Project Paper Data Sheet

Date: November 23,2009 Task Team Leader: Usman Qamar Country: Afghanistan Sector ManagedDirector: Simeon Ehui /John

icholas J. Krafft

Responsible agency: Ministry o f Agriculture, Irrigation and Livestock (MAIL)

Current closing date: December 3 1 , 2009 _L Revised c l o c Indicate if the restructuring i s :

Board approved Yes RVP approved

Does the restructured project require any exceptions to Bank policies? Have these been approved by Bank management? I s approval for any policy exception sought from the Board?

N o Not applicable N o

Revised project development objective/outcomes: to assist producer households in adopting improvedpractices so as to increase horticulture and livestock productivity and production in focus areas. Key outcomes would include increased productivity o f perennial and annual horticulture crops and poultry, and reduced mortality in large and small ruminants.

Does the restructured project trigger any new safeguard policies? N o

ARTF Financing Gap

1

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Introduction

1. This Project Paper seeks the approval o f the Executive Directors to introduce the following changes in the Afghanistan: Emergency Horticulture and Livestock Project, IDA Grant H2260-Af (P098256) and accompanying amendments to the project’s legal documents. Overly ambitious and complex project design coupled with sub-par performance o f the executing agency led to unsatisfactory execution o f the project and prolonged existence o f “problem project status”. The proposed restructuring would modify the project objective to focus more directly on horticulture and livestock productivity, adapt the approach to horticulture and livestock development to the local conditions, and rationalize the project scope and targets in l ine with available capacity. The project closing date would be extended by two years to accommodate the slow start o f project activities. The revised outcomes would be: (i) increase in the productivity and production o f horticulture and poultry, and (ii) reduced mortality in large and small ruminants in the project focus areas.

Background and Reasons for Restructuring

2. The IDA Grant H2260-AF (US$20 mi l l ion equivalent) for the project was approved by the Board on May 25,2006 and became effective on October 16,2006. The original project objective was to assist the Recipient in stimulating marketable output of perennial horticulture and livestock by improving the incentives framework for private investments and strengthening institutional capacity in the agricultural sector. The Ministry o f Agriculture, Irrigation and Livestock ( MAIL) i s the implementing agency of the project.

3. The original project consisted broadly o f the following parts:

P a r t 1: Perennial Horticulture, including (a) Rehabilitation o f existing orchards and development o f new orchards; (b) Establishment o f a Horticulture Development Council o f Afghanistan; and (c) Improvement o f the production, processing and marketing o f green raisins and pomegranate through the construction o f simple drying facilities.

Par t 2: Livestock, including (a) Strengthening the capacity o f General Department o f Livestock Production and Development (GDLPD) to supervise and regulate animal husbandry services; (b) Development o f livestock production and marketing initiatives for improving domestic food supplies and reducing imports, including: (i) establishment o f private dairy processing units; (ii) establishment o f a village-based poultry industry; and (iii) improving the collection, cleaning and marketing o f cashmere fiber; and (c) Promoting public-private partnerships for the delivery o f veterinary services.

Par t 3: Project Management and Implementation, including (a) Strengthening Ministry o f Agriculture’s administrative capacity; and (b) Provision o f training, technical assistance, goods, equipment and operating costs for the establishment o f an implementation support team (IMST) and for the implementation, monitoring and supervision o f the Project.

2

4. Reasons for Restructuring. As documented in the project ISRs overall implementation performance was deficient as indicated by: (i) generally sub-par performance by the executing agency; (ii) long delays in procurement and excessively slow disbursements compared to the original estimates; and (iii) prolonged existence o f “problem project” status. By the end o f 2008 it was evident that the project would not achieve i t s original physical targets and development objective by the grant closing date. I t was also clear that the original project objective and the scopehargets were overly ambitious, especially when considering the weak capacity o f the executing agency, the post-conflict environment in the country, and the emergency nature o f the project.

5. However, several factors have contributed to improved project performance in 2009: (i) a major emphasis by GOA on significantly improving performance in the agriculture sector; (ii) presence o f dynamic leadership and buildup o f a dedicated team in MAIL, representing a significant change in the policy and institutional environment; and (iii) preparation o f a new National Agricultural Development Framework (NADF), which recognizes horticulture and livestock as strategically important subsectors.

