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