ANZDEC Report
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ADB TA 7230 BAN: PPTA for the Second Crop Diversification Project FINAL REPORT PREPARED FOR The Ministry of Agriculture, the Department of Agricultural Extension, and the Asian Development Bank November 2009 CURRENCY EQUIVALENTS (As at 22 October 2009) Currency Unit - Bangladesh taka (TK) $1.00 - TK68.70 TK1.00 - $0.14556 ABBREVIATIONS AD – Additional Director (DAE, Regional Level) ADB – Asian Development Bank AEO – Agricultural Extension Officer ASPS II – Agricultural Sector Program Support Phase II (DANIDA) BABA – Basic Bank BADP – Bangladesh Agribusiness Development Project BARI – Bangladesh Agricultural Research Institute BBS – Bangladesh Bureau of Statistics BME – Benefit Monitoring and Evaluation (Survey Report) CAR – Capital adequacy ratio DAE – Department of Agricultural Extension DANIDA – Danish International Development Agency DD – Deputy Director (DAE District Level) DD – Deputy Director (DAE, District Level) EB – Eastern Bank GAP – Gender Action Plan HDTC – Horticulture Development Training Center HES – Horticultural Extension Specialists HVC – High value crops IFAD – International Fund for Agriculture Development ISO – International Standards Organization LGED – Local Government Engineering Department MFI – Micro Finance Institutions MMC – Market management committee MOA – Ministry of Agriculture MOF – Ministry of Finance NAP – National Agricultural Policy NATP – National Agricultural Technology Project NCDP – North West Crop Diversification Project NFPP – National Food Policy Plan NGO – Non Government Organization OFSSI – On Farm Small Scale Infrastructure PIU – Project Implementation Unit PKSF – Palli Karma-Sahayak Foundation PMU – Project Management Unit PPMS – Project Management Unit PPTA – Project Preparation Technical Assistance RCS – Rural Credit / NGO Specialist RDA – Rural Development Academy RDRS – Rural Development RRF – Rural Reconstruction Foundation (NGO) RRP – Report and Recommendation to the President SAAO – Sub Assistant Agricultural Officer t – Metric tonne UAO – Upazila Agricultural Officer NOTE(S) $ refers to United States Dollars Government refers to the Peoples Republic of Bangladesh CONTENTS Page LOAN AND PROJECT SUMMARY i MAP OF PROJECT AREA vi I. INTRODUCTION 1 A. Background 1 B. Definitions of terms used in this report 1 II. THE PROPOSAL 2 III. RATIONALE: SECTOR PERFORMANCE, PROBLEMS AND OPPORTUNITIES 2 A. Performance Indicators and Analysis 2 B. Analysis of Key Problems and Opportunities 3 IV. THE PROPOSED PROJECT 10 A. Impact and Outcome 10 B. Outputs 11 C. Outputs 11 D. Special Features 21 E. Project Investment Plan 21 F. Financing Plan 22 G. Implementation Arrangements 23 V. PROPOSED TECHNICAL ASSISTANCE 28 VI. PROJECT BENEFITS, IMPACTS, ASSUMPTIONS, AND RISK 28 A. Benefits and Impacts 28 B. Risks and Mitigation Measures 31 VII. ASSURANCES AND CONDITIONS 31 A. Specific Assurances 31 B. Conditions for Loan Effectiveness 32 C. Conditions for Disbursement 33 APPENDIXES 34 1 Design and Monitoring Framework 34 2 Summary of Agriculture Sector Analysis 38 3 External Assistance to Agriculture and Rural Development 48 4 Credit Line Delivery Through MFIs and Wholesale Banks 49 5 Cost Estimates and Financing Plan 53 6 Implementation Schedule 55 7 Procurement Plan 57 8 Outline Terms of Reference for Consultants 58 9 Outline Terms of Reference of TA Consultants 71 10 Project Justification and Economic Analysis 73 11 Summary of Initial Environmental Examination 79 12 Summary Poverty Reduction and Social Strategy (SPRSS) 85 13 Gender Action Plan (GAP) 92 14 Project Implementation Arrangements 94 15 Project Management Staffing 100 16 Project Management Structure 102 SUPPLEMENTARY APPENDIXES (available on request) A Detailed Sector Analysis B Calculation of Interest Rates for Lending C Evaluation of NGO-MFI and Financial Wholesalers D Agricultural Sector Credit Delivery E Detailed Cost Estimates F Economic and Financial Analysis G Initial Environmental Examination H Environmental Assessment & Review Procedures I Social and Gender Development Action Plan J Indigenous Peoples Development Assessment K Detailed TOR for TA Consultants (Climate Change) L Financial Management Questionnaire LOAN AND PROJECT SUMMARY Borrower Peoples Republic of Bangladesh. Classification Targeting classification: General intervention. Sector: Agriculture and Natural Resources. Sub sectors: Agricultural production, agroprocessing, agribusiness. Themes: Sustainable economic growth; gender and development; private sector development. Location impact: Rural (high impact), and national (medium impact) Environment Assessment Category C – An initial environmental examination was undertaken. A summary of the IEE is attached to this report under Appendix 11 Project Description The Second