6. Proposed Approach to Restructuring. I n June 2009 on the basis of an in-depth review carried out jointly by MAIL, Bank, and other donors supporting the project through the ARTF i t was agreed to restructure the project. To address the issues mentioned in paragraph 4 above and take advantage o f the recent positive developments it i s proposed to restructure the project with the following objectives: (i) developing a model for future development o f horticulture and livestock in the country and building necessary capacity; (ii) making the project targets realistic; and (iii) focusing project activities in selected areas to enhance i ts impact (11 districts selected by government’). Since focusing the project in 11 districts2 would entail a change in the originally intended beneficiaries, a f irst order restructuring i s proposed. Also, considering the project period already elapsed, a two-year extension of the closing date is proposed to allow more time for completing the revised project scope/targets.

Proposed Changes

7. Revised Project Objective. The revised project objective is to assist producer households in adopting improved practices so as to increase horticulture and livestock productivity and production in focus areas. The focus would be on productivity and production rather than on the incentives framework3. The Results Framework would be modified accordingly (see Attachment 1).

8. Changes in Project Scope/Targets4

1 The project would be confined to 11 districts (instead of being dispersed over 10 provinces as envisaged originally), where horticulture and livestock development could be addressed more intensively by mobilizing farmer/producer groups. Mir Bachakot (Kabul), Shaikh Ali (Parwan), Mahmood Raqi (Kapisa), BazaraWRokhdOnaba (Panjsher), Farkhar (Takhar), Imaam Sahib (Kundoz), Aybak (Samangan), Khulm (Balkh), Shebergan (Jawzjan), Sozma Qalla (Sari Pul), Pul-e-Kumri (Baghlan). The revised objective recognizes the fact that increased productivity i s the vital first link in the value chain. Revised project description i s included in Attachment 2.

2

3

4

3

Horticulture Development

A. The approach to horticulture development would be modiJied taking into account: (i) the overarching constraints of water availability; (ii) the existence of poly-culture in existing orchards; (iii) the need for strengthening extension services through structured mobilization, capacity building and training in farmer Jield schools; (iv) introducing elements o f farm planning and orchard management; (v) emphasizing integrated pest management; (vi) phasing out engagement in germ plasm and nursery development with increasing reliance on existing improved nurseries; (vii) gradually phasing out input subsidies in l ine with MAIL policy; and (vii) supporting value chain development for 4 fruit crops.

B. The target for new orchard development would be reducedfrom 5,000 ha to 3,000 ha, considering capacity constraints. The sub-component for development o f green raisins drying sheds and pomegranate export clusters in Kandahar would be dropped because o f security concerns. Horticulture research stations and preparation o f a Land Cover Atlas would be picked up under other future programs. Finally, given i ts poor track record, and the lack o f demand for an apex body’ in the horticulture sector, support to the Horticulture Development Council (later renamed NUHDUANHDO) would be phased out by end of CY2009. Marketing aspects would be supported through a bottom-up approach under the farmer organization development (FOD) component and the proposed value chain pilots.

Part 2: Livestock Development

A. Strengthening the capacity o f the General Department for Livestock Production and Development (GDLPD). The original project sought to strengthen the capacity o f GDLPD to supervise and regulate animal husbandry services. Unfortunately l i t t le progress could be made on this front because o f lack o f interest and staff, particularly at the field level for livestock extension. The restructured project would develop livestock extension packages that would be disseminated in areas where intensive farmer mobilization efforts would be made.

B. Animal Health Improvement. The original aim of this subcomponent to promote private-public sector partnership for the delivery of veterinary services would remain unchanged and actively supported. Preparatory activities for the privatization o f 120 government veterinary clinics have been completed and the process for their transfer to the concerned veterinarians would be completed within CY2009. An additional 45 government clinics6 would also be supported for privatization subject to their suitability. The project would also support preparation of a Breeding Policy for cattle in the context of the artificial insemination supported under the project.

NUHDA, as i t was originally constituted, was a quasigovernmental body that purported to represent the horticultural sector. The idea o f establishing an apex horticultural organization on a top-down basis has not worked. There i s also no demand for it from the sector. This number may increase to 80.

5

6

4

C. Poultry Development. This pro-poor project component is off to a good start and would continue to be supported under the restructured project with two changes to improve prospects o f sustainability and provide the intended beneficiaries with one additional development option. First, the project would meet the full requirement o f grower-feed and layer-feed for one month to ensure that the beneficiaries can securely reach the point where they start to earn income from sale o f eggs. And, second, the beneficiaries would be offered a choice between the semi commercial layer enterprise, and a broiler option.

