Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized

Report No: 35392-AM

PROJECT APPRAISAL DOCUMENT

ON A Public Disclosure Authorized

PROPOSED CREDIT

IN THE AMOUNT OF SDR 4.4 MILLION (US$6.25 MILLION EQUIVALENT)

TO THE

REPUBLIC OF ARMENIA

FOR A Public Disclosure Authorized AVIAN INFLUENZA PREPAREDNESS (AIP) PROJECT AS PART OF THE GLOBAL PROGRAM FOR AVIAN INFLUENZA (GPAI)

May 1,2006

Environmentally and Socially Sustainable Development Unit Europe and Central Asia Region Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS

(Exchange Rate Effective March 31,2006)

Currency Units = Armenian Dram (AMD) AMD455 = US$1

FISCAL YEAR January 1 - December 3 1

ABBREVIATIONS ANI) ACRONYMS

AI Avian Influenza MAP Multi-country APL AIP Avian Influenza Preparedness MDTF Multi-Donor Trust Fund APL Adaptable Program Loan MOA Ministry ofAgriculture ASEAN Association of Southeast Asian Nations M&E Monitoring and Evaluation BSL Bio-Safety Level MONP Ministry ofNature Protection CDC US Center for Disease Control MOH Ministry ofHealth CE Catastrophic Events NAPA National advance purchase agreements DIVA Differentiation ofinfected from vaccinated NARES National Agricultural Research and Animals Extension Systems EA Environmental assessment NCB National Competitive Bidding ECDPC European Center for Disease Prevention and NDCC National Disease Crisis Center Control EMP Environmental Management Plan OIE World Organization for Animal Health ERA Emergency Recovery Assistance OP Operational Policy ERL Emergency Recovery Loan POM Project Operational Manual FA0 Food and Agricultural Organization PP Procurement Plan FMR Financial Management Report NGO Non-governmental organization GDP Gross Domestic Product San-Epid State Hygiene and Anti-Epidemic Inspectorate GF-TAD Global Framework for Progressive Control of SARS Severe Acute Respiratory Syndrome Trans-boundary Diseases GPAI Global Program for Avian Influenza and Human SOE Statement ofExpenditures Pandemic Preparedness and Response HIV/AIDS Human Immune-deficiency ViruslAcquired TCP Technical Cooperation Program Immune Deficiency Syndrome mAI Highly pathogenic avian influenza TF Task Force H5N1 Avian Influenza A virus subtype H5N1 TF Trust Fund HSMP Health Systems Modernization Project ICB International Competitive Bidding UNDP UnitedNations Development Program ILI Influenza-like illness VMI Veterinary Marz Inspection IMTF Inter-Ministerial Task Force VSI Veterinary State Inspection JSDF Japanese Social Development Fund WAHIS World Animal Health Information System LDCC Local Disease Crisis Centers

Vice President: Shigeo Katsu Country Managermirector: Donna Dowsett-Coirolo Sector Manager: Juergen Voegele Task Team Leader: Mark R. Lundell ARMENIA AVIAN INFLUENZA PREPAREDNESS PROJECT

CONTENTS

Page

A . STRATEGIC CONTEXT AND RATIONALE ...... 1 1. Global regional and national sector issues ...... 1 2 . Rationale for Bank involvement ...... 4

B. PROJECT DESCRIPTION ...... 5 1. Lending instrument ...... 5 2 . Project development objective ...... 5 3 . Project components ...... 5 4 . Lessons learned and reflected in the project design...... 11 5. Alternatives considered and reasons for rejection ...... 13

C. IMPLEMENTATION ...... 13 1. Partnership arrangements ...... 13 2 . Institutional and implementation arrangements ...... 13 3 . Monitoring and evaluation ofoutcomeslresults ...... 14 4 . Sustainability* ...... 15 5 . Critical risks and possible controversial aspects ...... 15 6 . Main credit conditions ...... 17 D. APPRAISAL SUMMARY ...... 18 1. Economic analysis ...... 18 2 . Technical ...... 18 3 . Fiduciary ...... 20 4 . Environment and social aspects ...... 21 5 . Safeguard policies ...... 21 6 . Policy Exceptions and Readiness...... 22

Annex 1: Ten things you need to know about pandemic influenza (WHO .14 October 2005) ...... 23 Annex 2a: Summary and Review of the Avian Influenza Action Plan ...... 26 of the Republic of Armenia ...... 26

Annex 2b: Organization of the Veterinary Services and the Health Care System in the Republic of Armenia...... 29 Annex 3: Results Framework and Monitoring ...... 32 Annex 4a: Detailed Project Description ...... 40 Annex 4b: Culling and Compensation Procedures...... 49 Annex 5: Project Costs ...... 64 Annex 6: Implementation Arrangements ...... 65 Annex 7: Procurement, Financial Management, and Disbursement Arrangements ...... 66 Annex 8: Economic Analysis ...... 72 Annex 9: Safeguard Policy Issues...... 77 Annex 10: Project Preparation and Supervision ...... 79 Annex 11: Documents in the Project File ...... 80 Annex 12: Statement of Loans and Credits ...... 83 Annex 13: Country at a Glance ...... 84 Annex 14: IBRD 33364 ...... 86

ARMENIA

AVIAN INFLUENZA PREPAREDNESS PROJECT

PROJECT APPRAISAL DOCUMENT

EUROPE AND CENTRAL ASIA

ECSSD

Date: May 1,2006 Team Leader: Mark R. Lundell Country Director: D-M Dowsett-Coirolo Sectors: General agriculture, fishing and Sector ManagerDirector: Juergen Voegele forestry sector (50%); Health (50%) Themes: Natural disaster management (P);Other communicable diseases (P);Rural policies and institutions (S);Other environment and natural resources management (S) Project ID: PO99832 Environmental screening category: Partial Assessment

Lending- Instrument: Emergency Recovery Credit Project Financing Data [ ]Loan [XI Credit [ 3 Grant [ ] Guarantee [ ] Other:

For LoanslCreditslOthers: Total Bank financing (US$m.): 6.25 Proposed terms: Standard IDA charges and terms of40 years maturity including 10 years grace Financing Plan (US$m) Source Local Foreign Total BO~O~~C~~NT1.05 1.10 2.15 INTERNATIONAL DEVELOPMENT 3.15 3.10 6.25 AS SOCIATION US: AGENCY FOR INTERNATIONAL 0.07 0.06 0.13 DEVELOPMENT (USAID) JAPAN: MINISTRY OF FINANCE - 0.35 0.45 0.80 PHRDGWTS Total: 4.62 4.71 9.33

Borrower: Republic ofArmenia Armenia Responsible Agency: Ministry of Agriculture Government Building No. 3 Yerevan, 375010 Armenia Tel: t-374-10-524641, Fax: +374-10-524610 Ministry of Health Government Building No. 3 Yerevan, 375010 Armenia Tel: +374 -10 582413 Fax: 374 1 56 27 83

Does the project depart from the CAS in content or other significant respects? As part ofthe Global Program for Avian Influenza, this operation is of an [ ]Yes [XINO emergency nature. It was not foreseen in the CAS, but is not inconsistent with the CAS. Does the project require any exceptions from Bank policies? Re$ PAD D.6 The only policy exception requested has been with regard to the waiver ofthe [XIYes [ ] No completion ofthe EA and EMP per para. 12 ofOP 4.01. This waiver has been

[XIYes [ ]No [[ ]yes [XINO Does the project include any critical risks rated “substantial” or “high”? [XIYes [ ]No Re$ PAD C.5 Does the project meet the Regional criteria for readiness for implementation? [XIYes [ ]No Re$ PAD D.6

Component 1: Animal Health will support activities on prevention, control and eradication ofthe HPAI.

Component 2: Human Health will focus on activities to reduce the impact ofHPAI by building an effective national public health response strategy and an enabling environment and the necessary resources to bring proven interventions quickly up to nationwide scale. Component 3: Public Awareness and Implementation Support will provide information and communication activities to increase the attention and commitment ofgovernment, private sector, and civil society organizations, and to raise awareness, knowledge and understanding among the general population about the risk and impact ofa potential pandemic. Component 4. Support to Critical Imports would finance, under Emergency Recovery Assistance (ERA) procedures, a positive list ofcritically needed imports identified as necessary to a response program in the event an AI human pandemic were to occur. Which safeguard policies are triggered, if any? Re$ PAD DS, Technical Annex 9 There are two safeguard issues: (i)environmental assessment for technologies to be deployed for the disposal ofculled poultry and (ii)mitigation ofthe negative impacts ofmandated culling of poultry on small scale backyard poultry producers.

Overall, activities under the Project are not expected to generate any adverse environmental effects as they are focused largely on public sector capacity building and improved readiness for dealing with outbreaks of avian influenza in domestic poultry. These prevention-focused activities are expected to have a positive environmental impact as the Project's investments in facilities, equipment, and training for laboratories will improve the effectiveness and safety over existing avian influenza handling and testing procedures by meeting international standards established by the OIE. This would be reinforced by the mainstreaming of environmental safeguards into protocols and procedures for the culling and disposal of animals during AI outbreaks. Significant, non-standard conditions, if any, for: Re$ PAD C.6 Board presentation: None Loanlcredit effectiveness: (a) The Recipient has appointed the head ofthe Secretariat ofthe Inter-Ministerial Committee 1 for Avian Influenza.

(b) The Recipient has appointed Project Component Coordinators with terms ofreference and experience satisfactory to the Bank.

(c) A Project Operational Manual, satisfactory to the Bank, has been adopted by the Recipient. Covenants applicable to project implementation: a) A disbursement condition for the Animal Health component is the adoption by the Recipient of an Environmental Management Plan satisfactory to the Bank.

b) Disbursement conditions for the Compensation Fund sub-component are that: (i)the Compensation Fund has been established in a manner satisfactory to the Bank; (ii)the compensation Procedures Manual, satisfactory to the Bank, has been adopted by the Recipient; and, (iii)the Compensation Fund payments are being made in accordance with criteria and procedures set forth in the Compensation Procedures Manual.

c) A disbursement condition for the poultry restructuring co-financing grants is that the Poultry Restructuring Sub-projects are being selected and implemented in accordance with criteria and procedures set forth in the Project Operational Manual.

d) A disbursement condition for the Critical Imports component is that the Recipient has declared a national emergency on avian influenza and adopted a well-defined emergency recovery program satisfactory to the Bank.

A. STRATEGIC CONTEXT AND RATIONALE

1. Global regional and national sector issues

(a) Introduction

1, The continuing outbreaks of highly pathogenic avian influenza (HPAI), which begun in late 2003 in several Southeast Asian countries and have occurred more recently in Central Asia, Europe, the Middle East, and recently Africa, have been disastrous to the poultry industry in the two regions and have raised serious global public health concerns. As of February 2006, nearly 200 million domestic poultry had either died or been destroyed, and economic losses to the Asian poultry sector alone are estimated at around $10 billion. Of the 170 people known to have been infected by the disease in seven countries, 92 have died, These recent increases in the number of known cases of avian influenza (AI) transmission have raised concerns over the potential emergence of a pandemic, which could have devastating effects on human health and livelihoods.

2. It is impossible to anticipate when the next influenza pandemic may occur or how severe its consequences may be. On. average, three pandemics per century have been documented since the 16th century, occurring at intervals of 10-50 years. In the 20th century, pandemics occurred in 1918, 1957 and 1968. The pandemic of 1918 is estimated to have killed almost 50 million people in eighteen months, with peak mortality rates occurring in people aged 20-45 years. The pandemics of 1957 and 1968 were milder, but many countries nevertheless experienced major strains on health care resources. Ifa major pandemic were to appear again, similar to the one in 1918, even with modem advances in medicine, an unparalleled toll ofillness and death could result. Air travel might hasten the spread of a new virus, and decrease the time available for preparing interventions. Countries’ health care systems could be rapidly overwhelmed, economies strained, and social order disrupted. Through interventions as proposed in this Project, and in collaboration with other national and international partners, it should be possible to minimize a pandemic’s consequences in Armenia through advance preparation to meet the challenge.

(b) Key Issues

3. A coordinated global response to HPAI should involve three types of strategic activities: (i) preventing the occurrence and spread ofthe disease in domesticated animals, thus lowering the virus load in the environment, (ii)preventing andlor mitigating the effects of an outbreak in humans, and (iii)in the event of a pandemic, helping affected populations cope with its effects. This response should entail immediate measures while ensuring that these measures fit within a coherent longer-term strategy with respect to both animal and human health considerations. Key issues that have been identified in formulating this response include:

e Prevention and control of avian influenza is multi-sectoral in nature. It involves many players, including those in the areas of health, agriculture, environment, economics, and finance among others. At the country level, in particular, an integrated, multi and inter-sectoral response is needed based on shared objectives. Responses must address both the animal health and human health dimensions and also appropriate social measures (quarantines, transport restrictions, mass communication strategies).

a The risk of a human pandemic is real. The H5N1 strain currently affecting over twenty countries has proven highly fatal to humans. The risk that a pandemic virus will emerge depends on opportunities for human exposure and infection, which will persist as long as the H5N1 virus continues to circulate in animals. With the present situation, the potential of the HPAI virus to

1 become transmissible among humans needs to be a serious concern. If the virus adapts itself to human-to-human transmission, lives may be threatened on a large scale.

0 The geographic coverage of a response should be determined by both immediate and anticipated needs. Asia is today the most affected region, but the disease has spread to other areas of the world at an alarming rate and recent scientific evidence indicates that wild birds play a role in the spread of the virus from one country or region to another. The response should, therefore, combine control measures in countries where the virus has been already detected, with prevention measures in countries at risks (countries neighboring infected countries andor in migratory bird fly way paths). A minimum level ofpreparedness is essential in all countries.

An appropriate balance between short and long-term actions needs to be taken. Immediate action is needed in a number ofareas. The immediate to short-term objective is to reduce the risk to humans by preventing further spread of HPAI in those countries that are currently infected. The long-term vision of the strategy is to minimize the global threat and risk of HPAI in domestic poultry and humans, through progressive control and eradication of HPAI. Achieving this goal will diminish the global threat of a human pandemic, stabilize poultry production, enhance a robust regional and international trade in poultry and poultry products, increase human and food safety, and prevent the erosion of the livelihoods of the rural poor.

0 Global and regional aspects of the response need to be addressed and coordinated. Actions to secure borders and control international tradeltravel in the event of a pandemic, as well as measures to limit the effects of disease transmission by migratory birds, are trans-boundary issues requiring regional andlor international coordination. Global and regional efforts should build on existing mechanisms such as the joint OIElWorld Bank initiative for the Prevention and Control of Global Emerging and Re-emerging Diseases of Animal Origin, and the joint Global Framework for Progressive Control of Transboundary Animal Diseases (GF-TADs), a joint FAOlOIE initiative and regional organizations such as the Association of Southeast Asian Nations and South Asian Association for Regional Cooperation.

4. The FAOIOIE’s Global Strategy. The long-term vision of the strategy prepared by FA0 and OIE in collaboration with WHO is to minimize the global threat and risk of HPAI in humans and domestic poultry, through progressive control and eradication of HPAI, particularly that caused by H5N1 virus, from terrestrial domestic poultry. The global strategy isbeing implemented over three time frames: immediate to short (1-3 years), short to medium (4-6 years) and medium to long-term (7-10 years). During this period the spread of HPAI, mainly of the H5N1 strain, will have been progressively controlled in domestic poultry of all infected countries, and prevented from affecting those countries not currently infected, but at high risk. The strategy originally prepared to control HPAI in Asia is being revised by FA0 and OIE to take into account the current spread on the disease outside Asia. The strategy will be complemented by more detailed country specific HPAI control plans. FAOlOIE have also issued specific recommendations for avian influenza and OIE has recently issued recommendations for each region, in addition to its standards and guidelines provided for the prevention and control of HPAI in animals.

5. The Recommended Strategic Action plan prepared by WHO for Responding to the Avian Influenza Pandemic Threat lays out activities for individual countries, the international community, and WHO to prepare for a pandemic and mitigate its impact. The objectives of the plan correspond to the opportunities and capacities to intervene and are structured in three phases: (i)pre-pandemic - supporting the FAOIOIE’s control strategy and increasing collaboration between animal and health services; (ii) emergence of a pandemic - containing or delaying spread at the source; and, (iii)pandemic declared and spreading internationally - reducing morbidity, mortality and social disruption and conducting research to

2 guide response measures, WHO has also prepared a global plan, guidelines for pandemic preparedness, and a model country plan that will allow countries to assess their state of preparedness and identify priority needs.

6. The Bank has developed a global facility through a multi-country adjustable program loan (MAP). In parallel, the Bank is presently establishing with the EU, WHO and FAOIOE, and bilateral donors a multi-donor trust fund (TF) that primarily supports country level activities in conjunction with a smaller and complementary role at the regional and global level.

(e) The regional dimensi~n

7. Cases ofavian flu have already occurred in several countries, including most recently in Western Europe (Germany, France, and the UK) after having appeared in October 2005-January 2006 in Croatia, Romania, Ukraine, Greece, and Turkey. The earlier (mid-2005) Russian outbreak of HPAI H5N1 has to date affected six administrative regions, beginning in the Ural Mountains and moved west to within 200 km of Moscow. In the first three weeks of August 2005, outbreaks in poultry of HPAI H5N1 were reported in four regions of northern and central Kazakhstan. Other countries in the Balkan peninsula and the Caucasus are at risk due to their proximity to two main flyways, the East Afiica-West Asia Flyway, which crosses Turkey, and the Central Asia Flyway, Both flyways cross-areas in North-eastern Europe, where avian influenza in wild and domestic fowl has been diagnosed. From a geographical point ofview, Central Asian countries represent a vast area in which introduction of AI is likely to occur, and where the sensitivity ofthe system for early detection ofHPAI is low.

(d) The national dimension

8. Veterinarv Services Situation Being on a major migratory bird flyway and with outbreaks in a number of neighboring countries (Turkey, Azerbaijan, and Iraq), Armenia is now clearly faced with the threat of avian influenza. In reaction to this threat, the Ministry of Agriculture (MOA) established on October 3 1, 2005 an Inter-Ministerial Task Force on Avian Influenza to coordinate nationwide measures to combat the potential spread ofAI in Armenia. Soon thereafter the MOA developed with the MOH an Action Plan for AI which specifies measures they have targeted. On January 19, 2006, the Government drafted a broader National Strategy for AI to be implemented by an Inter-Ministerial Committee on AI, to which the Inter-Ministerial Task Force reports. In line with this National Strategy for AI, and in order to prevent the incursion of AI into the country, the Government has prohibited the import of poultry and poultry products from the countries that have reported H5N1 outbreak cases. Transportation means are being compulsorily disinfected at the border checkpoints, and veterinary services continually check dead birds in order to clarify the causes of their death. In addition, under the national law on “Veterinary affairs”, the Veterinary State Inspection has within the scope of its functions the responsibility to implement: 0 prevention activities referring to the incursion of quarantinable, specifically dangerous notifiable animal diseases; anti-endemic and veterinary-sanitary activities for the prevention, treatment and eradication of infectious and non-infectious animal diseases; the processes ofveterinary services related to protecting the population from general diseases for humans and animals; and, 0 veterinary-sanitary inspection of food products, raw materials, fodder and additives of animal origin, and veterinary drugs, as well as of inspection ofsupervision ofanimal carcass eradication.

9. Presently, the following veterinary subdivisions act within the structure of the Ministry of Agriculture:

3 0 Veterinary State Inspection - 1 division (6 people); 0 Border control veterinary points ofstate veterinary inspection - 8 divisions (12 people); 0 Marz inspection department of state veterinary inspection - 11 divisions (11 people); 0 Regional inspectors - (38 people); 0 “Veterinary anti-epidemic and diagnostic republican center” - 1 division (92 people); 0 Group for serological monitoring - 1 division (4 people); and, e “Veterinary anti-epidemic and diagnostic republican center” personnel in marzes.

10. At the marz level these personnel typically include a virologist, a serologist, and four or more veterinary service staff. Overall there are 757 community veterinarians in 902 communities, as well as private veterinarians. Veterinary service personnel are insufficiently equipped and do not have enough capacity for diagnostics and disinfections. Depending on the marz, regional veterinary and border control points lack complex veterinary laboratories and make it highly improbable to resist the spread of AI in case it appears in the country. In order to organize and implement effective measures against the spread of AI, supplemental financial resources are clearly needed.

11. Reported cases of AI outbreaks in Turkey, Russia and other nearby countries have created concern among the population that have resulted in decreased consumption of poultry products and negatively impacted producers. This negative impact has been particularly pronounced among the large- scale closed cycle enterprises which market through urban stores, because this is the source of most commercial sales. These producers are carrying out active advertising market campaigns in order not to lose their market. Ironically, backyard poultry producers that sell their production in open markets (with dubious veterinary permission) seem to have been impacted less to date (though this may change as open market trade oflive animals is increasingly banned).

2. Rationale for Bank involvement

12. HPAI control programs require a multi-disciplinary approach to integrate technical, social, economic, political, policy, and regulatory issues in addressing a complex problem. The Bank is well placed to build upon its knowledge base on multi-disciplinary approaches needed in the proposed Project, which draws on evidence and lessons learned in the various regions regarding emergency preparedness responses and multi-disciplinary approaches. The Bank’s experience in multi-sectoral, emergency response, and risk-mitigation projects gives it considerable qualifications in bringing together the relevant ministries, government agencies, and the donor community in Armenia, in understanding and addressing the social and economic impact, and in assuring high level political coordination.

13, Given the Bank’s work with FAO, WHO, OIE, EU and other partners in country and at the international level to address both preparedness and outbreaks and to assist with institutional assessments, the Bank can assist Armenia in leveraging additional resources from other international and bilateral agencies. In addition to its financial role, the technical assistance provided by the Bank has been important in similar global or regional emergency situations such as SARS, Tsunami relief, and HIVIAIDS. The Bank’s national and regional support is closely linked with the activities of FAO, WHO, OIE, and the EU, and the proposed Project is fully consistent with, and draws heavily on, the global strategies proposed by FA0 and WHO and the field assessments executed by them in Armenia in February-March 2006.

4 B. PROJECT DESCRIPTION

1. Lending instrument

14. The proposed Project is supported by the Bank's multi-country adaptable program loan (MAP) instrument, similar to the instrument already used to support the HIVfALDS' efforts in Africa and the Caribbean. The funds supplied fiom the MAP for the Global Program for Avian Influenza (GPAI) will complement activities supported by other international organizations and donor agencies and help ensure the availability of adequate resources to fund the priority investments and technical assistance which Armenia has identified as critical needs in implementing its response to HPAI. Funds under the GPAI are available to countries which have demonstrated satisfactory preparation to implement an expanded response by preparing a project which has the following characteristics:

a) a national strategc plan showing understanding ofthe issues and goals for addressing them;

b) national commitment and leadership, including well structured implementation arrangements;

c) an implementation strategy that includes program execution through multiple ministries and through non-governmental organizations (NGOs), community groups and civil society organizations; and,

d) clearly defined institutional arrangements for, and readiness to initiate, monitor and evaluate project progress and impact.

15. Credit Processinrr. The credit is being processed as an emergency investment operation using procedures under OP 8.50 - Emergency Recovery Loan (ERL) Procedures. However, the credit still meets all applicable Bank policies, practices and standards as discussed below.

2. Project development objective

16. The overall objective of the Project is to minimize the threat in Armenia posed to humans by HPAI infection and other zoonoses in domestic poultry and prepare for the control and response to an influenza pandemic and other infectious disease emergencies in humans. To achieve this, three areas will be supported (i)prevention, (ii)preparedness and planning and (iii)response and containment. Achieving these goals will contribute to diminishing the risk and burden of disease and loss of productivity in Armenia, limiting the regional spread of HPAI, and enhancing economic and social prospects at the national, regional, and global levels.

3. Project components

17. The Project will finance activities under four components: (i)animal health, (ii)human health, (iii)public awareness and implementation support; and, (iv) critical imports. Given the urgency of the situation, and a financing gap identified during program preparation of roughly US$2.5 million, the project team reached agreement with GOA counterparts during the appraisal ofthe project that the focus of the current project would be primarily on activities able to be completed during the first two years of project implementation (through mid-2008). Thus, a reduction of roughly US$2.5 in project scope was achieved by paring back some medium-tern activities. If sufficient additional parallel financing were not forthcoming from other multilateral and bilateral sources over the course of 2006, these pared back activities could possibly be covered in a second phase of the AI program in Armenia through a supplemental IDA credit (and corresponding government budget funds) to be agreed on in the future.

