Report No. PID8999

Project Name Kosovo-Emergency Farm Reconstruction Project

Region Europe and Central Asia Region

Sector Livestock; Other Agriculture

Project ID KOPE69325 Public Disclosure Authorized Borrower(s) UNMIK (RECIPIENT)

Implementing Agency Address UNMIK THROUGH FAO Department of Agriculture under the Joint Interim Administration Structure (JIAS) Government Building, Pristina, Kosovo Contact Person: Mr. M. Farinelli, Co-Head of the JIAS Department of Agriculture Tel: 381-38-500.223, ext567 Fax: 1-212-963-8603

Public Disclosure Authorized Email:[email protected]

Environment Category C

Date PID Prepared June 12, 2000

Projected Appraisal Date January 2000

Projected Board Date June 2000

1. Country and Sector Background Prior to the conflict in Kosovo between March and June 1999, the rural population accounted for around 65 percent of the total population in Kosovo. An estimated 90 percent of this rural population was engaged in Public Disclosure Authorized agricultural activities either on a full or part-time basis in the years preceding the conflict. As a direct consequence of the conflict, some 75 percent of the rural population was subject to mass migration: some 43 percent of the rural population took refuge abroad and a further 32 percent became internally displaced. By September 1999, around 85 percent of families that had previously left their homes had already returned to their village of origin. As a result of this disruption (and prior months of rising and often violent tensions in 1998) agricultural production as well as related processing industries almost came to a standstill in 1999: the spring cropping season of 1999 was largely forgone and the 1999 wheat harvest was a fraction of normal levels (45 percent of 1997 production). Kosovo currently relies on commercial imports (mainly from Macedonia, Albania, Montenegro and Greece) and large-scale donor relief aid to meet its food demands. Farm assets were damaged on a systematic and massive scale in the course of the conflict. The replacement value of losses of Public Disclosure Authorized animals, destroyed farm buildings, and agricultural machinery is conservatively estimated between US$750 and 800 million. The majority of livestock (cattle: 50 percent, small ruminants: 65 percent, poultry: 85 percent) which contributed around half of the value of agriculture production has been lost or killed. Over half of the agriculture mechanization (tractors: 55 percent, combine harvesters: 75 percent ) are lost or need repair. Many farm buildings (stables, sheds and storage space) have been destroyed, as have the dwellings of many rural families. While fallow land and the loss of cattle can be observed throughout Kosovo, the loss of agriculture mechanization and farm buildings is more concentrated in the western municipalities. Results from a farm damage assessment commissioned by the Food and Agriculture Organization of the United Nations (FAO) and the World Bank suggests that the following group of eight municipalities has been the most severely damaged : Skenderaj/Srbica, Gllogoc/Glogovac, Decan/Decani, Vushtrri/Vucitm, Kline/Klina, Peje/Pec, Istog/Istok and Gjakove/Djakovica.As an input to a medium term reconstruction and recovery program in support of UNMIK, the Bank in collaboration with FAO, prepared an agriculture and rural sector note which provides a detailed analysis of the constraints and opportunities facing the rural economy and the agriculture sector in Kosovo in the aftermath of the conflict waged in 1999, and suggests a medium-term (four year) program of policy actions and public investments to re-launch the rural economy on a path of sustainable and widespread growth. Based on this note, UNMIK has adopted its own agriculture strategy based in key components on the recommendations provided by FAO and the Bank.

2. Objectives The Emergency Farm Reconstruction Project (EFRP) has the objective of helping jumpstart agricultural production over the next two to three cropping seasons and to support re-launching of the rural economy by investing in key farm assets (cattle and farm mechanization) and key agricultural services (veterinary services, and policy analysis and formulation capacity). In doing so the project would support vulnerable households in targeted villages and municipalities in attaining minimum levels of agriculture production and food security through replaced farm assets and improved veterinary services.

