Document of The World Bank PROJECT APPRAISAL DOCUMENT · PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$30 MILLION TO THE REPUBLIC OF AZERBAIJAN FOR THE SECOND

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 68506-AZ

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN

IN THE AMOUNT OF US$30 MILLION

TO THE

REPUBLIC OF AZERBAIJAN

FOR THE

SECOND RURAL INVESTMENT PROJECT

June 13, 2012

Sustainable Development Department

South Caucasus Country Unit

Europe and Central Asia Region

This document has a restricted distribution and may be used by recipients only in the

performance of their official duties. Its contents may not otherwise be disclosed without World

Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective March 26, 2012)

Currency Unit = Azerbaijani New Manat

AZN 0.79 = US$1

US$ 1.27 = AZN 1

FISCAL YEAR

January 1 – December 31

ABBREVIATIONS AND ACRONYMS

AzRIP Azerbaijan Rural Investment Project

AzRIP-AF Azerbaijan Rural Investment Project Additional Financing

AZN Azerbaijani New Manat

CDD Community Driven Development

CIG Common Interest Group

CIS Commonwealth of Independent States

CPS Country Partnership Strategy

ECA Europe and Central Asia Region of the World Bank

EMF Environmental Management Framework

EMPF Environmental Management Plan Framework

ExComm Local Executive Committee

FAO Food and Agriculture Organization

FM Financial Management

GDP Gross Domestic Product

IDP Internally Displaced Person

IFR Interim Financial Report

IBRD International Bank for Reconstruction and Development

IGA Income Generation Activities

LSMS Livings Standards Measurement Survey

M&E Monitoring and Evaluation

MIS Management Information Systems

MP Micro-project

OM Operational Manual

PAT Project Assistance Team

PDO Project Development Objective

PM&E Participatory Performance Monitoring and Evaluation

PMU Project Management Unit

RGAC Regional Grant Approval Committee

ROO Regional Operations Office

SAAC State Agency for Agricultural Credits

SFDI Social Fund for the Development of IDPs

PRA Participatory Rural Appraisal

WG Working Group

Regional Vice President: Philippe Le Houerou

Country Director: Asad Alam

Sector Director:

Sector Manager:

Laszlo Lovei

Elisabeth Huybens

Task Team Leader: Daniel Owen

Table of Contents

I. Strategic Context ............................................................................................................ 1

A. Country Context ............................................................................................................... 1

B. Sectoral and Institutional Context .................................................................................... 1

C. Higher Level Objectives to which the Project Contributes ............................................. 3

II. Project Development Objectives ................................................................................... 4

A. Project Components ......................................................................................................... 5

B. Project Financing ............................................................................................................. 6

C. Lessons Learned and Reflected in the Project Design ..................................................... 7

III. Implementation .............................................................................................................. 9

A. Institutional and Implementation Arrangements ............................................................. 9

B. Results Monitoring and Evaluation ............................................................................... 10

C. Sustainability.................................................................................................................. 11

IV. Key Risks and Mitigation Measures .......................................................................... 11

A. Economic and Financial Analysis .................................................................................. 11

B. Technical ........................................................................................................................ 12

C. Financial Management ................................................................................................... 13

D. Procurement ................................................................................................................... 13

E. Social (including safeguards) ......................................................................................... 13

F. Environment (including safeguards) .............................................................................. 15

Annex 1: Results Framework and Monitoring ...................................................................... 17

Annex 2: Detailed Project Description ................................................................................. 20

Annex 3: Implementation Arrangements ............................................................................. 30

Annex 4: Operational Risk Assessment Framework (ORAF) ............................................. 46

Annex 5: Implementation Support Plan ................................................................................ 50

MAP: IBRD 38276

i

.

PAD DATA SHEET

Azerbaijan

Second Rural Investment Project (P122944)

PROJECT APPRAISAL DOCUMENT .

EUROPE AND CENTRAL ASIA

ECSS4

.

Basic Information

Date: 13-Jun-2012 Sectors: Other social services (40%), Microfinance

(15%), Water supply (15%), Rural and Inter-

Urban Roads and Highways (15%),

Transmission and Distribution of Electricity

(15%)

Country Director: Asad Alam Themes: Rural services and infrastructure (33%),

Participation and civic engagement (25%),

Rural non-farm income generation (25%),

Decentralization (17%)

Sector

Manager/Director: Elisabeth

Huybens/Laszlo Lovei

Project ID: P122944 EA

Category: B - Partial Assessment

Lending

Instrument: Specific Investment

Loan

Team Leader(s): Daniel Owen

Joint IFC: No .

Borrower: Republic of Azerbaijan

Responsible Agency: State Agency for Agricultural Credits (SAAC)

Contact: Mr. Subhan Asgerov Title: Director

Telephone

No.: 994-12-934693 Email: [email protected]

.

Project Implementation

Period: Start

Date: 01-Sep-2012 End

Date: 30-Mar-2017

Expected Effectiveness

Date: 01-Sep-2012

Expected Closing Date: 30-Sep-2017 .

Project Financing Data(US$M)

[ X ] Loan [ ] Grant [ ] Other

[ ] Credit [ ] Guarantee

ii

Proposed term: The IBRD flexible Loan with a variable spread has a final maturity of 17 years

including a grace period of 4 years.

For Loans/Credits/Others

Total Project Cost (US$M): 53.60

Total Bank Financing

(US$M): 30.00

.

Financing Source Amount(US$M)

Borrower 20.00

International Bank for Reconstruction and

Development 30.00

LOCAL BENEFICIARIES 3.60

Total 53.60 .

Expected Disbursements (in USD Million)

Fiscal

Year 2013 2014 2015 2016 2017 2018 0000 0000 0000

Annual 4.07 6.54 7.02 6.92 4.42 1.03 0.00 0.00 0.00

Cumulati

ve 4.07 10.61 17.63 24.55 28.97 30.00 0.00 0.00 0.00

.

Project Development Objective(s)

The Project Development Objective is to improve access to and use of community-driven rural

infrastructure and expand economic activities for rural households. This would be achieved through: (i)

the provision of grants to finance eligible demand-driven micro-projects in rural infrastructure; (ii) the

provision of training and consultants‟ services to support micro-project development by enhancing the

capacity of engaged local stakeholders in all aspects of micro-project program development; (iii)

building opportunities for rural employment and livelihood support services through the provision of

training and consultants‟ services to carry out pilot livelihood support services in six communities; and,

(iv) supporting project management capacity at the Project Management Unit and its Regional

Operations Offices for the purposes of effective management, implementation and monitoring and

evaluation of Project activities. .

Components

Component Name Cost (USD Millions)

Rural Community Infrastructure 18.90

Technical Assistance for Rural Infrastructure 4.73

Project Management and Results Monitoring 6.37 .

Compliance

Policy

Does the project depart from the CAS in content or in other significant

respects? Yes [ ] No [ X ]

.

iii

Does the project require any waivers of Bank policies? Yes [ ] No [ X ]

Have these been approved by Bank management? Yes [ ] No [ ]

Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ]

Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] .

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment OP/BP 4.01 X

Natural Habitats OP/BP 4.04 X

Forests OP/BP 4.36 X

Pest Management OP 4.09 X

Physical Cultural Resources OP/BP 4.11 X

Indigenous Peoples OP/BP 4.10 X

Involuntary Resettlement OP/BP 4.12 X

Safety of Dams OP/BP 4.37 X

Projects on International Waterways OP/BP 7.50 X

Projects in Disputed Areas OP/BP 7.60 X .

Legal Covenants

Name Recurrent Due Date Frequency

Schedule 2, Section I. A. Institutional

Arrangements X

Description of Covenant

1. The Borrower shall carry out the Project in accordance with the Operational Manual 2. The Borrower shall maintain the PMU and ensure it is adequately staffed with qualifications in

accordance with procedures necessary for the carrying out of the project. 3. The Borrower shall ensure the Working Group shall be maintained with broad stakeholder

representation satisfactory to the Bank.


Schedule 2, Section I. C. Micro-projects X


1. The Borrower shall make Grants to Beneficiaries in accordance with eligibility criteria and procedures

acceptable to the Bank. 2. The Borrower shall make each Grant under a Grant Agreement with the respective Beneficiary on

terms and conditions approved by the Bank.


Schedule 2. Section I. D. Safeguards X


The Borrower shall ensure that the Project is carried out by the Project Implementing Entity in

accordance with the provisions of the EMF and/or EMP(s). .

iv

Conditions

Name Type

Description of Condition

Team Composition

Bank Staff

Name Title Specialization Unit

Myrtle Laura Diachok Operations Officer Monitoring and

Evaluation SDV

Joseph Paul Formoso Senior Finance Officer Disbursement CTRLA

Ahmet Gokce Consultant Procurement ECSO2

Daniel Owen Senior Social

Development Specialist Task Team Leader ECSS4

Hiwote Tadesse Senior Program

Assistant Operations ECSSD

Deepal Fernando Senior Procurement

Specialist Procurement ECSO2

Rufiz Vakhid Chirag-

Zade Senior Operations

Officer Institutional

Arrangements ECSS1

Ghada Youness Senior Counsel Legal LEGEM

Gulana Enar Hajiyeva Environmental Specialist Environment ECSS3

Yagut Iltifat Ertenlice Procurement Assistant Procurement ECCAZ

Norpulat Daniyarov Sr Financial

Management Specialist Financial Management ECSO3

Martin Henry Lenihan Senior Social

Development Specialist Social Safeguards LCSSO

Sabina Vagif Majidova Team Assistant Logistics ECCAZ

Tural Jamalov Financial Management

Specialist Financial Management ECSO3

Non Bank Staff

Name Title Office Phone City

Peter Reid Consultant, Livelihood

Specialist Lyme Regis

Yoshiko Ishihara Consultant Rome .

Locations

Country First

Administrative

Location Planned Actual Comments

v

Division

Azerbaijan Beylaqan Rayonu Beylagan Rayon X

Azerbaijan Yardimli Rayonu Yardymli Rayon X

Azerbaijan Salyan Rayonu Salyan Rayon X

Azerbaijan Sabirabad Rayonu Sabirabad Rayon X

Azerbaijan Saatli Rayonu Saatly Rayon X

Azerbaijan Bilasuvar Rayonu Bilasuvar Rayon X

Azerbaijan Neftcala Rayonu Neftchala Rayon X

Azerbaijan Masalli Rayonu Masally Rayon X

Azerbaijan Lerik Rayonu Lerik Rayon X

Azerbaijan Lankaran Rayonu Lankaran Rayon X

Azerbaijan Imisli Rayonu Imishli Rayon X

Azerbaijan Calilabad Rayonu Jalilabad Rayon X

Azerbaijan Astara Rayonu Astara Rayon X

Azerbaijan Agcabadi Rayonu Aghjabadi Rayon X

Azerbaijan Tartar Rayonu Tartar Rayon X

Azerbaijan Zardab Rayonu Zardab Rayon X

Azerbaijan Zaqatala Rayonu Zaqatala Rayon X

Azerbaijan Yevlax Rayonu Yevlakh Rayon X

Azerbaijan Oguz Rayonu Oghuz Rayon X

Azerbaijan Ucar Rayonu Ujar Rayon X

Azerbaijan Tovuz Rayonu Tovuz Rayon X

Azerbaijan Samaxi Rayonu Shamakhi Rayon X

Azerbaijan Saki Rayonu Shaki Rayon X

Azerbaijan Samkir Rayonu Shamkir Rayon X

Azerbaijan Kurdamir Rayonu Kurdamir Rayon X

Azerbaijan Qabala Rayonu Qabala Rayon X

Azerbaijan Qusar Rayonu Qusar Rayon X

Azerbaijan Quba Rayonu Quba Rayon X

Azerbaijan Xacmaz Rayonu Khachmaz Rayon X

Azerbaijan Qazax Rayonu Qazakh Rayon X

Azerbaijan Goranboy Rayonu Goranboy Rayon X

Azerbaijan Qax Rayonu Qakh Rayon X

vi

Azerbaijan Ismayilli Rayonu Ismayilli Rayon X

Azerbaijan Goycay Rayonu Goychay Rayon X

Azerbaijan Daskasan Rayonu Dashkasan Rayon X

Azerbaijan Balakan Rayonu Balakan Rayon X

Azerbaijan Barda Rayonu Barda Rayon X

Azerbaijan Abseron Rayonu Absheron Rayon X

Azerbaijan Agsu Rayonu Aghsu Rayon X

Azerbaijan Agdas Rayonu Aghdash Rayon X

Azerbaijan Gadabay Rayonu Gadabay Rayon X

Azerbaijan Agstafa Rayonu Aghstafa Rayon X

Azerbaijan Qobustan Rayonu Gobustan Rayon X

Azerbaijan Samux Rayonu Samukh Rayon X

Azerbaijan Siyazan Rayonu Siazan Rayon X

Azerbaijan Xizi Rayonu Khizi Rayon X

Azerbaijan Haciqabul Rayonu Hajigabul Rayon X .

1

I. Strategic Context

A. Country Context

1. Over the past decade, Azerbaijan has experienced many of the same challenges as other

Commonwealth of Independent States (CIS) transition economies including deterioration in

infrastructure and service provision and increasing inequality. Infrastructure attrition in

Azerbaijan has been particularly acute in rural areas and the poor quality of public infrastructure,

exacerbated by a weak public expenditure framework, has been one of the factors impeding

development since the mid-1990s. Roughly 45% of the main and regional roads are in poor

condition, hindering social and economic development and limiting growth prospects in rural

areas of the country. The Government places high priority on infrastructure provision, including

power supply and gasification, irrigation investments and major highways crucial for the

development of Azerbaijan as a transport corridor, internal connectivity and the development of

regions within the country.

2. Since independence, oil and gas discoveries have given Azerbaijan new means for

combating poverty and developing a diversified and sustainable middle-income economy.

Driven by the oil boom, per capita income rose from a post-independence low of just US$470 in

1995 to $4,820 in 2009. The economy has continued to grow in recent years, recording an

average annual GDP growth rate of 24% in 2005-2008, with 12% growth in the non-oil sectors.

3. Strong growth and rising government social spending have reduced poverty markedly,

from 49% in 2001 to 16% in 2008 and to 7.6% in 2011, according to official estimates. This

decline has been largely driven by high growth rates averaging more than 20% over the period.

Higher minimum wage rates over the last decade are likely to have contributed to poverty

reduction. Minimum wages were last increased by 10% in January 2012 to the equivalent of

US$118 a month. Social transfers, including a well targeted social assistance program, have also

contributed to declining poverty. Data suggests that while rural and urban poverty rates have

fallen sharply, much of the poverty is rural.

4. Azerbaijan‟s development challenge is to maintain momentum by strengthening the non-

oil economy, improving competitiveness and by building skills and strengthening its institutions.

Azerbaijan faces an important challenge in improving governance and fighting corruption and

new challenges are emerging in economic prospects. The rapid growth derived from oil and gas

revenues is likely to plateau over the coming decade and decline thereafter. While Azerbaijan

has weathered the global economic crisis relatively well, the crisis has underlined the need for a

diversified economy, market-based policies and improved social services.

B. Sectoral and Institutional Context

5. Deficiencies in basic infrastructure (roads, water, and energy) in rural areas serve as

an obstacle to poverty reduction by discouraging people and businesses from residing in or

investing in rural space. Despite the tripling of government investment in basic infrastructure

since 2006, there are still important gaps in terms of access and quality of public services

between urban and rural areas. While over 90% of households in Baku have access to piped

2

water, the same is true for less than 33% of households in rural areas and in many parts of the

country outside Baku people receive as little as three hours supply per day. Similarly, rural

communities suffer from unreliable supplies of gas and electricity, a problem that becomes

especially acute in remote mountainous areas where access may be completely lacking.

Furthermore, the 2009 Country Economic Memorandum states that domestic vehicular traffic

has increased 10% per year since 2003, leading to increasing pressure on local road networks and

negative impacts on rural economic development. According to the 2008 Living Standards

Measurement Survey (LSMS), improved access to, and the quality of public utilities will not

only improve household livelihoods and living conditions but also the operating environment for

rural enterprises such as food processing and light manufacturing.