5 COMPONENT 1 - ANIMAL HEALTH

18. The Project will support activities to cover the needs in the short to medium-term, and rangmg from prevention, to control and eradication of HPAI, which have been based on an assessment of the particular conditions, constraints and possibilities in Armenia (including a rapid assessment of veterinary services and recent assessments of the poultry sector by the FAO). These activities fall into the main components and sub-components described below and total US$5.55 million.

A. National Policy Framework and Development of a National Strategic Plan

Al: Policy development and enabling environment. The Project activities’ support will include strategy development and the improvement of the regulatory framework to address key policy issues and ensure that disease control, prevention and eradication measures are implemented in a uniform and effective way in accordance with OIE standards and guidelines. It will support definition of disease control options and reviews of existing regulations and policies and fund related policy studies, strategy development and dissemination workshops. The main short-term outputs will be a detailed assessment of the capacity of MOA veterinary services and an elaboration of the AI Action Plan of the MOA and the MOH and National Strategy for AI into a strengthened national strategic plan for AI. Poultry sector compensation and restructuring studies and a veterinary monitoring and information system will also be supported. (US$ 0.18 million)

A2: Updating Essential Information on Migratory Birds. Flight and rest patterns of certain species of migratory birds, as they concern the territory of Armenia, are likely to have changed since the extensive studies carried out in the 1970s and 1980s, because of significant development of irrigation facilities, ponds, etc., in the southern oblasts. The project will finance an immediate effort to update this critical information, so as to identify “hot spots” and high-risk locations where migratory fowl may come into contact with domestic poultry. (US$0.07 million)

B. Strengthening Disease Surveillance and Diagnostic Capacity Sub-component

B1: Strengthening Animal Disease Surveillance and Diagnostic Capacity. Project support in this area will aim at strengthening the capacity of the MOA Veterinary State Inspection PSI) and its affiliated reference and regional diagnostic laboratories in detection, reporting and follow-up ofreported AI cases. This will cover the immediate formation and equipping of a Bio-Safety Level 3 (BSL3) central laboratory in Yerevan, as well as office equipment and rehabilitation of marz laboratories and border posts. Rapid test kits and consumables will be funded for the central laboratory, sprayers and disinfection means for the border posts, and vehicles for the VSI and marz levels as needed for the execution of their relevant roles in the National Strategy for AI. (USS2.61 million)

B2: Veterinary Services Training. Training will target the personnel of the MOA VSI, including those of the marz level and border posts. The focus of the training will be on disease surveillance (screening, sampling, and testing), outbreak management procedures (including simulation exercises, culling and disposal), and laboratory diagnosis (including analysis of epidemiological data and performance ofrisk assessments). Increased risk-based AI surveillance activities will also be supported at the marz level, coordinated through the VSI central laboratory. (US$ 0.16 million)

C. Outbreak Containment Plan

19. The sub-component will provide support to activities related to the implementation of the MOA responsibilities under the National Strategy for AI which details the containment plan for AI outbreaks.

6 The National Strategy for AI details the roles of the National Center (NC) ofthe MOA, the Local Disease Crisis Centers (LDCCs) set up on the basis of marz and raion-level Veterinary Inspection and Marz Agricultural Departments, and National and Local Expert groups. The sub-component will include the following activities.

C1: Targeting virus eradication at the source. Early detection and reporting, as well as rapid response, depend critically on the incentives for poultry owners to report very quickly any sick and dead poultry to their veterinarians. For this to happen, adequate compensation arrangements are absolutely essential. In order to target the eradication of the disease at the source of infection, the Project will target the following activities over the short-to medium-term: (i)culling of infected and at-risk poultry and compensation to farmers and producing companies at a reasonable (75% share) of market price; and (ii) disposal of carcasses and potentially infective materials in a bio-secure and environmentally acceptable manner (using a mobile incineration plant and a rehabilitated and expanded network of bio-thermal holes). The Government's National Strategy for AI makes reference to the right of poultry owners to receive compensation for damages suffered as a result ofmandatory culling, but no steps have been taken as yet to develop the required implementation arrangements - including financing, institutional arrangements, legal authority over the fund, fiduciary aspects, eligibility criteria, payment arrangements, flow of funds, etc. Thus, the project will also provide technical support to develop these required implementation arrangements, which will be specified in a Compensation Procedures Manual. (US$ 1.68 million)

Policies associated with virus eradication that the Government of Armenia is developing and would trigger in outbreak areas include: enhanced bio-security at poultry farms and associated premises, through bio-containment and bioexclusion, and control of movement of birds and products that may be infected, including controls at the interface ofinfectednon-infected areas and border controls.

C2: Veterinary personnel safety. Due to the highly pathogenic nature of the HPAI virus to humans, particularly the currently circulating H5N1 strain, this activity ofthe project would provide bio- safety hoods and other appropriate personal protective clothing support (over a three year period) to veterinary personnel to be involved in the disease surveillance and culling and disposal procedures, as well as to laboratory workers involved in virus isolation and diagnosis. (US$0.20 million)

C3: Restructuring the Poultry Sector. Restructuring the poultry sector in Armenia will focus on improving bio-security of backyard poultry raising and promoting manure management of backyard poultry in conformity with existing environmental regulations. Improving bio-security of backyard poultry farming could take the form of investments in improving penning of animals and closing up of barns, integration of backyard poultry activities of families into small village-level. enterprises practicing confined poultry raising, and possibly ofbanning unconfined backyard poultry raising in protection bands around known areas ofhigh prevalence of migratory birds farms. This last mode would involve offering support for diversification of family enterprise away from poultry raising into other activities. Since it would be extremely costly for the state to fund widespread programs for poultry sector restructuring, the introduction ofrestructuring modalities will be piloted under the Project (primarily in the second and third years of the project) with matching grants to be provided under a competitive proposal submission and award process (with at least 25% co-financing by private beneficiaries). During project appraisal, a draft set of implementation arrangements was developed with the MOA. These will be elaborated as part of the Project Operational Manual and updated with the results of technical assistance to be provided under a PHRD Grant from the Government ofJapan'. (US$0.67 million)

' The PHRD Grant from the Government of Japan covers a wide range of technical assistance and training activities under the Animal Health component, as well as under the Human Health and Public Awareness and Implementation Support components.

7 COMPONENT 2 - HUMAN HEALTH

20. Following the outbreak of Avian Influenza in both humans and animals across the border with Turkey, the MOH in Armenia has been proactive in partnering with other ministries as part of the Inter- Ministerial Task Force (IMTF) that was set up in October 2005 and in devising an Action Plan for AI preparedness and response in December 2005. The MOH has also instituted a series of measures to mitigate the risk of introduction and further transmission ofthe HPAI into Armenia. Most ofthe measures entail activities geared towards increased vigilance in border posts, e.g., screening passengers, banning importation of poultry and its products, disinfecting incoming vehicles, immunizing high risk groups against human influenza, procuring test kits, anti-viral medicine and information, education and communication (IEC) material, and collaborating with UN agencies (WHO and UNICEF in particular).

21. In further developing this response in the public health field, an appropriate balance needs to be struck between short-term crisis responses and medium-term actions to address systemic shortcomings with respect to core public health functions. The crisis measures include actions such as strengthened logistical support, prevention through further immunization of high-risk groups, and symptomatic case management with anti-viral drugs. The medium-term measures include routine and active surveillance in areas of AI outbreaks in poultry and case finding and ascertainment through serological testing and virological sub-typing. Building an effective national public health response in the medium term will also require an enabling environment and the necessary resources to bring proven interventions up to nationwide scale.

22. Thus, the Project will help in the short-term to operationalize some elements that are contemplated as part of the global strategic plan, expanding and intensifying these responses in the medium-term, As it is unlikely that the global spread of a pandemic influenza virus could be prevented once it emerges, the emphasis is on reducing its impact. Several tools will help achieve this aim: (i)year- round surveillance; (ii)effective and accurate methods ofdiagnosis; (iii)social distance interventions; (iv) vaccines (once they become available); (v) anti-viral drugs; and (vi) strengthened medical services. The interventions supported under the Project are based on Armenia’s epidemiological and programmatic needs, and well-assessed options for meeting them. The interventions will be grouped in three sub- components, totaling US$2.75 million.

A. Enhancing Public Health Program Planning and Coordination

23. The human health sections of the National Strategy for AI developed by the MOH are quite comprehensive in scope in covering the activities that need to be undertaken during the inter-pandemic, pre-pandemic and pandemic alert phases, clearly identifying the responsible agency for each measure at different stages of an eventual pandemic. However, the agencies in charge of implementation do not currently have the organizational and logistical means to implement the plan (i-e., trained personnel, protective gear, transport, and information and communications equipment). These are to be provided as quickly as possible under the project, In addition, it is not clear if the current legislative and regulatory framework allows for drastic measures such as social distancing and deployment of the health workforce under emergency conditions. These will be supported under the project through medium-term technical assistance, which will also target MOH to build its institutional and logistic capacity to participate in the Inter-Ministerial Committee for AI and to coordinate the implementation of the National Strategy for AI with the MOA and other sector representatives. (US$ 1.05 million)

B. Strengthening of National Public Health Surveillance Systems

24. In Armenia, the State Hygiene and Anti-Epidemic Inspectorate (San-Epid) of the MOH is responsible for all disease surveillance activities. In addition to its central office, the agency has 10

8 regional centers and 7 centers situated in Yerevan. The existing surveillance system is organised in a vertical way following the vertical organization of health programmes. Health workers at the primary level report to the marz level for a first analysis. The aggregate data is then sent to central level. There are no standard case definitions, so notifiable diseases are reported based on each clinician’s judgement. Routine surveillance data are sent on a monthly basis, while any urgent problem representing a health threat must immediately be reported to the marz level by means ofpaper (“emergency card”) or telephone call. Human influenza is a notifiable disease and, as such, is part of the regular surveillance activities which involves monthly reporting of all cases to the central office. However, at present there is no standard case definition-for Influenza Like Illness (ILI) nor any set criteria for more fkequent reporting in case ofan outbreak.

25. In addition, diagnostic facilities are limited. The central San-Epid laboratory does not have the diagnostic capability, nor the required bio-safety level facilities for virus isolation and sub-typing. Accordingly, the MOH has designated the Genetic Centre of the National Academy of Science as the National Influenza Center. The protocols and guidelines for active case surveillance in the case of an outbreak, detection of suspect cases, case ascertainment and reporting need to be defined and adopted, as well as all the training and information, education, and communication (EC) activities that need to be carried out in order to render surveillance activities more effective. Consequently, the sub-component will support the following: improvements oflaboratory networks, improvement of health information and telecommunication systems, training ofpersonnel at MOH and other selected agencies, and development ofstandard reporting forms and guidelines. (US$0.61 million)

C. Strengthening Health System Response Capacity

26. Aggressive containment measures such as isolation if ILI and confirmed cases, and prophylactic use of antiviral drugs may slow pandemic spread and allow time for response measures. Although mass vaccination is the preferred intervention, an efficacious vaccine may not be ready andor available for use as part of a large-scale vaccination campaign soon enough to contain the pandemic. Anti-viral supply and production capacity are also limited. Thus, the project will help MOH to strengthen health system response capacity with: expanded regular seasonal flu vaccination as a vital step to prevent an outbreak among humans; anti-virals of sufficient quantity for prevention ofinfluenza in those groups at highest risk such as poultry fanners, healthcare workers, children, those in close contact with confirmed cases, etc.; and with prophylactic and preventive equipment and supplies for patient care in the intensive care unit of the Infectious Disease reference hospital and for active case detection. This sub-component will also finance procurement of human influenza vaccines for administration to high risk populations and ofnew vaccines should there be available against avian influenza in humans. (US$ 1.09 million)

COMPONENT 3 - PUBLIC AWARENESS AND IMPLEMENTATION SUPPORT

27. This component will support strategic communication activities for stakeholders and beneficiaries. Similarly, resources will be allocated for improved coordination between the MOA’S regulatory framework and the roles of other ministries in the National Strategy for AI.

A. Public Awareness through Information and Communication Services

28. Support under this sub-component will be provided for the research, design, implementation and evaluation of an integrated communications strategy, addressing the needs of priority populations at the national, marz and community levels. The strategy will elevate knowledge and promote behavior-change in populations at-risk, to control the spread of the virus, prevent infection, foster timely reporting and support containment actions. At the same time, the strategy will educate vulnerable groups on preparedness plans and mitigation measures across pre-pandemic and pandemic phases. The

9 communications strategy will incorporate measures called for in the Environmental Management Plan (EMP) for safe culling and disposal of backyard poultry (US$0.3 1 million).

B. Coordination and Implementation Support

29, The multi-dimensional problems associated with HPAI infection necessitate collaboration fiom a wide range of stakeholders within each country, which in Armenia include: the Ministry of Finance and Economy, the Ministry or Territorial Affairs, the Ministry of Nature Protection, the MOA, the MOH, their associated diagnostic laboratories, NGOs and civil society organizations, and private sector companies and associations (e.g. large poultry production companies, farmers’ associations, veterinarians and farmer involvement at the grass roots level). The sub-component will support activities to improve the effective coordination and collaboration among these stakeholders and to bolster project implementation and monitoring capacity at existing project implementation structures in the MOA and MOH (US$0.62 million).

B1. National Coordination

30. The Inter-Ministerial Committee for Avian Influenza (which supervises the work of the Inter- Ministerial Task Force for Avian Influenza) will establish a Secretariat’ to implement the national awareness activities described above. It will be responsible for reviewing annual work plans and ensure coordination and linkages across relevant agencies and international partners. In AI outbreak situations, it will be in charge of triggering emergency responses by MOA and MOH, monitoring the actions taken, and coordinating public statements to the media. The Secretariat will be comprised of a Director, two Science Officers (spanning animal and human health issues), and a Public Information and Communications specialist. These staff would be contracted under the project. (US$ 0.1 1 million)

B2. Project Implementation

3 1. The Apculture Reform Support Project Implementation Unit (ARSP PIU) of the MOA (which currently implements the Rural Enterprise and Small Scale Commercial Agriculture Development Project) and the Project Implementation Unit ofthe Health Systems Modernization Project (HSMP) in the MOH will be entrusted with the fiduciary tasks of procurement and financial management. The relevant structures will be strengthened with additional fiduciary staff in each Unit. Both the MOA and the MOH will appoint Project Coordinators to liaise with the ARSP PIU and MOH HSMP PIU, respectively, and to prepare annual work programs and budgets as well as semi-annual interim unaudited financial reports. The Project Coordinators will manage the respective components for which their ministry is responsible and attend the regular meeting of the Secretariat and the periodic meetings of the Inter-Ministerial Committee for Avian Influenza. The ARSP PW will be responsible for consolidating the annual work plans, budgets, and financial reports for submission to the Secretariat and the Bank. (US$0.37 million)

32. At the local level, implementation would be the direct responsibility of each Marz Committee. Under marz task forces would be established under these Marz Committees and would implement the functions of Local Disease Crisis Centers (LDCCs) as noted in the National Strategy for AI.

33: Monitoring and Evaluation @WE)

33. Support would be provided to enable project monitoring and impact evaluation assessments. Two types ofM&E are envisaged. First, the ARSP PIU and the MOH HSMP PIU would collect relevant data fiom their ministries and other implementation agencies and then compile them into semi-annual progress

The Secretariat of the Task Force will also play the role ofthe NDCC - National Disease Crisis Center.

10 reports focusing on output indicators and the status of physical implementation by component and use of project funds. For some output indicators, specific surveys will need to be conducted to obtain data for this purpose. These would be financed by the Project. As for the financial reports (noted above), the ARSP PIU will be responsible for consolidating the ministerial progress reports into an integrated Project progress report. (US$ 0.13 million)

34. Impact evaluation reports. The aim of evaluation is to find out whether the interventions are effective or the program is having the desired impact. The evaluation will include both quantitative and qualitative aspects and be conducted on a yearly basis. The quantitative aspects will rely on new information systems and surveys implemented as part ofthe various components ofthe project, currently existing data sources, and primary evaluative data collection efforts. The goal ofthe qualitative aspect of the evaluation will be to document perceptions of program managers, staff, patients, and local and national leaders. Qualitative information will be collected using site-visit interviews, focus groups, and respondent surveys.

COMPONENT 4 - SUPPORT FOR CRITICAL IMPORTS

35. This component would finance, under Emergency Recovery Assistance (ERA) procedures, a positive list of critically needed imports identified as necessary to a response program in the event an AI human pandemic were to occur. This list includes protective clothing and gear, pharmaceuticals and vaccines, and medical and veterinary supplies and equipment. This component may be expanded in future for other items on the positive list (as to be agreed on by the Bank in the case of a pandemic). Under ERA procedures, critical imports would be procured through organized international commodity markets (in accordance with the provisions of paragraph 2.68 of the Guidelines) or other channels of procurement acceptable to the Bank.

4. Lessons learned and reflected in the project design

36. Relevant lessons for the design of the proposed operation have been drawn from previous World BanklIDA and FAO-supported emergency recovery projects. All these experiences and lessons learned have been taken into account in the design of the GPAI. These included the Vietnam Avian Influenza Emergency Recovery Project (approved in early FY05 under OP 8.50 procedures), which was the first project that has been approved by the Bank in response to Avian Influenza. Under the GPAI, projects for Kyrgyzstan and Nigeria have been prepared and approved over December 2005-March 2006, and a similar project for Turkey has been negotiated. The structure and content of the projects have been consulted thoroughly in the elaboration ofthe Armenia AIP project.

37. The lessons learned indicate that project success depends to a large extent on the speed of the response provided and, particularly when dealing with smallholders’ production systems, a speedy, efficient and transparent distribution of suitable key inputs is clearly a major factor in limiting the impact of a crisis and hastening recovery. A performance audit of some ofthe emergency projects supported by the Bank in various regons drew the following general lessons: (i)emergency projects should avoid policy conditionality; (ii)project design must be simple and take into account a realistic assessment of the existing Borrower’s capacity; (iii)a speedy appraisal and approval are crucial to provide a prompt response and a substantial contribution to project success; (iv) procurement arrangements need to be flexible and should be finalized at an early stage; (v)mitigation and prevention measures should be included in the design to minimize impacts of a possible recurrence of the disaster; and (vi)realistic assessments should be made of counterparts absorption capacity, as well as of the effective communications and coordination mechanisms among all relevant stakeholders.

11 38. Even though the Vietnam Avian Influenza Emergency Recovery Project has been in implementation for only about one year (effective on November 9, 2004), the main recommendations arising from its implementation have been the following:

(a) Preparedness is a key factor. While Vietnam had a national strategy document to control Avian Influenza in the domestic poultry population, it was not clearly understood and shared by all relevant agencies and stakeholders and some aspects ofthe response have been lagging behind.

(b) A two-pronged strategy is recommended. This should include: (i)the control of Avian Influenza at the source in high-risk regions (through aggressive measures including culling, movement control and vaccination campaigns for poultry and ducks); and (ii)simultaneously prepare with short and medium-term measures to minimize the risks to humans and prepare for an eventual pandemic.

(c) A “compensation framework” is an essential element to obtain real cooperation from affected stakeholders (farmerslproducers) and to ensure the efficacy ofthe surveillance and diagnosis mechanisms.

(d) The importance of strengthening the technical, scientific and operational capacity of the relevant participating agencies should not be overlooked. The AI crisis highlighted several weaknesses in the animal health as well as public health services systems, including: poor surveillance at the local level, weak diagnostic capacity, lack of epidemiological expertise and information system, and inadequate operating budget to bear the additional costs ofcontaining the spread of AI.

(e) There is a urgent need to organize an effective national response, including all technical ministries in charge ofagriculturelanimal health and human health, as well as other relevant sectors, at the national and sub-national level, in case of a human epidemic,

(f) It is extremely important to raise awareness in the public and private sectors fiom the initial moments, and to strengthen effective coordination mechanisms for the implementation of the necessary technical responses, involving the Government, the donor community, the private sector and the civil society.

(g) Attention should be given to support the integration of each country to a regional and global framework for the control of HPAI, and more broadly of all trans-boundary animal diseases and other emerging infectious diseases, to increase cost-effectiveness and ensure the harmonization ofactivities and responses

39. In terms ofpublic health, the following relevant lessons were derived &om emergency operations:

e Key data needs should be anticipated and infrastructure developed to provide information that reduces the number ofassumptions (“what is not known is as important as stating what is known”). e The program should include mileposts for periodic re-evaluation, so that necessary changes can be made based on new information. e External reviews of the program should be conducted periodically to increase objectivity and improve decision-making. e Ensure that all localities are able to respond to a pandemic and implement mass vaccination programs effectively. Provide funding to regional and local levels for preparedness and infiastructure development coupled with guidance and technical support. National oversight and assistance is important to assure nationwide protection and consistency of the response. e Surveillance systems should be in place, preferably, before starting the program. Communications materials should be developed to educate health care providers and the public.

12 5. Alternatives considered and reasons for rejection

40. Restructure of and “additional financing” to existing projects. An alternative that was considered was only to restructure ongoing projects and inject financing, in the form of additional financing (a new IDA credit) to support the implementation of the activities contemplated under this Project. After considering this option, it was decided that the importance of the issue and the need to scale-up the response at the country-level, requires additional focus and impetus to facilitate the implementation ofpriority activities. A separate project option allows for the establishment of a broader policy framework and alternative mechanisms to manage resource use and monitor the implementation of activities. More specifically, a separate project allows the preparation of a multi-sectoral national plan that includes the engagement of different governmental institutions and civil society, as well as scaled up efforts to serve the entire population. This will also facilitate advocacy and communication to mobilize political support at the highest political level needed for mounting effective and sustainable prevention and control efforts.

C. IMPLE~ENTATION

1. Partnership arrangements

41. The Bank and the international community can play a key role in the response to AI, especially at the country level where there is a need to develop an overall framework to guide national action plans that can be the basis for government and donor support. Such a framework should address both animal and public health aspects as well as economic impact. Many ofthe investments needed to address this disease are core public health and animal health functions that are considered “public goods“. The cross-border dimension of Avian Influenza also necessitates a regional response with support from the international community.

42. Armenia is receiving support on the technical content of an Avian Influenza response from key technical agencies -- WHO for public health and FAOlOIE for animal health. For example, FA0 has a regional Technical Cooperation Programs (TCPs) in the ECA region, in which Armenia participates. The program’s primary objective is to strengthen the capacity for generating and sharing HPAI disease intelligence and emergency preparedness planning. The program’s interaction with Armenia will, among other activities, target improved knowledge of migratory birds’ role in HPAI transmission, strengthened laboratory capacity for HPAIdiagnosis, and support for a National AI Strategic Plan in Armenia.

43. Currently, the EU has established a task force to address AI and is considering the allocation of funds into the multi-donor TF to be coordinated by the Bank. The degree to which Armenia will be able to access the multi-donor TF will be known in May 2006. The Bank has discussed the overall program supported by the AIHP project with the EU, the Government of Japan, the US Agency for International Development, and other international stakeholders at length, and is in the process of receiving endorsement for making grant financing available to Armenia to support the wider program. The Bank project team and ECA management will seek to reach agreement on identified grant financing during the course ofearly April 2006.

2. Institutional and implementation arrangements

44. The Project will be implemented by existing project implementation structures in the MOA and the MOH, However, institutional and implementation arrangements will be coordinated by the prime Minister who is the chairman of Inter-Ministerial Committee for Avian Influenza (under which a Secretariat is to be established). This Committee has been established to deal with zoonotic emergencies

13 and will provide general policies and guidelines for Project implementation. The Committee comprises representatives of the MOA, the Republican Agricultural Support Center (MSC), the MOH, the Ministry of Nature Protection, the Ministry of Territorial Administration, the National Police, the National Academy of Sciences, the Armenian State Agrarian University, and the Union of Veterinarians (an NGO). The Committee will be responsible for reviewing annual work plans and the Secretariat will be responsible for ensuring coordination and linkages across relevant agencies and international partners.

