DPR Korea: Uplands Food Security Project (UFSP)

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1 DPR Korea: Uplands Food Security Project (UFSP) Loan Number -KP Project Id. 11 Board Date Dec 2000 Effectiveness Date April 2001 Original Closing Date Dec 2006 Final Closing Date Dec 2008 Total Project Cost USD(M) USD 1.77 million IFAD loan USD (M) USD 2. million Cofinanciers (if any) USD. million from GoNK; USD 7.18 from WFP (World Food Programme), FAO (Food and Agriculture Organisation), UNDP (UN Development Programme), CESVI (Cooperazione e Sviluppo); USD.71 million from beneficiaries Implementing Agency The project was implemented by a project management unit (PMU), which was part of the Bureau of Project Cooperation of the Ministry of Agriculture (MoA). Principal Components The project s goal was to improve living standards for 18,000 low-income households (61,000 persons) on 6 cooperative farms in upland areas by introducing balanced, sustainable and replicable cropping systems and environmental management. These systems would improve soil fertility and enable higher and more secure agricultural production. The project had seven components, which corresponded to the project s seven specific objectives. These component are: i) agriculture development; ii) environment preservation; iii) provision of household and cooperative credit; iv) potato seed development; v) community facilities and services; vi) farm output processing; vii) project implementation support. Project Performance Design Implementation Relevance UFSP design was drawn on lessons from former IFAD operations in the country, especially with regard to the credit component. However, at appraisal, the project presented some design flaws, the most important being: i) a top-down approach with a resulting insufficient involvement of national stakeholders and input from the main project's stakeholders; ii) lack of efforts to firm up partnerships with other international development partners; iii) ignoring soil ph as an important soil fertility parameter. In addition, the technical orientations of the project's main component, sustainable crop production systems, were partly inappropriate and unclear. Finally, project design did not take into account the communication difficulties between the PMU and IFAD and other international development partners. Fortunately, considerable improvements in project strategy, in particular for the crop production component, were introduced at 200 MTR, when NAAS became more involved and cooperatives were given focused training and authorised to design their own sustainable crop production rotation systems. During the first three years, project's implementation was slow for the majority of the components. Difficulties were experienced in implementing the sustainable crop rotations component, due to an overly prescriptive approach and inappropriate crop rotation plans. The lack of funding from WFP and UNDP severely constrained the project's implementation; two of the components were not implemented till During the 200 MTR, mistakes that were made at Appraisal became evident and appropriate changes were recommended and implemented with a more participatory approach with local partners. In addition, unallocated funds were reallocated to the successful household credit programme that grew from % of project costs to over 20%. As a result of MTR, loan was amended and project was extended by one year. After the supervision mission in 2007, project was extended by a further year to allow the project to benefit from technical assistance in financial management as well as bringing its financial records up to standard. With regard to the credit component, this suffered from a substantial decrease in value when the KPW devalued as part of DPRK July 2002 economic reforms. The Central Bank showed commitment in taking corrective measures to cope with this problem. A reallocation of USD 2.2 million of remaining loan funds to the household credit revolving fund was agreed one month before completion. In terms of M&E, the project management unit (PMU) was successful in conducting a household survey with repeats on the same household sample at regular intervals, and in establishing a database on the performance of the participating cooperative farms. With its design centred on increasing crop yields in a sustainable manner, UFSP responded well to the country's needs of enhancing household incomes and food security as well as of reducing over-intensive farming and environmental and soil degradation. Its strategy was supportive of Government's policy of 6

