Completion Report. Project Number: Loan Numbers: 2022 and 2023 December Cambodia: Agriculture Sector Development Program

Transcription

1 Completion Report Project Number: Loan Numbers: 2022 and 2023 December 2011 Cambodia: Agriculture Sector Development Program

2 CURRENCY EQUIVALENTS Currency Unit riel (KR) At Appraisal At Program Completion 12 May June 2010 KR1.00 = $ $ $1.00 = KR3,835 KR4,226 ABBREVIATIONS ADB Asian Development Bank AIC Agricultural Inputs Company ASDP Agriculture Sector Development Program and Project BIP business implementation procedures DFP district focal point FWUC farmers water user community ha hectare KAMFIMEX Kampuchea Fishery Import and Export Company MAFF Ministry of Agriculture, Forestry, and Fisheries MEF Ministry of Economy and Finance MOWRAM Ministry of Water Resources and Meteorology MTEF medium-term expenditure framework PCU project coordination unit PFP provincial focal point PSU program support unit SDR special drawing right SEDPII Second Socioeconomic Development Plan, SORE state-owned rubber estate TA technical assistance TIP technological implementation procedures VEW village extension worker NOTES (i) (ii) The fiscal year (FY) of the Government of Cambodia ends on 31 December. In this report, "$" refers to US dollars. Vice-President S. Groff, Operations 2 Director General K. Senga, Southeast Asia Department (SERD) Director J. Mir, Environment, Natural Resources and Agriculture Division, SERD Team leader Team members N. Ikemoto, Senior Natural Resources Specialist, SERD C. Garcia, Senior Project Officer, SERD C. Wensley, Lead Water Resources Specialist, SERD 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.

3 CONTENTS Page BASIC DATA i I. PROGRAM AND PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1 A. Relevance of Design and Formulation 1 B. Program and Project Outputs 3 C. Program and Project Costs 7 D. Disbursements 7 E. Program and Project Schedules 7 F. Implementation Arrangements 8 G. Conditions and Covenants 8 H. Related Technical Assistance 9 I. Consultant Recruitment and Procurement 9 J. Performance of Consultants, Contractors, and Suppliers 9 K. Performance of the Borrower and the Executing Agency 10 L. Performance of the Asian Development Bank 10 III. EVALUATION OF PERFORMANCE 10 A. Relevance 10 B. Effectiveness in Achieving Outcome 11 C. Efficiency in Achieving Outcome and Outputs 11 D. Preliminary Assessment of Sustainability 12 E. Impact 12 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13 A. Overall Assessment 13 B. Lessons 13 C. Recommendations 14 APPENDIXES 1. Revised Program Framework Development Policy Letter 21 3 Program and Project Outputs Yearly Disbursements by Expenditure Category Compliance with Loan Covenants Financial and Economic Analysis 46

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5 BASIC DATA A. Loan Identification 1. Country 2. Loan Numbers 3. Project Title 4. Borrower 5. Executing Agencies 6. Amount of Loan a. Program Loan b. Project Loan 7. Project Completion Report Number Cambodia 2022 and 2023 Agriculture Sector Development Program and Project Kingdom of Cambodia Ministry of Agriculture, Forestry, and Fisheries Ministry of Economy and Finance SDR million SDR3.287 million PCR:CAM 1312 B. Loan Data 1. Appraisal Date Started 28 April 2003 Date Completed 12 May Loan Negotiations Date Started 8 October 2003 Date Completed 10 October Date of Board Approval 26 November Date of Loan Agreement 10 November Date of Loan Effectiveness In Loan Agreement 9 February 2005 Actual 2 December 2004 Number of Extensions none 6. Closing Date Loan 2022 Loan 2023 In Loan Agreement 31 December June 2009 Actual 1 July June 2010 Number of Extensions Terms of Loan Interest Rate 1% per annum during the 1% per annum during the grace period and 1.5% per grace period and 1.5% per annum thereafter annum thereafter Maturity (number of years) Grace Period (number of years) Disbursements a. Dates 1. Loan 2022-CAM: Agriculture Sector Development Program Initial Disbursement Final Disbursement 23 December July 2009 Time Interval 54 months Effective Date 2 December 2004 Original Closing Date 31 December 2007 Time Interval 37 months

6 ii 2. Loan 2023-CAM: Agriculture Sector Development Project Initial Disbursement 6 July 2005 Effective Date 2 December 2004 Final Disbursement 26 January 2011 Original Closing Date 30 June 2009 Time Interval 67 months Time Interval 55 months b. Amount (million) 1. Loan 2022-CAM: Agriculture Sector Development Program Tranche No. Date Disbursed SDR $ equivalent First tranche 23 December Second tranche 01 July Total Loan 2023-CAM: Agriculture Sector Development Project Amount (SDR 000) Category Original Allocation Last Revised Allocation Amount Disbursed Undisbursed Balance 1 01 Civil Works 65,700 63,165 59,548 3, Vehicles 195, , , Equipment 339, , ,800 7, Service Contracts 86, , ,135 8, Training 1,467,300 1,086, , , Consulting Services 640, , ,711 29, Incremental Operating Costs 160, , ,463 94, Interest Charge 71,300 71,300 62,446 8, Unallocated 260, , ,335 Total 3,287,000 3,287,000 2,677, , Local Costs (Financed) - Amount $ Percent of Local Costs 92% - Percent of Total Cost 47% C. Program Data 1. Program Cost ($ million) Cost Appraisal Estimate Actual Foreign Exchange Cost Local Currency Cost 0 0 Total Cancelled on 26 January 2011.

7 iii 2. Cost Breakdown by Tranche Item Appraisal Estimate Actual First Tranche Second Tranche Total Program Schedule Item Appraisal Actual First Tranche April 2004 December 2004 Second Tranche October 2006 July 2009 D. Project Data 1. Project Cost ($ million) Cost Appraisal Estimate Actual Foreign Exchange Cost Local Currency Cost Total Financing Plan ($ million) Cost Appraisal Estimate Actual Implementation Costs Borrower Financed ADB Financed Total IDC Costs Borrower Financed ADB Financed Total ADB = Asian Development Bank, IDC = interest during construction. 3. Cost Breakdown by Project Component ($ Million) Component Appraisal Estimate Actual 1. Extension Support for Farmer Groups Support Services for Agroenterprises Institutional Strengthening Project Management Support Contingencies Interest Charge Total

8 iv 4. Project Schedule Item Appraisal Estimate Actual Date of Contract with Implementation Consultants Second Quarter (Q2) Nov 2005 Date of Contract with Service Provider Q Jan 2008 Civil Works Contract Date of Awards Q Dec 2007 Completion of Works Q Apr 2009 Equipment and Supplies Q Jan 2006 Dates First Procurement Q Dec 2005 Last Procurement Q Apr Program Performance Report Ratings Implementation Period Development Objectives Ratings Implementation Progress From 30 November 2003 to 30 April 2004 Satisfactory Satisfactory From 1 May 2004 to 30 November 2004 Satisfactory Unsatisfactory From 1 December 2004 to 30 April 2008 Satisfactory Satisfactory From 1 May 2008 to 1 July 2009 Satisfactory Partly Satisfactory 6. Project Performance Report Ratings Implementation Period Development Objectives Ratings Implementation Progress From 30 November 2003 to 30 April 2004 Satisfactory Satisfactory From 1 May 2004 to 30 November 2004 Satisfactory Unsatisfactory From 1 December 2004 to 31 January 2011 Satisfactory Satisfactory