6. While rural poverty reduction depends on increasing incomes from agriculture and the

diversification and growth of the non-farm rural economy, there are significant constraints

facing the development of both sectors. Currently, employment in rural areas does not

guarantee a route out of poverty; the working poor account for 60% of the rural poor compared

to 50% for the whole country and 35.6% in urban areas. This is due to the poorly paid and

seasonal nature of employment in rural areas (median monthly earnings AZN 75 versus AZN

120 in urban areas), the lack of non-farm rural enterprises and the numerous constraints farmers

face in maximizing income earned from agriculture. A key constraint is the weakness in

infrastructure provision such as rural roads, irrigation and drainage systems. Irrigation is

particularly problematic, with at least 50% of all irrigated land damaged due to the effects of

salinity resulting from degraded irrigation and drainage systems. Similarly, farm profitability

and off-farm employment is constrained by undeveloped value chains with farmers typically

producing for their own consumption or sale in informal markets at very low prices. This is

compounded by the absence of market infrastructure such as storage, packaging and processing

facilities. Despite these constraints, agri-food is a key sector for the country‟s development,

being the second largest exporter after oil and gas and employing close to 40% of the total

workforce in full-time or seasonal employment. There are significant opportunities for

generating off-farm employment at the upper end of the agricultural value chain which is

currently underdeveloped.

7. There are important disparities between urban and rural areas in terms of access to

health services and education attainment. Physical remoteness to health care has been cited in

the 2008 LSMS as an explanation for lower utilization by the poor. Over two thirds of women in

the poorest quintile surveyed by the LSMS reported distance from a health facility as

representing a barrier to access, versus 14% in the richest quintile. Similarly, health service

utilization for both out-patient and in-patient services is higher in Baku and other urban areas

than for rural areas. For education, in rural areas, post-secondary education attainment rates are

below 11% compared to 40% in Baku. In general, rural areas have lower access to both pre-

school and post-secondary education, while the quality of the learning experience at primary and

secondary levels is affected by the poor condition of school facilities.

8. Institutional capacity at the local-self government level to address these urban-rural

disparities is growing and in need of support. Key institutions at the local level in Azerbaijan

include Municipalities and Local Executive Committees. Local Executive Committees

(ExComms) represent the various agencies and line Ministries of Central Government and are

3

primarily focused on regulatory functions and the development needs of larger settlements.

While elected Municipal Councils were established by law in 1995, they are still relatively new

institutions with limited responsibility (for roads, parks, cemeteries and some aspects of social

care) and financial capacity to support the provision of critical rural infrastructure. The Second

Rural Investment Project in Azerbaijan (AzRIP-2) is well placed to support the developing

decentralization agenda through mobilizing local communities to work closely with both

ExComm authorities and municipalities in the development of infrastructure in underserviced

rural communities.

9. Aside from the decentralization agenda, AzRIP-2 further reinforces a range of other

Government strategies and programs. AzRIP-2 complements specific strategies such as the

Regional Development Program covering 2009-2012 which is focused on strengthening the

productive potential of the regions in non-oil sectors (such as agriculture and tourism) and

improving living conditions to ease the pressure on migration to Baku. AzRIP-2 is similarly

aligned with Government action programs in other sectors such as infrastructure (prioritizing

power supply, roads and social infrastructure), and the state program for agriculture covering

2008-2015 which prioritizes the rehabilitation of irrigation networks and the development of

food processing enterprises. The Operational Manual (OM) specifies that micro-projects which

do not confirm to national legislation and regional development programs will not be supported

by AzRIP-2.

10. In terms of rationale for Bank engagement, AzRIP-2 not only builds on the successful

implementation of the original project, but also the experience with Community Driven

Development operations elsewhere in the region and globally. Beyond Azerbaijan, the World

Bank has supported a range of successful Local and Community Driven Development (CDD)

activities across Europe and Central Asia (ECA) that finance improved service delivery,

infrastructure provision and income generation in countries as diverse as Croatia, the Kyrgyz

Republic, Poland and Russia. These projects respond to the infrastructure and service deficits

that arose during the transition era following the privatization of collective farms and local

industries previously responsible for social infrastructure and service provision. They also

respond to a need to support alternative, more participatory and transparent forms of local

governance. These projects build on global best practice by the Bank to support participatory

decision making, local capacity building, and community control of resources through CDD.

Over the last decade, the Bank has increasingly used CDD projects across a range of countries to

address critical infrastructure needs and the current global CDD portfolio amounts to

approximately US$2 billion of Bank investments per year. According to the 2008 World

Development Report on Agriculture for Development, CDD can also contribute to the agriculture

for development agenda by first focusing on the provision of basic services and public goods and

then by supporting income generating activities once basic needs have been met.

C. Higher Level Objectives to which the Project Contributes

11. The Country Partnership Strategy (CPS) for Azerbaijan for 2011-2014 is focused on

achieving results in two key pillars: (i) building a competitive non-oil sector; and (ii)

strengthening human and social services; with a cross-cutting filter for improving governance

and institution-building across all activities. The importance of improved access to rural

4

infrastructure through cost-effective approaches that support rural communities‟ demand-driven

infrastructure investment priorities is emphasized in the CPS. Rural infrastructure projects have

a high impact on employment generation. Rehabilitation of small scale irrigation works

increases productivity significantly and school rehabilitation leads to increases in school

enrollment. The CPS identifies the primary vehicle for achieving these outcomes as the

Azerbaijan Second Rural Investment Project.

12. The Government‟s current development program is laid out in its strategy document

“State Program on Poverty Reduction and Sustainable Development 2006-15”. The broad

development goals include: maintaining macroeconomic stability; creating enabling conditions

to improve income-generating opportunities; improving the quality and access to basic health

and education services; improving infrastructure; and strengthening the social protection system

to better protect vulnerable groups. The project is also in line with the objectives of the state

programs on regional development, poverty reduction and food security.

II. Project Development Objectives

A. PDO

13. The Project Development Objective is to improve access to and use of community-driven

rural infrastructure and expand economic activities for rural households. This would be achieved

through: (i) the provision of grants to finance eligible demand-driven micro-projects in rural

infrastructure; (ii) the provision of training and consultants‟ services to support micro-project

development by enhancing the capacity of engaged local stakeholders in all aspects of micro-

project program development; (iii) building opportunities for rural employment and livelihood

support services through the provision of training and consultants‟ services to carry out pilot

livelihood support services in six communities; and, (iv) supporting project management

capacity at the Project Management Unit and its Regional Operations Offices for the purposes of

effective management, implementation and monitoring and evaluation of Project activities.

B. Project Beneficiaries

14. Under Component A - Rural Community Infrastructure, beneficiaries will include

individuals in rural communities in the 11 currently un-serviced rayons (Shabran, Siyazan, Xizi,

Abseron in the North, and Agcabadi, Beylaqan, Masalli, Uardimli, Lerik, Astara and Lankaran

Rayons in the Mugan-Salyan Zone) who will benefit from mobilization and access to improved

infrastructure. Other beneficiaries will include households and individuals from well-performing

micro-projects in the 45 existing rayons served under the original Azerbaijan Rural Investment

Project (AzRIP) and the Azerbaijan Rural Investment Project Additional Financing (AzRIP-AF),

who will benefit from second generation community infrastructure and livelihood support

services.1 These rayons comprise: Aghsu, Balakan, Gabala, Gakh, Gobustan, Guba, Gusar,

Ismayilli, Khachmaz, Oghuz, Shaki, Shamakhi, Zakatala in the North; Aghstafa, Barda,

Dashkasan, Gadabay, Goranboy, Khanlar, Qazakh, Samukh, Shamkir, Tartar and Tovuz in the

1 AzRIP became effective on January 18, 2005. The total project costs were US$21.10, of which US$15 million was financed

from a Bank loan. On March 27, 2008, additional financing of US$15 million was approved to support the expansion of

activities under AzRIP. The closing date for AzRIP was March 31, 2012.

5

North West; Aghdash, Goychay, Hajigabul, Kurdamir, Ujar, Yevlakh and Zardab in Lower

Shirvan; Bilasuvar, Imishli, Jalilabad, Neftchala, Saatly, Sabirabad and Salyan in Mughan

Salyan, and; Babek, Julfa, Kengerli, Ordubad, Sadarak, Shahbuz and Sherur in Nakhchivan.

Micro-projects in Nakhchivan are to be fully financed by Government funds. Other zones are

eligible for World Bank financed micro-projects. Individual, household and community-level

beneficiaries will be measured, tracked and monitored (incorporating social and gender data

disaggregation) using baseline surveys and follow-up impact evaluation. It is expected that in

total 600 eligible communities in 56 rayons will be serviced under AzRIP-2 and an estimated

1,500,000 community members are expected to benefit from infrastructure investments. Under

Component B – Technical Assistance for Rural Infrastructure, beneficiaries are projected to total

130,000 under participatory rural appraisal engagement; 9,000 in training and 10,000

beneficiaries in Community Network activities including workshops, cross visits and

Community Investment Conferences. Livelihood pilots are expected to benefit approximately

1,200 people. Women‟s empowerment through incubating leadership and participation in

decision-making has been a prominent feature of AzRIP‟s results narrative and a strong gender

focus will continue under AzRIP-2.

C. PDO Level Results Indicators

15. Achievement of the Development Objective will be assessed through the increase in

access to and use of rural infrastructure; the change in access to markets and basic social services

through improved rural infrastructure; and improved economic opportunities for rural

households. The outcome and intermediate indicators are specified in Annex 1.

II. Project Description

A. Project Components

16. The project is a Specific Investment Loan (SIL) with a total investment cost estimated at

US$53.60 million, of which US$30 million will be financed by the World Bank Loan. The

Project will scale up AzRIP both geographically into currently un-serviced rayons and vertically

through the inclusion of pilot livelihood support services and second generation institutional

support in current AzRIP active project areas. The Project has three components.

17. Component A - Rural Community Infrastructure. This component will finance

demand-driven micro-projects in rural infrastructure. Micro-projects eligible for finance through

Project proceeds would increase access to, and quality of local economic and social

infrastructure, such as roads, rural water supply, irrigation, schools, clinics and markets. Costs to

be supported from the project include identification, design, construction, rehabilitation, and

initial operation and maintenance of the micro-projects. Potential investments include basic

economic (e.g., rehabilitation of secondary roads, potable water systems, irrigation infrastructure,

electricity transformers) and social (e.g., school and clinic rehabilitation and construction)

infrastructure, based on priority needs identified by communities. The Project will target rural

communities (greater than 1,000 and less than 10,000 people with smaller communities open to

clustering with neighboring communities to achieve scale) in regions that meet established

selection criteria and have a higher relative incidence of poverty. The average size of micro-

projects will be US$70,000, while projects over US$85,000 will require prior review. Current

6

micro-project cycle procedures will be maintained in the new Project, including local governance

arrangements involving local authorities and sectoral line ministry representation in project

screening and approval and public and private sector linkages for key operation and maintenance

medium-term projections. Three categories of micro-project grants will be supported under

Component A: (i) micro-projects in previously un-serviced rayons which meet eligibility criteria

set out in the OM; (ii) second generation micro-projects in active AzRIP communities with high

performance ratings from previous micro-project implementation and which meet eligibility

criteria set out in the OM, and; (iii) micro-projects submitted by Common Interest Groups

supported under the pilot scheme in Component B which meet eligibility criteria as established

in the OM.

18. Component B - Technical Assistance for Rural Infrastructure. The objective of this

component is to enhance the capacity of engaged local stakeholders, including community

groups, local authorities, Regional Grant Approval Committees, Project Assistance Teams and

staff in the Regional Operations Offices in micro-project program development and to provide

technical assistance for pilot livelihood support initiatives. Stakeholder capabilities in functions

of contracting, procurement, financial management, and participatory monitoring and evaluation

will be strengthened. Livelihood support services will be piloted in six communities selected

among communities that successfully implemented economic infrastructure projects under

AzRIP and meet eligibility criteria described in the OM. Livelihood support services will

include mobilization and organization of common interest groups (CIGs), identification of

income generation activities (IGAs), preparation of business plan proposals, legalizing CIG

status, and training CIG members in business management. CIGs that are well organized and

performing in accordance with standards set out in the OM and equipped with quality business

plans may submit their proposal as a micro-project under Component A, Category (iii).

19. Component C - Project Management and Results Monitoring. This component will

finance the administrative and operational project implementation and management costs,

including overheads of Project Management Unit (PMU) professional staff, as well as PMU and

four Regional Operations Offices (ROOs) and their associated support staff, project outreach,

and support to Regional Grant Approval Committees (RGACs). AzRIP-2 will continue the

current practice of regular and rigorous project monitoring and evaluation using mixed

quantitative and qualitative methods and results based, gender disaggregated indicators

implemented on multiple levels – project, rayon and community. AzRIP-2 will also maintain the

intensive effort of physical verification of works and technical aspects of sub-project

implementation.

B. Project Financing

20. The Lending Instrument for the project is a SIL of US$30 million for a period of 5 years

from 2012 to 2017. The Loan will be a single currency (US dollar denominated), variable spread

loan, with a maturity of 17 years inclusive of 4 years of grace, a front end fee of 0.25%, with

repayments linked to commitment.

21. Total project financing requirements are estimated at US$53.60 million, inclusive of

price and physical contingencies, taxes, interest, and the front-end fee. The Government of

Azerbaijan will finance US$20 million towards total project costs, including 100% of costs of

7

micro-projects for Nakhchivan. The World Bank Loan of US$30 million will finance

Components A, B and C. Information on costs and financing sources is provided in Table 1.

Table 1. Project Costs by Component and Use of Financing

Project Components

Project Cost

(in millions)

IBRD

Financing

%

Financing

1. Component A: Rural Community Infrastructure

2. Component B: Technical Assistance for Rural infrastructure 3. Component C: Project Management and Results Monitoring

Front-End Fees

Total Project Costs

41.64

4.75 7.21

0.075

53.60

18.90

4.73 6.37

30.00

63

16 21

C. Lessons Learned and Reflected in the Project Design

22. The proposed project is a repeater project, building on the current AzRIP design and

institutional and implementation mechanisms with day-to-day management under the aegis of

the existing PMU, which will be strengthened with additional core and technical staff as needed.

The repeater project is founded on a similar yet enhanced PDO, project design and institutional

arrangements as the existing project.

23. AzRIP, under implementation since 2005, has garnered widespread recognition for its

strong results record and positive impact. The high quality operation has successfully achieved

its development objectives and has been acknowledged for delivering tangible results on the

ground and improving people‟s lives. The cumulative record of AzRIP is one of significant

improvement of rural communities‟ access to infrastructure services, improved mobility and

increased farmers' incomes. Beneficiary surveys have indicated that travel times to schools and

markets have been reduced by 47% and 26% respectively as a result of the rehabilitation of rural

roads. Livelihoods have improved significantly. The rehabilitation of irrigation systems,

reaching over 700,000 people, has increased average productivity by roughly 30% and added

more than $1 million to the value of production in project areas while primary school enrollment

has increased by 25% subsequent to school rehabilitation. Moreover, in villages where roads

have been rehabilitated under the project, 78% of farm products are now brought to markets in

nearby towns by farmers themselves (as opposed to 18% in non-project areas). In project areas,

farmers can now sell their produce at their farms at 20% higher prices, while prices for the same

products in non-project areas have decreased. A keen emphasis on sustainable infrastructure,

maintenance contracts and accountability has helped ensure that over 90% of infrastructure

rehabilitated is operational. The income of over 600,000 farmers has increased and 150,000

rural poor now have access to safe water. Women‟s empowerment has been a prominent feature

of AzRIP‟s implementation results narrative and a gender focus will continue under AzRIP-2 to

support women‟s participation and empowerment and dedicated gender tracking and monitoring

of project implementation and impacts.

8

24. The AzRIP-2 approach to local development pays particular attention to issues of

sustainability and maintenance. Participating communities prepare maintenance plans and cost-

share for maintenance of assets in conjunction with municipalities and service providers.

Financial and institutional sustainability has been strengthened through mobilization by

municipalities and line ministries of over US$800,000 for the operation and maintenance of

rehabilitated infrastructure.

25. A Social Assessment carried out as part of preparation of AzRIP-2 reaffirmed the

appropriateness of design choices and presented a series of recommendations which have been

integrated in the revised OM for the project. These relate to additional advocacy and promotion

work in new rayons with larger concentrations of internally displaced people; review of

settlement size eligibility criteria for national minority group areas with smaller settlement sizes;

and intensified efforts to foster women's leadership.

26. Impact evaluation findings from the first phase of AzRIP demonstrate a significant

economic boost as a result of project interventions and improvements in financial security

resulting from asset value and service enhancements and increases in on-farm and off-farm

income. A Cost-Benefit analysis of AzRIP micro-projects carried out in 2010 recorded very

high net present values and monetary appraisals of anticipated revenues from micro-projects at

85 times the value of initial investments. Participating communities from the first phase of

AzRIP have expressed strong demand for AzRIP to stimulate livelihood and income generating

opportunities and AzRIP-2 is incorporating this sequential evolution in project design.

Experience from CDD practice globally attests to the viability of this model and phased

evolution of a CDD program from an initial focus on welfare and public goods to second

generation public plus private goods and a productive investment focus.

