Safeguards Due Diligence Report Project Number: 44321-013 December 2019 Cambodia: Climate Resilient, Rice Commercialization Sector Development Program (Phou Poy Rice Mill) Prepared by Ministry of Water Resources and Meteorology for the Royal Government of Cambodia and the Asian Development Bank. This safeguards due diligence report is a document of the borrower. The views expressed herein do not necessarily represent those of ADB's Board of Directors, Management, or staff, and may be preliminary in nature. In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area. MINISTRY OF ECONOMY AND FINANCE Program Management Office (PMO) Climate Resilient Rice Commercialization Sector Development Program (Rice-SDP) Due Diligence Report on Social Safeguard of Paddy Drying and Storage (PDS) Facility within Phou Poy Rice Mill 1 | Page MINISTRY OF ECONOMY AND FINANCE Program Management Office (PMO) Climate Resilient Rice Commercialization Sector Development Program (Rice-SDP) Due Diligence Report on Social Safeguard of Paddy Drying and Storage (PDS) Facility within Phou Poy Rice Mill ___________________________________________________________________ I. Summary of Public Consultation 1. The Royal Government of Cambodia (RGC) has received loans and grants financing from the Asian Development Bank (ADB) and other sources towards the cost of the Climate-Resilient Rice Commercialization Sector Development Program ("Rice-SDP"). The Rice-SDP supports the implementation of the ‘Policy on the Promotion of Paddy production and Rice Export’ of the RGC. It is designed to help transform the predominantly subsistence rice sector into a commercially oriented one by improving household and national food security and expanding rice export through (i) removing the legal and regulatory constraints inhibiting rice commercialization; (ii) improving productivity of paddy crops and consistency in quality of milled rice; (iii) enhancing rice value chain support services; and (iv) addressing risks of climate change through mitigation and adaptation. The Rice-SDP is operating in three provinces which have high levels of rice production, namely Battambang, Kampong Thom and Prey Veng Provinces. 2. During the design of the Rice-SDP, the inadequate capacities of the post-harvest infrastructure to handle the increasing volumes of wet paddy were identified as a serious constraint. The infrastructure to handle, dry and store, and transport the volumes of wet paddy is not sufficiently developed despite significant private investment in drying, storage and milling facilities in recent years. Establishment of paddy drying, and storage (PDS) facilities are therefore one of the key activities under the Rice-SDP to help accommodate paddy supplies at peak periods after harvest to ensure better quality for processing and retained added value in Cambodia. 3. The Ministry of Economy and Finance (MEF) is the Executing Agency (EA) of the Rice- SDP and has established a Program Management office (PMO). The PMO has established a PDS Selection Committee in cooperation with the Ministry of Agriculture, Forestry and Fisheries/National Implementation Office (MAFF/NIO) and the three Provincial Implementation Offices (PIOs) who will participate in the entire PDS procurement process. 4. The Rice Millers eligible to avail the concessional loans from Rice-SDP to establish the PDS Facilities are selected following a cumbersome process. Upon receipt of the expression of interest (EOIs) from the Rice Millers, the PMO conducted a feasibility study through engaging an independent firm, assessed the Rice Millers’ PDS business proposals, and came up with a Final Ranking of the Rice Millers before employing a DD & CS (detailed design and construction 2 | Page supervision) firm to support the Rice Millers. The final ranking of the Rice Millers was endorsed by the PDS Selection Committee. The Phou Poy Rice Mill is ranked first in Battambang province and therefore got selected to avail the concessional loan for establishment of PDS Facility. 5. An initial environmental examination (IEE) for the proposed PDS Facility at Phou Poy Rice Mill in Battambang has been prepared covering all facets of environmental safeguards including policy principles, subproject scope, context and environment (physical, biological and socio- economic resources), anticipated environmental impacts and mitigation measures, analysis of alternatives, information disclosure, consultation and participation, grievance redress mechanism (GRM), a rapid environmental assessment, an environmental management plan (EMP), an environmental monitoring plan, institutional arrangement and responsibilities, etc. A brief description of the subproject area including socio-economic characteristics is described under para 6 & 7 below. 