3. Rationale for Bank's Involvement The Bank adds value to rural development and re-launching the agriculture sector by having prepared and developed a comprehensive medium term reconstruction framework which addresses policy as well as public investment issues, together with a key partner in this field, the FAO. The Emergency Farm Reconstruction Project prepared jointly by FAO and the Bank, takes key elements of the mentioned medium-term reconstruction framework and translates these elements into an operational concept. By providing a framework, together with the required implementation arrangements, the Bank anticipates to leverage additional donor co-financing that otherwise would not have been available. The Bank has also been instrumental in forging a partnership between UNMIK and FAO under this operation. In addition, in the course of project implementation the Bank will provide managerial and technical input during project implementation in its project supervisory capacity - which has proven to be an important element of project success in the case of the Emergency Farm Reconstruction Project in Bosnia.

4. Description The project comprises the following five components: (a) support to re-establishing the national cattle herd; (b) rehabilitation of veterinary services; (c) farm machinery repair and replacement; (d) agriculture policy capacity building; and (e) project management. Total project costs are estimated at US$25.0 million, of which financing has been secured to

-2 - date for US$11.8 million (US$10.0 million from the Bank's Trust Fund for Kosovo, and US$1.8 million from the Netherlands). The Bank is currently aiming to mobilize bilateral and multilateral resources to address the funding gap of US$13.2 million. Project implementation can go ahead in a meaningful way on the basis of the US$11.8 million currently available (the Initial Phase), as this funding will allow for the cattle restocking and new farm mechanization investments in the first three most damaged municipalities out of a total of eight envisaged municipalities (i.e. Skenderaj/Srbica, Gllogoc/Glogovac, Decan/Decane); as well as to carry out tractor and combine repairs in some four other municipalities. The available funding will also allow to fully finance the rehabilitation of core veterinary services (both veterinary practices and public animal health services) throughout Kosovo; and the agriculture policy capacity building program under UNMIK's Department of Agriculture. Resources provided from The Netherlands (US$1.8 million) will be allocated to finance the Capacity Support Component in full (US$0.9 million) and to finance a major share of the Rehabilitation of Veterinary Services Component (US$0.9 million out of US$1.3 million). All incremental funding made available over and above the first US$11.8 million would be invested in re-establishing the national cattle herd as well as in farm mechanization repair and replacement in five additional municipalities (i.e. Vushtrri/Vucitm, Kline/Klina, Peje/Pec, Istog/Istok and Gjakove/Djakovica). Project preparation activities are being funded through a grant (US$565,000) out of IDA's Trust Fund for Kosovo.Project Components (Total Cost - US$25.0 million / Initial Phase - US$11.8 million)

Support to Re-establishing the Cattle Herd (US$11.8 million / US$4.4 million). Under the initial phase and to assist in the restoration of food security of vulnerable farm families and in the rebuilding of the cattle herd, the project would finance the purchase of around 2,300 heads of imported cattle (this compares with a cattle loss of some 200,000 animals). Animals would be distributed to families who have lost all their cattle during the conflict and have experience in caring for livestock, within three municipalities with the highest incidence of agriculture damages (Skenderaj/Srbica, Gllogoc/Glogovac, Decan/Decane). Recipient farm families would be provided with after-delivery services (veterinary services, feed concentrate, artificial insemination) to ensure proper care of animals.

Rehabilitation of Veterinary Services (US$1.3 million / US$1.3 million). To rapidly restore critical animal health services in Kosovo, the project would provide basic kits of veterinary equipment to de facto private veterinarians throughout Kosovo operating out of municipal veterinary stations. On the side of public veterinary services, the project would equip a central diagnostic laboratory and rehabilitate some three regional public animal heath centers. The project would also provide equipment to support artificial insemination services.

Farm Machinery Repair and Replacement (US$7.9 million / US$3.3 million). Roughly 50 percent of tractors have been lost or damaged throughout the province. Under the initial phase, repairs of more lightly damaged tractors (some estimated 1,600 tractors), and combine harvesters would be carried out in four municipalities (Prizren/Prizren, Rahovec/Orahovac, Gjakove/Djakovica; and one further municipalities to be determined). Some

- 3 - 120 new tractors would be provided under the initial phase in the three municipalities included under the Cattle Component, as would critical farm implements (ploughs, harrows, etc.) to ensure land cultivation, in villages where critical tractor deficits persist (taking into account potential repairs provided).