27. Building on lessons learned under AzRIP, rayons that have demonstrated successful

results from AzRIP micro-project implementation will be eligible to request further support for

complementary rural infrastructure investments under a second generation window in

Component A. Evidence suggests that several engagements in one community are more likely to

have an impact on poverty reduction. These second generation micro-projects will also step up

efforts to crowd in private sector participation and thereby leverage additional capital, as well as

new ideas and skills in support of local development initiatives. An incremental approach is to

be incorporated within AzRIP's community engagement strategy to introduce support for

productive infrastructure and livelihoods support services. Diagnostic work on livelihoods to be

undertaken during the first year of Project implementation will determine the appropriate support

services for income generation and livelihood strengthening in the pilot communities. The

selected pilots would be targeted at a restricted number of communities that successfully

implemented economic infrastructure projects under the original project and would be

conditional on feasibility assessments. Probable areas of support would be business

development services, local organizational capacity strengthening, market and institutional

linkages and value addition initiatives.

28. Over the longer-term, the expected transformative impact of AzRIP-2 is twofold: (i) to

facilitate the translation of enhanced social capital into financial capital and economic well-

being; and (ii) to secure gains achieved in solidarity and social cohesion at the local level and

9

extend these pathways into improved governance and accountability between citizens and the

State. The intensive investment in social capital in AzRIP-2 is manifested by the design

emphasis on social and gender inclusion, social mobilization, collective decision-making,

establishment of local governance groups and networks (community networks, cross-visits

between communities and regional and national community investment knowledge sharing and

networking) and broad mandates on transparency, information access and communications. The

expected outcomes from such social capital investment include improved local governance, a

sustained demand side stimulus for inclusive economic growth and continued attention to

targeting to the most vulnerable and a focus on social inclusion.

29. The proposed operation is hence aligned with the CPS‟s cross-cutting filter on 'improving

governance and institution building‟. In particular, the articulation within the AzRIP sub-project

cycle of roles and responsibilities at the rayon level and its attendant municipal governance

support can be broadly understood as supporting decentralization efforts in Azerbaijan.

III. Implementation

A. Institutional and Implementation Arrangements

30. The proposed project builds on the ongoing AzRIP design and its institutional and

implementation mechanisms which proved to be successful in terms of achieving results on the

ground. The project will be under the general management of the State Agency for Agricultural

Credits (SAAC), which is the Ministry of Agriculture‟s agency for overseeing international rural

development projects. Day-to-day management of the project will be delegated to the Project

Management Unit (PMU) constituted within SAAC. The PMU has successfully implemented

the on-going AzRIP. It reports to the Director of SAAC and would have direct responsibility for

management, administration and coordination of the proposed project. The PMU has developed

the necessary experience and competence to manage all core functions including program

management, regional coordination, community mobilization and facilitation, capacity building,

training, procurement, financial management and monitoring and evaluation (including

environmental monitoring). This would facilitate a smooth transition from the current to the new

project. Annex 3 provides a chart of the proposed project organization. The project

implementation arrangements are described in detail in the OM. The OM for AzRIP-2 is based

on the manual utilized for guiding operations under the previous project and updated and revised

accordingly. The PMU comprises core staff, including the Director, Deputy Director, Engineers

and Community Development, Procurement, Financial Management, M&E and MIS Specialists.

As required, the project could also finance additional core and technical staff to provide

specialized inputs that are not currently available in the project structures and also to ensure that

all project activities are carried out effectively. In particular, the implementation of livelihood

activities will require a full-time Coordinator in the PMU. It is also proposed to add a Legal

Specialist to the core PMU team and to enhance its communications competencies. The PMU

has acquired solid experience in procurement and has established a reliable and effective

accounting and internal control systems under AzRIP. The PMU will continue to use these

arrangements for the financial management of AzRIP-2. The PMU is planning to retain existing

accounting software and accounting staff.

10

31. The project institutional arrangements at the national level also include the project

Working Group (WG) established by SAAC to review the OM on a quarterly basis and adopt

revisions, as required. The WG includes representatives of the Ministries of Economic

Development and Agriculture, the Parliamentary Commission on decentralization, Regional

Grant Approval Committees and civil society.

32. At the regional level, the PMU will be supported by the Regional Operations Offices

(ROOs) which are the PMU representatives in the project zones to support and monitor the

community project portfolio. The existing ROOs would continue to operate as under the

previous AzRIP projects. The ROOs have been operating as umbrella offices, incorporating

Project Assistance Teams (PATs), Technical Design Companies and Regional Grant Approval

Committees (RGACs) in one location, under the coordination of a Program Specialist

functioning as an extension of the PMU. This has worked well, and the same approach will be

adopted for AzRIP-2. The PATs are currently functioning as the Service Providers for providing

community mobilization, training and consultancy services for communities. The RGACs will

continue to review the project proposals for approval, while the Technical Design Companies

will help to develop local capacity for infrastructure development and maintenance.

B. Results Monitoring and Evaluation

33. The implementing agency of AzRIP has a good system in place for monitoring and

evaluation, including an intensive effort of physical verification of works and technical aspects

of sub-project implementation, which is conducted at several levels (project, rayon and

community). Reports from the field are generated regularly to produce monthly, quarterly and

annual progress reports. Several improvements will be made in AzRIP-2, including: (i)

sharpening of existing indicators and generation of new indicators with which to track progress

and measure impact, in particular to assess women‟s participation and empowerment, economic

changes and social capital impacts; (ii) improved monitoring and reporting on the complaints and

grievance redress mechanisms which were built into AzRIP; and (iii) using MIS information

more effectively for internal and external communications.

34. Impact Evaluation and Special Studies. A rigorous impact evaluation with quantitative

and qualitative components will be conducted for AzRIP-2. Specifically, the project plans to

conduct impact evaluation baseline, mid-point and end line field surveys. As part of the

monitoring and evaluation framework, the project will also undertake several thematic

evaluations and studies including the effects of the sub-projects on technical quality, women‟s

participation and empowerment, economic changes and social capital impacts.

35. Regular monitoring and reporting, including maintaining the MIS, will be carried out by

the PMU, who would also undertake the special studies with the assistance of contracted

consultant services. The impact evaluation and more complex special studies will be supported

by the Bank‟s Development Impact Monitoring and Evaluation (DIME) team.

11

C. Sustainability

36. This project will continue to use the AzRIP model which has demonstrated sustainability

by using an integrated approach to infrastructure development which combines sound economic

analysis in the selection of micro-projects, solid engineering design with support from Technical

Design Companies and attention to social dynamics and environmental sustainability.

Operations and maintenance plans prepared by communities will allow them to identify potential

funding gaps and develop financing mechanisms and strategies for long-term maintenance

requirements.

IV. Key Risks and Mitigation Measures

37. Since the proposed project builds on the ongoing AzRIP design and its institutional and

implementation mechanisms, the overall risk is anticipated to be Low. Potential risks are

summarized in the Operational Risk Assessment Framework (Annex 4). The proposed Project

has been strongly endorsed by the Cabinet of Ministers and the Prime Minister‟s Office and the

Project will coordinate closely with relevant central and local line ministries and agencies.

Project implementation risks are expected to be Low as existing PMU staff are experienced and

strongly committed to the project, and appropriate mitigation measures are in place, including

increased monitoring and evaluation at several levels, to ensure transparency and accountability

within the project.

V. Appraisal Summary

A. Economic and Financial Analysis

38. For the original project, an ex-post cost benefit analysis was conducted for 18 of the 340

micro-projects implemented between 2005 and 2009. This exercise was completed by an

independent consultant, who selected an equal number of projects from each of the three target

regions, as well as an equal number of water (potable and irrigation), health, and roads projects.

The findings of the cost-benefit analysis demonstrated a positive economic return from the

micro-project investments.

Ex-Post Cost Benefit Analysis of a Sample of 18 Micro-Projects

Project type

Project

Cost

Stream

Project

Benefit

Stream

Net Present

Value Budget

Number of

beneficiaries

Average for four water projects 39,979 143,096 103,117 31,171 1,444

Average for two irrigation

projects 54,631 11,776,892 11,722,261 34,154 1,200

Average for six health post

projects 442,719 120,334 80,582 38,281 2,645

Average for six roads projects 36,313 1,190,578 1,154,264 30,796 1,626

12

39. In addition to the above analysis, the beneficiary assessment for the original project also

demonstrated important socio-economic benefits. Where AzRIP rehabilitated rural roads, the

travel time to school and markets was reduced by 47% and 26% respectively. Moreover, 78% of

farm products are now brought to markets by farmers themselves, eliminating costly

intermediaries. This represents a significant achievement compared to non-beneficiary villages

in the same region where only 18% of farm produce are brought to market by the farmers

themselves. The value of agricultural production increased by more than US$1 million where

irrigation systems were rehabilitated and primary school enrollment increased by 25% after

rehabilitation of school buildings.

40. As a repeater project, supporting similar types of sub-projects, it is expected that AzRIP-

2 will yield similar positive economic returns and socio-economic benefits. However, given the

expected large number of micro-projects, a full cost-benefit analysis will not be carried out for

each micro-project. However, economic criteria and basic economic analytical tools will be used

to appraise micro-projects both at the community level (who will assess the financial costs of the

project and the degree to which it benefits the majority of community members), along with the

RGAC who will score each proposal based on a number of economic criteria. The specific

economic criteria to be used are outlined in the OM.

41. The livelihoods pilots will also be designed and implemented on the basis of economic

feasibility analysis to be undertaken during the first year of AzRIP-2 implementation, prior to

launching the livelihood initiatives.

B. Technical

42. Project investments will be based on appropriate technology for the infrastructure needs

of local communities, the majority of which have already been tested and validated under the

original project. Over the course of AzRIP implementation, the technical quality of the

completed infrastructure works has improved significantly. In the last year of the project, the

World Bank Task Team Engineer and engineers working for the independent evaluation

consultants deemed construction and engineering works completed in a sample of micro-projects

to be satisfactory. The preparation of each community micro-project is supported by a Technical

Design Company hired by the PMU for each operational zone who ensures technical norms and

standards are adhered to. The Technical Design Companies are responsible for helping with the

preliminary designs of each project, comparing technical and costing feasibility of alternative

designs, preparing technical documentation packages, environmental standards, as well as the

preparation of implementation monitoring and sustainability plans. Each community must also

designate a Community Engineer to collaborate with the Technical Design Company and Project

Assistance Team Engineers. Furthermore, a maintenance plan designed to ensure the

sustainability of the micro-project after its construction must be presented by the community

before the project is approved. For AzRIP-2, these practices will be scaled up to new project

areas and the OM will address in detail technical norms and standards for project preparation,

implementation, as well as operation and maintenance. Also, regular internal and external

technical audits will be undertaken to ensure construction meets the required technical standards.

13

C. Financial Management

43. The financial management (FM) arrangements have been assessed as satisfactory under

AzRIP and will be continued under AzRIP-2. The PMU will be responsible for FM

arrangements. The most recent FM supervision (December, 2011) indicates that the Accounting

and Internal Control system of the PMU is reliable and effective. Under AzRIP, the PMU have

submitted timely Interim Unaudited Financial Reports (IFRs) and project audit reports, the

quality of which have been assessed as satisfactory to the Bank. FM staffing arrangements of the

PMU were also assessed as adequate. The PMU will continue to use these arrangements for the

proposed project. The Bank and management of the PMU will work together to ensure that the

current PMU staff and systems for the proposed project needs are retained. Currently, the PMU

fully complies with the audit requirements of the ongoing project. As is the case with AzRIP,

independent auditors will audit project financial statements under terms of reference acceptable

to the Bank and in accordance with International Standards on Auditing (ISA). The PMU will

submit quarterly IFRs covering the period of one quarter, format and content of which have been

agreed with the PMU.

D. Procurement

44. A procurement assessment carried out during the pre-appraisal of AzRIP-2 in April 2011

found three potential risks: (i) the procurement environment may be affected by the problems

related to governance and corruption; (ii) probable attempts of administrative intervention in

procurement and selection under the AzRIP-financed sub-projects; and (iii) as the project

embraces community participation procurement, the pilot livelihood initiatives may face

procurement risks due to lack of capacity at that level.

45. The assessment concluded that due to their previous involvement in AzRIP, PMU staff

are familiar with Bank procurement procedures and have acquired the adequate experience and

capacity to carry out procurement activities related to the proposed Project. Risk mitigation

measures were discussed with PMU during project appraisal. The Procurement Plan will be

updated at least annually (or as required) to reflect project implementation needs. Procurement

under Component A - Rural Community Infrastructure will be will be carried out by the

communities under the guidance of the ROOs.

E. Social (including safeguards)

46. The primary stakeholders driving this project are the communities themselves, who will

be actively supported in identifying, selecting, planning, implementing and maintaining

infrastructure micro-projects. Communities targeted for assistance will be those suffering

serious infrastructure deficits and will be identified using socio-economic infrastructure

indicators provided by rayon authorities. This ensures that the most disadvantaged communities

in terms of infrastructure access are targeted for mobilization. Under the original project, about

30 communities whose primary inhabitants were national ethnic minorities benefited from

micro-projects and this number is expected to expand under AzRIP-2 as the project moves into

new rayons in the east of the country where ethnic minorities such as the Lezgins account for a

larger proportion of the population. A number of these rayons also border conflict-affected

areas.

14

47. Social development principles such as participation, transparency, gender and social

inclusion and local ownership underpin the micro-project selection, preparation and

implementation process.

48. Aside from communities, other key stakeholders include Rayon ExComm authorities

(local representatives of central government) and the relatively new municipalities. ExComm

authorities play a key role at critical junctures in the micro-project process including the

selection of project communities, the decision to mobilize, securing the relevant permits, and the

handover of specific community projects for operation and maintenance to the relevant line

agencies and ministries. Rayon ExComm representatives also participate in the RGACs.

Currently, municipalities have limited responsibility for rural roads, parks, and cemeteries, as

well as limited financial resources. AzRIP-2 will complement the national decentralization

agenda through engaging municipal officials as community project group members, targeting

training and capacity building measures at municipal officials, and transferring rural roads to

municipalities for operation and maintenance purposes. Furthermore, there is strong

involvement of private sector stakeholders in the form of contractors for the construction of civil

works, as well as Technical Design Companies who support communities in project design and

supervision.

49. Positive social impacts of the Project will include reduced travel time to access markets

and social services resulting in improved incomes, as well as enhanced human capital, increased

agricultural productivity, job creation during micro-project construction and increased

availability of power and potable water to households. Alongside these tangible benefits, it is

also expected that communities will benefit from increased levels of social capital, with

community members, especially women, becoming more engaged in decision making that

affects their lives, along with increasing trust, transparency and information sharing among

community members. This will largely be the result of the strong emphasis placed on consensus

building, broad based participation and community ownership during the community project

process.

50. Compared to the social benefits, Project social risks are relatively minor and mitigation

measures are already in place from the original project. Potential risks include elite capture and

gender bias in sub-project selection, the exclusion of IDPs and ethnic minorities from decision

making processes and project benefits, and potential resettlement impacts of micro-projects. In

order to assess these risks, a Social Assessment was conducted in March 2011. This analysis

found that the risk of elite capture was minimal, as AzRIP successfully introduced informed

participation of the beneficiaries and transparent decision-making at the community level. The

approach created a strong sense of community ownership of the infrastructure project during its

identification and planning, as well as for operations and maintenance.

51. In terms of gender, women actively participated in the process and were well represented

in the community level project committees („Community Group‟). AzRIP-2 will continue to

promote these key principles while paying closer attention to new challenges related to the

inclusion of Internally Displaced Persons ( IDPs) and ethnic minorities, such as intensifying

mobilization and participation of IDPs in the two new rayons (Agdzhebedi and Beilagan) where

15

their presence is significant; better coordination with the Social Fund for the Development of

IDPs Project (SFDI); and more emphasis on female leadership. AzRIP-2 will attempt to capture

social outcomes rigorously through a set of social capital indicators.

52. AzRIP-2 does not trigger OP 4.10 (Indigenous Peoples), but the Social Assessment

carried out as part of project preparation examined some aspects of one major national minority

group (the Talysh) in the southern rayons, which will be included in the newly expanded

coverage areas of AzRIP-2. The study found that the Talysh are integrated in wider society.

Interactions with Government institutions (rayon ExComm and municipality) are well

established and communications in the national Azeri language are not a constraint. Key village

institutions are not different from those in other areas and, with prevailing practices of broad

leadership structures and public meetings, are unlikely to provide an obstacle to AzRIP-2‟s

approach of inclusive participation and transparent decision-making. Like other areas, women

holding public offices, such as teachers and health workers, actively participate in public

meetings and are listened to. The project does not trigger OP 4.12 (Involuntary Resettlement) as

it will not finance activities that will require land acquisition or the displacement of livelihoods

or residences. These potential impacts will be screened out using provisions in the EMP

checklist.

