Document of The World Bank
Report No:
PROJECT BRIEF
ON A
PROPOSED LOAN
IN THE AMOUNT OF USD 25.00 MILLION
AND A
GLOBAL ENVIRONMENT FACILITY GRANT
IN THE AMOUNT OF USD 4.5 MILLION
TO
SERBIA AND MONTENEGRO
FOR A
TRANSITIONAL AGRICULTURE REFORM PROJECT
MARCH 22, 2006 CURRENCY EQUIVALENTS
(Exchange Rate Effective DATE)
Currency Unit = Serbian Dinar (CSD) 70.33 CSD = USD 1
FISCAL YEAR January 1 – December 31
ABBREVIATIONS AND ACRONYMS AnGR Animal Genetic Resources sector of the AgroWeb Central and Eastern Europe Network BSAP Biodiversity Strategy and Action Plan CAP Common Agricultural Policy of the European Union CAS Country Assistance Strategy CBD Convention on Biological Diversity CEO Chief Executive Officer CQ Selection based on consultant qualifications DASAP Department of Analytics, Statistics and Agrarian Policy (of MAFWM) DEP Department for Environmental Protection (of MSEP) EAR European Agency for Development EARDF EU European Union ES Executive Summary EXA Executing Agency FAO Food and Agriculture Agency of the United Nations FBS Selection under a fixed budget GEF Global Environment Facility GMO Genetically Modified Organisms GRS Government of the Republic of Serbia Ha Hectares HACCP Hazard Analysis and Critical Control Point IA Implementing Agency IBRD International Bank for Reconstruction and Development ICA Incremental Cost Analysis IPN Institute for the Protection of Nature IT Information Technology IUCN World Conservation Union LCS Least Cost Selection MAFWM Ministry of Agriculture, Forests and Water Management M&E Monitoring and Evaluation MSEP Ministry of Science and Environmental Protection NGO Nongovernmental Organization OP Operational Policy PAD Project Appraisal Document PB Project Brief QBS Quality Based Selection QCBS Quality and Cost-Based Selection RD Rural Development RDGP Rural Development Grants Program RDDSWG Rural Development Standing Working Group of South Eastern Europe SAM Union of Serbia and Montenegro SAP Stabilization and Accession Process of the EU SAVE Safeguard for Agricultural Varieties in Europe SOE Statement of Expense SPNP Stara Planina Nature Park Srbijasume Serbia Public Enterprise for Forestry STAP Scientific and Technical Advisory Panel STAR Serbia Transitional Agriculture Reform (Project) UNESCO United Nations Educational, Scientific and Cultural Organization UNDP United Nations Development Program USAID United States Agency for International Devleopment USD United States Dollar WTO World Trade Organization
Vice President: Shigeo Katsu Country Director: Orsalia Kalantzopoulos Sector Manager: Marjory-Anne Bromhead Task Team Leader: Julian Lampietti CONTENTS Page A. STRATEGIC CONTEXT AND RATIONALE 1 1. Country and sector issues 1 2. Rationale for Bank involvement 2 3. Higher level of objectives to which the project contributes 2
B. PROJECT DESCRIPTION 2 1. Lending Instrument 2 2. Program objective and Phases 3 3. Project development objective and key indicators 3 4. Project Components 3 5. Lessons learned and reflected in project design 4 6. Alternatives considered and reasons for rejection 4
C. IMPLEMENTATION 4 1. Partnership arrangements (if applicable) 4 2. Institutional and implementation arrangements 5 3. Monitoring and evaluation of outcomes/results 5 4. Sustainability 5 5. Critical risks and possible controversial aspects 6 6. Loan conditions and covenants 6
D. APPRAISAL SUMMARY 7 1. Economic and Financial analyses 7 2. Technical 7 3. Fiduciary 7 4. Social 7 5. Environment 8 6. Safeguard Policies 8 7. Policy Exceptions and Readiness 8
ANNEXES
Annex 1: Country and Sector or Program Background 9 Annex 2: Major Related Projects financed by the Bank, 2002-2005 14 Annex 3: Results Framework and Monitoring 15 Annex 4: Detailed Project Description 17 Annex 5: Project Costs 25 Annex 6: Implementation arrangements 26 Annex 7: Financial management and disbursement arrangements 29 Annex 8: Procurement arrangements 32 Annex 9: Economic and financial analyses 34 Annex 10: Safeguard Policy issues 35 Annex 11: Project Processing 36 Annex 12: Documents in Project File 37 Annex 13: Statement of Loans and Credits 38 Annex 14: Country at a Glance 39 Annex 15: Incremental Cost Analysis 41 Annex 16: STAP Roster Review 48 Map A. STRATEGIC CONTEXT AND RATIONALE
1. Country and sector issues
Agriculture and rural development
Serbia has significant comparative advantages in agriculture, thanks to large areas of agricultural land with high quality soils, a strategic trading location, and an educated workforce. Primary agricultural production and agro-processing was estimated to be 25 percent of GDP and 20 percent of exports in 2005. About 0.8 million ha, or 15 percent of the arable land consists of about 1050 large corporate farms and agrokombinats. Privately owned commercial farms, of averaging 10 ha, account for another 46 percent. The remaining 39 percent comprises over 600,000 small private farms, most under five ha and often consisting of several fragmented parcels of land1. These households produce agricultural products primarily for their own use, and depend heavily on non-farm income. There is significant regional variation in production systems and products. For example, the low- lying and fertile Vojvodina region is dominated by large, partially privatized Agrokombinats producing field and industrial crops and pigs, cattle and poultry. Producers in this region are more strongly market-oriented than in the rest of the country. Central Serbia is characterized by hilly topography, small farms and diverse farm production systems, with fairly intense production of high-value fruits and vegetables and dairy cattle. Southern Serbia, the poorest and least developed region, is characterized by mountainous geography, large extents of pasture and forest, small and fragmented arable areas, very limited commercial production, and high rates of out-migration.
In late 2000 the Government of Serbia launched an ambitious reform program to improve the business environment and create a vibrant private sector, and with the objective of “fast tracking” EU accession to join the EU in 2013. The program is producing the desired results and the country was recently voted the world’s number one overall reformer on a variety of measures relating to business regulations and their enforcement. The market forces being unleashed on the country after decades of economic and political isolation are also applying pressure on the agri-food sector to improve productivity and quality, but the recent history of isolation from competitive markets has not prepared the sector to respond to these rapid changes or to take advantage of the opportunities created by the reform process. The predominantly small scale Serbian farmers and small, domestically-oriented processing plants risk being overwhelmed by strong regional and international competition and by stringent food quality and safety requirements.
The GRS Agricultural Strategy (August 2005) sets out a road-map for growth and competitiveness based on: (i) completing the move to a competitive market economy, including abolishing remaining production subsidies and adopting WTO principles; (ii) increasing Serbia’s share of EU markets by harmonizing with EU sanitary and phyto-sanitary (SPS) and quality and agro-environmental requirements; (iii) improving competitiveness through adoption of modern, cost effective production technologies; and (iv) promoting rural development, especially in poor regions of the country. The GRS’ EU Integration Strategy for Serbian Agriculture lays out an ambitious three-phase plan for moving towards EU standards and integration with the EU Common Agricultural Policy (CAP). This is a centerpiece of Serbia’s agricultural strategy, both to gain access to CAP funds and to facilitate Serbian producers’ entry into the world’s largest agricultural market.
1 Source: MAFWM, 2005 -1- The CAP channels EU spending on agriculture and rural development through two streams: Pillar 1 which covers direct income support to farmers and the remaining market-related subsidies, and Pillar 2 which provides investment grants for rural development, including aspects such as farm modernization, food safety and quality, environmental management and animal welfare, and special assistance to marginal farming areas. Currently 70% of CAP support goes through Pillar 1 and only 30% through Pillar 2, but this is expected to reverse such that the great majority will be through Pillar 2 by the beginning of the next decade. Similarly, GRS policy aims to facilitate the transition to market competitiveness in the agri- food sector by moving away from price and input subsidies to structural support such as rural development grants2. It also aims to harmonize the financial delivery systems with EU requirements, in anticipation of receiving EU pre-accession (and eventually CAP) funds. For example, like the current CAP Pillar 2, the GRS 2006 Rural Development Grants program includes support for agro/eco-tourism, development and marketing of specialized local agricultural products and crafts, conservation and promotion of cultural, sociological and economic customs and values, and special provisions for marginalized areas. Access to EU markets will also require harmonization with EU policies such as the Common Agricultural Policy, the Habitats Directive and the environmental acquis. Experience in accession countries highlights the importance of a proactive approach to achieving this. For example, 70 percent of meat produced in Hungary is sold into the EU compared to 30 percent for Poland. In Poland, at the time of accession, 50 percent of all meat processing plants were unable to export into the EU because they failed to meet food safety and other requirements.
A number of donors (EU, USAID, FAO and the Governments of Germany, Austria, Italy and the Netherlands) have programs to address different aspects to help Serbia successfully access EU pre-accession instruments. Within this context, the MAFWM has requested World Bank support in improving the design, administration, and transparency of its structural support program and the development and dissemination of knowledge capital. This provides an opportunity to provide medium term support for a progressive reform agenda.
Biodiversity and nature protection
Conservation of biodiversity, including biodiversity important for agriculture, was identified as one of Serbia's priorities for environmental protection in the report titled "State of the Environment in 2000 and priorities in 2001+ for Serbia" which was adopted by the Government of Serbia. A national Biodiversity Strategy and Action Plan is under preparation, but the GRS already has a number of programs and mechanisms to support biodiversity conservation, both in natural areas and within agro-ecosystems.
About five percent of Serbia’s territory is designated as protected area (PA), including five National Parks, 120 nature reserves, 20 nature parks, 470 natural monuments and one Biosphere Reserve, and an application is under preparation for UNESCO designation of a second Biosphere Reserve (covering the transboundary West Stara Planina area, currently designated as a Nature Park in Serbia). The total area under protection is expected to increase to ten percent by 2010. However, there are gaps and inefficiencies in PA management, in some cases arising from unclear or overlapping roles of different institutions. Nature protection and protected areas as a whole falls under the Ministry of Science and Environmental Protection’s (MSEP) Department for Environmental Protection (DEP), while the MAFWM is responsible for managing certain resources such as forests, fish and water within the PAs. The Institute for Protection of Nature (IPN), which is under
2 market support is to fall from 40 percent of the budget in 2004 to 20 percent in 2008 -2- MSEP/DEP, is responsible for nature protection research, monitoring and planning. The Republic Institute for Urban Planning and Architecture and the Republic Institute for Spatial Planning, in consultation with municipalities, are responsible for preparing spatial plans for the PAs. However, the IPN has overall responsibility for the spatial plans, including approving them and monitoring their implementation.
Ninety seven of the PAs3 (including the Stara Planina Nature Park) are managed by the Public Enterprise for Forests (Srbijasume). The spatial plan for the SPNP reflects a diverse set of objectives for the park, including nature conservation, habitat restoration, small-scale livestock husbandry and agriculture, and sustainable tourism. However, Srbijasume’s responsibilities relating to non-forest areas within PAs remains undefined, and the organization has little experience or capacity in management of ecosystems (such as pastures), other land uses (such as tourism), or participatory approaches. In addition, the 1997 law establishing the SPNP only defines its outer boundaries. A new law will be required to establish its internal zoning plan and provide the basis for preparation of a management plan that addresses the specific objectives of each zone.
With regard to agro-biodiversity, in 2002, the Parliament approved a strategy "to preserve locally adapted breeds that are becoming extinct, for social and economical purposes, as well as future scientific researches and education purposes.” The strategy emphasizes in situ conservation and defining the role of these autochthonous (indigenous) breeds within the overall livestock sector. Key elements include protecting wild relatives of these breeds and their habitats, monitoring populations of endangered local breeds and providing incentives for maintaining them, raising public awareness, training personnel in modern conservation technologies and development of legislation and regulations in line with those of the EU. The GRS is also the only Balkan government which provides a direct subsidy to farmers to maintain autochthonous (indigenous) livestock varieties. The MAFWM Department for Genetic Resources and GMO is responsible for implementation of this strategy, including data collection and reporting, advising farmers and breeders’ associations and channeling Government subsidies to them, and direct support for in situ conservation activities. Local NGOS also contribute to the effort, including providing a connection to regional and international agro- biodiversity objectives programs. However the efforts to preserve this national heritage remain severely limited by capacity and funding constraints.
Country eligibility for GEF: The Union of Serbia and Montenegro (SAM) ratified the Convention on Biological Diversity (CBD) in 2002.
Country Driveness:
Agricultural competitiveness and sustainable rural economic development: The GRS Agricultural Development Strategy, and a master plan for reforming the agricultural sector (under preparation) both prioritize enhancing Serbia’s access to, and competitiveness in, international markets, particularly the EU. While the overall thrust is for agricultural intensification, the GRS also strongly supports adoption of agri-environmental practices as well as nature protection and conservation of biodiversity in rural areas. For example, the agricultural support program provides grants to assist farmers to convert to organic
3 Excluding national parks, which are managed by individual Public Enterprises established for this purpose -3- production, to diversify into non-agricultural income sources such as tourism in areas where agricultural intensification is not desirable or possible (such as in mountainous areas), and to maintain autochthonous varieties of livestock (see Annex 1 for details). It also provides special incentives and assistance, such as more flexible eligibility criteria and a higher percentage of grant funding, for farmers and communities in marginalized (“Less Favored” areas such as southern Serbia. The STAR project will support these important GRS priorities.
Conservation of Biological Diversity: Conservation of biodiversity, including biodiversity important for agriculture, was identified as one of Serbia's priorities for environmental protection in the report titled "State of the Environment in 2000 and priorities in 2001+ for Serbia" which was adopted by the Government of Serbia. Under the initiative of the MAFWM’s Department for Genetic Resources and Genetically Modified Organisms (DGR), the GRS adopted a strategy to preserve locally adapted breeds that are becoming extinct, for social and economical purposes, as well as future scientific researches and education purposes. IPN has developed a draft medium-term Plan for Biodiversity Protection. In February 2004, the Government of Serbia requested GEF funds through UNDP, to develop a Biodiversity Strategy and Action Plan (BSAP) through a participatory process. The Project Document emphasizes the impact that agricultural intensification has had on biodiversity conservation, both with respect to decline of local livestock varieties and through overgrazing in mountain areas. It calls for a focus on ecosystem conservation planning, and cross-sectoral integration in biodiversity conservation with active participation of stakeholders from various related sectors.
The Stara Planina Nature Park (SPNP) qualifies as “natural resource of the utmost importance” under Serbian law and falls under Category 5 in the IUCN categorization scheme for Protected Areas. At the local level there is a strong recognition that the region’s rich agro-biodiversity is endangered by the promotion of intensive farming and by the planned tourism development in core nature protected areas. Local NGOs, municipalities, the IPN branch in Niš and the recently formed Council for Sustainable Rural Development of Dimitrovgrad, have led strong initiatives to preserve in an integrated way the Stara Planina region's cultural and natural heritage, much of which is characterized by traditional extensive farming systems. Recently, two small scale projects implemented by local NGOs under Swiss and German funding have identified needs and opportunities which should be addressed through a larger project. In June 2003, the Department for Genetic Resources and GMO and the local NGO Natura Balkanika approached the World Bank with a project concept to preserve the biodiversity and traditional agricultural landscapes of the Stara Planina Nature Park. The concept was developed in close coordination with the Ministry of Science and Environment's Directorate for Environmental Protection and Nature Protection Institute. In January 2004, the GEF Focal Point for Serbia and Montenegro, and Minister for the Protection of Natural Recourses and Environment, officially requested World Bank assistance in preparing a project for submission to the GEF. A meeting of stakeholders during a March 2004 World Bank mission confirmed support for the proposed project objectives and activities.
2. Rationale for Bank and GEF Involvement
-4- The World Bank has experience with supporting agricultural competitiveness, sustainable land use and environmental management within the context of EU accession programs in a number of countries (Romania, Croatia, Slovakia, etc.). The objective is always to integrate these objectives within the broader economic development agenda.
In Serbia, the World Bank Country Assistance Strategy (CAS) for 2005-2007 emphasizes building a vibrant and competitive private sector and a responsive and transparent public sector. It is built on two complementary government strategies: the EU Stabilization and Accession Process (SAP) and the Poverty Reduction Strategy Paper. Based on these and the GRS Agricultural Strategy, the Bank has developed a comprehensive program of support for agriculture and rural development. The proposed operation represents an important element of this program, complimenting the ongoing land project and irrigation project which are helping to create the necessary initial conditions for growth. Consistent with emerging lessons from transition economies, and in accordance with the first three elements of the GRS Agricultural Strategy, this third operation will focus on agri-food sector competitiveness, introduction of modern technologies and harmonization with EU requirements. The CAS also includes a Global Environment Facility (GEF)-financed “In- situ Agro-biodiversity” project to promote economic development based on sustainable land use and conservation of ecosystems and agro-biodiversity, with a focus on the SPNP area. This is consistent with GRS and EU policies to promote agri-environmental activities and also supports the GRS rural poverty alleviation objectives by targeting the poorest rural area in the country. In recognition of the many areas of convergence and complimentarity, the GEF and IBRD operations have been fully blended into a single operation.
The project complements other World Bank support to Serbia for regional integration. This includes the Danube River Pollution Project (GEF, FY05) which seeks to reduce nutrient pollution from livestock production and slaughterhouses, in keeping with the EU environmental acquis (nitrates directive). The Bank also participates, together with the European Commission, in the Infrastructure Steering Group for South East Europe, which promotes a regional strategic approach to infrastructure development. The proposed project will help to strengthen cooperation between the World Bank and other donors, including the EC which is a key partner in promoting reforms linked with the SAP. The focus of this project is on supporting rural development in ways that echo Pillar 2 of the CAP both structurally and substantively, with its focus on agricultural competitiveness, agri- environmental measures and land management, and diversification and strengthening of rural economies and communities.
