Document of The World Bank Public Disclosure Authorized Report No: 29509 IMPLEMENTATION COMPLETION REPORT (IDA-29330 COFN-03910 PPFI-P9910) ON A CREDIT Public Disclosure Authorized IN THE AMOUNT OF SDR 10.2 MILLION TO THE AZERBAIJAN REPUBLIC FOR A FARM PRIVATIZATION PROJECT Public Disclosure Authorized JUNE 15, 2004 Public Disclosure Authorized CURRENCY EQUIVALENTS (Exchange Rate Effective June 15, 2004) Currency Unit = Manat 1 Manat = US$ .0002037 US$ 1 = 4909 Manat FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AAS Academy of Agriculural Sciences ASDAPAgency for Support to the Development of the Agricultural Private Sector ABP Agroprombank FSU Former Soviet Union IDA International Development Association IFAD International Fund for Agricultural Development MOA Ministry of Agriculture MOE Ministry of Economy MOF Ministry of Finance PIU Project Implementation Unit PMU Project Management Unit PPF Project Preparation Facility SA Special Account SIC State Irrigation Committee SLC State Land Committee SOE Statement of Expenditures WUA Water Users' Association Vice President: Shigeo Katsu Country Manager/Director: Donna Dowsett-Coirolo Sector Manager/Director: Benoit Blarel/Laura Tuck Task Team Leader/Task Manager: Thirumangalam V. Sampath AZERBAIJAN REPUBLIC Farm Privatization Project CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 5 5. Major Factors Affecting Implementation and Outcome 12 6. Sustainability 14 7. Bank and Borrower Performance 15 8. Lessons Learned 18 9. Partner Comments 19 10. Additional Information 20 Annex 1. Key Performance Indicators/Log Frame Matrix 22 Annex 2. Project Costs and Financing 24 Annex 3. Economic Costs and Benefits 26 Annex 4. Bank Inputs 30 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 33 Annex 6. Ratings of Bank and Borrower Performance 34 Annex 7. List of Supporting Documents 35 Annex 8. Beneficiary Survey Results 36 Annex 9. Stakeholder Workshop Results 45 Project ID: P040544 Project Name: Farm Privatization Team Leader: T.V. Sampath TL Unit: ECSSD ICR Type: Intensive Learning Model (ILM) of ICR Report Date: June 25, 2004 1. Project Data Name: Farm Privatization L/C/TF Number: IDA-29330; COFN-03910; PPFI-P9910 Country/Department: AZERBAIJAN Region: Europe and Central Asia Region Sector/subsector: Central government administration (75%); Irrigation and drainage (17%); Sub-national government administration (5%); Other social services (3%) Theme: State enterprise/bank restructuring and privatization (P); Rural services and infrastructure (P); Environmental policies and institutions (P); Land management (S); Civic engagement, participation and community driven development (S) KEY DATES Original Revised/Actual PCD: 05/25/1995 Effective: 04/16/1997 05/20/1997 Appraisal: 04/10/1996 MTR: 10/01/1999 11/01/2000 Approval: 01/16/1997 Closing: 06/30/2002 12/31/2003 Borrower/Implementing Agency: AZERBAIJAN REPUBLIC/MINISTRY OF AGRICULTURE Other Partners: Agency for Support to the Development of the Agricultural Private Sector STAFF Current At Appraisal Vice President: Shigeo Katsu Johannes F. Linn Country Director: D-M Dowsett-Coirolo Yukon Huang Sector Manager: Benoit Blarel Michael Gould Team Leader at ICR: T.V. Sampath T.V. Sampath ICR Primary Author: T.V. Sampath; Lucy M. Hancock 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: HS Sustainability: HL Institutional Development Impact: H Bank Performance: S Borrower Performance: HS QAG (if available) ICR Quality at Entry: S S Project at Risk at Any Time: Yes project was considered as at risk during the early statges 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The Farm Privatization Project (FPP) was prepared in the mid-1990s, following Azerbaijan’s “second independence” in 1991 and the very difficult period that followed, during which Azerbaijan faced the problems of transition to a market economy, a costly undeclared war, and a huge population of refugees and displaced persons. By the end of 1995, measured GDP stood at about 34 percent of its 1988 value. Agriculture, accounting for about 30 percent of GDP in 1990, declined by about 43 percent. In 1995, with the political situation gradually stabilizing and prospects improving for a peaceful resolution of the conflict with Armenia, the Government decided to embark on a reform program to stabilize the economy and accelerate structural reforms. Among the reforms was an effort to privatize agricultural land. A Land Reform Law was passed in 1996 to establish the right of former state and collective farm workers to own the land they worked. But ownership rights were