Capacity Building Support (US$0.9 million / US$0.9 million). To support UNMIK in analyzing and formulating a broad range of agriculture policy issues and responses, the project would provide international and national expertise to work within the UNMIK structures in the newly established Agricultural Department of the Joint Interim Administration. Capacity building would include training to Kosovar professionals. It would also provide UNMIK with limited consultant staff (both international and local) to cooperate with key minorities. These institution building activities would also establish key capacities in collecting and maintaining agriculture statistics and databases. The premises of the new UNMIK Department of Agriculture which were damaged during the conflict would also be refurbished.

Project Management Component (US$3.1 million / US$1.9 million). Implementing the above activities in the current environment in Kosovo to acceptable technical and fiduciary standards poses considerable management challenges. To meet these challenges, a Project Management Team (PMT) made up of a blend of local and international staff will be established and placed under the umbrella of the FAO Emergency Coordination Unit in Pristina. The PMT will be supported by technical expertise, and will implement activities in close collaboration with selected international and local NGOs.

Project Preparation. A project preparation grant (US$565,000) has recently been provided by IDA prior to project approval to expedite preparation and initial start-up of project activities thus ensuring an effective subsequent implementation.

5. Financing Total ( US$m) GOVERNMENT 0 IBRD 0 IDA 0 GOVERMENT OF THE NETHERLANDS 1.8 WB TRUST FUND FOR KOSOVO 10.0 OTHER DONORS (UNIDENTIFIED) 13.2 Total Project Cost 25.0

6. Implementation As the recipient of IDA and other donor co-financing under this project, UNMIK will have overall responsibility for the implementation of this operation. In the light of UNMIK's limited implementation capacity, the EFRP will be executed by the FAO through the FAO Emergency Coordination Unit (FAO/ECU) in Pristina with support from FAO Headquarters. FAO, supported through the FAO/ECU in Pristina, will implement all project components in coordination with UNMIK, and be responsible for procurement,

- 4 - financial management and disbursements. The FAO/ECU was established in Pristina shortly after the end of the conflict in Kosovo during July 1999, and has since had an impressive track record in executing FAO relief operations as well as in coordinating numerous NGOs implementing agriculture relief activities during the Summer and Fall of 1999. FAO is establishing a Project Management Team (PMT) during the on-going preparation and initial start-up phase. The PMT will carry out implementation and project management under the responsibility of the FAO Emergency Coordinator in Pristina (who is the Head of the Kosovo-based FAO/ECU) and relevant technical departments at FAO Headquarters. The PMT will be managed by an international team leader and a Kosovar deputy team leader, and provide for procurement and financial management expertise, as well as support staff. To carry out technical implementation, FAO will recruit international and local expertise in the following areas: (i) veterinary and livestock expertise, (ii) farm mechanization, (iii) monitoring and evaluation, and (iv) rural sociology. Beyond the partnership with FAO, a number of NGOs will be involved in carrying out a beneficiary selection process and in implementing the cattle restocking and the farm mechanization components at the municipality and village level. NGOs have played a key role in recent agriculture relief efforts in designated geographical areas of responsibility (jointly agreed upon by the NGOs and the FAO/ECU) to ensure a coordinated approach in providing relief services. To build on the expertise gained on the ground by NGOs over the past months, FAO will contract services with a number of international and local NGOs.

7. Sustainability Technical sustainability of delivered assets will be achieved through a careful selection of the types of animals and tractors which are suitable to local conditions and requirements of farmers: (i) cattle breeds combining adequate milk production and rusticity are known and appreciated by local farmers; and (ii) one standard type of tractors and three types of implements which correspond to those mostly used and appreciated by farmers. In addition, the related services (veterinary services, artificial insemination, quarantine, diagnosis laboratory, repair services for machinery, private dealers of spare parts) will be supported by the project to ensure continued service of imported assets. The types of assets being distributed by the project and associated follow-up activities suggest eminent sustainability. The project is making considerable provisions to provide after-delivery services to recipients in terms of veterinary and nutritional follow-up for cattle, and monitoring of tractor use and sharing. The community involvement in the distribution and use of the tractor should also ensure that it continues to be used as a community asset beyond the project cycle. Re-establishing veterinary services will also contribute to safeguarding the existing animal stock in the province and is likely to become an institutionally sustainable service.