45. Since the Bank is financing both agricultural sector and health sector projects in Armenia, the existing project implementation structures within the MOA (the ARSP PIU) and the MOH (the HSMP PIU) will be entrusted with fiduciary tasks of procurement and financial management. (Additional staff will to be recruited in the ARSP PIU and the MOH HTP PIU as needed for these fiduciary tasks.) One senior officer from the MOA and one from the MOH will be designated as Project Coordinators in charge of managing implementation of their relevant ministries’ project activities and liaising with the ARSP PIU and MOH RSMP PIU, respectively. These Project Coordinators will report to the Secretariat of the Committee and be members of the Committee. The Secretariat will recruit staff responsible for overall administration, public information, and coordination of scientific issues related to animal and human health.

46. At the local level, implementation will be the direct responsibility of each Marz Committee, including representatives of departments of Agriculture and Health. The Marz Committees will be strengthened to set up marz task forces (small coordination units) comprising representatives from the Marz Agricultural and Health departments and veterinary experts to work under the supervision and guidance of the national Secretariat. A Project Operational Manual (POM) is being prepared to integrate the relevant aspects of the National Strategy for AI. This POM will guide the management and implementation ofthe Project.

3. Monitoring and evaluation of outcomeslresults

47. Monitoring and evaluation (M&E) activities related to the project will be the responsibility of the ARSP PIU and the MOH HSMP PIU, with the participation of the staff of the departments of the MOA and MOH. These two implementation units have built up M&E capacity, but some detailed surveys for M&E would be contracted out. Monitoring project progress and the achievement ofobjectives will entail a process for reviewing continuously and systematically the various project implementation activities. The purpose ofthe M&E activities are to: (i)measure input, output and outcome indicators (see Annex 3); (ii)provide information regularly on progress toward achieving results and facilitating reporting to the government and the Bank (iii)alert managers, both in government and the Bank, to actual or potential problems in implementation so that adjustments can be made; (iv) determine whether the relevant stakeholders are responding as expected and intended by the project; and (v) provide a process whereby the coordinating and executing bodies can reflect and improve on their performance.

48. The results of relevant M&E activities will be reflected in the semi-annual and annual progress reports. The progress reports will cover the progress with the works, the institutional activities, training and studies, performance indicators, and financial management reports (FMR). A section of the progress reports will be devoted to issues identified during project implementation and the strategies and actions to be taken to resolve such issues that affect progress. The second semi-annual report of each year will be an annual report, providing information ofthe progress during the past year.

49. A comprehensive Mid-Term Progress Report will be prepared roughly half-way through project implementation (by November 15,2007). This report would support the Mid-Term Review exercise to be carried out by the Borrower and the Bank to discuss the experience accumulated during the first two years of implementation and to discuss possible adjustment to the project design, implementation schedule and

14 expected outcomeslresults. Similarly, a final Evaluation Report should be prepared after the project completion (May 3 1, 2009) providing detailed information on the accumulated impacts achieved by the project as well as the main lessons learned that could serve for similar operations outside the country.

4. Sustainability

50. Critical to the sustainability ofthe Project would be the continuous ownership ofthis initiative by the various stakeholders, coupled with strong political support and the availability of an adequate flow of financial resources to carry out project activities. In addition, institutional sustainability would be ensured by: (i)strengthening ofprograms to maintain public awareness of the threat of avian influenza and other rapid spreading infectious diseases; (ii)sustained surveillance and prevention and control activities, particularly in high risk regions; (iii)strengthened country capacity to manage at national and local levels the risk factors associated with the spread of avian influenza and other infectious diseases; and (iv) effectiveness ofprograms to control the spread ofavian influenza from birds to the general population.

5. Critical risks and possible controversial aspects

RISK RATING MITIGATION MEASURE From Outputs to Objective Decline in political commitment M Continuing support for inter-country collaboration to AI and to the threat ofa through information exchanges, dialogue, and global influenza pandemic. mobilization ofinternational commitment and resources. Project implementing agencies M Adequate implementation arrangements in place as a do not have sufficient authority, pre-condition ofBank financing; careful monitoring of leadership, and capacity to take leadership and project management during project leading role in AI prevention implementation; technical assistance and training. and control. Intervention activities not S Project activities will strengthen response capacity in effective in containing the selected priority areas in the short- and medium terms spread ofAvian Influenza from and lay the foundations for a broader-based strategy, birds to the human population. including broad awareness and communication campaigns critical to containing the spread of AI. Interventions well designed, phased, and carefully monitored, allowing for modifications and redesign- as needed. Good M&E to flag emerging issues Inadequate or lack of multi- M Inter-Ministerial Committee overseeing the program is sectoral participation selected to be representative and given visibility; annual work programming transparent. Low local-level commitment M Implementation mechanisms explicitly address local means that strong central decision making, communication strategies include commitment does not translate decentralized authorities as targets. into action on the ground. From Components to Outputs Controlling the spread ofthe M Project will support advocacy and coalition building to pandemic may expose the sensitize key groups including policy makers and the government to criticism for the media. This will be complemented by carefully curtailment ofcivil rights due to designed mass communication campaigns to build the adoption ofquarantines and support for the project among the wider population other related measures.

15 Lack oflaboratory capacity for S Project activities will be coordinated with efforts prompt diagnosis and undertaken by other international organizations surveillance and of sufficient quantity ofdrugs and other medical inputs needed to address the needs ofthe general population during a pandemic Inadequate institutional capacity Capacity building and institutional development as one to manage project and perform M ofthe project’s key objectives. effectively Financial resources not M Rapid disbursement procedures and simplified public accessible in a timely manner, sector procurement in accordance with OP for weak procurement management emergency operations. Lack of timely and predictable M Project activities are designed and implemented with access to expert advice and leading multilateral agencies such as FA0 and WHO; technical support regional bodies such as the European Union; and bilateral and other donor oreanizations. Low priority given to public S Transparency in decision and resource allocation; accountability and transparency strengthened fiduciary risk mitigation through in program management {e.g. community involvement for the activities financed by Compensation Fund and Poultry the Compensation Fund and Poultry Sector Sector Restructuring Fund.) Restructuring Fund; and, publication of audit results and achievements. Inadequate capacity for planned S Technical assistance and partnership between local .surveillance, surveys and organizations and international institutions will be monitoring and evaluation provided. M&E plan will include information on instruments for data collection, agencies responsible and a detailed time table Overall Risk Rating: MIS Risk Rating - H (High Risk), S {S bstantial R k), M (Modest Risk), N (Negligble or Low Risk)

5 1. In addition to the risk mitigation measures noted above, the Project will place strong emphasis on disclosure and transparency, complaint handling mechanisms coupled with specific remedial measures, and generally strengthened fiduciary risk mitigation. The corollary benefits regarding good governance are self-evident. The following measures are incorporated in project design to minimize the possible misuse of funds:

Ex-ante controls. Appropriate ex-ante internal controls in the poultry culling and compensation program {outlined in Annexes 4b and hex7) will be implemented before any disbursement of Bank resources for the Compensation Fund, and ex-ante checks will be carried out before compensation payments are made, Annual operationu2 reviews. To supplement the annual project audit, an annual operational review will be camed out by external reviewers, acceptable to the Bank, who will review the internal control framework and procedures, especially for the Compensation Fund component, and the inventories of drugs, vaccines, medical and veterinary equipment, and other sensitive andor expensive assets. Prior review of procurement. Project procurement will be subject to prior-review in accordance with the Bank’s procurement guidelines and with thresholds level indicated in Annex 7.

16 0 Complaints mechanisms. A strengthened complaint handling mechanism, especially for the Compensation Fund component implementation, will be put in place to handle complaints regarding alleged misuse offunds. 0 Transparency and public infor~ation. Information about project activities will be continually posted on a Project website. 0 Intensive supervision by the Bank. The project, including procurement and financial management activities, will be intensively supervised by Bank staff in the Country Office and by periodic supervision missions.

52. Possible Controversial Aspects. The Project will support the implementation of immediate responses to an influenza pandemic -- the classic “social distancing measures”-- such as quarantine, bans on mass gatherings, and travel restrictions that may be politically and socially controversial. This means that dialogue and compromises are needed among different stakeholders, backed by a well-designed communication strategy. A high degree ofpolitical commitment to preventing and controlling the spread of infectious diseases such as an influenza pandemic would be needed for managing controversies that will undoubtedly arise.

6. Main credit conditions

53. The key conditions needed to minimize the risks to the Project have been addressed by Armenia’s having already met the eligibility requirements for entering the GPAI (noted in para. 14 above). An inter- ministerial AI Action Plan was developed in late 2005, and a National Strategy for AI was drafted by the GOA in January 2006. (The National Strategy for AI was then approved the President of Armenia on April 20, 2006). An Inter-Ministerial Committee on AI has been established, and its associated Task Force meets weekly (at the operational level of participating ministries, agencies and, NGOs). Specific provisions have been developed during project preparation which meet Bank requirements covering organization and staffing of program units, management arrangements, provisions for procurement and financial management, and institutional arrangements for monitoring and evaluating project progress and impact. These were confirmed during Project appraisal. In addition, the MOA and MOH have prepared an action plan for the first year ofproject implementation which is satisfactory to the Bank.

54. The conditions of effectiveness for the Credit would be that: (i)the Borrower has appointed the head of the Secretariat of the Inter-Ministerial Committee for Avian Influenza; (ii)the Borrower has appointed Project Component Coordinators with terms of reference and experience satisfactory to the Bank and (ii)a project Operational Manual, satisfactory to the Bank has been adopted by the Borrower.

55. A disbursement condition for the Animal Health component is the adoption by the Borrower of an Environmental Management Plan satisfactory to the Bank. Disbursement conditions for the Compensation Fund sub-component are that: (i)the Compensation Fund has been established in a manner satisfactory to the Bank; (ii)the Compensation Procedures Manual, satisfactory to the Bank, has been adopted by the Borrower; and, (iii)the Compensation Fund payments are being made in accordance with criteria and procedures set forth in the Compensation Procedures Manual. A disbursement condition for the poultry restructuring co-financing grants is that the Poultry Restructuring Sub-projects are being selected and implemented in accordance with criteria and procedures set forth in the Project Operational Manual. A disbursement condition for the Critical Imports component is that the Borrower has declared a national emergency on avian influenza and adopted a well-defined emergency recovery program satisfactory to the Bank. In addition, the Borrower shall monitor and evaluate the project and report on its progress through semi-annual Project Reports and prepare a mid-term review report by November 15, 2007.

17 D. APPRAISAL SUMMARY

1. Economic analysis

56. Neither the timing nor the severity of the next pandemic can be predicted, but with the virus now endemic in bird populations in Asia, the risk will not be easily diminished. The emergence of a human influenza pandemic caused by a lethal virus would have a social and economic impact many times greater than the impact on the poultry sector. This would be through the costs associated with public and private efforts to prevent the emergence or spread of the disease in humans and to treat its effects and the economic consequences of sickness or death resulting from the disease outbreaks. However, the much more uncertain predictability of a human pandemic has caused the economic analysis of the Project to focus on the economic losses in the poultry sector

57. In this treatment ofHPAI as an animal health issue, actions to be taken by Armenia are analyzed using the traditional “without project” and “with project” scenarios. Under the “without project” case, the low capacity of government and the poultry industry to deal with outbreaks causes the sector to be increasingly vulnerable to a catastrophic AI occurrence. This catastrophic event (CE) would be characterized by multiple, simultaneous outbreaks leading to a spread of the disease to large sections of the country’s poultry flock, and eventually to a long-term reduction of the sector by 2040%. This is caused by massive public aversion to poultry consumption leading to a significant and sustained drop in prices and demand for poultry.

58. Under the “with project” scenario, the probability of the CE is reduced gradually to roughly two- thirds of that under the “without project” scenario (after five years). The stream of expected costs in this scenario is calculated by multiplying these probabilities with the respective net present values of costs, Given project expenditures of US$ 9.2 million, the analysis yields an NPV of $ 37.2 million and an internal rate of return of 69.9 %. (Annex 8 presents a detailed discussion of the economic analysis and calculation of the project’s NPV.)

2. Technical

59. Animal Health. The successful implementation of the program depends on a phased multi- disciplinary strategy based on a sound epidemiological approach to control HPAI outbreaks. This strategy has to take into consideration a broad range of epidemiological scenarios that exist in different poultry production systems in the affected countries and different levels of incidence (ranging from high incidence with variable flock outbreaks, though low frequency disease outbreaks with partial flock immunity, to sporadic outbreaks). A balanced combination of appropriate disease-control options, tailored to the specific characteristics of each country and its farming systems is essential for the achievement of the program objectives.

60. The implementation of the Project raises important technical issues and presents substantial challenges. Key issues include the following:

e The capacity of thepublic andprivate veterinary services. The Armenian veterinary services are inadequately equipped and trained to deal with HPAI and the potentially large scope, severity and rapid spread ofany outbreaks. This is evident across the entire range ofcritical capabilities: surveillance and diagnostic capacity for early detection and reporting of outbreaks, monitoring the disease, rapid response and implementation of the required control measures within and around the outbreaks, and essential research to understand how the disease develops in a particular situation.

18 e Adequate regulatory and incentive framework. The current legal and regulatory framework is incomplete, not fully consistent internally, and in many instances poorly aligned with actual physical, technical and staff capacities on the ground. Amendments will be needed, therefore, to the veterinary law, to various decrees governing emergency situations as well as highly dangerous animal diseases, to regulations concerning institutional responsibilities and the like. In addition, the legal basis for effective compensation being provided to livestock owners will need to be put in place urgently to ensure good governance, transparent allocation ofresources and probity in compensation payments.

e Laboratory facilities and staff capabilities. As a consequence of the Soviet legacy and 15 years of post-Soviet resource scarcity, most laboratory facilities are outdated and severely lacking in modern equipment needed to discharge critical diagnostic functions. Staff expertise, likewise, needs substantial upgrading. With the help of experts from FA0 and WHO and utilizing information and guidelines provided by WHO and OIE, the critical deficiencies have been identified and will be addressed by the Project.

e Bio-security measures. Bio-containment measures to prevent the spread of the virus from infected premises and bio-exclusion measures to exclude the virus from uninfected locations are essential, but have often proven to be difficult to implement effectively. The lack of capacity and experience in practicing effective measures is one ofthe main reasons for the persistence ofthe disease and its spread in the world. It will be critical to develop and practice effective implementation under the specific conditions of Armenia and to develop and institutionalize efficient coordination among local and national institutions, agencies and services.

e Epidemiological expertise. Incorporating epidemiological and epizoological studies linked to disease control programs, so as to generate quantitative and geo-referenced data on infection and transmission dynamics, is another key success factor. Scarce scientific expertise limits the availability of modem methodologes and tools, and the project will support initiatives to address this weakness.

e Wildlre species and reservoirs are a source of HPAI. Some species ofmigratory birds appear to have played a role in the transmission ofthe H5N1 virus to domestic poultry. Armenia is an important stop-over place on the flyways of a broad range of migratory birds and for many of them their main wintering location. The country therefore faces significant risk. It is very difficult to apply bio- security measures aimed at avoiding contact between migratory and other wild birds and domestic poultry, particularly where, as in Armenia, backyard poultry is widely practiced and domestic birds are allowed to roam freely. In these circumstances, it is likely to prove very difficult, if not impossible, to completely eradicate the HPAI virus, but the project will place heavy emphasis on efforts to minimize the contact between wild and domestic birds.

e Poor coordination among public agencies and weak linkages with the private sector. Ineffective coordination among ministries and public agencies, as well as weak linkages with the private sector, are major impediments to long-term planning for infectious disease control. Given the zoonotic and transboundary nature of HPAI, a well coordinated public-private response is essential. The project will seek to establish efficient coordination arrangements and mechanisms.

59. Public Health - Technical Considerations. In terms of public health, the swine influenza experience provides a benchmark for decision-making and public health response to the threat of an influenza pandemic. Yet, how relevant are the experiences and lessons of 1976 for a pandemic response today? Substantial changes in public health preparedness and infrastructure, in vaccine manufacturing and delivery, and in society have occurred which will affect a pandemic response. International surveillance for influenza and the strains that cause infection is much stronger than in 1976. The

19 additional surveillance data available today will provide a much stronger basis for assessing the likelihood of a pandemic, Experience has shown that new influenza strains can cause clusters of human diseases without becoming widespread. Improvements also have been made in public health preparedness planning, and communications between the different levels ofa health system.

60. Despite these changes, many of the lessons from the swine influenza experience remain relevant and, as demonstrated by the experience implementing smallpox vaccination, remain as significant challenges. The need to identify adverse effects following vaccination as coincidental or causal also remained problematic. Separating risk assessment and risk management, conduct of external program reviews, improved communications planning, and strong surveillance for vaccine safety all are areas where the lessons of swine influenza were appropriately applied in the smallpox program.

61. Lessons from swine influenza also were considered in developing the pandemic influenza preparedness and response plan under the Global Program for Avian Influenza. The importance of planning by Armenia’s MOH at the different levels of the system during the inter-pandemic period of strengthening key infrastructures, and of exercising response plans needs greater emphasis and will be addressed by the Project.

3. Fiduciary

62. Financial management. The financial management and procurement functions for the Animal Health and Public Awareness and Implementation Support components will be handled by the ARSP Project Implementation Unit (Pnr) in MOA and for the Human Health and Critical Imports components by the HSMP PIU in MOH. Both PIUs’ will be responsible for the flow of funds, accounting and reporting in their respective ministries. PIUs will be coordinating their work, and the reports will be consolidated by the ARSP PIU for submission to the Bank.

63. A financial management assessment of both ARSP and HSMP PIUs to be responsible for the project implementation was undertaken in March 2006 to determine whether the existing financial management arrangements are acceptable to the Bank This was in addition to assessment ofthe financial management arrangements of the ARSP PIU conducted in April 2005 during preparation of the Rural Enterprise and Small-scale Commercial Agriculture Development (RESCAD) project, and that of the HSMP PIU performed in February 2004 during preparation of the HSMP. Furthermore, the FM systems have also been reviewed periodically as part ofprevious projects supervisions for last several years and have been found satisfactory in both PIUs. The ARSP PIU and HSMF’ PIU have established and maintained good financial management systems for the implementation of the active RESCAD and HSMP projects respectively.

64. The financial management systems ofboth PWs are capable of supporting the implementation of the proposed project in accordance with the requirements ofOP 10.02, except for the Compensation Fund sub-component under ARSP PTU for which internal control and fund flow arrangements have been prepared (see Annex 4.b) but are yet to be finalized. The flow of funds under this sub-component will only begin after appropriate internal control and fund-flow procedures, satisfactory to the Bank, have been adopted and documented in the Compensation Procedures Manual (as noted above in para. 55 concerning disbursement conditions.) In addition, an action plan is prepared to further strengthen the financial management arrangements in both units and is presented in hex7 ofthe PAD.

65. Procurement assessments of the ARSP PIU and the HSMP PIU have been made in accordance with the requirements of OP 11.OO. The agreements covering procurement methods and thresholds have been determined for Armenia according to its capacity and experience with Bank procurement and are consistent with ERA assistance guidelines. The procurement agreements have been appraised and

20 detailed in the procurement plan for the first three years of the Project (summarized in Annex 7). The General Procurement Notice is to be issued on or about April 7,2006.

66. Procurement will be accelerated in the first six months of the Project by allowing Shopping procedures to be used for a certain number of emergency contracts, whose size would usually be above the normal ceiling for Shopping. These cover mainly the following: safety gear for veterinary and health services personnel; equipment and rapid test kits, and other reagents for the VSI reference laboratory and MOH laboratories; and, one mobile incineration plant and related containers for culling. In the event of a human AI pandemic, Emergency Recovery Assistance (ERA) procedures could be used for purchase of human vaccines (and for acceleration of procurement of other items as to be agreed with by the Bank in the case ofa pandemic).

4. Environment and social aspects

67. Overall, the Project will assist the government to develop a strategy for managing future emerging and re-emerging zoonotic and infectious disease outbreaks. As a result, the two safeguard issues which pertain to the Project are those of environmental assessment for technologies to be deployed for disposal of culled poultry and of mitigating the negative impacts of mandated culling of poultry on small scale backyard poultry producers.

68. In general, activities under the Project are not expected to generate any adverse environmental effects as they are focused largely on public sector capacity building and improved readiness for dealing with outbreaks of avian influenza in domestic poultry. These prevention-focused activities are expected to have a positive environmental impact as the Project's investments in facilities, equipment, and training for laboratories will improve the effectiveness and safety over existing avian influenza handling and testing procedures by meeting international standards established by the OLE. This would be reinforced by the mainstreaming of environmental safeguards into protocols and procedures for the culling and disposal ofanimals during AI outbreaks.

69. Whatever medical waste is generated in health care facilities will be managed using existing guidelines in Armenia, which have been found satisfactory under previous projects. The Project would also support updating these guidelines, training health care workers to manage medical waste following these guidelines, and the possible purchase of equipment for the proper handling and disposal of medical waste in participating facilities. These provisions would be included in the Project Operational Manual.

5. Safeguard policies

Environmental assessment Environmental Category B

69. Environmental Assessment and Environmental Management Plan. Since the Project supports investments in carcass disposal for culled poultry, the Project is assessed as a B-category project. An Environmental Assessment (EA) and an Environmental Management Plan (Em) for the deployment of carcass disposal capacity (mainly using bio-thermal holes, but also potentially using mobile incineration units) will be necessary. This EMP will also cover the clean up ofanimal wastes ofculled poultry by the local public veterinary services supported under the Project. The scope of this EMP will be specified in early project implementation, as a waiver for the requirement to complete the EA and EMP during project preparation has been sought and obtained per para. 12 of OP 4.01. Preparation of the EA and EMP is expected early in project implementation, and their adoption by the Government is set as a disbursement condition for the Animal Health component ofthe Project.

21 Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OPIBPIGP 4.0 1) Natural Habitats (OPIBP 4.04) Pest Management (OP 4.09) Cultural Property (OPN 1 1.03, being revised as OP 4.1 1) Involuntary Resettlement (OPIBP 4.12) Indigenous Peoples (OD 4.20, being revised as OP 4.10) Forests (OPIBP 4.36) Safety of Dams (OPIBP 4.37) Projects in Disputed Areas (OPIBPIGP 7.60)* Projects on International Waterways (OPIBPIGP 7.50)

6. Policy Exceptions and Readiness

70. The only policy exception requested has been with regard to the waiver of the completion of the EA and EMP per para. 12 of OP 4.01. This waiver has been approved by Bank senior management. The project meets the regional criteria for readiness for implementation.

* By supporting theproposedproject, the Bank does not intend to prejudice thefinal de~erminat~onof the parties' claims on the disputed areas

22 Annex 1: Ten things you need to know about pandemic influenza (WHO - 14 October 2005) ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT

A. Pandemic influenza is different from avian influenza

1. Avian influenza refers to a large group of different influenza viruses that primarily affect birds. On rare occasions, these bird viruses can infect other species, including pigs and humans. The vast majority of avian influenza viruses do not infect humans. An influenza pandemic happens when a new subtype emerges that has not previously circulated in humans,

2. For this reason, avian H5N1 is a strain with pandemic potential, since it might ultimately adapt into a strain that is contagious among humans. Once this adaptation occurs, it will no longer be a bird virus--it will be a human influenza virus. Influenza pandemics are caused by new influenza viruses that have adapted to humans.

B. Influenza pandemics are recurring events

3. An influenza pandemic is a rare but recurrent event. Three pandemics occurred in the previous century: “Spanish influenza” in 1918, “Asian influenza” in 1957, and “Hong Kong influenza” in 1968. The 1918 pandemic killed an estimated 40-50 million people worldwide, That pandemic, which was exceptional, is considered one of the deadliest disease events in human history. Subsequent pandemics were much milder, with an estimated 2 million deaths in 1957 and 1 million deaths in 1968.

4. A pandemic occurs when a new influenza virus emerges and starts spreading as easily as normal influenza - by coughing and sneezing. Because the virus is new, the human immune system will have no pre-existing immunity. This makes it likely that people who contract pandemic influenza will experience more serious disease than that caused by normal influenza.

C. The world may be on the brink of another pandemic

5. Health experts have been monitoring a new and extremely severe influenza virus - the H5N1 strain - for almost eight years. The H5N1 strain first infected humans in Hong Kong in 1997, causing 18 cases, including six deaths. Since mid-2003, this virus has caused the largest and most severe outbreaks in poultry on record. In December 2003, infections in people exposed to sick birds were identified.