Bank work on poverty in Serbia follows a programmatic approach geared towards supporting the PRSP process. Recent poverty studies such as Rural Poverty and Vulnerability in the Republic of Serbia (August 2005) and Poverty Assessment Report for Serbia and Montenegro (June 2003) indicate that rural households have a higher incidence of poverty than urban ones, that rural poverty rates have doubled since 1990, and that poverty incidence in southern and south-eastern Serbia is double the national average. The proposed project supports Goal 3 of the CAS, which is focused on lowering poverty rates and improving living conditions for poor and vulnerable populations. The project will help to alleviate rural poverty by improving rural economies and incomes, and through targeted support to residents of one of the “Less Favored Areas” in the southern region. This complements other operations that target pockets of poverty, such as the Bor Regional Development Project (FY06).
-5- 3. Higher level objectives to which the project contributes
The project will help to enhance the competitiveness of Serbian agricultural products in both local and international markets, increasing their contribution to GDP and foreign exchange earnings as well as reducing imports. It will improve the effectiveness and efficiency of the GRS ongoing support for sustainable rural development while also helping Serbia to move towards EU membership and towards benefiting from EU programs. To achieve this, the project will facilitate the establishment of an efficient, EU-compatible single payment system and increase capacity for distribution and use of funds for rural development under the CAP Pillar 2. It will contribute to poverty alleviation by strengthening and diversifying agriculture-based rural economies, and to environmental sustainability by strengthening GRS support for agri-environmental measures. Poverty reduction, social and environmental benefits will be particularly direct in southern Serbia, where GEF co-financing will support improved management of the Stara Planina Nature Park and assist residents of the area (many of whom have been leaving the area due to a lack of economic opportunities), to develop viable niche agricultural products and tourism-related enterprises based on sustainable land use and ecologically friendly practices.
The project is submitted under the GEF Operational Program (OP) # 13 (Conservation and Sustainable Use of Biological Diversity Important to Agriculture). The objective of OP 13 is to promote: the positive impacts and mitigate the negative impacts of agricultural systems and practices on biological diversity in agro-ecosystems and their interface with other ecosystems; the conservation and sustainable use of genetic resources of actual and potential value for food and agriculture; and the fair and equitable sharing of benefits arising out of genetic resources. In conformity with the Biodiversity Strategic Priority of “Mainstreaming Biodiversity in Production Landscapes and Sectors,” conservation objectives will be achieved by supporting traditional extensive farming systems and the conservation of locally adapted animal breeds upon which these systems are based. The project will in fact also contribute to the Strategic Priority of “Catalyzing Sustainability of Protected Areas,” because the GEF project area is a legally designated Nature Park (equivalent of IUCN Category V). While the project will focus on the production/multiple use areas of the SPNP outside the core conservation areas, where conservation is combined with sustainable use of natural resources, capacity building for Srbijasume is expected to improve management of core conservation areas as well. The project supports OP #4 (Mountain Ecosystems) as it will help to support conservation of the globally important Stara Planina mountain and its endangered endemic flora and fauna species (see next section). It will also contribute to OP #15 (Land Degradation) through support for development and implementation of a pasture management plan to restore damaged grasslands, as well as other environmentally sustainable land use practices. .
Biodiversity Significance and Status of the GEF Target Area
Seribia and Montenegro (SAM) hosts a large variety of ecosystems ranging from Mediterranean-Sub-Mediterranean evergreen forests, various deciduous forests, and coniferous woods typical of the Euro-Siberian and North American regions, to freshwater bodies and marine ecosystems on the Adriatic. Around 1,600 wild plant and animal species considered internationally significant inhabit the SAM. These factors make SAM one of the European centers of biological diversity.
-6- The West Balkan Mountain Range (Stara Planina), situated on the Serbo-Bulgarian border, is part of the Balkan Mountains Biodiversity Center which is one of six temperate centers of biodiversity in Europe. It is known for its rich biological and geological diversity as well as its cultural heritage. The landscape in this area is dominated by a rich and diverse mosaic of forests, pastures, wetlands, and numerous small villages with associated farms and vineyards. Important vegetation communities include high mountain grasslands, oak forests, conifer/evergreen forests and wetlands. The area’s species diversity, among the richest in the Balkans, results in part from a long tradition of sustainable, transhumant livestock grazing which has helped to maintain alpine and sub-alpine grasslands and meadows. For example, the Stara Planina is home to 1,195 known species of plants in 33 families, including 116 endemics in the Asteraceae alone. The flora includes wild relatives of several fruit and fodder species as well as widely used medicinal plants. More than 50 of the plant species are listed as rare, vulnerable, endangered or critically endangered across Europe, and a much larger number are vulnerable or endangered in the Balkan context. The area has over 30 species of mammals, 24 species of amphibians and reptiles (out of a total 46 species in Serbia and Montenegro), and 203 species of birds(including 60 percent of all nesting birds found in Serbia and Montenegro as well as a large number over over-wintering and pass-through migrants). Of 69 species of diurnal Lepidoptera, six are found only in the Stara Planina, while 55% are listed as rare, vulnerable or endangered in Europe. This rich biodiversity is under significant threat. Many of the plant species have declined dramatically in recent years, due to habitat deterioration, over-grazing or over-collecting (particularly commercially important medicinal plants such as Campanula calycialata, which has decreased by an estimated 80 percent over the past decade). All of the amphibian and reptile species of the Stara Planina are included on the preliminary Redlist for Serbia, as are all the insectivore mammals and several fish species. Eight species of nesting birds are believed to have become extinct within the past decade
In 1996, a memorandum was signed between the then Federal Republic of YuGRSlavia and Bulgaria on the creation of a transboundary Stara Planina Peace Park to preserve the area’s natural and socio-economic values. The Stara Planina Nature Park (SPNP) was established in 1997, covering area of 142,220 ha. in four municipalities (Pirot, Dimitrovgrad, Zaječar and Knjaževac (see Maps in Annex 4). The spatial plan currently under preparation will established three types of zones within the SPNP -- for core protection, sustainable natural resource use, and development of sustainable agriculture and eco-tourism, respectively-- and a surrounding buffer zone. The Government of Serbia is also in the process of preparing an application for the SPNP to be designated as a Biosphere Reserve under the UNESCO Man and Biosphere Program. On the Bulgarian side of the Stara Planina Mountain, there are 17 protected areas of national or international importance, and a proposal to establish a Nature Park in this area is under Ministerial Review. Meanwhile, there have been active cross- border programs supporting interaction among communities and local governments aimed at eco-tourism and environmentally friendly agriculture.
The Stara Planina is also an area historically rich in agrobiodiversity, particularly autochthonous varieties of sheep, goats and cattle which are adapted to the harsh conditions of the high grasslands. These local breeds dominated the landscape until about 50 years ago, in large flocks that moved seasonally between lowlands and highlands. However, in recent decades many people have either left the area or shifted towards more intensive livestock rearing using introduced higher-producing breeds. From a population of about 300,000 in the 1950’s, there are now approximately 20,000 sheep found within the SPNP, most of which are either exotic or mixed breeds. Only a few, very small herds of the pure breeds remain, mostly on isolated farms owned by old farmers who retain them either because of
-7- emotional attachment or because they cannot afford to “upgrade” to the exotic varieties. The introduced breeds are unable to tolerate the harsh conditions of transhumant grazing, and are instead kept at the lower elevations near the larger villages. The result has been overgrazing in these areas and abandonment of highland pastures. In the absence of moderate seasonal grazing, the high elevation grasslands are becoming overgrown with junipers and a few other invasive species, creating an impoverished vegetation and associated decline in butterflies, meadow birds and other fauna. The absence of livestock flocks in the high pastures has also led to the decline, and in some cases disappearance, of birds of prey and other predators.
Threats to sustainable land use and biodiversity
For centuries, the traditional agricultural production system in the Stara Planina area was transhumant livestock production, with herders initially moving seasonally between north and south and, later between lower and higher elevations. Extensive livestock production using locally adapted breeds created and maintained a biologically rich mosaic of mountain pastures interspersed with forest areas. However, beginning in the mid-1940s and continuing into the present, extensive farming has declined as a result of government policies that favored exclusively yield-oriented, intensive livestock production. This resulted in overgrazing and premature mowing in lower elevation areas, and under-utilization or abandonment of higher elevation meadows. Overgrazing has led to land degradation and erosion, while undergrazing has led to bush encroachment (particularly juniper monoculture) and a decline in both grazing areas and species richness. A number of important grass and herbaceous species are now threatened or endangered, particularly in alpine and sub-alpine areas. Other ecological changes in the area associated with intensive livestock production include decline in associated wildlife species (e.g. eagles and vultures, wild relatives of forage and edible plants), eutrophication of peat bogs, and related loss of associated unique plant communities characterized by a large number of endemic and rare species. (See Annex 1 for details of ecosystems and rare and endangered species under threat). The shift to intensive livestock production also involved the introduction of exotic high-yielding, exotic varieties and consequently a decline in autochthonous breeds.
While there is a general appreciation among the Serbian public for beautiful mountain landscapes and local products such as dried meet and cheeses, there is little understanding of the linkages with sustainable land use and biodiversity conservation, or of the threats to these valued landscapes and products. During the past few decades, development has become linked in peoples’ minds with agricultural intensification and large scale construction, even in unique natural areas, with little emphasis on preserving natural resources or ecological systems and services. This is reflected for example in the growing problem of unregulated tourism development, and also in local support for construction of environmentally damaging facilities such as downhill ski resorts. Introducing more environmentally friendly alternatives can have both direct and indirect benefits for the area’s biodiversity. For example, properly managed extensive livestock husbandry is a proven tool for maintaining grassland diversity. Organic and other types of low-impact agriculture can yield direct biodiversity benefits, such as reducing pesticide and fertilizer run-off into sensitive wetlands. However, these approaches usually involve lower production volumes and turnover, and higher per unit production costs. These costs must be compensated by higher sales prices in order to compete. One approach is to tap premium markets within the EU and elsewhere for environmentally friendly and culturally associated “brands” of local dairy, meat and other products.
-8- B. PROJECT DESCRIPTION
1. Lending Instrument
The total estimated project cost of USD 36.86 million would be funded by an IBRD Credit of 25, a USD 4.5 million GEF grant and contributions from local beneficiaries of USD 2.36 million (cash and in-kind) and USD 5 million in MAFWM’s budgetary resources.
2. Program objectives and phases
N/A
3. Project development objective and key indicators
The project development objective is to put in place a more efficient structural support system for enhancing competitiveness in the agri-food sector, and to maximize Serbia’s capacity to absorb EU funds for rural development in the future. The global objective is to conserve ecological systems, agro-biodiversity and wild biodiversity in the production areas of the Stara Planina Nature Park. The incremental GEF funds will help to integrate these global objectives into agriculture and rural development in the target area .
Key indicators would include: (i) improvement in MAFWM ability to disburse and track the use of structural support funds and to evaluate their impacts on the agri-food sector and rural development; (ii) an increase in the number of agricultural producers and processors using new technologies and practices; (iii) an increase in the number and volume of specialty products from Stara Planina being sold in Serbia and in the region; (iv) expansion of areas within the Stara Planina Nature Park under ecological management and/or restoration; and (v) increase in numbers and sizes of herds of purebred autochthonous livestock varieties.
4. Project components
The project objectives will be achieved through a series of strategic public investments that aim to: (i) improve and strengthen the GRS system for delivering rural development investment grants and agricultural subsidies; (ii) improve the knowledge and capacity of agricultural producers and processors to make the best use of these funds; (iii) increase incentives to farmers to maintain autochthonous livestock breeds; and (iv) improve management of the Stara Planina Nature Park (SPNP) in partnership with local communities and other stakeholders. It will build on and enhance existing Government systems and programs to help the agri-food sector participate fully in the benefits and opportunities offered by the GRS reform agenda, and accelerate the harmonization of these systems with EU requirements. This includes both support for establishing an efficient, EU-compatible farm payment system and for implementation of a rural development program consistent with Pillar 2 of the EU Common Agricultural Policy. GEF co-financing will provide incremental funds to increase capacity and incentives for agricultural producers and processors to engage in activities that support agro-biodiversity conservation and sustainable land use, and to support ecosystem restoration and management in the nature park. GEF support will be focused on the multiple use zones of the SPNP, supporting economic activities that are compatible with and contribute to maintaining the conservation values of -9- the park as a whole. For example, extensive livestock grazing will be used as a tool for grassland restoration and management, and improving access to premium markets for organic agricultural products and eco-tourism will help to link economic benefits with maintaining the ecological and cultural values of the SPNP.
Component 1: Strengthening the Agriculture and Rural Development Support System (US$ 19.5 million, of which $1.8 million from GEF)
In 2005, the GRS provided over USD 220 million in support for agriculture and rural development, including about USD 11 million in rural development grants and another USD 25 million in other types of structural support. The rural development grants are in the form of matching grants for which individuals can apply based on certain eligibility criteria (see Annex 4). As part of its overall economic reform and the process of moving towards EU accession, the GRS is progressively de-emphasizing price subsidies and shifting resources towards investment grants and income support. This component will support this shift towards structural support in two ways:
(i) Strengthening the system for providing rural development payments: This will involve building capacity for administering investment grant and subsidy programs; improving accessibility and transparency of granting processes; and monitoring and evaluating the distribution, use and impact of investment grants. This component complements existing support from the European Agency for Reconstruction (EAR) which is helping to establish an EU-compatible fiduciary system. The project will: support the preparation of an operational manual with clear and transparent criteria and procedures; strengthen MAFWM units responsible for grant administration by supplementing existing staff with long- term local consultants (most of whom are expected to be absorbed as regular MAFWM staff within two years) and through training; finance IT and other equipment required to manage the program; and establish satellite offices in under-served rural areas. GEF co-financing will be used to strengthen MAFWM capacity in areas such as agro-environmental production and agro-tourism, applicable anywhere in the country
(ii) Increasing investment grant funds for target objectives and areas: The project will supplement the existing GRS rural development grant funding by providing additional funds of about US$ 5 million per year. These funds will be targeted to encourage and support innovation, such as adoption of new methodologies and development of new types of products, and encourage collective action such as farmers’ associations and partnerships between producers and processors. They will provide additional incentives to encourage farmers to invest in activities that they may otherwise be unlikely or less likely to pursue through the regular GRS grant scheme, such as activities which have a significant “public goods” element (e.g. environmental management or cultural preservation). In the agriculturally marginal (“less favored” areas), where conventional agriculture is often not an appropriate land use or profitable activity, the funds will help to pilot approaches to introduce sustainable farming practices and to diversify household and local economies. GEF co-financing will be provided through a dedicated window to support activities such as conserving agro-biodiversity, ecological restoration, sustainable land use practices,
-10- sustainable rural tourism, etc.), primarily in the Stara Planina region and in support of the SPNP management plan. The terms of the grants can be adjusted as required to provide stronger incentives to engage in activities which provide environmental services or have particularly high externalities and social benefits. Examples include managed grazing of remote pastures and maintaining purebred livestock herds in support of national and regional breed recovery plans. Accessibility of the funds under this window will also be broadened as needed in order to meet specific objectives. For example, while the GRS rural development grants are presently available only to registered farmers and agricultural producers4, funds under this window will be available to people from the four municipalities surrounding the SPNP, who are interested in establishing new residences and/or agricultural or tourism enterprises within the nature park.
Component 2: Building Knowledge and Capacity of Agricultural Producers and Processors (US$ 13.4 million; of which US$ 1.1 million from GEF)
This component will help develop and disseminate the knowledge and technology needed for agricultural producers and processors to access and make effective use of the structural support provided by MAFWM. It will support applied/adaptive agricultural research and extension and advisory services, based on priorities to be determined in consultation with target beneficiaries. The component will build upon and enhance the existing GRS system, in which research and extension activities are carried out through competitively awarded contracts. Project support will strengthen MAFWM capacity to administer the contracting program, and will provide incremental funds for research and extension activities in priority areas. It will broaden the range of research topics beyond agricultural production technology to include aspects such as agricultural processing, marketing, and economic and social analysis, and diversify the pool of eligible service providers. GEF co-financing will support an increased emphasis on research and extension/advisory services and training opportunities relating to environmentally sustainable practices, including extensive livestock breeding and husbandry, organic and other environmental niche products, integrated pest and crop management, agro-forestry, pasture management, soil conservation, effluent reduction, etc.) and sustainable tourism. The GEF support will be particularly targeted to beneficiaries in and around the SPNP, but others will also benefit from the research results and training opportunities.
The component will include:
(i) Strengthening of MAFWM capacity: the project will support the establishment and capacity building of a unit within MAFWM to administer both the applied research and grant programs5, including setting priorities and targets; inviting and evaluating proposals; awarding and managing contracts; and monitoring contract implementation and results. This unit will be guided by a multi-sectoral entity (e.g. a Board) including representatives of MAFWM, research institutions and target beneficiaries (agricultural producers and processors);
(ii) Incremental funding for applied research contracts: likely areas for support include improving productivity of crops and livestock, integrated crop management, practical improvements in production, storage, processing and
4Having paid into the agricultural pension scheme for at least one year 5 Based on planned transfer of responsibility for applied agricultural research from the Ministry of Science, Technology and Development to MAFWM -11- packaging technologies, food safety, environmental management, etc.
(iii) Incremental funding for extension/advisory services contracts and training: contracts for extension and advisory services will be awarded to local service providers, including existing agricultural stations, academic institutions (e.g. agricultural schools), NGOs, private companies and private individuals. Contractors will develop suitable informational materials and provide information and advice on technologies and methodologies emerging from the applied research program, including a particular emphasis on areas that are important for enhancing competitiveness in the modern marketplace, such as international food safety and quality standards, cost cutting through improved efficiency, accessing organic and other premium and niche markets, organizing to obtain advantages of scale, and building effective linkages between producers and processors. They will also advise and assist clients in the preparation of proposals and business plans needed to access the GRS structural support funds and other sources of financing. In view of the limited technical and business capacity in many rural areas, the project will also support short- term, competency-based training to extension/advisory contractors to enhance their abilities to reach, advise and assist clients.