8. Lessons learned from past operations in the country/sector Many lessons of the successful Emergency Farm Reconstruction Project in Bosnia (1997 - 1998) are reflected in this operation. Similar activities (livestock, farm mechanization, veterinary support activities) were also undertaken under the agriculture component of the Emergency Reconstruction Project in Croatia (1995 - 1997). A first lesson is that simplicity of design is an important element in successful implementation of an

- 5 - emergency reconstruction project. Second, if full cost recovery is not feasible partial grant-based support explained up-front to recipients is preferable to the moral hazard created by unenforceable credit arrangements. Third, technical lessons have been learned from the Bosnia experience: imported sheep and, in particular, goats experienced serious adaptation problems and are therefore excluded from the operation in Kosovo. Similarly, smaller motorcultivators and associated attachments distributed under the project in Bosnia proved to be in low demand; in addition an agriculture damage and needs assessment survey confirmed little interest in motorcultivators; as a consequence, this type of equipment will also not be provided under the EFRP in Kosovo. Fourth, compliance with beneficiary selection criteria established under the mentioned project in Bosnia was poor as the selection process was carried out by the regional public administration which tended to allocate on the basis of political rather than technical/social criteria. In the case of the operation in Kosovo, a transparent and systematic consultation process with community level participation and checks and balances will help contribute to minimizing errors of inclusion or exclusion. Beyond the immediate implementation lessons associated with the Emergency Farm Reconstruction Project in Bosnia, an overall retrospective of the Bosnia post-conflict experience indicates that key for re-launching economic activities consists of addressing developmental and institutional issues up front, beyond striving for mere and immediate physical reconstruction targets. The Kosovo EFRP aims at doing so by including private sector (in particular veterinary services) and capacity building elements (UNMIK Department of Agriculture) into the design.

9. Program of Targeted Intervention (PTI) N

10. Environment Aspects (including any public consultation) Issues : No major environmental issues are foreseen for the project. The limited scope, relative to conflict damages, of new cattle, new farm mechanization and veterinary equipment provided does not raise environmental concerns. Animals will only be given to farmers with experience of rearing livestock and who lost all their cattle in the conflict. The number of cattle being provided and the geographically wide-spread distribution across many communities will not put pressure on pasture and grazing resources. The farm mechanization replacement and repair scheme does not entail environmental issues. The imported tractors will be as close as possible to existing mechanization levels. No environmental issues are envisaged under the capacity building component. Minor civil works associated with the refurbishing of three veterinary stations and of the premises of the UNMIK Department of Agriculture will be carried out under conditions such that they are acceptable to neighboring communities and with materials not presenting any currently foreseeable harm to health and the environment.

11. Contact Point:

Team Leader Severin L. Kodderitzsch The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: 1-202-458.2164

-6- Fax: 1-202-614.06.98

12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www.worldbank.org/infoshop

Note: This is information on an evolving project. Certain components may not be necessarily included in the final project.

Key Agencies and Contact Persons Mr. M. Farinelli, Co-head of the UNMIK Joint Interim Administration Structure (JIAS) Department of AgricultureGovernment Building, Pristina, Kosovo Telephone No.: (381) 38500 223, ext 5671 Fax No.: 1 212 963 8603 email: [email protected] Mr.D. Donati Head of the Emergency Coordination Unit Pristina World Food Programme Building, Pristina, Kosovo Telephone No.: (871) 761 943269 email: [email protected] Mr. L Thomas, Senior Operations Officer Special Relief Operations Service, Technical Cooperation Department, Food and Agriculture Organization of the United Nations Viale delle Terme di Caracalla, 00100 Rome, Italy Telephone No.: (39) 06 557 55042 Fax No.:(39) 06 570 53152 email: [email protected]

Processed by the InfoShop week ending June 16, 2000.

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