F. Environment (including safeguards)

53. The project does not raise any significant adverse environmental concerns. Experience

derived from the original AzRIP indicates that positive environmental impacts resulted from the

implementation of micro-projects such as improved irrigation, water supply and sewerage

systems. The potentially adverse environmental impacts of AzRIP-2 are mainly associated with

civil works during micro-projects‟ implementation, and include, inter alia, dust, noise, soil and

water pollution, generation of waste materials, waste disposal (including medical waste), and

damage to soil by excavation works.

54. Environmental Assessment. These potential negative environmental impacts trigger the

Operational Policy OP 4.01. The impacts are minor and can be prevented or minimized through

appropriate preventive actions and mitigation measures. Therefore, the project is classified as

Environmental Category „B‟, requiring a partial environmental assessment. Since micro-projects

are not pre-identified and will be determined in the course of project implementation by

applicant communities through intensive participatory processes, an Environmental Management

Framework (EMF) will be applied which will establish screening mechanisms and govern the

process of development and implementation of specific mitigation plans. The EMF for the

original AzRIP has been updated by the Borrower to address impacts from the newly proposed

activities to strengthen rural livelihoods and to reflect the expanded geographical coverage. The

updated EMF has been discussed with stakeholders and has been publicly disclosed by the

Borrower on April 15, 2011.

55. Capacity for the EMF implementation has been built under the original project through a

series of training regularly provided to the PMU, its Regional Offices and potential beneficiary

communities. The PMU Environmental Specialist is responsible for training delivery, assisting

the Regional Offices and applicant communities throughout the micro-project cycle and closely

16

supervising implementation of specific preventive and mitigation measures by project

beneficiaries. The same good practice will continue under AzRIP-2.

G. Other Safeguards Policies triggered

56. Projects on International Waterways. As was the case with AzRIP, AzRIP-2 will

support activities on rehabilitation or construction of irrigation and drainage systems, water

supply improvement and wastewater treatment. Such activities are likely to be developed inter

alia on rivers flowing into the Caspian Sea and trans-boundary rivers, which are international

waterways for the purposes of the World Bank Operational Policy on Projects on International

Waterways (OP 7.50). It is expected (and also based on the experience under the original

project) that proposed micro-projects would not produce a noticeable change for the abstraction

volumes of the systems and would not have an adverse change to the quality or quantity of river

flows, while the works would not change the nature of the original systems. With OP 7.50 being

triggered, riparian states have been notified accordingly.

17

Annex 1: Results Framework and Monitoring .

Country: Azerbaijan

Project Name: Second Rural Investment Project (P122944) .

Results Framework .

Project Development Objectives .

PDO Statement

To improve access to and use of community-driven rural infrastructure and expand economic activities for rural households. .

Project Development Objective Indicators

Cumulative Target Values Data Source/ Responsibility for

Indicator Name Core Unit of Measure Baseline YR1 YR2 YR3 YR4 End Target Frequency Methodology Data Collection

Percentage increase in

access to and use of rural

infrastructure Percentage 0.00 0.00 15.00 20.00

3 times during

project (baseline,

mid-term, final)

Randomized impact evaluation

DIME, Contracted firm

Percentage of households

that are satisfied with the

quality of basic rural infrastructure

Percentage 10.00 40.00 64.00 3 times during project (baseline,

mid-term, final)

Randomized

impact evaluation DIME, Contracted firm

Percentage reduction in travel time to market,

hospital, school, safe

water source

Percentage 0.00 30.00 48.00

3 times during

project (baseline, mid-term, final)

Randomized


Percentage change in

income from household

economic activity Percentage 0.00 16.00 23.00

3 times during

project (baseline,

mid-term, final)



.

Intermediate Results Indicators

Cumulative Target Values Data Source/ Responsibility for

Indicator Name Core Unit of Measure Baseline YR1 YR2 YR3 YR4 End Target Frequency Methodology Data Collection

Number of micro-projects Number 79.00 79.00 215.00 368.00 521.00 600.00

3 times during

project (baseline,

mid-term, final)



Direct project

beneficiaries Number 197500.00 197500.00 537500.00 920000.00 1300000.00 1500000.00

Quarterly and

annual project reports

Project MIS PMU/ROOs

18

Female beneficiaries Percentage Quarterly and


Project MIS PMU/ROOS

Participants in

consultation activities

during project

implementation (number)

Number 700.00 700.00 2000.00 3500.00 4800.00 5600.00

Quarterly and

annual project

reports

Project MIS PMU/ROOS

Intended beneficiaries

that are aware of project

information and project supported investments

Number 0.00 13000.00 35000.00 61000.00 86000.00 100000.00 3 times during project (baseline,

mid-term, final)

Randomized


Number of Women in

Community Project Committees

Number 0.00 160.00 400.00 700.00 1000.00 1200.00

Quarterly and



Percentage of subprojects where necessary

maintenance operations

are taking place with community engagement

Percentage 0.00 0.00 0.00 0.00 0.00 70.00

Six-month and 1

year after MP

completion

Micro-project evaluations

PMU/ROOs

Grievances registered related to delivery of

project benefits addressed

(%)

Percentage 0.00 0.00 60.00 60.00 70.00 80.00

Quarterly and



Change in community

members who feel they

have some influence in community decision-

making processes

(male/female)

Percentage 0.00 0.00 0.00 30.00 30.00 40.00

3 times during

project (baseline,

mid-term, final)


and qualitative

studies and focus groups

Contracted firm

Change in degree of people‟s trust in

community groups

Percentage 0.00 0.00 10.00 20.00 40.00 60.00

3 times during project (baseline,

mid-term, final)

Randomized

impact evaluation and qualitative

studies and focus

groups

Contracted firm

Change in people‟s willingness to contribute

to community project

costs

Percentage 0.00 0.00 15.00 30.00 50.00 60.00

3 times during

project (baseline, mid-term, final)

Randomized

impact evaluation

and qualitative studies and focus

groups

Contracted firm

No. of trainees in

capacity building

activities by kind of activity

(male/female/youth/

minorities/IDPs/municipal/ExComm)

Community training;

Cross visits; Seminars; Conferences

Number 0.00 1100.00 5500.00 10000.00 14500.00 19000.00

Quarterly and

annual project

reports

Project MIS PMU

No. of villages which

hold community-wide Number 0.00 0.00 30.00 60.00 90.00 120.00

Measured 6 and 12

months after

Regional

evaluations PMU

19

meetings organized by

Community Group to discuss public matters

after project completion

(measured at 6 and 12

months after completion

of sub-project)

project completion

No. of communities with new projects

implemented with

internal resources (including activities with

municipality and ExComm)

Number 0.00 0.00 50.00 110.00 260.00 420.00

Measured 6 and 12

months after project completion

Regional

evaluations, PMU

No. of communities with

projects implemented with external resources

Number 0.00 0.00 30.00 60.00 90.00 120.00

Measured 6 and 12

months after project completion

Regional

evaluations PMU

.

20

Annex 2: Detailed Project Description

Azerbaijan: Second Rural Investment Project (P122944)

1. Objective: The Project Development Objective is to improve access to and use of

community-driven rural infrastructure and expand economic activities for rural households. This

would be achieved through: (i) the provision of grants to finance eligible demand-driven micro-

projects in rural infrastructure; (ii) the provision of training and consultants‟ services to support

micro-project development by enhancing the capacity of engaged local stakeholders in all

aspects of micro-project program development; (iii) building opportunities for rural employment

and livelihood support services through the provision of training and consultants‟ services to

carry out pilot livelihood support services in six communities; and, (iv) supporting project

management capacity at the Project Management Unit (PMU) and its Regional Operations

Offices (ROOs) for the purposes of effective management, implementation and monitoring and

evaluation of Project activities.

2. This repeater project is a Specific Investment Loan (SIL) with a total investment cost

estimated at US$53.6 million, of which US$30 million will be financed by IBRD. The Project

will scale up AzRIP both geographically into currently un-serviced rayons and vertically through

the inclusion of pilot livelihood support services and second generation institutional support in

current AzRIP active project areas.

3. The Project has three components:

Component A - Rural Community Infrastructure -US$41.64 million

4. Two categories of micro-project grants will be supported under Component A: (i) micro-

projects in previously un-serviced rayons which meet eligibility criteria set out in the Operational

Manual (OM); (ii) second generation micro-projects in active AzRIP communities with high

performance ratings from previous micro-project implementation and which meet eligibility

criteria set out in the OM, and; (iii) micro-projects submitted by Common Interest Groups

supported under the pilot scheme in Component B which meet eligibility criteria as established

in the OM.

5. The current AzRIP provides investments in demand-driven micro-projects to eligible

communities in five regions (Mughan-Salyan, Lower Shirvan, Nakhchivan, North and North

West). This component will extend coverage and provide funding for demand-driven micro-

projects in rural infrastructure in eleven new rayons in the North and in the Mugan-Salyan zones.

The average size of the micro projects will be US$70,000, while micro-projects valued at over

US$85,000 will require prior review by the Working Group. Micro-project expenses eligible for

financing from the project include identification, design, construction and rehabilitation of the

investment. Potential investments, based on priority needs identified by communities include,

inter alia, rehabilitation or construction of:

Potable water systems

Irrigation infrastructure

Sewerage and drainage systems

Secondary roads and small bridges

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Small-scale local electricity distribution

Primary schools and kindergartens

Health centers

Community centers

Parks

Market places

6. Costs: This component will support costs related to the identification, design,

construction, rehabilitation, and initial operation and maintenance of the investment.

Beneficiaries are required to share the cost of the investment and to ensure the availability of

funds for O&M after the grant funding has been completed. Micro-projects require a minimum

community contribution of 10% of the investment cost, of which at least 2% must be in cash.

7. Eligibility: The project targets newly eligible rural communities and communities in

existing project coverage areas in 56 rayons across the country (11 new rayons and 45 rayons

served under AzRIP). These comprise the North zone rayons of Aghsu, Balakan, Gabala, Gakh,

Gobustan, Guba, Gusar, Ismayilli, Khachmaz, Oghuz, Shaki, Shamakhi, Zakatala and new

rayons of Absheron, Khizi, Shabran and Siyezen and; North West zone rayons of Aghstafa,

Barda, Dashkasan, Gadabay, Goranboy, Khanlar, Qazakh, Samukh, Shamkir, Tartar and Tovuz;

Lower Shirvan zone rayons of Aghdash, Goychay, Hajigabul, Kurdamir, Ujar, Yevlakh and

Zardab and Yevlakh; Mughan Salyan zone rayons of Bilasuvar, Imishli, Jalilabad, Neftchala,

Saatly, Sabirabad and Salyan and new rayons of Aghjebedi, Astara, Beylagan, Lenkaran, Lerik,

Masalli and Yardimli; Nakhchivan zone rayons of Babek, Julfa, Kengerli, Ordubad, Sadarak,

Shahbuz and Sherur. Micro-projects in Nakhchivan are to be fully financed by Government

funds. Other zones are eligible for IBRD financed micro-projects.

8. These rayons will benefit from mobilization and access to improved infrastructure.

Households and individuals from well-performing micro-projects in the 45 existing rayons

served under AzRIP will benefit from second generation community infrastructure and

livelihood support services.

9. The size of the communities should be greater than 1,000 and less than 10,000 people,

but smaller communities can cluster with neighboring communities to achieve scale, in regions

that meet established selection criteria and have a higher relative incidence of poverty. A total of

600 micro-projects are expected to be implemented in communities meeting eligibility criteria.

10. Current micro-project cycle procedures as detailed in the AzRIP OM will be maintained

in the new Project. Grants to project beneficiaries shall be delivered in accordance with

eligibility criteria and procedures acceptable to the Bank and shall include the following: (a) the

Grant(s) shall be denominated in Manat; (b) grants for financing micro-projects under

Component A shall be made available to: (i) municipalities; community-based organizations

registered as legal entities, which consist of representatives of rural communities with

populations of more than 1,000 and less than 10,000 (including clusters of smaller communities

that add up to 1,000), eligible under the OM; and any other associations and organizations as the

Government and the Bank may agree.

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11. ROOs shall launch a promotion and outreach campaign, issue requests for micro-project

proposals and assist in the preparation of micro-project proposals. Investments will be identified

by beneficiaries, prioritized through local participatory planning processes, and appraised

according to technical, financial, social, economic, institutional and environmental criteria set

out in the OM. Micro-project committees formed as part of community mobilization, as defined

in the OM, shall submit proposals of micro-projects to ROOs on behalf of their respective

community. ROOs shall appraise and evaluate micro-project proposals based on the following:

(i) impact on the community; (ii) institutional capacity to implement the service intended by the

Micro-project; (iii) financial viability; and (iv) technical and environmental safety. Any micro-

projects involving land expropriation shall not be eligible for consideration. ROOs shall register

the results and forward the summary evaluation of proposals to the respective Regional Grant

Approval Committee (RGAC) for their approval or rejection. Any members of the RGACs who

may have a potential conflict of interest in a particular proposal shall recuse themselves from

making a decision on that particular proposal.

12. The amount of individual grants shall be based upon the estimated cost of goods, works

services and operating costs that will be required for the Micro-project, and shall not exceed 90%

of the overall costs of Micro-projects. The Government shall take necessary actions, satisfactory

to the Bank, to ensure that, where proposals approved by the RGACs call for implementation of

micro-projects by community-based organizations that are not already registered as legal entities,

the charters of such organizations shall be registered in accordance with the laws of the

Government in a timely manner. The Government shall provide each Grant under a Grant

Agreement with the respective beneficiary community on terms and conditions approved by the

Bank, which shall include the following:

(a) The Beneficiary shall ensure that the grant funds are used exclusively for the

purposes specified for the Micro-project approved by the RGAC.

(b) The Beneficiary shall provide no less than 10% of the total cost of the Micro-

project, in cash or in-kind.

(c) The Government shall obtain rights adequate to protect its interests and those of

the Bank, including the right to: (i) suspend or terminate the right of the Beneficiary to

use the proceeds of the Grant, or obtain a refund of all or any part of the amount of the

Grant then withdrawn, upon the Beneficiary‟s failure to perform any of its obligations

under the Grant Agreement; and (ii) require each Beneficiary to: (a) carry out its Micro-

project with due diligence and efficiency and in accordance with sound technical,

economic, financial, managerial, environmental and social standards and practices

satisfactory to the Bank, including in accordance with the provisions of the Anti-

Corruption Guidelines applicable to recipients of loan proceeds other than the

Government; (b) provide, promptly as needed, the resources required for the purpose; (c)

procure the goods, works and services to be financed out of the Grant in accordance with

the provisions of this Agreement; (d) maintain policies and procedures adequate to enable

it to monitor and evaluate in accordance with indicators acceptable to the Bank, the

progress of the Micro-project and the achievement of its objectives; (e) (1) maintain a

financial management system and prepare financial statements in accordance with

consistently applied accounting standards acceptable to the Bank, both in a manner

adequate to reflect the operations, resources and expenditures related to the micro-

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project; and (2) at the Bank‟s or the Government‟s request, have such financial

statements audited by independent auditors acceptable to the Bank, in accordance with

consistently applied auditing standards acceptable to the Bank, and promptly furnish the

statements as so audited to the Government and the Bank; (f) enable the Government and

the Bank to inspect the micro-project, its operation and any relevant records and

documents; and (g) prepare and furnish to the Government and the Bank all such

information as the Government or the Bank shall reasonably request relating to the

foregoing.

13. The Government shall exercise its rights under each Grant Agreement in such manner as

to protect the interests of the Government and the Bank and to accomplish the purposes of the

Loan. Except as the Bank shall otherwise agree, the Government shall not assign, amend,

abrogate or waive any Grant Agreement or any of its provisions.

14. A village may not implement more than one project at a time, but since numerous

municipalities comprise two or three villages, it is not excluded that more than one project can be

implemented in one municipality. Eligible proposals have to be endorsed by at least 50% of

community members 16 years or older with adequate representation as specified in the OM. The

proposals have to include information on appraisal criteria such as presence or efforts to create

community groups, participation in training programs, ability or willingness to collect taxes and

a statement confirming the communities‟ investment share. The OM explains the detailed

eligibility and appraisal criteria.

15. AzRIP-2 support for second generation projects for community infrastructure and

Common Interest Group proposals will be based on eligibility criteria and performance ratings in

accordance with project and CIG evaluation standards set out in the OM.

16. Procurement. Procurement by grantees will be conducted based on the September 2003

“Manual for Conducting Very Small-Value Procurement under World Bank/IDA Small Grants,

Loans and Credits.” Training on compliance with the procurement procedures will be provided

as part of the capacity building and technical assistance for proposal preparation. Eligible

expenditures include works, goods and services for micro-projects.