Component 3: Management of the Stara Planina Nature Park (US$ 1.63 of which US$ 1.4 million GEF)
Components 1 and 2 will support research extension/advisory services and investment grants aimed at giving residents of rural areas – particularly in and around the SPNP—the knowledge, incentives and means to adopt environmentally sustainable land use and agricultural production and processing practices. Component 3 will support other aspects of improved management and biodiversity conservation within the non-core conservation areas (Zones 2 and 3) within SPNP. This includes capacity building and operational support for the management authority (Srbijasume), public awareness raising, strengthening of cooperation with local authorities and residents, strengthening transboundary cooperation, preparation of detailed management and operational plans, ecological restoration of priority sites (particularly degraded high elevation meadows), development and certification of “SPNP-branded” products based on sustainable use of natural resources, small scale infrastructure to support rural/eco-tourism. Establishment of a practical and meaningful ecological monitoring system is a key to effective PA management, and an estimated $150,000 would be allocated for this purpose (using the GEF Tracking Tool as a basis). In order to strengthen linkages between planning and management of the SPNP and local economic development, it will also contribute to the preparation of local rural development strategies and plans. In addition to increasing understanding of these linkages and local support for environmentally sound development, these strategies and plans will enable communities to access community-level grants under the GRS rural development support program.
Component 4: Project Management and Coordination (US$ 2.36 million, of which US$ 0.2 million from GEF)
The project will be managed as an integral program of MAFWM, without the establishment of a separate project implementation unit. This component will support incremental costs of consultant services, training, equipment and operations to facilitate project implementation (including procurement and financial management), monitoring and evaluation (M&E) and
-12- reporting. The project M&E system (estimated $200,000 over life of the project) will be designed to provide timely and concrete information to project managers, based on the Results Framework. This will include contracting a local NGO or company based in the Stara Planina area to support implementation of the GEF-financed activities, particularly under Component 3.
5. Lesson learned and reflected in Project design
Experience from several countries demonstrates the importance of harmonizing national systems and policies with EU, in advance of EU accession. Agricultural/rural development and environmental policies and requirements have proven to be among the most difficult and time-consuming to meet. Therefore, the GRS is interested in starting the harmonization process as soon as possible.
Experience gained from other projects aimed at increasing agricultural competitiveness within the EU framework has shown the importance of improving agricultural producers’ and processors’ knowledge of modern methods, standards and market requirements, as well as initial capital to enable them to put the knowledge into practice.
6. Alternatives considered and reasons for rejection
Initial concepts targeting support to a few high-poverty regions of the country, or to a limited number of pre-selected product/location combinations and types of investments (based on supply chain analysis to be carried out during project preparation) were rejected in favor of strengthening the GRS agriculture/rural development support system to operate efficiently and respond to opportunities identified by prospective beneficiaries. An exception has been made in the case of GEF co-financing targeted particularly to supporting extensive livestock husbandry based on locally adapted breeds and rural/eco-tourism in the Stara Planina area, in order to achieve particular national and global benefits.
An initial proposal to supplement the GRS Rural Development grant scheme was discarded in view of the fact that GRS already provides a large amount of money through this scheme annually. It was recognized that the real need was to improve the efficiency, transparency and targeting of the scheme.
The IBRD and GEF projects were initially separate, but have been blended both for administrative efficiency and to facilitate better integration of agri-environmental objectives and capacity within the agricultural sector in Serbia.
C. IMPLEMENTATION
1. Partnership arrangements
Several donors are supporting programs to assist Serbia to harmonize its programs and institutional structures with EU requirements. In particularly, the European Agency for Reconstruction EAR) is helping to develop an appropriate fiduciary system for an EU- compatible and certifiable Paying Agency. The STAR project focuses on strengthening technical aspects of the administration of the paying system and building capacity within government and among target beneficiaries to use the funds effectively and monitor and -13- evaluate the impacts. The EAR is also assisting Serbia to put in place key elements of a food safety system at a national level (e.g. standards, laboratories), while the STAR project will assist individual producers to understand and achieve the required standards. Continued close coordination with these EU programs will be required to ensure complementarity and synergy.
2. Institutional and implementation arrangements
The project will build on and expand existing implementation capacity within the Fiduciary Center for World Bank Projects, recently established within MAFWM. The technical aspects of project management will be overseen by the MAFWM’s Department of Analytics, Statistics and Agrarian Policy (DASAP), and the Department of Genetic Resources (for agro- biodiversity aspects). A new unit will be established within MAFWM to administer the applied research and extension support program, which will be implemented on the basis of competitively awarded contracts. DASAP will appoint a Project Manager who will coordinate project activities across all components.
The workload of the core MAFWM staff currently exceeds its capacity due to the competing demands of the regular MAFWM work program and the numerous donor funded programs. The project will mitigate this absorption capacity constraint by mobilizing long term national consultants who will reinforce relevant MAWFM units (e.g. grant administration). Subject to their satisfactory performance, these consultants will be converted to regular MAFWM positions by the mid term review. It is envisaged that this approach will upgrade MAFWM's fiduciary and resource allocation decision making systems to a level that would enable the project to rely on those systems for committing and disbursing the specific project financed investments. Furthermore, this expansion in personnel and capacity will help move MAFWM towards the greatly enhanced capacity which it will later require in order to absorb the upcoming EU pre-accession funds. Because of the specialized nature of activities to support ecological management and sustainable development in the SPNP, and the need for close and ongoing interaction with target communities, an NGO or firm based in the area will be contracted to support implementation of the GEF-financed activities, particularly those under Component 3. This contracted NGO or firm will work closely with Srbijasume and the Institute for Nature Protection to support improved management of the SPNP.
A Project Steering Committee will be established to provide strategic guidance. It will be led by MAFWM and consist of representatives from local self-governance organizations, NGOs, MSEP/DEP, Ministry of Finance, and Ministry for International Economic Relations.
3. Monitoring and evaluation outputs.
The project will help to put in place a transparent and efficient system for tracking payments made through the rural development grant system, and for monitoring and evaluating the impact of those grants in relation to the objectives of the Agricultural Development Strategy. This will provide MAFWM with essential information for improving the grant system itself as well as identifying additional policy reforms that may be needed to create an appropriate incentive environment. The Operational Manual under Component 1 will identify appropriate monitoring indicators, data collection systems and analytical methods for the rural development payment system. Similarly, an M&E system will be developed for the applied research and extension activities under Component 2. Capacity building for both components will support training in principles and methods for M&E and adaptive management, as well as the equipment and software needed for analysis. -14- The project will support development of an ecological monitoring system for the SPNP. The GEF Tracking Tool for Biodiversity Strategic Priority 2 (Mainstreaming Biodiversity in Production Landscapes and Sectors) will be used because, while the SPNP is a legally designated PA, the project focus is on biodiversity conservation in production landscapes outside the core conservation zones. The Tracking Tool will be completed for the first time (baseline) prior to GEF CEO Endorsement of the project, and repeated at mid-term and at the close of the project. Because increased stakeholder participation is a major objective of improved management of the SPNP, the M&E approach will also include a strong emphasis on participation.
4. Sustainability and Replicability
A core objective of the project is to enable Serbian farmers and agricultural processors to find their place within a rapidly growing regional market. The Serbian agriculture can only sustain itself and contribute to the sustainability of the national economy by becoming more competitive within this context. The project avoids the creation of potentially unsustainable programs and institutional structures by supplementing and building the capacity of existing ones, to which the GRS has already demonstrated a strong commitment, particularly as they represent an important part of the key to EU accession. The implementation of the project will be integrated within existing MAFWM structures or, in the case of some of the GEF- financed activities, contracted to a local NGO with a long-term presence in the area. Positions initially filled by local consultants to enable rapid build-up of capacity in key areas, such as administration of the rural development grants system, will be integrated into the MAFWM structure by the project midterm. This will represent an important first step towards establishing the much greater capacity that the MAFWM will require in order to absorb EU pre-accession funds.
The GRS rural development grants scheme already promotes sustainability by providing grants on a reimbursable and matching basis (usually 50% or below), which requires beneficiaries to invest their own resources. Under the project this will be enhanced by building capacity among beneficiaries and within MAFWM to prepare and evaluate business plans and analyze market opportunities.
The GEF co-financing will support the GRS strategy for conservation of agro-biodiversity, which aims to preserve autochthonous varieties not through ex situ or artificial “musem” approaches but by integrating them into the overall livestock sector by taking advantage of their special properties such as adaptation to local conditions and suitability for unique products (e.g. carpets from wool of indigenous Pirot sheep). It will also support environmentally, economically and socially sustainable land use and rural development in southern Serbia, providing urgently needed alternatives to unsustainable activities such as intensive livestock production and ski resorts.
Many projects supported by the World Bank and others aim to assist EU accession and pre- accession countries to harmonize with EU requirements and increase their access to competitive regional markets. The STAR project builds upon the experience of ongoing projects and will in turn provide useful lessons for future projects. Deterioration of mountain ecosystems and cultures as a result of declining economic opportunities and displacement of traditional livelihoods is a common phenomenon across much of Europe. Many countries in the EU (and elsewhere in the world where similar trends are found) provide substantial incentives to landholders aimed at maintaining mountain ecosystems and -15- communities. While wealthier countries can afford to maintain large direct subsidy programs, less developed countries and countries in transition need to develop less costly approaches based on increasing the economic viability of traditional products and practices. The project will help to identify and test sustainable models for on-farm conservation and enhancing the economic viability of farming systems that incorporate agro-biodiversity, both by adding value (e.g. through niche product development and marketing) and through synergy with other economic land uses such as environmentally and culturally based rural tourism. It will help to identify the key barriers to these types of biodiversity-friendly activities, and the best interventions and approaches for overcoming these barriers.
At the same time, many formerly socialist countries (including Serbia) are expanding, developing and modernizing their protected area systems, with an emphasis on combining strictly protected core conservation areas with large surrounding landscapes where conservation and economic development are linked through sustainable natural resource use. The experience gained through the STAR project will therefore be very useful for other areas in Serbia and elsewhere in the region.
A detailed replication strategy, to be developed as part of project preparation, will draw upon national policies and programs including the rural development grants and agricultural shows (such as the Regional Fair of Balkan Agrobiodiversity and Rural Heritage, held in Dimitrovgrad in September, 2004). It will also support and make use of regional networks as an important means of information dissemination. These include, for example: the Animal Genetic Resources (AnGR) sector of the AgroWeb Central and Eastern Europe Network (supported by FAO and eight other international partners), the Regional Rural Development Standing Working Group (RRD SWG) of South Eastern Europe, made up of agriculture- related Ministries of Balkan countries and currently chaired by the MAFWM of Serbia, as well as NGO-based initiatives such as the European Agro-biodiversity Network and the Balkan Network for Agrobiodiversity (both sponsored by the SAVE6 Foundation). The local NGO Natura Balkanika, the Serbian member/partner of these networks and very active in the Stara Planina, is expected to play an important role. The replication strategy will also include supporting awareness-raising and information-sharing events such as fairs and shows, in collaboration with the SAVE Foundation and other interested partners.
5. Critical risks
The main risks to project implementation and achievement of its objectives are:
RISK MITIGATION Limited institutional Institutional strengthening needs are being identified capacity could slow or and incorporated in the project design. constrain implementation Long-term national consultants engaged to increase of the project the absorption capacity of MAFWM departments involved in the project ( subject to satisfactory performance, they will be converted to MAFWM permanent staff by the mid-term review). MAFWM Fiduciary Centre for World Bank Projects is gaining familiarity and experience with Bank procurement and financial management procedures through the implementation of the Serbia Danube
6 Safeguard for Agricultural Varieties in Europe -16- River Enterprise Pollution Reduction Project and preparation of the STAR project. Political change could Recent reforms have received wide and positive slow progress on the recognition both nationally and internationally, and are reform agenda in the sufficiently far-reaching to be difficult to reverse. WTO country and delay the and EU SAA negotiations are likely to increase pressure introduction of towards further reform. Added pressure from the policies/programmes international donor community will strengthen oriented towards EU incentives for further progress in the reform agenda. accession and integration in the global economy. The scope and impact of Anticipation of EU pre-accession funding gives GRS the GRS investment grants strong motivation to develop an EU-compliant support scheme may be limited by system for agriculture/rural development as quickly as interested parties’ possible resistance to further reform and reorientation of traditional product- based agricultural subsidies towards project- based rural development support Insufficient interest on the Consultations during project preparation demonstrated part of target beneficiaries strong interest among commercially-oriented producers to invest time, effort and and processors. High level of uptake of the existing resources to take GRS grants indicates people are prepared to use advantage of the technical matching grants to support investment and financial assistance offered Investment grants may not Project support for improving efficiency, transparency be awarded or used and monitoring of the payment system will help to efficiently ensure that investment grants (and potentially other sources of external assistance) are directed towards achieving identified strategic objectives. Monitoring and evaluation during project implementation will help adapt investment measures based upon results achieved. Incentives and assistance The objective is to maintain a modest resident provided (by GEF) may population, not to attract large numbers of new residents. not be sufficient to Under-utilized farms in the project area represent a motivate many people to valuable economic asset, particularly given high urban remain in the SPNP area unemployment rates. Some people (including long time and engage in residents and recent immigrants to the area) have already environmentally initiated relevant activities such as organic pork and sustainable economic artisanal cheese production, but face clear constraints activities which the project is designed to address. suitable activities.
6. Loan conditions and covenants
-17- There are no specific conditions for Loan Effectiveness.
Covenants: N/A
D. Appraisal summary
1. Economic and financial analysis
TBC
2. Technical
TBC
3. Fiduciary
TBC (see Annex 7 & 8)
4. Social
Social impacts are expected to be positive overall, with improved incomes in rural areas. In longer term, the project should contribute to a reduction in rural-to-urban migration in marginalized areas, which should have positive social impacts as many of the rural people currently going to urban areas wind up unemployed or underemployed and living in unhealthy and insecure environment. Also, some positive social impact of encouraging younger people to remain in or return to rural villages, providing a support system for the rapidly aging population of these villages (both informal – family, and formal – increased population will result in increased social services provided by the state).
There is some risk of negative impacts on farmers/producers who are unable or unwilling to adopt new technologies and methods, who may face increased competition from those who do. The knowledge building component of the project aims to minimize this, by assisting as many target beneficiaries as possible to participate at least to some extent. This includes helping smallholders organize to achieve greater efficiency and economies of scale. In addition, much of the increased production supported by the project is likely to be export- oriented, with minimal impact on local markets on which such producers mainly rely. Some of the production will contribute to income substitution, increasing the affordability of products in the local market.
5. Environment
The project is rated Category B: environmental impacts are expected to be positive or neutral. . The objective of facilitating harmonization with EU requirements and accessing EU markets in itself guarantees movement towards more environmentally sound methods.
-18- This will be supported by research and extension on aspects such as Integrated Pest/Crop Management, organic production and reduction in pollution from processing plants.
The project will supplement and strengthen the GRS’ existing provisions for supporting agri- environmental activities and sustainable tourism. The Operational Manual developed for the GRS Rural Development Grant Scheme will include a section addressing environmental aspects of grant proposals, such as use of agricultural inputs and management of processing effluents. The project will also directly support improved management and ecological restoration in the SPNP, which is a globally significant biodiversity area. While the project aims to increase livestock numbers, there is little risk of triggering overgrazing as the objective is to encourage use of currently under-utilized high elevation meadows which are suffering from bush encroachment. Also, while the project aims to help develop markets for livestock products, the increased production will be from a very low base. Furthermore, the project will emphasize development of niche products whose market value will depend directly on certification as being ecologically friendly and supporting the sustainable use of the nature park. The project will also support a sustainable, ecologically friendly and socially supportive tourism development model, providing an alternative to current pressures for unsustainable, infrastructure-intensive model based on ski resorts. Any tourism-related infrastructure to be supported by the project will be small scale (e.g. visitor centers, trails) and consistent with the SPNP management plan, as well as being subject to prior environmental assessment.
4. Safeguard Policies
Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [X] [ ] Natural Habitats (OP/BP 4.04) [] [X ] Pest Management (OP 4.09) [] [ X] Cultural Property (OPN 11.03, being revised as OP 4.11) [ ] [X] Involuntary Resettlement (OP/BP 4.12) [ ] [X] Indigenous Peoples (OD 4.20, being revised as OP 4.10) [] [X ] Forests (OP/BP 4.36) [} [X ] Safety of Dams (OP/BP 4.37) [ ] [X] Projects in Disputed Areas (OP/BP/GP 7.60)* [ ] [X] Projects on International Waterways (OP/BP/GP 7.50) [ ] [X]
Compliance with the OP 4.01 will be achieved through including appropriate provisions in the Operational Manual for the GRS Rural Development Grant scheme. The impacts on natural habitats and forests are expected to be positive. While the project will promote grazing in natural mountain grasslands, this will be in accordance with a pasture management plan that uses extensive grazing as a tool to restore and maintain biodiversity. The project will strengthen the capacity of Srbijasume to manage forests an integrated, ecological approach that addresses a variety of values, rather than just timber production. Compliance with the OP 4.04 and 4.36 will be achieved through support for preparation and implementation of the SPNP management plan.
* By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas -19- 7. Policy Exceptions and Readiness.
The Project does not require any exceptions from Bank policies.
Readiness for implementation: The policy/legislative environment is adequate for project implementation. Recent policy reforms have created a positive environment for agricultural businesses to develop. The project will be implemented by government agencies and departments, private and socially owned enterprises and NGOS that are largely already in place, and will use and strengthen existing systems. Furthermore, project implementation will be relatively uncomplicated in that there will be no large scale procurement of works or equipment.
An agricultural sector study, soon to be completed, will identify structural issues to be addressed and will help target areas where additional investment funds are required to encourage innovation and achieve other strategic objectives.
-20- Annex 1: Country and Sector or Program Background
SERBIA and MONTENEGRO: TRANSITIONAL AGRICULTURAL REFORM PROJECT
Serbia’s regional trade opportunities are expanding rapidly, driven by economic recovery in the post accession countries, a proliferation of bilateral free trade agreements, plans for World Trade Organization (WTO) accession and the EU Stabilization and Association Agreement. In order to capitalize on these trade opportunities, in late 2000 the Government of Serbia launched an ambitious reform program to improve the business environment and create a vibrant private sector. The program is producing the desired results and the country was recently voted the world’s number one overall reformer on a variety of measures relating to business regulations and their enforcement.