6. Since then, over 100 human cases have been laboratory confirmed in four Asian countries (Cambodia, Indonesia, Thailand, and Viet Nam), and more than half of these people have died. Most cases have occurred in previously healthy children and young adults. Fortunately, the virus does not jump easily from birds to humans nor spread readily and sustainably among humans. Should H5N1 evolve to a form as contagious as normal influenza, a pandemic could begin.

D. All countries will be affected

7. Once a fully contagious virus emerges, its global spread is considered inevitable. Countries might, through measures such as border closures and travel restrictions, delay arrival of the virus, but cannot stop it. The pandemics of the previous century encircled the globe in 6 to 9 months, even when

23 most international travel was by ship. Given the speed and volume of international air travel today, the virus could spread more rapidly, possibly reaching all continents in less than 3 months.

E. Widespread illness will occur

8. Because most people will have no immunity to the pandemic virus, infection and illness rates are expected to be higher than during seasonal epidemics ofnormal influenza. Current projections for the next pandemic estimate that a substantial percentage of the world’s population will require some form of medical care. Few counties have the staff, facilities, equipment, and hospital beds needed to cope with large numbers ofpeople who suddenly fall ill.

F. Medical supplies will be inadequate

9. Supplies of vaccines and antiviral drugs - the two most important medical interventions for reducing illness and deaths during a pandemic - will be inadequate in all counties at the start of a pandemic and for many months thereafter. Inadequate supplies ofvaccines are ofparticular concern, as vaccines are considered the first line of defense for protecting populations. On present trends, many developing countries will have no access to vaccines throughout the duration of a pandemic.

G. Large numbers of deaths will occur

10. Historically, the number of deaths during a pandemic has varied greatly. Death rates are largely determined by four factors: the number of people who become infected, the virulence of the virus, the underlying characteristics and vulnerability of affected populations, and the effectiveness of preventive measures. Accurate predictions of mortality cannot be made before the pandemic virus emerges and begins to spread. All estimates of the number ofdeaths are purely speculative.

11. WHO has used a relatively conservative estimate - from 2 million to 7.4 million deaths - because it provides a useful and plausible planning target. This estimate isbased on the comparatively mild 1957 pandemic. Estimates based on a more virulent virus, closer to the one seen in 1918, have been made and are much higher. However, the 19 18 pandemic was considered exceptional.

H. Economic and social disruption will be great

12. High rates of illness and worker absenteeism are expected, and these will contribute to social and economic disruption. Past pandemics have spread globally in two and sometimes three waves. Not all parts of the world or of a single country are expected to be severely affected at the same time. Social and economic disruptions could be temporary, but may be amplified in today’s closely interrelated and interdependent systems of trade and commerce. Social disruption may be greatest when rates of absenteeism impair essential services, such as power, transportation, and communications.

I. Every country must be prepared

13. WHO has issued a series of recommended strategic actions Tpdf 113kbl for responding to the influenza pandemic threat. The actions are designed to provide different layers of defense that reflect the complexity of the evolving situation. Recommended actions are different for the present phase of pandemic alert, the emergence of a pandemic virus, and the declaration of a pandemic and its subsequent international spread.

24 J. WHO will alert the world when the pandemic threat increases

14. WHO works closely with ministries of health and various public health organizations to support countries' surveillance of circulating influenza strains. A sensitive surveillance system that can detect emerging influenza strains is essential for the rapid detection of a pandemic virus.

15. Six distinct phases have been defined to facilitate pandemic preparedness planning, with roles defined for governments, industry, and WHO. The present situation is categorized as phase 3: a virus new to humans is causing infections, but does not spread easily from one person to another.

25 Annex 2a: Summary and Review of the Avian Influenza Action Plan of the Republic of Armenia ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT

1. To have maximum impact on reducing the spread and cost of a pandemic influenza, it is critical that Armenia begin implementing its own country preparedness and response plans. Achieving this is one of the development objectives ofthe proposed project. As a first step, the Avian Influenza Action Plan of Armenia has been reviewed and summarized.

Pandemic Preparedness Assessment Tool

2. To evaluate the preparedness status and readiness in Armenia, the existing tools prepared by the European Center for Disease Prevention and Control (ECDC), in collaboration with WHO and the European Commission have been used3. In using these tools, the objectives have been to:

a) To evaluate the status of pandemic influenza preparedness in the country b) To determine a baseline of preparedness, or to determine progress made since an earlier assessment. c) To identify weaknesses and strengths ofpandemic influenza preparedness. d) To identify steps for improvement.

3. The assessment has focused on the following issues:

I. Avian Influenza Preparedness (Animal Component)

0 Is there awareness ofthe current situation in the work regarding avian influenzalconcern about its introduction into the country? YES

0 Contingency plan for an outbreak among birds available, including protection ofpeople living in the area and workers handling or killing affected birds? DEVELOPED, BUT TO BE REFINED

0 Collaboration arrangements established with international agencies such as FAO? YES

0 Isthere laboratory capacity to test animal specimens for influenza? NOT YET

0 Is the Ministry of Agriculture involved in pandemic preparednesslmember of national pandemic committee? YES

0 Have exercises been conducted on how to respond to an outbreak in birds? NO

II.Public Health Preparedness Seasonal Influenza:

0 Seasonal influenza surveillance systems in place and functional? PARTIALLY

0 Seasonal influenza vaccination program for target groups in place? NOT YET

ECDC with WHO and the EC, 2005, draft Assessment Toolfor National Pandemic Influenza Preparedness.

26 Pandemic Influenza (national level) Planning and Coordination

0 Relevance of pandemic planning recognized by decision makers and preparedness policies developed and adopted? YES

0 Legal and ethical frameworks established coherent with international legislation (International Health Regulations)? PARTIALLY

0 National Pandemic Planning Committee established? NO

0 Command and control structure in place outlining management and decision-making processes of all organizations involved in response to a health emergency? NO

0 Country has national influenza pandemic preparedness plan that is consistent with international plans and periodically updated? YES

Situation Monitoring and Assessment

0 National system available for influenza surveillance in both humans and animals? NO

0 Access to at least one laboratory able to offer routine influenza diagnosis, typing and sub-typing, but not necessarily strain identification? YES

0 Outbreak investigation capacity available (inventory ofresources available)? LIMITED

0 Contingency plans developed for ongoing monitoring of impact and resource needs during the pandemic phase. NO

Prevention and Containment

0 National guidance for public health response developed? LIMITED, NEEDS STRENGTHENING

0 National guidance for civil emergency response developed? LIMITED, NEEDS STRENGTHENING

0 Anticipated resource implications for implementation addressed? DURING AIP PREPARATION

0 Tabletop exercises conducted and results used to improve planning? NO

0 Strategy to access antivirals for national use (e.g., stockpiling) developed? YES

0 Priorities and criteria for deployment and use of antivirals defined? IN PROCESS

0 Strategy to access pandemic vaccines exploreddeveloped; regulatory issues, liability, intellectual property rights addressed? NOT YET

0 Priorities and criteria for use of pandemic vaccines defined; preliminary priorities for pandemic vaccines use developed, based on expected availability? NO

0 Logistic and operational needs for implementation ofpandemic vaccines strategy reviewed? NO

Health System Response Health services are informed about national pandemic influenza policies including preparedness plan? NOT UNIFORMLY THROUGHOUT THE COUNTRY

27 0 Contingency plans developed on how to maintain essential services? NO

0 Authorities, responsibilities and pathways identified for command and control of health systems in the event of a pandemic? NO

0 Pharmaceutical and other material supply needs estimated; arrangements to secure supply commenced? PARTIALLY

0 Plans for health workers training in pandemic influenza response developed? NO

Communication

0 National communication strategy for pandemic influenza established? NO

0 Capacity planned and tested for meeting expected domestic information demands for diverse audiences, including professionalitechnical groups, the news media and general public? NO

0 Networks among key response stakeholders established, including risk communicators, non- health government departments, and professional and technical groups? NO

0 News media with national plans familiarized, including preparedness activities and decision- making related to seasonal and pandemic influenza? NO, BUT TRAINING FUNDS SPECIFIED FOR SUCH

Categorization of Country Readiness

4. On the basis ofthe results ofthe preparedness assessment, Armenia is assessed as: LOW

5. Advanced: An eligible country would have a well developed and approved national preparedness and response plan showing understanding ofthe issues and goals for addressing them, actions adapted from international guidelines and best practices to meet national priorities, evidence of strong public support and a well balanced range of stakeholders. It would have identified investment priorities to support the implementation ofthe plans, have included financing estimates ofthe needs; defined key indicators for monitoring and evaluating the implementation ofnational programs; and be conducting ongoing public dialogue andlor involvement.

6. Moderate: As for "Advanced" but missing some key elements in the plans and without reliable financial estimations.

7. Low: Many key aspects missing, especially public dialogue and establishment of goals, requiring significant additional identification of implementable actions and direction.

28 Annex 2b: Organization of the Veterinary Services and the Health Care System in the Republic of Armenia ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT

A. Veterinary Care

1. In the result of agrarian reforms new businesses were created and state finances animal health services ceased to function. The established input and output distribution chains collapsed and a wide range of alternative processing (often home-based) and marketing systems developed, in most instances without veterinary oversight. These changes have brought serious challenges for the staff of the Veterinary State Inspection (VSI). Instead of working only with the veterinary fraternity in the state and collective farms, they now have to interact and communicate extensively with numerous individual livestock producers, private veterinarians, consumers and their organizations. Moreover, WTO membership has added a commitment to communicate about animal health, trade and food safety issues at the international level and to develop a domestic food safety assurance system that is compliant with the Codex Alimentarius.

2. Because of budgetary constraints, the number of diseases for which the SDV intends to have active control campaign has been reduced from 55 to 7 (brucellosis, tuberculosis, anthrax, pasterellosis, Foot and Mouth disease (FMD), gangrene emphysematous and hog classis cholera). The Government has stopped the provision of animal health medicine except for measures defined by state order. The previous “Zoovetsnab” together with its shops were privatized,

3. The diagnostic works of diseases are carried out not on due level, which is conditioned with laboratory equipment physical wear out and the staff under completeness. None of the 38 veterinary laboratories currently meet international standards (IS0 17025).4

Veterinary Services

4. The governmental veterinary inspection consists of structural subdivisions and regional entities (77 employees). At present 750 veterinary specialists are working in the communities and they are paid by the village authorities. Gradually the number of private veterinary practitioners service is developing, and they are licensed by the Ministry ofFinance and Economy.

5. The annual plan developed by the VSI is the basis for all the activities ofcommunity veterinaries, and the activity framework of each community is conditioned by that. The community veterinarians are accountable to regional inspectors, who in turn are accountable to the Marz State Veterinary Inspector, The latter regularly presents reports to Yerevan RA Agricultural Veterinary State Inspection.

Laboratories

6. Acting in the whole country, the veterinary laboratory chain is centralized in Yerevan at the ”Republican Veterinary Anti-epidemic and Diagnosis Center” State Non-commercial Organization (SNCO) as central veterinary laboratory. At present 10 Marz and 27 regional subdivisions of SNCO are acting. The Central Veterinary Laboratory is under the responsibility of VSI. The central lab has the only ELISASequipment and CPR6test in the veterinary services, and funds to procure test kits are limited.

ISOiIEC 17025= International Organization for StandardizatiodInternational Electrotechnical Commission’s standard for the competence of testing and calibration laboratories. Enzyme-linked Immunosorbent Assay

29 7. The SNCO Marz branches have bacteriological and serological examination capabilities, and the regional laboratories have only serological capabilities. The absence of in-service training has the staff increasingly out of touch with advances in their field.

8. According to the RA Government corresponding Decree about the “Order of Implementation of Meat and Animal Waste Products Veterinary-Sanitary Examination” in markets, shops, public food places the veterinary-sanitary examination is implemented by physical and legal entities having license for private veterinary activity.

Procurement and Distribution of Vaccines

9. In the Republic, for the implementation of animal anti-epidemic preventive measures the procurement of necessary veterinary vaccines is carried out through public tender.

10. The vaccines are provided to communities’ veterinarians free-of-charge. After the procurement of veterinary vaccines, refrigerated trucks transport the procured veterinary vaccines and diagnosis means from Yerevan to Marz centers, from where the Marz inspectors distribute them to regions, and the latter to communities. Marz inspectors have to report to the Veterinary State Service (Inspection) on vaccination they have performed.

Management of Veterinary Drugs

11. The past system of state distribution of veterinary drugs through the “Zoovetsnab” outlets has been replaced by private operators. Due to the RA Government corresponding decree, a state registration order was set up for biological vaccines, serums and diagnosis means used in the RA veterinary field and it is authorized to RA Ministry ofAgriculture. Currently, there is a list with 28 registered drugs and vaccines, and a further 2 applications are pending approval.

Veterinary control border checkpoints

12. In fact, none of the boundary posts or checkpoints is equipped according to boundary quarantine post requirements, and none have any facilities to quarantine animals or keep animal products in safe seclusion. They are not located in buildings instead they work in vans. All lack effective communications equipment.

Association of Private Veterinarians

13. The “Pan-Armenian Veterinarian Association” was founded and acts on public bases. Presently, the National Association has 98 physical members that are not active.

Animal Carcass Disposal Arrangements

14. There are no rendering plants in the Republic of Armenia. Disposal of animal carcasses is done through burial. Animal owners are, by law, required to inform a veterinarian when an animal has died; the veterinarian inspects the animal and decides if further bacteriological, virological or other tests are required. Ifnot, the carcass is to be disposed in an official animal burial ground.

Cyclic Polymerase Reaction

30 15. In addition, there are roughly 40 bio-thermal holes for the destruction of animal carcasses. Currently these bio-thermal holes are in various degrees of disrepair relative to their original condition. Ideally, these bio-thermal are of standardized design, constructed at a dry, high-ground place with a low level of subsoil water, at least 300 m from the livestock sheds, processing facilities, rivers, ponds and wells, and the area is fenced to a height of not less than 2 m. The hole itself is 10-12 m deep, with a diameter of 2-3 m, The facility is constructed of moisture- and thermo-resistant material (bricks, ferroconcrete, wood and clay), with a hermetic cover and a ventilation system (see drawing below). Construction costs are about 2.2 million Armenian dram. Within 20 days after being loaded with animal carcasses, the internal temperature rises to 65' C. The decaying process is completed within 35-40 days, with the formation of uniform and odorless compost, suitable for fertilizing. The bio-thermal hole has a significant advantage over burial grounds in that it causes fairly rapid destruction of many microbes. In the absence of rendering facilities, bio-thermal holes provide effective carcass sterilization and, thus, a high sanitary status at livestock farms.

31 Annex 3: Results Framework and Monitoring ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT Results Framework

PI30 Project Outcome Indicators Use of Project Outcome Information To minimize the threat in Armenia Evidence* of improved effectiveness of participating animal To determine whether or lased to humans by HPAI and public health services in limiting the spread of an HPAI not the project objective nfection and other zoonoses in outbreak and consequent pandemic in Armenia; has been achieved. lomestic poultry and prepare for Evidence* of widespread adoption of recommended practices he control and response to an for the prevention and control of HPAI among poultry producers, nfluenza pandemic and other distributors, and retail vendors; nfectious disease emergencies in Improving trend in poll of experts designed to gauge HPAI iumans. readiness in Armenia.

Intermediate Outcomes Intermediate Outcome Indicators For Each Component Use of Intermediate Outcome Monitoring [. Animal Health Component Zomponent LA: National Policy Component LA: Component LA: ‘ramework and development of a Evidence* of timely and satisfactory progress toward delivery of To verify satisfactory zational strategic plan - A Component LA outputs, as compared to the original plan, and timely progress in, :ountry-specific strategy (and its including specific indicators as follows: or completion of :orresponding information system) Detailed assessment of the MOA Veterinary State Inspection; Component LA. Nas developed, adopted, and National AI strategic plan developed and adopted by lisseminated to control and government. xadicate HPAI in areas at risk. Component 1.B: Strengthening Component 1.B: Component 1.B: Disease Surveillance and Evidence* oftimely and satisfactory progress toward delivery of To verify satisfactory Diagnostic Capacity - Animal Component LB outputs, as compared to the original plan, and timely progress in, lisease surveillance and diagnostic including specific indicators as follows: or completion of capacities strengthened and BSL-2+ attained in one reference laboratory; Component I.B. training of the veterinary services Self-assessment of the veterinary services executed; designed and completed. 100% monitoring of poultry breeding stock farms. Component 1.C: Outbreak Component 1.C: Component 1.C: Containment Plan - supplies and Evidence* of timely and satisfactory progress toward delivery of To verify satisfactory incineration investments deployed Component 1.C outputs, as compared to the original plan, and timely progress in, in field and certification of including specific indicators as follows: or completion of readiness for rapid response Emergency supplies procured and available at strategic Component LC. (necessary to control and eradicate locations in the field; an outbreak of HPAI) attained in One mobile incineration unit deployed and 16 bio-thermal areas at risk. disposal holes constructed or reconstructed; Certification of readiness rating obtained from FAOlOIE (following readiness review); Backyard poultry farming in unconfined conditions addressed in at least 200 farms; Compensation Fund established with clear operating modalities. 11. Human Health Component Component 1I.A: Enhancing Component 1I.A: Component 1I.A: Program Planning and Evidence* oftimely and satisfactory progress toward delivery of To verify satisfactory Coordination -Improved Component 1I.A outputs, as compared to the original plan, and timely progress in, command and control structures including specific indicators as follows: or completion of for quarantine and disease control Inter-institutional and multi-sectoral coordination Component ILA. in a health emergency were arrangements in place between MOH and MOA developed and implemented. National strategic plans for improvement of public health surveillance and disease control systems prepared according to WHO recommendations, approved and adequately resourced for implementation.

32 [ntermediate Outcomes Intermediate Outcome Indicators For Each Component Use of Intermediate Outcome Monitoring Component 1I.B: Strengthening Component 1I.B: Component 1I.B: National Public Health Evidence* of timely and satisfactory progress toward delivery of To verify satisfactory Surveillance Systems - Measures Component 1I.B outputs, as compared to the original plan, and timely progress in, to improve communicable disease including specific indicators as follows: or completion of surveillance and control in human Increased surveillance and outbreak investigation capacity; Component ILB. populations at risk were Number of public health laboratories (at least two) available developed, tested and for routine influenza diagnosis and typing rehabilitated and implemented. equipped, and with appropriate biomedical waste management systems; 4 Number of health personnel trained in influenza virus surveillance and control; 4 Number of sentinel site marzes {at polyclinics) complying with bi-weekly (winter) and monthly (summer) reporting on influenza occurrence; Increased laboratory capacity to collect and analyze specimens per day for viral typing, sub-typing and isolation in times of surging specimen load; % of positive tests of specimens confirmed by reference laboratory; Component 1I.C. Healthcare Component 1I.C: Component 1I.C: System Response Capaciv - Evidence* of timely and satisfactory progress toward delivery of To verify satisfactory - "Social distancing measures" Component 1I.C outputs, as compared to the original plan, and timely progress in, such as quarantine, bans on mass including specific indicators as follows: or completion of gatherings, and travel restrictions, Strategy for procurement of and access to human influenza Component 1I.C. were developed and implemented vaccine on the basis of well-defined criteria developed; backed up by a communication Strategy for access to and appropriate use of anti-virals (e.g., strategy. stockpiling and standard treatment protocol) developed; - Critical medical care networks A contingency plan for procurement of AI vaccine for were strengthened and readied to humans is developed should one become available and needed; cope with increased demand for Number of professionals and support personnel trained for services, and to prevent the spread active surveillance, case finding, and proper diagnosis, treatment of infection among high-risk and care to contain outbreaks and reduce occurrence and case populations and health care fatality during both pre-epidemic and pan-endemic phases ; workers. 4 Cumulative incidence rate (CIR); 4 % change in the AI case fatality rate.

33 Intermediate Outcomes Intermediate Outcome Indicators For Each Component Use of Intermediate __ Outcome Monitoring 111. Public Awareness and Implem~ tation Support Component Component 1II.A: Public Component 1II.A: Component 1II.A: Awareness - Evidence* of timely and satisfactory progress toward delivery of To verify satisfactory and -- Coordinated communications Component 1II.A outputs, as compared to the original plan, timely progress in, or process involving MOA, MOH, including specific indicators as follows: completion of Component Ministry of Territorial Political and civic leadership organized around a national 1I.A. Administration addressing strategic risk communication plan; information /communication needs Research-based risk communication strategies and ofpriority audiences, during pre- products, responding to the needs of priority audiences; pandemic and pandemic A-I phases; Consistent awareness-raising and behavior change -- Informed at-risk communities interventions with population at risk using appropriate adopting safe health practices, communications channels; reporting, and contributing to Communications strategies and products highlighting the outbreak control actions; actions and investments of participating ministries and the -- Educated citizenry, aware of the mobilization of group resources to contain the epidemic, impact and social containment generating social trust and credibility; measures needed if AI escalates Evidence of consistent communication and information across pandemic phases technologies, to promote reporting of outbreaks, fast response and an uninterrupted social dialogue; Production and dissemination of informational products that educate priority audiences about possible scenarios and mitigation and control actions to be undertaken. Component 1II.B: Coordination Component I1I.B: Component 1II.B: Support - Coordination and Evidence* of timely and satisfactory progress toward delivery of To verify satisfactory and management of project Component 1II.B outputs, as compared to the original plan, timely progress in, or implementation and M&E activities including specific indicators as follows: completion of Component carried out in a professional manner Program reports, financial monitoring, procurement and 1II.B. disbursement reports, audits, management and financial reports prepared and submitted periodically Methodology defined and monitoring and evaluation periodically undertaken * - via reports from technical and SOC audit teams (as required). The actual composition of teams TBD at likely would draw from international agencies and other experts.

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m t Annex 4a: Detailed Project Description ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT

1, The Project will finance activities under four components: (i)animal health, (ii)human health, (iii)public awareness and implementation support; and, (iv) critical imports. Given the urgency ofthe situation, following the recent experiences with HN/AIDS projects in Africa and the Caribbean, priority has been given to detailing the activities to be included in the first year ofthe project with subsequent activities for later years to be refined in more detail as part ofannual project reviews.

I. ANIMAL HEALTH COMPONENT

2. The Project will support activities proposed by Armenia to cover the needs in the short, long- term, and ranging from prevention, to control and total eradication of HPAI. These proposed measures comprise an integrated package maximizing the possibilities of success based on a detailed assessment of the particular conditions, constraints and possibilities of the country (including a rapid assessment of veterinary services and recent assessments ofthe poultry sector). In general, these activities fall into three major areas:

0 Improvements to the national policy framework, development of strategies and increasing preparedness. 0 Strengthening disease surveillance, diagnostic capacity and applied research. 0 Carrying out outbreak containment plans and restructuring ofthe poultry sector.