17. Reporting. The micro-project recipient will be required to complete regular reporting as

described in the cooperation agreement. The reports serve three main purposes: (i) regular

progress monitoring; (ii) performance monitoring; and (iii) payment requests based on progress

and performance.

18. Beneficiary community contribution. Ten percent of micro-project costs will be

provided through community contributions in cash or in-kind. The minimum cash contribution

shall be 2%. The in-kind portion of the Community Contribution can be work (unskilled labor),

services, material and equipment. Members of the Community Group and the Municipal

Council can not be paid for their work. Their work can be considered as in-kind community

contribution when calculating the budget for the Community Project. The in-kind contribution is

estimated by the PAT team at design in consultation with the Community Group. The Technical

Design Company calculates up to a maximum of 8% of the micro-project budget for the

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technical package accompanying the Project proposal. Community in-kind contributions are

verified at ROO site visits and documented in the Monitoring Reports submitted to the PMU to

trigger release of the CP tranches.

19. Participatory Performance Monitoring and Evaluation (PM&E). AzRIP-2

monitoring and evaluation activities are facilitated and coordinated by the Monitoring and

Evaluation and MIS Specialists at the central level and the M&E/MIS Specialist at the regional

level. The objectives of the M&E activities are to: (i) provide AzRIP-2 staff and stakeholders

with regular information on project implementation and outputs; (ii) identify bottlenecks and

impediments in project implementation; (iii) ensure that all the activities under AzRIP-2 are

implemented in compliance with the OM; (iv) determine to what extent the PMU achieves its

goals and objectives, and how it affects the intended beneficiaries‟ social conditions and

capacities; and (v) maintain acceptable performance standards for environmental and social

impacts. Besides project level and local level project monitoring, AzRIP-2 relies on

participatory monitoring and evaluation that engages local communities, as well as

municipalities and other stakeholders in a collaborative approach. The main objective is to

improve accountability, strengthen partnerships between all stakeholders, primarily between

local governments and communities and interest groups, encourage inclusiveness and promote

empowerment at the local level while accumulating lessons learned. Participatory M&E

methods to be used include community workshops, Participatory Rural Appraisal, beneficiary

assessment, self-assessment/evaluation methods, and community records and indicators.

Component B - Technical Assistance for Rural Infrastructure – US$4.75 million

20. This component will fund technical support services for micro-project implementation

and pilot livelihood support services. There are two sub-components, namely: (i) sub-component

B1 on Supporting Micro-Project (MP) Development and (ii) sub-component B2 on Piloting

Livelihood Support Services.

21. (i) The sub-component on Supporting MP Development will enhance the capacity of

engaged local stakeholders including communities, local authorities, RGACs, Project Assistance

Teams (PATs) and staff in the ROOs in all aspects of micro-project program development.

Stakeholder capabilities in functions of contracting, procurement, financial management and

participatory monitoring and evaluation will be strengthened.

22. The MP preparation, selection and implementation steps are described in detail in the

OM. In summary, the MP cycle comprises the following seven main steps:

1) Outreach planning

2) Community mobilization and MP preparation

3) MP appraisal

4) MP approval

5) Signing of Cooperation Agreement and MP implementation

6) MP completion and handover

7) MP evaluation.

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23. PATs and Technical Design Companies provide assistance to communities in

identification and preparation of project proposals through community mobilization and follow-

up activities. After appraisal by the ROO, the proposal is sent to the Regional Grant Approval

Committee (RGAC) for approval. The RGAC comprises a mixture of government and civil

society members identified and selected from stakeholders in the economic zone of operations of

the ROO. The OM establishes procedures on how the RGACs deal with the MP approval

process and MP proposals. Approved MPs enter into a cooperation agreement with the PMU

which will become effective once the Beneficiary Investment Share has been deposited in the

recipient‟s account. MPs below US$l5,000 can be implemented directly by the community and

their legal entity will act as both implementing and executing agency. They will recruit workers,

purchase equipment, materials and small-scale services (e.g. a plumber), and undertake

procurement activities which will have been described in detailed procedures in the scope of

work of the contract. MPs above US$15,000 are executed by outside contractors, who will be

contracted by the legal implementing entity according to the competitive procurement

procedures described in the scope of work of the contract. The ROO Procurement Officer will

ensure that adequate procedures are included in the contract, train the implementing partners and

supervise the procurement aspects of project implementation.

24. (ii) The sub-component on Piloting Livelihood Support Services was developed in

response to demand from communities supported under the original project who had invested in

economic infrastructure such as rural roads and irrigation systems. Community demand centered

on the need to support income generating activities at the community level. Diagnostic work

conducted by an International Livelihood Consultant recommended piloted livelihood support

services in six communities that already successfully implemented AZRIP micro-projects

focused on economic infrastructure such as road rehabilitation or irrigation schemes. Further

community selection criteria recommended included having a mix of communities from

Azerbaijan‟s agro-ecological zones (highlands, upland-rainfed, and lowlands), along with

willingness and commitment to organize Common Interest Groups (CIGs) focused on income

generation activities, and a willingness and capacity to engage in new activities and form new

institutions. These factors will be assessed in advance of providing services by PAT‟s

facilitators and PMU staff conducting follow-up field visits to communities that implemented

economic infrastructure. Once selected, communities will be eligible for the following services:

a. Mobilization and Organization of Common Interest Groups: Mobilization within

communities will begin with a three or four day Participatory Rural Appraisal (PRA)

process. While similar to the process used for mobilizing communities for infrastructure

micro-projects, the aim of the PRA exercise will be to conduct a participatory diagnosis

of the community‟s economic challenges. Adopting this approach will generate

important information on existing and potential on-farm and off-farm income generating

activities, and opportunities and constraints to realizing those opportunities. The PRA

exercise will further determine whether or not a community is committed and capable of

forming a Community Interest Group (CIG). CIGs will be selected among participants in

the PRA process, but unlike Community Project Groups, will be composed of people

with a common economic interest (e.g. dairy producers, handy-craft workers,

beekeepers). A particular emphasis will be placed on supporting CIGs that include or are

exclusively composed of women and youth. Following the PRA exercise, mobilization

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teams will return to each community with one or two weeks to assess progress in group

formation, to provide training on group dynamics, and to begin facilitating the process of

identifying income generating activities.

b. Identification of Income Generating Activities: Income generating activities will be

identified based on the diagnostic work conducted during the PRA process and will

respond to real needs identified by the community. Key principles underlying the

selection of activities should include their potential to: (i) be people centered and

participatory; (ii) be socially, environmentally and economically sustainable in the long

term; (iii) partner with other private sector actors (e.g. agri-business processors, tourist

operators) and donor initiatives (e.g. Oxfam, IFAD); and (iv) empower vulnerable

community members such as youth and women. When identifying specific investments

necessary for implementing the IGA, priority should be given to fixed assets (e.g.

buildings and equipment), costing less than AZN 50,000, that are technically feasible and

within the competence of the CIG to realize. Potential investments may relate to farm-

based activities (e.g. agricultural machinery and equipment); off-farm activities (e.g. milk

processing facilities); and non-farm activities (e.g. carpet making looms, honey

production equipment). An economic feasibility analysis will be required for identified

IGA proposals.

c. Business Plan Preparation: Once activities have been identified, training and advisory

services will be provided around the preparation of business plans. This support will

include market analysis, procurement planning, financial analysis and planning,

implementation planning and human resource and organization/management planning.

d. Formalizing CIG Status: The PMU will also provide legal support to CIGs in

formalizing their status as limited liability companies. Once registered, CIGs can open a

bank account for depositing income generated by the CIG.

e. Training and Technical Support: CIG members will also benefit from training and

advisory support on implementing their selected IGA. Topics covered will include basic

book-keeping, management principles, as well as technical topics relevant to the activity

selected.

25. It is estimated that providing the whole range of livelihood support services will cost

AZN 20,000 per community (10,000 for mobilization / organization services, and 10,000 for

training and technical support). At the end of the mobilization and training process, CIGs may

be eligible to submit their IGA business plan as a micro-project proposal that could be funded

under Component A. The eligibility of the proposal will depend on an assessment made by the

PMU according to criteria such as the: (i) regularity of CIG meetings; (ii) election of CIG office

holders; (iii) maintenance of good records; (iv) technical and economic viability of the proposal

– judged on the basis of the quality of the business plan; (v) environmental and social

sustainability of the proposal; and (vi) relevance of the proposal to the PRA diagnosis. Only

once these criteria have been met to the satisfaction of the PMU will a proposal be deemed

eligible for funding. All micro-project proposals will have to contribute 20% to the overall cost

of establishing the IGA, at least 10% of which must be cash. Further details on this sub-

component will comprise a dedicated operational manual prepared for the livelihoods pilots prior

to launch of the pilot program.

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Component C - Project Management and Results Monitoring – US$7.21 million

26. This component will finance the administrative and operational project implementation

and management costs, including overheads of Project Management Unit (PMU) professional

staff as well as PMU and Regional Operations Office (ROO) support staff, project outreach and

support to Regional Grant Approval Committees (RGACs).

27. Management responsibility for AzRIP-2 will come under the State Agency for

Agricultural Credits (SAAC) within the Ministry of Agriculture. AzRIP-2 will be managed by

the Project Management Unit (PMU) located in the SAAC office in Baku to provide overall

coordination and four decentralized Regional Operations Offices (ROOs) in the selected project

regions. Because the program is community demand-driven, decisions as to where, how and

what investments will be made are not defined in advance. The project will be managed with an

OM that will provide the PMU the authority and operational guidance needed to deliver and

account for funding, provide for institutional capacity building, and supervise implementation of

selected micro-project by recipients. The ROO staff will be guided by the procedures in the OM

to work with eligible communities, to assist them in identifying and developing micro-project

proposals and in seeking approval from the Regional Grant Approval Committees (RGACs).

The ROOs will then prepare cooperation agreements with the grant recipients for implementing

the MPs that have been approved by the RGACs. The recipients will implement their MPs under

the supervision and with the institutional support of the ROOs. The ROOs will monitor and

report on a step-by-step basis on the process and decisions made in the micro-project cycle and

keep detailed records in the Management Information System (MIS).

28. Evaluations will also include qualitative and participatory evaluation analysis, which will

allow ROOs, the PMU, the Government, the Bank and other donors to have regular updates of

the progress of the program. The PMU and the ROOs will use the MIS and M&E results to

continuously improve project management.

29. In addition, a randomized impact evaluation will be utilized in AzRIP-2. The impact

evaluation will seek to provide answers to four sets of questions. First, it will analyze the impact

of the project on poverty reduction. Second, it will assess whether the project improves access to

and use of basic services, such as education, health, water, roads. Third, it will evaluate the

impact of the project on communities‟ awareness and participation in community development.

Fourth, it will evaluate the impact on social capital dimensions, such as groups and networks,

trust and solidarity, collective action and cooperation, social cohesion and inclusion and

information and communication. A special focus of the evaluation will be on gender issues and

the methodology will include specific designs to disaggregate project results by gender.

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Attachment 1 to Annex 2:

Summary Description of Sub-Component on Piloting Livelihood Support Services

30. This subcomponent will serve to:

a. Develop capacity of involved stakeholders (communities, groups and individuals) to

identify, plan and implement income-generating micro-projects;

b. Identify and test selected institutional models for community livelihood projects;

c. Test the process of livelihood project planning and management with communities:

through identification, design, implementation, analysis and evaluation; and

d. Develop detailed operational guidelines for scaling up the livelihood pilots.

Activities and Responsibility

31. Work under this sub-component will be captured in two main phases, Inception and

Implementation. The main activities in the Inception Phase will be as follows:

Inception

Information outreach, selection of communities

Identify shortlist of possible communities

Visit local authorities and communities, information sharing, assess communities

Select final pilot candidates

Diagnostic

Diagnostic research conducted by contracted researchers on the key constraints to

income generation in selected communities

Diagnostic workshop to verify research findings and identify lessons learned

Community mobilization

Mobilization workshops for the entire community

Participatory Rural Appraisal exercise to select micro-project

Establish Community Groups

Training, IGA project planning

Training Community Groups in IGA methodology

Development of community IGA Proposals and Business Plans

Selection of IGA Projects by the Community Groups

Registration, Appraisal, Approval of the Community Group as a legal entity

capable of implementing an IGA

Approval and signing Cooperation Agreement between the Community Group

and the PMU.

32. The main activities in the Implementation Phase will be as follows:

Procurement and Implementation

Procurement of inputs for realizing the IGA

Start implementation of projects

Monitoring and evaluation

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Quarterly review of progress, on-going project adjustment

Annual review and workshop

Project evaluation

Completion, Handover and Evaluation

Completion and handover

Implementation Arrangements

33. The PMU will lead in implementing the pilots, managing the workplan, supervising

activities, facilitating partner relationships and monitoring progress of the projects. The PMU

will also work closely with community groups and local government authorities throughout the

pilot phase. AzRIP-2 PMU will need to recruit additional capacity to enable it to undertake

additional tasks. This will include legal, agricultural, and business development expertise.

34. Communities will be selected according to criteria developed for the purpose. Those

selected will be community groups or associations registered under the Municipality, and as such

they are allowed to generate revenue.

35. A number of topics to investigate have been identified and these will be addressed during

the Inception Phase through a mixture of quantitative and qualitative methods. National NGOs

and service providers will be selected for this work based on competence, reputation and

previous performance. It seems likely that a number of pilot initiatives will be related to

agricultural markets, and will engage in value chains. Depending on the selected sub-sectors and

commodities, private sector partners will be selected who are competent and are prepared to

invest. Depending on the nature of the pilots, other partners will be selected to work with

community groups, to support their work and help deliver positive outcomes.

Criteria for selection of Communities

36. The process of selection of communities will be made using the following criteria.

Levels of vulnerability

Levels of assets (physical, financial, natural)

Levels of income, income diversification

Local agro-ecology

Altitude, relief/topography, kind of agriculture (main crops, livestock etc),

irrigation

Existing activities

Main farm, non-farm and off-farm activities undertaken by community

Local employment

Opportunities for local employment

Willingness to participate and contribute through savings

Communities must be willing to engage in new and challenging activities.

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Annex 3: Implementation Arrangements


1. Project institutional and implementation arrangements for:

A. Project Administration Mechanisms

Project Administration Mechanisms

2. The project will be under the general management of the State Agency for Agricultural

Credits (SAAC). Responsibility for the day-to-day management and administration will be

delegated to the Project Management Unit (PMU) which will be maintained within the structure

of the SAAC. The PMU functions will include procurement, financial management and

disbursement, ensuring project compliance with the Operational Manual (OM) and the World

Bank safeguards, monitoring and evaluation, and reporting. The PMU has extensive experience

with World Bank-financed operations, and the successful implementation of AzRIP is the basic

justification for using the existing project implementation arrangements, including management

structure, for AzRIP-2. The AzRIP-2 Organization Chart is shown on Page 32. The project

institutional arrangements occur at the national and regional levels. Institutional arrangements at

the national level include the Project Working Group and the PMU.

3. The PMU will maintain core staff, including the Director, Deputy Director, Engineers,

procurement, financial management, environmental, M&E, MIS and community development

staff, and quality control personnel. The PMU has developed the necessary experience and

competence to manage core functions such as procurement and financial management, which

would allow for a quick start of project implementation. The PMU Director is responsible for

ensuring, on a daily basis, that the project is progressing according to plan and is responsible for

ensuring that the PMU is fulfilling its tasks. The Deputy Director will be in charge of day-to-day

operations of AzRIP-2, reporting to the Project Director. The M&E Specialist will be

responsible for establishing a project-wide M&E system to track the progress of the project. The

community development staff will be in charge of community mobilization and enhancement

activities of the project. The Environmental Consultant will coordinate the environmental

monitoring work and ensure that project activities are carried out in accordance with the EMP.

The Senior Engineer will coordinate engineering aspects of the project and ensure that AzRIP-2

technical standards are followed in design and implementation of MPs.

4. SAAC maintains the Working Group which was established with the primary objective to

review and adjust the policies and procedures outlined in the OM to effectively meet the project

needs. The Working Group is also tasked to review community projects in excess of US$85,000.

The Working Group consists of relevant representatives from the Ministry of Economic

Development, Ministry of Agriculture, the Parliamentary Commission on decentralization and

municipal development, chairpersons of RGAC and a member of civil society.

5. The PMU will be supported by four Regional Operations Offices (ROOs) acting as the

project‟s representation at the regional level. The PMU will provide institutional support to the

ROOs which will be responsible for daily project management and monitoring of the community

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project portfolio. The ROO staff will be contracted by the PMU and include skills required to

carry out appraisal, contracting, supervision and monitoring of community projects. These

centers will maintain close liaison with local authorities, civil societies, private sectors, and

communities. The ROOs will be focal points for project activities and fully equipped with

computers, office equipment, and dedicated transport for field staff. The ROOs will also

accommodate the Project Assistance Team (PAT), the Regional Grant Approval Committees

(RGAC) and the Technical Design Companies. The ROOs will support and monitor the

operations of PAT and facilitate the meetings of regional micro- project grant approval

committee. The ROOs will also facilitate contacts of the technical design companies with

participating communities and will be responsible for communications outreach at the rayon

level.