9 v E. Data on Asian Development Bank Missions Name of Mission Date No. of Persons No. of Person- Days Specialization of Members Fact-finding 21 Nov 6 Dec a, b, m Program-specific consultation Jan a, b Appraisal 28 Apr 12 May a, b, c, d, m Program-specific consultation Aug a Program-specific consultation Jan a, c, n Inception 26 Apr 5 May a, f Special administration 1 4 Feb a Review Apr a, o Review Jan a, f Special administration May a Review 31 Jul 7 Aug a Review 8 16 Feb a, e, f, g Special administration 4 5 Apr h (second tranche conditions) Special administration Jul h (second tranche conditions) Review 3 5 Oct f, h, i, j, m, Special administration Mar h, p (second tranche conditions) Special project administration Apr h, Midterm project review Sept f, h Review (second tranche 6 7 Nov h conditions) Review (second tranche 5 13 Feb h, k, m conditions) Review 27 Apr 1 May f, h Project review 3 8 Dec h Project review 31 May 4 Jun f, h Completion review 9 20 May f,h, l, q a = economist, b = social development specialist, c = financial management specialist, d = counsel, e = principal project specialist, f = project officer, g = programs officer, h = principal water resources specialist, i = country director, j = resettlement officer, k = social sector specialist, l = natural resources specialist, m = consultant (agricultural policy specialist), n = consultant (institutional development), o = consultant (agricultural enterprise restructuring specialist), p = consultant (resettlement), q = consultant (economist)

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11 I. PROGRAM AND PROJECT DESCRIPTION 1. On 26 November 2003, the Asian Development Bank (ADB) approved two loans CAM: Agriculture Sector Development Program and 2023-CAM: Agricultural Sector Development Project, collectively known as ASDP amounting to $29.7 million ($25 million for the program loan and $4.7 million for the project loan) to the Kingdom of Cambodia. 1 The objectives of the ASDP were to promote sustainable growth of market-based agriculture in Cambodia and to boost productivity by (i) improving the ability of smallholders to raise productivity and diversify into highvalue products; (ii) improving the market environment for private agro-based enterprise growth; and (iii) strengthening institutional capacity for agricultural commercialization. The ASDP also promoted greater participation of the poor and women. 2. Within the overall framework, the program loan was to assist policy and institutional reforms to ensure a favorable environment for market-based agricultural growth. The program loan was split into two tranches. The first tranche of $15 million was to be released after the Government of Cambodia met the first 10 of 24 conditions, and the second tranche of $10 million was to be released after meeting the remaining 14 conditions. These conditions required specific actions in three broad policy areas: (i) the provision of better access to productive land, water, better seeds, and other quality agricultural inputs; (ii) improvement in the efficiency of rubber production and elimination of direct state intervention in the agricultural input and output markets; and (iii) assistance to agricultural commercialization by rationalizing agricultural institutions and improving local access to effective research and extension services. Appendix 1 includes a list of the conditions that the government needed to fulfill for the release of the program loan tranches. 3. The project loan was for a pilot project to provide farmers with effective agricultural support services to increase agricultural productivity and promote diversification. 4. Associated advisory technical assistance (TA) was to support the government in policy and institutional reforms of the agriculture sector. 2 It was to cover three main areas: (i) strengthening the capacity of the Ministry of Agriculture, Forestry, and Fisheries (MAFF) for agricultural policy planning, program budgeting, and marketing services; (ii) further divesting state-owned enterprises in the agriculture sector; and (iii) developing national agricultural research and extension systems. II. EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation 5. In 2003, agriculture accounted for 34% of Cambodia s gross domestic product and employed about 65% of its total workforce. Despite its importance and potential, however, the agriculture sector had sluggish and widely fluctuating growth in the 1990s because of its heavy dependence on rain-fed rice cultivation. Of the total cropped area of about 2.6 million hectares (ha), 90% (2.3 million ha) accounted for rice in Of this, only 16% was irrigated. The average rice yield was about 2.1 tons per ha in 2001, the lowest in Southeast Asia. During the First Socioeconomic Development Plan, , agriculture grew on average by less than 3.0% per annum (with high variability), far below the plan target of 5.2% per annum, and had no substantial impact on poverty reduction in rural areas. 1 ADB Report and Recommendation of the President to the Board of Directors: Proposed Loans and Technical Assistance Grant to the Kingdom of Cambodia for the Agriculture Sector Development Program. Manila 2 ADB Technical Assistance to the Kingdom of Cambodia for Supporting Policy and Institutional Reforms in the Agriculture Sector. Manila (TA 4228-CAM).

12 2 6. With assistance from ADB, the government implemented in the first Agriculture Sector Program, 3 including reforms to land legislation, agricultural inputs, rural infrastructure, rural finance, public enterprises, and decentralization. Although that program was generally successful, the government recognized that the reforms introduced had to be intensified to speed up growth in agriculture. Under the Second Socioeconomic Development Plan, (SEDPII), the government intended to transform agriculture into a driving force for stronger economic growth and poverty reduction within a market-oriented policy framework by promoting agricultural commercialization and diversification. In line with SEDPII and with support from ADB, the government wished to continue its policy and institutional reforms and expand opportunities in the sector by solving performance-stifling issues such as (i) regulatory weaknesses that limited access to productive resources and better agricultural inputs, (ii) uncertainty in the market environment for private, agro-based enterprises, (iii) lack of resources for effective agricultural research and extension services to promote commercialized agriculture, and (iv) weak capacity and resources at agricultural institutions. 7. When the ASDP was formulated, ADB s strategy for Cambodia was to promote rural economic development and thereby help reduce poverty. The strategy for agriculture was to help achieve SEDPII s objectives by increasing agricultural productivity. Greater private participation in agriculture was planned, as was increased awareness and knowledge among the rural poor, women, and vulnerable groups to enable them to participate in agricultural development and have better access to productive opportunities. The ASDP was deemed an indispensable part of achieving these ADB strategies. Complementarity and synergy with other projects and programs of ADB and other external funding agencies were fully considered during ASDP loan processing. 8. Since the ASDP was approved in 2003, agriculture has continued to be a key contributor to the economy and remains an important source of rural employment. The government s 2004 Rectangular Strategy for Growth, Employment, Equity and Efficiency 4 and its National Strategic Development Plan, (and the updated plan for ) highlight the role of agriculture as a vehicle for macroeconomic and rural development in Cambodia. In 2007, MAFF and the Ministry of Water Resources and Meteorology (MOWRAM) also adopted the Strategy for Agriculture and Water, These are now the government s overarching frameworks for the harmonization of development partners efforts in agriculture and rural development. 5 The overall goal of the agriculture and water strategy is to contribute to poverty reduction, food security, and economic growth. In June 2005, the government had also released its Strategic Framework for Decentralization and Deconcentration Reforms. The ASDP's utilization of MAFF resources in the provinces and districts, as well as nationally, to achieve its objectives was consistent with this strategic framework. 9. ADB s agriculture, environment, and natural resource program in its Country Partnership Strategy for Cambodia focuses on four areas: (i) support sustainable natural resource use and management; (ii) stimulate the growth of competitive farms and rural enterprises, and create significant job opportunities; (iii) build sustainable rural infrastructure, including irrigation, to promote productivity increases, market connectivity, and competitiveness; and (iv) improve food 3 ADB Report and Recommendation of the President to the Board of Directors on a Proposed Loan and Technical Assistance to the Kingdom of Cambodia for the Agriculture Sector Program. Manila (Loan 1445-CAM[SF]). The loan was closed on 5 September The program completion report (ADB Program Completion Report on the Agriculture Sector Program in Cambodia. Manila) was circulated to the ADB Board in December 2001, while the program performance audit report (ADB Program Performance Audit Report on the Agriculture Sector Program in Cambodia. Manila) was circulated in July Prime Minister, Royal Government of Cambodia. July The Rectangular Strategy for Growth, Employment, Equity and Efficiency in Cambodia. Phnom Penh. First launched in 2004, the strategy was updated in 2008 Prime Minister, Royal Government of Cambodia. September The Rectangular Strategy for Growth, Employment, Equity and Efficiency in Cambodia Phase II. Phnom Penh. 5 MAFF and MOWRAM approved the final agenda for in April 2010.