A. National policy framework and development of a national strategic plan

A1: Policy development and enabling environment

3. To ensure that disease control, prevention and eradication measures are implemented in a uniform and effective way and in accordance with OIE standards and guidelines, improvement in the regulatory framework and the harmonization and rationalization of animal health governance and policy issues will be addressed, These are related to bio-security, vaccination, control ofanimal movement, border control, culling and disposal of carcasses, compensation, restructuring of poultry industry, compartmentalization and zoning, and other regulations related to the poultry sector. Thus, the Project will support definition of disease control options and reviews and strengthening of existing regulations and policies, and will fund related policy studies and dissemination workshops. The main outputs will be a detailed assessment of the capacity ofits veterinary services and development ofthe Action Plan on AI and the National Strategy for AI into a strengthened national AI strategic plan. (US$ 0.18 million)

A2: Updating Essential Information on Migratory Birds

4. In this area, the Project will support epidemiological studies with a focus on scaling up the knowledge base ofthe Ministry ofNature Protection on movement ofmigratory birds in the main areas of their known transit. Flight and rest patterns of certain species of migratory birds, as they concern the territory of Armenia, are likely to have changed since the extensive studies carried out in the 1970s and 198Os, because of significant development ofirrigation facilities, ponds, etc. The project will finance an immediate effort to update this critical information, so as to identify “hot spots” and high-risk locations where migratory fowl may come into contact with domestic poultry. (US$0.07 million)

40 B: Strengthening Disease Surveillance and Diagnostic Capacity

B1: Strengthening Animal Disease Surveillance and Diagnostic Capacity

5, Project support in this area will aim at strengthening the capacity of the MOA Veterinary State Inspection (VSI) and its affiliated reference and regional diagnostic laboratories in detection, reporting and follow-up ofreported AI cases. This will cover the formation and equipping of a Bio-Safety Level 3 (BSL3) laboratory in Yerevan, as well as office equipment and rehabilitation of marz laboratories and border posts. Rapid test kits and consumables will be funded for the central laboratory, sprayers and disinfection means for the border posts, and vehicles for the VSI and marz levels as needed for the execution of their relevant roles in the National Strategy for AI. The costs of funded activities (US$ 2.61 million) are composed as follows:

Cost in US$ Needs of National Reference Laboratory (Yerevan) Laboratory Equipments 282,239 Rapid Test Kits and Consumables 31,885 Laboratory Rehabilitation 360,000 Needs of the border-post and Regional Laboratories (Syuniq-Vayots Dzor, Ararat- Arrnavir, Kotayk-Gegharquniq, Aragatsotn-Shirak, Lori-Tavush) Laboratory and border post rehabilitation 600,000 Other veterinary services needs 965,833 Border post equipments and chemicals 187,364 Technical Assistance for Disease Surveillance 178,500 Total 2,605,822

B2: Veterinary Services Training and AI Surveillance

6. Training will target the personnel ofthe MOA VSI, including those ofthe marz level and border posts. The focus of the training will be on disease surveillance (screening, sampling, and testing), outbreak management procedures (including simulation exercises, culling and disposal), and laboratory diagnosis (including analysis of epidemiological data and performance of risk assessments). Increased risk-based AI surveillance activities will also be supported at the marz level, coordinated through the VSI. (US$0.16 million)

C. Outbreak Containment Plan

7. The sub-component will provide support to activities related to the implementation of the National Strategy for Avian Influenza, which details the containment plan for AI outbreaks. The National Strategy for Avian Influenza details the roles ofthe National Center (NC) ofthe MOA, the Local Disease Crisis Centers (LDCCs) set up on the basis of Local Veterinary Inspection and Marz Agricultural Departments, and National and Local Expert groups. The sub-component will include the following activities:

Cl: Targeting virus eradication at the source

8. Armenia’s HPAI control programs include the principle of targeting the disease at the source of infection, This refers predominantly to the backyard poultry sector. Wild birds are also implicated as reservoirs of disease, but the Project does not address the eradication of avian influenza viruses in avian

41 wildlife. Policies associated with this sub-component that the Government of Armenia has already introduced and would trigger in outbreak areas include: enhanced bio-security at poultry farms and associated premises, through bio-containment and bio-exclusion, and control of movement of birds and products that may be infected, including controls at the interface ofinfectednon-infected areas and border controls.

9. In order to target the eradication of the disease at the source of infection, the Project will target the following activities (totaling US$ 1.68 million):

(a) culling of infected and at-risk poultry and compensation to farmers and producing companies (at a reasonable market price); and,

(b) disposal of carcasses and potentially infective materials in a bio-secure and environmentally acceptable manner (using a mobile incineration plant and a rehabilitated and expanded network ofbio-thermal holes).

10. Assuming producer prices of roughly 1200 dramikg, live weights of 1.5 kg per animal, and a 75 percent compensation rate, the initial US$ 0.75 million reserve fund would be able to cover the culling of over 250,000 birds (about 4 percent of average poultry stocks). However, the role of the reserve is to assure the public (both producers and consumers) that a formal compensation policy has been devised, with operational procedures well defined and publicized, and ready to be used. Over time once producers are assured that the reserve fund is well organized, administered in a timely manner, and effective in attracting backyard producers to bring forth potentially infected poultry animals, the Government of Armenia may work out a mechanism whereby commercial poultry producers pay into the reserve fund, basically as a form of “insurance premia”. Given the high potential losses from even a small, localized outbreak, commercial poultry producers would likely be willing to pay a small insurance premia of this type if the overall National Strategy for AI were being well implemented.

11. The incineration plants to be deployed for disposal of infected and suspect poultry in an outbreak situation would be owned and managed by the MOA VSI. The costs ofrunning these incinerators would be shared by the national budget and provincial budgets (with a relevant policy on this cost sharing to be worked out). In times of outbreak, disposal of infected and suspect animals would be done without costs to poultry producers.

12. Establishment of a National Compensation Policy and Fund. Early detection and reporting as well as rapid response depend critically on the incentives for poultry owners to report very quickly any sick and dead poultry to their veterinarians. Without adequate compensation arrangements in place, poultry owners have no incentive to do so, but must fear that their animals will be destroyed and they lose this valuable capital. The Veterinary Law of November 19, 2005 established the state’s right to cull infected and suspected infected livestock in the case of outbreak of epizootic diseases. In addition, the Government’s National Strategy for AI makes reference to the right oflegal entities, private entrepreneurs and individuals to receive compensation for damages suffered as a result of mandatory culling, but no steps have been taken as yet to develop the required implementation arrangements - including financing, institutional arrangements, legal authority over the fund, fiduciary aspects, eligbility criteria, payment arrangements, flow offunds, etc. The project will provide technical support to do so. \

13. Compensation payments could, depending on the scope of disease outbreaks, pose a significant fiscal burden on the state, and the project will provide financial resources to establish the foundation of a compensation facility. The Government will establish a Compensation Fund from which the owners of animals culled will be compensated, and the Project will provide (in its first stage) US$0.75 million to finance this Fund (which could be increased by a further US0.75 million in the second phase).

42 US$1 00,000 will be disbursed into a specially established account so as to provide sufficient resources for immediate needs; it will be a condition of disbursement for this subcomponent that the modalities for operating the fund have been established and have been approved by IDA. The remaining US$0.65 million will be disbursed only in the event ofactual need.

14. The legal, institutional and operational details will be developed and agreed upon during the first months ofproject implementation. Key parameters guiding this effort include the following:

e Compensation payment to livestock owners will be through bank transfer. There will be no vouchers or animal replacements, Payment will be made within four weeks from the date of culling. e For smallholders (owning up to 200 birds), payment per bird will be at 75% of the market price of laying hens in the respective marz as reported by the Armenian National Statistical Service (NSS) for the third month preceding the month in which culling took place. Payments will be posted at the village level, in public, and under the supervision of the committee members from the village who attended the culling and signed the culling records. e For commercial poultry producers (with the exclusion of the 6 largest commercial poultry enterprises), compensation will be provided at a reasonable replacement cost - i.e., for birds less than 3 months old at the cost ofone-day chicks, and for birds older than 3 months at the cost of 3- months-old birds, as reported by the NSS during the third month preceding the month in which culling took place. e Flow-of-funds arrangements for making compensation payments will minimize the number of stages through which hdswill need to pass before reaching the intended beneficiaries, while ensuring maximum transparency

C2: Veterinary personnel safety

15, Due to the highly pathogenic nature of the HPAI virus to humans, particularly the currently circulating H5N1 strain, this activity of the project would provide bio-safety hoods and other appropriate personal protective clothing support to veterinary personnel to be involved in the disease surveillance and culling and disposal procedures, as well as to laboratory workers involved in virus isolation and diagnosis, (US$0.20 million).

Cost in US$ Gear for 120 staff (40 teams) 139,894 Disinfections for the Teams 55,221 Total 195,115

C3: Restructuring the Poultry Sector

16. Restructuring the poultry sector is an important strategy to guard against the damaging effects of HPAI, but also one of the most complicated interventions to be undertaken since it requires taking into account the structure of backyard versus commercial poultry production, marketing characteristics, and potential socioeconomic impact. Although backyard poultry accounts for are about 30 percent of production in Armenia, the ban on marketing of live backyard poultry has necessitated a ban on the marketing of live poultry layers (which are mainly in the commercial sector) in order to ensure compliance by backyard poultry producers. Thus, restructuring policy needs to carefully consider this linkage. In any case, restructuring should be a gradual process, coordinated with an overall disease control strategy that includes bio-security, zoning andlor compartmentalization, and possibly vaccination, and be based on the following factors and principles:

43 0 Well-defined socio-economic impact analysis, taking into account the interests of all stakeholders, particularly smallholder poultry farmers; 0 Public awareness to gain full support from these stakeholders (producers, consumers, government agencies, private sector institutions); 0 Market forces should drive the restructuring strategy taking into account commercial and smallholder poultry producers. e Public and private sectors should collaborate and be transparent in implementing restructuring strategies.

17. In this context, restructuring the poultry sector in Armenia will focus on improving bio-security of backyard poultry raising and promoting manure management of backyard poultry in conformity with existing environmental regulations. Improving bio-security of backyard poultry farming could take the form of investments in improving penning of animals and closing up of barns, integration of backyard poultry activities of families into small village-level enterprises practicing confined poultry raising, and possibly of banning unconfined backyard poultry raising in protection bands around known areas ofhigh prevalence of migratory birds farms. This last mode would involve offering support for diversification of family enterprise away from poultry raising into other activities. Since it would be extremely costly for the state to fund widespread programs for poultry sector restructuring, the introduction of restructuring modalities will be piloted under the Project with matching grants to be provided under a competitive proposal submission and award process (with at least 25% co-financing by private beneficiaries). (US$ 0.67 million)

11. HUMAN aEALTH COMPONENT

18. In the public health field, short-and long-term actions need to be taken and an appropriate balance struck between the two. While immediate steps can be taken to address the crisis, there is also a longer- term agenda given systemic shortcomings with respect to core public health functions. Work on both the short- and long-term fronts, therefore, needs to proceed in parallel, and efforts should be made to ensure that short-term responses are consistent with and contribute to proposed longer-term interventions. Setting priorities in both cases is essential.

19. Building an effective national public health response will require an enabling environment and the necessary resources to bring proven interventions quickly up to nationwide scale. Thus, the Project will help to operationalize some elements that are contemplated as part of the global strategic plan, expanding and intensifying the responses rapidly. As it is unlikely that the global spread of a pandemic influenza virus could be prevented once it emerges, the emphasis is on reducing its impact. Several tools will help achieve this aim: (i)year-round surveillance; (ii)effective and accurate methods of diagnosis; (iii)social distance interventions; (iv) vaccines (once they become available); (v) anti-viral drugs; and (vi) strengthened medical services. The interventions supported under the Project will be based on Armenia’s epidemiological and programmatic needs, and well-assessed options for meeting them. The interventions will be grouped in three sub-components, totaling US$ 2.75 million. These activities comprise a comprehensive mix ofgoods, technical assistance and training activities.

0 Enhancing Public Health Program Planning and Coordination 0 Strengthening of National Public Health Surveillance Systems 0 Strengthening Health System Response Capacity

A. Enhancing Public Health Program Planning and Coordination

20. The human health sections of the National Strategy for AI developed by the MOH are quite

44 comprehensive in scope in covering the activities that need to be undertaken during the inter-pandemic, pre-pandemic and pandemic alert phases, clearly identifying the responsible agency for each measure at different stages of an eventual pandemic. However, the agencies in charge of implementation do not currently have the organizational and logistical means to implement the plan (i.e., trained personnel, protective gear, transport, and information and communications equipment). Thus, this component will finance protective gear and clothing, information and communications equipment, rapid test kits, and other activities to protect healthcare workers and other personnel and to ensure that they can and are willing to continue to do their job in the case ofa pandemic. Funds would also be made available for the procurement of vehicles for the regional branches of the San-Epid network to facilitate coordination, supervision and outreach activities. In addition, it is not clear if the current legislative and regulatory framework allows for drastic measures such as social distancing and deployment of the health workforce under emergency conditions. These will be supported under the project through medium-term technical assistance, which will also target MOH to build its institutional capacity to participate in the Inter- Ministerial Committee for AI and to coordinate the implementation of the National Strategy for AI with the MOA and other sector representatives. (US$ 1.05 million)

B. Strengthening of National Public Health Surveillance Systems

21. This component intends to improve the current public health surveillance system to achieve standardization and better reactivity in order to ensure the early identification and early reporting of possible avian influenza cases for the early implementation of control measures. The main activities supported under this component would include: (1) improvement of laboratory networks; (ii) improvement of health information and telecommunication systems; and (iii)training of personnel at MOH and other selected agencies, and development of standard reporting forms and guidelines. In addition, the component will support technical assistance and additional investments needed to strengthen the areas ofsurveillance, communications, and information technology at the different levels ofthe health care system to support the country’s preparedness and capacity to respond to avian influenza and other infectious disease outbreaks and to fast-track available treatments for the disease. (US$0.61 million)

31. Improvement of Laboratory Networks

22. Under this activity, Armenia’s weak laboratory capacity will be strengthened and its supply needs will be met for specimen collection, transportation and laboratory investigations by upgrading the network ofregional and national public health laboratories to cope with the increased demand in case ofa pandemic. Laboratories of remote regions would be strengthened, as well as the connection between public health laboratories and epidemiologists and animal health laboratories and veterinary departments, In this area, the Project would finance establishment of: (i)a reference laboratory for diagnosis of avian flu at the San-Epid system; (ii)improvement ofpoor laboratory capacity at the central level and in remote reglons; (iii)improvement oflaboratory capacity at the Republican Infectious Diseases reference hospital; and, (iv) rehabilitation oflaboratory premises in Syunik marz and at the Infectious Diseases hospital

B2, Improvement of Health Information and Telecommunication Systems

23. Under this activity, the Project will support technical assistance and additional investments needed to strengthen the areas of surveillance, communications, and information technology at the different levels of the health care system needed to support the country’s preparedness and capacity to respond to avian influenza and other infectious disease outbreaks and to fast-track available treatments for the disease. The Project would finance: (i) computer sets for 56 central and regional offices (as well as for the border-post offices) of the San-Epid surveillance system and health care facilities; (ii) development ofsoftware on data collection and analysis; and (iii)internet connections for regional offices ofthe San-Epid system.

45 B3. Training and Development of Standard Reporting Forms and Guidelines

24. In this area, the Project will help with: (i)development of reporting forms, registries, guidelines and information material for improved effectiveness in surveillance; and (ii)case standardization, notification and feedback between the center and the marzes. Funds will also be provided to train staff at different levels of the health system in clinical management, epidemiology, laboratory reporting, laboratory bio-safety, molecular techniques applied to diagnosis and molecular epidemiology

C. Strengthening Health System Response Capacity

25. This subcomponent will support activities to help contain and prevent the spread of AI through various social distancing, containment and mass prophylactic activities. Under this sub-component, the project will strengthen health system response capacity with: expanded regular seasonal flu vaccination as a vital step to prevent an outbreak among humans; anti-virals of sufficient quantity for prevention of influenza in those groups at highest risk such as poultry farmers, healthcare workers, children, those in close contact with confirmed cases, etc.; and with prophylactic and preventive equipment and supplies for patient care in the intensive care unit of the Infectious Disease reference hospital and for active case detection. This sub-component will also finance procurement of human influenza vaccines for administration to high risk populations and of new vaccines should there be available against avian influenza in humans. (US$ 1.09 million)

111. PUBLIC AWARENESS AND ~PLEMENTATIONSUPPORT

26. This component will support strategic communication activities for stakeholders and beneficiaries. Similarly, resources will be allocated for improved coordination between the MOA’S regulatory framework and the roles of other ministries in the National Strategy for AI.

A. Public Awareness through Information and Communication Services

27. Support under this sub-component will be provided for the research, design, implementation and evaluation of an integrated communications strategy, addressing the needs of priority populations at the national, provincial and local levels. The strategy will elevate knowledge and promote behavior-change in populations at-risk, to control the spread of the virus, prevent infection, foster timely reporting and support containment actions. At the same time, the strategy will educate vulnerable groups on preparedness plans and mitigation measures across pre-pandemic and pandemic phases. The communications strategy will incorporate measures called for in the Environmental Management Plan (EMF’) for safe culling and disposal ofbackyard poultry. (US$0.3 1 million)

3. Coordination Support

28. The multi-dimensional problems associated with HPAI infection necessitate collaboration fiom a wide range of stakeholders within each country, which in Armenia include: the Ministry of Finance and Economy, the Ministry or Territorial Affairs, the Ministry of Nature Protection, the MOA, the MOH, their associated diagnostic laboratories, NGOs and civil society organizations, and private sector companies and associations (e.g. large poultry production companies, farmers’ associations, veterinarians and farmer involvement at the grass roots level). The sub-component will support activities to improve the effective coordination and collaboration among these stakeholders and to bolster project implementation and monitoring capacity at existing project implementation structures in the MOA and MOH. (US$0.60 million)

46 B1. National Coordination

29. The Inter-Ministerial Committee for Avian Influenza (which supervises the work of the Inter- Ministerial Task Force for Avian Influenza) will establish a Secretariat’ to implement the national awareness activities described above. It will be responsible for reviewing annual work plans and ensure coordination and linkages across relevant agencies and international partners. In AI outbreak situations, it will be in charge of triggering emergency responses by MOA and MOH, monitoring the actions taken, and coordinating public statements to the media. The Secretariat will be comprised of a Director, two Science Officers (spanning animal and human health issues), and a Public Information and Communications specialist. These staff would be contracted under the project. (US$ 0.10 million)

B2. Project Implementation

30. The Agriculture Reform Support Project Implementation Unit (ARSP PIU) of the MOA (which currently implements the Rural Enterprise and Small Scale Commercial Agriculture Development Project) and the Project Implementation Unit of the Health Systems Modernization Project (HSMP PTU) in the MOH will be entrusted with the fiduciary tasks of procurement and financial management. The relevant structures will be strengthened with additional fiduciary staff in each Unit. Both the MOA and the MOH will appoint Project Coordinators to liaise with the ARSP PIU and MOH HSMP PIU, respectively, and to prepare annual work programs and budgets as well as semi-annual interim unaudited financial reports. The Project Coordinators will manage the respective component for which their ministry is responsible and attend the regular meeting of the Secretariat and the periodic meetings of the Inter-Ministerial Committee for Avian Influenza. The ARSP PIUwill be responsible for consolidating the annual work plans, budgets, and financial reports for submission to the Secretariat and the Bank. (US$ 0.37 million)

31. At the local level, implementation would be the direct responsibility of each Marz Committee. Under these committees should be established Marz secretariat (Marz Task Force), which should implement also functions ofLDCC (Local Disease Crisis Center).

B3: Monitoring and Evaluation (M&E)

32. Support would be provided to enable project monitoring and impact evaluation assessments. Two types of M&E are envisaged. First, the ARSP PIU and the MOH HSMP PIU would collect relevant data from their ministries and other implementation agencies and then compile them into semi-annual progress reports focusing on output indicators and the status ofphysical implementation by component and use of project funds. For some output indicators, specific surveys will need to be conducted to obtain data for this purpose. These would be financed by the Project. As for the financial reports (noted above), the ARSP PKJ will be responsible for consolidating the ministerial progress reports into an integrated Project progress report. (US$0.13 million)

33. Impact evaluation reports. The aim of evaluation is to find out whether the interventions are effective or the program is having the desired impact. The evaluation will include both quantitative and qualitative aspects and be conducted on a yearly basis. The quantitative aspects will rely on new information systems and surveys implemented as part ofthe various components of the project, currently existing data sources, and primary evaluative data collection efforts. The goal ofthe qualitative aspect of the evaluation will be to document perceptions of program managers, staff, patients, and local and national leaders. Qualitative information will be collected using site-visit interviews, focus groups, and respondent surveys.

’The Secretariat ofthe Task Force will also play the role ofthe NDCC - National Disease Crisis Center.

47 IV. SUPPORT FOR CRITICAL IMPORTS

34, This component would finance, under Emergency Recovery Assistance (ERA) procedures, a positive list of critically needed imports identified as necessary to a response program in the event an AI human pandemic were to occur. This list includes protective clothing and gear, pharmaceuticals and vaccines, and medical and veterinary supplies and equipment. This component may be expanded in future for other items on the positive list (as to be agreed on by the Bank in the case of a pandemic). Under ERA procedures, critical imports would be procured through organized international commodity markets (in accordance with the provisions of paragraph 2.68 of the Guidelines) or other channels of procurement acceptable to the Bank.

48 Annex 4b: Culling and Compensation Procedures ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT

A. Compensation Fund

1. Early detection and reporting as well as rapid response depend critically on the incentives for poultry owners to report very quickly any sick and dead poultry to their veterinarians. Without adequate compensation arrangements in place, poultry owners have no incentive to do so, but must fear that their animals will be destroyed and they lose this valuable capital. The Veterinary Law ofNovember 19, 2005 established the state’s right to cull infected and suspected infected livestock in the case of outbreak of epizootic diseases. In addition, the Government’s National Strategy Plan for Avian Influenza makes reference to the right of poultry owners to receive compensation for damages suffered as a result of mandatory culling, but no steps have been taken as yet to develop the required implementation arrangements - including financing, institutional arrangements, legal authority over the compensation funds’ disbursement, fiduciary aspects, eligibility criteria, payment arrangements, flow of funds, etc. The project will provide technical support to do so. All the necessary legal, institutional and operational details will be developed and agreed upon during the first months of project implementation. They will be included in the Compensation Procedures Manual,

2. The first issue to be addressed is the provision of the legal basis for establishing responsibilities for Compensation Fund administration (for owners of any animals culled on Government orders), which should be done through the promulgation of a corresponding order of the Ministry of Agriculture (or Government Decree). This order should include specific responsibilities for the Fund’s operation (by the MOA’S Livestock Department and the ARSP PIU) as well as the necessary fkamework provisions concerning its administration and events triggering payment from the Fund, as well as the appropriate oversight arrangements. The order should identify the proposed means and modalities of financing the Fund (e.g., budgetary allocations and farmer and enterprise contributions) and establish the essential principles governing eligibility for compensation payments from the Fund.

3, Farmer and enterprise fees are considered the most appropriate means to realize cost sharing from the beneficiaries of the Compensation Fund. With medium- and large-scale livestock and poultry producers the ones who face the largest financial risk, strong consideration will be given to establishing an appropriate mechanism to have them contribute to the financing of the Compensation Fund. For poultry owners with more than 200 birds, for instance, it is strongly recommended that they be required to register with the Veterinary State Inspection (VSI) and the MOA Livestock Department, submit a quarterly report on the number of birds they have, and pay a small fee per bird into the Compensation Fund’s cofinancing account. In the event of subsequent mandatory culling, they would then be compensated for the number ofbirds they have reported and paid for.

4. It will take time before adequate domestic financing, fiom governmental or other sources, can be mobilized and will be available in sufficient amounts to operate an effective national Compensation Fund. Farmer and enterprise contributions in particular will take considerable time to accumulate in sufficient quantities to amount to a significant share ofthe overall Fund. In the immediate short run, therefore, and considering that the need for compensation payments could arise very soon, the main source of financing will be contingency funding to be provided by IDA under the Project (see para. 6 below). Government budget funds would be needed if the needs exceed the resources being made available by IDA. Over time, the Government will in any case need to set aside additional funds to cover for such a contingency and to substitute for IDA resources once the Project has closed.

49 5. The next step will be to prepare and approve the necessary specific regulations, procedures and operational guidelines for financing the Compensation Fund and operating the compensation mechanism. Critical in this context will be specific and transparent rules and regulations on: (i)the actual mobilization of the needed financing, notably as regards cost-sharing by livestock owners, (ii)the intermediate disposition ofsuch funds until they are actually needed, (iii)the procedural steps required to trigger actual compensation payments, and (iv) the administrative and payment arrangements in the event of an authorized case of compensation. Also needed are precise guidelines for: (i)establishing and verifying compensation claims, (ii)determining the amount of compensation per animal, (iii)recording and reporting culling and compensation claims, (iv) the actual payment to legitimate beneficiaries, and (v) monitoring payments.

6. IDA Financial Support. Compensation payments could, depending on the scope of disease outbreaks, pose a significant fiscal burden on the state, and the project will provide financial resources to establish the foundation of a compensation facility. Once the Government has developed the Compensation Procedures Manual, the Project will provide (in its first stage) up to US$0.75 million to finance this facility, exclusively earmarked, however, for outbreaks of HPAI. It will be a condition of disbursement for this sub-component that the modalities for operating the compensation mechanism have been established and documented in this Manual in a manner satisfactory to IDA. US$lOO,OOO will be disbursed into a specially established account so as to provide sufficient resources for immediate needs, The remaining US$0.65 million will be disbursed only in the event ofactual need.

