain Maize 66.3 65.7 62.3 54.7 40.7 36.6 35 45.6 -31% Potato 22.6 25.2 22.5 27.2 26.6 34.2 43.8 49.2 118% Sugar-beet - 0.1 0.8 6.3 11.7 9.8 13.5 14.3 Cotton 26.9 29.7 25.9 21.5 20.3 26.5 33.2 31.7 18% Tobacco 19.9 19.1 19.9 20.8 22.2 18.9 8.5 8.7 -56% Vegetables 23.4 20.7 19.5 22.2 14.9 22.4 32.2 32.8 40% Source: National Statistics Comittee, Kyrgyzstan (*) Over 5 years for sugar-beet Main Changes in the Cropping Pattern from 1989 to 1996 (base 0 in 1989) 140% 120% - -- - - - . . .-- 100% -- . ... - . . . .. - . . . --- - *+Wheat 6 0% - --------- --- --- --------------------- --------- - U - B arley / -Grain Maize i 40% ...... . .. ... -- -/-------------- -- --------- --- X Potato I l|) Cotton -|--Tobacco 0 -4--Vegetables -40% 89 Annex D Table 3 Table 3. Financial Crop Budgets for Selected Crops (Wheat, Barley, Maize) Existing Technology Potential Improved Technology Unit Quantity Unit Value Value Quantity Unit Value Value % increase Winter wheat Yield ton 1.9 2,500 4,750 2.7 2,500 6,750 42% By-product ton 2 40 80 3 40 120 50% Seed kg 230 4 (920) 200 4.0 (800) -13% N fertilizers 150 2.20 (330) P fertilizers 100 2.20 (220) K fertilizers 100 2.60 (260) Pesticides 2 100 (200) Herbicides kg 2 150 (300) 2 150 (300) 0% Irrigation m3 3400 0.020 (68) 3400 0.020 (68) 0% Mechanized Cultivation Is/ha 1 800 (800) 1 800 (800) 0% Mechanized Harvesting Is/ha 1 1,000 (1,000) 1 1,200 (1,200) 20% Transporation ton/SOkm 1.9 100 (190) 2.7 100 (270) Sub-total cash costs (3,278) (4,448) 36% Gross Margin 1,552 2,422 56% Labour requirement daylha 20 20 0% Return per labour som/day 78 121 56% Barley Yield ton 1.5 2,500 3,750 2.2 2,500 5,500 47% By-product ton 1.2 40 48 1.2 40 48 0% Seed kg 170 4 (680) 160 4.0 (640) -6% N fertilizers 150 2.20 (330) P fertilizers 100 2.20 (220) K fertilizers 50 2.60 (130) Pesticides 1 100 (100) Herbicides kg 1.5 150 (225) 2 150 (300) 33% Mechanized Cultivation Is/ha 1 800 (800) 1 800 (800) 0% Mechanized Harvesting Is/ha 1 800 (800) 1 1,000 (1,000) 25% Transporation ton/50km 1.5 100 (150) 2.2 100 (220) Sub-total cash costs (2,655) (3,740) 41% Gross Margin . 1,143 1,808 58% Labour requirement day/ha 20 20 Return per labour som/day 57 90 58% Maize Yield ton 3.8 1,500 5,700 6.3 1,500 9,450 66% By-product ton 5 40 200 10 40 400 100% Seed kg 25 8 (200) 25 8.0 (200) 0% N fertilizers 300 2.20 (660) P fertilizers 200 2.20 (440) K fertilizers 100 2.60 (260) Pesticides 1 100 (100) Herbicides kg 4 70 (280) Irrigation m3 3500 0.020 (70) 3500 0.020 (70) 0% Mechanized Cultivation Is/ha 1 1,000 (1,000) 1 1,000 (1,000) 0% Mechanized Harvesting Is/ha 1 1,500 (1,500) 1 2,000 (2,000) 33% Transporation ton/50km 3.8 100 (380) 6.3 100 (630) Sub-total cash costs (3,150) (5,640) 79% Gross Margin 2,750 4,210 53% Labour requirement day/ha 40 40 Return per labour som/day 69 105 53% Basic assumptions: 1) Yields: Existing technology corresponds to average yield 1994-1996 in the country; Improved technology is conservativey assumed to reach the average yields from 1989 to 1991 (see Table 1) 2) Source for input quantities and costs: specially commissioned farm management survey in Kara-Balta, June 1996, by TACIS advisers. Survey on 12 different farms (unit costs have been updated in 1997). 90 Annex D Table 4 Table 4. Financial Crop Budgets for Selected Crops (Sugarbeet, Luceme, Cotton) Existing Technology Potential Improved Technology Unit Quantiy Unit Value Value Quantity UnitValue Value % increase Sugarbeet Yield ton 12.4 - 16.5 Processed main product ton 1.38 8,000 11,022 1.83 8,000 14,667 33% By-product: pulp ton 13.8 80 1,102 18.3 80 1,467 33% Mollasses 1.05 100 105 1.75 100 175 Off-farm processing (6,000) (7,500) Seed kg 12 50 (600) 12 50.0 (600) 0% N fertilizers 120 2.2 (264) 200 2.2 (440) P fertilizers 75 2.2 (165) 100 2.2 (220) K fertilizers 20 2.6 (52) 50 2.6 (130) Pesticides 2 60 (120) Herbicides kg 2 110 (220) 2 110 (220) 0% Irrigation m3 5000 0.020 (100) 5000 0.020 (100) 0% Mechanized Cultivabon Is/ha 1 800 (800) 1 800 (800) 0% Mechanized Harvesting Istha 1 100 (100) 1 150 (150) 50% Transporation ton/SOkm 1.38 100 (138) 1.83 100 (183) 33% Sub-total cash costs (2,439) (2,963) 22% Gross Margin 3,791 5,845 54% Labour requirement day/ha 20 20 0% Retum per labour som/day 190 292 54% Luceme Yield ton 6 500 3,000 9 500 4,500 50% Seed kg 5 40 (200) 5 50.0 (250) 25% P fertilizers 50 2.2 (110) K fertilizers 50 2.6 (130) Irrigation m3 5500 0.020 (110) 5500 0.020 (110) 0% Mechanized Cultivation Islha 1 200 (200) 1 200 (200) 0% Mechanized Harvesting Is/ha 1 400 (400) 1 600 (600) 50% No transportation 6.00 - - 9.00 - - Sub-toal cash costs (910) (1,400) 54% Gross Margin 2,090 3,100 48% Labour requirement day/ha 50 50 Retum per labour sornfday 42 62 48% Cotton Yield ton 2.2 2.64 20% Processed product ton 0.69 12,400 8,525 0.83 12,400 10,230 By-product