6. Project Assistance Teams (PAT) will act as the Service Provider for AzRIP-2 zones and

will be responsible for coordinating all aspects of community mobilization, training, advising on

procurement and providing technical assistance to communities in the preparation of CP

proposals. The main services of PAT include rapid community assessment and organizing cross

fertilization visits and regional capacity building workshops. The PATs will also assist

community participatory M&E groups in monitoring implementation of the micro-projects. All

PAT staff are employed as full time local consultants by the PMU and coordinated by the Project

Deputy Director and community development staff. PAT reports directly to the PMU. The

PAT‟s work in the community is monitored by their respective ROOs, but they will operate

under the supervision of the PMU. PAT will consist of a team leader, mobilizers, trainers,

engineers, procurement officer and accountant.

7. The Regional Grant Approval Committees (RGACs) are located in the project target

zones and review all community project proposals for approval. The RGACs include

representatives from the rayon executive committees, municipalities, civil society and regional

representatives of the MOA and MOED. The RGACs will also be housed within the ROOs, in

order to facilitate communication. Finally, the PMU will recruit the technical design companies

in each zone with the objective to provide technical assistance to communities in engineering

aspects of micro-projects. The design companies would also assist the communities and the

PMU in quality control and construction supervision.

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AzRIP-2 ORGANIZATIONAL CHART

33

B. Financial Management, Disbursements and Procurement

Financial Management (FM)

8. The financial management arrangements for the project are satisfactory. The PMU

within SAAC will be responsible for FM arrangements. The PMU implemented AzRIP and its

financial management arrangements have been assessed as satisfactory. The project was closed

on March 31, 2012. The latest FM supervision indicates that Accounting and Internal Control

System of the PMU is reliable and effective. Financial Management staffing arrangements of

the PMU were also assessed as adequate.

9. The Inherent Risk, Control Risk, and Project Risk of the project are all rated as Moderate.

Due to a gap between the closing of the previous project and the anticipated effectiveness of

AzRIP-2, retroactive financing shall cover expenditures incurred and payments made for

eligible expenditures in an amount not exceeding US$ 4.2 million prior to the date of signing of

the Loan Agreement but on or after April 1, 2012. Therefore, the sustainability of the current

staffing arrangements of the PMU is assessed as low risk.

10. Country systems: A number of studies carried out for Azerbaijan (PEFA Assessment,

February 2008 and ROSC, September 2006) in the Public Financial Management (PFM) area

identified set forth recommendations to strengthen public and corporate sector accounting,

auditing, governance, and financial accountability frameworks. The Government has made

efforts to strengthen public financial management by enacting a Budget System Law,

modernizing Treasury operations and strengthening the capacity of the Chamber of Accounts.

The Government continues to receive donor support to reinforce public financial management,

particularly to improve budget preparation and allocation, introduce an internal audit function

and increase overall accountability and transparency in financial reporting. Despite the lack of

broad reliance on country systems in some areas of PFM, for Planning and Budgeting and

Internal Controls in AzRIP-2, country systems will be used and accompany relevant procedures

prescribed in the OM.

11. Budgeting and counterpart funding: The PMU will have overall responsibility to

coordinate the budget preparation with all project beneficiaries. Budget figures will be entered

into the accounting software and their execution will be monitored through the quarterly interim

un-audited financial reports (IFRs). The PMU will ensure timely data inflows from project

beneficiaries in the agreed format. The project budget will be split by quarterly expenditures,

components and sources of finance. The draft project budget will need to be agreed with the

relevant government organizations and project beneficiaries before sending it to the Bank.

Government counterpart funding should be made available to government agencies in a timely

manner.

12. Flow of Funds: The Bank funds under the Project will be disbursed through transaction-

based disbursement methods that include: reimbursements with full documentation,

reimbursements on the basis of Statements of Expenditures for small expenditures with defined

34

thresholds, payments against issued Special Commitments, direct payments to third parties, and

payments through the Designated Account. Government co-financing funds will be disbursed

through the Treasury system of the MOF. To facilitate the flow of funds for micro-projects not

exceeding US$15,000 which do not require the selection of a subcontractor, AzRIP PMU shall

facilitate opening of a local bank account at a commercial bank at the regional level by

municipalities representing the interests of local communities. The initial grant transfer shall be

made after approval of the Community Project and signing of the Cooperation Agreement.

Subsequent transfers will be based on agreed milestones. For MPs above US$15,000 and

executed by contractors, payments will be made directly to the subcontractor based on the

community‟s request and submission of necessary documents for subsequent MP tranches.

13. Accounting: The PMU maintains its accounting records in 1C based accounting system.

It has been agreed with the PMU that it would retain the existing accounting software. The

software will have the capacity to generate IFRs of the project.

14. Internal controls: Existing Accounting and Internal Control systems of the PMU have

been assessed as reliable and effective. To further strengthen the internal control environment

of the project the Bank will hire an independent consultant to review at least 25% of civil works

contracts for accuracy of design documentation and conduct physical verification of works.

This would allow the Bank to ensure that funds are spent for intended purposes and eligible

expenditures. In case of funds applied to ineligible expenditures, the implementing agency

should return the portion of ineligible expenditures to the Bank. All financial management

related documents will be signed first by the FMS and approved by the PMU Director.

15. Financial Reporting: The PMU has a history of submitting timely IFRs for AzRIP which

were satisfactory to the Bank. The PMU will submit quarterly IFRs covering the period of one

quarter, the format and content of which have been agreed with the PMU for AzRIP-2.

16. External Audit: Currently the PMU fully complies with the audit requirements of the

existing project. As was the case with AzRIP, a financial audit of the project financial

statements will be required: independent auditors will audit project financial statements under

terms of reference acceptable to the Bank and in accordance with International Standards on

Auditing (ISA). Project audit reports will need to be submitted to the Bank within six months

of the end of each calendar year and at project closing. In accordance with "The World Bank

(the Bank) Policy on Access to Information" dated July 1, 2010 the Bank requires that the

borrower makes the audited financial statements publically available in a timely fashion and

manner acceptable to the Bank. In addition, following the Bank‟s formal receipt of these

financial statements from the borrower, the Bank makes them available to the public in

accordance with this policy.

Disbursements

17. The loan will be disbursed through transaction-based disbursement methods that include:

reimbursements with full documentation, reimbursements on basis of Statements of

Expenditures for small expenditures with defined thresholds, payments against Special

Commitments, direct payments to third parties, and payments through the Designated Account.

35

18. Designated Accounts. To facilitate project implementation, a Designated Account will

be opened in a commercial bank on terms and conditions acceptable to the Bank, for the IBRD

loan. The Designated Account, which will be managed by the PMU, will be replenished on a

quarterly basis, as needed. The total ceiling will be limited to US$2 million for the IBRD loan.

The Designated Account will be audited annually in conjunction with the audit of the project

financial statements.

19. Disbursements will be made on the basis of full documentation for: (i) contracts for

goods costing more than the equivalent of US$200,000 each; (ii) contracts for works costing

more than the equivalent of US$1 million each; and (iii) services under contracts of more than

the equivalent of US$100,000 for each consulting firm and more than the equivalent of

US$50,000 each for individual consultant. Disbursements below these thresholds and for

expenditures against incremental operating costs and training would be made according to

certified Statement of Expenditure (SOEs). For all expenditures financed under Statement of

Expenditures (SOEs) full documentation in support of the SOEs will be retained in the PMU for

at least two years after the project closing date. This information will be available for review by

Bank missions during project supervision and by the projects auditors. SOEs will be audited in

conjunction with the annual audit of the project. Further instructions on the size of the

Minimum Application and on how funds will be withdrawn from this Loan will be provided in

the Disbursement letter.

20. The withdrawal of proceeds from the IBRD loan will be made in accordance with the

following schedule:

Category Amount of the Loan Allocated

(expressed in USD)

Percentage of

Expenditures to be

financed (Net of VAT)

(1) Goods, works, non-consulting

services, and consultants‟ services,

Training, and Incremental

Operating Costs for the Project

8,925,000 100%

(2) Grants

21,000,000 90%

(3) Front-end Fee 75,000 Amount payable pursuant to

Section 2.03 of this

Agreement in accordance

with Section 2.07 (b) of the

General Conditions

(4) Interest Rate Cap or Interest

Rate Collar premium

0 Amount due pursuant to

Section 2.07(c) of this

Agreement

TOTAL AMOUNT 30,000,000

36

21. Government Contribution. The Government‟s contribution of US$20 million to finance

project expenditures will be disbursed from budget allocations through the Treasury system of

the MoF, and managed by the PMU. Funds will be released to the project to finance project

expenditures as expenditures are incurred, and the Project Account shall be replenished

regularly to minimize delays in project implementation.

22. Beneficiary Contribution: The beneficiary contribution to finance project expenditures is

US$3.6 million.

23. Retroactive financing. Withdrawals up to an aggregate amount not to exceed US$4.2

million equivalent may be made for payments made on or after April 1, 2012, for eligible

expenditures.

Procurement

24. Procurement for the Project will be carried out in accordance with the World Bank‟s

“Guidelines: Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans

and IDA Credits & Grants, January 2011” and the “Guidelines: Selection and Employment of

Consultants under IBRD Loans & IDA Credits & Grants by World Bank Borrowers, January

2011;” and the provisions stipulated in the Legal Agreement.

25. Procurement Risk Assessment. A procurement assessment carried out during pre-

appraisal AzRIP-2 in April 2011 found three potential risks: (i) the procurement environment

may be affected by problems related to governance and corruption; (ii) probable attempts of

administrative intervention in procurement and selection under the project funded sub-projects;

and (iii) as the project involves community participation, including in the proposed livelihood

pilots, addressing procurement issues at that level may create problems due to lack of capacity.

As a result, the overall project risk for procurement is considered substantial. Risk mitigation

measures have been discussed with the PMU and incorporated in project design. The

procurement plan for the first 18 months of implementation was finalized during negotiations.

It will be updated at least annually (or as required) to reflect project implementation needs. The

procurement under the Rural Community Infrastructure Component will be undertaken by the

community under the guidance of the Regional Operations Offices.

26. The general conclusion is that the core PMU has adequate experience to carry out

procurement activities related to AzRIP-2. The staff is familiar with Bank procurement

procedures and guidelines as they have been involved in, and gained substantial knowledge and

experience during the implementation of AzRIP. The Project will finance various contracts for

civil works with a wide geographic spread, technical services, consultancy contracts and several

contracts for goods, as indicated in the Procurement Plan.

27. Procurement Plan and Procurement Arrangements. The PMU, has developed a

Procurement Plan for project implementation which provides the basis for procurement

methods. All contracts in the procurement plan shall be grouped in bid packages as much as

possible to encourage better/wider competition. This plan was agreed between the Borrower

and the Bank during negotiations. It will be available at the office of the PMU and on the

37

Bank's external website. The Procurement Plan shall be updated in agreement with the Bank

annually or as required to reflect the actual project implementation needs and improvements in

institutional capacity. Contracts not subject to Bank‟s prior review will be post reviewed by the

Bank‟s Procurement Specialist assigned to the project. Post review of contracts will be carried

out once per year. Not less than 5 % of the contracts under Component A: Rural Community

Infrastructure Component; and 20% of the contracts under Component B: Technical Assistance

for Rural Infrastructure, and Component C: Project Management and Results Monitoring will

be post reviewed by the Bank.

28. The following measures were agreed to mitigate the remaining risks and maintain the

implementing team‟s capacity:

The procurement section of the OM will be prepared by the PMU which, among other

things will elaborate on the roles and responsibilities in the management and

coordination of the procurement process, preparation of terms of reference and

technical specifications, evaluation, establishment and appointment of evaluation

committees, conflict of interest mitigation measures, record keeping, contract

management, a complaint handling mechanism, etc;

as needed, additional staff with experience in procurement will be hired to strengthen

the capacity of the PMU for coordination and management of the procurement and

management of the significant number of contracts;

the Bank‟s Procurement Specialist assigned to the project will provide the team with

a full set of the most recent procurement documents, including but not limited to

Procurement and Consultant Guidelines, standard and sample bidding documents,

proposal, evaluation report documents, etc.

29. It was agreed that the PMU will maintain complete records under AzRIP-2 for each

activity, to include complete procurement documentation for each contract, including bidding

documents, RFPs, advertisements, bids received, bid evaluations, no objections, letters of

acceptance, contract agreements, bid security, advance payment guarantee, performance

security, photocopies of invoices and payments and related correspondence, etc. The PMU will

also keep copies of the procurement files relating to the Rural Community Infrastructure

Component. Contract award information will be promptly recorded and contract rosters

maintained. Agreed reporting formats will be included in the OM.

30. Procurement of Goods, and Non-consultant technical services: Goods and non-

consultant technical services estimated to cost US$300,000 equivalent and more will be

procured through ICB. Goods, equipment and non-consultant technical services estimated to

cost less than US$300,000 may be procured through NCB and less than US$ 100,000 through

Shopping. Direct Contracting may be used with prior agreement with the Bank.

31. Procurement of Works: Works contracts estimated to cost US$3,000,000 equivalent or

more will be procured through ICB. Works contracts estimated to cost less than US$3,000,000

may be procured though NCB and less than US$100,000 through Shopping.

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32. Selection of Consultants: Consulting services under the project will be procured in

accordance with the Bank‟s Consultant Guidelines mentioned above and by using the standard

RFP and contract forms. Consultant‟s services would include Quality and Cost Based

Selections (QCBS), Fixed Budget Selection (FBS), Consultant Qualifications (CQ), Least Cost

Selection (LCS), Single Source Selection and Individual Consultants (IC). Consultancy

contracts estimated to cost more than US$100,000 equivalent will be selected through QCBS.

Individual Consultants would be selected in accordance with the provisions 5.1 to 5.6 of Section

V of the Consultant Guidelines. This method will require comparison of at least three qualified

candidates interested and available to undertake the assignment. For contracts with firms

estimated to cost less than US$100,000 a shortlist may be based solely on national firms unless

qualified international firms express interest in accordance with the provisions of paragraph 2.7

of the Consultants Guidelines.

33. Community Participation Procurement (CPP): Procurement of goods, works and services

under the Rural Community Infrastructure component shall be carried out in compliance with

the Community Participation Procedures method in accordance with paragraph 3.19 of the

Procurement Guidelines.

34. Operating Costs: These expenditures would cover costs incurred for all components

under the project, such as communications, utilities, office supplies and maintenance, fuel and

vehicle operation and its maintenance, salaries of support staff, eligible social charges, etc.,

which would be financed by the project as per annual budget approved by the Bank and would

be procured using administrative procedures of the Implementing Agency, which were reviewed

and found acceptable to the Bank. Operating costs will not include salaries of civil servants.

35. Other Special Procurement Arrangements: Retroactive Financing may be used for

advance contracting in an amount not exceeding US$4.2 million from the proceeds of the Loan.

C. Environmental and Social (including safeguards)

36. Environmental. The AzRIP-2 community projects, similar to AzRIP, will include rural

roads, water supply, sewerage, electricity, small bridges, small irrigation systems, schools and

kindergartens, health centers, community centers, etc. In addition, the menu of eligible

activities will be expanded to accommodate livelihood support activities to be identified during

implementation. The experience of AzRIP indicates positive environmental impacts resulting

from the implementation of the micro-projects, such as reduction of erosion through proper road

rehabilitation, improved wastewater treatment and improved water supply. There are also

certain negative impacts which might occur during the implementation of micro-projects.

Since micro-projects will be identified during the project implementation, the types and degree

of associated impacts will be determined accordingly. Consequently, the mitigation measures

will vary to address specific impacts, which can be summarized as follows:

Construction and general impacts: health and safety hazards for construction worker

and the public; noise; dust; soil and water pollution from fuel and oil; generation of

waste materials; surface run-off; excavation of materials and disposal of surplus soil;

risks to environmentally sensitive areas;

39

Water supply impacts: over-exploitation of water resources; interruption of surface

and underground drainage patterns; contamination of resources during construction

works; damage to soil during excavation;

Rural and suburban roads rehabilitation impacts: noise, dust, vehicle and pedestrian

safety, changes in drainage and traffic patterns;

Small bridges and footbridges construction impacts: changes to river regime and

riverbanks; disturbance to aquatic habitat and water quality during construction;

Wastewater, drainage and sewerage construction impacts: smell, impacts on the river

regime, pollution by the effluent;

Small-scale irrigation impacts: impacts on water resources; water logging of the soil;

discharge of wastewater;

Minor buildings: generation and disposal of wastes during construction/rehabilitation,

medical waste management during operation of medical facilities;

Livelihood support activities: the project will not provide financing for pesticides and

for activities likely to lead to increased pesticide use.