B. Culling

7. In the event of an HPAI outbreak, the overriding objective for the veterinary services is eradication ofthe disease at the source ofinfection. Accordingly, the project will provide support for: (i) culling of infected and at-risk poultry, (ii)compensation to farmers and commercial poultry producers, (iii)disposal of carcasses and potentially infective materials in a bio-secure and environmentally acceptable manner, and (iv) control of movement of birds and products that may be infected, including controls at the interface of infectednon-infected areas and border controls.

8. The project will provide the technical and logistical means to contain an HPAI outbreak through location quarantining and culling of the affected animals and those in the surrounding risk area. Culling and carcass disposal will be done under the supervision of the VSI or of VSI-contracted private veterinarians by properly equipped and protected staff (VSI staff, police of the Ministry of Internal Affairs, the national army, andor laborers hired by VSI for the purpose). Appropriate equipment and materials will be provided for efficient and humane animal culling as well as for the safe disposal of carcasses and contaminated materials. Carcass disposal will be case-specific, depending on local circumstances, but in all cases in an authorized and bio-environmentally safe manner. Protective clothing and other gear will be procured and kept in ready supply, to be issued to all staff and' workers involved in containing an outbreak. Accurate lists will be kept of all animals culled, so as to provide the basis for subsequent compensation to their owners.

9. In the event that mandatory culling is ordered for a particular location, the MOA Livestock Department will provide the applicable list ofcompensation values for each type ofpoultry (see para, 17) to the VSI as well as to the marz administration concerned. This information will be then used by the Community Culling Supervision Committee (see para. 10) to calculate the compensation payable to each poultry owner. To minimize the risk of fraud and misuse, stringent requirements will apply to the recording, reporting and verification of poultry cullings, compensation claims and compensation payments. They place heavy emphasis on transparency, community involvement and multiple ex-ante and ex-post verifications and reflect experience gained under previous and ongoing operations in the country. The procedures to satisfy these requirements involve considerable work, but they are considered

50 essential to ensure adequate fiduciary safeguards in the present Armenian environment. Practical experience will be closely monitored. Once it has become evident that the control mechanisms are effective, some streamlining could be considered if it is deemed not to increase the risk to an unacceptable level.

10. Village and Backyard Poultry. For village and backyard poultry operations, the culling will be done in the presence and under the technical and social supervision ofa small local ad-hoc committee, the Community Culling Supervision Committee (CCSC), established for this purpose by order of the marz administration. The CCSC comprises one official from the marz administration, the raion-level VSI veterinarian, and two trusted members of the village community, ofwhich at least one must be a woman. The community representatives may be from locally recognized and trusted community organizations; they are nominated by majority vote at a general village meeting. The CCSC will verify the number of birds culled and their owners, so as to ensure a correct count and full transparency for subsequent compensation payments.

11. At the time of culling, each individual poultry owner will receive a culling certijicate noting the date and the type and number of hislher birds culled (see attached sample Form 1). The blank certificates will provided to the marz administration by the MOA Livestock Department and are pre-numbered; the numbers are stored in the MOA Livestock Department’s data base (see para. 16). Each certificate will be signed by all four members of the CCSC and countersigned by the poultry owner; it is the poultry owner’s record of the claim to compensation. Since backyard poultry is predominantly the domain of women, ownership records on the owner’s certificate and on the summary community culling lists will be required to identify the actual owners (rather than simply the “head of household”). The certificate will be completed in four copies: one will be retained by the poultry owner, one will be kept by the marz administration, and one each will be attached to the community summary culling record compiled by the CCSC (see para. 12) and sent by the marz administration to the MOA Livestock Department (operating the Compensation Fund) and to the ARSP PIU, respectively. Certificates not signed by all members of the CCSC and the poultry owner will be declared invalid.

12. Based on the individual poultry owner certificates, the CCSC will then compile a summary record of the culling in the village (see attached sample Form 2). Blank pre-numbered community summary poultry culZing records are provided to the marz administration by the MOA Livestock Department; the numbers are stored in the Compensation Fund’s data base (see para. 16). All four CCSC members will sign and the poultry owners will countersign this list of birds culled and their owners. Forms not signed by all four members of the CCSC will be declared invalid, and all claims included on an invalid Community Summary Poultry Culling Record are rendered invalid as well. The community summary culling record is the official record that establishes the poultry owners’ right to compensation from the Compensation Fund. The summary record will be completed in eight identical copies: one will be posted in a weather-protected public place in the village; one will be kept by the raion representative ofthe VSI; two will be kept in the marz administration office; one will be sent by the CCSC to the ARSP PIU; one will be sent by the CCSC to the MOA Livestock Department Fund; one will be sent by the marz administration (together with the Marz Summary Report, see para. 13) to the ARSP PIU; and one will be sent by the marz administration (together with the Marz Summary Report to the MOA Livestock Department), Attached to the copies that are to be sent by the marz administration to the MOA Livestock Department and to the ARSP PIU must be copies of all individual owners’ culling certificates that form the basis for the compilation ofthe community summary culling list.

13. The marz administration will compile a Summary Report on the basis of all community summary poultry culling records, listing all villages and for each village the total number ofdifferent poultry culled (see attached sample Form 3). Blank pre-numbered Marz Summary Report forms are provided to the marz administration by the MOA Livestock Department; the numbers are stored in the MOA Livestock

51 Department’s data base (see para. 16). The Marz Summary Report will be made out in five copies and signed by the governor of the marz. Two copies will be kept by the marz administration, one will be provided to the raion VSI veterinarian, one is to be sent to the ARSP PIU, and one is to be sent to the MOA Livestock Department. Attached to the copies sent to the ARSP PIU and to the MOA Livestock Department are the community summary poultry culling records and copies of all individual owners’ culling certificates.

14, Medium- and Large-Scale Poultry Operations. At larger poultry farms and enterprises (with more than 200 birds),’ the culling will be carried out in the presence of the owner or manager or of a person designated by himlher and under the supervision of the raion VSI and one official of the marz administration. All three will sign the list of birds culled (see attached sample Form 4). In addition, an audit firm acceptable to IDA will be required to monitor the culling and to certify the culling report. Blank pre-numbered enterprise culling lists will be provided to the marz administration by the MOA Livestock Department; the numbers will be stored in the MOA Livestock Department’s data base (see para. 16). The culling record (list) will be made with five identical copies: one will be kept in the marz office; one will be kept by the raion-representative ofthe VSI; one will be given to the owner or manager of the farm or to the person designated by himher; one will be sent to the ARSP PIlJ by the marz administration; and one will be sent to the MOA Livestock Department by the marz administration. The culling list will be the official record that establishes the poultry owners’ right to compensation from the Fund. The copy given to the farm owner or hislher designated representative will be the poultry owner’s record ofthe claim to compensation. Actual compensation payments will be based, however, on the lower ofi (a) the number of birds reported by the enterprise to the MOA Livestock Department at the end of the quarter preceding the mandatory culling and for which the required fee has been paid to the Com~ensationFund cofinancing account (see para. 3) or (b) the number of birds reported and certijied on the Enterprise Poultry Culling Record. If all or part of the fee due to the Fund is overdue by more than three months, no compensation will be paid.

15. Forms. All forms will be provided by the MOA Livestock Department. They will be printed in booklets (of 20 or 25) and will be pre-numbered. The MOA Livestock Department will maintain a data base containing, inter alia, the numbers of all forms provided to each marz administration. All unused forms, as well as any invalid or incorrectly completed forms, must be returned to the MOA Livestock Department when the culling records are submitted.

16. Database. The MOA Livestock Department will establish and maintain a database to facilitate record keeping, monitoring and auditing. This database will include all marz and villageslsettlements. It will also include all livestock and poultry enterprises registered with the MOA Livestock Department, with the number of animals reported and the fees paid to the Compensation Fund’s cofinancing account for these animals. As mandatory culling orders are issued, the affected communities will be tagged accordingly. Once culling reports are received from marz administrations, the information from the Marz Summary Reports and the attached Community Summary Culling Lists will be entered into the database. The database will also contain a record ofall pre-numbered forms provided to marz administrations, so as to allow subsequent cross-checking offorms submitted or returned.

C. Compensation Payments

17. The key parameters governing the design of implementation arrangements for the actual operation ofthe compensation mechanism and the provision of compensation payments to poultry owners will include the following:

In 2005, there were an estimated six industrial enterprises with more than 500,000 birds each, 20 poultry farms with 2000-5000 birds, and roughly 20,000 backyard farm with more than 100 birds.

52 a Compensation payment to poultry owners by bank transfer. There will be no vouchers or animal replacements. Payment will be made within four weeks from the date of culling. a For smallholders (owning up to 200 birds), payment per bird will be made by bank transfer at 75% of the market price of laying hens in the respective marz center as reported by the NSS for the third month preceding the month in which culling took place.’ Payments will be posted at the village level, in public, and under the supervision of the two community representatives on the CCSC who attended the culling and signed the culling records. Special care will be taken to ensure that payments are made to the women poultry owners ofrecord. 0 For poultry ownerslproducers with more than 200 birds, compensation will be made by bank transfer at a reasonable replacement cost - i.e., for birds less than 3 months old at the cost of one- day chicks, and for birds older than 3 months at the cost of 3-months-old birds, as reported by the NSS during the third month preceding the month in which culling took place.

18. The MOA Livestock Department will establish the amounts of compensation to be paid, based on the parameters identified in para. 17. For village and backyard poultry owners, the culling record prepared and signed at the time of the culling and subsequently submitted by the marz administration to the MOA Livestock Department and the ARSP PIU (see paras. 9-13) will be the basis for compensation payments to be made. The culling record received and filed by the MOA Livestock Department will be used to calculate the amount of payment due to each village (in the case of smallholders) and to prepare the payment list - which is a copy of the Marz Summary Report with the appropriate compensation amounts added in the final column -- but the copy received by and filed at the ARSP PIU is the binding one for purposes of verifymg payment claims. No payment will be made unless and until the ARSP PIU has compared its records against the payment list prepared by the MOA Livestock Department.

19. For medium- and large poultry owners, the MOA Livestock Department will calculate the amount of payment due based on the reported number of birds and the fees paid (see para. 14) and will prepare the requisite payment list - which is based on the database records. However, no payment will be made unless and until the ARSP PIU has compared its records against the payment list prepared by the MOA Livestock Department.

20. Database Cross-Checking. Before finalizing the payment list, the MOA Livestock Department will check the culling records received for completeness, accuracy and validity (no blank lines, all signatures provided, all supporting documents attached, no duplicate claims submitted, etc.). It will also cross-check them against its database records to ensure that the pre-numbered forms match with the forms provided to the respective marz administration and that mandatory culling was in fact ordered for the village concerned. With respect to payment claims from medium- and large-scale poultry enterprises, the database check will verify that the enterprise is registered the MOA Livestock Department, has reported its poultry numbers on a quarterly basis, and has no fees overdue to the Compensation Fund cofinancing account for more than three months.

2 1. FZow of Funds. Flow-of-funds arrangements for making compensation payments are being designed to minimize the number of stages through which lnds will need to pass before reaching the intended beneficiaries, while ensuring maximum transparency. Once the payment lists are reconciled by the ARSP PIU, compensation payments will be effected from the Compensation Fund accounts through the banking system.

At the time ofproject appraisal, owners ofpoultry would have been compensated at roughly 900 AMD per kg (US$2.65 per bird. The US$0.75 million fimd would, thus, cover almost 280,000 birds in poultry systems.

53 22. For payments to village and backyard poultry owners, whose poultry was culled under the supervision ofthe CCSC, separate but identical notices will be sent to the marz administration, to the two community representatives on the CCSC, to the VSI representative in the corresponding raion, and to the ARSP PIU that contain information on the total amount being transmitted and on the amount of compensation per bird (by type). The marz administration, in consultation with the village mayor (gyughapet), will establish a date for the actual transfers to be made and will notify the gyughapet and the two community representatives on the CCSC accordingly; the date must be within one week of the notices sent to the marz administration and no more than four weeks after the date of culling in the village.

23. Confirmation of receipt of payment by the poultry owners will be supervised by officials of the marz administration and by the two community representatives on the CCSC, based on the village summary culling list kept by the marz administration and cross-checked against that kept in the village. Each poultry owner will sign the list to verify receipt of payment. To receive payment, each poultry owner will be required to present hislher culling voucher received at the time ofthe culling. The date and amount ofpayment will be recorded on the voucher and countersigned by the poultry owner.

24. All individual payments made to poultry owners will be recorded on the two copies of the community summary poultry culling record kept by the marz administration, and each poultry owner must sign for the payment received on both lists. These two copies of the community summary poultry culling record thus become the “community culling-and-payment record”. They must be signed by the marz administration representative and the two community representatives on the CCSC. Once the payments have been made to the eligible beneficiaries, and based on the completed community culling- and-payment records from all settlements in the marz, the marz administration completes the Marz Summary Report by entering in the final column for each community the amounts paid, by village and by type of poultry. The Marz administration will then submit to the MOA Livestock Department one copy of the completed Marz Summary Report, with one of the two copies of each community’s culling-and- payment record attached. The cover letter, signed by the governor, confirms that the eligible poultry owners have been paid.

25. For medium- and large-scale poultry enterprises who have provided the necessary account details when their poultry was culled, the compensation payments will be made by the ARSP PIU through the banking system. The MOA Livestock Department will transfer the list ofpayments to be made to the ARSP PIU, which will instruct bank branches in the appropriate locations to credit the account(s) ofthe eligible recipients. Banking fees associated with this service will be financed by the Project. The ARSP PIU will inform the MOA Livestock Department of the dates and amounts of payments made, with appropriate documentary evidence.

D. Operational Controls, Reviews and Audits

26. The ARSP PIU will arrange to have carried out, additional checks to ensure that the eliglble poultry owners, and only they, are paid and are paid in full. This will include, but not be limited to, (ex- ante or ex-post) periodic operational reviews, under terms of reference (TORS) acceptable to IDA, to confirm the validity and legitimacy of the compensation payments made. The reviewers will be required to verify compensation claims and payments made in randomly selected samples ofvillages and marzes; this verification will include: checking against the database maintained by the MOA Livestock Department, collecting and verifylng information available and obtained at the village level, checking with individual poultry owners, checking forms and reports, etc. Any significant weaknesses identified will be promptly rectified in close consultation with IDA.

54 27. In addition, the external independent auditors will be asked to provide an opinion on the reasonableness of the accounting, reporting and internal controls in respect of the operations of the Compensation Fund, and the audit TORS(acceptable to IDA) will include these specific requirements.

28. All ineligible claims will be refunded to IDA.

Attachments: Draft Forms for Culling and Compensation

Form 1: Poultry Culling Record - Owner’s Certificate (record ofbirds culled for individual poultry owner) Form 2: Community Summary Poultry Culling Record (record ofpoultry owners and birds culled by village, used to record cullings and subsequent compensation payments) Form 3: Marz Poultry Culling Summary Record (summary record ofbirds culled in all villages in the marz) Form 4: Enterprise Poultry Culling Record (record of birds culled for individual larger poultry operations, used to record cullings and subsequent compensation payments)

55 Form 1: Poultry Culling Record - Owner's Certificate

Community -Raion -Marz -Date

.I Name "of..... Poultry""..... "" Owner:"...".."...... "-...~..~.iI.__._.__..__I """.... l"..l ..... "".l.." " ...... ! Address:

1 3 j i 71 ...... _,,,- ... .- ...... l..-....~.lll....ll.l . . +" ...... "".ll 1 ...... j i

Culling Verified by the Community Culling Supervision Committee:

Marz representative (Name) Signature

VSI representative (Name) Signature

Community Representative (Name) Signature

Community Representative (Name) Signature

Poultry Owner (Name) Signature

56 Instructions:

(a) Enter new line for each different type ofpoultry. (b) Running numbers must be included in first column, continuing on each additional sheet. (c) Lines not used must be crossed out across the entire sheet. (d) Voucher must be signed by all four members ofthe Community Culling Supervision Committee and by the poultry owner.

57 ......

U - _. = -

.....

.....

".."......

.. - ""... .- _.

.".I .... ."...

UJ

PE a 4

......

...... ".". -c -d 9) E G Form 3: Marz Poultry Culling Summary Report MARZ POULTRY CULLING SUMMARY RIEPORT Sheet No. COPYNo.: I Raion: I Marz: I Date of Culling: Date of Compensation Payment:

-l-l." ...... " ...... ".I

...... "..".....I """,,,,,1

Culling Verified: Payment Verified: (Name) (Signature) (Signature) Governor, Marz

60 Instructions:

A. At the Time of Culling

(a) Complete for each villagelsettlement a new line for each different type ofpoultry. Only the last column must remain empty. (b) Running numbers must be included in first column, continuing on each additional sheet. Sheets must be numbered consecutively. (c) Lines not used must be crossed out across the entire sheet. (d) Each sheet must contain in the last line the sheet totals for the number ofbirds culled and for the total compensation value. (e) Each sheet (and copy thereof) must be signed by the governor of the marz. (f) Each sheet must be completed with at least five copies for the following distribution: (i) Copies No. 1 and No. 2 to be kept in the marz administration; (ii) Copy No. 3 to be kept by the raion-representative of the VSI; (iii)Copy No. 4 to be sent by the marz administration to the ARSP PIU; (iv) Copy No. 5 to be sent by the marz administration to the MOA Livestock Department,

B. At the Time of Compensation Payment

(g) Both copies ofthe sheet kept at the marz administration must be completed. (h) Enter the authorized compensation payment in each line, based on the valuation formula provided by the MOA Livestock Department. (i)Each sheet (and copy thereof) must be signed by the governor of the marz. (j) One completed copy ofeach sheet is kept in the marz administration. (k) The other copy of the sheet is sent by the marz administration to the MOA Livestock Department.

61 Community: Raion: Marz:

Name of Enterprise or Poultry Owner: I...... " ...... "...... " ...... " ...... " " ",l_.___,____,._l,,.-~" .... Passport or ID Number: ...... ,I,,,t_,,, _"____ ...... - _I....1""- ...... " .... "" " ."...... "...... " "...l"l_" . Address:

: Type of poultry (chickens, ducks, ' Number of 1 ] Culling Completed: No. I geese, etc. - under 3 monthslover 3 I poultry I Remarks I Signature of Owner or months) 1 i i I I Representative

"" ~ ." 11...... 4 ...... " ... ""_ "-4 .I.---.- .-! ...... " ...... I "" "...... "...... "".l 1.. 1 j "" 21",'".""'?" .- "_j_ ...... ""ll--.-lll" .- "- " "...... j i -...... I 31...... I ...... " ".... " .. "" .- ...... "...... i "...... " ... ."A .- ...... "" 11 ...... "...... "... j

41 I" ....-.-....--..I " " ...... "...... "lll,"...-...."...... I....."...."I ...... l...l-._lll.l._." ...." ..l"..." l"..l l._._,___l____.._! ......

... ",ltl.~,,, "" ...... ~ .~-" ll...l .-__.___I" ".,.-._I-" ...... I" "" ....I"

" " 1." 1- " " - i " i " 61 ...... "...... ll"."." ....." .... " ~ . 71 y"" A,..-.__ ...... 1.11.1 I--..---.-tlll-lt-- A". -- v-"."". ..-.._.____,_.__,____C__._ 81 ."...... "...... I ...."..* ,,l,_l_..._ ~ ...... "...... " ...... f --...--I" "__l.l.l" ...... ".r-" " ...... i ...... "I 91 .I" .I" ...... ".. "...... ".".l."." ...... " ...... " ...... ".... ".""l" "4.."...... "...... ".l" ...... ".... " ...... I" ..... : "...... "...... "...... 10 1 I j j ...... "... " ...ll.ll.l,l__ i_ ...... I ".l ...." .... l"..l "..l" i "...... "".".l.l "....

11 ! I ~ "" -3 ~ I "l"""." ..""..".l"""_"-. I...." ...... 4I...... I ...._l-...l-..--__._ .. "."l" " ... 12 j j I " " " I."lil- I I" " __,____._.._.__.I" ...... " _...... - 4 "...... 2 ""...... l".." I 13 " ""1 "-.""! "L ...... 1 ...... " ..... "...I. " ...... " ... "- 1"-_._._.__._.______^,,," 14 __ { .I...." I,,,._t- 4,______...... __ ...... j_- ..--l___..-.._l_-l..I ..".I"" ---l-_.--_ll..l_-_---(l_ltl ...... 1 ...... ll____...__,,__ll__--,- 15

Culling Verified:

marz representative (name) Signature

VSI representative (name) Signature

Enterprise Representative (name) Signature

Auditor's Certification: (name) (date) (stamp)

62 Instructions:

At the Time of Culling

(a) Enter a complete new line for each different type ofpoultry. Only the last two columns must remain empty* (b) Running numbers must be included in first column, continuing on each additional sheet. Sheets must be numbered consecutively. (c) Lines not used must be crossed out across the entire sheet. (d) Each line must be signed by the owner or representative ofthe enterprise. (e) Each sheet (and copy thereof) must be signed at the bottom by the marz representative, the VSI representative and the poultry owner or hidher representative. (f) Each sheet must be completed with at least six copies for the following distribution: (i) Copies No. 1 and No. 2 to be kept in the marz administration; (ii) Copy No. 3 to be kept by the raion-representative ofthe VSI; (iii) Copy No. 4 to be kept by the poultry enterprise; (iv) Copy No. 5 to be sent by the marz administration to the ARSP PIU; (v) Copy No. 6 to be sent by the marz administration to the MOA Livestock Department.

63 Annex 5: Project Costs ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT

Local Foreign Total Project Cost By Component andor Activity US $million US $million US $million 1. Animal Health Component 3.663 1.889 5.552 2. Human Health Component 0.335 2.410 2.745 3. Public Awareness and Communication Support 0.622 0.310 0.932

Total Baseline Cost 4.620 4.609 9.229 Contingencies 0.120 0.121 0.240 Total Project Costs 4.740 4.730 9.470

64 Annex 6: Implementation Arrangements ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT

1. The Project will be implemented by existing project implementation structures in the MOA and the MOH. However, institutional and implementation arrangements will be coordinated by the Government of Armenia, in which a Secretariat of the existing Inter-Ministerial Committee for Avian Influenza is established. This Committee has been established to deal with zoonotic emergencies and will provide general policies and guidelines for Project implementation. The Committee comprises representatives of the MOA, the Republican Agricultural Support Center (MSC), the MOH, the Ministry of Nature Protection, the Ministry of Territorial Administration, the National Police, the National Academy of Sciences, the Armenian State Agrarian University, and the Union of Veterinarians (an NGO). The Committee will be responsible for reviewing annual work plans and the Secretariat will be responsible for ensuring coordination and linkages across relevant agencies and international partners.,

2. Since the Bank is financing both agricultural sector and health sector projects in Armenia, the existing project implementation structures within the MOA (the Agriculture Reform Implementation PIU) and the MOH (the Health Systems Modernization Project Implementation Unit, HSMP PIU) will be entrusted with fiduciary tasks of procurement and financial management. (Additional staff will to be recruited in the ARSP PIU and the MOH HSMP PIU as needed for these fiduciary tasks.) One senior officer from the MOA and one from the MOH will be designated as Project Coordinators in charge of managing implementation of thdr relevant ministries’ project activities and liaising with the ARSP PIU and MOH HSMP PIU, respectively. These Project Coordinators will report to the Secretariat of the Committee and be members of the Committee. The Secretariat will recruit staff responsible for overall administration, public information, and coordination of scientific issues related to animal and human health.

3. The Project Coordinators will be responsible for the preparation of annual work programs and budgets and monitoring project implementation at the central and local levels. The ARSP PIU and the MOH HSMP will assist the Project Coordinators in preparation of semi-annual project management reports for the two ministries. The ARSP PIU will be responsible for consolidating the annual work plans and budgets for submission to the Secretariat and the Bank.

4. At the local level, implementation will be the direct responsibility of each marz Secretariat (task force) and should report to the Deputy Governor of the marz. The Deputy Governor will be the key marz official to be in contact with the Inter-Ministerial Committee for AI and its Secretariat in times of AI outbreak or other emergency situations. The marz level committees will be strengthened to set up marz level secretariats comprising officials and specialists to work under the supervision and guidance of the national Secretariat.

5. A Project Operational Manual (POM) is being prepared to integrate the relevant aspects of the MOA and MOH under the National Strategy for AI that has been prepared by the MOA and the MOH. This POM will guide the management and implementation of the Project and be updated as Armenia’s national AI strategic plan is finalized and updated periodically during the course of the Project.