D. Dairy Development. The original project envisaged a significant investment in dairy production. Implementation was envisaged in two phases: (i) an Inception Phase involving a detailed analysis o f the dairy sub sector; and (ii) based on the final inception report, the agreed investments were to be implemented. Regrettably, the contract with the facilitating partner was not finalized until March 2009 and mobilization took place only in May 2009. Experience in Afghanistan and elsewhere shows that sustainable dairy development requires a period of more than three years. In addition, continued support i s required in the post-commissioning phase. Based on these considerations, this sub-component would be limited to completing the ongoing Inception Phase and some follow up activities.

E. Cashmere fiber development and bee and fisheries production studies. The original project included improving the collection, cleaning and marketing o f cashmere fiber. A comprehensive study into the value chain for cashmere has been completed, which proposes sustainable ways for re-establishing cashmere harvesting and primary processing. The recommendations of the study are already being implemented with assistance from other donors and the project would not carry out further activities under this component. Studies for bee keeping and fisheries production are also ongoing. MAIL would share the proposals from these studies with other organizations to carry them forward.

Part 3: Project Implementation and Management

A. The existing project implementation arrangements would remain unchanged. However, the following additional activities would be carried out for enhancing effectiveness of project implementation and sustainability of project interventions:

e Mobilizing and building capacity o f producer groups (farmers and livestock owners) in the 11 focus districts and supporting their involvement in input supply, output marketin animal health services, saving boxes, and delivery o f extension services ; and YY

In the current scenario o f weak government and private institutions the role o f producer groups to fill the service delivery-deficit would be critical.

7

5

e Building institutional capacity in the selected focus districts to improve delivery o f horticulture and livestock related services through training o f district and provincial level MAIL staff, and establishing linkages with input suppliers, service providers and micro-credit institutions.

2. 3.

4.

9. Project Management Arrangements. The existing project management arrangements, including financial management, procurement and disbursement would remain unchanged. However, the composition and skill mix o f the implementation management support team (IMST) would be adjusted to reflect the requirements o f the restructured project.

ARTF Grant TF91885 11 Remaining amount in ARTF blanket approval 9 Total financing available and in pipeline 40

Financing gap 14.3 Estimated Project cost 54.3

10. the restructured project would be as follows. The IDA Grant would be fully disbursed during FYlO. Currently there i s a financing gap o f U S $ 14.3 mi l l ion for which ARTF funding support will be sought.

Estimated Cost and Financing Plan. The estimated cost and financing plan o f

Analysis

1 1. adverse effects on the economic, financial, technical, institutional, or social aspects o f the project as appraised.

12. Economic Analysis. The table below provides a summary, including the estimated ERRS for the main components. For the restructured components, as the horticulture, dairy and animal health activities are being targeted to the same

6

Effect o f Proposed Changes. The proposed changes would not have significant

beneficiaries in the focus clusters, their results are combined together. The IMST costs have been distributed proportionally between the mentioned subcomponents and the poultry subcomponent. Because o f the increase in management cost and a longer implementation period, the ERR and N P V have reduced but they are in the acceptable range.

Estimated Economic Rate of Return

Original Restructured ERR NPV NPV

Similarly, analysis o f farm models shows that farmers’ household income would increase at project maturity by 8 percent to 57 percent over the present situation. The extent o f this increase depends on the type and size o f farm, the relative importance o f the activity, the production system and the type o f crops and activities involved.

13. Social and Gender Aspects. The restructured project would increase the level of participation of producer households in the project through their participation in producer groups, extension activities (including farmer field schools), value chain development, input supply, and marketing, Gender mainstreaming efforts are ongoing across all the project components, and would be reflected in project staffing and in the results framework. Recently, a gender mainstreaming strategy has been prepared for the project.

14. Environmental Safeguards. The restructured project would remain in Environmental Category B as originally envisaged.

15. Counter-narcotics (CN). The I1 focus districts in which the restructuredproject operates are reportedly f r e e of poppy cultivation. In terms o f CN, the restructured project will continue to follow the strategy o f improving the economic returns o f l icit higher value crops and input and marketing facilities. Training and extension messages would continue to include C N communication.