37. The potential adverse environmental impacts are minor and can be addressed through

appropriate mitigation measures. For the purpose of OP 4.01 “Environmental Assessment‟, the

project has been assigned an environmental category „B‟. The Environmental Management

Framework prepared for the original AzRIP addresses most of the impacts specified above and

provides a framework mechanism for screening environmental impacts, developing mitigation

plans and monitoring environmental progress. As in the case of AzRIP, environmental

assessments will be carried out for specific micro-projects and/or project sites, and

environmental advisory services will be provided, as appropriate. An updated Environmental

Management Plan Framework was publicly disclosed in-country on April 15, 2011.

38. The Borrower‟s capacity to implement environmental safeguards has been developed

through experience with AzRIP. The original project supported environmental awareness

raising and capacity building activities both among the Regional Operations Offices and

potential sub-project beneficiaries. The PMU Environmental Specialist performed highly

satisfactorily and will continue close environmental monitoring of sub-projects, starting from

early stages of sub-project development, and will provide training and guidance to the PMU,

ROOs and community beneficiaries on project screening and appropriate mitigation measures.

Environmental training to be delivered under AzRIP-2 will include specific community/sub-

project guidance.

39. As was the case with AzRIP, AzRIP-2 will support activities around rehabilitation or

construction of irrigation and drainage systems, water supply improvement and wastewater

treatment. Such activities are likely to be developed inter alia on rivers flowing into the

Caspian Sea and trans boundary rivers, which are international waterways for the purposes of

the World Bank Operational Policy on Projects on International Waters (OP 7.50). With OP

7.50 being triggered, riparian states have been notified accordingly.

40. It is expected that micro-projects would not produce a noticeable change for the

abstraction volumes of the systems and would not have an adverse change to the quality or

quantity of river flows, while the works would not change the nature of the original systems.

40

The proposed project would not have any impact on the quality and quantity of the river flows

in the riparian countries. There would also be no impact on the Caspian Sea, since there would

not be a significant adverse change to the quality and quantity of water flowing to the Sea.

Similarly, water use in the riparian countries would not affect the project.

41. Social: OP/BP 4.12 on Involuntary Resettlement is not triggered as micro-projects

requiring land acquisition, or the displacement of people using land for livelihood or residential

purposes will not be financed under the project. The micro-project environmental checklists

within the environmental management framework have been updated by the client in order to

include additional questions to screen for land acquisition and resettlement.

42. Other social risks (findings from the Social Assessment). A Social Assessment was

carried out as part of the preparation of AzRIP-2. The exercise aimed at: assessing social of the

communities in the new rayons that would have important implications for project approach and

design; and examining measures to strengthen social outcomes of the project. A rapid social

assessment targeted two types of new rayons: (1) the two rayons near conflict affected areas

(Agdzhebedi and Beilagan); and (2) the southern rayons where one national minority group –

the Talysh – has a significant presence. The Social Assessment addressed issues of inclusion of

women and other vulnerable groups; and appropriate social capital indicators to incorporate in

project monitoring and evaluation. The exercise comprised a desk review, focus group

discussions and stakeholder workshops.

Rayons near Conflict Affected Areas

43. Neither rayon directly borders with the occupied area, but Agdzhebedi‟s west and

southwest boundaries border with partially-occupied rayons of Agdam, Khodzhaveno and

Fizuli. Some of its villages are within 10 km from the border with the occupied territory.

Beilagan shares some 30 kilometers of border with Fizuli. Since the 1994 cease fire, there have

been no major military operations although sporadic shootings in areas near the border have

been reported. Most people seem to believe that an imminent outbreak of any serious form of

violence is unlikely. According to the latest census data, the total population of Agdzhebedi is

about 123,000. Over 93,000 live in villages (kend)2. Beilagan‟s total population is about

87,000, and nearly 55,000 live in villages.

Table 1: Village Population in Agdzhebedi and Beilagan (2010)

Rayon Total village

population Of which

IDPs Number of

villages Agdzhebedi 93,042 8,642 40 Beilagan 54,577 3,928 24

Source: Agdzhebedi and Beilagan Rayon Executive Committees.

2 The term „village‟ (kend) refers to an official administrative-territorial division which is rural and less developed. „Settlement‟

(gasaba) is another type of administrative-territorial division used for a more developed and often larger locality. This document

follows these official designations, and uses the terms „village‟ and „settlement‟ separately. Under AzRIP-2, the settlements are

not beneficiary communities.

41

44. Internally Displaced Persons (IDPs). The number of IDPs living in the villages of

Agdzhebedi and Beilagan rayons is about 13,000 persons. In Beilagan, an additional 3,000

IDPs live in settlements. In Agdzhebedi, IDPs account for about 9% of the total village

population and in Beilagan their share is about 7%. In Agdzhebedi, most of the villages are

hosting IDP families. In Beilagan, all villages have IDP families, and in six of them IDPs

account for more than 10%. In most cases, IDP families are living on their own, mostly in

temporary housing in very poor conditions. Some families are still living in public buildings.

People report of marriages between members of IDP and non-IDP families in the same village,

but the identity of IDPs as those not originally from the community remains strong even after

almost 20 years of their residence. Field discussions revealed that IDPs believe, or wish to

believe, that the Government will give them new houses, and are awaiting the day when they

will move out of their current residence. This is unlikely to happen given the Government‟s

current low priority for IDPs living in rural communities regardless of their housing conditions.

However, the native village population seems to avoid talking about the likelihood of their

extended, if not permanent, residence in the villages in obvious consideration of the feelings of

the IDPs. In general, the native residents of the villages are highly sympathetic of the IDPs, and

seem to consider them as members of the same community.

45. Effects of the Conflict as Perceived by Community Members. Major effects of the

conflict as identified by the community members include: restricted use of public buildings as a

result of past and current occupation of IDPs; restricted use of farm land (some IDPs were

allocated land near the border, but cannot use it due to security risks) and anxiety and

psychological distress experienced by IDPs due to the painful memories of the past and future

uncertainties.

46. The Social Fund for Development of Internally Displaced Persons of Azerbaijan (SFDI).

SFDI has been operational since 1999. The World Bank has been financing some activities

through its Internally Displaced Persons Economic Development Support Project (IDP-EDS).

Micro-projects and micro-credit are the main activities financed by IDP-EDS. SFDI micro-

projects are essentially public infrastructure works, similar to those which are eligible under

AzRIP-2. Non-IDPs are also benefitting from the micro-projects. However, key features of

SFDI operational modalities are different from those under AzRIP-2. One of the most

important differences is the way infrastructure works are identified. While AzRIP-2 follows a

rigorous community process with strong emphasis on participation and transparency, which

includes mandatory, popular selection of the representative body („Community Group‟), SFDI

mostly works with the municipality for identification, planning and implementation of the

micro-projects.

National Minority Groups

47. Legal Rights. The Constitution guarantees respect for human rights and freedoms

regardless of ethnic origin, race, religion, languages or other distinctions. According to Article

25 of the Constitution, the State guarantees equality and respect of rights and freedoms for all

persons regardless of race, nationality, religion, language, ethnic origin, conviction or other

distinctions. Restriction of rights and freedoms of citizens based on racial, religious, ethnic

42

discrimination or of ethnic, political and social origin is strongly prohibited. Azerbaijan is a

party to the Framework Convention for the Protection of National Minorities since 2000.

48. The Talysh. According to the 1999 census data, national minorities constitute about 9.4%

of the total population in the country. The Talysh is the single most important minority in the

south where five new rayons will be included in AzRIP-2. The same census data reports about

77,000 Talysh persons in total in the country and most of them are believed to live in the

southern rayons. It is possible that the census figures are underreported. According to a study,

the Talysh make up nearly 95% of the rural population in some rayons.3 The same study cites

that the Talysh language belongs to a group of Iranian languages. Talysh speakers are also

found in Iran. The Talysh in Azerbaijan are bilingual, and some also speak Russian.

Proficiency of the Talysh in Azerbaijani is high except in remote and isolated communities.

Gender does not feature as an important factor to differentiate their levels of proficiency in

Azerbaijani.

49. Settlement Patterns and Main Livelihoods. The Talysh Mountains cover western parts of

the region. Mountainous areas of the region, especially Lerik and Yardymly rayons, are

characterized by a large number of small villages. While the Talysh are predominantly

agrarian, differences in climatic, geographical and natural resource bases serve to differentiate

main livelihoods of the residents of the region. The lowland Talysh cultivate such crops as rice

and tea, but in the mountainous areas livestock is the most important livelihood. In the lowland

along the Caspian coasts, the communities are engaged in fishing. The lowland area is more

accessible and hence integration with a wider economy can be more advanced.

Table 2: Population and Percentage of the Talysh in the Five Southern Rayons

Rayon Total population

(persons)

Proportion of the

Talysh (%)

Lenkoran 189,929 13.6

Astara 84,319 6.8

Lerik 63,314 11.4

Masally 173,937 21.1

Yardymly About 48,000 n/a Source: Census 1999, The State Statistical Committee

50. Decision Making and Participation. Community-level decision making mechanisms are

in principle the same as those in the Azeri communities, and would involve village-level public

meetings and/or discussions among the leaders. The latter not only includes official leaders

such as rayon ExComm and municipality representatives, but also Aksakhal members and other

respected persons, including women who are holding public offices (teachers, doctors and other

health workers).

3 John Clifton, Calvin Tiessen, Gabriela Deckinga and Laura Lucht, Sociolinguistic Situation of the Talysh in Azerbaijan, SIL

International, 2005 (http://www.sil.org/SILESR/2005/silesr2005-009.pdf).

http://www.sil.org/SILESR/2005/silesr2005-009.pdf

43

Inclusion of Women and Vulnerable Groups

51. Participation of Women. AzRIP-2 promotes the participation of women, and

incorporates measures to achieve it, including an indicative target of women‟s representation in

Community Group membership (set at 35%). Such measures, however, are not binding, and

participation and inclusion of women and vulnerable groups is mostly left to the will of

individual community members. Evidence suggests that actual participation of women in

various project activities has been satisfactory. According to the results of a series of focus

group discussions (FGDs) conducted in randomly selected 24 communities with completed

Community Projects, 71% of women said they actively participated in the project4. Women‟s

representation in Community Group memberships is 31% which is slightly lower than the

target, but nonetheless at a satisfactory level. This is a significant achievement in considering

that selection was left to the popular votes without any separate quota for women. Discussions

with Community Groups during field visits indicated that women are not only represented in the

groups, but they are active members. Most villages have a good pool of female professionals in

public offices (schools, hospitals, etc.), who are known to the residents and have the capacity

and experience to fulfill public functions, from which female Community Group members are

mostly drawn. Women account for about 28% of the total participants of community

mobilization workshops at the project level. Achievement of this satisfactory level of

participation without any binding measures is again encouraging, and seems to suggest a

genuine interest of women in the project.

52. Most types of Community Projects provide gender neutral benefits, thus the selection

process is not likely to involve gender-based competition. One important exception is,

however, drinking water supply which would potentially attract a higher level of interest from

women since fetching water is predominantly their role in rural Azerbaijan. AzRIP financed 66

potable water Community Projects during 2005-2008, which is nearly 20% of the total for the

period, indicating that male dominance in Community Project selection is unlikely5.

Table 3: Women’s Participation

North

North

West Nakhchivan Total

Community

Groups Women 31% 34% 27% 31%

Youth 6% 18% 4% 10%

Mobilization Women 30% 31% 23% 28%

Youth 26% 30% 13% 24%

Source: PMU

4 AzRIP: Project Quarterly Status Report (July-September, 2010).

5 It is possible that more communities chose drinking water supply as the top priority, but the budgetary ceiling did not allow it to

be implemented.

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53. Inclusion of Vulnerable Groups. Assessment of participation of youth is only possible

with the available data which covers the period 2009-2010. The youth‟s participation in

community mobilization workshops and training is reasonably high at about 21% and 10%,

respectively. For IDPs‟ participation, however, the data from the northwest zone which has a

sizeable IDP presence indicates more efforts are needed. On average, IDPs accounted for 14%

of the total population of the 19 communities where AzRIP was implemented, but less than 8%

of the participants of the village meetings. There are several communities where the difference

is quite significant, and in some communities with a high percentage of IDPs they are not

represented in the Community Group.

Social Capital Indicators

54. Following the World Bank‟s Social Capital Implementation Framework, potential

indicators were identified according to the five operational dimensions: (i) groups and networks;

(ii) trust and solidarity; (iii) collective action and cooperation; (iv) social cohesion and

inclusion; and (v) information and communication. Consultations narrowed down the potential

indicators, which include:

Number of Community Groups (CGs) which participated in cross visits

Number of projects and activities implemented with internal resources in cooperation

with municipality

Number of reporting meetings voluntarily organized by CGs

% of households willing to contribute to public projects

% of functional CGs six months after project completion

% of households which attended mobilization

% increase of community wide meetings

% of women in CG membership

Recommendations

55. Key recommendations of the Social Assessment are as follows:

Strengthen efforts to promote and ensure IDP participation and representation in

Agdzhebedi and Beilagan, especially in communities where IDPs‟ presence is

significant. Specific measures would include setting a percentage target for IDP

participants in community mobilization and CG membership.

Improve coordination on support to community infrastructure between AzRIP-2 and

SFDI in Agdzhebedi and Beilagan in order to maximize the benefits and avoid

potential duplication of efforts.

Adjustment of minimum population requirement (1,000 persons except for

Nakhchivan where it is 600) for eligible communities in some rayons (possibly Lerik

and Yardymly) where a great majority of the villages have less than 1,000 persons

and distance and poor accessibility makes clustering a challenge.

45

Preparation and implementation of a strategy to strengthen women‟s leadership

within AzRIP-2‟s programming.

Training of project staff on diversified women‟s constraints and female leadership.

Monitoring & Evaluation

56. The objectives of the monitoring and evaluation activities are to provide AzRIP-2 staff

and stakeholders with regular information on project implementation and outputs; identify

bottlenecks to project implementation; ensure that all activities under AzRIP-2 are implemented

in compliance with project regulations; determine to what extent the PMU achieves its goals

and objectives and how it affects the intended beneficiaries‟ social conditions and capacities;

and maintain acceptable performance standards for environmental and social impacts. The

project will continue to use the monitoring and evaluation procedures and existing MIS and

other relevant tools that have been established under the current AzRIP project, tailoring and

strengthening them as needed in order to better track and assess areas such as women‟s

participation and empowerment, economic changes and social capital impacts.

57. Data sources will include an impact evaluation including a baseline survey to be

conducted prior to project implementation; information from the MIS covering detailed tracking

of individual micro-projects and overall project progress including capacity building activities

at all levels, financial costs, etc. Periodic qualitative evaluations will be undertaken to measure

and assess the project‟s physical achievements, project impacts, and beneficiary satisfaction.

Additionally, after completion of the micro-project, community project evaluations will take

place after 6 months, 1 year and 2 years to assess the impact and sustainability of the project.

The costs of data collection and monitoring and evaluation will be covered under Component C

of the project (Project Management and Results Monitoring).

58. AzRIP-2 monitoring and evaluation activities will be conducted at three levels – central,

regional, and community. At the central level, the work will be facilitated and coordinated by

the M&E and MIS Specialists, with periodic supervision and monitoring done by the World

Bank and the Working Group through receipt and review of quarterly and special reports

provided by the PMU, as well as independent auditor reports. At the regional level, Community

Development/ Monitoring Officers will monitor project-level micro-projects, using the

performance indicators developed by the PMU for each type of infrastructure investment. The

ROO will also hire technical experts to monitor the technical quality of infrastructure works to

ensure compliance with technical standards established for the works. ROO staff will also visit

project sites at random for spot-monitoring. In addition, Community Groups will engage in

regular participatory monitoring and evaluation activities during project implementation. Data

collected at the regional and community levels will be entered by Regional MIS Officers into

the database for transmission to the PMU.

46

Annex 4: Operational Risk Assessment Framework (ORAF)

Azerbaijan: Second Rural Investment Project (P122944) .

Project Stakeholder Risks

Stakeholder Risk Rating Low

Description:

The Ministry of Economic Development may have concerns about the institutional

placement and context of the project, which they have expressed in the form of concerns on sustainability and efficiency issues in AzRIP.

Beneficiary capacity in new rayons to prepare and implement sub-projects may be weak.

Controversy around selection of additional project regions and beneficiary communities.