ton 1.4 1,200 1,650 1.7 1,200 1,980 Off-farm processing (2,300) (2,300) Seed kg 135 3.6 (486) 120 3.6 (432) N fertilizers kg 500 2.2 (1,100) 400 2.2 (880) P fertilizers kg 125 2.2 (275) 200 2.2 (440) K fertilizers kg 20 2.6 (52) 100 2.6 (260) Farmnyard manure ton 0.9 300 (270) 0.9 300 (270) Pesticides 4 130 (520) 5 130 (650) Herbicides kg 6 70 (420) Irrigation m3 9000 0.020 (180) 9000 0.020 (180) Mechanized Cultivation Is/ha 1 1,250 (1,250) 1 1,400 (1,400) Transporation ton/50km 0.69 100 (69) 0.83 100 (83) Sub-total cash costs (4,202) (5,015) 19% Gross Margin 3,673 4,896 33% Labour requirement day/ha 170 180 Return per labour 0orn/day 22 27 26% Basic assumptions: 1) Yields: Existing technology corresponds to average yield 1994-1996 in the country; Improved technology is conservativey assumed to reach the average yields from 1989 to 1991 (see Table 1) 2) Source for input quantities and costs: specially commissioned farm management survey in Kara-Balta, June 1996, by TACIS advisers. Survey on 12 different farms (unit costs have been updated in 1997). Annex D 9 1 Table 5 Farm Model 1. Individual Household in Kara-Balta (1): Financial -Amounts in Som W/o project With project Incremental % increase total area (2), including 10 10 - 0% Wheat 4 4 - 0% Barley 2 2 - 0% Maize 1 1 - 0% Sugarbeet 1 1 - 0% Lucerne 2 2 - 0% Operating costs per ha (3): Wheat (3,278) (4,448) (1,170) 36% Barley (2,655) (3,740) (1,085) 41% Maize (3,150) (5,640) (2,490) 79% Sugarbeet (2,439) (2,963) (525) 22% Lucerne (910) (1,400) (490) 54% Total operating costs (25,831) (36,675) (10,845) 42% Credit Requirements (3) (5,422) Income per ha (4) Wheat 4i.830 6,870 2,040 42% Barley 3,798 5,548 1,750 46% Maize 5,900 9,850 3,950 67% Sugarbeet (net of processing) 6,229 8,808 2,579 41% Lucerne 3,000 4,500 1,500 50% Gross Margin (for the farm) Wheat 6,208 9,688 3,480 56% Barley 2,286 3,616 1,330 58% Maize 2,750 4,210 1,460 53% Sugarbeet 3,791 5,845 2,054 54% Lucerne 4,180 6,200 2,020 48% Total Gros margin 19,215 29,559 10,344 54% Fixed Costs (@ Som 100 per ha) 1,000 1,000 . 0% Net income before taxes 18,215 28,559 10,344 57% Land Tax (c} Som 100 per ha) 1,000 1,000 0% Net income after tax 17,215 27,559 10,344 60% Net income per person (6 members) 2,869 4,593 1,724 60% Net income per ha 1,721 2,756 1,034 60% (1) Source: Specially commissioned farm survey in Kara-Balta, June 1996 by TACIS advisers (2) Synthesis of individual farms interviewed during the su .ey (3) Assumed to be 50% of incremental input requirements, the remaining 50% being financed by savings (4) Source: Tables 3 and 4 Calculation of Financial Rate of Return Year 1 2 3 4-20 Investment Cost (a) (9,531) Recurrent Cost (b) (713) (713) (713) (713) Net Income w/o project (c) 17,215 17,215 17,215 17,215 Net Income with Project (c) 17,215 20,663 24,111 27,559 Incremental Net Benefit - 3,448 6,896 10,344 Incremental Net Benefit due to Project (d) - 1,379 2,758 4,138 Net Benefit Stream (W/P) (10,244) 666 2,045 3,424 FRR 25% (a) Total Investment Cost of the project (US$ 18.8 million) divided by the number of households (33,605) (b) Annual Recurrent Cost of the project (US$ 1.41 million) divided by the number of households (33,605) (c) See Table Above (d) Only 40% arre attributed to the project. the irrigation would bring 20% of benefits, and the Rural finance project the remaining 40%. Annex D 0 Table 6 Farm Model 2. Peasant farm in Kara-Balta (1) Financial - Amounts in Som W/o project With project Incremental % increase total area (2), including 47 47 0% Wheat 20 20 0% Barley 16 16 0% Maize 2 2 0% Sugarbeet 3 3 0% Lucerne 6 6 0% Operating costs per ha (3): Wheat (3,278) (4,448) (1,170) 36% Barley (2,655) (3,740) (1,085) 41% Maize (3,150) (5,640) (2,490) 79% Sugarbeet t2,439) (2,963) (525) 22% Lucerne (910) (1,400) (490) 54% Total operating costs (127,116) (177,370) (50,254) 40% Credit Requirements (3) (25,127) Income per ha (4) Wheat 4,830 6,870 2,040 42% Barley 3,798 5,548 1,750 46% Maize 5,900 9,850 3,950 67% Sugarbeet (net of processing) 6,229 8,808 2,579 41% Lucerne 3,000 4,500 1,500 50% Gross Margin Wheat 31,040 48,440 17,400 56% Barley 18,288 28,928 10,640 58% Maize 5,500 8,420 2,920 53% Sugarbeet 11,372 17,535 6,163 54% Lucerne 12,540 18,600 6,060 48% Total Gros margin 78,740 121,923 43,183 55% Fixed Costs (@ Som 100 per ha) 4,700 4,700 - 0% Net income before taxes 74,040 117,223 43,183 58% Land Tax (@ Som 100 per ha) 4,700 4,700 - 0% Net income after tax 69,340 112,523 43,183 62% Net income per household (5 HHs) 13,868 22,505 8,637 62% Net income per person (30 members) 2,311 3,751 1,439 62% Net income per ha 1,475 2,394 919 62% (1) Source: Specially commissioned farm survey in Kara-Balta, June 1996 by TACIS advisers (2) Synthesis of individual farms interviewed during the survey (3) Assumed to be 