65 Annex 7: Procurement, Financial Management, and Disbursement Arrangements ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT

A. Procurement Arrangements

1. As described in OP 8.50 for Emergency Recovery Assistance (ERA), in addition to emergency assistance, the Bank may support operations for prevention and mitigation in countries prone to specific types of emergencies. Such operations could assist in: (a) developing a national strategy, (b) establishing an adequate institutional and regulatory framework, (c) carrying out studies of vulnerability and risk assessment, (d) reinforcing vulnerable structures, and (e) acquiring hazard-reduction technology.

2. Given the threat that HPAI may pose to the economic and social fabric of the country, as well as to the health of the population because of the risk of an influenza pandemic, the Project will be financed through a Credit to be approved following ERA procedures.

3. Procurement under the Project will be carried out in accordance with the 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 with the provisions stipulated in the Legal Agreement. Agreements covering procurement methods, thresholds, and other conditionality will be consistent with ERA assistance guidelines and determined for the Armenia Republic according to its capacity and experience with Bank procurement.

4. The activities covered under the Project will be implemented on the basis ofannual work plans to allow for needed flexibility in adjusting activities to account for in-country experience and the lessons from implementation by other countries participating in the multi-country GPAI. Accordingly, the following approach to procurement will be adopted.

5. Implementjng Agency Assessment. The Bank has carried out a procurement capacity assessment of the Project Implementation Unit (PIU) in the MOH currently implementing the Health Systems Modernization Project (HSMP), which will be responsible for the implementation of the Human Health component of the AIP. The HSMP PIU has procurement specialists in place for the HSMP and these arrangements will be relied upon for the AIP. The PIU in the MOA (the ARSP PIU) currently responsible for the implementation of the Rural Enterprise and Small Scale Commercial Agriculture Development Project will be responsible for the implementation of the Animal Health component of the AIP. Procurement staff in both PIUs are experienced with procurement following World Bank guidelines, including with all the procurement methods to be included under the Project. The same qualified staff will be responsible for procurement under this Project, but both PIUs will recruit an additional procurement specialist to assist the implementation of the ATP project However, given the country conditions, the Project has been classified in category “C”, signifying high risk (A - low, B - medium). The annual Procurement Plan (PP) will define thresholds for prior review appropriate to the category; these thresholds will be determined so as to minimize prior review as appropriate to the level ofrisk.

6. Procurement Plan. A Procurement Plan (PP) covering the initial 18 month period of Project implementation was prepared at appraisal and agreed at Negotiations. The updated PP for each subsequent year will be submitted to the Bank for approval before the end of the previous year and will use a pre-defined standard format which will, at a minimum, list: (i)goods and services to be procured during the following calendar year, (ii)the estimated value; (iii)the method ofprocurement; and (iv) the timetable for carrying out the procurement. When reviewing the annual work program, IDA will require consistent application of Bank procurement guidelines to the specific procurement lots expected during the year and their procurement methods. Ifneeded, the PP could be revised and re-submitted.

66 7. Procurement Methods and Thresh~lds. The Financing Agreement defines the appropriate methods for International Competitive Bidding (ICB), National Competitive Bidding (NCB), Limited International Bidding (LIB), Shopping, Direct Contracting (including through UN agencies), and Community Participation Practices. Thresholds for such procurement methods and prior review requirements have been initially indicated in the table below on the basis ofthe Bank’s assessment of the capacity of the PIUs which will be responsible for procurement. Such thresholds may be adjusted in the Procurement Plan based on the updated estimated risks of comption in the country, and the country’s capacity ofconstruction and manufacturing industries.

ICB: Goods >US$300,000 All ICB Works >us$2,000,000 LIB: Goods For specialized equipment All NCB: Goods us$100,000 All Selection (QCBS) for (Int’l shortlist) Consultant Services $100,000 Consultants ’ Qualifications Individual Consultants Services for assignments that meet the requirements > $50,000 set forth in the first sentence ofpara. 5.1 ofthe Consultant Guidelines. Single-Source Selection Services for tasks in circumstances which meet the All requirements ofpara. 3.10 ofthe Consultant Guidelines, with the Bank’s prior agreement.

67 8. Prior Review by the Bank. The Procurement Plan shall set forth those contracts which shall be subject to the Bank's prior review process. All other contract shall be subject to post review.

9. Advertisement. A General Procurement Notice (GPN) would be published in the UN "Development Business" on -line (UNDBonline) and in the Development Gateway's dgMarket around the period of Negotiation. For ICB goods and works contracts and large-value consultants contracts (more than US$200,000), Specific Procurement Notice would be advertised in the Development Business on- line (UNDBonline) and in the Development Gateway's dgMarket and national press, and in the case of NCB, in a major local newspaper (in the national language). Information on contract awards for the same shall be published within two weeks ofreceiving Bank's no-objections.

10. The Plus will follow the Bank's anti-comption measures and will not engage services of firms and individuals debarred by the Bank. The listing of debarred firms and individuals is located at: ht~://~.worldbank.or~h~l/opr/urocure/deba~.h~l

11. UN Agencies as Procurement Agents. For several years, a number of specialized UN and bilateral agencies operating in the Region have supported various country agencies in the procurement of drugs, vaccines, specialized test equipment and supplies, and other materials. Using this type of assistance will be part of the Project's procurement arrangements. In accordance with the Procurement Guidelines Section 3.9, the Project will include the use of Specialized Agencies of the United Nations (WHO, FA0 and UNICEF) as suppliers of goods (mainly for drugs and vaccines and some medical supplies such as reagents), following their own procedures ofprocurement.

12. Procurement under Emergency Assistance Provisions. Following ERA procedures, the Project is likely to include financing for items included on a positive list ofimports identified as necessary under a well-defined preparedness and response program to be prepared as part of project implementation. In case of a declared global influenza pandemic, which will trigger disbursement conditions for critical imports, support will be provided under the Project for the procurement of a positive list of critical imports. These may be procured under Modified International Competitive Bidding (MICB), according to paragraphs 2.66 and 2.67 of the Procurement Guidelines. Also, commonly traded commodities may be procured through organized international commodity markets or other channels of competitive procurement acceptable to the Bank, in accordance with the provision.

13. The positive list of critical inputs to be prepared by the Republic of Armenia or to be purchased by the Borrower from the private sector, based on historical imports during national emergencies, could include: e Pharmaceuticals and vaccines e Medical and veterinary supplies and equipment e Protective clothing and gear

14. Disbursements for items procured under emergency assistance provisions can be made for up to 100 percent of import costs. No more than 20 percent ofthe Credit proceeds may be used for retroactive financing of expenditures, and the payments must have been made after the appraisal mission.

B. Financial Management and Disbursement

15. Country Issues. The draft CFAA report, which is being finalized currently, concluded that the overall fiduciary risk" in Armenia is significant. The key reasons are: (i)inadequate capacity of core loRisk of illegal, irregular or unjustified transactions not being detected, measured on a four point scale according to the CFAA Guidelines (low, moderate, significant or high).

68 control and supervisory agencies performing the audits within the public sector; (ii)although most of the basic laws are in place with respect to various entities’ (private sector and public enterprises, including state non-commercial organizations) financial reporting, but compliance remains a problem and authorities need to improve the quality ofauditing, monitoring and supervision.

16. However, the fiduciary risk of the stand-alone financial management arrangements for Bank- financed investment projects in Armenia is considered low. The government counterpart funding remains a major concern but actions have been taken by the Government and the Bank to monitor the status ofthis problem. Weaknesses in the banking sector mean that there are inadequate commercial banks to manage the designated accounts. The project financial staffs are considered adequate. The audit arrangements are acceptable and no significant issues have been identified.

17. Strengths and Weaknesses The significant strengths that provide a basis for reliance on the project financial management system include: (i)significant experience of both PIUs management and FM staff in implementing Bank-financed projects for past several years; and (ii)adequate accounting software utilized by both PIUS. The significant weaknesses were not identified at the PIUS.

18, Internal Controls. The existing FMS staffing in the ARSP and HSMP PIUs are considered adequate to implement this new project at the initial phase, but additional staff will be needed to strengthen the existing capacity in both PIUs and particularly in ARSP PIU to allow for regular reconciliation ofthe documents to be received as well as periodic visits to the village level to review the implementation of the Compensation Fund. The additional FM staff will report to the PIUs financial managers and will be responsible for disbursement functions as well as project accounting -- maintaining books of accounts, reporting day-to-day transactions and preparing accounting reports and financial statements, as well as monitoring financial flows to project beneficiaries. The financial managers ofboth PIUs will have primary responsibility for the quarterly financial reports (FIMRs) and will prepare the annual financial statements for audit. However, the ARSP PIU’s financial manager will be also responsible for consolidation ofthe separate FMRs into one for regular submission to the Bank.

19, Accounting. The accounting books and records of the both PIUs will be maintained on an accrual basis and project financial statements, including quarterly FMRs, are going to be presented in United States dollars. The financial management manuals are being updated based on the agreed organizational structure of the FM team to reflect relevant accounting policies and internal control procedures.

20. Internal Audit. Neither internal audit units exists nor are going to be established in the PIUs, considering the small size ofthe entities.

21. Reporting and Monitoring. For project monitoring purposes, semi-annual financial reports will be required to be prepared by each PIU for the component‘s under their management. Both PIUs will be responsible for designing appropriate financial reports to include: (a) Project Sources and Uses of Funds, (b) Uses of Funds by Project Activity, (c) Designated AccountLocal Bank Account Statements, (d) Physical progress report, and (e) Procurement report. These financial reports will be submitted to IDA within 45 days ofthe end of each semester. The first semi-annual financial report will be submitted after the end of the first full semester following the initial disbursement. Formats of the annual financial statements and the financial reports will be incorporated in the financial management section of the Project Operational Manual. The accounting software currently used by the ARSP and HSMP PIUs will need to be upgraded to have the capacity to prepare financial reports incorporating all components, sub- components and expenditure categories, as may be appropriate.

69 22. Information Systems. ARSP PIU has been using 1C accounting software which is implemented in a number of PIUs and found to be adequate. The only drawback of the software is that it does not produce financial reports, and they are currently prepared in Excel, The HSMP PIU also uses 1C accounting software which has been upgraded in December 2004, incorporating new functionalities including automatic generation of financial reports. The software in ARSP PIU needs to be upgraded to generate financial reports for the project automatically.

Allocation of Credit Proceeds and Financing Percentage Expenditure Category Amount in US$ Financing Percentage (1) Goods, works, consultant services and 2,280,000 74% training under Part Iof the Project, excluding Part 1.3.(a) and 1.3.(d) (2) Goods, works, consultant services and 1,610,000 74% training under Part I1of the Project (3) Goods, works, consultant services and 330,000 74% training under Part I11 of the Project (4) Compensation Fund under Part I.3(a) of 720,000 96% the Project (5) Poultry Restructuring Sub-projects 500,000 74% under Part 1.3 (d) of the Project (6) Eligible imported goods and 220,000 74% commodities under Part IV of the Project as Ispecified in Section 1V.C of Schedule 2 of the Financing Agreement (7) Operational Costs 360,000 74% (8) Unallocated 230,000 Total Credit 6,250,000

24. Quick Disbursable Funds. In the event of a global influenza pandemic, the Borrower could obtain quick disbursing funds. These funds would be disbursed against a positive list of imports, identified as critical following emergency events. The declaration of a national emergency will be a disbursement condition for this element of the project. Upon declaration of an emergency, the Government will submit to IDA an initial recovery plan documenting the disaster declaration, the related budget appropriation and the proposed use of the funds. The ARSP PIU will keep IDA informed of updates in the recovery plan as the emergency response operations unfold.

25. Co~~en~a~onFund. The Compensation mechanism and the internal controls are described in Annex 4.b above.

26. Financial Audits. There will be annual audits of the project financial statements prepared for relevant components by ARSP and HSMP PIUs and consolidated by ARSP PIU, covering all aspects of the project, including specific requirements for the Compensation Fund. The audits will be performed by

70 independent auditors acceptable to the Bank, and in accordance with International Standards on Auditing (ISA), and the Bank’s guidelines on auditing as stated in the guidelines: Annual Financial Reporting and Auditing for World Bank-~nancedActivities (June 2003). The auditors’ TORS will be prepared by the ARSP PIU in coordination with HSMP PIU and cleared by the Bank before the engagement of the auditor. The audit TOR will include both the audit of financial transactions, an assessment of the internal control, funds flow mechanisms at the PIUS, and the reasonableness of the accounting, reporting and internal controls in respect of the Compensation Fund operation.

27. The annual audit reports will consist of a single opinion on the financial statements of the project, incorporating the project accounts, including two Designated Accounts Reconciliation, and SOE Withdrawal Schedules; as well as a Management Letter. The audit reports will be submitted to the Bank not later than six months after the end of the fiscal year to which they relate. The cost of the audits will be eligible for financing from the Credit. The both PIUs will provide the auditor with full access to project-related documents and records, including the compensation claims database (in case of ARSP PIU), and with the information required for the purpose ofthe audit. Sample TORS for project audit will be included in the Financial Manual.

28. Financial Management Action Plan. Financial management arrangements of the ARSP and HSMP PIUs are generally adequate, but a number of actions are required to ensure that arrangements are fully satisfactory for the project, with its specific FM needs, especially with respect to the Compensation Fund. The following action plan will be discussed with the Borrower during Negotiations. Satisfactory implementation of the action plan will ensure the establishment of a financial management system that fully meets requirements ofthe Project and ofthe Bank.

Action Responsibility Due Date Remarks Implementation ofappropriate internal control ARSP PIU, Disbursement The Compensation Fund sub- procedures and fund flow arrangements for the MOA Condition for the component will be disbursed after Compensation Fund component acceptable to Livestock Compensation the MOA Livestock Department and the Bank and documented in the relevant Department Fund sub- ARSP PIUhave implemented and operational manuals. component documented appropriate internal control and fund flow procedures. Staffing of the FM Unit. Recruitment of ARSP and To be ready FinanciallDisbursement Specialist. This is only HSMP PIUs before project an action for capacity building and not a FM implementation condition.

FM Procedures Manuals. Revise existing ARSP and To be ready Manuals already exist and will manuals to fully document the procedures for HSMP PIUs before project require only minor updates to reflect accounting and internal control, including implementation the characteristics ofthe project, disbursement and flow of funds (including flow including flow offunds and chart), financial reporting, including FMR, accountability for cash grants/ annual reports and audit. This is only an action compensation fund. for capacity building and not a FM condition.

29. Supervision Plaa During project implementation, the Bank will supervise the project’s financial management arrangements in two main ways: (i)review the project’s semi-annual financial reports and project progress reports as well as the project’s annual audited financial statements and auditor’s management letter; and (ii)during the Bank’s supervision missions, review the project’s financial management and disbursement arrangements (including a review of a sample of SOEs and movements on the Designated Account) to ensure compliance with the Bank’s minimum requirements. As required by the Bank and ECA guidelines, the Country Financial Management Specialist for Armenia and Georgia will carry out regular annual FM supervisions ofthe project.

71 Annex 8: Economic Analysis ARMENIA: AVIAN INFLUENZA PFWPAFWDNESS PROJECT

1. Evidence shows that the H5N1 strain of Highly Pathogenic Avian Influenza (HPAI) is now endemic in parts of Southeast Asia, where Cambodia, China, Indonesia, Laos, Thailand and Indonesia are the worst-affected countries. The continuing outbreaks that began in late 2003 and early 2004 have been disastrous for the poultry industry in the region, By early-2005, more than 200 million birds had died or been destroyed and losses to the poultry industry are estimated to be in excess ofUS$lO billion. The costs were related to the death of poultry from the disease itself, the culling of poultry to stem its spread, and the costs to governments of containing the epidemic in terms of equipment, materials, transport and personnel.

2. In Vietnam, one of the most seriously affected countries, some 44 million birds or 17 percent of the total population of poultry, were culled at an estimated cost of $120 million (0.3 percent of GDP)”. The costs would have been substantially higher if there had been a serious impact on tourism, where an estimated 5 percent drop in tourist and business arrivals would reduce GDP by a further 0.4 percent. (Fortunately, there has been only a small impact on tourism so far; the number of tourist arrivals in Vietnam increased by 20.5 percent in 2004 and rose further by 23 percent in the first seven months of 2005.) In Indonesia, an FA0 survey indicates that in the most seriously affected parts of the country, more than 20 percent ofpermanent industrial and commercial farm workers lost their jobs. So although the overall macro-economic effects have been relatively small, the impact on the poultry sector and on associated input and distribution channels has been severe.

3. Although HPAI is mainly an animal health problem, more than half ofthe over 100 human cases have been fatal. Moreover, it is widely believed in the scientific community that a global pandemic of human influenza is overdue. Such a pandemic would be the result ofthe emergence of a strain ofvims to which the world’s population had little or no immunity. A widespread epidemic needs not be severe or particularly deadly; the pandemics of 1957-1958 and 1968-1969 were relatively mild. However, there is the possibility that the H5N1 strain could, through genetic re-assortment or a more gradual process of adaptive mutation, become readily transmissible from human-to-human and become the basis of a global pandemic comparable to that of 1918- 1919, the “Spanish” influenza, which recent research has shown to have had its origin in an avian influenza virus.

4. Neither the timing nor the severity of the next pandemic can be predicted, but with the virus now endemic in bird populations in Asia the risk will not be easily diminished. Moreover, it is clear that containing and eradicating the virus will be a desirable objective, even if the problem were restricted to one of animal health in Armenia. Thus, economic analysis ofthe Project, takes into account the two main categories of economic impacts: (a) the economic consequences and costs associated with public and private efforts to prevent the emergence or spread of the disease and to treat its effects; and (b) the economic consequences and costs ofsickness or death resulting from the disease outbreaks.

5. These two are clearly related as a greater effort at prevention andlor treatment for a given severity of epidemic would be expected to reduce the spread of sickness andlor the percentage of mortality and thus reduce the economic impact and costs. There are also two “levels” ofpotential economic costs. The

l1World Bank. (2004). Avian Influenza Emergency Recovery Project. Technical Annex, Appendix 2. Other earlier and widely cited estimates by Oxford Economic Forecasting had been rather higher, suggesting costs ofover $200 million or around 0.6 percent ofGDP for Vietnam, and costs of $10-15 billion for East Asia as a whole, about 0.3- 0.5 percent ofregional GDP.

72 present spread of HPAI of the H5N1 strain involves transmission between animals and (so far) a limited incidence of transmission between animals and humans; as such, given the lethal nature of the virus, especially in poultry, it is principally an animal health crisis. However, the emergence of a human influenza pandemic caused by a lethal virus would have a social and economic impact many times greater.

Losses to the Poultry Sector, Related Industries, and Involved Populations.

6. The economic analysis follows a with-project scenario I without-project scenario approach to estimate net benefits of the Project to Armenia in the case of HPAI. The analysis focuses on the benefit of averting significant expected costs to the economy of a catastrophic spreading of the disease in Armenia's poultry flock due to a reduction in the probability of such a catastrophic event. The main costs averted that are considered in this analysis are:

(i)dramatic reductions in poultry prices and quantities demanded resulting in large-scale decreases in value added in the poultry sector (adjusted however for the positive substitution effect into other sources of protein, notably red meat and fish); (ii)loss of capital assets due to decommissioning as a result long termdecreases in demand and of poultry stock due to culling; and, (iii)the cost of culling in outbreak areas itself (and other activities to stem the further spreading above and beyond what would be done in the with project scenario).

7. Costs related to illness or death of humans (either in one country or internationally) as a result of infection from continual AI outbreaks in Armenia are not estimated owing to the current lack of adequate information on the probabilities of virus mutation and transmissibility. Given the time constraints and unavailability of precise data on some of the variables used in the analysis, this should be treated as a simulation exercise that indicates that even under very conservative assumptions and with only few of the benefits quantified, the returns on the project investments are sizeable.

Scenarios Considered

8. The without-uroiect scenario: As a result of the low capacity of government and the poultry industry to deal with outbreaks, the sector is vulnerable to a catastrophic AI occurrence. This catastrophic event (CE) would be characterized by multiple, simultaneous outbreaks leading to a spread of the disease to large sections of the country's poultry flock. Significant numbers of poultry would have to be culled with associated costs of culling and compensation to the farmers incurred by the state and the private sector. Subsequently, there would be massive public aversion to poultry consumption leading to a significant and sustained drop in prices and demand for poultry.

9. In turn, the poultry sector remains depressed in the medium term, leading to large sunk costs in the form of abandoned facilities. The public substitutes red meat, fish and other sources of protein for poultry. Prices of such substitutes go up, leading to increased net revenues for those sectors.'* Overall consumer surplus decreases.13 (In the long term the sector recovers partially.) The economic analysis

l2In the medium run, the red meat sector may expand, leading to a reduction in price levels. l3CS ofthose consumers who have to switch to substitutes decreases because (i)those products are not their first choice; (ii)the price increase in the other products. Consumers who are risk averse and continue to consume poultry products experience an increase in CS in the short run as poultry prices go down before the sector adjusts and supply decreases. Consumer surplus related to substitutes decreases as a result ofprice increases, at least in the short run before the sector adjusts and supply expands. The overall impact on CS is expected to be negative as consumers are forced to consume a mix that does not represent their first preference.

73 assigns the CE described above an annual probability of occ~rrence.'~ Under this scenario, this probability increases annually as the virus in the environment becomes endemic.

10. The with-uroiect scenario. The project builds capacity on the part of local government agencies and the private sector to respond effectively to outbreaks in such a way that multiple and simultaneous outbreaks may be contained with much higher efficiency, leading to a lower annual probability of the worst case scenario occurring. This is achieved through: (i)the adoption of a country-specific strategy (and its corresponding information system) to control and eradicate HPAI in areas of risk; (ii)the strengthening of disease surveillance and diagnostic capacity; (ii)the implementation of an outbreak containment plan, including deployment of supplies and incineration investments in field and certification of readiness for rapid response in areas at risk (all under Component 1: Animal Health).

11. Significant support to public awareness raising (under Component 3: Public Awareness and Implementation Support) will also help to: (i)increase the level of information among producer groups and their families and hence support the containment ofthe disease in risk areas; and, (ii)increase public confidence that the outbreaks will be contained effective and hence not lead to widespread illness among humans, which should reduce the risk of significant drops in demand for poultry products. The positive impact under this with project scenario is measured through a decrease in the annual probability of a CE.

Estimation of Benefits and Costs of the Project

12. In this section we present the methods used to estimate the main costs and benefits of the project, including assumptions made in this process. It is underlined that the objective of the analysis is to provide an order of magnitude approximation rather than precise estimates. Table 1 summarizes base case assumptions on key parameters which are discussed below. 2004 GDP contribution values are used. An annual average exchange rate of 486 dram/$ for 2004 is used to convert these figures into US Dollars. The period of analysis is 15 years, beginning in 2006. An annual discount rate of 12% is used in calculating the NPV,

Parameter Value 1 Annual probability ofCE occurring in first year ofwlout project scenario (2006) 15.O% 2 Annual increase in probability ofCE occurring 1.O% 3 Probability reduction factor due to project 12%

4 Decrease ofpoultry sector added value due to CE, in year ofCE and in long~ term 40%, 20% new market equilibrium 5 One time loss ofcapital in poultry sector 20% 6 Increase in value added of red meat and fish sectors, in year ofCE and in long lo%, 5% term new market eauilibrium

13. Without Project Scenario In this scenario, the main costs to the economy of multiple, simultaneous outbreaks that cannot be contained properly due to insufficient public and private sector capacity is the net cost incurred as a result of significant decrease in demand for poultry products, including meat and eggs. The net cost represents cost to the poultry sector and the positive impact on alternative protein sources, notably the red meat and fish sub-sectors.

l4There are several reasons for the focus in this analysis on a catastrophic event rather than multiple events ofvarying degrees of severity: (i)a probability distribution for events ofvarying severity is not available; (ii)related to the first point, employing an approach ofthe worst case scenario allows for simplicity in the analysis through the use a single variable probability. One can vary the assumed probability and see the impact on the net benefit due to the project.