13 3 security and climate resilience in agricultural production. The interventions will support the government's 2010 Rice Production and Export Policy. The second and fourth of these areas were targeted in the ASDP. ADB s future assistance program emphasizes strong alignment with government strategies and initiatives: (i) sustainable natural resource development, management, and conservation; (ii) food security, greater agricultural productivity, diversification, and commercialization; and (iii) rural infrastructure. Again these objectives were present in the ASDP. B. Program and Project Outputs 1. The Program Loan 10. The program loan financed the policy reforms in two tranches over 3 years, from January 2004 to December The policy initiatives for the program loan are described in the policy matrix of the report and recommendation of the President (footnote 1) and in the development policy letter (Appendix 2 of this report). More details on the program and project outputs are in Appendix 3. a. Improving Farmers Ability to Raise Productivity and Diversify 11. Providing better access to productive land. The revised Land Law had been formulated with assistance from ADB and passed in August 2001, but the government required additional support to implement it to ensure that the Cambodian people could benefit from access to available land and secure individual land rights. The ASDP provided such support, resulting in (i) approval of a subdecree in 2003 that stated the procedures for the distribution of unused state land to eligible poor households for productive purposes, (ii) approval of a subdecree in 2005 to reduce unused or excessive economic land concessions according to the Land Law of 2001, and (iii) issue by MAFF of a manual on extension services for social land concessions in Improving the legal and policy framework for better access to irrigation water. During the ASDP, MOWRAM completed the formation of farmers' water user communities (FWUCs), involving 29,300 farmers across 13 pilot areas in 11 provinces (Banteay Meanchey, Battambang, Kampong Cham, Kampong Chhnang, Kampong Speu, Kandal, Prey Veng, Pursat, Siem Reap, Svay Rieng, and Takeo). This legal and administrative framework, once in place, was to improve water resource planning and management, water being a key input for agricultural production. 13. Establishing the legal and institutional framework for better access to better seeds. In 2003, despite growth in the production of higher-value crops, farmers still had limited access to better seeds. The Law on Managing Seed and Hybrid Plant Authorization 6 was submitted to the National Assembly in February 2008, during the ASDP, and approved on 8 April 2008 as the legal and institutional framework to increase the delivery of certified-quality seeds to farmers. 14. Improving regulation to ensure the quality of agrochemicals traded in the market. The government wanted to improve the regulatory system to ensure the quality of agrochemicals traded in the market by training provincial staff and private traders, and strengthening the quality inspection system in the country. Under the ASDP, MAFF s Bureau of Agricultural Materials prepared a study on the agrochemical inspection system, approved in December 2006, to strengthen the inspection and control of agrochemicals. A government circular was approved in January 2007 to establish and implement measures to improve coordination between key government agencies in monitoring and controlling agricultural materials, and to strengthen the inspection system. The bureau also developed a database of agrochemicals traded in Cambodia, including the trade names, active product names, manufacturing companies, countries of origin, and provinces and districts where inspectors found the materials for sale, etc. To raise awareness nationwide, the bureau produced the first set of media packages in December Law on Managing Seed and Hybrid Plant Authorization (unofficial translation) (Law No. 04 Sor Chhor Nor Kor Bor Chor).

14 4 b. Improving the Market Environment for Private Agroenterprise Growth 15. Completing the divestment of the state-owned rubber estates. Over the 12 years before the ASDP, the government had sought to modernize Cambodia s rubber industry dominated by state-owned rubber estates (SOREs) to improve the market environment for private, agro-based enterprise growth and to promote private investment in agriculture. A key condition of the ASDP was the divestment of the seven SOREs (condition 5). Despite initial delays in the valuation of the estates and the acceptance of the auditors reports, the divestment started in earnest in May The government considered various options such as joint ventures, but eventually sold all estates to the private sector. All seven were offered for sale through international bidding managed by the National Development Committee, and were sold to domestic investors between 28 September 2007 and 12 February Some delays were encountered a decision was made to re-bid one estate (Chamkar Andong), and government elections in mid-2008 led to the deferral of key decisions on the divestment of the final three estates until the new government took office. 16. The government paid compensation to laid-off SORE workers from the proceeds of the sales, and prepared resettlement plans to provide compensation to affected persons according to the resettlement framework agreed on under the ASDP. An external monitor has been appointed to monitor the progress of the divestment, and to report regularly on the resettlement activities to the National Development Committee and ADB. As the resettlement plans are still being implemented, the external monitor s contract is being renewed for up to 18 months. 17. Keeping the state out of the agricultural input and output markets. Although the government had, before the ASDP, begun divesting the state-owned enterprises in agriculture by making them financially autonomous, two enterprises Agricultural Inputs Company (AIC) and Kampuchea Fishery Import and Export Company (KAMFIMEX) could not adapt to the market conditions, generating uncertainty in the agricultural input and output markets, and requiring the use of scarce public resources for redundant activities. These two enterprises could not be sold and were eventually liquidated KAMFIMEX through a subdecree that took effect on 1 August 2007 and AIC through a subdecree that took effect on 2 January All former staff of the two enterprises were laid off and compensated, or retained by MAFF or the Fisheries Administration. c. Strengthening Capacity for Competitive Agricultural Commercialization 18. Rationalizing the roles and responsibilities of ministry departments. The government saw the need to strengthen the departmental functions of MAFF by rationalizing the roles and responsibilities and the organizational setup of the departments, particularly in agricultural policy planning, monitoring, and market information services. MAFF issued a ministerial declaration (prakas) on 8 January 2008, which created the new planning and budget formulation unit in the general directorate of administration, even as it considered further restructuring. In June 2007, MAFF also finished drafting a human resource development strategy under TA 4228-CAM. 19. Formulating an operating strategy for gender mainstreaming. The government recognized that gender issues had to be incorporated into the agriculture mainstream to give women a greater role in increasing agricultural productivity and to make agricultural support services more effective. MAFF, which had started to promote gender mainstreaming in collaboration with the Ministry of Women s and Veterans Affairs, sought support under the ASDP to establish a sector-wide gender policy and strategy with specific action plans (condition 13). 7 The estates were transferred as follows: (i) contracts were signed for Boueng Ket (on 12 December 2007, taking effect on 10 January 2008), Memot (on 21 March 2008), Chamkar Andong (on 3 April 2008), and Snoul (on 10 June 2008); and (ii) ownership was transferred for Peam Chhiang (on 22 September 2008), Krek (on 23 September 2008), and Chup (on 12 February 2009).

15 5 MAFF then drafted a policy and strategy document, which was approved on 28 March Implementation took place with funding support from ADB 8 and was completed on 31 March Improving agricultural market information services. Under the ASDP, MAFF wanted to strengthen the capacity of its agricultural marketing office for market analysis, surveys, and data and information management. To do this, MAFF agreed to implement an effective strategy for its agricultural market information services (condition 11), improving the system through consistent and uniform data collection, management and dissemination, and staff capacity training. A strategy document was approved by MAFF on 26 September 2006, and is being implemented partly with support from the Government of Canada Ensuring proper coordination of national agricultural research activities. The government also hoped to strengthen the coordination of national agricultural research, with the help of a master plan to be drafted and initially implemented during the ASDP. The master plan that was first drafted under ADB TA 4228-CAM (footnote 2) was further developed under TA 4310-CAM 10 and approved by MAFF on 22 May Funds have yet to be released by the government to allow the full master plan to be implemented. However, the Cambodia Agricultural Research and Development Institute and other agencies are implementing research projects in the priority areas specified in the master plan. 22. Improving quality and coverage of public agricultural extension services. Given the limited coverage of extension services offered by private and civil society organizations, MAFF has made substantial efforts over the years to strengthen and expand public agricultural extension services, necessitating higher budgetary allocations in the medium-term expenditure framework. The government allocated more budgetary resources for this purpose before the release of the ASDP's first tranche. MAFF s working group at the Agricultural Extension Education Office proposed a better framework for the preparation of broadcasting programs through institutional changes and revisions in extension materials. MAFF approved the working group report on 22 February 2007, and its recommendations were implemented. Radio and television programs are broadcast weekly to disseminate information to farmers, and to incorporate the materials into training courses. 2. The Project Loan a. Extension Support for Farmer Groups 23. A total of 2,236 farmer groups were formed in 20 districts of the four project provinces Kampong Cham, Kampong Speu, Kampot, and Takeo to receive extension training under the project. The training was based on delivery of technological implementation procedures (TIPs) developed under the Australian CAAEP program. 11 The subjects included production technologies for rice (including integrated pest management, strategic rice improvement, and soil management), upland and fruit crops (including watermelon, taro, and coconut), vegetable and mushrooms, livestock (including pigs, cattle, poultry, and feed production), and fish and integrated farm systems, and involved group demonstrations and farm visits. A total of 3, extension programs were delivered to 74,739 participants through provincial focal points (PFPs) within the provincial departments of agriculture. 8 ADB Technical Assistance to the Kingdom of Cambodia for the Implementation of the Action Plan for Gender Mainstreaming in the Agriculture Sector. Manila (TA 4459-CAM, approved on 2 December, for $300,000). 9 Canadian International Development Agency Cambodia Agricultural Market Information Project Phnom Penh. 10 ADB Technical Assistance to the Kingdom of Cambodia for Formulating a Master Plan for National Agriculture Research. Manila (TA 4310-CAM, approved on 22 December, for $300,000). 11 Cambodia Australia Agricultural Extension Project (CAAEP), Phase II, implemented from 2001 to Includes programs delivered to village extension workers (VEWs) or agents. Female membership is almost 45%.