Serbia has significant comparative advantages in agriculture. The country has large amounts of agricultural land, high quality soils, a strategic trading location, and an educated workforce. Primary agricultural production and agro-processing is estimated to be 25 percent of GDP and 20 percent of exports in 2005. About 0.8 million ha (15 percent of the total cultivated area) is comprised of large corporate farms, most of which have been partly privatized as shareholding “mixed enterprises.” The remainder consists of small private farms which may be commercial or subsistence level. There are over a million private subsistence farms, most under five ha and often consisting of several fragmented parcels of land. These households depend heavily on non-farm income. The emerging group of private commercial farms, which produce primarily for market, average 10 ha in size and account for about five percent of the total arable land. There is significant regional variation in production systems and products. For example, agriculture in the low-lying and fertile Vojvodina region is dominated by field and industrial crops, notably wheat, maize, sugar- beet and sunflower, as well as production of pigs, cattle and poultry, mainly in large, partially privatized and/or employee-owned Agrokombinats. Producers in this region are more strongly market-oriented than in the rest of the country. By contrast, Central Serbia is characterized by hilly topography, small farms and diverse farm production systems, with fairly intense production of high-value fruits and vegetables. Livestock production in the Central region is dominated by dairy cattle. Southern Serbia, the poorest and least developed of the three regions, has mountainous geography and is characterized by small, fragmented arable areas and a large extent of pasture and forest. It is most suitable for extensive or semi-intensive production of ruminant livestock, but in recent decades government policies have promoted intensive production of cattle and pigs. This can provide high short-term yields but is not environmentally sustainable over the long term.
The market forces being unleashed on the country after decades of economic and political isolation are applying pressure on the agri-food sector to improve productivity and quality. However, the recent history of isolation from competitive markets has not prepared the sector to respond to these rapid changes or to take advantage of the opportunities created by the reform process. The predominantly small scale Serbian farmers and small, domestically- oriented processing plants risk being overwhelmed by strong regional and international competition and by stringent food quality and safety requirements. The legacy of isolation has also resulted in a sector marred by underdeveloped land, physical and social capital, and input markets. This contributes to inadequate investment in the physical, institutional, and knowledge capital necessary to be competitive in the new market environment.
The GRS Agricultural Development Strategy (August 2005) sets a road-map for growth and competitiveness. Key elements include: (i) completing the move to a competitive market -21- economy, including abolishing remaining production subsidies and adopting WTO principles; (ii) harmonizing with EU sanitary and phyto-sanitary, and quality and agro- environmental requirements to increase Serbia’s EU market share for meat, dairy, and fruit and vegetables; (iii) improving competitiveness through adoption of modern, cost effective production technologies; and (iv) promoting rural development, especially in poor regions of the country, through EU-type rural development grant mechanisms.
The GRS Agricultural Development Strategy takes into account the evolving nature of the EU Common Agricultural Policy (CAP). In the beginning (early 1960s), the CAP offered subsidies and guaranteed prices to farmers as incentives to increase production. Later it added supported investment to increase farm size and to adopt new technologies. As agricultural surpluses became a major factor, the CAP entered a new phase (the “Agenda 2000 reforms), in which direct income support for farmers increased while price support decreased, and a comprehensive rural development policy was introduced to encourage diversification into other kinds of rural initiatives. In its current version (begun in 2003), most of the CAP aid has been de-linked from the volume of production, and direct income payments (through a single farm payment scheme) are being linked to farmers’ meeting standards in areas such as environmental protection, food safety and animal welfare. The new CAP also places stronger emphasis on support for diversified rural development. EU spending on agriculture and rural development is now channeled through two streams: Pillar 1 (decreasing in importance) covers direct income support to farmers and the remaining market-related subsidies, while Pillar 2 (increasing in importance) provides grants to encourage measures for environmental management, higher food quality standards and animal welfare and to provide assistance to marginal farming areas.
The GRS agricultural support parallels this structure, with one stream providing subsidies and income support and another providing grants for rural development. The centerpiece of the Government’s program to implement its Agricultural Development Strategy and facilitate the transition to market competitiveness in the agri-food sector, is a move away from price and production support towards income and structural support. Driven by trade agreements, market support is to fall from 40 percent of the budget in 2004 to 20 percent in 2008. Furthermore, the GRS intends to deliver the structural support in a manner which is compatible with EU, in anticipation of receiving EU pre-accession funds and, eventually, support under the CAP. In addition to beginning a shift away from price and production support and working towards a single payment system, the GRS has incorporated key elements of the CAP’s Pillar 2. Eligible activities under the 2006 Rural Development Grants Program (RDGP) include agro/eco-tourism, development and marketing of specialized local agricultural products and crafts, and conservation and promotion of cultural, sociological and economic customs and values. Like the CAP Pillar 2, the RDGP also includes special eligibility provisions and better financial terms for “Less Favored Areas” and areas subject to environmental constraints, including flood prone areas, mountains and nature protection areas (see Table 1).
The GRS also aims to target its support efficiently to facilitate Serbian producers’ entry into the world’s largest agricultural market. This means working toward harmonization with EU policies such as the Common Agricultural Policy, the Habitats Directive and the environmental acquis. Experience in accession countries highlights the importance of a proactive approach. For example, 70 percent of meat produced in Hungary is sold into the EU compared to 30 percent for Poland. In Poland, at the time of accession, 50 percent of all meat processing plants were unable to export into the EU because they failed to meet food safety and other requirements.
-22- The GRS approach to rural development also places great importance on decentralized decision making with regards to environmental protection, use and protection of valuable natural resources, management of agricultural land, keeping and protection of domestic and exotic animals, and tourism development. In keeping with this principle, the process of developing a Strategy for Agricultural Development, which was coordinated by the Ministry for Agriculture, Forestry and Water Management (MAFWM), involved 20 stakeholder workshops. Also in line with the Government’s position on bottom-up and broad-based rural development is the fact that eligibility for rural development grants provided by the government is open not only to farmers but also to local NGOS whose number has been increasing in recent years parallel to the democratization of Serbia.
A number of donors (EU, USAID, FAO and the Governments of Germany, Austria, Italy and the Netherlands) have programs to address different aspects to help Serbia successfully access EU pre-accession instruments. Within this context, the MAFWM has requested World Bank support in improving the design, administration, and transparency of its structural support program and the development and dissemination of knowledge capital. This provides an opportunity to provide medium term support for a progressive reform agenda.
TABLE 1
Government of Republic of Serbia Ministry of Agriculture, Forestry and Water Management
Rural Development Grant Programme, 20067,8
Percentage of co-financing (%) Less Favored Areas9 Other parts of Serbia Import of livestock for breeding 50 40
Agricultural machines 50 30 Renovation/building of stables 50 30 Storage facilities, coolers, 60 40 drying facilities, and other equipment for finalization of primary products Rural infrastructure (electricity 60 50 supply, water supply, local and village roads, water supplying,
7 “Official Gaz. of R. Serbia, No 106/05 and 108/05”
8 Total budget for Rural Development Program for 2006 = approx. 8 million EUR. Farmers aged 40 and under are eligible (55 and under in LFAs). Maximum grant amount is 22,000 Euro per farmer and 55,000 Euro per legal entity. 9 LFA refers to marginalized rural areas, which are defined according to elevation, soil quality, erosion, flooding threats, etc. Nature protection areas are also included as they present constraints to agricultural development. 49 municipalities are classified as marginalized areas, including three of four Stara Planina municipalities (except Zajechar). -23- waste water system, renovation of village cultural centers, equipping of resource rural development centers, business incubators etc Diversification of rural households activities aiming to achieve alternative sources of income Renovation and building of 50 40 houses, equipping houses for agro/eco/rural tourism Equipment and adaptation of 50 40 buildings for traditional crafts Development and promotion of local products and rural values Promotion and designation of 60 50 origin/designation of geographical indication Conservation and promotion of 60 50 rural customs, economical, cultural and sociological values of the area
Capacity building in field of rural development and organization of rural population/community
Education on strategic 50 50 planning and on implementation of rural development project Support to establishment of 50 40 associations and cooperatives Support to projects in field of 50 50 integrated rural development (renovation/restoration of traditional rural household) Establishment of 50 30 demonstrational farms, processing and tourism capacities dedicated for educational purposes Support to regional 50 40 cooperation of farmers, their associations, local governments etc in field of rural development programmes (study tours to farms, fair in Serbia and abroad) Environmental protection and conservation of rural landscape Forestation and other 50 50 measures against bad lands/erosion Support to farmers willing to 50 50 start wormi-culture pasturing/grazing in high 50 50 mountain areas/ paying for a shepherd, electric fence, mobil equipment and infrastructure for summer shelters in the high mountain pastures, training of a shepherd dog etc Waste management projects 50 50 -24- etc… 90 EUR per hectare for mowing of high mountain meadows;
Support to organic farming Education on rural population 50 50 toward planning and implementation of organic farming projects Support to establishment of 50 50 demonstrational organic farming, processing and tourist capacities which have link with organic farming Cooperation, study tours, visits 50 40 to fairs related to organic farming organic certification is co-financed by 50%; good agricultural practices in terms of organic farming (crop production in conversion – 90 EUR per hectare; vegetable and fruit production in conversion – 125 EUR; animal farming in conversion – 90 EUR per cattle, 20 EUR per small ruminants; 1 EUR per hen…
Biodiversity Conservation and Nature Protection
Serbia and Montenegro hosts a large variety of ecosystems ranging from Mediterranean-Sub- Mediterranean evergreen forests, various deciduous forests, and coniferous woods typical of the Euro-Siberian and North American regions, to freshwater bodies and marine ecosystems on the Adriatic. This makes SaM one of the European centers of biological diversity. It is home to 39% of Europe's vascular plant species, 51% of its fish fauna, 74% of its bird fauna, and 68% of its mammalian fauna. The flora and fauna of SaM are characterized by great diversity, including more than 8,000 plant species, 15,500 animal species, 550 species of fungi, and about 400-500 species of lichen. The exceptional richness of plant and animal species and their communities is further illustrated by the existence of around 1,400 species of freshwater algae, 1,500 species of marine algae, 565 species of moss and 650 species of macro-mycete. Around 1,600 wild plant and animal species considered internationally significant inhabit the SaM.
The GRS has made a strong commitment to conservation of biodiversity, both in natural landscapes and within agricultural systems. SaM ratified the Convention on Biological Diversity in 2002, and the Government of the Republic of Serbia adopted biodiversity conservation as one of its priorities for environmental protection as laid out the report titled "State of the Environment in 2000 and priorities in 2001+ for Serbia". The Institute for Nature Protection (INP) has prepared a draft medium term Plan for Biodiversity Protection, and a national Biodiversity Strategy and Action Plan (BSAP) is under preparation with support from a GEF Enabling Activities grant10. The BSAP is expected to address, among other things, the impact that agricultural intensification has had on biodiversity conservation, in particular through overgrazing in mountain areas. It will emphasize the need for active, multi-sectoral stakeholder participation to ensure cross-sectoral integration for biodiversity
10 Implementing Agency for the BSAP is UNDP -25- conservation, and the need for strengthening capacity for ecosystem conservation planning to complement the traditional focus on preservation of individual rare or endangered species.
About five percent of Serbia’s territory is designated as protected area (PA), including five National Parks, 120 nature reserves, 20 nature parks, 470 natural monuments and one Biosphere Reserve. The Republic’s Landscape Management Plan anticipates the area under protection to increase to 10 percent by 2010.
In the area of agro-biodiversity, in 2002 the Federal Government adopted a strategy to preserve locally adapted breeds that are becoming extinct, for social and economical purposes, as well as future scientific researches and education purposes. The strategy was later adopted by the Republic of Serbia. As reflected in the "First report [to FAO] on the State of Animal Genetic Resources in the Federal Republic of Yugoslavia," the strategy gives priority to preserving the breeds that are most severely endangered. Its main elements are:
i) Identification of animals, their wild relatives and habitats, as well as the potential for their in situ conservation in an economically viable manner; ii) Characterization with respect to the scope, distribution, main characteristics and current state, including the identification of the most endangered breeds; iii) Clear definition of the role, utilization and conservation of locally adapted breeds in the overall livestock sector; iv) Enhancement of the communication and information system on available pure breeding materials; v) Establishment of permanent programs for monitoring breeds that are kept on farms and their wild relatives which may have economic, cultural or scientific value; vi) Training of personnel in state of the art conservation technologies; vii) Public awareness raising; viii) Development of legislation and regulations in line EU regulations and the CBD; and ix) Improved international communication and cooperation, especially within the region.
The Stara Planina Nature Park: Description, Biodiversity Importance and Threat Analysis
The West Balkan Mountain Range, situated on the (southeastern) border of Serbia and Bulgaria, is known in both countries as “Stara Planina11,” (see Map 1). It is part of the Balkan Mountains Biodiversity Center, which is one of six temperate centers of biodiversity in Europe. It is known for its rich biological and geological diversity as well as its cultural heritage. In 1996 the Governments of Bulgaria and Yugoslavia signed a memorandum of agreement to work towards the creation of a transboundary Stara Planina Peace Park. While the establishment of the transboundary park has not yet been achieved, in 1997, the Government established the Stara Planina Nature Park (SPNP) on an area covering 142,220 ha in four municipalities (Pirot, Dimitrovgrad, Zaječar and Knjaževac). The SPNP, which falls under Category V12 within the IUCN PA categorization system, qualifies as “natural resource of the utmost importance” under Serbian law. The Government of Serbia is in the
11 Old Mountain 12 Protected Landscape -26- process of preparing a proposal for the SPNP to be designated as a Biosphere Reserve under the UNESCO Man and Biosphere Program. On the Bulgarian side there are 17 protected areas of national or international importance, including notably the Chuprene Biosphere Reserve, the Belogradchishki Skali Nature Monument, the Kopren-Tri Chuki Protected Area, and the Gornata Koriya Strict Nature Reserve. A proposal to establish a Nature Park on the Bulgarian side is currently under the review by the Ministry of Environment and Water.
Map 1
About 8,700 people now live in the Nature Park, while the total population of the four municipalities is almost 200,000 (1991 census). The main land uses are agriculture (53% of the territory land) and forestry (41% land). About 13,000 hectares of the agricultural land are used for crop cultivation in small private holdings on lower elevations in the outskirts of the park. The significance of this activity declined during the socialist times with the advent of large socially-owned farms (agro-kombinats) and with the out-migration. Between 1948 and 1991 the population of the SPNP decreased by about 75%, as the younger generation moved to urban areas within these municipalities and beyond. However, as in Serbia’s other rural areas, the link with the land remained strong. In recent years, as a result of industrial collapse and widespread unemployment, there is a trend of urban dwellers returning to the land on a part-time basis to cultivate food for their own use. A small number are moving
-27- back to the area and trying to restart commercial production of agricultural products, but they require assistance to develop viable enterprises in the face of barriers such as remoteness, fragmented land holdings, and outdated technology and infrastructure. The spatial plan for the SPNP reflects a diverse set of objectives for the park, including nature conservation, habitat restoration, small-scale livestock husbandry and agriculture, and sustainable tourism.
The SPNP combines the elements of nature protection and agro-biodiversity. The area is known for its rich biological and geological diversity as well as its cultural heritage. The traditional agricultural production systems in the Stara Planina region were both shaped by and helped to conserve its biodiversity. For centuries, in the absence of national boundaries, south-north transhumant livestock production characterized the region’s economy. After the emergence of nation states in the 19th Century, transhumance survived in vertical form, following vegetation dynamics by moving to high elevation in the summer and low elevation in the winter. This type of livestock production was based mainly on locally adapted animal breeds. A rich diversity of vegetation in the mountain meadows developed as a result of moderate grazing pressure, and large areas of the SPNP are covered with this vegetation.
Starting in the mid-1940s, government policies favoring high-yield, intensive livestock production in large scale Agrokombinats and collective farms, began to displace the village- based extensive grazing system. The intensive production was concentrated in low elevation areas year-round, leading to overgrazing there and to the disuse of many higher elevation pastures. The latter has been aggravated by an overall trend of outmigration from the area: the sheep population on the mountain has declined from about 200,000 to 5,000 in recent years. The practice of early mowing has also grown to provide fodder for intensive production. The decline of traditional agricultural practices has resulted in a number of negative ecological impacts:
Loss of grassland biodiversity: The combination of over- and under-grazing and early mowing has resulted invasion of many mountain grasslands by junipers and other shrubs and the loss or decline of a number of economically important species, including alpine and sub- alpine communities of Poion violaceae and Seslerion coerulantis, and populations of Gentianella bulgarica, Crocus veluchensis, Lilium jankae, Campanula moesiaca, Thymus vandasii, Hypochoeris maculata ssp. pelivanovicii, Achillea lingulata and others. There is also a strong impact on some very rare species, many of which are endemic to the Stara Planina, Serbia or the Carpathian-Balkan region. Examples include Veronica bellidioides, Veronica baumgartenii (Carpathian-Balkan endemic), Veronica balcanica (Balkan endemic), Campanula moesaiaca (Moesian endemic), Campanula kladniana (South Carpathian- Moesian endemic, which is new for Serbian flora) Cerastium alpinum and Campanula alpina. One affected species of particular social significance is Gentiana lutea, an important but rare medicinal plant.
Changes in peat bog vegetation. There are early signs of eutrophication in peat bogs as a result of intensive livestock production. A key indicator for the nitrification is appearance of plant communities such as Rumicetum alpinae which have started to appear in some sections of the peat bogs. In addition to their intrinsic ecological value, peat bogs play an important role in ecological succession in that they establish favorable conditions for other plant communities, such as Geum coccinei-Deschampsietum caespitosae and Deschampsietum subalpinum. The former is characterized by a large number of endemic and rare breeds, such as Geum coccineum, Pseudorchis albida, P. friwaldii, Dactylorhiza cordygera, Saxifraga stellaris, Soldanella alpine and Senecio pancicii, and is found only in highest mountainous areas of Serbia on Stara Planina and Shar Planina. The latter appears
-28- around water creeks and forms a specific floral community that is characterized as rare in Serbia.
Loss of Autochthonous Animal Breeds. Most of the locally adapted livestock breeds characteristic of the Stara Planina region are now rare, endangered or threatened by extinction. Examples include the Mangolitsa pig which has a risk status of "endangered – maintained,” with a current population within the area of 64 animals. Other local pig breeds that have a “critical risk” status and declining populations include the Morava and the Resava pigs with estimated local populations of 30 or less. The Pirot’s Zeckel sheep, widely known for the production of Pirot cheese and Pirot carpets, is also endangered, with an estimated population size of 200 (only 10 breeding males) and a decreasing population trend. Other breeds whose Serbian populations are a matter for concern include the Vitoroga Zackel sheep, and the Balkan goat, pony and donkey.