6. Battambang is long renown for quality rice, fruit and vegetable production. Farming is the main source of income for the majority of households in the subproject area, while other income is obtained from off-farm employment in construction, other industries, government employment, and trading. A minority of rural households derive income from fishing, though this activity is merely a supplementary activity for part of the year. Rice production is the mainstay of the rural economy in most areas. The total paddy production in Battambang province was about 836,925 tons out of which wet season production was 796,059 tons and that of the dry season was 40,866 tons. 30% rice crop production in Battambang province depended on natural irrigation and irrigation, and 70% depended on rain water. Rice crop production has changed from traditional farming to mechanized farming through the use of modern agricultural equipment, rice seed, chemical fertilizer and pesticide, even though the increase in seasonal rice crop production is limited due to absence of irrigation facility (Source: Battambang Development Plan 2016-2018). 7. Many rural families do not have regular cash incomes, either because of access constraints, lack of landholdings and shortage of employment opportunities. Many families are dependent on remittances by family members working away from home, most often in the construction and garment industries and/or as overseas migrant workers. Alleviating poverty became RGC’s highest priority according to its Millennium Development Goals in 2008. Thereafter, sustained efforts by RGC led to the decrease in poverty rate from 47.8% in 2007 to 13.5% in 2014. But the rural poverty incidence where 90% of the poor live fell from 24.6% in 2009 to 20% in 2012. Based on the Battambang Development Plan, the poverty level in Sangkae district of Battambang province where the proposed PDS Facility is located has reduced from 22.98% in 2010 to 18.99% in 2017 (Source: Battambang Provincial Department of Planning, 2018). The proposed PDS Facility is expected to significantly contribute to a qualitative improvement in the villagers living standards as they will get opportunity to expand their rice business as the Rice Miller will buy more paddy from them than earlier times, farmers will be able to save on transportation cost as they do not have to transport the paddy very far, and also they can work as labor at the Facility to earn income. 3 | Page 8. Following the endorsement by the PDS Selection Committee, both the PMO and the DD & CS firm worked with the Phou Poy Rice Mill and completed the initial survey for detailed design, verification of the proposed location, site layout for construction, system and process design, machine layout drawings, detailed design and specifications of equipment, and budget estimates for the Facility. The proposed PDS Facility shall be constructed on an area of 2,880m2 (around 0.29 hectare) within the existing Rice Mill compound of the Phou Poy Rice Mill situated at the National Road No. 5, Chumnik Village, Anlong Vil commune, Sangkae District in Battambang province. The existing Rice Mill is located on a single piece of 60 hectares of land owned by the Rice Miller of which around 10 hectares has been fenced (land title issued by Provincial Department of Land Management and Urban Planning-“PDLMUPC”, Battambang, on 31 July 2006 attached as annex II). The proposed Facility will have a drying capacity of 300-800 tons per day (TPD) of wet paddy and the proposed works will mainly involve construction of a dryer of a size of 24 m x 60 m x 21 m (Width x Length x Height) and a storage building of a size of 24 m x 60 m x 17 m (Width x Length x Height). (See annex III: Detail Design of Phou Poy PDS Facility). 9. After completing the detailed design of the Facility, a Rice-SDP technical team comprising of MEF/PMO officials and consultants, MAFF/NIO officials and consultants, and IRE (DD&CS Consultant for establishment of PDS Facility) together with the provincial officials conducted a Public Consultation Meeting on social safeguards impact assessment for the proposed PDS Facility within the existing business compound of the Phou Poy Rice Mill. The main focus of the assessment was to avoid risks (such as validation of private land title, boundary conflict with neighbors if any, safety during construction activities, and impact of new PDS facilities at the proposed site - see annex I: Minutes of Public Consultation Meeting) and support the Rice Miller to strengthen his/her safeguard