Crop Diversification Project (SCDP) is a “follow on” Project to the ADB financed North West Crop Diversification Project (NCDP). The Project will reduce poverty by improving farmers’ incomes in 16 Districts and 39 Upazilas in the South and South West of Bangladesh; and in 9 Districts and 9 Upazilas in the north west of the country. The Project is market orientated and demand driven and will foster the commercialization of agriculture through interventions to promote diversification into high value crop (HVC) production and value addition. The Project will also strengthen institutional capacity in the agricultural sector. Project impact, outcome and outputs will be achieved through the implementation of 5 components, viz; 1: HVC Production Support; 2: Value Addition Support; 3: Credit Support; 4: Institutional Strengthening; 5: Project Implementation Support Project implementation plans respond to the needs of farmers at grass roots level, which will be identified in a “bottom” up participatory manner. The primary focus of the Project is the improvement of farmers’ capacity and knowledge to produce HVC and access markets, efficiently. Rationale The Project conforms to the Government’s priority agenda in national poverty reduction strategy, with agriculture sector development and diversification into HVC a key area of strategic focus under rural development activities. The Project focuses on the North West and South West areas of the country, South and West of the Jamuna, Padma and Ganges rivers, which contains some of its poorest people and least developed areas. The regional focus of the Project helps address the growing East/West divide in the incidence of poverty and economic development of the country, which is a growing Government concern. Furthermore, whilst the NCDP had positive outcomes, it was limited in its geographical scope, supply side driven, and did not place sufficient emphasis on marketing and the integration of the value chain. The SCDP will address these issues in its outputs. Impact and Outcome The Project’s impact will reduce rural poverty and increase economic development in the Project areas of the North West and South West of Bangladesh. The Project’s outcomes are improved high value crop production, value addition, and marketing efficiency by small and medium farmers. Project Investment Plan The investment cost of the Project is estimated at $ 45.95 million equivalent including taxes and duties of $ 1.7 million. Financing Plan A loan not exceeding $ 40 million will be provided from ADB’s Special Funds resources Project Financing Plan in $ millions Source Total % ADB 40.00 87 Government 5.62 12 Community investors 0.33 1 Total 49.95 100 Allocation and Relending It is proposed that financing be provided from ADB's Special Funds Terms resources with a loan maturity of 32 years, including a grace period of 8 years, and with an interest charge of 1% during the grace period and 1.5% thereafter. Period of Utilization Until December 2016 Estimated Project July 2016 Completion Date Executing Agency (i) The Department of Agricultural Extension (DAE) of the Ministry of Agriculture (MOA); and (ii) The Bangladesh Bank (BB). Implementation The implementing agency for components 1, 2, 4 and 5 will be the Arrangements DAE. BB is the implementing Agency for Component 3. Both DAE and BB were the implementing agencies for the NCDP. Credit will be channelled to beneficiaries through wholesale banks and MFI’s Overall Project supervision and inter agency coordination will be undertaken by a Project Steering Committee (PSC), established under the auspices of the Ministry of Agriculture. A Project Management Unit (PMU) will be established in Dhaka, and 2 regional Project Implementation Units (PIU) established at Jessore, and Bogra, covering the South West and North West Project areas respectively. Project implementation arrangements will be supported by DAE field offices throughout the Project area, and, additionally, the Project will form partnerships with private sector agribusinesses and other interested stakeholders through service provision contracts. Procurement Procurement of all goods and services under the Project will be in accordance with ADB’s Procurement Guidelines (2008, as amended from time to time). All small and widely dispersed civil works of up to $30,000 will be undertaken by the community, following the community participation guide. Shopping will be used for works exceeding $30,000 but no more than $100,000. For works valued at more than $100,000 but no more than $1,000,000, civil work contracts will be required and procured by PMU on the basis of national competitive bidding in accordance with the Government’s procurement procedures acceptable to ADB. Supply contracts for equipment or materials exceeding $1.0 million will