AF Rural Enterprise Development Program Region

Transcription

1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB4057 Project Name AF Rural Enterprise Development Program Region South Asia Sector Crops (20%);Other social services (20%);Micro- and SME finance (20%);General agriculture, fishing and forestry sector (20%);Agricultural marketing and trade (20%) Project ID P Borrower(s) THE ISLAMIC REPUBLIC OF AFGHANISTAN Implementing Agency Government of Afghanistan Ministry of Rural Reconstruction & Development Darulaman - Kabul, Afghanistan Tel: naser.temory@mrrd.gov.af Environment Category [ ] A [] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared July 30, 2008 Estimated Date of April, 2009 Appraisal Authorization Estimated Date of Board August 27, 2009 Approval 1. About 80% of Afghanistan s population lives in rural areas and are largely dependent on agriculture and livestock related occupations, which contribute an estimated 53% to total GDP. However, improving the livelihoods and reducing the vulnerability of the rural poor will depend on enhancing non-farm employment (self owned enterprises and non-agricultural wage labor) as well as farming (self employed farming and agricultural wage labor). 2. Key development issues related to the enhancement of rural livelihoods in Afghanistan include: Social capital developed in rural areas but with limited economic development Small scale and widely dispersed rural producers and enterprises, suffering from poorly developed value chains and high transaction costs Limited outreach of financial services and low creditworthiness of rural entrepreneurs Weak market infrastructure, including the absence of a well maintained road network, fears about security, poor market facilities, and telecommunications 3. Rationale for Bank Involvement: The Afghanistan National Development Strategy (ANDS) outlines the long term strategic vision for agriculture and rural development so as to ensure the social, economic and political well-being of rural communities, especially poor and vulnerable people, while stimulating the integration of rural communities within the national economy. This will require transforming agricultural production so that it is more productive and increasingly commercially oriented and expanding off-farm employment opportunities as the basis for increasing incomes among the rural population. The proposed Rural Enterprise Development Program (AREDP) is identified in the ANDS as part of the Comprehensive Agriculture and Rural Development Program. 4. The Ministry of Rural Rehabilitation and Development (MRRD) prepared a new policy paper in September 2007 on Rural Enterprise Development. This included a policy statement for an integrated Rural Enterprise Development Program that would serve as a mechanism to promote micro, small

2 and medium-scale enterprises that will create jobs and contribute to poverty alleviation particularly in rural areas. MRRD envisions the AREDP to be national in scope and extending to all 34 provinces in a similar manner to their successful Bank-funded National Solidarity Program (NSP). AREDP is expected to contribute not only to rural poverty reduction, but also to counter narcotic efforts and enhanced stability. Other policy statements include the establishment of an Afghanistan Enterprise Development Council (AEDC). 5. The MRRD is seeking multi-donor finance for the proposed AREDP and has sought World Bank assistance, both in the design of the program and in providing IDA finance. The Bank has considerable experience with rural livelihoods programs across South Asia and can bring experience and knowledge to this program in addition to financial assistance. Regional lessons and advice on the initial AREDP design received from GoA, was provided through the technical assistance P delivered in January A formal request for IDA finance was received from the Ministry of Finance on April 17, Obstacles to sustainable livelihood and enterprise development in rural Afghanistan include poor market access, transport cost and time, lack of information, skills or experience in managing community development activities, limited access to credit, and inadequate power and infrastructure for value addition. The AREDP would need to leverage on and extend linkages to existing rural programs that can have a direct impact on livelihood development particularly the National Solidarity Program (NSP), National Rural Access Program (NRAP), irrigation and power sector programs. Programs dealing with financial services (e.g. MISFA) can be important partners of the AREDP. 2. Proposed project development objective(s) 7. The MRRD articulates the over-arching development goal for AREDP as to stimulate inclusive economic growth by harnessing the potential of micro-enterprise sector and its strategic linkage with high growth drivers, particularly SMEs and large agri-businesses, for sustainable employment and income generation in rural areas. Specific objectives include increased rural incomes, livelihood generation, reduced vulnerability, improved food security, import substitution and developing rural enterprises (farm and non-farm). 8. In line with these objectives, key result areas of the project would broadly include: Expansion of the rural enterprise sector, particularly numbers of micro-entrepreneurs their turnovers and increases in household incomes Emergence of new market opportunities, as evidenced by diversity in rural SMEs and improved SME turnovers Increased investments in and improved incomes at various stages of the value chain Improved access to financial services from banks and MFIs Increased employment opportunities, particularly for women and youth Strong social and human capital developed in poor rural communities 3. Preliminary project description 9. AREDP is described as a vertically integrated approach to assist in the enhancement of rural livelihoods and formation of rural enterprises from the smallest to the largest. Community level group formation, provision of enterprise support services, improving access to credit, and strengthening the ability of GoA to deliver these services are key elements of the program. AREDP seeks to cluster and graduate the smaller micro enterprises into larger and more efficient enterprise associations that will be able to compete and establish forward linkages to SMEs. This approach would be achieved through the following three components: 10. Component A: Institutional Development and Livelihoods Support Services