Expected Outcomes

16. The key outcome of the restructured project would be a behavioral change in target producer households who would adopt improved practices to increase productivity of perennial and annual horticulture crops and poultry. And, with improved access to animal health services there would be reduced mortality in large and small ruminants. Finally, MAIL would have improved capacity, and a model, for horticulture and livestock development (see Results Framework- Attachment 1).

7

Benefits and Risks

17. Benefits. The main project benefits wou ld come from: (a) increased product iv i ty o f perennial and annual hort iculture crops in exist ing and n e w orchards; (b) increased production o f eggs and poultry meat; (c) reduced morta l i ty o f large and smal l ruminants; and; and (d) strengthened government and producer institutions and services.

18. Risks and their Mitigation. So far the project’s track record o f improved performance spans over less than one year and there are several r isks and externalities that cou ld adversely affect the project:

Risk The recent improvement in project performance reflects mainly the enhanced ownership by MAIL and good performance o f a few staff in the lead facilitating partner’s (LFP) team. Performance could weaken again. The general elections could lead to changes in MAIL and there could be turnover o f good staff. The expected surge in donor support to agriculture, contents o f which are hitherto not fully known, could have implications for the restructured moiect. There i s a significant financing gap (US$14.3 million) and delay in mobilizing resources could affect project performance.

Security issues could affect project implementation

NPftigation, Measure MAIL would continue close supervision, carry out a critical review o f performance o f key staff o f LFP and FPs, and take appropriate action.

MAIL would anticipate likely turnover o f staff and plan ahead to avoid gaps in critical ski l ls. MAIL will ensure that new initiatives complement and bring synergy for the restructured project.

Continued good performance and achievement o f outcomes would be critical to attract donor support. An effective M&E system i s being put in place to help demonstrate outcomes. Areas where producer group mobilization would take place would be selected taking security in to account. A distant working approach would be considered if security deteriorates. Greater reliance would be placed on locally recruited staff.

8

Attachment 1

Project Development Objectives

To assist producer households in adopting improved practices so as to increase horticulture and livestock productivity and production in focus areas

Revised Results Framework Project Outcome Indicators

Hor t icu l tu re 15 % increase in productivity' in target farmers orchards At least 50% o f target farmers adopt at least two best suitable practices' in focus districts 3000 ha o f new orchards established w i th at least 60 YO o f saplings surviving At least 10 % increase in producer price for the products where the value chain pi lot i s implemented

Livestock Animal Health

5 % reduction in mortality among large ruminants, 10 % reduction in small ruminants, I

20% reduction in mortality o f poultry

Poultry 0 A t least 60 % o f target producer

households adopt improved poultry raising practices in focus districts Incremental production o f 15 mi l l ion eggs and 450 tons o f meat per year achieved

Dairy Comprehensive feasibility study o f dairy development completed, providing recommendations for the way-forward

Inst i tut ion and Capacity Building Functioning horticulture and livestock extension and other services in place

Use of Project Outcome Information

Each supervision mission: review o f program approaches and adjust it accordingly

End o f the Project: assess impact o f project components at completion and reinforce strategic messages for development o f the sector

Yield Best suitable practices mean practices which are considered to be the best, considering the prevailing

situation o f Afghanistan, and include improved water management, pruning and orchard management.

9

9

Orchard management Increased productivity o f existing orchards through assistance in input supplies and technical services on best suitable practices for orchard production

veterinary clinics transferred to private sector operation Number o f households receiving animal health interventions from VFU's increased by 5% yearly Around 1 1,000 semi-intensive

Extension service Horticultural extension service developed that can reliably provide information to 15000 producer households in focus districts

monitor the progress and situation o f the project

Annual outcome monitoring and Impact Assessment

Improve marketable production and returns to farmers by targeted interventions in the value chain

Animal Health Improved access to animal health services through privatization

Poultry Semi-intensive layer and broiler poultry units established, generating sustainable income for rural women

Feasibility o f Dairy Development assessed

Livestock Extension Livestock extension services developed that can reliable provide information to 15,000 producer households in focus districts