2 sustainable national food security and it was also conformed to IFAD's Country Strategic Opportunities Paper (COSOP). UFSP was relevant to poor people's needs and in terms of geographical coverage, it was implemented in areas of greater poverty compared to other parts of DPRK. Effectiveness Overall, project's effectiveness was mostly achieved. The objective of introducing improved crop rotations and farming practices was partially met, with a moderate effect on soil fertility. Potential yields are still less than half of what could be practically achieved in the medium term. The objective of greater availability to cooperative farms of disease-free quality potato seed has been fully achieved. The objective of planting fuel-wood plots was achieved, but other erosion control measures were only partly implemented. The objective of providing credit services encouraging and enabling livestock and other enterprises by cooperatives and their farmers members was fully met. The objective of developing the capacity of cooperative communities to select and undertake productive projects has been achieved. The project also succeeded in improving the processing capacity of cooperative farms. Efficiency An ERR was calculated at project completion and it amounts to % compared to the Appraisal target of 20%. However, other factors have to be taken into account to make a fair assessment of the efficiency. The procurement of farm inputs and machinery under the sustainable crop production systems component, the credit component and the potato seed supply component were implemented according to schedule. The time lag between Board approval and loan effectiveness ( months) was exemplary; however, the project required a two-year extension. However, implementation was slow during the first half of the project for all the other (sub) components. Final utilization of funds was 89% of the Appraisal targets. Efficiency was also affected due to the KPW devaluation in 2002 without adjustment of the revolving fund, which led to a loss of an estimated USD1.2 million of IFAD funds invested in the credit component. Partner Performance IFAD IFAD succeeded in designing a project that was relevant to national and IFAD strategies at the time. However, IFAD is responsible for several important projects design flaws, partly due to the lack of a participatory approach. A key problem was the very difficult communication links between the PMU and IFAD. In addition, IFAD was not able to assure continuity to the project's management, as five different country programme managers were responsible for the project. After project's approval, IFAD staff reportedly visited Ryanggang Province only twice, at MTR and during the second-last supervision mission, which was conducted by IFAD itself in July Only after that, there were attempts to correct issues of communication and financial management by using the remaining project funds and assigning technical assistance to this effect. Training in financial management was provided after project completion in July-August Cooperating Institution UNOPS made a great effort in conducting the supervision missions, considering the difficulties met to access information and visit project sites. However, until the MTR, UNOPS recommendations were sometimes inconsistent on key issues such as crop rotations, and often lacked clarity. The main causes for this were the lack of continuity of supervision team members and the insufficient time allocated to proper discussion of findings and recommendations with project partners at the end of each supervision mission. Supervision of fiduciary aspects of the project by UNOPS was also insufficient. Government The project implementing body, the MoA, as the main stakeholder, took general responsibility for project implementation and installed a PMU within itself to conduct implementation. The PMU has been staffed by competent staff whose skills have increased from the experience gained during implementation. However, it is felt that more training and technical assistance in project management and implementation could have been useful. Audit and procurement are other two areas that would require improvement. The Project Steering Committee (PSC) met regularly, about four to six times per year. It provided comprehensive policy supervision and strategic guidance to the PMU and acted as a live forum to take adequate measures to solve project implementation problems arising among stakeholder institutions on national, provincial and county level. Ministry of Lands and Environmental Protection (MoLEP) made excellent and well-managed contributions to the project in coordinating re-forestation, river management, and prevention of soil erosion and so on. This was in spite of WFP s failure to deliver the planned FFW which was to be used to support this valuable project component. The Central Bank has showed to be a reliable partner in successfully carrying out household and farm credit application, arrangement and implementation according to the requirements of the loan agreement. It showed a high level of commitment in 7

3 trying to sort out the losses caused by the devaluation. Concerning the NAAS involvement in the sustainable crop production systems component, from 200 onwards NAAS did help the project and their support has contributed to the success of this component. NGO/Other The Italian NGO CESVI was identified at Formulation as a provider of technical assistance for the implementation of crop rotations and sustainable farming. The technical support of CESVI was not always fully useful to the project. This happened mainly as the consultant had good technical knowledge, but was not familiar with DPRK conditions. CESVI left the country in 200. Cofinancier(s) WFP only provided 8.7% of the USD 6 million promised, apparently because the PMU did not file any additional requests following correct procedure and because of serious communication constraints between WFP and PMU. With regard to FAO, although the loan agreement had stated that the borrower intended to obtain a grant of US$ 61,200 from FAO, no agreement was entered into between the borrower and FAO, and no grant money was ever received. UNDP provided support for technical assistance 2 by funding study tours and consultants. However, in 200 it stopped supporting the project, as UNDP had the possibility to do it as no formal agreement had been entered into with the project. In addition, the PMU never had any direct contact with anybody from UNDP and no statement was ever received. Combined Partner Performance Project's partnerships were weakly developed during project design. The involvement of these institutions was well intentioned, but inadequately prepared and not secured by any formal agreements between the borrower and the cofinanciers. Rural Poverty Impact Physical Assets Financial Assets Food Security Environment Human Assets Social capital and empowerment Through the community facilities and services, the project funded building materials for 16 community facilities, ranging from cultural centres, kindergartens, clinics, bridges and threshing sites. In addition, through the farm output processing, rice mills, oil presses, feed crushers, noodle makers and potato starch plants were procured, totalling 102 sets of machinery. Finally, UFSP contributed also to increase farms' livestock-based capital. Household income and financial assets increased significantly over project life. In all four counties, average livestock income, farm dividends and total income increased on average by about 100 per cent or more from 2000 to Both monetary savings and debts (household credits) increased over time, more markedly for credits than for savings. Thanks to the credit services, cooperative farm households have had opportunities for income-generating livestock activities and eventually improving incomes and nutritional status. UFSP has had a notable impact on improving food security. Improved cropping systems have resulted in increased yields, thus contributing to better food security. This has impacted not only cooperative farm families, but also the country as a whole: i) for crop yields and cropping intensity, neighbouring farms adopted management practices pioneered by project farms; ii) for potato, all farms countrywide increased access to improved potato seed; and iii) increased production went into the national food distribution system. In addition, most of the farm family credit has been used to produce small livestock that was consumed by the family or sold either in the nearest farmers' market. The adoption of improved cropping rotation systems has arrested the long term decline in soil fertility. Rehabilitation and planting of,00 ha of fuel-wood plantations for 6 cooperatives has addressed the issue of the decreasing forest resource as well as provided protection against erosion. As far as protective measures (bounding, terracing, construction of storm drains) these have been carried out on a total of 1200 ha, 0% of the appraisal target. The project introduced enhanced capability at county level for more efficient planning and management of grain production. At this regard, cooperative farm officers also benefitted from training and workshops delivered by NAAS. They began to see the training as significant opportunities to further increase grain production. UFSP contributed to strengthening and improving the collective management capacity and performance of cooperative farms. In addition, they now appear to function in a democratic and relatively transparent manner. Under the project, the cooperative farms were able to determine and then implement the community facilities and services component, to realize the farm output processing component, and to administer the household and cooperative credit component efficiently in concert with the Central Bank. As far as women, UFSP strongly contributed to their empowerment through the credit component as more than 90% of credits were underwritten by women. 8