fuzzy and a framework for implementation of the Land Reform Law was missing. The objective of the Farm Privatization Project was to assist the Government in accelerating land privatization and restructuring of state and collective farms and to develop models for farm privatization in pilot areas that could serve as a basis for wider geographic replication. Complementary activites to achieve the objective were to: (a) launch of services essential in support of private agriculture: land registration and titling, farm information and advisory services, credit access, and irrigation rehabilitation; (b) development of an enabling environment for land privatization; (c) development of community-based social services and formation of village groups to promote equitable and efficient implementation of the privatization program. Project objectives corresponded to the Bank Group’s 1996 Country Assistance Strategy, which set out the Bank’s support for reforms intended to ensure that economic efficiency and competitiveness were enhanced. In this area, the focus of the Bank during the CAS period was specified as agriculture, especially because of the many opportunities to expand output and the incomes of Azerbaijan’s poor. Emphasis was to be on creation of land markets and accelerating privatization of state and collective farms within an appropriate legal framework, demonopolization of input/output channels, design of a rural credit scheme, and rehabilitation of basic infrastructure and dilapidated irrigation and drainage systems. The project’s objective was ambitious, seeking to effect true land privatization that would devolve full responsibility for farm management to individuals with full land rights and formal, unambiguous titling. No countries of the CIS had then achieved this; even now, few other than Azerbaijan have approached it. The pilot approach limited risk in that achievement of the project objective did not depend on the timing of nationwide reforms. The project was complex in that, besides activities on the national level, it envisioned four components each to be implemented in six pilot locations. Within each pilot, the project envisioned interlocking policy and institutional improvements, each challenging, that were unlikely to succeed individually. For example, only farmers granted title would have access to the - 2 - project’s rural credit funds and/or be able to join Water Users’ Associations (WUAs); at the same time, broad participation in the credit program and the WUAs was required for their success, which in turn were key elements of long-term sustainability of the pilots. The interdependence of the project’s initiatives posed a significant risk. However, this element of risk was introduced deliberately as a means of increasing local pressure for the success of the whole. 3.2 Revised Objective: The objectives remained unchanged during the life of the project. 3.3 Original Components: A. Farm Privatization Support Services (US$20.0 million, of which US$10.1 million IDA, US$7.2 million IFAD. Component A comprised launch of support services for private farmers: land titling, market information, support for development of Water Users' Associations, and rural credit. (a) The land titling subcomponent aimed to ensure that titles were technically clear, certain and transferable, facilitating land transactions and use of land as collateral. To that end, this subcomponent financed development of a technically sound registration and cadastre system. (b) The Farm Information and Advisory Services (FIAS) subcomponent aimed to close the information gap for newly-private farmers and entrepreneurs, providing them agricultural extension services and marketing and legal information. (c) The Water Users' Associations (WUAs) support component aimed to remedy the tenuous financing of operations and maintenance of irrigation and drainage infrastructure by promoting associations of private farmers to help manage the infrastructure, collect water charges and undertake maintenance. (d) The Farm Credit subcomponent aimed to provide credit to finance farming inputs. This component was designed to support the project objective both by encouraging workers on the state farms in the six pilot areas to risk privatization, and also by providing a laboratory for development of Azeri models for farmer support services. B. Rehabilitation of Main Irrigation Water Supply and Drainage Works (US$5.5 million, of which US$2.43 million IDA, US$1.49 million IFAD). Component B undertook rehabilitation of irrigation and drainage works needed for adequate