50% of incremental input req ,rements, the remaining 50% being financed by savings (4) Source: Tables 3 and 4 Calculation of Financial Rate of Return Year 1 2 3 4-20 Investment Cost (a) (9,531) Recurrent Cost (b) (713) (713) (713) (713) Net Income per HH wlo project (c) 13.868 13,868 13,868 13,868 Net Income per HH with Project (c) 13,868 16,747 19,626 22,505 Incremental Net Benefit - 2,879 5,758 8,637 Incremental Net Benefit due to Project (dl 1,152 2,303 3 455 Net Benefit Stream (W/P) (10,244) 438 1,590 2,741 FRR | 21% (a) Total Investment Cost of the project (US$ 18.8 million) divided by the number of households (33,605) (b) Annual Recurrent Cost of the project (US$ 1.41 million) divided by the number of households (33,605) (c) See Table Above (d) Only 40% arre attributed to the project. the Irrigation would bring 20% of benefits, and the Rural finance project the remaining 40%. Annex D 93 Table 7 Farm Model 3. Individual Household in Osh (1): Financial - Amounts in Som total area (2), including 6 6 0% Wheat 2 2 0% Cotton 2 2 0% Maize 1 1 0%. Lucerne 1 1 - 0% Operating costs per ha (3): Wheat (3,278) (4,448) (1,170) 36% Cotton (4,202) (5,015) (813) 19% Maize (3,150) (5,640) (2,490) 79% Lucerne (910) (1,400) (490) 54% Total operating costs (35,282) (49,397) (14,116) 40% Credit Requirements (3) (7,058) Income per ha (4) Wheat 4,830 6,870 2,040 42% Cotton (net of processing) 7,875 9,910 2,035 26% Maize 5,900 9,850 3,950 67% Lucerne 3,000 4,500 1,500 50% Gross Margin Wheat 3,104 4,844 1,740 56% Cotton 7,347 9,791 2,445 33% Maize 2,750 4,210 1,460 53% Lucerne 2,090 3,100 1,010 48% Total Gros margin 15,291 21,945 6,655 44% Fixed Costs (@ Som 100 per ha) 600 600 - 0% Net income before taxes 14,691 21,345 6,655 45% Land Tax (@ Som 100 per ha) 600 600 - 0% Net income after tax 14,091 20,745 6,655 47% Net income per person (6 members) 2,348 3,458 1,109 47% Net income per ha 2,348 3,458 1,109 47% (1) Source: Specially commissioned farm survey in Osh, May 1996 by TACIS advisers (2) Synthesis of individual farms interviewed during the survey (3) Assumed to be 50% of incremental input requirements, the remaining 50% being financed by savings (4) Source: Tables 3 and 4 Calculation of Financial Rate of Return Year 1 2 3 4-20 Investment Cost (a) (9,531) Recurrent Cost (b) (713) (713) (713) (713) Net Income per HH w/o project (c) 14,091 14,091 14,091 14,091 Net Income per HH with Project (c) 14,091 16,309 18,527 20,745 Incremental Net Benefit - 2,218 4,436 6,655 Incremental Net Benefit due to Project (d) - 887 1,775 2,662 Net Benefit Stream (WIP) (10,244) 174 1,061 1,949 FRR 14% (a) Total Investment Cost of the project (US$ 18.8 million) divided by the number of households (33,605) (b) Annual Recurrent Cost of the project (US$ 1.41 million) divided by the number of households (33,605) (c) See Table Above (d) Only 40% arre attributed to the project. the irrigation would bring 20% of benefits, and the Rural finance project the remaining 40%. Annex D Table 8 94 Farm Model 4. Family Association in Osh (1) Financial - Amounts in Som 'M j W rcrMenitap increase total area (2), including 20 20 - 0% Wheat 8 8 - 0% Cotton 6 6 - 0% Maize 4 4 - 0% Lucerne 2 2 - 0% Operating costs per ha (3): Wheat (3,278) (4,448) (1,170) 36% Cotton (4,202) (5,015) (813) 19% Maize (3,150) (5,640) (2,490) 79% Lucerne (910) (1,400) (490) 54% Total operating costs (121,714) (168,516) (46,802) 38% Credit Requirements (3) (23,401) Income per ha (4) Wheat 4,830 6,870 2,040 42% Cotton (net of processing) 7,875 9,910 2,035 26% Maize 5,900 9,850 3,950 67% Lucerne 3,000 4,500 1,500 50% Gross Margin Wheat 12,416 19,376 6,960 56% Cotton 22,040 29,373 7,334 33% Maize 11,000 16,840 5,840 53% Lucerne 4,180 6.200 2,020 48% Total Gros margin 49,636 71,789 22,1154 45% Fixed Costs (@ Som 100 per ha) 2,000 2,000 0% Net income before taxes 47,636 69,789 22,154 47% Land Tax (c Som I 00 per ha) 2,000 2,000 - 0% Net income after tax 45,636 67,789 22,154 49% Net income per household (5 HHs) 11,409 16,947 5,538 49% Net income per person (30 members) 1,521 2,260 738 49% Net income per ha 2,282 3,389 1,108 49% (1) Source: Specially commissioned farm survey in Osh, May 1996 by TACIS advisers (2) Synthesis of individual farms interviewed during the survey (3) Assumed to be 50% of incremental input requirements, the remaining 50% being financed by savings (4) Source: Tables 3 and 4 Calculation of Financial Rate of Return Year 1 2 3 4-20 Investment Cost (a) (9,531) Recurrent Cost (b) (713) (713) (713) (713) Net Income per HH w/o project (c) 11,409 11,409 11,409 11,409 Net Income per HH with Project (c) 11,409 13,255 15,101 16,947 Incremental Net Benefit - 1,846 3,692 5,538 Incremental Net Benefit due to Project (d) 738 1,477 2,215 Net Benefit Stream (10,244) 25 764 1,502 FRR 10% (a) Total Investment Cost of the project (US$ 18.8 million) divided by the number of households (33,605) (b) Annual Recurrent Cost of the project (US$ 1.41 million) divided by the number of households (33,605) (c) See Table Above (d) Only 40% arre attributed to the project. the irrigation would bring 20% of benefits, and the Rural finance project the remaining 40%. 