16 6 24. The activities were generally well received and adopted by the target farmers, and new and updated technologies have been introduced continuously. The level of knowledge about TIPs and the uptake of the technologies beyond the project's target beneficiaries were assessed from diffusion surveys. These indicated significant uptake and diffusion of the technologies, and highlighted the success of the extension program, both within the target groups and among nontarget farmers in the project districts and provinces. The project also developed several business implementation procedures (BIPs) to complement the TIPs. The new practices and technologies introduced by the project were also shared with other projects as a result of cross-visits between staff and farmers from these other projects. Under TA 7305-CAM, 13 for example, farmers trained under the ASDP were utilized to improve the design of field demonstration programs for delivery to farmers in the western side of Kampong Cham (not covered by the ASDP) and in Kampong Thom, Siem Reap, and Banteay, which also were not covered by the ASDP. b. Support Services for Agroenterprises 25. This component was designed to introduce and provide business information and services to 4,400 agroenterprises through training, counseling, advisory support, and export promotion. In the event, the two consulting firms engaged to deliver the services managed to find only a few agroenterprises for development expectations for this component were perhaps ahead of their time (para. 45). To correct the situation, late in the project (from 2008), farmers who had received TIP and BIP training under component 1 of the project were targeted for agroenterprise business development training to encourage them to move from farm production into input supply, or marketing and processing of farm inputs. In total, 589 agroenterprises received assistance; of these, 180 (31%) involved women and 172 (29%) involved TIP and/or BIP farmers. c. Institutional Strengthening for Agricultural Commercialization 26. At the outset of the project, it was recognized that public institutions to promote marketing and export of agro-based products were weak and unable to effectively further trade and services in the private sector. To remedy these issues, the component aimed to provide training programs, seminars, equipment, and office facilities to agricultural institutions within MAFF. As with the second component, identification of needs was weak due to poor consultant performance. Training was eventually given to 26 staff (including 7 women) from four MAFF departments (planning and statistics, international cooperation, agro-industry, and agriculture legislation), as well as staff from the project coordination unit (PCU) and participants from the four project provinces. To maximize the impact, this training was later repeated and provided to provincial MAFF staff. In addition, computers and other office equipment were procured and delivered to MAFF and provincial and district implementaton units. d. Project Management Support 27. Under this component, support for project management was provided nationally and in the provinces and districts. The PCU was established for national coordination, and provincial and district focal points (PFPs and DFPs) were created to implement the project as detailed in the project administration memorandum. The project coordination units were provided with service vehicles, communications equipment, and incremental staff. A team of international and domestic consultants supported project management, and three domestic consulting firms were engaged to provide specialist services under components 2 and Tonle Sap Technology Demonstration for Productivity Enhancement, funded by ADB (TA 7305); Rural Livelihood Improvement Project in Kratie, Preh Vihear, and Ratanakiri, financed by the International Fund for Agricultural Development; and Economic and Social Relaunch of the Northwest Provinces, funded by the European Union.

17 7 28. The PCU, PFPs, and DFPs were fully established and equipped, and renovation of provincial and district offices was completed. Project staff numbers reached staff nationally; 40 staff in the provinces (in 4 PFPs); and 108 staff in the districts (in 18 DFPs). Of the 160 project staff, 28 staff were women. 29. There were two significant deviations in the implementation of the project. First, a decision was taken during the July August 2006 review mission to reduce the number of project districts from 28 to 18. This was due to the late start-up of the project and the additional costs of conducting the extension-training program over such a wide area. However, the targets for farmer groups and farmer training were still met. Second, the introduction late in the implementation process of business content to farming training (i.e., the BIPs) to supplement the production technology content (i.e., TIPs) was in part to redress the shortcomings encountered in component 2 of the project (development of agroenterprises). Both changes were reasonable. C. Program and Project Costs 30. ADB provided a program loan of $25.0 million equivalent denominated in special drawing rights (SDRs), and these funds were allocated through the Ministry of Economy and Finance (MEF). Actual disbursements totaled $26.9 million equivalent in two tranches $15.0 million and $11.9 million. The total disbursement in dollar terms was higher than the appraised amount due to appreciation of the SDR against the dollar over the program period. 31. The total cost of the investment project, including taxes, duties, and interest charges, was estimated at $5.8 million $1.7 million in foreign exchange costs and $4.1 million equivalent in local currency costs. The actual cost of the project was $4.2 million $2.0 million in foreign exchange costs and $2.2 million in local currency costs. ADB financed $4.1 million, including interest charges, and the government financed $0.1 million equivalent. A comparison of actual and estimated costs per project component is in the Basic Data. It shows that the actual cost of component 1 (Extension Support for Farmer Groups) was lower by $2.1 million. A significant reason for the apparent underspending was the decision to include incremental MAFF staff costs in component 4 (Project Management Support), which increased the costs for this component by $1.2 million over the appraisal estimate. D. Disbursements 32. The loans were approved on 26 November 2003 and became effective on 2 December The loans were disbursed in accordance with ADB guidelines. The first tranche of the program loan ($15.0 million) was disbursed on 23 December The second tranche of $11.9 million was released on 1 July At loan closing, disbursements under the project loan were $4.1 million. Disbursements were low during the first 3 years of implementation, but picked up in 2008 and The government disbursed $0.117 million for local currency costs; its contribution was minimal compared with appraisal estimates since taxes were not imposed on vehicles, equipment, and service providers. Further, the loan financed 100% of the incremental operating expenses, compared with 30% in the detailed cost estimates. An imprest account for the ADB loan was established, efficiently utilized, and effective in advancing project implementation. The reduction in the number of districts to be covered by the project and fewer activities under components 2 and 3 resulted in loan savings of $0.946 million equivalent, which were cancelled at loan closing on 26 January Appendix 4 details the yearly disbursements by expenditure category. E. Program and Project Schedules 34. Program schedule. The original program schedule was for 3 years from January 2004 to December 2006, with a loan closing date of June 2007 (footnote 1). However, after delays in loan signing, a program schedule of 2.5 years from December 2004 to June 2007 was agreed. Loan