74 (i) It is assumed that in the year in which the CE occurs, the impact on the poultry sector is a 40% decrease in the value added of production of meat and eggs. In the subsequent three years, the value added in the poultry sector is assumed to regain 80% ofthe pre-CE level. (ii) A further, one-time cost to the poultry sector occurs in the form of abandoned capital production assets as a result of the permanent decrease in demand and poultry stock that has to be culled in response to the outbreaks. This loss is estimated at 20% of the capital stock. The value of the poultry sector capital stock itself is assumed to be equal to three times the value of annual production it the poultry sector. (iii) Gains to the red meat and fisheries sub-sectors that are alternative sources of protein are assumed to be 10% of the value added in the year in which the CE occurs, gradually decreasing to 5% over the following 3 years.

14. The Government and the private sector would also incur incremental cost associated to the administration of containing the outbreaks. However, these costs are extremely difficult to estimate and are hence not included in this analysis. As discussed above, there is a significant loss of consumer surplus resulting from the perceived risk associated with poultry product consumption. These losses are not captured in the GDP data uses since the latter reflect production values. However, shortage of data makes it impossible to quantify this loss.

15. The stream of total annual costs due to a CE in a particular year thus obtained is summarized in the form on present value as of the year of the CE. This value is then multiplied with the probability of the CE occurring in a particular year to arrive at the expected cost. In the without project scenario, the probability ofthe CE occurring is assumed to be 15% in 2006, increasing annually at a rate of 1.O% due to increasing presence of the virus in the environment. This process results in an increasing stream of expected costs for the period 2006 - 2020, as presented in Table 2.

Year ‘06 ‘07 ‘08 ‘09 ‘10 ... ‘17 ‘18 ‘19 ‘20 I I Costs due to a CE (in NPV I terms ) 83.2 1 83.2 Probability of CE occurring (%) in the wlout project scenario 15 16 17 ~ 18 ~ 19 ~ ~ 25 ~ 25 ~ 25 ~ 25 ~ Expected costs in the wlout project scenario 12.47 13.31 14.14 14.97 15.80 Probability ofCE occurring (%) in the with project scenario 15.0 16.0 14.08 12.39 10.90 9.60 9.60 9.60 9.60 Expected costs in the with project scenario 12.48 13.31 11.71 10.31 9.07 7.98 7.98 7.98 7.98 Expected costs averted due to project - 2.42 ~ 4.67 I 6.74 I 1 12.80 ~ 12.80 I 12.80 I 12.80 Project cost 0.3 4.3 3.5 I 1.1 I

16 With-project Scenario It is assumed that the positive impact of the project will be felt starting in the third year of the project, 2008. In other words, the probability of the full impact of the catastrophic event being felt is assumed to range from 15-16% in 2006 - 2007, as under the without project scenario. From year 3, the annual probabilities are gradually reduced thanks to the project. The stream ofexpected

75 costs in this scenario are calculated by multiplying these probabilities with respective NPVs of costs and presented in Table 2.

17. The total project cost is estimated at US$9.2, which would disburse over four years: $0.3 million, $4.3 million, $3.5 million, and $1.1 million in 2006,2007,2008, and 2009.

Results of the Analysis

18. Based on the above assumptions, the analysis yields an NPV of $ 37.2 million and an internal rate ofreturn of69.9 %.

Sensitivity Analysis

19 A sensitivity analysis was carried out to gauge the impact ofvarying assumptions on the results of internal rate of return of the project. The analysis indicates that the model is robust as substantial reductions (or increases) in the assumed values are necessary for the IRR decrease to 20%, notably:

Holding all other values constant, assuming a value added loss in the poultry sector to 5% in the CE year and 1% in the long term (as opposed to the base values of40% and 20% ); 0 Reducing the losses sustained by the poultry sector in terms of value added loss (from 40% to 20% in the CE year and from 20% to 10% in the long term), while also increasing the gain in the red meat and fisheries sectors (fi-om 10% to 20% in the first year and from 5% to 10% in the long run); and, 0 Reducing the probability of the CE in 2006 to 4% (from the base case value of 15%) and the annual increase in probability to 0.2% (from 1%).

20. The IRR was not found to be very sensitive to variations in the value of the share of capital loss ofinvestment in the poultry sector.

76 Annex 9: Safeguard Policy Issues ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT

1. Overall, the Project will assist the government to develop a strategy for managing future emerging and re-emerging zoonotic and infectious disease outbreaks. As a result, the two safeguard issues which pertain to the Project are those ofenvironmental assessment for technologies to be deployed for disposal of culled poultry and of mitigating the negative impacts of mandated culling of poultry on small scale backyard poultry producers.

2. In general, activities under the Project are not expected to generate any adverse environmental effects as they are focused largely on public sector capacity building and improved readiness for dealing with outbreaks of avian influenza in domestic poultry. These prevention-focused activities are expected to have a positive environmental impact as the Project's investments in facilities, equipment, and training for laboratories will improve the effectiveness and safety over existing avian influenza handling and testing procedures by meeting international standards established by the OIE. This would be reinforced by the mainstreaming of environmental safeguards into protocols and procedures for the culling and disposal ofanimals during AI outbreaks.

3. Whatever medical waste is generated in health care facilities will be managed using existing guidelines in Armenia, which have been found satisfactory under previous projects. The Project would also support updating these guidelines, training health care workers to manage medical waste following these guidelines, and the possible purchase ofequipment for the proper handling and disposal of medical waste in participating facilities. These provisions would be included in the Project Operational Manual,

Environmental assessment Environmental Category B

4. Environmental Assessment and Environmental Management Plan. Since the Project supports investments in carcass disposal for culled poultry, the Project is assessed as a B-category project. An Environmental Assessment (EA) and an Environmental Management Plan (EMP) for the deployment of carcass disposal capacity (mainly using bio-thermal holes, but also potentially using mobile incineration units) will be necessary. This EMP will also cover the clean up of animal wastes of culled poultry by the local public veterinary services supported under the Project. The scope of this EMP will be specified in early project implementation, as a waiver for the requirement to complete the EA and EMP during project preparation has been sought and obtained per para. 12 of OP 4.01. Preparation of the EA and EMP is expected early in project implementation, and their adoption by the Government is set as a disbursement condition for the Animal Health component of the Project.

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OPIBPIGP 4.0 1) [X 1 E1 Natural Habitats (OPIBP 4.04) tl [ XI Pest Management (OP 4.09) [I XI Cultural Property (OPN 11.03, being revised as OP 4.1 1) [I [ XI Involuntary Resettlement (OPIBP 4.12) [I [X 1 Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I EX 1 Forests (OPIBP 4.36) 11 [X 1

77 Safety of Dams (OPIBP 4.37) 11 [X 1 Projects in Disputed Areas (OPIBPIGP 7.60)* [I [X 1 Projects on International Waterways (OPIBPIGP 7.50) [I xri

' By supporting the proposed project, the Bank does not intend to prejudice thefinal determination of the parties' claims on the disputed areas

78 Annex 10: Project Preparation and Supervision ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT

Planned Actual PCN review February 2006 February 2006 Initial PID to PIC February 2006 February 2006 Initial ISDS to PIC February 2006 February 2006 Appraisal March 10,2006 March 10,2006 Negotiations April 25,2006 April 27,2006 Board approval May 30,2006 Planned date ofeffectiveness June 2 1, 2006 Planned date ofmid-term review November 15, 2007 Planned closing date July 3 1,2009

Key institutions responsible for preparation ofthe project: Ministry ofAgriculture and Rural Development, Ministry ofHealth

Bank staff and consultants who worked on the project included:

Name Title Unit Mark Lundell Lead Agricultural Economist ECSSD Artavazd Hakobyan Operations Analyst ECSSD Robert Bambauer Animal Health Specialist Consultant Enis Baris Senior Public Health Specialist ECSHD Mario Bravo Senior Communications Officer EXTRO Susanna Hayrapetyan Sr. Health Specialist ECSHD Yingwei Wu Sr . Procurement Specialist ECSPS Arman Vatyan Financial Management Specialist ECSPS Jean Charles de Daruvar Senior Counsel LEGEC Junk0 Funahashi Senior Counsel LEGEC Andrina Ambrose Senior Finance Officer LOAGl Irene Bomani Senior Program Assistant ECSSD Amy Evans Project Implementation ECSSD Specialist, Consultant Aras Berenjforoush Legal Consultant LEGEC

Bank funds expended to date on project preparation: 1. Bank resources: US$74,000 2. Trust fknds (FAOICP): US$9,000 3. Total: US$83,000

Estimated Approval and Supervision costs: Estimated annual supervision cost: US$90,000

79 Annex 11: Documents in the Project File ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT

A. BANK

e Guidance notes to country teams on responding to AI e Rapid assessment ofthe economic impact ofpublic health emergencies ofinternational concern - the example of SARS - Milan Brahmhatt e Vietnam Avian Influenza Emergency Recovery Project - Memorandum ofthe President and Technical Annex e Minutes ofthe meeting on the Emerging zoonoses and pathogens: A Global public goods concern - implication for the World Bank, April 19,2005 e Issues Note on Avian Influenza in Africa, September 27,2005. - Frangois Le Gall and Ok Pannenborg

B. OTHER DONORS

a A global strategy for the progressive control ofHPAI - FAOIOIE in collaboration with WHO - May 2005 e FAO’s response to the avian influenza crisis - September 19,2005 e Technical Cooperation Program - Project descriptions for East Afnca, West Africa, Europe and Central Asia, North Africa, and the Middle East - WHO 2005

C. PUBLIC HEALTH RELATED

e Global avian influenza information from WHO Web site at ~.who.in~csrldlseasela~aninfluenza e Informationon US. influenza preparedness available at: ~.~s.govln~ol~andemicsld~s.htmland www.cdc. govlflulavian e WHO. 2005. Responding to the avian influenza pandemic threat. Recommended strategic actions. Geneva. a WHO. 2005. WHO global influenza preparedness plan. The role of WHO and recommendations for national measures before and during pandemics. Geneva. e United States Department ofHealth and Human Services. 2005. Pandemic Flu Fact Sheet, e United States Department ofHealth and Human Services. 2004. Pandemic Influenza Preparedness and Response Plan. Draft. e Browner, J., and Chalk, P. 2003. The Global Threat ofNew and Reemerging Infectious Diseases. Reconciling US. National Security and Public Health Policy. Santa Monica, CA: RAND. e Dowdle, W.R. 1997. The 1976 Experience. J. Infect Dis 1997; 176 (suppl. 1): 569-72. e Garcia-Abreu, A., Halperin, W., Dane1 I.2002. Public Health Surveillance Toolkit. A guide for busy task managers. Washington, D.C.: World Bank. e Huffinan, S., on the basis ofreport by Daniel Miller and Asel Ryskulova. 2005. Epidemiologic Surveillance Systems in Eastern Europe and Central Asia: An Overview. Washington, D.C.: World Bank. a Neustadt, R.E., Fineberg H.V. 1982. The Epidemic That Never Was. Policy Makmg and the Swine Flue Scare. Vintage Books.

80 D. ANIMAL HEALTH RELATED

OIE website on Avian Flu Official reporting, Scientific information, Standards, Guidelines, and Recommendations (-

FA0 website on Avian Flu General information, Communication, Publications, Projects proposals and reports (www.fao.org)

FAOIOIE. February 2005. Second FAO/OIE Regional Meeting on Avian Influenza Control in Asia. Ho Chi Minh City,

FAOIOIE. February, 2004. Recommendations of the Joint FAO/OIE Emergency Regional Meeting on Avian Influenza Control in Animals in Asia. Bangkok.

FAOIOIE. March 2005. Summary Report of the First Regional Steering Committee of GF-TADS (Global Framework for the Progressive Control of Transboundary Animal Diseases) in Asia and the Pacijic. Tokyo.

FAOIOTE/WHO. February, 2004. FAO/OIE/WO Technical Consulta~ionon the Control of Avian Influenza, 3- 4 February, 2004: Conclusions and ~ecommendations.

OE. May, 2005. OIE Report of the First Meeting of the Steering Committee of the Joint OIE/FAO Network of Expertise on Avian Influenza (OFFLU). OIE. Paris.

OIEIASEAN. August 2005. The Southeast Asia Foot and Mouth Disease Campaign: Business Plan for Phase III(2006-2008).

OIEIFAO. Network of Expertise on Avian Influenza (OFFLU). Pans.

OIEIFAO. April, 2005. International ScientiJic Conference on Avian Influenza, OIE Paris, France 7-8 April 2005: ~ecommendations.Paris.

E. BIBLIOGRAPFIY OF RECENT REPORTS & OTHER DOCUMENTS

Bell, Clive and Maureen Lewis. October 2004. The Economic Implications of Epidemics Old and New. Working Paper Number 54, Center for Global Development. Washington, DC. (see also Powerpoint presentation, “Economic Implications of Epidemics Old and New ”).

OIE, 2004. Emerging Zoonoses and Pathogens of Public Health Concern. Rev. sci. tech. Off. int. Epiz., 2004,23 (2).

FAOIOIE. February 2005. Second FAO/OIE Regional Meeting on Avian Influenza Control in Asia. Ho Chi Minh City.

FAOIOIE. February, 2004. Reco~mendationsof the Joint FAO/OIE Emergency Regional Meeting on Avian Influenza Control in Animals in Asia. Bangkok.

FAOIOIE. March 2005. Summary Report of the First Regional Steering Committee of GF-TADS (Global Framework for the Progressive Control of Transboundary Animal Diseases) in Asia and the Pacijic. Tokyo.

81 FAOIOIEfWHO. February, 2004. FAO/OIEhWO Technical Consultation on the Control of Avian Influenza, 3-4 Februaly, 2004: Conclusions and Recommendations.

Ferguson, Neil et al. 2005. Strategiesfor Containing an Emerging Influenza Pandemic in Southeast Asia. Nature.

OE. May, 2005. OIE Report of the First Meeting of the Steering Committee of the Joint OIE/FAO Network of Expertise on Avian Influenza (OFFLU). OIE. Paris.

OIEIASEAN. August 2005. The Southeast Asia Foot and Mouth Disease Campaign: Business Planfor Phase III(2006-2008).

OIEIFAO. Network of Expertise on Avian Influenza (OFFLV. Paris.

OIEIFAO. April, 2005. International Scientijk Conference on Avian Influenza, OIE Paris, France 7-8 April 2005: Recommendations. Paris.

Sandman, Peter and Jody Lanand.2005. Bird Flu: Communicating. Perspectives in Health, Vol. 10, No. 2. Pan American Health Organization. Washington, DC.

Schudel, A. August 2005. Tackling Avian Influenza at Source. Avian Influenza Technical Discussion & Coordination Meeting (Powerpoint presentation). Washington, DC.

Smolinski, Mark, Margaret A. Hamburg, and Joshua Lederburg (Editors). 2005. Microbial Threats to Pandemic Influenza. National Academies Press. Washington, DC.

WHO. 2005. WHO Global Influenza Preparedness Plan: The Role of WHO and ~ecommendationsfor National Measures Before and During Pandemics. Department of Communicable Disease Surveillance and Response, Global Influenza Program. Geneva. WHO, January 2005. Influenza Pandemic Preparedness and Response: Report by the Secretariat. Executive Board, 115* Session, Agenda Item 4.17. Geneva.

World Bank. July 2,2004. Technical Annex for a Proposed Credit of SDR3.5 million to the Socialist Republic of Vietnamfor an Avian Influenza Project. Washington, DC.

82 Annex 12: Statement of Loans and Credits ARMENIA AVIAN INFLUENZA PREPAREDNESS PROJECT

Difference between expected and actual Original Amount in US$ Millions disbursements Project FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. ID Rev’d PO83352 2006 RENEW ENERGY 0.00 5 .oo 0.00 0.00 0.00 5.04 0.00 0.00 PO93459 2006 AM -PRSC 2 0.00 20.00 0.00 0.00 0.00 20.43 0.00 0.00 PO87011 2006 RUR ENT & AGFW DEVT 0.00 20.00 0.00 0.00 0.00 18.11 -0.96 0.00 PO57880 2006 URBAN HEAT 0.00 15.00 0.00 0.00 0.00 12.69 0.00 PO87641 2005 YEREVAN WATERlWW 0.00 20.00 0.00 0.00 0.00 16.36 6.05 0.00 SERVS PO74503 2004 EDUC QUAL & 0.00 19.00 0.00 0.00 0.00 14.83 4.25 1.34 RELEVANCE (APL #1) PO73974 2004 HEALTH SYS MOD (APL 0.00 19.00 0.00 0.00 0.00 16.22 8.77 0.80

PO88499 2004 IRRIG DAM SAFETY 2 0.00 6.75 0.00 0.00 0.00 5.78 0.54 0.00 PO63398 2004 MUN WATER & WW 0.00 23.00 0.00 0.00 0.00 15.07 4.70 0.00 PO60786 2004 PUB SECT MOD 0.00 10.15 0.00 0.00 0.00 9.02 2.95 0.00 PO87620 2004 SOC PROT ADMIN 0.00 5.15 0.00 0.00 0.00 4.77 1.86 -0.04 PO44852 2002 ENT INCUBATOR LIL 0.00 5.00 0.00 0.00 0.00 1.93 1.23 0.85 PO55022 2002 IRRIG DEVT 0.00 24.90 0.00 0.00 0.00 9.22 4.29 0.00 PO57847 2002 NAT RES MGMT 0.00 8.30 0.00 0.00 0.00 6.85 0.98 0.00 PO69917 2002 NAT RES MGMT (GEF) 0.00 0.00 0.00 5.12 0.00 3.75 0.92 0.00 PO57838 2001 JUDICIAL REFORM 0.00 11.40 0.00 0.00 0.00 1.58 -0.44 0.00 PO57952 2000 SIF 2 0.00 20.00 0.00 0.00 0.00 0.14 -0.74 0.00 PO08276 1999 ELEC TRANSM & DISTR 0.00 21.00 0.00 0.00 0.00 0.95 0.26 0.18 PO64879 1999 IRRIG DAM SAFETY 0.00 26.60 0.00 0.00 0.00 8.16 7.88 2.44 Total:

STATEMENT OF IFC’s Held and Disbursed Portfolio In Millions of US Dollars

Committed Disbursed TFC IFC

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2002 ACBA Leasing 2.00 0.27 0.00 0.00 2.00 0.27 0.00 0.00 2004 Armeconombank 2.00 0.00 0.00 0.00 2.00 0.00 0.00 0.00 2000 Hotel Armenia 0.00 0.00 3.57 0.00 0.00 0.00 3.57 0.00 2004 Hotel Armenia 0.00 0.00 1.25 0.00 0.00 0.00 1.25 0.00

83 Annex 13: Country at a Glance ARMENIA AVIAN INFLUENZA PREPAREDNESS PROJECT

Europe & Lower- Central middle- POVERTY and SOCIAL kavelopment diamond' Armenia Asia income 2004 3.0 472 2,430 Population, mid-year (mil/ions) Life expectancy GNI per capita (At/as method, US$) 1,070 3,290 1,580 GNI (AUas method, US$ bii/ions) 3.3 1,553 3,847 - Average annual growth, 199844 Population (%) -0.7 -0.1 1.o GNI Gross Labor force (%) 0.7 -0.5 0.7 per primar] Most recent estimate (latest year available, 199844) capita enrollmen Poverty (% of population below nationalpoverty line) 51 Urban population (% of total population) 64 64 49 Life expectancy at birth (years) 75 68 70 Infant mortality (per 1,000 live births) 30 29 33 Child malnutrition (% of children under 5) 3 11 Access to improved water source Access to an improved water source (% ofpopu/ation) 92 91 01 Literacy (% ofpopulation age 15+) 99 97 90 Gross primary enrollment (% of school-age population) 99 101 114 ---Armenia Male 100 103 115 -Lo~r-midd/e-income group Female 97 101 113 KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1984 1994 2003 2004 iconomic ratios* GDP (US$ bitims) 1.3 2.8 3.5 Gross capital formationlGDP 23.5 24.7 24.2 Trade Exports of goods and serviceslGDP 39.3 31.9 33.1 Gross domestic savingslGDP -10.3 6.0 - Gross national savingslGDP 18.0 19.2

Current account balancelGDP -12.3 -6.7 -4.9 Domestic Capital 0.3 0.4 0.3 Interest paymentslGDP savings formation Total debtlGDP 16.3 40.2 31.7 Total debt servicelexports 1.7 9.0 5.1 Present value of debtlGDP 26.1 Present value of debtlexports 69.4 Indebtedness 1984-94 199444 2003 2004 200448 (average annualgrowth) GDP .. 7.6 13.9 10.1 7.0 -Armenia

GDP per capita .. 8.7 14.4 10.3 7.1 ~ Lower-middle-incomeQrOUP Exports of goods and services .. 7.7 20.2 12.2 9.0

STRUCTURE of the ECONOMY 1984 1994 2003 2004 Growth of capital and GDP (%) 1% of GDP) I 40 - I Agriculture 44.9 23.5 Industry 37.0 39.2 Manufacturing 30.1 21.9 Services 10.2 37.3 ,BQWMMOJ~ Household final consumption expenditure 99.1 03.0 I General gov'tfinal consumption expenditure 11.3 10.3 9.1 Imports of goods and sentices 73.1 49.0

198444 199404 2003 2004 Growth of exports and imports (%) (average annual growth) Agnculture 37 43 Industry 78 232 Manufactunng 52 154 Sewces 84 104 233 " Household final consumption expenditure 55 98 General gov't final consumption expenditure 16 140 Gmss capital formahon 88 355 Imports of goods and sewices 37 235

Note: 2004 data are preliminary estimates. This table was produced from the Development Economics LDB database. * The diamonds show four key indicators in the country (in bold) compared with its incomegroup average. if data are missing, the diamond will be incomplete.

84 Armenia

PRICES and GOVERNMENT FINANCE 1984 1994 2003 2004 Inflation(%) Domestic prices [% change) Consumer prices 4,962.3 4.6 3.2 Il5 Implicit GDP deflator 4,107.3 4.6 5.9 Government finance (% of GDP, includes current grants) Current revenue 27.7 17.8 14.7 Current budget balance -6.6 4.1 1.2 ' -GDP deflator -cPI Overall sumluddeficit -16.5 -1.3 -3.4 I 1

TRADE 1984 1994 2003 2004 Export and import levels (US$ mlll.) [US$ mi//ions) Total exports (fob) 21 5 686 a77 1 MO - Gold, jewelry, and other precious stones 35 1 I Machinery and mechanical equipment 20 Manufactures 129 167 Total imports (cif) 401 1,279 1,338 Food 71 222 Fuel and energy 160 179 Capital goods 43 212 259 Export price index (2000=1Oq) Import price index [2000=100) Exports Imports I Terms of trade [2000=100)

BALANCE of PAYMENTS 1984 1994 2003 2004 1 Current account balance to GDP (%) [US$ mi//ions) I Exports of goods and services 257 694 1,151 Imports of goods and services 518 1,397 1,674 Resource balance -261 -503 -524 Net income -7 91 132 Net curent transfers 106 225 218 Current account balance -162 -187 -1 74 Financing items (net) 159 310 204 Changes in net reserves 3 -1 23 -30 Memo: Reserves including gold [US$ millions) 35 550 534 Conversion rate [DEC, locaVUS$) 142.2 570.8 533.5

EXTERNAL DEBT and RESOURCE FLOWS 1904 1994 2003 2004 Composltlonof 2004 debt (US$ mill.) [US$ mi//ions) Total debt outstanding and disbursed 214 1,127 1,125 iBRD 2 8 7 IDA 6 662 884 I F22 G44 A7 Total debt service 4 95 88 IBRD 0 1 1 IDA 0 4 6 Composition of net resource flows Official grants 171 53 Official credtors 61 44 37 Private creditors 0 -6 -4 Foreign direct investment (net inflows) 8 121 Porffolio equity (net inflows) 0 0 World Bank program Commitments 85 40 0 A - IBRD E - Bilateral Disbursements 7 77 23 B - IDA D - Oiher multilateral F - Private Principal repayments 0 1 2 C-IMF G - Short-tern Net Rows 7 77 21 Interest payments 0 5 5 Net transfers 6 72 16

Note: This table was produced from the Development Economics LDB database. 8/24/05

85

MAP SECTION

SEPTEMBER 2004 SEPTEMBER

41

40

°

°

N N 43 43 °

E

shown on this map do not imply, the part of The World Bank This map was produced by the Map Design Unit of The World Bank. Group, any judgment on the legal status of territory, or The boundaries, colors, denominations and any other information endorsement or acceptance of such boundaries. ° E ARMENIA TURKEY

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