95 Annex D Table 9 Calculation of Economic Prices for main inputs and outputs Wheat Maize Sugar Cotton Urea Super P otassium Parity Price Import Import Import Export Import Import Import 2005 World Price in 1990 price (1) US$Ston 125 98 225 1,458 136 118 90 2005 World Price in 1997 price (2) US$ 1 ton 161 125 289 1,869 163 141 108 Quality Adjustment % 10% 10% 10% 0% 0% 0% 0% Insurance/freight US$ /ton 20 20 40 (30) 10 10 10 CIF in USS USS/ ton 164 132 300 1,839 173 151 118 CIF in Som (@ US$S=Som 17.5) Som I ton 2,878 2,319 5,249 32,185 3,022 2,643 2,061 Handling at boarder (at 3%) Som / ton 86 70 157 (966) 91 79 62 Marginofimporter(at5%) Som/ton 144 116 262 (1,609) 151 132 103 Transportfrom Boarder to mill (3) Som/ton 100 100 100 (100) 100 100 100 Economic Price at mill gate Som I ton 3,208 2,604 5,769 29,510 3,364 2,954 2,326 Processing cost (4) Som / ton 4,000 (9,443) Transport from producerto mill (5) Som I ton (100) (100) (100) 100 (100) (100) (100) Bagging (1.5%) Som / ton (48) (39) (87) Economic Farm gate price Som/ton 3,060 2,465 9,583 20,167 3,264 2,854 2,226 Financial Pnice Sam/ton 2,500 1,600 8,000 12,400 2,200 2,200 2,600 Conversion Factor Som/ton 122% 164% 120% 163% 148% 1300% 2 86% (1) Commodity Markets and the Developing Countries, a WB Quarteriy, November 1997. Average between 2005 and 2010 projected prices in 1990 constant dollars. See Table Al. For instance: wheat price is average between US$ 128.7 and 121.7 per ton. (2) Conversion of 1990 prices into 1997 prices multiplying by the G-5 MUV indexes: 128.2 for agriculture and 119.8 for fertilizers (base 100 in 1990). See Table A3 (3) Average of 100 km at Som 1 per ton/km (on major roads) (4) @ Som 4,000 per ton of sugar. @ 32% of price for cotton (5) Average of 50 km at Som 2 per ton/km (on rural roads) 96 Annex D Table 10 Economic Crop Budgets for Selected Crops (Wheat Barley, Maize) Existing Technology Potential Improved Technology Unit Quantity Unit Value Value Quantity Unit Value Value' % increase Winter wheat Yield ton 1.9 3,060 5,814 2.7 3,060 8,262 42% By-product ton 2 40 80 3 40 120 50% Seed kg 230 4 (920) 200 4.0 (800) -13% N fertilizers 150 3.26 (490) P fertilizers 150 2.85 (428) K fertilizers 100 2.23 (223) Pesticides 2 100 (200) Herbicides kg 2 150 (300) 4 150 (600) 100% Irrigation m3 3400 0.100 (340) 3400 0.100 (340) 0% Mechanized Cultivation Is/ha 1 1,200 (1,200) 1 1,200 (1,200) 0% Mechanized Harvesting Is/ha 1 1,500 (1,500) 1 1,800 (1,800) 20% Transporation ton/50km 1.9 100 (190) 2.7 100 (270) Sub-total cash costs (4,450) (6,350) 43% Labour Cost 20 20 (400) 20 20 (400) Gross Margin 1,044 1,632 56% Labour requirement day/ha 20 20 0% Barley Yield ton 1.5 2,500 3,750 2.2 2,500 5,500 47% By-product ton 1.2 40 48 1.2 40 48 0% Seed kg 170 4 (680) 160 4.0 (640) -6% N fertilizers 150 3.26 (490) P fertilizers 100 2.85 (285) K fertilizers 50 2.23 (111) Pesticides 1 100 (100) Herbicides kg 1.5 150 (225) 2 150 (300) 33% Mechanized Cultivation Is/ha 1 1,200 (1,200) 1 1,200 (1,200) 0% Mechanized Harvesting Is/ha 1 1,200 (1,200) 1 1,500 (1,500) 25% Transporation ton/50km 1.5 100 (150) 2.2 100 (220) Sub-total cash costs (3,455) (4,846) 40% Labour Cost 20 20 (400) 20 20 (400) Gross Margin (57) 302 Labour requirement day/ha 20 20 Maize Yield ton 3.8 2,465 9,367 6.3 2,465 15,530 66% By-product ton 5 40 200 10 40 400 100% Seed kg 25 8 (200) 25 8.0 (200) 0% N fertilizers 300 3.26 (979) P fertilizers 200 2.85 (571) K fertilizers 100 2.23 (223) Pesticides 1 100 (100) Herbicides kg 4 70 (280) Irrigation m3 3500 0.100 (350) 3500 0.100 (350) 0% Mechanized Cultivation Is/ha 1 1,500 (1,500) 1 1,500 (1,500) 0% Mechanized Harvesting Is/ha 1 2,250 (2,250) 1 3,000 (3,000) 33% Transporation ton/50km 3.8 100 (380) 6.3 100 (630) Sub-total cash costs (4,680) (7,833) 67% Labour Cost 40 20 (800) 40 20 (800) Gross Margin 4,087 7,298 79% Labour requirement day/ha 40 40 Retum per labour som/day 102 1 182 79% Basic assumptions: 1) Yields : Existing technology corresponds to average yield 1994-1996 in the country; Improved technology is conservativey assumed to reach the average yields from 1989 to 1991 (see Table 1) 2) Source for input quantities and costs: specially commissioned farm management survey in Kara-Balta, June 1996, by TACIS advisers. Survey on 12 different farms (unit costs have been updated in 1997). 