18 8 effectiveness was declared on 2 December 2004 and the first tranche was released on 23 December After the general election of July 2003, the new government took more than 1 year to assume office, which delayed decisions relating to the first-tranche conditions. The first tranche of $15 million equivalent was to be available for release upon loan effectiveness, subject to full compliance with first-tranche conditions. The second tranche of $10 million equivalent was to be released approximately 30 months later after due compliance with second-tranche conditions. 35. On 19 June 2007, ADB approved the government s request to extend the program closing date from 30 June 2007 to 31 December 2007 to give it time to comply with the conditions for the release of the second tranche. A second extension was approved on 25 January 2008, because the government had yet to finalize the documentation for two tranche conditions (seed law and master plan for agricultural research) and make progress on the two outstanding conditions relating to the divestment of seven SOREs, AIC, and KAMFIMEX. On 27 June 2008, a third request for extension was approved to allow more time for the divestment of the four remaining SOREs and for compliance with the social safeguard conditions relating to the compensation and resettlement of affected persons. A fourth extension (to 31 March 2009) was approved on 24 December 2008 and a fifth extension (to 30 June 2009) on 7 April 2009 to enable the government to complete the divestment of the final SORE, submit the resettlement plans, and appoint the external monitor for resettlement. 36. Project schedule. The project implementation period was originally to be for 5 years from January 2004 to December However, the project implementation consultants were not engaged until November 2005 and the project was not completed until June 2010, suffering delays through most of its implementation (paras. 47 and 48). Thus, at the midterm review in September 2008, a 12-month project loan closing extension (from December 2009 to December 2010) was sought, which ADB approved in April F. Implementation Arrangements 37. Program implementation. As envisaged at appraisal, MAFF and MEF were the executing agencies for the program loan. MAFF was responsible for overall implementation through an interministerial program secretariat, which included the Council for Agricultural and Rural Development, the Council for Land Policy, MOWRAM, and the ministries of land management, urban planning, and construction; rural development; commerce; interior; and women s and veterans affairs. A program support unit (PSU) was to streamline implementation and inter-agency coordination, assisted by international and national consultants financed under TA 4228-CAM (para. 41). 38. Project implementation. MAFF was responsible for overall implementation and established a PCU in its program secretariat before loan effectiveness. MEF monitored the use of loan proceeds and provided the government s share of project costs, and the Seila Task Force 15 oversaw the decentralization aspects of the project. The project components were implemented nationally by the PCU, assisted by implementation consultants, while the PFPs were responsible for day-to-day implementation and inter-agency coordination in the provinces, and the DFPs for most of the component 1 activities, including farmer group formation and extension training. G. Conditions and Covenants 39. Twenty-four policy measures were included in the policy matrix attached to the development policy letter under the program loan (the letter is in Appendix 2) and after some delays these were complied with (para. 35). Release of the first tranche of the loan was expected in April 2004 after completion of the external auditing of SOREs. However, formation of the new 14 ADB Loan 2022/2023-CAM (SF): Agriculture Sector Development Program. Progress Report on the Release of the First Tranche. Manila (8 December). 15 The Seila Task Force is a national inter-ministerial group mandated to develop a harmonized framework for the management and execution of external support to both governance reforms and local development.

19 9 government was delayed for more than 1 year after the general election in July 2003, causing a long delay in loan signing and resulting in an unsatisfactory rating from May to November Similarly, the project covenants were generally complied with except for the provision of functional literacy programs to women farmers. Due to low demand based on a rapid survey conducted by the provincial focal points, a literacy program was not carried out. Compliance with the loan covenants are detailed in Appendix 5. H. Related Technical Assistance 41. The associated TA (footnote 2) was to provide technical and advisory support to the government in three main areas: (i) strengthening of MAFF's institutional capacity for agricultural policy planning, program budgeting, and marketing services; (ii) further divestment of state-owned enterprises in the agriculture sector; and (iii) development of national agricultural research and extension systems. The TA was well formulated and its implementation arrangements were flexible enough to accommodate several adjustments necessary to support the ASDP. The TA is assessed as successful overall. 42. The TA started in July Consultants were progressively mobilized in the course of the TA, totaling 29 person-months of international and 28 person-months of national input in agricultural policy planning, corporate management, public expenditure management, agricultural research, social and gender analysis, and law. TA outputs consisted of consultant reports, workinggroup budgets, and 5-year work plans (which were then reduced to 3-year and 1-year plans), strategy papers, and milestone documents and TA deliverables (e.g., quarterly reports). The TA adopted a multi-stakeholder approach by engaging counterpart departments and administrative units identified for each component of the terms of reference. Two international consultants and one national consultant were hired directly by ADB for supplementary inputs to help the government achieve three of the second-tranche conditions. The TA is considered to have achieved its expected outcomes, although somewhat later than envisaged. The TA consultants performance was generally satisfactory. I. Consultant Recruitment and Procurement 43. The project financed a team of implementation consultants, whose recruitment was delayed due to the executing agency s unfamiliarity with ADB procedures. It took about 12 months after the loan became effective before the consultants were mobilized in December A total of 275 person-months (pm) of consultancy services was allocated at appraisal but was reduced to 219 pm during negotiations. Actual utilization was 232 pm resulting in slightly lower cost than the budget at appraisal. Given the delays in project implementation and the 1-year extension of the loan closing date, ADB in September 2009 approved the extension of the consulting contract by 1 year to continue management support to the PCU and to help the government finalize its project completion report. 44. Small works such as the construction and/or refurbishment of offices were procured through national competitive bidding, while international competitive bidding was used for larger packages such as vehicles, although they were delivered through local (Phnom Penh) companies. J. Performance of Consultants, Contractors, and Suppliers 45. There were several changes in the composition of the implementation consulting team over the project's life. The replacements were generally of a suitable caliber, but there were delays in finding a replacement provincial extension specialist in Kampong Cham during The contract variation for extending the implementation consultants input was a good compromise in that it ensured adequate levels of support, yet did not require any additional funds other than those allocated in the loan budget for consulting services.

20 The two local consulting firms eventually recruited to manage the agroenterprise resource centers and their activities under component 2 of the project performed unsatisfactorily. They focused on providing training and establishing databases rather than on business development. Component 3 (institutional strengthening for agricultural commercialization) required the engagement of local consultants to assess training needs and design an appropriate training program. The work of these consultants was also unsatisfactory and it was left to the senior members of the implementation consulting team to develop a suitable training program, using MAFF's staff resources to deliver it. Finally, a local firm of consultants was engaged to undertake an end-of-project benefits impact survey. The resultant report is considered satisfactory The performance of contractors for office construction and/or renovation and of suppliers of vehicles and equipment was satisfactory. K. Performance of the Borrower and the Executing Agency 48. The government s commitment to the reform agenda under the program was uneven. Progress in policy and institutional reforms within MAFF was slow until the PSU established individual working groups in October 2005, which then had the responsibility of meeting secondtranche loan conditions. 17 Despite their late establishment, these working groups assured timely preparation of outputs and put the project back on track toward achieving its goals, although additional consultant inputs were required to help MAFF prepare and implement the reforms. 49. Under the project loan, the government was slow to complete negotiations with the implementation consultants, and further delays to the project were caused by slow appointment of staff to the PFPs and DFPs. In part, this was due to the wait for confirmation of the selection of target districts, and to the slow flow of funds from the PCU to the provinces, which was caused by errors in the provinces' disbursement reports. However, as the project proceeded, measures were taken to rectify these problems, and the PCU and other MAFF staff deployed nationally, in the provinces, and districts significantly contributed to the achievement of most project objectives and targets. The performance of the borrower and the EA is considered as satisfactory. L. Performance of the Asian Development Bank 50. The second-tranche release conditions were very specific and could be used by ADB to monitor the government s progress in meeting the objectives and scope of the program loan. ADB fielded 17 missions, including an inception mission during program implementation. Overall, ADB s performance in supervising the implementation of the program was highly satisfactory. 51. As for the project, the midterm review came late (October 2008) and until June 2009, ADB s project-related missions were in conjunction with program missions, leaving limited time to review the project. Overall ADB s performance in supervising project implementation was satisfactory. III. EVALUATION OF PERFORMANCE A. Relevance 52. Both elements of the ASDP were highly relevant to the government's and ADB's stated objectives of promoting growth and diversity of market-based agriculture, improving agricultural productivity and alleviating poverty by increasing the participation of the poor in agricultural production and post-production marketing and processing. No significant changes were made to the scope of activities proposed under the program loan and the project, but each remained relevant during their implementation. 16 Greengoal. June End-of-Project Socio-Economic Survey. Project Loan No CAM (SF) Agriculture Sector Development Project (ASDP). Phnom Penh. 17 With the exception of divesting the SOREs; this was under the jurisdiction of the National Divestment Committee and supported separately by the TA.