In addition to loss of genetic diversity among domestic species, wild species are also negatively affected by over- and under-utilization of grasslands and meadows. This includes wild relatives of crop, forage and medicinal plants and fruits. The diversity of wild fauna is also strongly affected because of the decline of meadows and pastures. Meadow birds and insects (including numerous butterfly species) decline due to loss of wild flowers which provide nectar and seeds. In addition, many birds of prey (e.g. imperial and golden eagles, vultures) rely heavily on the presence of domestic livestock in high elevation pastures.
Causes of Biodiversity Loss
The decline of agro-biodiversity can be attributed both to incentives to intensify agriculture and livestock production, and barriers faced by producers of products that can be produced in biodiversity-friendly agricultural systems. For the most part, such products must target premium niche markets as they cannot compete with the products of intensive cultivation for standard markets. This requires the introduction of accepted and uniform quality standards for both produce and packaging and, frequently, a corresponding certification program for specialty local products. Small scale production which is vulnerable to climatic and other disruptions is another barrier, as it can prevent the establishment of linkages with distributors and markets that require a reliable stream of high quality products.
There are also shortcomings in policies directly related to nature conservation and biodiversity. For example, the existing draft medium-term Plan for Biodiversity Protection is nearly exclusively oriented to protection of threatened species, rather than the development of an ecosystem approach and integration of conservation spatial and sectoral plans such as agriculture, infrastructure, forestry and tourism. As in many natural areas, tourism is regarded as having great potential for economic development in the Stara Planina area. However, there is a serious risk of inappropriate tourism development, particularly in the face of an intensive debate over establishing winter ski resorts and runs in some of the most biologically important and fragile areas, which the INP has proposed should be classified as Zone 1 (core conservation area). There is an urgent need to approve a spatial plan and management plan for the SPNP, which would designate zones for different degrees of protection and types of use. In the absence of these approved plans it is virtually impossible to stop uncontrolled residential and tourism development within the park. The INP (in collaboration with other responsible agencies and local government) is in the process of developing such a plan, which envisages three internal zones and an external buffer zone. The plan will define the management regimes to be implemented in each of the zones following international best practice. The IPN estimates that less than 10% of the area of the
-29- Nature Park should be classified as Zone 1 where no human activities except for research should be carried out. Around 23% would be defined as category 2 where only limited traditional, bio-diversity friendly activities, including sustainable grazing would be permitted. The rest of the park area would be classified as Zone 3 where most sustainable farming, agro-processing and eco-tourism activities would be permitted as long as they are not in conflict with the conservation of the autochthonous species and breeds.
Preparation of a management plan is necessary but not sufficient, as there is also need for institutional capacity to implement it. The Serbian Public Enterprise for forest management, Srbijasume, is responsible for managing the SPNP because it contains large amounts of both state-owned and privately owned forest. It is primarily a forestry enterprise with an emphasis on timber management. It has the mandate and interest, but not yet the capacity, for a more integrated and comprehensive approach to management of the area. For example, it has no capacity or experience in grasslands management. Aside from timber harvesting schedules, its main management activity at present is to monitor and report occurrences of illegal development or land use (e.g. conversion of pasture to cropland).
With respect to institutional support for agro-biodiversity conservation, some of the key institutional constraints include:
Lack of capacity on the part of the semi-public Advisory Services to provide advice and training to farmers on the breeding and keeping of locally-adopted animal breeds and on extensive farming in general, including agro-forestry activities. Lack of institutions to provide farmers with advice and information on business plan development, loan applications, and market opportunities for specialized agricultural products as well as opportunities for business diversification, such as agro-tourism and traditional food processing (although adapted to food safety standards). Lack of an institution to maintain herdbooks and to compile and provide information on available breeding stock to farmers. Lack of institutional capacity to provide certification and brand security for specialized niche products that are biodiversity-friendly. Insufficient capacity on the part of veterinary services to assist farmers breeding locally adapted animal breeds. Lack of capacity within Government for the proper identification, characterization and monitoring of endangered locally adapted breeds and their wild relatives; and
-30-
-31- Annex 2 – Major Related Projects in Serbia and Montenegro Financed by the Bank: 2002-2005
SERBIA and MONTENEGRO: TRANSITIONAL AGRICULTURAL REFORM PROJECT
-32- Annex 3: Results Framework
SERBIA and MONTENEGRO: TRANSITIONAL AGRICULTURAL REFORM PROJECT
PDO Project Outcome Indicators Use of Project Output Information To put in place an MAFWM efficiently disbursing, efficient system for tracking, and evaluating the impact of delivering structural structural support funds for agriculture support to the agri-food and rural development, in support of sector to enhance its GRS Agricultural Development competitiveness and to Strategy, enhance Serbia’s capacity to absorb EU funds for agriculture and Increase in the number of agricultural rural development in the producers and processors using new future technologies and practices developed and extended with project assistance
GLOBAL OBJECTIVE To help conserve Expansion of areas within the Stara ecological systems, Planina Nature Park under ecological agro-biodiversity and management, including controlled wild biodiversity in the grazing. production areas of the Stara Planina Nature Increase in number of residents of Park SPNP earning at least 25% of their income from environmentally sustainable agriculture, tourism and/or natural resource use
INTERMEDIATE RESULTS INDICATORS Use of Intermediate RESULTS Outcome Monitoring
-33- (Component 1: If the rural development Strengthen Rural Operational Manual for Paying System Paying System does not completed and adopted pass the EU accreditation Development Paying requirements, or is unable System) to track and evaluate the Paying Agency accredited (by 3rd party, use of rural development (a) Government’s system using same criteria as for EU grant funds in a accreditation) transparent manner, for agricultural/rural design of the system and development payments is effectiveness of training compatible with EU Reliable tracking system for applications and provided will be payments in place and operating (EARDF) reviewed and corrected as appropriate Increase in number of RD grants awarded to (b) Increased investment residents of SPNP municipalities for If number of RD grants in sustainable land extensive livestock, breeding of indigenous awarded for these use/agro-biodiversity purposes does not livestock varieties and/or rural tourism increase at expected rate, activities and enterprises activities MAFWM will carry out relating to sustainable surveys to determine land use and agro- % increase in total quantity of milk purchased reasons for low uptake biodiversity in/around by local dairies in SPNP and propose measures to adjust (better targeted Stara Planina Nature extension and training, Park stronger incentives, removal of barriers, etc.)
If quantity of milk purchased by local dairies does not increase at expected rate, project team will commission study to determine underlying causes and potential corrective measures
-34- (Component 2: Applied Research/Extension The number of Knowledge and Coordination Unit established in extensionists being contracted and trained, Capacity Building) MAFWM, with multi-sectoral steering the number of grants used body to support related Increase in knowledge activities, and the number and capacity of Number of contracted of farmers and processors successfully achieving MAFWM and target extension/advisory service providers international standards farmers/ processers/ completing short-term training courses will indicate whether the bankers to distribute, applied research and obtain, and use Number of farmers and processors extension programs are targeting the right issues rural/agricultural within target group who obtain grants and offering the right development funds for to implement activities directly related types of information and investments consistent to knowledge products developed with skills development with project objectives project assistance If the number of formalized Number of target farmers/processors producer/processor who are applying/achieving linkages does not internationally accepted (HACCP13?) increase at expected rate, project team will survey standards producers and processors to determine the cause Number of applied research activities and adjust program undertaken and related extension accordingly. messages disseminated promoting Establishment of an biodiversity-friendly agriculture and internationally land use recognized organic certification system will confirm local interest in Number of new. formalized agri-food pursuing such premium producer/processor linkages niche markets and will also greatly facilitate their Establishment of local system to provide ability to do so. If system is not established, project internationally recognized certification team will assess whether for organic production cause is technical, financial or knowledge- Local tourism association established related. in SPNP, with relevant bye-laws, The establishment of a standards and marketing strategy local tourism association adopted by members will confirm local interest in pursuing rural tourism as an economic activity; Increase in number of viable herds/flocks failure to do so will of 4 target autochthonous livestock trigger assessment of breeds being maintained on local farms reasons, e.g. lack of (at least 3 farms for each breed, knowledge or start-up constraints, vs. lack of minimum of 30 head per herd/flock) economic viability
13 Hazard Analysis and Critical Control Point -35- (Component 3: Management plan for SPNP prepared Meeting management plan target will confirm Sustainable land use through participatory process, and Srbijasume is and ecological including areas designated as highest appropriate PA mgmt management in SPNP) priority for wild biodiversity within core authority; failure to do protection zones. so may trigger Government to Restoration of declining reconsider the environmentally Ecological monitoring program institutional sustainable land uses in developed and being implemented by arrangement. Stara Planina area SPNP manager Increase in the livestock using high Number of has of abandoned and elevation pastures degraded pasture (in priority areas as together with identified in SPNP management plan) restoration of a restored to active use for controlled significant area of abandoned/degraded grazing pastures will indicate that the managed Decrease in area of bush/tree grazing is an effective encroachment in grassland areas and viable tool; negative result will identified in Grassland Management signal need to explore Plan as priority for biodiversity other tools conservation Increase in commercial use of sustainably Numbers of sheep/goats/cows using harvested raw materials high elevation pastures increase in from SPNP will accordance with grazing management indicate that plan conservation and economic development are being successfully Increase in number of commercial agri- integrated enterprises using sustainably harvested raw materials from SPNP
(Component 4: Project Procurement plans regularly updated and Management) followed These indicators will confirm whether or not the Unqualified audits of project accounts implementation arrangements are appropriate Monitoring and Evaluation system and the right measures have established and operating, providing guidance been taken for capacity for improving project and park management building in MAFWM. Negative results will indicate Beneficiary surveys indicate awareness of either need for additional project and overall satisfaction with project training or new activities (mechanisms in place to receive and implementation arrangement resolve complaints) or leadership should be considered
-36- Arrangements for results monitoring
Target Values Data Collection and Reporting Outcome Indicators Baseline YR1 YR2 YR3 YR4 Frequency and Data Collection Responsibility for Reports Instruments Data Collection
Results Indicators for Each Component Component 1: Operational Manual for Paying N/A Manual Manual Project progress System completed and adopted prepared formally reports; approved by MAFWM MAFWM circular Paying Agency accredited N/A Accreditation Report of received accreditation body Increase in # of RD grants to 6 (in 2005) 12 30 Annual Paying System MAFWM-Paying SPNP municipalities for targeted tracking system; Agency activities progress reports Increase in quantity of milk X Liters 3X liters 20X liters Annual Project progress MAFWM purchased in SPNP (to be reports; survey of confirmed) producers and dairies Component 2: Number of contracted N/A 10 30 50 Annual Project progress MAFWM; extensionists completing ST reports DASAP training Number of target N/A 20 100 Annual Paying System MAFWM; farmers/processors obtaining tracking system DASAP grants related to project knowledge Number of farmers/processors ? 20 100 Annual Project progress MAFWM; achieving HACCP standards TBD reports; DASAP independent survey Number of applied research TBD 5 20 Annual Progress reports, MAFWM: DSAP activities undertaken and MAFWM budget
-37- related extension messages disseminated promoting biodiversity-friendly agriculture and land use
Establishment of local organic N/A Established Project progress MAFWM; certification system reports; official DASAP adoption by GRS Establishment of local tourism N/A Association Standards Marketing Project progress MAFWM & association, bye-laws, standards, established, developed strategy reports; registered Ministry of marketing strategy bye-laws developed association Tourism; local adopted documents business community Increase in number of viable Pigs 120 Pigs 400 Annual Project progress MAFWM & herds/flocks of target local Sheep 50 Sheep 200 reports; surveys Natura Balkanika breeds14 Goat 40 Goat 200 of breeders Pony 10 Pony 40 (at least 3 separate flocks/herds of each breed) Component 3 Management plan for SPNP N/A Draft Management Project progress MAFWM (GEF prepared through participatory Management Plan report; component project process, and including areas Plan approved Ministerial office); designated as highest priority for completed aproval Srbijasume wild biodiversity within core protection zones.
SPNP Ecological monitoring N/A Program Ongoing Full update Ongoing Annual Project progress MAFWM (GEF program developed; of baseline reports; SPNP component project baseline data monitoring office) and prepared reports Srbijasume Area of abandoned and degraded TBD15: total TBD TBD TBD TBD Annual Project progress MAFWM (GEF meadows/grasslands restored degraded reports; SPNP component project area; project ecological office) and targets monitoring Srbijasume system
14 Mangalitz pig; Zakel sheep, Balkan Goat, Domestic Mountain Pony 15 Pasture study to be completed
-38- Area of bush/tree encroachment TBD Target areas 25% of Ecological Srbijasume in grassland areas identified in identified in total target monitoring data Grassland Management Plan as Grassland area priority for biodiversity Mgmt Plan reduction achieved conservation
Increase in # sheep/goats/cows 5000 (?) 20,000 50,000 Annual Project progress MAFWM (GEF using high elevation pastures reports; survey of component project livestock owners office) and Srbijasume Number of commercial agri- TBD 16 TBD TBD Annual Project progress MAFWM(GEF enterprises based on sustainable reports; survey component project NRM (including tourism) office); Natura Balkanika; Regional Environmental Center Component 4 Monitoring and Evaluation N/A M&E Project Progress MAFWM system established and system Reports operating, providing guidance designed for improving project and park and staff trained management
16 Socio-economic assessment to be completed
-39- Annex 4: Detailed Project Description
SERBIA and MONTENEGRO: TRANSITIONAL AGRICULTURAL REFORM PROJECT
The project combines institutional capacity building, knowledge generation and dissemination, and direct investment to achieve several important objectives: (i) increase the efficiency of use of public funds (structural support for agriculture and rural development); (ii) enhance the competitiveness of Serbian agricultural products in local, regional and international (particularly EU) markets; (iii) help Serbia prepare itself to access and make good use of EU pre-accession and eventually CAP funds; (iv) increase rural incomes and strengthen rural economies; (v) reduce incentives for out-migration from rural areas; (vi) restore traditional agricultural and cultural practices in areas where these are disappearing; (vii) preserve biodiversity in natural and agri-ecosystems; and (viii) promote sustainable land use in ecologically fragile areas.
Objectives (v) through (viii) apply particularly to the mountainous Stara Planina area of southern Serbia, an area known for its rich biological and geological diversity as well as its cultural heritage. It is also the poorest region of Serbia, and has been undergoing economic decline, population loss and ecological degradation in recent years. The GEF-financed activities, which are targeted primarily to conserving biodiversity through sustainable land use in the agro-ecosystems and production landscapes of the Stara Planina Nature Park, were initially proposed as a separate operation (Serbia and Montenegro, In-situ Agro-biodiversity Project, Pipeline Entry and PDF-B (Pipeline entry 12-21-2004). They have now been integrated with IBRD-financed activities into a fully blended project.
The overall strategy for achieving these important objectives is to improve the efficiency, effectiveness and impact of the Government of Serbia’s (GRS) support for agriculture and rural development. Like many countries, Serbia has in place a variety of subsidy and support programs aimed at assisting farmers and residents of rural areas to improve their productivity, incomes and living conditions. Consistent with European Union (EU) policies and international trends, the GRS is in the process of shifting this support from traditional commodity-based subsidies to income support and structural support for investment in improved agricultural and agro-processing technology, improved land care and environmental management, and diversification of rural economies. This transition requires the development of new systems, new knowledge and investment capital on the part of the Government agencies which provide the support and on the part of the target beneficiaries. The project aims to support strategic public investments to help meet these needs.
In the Stara Planina region, the traditional economic system of extensive livestock grazing and small-scale (garden) farming effectively maintained the biologically rich landscape mosaic of forest and natural pasture. However, this economic system has declined precipitously over the past few decades as a result of government policies favoring intensive cultivation and livestock production as well as declining services and living conditions. With the near disappearance of the locally adapted livestock that once used the high elevation pastures for seasonal grazing, brush encroachment and invasion by exotic plants has decreased both the economic and ecological value of these areas. At the same time, lower elevation areas have become overgrazed and degraded through excessive and poorly managed use. In this region, the project has two complimentary objectives: to restore and develop economically viable livelihoods in order to improve local livelihoods and stem the tide of out- migration, and to support biodiversity conservation and sustainable use in accordance with the -40- goals of the park. The project will aim to achieve these objectives by developing incentives for sustainable land use management and in-situ conservation of agro-biodiversity. The particular emphasis in this area will therefore be on developing and marketing of organic and other niche products based on indigenous livestock varieties grazing in mountain meadows, and on developing environmentally sustainable rural tourism as a supplementary source of income for the local population. The project may also support the development of enterprises based on environmentally sustainable natural resource use to complement and enhance the viability of these main economic activities.
Component 1: Strengthening the Agriculture and Rural Development Support System (US$ 19.47 million, of which 1.8 million from GEF)
The Government of Serbia provides several types of support for the agriculture and rural development sector, totaling over USD 220 million in 2005. Of this over USD 11 million was in the form of matching grants for which individuals can apply, based on certain eligibility criteria. These criteria have been updated in the 2006 Rural Development Grant program, reflecting priorities that are consistent with those of Pillar 2 of the EU Common Agricultural Policy (CAP) (see Annex 1). The RD Grant program also makes special provisions to increase the accessibility of these funds to farmers in marginalized or “Less Favored Areas,” which include areas of high elevation, poor soil quality and high erosion or flood risk, and areas for nature protection. Forty nine municipalities in Serbia are classified as marginalized areas, including three of the four municipalities which comprise the Stara Planina Nature Park.
The value of this potentially very important structural support program for agriculture and rural development is undermined by a weak system for targeting and administration of the grants. Because the emphasis in the past has been on price and production subsidies, the grants scheme is relatively new and undeveloped. There is currently little strategic or operational guidance to ensure that the funds are allocated to their highest value and most efficient use, too few staff with too little training, little transparency in the process of grant approval and distribution, and no mechanisms in place to track the effectiveness or impact of the grants in relation to the sectoral objectives of improving competitiveness of agricultural products or strengthening rural economies and communities. The fiduciary aspects of the paying system are also weak. In addition to limiting the impact of the grants already being provided by GRS, these systemic shortcomings mean that the grants scheme does not currently meet the requirements for an EU-certified paying system, and would not be able to receive or absorb the EU pre-accession funds that GRS anticipates being eligible for within a few years. In addition, while the funds provided annually by GRS are very substantial overall, the amounts available and taken up for certain types of activities, such as those with a large “public good” element have been limited.