97 Annex D Table 11 Economic Crop Budgets for Selected Crops (Sugarbeet, Lucerne, Cotton) Existing Technology Potential Improved Technology Unit Quantity Unit Value Value Quantity Unit Value Value % increase Sugarbeet Yield ton 12.4 - 16.5 Processed main product ton 1.38 9,583 13,203 1.83 9.583 17,568 33% By-product: pulp ton 13.8 80 1.102 18.3 80 1,467 33% Mollasses 1.05 100 105 1.75 100 175 Off-farm processing 1.38 6,000 (8,267) 1.83 6,000 (11,000) Seed kg 12 50 (600) 12 50.0 (600) 0% N fertilizers 120 3.3 (392) 200 3.3 (653) P fertilizers 75 2.9 (214) 100 2.9 (285) K fertilizers 20 2.2 (45) 50 2.2 (111) Pesticides 2 60 (120) Herbicides kg 2 110 (220) 2 110 (220) 0% Irrigation m3 5000 0.100 (500) 5000 0.100 (500) 0% Mechanized Cultivation Is/ha 1 1,200 (1,200) 1 1,200 (1,200) 0% Mechanized Harvesting Is/ha 1 150 (150) 1 225 (225) Transporation ton/50km 1.38 100 (138) 1.83 100 (183) Sub-total cash costs (3,458) (4,098) 19% Labour Cost 20 20 (400) 20 20 (400) Gross Margin 2,285 3,712 62% Labour requirement day/ha 20 20 0% Retum per labour som/day 114 186 62% Lucerne Yield ton 6 500 3,000 9 500 4,500 50% Seed kg 5 40 (200) 5 50.0 (250) 25% P fertilizers 50 2.9 (143) K fertilizers 50 2.2 (111) Irrigation m3 5500 0.100 (550) 5500 0.100 (550) 0% Mechanized Cultivation Is/ha 1 300 (300) 1 300 (300) 0% Mechanized Harvesting Is/ha 1 600 (600) 1 900 (900) 50% No transportation 6.00 - - 9.00 - Sub-total cash costs (1,650) (2,254) 37% Labour Cost 50 20 (1,000) 50 20 (1,000) Gross Margin 350 1,246 256% Labour requirement day/ha 50 50 Return per labour som/day 7 25 256% Cotton Yield ton 2.2 2.64 20% Processed product ton 0.69 20,167 13,865 0.83 20,167 16,638 By-product ton 1.4 1,200 1,650 1.7 1,200 1,980 Off-farm processing (3,450) (3,450) Seed kg 135 3.6 (486) 120 3.6 (432) N fertilizers kg 500 3.3 (1,632) 400 3.3 (1,306) P fertilizers kg 125 2.9 (357) 200 2.9 (571) K fertilizers kg 20 2.2 (45) 100 2.2 (223) Farmyard manure ton 0.9 300 (270) 0.9 300 (270) Pesticides 4 130 (520) 5 130 (650) Herbicides kg 6 70 (420) Irrigation m3 9000 0.100 (900) 9000 0.100 (900) Mechanized Cultivation Is/ha 1 1,875 (1,875) 1 2,100 (2,100) Transporation ton/50km 0.69 100 (69) 0.83 100 (83) Sub-total cash costs (6,153) (6,953) 13% Labour Cost 170 20 (3.400) 180 20 (3,600) Gross Margin 2,512 4,614 84% Labour requirement day/ha 170 180 Return per labour _ somday 15 26 73% Basic assumptions: 1) Yields: Existing technology corresponds to average yield 1994-1996 in the country; Improved technology is conservativey assumed to reach the average yields from 1989 to 1991 (see Table 1) 2) Source for input quantities and costs: specially commissioned farm management survey in Kara-Balta, June 1996, by TACIS advisers. Survey on 12 different farms (unit costs have been updated in 1997). Annex D 98 Table 12 Farm Model 1. Individual Household in Kara-Balta (1) - Economic - Amounts in Som W/o project With project Incremental % increase total area (2), including 10 10 - 0% Wheat 4 4 - 0% Barley 2 2 - 0% Maize 1 1 - 0% Sugarbeet 1 1 - 0% Luceme 2 2 - 0% Operating costs per ha (3): Wheat (4,450) (6,350) (1,900) 43% Barley (3,455) (4,846) (1,391) 40% Maize (4,680) (7,833) (3,153) 67% Sugarbeet (3,458) (4,098) (640) 19% Lucerne (1,650) (2,254) (604) 37% Total operating costs (36,148) (51,532) (15,384) 43% Credit Requirements (3) (7,692) Income per ha (4) Wheat 5,894 8,382 2,488 42% Barley 3,798 5,548 1,750 46% Maize 9,567 15,930 6,363 67% Sugarbeet (net of processing) 6,143 8,210 2,066 34% Lucerne 3,000 4,500 1,500 50% Gross Margin (for the farm) Wheat 5,777 8,128 2,351 41% Barley 686 1,403 717 105% Maize 4,887 8,098 3,210 66% Sugarbeet 2,685 4,112 1,427 53% Lucerne 2,700 4,492 1,792 66% Total Gros margin 16,735 26,233 9,498 57% Fixed Costs (@ Som 100 per ha) 1,500 1,600 - 0% Net income before taxes 15,235 24,733 9,498 62% Land Tax (@ Som 100 per ha) - 0% Net income after tax 15,236 24,733 9,498 62% Net income per person (6 members) 2,539 4,122 1,583 62% Net Income per ha 1,524 2,473 950 62% (1) Source: Specially commissioned farm survey in Kara-Balta, June 1996 by TACIS advisers (2) Synthesis of individual farms interviewed during the suivey (3) Assumed to be 50% of incremental input requirements, the remaining 50% being financed by savings (4) Source: Tables 3 and 4 Calculation of Economic Rate of Return Year 1 2 3 4-20 Investment Cost (a) (9,531) Recurrent Cost (b) (713) (713) (713) (713) Net Income w/o project (c) 15,235 15,235 15,235 15,235 Net Income with Project (c) 15,235 18,401 21,567 24,733 Incremental Net Benefit - 3,166 6,332 9,498 Incremental Net Benefit due to Project (d) 1,266 2,533 3,799 Economic Stream (10,244) 553 1,819 3,086 Economic Rate of Return 23% (a) Total Investment Cost of the project (US$ 18.8 million) divided by the number of households (33,605) (b) Annual Recurrent Cost of the project (US$ 1.41 million) divided by the number of households (33,605) (c) See Table Above (d) Only 40% arre attributed to the project. the irrigation would bring 20% of benefits, and the Rural finance project the remaining 40%. Annex D 99 Table 13 Farm Model 2. Peasant farm in Kara-Balta (1) - Economic - Amounts in Som W/o project With project Incremental % increase total area (2), including 47 47 - 0% Wheat 20 20 - 0% Barley 16 16 - 0% Maize 2 2 - 0% Sugarbeet 3 3 - 0% Lucerne 6 6 - 0% Operating costs per ha (3): Wheat (4,450) (6,350) (1,900) 43% Bariey (3,455) (4,846) (1,391) 40% Maize (4,680) (7,833) (3,153) 67% Sugarbeet (3,458) (4,098) (640) 19% Lucerne (1,650) (2,254) (604) 37% Total operating costs (173,914) (246,027) (72,113) 41% Credit Requirements (3) (36,057) Income per ha (4) Wheat 5,894 8,382 2,488 42% Barley 3,798 5,548 1,750 46% Maize 9,567 15,930 6,363 67% Sugarbeet (net of processing) 6,143 8,210 2,066 34% Lucerne 3,000 4,500 1,500 50% Gross Margin Wheat 28,883 40,640 11,757 41% Barley 5,488 11,228 5,740 105% Maize 9,775 16,195 6,420 66% Sugarbeet 8,056 12,336 4,280 53% Lucerne 8,100 13,476 5,376 66% Total Gros margin 60,302 93,875 33,573 56% Fixed Costs (@ Som 100 per ha) 7,050 7,050 - 0% Net income before taxes 53,252 86,825 33,573 63% Land Tax (@ Som 100 per ha) 0% Net income after tax S3,252 86,825 33,573 63% Net income per household (5 HHs) 10,650 17,365 6,715 63% Net income per person (30 members) 1,775 2,894 1,119 63% Net income per ha 1,133 1,847 714 63% (1) Source: Specially commissioned farm survey in Kara-Balta, June 1996 by TACIS advisers (2) Synthesis of individual farms interviewed during the survey (3) Assumed to be 50% of incremental input requirements, the remaining 50% being financed by savings (4) Source: Tables 3 and 4 Calculation of Economic Rate of Return Year 1 2 3 4-20 Investment Cost (a) (9,531) Recurrent Cost (b) (713) (713) (713) (713) Net Income per HH w/o project (c) 10,650 10,650 10,650 10,650 Net Income per HH with Project (c) 10,650 12,889 15,127 17,365 Incremental Net Benefit - 2,238 4,476 6,715 Incremental Net Benefit due to Project (d) 895 1,791 2,686 Economic Stream (10,244) 182 1,077 1.973 Economic Rate of Return 15% (a) Total Investment Cost of the project (US$ 18.8 million) divided by the number of households (33,605) (b) Annual Recurrent Cost of the project (US$ 1.41 million) divided by the number of households (33,605) (c) See Table Above (d) Only 40% arre attributed to the project. the irrigation ..ould bring 20% of benefits, and the Rural finance project the remaining 40%. Annex D Table 14 100 Table 7: Farm Model 3. Individual Household in Osh (1) - Economic - Amounts in Som W/o p!oject With project Incremental % increase total area (2), including 6 p I 0% Wheat 2 2 0% Cotton 2 2 0% Maize 1 1 - 0% Lucerne 1 1 - 0% Operating costs per ha (3): Wheat (4,450) (6,350) (1,900) 43% Cotton (6,153) (6,953) (800) 13% Maize (4,680) (7,833) (3,153) 67% Lucerne (1,650) (2,254) (604) 37% Total operating costs (L-,016) (69,927) (19,911) 40% Credit Requirements (3) (9,956) Income per ha (4) Wheat 5,894 8.382 2,488 42% Cotton (net of processing) 12,065 15,168 3,103 26% Maize 9,567 15,930 6,363 67% Lucerne 3,000 4,500 1,500 50% Gross Margin Wheat 2,888 4,064 1,176 41 'Xo Cotton 11,824 16,429 4,605 39% Maize 4,887 8,098 3,210 66% Lucerne 1,350 2,246 896 66% Total Gros margin 20,950 30,837 9,887 47% Fixed Costs (@ Som 100 per ha) 900 900 - 0% Net income before taxes 20,050 29,937 9,887 49% Land Tax (@ Som 100 per ha) - 0% Net income after tax 20,050 29,937 9,887 49% Net income per person (6 members) 3,342 4,989 1,648 49% Net income per ha 3,342 4,989 1,648 49% (1) Source: Specially commissioned farm survey in Osn, May 1996 by TACIS advisers (2) Syntresis of individual farms interviewed during the iurvey (3) Assumed to be 50% of incremental input requirements, the remaining 50% being financed by savings (4) Source: Tables 3 and 4 Calculation of Economic Rate of Return Year 1 2 3 4-20 Investment Cost (a) (9,531) RecurrentCost(b) (713) (713) (713) (713) Net Income per HH w/o project (c) 20,050 20,050 20,050 20,050 Net Income per HH with Project (c) 20,050 23,345 26,641 29,937 Incremental Net Benefit - 3,296 6,591 9,887 Incremental Net Benefit due to Project (d) 1,318 2,637 3.955 Economic Stream (10,244) 605 1,923 3,241 Economic Rate of Return 24% (a) Total Investment Cost of the project (US$ 18.8 million) divided by the number of households (33,605) (b) Annual Recurrent Cost of the project (US$ 1.41 million) divided by the number of households (33,605) (c) See Table Above (d) Only 40% arre attributed to the project. the irrigation would bring 20% of benefits, and the Rural finance project the remaining 40%. Annex D Table 15 101 Table 8: Farm Model 4. Family Association in Osh (1) - Economic - Amounts in Som W/o project With project Incremental % increase total area (2), including 20 20 0% Wheat 8 8 - 0% Cotton 6 6 - 0% Maize 4 4 - 0% Lucerne 2 2 - 0% Operating costs per ha (3): Wheat (4,450) (6,350) (1,900) 43% Cotton (6,153) (6,953) (800) 13% Maize (4,680) (7,833) (3,153) 67% Lucerne (1,650) (2,254) (604) 37% Total operating costs (172,903) (238,643) (65,739) 38% Credit Requirements (3) (32,870) Income per ha (4) Wheat 5 894 8,382 2,488 42% Cotton (net of processing) 12,065 15,168 3,103 26% Maize 9,567 15,930 6,363 67% Lucerne 3,000 4,500 1,500 50% Gross Margin Wheat 11,553 16,256 4,703 41% Cotton 35,472 49,287 13,815 39% Maize 19,550 32,391 12,841 66% Lucerne 2,700 4,492 1,792 66% Total Gros margin 69,275 102,425 33,151 48% Fixed Costs (@ Som 100 per ha) 3,000 3,000 0% Net income before taxes 66,275 99,425 33,151 50% Land Tax (@ Som 100 per ha) _ 0% Net Income after tax 66,275 99,425 33,151 50% Net income per household (5 HHs) 13,255 19,885 6,630 50% Net income per person (30 members) 2,209 3,314 1,105 50% Net income per ha 3,314 4,971 1,658 50% (1) Source: Specially commissioned farm survey in Osh May 1996 by TACIS advisers (2) Synthesis of individual farms interviewed during the s irvey (3) Assumed to be 50% of incremental input requirements, the remaining 50% being financed by savings (4) Source: Tables 3 and 4 Calculation of Economic Rate of Return Year 1 2 3 4-20 Investment Cost (a) (9,531) Recurrent Cost (b) (713) (713) (713) (713) Net Income per HH w/o project (c) 13,255 13,255 13,255 13,255 Net Income per HH with Project (c) 13,255 15,465 17,675 19,885 Incremental Net Benefit - 2,210 4,420 6,630 Incremental Net Benefit due to Project (d) - 884 1,768 2,652 Economic Stream (10,244) 171 1,055 1,939 Economic Rate of Return 14% (a) Total Investment Cost of the project (US$ 18.8 million) divided by the number of households (33,605) (b) Annual Recurrent Cost of the project (US$ 1.41 million) divided by the number of households (33,605) (c) See Table Above (d) Only 40% arre attributed to the project. the irrigation would bring 20% of benefits, and the Rural finance project the remaining 40%. 102 Annex D3 Table 16 Economic Analysis: Base Scenario and Switching value 1 Plow coverage rate) PYl PY2 PY3 PY4 PY5 PY6 PY7 PY8 PYg PY', PY11-20 Project Economic Costs Investment costs (1) (US$'000) 7,590 6,690 3160 1,620 810 Recurrent Costs (1) (US$000) 1,350 1,540 1,540 1,490 1,410 1,410 1,410 1,410 1,410 1410 1,410 Sub-total Economic Costs 8,940 8,230 4,700 3,110 2,220 1,410 1,410 1,410 1,410 1,410 1,410 Base Scenario: Expected participation and adoption rates (2) Number of participating HHs (3) 11.202 22,403 33,605 33.605 33,605 33,605 33,605 33,605 33,605 33605 Net Economic Benefit per HH (Som) (4) 8,182 Net Economic Benefit per HH (US$) 468 Net Benefit per HH attributed to project (US$) (5) 187 Sub-total Economic Benefits - 2,095 4,190 6,285 6,285 6,285 6,285 6,285 6,285 6,285 6,285 NET ECONOMIC FLOW BASE SCENARIO (8,940) (6,135) (510) 3,175 4,065 4,875 4,875 4,875 4,875 4,875 4,875 Net Present Value (12%) 9,929 Economic Rate of Return (20 years) 20 l Switching Value 1: Reduced Participating Rate (6) Number of participating HHs (4) 8,103 16,207 24,310 24,310 24,310 24,310 24,310 24.310 24,310 24,310 Net Economic Benefit per HH (US$) (5) 468 Net Benefit per HH attributed to project (US$) (6) 187 Sub-total Economic Benefits - 1,516 3,031 4,547 4,547 4,547 4,547 4,547 4,547 4,547 4,547 NET ECONOMIC FLOW SWITCHING VALUE 1 (8,940) (6,714) (1,669) 1,437 2,327 3,137 3,137 3,137 3,137 3,137 3,137 Net Present Value (12%) (168) IEconomic Rate of Return (20 years) 12% (1) Source: COSTAB in constant terms (w/o price contingencies) including physical contingencies. Individual farm models in tables 5-8 and 12-15 are based on the total investment cost of US$18.8 million (including physical contingencies) and annual recurring cost of US$1.41 million. ERR of the project as a whole is based on a slightly higher investment cost at US$19.87 million (induding physical contingencies), and recurring costs of US$1.35 million in projectyear 1 and US$1.54 million from project year2 onwards mainly to include the cost of issuance of land certificates added during negotiations. This increase in the investment/recurring costs will only marginally reduce FRRsIERRs for individual farm models. (2) Percentages are derived from conservative estimates of the coverage of existing services evaluated between 47% and 70% (see IFAD pre-appraisal report), Key parameters are the following: i) Number of Farming Households at full development (3) 143,000 (estimates of the MAWR: see I FAD pre-appraisal report) ii) Coverage Rate et full development 47% iii) Adoption Rate of Proposed Technologies 50% iv) Combined Participating Rate [ii) x iii)] 24% v) Incremental Number of beneficiaries at full dvt |i) x iv)] 33,605 (3) Progressively