Technical Assistance Consultant’s Report

Project Number: 44328-012 July 2015

Kingdom of : Uplands Irrigation and Water Resources Management Sector Project (Financed by ADB’s Technical Assistance Special Fund)

Prepared by Lahmeyer IDP Consult Inc. in Association with TANCONS (Cambodia) Co., Ltd.

Metro Manila, Philippines

For Ministry of Water Resources and Meteorology (Executing Agency) Department of Farmer Water User Communes (Implementing Agency)

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.

FINAL REPORT: ADB PPTA-8702 CAM MAIN REPORT & APPENDICES

Proposed Loan Kingdom of Cambodia: Uplands Irrigation and Water Resources Management Sector Project

JULY 2015

Lahmeyer IDP Consult Inc.

In Association with

TANCONS (Cambodia) Co., Ltd

Cover Photographs

Main Canal, Taing Krasaing Main Canal, Prek Chik

This Report consists of One Volume containing the following:

Main Report

Appendices CURRENCY EQUIVALENTS (as of 1 July 2015)

Currency unit – Riel (KR)

KR1.00 = $0.00024 $1.00 = KR4,099.95

ABBREVIATIONS

ADB – Asian Development Bank ADF – Asian Development Fund DFWUC – Department of Farmer Water User Communes DHRW – Department of Hydrology and River Work EA – Executing Agency EARF – Environmental Assessment and Review Framework EIRR – Economic Internal Rate of Return EMP – Environmental Management Plan FWUCs – Farmer Water User Communes GDP – Gross Domestic Product Ha – Hectares IA – Implementing Agency IEE – Initial Environmental Examination IP – Indigenous people IRC – Inter-Ministerial Resettlement Committee MAFF – Ministry of Agriculture, Forest and Fisheries MEF – Ministry of Economy and Financial MOE – Ministry of Environment MOWRAM – Ministry of Water Resources and Meteorology O&M – Operation and Maintenance PAM – Project Administration Manual PDWRAMs – Provincial Departments of Water Resources and Meteorology PMIC – Project Management and Implementation Consultants PMU – Project Management Unit PPMS – Project Performance Monitoring System PPTA – Project Preparatory Technical Assistance RP – Resettlement Plans WRMSDP – Water Resources Management Sector Development Program

NOTES

In this report, “$” refers to US dollars.

TABLE OF CONTENTS

Page

I. THE PROJECT ...... 1 A. Rationale ...... 1 B. Impact and Outcome ...... 2 C. Outputs...... 2 D. Investment and Financing Plans ...... 3 E. Implementation Arrangements ...... 4 II. DUE DILIGENCE ...... 5 A. Technical ...... 5 B. Economic and Financial ...... 6 C. Governance ...... 6 D. Poverty and Social ...... 6 E. Safeguards ...... 6 F. Risks and Mitigating Measures ...... 7 III. SUMMARY FEASIBILITY STUDY OF CORE SUBPROJECTS ...... 8 A. Summary of Prek Chik Core Subproject ...... 8 B. Summary of Taing Krasaing (TKS) Core Subproject...... 14 IV. SUMMARY ECONOMIC AND FINANCIAL ANALYSIS ...... 17 V. SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY ...... 19

ANNEX 1 DESIGN AND MONITORING FRAMEWORK...... 22 ANNEX 2 LIST OF APPENDICES ...... 24

List of Tables

Table 1: Project Investment Plan...... 3 Table 2: Financing Plan ...... 3 Table 3: Implementation Arrangements ...... 4 Table 4: Summary of Risks and Mitigating Measures ...... 7

I. THE PROJECT

A. Rationale

1. Improved macroeconomic stability and public financial management reforms have helped Cambodia’s economy grow over the past decade. Gross domestic product (GDP) was 7% in 2014 and is expected to remain at 6.9% during 2015 to 2016.1Agriculture sector is among the main contributors with 29% share in the national GDP. The sector employs 72.3% of country’s workforce or an estimated five million people. Livelihoods of 80% Cambodians are dependent on agriculture.2

2. The farming systems in Cambodia are largely subsistence oriented. Agriculture is mostly based on rainfed production systems focused on paddy rice production. Even though Cambodia has become self-sufficient in rice and has an exportable surplus, still rice-based farming systems have low income. Despite the annual surplus of 3.3 million tons of paddy, nearly one-quarter of the provinces face food deficit. 11% of households are considered food insecure with many facing a deficit for 1–2 months each year.3

3. Rainfall distribution and river discharges have significant seasonal variability in Cambodia, affecting sustained agriculture production and increasing vulnerability. Timely availability of water and its efficient management is of prime importance to enhance agriculture productivity and for diversification of agriculture and rural economy. Deteriorating irrigation infrastructure is seriously compromising this. Climate change may further affect water availability, particularly during peak requirement, thus further reducing agriculture productivity.

4. Improving agricultural productivity, crop diversification, irrigation and water resources management, and water storage capacity are among the major thrusts of the Government's National Strategy. Irrigated agriculture is given high priority to ensure food security and to further develop the rural economy. Out of the 3.98 million hectares (ha) of agricultural land in Cambodia, about 1.3 million hectares is in command area of 2,730 irrigation systems.4 Most of the irrigation systems are either dysfunctional or under-performing due to deteriorated infrastructure, lack of resources for rehabilitation, and inadequate operation and maintenance (O&M). The two core irrigation systems selected by the project have total command area of 20,200 ha but only 1,015 ha is cultivate during dry season and about 11,000 ha in wet season due to water unavailability. The project will increase the cultivated area to about 28,000 ha during wet and dry seasons by ensuring irrigation supplies.

5. Irrigation consumes about 70% of the Cambodia’s water. Efficient, effective and sustainable management of country’s water resources largely depends upon how smartly irrigation systems are managed by optimizing the utilization of water commensurate with seasonal water requirements of the crops, with minimum conveyance and field application losses. Increased public investments in irrigation infrastructure along with introduction of modernized operational management will ensure increased efficiency and productivity of the irrigation systems. The project’s proposed interventions will enhance agricultural and rural economic productivity through increased efficiency of irrigation systems and improved management of water resources in uplands of Kampong Thom and Battambang provinces.

6. The Project will capitalize on the policy and legal reforms and institutional strengthening done under the ADB financed Water Resources Management Sector

1 The World Bank. Cambodia Data. http://www.worldbank.org/en/country/cambodia/overview (accessed 1 July 2015). 2 ADB. 2014. Agriculture, Natural Resources and Rural Development Sector Assessment, Strategy and Road Map: Cambodia, 2014–2018. Manila. 3 World Food Program. 2008. Comprehensive Food Security and Vulnerability Analysis—Cambodia. . 4 Cambodia Irrigation Schemes Information System, MOWRAM.

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Development Program (WRMSDP).5 The law on farmers’ participation in the O&M of irrigation systems,6 approved in March 2015, will be used as the basis for forming FWUCs and involving them in the design, implementation and subsequent O&M of the subprojects. This will ensure sustainability of Project investments.

7. The project will also develop synergies with the ongoing Climate Resilient Rice Commercialization Sector Development Program