This component aims to help address these constraints and build an efficient, transparent and EU-certifiable rural development support program and paying system, and to increase the availability of funds for certain purposes. It will achieve this through two subcomponents:
(a) Strengthening the system for providing rural development payments:
The objectives of this subcomponent include building capacity for administering investment grant and subsidy programs; improving accessibility and transparency of granting processes; and monitoring and evaluating the distribution, use and impact of investment grants. This component will focus on technical aspects, complementing ongoing support from the -41- European Agency for Reconstruction (EAR) which is helping to establish an EU-compatible fiduciary system. The project will:
support the preparation of an operational manual for the rural development grants program, providing clear and transparent criteria and procedures for review and approval of grant applications, disbursement of funds, and monitoring the use and impacts of the funds with particular reference to the objectives of the GRS Agricultural Development Strategy. This will facilitate both adaptive management of the program itself and development of government policy; and
strengthen MAFWM units responsible for grant administration, both by supplementing existing staff and through training. The project will provide funds to engage a number of long- term local consultants to assist in administration of the program, with the expectation that most of these consultants will be absorbed as regular MAFWM staff within two years17. It will also support the establishment of satellite offices in under-served rural areas to improve outreach and communication with clients, and training for the staff in both procedural/administrative and technical aspects. GEF co-financing will be used specifically to strengthen MAFWM capacity in areas such as agro-environmental production, sustainable land use and rural tourism. This improved capacity will have particularly important benefits in the Stara Planina region and other similar parts of the country, which are generally not well suited to conventional intensive agriculture but have comparative advantage in relation to tourism, niche products and provision of environmental services such as nature conservation and watershed protection.
(b) Increasing investment grant funds for target objectives and areas:
The project will provide incremental funds to be disbursed by MAFWM as grants for specific objectives, including encouraging innovation, collective action and economic diversification. In particular, GEF funds will be provided through a special window to support the global objectives of promoting sustainable land use (particularly well-managed extensive grazing), ecological restoration, sustainable rural tourism and related enterprises, and preservation of natural and agro-biodiversity in the Stara Planina region. This will supplement the limited funds available from GRS for these purposes (in 2005, approximately $ 140,000 equivalent went to farmers in the 4 Stara Planina municipalities. In 2006 the total amount is expected to be about $10 million, of which about $200,000 is likely to go to these municipalities).
The “GEF Window” will also apply somewhat different eligibility criteria than the overall GRS grant scheme. For example, the GRS rural development grants are presently available only to registered farmers and agricultural producers (i.e., people who have paid into the agricultural pension scheme for at least one year). But the objectives of GEF support in the Stara Planina area include encouraging people who are not currently registered agriculturalists to return to the area and initiate appropriate agricultural or tourism activities. The GRS scheme also sets a maximum age of 55 years for recipients in designated marginalized areas such as Stara Planina (compared with 40 years in other areas). A substantial proportion of the residents of the Stara Planina area are older than 55 years (due to out-migration of younger people), but many could make good use of grants for establishment of small tourism businesses (e.g. Bed and Breakfast), handicrafts businesses, etc. The GEF window can also provide investment grants on different terms, up to and including 100% of investment costs 17 Salaries for consultants will be commensurate with those of Ministry staff at the same level, to facilitate this integration -42- (compared with maximum of 60% under the regular GRS scheme), to encourage recipients to undertake activities with a high public goods element (such as ecological restoration) or higher than usual financial risk.
Component 2: Building Knowledge and Capacity of Agricultural Producers and Processors (US$ 13.4 million; of which US$ 1.1 million from GEF)
The agri-food sector has not been able to take advantage of Serbia’s impressive business- related policy reforms to develop and market competitive products. This is largely because of a lack of knowledge concerning modern production methods, product quality standards, market trends, methods of linking up with processors to form efficient, integrated supply chains, and generally how to run a successful business in a competitive, market-driven environment. This applies in particular to the large number of small scale private farmers, who have lost their traditional markets with the collapse of the socialist system and now risk being closed out of both local and regional markets as well. In the absence of such knowledge, much of the structural support provided by GRS is likely to be used inefficiently, to expand obsolete operations, while promising new opportunities are overlooked.
This component will help develop and disseminate the knowledge and technology that Serbian agricultural producers and processors need to in order to overcome these constraints. The GRS currently supports applied agricultural research and extension through a system of competitively awarded contracts. However, the process for determining research priorities is somewhat weak and is mainly focused on traditional agricultural issues and technologies (e.g. developing more productive crop and livestock varieties), and most of the research and extension grants are awarded to official research institutes and agricultural stations which are in many cases under-staffed, under-resourced and not up-to-date.
This component will build upon and strengthen the existing GRS system, to help ensure that the research and extension meet the pressing needs of farmers and agro-processors seeking to operate and compete in the new environment. This includes broadening the range research and extension topics beyond agricultural production technology, to include aspects such as agricultural processing, packaging, marketing, business and financial planning, and economic and social analysis. One important aspect, to be supported in part with GEF funds, is environmentally sustainable practices, integrated pest/crop management, production for organic and other niche markets, extensive livestock breeding and husbandry, pasture management, agro-forestry, soil conservation, effluent reduction, etc.). There is also an urgent need for capacity building for those interested in becoming involved with rural tourism. A second important objective of the component is to expand and diversify the pool of eligible service providers, both by bringing in NGOS, private companies, associations and private individuals to supplement the research institutions and agricultural stations that traditionally receive these contracts, and by strengthening local skills and capacity in the less traditional knowledge areas.
The component will support:
Strengthening of MAFWM capacity: the establishment and capacity building of a unit within MAFWM to administer both the applied research and grant programs18, including setting priorities and targets; inviting and evaluating proposals; awarding 18 Based on a planned transfer responsibility for applied agricultural research from the Ministry of Science, Technology and Development to MAFWM -43- and managing contracts; and monitoring contract implementation and results. This unit will be guided by a multi-sectoral entity (e.g. a Board) including representatives of MAFWM, research institutions and target beneficiaries (agricultural producers and processors). Both the Board and the staff of the unit will receive training and technical support to increase their knowledge and skills for optimal performance;
Incremental funding for contracts for applied research: likely areas for project support include improvement of crops and livestock (taking into account not only straight productivity but also production costs and targeting for specific markets), integrated pest and crop management, mixed farming systems, practical improvements in production, storage, processing and packaging technologies, food safety, environmental management, etc.
Incremental funding for contracts for extension/advisory service delivery: contracts for extension and advisory services will be awarded to local service providers, including existing agricultural stations, academic institutions (e.g. agricultural schools), NGOs, private companies and private individuals. Contractors will develop suitable informational materials and provide information and advice on technologies and methodologies emerging from the applied research program, including a particular emphasis on areas that are important for enhancing competitiveness in the modern marketplace, such as international food safety and quality standards, cost cutting through improved efficiency, accessing organic and other premium and niche markets, organizing to obtain advantages of scale, and building effective linkages between producers and processors. They will also advise and assist clients in the preparation of proposals and business plans needed to access the GRS structural support funds and other sources of financing. In view of the limited technical and business capacity in many rural areas, the project will also support short- term, competency-based training to extension/advisory contractors to enhance their abilities to reach, advise and assist clients.
Component 3: Sustainable Land Use and Ecological Management of the Stara Planina Nature Park (US$ 1.63 million, of which US$ 1.4 million GEF)
The GRS established the Stara Planina Nature Park in 1997 to help preserve the unique natural and cultural values of the area, but the declaration of a protected area is not enough to reverse the ongoing ecological decline. It will require a combination of measures to bring back the traditional land uses to the extent possible, and well-informed, active ecological management. Components 1 and 2 will support research, extension/advisory services and investment grants aimed at giving residents of the SPNP the knowledge, incentives and means to adopt environmentally sustainable land use and agricultural production and processing practices. However, it is not possible to simply turn back the clock and re-establish the physical, cultural and economic landscape of past centuries. Support for restoration of extensive livestock grazing and related businesses is just one tool among others that will need to be deployed in order to maintain this fragile landscape.
Component 3 will support other aspects of improved management of the SPNP, including capacity building and operational support for the management authority (Srbijasume), which currently is mainly focused on developing cutting plans for the state-owned and private forests within the park. Current management of pasture areas is largely limited to patrolling and determining whether pastures are being illegally converted to other use (e.g. cultivated), harvested (haymaking) or destroyed by sod collectors. Srbijasume’s responsibilities (in cooperation with the Institute for Nature Protection) include the preparation of a spatial plan -44- and associated legislation which will divide the Nature Park into zones with specific management objectives core conservation zone, buffer zone, transition/economic zone). However, the process has run into significant obstacles resulting from a lack of consensus among different stakeholders on the objectives and zoning of the area (in particular, proposals to develop potentially destructive ski resorts in some areas that are considered high priority for biodiversity conservation and nature tourism). The fact that much of the park territory is privately owned also introduces complications. The project will support public awareness raising and consensus building and strengthening of cooperation between the park management and local authorities and residents. The objective is to introduce a participatory approach for preparation and implementation of management plans. This component will also support implementation of those aspects of the management plan which would not be addressed through Components 1 and 2, such as ecological restoration work in areas where providing incentives for sustainable private use is not an appropriate approach. This also includes support for improved forest management (particularly in the fragmented, privately- owned patches of natural forest) and control of illegal hunting.
This component will also supplement in various ways the direct technical and financial support that will be provided to farmers under Components 1 and 2 to encourage adoption of sustainable land use and biodiversity conservation activities. For example, it will support the development and implementation of certification systems and product branding to add value to environmentally friendly products that are based on, and help maintain, the biological resources and ecological and cultural values of the SPNP.
The SPNP is the Serbian portion of a much larger transboundary area of international significance. There is a proposal to establish a transboundary Biosphere Reserve The project will strengthening transboundary cooperation, ecological restoration of priority sites (particularly degraded high elevation meadows), certification of “SPNP-branded” local products, small scale infrastructure to support rural/eco-tourism, and establishing an ecological monitoring system. It will also support the preparation of local rural development strategies and plans to enable communities to access community-level grants under the GRS rural development support program.
Another important element of the global objective is the preservation of autochthonous livestock varieties, which represent an important genetic (agro-biodiversity) heritage. This objective is related to sustainable land, as recently introduced “improved” breeds are poorly suited to traditional extensive husbandry methods and often cannot even survive under these conditions. However, most farmers tend to keep herds of mixed-breed livestock, rather than the purebred varieties, in part because the mixed-breeds can combine desirable traits of hardiness and higher productivity and in part because the purebred animals can be difficult to find and to maintain. The project will support the GRS “Strategy for the Conservation of Locally Adapted Breeds, ” supplementing ongoing GRS and local NGO initiatives to maintain the genetic heritage of autochthonous breeds of cattle, sheep, goats, horses, donkeys and pigs. This strategy is consistent with and contributes to regional and international policies and programs to preserve agro-biodiversity.
In addition to the monitoring and evaluation (M&E) of overall project implementation and impacts, there will be a specific M&E plan relating to the global objectives. This will be developed and implemented by the NGO or firm selected to support implementation of the GEF-supported activities in the southern region. The M&E plan will include use of the GEF Tracking Tool for SP-2 (biodiversity conservation outside of Protected Areas). Although the
-45- SPNP is a designated PA, falling within the IUCN Category V19 , the focus on the project is on conservation in the production/sustainable use areas of the park, rather than the core conservation areas. Therefore, using the Tracking Tool for SP-1 (sustainability of PA systems) would not be appropriate given the objectives of the project. In addition, specific outcome indicators will be identified relating to objectives such as stakeholder participation in park management, development of commercially viable organic/biodiversity friendly products, and increase in populations of endangered autochthonous breeds.
Component 4: Project Management and Coordination (US$ 236 million, of which US$ 0.2 million from GEF)
The project will be managed as an integral program of MAFWM, without the establishment of a separate project implementation unit. This component will support incremental costs of consultant services, training, equipment and operations to facilitate project implementation (including procurement and financial management), monitoring and evaluation and reporting. This will include contracting a local NGO or company based in the Stara Planina area to support implementation of the GEF-financed activities, particularly under Component 3.
.
19 IUCN Category V Protected Area = Protected Landscape (or Seascape), defined as area of land where the interaction of people and nature over time has produced an area of distinct character with significant aesthetic, ecological and/or cultural value, and often with high biological diversity. Safeguarding the integrity of this traditional interaction is vital to the protection, maintenance and evolution of such an area -46- Annex 5: Project Costs
SERBIA and MONTENEGRO: TRANSITIONAL AGRICULTURAL REFORM PROJECT
1. FINANCING PLAN
The project would involve an IBRD Loan of USD 25 million, a GEF grant of USD 4.5 million, and a contribution from the recipient of USD 7.31 million, including USD 5 million from MAFWM budgetary resources for rural development and animal genetic resource conservation and USD 2.31 million from local beneficiaries (cash and in-kind).
Local Costs Foreign Costs Total Project Cost by Component (USD million) (USD million) (USD million)
Total Baseline Cost Operating Costs Contingencies
Total Project Cost Total Financing Required
Note 1: In the PAD Main text, and Annex 4, Operating Costs are included in the cost of Component 1.
-47- Annex 6: Implementation Arrangements
SERBIA and MONTENEGRO: TRANSITIONAL AGRICULTURAL REFORM PROJECT
The duration of the project is 4 years, with completion expected at XXX.
TBC
-48- Annex 7: Financial Management and Disbursement Arrangements
SERBIA and MONTENEGRO: TRANSITIONAL AGRICULTURAL REFORM PROJECT
1. Summary of the Financial Management Assessment
Country issues
Financial risk Analysis
Strengths and Weaknesses
Implementation Arrangements
Implementation Arrangements are described in detail in Annex 6 above.
Funds Flow
Staffing of the Accounting/Finance Function
Accounting Policies and Procedures
Reporting and Monitoring
Information systems
Impact of Procurement Arrangements
Action Plan
Supervision Plan
2. Audit Arrangements
Internal audit
External audit
-49- Disbursement arrangements
The allocation of loan proceeds for the Project is the following:
Category Amount allocated (in % of expenditures to be financed (1) Goods 100% (2) Consultant's services, training 100% and workshops (3) Operating Costs 100%
-50- Annex 8: Procurement Arrangements
SERBIA and MONTENEGRO: TRANSITIONAL AGRICULTURAL REFORM PROJECT Procurement for the proposed Project would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Legal Agreement. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated according the actual project implementation needs.
Procurement of Goods: Goods procured under this project would include: limited IT equipment and of-the-shelf software, books, printed and digital materials if decided by the implementing agency based on the recommendations of the needs assessment. Since there are a very limited number of Goods contracts to be financed from the loan, it is anticipated that only Shopping procedures (for off-the-shelf goods estimated to cost less than Euro 60,000 equivalent per contract) will be used. Direct Contracting may be used in justified cases for procurement of proprietary goods items (for example, software or training materials and publications) subject to prior approval of an updated procurement plan which includes such method for identified Goods contracts by the IBRD.
Selection of Consultants: technical assistance to MoA includes creation of policy framework, improvement in human resources management, development of staff training and professional development plans and other advisory services under two components of the project. Short lists of consultants for services estimated to cost less than Euro 200,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. The following procurement methods would be followed:
(i) Quality and Cost Based Selection (QCBS) procedures would be used for technical assistance packages as listed in the procurement plan;
(ii) Quality Based Selection (QBS) procedures may be used for technical assistance assignments identified at a later stage of the project implementation for which it is difficult to define precise TOR and the required input from the consultants, and for which the Borrower expects the consultants to demonstrate innovation in their proposals;
(iii) Selection under Fixed Budget (FBS) procedures may be used for precisely defined assignments with the limited budget (for example, if at the mid term review of the project a decision is made to add a public information campaign package);
(iv) Least Cost Selection (LCS) procedures would be used for contracting financial audit services;
(v) Selection Based on the Consultants' Qualifications (CQ) procedures would be used for contracting of consulting services for relatively small value, simple assignments below Euro 100,000
(vi) Single Source contracting (of consulting firms) and Sole Source contracting (of individual consultants) may be used in justified cases as per provisions of paragraphs 3.9-3.10 and 5.4 of the Guidelines for Selection of Consultants subject to prior agreement with IBRD and approval of an updated procurement plan which includes such contracts.
-51- Operating Costs: operating costs required to administer project implementation would be procured using the implementing agency's administrative procedures.
Others: the Project will finance training of large number of civil servants and government officials in Slovakia and other countries. Training will be done in form of workshops, study tours, scholarships, grants. Procedures (for award of grants and scholarships) will be developed under HR and Training Needs Assessment (procurement package B.2.1 in the Procurement Plan) and outlined in the Training Manual prepared by the consultant and approved by the Bank prior to any grant and scholarships awards are made. Expenditures for the study tours and workshops not included in consultant's contracts will be disbursed against SOE.
Assessment of the agency's capacity to implement procurement
Procurement Plan
A draft Procurement Plan has been prepared during Pre-appraisal. The Procurement Plan provides the basis for the procurement methods and identifies the contracts subject to prior review by the Bank. This plan will be agreed between the Borrower and the Project Team during Appraisal.