4 Ag. Productivity Agricultural productivity increased over the project s life in the 7 cooperative farms with full project support and the 9 cooperative farms with partial project support, although more markedly in the case of the former. In cooperative farms with full support, rice, potato and soybean yields increased on average by about per cent between and , and maize, wheat and barley yields by about 0 per cent. However, incremental production targets were met only for potatoes and maize. Provision of virus-free and quality seed potatoes has played a major role in enabling the increases in potato production. In addition, the cultivation of the potato crop, once restricted to northern areas, now has been cultivated in southern areas also. Institutions and Services The project supported the Daehongdan Potato Research Institute and the creation of a potato seed production system. At this regard, UFSP provided inputs and equipment to this Institute and supported renovation and equipment for four countylevel potato tissue culture factories. In addition, UFSP contributed to strengthen the shift from rigid top-down central planning to a more participatory method. Markets This impact domain is not explicitly assessed by the PCR. The farmers' markets are themselves a fairly recent development as a result of small policy relaxation by the Government towards free marketing and started after the start of UFSP. However, it seems that the provision of UFSP family credit for small livestock might have had beneficial impact for the development of farmers' markets. Rural Poverty Impact Overarching Factors Innovation The project promoted the introduction of a few important technical innovations (crop rotations, a potato seed multiplication scheme). Farm household credit is also a very important innovation, which promoted household-level animal breeding and fattening activities. Farm managers also benefitted from the introduction of innovative pest management and other techniques. Replicability and Scaling-up Improved sustainable cropping systems appear to have been introduced and disseminated by CCFMCs also to cooperative farms not covered by the project. Field trials to further improve agricultural practices, although not directly promoted by the project, are under way. However, true replication of this component is in doubt because farm managers outside the project area lack access to farm machinery and other inputs to achieve it. The final supervision mission discussed the idea of a UFSP2 which would aim at higher yields, including the use of compound fertiliser, and the creation of reflow funds for farm investment, replication and up-scaling. With regard to the credit component, given its successful results, this is now being discussed as a possible national project in its own right. The CB is a reliable partner and is keen to expand outwards from the project farms using existing reflow funds. Innovation, Replicability and Scaling-up Sustainability and Ownership Targeting Gender The widespread adoption of improved crop rotations is technically sound and likely to be continued after the project. However, the cooperative farms have not yet developed their own financing planning and in a centrally-planned economy, their complete dependency to the State's provisions of the agricultural inputs may expose themselves to high risk of shortage of fertilizers and machineries. With regard to demand for credit, this has been rising steadily and demand now exceeds credit supply. The credit scheme will continue to be operated for the benefit of farm families after project completion using the project revolving fund, the value of which stands at about USD. million following a final replenishment of USD 2.2 million of unallocated funds at the end of the project. Finally, the sustainability of the potato seed supply and continuity of the environmental preservation efforts is quite likely, as both are carried by an official government policy. The project targeted poverty firstly by selecting low income counties; secondly by identifying least advanced cooperative farms; and thirdly by targeting credit to households with a high ratio of non-working members and women headed households. Within the context of a centrally planned economy where all rural families live and work on the cooperative farms this was an effective and appropriate targeting methodology. The project did not develop a specifically gender-oriented strategy. However, through different interventions, it aimed at enhancing women's livelihoods. Under the family credit component, most loans (82%) were made to the women headed households. Priority was given to poorer households either with a high number of nonworking members or women headed households. A big share of the loans has been applied to small livestock production on private household plots and this particularly targeted the nutrition of pregnant and lactating women. In addition, women benefitted from the farm output processing component through the creation of jobs more suited to them at cooperative farm level. 9

5 Overall Performance Estimated number of beneficiaries PCR Quality Scope Quality Lessons The project area included 6 cooperative farms in four counties. Of these 6 cooperatives, 7 were involved in all components, and 9 were included only in the environment preservation and household and cooperative credit components. Overall, PCR in compliance with the guidelines. However, the content of some sections was not corresponding to the title. Some sections may have deserved more in-depth quantitative and qualitative analysis. The PCR draws a number of lessons- more details on some of them would have been more useful, but overall they are good. 10