Horticulture Component 10000 farmers achieve 10 % increase in production as a result o f applying improved technologies (IPM, canopy and on-farm irrigation management principles) in focus districts

introduced by project Four suitable intercrops

120 extension workers trained Extension material produced for 6 tree crops and 4 intercrops

c o n f m receiving horticulture extension services in focus

15,000 producer households

districts At least 100 farmers and 30 tradersimerchants participate in the value chain activities 5 % increase in production o f 2 marketable crops 5 YO increase in returns o f 2

Quarterly progress report: monitor the progress and situation o f the project

Annual outcome monitoring and Impact Assessment

Quarterly progress report: monitor the progress and situation o f the project

Annual outcome monitoring and Impact Assessment

Quarterly progress report: monitor the progress and situation o f the project

Annual outcome monitoring and Impact Assessment marketable crops

Livestock Component At least 120 government 1 Quarterly progress report:

An estimated 8,000 households (40 % o f targeted households) will revert to improved backyard management 10

10

Institution Village based producer organizations (male and female) established and strengthened in 11 focus districts

Male and female producer groups have an improved access to services in 9 clusters in 5 selected focus districts

Strengthened capacity o f MAIL and district level agricultural institutions to ensure efficient implementation o f HLP and other projects

Quarterly progress report: monitor the progress and situation o f the project

and Capacity Building Componei Around 750 male and female producer groups operating

40 % o f the members o f male and female groups confirm having an improved access to the supply o f production inputs 20 YO o f male and female groups c o n f m having an improved access to marketing services 60 % o f the relevant institutions at district level c o n f m the establishment o f coordination and collaborative arrangements 80 % o f beneficiaries o f horticulture, livestock and FOD trainings c o n f m satisfaction with the trainings

Annual outcome monitoring and Impact Assessment

11

Attachment 2 Revised Project Description

The objective o f the Project i s to assist producer households in adopting improved practices so as to increase horticulture and livestock productivity and production in focus areas.

The Project consists o f the following parts:

Part 1: Hort icul ture Development

(a) Rehabilitation and expansion o f perennial and annual horticulture crop cultivation through: (i) the provision o f training and extension support to farmers for the rehabilitation o f existing orchards; (ii) the provision o f seedlings and other inputs to farmers; (iii) provision o f technical advisory services and training in integrated pest management, on-farm water management, farm planning and orchard management; (iv) the provision o f In-kind Grants to support the establishment o f new orchards; and (v) provision o f technical advisory services for establishment and training o f farmer groups and developing linkages with horticulture input and output markets.

(b) Establishment o f the Horticulture Development Council o f Afghanistan for: (i) the provision o f policy guidance and support to MAIL; and (ii) the carrying out o f activities such as training and research to support the development of the horticulture sector ll.

(c) Strengthening marketing support to farmers through mobilization o f farmers groups, establishing linkages with markets and provision o f support to the selected value chains.

Part 2: Livestock Development

(a) Strengthening the capacity o f GDLPD to supervise and regulate animal husbandry services, through the provision o f technical advisory services and training to staff at district offices, development o f livestock extension service packages, acquisition o f equipment and software, carrying out o f infrastructure rehabilitation and upgrading o f offices.

(b) Development o f livestock production and marketing initiatives for improving domestic food supplies and reducing imports, including: (i) establishment of a village-based intensive layer poultry units and broiler units for poor rural women through the provision o f In-kind Grants to Beneficiaries, the provision o f training and technical advisory services, supply o f initial stock, the

Support to this sub-component would be discontinued after December 2009 because o f the reasons explained in paragraph 6. B.

II

12

acquisition o f equipment and the carrying out o f small works; (ii) carrying out o f a comprehensive study o f the dairy sector in the country; and (iii) carrying out o f a comprehensive study into the value chain for cashmere in the country.

(c) Promoting public-private partnerships for the delivery o f veterinary services, including: (i) provision o f training and enhancing the capacity o f veterinarians; (ii) harmonizing the privatized veterinary field units clinical services system; (iii) establishing sanitary mandates through private-public partnership; and (iv) provision o f vaccines, disease surveillance equipment k d supplies for conducting sanitary mandates.

Part 3: Project Management and Implementation

(a) Strengthening MAIL’S administrative capacity including development o f i t s human resource functions and rehabilitation o f i t s offices, through the provision o f training, technical assistance, acquisition o f equipment, carrying out o f small works and provision o f operating costs.

(b) Provision o f training, technical assistance, goods, equipment and operating costs for the establishment o f IMST and for the implementation, monitoring and supervision o f the Project.

13