-52- Annex 9: Economic and Financial Analysis
SERBIA and MONTENEGRO: TRANSITIONAL AGRICULTURAL REFORM PROJECT
To Be Completed
Also, see Incremental Cost Analysis
-53- Annex 10: Safeguard Policy Issues
SERBIA and MONTENEGRO: TRANSITIONAL AGRICULTURAL REFORM PROJECT
To Be Completed
-54- Annex 11: Project Processing
SERBIA and MONTENEGRO: TRANSITIONAL AGRICULTURAL REFORM PROJECT
Planned Actual PCN Review Initial PID to PIC Initial ISDS to PIC Appraisal Negotiations Board/RVP Approval Planned Date of Effectiveness Planned date of MTR Planned Closing date
Key Institutions Responsible for preparation of the project:
Bank staff and consultants who worked on the project included:
Title Unit Tijen Arin Environmental Economist (TTL) ECSSD Agi Kiss Lead Ecologist (TTL) ECSSD
Bank funds expended to-date on project preparation:
Bank Resources: US $ Trust funds 0 Total: US $
Estimate Approval and Supervision Costs:
Remaining costs to approval: US $ Estimated total supervision costs (FY06 and 07): US $
-55- Annex 12: Documents in Project File
SERBIA and MONTENEGRO: TRANSITIONAL AGRICULTURAL REFORM PROJECT
1. Project Concept Note 2. Project Information Document 3. Integrated Safeguards Data Sheet
-56- Annex 13: Statement of Loans and Credits
SERBIA and MONTENEGRO: TRANSITIONAL AGRICULTURAL REFORM PROJECT
Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d P092786 2005 HUMAN CAPITAL TA (SIDEM APL #1) 6.47 0.00 0.00 0.00 0.00 6.38 0.14 0.00 P065954 2004 HEALTH REFORM 62.92 0.00 0.00 0.00 0.00 47.56 17.57 0.00 P082879 2004 HEALTH TA 12.38 0.00 0.00 0.00 0.00 11.69 2.09 0.00 P069864 2003 PUB FIN MGMT 5.45 0.00 0.00 0.00 0.00 4.17 1.59 0.00 P038090 2002 SOC BEN REF ADM 23.54 0.00 0.00 0.00 0.00 29.88 18.27 0.50 Total: 110.76 0.00 0.00 0.00 0.00 99.68 39.66 0.50
STATEMENT OF IFC’s Held and Disbursed Portfolio In Millions of US Dollars
Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.
Total portfolio: 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic.
Total pending commitment: 0.00 0.00 0.00 0.00
-57- Annex 14: Country at a Glance SERBIA and MONTENEGRO: TRANSITIONAL AGRICULTURAL REFORM PROJECT
Europe & Upper- POVERTY and SOCIAL Slovak Central middle- Republic Asia income Development diamond* 2003 P o p u l a t i o n , m i d - y e a r (millions) 5 . 4 4 7 3 3 3 5 L i f e e x p e c t a n c y G N I p e r c a p i t a (Atlas method, US$) 4 ,9 0 0 2 ,5 7 0 5 ,3 4 0 G N I (Atlas method, US$ billions) 2 6 . 4 1,2 17 1,7 8 8
Average annual growth, 1997-03 P o p u l a t i o n ( % ) 0 . 0 0.0 1.2 G N I L a b o r f o r c e ( % ) 0 . 5 0.2 1.8 G r o s s p e r p r i m a r y Most recent estimate (latest year available, 1997-03) c a p i t a e n r o l l m e n t P o v e r t y ( % o f p o p u l a t i o n b e l o w n a t i o n a l p o v e r t y l i n e ) ...... U r b a n p o p u l a t i o n ( % o f t o t a l p o p u l a t i o n ) 58 6 3 7 6 L i f e e x p e c t a n c y a t b i r t h ( y e a r s ) 73 6 9 7 3 In f a n t m o r t a l i t y ( p e r 1, 0 0 0 l i v e b i r t h s ) 8 3 1 19 C h i l d m a l n u t r i t i o n ( % o f c h i l d r e n u n d e r 5 ) ...... A c c e s s t o i m p r o v e d w a t e r s o u r c e A c c e s s t o a n i m p r o v e d w a t e r s o u r c e ( % o f p o p u l a t i o n ) 100 9 1 8 9 Il l i t e r a c y ( % o f p o p u l a t i o n a g e 15 + ) .. 3 9 G r o s s p r i m a r y e n r o l l m e n t (% of school-age population) 103 10 3 10 4 S l o v a k R e p u bSlovak l i c Republic M a l e 103 10 4 10 4 U p p e r - m i d d l e - i n c o m e g r o u p PRICES F e m a l e and GOVERNMENT FINANCE 103 10 2 10 4 1983 1993 2002 2003 D o m e s t i c p r i c e s Inflation (%) KEY ECONOMIC RATIOS and LONG-TERM TRENDS ( % c h a n g e ) 1 5 C o n s u m e r p r i c e s 1983.. 19932 3 .2 20023 .3 20038 .5 1 0 Economic ratios* GIm D p P l i c ( i Ut G S $D Pb i ld l i eo f n l a s t ) o r .. 213 8 .5 .4 24 4 .0 .2 34 2 .7 .5 G r o s s d o m e s t i c i n v e s t m e n t / G D P .. 2 4 . 7 2 9 .3 2 5 .3 5 G o v e r n m e n t f i n a n c e T r a d e E x p o r t s o f g o o d s a n d s e r v i c e s / G D P .. 5 6 . 7 7 1.8 7 8 .0 ( % o f G D P , i n c l u d e s c u r r e n t g r a n t s ) 0 G r o s s d o m e s t i c s a v i n g s / G D P .. 2 0 . 3 2 2 .2 2 3 .8 C u r r e n t r e v e n u e .. 3 9 .8 3 5 .6 3 7 .4 9 8 9 9 0 0 0 1 0 2 0 3 CG ru o r r s e s n n t b a tu i od g n e a t l s b a lv a i n gc es / G D P .. 2- 0 1.1 . 8 -2 1.0 1.1 -2 0 4 .4 .2 O v e r a l l s u r p l u s / d e f i c i t .. - 6 .3 10 .0 - 2 .5 G D P d e f l a t o r C P I C u r r e n t a c c o u n t b a l a n c e / G D P .. - 4 .5 - 8 .0 - 0 .9 D o m e s t i c In v e s t m e n t In t e r e s t p a y m e n t s / G D P .. 1.1 3 .8 2 .6 s a v i n g s TRADET o t a l d e b t / G D P .. 2 5 . 4 5 3 .8 5 6 .3 T o t a l d e b t s e r v i c e / e x p o r t s 1983.. 19938 . 5 200219 .3 200315 .6 P( U r S e $s e m n t i lv l i o a ln u s e ) o f d e b t / G D P .. . . 5 3 .9 .. Export and import levels (US$ mill.)
PT o r e t as le e n x t pv o a r l ut s e ( o f o f bd ) e b t / e x p o r t s .. 5 ,4 4 7. . 14 ,7 3 4 8 .4 2 2 1,8 3 8 .. 2 5 , 0 0 0 n .a ...... In d e b t e d n e s s 2 0 , 0 0 0 n .a . 1983-93 1993-03.. 2002.. 2003. . 2003-07.. ( a M v e a r n a u g f e a ac nt u n r u e a s l g r o w t h ) .. 4 ,5 5 4 12 , 5 8 4 19 ,5 10 1 5 , 0 0 0 S l o v a k R e p u b l i c TG o D t P a l i m p o r t s ( c i f ) - 1.9 4 .0.. 6 ,34 7 . 9 4 16 , 44 9 .2 9 2 2 ,4 74 9 .1 1 0 , 0 0 0 G F D o P o p d e r c a p i t a - 2 . 2 3 .9.. 54 5 . 6 4 84 5 .2 0 9 83 7 .8 U p p e r - m i d d l e - i n c o m e g r o u p E F x p u o e r l t a s n o d f eg n o e o r g d y s a n d s e r v i c e s .. 9 .3.. 1,35 2 . 4 5 22 ,2 2 .611 2 ,710 0 5 .4 5 , 0 0 0 C a p i t a l g o o d s ...... 0 STRUCTURE of the ECONOMY 9 7 9 8 9 9 0 0 0 1 0 2 0 3 E x p o r t p r i c e i n d e x ( 19 9 5 = 10 0 ) .. 8 3 13 3 12 9 1983 1993 2002 2003 Growth of investment and GDP (%) Im( % p o o f rG t p D r iP c e) i n d e x ( 19 9 5 = 10 0 ) .. 8 3 14 0 13 5 E x p o r t s I m p o r t s 3 0 TA e g r r m i c us l to u f r et r a d e ( 19 9 5 = 10 0 ) .. 105 . 0 7 94 5 .1 93 5 .7 In d u s t r y .. 3 3 .1 2 8 .6 2 9 .7 1 5 M a n u f a c t u r i n g .. 18 .6 2 0 .1 19 .5 BALANCE of PAYMENTS 0 S e r v i c e s .. 6 1.1 6 7 .4 6 6 .6 9 8 9 9 0 0 0 1 0 2 0 3 1983 1993 2002 2003 - 1 5 ( U S $ m i l l i o n s ) Current account balance to GDP (%) P r i v a t e c o n s u m p t i o n .. 5 4 . 9 5 6 .9 5 5 .3 - 3 0 GE x e p n o e r r t a s l o g o f g v eo r o n d m s e a n n t dc os e n r s v u i c m e p s t i o n .. 7 ,32 4 9 . 8 8 172 ,15 0 .9 1 2 52 ,117 0 .9 0 Im p o r t s o f g o o d s a n d s e r v i c e s .. 8 ,06 1.0 6 1 18 ,7 8 8 2 .9 7 2 5 ,57 2 9 4 .5 9 7 9 8 9 9 G D I 0 0 0 1 G0 2 D P 0 3 R e s o u r c e b a l a n c e .. - 6 6 3 - 1, 6 7 6 - 4 0 7 - 2
N e t i n c o m e .. - 3 8 - 4 5 6 - 12 0 - 4 1983-93 1993-03 2002 2003 Growth of exports and imports (%) N( a e v t e c r a u g r r e e an nt t n r u a a n l s g f er o r s w t h ) .. 10 0 19 3 2 4 9 A g r i c u l t u r e .. 2 . 6 - 1.6 4 .4 -3 6 0 C u r r e n t a c c o u n t b a l a n c e .. - 6 0 1 - 1, 9 3 9 - 2 7 7 In d u s t r y .. 2 . 0 0 .7 9 .2 2 0 F M i n a a n n c u i fn a g c i t t u e r m i n s g ( n e t ) .. 55 8 . 0 5 5 ,17- 1.2 5 1,7 36 6 .6 - 8 CS e h r a v n i c g e e s s i n n e t r e s e r v e s .. 52 . 2 1 - 3 , 26 3 .6 6 - 1,4 52 9 .0 1 0 - 1 0 MP r ie v m a t eo c : o n s u m p t i o n .. 4 .1 5 .2 - 0 .3 0 9 8 9 9 0 0 0 1 0 2 0 3 RG e ns e r av le g s o i n v c e l r u n d m i n e g n g t oc ol d n ( s U u S m $ p m t i o i l l n i o n s ) .. 42 5 . 0 9 9 ,04 9 .7 1 12 ,123 6 .2 - 1 0 CG ro o n s v s e d r s o i o m n e r s a t t i ec i( n D v E e C s t , m l o e c n a t l / U S $ ) .. 3 05 .8 .1 4 52 .3 .2 3- 6 9 .8 .7 E x p o r t s I m p o r t s Im p o r t s o f g o o d s a n d s e r v i c e s 9 .6 9 . 3 5 .2 13 .8
EXTERNAL DEBT and RESOURCE FLOWS 1983 1993 2002 2003 ( U S $ m i l l i o n s ) Composition of 2003 debt (US$ mill.) T o t a l d e b t o u t s t a n d i n g a n d d i s b u r s e d 3 9 9 3 ,3 9 3 13 ,0 13 18 ,3 2 2 IB R D .. 15 1 2 0 4 17 9 A : 1 7 9 ID A .. 0 0 0 D : 1 , 0 6 9 E : 6 3 8 T o t a l d e b t s e r v i c e 4 3 6 4 6 3 ,3 7 7 4 , 12 8 IB R D .. 9 3 1 5 5 G : 7 , 0 0 1 ID A .. 0 0 0
C o m p o s i t i o n o f n e t r e s o u r c e f l o w s O f f i c i a l g r a n t s .. 5 2 9 10 7 .. O f f i c i a l c r e d i t o r s - 1 3 3 3 0 - 12 1 P r i v a t e c r e d i t o r s 5 3 6 4 1,4 4 7 - 3 ,0 6 2 F : 9 , 4 3 5 F o r e i g n d i r e c t i n v e s t m e n t .. 16 6 4 ,0 0 7 .. P o r t f o l i o e q u i t y .. - 2 6 3 -585- 5 2 .. W o r l d B a n k p r o g r a m C o m m i t m e n t s .. 5 5 2 4 0 A - I B R D E - B i l a t e r a l D i s b u r s e m e n t s .. 4 0 0 0 B - I D A D - O t h e r m u l t i l a t e r a l F - P r i v a t e P r i n c i p a l r e p a y m e n t s .. 0 2 2 4 0 C - I M F G - S h o r t - t e r m -59- Annex 15: Incremental Cost Analysis SERBIA and MONTENEGRO: TRANSITIONAL AGRICULTURAL REFORM PROJECT
Overview
The main objectives of the GEF Alternative are to support the conservation of globally important agro-biodiversity and the important transboundary-ecosystem of the Stara Planina, by promoting traditional sustainable and biodiversity-sensitive agricultural practices in and around the Stara Planina Nature Park. Integrated into a larger Government of Serbia and Montenegro IBRD loan with a total project cost of US$36.81 million, the GEF Alternative will:
(a) promote and support entrepreneurial and agricultural activities within the Stara Planina region which ensure the sustainability of natural resources and are compatible with biodiversity conservative objectives by providing supplemental funds for the Government of Serbia’s rural development grant program which will be used for specific environmental activities in the Stara Planina region such as the conservation of agricultural biodiversity, conversion to organic agriculture, ecological restoration, or sustainable rural tourism; supporting research, training and extension services related to environmentally friendly land management practices, including extensive livestock breeding, organic farming, integrated pest and crop management, and sustainable tourism;
(b) help to protect biodiversity and natural resources within the Stara Planina Natural Park by providing capacity building and operational support for the Srbijasume20 management authority to develop and implement management plans; restoring ecological priority areas; develop programs for the certification for locally-based organic agriculture and development of rural eco-tourism; supporting the integration of environmental principles into local rural development strategies; building public awareness of local stakeholders of sustainable natural resource management and biodiversity conservation; strengthening transboundary cooperation with Bulgaria for biodiversity conservation and sustainable tourism development; and establishing comprehensive monitoring systems
The GEF Alternative (US$17.96 million) intends to achieve these outputs at a total incremental cost of approximately US$9.11 million, of which a grant of US$4.5 million is request from the GEF.
The GEF Alternative has been integrated into the larger Transitional Agricultural Reform Project, which has a total project cost of US$36.81 million. Of the total US$25 million of IBRD contribution to the Project, an estimated US$9.06 million will be specifically targeted to environmentally beneficial activities; US$6.32 is considered part of the Baseline, while an additional US$2.74 is considered leveraged funds and part of the GEF Alternative. The Government of Serbia and Montenegro has committed to the financing of US$5.00 million of its resources to the overall project, of which approximately US$1.82 million are specifically targeted to biodiversity objectives and US$0.69 are considered part of the GEF Alternative. Local farmers and beneficiaries of the IBRD and GEF grants are expected to contribute US$2.31 through matching grants and in-kind contributions, of which US$1.04 will have specific biodiversity benefits. US$0.68m of these matching grants are considered a part of the GEF Alternative.
20 Serbia Public Enterprise for Forestry -60- Context and Broad Development Goals
The biodiversity of Serbia is very high, both in ecosystems and species, with many relic and endemic species found in ice age refugia. The mountainous Stara Planina region in the southeast of the country is one of its premiere locations for both natural and agricultural biodiversity. Falling within the transborder West Balkan mountain range, it encompasses much of the Serbian portion of the Balkan Mountains Biodiversity Center, which is one of the six temperate centers of biodiversity in Europe. The government established the Stara Planina Nature Park (SPNP) in 1997 to help preserve the area’s rich biodiversity and cultural heritage, as well as signing a memorandum of agreement with Bulgaria in 1996 to work towards the creation of a transboundary Peace Park. An application is under preparation for the SPNP to be designated as a Biosphere Reserve under the UNESCO Man and Biosphere Program. The mosaic of forests, mountain meadows and wetlands/peat bogs hosts a wide range of wild animal and plant species, including a number of rare endemic species particularly in the alpine and sub-alpine communities. The Stara Planina region is also home to wild ancestors of several economically important species and to a variety of locally adapted autochthonous livestock varieties, many of them unique to the area or endemic to the Balkans, and endangered or threatened throughout their ranges. The richness of the ecosystem was both maintained by, and supported the development of, these local breeds . This ecosystem, however, is under threat from the expansion of intensive agriculture at lower elevations, abandonment of pastures at higher elevantions, and development of inappropriate tourism infrastructure. Establishing natural resources management and the drafting and implementation of protected areas management plans for this area will be critical to halting these threats to the ecosystem.
The proposed GEF Alternative focuses on the issue of introducing more sustainable agricultural practices in the Stara Planina region. The National Environmental Strategy and Action Plan (as well as the Biodiversity Strategy and Action Plan currently under preparation) identifies priority areas for conservation and causes of biodiversity loss. The SPNP area is identified as significant both for the richness of its biodiversity and the potential for transboundary cooperation. In the SPNP, as in other mountain areas, threats include the decline of agri-bioidiversity and livestock varieties due to intensification of farming with exotic varieties, poorly managed grazing , and tourism development which threatens even core protected areas.
The Federal Government of Serbia and Montenegro and the Government of the Republic of Serbia have taken important steps towards improved environmental management in recent years. These include passage in Serbia of a several new environmental laws and development of a new Forest Policy through a highly participatory process. In the agricultural sector, Serbia’s National Agricultural Strategy emphasizes enhancing competitiveness and harmonization with the European Union, in view of the GRS objective of European Union accession on a fast track. This includes aligning Serbia’s agricultural policies with those of the EU. Like the EU Common Agricultural Policy, the GRS support to agriculture is increasingly shifting from commodity subsidies to structural support for rural development, with a strong emphasis on agri-environmental measures, land care and conservation of ecosystems and biodiversity, and conservation of land and agricultural ecosystems. This is demonstrated for example by the GRS rural development grant program, which includes provisions to encourage farmers to invest in environmental management and to promote sustainable land and resource use particularly in marginalized agricultural areas where conventional (intensive) farming may be inappropriate. The GRS policy also emphasizes capacity building and investment to meet other requirements for EU membership and access to EU markets, including in particular the environmental acquis. For example, a recently approved World Bank-financed project will support the upgrading of slaughterhouses and other agricultural processing facilities to reduce nutrient flows into the Danube River. With World Bank, GEF and other donor support, the Government aims to integrate environmental principles into its sectoral policies and activities, build institutional capacity
-61- and raise public awareness regarding sustainable management of natural resources..