21 11 B. Effectiveness in Achieving Outcome 53. The program has been effective in attaining the objectives of (i) improving farmers ability to raise productivity and diversify into higher-value products by giving them better access to productive land, irrigation water, and higher-quality seeds and agrochemicals; (ii) improving the market environment for private agro-based enterprise growth by assisting government to complete the divestment of the SOREs and the liquidation of AIC and KAMFIMEX; and (iii) strengthening institutional capacity for competitive agricultural commercialization through rationalizing the roles and responsibilities of MAFF departments, helping the government formulate an operating strategy for gender mainstreaming in agriculture, and improving MAFF's agricultural market information services, coordination of national agricultural research activities, and the quality and coverage of agricultural extension services. Details of the specific activities are in Appendix 3 and in the program framework in Appendix 1. The program loan has financed broad policy measures, but they require implementation of downstream activities for benefits to flow through to farmers. Nonetheless, the specific conditions for the release of the two program loan tranches were met. 54. The project has been effective in achieving its objectives, especially in relation to providing extension support under component 1. A total of 52,176 farm households have received one or more training sessions (as compared with 56, targeted at appraisal) in 18 districts in the four project provinces. The latest adoption surveys indicate that the most commonly used technologies concerned paddy (83%), chicken raising (76%) and vegetable production (65%). To assess the level of knowledge about TIPs and the uptake of TIP technology beyond the project beneficiaries, diffusion surveys among non-target farmers were conducted in the project provinces. The latest diffusion survey records that 54% of these farmers are using the new technologies, and this can in part be attributed to the project. The effectiveness of component 2 (support services for agrobased enterprises, was more limited. Whereas the project aimed to support 4,400 enterprises, 19 only 479 enterprises were given assistance. 20 Financial analysis (Appendix 6) indicates that the project has increased average farm family incomes 21 from $399 per annum to $562 per annum an increase of $163 per annum or 41%. C. Efficiency in Achieving Outcome and Outputs 55. The activities under the program loan, although covered by very specific tranche conditions, were at the policy level and therefore it is not possible to calculate financial or economic rates of return on the expenditures incurred in each activity. However, the mix of interventions under the program loan does, and will continue to, provide the opportunity for more agricultural production and productivity. The costs of implementing the various measures under the program loan were assessed at appraisal to total $25 million. No specific recording of the costs has been made because of the diversity of reforms undertaken and the ongoing nature of most of the activities. However, with the exception of resettlement costs incurred as a consequence of the divestment of the SOREs, the implementation costs incurred under the program loan are likely to have been more or less as anticipated. Considering the wide-ranging agricultural benefits likely to flow from the measures taken to meet the tranche conditions under the program loan, it is assessed that overall, the expenditure required was an efficient use of the government s resources. 18 Based on 280 communes, with 10 groups per commune and 20 farmers per group. 19 It is not clear how this target was set or the enterprises were defined in the report and recommendation of the President. In any case, it greatly overstated the number of existing agroenterprises, unless at the time of project design it was assumed that a farmer with any commercial focus could be considered an agroenterprise. Toward the end of the project such farmers were included for training under component Component 2 suffered because of the limited number and capability of local consultants who bid for the work under this component. A better approach may have been to include funding for upskilling provincial and district agricultural extension staff to carry out the training of agroenterprises. This might also have provided a greater chance of such work continuing beyond project completion. 21 Excluding any off-farm income earned.

22 The project is assessed as efficient. The economic internal rate of return for the project has been re-estimated at 60% (Appendix 6). This compares with an appraisal estimate of 39%. The higher rate of return reflects the lower overall project cost (Basic Data, Project Costs, Item C) and the inclusion of estimated benefits from livestock production and fish farming, which were not included in the economic analysis at appraisal. The economic net present value for the project at a 12% discount rate is $15.7 million. The results of sensitivity testing indicate that the economic viability of the project remains robust across a range of changes in assumption. MAFF s decentralized approach to training delivery was efficient given the wide dispersal of targeted farmer beneficiaries. D. Preliminary Assessment of Sustainability 57. While agricultural commercialization in Cambodia continues to face constraints and restrict the sector s performance, the measures taken under the program loan will be supplemented by ongoing policy and institutional reforms. The measures are therefore assessed as sustainable. 58. For the project, initial indications are that the initiatives introduced will by and large be sustainable. The formation of farmer groups and their training has led to the adoption of better farming practices and diversification into new areas of agricultural activity. There is also evidence of significant diffusion of such advances beyond the farmer households targeted under the project. 22 Many of the direct beneficiaries have become informal village extension workers (VEWs) and this will help overcome the limited outreach of MAFF's extension workforce now that project funding is no longer available to supplement the normal budget allocation. The VEW model piloted under the project appears to have been particularly successful and led to private extension services. 23 There also has been sharing of the new farming practices and technologies with farmers under other projects and in districts and provinces not covered directly by the project. The agroenterprise resource centers are now in hibernation under the provincial departments of agriculture and seem unlikely to be reactivated given the current funding constraints. However, this was a relatively small element of the overall project. E. Impact 59. Because the ASDP is only one of several interventions that have been implemented in Cambodia, it is not possible to attribute improvements in Cambodia s agriculture sector to the ASDP alone. However, the improvements that did occur in the sector are consistent with the objectives and scope of the ASDP. Between 2006 and 2010, (i) agricultural sector output grew by 29%, at an average rate of 5.2% per annum; (ii) paddy yield has increased from 2.1 tons per ha to 3.0 tons per ha; (iii) the cultivated area of paddy has increased by 10% and paddy production by 31%; and (iv) cultivated areas of crops other than paddy have increased considerably e.g., maize by 96%, cassava by 106%, vegetables by 22%, and soybeans by 38% Several measures implemented directly or indirectly under the program loan have had and will continue to have an impact on the poor. In 2003, about 90% of Cambodia s poor lived in rural areas, and the agriculture sector employed about 65% of the total workforce. Therefore, measures to boost the sector s performance have alleviated poverty and will continue to do so. The poverty rate in Cambodia is estimated to have fallen from 47% in 1994 to 35% in 2004 and 30% in 2007 i.e., the poverty rate is declining at more than 1% per annum (footnote 25). The ASDP's positive impacts on poverty reduction arose from the measures related to the distribution of unused state land and excessive economic land concessions to eligible poor households. Also, in connection 22 This was possible because the project targeted 50% poor and 50% non-poor. Targeting of 100% poor would make this sort of diffusion less likely because the poor do not have access to cash and other resources. 23 MAFF s policy is to have a VEW for each village, trained in both basic extension service skills and specialist skills covering selected high-priority crops for processing and export. 24 MAFF. April Annual Report for Agriculture, Forestry and Fisheries Phnom Penh.