3 A-1 Group formation around assets and livelihood opportunities. Development of cluster organizations through the aggregation of existing community groups and associations A-2 Business development centers at provincial/regional levels. Technical assistance on value chain development, including processing and storage, and marketing. 11. Component B: Financial Services B-1 Community Fund to support small scale rural enterprises and their access to assets B-2 Technical assistance to improve outreach of financial services to rural enterprises and provide support to potential borrowers B-3 Competitive grant facility to encourage private sector - rural enterprise partnerships 12. Component C: Project Management and Co-ordination; including a Rural Enterprise Policy Unit and an Afghanistan Enterprise Development Council 13. The program would be implemented through a phased approach working both on a bottom-up and top-down approach. From the bottom up: social mobilization, building institution of the poor, facilitating access to assets, reaching scale and fostering forward linkages with private sector and financial services will be the key sequence. Supporting the livelihood opportunities of rural women would be emphasized. From the top-down: the program would support SMEs to develop business proposals with clusters of producers, improve access to finance, and reduce the transaction costs associated to partnership with rural entrepreneurs. A flexible approach would be adopted that can adapt to the Province, the capacity of existing institutions and the enterprise/livelihood opportunities available. 14. The MoF and MRRD plan for the AREDP to be a national program, with a budget of US$ 428 million over a five year first phase. A subsequent five year phase is budgeted at US$ 422 million. However, the budget includes the provision of credit to SMEs on soft terms. This was not favored by the Bank and other donors and is not a part of this concept note. Initial finance through IDA is also likely to be substantially less than the MRRD proposal. The program will begin in a limited number of provinces, and scale out to additional provinces as finances are secured, with the goal of reaching all 34 provinces within four years. This approach would allow early results and impact on household incomes and employment to emerge and for the AREDP model to be refined. Detailed calculations will need to be carried out of the initial geographical spread of the program for the first phase using likely IDA and bilateral donor finance, and the additional funds needed and the timeline for scalingup to a national program. Preliminary calculations suggest that a four year program (excluding SME credit) would require US$ million. Complementary finance from bilateral donors (such as DFID, CIDA and the Netherlands Embassy) could increase this amount significantly. This finance would support the majority of AREDP elements (particularly group organization & mobilization; enterprise and business development support; matching grants facility for micro-enterprises and SME/producer group partnerships and; institution building). 4. Safeguard policies that might apply 15. [Guideline: Refer to section 5 of the PCN. Which safeguard policies might apply to the project and in what ways? What actions might be needed during project preparation to assess safeguard issues and prepare to mitigate them?]

4 Safeguard Policies Triggered Yes No TBD Environmental Assessment (OP/BP 4.01) There is a need to develop skill in the relevant stakeholders especially the project management team to understand and appreciate the Environmental and social Impact assessment process and relevant tools and how to design the mitigation measures. Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12) Only minor land acquisition is expected within AREDP. An Abbreviated Resettlement Framework has been developed containing procedures for restoring of housing, compensation for loss of land and livelihood of project affected families in a consultative and mutually agreeable manner, compliant with OP Safety of Dams (OP/BP 4.37) Projects on International Waterways (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60) Environmental Category: B - Partial Assessment 16. Based on the implementation experience of the first phase, the following Safeguard Policies of the Bank are expected to addressed: Environmental Assessment (OP/BP 4.01) 17. Environmental Assessment (OP/BP 4.01): There is a need for skills development for the relevant stakeholders especially the project management team to understand and appreciate the Environmental and social Impact assessment process and relevant tools and how to design the mitigation measures. 5. Tentative financing Source: USD (m) Borrower/Recipient International Development Association (IDA) 30 Total Contact point Qazi Azmat Isa Title: Senior Rural Development Specialist qisa@worldbank.org Telephone: World Bank mission - Kabul office ext.5232 Location: Kabul, Afghanistan And

5 Kevin Crockford Title: Senior Rural Development Specialist Telephone: (92) Fax: (92) Location: Islamabad, Pakistan