Baseline Scenario
Under the Baseline Scenario, it is expected that the Government of Serbia and Montenegro and locally based expenditures related to environmental protection within the agricultural landscape and protected areas management in and around Stara Planina will financed mainly through the GRS (Ministry of Agriculture, Forestry and Water Management) rural development grants program and annual budgets of national and local government institutions concerned with agricultural development, natural resource management and nature protection. The Transitional Agricultural Reform Project, through IBRD financing, will also have significant environmental benefits and portions of the Project which are likely to have been funded even without the GEF additional components, are considered part of the Baseline.
These, plus other programmatic contributions, are summarized in the Incremental Cost Analysis matrix and are discussed below:
The Serbian Ministry of Agriculture, Forestry and Water Management’s Rural Development Grant Programme is expected to provide approximately US$140,000 – 200,000 per year, on the basis of matching grants, to applicants in the four municipalities that comprise the Stara Planina region, for purposes including increasing agricultural productivity, development and marketing of agricultural products and economic diversification (e.g tourism development). It is estimated that approximately 25% of the grants (US$180,000) will be allocated to eco- agricultural and sustainable tourism activities, although it is expected that this percentage will increase as a result of awareness raising, research and capacity building supported by Component 2 of the Transitional Agricultural Reform Project
The Transitional Agricultural Reform Project, financed through the IBRD and counterpart funding from the MoAFW and local beneficiaries, will promote improved systems delivery for rural development grants implemented in the Stara Planina region, additional financing for Serbia’s grant program, research and extension / advisory services. Of the total project cost (US$37.31 million), an estimated US$16.92 will have environmental benefits. US$7.81 of this amount can be considered as part of the Baseline (with the remaining having been leveraged by the GEF component and is considered part of the GEF Alternative);
Governmental support for the management and administration of the Stara Planina Nature Reserve, based on historical funds made available, will be approximately US$40,000 during the life of the Project;
Subsidies and project support from the GRS Department of Genetic Resources for autochthonous breed producers is expected to provide local farmers in the Stara Planina area with approximately US$25,000 per year;
The Loan Programme for the Development of Agriculture for the Dimitrovgrad, Knjazevac, Piot and Zajechar Municipalities is expected to contribute US$540,000 towards agricultural development during the project duration, of which approximately 15% (US$81,000) can be expected to support environmentally friendly agricultural practices. This percentage is likely to increase as the awareness raising, research, and extension and advisory services under the Transitional Agricultural Reform Project progresses;
Agricultural Stations located in the municipalities in and around Stara Planina (Pirot and others) implement research, extension and advisory services, with an estimated 15% of their budgets
-62- (US$256,000) likely to support improved and eco-agricultural practices;
The Regional Environment Center project for Transboundary Cooperation Through the Management of Shared Natural Resources in West Stara Planina is expected to contribute at least US$66,000 during the life of the project for local promotional events related to sustainable agriculture, rural development and rural eco-tourism.
The GRS Danube River Enterprise Pollution Reduction Project (GEF FY05) seeks to reduce nutrient pollution from livestock production and slaughterhouses. In the project region, it is anticipated that approximately $300,000 will be provided in the Stara Planina area for reducing effluents from slaughterhouses.
Local citizens are currently spending an estimated US$5,000a year in the project region to improve local tourism opportunities such as pensions, restaurants, etc.
Cost: Total expenditures under the Baseline Scenario are estimated at US$8.85 million, including US$1.78 million from the Government of Serbia and Montenegro and municipal budgets.
Benefits: Implementation of the Baseline Scenarios will result in only limited protection of biodiversity within the production landscape in and around Stara Planina and limited integration of environmental sustainability measures into local agricultural practices. Many of the initiatives listed under the Baseline Scenario are grant or loan programs for rural communities and farmers for basic rural development activities, and are consistent with the criteria under Pillar 2 of the EU Common Agricultural Policy (CAP). However, since these programs are essentially demand-driven, the degree to which they will support sustainable rural activities such as eco-agriculture, eco-tourism and other environmentally-friendly entrepreneurial activities is uncertain. Only very limited resources are available, mainly from local NGOS, for public awareness and planning activities to strategically guide and assist local stakeholders as they transition to environmentally friendly agricultural practices including maintenance of agro-biodiversity. Management of the SPNP currently focuses almost exclusively on timber production, with little capacity for or investment in ecological management, biodiversity protection or monitoring. Due to the extensive investment needs, existing governmental and other financing efforts in the project area will most likely not have a significant impact on the continuing damage to the agricultural landscapes and loss of biodiversity. Thus, under the Baseline Scenario, these valuable landscapes will most likely continue to be degraded and provide limited environmental benefit over the next decade.
Global Environmental Objective
The GEF Alternative would provide the means (above and beyond the Baseline Scenario) to establish a foundation for sustainable rural development, conservation of agro-biodiversity and protected areas management in the Stara Planina region, in particularly by integrating environmentally sound principles into several rural development programs which already exist in the Stara Planina region. The specific objectives of the GEF Alternative are to promote and support appropriate entrepreneurial and agricultural activities within the Stara Planina region and to help protect biodiversity and natural resources within the Stara Planina Nature Park.
Costs: The total cost of the GEF Alternative, estimated at US$17.96 million, is detailed as follows:
Support for Environmentally Friendly Agriculture and Rural Development: Incremental GEF and IBRD funds will complement existing rural development programs. Under this component, IBRD loans will be used to build the capacity for administering investment grant and subsidy programs, and provide additional investment grant funds for targeted objectives and areas – including sustainable agriculture and tourism. GEF funds will provide specific funding -63- for a special window within the rural development grants scheme to support local communities to initiate activities with high environmental benefits, such as eco-agricultural, ecological restoration or tourism activities. (Total component cost US$19.67 million, of which US$4.01 million considered part of the GEF Alternative; GEF financing US$2 million)
Building Knowledge and Capacity for Eco-Agricultural Producers and Processors: Incremental GEF, IBRD and governmental funds will support applied research, extension and advisory services and public awareness activities for eco-agricultural and rural tourism activities. (Total component cost US$13.5 million, of which US$3.04 million considered part of the GEF Alternative; GEF financing US$1.2 million)
Sustainable Land Use and Ecological Management of the Stara Planina Nature Park: Incremental funds will provide capacity building and operational support for the SPNP management authority (Srbijasume) and other stakeholders to develop and implement management plans and an ecological monitoring system; restore ecological priority areas; develop programs for the certification for locally-based organic agriculture and development of rural eco-tourism; support the integration of environmental principles into local rural development strategies; build public awareness of local stakeholders of sustainable natural resource management and biodiversity conservation; strengthening transboundary cooperation; and establish comprehensive monitoring systems (Total component cost of US1.73 million, all considered part of the GEF Alternative; GEF financing US$1.5 million).
Project Management: Funds will be provided to support operating costs of MAFWM and others, associated with the implementation of project activities, including monitoring, reporting and audit. It will also include meet the costs of a small project office in the Stara Planina region, in view of the diversity of activities to be undertaken (Total project management costs US$2.46 million, of which US$0.33 would focus on management of the GEF Alternative; GEF financing US$0.3 million).
Benefits: Implementation of the GEF Alternative would provide the means for mainstreaming environmental sustainability principals into rural development programs, and restore historical landscapes and agro-biodiversity in and around the Stara Planina Nature Park. Benefits generating from the project would include those classified as “national” as well as those considered “global” in nature – such as the protection of internationally significant biodiversity. The GEF grant has helped to leverage funds from the IBRD, but perhaps most significantly will have a long-term impact on the conventional rural development programs of Serbia.
Incremental Costs
The difference between the cost of the Baseline Scenario (US$8.85 million) and the cost of the GEF Alternative (US$17.96 million) is estimated at US$9.11 million. This represents the incremental cost for achieving sustainable global environmental benefits. Of this amount, the Government of Serbia’s Ministry of Agriculture, Forests and Watersheds has committed an additional US$0.69 million above and beyond the Baseline, and the IBRD loan component of the larger project US$2.74 million. Local beneficiaries participating are expected to contribute approximately US$0.68 million of their own financing through matching grants and in-kind contributions.
Incremental Cost Matrix
Component Category US$ Domestic Benefits Global Benefits million Support for Baseline 3.9 Functioning but On a demand-basis some Environmentally inefficient service governmental rural Friendly delivery for rural development grants may be -64- Agriculture and development programs requested by local farmers Rural Development for environmentally friendly agricultural activities With GEF 7.9 Improved service Increased understanding and Alternative delivery for all rural implementation of development programs; environmentally-friendly increased agricultural agricultural and rural production development activities Incremental 4.0 Benefit Building Baseline 4.6 Limited capacity for Little attention paid to raise Knowledge and research, extension and understanding and awareness Capacity for Eco- advisory services, of how to integrate Agricultural particularly for non- environmental principles into Producers and agricultural activities in landscape production areas Processors rural areas With GEF 7.65 Improved capacity Dedicated research for eco- Alternative agricultural production agricultural and sustainable tourism operations, which will have signficiant impact on not only other research and extension programs, but also the impact of national rural development grant schemes Incremental 3.03 Benefit Sustainable Land Baseline 0.04 Limited capacity to Use and Ecological plan and implement Management of the protected area Stara Planina management in Nature Nature Park Park; limited public awareness, no comprehensive strategy for improving natural resource management With GEF 1.77 Increased opportunities Sustainable conservation Alternative for alternative income management of Nature Park generation in rural natural resources; increased communities; increased awareness and use of capacity to manage biodiversity-friendly protected area; creation agricultural activities; of opportunities for transboundary collaboration education and nature with Bulgaria oriented tourism Incremental 1.73 Benefit Project Baseline 0.29 Not applicable Management With GEF 0.62 Alternative Incremental 0.33 Benefit Totals Baseline 8.85 With GEF 17.96 Alternative
Incremental 9.11 Benefit
-65- Annex 16: STAP Roster Analysis (Review by Michael P. Wells)
SERBIA and MONTENEGRO: TRANSITIONAL AGRICULTURAL REFORM PROJECT
Overview
This STAP review has been based on a draft World Bank project appraisal document (PAD) received on March 7, 2006.
The proposed project has been designed to complement an ambitious reform program launched in 2000 that aims to transform a declining agricultural sector formerly organized along socialist lines into a modern, competitive and more efficient industry that is capable of benefiting fully from a steadily closer relationship with the European Union (EU).
The project aims to: (i) improve and strengthen the government system for delivering rural development investment grants and agricultural subsidies (this includes support for establishing an efficient, EU-compatible farm payment system as well as the implementation of a rural development program consistent with the EU Common Agricultural Policy); (ii) improve the knowledge and capacity of agricultural producers and processors to make the best use of these funds; (iii) increase incentives to farmers to maintain traditional livestock breeds; and (iv) improve the management of Stara Planina Nature Park (SPNP), an area described as having global biodiversity significance.
GEF co-financing will provide incremental funds to increase capacity and incentives for agricultural producers and processors to engage in activities that support agro-biodiversity conservation and sustainable land use, and to support ecosystem restoration and management in SPNP.
The project is submitted under GEF Operational Program (OP) #13 (Conservation and Sustainable Use of Biological Diversity Important to Agriculture). Support for traditional extensive farming systems and the conservation of locally adapted animal breeds is also consistent with the Biodiversity Strategic Priority of “Mainstreaming Biodiversity in Production Landscapes and Sectors”. The project will also contribute to the Strategic Priority of “Catalyzing Sustainability of Protected Areas” by working around a national park, and will also supports OP #4 (Mountain Ecosystems) and contribute to OP #15 (Land Degradation).
The US$ 32 million project is to be financed by an IBRD Loan of US$ 23 million, a GEF grant of US$ 5 million, and a contribution from the recipient of US$ 4 million [is this final?].
The project is to be implemented by the Ministry for Agriculture, Forestry and Water Management (MAFWM). The project will support long term national consultants working under the direction of MAFWM staff. A local NGO or firm will be contracted to implement the GEF-financed activities and to support improved management of the SPNP in collaboration with the responsible government agency, the Public Enterprise for Forests (Srbijasume). A Project Steering Committee will be established to provide strategic guidance, be led by MAFWM and including representatives from local self-governance organizations, NGOS and other key ministries.
This is an important project that provides GEF with an opportunity to influence and steer an innovative government program in a direction that should generate global environmental benefits.
The Project Proposal
Issues emerging from the draft Project Appraisal Document:
-66- 1. Broad Context
It is difficult to assess the viability of the project in the absence of information on the troubled recent history of this region, the wrenching transitions experienced by the population, the considerable political uncertainties and the presumably traumatizing effect of civil strife on the population’s ability or willingness to participate in government-sponsored activities.
The project places a strong emphasis on improving transparency, especially through component 1. It would be useful if more specific information could be provided on how transparency would be improved by the project
3. Relationship to Agricultural Reform Program
As the proposed GEF-financed activities are an integral part of a proposed World Bank loan-financed project, this STAP review includes some consideration of issues raised by the latter. Furthermore, since the proposed World Bank loan and linked GEF project are closely linked to and based on the government’s agricultural reform program, the STAP review also considers issues raised by the PAD description of this program.
While the benefits of the national agricultural reform program are fully described, the potential social and environmental costs receive less attention. The proposal is articulate and persuasive on the benefits of this program, which clearly follows a path World Bank is enthusiastic about. Repeated mention is made of the strong reform emphasis on agricultural intensification and the adoption of modern agricultural practices, while the challenges faced by small farmers are characterized as a barrier to sustainable development (e.g., page 26, para 3). Showing that this is not development that is oblivious of social and environmental considerations, the proposal goes on to state that while “ the overall thrust is for agricultural intensification, the GRS also strongly supports adoption of agri- environmental practices as well as nature protection and conservation of biodiversity in rural areas" (page 3). The GEF funds are clearly to support the latter.
This raises the issue of whether GEF funds are effectively being sought to mitigate negative social and environmental impacts arising from the government’s donor-supported agricultural intensification program, described here in such relentlessly positive terms. An alternative scenario to the rather rosy future picture of reform presented here might be that food production for volatile and competitive export markets will become increasingly dominated by vertically-integrated privately- owned enterprises that will consolidate land holdings, wipe out smallholders or reduce them to casual laborers, destroy rural livelihoods and fuel further migration to towns, while offsite private sector farm owners with little concern for the environment will predominate, all with a disastrous effect on agricultural and wild biodiversity.
To conclude this point, it is suggested that the proposal be modified to include more information and analysis related to the strategic social and environmental issues that will surely arise from the ongoing agricultural reform program. Relevant experience from other countries could be drawn on for such an analysis. This should help the proposal make it clear that this project represents a relatively low-cost opportunity for GEF to steer a much larger investment project and a major reform program in a positive direction for the environment.
4. Lessons
Section 5 on lessons (page 11) should be developed in more detail, specifically concerning the GEF- funded activities.
-67- 5. Effectiveness of Grants
A significant portion of the project funds will be disbursed in grants to support rural development. In the case of the GEF funds, rural development activities that help conserve the environment will be supported. The proposal does not elaborate the safeguards in place to ensure that these grants will be used for their intended purpose. Considerable reliance seems to be placed on the development of an operational manual that will specify how the grant program is to be implemented, together with assurances of transparency and accountability.
Several questions should be clarified before or during the project’s final appraisal, including how much (both GEF and non-GEF funds) is to be disbursed as grants vs. supporting program costs, what the criteria are for these grants, what the maximum grant size will be, how the credentials/bona fides of applicants will be assured, who will select the grantees and how, how the project will ensure that these grants will not support activities that are environmentally damaging, and how tourism will be defined to ensure that environmentally-harmful tourism labeled as ecotourism will not be supported.
The proposal notes that the Government of Serbia already provides significant financial support for various aspects of agriculture and rural development through a program that this project aims to build on. It would be useful to have more information on how this program has performed.
6. Stakeholder Consultations
There is little information on consultations with stakeholders, including the farmers who are the intended beneficiaries.
Since the GEF support targets supporting livestock husbandry based on locally adapted breeds and rural/eco-tourism in the Stara Planina area, it would be good to have some indication that there is local interest in pursuing these opportunities.
7. Viability of Activities to be Supported
It is suggested that the proposal include any work done to assess the financial and economic viability of the agricultural and tourism activities to be supported. Presumably the project hypothesis is that these are potentially viable opportunities that simply need some seed money and technical support to become self-sufficient. Is there any evidence or analysis to support this?
8. Implementation Arrangements
The prospects/risks related to the implementation arrangements could be analyzed and documented in more detail than is currently provided in the risks section on page 14. There are at least three issues:
(i) Does MAFWM, described as fully stretched and no doubt already very absorbed with EU- related issues, have the capacity to manage this project effectively?
(ii) Are there established national NGOS or firms in the area of SPNP, or even elsewhere in Serbia and Montenegro, with the capacity to implement component 3 of the project, which will require fairly advanced and diverse technical expertise (e.g., in unusual livestock breeds and ecotourism) as well as the ability to work with grantees and stakeholders likely to need considerable support?
(iii) How effectively will the park management agency Srbijasume, described as a forestry enterprise with an emphasis on timber management, be able to adopt modern conservation practices and collaborate effectively with MAFWM and a locally-hired NGO or firm?
-68- 9. Sustainability
The proposal states that “The project will provide funds to engage a number of long- term local consultants to assist in administration of the program, with the expectation that most of these consultants will be absorbed as regular MAFWM staff within two years.” This seems vague for such a fundamental aspect of project sustainability. Should this be a covenant of the loan? Subsequently (page 14), the proposal states: “subject to satisfactory performance, they will be converted to MAFWM permanent staff by the mid-term review”. Surely it is the positions that need to become permanent, irrespective of the performance of the individuals that initially fill these positions.
Can nationals with the requisite capacity who are ready to work at government salaries be found?
More Detailed Comments on the Proposal
Page 27: This looks like an excellent list of key constraints to institutional support for agro- biodiversity conservation that the project will need to overcome. It would be useful to show how the project will address these.
Page 31: It is suggest that the indicators related to rural tourism or ecotourism could be made more environmentally specific so that, for example, poorly-planned ski resorts could not count as a positive development.
Annexes 2, 3, 5-7, 8-11, 13 and 15 are still to be completed.
-69- Annex 17: Map SERBIA and MONTENEGRO: TRANSITIONAL AGRICULTURAL REFORM PROJECT
To be included at later stage.
-70-