23 13 with the divestment of the SOREs, the payment of compensation to laid-off workers and the preparation of resettlement plans according to the resettlement framework agreed under the ASDP had direct positive impacts on the rural poor. Under the project, the selection criteria for training of farmer households aimed to include 50% poor households. 61. The ASDP (program and project) did not have significant positive or negative environmental impacts. However, the measures implemented under the program loan to improve the regulatory system and ensure the quality of agrochemicals traded in the market will have positive environmental impacts. The farmer training included the proper use of fertilizers and chemicals. IV. OVERALL ASSESSMENT AND RECOMMENDATIONS A. Overall Assessment 62. The ASDP was largely implemented as conceived. The first- and second-tranche conditions for disbursement of the program loan were fully complied with. The project delivered appropriate training to over 50,000 poor and non-poor households in 18 districts of the four selected provinces. Shortcomings in the training of agroenterprises and MAFF staff were not significant in the overall context of the project. The overall rating of the ASDP is assessed as successful. B. Lessons 1. Program Related 63. Technical assistance inputs. The implied assumption of the TA work plan (with its heavy emphasis on early TA inputs) was that the policy and institutional reforms would be achieved quite early on and that the remainder of the time would involve just monitoring and evaluation of implementation. Policy reforms take time, and continued monitoring and effort are required from the TA, the counterparts, the government, and ADB throughout the program in order to effect policy and institutional change. 64. Local ownership of process. It was not until the establishment of working groups for each of the tranche conditions in late 2005, under the initiative of the PSU, that ownership of the process became more localized. There were delays in the development of work plans and budgets, and the consequent disbursement of funds to the working groups caused a delay in meeting tranche conditions. However, resolving difficulties and obstacles was made easier by empowering the working groups to come up with their own ideas and solutions through internal processes. 65. Commitment to change. This is an important issue and lesson learned from the program loan activities. Although there clearly was a commitment to change in relation to most tranche conditions, there was back-tracking on the initial commitment to divest state-owned enterprises. However, after considerable reflection and reconsideration of options over the program period, all state-owned enterprises were successfully divested, and the benefits of this significantly better operations and financial performance of the ongoing enterprises, and cost savings for those wound up are increasingly appreciated. 66. Resettlement plans. At appraisal, the social and cost implications of the resettlement plans required in connection with the divestment of the SOREs were not fully anticipated. This was a key reason for the 2-year delay in the release of the second tranche of the program loan. The scope and cost of resettlement plans needs to be clearly recognized at the time of project design, since they are time-consuming to prepare and costly to implement. 2. Project Related 67. Funding constraints. The uptake of some project activities was constrained by the lack of funds (or credit) for necessary capital expenditure items (e.g., costs of establishing greenhouses, chicken-raising facilities). This was accentuated by the project s deliberate policy of seeking to

24 14 involve a substantial proportion of the rural poor, who lacked cash or access to credit. Future projects should include adequate funds for such purposes or seek involvement of a nongovernment organization with funding available for such items. 68. Value of diffusion and informal extension services. Budgetary constraints mean that once the project ends, follow-up provision of provincial and district extension services from MAFF staff is limited. This highlights the importance of developing the informal farmer-to-farmer and input-supplier-to-farmer extension services. In particular, the VEW program introduced late in the project s life has trained a number of farmers who will continue to disseminate their knowledge to neighboring farmers. Some farmers have become involved in the production of inputs to new technologies (e.g. fingerlings, chicks, and vaccinations) and are therefore motivated to encourage other farmers to also become active participants in the new technologies. 69. Profitability of new farming technologies. New activities such as vegetable growing, mushroom growing, pig fattening, chicken raising, and fish farming are more profitable than traditional paddy production and have had high adoption rates. However, for most of the targeted farmer households these new activities will be supplementary to paddy cultivation rather than a substitute for it. This is because most smallholders' paddy production is for own consumption rather than for sale. For household food security reasons, paddy will continue to be grown given the perceived risks associated with nontraditional agricultural activities. 70. Decentralized training. The project targeted a large number of districts (18) in four different provinces. The geographical spread meant that a decentralized training model was essential. Project staff deployed in the provinces and districts needed to be skilled to a level commensurate with the requirements of the project i.e., agricultural commercialization and diversification. MAFF provided this training and skills development centrally but enabled provincial and district extension staff to provide training and back-up support to the farmer households. 71. Farmer-based agroenterprises. The project found very few agroenterprises in the target districts. Toward the end of the project, the focus switched to providing agribusiness skills to the higher-performing farmer households that had already been trained in the new technologies. A number of examples emerged where these farmer households moved along the production chain and got involved in the production and/or sale of farm inputs to other farmers e.g., chicks for chicken farming, fingerlings for fish farming, chicken feed, vaccines. A positive side-effect of this process was the commercial incentive for these farm input suppliers to conduct extension services free, or for a small fee, to promote the sale of their farm input supplies. These were generally nonpoor farmers with sufficient resources of their own to develop these activities. However, the project also benefited poor farmers to a significant extent. 72. Monitoring and evaluation. Monitoring and evaluation is an important part of any project and the ASDP was fortunate to have monitoring and evaluation officers in the PCU and in the provinces and districts. The adoption, diffusion, and cost/production surveys were an important part of the monitoring and evaluation system and helped provide information on the value of the project. This aspect of the project was particularly well implemented. C. Recommendations 1. Program and Project Related 73. Further action or follow-up. The government should ensure the adequate post-project resourcing of provincial and district extension services to maintain the sustainability of the project. 74. Covenants. The covenants concerning resettlement activities under the SOREs need to be followed up until they are met. 75. Additional assistance. The government and ADB have agreed to consider a third sector development program the Climate Resilient Rice Commercialization Sector Development

25 15 Program for approval in 2013 with project preparatory TA to start in The lessons learned from the ASDP will be taken into account in formulating the proposed program. In particular, the working group model should be considered to assist future reform measures and to ensure local ownership of the reform process. Working groups should be resourced adequately and on time to prevent delays in program implementation. Associated capacity development TA should provide technical support and assist the working groups and government agencies, and the timing of TA inputs should be consistent with the time required to implement the reforms. 76. Timing of the performance evaluation report. The program performance evaluation report may be prepared in 2015, when the full ramifications of ASDP policy reform activities are apparent. 2. General 77. Appraisal. The time proposed for programs involving policy reforms should be realistic, and TA support to assist the reform process should be allocated evenly across the implementation period rather than concentrated early in the program. In addition, mechanisms to encourage counterpart and government ownership of the reforms must be built into the program. 78. New agricultural technologies. Commercialization of agricultural production by poor and non-poor farmers must involve new technologies and production opportunities (e.g., vegetables, mushrooms, livestock, and fish) as well as suitable capacity building to supplement paddy farming. Projects should allocate seed capital to finance low-cost capital items to help farmers establish the new technologies, especially when targeting poor farmers. 79. Agroenterprises. In rural areas it is likely to be more effective to focus on helping successful farmers expand their activities to become suppliers of farm inputs or marketers and/or processors of farm produce than to seek to develop nonfarm agroenterprises. These farmers may operate as individuals or collectively with other farmers. 80. Sustainability. To ensure future sustainability, measures are needed to develop selfsufficient agricultural extension services in rural areas once funding under a project ceases. The VEW model trialed in the ASDP is one such approach.

26 16 Appendix 1 REVISED PROGRAM FRAMEWORK Design Summary Performance Indicators/Targets Appraisal Status Goal Sustainable growth of the agriculture sector Poverty reduction in rural areas Purpose Policy and institutional reform measures firmly in place for marketbased agriculture sector Effective and sustainable agricultural support services in place Outputs 1. Program Loan a a. Secure and increase access to productive land provided (activities in the policy matrix: 1-a) Average real growth of the agriculture sector at 3.5% per annum in the medium term Comparable yields of major agricultural crops, and livestock, fishery, and forestry production with neighboring countries Reduction in rural poverty estimated at 40% of rural population Institutional set-up and regulatory framework favorable for commercialized agriculture Market environment to promote private enterprise growth Regular extension programs in at least 280 communes in the project area Average contribution of high-value crops to agricultural income higher than the current 18% increase in small-scale agro-based enterprises in the project area Subdecrees related to land concessions in place Number and area of social land concessions granted Number and area of unused economic land concessions reduced by at least 100,000 ha (400,000 ha in 2002) Average real growth of the agriculture sector over was 5.2%. Average paddy yield has increased from 2.1 tons per ha to 3.0 tons per ha over The overall poverty rate in Cambodia is estimated to have fallen from 35% in 2004 to less than 27% in GDP per capita has increased from $347 in 2003 to $706 in 2009 (a real increase of 71%). Nine activities were supported under the program loan (4 under the first tranche and 5 under the second tranche). Extension programs in 226 communes were provided under the project loan. The average income of the farmers is estimated to have increased by 41%. In March 2003, the government issued a subdecree stating the procedures for distribution of unused state land to eligible poor households for productive purposes. The government also agreed to establish before the release of the second tranche a mechanism for implementing this subdecree and to provide the beneficiaries with adequate agricultural extension services to support their productive and income-generating activities.