Risk Management:

The project is being developed in close collaboration with the Ministry of Agriculture and the Ministry of Economic Development and

enhanced communication mechanisms will be put in place to ensure that project implementation performance and results are broadly

disseminated. Additionally, indicators to measure sustainability will be developed for AzRIP-2 and shared proactively with MoED.

Resp: Both Stage: Both Due Date: Status: Completed

Risk Management:

As with AzRIP, efforts will be focused on stimulating community mobilization and strengthening community capacity to implement

sub-projects.

Resp: Client Stage: Both Due Date: Status: In Progress

Risk Management:

As with AzRIP, clear and transparent selection criteria to be used in selecting new regions and beneficiary communities, along with

active public information and dissemination campaigns.

Resp: Client Stage: Both Due Date: Status: Completed

Implementing Agency (IA) Risks (including Fiduciary Risks)

Capacity Rating Low

Description: Risk Management:

Gap between the closing of AzRIP 1 and effectiveness of AzRIP-2AzRIP-2 may result in

loss of experienced PMU staff.

Retroactive financing is in place to fill the gap.

Resp: Both Stage: Preparation Due Date: Status:

Governance Rating Low

Description:

Lack of support from the Ministry of Economic Development could influence the Ministry of Agriculture's views on the design and scope of the project.

Significant turnover and/or political appointments at top management levels of MoA, resulting in lack of competent management and failure to provide strong leadership, good

governance and transparent decision making.

Community concerns and priorities are not sufficiently taken into account.

Risk Management:

The project has received strong endorsement from the Cabinet of Ministers and the Prime Minister's office, and the task team will continue to work closely with the Ministry of Economic Development during project preparation to ensure their ongoing support.

Resp: Bank Stage: Preparation Due Date: Status: Completed

Risk Management:

The Bank will need to continue emphasizing the importance of a well governed agriculture sector to the national economy in the course

of our country dialogue. It will continue work with Government to build support and consensus for governance reforms.

Resp: Bank Stage: Both Due Date: Status: In Progress

Risk Management:

The project will enhance the role of communities in design and implementation, and ensure that adequate grievance redress mechanisms

47

exist.

Resp: Both Stage: Both Due Date: Status: In Progress

Risk Management:

The project will continue to use the transparent procedures established under AzRIP 1 with regard to the decision making process, which limit opportunities for interference.

Resp: Client Stage: Implementation Due Date: Status: In Progress

Risk Management:

Regular on-site supervision of civil works construction will be conducted together with procurement and FM reviews.

Oversight of rehabilitation works will be strengthened by increased participation of communities in tender award and construction

supervision.

Resp: Client Stage: Implementation Due Date: Status: Not Yet Due

Risk Management:

Properly established internal controls within PMU that ensure several levels of approval by procurement and FM of invoices. Reconciling of expenditures to the pre-approved procurement plan. Audits of project expenditures. PMU will have annual technical /

procurement audits to be carried out by independent consultants.

Resp: Client Stage: Implementation Due Date: Status: In Progress

Project Risks

Design Rating Low

Description:

Growing project complexity resulting from new component on strengthening household livelihoods, and scaling up of the number of regions the project will cover.

Non-transparent selection of participating grantees

Risk Management:

Design of new livelihoods component will be based on comprehensive diagnosis and analytics on sustainable livelihoods and

institutional arrangements and will draw on lessons learned from livelihoods support in CDD operations globally.


Risk Management:

Monitor implementation for consistency with guidelines to ensure that clear and transparent criteria are used for beneficiary selection

and project screening and approval.


Social and Environmental Rating Low

Description:

Proximity of two new rayons (Agcabadi and Beylaqan) to conflict-affected areas.

Risk that sub-projects benefit a small number of people and exclude women and

marginalized groups.

There is no risk related to involuntary resettlement or land acquisition. Potential land acquisition will be screened through questions in the EMF checklist as per AzRIP 1.

Beneficiary communities may fail to follow environmental requirements during sub-project implementation due to insufficient capacity or lack of understanding.

Risk Management:

If conflict occurs along the borders of these two rayons, the Bank and Project team will assess the continued feasibility of activities in these areas, or may recommend community mobilization or sub-projects designed to build community resilience to conflict.

Resp: Both Stage: Implementation Due Date: Status: Not Yet Due

Risk Management:

Regarding, inclusion of women and marginalized groups, the project will have a continued emphasis on inclusion of all relevant social

groups and robust grievance redress mechanisms.

Resp: Both Stage: Both Due Date: Status: In Progress

Risk Management:

48

AzRIP 1 supported environmental awareness raising and capacity building activities among both the Regional Offices and potential sub-

project beneficiaries. AzRIP-2 will continue the same good practice. The project EMP and OM contain clear procedures to be implemented for each sub-project.

Resp: Client Stage: Both Due Date: Status: Not Yet Due

Risk Management:

The Environmental Specialist will continue close environmental monitoring of sub-projects and will provide support and guidance to

community beneficiaries.


Program and Donor Rating Low


No dependence on other donors.

Resp: Stage: Due Date: Status:

Delivery Monitoring and Sustainability Rating Low

Description:

Weak technical quality of small-scale infrastructure.

Inadequate O&M arrangements, leading to lack of sustainability of small scale

infrastructure.

Inability of communities to collect the required funds for recurring O&M costs for

rehabilitated infrastructure.

Livelihood activities unable to be sustained after project completion.

Risk Management:

Enhancement of PMU capacity to handle livelihoods component, and continued emphasis on capacity building and accountability, local

responsibility and empowerment, partnerships and sustainability.


Risk Management:

Ongoing capacity building of Design Company and Engineers at the community and regional levels.


Risk Management:

Continued support for developing adequate standardized maintenance contracts and ongoing M&E, including capital improvement plans

and longer-term maintenance schedules.


Risk Management:

The project will further strengthen capacity of participating communities to take over the responsibility for O&M of rehabilitated infrastructure.


Other (Optional) Rating



Other (Optional) Rating


49


Overall Risk

Preparation Risk Rating: Low Implementation Risk Rating: Low

Comments:

50

Annex 5: Implementation Support Plan


I. Strategy and Approach to the Implementation Support

1. The strategy and approach for the Implementation Support Plan (ISP) is built on the

following key aspects.

2. Capacity building activities and micro-project cycle implementation under all

components will be implemented by AzRIP-2 staff working at the PMU and in the regions,

supported by Individual Consultants under contract. The PMU will be supported by three

existing Regional Operations Offices (ROOs) and one new ROO acting as the project‟s

representation at the regional level. The PMU will provide institutional support to the ROOs

which will be responsible for daily project management and monitoring of the community

project portfolio. The ROO staff will be contracted by the PMU and include skills required to

carry out appraisal, contracting, supervision and monitoring of community projects. The ROOs

will also accommodate the Project Assistance Team, the Regional Grant Approval Committees

and the Technical Design Companies. The ROOs will support and monitor the operations of

PATs and facilitate the meetings of the regional micro-project grant approval committees. The

ROOs will also facilitate contacts of the technical design companies with participating

communities. The institutional capacity building activities and studies will be undertaken

through individual and firm contracts. The PATs serve as service providers for AzRIP-2 zones

and will be responsible for coordinating all aspects of community mobilization, training,

advising on procurement and providing technical assistance to communities in the preparation of

micro-project proposals. The Regional Grant Approval Committees are located in the project

target zones and review all community project proposals for approval. The RGACs includes

representatives from the rayon executive committees, municipalities, civil society and regional

representatives of the Ministry of Agriculture and Ministry of Economic Development. The

PMU will recruit the technical design companies in each zone with the objective to provide

technical assistance to communities in engineering aspects of micro-projects. The design

companies would also assist the communities and the PMU in quality control and construction

supervision. The Bank team will provide overall implementation support to this structure of

project work flow.

3. The PMU has sound experience in fiduciary aspects and fiduciary arrangements have not

been significantly altered for this repeater project. The Bank‟s Task Team will monitor FM

arrangements and compliance.

4. The PMU has adequate capacity for procurement, and adequate thresholds for post – and

prior-review have been established. Subsequent to a Procurement Post Review carried out under

AzRIP, procurement oversight in the PMU will be strengthened and management of MP

contracting will be subject to rigorous scrutiny. The Bank procurement supervision will remain

a high priority during project implementation.

5. The Bank‟s Task Team will focus on strengthening the M&E capacity and providing

assistance to the PMU M&E Specialist in a high standard M&E and impact evaluation. Survey

methodologies are subject to the Task Team‟s review.

51

II. Implementation Support Plan

6. The Bank's supervision team will include a Washington-based Task Team Leader and

country-based fiduciary, procurement and safeguards staff.

7. Technical support for Component A: The Bank's Task Team will include a Participation

and Institutional Specialist to provide supervision support for the micro-projects component in

similar vein to implementation support provided during the course of the initial AzRIP project.

The technical specialists will provide support for the capacity building/TA program and the

workflow for micro-projects and provide technical advice on the implementation of activities

under this component. The Bank's Task Team will include a Civil Engineer to review the

adequacy of the design, construction, operation and maintenance schedules, planning and actual

works. The specialist will perform site supervision, audits and spot-checks of construction and

completed works. This input will require on average one mission per year through the life of the

project.

8. Technical support for Component B: The Bank‟s Task Team will include general CDD

technical expertise and specialized expertise in capacity building and social accountability to

enhance delivery and impact under this component by ensuring the necessary quality of capacity

enhancement inputs and training at multiple levels for the PMU, regional teams, ExComms,

communities and other stakeholders. A second focus for support is that of livelihood/income-

generating activities and the Bank‟s Task Team will include a Sustainable Livelihoods Specialist

to assist the PMU with the design and implementation of livelihood pilots and associated market

and assessment studies. This input will be required for approximately 2 missions a year in the

first 2 years of the project, and 1 mission in project years 3-5.

9. Technical support for Component C. The Bank‟s Task Team will include a Monitoring

and Evaluation specialist team from the Development Impact Evaluation Group (DIME). This

team will provide ongoing technical support for M&E and impact evaluation design and

implementation including baseline and periodic evaluation throughout the life of the project.

10. Financial Management Supervision: The Bank's Financial Management Specialist based

in Baku will conduct one FM supervision every year throughout the life of the project. FM

supervision will cover, in addition to standard FM areas, detailed review of civil works contracts

and funds flow between PMU and regional offices of the project.

11. Procurement supervision: The Bank‟s Procurement Specialists based in Baku will be

members of the project team throughout the project. During project implementation, designated

Procurement Specialists will join the regular Bank implementation support missions. The

frequency of procurement supervision is expected to be twice per year. In addition to the prior

review supervision to be carried out by the Bank team, procurement post reviews are to be

carried out on at least 10% of the contracts subject to post review. As a minimum, one post

review report which will include physical inspection of sample contracts including those subject

to prior review will be prepared each year and not less than 10% of the contracts will be

physically inspected.

52

12. Environmental Safeguards supervision. The Bank‟s Environmental Specialist based in

Baku will be a member of the project team throughout the project. Besides supervision of

compliance with environmental safeguards, the specialist will provide assistance and support in

conjunction with the PMU‟s Environmental Specialist on environmental issues arising during the

implementation of Component A.

13. Social Safeguards supervision: The Bank's Task Team will include a Social Development

Specialist who will provide support to the PMU on social development issues, in particular in the

area of assessments and social analysis relating to social impacts and social sustainability.

III. Implementation Main Focus

14. Table 1 presents the main focus of implementation support over the life of the project.

Table 1: Implementation Support

Time Focus Skills Needed Resource

Estimate

Partner Role

First twelve

months

M&E – IE baselines

Institutional

development capacity

building, TORs,

training,

livelihoods capacity

development,

assessments and

procurement prior

reviews

Participation and

Institutional

Specialist;

Civil Engineer;

Social Safeguards,

Procurement,

Environmental

Safeguards, and

M&E Specialist

US$ 135,000 /yr

12-48 months Implementation

review of MPs;

Livelihoods pilots

initiation;

M&E mid-term

Participation and

Institutional

Specialist;

Civil Engineer;

Social Safeguards,

Procurement,

Environmental

Safeguards, and

M&E Specialist

US$ 110,000/yr

> 48 months Policy dialogue with

government

Pilot results and

dissemination

IE end line

Participation and

Institutional

Specialist;

Civil Engineer;

Social Safeguards,

Procurement,

Environmental

Safeguards, and

M&E Specialist

US$ 110,000/yr

53

Skills Mix Required

Skills Needed Number of

Staff Weeks

Number of

Trips

Comments

Task Team Leader

Social Development Specialist

Institutional Specialist

Civil Engineer

M&E Specialist

Procurement Specialist

Financial Management Specialist

Environmental Specialist

Livelihoods Specialist

50

18

12

10

12

12

12

10

12

10

7

2

4

4

Field based

Field based

Field based

Field based

Partners

Name Institution/Country Role

To Be Determined FAO/CP Institutional and Technical Supervision Support

IBRD 38276

DECEMBER 2010

BALAKAN

ZAQATALA

QAX

SAKI

OGUZ

QABALA

AGDASYEVLAX

GORANBOYXANLAR

SAMUXSAMKIR

TOVUZ

AGSTAFA

QAZAX

GADABAY

DASKASAN

KALBACAR

SARUR

TARTAR

QUSAR

QUBA

ISMAYILLI

GOYCAY

AGSU

DAVACHI

SIYAZAN

XIZISAMAXI

QOBUSTAN

BAKIABSERON

HACIQABULKURDEMIRZARDAB

SABIRABAD

SAATLI

BILASUVAR

CALILABAD

NEFTCALA

YARDIMLI

MASALLI

LERIK

ASTARA

IMISLI

BEYLAQAN

A G C A B A D IAGDAM

XOCALI

LACIN

FUZULI

CABRAYIL

XOCAVA

ND

QUBADLI

Z AN

GI L

AN

SUSA

B A B E K

SAHBUZ

CULFA

ORDUBAD

BARDA

UCAR

XACMAZ

SALYAN

L A

NK

AR

AN

Agstafa

Balakan

Zaqatala

Qax

Saki

Oguz Qabala

Ismayilli

Goycay

AgdasYevlax

Ucar

Xacmaz

Siyazan

Maraza

Kurdemir

Saatli

Sabirabad

Astara

Lankaran

Masalli

Yardimli

Neftcala

Salyan

Gazi-Mammad

Bilasuvar

Lerik

Zardab

Agcabadi

Beylaqan

Imisli

Samaxi

Xizi

Quba

Agsu

BardaTartar

Davachi

Khyrdalan

Qusar

Nabiagaly

Ganja

Kalbacar

Sadarak

Sarur

Babek

CulfaOrdubad

Zangilan

Lacin

Xocali

QubadliCabrayil

Fuzuli

XocavandSusa

Sahbuz

Agdam

Xanlar

Tovuz

Qazax

Samkir

GoranboyGadabay

Daskasan

CalilabadNAKHCHIVAN

BAKU

G E O R G I A

A R M E N I A

R U S S I A N

F E D E R AT I O N

I S L A M I C R E P U B L I C O F I R A N

Araz Ri

verAraz

Lake Sevan

Kura

Samur River

Mingechevir Reservoir

ShamkurReservoir

C a s p i a n

S e a

Karasu River

Katek

hchay

Iori

Chikilchay

Kura

Lenkaran

S ham

kirch

ay

ArazReservoir

Kura River

To Tbilisi

To Tbilisi

To Dilizhan

To Yerevan

To Jolfa

To Kayakent

To Rasht

45° 46° 47° 48° 49° 50° 51°

45°

39°

40°

41°

39°

40°

41°

46° 47° 48° 50°

AZERBAIJAN

SECOND RURAL INVESTMENT PROJECT

AzRIP2 EXPANDED PROJECT AREAS

AzRIP1 PROJECT AREAS

MOTORWAYS

RAILROADS

DISTRICT CAPITALS

CAPITAL OF AUTONOMOUS REPUBLIC

NATIONAL CAPITAL

DISTRICT BOUNDARIES

INTERNATIONAL BOUNDARIES

This map was produced by theMap Design Unit of The World Bank.The boundaries, colors,denominations and any otherinformation shown on this map do notimply, on the part of The World BankGroup, any judgment on the legalstatus of any territory, or anyendorsement or acceptance of suchboundaries.

500 10 20 30 40

KILOMETERS

AZERBAIJAN

ARMENIA

ISLAMIC REP. OF IRAN

TURK

MEN

ISTANT U R K E Y

SYRIAN ARAB REP. IRAQ

GEORGIA

UKRAINE

RUSSIAN FEDERATION

KAZAKHSTAN

Baku

B lack SeaCasp ian

Sea

BAHRAMTAPEHEADWORKS

Document of The World Bank PROJECT APPRAISAL DOCUMENT · PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$30 MILLION TO THE REPUBLIC OF AZERBAIJAN FOR THE SECOND

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