phased in to reach in 4 years the previously estimated participattng number of households (4) Average economic benefits per HH of the four economic farm models (obtained by replacing financial prices by economic prices). Available on file. (5) About 40% of previous: the irrigation would bring 20% of benefits (10% of yield increases in addition to the main benefit of that project which is to stop any further deterioration of the scheme) and the Rural finance project the remaining 40%. (6) Assuming a reduced coverage rate or a reduced adoption rate of proposed technologies resulting in a reduced participation rate; Key parameters are the following: i) Number of Farming Households at full development 143,000 ii) Coverage Rate et full development 34% iii) Adoption Rate of Proposed Technologies 50% iv) Combined Participating Rate [ii) x iii)J 17% v) Incremental Number of beneficiaries at full dvt [i) x iv)] 24,310 103 Annex D Table 17 Economic Analysis: Base Scenario and Switching value 2 and 3: reduced benefits and Increased costs PYl PY2 PY3 PY4 PY5 PYW PY7 PY8 PY P PY10 PY11-20 Project Economic Costs Investment costs (1) (US$'000) 7,590 6,690 3,160 1,620 810 RecurrentCosts(1)(US$'000) 1,350 1,540 1,540 1,490 1,410 1,410 1,410 1,410 1,410 1,410 1,410 Sub-total Economic Costs 8,940 8,230 4,700 3,110 2,220 1,410 1,410 1,410 1,410 1,410 1,410 Switching Value 2: Reduced Benefits (2) Number of participating HHs (3) 11,202 22,403 33,605 33,605 33,605 33,605 33,605 33,605 33,605 33,605 Net Economic Benefit per HH (Som) (4) 5,957 Net Economic Benefit per HH (US$) 340 Net Benefit per HH attributed to project (US$) (5) 136 Sub-total Economic Benefits - 1,525 3,050 4,575 4,575 4,575 4,575 4,575 4,575 4,575 4,575 NET ECONOMIC FLOW SWITCHING VALUE 2 (8,940) (6,705) (1,650) 1,465 2,355 3,165 3,165 3,165 3,165 3,165 3,165 Net Present Value (12%) 0 Economic Rate of Return (20 years) 12° Switching Value 3: Higher costs than expected (6) Inflated Investment costs 10,426 9,190 4,341 2,225 1,113 Intlated RecurrentCosts 1,854 2,115 2,115 2,047 1,937 1,937 1,937 1,937 1,937 1,937 1,937 Sub-total Inflated Economic Costs 12,280 11,305 6,456 4,272 3,050 1,937 1,937 1,937 1,937 1,937 1,937 Number of participating HHs (3) 11,202 22,403 33,605 33,605 33,605 33,605 33,605 33,605 33,605 33,605 Net Economic Benefit per HH (US$) (4) 468 Net Benefit per HH attributed to project (US$) 187 Sub-total Economic Benefits - 2,095 4,190 6,285 6,285 6,285 6,285 6,285 6,285 6,285 6,285 NET ECONOMIC FLOW SWITCHING VALUE 3 (12,280) (9,210) (2.266) 2,013 3,236 4,348 4,348 4,348 4,348 4,348 4,348 Net Present Value (12%) (0) Economic Rate of Return (20 years) 12%1 (1) Source: COSTAB in constant terms (w/o prce contingencies) including physical contingencies. All investment costs included. Recurrent expenses continue after PY6 (2) Assuming lower increases in farm incomes than expected. Key assumptions are the following: i) NumberofFarming Households at full development (3) 143,000 (estimates of the MAWR: see IFAD pre-appraisal report) II) Coverage Rate et full development 47% iii) Adtoption Rate of Proposed Technologies 50% iv) Combined Participating Rate [ii) x iii)] 24% v) Incremental Number of beneficiaries at full dvt [i) x iv)J 33,605 vi) Lower Farm Benefits than Expected by (2): 27% (3) Progressively phased in to reach in 4 years the previously estimated participating number of households (4) Average economic benefits per HH of the four economic farm models (obtained by replacing financial prices by economic prices). Available on file. (5) About 40% of previous: the irrigation would bring 20% of benefits (10% of yield increases in addition to the main benefit of that project which is to stop any further deterioration of the scneme) and the Rurai finance project the remaining 40%. (6) Assuming unexpected increases in project investment and recurrent costs. Key assUmptions are the following: i) Number ot Farming Housenolds at full development 143.000 ii) Coverage Rate et full development 47% iii) Adoption Rate of Proposed Technologies 50% iv) Combined Participating Rate [ii) x iii)J 24% v) Incremental Number of beneficiaries at full dvt [i) x iv)3 33.605 vi) Higher Costs than expected by 37% IBRD 28979 705 75~ ED K A Z A K H S T A N K ~T A2omv r A A K S T> Ao Nlo T. ~ ~ ~ ~ . \\-}giv . p ,x '"'" '<;<,<, oTxogw _- 0 titi t : 0 r00;;;fjil- 005Q^;00VIT Sii ^) C;;;|;.;{: .AGRICULTURAL SUPPORT SERVICES PROJECT ToDusbenbe TAJIKISTAN os8 = g - tE_;; X PR ECTCOMPONEN~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~POJET OMONNT 70~~~~~~~~ ' ' oXDsabei;" g3T Mw A CROP PROTECT ON/SEED DEVELOPMENT gX / ei KAZAKHSTAN , RUSSIAo . X MARKET \NFORMATION~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ MRRT IPOMAIO K A C A K H S T A N LA N D A N D A O R A R A N REAPAR MI H' R,