27 Appendix 1 17 Design Summary b. Legal and policy framework improved for water resource management (1-b) Performance Indicators/Targets Appraisal Status Cabinet approval of the national water policy COM approved the National Water Resources Policy on 26 January 2004 to guide allocation, development, and management of the country s water resources. c. Legal framework established for better access to improved seeds (1-c) d. Regulatory system improved for ensuring the quality of agrochemicals traded in the market (1-d) e. State-owned rubber estates divested (2-a) f. State interventions into the agricultural input and output markets removed (2-b) g. Roles and responsibilities of MAFF's departments rationalized (3-a) Cost sharing for irrigation schemes in place for 11 pilots and replicated to other schemes Cabinet approval of the draft seed law for submission to the National Assembly High degree of awareness about the guidelines on agricultural materials standards Completion of the updated divestment plan Completion of the divestment process for state-owned corporations for inputs and outputs Cabinet approval of the revised subdecree On 8 April 2008, COM approved the Seed Law (Law on Managing Seed and Hybrid Plant Authorization). On 20 December 2006, MAFF approved the study on the agrochemical inspection system carried out by the Bureau of Agricultural Materials. On the basis of this study, a circular establishing and implementing specific measures to boost collaboration between key government agencies in the monitoring and control of agricultural materials, and to strengthen the inspection system for those materials, was approved on 15 January The seven SOREs were offered for sale through international bidding managed by the National Divestment Committee, and sold to domestic investors between September 2007 and February As part of the divestment, the government paid compensation to laid-off workers and has prepared resettlement plans according to the resettlement framework agreed under the ASDP. KAMFIMEX was liquidated on 25 July 2007 through issuance of a subdecree that took effect on 1 August AIC was liquidated on 29 June 2007 through issuance of a subdecree that took effect on 2 January The government has paid compensation to laid-off workers in accordance with the resettlement framework agreed under the ASDP. In January 2007, the working group on organizational restructuring finalized its report on the strengthening of MAFF s planning functions, assisted by TA 4228-CAM. MAFF issued a ministerial declaration on 8 January 2008 establishing a permanent plan and

28 18 Appendix 1 Design Summary h. Operational policy and strategy for gender mainstreaming in agriculture in place (3-b) i. Actions for Cambodia's compliance with the World Trade Organization provisions implemented in the agriculture sector (3-c) j. Agricultural market information services improved (3-d) k. National agricultural research system in place (3-e) l. Quality and coverage of the public agricultural extension services improved (3-f) Performance Indicators/Targets Appraisal Status budget formulation unit within the existing general directorate. In June 2007, MAFF also completed the preparation of a human resource development strategy with technical assistance under the ASDP. Cabinet approval of the policy and strategy Completion of WTO sanitary and phytosanitary requirements Approval of the revised market information services Approval of the national agricultural research master plan Sustainable funding for the extension services and increased outreach Approval of the new broadcasting program on agricultural technology The gender working group was established on 7 May 2003 to formulate the policy and strategy for mainstreaming gender issues in the agriculture sector. MAFF established the World Agri- Trade Office through a ministerial circular dated 1 September 2003 to ensure that products meet food safety and quality standards in line with WTO requirements to gain access to urban and international markets. MAFF s working group on agricultural market information services formulated a strategy for improving the market information system through consistent and uniform data collection, management and dissemination, and through staff capacity strengthening. The strategy document was approved by MAFF on 26 September 2006, and was implemented partly with support from the Government of Canada (Cambodia Agriculture Market Information Project). The master plan for agricultural research was first drafted under TA 4228-CAM and further developed under TA 4310-CAM. It was approved by MAFF on 22 May MEF approved a 10% increase in the 2004 recurrent budget for MAFF over the 2003 budget. MAFF increased the provincial extension budget over the 2003 level. MAFF s working group at the agricultural extension education office proposed an upgraded framework for the preparation of broadcasting programs through institutional changes and provision of revised extension materials. The report of the working group was approved by MAFF on 22 February 2007, and official copies disseminated on 11 April 2007.

29 Appendix 1 19 Design Summary 2. Project Loan Performance Indicators/Targets Appraisal Status a. Extension services for farmer groups provided and strengthened (Activities: group formation, training, and field demonstrations) b. Support services provided for agro-based enterprises (Activities: initial needs assessment and contractual services) c. Institutional capacity strengthened for agricultural commercialization (Activities: initial needs assessment, staff training, and provision of facilities and equipment) 3. Technical Assistance a. Capacity of the Ministry of Agriculture, Forestry, and Fisheries in policy planning, program budgeting and marketing services improved Regular extension support provided for about 56,000 farmers in 280 communes in 4 provinces About five contracts for support services for a total of about 4,400 agro-enterprises Total of about 200 central and provincial staff trained Increased efficiency in program budgeting and policy planning Reorganization of MAFF departments Training on technological implementation procedures was given to 52,176 farmers in 226 communes. The average farm income for these farmers is estimated to have increased by $163 per annum, or by 41%. Due to delays in project implementation, only 2 service providers were contracted to provide support to agroenterprises. A survey of existing agroenterprises in the four provinces was conducted to establish training needs and develop training programs. Business implementation procedures were provided to 589 participants, some of whom included high-performing farmers who might be encouraged to expand their operations into farm input supply and/or marketing/processing of farm outputs. In addition to training, the service providers provided counseling, outreach, and other advisory services to the agroenterprises. In lieu of formation of trade associations, 9 groups were formed in Kampot and Takeo. These groups were given training in business management and group facilitation. A training needs assessment was conducted within MAFF to support the process of agricultural commercialization. Sixty-nine staff from four MAFF departments attended the training courses. Computers were provided to these departments. The provincial and district focal persons who took part in the initial course are now providing training to other MAFF staff and farmers. In January 2007, the working group on organizational restructuring finalized its report on the strengthening of MAFF s planning functions, with the assistance of TA 4228-CAM consultants. MAFF issued a ministerial declaration on 8 January 2008 establishing a permanent plan and budget formulation unit within the existing general directorate. In June 2007,

30 20 Appendix 1 Design Summary Performance Indicators/Targets Appraisal Status b. Divestment of state-owned enterprises c. Promotion of national agricultural research and extension systems Inputs ADB Financing Program loan Project loan Technical assistance Government Contributions Project loan Technical assistance Institutionalization of MAFF's medium-term expenditure framework Progress of the divestment process Establishment of an effective national agricultural research and extension system $25.00 million $4.70 million $1.00 million $1.18 million $0.18 million MAFF also completed the preparation of a human resource development strategy with technical assistance under the ASDP. MAFF s working group on program budgeting, with support from TA 4428-CAM, prepared manuals on (i) accounting and financial management; (ii) monitoring and evaluation; and (iii) training in accounting, finance, planning, and monitoring and evaluation. The final report was submitted on 30 September 2006 and the systems are now being implemented within MAFF. State-owned enterprises have been divested during the program implementation period. The master plan for agricultural research was first drafted under TA 4228-CAM and further developed under TA 4310-CAM. It was approved by MAFF on 22 May $26.96 million $4.08 million $0.820 million $0.18 million Not available ADB = Asian Development Bank; AIC = Agriculture Inputs Corporation; ASDP = Agriculture Sector Development Program and Project; COM = Council of Ministers; GDP = gross domestic product; ha = hectare; KAMFIMEX = Kampuchea Fish Import and Export Company; MAFF = Ministry of Agriculture, Forestry, and Fisheries; SORE = state-owned rubber estate; TA = technical assistance; WTO = World Trade Organization. a Activities of the program loan component are listed with the numbers used in the policy matrix.

31 Appendix 2 21

32 22 Appendix 2

33 Appendix 2 23

34 24 Appendix 2